BILL ANALYSIS
C.S.H.B. 2072
By: De La Garza
04-19-95
Committee Report (Substituted)
BACKGROUND
Public adjusters are insurance claim specialists that act as
an adjuster for the insured party--not the insurance company--to
assist in making claims for damages under a property insurance
policy. Several other states, including California, New York, and
Florida have licensed public adjuster.
PURPOSE
As substituted, H.B. 2072 sets forth provisions for the
licensing and regulation of public adjusters and provides
penalties.
RULEMAKING AUTHORITY
It is the committee's opinion that this bill does grant
additional rulemaking authority to insurance commissioner under
SECTION 1 of the bill by adding Article 21.07-5, Sec. 11, Insurance
Code, permitting the commissioner to adopt rules regarding a code
of ethics for public adjusters and Sec. 13 which permits the
commissioner to adopt rules regarding license requirements.
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Chapter 21A, Insurance Code, by adding Article
21.07-5, as follows:
Sec. 1: DEFINITION.
Defines "public adjuster".
Sec. 2: LICENSED REQUIRED; EXEMPTION.
(a) Prohibits a person from acting as or holding out to be a
public adjuster unless the person holds a license issued by the
commissioner of insurance under Sec. 6 or 7 of this article. (b) Provides that this article does not apply to:
(1) an attorney licensed by this state or
(2) a licensed local recording agent.
Sec. 3: LICENSE APPLICATION.
(a) Requires an applicant for an adjuster's license to apply to
the commissioner on a form prescribed by the commissioner.
(b) Requires the applicant to furnish information concerning the
applicant's identity, personal history, business records and
other pertinent facts as required by the commissioner, and to
comply with specific security requirements. Authorizes the
commissioner to require an applicant to include a sample of the
applicant's fingerprints and a passport-type photograph.
(c) Requires the completed application to be notarized.
(d) Requires an applicant to pay a $250 application fee for each
application submitted. Requires the fee to be submitted with the
application and is non-refundable.
Sec. 4: SECURITY REQUIREMENTS.
(a) Requires each applicant for a public adjuster's license to
file a bond or other security with the commissioner. Requires
the bond to be executed and issued by a surety insurer and to be
in the amount of $25,000, payable to the commissioner for the use
and benefit of any person who recovers a judgment against the
individual license holder, and conditioned on the faithful
performance of the license holder in connection with the license
holder's business as a public adjuster.
(b) Sets forth alternatives for a bond under Subsection (a).
(c) Provides that a professional liability policy provided by a
public adjuster's employer constitutes compliance with the
requirements of this section if the employer's professional liability policy has a minimum liability limit of $250,000 for
all employees.
(d) Requires a bond to specifically authorize recovery by the
commissioner of the damages sustained if the license holder is
determined to be guilty of fraud or unfair practices in connection with the license holder's business as a public adjuster.
Prohibits the aggregate liability of the surety for all damages
from exceeding the amount of the bond.
(e) Authorizes a deposit with the state treasurer made under
Subsection (b)(2) of this section to be withdrawn by the applicant
only on filing with the commissioner evidence satisfactory to
the commissioner that the applicant has withdrawn from the business
of public adjusting and does not have any outstanding unsecured
liabilities; or has provided for the protection of a person who
recovers a final error judgement against the applicant by
furnishing an errors and omissions policy or a bond as otherwise
provided by this section.
(f) Authorizes securities deposited under this section to be
exchanged periodically for other qualified securities.
(g) Provides that a binding commitment to issue an insurance
policy or bond or the tender of the securities is sufficient in
connection with a license application.
(h) Authorizes a deposit to be paid to a person on showing that a
final judgement has been recovered against the applicant and
the final judgment remains unsatisfied. Authorizes the final
judgment to be paid from the deposit only to the extent of
deficiency in satisfaction of the final judgment.
Sec. 5: LICENSE EXAMINATION; ADVISORY COMMITTEE.
(a) Requires the commissioner to adopt a written examination for
a public adjuster's license that is similar to the examination
administered for an insurance adjuster's license under Section
10, Chapter 407, Article 21.04-4, V.T.C.S..
(b) Requires the commissioner to appoint an industry advisory
committee, composed of at least five members, to assist in
developing the examination. Requires at least three members to
be persons who are eligible for licensure as public adjusters.
Requires at least one member to be a person from the insurance
industry who is not a public adjuster. Provides that a member of
the advisory committee is not entitled to compensation for service
on the committee. Entitles a member to reimbursement for expenses
incurred in performing services for the committee, subject to
any applicable limitation in the General Appropriations Act.
(c) Provides that an examination is not required for the renewal
of a license issued under this article.
Sec. 6: LICENSE ISSUANCE; QUALIFICATIONS.
Requires the commissioner to issue an adjuster's license to an
applicant on determining that the application meets the
requirements of this article, the license fee has been paid, and
the applicant meets certain qualifications.
Sec. 7: NONRESIDENT LICENSE.
(a) Authorizes the commissioner to issue a reciprocal license to
an applicant for a public adjuster license who is not a
permanent resident of this state if the applicant
(1) holds a license as a public adjuster from another state.
(2) files a bond in accordance with Section 4 of this
article, in the amount required by Subsection (b) of this
section.
(b) Requires an applicant for a reciprocal license to file a bond
with department in the amount of $50,000.
(c) Requires an applicant for a reciprocal license to pay an
application fee of $350.
(d) Requires each person who holds a reciprocal license to comply
with all laws, including rules applicable to adjusters, and
the law governing the collection of state sales tax as appropriate for services performed.
Sec. 8: REGISTRATION PROGRAM FOR PUBLIC ADJUSTER TRAINEES.
(a) Requires a public adjuster trainee to register with the
department for a temporary certificate. Requires an applicant
for a temporary certificate as a trainee to apply to the commissioner on a form prescribed by the commissioner. Requires the
form to be accompanied by a non-refundable $125 registration
fee.
(b) Authorizes a temporary certificate to be issued only for
educational and training purposes. Authorizes the holder of a
temporary certificate to practice only under the direction and sponsorship of a licensed adjuster.
(c) Requires the sponsor of a public adjuster trainee to attest,
on a form prescribed by the commissioner, that the trainee is
under the supervision and control of the sponsor, and that the
sponsor has met certain security requirements.
(d) A temporary certificate expires on the 180th day after the
date of issuance and may be renewed once on application to the
commissioner. Precludes consecutive temporary certificates.
(e) A temporary certificate holder must comply with the security
requirements imposed under Section 4 of this article.
Sec. 9: PLACE OF BUSINESS.
(a) Requires each licensed public adjuster to maintain a place of
business accessible to the general public. Requires the address
of the place of business to appear on the face of the license.
Requires each license holder to notify the commissioner of any
change in address.
(b) Each nonresident public adjuster shall maintain an agent in
this state for service of process.
Sec. 10: CONDUCT TO COMPLY WITH CONTRACT.
Requires a licensed adjuster to prepare each claim for an insured
represented by the adjuster in accordance with the terms and
conditions of the contract of insurance under which recovery is
sought.
Sec. 11: CODE OF ETHICS.
Authorizes the commissioner, by rule, to adopt a code of ethics for
public adjusters to:
(1) foster the education of public adjusters concerning the
ethical, legal, and business principles that should
govern their conduct and;
(2) adopt recommendations regarding the solicitation of the
adjustment of losses by public adjusters.
Sec. 12: PUBLIC ADJUSTER AUTHORITY; EXEMPTION FROM INSURANCE
LAWS.
(a) Provides that this article does not limit or diminish the
authority of an adjuster licensed under this article does not
limit or diminish the authority of an adjuster licensed under this article to investigate or adjust a loss to less than may be
exercised by an adjuster licensed under Chapter 407, Article
21.07-4, V.T.C.S.
(b) Sets forth certain provisions from which a public adjuster
licensed under this article is exempt.
Sec. 13: LICENSE RENEWAL; CONTINUING EDUCATION REQUIREMENT.
(a) Provides that a license issued under this article expires on
the first anniversary of the date if issuance. Authorizes a
license holder to renew the license by filing a renewal application with the commissioner in the form prescribed by the
commissioner that demonstrates compliance with license
requirements. Requires the renewal application to be
accompanied by a $75 renewal fee and evidence of compliance with
the continuing education requirements imposed under Subsection
(b) of this section.
(b) Requires each license holder to annually complete at least 15
hours of continuing education courses. Requires the
commissioner, by rule, to prescribe the requirements for continuing education courses.
(c) Requires a license holder to submit the renewal information
and fee to the commissioner no later than 30 days after the
anniversary date of the license. If the license holder fails to submit the renewal application and fee within the required
period, the license lapses.
Sec. 14: CONTINGENT FEES.
(a) A public adjuster may receive a contingent fee for adjusting
a claim under this article. A contingent fee may not exceed 15
percent of the amount of the insurance settlement on a claim.
(b) Prevents a public adjuster from receiving a contingent fee for
72 hours after the date on which a loss is reported. Allows for
reasonable compensation from the insured for services rendered
on behalf of the insured.
Sec. 15: PROHIBITED CONDUCT.
(a) Prohibits a public adjuster from rendering legal advice to any
person in the adjuster's capacity as a public adjuster.
(b) Prohibits a public adjuster from representing an insured on a
claim or charge a fee to an insured while representing the
insurance carrier against which the claim is made.
(c) Prohibits a public adjuster from soliciting on a loss or claim
between the hours of 10:00p.m. and 6:00a.m.
(d) Prohibits a public adjuster from soliciting on any loss
involving bodily injury covered by a life, health, or accident
insurance policy.
(e) Prohibits a public adjuster from acquiring an interest in
salvaged property that is the subject of a claim adjusted by
the public adjuster without the knowledge and consent of the
insured.
(f) Prohibits a public adjuster from participating in the
reconstruction, repair, or restoration of damaged property, or
engage in any activities that may be construed as a presenting a conflict of interest.
Sec. 16: DENIAL, SUSPENSION, OR REVOCATION OF LICENSE.
(a) Sets forth provisions under which the commissioner is
authorized to deny, suspend, or revoke a public adjuster's
license.
(b) Entitles a license applicant or license holder who is denied
a license or whose license is revoked or suspended under this
section to notice and a hearing as provided by Section 5,
Article 21.01-2, of this code.
(c) Authorizes a final order entered as a result of a hearing to
be appealed to a court of jurisdiction.
(d) Requires an order suspending a public adjuster's license to
specify the period of the suspension not to exceed 12 months.
(e) Requires the holder of a license that is revoked or suspended
for cause to surrender the license to the commissioner on
demand.
(f) Authorizes the commissioner to issue a license or reinstate a
suspended or revoked license on a finding that the cause for
suspension, revocation, or refusal no longer exists.
(g) Authorizes a person whose license suspended under this article
to apply for a new license only after the expiration of the
period of suspension. Prohibits a person whose license is revoked
or whose application for a license is denied from applying for a
new license until the expiration of 12 months after the date of
the revocation or denial.
Sec. 17: NOTICE TO LAST ADDRESS.
Provides that notice by registered mail, return receipt requested,
to the last known address of a license applicant, license holder,
or other person to whom notice is required to be sent, constitutes
sufficient notice.
Sec. 18: CRIMINAL PENALTY; SANCTIONS.
(a) Provides that a person who violates this article commits a
misdemeanor punishable by a fine not to exceed $1,000,
confinement in county jail for a term not to exceed six months, or both.
(b) Provides that in addition to the criminal penalty imposed
under Subsection (a) of this section, a person violation of this
article is subject to the sanction provided by Section 7,
Article 21.21, of this code, as if the person had violated an order
under that section.
SECTION 2.
(a) Requires the commissioner of insurance to appoint the members
of the advisory committee created under Section 5(b), Article
21.07-5, Insurance Code, as added by this
Act, no later than October 31, 1995.
(b) Requires the commissioner of insurance to adopt the
examination required by Section 5, Article 21.07-5, Insurance
Code, no later than March 1, 1996. Authorizes the commissioner, pending the adoption of the examination, to issue a
temporary license to practice as a public adjuster to a person
who satisfies all the requirements for issuance of the license
except the examination requirement. Provides that a temporary
license issued under this subsection expires June 1, 1996, and
may not be renewed.
SECTION 3.
(a) Effective date: September 1, 1995, except as provided by
Subsection (b). (b) Effective date of Sections 2(a) and 17,
Article 21.07-5, Insurance Code: January 1, 1996.
SECTION 4. Emergency Clause.
COMPARISON OF ORIGINAL TO SUBSTITUTE
As substituted, House Bill 2072 provides for an exemption for
a local recording agents or solicitor for a local recording agent
which are not required to hold a license from the commissioner
under Section 6 or 7 of this article. The substitute allows the
commissioner to issue a nonresident license to a public adjuster
who files a bond in accordance with Section 4 of this article, in
the amount required by Section 7, Subsection (b) of this article.
The substitute also requires each nonresident public adjuster
to maintain an agent in this state for service of process. The
substitute allows a public adjuster to receive a contingent fee for
adjusting a claim under this article. However, a contingent fee
may not exceed 15 percent of the amount of the insurance settlement
on a claim. Additionally, the substitute prevents a public
adjuster from receiving a contingent fee for 72 hours after the
date on which a loss is reported and allows for reasonable
compensation from the insured for services rendered on behalf of
the insured.
SUMMARY OF COMMITTEE ACTION
In accordance with House rules, H.B. 2072 was heard in a
public hearing on April 19, 1995. The Chair laid out H.B. 2072 and
a substitute to H.B. 2072 and recognized Representative De La
Garza to explain the difference between the substitute to H.B. 2072
and the filed bill.
The Chair recognized the following persons to testify in
support of H.B. 2072: Michael Sherwood, representing himself;
Gerald C. Marshall, Jr., representing himself; Edwin Benjamin,
representing himself.
The Chair recognized Representative De La Garza who moved the
Committee adopt the substitute to H.B. 2072. The Chair recognized
Representative Counts who objected to the adoption of the
substitute to H.B. 2072. The Chair instructed the Clerk to call
the roll for a record vote on the adoption of the substitute to
H.B. 2072. The adoption of the substitute to H.B. 2072 prevailed
by the following vote: AYES (8); NAYES (1); ABSENT (0); PNV (0).
The Chair recognized Representative Dutton who moved the
Committee report H.B. 2072 as substituted to the full House with
the recommendation that it do pass and be printed. Representative
Averitt seconded the motion and the motion prevailed by the
following vote:
AYES (7); NAYES (1); ABSENT (1); PNV (0).