New York insurance agents are lauding a new legal opinion from state regulators that will allow producers to recover any money lost when clients bounce checks.
The Independent Insurance Agent and Brokers of New York (IIABNY) said the opinion — which reverses an earlier one that prevented agents from recovering money — is a victory for agents and has been a priority for the trade group for some time.
At issue are the fees agents pay when their insurance companies “sweep” their accounts for payments. Occasionally, agents will discover only afterward that a client’s check was bad.
IIABNY sought clarification from the department in 2006 whether an insurance company could refund the money to the agent and then cancel the client’s policy for non-payment of premium. The department said no in two separate opinions, the latest of which came in 2007. The agents group had argued that the department’s position was unfair to agents who unwittingly accepted bad checks.
Now, a new opinion form the department says that insurers can refund bounced check fees to agents and issue cancellation forms to insureds.
“We commend and thank the Insurance Department for reconsidering an issue of great importance to agents and brokers,” IIABNY Chair of the Board David M. Gelia said. “The previous position exposed producers to losses from a small number of clients who bounce checks. We appreciate the department’s change of opinion on this.”
The Professional Insurance Agents of New York (PIANY), the state’s other main trade group for agents, also praised the new opinion by the New York Insurance Department.
The previous opinions left an “agency holding the bag for the insufficient funds after the policy has been paid… Once the carrier has received payment from the agency, the policy cannot be canceled,” PIANY President Donna Chiapperino said. “We applaud the Insurance Department for recognizing the untenable position this puts our members, independent insurance agents, who are caught in the middle of and made victims of such transactions.”
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