What’s Next After E-Delivery of Policies and Notices?

Now that the electronic delivery of insurance policies and notices about them has been clearly authorized by the Georgia General Assembly (click here for an earlier post on this subject), the next step for agents who want to continue to work toward a truly paper free office and realize the savings in time and money that result is the use of electronic signatures for documents that, in the past, had to be physically signed by the insured (e.g., an application for or waiver of coverage).  As with the electronic delivery of policies and other documents, there are both legal and practical issues associated with using electronic signatures on documents.  ACORD has published an analysis by a well known law firm of these issues, which was the subject of an article by Jeff Yates of the Agents Council on Technology.

For those of you who have followed my blog posts and articles in the Dec Page magazine on the electronic delivery of insurance policies and other documents, the legal requirements for the use of electronic signatures will be familiar.  They are essentially the same as for the electronic delivery of such documents.  The consent of the customer to the use of electronic signatures must be obtained and that consent is subject to the same disclosure requirements in consumer transactions as for the electronic delivery of documents.  However, the burden of proving the electronic signature of a customer involves much more than proving the electronic delivery of a document.

While it may be enough under Georgia law to prove that a document was delivered electronically by obtaining a receipt of delivery from the recipient’s internet service provider, proving the validity of an electronic signature requires much more.  You must be able to prove not only that an electronic signature was obtained, but also the identity of the person who gave that signature and that the document to which it relates has not been changed since the date of the signature.  The analysis published by ACORD contains guidelines for developing procedures to accomplish these requirements.

There are several technology providers who offer products that they claim will fulfill all the legal requirements.  One of those providers is DocuSign, which has been endorsed by the IIABA and offers a discount to IIABA members.  Another is Silanis, which has recently published a marketing brochure that explains how its product addresses the legal requirements discussed in the ACORD analysis.  That brochure provides a good summation of those requirements and is worth reading for that reason alone.

If any of my readers have begun using electronic signatures in their agencies, I would appreciate hearing about your experience.

Should the Insurer be Sent a Copy of an Insurance Certificate?

A recent edition of IA News & Views asked this question.  My first thought was why bother, since under Georgia law an insurance certificate is “not a policy of insurance and does not affirmatively or negatively amend, extend, or alter the coverage afforded by the policy to which the certificate of insurance makes reference” and does “not confer to a certificate holder new or additional rights beyond what the referenced policy of insurance expressly provides.”  However, a review of the materials on the IIABA website page that is devoted to issues involving insurance certificates convinced me otherwise.

It turns out that the language of some insurance policies may be interpreted to provide coverage based on the contents of an insurance certificate issued by an agent regarding the policy.  If that is the case, then the failure of the agent to give a copy of the insurance certificate to the insurance company could be a basis for the insurance company to escape responsibility for providing coverage, leaving the agent with that liability exposure.  To make sure an agent or agency does not fall into any such traps for the unwary, I agree with the conclusion expressed on IIABA’s website page that copies of all insurance certificates issued should be sent to the insurance company involved regardless of what that company has said about the subject, unless the company is willing to indemnify and hold harmless an agent or agency for any claims that may arise based on the issuance of an insurance certificate.

In addition to the above practical reason for providing a copy of all insurance certificates issued to the insurance company involved, a regulation adopted by the Georgia Insurance Commissioner’s Office could be interpreted to require that to be done.  That regulation, 120-2-103-.06, requires an insurance company to “provide to their producers written instructions clearly outlining the insurer’s procedures and each party’s responsibilities for issuing and servicing certificates”, which procedures are to include  a method to “monitor certificates to ensure they have been issued in compliance with the insurer’s procedures, applicable statute and this regulation.”  Another part of the regulation permits copies of certificates to be provided “electronically.”

How can an insurance company fulfill the above obligation without requiring the submission to it of copies of the insurance certificates issued by its “producers”, i.e., agencies and agents?  I would be interested to know what, if anything, insurance companies licensed in Georgia have done in response to the above regulation.  If any of my readers could send me a copy of any such written instructions they have received, I would appreciate it.

Must an Agent Report His or Her Own Wrongdoing to the Insurance Commissioner?

Several months ago, I wrote a blog post on the legal duty of an agent to report wrongdoing by others to the Insurance Commissioner’s office.  As explained in that post, under certain circumstances, such a legal duty does exist.  But what about the wrongdoing of the agent himself or herself?   Does an agent have the duty to report such wrongdoing to the Insurance Commissioner’s office, too?

It turns out that such a duty does exist for (i) any type of criminal prosecution involving the agent, (ii) the conviction or sentencing of the agent for certain types of crimes, (iii) any suspension, revocation, or annulment of a business or professional license of any kind held by the agent, and (iv) any suspension, revocation, or refusal of an insurance license held by the agent.  In addition, there is a duty to notify the Insurance Commissioner’s office in the event any “other disciplinary action” is taken by a “lawful authority” with respect to an insurance or other business or professional license.  The source of this duty is found in the section of Georgia’s Insurance Code that deals with the grounds for suspending, revoking, or refusing to issue a license of any kind under that Code.

That code section makes the failure to report to the Insurance Commissioner’s office (i) a criminal prosecution of any kind within 30 days after the date of arrest, (ii) the conviction or sentencing for a felony or any crime involving “moral turpitude” within 60 days after it occurs, or (iii) the taking of a disciplinary action against an insurance or other business or professional license within 60 days after the action is taken a ground for suspending, revoking, or refusing to issue an insurance license of any kind.  This reporting duty exists with respect to any of the above actions whether they occur within or outside of Georgia and even if they occur in a foreign country.

Thus, if there is “disciplinary action” taken with respect to an agent’s non-resident license anywhere in the United States, that action must be reported to the Georgia Insurance Commissioner’s office.  It is also likely that other states have laws similar to Georgia’s, so there may well be a duty to report any such “disciplinary action” to every other state in which the agent holds a resident or non-resident’s license.

There is no definition of what constitutes “other disciplinary action”, but it is likely the Insurance Commissioner’s office would interpret that phrase to include any type of sanction levied by a regulatory body, no matter how small the fine or other penalty imposed.  Another interesting question is whether the above reporting duty also applies to actions taken against agencies, instead of individual agents.  The opening language of the code section refers to the “applicant for or holder of” a license of any kind, other than a probationary license, but the language of the parts of that code section that deal with “other disciplinary action” refer to such action “taken against him or her.”  While this use of individual pronouns may provide a basis for arguing those parts of the code section don’t apply to agencies, it is also likely the Insurance Commissioner’s office would not agree with such an argument.

Change in Hartford AARP Program

I received a call last week on the free legal service program that I run for the Independent Insurance Agents of Georgia from an agent who had recently received a new addendum for the program that the Hartford Insurance Companies have for members of the American Association of Retired Persons (“AARP”).  This new addendum made some changes to the program, but the one that most concerned this agent had to do with what happens to the policies that are in force under the program in the event the addendum was terminated.

As my readers know, what happens to the policies that are in force with an insurance company upon the termination of the relationship between an agency and the company is a crucial question in all agency agreements.  That is especially true for Hartford’s AARP program because it offers guaranteed renewability for the insureds who participate in it.  Ordinarily, as long as the agency has not violated any provisions of the agreement with the insurance company, the agency is given the ability to move the policies to another company.  But that is not likely to happen with the policies that are in force under Hartford’s AARP program given their guaranteed renewability feature.  Most likely, the insureds under those policies will want to stay with Hartford’ s program.

Recognizing this fact, the previous addendum for Hartford’s AARP program required Hartford to notify the insureds under it of the termination of the agency’s participation in the program and to ask each insured to decide whether they wanted to stay in the program with another agent or obtain new coverage through their existing agent.  If the insured chose the stay in the program with another agent, Hartford was required to pay the existing agent 1.5 times the most recent annual commission for the insured’s policy.

Under the new addendum for the AARP program, Hartford is not required to give any notice to the insureds of the agency’s termination from the program and more importantly, is not required to pay the agency anything for the policies that it is not able to move to another company by the their next renewal date.  Instead, all such policies will be “renewed with Hartford and immediately transferred to an internal Hartford code upon such renewal” and “no commission or other compensation will be due to” the agency for any such policy.

Since under the new addendum Hartford can terminate an agency’s participation in the AARP program immediately for any or no reason, if an agency elects to continue to participate in the program under the new addendum, it runs the risk of losing its right to participate in the program at any time and will not receive any compensation for the policies it placed with the program that it cannot move to another company by their next renewal date.  If an agency elects not to continue to participate in the program under the new addendum, it will have the right to receive the compensation described above for the policies that it cannot move to another insurance company.   Of course, it will run the risk that Hartford will choose to terminate its general agency agreement in light of the agency’s unwillingness to accept the new addendum to the AARP program.

Agencies that participate in Hartford’s AARP program have a decision to make.  Continue under the program and lose the right to compensation for policies it cannot move to another company if its participation in the program is terminated or opt out of the program and obtain compensation for those policies, but run the risk that Hartford will terminate its general agency agreement.  What to do will require some serious cost benefit analysis by the affected agencies.