November 2017 -- The E&O Report

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 November 2017
Volume 29, Number 11

Commission Payments to Retired and Deceased Producers

During the past few months, we received inquiries from several New York insurance agencies and brokerages with questions concerning how and when commission payments can be made when producers have retired and are no longer licensed. They also ask who would receive commission payments when producers have passed away and the executor or administrator of their estate are unlicensed. In this issue of The E&O Report, we discuss how these situations should be handled by the various parties involved in order to be in compliance with controlling New York State Law.

​​​On a Related Note
Got a question about your agency or brokerage's errors and omission insurance coverage? Contact Brian Bixby, president of IAAC, Big I New York's membership services division. Email him at or call (800) 851-8853, ext. 233.

Frequently, when insurance producers retire they decide they no longer wish to keep their insurance licenses in force and allow them to expire. It usually happens because the producer does not wish to sell any insurance going forward and/or they do not want to incur the license fees or spend the time and expense for the required continuing education. In this instance, the retired producer’s former agency or brokerage might still want to pay commissions to the producer who is no longer licensed. Under those circumstances, New York Insurance Law allows producers who were licensed at the time they sold, solicited or negotiated an insurance contract in the state to continue to receive renewal commissions on business they sold even after their license expired. New York Insurance Law Section 2102(e)(2) provides for this and states as follows:

Renewal or other deferred commissions may be paid to a person or other entity for selling, soliciting or negotiating insurance in this state if the person or other entity was required to be licensed under this article at the time of the sale, solicitation or negotiation and was so licensed at the time.

While New York Insurance Law Section 2102 generally prohibits the payment of commissions to an unlicensed person, it does allow payments to an unlicensed person in this particular situation. Under this exception, payments can be made to previously licensed producers for renewal commissions on business they placed while licensed. There is no limit on the length of time those renewal commissions can continue to be paid. The renewal commission payments can continue for the rest of the retired producer’s life.

A related question we received concerns whether commissions can be paid to the unlicensed representative of the estate of a deceased producer, such as the executor or administrator. There is nothing in the New York Insurance Law prohibiting the payment of commissions, both initial and renewal, to the unlicensed representative of the deceased producer’s estate for business sold by the deceased producer during his or her lifetime.

The unlicensed representative of the estate of a deceased producer can continue to receive commissions from initial placements and renewals of policies the deceased producer sold even though the representative will not be soliciting, negotiating or selling insurance contracts or acting as an insurance agent or producer. This situation was addressed by the New York State Department of Financial Services in an Office of General Counsel opinion issued on Dec. 10, 2004. The question posed was whether a widow, as the estate representative of her deceased husband, can receive commissions due her husband for insurance policies he sold prior to his death. In that opinion, the NYDFS stated as follows:

Nothing in the insurance law precludes the administrator of a deceased Insurance agent’s estate from receiving commissions that the deceased husband had earned but were not yet received before his death. Nothing in the insurance law precludes the administrator of a deceased agent’s estate from receiving commissions for subsequent renewals of policies that were initially transacted by the deceased agent.

With regard to each of the situations discussed above, it should be mentioned that if an endorsement or policy change is made to an existing insurance policy sold by a retired but now unlicensed producer or a deceased producer, the retired producer or estate representative may receive the additional commission resulting from the change. However, if an additional insurance policy is sold to an insured who was a customer of a retired unlicensed producer or deceased producer, the retired unlicensed producer or unlicensed representative of the estate cannot receive any of the commissions related to the new policy.

The insurance agency/brokerage, retired producer whose license has expired or unlicensed estate representative for a deceased producer should all be prudent and make certain they follow the guidelines set forth above for the payment of renewal commissions when a retirement or death occurs. Doing so will ensure commissions are properly paid and the actions taken do not violate the mandates of New York State Insurance Law.

Submitted by:
James C. Keidel, Esq.
Keidel, Weldon & Cunningham, LLP

Keidel, Weldon & Cunningham, LLP concentrates its practice in the defense of insurance agents and broker's errors and omissions claims and litigation, errors and omissions loss control counsel and education, insurance coverage analysis and litigation and insurance regulatory matters. Please direct any comments or questions to James C. Keidel, Esq. by mail to the main office of Keidel, Weldon & Cunningham, LLP, at 925 Westchester Avenue, Suite 400, White Plains, NY 10604, telephone at (914) 948-7000 or e-mail at The law firm also maintains offices in Syracuse, New York; New York City, New York; Wilton, Connecticut; Fair Lawn, New Jersey; Warwick, Rhode Island, Philadelphia, Pennsylvania, Williston, Vermont and Naples, Florida.
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