NOW VIEWING: Markets Resource Center > Agency-Company Contract Reviews > Companies A-D > American Colonial Limited Producer Agreement

American Colonial Limited Producer Agreement


    Laura Pearce

This review of the American Colonial Insurance Service’s Limited Agency Agreement for policies assumed from Citizens exclusively focuses on major issues of concern to insurance agencies and does not address general contract issues or provisions of the contract that contain boilerplate language.

Items of Concern

  • Requires a personal guarantee of an officer if the Producer is an incorporated agency. 
  • Indemnification language is not fair and mutual. 
  • Despite providing that ownership, use, and control of expirations and the records thereof remain the property of the Producer, the Company reserves the right to “notify” current policyholders of any additional products and services that are available that could result in premium savings. In addition, the Agreement includes broad language which provides that if the Producer enters into any third party agreements whereby the rights of the Company as set forth in this Agreement are in any way limited or modified, then the ownership and control of expirations becomes property of the Company. 

Provision-by-Provision Review 

Structure corresponds to the lettered and/or numbered paragraphs of the contract (PDF).

I. Authority and Appointment 

Grants limited authority to Producer to solicit, receive applications, provide quotes, and assist in effectuating the Company’s replacement contracts on policies assumed from Citizens, and also grants authority to Producer to collect and receive premiums on all such contracts of insurance accepted by the Company. In addition, provides that Producer agrees to indemnify the Company for any loss sustained by the Company as a result of failure of Producer to forward such premiums to the Company. Finally, provides that the Company may conduct a background check at any time during the appointment as a Producer for the Company, which appears to extend to any employee of the Producer.

II. Term  

Term of Agreement is one year and shall automatically renew for successive one-year terms, unless terminated by the parties.

III. Licensure/Errors and Omissions Coverage  

Provides that proof of required E&O coverage must be provided to the Company within 10 days of the effective date of the Agreement AND within 10 days of the renewal or such coverage. 

IV. Commission/Compensation  

Allows Company to unilaterally change its commission schedule at any time and without prior notice to the Producer. 

V. Premium Payment and Trust Account  

Company agrees to hold Producer harmless for loss to policyholders caused by direct Company error in the billing of policyholders. However, Producer must “immediately” notify Company of any known potential claim arising from problems related to the billing procedures. Also, allows Company to terminate the Agreement if the Producer causes a policy premium to be unpaid for certain specified reasons. 

VI. Fiduciary Relationship and Duties  

Provides that Producer’s fiduciary duty to the Company is violated if the Producer engages in a misrepresentation or permits another to engage in a misrepresentation in connection with an application for insurance with the Company. If such is the case, the Company can terminate the Agreement and can seek legal or equitable remedies if the Producer’s misrepresentation concerns duties and responsibilities under the Agreement and is willful. This latter type of misrepresentation that triggers legal remedies for the Company may need to be better defined or should at least provide a dispute resolution process for the Producer.

X. Book of Business/Expirations  

Acknowledges that ownership, use and control of expirations, the records thereof, and the Producer’s work product shall remain the property of the Producer. However, the Company reserves the right to notify current policyholders of any additional products or services that are available to them that could potentially result in premium savings. This appears to give the Company the right to solicit these policyholders under certain circumstances. In addition, the Agreement includes language which provides that if the Producer enters into any third party agreements whereby the rights of the Company as set forth in this Agreement are in any way limited or modified, then the ownership and control of expirations becomes property of the Company. It is not clear from this broad language as to the types of third party agreements to which the Company is referring. Finally, the Agreement provides that ownership of expirations will be vested in the Company if, upon termination of the Agreement, the Producer has not accounted for and paid all moneys due the Company. This language appears to give sole discretion to the Company to make this determination, and does not set forth a dispute resolution process or any appeal rights that may be available to the Producer. 

XII. Termination 

B. Termination With or Without Cause—Allows either party to terminate the Agreement at any time, with or without cause, upon delivery of 10 days advance written notice to the other party. 

XIII. Suspension of Authority 

Authorizes Company to immediately suspend the authority of the Producer, but it is not clear from the language of the Agreement whether such suspension can be without cause. 

XV. Software and Upload Licensing  

C. Provides that the Company’s liability for any damages or losses resulting from the use of the Company’s software will be limited to the replacement of the software, and in no event will the Company be liable for any loss of profits, or any direct, special, consequential, or incidental damages.  

D. Sets forth separate indemnification language for damages resulting in either party’s electronic transmission of information to the other party, as long as the party seeking indemnification is not at fault. However, the indemnification language in this section is not mutual in that the Company is not required to indemnify the Producer for indirect, incidental, or consequential damages, but the Producer is required to indemnify the Company for all resulting damages.

XVI. Indemnification and Hold Harmless 

The indemnification language is not fair and mutual in that the circumstances under which the Company is required to indemnify the Producer are much more limited than when the Producer is required to indemnify the Company. Also, the Company is not required to indemnify the Producer if the liability results from the Producer’s action or inaction that is inconsistent with the Company’s procedures. It appears from this language that even if the Producer were determined to be partially at fault, the Company would be absolved from its indemnification obligation. In addition, similar language absolving the Producer from its indemnification obligation when the Company is at fault is not included in the Agreement.

XVII. Amendments, Modifications and Changes; Severability; Applicable Law 

Provides that the Agreement may be amended at any time by the Company with regard to allowable classes of insurance, authority of Producer, commissions, and other related matters, and that such amendments may be expressed as Addenda to the Agreement or as Guidelines. However, the next paragraph provides that the Company may formally revise the Agreement upon giving 30 days prior written notice to the Producer and that the Company agrees to confer with the Producer about these amendments if the Producer makes a written request within 10 days of the effective date of the amendments. It appears that this notice requirement and right of the Producer to confer with the Company only applies to amendments that are not covered by the first sentence. In addition, the Producer’s right to confer with the Company does not set forth a formal dispute resolution or appeal process for the Producer.

AGREEMENT FOR INCORPORATED AGENCY 

Requires a separate personal guarantee of the terms and provisions of the Agreement from an officer of the Producer when the Producer is an incorporated agency.

FAIA’s Office of the General Counsel provides this contract review only for general information and comments. It is not intended to answer specific individual legal, business, or other questions. It was prepared solely for use as a guide, is not a substitute for the Agent’s/Agency’s independent evaluation of any provision in a contract, and is not a recommendation that the contract be signed or rejected. If specific legal or other expert advice is required or desired, please seek the services of an appropriate, competent professional, such as a licensed Florida attorney familiar with the Florida Insurance Code. 


Reviewed October 2014 

Current rating: 0 (0 ratings)