1-1 By: Sibley S.B. No. 1499
1-2 (In the Senate - Filed March 13, 1997; March 20, 1997, read
1-3 first time and referred to Committee on Economic Development;
1-4 April 4, 1997, reported adversely, with favorable Committee
1-5 Substitute by the following vote: Yeas 8, Nays 1; April 4, 1997,
1-6 sent to printer.)
1-7 COMMITTEE SUBSTITUTE FOR S.B. No. 1499 By: Sibley
1-8 A BILL TO BE ENTITLED
1-9 AN ACT
1-10 relating to the regulation and policy forms of certain lines of
1-11 insurance.
1-12 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-13 SECTION 1. Section 1, Article 5.13-2, Insurance Code, is
1-14 amended to read as follows:
1-15 Sec. 1. Purpose. This article governs the regulation of
1-16 general liability, commercial property, which shall include farm
1-17 and ranch owners and farm and ranch policies, all commercial
1-18 casualty, and medical professional liability insurance rates and
1-19 forms. It does not govern automobile, fidelity, surety, or
1-20 guaranty bonds. The purposes of this article are to:
1-21 (1) promote the public welfare by regulating insurance
1-22 rates to prohibit excessive, inadequate, or unfairly discriminatory
1-23 rates;
1-24 (2) promote availability of insurance;
1-25 (3) promote price competition among insurers to
1-26 provide rates and premiums that are responsive to competitive
1-27 market conditions;
1-28 (4) prohibit price-fixing agreements and other
1-29 anticompetitive behavior by insurers;
1-30 (5) regulate the insurance forms used for lines of
1-31 insurance subject to this article to ensure that they are not
1-32 unjust, unfair, inequitable, misleading, or deceptive; and
1-33 (6) provide regulatory procedures for the maintenance
1-34 of appropriate information reporting systems.
1-35 SECTION 2. Subsection (e), Section 8, Article 5.13-2,
1-36 Insurance Code, is amended to read as follows:
1-37 (e) The commissioner may promulgate standard insurance
1-38 policy forms, endorsements, and other related forms that may be
1-39 used, at the discretion of the insurer, by an insurer instead of
1-40 the insurer's own forms in writing insurance subject to this
1-41 article. The commissioner may disapprove a form or endorsement
1-42 filed under this section, or withdraw any previous approval
1-43 thereof, if the form or endorsement:
1-44 (1) violates or does not comply with this code, or any
1-45 valid rule relating thereto duly adopted by the commissioner, or is
1-46 otherwise contrary to law; or
1-47 (2) contains provisions or has any titles or headings
1-48 which are unjust, encourage misrepresentation, are deceptive, or
1-49 violate public policy. [Forms submitted by insurers for approval
1-50 under this section must provide coverage equivalent to that
1-51 provided in the policy forms used for these lines of coverage on
1-52 the effective date of this article. An endorsement may not reduce
1-53 coverage provided under the approved policy form.]
1-54 SECTION 3. Subsection (b), Article 5.25, Insurance Code, is
1-55 amended to read as follows:
1-56 (b) Notwithstanding Subsection (a) of this article, on and
1-57 after March 1, 1992, rates for homeowners and [farm and ranch
1-58 owner's] residential fire and residential allied lines insurance
1-59 coverage under this subchapter are determined as provided by
1-60 Subchapter M of this chapter, and rates for other lines of
1-61 insurance subject to this subchapter are determined as provided by
1-62 Article 5.13-2 of this code. This subsection does not affect the
1-63 requirement for the commissioner to conduct inspections of
1-64 commercial property and prescribe a manual of rules and rating
2-1 schedules for commercial property under this subchapter.
2-2 SECTION 4. Subsection (b), Article 5.25A, Insurance Code, is
2-3 amended to read as follows:
2-4 (b) Notwithstanding Subsection (a) of this article, on and
2-5 after March 1, 1992, rates for homeowners and [farm and ranch
2-6 owner's] residential fire and residential allied lines insurance
2-7 coverage under this subchapter are determined as provided by
2-8 Subchapter M of this chapter, and rates for other lines of
2-9 insurance subject to this subchapter are determined as provided by
2-10 Article 5.13-2 of this code.
2-11 SECTION 5. Subsection (i), Article 5.26, Insurance Code, is
2-12 amended to read as follows:
2-13 (i) Notwithstanding Subsections (a)-(h) of this article, on
2-14 and after March 1, 1992, rates for homeowners and [farm and ranch
2-15 owner's] residential fire and residential allied lines insurance
2-16 coverage under this subchapter are determined as provided by
2-17 Subchapter M of this chapter, and rates for other lines of
2-18 insurance subject to this subchapter are determined as provided by
2-19 Article 5.13-2 of this code.
2-20 SECTION 6. Subsection (d), Article 5.28, Insurance Code, is
2-21 amended to read as follows:
2-22 (d) Notwithstanding Subsection (a) of this article, on and
2-23 after March 1, 1992, rates for homeowners and [farm and ranch
2-24 owner's] residential fire and residential allied lines insurance
2-25 coverage under this subchapter are determined as provided by
2-26 Subchapter M of this chapter, and rates for other lines of
2-27 insurance subject to this subchapter are determined as provided by
2-28 Article 5.13-2 of this code.
2-29 SECTION 7. Subsection (b), Article 5.29, Insurance Code, is
2-30 amended to read as follows:
2-31 (b) Notwithstanding Subsection (a) of this article, on and
2-32 after March 1, 1992, rates for homeowners and [farm and ranch
2-33 owner's] residential fire and residential allied lines insurance
2-34 coverage under this subchapter are determined as provided by
2-35 Subchapter M of this chapter, and rates for other lines of
2-36 insurance subject to this subchapter are determined as provided by
2-37 Article 5.13-2 of this code.
2-38 SECTION 8. Subsection (b), Article 5.30, Insurance Code, is
2-39 amended to read as follows:
2-40 (b) Notwithstanding Subsection (a) of this article, on and
2-41 after March 1, 1992, rates for homeowners and [farm and ranch
2-42 owner's] residential fire and residential allied lines insurance
2-43 coverage under this subchapter are determined as provided by
2-44 Subchapter M of this chapter, and rates for other lines of
2-45 insurance subject to this subchapter are determined as provided by
2-46 Article 5.13-2 of this code.
2-47 SECTION 9. Subsection (b), Article 5.31, Insurance Code, is
2-48 amended to read as follows:
2-49 (b) Notwithstanding Subsection (a) of this article, on and
2-50 after March 1, 1992, rates for homeowners and [farm and ranch
2-51 owner's] residential fire and residential allied lines insurance
2-52 coverage under this subchapter are determined as provided by
2-53 Subchapter M of this chapter, and rates for other lines of
2-54 insurance subject to this subchapter are determined as provided by
2-55 Article 5.13-2 of this code.
2-56 SECTION 10. Subsection (b), Article 5.32, Insurance Code, is
2-57 amended to read as follows:
2-58 (b) Notwithstanding Subsection (a) of this article, on and
2-59 after March 1, 1992, rates for homeowners and [farm and ranch
2-60 owner's] residential fire and residential allied lines insurance
2-61 coverage under this subchapter are determined as provided by
2-62 Subchapter M of this chapter, and rates for other lines of
2-63 insurance subject to this subchapter are determined as provided by
2-64 Article 5.13-2 of this code.
2-65 SECTION 11. Subsection (a), Section 2, Article 5.33B,
2-66 Insurance Code, as added by Section 10, Chapter 415, Acts of the
2-67 74th Legislature, 1995, is amended to read as follows:
2-68 (a) "Residential property insurance" means insurance against
2-69 loss to real or tangible personal property at a fixed location
3-1 provided in a homeowners policy or[,] residential fire and allied
3-2 lines policy[, or farm and ranch owners policy].
3-3 SECTION 12. Subsection (b), Article 5.34, Insurance Code, is
3-4 amended to read as follows:
3-5 (b) Notwithstanding Subsection (a) of this article, on and
3-6 after March 1, 1992, rates for homeowners and [farm and ranch
3-7 owner's] residential fire and residential allied lines insurance
3-8 coverage under this subchapter are determined as provided by
3-9 Subchapter M of this chapter, and rates for other lines of
3-10 insurance subject to this subchapter are determined as provided by
3-11 Article 5.13-2 of this code.
3-12 SECTION 13. Article 5.35, Insurance Code, is amended to read
3-13 as follows:
3-14 Art. 5.35. POLICY FORMS. (a) The commissioner [Board]
3-15 shall adopt policy forms and endorsements for each kind of
3-16 insurance subject to this subchapter other than a line regulated
3-17 under Article 5.13-2 of this code that may be used by an insurer
3-18 without filing for approval to use such forms. [The coverage
3-19 provided by policy forms and endorsements adopted under this
3-20 subsection is the minimum coverage that may be provided under an
3-21 insurance policy for that type of insurance in this State.]
3-22 (b) The commissioner may also adopt policy forms and
3-23 endorsements of national insurers or policy forms and endorsements
3-24 adopted by a national organization of insurance companies or
3-25 similar organization on policy forms and endorsements. Policy
3-26 forms and endorsements may be adopted under this subsection for
3-27 each kind of insurance subject to this subchapter other than a line
3-28 regulated under Article 5.13-2 of this code on the request of an
3-29 insurer. For purposes of this subsection, "national insurer" means
3-30 an insurer subject to this article that, either directly or
3-31 together with its affiliates as part of an insurance holding
3-32 company system as those terms are defined by Article 21.49-1 of
3-33 this code, is licensed to do business and write the kinds of
3-34 insurance that are subject to this subchapter in 26 or more states
3-35 and maintains minimum annual direct written premiums for
3-36 residential property insurance of $750 million in the aggregate for
3-37 all states. [Except as provided by Subsections (d) and (e) of this
3-38 article, an insurer may only use forms adopted by the Board under
3-39 this article in writing insurance subject to this subchapter in
3-40 this State.]
3-41 (c) The commissioner may approve the use of policy forms and
3-42 endorsements adopted by a national organization of insurance
3-43 companies or a similar organization, if such forms or endorsements
3-44 are filed with and are approved by the commissioner in accordance
3-45 with this article. [An insurer may not enter into a contract or
3-46 agreement concerning an individual policy that is not contained in
3-47 the policy. Such a contract or agreement is void.]
3-48 (d) An insurer may use an endorsement to the policy forms
3-49 adopted or approved by the commissioner under this article if the
3-50 endorsement is approved by the commissioner pursuant to this
3-51 article. [The Board may approve the use of policy forms adopted by
3-52 a national organization of insurance companies, or similar
3-53 organization, if the forms, with any endorsement to the forms
3-54 required and approved by the Board, provides coverage equivalent to
3-55 the coverage provided by the policy forms adopted by the Board
3-56 under Subsection (a) of this section.]
3-57 (e) Unless adopted or approved by the commissioner pursuant
3-58 to Subsection (a), (b), or (c) of this article or, in the case of
3-59 an endorsement, under Subsection (d) of this article, an insurance
3-60 policy or endorsement for use in writing the types of insurance
3-61 subject to this article may not be delivered or issued for delivery
3-62 in this state. [An insurer may use an endorsement to the policy
3-63 forms adopted or approved by the Board under this article if the
3-64 endorsement is approved by the Board. Except as provided by
3-65 Article 5.38 of this code, an endorsement may not reduce the
3-66 coverage provided under the policy forms.]
3-67 (f) Each filing pursuant to Subsection (c) or (d) of this
3-68 article shall be made not rather than the 60th day before the date
3-69 of any use or delivery for use. At the expiration of the 60-day
4-1 period, a filed form or endorsement is approved unless before the
4-2 expiration of the 60 days the commissioner either disapproves the
4-3 form or endorsement by order or approves the form or endorsement.
4-4 Approval of a form or endorsement by the commissioner constitutes a
4-5 waiver of any unexpired portion of the 60-day period. The
4-6 commissioner may extend, by not more than an additional 30 days,
4-7 the period during which the commissioner may approve or disapprove
4-8 a form or endorsement by giving notice to the filer of the
4-9 extension before the expiration of the initial period. At the
4-10 expiration of any extension and in the absence of any earlier
4-11 approval or disapproval, the form or endorsement shall be
4-12 considered approved. For good cause shown, the commissioner may
4-13 withdraw the commissioner's approval at any time after notice and
4-14 hearing.
4-15 (g)(1) The commissioner may disapprove a policy form or
4-16 endorsement filed under this article, or withdraw any previous
4-17 approval thereof, if the policy form or endorsement:
4-18 (A) violates or does not comply with this code,
4-19 or any valid rule relating thereto duly adopted by the
4-20 commissioner, or is otherwise contrary to law; or
4-21 (B) contains provisions or has any titles or
4-22 headings which are unjust, encourage misrepresentation, are
4-23 deceptive, or violate public policy.
4-24 (2) The commissioner's order disapproving any form or
4-25 endorsement or any notice of the commissioner's intention to
4-26 withdraw a previous approval must state the grounds for the
4-27 disapproval in enough detail to reasonably inform the filer of the
4-28 grounds. An order of withdrawal of a previously filed form or
4-29 endorsement takes effect on the expiration of the prescribed period
4-30 but not sooner than the 60th day after the effective date of the
4-31 withdrawal order, as prescribed by the commissioner.
4-32 (h) The commissioner [Board] may not adopt or approve policy
4-33 forms for personal fire or homeowner's insurance or any endorsement
4-34 to the policy if the policy or endorsement is not in plain
4-35 language. For the purposes of this subsection, a policy or
4-36 endorsement is written in plain language if it achieves the minimum
4-37 score established by the commissioner on the Flesch reading ease
4-38 test or an equivalent test selected by the commissioner or, at the
4-39 option of the commissioner, if it conforms to the language
4-40 requirements in a National Association of Insurance Commissioners
4-41 model act relating to plain language. This subsection does not
4-42 apply to policy language that is mandated by state or federal law.
4-43 (i) An insurer may not use in this state any form or
4-44 endorsement after disapproval of the form or endorsement or
4-45 withdrawal of approval by the commissioner.
4-46 [(g) The Board may withdraw its approval of a policy or
4-47 endorsement form at any time, after notice and hearing.]
4-48 SECTION 14. Subsection (b), Article 5.39, Insurance Code, is
4-49 amended to read as follows:
4-50 (b) Notwithstanding Subsection (a) of this article, on and
4-51 after March 1, 1992, rates for homeowners and [farm and ranch
4-52 owner's] residential fire and residential allied lines insurance
4-53 coverage under this subchapter are determined, and hearings related
4-54 to those rates are conducted, as provided by Subchapter M of this
4-55 chapter, and rates for other lines of insurance subject to this
4-56 subchapter are determined as provided by Article 5.13-2 of this
4-57 code.
4-58 SECTION 15. Subsection (d), Article 5.40, Insurance Code, is
4-59 amended to read as follows:
4-60 (d) Notwithstanding Subsections (a)-(c) of this article, on
4-61 and after March 1, 1992, rates for homeowners and [farm and ranch
4-62 owner's] residential fire and residential allied lines insurance
4-63 coverage under this subchapter are determined, and hearings related
4-64 to those rates are conducted, as provided by Subchapter M of this
4-65 chapter, and rates for other lines of insurance subject to this
4-66 subchapter are determined as provided by Article 5.13-2 of this
4-67 code.
4-68 SECTION 16. Subsection (b), Article 5.41, Insurance Code, is
4-69 amended to read as follows:
5-1 (b) Notwithstanding Subsection (a) of this article, on and
5-2 after March 1, 1992, rates for homeowners and [farm and ranch
5-3 owner's] residential fire and residential allied lines insurance
5-4 coverage under this subchapter are determined as provided by
5-5 Subchapter M of this chapter, and rates for other lines of
5-6 insurance subject to this subchapter are determined as provided by
5-7 Article 5.13-2 of this code.
5-8 SECTION 17. Section 4, Article 5.101, Insurance Code, is
5-9 amended to read as follows:
5-10 Sec. 4. EFFECT OF ENDORSEMENTS. An insurer that provides
5-11 additional or reduced coverage through an endorsement to a policy
5-12 subject to this article may assess an additional or reduced charge
5-13 for coverage under the endorsement only with the prior approval of
5-14 the commissioner.
5-15 SECTION 18. This Act takes effect September 1, 1997, and
5-16 applies only to an insurance policy that is delivered, issued for
5-17 delivery, or renewed on or after January 1, 1998. A policy that is
5-18 delivered, issued for delivery, or renewed before January 1, 1998,
5-19 is governed by the law as it existed immediately before the
5-20 effective date of this Act, and that law is continued in effect for
5-21 that purpose.
5-22 SECTION 19. The importance of this legislation and the
5-23 crowded condition of the calendars in both houses create an
5-24 emergency and an imperative public necessity that the
5-25 constitutional rule requiring bills to be read on three several
5-26 days in each house be suspended, and this rule is hereby suspended.
5-27 * * * * *