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H. B. No. 564 As IntroducedAs Introduced
129th General Assembly | Regular Session | 2011-2012 |
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Cosponsors:
Representatives Terhar, Adams, J., DeVitis, Derickson, Hackett
A BILL
To amend section 3905.14 of the Revised Code to
regulate certificates of insurance prepared or
issued as evidence of property or casualty
insurance coverage.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:
Section 1. That section 3905.14 of the Revised Code be
amended to read as follows:
Sec. 3905.14. (A) As used in sections 3905.14 to 3905.16 of
the Revised Code:
(1) "Insurance agent" includes a limited lines insurance
agent, surety bail bond agent, and surplus line broker.
(2) "Refusal to issue or renew" means the decision of the
superintendent of insurance not to process either the initial
application for a license as an agent or the renewal of such a
license.
(3) "Revocation" means the permanent termination of all
authority to hold any license as an agent in this state.
(4) "Surrender for cause" means the voluntary termination of
all authority to hold any license as an agent in this state, in
lieu of a revocation or suspension order.
(5) "Suspension" means the termination of all authority to
hold any license as an agent in this state, for either a specified
period of time or an indefinite period of time and under any terms
or conditions determined by the superintendent.
(B) The superintendent may suspend, revoke, or refuse to
issue or renew any license of an insurance agent, assess a civil
penalty, or impose any other sanction or sanctions authorized
under this chapter, for one or more of the following reasons:
(1) Providing incorrect, misleading, incomplete, or
materially untrue information in a license or appointment
application;
(2) Violating or failing to comply with any insurance law,
rule, subpoena, consent agreement, or order of the superintendent
or of the insurance authority of another state;
(3) Obtaining, maintaining, or attempting to obtain or
maintain a license through misrepresentation or fraud;
(4) Improperly withholding, misappropriating, or converting
any money or property received in the course of doing insurance
business;
(5) Intentionally misrepresenting the terms, benefits, value,
cost, or effective dates of any actual or proposed insurance
contract or application for insurance;
(6) Having been convicted of or pleaded guilty or no contest
to a felony regardless of whether a judgment of conviction has
been entered by the court;
(7) Having been convicted of or pleaded guilty or no contest
to a misdemeanor that involves the misuse or theft of money or
property belonging to another, fraud, forgery, dishonest acts, or
breach of a fiduciary duty, that is based on any act or omission
relating to the business of insurance, securities, or financial
services, or that involves moral turpitude regardless of whether a
judgment has been entered by the court;
(8) Having admitted to committing, or having been found to
have committed, any insurance unfair trade act or practice or
insurance fraud;
(9) Using fraudulent, coercive, or dishonest practices, or
demonstrating incompetence, untrustworthiness, or financial
irresponsibility, in the conduct of business in this state or
elsewhere;
(10) Having an insurance agent license, or its equivalent,
denied, suspended, or revoked in any other state, province,
district, or territory;
(11) Forging or causing the forgery of an application for
insurance or any document related to or used in an insurance
transaction;
(12) Improperly using notes, any other reference material,
equipment, or devices of any kind to complete an examination for
an insurance agent license;
(13) Knowingly accepting insurance business from an
individual who is not licensed;
(14) Failing to comply with any official invoice, notice,
assessment, or order directing payment of federal, state, or local
income tax, state or local sales tax, or workers' compensation
premiums;
(15) Failing to timely submit an application for insurance.
For purposes of division (B)(15) of this section, a submission is
considered timely if it occurs within the time period expressly
provided for by the insurer, or within seven days after the
insurance agent accepts a premium or an order to bind coverage
from a policyholder or applicant for insurance, whichever is
later.
(16) Failing to disclose to an applicant for insurance or
policyholder upon accepting a premium or an order to bind coverage
from the applicant or policyholder, that the person has not been
appointed by the insurer;
(17) Having any professional license or financial industry
regulatory authority registration suspended or revoked or having
been barred from participation in any industry;
(18) Having been subject to a cease and desist order or
permanent injunction related to mishandling of funds or breach of
fiduciary responsibilities or for unlicensed or unregistered
activities;
(19) Causing or permitting a policyholder or applicant for
insurance to designate the insurance agent or the insurance
agent's spouse, parent, child, or sibling as the beneficiary of a
policy or annuity sold by the insurance agent or of a policy or
annuity for which the agent, at any time, was designated as the
agent of record, unless the insurance agent or a relative of the
insurance agent is the insured or applicant;
(20) Causing or permitting a policyholder or applicant for
insurance to designate the insurance agent or the insurance
agent's spouse, parent, child, or sibling as the owner or
beneficiary of a trust funded, in whole or in part, by a policy or
annuity sold by the insurance agent or by a policy or annuity for
which the agent, at any time, was designated as the agent of
record, unless the insurance agent or a relative of the insurance
agent is the insured or applicant;
(21) Failing to provide a written response to the department
of insurance within twenty-one calendar days after receipt of any
written inquiry from the department, unless a reasonable extension
of time has been requested of, and granted by, the superintendent
or the superintendent's designee;
(22) Failing to appear to answer questions before the
superintendent after being notified in writing by the
superintendent of a scheduled interview, unless a reasonable
extension of time has been requested of, and granted by, the
superintendent or the superintendent's designee;
(23) Transferring or placing insurance with an insurer other
than the insurer expressly chosen by the applicant for insurance
or policyholder without the consent of the applicant or
policyholder or absent extenuating circumstances;
(24) Failing to inform a policyholder or applicant for
insurance of the identity of the insurer or insurers, or the
identity of any other insurance agent or licensee known to be
involved in procuring, placing, or continuing the insurance for
the policyholder or applicant, upon the binding of the coverage;
(25) In the case of an agent that is a business entity,
failing to report an individual licensee's violation to the
department when the violation was known or should have been known
by one or more of the partners, officers, managers, or members of
the business entity;
(26) Submitting or using a document in the conduct of the
business of insurance when the person knew or should have known
that the document contained a writing that was forged as defined
in section 2913.01 of the Revised Code;
(27) Misrepresenting the person's qualifications, status or
relationship to another person, agency, or entity, or using in any
way a professional designation that has not been conferred upon
the person by the appropriate accrediting organization;
(28) Obtaining a premium loan or policy surrender or causing
a premium loan or policy surrender to be made to or in the name of
an insured or policyholder without that person's knowledge and
written authorization;
(29) Using paper, software, or any other materials of or
provided by an insurer after the insurer has terminated the
authority of the licensee, if the use of such materials would
cause a reasonable person to believe that the licensee was acting
on behalf of or otherwise representing the insurer;
(30) Soliciting, procuring an application for, or placing,
either directly or indirectly, any insurance policy when the
person is not authorized under this chapter to engage in such
activity;
(31) Soliciting, selling, or negotiating any product or
service that offers benefits similar to insurance but is not
regulated by the superintendent, without fully disclosing, orally
and in writing, to the prospective purchaser that the product or
service is not insurance and is not regulated by the
superintendent;
(32) Failing to fulfill a refund obligation to a policyholder
or applicant in a timely manner. For purposes of division (B)(32)
of this section, a rebuttable presumption exists that a refund
obligation is not fulfilled in a timely manner unless it is
fulfilled within one of the following time periods:
(a) Thirty days after the date the policyholder, applicant,
or insurer takes or requests action resulting in a refund;
(b) Thirty days after the date of the insurer's refund check,
if the agent is expected to issue a portion of the total refund;
(c) Forty-five days after the date of the agent's statement
of account on which the refund first appears.
The presumption may be rebutted by proof that the
policyholder or applicant consented to the delay or agreed to
permit the agent to apply the refund to amounts due for other
coverages.
(33) With respect to a surety bail bond agent license,
rebating or offering to rebate, or unlawfully dividing or offering
to divide, any commission, premium, or fee;
(34) Using a license for the principal purpose of procuring,
receiving, or forwarding applications for insurance of any kind,
other than life, or soliciting, placing, or effecting such
insurance directly or indirectly upon or in connection with the
property of the licensee or that of relatives, employers,
employees, or that for which they or the licensee is an agent,
custodian, vendor, bailee, trustee, or payee;
(35) In the case of an insurance agent that is a business
entity, using a life license for the principal purpose of
soliciting or placing insurance on the lives of the business
entity's officers, employees, or shareholders, or on the lives of
relatives of such officers, employees, or shareholders, or on the
lives of persons for whom they, their relatives, or the business
entity is agent, custodian, vendor, bailee, trustee, or payee;
(36) Offering, selling, soliciting, or negotiating policies,
contracts, agreements, or applications for insurance, or annuities
providing fixed, variable, or fixed and variable benefits, or
contractual payments, for or on behalf of any insurer or multiple
employer welfare arrangement not authorized to transact business
in this state, or for or on behalf of any spurious, fictitious,
nonexistent, dissolved, inactive, liquidated or liquidating, or
bankrupt insurer or multiple employer welfare arrangement;
(37) In the case of a resident business entity, failing to be
qualified to do business in this state under Title XVII of the
Revised Code, failing to be in good standing with the secretary of
state, or failing to maintain a valid appointment of statutory
agent with the secretary of state;
(38) In the case of a nonresident agent, failing to maintain
licensure as an insurance agent in the agent's home state for the
lines of authority held in this state;
(39) Knowingly aiding and abetting another person or entity
in the violation of any insurance law of this state or the rules
adopted under it.
(40)(a) Providing, issuing, modifying, altering, or signing a
certificate of insurance that is on a form other than a standard
certificate of insurance form promulgated by the association for
cooperative operations research and development, the American
association of insurance services, the insurance services office,
or a nationally recognized insurance advisory organization that
has been designated or approved by the department of insurance, or
a form promulgated by the insurance company that has underwritten
the policy referenced in the certificate of insurance.
(b) A certificate of insurance is not a policy of insurance
and does not affirmatively or negatively amend, extend, or alter
the coverage afforded by the policy of which the certificate of
insurance provides evidence. A certificate of insurance shall not
confer to a certificate holder new or additional rights beyond
what the referenced policy of insurance expressly provides.
(c) No certificate of insurance shall contain references to
contracts, including construction or service contracts, other than
the referenced contract of insurance of which the certificate
provides evidence. Notwithstanding any requirement, term, or
condition of any contract or other document that a certificate of
insurance may be issued for or pertain to, the insurance afforded
by the policy of insurance referenced in the certificate is
subject only to all the terms, exclusions, and conditions of that
policy.
(d) A certificate holder shall have a legal right to notice
of cancellation, nonrenewal, or any material change, or any
similar notice concerning a policy of insurance only if the
certificate holder is named within the policy or any endorsement
to the policy and the policy or endorsement requires notice to be
provided to the certificate holder. The terms and conditions of
the notice, including the required timing of the notice, are
governed by the policy of insurance and cannot be altered by a
certificate of insurance.
(e) As used in division (B)(40) of this section:
(i) "Certificate of insurance" means a document or
instrument, regardless of how titled or described, that is
prepared or issued by an insurer or insurance agent licensed under
this chapter as evidence of property or casualty insurance
coverage. "Certificate of insurance" does not include a document
issued to an individual as evidence of purchasing coverage under a
master policy, or a policy of insurance, insurance binder, policy
endorsement, automobile identification card, or any document used
to provide proof of financial responsibility for purposes of
Chapter 4509. of the Revised Code.
(ii) "Certificate holder" means any person, other than a
policyholder, that requests, obtains, or possesses a certificate
of insurance.
(C) Before denying, revoking, suspending, or refusing to
issue any license or imposing any penalty under this section, the
superintendent shall provide the licensee or applicant with notice
and an opportunity for hearing as provided in Chapter 119. of the
Revised Code, except as follows:
(1)(a) Any notice of opportunity for hearing, the hearing
officer's findings and recommendations, or the superintendent's
order shall be served by certified mail at the last known address
of the licensee or applicant. Service shall be evidenced by return
receipt signed by any person.
For purposes of this section, the "last known address" is the
residential address of a licensee or applicant, or the
principal-place-of-business address of a business entity, that is
contained in the licensing records of the department.
(b) If the certified mail envelope is returned with an
endorsement showing that service was refused, or that the envelope
was unclaimed, the notice and all subsequent notices required by
Chapter 119. of the Revised Code may be served by ordinary mail to
the last known address of the licensee or applicant. The mailing
shall be evidenced by a certificate of mailing. Service is deemed
complete as of the date of such certificate provided that the
ordinary mail envelope is not returned by the postal authorities
with an endorsement showing failure of delivery. The time period
in which to request a hearing, as provided in Chapter 119. of the
Revised Code, begins to run on the date of mailing.
(c) If service by ordinary mail fails, the superintendent may
cause a summary of the substantive provisions of the notice to be
published once a week for three consecutive weeks in a newspaper
of general circulation in the county where the last known place of
residence or business of the party is located. The notice is
considered served on the date of the third publication.
(d) Any notice required to be served under Chapter 119. of
the Revised Code shall also be served upon the party's attorney by
ordinary mail if the attorney has entered an appearance in the
matter.
(e) The superintendent may, at any time, perfect service on a
party by personal delivery of the notice by an employee of the
department.
(f) Notices regarding the scheduling of hearings and all
other matters not described in division (C)(1)(a) of this section
shall be sent by ordinary mail to the party and to the party's
attorney.
(2) Any subpoena for the appearance of a witness or the
production of documents or other evidence at a hearing, or for the
purpose of taking testimony for use at a hearing, shall be served
by certified mail, return receipt requested, by an attorney or by
an employee of the department designated by the superintendent.
Such subpoenas shall be enforced in the manner provided in section
119.09 of the Revised Code. Nothing in this section shall be
construed as limiting the superintendent's other statutory powers
to issue subpoenas.
(D) If the superintendent determines that a violation
described in this section has occurred, the superintendent may
take one or more of the following actions:
(1) Assess a civil penalty in an amount not exceeding
twenty-five thousand dollars per violation;
(2) Assess administrative costs to cover the expenses
incurred by the department in the administrative action, including
costs incurred in the investigation and hearing processes. Any
costs collected shall be paid into the state treasury to the
credit of the department of insurance operating fund created in
section 3901.021 of the Revised Code.
(3) Suspend all of the person's licenses for all lines of
insurance for either a specified period of time or an indefinite
period of time and under such terms and conditions as the
superintendent may determine;
(4) Permanently revoke all of the person's licenses for all
lines of insurance;
(5) Refuse to issue a license;
(6) Refuse to renew a license;
(7) Prohibit the person from being employed in any capacity
in the business of insurance and from having any financial
interest in any insurance agency, company, surety bail bond
business, or third-party administrator in this state. The
superintendent may, in the superintendent's discretion, determine
the nature, conditions, and duration of such restrictions.
(8) Order corrective actions in lieu of or in addition to the
other penalties listed in division (D) of this section. Such an
order may provide for the suspension of civil penalties, license
revocation, license suspension, or refusal to issue or renew a
license if the licensee complies with the terms and conditions of
the corrective action order.
(9) Accept a surrender for cause offered by the licensee,
which shall be for at least five years and shall prohibit the
licensee from seeking any license authorized under this chapter
during that time period. A surrender for cause shall be in lieu of
revocation or suspension and may include a corrective action order
as provided in division (D)(8) of this section.
(E) The superintendent may consider the following factors in
denying a license, imposing suspensions, revocations, fines, or
other penalties, and issuing orders under this section:
(1) Whether the person acted in good faith;
(2) Whether the person made restitution for any pecuniary
losses suffered by other persons as a result of the person's
actions;
(3) The actual harm or potential for harm to others;
(4) The degree of trust placed in the person by, and the
vulnerability of, persons who were or could have been adversely
affected by the person's actions;
(5) Whether the person was the subject of any previous
administrative actions by the superintendent;
(6) The number of individuals adversely affected by the
person's acts or omissions;
(7) Whether the person voluntarily reported the violation,
and the extent of the person's cooperation and acceptance of
responsibility;
(8) Whether the person obstructed or impeded, or attempted to
obstruct or impede, the superintendent's investigation;
(9) The person's efforts to conceal the misconduct;
(10) Remedial efforts to prevent future violations;
(11) If the person was convicted of a criminal offense, the
nature of the offense, whether the conviction was based on acts or
omissions taken under any professional license, whether the
offense involved the breach of a fiduciary duty, the amount of
time that has passed, and the person's activities subsequent to
the conviction;
(12) Such other factors as the superintendent determines to
be appropriate under the circumstances.
(F)(1) A violation described in division (B)(1), (2), (3),
(4), (5), (6), (7), (8), (9), (10), (11), (12), (13), (14), (16),
(17), (18), (19), (20), (22), (23), (24), (25), (26), (27), (28),
(29), (30), (31), (32), (33), (34), (35), and (36) of this section
is a class A offense for which the superintendent may impose any
penalty set forth in division (D) of this section.
(2) A violation described in division (B)(15) or (21) of this
section, or a failure to comply with section 3905.061, 3905.071,
or 3905.22 of the Revised Code, is a class B offense for which the
superintendent may impose any penalty set forth in division
(D)(1), (2), (8), or (9) of this section.
(3) If the superintendent determines that a violation
described in division (B)(36) of this section has occurred, the
superintendent shall impose a minimum of a two-year suspension on
all of the person's licenses for all lines of insurance.
(G) If a violation described in this section has caused, is
causing, or is about to cause substantial and material harm, the
superintendent may issue an order requiring that person to cease
and desist from engaging in the violation. Notice of the order
shall be mailed by certified mail, return receipt requested, or
served in any other manner provided for in this section,
immediately after its issuance to the person subject to the order
and to all persons known to be involved in the violation. The
superintendent may thereafter publicize or otherwise make known to
all interested parties that the order has been issued.
The notice shall specify the particular act, omission,
practice, or transaction that is subject to the cease-and-desist
order and shall set a date, not more than fifteen days after the
date of the order, for a hearing on the continuation or revocation
of the order. The person shall comply with the order immediately
upon receipt of notice of the order.
The superintendent may, upon the application of a party and
for good cause shown, continue the hearing. Chapter 119. of the
Revised Code applies to such hearings to the extent that that
chapter does not conflict with the procedures set forth in this
section. The superintendent shall, within fifteen days after
objections are submitted to the hearing officer's report and
recommendation, issue a final order either confirming or revoking
the cease-and-desist order. The final order may be appealed as
provided under section 119.12 of the Revised Code.
The remedy under this division is cumulative and concurrent
with the other remedies available under this section.
(H) If the superintendent has reasonable cause to believe
that an order issued under this section has been violated in whole
or in part, the superintendent may request the attorney general to
commence and prosecute any appropriate action or proceeding in the
name of the state against such person.
The court may, in an action brought pursuant to this
division, impose any of the following:
(1) For each violation, a civil penalty of not more than
twenty-five thousand dollars;
(4) Any other appropriate relief.
(I) With respect to a surety bail bond agent license:
(1) Upon the suspension or revocation of a license, or the
eligibility of a surety bail bond agent to hold a license, the
superintendent likewise may suspend or revoke the license or
eligibility of any surety bail bond agent who is employed by or
associated with that agent and who knowingly was a party to the
act that resulted in the suspension or revocation.
(2) The superintendent may revoke a license as a surety bail
bond agent if the licensee is adjudged bankrupt.
(J) Nothing in this section shall be construed to create or
imply a private cause of action against an agent or insurer.
Section 2. That existing section 3905.14 of the Revised Code
is hereby repealed.
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