1-1     By:  Farrar (Senate Sponsor - Cain)                    H.B. No. 423

 1-2           (In the Senate - Received from the House April 29, 1997;

 1-3     April 30, 1997, read first time and referred to Committee on

 1-4     Economic Development; May 7, 1997, reported favorably by the

 1-5     following vote:  Yeas 7, Nays 0; May 7, 1997, sent to printer.)

 1-6                            A BILL TO BE ENTITLED

 1-7                                   AN ACT

 1-8     relating to repair of motor vehicles covered under insurance

 1-9     policies.

1-10           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

1-11           SECTION 1.  Article 5.07-1, Insurance Code, is amended to

1-12     read as follows:

1-13           Art. 5.07-1.  Repair of Motor Vehicles; Disclosure of

1-14     Consumer Information.  (a)  Except as provided by rules duly

1-15     adopted [promulgated] by the commissioner [board], under an auto

1-16     insurance policy that is delivered, issued for delivery, or renewed

1-17     in this state an insurer may not, directly or indirectly, limit its

1-18     coverage under a policy covering damage to a motor vehicle by

1-19     specifying the brand, type, kind, age, vendor, supplier, or

1-20     condition of parts or products that may be used to repair the

1-21     vehicle or by limiting the beneficiary of the policy from selecting

1-22     a repair person or facility [shop] to repair damage to the motor

1-23     vehicle covered under the policy.

1-24           (b)  In connection with the repair of damage to a motor

1-25     vehicle covered under an auto insurance policy, an insurer, an

1-26     employee of an insurer, an agent of an insurer, a solicitor of

1-27     insurance for an insurer, an insurance adjuster, or an entity that

1-28     employs an insurance adjuster may not:

1-29                 (1)  solicit or accept a referral fee or gratuity in

1-30     exchange for referring a beneficiary or third-party claimant to a

1-31     repair person or facility to repair the damage;

1-32                 (2)  state or suggest, either orally or in writing, to

1-33     a beneficiary that a specific repair person or facility or a repair

1-34     person or facility identified on a preferred list compiled by an

1-35     insurer must be used by a beneficiary in order for the damage

1-36     repair or parts replacement to be covered by the policy; or

1-37                 (3)  restrict a beneficiary's or third-party claimant's

1-38     right to choose a repair person or facility by requiring the

1-39     beneficiary or third-party claimant to travel an unreasonable

1-40     distance to repair the damage.

1-41           (c)  A contract between an insurer and a repair person or

1-42     facility, including an agreement under which the repair person or

1-43     facility agrees to extend discounts for parts or labor to the

1-44     insurer in exchange for referrals by the insurer, may not result in

1-45     a reduction of coverage under the insured's auto insurance policy.

1-46           (d)  An insurer may not prohibit a repair person or facility

1-47     from providing a beneficiary or third-party claimant with

1-48     information that states the description, manufacturer, or source of

1-49     the parts used and the amounts charged to the insurer for the parts

1-50     and related labor.

1-51           (e)  At the time the vehicle is presented to an insurer or an

1-52     insurance adjuster or other person in connection with a claim for

1-53     damage repair, the insurer or insurance adjuster or other person

1-54     shall provide to the beneficiary or third-party claimant notice of

1-55     the provisions of this article.  The commissioner shall adopt a

1-56     rule establishing the method or methods insurers shall use to

1-57     comply with the notice provisions in this subsection.

1-58           (f)  Any beneficiary, third-party claimant, or repair person

1-59     or facility may submit a written, documented complaint to the

1-60     department with respect to an alleged violation of this article.

1-61           (g)  In the settlement of liability claims by a third party

1-62     against an insured for property damage claimed by the third party,

1-63     an insurer may not require the third-party claimant to have repairs

1-64     made by a particular repair person or facility or to use a

 2-1     particular brand, type, kind, age, vendor, supplier, or condition

 2-2     of parts or products.

 2-3           (h)  The commissioner may exercise the rule-making authority

 2-4     under Article 21.21-2 of this code with respect to any fraudulent

 2-5     activity of any party to an agreement described by Subsection (c)

 2-6     of this article.

 2-7           (i)  Any rules adopted [promulgated] by the commissioner

 2-8     [board] to implement this article shall include, but not be limited

 2-9     to, requirements that:

2-10                 (1)  any limitation described in Subsection (a) of this

2-11     section is clearly and prominently displayed on the face of the

2-12     policy or certificate in lieu of a policy; and

2-13                 (2)  the insured give written consent to such a

2-14     limitation, following both oral and written notification of any

2-15     limitation at the time the policy is purchased.

2-16           SECTION 2.  This Act takes effect September 1, 1997.

2-17           SECTION 3.  The importance of this legislation and the

2-18     crowded condition of the calendars in both houses create an

2-19     emergency and an imperative public necessity that the

2-20     constitutional rule requiring bills to be read on three several

2-21     days in each house be suspended, and this rule is hereby suspended.

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