26.1-26.3-03. Required contract provisions
No individual, partnership, corporation, or limited liability company acting in the capacity of a
managing general agent may 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 when both
parties share responsibility for a particular function, specifies the division of the responsibilities,
and which contains the following minimum provisions:
1. 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.
2. 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.
3. 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. This account must 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.
4. 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.
5. The contract may not be assigned in whole or in part by the managing general agent.
6. Appropriate underwriting guidelines, including:
a. The maximum annual premium volume;
b. The basis of the rates to be charged;
c. The types of risks which may be written;
d. Maximum limits of liability;
e. Applicable exclusions;
f. Territorial limitations;
g. Policy cancellation provisions; and
h. The maximum policy period.
The insurer has the right to cancel or nonrenew any policy of insurance subject to the
applicable laws and rules concerning the cancellation and nonrenewal of insurance
policies.
7. If the contract permits the managing general agent to settle claims on behalf of the
insurer:
a. All claims must be reported to the company in a timely manner.
b. A copy of the claim file must be sent to the insurer at its request or as soon as it
becomes known that the claim:
(1) Has the potential to exceed an amount determined by the commissioner or
exceeds the limit set by the company, whichever is less;
(2) Involves a coverage dispute;
(3) May exceed the managing general agent's claims settlement authority;
(4) Is open for more than six months; or
(5) Is closed by payment of an amount set by the commissioner or an amount
set by the company, whichever is less.
c. All claims files will be the joint property of the insurer and managing general
agent. However, upon an order of liquidation of the insurer, the files 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.
d. 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.
8. If electronic claims files are in existence, the contract must address the timely
transmission of the data.
9. 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 26.1-26.3-04.
10. The managing general agent may not:
a. 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.
b. Commit the insurer to participate in insurance or reinsurance syndicates.
c. Appoint any insurance producer without assuring that the insurance producer is
licensed in the appropriate lines of insurance.
d. Without prior approval of the insurer, pay or commit the insurer to pay a claim
over a specified amount, net of reinsurance, which may not exceed one percent
of the insurer's policyholder's surplus as of December thirty-first of the last
completed calendar year.
e. 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.
f. Permit its subagent to serve on the insurer's board of directors.
g. Jointly employ an individual who is employed with the insurer.
h. Appoint a submanaging general agent.
