H.B. No. 1367
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.
2-27 Sec. 4. EXCEPTIONS. (a) A legal entity engaged in the
3-1 business of insurance as specified in Section 2 of this article is
3-2 not in violation of the prohibited acts defined in or determined
3-3 pursuant to Sections 3(b) and 3(c) of this article if the refusal
3-4 to insure; refusal to continue to insure; the limiting of the
3-5 amount, extent, or kind of coverage; or the charging of an
3-6 individual a different rate for the same coverage is based upon
3-7 sound underwriting or actuarial principles reasonably related to
3-8 actual or anticipated loss experience.
3-9 (b) A legal entity engaged in the business of insurance as
3-10 specified in Section 2 of this article is not in violation of the
3-11 prohibited acts defined in or determined pursuant to Section 3 of
3-12 this article if the entity provides insurance coverage only to
3-13 persons who are required to obtain or maintain membership or
3-14 qualification for membership in a club, group, or organization, so
3-15 long as membership or membership qualifications are uniform
3-16 requirements of the insurer as a condition of providing insurance,
3-17 and are applied uniformly throughout this state, and the entity
3-18 does not engage in any of the prohibited acts defined in or
3-19 determined pursuant to Section 3 of this article for persons who
3-20 are qualified members, except as otherwise provided in this
3-21 section.
3-22 (c) A legal entity engaged in the business of insurance as
3-23 specified in Section 2 of this article is not in violation of the
3-24 prohibited acts defined in or determined pursuant to Section 3 of
3-25 this article if the refusal to insure; refusal to continue to
3-26 insure; the limiting of the amount, extent, or kind of coverage; or
3-27 the charging of an individual a different rate for the same
4-1 coverage is required or authorized by law or regulatory mandate.
4-2 (d) A legal entity in the business of insurance specified in
4-3 Section 2 of this article is not in violation of the prohibited
4-4 acts defined in or determined pursuant to Section 3 of this article
4-5 because different premiums result for policyholders with like
4-6 expense factors but different loss exposures under a mass marketing
4-7 plan. The commissioner shall by rule define selected groups
4-8 eligible for issuance of policies under mass marketing plan.
4-9 (e) In this article, sound actuarial principles for purposes
4-10 of title insurance means based on an examination of title or
4-11 closing of the transaction. This article shall not prevent
4-12 requirements to provide title insurance coverage relating to
4-13 possible community, homestead, or other martial rights in land.
4-14 Sec. 5. SANCTIONS. Any legal entity engaged in the business
4-15 of insurance in this state found to be in violation of or failing
4-16 to comply with this article is subject to the sanctions authorized
4-17 in Article 1.10 of this code, including administrative penalties
4-18 authorized under Article 1.10E of this code. The commissioner may
4-19 also utilize the cease and desist procedures authorized by Article
4-20 1.10A of this code.
4-21 SECTION 2. Subchapter B, Chapter 21, Insurance Code, is
4-22 amended by adding Article 21.21-7 to read as follows:
4-23 Art. 21.21-7. PROHIBITION ON USE BY HEALTH INSURERS OF
4-24 UNDERWRITING GUIDELINES BASED ON FLUENCY IN ENGLISH
4-25 Sec. 1. DEFINITIONS. In this article:
4-26 (1) "Health insurer" means any insurance company,
4-27 group hospital service corporation, or health maintenance
5-1 organization that delivers or issues for delivery an individual,
5-2 group, blanket, or franchise insurance policy or insurance
5-3 agreement, a group hospital service contract, or an evidence of
5-4 coverage that provides health insurance or health care benefits.
5-5 Without limiting the foregoing, the definition includes insurance
5-6 companies, associations, and organizations which come within the
5-7 purview of the following designated chapters of the Insurance Code:
5-8 Chapter 3, pertaining to life, health, and accident insurance
5-9 companies; Chapter 8, pertaining to general casualty companies;
5-10 Chapter 10, pertaining to fraternal benefit societies; Chapter 11,
5-11 pertaining to mutual life insurance companies; Chapter 12,
5-12 pertaining to local mutual aid associations; Chapters 13 and 14,
5-13 pertaining to statewide mutual assessment companies, mutual
5-14 assessment companies, and mutual assessment life, health, and
5-15 accident associations; Chapter 15, pertaining to mutual insurance
5-16 companies writing other than life insurance; Chapter 18, pertaining
5-17 to underwriters making insurance on the Lloyd's plan; Chapter 19,
5-18 pertaining to reciprocal exchanges; and Chapter 22, pertaining to
5-19 stipulated premium insurance companies.
5-20 (2) "Underwriting guideline" means a rule, standard,
5-21 marketing decision, or practice, whether written, oral, or
5-22 electronic, that is used by a health insurer or an agent of a
5-23 health insurer to examine, bind, accept, reject, renew, nonrenew,
5-24 cancel, charge a different rate for the same coverage, or limit
5-25 coverage(s) made available to classes of consumers of insurance.
5-26 Sec. 2. APPLICATION. This article applies to any health
5-27 insurance policy, agreement, contract, or evidence of coverage
6-1 delivered or issued for delivery by a health insurer.
6-2 Sec. 3. PROHIBITION. A health insurer may not use an
6-3 underwriting guideline that is based on the ability of an insured
6-4 or an applicant for insurance coverage or health care benefits to
6-5 speak English fluently or to be literate in the English language.
6-6 The applicant has the burden of proof to establish a violation of
6-7 this article.
6-8 SECTION 3. Subchapter C, Chapter 5, Insurance Code, is
6-9 amended by adding Article 5.35-3 to read as follows:
6-10 Art. 5.35-3. PROPERTY PROTECTION PROGRAM FOR UNDERSERVED
6-11 AREAS
6-12 Sec. 1. (a) By rule the commissioner may determine and
6-13 designate areas as underserved areas for residential property
6-14 insurance. In determining which areas will be designated as
6-15 underserved, the commissioner shall consider whether residential
6-16 property insurance is not reasonably available to a substantial
6-17 number of owners of insurable property in the underserved area and
6-18 any other relevant factors as determined by the commissioner. For
6-19 purposes of this article, residential property insurance means
6-20 insurance coverage against loss to real or tangible personal
6-21 property at a fixed location provided in a homeowners policy,
6-22 residential fire and allied lines policy, or farm and ranch owners
6-23 policy.
6-24 (b) The property protection program for underserved areas
6-25 operated under this article may not include windstorm and hail
6-26 insurance coverage for a risk eligible for that coverage under
6-27 Article 21.49 of this code.
7-1 Sec. 2. All insurers authorized to write property or
7-2 casualty insurance in this state and writing residential property
7-3 insurance in this state, including those insurers licensed under
7-4 Chapters 18 and 19 of this code, are authorized to write insurance
7-5 on the forms adopted under this article.
7-6 Sec. 3. The commissioner shall adopt policy forms for
7-7 residential property insurance specifically for use in the
7-8 designated underserved areas. The policy forms adopted pursuant to
7-9 this article shall include a basic policy covering fire and allied
7-10 lines perils with endorsements providing additional coverages at
7-11 the option of the insured. The adopted policy forms may be used by
7-12 all insurers writing insurance in underserved areas.
7-13 Sec. 4. The rates for residential property insurance subject
7-14 to this article shall be determined in accordance with the
7-15 provisions of this code applicable to each insurer.
7-16 Sec. 5. In the designated underserved areas, all insurers
7-17 specified in Section 2 of this article shall make available to
7-18 their agents and all agents shall offer all insureds the full range
7-19 of coverages promulgated under this article subject to the
7-20 applicable rates and underwriting guidelines of each such insurer.
7-21 Sec. 6. The premium on all policies written pursuant to this
7-22 article will not be subject to tax under Article 4.10 of this code.
7-23 Sec. 7. The premium on all policies written pursuant to this
7-24 article will not be considered net direct premiums under the
7-25 provisions of Section 3(g), Article 21.49, of this code.
7-26 SECTION 4. Subchapter E, Chapter 21, Insurance Code, is
7-27 amended by adding Article 21.79 to read as follows:
8-1 Art. 21.79. GROUP INSURANCE OF PRIVATE PASSENGER AUTO AND
8-2 RESIDENTIAL PROPERTY INSURANCE IN UNDERSERVED AREAS
8-3 Sec. 1. (a) By rule the commissioner may determine and
8-4 designate areas as underserved areas for private passenger auto
8-5 insurance or residential property insurance. In determining which
8-6 areas will be designated as underserved, the commissioner shall
8-7 consider whether such insurance is not reasonably available to a
8-8 substantial number of insurable risks and the availability of
8-9 insurance and any other relevant factors as determined by the
8-10 commissioner. For purposes of this article, residential property
8-11 insurance means insurance against loss to real or tangible personal
8-12 property at a fixed location provided in a homeowners policy,
8-13 residential fire and allied lines policy, or farm and ranch owners
8-14 policy.
8-15 (b) Group insurance provided under this article may not
8-16 include windstorm and hail insurance coverage for a risk eligible
8-17 for that coverage under Article 21.49 of this code.
8-18 Sec. 2. All insurers authorized to write property or
8-19 casualty insurance in this state and writing private passenger auto
8-20 insurance or residential property insurance in this state,
8-21 including insurers licensed under Chapters 18 and 19 of this code,
8-22 are authorized to write such insurance on a group basis in
8-23 underserved areas as designated by the commissioner.
8-24 Sec. 3. A group may be formed solely for the purpose of
8-25 purchasing insurance subject to this article.
8-26 Sec. 4. All policy forms and certificates for use in
8-27 underserved areas as designated by the commissioner shall be
9-1 adopted by the commissioner.
9-2 Sec. 5. The rates for coverage shall be subject to the
9-3 applicable statutory provisions relating to the respective
9-4 insurers.
9-5 Sec. 6. The commissioner may adopt any other rules that are
9-6 appropriate and necessary to implement this article.
9-7 SECTION 5. Article 21.49-12, Insurance Code, is amended to
9-8 read as follows:
9-9 Art. 21.49-12. MARKET ASSISTANCE PROGRAMS
9-10 Sec. 1. CREATION OF PROGRAMS. (a) The commissioner shall
9-11 <State Board of Insurance may> establish a voluntary mechanism to
9-12 be called a market assistance program to assist insureds in Texas
9-13 in obtaining residential property <liability> insurance coverage in
9-14 underserved areas, which shall be determined and designated by the
9-15 commissioner by rule using the standards specified in Section 1,
9-16 Article 5.35-3, of this code <where it has been shown not to be
9-17 readily available>. For purposes of this article, residential
9-18 property insurance means insurance against loss to real or tangible
9-19 personal property at a fixed location provided in a homeowners
9-20 policy, residential fire and allied lines policy, or farm and ranch
9-21 owners policy. The types of risks to be assisted under the <each>
9-22 market assistance program will be established by the commissioner
9-23 <board>. A market assistance program division shall be established
9-24 in and operated by the Texas Department of Insurance.
9-25 (b) The market assistance program established under this
9-26 article may not provide assistance with respect to windstorm and
9-27 hail insurance coverage for a risk eligible for that coverage under
10-1 Article 21.49 of this code.
10-2 Sec. 2. PLAN OF OPERATION. (a) The executive committee
10-3 shall develop and submit the plan of operation to the commissioner
10-4 for adoption by rule and shall be available to advise and consult
10-5 with the commissioner with regard to the administration of the
10-6 program. If the executive committee fails to submit a suitable
10-7 plan of operation within 180 days following the effective date of
10-8 this article, or if at any time thereafter the executive committee
10-9 fails to submit suitable amendments to the plan of operation, the
10-10 department shall develop and submit to the commissioner a plan of
10-11 operation and thereafter any amendments thereto, and the
10-12 commissioner shall, after notice and hearing, adopt by rule the
10-13 plan of operation developed by the department or any amendments to
10-14 the plan of operation <Each market assistance program shall be
10-15 administered under a plan of operation promulgated by the board>.
10-16 The <Each> plan of operation shall indicate types of coverage,
10-17 policy forms and terms, application forms, eligibility, and overall
10-18 operation of the program. All insurers licensed to write property
10-19 or casualty insurance and actually writing residential property
10-20 insurance in this state, including Lloyds, reciprocals, or
10-21 interinsurance exchanges, may <The board may require an insurer to>
10-22 participate in the program unless insurer participation is made
10-23 mandatory by the commissioner based on criteria provided in the
10-24 plan of operation, but the commissioner <board> may not permit an
10-25 insurer to condition its participation in a manner that is
10-26 inequitable to the participants.
10-27 (b) The plan of operation shall include, but is not limited
11-1 to, the following provisions:
11-2 (1) Applications will be accepted only from agents
11-3 duly licensed by the Texas Department of Insurance. Applications
11-4 from all other sources will be returned for referral to duly
11-5 licensed agents of the applicant's choice for preparation and
11-6 resubmission to the program.
11-7 (2) Applications for assistance shall be addressed to
11-8 the Market Assistance Program at the Texas Department of Insurance.
11-9 Each application must be accompanied by a copy of a current
11-10 nonrenewal or cancellation notice and a current declination letter
11-11 from at least one other insurer writing the coverage sought.
11-12 Applicants not having previous residential property insurance
11-13 coverage must provide copies of current declination letters from at
11-14 least two unaffiliated insurers writing the coverage sought.
11-15 (3) Each insurer has the right to individually
11-16 evaluate the risk and apply the rates in accordance with the
11-17 provisions of this code applicable to each insurer.
11-18 (4) Each insurer has the option of providing a premium
11-19 quote on the same coverage basis for which it normally provides
11-20 insurance in this state using its own underwriting guidelines and
11-21 the rates determined in accordance with the provisions of this code
11-22 applicable to each insurer.
11-23 (5) An insurer shall make its premium quote, indicate
11-24 its refusal to quote, or make a request for additional time within
11-25 30 days of receiving the application.
11-26 (6) If a premium quote is made, the applicant's agent
11-27 shall be notified by the program so that the agent may complete the
12-1 placement of the insurance, if the applicant accepts the coverage
12-2 at the premium quoted.
12-3 (7) An applicant is not eligible to apply to the
12-4 program again for the same coverage for the same risk if the
12-5 insurer cancels or nonrenews coverage for nonpayment of premium or
12-6 submission of a fraudulent claim.
12-7 (8) The plan of operation shall contain criteria under
12-8 which the commissioner may make insurer participation in the
12-9 program mandatory.
12-10 (c) The plan of operation may provide for subcommittees that
12-11 are necessary to carry out the functions of a program.
12-12 Sec. 3. EXECUTIVE COMMITTEE. (a) The program shall be
12-13 administered by an executive committee composed of 11 members
12-14 appointed by the commissioner:
12-15 (1) five members who represent the interests of
12-16 insurers;
12-17 (2) four public members; and
12-18 (3) two members who are licensed local recording
12-19 agents. <An executive committee shall administer each market
12-20 assistance program.>
12-21 (b) To be eligible to serve on the executive committee as a
12-22 representative of insurers, a person must be a full-time employee
12-23 of an authorized insurer. <The board shall appoint the members of
12-24 an executive committee.>
12-25 (c) The commissioner or the commissioner's designated
12-26 representative shall be an ex officio member of the executive
12-27 committee and must be present in every meeting of the executive
13-1 committee. <At least one member of the board must be designated a
13-2 member of the executive committee.>
13-3 <(d) The plan of operation may provide for subcommittees
13-4 that are necessary to carry out the functions of a program.>
13-5 <(e) A representative of the board must be present in every
13-6 meeting of an executive committee or subcommittee.>
13-7 Sec. 4. AGENTS. (a) Notwithstanding any other provision of
13-8 law, a market assistance program may have two categories of agents:
13-9 (1) an originating agent; and
13-10 (2) an issuing agent.
13-11 (b) An originating agent may complete an application for
13-12 insurance on behalf of an insured for submission to the program
13-13 without being appointed to represent the ultimate insurer.
13-14 (c) An issuing agent must be appointed to represent the
13-15 ultimate insurer and shall perform all of the customary duties of a
13-16 local recording agent including but not limited to the following:
13-17 (1) signing, executing, and delivering policies of
13-18 insurance;
13-19 (2) maintaining a record of the business;
13-20 (3) examining and inspecting the risk; and
13-21 (4) receiving and collecting premiums.
13-22 (d) An originating agent shall <may> share commissions, as
13-23 required by the market assistance program plan of operation
13-24 <negotiated on an individual basis>, with the issuing agent if the
13-25 originating agent holds a license as either a local recording agent
13-26 or as a salaried representative for those companies whose plan of
13-27 operation does not contemplate the use of local recording agents.
14-1 (e) The originating and issuing agent may be the same
14-2 person. If the originating agent and the issuing agent are not the
14-3 same person, the originating agent may not be held to be the agent
14-4 of the insurer unless there is an appointment as specified by
14-5 Article 21.14 of this code.
14-6 (f) The program may not share in commissions.
14-7 <Sec. 5. FEES. The plan of operation may provide reasonable
14-8 application fees to be used to cover expenses of the program.
14-9 These fees must be maintained in a separate account under the
14-10 control of a fiscal agent designated in the plan of operation.>
14-11 Sec. 5 <6>. CONFIDENTIALITY. (a) The Texas Department of
14-12 Insurance <State Board of Insurance> shall maintain as confidential
14-13 all application files and related documents received under this
14-14 article.
14-15 (b) In maintaining confidentiality, the Texas Department of
14-16 Insurance <State Board of Insurance> shall not permit the files and
14-17 related documents to be made available to the public except that
14-18 the Texas Department of Insurance <State Board of Insurance> shall
14-19 allow access to those files and related documents to originating or
14-20 issuing agents or to an applicant for his own file or to an insurer
14-21 who agrees to insure the applicant.
14-22 Sec. 6. PERIODIC REVIEW. (a) Information concerning the
14-23 number and type of applications received and placed, and such other
14-24 information, as deemed appropriate by the executive committee or
14-25 the commissioner, shall be collected.
14-26 (b) The executive committee shall review the demand for and
14-27 performance of the program six months following the approval of the
15-1 plan of operation, and at least annually thereafter, as necessary.
15-2 After each such review the executive committee shall report to the
15-3 commissioner as to the necessity for continued operation of the
15-4 voluntary program, need for establishment of a mandatory program,
15-5 or the need for establishment of a FAIR Plan pursuant to Article
15-6 21.49A of this code, or other recommendations the executive
15-7 committee deems appropriate. The program shall be terminated only
15-8 upon approval of the commissioner, but in no event earlier than 48
15-9 months following the commencement date of the initial plan of
15-10 operation.
15-11 Sec. 7. IMMUNITY FROM LIABILITY. The program, executive
15-12 committee members, and participating insurers and agents are not
15-13 personally liable for any act performed in good faith within the
15-14 scope of the person's authority as determined under this article or
15-15 for damages occasioned by his or her official acts or omissions
15-16 except for an act or omission that is corrupt or malicious.
15-17 Sec. 8. RULEMAKING AUTHORITY. The commissioner is
15-18 authorized to adopt rules in addition to the plan of operation that
15-19 are appropriate to accomplish the purposes of this article.
15-20 SECTION 6. Subchapter E, Chapter 21, Insurance Code, is
15-21 amended by adding Article 21.49A to read as follows:
15-22 Art. 21.49A. FAIR PLAN (FAIR ACCESS TO INSURANCE
15-23 REQUIREMENTS) ACT
15-24 Sec. 1. AUTHORITY; PURPOSE. (a) If the commissioner
15-25 determines, after a public hearing, that in all or any part of the
15-26 state residential property insurance is not reasonably available in
15-27 the voluntary market to a substantial number of insurable risks and
16-1 that at least 50 percent of the applicants to the residential
16-2 property market assistance program who are qualified under the plan
16-3 of operation, after the commissioner has made insurer participation
16-4 mandatory under the plan of operation, have not been placed with an
16-5 insurer in the previous 12-month period, the commissioner may
16-6 establish a FAIR (Fair Access to Insurance Requirements) Plan to
16-7 deliver residential property insurance to citizens of this state in
16-8 underserved areas, which shall be determined and designated by the
16-9 commissioner by rule. Each insurer, as defined herein, as a
16-10 condition of its authority to transact residential property
16-11 insurance in this state, shall participate in the FAIR Plan
16-12 Association in accordance with this Act.
16-13 (b) The FAIR Plan may not provide windstorm and hail
16-14 insurance coverage for a risk eligible for that coverage under
16-15 Article 21.49 of this code.
16-16 Sec. 2. DEFINITIONS. (1) "FAIR Plan Association" or
16-17 "association" means a nonprofit association established pursuant to
16-18 this Act to develop and administer a program to provide residential
16-19 property insurance in designated underserved areas in this state.
16-20 (2) "Insurer" means any licensed insurer writing
16-21 property and casualty insurance in this state, including:
16-22 (A) a Lloyd's plan company; and
16-23 (B) a reciprocal or interinsurance exchange.
16-24 (3) "Residential property insurance" means the
16-25 coverage against loss to real or tangible personal property at a
16-26 fixed location provided in a homeowners policy, residential fire
16-27 and allied lines policy, or farm and ranch owners policy.
17-1 (4) "Inspection bureau" means the organization or
17-2 organizations designated by the FAIR Plan Association with the
17-3 approval of the commissioner to make inspections to determine the
17-4 condition of the properties for which residential property
17-5 insurance is sought and to perform such other duties as may be
17-6 authorized by the FAIR Plan Association or the commissioner. The
17-7 manner and scope of the inspection and evaluation report for
17-8 residential property shall be prescribed by the association
17-9 pursuant to the plan of operation.
17-10 (5) "Net direct premiums" means gross direct written
17-11 premiums less return premiums upon canceled contracts (irrespective
17-12 of reinsurance assumed or ceded) written on residential property
17-13 pursuant to this Act.
17-14 (6) "Underserved area(s)" means area(s) designated as
17-15 underserved by the commissioner by rule. In determining which
17-16 areas will be designated as underserved, the commissioner shall
17-17 consider the factors specified in Section 1, Article 5.35-3, of
17-18 this code.
17-19 Sec. 3. GOVERNING COMMITTEE; PLAN OF OPERATION. (a) The
17-20 FAIR Plan shall be administered by the governing committee of the
17-21 association pursuant to a plan of operation. Subject to the
17-22 approval of the commissioner, the governing committee shall develop
17-23 the plan of operation and propose amendments thereto. The plan of
17-24 operation and any amendments thereto shall be adopted by the
17-25 commissioner by rule. The governing committee may on its own
17-26 initiative or at the request of the commissioner amend the plan of
17-27 operation.
18-1 (b) The governing committee shall be composed of 11 members
18-2 appointed by the commissioner as follows:
18-3 (1) five members who represent the interests of
18-4 insurers;
18-5 (2) four public members; and
18-6 (3) two members who are licensed local recording
18-7 agents.
18-8 (c) The commissioner or the commissioner's designated
18-9 representative from within the Texas Department of Insurance shall
18-10 serve as an ex officio member.
18-11 (d) To be eligible to serve on the governing committee as a
18-12 representative of insurers, a person must be a full-time employee
18-13 of an authorized insurer.
18-14 (e) The plan of operation shall provide:
18-15 (1) for establishment of a FAIR Plan Association for
18-16 the issuing of residential property insurance pursuant to this Act
18-17 and the distribution of the losses and the expenses in the writing
18-18 of such insurance in this state;
18-19 (2) that all insurers licensed to write property
18-20 insurance and writing residential property insurance shall
18-21 participate in the writings, expenses, profits, and losses of the
18-22 association, in the proportion that the net direct premiums, of
18-23 each participating insurer, written in this state during the
18-24 preceding calendar year, bear to the aggregate net direct premium
18-25 written in this state by all participating insurers; such
18-26 information shall be determined in accordance with the residential
18-27 property statistical plan adopted by the commissioner;
19-1 (3) that a participating insurer is entitled to
19-2 receive credit for similar insurance voluntarily written in a
19-3 designated underserved area and its participation in the writings
19-4 in the association shall be reduced in accordance with the
19-5 provisions of the plan of operation;
19-6 (4) for the immediate binding of eligible risks; for
19-7 the use of premium installment payment plans, adequate marketing,
19-8 and service facilities; and for the establishment of reasonable
19-9 service standards;
19-10 (5) procedures for efficient, economical, fair, and
19-11 nondiscriminatory administration of the FAIR Plan Association;
19-12 (6) procedures for determining the net level of
19-13 participation required for each insurer in the FAIR Plan
19-14 Association;
19-15 (7) for the use of deductibles and other underwriting
19-16 devices and for assessment of all members in amounts sufficient to
19-17 operate the association; and establish maximum limits of liability
19-18 to be placed through the program; and commissions to be paid to the
19-19 licensed agents submitting applications;
19-20 (8) that the association issue policies in its own
19-21 name;
19-22 (9) reasonable underwriting standards for determining
19-23 insurability of the risk;
19-24 (10) procedures for the assumption and ceding of
19-25 reinsurance by the association; and
19-26 (11) any other procedures or operational matters
19-27 deemed necessary by the governing committee or the commissioner.
20-1 Sec. 4. FAIR PLAN ASSOCIATION. Pursuant to procedures and
20-2 requirements set forth in the plan of operation, the FAIR Plan
20-3 Association (association) shall develop and administer a program
20-4 for participation by all insurers licensed to write property
20-5 insurance in this state and writing residential property insurance
20-6 in this state. The association shall make residential property
20-7 insurance available to applicants in underserved areas whose
20-8 property is insurable in accordance with reasonable underwriting
20-9 standards but who, after diligent efforts, are unable to procure
20-10 such insurance through the voluntary market, as evidenced by two
20-11 declinations from insurers licensed to write and actually writing
20-12 residential property insurance in the state.
20-13 Sec. 5. POWERS OF THE ASSOCIATION; CENTRALIZED OPERATIONS
20-14 AUTHORIZED. (a) The association is authorized, for FAIR Plan
20-15 purposes only, to issue policies of insurance and endorsements
20-16 thereto in its own name or a trade name duly adopted for that
20-17 purpose, and to act on behalf of all participating insurers in
20-18 connection with said policies and otherwise in any manner necessary
20-19 to accomplish the purposes of this Act, including but not limited
20-20 to issuance of policies, collection of premiums, issuance of
20-21 cancellations, and payment of commissions, losses, judgments, and
20-22 expenses.
20-23 (b) The participating insurers shall be liable to the
20-24 association as provided in this Act and the plan of operation for
20-25 the expenses and liabilities so incurred by the association, and
20-26 the association shall make assessments against the participating
20-27 insurers as required to meet such expenses and liabilities. In
21-1 connection with any policy issued by the association:
21-2 (1) service of any notice, proof of loss, legal
21-3 process, or other communication with respect to the policy shall be
21-4 made upon the association; and
21-5 (2) any action by the insured constituting a claim
21-6 under the policy shall be brought only against the association, and
21-7 the association shall be the proper party for all purposes in any
21-8 action brought under or in connection with any such policy. The
21-9 foregoing requirements shall be set forth in any policy issued by
21-10 the association and the form and content of any such policy shall
21-11 be subject to the approval of the commissioner.
21-12 (c) The association is authorized to assume and cede
21-13 reinsurance in conformity with the plan of operation.
21-14 (d) Each insurer must participate in the writings, expenses,
21-15 profits, and losses of the association in the proportion that its
21-16 net direct premiums written bear to the aggregate net direct
21-17 premiums written by all insurers.
21-18 Sec. 6. PROPERTY INSPECTION; FAIR PLAN PROCEDURE. (a) Any
21-19 person having an insurable interest in real or tangible personal
21-20 property at a fixed location in an underserved area who, after
21-21 diligent effort has been unable to obtain residential property
21-22 insurance, as evidenced by two current declinations from insurers
21-23 licensed to write property insurance and actually writing
21-24 residential property insurance in the state, is entitled upon
21-25 application to the association to an inspection and evaluation of
21-26 the property by representatives of the inspection bureau.
21-27 (b) Applications may be made on behalf of the applicant by a
22-1 licensed local recording agent and shall be submitted on forms
22-2 prescribed by the association.
22-3 (c) Promptly after the request for inspection is received,
22-4 an inspection must be made and an inspection report filed with the
22-5 association and made available to the applicant upon request.
22-6 (d) If the inspection bureau finds that the residential
22-7 property meets the reasonable underwriting standards established in
22-8 the plan of operation, the applicant shall be so informed in
22-9 writing and a policy or binder shall be issued by the association.
22-10 If the residential property does not meet the criteria, the
22-11 applicant shall be informed, in writing, of the reasons for the
22-12 failure of the residential property to meet the criteria.
22-13 (e) If, at any time, the applicant makes improvements in the
22-14 residential property or its condition which the applicant believes
22-15 are sufficient to make the residential property meet the criteria,
22-16 a representative of the inspection bureau shall reinspect the
22-17 residential property upon request. In any case, the applicant for
22-18 residential property insurance shall be eligible for one
22-19 reinspection any time within 60 days after the initial FAIR Plan
22-20 inspection. If upon reinspection the residential property meets
22-21 the reasonable underwriting standards established in the plan of
22-22 operation, the applicant shall be so informed in writing and a
22-23 policy or binder shall be issued by the association.
22-24 Sec. 7. APPROVAL OF RATES. The association shall file with
22-25 the commissioner for approval the proposed rates and supplemental
22-26 rate information to be used in connection with the issuance of
22-27 policies or endorsements. Rates shall be set in an amount
23-1 sufficient to carry all claims to maturity and to meet the expenses
23-2 incurred in the writing and servicing of the business. Within 60
23-3 days of the filing of the proposed rates, the commissioner shall
23-4 enter an order either approving or disapproving, in whole or in
23-5 part, the proposed rates. The commissioner may, upon notice to the
23-6 association, extend the period for entering an order under this
23-7 section an additional 30 days. No such policies or endorsements
23-8 shall be issued until such time as the commissioner approves the
23-9 rates to be applied to the policy or endorsement. An order
23-10 disapproving a rate shall state the grounds for the disapproval and
23-11 the findings in support thereof.
23-12 Sec. 8. APPEALS; JUDICIAL REVIEW. (a) Any applicant or
23-13 affected insurer has the right of appeal to the association. A
23-14 decision of the association may be appealed to the commissioner
23-15 within 30 days after such decision.
23-16 (b) All orders or decisions of the commissioner made
23-17 pursuant to this Act are subject to judicial review in accordance
23-18 with Article 1.04 of this code.
23-19 Sec. 9. IMMUNITY FROM LIABILITY. There is no liability on
23-20 the part of, and no cause of action against insurers, the
23-21 inspection bureau, the association, the governing committee, their
23-22 agents or employees, or the commissioner or the commissioner's
23-23 authorized representatives, with respect to any inspections
23-24 required to be undertaken by this Act or for any acts or omissions
23-25 in connection therewith, or for any statements made in any report
23-26 and communication concerning the insurability of the property, or
23-27 in the findings required by the provisions of this Act, or at the
24-1 hearings conducted in connection with such inspections.
24-2 Sec. 10. INSOLVENCY. In the event any participating insurer
24-3 fails, by reason of insolvency, to pay any assessment, the
24-4 association shall cause the reimbursement ratios to be immediately
24-5 recalculated, excluding therefrom the amount of the insolvent
24-6 insurer's assessment determined by the commissioner to be
24-7 uncollectible, so that such uncollectible amount is, in effect,
24-8 assumed and redistributed among the remaining participating
24-9 insurers.
24-10 Sec. 11. ASSESSMENTS AND PREMIUM SURCHARGES. Should a
24-11 deficit occur in the association, the association shall assess
24-12 participating insurers in accordance with this section and each
24-13 insurer may charge a premium surcharge on every property insurance
24-14 policy issued by it insuring property in this state, the effective
24-15 date of which policy is within the three-year period commencing 90
24-16 days after the date of assessment by the association. The amount
24-17 of the surcharge shall be calculated on the basis of a uniform
24-18 percentage of the premium on such policies equal to one-third of
24-19 the ratio of the amount of an insurer's assessment to the amount of
24-20 its direct earned premiums as reported in its financial statement
24-21 to the department for the calendar year immediately preceding the
24-22 year in which the assessment is made, such that over the period of
24-23 three years the aggregate of all such surcharges by an insurer
24-24 shall be equal to the amount of the assessment of such insurer.
24-25 The minimum surcharges on a policy may be $1; all surcharges may be
24-26 rounded to the nearest dollar.
24-27 Sec. 12. SANCTIONS. If the association, inspection bureau,
25-1 or participating insurer is found to be in violation of or in
25-2 failure to comply with this Act, each entity shall be subject to
25-3 the sanctions authorized in Article 1.10 of this code, including
25-4 administrative penalties authorized under Article 1.10E of this
25-5 code. The commissioner may also utilize any other disciplinary
25-6 procedures authorized by this code, including the cease and desist
25-7 procedures authorized by Article 1.10A of this code.
25-8 Sec. 13. ANNUAL REPORT. The association shall compile a
25-9 calendar year annual operating report and submit such annual report
25-10 to the commissioner on or before March 31 of the following calendar
25-11 year. This annual report shall be a matter of public record.
25-12 Sec. 14. POWERS OF THE COMMISSIONER. (a) In addition to
25-13 any powers conferred upon the commissioner by this or any other
25-14 law, the commissioner is charged with the authority to supervise
25-15 the association and the inspection bureau. In addition, the
25-16 commissioner has the power:
25-17 (1) to examine the operation of the association and
25-18 the inspection bureau through free access to all the books,
25-19 records, files, papers, and documents relating to their operation
25-20 and may summon, qualify, and examine as witnesses all persons
25-21 having knowledge of such operations, including the governing
25-22 committee, officers, or employees thereof;
25-23 (2) to do all things necessary to enable the State of
25-24 Texas and the association to fully participate in any federal
25-25 program of reinsurance which may be enacted for purposes similar to
25-26 the purposes of this Act;
25-27 (3) to require such reports from the association
26-1 concerning risks insured by the association pursuant to this Act as
26-2 may be deemed necessary; and
26-3 (4) to adopt policy forms, endorsements, rates, and
26-4 rating and rule manuals for use by the association.
26-5 SECTION 7. Subchapter E, Chapter 21, Insurance Code, is
26-6 amended by adding Article 21.49B to read as follows:
26-7 Art. 21.49B. PROPERTY AND CASUALTY INSURANCE INITIATIVES
26-8 TASK FORCE. The commissioner may establish a task force to study
26-9 the utility and feasibility of instituting various property and
26-10 casualty insurance initiatives in this state. The initiatives to
26-11 be studied may include, but are not limited to:
26-12 (1) possible coordination with the Texas Department of
26-13 Commerce to make certain property and casualty insurance an
26-14 enterprise zone program pursuant to Chapter 2303, Government Code;
26-15 (2) possible coordination with Neighborhood Housing
26-16 Service (NHS) Programs to establish voluntary NHS-Insurance
26-17 Industry Partnerships;
26-18 (3) possible insurance agent programs to increase
26-19 minority agency access to standard insurance companies, including
26-20 minority intern programs with insurance companies;
26-21 (4) possible tax incentives for insurance written in
26-22 underserved areas; and
26-23 (5) a consumer education program designed to increase
26-24 the ability of consumers to differentiate among different products
26-25 and providers in the property and casualty market.
26-26 SECTION 8. Article 21.53B, Insurance Code, is amended by
26-27 adding Subsection (c) to read as follows:
27-1 (c) The commissioner shall have all necessary authority to
27-2 enforce this section. An aggrieved party may ask the commissioner
27-3 to conduct any investigation, review, hearing, or other proceeding
27-4 to determine compliance with this section. The commissioner shall
27-5 take all reasonable steps, including the issuance of orders and the
27-6 assessment of penalties, to ensure compliance with this section.
27-7 SECTION 9. Section 4(7)(c), Article 21.21, and Articles
27-8 21.21-3 and 21.21-5, Insurance Code, are repealed.
27-9 SECTION 10. Subchapter C, Chapter 5, Insurance Code, is
27-10 amended by adding Article 5.33B to read as follows:
27-11 Art. 5.33B. VOLUNTARY INSPECTION PROGRAM
27-12 Sec. 1. RIGHT TO VOLUNTARY INSPECTION OF PROPERTY CONDITION.
27-13 Any person having an insurable interest in real or tangible
27-14 personal property at a fixed location who desires to purchase
27-15 residential property insurance may procure an independent
27-16 inspection of the condition of the property by an inspector
27-17 authorized to perform inspections under this article of the
27-18 property proposed to be insured.
27-19 Sec. 2. DEFINITIONS. In this article:
27-20 (a) "Residential property insurance" means insurance
27-21 against loss to real or tangible personal property at a fixed
27-22 location provided in a homeowners policy, residential fire and
27-23 allied lines policy, or farm and ranch owners policy.
27-24 (b) "Inspection" means a physical inspection of the
27-25 property for which residential property insurance is sought.
27-26 (c) "Inspection certificate" means a certificate
27-27 issued by an inspector pursuant to this article indicating that the
28-1 condition of the property meets or exceeds minimum standards.
28-2 (d) "Minimum standards" are those standards for
28-3 property condition insurability under this article as the
28-4 commissioner shall determine by rule.
28-5 (e) "Inspector" means a person authorized by the
28-6 commissioner to perform inspections under this article.
28-7 Sec. 3. PLAN OF OPERATION. (a) The commissioner shall
28-8 adopt a plan of operation for the Voluntary Inspection Program.
28-9 The plan of operation shall include rules and standards for the
28-10 inspection program, including but not limited to the following:
28-11 (1) the manner and scope of the inspections to be performed;
28-12 (2) the contents of the written evaluation report;
28-13 (3) the form of the inspection certificate to be issued;
28-14 (4) the term during which an inspection certificate shall
28-15 remain valid;
28-16 (5) rules for the certification and licensing of persons who
28-17 are authorized to perform inspections under this program, which
28-18 group shall include, but not be limited to:
28-19 (i) persons licensed to perform real property
28-20 inspections under the Real Estate Licensing Act;
28-21 (ii) designated employees or agents of a county or
28-22 municipality which elects to establish a voluntary inspection
28-23 program to inspect properties for residential properties within the
28-24 territorial limits of the county or municipality; and
28-25 (6) the fee which may be charged to the person requesting
28-26 the inspection.
28-27 (b) The commissioner may adopt rules to encourage the
29-1 coordination of inspections under this article with inspections
29-2 performed under article 5.33A.
29-3 Sec. 4. EFFECT OF CERTIFICATE. (a) The existence of an
29-4 inspection certificate issued under this article creates a
29-5 presumption that the property condition is adequate for residential
29-6 property insurance to be issued.
29-7 (b) As a condition of issuing a policy if an inspection
29-8 certificate is used in whole or in part to determine insurability,
29-9 an insurer may require a written statement by the applicant for
29-10 residential property insurance stating that there have been no
29-11 material or substantial changes to the property condition since the
29-12 date of the inspection certificate.
29-13 (c) An insurer who receives an inspection certificate may
29-14 not use property condition as grounds for refusing to issue or
29-15 renew residential property insurance unless the insurer reinspects
29-16 the property and specifies the areas of deficiency in its
29-17 declination letter.
29-18 Sec. 5. ENFORCEMENT. The commissioner may by rule provide
29-19 for the use of any of the disciplinary procedures authorized in
29-20 this code to maintain the integrity of the program or ensure
29-21 compliance with this article.
29-22 Sec. 6. RULEMAKING AUTHORITY. The commissioner is
29-23 authorized to adopt rules in addition to the plan of operation that
29-24 are appropriate to accomplish the purposes of this article.
29-25 SECTION 11. Article 21.21-7, Insurance Code, as added by
29-26 this Act, applies only to a health insurance policy, contract,
29-27 agreement, or evidence of coverage that is delivered, issued for
30-1 delivery, or renewed on or after January 1, 1996. A policy,
30-2 contract, agreement, or evidence of coverage that is delivered,
30-3 issued for delivery, or renewed before January 1, 1996, is governed
30-4 by the law as it existed immediately before the effective date of
30-5 this Act, and that law is continued in effect for that purpose.
30-6 SECTION 12. Article 21.21-8, Insurance Code, as added by
30-7 H.B. 668, Acts of the 74th Legislature, Regular Session, 1995, is
30-8 amended by adding Sections 4 and 5 to read as follows:
30-9 Sec. 4. AFFIRMATIVE DEFENSE. A legal entity engaged
30-10 in the business of insurance as specified in Section 1 of this
30-11 article is not in violation of the prohibited acts defined in or
30-12 determined pursuant to Section 2 of this article if the refusal to
30-13 insure; the refusal to continue to insure; the limiting of the
30-14 amount, extent, or kind of coverage; or the charging of an
30-15 individual a different rate for the same coverage is based upon
30-16 sound actuarial principles.
30-17 Sec. 5. EXCEPTION. A legal entity engaged in the business
30-18 of insurance as specified in Section 1 of this article is not in
30-19 violation of the prohibited acts defined in or determined pursuant
30-20 to Section 2 of this article if the entity provides insurance
30-21 coverage only to persons who are required to obtain or maintain
30-22 membership or qualification for membership in a club, group, or
30-23 organization so long as membership or membership qualifications are
30-24 uniform requirements of the insurer as a condition of providing
30-25 insurance, and are applied uniformly throughout this state, and the
30-26 entity does not engage in any of the prohibited acts defined in or
30-27 determined pursuant to Section 2 of this article for persons who
31-1 are qualified members, except as otherwise provided in this
31-2 section.
31-3 SECTION 13. The importance of this legislation and the
31-4 crowded condition of the calendars in both houses create an
31-5 emergency and an imperative public necessity that the
31-6 constitutional rule requiring bills to be read on three several
31-7 days in each house be suspended, and this rule is hereby suspended,
31-8 and that this Act take effect and be in force from and after its
31-9 passage, and it is so enacted.