CALIFORNIA INSURANCE CODE

§ 1733 Fiduciary Duty

  All funds received by any person acting as an insurance agent, broker or solicitor, life agent, life analyst, surplus broker, special lines surplus line broker, motor club agent, or bail agent or solicitor, as premium or return premium on or under any policy of insurance or undertaking of bail, are received and held by such person in his fiduciary capacity. Any such person who diverts or appropriates such fiduciary funds to his own use is guilty of theft and punishable for theft as provided by law. Any premium which a premium financer agrees to advance pursuant to the terms of a premium finance agreement shall constitute fiduciary funds as defined in this section only if actually received by a person licensed in one or more of the capacities herein specified.

§ 1733.5 Repealed. Stats. 1959, c. 4. p. 1793, § 1

§ 1734 Fiduciary funds: remittance and maintenance

  This section applies to any person licensed, whether under a permanent license, restricted license, temporary license, or certificate of convenience, to act in any of the capacities specified in Section 1733. If fiduciary funds, as specified in Section 1733, are received by such person, he shall:

 (a) Remit premiums, less commissions, and return premiums received or held by him to the insurer or the person entitled thereto, or

 (b) Maintain such fiduciary funds on California business at all times in a trustee bank account or depository in California separate from any other account or depository, in an amount at least equal to the premiums and return premiums, net of commissions, received by him and unpaid to the person entitled thereto or, at their direction or pursuant to written contract, for the account of such persons. As used in this section, “trustee bank account or depository” includes but is not limited to a checking account, demand account, or savings account, each of which shall be designated as a trust account. However, such person may commingle with such fiduciary funds in such account or depository such additional funds as he may deem prudent for the purpose of advancing premiums, establishing reserves for the paying of return premiums or for such contingencies as may arise in his business of receiving and transmitting premium or return premium funds, or

 (c) Maintain such fiduciary funds pursuant to Section 1734.5.

§ 1734.5 Fiduciary funds: alternative maintenance

 (a) If fiduciary funds, as defined in Section 1733, are received by any person licensed, whether under a permanent license, restricted license, temporary license, or certificate of convenience, to act in any of the capacities specified in Section 1733, and the funds are not remitted, or maintained pursuant to subdivisions (a) and (b) of Section 1734,  the funds shall be maintained as follows: (1) in United States government bonds and treasury certificates or other obligations fro which the full faith and credit of the United States are pledged for payment of principal and interest; (2) in certificates of deposit of banks or savings and loan associations licensed by any state government within the United States, or the United States government; or (3) in repurchase agreements collateralized by securities issued by the United States government.

 (b) As a condition to maintaining the fiduciary funds pursuant to this section, a written agreement shall be obtained from each and every insurer or person entitled thereto authorizing the maintenance and the retention of any earnings accruing on the funds.

 (c) Evidence of the funds shall be maintained on California business by a bank as defined in Section 102 of the Financial Code, or by a savings and loan association as defined in Section 5057 or 11000 of the Financial Code in a custodian or trust account in California separated from any other funds, in an amount at least equal to the premiums and return premiums, net of commissions received by him or her and unpaid to the persons entitled thereto, or, at their discretion or pursuant to a written contract, for the account of these persons. However, the persons may commingle with the fiduciary funds any additional funds as he or she may deem prudent for the purpose of advancing premiums, establishing reserves for the paying of return premiums, or for any contingencies as may arise in his or her business of receiving and transmitting premium and return premium funds.

 (d) The commissioner shall not have jurisdiction over any disputes arising between parties concerning the maintenance of fiduciary funds pursuant to this section. However, this subdivision shall not otherwise affect the authority granted to the commissioner over fiduciary funds by other provisions of this code, or regulations adopted pursuant thereto. As used in this subdivision, the term parties shall not include the commissioner.

§ 1735 Fiduciary funds in care of managing general agents

  As used in this section a managing general agent is licensed insurance agent who, (1) has a written management contract with one or more admitted insurers covering business transacted by the insurer in a substantial portion of the State of California; (2) under such contract manages the transaction of either all or one or more of the classes of insurance written by such insurers in that territory or the transactions therein by such insurers under a specified fictitious underwriter’s name; (3) has the power to appoint, supervise and terminate the appointment of local agents in such territory; (4) has the power to accept or decline risks; and (5) collects premium moneys from producing agents and brokers and remits such moneys to such insurers pursuant to the account current system.

   Any such managing general agents shall, with respect to any principals from whom fiduciary funds are held, comply with section 1734.

§ 1736 Forbidden acts and prescribed conduct

If any acts are forbidden or conduct prescribed by any provisions of this code, such acts shall not be performed and such conduct shall not be followed by both the organization and by any person named to exercise the power and perform the duties under license issued to such organization.

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