Texas 2021 - 87th Regular

Texas Senate Bill SB1809 Compare Versions

Version 1 (Old)

Version 2 (New)

Old	New		Differences
1		-	S.B. No. 1809
	1	+	By: Hancock S.B. No. 1809
	2	+	(Vo)
2	3
3	4
	5	+	A BILL TO BE ENTITLED
4	6		AN ACT
5	7		relating to the enforcement of insurance laws, including laws
6	8		governing the unauthorized business of insurance; authorizing
7	9		administrative penalties.
8	10		BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
9	11		SECTION 1. Section 36.157(b), Insurance Code, is amended to
10	12		read as follows:
11	13		(b) On certification by the commissioner under official
12	14		seal, testimony taken or records produced under this subchapter or
13	15		acquired in response to a request for information under Section
14	16		101.104 and held by the department are admissible in evidence in a
15	17		case without:
16	18		(1) prior proof of correctness; and
17	19		(2) proof, other than the certificate of the
18	20		commissioner, that the testimony or records were received from the
19	21		person testifying or producing the records.
20	22		SECTION 2. Section 36.158(a), Insurance Code, is amended to
21	23		read as follows:
22	24		(a) A record or other evidence acquired under a subpoena
23	25		under this subchapter or in response to a request for information
24	26		under Section 101.104 is not a public record for the period the
25	27		commissioner considers reasonably necessary to:
26	28		(1) complete the investigation;
27	29		(2) protect the person being investigated from
28	30		unwarranted injury; or
29	31		(3) serve the public interest.
30	32		SECTION 3. Section 83.051, Insurance Code, is amended to
31	33		read as follows:
32	34		Sec. 83.051. AUTHORITY OF COMMISSIONER TO ISSUE ORDER. (a)
33	35		The commissioner ex parte may issue an emergency cease and desist
34	36		order if:
35	37		(1) the commissioner believes that:
36	38		(A) an authorized person engaging in the business
37	39		of insurance is:
38	40		(i) committing an unfair act; or
39	41		(ii) in a hazardous condition or a
40	42		hazardous financial condition under Section 843.406 or Subchapter
41	43		A, Chapter 404, as determined by the commissioner; or
42	44		(B) an unauthorized person:
43	45		(i) is engaging in the business of
44	46		insurance in violation of Chapter 101 or in violation of a rule
45	47		adopted under that chapter; and [or]
46	48		(ii) does not meet a statutory exception or
47	49		exemption [is engaging in the business of insurance in violation of
48	50		Chapter 101 and is committing an unfair act]; and
49	51		(2) with respect to conduct described by Subdivision
50	52		(1)(A), it appears to the commissioner that the alleged conduct:
51	53		(A) is fraudulent;
52	54		(B) is hazardous or creates an immediate danger
53	55		to the public safety; or
54	56		(C) is causing or can be reasonably expected to
55	57		cause public injury that:
56	58		(i) is likely to occur at any moment;
57	59		(ii) is incapable of being repaired or
58	60		rectified; and
59	61		(iii) has or is likely to have influence or
60	62		effect.
61	63		(b) An order is final on the 61st [31st] day after the date
62	64		it is served [received], unless the affected person requests a
63	65		hearing under Section 83.053.
64	66		SECTION 4. Section 83.053(b), Insurance Code, is amended to
65	67		read as follows:
66	68		(b) The affected person must request the hearing not later
67	69		than the 60th [30th] day after the date on which the person is
68	70		served with an [receives the] order required by Section 83.052.
69	71		SECTION 5. Sections 83.054(a), (b), and (c), Insurance
70	72		Code, are amended to read as follows:
71	73		(a) On receiving a timely request for a hearing under
72	74		Section 83.053, the department [commissioner] shall docket the case
73	75		at the State Office of Administrative Hearings not later than the
74	76		30th day after the date the department receives the request [serve
75	77		notice of the time and place of the hearing].
76	78		(b) The hearing is subject to the procedures for contested
77	79		cases under Chapter 2001, Government Code. [The hearing must be
78	80		held not later than the 10th day after the date the commissioner
79	81		receives the request for a hearing unless the parties mutually
80	82		agree to a later hearing date.]
81	83		(c) At the hearing, the person requesting the hearing must
82	84		show [is entitled to show cause] why the order should not be
83	85		affirmed.
84	86		SECTION 6. Section 84.021, Insurance Code, is amended to
85	87		read as follows:
86	88		Sec. 84.021. IMPOSITION OF PENALTY. The commissioner may
87	89		impose an administrative penalty on a person licensed or regulated
88	90		under this code or another insurance law of this state, including an
89	91		unauthorized person as defined by Section 83.001, who violates:
90	92		(1) this code;
91	93		(2) another insurance law of this state; or
92	94		(3) a rule or order adopted under this code or another
93	95		insurance law of this state.
94	96		SECTION 7. Section 101.051(b), Insurance Code, is amended
95	97		to read as follows:
96	98		(b) The following acts in this state constitute the business
97	99		of insurance in this state:
98	100		(1) making or proposing to make, as an insurer, an
99	101		insurance contract;
100	102		(2) making or proposing to make, as guarantor or
101	103		surety, a guaranty or suretyship contract as a vocation and not
102	104		merely incidental to another legitimate business or activity of the
103	105		guarantor or surety;
104	106		(3) taking or receiving an insurance application;
105	107		(4) receiving or collecting any consideration for
106	108		insurance, including:
107	109		(A) a premium;
108	110		(B) a commission;
109	111		(C) a membership fee;
110	112		(D) an assessment; or
111	113		(E) dues;
112	114		(5) issuing or delivering an insurance contract to:
113	115		(A) a resident of this state; or
114	116		(B) a person authorized to do business in this
115	117		state;
116	118		(6) directly or indirectly acting as an agent for or
117	119		otherwise representing or assisting an insurer or person in:
118	120		(A) soliciting, negotiating, procuring, or
119	121		effectuating insurance or a renewal of insurance;
120	122		(B) disseminating information relating to
121	123		coverage or rates;
122	124		(C) forwarding an insurance application;
123	125		(D) delivering an insurance policy or contract;
124	126		(E) inspecting a risk;
125	127		(F) setting a rate;
126	128		(G) investigating or adjusting a claim or loss;
127	129		(H) transacting a matter after the effectuation
128	130		of the contract that arises out of the contract; or
129	131		(I) representing or assisting an insurer or
130	132		person in any other manner in the transaction of insurance with
131	133		respect to a subject of insurance that is resident, located, or to
132	134		be performed in this state;
133	135		(7) contracting to provide in this state
134	136		indemnification or expense reimbursement for a medical expense by
135	137		direct payment, reimbursement, or otherwise to a person domiciled
136	138		in this state or for a risk located in this state, whether as an
137	139		insurer, agent, administrator, trust, or funding mechanism or by
138	140		another method;
139	141		(8) doing any kind of insurance business specifically
140	142		recognized as constituting insurance business within the meaning of
141	143		statutes relating to insurance;
142	144		(9) doing or proposing to do any insurance business
143	145		that is in substance equivalent to conduct described by
144	146		Subdivisions (1)-(8) in a manner designed to evade statutes
145	147		relating to insurance or a claimed exception or exemption to
146	148		insurance regulation; or
147	149		(10) any other transaction of business in this state
148	150		by an insurer.
149	151		SECTION 8. Section 101.103(a), Insurance Code, is amended
150	152		to read as follows:
151	153		(a) If the commissioner has reason to believe a person,
152	154		including an insurer, has violated or is threatening to violate
153	155		this chapter or Chapter 226 or a rule adopted under this chapter or
154	156		Chapter 226, or that a person, including an insurer, violating this
155	157		chapter or Chapter 226 has engaged in or is threatening to engage in
156	158		an unfair act, the commissioner may:
157	159		(1) issue a cease and desist order [under Subchapter
158	160		D];
159	161		(2) impose an administrative penalty under Chapter 84
160	162		[seek injunctive relief under Section 101.105];
161	163		(3) direct the person to make restitution;
162	164		(4) [(3)] request the attorney general to recover a
163	165		civil penalty, seek restitution, or seek injunctive relief, or any
164	166		combination of those remedies, under this chapter or another law of
165	167		this state [under Section 101.105]; or
166	168		(5) [(4)] take any combination of those actions.
167	169		SECTION 9. Section 101.104, Insurance Code, is amended to
168	170		read as follows:
169	171		Sec. 101.104. REQUEST FOR INFORMATION. (a) If the
170	172		commissioner or department has reason to believe that a person,
171	173		including an insurer, is performing an act described by Section
172	174		101.051 or 101.052, the commissioner or department may send the
173	175		person or insurer a written request for information [person shall
174	176		immediately provide to the commissioner, on written request of the
175	177		commissioner, information] relating to that act.
176	178		(b) A person receiving an inquiry under Subsection (a) must
177	179		respond to the inquiry in writing not later than the 15th day after
178	180		the day the person receives the inquiry. If the department or
179	181		commissioner receives written notice from the person that
180	182		additional time is required to respond to the inquiry, the
181	183		department or commissioner shall grant a 10-day extension of the
182	184		time to respond to the inquiry.
183	185		(c) Failure of a person or insurer to provide the
184	186		information requested constitutes a violation under this chapter
185	187		and may be used as evidence to support the issuance of a cease and
186	188		desist order under Chapter 83. The commissioner may adopt as
187	189		findings of fact allegations made by the department in a hearing
188	190		under Chapter 83 if the department sought information on the
189	191		allegations from the person or insurer who is the respondent in the
190	192		proceeding in a request for information and the person or insurer
191	193		failed, wholly or partly, to respond to the request.
192	194		SECTION 10. The heading to Section 101.105, Insurance Code,
193	195		is amended to read as follows:
194	196		Sec. 101.105. CIVIL PENALTY; RESTITUTION AND INJUNCTIVE
195	197		RELIEF.
196	198		SECTION 11. Sections 101.105(a) and (c), Insurance Code,
197	199		are amended to read as follows:
198	200		(a) A person or entity, including an insurer, that violates
199	201		this chapter or Chapter 226 is subject to a civil penalty of not
200	202		more than $25,000 [$10,000] for each act of violation and for each
201	203		day of violation.
202	204		(c) On request by the commissioner, the attorney general
203	205		shall institute and conduct a civil suit in the name of the state
204	206		for injunctive relief, to recover a civil penalty, for restitution,
205	207		or for any combination of those remedies [both injunctive relief
206	208		and a civil penalty], as authorized under this subchapter or
207	209		another law of this state.
208	210		SECTION 12. The heading to Subchapter D, Chapter 101,
209	211		Insurance Code, is amended to read as follows:
210	212		SUBCHAPTER D. CONTESTED CASES; PRIOR PROCEEDINGS; RULES [CEASE AND
211	213		DESIST ORDERS]
212	214		SECTION 13. Section 101.151, Insurance Code, is amended to
213	215		read as follows:
214	216		Sec. 101.151. POWERS OF COMMISSIONER; NOTICE OF HEARING.
215	217		(a) The commissioner may set a hearing on whether to seek
216	218		administrative relief under this chapter [issue a cease and desist
217	219		order under Section 101.153] if the commissioner has reason to
218	220		believe that:
219	221		(1) an insurer or person has violated or is
220	222		threatening to violate this chapter or a rule adopted under this
221	223		chapter; or
222	224		(2) an insurer or person acting in violation of this
223	225		chapter has engaged in or is threatening to engage in an unfair act.
224	226		(b) A proceeding under this chapter is a contested case for
225	227		purposes of Chapter 2001, Government Code, and applicable
226	228		rules [The commissioner shall serve on the insurer or person a
227	229		statement of charges and a notice of hearing in the form provided by
228	230		Section 2001.052, Government Code, and applicable rules of the
229	231		commissioner].
230	232		SECTION 14. Section 101.154, Insurance Code, is amended to
231	233		read as follows:
232	234		Sec. 101.154. ENFORCEMENT; REFERRAL TO ATTORNEY GENERAL.
233	235		The commissioner may refer the matter to the attorney general for
234	236		enforcement if the commissioner has reason to believe that an
235	237		insurer or person has:
236	238		(1) violated an [a cease and desist] order issued
237	239		under this chapter [subchapter]; or
238	240		(2) failed to pay an assessed penalty or restitution.
239	241		SECTION 15. Section 101.156, Insurance Code, is amended to
240	242		read as follows:
241	243		Sec. 101.156. RULES. The commissioner may adopt reasonable
242	244		rules necessary to implement this chapter [subchapter].
243	245		SECTION 16. Section 101.201, Insurance Code, is amended to
244	246		read as follows:
245	247		Sec. 101.201. VALIDITY OF INSURANCE CONTRACTS. (a) An
246	248		insurance contract, agreement, or arrangement prohibited by
247	249		Section 101.102, purported to be effective in this state and
248	250		entered into by an unauthorized insurer or person, is unenforceable
249	251		by the unauthorized insurer or person. A person who in any manner
250	252		assisted directly or indirectly in the procurement, processing,
251	253		administration, claims handling, adjusting, or claims payment of
252	254		the contract, agreement, or arrangement is liable to the insured
253	255		for the full amount of a claim or loss under the terms of the
254	256		contract, agreement, or arrangement if the unauthorized insurer or
255	257		person fails to pay the claim or loss.
256	258		(b) This section does not apply to insurance procured by a
257	259		licensed surplus lines agent from an eligible surplus lines
258	260		insurer, as defined by Chapter 981, and independently procured
259	261		contracts of insurance, as described in Section 101.053(b)(4), that
260	262		are reported and on which premium tax is paid in accordance with
261	263		Chapter 225 or 226 or to another arrangement expressly authorized
262	264		by law.
263	265		SECTION 17. Section 101.202, Insurance Code, is amended to
264	266		read as follows:
265	267		Sec. 101.202. ATTORNEY'S FEES. (a) In an action against an
266	268		unauthorized insurer or unauthorized person on a contract,
267	269		agreement, or arrangement of insurance issued or delivered in this
268	270		state to a resident of this state or to a corporation authorized to
269	271		do business in this state, the court may award to the plaintiff a
270	272		reasonable attorney's fee if:
271	273		(1) the insurer or person failed, for at least 30 days
272	274		after a demand made before the commencement of the action, to make
273	275		payment under the terms of the contract, agreement, or arrangement
274	276		[contract's terms]; and
275	277		(2) the failure to make the payment was vexatious and
276	278		without reasonable cause.
277	279		(b) An unauthorized insurer's or person's failure to defend
278	280		an action described by Subsection (a) is prima facie evidence that
279	281		the failure to make payment was vexatious and without reasonable
280	282		cause.
281	283		SECTION 18. Sections 101.203(a) and (b), Insurance Code,
282	284		are amended to read as follows:
283	285		(a) If the commissioner has reason to believe that insurance
284	286		has been effectuated by or for a person in this state with an
285	287		unauthorized person or insurer, the commissioner shall in writing
286	288		order the person to:
287	289		(1) produce for examination all insurance contracts
288	290		and other documents evidencing insurance with both authorized and
289	291		unauthorized persons or insurers; and
290	292		(2) disclose to the commissioner:
291	293		(A) the amount of insurance;
292	294		(B) the name and address of each insurer;
293	295		(C) the gross amount of premiums paid or to be
294	296		paid; and
295	297		(D) the name and address of each person assisting
296	298		in the solicitation, negotiation, or effectuation of the insurance.
297	299		(b) A person who fails to comply with a written order under
298	300		Subsection (a) before the 31st day after the date of the order or
299	301		who wilfully makes a disclosure that is untrue, deceptive, or
300	302		misleading shall forfeit:
301	303		(1) $1,000 [$50]; and
302	304		(2) an additional $1,000 [$50] for each day the person
303	305		continues to fail to comply after expiration of the 30-day period.
304	306		SECTION 19. Sections 101.152 and 101.153, Insurance Code,
305	307		are repealed.
306	308		SECTION 20. The change in law made by this Act applies only
307	309		to an order issued by the commissioner and an action docketed or
308	310		filed by the commissioner, department, or office of attorney
309	311		general on or after the effective date of this Act. An action
310	312		docketed or filed before the effective date of this Act is governed
311	313		by the law as it existed immediately before the effective date of
312	314		this Act, and that law is continued in effect for that purpose.
313	315		SECTION 21. This Act takes effect September 1, 2021.
314		-	______________________________ ______________________________
315		-	President of the Senate Speaker of the House
316		-	I hereby certify that S.B. No. 1809 passed the Senate on
317		-	April 20, 2021, by the following vote: Yeas 31, Nays 0.
318		-	______________________________
319		-	Secretary of the Senate
320		-	I hereby certify that S.B. No. 1809 passed the House on
321		-	May 4, 2021, by the following vote: Yeas 142, Nays 3, two present
322		-	not voting.
323		-	______________________________
324		-	Chief Clerk of the House
325		-	Approved:
326		-	______________________________
327		-	Date
328		-	______________________________
329		-	Governor