State RegulationsCO specificDifficulty 2/5
A lender in Aurora requires every small-business borrower to buy its property insurance through one specific agent chosen by the lender as a condition of the loan. Under C.R.S. § 10-3-1105, this requirement is:
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
C.R.S. § 10-3-1105 prohibits coercing a debtor by requiring that insurance be placed with a particular insurer or agent as a condition of a loan. A Colorado borrower has the right to choose among willing insurers; a lender who forces a specific placement violates the coercion-of-debtors prohibition enforced by the Colorado Division of Insurance.
Why the other options are wrong
- A) The lender's insurable interest explains why it may require some insurance, but not why it may dictate the insurer or agent.
- C) The Colorado insurance code forbids, rather than requires, dictating a particular insurer or agent as a loan condition.
- D) A signed consent form does not legalize coercion of a debtor under C.R.S. § 10-3-1105.
Memory hook
Lenders may demand insurance — but never their named insurer.