Two Pennsylvania producers compete for the same account. Producer One circulates a written flyer stating that Producer Two's appointing insurer is insolvent, when Producer One knows the insurer is solvent and healthy. Which unfair practice has Producer One committed?

Why C is correct

Defamation in Pennsylvania insurance law, 40 P.S. § 1171.5(a)(3), consists of making or circulating false or maliciously critical statements about the financial condition of an insurer calculated to injure the insurer or its producers. A knowingly false written claim that a solvent competitor is insolvent fits squarely. The advertising regulations in 31 Pa. Code Ch. 51 reinforce the duty of truthfulness, and the Pennsylvania Insurance Department can enforce the prohibition under 40 P.S. § 1171.5. No actual customer loss is required for the practice to be actionable.

Why the other options are wrong

• A) Twisting requires inducing a policyholder to replace existing coverage to the policyholder's detriment; a flyer attacking a competitor's solvency is not a replacement inducement.
• B) Rebating involves offering premium rebates or valuables to induce a purchase; the flyer offers nothing of value to the applicant.
• D) Misappropriation is the conversion of entrusted premium or fiduciary funds, which has nothing to do with publishing false statements about a competitor.

Memory hook

Paper lies about a rival's wallet is defamation in Pennsylvania.