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15.1 Property and Casualty Laws ................................................................................. 3

15.2 Property Laws .................................................................................................... 30

15.3 Casualty Laws .................................................................................................... 32

Retention Question Answer Key ................................................................................. 46

Key Word Index ........................................................................................................ 49

Property & Casualty Students

Colorado State Laws

TABLE OF CONTENTS

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Colorado State Insurance Laws

OVERVIEWThis chapter helps students become more familiar with Colorado insurance regulatory and licensing processes. The primary purpose of licensing is to protect the general public.

Take NoteInformation in this chapter modifies or amends information from previous content.

15.1 Property and Casualty Laws

Insurance Commissioner The Commissioner is the head of the Division of Insurance and is appointed by the Governor and confirmed by the State Senate. The Commissioner must be well versed in insurance and have no financial interest in any insurance agency or company other than as a policyholder. The Commissioner also can hire employees to help carry out the duties of the office.

Retention Question 1The Insurance Commissioner is: a. Appointed by the President of the NAICb. Appointed by the Governor and confirmed by the State Senatec. Appointed by the State Senate and confirmed by the Governord. Elected through public nominations

Power and Duties The Commissioner has the power to administer the insurance laws of the state designed to protect the public. The Commissioner may establish and amend reasonable rules as necessary to carry out duties. The Commissioner’s duties are:

� Filing and safeguarding all books and papers required by law � Issuing Certificates of Authority to insurance companies that have complied with Colorado’s

laws: □ Before receiving a Certificate of Authority, the Commissioner must certify that the insurer

is in compliance with Colorado laws and is authorized to transact insurance in this state □ The Certificate of Authority must be renewed annually as long as the insurer continues to

comply with the law � Requiring all authorized insurers to keep books, records, accounts, and vouchers to verify

annual statements to determine solvency □ Insurance companies doing business in Colorado must file an annual financial statement □ Any insurer who fails to file required documents or maintain complaint records may

be assessed a penalty of up to $500 for the first violation and up to $5,000 for any subsequent violations

COLORADO STATE INSURANCE LAWS

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� Issuing, denying, revoking, or suspending licenses or Certificates of Authority as required by Colorado’s law

� Supervising the business of insurance in a manner that is in the best interest of the general public and to protect policyholders

� Transmitting all fees, surcharges, costs, taxes, penalties, and fines collected by the Division of Insurance to the Department of the Treasury

� Enforcing state insurance laws; the Commissioner does not make the laws � Conducting investigations and hearings to determine if anyone involved in the insurance

business has engaged in any unfair method of competition, unfair or deceptive act or trade practice, or has violated the insurance laws in Colorado

� If violations justify such action, the Commissioner must present the results of investigations and examinations to the district attorney or proper judicial district for possible criminal investigations

� Establishing effective procedures for examining the activities, operations, financial conditions and affairs of anyone transacting insurance, as determined by the general assembly

� Examining the financial condition and affairs of authorized insurers whenever it’s necessary, but no less than once every 5 years

� Managing insolvency procedures � Ensuring that rates are adequate, as opposed to being excessive, inadequate, or unfairly

discriminatory; the Commissioner does not set the rates

Retention Question 2All of the following are powers and duties of the Commissioner, except: a. Issuing, denying, revoking, or suspending insurance licensesb. Enforcing state insurance lawsc. Ensuring that insurance rates are adequated. Performing all duties in the best interest of independent insurance agents

Financial StatementsAll insurance companies doing business in Colorado must file an annual financial statement with the Commissioner annually by March 1st of each year. This is a detailed statement summarizing the assets and liabilities, amount of business transacted, premiums collected, claims paid, returned premiums, and the amount of reinsurance accepted from admitted and nonadmitted insurers for the previous calendar year. This statement is made under oath and must be provided on what is known as the convention blank form, which is adopted from year to year by the National Association of Insurance Commissioners (NAIC). The Commissioner may require an insurer to file interim financial statements and reports monthly or quarterly as deemed necessary to protect public interest. Authorized insurers are required to file the convention blank form with the NAIC annually along with additional filings as prescribed by the Commissioner.

ExaminationsAn examination is a formal or informal financial or market conduct assessment or investigation conducted by the Commissioner to determine compliance with Colorado insurance laws. Market conduct examinations can include routine, targeted, follow-up, multi-state, or desk examinations. Examiners must follow guidelines and procedures set forth in the Colorado insurance examiner’s handbook as adopted by the NAIC.


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� An examination or investigation of any person (individual, association, corporation, partnership, or agency) can be conducted at the sole discretion of the Commissioner as frequently as deemed appropriate; however

� A formal financial examination of every licensed insurer must be conducted not less frequently than once every 5 years

An examination is not limited to the financial condition of a company, and also can include all other activities and affairs of the company. Every person from whom information is requested must provide timely, convenient, and free access during reasonable hours at its offices of all books, records, accounts, papers, tapes, computer records, and other documents relating to the property, assets, business, and affairs of the company being examined.

The Commissioner and all examiners have the power to issue subpoenas, administer oaths, and examine under oath any person regarding any matter pertinent to the examination. The refusal to submit to examination or comply with any reasonable written request of the examiners is grounds for suspension, revocation, denial, or nonrenewal of any license or authority.

Upon the failure or refusal of any person to obey a subpoena, the Commissioner can petition a court of competent jurisdiction for an order, which is enforceable through:

� Contempt proceedings � Compelling the person to appear and testify; or � Produce documentary evidence

A person who knowingly testifies falsely to any matter related to an investigation, examination, or inquiry is guilty of a misdemeanor and, upon conviction, will be:

� Punished by a fine up to $5,000 and/or � Imprisoned in the county jail up to 3 months

The reasonable expenses and charges for the cost of the examination will be paid by the person being examined (examinee) directly to the examiner(s). The cost of financial examinations outside of the state will be paid by the examinee and will include the expenses of the Commissioner and staff.

Retention Question 3A licensed insurer must be examined by the Commissioner at least every _____ year(s). a. 1b. 3c. 5d. 7

Hearings and Penalties

HearingsTo protect the public, the Commissioner may examine and investigate the business affairs and conduct of every person applying or holding a license to determine whether a person has been or is engaged in the violation of state insurance laws or an unfair or deceptive act, practice, or method of competition. Based on information regarding the possible violation, the Commissioner may issue a statement of charges and hold a hearing. Such person may be required to appear and show cause as to why the Commissioner should not refuse, suspend, revoke, or continue such person’s license.

The Commissioner can refuse, suspend, revoke, or non-renew the license of an agency or business entity if, after a hearing, it is found the agency or business knew or should have known of its partner’s, officer’s, or manager’s violation of state law and neither reported it nor took corrective action.



PenaltiesIf, after a hearing, the Commissioner finds the person charged has engaged in an unfair method of competition, deceptive act or practice, or has violated any other rules or laws, the Commissioner will:

� Provide the findings in writing and issue a Cease and Desist Order � Impose a civil fine up to $3,000 per unintentional violation and up to a maximum of

$30,000 for all unintentional violations. Fines for knowing violations are $30,000 per violation and have a maximum of $750,000.

� Suspend or revoke a license, if the licensee knew or should have known a violation was being committed.

� Order payment of a claim not paid because of the violation, unless a civil action concerning the claim is pending

Any order issued as a final action by the Commissioner may be appealed and subject to judicial review by the Court of Appeals.

Violating a Cease and Desist Order is punishable by a fine of up to $500 per violation of an individual or up to $10,000 per violation of an insurer and/or license suspension or revocation.

Retention Question 4If the Commissioner suspects that a licensee or applicant has violated state law, engaged in an unfair method of competition, or engaged in an unfair or deceptive act or practice, the Commissioner may refuse, suspend, revoke or nonrenew such person’s license by: a. Issuing a cease and desist orderb. Holding a hearingc. Submitting a request to the Attorney Generald. Imposing a penalty

Retention Question 5The Commissioner can impose a penalty for all of the following, except a person who has: a. Surrendered his/her licenseb. Not surrendered his/her licensec. Engaged in an unfair trade practiced. Failed to pass the licensing examination

License Suspension and Revocation After conducting a hearing, the Commissioner can refuse, suspend, revoke, or non-renew a license if suitable grounds are found, or if the licensee has violated any provision under state law, or has:

� Attempted to obtain the license by fraud, misrepresentation, or a material misstatement � Been convicted of a felony or crime involving moral turpitude � Misappropriated funds � Accepted insurance business from an unlicensed individual or entity � Had a license suspended or revoked in another state � Demonstrated a lack of trustworthiness or competence � Cheated on an insurance examination � Committed an unfair trade practice or fraud



� Forged another’s name to an application for insurance or any document related to an insurance transaction

� Failed to comply with an administrative or court order to pay state income tax or child support

� Misrepresentated the terms of any actual or proposed insurance contract or application for insurance

� Failed to meet all licensing requirements � Submitted a license application that contains any incorrect, misleading, incomplete, or

materially false information

In addition to, or in lieu of, termination of a license, a civil penalty can be imposed not to exceed $3,000 per violation. If the person fails to pay a penalty or make restitution, the Commissioner may refer the matter to the Attorney General (or District Attorney) for enforcement of any criminal violations.

The Commissioner can enforce these provisions and impose a penalty or remedy against any person who is under investigation or charged with a violation even if the license has already lapsed or been surrendered.

The Commissioner must notify the applicant or licensee of the reasons for denial or nonrenewal of a license if such action is being taken.

A producer or business entity must report to the Commissioner if it is the subject of:

� Any administrative action by another jurisdiction within 30 days after the matter has become final or disposed

� Criminal prosecution in any jurisdiction within 30 days after the initial pretrial hearing date

An insurance producer license is at all times considered property of the State of Colorado. If a license is suspended, revoked, terminated, discontinued, or nonrenewed, the Commissioner will require surrender of the license and order it to be returned promptly to the Commissioner by personal delivery or by certified or registered mail within 15 days of such action.

If a license is lost, stolen, or destroyed while in possession of the licensee, an affidavit providing the facts of such loss must be provided to the Commissioner.

In addition to notifying a resident insurance producer licensee of any penalties, suspension, revocation, or termination, the Commissioner must also notify the central office of the National Association of Insurance Commissioners (NAIC).

Retention Question 6If a producer is the subject of criminal prosecution in any jurisdiction, the producer must report to the Commissioner after the initial pretrial hearing date within: a. 60 daysb. 12 monthsc. 10 daysd. 30 days



Retention Question 7The Commissioner can refuse, suspend, revoke, or nonrenew a license if the licensee has committed any of the following, except: a. Failed to pay child supportb. Issued insufficient coverage to a customer through apparent authorityc. Had a license suspended or revoked in another stated. Cheated on an insurance examination

Retention Question 8Concerning license suspension and revocation, the Commissioner can take all of the following actions, except: a. Notify the producer of any license suspension, revocation, or terminationb. Notify the NAIC of any license suspension, revocation, or terminationc. Notify the Attorney General or District Attorney of criminal violations of the

insurance coded. Impose a civil penalty of $1,500 per violation, up to $10,000 per fine in addition to,

or in lieu of, license termination

Records and Requests for InformationEvery entity and person must maintain its books, records, documents, and other business records, including internal and external communications, in a manner so that the following information may be readily understood:

� Operations and management � Policyholder services � Claims handling; rating � Underwriting; advertising, marketing and sales � Complaint/grievance handling � Producer licensing; � And, for Health insurers:

□ Network adequacy □ Utilization review □ Quality assessment and improvement □ Provider credentialing

Records and data for this regulation shall be maintained for the current calendar year plus 2 prior calendar years.

Unless another time period is specified by the Division in writing, every individual or business entity must provide a complete and accurate response to an Examination Request/Comment Form or Examination Request/Memo Form within 10 calendar days from the date on the form.

Except for responses to an Examination Request/Comment Form or Examination Request/Memo Form, and unless another time period is specified by statute, regulation or by the Division either electronically or in another written form, every individual or business entity must provide a complete and accurate response to any inquiry from the Division within 20 calendar days from the date of the inquiry.



Extension RequestsIf additional time is required to respond to any Division inquiry, a written request for an extension of time must be submitted to the Division employee or examiner making the inquiry. The request for an extension of time shall:

� Be made no later than 5:00 PM Mountain Time on the business day prior to the response due date

� Include a specific period of time for the extension � State in detail the reasons necessitating the extension

An extension may be granted, at the discretion of the Division, for good cause shown.

If an extension is not granted, or the person requesting the extension does not receive written confirmation from the Division that the extension is granted, the original response due date applies.

Failure to provide a complete and accurate response to a Division inquiry, failure to request an extension for a specified period, or failure to provide a complete and accurate response to a Division inquiry when an extension is not granted may result in a civil penalty of $500 for an initial violation, and may be increased up to a maximum penalty of $5,000 for each subsequent violation.

Licensing and Producers’ Legal ResponsibilityPersons Required to Be LicensedProducer – A person who solicits, negotiates, effects, procures, delivers, renews, continues, or binds policies of insurance for risks residing, located, or to be performed in this state. A producer cannot transact insurance for any lines of authority for which they are not qualified or properly licensed.

An insurance producer does not include the following and is not required to be licensed:

� An insurer � Any officer, director, or employee who:

□ Is salaried and devoted full time to clerical or administrative duties, including the incidental taking of applications and receipt of premiums as long as the person does not negotiate or solicit insurance and is not paid commission or compensation that varies based on the volume of application or premiums taken.

□ Conducts activities that are executive, managerial, administrative, or clerical and not directly related to the sale, solicitation, or negotiation of insurance.

□ Conducts activities related to underwriting, loss control, inspection, or claims handling □ Is a special agent or supervisor providing technical aid and who neither sells nor

negotiates insurance � An employer, association, or trustee administering its own employee benefit program that

happens to use insurance � An employee inspecting, rating, or classifying risks if not selling or negotiating insurance � A management association, partnership, or corporation not publicly selling insurance � An auto rental company’s officers and employees, for rental insurance transactions � A person whose activities are limited to advertising � A nonresident licensed to sell/negotiate commercial property and casualty policies in another

state � A salaried full-time employee whose job is to provide insurance advice to an employer, if not

selling insurance or receiving commissions



� A person who gathers/provides information for insurance purposes, if not receiving commissions

� An agent, representative, or member of a fraternal benefit society who devotes substantially all of his or her time to activities other than solicitation and negotiation and does not receive a commission or compensation directly related to the number or amount of contracts

� An agent, representative, or member of a fraternal benefit society who procured life insurance contracts in a face amount not exceeding $50,000, or any kind of insurance to not more than 25 individuals per year, and received no commission

The producer represents the insurance company, not the insured or beneficiary.

Retention Question 9The definition of a Colorado producer includes which of the following?a. A person who solicits or negotiates membership enrollments in a health care planb. A nonresident licensed to sell or negotiate commercial property and casualty

insurance policies in another statec. An insurerd. An employer, association, or trustee administering its own employee benefit

program that uses insurance

Prelicensing EducationEach applicant for a life, health or property and casualty license must provide evidence to the Commissioner of completion of an approved prelicensing educational program.

Applicants must complete at least 50 hours of approved education in each line of authority in which they seek licensure. This includes 3 hours pertaining specifically to insurance industry ethics. The training requirements are as follows:

� 50 hours – Life only � 50 hours – Health only � 50 hours – Property and Casualty

An individual seeking a producer license must pay, in addition to other fees and charges, an established fee for the operation of the prelicensing education program.

Retention Question 10Each applicant for an insurance license must provide evidence to the Commissioner that he or she has completed which of the following?a. At least 50 hours of an approved course and an additional 3 hours of ethicsb. At least 24 hours of an approved course and an additional 3 hours of ethicsc. At least 50 hours of an approved course including 3 hours of ethicsd. At least 24 hours of an approved course including 3 hours of ethics



Exemption from License ExaminationThe following are exempt from the licensing examination requirement:

� A nonresident applying for a license in this state for the same lines of authority is exempt from the prelicensing education and examination if the person is currently licensed in his or her home state and the license is in good standing

� A person licensed in another state who moves to this state and applies within 90 days after establishing legal residence to become a resident licensee in the same line of authority

� An applicant for a license to solicit and deliver travel accident policies � An individual applicant who holds a CLU, CPCU, ChFC, or RHU designation is only

required to take the examination pertaining to Colorado laws

Licensing RequirementsAn individual applicant for a resident insurance producer license must apply to the Commissioner and meet certain requirements. The Commissioner will issue a producer license to an individual who:

� Is at least 18 years of age � Is competent, trustworthy, and of good moral character and business reputation � Is a resident of Colorado, or a state for which Colorado grants nonresident licenses � Completes the required prelicensing education requirements � Passes the state insurance licensing examination as a resident licensee � Pays the required license fee � Has not committed an act that is ground for license refusal, suspension, or revocation � If a nonresident, submits a Letter of Certification issued within the previous 90 days from

his/her home state’s insurance regulatory authority with the application of license

Variable Contracts – Applicants for a variable products license must obtain authority to write life insurance. They must also provide evidence that they have passed the appropriate FINRA registration exam and are currently registered with a FINRA-member broker or dealer firm. Nonresidents must meet the requirements of their resident state and be currently registered with a FINRA-member firm.

An insurance agency or business entity must submit an application to act as an insurance producer. The Commissioner will issue a license if the agency or business entity has:

� Disclosed to the Commissioner all officers, partners, and Directors and whether or not they are licensed as producers and are trustworthy, of good moral character, and of good business reputation

� Paid the required fees as established by the Commissioner � Designated a licensed producer responsible for the agency or entity’s compliance with

state laws � Registered with the Commissioner each natural person who is acting as and is licensed as

an insurance producer; at least one licensed individual must hold a valid license for the lines of authority requested in the application

The Commissioner may require the filing of any documents necessary to verify information contained or required in the application.

Each insurer transacting any form of limited line credit insurance must provide each individual selling, soliciting, or negotiating limited lines credit insurance with a program of instruction approved by the Commissioner.



Retention Question 11Each of the following are requirements for licensure, except: a. Residency in Coloradob. Residency in a state to which Colorado grants nonresident licenses c. Passing the state licensing examinationd. Being at least 21 years of age

Nonresident LicenseA licensee from another state may apply for a nonresident license in Colorado. The Commissioner will waive any requirements for a qualified nonresident license applicant with a valid license from the applicant’s home state as long as the home state is reciprocal and awards nonresident licenses to residents of this state on the same basis. The Commissioner may issue an insurance producer license to a qualified nonresident person based on the following:

� The person maintains a license in good standing in the home state � The agency or business entity has its principal office located in another state � The person holds a similar license on the same basis and same lines of authority applied

for in this state � A proper request was submitted and fees were paid � The nonresident filed a current certification of license status with the Commissioner � The license status can be verified through the NAIC database � A nonresident who moves from one state to another or a resident producer who moves

from this state to another must file a change of address and certification from the new home state within 30 days after change of legal residence without paying a fee

� If a person’s home state license is suspended, terminated, or revoked, the nonresident producer must notify the Commissioner and return the Colorado nonresident license

Upon the issuance of a nonresident license, the Commissioner will be appointed as the nonresident’s agent to receive service of legal process. This lawful process will have the same legal validity as personal service of process to the nonresident licensee. Within 10 working days of receiving 3 copies of the process served, the Commissioner will forward a copy of such process by registered or certified mail to the nonresident’s address of record. The Commissioner will keep a record of all processes so served.

Lines of AuthorityAn insurance producer may receive qualification for a single license for one or more of the following lines of authority:

� Life – Coverage on human lives that may include benefits of endowment, annuities, accidental death or dismemberment and disability income

� Accident and Health – Coverage for sickness, bodily injury, or accidental death and dismemberment that may include disability income

� Variable Life and Variable Annuity Products – Coverage provided under such contracts � Property – Coverage for the direct or consequential loss or damage of property of any

kind � Casualty – Coverage against legal liability, including death, injury, disability, or damage

to real or personal property � Personal Lines – Coverage for noncommercial property and casualty losses sold to

individuals and families � Limited Lines Credit Insurance



� Crop hail � Title � Surplus Lines � Travel Insurance

Licensing Insurance producer licenses are issued as perpetual to an applicant who has met the requirements. Each producer license remains in effect unless suspended or revoked, as long as the continuation fee is paid, and continuing education requirements are completed on or before the due date. The license must include:

� Name, address, and personal identification number of the licensee � Date of issuance � General conditions relative to expiration or cancellation � Lines of insurance covered by the license � Trade name under which the licensee transacts business � Any other information deemed necessary by the Commissioner

A licensed producer who fails to meet the license continuation and renewal procedures due to military service, long-term medical disability, or any other condition deemed appropriate, may request a waiver of those procedures. A waiver may also be requested for examination requirements or other fines or sanctions imposed for failure to comply.

Licenses must be renewed biennially (every 2 years) by the last day of the producer’s birth month. Producers will be notified of the procedures for renewing their license by mail or email 90 days before the renewal is due.

After the expiration date, licenses may not be renewed by the usual renewal procedure. For up to one year, they may be reinstated by applying for reinstatement and paying an initial application fee. After one year, licenses may only be reinstated by completing a new prelicense education course and again passing the licensing exam.

All producer licensees must notify the Commissioner in writing of any change of address within 30 days after the change. Failure to provide notice will result in the assessment of a penalty.

Appointments by Insurer – A producer must be appointed by at least 1 insurer to transact insurance. A producer can be appointed by more than 1 insurer, but the appointment must be in place at the time the business is placed. The appointment may be terminated by the producer, insurer, or Commissioner.

Notification of Termination of Appointment – An insurer must notify the Commissioner within 30 days of terminating a producer’s appointment for cause. The insurer must provide additional documents, records, or data requested by the Commissioner if they have knowledge of a producer engaging in unlawful activities. The producer must be given a copy of the termination notice within 15 days after the Commissioner is notified. The producer has 30 days to file comments about the termination with the Commissioner.

Immunity – A producer, insurer, or authorized representative who compiles information and makes available to the Commissioner or law enforcement agency will not be subject to civil liabilities that arise from the result of any information that leads to the termination of a producer.

Confidentiality – The Commissioner is authorized to use these documents, materials, or other information to aid in the investigation and further any legal action taken against a producer. All information received must be kept confidential and no parties with access to this information can be required to testify in any private civil action concerning the confidential information.



Registration of Assumed Names – A producer must register any assumed name with the Commissioner PRIOR to its first use and must notify the Commissioner PRIOR to any change and before discontinuing its use. The Commissioner will not accept registration of any name that is misleading to the public or is identical or similar to the name of any producer whose license has been revoked or suspended.

Retention Question 12Each of the following is a component of the legal responsibility of maintaining an insurance license, except: a. A producer must register any assumed name in writing to the Commissioner within

30 days of useb. A producer must inform the Commissioner of any change in address within 30 daysc. An insurer must notify the Commissioner within 30 days of terminating a producer’s

appointmentd. The producer must be given a copy of the termination within 15 days of the

Commissioner’s notification, but has 30 days to file comments about that termination with the Commissioner

Surplus Lines In most cases, insurance must be sold through an admitted insurer that holds a Certificate of Authority. Certain types of high-risk insurance may not be available for sale through an admitted insurer and therefore may need to be placed legally through a nonadmitted insurer. A nonadmitted insurer is not required to hold a certificate of authority and does not file rates or forms with the Commissioner. In order to place business through a nonadmitted insurer, a person must first be licensed as an insurance producer before applying for a surplus lines producer license.

A resident producer can obtain a surplus lines producer license to represent nonadmitted insurers if the person:

� Is deemed to be trustworthy and competent by the Commissioner � Only transacts surplus lines business according to law � Remits taxes on surplus lines insurance transactions promptly

Surplus lines producers must prepare documentation demonstrating the required coverage was not procurable after a diligent search was made from among a minimum of 3 admitted insurers. A written record documenting diligent search efforts must be maintained by the producer for at least 3 years from the effective date of coverage.

A surplus lines producer cannot place insurance with a nonadmitted insurer solely to get a lower policy premium than that which would be accepted by an admitted carrier unless the premium rate quoted by the admitted carrier is more than 10% higher than that quoted by the nonadmitted carrier. Within 30 days of placing coverage with a nonadmitted insurer, a surplus lines producer must file with the Commissioner an affidavit describing the coverage.

A non-admitted insurer must be listed on the Commissioner’s Approved List of surplus lines insurers, which is issued each year on July 1st. A foreign or alien non-admitted insurer that wants to be included on the Approved List must apply and pay the required fees on or before March 1st of every year.

On or before March 1st of each year, each surplus lines producer must remit to the Division a 3% tax on the net premiums paid for surplus lines business he/she transacted in the previous year.

During the year, the producer must keep these funds in a separate account at an FDIC insured institution in the state of Colorado.



Surplus lines contracts issued for delivery in this state must include the following required disclosures and statements:

� “This policy is issued by an insurance company that is not regulated by the Colorado Division of Insurance. The insurance company may not provide claims service and may not be subject to service of process in Colorado. If the insurance company becomes insolvent, insureds or claimants will not be eligible for protection under Colorado law.” The Colorado Insurance Guaranty Association does not provide protection for such policies issued by nonadmitted insurers.

� For policies written on a claims-made basis: “This policy is a claims-made policy that provides liability coverage only if a claim is made during the policy period or any applicable extended reporting period”.

� If an auto policy does not provide the basic complying policy coverages: “This policy does not meet the statutory requirements of this state’s financial responsibility laws. It does not provide liability coverage for bodily injury and property damage”.

The disclosures must be affixed to the declaration page of the contract given to the insured and on a binder, if issued prior to the policy delivery. A copy of the disclosures must be maintained by the broker.

A surplus lines producer licensed in another state will be issued a nonresident surplus lines producer license in this state as long as all qualifications are met.

Retention Question 13All of the following are true about surplus lines insurance, except: a. Within 30 days, surplus lines producer must file an affidavit with the Commissioner

describing coverage placed with a non-admitted insurer within 30 daysb. To write surplus lines insurance in Colorado, a non-admitted insurer must be on the

Commissioner’s approved list that is issued each year on July 1c. The written record documenting the search for admitted insurance must be

maintained by the producer for at least one year from the effective date of coveraged. Each surplus lines producer must remit a 3% tax on the previous year’s surplus lines

premiums on or before March 1st of each year

Payment and Acceptance of Commissions/Fees No individual or entity can pay commissions or other valuable consideration to any person not licensed as a producer. Only a licensed producer can accept commissions or other payment for services that must be performed by a licensed insurance professional.

The individual or entity must be licensed when the service is performed, not necessarily when the consideration is received.

Producers are prohibited from charging fees, in addition to commissions, for overhead expenses associated with soliciting, procuring, or servicing policies. However, producers can charge fees for specific services, such as retirement planning, estate planning, risk management, and financial planning, for which the producer does not receive a commission from an insurer.

Before service is provided, the client must sign a statement disclosing that he/she is not obligated to buy any insurance product and that any sale relating to the service be contracted will not be sold by the producer rendering the service. The producer must retain a copy of this document for at least 3 years after the services are rendered.

A producer can split commissions only with a licensed partnership or corporation of which the producer is an employee, member, or agent, and a corporation of which the producer is an officer.



Retention Question 14Producers can receive the following forms of compensation for soliciting, procuring, or servicing policies: a. Administrative fees, in addition to commissionsb. Service fees, in addition to commissionsc. Consulting fees, in addition to commissionsd. Commissions from an insurer

Fiduciary/Commingling A fiduciary duty requires the highest of legal and ethical standards of conduct. Producers must act in a fiduciary capacity when handling premiums.

Producers cannot commingle client premiums with their personal funds. Premiums received by the producer must be kept in a separate account. Commingling is a breach of fiduciary duty. Producers who act in an agency capacity must set up a separate trust account where premiums, earned and unearned, must be deposited until remitted to the rightful owner. A producer must:

� Remit premiums received, less commissions, to the insurer on or before the policy due date or, if there is no due date, within 45 days after receipt

� Account for any collected premiums within 45 days after the policy due date or within 90 days after receipt

� Remit unearned premiums received from insurers to the insured, or credit the premiums to the insured’s account, as soon as possible, but within 30 days. If coverage is cancelled, premiums must be remitted to the insured within 45 days after the effective date of cancellation

� Promptly notify the Commissioner in writing if he/she failed to remit premiums as required by law

The producer must keep records of the fiduciary funds that are not considered personal assets and cannot be used as collateral for personal or business loans. However, interest earned on the account belongs to the producer.

Producers may not use funds received for a specific reason on behalf of a policyholder to satisfy any other amounts the policyholder owes to the producer unless the policyholder has given written authorization to do so.

Any insurer that delivers a policy to a producer will be deemed to have authorized that producer to receive premiums on its behalf upon policy delivery.

Retention Question 15With respect to a producer’s fiduciary responsibilities and duties, the agent must do all of the following, except: a. Remit premiums received to the insurer on or before the due date, or within 45 days

if there is no due dateb. Account for any collected premiums within 45 days after the policy due date or

within 90 days after receiptc. Remit to the insured any unearned premiums received from the insurer within 30

days, or within 45 days of cancellationd. Maintain separate bank accounts for all insurers represented



Prelicensing and Continuing Education (CE)

Continuing EducationProducers must complete up to 24 hours of approved continuing education courses within 24 months of their license renewal date. At least 3 of the CE hours must cover ethics, and at least 18 hours must be in the line(s) for which the producer is licensed. Producers licensed to sell property or personal lines insurance must complete 3 hours of continuing education on homeowner’s insurance coverage.

First-time licensees have until their 2nd continuation to comply, and then must fulfill requirements biennially (every 2 years). A course cannot be repeated within 2 years after completion. Course instructors may earn the same number of credit hours as attendees, but may not count instruction hours for any course more than once in 2 years. A maximum of 12 hours of CE can carry over to the next renewal period; any carryover hours must have been earned in the 120 days prior to the license continuation date. Written certification of completion of the course must be executed by the sponsoring organization.

The required number of hours applies regardless of the number of lines of authority for which a producer is licensed. The renewal date for all licenses held by a producer fall every 24 months from the date the first license is renewed. Producers must retain documentation of course completion for 5 years following license continuation.

CE requirements apply to any person licensed in Colorado to sell any line of insurance for which the state requires a licensing exam (i.e., life and annuity contracts, property and casualty, etc.). However, CE requirements do not apply to a person holding a limited or restricted license.

A nonresident shall meet Colorado’s continuing education requirements by meeting the CE requirements of his or her home state if that state allows Colorado producers to meet its continuing education requirement(s) on the same basis.

The license of any person failing to comply with CE requirements, or who falsifies a Certificate of Completion, will be suspended until CE requirements are met. Noncompliance is subject to any of the sanctions that may be imposed for violating insurance or other laws, including civil penalties, issuance of cease and desist orders, and/or suspensions or revocations of licenses.

PrelicensingAny person applying for a resident insurance producer license, other than those exempt, must successfully complete prelicensing education before taking the state producer license examination. The prelicensing education required is satisfied by the successful completion of course(s) with courses totaling 50 hours per line. Course(s) must be approved for prelicensing for the particular line of authority by the Division. Only successful completion of courses approved by the Division will satisfy the requirements of the regulation.

A certificate of completion must be issued by the approved Course Provider to each person satisfactorily completing the course.

The certificate of completion must contain the student’s full name, residential address, name of the approved course, beginning date, date of completion, name of the approved Course Provider, the original or electronic signature of the instructor and any other info the Division deems necessary.

The certificate of completion must have been earned prior to sitting for the state license examination. Proof of course completion must be transmitted electronically to the Division or its vendor. Such electronic transmission will satisfy the applicant’s responsibility to transmit the certificate to the Division.



Prelicensing certificates of completion shall be valid for a period of 1 year from the date of completion. Prelicensing certificates of completion that are more than 1 year old will not be accepted by the Division and students will be required to take an approved prelicensing course.

ExemptionsAn individual who was previously licensed for the same line(s) of authority in a reciprocal state is exempt from prelicensing education. Such an individual is required to certify knowledge of Colorado law applicable to insurance producers on a form approved by the Division. The person must currently be licensed in the other state, or the application must be received within 90 days of the cancellation of the applicant’s previous home state license. The prior home state also must issue a certificate stating that at the time of cancellation, the insurance producer is or was licensed in good standing for the line(s) of authority requested.

Retention Question 16How many credit hours of continuing education must a producer complete every license renewal period? a. 12b. 24c. 30d. 18

Unauthorized Entities Acting as an agent or aiding with any insurance transaction in Colorado, including proposing an insurance contract, taking applications, receiving premiums, and delivering contracts, is strictly prohibited unless the entity or individual is authorized with the required certificate of authority. An unauthorized entity engages in the transaction of insurance without specific authorization to do so.

It is illegal for any individual or entity to transact insurance, including forwarding insurance contracts, on behalf of an unauthorized insurance entity. Violation of this statute constitutes a Class I misdemeanor with a minimum sentence of 6 months in jail and/or a $500 fine and a maximum sentence of 18 months in jail and/or a $5,000 fine. This section does not apply to the lawful transaction of surplus lines and reinsurance.

Through the attorney general, the Commissioner can file an action in court to enjoin unauthorized entities from their activities. A complaint will be filed in the district court for the city of Denver to restrain such company from continuing violations. The Commissioner will issue an emergency Cease and Desist Order if it appears that the alleged conduct is fraudulent, creates an immediate danger to the public safety, or is expected to cause irreparable public injury. The emergency order will be served to the person by certified or registered mail with return receipt at the last known address stating the charges and requiring such person to immediately cease and desist from the practices stated in the order. The subject of the emergency order may request an immediate hearing for an opportunity to show cause why the order should be upheld.

If, after a hearing, the Commissioner determines that an emergency cease and desist order has been violated, the Commissioner may impose a civil penalty of $25,000 per violation and order complete restitution to all parties affected.

If a person fails to pay a penalty or make complete restitution, the Commissioner may refer the matter to the attorney general for enforcement, or cancel or revoke any permit, license, of certificate of authority.



Failure to obtain a certificate of authority will not impair the validity of a contract. An unauthorized insurance entity is still liable for its contractual obligations and if unable to pay its claims, any person who helped the unauthorized insurer procure the contract is liable to an insured for the full value of any loss insured under the contract.

All insurance advisers, counselors, or analysts must report every policy issued by an unauthorized insurer to the Commissioner. This requirement also applies to insurance investigators and adjusters.

Retention Question 17The Commissioner is going to send a cease and desist order to a producer. How must it be delivered? a. First-class certified mailb. Emailc. By telephone calld. In person

Retention Question 18Which of the following is correct regarding unauthorized entities?a. An unauthorized insurer’s act or contract is invalid because it is not authorized to

transact insurance businessb. The Commissioner is required to issue a Cease and Desist Order stating charges if

an unauthorized person is transacting insurancec. Every person acting as an insurance adviser, counselor, or analyst must report every

unauthorized policy or contract to the Commissionerd. A claims adjuster is not required to report unauthorized business to the Commissioner

Unfair Competition and Deceptive PracticesThe following are methods of unfair competition and unfair or deceptive acts and practices in the insurance business:

Coercion � Entering into action resulting in an unreasonable restraint of, or monopoly in, the insurance

business � Coercing a debtor into acquiring required insurance through a particular insurer, group,

agent, or broker � Unreasonably disapproving a policy that provides required coverage � Requiring a borrower, mortgagor, purchaser, insurer, broker, or agent to pay a handling or

replacement charge on a policy required to secure a loan on real property

MisrepresentationMaking a statement that is false/misleading:

� About a policy, its dividends, or its share of surplus receivable, or paid in the past � About a person’s financial condition or a life insurer’s legal reserve system



Unfair Discrimination � Permitting individuals of the same class and life expectancy to be charged different rates

for any life insurance or annuity contract with the same coverage, or in dividends or other benefits payable

� Permitting individuals of the same class between neighborhoods within a municipality and essentially of the same hazard to be charged different rates, policy fees, or benefits payable for any policy or contract of insurance

� Refusing to insure or renew, canceling, or limiting the amount of coverage on a property and casualty risk solely because of the geographic location of the risk (known as redlining), unless based on sound underwriting and actuarial principles related to anticipated loss experience

� Refusing to insure or renew, canceling, or limiting the amount of coverage on the residential property risk or personal property solely because of the age of the residential property

� Terminating or modifying coverage, refusing to issue or renew any property or casualty policy solely because the applicant or insured is mentally or physically impaired

� Permitting any classification solely on the basis of martial status or gender UNLESS such classification is for the purpose of insuring family units or is justified by actuarial statistics

� Permitting any classification solely on the basis of blindness, partial blindness, or a specific physical disability unless based on an unequal life expectancy or an expected risk of loss that is different than that of other individuals

� Denying health care coverage based solely on an individual’s casual or nonprofessional participation of motorcycling, snowmobiling, off-highway vehicle riding, skiing, or snowboarding

� Reducing benefits under a health insurance policy by adding an exclusionary impairment rider unless the rider only excludes conditions that have been documented in the original application, underwriting medical exam, or insured’s medical history

� Refusing to insure a person solely because another insurer has refused to issue a policy, has canceled, or refused to renew an existing policy

� Inquiring about sexual orientation; using information about gender, marital status, medical history, occupation, residential living arrangements, zip codes, or other territorial designations to determine sexual orientation; or using sexual orientation to determine insurability

� Refusing to write insurance or charging a higher premium because a person sought counseling for concerns related to HIV/AIDS or based on nonspecific blood code information from the Medical Information Bureau (MIB); investigation in response to the existence of nonspecific blood code is allowed as long as it is conducted in accordance with the provisions of the law

HIV Testing and Disclosure RequirementsNo person may request or require that an applicant submit to an HIV related test without:

� Obtaining the applicant’s prior written informed consent � Explaining the use of test results and to whom the test results may be disclosed � Providing the applicant with printed factual information the causes, symptoms and

transmission of AIDS and what a person should do if the results of the HIV related test is positive

On the basis of the applicant’s written informed consent prior to testing, the test results may be disclosed to reinsurers and medical personnel, but not agents and brokers. A separate written informed consent must be obtained from the applicant to disclose HIV related test results which identify the individual applicant.



The applicant must be notified in writing of an adverse underwriting decision based on the results of the blood test, but will not disclose the specific results of the test to the applicant. The applicant must be informed that the results of the blood test will be sent to the physician designated by the applicant at the time of application.

Any person failing to comply with the provisions regarding the disclosure of HIV related test results is guilty of a misdemeanor and punished with a fine of $500 - $5,000, or by imprisonment for 6 - 24 months, or both a fine and imprisonment.

Controlled BusinessA producer license cannot be granted to or renewed by any person using the license for the purpose of writing controlled business, which is the act of obtaining insurance on the life or property of one’s own self, spouse, or employer. A license is deemed to be used for the purpose of writing controlled business if, during any 12-month period, the total premiums on controlled business exceed the total premiums on all other insurance sold by the producer. This means that controlled business may be written on up to 50% of a producer’s premiums during any 12 month period.

DefamationMaking, publishing, or circulating any written or verbal statement that is false, maliciously critical, or derogatory to the financial condition of any insurance company with the intention to cause injury to that company. A person found guilty of defaming an insurer commits a misdemeanor punishable by a fine up to $500, imprisonment for up to 12 months, or both.

Each medical malpractice insurer shall submit information about claims settled against the insured to the Colorado State Board of Medical Examiners. Submitting this information is not considered defamation.

RebatesOffering or giving any premium discount, credit, service, advantage, favor, or anything of value that is not specified in the policy.

Retention Question 19Denying health coverage solely because the insured uses a motorcycle, is an example of what type of unfair trade practice? a. Unfair discriminationb. Unfair claim practicec. Prohibited underwritingd. Boycott

Retention Question 20Obtaining an insurance license for the sole purpose of writing insurance on the life or property of one’s employer constitutes which of the following?a. Rebatingb. Redliningc. Controlled businessd. Discrimination



Retention Question 21Each of the following are an example of boycott, coercion, or intimidation, except: a. Offering a premium discount or credit that is not specified in the policyb. Unreasonably disapproving a policy that provides requisite coveragec. Coercing a debtor into getting requisite insurance through a particular agentd. Requiring a mortgager to pay a handling charge on a policy required to secure a

loan

Unfair Claims Practices The acts in this section constitute unfair claims practices and the resulting penalties if committed in Colorado. The following acts cannot be committed willfully or so frequently that it indicates a general business practice:

� Misrepresenting pertinent policy facts or provisions relating to a claim � Compelling insureds to sue by offering substantially less than what a lawsuit would award � Refusing to pay claims without first conducting a reasonable investigation � Attempting to settle a claim for less than an amount a reasonable person would believe he/

she is entitled by reference to written or printed advertising material � Attempting to settle a claim based on an application altered by the agent or company without

notifying the insured or getting the insured’s consent � Paying a claim without stating the coverage under which payment is made � Delaying investigation or payment by requiring the claimant to submit subsequent

verification of a proof of loss when both the verification and the proof of loss require the same information

� Making known to insureds or claimants a policy of appealing arbitration awards in order to compel settlements for less than the awarded amount

� Adjusting a third-party claim based on comparative negligence without a reasonable investigation supporting the offset

� Excluding medical benefits under health coverage solely because the individual uses a motorcycle, snowmobile, off-highway vehicle, skis, or a snowboard

� Failure to acknowledge pertinent claim communications reasonably quickly � Failing to adopt and use standards for promptly investigating and settling claims � Failing to attempt, in good faith, to promptly, fairly and equitably settle a claim in which the

insurer’s liability has become reasonably clear � Failing to affirm or deny coverage within a reasonable period after receiving proof of loss � Failure to promptly give a reasonable explanation for the denial of a claim, based on policy

provisions, applicable law, or both � Failure to promptly settle claims where liability is clear under a section of the policy, in order

to influence settlements under other section(s)

Penalties for Unfair Claim Practices An insurer failing to pay a first-party property and casualty claim within 60 days, except for circumstances involving a reasonable dispute, will be fined:

� Up to $20, for a claim of $100 or less � 8% of the annual interest on the claim, from receipt to payment, for a claim exceeding

$100 � If the Commissioner deems an additional fine appropriate, a fine of $100 per day for each

day payments were delayed more than 60 days can be charged



Retention Question 22Which of the following is NOT an unfair claims practice? a. Misrepresenting pertinent policy facts or provisions to claimantsb. Excluding medical benefits under health coverage solely because the individual

uses a motorcycle, snowmobile, off-highway vehicle, skis, or a snowboard c. Promptly acknowledging communications pertinent to a claim d. Failing to attempt, in good faith, to promptly, fairly, and equitably settle a claim in

which the insurer’s liability has become reasonably clear

Do Not Call List Numbers on Colorado’s No Call List must be removed from insurers’ telemarketing lists at least once every 30 days.

Colorado Fraud Statute Every licensed insurer doing business in Colorado must prepare, implement, and maintain an insurance anti-fraud plan outlining specific procedures to:

� Prevent, detect, and investigate fraud � Educate employees about fraud detection and the company’s anti-fraud plan � Provide for hiring or contracting fraud investigator(s) � Report fraud to law enforcement and regulatory entities

Each insurer must state, on all applications, policies, and claim forms, that it is illegal to knowingly make a material misstatement or material omission in order to commit fraud. Penalties can include imprisonment, fines, denial of coverage, and civil damages.

Each insurer or person obtaining a judgment or settlement against a licensed insurance professional who is compensated from claim proceeds must notify the appropriate Colorado state licensing board of the judgment or settlement. Likewise, each person obtaining a judgment or settlement against an insurer can notify the Colorado Division of Insurance of the judgment or settlement.

Retention Question 23Who is required to prepare, implement, and maintain an insurance anti-fraud plan when transacting insurance in Colorado? a. Every licensed producerb. Every licensed third party administratorc. Every licensed insurerd. Every licensed managing general agent

Rate Regulations Colorado laws relating to rate regulations were designed to protect the public in order to:

� Prohibit price-fixing agreements and other anti-competitive behavior by insurers � Promote price competition among insurers � Improve the availability and reliability of insurance � Provide rates that are responsive to competitive market conditions



Rates cannot be excessive, inadequate, or unfairly discriminatory.

� Rates are excessive when profit is unreasonably high for the insurance provided, and expenses are unreasonably high in relation to services rendered.

� Rates are inadequate when they’re insufficient to sustain projected losses and expenses, and when continued, are likely to create a monopoly in the market.

� Rates are unfairly discriminatory when the difference between one carrier’s rates and those of the competition fail to reflect fairly the differences in expected losses and expenses. Past and prospective loss experience is considered when setting rates. An insurer is allowed a reasonable margin for profit.

Rate regulations apply to all kinds of insurance EXCEPT reinsurance (other than joint reinsurance), life insurance and annuities, sickness and accident insurance, nonprofit hospital and health services, Health Maintenance Organizations and surplus lines insurance.

The kinds of insurance that are regulated coverages are separated into two types:

� Type I coverages are regulated by prior filing and approval with the Division of Insurance and include Workers’ Compensation, Employer’s Liability (if filed by a rating organization), assigned risk motor vehicle insurance, and any other insurance classified as Type I by the Commissioner.

� Type II coverages are regulated by open competition and include all other types of property and casualty insurance, such as fire (property), casualty (liability), inland marine, title, medical malpractice, credit, Workers’ Compensation and Employer’s Liability filed by insurers, and any other kind of insurance not considered Type I.

Type II policy forms are not filed with the Commissioner and do not need prior approval for forms, rates, schedules of rates, rating plans, classifications, rules, or manuals. Rates may be filed and used immediately.

Rate Considerations � Past and prospective loss and expense experience � Catastrophe hazards and contingencies � Events or trends � Charges included to level premium rates over time � Dividends or savings to be allowed or returned by insurers

Prohibited Changes in Rates or CoveragesAn insurer is not permitted to increase premiums or decrease coverage under a property or casualty policy during the policy period if the insured has prepaid the premium. Exceptions exist for material misrepresentation or a change in risk caused by the insured.

This provision does not prohibit cancellation within the first 60 days.

Retention Question 24Which of the following types of coverage is considered Type I Coverage? a. Titleb. Firec. Assigned Risk Autod. Inland Marine



Retention Question 25Which of the following is incorrect with regard to insurance rates in Colorado? a. Rates must not be excessive, inadequate, or unfairly discriminatoryb. Considering past and prospective loss experience when setting rates is unfairly

discriminatoryc. Workers’ Compensation and assigned risk auto are regulated by prior filing and

approvald. Type II coverages are regulated by open competition, meaning that prior approval is

not required

Retention Question 26Which of the following is a reason an insured can increase a property or casualty policy’s premium or decrease its coverage during a policy period? a. Material misrepresentationb. A change of the insured’s namec. A change of the insured’s occupationd. The insured prepaid the premium

Summary Disclosure FormInsurers must file with the Division a Summary Disclosure Form for personal lines coverage, dwelling, fire, homeowners, or auto coverage, and producers must provide the appropriate Summary Disclosure Form to:

� Applicants at initial purchase of coverage � Insureds at policy renewal � Homeowners policyowners at least annually

The form must state in boldface letters that its contents don’t replace any policy provisions and that the policyholder should read the policy for complete details of terms and coverage. It must contain the policy’s major coverages, exclusions, cancellation and nonrenewal provisions, and the general factors considered when increasing premiums.

The following rules apply to personal auto policies:

� An insurer or producer must: □ Provide the form at the time of initial purchase, annually for homeowners policies, and

at renewal through hand delivery or electronic means via the company’s website, email, or fax, or within 48 hours of purchase if doing so by mail

□ Have an insured’s express consent to add optional and/or enhanced coverage that increases the premium, other than medical payments or uninsured or underinsured motorist coverage

□ Keep on file for a minimum of 3 years evidence of the consent of the insureds □ Specify, in a file or document containing consent to add optional and enhanced

coverage, whether optional or enhanced coverage generating a premium increase was initiated by the insured, or recommended by the producer, or insurer

� An insurer must clearly explain to the insured the products and coverage amount purchased and how being at fault in a car accident affects whether coverage applies



� The following medical payments coverage must be explained in the form: □ $5,000 medical payments coverage must be provided by all policies unless an insured

rejects coverage in writing □ Rejection of coverage can be contained on the application □ Insurer can offer higher limits

It is an unfair trade practice to violate any law regulating a Summary Disclosure Form. If a coverage dispute arises after policy issue, failure of an insurer or producer to provide a Summary Disclosure Form will result in the presumption that the form was not initially provided.

Retention Question 27All of the following apply to a Summary Disclosure form, except: a. Each insurer must file a Summary Disclosure Form for dwelling, fire, homeowners

or auto coverage with the Divisionb. The producer must provide the form within 30 days of purchase if doing so by mailc. Producers and insurers must have an insured’s express consent to add optional or

enhanced coverage, other than UM/UIM or medical payments, that increases the premium

d. Specify who initiated optional coverage, and keep the consumer consent on file for at least 3 years

Commercial Policy Requirements Cancellation To cancel a policy insuring commercial exposures that has been in force for 60 or more days, an insurer must provide the named insured with at least 10 days advance written notice if cancelling for nonpayment of premium. For all other reasons, 45 days advance written notice by 1st class mail to the last known address must be provided.

A commercial policy can only be cancelled for one or more of the following reasons:

� Nonpayment of premium � A willful material misstatement on the application by the insured � Any substantial change in the exposure or risk as of the policy’s effective date that was not

included on the original application, unless the insured notifies the insurer of the change and the insurer accepts the change

If the insurer fails to provide the renewal terms and invoice at least 45 days prior to the expiration date of the policy, the insurer shows an indication of willingness to renew.

Nonrenewal To nonrenew a policy covering commercial exposures once the policy has been in effect for 60 or more days, the insurer must give the named insured at least 45 days advance written notice (90 days for medical malpractice insurance). If the insurer fails to provide notice of nonrenewal at least 45 days prior to the expiration date, the insurer must renew the policy for an identical policy period at the same terms, conditions, and premium as the existing policy.

Premium Increase, Benefit Decrease To increase premiums or decrease benefits when renewing a policy covering commercial exposures, an insurer must provide the named insured with at least 45 days advance written notice stating the reason for such action, renewal terms, and premium due.



This notice requirement does not apply to exempt commercial policyholders.

A notice of a decrease in benefits during the policy’s term is valid only if the notice states the reason and is based on one or more valid reasons for doing so, as previously stated (nonpayment of premium, material misstatement on the application, or substantial change in risk).

These regulations do not apply to surplus lines or personal lines insurance.

Commercial Entities Hiring Risk Managers Insurers negotiating with commercial entities and covering them with Type II insurance are exempt from rate filing and form certification requirements if such entities hire their own risk managers. Such an entity is referred to as an exempt commercial policyholder, and must meet the definition as determined by the Commissioner. The definition of an exempt commercial policyholder will be reviewed periodically by the Commissioner with the recommendation of risk-management professionals.

If an exempt commercial policyholder operates in more than one state, the policy may include provisions to determine disputes arising from claim handling and procedures, cancellation of the policy, or nonrenewal of the policy. The state with the largest percentage of premiums charged under the policy will govern these disputes.

Retention Question 28What is the minimum advance written notice an insurer must provide to a policyholder before cancelling a commercial property or casualty policy for nonpayment of premium? a. 10 daysb. 15 daysc. 30 daysd. 45 days

Retention Question 29The insurer must give the named insured at least _____ days’ notice to nonrenew a commercial policy that has been in effect 60 days or more. a. 30b. 45c. 55d. 60

Retention Question 30If the insurer is unilaterally increasing premiums or decreasing benefits at the renewal of a commercial policy, the named insured must be notified _____ days before the renewal. a. 30b. 45c. 55d. 60



Use of Credit Information These definitions only apply to property and casualty insurance used in personal lines.

� Adverse Action – Any of the following actions taken by an insurer with respect to existing insurance or insurance that has been applied for: denial, cancellation, premium increase, or any unfavorable change in coverage or amount.

� Consumer – An insured whose credit information is used in the process of underwriting or rating insurance.

� Credit Report – A consumer reporting agency’s communication of information about a consumer’s creditworthiness, credit standing, or credit capacity that is or can be used to determine premiums, eligibility for coverage, or tier placement.

� Insurance Score – A number or rating derived from a mathematical process based on credit information in order to predict the future loss exposure of an applicant or insured.

If an insurer uses credit information in its underwriting or rating processes, it must disclose to the consumer, in writing at the time of application for insurance, of its intention to obtain credit information. An insurer offering personal property and casualty insurance cannot:

� Use an insurance score based on the consumer’s income, gender, address, postal zip code, ethnic group, religion, marital status, or nationality

� Deny, cancel, or fail to renew a policy of personal lines property and casualty insurance based on credit information, without consideration of any other applicable underwriting factor that is independent of credit information

� Establish a policy’s renewal premiums based on credit information without consideration of any other applicable underwriting factor that is independent of credit information

� Take adverse action against a consumer because he/she does not have a credit card, without consideration of any applicable underwriting factor that is independent of credit information

� Use the absence of credit information, or the inability to calculate an insurance score when underwriting or rating insurance, unless the insurer:

□ Treats the consumer in a manner otherwise approved by the Commissioner, if the insurer presents information that the absence or inability relates to the risk for the insurer

□ Treats the risk as credit-neutral as defined by the insurer, or □ Excludes the use credit as a component of the underwriting or rating processes

� Take adverse action against a consumer based on information contained in a credit report that was more than 90 days old on the date the policy was first written or renewed

� Use credit information more than 36 months old, unless the insurer has obtained current information for the consumer, recalculates the insurance score, and obtains an updated credit report, at least every 3 years

� Use the following as a negative factor in an insurance score or credit information to underwrite or rate a policy:

□ Credit inquiries not initiated by the consumer □ Credit inquiries for the consumer’s own records □ Inquiries relating to insurance □ Medical accounts in collection □ Multiple lender inquiries made by the auto or home lending industries within the same

30-day period, unless only 1 is considered □ A verified case of identity theft □ Credit information adversely affected by divorce or the credit information of a former

spouse



At the consumer’s request, an insurer must re-underwrite or re-rate a policy at its annual renewal, based on the consumer’s insurance score and an updated credit report. An insured can request a credit report be pulled no more frequently than every 12 months. The insurer can recalculate rates more often than every 12 months.

If an insurer uses credit information in underwriting or rating a consumer, the insurer or producer must disclose in writing at the time of application that the insurer can obtain credit information in connection with the application. The disclosure must communicate the following:

“In connection with this application for insurance, we may review your credit report or obtain or use a credit-based insurance score based on the information contained in that credit report. We may use a third party in connection with the development of your insurance score.”

An insurer taking an adverse action based on credit information must notify the consumer of the action and the specific reason for the action. The notification must include a description of up to four factors that were the primary influences of the adverse action. The use of generalized terms such as “poor credit history”, “poor credit rating”, or “poor insurance score” does not meet the explanation requirements.

Retention Question 31The following definitions apply to the use of credit information in personal lines insurance, except: a. Adverse Actionb. Credit Reportc. Insurance Scored. Title Element

Retention Question 32When using credit information, an insurer offering personal property and casualty insurance can not: a. Use an insurance score based on the consumer’s age, driving record, vehicle use,

annual mileage, territory, and liability limits selectedb. Consider an absence of credit information or the inability to calculate an insurance

score when underwriting or rating insurancec. Decline a policy based solely on credit informationd. Use a credit report or insurance score obtained within 90 days of a policy’s issue or

renewal date



15.2 Property Laws

Fraudulent Claims and Arson Information Reporting Act A fraudulent insurance act is committed if a person, knowingly and with intent to defraud, presents any written statement containing false material information or concealing material information in a policy application or claim.

When an insurer suspects arson in connection with a fire loss, it must notify an authorized investigative agency within 60 days after its investigation is complete or a judgment or settlement is received. An authorized agency includes the fire department, Colorado Bureau of Investigation (including the Attorney General), a District Attorney, and the Division of Insurance. Any authorized agency or insurer that receives any information about suspected fraud must hold the information in confidence until its release is required for a civil or criminal proceeding. Any person violating this Act commits a class 2 misdemeanor, which is punishable by imprisonment and/or fines.

Authorized agencies may require in writing for the insurer to produce relevant information related to the loss:

� The insured’s claim history and/or premium payment history � Insurance policy information pertaining to a fire loss of other claim information under

investigation � Other material related to the loss, including statements of any person who may have

information about the loss

Every person (except the person committing the act), insurer, and authorized agency is immune from civil liability when complying with a court order, testifying or cooperating with, furnishing evidence, or providing information to any of the following with regard to an actual or suspected fraudulent insurance act:

� Any agency of the federal, state, county, or municipal government � Any employee or agent of an agency � Another insurer, solely for the purpose of detecting, investigating, preventing, or prosecuting

an actual or suspected fraudulent insurance act

Retention Question 33The Fraudulent Claims and Arson Information Reporting Act requires all the following, except: a. When an insurer suspects arson in connection with a fire loss, it must notify the

local fire department or other investigation bureaub. Any person violating this Act commits a Class 2 misdemeanorc. No person or insurer is immune from civil liability when acting in good faith to

comply with a court order or furnish evidence to an agency of the federal, state, county, or municipal government

d. An insurer may be required to produce an insured’s claim or payment history, or any proof of loss the insured submitted



Insurance and Loans Secured by Real Property A lender cannot require a borrower under a loan secured by real property to provide hazard insurance coverage on that property in an amount exceeding the replacement value of the property, including its improvements. Any person harmed by a violation of this rule is entitled to obtain court-ordered relief and can recover damages, reasonable attorney fees, and costs. A violation does not affect the validity of the loan, the mortgage, or the deed of trust.

Retention Question 34Which of the following is true regarding insurance and loans secured by real property? a. A lender cannot require a borrower to provide hazard insurance on the property for

more than the replacement cost of the propertyb. A lender can require a borrower to provide hazard insurance coverage on the

property in an amount exceeding the replacement cost of the propertyc. A person harmed by a violation of this rule can recover damages, but not attorney

fees and costsd. Lenders cannot require borrowers to provide hazard insurance on property secured

by a loan

Homeowners Cancellation and Nonrenewal An insurer offering homeowners insurance cannot cancel or refuse to renew a policy without 30 days’ advance written notice by 1st class mail stating the reason for the cancellation or nonrenewal.

If the cancellation is for nonpayment of premium, the insurer must give 10 days’ advance written notice.

Availability of Fire InsuranceAn insurer cannot refuse to issue a fire policy for property in a federally designated disaster area prone to wildfire that is based on zip code, county, or distance from any wildfire UNLESS the property is located within an immediately threatened area.

Immediate Threatened Area – An area located within a federally designated disaster area because of wildfires, based on zip code, county location, or distance from wildfire. Absent of a written determination published by a government official, the area is under lawful order to evacuate or a pre-evacuation order.

The insurer cannot refuse to renew a fire policy for such property located in an immediately threatened area for any reason that is related to existing wildfires.

However, an insurer can require a property owner to take reasonable actions to reduce the risk of fire as a condition for renewal. Reasonable actions include:

� Requiring the policyowner to provide a defensible space around the structure � Requiring the property owner to clean out debris and leaves from gutters, downspouts, under

decks and porches � Adding or enhancing fire suppression systems



Retention Question 35An insurer can refuse to issue a fire policy for property in a federally designated disaster area prone to wildfire based on what condition? a. Droughtb. Zip codec. The property is located in an immediately threatened aread. The property is located in potentially threatened area

15.3 Casualty Laws

Policies Issued to Construction ProfessionalsA provision in a liability insurance policy issued to a construction professional that excludes or limits coverage for bodily injury, property damage, advertising injury, or personal injury occurring before the policy’s inception date is void in regard to any injury or damage that was unknown to the insured before the policy became effective.

In regard to liability insurance policies issued to construction professionals, the policy of Colorado favors a broad interpretation of insurance coverage and of the insurer’s duty to defend the insured. Upon a finding of ambiguity in an insurance policy, a court may consider a construction professional’s objective, reasonable expectations in the interpretation of an insurance policy issued to a construction professional.

Workers’ Compensation Who Must Be Covered In Colorado, Workers’ Compensation is mandatory in the private sector for employers of 1 or more employees. An employee is defined as any individual who performs services under a contract of hire, expressed or implied (written or verbal).

An individual that is free from control and direction in the performance of the service and is engaged in an independent trade, occupation, profession, or business (an independent contractor) is NOT considered an employee. To prove independence, it must be shown that the person for whom services are performed does not:

� Require the individual to work exclusively for the person for whom services are performed � Establish a quality of standard for the individual � Pay a salary instead of a fixed or contract rate � Terminate the work during the contract period unless the provider violates the terms of the

contract or fails to produce a result that meets the specifications of the contract � Provide more than minimal training, tools, or benefits for the individual (materials and

equipment may be supplied) � Dictate the time of performance, except for a completion schedule and mutually agreeable

work hours � Pay the service provider personally instead of making checks payable to the trade or business

name � Combine the business operations of the service provider with the person for whom services

are being provided



The definition of employee is not based on an individual’s status as an alien, minor, or being lawfully employed. Performing services exclusively or primarily for an individual/business is not conclusive evidence that an individual is an employee.

Workers’ Compensation coverage is optional for a working general partner or sole proprietor in their own business. These individuals may be included by an endorsement to be added as employees, however coverage must be provided for their employees. An executive officer of a corporation or a member of a limited liability company can elect or reject Workers’ Compensation coverage.

The following are EXCLUDED from the definition of an employee (and are not covered):

� A licensed real estate sales agent or broker, if paid commission, are considered an independent contractor, and are not treated as an employee for federal income tax purposes

� A person confined to a city or county jail or any department of corrections facility as an inmate who is working or participating in training, rehabilitation, or work release program

� A person who volunteers time or services for a ski area operator as long as they receive noncash renumeration and receive written notice that the volunteering does not constitute employment

� A person working as a driver under a lease agreement with a common carrier or contract carrier

� A person who provides host home services under the Home and Community-based Services for Persons with Developmental Disabilities Act and has a contract with a designated community-centered board

An eligible employer must provide coverage as required for all employees. An employer is defined as:

� The state and its districts, public institutions, and administrative boards � Every person, association, firm, and private corporation engaging 1 or more persons in the

same business or employment

The Workers’ Compensation Act of Colorado was not intended to apply to the following:

� Charitable, fraternal, religious, or social employers who are elected or serve in an advisory capacity and receive an annual salary of less than $750

� Employers of casual farm and ranch laborers, or persons who, at a place of business or domestically, do casual maintenance, repair, remodeling, yard, lawn, or shrub trimming as long as wages do not exceed $2,000 per calendar year. This exemption does not apply to full-time domestic persons working for 40 hours per week or 5 days or more per week.

� Persons or entities that only hire incidental casual laborers or part-time domestics (individuals who work fewer than 40 hours per week and fewer than 5 days per week)

� An employer providing a student internship sponsored by an education institution for the purpose of providing on-the-job training WITHOUT pay is excluded, and coverage will be provided by the educational institution

Retention Question 36Workers’ Compensation coverage is mandatory in the private sector for employers with at least: a. 1 or more employeesb. 10 or more employeesc. 20 or more employeesd. 50 or more employees



Retention Question 37The following are employers who must offer Workers’ Compensation, except: a. A state’s Department of Transportationb. Every person, association firm, and private corporation engaging 1 or more persons

in the same business or employmentc. Charitable, fraternal, religious, or social employers who are elected or serve in an

advisory capacity and receive an annual salary of less than $750d. A school district

Sources of Coverages Employers must secure compensation for their employees in 1 or more of the following ways:

� By insuring and maintaining coverage for the payment of compensation in the Pinnacol Assurance fund (State of Colorado Workers’ Compensation fund)

� By insuring and maintaining coverage for the payment of compensation with any stock or mutual insurer authorized to sell Workers’ Compensation insurance in this state

� By obtaining a self-insurance Certificate of Authority from the Commissioner of insurance

A public entity that has an annual payroll of less than $1 million is not eligible for self-insurance, unless it is part of a public entity pool with an annual payroll of at least $1 million.

Employers cannot require employees to pay for all or any part of the cost of Workers’ Compensation insurance.

Retention Question 38Employers may secure compensation for employees in all of the following ways, except:a. By requiring employees to obtain their own coverageb. By obtaining and maintaining coverage for payment of compensation with the

Pinnacle Assurance state fundc. By obtaining a self-insurance Certificate of Authority from the Commissioner if over

$1 million in annual payrolld. By obtaining and maintaining coverage through an authorized stock or mutual insurer

Benefits In Colorado, every employer must furnish applicable medical (unlimited), dental, hospital, surgical, disability and death benefits based on covered losses.

Disability BenefitsDisability income compensation is computed based on the average weekly wage of the injured employee at the time of disability (the date of the accident). Benefits are payable at least once every 2 weeks.

For an employee to receive disability benefits payable as wages, the disability period must exceed 3 days from when the employee leaves work as a result of the injury. If the disability lasts longer than 2 weeks (14 days), disability benefits are retroactive to the day the injured employee left work.



Temporary Partial DisabilityIn the case of temporary partial disability, the employee will receive 66 2/3% of the difference between the employee’s average weekly wage at the time of injury and the weekly wage earned during the continuance of the temporary partial disability, not to exceed 91% of the state average weekly wage. Benefits will continue until the employee reaches maximum medical improvement or an attending physician releases the employee to return to work to modified employment.

Permanent Total DisabilityIn the case of permanent total disability, the employee will receive 66 2/3% of the average weekly wages of the injured employee (not to exceed 91% of the state average weekly wage) and will continue until the death of the injured employee.

Death BenefitsDependents of a deceased worker are entitled to receive 66 2/3% of the deceased employee’s average weekly wage (based on minimum and maximum requirements).

If there are no dependents, compensation will be limited to the expenses provided for medical, hospital and funeral expense of the deceased. Reasonable funeral and burial expenses of an amount not to exceed $7,000 must be paid in a lump sum within 30 days after death.

Reduction in BenefitsIf it is determined that periodic death benefits granted by Social Security, Workers’ Compensation of another state or the federal government are payable to an employee and the employee’s dependents, the aggregate death benefits may be reduced by up to 50%.

Permanent total and temporary disability benefits may also be reduced when an employee is eligible for employer - paid retirement benefits or unemployment compensation benefits.

Retention Question 39All the following are true about Colorado Workers’ Compensation benefits, except: a. For an employee to receive disability benefits payable as wages, the disability

period must exceed 3 daysb. If a disability period exceeds 2 weeks, benefits are retroactivec. Disability benefits may be reduced up to 50% due to Social Security benefitsd. Benefits are 60% of the employee’s average weekly wages, but cannot exceed 91%

of the state’s average weekly wage

Retention Question 40Each of the following are true about Colorado Workers’ Compensation death benefits, except: a. Funeral expenses are limited to $7,000 and must be paid in a lump sum within 30

days of deathb. Death benefits are 66 2/3% of the employee’s average weekly wagec. These benefits cannot ever be reducedd. If the employee has no dependents, death benefits are limited to medical, hospital,

and funeral expenses



Claims Procedures An employee must notify the employer in writing within 4 working days of the injury. Failure to notify the employer may result in the employee losing up to one day’s compensation for each day’s failure to report.

An employer must notify the Division and the insurer within 10 days after an injury that qualifies for compensation and benefits. If an incident involves injury to 3 or more employees, notice must be provided immediately. To receive compensation, an employee or dependents must file a claim within 2 years after the employer notifies the Division, or within 3 years if providing a reasonable excuse for failing to file a claim within 2 years.

ExceptionA claim must be filed within 5 years for disability or death resulting from exposure to radioactive materials.

Retention Question 41In Colorado, an employer must notify the Division and the insurer after an injury that qualifies for compensation and benefits: a. Within 5 daysb. Within 10 daysc. Within 30 daysd. Immediately

Retention Question 42After an incident involving injury to 3 employees, an employer must notify the Division and the insurer: a. Within 5 daysb. Within 10 daysc. Within 30 daysd. Immediately

Automobile InsuranceCancellation

GroundsAn auto policy that has been in force for at least 60 days can only be cancelled for one or more of the following reasons:

� Nonpayment of premium � The driver’s license or motor vehicle registration of either the named insured or any

operator either residing in the insured’s household or who customarily operates an automobile insured under the policy has been suspended or revoked during the policy period or, if the policy is a renewal, during the policy period or the 180 days immediately preceding its effective date.

� The applicant knowingly made a false statement on the application � An insured knowingly and willfully made a false material statement on a claim under the

policy



A Notice of Cancellation must be mailed or delivered by the insurer to the named insured at least 30 days prior to the effective cancellation date. If cancelling for nonpayment of premium, at least 10 days’ notice must be provided or a notice that the policy will be cancelled if timely payment of premium is not made. Upon written request of the named insured, the reason for the cancellation must be mailed or delivered not less than 15 days prior to the cancellation.

NonrenewalAn insurer authorized to transact business in this state cannot refuse to write or refuse to renew a policy of insurance affording the coverage required solely based on these prohibited reasons:

� Because of the insured’s age, race, gender, national origin, residence, marital status, or lawful occupation, including military service

� Because another insurer has cancelled a policy or refused to write or renew a policy

An insurer cannot refuse to renew a policy unless the intention to nonrenew has been mailed or delivered to the named insured at the address shown in the policy at least 30 days prior to nonrenewal. This requirement does not apply in cases of nonpayment, the insured fails to pay any required advance premium, or if the insurer has demonstrated its willingness to renew.

If the insurer refuses to renew, the insured may, by written request, demand written notification of the reason for the nonrenewal. The reasons for nonrenewal must be provided within 20 days of such request.

Refusal, Cancellation and NonrenewalAn insurer cannot cancel, nonrenew, or increase the premium of an insurance policy on a motor vehicle used by any resident of the household solely because of convictions for traffic violations that resulted in less than 7 points being assessed resulting from the use of the auto while in the course of employment while driving an auto used primarily as a public or livery conveyance or licensed as a commercial vehicle.

This does not limit or restrict an insurer from cancelling, refusing to renew, increasing the premium or reclassifying an INSURED for traffic violations while using a motor vehicle for commercial purposes

An insurer cannot add a surcharge to the policy premium of an insured or family member living in the same household that results in excessive or unfairly discriminatory premiums.

An insurer cannot cancel, fail to renew, refuse to write, reclassify an insured, reduce coverage or increase premiums for any complying policy because the applicant, insured, permissive user, or any resident of the household of the applicant or insured:

� Had an accident(s) for which the covered driver is not at fault � Had a driver’s license suspended due to failure to pay child support or been denied a

license � Solely had a conviction or denial of auto registration for failure to have mandatory auto

insurance or denied a registration for failure to have such insurance � Solely had no prior insurance, based on the identity of the applicant’s prior insurer, or

based on the prior type of coverage, including assigned risk or residual market coverage unless actuarial justification filed with the Commissioner demonstrates an increase in risk

� Solely had no prior insurance if it was not required by another state � Failed to maintain coverage during a period in which the person was deployed or called

to active duty in the military � Solely because of the claim or driving record of ONE OR MORE, but fewer than all,

persons residing in the household of the named insured



These provisions do not apply to policies in force for less than 60 days, cancellation due to nonpayment of premium, increase in premium for coverage as part of a general increase as filed with the Commissioner and does not reclassify the insured, or reduction in coverage as part of a general reduction as filed with the Commissioner.

An insurer intending to take action must send written notice by U.S. mail 30 days before the effective date of the intended action. The notice must state in clear and specific terms:

� The proposed action to be taken, including the amount of any increase in premium or extent of reduction in coverage

� The proposed effective date of the action � The actual reason(s) for the action that are clear and specific so that a person of average

intelligence can identify the basis for the decision � The right of the insured to replace the auto coverage through an assigned risk plan � The right of the insured to file a complaint with the Division of Insurance regarding the

action intended to be taken

Retention Question 43After being in force for 60 days, an auto policy may be cancelled for any of the following reasons, except: a. Nonpayment of premiumb. The applicant knowingly made a misstatement on the applicationc. Revocation of the driver’s license or auto registration of an insured during the policy

periodd. An accident for which the covered driver is not at fault

Retention Question 44Notice requirements for Colorado auto insurance do not include which of the following? a. 30 days’ advance written notice to cancel a policyb. 30 days’ advance written notice to non-renew a policy, if the reason is givenc. 20 days’ advance written notice to non-renew a policy, if the reason is givend. 10 days’ advance written notice if cancelling a policy for nonpayment of premium

Exclusion of Named DriverIn lieu of cancellation, refusal to renew, or increase in premium, the insurer must offer to exclude any person in a household by name if a person’s driving record and claim experience would justify the refusal to write a policy if such person were applying individually and not part of a household.

The premiums charged on any policy excluding a named driver will not reflect the claims experience or driving record of the excluded named driver.

The insurer will not be liable for damages, losses, or claims arising out of the operation of use of the insured vehicle by the excluded named driver, whether or not the driver had express or implied permission of the person insured. There is no coverage under the policy for a named excluded driver.

A written notice must be provided at each policy renewal re-notifying the named insured of the party specifically excluded from coverage. Failure to re-notify the insured removes the exclusion.



Retention Question 45For an auto liability policy, which of the following is true? a. The policy can only cover the named insuredb. The policy can cover the named insured, applicant, and permissive users, but not

any member of the insured’s householdc. The policy can be cancelled due to a poor driving record or claims experience of

any regular driverd. The policy cannot be cancelled for poor driving or claims experience; instead,

the insurer must offer to continue coverage by excluding the person with the poor driving record or claims experience

Uninsured Motorist (UM)/Underinsured Motorist (UIM) Coverages An auto liability policy must provide coverage for insureds for bodily injury (including sickness or disease) including death suffered by a person arising out of the ownership, maintenance, or use of a motor vehicle. Protection is provided for persons legally entitled to recover damages from owners or operators of uninsured motor vehicles. The named insured may reject this coverage in writing. Before the policy is issued or renewed, the insurer must offer the insured the right to obtain uninsured motorist coverage equal to the insured’s bodily injury liability limits. The insurer cannot be required to offer limits higher than the insured’s limits.

An uninsured motor vehicle is a land motor vehicle of an at-fault driver that is not insured or bonded for bodily injury or death at the time of the accident. Uninsured motorist coverage must also include coverage an insured is legally entitled to collect from the owner or driver of an underinsured motor vehicle. An underinsured motor vehicle is a land motor vehicle of an at-fault driver that is insured or bonded for bodily injury or death at the time of the accident, but the limits of liability are less than the insured’s limits for uninsured motorist coverage.

The minimum limits for UM/UIM coverage must be at least $25,000 for bodily injury per person (injured in any 1 accident) and $50,000 for bodily injury per occurrence (the sum of all people injured in any 1 accident. This coverage is in addition to any legal liability and will cover the difference between the amount of legal liability coverage and the amount of damages up to the amount of coverage obtained.

Every policy providing UM/UIM which does not also provide insurance for collision damage must provide coverage for property damage arising out of the operation, maintenance, or use of an uninsured motor vehicle. This coverage is provided at the request of the insured and provides coverage for the actual cash value of the vehicle or the cost to repair or replacement, whichever is less. This coverage may be subject to a deductible. Coverage is not provided for:

� Damage if there is not actual physical contact between the covered motor vehicle and another motor vehicle

� Damages payable under any other property insurance � Loss of use of the motor vehicle

Retention Question 46The minimum limits of liability for uninsured/underinsured motorist coverage for bodily injury are: a. 25/50b. 50/75c. 50/25d. 15/25



Retention Question 47The following statements are true regarding Colorado UM/UIM coverage, except: a. An auto liability policy must cover insureds legally entitled to receive bodily injury

damages from owners or operators of uninsured vehiclesb. The named insured may reject uninsured motorist coverage in writingc. The minimum limits must be at least $25,000 for bodily injury to one person in any one

accident, and $50,000 for bodily injury to two or more persons in any one accidentd. Underinsured motorist coverage must be purchased separately

Financial Responsibility/Required CoveragesEvery owner of a motor vehicle who operates the motor vehicle on the public highways of Colorado must have in full force a complying policy or valid certificate of self-insurance. Basic coverage required for compliance, known as Financial Responsibility, is legal liability coverage for bodily injury or death and property damage, exclusive of interests and costs, from accidents arising out of the ownership, maintenance, or use of a motor vehicle in at least the following amounts:

� $25,000 for bodily injury � $50,000 for bodily injury � $15,000 for property damage per accident

Nothing prohibits the issuance of policies providing coverages more extensive than the minimum coverages (25/50/15). All insurers must offer collision coverage for damage to insured motor vehicles subject to deductibles of $100 and $250, in addition to other reasonable deductibles that may be offered. Collision coverage is provided without fault against property damage to the insured motor vehicle with another motor vehicle caused by physical contact with another object or upset of the insured motor vehicle.

When an accident occurs, an owner or operator of a motor vehicle must present to the requesting law enforcement officer immediate evidence of a complying policy or certificate of self-insurance. Proof may be provided by presenting a copy of the policy, or a card issued to the insured as evidence that a complying policy is in full force in either paper or electronic format. An electronic image on a cell phone or other portable electronic device is acceptable. Failure to have a complying policy is a class 1 misdemeanor traffic offense.

An accident report must be filed if a traffic accident causes property damage in excess of $1,000, involves injury or death of any person, or one of the participants cannot show proof of financial responsibility (evidence of insurance). Failure to file an accident report when required may result in suspension of a license.

An operator or owner named in an accident report that is required to be filed with the Director of the Department of Revenue is required to file:

� Security in an amount specified based on the accident report (not to exceed $35,000) will be sufficient to satisfy any judgments for damages and may be recovered against the operator or owner.

� Proof of financial responsibility for the future (evidence of insurance) is proof of the owner/operator’s ability to respond to damages for liability in the minimum amounts required to be carried (25/50/15). Proof may be made by either filing form “SR-22”, filing a policy issued by an authorized insurer, or filing a self-insured bond issued by an authorized surety company or satisfactory evidence of a savings account, deposit, or certificate of deposit.

Within 15 days of receipt of the accident form, the Director will inform the owner or operator of the requirements to comply and that the license (or operating privilege, if a nonresident) will be suspended if the owner/operator fails to comply with such requirement.



Within 60 days after receipt of the accident report, the Director must send written notice of the requirement of filing security and proof of responsibility for the future to each owner/operator by first class mail at the last known address.

Suspension of a driver’s license will be in effect within 20 days after the mailing of the notice by the Director unless the requirements are either not applicable or the requirements of filing are met.

If the security is a contract between the claimant and the operator or owner:

� Any obligor in default must be notified and allowed at least 10 days after the notice is mailed to correct a default.

� The Director will suspend the obligor’s license if the Director receives an affidavit from the creditor that the obligor has defaulted on the security, been notified of the default, and failed to correct the default within 15 days after the date the notice is mailed.

Retention Question 48What are the minimum limits of liability per Colorado financial responsibility laws? a. 25/50/100b. 50/25/10c. 25/50/15d. 25/50/20

Medical Payments Coverage Auto policies providing liability coverage for bodily injury must also provide at least $5,000 of medical payments coverage. Every insurer issuing personal auto policies that include medical payments coverage must disclose that such coverage:

� Pays for bodily injury, regardless of fault, up to the policy limits the insured has chosen � Is primary to any health coverage available, and payments under such coverage apply to any

coinsurance or deductible the person’s health coverage may require � Is required by law to cover medical expenses of an at-fault insured

The insurer must, for 3 years, keep a copy of the insured’s consent to any increase in coverage and premium unless the increase is required by law or made at policy renewal.

A policy can only be issued without medical payments coverage if the named insured rejects medical payments coverage in writing. The insurer must maintain proof that a named insured rejected medical payments coverage for at least 3 years after the date of the rejection. If the insurer fails to offer medical payments coverage, or fails to maintain or provide proof that the named insured rejected medical payments coverage, the insured’s policy will be required to provide medical payments coverage with benefits of $5,000.

If an insured selects limits for medical payments coverage or exercises the option not to purchase the coverage, the insurer is not required to notify any policyholder in any renewal or replacement policy of the availability of medical payments coverage. However, the insured can, at any time, make a request for additional coverage or coverage more extensive than that provided on a prior policy.



Retention Question 49The following statements are true about medical payments coverage in Colorado, except:a. Auto policies providing medical benefits must provide at least $5,000 per person in

such benefitsb. Medical payments coverage pays for bodily injury, regardless of fault, up to the

policy limitc. Medical payments coverage is primary to any available health coveraged. Medical payments coverage will cover the medical expenses of passengers, but not

those of an at fault insured

Transportation Network CompanyTransportation Network Companies provide prearranged transportation services for compensation using a digital network to connect a passenger with a driver using a personal vehicle (e.g. Uber, Lyft, etc.).

A transportation network company must file with the Public Utilities Commission evidence that the company or its driver has primary liability insurance coverage for incidents involving the driver during a prearranged ride. Coverage for incidents involving a driver must be in the amount of at least $1 million per occurrence. The insurance policy must provide coverage at all times the driver is engaged in a prearranged ride.

For the period of time when a driver is logged into a transportation network company’s digital network, but is not engaged in a prearranged ride, the following insurance requirements apply:

� A driver or a transportation network company on the driver’s behalf must maintain a primary automobile insurance policy that:

□ Recognizes the driver is a transportation network company driver and covers the driver’s provision of transportation network company services while the driver is logged into the transportation network company’s digital network

□ Meets at least the minimum coverage of at least $50,000 to any one person in any one accident, $100,000 to all persons in any one accident, and for property damage arising out of the use of the motor vehicle to a limit, exclusive of interest and costs, of $30,000 in any one accident

□ Is one of the following: y An insurance rider to, or endorsement of, the driver’s personal automobile insurance

policy required by the Motor Vehicle Financial Responsibility Act y A corporate liability insurance policy purchased by the transportation network

company that provides primary coverage for the period of time in which a driver is logged into the digital network

In a claims coverage investigation, a transportation network company must cooperate with a liability insurer that also insures the driver’s transportation network company vehicle, including the provision of relevant dates and times during which an incident occurred that involved the driver while the driver was logged into a transportation network company’s digital network.

If a transportation network company’s insurer makes a payment for a claim covered under comprehensive coverage or collision coverage, the transportation network company must cause its insurer to issue the payment directly to the business repairing the vehicle or jointly to the owner of the vehicle and the primary lienholder on the covered vehicle.



Colorado Auto Insurance Plan “The Plan” is comprised of all authorized insurers with Certificates of Authority to transact auto insurance in Colorado. The purpose of the plan is for consumers who are in good faith entitled to, but unable to obtain auto insurance through ordinary methods, to obtain coverage through a process of dividing up and distributing risks known as equitable apportionment, to all authorized insurers participating in the Plan. When applications are received, the Plan distributes them equally and fairly among member insurers.

Any applicant, insured, or insurer can appeal any decision of the Plan to the Commissioner. All authorized insurers must subscribe to and participate in the Plan. If an admitted auto insurer does not join the Plan or comply with the rules, the Commissioner will notify the insurer that it must join. Failure to comply within 10 days can result, after a hearing, in the suspension of the insurer’s Certificate of Authority.

Retention Question 50Which of the following is true regarding the Colorado Auto Insurance Plan? a. Auto insurers transacting business in Colorado may be members if they meet certain

capital and surplus requirementsb. Auto insurers transacting business in Colorado are required to be membersc. Auto insurers transacting business in Colorado are not required to be membersd. The Colorado Auto Insurance Plan supplements existing auto insurance for insureds

Bail BondsAn insurance producer who posts a bail bond with the court on behalf of a defendant must ensure that all the required documents comply with state law. Required documents include an indemnity agreement, a promissory note, a collateral receipt, and a bail bond revocation receipt.

An indemnity agreement must:

� Be in writing � Be signed by the producer � Be signed by the defendant and/or an indemnitor (someone who guarantees the performance

of the defendant) � Set forth the amount of bail set in the case, the name of the defendant, the court case number

if available, the court where the bond is executed, the premium charged, the amount and type of collateral held by the insurance producer, and the conditions under which the collateral is returned

� Contain documentation that the indemnitor has received copies of signed and dated disclosure forms

A promissory note must be:

� In writing � Signed by the producer � Signed by the defendant or indemnitor

A collateral receipt must:

� Be dated � Be in writing � Be signed by the producer � Be signed by the defendant or indemnitor



� Be pre-numbered � Contain a full description of the collateral, including the condition of the collateral at the

time it is taken into custody � State the amount of bail set in the case, the name of the defendant released on the bail

bond, the court case number, the court where the bond is executed, the premium charged, the amount and type of collateral held by the insurance producer, and the conditions under which the collateral is returned

A bail bond revocation request must be:

� Dated � In writing � Signed by the producer � Signed by the defendant or indemnitor

Before accepting consideration, payment, or taking collateral, the insurance producer who writes bail bonds must provide a disclosure statement to each defendant and indemnitor detailing the terms of the bail bond.

An insurance producer who posts a bail bond with the court:

� And who accepts consideration for a bail bond, must provide to the person tendering payment a pre-numbered, signed receipt

� Must provide the person tendering payment a signed and dated receipt for each premium payment listing the amount paid

� Must keep copies of each receipt, indemnity agreement, bond, disclosure statement, payment plan, bond revocation request, or other document for 3 years after the date of discharge of a bail bond

An insurance producer must prepare separate agreements and documents for each time the producer posts a bail bond with the court.

Business PracticesAn insurance producer who writes bail bonds may not charge a premium or commission of more than the greater of $50 or 15% of the amount of bail furnished.

Unfair Acts/PracticesThe following are unfair acts/practices:

� Paying a fee or rebate or giving/promising anything of value to a jailer, peace officer, clerk, deputy clerk, an employee of a court, district attorney or district attorney’s employees, or a person who has power to arrest or to hold a person in custody as a result of writing a bail bond

� Failure to post a bail bond within 24 hours after receipt of full payment or a signed contract for payment

□ If the bail bond is not posted within 24 hours after receipt of full payment or a signed contract for payment, failure to refund all moneys received, release all liens, and return all collateral within 7 days after receipt of good funds

� Failure to report or return after receiving payment in full, collateral taken as security on any bail bond to the principal, indemnitor, or depositor of the collateral

� Soliciting bail bond business in or about any place where prisoners are confined, arraigned, or in custody

� Failure to pay a final judgment award for failure to return or repay collateral received to secure a bond



Retention Question 51Which of the following is correct with regard to bail bonds? a. A producer must prepare separate agreements and documents each time the

producer posts a bail bond with the courtb. Each producer who writes bail bonds must submit a biennial report for bail bonds

posted by the producer for the reporting periodc. A producer who writes bail bonds may not charge a premium or a commission of

more than 10% of the amount of the bail furnishedd. Failure to post a bail bond immediately after receipt a signed contract for payment

is an unfair practice

Retention Question 52In order for a promissory note to be a valid bail bond, it must be signed by all of the following, except: a. Producerb. Defendantc. Judged. Indemnitor

Retention Question 53A producer will charge which of the following amounts if the bail is set at $1,000? a. $150b. $75c. $50d. $15

Retention Question 54A producer has how many days to refund all money, release all liens, and return all collateral if a bail bond is not posted within 24 hours after receipt of full payment? a. 10b. 7c. 5d. 14

RETENTION QUESTION ANSWER KEY


1. B The Commissioner is not elected in Colorado, but is appointed by the Governor and confirmed by the state Senate.

2. D The Commissioner also conducts examinations, investigations, and hearings, as well as performs all duties in the best interest of the general public and insurance companies.

3. C In addition to an examination of any insurer as often as the Commissioner deems appropriate, a formal financial examination must be conducted on every insurer every 5 years.

4. B The Commissioner will hold a hearing to determine if a suspected license holder or applicant has violated state insurance law or committed an unfair trade practice. If found guilty, the Commissioner will revoke, suspend, or refuse to issue or renew the license.

5. D If an applicant fails to pass the licensing examination, it can be retaken.

6. D A producer must report any criminal prosecution in any jurisdiction to the Commissioner within 30 days after the final disposition.

7. B Being convicted of a felony, misappropriating funds belonging to someone else, demonstrating a lack of trustworthiness or competence, or committing an unfair trade practice are also grounds for license suspension, non-renewal or revocation.

8. D The Commissioner may assess a civil penalty of no more than $3,000 per violation in addition to or in lieu of license suspension, non-renewal or revocation.

9. A A producer solicits, negotiates, effects, procures, delivers, renews, continues, or binds an insurance policy (including an annuity) for risks residing, located, or to be performed in Colorado, and memberships in a health care plan including prepaid plans.

10. C The prelicensing education requirement is 50 hours of an approved course that includes 3 hours of ethics.

11. D An individual applying for a license must be at least 18 years of age.

12. A A producer is required to register an assumed name before use.

13. C A written record documenting diligent search efforts must be maintained by the producer for at least 3 years from the effective date of coverage and not one year from the effective dates.

14. D A producer can’t receive any type of fee in addition to commissions, for soliciting, procuring, or servicing policies.

15. D A producer can maintain only one combined bank account for all insurers represented by the producer.

16. B A producer must complete 24 credit hours of continuing education every renewal period with at least 3 hours in ethics and 18 hours in the licensed line of business.

17. A The Commissioner must send a Cease and Desist Order by first-class certified mail within 14 days after filing of the action and must be accompanied by a copy of the complaint.

18. C An authorized entity prevents the public from being adequately insured, and every person acting as an adviser, counselor, or analyst or claim adjuster must report every unauthorized policy or contract to the Commissioner.

19. A It is unfair discrimination to deny health insurance coverage solely because the insured casually and nonprofessionally uses a motorcycle, snowmobile, off-highway vehicle, skis, or a snowboard.

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20. C Controlled business is procuring insurance on the life of the producer’s self, spouse, or employer, and is punishable by license nonrenewal.

21. A Offering a premium discount or credit not specified in the policy constitutes rebating.

22. C Promptly acknowledging communications pertinent to a claim is required with respect to claim practices.

23. C Every licensed insurer is required to have an anti-fraud plan in order to prevent, detect, and investigate fraud, educate employees, hire or contract fraud investigators, and report fraud.

24. C Fire, Title, and Inland Marine are Type II coverages.

25. B Considering past and prospective loss experience is an allowable method of setting rates and is not unfairly discriminatory.

26. A An insured can increase a property or casualty policy’s premium or decrease its coverage during a policy period for a material misrepresentation, as well as a change in risk caused by the insured.

27. B A producer must provide the Summary Disclosure form within 48 hours of purchase if doing so by mail and not within 30 days of purchase.

28. A An insurer must provide at least 10 days’ notice to a policyholder in advance of cancelling a commercial property or casualty policy for nonpayment of premium. 45 days’ notice is required if cancelling for reasons other than nonpayment of premium.

29. B If the insurer fails to provide notice of nonrenewal at least 45 days prior to the expiration, the policy is renewed.

30. B To be valid a decrease notice must state the reason, and must be based on one of the reasons for which the policy may be cancelled.

31. D “Title Element” is not a definition that applies to use of credit information for personal property and casualty insurance.

32. C An insurer may not deny, cancel, or nonrenew a personal P&C policy due to credit information only.

33. C All persons and insurers are immune from civil liability when acting in good faith to comply with a court order or furnish evidence relating to an actual or suspected fraudulent act.

34. A A lender may not require a borrower under a loan secured by real property to provide hazard insurance coverage on that property in an amount exceeding the replacement value of the improvements on the property.

35. C An insurer may refuse to issue a fire policy for property in a federally designated disaster area prone to wildfire if the property is in an immediately threatened area.

36. A Employers with one or more employees are required to provide coverage for Workers’ Compensation.

37. C Workers’ Compensation isn’t intended to apply to charity, fraternal, religious, or social advisors who are elected or serve in an advisory capacity and receive an annual salary of less than $750.

38. A Employers cannot require employees to obtain their own insurance and cannot require them to pay any part of the premium.

39. D Benefits are 66 2/3% of the average weekly wage, not 60%.



40. C Workers’ Compensation death benefits can be reduced by 50% based on any other state or Federal Workers’ Compensation death benefits being payable.

41. B An employer must notify the Division and the insurer within 10 days after an injury that qualifies for compensation and benefits.

42. D An employer must notify the Division and the insurer immediately after an incident involving injury to 3 or more employees.

43. D An insurer is not allowed to cancel an auto policy due to the insured being involved in an accident for which he/she is not at fault.

44. C Written notice for cancellation of an auto policy for other than nonpayment of premium must be provided at least 30 days prior to the date of cancellation, not 20 days.

45. D An insurer is only allowed to exclude a person who’s driving or claims experience justifies non-renewal or cancellation, and the insurer may not cancel coverage for the remaining insureds covered under the policy.

46. A The minimum limits of liability for uninsured/underinsured motorist coverage are 25/50 meaning $25,000 for bodily injury to one person in any one accident, $50,000 for bodily injury to two or more people in any one accident.

47. D Uninsured motorist coverage must also include coverage an insured is legally entitled to collect from the owner or driver of an underinsured motor vehicle.

48. C The minimum limits of liability for an auto policy to meet financial responsibility requirements is 25/50/15, meaning $25,000 for bodily injury to any one person per accident, $50,000 for bodily injury to two or more persons per accident, and $15,000 for property damage per accident.

49. D Colorado Medical Payment coverage is required to cover medical expenses for an insured regardless of fault.

50. B All auto insurers transacting business in Colorado are required to be members of the Colorado Auto Insurance Plan that provides insurance for those unable to obtain it in the traditional market.

51. A Producers must submit an annual report for bail bonds and may not charge a premium or a commission of $50 or 15% of the amount of the bail furnished, whichever is greater. Failure to post a bail bond within 24 hours after receipt of full payment or a signed contract for payment is an unfair practice.

52. C A promissory note can be used as a bail bond if it is in writing and signed by the producer and the defendant or indemnitor.

53. A A producer may charge $50 or 15% of the bail amount, whichever is greater; 15% of the bail of $1,000 is $150, which is greater than $50.

54. B. A producer has 7 days to refund all money, release all liens, and return all collateral if a bail bond is not posted within 24 hours after receipt of full payment.

KEY WORD INDEX


15.1 Property and Casualty Laws

Insurance Commissioner 3

A

Automobile Insurance 36Financial Responsibility 40Medical Payments Coverage 41

Availability of Fire Insurance 31

B

Bail Bonds 43Business Practices 44Unfair Acts or Practices 44

C

Cancellation 26, 36Cancellation/Nonrenewal 36Cease and Desist Order 6Claims Procedures 36Coercion 19Colorado Auto Insurance Plan

43Colorado Fraud Statute 23Commercial Policy Require-

ments 26Commercial Entities Hiring Risk

Managers 27Nonrenewal 26Premium Increase, Benefit De-

crease 26Controlled Business 21

D

Defamation 21Disclosure 25Do Not Call List 23

E

Exclusion of Named Driver 38

F

Fiduciary/Commingling 16Fraudulent Claims and Arson

Information Reporting Act 30

H

Hearings 5Homeowners Cancellation and

Nonrenewal 31

I

Insurance and Loans Secured by Real Property 31

Insurance CommissionerExaminations 4License Suspension and Revoca-

tion 6Power and Duties 3

L

License Suspension and Revoca-tion 6

Licensing 12Licensing and Producers’ Legal

Responsibility 9Fiduciary/Commingling 16Payment and Acceptance of Com-

missions/Fees 15Prelicensing Education 10Surplus Lines 14

Licensing Requirements 11

M

Misrepresentation 19

P

Payment and Acceptance of Commissions/Fees 15

Penalties 6Penalty/Penalties 22Persons Required to Be Licensed

9Policies Issued to Construction

Professionals 32Prelicensing and Continuing

Education (CE) 17Prelicensing Education 10Producer 9Prohibited Changes in Rates or

Coverages 24

R

Rate Regulations 23Rebates 21Records and Requests for Infor-

mation 8

S

Summary Disclosure Form 25Surplus Lines 14

T

Transportation Network Com-pany 42

U

Unauthorized Entities 18Unfair Claims Practices 22Unfair Competition and Decep-

tive Practices 19Coercion 19Misrepresentation 19

Unfair Discrimination 20Uninsured/Underinsured Motor-

ist 39Use of Credit Information 28

W

Who Must Be Covered 32Workers’ Compensation 32Workers’ Compensation

Benefits 34Sources of Coverages 34

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