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Senate Banking, Finance & Insurance Committee

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(Orig Post Date 6/19/2008) Sacramento, CA — Thanks in large part to the grassroots efforts of The Alliance of Insurance Agents and Brokers (The Alliance), AB 2956 (Coto), which clarifies who is an insurance agent and who is a broker, passed out of the Senate Insurance Committee June 18th on a 10-0 vote.

In committee, the bill was amended to clearly define “totality of the circumstances,” the traditional test used to determine whether an insurance professional is acting as an insurance agent or broker.

“The Alliance would like to thank IBA West for its leadership on this issue and for working closely with us over the past year to find a solution to protect independent agents and brokers from plaintiff lawyer lawsuits based on this legal fiction known as de facto agency,” said David G. Nielson CIC, executive director of The Alliance.

“Our two associations worked extremely well together to protect our respective members and I look forward to continuing to work together. We would also like to thank other trades that submitted letters of support, including NAIFA, NAMIC, PADIC and WIAA,” Nielson went on to say. Rather than relying upon the traditional “totality of the circumstances” test to determine whether a producer is acting as an agent or broker, the de facto agency legal fiction creates retroactive liability for producers who think they are brokers, who disclose to consumers they are brokers, and who have no agency appointment with carriers to whom they submit business.

“Instead of looking at the totality of the circumstances, the California Department of Insurance and plaintiff lawyers are creating this ‘gotcha’ situation, alleging that brokers who have performed “any one act” on behalf insurers are really de facto agents, who have illegally charged broker fees that must be disgorged for all transactions going back as far as four years. This is fundamentally unfair and the Legislature agrees,” said Nielson.

The Alliance President Debra Jackson praised her members, as well as Alliance lobbyist Kevin Pedrotti, for pushing AB 2956 through the Senate Insurance Committee. Ms. Jackson said, “I am very proud of The Alliance members who faxed hundreds of support letters to the Senate Insurance Committee, informing lawmakers of the need to enact this bill. Our grassroots network reacted swiftly to our call to action.” The entire insurance market—consumers, producers and insurers—benefit from clear standards defining when a producer is acting as an agent or broker. The next step for AB 2956 will be a vote on the Senate floor, then it will go back to the Assembly for a floor vote on the amendments made to the bill in the Senate and then on to Governor Schwarzenegger for signature. For additional information on how to help support AB 2956, producers are encouraged to contact us today.

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