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.