1-1 By: Hunter of Nueces (Senate Sponsor - Sibley) H.B. No. 1605
1-2 (In the Senate - Received from the House April 12, 1995;
1-3 April 18, 1995, read first time and referred to Committee on
1-4 Economic Development; May 16, 1995, reported favorably by the
1-5 following vote: Yeas 8, Nays 0; May 16, 1995, sent to printer.)
1-6 A BILL TO BE ENTITLED
1-7 AN ACT
1-8 relating to the licensing of insurance agents.
1-9 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-10 SECTION 1. Section 1A, Article 21.07, Insurance Code, is
1-11 amended to read as follows:
1-12 Sec. 1A. DEFINITIONS <DEFINITION>. In this Article,
1-13 "person" means an individual or a general partnership composed of
1-14 two or more individuals or a limited liability partnership
1-15 registered with the Secretary of State under Section 3.08, Texas
1-16 Revised Partnership Act (Article 6132b-3.08, Vernon's Texas Civil
1-17 Statutes). The term "partnership" or "agency partnership" as used
1-18 in this Article means a general partnership or a registered limited
1-19 liability partnership.
1-20 SECTION 2. Article 21.07, Insurance Code, is amended by
1-21 adding Section 1B to read as follows:
1-22 Sec. 1B. LICENSING OF LIMITED LIABILITY COMPANIES. In this
1-23 Article, the term "corporation" shall mean a corporation organized
1-24 under the Texas Business Corporation Act or a Texas domiciled
1-25 limited liability company organized or existing under the Texas
1-26 Limited Liability Company Act (Article 1528n, Vernon's Texas Civil
1-27 Statutes) having its principal place of business in this state and
1-28 having as one of its purposes the authority to act as an insurance
1-29 agent. Each officer, manager, and member of a limited liability
1-30 company must be licensed under this Article. The licensing and
1-31 regulation of a limited liability company shall be subject to the
1-32 same provisions and requirements of this Article that are
1-33 applicable to corporations licensed under this Article.
1-34 SECTION 3. Section 1A, Chapter 213, Acts of the 54th
1-35 Legislature, 1955 (Article 21.07-1, Vernon's Texas Insurance Code),
1-36 is amended to read as follows:
1-37 Sec. 1A. In this Act, "person" means an individual or a
1-38 general partnership composed of two or more individuals or a
1-39 limited liability partnership registered with the Secretary of
1-40 State under Section 3.08, Texas Revised Partnership Act (Article
1-41 6132b-3.08, Vernon's Texas Civil Statutes). The term "partnership"
1-42 or "agency partnership" as used in this Act means a general
1-43 partnership or a registered limited liability partnership.
1-44 SECTION 4. Chapter 213, Acts of the 54th Legislature, 1955
1-45 (Article 21.07-1, Vernon's Texas Insurance Code), is amended by
1-46 adding Section 1B to read as follows:
1-47 Sec. 1B. In this Act, the term "corporation" shall mean a
1-48 corporation organized under the Texas Business Corporation Act, The
1-49 Texas Professional Corporation Act (Article 1528e, Vernon's Texas
1-50 Civil Statutes) or a Texas domiciled limited liability company
1-51 organized or existing under the Texas Limited Liability Company Act
1-52 (Article 1528n, Vernon's Texas Civil Statutes) having its principal
1-53 place of business in this state and having as one of its purposes
1-54 the authority to act as an insurance agent. Each officer, manager,
1-55 and member of a limited liability company must be licensed under
1-56 this Act. The licensing and regulation of a limited liability
1-57 company shall be subject to the same provisions and requirements of
1-58 this Act that are applicable to corporations licensed under this
1-59 Act.
1-60 SECTION 5. Section 4, Chapter 757, Acts of the 60th
1-61 Legislature, Regular Session, 1967 (Article 21.07-3, Vernon's Texas
1-62 Insurance Code), is amended by amending Subsections (c) and (d) and
1-63 adding Subsection (j) to read as follows:
1-64 (c) The Commissioner shall issue a license to a general
1-65 partnership, or to a limited liability partnership registered with
1-66 the Secretary of State under Section 3.08, Texas Revised
1-67 Partnership Act (Article 6132b-3.08, Vernon's Texas Civil
1-68 Statutes), engaging in the business of insurance if each of the
2-1 partners is licensed as an agent under this Act. The term
2-2 "partnership" or "agency partnership" as used in this Act means a
2-3 general partnership or a registered limited liability partnership.
2-4 (d) The Commissioner shall issue a license to a corporation
2-5 on finding:
2-6 (1) that the corporation is a Texas corporation
2-7 <organized or existing under the Texas Business Corporation Act>
2-8 having its principal place of business in the State of Texas and
2-9 having as one of its purposes the authority to act as a managing
2-10 general agent; and
2-11 (2) that every officer, director, and shareholder of
2-12 the corporation is individually licensed as a managing general
2-13 agent under the provisions of this Insurance Code; provided,
2-14 however, that in the event ownership of the shares of such
2-15 corporation is acquired through devise or descent by an unlicensed
2-16 shareholder, the corporation shall still be entitled to a license
2-17 if such unlicensed shareholder qualifies as a licensed managing
2-18 general agent or disposes of the shares to a licensed managing
2-19 general agent within 90 days after the date of such stock
2-20 acquisition. If an unlicensed person acquires shares in such a
2-21 corporation and does not qualify to be licensed as a managing
2-22 general agent and the person does not dispose of the shares within
2-23 the 90-day period to a licensed managing general agent, the shares
2-24 must be purchased by the corporation for the value of the shares of
2-25 stock as reflected by the regular books and records of the
2-26 corporation on the date of the acquisition of the shares by the
2-27 unlicensed person. If the corporation fails or refuses to purchase
2-28 the shares, the corporation's license shall be cancelled.
2-29 (j) In this Act the term "corporation" shall mean a
2-30 corporation organized under the Texas Business Corporation Act or a
2-31 Texas domiciled limited liability company organized or existing
2-32 under the Texas Limited Liability Company Act (Article 1528n,
2-33 Vernon's Texas Civil Statutes) having its principal place of
2-34 business in this state and having as one of its purposes the
2-35 authority to act as a managing general insurance agent. Each
2-36 officer, manager, and member of a limited liability company must be
2-37 licensed under this Act. The licensing and regulation of a limited
2-38 liability company shall be subject to the same provisions and
2-39 requirements of this Act that are applicable to corporations
2-40 licensed under this Act.
2-41 SECTION 6. Section 3, Article 21.14, Insurance Code, is
2-42 amended to read as follows:
2-43 Sec. 3. APPLICATION FOR LICENSE; TO WHOM LICENSE MAY BE
2-44 ISSUED. (a) When any person, partnership, registered limited
2-45 liability partnership, limited liability company, or corporation
2-46 shall desire to engage in business as a local recording agent for
2-47 an insurance company, or insurance carrier, he or it shall make
2-48 application for a license to the Texas Department <State Board>
2-49 of Insurance, in such form as the Department <Board> may require.
2-50 Such application shall bear a signed endorsement by a general,
2-51 state or special agent of a qualified insurance company, or
2-52 insurance carrier that applicant or each member of the partnership
2-53 or each stockholder of the corporation or each member of the
2-54 limited liability company is a resident of this state.
2-55 (b) The Department <Board> shall issue a license to an
2-56 individual or a general partnership or a limited liability
2-57 partnership registered with the Secretary of State under Section
2-58 3.08, Texas Revised Partnership Act (Article 6132b-3.08, Vernon's
2-59 Texas Civil Statutes), engaging in the business of insurance. The
2-60 Department <Board> may not issue a license to a <general>
2-61 partnership if an inactive partner who is not subject to Section 3a
2-62 of this article has an interest in the partnership principally to
2-63 have written and be compensated therefor for insurance on property
2-64 controlled through ownership, mortgage or sale, family
2-65 relationship, or employment; and provided further, that all
2-66 licensed agents must be residents of Texas. Provided, that a
2-67 person who resides in a town through which the state line runs and
2-68 whose residence is in the town in the adjoining state may be
2-69 licensed, if the person's business office is being maintained in
2-70 this state. All persons acting as agent or solicitor for health
3-1 and accident insurance within the provisions hereof, and who
3-2 represent only fire and casualty companies, and not life insurance
3-3 companies, shall be required to procure only one license, and such
3-4 license as is required under the provisions of this article.
3-5 (c) The Department <Board> shall issue a license to a
3-6 corporation if the Department <Board> finds:
3-7 (1) That the corporation is a Texas corporation
3-8 organized or existing under the Texas Business Corporation Act or
3-9 the Texas Professional Corporation Act having its principal place
3-10 of business in the State of Texas and having as one of its purposes
3-11 the authority to act as a local recording agent; and
3-12 (2) That every officer, director and shareholder of
3-13 the corporation is individually licensed as a local recording agent
3-14 under the provisions of this Insurance Code, except as may be
3-15 otherwise permitted by this Section or Section 3a of this article,
3-16 or that every officer and director of the corporation is
3-17 individually licensed as a local recording agent under this
3-18 Insurance Code, that the corporation is a wholly owned subsidiary
3-19 of a parent corporation that is licensed as a local recording agent
3-20 under this Insurance Code, and that every shareholder of the parent
3-21 corporation is individually licensed as a local recording agent
3-22 under this Insurance Code, and except as specifically provided by
3-23 this article, that no shareholder of the corporation is a corporate
3-24 entity; and
3-25 (3) That such corporation will have the ability to pay
3-26 any sums up to $25,000 which it might become legally obligated to
3-27 pay on account of any claim made against it by any customer and
3-28 caused by any negligent act, error or omission of the corporation
3-29 or any person for whose acts the corporation is legally liable in
3-30 the conduct of its business as a local recording agent. The term
3-31 "customer" as used herein shall mean any person, firm or
3-32 corporation to whom such corporation sells or attempts to sell a
3-33 policy of insurance, or from whom such corporation accepts an
3-34 application for insurance. Such ability shall be proven in one of
3-35 the following ways:
3-36 (A) An errors and omissions policy insuring such
3-37 corporation against errors and omissions, in at least the sum of
3-38 $100,000 with no more than a $10,000 deductible feature or the sum
3-39 of at least $300,000 with no more than a $25,000 deductible
3-40 feature, issued by an insurance company licensed to do business in
3-41 the State of Texas or, if a policy cannot be obtained from a
3-42 company licensed to do business in Texas, a policy issued by a
3-43 company not licensed to do business in Texas, on filing an
3-44 affidavit with the Texas Department <State Board> of Insurance
3-45 stating the inability to obtain coverage and receiving the
3-46 Department's <Board's> approval; or
3-47 (B) A bond executed by such corporation as
3-48 principal and a surety company authorized to do business in this
3-49 state, as surety, in the principal sum of $25,000, payable to the
3-50 Texas Department <State Board> of Insurance for the use and benefit
3-51 of customers of such corporation, conditioned that such corporation
3-52 shall pay any final judgment recovered against it by any customer;
3-53 or
3-54 (C) A deposit of cash or securities of the class
3-55 authorized by Articles 2.08 and 2.10 of this Code, having a fair
3-56 market value of $25,000 with the State Treasurer. The State
3-57 Treasurer is hereby authorized and directed to accept and receive
3-58 such deposit and hold it exclusively for the protection of any
3-59 customer of such corporation recovering a final judgment against
3-60 such corporation. Such deposit may be withdrawn only upon filing
3-61 with the Department <Board> evidence satisfactory to it that the
3-62 corporation has withdrawn from business, and has no unsecured
3-63 liabilities outstanding, or that such corporation has provided for
3-64 the protection of its customers by furnishing an errors and
3-65 omissions policy or a bond as hereinbefore provided. Securities so
3-66 deposited may be exchanged from time to time for other qualified
3-67 securities.
3-68 A binding commitment to issue such a policy or
3-69 bond, or the tender of such securities, shall be sufficient in
3-70 connection with any application for license.
4-1 Nothing contained herein shall be construed to
4-2 permit any unlicensed employee or agent of any corporation to
4-3 perform any act of a local recording agent without obtaining a
4-4 local recording agent's license. The Department <Board> shall not
4-5 require a corporation to take the examination provided in Section 6
4-6 of this Article 21.14.
4-7 If at an time, any corporation holding a local
4-8 recording agent's license does not maintain the qualifications
4-9 necessary to obtain a license, the license of such corporation to
4-10 act as a local recording agent shall be cancelled or denied in
4-11 accordance with the provisions of Sections 16, 17 and 18 of this
4-12 Article 21.14; provided, however, that should any person who is not
4-13 a licensed local recording agent acquire shares in such a
4-14 corporation by devise or descent, they shall have a period of 90
4-15 days from date of acquisition within which to obtain a license as a
4-16 local recording agent or to dispose of the shares to a licensed
4-17 local recording agent except as may be permitted by Section 3a of
4-18 this article.
4-19 Should such an unlicensed person, except as may
4-20 be permitted by Section 3a of this article, acquire shares in such
4-21 a corporation and not dispose of them within said period of 90 days
4-22 to a licensed local recording agent, then they must be purchased by
4-23 the corporation for their book value, that is, the value of said
4-24 shares of stock as reflected by the regular books and records of
4-25 said corporation, as of the date of the acquisition of said shares
4-26 by said unlicensed person. Should the corporation fail or refuse
4-27 to so purchase such shares, its license shall be cancelled.
4-28 Any such corporation shall have the power to
4-29 redeem the shares of any shareholder, or the shares of a deceased
4-30 shareholder, upon such terms as may be agreed upon by the Board of
4-31 Directors and such shareholder or his personal representative, or
4-32 at such price and upon such terms as may be provided in the
4-33 Articles of Incorporation, the Bylaws, or an existing contract
4-34 entered into between the shareholders of the corporation.
4-35 Each corporation licensed as a local recording
4-36 agent shall file, under oath, a list of the names and addresses of
4-37 all of its officers, directors and shareholders with its
4-38 application for renewal license.
4-39 Each corporation licensed as a local recording
4-40 agent shall notify the Texas Department <State Board> of Insurance
4-41 upon any change in its officers, directors or shareholders not
4-42 later than the 30th day after the date on which the change became
4-43 effective.
4-44 The term "firm" as it applies to local recording
4-45 agents in Sections 2, 12 and 16 of this Article 21.14 shall be
4-46 construed to include corporations.
4-47 (d) The term "partnership" or "agency partnership" as used
4-48 in this Article means a general partnership or a registered limited
4-49 liability partnership domiciled in Texas.
4-50 (e) In this Article, the term "corporation" or
4-51 "corporations" shall mean a corporation organized under the Texas
4-52 Business Corporation Act, The Texas Professional Corporation Act
4-53 (Article 1528e, Vernon's Texas Civil Statutes), or a Texas
4-54 domiciled limited liability company organized or existing under the
4-55 Texas Limited Liability Company Act (Article 1528n, Vernon's Texas
4-56 Civil Statutes) having its principal place of business in this
4-57 state and having as one of its purposes the authority to act as an
4-58 insurance agent. Each officer, manager, and member of a limited
4-59 liability company must be licensed under this Article. The
4-60 licensing and regulation of a limited liability company shall be
4-61 subject to the same provisions and requirements of this Article
4-62 that are applicable to corporations licensed under this Article.
4-63 SECTION 7. Section 4(b), Article 1.14-2, Insurance Code, is
4-64 amended to read as follows:
4-65 (b) The Texas Department <State Board> of Insurance may
4-66 issue a surplus lines license to an agent as defined by Subdivision
4-67 (1) of Subsection (a) of Section 2 of this article after the agent
4-68 has:
4-69 (1) remitted the application <annual> fee set by the
4-70 Texas Department <State Board> of Insurance in an amount not to
5-1 exceed $50;
5-2 (2) submitted a completed license application on a
5-3 form approved by the Texas Department <State Board> of Insurance;
5-4 and
5-5 (3) passed a qualifying examination approved by the
5-6 Texas Department <State Board> of Insurance. If the agent is a
5-7 general partnership or a registered limited liability partnership,
5-8 this examination must be met by each natural person acting as a
5-9 partner in that partnership. If the agent is a corporation, this
5-10 examination requirement must be met by each natural person acting
5-11 as an officer, director, or shareholder of that corporation. If
5-12 the agent is a limited liability company, this examination
5-13 requirement must be met by each natural person acting as an
5-14 officer, manager, and member of that limited liability company.
5-15 SECTION 8. The importance of this legislation and the
5-16 crowded condition of the calendars in both houses create an
5-17 emergency and an imperative public necessity that the
5-18 constitutional rule requiring bills to be read on three several
5-19 days in each house be suspended, and this rule is hereby suspended,
5-20 and that this Act take effect and be in force from and after its
5-21 passage, and it is so enacted.
5-22 * * * * *