By:  Sibley                                  S.B. No. 1499

         97S0840/1                           

                                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

 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 commissioner

6-20     may also adopt policy forms and endorsements of national insurers

6-21     for each kind of insurance subject to this subchapter other than a

6-22     line regulated under Article 5.13-2 of this code on the request of

6-23     such an insurer.  For purposes of this subsection, "national

6-24     insurer" means an insurer subject to this article that, either

6-25     directly or together with its affiliates as part of an insurance

 7-1     holding company system as those terms are defined by Article

 7-2     21.49-1, is licensed to do business and write the kinds of

 7-3     insurance that are subject to this subchapter in 26 or more states.

 7-4     [The coverage provided by policy forms and endorsements adopted

 7-5     under this subsection is the minimum coverage that may be provided

 7-6     under an insurance policy for that type of insurance in this

 7-7     State.]

 7-8           (b)  The commissioner may approve the use of policy forms and

 7-9     endorsements adopted by a national organization of insurance

7-10     companies or a similar organization, if such forms or endorsements

7-11     are filed with and are approved by the commissioner in accordance

7-12     with this article.  [Except as provided by Subsections (d) and (e)

7-13     of this article, an insurer may only use forms adopted by the Board

7-14     under this article in writing insurance subject to this subchapter

7-15     in this State.]

7-16           (c)  An insurer may use an endorsement to the policy forms

7-17     adopted or approved by the commissioner under this article if the

7-18     endorsement is approved by the commissioner pursuant to this

7-19     article [not enter into a contract or agreement concerning an

7-20     individual policy that is not contained in the policy.  Such a

7-21     contract or agreement is void].

7-22           (d)  Unless adopted or approved by the commissioner pursuant

7-23     to Subsection (a) or (b) of this article or, in the case of an

7-24     endorsement, under Subsection (c) of this article, an insurance

7-25     policy or endorsement for use in writing the types of insurance

 8-1     subject to this article may not be delivered or issued for delivery

 8-2     in this state.  [The Board may approve the use of policy forms

 8-3     adopted by a national organization of insurance companies, or

 8-4     similar organization, if the forms, with any endorsement to the

 8-5     forms required and approved by the Board, provides coverage

 8-6     equivalent to the coverage provided by the policy forms adopted by

 8-7     the Board under Subsection (a) of this section.]

 8-8           (e)  Each filing pursuant to Subsection (b) or (c) of this

 8-9     article shall be made not later than the 60th day before the date

8-10     of any use or delivery for use.  At the expiration of the 60-day

8-11     period, a filed form or endorsement is approved unless before the

8-12     expiration of the 60 days the commissioner approves or disapproves

8-13     the form or endorsement by order.  Approval of a form or

8-14     endorsement by the commissioner constitutes a waiver of any

8-15     unexpired portion of the 60-day period.  The commissioner may

8-16     extend, by not more than an additional 30 days, the period during

8-17     which the commissioner may approve or disapprove a form or

8-18     endorsement by giving notice to the filer of the extension before

8-19     the expiration of the initial period.  At the expiration of any

8-20     extension and in the absence of any earlier approval or

8-21     disapproval, the form or endorsement shall be considered approved.

8-22     For good cause shown, the commissioner may withdraw the

8-23     commissioner's approval at any time after notice and hearing.  [An

8-24     insurer may use an endorsement to the policy forms adopted or

8-25     approved by the Board under this article if the endorsement is

 9-1     approved by the Board.  Except as provided by Article 5.38 of this

 9-2     code, an endorsement may not reduce the coverage provided under the

 9-3     policy forms.]

 9-4           (f)(1)  The commissioner may disapprove a policy form or

 9-5     endorsement filed under this article, or withdraw any previous

 9-6     approval thereof, if the policy form or endorsement:

 9-7                       (A)  violates or does not comply with this code,

 9-8     or any valid rule relating thereto duly adopted by the

 9-9     commissioner, or is otherwise contrary to law; or

9-10                       (B)  contains provisions or has any titles or

9-11     headings which are unjust, encourage misrepresentation, are

9-12     deceptive, or violate public policy.

9-13                 (2)  The commissioner's order disapproving any form or

9-14     endorsement or any notice of the commissioner's intention to

9-15     withdraw a previous approval must state the grounds for the

9-16     disapproval in enough detail to reasonably inform the filer of the

9-17     grounds.  An order of withdrawal of a previously filed form or

9-18     endorsement takes effect on the expiration of the prescribed period

9-19     but not sooner than the 60th day after the effective date of the

9-20     withdrawal order, as prescribed by the commissioner.

9-21           (g)  The commissioner [Board] may not adopt or approve policy

9-22     forms for personal fire or homeowner's insurance or any endorsement

9-23     to the policy if the policy or endorsement is not in plain

9-24     language.  For the purposes of this subsection, a policy or

9-25     endorsement is written in plain language if it achieves the minimum

 10-1    score established by the commissioner on the Flesch reading ease

 10-2    test or an equivalent test selected by the commissioner or, at the

 10-3    option of the commissioner, if it conforms to the language

 10-4    requirements in a National Association of Insurance Commissioners

 10-5    model act relating to plain language. This subsection does not

 10-6    apply to policy language that is mandated by state or federal law.

 10-7          (h)  An insurer may not use in this state any form or

 10-8    endorsement after disapproval of the form or endorsement or

 10-9    withdrawal of approval by the commissioner.

10-10          [(g)  The Board may withdraw its approval of a policy or

10-11    endorsement form at any time, after notice and hearing.]

10-12          SECTION 14.  Subsection (b), Article 5.39, Insurance Code, is

10-13    amended to read as follows:

10-14          (b)  Notwithstanding Subsection (a) of this article, on and

10-15    after March 1, 1992, rates for homeowners and [farm and ranch

10-16    owner's] residential fire and residential allied lines insurance

10-17    coverage under this subchapter are determined, and hearings related

10-18    to those rates are conducted, as provided by Subchapter M of this

10-19    chapter, and rates for other lines of insurance subject to this

10-20    subchapter are determined as provided by Article 5.13-2 of this

10-21    code.

10-22          SECTION 15.  Subsection (d), Article 5.40, Insurance Code, is

10-23    amended to read as follows:

10-24          (d)  Notwithstanding Subsections (a)-(c) of this article, on

10-25    and 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 16.  Subsection (b), Article 5.41, Insurance Code, is

 11-8    amended to read as follows:

 11-9          (b)  Notwithstanding Subsection (a) of this article, on and

11-10    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 as provided by

11-13    Subchapter M of this chapter, and rates for other lines of

11-14    insurance subject to this subchapter are determined as provided by

11-15    Article 5.13-2 of this code.

11-16          SECTION 17.  Section 4, Article 5.101, Insurance Code, is

11-17    amended to read as follows:

11-18          Sec. 4.  EFFECTS OF ENDORSEMENTS.  An insurer that provides

11-19    additional or reduced coverage through an endorsement to a policy

11-20    subject to this article may assess an additional or reduced charge

11-21    for coverage under the endorsement only with the prior approval of

11-22    the commissioner.

11-23          SECTION 18.  This Act takes effect September 1, 1997, and

11-24    applies only to an insurance policy that is delivered, issued for

11-25    delivery, or renewed on or after January 1, 1998.  A policy that is

 12-1    delivered, issued for delivery, or renewed before January 1, 1998,

 12-2    is governed by the law as it existed immediately before the

 12-3    effective date of this Act, and that law is continued in effect for

 12-4    that purpose.

 12-5          SECTION 19.  The importance of this legislation and the

 12-6    crowded condition of the calendars in both houses create an

 12-7    emergency and an imperative public necessity that the

 12-8    constitutional rule requiring bills to be read on three several

 12-9    days in each house be suspended, and this rule is hereby suspended.