HBA-DMH H.B. 1384 77(R)    BILL ANALYSIS


Office of House Bill AnalysisH.B. 1384
By: Dunnam
Insurance
3/15/2001
Introduced



BACKGROUND AND PURPOSE 

Under current law, agents working under an insurer are not protected from
insurers terminating relationships without cause, nor is there any
responsibility on the part of the insurer to compensate an agent for
losses. House Bill 1384 establishes circumstances under which an insurer
may and may not terminate a relationship with a captive agent, and requires
the commissioner of insurance to appoint a review board to review
involuntary agent terminations.  

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that rulemaking
authority is expressly delegated to the commissioner of insurance in
SECTION 1 (Sections 5, 13, and 14, Article 21.14A, Insurance Code) of this
bill. 

ANALYSIS

House Bill 1384 amends the Insurance Code to set forth the conditions under
which an insurer may and may not terminate a contractual agreement with an
agent, or reduce or restrict an agent's authority to conduct business under
a contract.  The bill specifies the conditions under which the termination
by an insurer of a contractual agreement with an agent is not or may be a
wrongful or unjustified termination.  The bill prohibits an insurer
committing certain acts in a manner designed to impact a selected agent or
the business produced by that agent in order to avoid the prohibition
against terminating a contractual agreement (Secs. 2 and 3, Art. 21.14A).   

The bill requires an insurer who enters into a contractual agreement with
an agent for the agent's services to establish a termination review process
for an agent involuntarily terminated by an insurer and specifies what the
insurer must do before terminating an agent's contractual agreement.  The
bill provides requirements for a mandatory review process that the insurer
must follow before terminating a contractual agreement with an agent (Sec.
4, Art. 21.14A).   

The bill requires that a review board be established to conduct a review of
a proposed termination of an agent.  The bill provides for the selection
process and composition of the review board.  The bill requires the
commissioner of insurance (commissioner) by rule to determine the manner in
which individuals are selected for a list for that county, if the review
board appointment system is impractical for a particular county (Sec. 5,
Art. 21.14A).   

The bill authorizes an agent to request a hearing, if the agent's
contractual agreement is proposed to be involuntarily terminated and sets
forth the requirements and procedures of the hearing (Sec. 6, Art. 21.14A).
The bill provides for an appeal of an order of the commission to a court of
competent jurisdiction (Sec. 10, Art. 21.14A).  The bill requires an agent
to deliver to the insurer all supplies, equipment, and records that belong
to the insurer after the review board's favorable ruling for the insurer or
the court enters a final order in favor of the insurer (Sec. 11, Art.
21.14A).  The bill sets forth provisions relating to administrative
penalties (Sec. 12, Art. 21.14A).  The bill requires the review board to
determine if the termination of the agent's agreement is wrongful or
unjustified and to report its findings in writing to the  agent, the
insurer, and the commissioner (Sec. 7, Article 21.14A).  The bill requires
the commissioner, by order, to award compensation to the agent if a
majority of the review board agrees that the involuntary termination of the
agent's contractual agreement with the insurer is wrongful or unjustified
(Sec.8, Art 21.14A).  The bill sets forth provisions with regard to an
agent accepting an appointment to act as an agent for another insurer (Sec.
9, Art. 21.14A).  

The bill requires the commissioner by rule to set a fee in an amount
reasonable and necessary to cover the costs incurred by the Texas
Department of Insurance in administering these provisions.  The bill
requires the fee, not to exceed $10, to be collected from each local
recording agent and solicitor who holds a license (Sec. 13 Art. 21.14A)
The bill authorizes the commissioner to adopt rules as necessary to
implement these provisions (Sec. 14, Art. 21.14A).  

EFFECTIVE DATE

September 1, 2001.