1.1                          A bill for an act 
  1.2             relating to insurance; regulating exclusive agencies; 
  1.3             increasing civil penalties for violation of agent 
  1.4             rights; prohibiting enforcement of certain agreements 
  1.5             against terminated agents; amending Minnesota Statutes 
  1.6             1996, sections 45.027, subdivision 6; and 60A.172. 
  1.7   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.8      Section 1.  Minnesota Statutes 1996, section 45.027, 
  1.9   subdivision 6, is amended to read: 
  1.10     Subd. 6.  [VIOLATIONS AND PENALTIES.] (a) The commissioner 
  1.11  may impose a civil penalty not to exceed $2,000 per violation 
  1.12  upon a person who violates any law, rule, or order related to 
  1.13  the duties and responsibilities entrusted to the commissioner 
  1.14  unless a different penalty is specified.  
  1.15     (b) The commissioner may impose a civil penalty not to 
  1.16  exceed $25,000 per violation upon an insurance company that 
  1.17  violates any law, rule, or order related to the right of an 
  1.18  insurance agent. 
  1.19     Sec. 2.  Minnesota Statutes 1996, section 60A.172, is 
  1.20  amended to read: 
  1.21     60A.172 [INSURANCE AGENCY CONTRACTS~~; CANCELLATION~~.] 
  1.22     Subdivision 1.  [CANCELLATION.] (a) An insurer may not 
  1.23  cancel a written agreement with an agent or reduce or restrict 
  1.24  an agent's underwriting authority with respect to property or 
  1.25  casualty insurance, based solely on the loss ratio experience on 
  1.26  that agent's book of business, if:  the insurer required the 
  2.1   agent to submit the application for underwriting approval, all 
  2.2   material information on the application was fully completed, and 
  2.3   the agent has not omitted or altered any information provided by 
  2.4   the applicant. 
  2.5      (b) For purposes of this section, "loss ratio experience" 
  2.6   means the ratio of claims paid divided by the premiums paid. 
  2.7      (c) This section applies only to agents who write 80 
  2.8   percent or more of their gross annual insurance business for one 
  2.9   company or any or all of its subsidiaries, and are not in the 
  2.10  direct employ of the company. 
  2.11     Subd. 2.  [NONCOMPETE AGREEMENTS.] (a) A company is 
  2.12  prohibited from enforcing against an agent an agreement that 
  2.13  restricts communication with or sale of insurance to customers 
  2.14  of the agent upon termination of an agency by the insurance 
  2.15  company, unless the agreement also permits the agent the option 
  2.16  of choosing, at the time of termination, to be free of any 
  2.17  noncompete restriction in exchange for agreeing to forgo the 
  2.18  compensation to the agent provided for in the agreement, if 
  2.19  any.  This paragraph applies to agency agreements entered into 
  2.20  on or after the effective date of this act.  
  2.21     (b) This paragraph applies to agency agreements entered 
  2.22  into prior to the effective date of this act, which are, on or 
  2.23  after that date, modified or amended, or under which the insurer 
  2.24  sponsors an agent for license renewal.  For agency agreements to 
  2.25  which this paragraph applies, the insurer may enforce an 
  2.26  agreement described in paragraph (a), except that the agent must 
  2.27  be given the option of choosing, at the time of termination, to 
  2.28  reduce the noncompete period to 30 days from the date of 
  2.29  termination in exchange for agreeing to forgo the compensation 
  2.30  to the agent provided for in the agreement, if any. 
  2.31     (c) For purposes of this subdivision, "termination" 
  2.32  includes an actual or constructive termination. 
  2.33     (d) This subdivision does not apply when the agent is 
  2.34  terminated for insolvency, abandonment, gross and willful 
  2.35  misconduct, or failure to pay over to the company money due to 
  2.36  the company after receipt by the agent of a written demand for 
  3.1   payment, or after revocation of the agent's license by the 
  3.2   commissioner. 
  3.3      Sec. 3.  [EFFECTIVE DATE.] 
  3.4      This act is effective the day following final enactment.