HRS § 431-9C-103 - Required contract provisions

No person, firm, association, or corporation acting as a managing general agent shall place business with an insurer unless there is in force a written contract between the managing general agent and the insurer which sets forth the responsibilities of each party; where both the managing general agent and the insurer share responsibility for a particular function, specifies the division of those responsibilities and which contains at least the following additional provisions: (1) The insurer may terminate the contract for cause upon written notice to the managing general agent and may suspend the underwriting authority of the managing general agent during the pendency of any dispute regarding the cause for termination; (2) The managing general agent shall render accounts to the insurer detailing all transactions and shall remit all funds due under the contract to the insurer on not less than a monthly basis; (3) All funds collected for the account of an insurer shall be held by the managing general agent in a fiduciary capacity and shall be deposited in an account in a bank which is a member of the Federal Reserve System. This account shall be used for all payments on behalf of the insurer by the managing general agent. The managing general agent may retain no more than three months estimated claims payments and allocated loss adjustment expenses; (4) Separate records of business written by the managing general agent shall be maintained in the managing general agent's office. The insurer shall have the right to access and to copy all accounts and records of the managing general agent related to the insurer's business in a form usable by the insurer; the commissioner shall have access to all books, bank accounts, and records of the managing general agent in a form usable to the commissioner. Records shall be in an organized form according to each class of insurance and shall include the following information to the extent it is applicable: (A) A record of each insurance contract procured or issued, together with the names of the insurers and insureds, the amount of premium paid or to be paid, or the basis of the premium or consideration paid or to be paid, and a statement of the subject of the insurance; (B) The names of any other licensees from whom business is accepted and the names of persons to whom commissions or allowances of any kind are promised or paid; (C) A record of each investigation or adjustment undertaken or consummated and a statement of any fee, commission, or other compensation received or to be received by an adjuster on account of each investigation or adjustment; (D) A record of each bill reviewed and a statement of any fee, commission, or other compensation received or to be received by the independent bill reviewer on account of the bill reviewed; and (E) Any additional information as shall be customary or as may reasonably be required by the commissioner. This paragraph shall not apply to life or accident and health or sickness insurance if the records required of that insurance are customarily maintained in the offices of the insurer; (5) The contract may not be assigned in whole or in part by the managing 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. The insurer shall have the right to cancel or nonrenew any policy of insurance subject to the applicable laws and rules concerning the cancellation and nonrenewal of insurance policies; (7) The insurer shall require the managing general agent to obtain and maintain a surety bond for the protection of the insurer. The bond amount shall be $100,000 or ten per cent of the managing general agent's total nationwide annual written premium for the insurer in the prior calendar year, whichever is greater; provided that the amount of the surety bond shall not exceed $500,000; (8) The insurer shall require the managing general agent to obtain and maintain an errors and omissions policy in the minimum amount of $1,000,000; (9) If the contract permits the managing general agent to settle claims on behalf of the insurer: (A) All claims shall be reported to the insurer in a timely manner; (B) A copy of the claim file shall be sent to the insurer upon request or as soon as it becomes known that the claim: (i) Has the potential to exceed a threshold amount determined by the commissioner or a limit set by the insurer, whichever is less; (ii) Involves a coverage dispute; (iii) May exceed the managing general agent's claims settlement authority; (iv) Is open for more than six months; or (v) Is closed by payment of a threshold amount set by the commissioner or an amount set by the insurer, whichever is less; (C) All claim files shall be the joint property of the insurer and managing general agent. However, upon an order of liquidation of the insurer, the files shall become the sole property of the insurer or its estate; provided that the managing general agent shall have reasonable access to and the right to copy the files on a timely basis; (D) 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; provided that the insurer may suspend the settlement authority during the pendency of any dispute regarding the cause for termination; and (E) Where electronic claims files are in existence, the contract shall address the timely transmission of the data; (10) 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, 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 and, in any event, not until the profits have been verified through examination pursuant to section 431:9C-105; and (11) The managing general agent shall not: (A) 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 whom those automatic agreements are in effect, the coverages and amounts or percentages that may be reinsured, and commission schedules; (B) Commit the insurer to participate in insurance or reinsurance syndicates; (C) Appoint any producer without assuring that the producer is lawfully licensed to transact the type of insurance for which the producer is appointed; (D) 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 per cent of the insurer's policyholder's surplus as of December 31 of the last completed calendar year; (E) 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; (F) Permit its subagent to serve on the board of directors of the insurer; (G) Employ an individual who is also employed by the insurer; or (H) Appoint a sub-managing general agent. [L 2002, c 155, pt of §2; am L 2003, c 212, §71; am L 2010, c 116, §1(11)]