MGA's Fee is a 'Loss Adjustment Expense,' Texas Appeals Court Rules

DALLAS - A $1.3 million "claims start up fee" charged by a managing general agent should be included in calculating losses incurred by a reinsurer under a reinsurance agreement, a Texas appellate court ruled Aug. 14. Employers Reinsurance Corp. v. American Southwest Insurance Managers Inc., No. 05-06-02184 (Texas App., Dallas Div.).

The Texas Court of Appeals, Dallas Division, determined that the fee constitutes a "loss adjustment expense" and remanded the action to the Collin County (Texas) District Court.

In 1993, American Southwest Insurance Managers Inc. entered into a reinsurance treaty with Employers Reinsurance Co.'s predecessor-in-interest, Vesta Fire Insurance Corp. Under …