Author: VU Faculty

Your agency/company contract has been amended as follows: "The Agency shall have no authority on behalf of the Company to provide new coverage or increase existing coverage when the National Weather Service has issued a tornado warning, tropical storm watch or warning or hurricane watch or warning for an area within a 200 mile radius of the risk location." Does this create problems for your agency?

"One of our largest Regional Insurance Carriers have added this paragraph to our Agency Contract regarding binder authority:

"The Agency shall have no authority on behalf of the Company to provide new coverage or increase existing coverage when the National Weather Service has issued a tornado warning, tropical storm watch or warning or hurricane watch or warning for an area within a 200 mile radius of the risk location. This restriction applies during the time period beginning with the issuance of the above-listed watches or warnings and ending 72 hours after the expiration of the above-listed watches or warnings.

"Our agency tries to have the underwriters bind the coverage whenever possible; however there are times our producers need to either bind a new risk or increase coverage without talking to the underwriter. Often these risks are several states away. We are struggling with the task of getting all of our binding authority at the desktops of our producers and CSRs. Do you have a suggestion on how to handle this entire project?"

This is a timely question. With spring storms and floods (where such coverage is provided), summer tornados, and fall hurricanes, it is important to understand one's binding authority. The example you give unquestionably makes this very difficult for multi-state operations. We ran this by our faculty and got the responses below.


There are lots of problems here if you want to be really thorough about it.

1.  The contract wording should be clarified by saying (if this is what is intended) that no new coverage or increase can become effective at a time (presumably 12:01 AM in all cases) which is within the "blackout" period. 

2.  Does an official warning of this kind clearly define an exact geographical area, so that the 200-mile radius area can be exactly compared with it?

3.  Does new coverage or an increase mean just either a totally new policy providing any property coverage whatsoever, or an increase in the limits of an existing policy that provides any property coverage?  New coverage or increase in coverage could mean any change in the policy, such as an endorsement, that broadens or expands it in any way, regardless of whether or not it has to do with the windstorm peril.

4.  Assuming the whole scope of the restriction on the agency's authority can be more clearly defined, the problem then becomes how to avoid violating the restriction without spending inordinate amounts of time and money finding out what is going on, exactly where and when, with regard to storm warnings. One way to deal with it in the binder might be to say something like: "This binder is subject to certain limitations on [the agency's] authority to provide coverage with reference to windstorm perils while official warnings are in effect." But this might have to be filed if binders are considered forms that have to be filed, and then it might not be approved.

5.  If I were the agency, I would carefully review the binding authority provisions (along with all other provisions) of my appointment contracts before signing and if the breadth and scope of authority does not align to my business needs, I would seek appropriate revisions needed just as I would do on any other provisions that are of concern to me.


Agents in Florida and other coastal states have been dealing with this limitation since the early to mid 1990s. I believe that many started out anxious and frustrated, but over the years it has become quite common for everyone from agents to bankers, mortgage companies, contractors, developers, and individuals themselves that, when a storm warning is announced, the ability to place or acquire coverage comes to a halt.

It really puts people in a testy mood if this is at the end of a month when most developers likely to close on property, but it seems that everyone has adjusted to some extent. It is a matter of educating those around you and I am also surprised that you have not yet encountered this with other carriers.


This link might help:  http://www.wunderground.com/severe.asp


At first glance I'd say call the insurer and ask them to "pick up their supplies." But I guess before that I'd ask their manager/vice-president the following:

1.  Will the underwriter bind coverage or wait until after the 72 hours?

2.  Does this apply to Liability and Med Pay or just Comp and Collision?

3.  If this is a new or replacement vehicle, does the policy wording extending coverage still apply? (YES! Binding authority has no effect on a contractual grant of coverage.)

4.  Good chance that your midwest location is not subject to a tropical storm or hurricane. My experience with tornados is that in many cases there is very little notice for a "warning" to be issued.

5.  I assume the 200 miles is "as the crow flies," not road miles.

6.  Actually I like my first idea.  :-)


What a pain. This kind of restriction is perhaps reasonable if you're talking hurricanes since they're known well in advance and covered widely in the news, but a tornado warning? Is this really such a problem? Have they had instances where they paid property claims for tornado damage and discovered after the loss that it was bound only minutes before the loss? Come on. And what about afterward? You mean I can't bind an account because two days ago there was a tornado that touched down in a pasture? I have to tell the client to put off the closing? Yeah, this is a good plan. 

And how in the world is an agent supposed to keep track of that? What if the tornado warning is in Canada? Or for that matter, what if it's in the northeast quadrant of the compass. While there are freaks of nature, the vast majority of tornados track from the southwest to northeast. Sounds like someone who doesn't live in tornado country wrote this one. It's just plain silly. I'd get with the state association and bear down on the carrier to relent as it applies to tornados.

Last Updated:  August 9, 2010