United States (Florida)

United States (Florida) JENNER & BLOCK David Kroeger dkroeger@jenner.com 1. Insurance intermediation activities 1.1 Is the distribution of insurance products (hereinafter referred to as insurance intermediation activities or insurance intermediation ) limited to insurance intermediaries in your country? No, insurance intermediaries can, and often do, become involved in the distribution of insurance products, but the distribution of insurance products is not limited to insurance intermediaries. Insurers may, and often do, directly distribute their products to policyholders. 1.2 What does the term insurance intermediation include? Is there any definition set forth by statutory or case law? In any case, please indicate which activities/services are included in the above definition, for example, presentation or proposal of insurance products, assistance or consultancy aimed at drafting the agreement. Are collaboration activities that relate to the administration or execution of the contracts drafted, even in the case of accidents, included in the definition? Does the drafting of contracts or insurance agreements in a collective form on behalf of insured individuals also form part of insurance intermediation activities? The term insurance intermediaries generally includes individuals or entities that in some capacity represent and act on behalf of one or more parties to an insurance transaction. Insurance intermediation can include a potentially broad scope of activities/services, including but not limited to the distribution of insurance products as well as those other areas specified above. In the US, insurance intermediaries are for the most part regulated by individual states. Each state has, accordingly, enacted legislation that regulates certain defined aspects of insurance intermediation. State regulation of insurance intermediaries often follows, to varying degrees, model laws that have been developed by the National Association of Insurance Commissioners (NAIC). The federal government in the United States has also enacted certain legislation that, in at least limited respects, regulates insurance intermediation. 1.3 Are insurance intermediation activities allowed as ancillary activities to other professional activities (eg, travel or rent-a-car services, etc) and to what extent? Furthermore, are there exceptions that allow actors, other than insurance intermediaries, to carry out insurance intermediation activities? Is it a matter related, for example, to the risk covered, the duration or the cost of the policy premium, etc? Insurance intermediation may be ancillary to the provision of other products and services so long as the individual or entity satisfies applicable insurance regulatory requirements. For example, Florida law allows for limited licences to be issued in connection with motor vehicle physical breakdown and mechanical breakdown insurance, industrial fire or burglary insurance, travel insurance, motor vehicle rental insurance, credit insurance, crop hail and multiple peril crop insurance, in-transit and storage personal property insurance, and portable electronics insurance (Florida Statute ( Fla. Stat. ) section 626.321). While insurance intermediation is broadly regulated by states and the federal government, it is not necessarily the case that all 1

conduct that might fall within the broad scope of insurance intermediation (see 1.2) falls within the scope of state and/or federal insurance laws. 2. Insurance intermediaries requirements 2.1 In order to act as an insurance intermediary, is there need for an authorisation and/or to be enrolled in a register? If yes, what are the requirements to be authorised/enrolled in the register as an insurance intermediary (individual or legal entities, integrity and/or professional requirements, etc)? Briefly explain how it works? Yes. Anyone transacting insurance within Florida must have a valid Florida-issued licence. With certain limited exceptions, a licence as an insurance agent, service representative, customer representative, or limited customer representative is required in order to engage in the solicitation of insurance (Fla. Stat. section 626.112(1)(b)). The solicitation of insurance is defined as the attempt to persuade any person to purchase an insurance product by: (i) describing the benefits or terms of insurance coverage, including premiums or rates of return; (ii) distributing an invitation to contract to prospective purchasers; (iii) making general or specific recommendations as to insurance products; (iv) completing orders or applications for insurance products; (v) comparing insurance products, advising as to insurance matters, or interpreting policies or coverages; or (vi) offering or attempting to negotiate on behalf of another person a viatical settlement contract as defined in section 626.9911. Further, no person may be, act as, or advertise or hold himself or herself out to be an insurance agent, insurance adjuster, or customer representative unless he or she is currently licensed by the department and appointed by an appropriate appointing entity or person (Fla. Stat. section 626.112(1)(a); emphasis added). Accordingly, an insurance agent, insurance adjuster, or customer representative must hold a licence from the State of Florida and also be appointed by an appropriate entity or person. To obtain a licence, one generally must submit a proper application, pay a fee and pass a written examination (Fla. Stat. sections 626.171, 626.172, 626.221, 626.231 and 626.241). An applicant for a licence may also be subject to additional investigation (Fla. Stat. section 626.201). There are reciprocity requirements for certain nonresident insurance intermediaries who have been licensed in other states, see, for example, Fla. Stat. sections 626.171, 626.172, 626.221 and 626.741 2.2 In what form can anyone access and verify the registration/authorisation or verify the fact that the insurance intermediary is a professional (eg, via the web)? The Florida Office of Insurance Regulation provides access on its website to a search engine that identifies insurance companies and related entities that are licensed to transact insurance business in the State of Florida (www.floir.com/companysearch/index.aspx). 2.3 Are insurance intermediaries with a registered office in another country allowed to operate in your country and how (eg, under the right of establishment or freedom to provide services in your country, as in the EU)? If yes, under what conditions? In such a case, are they bound by the same obligations as the insurance intermediaries with a registered office in your country? Please describe. No, unless the insurance intermediary obtains a valid Florida-issued licence. 3. Different types of insurance intermediaries 2

3.1 Please list the different types of insurance intermediaries acting in your country such as agents, brokers, banks, financial intermediaries or financial advisers. Insurance intermediaries may include, inter alia, insurance agents, insurance brokers, insurance solicitors, managing general agents, third-party administrators and reinsurance intermediaries. Florida statutes expressly address the following specific types of insurance intermediaries: insurance agents, insurance agencies, surplus lines agents, managing general agents, insurance adjusters, insurance administrators, reinsurance intermediaries, viatical settlement brokers, customer representatives, service representatives and agencies. 3.2 Do insurance intermediaries need to enter into a written contract with the insurers (or receive a mandate from the insurers)? No, although it is not unusual for insurance intermediaries to enter into written contracts with the individual or entity on whose behalf they are acting. This is particularly true for insurance intermediaries acting as agents for insurance companies. Note that under Florida law a written contract is required with respect to any insurance agent examining any group health insurance or any group health insurance plan for the purposes of giving or offering advice, counsel, recommendation or information in respect to terms, conditions, benefits, coverage or premium of any such policy or contract (Fla. Stat. section 626.593(1)). 3.3 Can an insurance intermediary enter into a contract with the insurers (or receive a mandate from the insurer) and in turn enter into one or more agreements with other insurance intermediaries (the so-called horizontal distribution)? Yes. See, for example, Fla. Stat. section 626.0428. 3.4 The insurance intermediaries more in detail: 3.4.1 The agent 3.4.1.1 Does the role of insurance agent exist in your country? If yes, describe the agent s functions. Yes. Insurance intermediaries commonly serve as an agent for one or more parties to an insurance transaction. Florida defines an insurance agent as a general lines agent, life agent, health agent, or title agent, or all such agents, as indicated by context. Moreover, the term agent includes an insurance producer or producer, but does not include a customer representative, limited customer representative, or service representative (Fla. Stat. section 626.015(2)). A general lines agent means an agent transacting any one or more of the following kinds of insurance: (a) property insurance; (b) casualty insurance, including commercial liability insurance underwritten by a risk retention group, a commercial self-insurance fund as defined in section 624.462 or a workers compensation self-insurance fund established pursuant to section 624.4621; (c) surety insurance; (d) health insurance, when transacted by an insurer also represented by the same agent as to property or casualty or surety insurance; and (e) marine insurance (Fla. Stat. section 626.015(5)). A life agent means an individual representing an insurer as to life insurance and annuity contracts, or acting as a viatical settlement broker as defined in section 626.9911, including agents appointed to transact life insurance, fixed-dollar annuity contracts, or variable contracts by the same insurer (Fla. Stat. section 626.015(10)). A health agent means an agent representing a health maintenance organisation or, as to health insurance only, an insurer transacting health insurance (Fla. Stat. section 626.015(6)). A title insurance agent means a person appointed in writing by a 3

title insurer to issue and countersign commitments or policies of title insurance on its behalf (Fla. Stat. section 626.841(1)). Florida also expressly regulates other types of insurance intermediaries, including surplus lines agents, managing general agents, insurance adjusters, insurance administrators, reinsurance intermediaries, viatical settlement brokers, customer representatives, service representatives and agencies, see Fla. Stat. section 626.016. Outside the regulatory context, the term insurance agent generally describes a party that acts on behalf of an insurer, and the term insurance broker generally describes a party that acts on behalf of policyholders. Florida s Insurance Code does not make this distinction. 3.4.1.2 In particular, does an agent act on behalf of the insurer or the insured? Who pays the agent s remuneration? To what kind of remuneration is the agent entitled? As defined under the Florida Insurance Code, an insurance agent often acts on behalf of an insurer. An insurance agent s remuneration is generally paid, directly or indirectly, by the party on whose behalf the insurance agent acts. It is commonly the subject of negotiation and may also be the subject of regulation. 3.4.1.3 If an agent acts on behalf of the insurer, describe the type of work relationship with the insurer (eg, subordinate, para-subordinate or freelance, self-employed etc). Does the principal-agent model exist, that is, is one appointed by the insurer to manage a particular branch or subsidiary? The insurance agency relationship is generally a principal-agent relationship between the insurance agent and the principal. 3.4.1.4 What type of organisation does the agent have? Can he have staff working for him (eg, sub-agents)? An insurance agency can take any number of legal forms and an insurance agent/agency may have staff (see, eg, Fla. Stat. sections 626.0428 and 626.015(8)). 3.4.1.5 Is the relationship between the insurer and the agent regulated by a collective bargaining agreement? If yes, what does it mainly cover? Can the relationship be exclusive to a particular area? Is the remuneration established by the collective bargaining agreement? Can the provisions be waived by the parties mutual agreement? Insurers and insurance agents often enter into written agreements. These agreements can cover all aspects of their relationship, including the scope of the agent s authority, the services to be provided by the agent, the remuneration of the agent and the exclusivity/non-exclusivity of the agency. As with any contract under US common law, the provisions of this agreement may be able to be waived. 3.4.1.6 Does the termination of the work relationship between the agent and insurer provide for the agent s obligation to return the portfolio of contracts? In such a case, would the agent be entitled to an indemnity? It is not unusual, upon termination of the insurer/insurance agent relationship, for the written agreement between the insurer and insurance agent (or applicable common law) to require the insurance agent to return certain files to the insurer, including but not limited to information concerning the policies of insurance for 4

which the insurance agent acted on behalf of the insurer. The issue whether the insurance agent is entitled to an indemnity would generally be dependent upon the terms of any contract between the insurer and the insurance agent. 3.4.2 The broker 3.4.2.1 Please describe the broker s services. In general terms, do the services consist of intermediation or are they similar to consultancy/advisory activities? Is the broker an independent actor? The term insurance broker generally describes a party that acts on behalf of a policyholder, although the general distinction between an insurance agent and an insurance broker can sometimes be blurred in practice. Insurance brokers generally do not distribute insurance products, at least not in the same sense that an insurance agent would do so. Florida s Insurance Code does not formally distinguish between insurance agents and insurance brokers. 3.4.2.2 Who pays for the broker s remuneration (please specify case by case for the different services, if any)? Is the broker allowed to retrocede a portion of his remuneration to the insurer or to the insured? Insurance brokers can receive compensation in a number of forms, including but not necessarily limited to direct payment by the policyholder and/or receipt of a portion of the premium paid by the policyholder for an insurance policy placed with the assistance of the broker. Insurance intermediaries generally cannot retrocede a portion of this remuneration. Insurance agents generally cannot share commissions or rebate any portion of a commission except in tightly regulated circumstances (Fla. Stat. sections 626.572 and 626.753). However, all commissions received by an insurance agent from an insurer in connection with the issuance of a policy, when a separate fee or other consideration has been paid to the insurance agent by an insured, shall be rebated to the insured or other party being charged within 30 days after receipt of such commission by the insurance agent (Fla. Stat. section 626.593(3)). 3.4.3 Banks, financial intermediaries, financial advisers and others allowed to act as insurance intermediaries 3.4.3.1 Can banks, financial intermediaries and/or financial advisers act as insurance intermediaries? Yes, so long as that person or entity satisfies Florida s regulatory requirements with respect to insurance intermediaries. 3.4.3.2 Please define a financial intermediary. Are there particular requisites for the profession of financial intermediary? Does the financial intermediary have to be enrolled in another register (eg, a register of financial intermediaries)? A financial intermediary is typically a financial institution that acts as an intermediary between parties who want to lend money and those who want to borrow it. One Florida statute defines a financial intermediary as a bank, broker, clearing corporation, or other person, or the nominee of any of them, which intermediary in the ordinary course of its business maintains registered public obligation accounts for its customers, when so acting (Fla. Stat. section 279.02). Financial intermediaries are generally not regulated under the same laws as insurance intermediaries. 5

3.4.3.3 Please define a financial adviser. Are there particular requisites for the profession of financial adviser? Does the financial adviser have to be enrolled in another register (eg, a register of financial advisers)? The term investment adviser is generally used in the securities context, and includes any person who receives compensation, directly or indirectly, and engages for all or part of her or his time, directly or indirectly, or through publications or writings, in the business of advising others as to the value of securities or as to the advisability of investments in, purchasing of, or selling of securities, except a dealer whose performance of these services is solely incidental to the conduct of her or his business as a dealer and who receives no special compensation for such services. The term investment adviser does not include the following: (i) any licensed practising attorney whose performance of such services is solely incidental to the practise of her or his profession; (ii) any licensed certified public accountant whose performance of such services is solely incidental to the practice of her or his profession; (iii) any bank authorised to do business in this state; (iv) any bank holding company as defined in the Bank Holding Company Act of 1956, as amended, authorised to do business in this State; (v) any trust company having trust powers which it is authorised to exercise in the State, which trust company renders or performs services in a fiduciary capacity incidental to the exercise of its trust powers; (vi) any person who renders investment advice exclusively to insurance or investment companies; (vii) any person who does not hold herself or himself out to the general public as an investment adviser and has no more than 15 clients within 12 consecutive months in this State; (viii) any person whose transactions in this State are limited to those transactions described in section 222(d) of the Investment Advisers Act of 1940. Those clients listed in subparagraph 6 may not be included when determining the number of clients of an investment adviser for purposes of section 222(d) of the Investment Advisers Act of 1940; or (ix) a federal covered adviser (Fla. Stat. section 517.021(13)). Investment advisers generally are not regulated under the same laws as insurance intermediaries. 3.4.3.4 Can financial intermediaries and/or financial advisers distribute any insurance and/or financial products? If yes, under what conditions or with what limitations? Yes, so long as that person or entity otherwise satisfies Florida s regulatory requirements with respect to insurance intermediaries. 3.4.3.5 With reference to insurance intermediaries other than agents, brokers, banks, financial intermediaries and financial advisers, as indicated under question 2.1 above (if any), please describe what kind of products they can distribute and under what conditions. Florida law allows for limited licences to be issued in connection with motor vehicle physical breakdown and mechanical breakdown insurance, industrial fire or burglary insurance, travel insurance, motor vehicle rental insurance, credit insurance, crop hail and multiple peril crop insurance, in-transit and storage personal property insurance, and portable electronics insurance (Fla. Stat. section 626.321). 4. Rules of conduct and responsibilities 4.1 Are there rules of conduct that insurance intermediaries should comply with (eg, duties in relation to the obligation of utmost care, correctness, utmost good faith, information, adequacy, transparency, conflict of interests, filing of 6

documentation, separate accounting or other accounting obligations)? Please describe the above duties, specifying if they apply to all types of insurance intermediary (eg, agents, brokers, banks, financial intermediaries, financial advisers, etc) and whether the content differs with particular reference to responsibility according to the type of actor/activity and person (insurer or insured) receiving the activity. Yes, there are rules of conduct imposed by virtue of Florida common law as well as Florida s Insurance Code. Under Florida common law, an agent has a fiduciary duty to his or her principal and may also have contractual obligations to the principal. Under Florida s Insurance Code, in order to transact insurance within the State, agents shall comply with consumer protection laws, including the following, as applicable: (i) continuing education requirements for resident and non-resident agents, as required in section 626.2815; (ii) fingerprinting requirements for resident and non-resident agents, as required under section 626.171 or section 626.202; (iii) fingerprinting following a department investigation under section 626.601; (iv) the submission of credit and character reports, as required by section 626.171 or section 626.521; (v) qualifications for licensure as an agent in section 626.731, 626.741, 626.785, 626.792, 626.831 or 626.835; (vi) examination requirements in section 626.221, 626.741, 626.792 or 626.835; (vii) required licensure or registration of insurance agencies under section 626.112; (viii) requirements for licensure of resident and non-resident agents in section 626.112, 626.321, 626.731, 626.741, 626.785, 626.792, 626.831, 626.835 or 626.927; (ix) the prohibition against employees of the United States Department of Veterans Affairs being licensed as life agents or health agents, under section 626.788 or 626.833; (x) the prohibition against licensed life agents or health agents who are members of the United States Armed Services selling insurance products to those of a lower military rank, under section 626.789 or 626.834; (xi) countersignature of insurance policies, as required under section 624.425, 624.426 or 626.741; (xii) the code of ethics for life insurance agents, as set forth in section 626.797; (xiii) the prohibition against the designation of a life insurance agent or his or her family member as the beneficiary of a life insurance policy sold to an individual other than a family member under section 626.798; (xiv) any other licensing requirement, restriction, or prohibition designated a consumer protection by the Chief Financial Officer, but not inconsistent with the requirements of Subtitle C of the Gramm-Leach-Bliley Act, 15 U.S.C.A. sections 6751 et seq. (Fla. Stat. section 626.025). The Florida Insurance Code also defines and prohibits unfair insurance trade practices, and that portion of the Code contains a policyholder bill of rights (Fla. Stat. section 626.951). 4.2 Does the insurance intermediary represent the insurer? By way of example, is the agent also the insurer s representative vis-à-vis the customer, and if so, does this also apply during trial before a court? Is there a matter of imputation of knowledge? What happens when a broker has information on matters relevant to the insurer s decision to insure which the broker fails to disclose to the insurer? Is the insured deemed to have breached its duty of disclosure in such circumstances? In which cases? Can the insurance intermediary be accountable for the contracts he executed on behalf of the insurer? An insurance intermediary may represent the insurer; these types of insurance intermediaries are often referred to as insurance agents. Pursuant to general common law of agency, the knowledge of an insurance agent may be imputed to an insurer and the insurer may be held vicariously liable for the wrongful acts of those insurance agents that produce business on its behalf. 7

4.3 Is the insurer jointly liable for damages caused by the insurance intermediary, appointed by the same, when executing intermediary activities? Who is liable vis-à-vis the insured person? Is it always the intermediary or the insurer? Pursuant to general common law of agency, an insurer may be held vicariously liable for the wrongful acts of those insurance agents that produce business on its behalf. 4.4 Are there particular regulations or specific forms of compensation for damages caused to the insured person? No. 5. Supervision and sanctions 5.1 Regardless of the requirement of an authorisation and/or enrolment, are insurance intermediaries subject to the control of supervisory bodies? Does the supervisory body have powers/duties of prudential supervision on the insurance intermediary s activities, and if yes, in what way does it act? Yes. Florida s Department of Financial Services, headed by Florida s Chief Financial Officer, and the Commissioner of the Office of Insurance Regulation jointly oversee the insurance industry in accordance with the provisions of the Florida Insurance Code. In general terms, these governmental agencies have powers and duties with respect to the following types of insurance intermediaries: insurance agents, insurance agencies, surplus lines agents, managing general agents, insurance adjusters, insurance administrators, reinsurance intermediaries, viatical settlement brokers, customer representatives, service representatives and agencies, see, for example, Fla. Stat. section 626.016. 5.2 Are there fines for violations of the insurance intermediaries obligations? If yes, please describe. Yes. Florida law provides for regulatory investigations, enforcement actions and a broad range of potential consequences for improper conduct on the part of insurance intermediaries, including restitution, fines, penalties, probation, suspension, revocation and disqualification. See, for example, Fla. Stat. sections 624.307(3), 624.310, 626.989 (unfair trade practices), 626.207, 626.602, 626.611, 626.6115, 626.621, 626.6215, 626.631, 626.681, 626.691 and 626.692. 5.3 Do sanctions also apply to foreign intermediaries who operate in your country? Yes. 5.4 Is there a consultation procedure with the insurance intermediary before the fine is applied? There is a regulatory process before any fine would be assessed, see for example, Fla. Stat. sections 626.601, 626.681. 5.5 Could the application of more fines, or the breach of particular regulations, result in the revocation of the authorisation, or in the intermediary being struck off the register (if any), or in the prohibition to act as an insurance intermediary? If yes, which are the most relevant circumstances? Yes. See, for example, Fla. Stat. sections 626.207, 626.602, 626.611, 626.6115, 626.621, 626.6215, 626.631, 626.681, 626.691 and 626.692. 8