375.149. Written contract required for placing business with insurer, content--termination of contract for cause--prohibited acts by managing general agents.
Written contract required for placing business with insurer,content--termination of contract for cause--prohibited acts bymanaging general agents.
375.149. No person, firm, association or corporation actingin the capacity of a managing general agent shall place businesswith an insurer unless there is in force a written contractbetween the insurer and the managing general agent which setsforth the responsibilities of each party and where both partiesshare responsibility for a particular function, specifies thedivision of such responsibilities, which has been approved by thedirector prior to its becoming effective as being in compliancewith the managing general agents act and which contains thefollowing minimum provisions:
(1) The insurer may terminate the contract for cause uponwritten notice to the managing general agent. The insurer maysuspend the underwriting authority of the managing general agentduring the pendency of any dispute regarding the cause fortermination. Nothing in this subdivision is intended to relievethe managing general agent or insurer of any other contractualobligation;
(2) The managing general agent will render accounts to theinsurer detailing all transactions and remit all funds due underthe contract to the insurer on not less than a monthly basis;
(3) All funds collected for the account of an insurer willbe held by the managing general agent in a fiduciary capacity ina segregated account in a bank which is a member of the FederalReserve System. This account shall be used for all payments onbehalf of the insurer and for no other purpose. The managinggeneral agent may retain no more than three months' estimatedclaims payments and allocated loss adjustment expenses;
(4) Separate records of business written by the managinggeneral agent shall be maintained. The insurer shall have accessand right to copy all accounts and records related to itsbusiness in a form usable by the insurer and the director shallhave access to all books, bank accounts and records of themanaging general agent in a form usable to the director. Suchrecords shall be retained for a minimum of three years followingthe transactions to which the records relate;
(5) The contract may not be assigned in whole or part by themanaging general agent;
(6) Appropriate underwriting guidelines including:
(a) The maximum annual premium volume;
(b) The basis of the rates to be charged;
(c) The types of risks which may be written;
(d) Maximum limits of liability;
(e) Applicable exclusions;
(f) Territorial limitations;
(g) Policy cancellation provisions; and
(h) The maximum policy period;
(7) The insurer shall retain the right to cancel or notrenew any policy of insurance subject to the applicable laws andregulations concerning the cancellation and nonrenewal ofinsurance policies;
(8) If the contract permits the managing general agent tosettle claims on behalf of the insurer:
(a) All claims must be reported to the company in a timelymanner;
(b) A copy of the claim file will be sent to the insurer atits request or as soon as it becomes known that the claim:
a. Has the potential to exceed a maximum amount determinedby the director or exceeds the limit set by the company,whichever is less;
b. Involves a coverage dispute;
c. May exceed the managing general agent's claims settlementauthority;
d. Is open for more than six months; or
e. Is closed by payment of an amount set by the director oran amount set by the company, whichever is less;
(c) All claim files will be the joint property of theinsurer and managing general agent. However, upon an order ofliquidation of the insurer such files shall become the soleproperty of the insurer or its estate, but the managing generalagent shall have reasonable access to and the right to copy thefiles on a timely basis;
(d) Any settlement authority granted to the managing generalagent may be terminated for cause upon the insurer's writtennotice to the managing general agent or upon the termination ofthe contract. The insurer may suspend the settlement authorityduring the pendency of the dispute regarding the cause fortermination. Nothing in this paragraph is intended to relievethe managing general agent or insurer of any other contractualobligation;
(9) Where electronic claims files are in existence, thecontract must include provision regarding the timely transmissionof the data;
(10) If the contract provides for a sharing of interimprofits by the managing general agent, and the managing generalagent has the authority to determine the amount of the interimprofits by establishing loss reserves or controlling claimpayments, or in any other manner, interim profits will not bepaid to the managing general agent until one year after they areearned for property insurance business and five years after theyare earned on casualty business and not until the profits havebeen verified pursuant to section 375.150;
(11) The managing general agent shall not:
(a) Bind reinsurance or retrocessions on behalf of theinsurer, except that the managing general agent may bindfacultative reinsurance contracts pursuant to obligatoryfacultative agreements if the contract with the insurer containsreinsurance underwriting guidelines including, for bothreinsurance assumed and ceded, a list of reinsurers with whichsuch automatic agreements are in effect, the coverages andamounts or percentages that may be reinsured and commissionschedules;
(b) Commit the insurer to participate in insurance orreinsurance syndicates;
(c) Appoint any producer without assuring that the produceris lawfully licensed to transact the type of insurance for whichhe is appointed;
(d) Without prior approval of the insurer, pay or commit theinsurer to pay a claim over a specified amount, net ofreinsurance, which shall not exceed one percent of the insurer'spolicyholder's surplus as of December thirty-first of theimmediately preceding calendar year;
(e) Collect any payment from a reinsurer or commit theinsurer to any claim settlement with a reinsurer, without priorapproval of the insurer. If prior approval is given, a reportmust be promptly forwarded to the insurer;
(f) Permit its subproducer to serve on its board ofdirectors;
(g) Jointly employ an individual who is employed with theinsurer; or
(h) Appoint a subordinate managing general agent.
(L. 1990 H.B. 1739 § 8)Effective 7-1-91