When the relationship between an insurance company and a managing general agent terminates in Maryland, it is typically the agent that owns the “expirations” (or “book of business”) – i.e., the policyholders’ contact information that may be used to solicit further business upon expiration of those policies. Maryland’s rule is consistent with the general weight of authority in the country that under the “American agency system,” the agent is the owner of expirations upon termination of the insurance agency relationship, particularly when such ownership is provided for by contract.
As for Maryland, Md. Code, Ins. Art. § 27-503 prevents insurance purchasers from losing their insurance when their agency relationship is terminated between their agents and the insurers. Upon the termination of that relationship, the statute grants ownership of expirations to the insurer, but requires the insurer to renew the agent’s policies through the agent for at least two years or until the policies are placed elsewhere. See Md. Code, Ins. Art. (“IN”) §27-503(b)(3). This is known as the “renewal rule.”
As to the larger question of, in the absence of a statute, whether the agent or the insurer owns expirations, expirations are generally “owned” by the insurance agent that wrote the policy (provided that the agent is not in default in remitting premiums to the insurer). See Charles Maggard Agency, Inc. v. Mo. Pub. Entity Risk Mgmt. Fund, 974 S.W.2d 671 (Mo. St. App. W.D. 1998); Spier v. Home Ins. Co., 404 F.2d 896 (7th Cir. 1968); Heyl v. Emery & Kaufman, Ltd., 204 F.2d 137 (5th Cir. 1953); F.B. Miller Agency, Inc. v. Home Ins. Co., 276 Ill. App. 418 (1934) (where ownership of expirations not provided in contract and insufficient evidence of industry custom, ownership granted to agent); Nat’l Fire Ins. Co. v. Sullard, 97 N.Y. App. Div. 233 (1904); Stein v. Nat’l Life Ass’n, 105 Ga. 821 (1898) (business owned by agent and was not a trade secret produced through a confidential relationship with insurer). There appears to be at least a few cases to the contrary, see State Farm Mut. Ins. Co. v. Dempster, 174 Cal. App. 2d 418 (1959) (expirations are owned by insurer as trade secrets); Fid. & Cas. Co. v. Downing & Downing, 88 Pa. Super. 133 (1926); Arrant v. Ga. Cas. Co., 212 Ala. 309 (1924) (agent not entitled to ownership of expirations under general principles of agency law), particularly where contractual provisions between the insurers and agents are construed to grant ownership of expirations to the insurers, see Arrant, 212 Ala. 309; Liberty Mut. Ins. Co. v. Outerbridge, 249 N.Y.S.2d 147 (1963). Some courts have also held that agents of mutual insurance companies or direct writing companies, as opposed to stock insurance companies, do not own their expirations. See State Farm Mut. Auto Ins. Co. v. Hedburg, 236 F. Supp. 797 (D. Minn. 1964) (mutual insurance companies); Hardin Cnty. Farm Bureau v. Farm Bureau Mut. Ins. Co., 341 S.W.2d 62 (Ky. 1960) (direct writing company). However, where the terms of a contract expressly assign expiration rights to the agent, courts have (where the agent has fully accounted for premiums owed to the insurer) enforced those rights. See, e.g., Nelson v. Farmers Mut. Auto Ins. Co., 4 Wis. 2d 36 (1958) (upholding jury finding that contract between insurer and agent granted expirations to agent).
Please contact Bill Sinclair, head of STSW’s commercial litigation group, at 410-385-9116 or bsinclair@silvermanthompson.com, to discuss this or similar insurance issues.