1-1 By: Madla S.B. No. 956
1-2 (In the Senate - Filed March 5, 1999; March 8, 1999, read
1-3 first time and referred to Committee on Economic Development;
1-4 April 16, 1999, reported adversely, with favorable Committee
1-5 Substitute by the following vote: Yeas 7, Nays 0; April 16, 1999,
1-6 sent to printer.)
1-7 COMMITTEE SUBSTITUTE FOR S.B. No. 956 By: Madla
1-8 A BILL TO BE ENTITLED
1-9 AN ACT
1-10 relating to the regulation of certain insurance agents and to the
1-11 consolidation of insurance agent licenses; providing penalties.
1-12 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-13 ARTICLE 1. GENERAL PROVISIONS APPLICABLE TO
1-14 ALL INSURANCE AGENTS
1-15 SECTION 1.01. Article 21.01, Insurance Code, is amended to
1-16 read as follows:
1-17 Art. 21.01. PURPOSE; CONSOLIDATION OF LICENSES; APPLICATION;
1-18 CERTIFICATE OF AUTHORITY OR LICENSE REQUIRED; RULEMAKING AUTHORITY
1-19 Sec. 1. PURPOSE. It is the intent of the legislature to
1-20 simplify and reform the regulation of insurance agents in this
1-21 state by consolidating the types of licenses issued to insurance
1-22 agents under this subchapter. This subchapter is also intended to
1-23 promote uniformity in the licensing, examination, continuing
1-24 education, and disciplinary requirements for agents.
1-25 Sec. 2. CERTIFICATE OF AUTHORITY OR LICENSE REQUIRED. It
1-26 shall not be lawful for any person to act [within this State], as
1-27 an agent or otherwise, in soliciting or receiving applications for
1-28 insurance of any kind whatever in this state, or in any manner to
1-29 aid in the transaction of the business of any insurance company
1-30 incorporated in this state [State], or out of it, without first
1-31 procuring a license or certificate of authority from the department
1-32 [Board].
1-33 Sec. 3. APPLICATION. (a) Except as otherwise provided by
1-34 this code, this subchapter applies to each person licensed in
1-35 accordance with:
1-36 (1) Section 4, Article 1.14-2, of this code;
1-37 (2) Section 7, Article 3.75, of this code;
1-38 (3) Subsection (c), Article 5.13-1, of this code;
1-39 (4) Article 10.37-3 of this code;
1-40 (5) Article 16.24A of this code;
1-41 (6) Section 9, Article 17.25, of this code;
1-42 (7) Article 21.07 of this code;
1-43 (8) Article 21.07-1 of this code;
1-44 (9) Chapter 29, Acts of the 54th Legislature, Regular
1-45 Session, 1955 (Article 21.07-2, Vernon's Texas Insurance Code);
1-46 (10) the Managing General Agents' Licensing Act
1-47 (Article 21.07-3, Vernon's Texas Insurance Code);
1-48 (11) Chapter 407, Acts of the 63rd Legislature,
1-49 Regular Session, 1973 (Article 21.07-4, Vernon's Texas Insurance
1-50 Code);
1-51 (12) Article 21.07-6 of this code;
1-52 (13) Article 21.07-7 of this code;
1-53 (14) Article 21.11 of this code;
1-54 (15) Article 21.14 of this code;
1-55 (16) Article 21.14-1 of this code;
1-56 (17) Article 21.14-2 of this code;
1-57 (18) Article 23.23A of this code; or
1-58 (19) a specialty license program established by the
1-59 department.
1-60 (b) Except as otherwise provided by law, each reference in
1-61 this code and other laws of this state to a particular type of
1-62 license authorizing an agent to engage in the business of insurance
1-63 in this state means a license designation as made by amendment,
1-64 enactment, or reenactment of or to Subchapter A, Chapter 21, of
2-1 this code by the 76th Legislature, Regular Session, 1999, or
2-2 subsequent amendments to that subchapter. A reference in this
2-3 subchapter to a statutory provision applies to all reenactments,
2-4 revisions, or amendments of that provision.
2-5 Sec. 4. RULES. The commissioner may adopt rules as
2-6 necessary to implement this subchapter and to meet the minimum
2-7 requirements of federal law and regulations.
2-8 SECTION 1.02. Article 21.01-1, Insurance Code, is amended to
2-9 read as follows:
2-10 Art. 21.01-1. AGENTS' QUALIFYING EXAMINATION; CONTINUING
2-11 EDUCATION REQUIREMENTS FOR AGENTS
2-12 Sec. 1. EXAMINATION ADMINISTRATION. (a) The commissioner
2-13 [State Board of Insurance] may[, at its discretion,] accept
2-14 examinations administered by a testing service as satisfying the
2-15 examination requirements of persons seeking license as agents,
2-16 [solicitors,] counselors, or adjusters under this code. The
2-17 commissioner [State Board of Insurance] may negotiate agreements
2-18 with such testing services to include performance of examination
2-19 development, test scheduling, examination site arrangements, and
2-20 test administration, grading, reporting and analysis. The
2-21 commissioner [State Board of Insurance] may require such testing
2-22 services to correspond directly with the applicants with regard to
2-23 the administration of such examinations and that such testing
2-24 services collect fees for administering such examinations directly
2-25 from the applicants. The commissioner [State Board of Insurance]
2-26 may stipulate that any agreements with such testing services
2-27 provide for the administration of examinations in specific locales
2-28 and at specified frequencies. The commissioner [State Board of
2-29 Insurance] shall retain the authority to establish the scope and
2-30 type of all examinations. Prior to negotiating and making any
2-31 agreement with any testing service as authorized hereby, the
2-32 commissioner [State Board of Insurance] shall hold a public hearing
2-33 [thereon] in accordance with Chapter 2001, Government Code [the
2-34 provisions of Section 5 of the Administrative Procedure and Texas
2-35 Register Act (Article 6252-13a, Vernon's Texas Civil Statutes)],
2-36 and shall adopt such rules[, regulations,] and standards as may be
2-37 deemed appropriate by the commissioner [Board] to implement the
2-38 authority granted in this article [Article].
2-39 (b) The commissioner may appoint advisory boards consisting
2-40 of any of the following persons: persons holding a license for
2-41 which the respective examinations are intended, persons who are
2-42 employed by insurance companies appointing such licensees, persons
2-43 acting as general agents or managers, persons teaching insurance at
2-44 an accredited college or university in Texas, persons who are
2-45 citizens of the State of Texas but who are not of any of the
2-46 preceding descriptions, or any combination of such persons. The
2-47 function of such advisory boards will be to make recommendations to
2-48 the commissioner [State Board of Insurance] or the testing service
2-49 with respect to the scope, type, and conduct of such examinations
2-50 and the times and places within the state where they shall be held.
2-51 The members of such advisory boards shall serve without pay but
2-52 shall be reimbursed for their reasonable expenses in attending
2-53 meetings of their respective advisory boards.
2-54 (c) In the absence of an agreement with a testing service,
2-55 the department [State Board of Insurance] shall administer any
2-56 required qualifying examination in accordance with this article
2-57 [the provisions of the respective statutes governing the issuance
2-58 of the license sought by the applicant]. The commissioner may
2-59 adopt rules relating to the scope, type, and conduct of the written
2-60 examinations and the times and places in this state at which the
2-61 examinations will be conducted. The commissioner's rules may
2-62 designate textbooks, manuals, and other materials to be studied by
2-63 applicants in preparation for examinations conducted under this
2-64 subsection. Those textbooks, manuals, or other materials may
2-65 consist of material available to an applicant by purchase from the
2-66 publisher or of material prepared at the direction of the
2-67 commissioner and distributed to an applicant on request and on
2-68 payment of the reasonable cost of the material. All examination
2-69 questions shall be prepared from the contents of the textbooks,
3-1 manuals, and other materials designated or prepared by the
3-2 commissioner under this subsection.
3-3 (d) Not later than the 30th day after the date on which a
3-4 licensing examination is administered under this code, the
3-5 department shall notify each examinee of the results of the
3-6 examination. However, if an examination is graded or reviewed by a
3-7 testing service, the department shall notify each examinee
3-8 [examinees] of the results of the examination not later than the
3-9 14th day after the date on which the department receives the
3-10 results from the testing service. If the notice of examination
3-11 results graded or reviewed by a testing service will be delayed for
3-12 longer than 90 days after the examination date, the department
3-13 shall notify the examinee of the reason for the delay before the
3-14 90th day. The department may require a testing service to notify
3-15 examinees of the results of an examination.
3-16 (e) If requested in writing by a person who fails a
3-17 licensing examination administered under this code, the department
3-18 shall furnish the person with an analysis of the person's
3-19 performance on the examination.
3-20 Sec. 2. EXAMINATION OF LICENSE APPLICANT. (a) Except as
3-21 provided by Subsection (c) of this section, each applicant for a
3-22 license to act as an insurance agent in this state must submit to a
3-23 personal written examination that is prescribed by the department
3-24 and must pass the examination to the satisfaction of the
3-25 department. The examination shall determine the applicant's
3-26 competence with respect to:
3-27 (1) the type of insurance contracts for which the
3-28 applicant seeks a license;
3-29 (2) the laws of this state regulating the business of
3-30 insurance; and
3-31 (3) the ethical obligations and duties of an insurance
3-32 agent.
3-33 (b) The department shall charge each applicant an
3-34 examination fee in an amount determined by the department as
3-35 necessary for administration of the examination. The fee must
3-36 accompany each application to take the examination. The fee is
3-37 nonrefundable other than for failure of the applicant to appear and
3-38 take the examination after the applicant has given at least 24
3-39 hours' notice of an emergency situation to the department and
3-40 received the department's approval of refund of the fee.
3-41 (c) The commissioner shall prescribe a limited written
3-42 licensing examination for applicants for a limited license under
3-43 Article 21.07-1 or Article 21.14 of this code. A limited
3-44 examination shall be administered according to the provisions of
3-45 this article and shall determine the applicant's competence and
3-46 understanding of:
3-47 (1) the general principles of insurance contracts;
3-48 (2) the laws of this state regulating the business of
3-49 insurance; and
3-50 (3) the ethical obligations and duties of an insurance
3-51 agent.
3-52 (d) The department may not require a person to take an
3-53 examination under this article if the person is:
3-54 (1) an applicant for the renewal of a license issued
3-55 by the department, and the applicant obtained the license by
3-56 successful completion of a written examination;
3-57 (2) an applicant whose Texas insurance license expired
3-58 less than one year before the date of the application, if the
3-59 previous license was not denied, revoked, or suspended by the
3-60 commissioner;
3-61 (3) a partnership, corporation, or bank;
3-62 (4) an applicant for a life, accident, and health
3-63 license who has attained the designation of chartered life
3-64 underwriter (CLU);
3-65 (5) an applicant for a life and health insurance
3-66 counselor license who has attained the designation of chartered
3-67 life underwriter (CLU), chartered financial consultant (ChFC), or
3-68 certified financial planner (CFP);
3-69 (6) an applicant for a property and casualty license
4-1 who has attained the designation of chartered property and casualty
4-2 underwriter (CPCU);
4-3 (7) an applicant for a specialty license issued by the
4-4 department;
4-5 (8) a nonresident individual who is exempt from the
4-6 examination requirement under Article 21.11 of this code; or
4-7 (9) an applicant for a general life, accident, and
4-8 health license who was authorized to solicit insurance on behalf of
4-9 a fraternal benefit society on September 1, 1999, if the applicant:
4-10 (A) had actually solicited insurance on behalf
4-11 of the fraternal benefit society for at least 24 months preceding
4-12 September 1, 1999;
4-13 (B) does not solicit insurance for any other
4-14 insurer or a different fraternal benefit society on or after
4-15 September 1, 1999;
4-16 (C) limits insurance solicitations on or after
4-17 September 1, 1999, to eligible members of the fraternal benefit
4-18 society; and
4-19 (D) does not solicit interest-sensitive life
4-20 insurance certificates with face amounts exceeding $35,000 on or
4-21 after September 1, 1999, unless the applicant has obtained the
4-22 designation of "Fraternal Insurance Counselor."
4-23 (e) A license to which the exemption authorized under
4-24 Subsection (d)(9) of this section applies must be held by the
4-25 applicant in an individual capacity and is not transferable.
4-26 (f) Each examination administered under this article shall
4-27 be offered in English and Spanish.
4-28 Sec. 3. CONTINUING EDUCATION REQUIREMENTS. (a) The
4-29 department has exclusive jurisdiction for all matters relating to
4-30 the continuing education of insurance agents who are licensed under
4-31 this code.
4-32 (b) Except as provided by Subsection (d) of this section,
4-33 each individual who holds a license issued by the department shall
4-34 complete continuing education. All required continuing education
4-35 hours must be completed before the expiration date of the
4-36 individual's license. An individual who holds a life, accident,
4-37 and health license, a life and health insurance counselor license,
4-38 or a property and casualty license shall complete 15 hours of
4-39 continuing education annually. The agent may not be required to
4-40 complete more than 15 continuing education hours annually as a
4-41 result of holding more than one license for which continuing
4-42 education is required. An individual who holds a limited life,
4-43 accident, and health license or a limited property and casualty
4-44 license shall complete five hours of continuing education annually.
4-45 Each individual who holds a license issued by the department shall
4-46 complete four hours of continuing education in ethics during each
4-47 license renewal period. At least 50 percent of all required
4-48 continuing education hours must be completed in a classroom setting
4-49 or a classroom equivalent setting approved by the department. The
4-50 department may grant reciprocity to license holders who complete
4-51 continuing education requirements in other professions or in
4-52 association with professional designations in an insurance-related
4-53 field.
4-54 (c) On a timely written request of an agent, the department
4-55 may extend the time for the agent to comply with the continuing
4-56 education requirements of this section or may exempt the agent from
4-57 some or all of the requirements for a licensing period if the
4-58 department finds that the agent is unable to comply with the
4-59 requirements because of illness, medical disability, or another
4-60 extenuating circumstance beyond the control of the agent. The
4-61 commissioner by rule shall prescribe the criteria for an exemption
4-62 or extension under this subsection.
4-63 (d) An individual who has continuously held a license issued
4-64 under this code to operate as an insurance agent for the 20 years
4-65 preceding September 1, 1999, is exempt from the continuing
4-66 education requirements of this section. The commissioner by rule
4-67 may provide for other reasonable exemptions.
4-68 (e) The department shall certify continuing education
4-69 programs for agents. Only a program that satisfies the criteria
5-1 established by rule by the commissioner may receive certification.
5-2 The certification criteria shall be designed to ensure that
5-3 continuing education programs enhance the knowledge, understanding,
5-4 and professional competence of the license holder. A nonrefundable
5-5 certification fee, in an amount set by the commissioner as
5-6 necessary for administering the program, must accompany each
5-7 application for certification of a continuing education program.
5-8 The fee shall be established by rule and based on a graduated scale
5-9 according to the number of hours required to complete the program.
5-10 (f) Each continuing education course provider shall register
5-11 with the department as a course provider. The department shall
5-12 assess a registration fee for each application for registration as
5-13 a provider, set by the commissioner in an amount necessary for the
5-14 proper administration of this section. The commissioner may adopt
5-15 rules establishing the requirements for continuing education course
5-16 providers. The department may negotiate agreements with
5-17 independent contractors under which the independent contractor
5-18 certifies and registers continuing education courses and providers.
5-19 The department may require those independent contractors to
5-20 correspond directly with providers with regard to the
5-21 administration of continuing education courses, and the contractors
5-22 may collect fees from the providers for administration of the
5-23 courses. The department retains the authority to establish the
5-24 scope and type of continuing education requirements for each type
5-25 of license.
5-26 (g) The commissioner may appoint an advisory council to
5-27 furnish the commissioner with information and assistance in the
5-28 conduct of the continuing education program for agents licensed
5-29 under this subchapter. If an advisory council is appointed, it
5-30 must be composed of nine members, four of whom must be public
5-31 members. The public members are entitled to reimbursement for
5-32 their reasonable travel expenses in attending meetings of the
5-33 advisory council, subject to any applicable limit in the General
5-34 Appropriations Act. A public member may not:
5-35 (1) be an officer, director, or employee of an
5-36 insurance company, insurance agency, agent, broker, adjuster, or
5-37 any other business entity regulated by the department;
5-38 (2) be a person required to register with the Texas
5-39 Ethics Commission under Chapter 305, Government Code; or
5-40 (3) be related to a person described by Subdivision
5-41 (1) or (2) of this subsection within the second degree by affinity
5-42 or consanguinity, as determined under Chapter 573, Government Code.
5-43 SECTION 1.03. Section 2, Article 21.01-2, Insurance Code, is
5-44 redesignated as Section 1A, Article 21.01-2, Insurance Code, and
5-45 amended to read as follows:
5-46 Sec. 1A [2]. EXPIRATION AND RENEWAL OF LICENSES.
5-47 (a) Except as provided by a staggered renewal system adopted under
5-48 Subsection (h) of this section, each agent license issued by the
5-49 department expires on the fifth anniversary of the date of
5-50 issuance unless suspended or revoked by the commissioner. A person
5-51 may renew a [an unexpired] license that has not expired or has not
5-52 been suspended or revoked by filing a properly completed renewal
5-53 application with the department in the form prescribed by the
5-54 department and paying to the department before the expiration date
5-55 of the license the required renewal fee. A renewal fee paid under
5-56 this section is nonrefundable.
5-57 (b) On the filing of a completed renewal application not
5-58 later than the expiration date of the license accompanied by the
5-59 renewal fee set by the commissioner, the original license continues
5-60 in force until:
5-61 (1) the department issues the renewal license; or
5-62 (2) the commissioner issues an order revoking the
5-63 license.
5-64 (c) If a person's license has been expired for 90 days or
5-65 less, the person may renew the license by filing a renewal
5-66 application with the department in the form prescribed by the
5-67 department and paying to the department the required renewal fee
5-68 and an additional [a] fee that is equal to one-half of the renewal
5-69 [license] fee[, if any,] for the license.
6-1 (d) If a person's license has been expired for more than 90
6-2 days but less than one year, the person may not renew the license,
6-3 but is entitled to a new license without taking the applicable
6-4 examination if the person submits to the department a new
6-5 application, the license fee, and an additional fee equal to
6-6 one-half of the license fee.
6-7 (e) [(c)] If a person's license has been expired for one
6-8 year or more [longer than 90 days], the person may not renew the
6-9 license. The person may obtain a new license by submitting to
6-10 reexamination, if examination is required for original issuance of
6-11 the license, and complying with the requirements and procedures for
6-12 obtaining an original license.
6-13 (f) The [However, the] department may renew without
6-14 reexamination an expired license of a person who was licensed in
6-15 this state, moved to another state, and is currently licensed and
6-16 has been in continual practice in the other state for the period
6-17 [two years] preceding application. The person must pay to the
6-18 department a fee that is equal to the license fee.
6-19 (g) [(d)] At least 30 days before the expiration of a
6-20 person's license, the department shall send written notice of the
6-21 impending license expiration to the person at the person's last
6-22 known mailing address according to the records of the department.
6-23 (h) [(e)] The commissioner by rule may adopt a system under
6-24 which licenses expire on various dates during a licensing period.
6-25 For the licensing period in which the license expiration is
6-26 changed, license fees shall be prorated [on a monthly basis] so
6-27 that each license holder shall pay only that portion of the license
6-28 fee that is allocable to the period [number of months] during which
6-29 the license is valid. On renewal of the license on the new
6-30 expiration date, the total license renewal fee is payable. The
6-31 commissioner shall adopt a system under which a person who holds
6-32 more than one license may renew all the licenses held in a single
6-33 process.
6-34 (i) [(f)] This section is not applicable to a license issued
6-35 under Article 21.07-6 or 21.07-7 of this code.
6-36 SECTION 1.04. Article 21.01-2, Insurance Code, is amended by
6-37 adding Section 2A to read as follows:
6-38 Sec. 2A. PROHIBITED ACTIVITIES. (a) A person licensed
6-39 under this code who receives a commission or other consideration
6-40 for services as an insurance agent may not receive an additional
6-41 fee for those services provided to the same client except for a fee
6-42 described by Article 21.35A or 21.35B of this code.
6-43 (b) An insurer or licensed insurance agent engaged in the
6-44 business of insurance in this state may not pay, directly or
6-45 indirectly, and may not accept, any commission or other valuable
6-46 consideration to or from any person for services performed by that
6-47 person as an insurance agent in this state unless the person holds
6-48 a license to act as an insurance agent as required by the laws of
6-49 this state. This subsection does not prevent the payment or
6-50 receipt of renewal or other deferred commissions to or by any
6-51 person solely because the person has ceased to hold a license to
6-52 act as an insurance agent.
6-53 (c) An insurance agent licensed under this code may not pay,
6-54 allow, or give, or offer to pay, allow, or give, directly or
6-55 indirectly, to any person who is not a licensed insurance agent,
6-56 any rebate of premiums payable, commission, paid employment, or
6-57 contract for service, or any other valuable consideration or
6-58 inducement, that is not specified in the policy or contract of
6-59 insurance for or on account of the solicitation or negotiation of
6-60 contracts of insurance.
6-61 (d) In addition to any other penalty imposed under this
6-62 code, a person who is determined by the department to have
6-63 committed conduct described by this subsection is barred from
6-64 receiving a license as an insurance agent before the fifth
6-65 anniversary of the date of the determination. This subsection
6-66 applies to a person who:
6-67 (1) acts as an insurance agent without holding a
6-68 license under this code;
6-69 (2) solicits a contract of insurance or acts as an
7-1 insurance agent without having been appointed or designated by an
7-2 authorized insurance company, association, or organization to do so
7-3 as provided by this code;
7-4 (3) solicits any contract of insurance or acts as an
7-5 agent for a person, including an insurance company, association, or
7-6 organization, not authorized to engage in the business of insurance
7-7 in this state without holding a license issued under Article 1.14-2
7-8 of this code; or
7-9 (4) as an officer or representative of an insurance
7-10 company, knowingly contracts with or appoints as an agent a person
7-11 who does not hold a valid and outstanding license.
7-12 (e) A person who has had an insurance license revoked in
7-13 this state or any other state may not solicit or otherwise transact
7-14 business under Chapter 10 of this code unless it is determined by
7-15 the department to be in the public interest, for good cause shown,
7-16 to allow the person to act in that capacity.
7-17 (f) A person who has had an insurance license revoked in
7-18 this state or any other state may not act as an officer, director,
7-19 member, manager, or partner, or as a shareholder with a controlling
7-20 interest, of an entity licensed under this subchapter unless it is
7-21 determined by the department to be in the public interest, for good
7-22 cause shown, to allow the person to act in that capacity.
7-23 (g) A property and casualty agent may not knowingly grant,
7-24 write, or permit a greater amount of insurance against loss by fire
7-25 than the reasonable value of the subject of the insurance.
7-26 SECTION 1.05. Section 5, Article 21.01-2, Insurance Code, is
7-27 redesignated as Section 3A, Article 21.01-2, Insurance Code, and
7-28 amended to read as follows:
7-29 Sec. 3A [5]. DENIAL OR REFUSAL OF LICENSE APPLICATION;
7-30 SUSPENSION OR REVOCATION OF LICENSES; DISCIPLINE OF LICENSE
7-31 HOLDERS. (a) In addition to any other remedy available under
7-32 Section 7, Article 1.10, of this code, the [The] department may
7-33 [shall] refuse to issue an original license, revoke, suspend, or
7-34 refuse to renew a license, place on probation a person whose
7-35 license has been suspended, assess an administrative penalty, or
7-36 reprimand a license holder for a violation of this code, another
7-37 insurance law of this state, or a rule of the commissioner [or the
7-38 board]. If a license suspension is probated, the commissioner may
7-39 require the person to:
7-40 (1) report regularly to the department on matters that
7-41 are the basis of the probation;
7-42 (2) limit the person's practice to the areas
7-43 prescribed by the department; or
7-44 (3) continue or review professional education until
7-45 the person attains a degree of skill satisfactory to the
7-46 commissioner in those areas that are the basis of the probation.
7-47 (b) If the department proposes to refuse to issue an
7-48 original license, or to suspend, revoke, or refuse to renew a
7-49 license, the person affected is entitled to a hearing conducted by
7-50 the State Office of Administrative Hearings in accordance with
7-51 Article 1.33B of this code. Notice of the hearing shall be
7-52 provided to the person and to any insurance carrier appearing on
7-53 the application as desiring that the license be issued.
7-54 (c) The department may discipline a license holder or deny a
7-55 license application under this article if the department determines
7-56 that the applicant or license holder, individually or through any
7-57 officer, director, or shareholder:
7-58 (1) has wilfully violated any provision of the
7-59 insurance laws of this state;
7-60 (2) has intentionally made a material misstatement in
7-61 the license application;
7-62 (3) has obtained, or attempted to obtain, a license by
7-63 fraud or misrepresentation;
7-64 (4) has misappropriated, converted to the applicant's
7-65 or holder's own use, or illegally withheld money belonging to:
7-66 (A) an insurer;
7-67 (B) a health maintenance organization; or
7-68 (C) an insured, enrollee, or beneficiary;
7-69 (5) has engaged in fraudulent or dishonest acts or
8-1 practices;
8-2 (6) has materially misrepresented the terms and
8-3 conditions of an insurance policy or contract, including a contract
8-4 relating to membership in a health maintenance organization;
8-5 (7) has made or issued, or caused to be made or
8-6 issued, any statement misrepresenting or making incomplete
8-7 comparisons regarding the terms or conditions of an insurance or
8-8 annuity contract legally issued by an insurer or a membership
8-9 issued by a health maintenance organization to induce the owner of
8-10 the contract or membership to forfeit or surrender the contract or
8-11 membership or allow it to lapse for the purpose of replacing the
8-12 contract or membership with another;
8-13 (8) is convicted of a felony;
8-14 (9) has offered or given a rebate of an insurance
8-15 premium or commission to an insured or enrollee;
8-16 (10) is not actively engaged in the soliciting or
8-17 writing of insurance for the public generally as required by
8-18 Section 2(c), Article 21.07, of this code; or
8-19 (11) has obtained or attempted to obtain a license,
8-20 not for the purpose of holding the license holder or applicant out
8-21 to the general public as an agent, but primarily for the purpose of
8-22 soliciting, negotiating, or procuring insurance or annuity
8-23 contracts or memberships covering:
8-24 (A) the applicant or license holder;
8-25 (B) a member of the applicant's or license
8-26 holder's family; or
8-27 (C) a business associate of the applicant or
8-28 license holder.
8-29 (d) An individual whose license application is denied or
8-30 whose license has been revoked under this article may not apply for
8-31 any license as an insurance agent before the fifth anniversary of:
8-32 (1) the effective date of the denial or revocation; or
8-33 (2) if the applicant or license holder seeks judicial
8-34 review of the department's action, the date of the final court
8-35 order or decree affirming that action.
8-36 (e) The commissioner may deny a timely application filed
8-37 under Subsection (d) of this section if the applicant does not show
8-38 good cause why the denial or revocation of the previous license
8-39 application or license should not be considered a bar to the
8-40 issuance of a new license. This subsection does not apply to an
8-41 applicant whose license application was denied for failure to:
8-42 (1) pass a required written examination; or
8-43 (2) submit a properly completed license application.
8-44 (f) Instead of or in addition to taking disciplinary action
8-45 under this section, the department may order that a license holder
8-46 who is currently afflicted with a disability be placed on
8-47 disability probation under the terms and conditions specified under
8-48 Article 21.15-6 of this code and department rules.
8-49 (g) Subsections (c)-(f) of this section do not apply to a
8-50 person who is licensed under, or holds a certificate of authority
8-51 issued under, Chapter 9 of this code. [The commissioner shall
8-52 prescribe procedures by which all decisions to deny, suspend, or
8-53 revoke a license, or to refuse to renew a license, are made by or
8-54 are appealable to the commissioner.]
8-55 SECTION 1.06. Article 21.01-2, Insurance Code, is amended by
8-56 adding Sections 4A, 5A, and 6A to read as follows:
8-57 Sec. 4A. JUDICIAL REVIEW. A license applicant or license
8-58 holder may appeal as provided by Article 1.04 of this code if:
8-59 (1) the commissioner:
8-60 (A) refuses an application for a license as
8-61 provided by this article; or
8-62 (B) suspends, revokes, or refuses to renew a
8-63 license at a hearing as provided by this article; or
8-64 (2) the applicant or license holder is dissatisfied
8-65 with another action of the commissioner.
8-66 Sec. 5A. AUTOMATIC FINES. (a) To expedite the department's
8-67 processing of certain violations of this code, the commissioner may
8-68 establish by rule monetary fines for certain violations.
8-69 Violations for which the fines may be assessed include a failure
9-1 to:
9-2 (1) obtain the total number of continuing education
9-3 hours before the renewal date of the license;
9-4 (2) timely report a change of address to the
9-5 department; or
9-6 (3) notify the department of an administrative action
9-7 taken against the agent by another state's insurance regulator.
9-8 (b) This section may not be construed to limit the
9-9 department's authority to take any other disciplinary action
9-10 against a license holder as provided under another provision of
9-11 this code.
9-12 (c) If a person disputes the assessment of a fine under this
9-13 section, the matter is a contested case subject to Chapter 2001,
9-14 Government Code.
9-15 Sec. 6A. ENFORCEMENT OF SUBCHAPTER. The attorney general, a
9-16 district or county attorney, or the department acting through the
9-17 commissioner may institute an injunction proceeding or any other
9-18 proceeding to enforce this subchapter and to enjoin any person,
9-19 firm, corporation, or bank from engaging or attempting to engage in
9-20 the business of insurance in violation of this code or any other
9-21 insurance law of this state. The provisions of this section are
9-22 cumulative of the other penalties or remedies provided by this
9-23 article.
9-24 SECTION 1.07. Article 21.04, Insurance Code, is amended to
9-25 read as follows:
9-26 Art. 21.04. LICENSE HOLDER [SOLICITOR] DEEMED COMPANY'S
9-27 AGENT. Any person who solicits an application for life, accident,
9-28 or health insurance, or property or casualty insurance, shall, in
9-29 any controversy between the insured or the insured's beneficiary
9-30 and the company issuing any policy upon such application or between
9-31 the insured or the insured's dependents and that company, be
9-32 regarded as the agent of the company, and not the agent of the
9-33 insured, but such agent shall not have the power to waive, change
9-34 or alter any of the terms or conditions of the application or
9-35 policy.
9-36 SECTION 1.08. Article 21.06, Insurance Code, is amended to
9-37 read as follows:
9-38 Art. 21.06. AUTHORITY TO APPOINT [CERTIFICATES FOR] AGENTS.
9-39 Each [such] foreign or domestic insurance company shall, by
9-40 resolution of its board of directors, designate an [some] officer
9-41 or agent who is empowered to appoint or employ its agents [or
9-42 solicitors] in this State, and such officer or agent shall promptly
9-43 notify the department [Board] in writing of the name, title, and
9-44 address of each person so appointed or employed. The authority of
9-45 that designee to act on behalf of the insurance company continues
9-46 in force [Upon receipt of this notice, the Board shall issue to him
9-47 a certificate which shall include a copy of the certificate of
9-48 authority authorizing the company requesting it to do business in
9-49 this State, and the name and title of the person to whom the
9-50 certificate is issued. Such certificate], unless sooner revoked by
9-51 the commissioner [Board] for cause or cancelled at the request of
9-52 the insurance company, [employing the holder thereof, shall
9-53 continue in force] until the first day of March next after its
9-54 issuance, and must be renewed annually.
9-55 SECTION 1.09. Section 1, Article 21.07, Insurance Code, is
9-56 amended to read as follows:
9-57 Sec. 1. APPLICABILITY OF ARTICLE [ACT]. (a) No person[,
9-58 corporation, or bank] shall act as an agent of any insurance
9-59 company, health maintenance organization, or [(i) local mutual aid
9-60 association, (ii) local mutual burial association, (iii) statewide
9-61 mutual assessment corporation, (iv) stipulated premium company,
9-62 (v) county mutual insurance company, (vi) casualty company writing
9-63 accident and health insurance, or (vii) any] other type of
9-64 insurance carrier licensed to do business in the State of Texas and
9-65 which insurance carrier's agents are required to be licensed under
9-66 the provisions of this subchapter [Article, on the date that this
9-67 Act shall become effective,] unless that person [individual or
9-68 entity] shall have first procured a license from the department as
9-69 [in this Article is] provided by this subchapter, and no such
10-1 insurance carrier shall appoint any person[, corporation, or bank]
10-2 to act as its agent unless such person[, corporation, or bank]
10-3 shall have obtained a license under the provisions of this
10-4 subchapter [Article], and no such person[, corporation, or bank]
10-5 who obtains a license shall engage in business as an agent until
10-6 that person [individual or entity] shall have been appointed to act
10-7 as an agent by some duly authorized insurance carrier designated by
10-8 the provisions of this code [Article] and authorized to do business
10-9 in the State of Texas. [Any person, corporation, or bank desiring
10-10 to act as an agent of any insurance carrier licensed to do business
10-11 in the State of Texas and writing health and accident insurance may
10-12 obtain a separate license as an agent to write health and accident
10-13 insurance provided such person, corporation, or bank complies with
10-14 the provisions of this Article and has been appointed to act as an
10-15 agent by some duly authorized insurance carrier authorized to do
10-16 health and accident insurance business in the State of Texas.]
10-17 (b) The provisions of this subchapter do not apply to:
10-18 (1) an actual full-time home office salaried employee
10-19 of an insurance carrier licensed to do business in this state,
10-20 other than an employee who solicits or receives an application for
10-21 the sale of insurance through an oral, written, or electronic
10-22 communication in accordance with Article 21.14 of this code;
10-23 (2) an actual attorney in fact or the actual traveling
10-24 salaried representative of a reciprocal exchange or interinsurance
10-25 exchange admitted to do business in this state as to business
10-26 transacted through the attorney in fact or salaried representative;
10-27 (3) the actual attorney in fact for a Lloyd's
10-28 association;
10-29 (4) the group motor vehicle insurance business or the
10-30 group motor vehicle department of companies engaged in that
10-31 business; or
10-32 (5) a salaried employee who is not involved in the
10-33 solicitation or negotiation of insurance in the office of a
10-34 licensed agent who devotes the employee's full time to clerical and
10-35 administrative services, including the incidental taking of
10-36 information from customers and receipt of premiums in the office of
10-37 a licensed agent, if the employee does not receive any commissions
10-38 and the employee's compensation is not varied by the volume of
10-39 premiums taken and received. [No insurer or licensed insurance
10-40 agent doing business in this State shall pay directly or indirectly
10-41 any commission, or other valuable consideration, to any person,
10-42 corporation, or bank for services as an insurance agent within this
10-43 State, unless such person, corporation, or bank shall hold a
10-44 currently valid license to act as an insurance agent as required by
10-45 the laws of this State; nor shall any person, corporation, or bank
10-46 other than a duly licensed insurance agent, accept any such
10-47 commission or other valuable consideration; provided, however, that
10-48 the provisions of this Section shall not prevent the payment or
10-49 receipt of renewal or other deferred commissions to or by any
10-50 person solely because such person, corporation, or bank has ceased
10-51 to hold a license to act as an insurance agent.]
10-52 [(c) A person who has had a license revoked under Section 10
10-53 of this Article may not solicit or otherwise transact business
10-54 under Chapter 10 of this code.]
10-55 SECTION 1.10. Section 1A, Article 21.07, Insurance Code, is
10-56 amended to read as follows:
10-57 Sec. 1A. DEFINITIONS. Unless the context clearly indicates
10-58 otherwise, in [In] this subchapter:
10-59 (1) "Agent" means a person who is an authorized agent
10-60 of an insurance company or health maintenance organization, any
10-61 person who is a sub-agent of an agent, and any other person who
10-62 performs the acts of an agent, whether through an oral, written, or
10-63 electronic communication or otherwise, in the solicitation of,
10-64 negotiation for, procurement of, or collection of premiums on an
10-65 insurance or annuity contract, or who represents or purports to
10-66 represent a health maintenance organization, including a health
10-67 maintenance organization offering only a single health care service
10-68 plan, in the solicitation of, negotiation for, procurement of, or
10-69 effectuation of membership in the health maintenance organization.
11-1 The term does not include:
11-2 (A) a regular salaried officer or employee of an
11-3 insurance company, health maintenance organization, or insurance
11-4 agent who:
11-5 (i) devotes substantially all of the
11-6 officer's or employee's time to activities other than the
11-7 solicitation of applications for insurance, annuity contracts, or
11-8 memberships;
11-9 (ii) does not receive a commission or
11-10 other compensation directly dependent on the business obtained; and
11-11 (iii) does not solicit or accept from the
11-12 public applications for insurance, annuity contracts, or
11-13 memberships;
11-14 (B) an employer or an employer's officers or
11-15 employees or the trustees of an employee benefit plan, to the
11-16 extent that those employers, officers, employees, or trustees are
11-17 engaged in the administration or operation of any program of
11-18 employee benefits involving the use of insurance or annuities
11-19 issued by an insurance company or memberships issued by a health
11-20 maintenance organization, if those employers, officers, employees,
11-21 or trustees are not compensated, directly or indirectly, by the
11-22 insurance company or health maintenance organization issuing the
11-23 insurance or annuity contracts or memberships;
11-24 (C) except as otherwise provided by this code, a
11-25 bank, a savings and loan association, or a credit union, or the
11-26 officers and employees of banks, savings and loan associations, or
11-27 credit unions, to the extent that those banks, savings and loan
11-28 associations, credit unions, or officers and employees collect and
11-29 remit premiums or charges by charging those premiums or charges
11-30 against accounts of depositors on the orders of those depositors;
11-31 or
11-32 (D) a person or the employee of a person who has
11-33 contracted to provide administrative, management, or health care
11-34 services to a health maintenance organization and who is
11-35 compensated for those services by the payment of an amount computed
11-36 as a percentage of the revenues, net income, or profit of the
11-37 health maintenance organization, if that method of compensation is
11-38 the sole basis for subjecting that person or the employee of the
11-39 person to this article.
11-40 (2) "Bank" means:
11-41 (A) a national banking association organized and
11-42 existing under the National Bank Act (12 U.S.C. Section 21 et
11-43 seq.), as amended;
11-44 (B) a state bank organized and existing under
11-45 Subtitle A, Title 3, Finance Code;
11-46 (C) a state savings bank organized and existing
11-47 under Subtitle C, Title 3, Finance Code;
11-48 (D) a bank branch; or
11-49 (E) a bank operating subsidiary, as defined by
11-50 state or federal law.
11-51 (3) "Control" means the power to direct or cause the
11-52 direction of the management and policies of a license holder,
11-53 whether directly or indirectly. For the purposes of this
11-54 subchapter, a person is considered to control:
11-55 (A) a corporate license holder if the person,
11-56 individually or acting with others, directly or indirectly, holds
11-57 with the power to vote, owns, or controls, or holds proxies
11-58 representing, at least 10 percent of the voting stock or voting
11-59 rights of the corporate license holder; or
11-60 (B) a partnership if the person through a right
11-61 to vote or through any other right or power exercises rights in the
11-62 management, direction, or conduct of the business of the
11-63 partnership.
11-64 (4) "Corporation" means a legal entity that is
11-65 organized under the business corporations laws or limited liability
11-66 company laws of this state, another state, or a territory of the
11-67 United States and that has as one of its purposes the authority to
11-68 act as an insurance agent. The licensing and regulation of a
11-69 limited liability company is subject to all provisions of this
12-1 subchapter that apply to a corporation licensed under this
12-2 subchapter.
12-3 (5) "Individual" means a natural person. The term
12-4 includes a resident or a nonresident of this state.
12-5 (6) "Insurance company," "insurance carrier," or
12-6 "insurer" means an insurance company regulated by the department.
12-7 The term includes:
12-8 (A) any domestic or foreign, stock and mutual,
12-9 life, health, or accident insurance company;
12-10 (B) any domestic or foreign, stock and mutual,
12-11 fire and casualty insurance company;
12-12 (C) a Mexican casualty company;
12-13 (D) a domestic or foreign Lloyd's plan insurer;
12-14 (E) a domestic or foreign reciprocal or
12-15 interinsurance exchange;
12-16 (F) a domestic or foreign fraternal benefit
12-17 society;
12-18 (G) a stipulated premium insurance company;
12-19 (H) a nonprofit or for-profit legal service
12-20 corporation;
12-21 (I) a statewide mutual assessment company;
12-22 (J) a local mutual aid association;
12-23 (K) a local mutual burial association;
12-24 (L) an exempt association under Article 14.17 of
12-25 this code;
12-26 (M) a nonprofit hospital, medical, or dental
12-27 service corporation, including a company subject to Chapter 20 of
12-28 this code;
12-29 (N) a health maintenance organization;
12-30 (O) a county mutual insurance company; or
12-31 (P) a farm mutual insurance company.
12-32 (7) "Partnership" means an association of two or more
12-33 persons organized under the partnership laws or limited liability
12-34 partnership laws of this state, another state, or a territory of
12-35 the United States. The term includes a general partnership,
12-36 limited partnership, limited liability partnership, and limited
12-37 liability limited partnership.
12-38 (8) "Person" means an individual, partnership,
12-39 corporation, or bank.
12-40 (9) "Sub-agent" means any person, other than a
12-41 regular salaried officer or employee of an insurance company,
12-42 insurance carrier, or health maintenance organization, or of an
12-43 agent, engaging in activities described under Subdivision (1) of
12-44 this section who acts for or on behalf of an agent, whether through
12-45 an oral, written, or electronic communication or otherwise, in the
12-46 solicitation of, negotiation for, or procurement of an insurance or
12-47 annuity contract or health maintenance organization membership, or
12-48 the collection of premiums or charges on an insurance or annuity
12-49 contract or health maintenance organization membership, whether or
12-50 not the sub-agent is designated by the agent as a sub-agent or by
12-51 any other title. A sub-agent is an agent, for all purposes of this
12-52 subchapter, and wherever the term "agent" is used in this chapter,
12-53 it includes sub-agents whether or not a sub-agent is specifically
12-54 mentioned. A sub-agent must hold at least one of the licenses
12-55 issued to the agent for whom the sub-agent acts, but is not
12-56 required to hold each of those licenses [Article, "person" means an
12-57 individual or a general partnership composed of two or more
12-58 individuals or a limited liability partnership registered with the
12-59 Secretary of State under Section 3.08, Texas Revised Partnership
12-60 Act (Article 6132b-3.08, Vernon's Texas Civil Statutes). The term
12-61 "partnership" or "agency partnership" as used in this Article means
12-62 a general partnership or a registered limited liability
12-63 partnership].
12-64 SECTION 1.11. Section 2, Article 21.07, Insurance Code, is
12-65 amended to read as follows:
12-66 Sec. 2. APPLICATION FOR LICENSE; TO WHOM LICENSE MAY BE
12-67 ISSUED. (a) Any person[, corporation, or bank] that desires to
12-68 become an agent for an [a local mutual aid association, a local
12-69 mutual burial association, a statewide mutual assessment
13-1 corporation, a stipulated premium company, a county mutual]
13-2 insurance company or health maintenance organization[, a casualty
13-3 company writing accident and health insurance, or any other type of
13-4 insurance carrier licensed to do business in the State of Texas],
13-5 the agents of which are required to be licensed under this
13-6 subchapter [Article], shall submit to the department an application
13-7 for a license in the form required by the department.
13-8 (b) Each applicant for a license to act as an insurance
13-9 agent in this state shall file with the commissioner a completed
13-10 application on forms developed by the department. The commissioner
13-11 shall establish by rule the requirements for a properly completed
13-12 application.
13-13 (c) The commissioner may not grant a license as an insurance
13-14 agent to write any form of insurance unless the department finds
13-15 that:
13-16 (1) the applicant is or intends to be actively engaged
13-17 in the soliciting or writing of insurance for the public generally
13-18 and is to be actively engaged in the business of insurance; and
13-19 (2) the application is not made to evade the laws
13-20 against rebating and discrimination, either for the applicant or
13-21 for some other person.
13-22 (d) This section does not prohibit an applicant insuring
13-23 property that the applicant owns or in which the applicant has an
13-24 interest, but it is the intent of this section to prohibit coercion
13-25 of insurance and to preserve to each individual the right to choose
13-26 that individual's own agent or insurance company, and to prohibit
13-27 the licensing of a person to engage in the insurance business
13-28 principally to handle business that the applicant controls only
13-29 through ownership, mortgage or sale, family relationship, or
13-30 employment. An applicant for an original license must have a bona
13-31 fide intention to engage in business in which, in any calendar
13-32 year, at least 25 percent of the total volume of premiums is
13-33 derived from persons other than the applicant and from property
13-34 other than that on which the applicant controls the placing of
13-35 insurance through ownership, mortgage, sale, family relationship,
13-36 or employment.
13-37 (e) The department may not deny a license application solely
13-38 on the ground that the applicant will act only part-time as an
13-39 agent.
13-40 (f) The [application must bear a signed endorsement by an
13-41 officer or properly authorized representative of the insurance
13-42 carrier that the individual applicant or each member of the
13-43 partnership or each officer, director, and shareholder of the
13-44 corporation or the responsible officer and employee of the bank is
13-45 qualified to hold that individual or the partnership, the
13-46 corporation, or the bank out in good faith to the general public as
13-47 an insurance agent, and that the insurance carrier desires that the
13-48 applicant act as an insurance agent to represent it in this State.]
13-49 [(c) The] department shall issue a license to an individual
13-50 to engage [or to a general partnership engaging] in the business of
13-51 insurance if the department finds that the individual:
13-52 (1) is at least 18 years of age;
13-53 (2) has passed the licensing examination required
13-54 under Article 21.01-1 of this code within the past 12 months;
13-55 (3) has not committed an act for which a license may
13-56 be denied under Article 21.01-2 of this code; and
13-57 (4) has submitted the application, appropriate fees,
13-58 and any other information required by the department.
13-59 (g) An individual agent licensed under Section 2, Article
13-60 21.07-1, of this code or Section 2, Article 21.14, of this code who
13-61 is operating as an individual agent and who is not covered by an
13-62 errors and omissions insurance policy of a general agency or
13-63 corporation shall certify to the department that the agent will
13-64 maintain the ability to pay any amount that the individual agent
13-65 might become legally obligated to pay due to any claim made against
13-66 the agent by a customer and caused by a negligent act, error, or
13-67 omission of the individual agent or any person for whose acts the
13-68 individual agent is legally liable in the conduct of business under
13-69 this code. For purposes of this subsection, the term "customer"
14-1 means a person, including a firm or corporation, to whom the
14-2 individual agent sells or attempts to sell a policy of insurance,
14-3 or from whom the individual agent accepts an application for
14-4 insurance. The individual agent shall maintain proof of the
14-5 ability to pay the amount through:
14-6 (1) an errors and omissions policy insuring the
14-7 individual agent against errors and omissions in at least the sum
14-8 of $250,000 with a deductible of not more than $10,000 issued by an
14-9 insurance company licensed to do business in this state or, if a
14-10 policy cannot be obtained from a company licensed to do business in
14-11 this state, a policy issued by a company not licensed to do
14-12 business in this state after filing an affidavit with the
14-13 department stating the inability to obtain coverage and receiving
14-14 the commissioner's approval; or
14-15 (2) a bond executed by the individual agent as
14-16 principal and a surety company authorized to do business in this
14-17 state, as surety, in the principal sum of $25,000, payable to the
14-18 department for the use and benefit of customers of the individual
14-19 agent, and conditioned that the individual agent shall pay any
14-20 final judgment recovered against the agent by a customer.
14-21 (h) A binding commitment to issue a policy or bond described
14-22 by Subsection (g) of this section is sufficient in connection with
14-23 an application for a license. An individual agent licensed under
14-24 both Articles 21.07-1 and 21.14 of this code is only required to
14-25 maintain one errors and omissions policy or bond to comply with
14-26 Subsection (g) of this section.
14-27 (i) An individual engaging in the business of insurance as a
14-28 sole proprietorship under the authority of a license issued under
14-29 this subchapter may incorporate, but the corporation does not have
14-30 greater license authority than that granted to the license holder
14-31 in the holder's individual capacity.
14-32 (j) Each individual license holder shall notify the
14-33 department on a monthly basis of:
14-34 (1) a change of the license holder's mailing address;
14-35 (2) a conviction of the license holder of a felony; or
14-36 (3) an administrative action taken against the license
14-37 holder by the insurance regulator of another state [partner in the
14-38 partnership must be licensed individually as an agent under this
14-39 Article].
14-40 (k) [(d)] The department shall issue a license to a
14-41 corporation or partnership if the department finds that:
14-42 (1) [That] the corporation or partnership is:
14-43 (A) organized under the laws of this state or
14-44 any other state or territory of the United States;
14-45 (B) admitted to conduct business in this state
14-46 by the secretary of state, if so required; and
14-47 (C) authorized by its articles of incorporation
14-48 or its partnership agreement to act as an insurance agent [a Texas
14-49 corporation organized or existing under the Texas Business
14-50 Corporation Act or the Texas Professional Corporation Act (Article
14-51 1528e, Vernon's Texas Civil Statutes) having its principal place of
14-52 business in the State of Texas and having as one of its purposes
14-53 the authority to act as an agent covered by this Article];
14-54 (2) the corporation or partnership meets the
14-55 definition of that entity adopted under Section 1A of this article;
14-56 [That every officer, director, and shareholder of the corporation
14-57 is individually licensed under the provisions of this Article, or
14-58 that every officer and director of the corporation is individually
14-59 licensed under this Article, that the corporation is a wholly owned
14-60 subsidiary of a parent corporation that is licensed under this
14-61 Article, and that every shareholder of the parent corporation is
14-62 individually licensed under this Article; and]
14-63 (3) at least one officer of the corporation or one
14-64 active partner of the partnership and all other persons performing
14-65 any acts of an agent on behalf of the corporation or partnership in
14-66 this state are individually licensed by the department separately
14-67 from the corporation or partnership;
14-68 (4) the [That such] corporation or partnership will
14-69 have the ability to pay any sums up to $25,000 which it might
15-1 become legally obligated to pay on account of any claim made
15-2 against it by any customer and caused by any negligent act, error,
15-3 or omission of the corporation or partnership or any person for
15-4 whose acts the corporation or partnership is legally liable in the
15-5 conduct of its business under this code [Article]. The term
15-6 "customer" means any person, firm, or corporation to whom such
15-7 corporation or partnership sells or attempts to sell a policy of
15-8 insurance, or from whom such corporation or partnership accepts an
15-9 application for insurance. Such ability shall be maintained
15-10 [proven] in one of the following ways:
15-11 (A) an errors and omissions policy insuring such
15-12 corporation or partnership against errors and omissions in at least
15-13 the sum of $250,000 [$100,000] with no more than a $10,000
15-14 deductible feature issued by an insurance company licensed to do
15-15 business in this state [the State of Texas] or, if a policy cannot
15-16 be obtained from a company licensed to do business in this state
15-17 [Texas], a policy issued by a company not licensed to do business
15-18 in this state after [Texas on] filing an affidavit with the
15-19 department stating the inability to obtain coverage and receiving
15-20 the commissioner's approval; or
15-21 (B) a bond executed by such corporation or
15-22 partnership as principal and a surety company authorized to do
15-23 business in this state [State], as surety, in the principal sum of
15-24 $25,000, payable to the department for the use and benefit of
15-25 customers of such corporation or partnership, conditioned that such
15-26 corporation or partnership shall pay any final judgment recovered
15-27 against it by any customer[; or]
15-28 [(C) a deposit of cash or securities of the
15-29 class authorized by Articles 2.08 and 2.10, Insurance Code, as
15-30 amended, having a fair market value of $25,000 with the
15-31 comptroller. The comptroller is directed to accept and receive
15-32 such deposit and hold it exclusively for the protection of any
15-33 customer of such corporation recovering a final judgment against
15-34 such corporation. Such deposit may be withdrawn only upon filing
15-35 with the department evidence satisfactory to it that the
15-36 corporation has withdrawn from business and has no unsecured
15-37 liabilities outstanding, or that such corporation has provided for
15-38 the protection of its customers by furnishing an errors and
15-39 omissions policy or a bond as provided. Securities so deposited
15-40 may be exchanged from time to time for other qualified securities].
15-41 A binding commitment to issue such a policy or bond[, or the tender
15-42 of such securities,] shall be sufficient in connection with any
15-43 application for license;
15-44 (5) the corporation or partnership intends to be
15-45 actively engaged in the business of insurance as required under
15-46 Subsection (c) of this section;
15-47 (6) each location from which the corporation or
15-48 partnership will conduct its Texas business under authority of an
15-49 insurance license is separately registered with the department;
15-50 (7) the corporation or partnership has submitted the
15-51 application, appropriate fees, and any other information required
15-52 by the department; and
15-53 (8) an officer, director, member, manager, partner, or
15-54 any other person who has the right or ability to control the
15-55 license holder has not:
15-56 (A) had a license suspended or revoked or been
15-57 the subject of any other disciplinary action by the insurance
15-58 regulator of this or any other state; or
15-59 (B) committed an act for which a license may be
15-60 denied under Article 21.01-2 of this code.
15-61 (l) Nothing contained in this section [herein] shall be
15-62 construed to permit any unlicensed employee or agent of any
15-63 corporation or partnership to perform any act of an agent under
15-64 this subchapter [Article] without obtaining a license.
15-65 (m) [If at any time, any corporation holding an agent's
15-66 license does not maintain the qualifications necessary to obtain a
15-67 license, the license of such corporation to act as an agent shall
15-68 be cancelled or denied in accordance with the provisions of
15-69 Sections 10 and 11 of this Article; provided, however, that should
16-1 any person who is not a licensed agent under this Article acquire
16-2 shares in such a corporation by devise or descent, that person
16-3 shall have a period of 90 days from date of acquisition within
16-4 which to obtain a license or to dispose of the shares to a person
16-5 licensed under this Article.]
16-6 [Should such an unlicensed person acquire shares in a
16-7 corporation and not dispose of them within a period of 90 days to a
16-8 licensed agent, then they must be purchased by the corporation for
16-9 their book value, that is, the value of said shares of stock as
16-10 reflected by the regular books and records of said corporation, as
16-11 of the date of the acquisition of said shares by said unlicensed
16-12 person. Should the corporation fail or refuse to so purchase such
16-13 shares, its license shall be cancelled.]
16-14 [Any such corporation shall have the power to redeem the
16-15 shares of any shareholder, or the shares of a deceased shareholder,
16-16 upon such terms as may be agreed upon by the board of directors and
16-17 such shareholder or such shareholder's personal representative, or
16-18 at a price and upon such terms as may be provided in the articles
16-19 of incorporation, the bylaws, or an existing contract entered into
16-20 between the shareholders of the corporation.]
16-21 Each corporation or partnership licensed as an agent under
16-22 this subchapter [Article] shall file, under oath, on a form
16-23 developed by the department, biographical information for each [a
16-24 list of the names and addresses of all] of its executive officers
16-25 and[,] directors or unlicensed partners who administer the entity's
16-26 operations in this state, and shareholders who are in control of
16-27 the corporation, or any other partners who have the right or
16-28 ability to control the partnership. If any corporation or
16-29 partnership is owned, in whole or in part, by another entity, a
16-30 biographical form is required for each individual who is in control
16-31 of the parent entity[, and shareholders with its application for
16-32 renewal license].
16-33 (n) Each corporation or partnership shall notify the
16-34 department on a monthly basis of:
16-35 (1) the addition or removal of licensed agents
16-36 employed by the corporation or partnership to perform any act of an
16-37 agent in this state;
16-38 (2) a felony conviction of a licensed agent of the
16-39 entity or any individual associated with the corporation or
16-40 partnership who is required to file biographical information with
16-41 the department;
16-42 (3) an event that would require notification under
16-43 Article 1.30 of this code; and
16-44 (4) the addition or removal of an officer, director,
16-45 partner, member, or manager.
16-46 (o) The department shall issue a license to a bank in the
16-47 manner provided for the licensing of a corporation under this
16-48 section.
16-49 (p) A person may not acquire in any manner any ownership
16-50 interest in an entity licensed as an agent under this subchapter if
16-51 the person is, or after the acquisition would be, directly or
16-52 indirectly, in control of the license holder, or otherwise acquire
16-53 control of or exercise any control over the license holder, unless
16-54 the person has filed the following information with the department
16-55 under oath:
16-56 (1) a biographical form for each person by whom or on
16-57 whose behalf the acquisition of control is to be effected;
16-58 (2) a statement certifying that no person who is
16-59 acquiring an ownership interest in or control of the license holder
16-60 has been the subject of a disciplinary action taken by any state
16-61 insurance regulator;
16-62 (3) a statement certifying that, immediately on the
16-63 change of control, the license holder will be able to satisfy the
16-64 requirements for the issuance of the license to solicit the line or
16-65 lines of insurance for which it is licensed; and
16-66 (4) any additional information that the commissioner
16-67 may by rule prescribe as necessary or appropriate to the protection
16-68 of the insurance consumers of this state or as in the public
16-69 interest.
17-1 (q) If a person required to file a statement under
17-2 Subsection (p) of this section is a partnership, limited
17-3 partnership, syndicate, or other group, the commissioner may
17-4 require that the information required by Subdivisions (1)-(4) of
17-5 that subsection for an individual be provided regarding each
17-6 partner of the partnership or limited partnership, each member of
17-7 the syndicate or group, and each person who controls the partner or
17-8 member. If the partner, member, or person is a corporation or the
17-9 person required to file the statement under Subsection (p) of this
17-10 section is a corporation, the commissioner may require that the
17-11 information required by Subdivisions (1)-(4) of that subsection be
17-12 provided regarding:
17-13 (1) the corporation;
17-14 (2) each individual who is an executive officer or
17-15 director of the corporation; and
17-16 (3) each person who is directly or indirectly the
17-17 beneficial owner of more than 10 percent of the outstanding voting
17-18 securities of the corporation.
17-19 (r) The department may disapprove an acquisition of control
17-20 if, after notice and opportunity for hearing, the commissioner
17-21 determines that:
17-22 (1) immediately on the change of control the license
17-23 holder would not be able to satisfy the requirements for the
17-24 issuance of the license to solicit the line or lines of insurance
17-25 for which it is presently licensed;
17-26 (2) the competence, trustworthiness, experience, and
17-27 integrity of the persons who would control the operation of the
17-28 license holder are such that it would not be in the interest of the
17-29 insurance consumers of this state to permit the acquisition of
17-30 control; or
17-31 (3) the acquisition of control would violate this code
17-32 or another law of this state, another state, or the United States.
17-33 (s) Notwithstanding Subsection (q) of this section, a change
17-34 in control is considered approved if the department has not
17-35 proposed to deny the requested change before the 91st day after the
17-36 date of receipt by the department of all information required by
17-37 this section.
17-38 (t) The commissioner shall be the corporation's or
17-39 partnership's attorney for service of process on whom all lawful
17-40 process, notice, or demand may be served in any legal proceeding
17-41 against the corporation or partnership if:
17-42 (1) the corporation or partnership licensed to
17-43 transact business in this state fails to appoint or maintain an
17-44 attorney for service in this state;
17-45 (2) an attorney for service cannot with reasonable
17-46 diligence be found; or
17-47 (3) the license of a corporation or partnership is
17-48 revoked.
17-49 (u) If a corporation or partnership that holds an agent's
17-50 license does not maintain the qualifications necessary for issuance
17-51 of the license, the department shall deny, revoke, or suspend the
17-52 license of the corporation or partnership to act as an agent as
17-53 provided by Article 21.01-2 of this code.
17-54 [Each corporation shall notify the department upon any change
17-55 in its officers, directors, or shareholders not later than the 30th
17-56 day after the date on which the change becomes effective.]
17-57 [Except as provided by Subdivision (2) of this subsection, a
17-58 corporation may not own any interest in another corporation
17-59 licensed under this Article, and each owner of an interest in a
17-60 corporation licensed under this Article shall be a natural person
17-61 who holds a valid license issued under this Article.]
17-62 [(e) The department shall issue a license to a bank if the
17-63 department finds that:]
17-64 [(1) the bank satisfies the definition of Section 1C
17-65 of this Article;]
17-66 [(2) at least one officer of the bank and each
17-67 individual who will be performing any acts as an agent for the bank
17-68 are individually licensed under this Article; and]
17-69 [(3) the bank will have the ability to pay any sums up
18-1 to $25,000 that it might become legally obligated to pay on account
18-2 of any claim made against it by a customer and caused by a
18-3 negligent act, error, or omission of the bank or any person for
18-4 whose acts the bank is legally liable in the conduct of its
18-5 business under this Article. The term "customer" means any person,
18-6 firm, or corporation to whom the bank sells or attempts to sell a
18-7 policy of insurance or from whom the bank accepts an application
18-8 for insurance. That ability shall be proven through:]
18-9 [(A) an errors and omissions policy insuring the
18-10 bank against errors and omissions in at least the sum of $100,000
18-11 with not more than a $10,000 deductible feature, issued by an
18-12 insurance company licensed to do business in this state or, if a
18-13 policy cannot be obtained from a company licensed to do business in
18-14 this state, a policy issued by a company not licensed to do
18-15 business in this state on filing an affidavit with the department
18-16 stating the inability to obtain coverage and receiving the
18-17 department's approval;]
18-18 [(B) a bond executed by the bank as principal
18-19 and a surety company authorized to do business in this state, as
18-20 surety, in the principal sum of $25,000, payable to the department
18-21 for the use and benefit of customers of the bank, conditioned that
18-22 the bank shall pay any final judgment recovered against it by a
18-23 customer; or]
18-24 [(C) a deposit with the comptroller of cash or
18-25 securities of the class authorized by Articles 2.08 and 2.10 of
18-26 this code, with a fair market value of $25,000. The comptroller
18-27 shall accept and receive the deposit and hold it exclusively for
18-28 the protection of a customer of the bank who recovers a final
18-29 judgment against the bank. The deposit may be withdrawn only on
18-30 filing with the department satisfactory evidence that the bank has
18-31 withdrawn from the business of insurance and has no unsecured
18-32 liabilities outstanding or that the bank has provided for the
18-33 protection of its customers by furnishing an errors and omissions
18-34 policy or a bond as provided by this subdivision. Securities so
18-35 deposited may be exchanged from time to time for other qualified
18-36 securities.]
18-37 [A binding commitment to issue such a policy or bond, or the
18-38 tender of applicable securities, is sufficient in connection with
18-39 an application for license.]
18-40 [Nothing in this subsection permits an unlicensed employee or
18-41 agent of a bank to perform any act of an agent under this Article
18-42 without obtaining a license.]
18-43 [A bank licensed as an agent under this Article may have
18-44 additional offices from which the business of insurance is
18-45 conducted only in a place with a population of 5,000 or less and
18-46 must comply with the department's regulations regarding additional
18-47 offices.]
18-48 [A bank licensed as an agent under this Article must maintain
18-49 the insurance records of the bank, including all files relating to
18-50 customer complaints, separate from records relating to the banking
18-51 transactions of the bank.]
18-52 [If at any time, a bank that holds an agent's license does
18-53 not maintain the qualifications necessary to obtain a license, the
18-54 license of that bank to act as an agent shall be canceled or denied
18-55 in accordance with Sections 10 and 11 of this Article.]
18-56 [Each bank licensed as an agent under this Article shall file
18-57 under oath with its application for license renewal a list of the
18-58 name and address of each individual who will be acting as an agent
18-59 on behalf of the bank and of each officer and director of the bank,
18-60 as defined by Article 21.02 of this code, and other biographical
18-61 information as required by the department.]
18-62 [Each bank shall notify the department of any change in its
18-63 officers and directors, and any change in other persons who will be
18-64 acting as agents, as defined by Article 21.02 of this code, and
18-65 submit biographical information on those officers, directors, and
18-66 persons as required by the department not later than the 30th day
18-67 after the date on which the change takes effect.]
18-68 SECTION 1.12. Article 21.07, Insurance Code, is amended by
18-69 adding Section 3A to read as follows:
19-1 Sec. 3A. TEMPORARY LICENSE. (a) The department may issue a
19-2 temporary agent's license to an applicant for a license under
19-3 Section 2 of this article who is being considered for appointment
19-4 as an agent by an insurer or health maintenance organization. An
19-5 applicant for a temporary license is not required to pass a written
19-6 examination. A temporary license is valid for the 90 days after
19-7 the date of issuance. The department shall issue a temporary
19-8 license immediately on receipt by the department of a properly
19-9 completed application executed by the person in the form required
19-10 by Section 2 of this article, accompanied by the nonrefundable
19-11 filing fee set by the department and a certificate signed by an
19-12 officer or properly authorized representative of the insurer or
19-13 health maintenance organization stating that:
19-14 (1) the applicant is being considered for appointment
19-15 by the insurer or health maintenance organization as its full-time
19-16 agent;
19-17 (2) the insurer or health maintenance organization
19-18 desires that the applicant be issued a temporary license; and
19-19 (3) the applicant will complete, under the insurer's
19-20 or health maintenance organization's supervision, at least 40 hours
19-21 of training as prescribed by Subsection (h) of this section not
19-22 later than the 14th day after the date on which the application,
19-23 certificate, and nonrefundable fee are delivered or mailed to the
19-24 department.
19-25 (b) If the temporary license is not received from the
19-26 department before the eighth day after the date on which the
19-27 application, certificate, and nonrefundable fee are delivered or
19-28 mailed to the department and the insurer or health maintenance
19-29 organization has not been notified that the application is denied,
19-30 the insurer or health maintenance organization may assume that the
19-31 temporary license will be issued in due course and the applicant
19-32 may proceed to act as an agent.
19-33 (c) A temporary license may not be renewed or issued more
19-34 than once in a consecutive six-month period to the same applicant.
19-35 (d) A temporary license may not be granted to a person who
19-36 does not intend to apply for a license to sell insurance or
19-37 memberships to the public generally.
19-38 (e) A temporary license may not be used to obtain
19-39 commissions from sales made to persons who have family, employment,
19-40 or business relationships with the temporary license holder. An
19-41 insurer or health maintenance organization may not knowingly pay,
19-42 directly or indirectly, to the holder of a temporary license under
19-43 this section, and a temporary license holder may not receive or
19-44 accept, a commission on the sale of a contract of insurance or
19-45 membership covering:
19-46 (1) the temporary license holder;
19-47 (2) a person related to the temporary license holder
19-48 by consanguinity or affinity;
19-49 (3) a person who is or has been during the past six
19-50 months the temporary license holder's employer, either as an
19-51 individual or as a member of a partnership, association, firm, or
19-52 corporation; or
19-53 (4) a person who is or who has been during the past
19-54 six months the employee of the temporary license holder.
19-55 (f) A person who has been issued a temporary license under
19-56 this section and is acting under the authority of the temporary
19-57 license may not engage in any insurance solicitation, sale, or
19-58 other agency transaction that results in or is intended to result
19-59 in the replacement of any existing individual life insurance policy
19-60 form or annuity contract that is in force, or receive, directly or
19-61 indirectly, any commission or other compensation that may or does
19-62 result from such a solicitation, sale, or other agency transaction.
19-63 A person who holds a permanent license may not circumvent or
19-64 attempt to circumvent the intent of this subsection by acting for
19-65 or with a person holding a temporary license. As used in this
19-66 subsection, "replacement" means a transaction in which a new life
19-67 insurance or annuity contract is to be purchased, and it is known
19-68 or should be known to the temporary agent that by reason of the
19-69 solicitation, sale, or other transaction the existing life
20-1 insurance or annuity contract has been or is to be:
20-2 (1) lapsed, forfeited, surrendered, or otherwise
20-3 terminated;
20-4 (2) converted to reduced paid-up insurance, continued
20-5 as extended term insurance, or otherwise reduced in value by the
20-6 use of nonforfeiture benefits or other policy values;
20-7 (3) amended so as to effect either a reduction in
20-8 benefits or in the term for which coverage would otherwise remain
20-9 in force or for which benefits would be paid;
20-10 (4) reissued with any reduction in cash value; or
20-11 (5) pledged as collateral or subjected to borrowing,
20-12 whether in a single loan or under a schedule of borrowing over a
20-13 period of time, for amounts in the aggregate exceeding 25 percent
20-14 of the loan value set forth in the policy.
20-15 (g) The department may cancel, suspend, or revoke the
20-16 temporary appointment powers of an insurer or health maintenance
20-17 organization if, after notice and opportunity for hearing, the
20-18 commissioner finds that that insurer or health maintenance
20-19 organization has abused the temporary appointment powers. An
20-20 appeal from the department's decision is subject to Article 1.04 of
20-21 this code. In considering whether abuse has occurred, the
20-22 department may consider:
20-23 (1) the number of temporary appointments made;
20-24 (2) the percentage of appointees sitting for
20-25 examination as agents under this article, as provided by Subsection
20-26 (j) of this section; and
20-27 (3) the number of appointees who pass the examination.
20-28 (h) The insurer or health maintenance organization shall
20-29 administer at least 40 hours of training to each applicant for a
20-30 temporary license not later than the 14th day after the date on
20-31 which the application, certificate, and nonrefundable fee are
20-32 delivered or mailed to the department. At least 10 hours must be
20-33 taught in a classroom setting, including an accredited college,
20-34 university, junior college, or community college, a business
20-35 school, or a private institute or classes sponsored by the insurer
20-36 or health maintenance organization and especially established for
20-37 this purpose. The training program must be designed to provide an
20-38 applicant with basic knowledge of:
20-39 (1) the broad principles of insurance, including the
20-40 licensing and regulatory laws of this state;
20-41 (2) the broad principles of health maintenance
20-42 organizations, including membership requirements and related
20-43 licensing and regulatory laws of this state; and
20-44 (3) the ethical obligations and duties of an agent.
20-45 (i) If the commissioner finds under Subsection (g) of this
20-46 section that an abuse of temporary appointment powers has occurred,
20-47 the commissioner may require the affected insurer or health
20-48 maintenance organization to file with the department a description
20-49 of the insurer's or health maintenance organization's training
20-50 program and may require the insurer or health maintenance
20-51 organization to obtain the approval of the department before
20-52 continuing to use the training program.
20-53 (j) Each insurer or health maintenance organization shall
20-54 ensure that, during any two consecutive calendar quarters, at least
20-55 70 percent of the insurer's or health maintenance organization's
20-56 applicants for temporary licenses sit for the required licensing
20-57 examination. At least 50 percent of the applicants taking the
20-58 examination must pass during that period.
20-59 (k) An insurer or health maintenance organization may not
20-60 make more than 250 appointments of temporary license holders during
20-61 a calendar year.
20-62 SECTION 1.13. Section 6, Article 21.07, Insurance Code, is
20-63 amended to read as follows:
20-64 Sec. 6. FILING OF [AGENT MAY BE LICENSED TO REPRESENT]
20-65 ADDITIONAL APPOINTMENTS [INSURERS]. (a) Except as specifically
20-66 prohibited by another provision of this code, an [Any] agent
20-67 licensed under this subchapter [Article] may represent and act as
20-68 an agent for more than one insurance carrier at any time while the
20-69 agent's license is in force, if the agent so desires. Any such
21-1 agent and the insurance carrier involved shall file with the
21-2 department [must give notice to the State Board of Insurance of]
21-3 any additional appointment [or appointments] authorizing the agent
21-4 to act as agent for an additional insurance carrier or carriers not
21-5 later than the 30th day after the effective date of the
21-6 appointment. The filing [Such notice] must include:
21-7 (1) [be accompanied by] a certificate from the [each]
21-8 insurance carrier to be named in the [each] additional appointment
21-9 that states[, and must state] that the [said] insurance company
21-10 desires to appoint the applicant as its agent;
21-11 (2) [. This notice shall also contain such] other
21-12 information as the commissioner [State Board of Insurance] may
21-13 require; and
21-14 (3) [. The agent shall be required to pay] a
21-15 nonrefundable fee in an amount [not to exceed $16 as] determined by
21-16 the commissioner [State Board of Insurance] for each additional
21-17 appointment for which the insurance carrier applies [applied for,
21-18 which fee shall accompany the notice. If approval of the
21-19 additional appointment is not received from the State Board of
21-20 Insurance before the eighth day after the date on which the
21-21 completed application and fee were received by the Board, the agent
21-22 and the insurance carrier, in the absence of notice of disapproval,
21-23 may assume that the Board approves the application, and the agent
21-24 may act for the insurance carrier].
21-25 (b) An appointment made under this Article to authorize an
21-26 agent to act as an agent for an insurance carrier continues in
21-27 effect without the necessity of renewal until it is terminated or
21-28 [and] withdrawn by the insurance carrier or agent. If the agent is
21-29 terminated for cause, the insurance carrier shall follow the
21-30 procedures established under Section 6B of [as provided by this
21-31 section or is otherwise terminated in accordance with] this
21-32 Article. Each renewal license issued to the agent authorizes the
21-33 agent to represent and act for the insurance carriers for which the
21-34 agent holds an appointment until the appointment is terminated or
21-35 withdrawn, and that agent is considered to be the agent of the
21-36 appointing insurance carriers for the purposes of this code
21-37 [Article].
21-38 (c) An agent appointed under this section may act on behalf
21-39 of the appointing carrier before the department receives the filing
21-40 made under this section.
21-41 (d) A person acting as a sub-agent is not required to be
21-42 separately appointed by each insurance carrier that has appointed
21-43 the licensed person who has designated the sub-agent in writing to
21-44 the department. Termination of the sub-agent by the licensed
21-45 person shall be reported promptly to the department and terminates
21-46 the sub-agent's authority to act for the licensed person and that
21-47 person's insurance carriers.
21-48 SECTION 1.14. Article 21.07, Insurance Code, is amended by
21-49 adding Sections 6B, 6C, 6D, and 6E to read as follows:
21-50 Sec. 6B. INSURANCE CARRIER TO NOTIFY DEPARTMENT OF
21-51 TERMINATION OF CONTRACT; COMMUNICATION PRIVILEGED. (a) Each
21-52 insurance carrier shall, on termination of the appointment of an
21-53 agent for cause, immediately file with the department a statement
21-54 of the facts relating to the termination of the appointment and
21-55 the date and cause of the termination. On receipt of the statement
21-56 the department shall record the termination of the appointment of
21-57 that agent to represent the insurance carrier in this state.
21-58 (b) A document, record, statement, or other information
21-59 required to be made or disclosed to the department under this
21-60 section is a privileged and confidential communication and is not
21-61 admissible in evidence in any court action or proceeding except
21-62 under a subpoena issued by a court of record.
21-63 (c) An insurance carrier, an employee or agent of the
21-64 carrier, or any other person, acting without malice, is not liable
21-65 for providing the information required to be disclosed under this
21-66 section.
21-67 Sec. 6C. FEES; USE OF FUNDS. (a) The department shall
21-68 collect from each agent of an insurance carrier writing insurance
21-69 in this state under this code a nonrefundable license fee and a
22-1 nonrefundable appointment fee for each appointment by an insurance
22-2 carrier. These fees, together with examination fees, license fees,
22-3 and license renewal fees, shall be deposited to the credit of the
22-4 Texas Department of Insurance operating fund.
22-5 (b) The department may use any portion of the fees collected
22-6 to enforce this subchapter, may employ persons as it considers
22-7 necessary to investigate and make reports regarding alleged
22-8 violations of this code and misconduct on the part of agents, and
22-9 may pay the salaries and expenses of those persons and office
22-10 employees and other expenses necessary to enforce this subchapter
22-11 from the fees collected. A person employed by the department under
22-12 this section may administer the oath and examine under oath any
22-13 person considered necessary in gathering information and evidence
22-14 and may have that information and evidence reduced to writing if
22-15 considered necessary, and all such expenses shall be paid from the
22-16 fees.
22-17 (c) The department shall set the fees in amounts reasonable
22-18 and necessary to implement this subchapter.
22-19 Sec. 6D. DUPLICATE LICENSE FEE. The department shall
22-20 collect in advance from an agent requesting a duplicate license a
22-21 fee in an amount set by the department. The fee collected under
22-22 this section shall be deposited to the credit of the Texas
22-23 Department of Insurance operating fund.
22-24 Sec. 6E. REQUIREMENT TO APPOINT SUB-AGENT. If a general
22-25 life, accident, and health agent or general property and casualty
22-26 agent who has been appointed by an insurance carrier that has a
22-27 permit to do business in this state desires to appoint a sub-agent
22-28 in the operation of an insurance business, the general agent shall
22-29 submit to the department in writing, in the form prescribed by the
22-30 department, notice of the sub-agent's appointment. The notice must
22-31 be accompanied by a nonrefundable fee in an amount determined by
22-32 the commissioner.
22-33 ARTICLE 2. LIFE, ACCIDENT, AND HEALTH LICENSES
22-34 SECTION 2.01. Subchapter A, Chapter 21, Insurance Code, is
22-35 amended by adding Article 21.07-1 to read as follows:
22-36 Art. 21.07-1. TEXAS LIFE, ACCIDENT, AND HEALTH AGENTS
22-37 LICENSE ACT
22-38 Sec. 1. SHORT TITLE; APPLICATION. (a) This article may be
22-39 cited as the Texas Life, Accident, and Health Agents License Act.
22-40 (b) Each agent of an insurance company authorized to provide
22-41 life, accident, and health insurance coverage in this state is
22-42 subject to this article. This article applies to each person who:
22-43 (1) performs the acts of an agent, as defined by
22-44 Article 21.02 of this code, whether through oral, written, or
22-45 electronic communications or otherwise, by the solicitation of,
22-46 negotiation for, procurement of, or collection of premiums on an
22-47 insurance or annuity contract offered by any type of insurance
22-48 carrier authorized to sell life, accident, and health insurance
22-49 products in this state; or
22-50 (2) represents or purports to represent a health
22-51 maintenance organization in the solicitation, negotiation,
22-52 procurement, or effectuation of membership in the health
22-53 maintenance organization.
22-54 Sec. 2. GENERAL LIFE, ACCIDENT, AND HEALTH LICENSE; LICENSE
22-55 REQUIRED. (a) A general life, accident, and health license is
22-56 required for each person who acts as:
22-57 (1) an agent writing life, accident, and health
22-58 insurance for a life insurance company;
22-59 (2) an agent writing only accident and health
22-60 insurance;
22-61 (3) an agent representing a health maintenance
22-62 organization;
22-63 (4) an agent writing fixed or variable annuity
22-64 contracts or variable life contracts;
22-65 (5) an industrial life insurance agent for an
22-66 industrial company that writes only weekly premium life insurance
22-67 on a debit basis under Article 3.52 of this code;
22-68 (6) an agent writing:
22-69 (A) only life insurance in excess of $15,000 on
23-1 any one life for a stipulated premium insurance company;
23-2 (B) only accident and health insurance for a
23-3 stipulated premium insurance company; or
23-4 (C) both types of insurance described by
23-5 Paragraphs (A) and (B) of this subdivision;
23-6 (7) an agent writing life, accident, and health
23-7 insurance for any type of authorized life insurance company,
23-8 including a legal reserve life insurance company, domiciled in this
23-9 state, representing the insurer in a foreign country or territory
23-10 and either on a United States military installation or with United
23-11 States military personnel; or
23-12 (8) an agent writing any other type of insurance as
23-13 required by the commissioner for the protection of the insurance
23-14 consumers of this state.
23-15 (b) For the purposes of this subsection, a "combination
23-16 company" is an insurer that writes weekly premium life insurance or
23-17 monthly ordinary life insurance on a debit basis. A general life,
23-18 accident, and health license is required for each person who acts
23-19 as a combination life insurance agent for a combination company. A
23-20 combination company and a combination life insurance agent may also
23-21 write ordinary contracts of life insurance.
23-22 (c) Except as otherwise provided by this subsection, a
23-23 general life, accident, and health license is required for an agent
23-24 writing life, accident, and health insurance for a fraternal
23-25 benefit society under Chapter 10 of this code. A license is not
23-26 required for an agent, regularly salaried officer, employee,
23-27 representative, or member of a fraternal benefit society who
23-28 devotes less than 50 percent of the person's time to the
23-29 solicitation or procurement of insurance contracts for the society.
23-30 A person who, in the preceding calendar year, has solicited or
23-31 procured the following amounts on any of the following contracts of
23-32 insurance on behalf of a fraternal benefit society is presumed to
23-33 have devoted 50 percent or more of the person's time to the
23-34 solicitation or procurement of insurance contracts:
23-35 (1) life insurance contracts that generate, in the
23-36 aggregate, more than $20,000 of direct premium for all lives
23-37 insured for the preceding calendar year, if no interest-sensitive
23-38 life insurance certificate is solicited or procured with a face
23-39 amount of insurance that exceeds $35,000 unless the person has
23-40 obtained the designation of "Fraternal Insurance Counselor";
23-41 (2) an insurance contract, other than a life insurance
23-42 contract, that the fraternal benefit society may write that insures
23-43 the individual lives of more than 25 persons; or
23-44 (3) a variable life insurance or variable annuity
23-45 contract.
23-46 Sec. 3. AUTHORITY TO WRITE ADDITIONAL PRODUCT LINES. A
23-47 person who holds a general life, accident, and health license
23-48 issued under the requirements of this subchapter may write
23-49 additional types of insurance contracts as provided under Section 5
23-50 of this article or under a specialty license program established by
23-51 the department without obtaining an additional license.
23-52 Sec. 4. LIMITED LIFE, ACCIDENT, AND HEALTH LICENSE. (a) In
23-53 this section:
23-54 (1) "Funeral prearrangement life insurance agent"
23-55 means an insurance agent who, subject to the limitations of this
23-56 section, writes only life insurance policies and fixed annuity
23-57 contracts to secure the delivery of funeral services and
23-58 merchandise under prepaid funeral contracts regulated by the Texas
23-59 Department of Banking under Chapter 154, Finance Code.
23-60 (2) "Job protection insurance" has the meaning
23-61 assigned by Article 25.01 of this code.
23-62 (b) This section applies to:
23-63 (1) a funeral prearrangement life insurance agent;
23-64 (2) an agent for an insurance company who writes only
23-65 job protection insurance;
23-66 (3) an agent for a stipulated premium company who
23-67 writes only life insurance not to exceed $15,000 on any one life;
23-68 (4) an agent for a local mutual aid association, a
23-69 local mutual burial association, or a statewide mutual aid
24-1 association;
24-2 (5) an agent writing policies or riders to policies
24-3 that provide only:
24-4 (A) lump-sum cash benefits in the event of
24-5 accidental death, death by accidental means, or dismemberment; or
24-6 (B) ambulance expense benefits in the event of
24-7 accident or sickness;
24-8 (6) an agent writing prepaid legal services contracts
24-9 under Article 5.13-1 or Chapter 23 of this code; and
24-10 (7) an agent writing any other type of insurance
24-11 required by the commissioner to be licensed for the protection of
24-12 the insurance consumers of this state.
24-13 (c) A person to whom this section applies must hold a
24-14 limited life, health, and accident license under this section. The
24-15 commissioner may adopt rules as necessary to implement this
24-16 section.
24-17 (d) Notwithstanding this section or any other law, a funeral
24-18 prearrangement life insurance agent may not:
24-19 (1) act as an agent for an insurance company unless
24-20 the agent acts under the supervision of a person, including a
24-21 corporation, who:
24-22 (A) holds a general life, accident, and health
24-23 license; and
24-24 (B) holds or is an authorized representative of
24-25 a holder of a permit issued by the Texas Department of Banking to
24-26 sell prepaid funeral benefits under Chapter 154, Finance Code;
24-27 (2) write any coverage or combination of coverages
24-28 with an initial guaranteed death benefit in excess of $15,000 on
24-29 any life; or
24-30 (3) act as an agent for more than one insurance
24-31 company.
24-32 (e) A person who holds a limited life, accident, and health
24-33 license issued under this section may write only the types of
24-34 insurance products described by this section.
24-35 (f) An applicant for a limited life, accident, and health
24-36 license is not eligible for a temporary license under Section 3A,
24-37 Article 21.07, of this code.
24-38 ARTICLE 3. PROPERTY AND CASUALTY LICENSES
24-39 SECTION 3.01. Article 21.14, Insurance Code, is amended to
24-40 read as follows:
24-41 Art. 21.14. TEXAS PROPERTY AND CASUALTY AGENTS LICENSE ACT
24-42 Sec. 1. SHORT TITLE; APPLICATION. (a) This article may be
24-43 cited as the Texas Property and Casualty Agents License Act.
24-44 (b) Each agent of an insurance company authorized to provide
24-45 property and casualty insurance coverage in this state is subject
24-46 to this article. This article applies to each person who performs
24-47 the acts of an agent, as defined by Article 21.02 of this code,
24-48 whether through oral, written, or electronic communications or
24-49 otherwise, by the solicitation of, negotiation for, procurement of,
24-50 or collection of premiums on an insurance contract offered by any
24-51 type of insurance carrier authorized to sell property and casualty
24-52 insurance products in this state, including:
24-53 (1) a fidelity or surety company;
24-54 (2) an interinsurance exchange;
24-55 (3) a mutual company, including a farm mutual or a
24-56 county mutual;
24-57 (4) a reciprocal exchange; or
24-58 (5) a Lloyd's plan.
24-59 Sec. 2. GENERAL PROPERTY AND CASUALTY LICENSE; LICENSE
24-60 REQUIRED. A general property and casualty license is required for
24-61 each person who acts as:
24-62 (1) an agent writing property and casualty insurance
24-63 for an insurance carrier authorized to provide property and
24-64 casualty insurance coverage in this state;
24-65 (2) a sub-agent of a person licensed as an agent under
24-66 this article who solicits and binds insurance risks on behalf of
24-67 that agent;
24-68 (3) an agent writing property and casualty insurance
24-69 for a county mutual insurance company; or
25-1 (4) an agent writing any other type of insurance as
25-2 required by the commissioner for the protection of the insurance
25-3 consumers of this state.
25-4 Sec. 3. AUTHORITY TO WRITE ADDITIONAL PRODUCT LINES. A
25-5 person who holds a general property and casualty license issued
25-6 under this subchapter may write additional types of insurance
25-7 contracts as provided under Section 6 of this article or under a
25-8 specialty license program established by the department.
25-9 Sec. 4. AUTHORITY TO WRITE ACCIDENT AND HEALTH INSURANCE. A
25-10 person who holds a general property and casualty license issued
25-11 under this subchapter may write health and accident insurance for a
25-12 property and casualty insurer authorized to sell those insurance
25-13 products in this state without holding a license issued under
25-14 Article 21.07-1 of this code.
25-15 Sec. 5. EMERGENCY LICENSE WITHOUT EXAMINATION. In the event
25-16 of the death or disability of a property and casualty agent or if a
25-17 property and casualty agent is found to be insolvent and unable to
25-18 pay for premiums as they become due to an insurer, the department
25-19 may issue to an applicant for a property and casualty license an
25-20 emergency property and casualty license without examination if it
25-21 is established to the satisfaction of the department that the
25-22 emergency license is necessary for the preservation of the agency
25-23 assets of a deceased, disabled, or insolvent property and casualty
25-24 agent. An emergency license is valid for 90 days in any 12
25-25 consecutive months and may be renewed by the department for an
25-26 additional 90 days during the 12-month period if the other
25-27 requirements of this subchapter are met.
25-28 Sec. 6. LIMITED PROPERTY AND CASUALTY LICENSE.
25-29 (a) Notwithstanding any other law, a limited property and casualty
25-30 license is required for each person who desires to act as an agent
25-31 writing:
25-32 (1) insurance only on growing crops under Article
25-33 21.14-2 of this code;
25-34 (2) any form of insurance authorized under Chapter 16
25-35 of this code for a farm mutual insurance company, except that a
25-36 license is not required under this subsection for a person who
25-37 wrote policies that generated, in the aggregate, less than $20,000
25-38 in direct premium for the preceding calendar year;
25-39 (3) exclusively all forms of insurance authorized to
25-40 be solicited and written in this state that cover the ownership,
25-41 operation, maintenance, or use of a motor vehicle that is designed
25-42 for use on the public highways, including a trailer or semitrailer,
25-43 and the motor vehicle's accessories or equipment;
25-44 (4) prepaid legal services contracts under Article
25-45 5.13-1 or Chapter 23 of this code;
25-46 (5) only industrial fire insurance policies covering
25-47 dwellings, household goods, and wearing apparel on a weekly,
25-48 monthly, or quarterly basis on a continuous premium payment plan
25-49 written for an insurance company whose business is devoted
25-50 exclusively to that business as described by Article 17.02 of this
25-51 code, except that a license is not required under this subsection
25-52 for a person who wrote industrial fire insurance policies that
25-53 generated, in the aggregate, less than $20,000 in direct premium
25-54 for the preceding calendar year; or
25-55 (6) any other type of insurance as required by the
25-56 commissioner for the protection of the insurance consumers of this
25-57 state.
25-58 (b) Subsection (a)(1) of this section applies to a
25-59 production credit association or bank for a cooperative, as
25-60 provided under the farm credit system under 12 U.S.C. 2001 et seq.,
25-61 as amended.
25-62 (c) A person who holds a limited property and casualty
25-63 license issued under this subchapter may write only the types of
25-64 insurance products designated on the license by the department.
25-65 Sec. 7. FULL-TIME HOME OFFICE EMPLOYEES: MANDATORY
25-66 REGISTRATION, CONTINUING EDUCATION REQUIREMENTS, AND NOTIFICATION
25-67 TO CONSUMERS; DISCIPLINARY ACTIONS. (a) Each actual full-time
25-68 home office salaried employee of an insurance carrier licensed to
25-69 do business in this state who solicits or receives an application
26-1 for the sale of insurance through an oral, written, or electronic
26-2 communication shall register with the commissioner.
26-3 (b) An insurance carrier licensed to do business in this
26-4 state whose general plan of operation includes the use of employees
26-5 described by Subsection (a) of this section shall certify to the
26-6 commissioner that each of those employees receives at least 15
26-7 hours of continuing education annually. Each continuing education
26-8 course provided by the insurance carrier shall be submitted to the
26-9 department for approval as provided by Section 3, Article 21.01-1,
26-10 of this code. A person registered under this section shall comply
26-11 with the continuing education requirements adopted under Section 3,
26-12 Article 21.01-1, of this code, as if the person were a licensed
26-13 agent. The continuing education must be designed to give the
26-14 employee:
26-15 (1) reasonable familiarity with:
26-16 (A) the broad principles of insurance;
26-17 (B) insurance licensing and regulatory laws; and
26-18 (C) the terms and conditions of the insurance
26-19 that the registrant transacts; and
26-20 (2) a fair and general understanding of the duties of
26-21 an insurer to an insured, including training in ethical
26-22 considerations.
26-23 (c) The registration of an actual full-time home office
26-24 salaried employee shall be suspended and the employer insurance
26-25 carrier may be disciplined for any act for which an agent may be
26-26 disciplined under Article 21.01-2 of this code.
26-27 (d) Each registrant under this section shall disclose the
26-28 fact of the registration when making an oral, written, or
26-29 electronic communication to solicit or receive an application for
26-30 the sale of insurance.
26-31 (e) Each person who registers under this section shall
26-32 submit a nonrefundable registration fee in an amount determined by
26-33 the department.
26-34 Sec. 8. INSURANCE SERVICE REPRESENTATIVE LICENSE. (a) An
26-35 insurance service representative license is required for each
26-36 person who is employed on a salaried basis to perform assigned
26-37 duties only within the office of a property and casualty agent.
26-38 Those duties may include the issuance of insurance binders only
26-39 with the express approval of the property and casualty agent who
26-40 supervises the insurance service representative.
26-41 (b) The provisions of Subchapter A of this chapter that
26-42 apply to a general license apply to a license issued under this
26-43 section, except that proof of financial responsibility is not
26-44 required of a person licensed only as an insurance service
26-45 representative. [LICENSING OF LOCAL RECORDING AGENTS AND
26-46 SOLICITORS; LIFE, HEALTH AND ACCIDENT INSURANCE EXCEPTED; OTHER
26-47 EXCEPTIONS]
26-48 [Sec. 1. CLASSES OF AGENTS. Insurance agents, as that term
26-49 is defined in the laws of this State, shall for the purpose of this
26-50 article be divided into two classes: Local Recording Agents and
26-51 Solicitors.]
26-52 [Sec. 2. DEFINITIONS; CERTAIN ORDERS, SOCIETIES OR
26-53 ASSOCIATIONS NOT AFFECTED. (a) In this article:]
26-54 [(1) "Local Recording Agent" means a person or firm
26-55 engaged in soliciting and writing insurance, being authorized by an
26-56 insurance company or insurance carrier, including fidelity and
26-57 surety companies, to solicit business and to write, sign, execute,
26-58 and deliver policies of insurance, and to bind companies on
26-59 insurance risks, and who maintain an office and a record of such
26-60 business and the transactions which are involved, who collect
26-61 premiums on such business and otherwise perform the customary
26-62 duties of a local recording agent representing an insurance carrier
26-63 in its relation with the public; or a person or firm engaged in
26-64 soliciting and writing insurance, being authorized by an insurance
26-65 company or insurance carrier, including fidelity and surety
26-66 companies, to solicit business, and to forward applications for
26-67 insurance to the home office of the insurance companies and
26-68 insurance carriers, where the insurance company's and insurance
26-69 carrier's general plan of operation in this State provides for the
27-1 appointment and compensation of agents for insurance and for the
27-2 execution of policies of insurance by the home office of the
27-3 insurance company or insurance carrier, or by a supervisory office
27-4 of such insurance company or insurance carrier, and who maintain an
27-5 office and a record of such business and the transactions which are
27-6 involved, and who collect premiums on such business and otherwise
27-7 qualify and perform the customary duties of a local recording agent
27-8 representing an insurance carrier in its relation with the public.]
27-9 [(2) "Solicitor" means a person who is a bona fide
27-10 solicitor and engaged in the business of soliciting and binding
27-11 insurance risks on behalf of a local recording agent, and who
27-12 offices with such local recording agent, and who does not sign and
27-13 execute policies of insurance, and who does not maintain company
27-14 records of such transactions. This shall not be construed to make
27-15 a solicitor of a local recording agent, who places business of a
27-16 class which the rules of the company or carrier require to be
27-17 placed on application or to be written in a supervisory office. A
27-18 solicitor may bind insurance risks only with the express prior
27-19 approval of the local recording agent for whom the solicitor works.]
27-20 [(3) "Board" means the State Board of Insurance.]
27-21 [(4) "Company" or "Carrier" means any insurance
27-22 company, corporation, inter-insurance exchange, mutual, reciprocal,
27-23 association, Lloyds or other insurance carrier licensed to transact
27-24 business in the State of Texas other than as excepted herein.]
27-25 [(5) "Insurance service representative" means a
27-26 solicitor employed on a salaried basis who performs assigned duties
27-27 only within the office of a local recording agent, which may
27-28 include binding insurance risks, but only with the express prior
27-29 approval of the local recording agent for whom the representative
27-30 works.]
27-31 [(b) Nothing contained in this article shall be so construed
27-32 as to affect or apply to orders, societies, or associations which
27-33 admit to membership only persons engaged in one or more crafts or
27-34 hazardous occupations in the same or similar lines of business, and
27-35 the ladies' societies, or ladies' auxiliary to such orders,
27-36 societies or associations, or any secretary of a Labor Union or
27-37 organization, or any secretary or agent of any fraternal benefit
27-38 society, which does not operate at a profit, except that a person
27-39 who has had a license revoked under Section 16 of this article may
27-40 not solicit or otherwise transact business under Chapter 10 of this
27-41 code.]
27-42 [Sec. 3. APPLICATION FOR LICENSE; TO WHOM LICENSE MAY BE
27-43 ISSUED. (a) When any person, partnership, registered limited
27-44 liability partnership, limited liability company, corporation, or
27-45 bank shall desire to engage in business as a local recording agent
27-46 for an insurance company, or insurance carrier, that person or
27-47 entity shall make application for a license to the Texas Department
27-48 of Insurance, in such form as the Department may require. Such
27-49 application shall bear a signed endorsement by a general, state or
27-50 special agent of a qualified insurance company, or insurance
27-51 carrier that applicant or each member of the partnership or each
27-52 stockholder of the corporation or each member of the limited
27-53 liability company is a resident of this state.]
27-54 [(b) The Department shall issue a license to an individual
27-55 or a general partnership or a limited liability partnership
27-56 registered with the Secretary of State under Section 3.08, Texas
27-57 Revised Partnership Act (Article 6132b-3.08, Vernon's Texas Civil
27-58 Statutes), engaging in the business of insurance. The Department
27-59 may not issue a license to a partnership if an inactive partner who
27-60 is not subject to Section 3a of this article has an interest in the
27-61 partnership principally to have written and be compensated therefor
27-62 for insurance on property controlled through ownership, mortgage or
27-63 sale, family relationship, or employment; and provided further,
27-64 that all licensed agents must be residents of Texas. Provided,
27-65 that a person who resides in a town through which the state line
27-66 runs and whose residence is in the town in the adjoining state may
27-67 be licensed, if the person's business office is being maintained in
27-68 this state. All persons acting as agent or solicitor for health
27-69 and accident insurance within the provisions hereof, and who
28-1 represent only fire and casualty companies, and not life insurance
28-2 companies, shall be required to procure only one license, and such
28-3 license as is required under the provisions of this article.]
28-4 [(c) The Department shall issue a license to a corporation
28-5 if the Department finds:]
28-6 [(1) That the corporation is a Texas corporation
28-7 organized or existing under the Texas Business Corporation Act or
28-8 the Texas Professional Corporation Act having its principal place
28-9 of business in the State of Texas and having as one of its purposes
28-10 the authority to act as a local recording agent; and]
28-11 [(2) That every officer, director and shareholder of
28-12 the corporation is individually licensed as a local recording agent
28-13 under the provisions of this Insurance Code, except as may be
28-14 otherwise permitted by this Section or Section 3a of this article,
28-15 or that every officer and director of the corporation is
28-16 individually licensed as a local recording agent under this
28-17 Insurance Code, that the corporation is a wholly owned subsidiary
28-18 of a parent corporation that is licensed as a local recording agent
28-19 under this Insurance Code, and that every shareholder of the parent
28-20 corporation is individually licensed as a local recording agent
28-21 under this Insurance Code, and except as specifically provided by
28-22 this article, that no shareholder of the corporation is a corporate
28-23 entity; and]
28-24 [(3) That such corporation will have the ability to
28-25 pay any sums up to $25,000 which it might become legally obligated
28-26 to pay on account of any claim made against it by any customer and
28-27 caused by any negligent act, error or omission of the corporation
28-28 or any person for whose acts the corporation is legally liable in
28-29 the conduct of its business as a local recording agent. The term
28-30 "customer" as used herein shall mean any person, firm or
28-31 corporation to whom such corporation sells or attempts to sell a
28-32 policy of insurance, or from whom such corporation accepts an
28-33 application for insurance. Such ability shall be proven in one of
28-34 the following ways:]
28-35 [(A) An errors and omissions policy insuring
28-36 such corporation against errors and omissions, in at least the sum
28-37 of $100,000 with no more than a $10,000 deductible feature or the
28-38 sum of at least $300,000 with no more than a $25,000 deductible
28-39 feature, issued by an insurance company licensed to do business in
28-40 the State of Texas or, if a policy cannot be obtained from a
28-41 company licensed to do business in Texas, a policy issued by a
28-42 company not licensed to do business in Texas, on filing an
28-43 affidavit with the Texas Department of Insurance stating the
28-44 inability to obtain coverage and receiving the Department's
28-45 approval; or]
28-46 [(B) A bond executed by such corporation as
28-47 principal and a surety company authorized to do business in this
28-48 state, as surety, in the principal sum of $25,000, payable to the
28-49 Texas Department of Insurance for the use and benefit of customers
28-50 of such corporation, conditioned that such corporation shall pay
28-51 any final judgment recovered against it by any customer; or]
28-52 [(C) A deposit of cash or securities of the
28-53 class authorized by Articles 2.08 and 2.10 of this Code, having a
28-54 fair market value of $25,000 with the comptroller. The comptroller
28-55 is hereby authorized and directed to accept and receive such
28-56 deposit and hold it exclusively for the protection of any customer
28-57 of such corporation recovering a final judgment against such
28-58 corporation. Such deposit may be withdrawn only upon filing with
28-59 the Department evidence satisfactory to it that the corporation has
28-60 withdrawn from business, and has no unsecured liabilities
28-61 outstanding, or that such corporation has provided for the
28-62 protection of its customers by furnishing an errors and omissions
28-63 policy or a bond as hereinbefore provided. Securities so deposited
28-64 may be exchanged from time to time for other qualified securities.]
28-65 [A binding commitment to issue such a policy or bond, or the
28-66 tender of such securities, shall be sufficient in connection with
28-67 any application for license.]
28-68 [Nothing contained herein shall be construed to permit any
28-69 unlicensed employee or agent of any corporation to perform any act
29-1 of a local recording agent without obtaining a local recording
29-2 agent's license. The Department shall not require a corporation to
29-3 take the examination provided in Section 6 of this Article 21.14.]
29-4 [If at any time, any corporation holding a local recording
29-5 agent's license does not maintain the qualifications necessary to
29-6 obtain a license, the license of such corporation to act as a local
29-7 recording agent shall be cancelled or denied in accordance with the
29-8 provisions of Sections 16, 17 and 18 of this Article 21.14;
29-9 provided, however, that should any person who is not a licensed
29-10 local recording agent acquire shares in such a corporation by
29-11 devise or descent, they shall have a period of 90 days from date of
29-12 acquisition within which to obtain a license as a local recording
29-13 agent or to dispose of the shares to a licensed local recording
29-14 agent except as may be permitted by Section 3a of this article.]
29-15 [Should such an unlicensed person, except as may be permitted
29-16 by Section 3a of this article, acquire shares in such a corporation
29-17 and not dispose of them within said period of 90 days to a licensed
29-18 local recording agent, then they must be purchased by the
29-19 corporation for their book value, that is, the value of said shares
29-20 of stock as reflected by the regular books and records of said
29-21 corporation, as of the date of the acquisition of said shares by
29-22 said unlicensed person. Should the corporation fail or refuse to
29-23 so purchase such shares, its license shall be cancelled.]
29-24 [Any such corporation shall have the power to redeem the
29-25 shares of any shareholder, or the shares of a deceased shareholder,
29-26 upon such terms as may be agreed upon by the Board of Directors and
29-27 such shareholder or his personal representative, or at such price
29-28 and upon such terms as may be provided in the Articles of
29-29 Incorporation, the Bylaws, or an existing contract entered into
29-30 between the shareholders of the corporation.]
29-31 [Each corporation licensed as a local recording agent shall
29-32 file, under oath, a list of the names and addresses of all of its
29-33 officers, directors and shareholders with its application for
29-34 renewal license.]
29-35 [Each corporation licensed as a local recording agent shall
29-36 notify the Texas Department of Insurance upon any change in its
29-37 officers, directors or shareholders not later than the 30th day
29-38 after the date on which the change became effective.]
29-39 [The term "firm" as it applies to local recording agents in
29-40 Sections 2, 12 and 16 of this Article 21.14 shall be construed to
29-41 include corporations.]
29-42 [(d) The department shall issue a license to a bank if the
29-43 department finds that:]
29-44 [(1) the bank is a national banking association
29-45 organized and existing under the National Bank Acts (12 U.S.C.
29-46 Section 21 et seq.), a state bank organized and existing under the
29-47 Texas Banking Act (Article 342-1.001 et seq., Vernon's Texas Civil
29-48 Statutes), a state savings bank organized and existing under the
29-49 Texas Savings Bank Act (Article 489e, Vernon's Texas Civil
29-50 Statutes), or a bank operating subsidiary, as defined by state or
29-51 federal law, that is located and doing business in this state in a
29-52 place with a population of 5,000 or less;]
29-53 [(2) at least one officer of the bank and each
29-54 individual who will be performing any acts of an agent for the bank
29-55 are individually licensed under this Article; and]
29-56 [(3) the bank will have the ability to pay any sums up
29-57 to $25,000 that it might become legally obligated to pay on account
29-58 of any claim made against it by a customer and caused by a
29-59 negligent act, error, or omission of the bank or any person for
29-60 whose acts the bank is legally liable in the conduct of its
29-61 business as a local recording agent. The term "customer" means any
29-62 person, firm, or corporation to whom the bank sells or attempts to
29-63 sell a policy of insurance or from whom the bank accepts an
29-64 application for insurance. That ability shall be proven through:]
29-65 [(A) an errors and omissions policy insuring the
29-66 bank against errors and omissions, in at least the sum of $100,000
29-67 with not more than a $10,000 deductible feature, or the sum of at
29-68 least $300,000 with not more than a $25,000 deductible feature,
29-69 issued by an insurance company licensed to do business in this
30-1 state or, if a policy cannot be obtained from a company licensed to
30-2 do business in this state, a policy issued by a company not
30-3 licensed to do business in this state, on filing an affidavit with
30-4 the department stating the inability to obtain coverage and
30-5 receiving the department's approval;]
30-6 [(B) a bond executed by the bank as principal
30-7 and a surety company authorized to do business in this state, as
30-8 surety, in the principal sum of $25,000, payable to the department
30-9 for the use and benefit of customers of the bank, conditioned that
30-10 the bank shall pay any final judgment recovered against it by a
30-11 customer; or]
30-12 [(C) a deposit with the comptroller of cash or
30-13 securities of the class authorized by Articles 2.08 and 2.10 of
30-14 this code, with a fair market value of $25,000. The comptroller
30-15 shall accept and receive the deposit and hold it exclusively for
30-16 the protection of a customer of the bank who recovers a final
30-17 judgment against the bank. The deposit may be withdrawn only on
30-18 filing with the department satisfactory evidence that the bank has
30-19 withdrawn from the business of insurance and has no unsecured
30-20 liabilities outstanding or that the bank has provided for the
30-21 protection of its customers by furnishing an errors and omissions
30-22 policy or a bond as provided by this subsection. Securities so
30-23 deposited may be exchanged from time to time for other qualified
30-24 securities.]
30-25 [A binding commitment to issue such a policy or bond, or the
30-26 tender of applicable securities, is sufficient in connection with
30-27 an application for license.]
30-28 [Nothing in this subsection shall be construed to permit an
30-29 unlicensed employee or agent of a bank to perform any act of a
30-30 local recording agent without obtaining a local recording agent's
30-31 license. The department may not require a bank to take the
30-32 examination provided by Section 6 of this Article.]
30-33 [A bank licensed as an agent under this Article may have
30-34 additional offices from which the business of insurance is
30-35 conducted only in a place with a population of 5,000 or less and
30-36 must comply with the department's regulations regarding additional
30-37 offices.]
30-38 [A bank licensed as an agent under this article must maintain
30-39 its insurance records, including all files relating to and
30-40 reflecting customer complaints, separate from records relating to
30-41 banking transactions of the bank.]
30-42 [If a bank that holds a local recording agent's license does
30-43 not maintain the qualifications necessary to obtain a license, the
30-44 license of that bank to act as a local recording agent shall be
30-45 canceled or denied in accordance with Sections 16 and 18 of this
30-46 article.]
30-47 [Each bank licensed as a local recording agent shall file
30-48 under oath with its application for license renewal a list of the
30-49 name and address of each individual who will be acting as an agent
30-50 on behalf of the bank and of each officer and director of the bank,
30-51 as defined by Article 21.02 of this code, and other biographical
30-52 information as required by the department.]
30-53 [Each bank licensed as a local recording agent shall notify
30-54 the department of any change in its officers and directors and any
30-55 change in other persons who will be performing any acts of an
30-56 agent, as defined by Article 21.02 of this code, and submit
30-57 biographical information on those officers, directors, and persons
30-58 as required by the department not later than the 30th day after the
30-59 date on which the change takes effect.]
30-60 [The term "firm," as that term applies to local recording
30-61 agents in Sections 2, 12, and 16 of this article, includes
30-62 corporations and banks.]
30-63 [(e) The term "partnership" or "agency partnership" as used
30-64 in this Article means a general partnership or a registered limited
30-65 liability partnership domiciled in Texas.]
30-66 [(f) In this Article, the term "corporation" or
30-67 "corporations" shall mean a corporation organized under the Texas
30-68 Business Corporation Act, The Texas Professional Corporation Act
30-69 (Article 1528e, Vernon's Texas Civil Statutes), or a Texas
31-1 domiciled limited liability company organized or existing under the
31-2 Texas Limited Liability Company Act (Article 1528n, Vernon's Texas
31-3 Civil Statutes) having its principal place of business in this
31-4 state and having as one of its purposes the authority to act as an
31-5 insurance agent. Each officer, manager, and member of a limited
31-6 liability company must be licensed under this Article. The
31-7 licensing and regulation of a limited liability company shall be
31-8 subject to the same provisions and requirements of this Article
31-9 that are applicable to corporations licensed under this Article.]
31-10 [(g) In this article, the term "bank" means a national
31-11 banking association organized and existing under the National Bank
31-12 Acts (12 U.S.C. Section 21 et seq.), a state bank organized and
31-13 existing under the Texas Banking Act (Article 342-1.001 et seq.,
31-14 Vernon's Texas Civil Statutes), a state savings bank organized and
31-15 existing under the Texas Savings Bank Act (Article 489e, Vernon's
31-16 Texas Civil Statutes), a bank branch, or a bank operating
31-17 subsidiary, as defined by state or federal law, that is located and
31-18 doing business in this state in a place with a population of 5,000
31-19 or less. A bank operating subsidiary, as defined by state or
31-20 federal law, located and doing business in a place in this state
31-21 with a population of 5,000 or less may own a licensed corporate
31-22 agent that is also located and doing business in a place with a
31-23 population of 5,000 or less, and is subject to Section 3a(5) of
31-24 this Article.]
31-25 [Sec. 3a. PERSONS OTHER THAN LICENSED LOCAL RECORDING AGENTS
31-26 WHO MAY SHARE IN PROFITS OF LOCAL RECORDING AGENT. (1) Upon the
31-27 death of a duly licensed local recording agent who is a member of
31-28 an agency partnership, the surviving spouse and children, if any,
31-29 of such deceased partner, or a trust for such surviving spouse and
31-30 children, may share in the profits of such agency partnership
31-31 during the lifetime of such surviving spouse or such children, as
31-32 the case may be, if and as provided by a written partnership
31-33 agreement, or in the absence of any written agreement, if and as
31-34 agreed by the surviving partner or partners and the surviving
31-35 spouse, the trustee, and the legal representative of the surviving
31-36 child or children. Such surviving spouse and any such surviving
31-37 children or trusts shall not be required to qualify as local
31-38 recording agents to participate in such profits, but shall not do
31-39 or perform any act of a local recording agent on behalf of such
31-40 partnership without having qualified as a local recording agent;
31-41 provided, however, that a duly licensed local recording agent who
31-42 is a member of an agency partnership may, with the approval of the
31-43 other members of the partnership, transfer an interest in the
31-44 agency partnership to his children or a trust for same, and may
31-45 operate such interest for their use and benefit; and such children
31-46 or trusts may share in the profits of such agency partnership.
31-47 Such child or children or trusts shall not be required to qualify
31-48 as a local recording agent to participate in such profits, but
31-49 shall not do or perform any act of a local recording agent on
31-50 behalf of such partnership without having qualified as a local
31-51 recording agent.]
31-52 [(2) Upon the death of a duly licensed local recording
31-53 agent, who is a sole proprietorship, unless otherwise provided by
31-54 the last will of such deceased agent, the surviving spouse and
31-55 children, if any, of such deceased agent, or a trust for such
31-56 spouse or children, may share in the profits of the continuance of
31-57 the agency business of said deceased agent, provided such agency
31-58 business is continued by a duly licensed local recording agent.
31-59 Said surviving spouse, trusts or children, may participate in such
31-60 profits during the lifetime of such surviving spouse and said
31-61 children. Said surviving spouse, trusts or children shall not be
31-62 required to qualify as local recording agents in order to
31-63 participate in the profits of such agency, but shall not do or
31-64 perform any act of a local recording agent in connection with the
31-65 continuance of such agency business without first having been duly
31-66 licensed as a local recording agent; provided, however, that a duly
31-67 licensed local recording agent who is a sole proprietorship may
31-68 transfer an interest in his agency to his children, or a trust for
31-69 same, and may operate such interest for their use and benefit; and
32-1 such children may share in the profits of such local recording
32-2 agency during their lifetime, and during such time shall not be
32-3 required to qualify as a local recording agent in order to
32-4 participate in such profits, but shall not do or perform any act of
32-5 a local recording agent in connection with such agency business
32-6 without first having been duly licensed as a local recording agent.]
32-7 [(3) Upon the death of a shareholder in a corporate licensed
32-8 local recording agency, the surviving spouse and children, if any,
32-9 of such deceased shareholder, or a trust for such surviving spouse
32-10 and children, may share in the profits of such corporate agency
32-11 during the lifetime of such surviving spouse or children, as the
32-12 case may be, if and as provided by a contract entered into by and
32-13 between all of the shareholders and the corporation. Any such
32-14 surviving spouse, surviving children, or trusts shall not be
32-15 required to individually qualify as a local recording agent in
32-16 order to participate in such profits, but shall not do or perform
32-17 any act of a local recording agency on behalf of such corporation
32-18 without having qualified as a local recording agent; provided,
32-19 however, that a shareholder in a corporate licensed local recording
32-20 agent, may, if provided by a contract entered into by and between
32-21 all of the shareholders and the corporation, transfer an interest
32-22 in the agency to his children or a trust for same, and such
32-23 children or trusts may share in the profits of such agency to the
32-24 extent of such interest during their lifetime. Such children or
32-25 trusts shall not be required to qualify as a local recording agent
32-26 to participate in such profits, but shall not do or perform any act
32-27 of a local recording agent on behalf of such corporation without
32-28 having qualified as a local recording agent.]
32-29 [(4) Except as provided in Subsections (1), (2), and (3)
32-30 above, and as may be provided in Section 6a, Article 21.14 of the
32-31 Insurance Code, no person shall be entitled to perform any act of a
32-32 local recording agent nor in any way participate as a partner or
32-33 corporate shareholder in the profits of any local recording agent,
32-34 without first having qualified as a duly licensed local recording
32-35 agent and having successfully passed the examination required by
32-36 the Insurance Code; provided, however, that all persons, or trusts
32-37 for any person, that received licenses before March 1, 1963, as
32-38 silent, inactive, or non-active partners, or who are silent,
32-39 inactive, or non-active partners in an agency which was so
32-40 qualified before such date, shall continue to receive licenses, or
32-41 renewals thereof, as partners in such agency or in any successor
32-42 agency, providing: (a) that such persons are members of an agency
32-43 in which there is at least one partner who has qualified as a duly
32-44 licensed local recording agent; (b) that such non-active partner
32-45 or partners do not actively solicit insurance; and (c) that such
32-46 agency is not a limited partnership.]
32-47 [(5) Notwithstanding any provision of this article or this
32-48 code to the contrary, a bank located and doing business in a place
32-49 with a population of 5,000 or less that owns a licensed bank
32-50 operating subsidiary, as defined by state or federal law, that is
32-51 also located and doing business in a place with a population of
32-52 5,000 or less may receive profits from the licensed bank operating
32-53 subsidiary. To advertise under the bank name or participate in the
32-54 insurance operation other than by receiving profits from the
32-55 insurance business, the bank must hold an agent license. Nothing
32-56 in this section permits a bank or any affiliate to pay commissions
32-57 or other valuable consideration to any nonlicensed employees, and a
32-58 bank may not pay, credit, or otherwise reward particular
32-59 nonlicensed units or geographic locations of the bank or any of its
32-60 affiliates with a portion of the commission.]
32-61 [Sec. 4. ACTING WITHOUT LICENSE FORBIDDEN. (a) It shall be
32-62 unlawful for any person, firm, partnership, corporation or bank, or
32-63 any partner, officer, director, employee, or shareholder of a
32-64 corporation, or any officer, director, or employee of a bank to act
32-65 as a local recording agent or solicitor in procuring business for
32-66 any insurance company, corporation, interinsurance exchange,
32-67 mutual, reciprocal, association, Lloyds or other insurance carrier,
32-68 until that person or entity shall have in force the license
32-69 provided for herein.]
33-1 [(b) No insurer doing business in this state shall pay
33-2 directly or indirectly any commission, or other valuable
33-3 consideration, to any person, firm, partnership, corporation, or
33-4 bank for services as a local recording agent within this state,
33-5 unless such person, firm, partnership, corporation, or bank shall
33-6 hold a currently valid license and appointment to act as a local
33-7 recording agent as required by the laws of this state; nor shall
33-8 any person, firm, partnership, corporation, or bank other than a
33-9 duly licensed and appointed local recording agent accept any such
33-10 commission or other valuable consideration; provided, however, that
33-11 nothing contained in this subsection shall prohibit an assigned
33-12 risk pool or assigned risk plan, duly authorized to operate by the
33-13 laws of this state, from paying commissions, or other valuable
33-14 consideration, to a duly licensed person, firm, partnership,
33-15 corporation, or bank for services as a local recording agent.]
33-16 [(c) No licensed local recording agent, managing general
33-17 agent, or surplus lines agent doing business in this state shall
33-18 pay directly or indirectly any commission, or other valuable
33-19 consideration, to any person, firm, partnership, corporation, or
33-20 bank for services as a local recording agent within this state,
33-21 unless such person, firm, partnership, corporation, or bank shall
33-22 hold a currently valid license to act as a local recording agent as
33-23 required by the laws of this state; nor shall any person, firm,
33-24 partnership, corporation, or bank other than a duly licensed local
33-25 recording agent accept any such commission or other valuable
33-26 consideration.]
33-27 [(d) No local recording agent doing business in this state
33-28 shall pay directly or indirectly any commission, or other valuable
33-29 consideration, to any person for services as a solicitor within
33-30 this state, unless such person shall hold a currently valid license
33-31 and appointment to act as a solicitor for such local recording
33-32 agent as required by the laws of this state; nor shall any person
33-33 other than a duly licensed and appointed solicitor accept any such
33-34 commission or other valuable consideration.]
33-35 [Sec. 5. ACTIVE AGENTS OR SOLICITORS ONLY TO BE LICENSED.
33-36 No license shall be granted to any person, firm, partnership,
33-37 corporation, or bank as a local recording agent or to a person as a
33-38 solicitor, for the purpose of writing any form of insurance, unless
33-39 it is found by the department that such person, firm, partnership,
33-40 corporation, or bank is or intends to be, actively engaged in the
33-41 soliciting or writing of insurance for the public generally; that
33-42 each person or individual of a firm is a resident of Texas and is
33-43 to be actively engaged in good faith in the business of insurance,
33-44 and that the application is not being made in order to evade the
33-45 laws against rebating and discrimination either for the applicant
33-46 or for some other person, firm, partnership, corporation, or bank.
33-47 Nothing herein contained shall prohibit an applicant insuring
33-48 property which the applicant owns or in which the applicant has an
33-49 interest; but it is the intent of this Section to prohibit coercion
33-50 of insurance and to preserve to each citizen the right to choose
33-51 that individual's own agent or insurance carrier, and to prohibit
33-52 the licensing of an individual, firm, partnership, corporation, or
33-53 bank to engage in the insurance business principally to handle
33-54 business which the applicant controls only through ownership,
33-55 mortgage or sale, family relationship or employment, which shall be
33-56 taken to mean that an applicant who is making an original
33-57 application for license shall show the department that the
33-58 applicant has a bona fide intention to engage in business in which,
33-59 in any calendar year, at least twenty-five per cent (25%) of the
33-60 total volume of premiums shall be derived from persons or
33-61 organizations other than applicant and from property other than
33-62 that on which the applicant shall control the placing of insurance
33-63 through ownership, mortgage, sale, family relationship or
33-64 employment. Nothing herein contained shall be construed to
33-65 authorize a partnership, corporation, or bank to receive a license
33-66 as a solicitor.]
33-67 [Sec. 5a. REQUIREMENTS AS TO KNOWLEDGE OR INSTRUCTION FOR
33-68 LOCAL RECORDING AGENT'S LICENSE. (a) Every applicant for local
33-69 recording agent's license from and after October 1, 1971, shall
34-1 upon the successful passage of the examination for local recording
34-2 agent's license as promulgated by the State Board of Insurance
34-3 pursuant to the provisions of this Article 21.14 be issued a
34-4 temporary local recording agent's license. The holder of a
34-5 temporary local recording agent's license shall have the same
34-6 authority and be subject to the same provisions of the law as local
34-7 recording agents until such temporary license shall expire. Each
34-8 such temporary license so issued shall expire upon the happening of
34-9 any one of the following, whichever shall first occur, to wit:]
34-10 [(i) The issuance of a local recording agent's license
34-11 to such person;]
34-12 [(ii) One year from date of issuance of the temporary
34-13 local recording agent's license.]
34-14 [Each such person receiving a temporary license as set out
34-15 above shall within one (1) year from the issue date of such
34-16 temporary license complete to the satisfaction of the State Board
34-17 of Insurance one of the following courses of study:]
34-18 [(i) Classroom courses in insurance satisfactory to
34-19 the State Board of Insurance at a school, college, junior college
34-20 or extension thereof; or]
34-21 [(ii) An insurance company or agents' association
34-22 school approved by the State Board of Insurance; or]
34-23 [(iii) A correspondence course in insurance approved
34-24 by the State Board of Insurance.]
34-25 [Upon the successful completion of any one of the above
34-26 courses of study within the one year period, the temporary agent
34-27 shall then be entitled to receive from the State Board of Insurance
34-28 his local recording agent's license.]
34-29 [(b) Provided, however, none of the provisions of this
34-30 section shall apply to the following:]
34-31 [(1) To any person holding a license as a local
34-32 recording agent upon the effective date of this Act.]
34-33 [(2) To any person applying for an emergency local
34-34 recording agent's license under the provisions of Section 6a of
34-35 Article 21.14 of the Insurance Code of Texas.]
34-36 [(3) To any person who holds the designation Chartered
34-37 Property and Casualty Underwriter (C.P.C.U.) from the American
34-38 Institute for C.P.C.U., the designation Certified Insurance
34-39 Counselor (C.I.C.) from the national Society of Certified Insurance
34-40 Counselors, or the designation Accredited Adviser in Insurance
34-41 (A.A.I.) from the Insurance Institute of America.]
34-42 [(4) To any person who has a bachelor's degree from a
34-43 four-year accredited college or university with a major in
34-44 insurance.]
34-45 [(5) To any person who within two (2) years
34-46 immediately preceding the filing of an application was a licensed
34-47 agent in good standing in the state from which the person moved to
34-48 Texas, provided such state makes similar provision for those agents
34-49 who may move from Texas to such state.]
34-50 [(6) To any person desiring to apply for a license to
34-51 solicit and write exclusively all forms of insurance authorized to
34-52 be solicited and written in Texas covering the ownership,
34-53 operation, maintenance or use of any motor vehicle, its accessories
34-54 and equipment, designed for use upon the public highways, including
34-55 trailers and semitrailers. Such person shall continue to apply for
34-56 and qualify to be licensed under the other provisions of Article
34-57 21.14 of the Insurance Code of Texas. Provided, such applicant
34-58 shall be required to take and pass, to the satisfaction of the
34-59 Texas Department of Insurance, an examination, promulgated by said
34-60 department, covering only those forms of insurance referred to in
34-61 this paragraph. Provided, when such a person so applies and
34-62 qualifies, the person shall be issued a license which shall contain
34-63 on the face of said license the following language: "Motor vehicle
34-64 insurance only." An agent holding such a limited license hereby
34-65 created shall solicit only those forms of insurance hereinabove
34-66 provided, but shall be subject to all other laws relating to local
34-67 recording agents.]
34-68 [(c) There is hereby created an Agents' Education Advisory
34-69 Board whose duties shall be to advise with and make recommendations
35-1 to the State Board of Insurance concerning the curriculum, course
35-2 content and schools to be approved under Subsection (a) above. The
35-3 members of said Advisory Board shall be appointed by the chairman
35-4 of the State Board of Insurance and shall serve for one year, from
35-5 September 1 to August 31, or until their successors are appointed.
35-6 Said Advisory Board shall be composed of the following persons:
35-7 Two (2) members, each of whom shall be a resident of Texas and have
35-8 a minimum of ten (10) years' experience as an executive of a fire
35-9 and casualty company doing business in Texas and whose company
35-10 operates an agents' school; two (2) members, each of whom shall be
35-11 a licensed local recording agent in Texas with a minimum of ten
35-12 (10) years' experience as an agent; and one (1) member who shall be
35-13 a teacher of insurance at a four-year accredited college or
35-14 university in Texas. Said Advisory Board shall meet at the offices
35-15 of the State Board of Insurance upon call of the chairman of the
35-16 State Board of Insurance and the members of said Advisory Board
35-17 shall be paid out of the Recording Agents License Fund for their
35-18 actual and necessary expenses incurred in connection with their
35-19 attendance at said meetings.]
35-20 [Sec. 5b. CONTINUING EDUCATION. (a) The State Board of
35-21 Insurance shall adopt a procedure for certifying and shall certify
35-22 continuing education programs for agents. Participation in the
35-23 programs is mandatory for all agents licensed under this article.
35-24 The State Board of Insurance shall exempt agents who have been
35-25 licensed for 20 years or more on or after September 1, 1992, and
35-26 shall have the rulemaking authority to provide for other reasonable
35-27 exemptions. No agent shall be required to complete more than 15
35-28 hours of continuing education per year. An agent licensed under
35-29 both Articles 21.07-1 and 21.14 of this code and any subsequent
35-30 amendments may elect to satisfy the continuing education
35-31 requirements of either article and shall not be required to
35-32 complete a total of more than 15 hours of continuing education per
35-33 year.]
35-34 [(b) On written request of the agent, the State Board of
35-35 Insurance may extend the time for the agent to comply with the
35-36 continuing education requirements of this section or may exempt the
35-37 agent from some or all of the requirements for a licensing period
35-38 if the board finds that the agent is unable to comply with the
35-39 requirements because of illness, medical disability, or another
35-40 extenuating circumstance beyond the control of the agent. The
35-41 criteria for such exemptions and extensions shall be established by
35-42 rule.]
35-43 [Sec. 5c. ADVISORY COUNCIL. (a) An advisory council of
35-44 nine members shall be appointed by the State Board of Insurance to
35-45 furnish the Board with information and assistance in the conduct of
35-46 the continuing education program for agents licensed under Articles
35-47 21.07-1 and 21.14.]
35-48 [(b) Four of the members of the advisory council must be
35-49 representatives of the general public. A public representative may
35-50 not be:]
35-51 [(1) an officer, director, or employee of an insurance
35-52 company, insurance agency, agent, broker, solicitor, adjuster, or
35-53 any other business entity regulated by the State Board of
35-54 Insurance;]
35-55 [(2) a person required to register with the secretary
35-56 of state under Chapter 305, Government Code; or]
35-57 [(3) related to a person described by Subdivision (1)
35-58 or (2) of this subsection within the second degree of affinity or
35-59 consanguinity.]
35-60 [Sec. 5d. JURISDICTION FOR CONTINUING EDUCATION.
35-61 Notwithstanding the rules or regulations of any other state agency,
35-62 the board has sole jurisdiction for all matters relating to the
35-63 continuing education of insurance agents who are licensed under
35-64 this Article.]
35-65 [Sec. 6. EXAMINATION REQUIRED; EXCEPTIONS. (a) If
35-66 applicant for a local recording agent's license has not prior to
35-67 date of such application, been licensed as a local recording agent,
35-68 or if the applicant for a solicitor's license has not been licensed
35-69 as a local recording agent or as a solicitor prior to date of such
36-1 application, the Board shall require such applicant to submit to a
36-2 written examination covering all kinds of insurance or contracts,
36-3 which license if granted, will permit the applicant to solicit.]
36-4 [(b) Any applicant for local recording agent's license who
36-5 has prior to the date of such application been licensed as a local
36-6 recording agent, shall be entitled to a local recording agent's
36-7 license without examination, provided the other requirements of
36-8 this article are met. Any applicant for solicitor's license who
36-9 has been licensed as a local recording agent or as a solicitor
36-10 prior to date of such application, shall be entitled to a
36-11 solicitor's license without an examination, provided the other
36-12 requirements of this article are met.]
36-13 [(c) The Board by rule shall apply different examination
36-14 standards to a solicitor employed as an insurance service
36-15 representative than those applied to other solicitors.]
36-16 [Sec. 6a. DEATH, DISABILITY OR INSOLVENCY; EMERGENCY LICENSE
36-17 WITHOUT EXAMINATION. In event of death or disability of a local
36-18 recording agent or in event a local recording agent is found to be
36-19 insolvent and unable to pay for premiums coming to his hands as
36-20 such local recording agent, the Board may issue to an applicant for
36-21 local recording agent's license an emergency local recording
36-22 agent's license for a period of ninety (90) days in any twelve (12)
36-23 consecutive months and at the Board's option, an additional period
36-24 up to ninety (90) days without an examination provided the other
36-25 requirements of this article are met and if it is established to
36-26 the satisfaction of the Board that such emergency license is
36-27 necessary for the preservation of the agency assets of a deceased
36-28 or disabled local recording agent or of an insolvent local
36-29 recording agent.]
36-30 [Sec. 7. CONDUCT OF EXAMINATIONS; NOTICE; MANUAL OF
36-31 QUESTIONS AND ANSWERS. Unless the State Board of Insurance accepts
36-32 a qualifying examination administered by a testing service, as
36-33 provided under Article 21.01-1, Insurance Code, as amended, all
36-34 examinations provided by this article shall be conducted by the
36-35 State Board of Insurance, and shall be held not less frequently
36-36 than one each sixty (60) days every year at times and places
36-37 prescribed by the State Board of Insurance, of which applicants
36-38 shall be notified by the State Board of Insurance in writing ten
36-39 (10) days prior to the date of such examinations, and shall be
36-40 conducted in writing in either the English or Spanish language.
36-41 Provided, further, that printed copies of a manual of questions and
36-42 answers thereto pertaining to the examination published under the
36-43 direction of the State Board of Insurance shall be made available
36-44 to all companies, general agents, and managers for the use of their
36-45 prospective agents, to all agents for the use of their prospective
36-46 solicitors in preparing for such examination. The questions to be
36-47 asked on such examination shall be based upon the questions and
36-48 answers contained in the manual.]
36-49 [Sec. 8. EXPIRATION OF LICENSE; RENEWAL. Except as may be
36-50 provided by a staggered renewal system adopted under Article
36-51 21.01-2 of this code, every license issued to a local recording
36-52 agent or a solicitor shall expire two years from the date of its
36-53 issue, unless a completed application to qualify for the renewal of
36-54 any such license shall be filed with the State Board of Insurance
36-55 and a nonrefundable fee paid on or before such date, in which event
36-56 the license sought to be renewed shall continue in full force and
36-57 effect until renewed or renewal is denied.]
36-58 [Sec. 9. FEES PAYABLE BEFORE EXAMINATION. Unless the State
36-59 Board of Insurance accepts a qualifying examination administered by
36-60 a testing service, as provided under Article 21.01-1, Insurance
36-61 Code, as amended, applicants required to be examined shall, at time
36-62 and place of examination, pay prior to being examined the following
36-63 fees: For a local recording agent's license a fee in an amount not
36-64 to exceed $50 as determined by the State Board of Insurance and for
36-65 a solicitor's license a fee in an amount not to exceed $20 as
36-66 determined by the State Board of Insurance. The fees paid under
36-67 this section shall not be returned for any reason other than
36-68 failure to appear and take the examination after the applicant has
36-69 given at least 24 hours' notice of an emergency situation to the
37-1 State Board of Insurance and received board approval. A new fee
37-2 shall be paid before each and every examination.]
37-3 [Sec. 10. RENEWAL FEES. (a) An applicant for the renewal
37-4 of a local recording agent's license shall pay, at the time the
37-5 renewal application is filed, a fee in an amount not to exceed $50
37-6 as determined by the State Board of Insurance. An applicant for
37-7 the renewal of a solicitor's license shall pay, at the time the
37-8 renewal application is filed, a fee in an amount not to exceed $20
37-9 as determined by the State Board of Insurance.]
37-10 [Sec. 11. ISSUANCE OF LICENSE. (a) Whenever the provisions
37-11 of this article have been complied with, the Board shall issue to
37-12 any applicant the license applied for where such applicant shall
37-13 have satisfactorily passed the examination prescribed by the State
37-14 Board of Insurance, and who shall possess the other qualifications
37-15 required by this article.]
37-16 [(b) The Commissioner of Insurance shall collect in advance
37-17 from agents requesting duplicate licenses a fee not to exceed $20.
37-18 The State Board of Insurance shall determine the amount of the fee.]
37-19 [Sec. 12. NOTICE TO COMMISSIONER OF INSURANCE OF APPOINTMENT
37-20 OF LOCAL RECORDING AGENT BY INSURANCE COMPANY. (a) After a person
37-21 or firm shall be granted a license as a local recording agent in
37-22 this state, that person or firm shall be authorized to act as such
37-23 local recording agent in this state, only after and during the time
37-24 such person or firm has been authorized so to do, by an insurance
37-25 company having a permit to do business in this state; and when so
37-26 authorized each company or carrier or its general or state or
37-27 special agent making the appointment shall immediately notify the
37-28 Commissioner of Insurance, on such form as the Commissioner may
37-29 require, of the appointment. If approval of an additional
37-30 appointment is not received from the Commissioner before the eighth
37-31 day after the date on which the completed application and fee were
37-32 received by the Commissioner, the agent and the insurance company
37-33 may assume that the Commissioner approves the application, and the
37-34 agent may act for the insurance company. The agent shall be
37-35 required to pay a nonrefundable fee of $16.00 for each appointment
37-36 applied for, which fee shall accompany the notice, and such person
37-37 or firm shall be presumed to be the agent for such company in this
37-38 state until such company or its general or state or special agent
37-39 shall have delivered written notice to the Commissioner of
37-40 Insurance that such appointment has been withdrawn.]
37-41 [(b) Every insurance carrier shall, upon termination for
37-42 cause of the appointment of any agent, immediately file with the
37-43 State Board of Insurance a statement of the facts relative to the
37-44 termination of the appointment and the date and cause thereof. The
37-45 Board shall thereupon record the termination of the appointment of
37-46 such agent to represent such insurance carrier in this state. The
37-47 agent terminated for cause shall receive from the insurance carrier
37-48 a copy of the notice sent to the State Board of Insurance.]
37-49 [(c) Any information, document, record or statement required
37-50 to be made or disclosed to the Board pursuant to this Article shall
37-51 be deemed confidential and privileged unless or until introduced as
37-52 evidence in an administrative hearing.]
37-53 [(d) No liability may be imposed on any insurance carrier,
37-54 its employees or agents, or any other person, acting without
37-55 malice, providing the information required to be disclosed pursuant
37-56 to this section.]
37-57 [Sec. 13. APPLICATION FOR SOLICITOR'S LICENSE. When any
37-58 local recording agent who has been appointed by an insurance
37-59 carrier having a permit to do business in this State shall desire
37-60 to appoint a solicitor in the operation of his business, he and a
37-61 company jointly shall make application for a license for such
37-62 solicitor to the Board of Insurance Commissioners, in such form as
37-63 the Board may require.]
37-64 [Sec. 14. NOTICE TO INSURANCE COMMISSIONERS OF SOLICITOR'S
37-65 APPOINTMENT; AUTHORITY TO SOLICIT. (a) No solicitor shall be
37-66 authorized to solicit insurance until after the State Board of
37-67 Insurance shall have been notified by a local recording agent of
37-68 his appointment, and no local recording agent shall accept business
37-69 tendered by a solicitor until such local recording agent has given
38-1 notice to the State Board of Insurance of such solicitor's
38-2 appointment as such, and until such solicitor has been licensed by
38-3 the State Board of Insurance. No solicitor shall have outstanding
38-4 at any time a notification of appointment from more than one local
38-5 recording agent, and a solicitor shall solicit insurance only in
38-6 the name of and for the account of the local recording agent by
38-7 whom he has been appointed.]
38-8 [(b) If approval of an appointment of a currently licensed
38-9 solicitor is not received from the Commissioner before the eighth
38-10 day after the date on which the completed application and
38-11 nonrefundable fee were received by the Commissioner, the solicitor
38-12 and local recording agent may assume that the Commissioner approves
38-13 the application, and the solicitor may act for the local recording
38-14 agent.]
38-15 [(c) A licensed solicitor's appointment may be terminated
38-16 either by the local recording agent who appointed the solicitor or
38-17 by the solicitor on the filing of notice with the Board of the
38-18 termination.]
38-19 [(d) Upon termination for cause of the appointment of any
38-20 solicitor, the local recording agent shall immediately file with
38-21 the State Board of Insurance a statement of the facts relative to
38-22 the termination of the appointment and the date and cause thereof.
38-23 The Board shall thereupon record the termination of the appointment
38-24 of such solicitor to represent such local recording agent. The
38-25 solicitor terminated for cause shall receive from the local
38-26 recording agent a copy of the notice sent to the State Board of
38-27 Insurance.]
38-28 [(e) Any information, document, record or statement required
38-29 to be made or disclosed to the Board pursuant to this Article shall
38-30 be deemed privileged and confidential unless or until introduced
38-31 into evidence in an administrative hearing.]
38-32 [(f) No liability may be imposed on any insurance carrier,
38-33 its employees or agents, or any other person, acting without
38-34 malice, providing the information required to be disclosed pursuant
38-35 to this section.]
38-36 [Sec. 15. FIRE INSURANCE IN EXCESS OF VALUE, WRITING OF
38-37 FORBIDDEN. It shall be unlawful for any local recording agent or
38-38 solicitor for an insurance company or insurance carrier knowingly
38-39 to grant, write or permit a greater amount of insurance against
38-40 loss by fire than the reasonable value of the subject of insurance.]
38-41 [Sec. 16. SUSPENSION OR REVOCATION OF LICENSE. (a) The
38-42 license of any local recording agent shall be suspended during a
38-43 period in which the agent does not have outstanding a valid
38-44 appointment to act as an agent for an insurance company. The Board
38-45 shall end the suspension on receipt of evidence satisfactory to the
38-46 board that the agent has a valid appointment. The Board shall
38-47 cancel the license of a solicitor if the solicitor does not have
38-48 outstanding a valid appointment to act as a solicitor for a local
38-49 recording agent, and shall suspend the license during a period that
38-50 the solicitor's local recording agent does not have outstanding a
38-51 valid appointment to act as an agent under this Article.]
38-52 [(b) The department may discipline any local recording agent
38-53 or solicitor or deny an application under Section 5, Article
38-54 21.01-2, of this code if it finds that the applicant, individually
38-55 or through any officer, director, or shareholder, for or holder of
38-56 such license:]
38-57 [(1) Has wilfully violated any provision of the
38-58 insurance laws of this state;]
38-59 [(2) Has intentionally made a material misstatement in
38-60 the application for such license;]
38-61 [(3) Has obtained, or attempted to obtain, such
38-62 license by fraud or misrepresentation;]
38-63 [(4) Has misappropriated or converted to the
38-64 applicant's or licensee's own use or illegally withheld money
38-65 belonging to an insurer or an insured or beneficiary;]
38-66 [(5) Has been guilty of fraudulent or dishonest acts;]
38-67 [(6) Has materially misrepresented the terms and
38-68 conditions of any insurance policies or contracts;]
38-69 [(7) Has made or issued, or caused to be made or
39-1 issued, any statement misrepresenting or making incomplete
39-2 comparisons regarding the terms or conditions of any insurance
39-3 contract legally issued by an insurance carrier for the purpose of
39-4 inducing or attempting to induce the owner of such contract to
39-5 forfeit or surrender such contract or allow it to expire for the
39-6 purpose of replacing such contract with another;]
39-7 [(8) Is convicted of a felony;]
39-8 [(9) Is guilty of rebating any insurance premium or
39-9 discriminating as between insureds;]
39-10 [(10) Is not engaged in the soliciting or writing of
39-11 insurance for the public generally as required by Section 5 of this
39-12 Article; or]
39-13 [(11) Is afflicted with a disability as that term is
39-14 defined by Subsection (a) of Article 21.15-6 of this code.]
39-15 [(c) The State Board of Insurance may order that a local
39-16 recording agent or solicitor who is afflicted with a disability be
39-17 placed on disability probation under the terms and conditions
39-18 specified under Article 21.15-6 of this code instead of taking
39-19 disciplinary action under Subsection (b) of this section.]
39-20 [(d) A license applicant or licensee whose license
39-21 application or license has been denied, refused, or revoked under
39-22 this section may not apply for any license as an insurance agent
39-23 before the first anniversary of the effective date of the denial,
39-24 refusal, or revocation, or, if the applicant or licensee seeks
39-25 judicial review of the denial, refusal, or revocation before the
39-26 first anniversary of the date of the final court order or decree
39-27 affirming that action. The Commissioner may deny an application
39-28 timely filed if the applicant does not show good cause why the
39-29 denial, refusal, or revocation of the previous license application
39-30 or license should not be considered a bar to the issuance of a new
39-31 license. This subsection does not apply to an applicant whose
39-32 license application was denied for failure to pass a required
39-33 written examination.]
39-34 [Sec. 18. APPEAL. If the Commissioner refuses an
39-35 application for license as provided by this article, or suspends,
39-36 revokes, or refuses to renew any license at a hearing as provided
39-37 by this article, and if the applicant or accused is dissatisfied
39-38 with the action of the Commissioner, the applicant or accused may
39-39 appeal from the action in accordance with Article 1.04 of this
39-40 Code.]
39-41 [Sec. 19. NOTICE TO LAST ADDRESS. Where notice to the
39-42 applicant or accused is provided for in any part of this article,
39-43 notice by registered mail to his last known address shall be
39-44 sufficient.]
39-45 [Sec. 20. LIFE, HEALTH AND ACCIDENT INSURANCE, INAPPLICABLE
39-46 TO; OTHER EXCEPTIONS. The provisions of this article do not apply
39-47 to the Life, Health and Accident Insurance business or the Life,
39-48 Health and Accident Department of the companies engaged therein,
39-49 nor shall it apply to any of the following, namely:]
39-50 [(a) Any actual full-time home office salaried
39-51 employee of any insurance carrier licensed to do business in Texas,
39-52 other than an employee who solicits or receives an application for
39-53 the sale of insurance through an oral, written, or electronic
39-54 communication in accordance with Section 20A of this article.]
39-55 [(b) Any actual attorney in fact and its actual
39-56 traveling salaried representative as to business transacted through
39-57 such attorney in fact or salaried representative of any reciprocal
39-58 exchange or interinsurance exchange admitted to do business in
39-59 Texas.]
39-60 [(c) Any adjuster of losses, and/or inspector of
39-61 risks, for an insurance carrier licensed to do business in Texas.]
39-62 [(d) Any General Agent or State Agent or Branch
39-63 Manager representing an admitted and licensed insurance company or
39-64 carrier, or insurance companies or carriers, in a supervisory
39-65 capacity.]
39-66 [(e) The actual attorney in fact for any Lloyds.]
39-67 [(f) All incorporated or unincorporated mutual
39-68 insurance companies, their agents and representatives, organized
39-69 and/or operating under and by authority of Chapters 16 and 17 of
40-1 this code.]
40-2 [(g) Nothing in this entire article shall ever be
40-3 construed to apply to any member, agent, employee, or
40-4 representative of any county or farm mutual insurance company as
40-5 exempted under Chapters 16 and 17 of this code.]
40-6 [(h) Nothing in this article shall apply to the group
40-7 motor vehicle insurance business or the group motor vehicle
40-8 department of the companies engaged in that business.]
40-9 [(i) Salaried employees not involved in solicitation
40-10 or negotiation of insurance in the office of a local recording
40-11 agent who devote their full time to clerical and administrative
40-12 services, including the incidental taking of information from
40-13 customers and receipt of premiums in the office of a local
40-14 recording agent, provided the employees do not receive any
40-15 commissions and their compensation is not varied by the volume of
40-16 premiums taken and received.]
40-17 [Sec. 20A. FULL-TIME HOME OFFICE SOLICITORS: MANDATORY
40-18 REGISTRATION, CONTINUING EDUCATION, AND NOTIFICATION TO CONSUMERS;
40-19 DISCIPLINARY ACTIONS. (a) Any actual full-time home office
40-20 salaried employee of any insurance carrier licensed to do business
40-21 in Texas who solicits or receives an application for the sale of
40-22 insurance through an oral, written, or electronic communication
40-23 shall register with the commissioner.]
40-24 [(b) Any insurance carrier licensed to do business in Texas
40-25 whose general plan of operation includes the use of employees
40-26 described in Subsection (a) of this section shall certify to the
40-27 commissioner that such employees receive continuing education of
40-28 not less than 15 hours per year designed to give such employees:]
40-29 [(1) reasonable familiarity with the broad principles
40-30 of insurance, with licensing and regulatory laws, and with
40-31 provisions, terms, and conditions of the insurance which the
40-32 registrant transacts; and]
40-33 [(2) a fair and general understanding of the
40-34 obligations and duties of an insurer to an insured, including
40-35 training in ethical considerations.]
40-36 [(c) The registration of any actual full-time home office
40-37 salaried employee shall be suspended and the employer insurance
40-38 carrier may be disciplined in accordance with the insurance laws of
40-39 this state, if the commissioner finds that the registrant:]
40-40 [(1) has wilfully violated any provision of this code,
40-41 the laws of this state, or a rule of the commissioner;]
40-42 [(2) has been guilty of fraudulent or dishonest acts;]
40-43 [(3) has materially misrepresented the terms and
40-44 conditions of any insurance policies or contracts;]
40-45 [(4) has made or issued, or caused to be made or
40-46 issued, any statement misrepresenting or making incomplete
40-47 comparisons regarding the terms or conditions of any insurance
40-48 contract legally issued by an insurance carrier for the purpose of
40-49 inducing or attempting to induce the owner of such contract to
40-50 forfeit or surrender such contract or allow it to expire for the
40-51 purpose of replacing such contract with another;]
40-52 [(5) is guilty of rebating any insurance premium or
40-53 discriminating as between insureds; or]
40-54 [(6) has been convicted of a felony involving fraud or
40-55 breach of fiduciary duty.]
40-56 [(d) Registrants under this section shall disclose such
40-57 registration when making an oral, written, or electronic
40-58 communication to solicit or receive an application for the sale of
40-59 insurance.]
40-60 [(e) The commissioner shall adopt rules to implement the
40-61 provisions of this section.]
40-62 [Sec. 21. FEES, DISPOSITION OF; APPROPRIATIONS. The fees
40-63 herein provided for, when collected, shall be deposited in the
40-64 State Treasury to the credit of the State Board of Insurance
40-65 operating fund; provided that no expenditures shall be made from
40-66 said fund except under authority of the Legislature as set forth in
40-67 the General Appropriation Bill; provided further that no
40-68 appropriation shall ever be made out of the General Revenue Fund
40-69 for the purpose of administering this article or any provision
41-1 thereof.]
41-2 [Sec. 22. REBATES OR INDUCEMENTS FORBIDDEN. It shall be
41-3 unlawful for any local recording agent to pay, allow, give or offer
41-4 to pay, allow or give, directly or indirectly, any rebate of
41-5 premiums payable, any commission, or any paid employment or
41-6 contract for service of any kind or anything of value whatsoever,
41-7 or any valuable consideration or inducement whatever, not specified
41-8 in the policy or contract of insurance for or on account of the
41-9 solicitation or negotiation of contracts of insurance on property
41-10 or risks in this State to any person, firm or corporation, other
41-11 than a duly licensed solicitor appointed by such local recording
41-12 agent, or to another local recording agent.]
41-13 [It shall be unlawful for any solicitor to pay, allow or give
41-14 or offer to pay, allow or give, directly or indirectly, any rebate
41-15 of premiums payable, any commission, or any paid employment or
41-16 contract for service of any kind, or anything of value whatsoever,
41-17 or any valuable consideration or inducement whatever, not specified
41-18 in the policy or contract of insurance, for or on account of the
41-19 solicitation or negotiation of contracts of insurance on property
41-20 or risks in this State to any person, firm or corporation.]
41-21 [Sec. 23. REPEAL; LAWS NOT IN CONFLICT NOT AFFECTED; ACT
41-22 CUMULATIVE. All laws or parts of laws pertaining to any phase of
41-23 the insurance business, which are in conflict with this article,
41-24 shall be and the same are hereby repealed; but all laws, Civil and
41-25 Criminal, affecting insurance agents, and/or insurance companies or
41-26 insurance carriers or the insurance business, which are not in
41-27 conflict herewith, shall not be affected by the provisions of this
41-28 article; but this article shall be deemed cumulative of such laws.]
41-29 [Sec. 24. VIOLATION OF ACT. Any person or any member of any
41-30 firm, or any corporation or bank, or any officer, director,
41-31 shareholder or employee of any corporation or bank who violates any
41-32 of the provisions of Sections 4, 15 and 22 of this Article shall be
41-33 guilty of a misdemeanor, and on conviction in a court of competent
41-34 jurisdiction, shall be punished by a fine of not less than One
41-35 Dollar ($1.00) nor more than One Hundred Dollars ($100.00).]
41-36 [Sec. 25. ENFORCEMENT OF ARTICLE. The Attorney General, or
41-37 any District or County Attorney, or the Board of Insurance
41-38 Commissioners, may institute any injunction proceeding or such
41-39 other proceeding to enforce the provisions of this article, and to
41-40 enjoin any person, firm or corporation from engaging or attempting
41-41 to engage in any of the business in violation of this article or
41-42 any of the provisions thereof. The provisions of this section are
41-43 cumulative of the other penalties or remedies provided for in this
41-44 article.]
41-45 [Sec. 26. ADMINISTRATION OF ARTICLE. The administration of
41-46 the provision of this article shall be vested in the Board of
41-47 Insurance Commissioners, and of the administrative officer of the
41-48 various counties in which the violation of any provision of this
41-49 article may occur; and the personnel charged with the direct
41-50 supervision of the article, except the regularly elected law
41-51 enforcement officers and their appointees, shall be responsible to
41-52 and serve at the will of the Board of Insurance Commissioners. It
41-53 shall be the duty of the Board of Insurance Commissioners and the
41-54 Attorney General, and of the District and County Attorneys in
41-55 counties where violations of this article may occur, to see that
41-56 its provisions are at all times obeyed, and to make such
41-57 investigations as will prevent or detect the violation of any
41-58 provision thereof. The Board of Insurance Commissioners shall at
41-59 once lay before the District or County Attorney of the proper
41-60 county, any evidence which shall come to its knowledge, of
41-61 criminality or threatened criminality under this article. In the
41-62 event of the neglect or refusal of such Attorney to institute and
41-63 prosecute such violation, or to enforce the other remedies provided
41-64 by this article, the Board shall submit such evidence to the
41-65 Attorney General, who is hereby authorized to proceed therein with
41-66 all the rights, privileges and powers conferred by law upon
41-67 District or County Attorneys. Provided, any person having
41-68 knowledge of the violation of the provisions of this article may
41-69 file a complaint for such violation with the proper officers as in
42-1 other misdemeanor cases. The Board of Insurance Commissioners is
42-2 given the power and authority, as a requisite for granting or
42-3 renewing a license to insurance companies or insurance carriers,
42-4 their local recording agents or solicitors, to require answers
42-5 under oath to any questions propounded by the said Board or under
42-6 its authority, and touching any phase of insurance business in the
42-7 State of Texas in which said insurance company or insurance
42-8 carrier, or such person or firm, shall be engaged, and to require
42-9 such person or firm seeking appointment as local recording agent to
42-10 submit his books, records, and accounts, insofar as they may be
42-11 material to any phase of insurance business, to examination and
42-12 inspection by the Board or any person acting under its authority.]
42-13 [Sec. 27. RULES. In addition to other rules required or
42-14 authorized by this article, the commissioner may adopt rules in
42-15 accordance with federal law applicable to the regulation of the
42-16 sale of insurance that are necessary and proper to carry out the
42-17 provisions of this article.]
42-18 ARTICLE 4. NONRESIDENT AGENT LICENSE
42-19 SECTION 4.01. Section 1, Article 21.11, Insurance Code, is
42-20 amended to read as follows:
42-21 Sec. 1. NONRESIDENT AGENT LICENSE. (a) The
42-22 [Notwithstanding Sections 3(a) and (b), Article 21.14, of this
42-23 code, the] department shall license a person who is not a resident
42-24 of this state to act as a nonresident agent if the department finds
42-25 that:
42-26 (1) the state in which the person resides accords the
42-27 same privilege to a person who is a resident of this state;
42-28 (2) the applicant for the nonresident license:
42-29 (A) if an individual:
42-30 (i) holds a license as an agent in the
42-31 state of residence and either obtained the license by passing a
42-32 written examination or held the license before the time a written
42-33 examination was required to obtain the license; or
42-34 (ii) subject to Subsection (b) of this
42-35 section, has passed the examination for an agent's license required
42-36 under Article 21.01-1 of this code and satisfies the requirements
42-37 adopted under Section 2, Article 21.07, of this code for licensing
42-38 of an individual; or
42-39 (B) if a corporation or partnership:
42-40 (i) has provided evidence of the authority
42-41 or ability to act as an agent in the entity's state of domicile;
42-42 (ii) has satisfied the requirements
42-43 adopted under Section 2, Article 21.07, of this code for licensing
42-44 of a corporation or partnership; and
42-45 (iii) is domiciled in a state that has
42-46 entered into a reciprocal agreement with the commissioner as
42-47 provided by Subsection (b) of this section; and
42-48 (3) the applicant or any officer, director,
42-49 shareholder, member, or partner of an applicant that is a business
42-50 entity, required to file biographical information with the
42-51 department under Article 21.07 of this code, has not:
42-52 (A) committed an act that constitutes grounds
42-53 for denial, suspension, or revocation of a license under Article
42-54 21.01-2 of this code; or
42-55 (B) had an insurance license suspended or
42-56 revoked by the department or the insurance regulator of another
42-57 state.
42-58 (b) The commissioner may enter into a reciprocal agreement
42-59 with the appropriate official of another state waiving the written
42-60 examination requirement for an applicant who is a resident of that
42-61 state if:
42-62 (1) a written examination is required of applicants
42-63 for an agent's license in the other state;
42-64 (2) the appropriate official of the other state
42-65 certifies that the applicant holds a license as an agent in the
42-66 other state and either passed a written examination to obtain the
42-67 license or was the holder of an agent's license before the time a
42-68 written examination was required; and
42-69 (3) in the other state, a resident of this state is
43-1 entitled to obtain an agent's license under the same conditions and
43-2 without discrimination as to fees or otherwise in favor of the
43-3 residents of the other state.
43-4 (c) A person who resides in a town through which the state
43-5 line runs and whose residence is located in the town in the
43-6 adjoining state may be licensed as a resident agent if the person
43-7 maintains the person's business office in this state [in accordance
43-8 with Article 21.14 of this code, subject to the limitations of this
43-9 article].
43-10 (d) The [(b) An applicant for issuance of a license under
43-11 this section must meet the requirements for issuance of a license
43-12 under Article 21.14 of this code, except that the] department may
43-13 [shall] waive any [of those] license requirements for an applicant
43-14 with a valid license from another state or jurisdiction that has
43-15 license requirements substantially equivalent to those of this
43-16 state.
43-17 (e) The commissioner shall be the attorney for service of
43-18 process on whom all lawful process, notice, or demand may be served
43-19 in any legal proceeding against a nonresident agent licensed to
43-20 transact business in this state if:
43-21 (1) the nonresident agent fails to appoint or maintain
43-22 an attorney for service in this state;
43-23 (2) an attorney for service is appointed but cannot
43-24 with reasonable diligence be found; or
43-25 (3) the license of the nonresident agent is revoked.
43-26 SECTION 4.02. Subsections (a) and (b), Section 2, Article
43-27 21.11, Insurance Code, are amended to read as follows:
43-28 (a) Except as otherwise specifically provided by this code
43-29 [section], a license issued under this article to an individual who
43-30 is not a resident of this state grants the same rights and
43-31 privileges afforded to a resident license holder [under a license
43-32 issued under Article 21.14 of this code].
43-33 (b) A person who holds a license issued under this article
43-34 and who is in compliance with the continuing education requirements
43-35 of the person's state of residence is exempt from the continuing
43-36 education requirements imposed under Article 21.01-1 of this code
43-37 [may not:]
43-38 [(1) maintain an office in this state;]
43-39 [(2) solicit insurance business in this state by any
43-40 method, including an oral, written, or electronic communication; or]
43-41 [(3) employ solicitors or others to directly or
43-42 indirectly solicit insurance in this state].
43-43 SECTION 4.03. Section 3, Article 21.11, Insurance Code, is
43-44 amended to read as follows:
43-45 Sec. 3. LIMITATIONS. (a) This article does not permit:
43-46 (1) any person or firm licensed solely as a broker in
43-47 the person's or firm's state of residence to be granted a license
43-48 under this article; or
43-49 (2) a holder of a license issued under this article to
43-50 act as a surplus lines agent under Article 1.14-2 of this code or
43-51 to perform any of the acts permitted under Article 1.14-2 of this
43-52 code, except as provided under Section 10, Article 21.54, of this
43-53 code[; or]
43-54 [(3) any person or firm who holds a license issued
43-55 under this article to engage in any form of direct solicitation of
43-56 insurance within this state].
43-57 (b) This subchapter [The commissioner shall revoke a
43-58 nonresident agent's license issued under this article if the
43-59 commissioner finds that the license was obtained or is being used
43-60 for the purpose of transacting insurance through a local recording
43-61 agent in a manner that permits the individual licensed under this
43-62 article, by subterfuge, to transact insurance as a local recording
43-63 agent.]
43-64 [(c) In the circumstances described by Subsection (b) of
43-65 this section, the commissioner shall also revoke the license of the
43-66 affected local recording agent.]
43-67 [(d) A license revoked under Subsection (b) or (c) of this
43-68 section is not subject to reissuance before the fifth anniversary
43-69 of the date the revocation is effective.]
44-1 [(e) The commissioner shall order that any insurance
44-2 transacted under an arrangement described by Subsection (b) of this
44-3 section be cancelled.]
44-4 [(f) Article 21.01-2 of this code] applies to licensing of a
44-5 nonresident agent under this article.
44-6 SECTION 4.04. Sections 4 and 5, Article 21.11, Insurance
44-7 Code, are amended to read as follows:
44-8 Sec. 4. HOME OFFICE EMPLOYEE. This article does not affect
44-9 the authority established under Section 7 [20], Article 21.14, of
44-10 this code of an actual full-time home office salaried employee of
44-11 an insurance carrier licensed to do business in this state.
44-12 Sec. 5. RULES. The commissioner may adopt rules as
44-13 necessary to implement this article and to meet the minimum
44-14 requirements of federal law and regulations.
44-15 ARTICLE 5. CONFORMING AMENDMENTS
44-16 SECTION 5.01. Section 1, Article 3.71, Insurance Code, is
44-17 amended to read as follows:
44-18 Sec. 1. Notwithstanding any contrary or inconsistent
44-19 provision of any law, two or more insurance companies authorized to
44-20 separately do such an insurance business in this state, including
44-21 stock companies, reciprocals, or inter-insurance exchanges, Lloyds'
44-22 associations, fraternal benefit societies and mutual companies of
44-23 all kinds, including state-wide mutual assessment corporations and
44-24 local mutual aid associations, and stipulated premium companies,
44-25 may join together to offer, sell and administer hospital, surgical
44-26 and medical expense insurance plans under a group policy covering
44-27 residents of this state who are sixty-five (65) years of age and
44-28 older and their spouses on which policy each insurance carrier
44-29 shall be severally liable, and such companies may agree with
44-30 respect to premium rates, policy provisions, sales, administrative,
44-31 technical and accounting procedures and other matters within the
44-32 scope of this Article. Such companies may issue such insurance
44-33 policies in their own names or in the name of an unincorporated
44-34 association, trust, or other organization formed for the sole
44-35 purposes of this Article and evidenced by a contract in writing
44-36 executed by the participating insurance companies, and any
44-37 unincorporated associations, trusts, or other organizations
44-38 heretofore formed for the sole purpose of this Article and
44-39 evidenced by a contract in writing executed by the participating
44-40 insurance companies is hereby ratified, confirmed and approved and
44-41 validated from the date of its formation. Any such policy may be
44-42 executed on behalf of the insurance companies by a duly authorized
44-43 person and need not be countersigned on behalf of any such company
44-44 by a resident agent. Any person who is licensed as a general life,
44-45 accident, and health [insurance] agent or as a general property and
44-46 casualty [local recording] agent [or as a solicitor] under Article
44-47 [the provisions of Articles 21.07,] 21.07-1[,] or [Article] 21.14
44-48 of this code [the Insurance Code of the State of Texas,] may act as
44-49 such agent in connection with policies of insurance or certificates
44-50 of insurance issued by any unincorporated association, trust or
44-51 other organization formed for the sole purposes of this Article
44-52 without the necessity of notifying the department [State Board of
44-53 Insurance] that such person is appointed to so act.
44-54 SECTION 5.02. Section 7, Article 3.75, Insurance Code, is
44-55 amended to read as follows:
44-56 Sec. 7. VARIABLE CONTRACT AGENTS LICENSE.
44-57 (a) Notwithstanding any other law of this state, no person shall
44-58 sell or offer for sale within this state a variable contract or do
44-59 or perform any act or thing in the sale, negotiation, making, or
44-60 consummating of any variable contract other than for himself,
44-61 unless such person shall have a valid and current license issued
44-62 under Article 21.07-1 of this code [certificate from the State
44-63 Board of Insurance] authorizing such person to act within this
44-64 state as a general life, accident, and health [variable] agent.
44-65 [No such certificate shall be issued unless and until said board is
44-66 satisfied, after examination, that such person is by training,
44-67 knowledge, ability, and character qualified to act as such agent.
44-68 Any such certificate may be withdrawn and cancelled by said board,
44-69 after notice and hearing, if it shall find that the holder thereof
45-1 does not then have the qualifications required for issue of such
45-2 certificate.]
45-3 (b) The licensing and regulation of a person acting as a
45-4 variable agent is subject to the same provisions applicable to the
45-5 licensing and regulation of other agents under Subchapter A,
45-6 Chapter 21, of this code. [The Commissioner of Insurance shall
45-7 collect in advance from variable agent applicants a nonrefundable
45-8 license fee in an amount not to exceed $50. Unless the State Board
45-9 of Insurance accepts a qualifying examination administered by a
45-10 testing service, as provided under Article 21.01-1, Insurance Code,
45-11 as amended, the Commissioner of Insurance shall collect in advance
45-12 from variable agent applicants an examination fee in an amount not
45-13 to exceed $20. The State Board of Insurance shall determine the
45-14 amount of the fees. A new examination fee shall be paid for each
45-15 and every examination. The examination fee shall not be returned
45-16 under any circumstance other than for failure to appear and take
45-17 the examination after the applicant has given at least 24 hours
45-18 notice of an emergency situation to the Commissioner of Insurance
45-19 and received the Commissioner's approval. All fees collected
45-20 pursuant to this section shall be deposited in the State Treasury
45-21 to the credit of the State Board of Insurance operating fund to be
45-22 used to administer the provisions of this section and Article
45-23 21.07-1, Insurance Code, as amended.]
45-24 [(c) Each license issued to a variable contract agent shall
45-25 expire two years following the date of issue, unless prior thereto
45-26 it is suspended or revoked by the Commissioner of Insurance.]
45-27 [(d) The Commissioner of Insurance shall suspend the license
45-28 of a variable agent during any period in which the agent does not
45-29 have an outstanding valid appointment. The Commissioner of
45-30 Insurance shall lift the suspension on receipt by the State Board
45-31 of Insurance of acceptable notice of a valid appointment.]
45-32 [(e) A license applicant or licensee whose license
45-33 application or license has been denied, refused, or revoked under
45-34 this section may not apply for any license as an insurance agent
45-35 before the first anniversary of the effective date of the denial,
45-36 refusal, or revocation, or, if the applicant or licensee seeks
45-37 judicial review of the denial, refusal, or revocation, before the
45-38 first anniversary of the date of the final court order or decree
45-39 affirming that action. The Commissioner of Insurance may deny an
45-40 application timely filed if the applicant does not show good cause
45-41 why the denial, refusal, or revocation of the previous license
45-42 application or license should not be considered a bar to the
45-43 issuance of a new license.]
45-44 [(f) Licenses which have not expired or which have not been
45-45 suspended or revoked may be renewed by filing with the State Board
45-46 of Insurance a completed renewal application and paying the
45-47 nonrefundable renewal fee set by the board in an amount not to
45-48 exceed $50 on or before the expiration date of the license in
45-49 accordance with Article 21.01-2 of this code.]
45-50 [(g) Any agent licensed under this article may represent and
45-51 act as an agent for more than one insurance carrier any time while
45-52 the license is in force, if the agent so desires. Any such agent
45-53 and the insurance carrier involved must give notice to the State
45-54 Board of Insurance of any additional appointment or appointments
45-55 authorizing the agent to act as agent for an additional insurance
45-56 carrier or carriers. Such notice shall be accompanied by a
45-57 certificate from each insurance carrier to be named in each
45-58 additional appointment that said insurance carrier desires to
45-59 appoint the applicant as its agent. This notice shall also contain
45-60 such other information as the State Board of Insurance may require.
45-61 The agent or company shall be required to pay a nonrefundable fee
45-62 in an amount not to exceed $16 as determined by the State Board of
45-63 Insurance for each additional appointment applied for, which fee
45-64 shall accompany the notice. If approval of the additional
45-65 appointment is not received from the board before the eighth day
45-66 after the date on which the completed application and fee were
45-67 received by the board, the agent and the insurance carrier, in the
45-68 absence of notice of disapproval, may assume that the board
45-69 approves the application, and the agent may act for the insurance
46-1 carrier. All fees collected pursuant to this section shall be
46-2 deposited in the State Treasury to the credit of the State Board of
46-3 Insurance operating fund to be used to administer the provisions of
46-4 this article and Article 21.07-1, Insurance Code, as amended.]
46-5 [(h) Duplicate License; Fee. The Commissioner of Insurance
46-6 shall collect in advance from agents requesting duplicate licenses
46-7 a fee not to exceed $20. The State Board of Insurance shall
46-8 determine the amount of the fee.]
46-9 SECTION 5.03. Subsection (c), Article 5.13-1, Insurance
46-10 Code, is amended to read as follows:
46-11 (c) The right of such insurers to issue prepaid legal
46-12 services contracts on individual, group, or franchise bases is
46-13 hereby recognized, and qualified agents of such insurers who are
46-14 licensed under Article 21.07-1 or [Articles 21.07 and] 21.14 of
46-15 this code [the Insurance Code, as amended, and Chapter 213, Acts of
46-16 the 54th Legislature, 1955, as amended (Article 21.07-1, Vernon's
46-17 Texas Insurance Code),] shall be authorized to write such coverages
46-18 under such rules [and regulations] as the commissioner [State Board
46-19 of Insurance] may prescribe.
46-20 SECTION 5.04. Chapter 10, Insurance Code, is amended by
46-21 adding Article 10.37-3 to read as follows:
46-22 Art. 10.37-3. AGENT'S LICENSE REQUIRED. (a) A person may
46-23 not solicit or procure insurance contracts on behalf of a fraternal
46-24 benefit society unless the person holds a license issued by the
46-25 department under this code or is specifically exempted from the
46-26 license requirement as provided by Section 2, Article 21.07-1, of
46-27 this code.
46-28 (b) The licensing and regulation of agents for fraternal
46-29 benefit societies under this chapter is subject to the requirements
46-30 adopted under Subchapter A, Chapter 21, of this code and other
46-31 existing or subsequent applicable laws governing the licensing of
46-32 those agents. A provision of such a law is applicable to a license
46-33 applicant and license holder under this chapter.
46-34 SECTION 5.05. Article 16.24A, Insurance Code, is amended to
46-35 read as follows:
46-36 Art. 16.24A. LICENSING OF AGENTS [FOR CROP INSURANCE].
46-37 (a) No person or firm shall solicit, write, sign, execute or
46-38 deliver insurance policies, bind insurance risks, collect premiums,
46-39 or otherwise act in the capacity of an insurance agent [a local
46-40 recording agent] in the solicitation or sale of [crop] insurance
46-41 for a farm mutual insurance company unless the person or firm holds
46-42 a license issued [is licensed] under Subchapter A, Chapter 21,
46-43 [Article 21.14] of this code.
46-44 (b) A farm mutual insurance company may not appoint and act
46-45 through an agent [who qualifies for a license as an agricultural
46-46 insurance agent] under Article 21.14-2 of this code.
46-47 SECTION 5.06. Section 9, Article 17.25, Insurance Code, is
46-48 amended to read as follows:
46-49 Sec. 9. AGENTS' LICENSE. Agents [or solicitors] for such
46-50 companies shall be licensed and appointed as provided by Subchapter
46-51 A, Chapter 21, [in Article 21.07 or 21.14] of this Code.
46-52 SECTION 5.07. Sections 4, 19, and 21, Managing General
46-53 Agents' Licensing Act (Article 21.07-3, Vernon's Texas Insurance
46-54 Code), are amended to read as follows:
46-55 Sec. 4. REDEMPTION OF SHARES [APPLICATION FOR LICENSE; TO
46-56 WHOM LICENSE MAY BE ISSUED]. [(a) Each applicant for license
46-57 shall be a resident of Texas and file a written sworn application
46-58 on forms furnished by the Commissioner. The applicant shall
46-59 include in the application the names and addresses of the
46-60 applicant's officers, directors, shareholders, or partners, if
46-61 applicable, and affiliates.]
46-62 [(b) The Commissioner shall issue a license to an individual
46-63 applicant upon successful completion of the examination and
46-64 compliance with the other requirements of this Act.]
46-65 [(c) The Commissioner shall issue a license to a general
46-66 partnership, or to a limited liability partnership registered with
46-67 the Secretary of State under Section 3.08, Texas Revised
46-68 Partnership Act (Article 6132b-3.08, Vernon's Texas Civil
46-69 Statutes), engaging in the business of insurance if each of the
47-1 partners is licensed as an agent under this Act. The term
47-2 "partnership" or "agency partnership" as used in this Act means a
47-3 general partnership or a registered limited liability partnership.]
47-4 [(d) The Commissioner shall issue a license to a corporation
47-5 on finding:]
47-6 [(1) that the corporation is a Texas corporation
47-7 having its principal place of business in the State of Texas and
47-8 having as one of its purposes the authority to act as a managing
47-9 general agent; and]
47-10 [(2) that every officer, director, and shareholder of
47-11 the corporation is individually licensed as a managing general
47-12 agent under the provisions of this Insurance Code; provided,
47-13 however, that in the event ownership of the shares of such
47-14 corporation is acquired through devise or descent by an unlicensed
47-15 shareholder, the corporation shall still be entitled to a license
47-16 if such unlicensed shareholder qualifies as a licensed managing
47-17 general agent or disposes of the shares to a licensed managing
47-18 general agent within 90 days after the date of such stock
47-19 acquisition. If an unlicensed person acquires shares in such a
47-20 corporation and does not qualify to be licensed as a managing
47-21 general agent and the person does not dispose of the shares within
47-22 the 90-day period to a licensed managing general agent, the shares
47-23 must be purchased by the corporation for the value of the shares of
47-24 stock as reflected by the regular books and records of the
47-25 corporation on the date of the acquisition of the shares by the
47-26 unlicensed person. If the corporation fails or refuses to purchase
47-27 the shares, the corporation's license shall be cancelled.]
47-28 [(e)] A corporation may redeem the shares of any shareholder
47-29 or the shares of a deceased shareholder, on terms agreed on by the
47-30 board of directors and the shareholder or the shareholder's
47-31 personal representative or at a price and on terms provided in the
47-32 articles of incorporation, the bylaws, or an existing contract
47-33 entered into between the shareholders of the corporation.
47-34 [(f) Nothing contained herein shall be construed to permit
47-35 any unlicensed shareholder or any employee or agent of any
47-36 corporation licensed as a managing general agent to perform any act
47-37 of a managing general agent without obtaining a managing general
47-38 agent's license.]
47-39 [(g) If at any time, any person holding a managing general
47-40 agent's license does not maintain the qualifications necessary to
47-41 obtain a license, the license of such person to act as a managing
47-42 general agent shall be cancelled or denied in accordance with the
47-43 other provisions of this Act.]
47-44 [(h) Nothing in this section shall prevent any shareholder
47-45 from selling or otherwise transferring stock in any corporation to
47-46 a company or managing general agent licensed to do business in
47-47 Texas, nor prevent any such company or managing general agent from
47-48 owning all or any portion of the stock of such corporation.]
47-49 [(i) Each corporation licensed as a managing general agent
47-50 shall notify the Commissioner of any change in its officers,
47-51 directors, or shareholders not later than the 30th day after the
47-52 date on which the change takes effect.]
47-53 [(j) In this Act the term "corporation" shall mean a
47-54 corporation organized under the Texas Business Corporation Act or a
47-55 Texas domiciled limited liability company organized or existing
47-56 under the Texas Limited Liability Company Act (Article 1528n,
47-57 Vernon's Texas Civil Statutes) having its principal place of
47-58 business in this state and having as one of its purposes the
47-59 authority to act as a managing general insurance agent. Each
47-60 officer, manager, and member of a limited liability company must be
47-61 licensed under this Act. The licensing and regulation of a limited
47-62 liability company shall be subject to the same provisions and
47-63 requirements of this Act that are applicable to corporations
47-64 licensed under this Act.]
47-65 Sec. 19. ADMINISTRATION AND REGULATION OF MANAGING GENERAL
47-66 AGENTS; VIOLATIONS OF ACT. (a) The licensing and regulation of a
47-67 person acting as a managing general agent is subject to the laws
47-68 and requirements applicable to the licensing and regulation of
47-69 other agents under Subchapter A, Chapter 21, Insurance Code.
48-1 (b) Any person, firm, or corporation who violates any of the
48-2 provisions of this Act or any rule, regulation, or order adopted
48-3 under this Act or Subchapter A, Chapter 21, Insurance Code, shall
48-4 be subject to:
48-5 (1) Sections 2A, 3A, 4A, 5A, and 6A, Article 21.01-2,
48-6 Insurance Code; and
48-7 (2) [sanctions under] Section 7, Article 1.10,
48-8 Insurance Code.
48-9 Sec. 21. ADMINISTRATION OF ACT. The administration of this
48-10 Act shall be vested in the commissioner, [State Board of Insurance]
48-11 who may establish, and from time to time amend, reasonable rules
48-12 [and regulations] for the administration of this Act.
48-13 SECTION 5.08. Article 22.14, Insurance Code, is amended to
48-14 read as follows:
48-15 Art. 22.14. LICENSING OF AGENTS. All agents of stipulated
48-16 premium companies shall be licensed in accordance with the
48-17 provisions of Subchapter A [Art. 21.07] of Chapter 21 of this Code.
48-18 SECTION 5.09. Chapter 23, Insurance Code, is amended by
48-19 adding Article 23.23A to read as follows:
48-20 Art. 23.23A. REGULATION OF AGENTS. The licensing and
48-21 regulation of an agent authorized to solicit prepaid legal services
48-22 contracts for corporations complying with this chapter is subject
48-23 to Subchapter A, Chapter 21, of this code.
48-24 ARTICLE 6. SURPLUS LINES
48-25 SECTION 6.01. Subdivision (1), Subsection (a), Section 2,
48-26 Article 1.14-2, Insurance Code, is amended to read as follows:
48-27 (1) "Surplus lines agent" means:
48-28 (A) [(i) is] an agent authorized under Article
48-29 21.14 who is granted a surplus lines license in accordance with
48-30 this Article; or
48-31 (B) [, (ii) is] a managing general agent who is
48-32 [(authorized to be licensed and] licensed under the Managing
48-33 General Agents' Licensing Act[, Acts, 1967, 60th Legislature,
48-34 Chapter 727, codified by Vernon as] (Article 21.07-3, Vernon's
48-35 Texas Insurance Code) who is granted a surplus lines license in
48-36 accordance with this Article and who complies with the provisions
48-37 of this Article, except it is not necessary that the managing
48-38 general agent be licensed as a general property and casualty
48-39 [recording] agent[, or (iii) is a nonresident insurance agent
48-40 authorized under Article 21.11 and who is granted a surplus lines
48-41 license for the limited purpose of acting on behalf of a purchasing
48-42 group operating in this state in the placement of liability
48-43 insurance for risks located in this state].
48-44 SECTION 6.02. Subdivision (2), Subsection (a), Section 2,
48-45 Article 1.14-2, Insurance Code, is amended to read as follows:
48-46 (2) A [Each "]surplus lines agent,["] as a condition
48-47 of being licensed as a surplus lines agent and as a condition of
48-48 continuing to be licensed as a surplus lines agent, shall offer the
48-49 proof of financial responsibility [solvency and demonstrate
48-50 capacity in respect of responsibility to insureds under policies of
48-51 surplus lines insurance, or in the alternative show proof of
48-52 adequate bond and surety] in respect of [his] transactions with
48-53 insureds under policies of surplus lines insurance [and] as
48-54 required by [the] reasonable rules [and regulations] of the
48-55 department [State Board of Insurance shall provide].
48-56 SECTION 6.03. Subdivision (3), Subsection (a), Section 2,
48-57 Article 1.14-2, Insurance Code, is amended to read as follows:
48-58 (3) Any surplus lines license granted to an agency
48-59 authorized under the Managing General Agents' Licensing Act
48-60 (Article 21.07-3, Vernon's Texas Insurance Code), but[, Acts, 1967,
48-61 60th Legislature, Chapter 727, that is] not [also] licensed under
48-62 Article 21.14 of this code, [the Insurance Code] shall be limited
48-63 to the acceptance of business originating through a regularly
48-64 licensed general property and casualty [recording] agent and does
48-65 [shall] not authorize the [such] surplus lines agency to transact
48-66 business directly with the applicant for insurance.
48-67 SECTION 6.04. Subsection (b), Section 4, Article 1.14-2,
48-68 Insurance Code, is amended to read as follows:
48-69 (b) The department [Texas Department of Insurance] may issue
49-1 a surplus lines license to an applicant if the applicant submits a
49-2 properly completed license application and an application fee as
49-3 determined by the department and the department determines that the
49-4 applicant [an agent as defined by Subdivision (1) of Subsection (a)
49-5 of Section 2 of this article after the agent has]:
49-6 (1) is an individual who:
49-7 (A) is a resident of this state;
49-8 (B) is currently licensed as a general property
49-9 and casualty agent under Article 21.14 of this code or as a
49-10 managing general agent under the Managing General Agents' Licensing
49-11 Act (Article 21.07-3, Vernon's Texas Insurance Code);
49-12 (C) has passed the surplus lines license
49-13 examination administered under Article 21.01-1 of this code and
49-14 department rules; and
49-15 (D) provides proof of financial responsibility
49-16 as required under Section 2 of this article [remitted the
49-17 application fee set by the Texas Department of Insurance in an
49-18 amount not to exceed $50];
49-19 (2) is a corporation or partnership that:
49-20 (A) has at least one officer or director or at
49-21 least one active partner who:
49-22 (i) is a resident of this state; and
49-23 (ii) has passed the surplus lines license
49-24 examination required under this article;
49-25 (B) is currently licensed as a general property
49-26 and casualty agent under Article 21.14 of this code or as a
49-27 managing general agent under the Managing General Agents' Licensing
49-28 Act (Article 21.07-3, Vernon's Texas Insurance Code); and
49-29 (C) provides proof of financial responsibility
49-30 as required under Section 2 of this article [submitted a completed
49-31 license application on a form approved by the Texas Department of
49-32 Insurance]; or [and]
49-33 (3) is a nonresident insurance agent authorized under
49-34 Article 21.11 of this code who holds a general property and
49-35 casualty license from the department and whose authority as a
49-36 surplus lines agent is limited to acting on behalf of a purchasing
49-37 group operating in this state in the placement of liability
49-38 insurance for risks located in this state [passed a qualifying
49-39 examination approved by the Texas Department of Insurance. If the
49-40 agent is a general partnership or a registered limited liability
49-41 partnership, this examination must be met by each natural person
49-42 acting as a partner in that partnership. If the agent is a
49-43 corporation, this examination requirement must be met by each
49-44 natural person acting as an officer, director, or shareholder of
49-45 that corporation. If the agent is a limited liability company,
49-46 this examination requirement must be met by each natural person
49-47 acting as an officer, manager, and member of that limited liability
49-48 company].
49-49 SECTION 6.05. Subsection (c), Section 4, Article 1.14-2,
49-50 Insurance Code, is amended to read as follows:
49-51 (c) In addition to the requirements of this article, the
49-52 administration and regulation of a surplus lines agent's license
49-53 is governed by Subchapter A, Chapter 21, of this code, except that
49-54 Article 21.07 of this code does not apply to a license issued under
49-55 this article. [Unless the State Board of Insurance adopts a system
49-56 for staggered renewal of licenses, as provided by Article 21.01-2
49-57 of this code, each license issued under this section is for a
49-58 two-year term that expires on December 31; however, the term of the
49-59 initial licensing period shall expire on December 31 of the year
49-60 following the year in which the license is issued. A license may
49-61 be renewed for periods of two years.]
49-62 SECTION 6.06. Subsection (d), Section 4, Article 1.14-2,
49-63 Insurance Code, is amended to read as follows:
49-64 (d) If a license holder does not maintain the qualifications
49-65 necessary to obtain the license, the department may revoke or
49-66 suspend the license or deny the renewal of that license in
49-67 accordance with Article 21.01-2 of this code. [By filing a
49-68 completed written application in the form prescribed by the State
49-69 Board of Insurance and paying the nonrefundable renewal fee set by
50-1 the board in an amount not to exceed $50, an unexpired license may
50-2 be renewed on or before the expiration date of the license.]
50-3 ARTICLE 7. REPEALER
50-4 SECTION 7.01. The following laws are repealed:
50-5 (1) Subsections (f), (g), and (h), Section 4, Article
50-6 1.14-2, Insurance Code;
50-7 (2) Section 15, Article 17.25, Insurance Code;
50-8 (3) Sections 15 and 15A, Texas Health Maintenance
50-9 Organization Act (Sections 20A.15 and 20A.15A, Vernon's Texas
50-10 Insurance Code);
50-11 (4) Sections 1, 3, 4, and 6, Article 21.01-2,
50-12 Insurance Code;
50-13 (5) Article 21.02-1, Insurance Code;
50-14 (6) Article 21.05, Insurance Code;
50-15 (7) the following sections of Article 21.07, Insurance
50-16 Code:
50-17 (A) Sections 1B and 1C;
50-18 (B) Section 3, as amended by Chapters 596 and
50-19 972, Acts of the 75th Legislature, Regular Session, 1997;
50-20 (C) Sections 3B, 4, 4A, 5, 7, 8, 9, 10, 10A, 11,
50-21 12, 13, 14, 15, 15A, 16, 17, 18, 19, and 20;
50-22 (D) Section 21, as added by Chapter 820, Acts of
50-23 the 75th Legislature, Regular Session, 1997; and
50-24 (E) Section 21, as added by Chapter 1196, Acts
50-25 of the 75th Legislature, Regular Session, 1997;
50-26 (8) Article 21.07A, Insurance Code;
50-27 (9) Chapter 213, Acts of the 54th Legislature, Regular
50-28 Session, 1955 (Article 21.07-1, Vernon's Texas Insurance Code);
50-29 (10) the following sections of the Managing General
50-30 Agents' Licensing Act (Article 21.07-3, Vernon's Texas Insurance
50-31 Code):
50-32 (A) Sections 4A, 4B, and 4C;
50-33 (B) Subsection (h), Section 5;
50-34 (C) Sections 6 and 6A;
50-35 (D) Sections 8, 9, and 10;
50-36 (E) Sections 12, 13, 14, and 15;
50-37 (F) Section 17; and
50-38 (G) Section 20;
50-39 (11) Section 14, Article 21.14-1, Insurance Code;
50-40 (12) Article 21.15, Insurance Code;
50-41 (13) Article 21.15-2, Insurance Code;
50-42 (14) Article 21.15-3, Insurance Code;
50-43 (15) Article 21.15-4, Insurance Code;
50-44 (16) Article 21.15-7, Insurance Code;
50-45 (17) Section 10, Article 21.58A, Insurance Code; and
50-46 (18) Article 23.23, Insurance Code.
50-47 ARTICLE 8. GRANDFATHER CLAUSE; TRANSITION
50-48 SECTION 8.01. On the effective date of this Act, a person
50-49 who holds a license issued by the Texas Department of Insurance
50-50 that is in good standing is:
50-51 (1) considered licensed under the applicable licensing
50-52 law as amended by this Act;
50-53 (2) entitled to act as an agent under the new license
50-54 type, subject to this article; and
50-55 (3) subject to the provisions of the Insurance Code as
50-56 amended by this Act.
50-57 SECTION 8.02. (a) A person who, immediately before the
50-58 effective date of this Act, holds an agent license issued by the
50-59 Texas Department of Insurance and who obtained that license by
50-60 passing a written examination is entitled to the appropriate
50-61 license as provided by Subchapter A, Chapter 21, Insurance Code, as
50-62 amended by this Act, without further examination.
50-63 (b) A person who, immediately before the effective date of
50-64 this Act, holds an agent license issued by the Texas Department of
50-65 Insurance before January 1, 1999, and who obtained that license
50-66 without taking a written examination or who actually solicited
50-67 insurance on behalf of a stipulated premium company, farm mutual
50-68 company, or county mutual insurance company before January 1, 1999,
50-69 is entitled to the appropriate license as provided by Subchapter A,
51-1 Chapter 21, Insurance Code, as amended by this Act, but must pass
51-2 the appropriate license examination not later than the second
51-3 anniversary of the date of issuance, to retain the license. The
51-4 license of a person who does not pass the license examination as
51-5 required by this subsection expires on the second anniversary of
51-6 the date of issuance and may not be renewed.
51-7 (c) A person who, immediately before the effective date of
51-8 this Act, holds an agent license issued by the Texas Department of
51-9 Insurance on or after January 1, 1999, and who obtained that
51-10 license without taking a written examination or who actually
51-11 solicited insurance on behalf of a stipulated premium company, farm
51-12 mutual company, or county mutual insurance company on or after
51-13 January 1, 1999, but before the effective date of this Act, is
51-14 entitled to the appropriate license as provided by Subchapter A,
51-15 Chapter 21, Insurance Code, as amended by this Act, but must pass
51-16 the appropriate license examination not later than May 31, 2000, to
51-17 retain the license. The license of a person who does not pass the
51-18 license examination as required by this subsection expires on May
51-19 31, 2000.
51-20 (d) A person who has actually solicited insurance on behalf
51-21 of a stipulated premium company, farm mutual company, or county
51-22 mutual insurance company for at least 24 months preceding the
51-23 effective date of this Act is entitled to the appropriate license
51-24 as provided by Subchapter A, Chapter 21, Insurance Code, as amended
51-25 by this Act, without further examination.
51-26 SECTION 8.03. (a) The Texas Department of Insurance may
51-27 issue a life, accident, and health license to a person who
51-28 solicited insurance on behalf of a fraternal benefit society
51-29 immediately before the effective date of this Act on submission to
51-30 the department by the person of the following:
51-31 (1) a certified statement from the fraternal benefit
51-32 society indicating the period of time the person has solicited
51-33 insurance on behalf of the fraternal benefit society;
51-34 (2) a completed license application form; and
51-35 (3) a nonrefundable application fee in an amount
51-36 determined by the department.
51-37 (b) To retain the license issued under Subsection (a) of
51-38 this section, a person who has solicited insurance on behalf of a
51-39 fraternal benefit society for less than two years as of the
51-40 effective date of this Act must pass the license examination
51-41 required under Subchapter A, Chapter 21, Insurance Code, not later
51-42 than the 180th day after the date of issuance of the license. The
51-43 license of a person who does not pass the license examination as
51-44 required by this subsection expires on the 180th day after the date
51-45 of issuance of the license and may not be renewed.
51-46 ARTICLE 9. EFFECTIVE DATE; TRANSITION; EMERGENCY
51-47 SECTION 9.01. (a) This Act takes effect September 1, 1999.
51-48 (b) Section 3, Article 21.01-1, Insurance Code, as amended
51-49 by this Act, applies to continuing education requirements for
51-50 insurance agents for a renewal of a license that occurs on or after
51-51 January 1, 2001.
51-52 SECTION 9.02. The importance of this legislation and the
51-53 crowded condition of the calendars in both houses create an
51-54 emergency and an imperative public necessity that the
51-55 constitutional rule requiring bills to be read on three several
51-56 days in each house be suspended, and this rule is hereby suspended.
51-57 * * * * *