By Farrar H.B. No. 423
75R1228 DLF-D
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, or condition of parts or
1-15 products that may be used to repair the vehicle or by limiting the
1-16 beneficiary of the policy from selecting a person or repair
1-17 facility [shop] to repair damage to the motor vehicle covered under
1-18 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 in connection with referring a person to another
2-2 person or repair facility to repair the damage;
2-3 (2) require or encourage a person to use another
2-4 person or repair facility identified on a preferred list to repair
2-5 the damage; or
2-6 (3) offer an incentive, including guaranteeing repair
2-7 work, to induce a person to use an identified person or repair
2-8 facility.
2-9 (c) Any rules adopted [promulgated] by the commissioner
2-10 [board] to implement this article shall include, but not be limited
2-11 to, requirements that:
2-12 (1) any limitation described in Subsection (a) of this
2-13 section is clearly and prominently displayed on the face of the
2-14 policy or certificate in lieu of a policy; and
2-15 (2) the insured give written consent to such a
2-16 limitation, following both oral and written notification of any
2-17 limitation at the time the policy is purchased.
2-18 SECTION 2. Section 17(a), Chapter 407, Acts of the 63rd
2-19 Legislature, Regular Session, 1973 (Article 21.07-4, Vernon's Texas
2-20 Insurance Code), is amended to read as follows:
2-21 (a) The department may discipline an adjuster or deny an
2-22 application under Section 5, Article 21.01-2, Insurance Code, for
2-23 any of the following causes:
2-24 (1) for any cause for which issuance of the license
2-25 could have been refused had it been existent and been known to the
2-26 board;
2-27 (2) if the applicant or licensee willfully violates or
3-1 knowingly participates in the violation of any provision of this
3-2 Act or Article 5.07-1(b), Insurance Code;
3-3 (3) if the applicant or licensee has obtained or
3-4 attempted to obtain any such license through willful
3-5 misrepresentation or fraud, or has failed to pass any examination
3-6 required under this Act;
3-7 (4) if the applicant or licensee has misappropriated,
3-8 or converted to the applicant's or licensee's own use, or has
3-9 illegally withheld moneys required to be held in a fiduciary
3-10 capacity;
3-11 (5) if the applicant or licensee has, with intent to
3-12 deceive, materially misrepresented the terms or effect of an
3-13 insurance contract, or has engaged in any fraudulent transactions;
3-14 or
3-15 (6) if the applicant or licensee is convicted, by
3-16 final judgment, of a felony.
3-17 SECTION 3. Section 4, Article 21.21, Insurance Code, is
3-18 amended to read as follows:
3-19 Sec. 4. UNFAIR METHODS OF COMPETITION AND UNFAIR OR
3-20 DECEPTIVE ACTS OR PRACTICES DEFINED. The following are hereby
3-21 defined as unfair methods of competition and unfair and deceptive
3-22 acts or practices in the business of insurance:
3-23 (1) Misrepresentations and False Advertising of Policy
3-24 Contracts. Making, issuing, circulating, or causing to be made,
3-25 issued or circulated, any estimate, illustration, circular or
3-26 statement misrepresenting the terms of any policy issued or to be
3-27 issued or the benefits or advantages promised thereby or the
4-1 dividends or share of the surplus to be received thereon, or making
4-2 any false or misleading statements as to the dividends or share of
4-3 surplus previously paid on similar policies, or making any
4-4 misleading representation or any misrepresentation as to the
4-5 financial condition of any insurer, or as to the legal reserve
4-6 system upon which any life insurer operates, or using any name or
4-7 title of any policy or class of policies misrepresenting the true
4-8 nature thereof, or making any misrepresentation to any policyholder
4-9 insured in any company for the purpose of inducing or tending to
4-10 induce such policyholder to lapse, forfeit, or surrender his
4-11 insurance;
4-12 (2) False Information and Advertising Generally.
4-13 Making, publishing, disseminating, circulating or placing before
4-14 the public, or causing, directly or indirectly, to be made,
4-15 published, disseminated, circulated, or placed before the public,
4-16 in a newspaper, magazine or other publication, or in the form of a
4-17 notice, circular, pamphlet, letter or poster, or over any radio or
4-18 television station, or in any other way, an advertisement,
4-19 announcement or statement containing any assertion, representation
4-20 or statement with respect to the business of insurance or with
4-21 respect to any person in the conduct of his insurance business,
4-22 which is untrue, deceptive or misleading;
4-23 (3) Defamation. Making, publishing, disseminating, or
4-24 circulating, directly or indirectly, or aiding, abetting or
4-25 encouraging the making, publishing, disseminating or circulating of
4-26 any oral or written statement or any pamphlet, circular, article or
4-27 literature which is false, or maliciously critical of or derogatory
5-1 to the financial condition of any insurer, and which is calculated
5-2 to injure any person engaged in the business of insurance;
5-3 (4) Boycott, Coercion and Intimidation. Entering into
5-4 any agreement to commit, or by any concerted action committing, any
5-5 act of boycott, coercion or intimidation resulting in or tending to
5-6 result in unreasonable restraint of, or monopoly in, the business
5-7 of insurance;
5-8 (5) False Financial Statements. (a) Filing with any
5-9 supervisory or other public official, or making, publishing,
5-10 disseminating, circulating or delivering to any person, or placing
5-11 before the public, or causing directly or indirectly, to be made,
5-12 published, disseminated, circulated, delivered to any person, or
5-13 placed before the public, any false statement of financial
5-14 condition of an insurer with intent to deceive;
5-15 (b) Making any false entry in any book, report
5-16 or statement of any insurer with intent to deceive any agent or
5-17 examiner lawfully appointed to examine into its condition or into
5-18 any of its affairs, or any public official to whom such insurer is
5-19 required by law to report, or who has authority by law to examine
5-20 into its condition or into any of its affairs, or, with like
5-21 intent, wilfully omitting to make a true entry of any material fact
5-22 pertaining to the business of such insurer in any book, report or
5-23 statement of such insurer;
5-24 (6) Stock Operations and Advisory Board Contracts.
5-25 Issuing or delivering or permitting agents, officers or employees
5-26 to issue or deliver, company stock or other capital stock, or
5-27 benefit certificates or shares in any corporation, or securities or
6-1 any special or advisory board contracts or other contracts of any
6-2 kind promising returns and profits as an inducement to insurance.
6-3 Provided, however, that nothing in this subsection shall be
6-4 construed as prohibiting the issuing or delivery of participating
6-5 insurance policies otherwise authorized by law.
6-6 (7) Unfair Discrimination. [(a)] Making or
6-7 permitting any unfair discrimination between individuals of the
6-8 same class and equal expectation of life in the rates charged for
6-9 any contract of life insurance or of life annuity or in the
6-10 dividends or other benefits payable thereon, or in any other of the
6-11 terms and conditions of such contract.
6-12 (8) Rebates. (a) Except as otherwise expressly
6-13 provided by law, knowingly permitting or offering to make or making
6-14 any contract of life insurance, life annuity or accident and health
6-15 insurance, or agreement as to such contract other than as plainly
6-16 expressed in the contract issued thereon, or paying or allowing, or
6-17 giving or offering to pay, allow, or give, directly or indirectly,
6-18 as inducement to such insurance, or annuity, any rebate of premiums
6-19 payable on the contract, or any special favor or advantage in the
6-20 dividends or other benefits thereon, or any valuable consideration
6-21 or inducement whatever not specified in the contract; or giving, or
6-22 selling, or purchasing or offering to give, sell, or purchase as
6-23 inducement to such insurance or annuity or in connection therewith,
6-24 any stocks, bonds, or other securities of any insurance company or
6-25 other corporation, association, or partnership, or any dividends or
6-26 profits accrued thereon, or anything of value whatsoever not
6-27 specified in the contract;
7-1 (b) Nothing in clause 7 or paragraph (a) of
7-2 clause 8 of this subsection shall be construed as including within
7-3 the definition of discrimination or rebates any of the following
7-4 practices:
7-5 (i) in the case of any contract of life
7-6 insurance or life annuity, paying bonuses to policyholders or
7-7 otherwise abating their premiums in whole or in part out of surplus
7-8 accumulated from non-participating insurance, provided that any
7-9 such bonuses or abatement of premiums shall be fair and equitable
7-10 to policyholders and for the best interests of the company and its
7-11 policyholders;
7-12 (ii) in the case of life insurance
7-13 policies issued on the industrial debit plan, making allowance to
7-14 policyholders who have continuously for a specified period made
7-15 premium payments directly to an office of the insurer in an amount
7-16 which fairly represents the saving in collection expenses;
7-17 (iii) readjustment of the rate of premium
7-18 for a group insurance policy based on the loss or expense
7-19 experience thereunder, at the end of the first or any subsequent
7-20 policy year of insurance thereunder, which may be made retroactive
7-21 only for such policy year.
7-22 (9) Deceptive Name, Word, Symbol, Device, or Slogan.
7-23 Using, displaying, publishing, circulating, distributing, or
7-24 causing to be used, displayed, published, circulated, or
7-25 distributed in any letter, pamphlet, circular, contract, policy,
7-26 evidence of coverage, article, poster, or other document,
7-27 literature, or public media of:
8-1 (a) a name as the corporate or business name of
8-2 a person or entity engaged in an insurance or insurance related
8-3 business in this state that is the same as, or deceptively similar
8-4 to, the name adopted and used by an insurance entity, health
8-5 maintenance organization, third party administrator, or group
8-6 hospital service company authorized to do business under the laws
8-7 of this state; or
8-8 (b) a word, symbol, device, slogan, or any
8-9 combination of these items, whether registered or not registered,
8-10 that is the same as or deceptively similar to one adopted and used
8-11 by an insurance entity, health maintenance organization, third
8-12 party administrator, or group hospital service company to
8-13 distinguish such entities, products, or service from other
8-14 entities, and includes the title, designation, character names, and
8-15 distinctive features of broadcast or other advertising.
8-16 Where two persons or entities are using a name, word, symbol,
8-17 device, slogan, or any combination of these items that are the same
8-18 or deceptively similar and are likely to cause confusion or a
8-19 mistake, the user who can demonstrate the first continuous actual
8-20 use of such name, word, symbol, device, slogan, or combination of
8-21 these items shall not have committed an unfair method of
8-22 competition or deceptive act or practice.
8-23 (10) Unfair Settlement Practices. (a) Engaging in
8-24 any of the following unfair settlement practices with respect to a
8-25 claim by an insured or beneficiary:
8-26 (i) misrepresenting to a claimant a
8-27 material fact or policy provision relating to coverage at issue;
9-1 (ii) failing to attempt in good faith to
9-2 effectuate a prompt, fair, and equitable settlement of a claim with
9-3 respect to which the insurer's liability has become reasonably
9-4 clear;
9-5 (iii) failing to attempt, in good faith,
9-6 to effectuate a prompt, fair, and equitable settlement under one
9-7 portion of a policy of a claim with respect to which the insurer's
9-8 liability has become reasonably clear in order to influence the
9-9 claimant to settle an additional claim under another portion of the
9-10 coverage, provided that this prohibition does not apply if payment
9-11 under one portion of the coverage constitutes evidence of liability
9-12 under another portion of the policy;
9-13 (iv) failing to provide promptly to a
9-14 policyholder a reasonable explanation of the basis in the policy,
9-15 in relation to the facts or applicable law, for the insurer's
9-16 denial of a claim or for the offer of a compromise settlement of a
9-17 claim;
9-18 (v) failing within a reasonable time to:
9-19 (A) affirm or deny coverage of a
9-20 claim to a policyholder; or
9-21 (B) submit a reservation of rights
9-22 to a policyholder;
9-23 (vi) refusing, failing, or unreasonably
9-24 delaying an offer of settlement under applicable first-party
9-25 coverage on the basis that other coverage may be available or that
9-26 third parties are responsible for the damages suffered, except as
9-27 may be specifically provided in the policy;
10-1 (vii) undertaking to enforce a full and
10-2 final release of a claim from a policyholder when only a partial
10-3 payment has been made, provided that this prohibition does not
10-4 apply to a compromise settlement of a doubtful or disputed claim;
10-5 (viii) refusing to pay a claim without
10-6 conducting a reasonable investigation with respect to the claim;
10-7 (ix) with respect to a Texas personal auto
10-8 policy, delaying or refusing settlement of a claim solely because
10-9 there is other insurance of a different type available to satisfy
10-10 all or any part of the loss forming the basis of that claim; or
10-11 (x) requiring a claimant, as a condition
10-12 of settling a claim, to produce the claimant's federal income tax
10-13 returns for examination or investigation by the person unless:
10-14 (A) the claimant is ordered to
10-15 produce those tax returns by a court;
10-16 (B) the claim involves a fire loss;
10-17 or
10-18 (C) the claim involves lost profits
10-19 or income.
10-20 (b) Paragraph (a) of this clause does not
10-21 provide a cause of action to a third party asserting one or more
10-22 claims against an insured covered under a liability insurance
10-23 policy.
10-24 (11) Misrepresentation of Insurance Policy.
10-25 Misrepresenting an insurance policy by:
10-26 (a) making an untrue statement of material fact;
10-27 (b) failing to state a material fact that is
11-1 necessary to make other statements made not misleading, considering
11-2 the circumstances under which the statements were made;
11-3 (c) making a statement in such manner as to
11-4 mislead a reasonably prudent person to a false conclusion of a
11-5 material fact;
11-6 (d) making a material misstatement of law; or
11-7 (e) failing to disclose any matter required by
11-8 law to be disclosed, including a failure to make disclosure in
11-9 accordance with another provision of this code.
11-10 (12) Illegal Remuneration for Certain Motor Vehicle
11-11 Repair Information. Violating Article 5.07-1(b) of this code.
11-12 SECTION 4. This Act takes effect September 1, 1997.
11-13 SECTION 5. The importance of this legislation and the
11-14 crowded condition of the calendars in both houses create an
11-15 emergency and an imperative public necessity that the
11-16 constitutional rule requiring bills to be read on three several
11-17 days in each house be suspended, and this rule is hereby suspended.