Q

In reviewing the material, we see that some states allow agents to commingle agency and company monies; and others states do not. Do these same rules apply to surplus lines brokers?

Ohio Subscriber

A

The section regarding commingling of funds addresses the issues of agents' commingling of funds. Since an agent is an agent of the appointing insurer, any money collected by the agent really belongs to the insurer and the agent is only the fiduciary for it. As we point out, some states allow an agent to commingle the insurer's funds with the agency's general operating funds, while other states require a separate account.

Since a surplus lines broker does not have an agency relationship with a surplus lines insurer, the money the broker collects is his—the surplus lines insurer has no claim to it until the broker turns it over to the insurer. Unless the broker and surplus lines insurer have a written agreement that states otherwise, the broker has no fiduciary responsibility to the insurer regarding the money collected.