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H0113...........................................................by BUSINESS
INSURANCE PRODUCERS - Amends existing law relating to producer licensing to
provide that fiduciary funds received or collected by a producer shall be
trust funds and shall be paid to the person entitled to the funds; to
provide that producers shall establish a separate account for certain
funds; to provide that producers may collect and deposit funds into a sweep
account maintained by or for the benefit of an applicable insurer; to
provide for the promulgation of rules; and to define fiduciary funds.
02/04 House intro - 1st rdg - to printing
02/07 Rpt prt - to Bus
02/16 Rpt out - rec d/p - to 2nd rdg
02/17 2nd rdg - to 3rd rdg
02/22 3rd rdg - PASSED - 69-0-1
AYES -- Anderson, Andrus, Barraclough, Barrett, Bastian, Bayer,
Bedke, Bell, Bilbao, Black, Block, Boe, Bolz, Bradford, Cannon,
Chadderdon, Clark, Collins, Crow, Deal, Denney, Edmunson, Ellsworth,
Eskridge, Field(18), Field(23), Garrett, Hart, Harwood, Henbest,
Henderson, Jaquet, Jones, Kemp, Lake, LeFavour, Loertscher, Mathews,
McGeachin, McKague, Miller, Mitchell, Moyle, Nielsen, Nonini,
Pasley-Stuart, Pence, Raybould, Ring, Ringo, Roberts, Rusche,
Rydalch, Sali, Sayler, Schaefer, Shepherd(2), Shepherd(8), Shirley,
Skippen, Smith(30), Smith(24), Smylie, Snodgrass, Stevenson, Trail,
Wills, Wood, Mr. Speaker
NAYS -- None
Absent and excused -- Martinez
Floor Sponsor - Nonini
Title apvd - to Senate
02/23 Senate intro - 1st rdg - to Com/HuRes
03/04 Rpt out - rec d/p - to 2nd rdg
03/07 2nd rdg - to 3rd rdg
03/08 3rd rdg - PASSED - 31-2-1, 1 vacancy
AYES -- Andreason, Brandt, Broadsword, Bunderson, Burkett,
Burtenshaw, Cameron, Coiner, Compton, Corder, Darrington, Gannon,
Geddes, Goedde, Hill, Jorgenson, Kelly, Keough, Little, Lodge,
Malepeai, Marley, McGee, McKenzie, Pearce, Richardson, Schroeder,
Stennett, Sweet, Werk, Williams
NAYS -- Davis, Stegner
Absent and excused -- Langhorst, (District 21 seat vacant)
Floor Sponsor - Compton
Title apvd - to House
03/09 To enrol
03/10 Rpt enrol - Sp signed
03/11 Pres signed
03/14 To Governor
03/18 Governor signed
Session Law Chapter 62
Effective: 07/01/05
]]]] LEGISLATURE OF THE STATE OF IDAHO ]]]]
Fifty-eighth Legislature First Regular Session - 2005
IN THE HOUSE OF REPRESENTATIVES
HOUSE BILL NO. 113
BY BUSINESS COMMITTEE
1 AN ACT
2 RELATING TO PRODUCER LICENSING; AMENDING SECTION 41-1024, IDAHO CODE, TO PRO-
3 VIDE THAT FIDUCIARY FUNDS RECEIVED OR COLLECTED BY A PRODUCER SHALL BE
4 TRUST FUNDS AND SHALL BE PAID TO THE PERSON ENTITLED TO THE FUNDS, TO PRO-
5 VIDE THAT PRODUCERS SHALL ESTABLISH A SEPARATE ACCOUNT FOR CERTAIN FUNDS,
6 TO REVISE TERMINOLOGY, TO PROVIDE THAT PRODUCERS MAY COLLECT AND DEPOSIT
7 FUNDS INTO A SWEEP ACCOUNT MAINTAINED BY OR FOR THE BENEFIT OF AN APPLICA-
8 BLE INSURER, TO PROVIDE FOR THE PROMULGATION OF RULES AND TO DEFINE FIDU-
9 CIARY FUNDS.
10 Be It Enacted by the Legislature of the State of Idaho:
11 SECTION 1. That Section 41-1024, Idaho Code, be, and the same is hereby
12 amended to read as follows:
13 41-1024. REPORTING AND ACCOUNTING FOR PREMIUMS. (1) All premiums or
14 return premiums fiduciary funds received or collected by a producer shall be
15 trust funds received by the producer in a fiduciary capacity, and the producer
16 shall, in the applicable regular course of business, account for and pay the
17 same to the insured, insurer or producer person entitled to the funds. If tThe
18 producer shall establishes a separate deposit account for funds belonging to
19 others in order to avoid a commingling of such fiduciary funds with his own
20 funds., he The producer may deposit and commingle in such separate deposit
21 account all fiduciary funds belonging to others so long as the amount of such
22 deposit so held for all other persons is reasonably ascertainable from the
23 records and accounts of the producer. A producer who duly collects and depos-
24 its funds into a sweep account maintained by or for the benefit of an applica-
25 ble insurer shall not be deemed to be in violation of the fiduciary fund
26 account requirement. The director may promulgate rules relating to accounting
27 for and handling of fiduciary funds and the fiduciary fund account.
28 (2) Fiduciary funds shall include all funds collected by an insurance
29 producer from or on behalf of a client or premium finance company that are to
30 be paid to an insurance company, its agents, or the producer's employer, and
31 all funds collected by an insurance producer from an insurance company or its
32 agents that are to be paid to a policyholder or claimant under any contract of
33 insurance.
34 (3) Any producer who, not being lawfully entitled thereto, diverts or
35 appropriates to his own use such trust or fiduciary funds or any portion
36 thereof, whether or not such funds have been separately deposited, shall upon
37 conviction be guilty of a felony.
STATEMENT OF PURPOSE
RS 14421
This proposal amends existing law to require that insurance
producers (agents and brokers) who hold funds in trust for others
maintain and account for the funds separately from the producer's
personal or business funds. Currently, the law does not prohibit a
producer from commingling funds the producer holds in trust for
others ("fiduciary funds") with the producer's own business or
personal funds. This can make tracing and accounting for fiduciary
funds extremely complicated, particularly in cases where
misappropriation has been alleged. Requiring the use of a separate
trust account for fiduciary funds will simplify accounting for and
identifying funds that do not belong to the producer, but are
simply being temporarily held by the producer for the benefit of
others. This is extremely important in cases where
misappropriation of client or insurer funds is alleged, or where a
creditor of a producer seizes the producer's assets. The proposal
also defines what types of funds are considered fiduciary funds,
allows the use of "sweep accounts" for some types of fiduciary
funds, and authorizes the Director to promulgate rules relating to
the handling of fiduciary funds and accounts. The proposal does
not prohibit producers from retaining interest earnings from
fiduciary accounts.
FISCAL IMPACT
None.
CONTACT
Name: Jim Genetti
Agency: Insurance, Dept. of
Phone: 334-4340
Statement of Purpose/Fiscal Impact H 113