HBA-ATS H.B. 3098 76(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 3098 By: Burnam Insurance 4/4/1999 Introduced BACKGROUND AND PURPOSE Texas law requires motorists to have liability insurance. This statutory scheme compels owners of motor vehicles to insure themselves against liability for the death of or injury to another person brought about by the use of their motor vehicle. Currently, minimum coverage for liability insurance is $20,000 per injured person, up to a total of $40,000 for everyone hurt in an accident, and $15,000 for property damage. The crux of liability insurance in Texas is that it is based on the common law fault system in which compensation for damages for personal injury is paid only after negligence has been proved or conceded. Thus, under liability insurance, an insurance company is only obligated to pay for damages for which its insureds are legally responsible, up to the policy's dollar limits. In contrast, under a no-fault insurance scheme, damages incurred by each side in an accident are paid by each side's insurance company. This type of insurance scheme provides medical and income benefits to persons injured in motor vehicle accidents regardless of whose fault the accident may be. Generally, neither side can sue the other, although some schemes permit some motor accident victims to claim damages for personal injuries they suffer as a result of their accident. A no-fault system may be beneficial to insurers because it can eliminate costly legal proceedings and it may help keep rates down. H.B. 3098 repeals the existing automobile liability insurance requirements under Texas law and replaces them with the Texas Motor Vehicle Insurance System (system), which provides motor vehicle insurance coverage for first party benefits to covered persons without regard to the fault of the covered person. Under this bill, the coverage must provide benefits for a person who suffers bodily injury, death, or property damage through the maintenance, operation, or use of a motor vehicle in this state, without regard to whether the person is a resident of this state or whether the motor vehicle is registered in this state. The coverage for first party benefits includes: reasonable and necessary medical expenses, without a limit or deductible; loss of income from work for a period of one year after the date of the accident causing injury, subject to a limit of $25,000 and with a deductible equal to one week's wages; damage to a motor vehicle, subject to a limit of five percent of the value of the motor vehicle; and damage to property other than a motor vehicle, subject to a deductible of $500. In addition, the system is required to offer additional coverage packages providing benefits for loss of income from work for a period of one year after the date of the accident causing injury, subject to benefit limits of $50,000 and $75,000, respectively. A person is prohibited from recovering damages for bodily injury or property damage arising out of the maintenance, operation, or use of a motor vehicle in this state. Under this bill, the commissioner of insurance is required to adopt a pay-at-the-pump premium rate that is established as a fixed rate collected for each gallon of motor fuel sold in this state. The rate must be sufficient to fund coverage. Each dealer in this state is required to collect the premium on the first sale for use of motor fuel in this state and to pay the premium to the comptroller of public accounts. The Texas Department of Insurance must divide all motor vehicles registered in this state into random groups of approximately 5,000 motor vehicles each. Motor vehicle insurers are authorized to bid to provide coverage to a group of motor vehicles. An insurer to which a motor vehicle has been assigned must pay benefits for the owner or operator of the vehicle, a member of the owner's family, and any other person injured through the maintenance, operation, or use of the motor vehicle, including a passenger or pedestrian. 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 (Articles 30.02, 30.03, 30.72, 30.73, 30.76, and 30.94, Insurance Code), the comptroller of public accounts in SECTION 1 (Articles 30.73 and 30.74, Insurance Code), and the State Board of Insurance in SECTION 3 of this bill. SECTION BY SECTION ANALYSIS SECTION 1. Amends the Insurance Code, by adding Chapter 30, as follows: CHAPTER 30. TEXAS MOTOR VEHICLE INSURANCE SYSTEM SUBCHAPTER A. GENERAL PROVISIONS Art. 30.01. DEFINITIONS. Defines "covered person," "dealer," "account," "motor fuel," "motor vehicle insurer," "motor vehicle," and "system." Art. 30.02. TEXAS MOTOR VEHICLE INSURANCE SYSTEM. Establishes the Texas Motor Vehicle Insurance System (system) to provide motor vehicle insurance coverage (coverage) in accordance with this chapter. Specifies that the system is administered by the Texas Department of Insurance (department) in accordance with rules adopted by the commissioner of insurance (commissioner). Art. 30.03. RULES. Authorizes the commissioner to adopt rules as necessary to implement this chapter. Art. 30.04. AUTHORITY TO CONTRACT. Authorizes the department to contract with a private accounting firm or other entity as appropriate to administer some or all of the functions of the department under this chapter. Art. 30.05. TEXAS MOTOR VEHICLE INSURANCE ACCOUNT. Sets forth that the system account is an account in the general revenue fund. Specifies that the account is composed of premiums and premium surcharges collected under this chapter. Provides that interest on money in the account is credited to the account. Authorizes the use of money in the account only for the costs of administering the system and to pay the cost of providing the coverage required by this chapter. Art. 30.06. PARTICIPATION OF PUBLIC INSURANCE COUNSEL. Authorizes the public insurance counsel to participate in a proceeding held to adopt premium rates or surcharges under this chapter in accordance with Article 1.35A (Office of Public Insurance Counsel). SUBCHAPTER B. COVERAGE Art. 30.31. SYSTEM COVERAGE; NO FAULT. Requires the system to provide coverage for first party benefits to covered persons in accordance with this subchapter. Specifies that a benefit payable under coverage provided through the system is payable without regard to the fault of the covered person. Art. 30.32. COVERED PERSONS. Sets forth that the coverage must provide benefits for a person who suffers bodily injury, death, or property damage through the maintenance, operation, or use of a motor vehicle in this state, without regard to whether the person is a resident of this state or whether the motor vehicle is registered in this state. Art. 30.33. BENEFITS. (a) Specifies that the coverage must provide first party benefits for: _reasonable and necessary medical expenses, without a limit or deductible; _loss of income from work for a period of one year after the date of the accident causing injury, subject to a limit of $25,000 and with a deductible equal to one week's wages; _damage to a motor vehicle, subject to a limit of five percent of the value of the motor vehicle, as established by rules adopted by the board; and _damage to property other than a motor vehicle, subject to a deductible of $500. (b) Sets forth that coverage through the system for medical expenses is secondary to any other insurance or benefit plan providing coverage for the expenses. (c) Prohibits the payment of a benefit for damage to a motor vehicle unless the damage to the vehicle exceeds $500. (d) Prohibits a benefit for damage to a motor vehicle from including amounts necessary for new replacement parts or replacement parts manufactured by a particular manufacturer if alternative replacement parts are available at a lower cost. (e) Requires the system to offer additional coverage packages providing benefits for loss of income from work for a period of one year after the date of the accident causing injury, subject to benefit limits of $50,000 and $75,000, respectively. Requires the State Board of Insurance (board) to adopt premium rates to be charged for the additional coverage packages provided under this subsection. Requires the county tax collector to collect the additional premium in accordance with Article 30.73. Art. 30.34. OUT-OF-STATE EXCLUSION. Prohibits the system from providing coverage for bodily injury, death, or property damage arising out of the maintenance, operation, or use of a motor vehicle outside this state. Art. 30.35. DUPLICATION OF COVERAGE PROHIBITED; SUPPLEMENTAL INSURANCE. (a) Prohibits a motor vehicle insurer (insurer) from issuing insurance providing benefits that duplicate the benefits provided under this chapter except through the system as provided by Subchapter E. (b) Authorizes an insurer, subject to approval by the commissioner and in accordance with rules adopted by the commissioner, to issue insurance providing benefits or indemnity coverage that supplements the benefits provided under this chapter, including insurance providing coverage for bodily injury, death, or property damage arising from the maintenance, operation, or use of a vehicle outside this state, additional coverage for property damage, and coverage for liability for damages for a serious injury, as defined by rules adopted by the commissioner, arising from the maintenance, operation, or use of a motor vehicle in this state. Art. 30.36. POLICY FORMS AND ENDORSEMENTS. Requires the commissioner to adopt standard policy forms and endorsements for the issuance of coverage under this chapter. SUBCHAPTER C. LIABILITY FOR MOTOR VEHICLE ACCIDENTS Art. 30.51. TORT LIABILITY LIMITED. Prohibits a person from recovering damages for bodily injury or property damage arising out of the maintenance, operation, or use of a motor vehicle in this state. Sets forth that any person involved in a motor vehicle accident in this state is subject to the limitations of this article. Art. 30.52. EXCEPTIONS. Sets forth that Article 30.51 does not apply to a claim for damages for serious bodily injury, as defined by rules adopted by the commissioner, against a motor vehicle manufacturer alleging gross negligence in the manufacture of a motor vehicle, or against a governmental or other entity alleging gross negligence in the design, construction, or maintenance of a public roadway. SUBCHAPTER D. COLLECTION OF PREMIUMS Art. 30.71. PAY-AT-THE-PUMP PREMIUM. Requires the commissioner to adopt a pay-at-the-pump premium rate in accordance with this article. Requires that the premium rate be established as a fixed rate collected for each gallon of motor fuel sold in this state and be in an amount necessary to fund coverage under this chapter, adjusted to reflect the additional premiums and premium surcharges collected under this subchapter. Art. 30.72. COLLECTION OF PAY-AT-THE-PUMP PREMIUM. Requires each dealer in this state to collect the premium on the first sale for use of motor fuel in this state and to pay the premium to the comptroller. Requires the comptroller of public accounts (comptroller) to adopt rules governing premium collection under this article, dealer recordkeeping and reporting, and premium payment to the comptroller. Requires the comptroller, by rule, to coordinate collection of the premium under this article with collection of motor fuel taxes under Chapter 153 (Motor Fuel Taxes), Tax Code. Art. 30.73. REGISTRATION SURCHARGE; ALTERNATIVE-FUEL VEHICLE PREMIUM; COLLECTION OF NECESSARY INFORMATION. (a) Requires the commissioner to adopt premium surcharges to be paid at the time a motor vehicle is registered. (b) Requires the commissioner to adopt premium rates for alternative-fuel vehicles to be paid at the time an alternative-fuel vehicle is registered. (c) Authorizes the commissioner to adopt rules requiring the collection of information relating to the motor vehicle and the owner and operators of the vehicle at the time the motor vehicle is registered. (d) Requires that the premium surcharges adopted under this article be in amounts reflecting the insurance risk of the vehicle registered. Authorizes the premium surcharges to vary according to the type, average gas mileage, and age of the motor vehicle registered, whether the vehicle is used as a private passenger vehicle or as a commercial vehicle, and other factors that relate to the insurance risk of the vehicle registered. (e) Authorizes the commissioner to authorize a premium offset against the registration fee for motor vehicles that pose a low insurance risk in comparison to other motor vehicles. (f) Requires the department to provide to each county tax collector in this state a manual listing the applicable premium, premium surcharge, or offset for each motor vehicle. Requires the county tax collector to collect the premium or premium surcharge required under this article and any additional premium paid under Article 30.33(e) at the time the vehicle is registered. Requires the county tax collector to pay the surcharge and additional premium to the comptroller. Requires the county tax collector to reduce the registration fee by the amount of any applicable offset. Requires the comptroller to transfer the amount of the offset from the fund to the account to which registration fees are deposited. (g) Requires the comptroller to adopt rules governing the collection and payment of the premium and premium surcharge under this article and the accounting of offsets against registration fees. (h) Requires the commissioner to adopt a system under which the owner of a motor vehicle is notified of the insurer to which the motor vehicle is assigned at the time the owner registers the motor vehicle. Art. 30.74. SURCHARGE FOR TRAFFIC VIOLATION. (a) Requires the commissioner to adopt premium surcharges to be paid on conviction of an offense under the Transportation Code or Section 49.08 (Intoxication Manslaughter), Penal Code. (b) Requires that the premium surcharge vary with the severity of the violation as it relates to the insurance risk of the convicted person. Prohibits the commissioner from adopting a premium surcharge to be paid on conviction of an offense that, in the opinion of the commissioner, does not relate to safety or insurance risk. (c) Requires the department to provide to each court in this state a manual listing the applicable premium surcharge for each offense for which a surcharge is made. Requires the collection of the surcharge at the time of conviction or at the time any other fine or fee is collected in connection with the offense. Requires that the surcharge be paid to the comptroller. (d) Requires the comptroller to adopt rules governing the collection and payment of the surcharge under this article. Art. 30.75. DEPOSIT OF PREMIUM TO ACCOUNT. Requires the comptroller to deposit premiums and premium surcharges collected under this subchapter to the credit of the account. Art. 30.76. BORDER AREAS. (a) Authorizes the commissioner, by rule, to designate specified areas of the state as border areas. (b) Sets forth that the owner or operator of a motor vehicle registered in a border area may be required to demonstrate that the owner or operator purchases motor fuel for the vehicle on a regular basis in this state before benefits are paid to that owner, operator, or a member of the owner's family under this chapter. (c) Provides that it is presumed that the owner or operator purchases motor fuel for the vehicle on a regular basis in this state if, during the seven days preceding the date of the accident, the owner or operator purchased motor fuel in this state. (d) Authorizes the owner or operator of a motor vehicle registered in a border area who is unable to purchase motor fuel in this state on a regular basis to apply to the commissioner to pay a premium, in an amount adopted by the commissioner, at the time the vehicle is registered. SUBCHAPTER E. PROVISION OF COVERAGE Art. 30.91. PROVISION OF COVERAGE FOR REGISTERED VEHICLES. (a) Requires that coverage for motor vehicles registered in this state be issued by motor vehicle insurers in this state. (b) Requires the insurer to which a motor vehicle has been assigned to pay benefits for the owner or operator of the vehicle, a member of the owner's family, and any other person injured through the maintenance, operation, or use of the motor vehicle, including a passenger or pedestrian, but not including the owner or operator of another vehicle involved in the accident or a member of that owner's family. (c) Requires the insurers to which multiple vehicles involved in an accident have been assigned to share the cost of benefits paid to any other person injured through the maintenance, operation, or use of the motor vehicle, including a passenger or pedestrian, but not including the owner or operator of another vehicle involved in the accident or a member of that owner's family, on a pro rata basis in accordance with rules adopted by the commissioner. Art. 30.92. MOTOR VEHICLES NOT REGISTERED IN THIS STATE. Requires the system to pay benefits for a covered person injured through the maintenance, operation, or use in this state of a motor vehicle that is not registered in this state. Requires the system, if a motor vehicle that is not registered in this state is covered by a policy of motor vehicle insurance, to pay benefits only after any first party benefits provided under that policy of insurance have been exhausted. Art. 30.93. MOTOR VEHICLE INSURER PARTICIPATION. (a) Requires the department to divide all motor vehicles registered in this state into random groups of approximately 5,000 motor vehicles each. (b) Authorizes insurers that satisfy the requirements of specifications established by the commissioner to bid to provide coverage to a group of motor vehicles in accordance with rules adopted by the commissioner. Sets forth that the specifications established by the commissioner must include requirements relating to equal employment opportunities imposed on employers by state or federal law. Authorizes the specifications to require the insurer to institute loss prevention programs. (c) Requires that the bidding be conducted on an annual basis. (d) Requires the commissioner to enter into a group coverage agreement with an insurer who is a successful bidder under Subsection (b) of this article and to act as the policyholder for each group. (e) Requires the department to notify, by the 45th day after the date a motor vehicle is registered, the operator of the motor vehicle of the insurer to which the vehicle has been assigned. Art. 30.94. CLAIMS DATA. Requires the commissioner to adopt rules requiring insurers to submit to the department data relating to claims for benefits. Prohibits an insurer from participating in the system unless the insurer complies with the claims data reporting requirements of this article. Art. 30.95. SATISFACTION REPORT CARDS. Requires an insurer providing coverage under this chapter to supply a customer satisfaction report card (card) to any person submitting a claim to the insurer under this chapter. Requires the card to be in a form adopted by the commissioner and to provide the person submitting the claim the opportunity to report the person's satisfaction with the insurer's settlement and service. Requires the card to include instructions for returning the card to the department or a designee of the department. Requires the department to compile the results of the cards and report the results to the commissioner. Authorizes the commissioner to restrict or increase an insurer's opportunity to bid on the basis of its performance as indicated by the cards. SECTION 2. Repealers: Chapter 601 (Motor Vehicle Safety Responsibility Act), Transportation Code; Sections 502.153 (Evidence of Financial Responsibility) and 502.157 (Initial Registration), Transportation Code; Subchapter A (Motor Vehicle or Automobile Insurance), Chapter 5 (Rating and Policy Forms), Insurance Code. Establishes September 1, 2000, as the effective date for the repealers. SECTION 3. Requires the board to adopt rules, for the first bidding period conducted under Article 30.93, Insurance Code, restricting bidding opportunities on the basis of the bidder's market share of motor vehicle insurance issued in this state. SECTION 4. Requires the Texas Motor Vehicle Insurance System to provide motor vehicle insurance coverage on and after September 1, 2000. Prohibits the collection of premiums and premium surcharges before September 1, 2000. Authorizes a motor vehicle insurer to issue insurance that provides coverage for periods ending before September 1, 2000, in accordance with the law as it existed immediately before the effective date of this Act. Continues in effect the previous law. SECTION 5. Sets forth that this Act takes effect only if the constitutional amendment proposed by the 76th Legislature, Regular Session, 1999, relating to authorizing the legislature to establish a "pay-at-the-pump" motor vehicle insurance system is adopted. Specifies that this Act has no effect if that amendment is not adopted. SECTION 6. Effective date: November 3, 1999, except as provided by Section 2 of this Act. SECTION 7. Emergency clause.