This past week during a town hall meeting we had in Long Island, New York, one of the attendees posed a question about whether New York State has any requirements for insurance agents and brokers to carry errors and omissions coverage. Each state has its own unique laws and requirements as it relates to many things, and this appears to be one area of diversity. I have located no requirement in New York’s laws for insurance agents and brokers to carry errors and omissions coverage. That is not to say that these insurance professionals do not carry such coverage, either individually, or collectively as members of companies and firms. The law often sets a minimum standard, and precautions can be taken that provide more protection than the minimum standard.
There is a model act drafted by the NAIC (National Association of Insurance Commissioners) known as the Producer Licensing Model Act (PLMA) that has been adopted by some states, the goal of which is to govern the licensure of individuals and entities authorized to sell and solicit the purchase of insurance within the state and develop a system of reciprocity within the states subscribing to the PLMA. The PLMA provides for streamlined administrative licensing requirements, reciprocal recognition of continuing education, and reciprocity for surplus lines and limited lines producers, and creates uniform standards for key areas of producer licensing.
Some additional standards adopted as part of this uniformity process focus on the following broad areas: (1) licensing qualifications, (2) pre-licensing education, (3) licensing testing, (4) integrity/background check standards, (5) license application process, (6) appointment process, (7) continuing education requirements, and (8) limited lines.
Rhode Island is a state in the Northeast that has a specific requirement for insurance producers that states:
§ 27-2.4-23 Errors and omissions insurance required of resident insurance producers. –
(a) All holders of resident insurance producer licenses issued by the insurance division of the department of business regulation of the state of Rhode Island shall, as a condition for obtaining and retaining such license, carry and maintain errors and omissions insurance covering the business activities contemplated, in an amount not less than two hundred fifty thousand dollars ($250,000) per claim and five hundred thousand dollars ($500,000) annual aggregate limit. Authorized insurance producers of a licensed firm may meet the requirements of this section with a policy in the name of the licensed firm insuring each licensee employed by, or associated with, the firm.
(b) Licensees shall maintain records and keep copies of all errors and omissions policies issued under this subsection.
(c) Failure to carry and maintain errors and omissions insurance may result in the suspension or revocation of the resident insurance producer license.
(d) This section shall not apply to insurance producers that are employed in that capacity directly by insurance companies.
(e) The department of business regulation may grant a written exemption to any producer who shows that he/she is not engaged in the sale, solicitation or negotiation of insurance. Such exemption shall only be valid while the insurance producer is not engaged in the sale, solicitation or negotiation of insurance.
To all those in the Northeast affected by the weekend blizzard; stay warm and be safe.