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You are here: Home . rules . 2006 . 1003-059

SUBCHAPTER D. EFFECT OF CRIMINAL CONDUCT

28 TAC §§1.501 and 1.503 - 1.509

1. INTRODUCTION. The Commissioner of Insurance adopts amendments to §1.501 and new §§1.503 - 1.509, concerning the effect of criminal conduct on licenses. The sections are adopted without changes to the proposed text published in the August 4, 2006 issue of the Texas Register (31 TexReg 6165).

In conjunction with this adoption and also published in this issue of the Texas Register, the Department has adopted the repeal of existing §§19.1801 - 19.1807 (relating to Fingerprint Card Requirement for Applicants for License) and adopted amendments to existing §3.1703 ( relating to the Application for Certificate of Registration for Viatical or Life Settlement Providers, Provider Representatives, or Brokers; Fees), §5.6403 ( relating to the Application for Initial Certificate of Approval for workers' compensation group self-insurance), §7.209 ( relating to Form A, Insurance Holding Company System Regulatory Act), and §19.711 (relating to Fingerprint Requirement for licensing of public insurance adjusters).

2. REASONED JUSTIFICATION. The sections are necessary to identify those individuals regulated by the Department who are subject to state laws and the Department's rules regarding the consequences of prior criminal conduct and fraudulent and dishonest activity and to establish requirements and procedures for obtaining an individual's criminal history information by using the individual's fingerprints. Because the special nature of the relationship between licensees, insurance companies, other insurance-related entities and the public requires the public to place trust in and reliance upon such persons, the Department has determined that it is necessary to consider the individual's criminal history information when determining an individual's fitness for licensure or other authorization, including certification, permit, or registration, or for control of an entity holding or seeking a license or other authorization, including a certificate, permit, or registration.

The adoption is necessary to maintain effective regulation of the insurance industry by establishing requirements and procedures to further ensure that persons receiving licensure and authorizations, including the officers, directors, partners, and controlling shareholders of insurance agencies, insurance companies and other regulated entities, are honest, trustworthy, reliable, and fit to hold those positions. The adoption establishes a reasonable procedure and funding mechanism for the Department to obtain necessary information to make those determinations. This adoption does not impose additional requirements or costs on individuals to maintain their current licenses or authorizations and thus should not affect the current license or authorization status of any person who has made a full disclosure of all past criminal conduct.

The Texas statutes applicable to the individuals affected by this adoption require the Department to determine those individuals' fitness for holding a license or authorization, or those individuals' fitness to control an entity holding or seeking a license or authorization. Additionally, the federal Violent Crime Control and Law Enforcement Act of 1994, specifically 18 U. S. C. §§1033 and 1034, prohibits an individual who has ever been convicted of a state or federal felony involving dishonesty or breach of trust from engaging in the business of insurance unless the individual is specifically authorized to do so by an insurance regulatory official. Because the applicable state statutes do not specify the method of inquiry regarding the determination of an individual's fitness, the Department has the discretion to determine the method.

The Department has determined that the use of criminal history information is the best means to assist the Department in performing this statutory duty. Additionally, to assist the Department in determining an individual's fitness, the Legislature enacted Insurance Code §§801.056 and 4001.103 authorizing the Department to require applicants for any license or authorization issued by the Department to submit fingerprints and Government Code §§411.106 and 411.087 authorizing access to an applicant's criminal history information from both the Texas Department of Public Safety (DPS) and the Federal Bureau of Investigation (FBI).

The adopted sections set forth a secure and uniform procedure by which the Department may obtain a complete criminal history from individuals applying for a license or authorization and from individuals who are seeking to be associated with a regulated entity. Under the adoption, the Commissioner may waive the fingerprinting requirement in response to Texas statutes related to non-resident licensing, the federal Gramm-Leach-Bliley Act, and the possibility that other state insurance departments may adopt similar background checks for their resident licensees and authorized individuals. The adoption, however, does not allow waiver of the requirement for persons subject to background checks by other entities, such as the National Association of Securities Dealers. Such an exception could create a dual standard for individuals, particularly among Texas residents. Additionally, licensees of these other entities may not be subject to 18 U. S. C. §§1033 and 1034. Federal law, or possibly state law, depending on the source of the information, could also prohibit those entities from sharing an individual's criminal history information contained in their files. The adoption does not require any individual to be fingerprinted or pay fingerprint-processing fees for renewing an existing license or authorization.

The Department has consulted with the DPS and determined that fingerprint checks, and in particular electronic fingerprint checks, provide the most effective method of identifying an individual and obtaining that individual's criminal history information. Improvements in electronic fingerprint technology have increased the accuracy of fingerprint capture and substantially reduced the time frame for processing the fingerprint to obtain the criminal history information.

The adopted procedure requires affected individuals to be fingerprinted by an acceptable vendor and pay the associated fingerprint processing fees charged by the DPS and FBI. The individual's fingerprints will either be submitted directly to the DPS, if captured by the DPS electronic vendor, or to the Department and then to the DPS if captured on paper. The associated fingerprint-processing fee charged by the DPS is set by Government Code §411.088(a)(2). The associated fingerprint-processing fee charged by the FBI is set by federal authority and is made known to the Department by the DPS. The Department understands from the DPS that all fingerprints will be processed through both the DPS and FBI.

Another factor considered by the Department in adopting these requirements and procedures is that the cost be reasonable and not unduly burdensome for an individual seeking a license or authorization. It is the Department's position that the total costs for fingerprinting and fingerprint processing, which are estimated to range from $48.95 to $56 per individual, meet this criteria. These costs are in line with, or less than, those costs in other states. For example, California requires a $76 fee; Florida requires a $64 fee; and Idaho requires a $60 fee. The adoption does not restrict individuals or their sponsors from making arrangements with an acceptable vendor or the DPS to facilitate the fingerprint collection process.

The Department is implementing this fingerprint identification process using both DPS and FBI resources for the following three reasons. The process will prevent individuals with a criminal history in another state from attempting to evade detection by simply moving to Texas. Fingerprint collection by an acceptable vendor allows for accurate verification of the identity of the individual being fingerprinted and increases confidence in the review process. Finally, fingerprints are the only method the FBI will accept to produce identity and criminal history information.

In conjunction with this adoption and also published in this issue of the Texas Register, the Department has adopted the repeal of existing §§19.1801 - 19.1807 (relating to Fingerprint Card Requirement for Applicants for License) and adopted amendments to existing §3.1703 ( relating to the Application for Certificate of Registration for Viatical or Life Settlement Providers, Provider Representatives, or Brokers; Fees), §5.6403 ( relating to the Application for Initial Certificate of Approval for workers' compensation group self-insurance), §7.209 ( relating to Form A, Insurance Holding Company System Regulatory Act), and §19.711 (relating to Fingerprint Requirement for licensing of public insurance adjusters). The repeal and the amendments are necessary to conform existing fingerprint requirements to the new requirements set forth in this rule.

In the proposal the Department also solicited comments as to whether having the amendment and new sections become effective no earlier than 90 days following the date the amendment and new sections were adopted by the Commissioner was a viable effective date. The Department received no comments concerning the effective date and thus considers that the 90 day time period for implementation is adequate. The Department also considers a date certain to be the most effective means for determining when individuals will be required to comply with the new fingerprint requirements, and therefore, the Department has determined that the amendments to §1.501 and new §§1.503 - 1.509 set forth in this adoption shall be effective January 1, 2007.

3. HOW THE SECTIONS WILL FUNCTION. The adopted amendment to §1.501(a) incorporates the establishment of the procedure for obtaining criminal history information into the purpose of the subchapter. The amendment to §1.501(b) clarifies and, to the extent necessary, adds types of authorizations, insurers and related entities subject to the applicability of §1.502 (relating to guidelines for licensing persons with criminal backgrounds), including workers' compensation related authorizations under Insurance Code Chapter 1305 and workers' compensation self-insurance groups under Labor Code Chapter 407A. Additionally, the amendment to §1.501(b) updates Insurance Code references in the list of affected license, authorization, certificate, permit, or registration types to reflect the new section numbers adopted as a result of the Legislature's enactment of the non-substantive Insurance Code revision and arranges this list of references in numerical order. New §1.503 specifies those individuals subject to the new fingerprint requirement in §1.504. New §1.504 sets forth the requirement to submit fingerprints and pay fees and provides exemptions to this requirement. New §1.505 addresses Insurance Code §§4056.055 and 4101.004 reciprocal licensing provisions for nonresident agents and adjusters by providing that the Commissioner may waive the fingerprint requirement for nonresident individuals holding a license in their state of residence. New §1.506 authorizes the Commissioner to waive the fingerprint requirement for individuals if the individual, or the insurance carrier or related entity with which the individual is associated, is not domiciled in Texas. New §1.507 relates to licenses and authorizations not listed in §§1.505 and 1.506 and authorizes the Commissioner to waive the fingerprint requirement for individuals if the individual, or the entity with which the individual is associated, is not domiciled in Texas. New §1.508 states how the Department will use the fingerprints and identifies certain state and federal confidentiality laws that apply to the Department's use and maintenance of criminal history information. New §1.509 identifies the entities that are authorized to capture an individual's fingerprints; addresses how fingerprints will be submitted and the method for the payment of DPS and FBI fingerprint processing fees when captured by the electronic vendor acceptable to the DPS, the Department's examination vendor, or a criminal law enforcement agency; requires all fingerprint impressions to be legible and suitable for use by the DPS and FBI; specifies that fingerprints must be submitted within the time frame indicated on the appropriate application or biographical submission forms and allows for certain extensions; and provides that the application or biographical submission is not complete until the criminal history information is received.

4. SUMMARY OF COMMENTS AND AGENCY'S RESPONSE.

General: A commenter asked concerning the Department's statutory authority to expand the collection of fingerprints by rule.

Agency Response: The Legislature enacted Insurance Code §§801.056 and 4001.103 authorizing the Department to require applicants for any license or authorization issued by the Department to submit fingerprints and as such this rule is not an expansion of authority but only a procedure for collecting those fingerprints.

General: A commenter appreciated the Department's adoption of electronic procedures and encouraged the Department to adopt further technological applications, including electronic licensing applications.

Agency Response: The Department currently does accept electronic license applications through both SIRCON Corporation and the National Insurance Producer Registry (NIPR) from nonresident applicants who hold a current license in their home state and who are applying for a reciprocal Texas license based on Insurance Code Chapter 4056. The Department is reviewing the process of accepting electronic applications from applicants requiring a licensing examination.

§1.503: A commenter asked why the Department is not following the NAIC Authorization for Criminal History Record Check Model Act that did not include a requirement for insurance company officers.

Agency Response: The NAIC model act is primarily designed for states that currently do not have fingerprint authorizations. The Texas Legislature enacted Insurance Code Article 1.10C in 1991, which was revised and re-adopted in part as §801.056 by the 77th Legislature in 2001. Further the Department has collected fingerprints on insurance company officers and directors since 28 Texas Administrative Code §7.209 became effective in May, 2002.

§§1.503, 1.504 and 1.506: A commenter expressed concern that the proposal could require insurance companies to submit information on officers and directors that have little if any relationship to Texas. As such, the commenter suggested a change to limit the fingerprinting requirement to officers and directors of Texas domestic carriers as a less onerous requirement for some insurers.

Agency Response: As stated in §§1.503(3) and 1.504(a), this rule does not create a general requirement for all insurance company officers, directors and controlling shareholders to submit fingerprints. Rather the fingerprint requirement is limited to those officers, directors, and controlling shareholders that are otherwise required to submit biographical information to the Department. Further, the adopted procedure is intended to reduce the burden on individuals because, as stated in §1.504(b)(1), as long as the fingerprinted individual maintains his active association, the individual can continue to be involved in the industry without having to make repetitive routine fingerprint filings with the Department. With respect to insurers not domiciled in Texas, those insurers subject to this rule will have made a choice to do business in Texas. The legislature has authorized the Department to collect fingerprints under Insurance Code §801.056 as the Department determines to be necessary to fulfill its statutory obligation under Chapters 801, 822, 823, 841, 843, 844, 846, 2551, and 2552 in determining the fitness of insurance company officers, directors and controlling shareholders that are engaging in the insurance business in Texas even though these entities may also be subject to primary regulation in another state. Additionally, §1.506 authorizes the Commissioner to waive the fingerprint requirement for individuals associated with insurers that are not domiciled in Texas . As such, it is the Department's position that these provisions are sufficient to address the commenter's concerns and the Department declines to include such a restriction in this rule.

§1.504: Commenters asked if individuals who have previously submitted fingerprints or have active licenses or associations will be required to submit additional fingerprints under §1.504.

Agency Response: While the rule does maintain the Department's statutory authorization in Insurance Code §§801.056 and 4001.103 to request fingerprints from any individual applicant, the proposal excepts those individuals who have active associations and licenses from the routine practice of collecting fingerprints. Further, individuals with active licenses who have submitted fingerprints would not be required to submit additional fingerprints for a new application in a different line. An individual who has allowed all their licenses to fully expire beyond any renewal periods and/or discontinued all their associations would be required to submit a new set of fingerprints upon application for a new license or a new association with an entity.

§1.509: A commenter asked if it can collect fingerprints at an insurance company or agency if its personnel have training from the Department of Public Safety.

Agency Response: Section 1.509 specifies the types of acceptable vendors. The Department of Public Safety and its vendor will determine if an insurance company or agency may subcontract with the Department of Public Safety vendor or make other arrangements with that vendor for submitting fingerprints.

5. NAMES OF THOSE COMMENTING FOR AND AGAINST THE SECTIONS.

For: Primerica.

For with Changes or Questions: Independent Insurance Agents of Texas, State Farm, and USAA.

Against: None.

6. STATUTORY AUTHORITY. The amendments and new sections are adopted under the Occupations Code, Government Code, Labor Code, and Insurance Code. Occupations Code Chapter 53 states the general procedure a licensing authority must employ when considering the consequences of a criminal record on granting or continuing a person's license, authorization, certificate, permit, or registration. Occupations Code §53.025 authorizes a licensing authority to issue guidelines relating to its practice under Chapter 53. Government Code §411.106 authorizes the Department to receive criminal history information from the DPS regarding insurance company principals and officers and applicants for any entity holding or seeking a license, certificate, permit, registration, or other authorization issued by the Department to engage in a regulated activity under the Insurance Code. Government Code §§411.083 and 411.087 authorize the Department to obtain, through the DPS, criminal history information from the FBI on those individuals described in Government Code §411.106. Labor Code §407A.051 authorizes the Commissioner to establish application requirements for self-insured workers' compensation groups. Labor Code §407A.008 authorizes the Commissioner to adopt rules to implement Labor Code Chapter 407A. Insurance Code §801.056 authorizes the Department to request a complete set of fingerprints from individuals controlling an insurance company, an insurance company's corporate officers, and individual applicants for any license, permit, registration, certification, or other authorization issued by the Department to engage in a regulated activity under the Insurance Code. Insurance Code §§801.101, 801.102, and 801.151 - 801.155 authorize the Commissioner to review the fitness and reputation of officers, directors and persons in control of insurance companies and to refuse or revoke a certificate of authority to any company based on a determination that such officer, director or controlling person is not worthy of public confidence. Insurance Code §822.060 authorizes the Commissioner to deny the charter of an insurance company if the Commissioner determines that proposed officers, directors, attorney in fact or managing head of the company lack sufficient standing and good record to make success of the proposed company probable. Insurance Code §823.052(b)(2) requires an insurer's registration statement to contain current information about ownership and management of the insurer, the insurer's holding company, and, if the Commissioner considers the information necessary, any of the insurer's other affiliates. Insurance Code §823.053(a) requires the insurer to report each material change to information disclosed in a registration statement, including additional information. Insurance Code §823.157 authorizes the Commissioner to deny the acquisition or change of control of an insurer if the Commissioner determines that due to a lack of trustworthiness or integrity of the persons who would control the operations of the domestic insurer, the acquisition or change of control would not be in the interest of the insurer's policyholders and the public. Insurance Code §841.061 authorizes the Commissioner to deny the charter of a life, accident, or health insurance company if the Commissioner determines that the proposed officers, directors, or managing executive of the company lack sufficient standing to make success of the proposed company probable. Insurance Code §843.082 authorizes the Commissioner to deny a certificate to a health maintenance organization if the Commissioner determines that the person responsible for the conduct of the affairs of the applicant is not competent, trustworthy, and of good reputation. Insurance Code §844.052 establishes that nonprofit corporations seeking a certificate under Insurance Code Chapter 844 must meet the same requirements for the issuance of a certificate of authority that a health maintenance organization is required to meet under Insurance Code Chapter 843. Insurance Code §846.003 subjects a multiple employer welfare arrangement to Insurance Code Chapter 801, and under Insurance Code §846.058, a multiple employer welfare arrangement, each board member and officer of the arrangement, and any agent or other person associated with the arrangement is subject to disqualification for eligibility for a certificate of authority if the person is prohibited from serving in any capacity with the arrangement under §411, Employee Retirement Income Security Act of 1974 (29 U.S.C. 1111). Insurance Code §2551.001 subjects title insurance companies to Insurance Code Chapter 801, which in §801.056 authorizes the Department to request a complete set of fingerprints from individuals controlling an insurance company, an insurance company's corporate officers, and individual applicants for any license, permit, registration, certification, or other authorization issued by the Department to engage in a regulated activity under the Insurance Code. Insurance Code §2552.003 subjects attorney's title insurance companies to the same provisions that apply to title insurance companies. Insurance Code §§2651.301 and 2652.201 authorize the Commissioner to deny or revoke the license of a title insurance agent or direct operation, or escrow officer if the person has been found guilty of fraudulent or dishonest practices. Insurance Code §4001.002(a) provides that, except as otherwise provided by the Insurance Code, the provisions of Insurance Code Title 13 apply to the persons licensed under the provisions listed in §4001.002(a). Insurance Code §4001.005 authorizes the Commissioner to adopt rules necessary to implement Insurance Code Title 13. Insurance Code §4001.102(b) authorizes the Commissioner to prescribe by rule the requirements for a properly completed application. Insurance Code §4001.103 also authorizes the Department to request a complete set of fingerprints from individual applicants for any license, permit or other authorization issued by the Department to engage in a regulated activity under Insurance Code Title 13. Insurance Code §4005.101 provides that the Department may deny or revoke a license to an individual licensed under Insurance Code Title 13, if that individual has been convicted of a felony or has engaged in fraudulent or dishonest activities. Insurance Code license types within the scope of Insurance Code Title 13 under Insurance Code §4001.002(b) include: surplus lines agent, §981.202; general property and casualty agent, §4051.051; limited property and casualty agent, §4051.101; insurance service representative, §4051.151; county mutual agent, §4051.201; agricultural agent, §4051.251; full-time home office employee, §4051.301; life and health insurance counselor, Chapter 4052; managing general agent, Chapter 4053; general life, accident, and heath agent, §4054.051; limited life, accident, and health agent, §4054.101; funeral prearrangement life insurance agent, §4054.151; life insurance not exceeding $15,000 agent, §4054.201; nonresident agent applicants, Chapter 4056; adjuster, Chapter 4101; public insurance adjuster, Chapter 4102; reinsurance intermediary manager and broker, Chapter 4152; and risk manager, Chapter 4153. Further, for a partnership or corporation applying for an agent's license, Insurance Code §§4001.106(b)(7)(B) and 4001.253(c) require the Department to find that the applicant's officers, directors, partners and other persons with a right to control the applicant have not committed an act for which licensure can be denied or revoked under Chapter 4005. Additionally, Insurance Code §4052.003 states that life and health insurance counselors are subject to the same licensing requirements as are applicable to agents under the Insurance Code. Insurance Code §4101.052(a)(2) authorizes the Department to make reasonable inquiries into an adjuster's personal history. Insurance Code §4101.053(a)(2)(D) requires the Department to determine that an adjuster is trustworthy and §4101.201 authorizes the Department to revoke or deny an adjuster license application under the applicable insurance laws of this state, which includes Chapter 4005. Insurance Code §4101.005 authorizes the Commissioner to adopt rules necessary to implement Insurance Code Chapter 4101. Insurance Code §§4102.053(a)(5) and (b), and 4102.054(5) require the Department to restrict or deny issuance of a public insurance adjuster license to a resident or nonresident individual based on a felony conviction. Further, for a partnership or corporation applying for a public insurance adjuster license, §§4102.055(b) and 4102.056(b) authorize the Commissioner to adopt rules analogous to the provisions of Chapter 4001 concerning the licensure of business entities organized under Texas law and business entities organized under the laws of another state. In addition to the provisions of Chapter 4001 previously listed concerning agent licensure, the Department has adopted §19.704 (b)(7) and (i) of this title (relating to Public Insurance Adjuster Licensing) which require the Department to find that a public insurance adjuster license applicant's officers, directors, partners and other persons with a right to control the applicant have not committed an act for which licensure can be denied or revoked under Insurance Code Chapters 4005 and 4102. Insurance Code §4102.201 authorizes the Department to revoke or deny issuing a public insurance adjuster license based on a felony conviction or engagement in fraudulent or dishonest activities. Insurance Code §4102.004 authorizes the Commissioner to adopt rules to implement Insurance Code Chapter 4102. Insurance Code Article 21.58A §§3(b) and 13 authorize the Commissioner to adopt rules relating to the certification of utilization review agents. Insurance Code Article 21.58C §2(a) authorizes the Commissioner to adopt rules relating to the certification of independent review organizations. Insurance Code §1111.005(a)(1), (5) and (8) provide that the Commissioner may deny or revoke a viatical and life settlement registration if the Commissioner finds the applicant or registrant, individually or through any officer, director, or shareholder of the applicant or registrant, has been convicted of a felony or has been convicted of a misdemeanor involving moral turpitude or fraud. Insurance Code §1111.003(a) authorizes the Commissioner to adopt rules relating to viatical and life settlements. Insurance Code §1305.053(2) authorizes the Commissioner to consider the fitness and reputation of each officer or director or other person having control of a workers' compensation health care network. Insurance Code §1305.102(d) authorizes the Commissioner to consider a workers' compensation management contractor's prior criminal history before approving the contract. Insurance Code §36.001 provides that the Commissioner of Insurance may adopt any rules necessary and appropriate to implement the powers and duties of the Texas Department of Insurance under the Insurance Code and other laws of this state.

7. TEXT.

§1.501. Purpose and Application.

(a) The purpose of this subchapter is to implement Chapter 53, Occupations Code, and sections and articles of the Insurance Code and Occupations Code that require and authorize the department to determine a person's fitness for holding a license, authorization, certification, permit, or registration, or a person's fitness to have the ability to control licensed, registered, permitted, certificate holding, and authorized entities, when that person has committed a criminal offense or has engaged in fraudulent or dishonest activity. This subchapter also establishes the procedure by which the department may obtain criminal history information on persons applying for a license, authorization, certification, permit, or registration, or acquiring the ability to control an entity holding or seeking a license, authorization, certificate, permit, or registration. To effect this implementation the department has developed guidelines in §1.502 of this subchapter (relating to Licensing Persons with Criminal Backgrounds) identifying the types of criminal offenses that directly relate to the duties and responsibilities of licensed and authorized insurance activities which are of such a serious nature that they are of prime importance in determining the person's fitness for licensure, authorization, certification, permit or registration, or control of a licensed, registered, permitted, certificate holding, or authorized entity.

(b) Section 1.502 of this subchapter applies to the following persons:

(1) applicants for, or holders of, any license, registration, permit, authorization, or certification, including temporary or training licenses or certificates, as agents, adjusters, public insurance adjusters, counselors, risk managers, reinsurance intermediaries, title agents, title escrow officers, title attorneys, utilization review agents, independent review organizations, viatical and life settlement registrants, and workers' compensation health care networks and management contractors, under the following Insurance Code provisions:

(A) Article 21.58A;

(B) Article 21.58C;

(C) Chapter 981;

(D) Chapter 1111;

(E) Chapter 1305;

(F) Chapter 2552;

(G) Chapter 2651 Subchapter A;

(H) Chapter 2652;

(I) Chapter 4001;

(J) Chapter 4051;

(K) Chapter 4052;

(L) Chapter 4053;

(M) Chapter 4054;

(N) Chapter 4055;

(O) Chapter 4056;

(P) Chapter 4101;

(Q) Chapter 4102;

(R) Chapter 4151;

(S) Chapter 4152;

(T) Chapter 4153; or

(U) any other provision providing for any type of license, registration, certification, permit, or authorization that the department may deny or revoke because of a criminal offense of the applicant or license holder;

(2) applicants for, or holders of, a license, registration, permit or authorization issued by the State Fire Marshal's Office, including the following provisions:

(A) Insurance Code Article 5.43-1;

(B) Insurance Code Article 5.43-2;

(C) Insurance Code Article 5.43-3;

(D) Occupations Code Chapter 2154; or

(E) any other provision providing for any type of license, registration, or authorization that the State Fire Marshal's Office may deny or revoke because of a criminal offense of the applicant or license holder;

(3) those who are or become partners or officers, directors, or controlling shareholders, including limited liability company members and managers, of entities that are applicants for, or holders of, a license, authorization, permit, certification, or registration under provisions specified in paragraphs (1) and (2) of this subsection and from whom biographical information is required;

(4) with regard to insurance companies, health maintenance organizations, holding companies, and other related entities, an individual who is required to provide biographical information and who:

(A) is the applicant, if the applicant is an individual, or an officer, director, or controlling shareholder of the applicant seeking an authorization as an insurer as described in Insurance Code Chapter 801 or an authorization under Insurance Code Chapters 822, 823, 841, 843, 844, 846, 2551, or 2552;

(B) becomes an officer, director, or controlling shareholder of an entity authorized as an insurer as described in Insurance Code Chapter 801 or an entity authorized under Insurance Code Chapters 822, 823, 841, 843, 844, 846, 2551, or 2552; or

(C) is the applicant if such person is an individual, or the chairman of the board, chief executive officer, president, chief financial officer, treasurer, and controller of the applicant if the applicant is not an individual, for each applicant under §7.209 of this title (relating to Form A); and

(5) each member of the initial board of trustees, subsequent members of the board, and the chief executive officer, president, secretary, treasurer, chief financial officer, and controller of the administrator and any service company filing biographical information under §5.6403 of this title (relating to Application for Initial Certificate of Approval).

(c) As used in §1.502 of this subchapter, the terms "license holder," "licensee," and "authorization holder" shall include all persons listed in subsection (b) of this section.

(d) As used in §1.502 of this subchapter, the terms "license" and "authorization" shall include all types of licenses, registrations, certificates, permits, or authorizations listed in subsection (b) of this section.

§1.503. Application of Fingerprint Requirement. The fingerprint requirement in §1.504(a) of this subchapter (relating to Fingerprint Requirement) applies to the following individuals:

(1) applicants for any license, registration, certification, authorization or permit, including temporary or training licenses or certificates, as agents, adjusters, public insurance adjusters, counselors, risk managers, reinsurance intermediaries, title agents, title escrow officers, viatical and life settlement registrants, and workers' compensation health care networks and management contractors, under the following Insurance Code provisions:

(A) Article 21.58A;

(B) Article 21.58C;

(C) Chapter 981;

(D) Chapter 1111 ;

(E) Chapter 1305;

(F) Chapter 2651, Subchapter A;

(G) Chapter 2652;

(H) Chapter 4001;

(I) Chapter 4051;

(J) Chapter 4052;

(K) Chapter 4053;

(L) Chapter 4054;

(M) Chapter 4056;

(N) Chapter 4101;

(O) Chapter 4102;

(P) Chapter 4152; or

(Q) Chapter 4153.

(2) with the exception of those individuals associated with licenses issued to corporations and limited liability companies under Insurance Code Chapter 2651 Subchapter A , individuals who are required to provide biographical information and who:

(A) are partners or officers, directors, or controlling shareholders, including limited liability company members and managers, of entities that are applicants for a license, certification, permit, registration, or authorization under provisions specified in paragraph (1) of this section; or

(B) become partners or officers, directors, or controlling shareholders, including limited liability company members and managers, of entities that are holders of a license, authorization, permit, certification or registration under provisions specified in paragraph (1) of this section.

(3) with regard to insurance companies, health maintenance organizations, holding companies, and other related entities, an individual who is required to provide biographical information and who:

(A) is the applicant, if the applicant is an individual, or an officer, director, or controlling shareholder of the applicant seeking an authorization as an insurer as described in Insurance Code Chapter 801 or an authorization under Insurance Code Chapters 822, 823, 841, 843, 844, 846, 2551, or 2552;

(B) becomes an officer, director, or controlling shareholder of an entity authorized as an insurer as described in Insurance Code Chapter 801 or an entity authorized under Insurance Code Chapters 822, 823, 841, 843, 844, 846, 2551, or 2552; or

(C) is the applicant if such person is an individual, or the chairman of the board, chief executive officer, president, chief financial officer, treasurer, and controller of the applicant if the applicant is not an individual, for each applicant under §7.209 of this title (relating to Form A).

(4) each member of the initial board of trustees, subsequent members of the board, and the chief executive officer, president, secretary, treasurer, chief financial officer, and controller of the administrator and any service company filing biographical information under §5.6403 of this title (relating to Application for Initial Certificate of Approval).

§1.504. Fingerprint Requirement.

(a) In the manner described in §1.509 of this subchapter (relating to Fingerprint Format and Complete Application), each individual listed in §1.503 of this subchapter (relating to Application of Fingerprint Requirement) must, at or near the same time that they submit their biographical information or application for licensure, registration, authorization, certification, or permit, also submit:

(1) a complete set of the individual's fingerprints;

(2) full payment for all processing fees charged by the Texas Department of Public Safety and the Federal Bureau of Investigation; and

(3) all additional identifying information required by the Texas Department of Public Safety and the Federal Bureau of Investigation for processing fingerprints.

(b) An individual listed in §1.503 of this subchapter is exempt from the requirement set forth in subsection (a) of this section if the individual satisfies the requirements of paragraphs (1), (2), (3), (4), (5) or (6) of this subsection.

(1) Except as provided in subsection (d) of this section, the individual is submitting an application or biographical information, and:

(A) previously provided the department a complete, legible fingerprint card or electronic set of fingerprints as part of an earlier submission which was granted or approved; and

(B) maintains that prior license, or licensed entity association, in good standing on the date of the subsequent application.

(2) The individual is licensed, or associated with an entity licensee, under Insurance Code Chapter 981 Subchapter E or Title 13 Subtitles A - D, and is:

(A) renewing an unexpired license or license that has been expired for not more than 90 days; or

(B) applying for a license that has been expired for more than 90 days but not more than one year.

(3) The individual is applying for an original emergency license pursuant to Insurance Code Chapters 4051, 4053, or 4101. Emergency licensees who later qualify for a permanent license by examination must submit a complete set of fingerprints and payment of all fingerprint processing fees prior to issuance of the permanent license.

(4) The individual, or the entity with which the individual is associated, is renewing an unexpired license, certification, registration, or authorization.

(5) The individual is licensed under Insurance Code Chapter 2651 Subchapter A or Chapter 2652 and is renewing an unexpired license or license that has been expired for not more than 90 days.

(6) The individual is submitting an application under Insurance Code Chapter 2651 Subchapter A or Chapter 2652 and has previously provided the department a complete, legible fingerprint card or electronic set of fingerprints as part of an earlier Insurance Code Chapter 2651 Subchapter A or Chapter 2652 submission that was granted or approved; and either:

(A) maintains that prior license in good standing on the date of the current application; or

(B) held a prior Insurance Code Chapter 2651 Subchapter A or Chapter 2652 license that has not been canceled for more than 60 days and maintained that license in good standing at the time of cancellation.

(c) The commissioner may waive the requirement in subsection (a) of this section if the commissioner determines that the individual is unable to provide fingerprints due to permanent physical injury or illness. The individual seeking a waiver under this subsection must submit evidence of such a condition to the satisfaction of the commissioner.

(d) The exemption set forth in subsection (b)(1) of this section is subject to the department's ability to maintain an individual's previously submitted set of fingerprints, and the department may require a complete set of fingerprints and payment of all fingerprint processing fees from an individual notwithstanding the exemption.

(e) This subchapter does not limit the department's statutory authority to require the submission of fingerprints or obtain criminal history information.

§1.505. Nonresident Agents and Adjusters.

(a) As authorized under Insurance Code §§4056.055 and 4101.004, the commissioner may waive the requirement in §1.504 of this subchapter (relating to Fingerprint Requirement) to the extent necessary to comply with federal law and promote reciprocal licensing between the states for nonresident individuals holding an agent or adjuster license in their state of residence.

(b) The requirement in §1.504 of this subchapter is in addition to and does not alter the criminal history reporting requirement set forth in Insurance Code §4056.051 for nonresident individuals who do not hold a license in their state of residence.

§1.506. Insurance Companies and Related Entities. The commissioner may waive the requirement in §1.504 of this subchapter (relating to Fingerprint Requirement) for individuals listed under §1.503(3) of this subchapter (relating to Application of Fingerprint Requirement) if the individual, or the entity with which the individual is associated, is not domiciled in Texas.

§1.507. Other Licensees and Registrants. The commissioner may waive the requirement in §1.504 of this subchapter (relating to Fingerprint Requirement) for individuals listed under §1.503(1), (2), and (4) of this subchapter (relating to Application of Fingerprint Requirement) if the individual, or the entity with which the individual is associated, is not domiciled in Texas.

§1.508. Use and Confidentiality of Fingerprints.

(a) The department shall submit all fingerprints received under this subchapter to the Texas Department of Public Safety and the Federal Bureau of Investigation to obtain criminal history information on the individual for the purpose of determining the individual's fitness for licensure, authorization, certification, permit, or registration, or control of an entity holding or seeking a license, authorization, certificate, permit, or registration.

(b) The department shall use and maintain all criminal history information obtained pursuant to this subchapter in accordance with state and federal laws, including:

(1) Texas Government Code §411.106;

(2) Texas Government Code §411.084;

(3) United States Public Law 92-544; and

(4) Code of Federal Regulations 28 CFR 50.12.

§1.509. Fingerprint Format and Complete Application.

(a) Each individual described in §1.503 of this subchapter (relating to Application of Fingerprint Requirement) and who is required to submit fingerprints under §1.504 of this subchapter (relating to Fingerprint Requirement) shall have a complete set of their fingerprints captured by:

(1) an electronic fingerprint vendor acceptable to the Texas Department of Public Safety;

(2) the department's examination vendor; or

(3) a criminal law enforcement agency, including a sheriff's office or police department.

(b) Individuals having their fingerprints captured by a vendor acceptable to the Texas Department of Public Safety shall pay, in a manner acceptable to the vendor, all fingerprint capture and processing fees directly to the vendor at the time the fingerprints are captured or at such time as is acceptable to the vendor.

(c) Individuals having their fingerprints captured by the department's examination vendor shall pay, in a manner acceptable to the vendor, all fingerprint capture and processing fees directly to the vendor at the time the fingerprints are captured or at such time as is acceptable to the vendor.

(d) Individuals having their fingerprints captured by a criminal law enforcement agency shall:

(1) pay that agency any associated charges that may apply to the capture of their fingerprints in a manner acceptable to that agency; and

(2) submit to the department payment for all applicable fingerprint processing fees in the amount and in the manner set forth on the department's application or biographical submission form, or as otherwise posted by the department if the individual is not using a department form.

(e) Fingerprint cards may be obtained by sending a written request to the Licensing Division, Mail Code 107-1B, Texas Department of Insurance, P.O. Box 149104, Austin, Texas 78714-9104; by telecopy or facsimile to (512) 475-1819; or by e-mail to LICENSE@tdi.state.tx.us.

(f) All fingerprint impressions must be legible and suitable for use by the Texas Department of Public Safety and Federal Bureau of Investigation.

(g) Individuals required to submit fingerprints shall submit them within the time frame indicated on the specific application or biographical submission form. Individuals may request an extension of time by contacting the division of the department that will process the application or biographical submission.

(h) The application or submission of a person required to submit fingerprints shall not be complete until the department receives the criminal history information. Criminal history processing time and rejection rates for applications and submissions with paper fingerprint cards may be substantially greater than with electronic fingerprints.



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