The Producer Who Took the Renewal List
Dana has held a Washington producer license since 2015. She left Harlow Insurance in March and joined Cascade Risk Partners, taking a printed copy of Harlow's renewal list with her. In April she called a Harlow client, a winery near Chelan whose buildings sit in a wildfire zone, and bound the property coverage with an insurer that is not admitted in Washington. Her file shows no record of the declinations that surplus lines placement requires, and the insured never signed a disclosure notice. In June she paid the winery's bookkeeper $500 for the introduction, after the bookkeeper had walked the owner through Dana's coverage comparisons. Dana's license renews September 30. She has logged 18 of her 24 continuing-education hours, including 1 hour of ethics.
1. Sort Dana's conduct into what likely draws Commissioner discipline and what is arguably defensible. Give your reasoning for each item rather than a list of rules.
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Three problems, one gray area.
- The surplus lines placement. Washington allows a nonadmitted insurer only through a properly licensed surplus lines broker after a documented search of the admitted market and written disclosure to the insured. A blank file is not a paperwork slip; it means the Commissioner cannot verify that the risk was truly unplaceable, and the insured may not know it has no guaranty-association protection. This is the most serious exposure.
- The $500 to the bookkeeper. Paying an unlicensed person is unlawful when the payment compensates soliciting or negotiating. The facts cut against Dana: the bookkeeper discussed coverage comparisons with the owner before the payment. The defensible version is a nominal, truly referral-only fee with no discussion of terms and written disclosure.
- The renewal list. Absent a written agreement to the contrary, expirations belong to the agency, not the departing producer. Using them is a civil and trade-secret problem and can also be an unfair trade practice under the insurance code.
- Gray area: the timing of the call. She is licensed; the question is whether Cascade's carriers had appointed her before she bound business. Appointment is the agency's job to confirm.
2. What should have happened before the winery policy was bound with a nonadmitted insurer, and what must the winery now be told?
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Before binding:
- A documented search showing the coverage was declined by admitted insurers writing that class in that territory. Wildfire exposure in Chelan is a real reason for declination, but the file has to prove it, not assert it.
- Placement with an eligible surplus lines insurer, not merely any unauthorized carrier.
- A signed disclosure to the insured that the insurer is not admitted, is not examined by the Commissioner in the same way, and that claims will not be paid by the Washington guaranty association if the insurer fails.
- Collection and remittance of the surplus lines premium tax, with the transaction reported as required.
Now: Dana should reconstruct the diligent search honestly and contemporaneously (contact logs, declination letters), obtain the missing disclosure signature, and disclose the gap to her errors-and-omissions carrier. She cannot backdate anything. The client conversation should be blunt: the practical risk of an insolvent nonadmitted carrier is that the winery has an unsecured claim, and the only backstop is the receiver and any collateral the insurer posted.
3. Dana has 18 of 24 hours done, 6 weeks before renewal. What are the licensing consequences, and how should the agency handle the list and the payment?
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CE: Washington requires 24 credit hours per two-year term, including at least 3 in ethics. Dana is short 6 hours total and 2 ethics hours. Completing 24 hours of anything will not fix the ethics shortfall. If she has not completed everything before the renewal date, she cannot renew on time; she stops being licensed for new business and her carrier appointments terminate. The fix is administrative, not clever: finish the hours now, keep certificates for the audit window, and do not transact while lapsed.
The list: return or destroy every copy, certify in writing that no data was retained, and stop contacting Harlow clients until counsel reviews any non-solicitation or confidentiality agreement. The agency's own exposure matters too, because Cascade benefits from business it may have to disgorge.
The $500: stop the practice, document what the bookkeeper actually did, and be prepared to show it was referral-only. If it was compensation for explaining coverage, refund it and treat the arrangement as a compliance failure rather than argue the point.