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A BILL TO BE ENTITLED
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AN ACT
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relating to the termination of agreements with certain insurance |
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agents. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Chapter 4051, Insurance Code, is amended by |
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adding Subchapter I to read as follows: |
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SUBCHAPTER I. TERMINATION OF CERTAIN CAPTIVE AGENTS |
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Sec. 4051.401. DEFINITION. In this subchapter, "agent" |
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means a captive agent who holds a general property and casualty |
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agent license under this chapter. |
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Sec. 4051.402. TERMINATION FOR CAUSE. (a) An insurer may |
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terminate a contractual agreement with an agent if: |
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(1) the agent breaches a fiduciary duty or trust; |
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(2) the agent commits gross and wilful misconduct; |
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(3) the agent fails to pay to the insurer money owed to |
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the insurer after receipt by the agent of a written demand for the |
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money from the insurer; or |
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(4) the department revokes the agent's license. |
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(b) The termination by an insurer of a contractual agreement |
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with an agent for a cause described by Subsection (a) is not a |
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breach of the contractual agreement for purposes of this |
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subchapter. |
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Sec. 4051.403. PROHIBITED GROUNDS FOR TERMINATION OF |
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CONTRACTUAL AGREEMENT. (a) An insurer may not cancel or terminate |
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a contractual agreement with an agent or reduce or restrict an |
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agent's authority to conduct business under the contract: |
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(1) based on the loss experience for the agent's |
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customers and former customers if: |
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(A) the agent followed underwriting guidelines |
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current at the time coverage for the customers was written; |
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(B) the insurer required the agent to submit the |
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application for insurance for underwriting approval by the insurer; |
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(C) all material information on the application |
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was fully completed; |
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(D) the information provided by the applicant for |
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insurance was not altered or omitted on the application by the |
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agent; and |
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(E) the policy was subject to approval by the |
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insurer; or |
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(2) because of the predominant geographic location of |
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the agent's customers. |
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(b) The termination by an insurer of a contractual agreement |
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with an agent in violation of Subsection (a) is a wrongful or |
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unjustified termination and a breach of the contractual agreement. |
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SECTION 2. This Act takes effect September 1, 2007. |