EstatePass
PLCaliforniahard

Acting as a broker (not the insurer's agent) for a California homeowners placement, a Personal Lines Broker-Agent intends to charge a $150 broker fee in addition to receiving commission from the insurer. Under Cal. Ins. Code § 1623(a) and 10 CCR §§ 2189.3-2189.5, which is required for the fee to be enforceable?

The fee must be disclosed and signed for in writing on a compliant form before charging, identifying both the fee and the commission, with the copy retained
BThe fee must be agreed to orally only, and a signed written disclosure becomes required solely when the broker fee charged exceeds $250 on a single placement transaction
CNo disclosure of any kind is required because both the broker fee and the insurer commission are presumed permitted and lawful under existing California law
DDisclosure is required only after the policy issues, by listing the broker fee as a separate line item on the policy's declarations page for the client

Why this is the answer

California uniquely permits a single licensee to act as a broker (representing the insured) and still receive commission from the insurer, but only with strict transparency. 10 CCR § 2189.3 lets a broker charge a fee only if the consumer agrees in advance after disclosure that the insurer may also pay a commission, receives the Standard Broker Fee Disclosure, and signs a broker fee agreement, and Ins. Code § 1623(a) presumes broker status only on a signed written agreement disclosing the fees and any insurer compensation. The signed documents must be kept for eighteen months after the latest policy expiration (10 CCR § 2189.4). Failing to give the disclosure or the signed agreement is an unfair practice under § 2189.5 and grounds for discipline under § 2189.6.

Studying for the California Personal Lines exam?

This question comes from our PL bank. Take a free practice test — no signup.

Free PL practice testPersonal Lines exam guide