S.B. No. 1637
AN ACT
1-1 relating to the approval and use of certain life, health, and
1-2 accident insurance policy forms.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Article 3.42, Insurance Code, is amended to read
1-5 as follows:
1-6 Art. 3.42. POLICY FORM APPROVAL. (a) No policy, contract
1-7 or certificate of life, term or endowment insurance, group life or
1-8 term insurance, industrial life insurance, accident or health
1-9 insurance, group accident or health insurance, hospitalization
1-10 insurance, group hospitalization insurance, medical or surgical
1-11 insurance, group medical or surgical insurance, or fraternal
1-12 benefit insurance, and no annuity or pure endowment contract or
1-13 group annuity contract, shall be delivered, issued or used in this
1-14 state by a life, accident, health or casualty insurance company, a
1-15 mutual life insurance company, mutual insurance company other than
1-16 life, mutual or natural premium life insurance company, general
1-17 casualty company, Lloyds, reciprocal or interinsurance exchange,
1-18 fraternal benefit society, group hospitalization service or any
1-19 other insurer, unless the form of said policy, contract or
1-20 certificate has been filed with the department <State Board of
1-21 Insurance> as provided by Subsections <in Paragraph> (c) and (d) of
1-22 this Article. Provided, however, that this Article shall not apply
1-23 to any society, company or other insurer whose activities are by
1-24 statute exempt from the control of the department <State Board of
2-1 Insurance> and which is entitled by statute to an exemption
2-2 certificate from the department <said Board> in evidence of its
2-3 exempt status; provided, further, that this Act shall not be
2-4 construed to enlarge the powers of any of the insurers subject to
2-5 this Article.
2-6 (b) No application form which is required to be or is
2-7 attached to the policy, contract or certificate, and no rider or
2-8 endorsement to be attached to, printed upon or used in connection
2-9 with any policy, contract or certificate described by Subsection
2-10 <in Paragraph> (a) of this Article shall be delivered, issued or
2-11 used in this state by any insurer described by Subsection <in
2-12 Paragraph> (a) of this Article unless the form of said application,
2-13 rider or endorsement has been filed with the department <State
2-14 Board of Insurance> as provided by Subsections <in Paragraph> (c)
2-15 and (d) of this Article. Each individual accident and sickness
2-16 policy application form, which is required to be or is attached to
2-17 the policy, shall comply with the rules and regulations of the
2-18 commissioner adopted under <Board promulgated pursuant to>
2-19 Subchapter G of this chapter. Provided, however, that this Article
2-20 shall not apply to riders or endorsements which relate to the
2-21 manner of distribution of benefits or to the reservation of rights
2-22 and benefits under such policies, contracts and certificates, and
2-23 which are used at the request of the holder of the policy, contract
2-24 or certificate.
2-25 (c) Each <(1) Every such> filing <hereby> required under
2-26 Subsection (a) or (b) of this Article shall be made prior to any
2-27 such issuance, delivery or use of such form, contract or policy.
3-1 On that filing, the <The> insurer may immediately issue, deliver
3-2 and use such form, contract or policy, provided such filing shall
3-3 be accompanied by a certification on behalf of the filing insurer,
3-4 signed by either an attorney licensed to practice law in this
3-5 state, an actuary familiar with the requirements of this Code and
3-6 the applicable rules and regulations adopted pursuant thereto, or
3-7 the chief executive officer of such filing insurer or a person
3-8 designated by that officer. Such certification must affirm that it
3-9 is on behalf of the insurer, that the insurer is bound thereby,
3-10 that the person certifying has reviewed the filing, and that, based
3-11 upon that person's best knowledge, information, and belief, such
3-12 filed form, contract, or policy complies in all respects with the
3-13 provisions of this Code and the adopted rules and regulations that
3-14 are applicable to such policy, contract, certificate, application,
3-15 rider, endorsement, or other form being filed. At the expiration
3-16 of 60 <sixty> days after receipt of such filed form, contract or
3-17 policy by the department, <State Board of Insurance> such form,
3-18 contract or policy shall be deemed approved by the department
3-19 <State Board of Insurance> unless prior thereto it has been
3-20 affirmatively either approved or disapproved by the written order
3-21 of the commissioner <Board>, or the insurer has requested in
3-22 writing that the approval period <deemer> be extended for an
3-23 additional period <of time,> not to exceed 45 <sixty> days. The
3-24 request for extension shall be considered granted upon being
3-25 received by the department <State Board of Insurance>. Only one
3-26 extension may be granted. On the expiration of the extension, the
3-27 form is considered approved unless the commissioner has taken
4-1 affirmative action to either approve or disapprove the form before
4-2 the expiration of the extension. If such policy, contract or form
4-3 is affirmatively disapproved by the commissioner <Board>, the
4-4 insurer, upon receiving written notice thereof, shall immediately
4-5 cease issuing or using such policy, contract or form. If any such
4-6 filed contract, policy or form is used, issued, or delivered prior
4-7 to either affirmative or statutory deemer approval, and if
4-8 corrections are required to be made before the commissioner will
4-9 approve the contract, policy or form <approval in order> to bring
4-10 the contract, policy or form into complete compliance with the
4-11 provisions of this Code and the applicable rules of the
4-12 commissioner <State Board of Insurance>, the commissioner
4-13 <Commissioner, at his discretion,> may order the insurer either to
4-14 reissue a corrected contract, policy or form to replace the one
4-15 previously issued, delivered, or used, or to amend and correct it
4-16 by endorsement or rider. If a contract, policy or form is
4-17 disapproved or approval is withdrawn under the provisions of
4-18 Subsection (i) <Section (f)> of this Article, the commissioner
4-19 <Commissioner> may<, at his discretion,> order a similar
4-20 replacement or amendment to correct the original contract, policy
4-21 or form. In the event it is determined after notice and
4-22 opportunity for hearing that Texas insureds have been financially
4-23 damaged by the use of a contract, policy or form filed and used
4-24 under this subsection but that has not been approved as provided by
4-25 this subsection and that does not comply with this Code and legally
4-26 adopted applicable rules of the commissioner <State Board of
4-27 Insurance>, and the commissioner determines that the insurer
5-1 intentionally used and issued that contract, policy or form with
5-2 the knowledge that it did not comply with this Code or those
5-3 applicable rules, the commissioner <Commissioner of Insurance> may
5-4 order the insurer to make complete restitution to those financially
5-5 damaged insureds in such form and amount and within such time
5-6 period as determined by the commissioner <Commissioner>. This
5-7 section shall not be construed to be in derogation or to in any way
5-8 limit the applicability of any otherwise applicable statute, but
5-9 the commissioner may not impose other sanctions or penalties on an
5-10 insurer for the issuance of a form, policy, or contract filed under
5-11 this subsection except as specifically provided by this subsection.
5-12 (d) <(2)> In lieu of and as an alternative to such filing
5-13 being accompanied by such certification as required by Subsection
5-14 (c) of this Article <in Paragraph (1) above>, any such filing
5-15 required hereby shall be made not less than 60 <sixty> days in
5-16 advance of any such issuance, delivery, or use of such form, and at
5-17 the expiration of 60 <sixty> days the form so filed shall be deemed
5-18 approved by the commissioner <State Board of Insurance> unless
5-19 prior thereto it has been affirmatively approved or disapproved by
5-20 the written order of the commissioner <said Board>. Approval of
5-21 any such form by the commissioner <such Board> shall constitute a
5-22 waiver of any unexpired portion of the waiting period, or periods,
5-23 herein provided.
5-24 (e) <(3) Those filed policies, contracts or forms which are
5-25 subject to either Section 11, Article 3.28, or Section 9, Article
5-26 3.44a, of this Code, may be filed and used in accordance with
5-27 Paragraph (1) above, but such filed policies, contracts or forms
6-1 shall not be deemed to be approved by the expiration of the sixty
6-2 days provided for in either Paragraph (1) or (2) hereof, and such
6-3 policies, contracts or forms must be either affirmatively approved
6-4 or disapproved by the Board under this Article within such sixty
6-5 days. The insurer may request once in writing that such sixty-day
6-6 period be extended for an additional sixty days, which request
6-7 shall be considered granted upon being received by the State Board
6-8 of Insurance.>
6-9 <(4)> The department <State Board of Insurance> shall
6-10 charge and receive the following fees in an amount to be determined
6-11 by the commissioner <Board> not to exceed the following:
6-12 (1) <(i)> for a filing of policy forms, amendments,
6-13 endorsements, and riders filed for review under this Article,
6-14 unless exempted pursuant to Subsection (h) <Section (e)> of this
6-15 Article, $100 <$200.00>; and
6-16 (2) <(ii)> for a filing of policy forms, amendments,
6-17 endorsements, and riders, exempted from review pursuant to
6-18 Subsection (h) <Section (e)> of this Article, $50 <$100.00>.
6-19 (f) The commissioner <Board> shall, within the limits fixed
6-20 by Subsection (e) of this Article <this subsection>, prescribe the
6-21 fees to be charged under Subsection (e) of this Article <this
6-22 subsection>. Fees collected under that <this> subsection shall be
6-23 deposited in the State Treasury <to the credit of the State Board
6-24 of Insurance operating fund>.
6-25 (g) <(d)> The order of the commissioner <State Board of
6-26 Insurance> disapproving any such form or withdrawing a previous
6-27 approval must <shall> state the grounds for such disapproval or
7-1 withdrawal and must describe in adequate detail the changes
7-2 necessary to obtain approval. The insurer is entitled to 45 days
7-3 after the date of the order to make the changes required to correct
7-4 the deficiencies noted in the order. The commissioner has 45 days
7-5 to approve or disapprove the form filed for reconsideration or the
7-6 form is considered approved for purposes of this Article.
7-7 (h) <(e)> The commissioner <State Board of Insurance> may,
7-8 by written order, exempt from the requirements of this Article for
7-9 so long as the commissioner considers <it deems> proper, any
7-10 insurance document or form specified in such order, to which in the
7-11 commissioner's <its> opinion <either (i)> this Article may not
7-12 practically be applied, <(ii)> the form's preparation, use, and
7-13 meaning have become routine or commonplace, or <(iii)> the filing
7-14 and approval of such form or document are, in the commissioner's
7-15 <its> opinion, not desirable, appropriate, required, or necessary
7-16 for the protection of the public. Additionally, the commissioner
7-17 <State Board of Insurance> may, after notice and hearing, adopt
7-18 reasonable rules and amendments to rules that are necessary for the
7-19 commissioner <it> to establish guidelines, procedures, methods,
7-20 standards, and criteria by which the various and different types of
7-21 forms and documents submitted to the department <Board> are to be
7-22 reviewed and approved by the commissioner <Board> as <being> in
7-23 compliance with this article or exempted under this subsection, and
7-24 to provide those guidelines, procedures, methods, standards, and
7-25 criteria by which a summary review and approval may be given to
7-26 those particular types of forms and documents designated by the
7-27 commissioner <Board> that, in the commissioner's <its> opinion,
8-1 will expedite the review and approval process of those forms and
8-2 documents.
8-3 (i) <(f)> The commissioner <State Board of Insurance> may
8-4 disapprove any such form, or, after notice and hearing, may
8-5 withdraw any previous approval thereto if the form:<, and only if,>
8-6 (1) violates <It is in any respect in violation of> or
8-7 does not comply with this Code or any valid rule relating thereto
8-8 duly adopted by the commissioner <State Board of Insurance>, or is
8-9 otherwise contrary to law; or
8-10 (2) <It> contains provisions or has any titles or
8-11 headings which are unjust, encourage misrepresentation or are
8-12 deceptive.
8-13 (j) If a form subject to Subsection (i) of this Article has
8-14 been on file with the department for at least 180 days and has been
8-15 previously affirmatively approved by the commissioner, considered
8-16 approved under the operation of this Article, or exempted from the
8-17 approval requirements as provided by this Article, the commissioner
8-18 may withdraw the previous approval or the exemption from the
8-19 approval requirements only if the form violates or does not comply
8-20 with specific requirements under this Code or a rule adopted under
8-21 this Code unless the commissioner finds proof of gross
8-22 misrepresentation or fraud to the policyholder.
8-23 (k) <(g)(1)> The commissioner <Board> may, after notice and
8-24 hearing, withdraw any previous approval of an individual accident
8-25 and sickness insurance policy form if, after consideration of all
8-26 relevant facts, the commissioner <Board> finds that the benefits
8-27 provided under such policy form are unreasonable in relation to the
9-1 premium charged, or the reserve required by Article 6.01 of this
9-2 code is not maintained by the insurer on the policies issued upon
9-3 such policy form. The commissioner <Board> shall from time to time
9-4 as conditions warrant, and after notice and hearing, promulgate
9-5 such reasonable rules and regulations and amendments thereto as are
9-6 necessary to establish the standard or standards by which any
9-7 previous approval of a policy form may be withdrawn. Any such rule
9-8 or regulation shall be promulgated in accordance with Section 10,
9-9 Chapter 397, Acts of the 54th Legislature, 1955 (Article 3.70-10,
9-10 Vernon's Texas Insurance Code). Nothing in this section shall be
9-11 construed as granting the commissioner <State Board of Insurance>
9-12 any power or authority to determine, fix, prescribe, or promulgate
9-13 the rates to be charged for any individual accident and sickness
9-14 insurance policy or policies.
9-15 (l) If a form subject to Subsection (k) of this Article has
9-16 been on file with the department for at least 360 days and has been
9-17 previously affirmatively approved by the commissioner, considered
9-18 approved under the operation of this Article, or exempted from the
9-19 approval requirements as provided by this Article, the commissioner
9-20 may withdraw the previous approval or the exemption from the
9-21 approval requirements only if the form violates or does not comply
9-22 with specific requirements under this Code or a rule adopted under
9-23 this Code unless the commissioner finds proof of gross
9-24 misrepresentation or fraud to the policyholder.
9-25 (m) <(2)> The commissioner <Board> shall require the filing
9-26 of all rates to be charged for individual accident and sickness
9-27 policies and may adopt necessary forms to be filed by insurers in
10-1 conjunction with the annual statement required under Articles 3.07
10-2 and 3.20-1 <3.20> of this code for reporting the experience on all
10-3 individual accident and sickness insurance policy forms issued by
10-4 the insurer so as to determine compliance with Subsection (l) <(1)>
10-5 of this Article <section>.
10-6 (n) <(h)> Appeals from any order of the commissioner <State
10-7 Board of Insurance> issued under this Article may be taken to the
10-8 District Court of Travis County, Texas, in accordance with Article
10-9 1.04 <21.80> of this code, or any amendments thereof.
10-10 (o) <(i)> No policy, contract, or certificate filed pursuant
10-11 to this article that contains a coordination of benefits provision
10-12 may be approved for use in this state unless it also provides the
10-13 order of benefit determination for insured dependent children. An
10-14 order of benefits determination provision may not be approved
10-15 unless it complies with the standards specified in Subsection (i)
10-16 <Section (f)> of this article. The commissioner <State Board of
10-17 Insurance> is authorized to promulgate and may order such provision
10-18 as is necessary in the accomplishment of the purpose of this
10-19 subsection <section>.
10-20 (p) <(j)> The commissioner <State Board of Insurance> is
10-21 hereby authorized to adopt such reasonable rules and regulations as
10-22 are necessary to implement and accomplish the specific provisions
10-23 of this Article and are within the standards and purposes of this
10-24 Article. The commissioner shall adopt rules under this Article in
10-25 compliance with Chapter 2001, Government Code (Administrative
10-26 Procedure Act). A rule adopted under this Article may not be
10-27 repealed or amended until the first anniversary of the adoption of
11-1 the rule unless the commissioner finds in a public hearing after
11-2 notice that there is a compelling public need for the amendment or
11-3 repeal of the rule or part of the rule.
11-4 <(k) The department shall develop and implement rules to
11-5 improve procedures for approval of policy forms under this
11-6 article.>
11-7 SECTION 2. This Act takes effect September 1, 1995, and
11-8 applies only to an insurance policy, contract, or form that is
11-9 delivered, issued for delivery, or renewed on or after January 1,
11-10 1996. A policy, contract, or form that is delivered, issued for
11-11 delivery, or renewed before January 1, 1996, is governed by the law
11-12 as it existed immediately before the effective date of this Act,
11-13 and that law is continued in effect for that purpose.
11-14 SECTION 3. The importance of this legislation and the
11-15 crowded condition of the calendars in both houses create an
11-16 emergency and an imperative public necessity that the
11-17 constitutional rule requiring bills to be read on three several
11-18 days in each house be suspended, and this rule is hereby suspended.