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