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The following opinion is presented on-line for informational use only and does not replace the official version. (Mich Dept of Attorney General Web Site - www.ag.state.mi.us)



Opinion No. 6140

April 1, 1983


Insurance agent bartering contracts of insurance for goods or services


Agent bartering contracts of insurance

An insurance agent may not barter contracts of insurance in return for goods or services.

Honorable Nancy A. Baerwaldt

Commissioner of Insurance

Department of Licensing and Regulation

Insurance Bureau

1048 Pierpont Street

Lansing, Michigan

You have requested my opinion regarding whether an insurance agent licensed to transact insurance in this state may, as members of 'barter exchanges,' barter contracts of insurance for goods or services.

It is my understanding that, generally, barter exchanges are organizations whose members barter, or trade, with other members for available goods or services. A member is paid by means of 'trade units,' which are considered the equivalent of the dollar value of the goods or services provided. These trade units are credited to the member's account and can be accumulated to buy any product or service offered by other members. The trade units are transferred by a system of 'exchange checks' or 'vouchers.' Thus, members can trade their goods or services for such things as plumbing, printing, laundry services, dental work, restaurant meals, etc. Generally, there is an initial membership fee, annual dues, and a service fee on each transaction.

The Insurance Code of 1956, 1956 PA 218, as amended, MCLA 500.100 et seq; MSA 24.1100 et seq, contemplates that insurance premiums will be paid to the agent in money rather than in the form of goods and services. Chapter 12 of the Insurance Code of 1956, 1956 PA 218, supra, governs insurance agents, solicitors, and counselors. 1956 PA 218, supra, Sec. 1207(1) and (2); MCLA 500.1207(1) and (2); MSA 24.11207(1) and (2), provides:

'(1) An agent shall be a fiduciary for all moneys received or held by him in his capacity as an agent. Failure by an agent in a timely manner to turn over the moneys which he holds in a fiduciary capacity to the persons to whom they are owned is prima facie evidence of violation of the agent's fiduciary responsibility.

'(2) An agent shall use reasonable accounting methods to record funds received in his fiduciary capacity including the receipt and distribution of all premiums due each of his insurers. He shall record return premiums received by or credited to him which are due an insured on policies reduced or canceled or which are due a prospective purchaser of insurance as a result of a rejected or declined application. Records required by this section shall be open to examination by the commissioner.' (Emphasis added.)

These provisions clearly contemplate that the agent, as a fiduciary, will receive money as payment for the insurance which is due the insurer, and that as agent, he or she receives payment for the insurance and under the proposed bartering system, the agent would receive something other than money for the insurance in violation of the statute.

Section 1207(2) requires an agent to use reasonable accounting methods to record all 'funds' received, which funds include the receipt and distribution of all premiums. The Commissioner of Insurance has the authority to examine all the records of an insurance agent which will shed light on the financial records which the agent is required by statute to keep. Szabo v Insurance Commissioner, 99 Mich App 596; 299 NW2d 364 (1980). The statutory requirements for the keeping of financial records as set forth in 1956 PA 218, Sec. 1207(2) supra, make no provision for acceptance of goods or services in lieu of premiums and for an agent remitting his own funds to meet the statutory obligation to remit premiums in money to the insurer or insurers. While the predecessor provision to 1956 PA 218, Sec. 1207, supra, 1956 PA 218, Sec. 1456, provided that a 'substitute for money or thing of value whatsoever' might be received by an agent as premium, this section was repealed by 1972 PA 133, effective March 30, 1973, and replaced by 1956 PA 218, Sec. 1207, supra, which makes no reference to anything other than money as the mode of payment.

Further, it is unlawful for an insurer or its agent to charge the insured anything less than the lawful insurance rate established by law. 1956 PA 218, supra, Sec. 2066(1), in addressing illegal rebates and inducements, provides:

'No insurer, by itself or any other party, and no insurance agent or solicitor, personally or by any other party, transacting any kind of insurance business shall offer, promise, allow, give, set off or pay, directly or indirectly, any rebate of, or part of, the premium payable on the policy or on any policy, or agent's commission thereon, or earnings, profit, dividends or other benefit founded, arising, accruing or to accrue thereon, or therefrom, or any other valuable consideration or inducement to or for insurance, on any risk in this state now or hereafter to be written, which is not specified in the contract or insurance; nor shall any such insurer, agent or solicitor, personally or otherwise, offer, promise, give, sell, or purchase any stocks, bonds, securities or any dividend or profits accruing or to accrue thereon, or other thing of value whatsover as inducement to insurance or in connection therewith which is not specified in the policy contract.' (Emphasis added.)

Similarly, 1956 PA 218, supra, Sec. 2070(1); MCLA 500.2070(1); MSA 24.12070(1) provides:

'No insured person or party shall receive or accept, directly or indirectly, any rebate of premium or part thereof, or agent's, soilicitor's or broker's commission thereon, payable on the policy, or on any policy of insurance, or any favor or advantage or share in the dividend or other benefit to accrue thereon, or any valuable consideration or inducement, not specified in the policy contract of insurance.'

Since an insured is not paying his premiums in cash under a barter arrangement, but rather by goods or services, the potential exists for improper or incorrect valuation of such goods and services provided. Policyholders who purchase policies of insurance with cash and policyholders who 'barter' for their insurance may be treated differently in conflict with the intent of the statute. The purpose and intent of the anti-rebate statute is to prevent distinction and discrimination between like policyholders. Northern Assurance Co v Meyer, 194 Mich 371, 378; 160 NW 617 (1916); OAG, 1945-1946, No 0-3658, p 392, (June 25, 1945). The statute was meant to repress practices by which agents would insure an individual and promise him or her certain conditions not provided for in the policy and would discriminate between different persons in the same class of insureds by offering inducements. Bernblum v Travelers Life Insurance Co of Hartford, Conn, 340 Mo 1217; 105 SW2d 941 (1937), Afro-American Insurance Co v LaBerth, 136 Fl 37; 186 S 241 (1939). The purpose of an anti-rebate statute is to establish uniform insurance rates throughout the enacting state and to maintain standards for such rates. Wolfe v Phillipine Investment Co, 175 Wash 165; 27 P2d 132, 133-134 (1933).

Moreover, it should be recognized that the insurance transaction must be distinguished from other types of transactions. The insurance agent who engages in barter is not accepting goods and services in exchange for his own product, but rather that of his principal. He cannot barter the insurance product because it does not belong to him. The only conceivable service for which he or she may barter would be his or her own services for which he is paid a commission. However, 1956 PA 218, Sec. 2066(1), supra, bars an insurance agent from extending directly or indirectly a rebate of the agent's commission. These provisions pertaining to illegal rebates and inducements militate against an insurance agent's participation in a barter exchange.

An insurance agent transacting insurance as a member of a barter exchange is not in the public interest. Insurance is a business affected with a public interest and insurance laws are to be construed in the interests of the public and policyholders. Attorney General, ex rel Commissioner of Insurance v Michigan Surety Co, 364 Mich 299, 325; 110 NW2d 677 (1961). An agent who must remit dollars to his or her insurers would, upon engaging in bartering, be required to remit his own funds to cover the requisite premium payments. Such an arrangement may lend itself to untimely remissions of premium money and perhaps to a failure to secure necessary insurance coverages in a timely manner. It could also pose the threat that unearned permium refunds, unearned commissions, other premiums collected, and even claim payments might be mishandled and/or misapplied by an agent who finds himself in a cash crunch as a result of his bartering.

It is my opinion, therefore, that an insurance agent may not barter contracts of insurance for goods and services as members of barter exchanges.

Frank J. Kelley

Attorney General

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