A BILL TO BE ENTITLED
AN ACT

relating to the termination of agreements with certain insurance agents.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Sub- Chapter A, Chapter 21. Insurance Code, is amended by adding Article 21.14 A to read as follows:

Art. 21.14A. PROCEDURES ON TERMINATION OF PROPERTY AND CASUALTY AGENT
 

Sec. 1.    DEFINITION.

In this article, "agent" means a captive agent who holds a general property and casualty agent license as that term

is described by Section 2. Article 21.14, of this code.
 

Sec. 2.    TERMINATION FOR CAUSE.

    (a)    An insurer may terminate a contractual agreement with an agent if:
            (1)    the agent is insolvent:
            (2)    the agent breaches a fiduciary duty or trust:
            (3)    the agent fails to perform duties in accordance with the contractual agreement:
            (4)    the agent commits gross and willful misconduct:
            (5)    the agent fails to pay to the insurer money owed to the insurer after receipt by the agent of a

            written demand for the money from the insurer: or
            (6)    the department revokes the agent's license.
    (b)    The termination by an insurer of a contractual agreement with an agent for a cause described by

    Subsection (a) of this section is not a wrongful or unjustified termination for purposes of this article.
 

Sec. 3. PROHIBITED GROUNDS FOR TERMINATION.

    (a)    An insurer may not cancel or terminate a contractual agreement with an agent or reduce or restrict an

    agent's authority to conduct business under the contract:
            (1)    based on the loss experience for the agent's customers and former customers if:
                    (A)    the agent followed underwriting guidelines current at the time coverage for the customers

                    was written:
                    (B)    the insurer required the agent to submit the application for insurance for underwriting

                    approval by the insurer:
                    (C)    all material information on the application was fully completed:
                    (D)    the information provided by the applicant for insurance was not altered or omitted on the

                    application by the agent: and

                    (E)    the policy was subject to approval by the insurer: or
            (2)    because of the predominant geographic location of the agent's customers.
    (b)    An insurer may not, in order to avoid the prohibition provided by Subsection (a) of this section, commit

    any of the following acts in a manner designed to impact a selected agent or the business produced by that

    agent:
            (1)    condition the acceptance of any type of property or casualty insurance on the sale of other types

            of insurance:
                    (A)    to the same customers of the agent: or
                    (B)    as a percentage of the agent's total sales

            (2)   restrict or limit the number of policies an agent may sell unless all agents of that insurer are subject

            to analogous restrictions or limitations:
            (3)   restrict or limit the types of insurance coverage or amounts of insurance an agent may sell unless

            all agents of that insurer are subject to analogous restrictions or limitations: or
            (4)    reduce an agent's level of compensation or commission unless all agents of that insurer are

            subject to similar reductions.
    (c)    The termination by an insurer of a contractual agreement with an agent in violation of Subsection (a) of

    this section may be a wrongful or unjustified termination for purposes of this article.
 

SECTION 2.    This Act takes effect September 1. 2003.