HOUSE BILL REPORT

SB 6388

BYSenators von Reichbauer, Moore, Johnson and Rasmussen; by request of Insurance Commissioner

Regarding the cancellation of insurance.

House Committe on Financial Institutions & Insurance

Majority Report:  Do pass.  (8)

      Signed by Representatives Dellwo, Chair; Zellinsky, Vice Chair; Baugher, Beck, Crane, Day, Dorn and Winsley.

House Staff:John Conniff (786-7119)

AS PASSED HOUSE MARCH 2, 1990

BACKGROUND:

A property and casualty insurance company may not cancel an agency agreement or refuse to renew a class of business without providing 120 days advance written notice to the affected agent. After the notice of agency cancellation, the company must permit the agent to continue his or her representation of the company for one year as to policyholders who renew their policies with the company.

No insurance company may cancel or refuse to renew the policy of an insured because of a termination of an agency agreement nor may a company cancel or amend an agency agreement or refuse to accept business from an agent if the action is arbitrary or discriminatory. Moreover, any insurer or agent rejecting business placed by a broker must provide a written explanation of the rejection.

SUMMARY:

Insurance code provisions governing cancellation of agency agreements are repealed and replaced with new provisions incorporating and amending existing code provisions.

No insurer may cancel or refuse to renew a policy because of the cancellation of the insurer's contract with an independent agent.

If an insurer wishes to cancel an agency agreement, the insurer must give 120 days written notice unless the cancellation is the result of certain specific circumstances such as the agent's gross and willful misconduct. During the 120 day notice period prior to agency termination, the insurer may not amend the agency agreement.

Unless the agency agreement provides otherwise, an agent may not accept new business for the cancelling insurer without written permission of the cancelling insurer. So long as the policy written by the agent continues to meet the insurer's underwriting standards, the insurer must permit renewal of all policies sold by the agent for a period of one year and the insurer must pay the agent any commission that the agent would have earned but for the cancellation.

After the one year renewal period, if the agent has not placed a policyholder with a new insurer, the cancelling insurer must offer to renew policies meeting its underwriting standards and where practical, the insurer must assign the policy to another agent located reasonably near the policyholder.

Once an insurer has canceled an agency agreement, the insurer is not required to continue to use the canceled agent services but the canceled agent continues as the insurer's agent as to those policies renewed within the one year period following notice of cancellation of the agency agreement.

Unless a policyholder notifies the insurer that the policyholder does not wish to renew his or her policy with the insurer, the insurer must give notice of renewal and must renew the policy if the policyholder continues to meet the underwriting standards of the company. A canceled agent may provide the written notice to the insurer that a policyholder does not wish to continue with the company so long as the policyholder has given the agent written authorization to provide such notice to the insurer.

The provisions of this act do not apply to agents employed directly by the insurer, to general agents, to non-property and casualty agents, and to cancellations resulting from insurer insolvency.

Fiscal Note:      Not Requested.

House Committee ‑ Testified For:    No one.

House Committee - Testified Against:      No one.

House Committee - Testimony For:    None.

House Committee - Testimony Against:      None.