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The Royal insurance arrangement was transacted in Idaho
Falls, Idaho. Schwab was licensed to conduct insurance business
in Wyoming, but not in Idaho. Royal was licensed to do business
in Idaho. Rebating by an insurance agent violates Idaho
insurance law. An insurance company is permitted to rebate part
or all of an insurance premium under the law of Idaho. So long
as petitioner made no misrepresentation in applying for the
insurance with Royal, the rebating aspect, although in violation
of Idaho law insofar as the rebate was made by Schwab, would not
invalidate the insurance coverage between Royal and petitioner.
Royal was aware of the rebating after petitioner's policy had
been applied for and came into force, and, because of its view
that petitioner had done nothing illegal, Royal did not attempt
to cancel the policy or contact petitioner. Royal believed that
only Schwab was involved in illegal activity (rebating). The
rebating by Schwab also violated the terms of the agreement
and/or relationship between Schwab and Royal.
Petitioner was under the mistaken impression that after the
first year of the Royal policy, he would have been entitled to
reduced coverage for the next year at a $3,500 premium. Although
petitioner thought the Royal insurance transaction was unusual,
he was not aware of any illegality or irregularity until after
the policy had been allowed to lapse. Petitioner's Royal policy
was allowed to lapse at the end of the first year, and just prior
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Last modified: May 25, 2011