1-1 By: Smithee (Senate Sponsor - Cain) H.B. No. 3563 1-2 (In the Senate - Received from the House May 12, 1997; 1-3 May 13, 1997, read first time and referred to Committee on Economic 1-4 Development; May 18, 1997, reported favorably by the following 1-5 vote: Yeas 10, Nays 0; May 18, 1997, sent to printer.) 1-6 A BILL TO BE ENTITLED 1-7 AN ACT 1-8 relating to procedures to issue rental car companies limited 1-9 licenses as insurance agents. 1-10 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-11 SECTION 1. Article 21.07, Insurance Code, is amended by 1-12 adding Section 21 to read as follows: 1-13 Sec. 21. (a) Notwithstanding any provisions of either this 1-14 Article or of this Code to the contrary, the Commissioner may issue 1-15 a license under this Article to a rental car company, or to the 1-16 franchisee of a rental car company, that complies with the 1-17 provisions of this section and only for the limited purposes as set 1-18 forth in this section. 1-19 (b) As used in this section: 1-20 (1) "Limited licensee" means a person authorized to 1-21 sell certain insurance coverages relating to the rental of motor 1-22 vehicles pursuant to the provisions of this section. 1-23 (2) "Rental agreement" means any written agreement 1-24 setting forth the terms and conditions governing the use of a 1-25 vehicle provided by the rental car company. 1-26 (3) "Rental car company" means any person in the 1-27 business of providing leased or rented vehicles to the public. 1-28 (4) "Renter" means any person obtaining the use of a 1-29 vehicle from a rental car company under the terms of a rental 1-30 agreement. 1-31 (5) "Vehicle" means a motor vehicle of the private 1-32 passenger type including passenger vans and minivans that are 1-33 primarily intended for the transport of persons. 1-34 (c) The Commissioner may issue to a rental car company, or 1-35 to a franchisee of a rental car company, that has complied with the 1-36 requirements of this section a limited license authorizing the 1-37 licensee, known as a "limited licensee" for the purpose of this 1-38 section, to act as agent, with reference to the kinds of insurance 1-39 specified in this section, or any insurer authorized to write such 1-40 kinds of insurance in this State. 1-41 (d) The prerequisites for issuance of a limited license 1-42 under this section are the filing with the Commissioner of the 1-43 following: 1-44 (1) a written application, signed by an officer of the 1-45 applicant, for the limited license in such form or forms, and 1-46 supplements thereto, and containing such information, as the 1-47 Commissioner may prescribe; and 1-48 (2) a certificate by the insurer that is to be named 1-49 in such limited license, stating that it has satisfied itself that 1-50 the named applicant is trustworthy and competent to act as its 1-51 insurance agent for this limited purpose and that the insurer will 1-52 appoint such applicant to act as the agent in reference to the 1-53 doing of such kind or kinds of insurance as are permitted by this 1-54 section, if the limited license applied for is issued by the 1-55 Commissioner. Such certification shall be subscribed by an officer 1-56 or managing agent of such insurer and affirmed as true under the 1-57 penalties of perjury. 1-58 (e) In the event that any provision of this section is 1-59 violated by a limited licensee, the Commissioner may: 1-60 (1) revoke or suspend a limited license issued under 1-61 this section in accordance with the provisions of Article 21.01-2 1-62 of this Code; or 1-63 (2) after notice and hearing, impose such other 1-64 penalties, including suspending the transaction of insurance at 2-1 specific rental locations where violations of this section have 2-2 occurred, as the Commissioner deems to be necessary or convenient 2-3 to carry out the purposes of this section. 2-4 (f) The rental car company or franchisee licensed pursuant 2-5 to Subsection (c) of this section may act as agent for an 2-6 authorized insurer only in connection with the rental of vehicles 2-7 and only with respect to the following kinds of insurance: 2-8 (1) excess liability insurance that provides coverage 2-9 to the rental car company or franchisee and renters and other 2-10 authorized drivers of rental vehicles, in excess of the standard 2-11 liability limits provided by the rental car company in its rental 2-12 agreement, for liability arising from the negligent operation of 2-13 the rental vehicle; 2-14 (2) accident and health insurance that provides 2-15 coverage to renters and other vehicle occupants for accidental 2-16 death or dismemberment and for medical expenses resulting from an 2-17 accident involving the rental vehicle that occurs during the rental 2-18 period; 2-19 (3) personal effects insurance that provides coverage 2-20 to renters and other rental vehicle occupants for the loss of, or 2-21 damage to, personal effects that occurs during the rental period; 2-22 or 2-23 (4) any other coverage that the Commissioner may 2-24 approve as meaningful and appropriate in connection with the rental 2-25 of vehicles. 2-26 (g) No insurance may be issued pursuant to this section 2-27 unless: 2-28 (1) the rental period of the rental agreement does not 2-29 exceed 30 consecutive days; and 2-30 (2) at every rental car location where rental car 2-31 agreements are executed, brochures or other written materials are 2-32 prominently displayed and readily available to the prospective 2-33 renter that: 2-34 (A) summarize, clearly and correctly, the 2-35 material terms of insurance coverage, including the identity of the 2-36 insurer, offered to renters; 2-37 (B) disclose that these policies offered by the 2-38 rental car company may provide a duplication of coverage already 2-39 provided by a renter's personal automobile insurance policy, 2-40 homeowner's insurance policy, personal liability insurance policy, 2-41 or other source of coverage; 2-42 (C) state that the purchase by the renter of the 2-43 kinds of insurance specified in this section is not required in 2-44 order to rent a vehicle; 2-45 (D) describe the process for filing a claim in 2-46 the event the renter elects to purchase coverage and in the event 2-47 of a claim; and 2-48 (E) contain any additional information on the 2-49 price, benefits, exclusions, conditions, or other limitations of 2-50 such policies as the Commissioner may by regulation prescribe; and 2-51 (3) evidence of coverage is provided to every renter 2-52 who elects to purchase such coverage. 2-53 (h) Any limited license issued under this section shall also 2-54 authorize any salaried employee of the licensee who, pursuant to 2-55 Subsection (i) of this section, is trained to act individually on 2-56 behalf, and under the supervision, of the licensee with respect to 2-57 the kinds of insurance specified in this section. 2-58 (i) Each rental car company or franchisee licensed pursuant 2-59 to this section shall conduct a training program which shall be 2-60 submitted to the Commissioner for approval prior to use and which 2-61 shall meet the following minimum standards: 2-62 (1) each trainee shall receive basic instruction about 2-63 the kinds of insurance specified in this section offered for 2-64 purchase by prospective renters of rental vehicles; 2-65 (2) each trainee shall be instructed to acknowledge to 2-66 a prospective renter of a rental vehicle that purchase of any such 2-67 insurance specified in this section is not required in order for 2-68 the renter to rent a vehicle; and 2-69 (3) each trainee shall be instructed to acknowledge to 3-1 a prospective renter of a rental vehicle that the renter may have 3-2 insurance policies that already provide the coverage being offered 3-3 by the rental car company pursuant to this section. 3-4 (j) Limited licensees acting pursuant to and under the 3-5 authority of this section shall comply with all applicable 3-6 provisions of this Article, except that notwithstanding any other 3-7 provision of this Article, or any rule adopted by the Commissioner, 3-8 a limited licensee pursuant to this section shall not be required 3-9 to treat premiums collected from renters purchasing such insurance 3-10 when renting vehicles as funds received in a fiduciary capacity, 3-11 provided that: 3-12 (1) the insurer represented by the limited licensee 3-13 has consented in writing, signed by the insurer's officer, that 3-14 premiums need not be segregated from funds received by the rental 3-15 car company on account of vehicle rental; and 3-16 (2) the charges for insurance coverage are itemized 3-17 but not billed to the renter separately from the charges for rental 3-18 vehicles. 3-19 (k) No limited licensee under this section shall advertise, 3-20 represent, or otherwise hold itself or any of its employees or 3-21 themselves out as licensed insurance agents. 3-22 SECTION 2. This Act takes effect September 1, 1997. 3-23 SECTION 3. The importance of this legislation and the 3-24 crowded condition of the calendars in both houses create an 3-25 emergency and an imperative public necessity that the 3-26 constitutional rule requiring bills to be read on three several 3-27 days in each house be suspended, and this rule is hereby suspended. 3-28 * * * * *