OGC Opinion No. 08-12-06
The Office of General Counsel issued the following opinion on December 30, 2008, representing the position of the New York State Insurance Department.
RE: Life Insurance Independent Adjuster License
Must XYZ Life Insurance Company (“XYZ Life”), a subsidiary of ABC Insurance Company (“ABC”), be licensed as an independent adjuster in New York to process life insurance claims on behalf of ABC?
XYZ Life cannot be so licensed, because there is no independent adjuster license for life insurance. (The processing of life insurance claims, unlike other types of insurance claims, typically requires little discretionary authority on the part of the person or entity handling such claims.) However, when the processing of life insurance claims requires adjusting, only certain persons—including employees, agents, or authorized affiliate insurers of the insurer itself—may, subject to statutory exceptions, adjust such claims. Since XYZ Life does not come within any of the statutory exceptions, it may only perform ministerial functions with respect to the processing of life insurance on behalf of ABC.
The inquirer reports that his or her company, XYZ Life, is a subsidiary of ABC, and not licensed to sell insurance in New York. Currently, XYZ Life administers life insurance policies on behalf of ABC in New York. When processing life insurance claims on behalf of ABC, the inquirer states that the duties of XYZ Life include the following: investigation for misrepresentation, including the obtaining and reviewing of medical records and any other pertinent documents; reviewing the claims to make final claims decisions; and settlement of the life insurance proceeds. The inquirer asks whether XYZ Life requires an independent adjuster license to perform these functions in New York.
N.Y. Ins. Law § 2102(a)(1) (McKinney 2006) is germane to the inquiry. That statute prohibits any person, firm, association or corporation from acting as an insurance agent, insurance broker, reinsurance intermediary or insurance adjuster in New York without an appropriate license. In addition, Insurance Law § 2108(a)(3) requires that no adjuster shall act on behalf of an insurer unless licensed as an independent adjuster.
The Superintendent has by regulation prescribed the types of independent adjuster licenses that may be issued. Specifically, N.Y. Comp. Codes R. & Regs. tit. 11, § 26.3 (Regulation 25) (2006) sets forth the types of licenses as follows:
(b) inland marine
(e) motor vehicle and workers’ compensation health service charges
(f) automobile damage or theft appraisals
(h) fidelity and surety
(i) accident and health
Currently, there is no provision in the regulation that allows for the issuance of a life insurance independent adjuster license, as life insurance claims, unlike other insurance claims, generally require little discretionary authority on the part of the person handling the claim. Thus, XYZ Life cannot obtain an independent adjuster license to adjust life insurance claims.
However, there are instances when significant discretionary authority may be involved in the adjusting of life insurance claims. Since there is no independent adjuster license for life insurance, in those instances only certain persons—including an employee, agent, or authorized affiliate insurer of the insurer itself—may adjust such claims. Insurance Law § 2101(g) defines the activities and role of an adjuster, and specifically provides for certain exceptions:
(1) The term “independent adjuster” means any person, firm, association or corporation who, or which, for money, commission or any other thing of value, acts in this state on behalf of an insurer in the work of investigating and adjusting claims arising under insurance contracts issued by such insurer and who performs such duties required by such insurer as are incidental to such claims and also includes any person who for compensation or anything of value investigates and adjusts claims on behalf of any independent adjuster, except that such term shall not include:
(A) any officer, director or regular salaried employee of an authorized insurer or entity licensed pursuant to article forty-four of the public health law providing comprehensive health service plans (as used in this paragraph, a “health maintenance organization”), or any manager thereof, individual or corporate, or the manager, agent or general agent of any department thereof, individual or corporate, or attorney in fact of any reciprocal insurer or Lloyds underwriter, or marine underwriting office, unless acting as an auto body repair estimator as defined in subsection (j) of this section;
(E) any officer, director or regular salaried employee of an authorized life insurance company, or any manager thereof, individual or corporate, or the manager, agent or general agent of any department thereof, individual or corporate, when the claim to be adjusted is submitted under an insurance contract issued by another insurer and the claim: (i) is within the scope of a contract of reinsurance between the two insurers for all of the underlying risks and none of the underlying risks are later reinsured back to the ceding insurer; and (ii) relates to a kind of insurance that the authorized life insurance company adjusting the claim is licensed to write… (Emphasis added.)
In determining what constitutes “investigating and adjusting of claims” within the meaning of Insurance Law § 2101(g)(1), the Department considers whether the duties performed in the handling of a claim require the exercise of discretionary authority conferred by the insurer to the person or entity (in which case an adjuster’s license is required), or the performance of strictly ministerial tasks. Tasks such as data entry and data processing are generally considered ministerial in nature, and do not require licensing, because they are not discretionary acts performed by the person or entity handling the “investigating and adjusting of claims.” See OGC Opinion 07-10-09 (Oct. 23, 2007).
Some of the activities performed by XYZ Life in processing life insurance claims seem to constitute the “investigating and adjusting of claims” within the meaning of Insurance Law § 2101. Since there is at present no independent adjuster license for life insurance, any tasks involving adjusting, investigating or the exercise of discretionary authority may be performed only by certain persons, including employees of ABC, or its agents or authorized affiliate insurers, as per the exceptions set forth in Insurance Law § 2101(g)(1)(A) and (1)(E). Since XYZ Life is not licensed to write insurance in the state of New York, it cannot avail itself of the exception for authorized affiliates.
To the extent that XYZ Life’s activities on behalf of ABC currently include the investigating and adjusting of life insurance claims, XYZ Life and its employees should cease all such activities immediately and provide the undersigned, within ten (10) business days of the date of this letter, with written confirmation that XYZ Life has, in fact, discontinued such activities.
For further information, you may contact Supervising Attorney D. Monica Marsh at the New York City office.