By Smithee H.B. No. 2830
77R7082 AJA-F
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to unauthorized insurance.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Sections 101.001(a) and (b), Insurance Code, are
1-5 amended to read as follows:
1-6 (a) It is a state concern that many persons [residents of
1-7 this state] hold insurance policies issued by persons or insurers
1-8 who are not authorized to do insurance business in this state and
1-9 who are not qualified as eligible surplus lines insurers under
1-10 Article 1.14-2. These persons [residents] face often
1-11 insurmountable obstacles in asserting legal rights under the
1-12 policies [in foreign forums under unfamiliar laws and rules of
1-13 practice].
1-14 (b) It is the policy of this state to protect persons
1-15 [residents] against acts by a person or insurer who is not
1-16 authorized to do insurance business in this state by:
1-17 (1) maintaining fair and honest insurance markets;
1-18 (2) protecting the premium tax revenues of this state;
1-19 (3) protecting authorized persons and insurers, who
1-20 are subject to strict regulation, from unfair competition by
1-21 unauthorized persons and insurers; and
1-22 (4) protecting against evasion of the insurance
1-23 regulatory laws of this state.
1-24 SECTION 2. Section 101.051(b), Insurance Code, is amended to
2-1 read as follows:
2-2 (b) The following acts [in this state] constitute the
2-3 business of insurance in this state:
2-4 (1) making or proposing to make, as an insurer, an
2-5 insurance contract;
2-6 (2) making or proposing to make, as guarantor or
2-7 surety, a guaranty or suretyship contract as a vocation and not
2-8 merely incidental to another legitimate business or activity of the
2-9 guarantor or surety;
2-10 (3) taking or receiving an insurance application;
2-11 (4) receiving or collecting any consideration for
2-12 insurance, including:
2-13 (A) a premium;
2-14 (B) a commission;
2-15 (C) a membership fee;
2-16 (D) an assessment; or
2-17 (E) dues;
2-18 (5) issuing or delivering an insurance contract [to:]
2-19 [(A) a resident of this state; or]
2-20 [(B) a person authorized to do business in this
2-21 state];
2-22 (6) directly or indirectly acting as an agent for or
2-23 otherwise representing or assisting an insurer or other person in:
2-24 (A) soliciting, negotiating, procuring, or
2-25 effectuating insurance or a renewal of insurance;
2-26 (B) disseminating information relating to
2-27 coverage or rates;
3-1 (C) forwarding an insurance application;
3-2 (D) delivering an insurance policy or contract;
3-3 (E) inspecting a risk;
3-4 (F) setting a rate;
3-5 (G) investigating or adjusting a claim or loss;
3-6 (H) transacting a matter after the effectuation
3-7 of the contract that arises out of the contract; or
3-8 (I) representing or assisting an insurer or
3-9 other person in any other manner in the transaction of insurance
3-10 [with respect to a subject of insurance that is resident, located,
3-11 or to be performed in this state];
3-12 (7) contracting to provide in this state
3-13 indemnification or expense reimbursement for a medical expense by
3-14 direct payment, reimbursement, or otherwise [to a person domiciled
3-15 in this state or for a risk located in this state], whether as an
3-16 insurer, agent, administrator, trust, or funding mechanism or by
3-17 another method;
3-18 (8) doing any kind of insurance business specifically
3-19 recognized as constituting insurance business within the meaning of
3-20 statutes relating to insurance;
3-21 (9) doing or proposing to do any insurance business
3-22 that is in substance equivalent to conduct described by
3-23 Subdivisions (1)-(8) in a manner designed to evade statutes
3-24 relating to insurance; or
3-25 (10) any other transaction of business in this state
3-26 by an insurer, regardless of the residency of the insured or the
3-27 location of the risk.
4-1 SECTION 3. Section 101.103(a), Insurance Code, is amended to
4-2 read as follows:
4-3 (a) If the commissioner has reason to believe a person,
4-4 including an insurer, has violated or is threatening to violate
4-5 this chapter or a rule adopted under this chapter, or that a
4-6 person, including an insurer, violating this chapter has engaged in
4-7 or is threatening to engage in an unfair act, the commissioner may:
4-8 (1) issue a cease and desist order under Subchapter D;
4-9 (2) seek injunctive relief under Section 101.105;
4-10 (3) request the attorney general to recover a civil
4-11 penalty under Section 101.105; [or]
4-12 (4) request the Travis County district attorney to
4-13 proceed with criminal prosecution; or
4-14 (5) take any combination of those actions.
4-15 SECTION 4. Section 101.106, Insurance Code, is amended to
4-16 read as follows:
4-17 Sec. 101.106. CRIMINAL PENALTY. (a) A person[, including an
4-18 insurer, who violates Section 101.102] commits an offense if the
4-19 person engages in the business of insurance:
4-20 (1) without a valid certificate of authority, license,
4-21 or specific authorization or exemption; or
4-22 (2) after the person's certificate of authority,
4-23 license, or authorization has been suspended or revoked.
4-24 (b) An offense under this section is a felony of the third
4-25 degree.
4-26 [(c) It is a defense to prosecution under this section that
4-27 Section 101.051 or 101.052, as applicable, by its terms does not
5-1 apply to the person charged.]
5-2 SECTION 5. Section 101.203(a), Insurance Code, is amended to
5-3 read as follows:
5-4 (a) If the commissioner has reason to believe that insurance
5-5 has been effectuated [by or for a person in this state] with an
5-6 unauthorized insurer, the commissioner shall in writing order the
5-7 person to:
5-8 (1) produce for examination all insurance contracts
5-9 and other documents evidencing insurance with both authorized and
5-10 unauthorized insurers; and
5-11 (2) disclose to the commissioner:
5-12 (A) the amount of insurance;
5-13 (B) the name and address of each insurer;
5-14 (C) the gross amount of premiums paid or to be
5-15 paid; and
5-16 (D) the name and address of each person
5-17 assisting in the solicitation, negotiation, or effectuation of the
5-18 insurance.
5-19 SECTION 6. Section 101.253, Insurance Code, is amended to
5-20 read as follows:
5-21 Sec. 101.253. FILING REQUIREMENTS FOR CORPORATIONS. The
5-22 amount of tax due [and payable] under Section 101.252 with respect
5-23 to a corporation that files a franchise tax return shall be
5-24 reported directly to the comptroller and is due:
5-25 (1) at the time the franchise tax report is due; or
5-26 (2) on another date specified by the comptroller.
5-27 SECTION 7. Section 101.301(a), Insurance Code, is amended to
6-1 read as follows:
6-2 (a) A person in this state investigating or adjusting a loss
6-3 or claim on a subject of insurance [in this state] shall
6-4 immediately report to the department an insurance policy or
6-5 contract that has been entered into by an insurer that is not
6-6 authorized to transact the insurance in this state.
6-7 SECTION 8. (a) The change in law made by Section 101.106,
6-8 Insurance Code, as amended by this Act, applies only to an offense
6-9 committed on or after the effective date of this Act. For purposes
6-10 of this section, an offense is committed before the effective date
6-11 of this Act if any element of the offense occurs before that date.
6-12 (b) An offense committed before the effective date of this
6-13 Act is covered by the law in effect when the offense was committed,
6-14 and the former law is continued in effect for that purpose.
6-15 SECTION 9. This Act takes effect September 1, 2001.