1-1 By: Dutton, et al. (Senate Sponsor - Ellis) H.B. No. 1367
1-2 (In the Senate - Received from the House May 15, 1995;
1-3 May 16, 1995, read first time and referred to Committee on State
1-4 Affairs; May 25, 1995, reported favorably by the following vote:
1-5 Yeas 9, Nays 1; May 25, 1995, sent to printer.)
1-6 A BILL TO BE ENTITLED
1-7 AN ACT
1-8 relating to certain acts of unfair discrimination in the business
1-9 of insurance and certain methods, programs, and mechanisms for
1-10 providing property and casualty insurance in underserved areas;
1-11 providing administrative penalties.
1-12 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-13 SECTION 1. Subchapter B, Chapter 21, Insurance Code, is
1-14 amended by adding Article 21.21-6 to read as follows:
1-15 Art. 21.21-6. UNFAIR DISCRIMINATION
1-16 Sec. 1. PROHIBITIONS. No person shall engage in any
1-17 practice of unfair discrimination which is defined in this article
1-18 or is determined pursuant to this article to be a practice of
1-19 unfair discrimination in the business of insurance.
1-20 Sec. 2. APPLICATION AND SCOPE. This article shall apply to
1-21 any legal entity engaged in the business of insurance in this
1-22 state, including:
1-23 (a) a capital stock company;
1-24 (b) a mutual company;
1-25 (c) a title insurance company;
1-26 (d) a fraternal benefit society;
1-27 (e) a local mutual aid association;
1-28 (f) a statewide mutual assessment company;
1-29 (g) a county mutual insurance company;
1-30 (h) a Lloyd's plan company;
1-31 (i) a reciprocal or interinsurance exchange;
1-32 (j) a stipulated premium insurance company;
1-33 (k) a group hospital service company;
1-34 (l) a health maintenance organization;
1-35 (m) a farm mutual insurance company;
1-36 (n) a risk retention group;
1-37 (o) a surplus lines carrier; and
1-38 (p) agents, brokers, adjusters, and life insurance
1-39 counselors.
1-40 Sec. 3. UNFAIR DISCRIMINATION DEFINED. "Unfair
1-41 discrimination" means:
1-42 (a) Refusing to insure; refusing to continue to
1-43 insure; limiting the amount, extent, or kind of coverage available;
1-44 or charging an individual a different rate for the same coverage
1-45 because of race, color, religion, or national origin;
1-46 (b) Refusing to insure; refusing to continue to
1-47 insure; limiting the amount, extent, or kind of coverage available;
1-48 or charging an individual a different rate for the same coverage
1-49 because of the age, gender, marital status, or geographic location
1-50 of the individual; however, nothing in this paragraph shall
1-51 prohibit an insurer from taking marital status into account for the
1-52 purpose of defining persons eligible for dependent benefits;
1-53 (c) Refusing to insure; refusing to continue to
1-54 insure; limiting the amount, extent, or kind of coverage; or
1-55 charging an individual a different rate for the same coverage
1-56 because of disability or partial disability; however, this
1-57 paragraph shall not be interpreted to modify any other provision of
1-58 law relating to the termination, modification, issuance, or renewal
1-59 of any insurance policy or contract.
1-60 Sec. 4. EXCEPTIONS. (a) A legal entity engaged in the
1-61 business of insurance as specified in Section 2 of this article is
1-62 not in violation of the prohibited acts defined in or determined
1-63 pursuant to Section 3(b) and 3(c) of this article if the refusal to
1-64 insure; refusal to continue to insure; the limiting of the amount,
1-65 extent, or kind of coverage; or the charging of an individual a
1-66 different rate for the same coverage is based upon sound
1-67 underwriting or actuarial principles reasonably related to actual
1-68 or anticipated loss experience.
2-1 (b) A legal entity engaged in the business of insurance as
2-2 specified in Section 2 of this article is not in violation of the
2-3 prohibited acts defined in or determined pursuant to Section 3 of
2-4 this article if the entity provides insurance coverage only to
2-5 persons who are required to obtain or maintain membership or
2-6 qualification for membership in a club, group, or organization, so
2-7 long as membership or membership qualifications are uniform
2-8 requirements of the insurer as a condition of providing insurance,
2-9 and are applied uniformly throughout this state, and the entity
2-10 does not engage in any of the prohibited acts defined in or
2-11 determined pursuant to Section 3 of this article for persons who
2-12 are qualified members, except as otherwise provided in this
2-13 section.
2-14 (c) A legal entity engaged in the business of insurance as
2-15 specified in Section 2 of this article is not in violation of the
2-16 prohibited acts defined in or determined pursuant to Section 3 of
2-17 this article if the refusal to insure; refusal to continue to
2-18 insure; the limiting of the amount, extent, or kind of coverage; or
2-19 the charging of an individual a different rate for the same
2-20 coverage is required or authorized by law or regulatory mandate.
2-21 Sec. 5. SANCTIONS. Any legal entity engaged in the business
2-22 of insurance in this state found to be in violation of or failing
2-23 to comply with this article is subject to the sanctions authorized
2-24 in Article 1.10 of this code, including administrative penalties
2-25 authorized under Article 1.10E of this code. The commissioner may
2-26 also utilize the cease and desist procedures authorized by Article
2-27 1.10A of this code.
2-28 SECTION 2. Subchapter B, Chapter 21, Insurance Code, is
2-29 amended by adding Article 21.21-7 to read as follows:
2-30 Art. 21.21-7. PROHIBITION ON USE BY HEALTH INSURERS OF
2-31 UNDERWRITING GUIDELINES BASED ON FLUENCY IN ENGLISH
2-32 Sec. 1. DEFINITIONS. In this article:
2-33 (1) "Health insurer" means any insurance company,
2-34 group hospital service corporation, or health maintenance
2-35 organization that delivers or issues for delivery an individual,
2-36 group, blanket, or franchise insurance policy or insurance
2-37 agreement, a group hospital service contract, or an evidence of
2-38 coverage that provides health insurance or health care benefits.
2-39 Without limiting the foregoing, the definition includes insurance
2-40 companies, associations, and organizations which come within the
2-41 purview of the following designated chapters of the insurance code:
2-42 Chapter 3, pertaining to life, health, and accident insurance
2-43 companies; Chapter 8, pertaining to general casualty companies;
2-44 Chapter 10, pertaining to fraternal benefit societies; Chapter 11,
2-45 pertaining to mutual life insurance companies; Chapter 12,
2-46 pertaining to local mutual aid associations; Chapters 13 and 14,
2-47 pertaining to statewide mutual assessment companies, mutual
2-48 assessment companies, and mutual assessment life, health, and
2-49 accident associations; Chapter 15, pertaining to mutual insurance
2-50 companies writing other than life insurance; Chapter 18, pertaining
2-51 to underwriters making insurance on the Lloyd's plan; Chapter 19,
2-52 pertaining to reciprocal exchanges; and Chapter 22, pertaining to
2-53 stipulated premium insurance companies.
2-54 (2) "Underwriting guideline" means a rule, standard,
2-55 marketing decision, or practice, whether written, oral, or
2-56 electronic, that is used by a health insurer or an agent of a
2-57 health insurer to examine, bind, accept, reject, renew, nonrenew,
2-58 cancel, charge a different rate for the same coverage, or limit
2-59 coverage(s) made available to classes of consumers of insurance.
2-60 Sec. 2. APPLICATION. This article applies to any health
2-61 insurance policy, agreement, contract, or evidence of coverage
2-62 delivered or issued for delivery by a health insurer.
2-63 Sec. 3. PROHIBITION. A health insurer may not use an
2-64 underwriting guideline that is based on the ability of an insured
2-65 or an applicant for insurance coverage or health care benefits to
2-66 speak English fluently or to be literate in the English language.
2-67 The applicant has the burden of proof to establish a violation of
2-68 this article.
2-69 SECTION 3. Section 1, Article 17.25, Insurance Code, is
2-70 amended to read as follows:
3-1 Sec. 1. Regulation. County mutual insurance companies
3-2 operating under the provisions of this Chapter shall be authorized
3-3 to write insurance against loss or damage from any hazard provided
3-4 therein or that any other fire or windstorm insurance company
3-5 operating in Texas may write on property described in Article 17.01
3-6 of this Chapter. County mutual insurance companies qualifying to
3-7 write casualty lines for state wide operation may write all lines
3-8 of automobile insurance, personal liability insurance, residential
3-9 fire insurance, residential allied lines insurance, homeowners
3-10 insurance, and farm and ranch owners insurance, provided that no
3-11 such company shall assume a risk on any one hazard greater than
3-12 five (5%) per cent of its assets, unless such excess shall be
3-13 promptly reinsured.
3-14 SECTION 4. Subchapter C, Chapter 5, Insurance Code, is
3-15 amended by adding Article 5.35-3 to read as follows:
3-16 Art. 5.35-3. PROPERTY PROTECTION PROGRAM FOR UNDERSERVED
3-17 AREAS
3-18 Sec. 1. (a) By rule the commissioner may determine and
3-19 designate areas as underserved areas for residential property
3-20 insurance. In determining which areas will be designated as
3-21 underserved, the commissioner shall consider whether residential
3-22 property insurance is not reasonably available to a substantial
3-23 number of owners of insurable property in the underserved area and
3-24 any other relevant factors as determined by the commissioner. For
3-25 purposes of this article, residential property insurance means
3-26 insurance coverage against direct loss to real or tangible personal
3-27 property at a fixed location provided in a homeowners policy,
3-28 residential fire and allied lines policy, or farm and ranch owners
3-29 policy.
3-30 (b) The property protection program for underserved areas
3-31 operated under this article may not include windstorm and hail
3-32 insurance coverage for a risk eligible for that coverage under
3-33 Article 21.49 of this code.
3-34 Sec. 2. All insurers authorized to write property or
3-35 casualty insurance in this state and writing residential property
3-36 insurance in this state, including those insurers licensed under
3-37 Chapters 17, 18, and 19 of this code, are authorized to write
3-38 insurance on the forms adopted under this article.
3-39 Sec. 3. The commissioner shall adopt policy forms for
3-40 residential property insurance specifically for use in the
3-41 designated underserved areas. The policy forms adopted pursuant to
3-42 this article shall include a basic policy covering fire and allied
3-43 lines perils with endorsements providing additional coverages at
3-44 the option of the insured. The adopted policy forms may be used by
3-45 all insurers writing insurance in underserved areas.
3-46 Sec. 4. The rates for residential property insurance subject
3-47 to this article shall be determined in accordance with the
3-48 provisions of this code applicable to each insurer.
3-49 Sec. 5. In the designated underserved areas, all insurers
3-50 specified in Section 2 of this article shall make available to
3-51 their agents and all agents shall offer all insureds the full range
3-52 of coverages promulgated under this article subject to the
3-53 applicable rates and underwriting guidelines of each such insurer.
3-54 Sec. 6. The premium on all policies written pursuant to this
3-55 article will not be subject to tax under Article 4.10 of this code.
3-56 Sec. 7. The premium on all policies written pursuant to this
3-57 article will not be considered net direct premiums under the
3-58 provisions of Section 3(g), Article 21.49, of this code.
3-59 SECTION 5. Subchapter E, Chapter 21, Insurance Code, is
3-60 amended by adding Article 21.79 to read as follows:
3-61 Art. 21.79. GROUP INSURANCE OF PRIVATE PASSENGER AUTO AND
3-62 RESIDENTIAL PROPERTY INSURANCE IN UNDERSERVED AREAS
3-63 Sec. 1. (a) By rule the commissioner may determine and
3-64 designate areas as underserved areas for private passenger auto
3-65 insurance or residential property insurance. In determining which
3-66 areas will be designated as underserved, the commissioner shall
3-67 consider whether such insurance is not reasonably available to a
3-68 substantial number of insurable risks and the availability of
3-69 insurance and any other relevant factors as determined by the
3-70 commissioner. For purposes of this article, residential property
4-1 insurance shall mean property insurance on one-family or two-family
4-2 dwellings.
4-3 (b) Group insurance provided under this article may not
4-4 include windstorm and hail insurance coverage for a risk eligible
4-5 for that coverage under Article 21.49 of this code.
4-6 Sec. 2. All insurers authorized to write property or
4-7 casualty insurance in this state and writing private passenger auto
4-8 insurance or residential property insurance in this state,
4-9 including insurers licensed under Chapters 17, 18, and 19 of this
4-10 code, are authorized to write such insurance on a group basis in
4-11 underserved areas as designated by the commissioner.
4-12 Sec. 3. A group may be formed solely for the purpose of
4-13 purchasing insurance subject to this article.
4-14 Sec. 4. All policy forms and certificates for use in
4-15 underserved areas as designated by the commissioner shall be
4-16 adopted by the commissioner.
4-17 Sec. 5. The rates for coverage shall be subject to the
4-18 applicable statutory provisions relating to the respective
4-19 insurers.
4-20 Sec. 6. The commissioner may adopt any other rules that are
4-21 appropriate and necessary to implement this article.
4-22 SECTION 6. Article 21.49-12, Insurance Code, is amended to
4-23 read as follows:
4-24 Art. 21.49-12. Market Assistance Programs
4-25 Sec. 1. Creation of programs. (a) The commissioner <State
4-26 Board of Insurance> may establish a voluntary mechanism to be
4-27 called a market assistance program to assist insureds in Texas in
4-28 obtaining residential property <liability> insurance coverage in
4-29 underserved areas, which shall be determined and designated by the
4-30 commissioner by rule using the standards specified in Section 1,
4-31 Article 5.35-3, of this code <where it has been shown not to be
4-32 readily available>. For purposes of this article, residential
4-33 property insurance means property insurance on one-family or
4-34 two-family dwellings. The types of risks to be assisted under the
4-35 <each> market assistance program will be established by the
4-36 commissioner <board>. A market assistance program division shall
4-37 be established in and operated by the Texas Department of
4-38 Insurance.
4-39 (b) The market assistance program established under this
4-40 article may not provide assistance with respect to windstorm and
4-41 hail insurance coverage for a risk eligible for that coverage under
4-42 Article 21.49 of this code.
4-43 Sec. 2. Plan of operation. (a) The executive committee
4-44 shall develop and submit the plan of operation to the commissioner
4-45 for adoption by rule and shall be available to advise and consult
4-46 with the commissioner with regard to the administration of the
4-47 program. If the executive committee fails to submit a suitable
4-48 plan of operation within 180 days following the effective date of
4-49 this article, or if at any time thereafter the executive committee
4-50 fails to submit suitable amendments to the plan of operation, the
4-51 department shall develop and submit to the commissioner a plan of
4-52 operation and thereafter any amendments thereto, and the
4-53 commissioner shall, after notice and hearing, adopt by rule the
4-54 plan of operation developed by the department or any amendments to
4-55 the plan of operation <Each market assistance program shall be
4-56 administered under a plan of operation promulgated by the board>.
4-57 The <Each> plan of operation shall indicate types of coverage,
4-58 policy forms and terms, application forms, eligibility, and overall
4-59 operation of the program. All insurers licensed to write property
4-60 or casualty insurance and actually writing residential property
4-61 insurance in this state, including Lloyds, reciprocals, or
4-62 interinsurance exchanges and county mutuals, may <The board may
4-63 require an insurer to> participate in the program unless insurer
4-64 participation is made mandatory by the commissioner based on
4-65 criteria provided in the plan of operation, but the commissioner
4-66 <board> may not permit an insurer to condition its participation in
4-67 a manner that is inequitable to the participants.
4-68 (b) The plan of operation shall include, but is not limited
4-69 to, the following provisions:
4-70 (1) Applications will be accepted only from agents
5-1 duly licensed by the Texas Department of Insurance. Applications
5-2 from all other sources will be returned for referral to duly
5-3 licensed agents of the applicant's choice for preparation and
5-4 resubmission to the program.
5-5 (2) Applications for assistance shall be addressed to
5-6 the Market Assistance Program at the Texas Department of Insurance.
5-7 Each application must be accompanied by a copy of a current
5-8 nonrenewal or cancellation notice and a current declination letter
5-9 from at least one other insurer writing the coverage sought.
5-10 Applicants not having previous residential property insurance
5-11 coverage must provide copies of current declination letters from at
5-12 least two unaffiliated insurers writing the coverage sought.
5-13 (3) Each insurer has the right to individually
5-14 evaluate the risk and apply the rates in accordance with the
5-15 provisions of this code applicable to each insurer.
5-16 (4) Each insurer has the option of providing a premium
5-17 quote on the same coverage basis for which it normally provides
5-18 insurance in this state using its own underwriting guidelines and
5-19 the rates determined in accordance with the provisions of this code
5-20 applicable to each insurer.
5-21 (5) An insurer shall make its premium quote, indicate
5-22 its refusal to quote, or make a request for additional time within
5-23 30 days of receiving the application.
5-24 (6) If a premium quote is made, the applicant's agent
5-25 shall be notified by the program so that the agent may complete the
5-26 placement of the insurance, if the applicant accepts the coverage
5-27 at the premium quoted.
5-28 (7) An applicant is not eligible to apply to the
5-29 program again for the same coverage for the same risk if the
5-30 insurer cancels or nonrenews coverage for nonpayment of premium or
5-31 submission of a fraudulent claim.
5-32 (8) The plan of operation shall contain criteria under
5-33 which the commissioner may make insurer participation in the
5-34 program mandatory.
5-35 (c) The plan of operation may provide for subcommittees that
5-36 are necessary to carry out the functions of a program.
5-37 Sec. 3. Executive Committee. (a) The program shall be
5-38 administered by an executive committee composed of nine members
5-39 appointed by the commissioner:
5-40 (1) five members who represent the interests of
5-41 insurers;
5-42 (2) two public members; and
5-43 (3) two members who are licensed local recording
5-44 agents. <An executive committee shall administer each market
5-45 assistance program.>
5-46 (b) To be eligible to serve on the executive committee as a
5-47 representative of insurers, a person must be a full-time employee
5-48 of an authorized insurer. <The board shall appoint the members of
5-49 an executive committee.>
5-50 (c) The commissioner or the commissioner's designated
5-51 representative shall be an ex officio member of the executive
5-52 committee and must be present in every meeting of the executive
5-53 committee. <At least one member of the board must be designated a
5-54 member of the executive committee.>
5-55 <(d) The plan of operation may provide for subcommittees
5-56 that are necessary to carry out the functions of a program.>
5-57 <(e) A representative of the board must be present in every
5-58 meeting of an executive committee or subcommittee.>
5-59 Sec. 4. Agents. (a) Notwithstanding any other provision of
5-60 law, a market assistance program may have two categories of agents:
5-61 (1) an originating agent; and
5-62 (2) an issuing agent.
5-63 (b) An originating agent may complete an application for
5-64 insurance on behalf of an insured for submission to the program
5-65 without being appointed to represent the ultimate insurer.
5-66 (c) An issuing agent must be appointed to represent the
5-67 ultimate insurer and shall perform all of the customary duties of a
5-68 local recording agent including but not limited to the following:
5-69 (1) signing, executing, and delivering policies of
5-70 insurance;
6-1 (2) maintaining a record of the business;
6-2 (3) examining and inspecting the risk; and
6-3 (4) receiving and collecting premiums.
6-4 (d) An originating agent shall <may> share commissions, as
6-5 required by the market assistance program plan of operation
6-6 <negotiated on an individual basis>, with the issuing agent if the
6-7 originating agent holds a license as either a local recording agent
6-8 or as a salaried representative for those companies whose plan of
6-9 operation does not contemplate the use of local recording agents.
6-10 (e) The originating and issuing agent may be the same
6-11 person. If the originating agent and the issuing agent are not the
6-12 same person, the originating agent may not be held to be the agent
6-13 of the insurer unless there is an appointment as specified by
6-14 Article 21.14 of this code.
6-15 (f) The program may not share in commissions.
6-16 <Sec. 5. FEES. The plan of operation may provide reasonable
6-17 application fees to be used to cover expenses of the program.
6-18 These fees must be maintained in a separate account under the
6-19 control of a fiscal agent designated in the plan of operation.>
6-20 Sec. 5 <6>. Confidentiality. (a) The Texas Department of
6-21 Insurance <State Board of Insurance> shall maintain as confidential
6-22 all application files and related documents received under this
6-23 article.
6-24 (b) In maintaining confidentiality, the Texas Department of
6-25 Insurance <State Board of Insurance> shall not permit the files and
6-26 related documents to be made available to the public except that
6-27 the Texas Department of Insurance <State Board of Insurance> shall
6-28 allow access to those files and related documents to originating or
6-29 issuing agents or to an applicant for his own file or to an insurer
6-30 who agrees to insure the applicant.
6-31 Sec. 6. PERIODIC REVIEW. (a) Information concerning the
6-32 number and type of applications received and placed, and such other
6-33 information, as deemed appropriate by the executive committee or
6-34 the commissioner, shall be collected.
6-35 (b) The executive committee shall review the demand for and
6-36 performance of the program six months following the approval of the
6-37 plan of operation, and at least annually thereafter, as necessary.
6-38 After each such review the executive committee shall report to the
6-39 commissioner as to the necessity for continued operation of the
6-40 voluntary program, need for establishment of a mandatory program,
6-41 or the need for establishment of a FAIR Plan pursuant to Article
6-42 21.49A of this code, or other recommendations the executive
6-43 committee deems appropriate. The program shall be terminated only
6-44 upon approval of the commissioner.
6-45 Sec. 7. IMMUNITY FROM LIABILITY. The program, executive
6-46 committee members, and participating insurers and agents are not
6-47 personally liable for any act performed in good faith within the
6-48 scope of the person's authority as determined under this article or
6-49 for damages occasioned by his or her official acts or omissions
6-50 except for an act or omission that is corrupt or malicious.
6-51 Sec. 8. RULEMAKING AUTHORITY. The commissioner is
6-52 authorized to adopt rules in addition to the plan of operation that
6-53 are appropriate to accomplish the purposes of this article.
6-54 SECTION 7. Subchapter E, Chapter 21, Insurance Code, is
6-55 amended by adding Article 21.49A, to read as follows:
6-56 Art. 21.49A. FAIR PLAN (FAIR ACCESS TO INSURANCE
6-57 REQUIREMENTS) ACT
6-58 Sec. 1. AUTHORITY; PURPOSE. (a) If the commissioner
6-59 determines, after a public hearing, that in all or any part of the
6-60 state residential property insurance is not reasonably available in
6-61 the voluntary market to a substantial number of insurable risks and
6-62 that at least 50 percent of the applicants to the residential
6-63 property market assistance program who are qualified under the plan
6-64 of operation, after the commissioner has made insurer participation
6-65 mandatory under the plan of operation, have not been placed with an
6-66 insurer in the previous 12-month period, the commissioner may
6-67 establish a FAIR (Fair Access to Insurance Requirements) Plan to
6-68 deliver residential property insurance to citizens of this state in
6-69 underserved areas, which shall be determined and designated by the
6-70 commissioner by rule. Each insurer, as defined herein, as a
7-1 condition of its authority to transact residential property
7-2 insurance in this state, shall participate in the FAIR Plan
7-3 Association in accordance with this Act.
7-4 (b) The FAIR Plan may not provide 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. DEFINITIONS. (1) "FAIR Plan Association" or
7-8 "association" means a nonprofit association established pursuant to
7-9 this Act to develop and administer a program to provide residential
7-10 property insurance in designated underserved areas in this state.
7-11 (2) "Insurer" means any licensed insurer writing
7-12 property and casualty insurance in this state, including:
7-13 (A) a county mutual insurance company;
7-14 (B) a Lloyd's plan company; and
7-15 (C) a reciprocal or interinsurance exchange.
7-16 (3) "Residential property insurance" means the
7-17 coverage against direct loss to real or tangible personal property
7-18 at a fixed location provided in a homeowners policy, residential
7-19 fire and allied lines policy, or farm and ranch owners policy.
7-20 (4) "Inspection bureau" means the organization or
7-21 organizations designated by the FAIR Plan Association with the
7-22 approval of the commissioner to make inspections to determine the
7-23 condition of the properties for which residential property
7-24 insurance is sought and to perform such other duties as may be
7-25 authorized by the FAIR Plan Association or the commissioner. The
7-26 manner and scope of the inspection and evaluation report for
7-27 residential property shall be prescribed by the association
7-28 pursuant to the plan of operation.
7-29 (5) "Net direct premiums" means gross direct written
7-30 premiums less return premiums upon canceled contracts (irrespective
7-31 of reinsurance assumed or ceded) written on residential property
7-32 pursuant to this Act.
7-33 (6) "Underserved area(s)" means area(s) designated as
7-34 underserved by the commissioner by rule. In determining which
7-35 areas will be designated as underserved, the commissioner shall
7-36 consider the factors specified in Section 1, Article 5.35-3, of
7-37 this code.
7-38 Sec. 3. GOVERNING COMMITTEE; PLAN OF OPERATION. (a) The
7-39 FAIR Plan shall be administered by the governing committee of the
7-40 association pursuant to a plan of operation. Subject to the
7-41 approval of the commissioner, the governing committee shall develop
7-42 the plan of operation and propose amendments thereto. The plan of
7-43 operation and any amendments thereto shall be adopted by the
7-44 commissioner by rule. The governing committee may on its own
7-45 initiative or at the request of the commissioner amend the plan of
7-46 operation.
7-47 (b) The governing committee shall be composed of nine
7-48 members appointed by the commissioner as follows:
7-49 (1) five members who represent the interests of
7-50 insurers;
7-51 (2) two public members; and
7-52 (3) two members who are licensed local recording
7-53 agents.
7-54 (c) The commissioner or the commissioner's designated
7-55 representative from within the Texas Department of Insurance shall
7-56 serve as an ex officio member.
7-57 (d) To be eligible to serve on the governing committee as a
7-58 representative of insurers, a person must be a full-time employee
7-59 of an authorized insurer.
7-60 (e) The plan of operation shall provide:
7-61 (1) for establishment of a FAIR Plan Association for
7-62 the issuing of residential property insurance pursuant to this Act
7-63 and the distribution of the losses and the expenses in the writing
7-64 of such insurance in this state;
7-65 (2) that all insurers licensed to write property
7-66 insurance and writing residential property insurance shall
7-67 participate in the writings, expenses, profits, and losses of the
7-68 association, in the proportion that the net direct premiums, of
7-69 each participating insurer, written in this state during the
7-70 preceding calendar year, bears to the aggregate net direct premium
8-1 written in this state by all participating insurers; such
8-2 information shall be determined in accordance with the residential
8-3 property statistical plan adopted by the commissioner;
8-4 (3) that a participating insurer is entitled to
8-5 receive credit for similar insurance voluntarily written in a
8-6 designated underserved area and its participation in the writings
8-7 in the association shall be reduced in accordance with the
8-8 provisions of the plan of operation;
8-9 (4) for the immediate binding of eligible risks; for
8-10 the use of premium installment payment plans, adequate marketing,
8-11 and service facilities; and for the establishment of reasonable
8-12 service standards;
8-13 (5) procedures for efficient, economical, fair, and
8-14 nondiscriminatory administration of the FAIR Plan Association;
8-15 (6) procedures for determining the net level of
8-16 participation required for each insurer in the FAIR Plan
8-17 Association;
8-18 (7) for the use of deductibles and other underwriting
8-19 devices and for assessment of all members in amounts sufficient to
8-20 operate the association; and establish maximum limits of liability
8-21 to be placed through the program; and commissions to be paid to the
8-22 licensed agents submitting applications;
8-23 (8) that the association issue policies in its own
8-24 name;
8-25 (9) reasonable underwriting standards for determining
8-26 insurability of the risk;
8-27 (10) procedures for the assumption and ceding of
8-28 reinsurance by the association; and
8-29 (11) any other procedures or operational matters
8-30 deemed necessary by the governing committee or the commissioner.
8-31 Sec. 4. FAIR PLAN ASSOCIATION. Pursuant to procedures and
8-32 requirements set forth in the plan of operation, the FAIR Plan
8-33 Association (association) shall develop and administer a program
8-34 for participation by all insurers licensed to write property
8-35 insurance in this state and writing residential property insurance
8-36 in this state. The association shall make residential property
8-37 insurance available to applicants in underserved areas whose
8-38 property is insurable in accordance with reasonable underwriting
8-39 standards but who, after diligent efforts, are unable to procure
8-40 such insurance through the voluntary market, as evidenced by two
8-41 declinations from insurers licensed to write and actually writing
8-42 residential property insurance in the state.
8-43 Sec. 5. POWERS OF THE ASSOCIATION; CENTRALIZED OPERATIONS
8-44 AUTHORIZED. (a) The association is authorized, for FAIR Plan
8-45 purposes only, to issue policies of insurance and endorsements
8-46 thereto in its own name or a trade name duly adopted for that
8-47 purpose, and to act on behalf of all participating insurers in
8-48 connection with said policies and otherwise in any manner necessary
8-49 to accomplish the purposes of this Act, including but not limited
8-50 to issuance of policies, collection of premiums, issuance of
8-51 cancellations, and payment of commissions, losses, judgments, and
8-52 expenses.
8-53 (b) The participating insurers shall be liable to the
8-54 association as provided in this Act and the plan of operation for
8-55 the expenses and liabilities so incurred by the association, and
8-56 the association shall make assessments against the participating
8-57 insurers as required to meet such expenses and liabilities. In
8-58 connection with any policy issued by the association:
8-59 (1) service of any notice, proof of loss, legal
8-60 process, or other communication with respect to the policy shall be
8-61 made upon the association; and
8-62 (2) any action by the insured constituting a claim
8-63 under the policy shall be brought only against the association, and
8-64 the association shall be the proper party for all purposes in any
8-65 action brought under or in connection with any such policy. The
8-66 foregoing requirements shall be set forth in any policy issued by
8-67 the association and the form and content of any such policy shall
8-68 be subject to the approval of the commissioner.
8-69 (c) The association is authorized to assume and cede
8-70 reinsurance in conformity with the plan of operation.
9-1 (d) Each insurer must participate in the writings, expenses,
9-2 profits, and losses of the association in the proportion that its
9-3 net direct premiums written bear to the aggregate net direct
9-4 premiums written by all insurers.
9-5 Sec. 6. PROPERTY INSPECTION; FAIR PLAN PROCEDURE. (a) Any
9-6 person having an insurable interest in real or tangible personal
9-7 property at a fixed location in an underserved area who, after
9-8 diligent effort has been unable to obtain residential property
9-9 insurance, as evidenced by two current declinations from insurers
9-10 licensed to write property insurance and actually writing
9-11 residential property insurance in the state, is entitled upon
9-12 application to the association to an inspection and evaluation of
9-13 the property by representatives of the inspection bureau.
9-14 (b) Applications may be made on behalf of the applicant by a
9-15 licensed local recording agent and shall be submitted on forms
9-16 prescribed by the association.
9-17 (c) Promptly after the request for inspection is received,
9-18 an inspection must be made and an inspection report filed with the
9-19 association and made available to the applicant upon request.
9-20 (d) If the inspection bureau finds that the residential
9-21 property meets the reasonable underwriting standards established in
9-22 the plan of operation, the applicant shall be so informed in
9-23 writing and a policy or binder shall be issued by the association.
9-24 If the residential property does not meet the criteria, the
9-25 applicant shall be informed, in writing, of the reasons for the
9-26 failure of the residential property to meet the criteria.
9-27 (e) If, at any time, the applicant makes improvements in the
9-28 residential property or its condition which the applicant believes
9-29 are sufficient to make the residential property meet the criteria,
9-30 a representative of the inspection bureau shall reinspect the
9-31 residential property upon request. In any case, the applicant for
9-32 residential property insurance shall be eligible for one
9-33 reinspection any time beginning 60 days after the initial FAIR Plan
9-34 inspection. If upon reinspection the residential property meets
9-35 the reasonable underwriting standards established in the plan of
9-36 operation, the applicant shall be so informed in writing and a
9-37 policy or binder shall be issued by the association.
9-38 Sec. 7. APPROVAL OF RATES. The association shall file with
9-39 the commissioner for approval the proposed rates and supplemental
9-40 rate information to be used in connection with the issuance of
9-41 policies or endorsements. Rates shall be set in an amount
9-42 sufficient to carry all claims to maturity and to meet the expenses
9-43 incurred in the writing and servicing of the business. Within 60
9-44 days of the filing of the proposed rates, the commissioner shall
9-45 enter an order either approving or disapproving, in whole or in
9-46 part, the proposed rates. The commissioner may, upon notice to the
9-47 association, extend the period for entering an order under this
9-48 section an additional 30 days. No such policies or endorsements
9-49 shall be issued until such time as the commissioner approves the
9-50 rates to be applied to the policy or endorsement. An order
9-51 disapproving a rate shall state the grounds for the disapproval and
9-52 the findings in support thereof.
9-53 Sec. 8. APPEALS; JUDICIAL REVIEW. (a) Any applicant or
9-54 affected insurer has the right of appeal to the association. A
9-55 decision of the association may be appealed to the commissioner
9-56 within 30 days after such decision.
9-57 (b) All orders or decisions of the commissioner made
9-58 pursuant to this Act are subject to judicial review in accordance
9-59 with Article 1.04 of this code.
9-60 Sec. 9. IMMUNITY FROM LIABILITY. There is no liability on
9-61 the part of, and no cause of action against insurers, the
9-62 inspection bureau, the association, the governing committee, their
9-63 agents or employees, or the commissioner or the commissioner's
9-64 authorized representatives, with respect to any inspections
9-65 required to be undertaken by this Act or for any acts or omissions
9-66 in connection therewith, or for any statements made in any report
9-67 and communication concerning the insurability of the property, or
9-68 in the findings required by the provisions of this Act, or at the
9-69 hearings conducted in connection with such inspections.
9-70 Sec. 10. INSOLVENCY. In the event any participating insurer
10-1 fails, by reason of insolvency, to pay any assessment, the
10-2 association shall cause the reimbursement ratios to be immediately
10-3 recalculated, excluding therefrom the amount of the insolvent
10-4 insurer's assessment determined by the commissioner to be
10-5 uncollectible, so that such uncollectible amount is, in effect,
10-6 assumed and redistributed among the remaining participating
10-7 insurers.
10-8 Sec. 11. ASSESSMENTS AND PREMIUM SURCHARGES. Should a
10-9 deficit occur in the association, the association shall assess
10-10 participating insurers in accordance with this section and each
10-11 insurer may charge a premium surcharge on every property insurance
10-12 policy issued by it insuring property in this state, the effective
10-13 date of which policy is within the three-year period commencing 90
10-14 days after the date of assessment by the association. The amount
10-15 of the surcharge shall be calculated on the basis of a uniform
10-16 percentage of the premium on such policies equal to one-third of
10-17 the ratio of the amount of an insurer's assessment to the amount of
10-18 its direct earned premiums as reported in its financial statement
10-19 to the department for the calendar year immediately preceding the
10-20 year in which the assessment is made, such that over the period of
10-21 three years the aggregate of all such surcharges by an insurer
10-22 shall be equal to the amount of the assessment of such insurer.
10-23 The minimum surcharges on a policy may be $1; all surcharges may be
10-24 rounded to the nearest dollar.
10-25 Sec. 12. SANCTIONS. If the association, inspection bureau,
10-26 or participating insurer is found to be in violation of or in
10-27 failure to comply with this Act, each entity shall be subject to
10-28 the sanctions authorized in Article 1.10 of this code, including
10-29 administrative penalties authorized under Article 1.10E of this
10-30 code. The commissioner may also utilize any other disciplinary
10-31 procedures authorized by this code, including the cease and desist
10-32 procedures authorized by Article 1.10A of this code.
10-33 Sec. 13. ANNUAL REPORT. The association shall compile a
10-34 calendar year annual operating report and submit such annual report
10-35 to the commissioner on or before March 31 of the following calendar
10-36 year. This annual report shall be a matter of public record.
10-37 Sec. 14. POWERS OF THE COMMISSIONER. (a) In addition to
10-38 any powers conferred upon the commissioner by this or any other
10-39 law, the commissioner is charged with the authority to supervise
10-40 the association and the inspection bureau. In addition, the
10-41 commissioner has the power:
10-42 (1) to examine the operation of the association and
10-43 the inspection bureau through free access to all the books,
10-44 records, files, papers and documents relating to their operation
10-45 and may summon, qualify, and examine as witnesses all persons
10-46 having knowledge of such operations, including the governing
10-47 committee, officers, or employees thereof;
10-48 (2) to do all things necessary to enable the State of
10-49 Texas and the association to fully participate in any federal
10-50 program of reinsurance which may be enacted for purposes similar to
10-51 the purposes of this Act;
10-52 (3) to require such reports from the association
10-53 concerning risks insured by the association pursuant to this Act as
10-54 may be deemed necessary; and
10-55 (4) to adopt policy forms, endorsements, rates, and
10-56 rating and rule manuals for use by the association.
10-57 SECTION 8. Subchapter E, Chapter 21, Insurance Code, is
10-58 amended by adding Article 21.49B to read as follows:
10-59 Art. 21.49B. PROPERTY AND CASUALTY INSURANCE INITIATIVES
10-60 TASK FORCE. The commissioner may establish a task force to study
10-61 the utility and feasibility of instituting various property and
10-62 casualty insurance initiatives in this state. The initiatives to
10-63 be studied may include, but are not limited to:
10-64 (1) possible coordination with the Texas Department of
10-65 Commerce to make certain property and casualty insurance an
10-66 enterprise zone program pursuant to Chapter 2303, Government Code;
10-67 (2) possible coordination with Neighborhood Housing
10-68 Service (NHS) Programs to establish voluntary NHS-Insurance
10-69 Industry Partnerships;
10-70 (3) possible insurance agent programs to increase
11-1 minority agency access to standard insurance companies, including
11-2 minority intern programs with insurance companies; and
11-3 (4) possible tax incentives for insurance written in
11-4 underserved areas.
11-5 SECTION 9. Article 21.53B, Insurance Code, is amended by
11-6 adding Subsection (c) to read as follows:
11-7 (c) The commissioner shall have all necessary authority to
11-8 enforce this section. An aggrieved party may ask the commissioner
11-9 to conduct any investigation, review, hearing, or other proceeding
11-10 to determine compliance with this section. The commissioner shall
11-11 take all reasonable steps, including the issuance of orders and the
11-12 assessment of penalties, to ensure compliance with this section.
11-13 SECTION 10. Articles 21.21-3 and 21.21-5, Insurance Code,
11-14 are repealed.
11-15 SECTION 11. Article 21.21-7, Insurance Code, as added by
11-16 this Act, applies only to a health insurance policy, contract,
11-17 agreement, or evidence of coverage that is delivered, issued for
11-18 delivery, or renewed on or after January 1, 1996. A policy,
11-19 contract, agreement, or evidence of coverage that is delivered,
11-20 issued for delivery, or renewed before January 1, 1996, is governed
11-21 by the law as it existed immediately before the effective date of
11-22 this Act, and that law is continued in effect for that purpose.
11-23 SECTION 12. The importance of this legislation and the
11-24 crowded condition of the calendars in both houses create an
11-25 emergency and an imperative public necessity that the
11-26 constitutional rule requiring bills to be read on three several
11-27 days in each house be suspended, and this rule is hereby suspended,
11-28 and that this Act take effect and be in force from and after its
11-29 passage, and it is so enacted.
11-30 * * * * *