Pa. Court Upholds Rights of Terminated Insurance Agents

By | January 29, 2008

  • January 29, 2008 at 1:06 am
    wondering.... says:
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    as the reason for non renewal…no longer writing with this broker…?

  • January 29, 2008 at 2:25 am
    DWT says:
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    That’s pretty much it. Our usual notice indcates that…

    This agent no longer represents…

  • January 29, 2008 at 4:02 am
    Presley Shofner says:
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    It is somewhat of a sad day when the only recourse an agent has is to sue for his rights. I was put in that position by a company over twenty years ago and I also won in court.( The carrier asked for an out of court settlement with a Gag order, but I refused the Gag Order.) In an industry where everything is based on a relationship it seems that the carriers are not playing with a full deck as more and more of them are trying to go direct sales over the internet and compete with thier own agents who are left with a disadvantaged price with the customer. It would be a whole lot nicer world if everyone just remembered that we all do better when we work together for the better good of our customers. Are there any companies out there anymore that believe in that principle? I hope so…..

  • January 29, 2008 at 4:57 am
    JLT says:
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    I have had to fight several carriers regarding this same issue, when as an MGA our agency’s productions due to the hard market classification terminations fell we lost two carrier contracts.

    In Washington to issue a non-renewal notice based upon “Agent no longer represents this carrier” isnt a legal reason. And the carrier has to give your agency 12 months after contract termination to replace the business. They also can not give your business to another appointed agent. Not without paying you the commission that placement would have generated for your agency.

    Unfortuantly a few of our peers that also lost their contracts didnt research the RCW or WAC and sent notices out when they were told to. Causing the loss of thousands of premium dollars along with devistating damage to their reputations.

    Moral of the story…dont let any carrier tell you what you can or can not do…research the law in your state. And hold the carrier accountable.

  • January 30, 2008 at 7:46 am
    SWFL Mark says:
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    Good point JLT. I find it hard to believe that Eppinger “didn’t care which way it went”.

    The only issue I have is that the reason for termination needs to be defined and this could create a different method for handling the existing book. If the agent or broker did something unethical or didn’t retain the required legal forms (this would put the company in extreme jeapordy), then I believe it’s in the company’s best interest to non-renew the business asap. On the other hand, if it’s a production issue, the cutomers shouldn’t be put in a position to re-shop for insurance just because the company and the agent had a different set of objectives.

  • January 30, 2008 at 8:22 am
    N Judge says:
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    Interesting when an agent is not concerned about their clients but about their book of business. I’ve seen them balk over these non-renewals when the company is having financial difficulties and can’t keep writing the business. And apparently, the contract becomes meaningless, unless you can terminate immediately with the agent and continue his book of business under contract terms for as long as the law requires. Makes it very difficult to end a relationships with a troublesome agent. As you can see, I’ve worked the company side. But mostly, I think it’s regrettable that the customer gets the squeeze play between two warring factions.

  • January 30, 2008 at 10:37 am
    JLT says:
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    I agree with the ethics issue. No carrier should be stuck due to an agents misrepresentation or financial instability however…this isnt the job of the carrier to police this agents actions.

    That is what the Insurance Commisioner’s Office is paid to do. I have seen enought displinary actions to know that when a carrier reports these unethical agents they usually act very quickly to seize the offending agent by the scruff of the neck to prevent any possible harm to the consumer.

    From an ethical standpoint it is our job at any level, Wholesaler, MGA or retailer to protect our consumers from a carrier’s whim. Isnt that why we all get paid the big bucks ;o)

  • January 30, 2008 at 11:51 am
    Stat Guy says:
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    Our company is committed to the agency system for distribution. I am surprised that an agent would have to go to court to fight for what was his in the first place, the book of business that he built. I read all kinds of horror stories in Insurance Journal about some of the big, national carriers; apparently they get too big and forget who it was that helped make them that way…we are NOT going to direct writing and it is easy to compete with the direct writers because we rely on hometown agents who still actually know their clients. As for this run off, this sounds like the company and agent had a very bad divorce…

  • January 30, 2008 at 12:38 pm
    downstate NY agent says:
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    I have experience with one company that terminated 5 agencies on the same day withoutgiving good reasons. It turned out that the real reason was that they all had sizable books of personal lines on Long Island where the company perceived a coastal axposure problem. This was the company’s way of getting around state laws. All 5 agencies have lost a ton of that business and the company go its way.

  • February 1, 2008 at 10:01 am
    Steve says:
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    How sorry is it when a company that uses the independent agency system as their main means for distributing business, they turn around and make the agent fight tooth and nail, THEN appeal the decision, just so precedented history can go on. Is this a company you want to represent?

  • February 4, 2008 at 9:46 am
    Jon L says:
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    Good point ! In the years to come, we will remember ECM not as a solid insurance carrier, but as the company that tried to “screw” the agency force. What a legacy. What was ECM thinking ?

  • February 4, 2008 at 10:18 am
    downstate NY guy again says:
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    It’s stories like this that make me value small companies that much more.

  • February 4, 2008 at 10:28 am
    Ernesto says:
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    ” Makes it very difficult to end a relationships with a troublesome agent.”

    I my experience, canceling business with an agent guilty of misrepresentation is not an issue.

    “troublesome” in company terms usually means a profitable book of business is with an agent they can’t get to behave like an employee. Companies hate it when their “independent agents” act independedent.

  • February 4, 2008 at 10:42 am
    Jack says:
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    I hope the Big Egos at Hartford take a look at this ruling. Hartford is infamous for their handling of agent terminations, and it really reached a fever pitch when they threw all their Florida agents under a bus this past year.

    Good for the MGA in this case. Too bad other carriers have gotten away with shenanigans because it’s too expensive and troublesome to fight about it.

  • February 4, 2008 at 12:04 pm
    JLT says:
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    Again remeber this is not the job of the company but the Insurance Commisioners Office, and by this case of the carrier’s actions it isnt the agent who suffers its the insured.

    Its our job as MGA to protect the interest of the insured, same with the carrier.

    Let the Commisioner handle the questionable agent. Not the carrier.

  • February 4, 2008 at 12:40 pm
    We got canned too says:
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    that we had given to one of our most coveted carriers. A carrier that I loved working with for 16 years. They were complaining about the losses and about poor production — right after their rates skyrocketed. I ended up being laid off after 12 years working at the firm.
    I actually had to type up the notices of non renewal and I called my people to give them a heads up about what was going on.
    The reason for non renewal was “no longer doing business with the broker.” Because the carrier had to pay some claims. I thought that’s what they were taking those premium dollars to maybe do. Good golly.

  • February 4, 2008 at 3:15 am
    downstate NY guy again says:
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    How is that the books of business that have “gone bad” are always the agents’ faults, even though insurance companies had the chance to underwrite the business when it was first written? I think companies like to blame others and other things for their results and not say, “Hey, we just had a stroke of bad luck but if we stay the course, things will improve.” Either that or say, “We blew it.”

    Big companies never seem to take responsiblity for their results prefering to blame others. On ther other hand, small companies do take responsibility and act responsibly and ethically, Let’s ehre it for small, responsible insurors.

  • February 4, 2008 at 4:10 am
    Company Gal says:
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    I have absolutely terminated agents due to mis-representation. Why in God’s name would I keep allowing an agent to put business on the books when he was outright lying about commercial operations and binding with us? An agent agrees to be the eyes and ears of the company. If I can’t trust them to do that, I don’t need them.

    So, should we regulate when an agent wants to move a book of business from one Co to another?

    I thought not

  • February 5, 2008 at 9:58 am
    Nobody Important says:
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    When I was on the property side I can recall any number of inspections on residential and commercial properties that looked like they had been deserted for years. Many of these houses looked like crack houses. These were bound by the agents under standard and above standard programs. It’s difficult to manage a book of business properly when some agents want to abuse the system. What can I get away with today?

  • February 5, 2008 at 10:23 am
    downstate NY guy says:
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    I think we’re talking about 2 different things heer. Terminating an agent for just cause is not only OK, it’s absolutely essential. if you can’t trust someone who is your agent, you should definitely not have him/her representing you. In fact, it mught even be a good idea to take legal action against them.

    On the other hand, when a company’s actions are frivolous when it comes to terminating agents, that’s a whole different story.

    I have seen agents of companies that I represented place business that I know would have walked away from. I have also had companies get upset because a book that had been good for many years had “gone bad” overnight. As a result, they terminated, when in reality, they were just looking to reduce their agency force perhaps because thay had appointed too many agents in the first place.

  • February 5, 2008 at 10:38 am
    steve says:
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    I believe we are looking at seperate items. Granted there is a always a bad apple in the barrel. They should have done their due dilligence before appointing an agent. THAT IS NOT WHAT THIS IS ABOUT!!

    The situation is the company does not have the right to send out illegal non-renewal notices. That is that!! And this company broke the law, and when they were told they broke the law, they appealed it.
    Maybe there isn’t any difference, it sounds like a few bad apples here also!!

  • February 5, 2008 at 10:50 am
    JLT says:
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    I agree. These are two different issues. In researching the company who sued the carrier they are a small agency with a gross revenue according to one company report of under 400K annually. So this in all likely hood a case where the carrier didnt feel this agent wasnt producing enough revenue. In this case the carrier is clearly in the wrong…

    So back to my original thread.. Insurance Companies are not god, they have to be held accountable for their actions.

  • February 5, 2008 at 11:51 am
    downstate NY guy says:
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    Amen

  • February 5, 2008 at 1:33 am
    Company Gal says:
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    Why is it illegal or immoral to terminate someone who doesn’t produce?

    Do you agents keep producers on the books who keep telling you their gonna produce next year…..but they never do?

    I absolutely agree, that the companies should follow the law in any termination. That said, I am seeing an overwhelming sentiment that we should keep an agency no matter what. I don’t get it. No one tells you to keep your sales force no matter what, why should we?

    It is true that a company should give plenty of warning and I think most do.

  • February 5, 2008 at 1:47 am
    JLT says:
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    Company Gal I think you need to read the whole thread. Nobody is saying its illegal or immoral to terminate an agent who doesnt produce. It is the manner in which they do that is in question hence the court ruling. To terminate the coverage to the insured by reason “The agent is no longer representing this carrier” is not a legal reason to terminate the INSURED’s coverage.

    Its easy to sit in the company’s position and think of the retailer as your customer however it isnt the agent that you are supposed to represent it is the name on that policy you just issued. That is part of what is in dispute, termination at will. That and the agent’s right to have an acceptable time frame to save his business. Put the shoe on the other foot. To suddenly be told “sorry you cant place any more business with us effective now” can be finacially devistating to an agent. In the case of the insured suddenly he is without coverage and what happens in the case of a loss?

    All the retailer is asking for is sufficent time to save his business. And for the insured to be able to have time to move his coverage to another carrier. Really is that too much to ask?

  • February 5, 2008 at 2:55 am
    Company Gal says:
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    JLT, I read the thread. Much of it was relating to the Co staying on a book and not terminating. You said “On the other hand, if it’s a production issue, the cutomers shouldn’t be put in a position to re-shop for insurance just because the company and the agent had a different set of objectives.” I agree – the agent should make provisions for their customer way in advance of non renewal. This is not the company’s fault.

    Sorry, when I tell an agent they need to meet a goal to retain their appointment, and they don’t meet it, then they get notice that if they don’t meet the next goal they will be terminated the agent has a decision to make. They either need to make producing that book a priority or move the business. It’s not personal. It’s either a business match or it’s not. If they can’t meet the goals, then they need to move the book (or sell it to another agent who represents co X to recap some $$). I absolutely understand that process is a pain in the butt. What usually happens is the agent ignores all of the goals and then is surprised and acts like the company is abandoning the insured. Then that same agent sees their volume decrease they cry hhow unfair it is.

    Someone else said fraud should be reported to the comissioner not handled by the company.

    I totally agree that the agent should be given adequate time to manage a business decision. I agree that the company should comply with the law at all times. At least in my experience, the dialog becan a couple of years before the legal clock even starts ticking. I just don’t buy that we should have to stay with an agent for any reason (production, fraud or even poor relationship).

    I have been on both sides of the business. I think that often CO people understimate how hard agency folks work or how mch they know. That said, I think that agents blame the company for everything.

  • February 11, 2008 at 4:52 am
    Shrinivas Shikhare says:
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    Who is responsible for setting up the rules, regulation for carrier-agent model ?

  • February 11, 2008 at 9:48 am
    downstate NY agent says:
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    There ARE NO models. Companies do whatever they think they can get away with.

  • February 11, 2008 at 11:13 am
    JLT says:
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    Amen



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