2023 New York Laws › ISC - Insurance › Article 61 - Reciprocal Insurers and Lloyds Underwriters › 6106 - Subscriber's Agreement.

§  6106.  Subscriber's  agreement.  (a)  (1)  Every  subscriber  of an
authorized  reciprocal  insurer  shall  have  executed  a   subscriber's
agreement,  and every subscriber executing such a subscriber's agreement
containing a provision for contingent  liability  of  subscribers  shall
execute  and  duly  acknowledge the same, in a manner sufficient for the
acknowledgment of conveyances of real property to  be  recorded  in  the
state in which such subscriber is domiciled.
(2)  Every  subscriber's agreement shall be identical in terms, except
as to the date and the name and address  of  the  subscriber,  with  all
other  subscriber's  agreements  currently  in force and effect with all
other subscribers of such reciprocal insurers. However, in the  case  of
any  reciprocal  insurer authorized pursuant to section six thousand one
hundred eight of  this  article  to  issue  non-assessable  policies  or
agreements,  or  having a corporate attorney-in-fact wholly owned by the
subscribers at such reciprocal insurer, the acceptance of  a  policy  or
binder of insurance containing the subscriber's agreement printed at the
end of the standard policy provisions or the binder, as the case may be,
preceded by the words printed upon the policy or binder:
"The  acceptance  of  this policy or binder shall constitute
that insured designated  therein  is  a  subscriber  of  the
reciprocal  insurer  and  shall constitute the execution and
delivery by the insured of the subscriber's agreement  which
is appended to this policy or binder, and hereby made a part
thereof",
shall  constitute  the  execution  and  delivery  of  said  subscriber's
agreement by that insured as fully and to the same extent as though said
agreement had been signed and acknowledged by that insured.
(3) Every such subscriber's agreement shall contain in  substance  the
following provisions:
(A)  A  designation and appointment of the attorney-in-fact to act for
and bind the subscriber in all transactions relating to or  arising  out
of   the   operations  of  such  reciprocal  insurer,  subject  to  such
limitations as may be lawfully provided.
(B) An agreement that service of summons or other legal process on the
attorney-in-fact   or   on   any   other   person   appointed   by   the
attorney-in-fact  to receive such process, shall, in any action, suit or
proceeding arising out of any contract, agreement or transaction of such
reciprocal insurer, be equivalent to personal service of such summons or
other legal process on each and every subscriber.
(C)  Unless  the   reciprocal   insurer   is   authorized   to   issue
non-assessable  policies under section six thousand one hundred eight of
this  article  an  agreement  for  the  contingent  liability   of   the
subscriber,  which  shall  state  that  such subscriber agrees to pay on
demand such subscriber's proportionate share of any assessment  lawfully
ordered  or  levied  by  the advisory committee or by the superintendent
under article seventy-four of this chapter.
(D) A  provision  that  there  shall  be  an  annual  meeting  of  the
subscribers, in person or by proxy, at a time and place to be determined
in  accordance  with  such  agreement, of which each subscriber shall be
duly notified and at which each subscriber shall have power to  vote  in
person  or  by  proxy  for  all  members of the advisory committee to be
chosen or appointed at such time, except that in the case of  a  foreign
reciprocal insurer, the superintendent may permit a modification of such
provision  provided  that  he  is  satisfied  that  the interests of the
subscribers are properly protected.
(E) A provision specifying the  powers  and  duties  of  the  advisory
committee,  which  shall  include  the  power  and  duty to regulate the
compensation,  powers  and  duties  of  the  attorney-in-fact,  if   not

specifically  provided  in  the  subscriber's  agreement, and shall also
include the power to make regulations  for  the  effective  control  and
custody  of  the  funds  and  investments  of the reciprocal insurer. In
addition, the advisory committee of a municipal reciprocal insurer shall
establish  procedures  to  prevent any conflicts of interest between the
attorney-in-fact and such insurer. Such procedures shall be submitted to
and  approved  by  the  superintendent,  who  shall  also  approve   the
attorney-in-fact for a municipal reciprocal insurer.
(F) Provisions setting forth the rights, privileges and obligations of
the  subscriber  as an underwriter, and as a policyholder subject to the
terms of insurance contracts required or permitted by law to be issued.
(G) General provisions relating to the operations  of  the  reciprocal
insurer,  including  the  subscriber's  operating  reserve requirements,
regulations for the return of savings or dividends, for withdrawals  and
refunds  and  such  other  matters  as  may be necessary to maintain the
operation of such reciprocal insurer in compliance with  the  provisions
of  this  chapter.  In  the case of a municipal reciprocal insurer, such
agreement shall include procedures to: (i) establish  and  promote  loss
control,  safety  programs  and  other  methods of risk management; (ii)
establish equitable risk classifications; and  (iii)  establish  uniform
recordkeeping and reporting procedures.
(4)  The  following  provisions  shall  be  contained  in  either  the
subscriber's agreement or a separate management  agreement  between  the
attorney-in-fact  and the advisory committee or the attorney-in-fact and
any person to which its functions have been delegated after approval  of
the advisory committee:
(A)  A  provision  that  the  attorney-in-fact  shall  provide written
notification of, and make all necessary arrangements as provided in  the
subscriber's  agreement, for the election, in person or by proxy, of the
members of the advisory committee. The cost of notification, ballot,  or
proxy  for  any  meeting  of  the advisory committee and for any meeting
which  may  be  called  for  the  election  shall  be  incurred  by  the
reciprocal.
(B)  A  provision  that  the  attorney-in-fact  shall  provide written
notification to the members of the advisory committee of not  less  than
ten  days  for  any regular meeting or five days for any special meeting
called pursuant to subsection (k) of section six  thousand  one  hundred
five of this article. The cost of such notification shall be incurred by
the reciprocal.
(C)  A  provision  that  the  advisory committee may, upon a vote of a
majority of its members at any regular or special  meeting  thereof  and
upon  written  notice  to  the  superintendent and the attorney-in-fact,
recommend termination of the attorney-in-fact for  a  stated  cause  and
appointment  of a new attorney-in-fact, subject to the provisions of any
management agreement approved by the superintendent. Termination of  the
attorney-in-fact  shall require the approval of a two-thirds majority of
the subscribers present in person or  by  proxy  at  a  special  meeting
called  for that purpose. The attorney-in-fact shall provide by mail not
less than thirty days prior written notification of such meeting to  all
subscribers.   The   mailing   of   notification   shall   include   the
recommendation  of  termination  and  replacement  as  prepared  by  the
advisory committee, and any other appropriate documents submitted by the
attorney-in-fact.  A  copy  of all documents mailed and certification of
their mailing to all subscribers shall be provided to all members of the
advisory committee. The cost of notification  and  proxy  for  any  such
meeting  shall  be incurred by the reciprocal. For reciprocals with less
than two thousand five hundred subscribers, at least twenty-five percent
of all subscribers shall be required to constitute  a  quorum.  For  all

other  reciprocals,  the  greater  of twenty-five hundred subscribers or
five percent of all subscribers shall constitute a quorum.
(D)  A  provision  that the attorney-in-fact shall cause all assets of
the reciprocal and its subscribers to be  invested  in  accordance  with
investment  guidelines  approved  by the advisory committee and shall be
properly accounted for on the financial records  of  the  reciprocal  as
being  held  for or on behalf of the subscribers. All cash assets of the
reciprocal and its subscribers, not otherwise  invested  in  short  term
securities  such  as  money  market  funds,  covering policy obligations
arising out of policies issued or issued  for  delivery  in  the  United
States shall be held in one or more appropriately identified accounts in
banks  that  are  members  of the federal reserve system. These accounts
shall  be  drawn  on  by  the  attorney-in-fact,  or  by  employees   or
representatives of the reciprocal authorized by the attorney-in-fact for
all payments on behalf of the reciprocal.
(E)  A  provision that if the attorney-in-fact is acting for more than
one reciprocal, separate records and accounts shall  be  maintained  for
each reciprocal.
(F)   A  provision  that  the  attorney-in-fact  may  not  assign  its
responsibilities as detailed in the subscriber's agreement in  whole  or
part  or enter into management agreements delegating its duties in whole
or part to another party without the  prior  approval  of  the  advisory
committee and the superintendent.
(G) A provision that the attorney-in-fact shall establish and maintain
underwriting  procedures  and  manuals,  setting  forth  the  rates  and
conditions for the acceptance or rejection of risks.
(H) A provision that the attorney-in-fact shall make a report  to  the
advisory  committee  at  each  regular  meeting  of the committee on the
financial condition of the  reciprocal  and  all  material  transactions
during the period since the last meeting.
(I)  A  provision  that the attorney-in-fact shall annually provide to
each member of the advisory committee:
(i) On or before March first of each year, a copy of the  reciprocal's
annual  statement  and  the  accompanying statement of actuarial opinion
filed with the superintendent pursuant to section three hundred seven of
this chapter; and
(ii) On or before June first of each year, a copy of:
(I) The certified statement filed with the superintendent pursuant  to
subsection (f) of section six thousand one hundred five of this article;
and
(II)  The  certified annual statement of the reciprocal filed with the
superintendent pursuant to section three hundred seven of this chapter.
(J) A provision specifying all  forms  and  amounts  (or  formulas  to
determine the amounts) of compensation the attorney-in-fact will receive
for  services  rendered  and, if all or part of the compensation will be
contingent  upon  the  reciprocal's  profits,  a  provision  that   such
compensation  shall  not  be  paid  until  at least five years after the
premiums on liability insurance are earned and at least one  year  after
the  premiums are earned on any other kind of insurance and, in no event
shall the compensation  be  paid  until  the  adequacy  of  reserves  on
outstanding  claims  has been independently verified by the same actuary
who opined on the latest annual statement filed with the  superintendent
pursuant to section three hundred seven of this chapter.
(K)  A  provision that the independent certified public accountant who
will prepare the annual report required by subsection (f) of section six
thousand one hundred five of this article and  the  independent  actuary
who  will prepare the opinion accompanying the annual statement pursuant

to section three hundred seven of this chapter shall be selected by  the
attorney-in-fact, subject to the approval of the advisory committee.
(L) A provision that the books, accounts and records of the reciprocal
shall  be  maintained  by the attorney-in-fact to clearly and accurately
disclose the nature  and  details  of  all  transactions  including  all
information necessary to determine that the compensation received by, or
owing  to,  the attorney-in-fact is provided in a manner consistent with
the subscriber's agreement and  any  management  agreement.  The  books,
accounts and records of the reciprocal shall be the sole property of the
reciprocal.
(M) A provision that the attorney-in-fact shall conduct the affairs of
the reciprocal in accordance with the provisions of this chapter.
(b) (1) The subscriber's agreement may contain such further provisions
as  may  be  necessary or proper; but neither the subscriber's agreement
nor the articles of association, if any,  of  an  authorized  reciprocal
insurer shall contain any provisions inconsistent with the provisions of
subsection (a) hereof.
(2)  The superintendent may, if he finds it necessary to carry out the
purpose and intent of this article, by regulation  prescribe  additional
provisions, not inconsistent with any law of this state, to be contained
in the subscriber's agreement of reciprocal insurers.
(c)  Every subscriber to a municipal reciprocal insurer shall agree to
participate  in  a  risk   management   program   established   by   the
attorney-in-fact.  The  attorney-in-fact of each insurer shall, with the
approval of the advisory committee, establish, promote and manage a risk
management program among the subscribers.  Each  program  shall  include
identifying  and  reducing  risks  through  the  implementation  of loss
control, safety programs and  other  methods  of  risk  management.  The
attorney-in-fact  may  enter  into  contracts  with any person, firm, or
corporation for services necessary to perform and  administer  the  risk
management  program  or  to perform or administer other functions deemed
necessary by the advisory committee and approved by the  superintendent.
An  individual subscriber may enter into contracts with any person, firm
or corporation for services necessary  to  perform  and  administer  any
function which that subscriber shall deem necessary.