78R3958 PB-D

By:  Lucio                                                        S.B. No. 1519



A BILL TO BE ENTITLED

AN ACT

relating to the termination of agreements with certain insurance 
agents.    
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:                        
	SECTION 1.  Subchapter A, Chapter 21, Insurance Code, is 
amended by adding Article 21.14A to read as follows:
	Art. 21.14A.  PROCEDURES ON TERMINATION OF PROPERTY AND 
CASUALTY AGENT
	Sec. 1.  DEFINITION.  In this article, "agent" means a 
captive agent who holds a general property and casualty agent 
license as that term is described by Section 2, Article 21.14, of 
this code.
	Sec. 2.  TERMINATION FOR CAUSE.  (a)  An insurer may 
terminate a contractual agreement with an agent if:
		(1)  the agent is insolvent;                                           
		(2)  the agent breaches a fiduciary duty or trust;                     
		(3)  the agent fails to perform duties in accordance 
with the contractual agreement;
		(4)  the agent commits gross and wilful misconduct;                    
		(5)  the agent fails to pay to the insurer money owed to 
the insurer after receipt by the agent of a written demand for the 
money from the insurer; or
		(6)  the department revokes the agent's license.                       
	(b)  The termination by an insurer of a contractual agreement 
with an agent for a cause described by Subsection (a) of this 
section is not a wrongful or unjustified termination for purposes 
of this article.
	Sec. 3.  PROHIBITED GROUNDS FOR TERMINATION.  (a)  An insurer 
may not cancel or terminate a contractual agreement with an agent or 
reduce or restrict an agent's authority to conduct business under 
the contract:
		(1)  based on the loss experience for the agent's 
customers and former customers if:
			(A)  the agent followed underwriting guidelines 
current at the time coverage for the customers was written;
			(B)  the insurer required the agent to submit the 
application for insurance for underwriting approval by the insurer;
			(C)  all material information on the application 
was fully completed;
			(D)  the information provided by the applicant for 
insurance was not altered or omitted on the application by the 
agent; and
			(E)  the policy was subject to approval by the 
insurer; or          
		(2)  because of the predominant geographic location of 
the agent's customers.
	(b)  An insurer may not, in order to avoid the prohibition 
provided by Subsection (a) of this section, commit any of the 
following acts in a manner designed to impact a selected agent or 
the business produced by that agent:
		(1)  condition the acceptance of any type of property 
or casualty insurance on the sale of other types of insurance:
			(A)  to the same customers of the agent; or                           
			(B)  as a percentage of the agent's total sales;                      
		(2)  restrict or limit the number of policies an agent 
may sell unless all agents of that insurer are subject to analogous 
restrictions or limitations;
		(3)  restrict or limit the types of insurance coverage 
or amounts of insurance an agent may sell unless all agents of that 
insurer are subject to analogous restrictions or limitations; or
		(4)  reduce an agent's level of compensation or 
commission unless all agents of that insurer are subject to similar 
reductions.
	(c)  The termination by an insurer of a contractual agreement 
with an agent in violation of Subsection (a) of this section may be 
a wrongful or unjustified termination for purposes of this article.
	SECTION 2.  This Act takes effect September 1, 2003.