Minnesota Session Laws - 1991, Regular Session

  

                         Laws of Minnesota 1991 

                         CHAPTER 39-H.F.No. 598 
           An act relating to insurance; regulating agent 
          rehabilitations and cancellations of agency contracts 
          by fire and casualty companies; amending Minnesota 
          Statutes 1990, sections 60A.171; and 60A.175. 
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
    Section 1.  Minnesota Statutes 1990, section 60A.171, is 
amended to read: 
    60A.171 [REHABILITATION AND CANCELLATION OF AGENCY 
CONTRACTS BY FIRE AND CASUALTY LOSS INSURANCE COMPANIES.] 
    Subdivision 1.  (a) After an agency contractual 
relationship has been in effect for a period of three years, an 
insurance company writing fire or casualty loss insurance in 
this state may not terminate the agency contractual relationship 
with any appointed agent unless the company has attempted to 
rehabilitate the agent as provided in subdivision 3a and gives 
the agent notice in writing of the termination at least three 
months in advance 4.  The insurer shall provide written notice 
of intent to rehabilitate. 
     (b) If the agent and company are not able to reach a 
mutually acceptable plan of rehabilitation, the company may 
terminate the agency contractual relationship after providing 
written notice of termination to the agent at least 90 days in 
advance. 
    (c) The notice of termination must include the reasons for 
termination and a copy of the notice of intent to rehabilitate. 
     (d) An insurance company may not terminate an agency 
contract based upon any of the following: 
     (1) an adverse loss experience for a single year; 
     (2) the geographic location of the agent's auto and 
homeowners insurance business; or 
     (3) the performance of obligations required of an insurer 
under Minnesota Statutes. 
    Subd. 2.  The company shall at the request of the agent 
renew any insurance contract written by the agent for the 
company for not more than one year for fire or casualty loss 
insurance during a period of nine months after the effective 
date of the termination, but in the event any risk does not meet 
current underwriting standards of the company, the company may 
decline its renewal, provided that the company shall give the 
agent not less than 60 days notice of its intention not to renew 
the contract of insurance. 
    Subd. 3.  No new business insurance or bond contract shall 
be written by the agent for the company after the effective date 
of the termination without the written approval of the company, 
or a limited contract.  The agent may increase liability on 
renewal or in force business for not more than one year for the 
insured after the effective date of the termination if the 
increased liability meets the current underwriting standards of 
the company. 
    Subd. 3a. 4.  (a) Following proper Before notice as 
required under subdivision 1, and prior to the effective date of 
termination of the agency contract, in an effort to avoid 
termination, the company shall negotiate in good faith in an 
effort to reach mutual agreement with the agent on a written 
plan for rehabilitation. 
    (b)  The rehabilitation plan must be in writing and must 
contain the following elements: 
    (1) identification by the company of the problem areas 
which need rehabilitation; 
    (2) what the agent must do to avoid termination; 
    (3) how the company intends to assist the agent to avoid 
termination; 
    (4) the mutually agreed upon corrective action to be 
undertaken by the agent and the specific target dates for 
accomplishment; 
    (5) periodic meeting dates at which the status of 
rehabilitation will be reviewed; and 
    (6) the term of the written plan which must extend for at 
least one year after the notice of termination. 
    (c) All agency contracts in existence on May 13, 1987, are 
subject to the rehabilitation requirement under subdivision 1.  
The rehabilitation plan need not be incorporated into the agency 
contract. 
    Subd. 4. 5.  Nothing contained in this section prohibits 
the earlier termination of an amendment or addendum subsequent 
to the inception date of the original agency agreement provided 
that the subsequent amendment or addendum provides for 
termination on shorter notice and the agent agrees in writing to 
the earlier termination. 
    Subd. 5. 6.  During the term of the contract the company 
shall not refuse to renew such business from the agent as would 
be in accordance with the company's current underwriting 
standards. 
    Subd. 6. 7.  The provisions of this section do not apply to 
the termination of an agent's contract for insolvency, 
abandonment, gross and willful misconduct, or failure to pay 
over to the company money due to the company after receipt by 
the agent of a written demand therefor, or after revocation of 
the agent's license by the commissioner of commerce; nor to the 
termination of agents who write insurance business exclusively 
for one company or agents in the direct employ of the company. 
    Subd. 7. 8.  All future and presently existing agency 
contractual relationships between an agent and a company writing 
fire or casualty loss insurance in this state are subject to the 
provisions of this section. 
    Subd. 8. 9.  If it is found, after notice and an 
opportunity to be heard as determined by the commissioner of 
commerce, that an insurance company has violated this section, 
the insurance company shall be subject to a civil action by the 
agent for actual damages suffered because of the premature 
termination of the contract by the company.  The commissioner of 
commerce shall employ the department's investigative and 
enforcement authority if the commissioner has a reason to 
believe that an insurer has violated this section.  An insurer 
found in violation of this section is subject to a civil penalty 
imposed by the commissioner not to exceed $10,000 per violation. 
    Subd. 10.  In the event that a company's compliance with 
this section is demonstrated to the satisfaction of the 
commissioner to represent a hazard or potential hazard to the 
financial integrity of the company, the commissioner may, after 
a hearing, issue an order relieving the company from its 
obligation to provide the renewal policies otherwise required by 
this section. 
    Subd. 11.  Upon termination of an agency, a company is 
prohibited from soliciting business in the notice of nonrenewal 
required by section 60A.37. 
    Sec. 2.  Minnesota Statutes 1990, section 60A.175, is 
amended to read: 
    60A.175 [AGENT COMMISSIONS.] 
    (a) An insurer that cancels a written agreement with an 
agent under section 60A.171 or 60A.172 or cancels a line of 
business sold by the agent must pay to the agent terminated all 
commissions, bonuses, and other compensation earned by that 
agent prior to or after termination.  The commission rate must 
be the rate in effect at the time of the notice of termination. 
    (b) An insurer may not reduce agent commissions, bonuses, 
or other compensation contained in written agreements without 
first providing written notice of the change to the agent at 
least 180 days before its effective date. 
      Sec. 3.  [EFFECTIVE DATE.] 
     Sections 1 and 2 apply to all agency contracts or written 
agreements in existence on or after August 1, 1991. 
    Presented to the governor April 29, 1991 
    Signed by the governor May 1, 1991, 11:50 a.m.