For-Profit Legal Service Contract Companies Penalties and Sanctions

 

For-Profit Legal Service Contract Companies (LSC)

Texas Occupations Code, Chapter 953

16 Texas Administration Code, Chapter 57

Class A:

1st Violation, Reprimand to $1,000

2nd Violation, $500 to $2,000

3rd Violation, $1,000 to $4,000 per day not corrected and/or 6-month probated suspension to 1-year full suspension.

  • Failed to supply the Executive Director with financial security information annually - 953.105
  • Failure of company to give receipt or copy of contract - 953.151, 57.71
  • Failed to provide description of services to holder of a group contract - 953.152
  • Using a legal service contract, endorsement, or attachment that has not been filed with the Executive Director - 953.156(a)
  • Marketed, sold, offered for sale, administered, or issued a legal service contract that was not written, printed, or typed in clear, understandable language that is easy to read - 953.156(b)(1)
  • Marketed, sold, offered for sale, administered, or issued a legal service contract that did not include the name and full address of the company - 953.156(b)(2)
  • Marketed, sold, offered for sale, administered, or issued a legal service contract that did not include the purchase price of the contract and the terms under which the contract is sold - 953.156(b)(3)
  • Marketed, sold, offered for sale, administered, or issued a legal service contract that did not include the terms and restrictions governing cancellation of the contract by the company or the legal service contract holder - 953.156(b)(4)
  • Marketed, sold, offered for sale, administered, or issued a legal service contract that failed to identify the administrator - 953.156(b)(5)(A)
  • Marketed, sold, offered for sale, administered, or issued a legal service contract that failed to identify the sales representative - 953.156(b)(5)(B)
  • Marketed, sold, offered for sale, administered, or issued a legal service contract that failed to identify the name of the legal service contract holder - 953.156(b)(5)(C)
  • Marketed, sold, offered for sale, administered, or issued a legal service contract that did not include the amount of any deductible or co-payment - 953.156(b)(6)
  • Marketed, sold, offered for sale, administered, or issued a legal service contract that did not specify the legal services and other benefits to be provided under the contract, and any limitation, exception, or exclusion - 953.156(b)(7)
  • Marketed, sold, offered for sale, administered, or issued a legal service contract that did not specify the legal services for which the company will provide reimbursement and the amount of that reimbursement - 953.156(b)(8)
  • Marketed, sold, offered for sale, administered, or issued a legal service contract that did not specify any restriction governing the transferability of the contract or the assignment of benefits - 953.156(b)(9)
  • Marketed, sold, offered for sale, administered, or issued a legal service contract that did not include the duties of the legal service contract holder - 953.156(b)(10)
  • Marketed, sold, offered for sale, administered, or issued a legal service contract that did not include the contact information for the department, including the department’s toll-free number and electronic mail address, as well as a statement that the department regulates the company and the company’s sales representatives - 953.156(b)(11)
  • Failed to explain the method to be used in resolving the legal service contract holder's complaints and grievances - 953.156(b)(12)
  • Failed to explain how legal services may be obtained under the legal service contract - 953.156(b)(13)
  • Failure of executive officer to approve a change to the contract - 953.156(b)(14)
  • Failed to include any eligibility and effective date requirements, including a definition of eligible dependents and the effective date of their coverage - 953.156(b)(15)
  • Failed to include the conditions under which coverage will terminate - 953.156(b)(16)
  • Failed to explain any subrogation arrangements - 953.156(b)(17)
  • Failure of the contract to contain a payment provision that provides for a grace period of at least 31 days - 953.156(b)(18)
  • Failed to include conditions under which contract rates may be modified - 953.156(b)(19)
  • Failed to include any other items required by the executive director as determined by rule - 953.156(b)(20)
  • Use by a company of a prohibited company name - 953.160
  • Failed to notify Department of change of information set forth in license application - 57.70
  • Failed to provide a receipt for, or other written evidence of the purchase of a legal service - 57.71(a)
  • Failed to provide a copy of the legal service contract to contract holder within 45 days - 57.71(b)
  • Failed to provide a copy of the terms of a group legal service contract - 57.71(c)
  • Failed to provide a receipt for, or other written evidence of the purchase of a group legal service contract - 57.71(d)
  • Failed to include Department information in legal service contract - 57.71(e)

Class B:

1st Violation, $500 to $3,000 and/or 6-month probated suspension

2nd Violation, $1,500 to $5,000 plus 1-year probated suspension to 1-year full suspension

3rd Violation, $3,500 to $5,000 per day plus 1-year full suspension to revocation

  • Operating as a legal service contract company without a registration - 953.051, 57.21
  • Operating as a legal service contract sales representative without a registration - 953.051, 57.22
  • Operating as a legal service contract administrator without a registration - 953.051, 57.23
  • Failure by contracting attorney to be licensed and in good standing - 953.153 (1), (2)
  • Failure by contracting attorney to maintain minimum required levels of professional liability and errors and omissions insurance - 953.153(3)
  • Interference by a company with the attorney-client relationship or with the attorney’s independent exercise of professional judgment - 953.154
  • Failure by company to maintain a copy of each unique form of legal service contract filed with the executive director - 953.155(a)(1)
  • Failure by company to maintain the name and address of each legal service contract holder - 953.155(a)(2)
  • Failure by company to maintain a list of the sales representatives authorized by the company to market, sell or offer to sell the company’s legal service contracts - 953.155(a)(3)
  • Failure by company to maintain a copy of each contract entered into between the company and a contracting attorney - 953.155(a)(4)
  • Failure by company to maintain a list of complaints the company has received from legal service contract holders, including the name of the sales representative involved in the transaction leading to the complaint - 953.155(a)(5)
  • Failed to retain the required records for 2 years - 953.155(c)
  • Failed to retain records after discontinuance of business - 953.155(d)
  • Failed to refund full purchase price of the contract when voided - 953.158(c)
  • Failed to provide notice of cancellation to certificate holder - 953.159(a)
  • Used a company name with a word that is descriptive of the insurance, casualty, or surety business - 953.160(a)(1)
  • Used a company name that is deceptively similar to the name or description of an insurance or surety corporation or to the name of any other company - 953.160(a)(2)
  • Made, permitted, or caused false or misleading statements in the company’s contracts or marketing - 953.161(1)
  • Deliberately omitted a material statement in the company’s contracts or marketing - 953.161(2)
  • Operating with an expired registration - 57.25(c)
  • Sales representative selling legal service contracts on behalf of an unregistered company - 57.72

Class C:

1st Violation, $500 to $5,000 and/or 1-year probated suspension up to revocation

2nd Violation, $1,500 to $5,000 plus 1-year probated suspension to revocation

3rd Violation, $3,000 to $5,000 plus revocation

  • Failing to make records available to the Executive Director upon request - 953.005
  • Failure to maintain required financial security - 953.101, 953.102

Class D:

1st Violation, Revocation

2nd Violation, Revocation

3rd Violation, Revocation

  • Failed to comply with previous order of Commission/Executive Director - 51.353(a)
  • Made a material misrepresentation or fraudulent statement in the application - 953.055(a)(1)
  • Has has a license revoked under the Insurance Code - 953.055(a)(2)
  • Has had a license suspended or revoked under Section 82.063, Government Code - 953.055(a)(3)
  • Company obtained a license by fraud or false representation - 57.21(d), 60.23(a)(1)
  • Sales Representative obtained a license by fraud or false representation - 57.22(d), 60.63(b)
  • Administrator obtained a license by fraud or false representation - 57.23(d), 60.63(b)
  • Failed to pay the Department for a dishonored check - 60.82