By Smithee                                            H.B. No. 3041
         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 prompt payment of insurance claims.
 1-3           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
 1-4           SECTION 1.  Article 21.55, Chapter 21, Subchapter E,
 1-5     Insurance Code, is amended to read as follows:
 1-6           Art. 21.55.  Prompt Payment of Claims
 1-7           Sec. 1.  Definitions.  In this article:
 1-8                 (1)  "Claimant" means a person making a claim.
 1-9                 (2)  "Business day" means a day other than a Saturday,
1-10     Sunday, or holiday recognized by this state.
1-11                 (3)  "Claim" means a first party claim made by an
1-12     insured or a policyholder under an insurance policy or contract or
1-13     by a beneficiary named in the policy or contract that must be paid
1-14     by the insurer directly to the insured or beneficiary.
1-15                 (4)  "Insurer" means any insurer engaged in the
1-16     business of insurance [authorized to do business as an insurance
1-17     company or to provide insurance] in this state, as defined by
1-18     article 1.14-1 of this Code, including:
1-19                       (A)  a domestic or foreign, stock and mutual,
1-20     life, health, or accident insurance company;
1-21                       (B)  a domestic or foreign, stock or mutual, fire
 2-1     and casualty insurance company;
 2-2                       (C)  a Mexican casualty company;
 2-3                       (D)  a domestic or foreign Lloyd's plan insurer;
 2-4                       (E)  a domestic or foreign reciprocal or
 2-5     insurance exchange;
 2-6                       (F)  a domestic or foreign fraternal benefit
 2-7     society;
 2-8                       (G)  a stipulated premium insurance company;
 2-9                       (H)  a nonprofit legal service corporation;
2-10                       (I)  a statewide mutual assessment company;
2-11                       (J)  a local mutual aid association;
2-12                       (K)  a local mutual burial association;
2-13                       (L)  an association exempt under Article 14.17 of
2-14     this code;
2-15                       (M)  a nonprofit hospital, medical, or dental
2-16     service corporation, including a company subject to Chapter 20 of
2-17     this code;
2-18                       (N)  a county mutual insurance company;
2-19                       (O)  a farm mutual insurance company;
2-20                       (P)  a risk retention group;
2-21                       (Q)  a purchase group;
2-22                       (R)  a surplus lines carrier; and,
2-23                       (S)  a guaranty association created and operating
2-24     under Article 21.28-C or 21.28-D of this code.
2-25                 (5)  "Notice of claim" means any notification in
 3-1     writing to an insurer, by a claimant, that reasonably apprises the
 3-2     insurer of the facts relating to the claim.  "Notice" includes any
 3-3     oral notification, if the insurer does not promptly advise the
 3-4     claimant, in writing, that written notice is required.
 3-5           Sec. 2.  Notice of claim.  (a)  Except as provided by
 3-6     Subsection (d) of this section, an insurer shall, not later than
 3-7     the 15th day after receipt of notice of a claim [or the 30th
 3-8     business day if the insurer is an eligible surplus lines insurer]:
 3-9                 (1)  acknowledge receipt of the claim;
3-10                 (2)  commence any investigation of the claim; and
3-11                 (3)  request from the claimant all items, statements,
3-12     and forms that the insurer reasonably believes, at that time, will
3-13     be required from the claimant.  Additional requests may be made if
3-14     during the investigation of the claim such additional requests are
3-15     necessary.
3-16           (b)  If the acknowledgement of the claim is not made in
3-17     writing, the insurer shall make a record of the date, means, and
3-18     content of the acknowledgement.
3-19           (c)  If the insurer receives notice of the claim, other than
3-20     in writing, the insurer may within three (3) business days advise
3-21     the claimant that written notice is required.  If the insurer does
3-22     not request written notice as provided by this section, then the
3-23     insurer's time limits for acknowledging the claim, commencing its
3-24     investigation, and requesting information shall run from the date
3-25     the insurer received unwritten notice of the claim.
 4-1           Sec. 3.  Acceptance or rejection of claims.  (a)  Except as
 4-2     provided by Subsections (b) and (d) of this section, an insurer
 4-3     shall notify a claimant in writing of the acceptance or rejection
 4-4     of the claim not later than the 15th business day after the date
 4-5     the insurer receives all items, statements, and forms required by
 4-6     the insurer from the claimant, in order to secure final proof of
 4-7     loss.
 4-8           (b)  If the insurer has a reasonable basis to believe that
 4-9     the loss results from arson, the insurer shall notify the claimant
4-10     in writing of the acceptance or rejection of the claim not later
4-11     than the 30th day after the date the insurer receives all items,
4-12     statements, and forms required by the insurer from the claimant.
4-13           (c)  If the insurer rejects the claim, the notice required by
4-14     Subsections (a) and (b) of this section must state the reasons for
4-15     the rejection.
4-16           (d)  If the insurer is unable to accept or reject the claim
4-17     within the period specified by Subsection (a) or (b) of this
4-18     section, the insurer shall notify the claimant, not later than the
4-19     date specified under Subsection (a) or (b), as applicable.  The
4-20     notice provided under this subsection must give the reasons the
4-21     insurer needs additional time.
4-22           (e)  Not later than the 45th day after the date an insurer
4-23     notifies a claimant under Subsection (d) of this section, the
4-24     insurer shall accept or reject the claim.
4-25           (f)  Except as otherwise provided, if an insurer delays
 5-1     payment of a claim following its receipt of all items, statements,
 5-2     and forms reasonably requested and required, as provided under
 5-3     Section 2 of this article, for a period exceeding the period
 5-4     specified in other applicable statutes or, in the absence of any
 5-5     other specified period, for more than 60 days, the insurer shall
 5-6     pay damages and other items as provided for in Section 6 of this
 5-7     article.
 5-8           (g)  If it is determined as a result of arbitration or
 5-9     litigation that a claim received by an insurer is invalid and
5-10     therefore should not be paid by the insurer, the requirements of
5-11     Subsection (f) of this section shall not apply in such case.
5-12           Sec. 4.  Payment of claims.  If an insurer notifies a
5-13     claimant that the insurer will pay a claim or part of a claim under
5-14     Section 3 of this article, the insurer shall pay the claim not
5-15     later than the fifth business day after the notice has been made.
5-16     If payment of the claim or part of the claim is conditioned on the
5-17     performance of an act by the claimant, the insurer shall pay the
5-18     claim not later than the fifth business day after the date the act
5-19     is performed.  [Surplus lines insurers shall pay the claim not
5-20     later than the twentieth business day after the notice or date the
5-21     act is performed.]
5-22           Sec. 5.  Exemption.  (a)  This article does not apply to[:]
5-23                 [(1)]  workers' compensation insurance[;]
5-24                 [(2)  mortgage guaranty insurance;]
5-25                 [(3)  title insurance;]
 6-1                 [(4)  fidelity, surety, or guaranty bonds;]
 6-2                 [(5)  marine insurance other than inland marine
 6-3     insurance governed by Article 5.53 of this code; or]
 6-4                 [(6)  a guaranty association created and operating
 6-5     under Article 9.48 of this code].
 6-6           (b)  A guaranty association created and operating under
 6-7     Article 21.28-C or 21.28-D of this code shall not be subject to the
 6-8     damage provisions contained in Section 6 of this article.  A
 6-9     guaranty association may receive an extension of the time periods
6-10     under this article from a court of competent jurisdiction upon good
6-11     cause shown and after reasonable notice to policyholders.
6-12           [(c)  This article does not apply to Chapter 20A of this code
6-13     except as provided in Section 9 of that chapter.]
6-14           ([d]c)  In the event of a weather-related catastrophe or
6-15     major natural disaster, as defined by the State Board of Insurance,
6-16     the claim-handling deadlines imposed under this article are
6-17     extended for an additional 15 days.
6-18           Sec. 6.  Damages.  In all cases where a claim is made
6-19     pursuant to a policy of insurance and the insurer liable therefor
6-20     is not in compliance with the requirements of this article, such
6-21     insurer shall not be entitled to deny liability for the claim, and
6-22     such insurer shall be liable to pay the holder of the policy, or
6-23     the beneficiary making a claim under the policy, in addition to the
6-24     amount of the claim, 18 percent per annum of the amount of such
6-25     claim as damages, together with reasonable attorney fees.  If suit
 7-1     is filed, such attorney fees shall be taxed as part of the costs in
 7-2     the case.  The 18 percent penalty shall accrue beginning on the
 7-3     date of violation and shall continue until the claim is paid in
 7-4     full.
 7-5           Sec. 7.  Cumulative remedies.  The provisions of this article
 7-6     are not exclusive.  The remedies provided herein are in addition to
 7-7     any other remedy or procedure provided by any other law or at
 7-8     common law.
 7-9           Sec. 8.  Liberal construction.  This article shall be
7-10     liberally construed to promote its underlying purpose which is to
7-11     obtain prompt payment of claims made pursuant to policies of
7-12     insurance.
7-13           SECTION 2.  This Act takes effect September 1, 1999, and
7-14     applies only to an action commenced on or after that date.  An
7-15     action that commenced before the effective date of this Act is
7-16     governed by the law applicable to the action immediately before the
7-17     effective date of this Act, and that law is continued in effect for
7-18     that purpose.
7-19           SECTION 3.  The importance of this legislation and the
7-20     crowded condition of the calendars in both houses create an
7-21     emergency and an imperative public necessity that the
7-22     constitutional rule requiring bills to be read on three several
7-23     days in each house be suspended, and this rule is hereby suspended.