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.