NOW VIEWING: Markets Resource Center > Agency-Company Contract Reviews > Companies A-D > Centauri Specialty Authorization and Appointment Agreement

Centauri Specialty Authorization and Appointment Agreement


   

This review of Centauri Specialty Insurance Company’s authorization and appointment agreement 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

  • The indemnification language is not fair and mutual.
  • Appears to require the Principal Agent to provide a personal guarantee.
  • Provides the MGA the authority (with a significant amount of discretion) to withhold commissions from the Agency, terminate the Agreement, suspend the Agency or impose an administrative fine on the Agency.

Provision-by-Provision Review

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

Section I.

Authorizes MGA to establish additional appointment criteria during the term of the Agreement and then, in its sole discretion, to decline to authorize and/or appoint any Agent that does not comply with or satisfy this additional criteria.

Section II.

Provides that the term of the Agreement is one year, and that it shall renew for one year periods only if the Agency complies with any additional licensure or appointment criteria promulgated by the MGA and if the Agency complies with the terms of the Agreement, as determined solely by the MGA.

Section III.

A. Allows the MGA to unilaterally supplement and amend, from time-to-time, any underwriting manuals and producer policies and procedures (“documents”), without prior notice to the Agency, and requires the Principal Agent to ensure that all agents in the Agency comply with these documents.

E. Sets forth record-keeping requirements of five years for certain documents that may differ from Florida law.

G. Requires the Agency to indemnify the MGA and a whole host of other entities of individuals (like Board members, shareholders, representatives, committees, etc.), whereas the MGA’s indemnification obligations extend only to the Agency and its officers and employees. Also requires the Agency to indemnify the MGA for damages arising out of any negligent or wrongful act of the Agency or any error or omission of the Agency, whereas the MGA’s obligation to indemnify the Agency is more limited and only arises when the damages are caused solely by the negligence or willful misconduct of the MGA. Finally, the Agency’s obligation to indemnify the MGA is not required to the extent the MGA solely caused the liability or damage, whereas, the MGA is not obligated to indemnify the Agency any time the Agency caused or contributed to the liability or damage.

V. States that the Principal Agent is responsible for the Agent’s or Agency’s compliance with and performance of the obligations set forth in the Agreement, including the confidentiality provisions. This appears to be a “personal guarantee” imposed on the Principal Agent.

Section IV.

A. Authorizes the MGA to withhold commissions from the Agency if the Agency does not fully comply with the terms of the Agreement. This appears to give the MGA the sole discretion to determine non-compliance of the Agency without a dispute resolution process or appeal rights being given to the Agency.

Section V.

A. Allows either party to terminate the Agreement, without cause, any time upon 60 days advance notice to the other party. Also allows the MGA the right to immediately terminate the Agreement, with cause and without notice, under certain specified circumstances, some of which are based on determinations made by the MGA in its sole but reasonable discretion. However, in those cases, the Agency has an opportunity to cure the MGA’s alleged default or breach, but is not afforded a dispute resolution or appeal process.

B. Allows the MGA, in its sole discretion, to suspend the Agency instead of choosing to terminate the Agency, but again, the Agency is not afforded a dispute resolution or appeal process.

D. Authorizes the MGA to require payment (aka, an administrative payment) by the Agency of an amount not to exceed the gross amount of any commission derived by the Agency on any policy written in violation of the Agreement or Florida law, as determined by the MGA in its sole discretion, and failure of the Agency to make such payment to the MGA is grounds for immediate termination of the Agreement by the MGA. The Agreement does not set forth any dispute resolution or appeal process for the Agency to challenge the imposition of this “fine.”

Section VI.

N. Provides that upon termination of the Agreement, use, ownership and control of expirations remains the property of the Agency, as long as the Agency has promptly accounted for and paid over to the MGA all funds owed to the MGA. It appears this determination is made solely by the MGA, and the Agreement does not set forth a dispute resolution or appeal process for the Agency to challenge the MGA’s determination.

O. Provides that if either party commences legal or arbitration proceedings to enforce the provisions of the Agreement, then the prevailing party is entitled to recover attorneys’ fees.

P. States that the Principal Agent, as designated by the execution of the Agreement, shall be responsible for the Agency’s compliance with the Agreement. Again, this appears to indicate that the Principal Agent is making a personal guarantee.

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, revised or rejected. Any communication you have with the Company regarding this contract should be an individual communication, and not on behalf of a group of agencies or through FAIA. 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 November 2014

Current rating: 0 (0 ratings)