OGC Op. No. 07-09-14
The Office of General Counsel issued the following opinion on September 17, 2007, representing the position of the New York State Insurance Department.
RE: Insurance Brokerage1 Ownership
1) May an individual who is not a licensed agent or broker own a percentage of a corporate insurance agent or broker?
2) Do the rules differ if an individual is admitted to the New York bar?
1) Yes. An individual who is not a licensed agent or broker may own a percentage of a corporate insurance agent or broker.
2) No. Admission to the bar has no bearing on the governing legal standards.
The inquiry was of a general nature, without reference to particular facts.
There is no provision in the Insurance Law or regulations promulgated thereunder that prohibits a person or entity not licensed by the Insurance Department from owning an interest in a corporate insurance agent or broker. A nonlicensee that owns an interest in an insurance agent or broker may share in the overall profits generated by that business. See OGC Opinion No. 04-08-11 (August 18, 2004) (non-licensed owner of an interest in an insurance agency may share in overall profits generated by the insurance agency); See also, OGC Opinion (July 27, 2007) (nonlicensee that owns interest in insurance agent or broker must comply with Insurance Law §§ 2114, 2115, or 2116 and § 2102 with regard to commission sharing.) A non-licensed owner of an insurance agent or broker also may make referrals to the insurance agent or broker, provided that there is no discussion of specific insurance policy terms and conditions, and the compensation for the referrals is not based upon whether a sale is made. See, e.g., OGC Opinion No. 06-01-13 (January 10, 2006). Moreover, a nonlicensee owner of an interest in an insurance agent or broker who has previously had his or her license revoked must comply with the provisions of Insurance Law § 2111. See OGC Opinion (February 28, 2000) (revoked licensee may not be in a position, either directly or indirectly, to direct the management, control or activities of a licensee.)
The rules do not differ for an individual admitted to the state bar. Admission to the bar has no effect on the standards governing ownership of an insurance agent or broker. A licensed attorney who owns an interest in an insurance agent or broker must comply with the statutory provisions outlined above, without exception.
For further information you may contact Supervising Attorney Michael Campanelli at the New York City Office.
1 The inquiry used the term “brokerage agency,” which conflates two separate entities: insurance brokers and insurance agents.