EXPLANATION: CAPITALS INDICATE MAT TER ADDED TO EXISTIN G LAW. [Brackets] indicate matter deleted from existing law. *sb0229* SENATE BILL 229 C4, J5 4lr0325 (PRE–FILED) CF HB 67 By: Chair, Finance Committee (By Request – Departmental – Maryland Insurance Administration) Requested: September 15, 2023 Introduced and read first time: January 10, 2024 Assigned to: Finance A BILL ENTITLED AN ACT concerning 1 Insurance – Penalties – Unauthorized Insurers, Insurance Producers, and 2 Public Adjusters 3 FOR the purpose of altering the maximum civil penalty to which an unauthorized insurer 4 or person that violates certain provisions of State insurance law is subject for each 5 violation; altering the maximum civil penalty that the Maryland Insurance 6 Commissioner may impose, in addition to suspending or revoking the license, on the 7 holder of an insurance producer license or a public adjuster licensee for each violation 8 of State insurance law; and generally relating to penalties imposed under State 9 insurance law. 10 BY repealing and reenacting, with amendments, 11 Article – Insurance 12 Section 4–212, 10–126, and 10–410 13 Annotated Code of Maryland 14 (2017 Replacement Volume and 2023 Supplement) 15 SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND, 16 That the Laws of Maryland read as follows: 17 Article – Insurance 18 4–212. 19 An unauthorized insurer or person that violates this subtitle is subject to a civil 20 penalty of not less than $100 but not exceeding [$50,000] $125,000 for each violation. 21 10–126. 22 2 SENATE BILL 229 (a) The Commissioner may deny a license to an applicant under §§ 2–210 through 1 2–214 of this article, or suspend, revoke, or refuse to renew or reinstate a license after 2 notice and opportunity for hearing under §§ 2–210 through 2–214 of this article if the 3 applicant or holder of the license: 4 (1) has willfully violated this article or another law of the State that relates 5 to insurance; 6 (2) has intentionally misrepresented or concealed a material fact in the 7 application for a license; 8 (3) has obtained or attempted to obtain a license by misrepresentation, 9 concealment, or other fraud; 10 (4) has misappropriated, converted, or unlawfully withheld money 11 belonging to an insurer, insurance producer, beneficiary, or insured; 12 (5) has willfully and materially misrepresented the provisions of a policy; 13 (6) has committed fraudulent or dishonest practices in the insurance 14 business; 15 (7) has participated, with or without the knowledge of an insurer, in selling 16 motor vehicle insurance without an actual intent to sell the insurance, as evidenced by a 17 persistent pattern of filing certificates of insurance together with or closely followed by 18 cancellation notices for the insurance; 19 (8) has been convicted by final judgment in any state or federal court of a 20 felony or crime involving moral turpitude; 21 (9) has knowingly participated in writing or issuing substantial 22 over–insurance of property insurance risks; 23 (10) has failed an examination required by this subtitle; 24 (11) has willfully failed to comply with or has willfully violated a proper 25 order, subpoena, or regulation of the Commissioner or the insurance regulatory authority 26 of another state; 27 (12) has failed or refused to pay over on demand money that belongs to an 28 insurer, insurance producer, or other person entitled to the money; 29 (13) has otherwise shown a lack of trustworthiness or competence to act as 30 an insurance producer; 31 (14) is not or does not intend to carry on business in good faith and represent 32 SENATE BILL 229 3 to the public that the person is an insurance producer; 1 (15) has been denied a license or certificate in another state or has had a 2 license or certificate suspended or revoked in another state; 3 (16) has intentionally or willfully made or issued, or caused to be made or 4 issued, a statement that materially misrepresents or makes incomplete comparisons about 5 the terms or conditions of a policy or contract issued by an authorized insurer, for the 6 purpose of inducing or attempting to induce the owner of the policy or contract to forfeit or 7 surrender it or allow it to lapse in order to replace it with another; 8 (17) has transacted insurance business that was directed to the applicant or 9 holder for consideration by a person whose license or certificate to engage in the insurance 10 business at the time was suspended or revoked, and the applicant or holder knew or should 11 have known of the suspension or revocation; 12 (18) has solicited, procured, or negotiated insurance contracts for an 13 unauthorized insurer, including contracts for nonprofit health service plans, dental plan 14 organizations, and health maintenance organizations; 15 (19) has knowingly employed or knowingly continued to employ an 16 individual acting in a fiduciary capacity who has been convicted of a felony or crime of moral 17 turpitude within the preceding 10 years; 18 (20) has forged another’s name to an application for insurance or to any 19 document related to an insurance transaction; 20 (21) has improperly used notes or any other reference material to complete 21 an examination for a license; 22 (22) has failed to pay income tax or related interest or penalty under: 23 (i) an assessment under the Tax – General Article that is final and 24 no longer subject to review by the tax court; or 25 (ii) an order of the tax court that is final and no longer subject to 26 judicial review; or 27 (23) in providing information under § 10–118 of this subtitle regarding the 28 termination of an appointment with an insurer, has made an inaccurate statement with 29 actual malice. 30 (b) (1) The Commissioner may deny a license to an applicant business entity 31 under §§ 2–210 through 2–214 of this article, or suspend, revoke, or refuse to renew or 32 reinstate a license of a business entity after notice and opportunity for hearing under §§ 33 2–210 through 2–214 of this article, if an individual listed in paragraph (2) of this 34 subsection has: 35 4 SENATE BILL 229 (i) violated any provision of this subtitle; 1 (ii) been convicted of a felony, a crime of moral turpitude, or any 2 criminal offense involving dishonesty or breach of trust; or 3 (iii) had any professional license suspended or revoked for a 4 fraudulent or dishonest practice. 5 (2) This subsection applies in any case that involves a business entity if the 6 violation was committed by an individual who is: 7 (i) an insurance producer; 8 (ii) 1. in the case of a limited liability company, an officer, 9 director, member, or manager; 10 2. in the case of a partnership, a partner; and 11 3. in the case of a corporation, a director, officer, or owner; or 12 (iii) an individual with direct control over the fiscal management of 13 the business entity. 14 (c) Instead of or in addition to suspending or revoking the license, the 15 Commissioner may impose on the holder of the license a penalty of not less than $100 but 16 not exceeding [$500] $5,000 for each violation of this article. 17 (d) Instead of or in addition to suspending or revoking the license, the 18 Commissioner may require that restitution be made to any citizen who has suffered 19 financial injury because of the violation of this article. 20 (e) If the license is suspended under this section, the Commissioner may require 21 the individual to pass an examination and file a new application before the suspension is 22 lifted. 23 (f) (1) Within 30 days after the final disposition of the matter, an insurance 24 producer shall report to the Commissioner any adverse administrative action taken against 25 the insurance producer: 26 (i) in another jurisdiction; or 27 (ii) by another governmental unit in this State. 28 (2) The report shall include a copy of the order, consent order, and any 29 other relevant legal documents. 30 SENATE BILL 229 5 (g) (1) (i) In this subsection, the term “charging document” means a 1 written accusation alleging that a defendant has committed an offense. 2 (ii) In this subsection, the term “charging document” includes: 3 1. a citation; 4 2. an indictment; 5 3. an information; and 6 4. a statement of charges. 7 (2) This subsection does not apply to a misdemeanor violation of the 8 Maryland Vehicle Law or the vehicle law of another jurisdiction. 9 (3) If an insurance producer is prosecuted for a crime in any jurisdiction, 10 the insurance producer shall report the prosecution to the Commissioner within 30 days 11 after the insurance producer’s initial appearance before a court, including an appearance 12 before: 13 (i) a judicial officer of the District Court due to an arrest; 14 (ii) the District Court in response to a summons; 15 (iii) the circuit court due to execution of a warrant; or 16 (iv) the circuit court in person or by written notice of counsel in 17 response to a summons. 18 (4) The report shall include a copy of: 19 (i) the charging document; 20 (ii) any order issued by a court; and 21 (iii) any other relevant legal documents. 22 (h) An individual is subject to denial or suspension of a license under § 10–119.3 23 of the Family Law Article if the individual: 24 (1) is in arrears in the payment of child support amounting to more than 25 120 days under the most recent order; or 26 (2) has failed to comply with a subpoena issued by the Child Support 27 Administration under § 10–108.6 of the Family Law Article. 28 6 SENATE BILL 229 10–410. 1 (a) The Commissioner may deny a license to an applicant or suspend, revoke, or 2 refuse to renew or reinstate a license after notice and opportunity for a hearing under §§ 3 2–210 through 2–214 of this article if the applicant or licensee: 4 (1) has violated this article; 5 (2) has made a material misstatement in the application for the license; 6 (3) has engaged in fraudulent or dishonest practices; 7 (4) has demonstrated incompetency or untrustworthiness to act as a public 8 adjuster; 9 (5) has misappropriated, converted, or unlawfully withheld money that 10 belongs to an insurer, insurance producer, insured, or other person; 11 (6) has willfully and materially misrepresented the provisions of a policy; 12 (7) has been convicted of a felony, a crime of moral turpitude, or any 13 criminal offense involving dishonesty or breach of trust; 14 (8) has willfully failed to comply with or has willfully violated a proper 15 order or regulation of the Commissioner; 16 (9) has failed or refused to pay on demand money that belongs to an 17 insurer, insurance producer, insured, or other person entitled to the money; 18 (10) is not carrying on or does not intend to carry on business in good faith 19 while representing to the public that the person is a public adjuster; 20 (11) has been denied a license or has had a license suspended or revoked in 21 another state; or 22 (12) has knowingly employed or knowingly continued to employ an 23 individual acting in a fiduciary capacity who has been convicted within the preceding 10 24 years of a felony or crime of moral turpitude. 25 (b) (1) The Commissioner may deny a license to a business entity applicant or 26 suspend, revoke, or refuse to renew or reinstate the license of a business entity after notice 27 and opportunity for a hearing under §§ 2–210 through 2–214 of this article, if an individual 28 listed in paragraph (2) of this subsection: 29 (i) violates any provision of this article; 30 (ii) is convicted of a felony, a crime of moral turpitude, or any 31 SENATE BILL 229 7 criminal offense involving dishonesty or breach of trust; or 1 (iii) has any professional license suspended or revoked for a 2 fraudulent or dishonest practice. 3 (2) The sanctions provided for under this subsection may be imposed on a 4 business entity if the violation was committed by an individual who: 5 (i) is a public adjuster employed by the business entity; 6 (ii) 1. in the case of a limited liability company, is an officer, 7 director, member, or manager; 8 2. in the case of a partnership, is a partner; and 9 3. in the case of a corporation, is a director, officer, or 10 controlling owner; or 11 (iii) has direct control over the fiscal management of the business 12 entity. 13 (c) Instead of or in addition to suspending or revoking the license of a public 14 adjuster, the Commissioner may impose on the licensee a penalty of not less than $100 but 15 not exceeding [$500] $5,000 for each violation of this article. 16 (d) Instead of or in addition to suspending or revoking the license, the 17 Commissioner may require that restitution be made to any citizen who has suffered 18 financial injury because of the violation of this article. 19 (e) If the license is suspended under this section, the Commissioner may require 20 the individual to pass an examination and file a new application before the suspension is 21 lifted. 22 SECTION 2. AND BE IT FURTHER ENACTED, That this Act shall take effect 23 October 1, 2024. 24