MISSISSIPPI LEGISLATURE
2004 Regular Session
To: Business and Financial Institutions
By: Senator(s) Michel, Hewes, Brown, King, Thames, Walley, Little, Doxey, Moffatt, Jackson (15th), Chaney, Morgan, Albritton, Flowers, Tollison, Nunnelee, Browning, Pickering, Kirby, Butler, White, Robertson, Hyde-Smith, Lee (35th)
AN ACT TO AMEND SECTION 73-35-16, MISSISSIPPI CODE OF 1972, TO INCREASE THE MAXIMUM AMOUNT OF PREMIUM FOR THE ERRORS AND OMISSIONS INSURANCE PROGRAM OFFERED TO LICENSEES OF THE MISSISSIPPI REAL ESTATE COMMISSION; TO AMEND SECTION 73-35-21, MISSISSIPPI CODE OF 1972, TO CLARIFY THAT ASSOCIATE REAL ESTATE BROKERS OR SALESPERSONS MAY OWN ANY LAWFULLY CONSTITUTED BUSINESS ORGANIZATION FOR THE PURPOSE OF RECEIVING COMMISSIONS; TO AMEND SECTION 73-35-11, MISSISSIPPI CODE OF 1972, TO PROVIDE THAT A COOPERATIVE AGREEMENT BETWEEN A MISSISSIPPI LICENSED REAL ESTATE BROKER AND BROKER LICENSED IN ANOTHER STATE DOES NOT AUTHORIZE ANY PERSON NOT LICENSED BY THE STATE OF MISSISSIPPI TO PERFORM ANY REAL ESTATE ACTIVITY; AND FOR RELATED PURPOSES.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:
SECTION 1. Section 73-35-16, Mississippi Code of 1972, is amended as follows:
73-35-16. (1) The following words and phrases shall have the meanings ascribed herein unless the context clearly indicates otherwise:
(a) "Aggregate limit" means a provision in an insurance contract limiting the maximum liability of an insurer for a series of losses in a given time period such as the policy term.
(b) "Claims-made" means policies written under a claims-made basis which shall cover claims made (reported or filed) during the year the policy is in force for incidents which occur that year or during any previous period the policyholder was insured under the claims-made contract. This form of coverage is in contrast to the occurrence policy which covers today's incident regardless of when a claim is filed even if it is one or more years later.
(c) "Extended reporting period" means a designated period of time after a claims-made policy has expired during which a claim may be made and coverage triggered as if the claim had been made during the policy period.
(d) "Licensee" means any active individual broker, broker-salesperson or salesperson, any partnership or any corporation.
(e) "Per-claim limit" means the maximum limit payable, per licensee, for damages arising out of the same error, omission or wrongful act.
(f) "Prior acts coverage" applies to policies on a claims-made versus occurrence basis. Prior acts coverage responds to claims that are made during a current policy period, but the act or acts causing the claim or injuries for which the claim is made occurred prior to the inception of the current policy period.
(g) "Proof of coverage" means a copy of the actual policy of insurance, a certificate of insurance or a binder of insurance.
(h) "Retroactive date" means a provision, found in many claims-made policies, that the policy shall not cover claims for injuries or damages that occurred before the retroactive date even if the claim is first made during the policy period.
(2) The following persons shall submit proof of insurance:
(a) Any active individual broker, active broker-salesperson or active salesperson;
(b) Any partnership (optional); or
(c) Any corporation (optional).
(3) Individuals whose licenses are on inactive status are not required to carry errors and omissions insurance.
(4) All Mississippi licensees shall be covered for activities contemplated under this chapter.
(5) Licensees may obtain errors and omissions coverage through the insurance carrier approved by the Mississippi Real Estate Commission and provided on a group policy basis. The following are minimum requirements of the group policy to be issued to the commission, including, as named insureds, all licensees who have paid their required premium:
(a) All activities contemplated under this chapter are included as covered activities;
(b) A per-claim limit is not less than One Hundred Thousand Dollars ($100,000.00);
(c) An annual aggregate limit is not less than One Hundred Thousand Dollars ($100,000.00);
(d) Limits apply per licensee per claim;
(e) Maximum deductible is Two Thousand Five Hundred Dollars ($2,500.00) per licensee per claim for damages;
(f) Maximum deductible is One Thousand Dollars ($1,000.00) per licensee per claim for defense costs; and
(g) The contract of insurance pays, on behalf of the injured person(s), liabilities owed.
(6) (a) The maximum contract period between the insurance carrier and the commission is to be three (3) consecutive policy terms, after which time period the commission shall place the insurance out for competitive bid. The commission shall reserve the right to place the contract out for bid at the end of any policy period.
(b) The policy period shall be a twelve-month policy term.
(c) The retroactive date for the master policy shall not be before July 1, 1994.
(i) The licensee may purchase full prior acts coverage on July 1, 1994, if the licensee can show proof of errors and omissions coverage that has been in effect since at least March 15, 1994.
(ii) If the licensee purchases full prior acts coverage on July 1, 1994, that licensee shall continue to be guaranteed full prior acts coverage if the insurance carriers are changed in the future.
(iii) If the licensee was not carrying errors and omissions insurance on July 1, 1994, the individual certificate shall be issued with a retroactive date of July 1, 1994. This date shall not be advanced if the insurance carriers are changed in the future.
(iv) For any new licensee who first obtains a license after July 1, 1994, the retroactive date shall be the effective date of licensure.
(v) For any licensee who changes status of license from inactive to active, the retroactive date shall be the effective date of change to "active" licensure.
(d) Each licensee shall be notified of the required terms and conditions of coverage for the policy at least thirty (30) days before the renewal date of the policy. A certificate of coverage, showing compliance with the required terms and conditions of coverage, shall be filed with the commission by the renewal date of the policy by each licensee who elects not to participate in the insurance program administered by the commission.
(e) If the commission is unable to obtain errors and omissions insurance coverage to insure all licensees who choose to participate in the insurance program at a premium of no more than Two Hundred Dollars ($200.00) per twelve-months' policy period, the requirement of insurance coverage under this section shall be void during the applicable contract period.
(7) Licensees may obtain errors and omissions coverage independently if the coverage contained in the policy complies with the following minimum requirements:
(a) All activities contemplated under this chapter are included as covered activities;
(b) A per-claim limit is not less than One Hundred Thousand Dollars ($100,000.00);
(c) The deductible is not more than Two Thousand Five Hundred Dollars ($2,500.00) per licensee per claim for damages and the deductible is not more than One Thousand Dollars ($1,000.00) per licensee per claim for defense costs; and
(d) If other insurance is provided as proof of errors and omissions coverage, the other insurance carrier shall agree to a noncancelable policy or to provide a letter of commitment to notify the commission thirty (30) days before the intention to cancel.
(8) The following provisions apply to individual licensees:
(a) The commission shall require receipt of proof of errors and omissions insurance from new licensees within thirty (30) days of licensure. Any licenses issued at any time other than policy renewal time shall be subject to a pro rata premium.
(b) For licensees not submitting proof of insurance necessary to continue active licensure, the commission shall be responsible for sending notice of deficiency to those licensees. Licensees who do not correct the deficiency within thirty (30) days shall have their licenses placed on inactive status. The commission shall assess fees for inactive status and for return to active status when errors and omissions insurance has been obtained.
(c) Any licensee insured in the state program whose license becomes inactive shall not be charged an additional premium if the license is reactivated during the policy period.
(9) The commission is authorized to adopt such rules and regulations as it deems appropriate to handle administrative duties relating to operation of the program, including billing and premium collection.
SECTION 2. Section 73-35-21, Mississippi Code of 1972, is amended as follows:
73-35-21. (1) The commission may, upon its own motion and shall upon the verified complaint in writing of any person, hold a hearing for the refusal of license or for the suspension or revocation of a license previously issued, or for such other action as the commission deems appropriate. The commission shall have full power to refuse a license for cause or to revoke or suspend a license where it has been obtained by false or fraudulent representation, or where the licensee in performing or attempting to perform any of the acts mentioned herein, is deemed to be guilty of:
(a) Making any substantial misrepresentation in connection with a real estate transaction;
(b) Making any false promises of a character likely to influence, persuade or induce;
(c) Pursuing a continued and flagrant course of misrepresentation or making false promises through agents or salespersons or any medium of advertising or otherwise;
(d) Any misleading or untruthful advertising;
(e) Acting for more than one (1) party in a transaction or receiving compensation from more than one (1) party in a transaction, or both, without the knowledge of all parties for whom he acts;
(f) Failing, within a reasonable time, to account for or to remit any monies coming into his possession which belong to others, or commingling of monies belonging to others with his own funds. Every responsible broker procuring the execution of an earnest money contract or option or other contract who shall take or receive any cash or checks shall deposit, within a reasonable period of time, the sum or sums so received in a trust or escrow account in a bank or trust company pending the consummation or termination of the transaction. "Reasonable time" in this context means by the close of business of the next banking day;
(g) Entering a guilty plea or conviction in a court of competent jurisdiction of this state, or any other state or the United States of any felony;
(h) Displaying a "for sale" or "for rent" sign on any property without the owner's consent;
(i) Failing to furnish voluntarily, at the time of signing, copies of all listings, contracts and agreements to all parties executing the same;
(j) Paying any rebate, profit or commission to any person other than a real estate broker or salesperson licensed under the provisions of this chapter;
(k) Inducing any party to a contract, sale or lease to break such contract for the purpose of substituting in lieu thereof a new contract, where such substitution is motivated by the personal gain of the licensee;
(l) Accepting a commission or valuable consideration as a real estate salesperson for the performance of any of the acts specified in this chapter from any person, except his employer who must be a licensed real estate broker; or
(m) Any act or conduct, whether of the same or a different character than hereinabove specified, which constitutes or demonstrates bad faith, incompetency or untrustworthiness, or dishonest, fraudulent or improper dealing.
(2) No real estate broker shall practice law or give legal advice directly or indirectly unless said broker be a duly licensed attorney under the laws of this state. He shall not act as a public conveyancer nor give advice or opinions as to the legal effect of instruments nor give opinions concerning the validity of title to real estate; nor shall he prevent or discourage any party to a real estate transaction from employing the services of an attorney; nor shall a broker undertake to prepare documents fixing and defining the legal rights of parties to a transaction. However, when acting as a broker, he may use an earnest money contract form. A real estate broker shall not participate in attorney's fees, unless the broker is a duly licensed attorney under the laws of this state and performs legal services in addition to brokerage services.
(3) It is expressly provided that it is not the intent and purpose of the Mississippi Legislature to prevent a license from being issued to any person who is found to be of good reputation, is able to give bond, and who has lived in the State of Mississippi for the required period or is otherwise qualified under this chapter.
(4) In addition to the reasons specified in subsection (1) of this section, the commission shall be authorized to suspend the license of any licensee for being out of compliance with an order for support, as defined in Section 93-11-153. The procedure for suspension of a license for being out of compliance with an order for support, and the procedure for the reissuance or reinstatement of a license suspended for that purpose, and the payment of any fees for the reissuance or reinstatement of a license suspended for that purpose, shall be governed by Section 93-11-157 or 93-11-163, as the case may be. If there is any conflict between any provision of Section 93-11-157 or 93-11-163 and any provision of this chapter, the provisions of Section 93-11-157 or 93-11-163, as the case may be, shall control.
(5) Nothing in this chapter shall prevent a real estate licensee from owning any lawfully constituted business organization, including, but not limited to, a corporation, limited liability company or limited liability partnership, for the purpose of receiving payments contemplated in this chapter. The business organization shall not be required to be licensed under this chapter and shall not engage in any other activity requiring a real estate license.
SECTION 3. Section 73-35-11, Mississippi Code of 1972, is amended as follows:
73-35-11. A broker licensed in Mississippi may lawfully enter into a cooperative agreement with a broker licensed in a state other than Mississippi to divide the commission of the sale of real estate within the State of Mississippi. The cooperative agreement shall state the compensation to be paid to the Mississippi broker and shall be filed with the commission within ten (10) days of the parties affixing their signatures. This cooperative agreement does not authorize any person not licensed by the State of Mississippi to perform any real estate activity described in Section 73-35-1 and Section 73-35-3.
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The Mississippi broker shall determine that the cooperating broker is licensed as a broker in another state.
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SECTION 4. This act shall take effect and be in force from and after July 1, 2004.