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 * * * * *