Texas Department of Insurance Investigations
Texas Department of Insurance Investigation Defense Attorneys
The insurance industry in Texas is regulated by the Texas Department of Insurance (TDI). If you have been contacted by the Texas Department of Insurance or notified that an investigation is underway, you need to respond promptly. Your professional license and career could be at risk.
The attorneys at Hendershot Cowart P.C. have been representing licensed professionals since 1987. We have extensive experience with state and federal agencies, including the Texas Department of Insurance. In our years of practicing administrative law, our firm has learned how to navigate the rules and procedures of most state government departments. As a result, we know how to prepare and present the most effective defense strategy on behalf of our clients.
On This Page:
- How Are Texas Department of Insurance Investigations Initiated?
- When Should I Get An Attorney Involved in a TDI Investigation?
- The TDI Investigation Process
- Common Reasons for Insurance Investigations
- Potential Outcomes of a Texas Department of Insurance Investigation
- Can I Appeal a Texas Department of Insurance Decision?
- Seek Legal Counsel for TDI Investigations & Protect your Insurance License
TDI investigations are often initiated through complaints from consumers or whistleblowers, or routine examinations of insurance companies or agents by the department or other law enforcement agencies.
The risks and consequences of a Texas Department of Insurance investigation are high. Depending on the severity of the alleged wrongdoing, your license and your agency’s license can be revoked or suspended.
A TDI defense attorney can protect your rights throughout the investigation and help you navigate the process, including:
- Communicate directly with the department and its officers on your behalf;
- Counsel you through investigative interviews;
- Help you submit the correct documents as requested;
- Negotiate a resolution on your behalf; and
- Appeal decisions as needed before the State Office of Administrative Hearings.
Insurance agents have rights during a TDI investigation. You also have obligations, such as cooperating with interview requests and providing requested documents. Legal counsel can work with you to present your side of the story and help manage your legal obligations throughout the investigative process.
Although specific details of a TDI investigation can vary widely depending on the allegation, here is a general overview of the TDI investigation process:
- Notification to the insurance agent: If an insurance agent is the subject of an investigation, they will typically receive formal notification from TDI. This notification may come in the form of a letter, email, or in-person contact. The notification will outline the reason for the investigation, the specific allegations or concerns, and any relevant statutes or regulations under review.
- Information gathering: TDI investigators will collect information and evidence related to the investigation. This may involve reviewing databases, documents, records, policies, contracts, and other relevant materials. Subpoenas may be issued for critical documents.
- Interviews: Investigators may also interview clients, employees, and other individuals with knowledge of the case, or conduct surveillance.
- Investigation report: Once the investigation is complete, TDI investigators will compile their findings and file a case report. This report will typically include a summary of the investigation, evidence collected, and any violations or compliance issues identified.
- Review and determination: TDI's legal team will review the investigation report and determine whether there is sufficient evidence to support allegations of wrongdoing or regulatory violations.
Insurance agents facing a TDI investigation are encouraged to seek legal counsel immediately to ensure their rights are protected and to navigate the process effectively.
The TDI enforces the Texas Insurance Code and other laws regarding insurance and insurance companies and conducts investigations into potential violations, including insurance fraud.
Common allegations of agent fraud or wrongdoing may include:
- Failure to timely pay claims: Agent fails to provide notice of acceptance or rejection of a claim within 15 business days after the insurer receives information required to secure final proof of loss.
- Selling insurance without a license: It is illegal to sell insurance in Texas without a license. Unlicensed companies usually don't meet the state's financial requirements and may not have the money to pay claims.
- Application fraud: Agent forges an insurance application using information from an unsuspecting person to obtain commissions.
- Clean sheeting: Agent conspires to acquire life insurance without disclosing life-threatening illness.
- Theft or conversion: Agent retains customer premiums, provides the customer with fictitious insurance documents and issues fraudulent liability insurance cards. May involve the conversion of annuity funds.
- Churning: Agent induces customer to use cash value of existing policy to purchase a new policy, resulting in another commission for the agent.
The potential outcomes of a Texas Department of Insurance (TDI) investigation can vary depending on the nature and severity of the violations or issues identified during the investigation. Here are some potential disciplinary actions:
- Warning or informal resolution: TDI may issue a warning or engage in an informal resolution process for minor or non-systemic issues. This may involve counseling the insurance agent on compliance matters and seeking voluntary corrective actions.
- Administrative penalties: If TDI finds evidence of violations, they may impose administrative penalties on the insurance agent. Penalties can vary in severity and may include fines, which can range from nominal amounts to substantial sums.
- License suspension or revocation: In cases of serious misconduct or repeated violations, TDI has the authority to suspend or revoke an insurance agent's or an agency’s license. This action effectively bars the agent from conducting insurance-related activities in Texas.
- Restitution to consumers: In cases where consumers have suffered financial harm due to an agent's actions, TDI may require the insurance agent to provide restitution to affected individuals or policyholders.
- Civil or criminal referrals: In cases involving fraud, embezzlement, or other criminal activities, TDI may refer the matter to law enforcement agencies for possible criminal prosecution. The Texas Department of Insurance has a special prosecutor assigned to work on insurance-related crimes in district attorney offices in Bexar, Dallas, Harris, Tarrant, and Travis Counties.
If violations are found, you can request a hearing to challenge TDI’s decision before an administrative law judge for the State Office of Administrative Hearings. The hearing is another opportunity to present your case and tell your side of the story.
An administrative hearing is like a trial with rules and procedures that must be followed. Both you and the TDI will present evidence to the Administrative Law Judge, who will make findings of fact and conclusions of law. An attorney can guide you through the process and help make the strongest case possible to protect and defend your license.
Insurance agents facing a Texas Department of Insurance investigation are encouraged to seek legal counsel to ensure their rights are protected and to navigate the process effectively. At Hendershot Cowart P.C., our team of administrative lawyers are ready to listen to you and prepare the best possible response strategy to protect your livelihood.
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