By Smithee H.B. No. 1853
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to certain unfair or deceptive acts or practices under the
1-3 Insurance Code.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Section 16, Article 21.21, Insurance Code, is
1-6 amended to read as follows:
1-7 Sec. 16. Relief Available to Injured Parties. (a) Any
1-8 person who has sustained actual damages as a result of another's
1-9 engaging in a prohibited <an> act or practice described by
1-10 Subsection (b) of this section <declared in Section 4 of this
1-11 Article or in rules or regulations lawfully adopted by the Board
1-12 under this Article to be unfair methods of competition or unfair or
1-13 deceptive acts or practices in the business of insurance or in any
1-14 practice defined by Section 17.46 of the Business & Commerce Code,
1-15 as amended, as an unlawful deceptive trade practice> may maintain
1-16 an action against the person or persons engaging in the act or
1-17 practice <such acts or practices>.
1-18 (b) An insurer commits a prohibited act or practice for
1-19 purposes of Subsection (a) of this section if the insurer:
1-20 (1) commits an act or engages in a practice declared
1-21 in Section 4 of this Article to be an unfair method of competition
1-22 or an unfair act or practice in the business of insurance;
1-23 (2) commits an act or engages in a practice that is a
2-1 false, misleading, or deceptive act or practice described by
2-2 Section 17.46(b), Business & Commerce Code;
2-3 (3) misrepresents to a claimant, including a
2-4 third-party claimant, pertinent facts or policy provisions relating
2-5 to coverage;
2-6 (4) fails to acknowledge, with reasonable promptness,
2-7 pertinent communications relating to claims arising under a policy
2-8 issued by the insurer;
2-9 (5) fails to adopt and implement reasonable standards
2-10 for prompt investigation of claims, including third-party claims,
2-11 arising under a policy issued by the insurer;
2-12 (6) fails to attempt in good faith to effectuate a
2-13 prompt, fair, and equitable settlement of a claim submitted,
2-14 including a third-party claim, with respect to which the insurer's
2-15 liability is reasonably clear;
2-16 (7) engages in a pattern or practice of compelling
2-17 policyholders to institute lawsuits to recover amounts due under
2-18 the insurer's policies by offering substantially less than the
2-19 amount ultimately recovered by them;
2-20 (8) fails to promptly provide claim forms to a
2-21 policyholder, if the forms are required to make a claim under the
2-22 policy;
2-23 (9) fails to affirm or deny coverage of a claim, or to
2-24 reserve the insurer's rights under a policy, within a reasonable
2-25 time after the policyholder has made a claim; or
3-1 (10) refuses to pay a claim, including a third-party
3-2 claim, without conducting a reasonable investigation based on
3-3 available information.
3-4 (c) For purposes of Subsection (b)(4) of this section,
3-5 pertinent communications do not include written communications that
3-6 are a direct response to a specific inquiry made by the insurer
3-7 after the initial report of a claim. An acknowledgment of a
3-8 communication is presumed to be reasonably prompt if it is
3-9 delivered or mailed before the 16th business day after the date it
3-10 is received by the insurer.
3-11 (d) In a suit filed under this section, any plaintiff who
3-12 prevails may obtain:
3-13 (1) the amount of actual damages plus court costs and
3-14 reasonable and necessary attorneys' fees. If the trier of fact
3-15 finds that the defendant <knowingly> committed the acts complained
3-16 of intentionally, or with reckless disregard for the rights of a
3-17 person, the court shall award, in addition, two times the amount of
3-18 actual damages; or
3-19 (2) an order enjoining such acts or failure to act; or
3-20 (3) any other relief which the court deems proper.
3-21 (e) <(c)> On a finding by the court that an action under
3-22 this section was groundless and brought in bad faith or brought for
3-23 the purpose of harassment, the court shall award to the defendant
3-24 reasonable and necessary attorneys' fees and court costs.
3-25 (f) <(d)> All actions under this Article must be commenced
4-1 within two years after the date on which the prohibited <unfair
4-2 method of competition or unfair or deceptive> act or practice
4-3 occurred or within two years after the person bringing the action
4-4 discovered or, in the exercise of reasonable diligence, should have
4-5 discovered the occurrence of the prohibited <unfair method of
4-6 competition or unfair or deceptive> act or practice. The period of
4-7 limitation provided in this section may be extended for a period of
4-8 180 days if the person bringing the action proves that the failure
4-9 to timely commence the action was caused by the defendant's
4-10 engaging in conduct solely calculated to induce the plaintiff to
4-11 refrain from or postpone the commencement of the action.
4-12 (g) <(e)> As a prerequisite to filing a suit seeking damages
4-13 under this section against any person, the person seeking damages
4-14 shall give written notice to the other person at least 30 days
4-15 before filing suit. The notice must advise the person of the
4-16 specific complaint and the amount of actual damages and expenses,
4-17 including any attorneys' fees reasonably incurred in asserting the
4-18 claim against the defendant.
4-19 (h) <(f)> If giving 30 days' written notice is impracticable
4-20 because the suit must be filed in order to prevent the expiration
4-21 of the statute of limitations or because the claim is asserted as a
4-22 counterclaim, the notice provided for in Subsection (g) <(e)> of
4-23 this section is not required, and the tender of a written offer of
4-24 settlement provided for by Subsection (i) <(g)> of this section may
4-25 be made not later than the 30th day after the date of filing of the
5-1 suit or counterclaim.
5-2 (i) <(g)> A person who receives the written notice provided
5-3 by Subsection (g) <(e)> of this section may tender, not later than
5-4 the 30th day after the date of receipt of the notice, to the person
5-5 seeking damages, a written offer of settlement, including an
5-6 agreement to reimburse the person for any attorneys' fees
5-7 reasonably incurred in asserting the claim to the date of the
5-8 written notice. A person who does not receive a written notice
5-9 because the suit or counterclaim is filed as provided for by
5-10 Subsection (h) <(f)> of this section may tender, not later than the
5-11 30th day after the date of filing of the suit or counterclaim, a
5-12 written offer of settlement, including an agreement to reimburse
5-13 the person for any attorneys' fees reasonably incurred in asserting
5-14 the claim to the date the suit or counterclaim was filed. An offer
5-15 of settlement is rejected if it is not accepted on or before the
5-16 30th day after the date of receipt by the person seeking damages.
5-17 (j) <(h)> A rejected settlement offer made in compliance
5-18 with Subsection (i) <(g)> of this section may be filed with the
5-19 court with an affidavit certifying its rejection. If the court
5-20 finds that the amount tendered in the settlement offer is the same
5-21 or substantially the same as the actual damages found by the trier
5-22 of fact, the plaintiff may not recover an amount that exceeds the
5-23 lesser of:
5-24 (1) the amount tendered in the settlement offer; or
5-25 (2) the amount of actual damages found by the trier of
6-1 fact.
6-2 (k) <(i)> The tender of an offer of settlement is not an
6-3 admission of engaging in a prohibited <an unlawful> act or practice
6-4 or of liability under this Article. Evidence of a settlement offer
6-5 may be introduced only to determine the reasonableness of the
6-6 settlement offer as provided for by Subsection (j) <(h)> of this
6-7 section.
6-8 SECTION 2. Section 6, Article 21.21, Insurance Code, is
6-9 amended to read as follows:
6-10 Sec. 6. Hearings, witnesses, appearances, and production of
6-11 books. (a) Whenever the Board shall have reason to believe that
6-12 any such person has been engaged or is engaging in this state in
6-13 any unfair method of competition or any unfair or deceptive act or
6-14 practice defined in Section 4 of this Article, or another
6-15 prohibited act or practice described by Section 16(b) of this
6-16 Article, and that a proceeding by it in respect thereto would be to
6-17 the interest of the public, it shall issue and serve upon such
6-18 person a statement of the charges in that respect and a notice of a
6-19 hearing thereon to be held at a time and place fixed in the notice,
6-20 which shall not be less than five days after the date of the
6-21 service thereof.<;>
6-22 (b) At the time and place fixed for such hearing, such
6-23 person shall have an opportunity to be heard and to show cause why
6-24 an order should not be made by the Board requiring such person to
6-25 cease and desist from the acts, methods or practices so complained
7-1 of. Upon good cause shown, the Board shall permit any person to
7-2 intervene, appear and be heard at such hearing by counsel or in
7-3 person.<;>
7-4 (c) Nothing contained in this Act shall require the
7-5 observance at any such hearing of formal rules of pleading or
7-6 evidence.<;>
7-7 (d) The Board, upon such hearing, may administer oaths,
7-8 examine and cross-examine witnesses, receive oral and documentary
7-9 evidence, and shall have the power to subpoena witnesses, compel
7-10 their attendance, and require the production of books, papers,
7-11 records, correspondence, or other documents which it deems relevant
7-12 to the inquiry. The Board, upon such hearing, may, and upon the
7-13 request of any party, shall cause to be made a stenographic record
7-14 of all the evidence and all the proceedings had at such hearing.
7-15 If no stenographic record is made and if a judicial review is
7-16 sought, the Board shall prepare a statement of the evidence and
7-17 proceeding for use on review. In case of a refusal of any person
7-18 to comply with any subpoena issued hereunder or to testify with
7-19 respect to any matter concerning which he may be lawfully
7-20 interrogated, the District Court of Travis County or the county
7-21 where such party resides, on application of the Board, may issue an
7-22 order requiring such person to comply with such subpoena and to
7-23 testify; and any failure to obey any such order of the court may be
7-24 punished by the court as a contempt thereof.
7-25 SECTION 3. Section 7(a), Article 21.21, Insurance Code, is
8-1 amended to read as follows:
8-2 (a) If, after such hearing under the terms of Section 6 of
8-3 this Article <the Act>, the Board shall determine that the method
8-4 of competition or the act or practice in question is defined in
8-5 Section 4 or 16(b) of this Article, or rules or regulations issued
8-6 under this Article, <or in Section 17.46 of the Business & Commerce
8-7 Code, as amended,> and that the person complained of has engaged in
8-8 such method of competition, act or practice in violation of this
8-9 Article or rules and regulations issued under this Article <or of
8-10 the Deceptive Trade Practices--Consumer Protection Act (Sections
8-11 17.41 et seq., Business & Commerce Code), as specified in Section
8-12 17.46 of the Business & Commerce Code>, it shall reduce its
8-13 findings to writing and issue and cause to be served upon the
8-14 person charged with the violation an order requiring such person to
8-15 cease and desist from engaging in such method of competition, act
8-16 or practice.
8-17 SECTION 4. Section 14(a), Article 21.21, Insurance Code, is
8-18 amended to read as follows:
8-19 (a) In connection with the issuance of a cease and desist
8-20 order as provided in Section 7 of this Article or upon application
8-21 of any aggrieved person, the Board may, after notice and hearing as
8-22 provided in Section 6 of this Article, in connection with the
8-23 issuance of a cease and desist order resulting from a finding that
8-24 a person has engaged in a method of competition, act or practice in
8-25 violation of this Article or<,> rules or regulations issued under
9-1 this Article, including a prohibited act or practice described by
9-2 Section 16(b) of this Article <or Section 17.46, Business &
9-3 Commerce Code, as amended>, or upon finding by the Board that the
9-4 aggrieved person and persons similarly situated were induced to
9-5 purchase a policy of insurance as a result of the person engaging
9-6 in a method of competition, act or practice in violation of this
9-7 Article or<,> rules or regulations issued under this Article,
9-8 including a prohibited act or practice described by Section 16(b)
9-9 of this Article <or Section 17.46, Business & Commerce Code, as
9-10 amended>, the Board may require the person to account for all
9-11 premiums collected for policies issued during the immediately
9-12 preceding two years in connection with such acts in violation of
9-13 this Article and require: (i) such person to give notice to all
9-14 persons from whom such premiums were collected, and (ii) to refund
9-15 the total of all premiums collected from each such person, electing
9-16 to accept a premium refund in exchange for cancellation of the
9-17 policy of insurance issued. Premiums so refunded shall be net of
9-18 policy benefits actually paid by such person while the policy of
9-19 insurance was in force. The Board shall specify a reasonable time
9-20 within which the person shall be required to make such premium
9-21 refunds.
9-22 SECTION 5. Sections 15(a) and (c), Article 21.21, Insurance
9-23 Code, are amended to read as follows:
9-24 (a) If the Attorney General has reason to believe that any
9-25 person in the insurance business in this state is engaging in, has
10-1 engaged in, or is about to engage in any act or practice declared
10-2 to be unlawful by this Article or rules or regulations issued under
10-3 this Article, including a prohibited act or practice described by
10-4 Section 16(b) of this Article <or by Section 17.46 of the Business
10-5 & Commerce Code, as amended>, and that proceedings would be in the
10-6 public interest, the Attorney General may bring an action in the
10-7 name of the state against the person to restrain by temporary or
10-8 permanent injunction the use of such method, act, or practice.
10-9 (c) In addition to the request for a temporary or permanent
10-10 injunction in a proceeding brought under Subsection (a) of this
10-11 section, the Attorney General, on a finding by the court that the
10-12 defendant has engaged or is engaging in a practice declared to be
10-13 unlawful by <Article 17.46 of the Business & Commerce Code, as
10-14 amended,> this Article<,> or rules or regulations issued under this
10-15 Article, including a prohibited act or practice described by
10-16 Section 16(b) of this Article, may request a civil penalty of not
10-17 more than $10,000 per violation.
10-18 SECTION 6. Section 17(a), Article 21.21, Insurance Code, is
10-19 amended to read as follows:
10-20 (a) If a member of the insurance buying public has been
10-21 damaged by a prohibited act or practice described by Section 16(b)
10-22 of this Article <an unlawful method, act, or practice defined in
10-23 Section 4 of this Article or by the rules and regulations lawfully
10-24 adopted by the Board under this Article or by any practice defined
10-25 by Section 17.46 of the Business & Commerce Code, as amended, as an
11-1 unlawful deceptive trade practice>, the Board may request the
11-2 Attorney General to bring a class action, or the individual damaged
11-3 may bring an action on behalf of himself and others similarly
11-4 situated, to recover damages and relief as provided in this
11-5 section.
11-6 SECTION 7. Sections 22(a) and (b), Insurance Code, are
11-7 amended to read as follows:
11-8 (a) In the administration of this Article the Board may
11-9 accept assurance of voluntary compliance with respect to any act or
11-10 practice which violates this Article or regulations issued under
11-11 this Article, including a prohibited act or practice described by
11-12 Section 16(b) of this Article <or any act declared to be unlawful
11-13 in Section 17.46 of the Business & Commerce Code, as amended>, from
11-14 any person who is engaging in, has engaged in, or is about to
11-15 engage in the act or practice. The assurance shall be in writing
11-16 and shall be filed with the Board.
11-17 (b) The acceptance of an assurance of voluntary compliance
11-18 may be conditioned on the stipulation that the person in violation
11-19 of this Article or regulations issued under this Article, including
11-20 a prohibited act or practice described by Section 16(b) of this
11-21 Article <or Section 17.46, Business & Commerce Code, as amended>,
11-22 restore to any person in interest any money which may have been
11-23 acquired by means of acts or practices which violate this Article
11-24 or regulations issued under this Article<, or Section 17.46,
11-25 Business & Commerce Code, as amended>.
12-1 SECTION 8. This Act takes effect September 1, 1995, and
12-2 applies to the conduct of an insurer on or after that date. The
12-3 conduct of an insurer that occurs before the effective date of this
12-4 Act is governed by the law as it existed immediately before the
12-5 effective date of this Act, and that law is continued in effect for
12-6 that purpose.
12-7 SECTION 9. The importance of this legislation and the
12-8 crowded condition of the calendars in both houses create an
12-9 emergency and an imperative public necessity that the
12-10 constitutional rule requiring bills to be read on three several
12-11 days in each house be suspended, and this rule is hereby suspended.