Current through August, 2024
Section 1 Purpose
The purpose of this regulation is to ensure the sufficiency
of funds held by third parties when the intended beneficiaries of the funds are
insured, insurance policy applicants or insurers.
Section 2 Authority
This regulation is issued pursuant to the authority vested in
the Commissioner of Banking, Insurance and Securities by 8 V.S.A § 75 and
§ 4812.
Section 3
Applicability
This regulation applies to any third party which accepts
receipt of funds intended to offset insurance policy obligations from any
insured, insurance policy applicant or insurer.
Section 4 Definitions
For the purposes of this regulation, the following
definitions apply:
A. "Financial
Account" is an account held by a federally insured financial institution or a
registered investment company that is short-term, highly liquid, and without
risk to principal.
B. "Third Party
Recipient" includes insurance agents, insurance brokers, independent adjusters,
managing general agents, consultants or any other person or business entity
that receives funds intended to offset insurance policy obligations of the
remitter.
"Third Party Recipient" does not include a federally insured
depository institution or its subsidiaries, affiliates or parent corporation,
or a lender licensed under Chapter 73, 8 V.S.A., except in such instance as the
federally insured depository institution, its subsidiaries, affiliates or
parent corporation or licensed lender is engaged in a transaction for which it
is required to be licensed under 8 V.S.A. Chapter 131.
C. "Trust Account" is a financial account
established by a third party recipient which is separate and distinct from the
operating and/or personal accounts of the third party recipient. A trust
account is comprised of funds, remitted from insureds, policy applicants or
insurers to third party recipients, that are intended to offset insurance
policy obligations of the remitter.
D. "Voluntary Deposits" are deposits made to
trust accounts by third party recipients from sources other than funds remitted
from insureds, policy applicants or insurers. Third party recipients may make
voluntary deposits into a trust account in order to maintain a minimum balance,
to guarantee the adequacy of the account, or to cover funds due but
uncollected.
Section 5
Fiduciary Responsibility of Third Party Recipients
A. Every third party recipient which accepts
funds intended to offset insurance policy obligations of the remitter is a
fiduciary for those funds. Every third party recipient which does not
immediately remit the funds to the insured or insurer for whom the funds are
intended shall deposit the funds in a trust account Funds which are received
from the remitter and which are, in turn, remitted to the insured or insurer
within the course of the same business day, or no later than the end of the
following business day, will be considered to have been immediately remitted.
However, the third party remitter must show no intent to inappropriately use or
commingle remitter's funds with the third party recipient's operating accounts,
nor may the actions of the third party recipient have the effect of
inappropriately using or commingling the remitter's funds.
B. No funds may be withdrawn or transferred
from a trust account except as hereinafter specified:
1) Withdrawals from trust accounts shall be
made to meet payment of premiums to insurers and payment of return premiums or
other credits to insureds
2) A
third party recipient may transfer to its operating account or accounts:
interest earned on trust accounts; commissions on insurance policies; or,
monies paid into the account in the form of voluntary deposits so long as the
balance remaining in the trust account is greater than or equal to the
aggregate of all fiduciary funds received but not remitted.
Section 6 Accounting
Requirements
Every third party recipient shall maintain a ledger or system
showing all receipts and disbursements for each trust account established by
the third party recipient Entries into the ledger or system shall identify at a
minimum:
1) the source of all
deposits,
2) the nature of all
disbursements,
3) the date and
amount of each transaction, and
4)
the name of the insured, policy applicant, or insurer for whom the transaction
was made.
Section 7
Severability
Should a court hold any provision of this regulation invalid
in any circumstances, the invalidity shall not affect any other provisions or
circumstances.
Section 8
Effective Date
This regulation shall become effective October 1,
1996.
STATUTORY AUTHORITY: 8 V.S.A. §§ 75
and
4812
