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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 or14 return premiumsfiduciary 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 producerperson entitled to the funds. If tThe 18 producer shall establish esa separate depositaccount for funds belonging to 19 others in order to avoid a commingling of such fiduciary funds with his own 20 funds. , heThe producer may deposit and commingle in such separate deposit21 account all fiduciary funds belonging to othersso 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