The Referral Commission Program
A funeral home in Columbia wants to increase preneed sales. The owner creates a 'preneed referral program' and pays a $150 commission to a local insurance agent, a hospital chaplain, and a part-time receptionist for each preneed contract they bring in. None of the three holds a Missouri preneed agent license. The receptionist writes a $7,800 preneed contract on a walk-in family, collects a $1,000 check, and gives the family a receipt on funeral home letterhead. The funeral home deposits the $1,000 into its general operating account the same day. The owner says, 'They are independent contractors, so the funeral home isn't responsible.' The funeral home's preneed seller license is current.
1. Does Chapter 436 require the three persons to be licensed? Explain the seller's responsibility.
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Licensing. Chapter 436 requires preneed sellers to be licensed and requires persons who sell or solicit preneed contracts for a seller to be licensed or registered as preneed agents. The insurance agent, chaplain, and receptionist are all engaging in preneed solicitation or sales without that credential. Paying them a $150 commission per contract is strong evidence that the funeral home is compensating unlicensed preneed activity. The owner's 'independent contractor' label does not control: the funeral home created the program, supplied the contract forms and receipt, set the commission, and received the money. The seller is responsible for the acts of its agents and for supervising them. Each contract can be a separate violation.
2. What must happen to the $1,000 and the contract?
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The $1,000. The check is a preneed payment, not general revenue. It must be deposited into the preneed trust or joint account within 30 days after receipt, and the funeral home must remove it from the operating account immediately. The seller should reconcile the payment, issue a trust receipt, and give the purchaser the required contract and disclosure documents. The contract. A licensed preneed agent should review and adopt the contract; if it cannot be cured, the seller should cancel and refund the purchaser according to Chapter 436. Commissions paid to unlicensed persons should be stopped and may need to be disgorged. Consequences. The Board can fine, suspend, or revoke the preneed seller license and discipline the owner; unlicensed persons may also be referred for prosecution. The funeral home should adopt a written preneed compliance program, license every solicitor, and segregate funds before resuming sales.
3. What compliance program should the owner adopt for preneed sales?
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Compliance program. The owner should immediately suspend the referral program, license or terminate the three participants, and place all preneed solicitations under a licensed preneed agent. It should require written agent agreements, train agents on Chapter 436 and the trust deposit rule, centralize receipting so no one collects cash without a preneed receipt, and have a bookkeeper reconcile deposits within 30 days. The program should include a licensing check before any solicitation, a ban on commissions to unlicensed persons, quarterly trust reconciliations, and annual training. The owner should also document corrective action and report to the Board if violations are found, because a written compliance program reduces the risk of repeat violations and supports a good-faith defense in any disciplinary proceeding.