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.