First Regular Session
Sixty-first General Assembly
LLS NO. 970714.01D EBD
HOUSE BILL 971345
STATE OF COLORADO
BY REPRESENTATIVE Dean;
also SENATOR Ament.
BUSINESS AFFAIRS & LABOR
A BILL FOR AN ACT
CONCERNING TERMINATION OF INSURANCE AGENTS, AND,
IN CONNECTION THEREWITH, PROHIBITING THE WRONGFUL TERMINATION
OF INSURANCE AGENTS.
Bill Summary
(Note: This summary applies to this bill as introduced
and does not necessarily reflect any amendments which may be subsequently
adopted.)
Prohibits an insurer from canceling a written agreement or appointment with an agent or from restricting an agent's underwriting authority with respect to property or casualty insurance based on the agent's loss ratio experience if the insurer required the agent to submit applications to the insurer for underwriting approval.
Prohibits an insurer from canceling or refusing to renew a written contractual agreement except for "good cause." Defines "good cause" as criminal misconduct, conviction of crimes of moral turpitude, absence from the agent's business premises, the agent's failure to pay moneys owed to the insurer in a timely manner, death or total disability of the agent, or insolvency or bankruptcy of the insurer. Requires the insurer to notify the agent 90 days before the proposed action. Voids the notice if the agent cures the grounds for "good cause".
Forbids the insurer, in order to avoid the requirements of this act, from conditioning acceptance of an insurance application on production of applications or premiums from other classes of business restricting the number of policies otherwise acceptable to the agent, or reducing the commission level below that in the contract.
Forbids an insurer from taking action against an agent that approaches a government agency or official regarding an issue that the agent or a client of the agent has with an insurer.
Allows for economic damages and exemplary (punitive) damages as authorized by law for violations of this act.
Requires insurers to pay any amounts owed to terminated
agents for policy renewals on or before the date those payments
are due. Requires an insurer to provide a report on all policies
solicited by the agent before the agent was terminated.
Be it enacted by the General Assembly of the State of Colorado:
SECTION 1. Part 1 of article 1 of title 10, Colorado Revised Statutes, 1994 Repl. Vol., as amended, is amended BY THE ADDITION OF THE FOLLOWING NEW SECTIONS to read:
101120.5. Wrongful termination of insurance agents. (1) AS USED IN THIS SECTION, UNLESS THE CONTEXT OTHERWISE REQUIRES:
(a) "AGENT" MEANS A PERSON THAT, BY APPOINTMENT OR WRITTEN AGREEMENT, SOLICITS, NEGOTIATES, SERVICES, OR EFFECTS INSURANCE OR ANNUITY CONTRACTS IN THIS STATE.
(b) "GOOD CAUSE" MEANS:
(I) CRIMINAL MISCONDUCT OR GROSS NEGLIGENCE RELATING TO THE BUSINESS OR OCCURRING ON THE PREMISES OF THE AGENT;
(II) FRAUD OR CRIMES INVOLVING MORAL TURPITUDE;
(III) ABSENCE FROM THE PREMISES OF THE INSURANCE AGENT FOR SUCH A PERIOD OF TIME AS MAY UNREASONABLY INTERFERE WITH THE TRANSACTION OF INSURANCE BUSINESS;
(IV) FAILURE BY THE AGENT TO PAY MONEYS OWED TO THE INSURER IN A TIMELY MANNER;
(V) DEATH OR TOTAL DISABILITY OF THE AGENT;
(VI) THE INSURER'S BANKRUPTCY OR INSOLVENCY; EXCEPT THAT THE COMMISSIONER SHALL NOTIFY ALL AGENTS OF SUCH INSURER.
(c) "LOSS RATIO EXPERIENCE" MEANS THE RATIO OF CLAIMS PAID BY THE PREMIUM COMPARED WITH THE PREMIUMS PAID.
(2) NO INSURER MAY CANCEL A WRITTEN AGREEMENT OR APPOINTMENT WITH AN AGENT OR REDUCE OR RESTRICT AN AGENT'S UNDERWRITING AUTHORITY WITH RESPECT TO PROPERTY OR CASUALTY INSURANCE BASED ON THE LOSS EXPERIENCE OR THE MIX OF THE AGENT'S ENTIRE BOOK OF BUSINESS, IF THE INSURER REQUIRED THE AGENT TO SUBMIT APPLICATIONS TO THE INSURER FOR UNDERWRITING APPROVAL OR HOLD AND MAINTAIN APPLICATIONS FOR REVIEW AT ANY TIME BY THE INSURER'S UNDERWRITERS OR PORTFOLIO MANAGERS FOR FINAL OR CONTINUED APPROVAL OR REJECTION OR CANCELLATION OF INSURANCE APPLICATIONS OR CONTRACTS.
(3) NO INSURER MAY UNILATERALLY CANCEL, REFUSE TO RENEW, OR OTHERWISE TERMINATE A WRITTEN CONTRACTUAL AGREEMENT WITH AN AGENT EXCEPT FOR GOOD CAUSE. SUCH WRITTEN CONTRACTUAL AGREEMENT INCLUDES ANY PRIOR MODIFICATION THAT HAS BEEN IN EFFECT FOR FIVE OR MORE YEARS. IF AN INSURER PROPOSES TO CANCEL, REFUSE TO RENEW, OR TERMINATE A WRITTEN CONTRACTUAL AGREEMENT, THE INSURER SHALL NOTIFY THE AGENT BY CERTIFIED MAIL AT LEAST NINETY DAYS PRIOR TO THE DATE ON WHICH THE INSURER PROPOSES TO CANCEL SUCH WRITTEN CONTRACTUAL AGREEMENT. SUCH NOTICE SHALL INCLUDE A STATEMENT OF THE GOOD CAUSE UNDER WHICH THE AGREEMENT IS BEING CANCELED, NONRENEWED, OR TERMINATED.
(4) IF, PRIOR TO THE DATE SET BY THE INSURER FOR CANCELLATION, NONRENEWAL, OR TERMINATION, THE AGENT HAS CURED THE BASIS OF THE INSURER'S GOOD CAUSE, THE NOTICE AND ANY SUBSEQUENT CANCELLATION, NONRENEWAL, OR TERMINATION SHALL BE VOID.
(5) NO INSURER, FOR THE PURPOSE OF AVOIDING THE REQUIREMENTS OF SUBSECTIONS (2) TO (4) OF THIS SECTION, SHALL:
(a) CONDITION ACCEPTANCE OF AN INSURANCE APPLICATION FROM ANY OR ALL AGENTS ON THE CONTEMPORANEOUS PRODUCTION OF APPLICATIONS OR PREMIUMS FROM OTHER CLASSES OF INSURANCE FROM AN AGENT'S EXISTING OR FUTURE CLIENTS;
(b) RESTRICT THE NUMBER OF POLICIES OF INSURANCE OR ANNUITY CONTRACTS PROCURED BY AN AGENT THAT ARE OTHERWISE ACCEPTABLE TO THE INSURER BY THE IMPOSITION OF POLICY OR PREMIUM COUNT QUOTAS;
(c) REDUCE POLICY LIMITS OR ELIMINATE FORMS AVAILABLE TO ANY SPECIFIC AGENT OR GROUP OF AGENTS IF THOSE LIMITS OR FORMS ARE NOT IMPLEMENTED ON A STATEWIDE BASIS TO THE TOTAL AGENCY FORCE OF THAT COMPANY; OR
(d) REDUCE THE COMMISSION LEVEL FROM THAT ESTABLISHED BY A WRITTEN CONTRACT.
(6) AN INSURER SHALL NOT TERMINATE OR OTHERWISE PENALIZE AN AGENT SOLELY BECAUSE THE AGENT CONTACTED AN ELECTED OFFICIAL, GOVERNMENT REPRESENTATIVE, OR AGENCY REGARDING AN ISSUE THAT THE AGENT OR ANY CLIENT OF THE AGENT MAY HAVE WITH AN INSURER.
(7) IN ANY CIVIL ACTION FOR THE ENFORCEMENT OF THIS SECTION, THE PREVAILING PARTY SHALL BE ENTITLED TO ECONOMIC DAMAGES AND EXEMPLARY DAMAGES AS AWARDED IN ACCORDANCE WITH SECTION 1321102, C.R.S.
101120.7. Agent entitled to payment. (1) AS USED IN THIS SECTION, UNLESS THE CONTEXT OTHERWISE REQUIRES:
(a) "AGENT" MEANS A PERSON THAT, BY APPOINTMENT OR WRITTEN AGREEMENT, SOLICITS, NEGOTIATES, SERVICES, OR EFFECTS INSURANCE OR ANNUITY CONTRACTS IN THIS STATE.
(b) "BOOK OF BUSINESS" MEANS THAT GROUP OF CLIENTS OR POLICYHOLDERS THAT AN AGENT IS RESPONSIBLE FOR:
(I) SELLING INSURANCE POLICIES TO SUCH GROUP;
(II) SERVICING INSURANCE POLICIES ISSUED TO SUCH GROUP;
(III) SOLICITING RENEWALS OF POLICIES OWNED BY SUCH GROUP;
(IV) SOLICITING FUTURE BUSINESS FOR THE INSURER FROM SUCH GROUP; OR
(V) ACTING AS INTERMEDIARY BETWEEN THE INSURER AND SUCH GROUP.
(2) AN INSURER SHALL PAY TO AN AGENT WHO HAS BEEN TERMINATED THE PRORATED AMOUNT OF ANY COMMISSIONS OR OTHER PAYMENTS CUSTOMARILY MADE TO AGENTS BY INSURERS FOR THE RENEWAL OF INSURANCE POLICIES ON OR BEFORE THE DATE ON WHICH THOSE PAYMENTS WOULD HAVE BEEN DUE IF THE AGENTINSURER RELATIONSHIP HAD CONTINUED.
(3) AN AGENT WHO HAS BEEN TERMINATED SHALL BE ENTITLED TO COMPENSATION FOR THE AGENT'S BOOK OF BUSINESS.
(4) AN AGENT SHALL BE ENTITLED TO AN ACCOUNTING AND A REPORT FROM THE INSURANCE COMPANY ON THE STATUS OF ALL POLICIES SOLICITED BY THE AGENT DURING THE DURATION OF THE AGENTINSURER RELATIONSHIP.
SECTION 2. Safety clause. The general assembly hereby finds, determines, and declares that this act is necessary for the immediate preservation of the public peace, health, and safety.