HBA- TYH, BTC H.B. 476 76(R)    BILL ANALYSIS


Office of House Bill AnalysisH.B. 476
By: Chavez
Insurance
4/12/1999
Introduced



BACKGROUND AND PURPOSE 

Currently, motor vehicle insurance policies are written based on the
vehicle driven as well as the driving record of the insured individual.
Rates are impacted by this formula, which increases premiums for persons
owning expensive vehicles and for those who live in areas of high theft,
high traffic congestion, and other factors.  The purpose of this
legislation is to require insurers to insure the individual driver, rather
than the driver's automobile, and to determine the insured's premium rates
on that basis. 

H.B. 476 uses the driver's record as the basis of the premium determination
and allows an insurer to provide a discount for "honor student[s]."  This
bill expands the minimum coverage amounts to reflect cost of living and
property value increases that have occurred since the implementation of the
amended legislation, and authorizes the commissioner of insurance to adopt
rules governing the procedures for establishing and adjusting minimum base
rates.  This bill prohibits insurance companies from refusing to issue or
renew a passenger vehicle insurance policy to a person who holds a driver's
license or who has been certified by the Texas Department of Public Safety
as eligible to hold a license.  The bill also establishes a criminal
penalty (Class A misdemeanor) for operation of a motor vehicle in violation
of the law, and provides for an automatic suspension of the driver's
license upon termination of passenger vehicle insurance. 

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that rulemaking
authority is expressly delegated to the commissioner of insurance in
SECTION 1 (Article 27.152, Insurance Code) and SECTION 8 (Article 5.03-3,
Insurance Code) of this bill. 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends the Insurance Code, by adding Chapter 27, as follows:

CHAPTER 27.  INSURANCE FOR PASSENGER VEHICLES

SUBCHAPTER A.  GENERAL PROVISIONS

Art.  27.001.  DEFINITIONS.  Defines: "driver's license," "highway," and
"passenger vehicle." 

Art.  27.002.  EXCEPTION TO APPLICATION.  Establishes that this chapter
does not apply to a person while the person is operating a government
vehicle in the course of the person's employment. 

Art.  27.003.  REFERENCES TO PRIOR LAW.  Provides that a reference in
another law to the Motor Vehicle Safety Responsibility Act, Article 6701h,
V.T.C.S., as that law existed on August 31, 1995, or to Chapter 601,
Transportation Code, as that law existed on August 31, 1997, means this
chapter, insofar as it is applicable to a passenger vehicle. 

SUBCHAPTER B.  INSURANCE REQUIREMENT.

 Art.  27.051.  INSURANCE REQUIRED.  Prohibits a person from operating a
passenger vehicle on a highway unless the person is covered for damages
arising from that person's use of a passenger vehicle by a passenger
vehicle liability insurance policy that complies with Subchapter C of this
chapter. 

SUBCHAPTER C.  PASSENGER VEHICLE INSURANCE.

Art.  27.101.  PASSENGER VEHICLE INSURANCE; REQUIREMENTS.  (a) Specifies
that to satisfy the requirement of Art. 27.051 of this code, a passenger
vehicle liability insurance policy must: 

(1)  except as provided by Subsection (b) of this article, be issued by an
insurance company authorized to write motor vehicle liability insurance in
this state; 
(2)  be written to or for the benefit of each person named in the policy as
the insured; and  
(3)  meet the requirements of this subchapter.

(b)  Authorizes a person who is not a resident of this state and who does
not hold a driver's license issued by this state to satisfy the
requirements of Art. 27.051 of this code through a motor vehicle liability
insurance policy written by an insurance company that is not authorized to
do business in this state, if the insurance company is authorized to do
business in another state, executes a power of attorney authorizing the
Texas Department of Insurance (department) to accept on its behalf service
of notice or process in an action arising out of a motor vehicle accident
in this state, and agrees in writing that its policies will be treated as
conforming to the laws of this state relating to the terms of a passenger
vehicle liability insurance policy. 

Art.  27.102.  MINIMUM COVERAGE AMOUNTS.  (a)  Establishes that the minimum
amounts of passenger vehicle liability insurance coverage required by this
chapter are: 

(1)  $30,000 for bodily injury to or death of one person in one accident;
(2)  $60,000 for bodily injury to or death of two or more persons in one
accident, subject to the amount provided by Subdivision (1) of this
subsection for bodily injury to or death of one of the persons; and 
(3)  $20,000 for damage to or destruction of property of others in one
accident.   

(b)  Authorizes coverage required under Subsection (a) to exclude, with
respect to one accident: the first $250 of liability for bodily injury to
or death of one person; the first $500 of liability for bodily injury to or
death of two or more persons, subject to the amount provided by Subdivision
(1) of this subsection for bodily injury to or death of one of the persons;
and the first $250 of liability for damage to or destruction of property to
others. 

Art. 27.103.  REQUIRED TERMS.  Establishes that a passenger vehicle
liability insurance policy required by this chapter must pay, on behalf of
each named insured, amounts the insured becomes obligated to pay as damages
arising out of the use by the insured of any passenger vehicle in the
United States or Canada, subject to the amounts and exclusions of Art.
27.102 of this code. 

Art. 27.104.  PROHIBITED TERMS.  Prohibits an insurance policy required by
this chapter from insuring against liability: for which the insured or
insurer may be held liable under a worker's compensation law; for bodily
injury to or death of an employee of the insured engaged in employment,
other than domestic, of the insured, or in domestic employment if benefits
for the injury are payable or required to be provided under a worker's
compensation law; or for injury to or destruction of property owned by,
rented to, in the care of, or transported by the insured. 

Art. 27.105.  ADDITIONAL COVERAGE.  Authorizes an insurance policy which
provides required coverage amounts, subject to Art. 27.104, to also provide
additional coverage either  in excess of or in addition to the policy.
Authorizes additional coverage to include comprehensive coverage applicable
to a passenger vehicle owned by the insured or liability coverage for the
insured's vehicle when used by another driver licensed in another state.
Provides that such coverage is not subject to this chapter. 

Art. 27.106.  POLICY FORM.  Requires the policy form and any endorsement to
the policy to be adopted by the commissioner of insurance (commissioner) in
accordance with Article 5.06 (Policy Forms and Endorsements) of this code.
Requires the form to state the dollar amount of coverage provided,
including any optional coverage. 

Art. 27.107.  MULTIPLE POLICIES.  Authorizes this chapter's liability
insurance requirements to be satisfied by a combination of policies of one
or more insurance companies if the policies meet the requirements when
combined.   

Art. 27.108.  NOTICE TO TEXAS DEPARTMENT OF PUBLIC SAFETY; CONTINUATION OF
COVERAGE; CONSIDERATION OF DRIVING RECORD. Requires an insurance company
which issues a motor vehicle insurance policy representing the company's
satisfaction of the requirements of this chapter to notify the Texas
Department of Public Safety (DPS) of the issuance of the policy,
termination of the policy by any party, or a claim made under the policy.
Provides that terminated policy coverage on a passenger vehicle continues
until the fifth day after the date the notice is mailed.  Requires the DPS
to suspend the person's driver's license pursuant to Subchapter T (Summary
Suspension After Termination of Passenger Vehicle Insurance), Chapter 521,
Transportation Code, upon receipt of notice of termination of coverage.
Requires the public safety director of the DPS, upon receipt of notice of
five or more claims against a person's insurance policy within a three year
period, to review the insured's record.  Authorizes the initiation of
proceedings to consider suspension or revocation of the person's license
under Subchapter N (General Provisions Relating to License Denial,
Suspension, or Revocation), Chapter 521, Transportation Code. 

Art. 27.109.  PROOF OF COVERAGE.  Requires the commissioner to prescribe a
standard proof of insurance to be used by an insured to comply with Section
521.143 (Evidence of Financial Responsibility Required), Transportation
Code. 

SUBCHAPTER D. GUARANTEED ISSUE AND RENEWABILITY; RATES

Art. 27.151.  ISSUANCE TO LICENSED DRIVER.  Prohibits an insurance company
authorized to write motor vehicle liability insurance in this state from
refusing to issue or renew a minimal limits auto insurance policy to a
person who holds a driver's license or who has been certified by DPS as
eligible to hold a license under Section 21.143 (sic), Transportation Code. 

Art.  27.152.  RATES.  (a)  Requires the commissioner, after notice and
hearing, to establish and annually adjust as is actuarially justifiable,
the minimum base rates for passenger vehicle liability insurance issued
under this chapter.  Requires the commissioner to adopt rules governing the
procedures for establishing and adjusting minimum base rates.  Provides
that Subchapter A (Motor Vehicle or Automobile Insurance), Chapter 5,
Insurance Code, and Subchapter M (Flexible Rating Program for Certain
Insurance Lines), Chapter 5, Insurance Code, do not apply to rates for
passenger vehicle liability insurance governed by this chapter.  

(b)  Prohibits minimum base rates from varying because of the insured's
area of residence, age, or gender. 

(c)  Prohibits an insurer from charging a rate that exceeds the applicable
minimum base rate established under this section, except as provided in
this section. 

(d)  Establishes that if an insured was covered by one or more passenger
vehicle liability insurance policies issued under this chapter which paid
one liability claim during the period that began three years before the
date on which a premium is due, the applicable  rate to that insured is two
times the minimum base rate that would otherwise be applicable to the
insured. 

(e)  Establishes that if an insured was covered by one or more passenger
vehicle liability insurance policies issued under this chapter that paid
two liability claims, during the period that began three years before the
date on which a premium is due, the rate applicable to that insured is four
times the minimum base rate that would otherwise be applicable to the
insured. 

(f)  Establishes that if an insured was covered by one or more passenger
vehicle liability insurance policies issued under this chapter that paid
three liability claims, during the period that began three years before the
date on which a premium is due, the rate applicable to that insured is
eight times the minimum base rate that would otherwise be applicable to the
insured. 

(g)  Establishes that if an insured was covered by one or more passenger
vehicle liability insurance policies issued under this chapter that paid
four liability claims, during the period that began three years before the
date on which a premium is due, the rate applicable to that insured is 16
times the minimum base rate that would otherwise be applicable to the
insured. 

(h)  Establishes that if an insured was covered by one or more passenger
vehicle liability insurance policies issued  under this chapter that paid
five or more liability claims, during the period that began three years
before the date on which a premium is due, the rate applicable to that
insured is 32 times the minimum base rate that would otherwise be
applicable to the insured.  Further provides that an insurer that knows of
five or more liability claims against an insured during this three year
period must notify the department and the department must review the
insured's record, as provided by Art. 27.108 (d) of this code. 

SUBCHAPTER E.  PENALTIES

Art. 27.201.  OPERATION OF PASSENGER VEHICLE IN VIOLATION OF INSURANCE
REQUIREMENT; OFFENSE.  (a)  Provides that a person commits an offense if
the person operates a passenger vehicle in violation of Article 27.051 of
this code. 

(b)  Establishes that, except as provided by Subsection (c) of this
section, an offense under this section is a Class A misdemeanor. 

(c)  Provides that if at time of trial of an offense under Subsection (a)
of this section, the person has been previously convicted of an offense
under that subsection, an offense under this section is a state jail
felony. 

SECTION 2.  Amends Chapter 521, Transportation Code, by adding Subchapter
T, as follows: 

SUBCHAPTER T.  SUMMARY SUSPENSION AFTER TERMINATION OF PASSENGER VEHICLE
INSURANCE 

Sec. 521.501.  NOTICE OF TERMINATION OF INSURANCE; SUSPENSION OF LICENSE.
(a)  Requires the Public Safety Director, on receipt of notice under Art.
27.108, Insurance Code, that the passenger vehicle insurance issued to a
license holder has been canceled, to mail a notice of that fact and of
these subchapter provisions to the license holder. 

(b)  Provides that the person's license be suspended on the 10th day after
the date of mailing of the notice unless, prior to that date, the person
submits evidence of substitute passenger vehicle liability insurance that
complies with the requirements of Chapter 27 (Health Benefit Plans for
Children), Insurance Code, or requests a hearing under this subchapter.   

Sec. 521.502.  HEARING.  (a)  Requires that a hearing under this subchapter
be conducted  in the same manner as a hearing under Section 521.293
(Jurisdiction; Presiding Officer). 

(b)  Establishes that the hearing must be held no later than the fifth day
after the date that the request for hearing is received by the DPS. 

(c)  Provides that the only issue at the hearing is whether the license
holder is covered by a policy of passenger vehicle liability insurance that
complies with Chapter 27, Insurance Code. 

(d)  Requires the presiding officer to recommend suspension of license and
requires the director to suspend the license if the license holder is not
covered by a policy that complies with Chapter 27. 
 
(e)  Provides that a person can appeal the suspension of the license
pursuant to Section 521.302 (Appeal; Judicial Review), excluding Section
521.302 (f), where the issue is the same as described in Subsection (c). 

Sec. 521.503.  PERIOD OF SUSPENSION.  Establishes that the suspension of a
license under this subchapter continues until the license holder submits to
the director satisfactory evidence of vehicle liability insurance that
complies with Chapter 27, Insurance Code, and complies with each
requirement for renewal of the license.  Prohibits a license renewal during
the period of suspension. 

Sec. 521.504.  SURRENDER OF LICENSE; RETURN.  Requires the license holder
to surrender the license to the department upon suspension of the license.
Requires DPS to return the license to the holder at the time the suspension
is lifted unless, during the period of suspension the license expired or
was revoked. 

SECTION 3.  Amends Section 521.143, Transportation Code, as follows:  

Sec. 521.143.  EVIDENCE OF FINANCIAL RESPONSIBILITY REQUIRED.  (a)
Provides that an application for an original or renewal of a driver's
license must have evidence of passenger vehicle liability insurance that
complies with the requirements of Article 5.06 (Policy Forms and
Endorsements), Insurance Code, and Chapter 27, Insurance Code. 

(b)  Requires DPS to issue a person a certificate of eligibility for a
driver's license, if the applicant satisfies each requirement for issuance
of a license other than the requirement in Subsection (a).  Requires DPS to
issue the license in accordance with Subchapter I (Issuance of Driver's
License) on presentation of evidence that the applicant has satisfied
Subsection (a).  Deletes Subsections (b), (c) and (d). 

SECTION 4.  Amends Subchapter A, Chapter 601, Transportation Code, by
adding Section 601.0025, as follows:   

Sec. 601.0025.  PASSENGER VEHICLES EXCLUDED.  Provides that,
notwithstanding any other law, this chapter does not apply to the
operation, maintenance, or use of a passenger vehicle, as that term is
defined by Art. 27.001, Insurance Code, and the term "motor vehicle," as
used in this chapter, does not include a passenger vehicle. 

SECTION 5.  Amends Articles 5.01 (e) and (f), Insurance Code, to delete a
motor bicycle from the list  of vehicles for which vehicle liability
insurance is necessary for liability reasons.  Provides that semi-trailers
pulled or towed by a motor vehicle, excluding every motor vehicle running
only upon fixed rails or tracks, are to be included in the list.  Provides
that the term "motor vehicle or automobile insurance" includes a policy of
passenger vehicle insurance written to comply with Chapter 27 of this code,
and excludes workers' compensation insurance from the definition. Provides
that notwithstanding Subsections (a) through (d) of this article, rates for
motor vehicle insurance in this state, other than passenger vehicle
liability insurance, are determined as provided by the flexible rating
program adopted under Subchapter M of this chapter.    

SECTION 6.  Amends Art. 5.01-2 (b), Insurance Code, by deleting the
effective date of March 1, 1992, for which rates for motor vehicle
insurance written by a Lloyds plan insurer or a reciprocal or
interinsurance exchange, other than passenger vehicle liability insurance,
are determined as provided by the flexible rating program adopted under
subchapter M of this chapter. 

SECTION 7. Amends Art 5.03 (g), Insurance Code, to make a conforming change
and a nonsubstantive change. 

SECTION 8.  Amends Sections 1 and 2, Art. 5.03-3, Insurance Code, to
include definitions, as follows: 

(1)  "Honor student" means an individual who, according to the official
scholastic records for the preceding academic semester, quarter, or other
grade reporting period has at least a "B" average or at least a 3.0 average
on a 4.0 scale.   
 
(2)  "Insurer" means an insurance company, interinsurance exchange, mutual,
capital stock company, fraternal benefit society, local mutual aid
association, county mutual, reciprocal, association, Lloyd's plan, or other
entity writing motor vehicle insurance in this state.  The term includes a
company affiliated with an insurer.  Deletes existing text in Subsection
(3) and redesignates existing Subsection (4) as Subsection (3). 

Sec. 2.  DISCOUNT AUTHORIZED.  Provides that an insurer who delivers or
issues for delivery in this state a motor vehicle insurance policy, on
receipt of written verification from the insured that the insured is
eligible and that the motor vehicle available for use by the insured
satisfies the requirements of this section, may grant a discount in the
amount provided by this section in the premiums charged for the liability,
medical payments, and personal injury protection coverage for the insured.
Deletes language that a discount for collision coverage apply only for the
motor vehicle designated to be driven by the honor student.  Establishes
that in order to be eligible for a discount under this article, an
applicant is required to annually file the grade report issued by the
school or other information that presents evidence satisfactory to
establish that the person covered by the discount is licensed to drive in
the state, is under 25 years old and qualifies as a youthful driver under
Texas Department of Insurance automobile classification plan, and is
enrolled as a full time student in the junior or senior year of high school
or academic courses in a higher education institution.  Provides that the
motor vehicle available for use by the insured must be a private passenger
vehicle that is registered in this state and has a gross weight not to
exceed 25,000 pounds.  Requires the commissioner to set by rule the amount
of the discounts applicable under this article and authorizes the
commissioner to adopt other rules necessary for the implementation of this
article. 

SECTION 9.  Amends Article 5.04 (c), Insurance Code, to delete March 1,
1992, as the date on which rates for motor vehicle insurance, other than
passenger vehicle liability insurance, are to be determined. 

SECTION 10.  Amends Articles 5.06 (9) and (10), Insurance Code, as follows:

(9).  Deletes language which prohibits an insurance policy or other
document evidencing proof of purchase of a passenger vehicle liability
insurance policy written for a term of less than 30 days from being used to
obtain a motor vehicle inspection certificate or an automobile registration
or license plates. 

(10)  Makes conforming changes.

SECTION 11.  Amends Sections 1, 2, and 3, Article 5.06-1, Insurance Code,
as follows:   

(1)  Deletes the language which includes insurance issued pursuant to an
assigned risk plan established under authority of Section 35 of the Texas
Motor Vehicle Safety-Responsibility Act from the insurance covering
liability in this section.  Deletes designation of uninsured or
underinsured motor vehicles. 

(2)  Makes nonsubstantive changes.  Adds Subsection (d), to require the
portion of a policy form adopted under Art. 5.06 of this code to provide
coverage under this article to include provisions that, regardless of the
number of persons insured, policies or bonds applicable,  vehicles
involved, or claims made, prohibit the total aggregate limit of liability
to any one person who sustains bodily injury or property damage as the
result of any one occurrence from exceeding the limit of liability for
these coverages as stated in the policy, and establish that the total
aggregate limit of liability to all claimants, if more than one, is
prohibited from exceeding the total limit of liability per occurrence as
stated in the policy; and require the exclusion of the recovery of damages
for bodily injury or property damage or both resulting from the intentional
acts of the insured.  Provides that the portion of a policy form adopted
under Art. 5.06 of this code to provide coverage under this article must
require actual physical contact to occur between the motor vehicle owned or
operated by the unknown person and the person or property insured, where
the owner or operator of such motor vehicle causes bodily injury or
property damage to the insured, in order for the insured to recover under
the uninsured motorist coverages.   

(3)  Makes a conforming change. 

SECTION 12.  Amends Section 4 (a), Article 5.06-1, Insurance Code, to make
a conforming change. 

SECTION 13.  Amends Sections (7) and (8), Article 5.06-1, Insurance Code,
by deleting "motor vehicle." 

SECTION 14.  Amends Subsections (a), (b), and (c), Article 5.06-3, 20-16,
Insurance Code, as follows: 
  
(a)  Deletes insurance issued pursuant to an assigned risk plan established
under authority of Section 35, Texas Motor Vehicle Safety-Responsibility
Act, from being the type of automobile liability insurance policy which is
required to be delivered with personal injury protection insurance.   Makes
nonsubstantive changes.   

(b)  Deletes "members of the insured's household" and an authorized
"operator" from the list of persons covered under the "personal injury
protection" portion of an automobile liability insurance policy.  Makes
nonsubstantive changes 

(c)  Deletes language disregarding the fact that there may be collateral
medical benefits, when discussing which benefits are to be paid in an
accident regardless of fault.  Provides that previous designation of an
insurer's right to subrogation and benefit limitations are the same except
as provided by this subsection. 

SECTION 15.  Amends Article 5.09 (c), Insurance Code, to delete March 1,
1992 as the inception date on which rates for motor vehicle insurance,
other than passenger vehicle liability insurance are determined as provided
by Subchapter M of this chapter.  Makes a nonsubstantive change. 

SECTION 16.  Amends Article 5.11 (c), Insurance Code, to make conforming
changes. 

SECTION 17.  Amends Article 5.96 (a-1), Insurance Code, to make
nonsubstantive changes. 

SECTION 18.  Amends Section 1, Article 5.101, Insurance Code, by adding
Subsection (11), "passenger vehicle liability insurance," to the list of
exempt insurance lines which the flexible insurance rating program was
designed to help stabilize. 

SECTION 19.  Repealer:

Sec. 502.153, Transportation Code (Evidence of Financial Responsibility);

Sec. 548.105, Transportation Code (Evidence of Financial Responsibility as
Prerequisite to Issuance of Inspection Certificate); 

Sec. 29, Chapter 705, Acts of the 74th Legislature, Regular Session, 1995; 

Sec. 4, Chapter 443, Acts of the 74th Legislature, Regular Session, 1995; 

Sec. 5, Chapter 621, Acts of the 74th Legislature, Regular Session, 1995;
and  
 
Art. 21.81, Insurance Code (Texas Automobile Insurance Plan Association).

SECTION 20.  (a)  Effective date: September 1, 1999, except as provided by
Subsection (b) of this 
section.  

(b)  Provides that Section 19 of this Act takes effect January 1, 2000.

(c)  Provides that this Act applies only to the operation of a passenger
vehicle on or after January 1, 2000.  Makes application of this Act
prospective. 

(d)  Provides that this Act applies only to an insurance policy that is
delivered, issued for delivery, or renewed on or after January 1, 2000.
Makes application of this Act prospective.   

SECTION 21.  Emergency clause.