A BILL TO BE ENTITLED
AN ACT to clarify the civil liability and increase the criminal penalty for persons who represent unauthorized insurers and to provide that such activity is grounds for revocation of the license of the insurance agent or broker; and to limit direct procurement of insurance only through eligible surplus lines insurers.
The General Assembly of North Carolina enacts:
SECTION 1.  G.S. 58‑33‑95 reads as rewritten:
"§ 58‑33‑95.  Agents personally liable; representing unlicensed company prohibited; penalty.
(a)	Any person  or entity who solicits, negotiates, or sells insurance in this State for an unauthorized insurer:
(1)	Is the representative of that insurer and shall be strictly liable for any losses or unpaid claims if an unauthorized insurer fails to pay in full or in part any claim or loss within the provisions of any insurance contract sold, directly or indirectly, by or through that person or entity on behalf of the unauthorized insurer.
(2)	Shall be guilty of a Class 1 misdemeanor if the person or entity does not know that the insurer is an unauthorized insurer. Each solicitation, negotiation, or sale shall constitute a separate offense.
(3)	Shall be guilty of a Class H felony if the person or entity knows that the insurer is an unauthorized insurer. Each solicitation, negotiation, or sale shall constitute a separate offense.
(b)	A civil action may be filed or a license revocation proceeding may be initiated under this section regardless of whether a criminal action is brought or a criminal conviction is obtained for the act alleged in the civil action or revocation proceeding.
(c)	As used in this section, the terms "negotiate", "sell", and "solicit" shall have the meanings set forth in G.S. 58‑33‑10. As used in this section, the status of an entity or person as an "unauthorized insurer" shall be determined in accordance with Article 28 of this Chapter and, if applicable, Article 49 of this Chapter."
SECTION 2.  G.S. 58‑33‑46(a) is amended by adding a new subdivision to read:
"(12a)	Soliciting, negotiating, or selling insurance in this State for an unauthorized insurer, regardless of whether the licensee or applicant knew that the insurer was unauthorized. As used in this section, the terms "soliciting", "negotiating", and "selling" shall have the meaning of "solicit", "negotiate", and "sell", respectively, set forth in G.S. 58‑33‑10." 
SECTION 3.  G.S. 58‑28‑45(h) reads as rewritten:
"(h)	Except as provided in G.S. 58‑33‑95, any person, corporation, association or partnership violating any of the provisions of this section shall be guilty of a Class 3 misdemeanor and shall only be fined not less than one thousand dollars ($1,000) nor more than five thousand dollars ($5,000)."
SECTION 4.  G.S. 58‑28‑5(b) reads as rewritten:
"(b)	Any person in this State may directly procure or directly renew insurance with an eligible surplus lines insurer, as defined in G.S. 58‑21‑10(3), without the involvement of an agent, broker, or surplus lines licensee, on a risk located or to be performed, in whole or in part, in this State. The person shall, within 30 days after the date the insurance is procured or renewed, file a written report with the Commissioner on forms prescribed by the Commissioner. The report must contain the name and address of the insured; name and address of the insurer; the subject of insurance; a general description of the coverage; the amount of premium currently charged; and any additional information requested by the Commissioner. The report must also contain an affidavit of the insured that states that the full amount or kind of insurance cannot be obtained from insurers that are licensed to do business in this State; and that the insured has made a diligent search among the insurers that are licensed to transact and are actually writing the particular kind and class of insurance in this State. Gross premiums charged for the insurance, less any return premiums, are subject to a tax at the rate of five percent (5%). At the time of filing the report required by this subsection, the insured shall pay the tax to the Commissioner. The Commissioner has the powers specified in G.S. 58‑21‑90 with respect to the tax levied by this subsection."
SECTION 5.  This act becomes effective December 1, 2004, and applies to act committed on or after that date.