S.B. No. 1809
AN ACT
relating to the enforcement of insurance laws, including laws
governing the unauthorized business of insurance; authorizing
administrative penalties.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 36.157(b), Insurance Code, is amended to
read as follows:
(b) On certification by the commissioner under official
seal, testimony taken or records produced under this subchapter or
acquired in response to a request for information under Section
101.104 and held by the department are admissible in evidence in a
case without:
(1) prior proof of correctness; and
(2) proof, other than the certificate of the
commissioner, that the testimony or records were received from the
person testifying or producing the records.
SECTION 2. Section 36.158(a), Insurance Code, is amended to
read as follows:
(a) A record or other evidence acquired under a subpoena
under this subchapter or in response to a request for information
under Section 101.104 is not a public record for the period the
commissioner considers reasonably necessary to:
(1) complete the investigation;
(2) protect the person being investigated from
unwarranted injury; or
(3) serve the public interest.
SECTION 3. Section 83.051, Insurance Code, is amended to
read as follows:
Sec. 83.051. AUTHORITY OF COMMISSIONER TO ISSUE ORDER. (a)
The commissioner ex parte may issue an emergency cease and desist
order if:
(1) the commissioner believes that:
(A) an authorized person engaging in the business
of insurance is:
(i) committing an unfair act; or
(ii) in a hazardous condition or a
hazardous financial condition under Section 843.406 or Subchapter
A, Chapter 404, as determined by the commissioner; or
(B) an unauthorized person:
(i) is engaging in the business of
insurance in violation of Chapter 101 or in violation of a rule
adopted under that chapter; and [or]
(ii) does not meet a statutory exception or
exemption [is engaging in the business of insurance in violation of
Chapter 101 and is committing an unfair act]; and
(2) with respect to conduct described by Subdivision
(1)(A), it appears to the commissioner that the alleged conduct:
(A) is fraudulent;
(B) is hazardous or creates an immediate danger
to the public safety; or
(C) is causing or can be reasonably expected to
cause public injury that:
(i) is likely to occur at any moment;
(ii) is incapable of being repaired or
rectified; and
(iii) has or is likely to have influence or
effect.
(b) An order is final on the 61st [31st] day after the date
it is served [received], unless the affected person requests a
hearing under Section 83.053.
SECTION 4. Section 83.053(b), Insurance Code, is amended to
read as follows:
(b) The affected person must request the hearing not later
than the 60th [30th] day after the date on which the person is
served with an [receives the] order required by Section 83.052.
SECTION 5. Sections 83.054(a), (b), and (c), Insurance
Code, are amended to read as follows:
(a) On receiving a timely request for a hearing under
Section 83.053, the department [commissioner] shall docket the case
at the State Office of Administrative Hearings not later than the
30th day after the date the department receives the request [serve
notice of the time and place of the hearing].
(b) The hearing is subject to the procedures for contested
cases under Chapter 2001, Government Code. [The hearing must be
held not later than the 10th day after the date the commissioner
receives the request for a hearing unless the parties mutually
agree to a later hearing date.]
(c) At the hearing, the person requesting the hearing must
show [is entitled to show cause] why the order should not be
affirmed.
SECTION 6. Section 84.021, Insurance Code, is amended to
read as follows:
Sec. 84.021. IMPOSITION OF PENALTY. The commissioner may
impose an administrative penalty on a person licensed or regulated
under this code or another insurance law of this state, including an
unauthorized person as defined by Section 83.001, who violates:
(1) this code;
(2) another insurance law of this state; or
(3) a rule or order adopted under this code or another
insurance law of this state.
SECTION 7. Section 101.051(b), Insurance Code, is amended
to read as follows:
(b) The following acts in this state constitute the business
of insurance in this state:
(1) making or proposing to make, as an insurer, an
insurance contract;
(2) making or proposing to make, as guarantor or
surety, a guaranty or suretyship contract as a vocation and not
merely incidental to another legitimate business or activity of the
guarantor or surety;
(3) taking or receiving an insurance application;
(4) receiving or collecting any consideration for
insurance, including:
(A) a premium;
(B) a commission;
(C) a membership fee;
(D) an assessment; or
(E) dues;
(5) issuing or delivering an insurance contract to:
(A) a resident of this state; or
(B) a person authorized to do business in this
state;
(6) directly or indirectly acting as an agent for or
otherwise representing or assisting an insurer or person in:
(A) soliciting, negotiating, procuring, or
effectuating insurance or a renewal of insurance;
(B) disseminating information relating to
coverage or rates;
(C) forwarding an insurance application;
(D) delivering an insurance policy or contract;
(E) inspecting a risk;
(F) setting a rate;
(G) investigating or adjusting a claim or loss;
(H) transacting a matter after the effectuation
of the contract that arises out of the contract; or
(I) representing or assisting an insurer or
person in any other manner in the transaction of insurance with
respect to a subject of insurance that is resident, located, or to
be performed in this state;
(7) contracting to provide in this state
indemnification or expense reimbursement for a medical expense by
direct payment, reimbursement, or otherwise to a person domiciled
in this state or for a risk located in this state, whether as an
insurer, agent, administrator, trust, or funding mechanism or by
another method;
(8) doing any kind of insurance business specifically
recognized as constituting insurance business within the meaning of
statutes relating to insurance;
(9) doing or proposing to do any insurance business
that is in substance equivalent to conduct described by
Subdivisions (1)-(8) in a manner designed to evade statutes
relating to insurance or a claimed exception or exemption to
insurance regulation; or
(10) any other transaction of business in this state
by an insurer.
SECTION 8. Section 101.103(a), Insurance Code, is amended
to read as follows:
(a) If the commissioner has reason to believe a person,
including an insurer, has violated or is threatening to violate
this chapter or Chapter 226 or a rule adopted under this chapter or
Chapter 226, or that a person, including an insurer, violating this
chapter or Chapter 226 has engaged in or is threatening to engage in
an unfair act, the commissioner may:
(1) issue a cease and desist order [under Subchapter
D];
(2) impose an administrative penalty under Chapter 84
[seek injunctive relief under Section 101.105];
(3) direct the person to make restitution;
(4) [(3)] request the attorney general to recover a
civil penalty, seek restitution, or seek injunctive relief, or any
combination of those remedies, under this chapter or another law of
this state [under Section 101.105]; or
(5) [(4)] take any combination of those actions.
SECTION 9. Section 101.104, Insurance Code, is amended to
read as follows:
Sec. 101.104. REQUEST FOR INFORMATION. (a) If the
commissioner or department has reason to believe that a person,
including an insurer, is performing an act described by Section
101.051 or 101.052, the commissioner or department may send the
person or insurer a written request for information [person shall
immediately provide to the commissioner, on written request of the
commissioner, information] relating to that act.
(b) A person receiving an inquiry under Subsection (a) must
respond to the inquiry in writing not later than the 15th day after
the day the person receives the inquiry. If the department or
commissioner receives written notice from the person that
additional time is required to respond to the inquiry, the
department or commissioner shall grant a 10-day extension of the
time to respond to the inquiry.
(c) Failure of a person or insurer to provide the
information requested constitutes a violation under this chapter
and may be used as evidence to support the issuance of a cease and
desist order under Chapter 83. The commissioner may adopt as
findings of fact allegations made by the department in a hearing
under Chapter 83 if the department sought information on the
allegations from the person or insurer who is the respondent in the
proceeding in a request for information and the person or insurer
failed, wholly or partly, to respond to the request.
SECTION 10. The heading to Section 101.105, Insurance Code,
is amended to read as follows:
Sec. 101.105. CIVIL PENALTY; RESTITUTION AND INJUNCTIVE
RELIEF.
SECTION 11. Sections 101.105(a) and (c), Insurance Code,
are amended to read as follows:
(a) A person or entity, including an insurer, that violates
this chapter or Chapter 226 is subject to a civil penalty of not
more than $25,000 [$10,000] for each act of violation and for each
day of violation.
(c) On request by the commissioner, the attorney general
shall institute and conduct a civil suit in the name of the state
for injunctive relief, to recover a civil penalty, for restitution,
or for any combination of those remedies [both injunctive relief
and a civil penalty], as authorized under this subchapter or
another law of this state.
SECTION 12. The heading to Subchapter D, Chapter 101,
Insurance Code, is amended to read as follows:
SUBCHAPTER D. CONTESTED CASES; PRIOR PROCEEDINGS; RULES [CEASE AND
DESIST ORDERS]
SECTION 13. Section 101.151, Insurance Code, is amended to
read as follows:
Sec. 101.151. POWERS OF COMMISSIONER; NOTICE OF HEARING.
(a) The commissioner may set a hearing on whether to seek
administrative relief under this chapter [issue a cease and desist
order under Section 101.153] if the commissioner has reason to
believe that:
(1) an insurer or person has violated or is
threatening to violate this chapter or a rule adopted under this
chapter; or
(2) an insurer or person acting in violation of this
chapter has engaged in or is threatening to engage in an unfair act.
(b) A proceeding under this chapter is a contested case for
purposes of Chapter 2001, Government Code, and applicable
rules [The commissioner shall serve on the insurer or person a
statement of charges and a notice of hearing in the form provided by
Section 2001.052, Government Code, and applicable rules of the
commissioner].
SECTION 14. Section 101.154, Insurance Code, is amended to
read as follows:
Sec. 101.154. ENFORCEMENT; REFERRAL TO ATTORNEY GENERAL.
The commissioner may refer the matter to the attorney general for
enforcement if the commissioner has reason to believe that an
insurer or person has:
(1) violated an [a cease and desist] order issued
under this chapter [subchapter]; or
(2) failed to pay an assessed penalty or restitution.
SECTION 15. Section 101.156, Insurance Code, is amended to
read as follows:
Sec. 101.156. RULES. The commissioner may adopt reasonable
rules necessary to implement this chapter [subchapter].
SECTION 16. Section 101.201, Insurance Code, is amended to
read as follows:
Sec. 101.201. VALIDITY OF INSURANCE CONTRACTS. (a) An
insurance contract, agreement, or arrangement prohibited by
Section 101.102, purported to be effective in this state and
entered into by an unauthorized insurer or person, is unenforceable
by the unauthorized insurer or person. A person who in any manner
assisted directly or indirectly in the procurement, processing,
administration, claims handling, adjusting, or claims payment of
the contract, agreement, or arrangement is liable to the insured
for the full amount of a claim or loss under the terms of the
contract, agreement, or arrangement if the unauthorized insurer or
person fails to pay the claim or loss.
(b) This section does not apply to insurance procured by a
licensed surplus lines agent from an eligible surplus lines
insurer, as defined by Chapter 981, and independently procured
contracts of insurance, as described in Section 101.053(b)(4), that
are reported and on which premium tax is paid in accordance with
Chapter 225 or 226 or to another arrangement expressly authorized
by law.
SECTION 17. Section 101.202, Insurance Code, is amended to
read as follows:
Sec. 101.202. ATTORNEY'S FEES. (a) In an action against an
unauthorized insurer or unauthorized person on a contract,
agreement, or arrangement of insurance issued or delivered in this
state to a resident of this state or to a corporation authorized to
do business in this state, the court may award to the plaintiff a
reasonable attorney's fee if:
(1) the insurer or person failed, for at least 30 days
after a demand made before the commencement of the action, to make
payment under the terms of the contract, agreement, or arrangement
[contract's terms]; and
(2) the failure to make the payment was vexatious and
without reasonable cause.
(b) An unauthorized insurer's or person's failure to defend
an action described by Subsection (a) is prima facie evidence that
the failure to make payment was vexatious and without reasonable
cause.
SECTION 18. Sections 101.203(a) and (b), Insurance Code,
are amended to read as follows:
(a) If the commissioner has reason to believe that insurance
has been effectuated by or for a person in this state with an
unauthorized person or insurer, the commissioner shall in writing
order the person to:
(1) produce for examination all insurance contracts
and other documents evidencing insurance with both authorized and
unauthorized persons or insurers; and
(2) disclose to the commissioner:
(A) the amount of insurance;
(B) the name and address of each insurer;
(C) the gross amount of premiums paid or to be
paid; and
(D) the name and address of each person assisting
in the solicitation, negotiation, or effectuation of the insurance.
(b) A person who fails to comply with a written order under
Subsection (a) before the 31st day after the date of the order or
who wilfully makes a disclosure that is untrue, deceptive, or
misleading shall forfeit:
(1) $1,000 [$50]; and
(2) an additional $1,000 [$50] for each day the person
continues to fail to comply after expiration of the 30-day period.
SECTION 19. Sections 101.152 and 101.153, Insurance Code,
are repealed.
SECTION 20. The change in law made by this Act applies only
to an order issued by the commissioner and an action docketed or
filed by the commissioner, department, or office of attorney
general on or after the effective date of this Act. An action
docketed or filed before the effective date of this Act is governed
by the law as it existed immediately before the effective date of
this Act, and that law is continued in effect for that purpose.
SECTION 21. This Act takes effect September 1, 2021.
______________________________ ______________________________
President of the Senate Speaker of the House
I hereby certify that S.B. No. 1809 passed the Senate on
April 20, 2021, by the following vote: Yeas 31, Nays 0.
______________________________
Secretary of the Senate
I hereby certify that S.B. No. 1809 passed the House on
May 4, 2021, by the following vote: Yeas 142, Nays 3, two present
not voting.
______________________________
Chief Clerk of the House
Approved:
______________________________
Date
______________________________
Governor