{"data":{"id":"us-ky/krs-304.3-520","jurisdiction":"us-ky","citation":"KRS 304.3-520","heading":"Contract between insurer and controlling agent -- Minimum provisions -","body":"- Prohibited activities.\nA person acting in the capacity of controlling agent shall not place business with an\ninsurer unless there is in force a written contract between the part ies which sets forth the\nresponsibilities of each party and, where both parties share responsibility for a particular\nfunction, specifies the division of these responsibilities, and which contains the following\nminimum provisions:\n(1) The insurer may termi nate the contract for cause upon written notice to the\ncontrolling agent. The insurer may suspend the underwriting authority of the\ncontrolling agent during the pendency of any dispute regarding the termination;\n(2) The controlling agent shall render accou nt to the insurer detailing all transactions\nand remit all funds due under the contract to the insurer on not less than a monthly\nbasis;\n(3) All funds collected for the account of the insurer shall be held by the controlling\nagent in a fiduciary capacity i n a bank which is a member of the federal reserve\nsystem. This account shall be used for all payments on behalf of the insurer. The\ncontrolling agent may retain no more than three (3) months estimated claims\npayments and allocated loss adjustment expenses;\n(4) Separate records of business written by the controlling agent shall be maintained.\nThe insurer shall have access to and the right to copy all accounts and records\nrelated to its business in a form usable by the insurer, and the commissioner shall\nhave access to all books, bank accounts, and records of the controlling agent in a\nform usable to the commissioner. These records shall be retained according to KRS\n304.2-220 and the commissioner's administrative regulations;\n(5) The contract shall not be assigned in whole or in part by the controlling agent;\n(6) Appropriate underwriting guidelines, including:\n(a) The maximum annual premium volume;\n(b) The basis of the rates to be charged;\n(c) The types of risks which may be written;\n(d) Maximum limits of liability;\n(e) Applicable exclusions;\n(f) Territorial limitations;\n(g) Policy cancellation provisions, including a statement that the ins urer shall\nhave the right to cancel or nonrenew any policy of insurance subject to\napplicable laws concerning the cancellation and nonrenewal of insurance\npolicies; and\n(h) The maximum policy period;\n(7) If the contract permits the controlling agent to settle claims on behalf of the insurer:\n(a) All claims shall be reported to the insurer in a timely manner;\n(b) A copy of the claim file shall be sent to the insurer at its request or as soon as\nit becomes known that the claim:\n1. Has the potential to exceed an amount determined by the commissioner\nor exceeds the limit set by the insurer, whichever is less;\n2. Involves a coverage dispute;\n3. May exceed the controlling agent's claims settlement authority;\n4. Is open for more than six (6) months; or\n5. Is closed  by payment of an amount set by the commissioner or an\namount set by the insurer, whichever is less;\n(c) All claim files shall be the joint property of the insurer and the controlling\nagent. However, upon an order of liquidation of the insurer the claim fi les\nshall become the sole property of the insurer or its estate. The controlling\nagent shall have reasonable access to and the right to copy the files; and\n(d) Any settlement authority granted to the controlling agent may be terminated\nfor cause upon the i nsurer's written notice to the controlling agent or upon the\ntermination of the contract. The insurer may suspend the settlement authority\nduring the pendency of any dispute regarding the cause for termination;\n(8) Where electronic claims files are in exis tence, the contract shall address the timely\ntransmission of the data;\n(9) If the contract provides for a sharing of interim profits by the controlling agent, and\nthe controlling agent has the authority to determine the amount of the interim profits\nby establishing loss reserves or controlling claim payments, or in any other manner,\ninterim profits shall not be paid to the controlling agent until one (1) year after they\nare earned for property insurance business and five (5) years after they are earned on\ncasualty business, and not until the profits have been verified pursuant to KRS\n304.3-530; and\n(10) The controlling agent shall not:\n(a) Bind reinsurance or retrocessions on behalf of the insurer, except that the\ncontrolling agent may bind facultative reins urance contracts pursuant to\nobligatory facultative agreements if the contract with the insurer contains\nreinsurance underwriting guidelines, including, for both reinsurance assumed\nand ceded, a list of reinsurers with which the automatic agreements are in\neffect the coverages and amounts or percentages that may be reinsured, and\ncommission schedules;\n(b) Commit the insurer to participate in insurance or reinsurance syndicates;\n(c) Appoint any person producing business without assuring that the person is\nlawfully licensed to transact the type of insurance for which the person is\nappointed;\n(d) Without prior approval of the insurer, pay or commit the insurer to pay a claim\nover a specified amount, net of reinsurance, which shall not exceed one\npercent (1%) of  the insurer's policyholder surplus as of December 31 of the\nlast completed calendar year;\n(e) Collect any payment for a reinsurer or commit the insurer to any claim\nsettlement with a reinsurer without prior approval of the insurer. If prior\napproval is given, a report shall be promptly forwarded to the insurer;\n(f) Permit its subproducer to serve on the insurer's board of directors;\n(g) Jointly employ an individual who is employed with the insurer; or\n(h) Appoint a subcontrolling agent.","path":[],"source_url":"https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=16742","current_through":"Includes enactments through the 2026 Regular Session","vintage":"09/05/2026","retrieved_at":"2026-09-05T20:57:37Z","sha256":"aa6bf63009df04de80468efbbc31d0cfd4b8a328c770c2eb934dceae806f09e7","source_id":"us-ky","stale":false,"prev":"us-ky/krs-304.3-510","next":"us-ky/krs-304.3-530"},"notice":"GroundRules: Original legal text. Not legal advice."}