The Alliance of Insurance Agents and Brokers is warning California agents and brokers that the Department of Insurance (DOI) is drafting another new set of proposed regulations to impose fiduciary duties, disclosure of compensation and conflicts of interest on both brokers and agents.
As a prelude to the regulations, the DOI issued its 9-30-05 private advisory letter concluding that independent agents and brokers presently owe fiduciary duties to their customer insureds.
Alliance Executive Director Ken Nigohosian explained, “This may reflect a DOI strategy to overcome the lack of authority in its two previous attempts to promulgate regulations. The Alliance, working in conjunction with the Western Insurance Agents Association, quickly responded with our own legal analysis on October 6, which denounced the DOI analysis as incorrect and irresponsible.”
Alliance counsel Robert Hogeboom (Barger & Wolen) commented, “It has been learned that the DOI advisory letter has also been distributed to several plaintiff law firms which currently have litigation pending against agents and brokers. Whether the letter then will be used by plaintiffs in litigation to support their contention of fiduciary duties, we can only speculate. However, by distributing the letter among different representative groups, it raises the argument that its conclusions are tantamount to underground regulations.”
Hogeboom continued, “We are specifically concerned that the DOI, in conjunction with plaintiff law firms, is attempting in the advisory letter to provide legal support for a California Insurance Code (CIC) 332 cause of action for concealment of compensation and steering based on a supposed duty to disclose as a result of a fiduciary relationship.”
The Alliance and a coalition of industry organizations severely criticized the commissioner’s attempt to steam roll fiduciary duty regulations last year in the wake of Eliot Spitzer’s bid rigging investigations in New York. “The DOI quickly found that the industry was united in opposing unnecessary regulations aimed at the industry in general, as opposed to focusing on any specific bid rigging concerns,” Nigohosian said.
Nigohosian added, “The Alliance will continue, on behalf of its members, challenging all proposed unnecessary regulations which seek to change how agents and brokers do business with the public in traditional insurance sales.”
Topics Agencies Legislation
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