By De La Garza H.B. No. 2072
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the licensing and regulation of public adjusters;
1-3 providing criminal penalties.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Subchapter A, Chapter 21, Insurance Code, is
1-6 amended by adding Article 21.07-5 to read as follows:
1-7 Art. 21.07-5. PUBLIC ADJUSTERS
1-8 Sec. 1. DEFINITION. In this article, "public adjuster"
1-9 means a person who represents or adjusts the first party interest
1-10 of a named insured in insurance policies that cover physical damage
1-11 to real and personal property by giving advice regarding, or
1-12 preparing or negotiating, such a claim, and who solicits from the
1-13 insured or the insured's representative the contractual right and
1-14 obligation to lawfully provide services relating to the adjustment
1-15 of a loss involving physical damage to real or person property.
1-16 The term does not include a person employed only to furnish
1-17 technical assistance or clerical support.
1-18 Sec. 2. LICENSE REQUIRED; EXEMPTION. (a) A person may not
1-19 act as or hold out to be a public adjuster in this state unless the
1-20 person holds a license issued by the commissioner under Section 6
1-21 or 7 of this article.
1-22 (b) This article does not apply to:
1-23 (1) an attorney licensed by this state; or
1-24 (2) a licensed local recording agent or a solicitor
2-1 for a local recording agent while acting for an insured concerning
2-2 a loss under a policy issued by that agent.
2-3 Sec. 3. LICENSE APPLICATION. (a) An applicant for a public
2-4 adjuster's license shall apply to the commissioner on a form
2-5 prescribed by the commissioner.
2-6 (b) As part of the application, the applicant shall furnish
2-7 information concerning the applicant's identity, personal history,
2-8 business records, and other pertinent facts as required by the
2-9 commissioner, and shall comply with the security requirements
2-10 imposed under Section 4 of this article. The commissioner may
2-11 require an applicant to include a sample of the applicant's
2-12 fingerprints and a passport-type photograph.
2-13 (c) The completed application must be notarized.
2-14 (d) An applicant shall pay a $250 application fee for each
2-15 application submitted. The fee must be submitted with the
2-16 application and is nonrefundable.
2-17 Sec. 4. SECURITY REQUIREMENTS. (a) Each applicant for a
2-18 public adjuster's license shall file a bond or other security with
2-19 the commissioner as required by this section. The bond must be:
2-20 (1) executed and issued by a surety insurer;
2-21 (2) in the amount of $500,000;
2-22 (3) payable to the commissioner for the use and
2-23 benefit of any person who recovers a judgment against the
2-24 individual license holder; and
2-25 (4) conditioned on the faithful performance of the
2-26 license holder in connection with the license holder's business as
2-27 a public adjuster.
3-1 (b) Instead of a bond under Subsection (a) of this section,
3-2 an applicant may:
3-3 (1) file with the commissioner a professional
3-4 liability policy or similar policy or contract of professional
3-5 liability coverage acceptable to the commissioner that insures the
3-6 individual applicant against errors and omissions in at least the
3-7 amount of $500,000, with a deductible not to exceed $1,500; or
3-8 (2) deposit with the state treasurer cash or
3-9 securities of the class authorized by Articles 2.08 and 2.10 of
3-10 this code that have a fair market value of at least $500,000, to be
3-11 held exclusively for the protection of a person who recovers a
3-12 final judgment against the applicant.
3-13 (c) A professional liability policy provided by a public
3-14 adjuster's employer constitutes satisfactory compliance with the
3-15 requirements of this section if the employer's professional
3-16 liability policy has a minimum liability limit of $1 million for
3-17 all employees.
3-18 (d) If a bond is used to satisfy the requirements of this
3-19 section, the bond must specifically authorize recovery by the
3-20 commissioner of the damages sustained as a result of the license
3-21 holder's action in connection with the license holder's business as
3-22 a public adjuster. The aggregate liability of the surety for all
3-23 damages may not exceed the amount of the bond.
3-24 (e) A deposit with the state treasurer made under Subsection
3-25 (b)(2) of this section may be withdrawn by the applicant only on
3-26 filing with the commissioner evidence satisfactory to the
3-27 commissioner that the applicant has withdrawn from the business of
4-1 public adjusting and:
4-2 (1) does not have any outstanding unsecured
4-3 liabilities; or
4-4 (2) has provided for the protection of a person who
4-5 recovers a final error judgment against the applicant by furnishing
4-6 an errors and omissions policy or a bond as otherwise provided by
4-7 this section.
4-8 (f) Securities deposited under this section may be exchanged
4-9 periodically for other qualified securities.
4-10 (g) A binding commitment to issue an insurance policy or
4-11 bond or the tender of the securities is sufficient in connection
4-12 with a license application.
4-13 (h) All or part of a deposit may be paid to a person on a
4-14 showing that damages sustained as a result of the license holder's
4-15 action in connection with the license holder's business as a public
4-16 adjuster remain unpaid. Those damages may be paid from the deposit
4-17 only to the extent of the deficiency in payment of the damages
4-18 sustained.
4-19 Sec. 5. LICENSE EXAMINATION; ADVISORY COMMITTEE. (a) The
4-20 commissioner shall prescribe a written examination for a public
4-21 adjuster's license that is comparable to the examination
4-22 administered for an insurance adjuster's license under Section 10,
4-23 Chapter 407, Acts of the 63rd Legislature, Regular Session, 1973
4-24 (Article 21.07-4, Vernon's Texas Insurance Code).
4-25 (b) The commissioner may appoint an industry advisory
4-26 committee. If the commissioner elects to appoint the advisory
4-27 committee, the advisory committee shall be composed of nine members
5-1 as follows:
5-2 (1) three members who represent the general public;
5-3 (2) the chairman of the unauthorized practice of law
5-4 committee of the State Bar of Texas;
5-5 (3) two members with knowledge and experience in the
5-6 profession of insurance adjusting;
5-7 (4) one member who represents the domestic insurance
5-8 companies authorized to do business in this state;
5-9 (5) one member who represents the foreign insurance
5-10 companies authorized to do business in this state; and
5-11 (6) one member who is a public adjuster.
5-12 A member of the advisory committee is not entitled to
5-13 compensation for service on the committee. A member is entitled to
5-14 reimbursement for reasonable and necessary expenses incurred in
5-15 performing services for the committee, subject to any applicable
5-16 limitation in the General Appropriations Act.
5-17 (c) An examination is not required for the renewal of a
5-18 license issued under this article.
5-19 (d) This article does not prevent the department from using
5-20 a testing contractor to administer the examination required by this
5-21 section.
5-22 Sec. 6. LICENSE ISSUANCE; QUALIFICATIONS. The commissioner
5-23 shall issue a public adjuster's license to an applicant on
5-24 determining that the application meets the requirements of this
5-25 article, that the license fee has been paid, and that the
5-26 applicant:
5-27 (1) is at least 18 years of age;
6-1 (2) is a citizen of the United States;
6-2 (3) is a resident of this state;
6-3 (4) is trustworthy and of a moral character that
6-4 reasonably ensures that the applicant will conduct the business of
6-5 a public adjuster fairly and in good faith without detriment to the
6-6 members of the public whose interests the public adjuster may
6-7 represent;
6-8 (5) has never been convicted of a felony or if
6-9 convicted of a felony, has received a full pardon from that
6-10 conviction and is otherwise relieved from any disabilities
6-11 connected with that conviction;
6-12 (6) has sufficient experience or training relating to
6-13 the assessment of:
6-14 (A) real and personal property values; and
6-15 (B) physical loss or damage to real or personal
6-16 property that may be the subject of insurance and claims under
6-17 insurance;
6-18 (7) is sufficiently informed as to the terms and
6-19 effects of the types of insurance contracts that provide coverage
6-20 on real and personal property;
6-21 (8) possesses knowledge and experience adequate to
6-22 enable the applicant to engage in the business of a public adjuster
6-23 fairly and without injury to the public or any member of the public
6-24 with whom the public adjuster may have business as a public
6-25 adjuster;
6-26 (9) has successfully passed the license examination
6-27 adopted under Section 5 of this article or is exempt from the
7-1 examination requirement under this article; and
7-2 (10) has complied with the security requirements
7-3 imposed under Section 4 of this article.
7-4 Sec. 7. NONRESIDENT LICENSE. (a) The commissioner may
7-5 issue a nonresident license to an applicant for a public adjuster
7-6 license who is not a permanent resident of this state if the
7-7 applicant:
7-8 (1) holds a license as a public adjuster issued by
7-9 another state or, if the nonresident applicant's state of residence
7-10 does not license public adjusters, the applicant successfully
7-11 passes the license examination adopted under Section 5 of this
7-12 article;
7-13 (2) files a bond in accordance with Section 4 of this
7-14 article in the amount required by Subsection (b) of this section;
7-15 and
7-16 (3) pays the application fee required by Subsection
7-17 (c) of this section.
7-18 (b) An applicant for a nonresident license must file a bond
7-19 with the department in the amount of $50,000.
7-20 (c) An applicant for a nonresident license shall pay an
7-21 application fee of $250.
7-22 (d) Each person who holds a nonresident license shall comply
7-23 with all laws, including rules, of this state applicable to public
7-24 adjusters, including the law governing the collection of state
7-25 sales tax as appropriate for services performed under this article.
7-26 (e) The commissioner may issue a nonresident license to an
7-27 applicant under this section only if the applicant's state of
8-1 residence has a similar reciprocity program for residents of this
8-2 state who are licensed under this article.
8-3 Sec. 8. LICENSE BY RECIPROCITY. The commissioner by rule
8-4 may adopt a reciprocal license program for public adjusters and may
8-5 enter into reciprocal agreements with the appropriate officials of
8-6 other states.
8-7 Sec. 9. REGISTRATION PROGRAM FOR PUBLIC ADJUSTER TRAINEES.
8-8 (a) A public adjuster trainee must register with the department
8-9 for a trainee certificate under this section. An applicant for a
8-10 trainee certificate as a trainee shall apply to the commissioner on
8-11 a form prescribed by the commissioner. The form must be
8-12 accompanied by a nonrefundable $125 registration fee.
8-13 (b) A trainee certificate may be issued under this section
8-14 only for educational and training purposes. The holder of a
8-15 trainee certificate may practice only under the direction and
8-16 sponsorship of a licensed public adjuster.
8-17 (c) The sponsor of a public adjuster trainee shall attest,
8-18 on a form prescribed by the commissioner, that the trainee is under
8-19 the supervision and control of the sponsor, and that the sponsor
8-20 has met the security requirements of Section 4 of this article.
8-21 (d) A trainee certificate expires on the 180th day after the
8-22 date of issuance, and may be renewed once on application to the
8-23 commissioner. A person is not entitled to hold more than two
8-24 consecutive trainee certificates.
8-25 (e) Each person who holds a trainee certificate under this
8-26 section must comply with the security requirements imposed under
8-27 Section 4 of this article.
9-1 (f) An applicant for a trainee certificate must satisfy the
9-2 requirements for a public adjuster imposed under Section 6 of this
9-3 article, other than the requirements imposed under Subdivisions (9)
9-4 and (10) of that section.
9-5 Sec. 10. PLACE OF BUSINESS; AGENT FOR SERVICE OF PROCESS.
9-6 (a) Each licensed public adjuster shall maintain in this state a
9-7 place of business accessible to the general public. The department
9-8 shall maintain in its records the address of the place of business.
9-9 Each license holder shall promptly notify the commissioner of any
9-10 change in the address.
9-11 (b) Each nonresident public adjuster shall maintain an agent
9-12 in this state for service of process. The department shall
9-13 maintain in its records the name and address of the agent.
9-14 Sec. 11. CONDUCT TO COMPLY WITH CONTRACT. A licensed public
9-15 adjuster shall prepare each claim for an insured represented by the
9-16 adjuster in accordance with the terms and conditions of the
9-17 contract of insurance under which recovery is sought.
9-18 Sec. 12. CODE OF ETHICS. The commissioner by rule may adopt
9-19 a code of ethics for public adjusters to:
9-20 (1) foster the education of public adjusters
9-21 concerning the ethical, legal, and business principles that should
9-22 govern their conduct; and
9-23 (2) adopt recommendations regarding the solicitation
9-24 of the adjustment of losses by public adjusters.
9-25 Sec. 13. PUBLIC ADJUSTER AUTHORITY; EXEMPTION FROM INSURANCE
9-26 LAWS. (a) This article does not limit or diminish the authority
9-27 of a public adjuster licensed under this article to investigate or
10-1 adjust a loss to less than the authority for that purpose that may
10-2 be exercised by an adjuster licensed under Chapter 407, Acts of the
10-3 63rd Legislature, Regular Session, 1973 (Article 21.07-4, Vernon's
10-4 Texas Insurance Code).
10-5 (b) The conduct of business by a licensed public adjuster as
10-6 authorized by this article does not constitute a violation of:
10-7 (1) Articles 21.01, 21.02, 21.02-1, 21.04, 21.06,
10-8 21.07, and 21.14 of this code;
10-9 (2) Chapter 213, Acts of the 54th Legislature, Regular
10-10 Session, 1955 (Article 21.07-1, Vernon's Texas Insurance Code);
10-11 (3) Chapter 757, Acts of the 60th Legislature, Regular
10-12 Session, 1967 (Article 21.07-3, Vernon's Texas Insurance Code); and
10-13 (4) Chapter 407, Acts of the 63rd Legislature, Regular
10-14 Session, 1973 (Article 21.07-4, Vernon's Texas Insurance Code).
10-15 (c) A public adjuster may not settle a claim without the
10-16 prior written consent of the insured.
10-17 Sec. 14. LICENSE RENEWAL; CONTINUING EDUCATION REQUIREMENT.
10-18 (a) A license issued under this article expires on the second
10-19 anniversary of the date of issuance. A license holder may renew
10-20 the license by filing a renewal application accompanied by the
10-21 renewal fee with the commissioner in the form prescribed by the
10-22 commissioner that demonstrates continued compliance with the
10-23 license requirements imposed under this article or adopted by rule
10-24 by the commissioner. The renewal application must be accompanied
10-25 by a $75 renewal fee and evidence of compliance with the continuing
10-26 education requirements imposed under Subsection (b) of this
10-27 section.
11-1 (b) Each license holder must complete, for each two-year
11-2 license period, at least 30 hours of continuing education courses.
11-3 The commissioner by rule shall prescribe the requirements for
11-4 continuing education courses under this article.
11-5 (c) A license holder must submit the renewal information and
11-6 renewal fee to the commissioner not later than the 90th day after
11-7 the expiration date of the license. If the license holder fails to
11-8 submit the renewal application and fee within the required period,
11-9 the license lapses.
11-10 Sec. 15. CONTINGENT FEES. (a) Except as provided by
11-11 Subsection (b) of this section, a public adjuster may receive a
11-12 contingent fee for adjusting a claim under this article. A
11-13 contingent fee collected under this section may not exceed 10
11-14 percent of the amount of the insurance settlement on the claim.
11-15 (b) A public adjuster may not receive a contingent fee on a
11-16 claim for which an insurance company, not later than 15 days after
11-17 the date on which the loss is reported to the insurance company,
11-18 or, in the event of a declared catastrophe or disaster, not later
11-19 than 15 days after the first inspection conducted by the adjuster
11-20 for the insurance company, makes an offer to the insured in writing
11-21 to settle the claim. The public adjuster is not entitled to
11-22 compensation for any portion of the amount initially offered to the
11-23 insured by the insurance company. The public adjuster may only
11-24 receive a contingent fee or compensation based on the increase
11-25 computed by subtracting the amount initially offered by the
11-26 insurance company to the insured from the amount finally paid by
11-27 the insurance company to the insured on the claim.
12-1 (c) An insured who uses the services of a public adjuster
12-2 shall sign a disclosure form prescribed by the department that
12-3 acknowledges that:
12-4 (1) the fee paid to the public adjuster will be paid
12-5 from the proceeds received by the insured on the claim;
12-6 (2) the public adjuster represents the insured rather
12-7 than the insurance company; and
12-8 (3) the insured, rather than the insurance company, is
12-9 responsible for payment of the fee owed to the public adjuster.
12-10 Sec. 16. PROHIBITED CONDUCT. (a) A public adjuster may not
12-11 render legal advice to any person in the adjuster's capacity as a
12-12 public adjuster.
12-13 (b) A public adjuster may not represent an insured on a
12-14 claim or charge a fee to an insured while representing the
12-15 insurance carrier against which the claim is made.
12-16 (c) A public adjuster may not, between the hours of 10 p.m.
12-17 and 6 a.m., solicit or attempt to solicit on a loss or claim in
12-18 person, by telephone, or in any other manner.
12-19 (d) A public adjuster may not solicit or attempt to solicit,
12-20 directly or indirectly, on any loss involving bodily injury covered
12-21 by a life, health, or accident insurance policy.
12-22 (e) A public adjuster may not acquire an interest in
12-23 salvaged property that is the subject of a claim adjusted by the
12-24 public adjuster without the knowledge and consent of the insured.
12-25 (f) A public adjuster may not participate directly or
12-26 indirectly in the reconstruction, repair, or restoration of the
12-27 damaged property or engage in any other activities that may
13-1 reasonably be construed as presenting a conflict of interest.
13-2 (g) A public adjuster may not, directly or indirectly,
13-3 receive or pay any valuable consideration, special favor, or
13-4 advantage from or to any person with an interest in the claim,
13-5 including an attorney, contractor, or supplier.
13-6 (h) A public adjuster may not contact an insured until the
13-7 expiration of the 15th day after the date on which the insured
13-8 reports the claim to the insurance company.
13-9 Sec. 17. DENIAL, SUSPENSION, OR REVOCATION OF LICENSE. (a)
13-10 The commissioner may deny, suspend, or revoke a public adjuster's
13-11 license for:
13-12 (1) a violation of this article;
13-13 (2) a cause that constitutes grounds for denial of an
13-14 original license;
13-15 (3) willful misrepresentation or fraud in obtaining
13-16 the license;
13-17 (4) failure to pass a required license examination;
13-18 (5) misappropriation or conversion by the license
13-19 applicant or license holder of money required to be held in a
13-20 fiduciary capacity;
13-21 (6) material misrepresentation, with intent to
13-22 deceive, of the terms of an insurance contract;
13-23 (7) engaging in a fraudulent transaction;
13-24 (8) demonstrated incompetence or untrustworthiness in
13-25 the conduct of the license holder's affairs under the license, as
13-26 determined by the commissioner;
13-27 (9) conviction of a felony by a final judgment in a
14-1 court of competent jurisdiction; or
14-2 (10) material misrepresentation, with intent to
14-3 deceive, of the person's status as a public adjuster.
14-4 (b) A license applicant or license holder who is denied a
14-5 license or whose license is revoked or suspended under this section
14-6 is entitled to notice and a hearing as provided by Section 5,
14-7 Article 21.01-2, of this code.
14-8 (c) A final order entered as a result of a hearing under
14-9 this section may be appealed to a court of competent jurisdiction
14-10 as provided by Subchapter G, Chapter 2001, Government Code.
14-11 (d) An order suspending a public adjuster's license must
14-12 specify the period of the suspension not to exceed 12 months.
14-13 (e) The holder of a license that is revoked or suspended for
14-14 cause shall surrender the license to the commissioner on demand.
14-15 (f) The commissioner may issue a license or reinstate a
14-16 suspended or revoked license on a finding that the cause for
14-17 suspension, revocation, or refusal no longer exists.
14-18 (g) A person whose license is suspended under this article
14-19 may apply for a new license only after the expiration of the period
14-20 of suspension. A person whose license is revoked or whose
14-21 application for a license is denied may not apply for a new license
14-22 until the expiration of 12 months after the date of the revocation
14-23 or denial.
14-24 Sec. 18. NOTICE TO LAST ADDRESS. Notice by registered mail,
14-25 return receipt requested, to the last known address of a license
14-26 applicant, license holder, or other person to whom notice of intent
14-27 to initiate disciplinary action is required to be sent under this
15-1 article, as reflected by the records of the department, constitutes
15-2 sufficient notice.
15-3 Sec. 19. CRIMINAL PENALTY; SANCTIONS. (a) A person commits
15-4 an offense if the person violates this article. An offense under
15-5 this subsection is a misdemeanor punishable by:
15-6 (1) a fine not to exceed $1,000;
15-7 (2) confinement in county jail for a term not to
15-8 exceed six months; or
15-9 (3) both the fine and confinement.
15-10 (b) In addition to the criminal penalty imposed under
15-11 Subsection (a) of this section, a person in violation of this
15-12 article is subject to the sanctions provided by Section 7, Article
15-13 21.21, of this code as if the person had violated an order under
15-14 that section.
15-15 SECTION 2. The commissioner of insurance shall adopt the
15-16 examination required by Section 5, Article 21.07-5, Insurance Code,
15-17 as added by this Act, not later than March 1, 1996. Pending the
15-18 adoption of the examination, the commissioner may issue a temporary
15-19 license to practice as a public adjuster to a person who satisfies
15-20 all the requirements for issuance of the license except the
15-21 examination requirement. A temporary license issued under this
15-22 subsection expires June 1, 1996, and may not be renewed.
15-23 SECTION 3. (a) Except as provided by Subsection (b) of this
15-24 section, this Act takes effect September 1, 1995.
15-25 (b) Sections 2(a) and 19, Article 21.07-5, Insurance Code,
15-26 as added by this Act, take effect January 1, 1996.
15-27 SECTION 4. The importance of this legislation and the
16-1 crowded condition of the calendars in both houses create an
16-2 emergency and an imperative public necessity that the
16-3 constitutional rule requiring bills to be read on three several
16-4 days in each house be suspended, and this rule is hereby suspended.