Alberta brokerage Buttar & Associates Insurance Network received a $1,000 fine after the Alberta Insurance Council found that the agency received premiums funds from a client and did not pay these over to the insurer by way of a pre-authorized withdrawal that the insurer had processed.
The council received a complaint in March 2012 from a person identified only as ‘JK,’ in which she claimed that she made two payments to the Buttar & Associates for an insurance policy through
Intact.
She signed a copy of a premium finance contract she entered into with a premium financing company, IFS, for the remaining balance of that policy. JK told council that, as of the date of her complaint, she had not received any documents or refund from Intact or Buttar & Associates.
IFS confirmed to council that it had forwarded $3,557.25 to the brokerage by direct deposit to pay for the insurance policy that Buttar & Associates placed for JK. The agency received the funds on Nov. 25, 2011.
Intact, however, told council that it had not received anything from the brokerage.
The premium finance contract had an outstanding balance in the amount of $3,028.55. An IFS representative told council that this sum “is technically the loan balance owing by the customer, however we have not received the cancellation credit from the broker and this amount should be enough to clear the balance.”
When contacted by council, a representative of the brokerage said the insurance policy was placed through the brokerage for JK on agency bill, and therefore the insurance company received the funds.
“The monies to Intact were owed on a monthly basis for all agency bill policies and were paid through deductions in the commissions payable accordingly,” the brokerage representative told council.
Council said the brokerage representative advised that a refund in the amount of $600 was paid to JK as the insurance policies were canceled.
But council ultimately found that the brokerage had not in fact paid the funds to the insurer, a violation of regulations.
“An insurance agent who acts in negotiating, renewing or continuing a contract of insurance with an insurer and who receives a payment from the insured for a premium for the contract is deemed to hold the premium in trust for the insurer,” the council ruled.
“If the insurance agent fails to pay the premium… over to the insurer within 30 days after the agent receives a written demand for payment of the premium, the agent’s failure is proof, in the absence of evidence to the contrary, that the agent has used or applied the premium for a purpose other than paying it over to the insurer.”
Council said in its view, Intact’s pre-authorized withdrawal that the insurer attempted to process constituted a written demand for the premium funds.
The agency was fined $1,000, the maximum allowed. Council’s ruling said the brokerage does not currently hold a license, so it could not suspend or revoke its license.
