Agents are always excited to sign new contracts with FMO’s, but don’t always read through their contracts that bind them to certain rules and agreements. Attorneys will not be able to help get you out of a contract you’re unhappy with, because the contract you sign is legally binding.

A Reciprocal release (also known as a Mutual Release Agreement) is a contract that essentially “releases” both parties. This release encompasses the parties’ claims, counterclaims, cross-claims, third-party claims, obligations, liability, and clauses. Anything that happens between the two parties prior to release, cannot be acted upon using legal action in regards to the dissolution of the contract.

According to LawInsider.com

“Reciprocal Release-Both parties, as well as their authorized representatives, agree to remain mutually free from any claim for damages to any person, or to the Leased Property and its improvements, personal property, the LESSEE improvements, as well as the modifications both of the LESSOR and of the LESSEE, on or with regards to the Leased Property under the insurance policies contracted by the parties, and in effect when such damages occur.”

A reciprocal release is the “no strings attached” approach, which will allow both parties to walk away from one another without either party being able to pursue legal action for anything that occurred prior to the release being signed. It also allows the agent or agency (plus their downlines) to release freely from the FMO, and should be used as a precursor in any contract agreement an agent has with a new organization. The reciprocal release is designed to protect the agent more than anything else.

When an agent signs a contract with a carrier, there are two different types of contracts in regards to commissions. It’s imperative that you know the difference before signing!

• Direct Contract
• Assigned Commissions Contract

A Direct Contract is an agreement upon both parties that the agent owns their business. They own their books, which includes any renewals-even if they leave the FMO. This also means that the agent is paid their full commission, directly from the carrier. An Assigned Commissions Contract states that the upline, (the SGA, MGA, GA, etc) is paid the commissions from the carrier, and then paid to the agent. This type of contract does not allow an agent to own their books or renewals. So if the agent wants to be released from their upline, they won’t be able to take those renewals with them when they go.

If you’re an agent and are unable to get a release from all of your uplines, you can exercise a self-release. Different carriers have different process requirements, but for the most part these are the general rules:

If you’re an agent who sells Medicare Advantage or Part D, you should know that realistically the only time of year that you can get a release is from January to April. Reason for this is due to the timing of AEP and OEP. Carriers, FMO’s and uplines will more than likely not release at all from September 1 to December 31, due to the money each of these entities has invested in their agents for the preparation of AEP. The self-release policy is also included in this restriction. If an agent begins the self-release process, but the six month end period is between September 1st and December 31st, the agent will not be able to transfer until at least January 1st.