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.