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