By Thompson H.B. No. 2710
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to unfair insurance practices.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Chapter 21, Subchapter B, Insurance Code, is
1-5 amended by adding Article 21.21-10 to read as follows:
1-6 Art. 21.21-10. UNFAIR LIABILITY INSURANCE PRACTICES
1-7 Sec. 1. DECLARATION OF PURPOSE. The purpose of this Act is
1-8 to define and prohibit unfair practices relating to liability
1-9 insurance and to protect insureds, beneficiaries, and claimants
1-10 under such policies.
1-11 Sec. 2. DEFINITIONS. In this Article:
1-12 (a) "Person" means any individual, corporation, association,
1-13 partnership, reciprocal exchange, inter-insurer, Lloyds insurer,
1-14 fraternal benefit society, and any other legal entity engaged in
1-15 the business of insurance, including agents, brokers, adjusters and
1-16 life insurance counselors. With respect to defining persons who may
1-17 seek relief, the term shall include insureds, beneficiaries,
1-18 claimants, and any other person or entity seeking relief for
1-19 conduct prohibited by this Article.
1-20 (b) "Insured" means any named insured and any additional
1-21 insured under a liability insurance policy.
1-22 (c) "Beneficiary" means any named beneficiary or intended
1-23 third party beneficiary under a liability insurance policy.
1-24 (d) "Claimant" means any person seeking damages or benefits
2-1 that may be payable or subject to indemnity under another person's
2-2 liability insurance policy.
2-3 Sec. 3. REQUIRED DISCLOSURES. Any person representing an
2-4 insurer or insured in the investigation or adjustment of any claim
2-5 or loss shall provide the following written disclosure to any
2-6 claimant at the time of the initial contact or communication with
2-7 the claimant:
2-8 "I represent the liability insurance company that insures the
2-9 person against whom you may have a claim. Before discussing your
2-10 claim with me or any other representative of the insurer, you
2-11 should be aware of certain facts that may affect your claim.
2-12 Your interests and the interest of our insured are in
2-13 conflict. Our primary responsibility is to protect the interests of
2-14 our insured. We will consider our insured's interests above your
2-15 interests.
2-16 Your interests and the company's interests are in conflict.
2-17 While we may work with you to reach a settlement that you consider
2-18 fair, our interest is to pay the least possible amount to settle
2-19 your claim.
2-20 We have a responsibility to fairly investigate the claim. To
2-21 assist us, you may need to provide information to help us evaluate
2-22 your claim. We may only request information that is reasonably
2-23 required to evaluate your claim. You are not required to give us
2-24 information, but if you do not, that may result in your claim being
2-25 delayed or denied.
2-26 We must deal with you fairly, honestly, and in good faith.
2-27 You are not required to negotiate with us.
3-1 You are not required to accept a settlement offer by us.
3-2 You may be entitled to receive payment for: medical attention
3-3 for any injuries resulting from this accident; physical pain and
3-4 suffering; mental anguish; lost wages; physical impairment or
3-5 disfigurement; and other types of compensation, as applicable.
3-6 You have the right to have your car repaired at the body shop
3-7 of your choice within reasonable standards as set by the repair
3-8 industry.
3-9 You have the right to consult with an attorney at any time to
3-10 evaluate the fairness of any offer.
3-11 If you agree to a settlement without consulting an attorney,
3-12 you have thirty (30) days after you receive payment or sign a
3-13 release, whichever is later, to reconsider and cancel or
3-14 renegotiate the settlement.
3-15 You have the right to file suit against our insured to
3-16 determine the responsibility for your claim and the fair amount of
3-17 damages."
3-18 Sec. 4. CLAIMANT'S RIGHT OF CANCELLATION. (a) A claimant
3-19 who accepts a settlement offer in compromise of a liability claim
3-20 may cancel the settlement agreement, if:
3-21 (1) the claimant was not represented by an attorney in
3-22 negotiating the settlement; and
3-23 (2) the claimant sends written notice of cancellation
3-24 to the insurer by hand-delivery, mail, or facsimile transmission
3-25 prior to midnight on the thirtieth (30th) day after the later of
3-26 the date when the claimant signed any release, received any
3-27 payment, or deposited any payment.
4-1 (b) A claimant who elects to cancel a settlement shall, by
4-2 the thirtieth (30th) day after sending the cancellation notice,
4-3 tender back to the insurer any payments received, unless within
4-4 that time period the parties renegotiate a settlement or the
4-5 claimant files suit against the insured. If the claimant files
4-6 suit against the insured, then any repayment shall be abated
4-7 pending the outcome of that suit.
4-8 (c) If a claimant sends written notice to the insurer within
4-9 thirty (30) days stating that the claimant is consulting with, or
4-10 is attempting to consult with, an attorney regarding the
4-11 settlement, the claimant shall have an additional thirty (30) days
4-12 in which to send notice of cancellation.
4-13 (d) Any settlement agreement tendered to a claimant who is
4-14 not represented by an attorney shall include the following notice
4-15 in twelve (12) point, boldface type immediately above any space
4-16 provided for the claimant's signature accepting the settlement:
4-17 "You have the right to reconsider and cancel this agreement
4-18 within thirty (30) days after you sign this agreement,
4-19 receive payment from us, or deposit any payment from us. To
4-20 cancel, send us written notice by mail or hand-delivery to
4-21 the following address, or by facsimile transmission to the
4-22 following telephone number. If you send us notice within
4-23 thirty (30) days that you are consulting with, or are
4-24 attempting to consult with, an attorney, your deadline for
4-25 canceling this agreement will be extended to the sixtieth
4-26 (60th) day after you sign this agreement, receive payment
4-27 from us, or deposit any payment from us."
5-1 Sec. 5. UNFAIR LIABILITY CLAIM SETTLEMENT PRACTICES DEFINED.
5-2 The following practices are defined as unfair liability claim
5-3 settlement practices in the business of insurance:
5-4 (a) failing to provide to a claimant the notice required by
5-5 Section 3 of this Subchapter.
5-6 (b) acting in any manner that is inconsistent with the
5-7 rights and responsibilities set out in the notice provided for in
5-8 Section 3 of this Subchapter.
5-9 (c) misrepresenting to a claimant a material fact or policy
5-10 provision relating to coverage at issue.
5-11 (d) failing to attempt in good faith to effectuate a prompt,
5-12 fair, and equitable settlement of a claim with respect to which the
5-13 insurer's liability has become reasonably clear.
5-14 (e) failing to attempt, in good faith, to effectuate a
5-15 prompt, fair, and equitable settlement under one portion of a
5-16 policy of a claim with respect to which the insurer's liability has
5-17 become reasonably clear in order to influence the claimant to
5-18 settle an additional claim under another portion of the coverage,
5-19 provided that this prohibition does not apply if payment under one
5-20 portion of the coverage constitutes evidence of liability under
5-21 another portion of the policy.
5-22 (f) failing to provide promptly to a claimant a reasonable
5-23 explanation of the basis in relation to the facts or applicable
5-24 law, for the insurer's denial of a claim or for the offer of a
5-25 compromise settlement of a claim.
5-26 (g) failing within a reasonable time to affirm or deny
5-27 coverage of a claim to a claimant.
6-1 (h) refusing, failing, or unreasonably delaying an offer of
6-2 settlement under applicable coverage on the basis that other
6-3 coverage may be available, or that other parties are responsible
6-4 for the damages suffered, except as may be specifically provided in
6-5 the policy;
6-6 (i) undertaking to enforce a full and final release of a
6-7 claim from a claimant when only a partial payment has been made,
6-8 provided that this prohibition does not apply to a compromise
6-9 settlement of a doubtful or disputed claim;
6-10 (j) refusing to pay a claim without conducting a reasonable
6-11 investigation with respect to the claim;
6-12 (k) requiring a claimant, as a condition of settling a
6-13 claim, to produce the claimant's federal income tax returns for
6-14 examination or investigation by the person unless:
6-15 (1) the claimant is ordered to produce those tax
6-16 returns by a court; or
6-17 (2) the claim involves lost profits or income.
6-18 (l) with respect to a Texas personal auto policy, delaying
6-19 or refusing settlement of a claim solely because there is other
6-20 insurance of a different type available to satisfy all or any part
6-21 of the loss forming the basis of that claim; or
6-22 (m) misrepresenting insurance coverage by:
6-23 (1) making an untrue statement of material fact;
6-24 (2) failing to state a material fact that is necessary
6-25 to make other statements made not misleading, considering the
6-26 circumstances under which the statements were made;
6-27 (3) making a statement in such manner as to mislead a
7-1 reasonably prudent person to a false conclusion of a material fact;
7-2 (4) making a material misstatement of law; or
7-3 (5) failing to disclose any matter required by law to
7-4 be disclosed, including a failure to make disclosure in accordance
7-5 with another provision of this Code.
7-6 (n) failing to honor a cancellation notice sent by a
7-7 claimant pursuant to Section 4 of this Subchapter.
7-8 (o) filing suit against an insured, beneficiary, or claimant
7-9 seeking declaratory relief or other relating to insurance coverage,
7-10 before the underlying claim against the insured is resolved, if
7-11 proof of the insurer's claim for declaratory or other relief relies
7-12 on factual allegations that are inconsistent with the factual
7-13 allegations in the underlying claim, creates any risk of
7-14 inconsistent determinations, or poses any other risk of prejudice
7-15 to the insured in the underlying claim.
7-16 (p) seeking, obtaining, or disseminating any information
7-17 regarding an insured, beneficiary, or claimant that is not
7-18 reasonably related to the evaluation of the claim or that subjects
7-19 the insured, beneficiary, or claimant to undue burden, unnecessary
7-20 expense, harassment or annoyance, or invasion of personal,
7-21 constitutional, or property rights.
7-22 (q) seeking, obtaining, or disseminating any information
7-23 regarding an insured, beneficiary, or claimant by false pretenses,
7-24 trespass, invasion of privacy, or any other deceptive or intrusive
7-25 means.
7-26 (r) compelling an insured, beneficiary, or claimant to file
7-27 suit to recover amounts due by offering less than the amount
8-1 ultimately recovered in the suit brought by that person.
8-2 (s) denying a defense to an insured or other person who is
8-3 entitled to a defense under a policy.
8-4 Sec. 6. RELIEF AVAILABLE TO INJURED PARTIES. (a) Any
8-5 insured, beneficiary, claimant, or other person who has sustained
8-6 actual damages caused by another's engaging in an act or practice
8-7 declared in Section 5 of this Article to be unfair liability claim
8-8 settlement practice may maintain an action against the person or
8-9 persons engaging in such acts or practices
8-10 (b) In a suit filed under this section, any plaintiff who
8-11 prevails may obtain:
8-12 (1) the amount of actual damages, plus court costs,
8-13 expert witness fees, and reasonable and necessary attorneys' fees.
8-14 If the trier of fact finds that the defendant knowingly committed
8-15 the acts complained of, the trier of fact may award not more than
8-16 three times the amount of actual damages; or
8-17 (2) an order enjoining such acts or failure to act; or
8-18 (3) at the claimant's option, cancellation of any
8-19 settlement agreement obtained by an insurer engaging in any conduct
8-20 prohibited by Section 5 of this Article;
8-21 (4) any other relief which the court deems proper.
8-22 (c) If any settlement agreement is cancelled at the
8-23 claimant's election under Section 6(b)(3), the insurer's liability
8-24 for the claim shall remain established, and only the amount of
8-25 liability shall be determined. If the claimant is found to be
8-26 entitled to an amount greater than the amount the claimant would
8-27 have received under the cancelled agreement, or if the claimant
9-1 receives a greater amount through any subsequent settlement
9-2 agreement, then the insurer shall be liable, in addition, for a
9-3 penalty of 18% per annum on the amount owed to the claimant,
9-4 accruing on the date of the original agreement, and continuing
9-5 until the amount owed is paid.
9-6 (d) If an insurer breaches its duty to defend or breaches
9-7 its duty to indemnify, then the amount of any judgment obtained
9-8 against the insured, whether by actual trial, settlement, default
9-9 judgment, or otherwise, shall be presumed reasonable in any suit to
9-10 recover policy benefits or other damages from the insurer. To
9-11 rebut the presumption, the insurer has the burden of proving that
9-12 the settlement was unreasonable, or was the product of fraud and
9-13 collusion. Good faith negotiations between the claimant and the
9-14 insured shall not be considered evidence of collusion. If the
9-15 insurer proves that the settlement was unreasonable or was the
9-16 product of fraud and collusion, then the factfinder shall determine
9-17 the reasonable amount of damages owed by the insurer.
9-18 SECTION 2. Title 2, Subtitle C, Chapter 37, Civil Practices
9-19 and Remedies Code, is amended by adding Section 37.012 as follows:
9-20 Sec. 37.012 INSURANCE CASES. (a) No claim for declaratory
9-21 relief may be filed by a liability insurer before the underlying
9-22 claim is finally resolved, if proof of the insurer's claim for
9-23 declaratory or other relief relies on factual allegations that are
9-24 inconsistent with the factual allegations in the underlying claim,
9-25 creates any risk of inconsistent determinations, or poses any other
9-26 risk of prejudice to the insured in the underlying claim.
9-27 (b) In any case in which a liability insurer seeks
10-1 declaratory relief relating to a liability insurance policy, the
10-2 court shall award to the opposing party or parties reasonable and
10-3 necessary attorney's fees.
10-4 SECTION 3. This Act takes effect September 1, 1999, and
10-5 applies only to an action commenced on or after that date. An
10-6 action that commenced before the effective date of this Act is
10-7 governed by the law applicable to the action immediately before the
10-8 effective date of this Act, and that law is continued in effect for
10-9 that purpose.
10-10 SECTION 4. The importance of this legislation and the
10-11 crowded condition of the calendars in both houses create an
10-12 emergency and an imperative public necessity that the
10-13 constitutional rule requiring bills to be read on three several
10-14 days in each house be suspended, and this rule is hereby suspended.