AN ACT
1-1 relating to the regulation and policy forms of certain lines of
1-2 insurance.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Section 1, Article 5.13-2, Insurance Code, is
1-5 amended to read as follows:
1-6 Sec. 1. Purpose. This article governs the regulation of
1-7 general liability, commercial property, which shall include farm
1-8 and ranch owners and farm and ranch policies, all commercial
1-9 casualty, and medical professional liability insurance rates and
1-10 forms. It does not govern automobile, fidelity, surety, or
1-11 guaranty bonds. The purposes of this article are to:
1-12 (1) promote the public welfare by regulating insurance
1-13 rates to prohibit excessive, inadequate, or unfairly discriminatory
1-14 rates;
1-15 (2) promote availability of insurance;
1-16 (3) promote price competition among insurers to
1-17 provide rates and premiums that are responsive to competitive
1-18 market conditions;
1-19 (4) prohibit price-fixing agreements and other
1-20 anticompetitive behavior by insurers;
1-21 (5) regulate the insurance forms used for lines of
1-22 insurance subject to this article to ensure that they are not
1-23 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
3-1 owner's] residential fire and residential allied lines insurance
3-2 coverage under this subchapter are determined as provided by
3-3 Subchapter M of this chapter, and rates for other lines of
3-4 insurance subject to this subchapter are determined as provided by
3-5 Article 5.13-2 of this code. This subsection does not affect the
3-6 requirement for the commissioner to conduct inspections of
3-7 commercial property and prescribe a manual of rules and rating
3-8 schedules for commercial property under this subchapter.
3-9 SECTION 4. Subsection (b), Article 5.25A, Insurance Code, is
3-10 amended to read as follows:
3-11 (b) Notwithstanding Subsection (a) of this article, on and
3-12 after March 1, 1992, rates for homeowners and [farm and ranch
3-13 owner's] residential fire and residential allied lines insurance
3-14 coverage under this subchapter are determined as provided by
3-15 Subchapter M of this chapter, and rates for other lines of
3-16 insurance subject to this subchapter are determined as provided by
3-17 Article 5.13-2 of this code.
3-18 SECTION 5. Subsection (i), Article 5.26, Insurance Code, is
3-19 amended to read as follows:
3-20 (i) Notwithstanding Subsections (a)-(h) of this article, on
3-21 and after March 1, 1992, rates for homeowners and [farm and ranch
3-22 owner's] residential fire and residential allied lines insurance
3-23 coverage under this subchapter are determined as provided by
3-24 Subchapter M of this chapter, and rates for other lines of
3-25 insurance subject to this subchapter are determined as provided by
4-1 Article 5.13-2 of this code.
4-2 SECTION 6. Subsection (d), Article 5.28, Insurance Code, is
4-3 amended to read as follows:
4-4 (d) Notwithstanding Subsection (a) of this article, on and
4-5 after March 1, 1992, rates for homeowners and [farm and ranch
4-6 owner's] residential fire and residential allied lines insurance
4-7 coverage under this subchapter are determined as provided by
4-8 Subchapter M of this chapter, and rates for other lines of
4-9 insurance subject to this subchapter are determined as provided by
4-10 Article 5.13-2 of this code.
4-11 SECTION 7. Subsection (b), Article 5.29, Insurance Code, is
4-12 amended to read as follows:
4-13 (b) Notwithstanding Subsection (a) of this article, on and
4-14 after March 1, 1992, rates for homeowners and [farm and ranch
4-15 owner's] residential fire and residential allied lines insurance
4-16 coverage under this subchapter are determined as provided by
4-17 Subchapter M of this chapter, and rates for other lines of
4-18 insurance subject to this subchapter are determined as provided by
4-19 Article 5.13-2 of this code.
4-20 SECTION 8. Subsection (b), Article 5.30, Insurance Code, is
4-21 amended to read as follows:
4-22 (b) Notwithstanding Subsection (a) of this article, on and
4-23 after March 1, 1992, rates for homeowners and [farm and ranch
4-24 owner's] residential fire and residential allied lines insurance
4-25 coverage under this subchapter are determined as provided by
5-1 Subchapter M of this chapter, and rates for other lines of
5-2 insurance subject to this subchapter are determined as provided by
5-3 Article 5.13-2 of this code.
5-4 SECTION 9. Subsection (b), Article 5.31, Insurance Code, is
5-5 amended to read as follows:
5-6 (b) Notwithstanding Subsection (a) of this article, on and
5-7 after March 1, 1992, rates for homeowners and [farm and ranch
5-8 owner's] residential fire and residential allied lines insurance
5-9 coverage under this subchapter are determined as provided by
5-10 Subchapter M of this chapter, and rates for other lines of
5-11 insurance subject to this subchapter are determined as provided by
5-12 Article 5.13-2 of this code.
5-13 SECTION 10. Subsection (b), Article 5.32, Insurance Code, is
5-14 amended to read as follows:
5-15 (b) Notwithstanding Subsection (a) of this article, on and
5-16 after March 1, 1992, rates for homeowners and [farm and ranch
5-17 owner's] residential fire and residential allied lines insurance
5-18 coverage under this subchapter are determined as provided by
5-19 Subchapter M of this chapter, and rates for other lines of
5-20 insurance subject to this subchapter are determined as provided by
5-21 Article 5.13-2 of this code.
5-22 SECTION 11. Subsection (a), Section 2, Article 5.33B,
5-23 Insurance Code, as added by Section 10, Chapter 415, Acts of the
5-24 74th Legislature, 1995, is amended to read as follows:
5-25 (a) "Residential property insurance" means insurance against
6-1 loss to real or tangible personal property at a fixed location
6-2 provided in a homeowners policy or[,] residential fire and allied
6-3 lines policy[, or farm and ranch owners policy].
6-4 SECTION 12. Subsection (b), Article 5.34, Insurance Code, is
6-5 amended to read as follows:
6-6 (b) Notwithstanding Subsection (a) of this article, on and
6-7 after March 1, 1992, rates for homeowners and [farm and ranch
6-8 owner's] residential fire and residential allied lines insurance
6-9 coverage under this subchapter are determined as provided by
6-10 Subchapter M of this chapter, and rates for other lines of
6-11 insurance subject to this subchapter are determined as provided by
6-12 Article 5.13-2 of this code.
6-13 SECTION 13. Article 5.35, Insurance Code, is amended to read
6-14 as follows:
6-15 Art. 5.35. POLICY FORMS. (a) The commissioner [Board]
6-16 shall adopt policy forms and endorsements for each kind of
6-17 insurance subject to this subchapter other than a line regulated
6-18 under Article 5.13-2 of this code that may be used by an insurer
6-19 without filing for approval to use such forms. [The coverage
6-20 provided by policy forms and endorsements adopted under this
6-21 subsection is the minimum coverage that may be provided under an
6-22 insurance policy for that type of insurance in this State.]
6-23 (b) The commissioner may also adopt policy forms and
6-24 endorsements of national insurers or policy forms and endorsements
6-25 adopted by a national organization of insurance companies or
7-1 similar organization on policy forms and endorsements. Policy
7-2 forms and endorsements may be adopted under this subsection for
7-3 each kind of insurance subject to this subchapter other than a line
7-4 regulated under Article 5.13-2 of this code on the request of an
7-5 insurer. For purposes of this subsection, "national insurer" means
7-6 an insurer subject to this article that, either directly or
7-7 together with its affiliates as part of an insurance holding
7-8 company system as those terms are defined by Article 21.49-1 of
7-9 this code, is licensed to do business and write the kinds of
7-10 insurance that are subject to this subchapter in 26 or more states
7-11 and maintains minimum annual direct written premiums for
7-12 residential property insurance of $750 million in the aggregate for
7-13 all states. [Except as provided by Subsections (d) and (e) of this
7-14 article, an insurer may only use forms adopted by the Board under
7-15 this article in writing insurance subject to this subchapter in
7-16 this State.]
7-17 (c) The commissioner may approve the use of policy forms and
7-18 endorsements adopted by a national organization of insurance
7-19 companies or a similar organization, if such forms or endorsements
7-20 are filed with and are approved by the commissioner in accordance
7-21 with this article. [An insurer may not enter into a contract or
7-22 agreement concerning an individual policy that is not contained in
7-23 the policy. Such a contract or agreement is void.]
7-24 (d) An insurer may use an endorsement to the policy forms
7-25 adopted or approved by the commissioner under this article if the
8-1 endorsement is approved by the commissioner pursuant to this
8-2 article. [The Board may approve the use of policy forms adopted by
8-3 a national organization of insurance companies, or similar
8-4 organization, if the forms, with any endorsement to the forms
8-5 required and approved by the Board, provides coverage equivalent to
8-6 the coverage provided by the policy forms adopted by the Board
8-7 under Subsection (a) of this section.]
8-8 (e) Unless adopted or approved by the commissioner pursuant
8-9 to Subsection (a), (b), or (c) of this article or, in the case of
8-10 an endorsement, under Subsection (d) of this article, an insurance
8-11 policy or endorsement for use in writing the types of insurance
8-12 subject to this article may not be delivered or issued for delivery
8-13 in this state. [An insurer may use an endorsement to the policy
8-14 forms adopted or approved by the Board under this article if the
8-15 endorsement is approved by the Board. Except as provided by
8-16 Article 5.38 of this code, an endorsement may not reduce the
8-17 coverage provided under the policy forms.]
8-18 (f) Each filing pursuant to Subsection (c) or (d) of this
8-19 article shall be made not later than the 60th day before the date
8-20 of any use or delivery for use. At the expiration of the 60-day
8-21 period, a filed form or endorsement is approved unless before the
8-22 expiration of the 60 days the commissioner either disapproves the
8-23 form or endorsement by order or approves the form or endorsement.
8-24 Approval of a form or endorsement by the commissioner constitutes a
8-25 waiver of any unexpired portion of the 60-day period. The
9-1 commissioner may extend, by not more than an additional 30 days,
9-2 the period during which the commissioner may approve or disapprove
9-3 a form or endorsement by giving notice to the filer of the
9-4 extension before the expiration of the initial period. At the
9-5 expiration of any extension and in the absence of any earlier
9-6 approval or disapproval, the form or endorsement shall be
9-7 considered approved. For good cause shown, the commissioner may
9-8 withdraw the commissioner's approval at any time after notice and
9-9 hearing.
9-10 (g)(1) The commissioner may disapprove a policy form or
9-11 endorsement filed under this article, or withdraw any previous
9-12 approval thereof, if the policy form or endorsement:
9-13 (A) violates or does not comply with this code,
9-14 or any valid rule relating thereto duly adopted by the
9-15 commissioner, or is otherwise contrary to law; or
9-16 (B) contains provisions or has any titles or
9-17 headings which are unjust, encourage misrepresentation, are
9-18 deceptive, or violate public policy.
9-19 (2) The commissioner's order disapproving any form or
9-20 endorsement or any notice of the commissioner's intention to
9-21 withdraw a previous approval must state the grounds for the
9-22 disapproval in enough detail to reasonably inform the filer of the
9-23 grounds. An order of withdrawal of a previously filed form or
9-24 endorsement takes effect on the expiration of the prescribed period
9-25 but not sooner than the 60th day after the effective date of the
10-1 withdrawal order, as prescribed by the commissioner.
10-2 (h) The commissioner [Board] may not adopt or approve policy
10-3 forms for personal fire or homeowner's insurance or any endorsement
10-4 to the policy if the policy or endorsement is not in plain
10-5 language. For the purposes of this subsection, a policy or
10-6 endorsement is written in plain language if it achieves the minimum
10-7 score established by the commissioner on the Flesch reading ease
10-8 test or an equivalent test selected by the commissioner or, at the
10-9 option of the commissioner, if it conforms to the language
10-10 requirements in a National Association of Insurance Commissioners
10-11 model act relating to plain language. This subsection does not
10-12 apply to policy language that is mandated by state or federal law.
10-13 (i) An insurer may not use in this state any form or
10-14 endorsement after disapproval of the form or endorsement or
10-15 withdrawal of approval by the commissioner.
10-16 (j) Notwithstanding Article 1.35A of this code, the office
10-17 of public insurance counsel may submit written comments to the
10-18 commissioner and otherwise participate regarding individual company
10-19 filings made pursuant to this article.
10-20 [(g) The Board may withdraw its approval of a policy or
10-21 endorsement form at any time, after notice and hearing.]
10-22 SECTION 14. Subsection (b), Article 5.39, Insurance Code, is
10-23 amended to read as follows:
10-24 (b) Notwithstanding Subsection (a) of this article, on and
10-25 after March 1, 1992, rates for homeowners and [farm and ranch
11-1 owner's] residential fire and residential allied lines insurance
11-2 coverage under this subchapter are determined, and hearings related
11-3 to those rates are conducted, as provided by Subchapter M of this
11-4 chapter, and rates for other lines of insurance subject to this
11-5 subchapter are determined as provided by Article 5.13-2 of this
11-6 code.
11-7 SECTION 15. Subsection (d), Article 5.40, Insurance Code, is
11-8 amended to read as follows:
11-9 (d) Notwithstanding Subsections (a)-(c) of this article, on
11-10 and after March 1, 1992, rates for homeowners and [farm and ranch
11-11 owner's] residential fire and residential allied lines insurance
11-12 coverage under this subchapter are determined, and hearings related
11-13 to those rates are conducted, as provided by Subchapter M of this
11-14 chapter, and rates for other lines of insurance subject to this
11-15 subchapter are determined as provided by Article 5.13-2 of this
11-16 code.
11-17 SECTION 16. Subsection (b), Article 5.41, Insurance Code, is
11-18 amended to read as follows:
11-19 (b) Notwithstanding Subsection (a) of this article, on and
11-20 after March 1, 1992, rates for homeowners and [farm and ranch
11-21 owner's] residential fire and residential allied lines insurance
11-22 coverage under this subchapter are determined as provided by
11-23 Subchapter M of this chapter, and rates for other lines of
11-24 insurance subject to this subchapter are determined as provided by
11-25 Article 5.13-2 of this code.
12-1 SECTION 17. Section 5, Article 5.73, Insurance Code, is
12-2 amended to read as follows:
12-3 Sec. 5. The authority granted under this article shall be
12-4 reviewed during the normal Sunset cycle of the Texas Department of
12-5 Insurance [expires September 1, 1997].
12-6 SECTION 18. Section 4, Article 5.101, Insurance Code, is
12-7 amended to read as follows:
12-8 Sec. 4. EFFECT OF ENDORSEMENTS. An insurer that provides
12-9 additional or reduced coverage through an endorsement to a policy
12-10 subject to this article may assess an additional or reduced charge
12-11 for coverage under the endorsement only with the prior approval of
12-12 the commissioner.
12-13 SECTION 19. This Act takes effect September 1, 1997, and
12-14 applies only to an insurance policy that is delivered, issued for
12-15 delivery, or renewed on or after January 1, 1998. A policy that is
12-16 delivered, issued for delivery, or renewed before January 1, 1998,
12-17 is governed by the law as it existed immediately before the
12-18 effective date of this Act, and that law is continued in effect for
12-19 that purpose.
12-20 SECTION 20. The importance of this legislation and the
12-21 crowded condition of the calendars in both houses create an
12-22 emergency and an imperative public necessity that the
12-23 constitutional rule requiring bills to be read on three several
12-24 days in each house be suspended, and this rule is hereby suspended.
_______________________________ _______________________________
President of the Senate Speaker of the House
I hereby certify that S.B. No. 1499 passed the Senate on
April 10, 1997, by a viva-voce vote.
_______________________________
Secretary of the Senate
I hereby certify that S.B. No. 1499 passed the House on
May 27, 1997, by a non-record vote.
_______________________________
Chief Clerk of the House
Approved:
_______________________________
Date
_______________________________
Governor