California Insurance Code & EthicsQuestion 37 of 215
A P&C broker collects $5,000 in premiums from a client to bind a homeowners policy with an admitted insurer. Under the fiduciary duty statute, the broker must:
a.Deposit the funds in the broker's general operating account and remit within 90 days
b.Hold the premiums in a fiduciary capacity as trust funds and account for them
c.Issue the funds as a personal loan to the insurer at market rates
d.Retain the funds as compensation until the policy lapses
Explanation
Section 1733 requires a licensee who handles premiums to hold them in a fiduciary capacity and not commingle them with personal or business operating funds. Premiums are trust funds that must be remitted to the insurer net of commission or returned to the insured. Choices (a), (c), and (d) are all commingling or conversion violations.
Law Reference: Cal. Ins. Code §1733Practice all 215 questions free — no signup required.
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