EXHIBIT 2(b)


                             ASSUMPTION AGREEMENT

      This  Assumption  Agreement,  dated  as  of  December  1,  2002   (this
 "Agreement"), is  by  and  among The  Millers  Insurance  Company,  a  Texas
 property and casualty insurance company ("Millers"), Millers General Agency,
 Inc., a Texas corporation ("MGA"), and Phoenix Indemnity Insurance  Company,
 an Arizona property and casualty insurance company ("Phoenix").

                            PRELIMINARY STATEMENTS

      A.   Hallmark Financial Services, Inc.,  a Nevada corporation,  Millers
 American Group, Inc.,  a Texas corporation,  and Millers  have entered  into
 that certain  Purchase  Agreement,  dated  as  of  November  26,  2002  (the
 "Purchase Agreement").

      B.   Millers owes Phoenix  an intercompany payable  in connection  with
 reinsurance  obligations   and   overpayment   of   tax   liabilities   (the
 "Intercompany Payable") which, as of September  30, 2002, was in the  amount
 of $478,054.00.

      C.   The assumption of the Intercompany Payable  by MGA is a  condition
 precedent to  the  consummation  of the  transactions  contemplated  by  the
 Purchase Agreement.

                            STATEMENT OF AGREEMENT

      NOW, THEREFORE,  in  consideration  of  the  premises  and  the  mutual
 agreements and covenants set forth herein and in the Purchase Agreement, and
 for other good and valid consideration, the receipt and sufficiency of which
 are hereby acknowledged, the parties hereto hereby agree as follows:

      1.     Assumption of  Liabilities.  MGA  hereby assumes  and agrees  to
 perform, pay  or  cause  to  be  paid, and  fully  discharge  when  due  the
 Intercompany Payable  in  an  aggregate amount  not  to  exceed  $480,000.00
 effective as of December 1, 2002 (the "Assumed Liability").

      2.     Liabilities Not Assumed.  Except for the Assumed Liability,  MGA
 has not agreed to pay or assume, shall not be required to pay or assume  and
 shall not have any  liability or obligation with  respect to, and shall  not
 assume, and Millers  shall remain  liable for,  any and  all liabilities  of
 Millers other than the Assumed Liability.   Phoenix represents and  warrants
 that the Assumed  Liability is the  full amount of  all liabilities owed  by
 Millers to Phoenix.

      3.     No Third Party  Beneficiaries.  This Agreement shall be  binding
 upon and  inure  solely to  the  benefit of  the  parties hereto  and  their
 respective successors and permitted assigns  and nothing herein, express  or
 implied, is intended to or shall confer  upon any other person any legal  or
 equitable right, benefit  or remedy  of any  nature whatsoever  under or  by
 reason of this Agreement.

      4.     Assignment.  This Agreement may not be assigned by either  party
 without the prior written consent of the other party, which consent will not
 be unreasonably withheld.

      5.     Purchase Agreement.   The Purchase  Agreement shall survive  the
 execution and delivery of this Agreement.

      6.     Governing  Law.    This Agreement  shall  be  governed  by,  and
 construed in accordance with, the laws of the State of Texas without  regard
 to its conflict of law principles.

      7.     Counterparts.  This  Agreement may be executed and delivered  in
 any number of  counterparts, each of  which when so  executed and  delivered
 shall be deemed to be an original and all of which shall constitute one  and
 the same instrument.

      8.     Amendment.   This  Agreement  may  not be  amended  or  modified
 except by an instrument in writing executed by each of the parties hereto.

      9.     Severability.  If any term or other provision of this  Agreement
 is invalid, illegal  or incapable  of being enforced  by any  law or  public
 policy, all other terms and provisions of this Agreement shall  nevertheless
 remain in full force and effect so  long as the economic or legal  substance
 of the  transactions  contemplated hereby  is  not affected  in  any  manner
 materially adverse to any  party.  Upon the  determination that any term  or
 other provision of this Agreement is invalid, illegal or incapable of  being
 enforced, the parties hereto  shall negotiate in good  faith to modify  this
 Agreement so as to effect the original  intent of the parties as closely  as
 possible in an acceptable manner in order that the transactions contemplated
 hereby are  consummated as  originally contemplated  to the  fullest  extent
 possible.

      10.    Waiver  and   Consent.    Phoenix   hereby  waives  any   notice
 requirements and any other  rights that it may  have and hereby consents  to
 the assumption of the Assumed Liability by MGA pursuant to the terms of this
 Agreement.  Phoenix hereby acknowledges that  the assumption of the  Assumed
 Liability by MGA will be effective as of the date hereof.


                           [SIGNATURE PAGE FOLLOWS]



      IN WITNESS WHEREOF, the  undersigned have caused  this Agreement to  be
 executed as of the date first above written.


                          THE MILLERS INSURANCE COMPANY



                          By:    ____________________________________________
                          Name:  ____________________________________________
                          Title: ____________________________________________


                          MILLERS GENERAL AGENCY, INC.



                          By:    ____________________________________________
                          Name:  ____________________________________________
                          Title: ____________________________________________


                          PHOENIX INDEMNITY INSURANCE COMPANY



                          By:    ____________________________________________
                          Name:  ____________________________________________
                          Title: ____________________________________________