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.