N.Y. Insurance Law § 6106: Subscriber's agreement

§ 6106. Subscriber's agreement. (a) (1) Every subscriber of an

authorized reciprocal insurer shall have executed a subscriber's

agreement, and every subscriber executing such a subscriber's agreement

containing a provision for contingent liability of subscribers shall

execute and duly acknowledge the same, in a manner sufficient for the

acknowledgment of conveyances of real property to be recorded in the

state in which such subscriber is domiciled.

(2) Every subscriber's agreement shall be identical in terms, except

as to the date and the name and address of the subscriber, with all

other subscriber's agreements currently in force and effect with all

other subscribers of such reciprocal insurers. However, in the case of

any reciprocal insurer authorized pursuant to section six thousand one

hundred eight of this article to issue non-assessable policies or

agreements, or having a corporate attorney-in-fact wholly owned by the

subscribers at such reciprocal insurer, the acceptance of a policy or

binder of insurance containing the subscriber's agreement printed at the

end of the standard policy provisions or the binder, as the case may be,

preceded by the words printed upon the policy or binder:

"The acceptance of this policy or binder shall constitute

that insured designated therein is a subscriber of the

reciprocal insurer and shall constitute the execution and

delivery by the insured of the subscriber's agreement which

is appended to this policy or binder, and hereby made a part

thereof",

shall constitute the execution and delivery of said subscriber's

agreement by that insured as fully and to the same extent as though said

agreement had been signed and acknowledged by that insured.

(3) Every such subscriber's agreement shall contain in substance the

following provisions:

(A) A designation and appointment of the attorney-in-fact to act for

and bind the subscriber in all transactions relating to or arising out

of the operations of such reciprocal insurer, subject to such

limitations as may be lawfully provided.

(B) An agreement that service of summons or other legal process on the

attorney-in-fact or on any other person appointed by the

attorney-in-fact to receive such process, shall, in any action, suit or

proceeding arising out of any contract, agreement or transaction of such

reciprocal insurer, be equivalent to personal service of such summons or

other legal process on each and every subscriber.

(C) Unless the reciprocal insurer is authorized to issue

non-assessable policies under section six thousand one hundred eight of

this article an agreement for the contingent liability of the

subscriber, which shall state that such subscriber agrees to pay on

demand such subscriber's proportionate share of any assessment lawfully

ordered or levied by the advisory committee or by the superintendent

under article seventy-four of this chapter.

(D) A provision that there shall be an annual meeting of the

subscribers, in person or by proxy, at a time and place to be determined

in accordance with such agreement, of which each subscriber shall be

duly notified and at which each subscriber shall have power to vote in

person or by proxy for all members of the advisory committee to be

chosen or appointed at such time, except that in the case of a foreign

reciprocal insurer, the superintendent may permit a modification of such

provision provided that he is satisfied that the interests of the

subscribers are properly protected.

(E) A provision specifying the powers and duties of the advisory

committee, which shall include the power and duty to regulate the

compensation, powers and duties of the attorney-in-fact, if not

specifically provided in the subscriber's agreement, and shall also

include the power to make regulations for the effective control and

custody of the funds and investments of the reciprocal insurer. In

addition, the advisory committee of a municipal reciprocal insurer shall

establish procedures to prevent any conflicts of interest between the

attorney-in-fact and such insurer. Such procedures shall be submitted to

and approved by the superintendent, who shall also approve the

attorney-in-fact for a municipal reciprocal insurer.

(F) Provisions setting forth the rights, privileges and obligations of

the subscriber as an underwriter, and as a policyholder subject to the

terms of insurance contracts required or permitted by law to be issued.

(G) General provisions relating to the operations of the reciprocal

insurer, including the subscriber's operating reserve requirements,

regulations for the return of savings or dividends, for withdrawals and

refunds and such other matters as may be necessary to maintain the

operation of such reciprocal insurer in compliance with the provisions

of this chapter. In the case of a municipal reciprocal insurer, such

agreement shall include procedures to: (i) establish and promote loss

control, safety programs and other methods of risk management; (ii)

establish equitable risk classifications; and (iii) establish uniform

recordkeeping and reporting procedures.

(4) The following provisions shall be contained in either the

subscriber's agreement or a separate management agreement between the

attorney-in-fact and the advisory committee or the attorney-in-fact and

any person to which its functions have been delegated after approval of

the advisory committee:

(A) A provision that the attorney-in-fact shall provide written

notification of, and make all necessary arrangements as provided in the

subscriber's agreement, for the election, in person or by proxy, of the

members of the advisory committee. The cost of notification, ballot, or

proxy for any meeting of the advisory committee and for any meeting

which may be called for the election shall be incurred by the

reciprocal.

(B) A provision that the attorney-in-fact shall provide written

notification to the members of the advisory committee of not less than

ten days for any regular meeting or five days for any special meeting

called pursuant to subsection (k) of section six thousand one hundred

five of this article. The cost of such notification shall be incurred by

the reciprocal.

(C) A provision that the advisory committee may, upon a vote of a

majority of its members at any regular or special meeting thereof and

upon written notice to the superintendent and the attorney-in-fact,

recommend termination of the attorney-in-fact for a stated cause and

appointment of a new attorney-in-fact, subject to the provisions of any

management agreement approved by the superintendent. Termination of the

attorney-in-fact shall require the approval of a two-thirds majority of

the subscribers present in person or by proxy at a special meeting

called for that purpose. The attorney-in-fact shall provide by mail not

less than thirty days prior written notification of such meeting to all

subscribers. The mailing of notification shall include the

recommendation of termination and replacement as prepared by the

advisory committee, and any other appropriate documents submitted by the

attorney-in-fact. A copy of all documents mailed and certification of

their mailing to all subscribers shall be provided to all members of the

advisory committee. The cost of notification and proxy for any such

meeting shall be incurred by the reciprocal. For reciprocals with less

than two thousand five hundred subscribers, at least twenty-five percent

of all subscribers shall be required to constitute a quorum. For all

other reciprocals, the greater of twenty-five hundred subscribers or

five percent of all subscribers shall constitute a quorum.

(D) A provision that the attorney-in-fact shall cause all assets of

the reciprocal and its subscribers to be invested in accordance with

investment guidelines approved by the advisory committee and shall be

properly accounted for on the financial records of the reciprocal as

being held for or on behalf of the subscribers. All cash assets of the

reciprocal and its subscribers, not otherwise invested in short term

securities such as money market funds, covering policy obligations

arising out of policies issued or issued for delivery in the United

States shall be held in one or more appropriately identified accounts in

banks that are members of the federal reserve system. These accounts

shall be drawn on by the attorney-in-fact, or by employees or

representatives of the reciprocal authorized by the attorney-in-fact for

all payments on behalf of the reciprocal.

(E) A provision that if the attorney-in-fact is acting for more than

one reciprocal, separate records and accounts shall be maintained for

each reciprocal.

(F) A provision that the attorney-in-fact may not assign its

responsibilities as detailed in the subscriber's agreement in whole or

part or enter into management agreements delegating its duties in whole

or part to another party without the prior approval of the advisory

committee and the superintendent.

(G) A provision that the attorney-in-fact shall establish and maintain

underwriting procedures and manuals, setting forth the rates and

conditions for the acceptance or rejection of risks.

(H) A provision that the attorney-in-fact shall make a report to the

advisory committee at each regular meeting of the committee on the

financial condition of the reciprocal and all material transactions

during the period since the last meeting.

(I) A provision that the attorney-in-fact shall annually provide to

each member of the advisory committee:

(i) On or before March first of each year, a copy of the reciprocal's

annual statement and the accompanying statement of actuarial opinion

filed with the superintendent pursuant to section three hundred seven of

this chapter; and

(ii) On or before June first of each year, a copy of:

(I) The certified statement filed with the superintendent pursuant to

subsection (f) of section six thousand one hundred five of this article;

and

(II) The certified annual statement of the reciprocal filed with the

superintendent pursuant to section three hundred seven of this chapter.

(J) A provision specifying all forms and amounts (or formulas to

determine the amounts) of compensation the attorney-in-fact will receive

for services rendered and, if all or part of the compensation will be

contingent upon the reciprocal's profits, a provision that such

compensation shall not be paid until at least five years after the

premiums on liability insurance are earned and at least one year after

the premiums are earned on any other kind of insurance and, in no event

shall the compensation be paid until the adequacy of reserves on

outstanding claims has been independently verified by the same actuary

who opined on the latest annual statement filed with the superintendent

pursuant to section three hundred seven of this chapter.

(K) A provision that the independent certified public accountant who

will prepare the annual report required by subsection (f) of section six

thousand one hundred five of this article and the independent actuary

who will prepare the opinion accompanying the annual statement pursuant

to section three hundred seven of this chapter shall be selected by the

attorney-in-fact, subject to the approval of the advisory committee.

(L) A provision that the books, accounts and records of the reciprocal

shall be maintained by the attorney-in-fact to clearly and accurately

disclose the nature and details of all transactions including all

information necessary to determine that the compensation received by, or

owing to, the attorney-in-fact is provided in a manner consistent with

the subscriber's agreement and any management agreement. The books,

accounts and records of the reciprocal shall be the sole property of the

reciprocal.

(M) A provision that the attorney-in-fact shall conduct the affairs of

the reciprocal in accordance with the provisions of this chapter.

(b) (1) The subscriber's agreement may contain such further provisions

as may be necessary or proper; but neither the subscriber's agreement

nor the articles of association, if any, of an authorized reciprocal

insurer shall contain any provisions inconsistent with the provisions of

subsection (a) hereof.

(2) The superintendent may, if he finds it necessary to carry out the

purpose and intent of this article, by regulation prescribe additional

provisions, not inconsistent with any law of this state, to be contained

in the subscriber's agreement of reciprocal insurers.

(c) Every subscriber to a municipal reciprocal insurer shall agree to

participate in a risk management program established by the

attorney-in-fact. The attorney-in-fact of each insurer shall, with the

approval of the advisory committee, establish, promote and manage a risk

management program among the subscribers. Each program shall include

identifying and reducing risks through the implementation of loss

control, safety programs and other methods of risk management. The

attorney-in-fact may enter into contracts with any person, firm, or

corporation for services necessary to perform and administer the risk

management program or to perform or administer other functions deemed

necessary by the advisory committee and approved by the superintendent.

An individual subscriber may enter into contracts with any person, firm

or corporation for services necessary to perform and administer any

function which that subscriber shall deem necessary.