State RegulationsMA specificDifficulty 2/5
A Massachusetts producer tells an applicant that a lender will refuse the applicant's financing unless the applicant buys a policy from one particular insurer. Under M.G.L. c. 176D, § 3(4), which unfair trade practice is this?
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
M.G.L. c. 176D, § 3(4) prohibits coercion and intimidation, including forcing or attempting to force a person to purchase insurance by threatening harm unrelated to the transaction. Tying a customer's access to financing to the purchase of a policy from a designated insurer converts a free market choice into a compelled one, which is the essence of the practice the Massachusetts Division of Insurance polices. The wrong lies in the leverage applied to the buyer, not in the accuracy of any statement or the rates charged.
Why the other options are wrong
- A) Defamation under M.G.L. c. 176D, § 3(3) requires malicious statements about a competitor's financial condition; none were made here.
- C) False advertising under M.G.L. c. 176D, § 3(2) requires an untrue or misleading sales message; the producer's statement was about lender conditions, not coverage terms.
- D) Unfair discrimination under M.G.L. c. 176D, § 3(7) concerns unequal treatment of similarly situated insurance applicants, not borrower pressure tactics.
Memory hook
'Buy here or the loan dies' is coercion — leverage, not selling.