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