By Dutton, De La Garza, Duncan H.B. No. 1367
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to certain acts of unfair discrimination in the business
1-3 of insurance and certain methods, programs, and mechanisms for
1-4 providing property and casualty insurance in underserved areas;
1-5 providing administrative penalties.
1-6 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-7 SECTION 1. Subchapter B, Chapter 21, Insurance Code, is
1-8 amended by adding Article 21.21-6 to read as follows:
1-9 Art. 21.21-6. UNFAIR DISCRIMINATION
1-10 Sec. 1. PROHIBITIONS. No person shall engage in any
1-11 practice of unfair discrimination which is defined in this article
1-12 or is determined pursuant to this article to be a practice of
1-13 unfair discrimination in the business of insurance.
1-14 Sec. 2. APPLICATION AND SCOPE. This article shall apply to
1-15 any legal entity engaged in the business of insurance in this
1-16 state, including:
1-17 (a) a capital stock company;
1-18 (b) a mutual company;
1-19 (c) a title insurance company;
1-20 (d) a fraternal benefit society;
1-21 (e) a local mutual aid association;
1-22 (f) a statewide mutual assessment company;
1-23 (g) a county mutual insurance company;
1-24 (h) a Lloyd's plan company;
2-1 (i) a reciprocal or interinsurance exchange;
2-2 (j) a stipulated premium insurance company;
2-3 (k) a group hospital service company;
2-4 (l) a health maintenance organization;
2-5 (m) a farm mutual insurance company;
2-6 (n) a risk retention group;
2-7 (o) a surplus lines carrier; and
2-8 (p) agents, brokers, adjusters, and life insurance
2-9 counselors.
2-10 Sec. 3. UNFAIR DISCRIMINATION DEFINED. "Unfair
2-11 discrimination" means:
2-12 (a) Refusing to insure; refusing to continue to
2-13 insure; limiting the amount, extent, or kind of coverage available;
2-14 or charging an individual a different rate for the same coverage
2-15 because of race, color, religion, or national origin;
2-16 (b) Refusing to insure; refusing to continue to
2-17 insure; limiting the amount, extent, or kind of coverage available;
2-18 or charging an individual a different rate for the same coverage
2-19 because of the age, gender, marital status, or geographic location
2-20 of the individual; however, nothing in this paragraph shall
2-21 prohibit an insurer from taking marital status into account for the
2-22 purpose of defining persons eligible for dependent benefits;
2-23 (c) Refusing to insure; refusing to continue to
2-24 insure; limiting the amount, extent, or kind of coverage; or
2-25 charging an individual a different rate for the same coverage
2-26 because of disability or partial disability; however, this
2-27 paragraph shall not be interpreted to modify any other provision of
3-1 law relating to the termination, modification, issuance, or renewal
3-2 of any insurance policy or contract.
3-3 Sec. 4. EXCEPTIONS. (a) A legal entity engaged in the
3-4 business of insurance as specified in Section 2 of this article is
3-5 not in violation of the prohibited acts defined in or determined
3-6 pursuant to Section 3(b) and 3(c) of this article if the refusal to
3-7 insure; refusal to continue to insure; the limiting of the amount,
3-8 extent, or kind of coverage; or the charging of an individual a
3-9 different rate for the same coverage is based upon sound
3-10 underwriting or actuarial principles reasonably related to actual
3-11 or anticipated loss experience.
3-12 (b) A legal entity engaged in the business of insurance as
3-13 specified in Section 2 of this article is not in violation of the
3-14 prohibited acts defined in or determined pursuant to Section 3 of
3-15 this article if the entity provides insurance coverage only to
3-16 persons who are required to obtain or maintain membership or
3-17 qualification for membership in a club, group, or organization, so
3-18 long as membership or membership qualifications are uniform
3-19 requirements of the insurer as a condition of providing insurance,
3-20 and are applied uniformly throughout this state, and the entity
3-21 does not engage in any of the prohibited acts defined in or
3-22 determined pursuant to Section 3 of this article for persons who
3-23 are qualified members, except as otherwise provided in this
3-24 section.
3-25 (c) A legal entity engaged in the business of insurance as
3-26 specified in Section 2 of this article is not in violation of the
3-27 prohibited acts defined in or determined pursuant to Section 3 of
4-1 this article if the refusal to insure; refusal to continue to
4-2 insure; the limiting of the amount, extent, or kind of coverage; or
4-3 the charging of an individual a different rate for the same
4-4 coverage is required or authorized by law or regulatory mandate.
4-5 Sec. 5. SANCTIONS. Any legal entity engaged in the business
4-6 of insurance in this state found to be in violation of or failing
4-7 to comply with this article is subject to the sanctions authorized
4-8 in Article 1.10 of this code, including administrative penalties
4-9 authorized under Article 1.10E of this code. The commissioner may
4-10 also utilize the cease and desist procedures authorized by Article
4-11 1.10A of this code.
4-12 SECTION 2. Subchapter B, Chapter 21, Insurance Code, is
4-13 amended by adding Article 21.21-7 to read as follows:
4-14 Art. 21.21-7. PROHIBITION ON USE BY HEALTH INSURERS OF
4-15 UNDERWRITING GUIDELINES BASED ON FLUENCY IN ENGLISH
4-16 Sec. 1. DEFINITIONS. In this article:
4-17 (1) "Health insurer" means any insurance company,
4-18 group hospital service corporation, or health maintenance
4-19 organization that delivers or issues for delivery an individual,
4-20 group, blanket, or franchise insurance policy or insurance
4-21 agreement, a group hospital service contract, or an evidence of
4-22 coverage that provides health insurance or health care benefits.
4-23 Without limiting the foregoing, the definition includes insurance
4-24 companies, associations, and organizations which come within the
4-25 purview of the following designated chapters of the insurance code:
4-26 Chapter 3, pertaining to life, health, and accident insurance
4-27 companies; Chapter 8, pertaining to general casualty companies;
5-1 Chapter 10, pertaining to fraternal benefit societies; Chapter 11,
5-2 pertaining to mutual life insurance companies; Chapter 12,
5-3 pertaining to local mutual aid associations; Chapters 13 and 14,
5-4 pertaining to statewide mutual assessment companies, mutual
5-5 assessment companies, and mutual assessment life, health, and
5-6 accident associations; Chapter 15, pertaining to mutual insurance
5-7 companies writing other than life insurance; Chapter 18, pertaining
5-8 to underwriters making insurance on the Lloyd's plan; Chapter 19,
5-9 pertaining to reciprocal exchanges; and Chapter 22, pertaining to
5-10 stipulated premium insurance companies.
5-11 (2) "Underwriting guideline" means a rule, standard,
5-12 marketing decision, or practice, whether written, oral, or
5-13 electronic, that is used by a health insurer or an agent of a
5-14 health insurer to examine, bind, accept, reject, renew, nonrenew,
5-15 cancel, charge a different rate for the same coverage, or limit
5-16 coverage(s) made available to classes of consumers of insurance.
5-17 Sec. 2. APPLICATION. This article applies to any health
5-18 insurance policy, agreement, contract, or evidence of coverage
5-19 delivered or issued for delivery by a health insurer.
5-20 Sec. 3. PROHIBITION. A health insurer may not use an
5-21 underwriting guideline that is based on the ability of an insured
5-22 or an applicant for insurance coverage or health care benefits to
5-23 speak English fluently or to be literate in the English language.
5-24 The applicant has the burden of proof to establish a violation of
5-25 this article.
5-26 SECTION 3. Section 1, Article 17.25, Insurance Code, is
5-27 amended to read as follows:
6-1 Sec. 1. Regulation. County mutual insurance companies
6-2 operating under the provisions of this Chapter shall be authorized
6-3 to write insurance against loss or damage from any hazard provided
6-4 therein or that any other fire or windstorm insurance company
6-5 operating in Texas may write on property described in Article 17.01
6-6 of this Chapter. County mutual insurance companies qualifying to
6-7 write casualty lines for state wide operation may write all lines
6-8 of automobile insurance, personal liability insurance, residential
6-9 fire insurance, residential allied lines insurance, homeowners
6-10 insurance, and farm and ranch owners insurance, provided that no
6-11 such company shall assume a risk on any one hazard greater than
6-12 five (5%) per cent of its assets, unless such excess shall be
6-13 promptly reinsured.
6-14 SECTION 4. Subchapter C, Chapter 5, Insurance Code, is
6-15 amended by adding Article 5.35-3 to read as follows:
6-16 Art. 5.35-3. PROPERTY PROTECTION PROGRAM FOR UNDERSERVED
6-17 AREAS
6-18 Sec. 1. (a) By rule the commissioner may determine and
6-19 designate areas as underserved areas for residential property
6-20 insurance. In determining which areas will be designated as
6-21 underserved, the commissioner shall consider whether residential
6-22 property insurance is not reasonably available to a substantial
6-23 number of owners of insurable property in the underserved area and
6-24 any other relevant factors as determined by the commissioner. For
6-25 purposes of this article, residential property insurance means
6-26 insurance coverage against direct loss to real or tangible personal
6-27 property at a fixed location provided in a homeowners policy,
7-1 residential fire and allied lines policy, or farm and ranch owners
7-2 policy.
7-3 (b) The property protection program for underserved areas
7-4 operated under this article may not include windstorm and hail
7-5 insurance coverage for a risk eligible for that coverage under
7-6 Article 21.49 of this code.
7-7 Sec. 2. All insurers authorized to write property or
7-8 casualty insurance in this state and writing residential property
7-9 insurance in this state, including those insurers licensed under
7-10 Chapters 17, 18, and 19 of this code, are authorized to write
7-11 insurance on the forms adopted under this article.
7-12 Sec. 3. The commissioner shall adopt policy forms for
7-13 residential property insurance specifically for use in the
7-14 designated underserved areas. The policy forms adopted pursuant to
7-15 this article shall include a basic policy covering fire and allied
7-16 lines perils with endorsements providing additional coverages at
7-17 the option of the insured. The adopted policy forms may be used by
7-18 all insurers writing insurance in underserved areas.
7-19 Sec. 4. The rates for residential property insurance subject
7-20 to this article shall be determined in accordance with the
7-21 provisions of this code applicable to each insurer.
7-22 Sec. 5. In the designated underserved areas, all insurers
7-23 specified in Section 2 of this article shall make available to
7-24 their agents and all agents shall offer all insureds the full range
7-25 of coverages promulgated under this article subject to the
7-26 applicable rates and underwriting guidelines of each such insurer.
7-27 Sec. 6. The premium on all policies written pursuant to this
8-1 article will not be subject to tax under Article 4.10 of this code.
8-2 Sec. 7. The premium on all policies written pursuant to this
8-3 article will not be considered net direct premiums under the
8-4 provisions of Section 3(g), Article 21.49, of this code.
8-5 SECTION 5. Subchapter E, Chapter 21, Insurance Code, is
8-6 amended by adding Article 21.79 to read as follows:
8-7 Art. 21.79. GROUP INSURANCE OF PRIVATE PASSENGER AUTO AND
8-8 RESIDENTIAL PROPERTY INSURANCE IN UNDERSERVED AREAS
8-9 Sec. 1. (a) By rule the commissioner may determine and
8-10 designate areas as underserved areas for private passenger auto
8-11 insurance or residential property insurance. In determining which
8-12 areas will be designated as underserved, the commissioner shall
8-13 consider whether such insurance is not reasonably available to a
8-14 substantial number of insurable risks and the availability of
8-15 insurance and any other relevant factors as determined by the
8-16 commissioner. For purposes of this article, residential property
8-17 insurance shall mean property insurance on one-family or two-family
8-18 dwellings.
8-19 (b) Group insurance provided under this article may not
8-20 include windstorm and hail insurance coverage for a risk eligible
8-21 for that coverage under Article 21.49 of this code.
8-22 Sec. 2. All insurers authorized to write property or
8-23 casualty insurance in this state and writing private passenger auto
8-24 insurance or residential property insurance in this state,
8-25 including insurers licensed under Chapters 17, 18, and 19 of this
8-26 code, are authorized to write such insurance on a group basis in
8-27 underserved areas as designated by the commissioner.
9-1 Sec. 3. A group may be formed solely for the purpose of
9-2 purchasing insurance subject to this article.
9-3 Sec. 4. All policy forms and certificates for use in
9-4 underserved areas as designated by the commissioner shall be
9-5 adopted by the commissioner.
9-6 Sec. 5. The rates for coverage shall be subject to the
9-7 applicable statutory provisions relating to the respective
9-8 insurers.
9-9 Sec. 6. The commissioner may adopt any other rules that are
9-10 appropriate and necessary to implement this article.
9-11 SECTION 6. Article 21.49-12, Insurance Code, is amended to
9-12 read as follows:
9-13 Art. 21.49-12. Market Assistance Programs
9-14 Sec. 1. Creation of programs. (a) The commissioner <State
9-15 Board of Insurance> may establish a voluntary mechanism to be
9-16 called a market assistance program to assist insureds in Texas in
9-17 obtaining residential property <liability> insurance coverage in
9-18 underserved areas, which shall be determined and designated by the
9-19 commissioner by rule using the standards specified in Section 1,
9-20 Article 5.35-3, of this code <where it has been shown not to be
9-21 readily available>. For purposes of this article, residential
9-22 property insurance means property insurance on one-family or
9-23 two-family dwellings. The types of risks to be assisted under the
9-24 <each> market assistance program will be established by the
9-25 commissioner <board>. A market assistance program division shall
9-26 be established in and operated by the Texas Department of
9-27 Insurance.
10-1 (b) The market assistance program established under this
10-2 article may not provide assistance with respect to windstorm and
10-3 hail insurance coverage for a risk eligible for that coverage under
10-4 Article 21.49 of this code.
10-5 Sec. 2. Plan of operation. (a) The executive committee
10-6 shall develop and submit the plan of operation to the commissioner
10-7 for adoption by rule and shall be available to advise and consult
10-8 with the commissioner with regard to the administration of the
10-9 program. If the executive committee fails to submit a suitable
10-10 plan of operation within 180 days following the effective date of
10-11 this article, or if at any time thereafter the executive committee
10-12 fails to submit suitable amendments to the plan of operation, the
10-13 department shall develop and submit to the commissioner a plan of
10-14 operation and thereafter any amendments thereto, and the
10-15 commissioner shall, after notice and hearing, adopt by rule the
10-16 plan of operation developed by the department or any amendments to
10-17 the plan of operation <Each market assistance program shall be
10-18 administered under a plan of operation promulgated by the board>.
10-19 The <Each> plan of operation shall indicate types of coverage,
10-20 policy forms and terms, application forms, eligibility, and overall
10-21 operation of the program. All insurers licensed to write property
10-22 or casualty insurance and actually writing residential property
10-23 insurance in this state, including Lloyds, reciprocals, or
10-24 interinsurance exchanges and county mutuals, may <The board may
10-25 require an insurer to> participate in the program unless insurer
10-26 participation is made mandatory by the commissioner based on
10-27 criteria provided in the plan of operation, but the commissioner
11-1 <board> may not permit an insurer to condition its participation in
11-2 a manner that is inequitable to the participants.
11-3 (b) The plan of operation shall include, but is not limited
11-4 to, the following provisions:
11-5 (1) Applications will be accepted only from agents
11-6 duly licensed by the Texas Department of Insurance. Applications
11-7 from all other sources will be returned for referral to duly
11-8 licensed agents of the applicant's choice for preparation and
11-9 resubmission to the program.
11-10 (2) Applications for assistance shall be addressed to
11-11 the Market Assistance Program at the Texas Department of Insurance.
11-12 Each application must be accompanied by a copy of a current
11-13 nonrenewal or cancellation notice and a current declination letter
11-14 from at least one other insurer writing the coverage sought.
11-15 Applicants not having previous residential property insurance
11-16 coverage must provide copies of current declination letters from at
11-17 least two unaffiliated insurers writing the coverage sought.
11-18 (3) Each insurer has the right to individually
11-19 evaluate the risk and apply the rates in accordance with the
11-20 provisions of this code applicable to each insurer.
11-21 (4) Each insurer has the option of providing a premium
11-22 quote on the same coverage basis for which it normally provides
11-23 insurance in this state using its own underwriting guidelines and
11-24 the rates determined in accordance with the provisions of this code
11-25 applicable to each insurer.
11-26 (5) An insurer shall make its premium quote, indicate
11-27 its refusal to quote, or make a request for additional time within
12-1 30 days of receiving the application.
12-2 (6) If a premium quote is made, the applicant's agent
12-3 shall be notified by the program so that the agent may complete the
12-4 placement of the insurance, if the applicant accepts the coverage
12-5 at the premium quoted.
12-6 (7) An applicant is not eligible to apply to the
12-7 program again for the same coverage for the same risk if the
12-8 insurer cancels or nonrenews coverage for nonpayment of premium or
12-9 submission of a fraudulent claim.
12-10 (8) The plan of operation shall contain criteria under
12-11 which the commissioner may make insurer participation in the
12-12 program mandatory.
12-13 (c) The plan of operation may provide for subcommittees that
12-14 are necessary to carry out the functions of a program.
12-15 Sec. 3. Executive Committee. (a) The program shall be
12-16 administered by an executive committee composed of nine members
12-17 appointed by the commissioner:
12-18 (1) five members who represent the interests of
12-19 insurers;
12-20 (2) two public members; and
12-21 (3) two members who are licensed local recording
12-22 agents. <An executive committee shall administer each market
12-23 assistance program.>
12-24 (b) To be eligible to serve on the executive committee as a
12-25 representative of insurers, a person must be a full-time employee
12-26 of an authorized insurer. <The board shall appoint the members of
12-27 an executive committee.>
13-1 (c) The commissioner or the commissioner's designated
13-2 representative shall be an ex officio member of the executive
13-3 committee and must be present in every meeting of the executive
13-4 committee. <At least one member of the board must be designated a
13-5 member of the executive committee.>
13-6 <(d) The plan of operation may provide for subcommittees
13-7 that are necessary to carry out the functions of a program.>
13-8 <(e) A representative of the board must be present in every
13-9 meeting of an executive committee or subcommittee.>
13-10 Sec. 4. Agents. (a) Notwithstanding any other provision of
13-11 law, a market assistance program may have two categories of agents:
13-12 (1) an originating agent; and
13-13 (2) an issuing agent.
13-14 (b) An originating agent may complete an application for
13-15 insurance on behalf of an insured for submission to the program
13-16 without being appointed to represent the ultimate insurer.
13-17 (c) An issuing agent must be appointed to represent the
13-18 ultimate insurer and shall perform all of the customary duties of a
13-19 local recording agent including but not limited to the following:
13-20 (1) signing, executing, and delivering policies of
13-21 insurance;
13-22 (2) maintaining a record of the business;
13-23 (3) examining and inspecting the risk; and
13-24 (4) receiving and collecting premiums.
13-25 (d) An originating agent shall <may> share commissions, as
13-26 required by the market assistance program plan of operation
13-27 <negotiated on an individual basis>, with the issuing agent if the
14-1 originating agent holds a license as either a local recording agent
14-2 or as a salaried representative for those companies whose plan of
14-3 operation does not contemplate the use of local recording agents.
14-4 (e) The originating and issuing agent may be the same
14-5 person. If the originating agent and the issuing agent are not the
14-6 same person, the originating agent may not be held to be the agent
14-7 of the insurer unless there is an appointment as specified by
14-8 Article 21.14 of this code.
14-9 (f) The program may not share in commissions.
14-10 <Sec. 5. FEES. The plan of operation may provide reasonable
14-11 application fees to be used to cover expenses of the program.
14-12 These fees must be maintained in a separate account under the
14-13 control of a fiscal agent designated in the plan of operation.>
14-14 Sec. 5 <6>. Confidentiality. (a) The Texas Department of
14-15 Insurance <State Board of Insurance> shall maintain as confidential
14-16 all application files and related documents received under this
14-17 article.
14-18 (b) In maintaining confidentiality, the Texas Department of
14-19 Insurance <State Board of Insurance> shall not permit the files and
14-20 related documents to be made available to the public except that
14-21 the Texas Department of Insurance <State Board of Insurance> shall
14-22 allow access to those files and related documents to originating or
14-23 issuing agents or to an applicant for his own file or to an insurer
14-24 who agrees to insure the applicant.
14-25 Sec. 6. PERIODIC REVIEW. (a) Information concerning the
14-26 number and type of applications received and placed, and such other
14-27 information, as deemed appropriate by the executive committee or
15-1 the commissioner, shall be collected.
15-2 (b) The executive committee shall review the demand for and
15-3 performance of the program six months following the approval of the
15-4 plan of operation, and at least annually thereafter, as necessary.
15-5 After each such review the executive committee shall report to the
15-6 commissioner as to the necessity for continued operation of the
15-7 voluntary program, need for establishment of a mandatory program,
15-8 or the need for establishment of a FAIR Plan pursuant to Article
15-9 21.49A of this code, or other recommendations the executive
15-10 committee deems appropriate. The program shall be terminated only
15-11 upon approval of the commissioner.
15-12 Sec. 7. IMMUNITY FROM LIABILITY. The program, executive
15-13 committee members, and participating insurers and agents are not
15-14 personally liable for any act performed in good faith within the
15-15 scope of the person's authority as determined under this article or
15-16 for damages occasioned by his or her official acts or omissions
15-17 except for an act or omission that is corrupt or malicious.
15-18 Sec. 8. RULEMAKING AUTHORITY. The commissioner is
15-19 authorized to adopt rules in addition to the plan of operation that
15-20 are appropriate to accomplish the purposes of this article.
15-21 SECTION 7. Subchapter E, Chapter 21, Insurance Code, is
15-22 amended by adding Article 21.49A, to read as follows:
15-23 Art. 21.49A. FAIR PLAN (FAIR ACCESS TO INSURANCE
15-24 REQUIREMENTS) ACT
15-25 Sec. 1. AUTHORITY; PURPOSE. (a) If the commissioner
15-26 determines, after a public hearing, that in all or any part of the
15-27 state residential property insurance is not reasonably available in
16-1 the voluntary market to a substantial number of insurable risks and
16-2 that at least 50 percent of the applicants to the residential
16-3 property market assistance program who are qualified under the plan
16-4 of operation, after the commissioner has made insurer participation
16-5 mandatory under the plan of operation, have not been placed with an
16-6 insurer in the previous 12-month period, the commissioner may
16-7 establish a FAIR (Fair Access to Insurance Requirements) Plan to
16-8 deliver residential property insurance to citizens of this state in
16-9 underserved areas, which shall be determined and designated by the
16-10 commissioner by rule. Each insurer, as defined herein, as a
16-11 condition of its authority to transact residential property
16-12 insurance in this state, shall participate in the FAIR Plan
16-13 Association in accordance with this Act.
16-14 (b) The FAIR Plan may not provide windstorm and hail
16-15 insurance coverage for a risk eligible for that coverage under
16-16 Article 21.49 of this code.
16-17 Sec. 2. DEFINITIONS. (1) "FAIR Plan Association" or
16-18 "association" means a nonprofit association established pursuant to
16-19 this Act to develop and administer a program to provide residential
16-20 property insurance in designated underserved areas in this state.
16-21 (2) "Insurer" means any licensed insurer writing
16-22 property and casualty insurance in this state, including:
16-23 (A) a county mutual insurance company;
16-24 (B) a Lloyd's plan company; and
16-25 (C) a reciprocal or interinsurance exchange.
16-26 (3) "Residential property insurance" means the
16-27 coverage against direct loss to real or tangible personal property
17-1 at a fixed location provided in a homeowners policy, residential
17-2 fire and allied lines policy, or farm and ranch owners policy.
17-3 (4) "Inspection bureau" means the organization or
17-4 organizations designated by the FAIR Plan Association with the
17-5 approval of the commissioner to make inspections to determine the
17-6 condition of the properties for which residential property
17-7 insurance is sought and to perform such other duties as may be
17-8 authorized by the FAIR Plan Association or the commissioner. The
17-9 manner and scope of the inspection and evaluation report for
17-10 residential property shall be prescribed by the association
17-11 pursuant to the plan of operation.
17-12 (5) "Net direct premiums" means gross direct written
17-13 premiums less return premiums upon canceled contracts (irrespective
17-14 of reinsurance assumed or ceded) written on residential property
17-15 pursuant to this Act.
17-16 (6) "Underserved area(s)" means area(s) designated as
17-17 underserved by the commissioner by rule. In determining which
17-18 areas will be designated as underserved, the commissioner shall
17-19 consider the factors specified in Section 1, Article 5.35-3, of
17-20 this code.
17-21 Sec. 3. GOVERNING COMMITTEE; PLAN OF OPERATION. (a) The
17-22 FAIR Plan shall be administered by the governing committee of the
17-23 association pursuant to a plan of operation. Subject to the
17-24 approval of the commissioner, the governing committee shall develop
17-25 the plan of operation and propose amendments thereto. The plan of
17-26 operation and any amendments thereto shall be adopted by the
17-27 commissioner by rule. The governing committee may on its own
18-1 initiative or at the request of the commissioner amend the plan of
18-2 operation.
18-3 (b) The governing committee shall be composed of nine
18-4 members appointed by the commissioner as follows:
18-5 (1) five members who represent the interests of
18-6 insurers;
18-7 (2) two public members; and
18-8 (3) two members who are licensed local recording
18-9 agents.
18-10 (c) The commissioner or the commissioner's designated
18-11 representative from within the Texas Department of Insurance shall
18-12 serve as an ex officio member.
18-13 (d) To be eligible to serve on the governing committee as a
18-14 representative of insurers, a person must be a full-time employee
18-15 of an authorized insurer.
18-16 (e) The plan of operation shall provide:
18-17 (1) for establishment of a FAIR Plan Association for
18-18 the issuing of residential property insurance pursuant to this Act
18-19 and the distribution of the losses and the expenses in the writing
18-20 of such insurance in this state;
18-21 (2) that all insurers licensed to write property
18-22 insurance and writing residential property insurance shall
18-23 participate in the writings, expenses, profits, and losses of the
18-24 association, in the proportion that the net direct premiums, of
18-25 each participating insurer, written in this state during the
18-26 preceding calendar year, bears to the aggregate net direct premium
18-27 written in this state by all participating insurers; such
19-1 information shall be determined in accordance with the residential
19-2 property statistical plan adopted by the commissioner;
19-3 (3) that a participating insurer is entitled to
19-4 receive credit for similar insurance voluntarily written in a
19-5 designated underserved area and its participation in the writings
19-6 in the association shall be reduced in accordance with the
19-7 provisions of the plan of operation;
19-8 (4) for the immediate binding of eligible risks; for
19-9 the use of premium installment payment plans, adequate marketing,
19-10 and service facilities; and for the establishment of reasonable
19-11 service standards;
19-12 (5) procedures for efficient, economical, fair, and
19-13 nondiscriminatory administration of the FAIR Plan Association;
19-14 (6) procedures for determining the net level of
19-15 participation required for each insurer in the FAIR Plan
19-16 Association;
19-17 (7) for the use of deductibles and other underwriting
19-18 devices and for assessment of all members in amounts sufficient to
19-19 operate the association; and establish maximum limits of liability
19-20 to be placed through the program; and commissions to be paid to the
19-21 licensed agents submitting applications;
19-22 (8) that the association issue policies in its own
19-23 name;
19-24 (9) reasonable underwriting standards for determining
19-25 insurability of the risk;
19-26 (10) procedures for the assumption and ceding of
19-27 reinsurance by the association; and
20-1 (11) any other procedures or operational matters
20-2 deemed necessary by the governing committee or the commissioner.
20-3 Sec. 4. FAIR PLAN ASSOCIATION. Pursuant to procedures and
20-4 requirements set forth in the plan of operation, the FAIR Plan
20-5 Association (association) shall develop and administer a program
20-6 for participation by all insurers licensed to write property
20-7 insurance in this state and writing residential property insurance
20-8 in this state. The association shall make residential property
20-9 insurance available to applicants in underserved areas whose
20-10 property is insurable in accordance with reasonable underwriting
20-11 standards but who, after diligent efforts, are unable to procure
20-12 such insurance through the voluntary market, as evidenced by two
20-13 declinations from insurers licensed to write and actually writing
20-14 residential property insurance in the state.
20-15 Sec. 5. POWERS OF THE ASSOCIATION; CENTRALIZED OPERATIONS
20-16 AUTHORIZED. (a) The association is authorized, for FAIR Plan
20-17 purposes only, to issue policies of insurance and endorsements
20-18 thereto in its own name or a trade name duly adopted for that
20-19 purpose, and to act on behalf of all participating insurers in
20-20 connection with said policies and otherwise in any manner necessary
20-21 to accomplish the purposes of this Act, including but not limited
20-22 to issuance of policies, collection of premiums, issuance of
20-23 cancellations, and payment of commissions, losses, judgments, and
20-24 expenses.
20-25 (b) The participating insurers shall be liable to the
20-26 association as provided in this Act and the plan of operation for
20-27 the expenses and liabilities so incurred by the association, and
21-1 the association shall make assessments against the participating
21-2 insurers as required to meet such expenses and liabilities. In
21-3 connection with any policy issued by the association:
21-4 (1) service of any notice, proof of loss, legal
21-5 process, or other communication with respect to the policy shall be
21-6 made upon the association; and
21-7 (2) any action by the insured constituting a claim
21-8 under the policy shall be brought only against the association, and
21-9 the association shall be the proper party for all purposes in any
21-10 action brought under or in connection with any such policy. The
21-11 foregoing requirements shall be set forth in any policy issued by
21-12 the association and the form and content of any such policy shall
21-13 be subject to the approval of the commissioner.
21-14 (c) The association is authorized to assume and cede
21-15 reinsurance in conformity with the plan of operation.
21-16 (d) Each insurer must participate in the writings, expenses,
21-17 profits, and losses of the association in the proportion that its
21-18 net direct premiums written bear to the aggregate net direct
21-19 premiums written by all insurers.
21-20 Sec. 6. PROPERTY INSPECTION; FAIR PLAN PROCEDURE. (a) Any
21-21 person having an insurable interest in real or tangible personal
21-22 property at a fixed location in an underserved area who, after
21-23 diligent effort has been unable to obtain residential property
21-24 insurance, as evidenced by two current declinations from insurers
21-25 licensed to write property insurance and actually writing
21-26 residential property insurance in the state, is entitled upon
21-27 application to the association to an inspection and evaluation of
22-1 the property by representatives of the inspection bureau.
22-2 (b) Applications may be made on behalf of the applicant by a
22-3 licensed local recording agent and shall be submitted on forms
22-4 prescribed by the association.
22-5 (c) Promptly after the request for inspection is received,
22-6 an inspection must be made and an inspection report filed with the
22-7 association and made available to the applicant upon request.
22-8 (d) If the inspection bureau finds that the residential
22-9 property meets the reasonable underwriting standards established in
22-10 the plan of operation, the applicant shall be so informed in
22-11 writing and a policy or binder shall be issued by the association.
22-12 If the residential property does not meet the criteria, the
22-13 applicant shall be informed, in writing, of the reasons for the
22-14 failure of the residential property to meet the criteria.
22-15 (e) If, at any time, the applicant makes improvements in the
22-16 residential property or its condition which the applicant believes
22-17 are sufficient to make the residential property meet the criteria,
22-18 a representative of the inspection bureau shall reinspect the
22-19 residential property upon request. In any case, the applicant for
22-20 residential property insurance shall be eligible for one
22-21 reinspection any time beginning 60 days after the initial FAIR Plan
22-22 inspection. If upon reinspection the residential property meets
22-23 the reasonable underwriting standards established in the plan of
22-24 operation, the applicant shall be so informed in writing and a
22-25 policy or binder shall be issued by the association.
22-26 Sec. 7. APPROVAL OF RATES. The association shall file with
22-27 the commissioner for approval the proposed rates and supplemental
23-1 rate information to be used in connection with the issuance of
23-2 policies or endorsements. Rates shall be set in an amount
23-3 sufficient to carry all claims to maturity and to meet the expenses
23-4 incurred in the writing and servicing of the business. Within 60
23-5 days of the filing of the proposed rates, the commissioner shall
23-6 enter an order either approving or disapproving, in whole or in
23-7 part, the proposed rates. The commissioner may, upon notice to the
23-8 association, extend the period for entering an order under this
23-9 section an additional 30 days. No such policies or endorsements
23-10 shall be issued until such time as the commissioner approves the
23-11 rates to be applied to the policy or endorsement. An order
23-12 disapproving a rate shall state the grounds for the disapproval and
23-13 the findings in support thereof.
23-14 Sec. 8. APPEALS; JUDICIAL REVIEW. (a) Any applicant or
23-15 affected insurer has the right of appeal to the association. A
23-16 decision of the association may be appealed to the commissioner
23-17 within 30 days after such decision.
23-18 (b) All orders or decisions of the commissioner made
23-19 pursuant to this Act are subject to judicial review in accordance
23-20 with Article 1.04 of this code.
23-21 Sec. 9. IMMUNITY FROM LIABILITY. There is no liability on
23-22 the part of, and no cause of action against insurers, the
23-23 inspection bureau, the association, the governing committee, their
23-24 agents or employees, or the commissioner or the commissioner's
23-25 authorized representatives, with respect to any inspections
23-26 required to be undertaken by this Act or for any acts or omissions
23-27 in connection therewith, or for any statements made in any report
24-1 and communication concerning the insurability of the property, or
24-2 in the findings required by the provisions of this Act, or at the
24-3 hearings conducted in connection with such inspections.
24-4 Sec. 10. INSOLVENCY. In the event any participating insurer
24-5 fails, by reason of insolvency, to pay any assessment, the
24-6 association shall cause the reimbursement ratios to be immediately
24-7 recalculated, excluding therefrom the amount of the insolvent
24-8 insurer's assessment determined by the commissioner to be
24-9 uncollectible, so that such uncollectible amount is, in effect,
24-10 assumed and redistributed among the remaining participating
24-11 insurers.
24-12 Sec. 11. ASSESSMENTS AND PREMIUM SURCHARGES. Should a
24-13 deficit occur in the association, the association shall assess
24-14 participating insurers in accordance with this section and each
24-15 insurer may charge a premium surcharge on every property insurance
24-16 policy issued by it insuring property in this state, the effective
24-17 date of which policy is within the three-year period commencing 90
24-18 days after the date of assessment by the association. The amount
24-19 of the surcharge shall be calculated on the basis of a uniform
24-20 percentage of the premium on such policies equal to one-third of
24-21 the ratio of the amount of an insurer's assessment to the amount of
24-22 its direct earned premiums as reported in its financial statement
24-23 to the department for the calendar year immediately preceding the
24-24 year in which the assessment is made, such that over the period of
24-25 three years the aggregate of all such surcharges by an insurer
24-26 shall be equal to the amount of the assessment of such insurer.
24-27 The minimum surcharges on a policy may be $1; all surcharges may be
25-1 rounded to the nearest dollar.
25-2 Sec. 12. SANCTIONS. If the association, inspection bureau,
25-3 or participating insurer is found to be in violation of or in
25-4 failure to comply with this Act, each entity shall be subject to
25-5 the sanctions authorized in Article 1.10 of this code, including
25-6 administrative penalties authorized under Article 1.10E of this
25-7 code. The commissioner may also utilize any other disciplinary
25-8 procedures authorized by this code, including the cease and desist
25-9 procedures authorized by Article 1.10A of this code.
25-10 Sec. 13. ANNUAL REPORT. The association shall compile a
25-11 calendar year annual operating report and submit such annual report
25-12 to the commissioner on or before March 31 of the following calendar
25-13 year. This annual report shall be a matter of public record.
25-14 Sec. 14. POWERS OF THE COMMISSIONER. (a) In addition to
25-15 any powers conferred upon the commissioner by this or any other
25-16 law, the commissioner is charged with the authority to supervise
25-17 the association and the inspection bureau. In addition, the
25-18 commissioner has the power:
25-19 (1) to examine the operation of the association and
25-20 the inspection bureau through free access to all the books,
25-21 records, files, papers and documents relating to their operation
25-22 and may summon, qualify, and examine as witnesses all persons
25-23 having knowledge of such operations, including the governing
25-24 committee, officers, or employees thereof;
25-25 (2) to do all things necessary to enable the State of
25-26 Texas and the association to fully participate in any federal
25-27 program of reinsurance which may be enacted for purposes similar to
26-1 the purposes of this Act;
26-2 (3) to require such reports from the association
26-3 concerning risks insured by the association pursuant to this Act as
26-4 may be deemed necessary; and
26-5 (4) to adopt policy forms, endorsements, rates, and
26-6 rating and rule manuals for use by the association.
26-7 SECTION 8. Subchapter E, Chapter 21, Insurance Code, is
26-8 amended by adding Article 21.49B to read as follows:
26-9 Art. 21.49B. PROPERTY AND CASUALTY INSURANCE INITIATIVES
26-10 TASK FORCE. The commissioner may establish a task force to study
26-11 the utility and feasibility of instituting various property and
26-12 casualty insurance initiatives in this state. The initiatives to
26-13 be studied may include, but are not limited to:
26-14 (1) possible coordination with the Texas Department of
26-15 Commerce to make certain property and casualty insurance an
26-16 enterprise zone program pursuant to Chapter 2303, Government Code;
26-17 (2) possible coordination with Neighborhood Housing
26-18 Service (NHS) Programs to establish voluntary NHS-Insurance
26-19 Industry Partnerships;
26-20 (3) possible insurance agent programs to increase
26-21 minority agency access to standard insurance companies, including
26-22 minority intern programs with insurance companies; and
26-23 (4) possible tax incentives for insurance written in
26-24 underserved areas.
26-25 SECTION 9. Article 21.53B, Insurance Code, is amended by
26-26 adding Subsection (c) to read as follows:
26-27 (c) The commissioner shall have all necessary authority to
27-1 enforce this section. An aggrieved party may ask the commissioner
27-2 to conduct any investigation, review, hearing, or other proceeding
27-3 to determine compliance with this section. The commissioner shall
27-4 take all reasonable steps, including the issuance of orders and the
27-5 assessment of penalties, to ensure compliance with this section.
27-6 SECTION 10. Articles 21.21-3 and 21.21-5, Insurance Code,
27-7 are repealed.
27-8 SECTION 11. Article 21.21-7, Insurance Code, as added by
27-9 this Act, applies only to a health insurance policy, contract,
27-10 agreement, or evidence of coverage that is delivered, issued for
27-11 delivery, or renewed on or after January 1, 1996. A policy,
27-12 contract, agreement, or evidence of coverage that is delivered,
27-13 issued for delivery, or renewed before January 1, 1996, is governed
27-14 by the law as it existed immediately before the effective date of
27-15 this Act, and that law is continued in effect for that purpose.
27-16 SECTION 12. The importance of this legislation and the
27-17 crowded condition of the calendars in both houses create an
27-18 emergency and an imperative public necessity that the
27-19 constitutional rule requiring bills to be read on three several
27-20 days in each house be suspended, and this rule is hereby suspended,
27-21 and that this Act take effect and be in force from and after its
27-22 passage, and it is so enacted.