ZEM H.B. 2160 75(R)BILL ANALYSIS CIVIL PRACTICES H.B. 2160 By: Uher 4-14-97 Committee Report (Substituted) BACKGROUND Premium finance companies make loans, primarily through insurance agents, for the cost of the premium on an insurance policy purchased by a person from the insurance agent. These loans are primarily made to finance the premiums on auto insurance. Premium finance companies are licensed and regulated in their business practices by the Texas Department of Insurance. There have been some flagrant abuses of the judicial process by at least one premium finance company licensed to do business in Texas by filing suit against a Texas citizen in a court in a county far removed from the county where the transaction giving rise to the suite occurred for the purpose of harassment and delay. There is reason to believe this is not an isolated case but is the general practice of this company. PURPOSE The purpose of this bill is to discourage the abuse of the judicial process by premium finance companies by providing penalties for such action in the law. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Chapter 24, Insurance Code, by adding Art. 24.23 as follows: Art. 24.23. ABUSE OF JUDICIAL PROCESS. Sec. 1. LACK OF VENUE. (a) Makes it a violation of the Insurance Code, subject to the powers of sanctions of the Commissioner under Art. 1.10(7) of the Insurance Code, for a premium finance company to bring an action against a person without there being a reasonable basis for maintaining venue in the court where the action is bought. (b) Provides for compensatory and exemplary damages for such action to the party against whom such action is brought. (c) Provides that Chapter 41, Civil Practice and Remedies Code, does not apply to exemplary damages awarded under (b). Sec. 2. NO CREDIBLE EVIDENCE. (a) Makes it a violation of the Insurance Code for a premium finance company to bring an action against a person in a court in which the court determines that: (1) there is no credible evidence to support the allegations contained in such action; and (2) the action is not warranted by a good faith argument for the extension, modification, or reversal of existing law. (b) Provides that a violation under this subsection is subject to sanctions under Art. 1.10(7) of the Insurance Code. (c) Provides for compensatory and exemplary damages for such action to the party against whom such action is brought. (d) Provides that Chapter 41, Civil Practice and Remedies Code, does not apply to exemplary damages awarded under (c). SECTION 2. (a) Provides that a premium finance company that brought an action as described in Sec. 1 before and that is pending on the effective date of this Act that violates Section 1, Art. 24.23, Insurance Code, shall dismiss that action not later than the 10th day after the effective date of this Act. (b) Provides that a premium finance company that violates Subsection (a) of this section is subject to sanctions of the Commissioner of Insurance under Art. 1.10(7) of the Insurance Code. (c) Provides that a premium finance company that violates Subsection (a) of this section is also subject to Section 1(b), Article 24.23, Insurance Code, as added by this Act. SECTION 3. Emergency clause. Effective date: upon passage. COMPARISON OF ORIGINAL TO SUBSTITUTE The committee substitute deletes provisions making a violation of this section a Class B misdemeanor and instead makes the violation of this section subject to sanctions under Article 1.10(7) of the Insurance Code.