Authored by attorney Douglas M. Palais
Agreements between insurers and their appointed agents set forth the actual authority, as opposed to the apparent authority, of the agents. While commission schedules often change with some regularity, there are other portions of these agreements that agents should monitor on a regular basis.
This article will very briefly point out a few of these types of provisions and provide some tips for agents.
Underwriting Guidelines: Agency agreements often refer to a separate set of documents which contain the insurer’s underwriting guidelines. It is essential for agents to keep up to date with these guidelines and to review them office-wide in order to ensure compliance.
Binding Authority: Similarly, agents must stay aware of their binding authority, whether set forth in the agency agreement itself or in a separate set of documents.
Indemnification: Nearly every agency agreement contains indemnification provisions. Some of these are bilateral and some are one-sided. Either way, it is important to be familiar with these provisions, particularly when there is a potential E & O claim on the horizon.
Choice of Law: Some agency agreements contain choice of law provisions, which would apply in the event of an insurer/agency dispute. Most often, when dealing with national insurers, the choice of law is not Virginia law.
Choice of Venue: Similarly, some agency agreements specifically identify a geographic location for dispute resolution which is not in Virginia.
Arbitration: Many agency agreements contain arbitration provisions, which are uniformly enforced by the courts. Thus, if there is an insurer/agent dispute, courts will not have jurisdiction over the dispute; instead, one or more arbitrators will. And there is no appeal from a decision of an arbitrator or an arbitration panel.
Tip Number One: Designate an agency employee for the maintenance and updating of all agency agreements. Be sure that updates are shared throughout the agency.
Tip Number Two: Do not rely on telephonic authorization from an insurer representative with respect to diverging from written underwriting guidelines and/or binding authority. If and when push comes to shove, the documents will govern no matter what the agent may have been told verbally.
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