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SUBCHAPTER A. GENERAL
PROVISIONS
Sec. 101.001. State Policy and Purpose.
(a) It is a state concern that many residents of this state hold insurance
policies issued by persons or insurers who are not authorized to do
insurance business in this state and who are not qualified as eligible
surplus lines insurers under Chapter 981. These residents face often
insurmountable obstacles in asserting legal rights under the policies in
foreign forums under unfamiliar laws and rules of practice.
(b) It is the policy of this state to protect
residents against acts by a person or insurer who is not authorized to do
insurance business in this state by:
(1) maintaining fair and honest insurance
markets;
(2) protecting the premium tax revenues of
this state;
(3) protecting authorized persons and
insurers, who are subject to strict regulation, from unfair competition by
unauthorized persons and insurers; and
(4) protecting against evasion of the
insurance regulatory laws of this state.
(c) The purpose of this chapter is to subject certain
insurers and persons to the jurisdiction of:
(1) the commissioner and proceedings
before the commissioner; and
(2) the courts of this state in suits by
or on behalf of the state or an insured or beneficiary under an insurance
contract.
(d) It is also a concern that this state not become a safe harbor for
persons or insurers engaged in the unauthorized business of insurance in
this state, regardless of whether the insureds or other persons affected by
the unauthorized business of insurance are residents of this state.
Sec. 101.002. Definitions. In this chapter:
(1) "Insurer"
includes:
(A) a corporation,
association, partnership, or individual engaged as a principal in the
business of insurance;
(B) an interinsurance exchange
or mutual benefit society; or
(C) an insurance exchange or
syndicate.
(2) "Unfair act" means an unfair method of
competition or an unfair or deceptive act or practice as defined under
Article 21.21 or a rule adopted under that article.
Sec. 101.003. Insurance Exchanges and Syndicates; Rules.
The commissioner shall adopt rules defining insurance exchanges and
syndicates that are insurers for purposes of Section 101.002.
Sec. 101.004. Unconstitutional Application Prohibited; Notice
to Commissioner.
(a) Subject to Subsection (b), this chapter does not
apply to an insurer or other person to whom, under the constitution or
statutes of the United States or the constitution of this state, it may not
apply.
(b) Before commencing operations, an insurer or other
person claiming an exemption described by Subsection (a) must file with the
commissioner:
(1) notice of the claim; and
(2) documents supporting the claim.
(Sections 101.005 to 101.050 reserved for expansion)
SUBCHAPTER B. BUSINESS OF
INSURANCE; EXCEPTIONS
Sec. 101.051. Conduct that Constitutes the Business
of Insurance.
(a) In this section, "medical expense" includes
surgical, chiropractic, physical therapy, speech pathology, audiology,
professional mental health, dental, hospital, or optometric expenses.
(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
(10) any other transaction of business in
this state by an insurer.
(c) An act described by Subsection (b) by an unlicensed or
unauthorized person or insurer that occurs in this state and that affects a
person in another state or jurisdiction constitutes the business of
insurance in this state.
Sec. 101.052. Advertising Relating to Medicare
Supplement Policies.
With respect to a Medicare supplement policy authorized
under Article 3.74, the business of insurance in this state includes using,
creating, publishing, mailing, or disseminating in this state an
advertisement relating to an act that constitutes the business of insurance
under Section 101.051 unless the advertisement is used, created, published,
mailed, or disseminated on behalf of an insurer or person who:
(1) is authorized under this code to
engage in the business of insurance in this state;
(2) has actual knowledge of the content of
the advertisement;
(3) has authorized the advertisement to be
used, created, published, mailed, or disseminated on that insurer's or
person's behalf; and
(4)
is clearly identified by name in the advertisement as the sponsor of
the advertisement.
Sec. 101.053. Application of Subchapter.
(a) Sections 101.051 and 101.052 apply to an act
whether performed by mail or otherwise. Venue for an act performed by mail
is at the place where the matter transmitted by mail is delivered and takes
effect.
(b) Sections 101.051 and 101.052 do not apply to:
(1) the lawful transaction of surplus
lines insurance under Chapter 981;
(2) the lawful transaction of reinsurance
by insurers;
(3) a transaction in this state that:
(A) involves a policy that:
(i) is lawfully
solicited, written, and delivered outside this state; and
(ii) covers, at
the time the policy is issued, only subjects of insurance that are not
resident, located, or expressly to be performed in this state; and
(B) takes place after the
policy is issued;
(4) a transaction:
(A) that involves an insurance
contract independently procured by the insured from an insurance company not
authorized to do insurance business in this state through negotiations
occurring entirely outside this state;
(B) that is reported; and
(C) on which premium tax is
paid in accordance with this Chapter 226;
(5) a transaction in this state that:
(A) involves group life,
health, or accident insurance, other than credit insurance, and group
annuities in which the master policy for the group was lawfully issued and
delivered in a state in which the insurer or person was authorized to do
insurance business; and
(B) is authorized by a statute
of this state;
(6) an activity in this state by or on the
sole behalf of a nonadmitted captive insurance company that insures solely:
(A) directors’ and officers’
liability insurance for the directors and officers of the company's parent
and affiliated companies;
(B) the risks of the company's
parent and affiliated companies; or
(C) both the individuals and
entities described by Paragraphs (A) and (B);
(7) the issuance of a qualified charitable
gift annuity under Chapter 102; or
(8) a lawful transaction by a servicing
company of the Texas workers' compensation employers' rejected risk fund
under Section 4.08, Article 5.76-2, as that article existed before its
repeal.
(c) Subsection (b)(6) does not exempt an insured or
insurer from the payment of an applicable tax on premium or from another
applicable provision of this code.
Sec. 101.054. Exception; Full-Time Salaried Employee.
Section 101.051(b)(6) does not prohibit a full-time
salaried employee of a corporate insured from acting as an insurance manager
or buyer in placing insurance on behalf of:
(1) the employee's employer; or
(2) a parent or affiliated company of the
employer.
Sec. 101.055. Exception; Certain Entities that
Reimburse Medical Expenses.
(a) Section 101.051(b)(7) does not apply to:
(1) a program otherwise authorized by law
that is established:
(A) by a political subdivision
of this state;
(B) by a state agency; or
(C) under Chapter 791,
Government Code; or
(2) a multiple employer welfare
arrangement that is fully insured as defined by 29 U.S.C. Section
1144(b)(6).
(1) standards requiring the maintenance of
specified levels of contributions that the plan, or a trust established
under the plan, must meet to be considered able to pay benefits in full when
due; and
(2) provisions to enforce the standards
described by Subdivision (1).
(Sections 101.056 to 101.100 reserved for expansion)
SUBCHAPTER C. PROHIBITION;
ENFORCEMENT
Sec. 101.101. Definition.
In this subchapter, "person" means an individual or
entity that is a person for purposes of Section 2(a), Article 21.21.
Sec. 101.102. Unauthorized Insurance Prohibited.
(a) A person, including an insurer, may not directly or indirectly do an act
that constitutes the business of insurance under this chapter except as
authorized by statute.
(b) With respect to insurance of a subject that is
resident, located, or to be performed in this state, this section does not
prohibit an act performed outside this state, including the collection of
premiums, by a person, including an insurer, authorized to do business in
this state if the transaction and insurance contract otherwise comply with
statute.
Sec. 101.103. Powers of Commissioner; Remedies for
Certain Conduct.
(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) seek injunctive relief under Section
101.105;
(3) request the attorney general to
recover a civil penalty under Section 101.105; or
(4) take any combination of those actions.
Sec. 101.104. Request for Information.
If the commissioner has reason to believe that a person, including an
insurer, is performing an act described by Section 101.051 or 101.052, the
person shall immediately provide to the commissioner, on written request of
the commissioner, information relating to that act.
Sec. 101.105. Civil Penalty; Injunctive Relief.
(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 $10,000 for each act of
violation and for each day of violation
(b) The commissioner may
request that the attorney general institute a civil suit in a
district court in Travis County for injunctive relief to restrain a
person or entity, including an insurer, from continuing a violation
or threat of violation described by Section 101.103(a).
On application for injunctive relief and a finding that a
person or entity, including an insurer, is violating or threatening
to violate this chapter or Chapter 226, the district court shall
grant the injunctive relief and issue an injunction without bond.
(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, or for both injunctive
relief and a civil penalty, as authorized under this subchapter.
Sec. 101.106. Criminal Penalty.
(a) A person, including an insurer, who intentionally, knowingly, or
recklessly violates Section 101.102 commits an
offense.
(b) An offense under this section is a felony of the
third degree.
(c) It is a defense to prosecution under this section
that Section 101.051 or 101.052, as applicable, by its terms does not apply
to the person charged.
(Sections 101.107 to 101.150 reserved for expansion)
SUBCHAPTER D. CEASE AND DESIST
ORDERS
Sec. 101.151. Powers of Commissioner; Notice of
Hearing.
(a) The commissioner may set a hearing on whether to 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) 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.
Sec. 101.152. Hearing.
(a) Except as agreed by the parties with prior written approval of the
commissioner, a hearing under this subchapter must be held not earlier than
the fifth day or later than the 30th day after the date of service of the
statement and notice required under Section 101.151.
(b) The hearing shall be conducted in the manner
provided for a contested case under Chapter 2001, Government Code, and the
commissioner's rules.
Sec. 101.153. Cease and Desist Order.
After a hearing held under this subchapter, the commissioner may issue
against the insurer or person charged with a violation an order that
requires that the insurer or person immediately cease and desist from the
violation.
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 a cease and desist order
issued under this subchapter; or
(2) failed to pay an assessed penalty.
Sec. 101.155. Effect of Prior Proceedings.
The commissioner and department may proceed under this chapter or any other
applicable law without regard to prior proceedings.
Sec. 101.156. Rules.
The commissioner may adopt reasonable rules necessary to implement this
subchapter.
(Sections 101.157 to 101.200 reserved for expansion)
SUBCHAPTER E. INSURANCE CONTRACTS WITH UNAUTHORIZED
INSURERS
Sec. 101.201. Validity of Insurance Contracts.
(a) An insurance contract effective in this state and entered into by an
unauthorized insurer is unenforceable by the insurer. A person who in any
manner assisted directly or indirectly in the procurement of the contract is
liable to the insured for the full amount of a claim or loss under the terms
of the contract if the unauthorized insurer 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.
Sec. 101.202. Attorney’s Fees.
(a) In an action against an unauthorized insurer or unauthorized person on
a contract 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 contract's terms; and
(2) the failure to make the payment was
vexatious and without reasonable cause.
(b) An 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.
Sec. 101.203. Investigation and Disclosure.
(a) If the commissioner has reason to believe that insurance has been
effectuated by or for a person in this state with an unauthorized 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 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
willfully makes a disclosure that is untrue, deceptive, or misleading shall
forfeit:
(1) $50; and
(2) an additional $50 for each day the
person continues to fail to comply after expiration of the 30-day period.
(c) This section does not apply to:
(1) a transaction in this state that:
(A) involves a policy that:
(i) is lawfully
solicited, negotiated, written, and delivered outside this state; and
(ii) covers, at
the time the policy is issued, only subjects of insurance that are not
resident, located, or expressly to be performed in this state; and
(B) takes place after the
policy is issued; or
(2) surplus lines insurance procured
through eligible surplus lines carriers as defined by Article 1.14-2.
SUBCHAPTER F. TAXES
Sec. 101.251.
Repealed by 79th Leg., eff. April 1, 2005
Sec. 101.252. Repealed by 79th Leg., eff. April 1, 2005
Sec. 101.253. Repealed by 79th Leg., eff. April 1, 2005
(Sections 101.254 to 101.300 reserved for expansion)
SUBCHAPTER G. REPORTING OF UNAUTHORIZED INSURANCE
Sec. 101.301. Reporting Required.
(a) A person investigating or adjusting a loss or claim on a subject of
insurance in this state shall immediately report to the department an
insurance policy or contract that has been entered into by an insurer that
is not authorized to transact the insurance in this state.
(b) This section does not apply to:
(1) a transaction described by Section
101.053(b)(4); or
(2)
surplus lines insurance procured through eligible surplus lines
carriers as defined by Article 1.14-2.
SUBCHAPTER H. CERTAIN PROCEEDINGS;
BOND REQUIREMENTS
Sec. 101.351. Definitions.
(a) In this subchapter, "court
proceeding" includes an action or suit.
(b) The definition of "state"
assigned by Section 311. 005, Government Code, does not apply in this
chapter.
Sec. 101.352.
Applicability.
This subchapter applies only to a court or administrative proceeding
against an unauthorized person or insurer in which the person or insurer
was served under Section 804.107.
Sec. 101.353.
Bond Requirements for Court Proceeding.
(a) Except as provided by
Subsection (c), before an unauthorized person or insurer may file a
pleading in a court proceeding to which this subchapter applies, the
person or insurer must deposit
cash or securities or file a bond with good and sufficient sureties
approved by the court in an amount determined by the court as sufficient
to pay any final judgment that may be
rendered in the proceeding.
(b) An unauthorized person or
insurer must file the deposit required by this section with the clerk of
the court in which the proceeding is pending.
(c) The court may issue an order
waiving the deposit or bond required by this section if the unauthorized
person or insurer demonstrates to the court's satisfaction that the
person or insurer
maintains sufficient available funds or securities in a state in the
United States, in trust or otherwise, to satisfy any final judgment that
may be rendered in the proceeding.
Sec. 101.354. Bond
Requirements for Administrative Proceeding.
(a) Except as provided by
Subsection (c), before an unauthorized person or insurer may file a
pleading in an administrative proceeding of the department to which this
subchapter applies, the person or insurer must, if required by statute,
deposit cash or securities or file a bond with good and sufficient
sureties approved by the commissioner in an amount determined by the
commissioner as sufficient to pay any final order that may be entered in
the proceeding.
(b) An unauthorized person or
insurer must file the deposit required by this section with the chief
clerk of the department.
(c) The commissioner may issue
an order waiving the deposit or bond required by this section if the
unauthorized person or insurer demonstrates to the commissioner's
satisfaction that the
person or insurer maintains sufficient available funds or securities in
a state in the United States, in trust or otherwise, to satisfy any
final order that may be entered in the proceeding.
Sec. 101.355. Postponement.
A court or the commissioner may order any postponement necessary
to afford an unauthorized person or insurer a reasonable opportunity to:
(1) comply with Section 101.353 or 101.354, as appropriate; and
(2) defend that court or administrative proceeding.
Sec. 101.356. Motion to Quash.
Sections 101.353 and 101.354 do not prevent an unauthorized
person or insurer from filing a motion to quash a writ or to set aside
service made under Section 804.107 on the ground that the person or
insurer has not engaged in the business of insurance as described by
Section 101.051.
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Procedures Manual Directory
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