H.B. No. 1605
1-1 AN ACT
1-2 relating to the licensing of insurance agents.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Section 1A, Article 21.07, Insurance Code, is
1-5 amended to read as follows:
1-6 Sec. 1A. DEFINITIONS <DEFINITION>. In this Article,
1-7 "person" means an individual or a general partnership composed of
1-8 two or more individuals or a limited liability partnership
1-9 registered with the Secretary of State under Section 3.08, Texas
1-10 Revised Partnership Act (Article 6132b-3.08, Vernon's Texas Civil
1-11 Statutes). The term "partnership" or "agency partnership" as used
1-12 in this Article means a general partnership or a registered limited
1-13 liability partnership.
1-14 SECTION 2. Article 21.07, Insurance Code, is amended by
1-15 adding Section 1B to read as follows:
1-16 Sec. 1B. LICENSING OF LIMITED LIABILITY COMPANIES. In this
1-17 Article, the term "corporation" shall mean a corporation organized
1-18 under the Texas Business Corporation Act or a Texas domiciled
1-19 limited liability company organized or existing under the Texas
1-20 Limited Liability Company Act (Article 1528n, Vernon's Texas Civil
1-21 Statutes) having its principal place of business in this state and
1-22 having as one of its purposes the authority to act as an insurance
1-23 agent. Each officer, manager, and member of a limited liability
2-1 company must be licensed under this Article. The licensing and
2-2 regulation of a limited liability company shall be subject to the
2-3 same provisions and requirements of this Article that are
2-4 applicable to corporations licensed under this Article.
2-5 SECTION 3. Section 1A, Chapter 213, Acts of the 54th
2-6 Legislature, 1955 (Article 21.07-1, Vernon's Texas Insurance Code),
2-7 is amended to read as follows:
2-8 Sec. 1A. In this Act, "person" means an individual or a
2-9 general partnership composed of two or more individuals or a
2-10 limited liability partnership registered with the Secretary of
2-11 State under Section 3.08, Texas Revised Partnership Act (Article
2-12 6132b-3.08, Vernon's Texas Civil Statutes). The term "partnership"
2-13 or "agency partnership" as used in this Act means a general
2-14 partnership or a registered limited liability partnership.
2-15 SECTION 4. Chapter 213, Acts of the 54th Legislature, 1955
2-16 (Article 21.07-1, Vernon's Texas Insurance Code), is amended by
2-17 adding Section 1B to read as follows:
2-18 Sec. 1B. In this Act, the term "corporation" shall mean a
2-19 corporation organized under the Texas Business Corporation Act, The
2-20 Texas Professional Corporation Act (Article 1528e, Vernon's Texas
2-21 Civil Statutes) or a Texas domiciled limited liability company
2-22 organized or existing under the Texas Limited Liability Company Act
2-23 (Article 1528n, Vernon's Texas Civil Statutes) having its principal
2-24 place of business in this state and having as one of its purposes
2-25 the authority to act as an insurance agent. Each officer, manager,
3-1 and member of a limited liability company must be licensed under
3-2 this Act. The licensing and regulation of a limited liability
3-3 company shall be subject to the same provisions and requirements of
3-4 this Act that are applicable to corporations licensed under this
3-5 Act.
3-6 SECTION 5. Section 4, Chapter 757, Acts of the 60th
3-7 Legislature, Regular Session, 1967 (Article 21.07-3, Vernon's Texas
3-8 Insurance Code), is amended by amending Subsections (c) and (d) and
3-9 adding Subsection (j) to read as follows:
3-10 (c) The Commissioner shall issue a license to a general
3-11 partnership, or to a limited liability partnership registered with
3-12 the Secretary of State under Section 3.08, Texas Revised
3-13 Partnership Act (Article 6132b-3.08, Vernon's Texas Civil
3-14 Statutes), engaging in the business of insurance if each of the
3-15 partners is licensed as an agent under this Act. The term
3-16 "partnership" or "agency partnership" as used in this Act means a
3-17 general partnership or a registered limited liability partnership.
3-18 (d) The Commissioner shall issue a license to a corporation
3-19 on finding:
3-20 (1) that the corporation is a Texas corporation
3-21 <organized or existing under the Texas Business Corporation Act>
3-22 having its principal place of business in the State of Texas and
3-23 having as one of its purposes the authority to act as a managing
3-24 general agent; and
3-25 (2) that every officer, director, and shareholder of
4-1 the corporation is individually licensed as a managing general
4-2 agent under the provisions of this Insurance Code; provided,
4-3 however, that in the event ownership of the shares of such
4-4 corporation is acquired through devise or descent by an unlicensed
4-5 shareholder, the corporation shall still be entitled to a license
4-6 if such unlicensed shareholder qualifies as a licensed managing
4-7 general agent or disposes of the shares to a licensed managing
4-8 general agent within 90 days after the date of such stock
4-9 acquisition. If an unlicensed person acquires shares in such a
4-10 corporation and does not qualify to be licensed as a managing
4-11 general agent and the person does not dispose of the shares within
4-12 the 90-day period to a licensed managing general agent, the shares
4-13 must be purchased by the corporation for the value of the shares of
4-14 stock as reflected by the regular books and records of the
4-15 corporation on the date of the acquisition of the shares by the
4-16 unlicensed person. If the corporation fails or refuses to purchase
4-17 the shares, the corporation's license shall be cancelled.
4-18 (j) In this Act the term "corporation" shall mean a
4-19 corporation organized under the Texas Business Corporation Act or a
4-20 Texas domiciled limited liability company organized or existing
4-21 under the Texas Limited Liability Company Act (Article 1528n,
4-22 Vernon's Texas Civil Statutes) having its principal place of
4-23 business in this state and having as one of its purposes the
4-24 authority to act as a managing general insurance agent. Each
4-25 officer, manager, and member of a limited liability company must be
5-1 licensed under this Act. The licensing and regulation of a limited
5-2 liability company shall be subject to the same provisions and
5-3 requirements of this Act that are applicable to corporations
5-4 licensed under this Act.
5-5 SECTION 6. Section 3, Article 21.14, Insurance Code, is
5-6 amended to read as follows:
5-7 Sec. 3. APPLICATION FOR LICENSE; TO WHOM LICENSE MAY BE
5-8 ISSUED. (a) When any person, partnership, registered limited
5-9 liability partnership, limited liability company, or corporation
5-10 shall desire to engage in business as a local recording agent for
5-11 an insurance company, or insurance carrier, he or it shall make
5-12 application for a license to the Texas Department <State Board>
5-13 of Insurance, in such form as the Department <Board> may require.
5-14 Such application shall bear a signed endorsement by a general,
5-15 state or special agent of a qualified insurance company, or
5-16 insurance carrier that applicant or each member of the partnership
5-17 or each stockholder of the corporation or each member of the
5-18 limited liability company is a resident of this state.
5-19 (b) The Department <Board> shall issue a license to an
5-20 individual or a general partnership or a limited liability
5-21 partnership registered with the Secretary of State under Section
5-22 3.08, Texas Revised Partnership Act (Article 6132b-3.08, Vernon's
5-23 Texas Civil Statutes), engaging in the business of insurance. The
5-24 Department <Board> may not issue a license to a <general>
5-25 partnership if an inactive partner who is not subject to Section 3a
6-1 of this article has an interest in the partnership principally to
6-2 have written and be compensated therefor for insurance on property
6-3 controlled through ownership, mortgage or sale, family
6-4 relationship, or employment; and provided further, that all
6-5 licensed agents must be residents of Texas. Provided, that a
6-6 person who resides in a town through which the state line runs and
6-7 whose residence is in the town in the adjoining state may be
6-8 licensed, if the person's business office is being maintained in
6-9 this state. All persons acting as agent or solicitor for health
6-10 and accident insurance within the provisions hereof, and who
6-11 represent only fire and casualty companies, and not life insurance
6-12 companies, shall be required to procure only one license, and such
6-13 license as is required under the provisions of this article.
6-14 (c) The Department <Board> shall issue a license to a
6-15 corporation if the Department <Board> finds:
6-16 (1) That the corporation is a Texas corporation
6-17 organized or existing under the Texas Business Corporation Act or
6-18 the Texas Professional Corporation Act having its principal place
6-19 of business in the State of Texas and having as one of its purposes
6-20 the authority to act as a local recording agent; and
6-21 (2) That every officer, director and shareholder of
6-22 the corporation is individually licensed as a local recording agent
6-23 under the provisions of this Insurance Code, except as may be
6-24 otherwise permitted by this Section or Section 3a of this article,
6-25 or that every officer and director of the corporation is
7-1 individually licensed as a local recording agent under this
7-2 Insurance Code, that the corporation is a wholly owned subsidiary
7-3 of a parent corporation that is licensed as a local recording agent
7-4 under this Insurance Code, and that every shareholder of the parent
7-5 corporation is individually licensed as a local recording agent
7-6 under this Insurance Code, and except as specifically provided by
7-7 this article, that no shareholder of the corporation is a corporate
7-8 entity; and
7-9 (3) That such corporation will have the ability to pay
7-10 any sums up to $25,000 which it might become legally obligated to
7-11 pay on account of any claim made against it by any customer and
7-12 caused by any negligent act, error or omission of the corporation
7-13 or any person for whose acts the corporation is legally liable in
7-14 the conduct of its business as a local recording agent. The term
7-15 "customer" as used herein shall mean any person, firm or
7-16 corporation to whom such corporation sells or attempts to sell a
7-17 policy of insurance, or from whom such corporation accepts an
7-18 application for insurance. Such ability shall be proven in one of
7-19 the following ways:
7-20 (A) An errors and omissions policy insuring such
7-21 corporation against errors and omissions, in at least the sum of
7-22 $100,000 with no more than a $10,000 deductible feature or the sum
7-23 of at least $300,000 with no more than a $25,000 deductible
7-24 feature, issued by an insurance company licensed to do business in
7-25 the State of Texas or, if a policy cannot be obtained from a
8-1 company licensed to do business in Texas, a policy issued by a
8-2 company not licensed to do business in Texas, on filing an
8-3 affidavit with the Texas Department <State Board> of Insurance
8-4 stating the inability to obtain coverage and receiving the
8-5 Department's <Board's> approval; or
8-6 (B) A bond executed by such corporation as
8-7 principal and a surety company authorized to do business in this
8-8 state, as surety, in the principal sum of $25,000, payable to the
8-9 Texas Department <State Board> of Insurance for the use and benefit
8-10 of customers of such corporation, conditioned that such corporation
8-11 shall pay any final judgment recovered against it by any customer;
8-12 or
8-13 (C) A deposit of cash or securities of the class
8-14 authorized by Articles 2.08 and 2.10 of this Code, having a fair
8-15 market value of $25,000 with the State Treasurer. The State
8-16 Treasurer is hereby authorized and directed to accept and receive
8-17 such deposit and hold it exclusively for the protection of any
8-18 customer of such corporation recovering a final judgment against
8-19 such corporation. Such deposit may be withdrawn only upon filing
8-20 with the Department <Board> evidence satisfactory to it that the
8-21 corporation has withdrawn from business, and has no unsecured
8-22 liabilities outstanding, or that such corporation has provided for
8-23 the protection of its customers by furnishing an errors and
8-24 omissions policy or a bond as hereinbefore provided. Securities so
8-25 deposited may be exchanged from time to time for other qualified
9-1 securities.
9-2 A binding commitment to issue such a policy or
9-3 bond, or the tender of such securities, shall be sufficient in
9-4 connection with any application for license.
9-5 Nothing contained herein shall be construed to
9-6 permit any unlicensed employee or agent of any corporation to
9-7 perform any act of a local recording agent without obtaining a
9-8 local recording agent's license. The Department <Board> shall not
9-9 require a corporation to take the examination provided in Section 6
9-10 of this Article 21.14.
9-11 If at an time, any corporation holding a local
9-12 recording agent's license does not maintain the qualifications
9-13 necessary to obtain a license, the license of such corporation to
9-14 act as a local recording agent shall be cancelled or denied in
9-15 accordance with the provisions of Sections 16, 17 and 18 of this
9-16 Article 21.14; provided, however, that should any person who is not
9-17 a licensed local recording agent acquire shares in such a
9-18 corporation by devise or descent, they shall have a period of 90
9-19 days from date of acquisition within which to obtain a license as a
9-20 local recording agent or to dispose of the shares to a licensed
9-21 local recording agent except as may be permitted by Section 3a of
9-22 this article.
9-23 Should such an unlicensed person, except as may
9-24 be permitted by Section 3a of this article, acquire shares in such
9-25 a corporation and not dispose of them within said period of 90 days
10-1 to a licensed local recording agent, then they must be purchased by
10-2 the corporation for their book value, that is, the value of said
10-3 shares of stock as reflected by the regular books and records of
10-4 said corporation, as of the date of the acquisition of said shares
10-5 by said unlicensed person. Should the corporation fail or refuse
10-6 to so purchase such shares, its license shall be cancelled.
10-7 Any such corporation shall have the power to
10-8 redeem the shares of any shareholder, or the shares of a deceased
10-9 shareholder, upon such terms as may be agreed upon by the Board of
10-10 Directors and such shareholder or his personal representative, or
10-11 at such price and upon such terms as may be provided in the
10-12 Articles of Incorporation, the Bylaws, or an existing contract
10-13 entered into between the shareholders of the corporation.
10-14 Each corporation licensed as a local recording
10-15 agent shall file, under oath, a list of the names and addresses of
10-16 all of its officers, directors and shareholders with its
10-17 application for renewal license.
10-18 Each corporation licensed as a local recording
10-19 agent shall notify the Texas Department <State Board> of Insurance
10-20 upon any change in its officers, directors or shareholders not
10-21 later than the 30th day after the date on which the change became
10-22 effective.
10-23 The term "firm" as it applies to local recording
10-24 agents in Sections 2, 12 and 16 of this Article 21.14 shall be
10-25 construed to include corporations.
11-1 (d) The term "partnership" or "agency partnership" as used
11-2 in this Article means a general partnership or a registered limited
11-3 liability partnership domiciled in Texas.
11-4 (e) In this Article, the term "corporation" or
11-5 "corporations" shall mean a corporation organized under the Texas
11-6 Business Corporation Act, The Texas Professional Corporation Act
11-7 (Article 1528e, Vernon's Texas Civil Statutes), or a Texas
11-8 domiciled limited liability company organized or existing under the
11-9 Texas Limited Liability Company Act (Article 1528n, Vernon's Texas
11-10 Civil Statutes) having its principal place of business in this
11-11 state and having as one of its purposes the authority to act as an
11-12 insurance agent. Each officer, manager, and member of a limited
11-13 liability company must be licensed under this Article. The
11-14 licensing and regulation of a limited liability company shall be
11-15 subject to the same provisions and requirements of this Article
11-16 that are applicable to corporations licensed under this Article.
11-17 SECTION 7. Section 4(b), Article 1.14-2, Insurance Code, is
11-18 amended to read as follows:
11-19 (b) The Texas Department <State Board> of Insurance may
11-20 issue a surplus lines license to an agent as defined by Subdivision
11-21 (1) of Subsection (a) of Section 2 of this article after the agent
11-22 has:
11-23 (1) remitted the application <annual> fee set by the
11-24 Texas Department <State Board> of Insurance in an amount not to
11-25 exceed $50;
12-1 (2) submitted a completed license application on a
12-2 form approved by the Texas Department <State Board> of Insurance;
12-3 and
12-4 (3) passed a qualifying examination approved by the
12-5 Texas Department <State Board> of Insurance. If the agent is a
12-6 general partnership or a registered limited liability partnership,
12-7 this examination must be met by each natural person acting as a
12-8 partner in that partnership. If the agent is a corporation, this
12-9 examination requirement must be met by each natural person acting
12-10 as an officer, director, or shareholder of that corporation. If
12-11 the agent is a limited liability company, this examination
12-12 requirement must be met by each natural person acting as an
12-13 officer, manager, and member of that limited liability company.
12-14 SECTION 8. The importance of this legislation and the
12-15 crowded condition of the calendars in both houses create an
12-16 emergency and an imperative public necessity that the
12-17 constitutional rule requiring bills to be read on three several
12-18 days in each house be suspended, and this rule is hereby suspended,
12-19 and that this Act take effect and be in force from and after its
12-20 passage, and it is so enacted.