Senate Bill No. 417
(By Senator Minard)
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[Introduced February 2, 2004; referred to the Committee on
Banking and Insurance.]
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A BILL to repeal §33-12-26 of the code of West Virginia, 1931, as
amended; to amend and reenact §33-3-33 of said code; to amend
and reenact §33-12-3, §33-12-8, §33-12-10, §33-12-18,
§33-12-23, §33-12-27, §33-12-28, §33-12-30, §33-12-31 and
§33-12-32 of said code; to amend and reenact §33-37-1,
§33-37-2, §33-37-3, §33-37-4, §33-37-6 and §33-37-7 of said
code; and to amend said code by adding thereto a new section,
designated §33-37-8, all relating to Gramm-Leach-Bliley Act
and reciprocity; eliminating the residency restriction
reporting requirement for surplus lines licensees remitting
the insurance policy surcharge; licensing of managing general
agents; providing for certain penalties for violation by
managing general agents; license requirement for insurance
producers; continuing education required; fees charged;
insurance producer appointments; service representatives; and repealing insurance vending machines.
Be it enacted by the Legislature of West Virginia:
That §33-12-26 of the code of West Virginia, 1931, as amended,
be repealed; that §33-3-33 of said code be amended and reenacted;
that §33-12-3, §33-12-8, §33-12-10, §33-12-18, §33-12-23,
§33-12-27, §33-12-28, §33-12-30, §33-12-31 and §33-12-32 of said
code be amended and reenacted; that §33-37-1, §33-37-2, §33-37-3,
§33-37-4, §33-37-6 and §33-37-7 of said code be amended and
reenacted; and that said code be amended by adding thereto a new
section, designated §33-37-8, all to read as follows:
ARTICLE 3. LICENSING, FEES AND TAXATION OF INSURERS.
§33-3-33. Surcharge on fire and casualty insurance policies to
benefit volunteer and part volunteer fire
departments; special fund created; allocation of
proceeds; effective date.
(a) For the purpose of providing additional revenue for
volunteer fire departments, part-volunteer fire departments,
certain retired teachers and the teachers retirement reserve fund,
there is hereby authorized and imposed on and after the first day
of July, one thousand nine hundred ninety-two, on the policyholder
of any fire insurance policy or casualty insurance policy issued by
any insurer, authorized or unauthorized, or by any risk retention
group, a policy surcharge equal to one percent of the taxable premium for each such policy. For purposes of this section,
casualty insurance may not include insurance on the life of a
debtor pursuant to or in connection with a specific loan or other
credit transaction or insurance on a debtor to provide indemnity
for payments becoming due on a specific loan or other credit
transaction while the debtor is disabled as defined in the policy.
The policy surcharge may not be subject to premium taxes, agent
commissions or any other assessment against premiums.
(b) The policy surcharge shall be collected and remitted to
the commissioner by the insurer or in the case of
excess surplus
lines coverage, by the
resident excess lines broker surplus lines
licensee, or if the policy is issued by a risk retention group, by
the risk retention group. The amount required to be collected
under this section shall be remitted to the commissioner on a
quarterly basis on or before the twenty-fifth day of the month
succeeding the end of the quarter in which they are collected,
except for the fourth quarter for which the surcharge shall be
remitted on or before the first day of March of the succeeding
year.
(c) Any person failing or refusing to collect and remit to the
commissioner any policy surcharge and whose surcharge payments are
not postmarked by the due dates for quarterly filing is liable for
a civil penalty of up to one hundred dollars for each day of
delinquency, to be assessed by the commissioner. The commissioner may suspend the insurer, broker or risk retention group until all
surcharge payments and penalties are remitted in full to the
commissioner.
(d) One half of all money from the policy surcharge shall be
collected by the commissioner who shall disburse the money received
from the surcharge into a special account in the state treasury,
designated the "fire protection fund." The net proceeds of this
portion of the tax, and the interest thereon after appropriation by
the Legislature shall be distributed quarterly on the first day of
the months of January, April, July and October to each volunteer
fire company or department on an equal share basis by the state
treasurer.
(1) Before each distribution date, the state fire marshal
shall report to the state treasurer the names and addresses of all
volunteer and part volunteer fire companies and departments within
the state which meet the eligibility requirements established in
section eight-a, article fifteen, chapter eight of this code.
(2) The remaining fifty percent of the moneys collected shall
be transferred to the teachers retirement system to be disbursed
according to the provisions of sections twenty-six-j, twenty-six-k
and twenty-six-l, article seven-a, chapter eighteen of this code.
Any balance remaining after the disbursements authorized by this
subdivision have been paid shall be paid by the teachers retirement
system into the teachers retirement system reserve fund.
(e) The allocation, distribution and use of revenues provided
in the fire protection fund are subject to the provisions of
sections eight-a and eight-b, article fifteen, chapter eight of
this code.
ARTICLE 12. INSURANCE PRODUCERS AND SOLICITORS.
§33-12-3. License required.
(a) A person shall not sell, solicit or negotiate insurance
covering subjects of insurance resident, located or to be performed
in this state for any class or classes of insurance unless the
person is licensed for that line of authority in accordance with
this article.
(b) No person shall in West Virginia act as or hold himself or
herself out to be an agent or insurance agency or solicitor unless
then licensed therefor pursuant to this article.
(c) No
agent individual insurance producer, insurance agency
or solicitor or any representative or employee thereof shall
solicit or take application for, negotiate, procure or place for
others any kind of insurance,
or receive or share, directly or
indirectly, any commission or other valuable consideration arising
from the sale, solicitation, or negotiation of any such contract
for which that person is not then licensed.
(d) No insurer shall accept any business from
or pay any
commission to any
agent individual insurance producer who does not
then hold an appointment as
agent an individual insurance producer for such insurer pursuant to this article.
§33-12-8. Continuing education required.
The purpose of this provision is to provide continuing
education under guidelines set up under the insurance
commissioner's office, with the guidelines to be set up under the
board of insurance agent education.
Nothing in this section
prohibits an individual from receiving commissions which have been
vested and earned while that individual maintained an approved
insurance agent's license.
(a) This section applies to individual producers licensed to
engage in the sale of the following types of insurance:
(1) Life insurance coverage on human lives including benefits
of endowment and annuities, and may include benefits in the event
of death or dismemberment by accident and benefits for disability
income;
(2)
Accident and health or sickness. -- Insurance coverage for
sickness, bodily injury or accidental death and may include
benefits for disability income;
(3) Property insurance coverage for the direct or
consequential loss or damage to property of every kind;
(4)
Casualty. -- Insurance coverage against legal liability,
including that for death, injury or disability or damage to real or
personal property;
(5)
Variable life and variable annuity products. -- Insurance coverage provided under variable life insurance contracts and
variable annuities;
(6)
Personal lines. -- Property and casualty insurance
coverage sold to individuals and families for primarily
noncommercial purposes; and
(7) Any other line of insurance permitted under state laws or
regulations.
(b) This section does not apply to:
(1) Individual producers holding limited line credit insurance
licenses for any kind or kinds of insurance offered in connection
with loans or other credit transactions or insurance for which an
examination is not required by the commissioner, nor does it apply
to any limited or restricted license as the commissioner may
exempt; and
(2) Individual producers selling credit life or credit
accident and health insurance.
(c) (1) The board of insurance agent education as established
by section seven of this article shall develop a program of
continuing insurance education and submit the proposal for the
approval of the commissioner on or before the thirty-first day of
December of each year. No program may be approved by the
commissioner that includes a requirement that any
agent individual
insurance producer complete more than twenty-four hours of
continuing insurance education
triennially biennially. No program may be approved by the commissioner that includes a requirement
that any of the following individual
insurance producers complete
more than six hours of continuing insurance education biennially:
(A) Individual insurance producers who sell only preneed
burial insurance contracts; and
(B) Individual insurance producers who engage solely in
telemarketing insurance products by a scripted presentation which
scripted presentation has been filed with and approved by the
commissioner.
(C) The biennium mandatory continuing insurance education
provisions of this section become effective on the reporting period
beginning the first day of July, two thousand
three six.
(2) The commissioner and the board, under standards
established by the board, may approve any course or program of
instruction developed or sponsored by an authorized insurer,
accredited college or university, agents' association, insurance
trade association or independent program of instruction that
presents the criteria and the number of hours that the board and
commissioner determine appropriate for the purpose of this section.
(d) Individual insurance producers licensed to sell insurance
and who are not otherwise exempt shall satisfactorily complete the
courses or programs of instructions the commissioner may prescribe.
(e) Every individual insurance producer subject to the
continuing education requirements shall furnish, at intervals and on forms as may be prescribed by the commissioner, written
certification listing the courses, programs or seminars of
instruction successfully completed by the person. The
certification shall be executed by, or on behalf of, the
organization sponsoring the courses, programs or seminars of
instruction.
(f) Any individual insurance producer failing to meet the
requirements mandated in this section, and who has not been granted
an extension of time, with respect to the requirements, or who has
submitted to the commissioner a false or fraudulent certificate of
compliance shall have his or her license automatically suspended
and no further license may be issued to the person for any kind or
kinds of insurance until the person demonstrates to the
satisfaction of the commissioner that he or she has complied with
all of the requirements mandated by this section and all other
applicable laws or rules.
(g) The commissioner shall notify the individual insurance
producer of his or her suspension pursuant to subsection (f) of
this section by certified mail, return receipt requested, to the
last address on file with the commissioner pursuant to subsection
(e), section nine of this article. Any individual insurance
producer who has had a suspension order entered against him or her
pursuant to this section may, within thirty calendar days of
receipt of the order, file with the commissioner a request for a hearing for reconsideration of the matter.
(h) Any individual insurance producer who does not
satisfactorily demonstrate compliance with this section and all
other laws applicable thereto as of the last day of the biennium
following his or her suspension shall have his or her license
automatically canceled and is subject to the education and
examination requirements of section five of this article.
(i) The commissioner is authorized to hire personnel and make
reasonable expenditures considered necessary for purposes of
establishing and maintaining a system of continuing education for
insurers. The commissioner shall charge a fee of twenty-five
dollars to continuing education providers for each continuing
education course submitted for approval which shall be used to
maintain the continuing education system. The commissioner may, at
his or her discretion, designate an outside administrator to
provide all of or part of the administrative duties of the
continuing education system subject to direction and approval by
the commissioner. The fees charged by the outside administrator
shall be paid by the continuing education providers. In addition
to fees charged by the outside administrator, the outside
administrator shall collect and remit to the commissioner the
twenty-five dollar course submission fee.
§33-12-10. Fees.
The fee for an agent's license shall be twenty-five dollars,
as provided in section thirteen, article three of this chapter the
fee for a solicitor's license shall be twenty-five dollars, and the
fee for an insurance agency producer license shall be two hundred
dollars. The commissioner shall receive the following fees from
insurance agents individual insurance producers, solicitors,
insurance agencies and excess line brokers and insurance agency
producers: For letters of certification, five dollars; for letters
of clearance, ten dollars; for duplicate license, five dollars.
All fees and moneys so collected shall be used for the purposes set
forth in section thirteen, article three of this chapter.
§33-12-18. Agent to deal only with licensed insurer or solicitor;
appointment as agent required.
(a) An individual insurance producer may not act as an agent
of an insurer unless the
individual insurance producer becomes an
appointed agent of that insurer. An insurance producer who is not
acting as an agent of an insurer is not required to become
appointed.
(b) To appoint an individual
insurance producer as its agent,
the appointing insurer shall file, in a format approved by the
insurance commissioner, a notice of appointment within fifteen days
from the date the agency contract is executed or the first
insurance application is submitted. An insurer may also elect to
appoint an individual
insurance producer to all or some insurers
within the insurer's holding company system or group by the filing of a single appointment request.
(c) Upon receipt of the notice of appointment, the insurance
commissioner shall verify within a reasonable time not to exceed
thirty days that the individual insurance producer is eligible for
appointment. If the individual insurance producer is determined to
be ineligible for appointment, the insurance commissioner shall
notify the insurer within five days of its determination.
(d) An insurer shall pay a nonrefundable appointment
processing fee, in the amount and method of payment set forth in
section thirteen, article three of this chapter, for each
appointment notification submitted by the insurer to the
commissioner.
(e) An insurer shall remit, in a manner prescribed by the
insurance commissioner, a renewal appointment fee in the amount set
forth in section thirteen, article three of this chapter no later
than midnight the thirty-first day of May annually.
(f) Each insurer shall maintain a current list of individual
insurance producers appointed to accept applications on behalf of
the insurer. Each insurer shall make a list available to the
commissioner upon reasonable request for purposes of conducting
investigations and enforcing the provisions of this chapter.
(g) Insurance agencies licensed as producers are not subject
to the provisions of this section.
§33-12-23. Payment of commissions.
(a) The entire commission payable by any insurer licensed to
transact insurance in this state on any insurance policy shall be
paid directly to the licensed resident agent who countersigns the
policy. The countersigning agent may not pay any part of the
commission to any person other than a licensed agent:
Provided,
That the portion of such commission retained by the countersigning
resident agent may not be less than ten percent of the gross policy
premium or fifty percent of the commission payable by the insurer
as provided herein, whichever is the lesser amount. The term
"commission" as used herein shall include engineering fees, service
fees or any other compensation incident to the issuance of a policy
payable by or to any insurer or agent.
(b) It shall be unlawful for any insurer or agent to pay, and
any person to accept, directly or indirectly, any commission except
as provided in this section:
Provided, That any licensed resident
agent may pay his or her commissions, or direct that his or her
commissions be paid, to a business entity licensed as an insurance
producer if:
(1) The business entity is engaged, through its licensed
resident agents individual insurance producers, in conducting an
insurance agency business with respect to the general public;
(2) If a partnership licensed as an insurance agency producer,
each partner satisfies the commissioner that he or she meets the
licensing qualifications as set forth in section six of this article;
(3) If a corporation licensed as an insurance agency producer,
each officer, employee or any one or more stockholders owning,
directly or indirectly, the controlling interest in the corporation
satisfies the commissioner that he or she meets the licensing
qualifications as set forth in section six of this article. The
requirements set forth in this subdivision may not apply to
clerical employees, or other employees not directly engaged in the
selling or servicing of insurance;
(4) If a limited liability company licensed as an insurance
agency producer, each officer, employee or any one or more members
owning, directly or indirectly, the controlling interest in a
limited liability company satisfies the commissioner that he or she
meets the licensing qualifications as set forth in section six of
this article. The requirements set forth in this subdivision shall
not apply to clerical employees, or other employees not directly
engaged in the selling or servicing of insurance; and
(5) If any other business entity licensed as an insurance
agency producer, approval is granted by the commissioner.
(c)
This section Subsection (a) of this section will not apply
to reinsurance, or life insurance, or accident and sickness
insurance; nor to excess line insurance procured in accordance with
the provisions of article twelve-c
of this chapter relating
thereto; nor to credit insurance, any contract of insurance covering the rolling stock of any railroad or covering any vessel,
aircraft or motor carrier used in interstate or foreign commerce,
any liability or other risks incident to the ownership, maintenance
or operation thereof, any contract of insurance covering any
property in interstate or foreign commerce, or any liability or
risks incident thereto.
(d) An insurance company or insurance producer may not pay a
commission, service fee, brokerage or other valuable consideration
to a person for selling, soliciting or negotiating insurance in
this state if that person is required to be licensed under this
article and is not so licensed.
(e) A person shall not accept a commission, service fee,
brokerage or other valuable consideration for selling, soliciting
or negotiating insurance in this state if that person is required
to be licensed under this article and is not so licensed.
(f) Renewal or other deferred commissions may be paid to a
person for selling, soliciting or negotiating insurance in this
state if the person was required to be licensed under this article
at the time of the sale, solicitation or negotiation and was so
licensed at that time.
§33-12-27. Payment of commissions under assigned risk plan.
An insurer participating in a plan for assignment of personal
injury liability insurance or property damage liability insurance
on owner's automobiles or operators, which plan has been approved by the commissioner, may pay a commission to a qualified agent
individual insurance producer who is licensed to act as agent
individual insurance producer for any insurer participating in the
plan when the agent individual insurance producer is designated by
the insured as the individual insurance producer of record under an
automobile assigned risk plan pursuant to which a policy is issued
under the plan, and section eleven of this article shall not be
applicable thereto.
§33-12-28. Service representative permit.
Individual nonresidents of West Virginia, employed on salary
by an insurer, who enter the state to assist and advise resident
agents in the solicitation, negotiation, making or procuring of
contracts of insurance on risks resident, located or to be
performed in West Virginia shall obtain a service representative
permit. The commissioner may, upon receipt of a properly prepared
application, issue the permit without requiring a written
examination therefor therefore. On or after the first day of June,
two thousand two, no service representative license will be issued
which is not a renewal of an existing license. The fee for a
service representative permit shall be twenty-five dollars and the
permit shall expire at midnight on the thirty-first day of March
next following the date of issuance. Issuance of a service
representative permit may not entitle the holder to countersign
policies. The representative may not in any manner sell, solicit, negotiate, make or procure insurance in this state except when in
the actual company of the licensed resident agent individual
producer whom he or she has been assigned to assist. All fees
collected under this section shall be used for the purposes set
forth in section thirteen, article three of this chapter.
§33-12-30. Termination of contractual relationship prohibited.
No insurance company may cancel, refuse to renew or otherwise
terminate a written contractual relationship with any insurance
agent individual insurance producer who has been employed or
appointed pursuant to that written contract by an insurance company
as a result of any analysis of a loss ratio resulting from claims
paid under the provisions of an endorsement for uninsured and
underinsured motor vehicle coverage issued pursuant to the
provisions of section thirty-one, article six of this chapter, nor
may any provision of that contract, including the provisions for
compensation therein, operate to deter or discourage the insurance
agent from selling and writing endorsements for optional uninsured
or underinsured motor vehicle coverage.
§33-12-31. Termination of contractual relationship; continuation
of certain commissions; exceptions.
(a) In the event of a termination of a contractual
relationship between a duly licensed insurance agent individual
insurance producer and an automobile insurer of private passenger
automobiles who is withdrawing from writing private passenger automobile insurance within the state, the insurer shall pay the
agent individual insurance producer a commission, equal to the
commission the agent individual insurance producer would have
otherwise been entitled to under his or her contract with the
insurer, for a period of two years from the date of termination of
the contractual relationship for those renewal policies that cannot
otherwise be canceled or nonrenewed pursuant to law, which policies
the agent individual insurance producer continues to service. The
insurer must continue the appointment of the agent individual
insurance producer for the duration of time the agent individual
insurance producer continues to service the business: Provided,
That this requirement shall not obligate the withdrawing insurer to
accept any new private passenger automobile insurance within the
state.
(b) Subsection (a) of this section does not apply to an agent
individual insurance producer who is an employee of the insurer, or
an agent individual insurance producer as defined by article
twelve-a of this chapter, or an agent individual insurance
producer, who by contractual agreement either represents only one
insurer or group of affiliated insurers or who is required by
contract to submit risks to a specified insurer or group of
affiliated insurers prior to submitting them to others.
§33-12-32. Limited licenses for rental companies.
(a) Purpose. -- This section authorizes the insurance commissioner to issue limited licenses for the sale of automobile
rental coverage.
(b) Definitions. -- The following words when used in this
section shall have the following meanings:
(1) "Authorized insurer" means an insurer that is licensed by
the commissioner to transact insurance in West Virginia.
(2) "Automobile rental coverage" or "rental coverage" is
insurance offered incidental to the rental of a vehicle as
described in this section.
(3) "Limited license" means the authorization by the
commissioner for a person to sell rental coverage as agent an
individual insurance producer of an authorized insurer pursuant to
the provisions of this section without the necessity of agent
individual insurance producer prelicensing education, examination,
or continuing education.
(4) "Limited licensee" is an individual resident of this state
or nonresident who obtains a limited license.
(5) "Rental agreement" means any written agreement setting
forth the terms and conditions governing the use of a vehicle
provided by the rental company for rental or lease.
(6) "Rental company" means any person or entity in the
business of providing private motor vehicles to the public under a
rental agreement for a period not to exceed ninety days.
(7) "Renter" means any person obtaining the use of a vehicle from a rental company under the terms of a rental agreement for a
period not to exceed ninety days.
(8) "Vehicle" or "rental vehicle" means a motor vehicle of the
private passenger type including passenger vans, minivans and sport
utility vehicles and of the cargo type, including cargo vans,
pick-up trucks and trucks with a gross vehicle weight of twenty-six
thousand pounds or less and which do not require the operator to
possess a commercial driver's license.
(9) "Rental period" means the term of the rental agreement.
(c) The commissioner may issue a limited license for the sale
of automobile rental coverage to an employee of a rental company,
who has satisfied the requirements of this section.
(d) As a prerequisite for issuance of a limited license under
this section, there shall be filed with the commissioner a written
application for a limited license, signed by the applicant, in a
form or forms and supplements thereto, and containing any
information, as the commissioner may prescribe. The limited
licensee shall pay to the insurance commissioner an annual fee of
twenty-five dollars.
(e) The limited licensee shall be appointed by the licensed
insurer or insurers for the sale of automobile rental coverage.
The employer of the limited licensee shall maintain at each
insurance sales location a list of the names and addresses of
employees which are selling insurance at the location.
(f) In the event that any provision of this section or
applicable provisions of the insurance code is violated by a
limited licensee or other employees operating under his or her
direction, the commissioner may:
(1) After notice and a hearing, revoke or suspend a limited
license issued under this section in accordance with the provisions
of section thirteen, article two of this chapter; or
(2) After notice and hearing, impose any other penalties,
including suspending the transaction of insurance at specific
locations where applicable violations of the insurance code have
occurred, as the commissioner considers to be necessary or
convenient to carry out the purposes of this section.
(g) Any limited license issued under this section shall also
authorize any other employee working for the same employer and at
the same location as the limited licensee to act individually, on
behalf, and under the supervision, of the limited licensee with
respect to the kinds of coverage authorized in this section. In
order to sell insurance products under this section at least one
employee who has obtained a limited license must be present at each
location where insurance is sold. All other employees working at
that location may offer or sell insurance consistent with this
section without obtaining a limited license. However, the limited
licensee shall directly supervise and be responsible for the
actions of all other employees at that location related to the offer or sale of insurance as authorized by this section. No
limited licensee under this section shall advertise, represent, or
otherwise hold himself or herself or any other employees out as
licensed insurers, insurance agents or insurance brokers or
individual insurance producers.
(h) No automobile rental coverage insurance may be issued by
a limited licensee pursuant to this section unless:
(1) The rental period of the rental agreement does not exceed
ninety consecutive days; and
(2) At every rental location where rental agreements are
executed, brochures or other written material are readily available
to the prospective renter that:
(A) Summarize clearly and correctly, the material terms of
coverage offered to renters, including the identity of the insurer;
(B) Disclose that the coverage offered by the rental company
may provide a duplication of coverage provided by a renter's
personal automobile insurance policy, homeowner's insurance policy,
personal liability insurance policy, or other source of coverage;
(C) State that the purchase by the renter of the kinds of
coverage specified in this section is not required in order to rent
a vehicle; and
(D) Describe the process for filing a claim in the event the
renter elects to purchase coverage and in the event of a claim.
(3) Any evidence of coverage on the face of the rental agreement is disclosed to every renter who elects to purchase the
coverage.
(4) The limited licensee to sell automobile rental coverage
may offer or sell insurance only in connection with and incidental
to the rental of vehicles, whether at the rental office or by
preselection of coverage in a master, corporate, group rental, or
individual agreements in any of the following general categories;
(A) Personal accident insurance covering the risks of travel,
including, but not limited to, accident and health insurance that
provides coverage, as applicable, to renters and other rental
vehicle occupants for accidental death or dismemberment and
reimbursement for medical expenses resulting from an accident that
occurs during the rental period;
(B) Liability insurance (which may include uninsured and
underinsured motorist coverage whether offered separately or in
combination with other liability insurance) that provides coverage,
as applicable, to renters and other authorized drivers of rental
vehicles for liability arising from the operation of the rental
vehicle;
(C) Personal effects insurance that provides coverage,
applicable to renters and other vehicle occupants of the loss of,
or damage to, personal effects that occurs during the rental
period;
(D) Roadside assistance and emergency sickness protection programs; and
(E) Any other travel or auto-related coverage that a rental
company offers in connection with and incidental to the rental of
vehicles.
(i) Each rental company for which an employee has received a
limited license pursuant to this section shall conduct a training
program in which its employees being trained shall receive basic
instruction about the kinds of coverage specified in this section
and offered for purchase by prospective renters of rental vehicles:
Provided, That limited licensees and employees working hereunder
are not subject to the agent prelicensing education, examination or
continuing education requirements of this article.
(j) Notwithstanding any other provision of this section, or
any rule adopted by the commissioner neither the rental company,
the limited licensee, nor the other employees working with the
limited licensee at the rental company, shall be required to treat
moneys collected from renters purchasing such insurance when
renting vehicles as funds received in a fiduciary capacity,
provided that the charges for coverage shall be itemized and be
ancillary to a rental transaction. The sale of insurance not in
conjunction with a rental transaction may not be permitted.
ARTICLE 37. MANAGING GENERAL AGENTS.
§33-37-1. Definitions.
As used in this Article For the purposes of this article:
(a) "Actuary" means a person who is a member in good standing
of the American academy of actuaries.
(b) "Insurer" means any person, firm, association or
corporation engaged as indemnitor, surety or contractor in the
business of entering into contracts of insurance or of annuities as
limited to:
(1) Any insurer who is doing an insurance business, or has
transacted insurance in this state, and against whom claims arising
from that transaction may exist now or in the future:
(2) This includes, but is not limited to, any domestic insurer
as defined in section six, article one of this chapter and any
foreign insurer as defined in section seven, article one of this
chapter, including any stock insurer, mutual insurer, reciprocal
insurer, farmers' mutual fire insurance company, fraternal benefit
society, hospital service corporation, medical service corporation,
dental service corporation, health service corporation, health care
corporation, health maintenance organization, captive insurance
company or risk retention group.
(c) "Managing general agent" means any person, firm,
association or corporation who negotiates and binds ceding
reinsurance contracts on behalf of an insurer or manages all or
part of the insurance business of an insurer, including the
management of a separate division, department or underwriting
office, and acts as an agent for such insurer whether known as a managing general agent, manager or other similar term, who, with or
without the authority, either separately or together with
affiliates, produces, directly or indirectly, and underwrites an
amount of gross direct written premium equal to or greater than
five percent of the policyholder surplus as reported in the last
annual statement of the insurer in any one quarter or year,
together with one or more of the following:
(1) Adjusts or pays claims in excess of an amount determined
by the commissioner; or
(2) Negotiates reinsurance on behalf of the insurer.
Notwithstanding the preceding provision, the following persons
are not to be considered as managing general agents for the
purposes of this article:
(1) An employee of the insurer;
(2) A United States manager of the United States branch of an
alien insurer;
(3) An underwriting manager that, pursuant to contract,
manages all or part of the insurance operations of the insurer, is
under common control with the insurer, is subject to the holding
company regulatory act, and whose compensation is not based on the
volume of premiums written without regard to the profitability of
the business written;
(4) The attorney-in-fact authorized by and acting for the
subscribers of a reciprocal insurer or inter-insurance exchange
under powers of attorney
(b) "Home state" means the District of Columbia and any state
or territory of the United States in which a managing general agent
is incorporated, or maintains its principal place of business. If
neither the state in which the managing general agent is
incorporated, nor the state in which it maintains its principal
place of business has adopted this article, or a substantially
similar law governing managing general agents, the managing general
agent may declare another state, in which it conducts business, to
be its "home state."
(c) "Insurer" means any person, firm, association or
corporation duly licensed in this state as an insurance company
pursuant to article three of this chapter. Insurer includes, but
is not limited to, any domestic insurer as defined in section six,
article one of this chapter and any foreign insurer as defined in
section seven, article one of this chapter, including any stock
insurer, mutual insurer, reciprocal insurer, farmers' mutual fire
insurance company, fraternal benefit society, hospital service
corporation, medical service corporation, dental service
corporation, health service corporation, health care corporation,
health maintenance organization, captive insurance company or risk
retention group.
(d) "Managing general agent" (MGA) means any person, firm,
association or corporation who:
(1) Manages all or part of the insurance business of an
insurer (including the management of a separate division,
department or underwriting office); and
(2) Acts as an agent for such insurer whether known as a
managing general agent, manager or other similar term, who, with or
without the authority, either separately or together with
affiliates, produces, directly or indirectly, and underwrites an
amount of gross direct written premium equal to or more than five
percent of the policyholder surplus as reported in the last annual
statement of the insurer in any one quarter or year together with
one or more of the following activities related to the business
produced:
(A) Adjusts or pays claims in excess of ten thousand dollars
per claim; or
(B) Negotiates reinsurance on behalf of the insurer.
(3) Notwithstanding the above, the following persons shall not
be considered managing general agents for the purposes of this
article:
(A) An employee of the insurer;
(B) A U.S. manager of the United States branch of an alien
insurer;
(C) An underwriting manager which, pursuant to contract,
manages all or part of the insurance operations of the insurer, is
under common control with the insurer, subject to the holding
company regulatory act, and whose compensation is not based on the
volume of premiums written; and
(D) The attorney-in-fact authorized by and acting for the
subscribers of a reciprocal insurer or inter-insurance exchange
under powers of attorney.
(e) "Person" means an individual or a business entity.
(d) (f) "Underwrite" means the authority to accept or reject
risk on behalf of the insurer. as authorized by the insurer
§33-37-2. Licensure.
(a) Any person, or a person working for a firm, association or
corporation, shall not act in the capacity of a managing general
agent with respect to risks located in this state for an insurer
licensed in this state unless such person is licensed and appointed
as an agent of the insurer in this state.
(b) Any person, or a person working for a firm, association or
corporation, shall not act in the capacity of a managing general
agent representing an insurer domiciled in this state with respect
to risks located outside this state unless such person is licensed
and appointed as an agent of the insurer in this state. The
license held by such person may be a nonresident license.
(c) The commissioner may require a bond in an amount
acceptable to him or her for the protection of the insurer.
(d) The commissioner may require the managing general agent to
maintain an errors and omissions policy of liability insurance.
(a) No domestic insurer shall permit a person to act, and no
person shall act, in the capacity of a managing general agent for
an insurer domiciled in this state unless such person is licensed
in this state to act as a managing general agent.
(b) No foreign or alien insurer shall permit a person to act,
and no person shall act, in the capacity of a managing general
agent representing such an insurer unless such person is licensed
in this state to act as a managing general agent.
(c) No person shall act in the capacity of a managing general
agent with respect to risks located in this state for an insurer
licensed in this state unless such person is a licensed insurance
producer in this state.
(d) The commissioner may license as a managing general agent
any individual or business entity that has complied with the
requirements of this article and any regulations concerning
licensure that may be promulgated by the commissioner. The
commissioner may refuse to issue a license, subject to the right of
the applicant to demand a hearing on the application, if the
commissioner believes the applicant, any person named on the
application, or any member, principal, officer or director of the applicant is not trustworthy or competent to act as a managing
general agent, or that any of the foregoing has given cause for
revocation or suspension of such license, or has failed to comply
with any prerequisite for issuance of such license.
(e) Any person seeking a license pursuant to subsection (d) of
this section shall apply for the license in a form acceptable to
the commissioner and shall pay to the commissioner a nonrefundable
application fee in an amount prescribed by the commissioner. The
application fee shall be not less than five hundred dollars nor
more than one thousand dollars. Every licensed managing general
agent shall pay to the commissioner a nonrefundable annual renewal
fee in an amount prescribed by the commissioner. The renewal fee
shall be not less than two hundred dollars nor more than one
thousand dollars. Between the first day of May and the first day
of June of the renewal year, each licensed managing general agent
shall submit to the commissioner the renewal fee and a renewal
application form as prescribed by the commissioner. All fees shall
be collected by the commissioner, paid into the state treasury and
placed to the credit of the special revenue account provided for in
section thirteen, article three of this chapter. Each license
issued pursuant to this article expires at midnight on the
thirtieth day of June next following the day of issuance.
(f) The commissioner may require a bond in an amount
acceptable to him or her for the protection of the insurer.
(g) The commissioner may require a managing general agent to
maintain an errors and omissions policy that is acceptable to the
commissioner.
(h) Except where prohibited by state or federal law, by
submitting an application for license, the applicant shall be
deemed to have appointed the secretary of state as the agent for
service of process on the applicant in any action or proceeding
arising in this state out of or in connection with the exercise of
the license. Such appointment of the secretary of state as agent
for service of process shall be irrevocable during the period
within which a cause of action against the applicant may arise out
of transactions with respect to subjects of insurance in this
state. Service of process on the secretary of state shall conform
to the provisions of section twelve, article four of this chapter.
(i) A person seeking licensure shall provide evidence, in a
form acceptable to the commission, of its appointments or contracts
as a managing general agent. The commissioner may refuse to renew
the license of a person that has not been appointed by, or
otherwise authorized to act for, an insurer as a managing general
agent.
§33-37-3. Required contract provisions.
Any No person, or a person working for a firm, association or
corporation acting in the capacity of a managing general agent
shall not place business with an insurer unless there is in force a written contract between the parties which sets forth the
responsibilities of each party and whereby where both parties share
responsibility for a particular function, which specifies the
division of such responsibilities, and which contains the following
minimum provisions:
(a) The insurer may terminate the contract for cause upon
written notice to the managing general agent. The insurer may
suspend the underwriting authority of the managing general agent
during the pendency of any dispute regarding the cause for
termination.
(b) The managing general agent will render accounts to the
insurer detailing all transactions and remit all funds due under
the contract to the insurer on not less than a monthly basis.
(c) All funds collected for the account of an insurer will be
held by the managing general agent in a fiduciary capacity in a
bank which is a member of the federal reserve system with an FDIC
insured financial institution. This account shall be used for all
payments on behalf of the insurer. The managing general agent may
retain no more than three months estimated claims payments and
allocated loss adjustment expenses.
(d) The managing general agent shall maintain separate records
of business that he or she writes. The insurer shall have access to
and the right to copy all accounts and records related to its
business, in a form usable by it. The commissioner shall have access to all books, bank accounts and records of the managing
general agent in a form usable to him or her.
(d) Separate records of business written by the managing
general agent will be maintained. The insurer shall have access
and right to copy all accounts and records related to its business
in a form usable by the insurer and the commissioner shall have
access to all books, bank accounts and records of the managing
general agent in a form usable to the commissioner.
(e) The contract may not be assigned, in whole or part, by the
managing general agent.
(f) The contract shall contain appropriate underwriting
guidelines including:
(f) Appropriate underwriting guidelines including:
(1) The maximum annual premium volume;
(2) The basis of the rates to be charged;
(3) The types of risks which may be written;
(4) Maximum limits of liability;
(5) Applicable exclusions;
(6) Territorial limitations;
(7) Policy cancellation provisions; and
(8) The maximum policy period.
The insurer shall have the right to cancel or non renew any
policy of insurance subject to the applicable laws and rules
concerning the cancellation and non renewal of insurance policies.
(g) If the contract permits the managing general agent to
settle claims on behalf of the insurer:
(1) All claims must be reported to the company in a timely
manner; and
(2) A copy of the claim file will be sent to the insurer at
its request or as soon as it becomes known that the claim:
(A) Has the potential to exceed an amount determined by the
commissioner or exceeds the limit set by the company; whichever is
less;
(B) Involves a coverage dispute;
(C) May exceed the managing general agents claims settlement
authority;
(D) Is open for more than six months; or
(E) Is closed by payment of an amount set by the commissioner
or an amount set by the company, whichever is less.
(3) All claim files will be the joint property of the insurer
and managing general agent. However, upon an order of liquidation
of the insurer, such files shall become the sole property of the
insurer or its estate. The managing general agent shall have
reasonable access to and the right to copy the files on a timely
basis.
(4) Any settlement authority granted to the managing general
agent may be terminated for cause upon the insurer's written notice
to the managing general agent or upon the termination of the contract. The insurer may suspend the settlement authority during
the pendency of any dispute regarding the cause for termination.
(h) If Where electronic claims files are in existence, the
contract must address the timely transmission of the data
contained
in such files.
(i) If the contract provides for a sharing of interim profits
by the managing general agent, and the managing general agent has
the authority to determine the amount of the interim profits by
establishing loss reserves or controlling claim payments, or in any
other manner, interim profits will not be paid to the managing
general agent until one year after they are earned for property
insurance business and five years after they are earned on casualty
business and not until the profits have been verified pursuant to
section four of this article.
(j) The managing general agent may use only advertising
material pertaining to the business issued by an insurer that has
been approved in writing by the insurer in advance of its use.
(j) (k) The managing general agent shall not:
(1) Bind reinsurance or retrocessions on behalf of the
insurer, except that the managing general agent may bind
facultative reinsurance contracts pursuant to obligatory
facultative agreements if the contract with the insurer contains
reinsurance underwriting guidelines including, for both reinsurance
assumed and ceded, a list of reinsurers with which such automatic agreements are in effect, the coverages and amounts or percentages
that may be reinsured and commission schedules;
(2) Commit the insurer to participate in insurance or
reinsurance syndicates;
(3) Appoint any agent producer without assuring that the agent
producer is lawfully licensed to transact the type of insurance for
which he or she is appointed;
(4) Without prior approval of the insurer, pay or commit the
insurer to pay a claim over a specified amount, net of reinsurance,
which shall not exceed one percent of the insurer's policyholder's
surplus as of the thirty-first day of December of the last
completed calendar year;
(5) Collect any payment from a reinsurer or commit the insurer
to any claim settlement with a reinsurer; without prior approval of
the insurer. If prior approval is given, a report must be promptly
forwarded to the insurer;
(6) Permit its subproducer to serve on the insurer's board of
directors;
(6) Except as provided in subsection (g), section four of this
article, permit its subproducer to serve on the insurer's board of
directors;
(7) Jointly employ an individual who is employed with the
insurer; or
(8) Appoint a sub managing general agent.
§33-37-4. Duties of insurers.
(a) The insurer shall have on file an independent financial
examination, in a form acceptable to the commissioner, of each
managing general agent with which it has done business.
(a) The insurer shall have on file an independent audited
financial statement or reports for the two most recent fiscal years
that provide that the managing general agent has a positive net
worth. If the managing general agent has been in existence for
less than two fiscal years, the managing general agent shall
include financial statements or reports, certified by an officer of
the managing general agent and prepared in accordance with GAAP,
for any completed fiscal years, and for any month during the
current fiscal year for which financial statements or reports have
been completed. An audited financial/annual report prepared on a
consolidated basis shall include a columnar consolidating or
combining worksheet that shall be filed with the report and include
the following:
(1) Amounts shown on the consolidated audited financial report
shall be shown on the worksheet;
(2) Amounts for each entity shall be stated separately; and
(3) Explanations of consolidating and eliminating entries
shall be included.
(b) If a managing general agent establishes loss reserves, the
insurer shall annually obtain the opinion of an actuary in a form consistent with the requirements for actuarial certifications as
imposed upon the insurer by statute or rule of the commissioner,
attesting to the adequacy of loss reserves established for losses
incurred and outstanding on business produced by the managing
general agent. This required actuary's opinion is in addition to
any other required loss reserve certification.
(c) The insurer shall at least semiannually conduct an on-site
review of the underwriting and claims processing operations of the
managing general agent.
(d) Binding authority for all reinsurance contracts or
participation in insurance or reinsurance syndicates shall rest
with an officer of the insurer, who shall not be affiliated with
the managing general agent.
(e) Within thirty days of entering into or terminating a
contract with a managing general agent, the insurer shall provide
written notification of such appointment or termination to the
commissioner. A notice of appointment of a managing general agent
shall include a statement of duties which such agent is expected to
perform on behalf of the insurer, the lines of insurance for which
such agent is to be authorized to act, and any other information
the commissioner may request.
(e) Within thirty days of entering into or terminating a
contract with a managing general agent, the insurer shall provide
written notification to the commissioner. Notices of entering into a contract with a managing general agent shall include a statement
of duties which the applicant is expected to perform on behalf of
the insurer, the lines of insurance for which the applicant is to
be authorized to act, and any other information the commissioner
may request.
(f) An insurer shall review its books and records each quarter
to determine if any producer as defined by subsection (c), section
one of this article has become, by operation of that subsection
(d), section one of this article, a managing general agent as
defined therein in that subsection. If the insurer determines that
a producer has become a managing general agent as defined in
subsection (c), section one pursuant to the above, the insurer
shall promptly notify the producer and the commissioner of such
determination and the insurer and producer must fully comply with
the provisions of this article within thirty days thereafter.
(g) An insurer shall not appoint to its board of directors an
officer, director, employee, subproducer or controlling shareholder
of its managing general agents. This subsection shall not apply to
relationships governed by the Insurance Holding Company Systems
Regulatory Act or the Business Transacted with Producer Controlled
Property/Casualty Insurer Act.
§33-37-6. Penalties and liabilities.
(a) If the commissioner finds after a hearing conducted in
accordance with section thirteen, article two of this chapter that any person has violated any provision of this article, the
commissioner may order:
(a) If the commissioner finds that the managing general agent
or any other person has violated any provision of this article, or
any rule or order promulgated thereunder, after a hearing conducted
in accordance with section thirteen, article two of this chapter,
the commissioner may order:
(1) For each separate violation, a penalty in an amount of one
thousand dollars not exceeding ten thousand dollars;
(2) Revocation or suspension of the producer's license; and
(3) Reimbursement by the managing general agent of the
insurer, the rehabilitator or liquidator of the insurer for any
losses incurred by the insurer and its policyholders and creditors
caused by a violation of this article committed by the managing
general agent; and
(4) If it was found that because of any such violation that
the insurer has suffered any loss or damage, the commissioner may
maintain a civil action brought by or on behalf of the insurer and
its policyholders and creditors for recovery of compensatory
damages for the benefit of the insurer and its policyholders and
creditors or other appropriate relief.
(b) If an order of rehabilitation or liquidation of the
insurer has been entered pursuant to article ten of this chapter
and the receiver appointed under that order determines that the managing general agent or any other person has not materially
complied with this article, or any rule or order promulgated
thereunder, and the insurer suffered any loss or damage therefrom,
the receiver may maintain a civil action for recovery of damages or
other appropriate sanctions for the benefit of the insurer.
(c) Nothing contained in this section shall affect the right
of the commissioner to impose any other penalties provided for in
this chapter.
(d) Nothing contained in this article is intended to or shall
in any manner limit or restrict the rights of policyholders,
claimants and creditors.
(b) (e) The decision, determination or order of the
commissioner pursuant to subsection (a) of this section shall be
subject to judicial review pursuant to section fourteen, article
two of this chapter.
§33-37-7. Rules and regulations.
The commissioner is thereby authorized to promulgate
reasonable rules for the implementation and administration of the
provisions of this article, pursuant to chapter twenty-nine-a of
this code.
§33-37-8. Effective date.
This article shall take effect on the first day of July, two
thousand four. No insurer may continue to use the services of a
managing general agent on and after the first day of July, two thousand four, unless such utilization is in compliance with this
article.
NOTE: The purpose of this bill is to correct sections that
are in conflict with the Gramm-Leach-Bliley Act ("GLBA"), and
repeal insurance vending machines. These GLBA amendments authorize
the Insurance Commissioner to require nonresident surplus lines
licensees to remit the surcharge on fire and casualty insurance
policies; license individual insurance producers and agency
insurance producers as managing general agents; and make technical
corrections in the producer model licensing act. The amendment to
section eight of article twelve changes the continuing education
requirement from twenty-four hours triennially to twenty-four hours
biennially. The amendment to section ten of article twelve makes
technical corrections by removing excess line broker and specifying
individual insurance producer and insurance agency. The amendment
to section eighteen of article twelve makes only a change in the
title which has caused some confusion in regard to when an
appointment is required. The amendment to section thirty-two of
article twelve allows nonresident limited licenses for rental car
company representatives to maintain the reciprocity status of West
Virginia. The repeal of section twenty-six of article twelve is
sought because this section is obsolete and there are no insurance
vending machines used in this state.
Strike-throughs indicate language that would be stricken from
the present law, and underscoring indicates new language that would
be added.
§33-37-8 is new, therefore, strike-throughs and underscoring
have been omitted.
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