1-1 By: Craddick (Senate Sponsor - Bivins) H.B. No. 578
1-2 (In the Senate - Received from the House March 12, 1997;
1-3 March 12, 1997, read first time and referred to Committee on
1-4 Economic Development; March 19, 1997, reported favorably by the
1-5 following vote: Yeas 7, Nays 0; March 19, 1997, sent to printer.)
1-6 A BILL TO BE ENTITLED
1-7 AN ACT
1-8 relating to certain licensed nonresident insurance agents.
1-9 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-10 SECTION 1. Article 21.11, Insurance Code, is amended to read
1-11 as follows:
1-12 Art. 21.11. NONRESIDENT [COMMISSIONS TO NON-RESIDENTS;
1-13 CANCELLATION OF NON-RESIDENT AGENT'S LICENSE; NON-RESIDENT AGENT
1-14 NOT TO ACT AS SURPLUS LINES] AGENT
1-15 Sec. 1. NONRESIDENT AGENT LICENSE. (a) Notwithstanding
1-16 Sections 3(a) and (b), Article 21.14, of this code, the department
1-17 shall license a person who is not a resident of this state to act
1-18 as a nonresident agent in accordance with Article 21.14 of this
1-19 code, subject to the limitations of this article.
1-20 (b) An applicant for issuance of a license under this
1-21 section must meet the requirements for issuance of a license under
1-22 Article 21.14 of this code, except that the department shall waive
1-23 any of those license requirements for an applicant with a valid
1-24 license from another state or jurisdiction that has license
1-25 requirements substantially equivalent to those of this state.
1-26 Sec. 2. RIGHTS OF LICENSE HOLDER. (a) Except as provided
1-27 by this section, a license issued under this article to an
1-28 individual who is not a resident of this state grants the same
1-29 rights and privileges afforded under a license issued under Article
1-30 21.14 of this code.
1-31 (b) A person who holds a license issued under this article
1-32 may not:
1-33 (1) maintain an office in this state;
1-34 (2) solicit insurance business in this state by any
1-35 method, including an oral, written, or electronic communication; or
1-36 (3) employ solicitors or others to directly or
1-37 indirectly solicit insurance in this state.
1-38 (c) The commissioner shall impose on a resident of another
1-39 state or jurisdiction of the United States who is an applicant for
1-40 a license or a holder of a license issued under this article any
1-41 requirement or restriction that:
1-42 (1) the other state or jurisdiction of the United
1-43 States imposes on a resident of this state who is a nonresident
1-44 applicant or license holder in that state or jurisdiction; and
1-45 (2) is in addition to or stricter than the
1-46 requirements or restrictions imposed under the insurance law of
1-47 this state on an applicant or license holder who is not a resident
1-48 of this state.
1-49 (d) For purposes of Subsection (c) of this section,
1-50 "requirement or restriction" includes a requirement or restriction
1-51 imposed by a law or regulation that:
1-52 (1) limits the rights or privileges of a person;
1-53 (2) affects a commission or other compensation paid to
1-54 a person; or
1-55 (3) imposes a condition precedent on a person.
1-56 Sec. 3. LIMITATIONS. (a) This article does not permit:
1-57 (1) [Any person, agent, firm, or corporation licensed
1-58 by the Board to act as a fire and marine, marine, tornado, rent,
1-59 accident, casualty, liability, health, elevator, disability, plate
1-60 glass, burglary, bonding, title, surety or fidelity insurance agent
1-61 in the State of Texas, is hereby prohibited from paying, directly
1-62 or indirectly, any commission, brokerage or other valuable
1-63 consideration on account of any policy or policies covering
1-64 property, person or persons in this State, to any person, persons,
2-1 agent, firm or corporation that is a non-resident of this State, or
2-2 to any person or persons, agent, firm or corporation not duly
2-3 licensed by the Board as a fire, fire and marine, marine, tornado,
2-4 rent, accident, casualty, liability, health, elevator, disability,
2-5 plate glass, burglary, bonding, title, surety or fidelity insurance
2-6 agent; excepting however, that on any policy of insurance
2-7 originated by a Licensed Non-Resident Insurance Agent, as
2-8 hereinafter defined, and covering property or persons in this
2-9 State, a Texas local Recording Agent may divide the commission with
2-10 the originating Licensed Non-Resident Insurance Agent, but in any
2-11 such case the insurance company or carrier shall pay to the Texas
2-12 Local Recording Agent through which such policy is issued, signed
2-13 or countersigned, his minimum share, which shall be a sum not less
2-14 than the amount of commission or brokerage required to be paid by
2-15 the laws or regulations of the State of such originating
2-16 Non-Resident Agent when a similar policy of insurance is originated
2-17 by a Texas Local Recording Agent covering persons or property in
2-18 such other State.]
2-19 [Nothing herein shall prevent a Texas Local Recording Agent
2-20 from dividing with, or paying commissions to, another Texas Local
2-21 Recording Agent. Nothing herein shall relieve any insurance
2-22 company or carrier covered thereby from writing Texas risks through
2-23 Texas agents as provided in Article 21.09, Insurance Code.]
2-24 [A Licensed Non-Resident Insurance Agent is any person, firm
2-25 or corporation residing or domiciled in another State and having a
2-26 Non-Resident Insurance Agent's license as is hereinafter
2-27 authorized.]
2-28 [Upon application, in such form as the Board of Insurance
2-29 Commissioners may require, a non-resident of this State who is duly
2-30 licensed to transact insurance other than life under the laws of
2-31 the State wherein such applicant resides, if such State does not
2-32 prohibit residents of this State from acting as insurance agent
2-33 therein, the Board of Insurance Commissioners may issue to such
2-34 applicant a Non-Resident Agent's license.]
2-35 [The issuance of a Non-Resident Agent's license shall be for
2-36 the purpose of permitting a Local Recording Agent of Texas to
2-37 divide commission with an agent of another State on insurance
2-38 covering property or persons in this State placed with or through a
2-39 Local Recording Agent, and to permit an agent of another State, who
2-40 qualifies and is licensed as a Non-Resident Agent, to inspect and
2-41 service such risks in Texas, which license shall be subject to the
2-42 same fees, qualifications, requirements and restrictions as apply
2-43 to Local Recording Agents of this State, except that an office
2-44 shall not be maintained in this State by a Non-Resident Agent and
2-45 all such insurance transacted shall be through licensed Local
2-46 Recording Agents as provided in Article 21.09 of the Texas
2-47 Insurance Code; and provided further that a Non-Resident Agent
2-48 shall transact all matters with the Board of Insurance
2-49 Commissioners relating to rates and rate engineering and
2-50 terminology of standard policy forms through Local Recording
2-51 Agents, and nothing contained herein shall be construed as granting
2-52 authority to a Non-Resident Agent to transact such matters directly
2-53 with the Board of Insurance Commissioners; and, except that the
2-54 Board of Insurance Commissioners, at its discretion, on payment by
2-55 applicant of the examination fee, may enter into a reciprocal
2-56 arrangement with the officer having jurisdiction of insurance
2-57 business in any other State to accept in lieu of the written
2-58 examination of such an applicant residing therein, a certificate of
2-59 such officer to the effect that the applicant is licensed as an
2-60 insurance agent in such State and has complied with its
2-61 qualification standards in respect to the following:]
2-62 [(a) Experience or training;]
2-63 [(b) Reasonable familiarity with the broad principles
2-64 of insurance, licensing and regulatory laws, and with provisions,
2-65 terms, and conditions of the insurance which applicant proposes to
2-66 transact; and]
2-67 [(c) A fair and general understanding of the
2-68 obligations and duties of an insurance agent.]
2-69 [Nothing contained herein shall be construed to permit] any
3-1 person or firm [who is] licensed solely as a broker in the person's
3-2 or firm's state [State] of [his] residence to be granted a
3-3 [Non-Resident] license under this article [as referred to herein];
3-4 (2) [provided further that nothing contained herein
3-5 shall be construed to permit] a holder of a [Non-Resident Agent's]
3-6 license issued under this article to act as a surplus lines agent
3-7 [Surplus Lines Agent] under [the provisions of] Article 1.14-2 of
3-8 this code [the Insurance Code] or to perform any of the acts
3-9 permitted under Article 1.14-2 of this code, except as provided
3-10 under Section 10, Article 21.54, of this code; [thereunder] or
3-11 (3) [to permit] any person or firm who holds a
3-12 [Non-Resident Agent's] license issued under this article [as
3-13 authorized herein] to engage in any form of direct solicitation of
3-14 insurance within this state [State].
3-15 (b) The commissioner shall revoke a nonresident agent's [A
3-16 Non-Resident Agent's] license issued under this article if the
3-17 commissioner finds [shall be cancelled and not be subject to
3-18 reissuance when it is found by the Board of Insurance
3-19 Commissioners] that the [such] license was obtained or is being
3-20 used for the purpose of transacting insurance through a local
3-21 recording agent [Local Recording Agent] in [such] a manner that
3-22 permits the individual licensed under this article [as to permit a
3-23 Non-Resident Agent], by subterfuge, to transact insurance as a
3-24 local recording agent.
3-25 (c) In the circumstances described by Subsection (b) of this
3-26 section, the commissioner shall also revoke [Local Recording Agent,
3-27 and in which event] the license of the affected local recording
3-28 agent.
3-29 (d) A license revoked under Subsection (b) or (c) of this
3-30 section is [Local Recording Agent likewise shall be cancelled and]
3-31 not [be] subject to reissuance before the fifth anniversary of the
3-32 date the revocation is effective.
3-33 (e) The commissioner shall order that any [and all]
3-34 insurance transacted under an [such] arrangement described by
3-35 Subsection (b) of this section [shall] be cancelled[, provided
3-36 further that the provisions of Sections 16 and 17, Article 21.14 of
3-37 the Insurance Code shall apply to such cancellation].
3-38 (f) Article 21.01-2 of this code applies to licensing of a
3-39 nonresident agent under this article.
3-40 Sec. 4. HOME OFFICE EMPLOYEE. This article does not affect
3-41 the authority established under Section 20, Article 21.14, of this
3-42 code of an actual full-time home office salaried employee of an
3-43 insurance carrier licensed to do business in this state.
3-44 Sec. 5. RULES. The commissioner may adopt rules to
3-45 implement this article.
3-46 SECTION 2. Article 21.09, Insurance Code, is repealed.
3-47 SECTION 3. This Act applies only to conduct occurring on or
3-48 after the effective date of this Act. Conduct occurring before the
3-49 effective date of this Act is governed by the law as it existed
3-50 immediately before the effective date of this Act, and that law is
3-51 continued in effect for that purpose.
3-52 SECTION 4. The importance of this legislation and the
3-53 crowded condition of the calendars in both houses create an
3-54 emergency and an imperative public necessity that the
3-55 constitutional rule requiring bills to be read on three several
3-56 days in each house be suspended, and this rule is hereby suspended,
3-57 and that this Act take effect and be in force from and after its
3-58 passage, and it is so enacted.
3-59 * * * * *