1-1 By: Shapiro S.B. No. 517
1-2 (In the Senate - Filed February 15, 1999; February 17, 1999,
1-3 read first time and referred to Committee on Economic Development;
1-4 March 4, 1999, reported favorably by the following vote: Yeas 6,
1-5 Nays 0; March 4, 1999, sent to printer.)
1-6 A BILL TO BE ENTITLED
1-7 AN ACT
1-8 relating to automobile clubs.
1-9 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-10 SECTION 1. Section 722.002, Transportation Code, is amended
1-11 by amending Subdivision (2) and adding Subdivisions (3), (4), and
1-12 (5) to read as follows:
1-13 (2) "Automobile club" means a person who, for
1-14 consideration, promises the membership assistance in matters
1-15 relating to travel, and to the operation, use, or maintenance of a
1-16 motor vehicle, by supplying services such as [services related to]:
1-17 (A) community traffic safety;
1-18 (B) travel and touring;
1-19 (C) theft prevention or rewards;
1-20 (D) maps;
1-21 (E) towing;
1-22 (F) emergency road service [assistance];
1-23 (G) bail bonds and legal fee reimbursement in
1-24 the defense of traffic offenses; [and]
1-25 (H) lockout or lost key service;
1-26 (I) insurance service as provided by Section
1-27 722.0021;
1-28 (J) immediate destination service;
1-29 (K) trip interruption service; and
1-30 (L) reimbursement service as provided by Section
1-31 722.0022 [purchase of accidental injury and death benefits
1-32 insurance coverage from an authorized insurance company].
1-33 (3) "Emergency road service" means the adjustment,
1-34 repair, or replacement of tires, mechanical parts, or other
1-35 equipment of a motor vehicle performed at or near the site of a
1-36 breakdown or accident involving the motor vehicle, but not at a
1-37 repair facility, to permit the motor vehicle to be operated under
1-38 its own power.
1-39 (4) "Immediate destination service" means the
1-40 provision of transportation to the member's intended destination or
1-41 residence if the member's motor vehicle is stolen or made
1-42 inoperable by an accident, theft, or a breakdown occurring less
1-43 than 50 miles from the member's residence.
1-44 (5) "Trip interruption service" means the provision of
1-45 food, lodging, or transportation to the member's intended
1-46 destination if the member's motor vehicle is stolen or made
1-47 inoperable by an accident, theft, or a breakdown occurring 50 or
1-48 more miles from the member's residence.
1-49 SECTION 2. Chapter 722, Transportation Code, is amended by
1-50 adding Sections 722.0021 and 722.0022 to read as follows:
1-51 Sec. 722.0021. INSURANCE SERVICE. (a) An automobile club
1-52 may provide insurance service only as provided by this section.
1-53 (b) An automobile club may provide a member accidental
1-54 injury and death benefit insurance coverage through purchase of a
1-55 group policy of insurance issued to the automobile club for the
1-56 benefit of its members. The coverage must be purchased from an
1-57 insurance company authorized to sell that type of coverage in this
1-58 state. The automobile club shall provide each member covered by
1-59 the insurance a certificate of participation. The certificate of
1-60 participation must state on its face in at least 14-point black
1-61 boldface type that the certificate is only a certificate of
1-62 participation in a group accidental injury and death policy and is
1-63 not motor vehicle liability insurance coverage.
1-64 (c) An automobile club may endorse insurance products and
2-1 refer members to agents or insurers authorized to provide the
2-2 insurance products in this state. The automobile club or an agent
2-3 of the automobile club may not receive remuneration for the
2-4 referral.
2-5 (d) Except as provided by Subsection (e), an automobile club
2-6 performing services permitted by this chapter is not engaged in the
2-7 insurance business and is not subject to regulation under the
2-8 insurance laws of this state because of the performance of those
2-9 services.
2-10 (e) An automobile club may sell insurance products to a
2-11 member for a consideration separate from the amount that the member
2-12 pays for membership in the automobile club if the automobile club
2-13 is properly licensed as an agent under the applicable provisions of
2-14 the Insurance Code.
2-15 Sec. 722.0022. REIMBURSEMENT SERVICE. An automobile club
2-16 may reimburse expenditures by a member only for:
2-17 (1) bail bonds and legal fees in defense of a traffic
2-18 offense;
2-19 (2) towing;
2-20 (3) emergency road service not to exceed $250 for each
2-21 occurrence;
2-22 (4) lockout or lost key service;
2-23 (5) immediate destination service not to exceed $50
2-24 for each occurrence; and
2-25 (6) trip interruption service not to exceed $1,500 for
2-26 each occurrence.
2-27 SECTION 3. Subsection (a), Section 722.005, Transportation
2-28 Code, is amended to read as follows:
2-29 (a) An applicant for an automobile club certificate of
2-30 authority may provide the security required for that certificate by
2-31 depositing with the state or pledging in the form prescribed by the
2-32 secretary of state:
2-33 (1) $50,000 [$25,000] in securities approved by the
2-34 secretary;
2-35 (2) $50,000 [$25,000] in cash; or
2-36 (3) a $50,000 [$25,000] bond in the form prescribed by
2-37 the secretary that is:
2-38 (A) payable to the state;
2-39 (B) executed by a corporate surety licensed to
2-40 do business in this state; and
2-41 (C) conditioned on the faithful performance of
2-42 the automobile club in selling or providing club services and the
2-43 payment of any fines or penalties levied against the club for
2-44 failure to comply with this chapter.
2-45 SECTION 4. Subsection (a), Section 722.008, Transportation
2-46 Code, is amended to read as follows:
2-47 (a) After a public hearing, the secretary of state shall
2-48 revoke or suspend an automobile club's certificate of authority if
2-49 the secretary determines, for good cause shown, that:
2-50 (1) the club:
2-51 (A) has violated this chapter;
2-52 (B) is not acting as an automobile club;
2-53 (C) is insolvent or has assets valued at less
2-54 than its liabilities;
2-55 (D) has refused to submit to an examination by
2-56 the secretary; [or]
2-57 (E) is transacting business in a fraudulent
2-58 manner;
2-59 (F) has engaged in a false, misleading, or
2-60 deceptive act or practice declared unlawful by Subchapter E,
2-61 Chapter 17, Business & Commerce Code;
2-62 (G) has failed to issue a service contract or
2-63 membership card as required by this chapter;
2-64 (H) has represented a service contract or
2-65 membership card as automobile liability or collision insurance; or
2-66 (I) has knowingly permitted an amount paid by a
2-67 member under a service contract to be included under the amount
2-68 financed in a premium finance agreement, as defined by Article
2-69 24.01, Insurance Code; or
3-1 (2) an owner, officer, or manager of the club is not
3-2 of good moral character.
3-3 SECTION 5. Section 722.009, Transportation Code, is amended
3-4 by amending Subsection (a) and adding Subsection (c) to read as
3-5 follows:
3-6 (a) Each automobile club operating under this chapter shall
3-7 furnish to each member [the membership] a service contract or
3-8 membership card and a list of services and benefits to which the
3-9 member is entitled. The contract, card, or list must include [that
3-10 includes] the following information:
3-11 (1) the club's name;
3-12 (2) the street address of the club's home office and
3-13 of its usual place of business in this state; [and]
3-14 (3) a description of the services or benefits to which
3-15 the members are entitled and a description of the geographic area
3-16 in which the services or benefits are available;
3-17 (4) a toll-free telephone number that is answered 24
3-18 hours a day, if the automobile club provides towing or emergency
3-19 road service or requires prior approval for reimbursement service;
3-20 and
3-21 (5) a statement, in at least 14-point boldface type,
3-22 that contains in substance the following: "This automobile club
3-23 service contract, membership card, and list of services and
3-24 benefits are not automobile liability or collision insurance."
3-25 (c) The service contract, membership card, and list of
3-26 services and benefits must be furnished to the member:
3-27 (1) at the time the member agrees to become a member,
3-28 if the member was solicited in person to become a member; or
3-29 (2) not later than the 30th day after the date the
3-30 member agrees to become a member, if the member was not solicited
3-31 in person to become a member.
3-32 SECTION 6. Section 722.012, Transportation Code, is amended
3-33 to read as follows:
3-34 Sec. 722.012. ADVERTISING RESTRICTIONS. An automobile club
3-35 operating under this chapter may not:
3-36 (1) refer to its certificate of authority or to
3-37 approval by the secretary of state in any advertising, contract, or
3-38 membership card; or
3-39 (2) advertise or describe its service contract
3-40 [services] in a manner that would lead the public to believe that
3-41 the service contract includes [services include] automobile
3-42 liability or collision insurance.
3-43 SECTION 7. Section 722.013, Transportation Code, is
3-44 repealed.
3-45 SECTION 8. An automobile club that has a certificate of
3-46 authority on September 1, 1999, shall meet the increased security
3-47 requirements of Section 722.005, Transportation Code, as amended by
3-48 this Act, on and after that date.
3-49 SECTION 9. This Act takes effect September 1, 1999.
3-50 SECTION 10. The importance of this legislation and the
3-51 crowded condition of the calendars in both houses create an
3-52 emergency and an imperative public necessity that the
3-53 constitutional rule requiring bills to be read on three several
3-54 days in each house be suspended, and this rule is hereby suspended.
3-55 * * * * *