By Patterson S.B. No. 715
74R5957 PB-F
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 directly or
1-13 indirectly solicits from the insured or the insured's
1-14 representative the contractual right and obligation to lawfully
1-15 provide services relating to the adjustment of a loss involving
1-16 physical damage to real or personal property. The term does not
1-17 include a person employed only to furnish technical assistance or
1-18 clerical support.
1-19 Sec. 2. LICENSE REQUIRED; EXEMPTION. (a) A person may not
1-20 act as or hold out to be a public adjuster in this state unless the
1-21 person holds a license issued by the commissioner under Section 6
1-22 or 7 of this article.
1-23 (b) This article does not apply to an attorney licensed by
1-24 this state.
2-1 (c) The practice of functions under this article by a
2-2 licensed public adjuster does not constitute the unauthorized
2-3 practice of law.
2-4 Sec. 3. LICENSE APPLICATION. (a) An applicant for a public
2-5 adjuster's license shall apply to the commissioner on a form
2-6 prescribed by the commissioner.
2-7 (b) As part of the application, the applicant shall furnish
2-8 information concerning the applicant's identity, personal history,
2-9 business records, and other pertinent facts as required by the
2-10 commissioner, and shall comply with the security requirements
2-11 imposed under Section 4 of this article. The commissioner may
2-12 require an applicant to include a sample of the applicant's
2-13 fingerprints and a passport-type photograph.
2-14 (c) The completed application must be notarized.
2-15 (d) An applicant shall pay a $250 application fee for each
2-16 application submitted. The fee must be submitted with the
2-17 application and is nonrefundable.
2-18 Sec. 4. SECURITY REQUIREMENTS. (a) Each applicant for a
2-19 public adjuster's license shall file a bond or other security with
2-20 the commissioner as required by this section. The bond must be
2-21 executed and issued by a surety insurer and must be in the amount
2-22 of $25,000, payable to the commissioner for the use and benefit of
2-23 any person who recovers a judgment against the individual license
2-24 holder, and conditioned on the faithful performance of the license
2-25 holder in connection with the license holder's business as a public
2-26 adjuster.
2-27 (b) Instead of a bond under Subsection (a) of this section,
3-1 an applicant may:
3-2 (1) file with the commissioner a professional
3-3 liability policy or similar policy or contract of professional
3-4 liability coverage acceptable to the commissioner that insures the
3-5 individual applicant against errors and omissions in at least the
3-6 amount of $50,000, with a deductible not to exceed $1,500; or
3-7 (2) deposit with the state treasurer cash or
3-8 securities of the class authorized by Articles 2.08 and 2.10 of
3-9 this code that have a fair market value of at least $50,000, to be
3-10 held exclusively for the protection of a person who recovers a
3-11 final judgment against the applicant.
3-12 (c) A professional liability policy provided by a public
3-13 adjuster's employer constitutes satisfactory compliance with the
3-14 requirements of this section if the employer's professional
3-15 liability policy has a minimum liability limit of $250,000 for all
3-16 employees.
3-17 (d) If a bond is used to satisfy the requirements of this
3-18 section, the bond must specifically authorize recovery by the
3-19 commissioner of the damages sustained if the license holder is
3-20 determined to be guilty of fraud or unfair practices in connection
3-21 with the license holder's business as a public adjuster. The
3-22 aggregate liability of the surety for all damages may not exceed
3-23 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 a final judgment has been recovered against the
4-15 applicant and the final judgment remains unsatisfied. The final
4-16 judgment may be paid from the deposit only to the extent of
4-17 deficiency in satisfaction of the final judgment.
4-18 Sec. 5. LICENSE EXAMINATION; ADVISORY COMMITTEE. (a) The
4-19 commissioner shall adopt a written examination for a public
4-20 adjuster's license that is similar to the examination administered
4-21 for an insurance adjuster's license under Section 10, Chapter 407,
4-22 Acts of the 63rd Legislature, Regular Session, 1973 (Article
4-23 21.07-4, Vernon's Texas Insurance Code).
4-24 (b) The commissioner shall appoint an industry advisory
4-25 committee, composed of at least five members, to assist in
4-26 developing the examination required by this section. At least
4-27 three members must be persons who are eligible for licensure as
5-1 public adjusters. At least one member must be a person from the
5-2 insurance industry who is not a public adjuster. A member of the
5-3 advisory committee is not entitled to compensation for service on
5-4 the committee. A member is entitled to reimbursement for
5-5 reasonable and necessary expenses incurred in performing services
5-6 for the committee, subject to any applicable limitation in the
5-7 General Appropriations Act.
5-8 (c) An examination is not required for the renewal of a
5-9 license issued under this article.
5-10 Sec. 6. LICENSE ISSUANCE; QUALIFICATIONS. The commissioner
5-11 shall issue a public adjuster's license to an applicant on
5-12 determining that the application meets the requirements of this
5-13 article, that the license fee has been paid, and that the
5-14 applicant:
5-15 (1) is at least 18 years of age;
5-16 (2) is a citizen of the United States and a resident
5-17 of this state;
5-18 (3) is trustworthy and of a moral character that
5-19 reasonably ensures that the applicant will conduct the business of
5-20 a public adjuster fairly and in good faith without detriment to the
5-21 members of the public whose interests the public adjuster may
5-22 represent;
5-23 (4) has never been convicted of a felony or if
5-24 convicted of a felony, has received a full pardon from that
5-25 conviction and is otherwise relieved from any disabilities
5-26 connected with that conviction;
5-27 (5) has sufficient experience or training relating to
6-1 the assessment of:
6-2 (A) real and personal property values; and
6-3 (B) physical loss or damage to real or personal
6-4 property that may be the subject of insurance and claims under
6-5 insurance;
6-6 (6) has a general understanding of the earnings
6-7 capabilities of insurance;
6-8 (7) is sufficiently informed as to the terms and
6-9 effects of the types of insurance contracts that provide coverage
6-10 on real and personal property;
6-11 (8) possesses knowledge and experience adequate to
6-12 enable the applicant to engage in the business of a public adjuster
6-13 fairly and without injury to the public or any member of the public
6-14 with whom the public adjuster may have business as a public
6-15 adjuster;
6-16 (9) has successfully passed the license examination
6-17 adopted under Section 5 of this article or is exempt from the
6-18 examination requirement under this article; and
6-19 (10) has complied with the security requirements
6-20 imposed under Section 4 of this article.
6-21 Sec. 7. LICENSE BY RECIPROCITY. (a) The commissioner may
6-22 issue a reciprocal license to an applicant for a public adjuster
6-23 license who is not a permanent resident of this state if the
6-24 applicant:
6-25 (1) holds a license as a public adjuster issued by
6-26 another state that:
6-27 (A) the commissioner determines to have license
7-1 requirements substantially similar to those of this state; and
7-2 (B) grants analogous reciprocity to residents of
7-3 this state;
7-4 (2) files a bond in accordance with Section 4 of this
7-5 article in the amount required by Subsection (b) of this section;
7-6 and
7-7 (3) pays the application fee required by Subsection
7-8 (c) of this section.
7-9 (b) An applicant for a reciprocal license must file a bond
7-10 with the department in the amount of $100,000. If more than one
7-11 applicant from the same firm applies, the bond amount is increased
7-12 by $25,000 per applicant, to a maximum of $200,000 per firm.
7-13 (c) An applicant for a reciprocal license shall pay an
7-14 application fee of $1,500. If more than one applicant from the
7-15 same firm applies, the application fee is increased by $500 for
7-16 each additional applicant, to a maximum of $3,500 per firm.
7-17 (d) Each person who holds a reciprocal license shall comply
7-18 with all laws, including rules, of this state applicable to public
7-19 adjusters, including the law governing the collection of state
7-20 sales tax as appropriate for services performed under this article.
7-21 (e) The commissioner may enter into reciprocal agreements
7-22 with the appropriate officials of any other state to implement this
7-23 section.
7-24 Sec. 8. REGISTRATION PROGRAM FOR PUBLIC ADJUSTER TRAINEES.
7-25 (a) A public adjuster trainee must register with the department
7-26 for a temporary certificate under this section. An applicant for a
7-27 temporary certificate as a trainee shall apply to the commissioner
8-1 on a form prescribed by the commissioner. The form must be
8-2 accompanied by a nonrefundable $125 registration fee.
8-3 (b) A temporary certificate may be issued under this section
8-4 only for educational and training purposes. The holder of a
8-5 temporary certificate may practice only under the direction and
8-6 sponsorship of a licensed public adjuster.
8-7 (c) The sponsor of a public adjuster trainee shall attest,
8-8 on a form prescribed by the commissioner, that the trainee is under
8-9 the supervision and control of the sponsor, and that the sponsor
8-10 has met the security requirements of Section 4 of this article.
8-11 (d) A temporary certificate expires on the 180th day after
8-12 the date of issuance, and may be renewed once on application to the
8-13 commissioner. A person is not entitled to hold more than two
8-14 consecutive temporary certificates.
8-15 (e) Each person who holds a temporary certificate under this
8-16 section must comply with the security requirements imposed under
8-17 Section 4 of this article.
8-18 Sec. 9. PLACE OF BUSINESS. Each licensed public adjuster
8-19 shall maintain in this state a place of business accessible to the
8-20 general public. The address of the place of business must appear
8-21 on the face of the license. Each license holder shall promptly
8-22 notify the commissioner of any change in the address.
8-23 Sec. 10. CONDUCT TO COMPLY WITH CONTRACT. A licensed public
8-24 adjuster shall prepare each claim for an insured represented by the
8-25 adjuster in accordance with the terms and conditions of the
8-26 contract of insurance under which recovery is sought.
8-27 Sec. 11. CODE OF ETHICS. The commissioner by rule may adopt
9-1 a code of ethics for public adjusters to:
9-2 (1) foster the education of public adjusters
9-3 concerning the ethical, legal, and business principles that should
9-4 govern their conduct; and
9-5 (2) adopt recommendations regarding the solicitation
9-6 of the adjustment of losses by public adjusters.
9-7 Sec. 12. PUBLIC ADJUSTER AUTHORITY; EXEMPTION FROM INSURANCE
9-8 LAWS. (a) This article does not limit or diminish the authority
9-9 of a public adjuster licensed under this article to investigate or
9-10 adjust a loss to less than the authority for that purpose that may
9-11 be exercised by an adjuster licensed under Chapter 407, Acts of the
9-12 63rd Legislature, Regular Session, 1973 (Article 21.07-4, Vernon's
9-13 Texas Insurance Code).
9-14 (b) A public adjuster licensed under this article is exempt
9-15 from:
9-16 (1) Articles 21.01, 21.02, 21.02-1, 21.04, 21.06,
9-17 21.07, and 21.14 of this code;
9-18 (2) Chapter 213, Acts of the 54th Legislature, Regular
9-19 Session, 1955 (Article 21.07-1, Vernon's Texas Insurance Code);
9-20 (3) Chapter 757, Acts of the 60th Legislature, Regular
9-21 Session, 1967 (Article 21.07-3, Vernon's Texas Insurance Code); and
9-22 (4) Chapter 407, Acts of the 63rd Legislature, Regular
9-23 Session, 1973 (Article 21.07-4, Vernon's Texas Insurance Code).
9-24 Sec. 13. LICENSE RENEWAL; CONTINUING EDUCATION REQUIREMENT.
9-25 (a) A license issued under this article expires on the first
9-26 anniversary of the date of issuance. A license holder may renew
9-27 the license by filing a renewal application with the commissioner
10-1 in the form prescribed by the commissioner that demonstrates
10-2 continued compliance with the license requirements imposed under
10-3 this article or adopted by rule by the commissioner. The renewal
10-4 application must be accompanied by a $75 renewal fee and evidence
10-5 of compliance with the continuing education requirements imposed
10-6 under Subsection (b) of this section.
10-7 (b) Each license holder must annually complete at least 15
10-8 hours of continuing education courses. The commissioner by rule
10-9 shall prescribe the requirements for continuing education courses
10-10 under this article.
10-11 (c) A license holder must submit the renewal information and
10-12 renewal fee to the commissioner not later than the 30th day after
10-13 the anniversary date of the license. If the license holder fails
10-14 to submit the renewal application and fee within the required
10-15 period, the license lapses.
10-16 Sec. 14. PROHIBITED CONDUCT. (a) A public adjuster may not
10-17 render legal advice to any person in the adjuster's capacity as a
10-18 public adjuster.
10-19 (b) A public adjuster may not represent an insured on a
10-20 claim or charge a fee to an insured while representing the
10-21 insurance carrier against which the claim is made.
10-22 (c) A public adjuster may not, between the hours of 10 p.m.
10-23 and 6:00 a.m., solicit or attempt to solicit on a loss or claim in
10-24 person, by telephone, or in any other manner.
10-25 (d) A public adjuster may not solicit or attempt to solicit,
10-26 directly or indirectly, on any loss involving bodily injury covered
10-27 by a life, health, or accident insurance policy.
11-1 (e) A public adjuster may not acquire an interest in
11-2 salvaged property that is the subject of a claim adjusted by the
11-3 public adjuster without the knowledge and consent of the insured.
11-4 (f) A public adjuster may not participate directly or
11-5 indirectly in the reconstruction, repair, or restoration of the
11-6 damaged property or engage in any other activities that may
11-7 reasonably be construed as presenting a conflict of interest.
11-8 Sec. 15. DENIAL, SUSPENSION, OR REVOCATION OF LICENSE. (a)
11-9 The commissioner may deny, suspend, or revoke a public adjuster's
11-10 license for:
11-11 (1) a violation of this article;
11-12 (2) a cause that constitutes grounds for denial of an
11-13 original license;
11-14 (3) willful misrepresentation or fraud in obtaining
11-15 the license;
11-16 (4) failure to pass the license examination;
11-17 (5) misappropriation or conversion by the license
11-18 applicant or license holder of money required to be held in a
11-19 fiduciary capacity;
11-20 (6) material misrepresentation, with intent to
11-21 deceive, of the terms of an insurance contract;
11-22 (7) engaging in a fraudulent transaction;
11-23 (8) demonstrated incompetence or untrustworthiness in
11-24 the conduct of the license holder's affairs under the license, as
11-25 determined by the commissioner;
11-26 (9) conviction of a felony by a final judgment in a
11-27 court of competent jurisdiction; or
12-1 (10) material misrepresentation, with intent to
12-2 deceive, of the person's status as a public adjuster.
12-3 (b) A license applicant or license holder who is denied a
12-4 license or whose license is revoked or suspended under this section
12-5 is entitled to notice and a hearing as provided by Section 5,
12-6 Article 21.01-2, of this code.
12-7 (c) A final order entered as a result of a hearing under
12-8 this section may be appealed to a court of competent jurisdiction
12-9 as provided by Subchapter G, Chapter 2001, Government Code.
12-10 (d) An order suspending a public adjuster's license must
12-11 specify the period of the suspension not to exceed 12 months.
12-12 (e) The holder of a license that is revoked or suspended for
12-13 cause shall surrender the license to the commissioner on demand.
12-14 (f) The commissioner may issue a license or reinstate a
12-15 suspended or revoked license on a finding that the cause for
12-16 suspension, revocation, or refusal no longer exists.
12-17 (g) A person whose license is suspended under this article
12-18 may apply for a new license only after the expiration of the period
12-19 of suspension. A person whose license is revoked or whose
12-20 application for a license is denied may not apply for a new license
12-21 until the expiration of 12 months after the date of the revocation
12-22 or denial.
12-23 Sec. 16. NOTICE TO LAST ADDRESS. Notice by registered mail,
12-24 return receipt requested, to the last known address of a license
12-25 applicant, license holder, or other person to whom notice is
12-26 required to be sent under this article, as reflected by the records
12-27 of the department, constitutes sufficient notice.
13-1 Sec. 17. CRIMINAL PENALTY; SANCTIONS. (a) A person commits
13-2 an offense if the person violates this article. An offense under
13-3 this subsection is a misdemeanor punishable by:
13-4 (1) a fine not to exceed $1,000;
13-5 (2) confinement in county jail for a term not to
13-6 exceed six months; or
13-7 (3) both the fine and confinement.
13-8 (b) In addition to the criminal penalty imposed under
13-9 Subsection (a) of this section, a person in violation of this
13-10 article is subject to the sanctions provided by Section 7, Article
13-11 21.21, of this code as if the person had violated an order under
13-12 that section.
13-13 SECTION 2. (a) The commissioner of insurance shall appoint
13-14 the members of the advisory committee created under Section 5(b),
13-15 Article 21.07-5, Insurance Code, as added by this Act, not later
13-16 than October 31, 1995.
13-17 (b) The commissioner of insurance shall adopt the
13-18 examination required by Section 5, Article 21.07-5, Insurance Code,
13-19 as added by this Act, not later than March 1, 1996. Pending the
13-20 adoption of the examination, the commissioner may issue a temporary
13-21 license to practice as a public adjuster to a person who satisfies
13-22 all the requirements for issuance of the license except the
13-23 examination requirement. A temporary license issued under this
13-24 subsection expires June 1, 1996, and may not be renewed.
13-25 SECTION 3. (a) Except as provided by Subsection (b) of this
13-26 section, this Act takes effect September 1, 1995.
13-27 (b) Sections 2(a) and 17, Article 21.07-5, Insurance Code,
14-1 as added by this Act, take effect January 1, 1996.
14-2 SECTION 4. The importance of this legislation and the
14-3 crowded condition of the calendars in both houses create an
14-4 emergency and an imperative public necessity that the
14-5 constitutional rule requiring bills to be read on three several
14-6 days in each house be suspended, and this rule is hereby suspended.