1-1 By: Harris S.B. No. 1191
1-2 (In the Senate - Filed March 10, 1999; March 11, 1999, read
1-3 first time and referred to Committee on Economic Development;
1-4 April 16, 1999, reported adversely, with favorable Committee
1-5 Substitute by the following vote: Yeas 6, Nays 0; April 16, 1999,
1-6 sent to printer.)
1-7 COMMITTEE SUBSTITUTE FOR S.B. No. 1191 By: Sibley
1-8 A BILL TO BE ENTITLED
1-9 AN ACT
1-10 relating to the repair of a motor vehicle under an insurance
1-11 policy; providing penalties.
1-12 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-13 SECTION 1. Article 5.07-1, Insurance Code, is amended to
1-14 read as follows:
1-15 Art. 5.07-1. REPAIR OF MOTOR VEHICLES; DISCLOSURE OF
1-16 CONSUMER INFORMATION. (a) Except as provided by rules duly
1-17 adopted by the commissioner, under an auto insurance policy that is
1-18 delivered, issued for delivery, or renewed in this state a person
1-19 subject to this article [an insurer] may not, directly or
1-20 indirectly:
1-21 (1) specify on any damage report, estimate, or
1-22 appraisal[, limit its coverage under a policy covering damage to a
1-23 motor vehicle by specifying] the brand, type, kind, age, vendor,
1-24 supplier, or condition of the parts or products that may be used to
1-25 repair the motor vehicle;
1-26 (2) require the use of any part or product in the
1-27 repair of a motor vehicle; or
1-28 (3) require any repair person or facility to specify
1-29 on any damage report, estimate, or appraisal the brand, type, kind,
1-30 age, vendor, supplier, or condition of a part or product that may
1-31 be used to repair the motor vehicle.
1-32 (b) Under an auto insurance policy that is delivered, issued
1-33 for delivery, or renewed in this state, a person subject to this
1-34 article may not directly or indirectly limit [by limiting] the
1-35 beneficiary of the policy or a third-party claimant from selecting
1-36 a repair person or facility to repair damage to the motor vehicle
1-37 covered under the policy.
1-38 (c) [(b)] In connection with the repair of damage to a motor
1-39 vehicle covered under an auto insurance policy, a person subject to
1-40 this article [an insurer, an employee of an insurer, an agent of an
1-41 insurer, a solicitor of insurance for an insurer, an insurance
1-42 adjuster, or an entity that employs an insurance adjuster] may not:
1-43 (1) solicit or accept a referral fee, [or] gratuity,
1-44 discount, or other form of compensation in exchange for referring a
1-45 beneficiary of a policy or third-party claimant to one or more [a]
1-46 repair persons [person] or facilities [facility] to repair the
1-47 damage;
1-48 (2) communicate [state or suggest, either orally or in
1-49 writing,] to a beneficiary of a policy or a third-party claimant
1-50 that, for the damage repair or parts replacement to be covered by
1-51 the policy, a beneficiary of a policy or a third-party claimant is
1-52 required to use one or more [a specific] repair persons [person] or
1-53 facilities;
1-54 (3) communicate to a beneficiary of a policy or a
1-55 third-party claimant that one or more [facility or a] repair
1-56 persons [person] or facilities [facility] identified on a
1-57 [preferred] list of repair persons and facilities maintained by or
1-58 compiled by a person subject to this article is preferred or
1-59 recommended [an insurer must be used by a beneficiary in order for
1-60 the damage repair or parts replacement to be covered by the
1-61 policy]; [or]
1-62 (4) [(3)] restrict a beneficiary's or third-party
1-63 claimant's right to choose a repair person or facility;
1-64 (5) require [by requiring] the beneficiary of a policy
2-1 or third-party claimant to travel an unreasonable distance to
2-2 repair the damage;
2-3 (6) threaten to remove the beneficiary's or claimant's
2-4 motor vehicle from a repair person or facility selected by the
2-5 beneficiary or claimant for any reason;
2-6 (7) communicate to a beneficiary of a policy or a
2-7 third-party claimant that repairs, including parts, materials, or
2-8 labor, are guaranteed by a person other than the repair person or
2-9 facility that performs the damage repairs;
2-10 (8) communicate to a beneficiary of a policy or a
2-11 third-party claimant that alternative direct billed transportation
2-12 coverage is allowed following the filing of a claim only if the
2-13 damaged motor vehicle is repaired by a repair person or facility
2-14 selected or recommended by the insurer or an agent of the insurer;
2-15 (9) provide any other incentive to induce the
2-16 beneficiary of a policy or a third-party claimant to waive the
2-17 right to select the repair person or facility to repair damage to
2-18 the beneficiary's or the claimant's motor vehicle; or
2-19 (10) reduce the amount paid for repairs by applying
2-20 predesignated limits on the quantity of or charges for materials
2-21 that are used to repair a motor vehicle.
2-22 [(c) A contract between an insurer and a repair person or
2-23 facility, including an agreement under which the repair person or
2-24 facility agrees to extend discounts for parts or labor to the
2-25 insurer in exchange for referrals by the insurer, may not result in
2-26 a reduction of coverage under the insured's auto insurance policy.]
2-27 (d) An insurer may not contract with a repair person or
2-28 facility for any purpose other than for the provision of damage
2-29 reports, estimates, or appraisals.
2-30 (e) A person subject to this article [An insurer] may not
2-31 directly or indirectly prohibit a repair person or facility from
2-32 providing a beneficiary of a policy or third-party claimant with
2-33 any information about the damage repairs to the beneficiary's or
2-34 the claimant's vehicle [that states the description, manufacturer,
2-35 or source of the parts used and the amounts charged to the insurer
2-36 for the parts and related labor].
2-37 (f) [(e)] At the time the vehicle is presented to a person
2-38 subject to this article [an insurer or an insurance adjuster or
2-39 other person in connection with a claim for damage repair], the
2-40 [insurer or insurance adjuster or other] person shall provide to
2-41 the beneficiary or third-party claimant notice of the provisions of
2-42 this article. The commissioner shall adopt a rule establishing the
2-43 method or methods insurers shall use to comply with the notice
2-44 provisions in this subsection.
2-45 (g) [(f)] Any beneficiary, third-party claimant, consumer
2-46 group, representative of a consumer, insurer, [or] repair person,
2-47 or repair facility may submit a written, documented complaint to
2-48 the department with respect to an alleged violation of this
2-49 article.
2-50 (h) [(g)] In the settlement of liability claims by a third
2-51 party against an insured for property damage claimed by the third
2-52 party, a person subject to this article [an insurer] may not
2-53 communicate to a third-party claimant that:
2-54 (1) in order for repairs to be covered, the claimant
2-55 is required to use a specific [require the third-party claimant to
2-56 have repairs made by a particular] repair person or facility; or
2-57 (2) the person prefers or recommends that the claimant
2-58 use a repair person or facility identified on a list of repair
2-59 persons and facilities maintained by or compiled by a person
2-60 subject to this article.
2-61 (i) In the settlement of liability claims by a third party
2-62 against an insured for property damage claimed by the third party,
2-63 a person subject to this article may not:
2-64 (1) specify on a damage report, estimate, or appraisal
2-65 the [to use a particular] brand, type, kind, age, vendor, supplier,
2-66 or condition of parts or products that may be used to repair the
2-67 motor vehicle;
2-68 (2) require the use of any specific parts in the
2-69 repair of a motor vehicle; or
3-1 (3) require any repair person or facility to specify
3-2 on any damage report, estimate, or appraisal the brand, type, kind,
3-3 age, vendor, supplier, or condition of a part or product that may
3-4 be used to repair the motor vehicle.
3-5 (j) [(h)] The commissioner may exercise the rule-making
3-6 authority under Article 21.21-2 of this code with respect to any
3-7 fraudulent activity of any party under [to an agreement described
3-8 by Subsection (c) of] this article.
3-9 (k) The [(i) Any] rules adopted by the commissioner to
3-10 implement this article shall include, but not be limited to,
3-11 requirements that:
3-12 (1) any limitation described in Subsection (a) of this
3-13 section is clearly and prominently displayed on the face of the
3-14 policy or certificate in lieu of a policy; and
3-15 (2) the insured give written consent to such a
3-16 limitation, following both oral and written notification of any
3-17 limitation at the time the policy is purchased.
3-18 (l) The commissioner may not adopt a rule that allows an
3-19 insurer to specify a non-original equipment manufacturer part as
3-20 the basis for a damage report, estimate, or appraisal as a limit to
3-21 the cost of a repair to a part damaged in an accident in a case in
3-22 which:
3-23 (1) the beneficiary's or third-party claimant's
3-24 vehicle is still under the manufacturer's original warranty;
3-25 (2) the part lacks a warranty that is at least equal
3-26 to the warranty provided by the original equipment manufacturer for
3-27 the same part;
3-28 (3) the use of that part would reduce the market value
3-29 of the beneficiary's vehicle once repairs are completed to a
3-30 greater extent than would the use of an aftermarket part made by
3-31 the original equipment manufacturer;
3-32 (4) the use of that part would lessen the safety of
3-33 the vehicle in any respect; or
3-34 (5) a person subject to this article cannot
3-35 satisfactorily demonstrate the suitability for use of the part to
3-36 the commissioner.
3-37 (m) A person subject to this article who uses or references
3-38 survey data to directly or indirectly determine reasonable costs
3-39 for damage repairs or costs shall:
3-40 (1) ensure that the survey data was obtained by
3-41 statistically sound survey and research methods;
3-42 (2) publish a report that:
3-43 (A) contains the results of the survey;
3-44 (B) contains the complete and factual criteria
3-45 used for the survey; and
3-46 (C) divides the results of the survey by each
3-47 market surveyed;
3-48 (3) provide a copy of the report to the commissioner;
3-49 and
3-50 (4) upon request, provide a copy of the report to:
3-51 (A) a repair person or facility that
3-52 participated in the survey; and
3-53 (B) any person whose claim is decided or
3-54 influenced by the results of the survey.
3-55 (n) This article applies to:
3-56 (1) an insurer;
3-57 (2) an insurance holding company;
3-58 (3) an investment vehicle to which an insurer belongs;
3-59 (4) an affiliate corporation of an insurer;
3-60 (5) a person described by Subdivisions (1) through (4)
3-61 of this subsection who owns, controls, or has a significant
3-62 interest in the business of a person who is engaged in the
3-63 collision repair of motor vehicles;
3-64 (6) an employee or agent of a person described by
3-65 Subdivisions (1) through (4) of this subsection;
3-66 (7) a solicitor of insurance for a person described by
3-67 Subdivisions (1) through (4) of this subsection;
3-68 (8) a person who is directly or indirectly controlled
3-69 by a person described by Subdivisions (1) through (4) of this
4-1 subsection, either contractually or by other means;
4-2 (9) an insurance adjuster or a person who employs an
4-3 insurance adjuster; or
4-4 (10) an appraiser.
4-5 (o) A person commits an unfair and deceptive act or practice
4-6 in the business of insurance if the person violates this article
4-7 and is subject to each penalty or other sanction provided by
4-8 Article 21.21 of this code for that violation.
4-9 (p) In this article:
4-10 (1) "Communicate" means to infer, imply, or state a
4-11 proposition or idea, either directly or indirectly, orally or in
4-12 writing.
4-13 (2) "Survey data" means data that:
4-14 (A) results from a survey, evaluation, or other
4-15 determination of market pricing for:
4-16 (i) labor, parts, or other items relating
4-17 to collision repair of a motor vehicle;
4-18 (ii) the quality or quantity of parts or
4-19 materials used for collision repair of a motor vehicle; or
4-20 (iii) the rates charged for collision
4-21 repair of a motor vehicle; and
4-22 (B) is used to determine or to influence,
4-23 directly or indirectly, prevailing market pricing or practice in
4-24 specific markets.
4-25 SECTION 2. This Act takes effect September 1, 1999.
4-26 SECTION 3. Subsection (d), Article 5.07-1, Insurance Code,
4-27 as amended by this Act, applies only to a contract entered into on
4-28 or after the effective date of this Act. A contract that is
4-29 entered into before the effective date of this Act is governed by
4-30 the law in effect immediately before that date and that law is
4-31 continued in effect for that purpose.
4-32 SECTION 4. The importance of this legislation and the
4-33 crowded condition of the calendars in both houses create an
4-34 emergency and an imperative public necessity that the
4-35 constitutional rule requiring bills to be read on three several
4-36 days in each house be suspended, and this rule is hereby suspended.
4-37 * * * * *