OGC Op. No. 07-08-16

The Office of General Counsel issued the following opinion on August 31, 2007 representing the position of the New York State Insurance Department.

RE: Commissions and liquidation

Question Presented:

Are commissions earned by insurance producers when the policy is placed?


As a general rule, commissions are earned when the policy is issued. However, that general rule may be modified by contract. The New York State Insurance Department will not opine as to whether under Texas law the general rule may be affected by the insolvency of the insurer.


The inquirer furnished a copy of a June 29, 2007 letter, although he did not furnish the original letter that generated his reply, which questions why an entity is requesting return of commissions previously paid by Insurer, a Texas-domiciled insurer authorized to do business in New York.

According to the records of the Insurance Department, Insurer, a member of the Doe Insurance Group, was previously authorized to issue property/casualty insurance policies in New York.

In August 2006, by Order of the Texas court, some members of the Doe Insurance Group, including Insurer, were found to be insolvent and placed in liquidation under the control of the Texas Insurance Commissioner. Subsequently, the Texas Commissioner appointed a Special Deputy Receiver. Because Insurer had issued policies in New York, in accordance with N.Y. Ins. Law § 7410 (McKinney 2006), the New York Superintendent of Insurance was appointed by a New York court as an Ancillary Receiver of Insurer, and Insurer’s license in New York was revoked.


According Insurance Department’s records, the inquirer is licensed to transact business as an insurance agent pursuant to Insurance Law § 2103(a) & (b), and as an insurance broker pursuant to Insurance Law §2104(b)(1)(B).

The inquirer is correct in his assumption that under New York law an insurance agent or insurance broker generally earns commissions when the policy is issued. See Hammond & Co. v. Risk Specialists of New York, Inc., 210 A.D.2d 202, 619 N.Y.S.2d 744 (2d Dept. 1994); see also the January 11, 2006 opinion of the Department’s Office of General Counsel. However, that general rule is subject to modification by contract between the insurance company and the insurance producer.

The Insurance Department is not aware of any New York law under which the receiver of Insurer may recover the commissions. However, under the facts presented here, the right of a receiver of an insolvent insurance company to recover commissions previously paid, on behalf of the estate of the insurer as part of the liquidation of the insurer, would be subject to a determination by a court of competent jurisdiction under Texas law. The New York Insurance Department will not opine on Texas law.

For further information you may contact Principal Attorney Alan Rachlin at the New York City Office.