A Pennsylvania producer tells an applicant that a participating policy's dividends are guaranteed, knowing they are not, and separately states that a rival insurer is financially weak, with no factual basis. Which unfair practices has the producer committed?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Both statements are unfair trade practices. Calling dividends guaranteed when they are not is a false statement about the terms and benefits of the policy under 40 P.S. § 1171.5(a)(1), and falsely disparaging a competitor's financial condition is defamation of an insurer under 40 P.S. § 1171.5(a)(3). The advertising regulations in 31 Pa. Code Ch. 51 likewise require truthful, complete advertising. Pennsylvania law does not require a completed sale or a proven loss: the false statements themselves, made to induce the transaction, are enough for the Pennsylvania Insurance Department to act under 40 P.S. § 1171.5.
Why the other options are wrong
- B) Statements disparaging another insurer's financial condition are expressly actionable as defamation of an insurer when false and maliciously critical.
- C) Statements about a policy's own features, including dividend promises, are the core of the misrepresentation prohibition.
- D) Pennsylvania's unfair trade practices reach false statements made to induce a purchase; the practice is complete without a closed sale or a measurable loss.
Memory hook
Fake dividends plus a fake insult is a two-for-one violation: misrepresentation and defamation.