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Home > Communications > News
Poolman Finds Payments to Farm Bureau Legal, Makes Recommendations
March 20, 2003 701-328-2440

Bismarck, ND - North Dakota Insurance Commissioner Jim Poolman today found service-fee and royalty payments made from Nodak Mutual Insurance Company to the North Dakota Farm Bureau were not illegal. "No law prohibits a company from paying another company for services performed and benefits received," Poolman stated. "Clearly, the Farm Bureau and Nodak benefit from their affiliation." 

By letter dated September 20, 2002, Senior Management at Nodak requested the Insurance Department place the company under Administrative Supervision, raising allegations of misconduct by the company's Board of Directors. The Board likewise consented to the supervision, to resolve the dispute. 

By Interim Order issued today, Poolman also addressed senior management's allegations against the Board: 'It is safe to say that the allegations of misconduct by the Board were a result of a breakdown of communication between the Board and senior management," Poolman said. "The allegations appear to have been without merit." Poolman emphasized that "These are all good people. Since our administrative supervision began all parties have been working to serve the best interests of the company and the policyholders." 

Poolman emphasized that both Senior Management and the Board of Directors have fully 
cooperated with the Insurance Department, and especially praised the Board for the proposal to create an entirely new Board structure. Poolman suspended service fee and royalty payments by the company, pending Insurance Department review. Under current agreements, Nodak would have been scheduled to pay an estimated $848,000 to Farm Bureau during 2003. 

Poolman's Order will authorize the new Board to decide whether to reinstate the service fee and royalty payments, assuming the by law change is approved by policyholders in the election to be held Friday, March 21, 2003. "Transparency is the key," Poolman said. "Whether or not the law specifically requires it, I want the Board to specifically articulate and quantify the respective values and benefits these organizations bring to each other, when they negotiate these agreements." 

Poolman also recommended that to ensure independence, Farm Bureau Directors sitting on the Nodak Board should abstain from voting on matters materially affecting the Farm Bureau. "This recommendation really has nothing to do with Farm Bureau specifically," Poolman said. "As a matter of corporate governance, I simply believe Directors generally should abstain from votes in which they have a material self-interest." Poolman also recommended that the President of the Farm Bureau Board should not ever serve as President of the Nodak Board of Directors. 

Policyholders will vote on March 21, 2003, on whether to approve the proposed Board changes. Poolman says administrative supervision will last until a new CEO is hired and final reports on the departments financial examination and market conduct examinations are filed. 

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North Dakota Insurance Department
600 E. Boulevard Ave.
Bismarck, ND 58505-0320
Phone 701.328.2440
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