Court Opinions

State Laws

US Code

US Constitution

Texas Insurance Code - Not Codified - Article 5.08. Special Favors And Profit Sharing

Legal Research Home > Texas Lawyer > Insurance Code - Not Codified > Texas Insurance Code - Not Codified - Article 5.08. Special Favors And Profit Sharing

Art. 5.08. SPECIAL FAVORS AND PROFIT SHARING.                                  

Article repealed effective April 1, 2007
	(a) Except as provided by this article, it shall be unlawful 
for any insurer, as defined in this subchapter, or its officers, 
directors, general agent, state agents, special agents, local 
agents or other representatives, to grant to or contract with 
insured for any special favor or advantage in dividends or other 
profits, or any commissions or dividends of commissions or profits 
to accrue thereon, or any compensation or any valuable 
consideration not specified in the policy contract, or any 
inducement not specified in the policy contract, for the purpose of 
writing the insurance of any insured.
	(b)  Nothing in this article, however, shall be construed to 
prohibit an insurer from sharing its profits after the same have 
been earned with its policyholders under and in accordance with an 
agreement as to such profit sharing contained in its policy 
contract.  Any profit sharing under any policy with insured shall be 
uniform as between such insured, and shall consist only and solely 
of an equitable distribution under and in accordance with the terms 
of the policy of earnings between such insured, and no such insurer 
shall discriminate in any distribution of profits between insured 
of a class, and no classes for such distribution shall be made or 
established except on the approval of the commissioner.  No part of 
any profit shall be distributed to any insured under any such policy 
until the expiration of the policy contract.  Any violation of the 
terms of this subsection shall constitute unjust discrimination and 
shall constitute rebating, and shall be sufficient grounds for the 
revocation of the permit of the insurer or of the license of the 
agent being guilty of such unjust discrimination and rebating.
	(c)  This article does not prohibit an insurer, on approval 
by the commissioner, from distributing to policyholders who are on 
active duty in the United States Armed Forces any estimated profits 
resulting from service by those policyholders in any foreign 
country in a combat theater of operations at any time after January 
1, 1990.  An insurer that elects to make such distributions shall 
file a written description of its distribution program with the 
commissioner for approval by the commissioner and shall notify the 
commissioner in writing of each distribution made under the 
program.  The insurer may distribute the estimated profits among 
those policyholders based on the length of time served by a 
policyholder in a combat theater of operations, the location of the 
military service, the duration of the applicable insurance policy, 
or any other reasonable basis.  The commissioner shall act on the 
insurer's distribution program within five business days of receipt 
of the insurer's distribution program, otherwise the distribution 
program shall be deemed approved.
	(d)  This article does not prohibit an insurer, on approval 
by the commissioner, from sharing profits with policyholders who 
are part of a group program established by a nonprofit business 
association and who participate in the group program because of 
membership in the association.  An insurer that elects to make 
distributions under this subsection shall file a written 
description of its distribution program with the commissioner for 
approval by the commissioner and shall notify the commissioner in 
writing of each distribution made under the program.  The 
commissioner shall act on the insurer's distribution program within 
five business days of receipt of the insurer's distribution 
program, otherwise the distribution program shall be deemed 
approved.  For purposes of this subsection, "nonprofit business 
association" means a business association that is a nonprofit 
corporation exempt from federal income tax under Section 501(a) of 
the Internal Revenue Code of 1986, and its subsequent amendments, 
by being listed as an exempt organization under Section 501(c)(6) 
of that code.

Acts 1951, 52nd Leg., ch. 491.                                                

Amended by Acts 1991, 72nd Leg., ch. 6, Sec. 1, eff. March 19, 1991;  
Acts 1999, 76th Leg., ch. 1240, Sec. 1, eff. June 18, 1999.

Last modified: August 11, 2007