By Lucio S.B. No. 1669
74R9789 DLF-D
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to review of the termination of certain insurance agents.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Subchapter A, Chapter 21, Insurance Code, is
1-5 amended by adding Article 21.14A to read as follows:
1-6 Art. 21.14A. PROHIBITION ON WRONGFUL TERMINATION OF LOCAL
1-7 RECORDING AGENT OR SOLICITOR; REVIEW; REVIEW BOARD
1-8 Sec. 1. DEFINITIONS. In this article:
1-9 (1) "Agent" means a local recording agent or a
1-10 solicitor as those terms are defined by Section 2, Article 21.14,
1-11 of this code.
1-12 (2) "Review board" means the board of review created
1-13 by this article.
1-14 Sec. 2. MANDATORY REVIEW BY INSURER. (a) Each insurer who
1-15 enters into an agreement with an agent to use the services of the
1-16 agent shall establish a termination review process in accordance
1-17 with this section for an agent involuntarily terminated by the
1-18 insurer.
1-19 (b) Before terminating an agent's agreement, the insurer
1-20 must:
1-21 (1) send to the agent and the commissioner by
1-22 certified mail written notice of the proposed termination;
1-23 (2) notify the agent of the agent's right to a hearing
1-24 before a review board; and
2-1 (3) conduct a review under the termination review
2-2 process.
2-3 (c) Not later than the 15th day after the notice under
2-4 Subsection (b)(1) of this section is mailed, the insurer shall
2-5 notify the agent in writing of the reasons for the proposed
2-6 termination.
2-7 (d) The agent in writing may decline a review under this
2-8 section. The insurer shall provide a copy of the declination to
2-9 the commissioner.
2-10 (e) The insurer and the agent by mutual agreement may
2-11 terminate a review conducted under this section at any time. The
2-12 insurer shall notify the commissioner in writing of the termination
2-13 of a review under this subsection.
2-14 (f) A review by an insurer must be conducted not later than
2-15 the 15th day after the date on which the agent is notified of the
2-16 reasons for the proposed termination and before the date of
2-17 termination.
2-18 Sec. 3. REVIEW BOARD. (a) A review board shall be
2-19 established as provided by this section.
2-20 (b) The review board is composed of three members selected
2-21 from a list of 10 individuals compiled by the commissioner. To be
2-22 on the list an individual must serve as an arbitrator or mediator
2-23 for the alternative dispute resolution system established under
2-24 Chapter 152, Civil Practice and Remedies Code, by the county in
2-25 which the agent conducted business as an agent or, if there is no
2-26 alternative dispute resolution system in that county, must serve as
2-27 an arbitrator or mediator for the alternative dispute resolution
3-1 system in a county adjoining that county. If the appointment
3-2 system established by this section is impractical for a particular
3-3 county, the commissioner by rule shall determine the manner in
3-4 which individuals are selected for a list for that county.
3-5 (c) In compiling the list of prospective review board
3-6 members, the commissioner shall ensure that the individuals are
3-7 impartial. If, after the list is compiled, it is determined that
3-8 an individual on the list has a conflict of interest with respect
3-9 to the matter subject to review, the commissioner shall strike that
3-10 individual and substitute another.
3-11 (d) One member of the review board shall be selected by the
3-12 affected agent, one by the insurer, and one by the commissioner.
3-13 (e) The expenses of the review board shall be shared equally
3-14 by the agent and the insurer.
3-15 Sec. 4. POWERS OF REVIEW BOARD. A review board established
3-16 under this article may issue subpoenas, qualify witnesses,
3-17 administer oaths to witnesses, and take any other appropriate
3-18 action necessary to conduct hearings and issue orders under this
3-19 article.
3-20 Sec. 5. NOTICE; HEARING. (a) An agent whose agreement with
3-21 an insurer is terminated may request a hearing before the review
3-22 board.
3-23 (b) On receipt of a request for a hearing by an agent, the
3-24 commissioner shall set a hearing date. The hearing must be
3-25 conducted not later than the 30th day after the date on which the
3-26 request is received by the commissioner, or at a later date
3-27 approved by both the agent and the insurer.
4-1 (c) The commissioner shall notify the agent and the insurer
4-2 of the date, time, and place of the hearing.
4-3 (d) The members of the review board shall select one member
4-4 as moderator. The moderator shall convene and adjourn the hearings
4-5 of the review board.
4-6 (e) The review board shall provide the parties to the
4-7 hearing with an opportunity to present evidence and arguments in
4-8 support of their respective positions.
4-9 (f) The insurer and the agent are immune from civil
4-10 liability for disclosures made at the hearing. This immunity does
4-11 not extend to disclosures made in bad faith or with knowledge of
4-12 their falseness.
4-13 Sec. 6. BOARD DETERMINATION. (a) On completion of the
4-14 hearing, the review board shall determine if the termination of the
4-15 agent's agreement was wrongful or unjustified. If in the opinion
4-16 of at least two members of the review board an involuntary
4-17 termination was wrongful or unjustified, the review board shall
4-18 award the agent:
4-19 (1) the greater of:
4-20 (A) three times the agent's gross income from
4-21 the calendar year before the year in which the termination hearing
4-22 is held; or
4-23 (B) the agent's gross income from the 12 months
4-24 preceding the date on which the hearing begins; and
4-25 (2) any benefits that the agent would have received if
4-26 the agent had voluntarily terminated the agreement, including
4-27 regular termination benefits, insurance, and extended termination
5-1 benefits of the type provided to an agent who retires, resigns, or
5-2 otherwise voluntarily terminates an agreement with an insurer.
5-3 (b) The amount awarded under Subsection (a) may not be less
5-4 than the amount the agent is due under the agreement before the
5-5 termination.
5-6 (c) If the agent desires to be reinstated with the insurer,
5-7 the review board may order that the insurer reinstate the agent
5-8 under the agreement.
5-9 (d) The review board shall provide a copy of its order to
5-10 the agent, the insurer, and the commissioner.
5-11 Sec. 7. EMPLOYMENT BY OTHER INSURER. The agent may accept
5-12 an appointment to act as agent for another insurer if the agent
5-13 notifies the commissioner and the insurer in writing that the agent
5-14 desires to do so. Acceptance of an appointment under this section
5-15 does not affect an order of a review board issued under this
5-16 article.
5-17 Sec. 8. APPEAL. (a) An order of the commissioner or a
5-18 determination of the review board under this article may be
5-19 appealed to a court of competent jurisdiction by either party for a
5-20 trial de novo.
5-21 (b) An appeal under this section must be brought in the
5-22 county in which the agent conducted business as an agent.
5-23 (c) If the insurer brings an appeal in which the agent is
5-24 the prevailing party, the agent is entitled to attorney's fees and
5-25 court costs.
5-26 Sec. 9. DETERMINATION FOR INSURANCE COMPANY. If the review
5-27 board rules in favor of the insurer and the order is not appealed,
6-1 or if a court issues a final order in favor of the insurer, the
6-2 agent, not later than the 30th day after the review board or court
6-3 order becomes final, shall turn over all equipment, records, and
6-4 supplies in the possession of the agent and belonging to the
6-5 insurer.
6-6 Sec. 10. ADMINISTRATIVE PENALTY. (a) Failure by an insurer
6-7 or agent to comply with an order of the review board under this
6-8 article or an attempt by the insurer or agent to coerce or
6-9 intimidate a member of the review board is a violation of this
6-10 article and subjects the person to an administrative penalty under
6-11 Article 1.10E of this code.
6-12 (b) The review board may recommend that the commissioner
6-13 impose an administrative penalty under this article.
6-14 Sec. 11. RULES. The commissioner may adopt rules as
6-15 necessary to implement this article.
6-16 SECTION 2. This Act takes effect September 1, 1995.
6-17 SECTION 3. The importance of this legislation and the
6-18 crowded condition of the calendars in both houses create an
6-19 emergency and an imperative public necessity that the
6-20 constitutional rule requiring bills to be read on three several
6-21 days in each house be suspended, and this rule is hereby suspended.