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.
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