State RegulationsVA specificDifficulty 1/5
A producer circulates a flyer to local businesses asserting that a competing insurer is financially insolvent, knowing the statement is false and made to steer business away from the competitor. Which unfair trade practice is this?
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
Va. Code § 38.2-508 prohibits defaming a person engaged in the insurance business by false and malicious statements about its financial condition or business affairs. A knowingly false insolvency claim circulated to divert business is defamation, and the Virginia Bureau of Insurance can act against the producer and any insurer that sanctioned it. Truth is the defense; knowing falsity is the violation.
Why the other options are wrong
- A) Twisting is inducing the surrender or exchange of an existing policy by misrepresentation; the stem involves no policy replacement.
- B) Rebating is giving something of value outside the contract as an inducement; the false insolvency claim is not a rebate.
- D) A boycott is a collective agreement to withhold business to coerce; a single false flyer is not coordinated group action.
Memory hook
False and malicious about a competitor — that is defamation.