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 new rules at 16 Texas Administrative Code, §§57.1, 57.10,
57.21 - 57.23, 57.25, 57.70 - 57.72, 57.80, and 57.90 regarding the regulation
of certain for-profit legal service contract programs and registration of
administrators, companies, and sales representatives. Sections 57.10, 57.21
and 57.80 are adopted with changes to the text as published in the January
30, 2004, issue of the
Texas Register
(29
TexReg 750). Sections 57.1, 57.22, 57.23, 57.25, 57.70 - 57.72, and 57.90
are adopted without changes and will not be republished.
The proposed 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 rules are necessary to implement
Chapter 953, Texas Occupations Code, which became effective September 1, 2003,
after the passage of Senate Bill 597 during the 78th regular session of the
Texas Legislature.
The Department drafted and distributed the proposed rules to persons internal
and external to the agency. One comment was received from a law firm. Section
57.10 is changed in response to the comment to clarify that a human resources
director who is not compensated for the sale of legal service contracts to
employees, is not a "sales representative" for purposes of Chapter 953.
Section 57.21(c)(4) is changed in the adoption to clarify that certain
types of financial security must meet the market value requirements of Occupations
Code, Section 953.101. Section 57.80(d) is changed in the adoption to clarify
the due date and applicable time frame for the annual premium tax replacement
fee.
The new rules are adopted under Texas Occupations Code, Chapter
953 and Texas Occupations Code, Chapter 51, which authorize the Commission
to adopt rules as necessary to implement Chapter 953 and any other law establishing
a program regulated by the Department.
The statutory provisions affected by the adoption are those set forth in
Texas Occupations Code, Chapter 953 and Texas Occupations Code, Chapter 51.
No other statutes, articles, or codes are affected by the adoption.
§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 by an employer or association on behalf of its employees
or association members that choose to purchase the service.
(2)
Group legal service contract manager--A person who:
(A)
manages a legal service contract purchased from a sales
representative; and
(B)
does not obtain income from the sale of legal service contracts
to employees or association members.
(3)
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.
(4)
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.
(5)
Sales Representative--A person who sells or solicits legal
service contracts or group legal service contracts. A group legal service
contract manager is not a sales representative.
§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.
§57.80.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.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of
the Secretary of State on June 8, 2004.
TRD-200403738
William H. Kuntz, Jr.
Executive Director
Texas Department of Licensing and Regulation
Effective date: June 28, 2004
Proposal publication date: January 30, 2004
For further information, please call: (512) 463-7348