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.