CHAPTER 4005. CONDUCT, DISCIPLINARY ACTIONS, AND SANCTIONS - Texas Statutes

INSURANCE CODE

TITLE 13. REGULATION OF PROFESSIONALS

SUBTITLE A. GENERAL PROVISIONS

CHAPTER 4005. CONDUCT, DISCIPLINARY ACTIONS, AND SANCTIONS

SUBCHAPTER A. AUTHORIZED CONDUCT

Sec. 4005.001. DEFINITION. In this subchapter, "client" means:

(1) an applicant for insurance coverage; or

(2) an insured.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Sec. 4005.002. AUTHORIZATION TO OBTAIN CERTAIN RECORDS OR

PHOTOGRAPHS. (a) In connection with a client's application for

insurance coverage or with the issuance of an insurance policy to

a client, or on a client's request, a general property and

casualty agent or personal lines property and casualty agent may

obtain:

(1) the motor vehicle record of a person insured under or to be

insured under an insurance policy; or

(2) a photograph of property insured under or to be insured

under an insurance policy.

(b) The agent must provide a copy of the motor vehicle record to

the client.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

548, Sec. 2.21, eff. September 1, 2007.

Sec. 4005.003. FEES. (a) A general property and casualty agent

or personal lines property and casualty agent may charge a client

a fee to reimburse the agent for costs the agent incurred in

obtaining a motor vehicle record or photograph of property

described under Section 4005.002. The fee may not exceed the

actual costs to the agent.

(b) For services provided to a client, a property and casualty

agent described by Subsection (a) may charge a reasonable fee,

including a fee for:

(1) special delivery or postal charges;

(2) printing or reproduction costs;

(3) electronic mail costs;

(4) telephone transmission costs; and

(5) similar costs that the agent incurs on behalf of the client.

(c) A property and casualty agent described by Subsection (a)

may charge a client a fee under this section only if, before the

agent incurs an expense for the client, the agent:

(1) notifies the client of the agent's fee; and

(2) obtains the client's written consent for each fee to be

charged.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

548, Sec. 2.22, eff. September 1, 2007.

Sec. 4005.004. DISCLOSURE OF COMPENSATION. (a) In this section:

(1) "Affiliate" has the meaning described by Section 823.003(a).

(2) "Agent" means a person licensed under Chapter 4051, 4053,

4054, or 4056.

(3) "Compensation from an insurer or other third party" includes

payments, commissions, fees, awards, overrides, bonuses,

contingent commissions, loans, stock options, gifts, prizes, or

any other form of valuable consideration, whether or not payable

under a written contract or agreement.

(4) "Compensation from a customer" does not include a fee

described by Section 4005.003, an application fee, or an

inspection fee.

(5) "Customer" means the person signing the application for

insurance or the authorized representative of the insured

actually negotiating the placement of an insurance product with

the agent. A person is not to be considered a "customer" of an

agent for purposes of this section solely because the person is a

participant or beneficiary:

(A) of an employee benefit plan; or

(B) of, or otherwise covered by, a group or blanket insurance

policy or group annuity contract sold, solicited, or negotiated

by an agent or the agent's affiliate.

(6) "Documented acknowledgment" means a customer's dated

acknowledgment, obtained before the customer's purchase of an

insurance product, as demonstrated by the customer's written or

electronic signature or recorded voice, or by other additional

methods that the commissioner may authorize by rule.

(b) If an agent, or any affiliate of an agent, receives

compensation from a customer for the placement or renewal of an

insurance product, other than a service fee described under

Section 4005.003, an application fee, or an inspection fee, the

agent or the affiliate may not accept or receive any compensation

from an insurer or other third party for that placement or

renewal unless the agent has, before the customer's purchase of

insurance:

(1) obtained the customer's documented acknowledgment that the

compensation will be received by the agent or affiliate; and

(2) provided a description of the method and factors used to

compute the compensation to be received from the insurer or other

third party for that placement.

(c) This section does not apply to:

(1) a licensed agent who acts only as an intermediary between an

insurer and the customer's agent, including a managing general

agent;

(2) a reinsurance intermediary or surplus lines agent placing

reinsurance or surplus lines insurance; or

(3) an agent whose sole compensation for the placement or

servicing of an insurance product is derived from commissions,

salaries, and other remuneration paid by the insurer.

(d) An agent may satisfy any requirements imposed by this

section through an affiliate.

(e) The commissioner may adopt rules as necessary to implement

the disclosure and acknowledgment of disclosure requirements

under this section.

Added by Acts 2005, 79th Leg., Ch.

755, Sec. 1, eff. September 1, 2005.

SUBCHAPTER B. PROHIBITED CONDUCT

Sec. 4005.051. APPLICABILITY OF SUBCHAPTER. This subchapter

does not apply to a person who holds a license or certificate of

authority issued under Title 11.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Sec. 4005.052. CERTAIN CONDUCT PROHIBITED AFTER REVOCATION OF

LICENSE. A person whose insurance license has been revoked in

this state or any other state may not:

(1) solicit or otherwise engage in business under Chapter 885

unless the department determines it to be in the public interest,

for good cause shown, to permit the person to act in that

capacity; or

(2) act as an officer, director, member, manager, or partner, or

as a shareholder with a controlling interest, of an entity

holding a license issued under this title unless the department

determines it to be in the public interest, for good cause shown,

to permit the person to act in that capacity.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Sec. 4005.053. CERTAIN PAYMENTS PROHIBITED TO OR FROM PERSON NOT

HOLDING LICENSE. (a) An insurer or agent engaged in the

business of insurance in this state may not pay to any person,

directly or indirectly, and may not accept from any person a

commission or other valuable consideration for a service

performed by that person as an agent in this state unless the

person holds a license to act as an agent in this state.

(b) Subsection (a) does not prevent the payment of a renewal or

other deferred commission to a person or the acceptance of a

renewal or other deferred compensation by a person solely because

the person no longer holds a license to act as an agent.

(c) An agent may not pay, permit, or give or offer to pay,

permit, or give, directly or indirectly, to any person who does

not hold a license as an agent:

(1) a rebate of premiums payable, a commission, employment, a

contract for service, or any other valuable consideration or

inducement that is not specified in the insurance policy or

contract for or on account of the solicitation or negotiation of

an insurance contract; or

(2) a fee or other valuable consideration for referring a

customer who seeks to purchase an insurance product or seeks an

opinion on or advice regarding an insurance product, based on

that customer's purchase of insurance.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Sec. 4005.054. RECEIVING ADDITIONAL FEE PROHIBITED. A person

who holds a license under this code and receives a commission or

other consideration for services as an agent may not receive an

additional fee for those services provided to the same client

except for a fee:

(1) described by Section 550.001 or 4005.003; and

(2) for which disclosure is made as required under Section

4005.003 or Section 4005.004.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Amended by:

Acts 2005, 79th Leg., Ch.

755, Sec. 2, eff. September 1, 2005.

Sec. 4005.055. CERTAIN COVERAGE FOR LOSS BY FIRE PROHIBITED. A

property and casualty agent may not knowingly grant, write, or

permit a greater amount of insurance against loss by fire than

the reasonable value of the insured subject.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

SUBCHAPTER C. DISCIPLINARY ACTIONS AND PROCEDURES; ENFORCEMENT

Sec. 4005.101. GROUNDS FOR LICENSE DENIAL OR DISCIPLINARY

ACTION. (a) This section does not apply to a person who holds a

license or certificate of authority issued under Title 11.

(b) The department may deny a license application or discipline

a license holder under this subchapter if the department

determines that the applicant or license holder, individually or

through an officer, director, or shareholder:

(1) has wilfully violated an insurance law of this state;

(2) has intentionally made a material misstatement in the

license application;

(3) has obtained or attempted to obtain a license by fraud or

misrepresentation;

(4) has misappropriated, converted to the applicant's or license

holder's own use, or illegally withheld money belonging to:

(A) an insurer;

(B) a health maintenance organization; or

(C) an insured, enrollee, or beneficiary;

(5) has engaged in fraudulent or dishonest acts or practices;

(6) has materially misrepresented the terms and conditions of an

insurance policy or contract, including a contract relating to

membership in a health maintenance organization;

(7) has made or issued, or caused to be made or issued, a

statement misrepresenting or making incomplete comparisons

regarding the terms or conditions of an insurance or annuity

contract legally issued by an insurer or a membership issued by a

health maintenance organization to induce the owner of the

contract or membership to forfeit or surrender the contract or

membership or allow it to lapse for the purpose of replacing the

contract or membership with another;

(8) has been convicted of a felony;

(9) has offered or given a rebate of an insurance premium or

commission to an insured or enrollee;

(10) is not actively engaged in soliciting or writing insurance

for the public generally as required by Section 4001.104(a); or

(11) has obtained or attempted to obtain a license, not for the

purpose of holding the applicant or license holder out to the

general public as an agent, but primarily for the purpose of

soliciting, negotiating, or procuring an insurance or annuity

contract or membership covering:

(A) the applicant or license holder;

(B) a member of the applicant's or license holder's family; or

(C) a business associate of the applicant or license holder.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Sec. 4005.102. REMEDIES FOR VIOLATION OF INSURANCE LAWS OR

COMMISSIONER RULES. In addition to any other remedy available

under Chapter 82, for a violation of this code, another insurance

law of this state, or a rule of the commissioner, the department

may:

(1) deny an application for:

(A) an original license; or

(B) a certificate issued under Chapter 4008;

(2) suspend, revoke, or deny renewal of:

(A) a license; or

(B) a certificate issued under Chapter 4008;

(3) place on probation a person whose license has been

suspended;

(4) assess an administrative penalty;

(5) reprimand a license holder; or

(6) require a license holder to qualify, or re-qualify if the

agent has already qualified, for a certificate to sell a product

or product line designated by rule under Chapter 4008.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Amended by:

Acts 2009, 81st Leg., R.S., Ch.

451, Sec. 4, eff. June 19, 2009.

Sec. 4005.103. PROBATED LICENSE SUSPENSION. If a license

suspension is probated, the commissioner may require the license

holder to:

(1) report regularly to the department on any matter that is the

basis of the probation;

(2) limit the license holder's practice to the areas prescribed

by the department; or

(3) continue or review professional education until the license

holder attains a degree of skill satisfactory to the commissioner

in each area that is the basis of the probation.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Sec. 4005.104. HEARING. (a) If the department proposes to deny

an application for an original license or to suspend, revoke, or

deny renewal of a license, the applicant or license holder is

entitled to a hearing conducted by the State Office of

Administrative Hearings as provided by Chapter 40.

(b) Notice of the hearing shall be provided to:

(1) the applicant or license holder; and

(2) any insurer indicated on the application as desiring that

the license be issued.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Sec. 4005.105. APPLICATION FOR LICENSE AFTER DENIAL OF

APPLICATION OR REVOCATION OF LICENSE. (a) This section does not

apply to a person who holds a license or certificate of authority

issued under Title 11.

(b) An individual whose license application has been denied or

whose license has been revoked under this subchapter may not

apply for an agent license before the fifth anniversary of:

(1) the effective date of the denial or revocation; or

(2) the date of a final court order affirming the denial or

revocation if judicial review was sought.

(c) A license application filed after the time required by

Subsection (b) may be denied by the commissioner if the applicant

fails to show good cause why the denial or revocation should not

be a bar to the issuance of a new license.

(d) Subsection (c) does not apply to an applicant whose license

application was denied for failure by the applicant to:

(1) pass a required written examination; or

(2) submit a properly completed license application.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Sec. 4005.106. APPLICATION FOR LICENSE AFTER CERTAIN

DETERMINATIONS. (a) In addition to any other penalty imposed

under this code, a person who the department determines has

engaged in conduct described by this section may not obtain a

license as an agent before the fifth anniversary of the date of

the determination.

(b) This section applies to a person who:

(1) acts as an agent without holding a license under this code;

(2) solicits an insurance contract or acts as an agent without

having been appointed or designated by an authorized insurer,

association, or organization to do so as provided by this code;

(3) solicits an insurance contract or acts as an agent for a

person, including an insurer, association, or organization, who

is not authorized to engage in the business of insurance in this

state without holding a surplus lines agent license issued under

Chapter 981; or

(4) as an officer or representative of an insurer, knowingly

contracts with or appoints as an agent a person who does not hold

a valid license.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Sec. 4005.107. DISCIPLINARY PROCEEDING FOR CONDUCT COMMITTED

BEFORE SURRENDER OR FORFEITURE OF LICENSE. (a) The department

may institute a disciplinary proceeding against a former license

holder for conduct committed before the effective date of a

voluntary surrender or automatic forfeiture of the license.

(b) In a proceeding under this section, the fact that the

license holder has surrendered or forfeited the license does not

affect the former license holder's culpability for the conduct

that is the subject of the proceeding.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Sec. 4005.108. DISABILITY PROBATION. (a) This section does not

apply to a person who holds a license or certificate of authority

issued under Title 11.

(b) Instead of or in addition to taking disciplinary action

under Section 4005.102, 4005.103, 4005.105(c), or 4005.107, the

department may order that a license holder who is disabled be

placed on disability probation under the terms specified under

Chapter 4006 and department rules.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Sec. 4005.109. FINES. (a) To expedite the department's

processing of certain violations of this code, the commissioner

by rule may establish fines for certain violations.

(b) A violation for which a fine may be assessed under this

section includes a failure to:

(1) obtain the total number of continuing education hours before

the renewal date of a license;

(2) timely report a change of address to the department; or

(3) notify the department of an administrative action against

the agent by a financial or insurance regulator of another state

or of the federal government.

(c) This section does not limit the department's authority to

take any other disciplinary action against a license holder as

otherwise provided by this code.

(d) The dispute of an assessment of a fine under this section is

a contested case subject to Chapter 2001, Government Code.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Sec. 4005.110. ENFORCEMENT OF TITLE. The attorney general, a

district or county attorney, or the department acting through the

commissioner may bring a proceeding for an injunction or bring

any other proceeding to enforce this title and to enjoin any

person, firm, corporation, or depository institution from

engaging in or attempting to engage in the business of insurance

in violation of this code or any other insurance law of this

state.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

SUBCHAPTER D. CRIMINAL PENALTIES

Sec. 4005.151. ACTING AS AGENT AFTER LICENSE SUSPENSION OR

REVOCATION; CRIMINAL PENALTY. (a) A person commits an offense

if the person acts as an agent after the person's agent license

has been suspended or revoked.

(b) An offense under this section is a felony punishable by:

(1) a fine not to exceed $5,000;

(2) imprisonment for a term of not more than two years; or

(3) both fine and imprisonment under this subsection.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Sec. 4005.152. AGENT ASSISTING OR CONSPIRING WITH PERSON WHOSE

LICENSE HAS BEEN SUSPENDED OR REVOKED; CRIMINAL PENALTY. (a) A

person commits an offense if the person is an agent who holds a

license under this code and the person assists or conspires with

a person whose license as an agent has been suspended or revoked

to act as an agent.

(b) An offense under this section is a misdemeanor punishable

by:

(1) a fine not to exceed $1,000;

(2) confinement in jail for a term of not more than six months;

or

(3) both fine and confinement in jail under this subsection.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Sec. 4005.153. EMBEZZLEMENT OR CONVERSION BY AGENT; CRIMINAL

PENALTY. (a) A person commits an offense if the person, as an

agent for an insurer lawfully engaged in the business of

insurance in this state, collects premiums or otherwise receives

money or a substitute for money, and the person:

(1) embezzles, fraudulently converts, or appropriates to the

person's own use the money or substitute for money; or

(2) with intent to embezzle and contrary to the instructions of

or without the consent of the insurer, takes, secretes, or

otherwise disposes of or fraudulently withholds, appropriates,

lends, invests, or otherwise uses or applies, any money or

substitute for money received by the person in the person's

capacity as agent or broker.

(b) A person who commits an offense under this section shall be

punished as if the person had stolen the money or substitute for

money.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.