76R10915 DLF-D
By Keffer H.B. No. 2493
Substitute the following for H.B. No. 2493:
By Seaman C.S.H.B. No. 2493
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the conduct of the business of certain surety
1-3 companies.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Section 2(a), Article 21.21, Insurance Code, is
1-6 amended to read as follows:
1-7 (a) "Person" shall mean any individual, corporation,
1-8 association, partnership, reciprocal exchange, inter-insurer,
1-9 Lloyds insurer, fraternal benefit society, and any other legal
1-10 entity engaged in the business of insurance, including agents,
1-11 brokers, adjusters and life insurance counselors. For purposes of
1-12 this subdivision, the business of insurance includes making or
1-13 proposing to make, as guarantor or surety, a guaranty or suretyship
1-14 contract as a vocation and not merely incidental to another
1-15 legitimate business or activity of the guarantor or surety.
1-16 SECTION 2. Chapter 7, Insurance Code, is amended by adding
1-17 Article 7.20 to read as follows:
1-18 Art. 7.20. BOND OF SURETY COMPANY; PROMPT PAYMENT
1-19 Sec. 1. DEFINITIONS. In this article:
1-20 (1) "Bond" means any bond, undertaking, recognizance,
1-21 or other obligation described by Section 1(a), Chapter 87, Acts of
1-22 the 56th Legislature, Regular Session, 1959 (Article 7.19-1,
1-23 Vernon's Texas Insurance Code).
1-24 (2) "Business day" means a day other than a Saturday,
2-1 Sunday, or holiday recognized by this state.
2-2 (3) "Surety company" means any person issuing a bond.
2-3 Sec. 2. NOTICE OF CLAIM. (a) A surety company that has
2-4 issued a bond shall, not later than the 15th day after receipt of
2-5 notice of a claim under the bond:
2-6 (1) acknowledge receipt of the claim;
2-7 (2) begin any review or investigation necessary to
2-8 determine whether the surety company is obligated to pay the claim
2-9 under the bond; and
2-10 (3) request from the claimant each item, statement, or
2-11 form that the surety company reasonably believes will be required
2-12 from the claimant.
2-13 (b) If the acknowledgment of receipt of the claim is not
2-14 made in writing, the surety company shall make a record of the
2-15 date, means, and content of the acknowledgment.
2-16 (c) A surety company may make a request for an item,
2-17 statement, or form in addition to the request made in compliance
2-18 with Subsection (a) of this section only if during the review or
2-19 investigation the surety company determines that the additional
2-20 request is necessary.
2-21 Sec. 3. ACCEPTANCE OR REJECTION OF CLAIMS. (a) Except as
2-22 provided by Subsection (c) of this section, a surety company shall
2-23 notify a claimant in writing of the acceptance or rejection of the
2-24 claim not later than the 15th business day after the date the
2-25 surety company receives all items, statements, and forms required
2-26 by the surety company to secure final proof of the surety company's
2-27 obligation to pay under the bond.
3-1 (b) If the surety company rejects the claim, the notice
3-2 required by Subsection (a) of this section must state the reasons
3-3 for the rejection.
3-4 (c) If the surety company is unable to accept or reject the
3-5 claim within the period specified by Subsection (a) of this
3-6 section, the surety company shall notify the claimant, not later
3-7 than the date specified under Subsection (a), that the surety
3-8 company is unable to accept or reject the claim within that period.
3-9 The notice provided under this subsection must give the reasons the
3-10 surety company needs additional time to accept or reject the claim.
3-11 (d) Not later than the 45th day after the date a surety
3-12 company notifies a claimant under Subsection (c) of this section,
3-13 the surety company shall accept or reject the claim.
3-14 Sec. 4. PAYMENT OF CLAIMS. (a) If a surety company
3-15 notifies a claimant under Section 3 of this article that the surety
3-16 company will pay a claim or part of a claim, the surety company
3-17 shall pay the claim not later than the fifth business day after the
3-18 date of the notice. If payment of the claim or part of the claim
3-19 is conditioned on the performance of an act by the claimant, the
3-20 surety company shall pay the claim not later than the fifth
3-21 business day after the date the act is performed.
3-22 (b) A surety company that delays payment of a claim until
3-23 after the 60th day after the first day on which all items,
3-24 statements, and forms reasonably requested under Section 2 of this
3-25 article are received is liable to the claimant under Section 5 of
3-26 this article. This subsection does not apply if it is determined
3-27 as a result of arbitration or litigation that the claim received by
4-1 the surety company is invalid.
4-2 Sec. 5. REQUIREMENTS APPLICABLE TO CERTAIN BONDS. A surety
4-3 company that issues a surety bond described by Section 407.064,
4-4 Labor Code, is not required to comply with Sections 2, 3, and 4 of
4-5 this article but shall comply with the terms of the surety bond
4-6 contract with respect to acknowledging a claim, accepting or
4-7 rejecting a claim, and paying a claim.
4-8 Sec. 6. DAMAGES. (a) If a claim is made under a bond and
4-9 the surety company obligated on the bond violates this article, the
4-10 surety company is liable to pay the claimant, in addition to the
4-11 amount of the claim, interest on the amount of the claim accruing
4-12 at the rate of 18 percent a year beginning on the 16th day after
4-13 the date on which the claim is filed, together with reasonable
4-14 attorney's fees. If suit is filed, the attorney's fees shall be
4-15 taxed as part of the costs in the case.
4-16 (b) In addition to the amount for which a surety company is
4-17 liable under Subsection (a) of this section, a surety company that
4-18 violates this article in bad faith is liable to the claimant for an
4-19 amount equal to two times the amount of the claim.
4-20 Sec. 7. CUMULATIVE REMEDIES. The remedies and procedures of
4-21 this article are not exclusive but are in addition to any other
4-22 remedy or procedure provided by any other law, including common
4-23 law.
4-24 Sec. 8. LIBERAL CONSTRUCTION. This article shall be
4-25 liberally construed to obtain prompt payment of claims made under
4-26 the bonds of surety companies.
4-27 SECTION 3. This Act takes effect September 1, 1999, and
5-1 applies only to a claim made under a bond, as that term is defined
5-2 by Article 7.20, Insurance Code, as added by this Act, that is
5-3 delivered, issued for delivery, or renewed on or after January 1,
5-4 2000. A bond that is delivered, issued for delivery, or renewed
5-5 before January 1, 2000, is governed by the law as it existed
5-6 immediately before the effective date of this Act, and that law is
5-7 continued in effect for that purpose.
5-8 SECTION 4. The importance of this legislation and the
5-9 crowded condition of the calendars in both houses create an
5-10 emergency and an imperative public necessity that the
5-11 constitutional rule requiring bills to be read on three several
5-12 days in each house be suspended, and this rule is hereby suspended.