BILL ANALYSIS
C.S.H.B. 1987
By: Duncan
04-10-95
Committee Report (Substituted)
BACKGROUND
The law requiring the filing of an affidavit as evidence of
diligent effort is antiquated and difficult to enforce. The Texas
Department of Insurance ("TDI") has existing rule making authority
to establish meaningful procedures for agents to document diligent
effort.
The Surplus Lines Stamping Office of Texas ("SLSOT") is a non-profit association established pursuant to Article 1.14-2 §6A.
Among other statutorily imposed duties to facilitate and encourage
compliance with state surplus lines laws, the SLSOT must receive,
review and record all surplus lines contracts which surplus lines
agents are required to report to and file in accordance with rules
promulgated by the Texas Department of Insurance. Surplus lines
agents must file with the SLSOT each and every surplus lines
contract procured in this state.
PURPOSE
As substituted House Bill 1987 would remove language requiring
documentation of diligent effort by surplus lines agents. Section
2 of this legislation serves to clarify the status of the Surplus
Lines Stamping Office of Texas as exempt from the filing
requirements of the State Library. Section 2 also codifies
existing TDI regulations concerning the confidentiality of
individual policy filings containing personal information about
consumers or trade secrets of insurers and their agents. Section
3 recognizes insurance exchanges created by another state, if such
exchanges meet certain requirements.
RULEMAKING AUTHORITY
It is the committee's opinion that this bill does not
expressly grant any additional rulemaking authority to a state
officer, department, agency or institution.
SECTION BY SECTION ANALYSIS
SECTION 1.
Amends Article 1.14-2, Section 6, Insurance Code by deleting
Subsection (a) and related language in Subsection (c) which removes
the affidavit requirement.
Subsection (a) defines a provision which requires an affidavit for
proof of diligent effort to be filed with the Texas Department of
Insurance. Subsection (c) also removes the affidavit requirement,
but maintains the requirement that the surplus lines agent file a
true and correct copy of the contract issued, certificate, cover
note or other confirmation of insurance as delivered to the
insured.
SECTION 2.
Amends Section 6A, Article 1.14-2, Insurance Code by adding
Subsections (g) and (h). This section clarifies existing
regulations and/or statutes affecting the Surplus Lines Stamping
Office of Texas.
Creates a new subsection (g) clarifying that the Surplus Lines
Stamping Office of Texas is not required to submit documents to the
State Library. Pursuant to Article 1.14-2 and to Texas Department
Insurance regulations, the Surplus Lines Stamping Office of Texas
must file and record each policy submitted by surplus lines agents.
SECTION 2. (continued)
Permits consumers, agents, carriers and their representatives to
check on the content, nature and validity of surplus lines policies
procured in this state. Such records are kept by the Surplus
Lines Stamping Office of Texas indefinitely, and all interested
parties are served well by having one central repository for such
records, as opposed to having more recent filings at the SLSOT and
older records at the State Library. Additionally, the special
expertise of the SLSOT allows for an efficient response to requests
by consumers, agents and insurers for copies of their filed
policies.
Although the Surplus Lines Stamping Office of Texas is not a state
agency, the wording of Section 441 of the Government Code,
regarding the Surplus Lines Stamping Office of Texas could be
interpreted as meeting the definitional section of Section 441, as
evidenced by the attached copy of correspondence received by the
Surplus Lines Stamping Office of Texas from the State Library.
Legal opinions by prior and current legal counsel for the Surplus
Lines Stamping Office of Texas have determined that the Surplus
Lines Stamping Office of Texas is not, in fact, subject to Section
441, but the proposed language of Section 2 of this immediate
legislation will resolve the issue by statute.
In addition to the above, new subsection (h) of Article 1.14-2 §6A,
is a codification of existing TDI regulations protecting consumers
from disclosure of their surplus lines policies, which contain
personal and private information, to third parties, other than the
agent or insurer that originally issued the policy. New subsection
(h), as well as existing TDI regulations, also serve to encourage
filings of the policies by protecting trade secrets of the filing
agent or company from disclosure of personal and private
information. A copy of the declarations page of a filed policy,
with private information redacted, is attached to highlight the
type of information that would otherwise be subject to disclosure.
SECTION 3.
Amends Section 8(b) of Article 1.14-2 of the Texas Insurance Code
by adding Subsection (2). Section (b) sets forth certain
eligibility requirements for surplus lines insurers. H.B. 1987
includes language in Section 8(b) which recognizes insurance
exchanges created by the laws of another state, if such exchanges
meet certain requirements.
Such requirements are the maintaining of capital and surplus in the
amount of $75 million by the exchange; the maintaining of at least
50% of policyholder surplus of each syndicate of the exchange in a
custodial account; and the maintaining of levels of capital and
surplus by the level of funds maintained by the exchange.
SECTION 4. Effective date, September 1, 1995; transition
statement.
SECTION 5. Emergency clause
COMPARISON OF ORIGINAL TO SUBSTITUTE
As substituted, H.B. 1987 differs with the filed version of
H.B. 1987 under Section 2 of the substitute which amends Section 6A
of Article 1.14-2, Subsection (g) and (h). The change clarifies
that only individual surplus lines policies, which contain personal
and private information, are not subject to open records law, but
aggregate data obtained from individual policies is subject to open
records law.
SUMMARY OF COMMITTEE ACTION
In accordance with House Rules, H.B. 1987 was heard in a
public hearing on April 5, 1995. There being a quorum present, the
Chair laid out H.B. 1987 and recognized Representative Duncan to
explain the bill. No one testified in support of, in opposition
to, or neutrally on H.B. 1987.
SUMMARY OF COMMITTEE ACTION (continued)
The Chair recognized Representative De La Garza who moved the
Committee report H.B. 1987 as filed to the full House with the
recommendation that it do pass and be printed. Representative
Averitt seconded the motion and the motion prevailed by the
following vote:
AYES (6); NAYS (0); ABSENT (3); PNV (0).
Pursuant to an announcement filed with the Journal Clerk and
read by the Reading Clerk, the House Committee on Insurance met in
a formal meeting on April 10, 1995 on the House Floor. There being
a quorum present, the Chair laid out H.B. 1987 for reconsideration
by which the vote was taken on the bill by the Committee. The
Chair recognized Representative Averitt who moved the Committee
reconsider the vote on H.B. 1987 by which it was taken on April 5,
1995. Representative Shields seconded the motion for
reconsideration and the motion prevailed by the following vote:
AYES (7); NAYES (0); ABSENT (2); PNV (0).
The Chair recognized Representative Duncan who offered a
substitute to H.B. 1987 and moved the Committee adopt the
substitute to H.B. 1987. The Chair heard no objections and the
substitute to H.B. 1987 was adopted.
The Chair recognized Representative Shields who moved the
Committee report H.B. 1987 as substituted to the full House with
the recommendation that it do pass and be printed. Representative
Driver seconded the motion and the motion prevailed by the
following vote:
AYES (7); NAYES (0); ABSENT (2); PNV (0).