By: Sibley S.B. No. 1004
2001S0610/1
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to regulating the unauthorized practice of the business of
1-3 insurance; providing a criminal penalty.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Subsections (a) and (b), Section 101.001,
1-6 Insurance Code, are amended to read as follows:
1-7 (a) It is a state concern that many persons [residents of
1-8 this state] hold insurance policies issued by persons or insurers
1-9 who are not authorized to do insurance business in this state and
1-10 who are not qualified as eligible surplus lines insurers under
1-11 Article 1.14-2. These persons [residents] face often
1-12 insurmountable obstacles in asserting legal rights under the
1-13 policies [in foreign forums under unfamiliar laws and rules of
1-14 practice].
1-15 (b) It is the policy of this state to protect persons
1-16 [residents] against acts by a person or insurer who is not
1-17 authorized to do insurance business in this state by:
1-18 (1) maintaining fair and honest insurance markets;
1-19 (2) protecting the premium tax revenues of this state;
1-20 (3) protecting authorized persons and insurers, who
1-21 are subject to strict regulation, from unfair competition by
1-22 unauthorized persons and insurers; and
1-23 (4) protecting against evasion of the insurance
1-24 regulatory laws of this state.
1-25 SECTION 2. Subsection (b), Section 101.051, Insurance Code,
2-1 is amended to 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
3-1 coverage or rates;
3-2 (C) forwarding an insurance application;
3-3 (D) delivering an insurance policy or contract;
3-4 (E) inspecting a risk;
3-5 (F) setting a rate;
3-6 (G) investigating or adjusting a claim or loss;
3-7 (H) transacting a matter after the effectuation
3-8 of the contract that arises out of the contract; or
3-9 (I) representing or assisting an insurer or
3-10 other person in any other manner in the transaction of insurance
3-11 with respect to a subject of insurance [that is resident, located,
3-12 or] [to be performed in this state];
3-13 (7) contracting to provide [in this state]
3-14 indemnification or expense reimbursement for a medical expense by
3-15 direct payment, reimbursement, or otherwise to a person [domiciled
3-16 in this state or for a risk located in this state], whether as an
3-17 insurer, agent, administrator, trust, or funding mechanism or by
3-18 another method;
3-19 (8) doing any kind of insurance business specifically
3-20 recognized as constituting insurance business within the meaning of
3-21 statutes relating to insurance;
3-22 (9) doing or proposing to do any insurance business
3-23 that is in substance equivalent to conduct described by
3-24 Subdivisions (1)-(8) in a manner designed to evade statutes
3-25 relating to insurance; or
3-26 (10) any other transaction of business in this state
4-1 by an insurer, notwithstanding the residency of the insured or the
4-2 location of the risk.
4-3 SECTION 3. Subsection (a), Section 101.103, Insurance Code,
4-4 is amended to read as follows:
4-5 (a) If the commissioner has reason to believe a person,
4-6 including an insurer, has violated or is threatening to violate
4-7 this chapter or a rule adopted under this chapter, or that a
4-8 person, including an insurer, violating this chapter has engaged in
4-9 or is threatening to engage in an unfair act, the commissioner may:
4-10 (1) issue a cease and desist order under Subchapter D;
4-11 (2) seek injunctive relief under Section 101.105;
4-12 (3) request the attorney general to recover a civil
4-13 penalty under Section 101.105; [or]
4-14 (4) request the district attorney for Travis County to
4-15 proceed with criminal prosecution; or
4-16 (5) take any combination of those actions.
4-17 SECTION 4. Section 101.106, Insurance Code, is amended to
4-18 read as follows:
4-19 Sec. 101.106. CRIMINAL PENALTY. (a) A person[, including
4-20 an insurer, who violates Section 101.102] commits an offense if the
4-21 person engages in the business of insurance:
4-22 (1) without holding a valid certificate of authority
4-23 or license or a specific authorization or exemption issued by the
4-24 department; or
4-25 (2) after the person's certificate of authority,
4-26 license, or authorization has been revoked or suspended by the
5-1 commissioner.
5-2 (b) An offense under this section is a felony of the third
5-3 degree.
5-4 [(c) It is a defense to prosecution under this section that
5-5 Section 101.051 or 101.052, as applicable, by its terms does not]
5-6 [apply to the person charged.]
5-7 SECTION 5. Subsection (a), Section 101.203, Insurance Code,
5-8 is amended to read as follows:
5-9 (a) If the commissioner has reason to believe that insurance
5-10 has been effectuated by or for a person [in this state] with an
5-11 unauthorized insurer, the commissioner shall in writing order the
5-12 person to:
5-13 (1) produce for examination all insurance contracts
5-14 and other documents evidencing insurance with both authorized and
5-15 unauthorized insurers; and
5-16 (2) disclose to the commissioner:
5-17 (A) the amount of insurance;
5-18 (B) the name and address of each insurer;
5-19 (C) the gross amount of premiums paid or to be
5-20 paid; and
5-21 (D) the name and address of each person
5-22 assisting in the solicitation, negotiation, or effectuation of the
5-23 insurance.
5-24 SECTION 6. Section 101.253, Insurance Code, is amended to
5-25 read as follows:
5-26 Sec. 101.253. FILING REQUIREMENTS FOR CORPORATIONS. The
6-1 amount of tax due [and payable] under Section 101.252 with respect
6-2 to a corporation that files a franchise tax return shall be
6-3 reported directly to the comptroller and is due:
6-4 (1) at the time the franchise tax report is due; or
6-5 (2) on another date specified by the comptroller.
6-6 SECTION 7. Subsection (a), Section 101.301, Insurance Code,
6-7 is amended to read as follows:
6-8 (a) A person investigating or adjusting a loss or claim on a
6-9 subject of insurance [in this state] shall immediately report to
6-10 the department an insurance policy or contract that has been
6-11 entered into by an insurer that is not authorized to transact the
6-12 insurance in this state.
6-13 SECTION 8. (a) This Act takes effect September 1, 2001.
6-14 (b) The change in law made by this Act applies only to an
6-15 offense committed on or after the effective date of this Act. For
6-16 purposes of this section, an offense is committed before the
6-17 effective date of this Act if any element of the offense occurs
6-18 before that date.
6-19 (c) An offense committed before the effective date of this
6-20 Act is covered by the law in effect when the offense was committed,
6-21 and the former law is continued in effect for that purpose.
6-22 (d) The change in law made by this Act applies only to an
6-23 insurance policy, contract, or evidence of coverage delivered,
6-24 issued for delivery, or renewed on or after January 1, 2002. A
6-25 policy, contract, or evidence of coverage delivered, issued for
6-26 delivery, or renewed before January 1, 2002, is governed by the law
7-1 as it existed immediately before the effective date of this Act,
7-2 and that law is continued in effect for that purpose.