Honorable Charles F. Armstrong AGO 84 Opinion No. 84 Pennsylvania Attorney General Opinions
Opinion of the Attorney General July 7, 1933 Agents and brokers—Relates—Rewriting in other companies without expense to insured, risks previously carried by companies which have gone into receivership —Act; of May 17, 1921, P. L. 789, Secs. 605, 636. Where an insurance agent or broker, following the failure of an insurance company, rewrites a risk insured thereby with another company without charging and collecting from the insured the premium for such new policy, he is violating the laws of the Commonwealth against giving rebates. Honorable Charles F. Armstrong, Insurance Commissioner, Harris-burg, Pennsylvania. Sir: You have asked to be advised whether the practice of insurance agents and brokers in rewriting in other companies, without expense to the insured, risks previously carried by companies which have gone into receivership is in violation of law. We understand that in order to keep the good will of a client certain agents and brokers licensed by you have taken the position that upon the failure of a company with which they have placed their client's insurance they should, without cost to him, replace the insurance with another company for the balance of the unexpired term of his policy. You suggest that in so doing these agents and brokers are violating the anti-rebate laws of the Commonwealth, in that they are advancing out of their own funds the amount of premium, less commission, necessary to secure the new insurance. While they may do this on the assumption that they will recover back from the company in receivership the unearned premium paid for the original policy, and to which the client is entitled, there is reason to suppose that such will not be the result, because experience shows that once a company is in receivership, it is not likely to pay claims in full. Section 635 of the Insurance Department Act of 1921, approved May 17, 1921, P. L. 789, provides in part as follows:
"No insurance agent, solicitor, or broker, personally or by any other party, shall offer, promise, allow, give, set off, or pay, directly or indirectly, any rebate of, or part of, the premium payable on the policy or on any policy or agent's commission thereon, or earnings, profit, dividends, or other benefit founded, arising, accruing or to accrue thereon or therefrom, * * * nor shall any such agent,
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