State RegulationsVA specificDifficulty 2/5
A Virginia producer routinely deposits clients' premium payments into his personal checking account and draws on the balance to pay office rent, intending to reimburse the account before remitting to insurers. How does Virginia law treat this practice?
Select an option to reveal the answer and the full 3-part explanation — free, no signup.
Answer & full 3-part explanation (select an option above, or peek)
Why D is correct
Because a producer holds premium funds in a fiduciary capacity, the Virginia provisions governing producer conduct — including the trust-account requirement reflected at Va. Code § 38.2-1822(G) — require those funds to be kept distinct from the producer's personal assets. Commingling client money with the producer's own and spending it on personal expenses is a fiduciary breach that the Virginia Bureau of Insurance and the Commission can sanction, regardless of any intent to reimburse.
Why the other options are wrong
- A) Intent to reimburse does not cure commingling; the separation requirement exists to protect the funds before remittance, not after the producer has spent them.
- B) Insurer consent cannot authorize the producer to commingle fiduciary funds; the duty runs to the applicants and the regulator, not to the insurers alone.
- C) No threshold exempts small amounts; fiduciary funds must be kept separate whatever their size.
Memory hook
Client money sleeps in the trust account, not in the rent check.