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Legislators have filed several bills during the 77th Texas legislative session that may affect the surplus lines industry, if passed. The bill numbers (at press time) appear below,
along with a brief description. SB 414 by Madla (Companion Bill - HB 1163 by Eiland) This is a major reform of Texas agent licensing laws, to comply with licensing uniformity/reciprocity requirements of the federal Gramm-Leach-Bliley Act (GLBA) of 1999. Among many changes, the bill reduces the number of license types, revises continuing education requirements, and grants the Commissioner of Insurance broad rule-making authority when needed to ensure Texas law conforms to GLBA. A major revision for surplus lines insurance is the licensing of non-resident agents. Also, the bill provides that a surplus lines license will be issued to a corporation, limited liability company, or partnership if at least one officer, director, or active partner has passed the surplus lines exam; if the agency currently holds a general P&C or MGA license; if the agency provides proof of financial responsibility; and if the agency conducts surplus lines insurance activities only through individuals holding a surplus lines license. This latter provision is a significant departure from current practice, as it would require substantial increases in the number of individuals with a SL license in most agencies. The effective date of the bill is September 1, 2001. SB 1004 by Sibley Broadens the definition of “business of insurance” under Section 101.051 to include any insurance activity, regardless of the residency of the insured or location of the risk. Current law limits regulatory jurisdiction to transactions involving Texas residents and Texas risks. The bill also explicitly authorizes the Commissioner of Insurance to request the Travis County district attorney to proceed with criminal prosecution against persons or entities engaged in unauthorized insurance, in addition to other actions available to him. An adjuster investigating a loss involving a policy issued by an unauthorized insurer must report this fact to TDI, regardless of whether the policy covers a Texas resident or location. HB 188 by Burnham Permits a third party plaintiff to name the defendant’s liability insurer as a party in a lawsuit. This would allow the plaintiff to directly sue the defendant’s insurer, conceivably resulting in the insurer being liable for damages in excess of any policy limits under the insured’s coverage. HB 1000 by Naishtat Authorizes for-profit nursing homes to purchase liability insurance from the Texas Medical Liability Insurance Underwriting Association, commonly referred to as the Joint Underwriting Association (JUA). Currently, the surplus lines market is the sole source of this coverage. HB 1036 by Thompson Requires disclosure of certain information to a third party claimant, through a "disclosure document". The document must inform the claimant that the insurer does not represent the claimant; the interests of the insurer or insured may conflict with those of the claimant; the claimant is not required to accept a settlement offer by the insurer; and the claimant has the right to consult with an attorney or seek other assistance at any time to evaluate the fairness of any request for information or settlement offer from the insurer. The required language of the disclosure document would be drafted by the Office of Public Insurance Counsel and then adopted by the Commissioner of Insurance. The bill applies to surplus lines insurers. HB 1383 by Dunnam Would add Article 21.56B to the Texas Insurance Code. The bill requires the Commissioner, in consultation with the State Bar, to adopt rules to ensure the independence of counsel provided to an insured under a liability policy. These rules must specify circumstances when the insurer cannot provide to the insured the services of an attorney employed by or under contract to the insurer. The bill applies to any insurer issuing a liability policy in Texas, including a surplus lines insurer. HB 1408 by Junnell Would add Article 21.29 to the Texas Insurance Code, which requires an insurer to promptly refund any unearned premium for a policy. The Commissioner is charged with adopting rules necessary for implementation. The bill applies to surplus lines insurers. HB 1703 by Smithee Would permit a nonadmitted captive insurer to operate in Texas, provided the captive insures only the risks, including D&O exposures, of its parent and affiliates. The bill carves out the activities of a nonadmitted captive from the definition of "business of insurance" under Section 101.051, in effect creating a broad captive insurer exemption provision in the Insurance Code. At present, the law exempts only "management or accounting activity" on behalf of a nonadmitted captive. HB 1703 permits any activity by or on the sole behalf of the captive. HB 2555 by Eiland The Financial Information Privacy Protection Act is added as Chapter 28A to Title 1 of the Texas Insurance Code. Requirements in the bill conform to provisions under the federal Gramm-Leach-Bliley Act prohibiting the release of certain non-public personal information held by financial institutions. The bill requires a “licensee” (generally, insurer) to provide a “clear and conspicuous” notice to “consumers” (generally, applicants) and “customers” (generally, policyholders) regarding the licensee’s policies on release of private information. An initial privacy notice, annual notice, and revised privacy notice are required. Privacy notices are not applicable to commercial lines policies. Consumers may direct that a licensee not disclose personal financial information about that consumer to a nonaffiliated third party (“opt out”). Surplus lines agents (styled “excess line brokers” in the bill) and surplus lines insurers are considered to be in compliance with the act if they do not disclose private information to a nonaffiliated third party for any purpose (except as permitted by law), if a single privacy notice is given to the customer when the policy is delivered. The bill specifies the required wording and size of the privacy notice. HB 3079 by Smithee While relating primarily to tax issues of interest to admitted insurers (e.g., credit for examination expenses), this bill also expands liability for payment of unauthorized insurance taxes to include the agent of an unauthorized insurer. HB 3477 by Eiland Provides that Travis County may be the venue for any allegation of a violation of the Insurance Code or another insurance law of Texas. Note: You can learn more about these bills, see status updates on each, and read the bill text in their entirety by clicking on the “Legislation” button located on the Stamping Office web site at www.slsot.org. |
From the Lone Star Lines - April - June
Issue 2001
Surplus Lines Stamping Office of Texas
What the GM
Has to Say...
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Two significant tax "events" transpired over the past weeks. First, in late January the Third District Texas Court of Appeals issued its opinion in Dow Chemical Co. v. Rylander, effectively holding Texas' independently procured tax statute invalid. Refer to the discussion on page 3 for more on this important decision. Secondly, after several years of debate and drafting, the Comptroller adopted its long-expected update to the regulation on surplus lines premium taxes, as 34 TAC 3.822. It covers many important surplus lines tax issues (in some instances codifying what was heretofore regulatory interpretation of law), including definition of exempt premiums, clarification of the surplus lines "agent of record", allocation and reporting of premium on policies covering multi-state exposures, election and reporting of an agent's tax basis, required prepayment of taxes, credit for tax on bad debts, tax on financed transactions, and tax "rebating". The effective date of the regulation was March 20th. A copy of the new rule was included in the April Stamping Office bulletin and is also available for review at the Stamping Office web site (www.slsot.org) under "Hot News". Phil Ballinger, CPCU, ASLI General Manager |
From the Lone Star Lines - April - June
Issue 2001
Surplus Lines Stamping Office of Texas
Board
of Director News
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Commissioner Jose Montemayor has appointed George Adkins, John L. Wortham & Son, Houston; Jimmy E. Garcia, City Public Service, San Antonio; and Nathan E. Holt, GAINSCO Companies, Ft. Worth to serve three-year terms as members of the Stamping Office Board of Directors. Congratulations to these new members. |
From the Lone Star Lines - April - June
Issue 2001
Surplus Lines Stamping Office of Texas
2001 Surplus Lines Regulation / Tax Seminars
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The following is a list of dates and locations of the 2001 SLSOT seminars. These seminars will feature speakers from the SLSOT, Texas Department of Insurance, and the Comptroller of Public Accounts. As the 77th Texas Legislature is currently in session, the seminars will focus on legislative and regulatory issues pertaining to the surplus lines industry. A bulletin will be distributed to Texas surplus lines agents and companies several months before the seminars that will include the seminar agenda as well as registration information. You can find information and on-line registration on our web site at www.slsot.org. San Antonio - San Antonio Convention Center |
From the Lone Star Lines - April - June
Issue 2001
Surplus Lines Stamping Office of Texas
Court Topples Texas Independently Procured Insurance Tax
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On January 25th the Third District Court of Appeals ruled in Dow Chemical Co. v. Rylander that Texas' independently procured (IP) insurance tax law was invalid. In the clearest affirmation of the 1962 US Supreme Court Todd Shipyards decision in recent memory, the opinion stated "this Court is bound by Todd Shipyards unless and until the Supreme Court overrules it". Todd Shipyards held that the Texas IP tax violated the federal McCarran-Ferguson Act. In March, Texas appealed the Dow decision to the Texas Supreme Court. |
Who's New? Staff Changes
| We welcome Angelica Perez and Janet Bunner to our staff. Ms. Perez is a Data Entry Clerk in the Data Entry Department. Ms. Bunner joins us as Records Prep Clerk in the Document Processing Department. We also congratulate the following staff on their new positions: Stephanie Noesser promoted to Human Resources Manager; Brian Wilds promoted to Director of Financial Analysis & Accounting; Tammy McDonald promoted to Data Entry Examiner I; Dana Strunk promoted to Data Entry Clerk; and Monte Hall promoted to Agent Services Coordinator. |
From the Lone Star Lines - April - June
Issue 2001
Surplus Lines Stamping Office of Texas
| When submitting multiple batches within the same box, be sure each Transmittal and Verification Slip is affixed to the items listed and that each batch is bundled separately from the others. |
From the Lone Star Lines - April - June
Issue 2001
Surplus Lines Stamping Office of Texas
Comparison of SLSOT Premium Processed
by Line
of Business
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