OGC Opinion No. 07-05-21
The Office of General Counsel issued the following opinion on May 31, 2007, representing the position of the New York State Insurance Department.
RE: Public Adjusters Compensating Independent Agents
Question Presented:
May a public adjuster compensate an independent insurance agent for referring an insured to the public adjuster?
Conclusion:
No. A public adjuster may not compensate an independent insurance agent for referring an insured to the public adjuster, because independent insurance agents do not fall within the exception, set forth in § 25.3(b) of N.Y. Comp. Codes R. & Regs. tit. 11, Part 25 (1986) (Regulation 10), to the general rule that a public adjuster shall not compensate any person, firm, or corporation for procuring or assisting in procuring the adjustment of a loss for the public adjuster.
Facts:
The inquiry is of a general nature, without reference to particular facts.
Analysis:
N.Y. Ins. Law § 2101(b) (McKinney 2006) defines an “independent insurance agent” as “an ‘insurance agent’ who is not owned or controlled by any insurer, fraternal benefit society or health maintenance organization or group of such insurers and whose agency agreement does not prohibit the representation of other insurers or groups of insurers and which provides that upon termination of the agreement the agent's records and use and control of expirations remain the property of the agent.”
11 NYCRR § 25.3(b) (Regulation 10) applies to public adjusters, and states that:
(b) No such licensee or sublicensee shall divide any fee or give any fee, commission or other compensation to any person, firm or corporation for procuring, or assisting in procuring, the adjustment of any such loss for any such licensee or sublicensee, unless the person, firm or corporation to whom such fee, commission or other compensation is given or paid had at the time when the loss occurred:
(1) a public adjuster's license issued and in force pursuant to section 1231 of the Insurance Law; or
(2) an insurance broker's license issued and in force and such licensee either was the broker of record in placing the insurance which was involved in the adjustment of the loss, whether or not designated in writing to act for the insured, or was designated to act for the insured in writing before a loss occurred.
In making a referral to a public adjuster, an independent insurance agent would be assisting in procuring the adjustment of a loss. Thus, by the plain terms of 11 NYCRR § 25.3(b) (Regulation 10), a public adjuster may not compensate a person for making a referral to the public adjuster unless that person had a license in force as a public adjuster when the loss occurred, or had a valid insurance broker’s license and was either the broker of record for the loss adjusted, or was designated to act for the insured in writing before the loss. The regulatory provisions make no exception for independent insurance agents who refer insureds to a public adjuster. Therefore, a public adjuster may not compensate an independent insurance agent for making referrals to the public adjuster.
For further information you may contact Attorney Joana Lucashuk at the New York City Office.
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1 Section 123 was recodified as § 2108 in 1984.