Bill not drafted by TLC or Senate E&E.
Line and page numbers may not match official copy.
By Dutton H.B. No. 3264
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the regulation and policy forms of certain lines of
1-3 insurance.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Section 1, Article 5.13-2, Insurance Code, is
1-6 amended to read as follows:
1-7 Sec. 1. Purpose. This article governs the regulation of
1-8 general liability, commercial property, which shall include farm
1-9 and ranch owners and farm and ranch policies, all commercial
1-10 casualty, and medical professional liability insurance rates and
1-11 forms. It does not govern automobile, fidelity, surety, or
1-12 guaranty bonds. The purposes of this article are to:
1-13 (1) promote the public welfare by regulating insurance
1-14 rates to prohibit excessive, inadequate, or unfairly discriminatory
1-15 rates;
1-16 (2) promote availability of insurance;
1-17 (3) promote price competition among insurers to
1-18 provide rates and premiums that are responsive to competitive
1-19 market conditions;
1-20 (4) prohibit price-fixing agreements and other
1-21 anticompetitive behavior by insurers;
1-22 (5) regulate the insurance forms used for lines of
1-23 insurance subject to this article to ensure that they are not
1-24 unjust, unfair, inequitable, misleading, or deceptive; and
2-1 (6) provide regulatory procedures for the maintenance
2-2 of appropriate information reporting systems.
2-3 SECTION 2. Subsection (e), Section 8, Article 5.13-2,
2-4 Insurance Code, is amended to read as follows:
2-5 (e) The commissioner may promulgate standard insurance
2-6 policy forms, endorsements, and other related forms that may be
2-7 used, at the discretion of the insurer, by an insurer instead of
2-8 the insurer's own forms in writing insurance subject to this
2-9 article. The commissioner may disapprove a form or endorsement
2-10 filed under this section, or withdraw any previous approval
2-11 thereof, if the form or endorsement:
2-12 (1) violates or does not comply with this code, or any
2-13 valid rule relating thereto duly adopted by the commissioner, or is
2-14 otherwise contrary to law; or
2-15 (2) contains provisions or has any titles or headings
2-16 which are unjust, encourage misrepresentation, are deceptive, or
2-17 violate public policy. [Forms submitted by insurers for approval
2-18 under this section must provide coverage equivalent to that
2-19 provided in the policy forms used for these lines of coverage on
2-20 the effective date of this article. An endorsement may not reduce
2-21 coverage provided under the approved policy form.]
2-22 SECTION 3. Subsection (b), Article 5.25, Insurance Code, is
2-23 amended to read as follows:
2-24 (b) Notwithstanding Subsection (a) of this article, on and
2-25 after March 1, 1992, rates for homeowners and [farm and ranch
2-26 owner's] residential fire and residential allied lines insurance
2-27 coverage under this subchapter are determined as provided by
2-28 Subchapter M of this chapter, and rates for other lines of
2-29 insurance subject to this subchapter are determined as provided by
2-30 Article 5.13-2 of this code. This subsection does not affect the
3-1 requirement for the commissioner to conduct inspections of
3-2 commercial property and prescribe a manual of rules and rating
3-3 schedules for commercial property under this subchapter.
3-4 SECTION 4. Subsection (b), Article 5.25A, Insurance Code, is
3-5 amended to read as follows:
3-6 (b) Notwithstanding Subsection (a) of this article, on and
3-7 after March 1, 1992, rates for homeowners and [farm and ranch
3-8 owner's] residential fire and residential allied lines insurance
3-9 coverage under this subchapter are determined as provided by
3-10 Subchapter M of this chapter, and rates for other lines of
3-11 insurance subject to this subchapter are determined as provided by
3-12 Article 5.13-2 of this code.
3-13 SECTION 5. Subsection (i), Article 5.26, Insurance Code, is
3-14 amended to read as follows:
3-15 (i) Notwithstanding Subsections (a)-(h) of this article, on
3-16 and after March 1, 1992, rates for homeowners and [farm and ranch
3-17 owner's] residential fire and residential allied lines insurance
3-18 coverage under this subchapter are determined as provided by
3-19 Subchapter M of this chapter, and rates for other lines of
3-20 insurance subject to this subchapter are determined as provided by
3-21 Article 5.13-2 of this code.
3-22 SECTION 6. Subsection (d), Article 5.28, Insurance Code, is
3-23 amended to read as follows:
3-24 (d) Notwithstanding Subsection (a) of this article, on and
3-25 after March 1, 1992, rates for homeowners and [farm and ranch
3-26 owner's] residential fire and residential allied lines insurance
3-27 coverage under this subchapter are determined as provided by
3-28 Subchapter M of this chapter, and rates for other lines of
3-29 insurance subject to this subchapter are determined as provided by
3-30 Article 5.13-2 of this code.
4-1 SECTION 7. Subsection (b), Article 5.29, Insurance Code, is
4-2 amended to read as follows:
4-3 (b) Notwithstanding Subsection (a) of this article, on and
4-4 after March 1, 1992, rates for homeowners and [farm and ranch
4-5 owner's] residential fire and residential allied lines insurance
4-6 coverage under this subchapter are determined as provided by
4-7 Subchapter M of this chapter, and rates for other lines of
4-8 insurance subject to this subchapter are determined as provided by
4-9 Article 5.13-2 of this code.
4-10 SECTION 8. Subsection (b), Article 5.30, Insurance Code, is
4-11 amended to read as follows:
4-12 (b) Notwithstanding Subsection (a) of this article, on and
4-13 after March 1, 1992, rates for homeowners and [farm and ranch
4-14 owner's] residential fire and residential allied lines insurance
4-15 coverage under this subchapter are determined as provided by
4-16 Subchapter M of this chapter, and rates for other lines of
4-17 insurance subject to this subchapter are determined as provided by
4-18 Article 5.13-2 of this code.
4-19 SECTION 9. Subsection (b), Article 5.31, Insurance Code, is
4-20 amended to read as follows:
4-21 (b) Notwithstanding Subsection (a) of this article, on and
4-22 after March 1, 1992, rates for homeowners and [farm and ranch
4-23 owner's] residential fire and residential allied lines insurance
4-24 coverage under this subchapter are determined as provided by
4-25 Subchapter M of this chapter, and rates for other lines of
4-26 insurance subject to this subchapter are determined as provided by
4-27 Article 5.13-2 of this code.
4-28 SECTION 10. Subsection (b), Article 5.32, Insurance Code, is
4-29 amended to read as follows:
4-30 (b) Notwithstanding Subsection (a) of this article, on and
5-1 after March 1, 1992, rates for homeowners and [farm and ranch
5-2 owner's] residential fire and residential allied lines insurance
5-3 coverage under this subchapter are determined as provided by
5-4 Subchapter M of this chapter, and rates for other lines of
5-5 insurance subject to this subchapter are determined as provided by
5-6 Article 5.13-2 of this code.
5-7 SECTION 11. Subsection (a), Section 2, Article 5.33B,
5-8 Insurance Code, as added by Section 10, Chapter 415, Acts of the
5-9 74th Legislature, 1995, is amended to read as follows:
5-10 (a) "Residential property insurance" means insurance against
5-11 loss to real or tangible personal property at a fixed location
5-12 provided in a homeowners policy or[,] residential fire and allied
5-13 lines policy[, or farm and ranch owners policy].
5-14 SECTION 12. Subsection (b), Article 5.34, Insurance Code, is
5-15 amended to read as follows:
5-16 (b) Notwithstanding Subsection (a) of this article, on and
5-17 after March 1, 1992, rates for homeowners and [farm and ranch
5-18 owner's] residential fire and residential allied lines insurance
5-19 coverage under this subchapter are determined as provided by
5-20 Subchapter M of this chapter, and rates for other lines of
5-21 insurance subject to this subchapter are determined as provided by
5-22 Article 5.13-2 of this code.
5-23 SECTION 13. Article 5.35, Insurance Code, is amended to read
5-24 as follows:
5-25 Art. 5.35. POLICY FORMS. (a) The commissioner [Board]
5-26 shall adopt policy forms and endorsements for each kind of
5-27 insurance subject to this subchapter other than a line regulated
5-28 under Article 5.13-2 of this code that may be used by an insurer
5-29 without filing for approval to use such forms. The commissioner
5-30 may also adopt policy forms and endorsements of national insurers
6-1 for each kind of insurance subject to this subchapter other than a
6-2 line regulated under Article 5.13-2 of this code on the request of
6-3 such an insurer. For purposes of this subsection, "national
6-4 insurer" means an insurer subject to this article that, either
6-5 directly or together with its affiliates as part of an insurance
6-6 holding company system as those terms are defined by Article
6-7 21.49-1, is licensed to do business and write the kinds of
6-8 insurance that are subject to this subchapter in 26 or more states.
6-9 [The coverage provided by policy forms and endorsements adopted
6-10 under this subsection is the minimum coverage that may be provided
6-11 under an insurance policy for that type of insurance in this
6-12 State.]
6-13 (b) The commissioner may approve the use of policy forms and
6-14 endorsements adopted by a national organization of insurance
6-15 companies or a similar organization, if such forms or endorsements
6-16 are filed with and are approved by the commissioner in accordance
6-17 with this article. [Except as provided by Subsections (d) and (e)
6-18 of this article, an insurer may only use forms adopted by the Board
6-19 under this article in writing insurance subject to this subchapter
6-20 in this State.]
6-21 (c) An insurer may use an endorsement to the policy forms
6-22 adopted or approved by the commissioner under this article if the
6-23 endorsement is approved by the commissioner pursuant to this
6-24 article [not enter into a contract or agreement concerning an
6-25 individual policy that is not contained in the policy. Such a
6-26 contract or agreement is void].
6-27 (d) Unless adopted or approved by the commissioner pursuant
6-28 to Subsection (a) or (b) of this article or, in the case of an
6-29 endorsement, under Subsection (c) of this article, an insurance
6-30 policy or endorsement for use in writing the types of insurance
7-1 subject to this article may not be delivered or issued for delivery
7-2 in this state. [The Board may approve the use of policy forms
7-3 adopted by a national organization of insurance companies, or
7-4 similar organization, if the forms, with any endorsement to the
7-5 forms required and approved by the Board, provides coverage
7-6 equivalent to the coverage provided by the policy forms adopted by
7-7 the Board under Subsection (a) of this section.]
7-8 (e) Each filing pursuant to Subsection (b) or (c) of this
7-9 article shall be made not later than the 60th day before the date
7-10 of any use or delivery for use. At the expiration of the 60-day
7-11 period, a filed form or endorsement is approved unless before the
7-12 expiration of the 60 days the commissioner approves or disapproves
7-13 the form or endorsement by order. Approval of a form or
7-14 endorsement by the commissioner constitutes a waiver of any
7-15 unexpired portion of the 60-day period. The commissioner may
7-16 extend, by not more than an additional 30 days, the period during
7-17 which the commissioner may approve or disapprove a form or
7-18 endorsement by giving notice to the filer of the extension before
7-19 the expiration of the initial period. At the expiration of any
7-20 extension and in the absence of any earlier approval or
7-21 disapproval, the form or endorsement shall be considered approved.
7-22 For good cause shown, the commissioner may withdraw the
7-23 commissioner's approval at any time after notice and hearing. [An
7-24 insurer may use an endorsement to the policy forms adopted or
7-25 approved by the Board under this article if the endorsement is
7-26 approved by the Board. Except as provided by Article 5.38 of this
7-27 code, an endorsement may not reduce the coverage provided under the
7-28 policy forms.]
7-29 (f)(1) The commissioner may disapprove a policy form or
7-30 endorsement filed under this article, or withdraw any previous
8-1 approval thereof, if the policy form or endorsement:
8-2 (A) violates or does not comply with this code,
8-3 or any valid rule relating thereto duly adopted by the
8-4 commissioner, or is otherwise contrary to law; or
8-5 (B) contains provisions or has any titles or
8-6 headings which are unjust, encourage misrepresentation, are
8-7 deceptive, or violate public policy.
8-8 (2) The commissioner's order disapproving any form or
8-9 endorsement or any notice of the commissioner's intention to
8-10 withdraw a previous approval must state the grounds for the
8-11 disapproval in enough detail to reasonably inform the filer of the
8-12 grounds. An order of withdrawal of a previously filed form or
8-13 endorsement takes effect on the expiration of the prescribed period
8-14 but not sooner than the 60th day after the effective date of the
8-15 withdrawal order, as prescribed by the commissioner.
8-16 (g) The commissioner [Board] may not adopt or approve policy
8-17 forms for personal fire or homeowner's insurance or any endorsement
8-18 to the policy if the policy or endorsement is not in plain
8-19 language. For the purposes of this subsection, a policy or
8-20 endorsement is written in plain language if it achieves the minimum
8-21 score established by the commissioner on the Flesch reading ease
8-22 test or an equivalent test selected by the commissioner or, at the
8-23 option of the commissioner, if it conforms to the language
8-24 requirements in a National Association of Insurance Commissioners
8-25 model act relating to plain language. This subsection does not
8-26 apply to policy language that is mandated by state or federal law.
8-27 (h) An insurer may not use in this state any form or
8-28 endorsement after disapproval of the form or endorsement or
8-29 withdrawal of approval by the commissioner.
8-30 [(g) The Board may withdraw its approval of a policy or
9-1 endorsement form at any time, after notice and hearing.]
9-2 SECTION 14. Subsection (b), Article 5.39, Insurance Code, is
9-3 amended to read as follows:
9-4 (b) Notwithstanding Subsection (a) of this article, on and
9-5 after March 1, 1992, rates for homeowners and [farm and ranch
9-6 owner's] residential fire and residential allied lines insurance
9-7 coverage under this subchapter are determined, and hearings related
9-8 to those rates are conducted, as provided by Subchapter M of this
9-9 chapter, and rates for other lines of insurance subject to this
9-10 subchapter are determined as provided by Article 5.13-2 of this
9-11 code.
9-12 SECTION 15. Subsection (d), Article 5.40, Insurance Code, is
9-13 amended to read as follows:
9-14 (d) Notwithstanding Subsections (a)-(c) of this article, on
9-15 and after March 1, 1992, rates for homeowners and [farm and ranch
9-16 owner's] residential fire and residential allied lines insurance
9-17 coverage under this subchapter are determined, and hearings related
9-18 to those rates are conducted, as provided by Subchapter M of this
9-19 chapter, and rates for other lines of insurance subject to this
9-20 subchapter are determined as provided by Article 5.13-2 of this
9-21 code.
9-22 SECTION 16. Subsection (b), Article 5.41, Insurance Code, is
9-23 amended to read as follows:
9-24 (b) Notwithstanding Subsection (a) of this article, on and
9-25 after March 1, 1992, rates for homeowners and [farm and ranch
9-26 owner's] residential fire and residential allied lines insurance
9-27 coverage under this subchapter are determined as provided by
9-28 Subchapter M of this chapter, and rates for other lines of
9-29 insurance subject to this subchapter are determined as provided by
9-30 Article 5.13-2 of this code.
10-1 SECTION 17. Section 4, Article 5.101, Insurance Code, is
10-2 amended to read as follows:
10-3 Sec. 4. EFFECTS OF ENDORSEMENTS. An insurer that provides
10-4 additional or reduced coverage through an endorsement to a policy
10-5 subject to this article may assess an additional or reduced charge
10-6 for coverage under the endorsement only with the prior approval of
10-7 the commissioner.
10-8 SECTION 18. This Act takes effect September 1, 1997, and
10-9 applies only to an insurance policy that is delivered, issued for
10-10 delivery, or renewed on or after January 1, 1998. A policy that is
10-11 delivered, issued for delivery, or renewed before January 1, 1998,
10-12 is governed by the law as it existed immediately before the
10-13 effective date of this Act, and that law is continued in effect for
10-14 that purpose.
10-15 SECTION 19. The importance of this legislation and the
10-16 crowded condition of the calendars in both houses create an
10-17 emergency and an imperative public necessity that the
10-18 constitutional rule requiring bills to be read on three several
10-19 days in each house be suspended, and this rule is hereby suspended.