Chapter
085
2007 -- H 5741 SUBSTITUTE B
Enacted 06/22/07
A N A C T
RELATING
TO INSURANCE - INSURANCE PRODUCERS - PRODUCER LICENSING ACT
Introduced
By: Representative Laurence W. Ehrhardt
Date
Introduced: February 28, 2007
It is enacted by the General Assembly as
follows:
SECTION 1.
Sections 27-2.4-2, 27-2.4-4, 27-2.4-6, 27-2.4-8, 27-2.4-13, 27-2.4-14 and
27-2.4-23 of the General Laws in Chapter 27-2.4
entitled "Producer Licensing Act" are hereby
amended to read as follows:
27-2.4-2.
Definitions. -- The following definitions apply to this chapter:
(1)
"Business entity" means a corporation, association, partnership,
limited liability
company, limited liability partnership, or other
legal entity;
(2) (1)
"Insurance commissioner" means the director of the department of
business
regulation or his or her designee;
(3) (2)
"Department" means the department of business regulation;
(4) (3)
"Home state" means any state or territory of the United States, or
the District of
Columbia, in which an insurance producer
maintains his or her principal place of residence or
principal place of business and is licensed to
act as an insurance producer;
(5) (4)
"Insurance" means any of the lines of authority set forth in this
title;
(6) (5)
"Insurance producer" means a person required to be licensed under the
laws of
this state to sell, solicit or negotiate
insurance;
(7) (6)
"Insurer" means: (i) any person, reciprocal exchange, interinsurer,
Lloyds insurer,
fraternal benefit society, and any other legal
entity engaged in the business of insurance,
including insurance producers; (ii)
notwithstanding sections 27-19-2, 27-20-2, 27-20.1-2, 27-
20.2-2, 27-20.3-2, and 27-41-22, all of whom
shall be engaged in the business of insurance for
the purpose of this chapter, nonprofit hospital
and/or medical service corporation, a nonprofit
dental service corporation, a nonprofit
optometric service corporation, a nonprofit legal service
corporation, a health maintenance organization
as defined in chapter 41 of this title or as defined
in chapter 62 of title 42, or any other entity
providing a plan of health benefits subject to state
insurance regulation; and (iii) an organization
that for consideration assumes certain risks for an
insured. Insurer organizations may include
corporations, stock companies, mutual companies, risk
retention groups, reciprocals, captives, Lloyds
associations, and government residual plans.
(8) (7)
"License" means a document issued by this state's insurance
commissioner
authorizing a person to act as an insurance
producer for the lines of authority specified in the
document. The license itself does not create any
authority, actual, apparent or inherent, in the
holder to represent or commit an insurance
carrier;
(9) (8)
"Limited line credit insurance" includes credit life, credit
disability, credit
property, credit unemployment, involuntary
unemployment, mortgage life, mortgage guaranty,
mortgage disability, guaranteed automobile
protection (gap) insurance, and any other form of
insurance offered in connection with an
extension of credit that is limited to partially or wholly
extinguishing that credit obligation that the
insurance commissioner determines should be
designated a form of limited line credit
insurance;
(10) (9)
"Limited line credit insurance producer" means a person who sells,
solicits or
negotiates one or more forms of limited line
credit insurance coverage to individuals through a
master, corporate, group or individual policy;
(11) (10)
"Limited lines insurance" means those lines of insurance that the
insurance
commissioner deems necessary to recognize for
purposes of complying with section 27-2.4-10(e);
(12) (11)
"Limited lines producer" means a person authorized by the insurance
commissioner to sell, solicit or negotiate
limited lines insurance;
(13) (12)
"NAIC" means National Association of Insurance Commissioners;
(14) (13)
"Negotiate" means the act of conferring directly with or offering
advice
directly to a purchaser or prospective purchaser
of a particular contract of insurance concerning
any of the substantive benefits, terms or
conditions of the contract, provided that the person
engaged in that act either sells insurance or
obtains insurance from insurers for purchasers;
(15) (14)
"Person" means an individual or a business entity;
(16) (15)
"Resident" means a person who either resides in Rhode Island or
maintains an
office in Rhode Island where the business of
producing insurance is transacted and designates
Rhode Island as the residence for purposes of
licensure;
(17) (16)
"Sell" means to exchange a contract of insurance by any means, for
money or
its equivalent, on behalf of an insurance
company;
(18) (17)
"Solicit" means attempting to sell insurance or asking or urging a
person to
apply for a particular kind of insurance from a
particular company;
(19) (18)
"Terminate" means the cancellation of the relationship between an
insurance
producer and the insurer or the termination of
an insurance producer's authority to transact
insurance;
(20)
"Uniform business entity application" means the current version of
the NAIC
uniform business entity application for resident
and nonresident business entities;
(21) (19)
"Uniform application" means the current version of the NAIC uniform
application for resident and nonresident
insurance producer licensing.
27-2.4-4.
Fees. -- (a) Fees required by this chapter for the period commencing
July 1,
2002, and ending on June 30, 2003, shall be as follows:
(1) Initial
insurance producer license: $60.00;
(2) Annual
insurance producer renewal: $60.00;
(3) Annual
company contract fee: $35.00.
(b) Commencing
July 1, 2003, the fees shall be as follows:
(1) Initial
insurance producer license: $50.00 $55.00;
(2) Annual
insurance producer renewal: $50.00 $55.00; and
(3) Annual
contract fee: $25.00 $30.00.
(c) (b)
The insurance commissioner may by rule or regulation specify fees for letters
of
certification, clearance letters, duplicate
licenses, and any other fees for service and documents
that are reasonably determined by the insurance
commissioner.
27-2.4-6.
Order to cease unlicensed activities. -- (a) If the department has
reason to
believe that any person, firm, or corporation
or association is conducting any activities requiring
licensure under this chapter without obtaining a
license, or who after the denial, suspension or
revocation of a license conducts any activities
requiring licensure under this chapter, the
department may issue its order to that person,
firm, corporation or association commanding them
to appear before the department at a hearing
after issuance of that order to show cause why the
department should not issue an order to that
person to cease and desist from the violations of the
provisions of this chapter. The order to show
cause may be served on any person, firm,
corporation or association named in the order in
the same manner that summons in a civil action
may be served, or by mailing a copy of the
order, certified mail, return receipt requested, to that
person at any address at which he or she has done
business or at which he or she lives. If upon
that hearing the department is satisfied that
the person is in fact violating any provision of this
chapter, then the department may order that
person, in writing, to cease and desist from that
violation. All hearings shall be governed in
accordance with the Administrative Procedures Act,
chapter 35 of title 42. If that person fails to
comply with an order of the department after being
afforded a hearing, the superior court in the
county where the insurance transaction took place has
jurisdiction upon complaint of the department to
restrain and enjoin that person from violating
this chapter.
(b) Any person
who violates this section by operating without a license shall be guilty of
a misdemeanor and fined an amount not exceeding
one thousand dollars ($1,000) or imprisoned
for a term not exceeding one year, or both. The
matter shall be referred to the department of
attorney general.
27-2.4-8.
Application for license. -- (a) A person applying for a resident
insurance
producer license shall make application to the
insurance commissioner on the uniform application
and declare under penalty of refusal, suspension
or revocation of the license that the statements
made in the application are true, correct and
complete to the best of the individual's knowledge
and belief. Before approving the application,
the insurance commissioner shall find that the
individual:
(1) Is at least
eighteen (18) years of age;
(2) Has not committed
any act that is a ground for denial, suspension or revocation set
forth in section 27-2.4-14;
(3) Has completed
a prelicensing course of study for the lines of authority for which the
person has applied;
(4) Has paid the
fees set forth in section 27-2.4-4; and
(5) Has
successfully passed the examinations for the lines of authority for which the
person has applied.
(b) A business
entity acting as an insurance producer is required to obtain an insurance
producer license. Application shall be made
using the Uniform Business Entity Application.
Before approving the application, the insurance
commissioner shall find that:
(1) The
business entity has paid the fees set forth in this chapter; and
(2) The
business entity has designated a licensed insurance producer responsible for
the
business entity's compliance with the insurance
laws, rules and regulations of this state.
(c) (b)
The insurance commissioner may require any documents reasonably necessary to
verify the information contained in an
application.
(d) (c)
Each insurer that sells, solicits or negotiates any form of limited line credit
insurance shall provide to each individual whose
duties will include selling, soliciting or
negotiating limited line credit insurance a
program of instruction that may be approved by the
insurance commissioner.
27-2.4-13.
Temporary licenses. -- (a) The insurance commissioner may issue a
temporary insurance producer license for a
period not to exceed one hundred eighty (180) days
without requiring an examination if the
insurance commissioner deems that the temporary license
is necessary for the servicing of an insurance
business in the following cases:
(1) To the
surviving spouse or court-appointed personal representative of a licensed
insurance producer who dies or becomes mentally
or physically disabled to allow adequate time
for the sale of the insurance business owned by
the insurance producer or for the recovery or
return of the insurance producer to the business
or to provide for the training and licensing of new
personnel to operate the insurance producer's
business; or
(2) To a member
or employee of a business entity operated by a licensed as an
insurance
producer, upon the death or disability of an
that individual designated in the business entity
application or the license; or
(3) To the
designee of a licensed insurance producer entering active service in the armed
forces of the United States of America; or
(4) In any other
circumstance where the insurance commissioner deems that the public
interest will best be served by the issuance of
this license.
(b) The insurance
commissioner may by order limit the authority of any temporary
insurance producer in any way deemed necessary
to protect the insured and the public. The
insurance commissioner may require the temporary
insurance producer to have a suitable sponsor
who is a licensed insurance producer or insurer
and who assumes responsibility for all acts of the
temporary insurance producer and may impose
other similar requirements designed to protect the
insured and the public. The insurance
commissioner may by order revoke a temporary license if
the interest of the insured or the public are endangered.
A temporary license may not continue
after the owner or the personal representative
disposes of the business.
27-2.4-14.
Licenses -- Denial -- Nonrenewal -- Suspension or revocation. -- (a)
The
insurance commissioner may place on probation,
suspend, revoke or refuse to issue or renew an
insurance producer's license or may levy an
administrative penalty in accordance with section 42-
14-16 or any combination of actions, for any one
or more of the following causes:
(1) Providing
incorrect, misleading, incomplete or materially untrue information in the
license application;
(2) Violating any
insurance laws, or violating any regulation, subpoena or order of the
insurance commissioner or of another state's
insurance commissioner;
(3) Obtaining or
attempting to obtain a license through misrepresentation or fraud;
(4) Improperly
withholding, misappropriating or converting any monies or properties
received in the course of doing insurance
business;
(5) Intentionally
misrepresenting the terms of an actual or proposed insurance contract or
application for insurance;
(6) Having been
convicted of a felony;
(7) Having
admitted or been found to have committed any insurance unfair trade practice
or fraud;
(8) Using
fraudulent, coercive, or dishonest practices or demonstrating incompetence,
untrustworthiness or financial irresponsibility
in this state or in another place;
(9) Having an
insurance producer license, or its equivalent, denied, suspended or
revoked in any other state, province, district
or territory or administrative action under this
section;
(10) Forging
another's name to an application for insurance or to any document related to
an insurance transaction;
(11) Cheating on
an examination for an insurance license;
(12) Knowingly
accepting insurance business from an individual who is not licensed;
(13) Failing to
comply with an administrative or court order imposing a child support
obligation; or
(14) Failing to
pay state income tax or comply with any administrative or court order
directing payment of state income tax.
(b) In the event
that the action by the insurance commissioner is to non-renew or to deny
an application for a license, the insurance
commissioner shall notify the applicant or insurance
producer and advise, in writing, the applicant
or insurance producer of the reason for the denial or
non-renewal of the applicant's or insurance
producer's license. The applicant or insurance
producer may make written demand upon the
insurance commissioner within thirty (30) days for
a hearing before the insurance commissioner to
determine the reasonableness of the insurance
commissioner's action. The hearing shall be
conducted pursuant to the Administrative Procedures
Act, chapter 35 of title 42.
(c) The
license of a business entity may be suspended, revoked or refused if the
insurance commissioner finds, after hearing,
that an individual insurance producer's violation was
known or should have been known by one or more
of the partners, officers or managers acting on
behalf of the partnership or corporation and the
violation was neither reported to the insurance
commissioner nor corrective action taken by the
business entity in a timely manner.
(d) (c)
In addition to or in lieu of any applicable denial, suspension or revocation of
a
license, a person may, after hearing, be subject
to an administrative fine in accordance with
section 42-14-16.
(e) (d)
The insurance commissioner shall retain the authority to enforce the provisions
of
and impose any penalty or remedy authorized by
this chapter and this title against any person who
is under investigation for or charged with a
violation of this chapter or this title even if the
person's license or registration has been
surrendered or has lapsed by operation of the law.
27-2.4-23.
Errors and omissions insurance required of resident insurance producers.
[Effective January 1, 2007.] -- (a) All holders of
resident insurance producer licenses issued by
the insurance division of the department of
business regulation of the state of Rhode Island shall,
as a condition for obtaining and retaining such
license, carry and maintain errors and omissions
insurance covering the business activities
contemplated., in an amount not less than two hundred
fifty thousand dollars ($250,000) per claim and
five hundred thousand dollars ($500,000) annual
aggregate limit. Authorized insurance
producers of a licensed firm may meet the requirements of
this section with a policy in the name of the
licensed firm insuring each licensee employed by, or
associated with, the firm.
(b) Licensees shall
maintain records and keep copies of all errors and omissions policies
issued under this subsection and shall make
this information available to the public and insurance
division upon request.
(c) Failure to
carry and maintain errors and omissions insurance may result in the
suspension or revocation of the resident
insurance producer license.
(d) This section
shall not apply to insurance producers that are employed in that capacity
directly by insurance companies.
(e) The
department of business regulation may grant a written exemption to any producer
who shows that he/she is not engaged in the
sale, solicitation or negotiation of insurance. Such
exemption shall only be valid while the insurance
producer is not engaged in the sale, solicitation
or negotiation of insurance.
SECTION 2. This
act shall take effect upon passage.
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LC01165/SUB B
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