Delaware General Assembly


CHAPTER 424

FORMERLY

HOUSE BILL NO. 332

AS AMENDED BY HOUSE AMENDMENT NO. 1 AND

SENATE AMENDMENT NO. 1

AN ACT TO AMEND CHAPTER 17. TITLE 18, DELAWARE CODE RELATING TO INSURANCE AGENTS. BROKERS. AND OTHER LICENSEES OF THE INSURANCE DEPARTMENT.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE. OF DEI.AWARE:

Section 1. Amend Chapter 17, Title 18, Delaware Code by striking said chapter in its entirety and by substituting in lieu thereof the following:

"CHAPTER 17. AGENTS, BROKERS. CONSULTANTS, ADJUSTERS, APPRAISERS. AND LIMITED REPRESENTATIVES

1701. Scope and intent of chapter.

(a) This chapter shall govern the qualifications and procedures for granting licenses to agents, brokers, surplus lines brokers, consultants, fraternal representatives. adjusters, apprentice adjusters, property damage appraisers, apprentice property damage appraisers, and temporary licensees, This chapter shall apply to all lines of insurance including, but not limited to, life, health, variable annuity and variable life, properly. 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) This chapter shall establish the qualifications for granting licenses to professional insurance personnel; to establish the procedures to he 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.

1702. Definitions.

As used in this Chapter:

(1) 'Adjuster' means a licensee of the Department who. as an independent contractor, or on behalf of an independent contractor, insurer, self-insurer, agent, broker, or managing general agent, investigates and/or negotiates settlement of claims arising under insurance contracts.

(2) 'Agent' means a licensee of the Department 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.

(3) 'Appraiser' means a licensee of the Department who assesses property damage to motor vehicles.

(4) 'Apprentice' means a licensee of the Department who is qualified in all respects as an adjuster or appraiser, except as to experience, education, and/or training.

(5) ‘Broker’ means a licensee who for compensation negotiates on behalf of others contracts for insurance from companies to whom he or she is not appointed.

(6) 'Consultant' means a licensee of the Department who tin compensation holds himself/herself 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 he obtained under any contract of insurance that could he issued in this State.

(7) 'Fraternal Representative' means a licensee of the Department who is appointed or authorized to act tin a society of fraternal organization in the solicitation. negotiation, procurement, or making of a life insurance, accident, and health insurance or annuity contract. for no compensation except as specifically exempted from this requirement by § 6128 of this Title.

(8) 'Interim Agent' means a licensee of the Department who is qualified in all respects as an agent except as to experience, education, and training.

(9) 'Licensee' means a person who is licensed by the Department in accordance with this title.

(10) 'Limited Representative' means a licensee of the Department who is authorized by the Commissioner to solicit or negotiate contracts for a particular line of insurance which the Commissioner may by regulation deem essential for the transaction of insurance business in this State and which does not require the professional competency for an insurance agent or insurance broker's license.

(11) 'Solicitation' or 'solicit' means conduct or communication by any person which is intended to offer or effectuate a contract or policy of insurance for a particular person(s), natural or corporate, and for which a commission or other form of compensation will be paid, or is expected, either directly or indirectly the term does not include advertisement of insurance contracts or policies which are disseminated generally

(12) 'Surplus Lines Broker' means it licensee of the Department who acts or aids in any manner in negotiating contracts of insurance with an insurance company not licensed to transact business in this State

(13) 'Travel Accident X Baggage Agent' means a licensee of the Department who is a ticket-selling agent or other representative of a common carrier who solicits over-the-counter. short-term, non-renewable, travel accident ticket policies and baggage insurance.

1703. Agents.

(a) Any person not duly licensed 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.

(b) Every agent who solicits or negotiates an application for insurance of any kind shall. In any controversy between the insured or his/her beneficiary and the insurer, be regarded as the agent of the insurer and not or the insured or such beneficiary. 'fins provision shall not affect the apparent authority of an agent

1704. Brokers

(a) A broker may not issue binders, conditional receipts, or effectuate or countersign insurance contracts on behalf of the insurer.

(b) Any person not holding a broker's license, who acts of 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/herself with an insurer who has not appointed the broker as its agent, shall be regarded, in any controversy between the insured or his/her beneficiary and the insurer, as representing the insured or his/her 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 of deliver.

(d) A licensed agent may be licensed as a broker and be a broker to insurers for which he/she is not licensed as an agent. A licensed broker may be licensed as and be an agent to insurers when so appointed. The sole relationship between a broker and an insurer for which the broker is licensed as an agent shall, as to transactions arising during the relationship, be that of insurer and agent.

1705. Surplus Lines Brokers.

(a) All transactions entered into by a surplus lines broker as such shall be subject to Chapter 19 of this title.

1706. Consultants.

(a) A consultant shall serve the interests of his/her clients alone and shall render to his/her clients such advice, counsel, opinion or service as meets the clients' needs and interests.

(b) No consultant may accept any fee other than that fee agreed upon in advance by the consultant and his/her client.

(c) 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/her client.

(d) Before any consultant offers any advice, counsel, opinion, or service to his/her client, a written agreement on a form approved by the 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/her activities under the agreement and the consultant shall make the agreement available for inspection by the Department upon the Commissioner's request.

(e) A duly licensed agent or broker shall be entitled to serve as a consultant without a separate license therefore provided he/she complies with all other provisions of this section.

1707. Limited Insurance Representative.

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 license.

1708. Fraternal Representatives.

All transactions entered into by a fraternal representative as such shall be subject to the provisions of Chapter 61 of this title.

1709. Adjusters.

(a) None of the following shall be deemed to be an adjuster.

(1) An attorney-at-law licensed to practice law in this State who negotiates insurance losses from time to time and incidental to the practice of law, and who does not advertise or represent that he is an adjuster.

(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.

(4) Any person who negotiates and/or settles claims arising under life and health insurance policies.

(b) No adjuster's license shall be required for any adjuster sent into this State on behalf of an insurer for the investigation or adjustment of a particularly unusual or extraordinary loss, or series of losses, resulting from a catastrophe common to all such losses; provided that such adjuster shall furnish to the Commissioner written notice within 10 calendar days of any such catastrophic insurance adjustment work.

(c) Every adjuster who investigates any claim under any insurance contract covering property located in this State shall promptly report to the Commissioner any facts or circumstances found and from which he/she believes fraud has been committed or attempted pursuant to Chapter 24 of this title.

(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 he 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.

(f) No insurance company. agent, adjuster. or appraiser or any person employed to perform their service shall recommend the use of a particular service or source for the repair of property damage without clearly informing the claimant that the claimant is under no obligation to use the recommended repair service.

(g) No insurance company, agent. adjuster, or appraiser or any other person employed to perform their service shall accept any gratuity from a repair service for recommending that repair service to a claimant.

1710. Appraisers.

(a) An appraiser shall be authorized to examine damaged property in accordance with § 1716(d) of this Title.

(b) In any such examination or estimate conducted pursuant to this section the appraiser shall insure that the cost of repairing and/or replacing all damaged and/or missing parts which affect the sale operation of the 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 sale operation of the vehicle.

(c) An appraiser must provide the vehicle owner or the appropriate repair facility with such itemized legible repair appraisal. All appraisal(s) are to include the licensee's name.

(d) All appraisals must be based on the appraiser expertise and not biased or influenced by any individual. owner, repair facility, or insurer. The licensee will negotiate in good faith any discrepancies with the repair facility to restore damaged property to its pre-damaged condition.

1711. Apprentice Adjusters and Appraisers.

(a) An apprentice license shall be issued and valid for a period not exceeding 12 months and may be extended or renewed only upon the written approval of the Commissioner.

(b) An application for an initial license as an apprentice adjuster or apprentice appraiser shall be accompanied by a statement front a duly licensed adjuster or appraiser assuming full responsibility for the actions of such applicant taken under the requested license and certifying that such applicant is a full-time employee under the supervision of the licensed adjuster or appraiser. Apprentice adjusters and apprentice appraisers are restricted to participation in factual investigation and tentative closing of losses subject to the review and final determination of a licensed adjuster/appraiser.

(c) Compensation of an apprentice adjuster or apprentice appraiser shall be on a salary basis only.

1712. Travel Accident & Baggage Agents.

(a) The Commissioner may issue a travel accident and baggage agent license without examination to a ticket selling agent or other representative of a common carrier upon filing with the Commissioner an application for a license and appointment and paying the fee prescribed for agents under § 701 of this Title.

(b) A license so issued enables the licensee to solicit and sell only over-the counter, short-term, nonrenewable travel accident ticket policies and baggage insurance of such insurer.

1713. License Requirements.

(a) No person shall act as or hold himself/herself out to be a licensee of this Department, an insurance agent, or broker for any line or lines of insurance unless duly licensed for such line or lines in accordance with this Title.

(a) A license shall be issued to an applicant by the Department upon proper application attesting to the applicant's qualifications, as verified to the Department under § 1721 of this Title. A license issued pursuant to this title shall authorize the applicant to transact insurance business according to its terms.

(b) Except as provided in (d), all licenses issued pursuant to this title shall be valid and effective unless and until:

(1) The licensee fails to complete the minimum continuing education credit units prescribed by regulation for license continuation, or the licensee otherwise ceases to be qualified to hold such license, and/or

(2) the license is revoked or terminated pursuant to provisions Of this chapter.

(a) the license of agents 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. However, during such time period, no new business shall be written unless with a company by which an agent is appointed. One year following, the termination of an agent's final appointment in a line or lines of authority, the Commissioner shall recall the license and delete such line or lines of authority therefrom for which no appointment has been tiled.

(e) No agent shall place any insurance with any insurer as to which he/she does not hold a license and appointment as agent under this chapter

(f) No person shall act as an appraiser for property damage claims on-behalf of any insurance company or firm or corporation engaged in the adjustment or appraisal of property damage claims unless such person has first secured an appropriate appraiser or adjuster license from the Commissioner.

(g) The Commissioner shall prescribe all forms required under this chapter as to licenses and appointments.

1714. Insurer's Appointment.

(a) Each insurer shall tile with the Commissioner. in writing, an appointment identifying such insurer's agent(s), and/or fraternal insurance representatives) 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. No agent shall solicit insurance on behalf of an insurer prior to the filing of an appointment pursuant to this subsection.

(b) The initial application for a license for an agent or fraternal representative shall be accompanied by an insurer's appointment as above provided.

1715. Termination of Appointment.

(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. Failure of the insurer to notify the Commissioner of the termination of an appointment, regardless of whether terminated by the insurer or the agent, shall result in a non-rebuttable presumption that the agent or fraternal representative continues to be authorized to bind the insurer.

(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 §1718 of this title, 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 this title; 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.

1716. LINES OF AUTHORITY ENUMERATED.

(a) An insurance agent may quality for licensing for the following lines of authority:

(1) Life insurance, as defined in § 902 of this title.

(2) Variable annuity (including variable life), which means 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) Health insurance, as defined in § 903 of this title.

(4) Medicare supplement insurance and long-term care insurance, as a supplement to a license issued pursuant to (3) above.

(5) Title insurance, as defined in § 908 of this title.

(6) Fire and allied lines (property), as defined in § 904 of this title.

(7) Casualty (liability, home owners), as defined in § 906 of this title.

(8) Fidelity and surety, as defined in § 905 of this title.

(9) Marine and transportation insurance, as defined in § 907 of this title.

(10) General lines, which includes all lines of authority defined above except life insurance, variable annuity, and title insurance.

(b) A broker's license may be issued for life insurance and/or general lines, as defined above.

(c) Surplus lines broker's qualification:

(1) A surplus lines broker's license shall be issued only to licensed general lines brokers who are bona fide residents of the State.

(2) Such license shall include all lines of insurance except life, title, and variable annuity.

(d) A property damage appraiser's license shall convey authority for the appraisal of damage to motor vehicles as defined in 21 Del. C. § 101.

(e) An adjuster's license shall convey authority to investigate 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.

(2) Casualty insurance.

(3) Fidelity and surety.

(4) Automobile insurance.

(5) Marine and transportation insurance.

(f) 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.

(2) Credit insurance lines.

(3) Life insurance or annuity products used solely to fund a pre-arranged funeral program.

(g) Continuing education requirements prescribed by regulation of the Insurance Commissioner for limited representatives shall include only those lines for which the limited representative is certified.

1717. Exemptions to Licensing Requirement.

A license as an insurance agent, broker, 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, or surplus lines broker, if such officer or employee's duties and responsibilities do not include the negotiation or solicitation of insurance policy provisions.

(2) Persons who secure and furnish information, but who do not solicit or make calls for the purpose of the sale of group or wholesale life insurance, annuities, or group, blanket, or franchise health insurance as defined in 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 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. Each licensee is responsible for continuing their professional education as provided by statute or regulation.

(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.

(6) Engage in a practice known as "churning policies" as defined by regulations promulgated by the Department.

(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 Commissioner shall hear and determine alleged violations hereunder; penalties For violations shall be as provided in § 1732 of this Title.

1719. Interim Agent's License.

(a) The Commissioner may, at his/her discretion, and upon application, issue an interim agent's license to any applicant, provided that the applicant meets the qualifications described in § 1721 of this title, 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 Commissioner's office, shall certify that it:

(1) has instructed the applicant in the duties and responsibilities of an agent

(2) has verified, by an examination approved and conducted by the Insurance Commissioner, 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 title;

(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 agents license may be issued for either life and health insurance authority or for one or more of the following lines of authority: fire, casualty, fidelity and surety, or 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, fire, casualty, fidelity and surety, or marine and transportation insurance authority shall not be valid for more than 180 days. An interim license may only be renewed or extended upon written approval of the Commissioner and may not exceed a period of one year.

(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 agents license shall be submitted to the sponsoring insurance company through a licensed resident agent of the sponsoring insurance company.

1720. Agency Licenses.

An agency lawfully organized under the laws of the State of Delaware shall have an agency license of the same line of authority as each individual licensee acting on behalf of the agency. Each individual acting as or representing to be an adjuster, agent, or broker on behalf of the agency shall be registered as an agency member. Termination of any licensee from the list of registered members must be filed by the agency within (30) thirty days from the date of termination. Failure to provide notification may subject the agency to a penalty as otherwise provided in this Title.

1721. Prerequisites for An Insurance License.

(a) The Commissioner shall not issue, continue, or permit to continue any license of any agent, fraternal representative, broker, surplus lines broker, consultant, adjuster, or motor vehicle physical damage appraiser, unless the applicant for or holder of the license shall:

(1) Be at least 18 years of age, in the case of natural persons.

(2) Be competent, trustworthy, financially responsible, and of good reputation. Each application for an initial license shall contain the certification of the sponsoring insurance company that it has investigated the applicant's background and that the applicant meets this requirement.

(3) Have demonstrated his/her 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 this chapter.

(4) Have filed with the Commissioner a request that he/she be appointed from an insurance company qualified to transact insurance business in this State, if the application is for the issuance of a license for an agent or limited or fraternal insurance representative.

(5) Certify that the applicant does not intend to use the license principally for the purpose of writing controlled business as defined in § 1729 of this title.

(6) Pay to the Commissioner all fees required by Chapter 7 of this title.

(b) An applicant may qualify for a resident license if he/she resides in this State or maintains his/her principal place of business in this State, provided that any resident license shall be void if the holder thereof also holds or makes application for a similar license in any other state or jurisdiction, or thereafter claims to be a resident of any other state or jurisdiction.

(c) An applicant may qualify for a nonresident license only if he/she holds a similar license in another state of the United States, province of Canada, or other foreign country, complies with § 1722 of this title and pays to the Commissioner all fees required by this chapter. A nonresident license may be issued without the applicant taking any written examination if the insurance commissioner of the state of the applicant's residence certifies to the Commissioner that the applicant has passed a similar written examination or has been the continuous holder of a similar license issued prior to the time such written examination was required in the state of his/her residence. A nonresident license shall grant the same rights and privileges afforded to the holder of a resident license, except as provided in § 1722 of this title. Similarly, the holder of a nonresident license shall be subject to all the duties, responsibilities, liabilities, and prohibitions to which a resident holder of a license is subject.

(d) Change in residency status.

(1) A licensed nonresident agent, after becoming a Delaware resident, may retain authority under the nonresident agent license for a maximum of 60 days or until a resident license is issued, whichever occurs first, and at which time all authority granted under the non-resident license shall cease.

(2) A licensed resident agent, after becoming a resident of another state, may retain authority in Delaware under the resident agent license for a maximum of sixty (60) days or until a non-resident license is issued, whichever occurs first, and at which time all authority granted under the resident license shall cease.

(4) Criteria used by the Commissioner to establish residency shall

include, but not be limited to:

a. Jurisdiction for payment of state taxes;

b. jurisdiction for automobile driver's license and motor vehicle registration.

c. location of voter registration.

d. location of principal residence, such as owned or rented dwelling, condominium or apartment; and

e. location of principal place of business as described in § 1721(b) of this chapter.

1722. Special Qualifications.

(a) Every applicant for a license as a broker shall meet the prerequisites described in § 1721 of this title and, in addition thereto, shall file with the Commissioner a bond in favor of any citizen of the State in a face amount of not less than $5,000 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 canceled unless at least 30 days' prior written notice thereof has been given to the licensee and the Commissioner.

(b) Every applicant for a license as a broker or agent requesting authority for lines of casualty, tire, fidelity and 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/her personal, firm, or corporate funds, and shall forthwith deposit and retain therein all premiums and return premiums received by him/her, pending due transmittal of such premiums or return premiums to the appropriate insurance company or insured; provided, however, he/she may deposit and commingle in the same such trust account all premiums and return premiums received by him/her, 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.

(c) Every applicant for a nonresident license shall meet the requirements of subsection (b) of this section, except that the trust account may be established and maintained in a commercial bank in the state where the applicant resides.

(d) Every applicant for a license as a broker must have held a license as an agent for at least two years for all lines of insurance for which he/she has applied for a license 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. Suspension or revocation of the agent's license shall result in the immediate revocation of the broker's license.

(e) Every applicant for a license as a surplus lines broker must be a bona tide resident of this State and must have held a license as a general lines broker for at least one year.

(f) Every applicant for a license as an apprentice adjuster or apprentice property damage appraiser must file with the Commissioner a certification from one holding a license as an adjuster or property damage appraiser in which said holder of the license assumes responsibility for the applicant's training and for all actions undertaken by the applicant pursuant la the requested license.

(g) Every applicant for a license as an agent for the line variable annuity must hold a license as a life insurance agent and must be registered with the National Association of Security Dealers.

1723. Nonresident License Fees.

Notwithstanding any other provision of this title, every applicant for a nonresident license shall be subject to the same fees as a resident applicant.

1724. Exemption From Written Examination.

(a) The following shall be exempt from the requirement for a written examination:

(1) Every applicant for a resident license covering the same line or lines of insurance for which the applicant previously held a license in this State, other than a temporary license, within 12 months next preceding the date of the application, unless such previous license was revoked, suspended or renewal thereof was refused by the Commissioner.

(2) Every applicant for a nonresident license who resides in another state or jurisdiction which extends a similar exemption for Delaware applicants and who has held a similar license in any other state within 12 months prior to his/her application for a license in this State and who files with the Commissioner a certification from the public official having supervision of insurance business of such other state of jurisdiction as to the applicant's license and good standing in such other state or jurisdiction. A facsimile signature and seal of the certifying public official will be sufficient.

(3) 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,

(4) 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 the rules, regulations, and State laws.

(5) Every applicant for a license as an agent for title insurance who is an attorney,

(6) Every applicant for a license as a fraternal representative qualified as described in § 6128 of this Title.

(7) Every applicant for a license as an adjuster who has successfully completed all phases of the Insurance Institute of America qualification requirements and/or attained the designation of Chartered Property and Casualty Underwriter.

1725. Written Examinations.

(a) 'The Commissioner shall subject each applicant, not otherwise exempted from the requirement of written examination, to a written examination which the applicant must personally take and pass to the satisfaction of the Commissioner.

(b) If the applicant is other than a natural person and is not otherwise exempt, the written examination must be successfully taken by each individual who is to be named in the license for the partnership or corporation.

(c) Each 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 license applied for and may also test the applicant's knowledge of the duties and responsibilities of a licensee and of the pertinent insurance laws of the State.

(d) There shall be a written examination for each line of insurance, and an applicant shall take and pass the examination for each line the applicant proposes to transact under a license.

(e) All written examinations shall be conducted and administered in accordance with regulations issued by the Commissioner. Such examinations may be administered and graded by an independent testing service, as specified by contract.

(f) The Commissioner may require a reasonable waiting period between reexaminations for any applicant who twice fails to pass a written examination covering the same line of insurance. The waiting period shall not exceed six months.

(g) The Commissioner may, by regulation, establish a prerequisite for examination and requirement for a reasonable number of hours of formal instruction presented by an educational institution. Such regulation, if issued, will specify the number of hours required for life and health or the property and casualty lines, or for both, and will include the procedures for course approval and verification of the training received.

1726. Additional or Continuing Education.

In addition to meeting the standards prescribed in other sections of this chapter for the issuance of a license, the Commissioner may promulgate regulations and/or prerequisites which will establish reasonable standards and criteria for requiring additional or continuing education of licensees, in order to ensure the maintenance or improvement of a licensee's insurance skills and knowledge. Failure to provide proof of meeting continuing education requirements may result in suspension of license(s). No regulation may require additional or continuing education for limited representatives qualified and licensed under § 1716(f) of this title in any lines other than those for which licensure has been granted.

1727. Application For a License.

(a) An application for a license by an agent, broker, fraternal representative, adjuster, and property damage appraiser shall be submitted, on forms or electronically as approved by the Commissioner provided for that purpose, to the Commissioner upon receipt of notice from the Commissioner that the examination for such license 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 § 701 of this title.

1728. License.

(a) Form.

(1) The license shall contain the name, resident or nonresident status type, and line or lines of authority conveyed and such other information as the Commissioner shall, from time to time, require.

(2) The license of an agent shall not identify the insurer or insurers for whom the agent is authorized to act, except as provided in § 1719 of this title.

(3) A licensee qualified as an agent or fraternal representative shall have the authority to represent as many insurers as may file appointments with the Commissioner designating the licensee as agent.

(b) Records.

(1) The licensee shall maintain at his principal place of business the license issued by the Commissioner, together with such records as may be reasonably required by the Commissioner. Such records shall show, for each poke) 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, 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/her residence.

(3) All licenses issued hereunder shall be and remain the property of the State. Upon expiration, termination, suspension, or revocation of a license, the licensee or other person having custody or control of such license shall forthwith deliver it to the Commissioner, either in person or by mail. In the event of loss or destruction of a license, the Commissioner may accept in lieu of surrender thereof a signed statement from a licensee or other individual certifying the loss or destruction thereof.

(4) Every license holder shall notify the Commissioner of any change in residential or business address within 30 days thereof. A license may be suspended for failure to give notice of change of address hereunder.

(2) The Commissioner may issue a new license for any lost, stolen, or destroyed license issued pursuant to this Title upon written request from the licensee and payment of appropriate fees.

(c) Term.

All licenses issued under this chapter, except temporary licenses, shall be valid and effective unless and until:

(1) The license is revoked or terminated pursuant to § 1732 of this title.

(2) The licensee no longer qualifies for licensing under § 1712 of this
title.

(3) The licensee fails to complete the minimum continuing education requirements established by regulation.

(4) One year after the termination of the last remaining insurer's appointment if licensed as an agent or limited or fraternal representative.

(5) The licensee fails to abide by the terms and conditions set forth in an order or rule of the Commissioner.

(d) The Commissioner shall prescribe the date for and procedures to be followed in filing continuation requests for appointments by published bulletin or regulation.

(e) The authority of agents 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 licensees license and delete such line or lines of authority therefrom for which no appointment has been tiled.

1729. Controlled Business.

(a) For the purpose of assisting in the enforcement or the laws against rebates, and to help prevent the use of undue influence or coercion in the securing of insurance business, the Commissioner shall not grant an agent or broker license to any person if the Commissioner has reasonable cause to believe that:

(1) During the calendar year immediately preceding the request for renewal of any such license, the license has been used for the purpose of writing controlled business: or

(2) The circumstances of the applicant for such license are such as to induce the Commissioner reasonably to believe that during the 12-month period immediately following issuance or renewal of the license, if so issued or renewed, the license will be used for the purpose of writing controlled business.

A license shall be deemed to be used for the purpose of writing controlled business if the aggregate net amount of commissions or other compensation received or to be received by the licensee or applicant on controlled business written or to be written during the period involved, exceeds 25% of the aggregate net amount of commissions or other compensation received or to be received by the licensee or applicant on all insurance business written or to be written by him/her during the same period.

"Controlled business" means insurance procured or to be procured by or through such applicant or licensee upon:

Said applicant/licensee's own life, person, property, or interests, or those of a spouse or relatives by blood or marriage to the second degree;

The life, person, property, casualty risks, surety risks, or title risks of his/her employer, principal, firm, officer, director, stockholder, client or any person whom such applicant/licensee may serve under professional service contract, or of any officer, director, stockholder, or member of his/her employer or firm, other than members of mutual insurers, or of any spouse of any such employer, officer, director, stockholder, or member;

(3)The property or interests of any corporation of which he has stock control, or of which the stock control is held by any combination of himself, his firm, his employer, controlling stockholders of his employer, his directors, officers, or stockholders and spouses of any of them; the property or interests of any subsidiary of any such corporation;

(4)The life, person, property, or interests of his ward, or his employees, or upon persons, property, or interests under his supervision or control as trustee, lawyer, agent, or receiver, or as administrator or executor of any estate; or

(5) Property sold on contract by him as agent or principal, his officer, director, or stockholder, or by his employer or his firm, or by any officer, director, stockholder, or member of his employer or firm, except in the case of real property.

(6)Nothing in this section shall apply to:

a. Insurance protecting the interests of a sales or financing agency and a motor vehicle sold or financed by such agency,

b. Insurance of the interest of a real property mortgagee and mortgaged property, and

c. Any insurance issued in connection with a credit transaction and insurance which is sold as an incidental coverage to the transaction.

1730. Commissions; Payment; Acceptance; Fees.

(a) No insurer, insurance agent, insurance broker, surplus lines insurance broker, or consultant 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, or surplus lines insurance broker 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, or surplus lines broker 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/her commissions, or direct that his commissions be paid to a licensed partnership, firm, association, or corporation of which he/she 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 tees in connection with application for insurance submitted under the Delaware Assigned Risk Plan (§ 2527 of this title) or Fair Plan (§4107-4113 of this title), nor to individuals holding temporary licenses.

(e) No licensed agent or fraternal insurance representative shall charge or collect a fee which has not been tiled as a part of the premium in accordance with § 2503 of this title.

(f) 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.

(g) This section shall not preclude the payment of commissions as directed by Court order.

1731. Nonresident Power of Attorney.

(a) Every nonresident licensed under this chapter shall designate the Commissioner, by written instrument, as his/her 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 irrevocable 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 any Deputy Insurance Commissioner or such other person(s) within the Department as the Commissioner shall designate, in duplicate, and shall be accompanied by a process fee as established in § 701 of this title. Upon receipt of such process, the Commissioner shall forthwith transmit a copy thereof by registered or certified mail, with return receipt requested, to the nonresident 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.

1732 Violations; 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 that $25 and not more than $30,000 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 subsection (c) of this section. Such bond shall be held by the Department and a hearing shall be held not later than 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 he found, declare forfeit all or part of such bond.

(b) Failure to post bond within 10 days shall automatically suspend the 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 license 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 noncompliance 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 a license application;

(4) obtaining or attempting to obtain a license through misrepresentation or fraud;

(5) improperly withholding, misappropriating, or converting to one's own use any money belonging to policyholders, 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 business in this State or elsewhere;

(9) suspension or revocation of the licensee's license in another state, province, district, or territory;

(10) forgery by the licensee in connection with any application for insurance;

(11) offering or receiving assistance in completion army examination or issuance or renewal of an insurance license;

(12) conviction by final judgment, of a felony or a crime involving dishonesty.

(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.

1733. Termination or Suspension of License; Fines.

(a) The Commissioner may suspend a license for not more than 12 months or may revoke or refuse to continue any license issued under this title if after a hearing, it is determined that the licensee has committed one or more ()I' the violations enumerated in § 1732(e) of this title.

(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 $10,000 for each such violation. The Commissioner's order shall specify the date upon which such line 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 lines paid and recovered to the State Treasurer.

(c) In the event of suspension. revocation, refusal to continue any license hereunder the Commissioner shall give notice of such action to all insurers represented by the licensee.

(d) The Commissioner shall not again issue a license under -this title to any person whose license has been revoked until:

(1) The expiration of one year from the date of revocation: and

(2) Until such person shall qualify for licensing in accordance with the applicable provisions of title. A person whose license has been revoked or suspended 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. tiller a hearing, that one or more of the violations set forth in § 1732 of this title has been committed by an individual employed by such partnership, fiat, 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.

(f) The Commissioner may place any individual. partnership, corporation, or firm on probation for a period of one year for violation of any insurance laws, rules. regulations. and orders. The probationary period will not exceed one (1) year.

1734. Hearings.

(a) All hearings held pursuant to this Chapter shall be governed by the Administrative Procedures Act, 29 Del C, § 101 et seq. and such additional implemented regulations as may be published by the Commissioner.

1735. 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 the public interest, he/she 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 except by leave of the court.

(b) 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.

(c) A copy of the petition, and of the order to show cause, if they are issued, shall he served upon the licensee in the same manner as provided by law of this State the service of other legal process.

(a) Upon the tiling 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.

(a) 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 expeditious)), feminine 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 finds owed to the agent or on account of insurance business transacted by him/her, 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 and no charges for services so rendered shall be made against the funds or assets of the agent or brokerage business except by leave of the court.

(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.

1736. Countersignature.

Any statute or rule of law to the contrary notwithstanding, a nonresident agent holding a current Delaware nonresident agent license shall not be required to obtain a countersignature by a resident Delaware agent on any policy or policies of insurance effected by such nonresident agent.

1737. Rules and Regulations.

The Commissioner may issue reasonable rules and regulations for the implementation and administration of this chapter.

1738. Conflict With the Laws.

All statutes, parts of statutes and rules of law of this State which are inconsistent with this chapter are hereby superseded.

1739. Report of Violation to Commissioner; Confidentiality of Report.

Every insurer, agent, broker, administrator, or other person except for attorneys functioning within the scope of the attorney-client privilege who has knowledge of a violation of any provision of this chapter shall promptly report the facts and circumstances pertaining to the violation to the Commissioner.

(b) If a person who submits information pursuant to subsection (a) of this section requests, the Commissioner shall keep the person's name and the information confidential.

1740. Enforcement After License, Lapses or is Surrendered

The Commissioner shall retain authority to enforce the provisions of, and impose any penalty or remedy authorized by, this chapter and title against any person who is under investigation for, or charged with, a violation of this chapter and title even if, while the investigation or charges are pending, such person's license, or registration is surrendered or lapses by operation of law."

Section 2. If any provision of this Act or the application thereof to any person or circumstance is held invalid, such invalidity shall not affect other provisions or applications of the Act which can be given effect without the invalid provision or application, and to that end the provisions of this Act are declared to be severable.

Approved July 1, 1996