By Carona S.B. No. 546
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.