A spectacular example of being out of trust and its consequences
When an insured writes a check to his insurance agent or broker, he expects the funds to be paid to the insurer. Professional agents and brokers keep these funds in a trust account at a local bank. The amount of money held in trust can be huge, since insurers usually allow agents and brokers to hold the funds for up to 45 days before forwarding them. Some agents and brokers cannot overcome the temptation to "borrow" this money for personal use, believing they can pay it back from current sales. When the time comes to pay the insurers, the funds may not be available. A widely followed case, United States of America v. Michael Segal and Near North Insurance Brokerage Inc., vividly illustrates that money held in trust can be used for only one purpose--payment of premiums for which it was originally delivered. Failure to keep the trust money separate is a crime that will be seriously punished.








(United States v. Vincent, 416 F.3d 593, 7th Cir. 2005).






(524 U.S. 321, 334 [1998])

United States Of America v. Michael Segal and Near North Insurance Brokerage Inc., in the United States Court of Appeals for the Seventh Circuit, Nos. 05-4601 & 05-4756, 2007.C07.0000707 (Aug. 2, 2007).
Barry Zalma, Esq., CFE, is a California attorney. His practice emphasizes the representation of insurers and others in the business of insurance. He founded Zalma Insurance Consultants in 2001 and serves as its senior consultant. He provides expert witness testimony and consults with plaintiffs and defendants concerning insurance coverage, insurance claims handling and bad faith. He has qualified as an expert in state and federal courts in California, Mississippi, Texas and New Mexico, as well as in the Grand Caymans. He can be reached at [email protected] . His consulting practice's Web site is www.zic.bz .