HOUSE BILL NO. 1058
AN ACT TO REPEAL CHAPTER 17, TITLE 18, DELAWARE INSURANCE CODE, AND TO ENACT A NEW CHAPTER TO PROVIDE FOR THE LICENSING AND REGULATION OF INSURANCE AGENTS, BROKERS, ADJUSTERS, APPRAISERS AND CONSULTANTS.
Be it enacted by the General Assembly of the State of Delaware:
Section 1. Amend Chapter 17, Title 18, Delaware Code, by striking Chapter 17 in its entirety, and inserting in lieu thereof a new Chapter 17 to read as follows:
"CHAPTER 17. AGENTS, BROKERS, SOLICITORS AND ADJUSTERS
§1701. Scope, intent and concept of chapter
(a) This chapter shall govern the qualifications and procedures for granting certificates of authority to agents, brokers, surplus lines brokers, consultants, limited representatives, fraternal representatives, adjusters, apprentice adjusters, motor vehicle physical damage appraiser, apprentice motor vehicle physical damage appraisers, interim licensees and temporary licensees. The provisions of this chapter shall apply to all lines of insurance including, but not limited to, life, health, variable annuity and variable life, property, casualty, surety, title, credit, motor vehicle, travel, transportation and marine, and to all types of insurers, whether operating on a mutual, stock, reciprocal, fraternal, group or other plan.
(b) The intent of this chapter is to supersede 18 Del. C., Chapter 17, as enacted in 1968 and as subsequently amended, and to substitute therefor the basic provisions of the Uniform Agents & Brokers Licensing Act as approved by the National Association of Insurance Commissioners and as adapted by this chapter for Delaware.
(c) The basic concept of this chapter is to establish the qualifications for granting certificates of authority to professional insurance personnel; to establish the procedures to be followed in determining the initial and continuing qualifications for such personnel; to provide definitions of their authorities, duties, responsibilities and prohibitions, in a manner that will provide guidance to such personnel and control over such personnel by the Commissioner of Insurance for the benefit and protection of the citizens of the State of Delaware.
§1702. Definition and responsibilities of agent
(a) An agent is an individual, partnership or corporation holding an agent's certificate of authority and appointed by an insurer to solicit applications for policies of insurance, or to negotiate for policies of insurance on its behalf and, if authorized to do so by the insurer, to issue conditional receipts, to effectuate and/or to countersign insurance contracts.
(b) Any individual, partnership or corporation not having a certificate of authority as an agent, broker, surplus lines broker or limited representative, who solicits an application for a policy of insurance on behalf of an insurer, shall be deemed an agent and shall thereby become subject to all of the duties, responsibilities, liabilities, prohibitions, and penalties to which an agent of such insurer is subject, and such insurer, by compensating such individual, partnership or corporation through any of its officers, agents or employees for soliciting said policy of insurance, shall thereby have accepted and acknowledged such individual, partnership or corporation as its agent in such transaction.
() Every agent who solicits or negotiates an application for insurance of any kind shall, in any controversy between the insured or his beneficiary and the insurer, be regarded as the agent of the insurer and not of the insured or his beneficiary. This provision shall not affect the apparent authority of an agent.
§1703. Definition and responsibilities of broker
(a) A broker is any individual, partnership or corporation holding a broker's certificate of authority who, for compensation but not being appointed by an insurer as an agent, acts or aids in any manner in negotiating a contract for insurance for a party other than himself. A broker may not issue binders, conditional receipts or effectuate or countersign insurance contracts on behalf of the insurer.
(b) Any individual, partnership or corporation not holding a broker's certificate of authority, who acts or aids in any manner in negotiating contracts for insurance for a party other than himself with an insurer that has not appointed him as an agent, shall be deemed a broker and shall thereby become subject to all the duties, responsibilities, liabilities, prohibitions and penalties to which brokers are subject.
(c) Every broker who acts or aids in any manner in negotiating contracts for insurance for a party other than himself with an insurer who has not appointed the broker as its agent, shall be regarded, in any controversy between the insured or his beneficiary and the insurer, as representing the insured or his beneficiary and not the insurer; except that any insurer which directly or through any of its agents delivers in this State to any broker a policy of insurance pursuant to the application or request of such broker, shall be deemed to have authorized such broker to receive on the insurer's behalf payment of any Premium which is due on such policy of insurance at the time of its issuance or delivery.
§1704. Definition and responsibilities of surplus lines broker
A surplus lines broker is any individual, partnership or corporation holding a surplus lines broker's certificate of authority who acts or aids in any manner in negotiating contracts of insurance with an insurance company not licensed to transact business in this State, pursuant to the provisions of Chapter 19 of this title.
§1705. Definition and responsibilities of consultants
(a) A consultant is any individual, partnership or corporation holding a consultant's certificate of authority and who is not appointed by an insurer as its agent who, for a fee, holds himself or itself out to the public as being engaged in the business of offering advice, counsel, opinion or service with respect to the benefits, advantages or disadvantages to be obtained under any contract of insurance that could be issued in this State.
(b) A consultant shall serve with objectivity and loyalty the interests of his clients alone and shall render to his clients such advice, counsel, opinion or service as meets the clients' needs and interests.
(c) No consultant may accept any fee other than that fee agreed upon in advance by the consultant and his client.
(d) No consultant may accept any fee, commission or other consideration from an insurer for any activity for which the consultant has received or will receive a fee from his client.
(e) Before any consultant offers any advice, counsel, opinion or service to his client, a written agreement on a form approved by the Insurance Commissioner shall be prepared by the consultant and shall be signed by both the consultant and the client. The agreement shall outline the nature of the activity to be performed by the consultant and the amount of the fee to be paid to the consultant by the client. The consultant shall retain a copy of each such agreement for not less than three years after the completion of his activities under the agreement and the consultant shall make the agreement available for inspection by the Insurance Commissioner upon his request.
(f) A duly licensed agent or broker shall be entitled to serve as a consultant without a separate certificate of authority as a consultant provided he complies with the other provisions of this section.
§1707. Definition and responsibilities of limited representative
(a) A limited representative is any individual, partnership or corporation holding a limited representative's certificate of authority and appointed by an insurer to solicit or negotiate contracts for those lines of insurance which the Commissioner may deem, by regulation, essential for the transaction of insurance business in this State and which do not require that level of qualifications required for an agent's or broker's certificate of authority.
() A limited representative is subject to all the duties, responsibilities, liabilities, prohibitions and penalties to which agents are subject as pertains to the particular line or lines of insurance for which the limited representative holds a certificate of authority.
§1708. Definition and responsibilities of fraternal representatives
(a) A fraternal representative is any individual, partnership or corporation holding a fraternal representative's certificate of authority and appointed or authorized to act for a society or fraternal organization in the solicitation, negotiation or procurement of life, accident or health insurance or annuity contracts, and who receives no commissions except as specifically exempted from this requirement by section 6128 of this title.
§1709. Definition of responsibilities of adjuster
(a) An adjuster is any individual, firm or corporation who, for compensation as an independent contractor, or as the employee of or acting on behalf of an independent contractor, insurer, self-insurer, or managing general agent, investigates, estimates, negotiates settlement of claims arising under insurance contracts.
(b) None of the following shall be deemed to be an adjuster:
(1) An attorney at law licensed to practice law in this state.
(2) Employees of insurers, brokers or agents who work in the office of licensed employers, but who do not negotiate the settlement of claims as a part of their duties.
(3) A licensed agent or broker who adjusts or assists in the adjustment of losses arising under policies of insurance issued through or serviced by such agent or broker.
(c) No adjuster's certificate of authority shall be required for any adjuster sent into this State on behalf of an insurer for the investigation or adjustment of a particular unusual or extraordinary loss, or series of losses, resulting from a catastrophe common to all such losses.
(d) An adjuster shall be authorized to represent an insurer, self-insurer, agent or broker in investigating and negotiating settlement of claims arising under insurance contracts.
(e) An adjuster shall not be authorized to operate as a "public adjuster", representing directly or indirectly an insured for compensation in the investigation and negotiation of a settlement of a claim arising under an insurance contract.
§1710. Motor vehicle damage appraiser defined
(a) A motor vehicle physical damage appraiser is any individual, partnership or corporation whose business is the appraising of damage to motor vehicles.
(b) A motor vehicle damage appraiser shall be authorized to inspect damaged motor vehicles for the purpose of determining the amount of damage by providing a realistic estimate of the probable cost of repair or replacement.
(c) In all such examinations and/or estimates, the appraiser shall insure that the cost of repairing and/or replacing all damaged or missing parts which will affect the safe operation of the motor vehicle are included in the estimate of the probable cost of repair or replacement; estimates of the probable cost of repair or replacement shall not be based upon the use of used or reconditioned parts where the use of such parts may affect safe operation of the motor vehicle.
§1711. Apprentice adjusters or apprentice motor vehicle damage appraisers defined
(a) An apprentice adjuster or apprentice motor vehicle damage appraiser is an individual to whom an initial license as an adjuster or appraiser has been issued and who is qualified to be a licensed adjuster or appraiser in this State, except as to experience, Education and training.
(b) Such license shall be issued and shall be valid for a period not exceeding twelve (12) months and shall not be extended or renewed.
(c) An application for an initial license as an apprentice adjuster or apprentice appraiser shall be accompanied by a statement from a duly licensed adjuster or appraiser assuming full responsibility for the actions of such applicant undertaken under the requested license and certifying that such applicant is a full-time employee under the supervision of the licensed adjuster or appraiser.
§1712. Interim license defined
(a) An interim agent's license is a license issued to an applicant qualified in all respects as an agent except as to experience, education and training.
(b) An interim license shall be issued only upon the request of an insurer who:
(1) shall certify that the applicant meets the qualifications set forth in 18 Del. C. §1721.
(2) shall accept responsibility for training, supervision and liability for all actions of such applicant undertaken under the requested license of the agent for whom such license is requested.
§1713. Temporary license defined
(a) A temporary license is a license issued for the purpose of winding up the affairs of a licensee who is deceased, disabled or otherwise incapable of transacting insurance business.
(b) Such licenses shall be issued only in accordance with the provisions of §1719 of this Chapter.
§1714. Certificate of authority defined
(a) An insurance certificate of authority is a permanent license issued by the State Insurance Department to an individual, corporation, firm or partnership qualifying in one or more insurance capabilities and in one or more lines of authority as defined in §1716 of this Chapter.
(b) A certificate of authority shall be issued to the applicant by the Department, upon proper application, and shall attest to the applicant's qualifications, as verified by the Department under the provisions of §1721 of this Chapter and shall authorize the applicant to transact insurance business according to its terms.
(c) The certificate of authority shall be valid and effective unless and until:
(i) licensee fails to pay the annual fee or otherwise ceases to be qualified to hold such certificate of authority;
(ii) the certificate is revoked or terminated pursuant to §1733 of this Chapter.
§1715. Insurer's appointment
(a) Each insurer shall file with the Commissioner, in writing, an appointment identifying such insurer's agent(s), and/or limited or fraternal insurance representative(s) in this State. The appointment shall be signed by a representative of the insurer authorized, in writing, to appoint and terminate the employment of agents on behalf of the insurer and shall specify the individual members of any firm, corporation or partnership to whom authority is granted.
(b) The initial application for a certificate of authority for an agent, limited or fraternal representative shall be accompanied by an insurer's appointment as above provided.
§1716. Lines of authority enumerated
(a) An insurance agent may qualify for licensing for the following lines of authority:
(1) Life insurance - Code No. 1, defined in §902 of this Title.
(2) Variable annuity (including variable life) - Code No. 8, an annuity contract in which the periodic benefit varies usually in relation to security market values, a cost of living index or other variable factor, in contrast to a fixed or guaranteed annuity contract.
(3) Sickness, accident and health - Code No. 2, as defined in 1903 of this Title.
(4) Title insurance - Code No. 7, as defined in §908 of this Title.
(5) Fire and allied lines (property) - Code No. 4, as defined in §906 of this Title.
(6) Casualty (liability, home owners) - Code No. 5, as defined in §906 of this Title.
(7) Fidelity and surety - Code No. 6, as defined in §905 of this Title.
(8) Marine and transportation - Code No. 13, as defined in §907 of this Title.
(9) General lines - Code No. 3, including all lines of authority defined above except life insurance, variable annuity and title insurance.
(b) A limited representative may be qualified and licensed and a qualified insurance agent may hold one or more of the following limited lines of authority:
(1) Vehicle liability and vehicle damage (automobile insurance) - Code No. 9, as defined in §906(a) (1) (2).
(2) Credit life, credit health insurance - Code No. 10, as defined in §3702 (1) (2) of this Title.
(3) Public carrier's insurance - Code No. 11, which provides authority for persons representing public carriers to solicit and/or sell insurance incidental to the transportation of persons, or to the transportation and/or storage of property provided such insurance shall be limited to the persons or property to be transported and/or stored.
(c) A broker's certificate of authority may be issued for the following lines of authority:
(1) Life insurance (Code No. 1), general lines (Code No. 3), or life and general lines (Codes 1-3).
(2) A life broker's authority code includes authority for life and health (Codes No. 1 and 2, as defined).
(3) A general lines broker's authority includes the authority for all lines of insurance except title insurance (Code No. 7), life insurance (Code No. 1) and variable annuity (Code No. 8).
(0) A life and general lines broker's certificate of authority includes all lines of insurance except variable annuity (Code No. 8) and title insurance (Code No. 7).
(d) Surplus lines broker's qualification:
(1) A surplus lines broker's certificate of authority shall be issued only to licensed general lines brokers who are bona fide residents of the State.
(2) Such certificate of authority shall include all lines of insurance except life, title and variable annuity.
(e) A motor vehicle damage appraiser's certificate of authority shall convey authority for the appraisal of damage to motor vehicles only and shall not pertain to other types of damage appraisal.
(f) An adjuster's certificate of authority shall convey authority to investigate, estimate and negotiate settlement of claims on behalf of licensed agents, brokers, self-insurers or insurers in one or more of the following lines of insurance:
(1) Fire and allied lines - Code No. 4.
(2) Casualty insurance - Code No. 5.
(3) Fidelity and surety - Code No. 6.
(4) Automobile insurance - Code No. 9.
(5) Marine and transportation insurance - Code No. 13.
§1717. Exemptions to licensing requirement
(a) A certificate of authority as an insurance agent, broker, surplus lines broker, limited or fraternal representative, adjuster or appraiser shall not be required of any of the following:
(1) A regular salaried officer or employee of an insurance company, or of a licensed insurance agent, broker, surplus lines broker or limited representative, if such officer or employee's duties and responsibilities do not include the negotiation or solicitation of insurance.
(2) Person who secure and furnish information, but who do not solicit or make calls for the purpose of: sale of group or wholesale life insurance, annuities, or group, blanket or franchise health insurance as defined in Chapters 31 and 35 of this Title; or, enrolling individuals under such plans or issuing certificates thereunder or otherwise assisting in the administration of such plans, where no commission is paid for such services.
(3) Employers or their officers or employees, or the trustees of any employee trust plan, to the extent that such officers, employers, employees or trustees are engaged in the administration or operation of any program of employee benefits for their own employees or the employees of their subsidiaries or affiliates involving insurance issued by a licensed insurance company; provided, that such employers, officers, employees or trustees are not compensated directly or indirectly by the insurance company issuing such insurance.
§1718. Duties of licensed insurance personnel
(a) It is the duty and responsibility of all persons licensed in accordance with the provisions of this Chapter to transact insurance business hereunder and to conduct such business, at all times, in accordance with the highest standards of fidelity, good faith and sound business principles. Each licensee shall conduct business hereunder to insure that each transaction undertaken will, to the extent of the licensee's capabilities, meet the needs of the insurance buying public.
(b) No licensee shall
(1) employ manipulative, deceptive, misleading or fraudulent practices, devices or representations to induce the purchase of any policy of insurance and/or the settlement of any claim under any policy of insurance.
(2) make recommendations for the purchase of new insurance or the termination or surrender of existing insurance unless such licensee has reasonable grounds for believing that such recommendations are suitable for the client on the basis of available facts and information known to such licensee.
(3) solicit, negotiate or place insurance unless the licensee discloses all material facts relevant to the proposed insurance to such licensee's client.
(4) make extravagant claims regarding the management or investment ability of a particular insurer.
(5) employ any chart, table, sales aid or device which misrepresents or inadequately represents policy benefits, values or limitations in comparison with those of competitive insurers or insurance products.
(c) A licensee shall be personally liable for violations hereunder and may not avoid such liability by reliance upon the existence or continuation of any business practice, or upon the use of any products, printed sales aid or device offered or utilized by any insurer which such licensee represents or with whom the licensee transacts such insurance business.
(d) The Insurance Commissioner shall heat and determine alleged violations hereunder; penalties for violations shall be as provided in §1733 of this Title.
§1719. Temporary license
(a) The Commissioner may issue a temporary license as defined in §1713 of this Chapter, for any lines of insurance covered by any certificate of authority issued pursuant to this Chapter, for a period of ninety (90) days without requiring an examination, if Commissioner deems that such temporary license is necessary for the servicing of the insurance business involved in any of the following cases:
(1) To the surviving spouse, next of kin, personal representative or any employee of any individual holding any certificate of authority who becomes deceased; or to the spouse, next of kin, any employee or legal guardian of the holder of a certificate of authority who becomes disabled.
(2) To any partner or employee of a partnership or officer or employee of a corporation, upon the death or disability of an individual designated in any certificate of authority issued to said partnership or corporation.
(3) To the designee of any individual holding a certificate of authority who is entering upon active service in the Armed Forces of the United States of America.
(4) In any other circumstances where the Commissioner deems that the public interests will best be served by the issuance of such temporary license.
(b) The Commissioner may renew any temporary license for an additional term or terms of ninety (90) days each, not exceeding in the aggregate twelve (12) months for the entire period.
(c) A temporary license may cover only the same lines of insurance as were covered under the certificate of authority being replaced by the temporary license.
(d) The individual holding a temporary license may exercise the same powers as the individual holding the certificate of authority which is being replaced by the temporary license, without the necessity of any new appointments of the individual holding the temporary license by insurance companies who had previously appointed the holder of the certificate of authority. An individual holding a temporary license shall not be appointed by any additional insurance company that had not previously appointed the holder of the certificate of authority and shall not be authorized to deal in any additional lines of insurance not authorized under the original certificate of authority. This provision shall not prohibit any insurance company from terminating any of its appointments.
§1720. Interim agent's license
(a) The Commissioner may, at his discretion, and upon application, issue an interim agent's license to any applicant without an examination, provided that the applicant meets the qualifications described in §1721 except for the qualifications regarding education and training, and provided further that the applicant is sponsored by an insurance company authorized to transact insurance business in this State.
(b) The sponsoring insurance company, at the time of submitting an application for an interim agent's license to the Insurance Commissioner's Office, shall certify to the Commissioner that the sponsoring insurance company :
(1) has instructed the applicant in the duties and responsibilities of an agent.
(2) has verified, by an examination approved by the Commissioner and conducted by the insurance company, that the applicant has attained at least a minimum level of competency as an agent; provided that such examination shall be limited to the determination that the applicant has mastered the basic definitions of policy terms and forms, and has an understanding of an agent's duties, obligations and responsibilities, including legal and ethical duties, obligations and responsibilities.
(3) has conducted an investigation of the applicant's background and character and has ascertained that the applicant has the qualifications required by §1721 (a) (2) of this Chapter.
(4) does assume responsibility for the applicant's actions pertaining to all transactions undertaken by authority of the requested interim agent's license.
(c) An interim agent's license may be issued for either life and health insurance authority or for one or more of the following lines of authority: fire; casualty, surety; marine and transportation. No individual may hold more than one interim agent's license at the same time.
(d) An interim agent's license issued for life and health insurance authorities shall not be valid for more than 120 days. An interim agent's license issued for fire, casualty, surety or marine and transportation authority shall not be valid for more than 180 days. No interim agent's license may be renewed or extended.
(e) An individual holding an interim agent's license shall not have authority to bind an insurance company to a risk except that a conditional receipt may be issued in the case of applications for life insurance. All transactions of an individual holding an interim agent's license shall be submitted to the sponsoring insurance company through a licensed resident agent of the sponsoring insurance company.
§1721. Prerequisites for a certificate of authority
(a) The Commissioner shall not issue, continue or permit to continue any certificate of authority of any agent, limited or fraternal representative, broker, surplus lines broker, consultant, adjuster or motor vehicle physical damage appraiser, unless the applicant for or holder of the certificate of authority shall
(1) be at least 18 years of age, except for partnerships or corporations which shall be exempt from this requirement.
(2) be competent, trustworthy, financially responsible and of good reputation. Each application for an initial certificate of authority for each resident applicant shall contain the certification of the sponsoring insurance company that it has investigated the applicant's background and that the applicant meets this requirement.
(0) make his principal business occupation the transaction of insurance business under the requested certificate of authority, deriving therefrom on an annual basis not less than 50% of his entire income from his personal services, except that limited and fraternal representatives and those holding interim agent's licenses and temporary licenses shall be exempt from this requirement.
(1) have demonstrated his competence to act as to the type and line of authority applied for by successfully completing a written examination approved by the Commissioner, unless specifically exempted from such examination by any other provision of this Chapter.
(2) have filed with the Commissioner a request that he be appointed from an insurance company qualified to transact insurance business in this State, if the application be for an issuance of a certificate of authority for an agent or limited or fraternal insurance representative or for the issuance of an Interim agent's license.
(3) certify that the applicant does not intend to use the certificate of authority or license principally for the purpose of writing controlled business as defined in §1730 of this Chapter, except that limited representatives may write the following types of insurance:
(i) insurance on the interest of a sales or financing agency in a motor vehicle sold or financed by it;
(ii) insurance on the interest of a real property mortgagee in real property mortgaged by it; and
() credit life insurance;
(iv) credit health insurance.
(7) pay to the Commissioner all fees required by Chapter 7 of this title.
(b) An applicant may qualify for a resident certificate of authority if he resides in this State or maintains his principal place of business in this State, provided that any resident certificate of authority shall be void if the holder thereof also holds or makes application for a similar certificate of authority in any other State or jurisdiction, or thereafter claims to be a resident of any other State or jurisdiction; provided, however, that if such person is a resident of a community or county, the border of which is contiguous with the boundary line of this State, he may qualify and hold a similar resident certificate of authority from each State containing a portion of said community or trade area, without voiding his resident certificate of authority issued pursuant to this Chapter.
(c) An applicant may qualify for a non-resident certificate of authority only if he holds a similar certificate of authority in another State of the United States, Province of Canada or other foreign country, if the applicant complies with §1732 of this Chapter and pays to the Commissioner all fees required by this Chapter. A non-resident certificate of authority may be issued without the applicant taking any written examination, if the Commissioner of the State of the applicant's residence certifies to the Commissioner of this State that the applicant has passed a similar written examination or has been the continuous holder of a similar certificate of authority issued prior to the time such written examination was required in the State of his residence. A non-resident certificate of authority shall grant the same rights and privilege afforded to the holder of a resident certificate of authority, except as provided in §1723 of this Chapter. Similarly the holder of a nonresident certificate of authority shall be subject to all the duties, responsibilities, liabilities, prohibitions, to which a resident holder of a certificate of authority is subject.
§1722. Special qualifications
(a) Every applicant for a certificate of authority as a broker shall meet the prerequisites described in §1721 of this Chapter and, in addition thereto, shall file with the Commissioner a bond in favor of any citizen of the State of Delaware in a face amount of not less than $5,000.00 and guaranteed by a corporate surety approved by the Commissioner. The bond shall be continuous in form and shall be conditioned upon full accounting and due payment to all persons entitled thereto of any funds coming into the broker's possession as a result of the transaction of insurance business. The bond shall provide that it may not be terminated or cancelled unless at least thirty (30) days' prior written notice thereof has been given to the Commissioner.
(b) Every applicant for a certificate of authority as a broker, agent or limited representative requesting authority for lines of casualty, fire, surety or marine and transportation shall meet the prerequisites described in §1721 of this Title and, in addition thereto, shall establish and maintain in a commercial bank in this State one or more trust accounts separate from accounts holding his personal, firm or corporate funds, and shall forthwith deposit and retain therein all premiums and return premiums received by him, pending due transmittal of such premiums or return premiums to the appropriate insurance company or insured; provided, however, he may deposit and comingle in the same such trust account all premiums and return premiums received by him, if the persons to whom such funds are owed and the amount owed to each are reasonably distinguishable from accounts and records maintained by the applicant. The Commissioner may control the procedures for maintaining such trust accounts by regulation.
() Every applicant for a non-resident certificate of authority shall meet the requirements of subparagraph (b) above, except that the trust account may be established and maintained in a commercial bank in the State where the applicant resides.
(a) Every applicant for a certificate of authority as a broker must have held a certificate of authority as an agent for at least two years for all lines of insurance for which he has applied for a certificate of authority or must have had special education, training or experience which the Commissioner finds sufficient to adequately demonstrate the applicant's competence in fulfilling the responsibilities of a broker.
(e) Every applicant for a certificate of authority as a surplus lines broker must be a bona fide resident of this State and must have held a certificate of authority as a general lines broker for at least one year.
(f) Every applicant for a certificate of authority as an apprentice adjuster or apprentice motor vehicle damage appraiser must file with the Commissioner a certification from one holding a certificate of authority as an adjuster or motor vehicle physical damage appraiser in which said holder of the certificate of authority assumes responsibility for the applicant's training and for all actions undertaken by the applicant pursuant to the requested certificate of authority.
(g) Every applicant for a certificate of authority as an agent for the line of variable annuity must hold a certificate of authority as a life insurance agent and must be registered with the National Association of Security Dealers.
§1723. Retaliatory provisions
Every applicant for a non-resident certificate of authority shall be subject to the provisions of §531 of this title.
§1724. Exemption from written examination
The following shall be exempt from the requirement for a written examination, except for the examination required by §1726 of this Chapter:
(a) Every applicant for a resident certificate of authority covering the same or lines of insurance for which the applicant previously held a certificate of authority in this State, other than a temporary license, within twelve (12) months next preceding the date of the application, unless such previous certificate of authority was revoked, suspended or renewal thereof was refused by the Commissioner.
(b) Every applicant for a non-resident certificate of authority who resides in another State or jurisdiction which extends a similar exemption for Delaware applicants and who has held a similar certificate of authority in any other State within twelve (12) months prior to his application for a certificate of authority in this State and who files with the Commissioner a certification from the public official having supervision of insurance business of such other State or jurisdiction as to the applicant's certificate of authority and good standing in such other state or jurisdiction. A facsimile signature and seal of the certifying public official will be sufficient.
(c) Every applicant who has attained the designation of Chartered Life Underwriter shall only be required to take that portion of the written examination for lines of life, health, and variable annuity pertaining to the rules, regulations or State laws.
(d) Every applicant who has attained the designation of Chartered Property and Casualty Underwriter shall only be required to take that portion of the examinations for fire, casualty, surety or marine and transportation pertaining to rules, the regulations and State laws.
(e) Every applicant far a certificate of authority as an agent for title insurance who is an attorney.
(f) Every applicant for a certificate of authority as a limited representative for a public carrier.
(g) Every applicant for a certificate of authority as a fraternal representative qualified as described in §6128 of this Chapter.
(h) Every applicant for a certificate of authority as an adjuster who has successfully completed all phases of the Insurance Institute of America qualification requirements.
§1725. Written examination
The Commissioner, upon receipt of an application for a resident certificate of authority, shall subject each applicant to a written examination which the applicant must personally take and pass to the satisfaction of the Commissioner. If the applicant is a partnership or corporation and is not otherwise exempt, the written examination must be successfully taken by each individual who is to be named in the certificate of authority applied for. Each such written examination shall be approved for use by the Commissioner and shall reasonably test the applicant's knowledge of the lines of insurance, policies and transactions to be handled under the certificate of authority applied for and of the duties and responsibilities of the holder of such a certificate of authority and of the pertinent insurance laws of this State. There shall be a separate written examination for each line of insurance which the applicant proposes to transact under the certificate of authority applied for. All written examinations shall be conducted and administered in accordance with regulations issued by the Commissioner. The Commissioner may require a reasonable waiting period, not exceeding six (6) months, before permitting a re-examination of an applicant who has previously failed twice to pass a written examination covering the same lines of insurance.
§1726. Validation examination
(a) Holders of Delaware certificates of authority, both resident and non-resident, shall during the fifth calendar year following issuance of such certificate, and in every fifth calendar year thereafter, take a self-administered written examination prepared by the Department, the purpose of which shall be to determine that all holders of certificates of authority are familiar with current statutes, regulations and ethical requirements for the transaction of insurance business in this State.
(b) The examination shall be limited in scope to the lines of insurance for which the certificate(s) of authority is held and to changes in statutes, regulations and insurance products occurring during the five years preceding the examination year; the Department shall prepare and provide a syllabus setting forth, in summary form, all such changes and developments and the examination shall be limited to matters covered therein.
() The Commissioner shall notify holders of certificates of authority due for examination during the calendar year preceding the examination year and shall provide such holders with an application for examination.
(a) Each certificate holder shall complete and return the application for examination provided by the Commissioner and shall include with such application the examination fee as provided in Section 701 of this Title. Upon receipt of the examination, the Commissioner shall forward a syllabus and examination documents to the certificate holder.
(e) Each certificate holder shall, prior to the expiration of the examination calendar year complete and return the examination to the Department together with a signed statement certifying that the examination was personally completed without assistance. The examination shall be promptly, fairly and impartially graded and the results thereof transmitted to the certificate holder.
(f) The Commissioner shall establish a qualifying score. Any certificate holder not achieving such score may be reexamined, upon application and payment of the examination fee. The certificate of authority of any individual who fails to submit and/or pass such examination prior to the expiration of the examination calendar year shall be suspended and shall remain suspended until such individual is examined and achieves a qualifying score; provided, however, any certificate of authority which shall remain suspended hereunder for more than six months shall automatically terminate. Termination hereunder shall be without right of renewal unless the holder shall make application for and qualify for a permanent license.
(g) Every certificate of authority holder shall notify the Commissioner of any change in residential or business address within thirty (30) days thereof. A certificate of authority may be suspended for failure to give notice of change of address hereunder.
§1727. Application for a certificate of authority
(a) An application for a certificate of authority by an agent, broker, limited and/or fraternal representative, adjuster, and motor vehicle damage appraiser shall be submitted, on forms provided for that purpose, to the Commissioner upon receipt of notice from the Commissioner that the examination for such certificate of authority has been satisfactorily completed by such applicant.
(b) Applications will be submitted in accordance with the regulations issued by the Commissioner and shall be accompanied by all fees prescribed in Section 701 of this Title.
§1728. Certificate of Authority (a) Form.
(1) The certificate of authority shall contain the name, resident or non-resident status, type and line or lines of authority conveyed and such other information as the Commissioner shall, from time to time, require.
(2) The certificate of authority of an agent shall not identify the insurer or insurers for whom the agent is authorized to act, except as provided in Section 1719 and Section 1720 of this Chapter.
(3) A licensee qualified as an agent, limited or fraternal representative, shall have the authority to represent as many insurers as may file appointments with the Commissioner designating the licensee as agent.
(1) The licensee shall maintain at his principal place of business the certificate of authority issued by the Commissioner, together with such records as may be reasonably required by the Commissioner. Such records shall show, for each policy or contract placed or countersigned by or through the licensee, names of the insurers, insureds, policy number, expiration date thereof, premium payable under the terms of the policy or contract, claims data and such other information as the Commissioner may, from time to time, require. Records shall be retained and available for inspection by the Commissioner for a period of three years.
(2) Nothing in this Section shall prohibit the licensee from maintaining its principal place of business at his residence.
(3) All certificates of authority issued hereunder shall be and remain the property of the State of Delaware. Upon expiration, termination, suspension or revocation of a certificate of authority, the licensee or other person having custody or control of such certificate shall forthwith deliver it to the Commissioner, either in person or by mail. In the event of loss or destruction of a certificate of authority, the Commissioner may accept in lieu of surrender thereof a signed statement from a licensee or other individual certifying the loss or destruction thereof.
(c) Term. All certificates of authority issued under this Chapter, except interim and temporary licenses, shall be valid and effective unless and until:
(1) The certificate is revoked or terminated pursuant to Section 1733 of this Chapter.
(2) The licensee no longer qualifies for licensing under Section 1721 of this Chapter.
(3) The licensee fails to pay annual continuation fees (if licensed as a broker, surplus lines broker, adjuster, motor vehicle damage appraiser or consultant), or fails to file the annual insurer's request for appointment continuation (if licensed as an agent or limited or fraternal representative), or fails to pay fees due in accordance with Section 701 of this Title.
(d) The Commissioner shall prescribe the date for and procedures to be followed in filing annual continuation requests and annual continuation of insurers appointments, by published bulletin or regulation.
() Applications for annual continuation of certificates of authority and/or agent's appointments filed in the form and at such time as may be provided by regulation will be processed and approved by the Department. Applications filed within thirty (30) days after the filing date will be subject to a late filing fee equal to fifty (50%) per cent of the applicable application fees, which shall accompany the application.
(a) If a continuation application shall not have been filed within thirty (30) days of the date prescribed, such license shall expire and terminate at midnight on the thirtieth day following the date announced by regulation for such filing. The certificate of authority shall forthwith be recalled by the Commissioner and the holder of such expired certificate shall be required to re-qualify by application for an initial license.
(b) If no annual request for continuation of agent and/or limited and fraternal representatives' authority shall be filed by the insurer, the authority of such agents and/or limited and fraternal representatives to represent such insurers, shall terminate effective at midnight on the thirtieth day following the published date for such filings.
(c) The authority of agents, limited or fraternal representatives shall remain in effect so long as at least one current insurer's appointment for each line of authority for which the licensee is qualified remains in effect. One year following the termination of an agent's final appointment in a line or lines of authority, the Commissioner shall recall such licensee's certificate of authority and delete such line or lines of authority therefrom for which no appointment has been filed.
§1729. Termination of appointment; agents limited representatives
(a) Subject to the terms of any agreement between an insurer and agent, if any, an insurer or agent may terminate an agency appointment at any time. If termination is by the insurer, the insurer shall promptly give written notice of termination and the effective date thereof to the Commissioner and to the agent.
(b) All notices of termination shall be filed on forms prescribed by the Commissioner and shall set forth the cause for such termination.
(c) If termination is based upon violation of any of the duties set forth under Section 1718 of this Chapter, the insurer shall so notify the Commissioner. Any information, document, record or statement provided pursuant to this Section may be used by the Commissioner in any action taken pursuant to Section 1733; provided, however, such information shall be absolutely privileged in any civil action between the insurer and agent, and no cause of action shall exist by an agent against an insurer for furnishing such information to the Commissioner.
§1730. Controlled business
(a) The Commissioner shall not grant, renew, continue or permit to continue any certificate of authority if he finds that the license is being used by an agent or will be used by an applicant for the purpose of writing "controlled business"; "controlled business" shall be:
(1) Insurance written in the interest of the licensee or of his immediate family or of his employer.
(2) Insurance written to cover the licensee or members of his immediate family or a corporation, association or partnership, where the officers, directors, substantial stockholders, partners, and/or employees of such a corporation, association or partnership, of which he, or member of his immediate family, is an officer, director, substantial stockholder, partner, associate or employee. Provided, however, that nothing in this Section shall apply to insurance written in connection with credit transactions, as defined in Section 906(a) (9) of this Title.
(b) A certificate of authority shall be deemed to have been used for the purpose of writing "controlled business" if the Commissioners finds that during any twelve-month period, commissions earned on such controlled business have exceeded 25% of the aggregate commissions earned on all business written by the licensee during the period.
(c) This Section shall not apply to:
(1) Insurance protecting the interests of a sales or financing agency and a motor vehicle sold or financed by such agency.
(2) Insurance of the interest of a real property mortgagee and mortgaged property.
(3) Credit life and credit health insurance as defined in Section 3702 (1) (2) of this Title.
(d) As a condition of or in connection with continuation of any certificate of authority, the Commissioner may require the licensee to file such information pertaining to the applicant's business under such certificate of authority during the preceding year.
§1731. Commissions, payments; acceptance; fees
(a) No insurer, insurance agent, insurance broker, surplus lines insurance broker, consultant or limited insurance representative shall pay, directly or indirectly, any commission, finder's fee, brokerage fee or other valuable consideration to any persons for services as an insurance agent, broker, surplus lines insurance broker or limited insurance representative within this State, unless such person held at the time such services were performed a valid license for that line of insurance as required by the laws of this State; nor shall any person not duly licensed by this State as an insurance agent, insurance broker, surplus lines broker or limited insurance representative at any time such services were performed, accept any such commission, brokerage fee or other valuable consideration.
(b) Any person duly licensed under this Chapter may pay or sign his commissions, or direct that his commissions be paid to a licensed partnership, firm, association or corporation of which he is an officer, employee or agent.
(c) This Section shall not prohibit payment or receipt of renewal or other deferred commissions to or by any person otherwise entitled thereto under this Chapter.
(d) This Section shall not prohibit payment or receipt of commissions or fees in connection with application for insurance submitted under the Delaware Assigned Risk Plan (Section 2527 of this Title) or FAIR plan (Sections 4107-4113 of this Title); nor to individuals holding interim or temporary licenses.
() No licensed agent, limited or fraternal insurance representative shall charge or collect a fee which has not been filed as a part of the premium in accordance with 18 Del. C. Section 2503.
() This Section shall not preclude the collection of fees by a licensed broker who may charge a service fee for services rendered to a client pursuant to an express agreement, made in advance, for the payment of such service fees.
§1732. Nonresident power of attorney
(a) Every non-resident licensed under this Chapter shall designate the Commissioner, by written instrument, as his attorney upon whom may be served all legal process issued in connection with any action or proceeding brought or pending in this State against or involving the licensee and relating to transactions arising from or in connection with licensing hereunder. The appointment shall be irrecoverable and shall continue in force so long as any action or proceeding may be commenced. The Commissioner shall prescribe and furnish the designation forms.
(b) Process shall be served upon the Commissioner or Deputy Commissioner or such other person (s) within the Department as the Commissioner shall designate, in duplicate, and shall be accompanied by a process fee of $2.50. Upon receipt of such process, the Commissioner shall forthwith transmit a copy thereof by registered or certified mail, with return receipt requested, to the non-resident licensee at his business address of record with the Commissioner.
(c) Service of process and the transmission thereof to the licensee hereunder shall, for all intents and purposes constitute personal service of process upon the licensee.
§1733. Penalty bond
(a) The Commissioner may require an individual, firm or corporation licensed under this Chapter to post a monetary penalty bond of not less than $25 and not more than $2,000 with the Department if, upon investigation the Commissioner finds reasonable grounds to believe that such individual, firm or corporation has committed one or more of the violations set forth in subparagraph (c) hereof. Such bond shall be held by the Department and a hearing shall be held not later than sixty (60) days following imposition of the bond, except upon application of the licensee, the hearing date may be postponed to a later date. Following the hearing, the Commissioner shall refund all sums held hereunder if no violation shall be established and may, if a violation or violations be found, declare forfeit all or part of such bond.
(b) Failure to post bond within ten (10) days shall automatically suspend licensee's authority to transact business under this Chapter until such time as the Commissioner has conducted a hearing and issued a final order hereunder.
(c) The Commissioner may require a monetary penalty bond upon a finding of probable cause to believe that any one or more of the following offenses have been committed and may, following hearing, suspend, revoke, refuse to issue and/or refuse to continue a certificate of authority for any person or firm found to have committed one or more of the following offenses:
(1) Concealment of any material fact which, if known to the Commissioner at the time of issuance of a license hereunder would have been grounds for refusal to issue such license.
(2) Willful violation of or non-compliance with any insurance laws or any lawful regulation, rule or order of the Department, Commissioner or of a Commissioner or Department of insurance of another state.
(3) Any materially untrue statement in the license application.
(4) Obtaining or attempting to obtain such license through misrepresentation or fraud.
(5) Improperly withholding, misappropriating or converting to one's own use any monies belonging to policy-holders, insurers, beneficiaries or others received in the course of transaction of insurance business.
(6) Willful misrepresentation of the terms of any actual or proposed insurance contracts.
(7) Conviction of any unfair trade practice or fraud defined in this Code.
(8) Use of fraudulent, coercive or dishonest practices or incompetence, untrustworthiness or financial irresponsibility in the conduct of insurance business under this license.
(9) Suspension or revocation of the licensee's license in another state, province, district or territory.
(10) Forgery by the licensee in connection with application for any application for insurance.
(11) Offering or receiving assistance in completion of any examination or issuance or renewal of an insurance license.
(12) Conviction by final judgment, of a felony involving moral turpitude.
(d) The Commissioner's order to post a penalty bond shall set forth the offense charged, the amount to be posted and the right to the licensee to request a hearing on all questions of fact pertaining to the violation charged.
(e) Upon issuance of an order to post bond, the Commissioner shall promptly notify any insurer currently authorizing the licensee to represent such insurer.
(f) Penalty bonds forfeited hereunder shall be forwarded to the State Treasurer.
§1734. Termination or suspension of certificate of authority; fines
(a) The Commissioners may suspend a certificate of authority for not more than twelve (12) months or may revoke or refuse to continue any certificate of authority issued under this Title if, after hearing, it is determined that the licensee has committed one or more of the violations enumerated in Section 1733 (c) of this Chapter.
(b) In lieu of such suspension, revocation or refusal to continue, the Commissioner may levy a fine upon the licensee of not less than $25 and not more than $2,000 for each such violation. The Commissioner's order shall specify the date upon which such fine shall be paid and shall revoke the license of any licensee failing to comply with such order. The date on which payment shall be due shall be not less than 15 days following the date of the Commissioner's order. The Commissioner may institute a civil action to recover fines so levied and shall pay over all fines paid and were recovered to the State Treasurer.
(c) In the event of suspension, revocation or refusal to continue any certificate of authority hereunder the Commissioner shall give notice of such action to all insurers represented by the licensee.
(d) The Commissioner shall not again issue a certificate of authority under this Title to any person whose license has been revoked until
(i) The expiration of one year from the date of revocation; and
(ii) Until such person shall qualify for licensing in accordance with the applicable provisions of this Title. A person whose license has been revoked on two occasions shall not again be licensed under this Title.
(e) The license of a firm, partnership or corporation may be suspended, revoked or refused if the Commissioner finds, after a hearing, that one or more of the violations set forth in Section 1733 of this Chapter has been committed by an individual employed by such partnership, firm or corporation licensed and that such violation or violations were known or should have been known to one or more of the partners, officers or managers acting on behalf of such firm and that such violation was neither corrected nor reported to the Insurance Department.
All hearings held pursuant to this Chapter shall be governed by Chapter 3 of this Title and such additional implemented regulations as may be published by the Insurance Commissioner.
§1736. Conservation of agent or broker business
(a) If the Commissioner finds that the business of any licensed general lines agent or broker in this State has become financially impaired or insolvent, or has been abandoned by the licensee, or has been conducted in such a manner as to require or justify revocation of the licenses of that licensee, and if the Commissioner further finds that the conservation and administration of the business of the licensee would be in public interest, he shall file in the Court of Chancery in the County in which the agent or broker's business is located a Petition for the appointment of the Commissioner as Conservator or Receiver of such agent or broker's business.
() The Petition shall be verified by the Commissioner and shall set forth the facts and circumstances from which the existence of one or more of the grounds required under subsection (a) above, may be determined; such petition may request that the licensee be required to show cause why the petition should not be granted.
(a) A copy of the petition, and of the order to show cause, if they are issued, shall be served upon the licensee in the same manner as provided by law of this State for service of other legal process.
(b) Upon the filing of a petition and pending a hearing upon the order to show cause, the Court may, upon good cause shown and without notice to the other party, appoint the Commissioner as temporary conservator or receiver of the agent's or broker's business.
(c) The Commissioner shall, as conservator or receiver, be authorized and empowered to conduct and administer the affairs of the agent or broker business in order to expeditiously terminate such business and, to the extent reasonably possible to provide services and an accounting for funds to all persons previously insured and to insurers who have previously been doing business through such agent or broker. Subject to the Court's order, the Commissioner, shall have the power to collect funds owed to the agent or broker on account of insurance business transacted by him, and to account for and make payment of those funds to such persons as are entitled to them.
(f) The Commissioner may delegate the actual conduct and administration of the business of the agent or broker to a Deputy or other regular employee of the Department, and no charges for services so rendered shall be made against the funds or assets of the agent or brokerage business.
(g) Except as expressly herein provided, receivership or conservatorship shall be subject to the applicable laws of this State and to the Order of any court of competent jurisdiction,
§1737. Counter signature
Any statute or rule of law to the contrary notwithstanding a non-resident agent holding a current Delaware non-resident agent certificate of authority shall not be required to obtain a counter signature by a resident Delaware agent on any policy or policies of insurance effected by such nonresident agent.
§1738. Rules and regulations
The Commissioner of insurance may issue reasonable rules and regulations for the implementation and administration of the provisions of this title.
§1739. Conflict with the laws
All statutes, parts of statutes and rules of law of this State which are inconsistent with the provisions of this Chapter are hereby superseded.
Section 2. If any provision of this Chapter or its application to any person or circumstances is held invalid, that invalidity shall not affect other provisions or applications of this Chapter or the application thereof and the provisions of this Chapter are and shall be deemed severable.
Section 3. Effective date
This chapter shall take effect six months after signature by the Governor.
Approved July 29, 1974.