Producer Duties and Responsibilities

Maine producers have legal and ethical duties to clients, insurers, and the public. Understanding these responsibilities is essential for professional practice.

Fiduciary Responsibilities

Producer as Fiduciary

A fiduciary is someone who acts on behalf of another with utmost good faith and loyalty.

Producer Fiduciary Duties:

Duties to Applicants/Insureds

Producer Must:

1. Determine Client Needs

   • Ask questions about exposures, assets, liabilities
   • Understand client's risk tolerance and budget
   • Recommend appropriate coverage types and limits

2. Explain Coverage

   • Describe what IS covered
   • Explain what is NOT covered (exclusions, limitations)
   • Use clear language, not insurance jargon
   • Provide policy documents and review key provisions

3. Disclose Material Information

   • Policy terms and conditions
   • Exclusions and limitations
   • Deductibles and coinsurance
   • Producer's role and compensation
   • Insurer's financial strength (if relevant)

4. Provide Ongoing Service

   • Review coverage at renewal
   • Notify of coverage changes
   • Assist with claims
   • Answer questions promptly

Duties to Insurers

Producer Must:

1. Accurately Represent Applicant

   • Provide truthful, complete information
   • Disclose all material facts known to producer
   • Not conceal adverse information

2. Follow Insurer Guidelines

   • Comply with underwriting requirements
   • Submit applications properly and timely
   • Obtain necessary documentation

3. Protect Insurer Interests

   • Report suspected fraud
   • Identify high-risk exposures
   • Recommend appropriate coverage and pricing

4. Account for Premiums

   • Promptly forward premiums to insurer
   • Maintain accurate premium accounting
   • Not commingle premiums with personal funds

Disclosure Obligations

Material Facts

Material Fact: Information that would affect an underwriter's decision to issue coverage or the premium charged.

Examples of Material Facts:

For Property Insurance:

• Prior losses or claims history
• Property condition and age
• Occupancy type and use
• Fire protection (distance to fire hydrant, fire station)
• Security features or lack thereof

For Auto Insurance:

• Driving record (accidents, violations)
• All drivers in household
• Vehicle use (commute distance, business use)
• Prior insurance coverage and lapses
• Garaging location

For Liability Insurance:

• Business operations and activities
• Prior liability claims
• Safety programs and loss control
• Subcontractors used
• Contractual liability assumed

Duty to Disclose to Applicant

Producer Must Disclose:

1. Coverage Limitations

   • "This homeowners policy does NOT cover flood damage. You need separate flood insurance for that exposure."

2. Exclusions

   • "Business use of your personal auto may not be covered. You may need commercial auto coverage."

3. Deductibles and Out-of-Pocket Costs

   • "This policy has a $2,500 deductible. You'll pay the first $2,500 of any claim."

4. Waiting Periods

   • "Workers' compensation coverage doesn't start until 8 days after the policy effective date."

5. Potential Coverage Gaps

   • "Your homeowners policy only covers your home. Your rental property needs separate dwelling coverage."

Handling of Premiums

Premium Trust Account

Maine law requires proper handling of insurance premiums:

Requirements:

1. Separate Account

   • Maintain separate bank account for insurance premiums
   • Cannot commingle with personal or business operating funds
   • Must be clearly designated as insurance trust account

2. Prompt Remittance

   • Forward premiums to insurer within reasonable time
   • Typically within 15-30 days of receipt
   • Cannot use premiums for personal purposes
   • Cannot "borrow" from premium account

3. Accurate Accounting

   • Maintain detailed records of all premium transactions
   • Reconcile accounts regularly
   • Track premiums received, forwarded, and commissions earned

Prohibited Conduct:

• Misappropriation: Using premium funds for personal use
• Commingling: Mixing premium funds with personal funds
• Delayed Remittance: Holding premiums beyond reasonable period
• Fraudulent Accounting: False records or concealing misappropriation

Penalties for Premium Mishandling

Consequences:

• Immediate license suspension or revocation
• Criminal prosecution (theft, embezzlement)
• Restitution to harmed parties
• Fines up to $10,000 per violation
• Imprisonment for serious violations

Errors and Omissions Insurance

E&O Coverage Requirement

Maine Recommendation:

• E&O insurance strongly recommended (not statutorily required)
• Protects producer from professional liability claims
• Covers negligent acts, errors, or omissions in professional services

What E&O Covers

Typical Coverage:

Exclusions:

• Intentional wrongdoing
• Criminal acts
• Fraud
• Failure to pay claims (insurer's responsibility)

E&O Claims Scenarios

Scenario 1: Coastal Property - Flood Coverage Failure

Portland producer sells homeowners insurance to coastal property owner. Hurricane causes storm surge flooding. Homeowner suffers $150,000 in flood damage. Producer never discussed flood coverage or flood insurance requirement.

Result: Producer may be liable for failing to identify exposure and recommend flood insurance. E&O insurance would defend and potentially cover damages.

Scenario 2: Business Coverage Gap

Producer sells BOP to restaurant. Fire occurs causing $500,000 in damage and 4-month closure. Policy limit is only $250,000. Producer never discussed coverage adequacy with owner.

Result: Producer may be liable for inadequate coverage recommendation. E&O would respond.

Continuing Education Compliance

Producer's Personal Responsibility

CE is Non-Delegable:

• Cannot assign CE responsibility to staff
• Cannot rely on others to track CE
• Must personally complete required courses
• Cannot claim CE credit for courses not taken

Consequences of CE Non-Compliance

License Expiration:

• License expires on renewal date if CE not complete
• Cannot transact insurance business
• Illegal to sell insurance with expired license

Reinstatement:

• Must complete all CE hours
• Submit reinstatement application
• Pay reinstatement and renewal fees
• Possible late fees

Serious Violations:

• False CE claims can result in license revocation
• Fraud penalties apply
• Criminal prosecution possible for intentional violations

Professional Conduct Standards

Maine Producer Code of Ethics

Fundamental Principles:

1. Integrity

   • Be honest in all dealings
   • Keep promises and commitments
   • Maintain high moral character

2. Competence

   • Maintain knowledge and skills
   • Stay current with laws and regulations
   • Seek additional education when needed

3. Confidentiality

   • Protect client information
   • Don't disclose personal or financial information
   • Follow privacy laws

4. Professionalism

   • Treat all parties with respect
   • Avoid conflicts of interest
   • Put client interests first

5. Compliance

   • Follow all laws and regulations
   • Cooperate with regulatory authorities
   • Maintain required licenses and appointments

Conflicts of Interest

Must Avoid or Disclose:

Examples:

1. Financial Interest in Insurer

   • Producer owns stock in insurer
   • Must disclose to clients
   • Cannot favor insurer due to ownership

2. Family Relationships

   • Selling insurance to family members
   • Must provide same disclosures as non-family
   • Cannot take advantage of relationship

3. Dual Roles

   • Producer also serves as mortgage broker
   • Must disclose all roles and compensation
   • Cannot require insurance purchase as condition of mortgage

Advertising and Marketing Standards

Truth in Advertising

Maine Requirements:

Must:

• Be truthful and not misleading
• Clearly identify producer/agency
• Disclose material information
• Use clear, understandable language

Must Not:

• Make false or exaggerated claims
• Misrepresent policy benefits
• Disparage competitors unfairly
• Use deceptive headlines or subject lines

Electronic Communications

Email Marketing:

• Obtain consent before sending (CAN-SPAM compliance)
• Provide opt-out mechanism
• Clearly identify sender
• Honor opt-out requests promptly

Social Media:

• Follow insurance advertising regulations
• Disclose producer license status
• Don't misrepresent qualifications
• Maintain professional standards online

Text Messages:

• Obtain explicit consent (TCPA compliance)
• Provide clear opt-out method
• Don't send unsolicited insurance texts
• Follow quiet hours (no texts before 8 AM or after 9 PM)

Appointment and Company Relations

Maintaining Appointments

Producer Responsibilities:

1. Valid Appointments Required

   • Cannot sell insurance without company appointment
   • Must be appointed for each line of authority sold
   • Appointment must be active and current

2. Multiple Company Appointments

   • Can represent multiple insurers
   • Must disclose all appointments if requested
   • Cannot favor one company due to higher commissions

3. Termination Notification

   • Notify Bureau if appointment terminated
   • Cannot continue selling for terminated company
   • Must return company materials

Company Notification Obligations

When Company Terminates Appointment:

For Cause Termination (producer misconduct):

• Company must notify Bureau within 30 days
• Must state reason for termination
• Producer has right to respond

Consequences:

• Bureau investigates termination reason
• May result in license discipline
• Multiple terminations are red flag

Consumer Complaints

Handling Consumer Complaints

When Consumer Complains:

1. Listen Carefully

   • Hear consumer's concerns fully
   • Don't interrupt or get defensive
   • Take notes

2. Investigate

   • Review relevant documents
   • Check policy and application
   • Determine facts

3. Respond Promptly

   • Acknowledge complaint quickly
   • Provide explanation or resolution
   • Follow up to ensure satisfaction

4. Document

   • Maintain complaint file
   • Record actions taken
   • Keep resolution documentation

Maine Bureau Complaints

If Consumer Files with Bureau:

1. Producer Will Be Notified

   • Bureau sends complaint to producer
   • Producer must respond within specified time (typically 15-30 days)

2. Provide Complete Response

   • Address all allegations
   • Include supporting documentation
   • Explain actions taken

3. Cooperate with Bureau

   • Answer all questions truthfully
   • Provide requested records
   • Attend hearings if required

4. Implement Resolution

   • Follow Bureau directives
   • Make any required restitution
   • Change practices if needed

Failure to Respond:

• License suspension for non-response
• Fines and penalties
• Default finding against producer