EstatePass
PLCaliforniahard

A California Personal Lines Broker-Agent receives a $1,800 premium check from an insured on Monday for a homeowners policy. The carrier's net (after the agent's 15% commission) is $1,530. The agent uses an interest-bearing fiduciary account. Under Cal. Ins. Code § 1733, which of the following is correct?

The agent must place the full $1,800 in the fiduciary trust account; only after the net premium is remitted (or earned) may the commission be withdrawn
BThe agent may immediately transfer the full $1,800 to her operating account because the 15% commission portion is hers to spend the moment it is received
CThe agent must mail the full $1,800 gross premium to the carrier within 24 hours and then bill the carrier separately to recover her earned commission later
DPremium trust account rules apply only when premiums collected exceed $10,000 in a single transaction; any smaller amounts may go to operating funds

Why this is the answer

Cal. Ins. Code § 1733 establishes that premiums collected by a broker-agent are held in a fiduciary capacity for the insurer until properly remitted. The required vehicle is a premium trust account separated from operating funds. Commission portions cannot be 'siphoned off' at receipt - the entire gross premium must enter the trust account and the commission may be removed only when the broker has the contractual right to it (typically after the carrier statement reconciles, or per the producer agreement). Failure to maintain the trust account or misappropriating funds for personal use is conversion and a § 1668 ground for revocation, and may also be theft under Penal Code § 506.

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