Section: Outlines, analyses and headnotes not part of statutes
6. No person, firm, association, or corporation acting in the capacity of a managing general agent shall place business with an insurer unless there is in force a written contract between the parties which sets forth the responsibilities of each party and, if both parties share responsibility for a particular function, specifies the division of such responsibilities, and which contains the following minimum provisions:
a. The insurer may terminate the contract upon written notice to the managing general agent. The insurer may suspend the underwriting authority of the managing general agent during the pendency of any dispute regarding the cause for termination. The insurer shall, within 15 days of any termination of the contract, file written notice of the termination with the commissioner. Notice of termination shall be on a form established by the commissioner and shall indicate the date of termination and the reason therefor. Agency appointment shall not terminate until notice of termination has been received by the commissioner.
b. The managing general agent shall render accounts to the insurer detailing all transactions and remit all funds due under the contract to the insurer on not less than a monthly basis.
c. All funds collected for the account of an insurer shall be held by the managing general agent in a trust account which shall conform with the requirements established by the commissioner for the management of funds by insurance producers licensed in this State. The account shall be used for all payments on behalf of the insurer. The managing general agent shall retain no more than three months' estimated claims payments and allocated loss adjustment expenses.
d. Separate records of business written by the managing general agent shall be maintained. The insurer shall have access and the right to copy all accounts and records related to this business in a form usable by the insurer and the commissioner shall have access to all books, bank accounts and records of the managing general agent in a form usable to the commissioner.
e. The contract shall not be assigned in whole or part by the managing general agent.
f. Appropriate underwriting guidelines including:
(1) The maximum annual premium volume;
(2) The basis of the rates to be charged;
(3) The types of risks which may be written;
(4) Maximum limits of liability;
(5) Applicable exclusions;
(6) Territorial limitations;
(7) Policy cancellation provisions; and
(8) The maximum policy period.
The insurer shall have the right to cancel or non-renew any policy of insurance subject to the applicable laws and regulations of this State governing the cancellation and nonrenewal of insurance policies.
g. If the contract permits the managing general agent to settle claims on behalf of the insurer the managing general agent shall comply with the requirements governing the settlement of claims set forth in subsections (9) and (10) of section 4 of P.L.1947, c.379 (C.17:29B-4), or sections 1 and 2 of P.L.1975, c.101 (C.17B:30-13.1 and 17B:30-13.2), as applicable, and any regulations promulgated by the commissioner thereunder. In addition:
(1) All claims shall be reported to the company in a timely manner.
(2) A copy of the claim file shall be sent to the insurer at its request or as soon as it becomes known that the claim:
(a) Has the potential to exceed an amount determined by the commissioner or exceeds the limit set by the insurer, whichever is less;
(b) Involves a coverage dispute;
(c) May exceed the managing general agent's claims settlement authority;
(d) Is open for more than six months; or
(e) Is closed by payment of an amount set by the commissioner or an amount set by the insurer, whichever is less.
(3) All claim files shall be the joint property of the insurer and managing general agent. However, upon an order of liquidation of the insurer such files shall become the sole property of the insurer or its estate, and the managing general agent shall have reasonable access to and the right to copy the files on a timely basis.
(4) Any settlement authority granted to the managing general agent may be terminated for cause upon the insurer's written notice to the managing general agent or upon the termination of the contract. The insurer may suspend the settlement authority during the pendency of any dispute regarding the cause for termination.
h. If electronic claims files are in existence, the contract shall address the timely transmission of the data.
i. If the contract provides for a sharing of interim profits by the managing general agent and the managing general agent has the authority to determine the amount of the interim profits by establishing loss reserves or controlling claim payments or in any other manner, interim profits shall not be paid to the managing general agent until one year after they are earned for property insurance business and five years after they are earned on casualty business, or such other periods of time as determined by the commissioner, and not until the profits have been certified pursuant to section 7 of this act.
j. The managing general agent shall not:
(1) Bind reinsurance or retrocessions on behalf of the insurer, except that the managing general agent may bind facultative reinsurance contracts pursuant to obligatory facultative agreements if the contract with the insurer contains reinsurance underwriting guidelines including, for both reinsurance assumed and ceded, a list of reinsurers with which such automatic agreements are in effect, the coverages and amounts or percentages that may be reinsured and commission schedules;
(2) Commit the insurer to participate in insurance or reinsurance syndicates;
(3) Appoint any insurance producer without assuring that the producer is lawfully licensed to transact the type of insurance for which he is appointed;
(4) Without prior approval of the insurer, pay or commit the insurer to pay a claim over a specified amount, net of reinsurance, which shall not exceed one percent of the insurer's policyholders' surplus as of December 31 of the last completed calendar year;
(5) Collect any payment from a reinsurer or commit the insurer to any claim settlement with a reinsurer, without prior approval of the insurer. If prior approval is given, a report shall be promptly forwarded to the insurer;
(6) Permit its subproducer to serve on its board of directors;
(7) Jointly employ an individual, who is employed with the insurer; or
(8) Appoint a sub-managing general agent.
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