GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1989

H	1 

HOUSE BILL 1310

Short Title:  Designated Insurance Agents.	(Public)
─────────────────────────────────────── 
Sponsors: Representative Beard.
─────────────────────────────────────── 
Referred to:  Commerce.
─────────────────────────────────────── 

April 12, 1989

A BILL TO BE ENTITLED
AN ACT TO MODERNIZE AND IMPROVE THE DESIGNATED AGENTS PROGRAM IN THE NORTH CAROLINA MOTOR VEHICLE REINSURANCE FACILITY.
The General Assembly of North Carolina enacts:
Section 1.  Article 25A of Chapter 58 of the General Statutes is amended by adding a new section to read:
"§ 58-248.42.  Designated agents.
(a)	Upon the application of any licensed fire and casualty agent meeting all of the standards set forth below as determined by the Facility within 10 days of its receipt of the application, the Facility shall contract with one or more members within 20 days of the making of the determination to appoint such licensed fire and casualty agent as a designated agent in accordance with reasonable rules as are established by the plan of operation.  Such standards shall be:
(1)	The applicant has been, for the preceding 12 months, a licensed fire and casualty agent; and has actively conducted his business of selling and servicing of motor vehicle liability insurance in the community in which designation is sought during the 12 months preceding application.
(2)	The applicant has generated a minimum of fifty thousand dollars ($50,000) of fire and casualty premium, of which twenty-five thousand dollars ($25,000) is motor vehicle liability insurance; or has demonstrated in the preceding 12 months the capability of generating such volume.
(3)	The applicant shall secure, and maintain in force during designation, a bond for the benefit of the designated carrier in the amount of not less than the following:
a.	Twenty-five thousand dollars ($25,000); or
b.	Fifty thousand dollars ($50,000), if the applicant's annual premium volume is in excess of fifty thousand dollars ($50,000).
(4)	The applicant shall be financially responsible and have no unsatisfied judgments, delinquent accounts, or claims against himself or the agency.
The applicant shall meet all eligibility requirements listed under this subsection and shall continue to meet such eligibility requirements throughout the designation.  The designation may be transferred, in the event of the retirement, incapacity, or death of the applicant, to any person who qualifies under this section; provided, however, such person to whom the designation is transferred shall have 13 months from the date of the transfer to satisfy the requirements of subdivisions (1) and (2) of this subsection.
(b)	The applicant shall furnish the Facility with adequate documentation to verify books, records, and accounts for the agency.
(c)	Designated carriers shall monitor the books of business and business practices of agents appointed to them on an ongoing basis to ascertain that each designated agent is adhering to minimum bookkeeping standards regarding premium billings and collections, completion of applications, and reporting of claims.
(d)	The Facility shall develop a comprehensive audit report for completion annually by designated carriers on each designated agent.  The annual audit shall be the means for determining further eligibility.
(e)	With respect to business produced by designated agents, adequate provision shall be made by the Facility to assure that such business is rated using Facility rates.  All business produced by designated agents may be ceded to the Facility, except designated agents may place liability insurance policies with a voluntary carrier as long as all policies written by the voluntary carrier are retained by the voluntary carrier unless ceded to the Facility using Facility rates.  No agent may be designated under this section to any insurer that does not actively write voluntary market business.  Designated agents must provide the Facility with a list of such policies written by the voluntary carrier at least annually, or as requested by the Facility, on a form approved by the Facility.  If no insurer is willing to contract with any such agent on terms acceptable to the Board, the Facility shall license such agent to write directly on behalf of the Facility.  However, for this purpose the Facility does not act as an insurer, but acts only as the statutory agent of all of the members of the Facility, which shall be bound on risks written by the Facility's appointed agent.  The Facility may contract with one or more servicing carriers and shall promulgate fair and reasonable underwriting procedures to require that business produced by Facility agents and written through said servicing carrier shall be rated using Facility rates.  All business produced by Facility agents may be ceded to the Facility.
(f)	The Commissioner shall require, as a condition precedent to the issuance, renewal, or continuation of a resident agent's license to any designated agent to act for the company appointing such designated agent under contract with the Facility, that the designated agent file and thereafter maintain in force while so licensed a bond in favor of the State of North Carolina executed by an authorized corporate surety approved by the Commissioner, cash, mortgage on real property, or other securities approved by the Commissioner, in an amount to be determined by the Commissioner, but in no event less than fifteen thousand dollars ($15,000), for the use of aggrieved persons.  Such bond, cash, mortgage, or other securities shall be conditioned on the accounting by the designated agent to any person requesting the designated agent to obtain motor vehicle insurance for moneys or premiums collected in connection therewith.  Any such bond shall remain in force until the surety is released from liability by the Commissioner, or until the bond is cancelled by the surety.  Without prejudice to any liability accrued prior to such cancellation, the surety may cancel the bond upon 30 days' advance notice in writing filed with the Commissioner."
Sec. 2.  G.S. 58-248.33(g) reads as rewritten:
"(g)	Except as may be delegated specifically to others in the plan of operation or reserved to the members, power and responsibility for the establishment and operation of the Facility is vested in the Board of Governors, which power and responsibility include but is not limited to the following:
(1)	To sue and be sued in the name of the Facility. No judgment against the Facility shall create any direct liability in the individual member companies of the Facility.
(2)	To receive and record cessions.
(3)	To assess members on the basis of participation ratios established in the plan of operation to cover anticipated or incurred costs of operation and administration of the Facility at such intervals as are established in the plan of operation.
(4)	To contract for goods and services from others to assure the  efficient operation of the Facility.
(5)	To hear and determine complaints of any company, agent or other interested party concerning the operation of the Facility.
									(7)	To maintain all loss, expense, and premium data relative to all risks reinsured in the Facility, and to require each member to furnish such statistics relative to insurance reinsured by the Facility at such times and in such form and detail as may be required.
(8)	To establish fair and reasonable procedures for the sharing among members of any loss on Facility business which cannot be recouped pursuant to G.S. 58-248.34(f) or which cannot be recouped or allocated under G.S. 58-248.41, and other costs, charges, expenses, liabilities, income, property and other assets of the Facility and for assessing or distributing to members their appropriate shares. Such shares may be based on the member's premiums for voluntary business for the appropriate category of motor vehicle insurance or by any other fair and reasonable method.
(9)	To receive or distribute all sums required by the operation of the Facility.
(10)	To accept all risks submitted in accordance with this Article.
(11)	To establish procedures for reviewing claims practices of member companies to the end that claims to the account of the Facility will be handled fairly and efficiently.
(12)	To adopt and enforce all rules and to do anything else where the Board is not elsewhere herein specifically empowered which is otherwise necessary to accomplish the purpose of the Facility and is not in conflict with the other provisions of this Article."
Sec. 3.  This act shall become effective October 1, 1989.