Oregon Consultants, Adjusters and Producer Appointments

Oregon licenses more than insurance producers. People who advise the public about insurance for a fee, and people paid to adjust claims, need their own licenses. This chapter covers those licenses, how a producer is appointed to represent an insurer and how that appointment ends, and the federal law that keeps certain convicted persons out of the business of insurance.

Types of licensees

Consultants (ORS 744.605, 744.609, 744.626; OAR 836-071-0150)

Who is an insurance consultant (ORS 744.605). A person is engaged in business as an insurance consultant, and must hold an insurance consultant license, if the person either:

• For compensation other than a commission from selling insurance, acts as a consultant about insurance, gives advice, counsel, opinion or service about the benefits, advantages or disadvantages of insurance, or otherwise provides information about insurance, or
• Offers to do those things while using a title such as insurance planner, consultant, adviser or counselor, or financial and insurance planner, consultant, adviser or counselor

Compensation includes pay for related financial services provided along with the advice. A license may be held by an individual or a business entity. A business entity acts through individuals who are themselves licensed for the class of insurance involved.

Who is not a consultant (ORS 744.609). The license requirement does not apply to:

• An attorney providing services as an attorney
• A certified public accountant or public accountant acting as one
• A person who does the consulting activities while conducting an educational seminar
• A financial institution or consumer finance licensee
• A recognized actuary
• A person who provides the services only to insurance producers or authorized insurers

Classes (ORS 744.626). A consultant license may cover life, health, or property and casualty insurance. The property and casualty class also covers marine and transportation insurance and surety.

Qualifications and duties.

• A resident individual applicant generally needs at least five years’ experience in the insurance business related to the classes applied for (or equivalent education or qualifications), and must pass an examination. A producer already licensed for the same classes does not take the consultant examination (ORS 744.619)
• A consultant must keep a current certificate of errors and omissions insurance on file with the Director (ORS 744.635) in the amount of $500,000, claims made or per occurrence (OAR 836-071-0150)
• A consultant gives every client and prospective client a written disclosure statement (ORS 744.650). It describes the work to be performed, the consultant’s background and areas of expertise, the fee schedule and whether fees may be negotiated, anyone other than clients the consultant represents, and whether the consultant will also receive a commission or other compensation
• A consultant may not give or receive a rebate of any fee (ORS 744.655), and keeps the records of each transaction for three years after it concludes (ORS 744.638)

Consultant and producer at once. A producer who is not also licensed as a consultant may receive only commission, unless a rule provides otherwise (ORS 744.077). For a person licensed as both, the Director sets by rule when a commission, a fee, or both may be accepted. Under that rule, a consultant paid by the client may not also accept compensation from the insurer unless, before the transaction, the consultant obtains the client’s documented acknowledgment and discloses the amount the insurer will pay (OAR 836-071-0263).

Adjusters (ORS 744.531)

An adjuster is a person who receives a fee, commission or other compensation to investigate, negotiate or settle first party or third party losses arising as claims under an insurance contract covering an Oregon risk (ORS 744.502). A person may not engage in business as an adjuster without an adjuster license (ORS 744.505).

Classes (ORS 744.531). Oregon issues one adjuster license, divided by class:

• Property and casualty, which also covers losses under marine and transportation and surety insurance
• Health, whether provided by an insurer or a health care service contractor
• Any other class the Director specifies by rule

Who does not need an adjuster license (ORS 744.515). Among others:

• A licensed resident insurance producer
• A person an authorized insurer employs and authorizes in writing to adjust losses under its own policies
• A person adjusting one loss before being licensed, who applies for the license within two days after beginning the adjustment
• A person holding a temporary catastrophe permit, obtained within five days after being deployed to a declared catastrophe. The permit lasts 90 days, or longer if the Director decides it is needed (ORS 744.555)
• An adjuster of maritime losses, an attorney acting as an attorney, and a person who gives an estimate or report without compensation

A resident individual adjuster must be at least 18, pass an examination, and be trustworthy and reliable (ORS 744.525). To renew, an adjuster completes 24 hours of continuing education each license period, including 3 hours of ethics and 3 hours of Oregon law (or subjects the adjuster’s home state requires) (ORS 744.521). An adjuster who adjusts a loss under a policy from an unauthorized insurer (other than a surplus lines insurer) notifies the Director within 20 days (ORS 744.541), and keeps transaction records for three years (ORS 744.578).

Company regulation

Producer appointment (ORS 744.078)

A license lets a producer transact insurance in Oregon. An appointment is the insurer’s authorization for the producer to act as its agent.

• A producer may not act as an agent of an insurer unless the producer is an appointed agent of that insurer, or is transacting insurance on behalf of another producer who is appointed, under conditions the Director sets by rule (ORS 744.078(1))
• Each insurer keeps a current list of the producers contractually authorized to accept applications for it, and makes the list available to the Director on request (ORS 744.078(2))
• A producer may represent as many insurers as appoint them, under one producer license (ORS 744.078(3))
• A person who solicits or procures an application as an agent of the insurer is regarded as the insurer’s agent, not the insured’s, in all matters relating to the application and the policy issued from it. A contrary provision in the application or policy is void (ORS 744.078(4)). A group contract may state whether the group policyholder acts for the insured or for the insurer

Under the Director’s rules, an individual producer working for an appointed agency may transact insurance for that insurer without an appointment of their own, within the classes on their license (OAR 836-071-0295). The Director may also require an insurer to file its producers’ compensation agreements, which are not public records (ORS 744.087).

Termination of appointment (ORS 744.079, 744.081)

Notice to the producer (ORS 744.081). An insurer that terminates a producer’s appointment must give the producer written notice at least 90 days before the termination takes effect, stating the reasons. The termination does not affect any contract rights the producer has, such as to commissions. The producer may sue over a statement in the notice only if it is false and the insurer knew it was false.

The 90-day notice is not required when:

• The producer’s license is denied, restricted, suspended, revoked or canceled
• The producer’s business is sold, transferred or merged, and the insurer has not appointed the successor
• The producer is insolvent or fails to remit balances as the agreement requires
• The producer commits fraud or intentional misconduct
• The insurer discontinues that class of insurance, or stops selling insurance in Oregon
• The insurer and producer mutually agree to end the appointment

A producer may end an appointment at any time, notifying the insurer, and the Director within 30 days after the termination takes effect.

Report to the Director for cause (ORS 744.079). When an insurer ends its relationship with a producer for cause, it notifies the Director within 30 days after the termination takes effect. For cause means one of the grounds for license discipline in ORS 744.074, or a court, government body or self-regulatory organization finding that the producer engaged in such conduct. Then:

• The insurer sends the producer a copy of the notification within 15 days after notifying the Director (including any follow-up report). For a for-cause termination, the copy goes by certified mail, return receipt requested, or overnight delivery
• The producer may file written comments with the Director within 30 days after receiving the copy, sending a copy to the insurer. The comments go in the Director’s file and accompany the report whenever it is shared
• If the insurer later learns more that would have been reportable, it reports that too
• The information is confidential. It is not subject to subpoena or discovery and not admissible in a private civil action
• Absent actual malice, the insurer, the producer and the Director are immune from civil liability for the report. The immunity applies only if an officer or authorized representative of the insurer certifies the propriety of the for-cause termination in writing

An insurer or producer who fails to file a required notice may face administrative action, including suspension or revocation of its license or certificate of authority.

Sidenote

Know this...

Keep the two termination notices apart. The producer gets 90 days’ advance written notice of a termination, with reasons (ORS 744.081). When the insurer ends the appointment, it reports to the Director within 30 days only if the termination is for cause (ORS 744.079). When the producer ends it, the producer notifies the Director within 30 days whatever the reason (ORS 744.081).

Federal Laws and Regulations: 18 United States Code (USC) Sections 1033 and 1034

Two sections added to the federal criminal code in 1994 reach misconduct that threatens an insurer’s financial condition, and keep certain convicted persons out of the business. They apply to anyone engaged in the business of insurance whose activities affect interstate commerce, including the officers, directors, agents and employees of insurers.

Crimes under 18 U.S.C. 1033. It is a federal crime to:

• Knowingly make a false material statement or report, or willfully overvalue property or securities, in financial reports or documents given to an insurance regulator, to influence the regulator’s actions
• Willfully embezzle or misappropriate the moneys, funds, premiums or other property of a person engaged in the business of insurance
• Knowingly make a false entry of material fact in the books, reports or statements of an insurance business, intending to deceive anyone about its financial condition or solvency
• Corruptly obstruct a proceeding before an insurance regulator by threats or force

Each carries a fine, imprisonment of up to 10 years, or both. For false statements, embezzlement and false entries, the maximum rises to 15 years where the conduct jeopardized an insurer’s safety and soundness and was a significant cause of its being placed in conservation, rehabilitation or liquidation. Embezzlement of $5,000 or less carries up to one year.

The prohibited person. A person who has been convicted of any felony involving dishonesty or a breach of trust, or of an offense under section 1033, commits a crime by willfully engaging in the business of insurance. So does anyone in the business who willfully permits such a person to participate. Each carries up to five years’ imprisonment. A prohibited person may work in the business of insurance only with the written consent of an insurance regulator authorized to regulate the insurer, specifically referring to this subsection. This is often called a “1033 waiver.”

Civil penalties under 18 U.S.C. 1034. The U.S. Attorney General may bring a civil action against a person who engages in conduct that is an offense under section 1033. On proof by a preponderance of the evidence, the civil penalty is up to $50,000 for each violation, or the amount of compensation the person received or offered for the conduct, whichever is greater. The Attorney General may also ask a federal court for an injunction barring the person from continuing the conduct.

Lesson summary

• A person paid, other than by commission, to advise on insurance, or using a title such as insurance consultant or adviser, needs an insurance consultant license (ORS 744.605). Attorneys, accountants, seminar presenters, financial institutions, actuaries, and those advising only producers or insurers are exempt (ORS 744.609).
• A consultant carries $500,000 of E&O coverage (OAR 836-071-0150) and gives each client a written disclosure statement covering fees and whether a commission will also be received (ORS 744.650).
• A producer who is not also a licensed consultant may receive only commission (ORS 744.077).
• An adjuster is paid to investigate, negotiate or settle claims, and holds a property and casualty or health class license (ORS 744.531). Resident producers and an insurer’s own adjusting employees are exempt.
• A producer may act for an insurer only if appointed by it, or through an appointed producer as the rules allow. A producer who solicits an application is the insurer’s agent, not the insured’s (ORS 744.078).
• An insurer terminating an appointment gives the producer 90 days’ written notice with reasons, except for listed causes such as license loss, insolvency or fraud (ORS 744.081).
• A for-cause termination is reported to the Director within 30 days, with a copy to the producer within 15 days. The producer may comment within 30 days, and the report is confidential (ORS 744.079).
• 18 U.S.C. 1033 makes false statements to insurance regulators, embezzlement of premiums or other insurance funds, false entries about an insurer’s financial condition, and obstruction of regulatory proceedings federal crimes, and bars a person convicted of a felony involving dishonesty or breach of trust from the business without a regulator’s written consent. 18 U.S.C. 1034 adds civil penalties of up to $50,000 per violation, or more if the compensation was larger, and injunctions.