Charles P.Randall
Attorney at Law
1200 North Federal Highway
Suite 209
Boca Raton, FL33432
Telephone: 561.750.5050
Fax: 561.750.7272
Chuck@cprattorney.com 

FOR THE INSURANCE PROFESSIONAL

By and large, the Insurance Professional of today is better trained and educated than when I began my insurance carrier some thirty-plus years ago. There is a reason for this: YOU ARE BEING HELD TO A HIGHER STANDARD OF COMPETENCE THAN AT ANY OTHER TIME IN THE PAST! To understand this fact and to act accordingly may solve at least half of your problems.

The typical problems brought to my attention by insurance professionals fall into fairly predictable areas: Consumer Assistance; Department Investigations; Commission/Ownership of Accounts Disputes; Operational Issues; and Extraordinary Transactions.


Consumer Assistance

While the Policyholder is the first person to learn of a problem, the Insurance Professional is often the second. Policyholders naturally contact an Insurance Professional to report a problem or to get necessary advice. Often times, a Policyholder will consult with an Insurance Professional who did not even sell the policy at issue. Many of my referrals come from Insurance Professionals who recognize that the problem a Policyholder has is not easy to fix. Now you know who to call.


Department Investigations

Under the umbrella of the Florida Department of Financial Services, the Department of Insurance licenses and regulates the affairs of insurance agents and companies doing business in the State of Florida.

In my experience, the career attorneys working for the Department are professional, competent and have sufficient resources to complete their assigned tasks. But with that said, the majority of problems an agent experiences actually occurs before the Department assigns a staff attorney to file a revocation action. The real problem for the agent occurs at the investigation phase.

To fully appreciate the dynamic environment surrounding DOI investigations, it may be helpful to understand that the Department is endowed with law enforcement authority; that is, the power to arrest. As a consequence, there are some investigators who are the equivalent of armed law enforcement officers. The agent or agency under investigation typically will not see this type of investigator. The agent or agency under investigation will, under all but the most unusual circumstance, see the career investigator who will walk unannounced through the front door of the agency demanding to immediately inspect records. Thus, the first question I usually hear from an agent who just had an investigator walk through their door is, "Do I have to show them the records they are demanding?" The simple and straightforward answer to that question is yes; but there are caveats.

FIRST: The Department must have a reason to believe that a person has violated or is violating a provision in the insurance code; or

SECOND: The Department must be acting upon the written complaint signed by any interested person indicating that a violation may exist. (See 624.317, F.S.).

If either of these two criteria are present, the Department has the right to demand inspection of the records even if they are in the possession of a person's attorneys, employees, agents and representatives who shall make freely available to the investigator the accounts, records, documents, files, information, assets, and matters in their possession or control relating to the subject of the examination or investigation. (See 624.318 (2), F.S.).

However: Neither the Department nor the investigator has the right to remove any record, account, document, file, or other property of the person being examined from the offices of such person except with the written consent of such person given in advance of such removal or pursuant to an order of court duly obtained. (see 624.318 (5), F.S.). I recommend that such written consent not be given until after you have consulted with an attorney.

The insurance code is silent as to whether the inspection demanded must be "reasonable" or done in a "reasonable manner," although I would certainly advocate that the courts would impose such a requirement. But Florida's Required Records Doctrine has been interpreted so as to eliminate the agent's claimed constitutional right against self incrimination by refusing to produce records. However, even though an agent does not have the right to refuse to produce documents because such an act would be self-incriminating, it is the burden of the Department to establish that the documents and records it wishes to review actually come under the descriptions of documents and records allowed by statute to be reviewed by the Department. See, Saviak v. Gunter, 379 So.2d 450 (3DCA 1980). Sound confusing? It is and the best advice I can give is to call an attorney upon the first hint that an investigation is underway.


Commission/Ownership of Accounts Disputes.

Do you have the right to renewal commission? Do you have an obligation to pay a renewal commission? Do you have a right to use the policyholder data you compiled? Can you prevent anyone else from using the policyholder data you compiled? Can you prevent anyone else from using the policyholder data that you own? What about non-compete agreements or terminations with or without cause?

Such issues are usually too complicated to be addressed here. Generally speaking, these matters are controlled by contract, but in turn, such contracts may be controlled by custom and usage practices (prevalent in the insurance industry for 100+ years) or by the state insurance code. It is generally best to resolve these issues in advance before they become a problem.  See the Extraordinary Transactions section below.


Operational Issues

Most operational issues within an insurance agency are actually the result of what I would call "the expectation deviation."  That is, the expectations (or beliefs) of one member of an agency deviates from those of another. For instance, a subproducer may have a well founded belief that the business he or she is bringing into the agency somehow "belongs" to the subproducer or somehow entitles the job producer to expanded privileges, rights or income. The producer, on the other hand, often feels that the agency is there in the first place due to his/her effort or investment and that the subproducer's rights (if any) are subordinate to the needs of the business as a whole. Often these beliefs operate independently from the actual legal rights of the parties.

It is good business practice to make a written agency contract that spells out the rights and obligations of the parties operating within an insurance agency. A written agency contract will help eliminate questions relating to the "rights" of a subproducer vis-a-vis a producer and is often combined with a covenant not to compete and/or a trade secrets provision that can be reviewed by separate legal counsel or the courts when the parties part ways. But please note that an agency contract is a specialized and limited agreement pertaining only to the common elements affecting Insurance Professionals during critical insurance agency operations. Other laws, like the Fair Labor Standards Act or Workers' Compensation Act, may have an effect upon the overall rights and obligations of the parties under an employer/employee context that will not be affected by the agency contract and are areas outside my expertise. For these types of problems, it will be necessary for the Insurance Professional to consult with a specialist in the area of concern.


Extraordinary Transactions

Are you thinking about buying or selling an insurance agency? If so, you will have to develop an understanding about what exactly is being bought or sold, which will in turn lead you to examine just how valuable and vulnerable the accounts really are to such factors as longevity and non-retention due to the agency transfer. Further, how will you handle residual liability or the uncertainty of market availability to account retention when establishing an insurance agency's valuation? These types of extraordinary transactions are unique to each circumstance and will require custom Buy/Sell Agreements dealing with these problems and others like them.  As with most things legal, you will need to consult a financial professional to consider the tax and other implications resulting from the sale, but contacting me before hand is the logical place to start.

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