Z-549                 _______________________________________________

                                                   HOUSE BILL NO. 1196

                        _______________________________________________

State of Washington                               51st Legislature                              1989 Regular Session

By Representatives Dellwo, Chandler, Nutley, Winsley and K. Wilson; by request of Insurance Commissioner

Read first time 1/18/89 and referred to Committee on Financial Institutions & Insurance.

AN ACT Relating to cancellation of contracts between insurers and agents; adding a new section to chapter 48.17 RCW; and repealing RCW 48.17.590.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1.  A new section is added to chapter 48.17 RCW to read as follows:

          (1) No insurer authorized to do business in this state may cancel or refuse to renew any policy because that insurer's contract with the independent agent through whom such policy is written has been terminated by the insurer, the agent, or by mutual agreement.

          (2) If an insurer intends to terminate a written agency contract with an independent agent, the insurer shall give the agent not less than one hundred twenty days' advance written notice of the intent, unless the termination is based upon the agent's abandonment of the agency, the agent's gross and willful misconduct, the agent's loss of license by order of the insurance commissioner, the agent's sale of, or material change of ownership in, the agency, the agent's fraud or material misrepresentation relative to the business of insurance, or the agent's default in payments due the insurer under the terms of the agreement.  During the notice period the insurer shall not amend the existing contract without the consent of the agent.

          (a) Unless the agency contract provides otherwise, during the one hundred twenty day notice period the independent agent shall not write or bind any new business on behalf of the terminating insurer without specific written approval.  However, routine adjustments by insureds are permitted.  The terminating insurer shall permit renewal of all its policies in the agent's book of business for a period of one year following the effective date of the termination, to the extent the policies meet the insurer's underwriting standards.  The rate of commission for any policies renewed under this provision shall be the same as the agent would have received had the agency agreement not been terminated.

          (b) At the conclusion of the one year renewal period, an insurer that does not have a valid underwriting reason for not renewing coverage and that has not received notification from its terminated agent of the placement of the coverage with another insurer shall offer to continue the coverage to those insureds whose policies have not been placed with another insurer.  In those cases, the insurer may write the policies directly or it may assign the business to appointed agents located reasonably near the insured willing to accept the assignments, with or without the involvement of the insured in the agent selection process.

          (c) An insurer is not required to continue the appointment of a terminated independent agent during or after the one year renewal period.  However, an agent whose contract has been terminated by the insurer remains an agent of the terminating insurer as to actions associated with the policies subject to this section just as if he or she were appointed by the insurer as its agent.

          (3) In the absence of receipt of notice from the insured that coverage will not be continued with the existing insurer, an insurer whose agency contract has been terminated by an independent agent, or by the mutual agreement of the insurer and the agent, that elects to renew or lacks a valid reason not to renew, shall give the renewal notice required by chapter 48.18 RCW to affected insureds, and continue renewed coverage in accordance with the methods specified in subsection (2)(b) of this section.  Agents affected by this subsection may provide the notice to an insurer that an insured does not intend to continue existing coverage with the insurer, after receiving written authority to do so from an insured.

          (4) For purposes of this section an "independent agent" is a licensed insurance agent representing an insurer on an independent contractor basis and not as an employee.  This term includes only those agents not obligated by contract to place insurance accounts with a particular insurer or group of insurers.

          (5) This section does not apply to (a) agents or policies of an insurer or group of insurers if the business is owned by the insurer or group of insurers and the termination of any such contractual agreement does not result in the cancellation or nonrenewal of any policies of insurance; (b) general agents, to the extent that they are acting in that capacity; (c) life, disability, surety, ocean marine and foreign trade, and title insurance policies; (d) situations where the termination of the agency contract results from the insolvency or liquidation of the terminating insurer.

          (6) No insurer may terminate its agency contract with an appointed agent unless it complies with this section.

          (7) Nothing contained in this section excuses an insurer from giving  cancellation and renewal notices that may be required by chapter 48.18 RCW.

NEW SECTION. Sec. 2.  Section 1, chapter 286, Laws of 1986 and RCW 48.17.590 are each repealed.