§ 7.15 Insurance Renewal Commissions and Termination Benefits

• Jurisdiction: United States
• Publication year: 2021

§ 7.15 Insurance Renewal Commissions and Termination Benefits

[1]—Renewal Commissions

Many insurance agents receive commissions not only on policies they sell, but, under certain circumstances, on renewals of those policies as well. Certain conditions are often placed upon this renewal commission right. For example, in many instances the salesman must still be employed by the company when the policy is renewed.

In divorces involving an insurance salesman, commissions earned during marriage and received before divorce are generally considered marital property. The more difficult issue pertains to the salesman's right to receive renewal commissions in the future on policies sold during marriage. This again presents the issue of what contingent rights at divorce are "property" to be divided at divorce. Some courts have concluded that a salesman's right to receive renewal commissions after divorce is too contingent to constitute property that could be divided at divorce.¹¹¹⁹ Other courts have concluded that these renewal commissions should be considered marital assets, even though they will be received after divorce.¹¹²⁰

If it does become accepted that the future renewal commissions are divisible property at divorce, other complex issues will arise. First, the determination of the marital interest in the commission would be difficult, since the reasons for the renewal are difficult to determine. For example, the policyholder might renew solely due to services rendered after divorce by the salesman. Alternatively, the policy holder might renew without ever seeing or talking to the salesman after the divorce. In addition, if the court tries to value the right to receive renewal commissions after divorce, the court will have to estimate the renewal rate.¹¹²¹

In a Louisiana case, there was testimony that "at least" 80% of the husband's customers required some effort by the husband to get them to renew. Based on this testimony, as well as the fact that there was no showing what percentage of the policies automatically renewed, the appellate court affirmed the trial court's ruling that all post-divorce renewal payments would be the husband's separate property.¹¹²²

[2]—Termination Benefits

Insurance salespeople sometimes have a right to receive a "termination benefit" after divorce when the salesperson ends his employment relationship with the company. Courts have had to consider whether there should be a marital claim to a portion of these benefits, when the...