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