SRC-PNG C.S.S.B. 1191 76(R)BILL ANALYSIS


Senate Research CenterC.S.S.B. 1191
76R11517 DB-DBy: Harris
Economic Development
4/15/1999
Committee Report (Substituted)


DIGEST 

Currently, Article 5.07-1, Insurance Code, is intended to provide Texans
freedom of choice under auto insurance policies when repairing damage to
their vehicles.  The Texas Department of Insurance is authorized to
promulgate rules regarding notice of the article and fraudulent activities.
In spite of these protections, the steering of business by insurance
companies to "preferred" repair shops still occurs.  This bill would
clarify the freedom of choice requirements in the repair of autos covered
by insurance policies. 

PURPOSE

As proposed, C.S.S.B. 1191 clarifies the freedom of choice requirements in
the repair of autos covered by insurance policies. 

RULEMAKING AUTHORITY

This bill does not grant any additional rulemaking authority to a state
officer, institution, or agency. 

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Article 5.07-1, Insurance Code, to prohibit a person
subject to this article, rather than an insurer, from specifying on any
damage report, estimate, or appraisal, the brand, type, kind, age, vendor,
supplier, or condition of the parts or products that may be used to repair
the motor vehicle, requiring the use of any part or product in the repair
of the motor vehicle, or requiring any repair person or facility to specify
on any damage report, estimate, or appraisal the brand, type, kind, age,
vendor, supplier, or condition of the parts or products that may be used to
repair the motor vehicle.  Prohibits a person subject to this article from
directly or indirectly limiting the beneficiary of the policy or a
third-party claimant from selecting a repair person or facility to repair
damage to the motor vehicle covered under an auto insurance policy that is
delivered, issued for delivery, or renewed in this state.  Prohibits a
person subject to this article from soliciting or accepting any form of
compensation in exchange for referring a beneficiary of a policy or
third-party claimant to one or more repair persons or facilities to repair
the damage; from communicating to a beneficiary or a third-party claimant
that, for the damage repair or parts replacement to be covered by the
policy, a beneficiary or a third-party claimant is required to use, one or
more repair persons or facilities; from communicating to a beneficiary or a
third-party claimant that one or more repair persons or facilities
identified on a list of repair persons and facilities maintained by or
compiled by a person subject to this article is preferred or recommended;
from restricting a beneficiary or third-party claimant's right to choose a
repair person or facility by threatening to remove the beneficiary's or
claimant's motor vehicle from a repair person or facility selected by the
beneficiary or claimant for any reason;  from communicating to a
beneficiary or third-party claimant that repairs, including parts,
materials, or labor, are guaranteed by a person other than the repair
person or facility that performs the damage repairs;  from communicating to
a beneficiary or third-party claimant that alternative direct billed
transportation coverage is allowed following the filing of a claim only if
the damaged motor vehicle is repaired by a repair person or facility
selected or recommended by the insurer or an agent of the insurer; from
providing any other incentive to induce the beneficiary of a policy or a
third-party claimant to waive the right to select the repair person or
facility to repair damage to the beneficiary's or the claimant's motor
vehicle; or from reducing the amount paid for repairs by applying
predesignated limits on the quantity of or charge for materials that are
used to repair a motor vehicle. Prohibits an insurer from contracting with
a repair person or facility for any purpose other than for  the provision
of damage reports, estimates, or appraisals. Authorizes any beneficiary,
third-party claimant, consumer group, representative of a consumer,
insurer, repair person, or facility to submit a written, documented
complaint to the Texas Department of Insurance (TDI) with respect to an
alleged violation of this article.  Prohibits a person subject to this
article, in the settlement of liability claims by a third party against an
insured for property damage claimed by the third party, from communicating
to the third-party that in order for repairs to be covered, the claimant is
required to use a specific repair person or facility; or the person prefers
or recommends that the claimant use a repair person or facility identified
on a list of repair persons and facilities maintained or compiled by a
person subject to this article.  Prohibits a person subject to this
article, in the settlement of liability claims by a third party against an
insured for property damage claimed by the third party, from specifying on
a damage report, estimate, or appraisal the brand, type, kind, age, vendor,
supplier, or condition of the parts or products that may be used to repair
the motor vehicle; from requiring the use of any specific parts in the
repair of a motor vehicle, or from requiring any repair person or facility
to specify on any damage report, estimate, or appraisal the  brand, type,
kind, age, vendor, supplier, or condition of the parts or products that may
be used to repair the motor vehicle. Sets forth the circumstances in which
the commissioner of TDI (commissioner) is prohibited from adopting a rule
that allows an insurer to specify a non-original equipment manufacturer
part as the basis for a damage report, estimate, or appraisal as a limit to
the cost of a repair to a part damaged in an accident.  Sets forth
requirements for a person subject to this article who uses or references
survey data to directly or indirectly determine reasonable costs for damage
repairs.  Sets forth the individuals and entities this section applies to.
Provides that a person commits an unfair and deceptive act or practice in
the business of insurance if the person violates Subsection (b) of this
article and is subject to each penalty or other sanction provided by
Article 21.21 of this code for that violation.  Defines "communicate" and
"survey data." Deletes text prohibiting a contract between an insurer and a
repair person or facility from resulting in a reduction of coverage under
the insured's auto insurance policy.  Deletes text authorizing the
commissioner of TDI to exercise the rulemaking authority under Article
21.21-2 of this code with respect to any fraudulent activity of any party
to an agreement described by Subsection (c).  Makes conforming and
nonsubstantive changes. 

SECTION 2. Effective date: September 1, 1999.

SECTION 3. Makes application of this Act prospective.

SECTION 4. Emergency clause.

SUMMARY OF COMMITTEE CHANGES

SECTION 1. 

Amends Article 5.07-1, Insurance Code, to prohibit a person subject to this
article, rather than an insurer, from specifying on any damage report,
estimate, or appraisal, the brand, type, kind, age, vendor, supplier, or
condition of the parts or products that may be used to repair the motor
vehicle, requiring the use of any part or product in the repair of the
motor vehicle, or requiring any repair person or facility to specify on any
damage report, estimate, or appraisal the brand, type, kind, age, vendor,
supplier, or condition of the parts or products that may be used to repair
the motor vehicle, rather than prohibiting a person subject to this
article, from limiting its coverage under an insurance policy covering
damage to a motor vehicle or limiting its liability for a third-party
claimant's property repairs by recommending or requiring a particular
brand, type, kind, age, vendor, supplier, or condition of the parts or
products that may be used to repair the motor vehicle or a particular
quantity of products and materials that may be used to repair the motor
vehicle.  Prohibits a person subject to this article from directly or
indirectly limiting the beneficiary of the policy or a third-party claimant
from selecting a repair person or facility to repair damage to the motor
vehicle covered under an auto insurance policy that is delivered, issued
for delivery, or renewed in this state.  Prohibits a person subject to this
article from soliciting or accepting a discount in exchange for referring a
beneficiary or third-party claimant to a repair person or facility to
repair the damage; from communicating to a beneficiary or a third-party
claimant that, for the damage repair or parts replacement to be covered by
the policy, a beneficiary or a thirdparty claimant is required to use, one
or more repair persons or facilities; from  communicating to a beneficiary
or a third-party claimant that one or more repair persons or facilities
identified on a list of repair persons and facilities maintained by or
compiled by a person subject to this article is preferred or recommended;
from communicating to a beneficiary or third-party claimant that repairs,
including parts, materials, or labor, are guaranteed by a person other than
the repair person or facility that performs the damage repairs; from
communicating to a beneficiary or third-party claimant that alternative
direct billed transportation coverage is allowed following the filing of a
claim only if the damaged motor vehicle is repaired by a repair person or
facility selected or recommended by the insurer or an agent of the insurer
from providing any other incentive to induce the beneficiary of a policy or
a third-party claimant to waive the right to select the repair person or
facility to repair damage to the beneficiary's or the claimant's motor
vehicle; or from reducing the amount paid for repairs by applying
predesignated limits on the quantity of or charge for materials that are
used to repair a motor vehicle.  Prohibits an insurer from contracting with
a repair person or facility for any purpose other than for the provision of
damage reports, estimates, or appraisals. Authorizes an insurer to submit a
written, documented complaint to TDI with respect to an alleged violation
of this article.  Prohibits a person subject to this article, in the
settlement of liability claims by a third party against an insured for
property damage claimed by the third party, from communicating to the
third-party that in order for repairs to be covered, the claimant is
required to use a specific repair person or facility; or the person prefers
or recommends that the claimant use a repair person or facility identified
on a list of repair persons and facilities maintained or compiled by a
person subject to this article.  Prohibits a person subject to this
article, in the settlement of liability claims by a third party against an
insured for property damage claimed by the third party, from specifying on
a damage report, estimate, or appraisal the brand, type, kind, age, vendor,
supplier, or condition of the parts or products that may be used to repair
the motor vehicle; from requiring the use of any specific parts in the
repair of a motor vehicle, or from requiring any repair person or facility
to specify on any damage report, estimate, or appraisal the  brand, type,
kind, age, vendor, supplier, or condition of the parts or products that may
be used to repair the motor vehicle.  Sets forth the circumstances in which
the commissioner is prohibited from adopting a rule that allows an insurer
to specify a non-original equipment manufacturer part as the basis for a
damage report, estimate, or appraisal as a limit to the cost of a repair to
a part damaged in an accident.  Revises the requirements for a person
subject to this article who uses or references survey data to directly or
indirectly determine reasonable costs for damage repairs, rather than use
or references survey data to influence persons engaged in collision repair,
policy holders, or third-party claimants with respect to charges for labor,
parts, or other items used in the repair of collision damage.  Makes
conforming and nonsubstantive changes. 

SECTION 3. 

Makes application of this Act prospective.
 Redesignates proposed SECTION 3 as SECTION 4.