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EXHIBIT 10.5
MICOA/SCW SALES AGENCY AGREEMENT
(MEDICAL PROFESSIONAL LIABILITY - MICHIGAN ONLY)
JANUARY 1, 2000
This Agreement is made between Mutual Insurance Corporation of America, a
Michigan corporation ("MICOA"), and SCW Agency Group, Inc., a Michigan
corporation ("SCW" or "Agent").
RECITALS
1. MICOA is engaged in the business of providing insurance, including the
types of professional liability insurance listed on the attached Commission
Schedule; and,
2. SCW is engaged in the business of insurance sales as a licensed Michigan
insurance agent.
NOW, THEREFORE, in consideration of the mutual promises and undertakings set
forth herein, the parties agree as follows:
A. AUTHORITY AND RESPONSIBILITY OF AGENT
Subject to the requirements imposed by law, the underwriting rules and
procedures of MICOA, and the terms of this Agreement, MICOA confirms the
appointment of SCW as a nonexclusive professional liability sales agent in
the State of Michigan, for those types of professional liability insurance
listed on the attached Commission Schedule. SCW's duties include the
following:
1. Solicitation, receipt, and transmittal to MICOA of proposals for
insurance contracts of the types specified on the attached Commission
Schedule, and assistance in marketing these insurance products.
2. Production and delivery of certificates of insurance and written
binders in accordance with MICOA underwriting requirements. SCW is not
authorized to accept or bind any risk or to otherwise obligate MICOA
without specific authority from MICOA.
3. The usual and customary services, including marketing services, of an
agent on policies placed with MICOA subject to the following:
- MICOA will not be responsible for Agent's expenses related to
Michigan sales, including but not limited to salaries, benefits,
bonuses, rent, transportation, employee hire or solicitor's fees,
postage, telephone, advertising, licensing fees or any other
expenses unless agreed upon in writing.
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4. To promptly report all claims and losses of which Agent has knowledge,
and properly notify MICOA when Agent receives notice of the
commencement of any related legal action. Agent shall refrain from
admitting or denying liability on the part of MICOA in connection with
any claim or lawsuit.
5. Appoint subagents to distribute MICOA's products and services as
appropriate in the State of Michigan, provided that such appointments
are done with prior notice to MICOA and upon appointment by MICOA as a
licensed agent. Agent shall oversee the activities of any subagents
appointed by it and shall apprise MICOA of the names, addresses and
duration of any appointments activated by Agent. Agent shall instruct
and oversee any subagents so as to assure compliance with the terms
and requirements of this Agreement. The following three agencies have
already been appointed by MICOA as subagents:
- City Insurance Agency, Inc., Marquette, Michigan
- ▇▇▇▇▇▇▇▇▇ Agency, St. Clair Shores, Michigan
- ▇▇▇▇▇▇▇-▇▇▇▇▇ Agency, Inc., Traverse City, Michigan
- Insurance by Burley, Petoskey, Michigan
- ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ & Associates, Inc., Southfield,
Michigan
The terms of the agreements with the subagents will govern the
compensation paid to the subagents. If MICOA has agreed or does agree
in writing, in connection with a subagency agreement, to pay SCW at a
different commission rate than is provided herein, or to make other
payments in relation to a subagent (including but not limited to
payments upon termination of the subagency relationship), then those
payment terms will remain effective in connection with that subagency
agreement. Except as otherwise agreed to by MICOA in connection with a
subagency agreement, SCW will be responsible for compensating the
subagents from the commissions SCW receives pursuant to this
Agreement.
B. COMMISSIONS
1. Commissions shall be paid to SCW by MICOA in accordance with the
attached Commission Schedule of June 26, 1999, which is hereby
reiterated and incorporated by attachment; and which in pertinent part
reconfirms 1999 commissions, the Production Bonus Schedule and the
Three Year Schedule of Commissions(1). The Three Year Agency
Commission Schedule and Production Bonus Schedule (Incentive Plan) are
attached. The Incentive Plan is subject to annual change at MICOA's
sole discretion. All other aspects of the June 26, 1999 renewal
document
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(1) The reference contained on page 2 of the 6/26/99 document to
Paragraph G of this Agreement shall be deemed changed to Paragraph H.
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shall remain in force during the effectiveness of this Agreement
unless otherwise agreed in writing by the Parties. Commissions may be
revised by mutual agreement between the parties, or by MICOA after
giving Agent 120 days' advance notice of the proposed changes and
effective date. Any return commission otherwise due MICOA under this
Agreement will be calculated at the rate initially applicable.
2. Commissions on premiums shall be paid to Agent by the 15th of the
month following the month in which such premiums are received and
recorded by MICOA, subject to deduction of any return commissions due
from the Agent.
3. For production purposes, new business shall be defined as all new
policies or policies where there is a break in continuous coverage of
at least one day. Extended discovery period (tails) will be treated as
renewal premium.
4. Commissions on policies of less than one year will not be annualized,
but rather will be paid for the actual policy period.
5. Agent agrees to return commissions on policy cancellations or
reductions at the same rate at which such commissions were originally
paid. The payment of commissions by MICOA to Agent is contingent upon
Agent being legally licensed. Any revocation or cancellation of
Agent's license is grounds for nonpayment of commissions.
C. MICOA BILLED POLICIES
For professional liability business covered by the attached Commission
Schedule which is placed with MICOA and billed directly to the
policyholder, the following shall apply:
1. The processing and submittal of all such business shall be subject to
provisions outlined in MICOA's written requirements and forms as they
may be implemented from time to time.
2. If Agent receives any premium payments, Agent shall submit the
appropriate premium to MICOA without deduction of commission.
3. Agent's name shall appear on all policies, premium notices,
endorsements, and cancellation notices to policyholders. Copies of all
such items sent to policyholders shall be sent at the same time to the
Agent.
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4. MICOA will provide Agent a monthly accounting of all transactions
using industry standards, including name, policy number, effective
date, premium and commission.
5. MICOA will furnish Agent with a list of all policies which are due to
renew, at least 90 days in advance of expiration. Such list will also
include current premium and a schedule of all credits or debits
currently applied to the policy, as well as any proposed changes to
the renewal policy.
D. POLICY CANCELLATION
Cancellation of any policy in force, when requested by the Agent, will be
honored by MICOA, except for those policies MICOA is not otherwise
permitted to cancel.
E. NONEXCLUSIVE APPOINTMENT OF AGENT
MICOA may appoint other agents to sell its professional liability products
in Michigan. SCW is accordingly a nonexclusive agent for MICOA. Agent also
agrees not to sell or sign a contract to sell any professional liability
products offered in competition with MICOA in Michigan by any other carrier
without the written consent of MICOA, except as specifically provided in
this paragraph. SCW agrees to submit all covered professional liability
risks to MICOA for MICOA's underwriting evaluation and policy premium
quotation. If MICOA declines a risk or MICOA's premium quotation is
significantly higher than that quoted by another insurance company, then
SCW, following consultation with MICOA, may place the risk with that other
insurance company. SCW agrees that MICOA may review placements made by SCW
with other insurance carriers on a quarterly basis.
MICOA Agrees to continue its practice of not accepting agent of record
letters or their equivalent regarding any Michigan professional liability
business.. Nor will MICOA provide that such business written by SCW or any
other agent be transferred from the writing agency by MICOA. All such MICOA
business written by SCW shall remain with SCW, unless otherwise agreed by
SCW in writing.
F. OWNERSHIP AND SALE OF EXPIRATIONS
1. OWNERSHIP. SCW shall own all expirations for business written pursuant
to this Agreement at and after January 1, 2000. As to other years of
MICOA Michigan professional liability business already written by SCW,
expiration ownership shall vest in SCW as follows:
Effective December 31 of each year specified under "Year" below,
expirations for all such MICOA policies written through SCW during the
years listed under "Policy Years" shall become the property of SCW:
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YEAR POLICY YEARS
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2000 1997 through 1999
2001 1994 through 1996
2002 1991 through 1993
There shall be no ownership or sales rights granted SCW under any
circumstances for MICOA Michigan professional liability business SCW
wrote prior to 1991.
2. SALES OF ALL VESTED EXPIRATIONS. Beginning January 1,2003 SCW may sell
all of the expirations vested pursuant to F,1, above, subject to
MICOA's right of first refusal. SCW shall notify MICOA in writing of
its desire to sell all of the expirations and MICOA shall have 45
business days to agree to purchase all such expirations. The price
paid by MICOA shall be fixed at 150% of the commission income SCW
earned for all MICOA Michigan professional liability business SCW sold
from January 1, 1991 through December 31, 1999. MICOA shall be allowed
to verify the amount of such commissions from an audit of SCW's
records paid for by MICOA upon request.
3. SALES OF LESS THAN ALL EXPIRATIONS. For any proposed sales of less
than all vested expirations at and after January 1, 2003, MICOA's
right of first refusal shall apply, and the 150% commission pricing
shall be applied for the specific policy expirations and years to be
sold.
4. PAYMENT. Amounts due SCW under F,2 and 3 above may be paid in one lump
sum or in equal quarterly installments over no less than two years at
MICOA's option.
5. TERMINATION PRIOR TO COMPLETE VESTING. If this Agreement is terminated
prior to December 31, 2002, expirations for any unvested periods of
remaining Policy years between 1991 and 1999 shall vest in SCW at the
times designated in F, 1, above, unless the termination is due to :
SCW's loss of license, fraud, willful misrepresentation, abandonment
of this Agreement or failure by SCW to cure a material breach within
30 days after written notice of such breach.
G. AGENT'S ERRORS AND OMISSION INSURANCE
Agent will maintain valid errors and omissions insurance, with minimum
limits of $1,000,000 per incident, which shall contain terms acceptable to
MICOA covering Agent's solicitors and employees. Agent shall provide MICOA
a copy of the policy upon request.
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H TERMINATION OF AGREEMENT
1. This Agreement may be terminated by MICOA or SCW upon giving at least
120 advance written notice to the other party. This Agreement may
nevertheless be terminated immediately in the event of: loss of
license; fraud; willful misrepresentation; abandonment of this
Agreement or failure by a Party to cure a material breach within 30
days after written notice of said breach; provided that, if this
Agreement is terminated by MICOA with less advance notice than is
required to terminate the subagency agreements, those subagency
agreements will continue to be honored by MICOA until they are
properly terminated, and MICOA will pay the subagents the compensation
they are entitled to receive under the subagency agreements.
2. All MICOA written or recorded information in the possession of SCW
from time to time as a result of this Agreement, including insured
listings, data, and expiration lists, are and shall be continually
owned by MICOA, unless they have become the property of SCW pursuant
to Paragraph F, above. All such information will be kept
confidentially by SCW, regarded as proprietary to MICOA, and used only
as necessary to perform this Agreement. Copies of any such information
will be made available to MICOA at any time upon reasonable request.
Upon termination of this Agreement, all originals and copies of such
information will be returned immediately to MICOA upon its direction,
or will be destroyed and confirmed destroyed by SCW upon MICOA's
request.
I. MISCELLANEOUS
1. Amendment. This Agreement may be amended only in writing by mutual
agreement of the parties.
2. Nonwaiver. Waiver of any provision of this Agreement may only be made
in writing, and shall not be construed as a waiver of any other
provisions of this Agreement.
3. Previous Agreement. As of the Effective Date of this Agreement, this
Agreement supersedes and replaces any previous Sales Agency Agreement
between the parties covering professional liability insurance in the
State of Michigan. This Agreement does not supersede the agreements
which have been entered into concerning the subagencies listed in
Paragraph A, 5, above.
4. Independent Contractor. Agent shall in all respects function and be
regarded as an independent contractor while performing its obligations
under this Sales Agency Agreement.
5. Michigan Law. This Agreement shall be interpreted and enforced under
the laws of the State of Michigan.
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6. Effective Date. This Agreement is made effective beginning January 1,
2000, and the first year and renewal commissions specified on the
Agency Commission Schedule shall be effective from January 1, 2000.
The parties, by their respective designees authorized to sign for them,
have executed this Agreement.
MUTUAL INSURANCE CORPORATION
OF AMERICA
Dated: March 30, 2000 By ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Its CMO
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SCW AGENCY GROUP, INC.
Dated: 4-13-2000 , 1988 By ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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Its CEO
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JUNE 26, 1999
1999
RENEWAL
OF MICOA/SC&W SALES AGENCY AGREEMENT
THREE YEAR SCHEDULE OF COMMISSIONS
1999 RENEWAL AND PRODUCTION BONUS SCHEDULE
MICOA and SC&W agree to renew the Sales Agency Agreement ("Agreement") which
was effective January 1, 1998 for an additional year beginning January 1, 1999,
subject to the following stipulations and the information contained on the
attached.
The January 1, 1999 Agency Commission Schedule, and,
The 1999 Production Bonus Schedule
As provided in the Agency Commission Schedule including Production Bonus, any
Production Bonus Commission applicable to 1999 shall be determined by the 1999
production bonus provisions of the January 1, 1999 Agency Commission Schedule.
Any 1999 bonus earned shall be payable by February 1, 2000.
THREE YEAR SCHEDULE OF COMMISSIONS
Also attached is the 1999 SC&W Michigan Three Year Physician-Individual and
Medstaff Commission Schedule, the provisions of which would apply to each
listed year provided that the Agreement is renewed and otherwise in effect for
the year. Nothing in this Commission schedule, this 1999 Renewal or the other
provisions of the Agreement or its attachments shall be construed or understood
to imply automatic annual renewal or extension of the agreement or its
attachments.
ANNUAL PLAN REVIEW
A review of SC&W performance results for MICOA based on SC&W's annual plan for
Michigan MICOA business shall be a precondition to any decision to renew the
Agreement for years beyond 1999.
Annual plans will become effective each January 1 for years when this Agreement
is renewed. The Plans will be developed in writing by SC&W, and will be subject
to MICOA's review and acceptance by December 1 of each year previous to the
anticipated renewal year. For 1999 the annual plan was submitted to MICOA and
accepted in June 1999.
Plan reviews by MICOA and SC&W will also recognize any MICOA imposed business
factors including rate changes and underwriting criteria, during the relevant
year, which were beyond SC&W's control and which directly affected annual
production results for the period. Any plan performance review as a
precondition to any decision to renew the agreement will be concluded by
January 15 of the year following the preceding sales year under review.
Reviews deemed unsatisfactory to MICOA in its sole discretion, and which are
unaffected directly by MICOA imposed business factors impacting the period under
review shall be considered grounds for termination otherwise permitted by
Paragraph G of the Agreement.
MICOA
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, M.D.
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇, M.D.
Secretary/Treasurer
SC&W
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
CEO
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JANUARY 1, 1999
AGENCY COMMISSION SCHEDULE
FIRST YEAR RENEWAL
COMMISSION(1) COMMISSION(2)
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PHYSICIAN-INDIVIDUAL
- Claims Made ]
- Occurrence ] Note: See Page 5 attachment for three year rate schedule.
- Tailgard ]
MEDSTAFF
- Claims Made ]
- Occurrence ] Note: See Page 5 attachment for three year rate schedule
- Tailgard ]
DENTISTS
- Claims Made 15.0% 8.5%
- Occurrence 15.0% 8.5%
- Tailgard 15.0% 8.5%
HOSPITALS
- 200,000 plus 15.0% 5.0%
- 0 to 200,000 15.0% 7.0%
ENDORSEMENTS
- All endorsements results in additional premium will be treated as new business.
- Endorsements resulting in a decrease of premium shall be treated as renewal business.
- Extended reporting endorsement (tails) shall be paid as renewals (5.0%).
- Prior acts policies paid as new business (5.0%)
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FOOTNOTES
(1) Effective July 1, 1999
(2) Effective July 1, 1999.
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1999 SC&W MICHIGAN THREE YEAR PHYSICIAN-INDIVIDUAL AND MEDSTAFF
COMMISSION SCHEDULE
FIRST YEAR AND CHANGE DATE DURATION
RENEWAL
COMMISSIONS
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5.00% Now Now
--- ---
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5.50% July to Dec 1999 6 Mos.
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5.75% Jan to July 2000 6 Mos.
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6.00% July to Dec 2000 6 Mos.
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6.50% Jan to July 2001 6 Mos.
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6.75% July to Dec 2001 6 Mos.
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7.00% Jan to July 2002 6 Mos.
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7.50% July to Dec 2002 6 Mos.
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42 Mos.
Note: Thirty-six month schedule of above commission levels are subject to
contract review provisions. At December 2002 this commission schedule may
be reduced at MICOA'S discretion.
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2000 INCENTIVE PLAN - SC&W*
Total Bonus Incentive: $107,000
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GOAL
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1. Underwriting Loss 30% Year-end threshold
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2. Retention 30% 85%
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3. Loss Ratio 30% 85%
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4. Business Plan Execution 10% As planned
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% LEVEL ACHIEVED % APPLIED AWARD LEVEL
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1. UNDERWRITING LOSS % APPLIED AWARD LEVEL - $32,100
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102 8% $8,560
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Target 100 16% $17,120
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96 24% $25,680
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94 30% $32,100
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2. RETENTION LEVEL % APPLIED AWARD LEVEL - $32,100
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84 8% $8,560
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Target 85 16% $17,120
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87 24% $25,680
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89 30% $32,100
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3. LOSS RATIO % APPLIED AWARD LEVEL - $32,100
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86.5 8% $8,560
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86 16% $17,120
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Target 85 24% $25,680
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82 30% $32,100
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4. BUSINESS PLAN EXECUTION 10% $10,700
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* This 2000 Incentive Plan may be changed at MICOA's sole discretion beyond
2000.