By Duncan H.B. No. 1988
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to insurance rates and policy forms for certain lines of
1-3 insurance.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Article 5.01, Insurance Code, is amended to read
1-6 as follows:
1-7 Art. 5.01. RATES <FIXING RATE> OF PRIVATE PASSENGER MOTOR
1-8 VEHICLE <AUTOMOBILE> INSURANCE; BENCHMARK
1-9 Sec. 1. PRIVATE PASSENGER MOTOR VEHICLE INSURANCE.
1-10 (a) Every insurance company, corporation, interinsurance exchange,
1-11 mutual, reciprocal, association, Lloyd's, or other insurer,
1-12 hereinafter called insurer, writing any form of private passenger
1-13 motor vehicle insurance in this State, shall annually file with the
1-14 department <State Board of Insurance, hereinafter called Board>, on
1-15 forms prescribed by the commissioner <Board>, a report showing its
1-16 premiums and losses on each classification of private passenger
1-17 motor vehicle risks written in this State.
1-18 (b) <The Board shall have the sole and exclusive power and
1-19 authority, and it shall be its duty to determine, fix, prescribe,
1-20 and promulgate just, reasonable and adequate rates of premiums to
1-21 be charged and collected by all insurers writing any form of
1-22 insurance on motor vehicles in this State, including fleet or other
1-23 rating plans designed to discourage loses from fire and theft and
2-1 similar hazards and any rating plans designed to encourage the
2-2 prevention of accidents. In promulgating any such rating plans the
2-3 Board shall give due consideration to the peculiar hazards and
2-4 experience of individual risks, past and prospective, within and
2-5 outside the State and to all other relevant factors, within and
2-6 outside the State. The Board shall have the authority also to
2-7 alter or amend any and all of such rates of premiums so fixed and
2-8 determined and adopted by it, and to raise or lower the same or any
2-9 part thereof.>
2-10 <(c)> At least annually, the commissioner <Board> shall
2-11 conduct a hearing to review the reports of premiums earned and
2-12 losses incurred in the writing of motor vehicle insurance in this
2-13 State and may fix, determine, and adopt benchmark <new> rates to be
2-14 used in the writing of that insurance <in whole or in part or may
2-15 alter or amend rates previously fixed, determined, and adopted by
2-16 the Board to assure that those rates comply with the requirements
2-17 of this subchapter>.
2-18 (c) <(d) Said Board shall have authority to employ clerical
2-19 help, inspectors, experts, and other assistants, and to incur such
2-20 other expenses as may be necessary in carrying out the provisions
2-21 of this law, provided, however, that the number of employees and
2-22 salary of each shall be fixed in the General Appropriation Bill
2-23 passed by the Legislature.> The commissioner <Board> shall
2-24 ascertain as soon as practicable the annual insurance losses
2-25 incurred under all policies on motor vehicles in this State, make
3-1 and maintain a record thereof, and collect such data as will enable
3-2 the commissioner <said Board> to classify the various motor
3-3 vehicles of the State according to the risk and usage made thereof,
3-4 and to classify and assign the losses according to the various
3-5 classes of risks to which they are applicable; the commissioner
3-6 <Board> shall also ascertain the amount of premiums on all such
3-7 policies for each class of risks, and maintain a permanent record
3-8 thereof in such manner as will aid in determining just, reasonable
3-9 and adequate rates of premium.
3-10 (d) Private passenger motor <(e) Motor> vehicle or
3-11 automobile insurance as referred to in this article means
3-12 <subchapter shall be taken and construed to mean> every form of
3-13 insurance on any automobile or other vehicle not used for a
3-14 business or commercial purpose <hereinafter enumerated> and <its
3-15 operating equipment or> necessitated by reason of the liability
3-16 imposed by law for damages arising out of the ownership, operation,
3-17 maintenance, or use in this State of a private passenger <any>
3-18 automobile, motorcycle, or motorbicycle, <truck, truck-tractor,
3-19 tractor, traction engine, or any other self-propelled vehicle,> and
3-20 including also every <vehicle,> trailer <or semi-trailer> pulled or
3-21 towed by a private passenger motor vehicle<, but excluding every
3-22 motor vehicle running only upon fixed rails or tracks>. Workers'
3-23 compensation insurance is excluded from the foregoing definition.
3-24 Sec. 2. ESTABLISHMENT OF BENCHMARK. (a) In this article:
3-25 (1) "Benchmark rate" means the rate for various
4-1 coverages within a line of insurance that is set annually by the
4-2 commissioner and relative to which the flexibility bands and
4-3 statutory rate limitations apply.
4-4 (2) "Classification" means a generic application to
4-5 similar risks within the same line.
4-6 (3) "Disallowed expenses" means: (A) administrative
4-7 expenses not including acquisition expenses, loss control, and
4-8 safety engineering expenses, that exceed 110 percent of the
4-9 industry median for those expenses:
4-10 (B) lobbying expenses:
4-11 (C) advertising expenses, other than advertising
4-12 that is directly related to the services or products provided by
4-13 the insurer, advertising designed and directed at loss prevention,
4-14 or advertising the promotion of organizations exempt from federal
4-15 taxation under Section 501(c)(3) of the Internal Revenue Code.
4-16 (D) amounts paid by an insurer as damages in a
4-17 suit against the insurer for bad faith or as fines or penalties for
4-18 violation of law;
4-19 (E) contributions to organizations engaged in
4-20 legislative advocacy;
4-21 (F) fees and penalties imposed on the insurer
4-22 for civil or criminal violations of law;
4-23 (G) contributions to social, religious,
4-24 political, or fraternal organizations;
4-25 (H) fees and assessments paid to advisory
5-1 organizations; and
5-2 (I) any unreasonably incurred expenses, as
5-3 determined by the commissioner.
5-4 (4) "Flexibility band" means a range of rates relative
5-5 to the benchmark rates set by the commissioner, within which an
5-6 insurer, during a set period, may increase or decrease rate levels
5-7 by classification without prior approval by the commissioner.
5-8 (5) "Rate" or "rating plan" means the charge for a
5-9 particular coverage for each unit of exposure.
5-10 (b) The range of the flexibility band is 30 percent above
5-11 and below the benchmark rate.
5-12 Sec. 3. OPERATION OF FLEXIBLE RATING PLAN. (a) Under the
5-13 flexible rating plan prescribed by this article, rates used by
5-14 insurers in writing private passenger motor vehicle insurance are
5-15 determined through the application of the flexibility band to a
5-16 benchmark rate and are implemented on a file and use basis.
5-17 (b) Each year, not later than October 15, the commissioner
5-18 shall conduct a hearing to set a benchmark rate for each coverage
5-19 within a line of insurance. The hearing shall be conducted under
5-20 Article 1.33B of this code. The commissioner must set the
5-21 benchmark rate based on the average of the prospective loss and
5-22 expense experience of all insurers writing private passenger motor
5-23 vehicle insurance in this state. In promulgating the benchmark
5-24 rate, the commissioner shall consider:
5-25 (1) past and prospective loss experience:
6-1 (A) within the state; and
6-2 (B) outside the state if the state data are not
6-3 credible;
6-4 (2) the peculiar hazards and experience of individual
6-5 risks, past and prospective, within and outside the state
6-6 (3) a fair and reasonable rate of return for all
6-7 insurers writing this insurance;
6-8 (4) average expenses of operation of all insurers
6-9 writing this line of business, less disallowed expenses;
6-10 (5) the extent and nature of competition in the
6-11 market;
6-12 (6) investment income; and
6-13 (7) any other relevant factors.
6-14 (c) An insurer, the public insurance counsel, an insurance
6-15 industry trade association, and any other interested person shall
6-16 be admitted as a party and may present testimony at the hearing and
6-17 may file information for consideration by the commissioner.
6-18 (d) An insurer shall use the benchmark rate set by the
6-19 commissioner to develop rates the insurer uses for the year
6-20 following the setting of the benchmark rate.
6-21 (e) An insurer may use any rate by classification within the
6-22 flexibility band without prior approval by the commissioner. Not
6-23 later than the 30th day after the effective date of the benchmark
6-24 rate, each insurer which proposes to write private passenger motor
6-25 vehicle insurance in this state during the effective period of the
7-1 benchmark rate shall file with the department its proposed rate by
7-2 classification and territory under the rating manual it uses to
7-3 write that insurance. The insurer shall include in the filing any
7-4 statistics to support the rates to be used by the insurer as
7-5 required by rule of the commissioner and this code. Rates proposed
7-6 in filings made under this subsection must be just, reasonable,
7-7 adequate, nondiscriminatory, and not excessive for the risks to
7-8 which they apply. The filing must specify the date on which the
7-9 rate takes effect. After the effective date of the benchmark rate
7-10 and before the date specified in the insurer's filing of a new
7-11 rate, the insurer's previously filed rate remains in effect.
7-12 (f) An insurer may not use a rate outside the upper and
7-13 lower limits of the flexibility band without the prior approval of
7-14 the commissioner. Except in cases in which the commissioner
7-15 requests additional information under this subsection or in which a
7-16 hearing is held under subsection (g) of this section, a filing made
7-17 by an insurer to use a rate outside the flexibility band is
7-18 considered approved by the commissioner unless the commissioner
7-19 disapproves the filing not later than the 60th day after the date
7-20 of the filing. A filing to propose a rate outside the flexibility
7-21 band must produce rates that are just, reasonable, adequate,
7-22 nondiscriminatory, and not excessive for the risks to which they
7-23 apply, or the commissioner shall disapprove the filing. If the
7-24 commissioner requests additional information regarding the filing,
7-25 the commissioner shall act on the filing not later than the 60th
8-1 day after the date the response to that request is received by the
8-2 department. The rate takes effect on the expiration of that 60-day
8-3 period if the Commissioner fails to act within that period or on
8-4 the date the commissioner affirmatively approves the rate, which
8-5 ever date first occurs.
8-6 (g) An insurer, the public insurance counsel, and any other
8-7 interested person may request, in writing, not later than the 30th
8-8 day after the date of the filing under Subsection (f) of this
8-9 section, that the commissioner hold a hearing on an insurer's
8-10 filing to use a rate outside the flexibility band. On receipt of
8-11 such a request, the commissioner shall conduct a hearing under
8-12 Article 1.33B of this code. After the hearing, the commissioner
8-13 has 60 days to disapprove the filing, or it is considered approved.
8-14 (h) To obtain approval for a rate outside the flexibility
8-15 band, the insurer must show that the insurer serves or intends to
8-16 serve a segment of the market that requires the rate proposed in
8-17 the filing.
8-18 (i) The commissioner, by rule, shall adopt a rating manual
8-19 of rating rules, classifications, and territories for private
8-20 passenger motor vehicle insurance subject to this article and shall
8-21 determine the benchmark rate for those classifications and
8-22 territories. The rating manual promulgated by the commissioner
8-23 shall be used by an insurer unless the insurer receives approval to
8-24 use its own manual under Subsection (j) of this section.
8-25 (j) Following written application and approval, an insurer
9-1 may use its own rating manual relative to classifications of risks
9-2 and territories that is different from that promulgated by the
9-3 commissioner to calculate the rate used by that insurer for an
9-4 individual risk. The commissioner may approve the use of only such
9-5 additions or refinements in the classifications plan and
9-6 territorial definitions adopted by the commissioner as will produce
9-7 subclassifications, which, when combined will enable consideration
9-8 of the insurer's experience under both the commissioner's rating
9-9 manual and the insurer's rating manual. To obtain approval to use
9-10 its own rating manual, the insurer shall follow the same procedures
9-11 used for approval of a filing under Subsection (f) of this section.
9-12 (k) During a 12-month period, an insurer may not change a
9-13 rate adopted under this section more than twice on a file and use
9-14 basis. Additional changes require the prior approval of the
9-15 commissioner.
9-16 (l) An insurer which writes private passenger motor vehicle
9-17 insurance subject to this subchapter is required to make rate
9-18 filings under this section, using its own past and prospective
9-19 premium and loss data, as well as its own data for expenses and for
9-20 profit and contingency factors. The insurer may supplement its own
9-21 past and prospective premium and loss data with industry-wide data,
9-22 as necessary.
9-23 <(f) Notwithstanding Subsections (a) through (d) of this
9-24 article, on and after March 1, 1992, rates for motor vehicle
9-25 insurance in this state are determined as provided by the flexible
10-1 rating program adopted under Subchapter M of this chapter. This
10-2 subsection expires December 31, 1995.>
10-3 SECTION 2. Article 5.01B, Insurance Code, is amended to read
10-4 as follows:
10-5 Art. 5.01B. Public Information. <(a)> Information filed or
10-6 otherwise provided by an insurer to the commissioner <State Board
10-7 of Insurance> for the purpose of determining, fixing, prescribing,
10-8 promulgating, altering, or amending commercial automobile liability
10-9 insurance rates under Article 5.13-2 <5.01> of this code <,
10-10 obtaining a rate deviation under Article 5.03 of this code,> or
10-11 reporting losses under Article 5.04-1 of this code is public
10-12 information unless it is exempt under Subchapter C, Chapter 522,
10-13 Government Code <Section 3(a), Chapter 424, Acts of the 63rd
10-14 Legislature, Regular Session, 1973 (Article 6252-17a, Vernon's
10-15 Texas Civil statutes), or Section (b) of this article>.
10-16 <(b) Information provided with an application under Section
10-17 (d), Article 5.03, of this code is exempt from the disclosure
10-18 requirements of this article.>
10-19 SECTION 3. Article 5.04, Insurance Code, is amended to read
10-20 as follows:
10-21 Art. 5.04. Experience as Factor. (a) To insure the
10-22 adequacy and reasonableness of rates the commissioner <Board> may
10-23 take into consideration past and prospective experience, within and
10-24 outside the State, and all other relevant factors, within and
10-25 outside the State, gathered from a territory sufficiently broad to
11-1 include the varying conditions of the risks involved and the
11-2 hazards and liabilities assumed, and over a period sufficiently
11-3 long to insure that the rates determined therefrom shall be just,
11-4 reasonable and adequate, and to that end the commissioner <Board>
11-5 may consult any advisory <rate making> organization or association
11-6 that may now or hereafter exist.
11-7 (b) As a basis for motor vehicle rates under this
11-8 subchapter, the commissioner <State Board of Insurance> shall use
11-9 data from within this State to the extent that the data is credible
11-10 and available.
11-11 <(c) Notwithstanding Subsections (a) and (b) of this
11-12 article, on and after March 1, 1992, rates for motor vehicles are
11-13 determined as provided by Subchapter M of this chapter. This
11-14 subsection expires December 31, 1995.>
11-15 SECTION 4. Article 5.05, Insurance Code, is amended to read
11-16 as follows:
11-17 Art. 5.05. Reports on Experience. (a) Recording and
11-18 Reporting of Loss Experience and Other Data. The commissioner
11-19 <Board> shall, after due consideration, promulgate reasonable rules
11-20 and statistical plans, which may be modified from time to time and
11-21 which shall be used thereafter by each insurer in the recording and
11-22 reporting of its loss experience and such other data as may be
11-23 required, in order that the total loss and expense experience of
11-24 all insurers may be made available at least annually in such form
11-25 and detail as may be necessary to aid in determining whether rates
12-1 and rating systems in use under this subchapter comply with the
12-2 standards adopted under this subchapter. In promulgating such
12-3 rules, the commissioner <Board> shall provide that rules be as
12-4 uniform as is practicable to the rules and to the form of the
12-5 statistical plans used in other states.
12-6 (b) Interchange of Rating Plan Data. Reasonable rules may
12-7 be promulgated by the commissioner <Board> after due consideration
12-8 to allow the interchange of loss experience information as
12-9 necessary for the application of rating plans.
12-10 (c) Consultation with other States. In order to further
12-11 uniform administration of rating laws, the commissioner <Board> and
12-12 every insurer and advisory <rating> organization may exchange
12-13 information and experience data with insurance supervisory
12-14 officials, insurers and advisory <rating> organizations in other
12-15 states and may consult and cooperate with them with respect to
12-16 rate-making and the application of rating systems.
12-17 (d) The commissioner <Board> is hereby authorized and
12-18 empowered to require sworn statements from any insurer affected by
12-19 this article, showing its experience on any classification or
12-20 classifications of risks and such other information which may be
12-21 necessary or helpful in performing duties or authority imposed by
12-22 law. The commissioner <Board> shall prescribe the necessary forms
12-23 for such statements and reports, having due regard to the rules,
12-24 methods and forms in use in other states for similar purposes in
12-25 order that uniformity of statistics may not be disturbed.
13-1 (e) The commissioner may designate one or more qualified
13-2 organizations as statistical agents to assist in the gathering and
13-3 compilation of loss and expense experience. The commissioner may
13-4 appoint as a statistical agent any organization that applies for
13-5 such an appointment and is technically qualified to perform the
13-6 duties assigned to it by the commissioner. An insurer may fulfill
13-7 its obligations under this article by reporting data to any
13-8 organization that has been appointed as a statistical agent. The
13-9 commissioner may require that a statistical agent report data in a
13-10 form that is easy to combine with the data of other agents and may
13-11 designate a single agent for the purpose of combining the data.
13-12 SECTION 5. Article 5.06, Insurance Code, is amended to read
13-13 as follows:
13-14 Art. 5.06. Policy Forms and Endorsements. (a) <(1)> The
13-15 commissioner <Board> shall adopt a policy form and endorsements for
13-16 private passenger <each type of> motor vehicle insurance <subject
13-17 to this subchapter>. The coverage provided by a policy form
13-18 adopted under this subsection is the minimum coverage that may be
13-19 provided under an insurance policy for that type of insurance in
13-20 this State. Each policy form must provide the coverages mandated
13-21 under Articles 5.06-1 and 5.06-3 of this code, except that the
13-22 coverages may be rejected by the named insured as provided by those
13-23 articles.
13-24 (b) <(2)> Except as provided by Subsections (c) <(3)> and
13-25 (d) <(4)> of this article, an insurer may only use a form adopted
14-1 by the commissioner <Board> under this section in writing private
14-2 passenger motor vehicle insurance that is delivered, issued for
14-3 delivery, or renewed in this State. A contract or agreement not
14-4 written into the application and policy is <void and of no effect
14-5 and> in violation of the provisions of this subchapter<,> and is
14-6 sufficient cause for revocation of license of such insurer to write
14-7 private passenger motor vehicle <automobile> insurance within this
14-8 State.
14-9 (c) <(3)> The commissioner <Board> may approve the use of a
14-10 policy form adopted by a national organization of insurance
14-11 companies, or similar organization, if the form, with any
14-12 endorsement to the form required and approved by the commissioner
14-13 <Board>, provides coverage equivalent to the coverage provided by
14-14 the form adopted by the commissioner <Board> under Subsection (a)
14-15 <(1)> of this article <section>.
14-16 (d) <(4)> An insurer may use an endorsement to the policy
14-17 form adopted or approved by the commissioner <Board> under this
14-18 article if the endorsement is approved by the commissioner <Board>.
14-19 (e) <(5)> An insurer, if in compliance with applicable
14-20 requirements and conditions, may issue and deliver a certificate of
14-21 insurance as a substitute for the entire policy of insurance. The
14-22 certificate of insurance shall make reference to and identify the
14-23 policy form adopted or approved by the commissioner <Board> for
14-24 which the substitution of certificate is made. The certificate
14-25 shall be in such form as is prescribed by the commissioner <Board>.
15-1 The certificate will represent the policy of insurance, and when
15-2 issued, shall be evidence that the certificate holder is insured
15-3 under the identified policy form. The certificate is subject to
15-4 the same limitations, conditions, coverages, selection of options,
15-5 and other provisions of the policy as are provided in the policy
15-6 and that insurance policy information is to be shown on and
15-7 adequately referenced by the certificate of insurance issued by the
15-8 insurer to the insured. Reference shall be made in the
15-9 certificate, or in subsequent attachments, to all endorsements to
15-10 the policy of insurance. The certificate shall be executed in the
15-11 same manner as though a policy were issued. When the certificate
15-12 is substituted for the policy of insurance by an insurer, the
15-13 insurer shall simultaneously furnish to the insured receiving the
15-14 certificate an "outline of coverages", the form and content of
15-15 which has been approved by the commissioner <Board>. At the
15-16 request of an insured at any time, an insurer which has substituted
15-17 a certificate for a policy of insurance shall provide a copy of the
15-18 policy.
15-19 (f) <(6) The Board may promulgate such rules as are
15-20 necessary to implement the certificate in lieu of policy provision
15-21 herein, including a rule limiting the application thereof to
15-22 private passenger automobile policies.>
15-23 <(7)> The commissioner <Board> may not adopt or approve a
15-24 policy form for private passenger automobile insurance or any
15-25 endorsement to the policy if the policy or endorsement is not in
16-1 plain language. For the purposes of this subsection, a policy or
16-2 endorsement is written in plain language if it achieves the minimum
16-3 score established by the commissioner on the Flesch reading ease
16-4 test or an equivalent test selected by the commissioner, or, at the
16-5 option of the commissioner, if it conforms to the language
16-6 requirements in a National Association of Insurance Commissioners
16-7 model act relating to plain language. This subsection does not
16-8 apply to policy language that is mandated by state or federal law.
16-9 (g) <(8) The Board may withdraw its approval of a policy or
16-10 endorsement form at any time, after notice and hearing.>
16-11 <(9)> An insurance policy or other document evidencing proof
16-12 of purchase of a private passenger motor vehicle <personal
16-13 automobile> insurance policy written for a term of less than 30
16-14 days may not be used to obtain an original or renewal driver's
16-15 license, an automobile registration or license plates, or a motor
16-16 vehicle inspection certificate and must contain a statement as
16-17 follows:
16-18 "TEXAS LAW PROHIBITS USE OF THIS DOCUMENT TO OBTAIN A MOTOR
16-19 VEHICLE INSPECTION CERTIFICATE, AN ORIGINAL OR RENEWAL DRIVER'S
16-20 LICENSE, OR AN AUTOMOBILE REGISTRATION OR LICENSE PLATES."
16-21 (h) <(10)> Before accepting any premium or fee for a private
16-22 passenger motor vehicle <personal automobile> insurance policy or
16-23 binder for a term of less than 30 days, an agent or insurer must
16-24 make the following written disclosure to the applicant or insured:
16-25 "TEXAS LAW PROHIBITS USE OF THIS POLICY OR BINDER TO OBTAIN A
17-1 MOTOR VEHICLE INSPECTION CERTIFICATE, AN ORIGINAL OR RENEWAL
17-2 DRIVER'S LICENSE, OR AN AUTOMOBILE REGISTRATION OR LICENSE PLATES."
17-3 SECTION 6. Article 5.13, Insurance Code, is amended to read
17-4 as follows:
17-5 Art. 5.13. Scope of Sub-chapter. (a) This Sub-chapter
17-6 applies to every insurance company, corporation, interinsurance
17-7 exchange, mutual, reciprocal, association, Lloyds, or other
17-8 organization or insurer writing any of the characters of insurance
17-9 business herein set forth, hereinafter called "Insurer"; provided
17-10 that nothing in this entire Sub-chapter shall ever be construed to
17-11 apply to any county or farm mutual insurance company or
17-12 association, as regulated under Chapters 16 and 17 of this Code.
17-13 (b) This Sub-chapter applies to the writing of commercial
17-14 motor vehicle insurance, casualty insurance and the writing of
17-15 fidelity, surety, and guaranty bonds, on risks or operations in
17-16 this State except as herein stated.
17-17 (c) This Sub-chapter does not apply to the writing of
17-18 private passenger motor vehicle, life, health, accident,
17-19 professional liability, reinsurance, aircraft, fraternal benefit,
17-20 fire, lightning, tornado, windstorm, hail, smoke or smudge,
17-21 cyclone, earthquake, volcanic eruption, rain, frost and freeze,
17-22 weather or climatic conditions, excess or deficiency of moisture,
17-23 flood, the rising of the waters of the ocean or its tributaries,
17-24 bombardment, invasion, insurrection, riot, civil war or commotion,
17-25 military or usurped power, any order of a civil authority made to
18-1 prevent the spread of a conflagration, epidemic or catastrophe,
18-2 vandalism or malicious mischief, strike or lockout, water or other
18-3 fluid or substance, resulting from the breakage or leakage of
18-4 sprinklers, pumps, or other apparatus erected for extinguishing
18-5 fires, water pipes or other conduits or containers, or resulting
18-6 from casual water entering through leaks or opening in buildings or
18-7 by seepage through building walls, including insurance against
18-8 accidental injury of such sprinklers, pumps, fire apparatus,
18-9 conduits or container, workers' <workmen's> compensation, inland
18-10 marine, ocean marine, marine, or title insurance; nor does this
18-11 Sub-chapter apply to the writing of explosion insurance, except
18-12 insurance against loss from injury to person or property which
18-13 results accidentally from steam boilers, heaters or pressure
18-14 vessels, electrical devices, engines and all machinery and
18-15 appliances used in connection therewith or operation thereby.
18-16 (d) This Sub-chapter shall not be construed as limiting in
18-17 any manner the types or classes of insurance which may be written
18-18 by the several types of insurers under appropriate statutes or
18-19 their charters or permits.
18-20 (e) The regulatory power herein conferred is vested in the
18-21 commissioner <Board of Insurance Commissioners of the State of
18-22 Texas>. <Within the Board, the Casualty Insurance Commissioner
18-23 shall have primary supervision of regulation herein provided,
18-24 subject however to the final authority of the entire Board.>
18-25 SECTION 7. The heading of Article 5.13-2, Insurance Code, is
19-1 amended to read as follows:
19-2 Art. 5.13-2. RATES FOR GENERAL LIABILITY, COMMERCIAL MOTOR
19-3 VEHICLE, AND COMMERCIAL PROPERTY INSURANCE COVERAGE
19-4 SECTION 8. Sections 1, 2, 8, and 10, Article 5.13-2,
19-5 Insurance Code, are amended to read as follows:
19-6 Sec. 1. Purpose. <(a)> This article governs the regulation
19-7 of general liability, commercial motor vehicle, commercial
19-8 property, all commercial casualty, and medical professional
19-9 liability insurance rates and forms. It does not govern private
19-10 passenger motor vehicle insurance, <automobile> fidelity, surety,
19-11 or guaranty bonds. The purposes of this article are to:
19-12 (1) promote the public welfare by regulating insurance
19-13 rates to prohibit excessive, inadequate, or unfairly discriminatory
19-14 rates;
19-15 (2) promote availability of insurance;
19-16 (3) promote price competition among insurers to
19-17 provide rates and premiums that are responsive to competitive
19-18 market conditions;
19-19 (4) prohibit price-fixing agreements and other
19-20 anticompetitive behavior by insurers;
19-21 (5) regulate the insurance forms used for lines of
19-22 insurance subject to this article to ensure that they are not
19-23 unjust, unfair, inequitable, misleading, or deceptive; and
19-24 (6) provide regulatory procedures for the maintenance
19-25 of appropriate information reporting systems.
20-1 <(b) This article expires December 31, 1995.>
20-2 Sec. 2. Scope. This article applies to all lines of general
20-3 liability, commercial motor vehicle, commercial property, all
20-4 commercial casualty, and medical professional liability insurance
20-5 written under policies or contracts of insurance issued by a
20-6 licensed insurer, other than a fidelity, surety, or guaranty bond
20-7 <or an automobile policy>. This article shall apply to a Lloyd's
20-8 association in the writing of commercial motor vehicle insurance.
20-9 "Commercial motor vehicle insurance" means that type of motor
20-10 vehicle insurance that does not meet the definition of private
20-11 passenger motor vehicle insurance contained in the rules and rating
20-12 manual promulgated by the commissioner under the authority of
20-13 Article 5.01 of this code.
20-14 Sec. 8. Forms (a) An insurance policy or printed
20-15 endorsement form for use in writing the types of insurance subject
20-16 to this article may not be delivered or issued for delivery in this
20-17 state unless the form has been filed with and approved by the
20-18 commissioner.
20-19 (b) Each filing shall be made not later than the 60th day
20-20 before the date of any use or delivery for use. At the expiration
20-21 of the 60-day period a filed form is approved unless, before the
20-22 expiration of the 60 days, the commissioner approves or disapproves
20-23 the form by order. Approval of a form by the commissioner
20-24 constitutes a waiver of any unexpired portion of the 60-day period.
20-25 The commissioner may extend by not more than an additional 10 days
21-1 the period during which it may approve or disapprove a form by
21-2 giving notice to the filer of the extension before the expiration
21-3 of the initial period. At the expiration of any extension and in
21-4 the absence of any earlier approval or disapproval, the form shall
21-5 be considered approved. For good cause shown, the commissioner may
21-6 withdraw the commissioner's approval at any time after notice and a
21-7 hearing.
21-8 (c) A commissioner's order disapproving any form or any
21-9 notice of the commissioner's intention to withdraw a previous
21-10 approval must state the grounds for the disapproval in enough
21-11 detail to reasonably inform the filer of the grounds. An order of
21-12 withdrawal of a previously approved form takes effect on the
21-13 expiration of the prescribed period, but not sooner than the 30th
21-14 day after the effective date of the withdrawal order, as prescribed
21-15 by the commissioner.
21-16 (d) An insurer may not use in this state any form after
21-17 disapproval of the form or withdrawal of approval by the
21-18 commissioner.
21-19 (e) The commissioner may promulgate standard insurance
21-20 policy forms, endorsements, and other related forms that may be
21-21 used, at the discretion of the insurer, by an insurer instead of
21-22 the insurer's own forms in writing insurance subject to this
21-23 article. <Forms submitted by insurers for approval under this
21-24 section must provide coverage equivalent to that provided in the
21-25 policy forms used for these lines of coverage on the effective date
22-1 of this article. An endorsement may not reduce coverage provided
22-2 under the approved policy form.>
22-3 (f) Policy forms for use with large risks are exempt from
22-4 the requirements of Subsection (a), (b), and (e) of this section.
22-5 For purposes of this subsection "large risk" means:
22-6 (1) an insured that has total insured property values
22-7 of $10 million or more;
22-8 (2) an insured that has total annual gross revenues of
22-9 $20 million or more; or
22-10 (3) an insured that has a total premium of $50,000 or
22-11 more for property insurance, $50,000 or more for general liability
22-12 insurance, or $100,000 or more for multiperil insurance.
22-13 Sec. 10. ADMINISTRATIVE PROCEDURES <AND TEXAS REGISTER ACT
22-14 APPLICABLE>. Article 1.33B of this code <The provisions of the
22-15 Administrative Procedure and Texas Register Act (Article 6252-13a,
22-16 Vernon's Texas Civil Statutes)>, applies <apply> to all <rate>
22-17 hearings required <conducted> under this article.
22-18 SECTION 9. Article 1.33B, Insurance Code is amended by
22-19 adding section (g) to read:
22-20 (g) Relevant evidence in a proceeding to determine benchmark
22-21 rates includes aggregate data related to premiums, losses and
22-22 expenses that shall be provided by the Commissioner to all parties.
22-23 The premium, loss, expense, profit, and rate of return experience
22-24 of any individual insurer or other interested party is not relevant
22-25 in a proceeding to determine a benchmark rate.
23-1 SECTION 10. Article 5.25, Insurance Code, is amended to read
23-2 as follows:
23-3 Art. 5.25. <BOARD SHALL FIX> RATES FOR PRIVATE PROPERTY
23-4 INSURANCE; DATA GATHERING
23-5 Sec. 1. ESTABLISHMENT OF BENCHMARK. (A) In this article:
23-6 (1) "Benchmark rate" means the rate for various
23-7 coverages within a line of insurance that is set annually by the
23-8 commissioner and relative to which the flexibility bands and
23-9 statutory rate limitations apply.
23-10 (2) "Classification" means a generic application to
23-11 similar risks within the same line.
23-12 (3) "Disallowed expenses" means: (a) administrative
23-13 expenses not including acquisition expenses, loss control, and
23-14 safety engineering expenses, that exceed 110 percent of the
23-15 industry median for those expenses:
23-16 (B) lobbying expenses:
23-17 (C) advertising expenses, other than advertising that is
23-18 directly related to the services or products provided by the
23-19 insurer, advertising designed and directed at loss prevention, or
23-20 advertising the promotion of organizations exempt from federal
23-21 taxation under Section 501(c)(3) of the Internal Revenue Code.
23-22 (D) amounts paid by an insurer as damages in a suit against
23-23 the insurer for bad faith or as fines or penalties for violation of
23-24 law;
23-25 (E) contributions to organizations engaged in legislative
24-1 advocacy;
24-2 (F) fees and penalties imposed on the insurer for civil or
24-3 criminal violations of law;
24-4 (G) contributions to social, religious, political, or
24-5 fraternal organizations;
24-6 (H) fees and assessments paid to advisory organizations; and
24-7 (I) any unreasonably incurred expenses, as determined by the
24-8 commissioner.
24-9 (4) "Flexibility band" means a range of rates relative
24-10 to the benchmark rates set by the commissioner, within which an
24-11 insurer, during a set period, may increase or decrease rate levels
24-12 by classification without prior approval by the commissioner.
24-13 (5) "Private property insurance" means homeowners
24-14 insurance, farm and ranch owners insurance, residential fire
24-15 insurance, and residential allied lines insurance.
24-16 (6) "Rate" or "rating plan" means the charge for a
24-17 particular line for each unit of exposure.
24-18 (b) The range of the flexibility band is 30 percent above
24-19 and below the benchmark rate.
24-20 Sec. 2. OPERATION OF FLEXIBLE RATING PLAN. (a) Under the
24-21 flexible rating plan prescribed by this article, rates used by
24-22 insurers in writing private property insurance are determined
24-23 through the application of the flexibility band to a benchmark rate
24-24 and are implemented on a file and use basis.
24-25 (b) Each year, not later than October 15, the commissioner
25-1 shall conduct a hearing to set a benchmark rate for each coverage
25-2 within a line of insurance. The hearing shall be conducted under
25-3 Article 1.33B of this code. The commissioner must set the
25-4 benchmark rate based on the average of the prospective loss and
25-5 expense experience of all insurers writing private passenger motor
25-6 vehicle insurance in this state. In promulgating the benchmark
25-7 rate, the commissioner shall consider:
25-8 (1) past and prospective loss experience:
25-9 (A) within the state; and
25-10 (B) outside the state if the state data are not
25-11 credible;
25-12 (2) the peculiar hazards and experience of individual
25-13 risks, past and prospective, within and outside the state;
25-14 (3) a fair and reasonable rate of return for all
25-15 insurers writing this insurance;
25-16 (4) average expenses of operation of all insurers
25-17 writing this line of business, less disallowed expenses;
25-18 (5) the extent and nature of competition in the
25-19 market;
25-20 (6) investment income; and
25-21 (7) any other relevant factor.
25-22 (c) An insurer, the public insurance counsel, an insurance
25-23 industry trade association, and any other interested person shall
25-24 be admitted as a party and may present testimony at the hearing and
25-25 may file information for consideration by the commissioner.
26-1 (d) An insurer shall use the benchmark rate set by the
26-2 commissioner to develop rates the insurer uses for the year
26-3 following the setting of the benchmark rate.
26-4 (e) An insurer may use any rate by classification within the
26-5 flexibility band without prior approval by the commissioner. Not
26-6 later than the 30th day after the effective date of the benchmark
26-7 rate, each insurer which proposes to write private property
26-8 insurance in this state during the effective period of the
26-9 benchmark rate shall file with the department its proposed rate by
26-10 classification and territory under the rating manual it uses to
26-11 write that insurance. The insurer shall include in the filing any
26-12 statistics to support the rates to be used by the insurer as
26-13 required by rule of the commissioner and this code. Rates proposed
26-14 in filings made under this subsection must be just, reasonable,
26-15 adequate, nondiscriminatory, and not excessive for the risks to
26-16 which they apply. The filing must specify the date on which the
26-17 rate takes effect. After the effective date of the benchmark rate
26-18 and before the date specified in the insurer's filing of a new
26-19 rate, the insurer's previously filed rate remains in effect.
26-20 (f) An insurer may not use a rate outside the upper and
26-21 lower limits of the flexibility bands without the prior approval of
26-22 the commissioner. Except in cases in which the commissioner
26-23 requests additional information under this subsection or in which a
26-24 hearing is held under subsection (g) of this section, a filing made
26-25 by an insurer to use a rate outside the flexibility bands is
27-1 considered approved by the commissioner unless the commissioner
27-2 disapproves the filing not later than the 60th day after the date
27-3 of the filing. A filing to propose a rate outside the flexibility
27-4 bands must produce rates that are just, reasonable, adequate,
27-5 nondiscriminatory, and not excessive for the risks to which they
27-6 apply, or the commissioner shall disapprove the filing. If the
27-7 commissioner requests additional information regarding the filing,
27-8 the commissioner shall act on the filing not later than the 60th
27-9 day after the date the response to that request is received by the
27-10 department. The rate takes effect on the expiration of that 60-day
27-11 period if the commissioner fails to act within that period or on
27-12 the date the commissioner affirmatively approves the rate,
27-13 whichever date first occurs.
27-14 (g) An insurer, the public insurance counsel, and any other
27-15 interested person may request, in writing, not later than the 30th
27-16 day after the date of the filing under Subsection (f) of this
27-17 section, that the commissioner hold a hearing on an insurer's
27-18 filing to use a rate outside the flexibility bands. On receipt of
27-19 such a request, the commissioner shall conduct a hearing under
27-20 Article 1.33B of this code. After the hearing, the commissioner
27-21 has 60 days to disapprove the filing, or it is considered approved.
27-22 (h) To obtain approval for a rate outside the flexibility
27-23 band, the insurer must show that the insurer serves or intends to
27-24 serve a segment of the market that requires the rate proposed in
27-25 the filing.
28-1 (i) The commissioner, by rule, shall adopt a rating manual
28-2 of rating rules, classifications, and territories for private
28-3 property insurance subject to this article and shall determine the
28-4 benchmark rate for those classifications and territories. The
28-5 rating manual promulgated by the commissioner shall be used by an
28-6 insurer unless the insurer receives approval to use its own manual
28-7 under Subsection (j) of this section.
28-8 (j) Following written application and approval, an insurer
28-9 may use its own rating manual relative to classifications of risks
28-10 and territories that is different from that promulgated by the
28-11 commissioner, to calculate the rate used by that insurer for an
28-12 individual risk. The commissioner may approve the use of only such
28-13 additions or refinements in the classifications plan and
28-14 territorial definitions adopted by the commissioner as will produce
28-15 subclassifications, which, when combined will enable consideration
28-16 of the insurer's experience under both the commissioner's rating
28-17 manual and the insurer's rating manual. To obtain approval to use
28-18 its own rating manual, the insurer shall follow the same procedures
28-19 used for approval of a filing under Subsection (f) of this section.
28-20 (k) During a 12-month period, an insurer may not change a
28-21 rate adopted under this section on a file and use basis.
28-22 Additional changes require the prior approval of the commissioner.
28-23 (l) An insurer which writes private property insurance is
28-24 required to make rate filings under this section, using its own
28-25 past and prospective premium and loss data, as well as its own data
29-1 for expenses and for profit and contingency factors. The insurer
29-2 may supplement its own past and prospective premium and loss data
29-3 with industry-wide data as necessary.
29-4 Sec. 3. DETERMINATION OF ANNUAL FIRE LOSS. <a> The
29-5 department <State Board of Insurance shall have the sole and
29-6 exclusive power and authority and it shall be its duty to
29-7 prescribe, fix, determine and promulgate the rates of premiums to
29-8 be charged and collected by fire insurance companies transacting
29-9 business in this State. Said Board shall also have authority to
29-10 alter or amend any and all such rates of premiums so fixed and
29-11 determined and adopted by it, and to raise or lower the same, or
29-12 any part thereof, as herein provided. Said Board shall have
29-13 authority to employ clerical help, inspectors, experts and other
29-14 assistants, and to incur such other expenses as may be necessary in
29-15 carrying out the provisions of this law. Said Board> shall
29-16 ascertain as soon as practicable the annual fire loss in this
29-17 State. The department shall<,> obtain, make, and maintain a record
29-18 of the fire loss <thereof> and collect such data with respect to
29-19 the fire loss <thereto> as will enable the department <said Board>
29-20 to classify the fire losses of this State, the causes thereof, and
29-21 the amount of premiums collected therefor for each class of risks
29-22 and the amount paid thereon, in such manner as will aid in
29-23 determining equitable insurance rates, methods of reducing such
29-24 fire losses and reducing the insurance rates of the State, or
29-25 subdivisions of the State. The commissioner <Board> may designate
30-1 one or more advisory organizations or other agencies to gather,
30-2 audit, and compile such experience of insurers, and the cost
30-3 thereof shall be borne by such insurers.
30-4 <(b)> <Notwithstanding Subsection (a) of this article, on
30-5 and after March 1, 1992, rates for homeowners and farm and ranch
30-6 owner's residential fire and residential allied lines insurance
30-7 coverage under this subchapter are determined as provided by
30-8 Subchapter M of this chapter, and rates for other lines of
30-9 insurance subject to this subchapter are determined as provided by
30-10 Article 5.13-2 of this code. This subsection does not affect the
30-11 requirement for the Board to conduct inspections of commercial
30-12 property and prescribe a manual of rules and rating schedules for
30-13 commercial property under this subchapter. This subsection expires
30-14 December 31, 1995.>
30-15 Sec. 4. STATISTICAL AGENTS. (a) The commissioner may
30-16 designate one or more qualified organizations as statistical agents
30-17 to assist in the gathering and compilation of loss and expense
30-18 experience. The commissioner may appoint as a statistical agent
30-19 any organization that applies for such an appointment and is
30-20 technically qualified to perform the duties assigned to it by the
30-21 commissioner.
30-22 (b) An insurer may fulfill its obligations under this
30-23 article by reporting data to any organization that has been
30-24 appointed as a statistical agent. The commissioner may require
30-25 that a statistical agent report data in a form that is easy to
31-1 combine with the data of other agents and may designate a single
31-2 agent for the purpose of combining the data.
31-3 SECTION 11. Article 5.28, Insurance Code, is amended to read
31-4 as follows:
31-5 Art. 5.28. Statements and Books. (a) The commissioner may
31-6 <Said Board is authorized and empowered to> require sworn
31-7 statements for any period of time from any fire insurance company
31-8 affected by this law and from any of its directors, officers,
31-9 representatives, general agents, state agents, special agents, and
31-10 local agents of the rates and premiums collected for fire insurance
31-11 on each class of risks, on all property in this State and of the
31-12 causes of fire, if such be known, if they are in possession of such
31-13 data, and information, or can obtain it at a reasonable expense;
31-14 and the commissioner may <said Board is empowered to> require such
31-15 statements showing all necessary facts and information to enable
31-16 the commissioner <said Board to make, amend and maintain the
31-17 general basis schedules provided for in this law and the rules and
31-18 regulations for applying same and to determine reasonable and
31-19 proper maximum specific rates and> to determine and assist in the
31-20 enforcement of the provisions of this law.
31-21 (b) The commissioner may <said Board shall> also <have the
31-22 right, at its discretion>, either personally<,> or by someone duly
31-23 authorized by the commissioner <it>, <to> visit the office whether
31-24 general, local or otherwise, of any insurance company doing
31-25 business in this State, and the home office of said company outside
32-1 of this State, if there be such, and the office of any officers,
32-2 directors, general agents, state agents, local agents or
32-3 representatives of such company, and there require such company,
32-4 its officers, agents or representatives, to produce for inspection
32-5 by the commissioner or the commissioner's <said Board or any of its
32-6 duly> authorized representative <representatives> all books,
32-7 records and papers of such company or such agents and
32-8 representatives; and the commissioner <said Board> or the
32-9 commissioner's <its duly> authorized agent <agents> or
32-10 representative <representatives> shall have the right to examine
32-11 such books and papers and make or cause to be made copies thereof;
32-12 and shall have the right to take testimony under oath with
32-13 reference thereto, and to compel the attendance of witnesses for
32-14 such purpose.
32-15 (c) The commissioner <said Board> shall be further empowered
32-16 to require the fire insurance companies transacting business in
32-17 this State or any of them, to furnish the commissioner <said Board>
32-18 with any and all data which may be in their possession, either
32-19 jointly or severally, including maps, tariffs, inspection reports
32-20 and any and all data affecting fire insurance risks in this State,
32-21 or in any portion thereof, and the commissioner <said Board> shall
32-22 be empowered to require any two (2) or more of said companies, or
32-23 any joint agent or representative of them, to turn over any and all
32-24 such data in their possession, or any part thereof, to the
32-25 commissioner <said Board> for the commissioner's <its> use in
33-1 carrying out the provisions of this law.
33-2 <(d) Notwithstanding Subsection (a) of this article, on and
33-3 after March 1, 1992, rates for homeowners and farm and ranch
33-4 owner's residential fire and residential allied lines insurance
33-5 coverage under this subchapter are determined as provided by
33-6 Article Subchapter M of this chapter, and rates for other lines of
33-7 insurance subject to this subchapter are determined as provided by
33-8 5.13-2 of this code. This subsection expires December 31, 1995.>
33-9 SECTION 12. Article 5.30, Insurance Code, is amended to read
33-10 as follows:
33-11 Art. 5.30. Analysis of Rate. <a> When a policy of fire
33-12 insurance shall be issued by any company transacting the business
33-13 of fire insurance in this State, such company shall furnish the
33-14 policyholder with a written or printed analysis of the rate or
33-15 premium charged for such policy, showing the items of charge and
33-16 credit which determine the rate, unless such policyholder has
33-17 theretofore been furnished with such analysis of such rate. All
33-18 schedules of rates <promulgated by said Board> shall be open to the
33-19 public, and every local agent of such fire insurance company shall
33-20 have and exhibit to the public copies of such schedules covering
33-21 all risks upon which he is authorized to write insurance.
33-22 <(b) Notwithstanding Subsection (a) of this article, on and
33-23 after March 1, 1992, rates for homeowners and farm and ranch
33-24 owner's residential fire and residential allied lines insurance
33-25 coverage under this subchapter are determined as provided by
34-1 Subchapter M of this chapter, and rates for other lines of
34-2 insurance subject to this subchapter are determined as provided by
34-3 Article 5.13-2 of this code. This subsection expires December, 31,
34-4 1995.>
34-5 SECTION 13. Article 5.35, Insurance Code, is amended to read
34-6 as follows:
34-7 Art. 5.35. Policy Forms. (a) The commissioner <Board>
34-8 shall adopt policy forms and endorsements for private property
34-9 <each kind of> insurance as defined by Section 1(a), Article 5.25,
34-10 <subject to this subchapter other than a line regulated under
34-11 Article 5.13-2> of this code. The coverage provided by policy
34-12 forms and endorsements adopted under this subsection is the minimum
34-13 coverage that may be provided under an insurance policy for that
34-14 type of insurance in this State.
34-15 (b) Except as provided by Subsections (d) and (e) of this
34-16 article, an insurer may only use forms adopted by the commissioner
34-17 <Board> under this article in writing private property insurance
34-18 <subject to this subchapter> in this State.
34-19 (c) An insurer may not enter into a contract or agreement
34-20 concerning an individual policy that is not contained in the
34-21 policy. Such a contract or agreement is void.
34-22 (d) The commissioner <Board> may approve the use of policy
34-23 forms adopted by a national organization of insurance companies, or
34-24 similar organization, if the forms, with any endorsement to the
34-25 forms required and approved by the commissioner <Board>, provides
35-1 coverage equivalent to the coverage provided by the policy forms
35-2 adopted by the commissioner <Board> under Subsection (a) of this
35-3 article <section>.
35-4 (e) An insurer may use an endorsement to the policy forms
35-5 adopted or approved by the commissioner <Board> under this article
35-6 if the endorsement is approved by the commissioner <Board>. Except
35-7 as provided by Article 5.38 of this code, an endorsement may not
35-8 reduce the coverage provided under the policy forms.
35-9 (f) The commissioner <Board> may not adopt or approve policy
35-10 forms for personal fire or homeowner's insurance or any endorsement
35-11 to the policy if the policy or endorsement is not in plain
35-12 language. For the purposes of this subsection, a policy or
35-13 endorsement is written in plain language if it achieves the minimum
35-14 score established by the commissioner on the Flesch reading ease
35-15 test or an equivalent test selected by the commissioner or, at the
35-16 option of the commissioner, if it conforms to the language
35-17 requirements in a National Association of Insurance Commissioners
35-18 model act relating to plain language. This subsection does not
35-19 apply to policy language that is mandated by state or federal law.
35-20 (g) The commissioner <Board> may withdraw <its> approval of
35-21 a policy or endorsement form at any time, after notice and hearing.
35-22 SECTION 14. Article 5.39, Insurance Code, is amended to read
35-23 as follows:
35-24 Art. 5.39. COMPLAIN OF <RATES OR> ORDER. <(a)> Any citizen
35-25 or number of citizens of this State or any policyholder or
36-1 policyholders, or any insurance company affected by this
36-2 subchapter, or any board of trade, chamber of commerce, or other
36-3 civic organization, or the civil authorities of any town, city, or
36-4 village, shall have the right to file a petition with the
36-5 commissioner <Board>, setting forth any cause of complaint that
36-6 they may have as to any order made by the commissioner <this Board,
36-7 or any rate fixed and determined by the Board>, and they shall have
36-8 the right to offer evidence in support of the allegations of such
36-9 petition by witnesses, or by depositions, or by affidavits; upon
36-10 the filing of such petition, the party complained of, if other than
36-11 the commissioner <Board>, shall be notified by the commissioner
36-12 <Board> of the filing of such petition and a copy thereof furnished
36-13 the party or parties, company or companies, of whom complaint is
36-14 made, and the said petition shall be set down for a hearing at a
36-15 time not exceeding thirty (30) days after the filing of such
36-16 petition and the commissioner <Board> shall hear and determine said
36-17 petition; but it shall not be necessary for the petitioners or any
36-18 one of them to be present to present the cause to the commissioner
36-19 <Board>, but the commissioner <they> shall consider the testimony
36-20 of all witnesses, whether such witnesses testify in person or by
36-21 depositions, or by affidavits, and if it be found that the
36-22 complaint made in such petition is a just one, then the matter
36-23 complained of shall be corrected or required to be corrected by the
36-24 commissioner <said Board>.
36-25 <(b) Notwithstanding Subsection (a) of this article, on and
37-1 after March 1, 1992, rates for homeowners and farm and ranch
37-2 owner's residential fire and residential allied lines insurance
37-3 coverage under this subchapter are determined, and hearings related
37-4 to those rates are conducted, as provided by Subchapter M of this
37-5 chapter, and rates for other lines of insurance subject to this
37-6 subchapter are determined as provided by Article 5.13-2 of this
37-7 code. This subsection expires December 31, 1995.>
37-8 SECTION 15. Article 5.40, Insurance Code, is amended to read
37-9 as follows:
37-10 Art. 5.40. Hearing of Protests. (a) The department <Board>
37-11 shall give the public and all insurance companies to be affected by
37-12 the commissioner's <its> orders <or decisions>, reasonable notice
37-13 thereof, not exceeding thirty (30) days, and an opportunity to
37-14 appear and be heard with respect to the same; which notice shall be
37-15 published in one or more daily papers of the State, and such notice
37-16 to any insurance company to be affected thereby shall be mailed
37-17 addressed to the State or general agent of such company, if such
37-18 address be known to the department <Board>, or, if not known, then
37-19 such letter shall be addressed to some local agent of such company,
37-20 or if the address of a local agent be unknown to the department
37-21 <Board>, then by publication in one or more of the daily papers of
37-22 the State, and the commissioner <Board> shall hear all protests or
37-23 complaints from any insurance company or any citizen or any city,
37-24 town, or village or any commercial or civic organization as to the
37-25 <inadequacy or unreasonableness of any rates fixed by it or
38-1 approved by it, or as to the inadequacy or unreasonableness of any
38-2 general basis schedules promulgated by it or the> injustice of any
38-3 order <or decision> by the commissioner <it>, and if any insurance
38-4 company, or other person, or commercial or civic organization, or
38-5 any city, town, or village, which shall be interested in any such
38-6 order <or decision> shall be dissatisfied with any order
38-7 <regulation, schedule or rate> adopted by the commissioner <such
38-8 Board> such company or person, commercial or civic organization,
38-9 city, town, or village shall have the right, within thirty (30)
38-10 days after the issuance of the order <making of such regulation or
38-11 order, or rate, or schedule> or within thirty (30) days after
38-12 hearing above provided for, to bring an action against the
38-13 department <said Board> in the District Court of Travis County to
38-14 have such <regulation or> order <or schedule or rate> vacated or
38-15 modified; and shall set forth in a petition therefor the principal
38-16 grounds of objection to any or all of such <regulations, schedules,
38-17 rates or> orders. In any such suit the issue shall be formed and
38-18 the controversy tried and determined as in other civil cases. The
38-19 court may set aside and vacate or annul any or all or any part of
38-20 any <regulation, schedule> order <or rate promulgated or> adopted
38-21 by the commissioner <said Board>, which shall be found by the court
38-22 to be unreasonable or<,> unjust, <excessive or inadequate,> without
38-23 disturbing others. No injunction, interlocutory order or decree
38-24 suspending or restraining, directly or indirectly, the enforcement
38-25 of any <schedule, rate,> order <or regulation> of the commissioner
39-1 <said Board> shall be granted. <In such suit, the court, by
39-2 interlocutory order, may authorize the writing and acceptance of
39-3 fire insurance policies at any rate which in the judgment of court
39-4 is fair and reasonable, during the pending of such suit, upon
39-5 condition that the party to such suit in whose favor the said
39-6 interlocutory order of said court may be, shall execute and file
39-7 with the Board a good and sufficient bond to be first approved by
39-8 said court, conditioned that the party giving said bond will abide
39-9 the final judgment of said court and will pay to the Board whatever
39-10 difference in the rate of insurance, it may be finally determined
39-11 to exist between the rates as fixed by the Board complained of in
39-12 such suit, and the rate finally determined to be fair and
39-13 reasonable by the court in said suit, and the said Board, when it
39-14 receives such difference in money, shall transmit the same to the
39-15 parties entitled thereto.>
39-16 (b) Whenever any action shall be brought by any company
39-17 under any provision of this article within said period of thirty
39-18 (30) days, no penalties nor forfeitures shall attach or accrue on
39-19 account of the failure of the plaintiff to comply with the orders<,
39-20 schedules, rates or regulations> sought to be vacated in such
39-21 action until the final determination of the same.
39-22 (c) Either party to any such action, if dissatisfied with
39-23 the judgment or decree of said court, may appeal therefrom as in
39-24 other civil cases. No action shall be brought in any court of the
39-25 United States to set aside any orders<, rates, schedules or
40-1 regulations> made by the commissioner <said Board> under the
40-2 provisions of this law until all of the remedies provided herein
40-3 shall have been exhausted by the party complaining.
40-4 <(d) Notwithstanding Subsection (a)-(c) of this article, on
40-5 and after March 1, 1992, rates for homeowners and farm and ranch
40-6 owner's residential fire and residential allied lines insurance
40-7 coverage under this subchapter are determined, and hearings related
40-8 to those rates are conducted, as provided by Subchapter M of this
40-9 chapter, and rates for other lines of insurance subject to this
40-10 subchapter are determined as provided by Article 5.13-2 of this
40-11 code. This subsection expires December 31, 1995.>
40-12 SECTION 16. Article 5.41, Insurance Code, is amended to read
40-13 as follows:
40-14 Art. 5.41. Rebating or Discrimination. <(a)> No company
40-15 shall engage or participate in the insuring or reinsuring of any
40-16 property in this State against loss or damage by fire except in
40-17 compliance with the terms and provisions of this law; nor shall any
40-18 such company knowingly write insurance at any <lesser> rate other
40-19 than the rates <herein> provided by Articles 5.13-2 and 5.25 of
40-20 this code <for>, and it shall be unlawful for any company so to do,
40-21 unless it shall thereafter file an analysis of same with the
40-22 commissioner <Board>, and it shall be unlawful for any company, or
40-23 its officers, directors, general agents, state agents, special
40-24 agents, local agents, or its representatives, to grant or contract
40-25 for any special favor or advantages in the dividends or other
41-1 profits to come thereon, or in commissions in the dividends or
41-2 other profits to accrue thereon, or in commissions or division of
41-3 commission, or any position or any valuable consideration or any
41-4 inducement not specified in the policy contract of insurance; nor
41-5 shall such company give, sell or purchase, offer to give, sell or
41-6 purchase, directly or indirectly, as an inducement to insure or in
41-7 connection therewith, any stocks, bonds or other securities of any
41-8 insurance company or other corporation, partnership or individual,
41-9 or any dividends or profits accrued or to accrue thereon, or
41-10 anything of value whatsoever, not specified in the policy. Nothing
41-11 in this law shall be construed to prohibit a company from sharing
41-12 its profits with its policyholders, if such agreement as to profit
41-13 sharing shall be placed on or in the face of the policy, and such
41-14 profit sharing shall be uniform and shall not discriminate between
41-15 individuals or between classes. No part of the profit shall be
41-16 paid until the expiration of the policy. Any company, or any of
41-17 its officers, directors, general agents, state agents, special
41-18 agents, local agents or its representatives, doing any of the acts
41-19 in this article prohibited, shall be deemed guilty of unjust
41-20 discrimination. If any agent or company shall issue a policy
41-21 without authority, and any policyholder holding such policy shall
41-22 sustain a loss or damage thereunder, said company or companies
41-23 shall be liable to the policyholder thereunder, in the same manner
41-24 and to the same extent as if said company had been authorized to
41-25 issue said policies, although the company issued said policy in
42-1 violation of the provisions of this subchapter. But this shall not
42-2 be construed to give any company the right to issue any contract or
42-3 policy of insurance other than as provided in this subchapter.
42-4 <(b) Notwithstanding Subsection (a) of this article, on and
42-5 after March 1, 1992, rates for homeowners and farm and ranch
42-6 owner's residential fire and residential allied lines insurance
42-7 coverage under this subchapter are determined as provided by
42-8 Subchapter M of this chapter, and rates for other lines of
42-9 insurance subject to this subchapter are determined as provided by
42-10 Article 5.13-2 of this code. This subsection expires December 31,
42-11 1995.>
42-12 SECTION 17. Subchapter C, Chapter 5, Insurance Code, is
42-13 amended by adding Article 5.25-1 to read as follows:
42-14 Art. 5.25-1. RATES AND FORMS FOR OTHER LINES. (a) Rates,
42-15 policy forms, and endorsements for lines of insurance other than
42-16 private property insurance as defined by Section 1(a), Article
42-17 5.25, of this code are filed, determined, and approved as provided
42-18 by Article 5.13-2 of this code.
42-19 (b) This article does not affect the requirement that the
42-20 commissioner conduct inspections of commercial property and
42-21 prescribe a manual of rules and rating schedules for commercial
42-22 property under this subchapter and does not affect the application
42-23 of other provisions of this subchapter that are otherwise
42-24 applicable to lines of insurance other than private property
42-25 insurance as defined by Section 1(a), Article 5.25, of this code.
43-1 SECTION 18. The following laws are repealed:
43-2 (1) Articles 5.01-2, 5.03, 5.06-2, 5.11, 5.14, 5.15,
43-3 5.19, 5.25A, 5.26, 5.29, 5.31, 5.32, 5.34, 5.41(b), 5.96(a-1),
43-4 5.96A, 5.97, 5.97A, 5.98, 5.101, 17.22(b), and 21.69, Insurance
43-5 Code; and
43-6 (2) Article 5.09(b), Insurance Code, as added by
43-7 Chapter 242, Acts of the 72nd Legislature, 2nd Called Session,
43-8 1991.
43-9 SECTION 19. This Act takes effect September 1, 1995, and
43-10 applies only to an insurance policy that is delivered, issued for
43-11 delivery, or renewed on or after January 1, 1996. A policy that is
43-12 delivered, issued for delivery, or renewed before January 1, 1996,
43-13 is governed by the law as it existed immediately before the
43-14 effective date of this Act, and that law is continued in effect for
43-15 that purpose.
43-16 SECTION 20. The importance of this legislation and the
43-17 crowded condition of the calendars in both houses create an
43-18 emergency and an imperative public necessity that the
43-19 constitutional rule requiring bills to be read on three several
43-20 days in each house be suspended, and this rule is hereby suspended.