By Bosse H.B. No. 503
75R6 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 promulgated by the board, under an auto insurance policy that is
1-11 delivered, issued for delivery, or renewed in this state an insurer
1-12 may not, directly or indirectly, limit its coverage under a policy
1-13 covering damage to a motor vehicle by specifying the brand, type,
1-14 kind, age, or condition of parts or products that may be used to
1-15 repair the vehicle or by limiting the beneficiary of the policy
1-16 from selecting a person or shop to repair damage to the motor
1-17 vehicle covered under the policy.
1-18 (b) An insurer, an employee of an insurer, an agent of an
1-19 insurer, a solicitor of insurance for an insurer, an insurance
1-20 adjuster, or an entity that employs an insurance adjuster may not
1-21 solicit or accept a referral fee, gratuity, or other compensation
1-22 in connection with referring a person to another person or shop to
1-23 repair damage to a motor vehicle covered under an auto insurance
1-24 policy.
2-1 (c) Any rules promulgated by the board to implement this
2-2 article shall include, but not be limited to, requirements that:
2-3 (1) any limitation described in Subsection (a) of this
2-4 section is clearly and prominently displayed on the face of the
2-5 policy or certificate in lieu of a policy; and
2-6 (2) the insured give written consent to such a
2-7 limitation, following both oral and written notification of any
2-8 limitation at the time the policy is purchased.
2-9 SECTION 2. Section 17(a), Chapter 407, Acts of the 63rd
2-10 Legislature, Regular Session, 1973 (Article 21.07-4, Vernon's Texas
2-11 Insurance Code), is amended to read as follows:
2-12 (a) The department may discipline an adjuster or deny an
2-13 application under Section 5, Article 21.01-2, Insurance Code, for
2-14 any of the following causes:
2-15 (1) for any cause for which issuance of the license
2-16 could have been refused had it been existent and been known to the
2-17 board;
2-18 (2) if the applicant or licensee willfully violates or
2-19 knowingly participates in the violation of any provision of this
2-20 Act or Article 5.07-1(b), Insurance Code;
2-21 (3) if the applicant or licensee has obtained or
2-22 attempted to obtain any such license through willful
2-23 misrepresentation or fraud, or has failed to pass any examination
2-24 required under this Act;
2-25 (4) if the applicant or licensee has misappropriated,
2-26 or converted to the applicant's or licensee's own use, or has
2-27 illegally withheld moneys required to be held in a fiduciary
3-1 capacity;
3-2 (5) if the applicant or licensee has, with intent to
3-3 deceive, materially misrepresented the terms or effect of an
3-4 insurance contract, or has engaged in any fraudulent transactions;
3-5 or
3-6 (6) if the applicant or licensee is convicted, by
3-7 final judgment, of a felony.
3-8 SECTION 3. Section 4, Article 21.21, Insurance Code, is
3-9 amended to read as follows:
3-10 Sec. 4. UNFAIR METHODS OF COMPETITION AND UNFAIR OR
3-11 DECEPTIVE ACTS OR PRACTICES DEFINED. The following are hereby
3-12 defined as unfair methods of competition and unfair and deceptive
3-13 acts or practices in the business of insurance:
3-14 (1) Misrepresentations and False Advertising of Policy
3-15 Contracts. Making, issuing, circulating, or causing to be made,
3-16 issued or circulated, any estimate, illustration, circular or
3-17 statement misrepresenting the terms of any policy issued or to be
3-18 issued or the benefits or advantages promised thereby or the
3-19 dividends or share of the surplus to be received thereon, or making
3-20 any false or misleading statements as to the dividends or share of
3-21 surplus previously paid on similar policies, or making any
3-22 misleading representation or any misrepresentation as to the
3-23 financial condition of any insurer, or as to the legal reserve
3-24 system upon which any life insurer operates, or using any name or
3-25 title of any policy or class of policies misrepresenting the true
3-26 nature thereof, or making any misrepresentation to any policyholder
3-27 insured in any company for the purpose of inducing or tending to
4-1 induce such policyholder to lapse, forfeit, or surrender his
4-2 insurance;
4-3 (2) False Information and Advertising Generally.
4-4 Making, publishing, disseminating, circulating or placing before
4-5 the public, or causing, directly or indirectly, to be made,
4-6 published, disseminated, circulated, or placed before the public,
4-7 in a newspaper, magazine or other publication, or in the form of a
4-8 notice, circular, pamphlet, letter or poster, or over any radio or
4-9 television station, or in any other way, an advertisement,
4-10 announcement or statement containing any assertion, representation
4-11 or statement with respect to the business of insurance or with
4-12 respect to any person in the conduct of his insurance business,
4-13 which is untrue, deceptive or misleading;
4-14 (3) Defamation. Making, publishing, disseminating, or
4-15 circulating, directly or indirectly, or aiding, abetting or
4-16 encouraging the making, publishing, disseminating or circulating of
4-17 any oral or written statement or any pamphlet, circular, article or
4-18 literature which is false, or maliciously critical of or derogatory
4-19 to the financial condition of any insurer, and which is calculated
4-20 to injure any person engaged in the business of insurance;
4-21 (4) Boycott, Coercion and Intimidation. Entering into
4-22 any agreement to commit, or by any concerted action committing, any
4-23 act of boycott, coercion or intimidation resulting in or tending to
4-24 result in unreasonable restraint of, or monopoly in, the business
4-25 of insurance;
4-26 (5) False Financial Statements. (a) Filing with any
4-27 supervisory or other public official, or making, publishing,
5-1 disseminating, circulating or delivering to any person, or placing
5-2 before the public, or causing directly or indirectly, to be made,
5-3 published, disseminated, circulated, delivered to any person, or
5-4 placed before the public, any false statement of financial
5-5 condition of an insurer with intent to deceive;
5-6 (b) Making any false entry in any book, report
5-7 or statement of any insurer with intent to deceive any agent or
5-8 examiner lawfully appointed to examine into its condition or into
5-9 any of its affairs, or any public official to whom such insurer is
5-10 required by law to report, or who has authority by law to examine
5-11 into its condition or into any of its affairs, or, with like
5-12 intent, wilfully omitting to make a true entry of any material fact
5-13 pertaining to the business of such insurer in any book, report or
5-14 statement of such insurer;
5-15 (6) Stock Operations and Advisory Board Contracts.
5-16 Issuing or delivering or permitting agents, officers or employees
5-17 to issue or deliver, company stock or other capital stock, or
5-18 benefit certificates or shares in any corporation, or securities or
5-19 any special or advisory board contracts or other contracts of any
5-20 kind promising returns and profits as an inducement to insurance.
5-21 Provided, however, that nothing in this subsection shall be
5-22 construed as prohibiting the issuing or delivery of participating
5-23 insurance policies otherwise authorized by law.
5-24 (7) Unfair Discrimination. [(a)] Making or
5-25 permitting any unfair discrimination between individuals of the
5-26 same class and equal expectation of life in the rates charged for
5-27 any contract of life insurance or of life annuity or in the
6-1 dividends or other benefits payable thereon, or in any other of the
6-2 terms and conditions of such contract.
6-3 (8) Rebates. (a) Except as otherwise expressly
6-4 provided by law, knowingly permitting or offering to make or making
6-5 any contract of life insurance, life annuity or accident and health
6-6 insurance, or agreement as to such contract other than as plainly
6-7 expressed in the contract issued thereon, or paying or allowing, or
6-8 giving or offering to pay, allow, or give, directly or indirectly,
6-9 as inducement to such insurance, or annuity, any rebate of premiums
6-10 payable on the contract, or any special favor or advantage in the
6-11 dividends or other benefits thereon, or any valuable consideration
6-12 or inducement whatever not specified in the contract; or giving, or
6-13 selling, or purchasing or offering to give, sell, or purchase as
6-14 inducement to such insurance or annuity or in connection therewith,
6-15 any stocks, bonds, or other securities of any insurance company or
6-16 other corporation, association, or partnership, or any dividends or
6-17 profits accrued thereon, or anything of value whatsoever not
6-18 specified in the contract;
6-19 (b) Nothing in clause 7 or paragraph (a) of
6-20 clause 8 of this subsection shall be construed as including within
6-21 the definition of discrimination or rebates any of the following
6-22 practices:
6-23 (i) in the case of any contract of life
6-24 insurance or life annuity, paying bonuses to policyholders or
6-25 otherwise abating their premiums in whole or in part out of surplus
6-26 accumulated from non-participating insurance, provided that any
6-27 such bonuses or abatement of premiums shall be fair and equitable
7-1 to policyholders and for the best interests of the company and its
7-2 policyholders;
7-3 (ii) in the case of life insurance
7-4 policies issued on the industrial debit plan, making allowance to
7-5 policyholders who have continuously for a specified period made
7-6 premium payments directly to an office of the insurer in an amount
7-7 which fairly represents the saving in collection expenses;
7-8 (iii) readjustment of the rate of premium
7-9 for a group insurance policy based on the loss or expense
7-10 experience thereunder, at the end of the first or any subsequent
7-11 policy year of insurance thereunder, which may be made retroactive
7-12 only for such policy year.
7-13 (9) Deceptive Name, Word, Symbol, Device, or Slogan.
7-14 Using, displaying, publishing, circulating, distributing, or
7-15 causing to be used, displayed, published, circulated, or
7-16 distributed in any letter, pamphlet, circular, contract, policy,
7-17 evidence of coverage, article, poster, or other document,
7-18 literature, or public media of:
7-19 (a) a name as the corporate or business name of
7-20 a person or entity engaged in an insurance or insurance related
7-21 business in this state that is the same as, or deceptively similar
7-22 to, the name adopted and used by an insurance entity, health
7-23 maintenance organization, third party administrator, or group
7-24 hospital service company authorized to do business under the laws
7-25 of this state; or
7-26 (b) a word, symbol, device, slogan, or any
7-27 combination of these items, whether registered or not registered,
8-1 that is the same as or deceptively similar to one adopted and used
8-2 by an insurance entity, health maintenance organization, third
8-3 party administrator, or group hospital service company to
8-4 distinguish such entities, products, or service from other
8-5 entities, and includes the title, designation, character names, and
8-6 distinctive features of broadcast or other advertising.
8-7 Where two persons or entities are using a name, word, symbol,
8-8 device, slogan, or any combination of these items that are the same
8-9 or deceptively similar and are likely to cause confusion or a
8-10 mistake, the user who can demonstrate the first continuous actual
8-11 use of such name, word, symbol, device, slogan, or combination of
8-12 these items shall not have committed an unfair method of
8-13 competition or deceptive act or practice.
8-14 (10) Unfair Settlement Practices. (a) Engaging in
8-15 any of the following unfair settlement practices with respect to a
8-16 claim by an insured or beneficiary:
8-17 (i) misrepresenting to a claimant a
8-18 material fact or policy provision relating to coverage at issue;
8-19 (ii) failing to attempt in good faith to
8-20 effectuate a prompt, fair, and equitable settlement of a claim with
8-21 respect to which the insurer's liability has become reasonably
8-22 clear;
8-23 (iii) failing to attempt, in good faith,
8-24 to effectuate a prompt, fair, and equitable settlement under one
8-25 portion of a policy of a claim with respect to which the insurer's
8-26 liability has become reasonably clear in order to influence the
8-27 claimant to settle an additional claim under another portion of the
9-1 coverage, provided that this prohibition does not apply if payment
9-2 under one portion of the coverage constitutes evidence of liability
9-3 under another portion of the policy;
9-4 (iv) failing to provide promptly to a
9-5 policyholder a reasonable explanation of the basis in the policy,
9-6 in relation to the facts or applicable law, for the insurer's
9-7 denial of a claim or for the offer of a compromise settlement of a
9-8 claim;
9-9 (v) failing within a reasonable time to:
9-10 (A) affirm or deny coverage of a
9-11 claim to a policyholder; or
9-12 (B) submit a reservation of rights
9-13 to a policyholder;
9-14 (vi) refusing, failing, or unreasonably
9-15 delaying an offer of settlement under applicable first-party
9-16 coverage on the basis that other coverage may be available or that
9-17 third parties are responsible for the damages suffered, except as
9-18 may be specifically provided in the policy;
9-19 (vii) undertaking to enforce a full and
9-20 final release of a claim from a policyholder when only a partial
9-21 payment has been made, provided that this prohibition does not
9-22 apply to a compromise settlement of a doubtful or disputed claim;
9-23 (viii) refusing to pay a claim without
9-24 conducting a reasonable investigation with respect to the claim;
9-25 (ix) with respect to a Texas personal auto
9-26 policy, delaying or refusing settlement of a claim solely because
9-27 there is other insurance of a different type available to satisfy
10-1 all or any part of the loss forming the basis of that claim; or
10-2 (x) requiring a claimant, as a condition
10-3 of settling a claim, to produce the claimant's federal income tax
10-4 returns for examination or investigation by the person unless:
10-5 (A) the claimant is ordered to
10-6 produce those tax returns by a court;
10-7 (B) the claim involves a fire loss;
10-8 or
10-9 (C) the claim involves lost profits
10-10 or income.
10-11 (b) Paragraph (a) of this clause does not
10-12 provide a cause of action to a third party asserting one or more
10-13 claims against an insured covered under a liability insurance
10-14 policy.
10-15 (11) Misrepresentation of Insurance Policy.
10-16 Misrepresenting an insurance policy by:
10-17 (a) making an untrue statement of material fact;
10-18 (b) failing to state a material fact that is
10-19 necessary to make other statements made not misleading, considering
10-20 the circumstances under which the statements were made;
10-21 (c) making a statement in such manner as to
10-22 mislead a reasonably prudent person to a false conclusion of a
10-23 material fact;
10-24 (d) making a material misstatement of law; or
10-25 (e) failing to disclose any matter required by
10-26 law to be disclosed, including a failure to make disclosure in
10-27 accordance with another provision of this code.
11-1 (12) Illegal Remuneration for Referral for Repair.
11-2 Violating Article 5.07-1(b) of this code.
11-3 SECTION 4. This Act takes effect September 1, 1997.
11-4 SECTION 5. The importance of this legislation and the
11-5 crowded condition of the calendars in both houses create an
11-6 emergency and an imperative public necessity that the
11-7 constitutional rule requiring bills to be read on three several
11-8 days in each house be suspended, and this rule is hereby suspended.