By Dunnam H.B. No. 1384
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the termination of agreements with certain insurance
1-3 agents.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Subchapter A, Chapter 21, Insurance Code, is
1-6 amended by adding Article 21.14A to read as follows:
1-7 Art. 21.14A. PROCEDURES AND REVIEW ON TERMINATION OF LOCAL
1-8 RECORDING AGENT OR SOLICITOR
1-9 Sec. 1. DEFINITION. In this article, "agent" means a captive
1-10 agent who is licensed as a local recording agent or a solicitor as
1-11 those terms are defined by Section 2, Article 21.14, of this code.
1-12 Sec. 2. TERMINATION FOR CAUSE. (a) An insurer may
1-13 terminate a contractual agreement with an agent because:
1-14 (1) the agent is insolvent;
1-15 (2) the agent breaches a fiduciary duty or trust;
1-16 (3) the agent fails to perform duties in accordance
1-17 with the contractual agreement;
1-18 (4) the agent commits gross and wilful misconduct;
1-19 (5) the agent fails to pay to the insurer money owed
1-20 to the insurer after receipt by the agent of a written demand for
1-21 the money from the insurer; or
1-22 (6) the department revokes the agent's license.
1-23 (b) The termination by an insurer of a contractual agreement
1-24 with an agent for a cause described by Subsection (a) of this
2-1 section is not a wrongful or unjustified termination for purposes
2-2 of this article.
2-3 Sec. 3. PROHIBITED GROUNDS FOR TERMINATION. (a) An insurer
2-4 may not cancel or terminate a contractual agreement with an agent
2-5 or reduce or restrict an agent's authority to conduct business
2-6 under the contract:
2-7 (1) based on the loss experience for the agent's
2-8 customers and former customers if:
2-9 (A) the agent followed underwriting guidelines
2-10 current at the time coverage for the customers was written;
2-11 (B) the insurer required the agent to submit the
2-12 application for insurance for underwriting approval by the insurer;
2-13 (C) all material information on the application
2-14 was fully completed;
2-15 (D) the information provided by the applicant
2-16 for insurance was not altered or omitted on the application by the
2-17 agent; and
2-18 (E) the policy was subject to approval by the
2-19 insurer; or
2-20 (2) because of the predominant geographic location of
2-21 the agent's customers.
2-22 (b) An insurer may not, in order to avoid the prohibition
2-23 provided by Subsection (a) of this section, commit any of the
2-24 following acts in a manner designed to impact a selected agent or
2-25 the business produced by that agent:
2-26 (1) condition the acceptance of any type of property
2-27 or casualty insurance on the sale of other types of insurance:
3-1 (A) to the same customers of the agent; or
3-2 (B) as a percentage of the agent's total sales;
3-3 (2) restrict or limit the number of policies an agent
3-4 may sell unless all agents of that insurer are subject to analogous
3-5 restrictions or limitations;
3-6 (3) restrict or limit the types of insurance coverage
3-7 or amounts of insurance an agent may sell unless all agents of that
3-8 insurer are subject to analogous restrictions or limitations; or
3-9 (4) reduce an agent's level of compensation or
3-10 commission unless all agents of that insurer are subject to similar
3-11 reductions.
3-12 (c) The termination by an insurer of a contractual agreement
3-13 with an agent in violation of Subsection (a) of this section may be
3-14 a wrongful or unjustified termination for purposes of this article.
3-15 SECTION 2. This Act takes effect September 1, 2001.