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79R5687 PB-F

By:  Turner                                                       H.B. No. 1254



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.  Chapter 4051, Insurance Code, as effective April 
1, 2005, is amended by adding Subchapter I to read as follows:

SUBCHAPTER I. TERMINATION OF CERTAIN CAPTIVE AGENTS
	Sec. 4051.401.  DEFINITION.  In this subchapter, "agent" 
means a captive agent who holds a general property and casualty 
agent license under this chapter.
	Sec. 4051.402.  TERMINATION FOR CAUSE.  (a)  An insurer may 
terminate a contractual agreement with an agent if:
		(1)  the agent breaches a fiduciary duty or trust;                     
		(2)  the agent commits gross and wilful misconduct;                    
		(3)  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
		(4)  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) is not a 
breach of the contractual agreement for purposes of this 
subchapter.
	Sec. 4051.403.  PROHIBITED GROUNDS FOR TERMINATION OF 
CONTRACTUAL AGREEMENT.  (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)  The termination by an insurer of a contractual agreement 
with an agent in violation of Subsection (a) is a wrongful or 
unjustified termination and a breach of the contractual agreement.
	SECTION 2.  This Act takes effect September 1, 2005.