General Insurance PrinciplesQuestion 186 of 474
A producer collects a client's premium and parks it in his personal checking account for two weeks before forwarding it. This violates:
a.the fiduciary duty to hold premium funds in trust, unmixed
b.the utmost good faith rule, since the client was not told
c.the indemnity rule, because the client paid more than needed
d.the co-insurance clause, which governs how funds are split
Explanation
Premium in a producer's hands belongs to the insurer, and any return premium belongs to the client, so the producer holds the money as a fiduciary and must keep it apart from personal funds. Commingling is the breach, and forwarding the money later does not cure it. Coinsurance is a property-rating clause about insuring to value and has nothing to do with handling money.
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