78R6123 KCR-F
By: Seaman, Smithee, Eiland, Thompson, H.B. No. 392
Naishtat
Substitute the following for H.B. No. 392:
By: Thompson C.S.H.B. No. 392
A BILL TO BE ENTITLED
AN ACT
relating to the licensing of public insurance adjusters; providing
administrative and criminal penalties.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 1(b), Chapter 407, Acts of the 63rd
Legislature, Regular Session, 1973 (Article 21.07-4, Vernon's
Texas Insurance Code), is amended to read as follows:
(b) "Adjuster" shall not include:
(1) an attorney at law who adjusts insurance losses
from time to time and incidental to the practice of law, and who
does not advertise or represent that he is an adjuster;
(2) a salaried employee of an insurer who is not
regularly engaged in the adjustment, investigation, or supervision
of insurance claims;
(3) persons employed only for the purpose of
furnishing technical assistance to a licensed adjuster, including,
but not limited to, photographers, estimators, private detectives,
engineers, handwriting experts, and attorneys at law;
(4) a licensed agent or general agent of an authorized
insurer who processes undisputed and/or uncontested losses for such
insurer under policies issued by said agent or general agent;
(5) a person who performs clerical duties with no
negotiations with the parties on disputed and/or contested claims;
(6) any person who handles claims arising under life,
accident and health insurance policies;
(7) a person who is employed principally as a
right-of-way agent or right-of-way and claims agent and whose
primary responsibility is the acquisition of easements, leases,
permits, or other real property rights and whose claims handling
arises out of operations under those easements, leases, permits, or
other contracts or contractual obligations; [or]
(8) an individual who is employed to investigate
suspected fraudulent insurance claims but who does not adjust
losses or determine claims payments; or
(9) a public insurance adjuster who is licensed under
Article 21.07-5, Insurance Code.
SECTION 2. Subchapter A, Chapter 21, Insurance Code, is
amended by adding Article 21.07-5 to read as follows:
Art. 21.07-5. PUBLIC INSURANCE ADJUSTERS
Sec. 1. DEFINITIONS. In this article:
(1) "License holder" means an individual licensed
under this article as a public insurance adjuster.
(2) "Person" includes an individual, firm, company,
association, organization, partnership, limited liability company,
or corporation.
(3) "Public insurance adjuster" means an individual
who, for compensation, acts on behalf of, or aids in any manner, an
insured in negotiating for or effecting the settlement of a claim
for loss or damage under any policy of insurance covering real or
personal property or who, on behalf of any other public insurance
adjuster, investigates, settles, or adjusts or advises or assists
an insured with a claim for loss or damage under any policy of
insurance covering real or personal property. The term includes an
individual who advertises, solicits business, or holds the
individual out to the public as an adjuster of claims for loss or
damage under any policy of insurance covering real or personal
property. The term does not include:
(A) an officer or employee of the federal or
state government or of a political subdivision of the state
government while engaged in the performance of official duties;
(B) a charitable organization incorporated under
the laws of this state that is organized and maintained for the
public good and not for private profit;
(C) an attorney engaged in the performance of the
attorney's professional duties;
(D) insurers admitted to do business in the state
and insurance agents licensed by this state while engaged in the
performance of duties in connection with insurance transactions;
(E) the legal owner of personal property that has
been sold under a conditional sales agreement or a mortgagee under
the terms of a chattel mortgage;
(F) a salaried office employee who performs
exclusively clerical or administrative duties attendant to the
disposition of the business regulated by this article;
(G) a photographer, estimator, appraiser,
engineer, or arbitrator who is employed by a licensed public
insurance adjuster exclusively for the purpose of furnishing
technical assistance to the public insurance adjuster; or
(H) a private investigator licensed under
Chapter 1702, Occupations Code, while acting within the scope of
that license.
Sec. 2. NOT LAW LICENSE. This article may not be construed
as entitling any person who is not an active member of the State Bar
of Texas to practice law in this state.
Sec. 3. LICENSE REQUIRED; EXEMPTION. (a) Except as
provided by Section 17 of this article, an individual may not act as
a public insurance adjuster in this state or hold the individual out
to be a public insurance adjuster in this state unless the
individual holds a license issued by the commissioner under Section
5 or 16 of this article.
(b) The following persons are exempt from the license
requirement under Subsection (a) of this section:
(1) an attorney licensed by this state; and
(2) a licensed property and casualty agent while
acting for an insured concerning a loss under a policy issued by
that agent.
(c) A contract for services regulated by this article that
is entered into by an insured with an individual who is in violation
of Subsection (a) of this section may be voided at the option of the
insured. If a contract is voided under this subsection, the insured
is not liable for the payment of any past services rendered, or
future services to be rendered, by that individual under that
contract or otherwise.
(d) A person employed by the department under this article
may administer and examine under oath any person as considered
necessary in gathering any information and evidence required by
this article and may have that information and evidence reduced to
writing if considered necessary. All related expenses shall be
paid from the fees collected under this article.
Sec. 4. LICENSE APPLICATION. (a) An application for a
license under this article must be on a form prescribed by the
commissioner.
(b) The completed application must be notarized and be
accompanied by the license application fee set under Section 12 of
this article for each application submitted. The license
application fee is nonrefundable.
Sec. 5. QUALIFICATIONS FOR LICENSE; ISSUANCE. The
commissioner shall issue a resident public insurance adjuster
license to an applicant on determining that the application meets
the requirements of this article, the application license fee has
been paid, and the applicant is an individual who:
(1) is at least 18 years of age;
(2) is a resident of this state;
(3) is trustworthy and of a moral character that
reasonably ensures that the applicant will conduct the business of
a public insurance adjuster fairly and in good faith without
detriment to the public;
(4) has never been convicted of a felony or, if
convicted of a felony, has received a full pardon from that
conviction and is otherwise relieved of any disabilities connected
with that conviction;
(5) has sufficient experience or training relating to
the assessment of:
(A) real and personal property values; and
(B) physical loss of or damage to real or
personal property that may be the subject of insurance and claims
under insurance;
(6) has a general understanding of the earnings
capabilities of insurance;
(7) is sufficiently informed as to the terms and
effects of the types of insurance contracts that provide coverage
on real and personal property;
(8) possesses knowledge and experience adequate to
enable the applicant to engage in the business of a public insurance
adjuster fairly and without injury to the public or to any member of
the public with whom the applicant may have business as a public
insurance adjuster;
(9) has successfully passed the license examination
prescribed under Section 9 of this article or is exempt from the
examination requirement under this article;
(10) has complied with the security requirements
prescribed under Section 6 of this article; and
(11) has complied with any other requirements under
applicable state law, including providing a complete set of
fingerprints on request as provided by Section 801.056 of this
code.
Sec. 6. SECURITY REQUIREMENTS. (a) Each applicant for a
public insurance adjuster license must file a surety bond or other
security with the commissioner in accordance with this section.
(b) A surety bond filed to meet the purposes of this section
must:
(1) be executed and issued by a surety insurer;
(2) be in the amount of $50,000;
(3) be payable to the commissioner for the use and
benefit of any person who recovers a judgment against the
individual license holder;
(4) specifically authorize recovery by the
commissioner of the damages sustained if the license holder is
determined by the commissioner to be guilty of fraud or unfair
practices in connection with the license holder's business as a
public insurance adjuster; and
(5) be conditioned on the faithful performance of the
license holder in connection with the license holder's business as
a public insurance adjuster.
(c) Instead of filing a bond under Subsection (b) of this
section, an applicant may:
(1) file with the commissioner a professional
liability policy or similar policy or contract of professional
liability coverage acceptable to the commissioner that insures the
individual license holder against errors and omissions in
connection with the license holder's business as a public insurance
adjuster in at least the amount of $50,000, with a deductible not to
exceed $1,500; or
(2) deposit with the comptroller cash in the amount of
$50,000 or securities of the class authorized by Articles 2.08 and
2.10 of this code that have a fair market value of at least $50,000,
to be held exclusively for the protection of a person who is
entitled to recover a final judgment against the license holder in
connection with the license holder's business as a public insurance
adjuster.
(d) A professional liability policy provided by a public
insurance adjuster's employer constitutes satisfactory compliance
with the requirements of this section if the employer's
professional liability policy has a minimum liability limit of
$250,000 for all employees.
(e) If a bond is used to satisfy the requirements of this
section, the aggregate liability of the surety for all damages may
not exceed the amount of the bond.
(f) A deposit with the comptroller made under Subsection
(c)(2) of this section may be withdrawn by the license holder only
on filing with the commissioner a written statement that the
license holder has withdrawn from the business of public insurance
adjusting and:
(1) does not have any outstanding unsecured
liabilities; or
(2) has provided for the protection of a person or
persons who are entitled to recover a final error judgment against
the license holder in connection with the license holder's business
as a public insurance adjuster by furnishing an errors and
omissions policy or a bond as otherwise provided by this section.
(g) Securities deposited under this section may be
exchanged periodically for other qualified securities.
(h) A binding commitment to issue an insurance policy or
bond or the tender of the securities in connection with a license
application is sufficient evidence of the applicant's ability to
comply with this section on issuance of a license.
(i) All or part of a deposit may be paid to a person on a
showing that a final judgment has been rendered against the license
holder in connection with the license holder's business as a public
insurance adjuster and the final judgment remains unsatisfied. The
final judgment may be paid from the deposit only to the extent of
deficiency in satisfaction of the final judgment.
(j) A license holder must comply with the security
requirements of this section for the license to remain effective.
Failure to comply with the security requirements constitutes
grounds for the immediate forfeiture or suspension of the license.
Sec. 7. SURETY BOND REQUIREMENT. (a) If a license holder
uses a surety bond to comply with Section 6 of this article, the
license holder shall at all times maintain the surety bond in full
force and effect on file with the commissioner.
(b) The commissioner shall suspend the license of a public
insurance adjuster who fails to maintain a surety bond in
compliance with this section. The license may not be reinstated
until the license holder files an application for reinstatement, in
the format prescribed by the commissioner, accompanied by a proper
bond.
(c) Notwithstanding the applicant's compliance with this
section, the commissioner may deny the application:
(1) for any reason that would justify a denial,
suspension, or revocation of a license; or
(2) for the performance by the applicant of any
practice for which a license under this article is required while
the applicant is under suspension for failure to keep the surety
bond in force.
(d) Bonds executed and filed with the commissioner in
compliance with this article shall remain in force and effect until
the surety has terminated future liability. The surety company
shall notify the commissioner not later than the 30th day before the
date of termination of the bond.
Sec. 8. LICENSE AUTHORIZATION. A license issued under
Section 5 or 16 of this article includes the authority to adjust
claims for fire and allied coverages, burglary, flood, and all
other property claims, both real and personal, and claims for loss
of income.
Sec. 9. LICENSE EXAMINATION; ADVISORY COMMITTEE. (a) Each
applicant for a license as a public insurance adjuster, before the
issuance of the license, must personally take and pass a written
examination to the satisfaction of the commissioner.
(b) The commissioner shall prescribe the examination
required by this section. The examination must be of sufficient
scope to reasonably test the applicant's:
(1) knowledge of basic insurance theory, essential
elements of contracts, and claims ethics;
(2) technical competence in the handling of the types
of claims for which the applicant is being tested; and
(3) knowledge of:
(A) Article 21.21 of this code;
(B) the Unauthorized Insurers False Advertising
Process Act (Article 21.21-1, Vernon's Texas Insurance Code);
(C) Article 21.21-2 of this code;
(D) Subchapter E, Chapter 17, Business & Commerce
Code;
(E) analogous laws as specified by the
commissioner; and
(F) the duties and responsibilities of public
insurance adjusters under the law.
(c) The commissioner shall appoint a public insurance
adjusters examination advisory committee composed of at least five
members to assist in developing the examination required by this
section. At least three members must be eligible for licensure as
public insurance adjusters. At least one member must be a
representative of the insurance industry who is not a public
insurance adjuster. A member of the advisory committee is not
entitled to compensation for service on the committee. A member is
entitled to reimbursement for reasonable and necessary expenses
incurred in performing services for the committee, subject to any
limitation in the General Appropriations Act.
(d) Within a reasonable period not to exceed 30 days after
the date of the examination, the commissioner shall transmit the
results of the examination and the action taken on the application
to the applicant.
(e) An examination is not required for the renewal of a
license issued under Section 5 or 16 of this article.
Sec. 10. EXAMINATION PROCEDURES. (a) The written
examination may be supplemented by oral examination.
(b) The department shall offer the examination at times and
places within this state as the commissioner considers necessary to
reasonably serve the convenience of both the department and license
applicants.
(c) The commissioner may require a waiting period of
reasonable duration before an applicant who fails the examination,
but who is otherwise qualified, may be reexamined.
(d) The commissioner must approve the persons who schedule
and administer the examination required under Section 9 of this
article.
Sec. 11. LICENSE FORMAT. (a) The commissioner shall
prescribe the form of a license issued under Section 5 or 16 of this
article.
(b) Each license must state:
(1) the name of the public insurance adjuster;
(2) the address of the public insurance adjuster's
place of business;
(3) the date of issuance and the date of expiration of
the license; and
(4) the name of the firm, if any, with which the public
insurance adjuster is employed at the time the license is issued.
Sec. 12. FEES. (a) The commissioner shall collect in
advance nonrefundable fees for:
(1) a public insurance adjuster license application;
(2) a nonresident public insurance adjuster license
application;
(3) the public insurance adjuster examination; and
(4) a public insurance adjuster trainee certificate
under Section 17 of this article.
(b) The commissioner shall collect a fee for the renewal of
a license or certificate issued under this article.
(c) The commissioner shall by rule set the amount of each
fee required under this article in an amount reasonable and
necessary to implement this article.
Sec. 13. USE OF FEES. (a) The fees authorized by this
article shall be deposited in the state treasury to the credit of
the Texas Department of Insurance operating account.
(b) The department may use any portion of the fees collected
under this article to enforce this article, to employ persons as it
considers necessary to investigate and make reports regarding
alleged violations of this code and misconduct on the part of public
insurance adjusters, and to pay the salaries and expenses of
persons and office employees and other expenses necessary to
enforce this article.
Sec. 14. PLACE OF BUSINESS; AGENT FOR SERVICE OF PROCESS.
(a) Each resident license holder shall maintain a place of
business in this state that is publicly accessible and maintain in
the place of business the records required by this article. The
address of the place of business must appear on the face of the
license. The license holder shall promptly notify the commissioner
of any change in the address of the license holder's place of
business.
(b) Each nonresident license holder shall maintain an agent
in the state for service of process. The name and address of the
nonresident license holder's out-of-state place of business and the
name and address of the agent must appear on the face of the
license. The license holder shall promptly notify the department
of any change in the address of the license holder's place of
business or in the agent for service of process.
(c) A license issued under this article must at all times be
posted in a conspicuous place in the principal place of business of
the license holder.
Sec. 15. LICENSE NOT ASSIGNABLE. A license issued under
this article is not assignable.
Sec. 16. NONRESIDENT LICENSE. (a) The commissioner may
issue a nonresident license to an applicant for a public insurance
adjuster license who is not a permanent resident of this state on
determining that the application meets the requirements of this
article, the nonresident application license fee has been paid, the
applicant meets the requirements imposed under Sections 5(1),
(3)-(8), and (11) of this article, and the applicant:
(1) except as provided by Subsection (b) of this
section, has passed to the satisfaction of the commissioner an
examination that is approved by the commissioner and is of
sufficient scope as prescribed by Section 9 of this article;
(2) is self-employed as a public insurance adjuster or
associated with or employed by a public insurance adjusting firm or
other public insurance adjuster; and
(3) has filed a bond in accordance with Section 6 of
this article in the amount required by Subsection (e) of this
section.
(b) The examination requirement does not apply to an
applicant who is licensed as:
(1) a resident public insurance adjuster in the
applicant's state of residence, if that state requires the passing
of a written examination in order to obtain the license and a
reciprocal agreement with the appropriate official of that state
has been entered into by the department; or
(2) a nonresident public insurance adjuster in a state
other than the applicant's state of residence, if the state of
licensure requires the passing of a written examination in order to
obtain the license and a reciprocal agreement with the appropriate
official of the state of licensure has been entered into by the
department.
(c) If currently licensed as a resident public insurance
adjuster in the applicant's state of residence, the applicant shall
provide with the application a certificate or letter of
authorization from the licensing authority of the applicant's state
of residence stating that the applicant holds a current or
comparable license to act as a public insurance adjuster. The
certificate or letter must be signed by the appropriate licensing
official of the applicant's state of residence and must disclose:
(1) whether the applicant has:
(A) ever had any license or eligibility to hold
any license declined, denied, suspended, or revoked;
(B) ever been placed on probation; or
(C) been subject to an administrative fine or
penalty; and
(2) if an action described by Subdivision (1) of this
subsection occurred, the reason for the action.
(d) If the applicant's state of residence does not require
licensure as a resident public insurance adjuster and the applicant
has been licensed as an adjuster, agent, broker, or other insurance
representative in the applicant's state of residence or any other
state within the past three years, the applicant must provide with
the application a certificate or letter of authorization from the
licensing authority stating that the applicant holds or has held a
license to act as an adjuster, agent, broker, or other insurance
representative. The certificate or letter must be signed by the
appropriate licensing official and must disclose the information
required under Subsections (c)(1) and (2) of this section.
(e) An applicant for a nonresident license must file a
surety bond with the department in the amount of $50,000.
(f) A nonresident license holder shall comply with all the
requirements of this article in performing any of the activities of
a public insurance adjuster in this state, including the
requirements relating to records maintenance imposed under Section
25 of this article. The failure of a nonresident license holder to
properly maintain records in accordance with this article and make
them available to the department on request constitutes grounds for
the immediate suspension of the nonresident license issued under
this article.
(g) Each individual who holds a nonresident license shall
comply with all other laws and rules of this state applicable to
public insurance adjusters, including the law governing the
collection of state sales tax as appropriate for services performed
under this article.
(h) After licensure as a nonresident public insurance
adjuster, as a condition of doing business in this state, the
license holder must submit to the department annually, not later
than January 1 and in the format prescribed by the commissioner, an
affidavit certifying that the license holder is familiar with and
understands the laws specified by Section 9 of this article, the
applicable rules adopted under those laws, and the terms and
conditions of the types of insurance contracts that provide
coverage on real and personal property. Compliance with the filing
requirement provided by this subsection is necessary to the
issuance, continuation, reinstatement, or renewal of a nonresident
public insurance adjuster license.
Sec. 17. REGISTRATION PROGRAM FOR TRAINEES. (a) A public
insurance adjuster trainee must register with the department for a
temporary certificate under this section. An applicant for a
temporary certificate as a trainee shall apply to the commissioner
in the format prescribed by the commissioner. The application must
be accompanied by the nonrefundable registration fee.
(b) A temporary certificate may be issued under this section
only for educational and training purposes. The holder of a
temporary certificate may practice only under the direction and
sponsorship of a license holder.
(c) The sponsor of a public insurance adjuster trainee shall
attest, in the format prescribed by the commissioner, that the
trainee is under the supervision and control of the sponsor and that
the sponsor has met the security requirements of Section 6 of this
article.
(d) A temporary certificate expires on the 180th day after
the date of issuance and may be renewed once on application to the
commissioner. An individual may not hold more than two consecutive
temporary certificates.
(e) Each individual who holds a temporary certificate under
this section must comply with the security requirements imposed
under Section 6 of this article. The security requirements may be
fulfilled by a surety bond purchased by the sponsoring license
holder if the bond also covers the acts described by Section 6(b) of
this article with regard to the temporary certificate holder. The
security requirements may also be fulfilled if the sponsoring
license holder complies with the requirements in Section 6(c)(1) of
this article and the temporary certificate holder is an employee of
the sponsoring license holder covered under a professional
liability policy or similar policy or contract of professional
liability coverage purchased by the sponsoring license holder in
compliance with Section 6(c)(1) of this article.
Sec. 18. CONDUCT TO COMPLY WITH CONTRACT. A license holder
shall prepare each claim for an insured represented by the license
holder in accordance with the terms and conditions of the contract
of insurance under which recovery is sought.
Sec. 19. CODE OF ETHICS. The commissioner by rule shall
adopt:
(1) a code of ethics for public insurance adjusters
that fosters the education of public insurance adjusters concerning
the ethical, legal, and business principles that should govern
their conduct;
(2) recommendations regarding the solicitation of the
adjustment of losses by public insurance adjusters; and
(3) any other principles of conduct or procedures that
the commissioner considers necessary and reasonable.
Sec. 20. PUBLIC INSURANCE ADJUSTER AUTHORITY; EXEMPTION
FROM CERTAIN INSURANCE LAWS. (a) This article does not limit or
diminish the authority of a license holder to investigate or adjust
a loss to less than the authority for that purpose that may be
exercised by an adjuster licensed under Chapter 407, Acts of the
63rd Legislature, Regular Session, 1973 (Article 21.07-4, Vernon's
Texas Insurance Code).
(b) A license holder is exempt from:
(1) Articles 21.01, 21.02, 21.04, 21.07, and 21.14 of
this code;
(2) Article 21.07-1 of this code, as added by Chapter
703, Acts of the 77th Legislature, Regular Session, 2001;
(3) the Managing General Agents' Licensing Act
(Article 21.07-3, Vernon's Texas Insurance Code); and
(4) Chapter 407, Acts of the 63rd Legislature, Regular
Session, 1973 (Article 21.07-4, Vernon's Texas Insurance Code).
Sec. 21. LICENSE RENEWAL. (a) A license issued under this
article expires on the second anniversary of the date of issuance
unless suspended or revoked by the commissioner. A license holder
may renew a license that has not expired or has not been suspended
or revoked by filing with the department a properly completed
renewal application, in the format prescribed by the commissioner,
that demonstrates continued compliance with the license
requirements imposed under this article or adopted by rule by the
commissioner. The completed renewal application must be
accompanied by the renewal fee and evidence of compliance with the
continuing education requirements imposed under Section 22 of this
article.
(b) A license holder must submit the completed renewal
application, evidence of compliance with the continuing education
requirements, and the renewal fee to the commissioner not later
than the 30th day before the date on which the license is scheduled
to expire. The original license continues in force until:
(1) the department issues the renewal license; or
(2) the commissioner issues an order revoking the
license.
(c) A person whose license has been expired for 90 days or
less may renew the license by filing a completed renewal
application in the format prescribed by the commissioner and
evidence of compliance with the continuing education requirements
and by paying to the department the required renewal fee and an
additional fee that is equal to one-half of the renewal fee for the
license.
(d) A person whose license has been expired for more than 90
days but less than one year may not renew the license but is
entitled to a new license without taking the applicable examination
if the person submits to the department a new application, evidence
of compliance with the continuing education requirements, the
license fee, and an additional fee equal to one-half of the license
fee.
(e) A person whose license has been expired for one year or
more may not renew the license. The person may obtain a new license
by submitting to reexamination, if examination is required for
original issuance of the license, and by complying with the
requirements and procedures for obtaining an original license.
(f) The department may renew without reexamination an
expired license of a person who was licensed in this state, moved to
another state, and is currently licensed and has been in continual
practice in the other state up to and including the date of the
application. The person must pay to the department a fee that is
equal to the license fee.
(g) Not later than the 30th day after moving from one state
to another state, a nonresident or resident public insurance
adjuster licensed in this state shall file with the department:
(1) the license holder's address; and
(2) proof of authorization to engage in the business
of public insurance adjuster in the new state of residence.
(h) The department may not charge a fee or require a license
application under Subsection (g) of this section.
(i) At least 30 days before the expiration of a license, the
department shall send written notice of the impending license
expiration to the license holder at the license holder's last known
mailing address according to the records of the department.
Sec. 22. CONTINUING EDUCATION REQUIREMENTS. Each license
holder must annually complete at least 15 hours of continuing
education courses. The commissioner by rule shall prescribe the
requirements for continuing education under this section.
Sec. 23. CONTINGENT FEES. (a) Except as provided by
Subsection (b) of this section, a license holder may receive a
contingent fee for adjusting a claim under this article. A
contingent fee collected under this section may not exceed 10
percent of the amount of the insurance settlement on the claim.
(b) A license holder may not receive a contingent fee on a
claim for which an insurance company, not later than the third day
after the date on which the loss is reported to the insurance
company, either pays or commits in writing to pay to the insured the
policy limit of the insurance policy in accordance with Section
862.053 of this code. The license holder is entitled to reasonable
compensation from the insured for services provided by the license
holder on behalf of the insured, based on the time spent on a claim
that is subject to this subsection and expenses incurred by the
license holder, until the claim is paid or the insured receives a
written commitment to pay from the insurance company.
Sec. 24. PROHIBITED CONDUCT. (a) A license holder may not,
directly or indirectly, act within this state as a public insurance
adjuster without having first entered into a contract, in writing,
on a form approved by the commissioner, executed in duplicate by the
license holder and the insured or the insured's authorized
representative. One copy of the contract shall be kept on file by
the license holder and must be available at all times for
inspection, without notice, by the commissioner or the
commissioner's authorized representative.
(b) A license holder may not solicit or attempt to solicit a
client for employment during the progress of a loss-producing
natural disaster occurrence.
(c) A license holder may not solicit or attempt to solicit
business on a loss or a claim in person, by telephone, or in any
other manner at any time except between the hours of 9 a.m. and 9
p.m. on a weekday or a Saturday, and between noon and 9 p.m. on a
Sunday. This subsection does not prohibit a license holder from
accepting phone calls or personal visits during the prohibited
hours from an insured on the insured's initiation.
(d) A license holder may not use any form of contract that is
not approved by the commissioner. The contract must contain a
provision allowing the client to rescind the contract by written
notice to the license holder within 72 hours of signature and must
include in 12-point boldfaced type, prominently displayed, the
statement: "WE REPRESENT THE INSURED ONLY."
(e) A license holder may not knowingly make any false report
to the license holder's employer or client and may not divulge to
any other person, except as the law may require, any information
obtained except at the direction of the employer or the client for
whom the information is obtained.
(f) A license holder may not use a badge in connection with
the official activities of the license holder's business.
(g) A license holder may not permit an employee or agent, in
the employee's or agent's own name, to:
(1) advertise;
(2) solicit or engage clients;
(3) furnish reports or present bills to clients; or
(4) in any manner conduct business for which a license
is required under this article.
(h) A license holder may not render legal advice to any
person in the license holder's capacity as a public insurance
adjuster.
(i) A license holder may not represent an insured on a claim
or charge a fee to an insured while representing the insurance
carrier against which the claim is made.
(j) A license holder may not solicit or attempt to solicit
business, directly or indirectly, on a bodily injury loss covered
by a life, health, or accident insurance policy.
(k) A license holder may not, without the knowledge and
written consent of the insured, acquire an interest in salvaged
property that is the subject of a claim adjusted by the license
holder.
(l) A license holder may not participate directly or
indirectly in the reconstruction, repair, or restoration of damaged
property that is the subject of a claim adjusted by the license
holder or engage in any other activities that may reasonably be
construed as presenting a conflict of interest, including
soliciting or accepting any remuneration from, or having a
financial interest in, any salvage firm, repair firm, or other firm
that obtains business in connection with a claim the license holder
has a contract or agreement to adjust.
(m) A license holder may not:
(1) use any misrepresentation to solicit a contract or
agreement to adjust a claim;
(2) advance money to a potential client or insured in
order to obtain business;
(3) offer to pay a fee, commission, or other valuable
consideration, exceeding $100, to a person for referring a loss to
the license holder unless the license holder employs the person for
that purpose and the person is licensed to act as a public insurance
adjuster under this article;
(4) use a letterhead, advertisement, other printed
matter, or any other means to represent that the license holder is
an instrumentality of the federal government, of a state, or of a
political subdivision of a state; or
(5) use a name different from that under which the
license holder is currently licensed in an advertisement,
solicitation, or contract for business.
Sec. 25. RECORDS MAINTENANCE. (a) A license holder shall
keep a complete record of each of the license holder's transactions
as a public insurance adjuster. The records must include:
(1) the name of the insured;
(2) the date, location, and amount of the loss;
(3) a copy of the contract between the license holder
and the insured;
(4) the name of the insurer and the amount, expiration
date, and number of each policy under which the loss is covered;
(5) an itemized statement of the recoveries by the
insured from the sources known to the license holder;
(6) the total compensation received for the
adjustment; and
(7) an itemized statement of disbursements made by the
license holder from recoveries received on behalf of the insured.
(b) The license holder shall maintain the records required
to be kept under this section for at least five years after the date
of the termination of a transaction with the insured. The records
must be open to examination by the commissioner.
Sec. 26. FIDUCIARY CAPACITY. (a) All funds received as
claim proceeds by a license holder acting as a public insurance
adjuster are received and held by the license holder in a fiduciary
capacity. A license holder who diverts or appropriates any
fiduciary funds for the license holder's personal use is guilty of
theft and is punishable for theft as provided by law.
(b) An applicant for a license to act as a public insurance
adjuster must, as part of the application, endorse an authorization
for disclosure to the commissioner of all financial records of any
funds the public insurance adjuster holds as a fiduciary. The
authorization shall continue in force and effect for as long as the
license holder continues to be licensed under this article.
Sec. 27. NOTICE TO LAST ADDRESS. Notice by registered mail,
return receipt requested, sent to the last known address of an
applicant for a license, license holder, or other person to whom
notice is required to be sent under this article, as reflected by
the records of the department, constitutes sufficient notice under
this article.
Sec. 28. ADVERTISEMENTS. Each advertisement by a license
holder soliciting or advertising business must display the license
holder's name, address, and license number as they appear in the
records of the commissioner. The commissioner may adopt rules
defining the term "advertisement" as used in this section.
Sec. 29. RULES. The commissioner may adopt reasonable and
necessary rules to implement this article, including rules
regarding the:
(1) qualifications of license holders, in addition to
those prescribed by this article, that are necessary to promote and
protect the public interest; and
(2) regulation of the conduct of license holders.
Sec. 30. DENIAL, SUSPENSION, OR REVOCATION OF LICENSE. (a)
The commissioner may deny an application for a license under this
article or suspend or revoke a license issued under this article on
the basis of:
(1) a violation of this article or of any rule adopted
by the commissioner under this article;
(2) a cause that constitutes grounds for denial of an
original license;
(3) wilful misrepresentation or fraud in obtaining a
license;
(4) failure to pass a required license examination;
(5) the misappropriation or conversion of money
required to be held in a fiduciary capacity;
(6) material misrepresentation, with intent to
deceive, of the terms of an insurance contract;
(7) engaging in a fraudulent transaction;
(8) demonstrated incompetence or untrustworthiness in
the conduct of the license holder's affairs under the license, as
determined by the commissioner;
(9) conviction of a felony by a final judgment in a
court of competent jurisdiction; or
(10) material misrepresentation, with intent to
deceive, of the person's status as a public insurance adjuster.
(b) If the department proposes to refuse to issue an
original license under this article or to suspend, revoke, or
refuse to renew a license under this article, the person affected is
entitled to notice and hearing in the manner provided by Section
3A(b), Article 21.01-2, of this code.
(c) A final order entered as a result of a hearing under this
section may be appealed as provided by Subchapter D, Chapter 36, of
this code.
(d) An order suspending a license issued under this article
must specify the period of the suspension. A suspension may not
exceed 12 months.
(e) The holder of a license that is revoked or suspended for
cause shall surrender the license to the commissioner on demand.
(f) The commissioner may issue a license or reinstate a
suspended or revoked license on a finding that the cause for
suspension, revocation, or denial no longer exists.
(g) A person whose license is suspended under this article
may apply for a new license only after the expiration of the period
of suspension. A person whose license is revoked or whose
application for a license is denied may not apply for a new license
until the fifth anniversary of:
(1) the effective date of the denial or revocation; or
(2) if the applicant or license holder seeks judicial
review of the department's action, the date of the final court order
or decree affirming that action.
(h) The commissioner may deny a timely application filed
under Subsection (g) of this section if the applicant does not show
good cause why the denial of the previous license application or the
revocation of the license should not be considered a bar to the
issuance of the new license. This subsection does not apply to an
applicant whose license application was denied for failure to:
(1) pass the required written examination; or
(2) submit a properly completed license application.
(i) The commissioner, in lieu of suspending or revoking a
license for a violation of this article or a rule adopted under this
article, may impose on a license holder an administrative penalty
in the manner prescribed by Chapter 84 of this code in an amount not
to exceed $1,000 for each violation if the commissioner determines
that action better serves the purposes of this article.
(j) The department may institute a disciplinary proceeding
against a license holder for conduct that the license holder
committed before the effective date of a voluntary surrender or
automatic forfeiture of the license. In the proceeding, the fact
that the license holder has surrendered or forfeited the license
does not affect the license holder's culpability for the conduct.
Sec. 31. CEASE AND DESIST ORDER. If the commissioner
believes that a person is engaging in acts or practices in violation
of Section 3(a) of this article, the commissioner may, without
notice or hearing, issue and cause to be served on the person an
order requiring the person to immediately cease and desist from
engaging further in those acts or practices.
Sec. 32. AUTOMATIC FINES. The commissioner may impose an
automatic fine in the manner prescribed by Section 5A, Article
21.01-2, of this code for a violation of this article.
Sec. 33. CRIMINAL PENALTY; SANCTIONS. (a) A person commits
an offense if the person violates this article. Except as provided
by Section 26(a) of this article, an offense under this subsection
is a misdemeanor punishable by:
(1) a fine in an amount not to exceed $1,000;
(2) confinement in county jail for a term not to exceed
six months; or
(3) both the fine and confinement.
(b) In addition to the criminal penalties imposed under
Subsection (a) of this section, a person who violates this article
is subject to the sanctions provided by Section 7, Article 21.21, of
this code as if the person had violated an order under that section.
SECTION 3. (a) The commissioner of insurance shall appoint
the members of the public insurance adjusters examination advisory
committee created under Section 9(c), Article 21.07-5, Insurance
Code, as added by this Act, not later than the 60th day after the
effective date of this Act.
(b) The commissioner of insurance shall adopt the
examination required by Section 9, Article 21.07-5, Insurance Code,
as added by this Act, not later than January 1, 2004. Pending the
adoption of the examination, the commissioner may issue a temporary
license to practice as a public insurance adjuster to an individual
who satisfies all the requirements for issuance of the license
except the examination requirement. A temporary license issued
under this subsection expires June 1, 2004, and may not be renewed
except as determined by the commissioner.
(c) The commissioner of insurance shall adopt the code of
ethics prescribed under Section 19, Article 21.07-5, Insurance
Code, as added by this Act, not later than September 1, 2004.
(d) Subject to the provisions of Subsections (a), (b), and
(c) of this section, the commissioner of insurance shall adopt
rules as necessary to implement Article 21.07-5, Insurance Code, as
added by this Act, not later than January 1, 2004.
SECTION 4. This Act takes effect immediately if it receives
a vote of two-thirds of all the members elected to each house, as
provided by Section 39, Article III, Texas Constitution. If this
Act does not receive the vote necessary for immediate effect, this
Act takes effect September 1, 2003.