78R14886 KCR-D
By: Fraser, et al. S.B. No. 127
Substitute the following for S.B. No. 127:
By: Seaman C.S.S.B. No. 127
A BILL TO BE ENTITLED
AN ACT
relating to the handling, settling, and use of certain claims in the
insurance business; providing penalties.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
ARTICLE 1. WATER DAMAGE CLAIMS
SECTION 1.01. Subchapter C, Chapter 5, Insurance Code, is
amended by adding Article 5.35-4 to read as follows:
Art. 5.35-4. RESTRICTIONS ON USE OF CLAIMS HISTORY FOR
WATER DAMAGE; PERMISSIBLE SURCHARGES
Sec. 1. PURPOSE. The purpose of this article is to protect
persons and property from being unfairly stigmatized in obtaining
residential property insurance by the filing of a water damage
claim or claims under a residential property insurance policy.
Sec. 2. DEFINITIONS. In this article:
(1) "Insurer" means an insurance company, reciprocal
or interinsurance exchange, mutual, capital stock company, county
mutual insurance company, farm mutual insurance company,
association, Lloyd's plan company, or other entity writing
residential property insurance in this state. The term includes an
affiliate as described by Section 2, Article 21.49-1, of this code
or Section 823.003(a) of this code if that affiliate is authorized
to write and is writing residential property insurance in this
state. The term does not include the Texas Windstorm Insurance
Association created and operated under Article 21.49 of this code
or the FAIR Plan created and operated under Article 21.49A of this
code.
(2) "Residential property insurance" means insurance
against loss to residential real property at a fixed location or
tangible personal property provided in a homeowners policy, which
includes a tenant policy, a condominium owners policy, or a
residential fire and allied lines policy.
(3) "Underwriting guideline" means a rule, standard,
guideline, or practice, whether written, oral, or electronic, that
is used by an insurer or an agent of an insurer to decide whether to
accept or reject an application for a residential property
insurance policy or to determine how to classify the risks that are
accepted for the purpose of determining a rate.
Sec. 3. RESTRICTIONS ON USE OF CLAIMS HISTORY FOR WATER
DAMAGE. (a) Underwriting guidelines relating to a water damage
claim or claims used by an insurer shall be governed by rules
adopted by the commissioner in accordance with the purpose of this
article. An insurer may not use an underwriting guideline relating
to a water damage claim or claims that is not in accordance with the
rules adopted by the commissioner under this article.
(b) An insurer shall file with the department its
underwriting guidelines relating to a water damage claim or claims
in accordance with the rules adopted by the commissioner.
Sec. 4. PREMIUM SURCHARGES FOR WATER DAMAGE CLAIMS.
(a) An insurer may assess a premium surcharge for water damage
claims at the time a residential property insurance policy is
issued in accordance with rules adopted by the commissioner. This
surcharge shall be in addition to the premium that would be charged
for the policy had the claim or claims not occurred. The
commissioner shall determine by rule the amount of any surcharge
that may be assessed under this subsection, except that the amount
of the surcharge may not exceed 15 percent of the total premium that
would be charged for the policy had the claim or claims not
occurred. The insurer may continue to assess this premium
surcharge for such period as the commissioner determines by rule.
(b) The insurer may at the time of renewal of the policy
assess an additional premium surcharge for water damage claims made
in the preceding policy year as determined by the commissioner by
rule. This surcharge shall be in addition to the premium that would
be charged for the policy had the claim or claims not occurred and
shall be in addition to the surcharge adopted by the commissioner
under Subsection (a) of this section. The commissioner shall
determine by rule the amount of any surcharge that may be assessed
under this subsection, except that the amount of the surcharge may
not exceed 15 percent of the total premium that would be charged for
the policy had the claim or claims not occurred, excluding the
amount of the surcharge provided in Subsection (a) of this section.
The insurer may continue to assess this premium surcharge for a
period determined by rule of the commissioner.
(c) The commissioner may authorize a surcharge as provided
by Subsection (a) or (b) of this section that is greater than 15
percent for risks with three or more water damage claims in
accordance with rules adopted by the commissioner.
(d) In determining the surcharges under this section, the
commissioner may consider the number of water damage claims, the
type of water damage claims, and the total amount paid for water
damage claims.
Sec. 5. RULEMAKING AUTHORITY. The commissioner shall adopt
rules to accomplish the purposes of this article, including rules
with regard to the definition of a water damage claim.
SECTION 1.02. Article 5.35-4, Insurance Code, as added by
this article, applies only to a residential property insurance
policy that is delivered or issued for delivery based on an
application that is submitted on or after the effective date of this
Act.
ARTICLE 2. CLAIMS HANDLING PROCEDURES AND TIME FRAMES
SECTION 2.01. Subchapter E, Chapter 21, Insurance Code, is
amended by adding Article 21.55A to read as follows:
Art. 21.55A. WATER DAMAGE CLAIMS
Sec. 1. PURPOSES. The purposes of this article are to:
(1) provide for the prompt, efficient, and effective
handling and processing of water damage claims filed under
residential property insurance policies, including claims
involving losses due to mold;
(2) reduce the confusion and inconvenience
policyholders experience in filing and resolving water damage
claims filed under residential property insurance policies,
including claims involving losses due to mold; and
(3) reduce claim costs and premiums for residential
property insurance issued in this state.
Sec. 2. APPLICABILITY. This article applies to any insurer
that handles or processes water damage claims filed under
residential property insurance policies.
Sec. 3. RULES. (a) The commissioner may adopt rules that
identify the types of water damage claims that require more prompt,
efficient, and effective processing and handling than the
processing and handling required under Article 21.55 of this code.
(b) The commissioner by rule may regulate the following
aspects of water damage claims:
(1) required notice;
(2) acceptance and rejection of a claim;
(3) claim handling and processing procedures and time
frames;
(4) claim investigation requirements, procedures, and
time frames;
(5) settlement of claims; and
(6) any other area of claim processing, handling, and
response determined to be relevant and necessary by the
commissioner.
(c) A rule adopted under this section supersedes the minimum
standards described by Article 21.55 of this code.
ARTICLE 3. LICENSING OF PUBLIC INSURANCE ADJUSTERS
SECTION 3.01. Subsection (b), Section 1, 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 3.02. 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) "Licensee" 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)(A) "Public insurance adjuster" means:
(i) an individual who, for compensation:
(a) acts on behalf of an insured in
negotiating for or effecting the settlement of a claim or claims for
loss or damage under any policy of insurance covering real or
personal property; or
(b) on behalf of any other public
insurance adjuster, investigates, settles, or adjusts or advises or
assists an insured with a claim or claims for loss or damage under
any policy of insurance covering real or personal property; or
(ii) an individual who advertises, solicits
business, or holds himself or herself out to the public as an
adjuster of claims for loss or damage under any policy of insurance
covering real or personal property.
(B) "Public insurance adjuster" does not
include:
(i) an officer or employee of the federal or
state government or of a political subdivision of the state
government while the officer or employee is engaged in the
performance of official duties;
(ii) an attorney engaged in the performance
of the attorney's professional duties;
(iii) insurers admitted to do business in
the state, and agents licensed by this state, engaged in the
performance of their duties in connection with insurance
transactions;
(iv) 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;
(v) any salaried office employee who
performs exclusively clerical or administrative duties attendant
to the disposition of the business regulated by this article;
(vi) photographers, estimators, appraisers,
engineers, and arbitrators who are employed by a public insurance
adjuster exclusively for the purpose of furnishing technical
assistance to the licensed public insurance adjuster; or
(vii) a private investigator licensed under
Chapter 1702, Occupations Code, while acting within the scope of
that license.
Sec. 2. NOT LAW LICENSE. Nothing in this article shall be
construed as entitling any person who is not licensed by the Supreme
Court of Texas to practice law in this state.
Sec. 3. LICENSE REQUIRED; EXEMPTION. (a) A person may not
act as a public insurance adjuster in this state or hold himself or
herself out to be a public insurance adjuster in this state, unless
the person holds a license or certificate issued by the
commissioner under Section 5, 15, or 16 of this article.
(b) A license is not required for:
(1) an attorney licensed to practice law in this state
who has complied with Section 5(a)(6) of this article; or
(2) a person licensed as a general property and
casualty agent under Article 21.14 of this code while acting for an
insured concerning a loss under a policy issued by that agent.
(c) Any contract for services regulated by this article that
is entered into by an insured with a person who is in violation of
Subsection (a) of this section may be voided at the option of the
insured, and if a contract is so voided, the insured shall not be
liable for the payment of any past services rendered, or future
services to be rendered, by that person under that contract or
otherwise.
(d) If the commissioner believes that a person is engaging
in acts or practices in violation of Subsection (a) of this section,
the commissioner ex parte may issue an emergency cease and desist
order, in accordance with Subchapter B, Chapter 83, of this code
requiring the person to immediately cease and desist from engaging
further in the acts or practices.
Sec. 4. APPLICATION FOR LICENSE. (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 a license application fee, as provided by Section 11
of this article, for each application submitted. The application
fee is nonrefundable.
Sec. 5. QUALIFICATIONS FOR LICENSE; ISSUANCE. (a) The
commissioner shall issue a public insurance adjuster license to an
applicant on determining that the application meets the
requirements of this article, that the license application fee has
been paid, and that the applicant is an individual who:
(1) is at least 18 years of age;
(2) is a citizen of the United States or has complied
with all federal laws pertaining to employment or to the
transaction of business in the United States;
(3) is a resident of this state;
(4) 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;
(5) has not been convicted of a felony in the 10 years
immediately preceding filing an application under this article or,
if convicted of a felony in the 10 years immediately preceding
filing an application under this article, has received a full
pardon from that conviction and is otherwise relieved from any
disabilities connected with that conviction;
(6) 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;
(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 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 8 of this article or is exempt from the
examination requirement under this article;
(10) has complied with the financial responsibility
requirements imposed 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 Article 1.10C of this code.
(b) The commissioner may issue a resident public adjuster
license to an applicant who has been convicted of a felony 11 or
more years before filing an application under this article if the
commissioner determines that the applicant is qualified to act as a
public adjuster and that the circumstances surrounding the
applicant's conviction do not warrant the denial of a license
issued under this chapter.
Sec. 6. FINANCIAL RESPONSIBILITY REQUIREMENTS. (a) As a
continuing condition of licensure, a public insurance adjuster must
file proof of financial responsibility with respect to transactions
with insureds under this article in an amount determined by the
commissioner by rule. The financial responsibility shall include
the ability to pay sums the public insurance adjuster is obligated
to pay under any judgment against the public insurance adjuster by
an insured, based on an error, omission, fraud, negligent act, or
unfair practice of the public insurance adjuster or any person for
whose acts the public insurance adjuster is legally liable in the
transaction of the public insurance adjuster's business under this
code. In determining the amount of the financial responsibility
requirement, the commissioner shall consider the nature of the
obligation, other financial security requirements under this code,
and financial security requirements adopted for public insurance
adjusters in other states. In determining the types of financial
responsibility required, the commissioner may consider a surety
bond or a professional liability policy or similar policy or
contract of professional liability coverage acceptable to the
commissioner.
(b) In addition to any other remedy available under this
code, if the commissioner believes that a person is committing a
violation by failing to maintain the financial responsibility
requirements of this section, the commissioner ex parte may issue
an emergency cease and desist order and suspend the person's
license, in accordance with Subchapter B, Chapter 83, of this code,
requiring the person to immediately cease and desist from engaging
in the activities of a public insurance adjuster.
(c) A license suspended under Subsection (b) of this section
may be reinstated on the approval of an application for
reinstatement filed with the commissioner, in the form prescribed
by the commissioner, with proof that the financial responsibility
requirements of this section have been met. The commissioner may
deny the application for reinstatement:
(1) for any reason that would justify a refusal to
issue, or a 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 financial
responsibility requirements in force.
Sec. 7. LICENSE AUTHORIZATION. A license issued under
Section 5 or 15 of this article authorizes the adjusting of claims
on behalf of insureds for fire and allied coverages, burglary,
flood, and all other property claims, both real and personal,
including loss of income, but only when the client is an insured
under the insurance policy.
Sec. 8. EXAMINATION FOR LICENSE; ADVISORY COMMITTEE.
(a) Each applicant for a license as a public insurance adjuster
must, before the issuance of the license, take and pass an
examination to the satisfaction of the commissioner.
(b) The examination required by this section must be
prescribed by the commissioner and 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) Article 21.55 of this code;
(E) the Deceptive Trade Practices-Consumer
Protection Act (Subchapter E, Chapter 17, Business & Commerce
Code);
(F) analogous laws as specified by the
commissioner;
(G) statutory provisions related to the
unauthorized practice of law contained in Subchapter G, Chapter 81,
Government Code; and
(H) the duties and responsibilities of public
insurance adjusters under the law.
(c) The commissioner may 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 person
from the insurance industry who is not a public insurance adjuster,
and at least one member must represent consumer interests. 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) The commissioner shall, within a reasonable period not
to exceed 30 days after the date of the examination, 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 15 of this article.
Sec. 9. EXAMINATION; FORM; TIME. (a) The answers of the
applicant to an examination required under this article shall be
made by the applicant in writing. A written examination may be
supplemented by oral examination.
(b) The examination shall be given at such times and places
within the state as the commissioner deems necessary to reasonably
serve the convenience of both the commissioner and 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 scheduling and administration of examinations
required under Section 8 of this article shall be effected by
persons approved by the commissioner.
Sec. 10. FORM OF LICENSE. The commissioner shall prescribe
the form of the licenses issued under Section 5 or 15 of this
article, which must contain:
(1) the name of the public insurance adjuster and the
address of the public insurance adjuster's place of business;
(2) the date of issuance and the date of expiration of
the license; and
(3) the name of the firm, if any, with whom the public
insurance adjuster is employed at the time the license is issued.
Sec. 11. FEE FOR LICENSE, RENEWAL, AND EXAMINATION.
(a) The commissioner shall collect in advance the following
nonrefundable fees:
(1) for a public insurance adjuster license, an
application fee in an amount to be determined by rule by the
commissioner;
(2) for a nonresident public insurance adjuster
license, an application fee in an amount to be determined by rule by
the commissioner;
(3) for each public insurance adjuster examination, a
fee in an amount to be determined by rule by the commissioner; and
(4) for a public insurance adjuster trainee
certificate under Section 16 of this article, a registration fee in
an amount to be determined by rule by the commissioner.
(b) The amount of the fee for the renewal of a license or a
certificate issued under this article shall be determined by rule
by the commissioner.
Sec. 12. USE OF FEES COLLECTED. (a) When collected, the
fees authorized by this article shall be deposited with the
comptroller to the credit of the Texas Department of Insurance
operating account.
(b) The department may use any portion of the fees collected
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. A person employed by the department under
this section may examine under oath any person for the purpose of
gathering information and evidence and may have the information and
evidence reduced to writing. All expenses incurred under this
section shall be paid from the fees collected under this article.
(c) The commissioner shall set the fees in amounts
reasonable and necessary to implement this article.
Sec. 13. PLACE OF BUSINESS; AGENT FOR SERVICE OF PROCESS.
(a) Each licensee who is a resident of this state shall maintain a
place of business in this state that is accessible to the general
public 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 licensee shall promptly notify the
commissioner of any change in the address of the licensee's place of
business.
(b) Each nonresident licensee shall maintain an agent in
this state for service of process. The name and address of the
nonresident licensee's out-of-state business address and the name
and address of the agent must appear on the face of the license. The
licensee shall promptly notify the department of any change in the
address of the licensee'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 licensee.
Sec. 14. LICENSE NOT ASSIGNABLE. A license issued under
this article is not assignable.
Sec. 15. 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, that the nonresident license application fee has been
paid, and that the applicant is an individual who:
(1) is at least 18 years of age;
(2) has passed, to the satisfaction of the
commissioner, an examination approved by the commissioner and of
sufficient scope as prescribed by Section 8 of this article,
provided, however, that the requirement for such an examination
does not apply to:
(A) an applicant who is licensed as a resident
public insurance adjuster in the applicant's state of residence, if
the 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
(B) an applicant who is licensed as 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;
(3) is self-employed as a public insurance adjuster or
associated with or employed by a public insurance adjusting firm or
other public insurance adjuster;
(4) 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;
(5) 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 from any disabilities
connected with that conviction;
(6) 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;
(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 any member of
the public with whom the applicant may have business as a public
insurance adjuster;
(9) if currently licensed as a resident public
insurance adjuster in the applicant's state of residence, provides
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 whether the applicant has ever
had any license or eligibility to hold any license declined,
denied, suspended, or revoked and whether the applicant has ever
been placed on probation and whether an administrative fine or
penalty has been levied against the applicant and, if so, the reason
for the action;
(10) 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, provides 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 whether the
applicant has ever had any license or eligibility to hold any
license declined, denied, suspended, or revoked and whether the
applicant has ever been placed on probation and whether an
administrative fine or penalty has been levied against the
applicant and, if so, the reason for the action;
(11) files proof of financial responsibility in
accordance with Section 6 of this article;
(12) pays the application fee required by Section 11
of this article; and
(13) complies with any other requirements under
applicable state law, including providing a complete set of
fingerprints on request as provided by Article 1.10C of this code.
(b) A nonresident licensee shall comply with all of the
requirements of this article in performing any of the activities of
a public insurance adjuster in this state, including the
requirements on record maintenance in Section 24 of this article.
The failure of a nonresident licensee, as determined by the
commissioner after notice and an opportunity for a hearing, to
properly maintain records in accordance with this article and make
them available to the department on request constitutes grounds for
the suspension of the nonresident license issued under this
article, in accordance with Section 30 of this article.
(c) 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.
(d) After licensure as a nonresident public insurance
adjuster, as a condition of doing business in this state, the
licensee must annually, not later than January 1 and on a form
prescribed by the commissioner, submit an affidavit certifying that
the licensee is familiar with and understands the laws specified in
Section 8 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 for the issuance, continuation, reinstatement, or
renewal of a nonresident public insurance adjuster license.
(e) A nonresident licensee is subject to Section 6(b) of
this article, relating to failure to maintain the financial
responsibility requirements.
Sec. 16. 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 must apply to the commissioner
on a form prescribed by the commissioner. The form must be
accompanied by a nonrefundable registration fee as prescribed by
Section 11(a)(4) of this article.
(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 licensee of this state.
(c) The sponsor of a public insurance adjuster trainee shall
attest, on a form prescribed by the commissioner, that the trainee
is under the supervision and control of the sponsor and that the
sponsor has met the financial responsibility 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 is not entitled to hold more than two
consecutive temporary certificates.
(e) Each individual who holds a temporary certificate under
this section must comply with the financial responsibility
requirements imposed under Section 6 of this article.
Sec. 17. CONDUCT TO COMPLY WITH CONTRACT. A licensee shall
prepare each claim for an insured represented by the licensee in
accordance with the terms and conditions of the contract of
insurance under which recovery is sought.
Sec. 18. CODE OF ETHICS. The commissioner, with guidance
from the public insurance adjusters examination advisory
committee, 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 deems necessary and reasonable.
Sec. 19. PUBLIC INSURANCE ADJUSTER AUTHORITY. This article
does not limit or diminish the authority of a licensee 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).
Sec. 20. 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 licensee may
renew a license that has not expired and has not been suspended or
revoked by filing with the department a properly completed renewal
application, in the form 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:
(1) a renewal fee in the amount determined by the
commissioner under Section 11(b) of this article; and
(2) evidence of compliance with the continuing
education requirements imposed under Section 21 of this article.
(b) A licensee 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 second anniversary date of the license.
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 form 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) At least 30 days before the expiration of a license, the
department shall send written notice of the impending license
expiration to the licensee at the licensee's last known mailing
address according to the records of the department.
Sec. 21. CONTINUING EDUCATION REQUIREMENT. (a) Each
licensee must annually complete at least 15 hours of continuing
education courses. The commissioner by rule shall prescribe the
requirements for continuing education courses under this section.
(b) Notwithstanding Subsection (a) of this section, the
commissioner may waive any continuing education requirement for a
nonresident public insurance adjuster with a valid license from
another state having continuing education requirements
substantially equivalent to those of this state.
Sec. 22. COMMISSION. (a) Except as provided by Subsection
(b) of this section, a licensee may receive a commission for service
provided under this article consisting of an hourly fee, a flat
rate, a percentage of the total amount paid by an insurer to resolve
a claim, or another method of compensation. The total commission
received may not exceed 10 percent of the amount of the insurance
settlement on the claim.
(b) A licensee may not receive a commission consisting of a
percentage of the total amount paid by an insurer to resolve a claim
on a claim on which the insurer, not later than 72 hours after the
date on which the loss is reported to the insurer, either pays or
commits in writing to pay to the insured the policy limit of the
insurance policy in accordance with Article 6.13 or Section 862.053
of this code. The licensee is entitled to reasonable compensation
from the insured for services provided by the licensee on behalf of
the insured, based on the time spent on a claim that is subject to
this subsection and expenses incurred by the licensee, until the
claim is paid or the insured receives a written commitment to pay
from the insurer.
(c) Except for the payment of a commission by the insured,
all persons paying any proceeds of a policy of insurance or making
any payment affecting an insured's rights under a policy of
insurance must:
(1) include the insured as a payee on the payment draft
or check; and
(2) require the written signature and endorsement of
the insured on the payment draft or check.
(d) A public insurance adjuster may not accept any payment
that violates Subsection (c) of this section.
(e) Notwithstanding any authorization the insured may have
given to a public insurance adjuster, a public insurance adjuster
may not sign and endorse any payment draft or check on behalf of an
insured.
Sec. 23. PROHIBITED CONDUCT. (a) A licensee 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
licensee and the insured or the insured's duly authorized
representative. One copy of the contract shall be kept on file in
this state by the licensee and must be available at all times for
inspection, without notice, by the commissioner or the
commissioner's duly authorized representative.
(b) A licensee may not solicit or attempt to solicit a
client for employment during the progress of a loss-producing
natural disaster occurrence.
(c) A licensee 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 licensee from
accepting phone calls or personal visits during the prohibited
hours from an insured upon the insured's initiation.
(d) A licensee 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 licensee within 72 hours of signature and must include
a notice in 12-point boldface type, prominently displayed, the
statement: "WE REPRESENT THE INSURED ONLY." The commissioner by
rule may require additional prominently displayed notice
requirements in the contract as the commissioner deems necessary.
(e) A licensee may not knowingly make any false report to
the licensee'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 licensee may not use a badge in connection with the
official activities of the licensee's business.
(g) A licensee may not permit an employee or agent, in the
employee's or agent's own name, to advertise, solicit or engage
clients, furnish reports or present bills to clients, or in any
manner conduct business for which a license is required under this
article.
(h) A licensee may not render services or perform acts that
constitute the practice of law, including the giving of legal
advice to any person in the licensee's capacity as a public
insurance adjuster.
(i) A licensee 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 licensee may not solicit or attempt to solicit
business, directly or indirectly, or act in any manner on a bodily
injury loss covered by a life, health, or accident insurance policy
or on any claim for which the client is not an insured under the
insurance policy.
(k) A licensee may not, without the knowledge and consent of
the insured in writing, acquire an interest in salvaged property
that is the subject of a claim adjusted by the licensee.
(l) A licensee 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 licensee 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 any claim the licensee has a contract or agreement
to adjust.
(m) A licensee may not:
(1) use any misrepresentation to solicit a contract or
agreement to adjust a claim;
(2) advance money to any potential client or insured;
(3) pay, allow, or give, or offer to pay, allow, or
give, directly or indirectly, to a person who is not a licensed
public insurance adjuster a fee, commission, or other valuable
consideration for the referral of an insured to the public
insurance adjuster based on the insured entering into a contract
with that public insurance adjuster; a licensee may not otherwise
offer to pay a fee, commission, or other valuable consideration
exceeding $100 to a person not licensed as a public insurance
adjuster for referring an insured to the licensee;
(4) use any letterhead, advertisement, or other
printed matter, or use any other means, to represent that the
licensee 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
licensee is currently licensed in an advertisement, solicitation,
or contract for business.
Sec. 24. RECORD MAINTENANCE. (a) A licensee shall keep a
complete record in this state of each of the licensee's
transactions as a public insurance adjuster. The records shall
include all of the following:
(1) the name of the insured;
(2) the date, location, and amount of the loss;
(3) a copy of the contract between the licensee 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 licensee;
(6) the total compensation received for the
adjustment; and
(7) an itemized statement of disbursements made by the
licensee from recoveries received on behalf of the insured.
(b) Records required to be kept under this section shall be
maintained in this state for at least five years after the
termination of a transaction with the insured and must be open to
examination by the commissioner.
Sec. 25. FIDUCIARY CAPACITY. (a) All funds received as
claim proceeds by a licensee acting as a public insurance adjuster
are received and held by the licensee in a fiduciary capacity. A
licensee who diverts or appropriates any fiduciary funds for the
licensee'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
licensee continues to be licensed under this article.
Sec. 26. NOTICE TO LAST ADDRESS. Notice by registered mail,
return receipt requested, sent to the last known address of an
applicant for a license, licensee, 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. 27. RELOCATION TO ANOTHER STATE. (a) 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 licensee's new address; and
(2) proof of authorization to engage in the business
of public insurance adjuster in the new state of residence if that
state requires licensure of public insurance adjusters.
(b) The department may not charge a fee or require a license
application under Subsection (a) of this section.
Sec. 28. ADVERTISEMENTS. Every advertisement by a licensee
soliciting or advertising business must display the licensee's
name, address, and license number as they appear in the records of
the commissioner.
Sec. 29. RULES. The commissioner may adopt reasonable and
necessary rules to implement this article, including rules
regarding the:
(1) qualifications of licensees, in addition to those
prescribed by this article, that are necessary to promote and
protect the public interest;
(2) regulation of the conduct of licensees;
(3) prescription of fees required by Section 11 of
this article; and
(4) advertisements under Section 28 of this article
and the definition of "advertisement" as the term is used in that
section.
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 licensee'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 as 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 to a court of competent jurisdiction 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 not to 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 refusal 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, except for a failure to submit
a completed application, 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 licensee 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 licensee an administrative penalty in an
amount not to exceed $2,000 per violation if the commissioner
determines that such action better serves the purposes of this
article.
(j) The department may institute a disciplinary proceeding
against a licensee for conduct that the licensee committed before
the effective date of a voluntary surrender or automatic forfeiture
of the license. In the proceeding, the fact that the licensee has
surrendered or forfeited the license does not affect the licensee's
culpability for the conduct.
Sec. 31. AUTOMATIC FINES. Section 5A, Article 21.01-2, of
this code applies to violations of this article.
Sec. 32. CRIMINAL PENALTY; SANCTIONS. (a) A person
commits an offense if the person violates this article. Except as
provided by Section 25(a) of this article, an offense under this
subsection is a Class B misdemeanor.
(b) In addition to the criminal penalties imposed under
Subsection (a) of this section, a person in violation of 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 3.03. Section 3, Article 21.01, Insurance Code, is
amended to read as follows:
Sec. 3. APPLICATION. Except as otherwise provided by this
code, this subchapter applies to each person licensed in accordance
with:
(1) Section 4, Article 1.14-2, of this code;
(2) Section 7, Article 3.75, of this code;
(3) Subsection (c), Article 5.13-1, of this code;
(4) Article 10.37-3 of this code;
(5) Article 16.24A of this code;
(6) Section 9, Article 17.25, of this code;
(7) Article 21.07 of this code;
(8) Article 21.07-1 of this code;
(9) Chapter 29, Acts of the 54th Legislature, Regular
Session, 1955 (Article 21.07-2, Vernon's Texas Insurance Code);
(10) the Managing General Agents' Licensing Act
(Article 21.07-3, Vernon's Texas Insurance Code);
(11) Chapter 407, Acts of the 63rd Legislature,
Regular Session, 1973 (Article 21.07-4, Vernon's Texas Insurance
Code);
(12) Article 21.07-5 of this code;
(13) Article 21.07-6 of this code;
(14) [(13)] Article 21.07-7 of this code;
(15) [(14)] Article 21.09 of this code;
(16) [(15)] Article 21.11 of this code;
(17) [(16)] Article 21.14 of this code;
(18) [(17)] Article 21.14-1 of this code;
(19) [(18)] Article 21.14-2 of this code; or
(20) [(19)] Article 23.23A of this code.
SECTION 3.04. (a) If the commissioner of insurance elects
to appoint a public insurance adjusters examination advisory
committee under Subsection (c), Section 8, Article 21.07-5,
Insurance Code, as added by this article, the commissioner shall
appoint the members of the committee not later than the 60th day
after the effective date of this Act. If, on the effective date of
this Act, the commissioner has a contract with a testing service for
the examination of adjuster applicants under Article 21.07-5,
Insurance Code, as added by this article, the commissioner may add
the public insurance adjusters examination to the scope of that
contract, without seeking additional bids, at a fee not greater
than the highest adjuster examination fee charged.
(b) The commissioner of insurance shall adopt the
examination required by Section 8, Article 21.07-5, Insurance Code,
as added by this article, 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 18, Article 21.07-5, Insurance
Code, as added by this article, 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 article, not later than January 1, 2004.
ARTICLE 4. EFFECTIVE DATE
SECTION 4.01. 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.