The indemnification provision of a commercial agency contract is a clause that many agents only read after the fact; That is, they face a claim for error and injunction and then only turn to their agency contract to determine if the company will provide assistance. To paraphrase one of the IIAA`s TV commercials, it`s the wrong time to find out you don`t have the right compensation provision. In several recent agreements, the Committee has noted an erosion of the Agent`s exclusive ownership of its expiration conditions by requesting co-ownership of the Agent and the Company on the expiration dates. In addition, some contracts stipulate that, in certain circumstances, the agent may lose his expiry periods after the termination of the agency contract. Other companies require security at expiry periods. We do not believe that the agent`s property should be encumbered in any way, especially since the value of the business book is seriously affected by ownership restrictions. Whether an agent is required or chooses to use a service center, they must review the agreement regarding ownership of expiration periods, restrictions on cross-selling and business renewals, and termination terms. As we have seen above, the ownership of expiration periods by the agent must be clearly recognized. In addition, the company`s contacts with the insured should be limited, in particular in the areas of cross-selling and renewals, unless the agent has expressly consented to this. These types of services must be returned to the agent.
The termination provisions should clearly state the obligations of the agent and the company after termination, including the information an agent receives about the services provided by the company. When the Guide was first published in 1978, only one of the re-examined agency contracts contained an arbitration clause. More and more companies are including arbitration clauses in their agency contracts. The written rehabilitation plan would not be included in the agency`s contract, as it would vary depending on the circumstances. However, all restructuring contracts should include the following elements: the “Checklist for Company Agreements between Agencies” of the Independent Representative was first published in 1978 as the “Guide to Company Agreements between Agencies” and revised in 1981 and 1985. Independent Insurance Agents Of America, Inc. Agency Contracts Committee decided it was time to take a fresh look at agency-company contracts, as this is a dynamic area where contractual terms change as new issues and conflicts arise in the agency-company relationship. The “ownership of expiration dates” provision is often overlooked because agents assume they own the agreement they enter into with the companies.
The agent`s ownership of its expiration conditions is the essence of the independent agency system. A well-constructed “ownership of operations” provision is crucial not only to preserve the agent`s independence and fairness in his business, but also to define the right boundaries between his clients and the company. Provision (B) is extremely important because it ensures that the name of the agency is clearly visible on all communications from the company to the insured. Without this protection, the agent`s relationship with the insured could be seriously compromised. Agency contracts have come a long way since the IIAA published the “Minimum Criteria for Updating Agency Contracts” in 1968. Many contract protection measures that were unknown in those dark years are now hubs for most agency contracts. Despite this progress, the Committee continues to note two trends that continue to this day. The Committee remains strongly committed to the inclusion of an arbitration clause in all agency contracts.
The inclusion of an arbitration clause is important to provide a fair and objective means of resolving disputes arising out of the contract. In short, it makes sense for the other protected and makes the contract work. It also encourages good faith efforts to resolve disputes to avoid arbitration and potential litigation. The following provision is recommended. Provision (a) recognizes that the Agreement is an agreement between two consenting parties and that, before the terms of the Agreement are amended, each negotiates in good faith with the other and agrees to amendments to be made. This provision clarifies what was implied – the duty of good faith imposed on each party to negotiate with the other on an individual basis. It is an important principle that the agent must ensure that it is written into his contract. If the agent represents a company without an arbitration clause in their agency contract, they must ask the company for written notice of its dispute resolution procedures. Provision (A) is extremely important because it provides that decisions on direct accounting must be taken by mutual agreement between representatives and enterprises. Today, most treaties do not stipulate that these decisions are taken by mutual agreement. Some contracts do not cover the point, others seem to indicate that the company is making this decision. If termination is unavoidable, certain guarantees should be included in the agency contract.
There should be a provision that allows the agent to give written notice at least 180 days prior to termination, including the specific reasons for termination. In the event of termination, any renewal that occurs within one year of termination and that complies with applicable subscription standards must be renewed for at least one additional year at the commission rate and in accordance with the terms and conditions in effect before termination. This provision allows for a smooth transition of business activity after termination. As a result, the work of the Agency`s Contracts Committee continues. Through this guide and the contract seminars that the Officers` Committee is organizing across the country, the Committee continues its crusade to train officers, so that they will in turn ask their companies for fair agency agreements. Agency contracts arise when someone hires an agent to make decisions for them. .