By: Barrientos S.B. No. 1167 73R4309 CAG-D A BILL TO BE ENTITLED 1-1 AN ACT 1-2 relating to the regulation of public insurance adjusters; providing 1-3 a penalty. 1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-5 SECTION 1. Subchapter A, Chapter 21, Insurance Code, is 1-6 amended by adding Article 21.07-5 to read as follows: 1-7 Art. 21.07-5. PUBLIC INSURANCE ADJUSTERS 1-8 Sec. 1. DEFINITIONS. In this article: 1-9 (1) "Person" means a corporation, partnership, 1-10 individual, or association. 1-11 (2) "Adjustment or settlement of a claim" means 1-12 preparing and presenting factual documentation necessary to 1-13 substantiate values of damages and negotiating with an insurer in 1-14 behalf of the insured in order to accurately establish the amount 1-15 of damage, the cause of the damage, or the extent of a loss covered 1-16 by an insurance policy, including: 1-17 (A) negotiating with an insurer to determine: 1-18 (i) the proximate cause of the loss and 1-19 its relationship to the policy; 1-20 (ii) the method of repair and the per unit 1-21 cost of repair to or replacement of a structure or real or personal 1-22 property; and 1-23 (iii) the assessment of earnings loss; 1-24 (B) advising an insured in areas relevant to the 2-1 policy of insurance, its coverage, limitations, and conditions, the 2-2 appraisal process, and Article 21.55 of this code; and 2-3 (C) advising an insured to seek the services of 2-4 an attorney whenever the public adjuster believes that the need for 2-5 legal assistance is warranted. 2-6 (3) "Public adjuster" means a person who, for 2-7 compensation, represents an insured as an adjuster of first-party 2-8 property insurance claims and acts on the behalf of or aids an 2-9 insured in adjusting or effecting the settlement of a claim or 2-10 claims for loss or damage under a policy of insurance. The term 2-11 does not include: 2-12 (A) an attorney who adjusts insurance losses; 2-13 (B) an individual who only performs clerical or 2-14 technical duties; 2-15 (C) a contractor who submits a scope and cost of 2-16 repairs to an insured without providing any other services 2-17 involving the adjustment or settlement of a claim; 2-18 (D) a person employed for the purpose of 2-19 furnishing technical assistance to a public adjuster, including a 2-20 photographer, engineer, architect, accountant, or attorney; 2-21 (E) a salaried employee of an insurer regularly 2-22 engaged in the adjustment, investigation, or supervision of 2-23 insurance claims on behalf of the insurer; 2-24 (F) a licensed agent or general agent of an 2-25 insurer who processes an undisputed or uncontested claim for an 2-26 insurer under policies issued by the agent or general agent; 2-27 (G) an independent insurance adjuster who is an 3-1 authorized agent of an authorized insurer and who processes 3-2 undisputed or uncontested or disputed claims for the insurer; and 3-3 (H) a person handling claims arising under life, 3-4 accident, and health insurance policies. 3-5 Sec. 2. LICENSE REQUIRED. (a) A person may not act as or 3-6 hold himself out to be a public adjuster or an associate adjuster 3-7 unless the person holds a license issued under this article. 3-8 (b) A license issued under this article is effective for two 3-9 years from the date of issuance. 3-10 Sec. 3. QUALIFICATIONS; BOND REQUIREMENTS. (a) The 3-11 commissioner shall issue a public adjuster license to an applicant 3-12 on determining that an application is complete, that the license 3-13 fee has been paid, and that the applicant meets the requirements 3-14 for a license under this article. 3-15 (b) An applicant for a license must have: 3-16 (1) a reasonable understanding of the provisions, 3-17 terms, and conditions of insurance policies; 3-18 (2) an understanding of the insurance laws of this 3-19 state; and 3-20 (3) a good business reputation. 3-21 (c) An applicant must be of good moral character to act as a 3-22 public adjuster. 3-23 (d) An applicant must have demonstrable experience, 3-24 training, or instruction relating to the assessment of real and 3-25 personal property values and physical loss or damage to real and 3-26 personal property that may be the subject of insurance claims, 3-27 including earnings loss. 4-1 (e) An applicant must pass the examination required by 4-2 Section 14 of this article. 4-3 (f) An individual applicant must be at least 20 years of 4-4 age, be a citizen of the United States and of this state, and have 4-5 been a resident of this state for at least 12 months immediately 4-6 preceding the date of filing of the application for a license as a 4-7 public adjuster. 4-8 (g) The applicant for a license may not be licensed as an 4-9 independent or company staff adjuster under Chapter 407, Acts of 4-10 the 63rd Legislature, Regular Session, 1973 (Article 21.07-4, 4-11 Vernon's Texas Insurance Code), and its subsequent amendments. 4-12 (h) An individual applicant for a license must have held an 4-13 associate adjuster license issued under Section 8 of this article 4-14 for at least two years immediately preceding the date of the filing 4-15 of the application for a license as a public adjuster. 4-16 (i) A corporation or partnership may qualify for a license 4-17 under this article if the corporation or partnership is organized 4-18 or existing under the laws of this state and each officer, 4-19 director, and person owning 90 percent or more of the outstanding 4-20 voting securities of the corporation and each general partner of 4-21 the partnership is a licensed public adjuster under this article. 4-22 Sec. 4. BOND REQUIREMENTS FOR PUBLIC ADJUSTERS. (a) An 4-23 individual applicant must either: 4-24 (1) file a surety bond with the commissioner in the 4-25 amount of $10,000, payable to the state for the benefit of any 4-26 person recovering a judgment against the applicant and conditioned 4-27 on the faithful performance of the individual applicant's duties as 5-1 a public adjuster; 5-2 (2) file an adjuster's professional liability policy 5-3 or contract of professional liability coverage acceptable to the 5-4 commissioner, insuring the individual applicant against errors and 5-5 omissions in the amount of $10,000 or more; or 5-6 (3) deposit with the state treasurer $10,000 to be 5-7 held for the protection of a person recovering a final judgment 5-8 against the individual applicant. 5-9 (b) A corporate or partnership applicant shall file a surety 5-10 bond in the amount of $100,000 with the application for a license. 5-11 The bond must be conditioned that the bond is for the benefit of a 5-12 person having a claim against it by an insured on whose behalf the 5-13 corporation or partnership has acted as public adjuster. 5-14 (c) A bond issued under Subsection (a) or (b) of this 5-15 section shall authorize recovery by the commissioner of damages 5-16 sustained if the licensee is guilty of fraud or unfair practices in 5-17 connection with the licensee's business as a public adjuster. The 5-18 aggregate liability of the surety for damages may not exceed the 5-19 amount of the bond. 5-20 (d) A deposit with the state treasurer made under Subsection 5-21 (a) of this section may be withdrawn by the applicant only on 5-22 filing with the commissioner evidence satisfactory to the 5-23 commissioner that the applicant has withdrawn from the business of 5-24 public adjusting and has no unsecured liabilities outstanding or 5-25 that the individual applicant has provided for the protection of 5-26 any person recovering a final judgment against the applicant by 5-27 furnishing an errors and omissions policy or a bond as provided by 6-1 this section. The deposit may be withdrawn by any person or on 6-2 showing that the final judgment has been secured against the 6-3 applicant and that final judgment remains unsatisfied. A 6-4 withdrawal predicated on an unsatisfied final judgment may be made 6-5 only to the extent of the deficiency in the satisfaction of the 6-6 final judgment. 6-7 Sec. 5. CRIMINAL HISTORY BACKGROUND CHECK. The commissioner 6-8 may request a law enforcement agency to assist in a criminal 6-9 history background check on an applicant as provided by Article 6-10 1.10C of this code. 6-11 Sec. 6. NONRESIDENT LICENSE. (a) An individual who resides 6-12 outside this state and who holds a public adjuster license issued 6-13 by another state is eligible to apply for a nonresident license 6-14 under this section. 6-15 (b) Any application for a nonresident license must be 6-16 accompanied by a certificate issued by the appropriate licensing 6-17 agency in the other state that states each line of insurance for 6-18 which the applicant is qualified in the other state, provides proof 6-19 that the applicant is in good standing, and provides that the 6-20 applicant's license has never been suspended or revoked. 6-21 (c) The application must be accompanied by a list of 6-22 properties where the applicant is to adjust claims and the names 6-23 and addresses of the insureds for whom the applicant will be 6-24 working. 6-25 (d) A nonresident public adjuster is subject to any 6-26 restrictions under which a public adjuster licensed in this state 6-27 is subject to in the jurisdiction in which the nonresident 7-1 applicant resides. 7-2 (e) A nonresident license is valid for 90 days after the 7-3 date of issuance and may be renewed on application for an 7-4 additional 90 days until a claim is settled. 7-5 (f) An application fee of $250 must accompany each 7-6 application or renewal for a nonresident public adjuster license. 7-7 The application fee is nonrefundable. 7-8 (g) A nonresident public adjuster must be sponsored and 7-9 supervised by a public adjuster licensed in this state and the 7-10 application must be accompanied by the affidavit of the public 7-11 adjuster acting as the sponsor and supervisor. 7-12 (h) An application for a nonresident public adjuster license 7-13 must be submitted within 24 hours after the applicant arrives in 7-14 the state for the purpose of adjusting insurance claims. 7-15 (i) A nonresident public adjuster may not solicit business 7-16 in this state. 7-17 (j) A public adjuster who acts as the sponsor and supervisor 7-18 of the nonresident public adjuster must notify the commissioner in 7-19 writing of the sponsorship within 24 hours after the nonresident 7-20 has entered the state to act as a public adjuster. The notice must 7-21 include a copy of the nonresident's application for a license under 7-22 this section. 7-23 (k) The public adjuster who sponsors or supervises a 7-24 nonresident public adjuster may not sponsor more than two 7-25 nonresident public adjusters during the term of a nonresident's 7-26 license. 7-27 (l) Each nonresident public adjuster shall file with the 8-1 commissioner a bond equal to the bond a resident public adjuster 8-2 must file. 8-3 Sec. 7. QUALIFICATION FOR LICENSING BY RECIPROCITY. (a) To 8-4 qualify for a reciprocal license as a public adjuster, an applicant 8-5 for licensing must: 8-6 (1) submit to the commissioner a reciprocity fee as 8-7 determined by the commissioner and a completed application given 8-8 under oath, in the form prescribed by the commissioner; 8-9 (2) have possessed at the time of initial licensing as 8-10 a public adjuster other qualifications necessary to have been 8-11 eligible for licensing at that time in this state; 8-12 (3) have presented to the commissioner proof of 8-13 initial licensing by examination and proof that the license and 8-14 other license or licenses granted to the applicant by any other 8-15 state have not been suspended, revoked, canceled, surrendered, or 8-16 otherwise restricted for any reason; 8-17 (4) submit to the board a notice of sponsorship of the 8-18 applicant by a licensee of the state under whom the applicant will 8-19 practice; and 8-20 (5) satisfy any other requirement set by statute. 8-21 (b) An applicant is not eligible for licensing by 8-22 reciprocity unless the state in which the applicant was initially 8-23 licensed as a public adjuster also grants reciprocal licensing to 8-24 public adjusters duly licensed by examination in this state, under 8-25 like circumstances and conditions. 8-26 Sec. 8. ASSOCIATE ADJUSTER LICENSE. (a) An applicant for 8-27 an associate adjuster license must: 9-1 (1) be at least 18 years of age; and 9-2 (2) be a resident of this state. 9-3 (b) On payment of the application fee, the commissioner 9-4 shall issue an associate adjuster license to an applicant qualified 9-5 under this section. The commissioner may not issue a license as an 9-6 associate adjuster to a person licensed as an agent, broker, 9-7 solicitor, or surplus lines broker. 9-8 (c) A license of an associate adjuster may be renewed 9-9 annually on payment of the license renewal fee. 9-10 (d) A holder of an associate adjuster license may only 9-11 perform an activity under this article if the holder is working 9-12 under the supervision of a public adjuster. 9-13 Sec. 9. LICENSE RENEWAL. (a) A license may be renewed for 9-14 one or two years, as determined by the commissioner, by payment of 9-15 a license renewal fee as determined by the commissioner and by 9-16 filing a completed application given under oath before the 9-17 expiration date of the license. The application must state that 9-18 the requirements for renewal have been completed by the licensee 9-19 during the preceding license period. 9-20 (b) On timely receipt of the completed application, the 9-21 renewal fee, and proof of completion of any other requirements, the 9-22 commissioner shall issue a license renewal bearing the public 9-23 adjuster's license number, the period for which it is renewed, and 9-24 other information the commissioner determines necessary. 9-25 (c) If a person's license has been expired for 90 days or 9-26 less, the person may renew the license by paying to the 9-27 commissioner the required renewal fee and a fee that is one-half of 10-1 the application fee for a license. 10-2 (d) If a person's license has been expired for 90 days or 10-3 more, the person may not renew the license. 10-4 (e) At least 30 days before the expiration of a person's 10-5 license, the commissioner shall send written notice of the 10-6 impending license expiration to the person at the licensee's last 10-7 known address according to the records of the commissioner. 10-8 Sec. 10. PLACE OF BUSINESS; DISPLAY OF LICENSE. (a) A 10-9 public adjuster shall maintain a place of business accessible to 10-10 the public from which the licensee principally conducts 10-11 transactions under the license. The address of that place of 10-12 business must be listed on the application for a license or renewal 10-13 of the license and the licensee shall promptly notify the 10-14 commissioner in writing of any change of address. 10-15 (b) A public adjuster or an associate adjuster shall display 10-16 the license in a conspicuous place in the place of business in a 10-17 location customarily open to the public and shall show the license 10-18 on request to a person with whom the licensee is doing business. 10-19 (c) A copy of the license shall be carried by a public 10-20 adjuster or an associate adjuster and presented on request. 10-21 (d) A public adjuster shall keep a record of: 10-22 (1) all investigations and adjustments undertaken; 10-23 (2) any fee, commission, or other compensation 10-24 received or to be received by an adjuster for an investigation or 10-25 adjustment; and 10-26 (3) accounts for all work in progress or funds held by 10-27 the adjuster. 11-1 (e) A public adjuster shall make the records described in 11-2 Subsection (d) of this section available for examination by the 11-3 commissioner at all times, shall retain the records for at least 11-4 three years, and shall maintain the records at the adjuster's place 11-5 of business. 11-6 Sec. 11. ADJUSTER'S RIGHTS IN DEALING WITH INSURED AND 11-7 INSURER. (a) A public adjuster may, on the consent of the 11-8 adjuster's insured client, receive a limited power of attorney to 11-9 act on behalf of the insured to: 11-10 (1) give prompt notice to the insurance company or its 11-11 agent; 11-12 (2) furnish a complete inventory of damaged real and 11-13 personal property and loss of earnings, showing the quantity, 11-14 description, and amount of loss, and to attach all bills, receipts, 11-15 and related documents that justify the claims in the estimate or 11-16 inventory; 11-17 (3) provide the insurer with access to the damaged 11-18 property or to exhibit the damaged property; 11-19 (4) provide the insurer with copies of requested 11-20 records and documents; 11-21 (5) determine the repair or replacement cost of the 11-22 damaged property; 11-23 (6) determine the scope and the value of the loss as 11-24 it pertains to structure, contents, and loss of earnings; 11-25 (7) negotiate on behalf of the insured; 11-26 (8) discuss policy coverage; or 11-27 (9) inform the insured when it is necessary to seek 12-1 legal counsel. 12-2 (b) An insurer notified of the adjuster's power of attorney 12-3 shall deal with the public adjuster in the same manner as it would 12-4 with the insured. 12-5 (c) An insured shall be reimbursed for all expenses incurred 12-6 in obtaining a settlement following a loss. 12-7 (d) An insurer notified of a public adjuster's contract 12-8 shall acknowledge the contract between the public adjuster and the 12-9 insured. 12-10 Sec. 12. ADVISORY COMMITTEE. (a) The board shall appoint 12-11 an industry advisory committee to aid the commissioner in 12-12 administering this article. The industry advisory committee is 12-13 composed of five persons, including two persons licensed to 12-14 practice law in this state, one person who is an independent 12-15 adjuster for an insurance company, and two licensed public 12-16 adjusters. 12-17 (b) A member of the advisory committee serves a two-year 12-18 term. A member of the advisory committee is not entitled to 12-19 compensation but is entitled to reimbursement for reasonable and 12-20 necessary expenses incurred in performing duties as a member, 12-21 subject to any applicable limitation in the General Appropriations 12-22 Act. 12-23 (c) The advisory committee may propose reasonable rules 12-24 necessary for the proper administration of this article as it 12-25 relates to the licensing of public adjusters, including a code of 12-26 ethics to foster the education of all public adjusters concerning 12-27 the ethical, legal, and business principles that should govern 13-1 their conduct, and rules relating to the interaction between a 13-2 public adjuster and an insurance company adjuster. 13-3 Sec. 13. PENALTY. (a) A person commits an offense if the 13-4 person knowingly or intentionally violates this article. 13-5 (b) An offense under this section is a Class B misdemeanor. 13-6 Sec. 14. EXAMINATION. (a) An examination for a public 13-7 adjuster license shall be approved by the commissioner and must be 13-8 similar to the examination administered for applicants for an 13-9 adjuster license provided by Section 10, Chapter 407, Acts of the 13-10 63rd Legislature, Regular Session, 1973 (Article 21.07-4, Vernon's 13-11 Texas Insurance Code), and its subsequent amendments. 13-12 (b) The examination shall be reviewed by the industry 13-13 advisory committee. 13-14 (c) The examination shall be offered on a monthly basis. 13-15 Sec. 15. DENIAL, SUSPENSION, OR REVOCATION OF A LICENSE. 13-16 (a) The commissioner may deny, suspend, or revoke a public 13-17 adjuster license on the following grounds: 13-18 (1) the licensee has obtained or attempted to obtain a 13-19 license through willful misrepresentation or fraud; 13-20 (2) the licensee has failed to pass a required 13-21 examination; 13-22 (3) the licensee has been convicted of a felony; or 13-23 (4) the licensee has, with the intent to deceive, 13-24 materially misrepresented the licensee's affiliation or status as a 13-25 public adjuster or associate adjuster. 13-26 (b) Proceedings for the denial, suspension, or revocation of 13-27 a license and appeals from those proceedings shall be conducted in 14-1 the manner provided for analogous proceedings under Section 18, 14-2 Chapter 407, Acts of the 63rd Legislature, Regular Session, 1973 14-3 (Article 21.07-4, Vernon's Texas Insurance Code), and its 14-4 subsequent amendments. 14-5 (c) An order suspending a public adjuster or associate 14-6 adjuster license shall specify the period of the suspension, which 14-7 may not be longer than 12 months from the date of the suspension. 14-8 The holder of a license that has been revoked or suspended shall 14-9 surrender the license to the commissioner on demand. Issuance or 14-10 reinstatement of a license may be ordered in the discretion of the 14-11 commissioner on a finding that the cause for suspension, 14-12 revocation, or refusal no longer exists. 14-13 (d) A public adjuster or associate adjuster whose license 14-14 has been revoked may not reapply for a license to act as a public 14-15 adjuster or associate adjuster until 12 months from the date of the 14-16 final order revoking the license. 14-17 Sec. 16. UNAUTHORIZED PRACTICE OF LAW. A holder of a 14-18 license, acting in strict conformity with this article, is not 14-19 engaged in the unauthorized practice of law. 14-20 Sec. 17. CONTINUING EDUCATION REQUIREMENTS. A public 14-21 adjuster shall complete 30 hours of continuing education approved 14-22 by the commissioner during each two-year licensing period. The 14-23 commissioner may approve the continuing education classes available 14-24 to an insurance company adjuster, insurance company agent, or 14-25 independent adjuster. 14-26 SECTION 2. (a) A person appointed before September 1, 1995, 14-27 to the Industry Advisory Committee as a public adjuster member is 15-1 not required to be licensed as a public adjuster under Article 15-2 21.07-5, Insurance Code, as added by this Act, but must be eligible 15-3 for a license. 15-4 (b) For two years beginning on the effective date of this 15-5 Act, the commissioner shall waive the examination requirement and 15-6 associate adjuster requirement imposed under Section 3, Article 15-7 21.07-5, Insurance Code, as added by this Act, and grant a license 15-8 under this Act to any person who applies for the exemption and 15-9 provides evidence that the person: 15-10 (1) is a licensed or registered insurance adjuster; 15-11 (2) has worked as an adjuster for one year or more 15-12 preceding the date of the application for exemption; and 15-13 (3) meets all other licensing requirements provided by 15-14 statute or rules of the State Board of Insurance. 15-15 SECTION 3. This Act takes effect September 1, 1993. 15-16 SECTION 4. The importance of this legislation and the 15-17 crowded condition of the calendars in both houses create an 15-18 emergency and an imperative public necessity that the 15-19 constitutional rule requiring bills to be read on three several 15-20 days in each house be suspended, and this rule is hereby suspended.