Chapter 211

2007 -- S 0386 SUBSTITUTE A

Enacted 07/02/07


A N  A C T



     Introduced By: Senator Leo R. Blais

     Date Introduced: February 13, 2007


It is enacted by the General Assembly as follows:


     SECTION 1. Sections 27-2.4-2, 27-2.4-4, 27-2.4-6, 27-2.4-8, 27-2.4-13, 27-2.4-14 and

27-2.4-23 of the General Laws in Chapter 27-2.4 entitled "Producer Licensing Act" are hereby

amended to read as follows:


     27-2.4-2. Definitions. -- The following definitions apply to this chapter:

      (1) "Business entity" means a corporation, association, partnership, limited liability

company, limited liability partnership, or other legal entity;

      (2) (1) "Insurance commissioner" means the director of the department of business

regulation or his or her designee;

      (3) (2) "Department" means the department of business regulation;

      (4) (3) "Home state" means any state or territory of the United States, or the District of

Columbia, in which an insurance producer maintains his or her principal place of residence or

principal place of business and is licensed to act as an insurance producer;

      (5) (4) "Insurance" means any of the lines of authority set forth in this title;

      (6) (5) "Insurance producer" means a person required to be licensed under the laws of

this state to sell, solicit or negotiate insurance;

      (7) (6) "Insurer" means: (i) any person, reciprocal exchange, interinsurer, Lloyds insurer,

fraternal benefit society, and any other legal entity engaged in the business of insurance,

including insurance producers; (ii) notwithstanding sections 27-19-2, 27-20-2, 27-20.1-2, 27-

20.2-2, 27-20.3-2, and 27-41-22, all of whom shall be engaged in the business of insurance for

the purpose of this chapter, nonprofit hospital and/or medical service corporation, a nonprofit

dental service corporation, a nonprofit optometric service corporation, a nonprofit legal service

corporation, a health maintenance organization as defined in chapter 41 of this title or as defined

in chapter 62 of title 42, or any other entity providing a plan of health benefits subject to state

insurance regulation; and (iii) an organization that for consideration assumes certain risks for an

insured. Insurer organizations may include corporations, stock companies, mutual companies, risk

retention groups, reciprocals, captives, Lloyds associations, and government residual plans.

      (8) (7) "License" means a document issued by this state's insurance commissioner

authorizing a person to act as an insurance producer for the lines of authority specified in the

document. The license itself does not create any authority, actual, apparent or inherent, in the

holder to represent or commit an insurance carrier;

      (9) (8) "Limited line credit insurance" includes credit life, credit disability, credit

property, credit unemployment, involuntary unemployment, mortgage life, mortgage guaranty,

mortgage disability, guaranteed automobile protection (gap) insurance, and any other form of

insurance offered in connection with an extension of credit that is limited to partially or wholly

extinguishing that credit obligation that the insurance commissioner determines should be

designated a form of limited line credit insurance;

      (10) (9) "Limited line credit insurance producer" means a person who sells, solicits or

negotiates one or more forms of limited line credit insurance coverage to individuals through a

master, corporate, group or individual policy;

      (11) (10) "Limited lines insurance" means those lines of insurance that the insurance

commissioner deems necessary to recognize for purposes of complying with section 27-2.4-10(e);

      (12) (11) "Limited lines producer" means a person authorized by the insurance

commissioner to sell, solicit or negotiate limited lines insurance;

      (13) (12) "NAIC" means National Association of Insurance Commissioners;

      (14) (13) "Negotiate" means the act of conferring directly with or offering advice

directly to a purchaser or prospective purchaser of a particular contract of insurance concerning

any of the substantive benefits, terms or conditions of the contract, provided that the person

engaged in that act either sells insurance or obtains insurance from insurers for purchasers;

      (15) (14) "Person" means an individual or a business entity;

      (16) (15) "Resident" means a person who either resides in Rhode Island or maintains an

office in Rhode Island where the business of producing insurance is transacted and designates

Rhode Island as the residence for purposes of licensure;

      (17) (16) "Sell" means to exchange a contract of insurance by any means, for money or

its equivalent, on behalf of an insurance company;

      (18) (17) "Solicit" means attempting to sell insurance or asking or urging a person to

apply for a particular kind of insurance from a particular company;

      (19) (18) "Terminate" means the cancellation of the relationship between an insurance

producer and the insurer or the termination of an insurance producer's authority to transact


      (20) "Uniform business entity application" means the current version of the NAIC

uniform business entity application for resident and nonresident business entities;

      (21) (19) "Uniform application" means the current version of the NAIC uniform

application for resident and nonresident insurance producer licensing.


     27-2.4-4. Fees. -- (a) Fees required by this chapter for the period commencing July 1,

2002, and ending on June 30, 2003, shall be as follows:

      (1) Initial insurance producer license: $60.00;

      (2) Annual insurance producer renewal: $60.00;

      (3) Annual company contract fee: $35.00.

      (b) Commencing July 1, 2003, the fees shall be as follows:

      (1) Initial insurance producer license: $50.00 $55.00;

      (2) Annual insurance producer renewal: $50.00 $55.00; and

      (3) Annual contract fee: $25.00 $30.00.

      (c) (b) The insurance commissioner may by rule or regulation specify fees for letters of

certification, clearance letters, duplicate licenses, and any other fees for service and documents

that are reasonably determined by the insurance commissioner.


     27-2.4-6. Order to cease unlicensed activities. -- (a) If the department has reason to

believe that any person, firm, or corporation or association is conducting any activities requiring

licensure under this chapter without obtaining a license, or who after the denial, suspension or

revocation of a license conducts any activities requiring licensure under this chapter, the

department may issue its order to that person, firm, corporation or association commanding them

to appear before the department at a hearing after issuance of that order to show cause why the

department should not issue an order to that person to cease and desist from the violations of the

provisions of this chapter. The order to show cause may be served on any person, firm,

corporation or association named in the order in the same manner that summons in a civil action

may be served, or by mailing a copy of the order, certified mail, return receipt requested, to that

person at any address at which he or she has done business or at which he or she lives. If upon

that hearing the department is satisfied that the person is in fact violating any provision of this

chapter, then the department may order that person, in writing, to cease and desist from that

violation. All hearings shall be governed in accordance with the Administrative Procedures Act,

chapter 35 of title 42. If that person fails to comply with an order of the department after being

afforded a hearing, the superior court in the county where the insurance transaction took place has

jurisdiction upon complaint of the department to restrain and enjoin that person from violating

this chapter.

      (b) Any person who violates this section by operating without a license shall be guilty of

a misdemeanor and fined an amount not exceeding one thousand dollars ($1,000) or imprisoned

for a term not exceeding one year, or both. The matter shall be referred to the department of

attorney general.


     27-2.4-8. Application for license. -- (a) A person applying for a resident insurance

producer license shall make application to the insurance commissioner on the uniform application

and declare under penalty of refusal, suspension or revocation of the license that the statements

made in the application are true, correct and complete to the best of the individual's knowledge

and belief. Before approving the application, the insurance commissioner shall find that the


      (1) Is at least eighteen (18) years of age;

      (2) Has not committed any act that is a ground for denial, suspension or revocation set

forth in section 27-2.4-14;

      (3) Has completed a prelicensing course of study for the lines of authority for which the

person has applied;

      (4) Has paid the fees set forth in section 27-2.4-4; and

      (5) Has successfully passed the examinations for the lines of authority for which the

person has applied.

      (b) A business entity acting as an insurance producer is required to obtain an insurance

producer license. Application shall be made using the Uniform Business Entity Application.

Before approving the application, the insurance commissioner shall find that:

      (1) The business entity has paid the fees set forth in this chapter; and

      (2) The business entity has designated a licensed insurance producer responsible for the

business entity's compliance with the insurance laws, rules and regulations of this state.

      (c) (b) The insurance commissioner may require any documents reasonably necessary to

verify the information contained in an application.

      (d) (c) Each insurer that sells, solicits or negotiates any form of limited line credit

insurance shall provide to each individual whose duties will include selling, soliciting or

negotiating limited line credit insurance a program of instruction that may be approved by the

insurance commissioner.


     27-2.4-13. Temporary licenses. -- (a) The insurance commissioner may issue a

temporary insurance producer license for a period not to exceed one hundred eighty (180) days

without requiring an examination if the insurance commissioner deems that the temporary license

is necessary for the servicing of an insurance business in the following cases:

      (1) To the surviving spouse or court-appointed personal representative of a licensed

insurance producer who dies or becomes mentally or physically disabled to allow adequate time

for the sale of the insurance business owned by the insurance producer or for the recovery or

return of the insurance producer to the business or to provide for the training and licensing of new

personnel to operate the insurance producer's business; or

      (2) To a member or employee of a business entity operated by a licensed as an insurance

producer, upon the death or disability of an that individual designated in the business entity

application or the license; or

      (3) To the designee of a licensed insurance producer entering active service in the armed

forces of the United States of America; or

      (4) In any other circumstance where the insurance commissioner deems that the public

interest will best be served by the issuance of this license.

      (b) The insurance commissioner may by order limit the authority of any temporary

insurance producer in any way deemed necessary to protect the insured and the public. The

insurance commissioner may require the temporary insurance producer to have a suitable sponsor

who is a licensed insurance producer or insurer and who assumes responsibility for all acts of the

temporary insurance producer and may impose other similar requirements designed to protect the

insured and the public. The insurance commissioner may by order revoke a temporary license if

the interest of the insured or the public are endangered. A temporary license may not continue

after the owner or the personal representative disposes of the business.


     27-2.4-14. Licenses -- Denial -- Nonrenewal -- Suspension or revocation. -- (a) The

insurance commissioner may place on probation, suspend, revoke or refuse to issue or renew an

insurance producer's license or may levy an administrative penalty in accordance with section 42-

14-16 or any combination of actions, for any one or more of the following causes:

      (1) Providing incorrect, misleading, incomplete or materially untrue information in the

license application;

      (2) Violating any insurance laws, or violating any regulation, subpoena or order of the

insurance commissioner or of another state's insurance commissioner;

      (3) Obtaining or attempting to obtain a license through misrepresentation or fraud;

      (4) Improperly withholding, misappropriating or converting any monies or properties

received in the course of doing insurance business;

      (5) Intentionally misrepresenting the terms of an actual or proposed insurance contract or

application for insurance;

      (6) Having been convicted of a felony;

      (7) Having admitted or been found to have committed any insurance unfair trade practice

or fraud;

      (8) Using fraudulent, coercive, or dishonest practices or demonstrating incompetence,

untrustworthiness or financial irresponsibility in this state or in another place;

      (9) Having an insurance producer license, or its equivalent, denied, suspended or

revoked in any other state, province, district or territory or administrative action under this


      (10) Forging another's name to an application for insurance or to any document related to

an insurance transaction;

      (11) Cheating on an examination for an insurance license;

      (12) Knowingly accepting insurance business from an individual who is not licensed;

      (13) Failing to comply with an administrative or court order imposing a child support

obligation; or

      (14) Failing to pay state income tax or comply with any administrative or court order

directing payment of state income tax.

      (b) In the event that the action by the insurance commissioner is to non-renew or to deny

an application for a license, the insurance commissioner shall notify the applicant or insurance

producer and advise, in writing, the applicant or insurance producer of the reason for the denial or

non-renewal of the applicant's or insurance producer's license. The applicant or insurance

producer may make written demand upon the insurance commissioner within thirty (30) days for

a hearing before the insurance commissioner to determine the reasonableness of the insurance

commissioner's action. The hearing shall be conducted pursuant to the Administrative Procedures

Act, chapter 35 of title 42.

      (c) The license of a business entity may be suspended, revoked or refused if the

insurance commissioner finds, after hearing, that an individual insurance producer's violation was

known or should have been known by one or more of the partners, officers or managers acting on

behalf of the partnership or corporation and the violation was neither reported to the insurance

commissioner nor corrective action taken by the business entity in a timely manner.

      (d) (c) In addition to or in lieu of any applicable denial, suspension or revocation of a

license, a person may, after hearing, be subject to an administrative fine in accordance with

section 42-14-16.

      (e) (d) The insurance commissioner shall retain the authority to enforce the provisions of

and impose any penalty or remedy authorized by this chapter and this title against any person who

is under investigation for or charged with a violation of this chapter or this title even if the

person's license or registration has been surrendered or has lapsed by operation of the law.


     27-2.4-23. Errors and omissions insurance required of resident insurance producers.

[Effective January 1, 2007.] -- (a) All holders of resident insurance producer licenses issued by

the insurance division of the department of business regulation of the state of Rhode Island shall,

as a condition for obtaining and retaining such license, carry and maintain errors and omissions

insurance covering the business activities contemplated., in an amount not less than two hundred

fifty thousand dollars ($250,000) per claim and five hundred thousand dollars ($500,000) annual

aggregate limit. Authorized insurance producers of a licensed firm may meet the requirements of

this section with a policy in the name of the licensed firm insuring each licensee employed by, or

associated with, the firm.

      (b) Licensees shall maintain records and keep copies of all errors and omissions policies

issued under this subsection and shall make this information available to the public and insurance

division upon request.

      (c) Failure to carry and maintain errors and omissions insurance may result in the

suspension or revocation of the resident insurance producer license.

      (d) This section shall not apply to insurance producers that are employed in that capacity

directly by insurance companies.

      (e) The department of business regulation may grant a written exemption to any producer

who shows that he/she is not engaged in the sale, solicitation or negotiation of insurance. Such

exemption shall only be valid while the insurance producer is not engaged in the sale, solicitation

or negotiation of insurance.


     SECTION 2. This act shall take effect upon passage.



LC01116/SUB A/2