Florida Statutes, Rules and Regulations Common to All Lines — practice questions

15% of the exam ≈24 real questions 24 free questions here

Licensing, appointments, fiduciary duties, unfair trade practices and discipline — about 24 of the 160 scored questions, tied for the largest domain. It is almost entirely fixed numbers and named offenses, which makes it the cheapest domain on the exam to lock down.

Where people lose points

• Treating the license and the appointment as one thing. Section 626.112(1)(a), F.S. requires both, and there is no grace period that lets an unappointed licensee transact first and be appointed afterward. The appointing entity — not the agent — files the renewal, in the appointee's birth month and every 24 months after (s. 626.381, F.S.).
• Sending a 2-20 agent to get a 2-15 for health. Section 626.311(1), F.S. gives the general lines license all property, marine, casualty and surety lines and expressly adds health insurance; bail bonds are the one exception and need a separate chapter 648 license. The agent still needs an appointment from the health insurer.
• Underreading the 30-day change notice. Section 626.551, F.S. requires written notice to the department within 30 days of a change of name, residence address, principal business street address, mailing address, contact telephone numbers or e-mail address — and the duty runs from the licensee directly to the department. Telling the appointing insurer does not satisfy it.
• Mixing the fine ceilings. Section 626.681(1), F.S. allows up to $500 against a licensee in lieu of suspension, or up to $3,500 for willful misconduct, and s. 626.681(2) allows up to $10,000 per violation against an agency. The $12,500 nonwillful and $100,000 willful figures belong to the unfair trade practices fines in s. 626.9521(2), F.S.
• Giving the client too much. Section 626.9541(1)(m), F.S. permits merchandise, gift cards, event tickets or anti-fraud and loss-mitigation services totaling $100 or less per insured or prospective insured per calendar year. Anything above that, or anything conditioned on the purchase, falls back under the rebating and unlawful-inducement prohibitions.

Questions and answers, explained

All 10 questions above, with the correct answer and why it is correct. Everything here is on florida statutes, rules and regulations common to all lines.

1. Maritza passed the 2-20 examination and received her general lines license from the Department of Financial Services three weeks ago. No insurer or agency has appointed her yet. A neighbor asks her to write a homeowners policy today. What may Maritza lawfully do?

   • AWrite the policy now, because the license by itself authorizes her to transact insurance
   • BNothing — she needs a current license and an appointment before she transacts insuranceCorrect
   • CWrite the policy now and obtain an appointment from the insurer within 30 days afterward
   • DTake the application herself and have any licensed and appointed agent sign it as the producing agent

   Why: Section 626.112(1)(a), F.S., provides that no person may be, act as, or hold himself or herself out to be an insurance agent unless currently licensed by the department AND appointed by an appropriate appointing entity. The license and the appointment are two separate requirements, and neither substitutes for the other. There is no grace period that lets an unappointed licensee transact first and be appointed afterward, which eliminates C. Option D would also violate the statute, because soliciting the business and having someone else sign for it is a form of unlawfully holding out.

   Reference s. 626.112(1)(a), F.S.

2. A general lines agent collects premiums on behalf of an insurer for which she does not hold an appointment. The insurer is not a surplus lines insurer. How must she handle those funds?

   • AShe may deposit them into the agency's general operating account so long as she remits them to the insurer within 45 days
   • BShe must keep them in a separate account, not commingled with her own fundsCorrect
   • CShe must forward them to the Office of Insurance Regulation, which then disburses them to the insurer
   • DShe may retain them as earned commission until the insurer demands payment in writing

   Why: Section 626.561, F.S., requires an agent to keep funds belonging to each insurer for which the agent is not appointed — other than a surplus lines insurer — in a separate account, so that the funds are not commingled with the agent's own money and the department can properly audit them. The statute does not set a fixed remittance deadline in days; it requires accounting and payment in the applicable regular course of business, so A states a number that is not in the law. Related records must be preserved for at least 3 years after the premium payment.

   Reference s. 626.561, F.S.

3. To close a commercial package sale, an agent offers to pay the client's first monthly installment out of her own commission. The agency has no rebate schedule on file with the insurer and nothing is displayed in the office. Which statement is correct?

   • AIt is permissible, because the agent is giving up her own commission rather than the insurer's money
   • BIt is permissible if the agent discloses the arrangement to the insurer in writing after the sale closes
   • CIt is illegal dealing in premiums, because the full premium was not collected from the insured before binding
   • DIt is an unlawful rebate, and the narrow statutory exception does not apply hereCorrect

   Why: Section 626.9541(1)(h), F.S., prohibits knowingly offering any rebate of premium, or any valuable consideration or inducement not specified in the insurance contract, as an inducement to buy. Florida does allow commission rebating in narrow circumstances under s. 626.572, F.S., but only if the rebate is available to all insureds in the same actuarial class, a rebate schedule is filed with the insurer and prominently displayed in public view at the agent's place of business with free copies available on request, the same percentage is given to everyone buying the same policy for the same amount of insurance, the insurer does not prohibit rebating, and no discriminatory factors are used. None of those conditions is met here, so the exception cannot save the offer.

   Reference ss. 626.9541(1)(h) and 626.572, F.S.

4. Which statement accurately describes Florida's insurance regulatory structure?

   • AThe Financial Services Commission serves as agency head for the Office of Insurance RegulationCorrect
   • BThe Insurance Commissioner is elected statewide and heads the Department of Financial Services, while the Governor and Cabinet oversee agent licensing
   • CThe Office of Insurance Regulation issues licenses to insurance agents and agencies, and the Department of Financial Services approves insurer rate filings
   • DThe Financial Services Commission consists of the Chief Financial Officer and three members appointed by the Governor, and it directly heads the Department of Financial Services

   Why: Section 20.121, F.S., makes the Chief Financial Officer the head of the Department of Financial Services and creates the Financial Services Commission, composed of the Governor and Cabinet — the Governor, Attorney General, Chief Financial Officer, and Commissioner of Agriculture — acting as a collegial body, with commission action requiring at least three affirmative votes. The commission serves as agency head for both the Office of Insurance Regulation and the Office of Financial Regulation. The Insurance Commissioner is appointed by the commission rather than elected; agent and agency licensing belongs to DFS, not OIR; and insurer rate filings are reviewed by OIR, not DFS.

   Reference s. 20.121, F.S.

5. An unlicensed man who works for no agency meets a friend for lunch, walks him through the coverages in a commercial package policy, and urges him to buy it through a 2-20 agent he knows. No application is signed and no money changes hands. Under the Florida Insurance Code, his conduct is:

   • AOutside the definition, because no contract of insurance was ever effectuated
   • BTransacting insurance, because solicitation and inducement fall inside the definitionCorrect
   • COutside the definition, because the conversation occurred away from an agency office
   • DTransacting insurance only if he is compensated with a fee or a share of the commission

   Why: Section 624.10, F.S., defines "transact" with respect to insurance to include solicitation or inducement; preliminary negotiations; effectuation of a contract of insurance; and the transaction of matters subsequent to effectuation and arising out of the contract. Because solicitation and inducement are each independently listed, the conduct is complete long before any contract exists, which is why A fails even though nothing was signed. Compensation is not an element of the definition either; the separate rule in s. 626.112(8), F.S., bars a licensee from paying an unlicensed person any fee or other consideration for referring prospective purchasers where the payment depends on whether the referral results in a purchase. That is a prohibition aimed at the licensee who pays, not a test for what counts as transacting.

   Reference s. 624.10, F.S.

6. An agent places a client's commercial general liability coverage with an entity she knew was not authorized to transact insurance in Florida and was not an eligible surplus lines insurer. A $300,000 covered claim occurs and the entity refuses to pay. Under s. 626.901, F.S., her exposure is:

   • APersonal liability to the insured for the full amount of the claim or loss left unpaidCorrect
   • BLiability capped at the premium she collected, plus a cease and desist order
   • CAn administrative fine only, since the section creates no private right of action
   • DLiability shared with the insured, because he signed the coverage application

   Why: Section 626.901(2), F.S., makes any person who knew or reasonably should have known that a contract was entered into in violation of the section, and who solicited, negotiated, took application for, or effectuated that contract, liable to the insured for the full amount of the claim or loss not paid. The exposure is measured by the unpaid claim, not by the agent's earnings, so B understates it — and the cease and desist authority in the same section (the office or department may issue an immediate final order) is cumulative, not a substitute. The insured's signature on an application does not shift the loss back onto him, because the statute places the risk of an unauthorized placement on the licensee who arranged it.

   Reference s. 626.901, F.S.

7. A 2-20 agent wants to split the commission on a commercial auto account she just wrote. With whom may she lawfully divide that commission?

   • AThe unlicensed office manager who prepared the application and gathered the loss runs
   • BA corporation of any kind, provided the payment is disclosed to the insurer in writing
   • CA Florida-licensed real estate broker who referred the account to her agency
   • DA customer representative, or another agent licensed and appointed for the same linesCorrect

   Why: Section 626.753(1)(a), F.S., allows an agent to divide or share commissions only with other agents appointed and licensed to write the same kind or kinds of insurance, or with a customer representative, and paragraph (1)(c) confirms that a customer representative may share in commissions with an agent. Subsection (2) is what defeats B: a licensee may not share a commission with any corporation unless that corporation is an insurance agency, so written disclosure to the insurer cures nothing. Paying an unlicensed employee or an outside referral source a piece of the commission is unlawful compensation, and subsection (4) makes revocation the penalty for violating the section.

   Reference s. 626.753, F.S.

8. A general lines agent who was the sole licensee of her agency dies unexpectedly. Her unlicensed son wants to keep the agency operating while the estate is settled. Under s. 626.175, F.S., the department may issue him:

   • AA temporary license good for 12 months, renewable once for another 12 months
   • BNo license of any kind, because temporary licenses issue only to licensed adjusters
   • CA nonrenewable temporary license for a period that may not exceed 6 monthsCorrect
   • DA temporary license good for 90 days that converts to a regular license on expiry

   Why: Section 626.175, F.S., authorizes the department to issue a temporary license, for a period not to exceed 6 months and expressly designated nonrenewable, to an employee, family member, business associate, or personal representative of an agent who has died or become unable to perform because of military service, illness, or other physical or mental disability. The license terminates early when the replaced agent returns to duty, when the affairs of the agency or the estate are wound up, or when the temporary licensee qualifies for a regular license. Nothing converts automatically: passing the written examination and then being licensed and appointed is what produces a regular license, which is why D is wrong.

   Reference s. 626.175, F.S.

9. A licensed agent moves to a new residence, switches to a new business e-mail address, and begins using a new business telephone number. What does the Insurance Code require of her?

   • AWritten notice to the department within 10 days after each change
   • BNotice to each appointing insurer, which then reports it to the department
   • CNotice only at her next license renewal, on the renewal application
   • DWritten notice to the department within 30 days after each changeCorrect

   Why: Section 626.551, F.S., requires a licensee to notify the department in writing within 30 days after a change of name, residence address, principal business street address, mailing address, contact telephone numbers including a business telephone number, or e-mail address. The duty runs directly from the licensee to the department; routing it through an appointing insurer, as B suggests, does not satisfy the statute even if the insurer updates its own records. Failure to notify carries a fine of up to $250 for the first offense, and a fine of at least $500 or suspension or revocation of the license for subsequent offenses.

   Reference s. 626.551, F.S.

10. The department finds a ground for suspending an individual agent's license. The suspension is not mandatory and this is not a second offense, so the department decides to impose an administrative penalty instead. The maximum penalty it may impose is:

    • A$1,000 for the violation, or $5,000 if the department finds that it was willful
    • B$500 for any violation, whether or not the department makes a finding of willfulness
    • C$10,000 per violation, which is the maximum the statute sets for insurance agencies
    • D$500, or up to $3,500 where it finds willful misconduct or a willful violationCorrect

    Why: Section 626.681(1), F.S., lets the department, in lieu of or in addition to suspension or revocation and except on a second offense or where the action is mandatory, impose on a licensee or appointee an administrative penalty of up to $500, or up to $3,500 where it has found willful misconduct or a willful violation. C states a figure that is real but misapplied: the $10,000-per-violation ceiling in s. 626.681(2) governs insurance agencies, not individual licensees. The penalty may also be augmented by an amount equal to any commissions received by or accruing to the licensee in connection with the transaction, and the department may allow up to 30 days to pay before the license is suspended or revoked.

    Reference s. 626.681, F.S.

Topics inside this domain

• Florida property claim deadlines
• Bad faith and the civil remedy notice

Drill other domains

• Types of Property Policies (14%)
• Property Insurance Terms and Related Concepts (9.5%)
• Property Policy Provisions and Contract Law (8%)
• Types of Casualty Policies, Bonds, and Related Terms (15%)
• Casualty Insurance Terms and Related Concepts (9.5%)
• Casualty Policy Provisions (8%)

← Back to the full practice exam