ZEM C.S.H.B. 2700 75(R)BILL ANALYSIS CIVIL PRACTICES C.S.H.B. 2700 By: Gray 4-25-97 Committee Report (Substituted) BACKGROUND There has been a recent proliferation of class action lawsuits against insurance companies. In a number of these cases, the recovery of policy holders has been insignificant, but the legal costs to the state have been large. PURPOSE The purpose of this bill is to establish guidelines by which one may file a class action lawsuit against an insurer. 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 Article 1.10, Insurance Code, by adding section 21 as follows: 21. ADMINISTRATION OF CLASS ACTION PROCEEDINGS (a) Provides that a plaintiff filing a cause of action against an insurer in the form of a class action suit must give notice to the commissioner not later than 14 days after commencement. Specifies what information must be included within the notice and proper service of this notice. Provides that if no notice is given, the cause of action is abated pending a determination by the court on whether notice was proper. (b) Requires the commissioner to review every cause of action which is filed as a class action in which the commissioner has received notice and in which an insurer certified by the department is a defendant. Provides that during the review process, a pending cause of action will be abated for no more than 75 days on motion of the commissioner (c) Provides that if the Commissioner issues an order during the abatement period involving one or more insurers and granting full restitution to the insured(s) a pending class action containing the same class or subclass of insured(s), or an appropriate portion of the class action, shall be dismissed by the court without prejudice as to refiling of individual lawsuits concerning the same subject matter. (d) Provides for the award of attorney's fees on behalf of the class if the commissioner issues an order that results in full restitution to the insured(s). Specifies the range of these fees as it relates to the total amount of restitution. SECTION 2. Applies prospectively; savings clause. SECTION 3. Effective date: September 1, 1997. SECTION 4. Emergency Clause. COMPARISON OF ORIGINAL TO SUBSTITUTE The committee substitute makes the following changes: 1. Provides that failure to give the required notice under Section 21(a) results in an abatement, rather than a dismissal of the lawsuit. 2. Shortens the period of review by the commissioner and abatement of the lawsuit from one year in the bill as filed to 75 days in the substitute. 3. Provides for the award of attorney's fees if an order by the commissioner results in full restitution to the insured(s). 4. Makes application of the act prospective; removes pending cases from application of the act.