By Lewis of Tarrant H.B. No. 1544 75R5653 PB-D 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: 1-24 (1) an attorney licensed by this state; or 2-1 (2) a licensed local recording agent or a solicitor 2-2 for a local recording agent while acting for an insured concerning 2-3 a loss under a policy issued by that agent. 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 (1) executed and issued by a surety insurer; 2-22 (2) in the amount of $25,000; 2-23 (3) payable to the commissioner for the use and 2-24 benefit of any person who recovers a judgment against the 2-25 individual license holder; and 2-26 (4) conditioned on the faithful performance of the 2-27 license holder in connection with the license holder's business as 3-1 a public adjuster. 3-2 (b) Instead of a bond under Subsection (a) of this section, 3-3 an applicant may: 3-4 (1) file with the commissioner a professional 3-5 liability policy or similar policy or contract of professional 3-6 liability coverage acceptable to the commissioner that insures the 3-7 individual applicant against errors and omissions in connection 3-8 with the applicant's business as a public adjuster in at least the 3-9 amount of $50,000, with a deductible not to exceed $1,500; or 3-10 (2) deposit with the state treasurer cash or 3-11 securities of the class authorized by Articles 2.08 and 2.10 of 3-12 this code that have a fair market value of at least $50,000, to be 3-13 held exclusively for the protection of a person who recovers a 3-14 final judgment against the applicant in connection with the 3-15 applicant's business as a public adjuster. 3-16 (c) A professional liability policy provided by a public 3-17 adjuster's employer constitutes satisfactory compliance with the 3-18 requirements of this section if the employer's professional 3-19 liability policy has a minimum liability limit of $250,000 for all 3-20 employees. 3-21 (d) If a bond is used to satisfy the requirements of this 3-22 section, the bond must specifically authorize recovery by the 3-23 commissioner of the damages sustained if the license holder is 3-24 determined to be guilty of fraud or unfair practices in connection 3-25 with the license holder's business as a public adjuster. The 3-26 aggregate liability of the surety for all damages may not exceed 3-27 the amount of the bond. 4-1 (e) A deposit with the state treasurer made under Subsection 4-2 (b)(2) of this section may be withdrawn by the applicant only on 4-3 filing with the commissioner evidence satisfactory to the 4-4 commissioner that the applicant has withdrawn from the business of 4-5 public adjusting and: 4-6 (1) does not have any outstanding unsecured 4-7 liabilities; or 4-8 (2) has provided for the protection of a person who 4-9 recovers a final error judgment against the applicant in connection 4-10 with the applicant's business as a public adjuster by furnishing an 4-11 errors and omissions policy or a bond as otherwise provided by this 4-12 section. 4-13 (f) Securities deposited under this section may be exchanged 4-14 periodically for other qualified securities. 4-15 (g) A binding commitment to issue an insurance policy or 4-16 bond or the tender of the securities in connection with a license 4-17 application is sufficient evidence of the applicant's ability to 4-18 comply with this section on issuance of a license. 4-19 (h) All or part of a deposit may be paid to a person on a 4-20 showing that a final judgment has been recovered against the 4-21 license holder in connection with the license holder's business as 4-22 a public adjuster and the final judgment remains unsatisfied. The 4-23 final judgment may be paid from the deposit only to the extent of 4-24 deficiency in satisfaction of the final judgment. 4-25 Sec. 5. LICENSE EXAMINATION; ADVISORY COMMITTEE. (a) The 4-26 commissioner shall adopt a written examination for a public 4-27 adjuster's license that is similar to the examination administered 5-1 for an insurance adjuster's license under Section 10, Chapter 407, 5-2 Acts of the 63rd Legislature, Regular Session, 1973 (Article 5-3 21.07-4, Vernon's Texas Insurance Code). 5-4 (b) The commissioner shall appoint an industry advisory 5-5 committee, composed of at least five members, to assist in 5-6 developing the examination required by this section. At least 5-7 three members must be persons who are eligible for licensure as 5-8 public adjusters. At least one member must be a person from the 5-9 insurance industry who is not a public adjuster. A member of the 5-10 advisory committee is not entitled to compensation for service on 5-11 the committee. A member is entitled to reimbursement for 5-12 reasonable and necessary expenses incurred in performing services 5-13 for the committee, subject to any applicable limitation in the 5-14 General Appropriations Act. 5-15 (c) An examination is not required for the renewal of a 5-16 license issued under this article. 5-17 Sec. 6. LICENSE ISSUANCE; QUALIFICATIONS. The commissioner 5-18 shall issue a public adjuster's license to an applicant on 5-19 determining that the application meets the requirements of this 5-20 article, that the license fee has been paid, and that the 5-21 applicant: 5-22 (1) is at least 18 years of age; 5-23 (2) is a citizen of the United States; 5-24 (3) is a resident of this state; 5-25 (4) is trustworthy and of a moral character that 5-26 reasonably ensures that the applicant will conduct the business of 5-27 a public adjuster fairly and in good faith without detriment to the 6-1 members of the public whose interests the public adjuster may 6-2 represent; 6-3 (5) has never been convicted of a felony or if 6-4 convicted of a felony has received a full pardon from that 6-5 conviction and is otherwise relieved from any disabilities 6-6 connected with that conviction; 6-7 (6) has sufficient experience or training relating to 6-8 the assessment of: 6-9 (A) real and personal property values; and 6-10 (B) physical loss or damage to real or personal 6-11 property that may be the subject of insurance and claims under 6-12 insurance; 6-13 (7) has a general understanding of the earnings 6-14 capabilities of insurance; 6-15 (8) is sufficiently informed as to the terms and 6-16 effects of the types of insurance contracts that provide coverage 6-17 on real and personal property; 6-18 (9) possesses knowledge and experience adequate to 6-19 enable the applicant to engage in the business of a public adjuster 6-20 fairly and without injury to the public or any member of the public 6-21 with whom the public adjuster may have business as a public 6-22 adjuster; 6-23 (10) has successfully passed the license examination 6-24 adopted under Section 5 of this article or is exempt from the 6-25 examination requirement under this article; and 6-26 (11) has complied with the security requirements 6-27 imposed under Section 4 of this article. 7-1 Sec. 7. NONRESIDENT LICENSE. (a) The commissioner may 7-2 issue a nonresident license to an applicant for a public adjuster 7-3 license who is not a permanent resident of this state if the 7-4 applicant: 7-5 (1) holds a license as a public adjuster issued by 7-6 another state; 7-7 (2) files a bond in accordance with Section 4 of this 7-8 article in the amount required by Subsection (b) of this section; 7-9 and 7-10 (3) pays the application fee required by Subsection 7-11 (c) of this section. 7-12 (b) An applicant for a nonresident license must file a bond 7-13 with the department in the amount of $50,000. 7-14 (c) An applicant for a nonresident license shall pay an 7-15 application fee of $350. 7-16 (d) Each person who holds a nonresident license shall comply 7-17 with all laws, including rules, of this state applicable to public 7-18 adjusters, including the law governing the collection of state 7-19 sales tax as appropriate for services performed under this article. 7-20 Sec. 8. REGISTRATION PROGRAM FOR PUBLIC ADJUSTER TRAINEES. 7-21 (a) A public adjuster trainee must register with the department 7-22 for a temporary certificate under this section. An applicant for a 7-23 temporary certificate as a trainee shall apply to the commissioner 7-24 on a form prescribed by the commissioner. The form must be 7-25 accompanied by a nonrefundable $125 registration fee. 7-26 (b) A temporary certificate may be issued under this section 7-27 only for educational and training purposes. The holder of a 8-1 temporary certificate may practice only under the direction and 8-2 sponsorship of a licensed public adjuster. 8-3 (c) The sponsor of a public adjuster trainee shall attest, 8-4 on a form prescribed by the commissioner, that the trainee is under 8-5 the supervision and control of the sponsor and that the sponsor has 8-6 met the security requirements of Section 4 of this article. 8-7 (d) A temporary certificate expires on the 180th day after 8-8 the date of issuance and may be renewed once on application to the 8-9 commissioner. A person is not entitled to hold more than two 8-10 consecutive temporary certificates. 8-11 (e) Each person who holds a temporary certificate under this 8-12 section must comply with the security requirements imposed under 8-13 Section 4 of this article. 8-14 Sec. 9. PLACE OF BUSINESS; AGENT FOR SERVICE OF PROCESS. 8-15 (a) Each licensed public adjuster who is a resident of this state 8-16 shall maintain in this state a place of business accessible to the 8-17 general public. The address of the place of business must appear 8-18 on the face of the license. Each license holder shall promptly 8-19 notify the commissioner of any change in the address. 8-20 (b) Each nonresident public adjuster shall maintain an agent 8-21 in this state for service of process. The name and address of the 8-22 agent must appear on the face of the license. The license holder 8-23 shall promptly notify the department of any change in the agent for 8-24 service of process. 8-25 Sec. 10. CONDUCT TO COMPLY WITH CONTRACT. A licensed 8-26 public adjuster shall prepare each claim for an insured represented 8-27 by the adjuster in accordance with the terms and conditions of the 9-1 contract of insurance under which recovery is sought. 9-2 Sec. 11. CODE OF ETHICS. The commissioner by rule may 9-3 adopt a code of ethics for public adjusters to: 9-4 (1) foster the education of public adjusters 9-5 concerning the ethical, legal, and business principles that should 9-6 govern their conduct; and 9-7 (2) adopt recommendations regarding the solicitation 9-8 of the adjustment of losses by public adjusters. 9-9 Sec. 12. PUBLIC ADJUSTER AUTHORITY; EXEMPTION FROM INSURANCE 9-10 LAWS. (a) This article does not limit or diminish the authority 9-11 of a public adjuster licensed under this article to investigate or 9-12 adjust a loss to less than the authority for that purpose that may 9-13 be exercised by an adjuster licensed under Chapter 407, Acts of the 9-14 63rd Legislature, Regular Session, 1973 (Article 21.07-4, Vernon's 9-15 Texas Insurance Code). 9-16 (b) A public adjuster licensed under this article is exempt 9-17 from: 9-18 (1) Articles 21.01, 21.02, 21.02-1, 21.04, 21.06, 9-19 21.07, and 21.14 of this code; 9-20 (2) Chapter 213, Acts of the 54th Legislature, Regular 9-21 Session, 1955 (Article 21.07-1, Vernon's Texas Insurance Code); 9-22 (3) Chapter 757, Acts of the 60th Legislature, Regular 9-23 Session, 1967 (Article 21.07-3, Vernon's Texas Insurance Code); and 9-24 (4) Chapter 407, Acts of the 63rd Legislature, Regular 9-25 Session, 1973 (Article 21.07-4, Vernon's Texas Insurance Code). 9-26 Sec. 13. LICENSE RENEWAL; CONTINUING EDUCATION REQUIREMENT. 9-27 (a) A license issued under this article expires on the first 10-1 anniversary of the date of issuance. A license holder may renew 10-2 the license by filing a renewal application with the commissioner 10-3 in the form prescribed by the commissioner that demonstrates 10-4 continued compliance with the license requirements imposed under 10-5 this article or adopted by rule by the commissioner. The renewal 10-6 application must be accompanied by a $75 renewal fee and evidence 10-7 of compliance with the continuing education requirements imposed 10-8 under Subsection (b) of this section. 10-9 (b) Each license holder must annually complete at least 15 10-10 hours of continuing education courses. The commissioner by rule 10-11 shall prescribe the requirements for continuing education courses 10-12 under this article. 10-13 (c) A license holder must submit the renewal information and 10-14 renewal fee to the commissioner not later than the 30th day after 10-15 the anniversary date of the license. If the license holder fails 10-16 to submit the renewal application and fee within the required 10-17 period, the license lapses. 10-18 Sec. 14. CONTINGENT FEES. (a) Except as provided by 10-19 Subsection (b) of this section, a public adjuster may receive a 10-20 contingent fee for adjusting a claim under this article. A 10-21 contingent fee collected under this section may not exceed 15 10-22 percent of the amount of the insurance settlement on the claim. 10-23 (b) A public adjuster may not receive a contingent fee on a 10-24 claim for which an insurance company, not later than 72 hours after 10-25 the date on which the loss is reported to the insurance company, 10-26 either pays or commits in writing to pay to the insured the policy 10-27 limit of the insurance policy in accordance with Article 6.13 of 11-1 this code. The public adjuster is entitled to reasonable 11-2 compensation from the insured for services provided by the adjuster 11-3 on behalf of the insured, based on the time spent on a claim that 11-4 is subject to this subsection and expenses incurred by the 11-5 adjuster, until the claim is paid or the insured receives a written 11-6 commitment to pay from the insurance company. 11-7 Sec. 15. PROHIBITED CONDUCT. (a) A public adjuster may not 11-8 render legal advice to any person in the adjuster's capacity as a 11-9 public adjuster. 11-10 (b) A public adjuster may not represent an insured on a 11-11 claim or charge a fee to an insured while representing the 11-12 insurance carrier against which the claim is made. 11-13 (c) A public adjuster may not, between the hours of 10 p.m. 11-14 and 6 a.m., solicit or attempt to solicit on a loss or claim in 11-15 person, by telephone, or in any other manner. 11-16 (d) A public adjuster may not solicit or attempt to solicit, 11-17 directly or indirectly, on any loss involving bodily injury covered 11-18 by a life, health, or accident insurance policy. 11-19 (e) A public adjuster may not acquire an interest in 11-20 salvaged property that is the subject of a claim adjusted by the 11-21 public adjuster without the knowledge and consent of the insured. 11-22 (f) A public adjuster may not participate directly or 11-23 indirectly in the reconstruction, repair, or restoration of the 11-24 damaged property or engage in any other activities that may 11-25 reasonably be construed as presenting a conflict of interest. 11-26 Sec. 16. DENIAL, SUSPENSION, OR REVOCATION OF LICENSE. 11-27 (a) The commissioner may deny, suspend, or revoke a public 12-1 adjuster's license for: 12-2 (1) a violation of this article; 12-3 (2) a cause that constitutes grounds for denial of an 12-4 original license; 12-5 (3) wilful misrepresentation or fraud in obtaining the 12-6 license; 12-7 (4) failure to pass a required license examination; 12-8 (5) misappropriation or conversion by the license 12-9 applicant or license holder of money required to be held in a 12-10 fiduciary capacity; 12-11 (6) material misrepresentation, with intent to 12-12 deceive, of the terms of an insurance contract; 12-13 (7) engaging in a fraudulent transaction; 12-14 (8) demonstrated incompetence or untrustworthiness in 12-15 the conduct of the license holder's affairs under the license, as 12-16 determined by the commissioner; 12-17 (9) conviction of a felony by a final judgment in a 12-18 court of competent jurisdiction; or 12-19 (10) material misrepresentation, with intent to 12-20 deceive, of the person's status as a public adjuster. 12-21 (b) A license applicant or license holder who is denied a 12-22 license or whose license is revoked or suspended under this section 12-23 is entitled to notice and a hearing as provided by Section 5, 12-24 Article 21.01-2, of this code. 12-25 (c) A final order entered as a result of a hearing under 12-26 this section may be appealed to a court of competent jurisdiction 12-27 as provided by Subchapter G, Chapter 2001, Government Code. 13-1 (d) An order suspending a public adjuster's license must 13-2 specify the period of the suspension not to exceed 12 months. 13-3 (e) The holder of a license that is revoked or suspended for 13-4 cause shall surrender the license to the commissioner on demand. 13-5 (f) The commissioner may issue a license or reinstate a 13-6 suspended or revoked license on a finding that the cause for 13-7 suspension, revocation, or refusal no longer exists. 13-8 (g) A person whose license is suspended under this article 13-9 may apply for a new license only after the expiration of the period 13-10 of suspension. A person whose license is revoked or whose 13-11 application for a license is denied may not apply for a new license 13-12 until the expiration of 12 months after the date of the revocation 13-13 or denial. 13-14 Sec. 17. NOTICE TO LAST ADDRESS. Notice by registered 13-15 mail, return receipt requested, to the last known address of a 13-16 license applicant, license holder, or other person to whom notice 13-17 is required to be sent under this article, as reflected by the 13-18 records of the department, constitutes sufficient notice under this 13-19 article. 13-20 Sec. 18. CRIMINAL PENALTY; SANCTIONS. (a) A person commits 13-21 an offense if the person violates this article. An offense under 13-22 this subsection is a misdemeanor punishable by: 13-23 (1) a fine not to exceed $1,000; 13-24 (2) confinement in county jail for a term not to 13-25 exceed six months; or 13-26 (3) both the fine and confinement. 13-27 (b) In addition to the criminal penalty imposed under 14-1 Subsection (a) of this section, a person in violation of this 14-2 article is subject to the sanctions provided by Section 7, Article 14-3 21.21, of this code as if the person had violated an order under 14-4 that section. 14-5 SECTION 2. (a) The commissioner of insurance shall appoint 14-6 the members of the advisory committee created under Section 5(b), 14-7 Article 21.07-5, Insurance Code, as added by this Act, not later 14-8 than October 31, 1997. 14-9 (b) The commissioner of insurance shall adopt the 14-10 examination required by Section 5, Article 21.07-5, Insurance Code, 14-11 as added by this Act, not later than March 1, 1998. Pending the 14-12 adoption of the examination, the commissioner may issue a temporary 14-13 license to practice as a public adjuster to a person who satisfies 14-14 all the requirements for issuance of the license except the 14-15 examination requirement. A temporary license issued under this 14-16 subsection expires June 1, 1998, and may not be renewed. 14-17 SECTION 3. (a) Except as provided by Subsection (b) of this 14-18 section, this Act takes effect September 1, 1997. 14-19 (b) Sections 2(a) and 18, Article 21.07-5, Insurance Code, 14-20 as added by this Act, take effect January 1, 1998. 14-21 SECTION 4. The importance of this legislation and the 14-22 crowded condition of the calendars in both houses create an 14-23 emergency and an imperative public necessity that the 14-24 constitutional rule requiring bills to be read on three several 14-25 days in each house be suspended, and this rule is hereby suspended.