Neither insurance statutes nor regulations address property/casualty broker commissions, limitations or when broker commissions are considered earned, except that Insurance Law §2102 requires the proper licensing of a broker before a commission can be legally paid or accepted. [See the Licensing-Excess Line Brokers ELANY Says]
Court cases and Department of Financial Services interpretations, however, offer some helpful guidance. Circular Letter 1976-16 asserts the following: In general, a broker has earned his commission in full when the policy has been issued and the premium paid.
There are exceptions to this general statement. A broker and insurer can contractually agree to return commissions by the broker in proportion to any return premium. The residual markets have their own rules as well.
An insurance company may pay commissions that are owed to an agent after the agent’s termination date in cases where the agent’s license has expired and has not been renewed. An agent’s commission vests at the time the licensed agent places the policy. While the Department of Financial Service' OGC Opinion of May 7, 2001 stating this discusses agents, ELANY believes the opinion would apply to brokers as well.
While an insurance broker may forego collecting earned commission from an insurer, doing so cannot reduce the premium as per the OGC Opinion of February 12, 2001.
***
ELANY DISCLAIMER:
This is not intended to be nor should it be construed as legal advice. Consult with your own legal counsel.
Last Reviewed/Revised: October 15, 2020