Bill Text: OH HB564 | 2011-2012 | 129th General Assembly | Introduced

---

Bill Title: To regulate certificates of insurance prepared or issued as evidence of property or casualty insurance coverage.

Spectrum: Partisan Bill (Republican 6-0)

Status: (Introduced - Dead) 2012-05-30 - To Insurance [HB564 Detail]

Download: Ohio-2011-HB564-Introduced.html

---

As Introduced

129th General Assembly Regular Session 2011-2012

H. B. No. 564

Representative Hottinger 

Cosponsors: Representatives Terhar, Adams, J., DeVitis, Derickson, Hackett 

---

A BILL

To amend section 3905.14 of the Revised Code to

1

regulate certificates of insurance prepared or

2

issued as evidence of property or casualty

3

insurance coverage.

4

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:

Section 1.  That section 3905.14 of the Revised Code be	5
amended to read as follows:	6

Sec. 3905.14.  (A) As used in sections 3905.14 to 3905.16 of	7
the Revised Code:	8

(1) "Insurance agent" includes a limited lines insurance	9
agent, surety bail bond agent, and surplus line broker.	10

(2) "Refusal to issue or renew" means the decision of the	11
superintendent of insurance not to process either the initial	12
application for a license as an agent or the renewal of such a	13
license.	14

(3) "Revocation" means the permanent termination of all	15
authority to hold any license as an agent in this state.	16

(4) "Surrender for cause" means the voluntary termination of	17
all authority to hold any license as an agent in this state, in	18
lieu of a revocation or suspension order.	19

(5) "Suspension" means the termination of all authority to	20
hold any license as an agent in this state, for either a specified	21
period of time or an indefinite period of time and under any terms	22
or conditions determined by the superintendent.	23

(B) The superintendent may suspend, revoke, or refuse to	24
issue or renew any license of an insurance agent, assess a civil	25
penalty, or impose any other sanction or sanctions authorized	26
under this chapter, for one or more of the following reasons:	27

(1) Providing incorrect, misleading, incomplete, or	28
materially untrue information in a license or appointment	29
application;	30

(2) Violating or failing to comply with any insurance law,	31
rule, subpoena, consent agreement, or order of the superintendent	32
or of the insurance authority of another state;	33

(3) Obtaining, maintaining, or attempting to obtain or	34
maintain a license through misrepresentation or fraud;	35

(4) Improperly withholding, misappropriating, or converting	36
any money or property received in the course of doing insurance	37
business;	38

(5) Intentionally misrepresenting the terms, benefits, value,	39
cost, or effective dates of any actual or proposed insurance	40
contract or application for insurance;	41

(6) Having been convicted of or pleaded guilty or no contest	42
to a felony regardless of whether a judgment of conviction has	43
been entered by the court;	44

(7) Having been convicted of or pleaded guilty or no contest	45
to a misdemeanor that involves the misuse or theft of money or	46
property belonging to another, fraud, forgery, dishonest acts, or	47
breach of a fiduciary duty, that is based on any act or omission	48
relating to the business of insurance, securities, or financial	49
services, or that involves moral turpitude regardless of whether a	50
judgment has been entered by the court;	51

(8) Having admitted to committing, or having been found to	52
have committed, any insurance unfair trade act or practice or	53
insurance fraud;	54

(9) Using fraudulent, coercive, or dishonest practices, or	55
demonstrating incompetence, untrustworthiness, or financial	56
irresponsibility, in the conduct of business in this state or	57
elsewhere;	58

(10) Having an insurance agent license, or its equivalent,	59
denied, suspended, or revoked in any other state, province,	60
district, or territory;	61

(11) Forging or causing the forgery of an application for	62
insurance or any document related to or used in an insurance	63
transaction;	64

(12) Improperly using notes, any other reference material,	65
equipment, or devices of any kind to complete an examination for	66
an insurance agent license;	67

(13) Knowingly accepting insurance business from an	68
individual who is not licensed;	69

(14) Failing to comply with any official invoice, notice,	70
assessment, or order directing payment of federal, state, or local	71
income tax, state or local sales tax, or workers' compensation	72
premiums;	73

(15) Failing to timely submit an application for insurance.	74
For purposes of division (B)(15) of this section, a submission is	75
considered timely if it occurs within the time period expressly	76
provided for by the insurer, or within seven days after the	77
insurance agent accepts a premium or an order to bind coverage	78
from a policyholder or applicant for insurance, whichever is	79
later.	80

(16) Failing to disclose to an applicant for insurance or	81
policyholder upon accepting a premium or an order to bind coverage	82
from the applicant or policyholder, that the person has not been	83
appointed by the insurer;	84

(17) Having any professional license or financial industry	85
regulatory authority registration suspended or revoked or having	86
been barred from participation in any industry;	87

(18) Having been subject to a cease and desist order or	88
permanent injunction related to mishandling of funds or breach of	89
fiduciary responsibilities or for unlicensed or unregistered	90
activities;	91

(19) Causing or permitting a policyholder or applicant for	92
insurance to designate the insurance agent or the insurance	93
agent's spouse, parent, child, or sibling as the beneficiary of a	94
policy or annuity sold by the insurance agent or of a policy or	95
annuity for which the agent, at any time, was designated as the	96
agent of record, unless the insurance agent or a relative of the	97
insurance agent is the insured or applicant;	98

(20) Causing or permitting a policyholder or applicant for	99
insurance to designate the insurance agent or the insurance	100
agent's spouse, parent, child, or sibling as the owner or	101
beneficiary of a trust funded, in whole or in part, by a policy or	102
annuity sold by the insurance agent or by a policy or annuity for	103
which the agent, at any time, was designated as the agent of	104
record, unless the insurance agent or a relative of the insurance	105
agent is the insured or applicant;	106

(21) Failing to provide a written response to the department	107
of insurance within twenty-one calendar days after receipt of any	108
written inquiry from the department, unless a reasonable extension	109
of time has been requested of, and granted by, the superintendent	110
or the superintendent's designee;	111

(22) Failing to appear to answer questions before the	112
superintendent after being notified in writing by the	113
superintendent of a scheduled interview, unless a reasonable	114
extension of time has been requested of, and granted by, the	115
superintendent or the superintendent's designee;	116

(23) Transferring or placing insurance with an insurer other	117
than the insurer expressly chosen by the applicant for insurance	118
or policyholder without the consent of the applicant or	119
policyholder or absent extenuating circumstances;	120

(24) Failing to inform a policyholder or applicant for	121
insurance of the identity of the insurer or insurers, or the	122
identity of any other insurance agent or licensee known to be	123
involved in procuring, placing, or continuing the insurance for	124
the policyholder or applicant, upon the binding of the coverage;	125

(25) In the case of an agent that is a business entity,	126
failing to report an individual licensee's violation to the	127
department when the violation was known or should have been known	128
by one or more of the partners, officers, managers, or members of	129
the business entity;	130

(26) Submitting or using a document in the conduct of the	131
business of insurance when the person knew or should have known	132
that the document contained a writing that was forged as defined	133
in section 2913.01 of the Revised Code;	134

(27) Misrepresenting the person's qualifications, status or	135
relationship to another person, agency, or entity, or using in any	136
way a professional designation that has not been conferred upon	137
the person by the appropriate accrediting organization;	138

(28) Obtaining a premium loan or policy surrender or causing	139
a premium loan or policy surrender to be made to or in the name of	140
an insured or policyholder without that person's knowledge and	141
written authorization;	142

(29) Using paper, software, or any other materials of or	143
provided by an insurer after the insurer has terminated the	144
authority of the licensee, if the use of such materials would	145
cause a reasonable person to believe that the licensee was acting	146
on behalf of or otherwise representing the insurer;	147

(30) Soliciting, procuring an application for, or placing,	148
either directly or indirectly, any insurance policy when the	149
person is not authorized under this chapter to engage in such	150
activity;	151

(31) Soliciting, selling, or negotiating any product or	152
service that offers benefits similar to insurance but is not	153
regulated by the superintendent, without fully disclosing, orally	154
and in writing, to the prospective purchaser that the product or	155
service is not insurance and is not regulated by the	156
superintendent;	157

(32) Failing to fulfill a refund obligation to a policyholder	158
or applicant in a timely manner. For purposes of division (B)(32)	159
of this section, a rebuttable presumption exists that a refund	160
obligation is not fulfilled in a timely manner unless it is	161
fulfilled within one of the following time periods:	162

(a) Thirty days after the date the policyholder, applicant,	163
or insurer takes or requests action resulting in a refund;	164

(b) Thirty days after the date of the insurer's refund check,	165
if the agent is expected to issue a portion of the total refund;	166

(c) Forty-five days after the date of the agent's statement	167
of account on which the refund first appears.	168

The presumption may be rebutted by proof that the	169
policyholder or applicant consented to the delay or agreed to	170
permit the agent to apply the refund to amounts due for other	171
coverages.	172

(33) With respect to a surety bail bond agent license,	173
rebating or offering to rebate, or unlawfully dividing or offering	174
to divide, any commission, premium, or fee;	175

(34) Using a license for the principal purpose of procuring,	176
receiving, or forwarding applications for insurance of any kind,	177
other than life, or soliciting, placing, or effecting such	178
insurance directly or indirectly upon or in connection with the	179
property of the licensee or that of relatives, employers,	180
employees, or that for which they or the licensee is an agent,	181
custodian, vendor, bailee, trustee, or payee;	182

(35) In the case of an insurance agent that is a business	183
entity, using a life license for the principal purpose of	184
soliciting or placing insurance on the lives of the business	185
entity's officers, employees, or shareholders, or on the lives of	186
relatives of such officers, employees, or shareholders, or on the	187
lives of persons for whom they, their relatives, or the business	188
entity is agent, custodian, vendor, bailee, trustee, or payee;	189

(36) Offering, selling, soliciting, or negotiating policies,	190
contracts, agreements, or applications for insurance, or annuities	191
providing fixed, variable, or fixed and variable benefits, or	192
contractual payments, for or on behalf of any insurer or multiple	193
employer welfare arrangement not authorized to transact business	194
in this state, or for or on behalf of any spurious, fictitious,	195
nonexistent, dissolved, inactive, liquidated or liquidating, or	196
bankrupt insurer or multiple employer welfare arrangement;	197

(37) In the case of a resident business entity, failing to be	198
qualified to do business in this state under Title XVII of the	199
Revised Code, failing to be in good standing with the secretary of	200
state, or failing to maintain a valid appointment of statutory	201
agent with the secretary of state;	202

(38) In the case of a nonresident agent, failing to maintain	203
licensure as an insurance agent in the agent's home state for the	204
lines of authority held in this state;	205

(39) Knowingly aiding and abetting another person or entity	206
in the violation of any insurance law of this state or the rules	207
adopted under it.	208

(40)(a) Providing, issuing, modifying, altering, or signing a	209
certificate of insurance that is on a form other than a standard	210
certificate of insurance form promulgated by the association for	211
cooperative operations research and development, the American	212
association of insurance services, the insurance services office,	213
or a nationally recognized insurance advisory organization that	214
has been designated or approved by the department of insurance, or	215
a form promulgated by the insurance company that has underwritten	216
the policy referenced in the certificate of insurance.	217

(b) A certificate of insurance is not a policy of insurance	218
and does not affirmatively or negatively amend, extend, or alter	219
the coverage afforded by the policy of which the certificate of	220
insurance provides evidence. A certificate of insurance shall not	221
confer to a certificate holder new or additional rights beyond	222
what the referenced policy of insurance expressly provides.	223

(c) No certificate of insurance shall contain references to	224
contracts, including construction or service contracts, other than	225
the referenced contract of insurance of which the certificate	226
provides evidence. Notwithstanding any requirement, term, or	227
condition of any contract or other document that a certificate of	228
insurance may be issued for or pertain to, the insurance afforded	229
by the policy of insurance referenced in the certificate is	230
subject only to all the terms, exclusions, and conditions of that	231
policy.	232

(d) A certificate holder shall have a legal right to notice	233
of cancellation, nonrenewal, or any material change, or any	234
similar notice concerning a policy of insurance only if the	235
certificate holder is named within the policy or any endorsement	236
to the policy and the policy or endorsement requires notice to be	237
provided to the certificate holder. The terms and conditions of	238
the notice, including the required timing of the notice, are	239
governed by the policy of insurance and cannot be altered by a	240
certificate of insurance.	241

(e) As used in division (B)(40) of this section:

242

(i) "Certificate of insurance" means a document or	243
instrument, regardless of how titled or described, that is	244
prepared or issued by an insurer or insurance agent licensed under	245
this chapter as evidence of property or casualty insurance	246
coverage. "Certificate of insurance" does not include a document	247
issued to an individual as evidence of purchasing coverage under a	248
master policy, or a policy of insurance, insurance binder, policy	249
endorsement, automobile identification card, or any document used	250
to provide proof of financial responsibility for purposes of	251
Chapter 4509. of the Revised Code.	252

(ii) "Certificate holder" means any person, other than a	253
policyholder, that requests, obtains, or possesses a certificate	254
of insurance.	255

(C) Before denying, revoking, suspending, or refusing to	256
issue any license or imposing any penalty under this section, the	257
superintendent shall provide the licensee or applicant with notice	258
and an opportunity for hearing as provided in Chapter 119. of the	259
Revised Code, except as follows:	260

(1)(a) Any notice of opportunity for hearing, the hearing	261
officer's findings and recommendations, or the superintendent's	262
order shall be served by certified mail at the last known address	263
of the licensee or applicant. Service shall be evidenced by return	264
receipt signed by any person.	265

For purposes of this section, the "last known address" is the	266
residential address of a licensee or applicant, or the	267
principal-place-of-business address of a business entity, that is	268
contained in the licensing records of the department.	269

(b) If the certified mail envelope is returned with an	270
endorsement showing that service was refused, or that the envelope	271
was unclaimed, the notice and all subsequent notices required by	272
Chapter 119. of the Revised Code may be served by ordinary mail to	273
the last known address of the licensee or applicant. The mailing	274
shall be evidenced by a certificate of mailing. Service is deemed	275
complete as of the date of such certificate provided that the	276
ordinary mail envelope is not returned by the postal authorities	277
with an endorsement showing failure of delivery. The time period	278
in which to request a hearing, as provided in Chapter 119. of the	279
Revised Code, begins to run on the date of mailing.	280

(c) If service by ordinary mail fails, the superintendent may	281
cause a summary of the substantive provisions of the notice to be	282
published once a week for three consecutive weeks in a newspaper	283
of general circulation in the county where the last known place of	284
residence or business of the party is located. The notice is	285
considered served on the date of the third publication.	286

(d) Any notice required to be served under Chapter 119. of	287
the Revised Code shall also be served upon the party's attorney by	288
ordinary mail if the attorney has entered an appearance in the	289
matter.	290

(e) The superintendent may, at any time, perfect service on a	291
party by personal delivery of the notice by an employee of the	292
department.	293

(f) Notices regarding the scheduling of hearings and all	294
other matters not described in division (C)(1)(a) of this section	295
shall be sent by ordinary mail to the party and to the party's	296
attorney.	297

(2) Any subpoena for the appearance of a witness or the	298
production of documents or other evidence at a hearing, or for the	299
purpose of taking testimony for use at a hearing, shall be served	300
by certified mail, return receipt requested, by an attorney or by	301
an employee of the department designated by the superintendent.	302
Such subpoenas shall be enforced in the manner provided in section	303
119.09 of the Revised Code. Nothing in this section shall be	304
construed as limiting the superintendent's other statutory powers	305
to issue subpoenas.	306

(D) If the superintendent determines that a violation	307
described in this section has occurred, the superintendent may	308
take one or more of the following actions:	309

(1) Assess a civil penalty in an amount not exceeding	310
twenty-five thousand dollars per violation;	311

(2) Assess administrative costs to cover the expenses	312
incurred by the department in the administrative action, including	313
costs incurred in the investigation and hearing processes. Any	314
costs collected shall be paid into the state treasury to the	315
credit of the department of insurance operating fund created in	316
section 3901.021 of the Revised Code.	317

(3) Suspend all of the person's licenses for all lines of	318
insurance for either a specified period of time or an indefinite	319
period of time and under such terms and conditions as the	320
superintendent may determine;	321

(4) Permanently revoke all of the person's licenses for all	322
lines of insurance;	323

(5) Refuse to issue a license;

324

(6) Refuse to renew a license;

325

(7) Prohibit the person from being employed in any capacity	326
in the business of insurance and from having any financial	327
interest in any insurance agency, company, surety bail bond	328
business, or third-party administrator in this state. The	329
superintendent may, in the superintendent's discretion, determine	330
the nature, conditions, and duration of such restrictions.	331

(8) Order corrective actions in lieu of or in addition to the	332
other penalties listed in division (D) of this section. Such an	333
order may provide for the suspension of civil penalties, license	334
revocation, license suspension, or refusal to issue or renew a	335
license if the licensee complies with the terms and conditions of	336
the corrective action order.	337

(9) Accept a surrender for cause offered by the licensee,	338
which shall be for at least five years and shall prohibit the	339
licensee from seeking any license authorized under this chapter	340
during that time period. A surrender for cause shall be in lieu of	341
revocation or suspension and may include a corrective action order	342
as provided in division (D)(8) of this section.	343

(E) The superintendent may consider the following factors in	344
denying a license, imposing suspensions, revocations, fines, or	345
other penalties, and issuing orders under this section:	346

(1) Whether the person acted in good faith;

347

(2) Whether the person made restitution for any pecuniary	348
losses suffered by other persons as a result of the person's	349
actions;	350

(3) The actual harm or potential for harm to others;

351

(4) The degree of trust placed in the person by, and the	352
vulnerability of, persons who were or could have been adversely	353
affected by the person's actions;	354

(5) Whether the person was the subject of any previous	355
administrative actions by the superintendent;	356

(6) The number of individuals adversely affected by the	357
person's acts or omissions;	358

(7) Whether the person voluntarily reported the violation,	359
and the extent of the person's cooperation and acceptance of	360
responsibility;	361

(8) Whether the person obstructed or impeded, or attempted to	362
obstruct or impede, the superintendent's investigation;	363

(9) The person's efforts to conceal the misconduct;

364

(10) Remedial efforts to prevent future violations;

365

(11) If the person was convicted of a criminal offense, the	366
nature of the offense, whether the conviction was based on acts or	367
omissions taken under any professional license, whether the	368
offense involved the breach of a fiduciary duty, the amount of	369
time that has passed, and the person's activities subsequent to	370
the conviction;	371

(12) Such other factors as the superintendent determines to	372
be appropriate under the circumstances.	373

(F)(1) A violation described in division (B)(1), (2), (3),	374
(4), (5), (6), (7), (8), (9), (10), (11), (12), (13), (14), (16),	375
(17), (18), (19), (20), (22), (23), (24), (25), (26), (27), (28),	376
(29), (30), (31), (32), (33), (34), (35), and (36) of this section	377
is a class A offense for which the superintendent may impose any	378
penalty set forth in division (D) of this section.	379

(2) A violation described in division (B)(15) or (21) of this	380
section, or a failure to comply with section 3905.061, 3905.071,	381
or 3905.22 of the Revised Code, is a class B offense for which the	382
superintendent may impose any penalty set forth in division	383
(D)(1), (2), (8), or (9) of this section.	384

(3) If the superintendent determines that a violation	385
described in division (B)(36) of this section has occurred, the	386
superintendent shall impose a minimum of a two-year suspension on	387
all of the person's licenses for all lines of insurance.	388

(G) If a violation described in this section has caused, is	389
causing, or is about to cause substantial and material harm, the	390
superintendent may issue an order requiring that person to cease	391
and desist from engaging in the violation. Notice of the order	392
shall be mailed by certified mail, return receipt requested, or	393
served in any other manner provided for in this section,	394
immediately after its issuance to the person subject to the order	395
and to all persons known to be involved in the violation. The	396
superintendent may thereafter publicize or otherwise make known to	397
all interested parties that the order has been issued.	398

The notice shall specify the particular act, omission,	399
practice, or transaction that is subject to the cease-and-desist	400
order and shall set a date, not more than fifteen days after the	401
date of the order, for a hearing on the continuation or revocation	402
of the order. The person shall comply with the order immediately	403
upon receipt of notice of the order.	404

The superintendent may, upon the application of a party and	405
for good cause shown, continue the hearing. Chapter 119. of the	406
Revised Code applies to such hearings to the extent that that	407
chapter does not conflict with the procedures set forth in this	408
section. The superintendent shall, within fifteen days after	409
objections are submitted to the hearing officer's report and	410
recommendation, issue a final order either confirming or revoking	411
the cease-and-desist order. The final order may be appealed as	412
provided under section 119.12 of the Revised Code.	413

The remedy under this division is cumulative and concurrent	414
with the other remedies available under this section.	415

(H) If the superintendent has reasonable cause to believe	416
that an order issued under this section has been violated in whole	417
or in part, the superintendent may request the attorney general to	418
commence and prosecute any appropriate action or proceeding in the	419
name of the state against such person.	420

The court may, in an action brought pursuant to this	421
division, impose any of the following:	422

(1) For each violation, a civil penalty of not more than	423
twenty-five thousand dollars;	424

(2) Injunctive relief;

425

(3) Restitution;

426

(4) Any other appropriate relief.

427

(I) With respect to a surety bail bond agent license:

428

(1) Upon the suspension or revocation of a license, or the	429
eligibility of a surety bail bond agent to hold a license, the	430
superintendent likewise may suspend or revoke the license or	431
eligibility of any surety bail bond agent who is employed by or	432
associated with that agent and who knowingly was a party to the	433
act that resulted in the suspension or revocation.	434

(2) The superintendent may revoke a license as a surety bail	435
bond agent if the licensee is adjudged bankrupt.	436

(J) Nothing in this section shall be construed to create or	437
imply a private cause of action against an agent or insurer.	438

Section 2. That existing section 3905.14 of the Revised Code	439
is hereby repealed.	440