A June 27, 2007 opinion issued by the Office of General Counsel of the New York State Insurance Department should be of interest concerning the sharing of commissions with charities and the advertisement of such arrangement.
The specific questions posed were:
- May an insurance agent have an informal arrangement with a group whereby the agent pledges to give to charity commissions earned from the sale of insurance to clients referred to the agent by members of the group?
- May the agent advertise to a potential client that the commissions earned from that sale of insurance will be donated to charity
Here are the answers:
- Yes. Based on the facts provided, an insurance agent would not violate New York Insurance Law § 2115 — which prohibits a licensed agent from sharing commissions with an unlicensed entity — if the agent were, in accordance with the informal arrangement, to donate commissions from referrals every time that the agent sold a policy pursuant to such referrals. Nor would the referring group member be acting as an insurance agent without a license in violation of New York Insurance Law § 2102(a)(1).
- No. An insurance agent may not advertise to potential clients that the agent’s commissions will be donated to charity, since the agent would be making an unlawful inducement in violation of Insurance Law §§ 2324 or 4224.
In a March 12, 2007 opinion, the Department’s Office of General Counsel opined that, while nothing precludes an agent or broker from making charitable contributions, advertising those contributions as an incentive for new insurance business constitutes an offer of an intangible benefit or inducement that violates Insurance Law §§ 2324.
Here is some food for thought. John T. Bair and Howard Saperston, III of the structured settlement firm, Forge Consulting, LLC, used Forge Consulting contributions to one non-profit or charity, ATLA (improperly stated as the "American Trial Lawyers Association"**) in an advertisement to solicit new business for Forge Consulting, from lawyers who are members of another non profit or charity, the New York State Trial Lawyers Association (NYSTLA). Many NYSTLA members are also members of the American Association for Justice (formerly ATLA)
Why would the Forge Consulting reference "the largest non law firm contributor to ATLA" be relevant to the target audience in an advertisement other than as an inducement to refer? Many of the members of NYSTLA are also members of AAJ (formerly ATLA)
Structured settlement brokers and consultants operating in New York State should be mindful of these recent opinions in order to assure a best practices approach.
*the most recent name of AAJ, prior to AAJ, was the Association of Trial Lawyers of America.