Requirements for Service Fee Agreements
Question: “Are there any disclaimers or any other special information we need to include in a service fee agreement in addition to what’s in the attached form?”
Answer: The only requirements are stated in Section 2119 of the New York Insurance Law, titled Insurance agents, brokers, consultants, life settlement brokers, and title insurance agents; written contract for compensation; excess charges prohibited, subsection (c):
(c)(1) No insurance broker may receive any compensation, other than commissions deductible from premiums on insurance policies or contracts, from any insured or prospective insured for or on account of the sale, solicitation or negotiation of, or other services in connection with, any contract of insurance made or negotiated in this state or for any other services on account of such insurance policies or contracts, including adjustment of claims arising therefrom, unless such compensation is based upon a written memorandum, signed by the party to be charged, and specifying or clearly defining the amount or extent of such compensation.
(2) A copy of every such memorandum shall be retained by the broker for not less than three years after such services have been fully performed.
(3) This subsection shall not affect the right of any such broker to recover from the insured the amount of any premium or premiums for insurance effectuated by or through such broker.
(4) This subsection shall not affect the requirements of subsection (a) or (b) hereof, subsection (g) of section two thousand one hundred one or section two thousand one hundred eight of this article.
FYI, subsections (a) and (b) of Section 2119 permit agents and brokers to charge consulting fees and subsequently receive commissions on sales of insurance to those clients, if the written memorandum provides for that. Subsection (g) of Section 2101 and Section 2108 pertain to adjusters.
Therefore, all the law requires is that your service fee agreement specify or clearly define the amount or extent of the fee you’re charging, and that it be signed by the person being charged. It looks like the form you’re using is the Total Cost Form created by the Excess Line Association of New York. That should more than suffice.
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