1-1  By:  Sibley                                           S.B. No. 1637
    1-2        (In the Senate - Filed April 4, 1995; April 6, 1995, read
    1-3  first time and referred to Committee on Economic Development;
    1-4  April 28, 1995, reported adversely, with favorable Committee
    1-5  Substitute by the following vote:  Yeas 8, Nays 0; April 28, 1995,
    1-6  sent to printer.)
    1-7  COMMITTEE SUBSTITUTE FOR S.B. No. 1637                  By:  Sibley
    1-8                         A BILL TO BE ENTITLED
    1-9                                AN ACT
   1-10  relating to the approval and use of certain life, health, and
   1-11  accident insurance policy forms.
   1-12        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
   1-13        SECTION 1.  Article 3.42, Insurance Code, is amended to read
   1-14  as follows:
   1-15        Art. 3.42.  POLICY FORM APPROVAL.  (a)  No policy, contract
   1-16  or certificate of life, term or endowment insurance, group life or
   1-17  term insurance, industrial life insurance, accident or health
   1-18  insurance, group accident or health insurance, hospitalization
   1-19  insurance, group hospitalization insurance, medical or surgical
   1-20  insurance, group medical or surgical insurance, or fraternal
   1-21  benefit insurance, and no annuity or pure endowment contract or
   1-22  group annuity contract, shall be delivered, issued or used in this
   1-23  state by a life, accident, health or casualty insurance company, a
   1-24  mutual life insurance company, mutual insurance company other than
   1-25  life, mutual or natural premium life insurance company, general
   1-26  casualty company, Lloyds, reciprocal or interinsurance exchange,
   1-27  fraternal benefit society, group hospitalization service or any
   1-28  other insurer, unless the form of said policy, contract or
   1-29  certificate has been filed with the department <State Board of
   1-30  Insurance> as provided by Subsections <in Paragraph> (c) and (d) of
   1-31  this Article.  Provided, however, that this Article shall not apply
   1-32  to any society, company or other insurer whose activities are by
   1-33  statute exempt from the control of the department <State Board of
   1-34  Insurance> and which is entitled by statute to an exemption
   1-35  certificate from the department <said Board> in evidence of its
   1-36  exempt status; provided, further, that this Act shall not be
   1-37  construed to enlarge the powers of any of the insurers subject to
   1-38  this Article.
   1-39        (b)  No application form which is required to be or is
   1-40  attached to the policy, contract or certificate, and no rider or
   1-41  endorsement to be attached to, printed upon or used in connection
   1-42  with any policy, contract or certificate described by Subsection
   1-43  <in Paragraph> (a) of this Article shall be delivered, issued or
   1-44  used in this state by any insurer described by Subsection <in
   1-45  Paragraph> (a) of this Article unless the form of said application,
   1-46  rider or endorsement has been filed with the department <State
   1-47  Board of Insurance> as provided by Subsections <in Paragraph> (c)
   1-48  and (d) of this Article.  Each individual accident and sickness
   1-49  policy application form, which is required to be or is attached to
   1-50  the policy, shall comply with the rules and regulations of the
   1-51  commissioner adopted under <Board promulgated pursuant to>
   1-52  Subchapter G of this chapter.  Provided, however, that this Article
   1-53  shall not apply to riders or endorsements which relate to the
   1-54  manner of distribution of benefits or to the reservation of rights
   1-55  and benefits under such policies, contracts and certificates, and
   1-56  which are used at the request of the holder of the policy, contract
   1-57  or certificate.
   1-58        (c)  Each <(1)  Every such> filing <hereby> required under
   1-59  Subsection (a) or (b) of this Article shall be made prior to any
   1-60  such issuance, delivery or use of such form, contract or policy.
   1-61  On that filing, the <The> insurer may immediately issue, deliver
   1-62  and use such form, contract or policy, provided such filing shall
   1-63  be accompanied by a certification on behalf of the filing insurer,
   1-64  signed by either an attorney licensed to practice law in this
   1-65  state, an actuary familiar with the requirements of this Code and
   1-66  the applicable rules and regulations adopted pursuant thereto, or
   1-67  the chief executive officer of such filing insurer or a person
   1-68  designated by that officer.  Such certification must affirm that it
    2-1  is on behalf of the insurer, that the insurer is bound thereby,
    2-2  that the person certifying has reviewed the filing, and that, based
    2-3  upon that person's best knowledge, information, and belief, such
    2-4  filed form, contract, or policy complies in all respects with the
    2-5  provisions of this Code and the adopted rules and regulations that
    2-6  are applicable to such policy, contract, certificate, application,
    2-7  rider, endorsement, or other form being filed.  At the expiration
    2-8  of 60 <sixty> days after receipt of such filed form, contract or
    2-9  policy by the department, <State Board of Insurance> such form,
   2-10  contract or policy shall be deemed approved by the department
   2-11  <State Board of Insurance> unless prior thereto it has been
   2-12  affirmatively either approved or disapproved by the written order
   2-13  of the commissioner <Board>, or the insurer has requested in
   2-14  writing that the approval period <deemer> be extended for an
   2-15  additional period <of time,> not to exceed 45 <sixty> days.  The
   2-16  request for extension shall be considered granted upon being
   2-17  received by the department <State Board of Insurance>.  Only one
   2-18  extension may be granted.  On the expiration of the extension, the
   2-19  form is considered approved unless the commissioner has taken
   2-20  affirmative action to either approve or disapprove the form before
   2-21  the expiration of the extension.  If such policy, contract or form
   2-22  is affirmatively disapproved by the commissioner <Board>, the
   2-23  insurer, upon receiving written notice thereof, shall immediately
   2-24  cease issuing or using such policy, contract or form.  If any such
   2-25  filed contract, policy or form is used, issued, or delivered prior
   2-26  to either affirmative or statutory deemer approval, and if
   2-27  corrections are required to be made before the commissioner will
   2-28  approve the contract, policy or form <approval in order> to bring
   2-29  the contract, policy or form into complete compliance with the
   2-30  provisions of this Code and the applicable rules of the
   2-31  commissioner <State Board of Insurance>, the commissioner
   2-32  <Commissioner, at his discretion,> may order the insurer either to
   2-33  reissue a corrected contract, policy or form to replace the one
   2-34  previously issued, delivered, or used, or to amend and correct it
   2-35  by endorsement or rider.  If a contract, policy or form is
   2-36  disapproved or approval is withdrawn under the provisions of
   2-37  Subsection (i) <Section (f)> of this Article, the commissioner
   2-38  <Commissioner> may<, at his discretion,> order a similar
   2-39  replacement or amendment to correct the original contract, policy
   2-40  or form.  In the event it is determined after notice and
   2-41  opportunity for hearing that Texas insureds have been financially
   2-42  damaged by the use of a contract, policy or form filed and used
   2-43  under this subsection but that has not been approved as provided by
   2-44  this subsection and that does not comply with this Code and legally
   2-45  adopted applicable rules of the commissioner <State Board of
   2-46  Insurance>, and the commissioner determines that the insurer
   2-47  intentionally used and issued that contract, policy or form with
   2-48  the knowledge that it did not comply with this Code or those
   2-49  applicable rules, the commissioner <Commissioner of Insurance> may
   2-50  order the insurer to make complete restitution to those financially
   2-51  damaged insureds in such form and amount and within such time
   2-52  period as determined by the commissioner <Commissioner>.  This
   2-53  section shall not be construed to be in derogation or to in any way
   2-54  limit the applicability of any otherwise applicable statute, but
   2-55  the commissioner may not impose other sanctions or penalties on an
   2-56  insurer for the issuance of a form, policy, or contract filed under
   2-57  this subsection except as specifically provided by this subsection.
   2-58        (d) <(2)>  In lieu of and as an alternative to such filing
   2-59  being accompanied by such certification as required by Subsection
   2-60  (c) of this Article <in Paragraph (1) above>, any such filing
   2-61  required hereby shall be made not less than 60 <sixty> days in
   2-62  advance of any such issuance, delivery, or use of such form, and at
   2-63  the expiration of 60 <sixty> days the form so filed shall be deemed
   2-64  approved by the commissioner <State Board of Insurance> unless
   2-65  prior thereto it has been affirmatively approved or disapproved by
   2-66  the written order of the commissioner <said Board>.  Approval of
   2-67  any such form by the commissioner <such Board> shall constitute a
   2-68  waiver of any unexpired portion of the waiting period, or periods,
   2-69  herein provided.
   2-70        (e) <(3)  Those filed policies, contracts or forms which are
    3-1  subject to either Section 11, Article 3.28, or Section 9, Article
    3-2  3.44a, of this Code, may be filed and used in accordance with
    3-3  Paragraph (1) above, but such filed policies, contracts or forms
    3-4  shall not be deemed to be approved by the expiration of the sixty
    3-5  days provided for in either Paragraph (1) or (2) hereof, and such
    3-6  policies, contracts or forms must be either affirmatively approved
    3-7  or disapproved by the Board under this Article within such sixty
    3-8  days.  The insurer may request once in writing that such sixty-day
    3-9  period be extended for an additional sixty days, which request
   3-10  shall be considered granted upon being received by the State Board
   3-11  of Insurance.>
   3-12        <(4)>  The department <State Board of Insurance> shall charge
   3-13  and receive the following fees in an amount to be determined by the
   3-14  commissioner <Board> not to exceed the following:
   3-15              (1) <(i)>  for a filing of policy forms, amendments,
   3-16  endorsements, and riders filed for review under this Article,
   3-17  unless exempted pursuant to Subsection (h) <Section (e)> of this
   3-18  Article, $100 <$200.00>; and
   3-19              (2) <(ii)>  for a filing of policy forms, amendments,
   3-20  endorsements, and riders, exempted from review pursuant to
   3-21  Subsection (h) <Section (e)> of this Article, $50 <$100.00>.
   3-22        (f)  The commissioner <Board> shall, within the limits fixed
   3-23  by Subsection (e) of this Article <this subsection>, prescribe the
   3-24  fees to be charged under Subsection (e) of this Article <this
   3-25  subsection>. Fees collected under that <this> subsection shall be
   3-26  deposited in the State Treasury <to the credit of the State Board
   3-27  of Insurance operating fund>.
   3-28        (g) <(d)>  The order of the commissioner <State Board of
   3-29  Insurance> disapproving any such form or withdrawing a previous
   3-30  approval must <shall> state the grounds for such disapproval or
   3-31  withdrawal and must describe in adequate detail the changes
   3-32  necessary to obtain approval.  The insurer is entitled to 45 days
   3-33  after the date of the order to make the changes required to correct
   3-34  the deficiencies noted in the order.  The commissioner has 45 days
   3-35  to approve or disapprove the form filed for reconsideration or the
   3-36  form is considered approved for purposes of this Article.
   3-37        (h) <(e)>  The commissioner <State Board of Insurance> may,
   3-38  by written order, exempt from the requirements of this Article for
   3-39  so long as the commissioner considers <it deems> proper, any
   3-40  insurance document or form specified in such order, to which in the
   3-41  commissioner's <its> opinion <either (i)> this Article may not
   3-42  practically be applied, <(ii)> the form's preparation, use, and
   3-43  meaning have become routine or commonplace, or <(iii)> the filing
   3-44  and approval of such form or document are, in the commissioner's
   3-45  <its> opinion, not desirable, appropriate, required, or necessary
   3-46  for the protection of the public.  Additionally, the commissioner
   3-47  <State Board of Insurance> may, after notice and hearing, adopt
   3-48  reasonable rules and amendments to rules that are necessary for the
   3-49  commissioner <it> to establish guidelines, procedures, methods,
   3-50  standards, and criteria by which the various and different types of
   3-51  forms and documents submitted to the department <Board> are to be
   3-52  reviewed and approved by the commissioner <Board> as <being> in
   3-53  compliance with this article or exempted under this subsection, and
   3-54  to provide those guidelines, procedures, methods, standards, and
   3-55  criteria by which a summary review and approval may be given to
   3-56  those particular types of forms and documents designated by the
   3-57  commissioner <Board> that, in the commissioner's <its> opinion,
   3-58  will expedite the review and approval process of those forms and
   3-59  documents.
   3-60        (i) <(f)>  The commissioner <State Board of Insurance> may
   3-61  disapprove any such form, or, after notice and hearing, may
   3-62  withdraw any previous approval thereto if the form:<, and only if,>
   3-63              (1)  violates <It is in any respect in violation of> or
   3-64  does not comply with this Code or any valid rule relating thereto
   3-65  duly adopted by the commissioner <State Board of Insurance>, or is
   3-66  otherwise contrary to law; or
   3-67              (2)  <It> contains provisions or has any titles or
   3-68  headings which are unjust, encourage misrepresentation or are
   3-69  deceptive.
   3-70        (j)  If a form subject to Subsection (i) of this Article has
    4-1  been on file with the department for at least 180 days and has been
    4-2  previously affirmatively approved by the commissioner, considered
    4-3  approved under the operation of this Article, or exempted from the
    4-4  approval requirements as provided by this Article, the commissioner
    4-5  may withdraw the previous approval or the exemption from the
    4-6  approval requirements only if the form violates or does not comply
    4-7  with specific requirements under this Code or a rule adopted under
    4-8  this Code unless the commissioner finds proof of gross
    4-9  misrepresentation or fraud to the policyholder.
   4-10        (k) <(g)(1)>  The commissioner <Board> may, after notice and
   4-11  hearing, withdraw any previous approval of an individual accident
   4-12  and sickness insurance policy form if, after consideration of all
   4-13  relevant facts, the commissioner <Board> finds that the benefits
   4-14  provided under such policy form are unreasonable in relation to the
   4-15  premium charged, or the reserve required by Article 6.01 of this
   4-16  code is not maintained by the insurer on the policies issued upon
   4-17  such policy form.  The commissioner <Board> shall from time to time
   4-18  as conditions warrant, and after notice and hearing, promulgate
   4-19  such reasonable rules and regulations and amendments thereto as are
   4-20  necessary to establish the standard or standards by which any
   4-21  previous approval of a policy form may be withdrawn.  Any such rule
   4-22  or regulation shall be promulgated in accordance with Section 10,
   4-23  Chapter 397, Acts of the 54th Legislature, 1955 (Article 3.70-10,
   4-24  Vernon's Texas Insurance Code).  Nothing in this section shall be
   4-25  construed as granting the commissioner <State Board of Insurance>
   4-26  any power or authority to determine, fix, prescribe, or promulgate
   4-27  the rates to be charged for any individual accident and sickness
   4-28  insurance policy or policies.
   4-29        (l)  If a form subject to Subsection (k) of this Article has
   4-30  been on file with the department for at least 360 days and has been
   4-31  previously affirmatively approved by the commissioner, considered
   4-32  approved under the operation of this Article, or exempted from the
   4-33  approval requirements as provided by this Article, the commissioner
   4-34  may withdraw the previous approval or the exemption from the
   4-35  approval requirements only if the form violates or does not comply
   4-36  with specific requirements under this Code or a rule adopted under
   4-37  this Code unless the commissioner finds proof of gross
   4-38  misrepresentation or fraud to the policyholder.
   4-39        (m) <(2)>  The commissioner <Board> shall require the filing
   4-40  of all rates to be charged for individual accident and sickness
   4-41  policies and may adopt necessary forms to be filed by insurers in
   4-42  conjunction with the annual statement required under Articles 3.07
   4-43  and 3.20-1 <3.20> of this code for reporting the experience on all
   4-44  individual accident and sickness insurance policy forms issued by
   4-45  the insurer so as to determine compliance with Subsection (l) <(1)>
   4-46  of this Article <section>.
   4-47        (n) <(h)>  Appeals from any order of the commissioner <State
   4-48  Board of Insurance> issued under this Article may be taken to the
   4-49  District Court of Travis County, Texas, in accordance with Article
   4-50  1.04 <21.80> of this code, or any amendments thereof.
   4-51        (o) <(i)>  No policy, contract, or certificate filed pursuant
   4-52  to this article that contains a coordination of benefits provision
   4-53  may be approved for use in this state unless it also provides the
   4-54  order of benefit determination for insured dependent children.  An
   4-55  order of benefits determination provision may not be approved
   4-56  unless it complies with the standards specified in Subsection (i)
   4-57  <Section (f)> of this article.  The commissioner <State Board of
   4-58  Insurance> is authorized to promulgate and may order such provision
   4-59  as is necessary in the accomplishment of the purpose of this
   4-60  subsection <section>.
   4-61        (p) <(j)>  The commissioner <State Board of Insurance> is
   4-62  hereby authorized to adopt such reasonable rules and regulations as
   4-63  are necessary to implement and accomplish the specific provisions
   4-64  of this Article and are within the standards and purposes of this
   4-65  Article.  The commissioner shall adopt rules under this Article in
   4-66  compliance with Chapter 2001, Government Code (Administrative
   4-67  Procedure Act).  A rule adopted under this Article may not be
   4-68  repealed or amended until the first anniversary of the adoption of
   4-69  the rule unless the commissioner finds in a public hearing after
   4-70  notice that there is a compelling public need for the amendment or
    5-1  repeal of the rule or part of the rule.
    5-2        <(k)  The department shall develop and implement rules to
    5-3  improve procedures for approval of policy forms under this
    5-4  article.>
    5-5        SECTION 2.  This Act takes effect September 1, 1995, and
    5-6  applies only to an insurance policy, contract, or form that is
    5-7  delivered, issued for delivery, or renewed on or after January 1,
    5-8  1996.  A policy, contract, or form that is delivered, issued for
    5-9  delivery, or renewed before January 1, 1996, is governed by the law
   5-10  as it existed immediately before the effective date of this Act,
   5-11  and that law is continued in effect for that purpose.
   5-12        SECTION 3.  The importance of this legislation and the
   5-13  crowded condition of the calendars in both houses create an
   5-14  emergency and an imperative public necessity that the
   5-15  constitutional rule requiring bills to be read on three several
   5-16  days in each house be suspended, and this rule is hereby suspended.
   5-17                               * * * * *