16 TAC §§57.1, 57.10, 57.21 - 57.23, 57.25, 57.70 - 57.72, 57.80, 57.90
The Texas Department of Licensing and Regulation ("Department")
adopts on an emergency basis new rules at 16 Texas Administrative Code ("TAC"),
Chapter 57, §§57.1, 57.10, 57.21 - 57.23, 57.25, 57.70 - 57.72,
57.80 and 57.90, concerning regulation of certain prepaid legal service contract
programs and registration of administrators, companies and sales representatives.
The new rules define and set out registration and fee requirements, describe
the responsibilities imposed upon all registrants, and specify available administrative
penalties and sanctions.
The new rules are adopted on an emergency basis pursuant to §2001.034
of the Government Code, which allows a state agency to adopt emergency rules
if a requirement of state or federal law requires adoption of the rules on
less than 30 days notice and to ensure compliance with new legislation enacted
during the 78th Legislative Session, Regular Session, including Senate Bill
597, which became effective September 1, 2003.
These new rules were proposed for public comment and permanent adoption
in accordance with Texas Government Code, §2001.023 and §2001.029,
and published in the January 30, 2004, issue of the
Texas Register
(29 TexReg 750). The Texas Commission of Licensing and
Regulation ("Commission") at their meeting on February 25, 2004, authorized
the Department to adopt these new rules on an emergency basis, which enables
the Commission to comply with the timetable prescribed by Senate Bill 597
and set out in Chapter 953, Texas Occupations Code.
The new rules are adopted on an emergency basis under Texas Occupations
Code, Chapters 51 and 953, which authorize the Commission to adopt rules as
necessary to implement Chapter 953 and any other law establishing a program
regulated by the Department; and Government Code, §2001.034, which provides
for the adoption of administrative rules on an emergency basis, without notice
and comment.
The statutory provisions affected by the adopted emergency rules are those
set forth in the Texas Occupations Code, Chapters 51 and 953, and Senate Bill
597, 78th Legislature.
No other statutes, articles, or codes are affected by the emergency adoption.
§57.1.Authority.
These rules are promulgated under the authority of Title 5, Texas Occupations
Code, Chapter 953, and Title 2, Texas Occupations Code, Chapter 51.
§57.10.Definitions.
The following words and terms, when used in this chapter, have the
following meanings.
(1)
Group legal service contract--A legal service contract
that is entered into on behalf of a group by a group representative and provides
legal services for members of the group that choose to purchase the service.
(2)
Administrator--The person appointed by a company to be
responsible for:
(A)
all or any part of the administration of legal service
contracts or group legal service contracts;
(B)
the sale of legal service contracts or group legal service
contracts; or
(C)
compliance with Title 5, Texas Occupations Code, Chapter
953 and this chapter.
(3)
Company--A person who:
(A)
is contractually obligated to a legal service contract
holder under the terms of a legal service contract;
(B)
enters into a contract with a contracting attorney to provide
or obtain covered legal services for a legal service contract holder; and
(C)
operates as a for-profit legal service contract company.
(4)
Sales Representative--A person who sells or solicits:
(A)
legal service contracts; or
(B)
group legal service contracts to a person on behalf of
a legal service contract company.
§57.21.Registration Requirements--Company.
(a)
No person may operate as a company without first registering
with the department.
(b)
Registration is valid for one year from the date issued
and must be renewed annually.
(c)
Original and renewal applications must be accompanied by:
(1)
an audit report and audited financial statements for the
company's most recent fiscal year;
(2)
a certified statement, made by an actuary, describing the
company's reserves, if any;
(3)
the required fees; and
(4)
proof of one of the following forms of financial security
that meets the market value requirements of Texas Occupations Code §953.101:
(A)
a surety bond issued by an authorized surety;
(B)
securities of the type eligible for deposit by an authorized
insurer in Texas;
(C)
a deposit of cash or cash equivalents;
(D)
an irrevocable letter of credit issued by a qualified financial
institution; or
(E)
another form of security acceptable to the Executive Director.
(d)
Falsification of information on an application is cause
for denial of the application and revocation of the registration.
§57.22.Registration Requirements--Sales Representative.
(a)
No person may sell or solicit legal service contracts to
a person on behalf of a company without first registering with the department.
(b)
Registration is valid for one year from the date issued
and must be renewed annually.
(c)
The required fee must accompany both original and renewal
applications.
(d)
Falsification of information on an application is cause
for denial of the application or revocation of the registration.
§57.23.Registration Requirements--Administrator.
(a)
No person may act as an administrator on behalf of a company
without first registering with the department.
(b)
Registration is valid for one year from the date issued
and must be renewed annually.
(c)
The required fee must accompany both original and renewal
applications.
(d)
Falsification of information on an application is cause
for denial of the application or revocation of the registration.
§57.25.Registration Requirements--Renewal.
(a)
A complete application for registration renewal must be
submitted on an approved Department form with all required fees.
(b)
Non-receipt of a registration renewal notice from the Department
does not exempt a person from any requirements of this chapter.
(c)
A person shall not perform work requiring registration
under Title 5, Texas Occupations Code, Chapter 953 with an expired registration.
§57.70.Responsibilities of Registrants--General.
A registrant shall notify the Department in writing within thirty (30)
days of any change in the information set forth in the registrant's most recent
original and renewal application.
§57.71.Responsibilities of Registrants--Company.
(a)
A company must provide a receipt for or other written evidence
of the purchase of a legal service contract to a contract holder within 45
days.
(b)
A company must provide a copy of the legal service contract
to the contract holder within 45 days.
(c)
A company must provide a copy of the terms of a group legal
service contract including the obligations and benefits of each party as specified
in Texas Occupations Code, Chapter 953, §953.156 within 45 days.
(d)
A company must provide a receipt for or other written evidence
of the purchase of a group legal service contract to a contract holder within
45 days.
(e)
A company must include a statement substantially similar
to, "Legal service contract companies and their sales representatives are
regulated by the Texas Department of Licensing and Regulation. You may contact
the Department at P.O. Box 12157, Austin, TX 78711, 512-463-6599, 800-803-9202,
or at legalservicecontract@license.state.tx.us." in each legal service contract
sold or offered for sale in Texas.
§57.72.Responsibilities of Registrant--Sales Representative.
A sales representative may only sell legal service contracts regulated
under Title 5, Texas Occupations Code, Chapter 953 and this chapter on behalf
of a registered company.
§57.80.Fees.
(a)
All fees are non-refundable.
(b)
The original and renewal registration fee for a company
shall be:
(1)
$500 for a company that sells 0 to 1,000 legal service
contracts during the twelve (12) months preceding the date of the application;
(2)
$750 for a company that sells 1,001 to 2,500 legal service
contracts during the twelve (12) months preceding the date of the application;
and
(3)
$1,000 for company that sells 2,501 or more legal service
contracts during the twelve (12) months preceding the date of the application.
(c)
For purposes of subsection (b) of this section if a company
that sold no legal service contracts in this state in the preceding year previously
sold prepaid legal service contracts under article 5.13-1, Texas Insurance
Code, the company's registration fee shall be based on the number of prepaid
legal service contracts sold under the Texas Insurance Code in the preceding
year.
(d)
By March 1 of each year, companies must also pay an annual
premium tax replacement fee. The premium tax replacement fee is equal to the
difference between an amount equal to 1.7% of the amount a company collects
for legal service contracts sold by the company in Texas in the previous year
and the amount the company paid to the state in franchise taxes in the same
year.
(e)
The original and renewal registration fee for a sales representative
is $50.
(f)
The original and renewal registration fee for an administrator
is $50.
(g)
A $25 fee shall be charged for duplicate or amended registration
certificates.
(h)
Late renewal fees for registrations issued under this chapter
are provided for in Title 16, §60.83 of the Commission rules.
§57.90.Administrative Penalties and Sanctions.
If a person violates any provision of Title 5, Texas Occupations Code,
Chapter 953, any provision of Title 16, Texas Administrative Code, Chapter
57, or any provision of an order of the Executive Director or Commission,
proceedings may be instituted to impose administrative penalties, administrative
sanctions, or both administrative penalties and sanctions in accordance with
the provisions of Title 5, Texas Occupations Code, Chapter 953; Title 2, Texas
Occupations Code, Chapter 51; and Title 16, Texas Administrative Code, Chapter
60 (relating to the Texas Commission of Licensing and Regulation.)
This agency hereby certifies that the emergency adoption
has been reviewed by legal counsel and found to be within the agency's legal
authority to adopt.
Filed with the Office of
the Secretary of State on February 25, 2004.
TRD-200401461
William H. Kuntz, Jr.
Executive Director
Texas Department of Licensing and Regulation
Effective Date: February 25, 2004
Expiration Date: June 23, 2004
For further information, please call: (512) 463-7348