By Farrar H.B. No. 423
Substitute the following for H.B. No. 423:
By Lewis of Tarrant C.S.H.B. No. 423
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to repair of motor vehicles covered under insurance
1-3 policies and to civil remedies for unfair competition or practices
1-4 in the business of insuring motor vehicles against damage.
1-5 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-6 SECTION 1. Article 5.07-1, Insurance Code, is amended to
1-7 read as follows:
1-8 Art. 5.07-1. REPAIR OF MOTOR VEHICLES; DISCLOSURE OF
1-9 CONSUMER INFORMATION. (a) Except as provided by rules duly
1-10 adopted [promulgated] by the commissioner [board], under an auto
1-11 insurance policy that is delivered, issued for delivery, or renewed
1-12 in this state an insurer may not, directly or indirectly, limit its
1-13 coverage under a policy covering damage to a motor vehicle by
1-14 specifying the brand, type, kind, age, vendor, supplier, or
1-15 condition of parts or products that may be used to repair the
1-16 vehicle or by limiting the beneficiary of or claimant under of the
1-17 policy from selecting a repair person or facility [shop] to repair
1-18 damage to the motor vehicle covered under the policy.
1-19 (b) In connection with the repair of damage to a motor
1-20 vehicle covered under an auto insurance policy, an insurer, an
1-21 employee of an insurer, an agent of an insurer, a solicitor of
1-22 insurance for an insurer, an insurance adjuster, or an entity that
1-23 employs an insurance adjuster may not:
1-24 (1) solicit or accept a referral fee, gratuity, or
2-1 other compensation from any source in connection with referring a
2-2 beneficiary or claimant to a repair person or facility to repair
2-3 the damage;
2-4 (2) state, imply, or suggest, either orally or in
2-5 writing, to a beneficiary or claimant that a specific repair person
2-6 or facility or a repair person or facility identified on a
2-7 preferred list compiled by an insurer must be utilized by a
2-8 beneficiary or claimant in order for the damage repair or parts
2-9 replacement to be covered by the policy; or
2-10 (3) restrict a beneficiary's or claimant's right to
2-11 choose a repair person or facility by requiring the beneficiary or
2-12 claimant to travel an unreasonable distance to receive full payment
2-13 for the damage repair.
2-14 (c) A contract between an insurer and a repair person or
2-15 facility may not cause the use of parts or labor that result in a
2-16 reduction in the actual cash value of the motor vehicle.
2-17 (d) An insurer, or another person on behalf of the insurer,
2-18 shall direct the repair person or facility to present to the
2-19 beneficiary or claimant, upon completion of the repair work and
2-20 prior to release of the vehicle, a copy of the original invoice
2-21 describing and itemizing the cost of replacement parts used and
2-22 itemizing the repair charges.
2-23 (e) At the time the vehicle is presented to an insurer or an
2-24 insurance adjuster or other person in connection with a claim for
2-25 damage repair, the insurer or insurance adjuster or other person
2-26 shall provide to the beneficiary or claimant, on a separate piece
2-27 of paper, the following notice:
3-1 NOTICE TO INSURANCE CONSUMERS FROM THE STATE OF TEXAS
3-2 BY LAW, YOU HAVE THE RIGHT TO SELECT WHERE YOUR MOTOR VEHICLE
3-3 IS REPAIRED. YOUR INSURANCE COMPANY IS REQUIRED TO PAY A
3-4 REASONABLE RATE OF REIMBURSEMENT FOR REPAIR TO YOUR MOTOR
3-5 VEHICLE. IF YOU HAVE QUESTIONS ABOUT YOUR MOTOR VEHICLE
3-6 REPAIR RIGHTS, CONTACT THE TEXAS DEPARTMENT OF INSURANCE AT
3-7 1-800-252-3439.
3-8 (f) Any person, including a repair person or facility on
3-9 behalf of a beneficiary or claimant under an auto insurance policy,
3-10 may complain to the department with respect to a violation of this
3-11 article.
3-12 (g) Any rules adopted [promulgated] by the commissioner
3-13 [board] to implement this article shall include, but not be limited
3-14 to, requirements that:
3-15 (1) any limitation described in Subsection (a) of this
3-16 section is clearly and prominently displayed on the face of the
3-17 policy or certificate in lieu of a policy; and
3-18 (2) the insured give written consent to such a
3-19 limitation, following both oral and written notification of any
3-20 limitation at the time the policy is purchased.
3-21 SECTION 2. Section 17(a), Chapter 407, Acts of the 63rd
3-22 Legislature, Regular Session, 1973 (Article 21.07-4, Vernon's Texas
3-23 Insurance Code), is amended to read as follows:
3-24 (a) The department may discipline an adjuster or deny an
3-25 application under Section 5, Article 21.01-2, Insurance Code, for
3-26 any of the following reasons:
3-27 (1) for any cause for which issuance of the license
4-1 could have been refused had it been existent and been known to the
4-2 commissioner [board];
4-3 (2) if the applicant or licensee willfully violates or
4-4 knowingly participates in the violation of any provisions of this
4-5 Act or Article 5.07-1(b)(1) or (c), Insurance Code.
4-6 (3) if the applicant or licensee has obtained or
4-7 attempted to obtain any such license through willful
4-8 misrepresentation or fraud, or has failed to pass any examination
4-9 required under this Act;
4-10 (4) if the applicant or licensee has misappropriated,
4-11 or converted to the applicant's or licensee's own use, or has
4-12 illegally withheld moneys required to be held in fiduciary
4-13 capacity;
4-14 (5) if the applicant or licensee has, with intent to
4-15 deceive, materially misrepresented the terms or effect of an
4-16 insurance contract, or has engaged in any fraudulent transactions;
4-17 or
4-18 (6) if the applicant or licensee is convicted, by
4-19 final judgment, of a felony.
4-20 SECTION 3. Section 4, Article 21.21, Insurance Code, is
4-21 amended to read as follows:
4-22 Sec. 4. UNFAIR METHODS OF COMPETITION AND UNFAIR OR
4-23 DECEPTIVE ACTS OR PRACTICES DEFINED. The following are hereby
4-24 defined as unfair methods of competition and unfair and deceptive
4-25 acts or practices in the business of insurance:
4-26 (1) Misrepresentations and False Advertising of Policy
4-27 Contracts. Making, issuing, circulating, or causing to be made,
5-1 issued or circulated, any estimate, illustration, circular or
5-2 statement misrepresenting the terms of any policy issued or to be
5-3 issued or the benefits or advantages promised thereby or the
5-4 dividends or share of the surplus to be received thereon, or making
5-5 any false or misleading statements as to the dividends or share of
5-6 surplus previously paid on similar policies, or making any
5-7 misleading representation or any misrepresentation as to the
5-8 financial condition of any insurer, or as to the legal reserve
5-9 system upon which any life insurer operates, or using any name or
5-10 title of any policy or class of policies misrepresenting the true
5-11 nature thereof, or making any misrepresentation to any policyholder
5-12 insured in any company for the purpose of inducing or tending to
5-13 induce such policyholder to lapse, forfeit, or surrender his
5-14 insurance;
5-15 (2) False Information and Advertising Generally.
5-16 Making, publishing, disseminating, circulating or placing before
5-17 the public, or causing, directly or indirectly, to be made,
5-18 published, disseminated, circulated, or placed before the public,
5-19 in a newspaper, magazine or other publication, or in the form of a
5-20 notice, circular, pamphlet, letter or poster, or over any radio or
5-21 television station, or in any other way, an advertisement,
5-22 announcement or statement containing any assertion, representation
5-23 or statement with respect to the business of insurance or with
5-24 respect to any person in the conduct of his insurance business,
5-25 which is untrue, deceptive or misleading;
5-26 (3) Defamation. Making, publishing, disseminating, or
5-27 circulating, directly or indirectly, or aiding, abetting or
6-1 encouraging the making, publishing, disseminating or circulating of
6-2 any oral or written statement or any pamphlet, circular, article or
6-3 literature which is false, or maliciously critical of or derogatory
6-4 to the financial condition of any insurer, and which is calculated
6-5 to injure any person engaged in the business of insurance;
6-6 (4) Boycott, Coercion and Intimidation. Entering into
6-7 any agreement to commit, or by any concerted action committing, any
6-8 act of boycott, coercion or intimidation resulting in or tending to
6-9 result in unreasonable restraint of, or monopoly in, the business
6-10 of insurance;
6-11 (5) False Financial Statements. (a) Filing with any
6-12 supervisory or other public official, or making, publishing,
6-13 disseminating, circulating or delivering to any person, or placing
6-14 before the public, or causing directly or indirectly, to be made,
6-15 published, disseminated, circulated, delivered to any person, or
6-16 placed before the public, any false statement of financial
6-17 condition of an insurer with intent to deceive;
6-18 (b) Making any false entry in any book, report
6-19 or statement of any insurer with intent to deceive any agent or
6-20 examiner lawfully appointed to examine into its condition or into
6-21 any of its affairs, or any public official to whom such insurer is
6-22 required by law to report, or who has authority by law to examine
6-23 into its condition or into any of its affairs, or, with like
6-24 intent, wilfully omitting to make a true entry of any material fact
6-25 pertaining to the business of such insurer in any book, report or
6-26 statement of such insurer;
6-27 (6) Stock Operations and Advisory Board Contracts.
7-1 Issuing or delivering or permitting agents, officers or employees
7-2 to issue or deliver, company stock or other capital stock, or
7-3 benefit certificates or shares in any corporation, or securities or
7-4 any special or advisory board contracts or other contracts of any
7-5 kind promising returns and profits as an inducement to insurance.
7-6 Provided, however, that nothing in this subsection shall be
7-7 construed as prohibiting the issuing or delivery of participating
7-8 insurance policies otherwise authorized by law.
7-9 (7) Unfair Discrimination. [(a)] Making or
7-10 permitting any unfair discrimination between individuals of the
7-11 same class and equal expectation of life in the rates charged for
7-12 any contract of life insurance or of life annuity or in the
7-13 dividends or other benefits payable thereon, or in any other of the
7-14 terms and conditions of such contract.
7-15 (8) Rebates. (a) Except as otherwise expressly
7-16 provided by law, knowingly permitting or offering to make or making
7-17 any contract of life insurance, life annuity or accident and health
7-18 insurance, or agreement as to such contract other than as plainly
7-19 expressed in the contract issued thereon, or paying or allowing, or
7-20 giving or offering to pay, allow, or give, directly or indirectly,
7-21 as inducement to such insurance or annuity, any rebate of premiums
7-22 payable on the contract, or any special favor or advantage in the
7-23 dividends or other benefits thereon, or any valuable consideration
7-24 or inducement whatever not specified in the contract; or giving, or
7-25 selling, or purchasing or offering to give, sell, or purchase as
7-26 inducement to such insurance or annuity or in connection therewith,
7-27 any stocks, bonds, or other securities of any insurance company or
8-1 other corporation, association, or partnership, or any dividends or
8-2 profits accrued thereon, or anything of value whatsoever not
8-3 specified in the contract;
8-4 (b) Nothing in clause 7 or paragraph (a) of
8-5 clause 8 of this subsection shall be construed as including within
8-6 the definition of discrimination or rebates any of the following
8-7 practices:
8-8 (i) in the case of any contract of life
8-9 insurance or life annuity, paying bonuses to policyholders or
8-10 otherwise abating their premiums in whole or in part out of surplus
8-11 accumulated from non-participating insurance, provided that any
8-12 such bonuses or abatement of premiums shall be fair and equitable
8-13 to policyholders and for the best interests of the company and its
8-14 policyholders;
8-15 (ii) in the case of life insurance
8-16 policies issued on the industrial debit plan, making allowance to
8-17 policyholders who have continuously for a specified period made
8-18 premium payments directly to an office of the insurer in an amount
8-19 which fairly represents the saving in collection expenses;
8-20 (iii) readjustment of the rate of premium
8-21 for a group insurance policy based on the loss or expense
8-22 experience thereunder, at the end of the first or any subsequent
8-23 policy year of insurance thereunder, which may be made retroactive
8-24 only for such policy year.
8-25 (9) Deceptive Name, Word, Symbol, Device, or Slogan.
8-26 Using, displaying, publishing, circulating, distributing, or
8-27 causing to be used, displayed, published, circulated, or
9-1 distributed in any letter, pamphlet, circular, contract, policy,
9-2 evidence of coverage, article poster, or other document,
9-3 literature, or public media of:
9-4 (a) a name as the corporate or business name of
9-5 a person or entity engaged in an insurance or insurance related
9-6 business in this state that is the same as, or deceptively similar
9-7 to, the name adopted and used by an insurance entity, health
9-8 maintenance organization, third party administrator, or group
9-9 hospital service company authorized to do business under the laws
9-10 of this state; or
9-11 (b) a word, symbol, device, slogan, or any
9-12 combination of these items, whether registered or not registered,
9-13 that is the same as or deceptively similar to one adopted and used
9-14 by an insurance entity, health maintenance organization, third
9-15 party administrator, or group hospital service company to
9-16 distinguish such entities, products, or service from other
9-17 entities, and includes the title, designation, character names, and
9-18 distinctive features of broadcast or other advertising.
9-19 Where two persons or entities are using a name, word, symbol,
9-20 device, slogan, or any combination of these items that are the same
9-21 or deceptively similar and are likely to cause confusion or a
9-22 mistake, the user who can demonstrate the first continuous actual
9-23 use of such name, word, symbol, device, slogan, or combination of
9-24 these items shall not have committed an unfair method of
9-25 competition or deceptive act or practice.
9-26 (10) Unfair Settlement Practices. (a) Engaging in
9-27 any of the following unfair settlement practices with respect to a
10-1 claim by an insured or beneficiary:
10-2 (i) misrepresenting to a claimant a
10-3 material fact or policy provision relating to coverage at issue;
10-4 (ii) failing to attempt in good faith to
10-5 effectuate a prompt, fair, and equitable settlement of a claim with
10-6 respect to which the insurer's liability has become reasonably
10-7 clear;
10-8 (iii) failing to attempt, in good faith,
10-9 to effectuate a prompt, fair, and equitable settlement under one
10-10 portion of a policy of a claim with respect to which the insurer's
10-11 liability has become reasonably clear in order to influence the
10-12 claimant to settle an additional claim under another portion of the
10-13 coverage, provided that this prohibition does not apply if payment
10-14 under one portion of the coverage constitutes evidence of liability
10-15 under another portion of the policy;
10-16 (iv) failing to provide promptly to a
10-17 policyholder a reasonable explanation of the basis in the policy,
10-18 in relation to the facts or applicable law, for the insurer's
10-19 denial of a claim or for the offer of a compromise settlement of a
10-20 claim;
10-21 (v) failing within a reasonable time to:
10-22 (A) affirm or deny coverage of a
10-23 claim to a policyholder; or
10-24 (B) submit a reservation of rights
10-25 to a policyholder;
10-26 (vi) refusing, failing, or unreasonably
10-27 delaying an offer of settlement under applicable first-party
11-1 coverage on the basis that other coverage may be available or that
11-2 third parties are responsible for the damages suffered, except as
11-3 may be specifically provided in the policy;
11-4 (vii) undertaking to enforce a full and
11-5 final release of a claim from a policyholder when only a partial
11-6 payment has been made, provided that this prohibition does not
11-7 apply to a compromise settlement of a doubtful or disputed claim;
11-8 (viii) refusing to pay a claim without
11-9 conducting a reasonable investigation with respect to the claim;
11-10 (ix) with respect to a Texas personal auto
11-11 policy, delaying or refusing settlement of a claim solely because
11-12 there is other insurance of a different type available to satisfy
11-13 all or any part of the loss forming the basis of that claim; or
11-14 (x) requiring a claimant, as a condition
11-15 of settling a claim, to produce the claimant's federal income tax
11-16 returns for examination or investigation by the person unless:
11-17 (A) the claimant is ordered to
11-18 produce those tax returns by a court;
11-19 (B) the claim involves a fire loss;
11-20 or
11-21 (C) the claim involves lost profits
11-22 or income.
11-23 (b) Paragraph (a) of this clause does not
11-24 provide a cause of action to a third party asserting one or more
11-25 claims against an insured covered under a liability insurance
11-26 policy.
11-27 (11) Misrepresentation of Insurance Policy.
12-1 Misrepresenting an insurance policy by:
12-2 (a) making an untrue statement of material fact;
12-3 (b) failing to state a material fact that is
12-4 necessary to make other statements made not misleading, considering
12-5 the circumstances under which the statements were made;
12-6 (c) making a statement in such manner as to
12-7 mislead a reasonably prudent person to a false conclusion of a
12-8 material fact;
12-9 (d) making a material misstatement of law; or
12-10 (e) failing to disclose any matter required by
12-11 law to be disclosed, including a failure to make disclosure in
12-12 accordance with another provision of this code.
12-13 (12) Illegal Remuneration for Certain Motor Vehicle
12-14 Repair Information. Violating Article 5.07-1(b)(1) or (c) of this
12-15 code.
12-16 SECTION 4. This Act takes effect September 1, 1997.
12-17 SECTION 5. The importance of this legislation and the
12-18 crowded condition of the calendars in both houses create an
12-19 emergency and an imperative public necessity that the
12-20 constitutional rule requiring bills to be read on three several
12-21 days in each house be suspended, and this rule is hereby suspended.