By:  Lucio                                                        S.B. No. 1291
	(In the Senate - Filed March 9, 2005; March 21, 2005, read 
first time and referred to Committee on Business and Commerce; 
May 2, 2005, reported adversely, with favorable Committee 
Substitute by the following vote:  Yeas 7, Nays 0; May 2, 2005, 
sent to printer.)


COMMITTEE SUBSTITUTE FOR S.B. No. 1291                                   By:  Lucio

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, 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: (1) primarily represents one insurer or the subsidiaries and affiliates of that insurer; and (2) 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 based on the loss experience for the agent's customers and former customers if: (1) the agent followed underwriting guidelines current at the time coverage for the customers was written; (2) the insurer required the agent to submit the application for insurance for underwriting approval by the insurer; (3) all material information on the application was fully completed; (4) the information provided by the applicant for insurance was not altered or omitted on the application by the agent; and (5) the policy was subject to approval by the insurer. (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.
* * * * *