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.