A lender in Aurora requires every small-business borrower to buy its property insurance through one specific agent chosen by the lender as a condition of the loan. Under C.R.S. § 10-3-1105, this requirement is:

Why B is correct

C.R.S. § 10-3-1105 prohibits coercing a debtor by requiring that insurance be placed with a particular insurer or agent as a condition of a loan. A Colorado borrower has the right to choose among willing insurers; a lender who forces a specific placement violates the coercion-of-debtors prohibition enforced by the Colorado Division of Insurance.

Why the other options are wrong

• A) The lender's insurable interest explains why it may require some insurance, but not why it may dictate the insurer or agent.
• C) The Colorado insurance code forbids, rather than requires, dictating a particular insurer or agent as a loan condition.
• D) A signed consent form does not legalize coercion of a debtor under C.R.S. § 10-3-1105.

Memory hook

Lenders may demand insurance — but never their named insurer.

Why A is correct

C.R.S. § 10-3-1105 protects Colorado debtors: a lender may require insurance as a loan condition but may not require the borrower to obtain it from any particular insurer or agent, may not unreasonably disapprove a policy the borrower selects, and may not impose a separate handling charge for the required coverage.

Why the other options are wrong

• B) Requiring purchase from an affiliated agency is exactly the coercion of debtors that C.R.S. § 10-3-1105 forbids.
• C) Unreasonable disapproval of a policy the borrower selects is prohibited by C.R.S. § 10-3-1105.
• D) A separate handling charge for the required insurance is expressly barred by C.R.S. § 10-3-1105.

Memory hook

Lenders can demand insurance, not your insurance agent.