1-1 AN ACT
1-2 relating to repair of motor vehicles covered under insurance
1-3 policies.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Article 5.07-1, Insurance Code, is amended to
1-6 read as follows:
1-7 Art. 5.07-1. Repair of Motor Vehicles; Disclosure of
1-8 Consumer Information. (a) Except as provided by rules duly
1-9 adopted [promulgated] by the commissioner [board], under an auto
1-10 insurance policy that is delivered, issued for delivery, or renewed
1-11 in this state an insurer may not, directly or indirectly, limit its
1-12 coverage under a policy covering damage to a motor vehicle by
1-13 specifying the brand, type, kind, age, vendor, supplier, or
1-14 condition of parts or products that may be used to repair the
1-15 vehicle or by limiting the beneficiary of the policy from selecting
1-16 a repair person or facility [shop] to repair damage to the motor
1-17 vehicle covered under the policy.
1-18 (b) In connection with the repair of damage to a motor
1-19 vehicle covered under an auto insurance policy, an insurer, an
1-20 employee of an insurer, an agent of an insurer, a solicitor of
1-21 insurance for an insurer, an insurance adjuster, or an entity that
1-22 employs an insurance adjuster may not:
1-23 (1) solicit or accept a referral fee or gratuity in
1-24 exchange for referring a beneficiary or third-party claimant to a
2-1 repair person or facility to repair the damage;
2-2 (2) state or suggest, either orally or in writing, to
2-3 a beneficiary that a specific repair person or facility or a repair
2-4 person or facility identified on a preferred list compiled by an
2-5 insurer must be used by a beneficiary in order for the damage
2-6 repair or parts replacement to be covered by the policy; or
2-7 (3) restrict a beneficiary's or third-party claimant's
2-8 right to choose a repair person or facility by requiring the
2-9 beneficiary or third-party claimant to travel an unreasonable
2-10 distance to repair the damage.
2-11 (c) A contract between an insurer and a repair person or
2-12 facility, including an agreement under which the repair person or
2-13 facility agrees to extend discounts for parts or labor to the
2-14 insurer in exchange for referrals by the insurer, may not result in
2-15 a reduction of coverage under the insured's auto insurance policy.
2-16 (d) An insurer may not prohibit a repair person or facility
2-17 from providing a beneficiary or third-party claimant with
2-18 information that states the description, manufacturer, or source of
2-19 the parts used and the amounts charged to the insurer for the parts
2-20 and related labor.
2-21 (e) At the time the vehicle is presented to an insurer or an
2-22 insurance adjuster or other person in connection with a claim for
2-23 damage repair, the insurer or insurance adjuster or other person
2-24 shall provide to the beneficiary or third-party claimant notice of
2-25 the provisions of this article. The commissioner shall adopt a
2-26 rule establishing the method or methods insurers shall use to
2-27 comply with the notice provisions in this subsection.
3-1 (f) Any beneficiary, third-party claimant, or repair person
3-2 or facility may submit a written, documented complaint to the
3-3 department with respect to an alleged violation of this article.
3-4 (g) In the settlement of liability claims by a third party
3-5 against an insured for property damage claimed by the third party,
3-6 an insurer may not require the third-party claimant to have repairs
3-7 made by a particular repair person or facility or to use a
3-8 particular brand, type, kind, age, vendor, supplier, or condition
3-9 of parts or products.
3-10 (h) The commissioner may exercise the rule-making authority
3-11 under Article 21.21-2 of this code with respect to any fraudulent
3-12 activity of any party to an agreement described by Subsection (c)
3-13 of this article.
3-14 (i) Any rules adopted [promulgated] by the commissioner
3-15 [board] to implement this article shall include, but not be limited
3-16 to, requirements that:
3-17 (1) any limitation described in Subsection (a) of this
3-18 section is clearly and prominently displayed on the face of the
3-19 policy or certificate in lieu of a policy; and
3-20 (2) the insured give written consent to such a
3-21 limitation, following both oral and written notification of any
3-22 limitation at the time the policy is purchased.
3-23 SECTION 2. This Act takes effect September 1, 1997.
3-24 SECTION 3. The importance of this legislation and the
3-25 crowded condition of the calendars in both houses create an
3-26 emergency and an imperative public necessity that the
3-27 constitutional rule requiring bills to be read on three several
4-1 days in each house be suspended, and this rule is hereby suspended.
_______________________________ _______________________________
President of the Senate Speaker of the House
I certify that H.B. No. 423 was passed by the House on April
28, 1997, by a non-record vote.
_______________________________
Chief Clerk of the House
I certify that H.B. No. 423 was passed by the Senate on May
15, 1997, by the following vote: Yeas 31, Nays 0.
_______________________________
Secretary of the Senate
APPROVED: _____________________
Date
_____________________
Governor