1-1 By: Carona S.B. No. 1531
1-2 (In the Senate - Filed March 12, 1999; March 15, 1999, read
1-3 first time and referred to Committee on Economic Development;
1-4 April 9, 1999, reported adversely, with favorable Committee
1-5 Substitute by the following vote: Yeas 4, Nays 0; April 9, 1999,
1-6 sent to printer.)
1-7 COMMITTEE SUBSTITUTE FOR S.B. No. 1531 By: Carona
A BILL TO BE ENTITLED
1-8 AN ACT
1-9 relating to unfair settlement practices in the business of
1-10 insurance.
1-11 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-12 SECTION 1. Section 4, Article 21.21, Insurance Code, is
1-13 amended to read as follows:
1-14 Sec. 4. UNFAIR METHODS OF COMPETITION AND UNFAIR OR
1-15 DECEPTIVE ACTS OR PRACTICES DEFINED. The following are hereby
1-16 defined as unfair methods of competition and unfair and deceptive
1-17 acts or practices in the business of insurance:
1-18 (1) Misrepresentations and False Advertising of Policy
1-19 Contracts. Making, issuing, circulating, or causing to be made,
1-20 issued or circulated, any estimate, illustration, circular or
1-21 statement misrepresenting the terms of any policy issued or to be
1-22 issued or the benefits or advantages promised thereby or the
1-23 dividends or share of the surplus to be received thereon, or making
1-24 any false or misleading statements as to the dividends or share of
1-25 surplus previously paid on similar policies, or making any
1-26 misleading representation or any misrepresentation as to the
1-27 financial condition of any insurer, or as to the legal reserve
1-28 system upon which any life insurer operates, or using any name or
1-29 title of any policy or class of policies misrepresenting the true
1-30 nature thereof, or making any misrepresentation to any policyholder
1-31 insured in any company for the purpose of inducing or tending to
1-32 induce such policyholder to lapse, forfeit, or surrender his
1-33 insurance;
1-34 (2) False Information and Advertising Generally.
1-35 Making, publishing, disseminating, circulating or placing before
1-36 the public, or causing, directly or indirectly, to be made,
1-37 published, disseminated, circulated, or placed before the public,
1-38 in a newspaper, magazine or other publication, or in the form of a
1-39 notice, circular, pamphlet, letter or poster, or over any radio or
1-40 television station, or in any other way, an advertisement,
1-41 announcement or statement containing any assertion, representation
1-42 or statement with respect to the business of insurance or with
1-43 respect to any person in the conduct of his insurance business,
1-44 which is untrue, deceptive or misleading;
1-45 (3) Defamation. Making, publishing, disseminating, or
1-46 circulating, directly or indirectly, or aiding, abetting or
1-47 encouraging the making, publishing, disseminating or circulating of
1-48 any oral or written statement or any pamphlet, circular, article or
1-49 literature which is false, or maliciously critical of or derogatory
1-50 to the financial condition of any insurer, and which is calculated
1-51 to injure any person engaged in the business of insurance;
1-52 (4) Boycott, Coercion and Intimidation. Entering into
1-53 any agreement to commit, or by any concerted action committing, any
1-54 act of boycott, coercion or intimidation resulting in or tending to
1-55 result in unreasonable restraint of, or monopoly in, the business
1-56 of insurance;
1-57 (5) False Financial Statements. (a) Filing with any
1-58 supervisory or other public official, or making, publishing,
1-59 disseminating, circulating or delivering to any person, or placing
1-60 before the public, or causing directly or indirectly, to be made,
1-61 published, disseminated, circulated, delivered to any person, or
1-62 placed before the public, any false statement of financial
1-63 condition of an insurer with intent to deceive;
1-64 (b) Making any false entry in any book, report
2-1 or statement of any insurer with intent to deceive any agent or
2-2 examiner lawfully appointed to examine into its condition or into
2-3 any of its affairs, or any public official to whom such insurer is
2-4 required by law to report, or who has authority by law to examine
2-5 into its condition or into any of its affairs, or, with like
2-6 intent, wilfully omitting to make a true entry of any material fact
2-7 pertaining to the business of such insurer in any book, report or
2-8 statement of such insurer;
2-9 (6) Stock Operations and Advisory Board Contracts.
2-10 Issuing or delivering or permitting agents, officers or employees
2-11 to issue or deliver, company stock or other capital stock, or
2-12 benefit certificates or shares in any corporation, or securities or
2-13 any special or advisory board contracts or other contracts of any
2-14 kind promising returns and profits as an inducement to insurance.
2-15 Provided, however, that nothing in this subsection shall be
2-16 construed as prohibiting the issuing or delivery of participating
2-17 insurance policies otherwise authorized by law;[.]
2-18 (7) Unfair Discrimination. [(a)] Making or permitting
2-19 any unfair discrimination between individuals of the same class and
2-20 equal expectation of life in the rates charged for any contract of
2-21 life insurance or of life annuity or in the dividends or other
2-22 benefits payable thereon, or in any other of the terms and
2-23 conditions of such contract;
2-24 (8) Rebates. (a) Except as otherwise expressly
2-25 provided by law, knowingly permitting or offering to make or making
2-26 any contract of life insurance, life annuity or accident and health
2-27 insurance, or agreement as to such contract other than as plainly
2-28 expressed in the contract issued thereon, or paying or allowing, or
2-29 giving or offering to pay, allow, or give, directly or indirectly,
2-30 as inducement to such insurance, or annuity, any rebate of premiums
2-31 payable on the contract, or any special favor or advantage in the
2-32 dividends or other benefits thereon, or any valuable consideration
2-33 or inducement whatever not specified in the contract; or giving, or
2-34 selling, or purchasing or offering to give, sell, or purchase as
2-35 inducement to such insurance or annuity or in connection therewith,
2-36 any stocks, bonds, or other securities of any insurance company or
2-37 other corporation, association, or partnership, or any dividends or
2-38 profits accrued thereon, or anything of value whatsoever not
2-39 specified in the contract;
2-40 (b) Nothing in clause 7 or paragraph (a) of
2-41 clause 8 of this subsection shall be construed as including within
2-42 the definition of discrimination or rebates any of the following
2-43 practices:
2-44 (i) in the case of any contract of life
2-45 insurance or life annuity, paying bonuses to policyholders or
2-46 otherwise abating their premiums in whole or in part out of surplus
2-47 accumulated from non-participating insurance, provided that any
2-48 such bonuses or abatement of premiums shall be fair and equitable
2-49 to policyholders and for the best interests of the company and its
2-50 policyholders;
2-51 (ii) in the case of life insurance
2-52 policies issued on the industrial debit plan, making allowance to
2-53 policyholders who have continuously for a specified period made
2-54 premium payments directly to an office of the insurer in an amount
2-55 which fairly represents the saving in collection expenses;
2-56 (iii) readjustment of the rate of premium
2-57 for a group insurance policy based on the loss or expense
2-58 experience thereunder, at the end of the first or any subsequent
2-59 policy year of insurance thereunder, which may be made retroactive
2-60 only for such policy year;[.]
2-61 (9) Deceptive Name, Word, Symbol, Device, or Slogan.
2-62 (a) Using, displaying, publishing, circulating, distributing, or
2-63 causing to be used, displayed, published, circulated, or
2-64 distributed in any letter, pamphlet, circular, contract, policy,
2-65 evidence of coverage, article, poster, or other document,
2-66 literature, or public media of:
2-67 (i) [(a)] a name as the corporate or
2-68 business name of a person or entity engaged in an insurance or
2-69 insurance related business in this state that is the same as, or
3-1 deceptively similar to, the name adopted and used by an insurance
3-2 entity, health maintenance organization, third party administrator,
3-3 or group hospital service company authorized to do business under
3-4 the laws of this state; or
3-5 (ii) [(b)] a word, symbol, device, slogan,
3-6 or any combination of these items, whether registered or not
3-7 registered, that is the same as or deceptively similar to one
3-8 adopted and used by an insurance entity, health maintenance
3-9 organization, third party administrator, or group hospital service
3-10 company to distinguish such entities, products, or service from
3-11 other entities, and includes the title, designation, character
3-12 names, and distinctive features of broadcast or other
3-13 advertising;[.]
3-14 (b) Where two persons or entities are using a
3-15 name, word, symbol, device, slogan, or any combination of these
3-16 items that are the same or deceptively similar and are likely to
3-17 cause confusion or a mistake, the user who can demonstrate the
3-18 first continuous actual use of such name, word, symbol, device,
3-19 slogan, or combination of these items shall not have committed an
3-20 unfair method of competition or deceptive act or practice;[.]
3-21 (10) Unfair Settlement Practices. (a) Engaging in
3-22 any of the following unfair settlement practices with respect to a
3-23 claim by an insured, [or] beneficiary, or health care provider, or
3-24 a person that has contracted to provide services to an insured or
3-25 beneficiary:
3-26 (i) misrepresenting to a claimant a
3-27 material fact or policy provision relating to coverage at issue;
3-28 (ii) failing to attempt in good faith to
3-29 effectuate a prompt, fair, and equitable settlement of a claim with
3-30 respect to which the insurer's liability has become reasonably
3-31 clear;
3-32 (iii) failing to attempt, in good faith,
3-33 to effectuate a prompt, fair, and equitable settlement under one
3-34 portion of a policy of a claim with respect to which the insurer's
3-35 liability has become reasonably clear in order to influence the
3-36 claimant to settle an additional claim under another portion of the
3-37 coverage, provided that this prohibition does not apply if payment
3-38 under one portion of the coverage constitutes evidence of liability
3-39 under another portion of the policy;
3-40 (iv) failing to provide promptly to a
3-41 policyholder a reasonable explanation of the basis in the policy,
3-42 in relation to the facts or applicable law, for the insurer's
3-43 denial of a claim or for the offer of a compromise settlement of a
3-44 claim;
3-45 (v) failing within a reasonable time to:
3-46 (A) affirm or deny coverage
3-47 of a claim to a policyholder; or
3-48 (B) submit a reservation of
3-49 rights to a policyholder;
3-50 (vi) refusing, failing, or unreasonably
3-51 delaying an offer of settlement under applicable first-party
3-52 coverage on the basis that other coverage may be available or that
3-53 third parties are responsible for the damages suffered, except as
3-54 may be specifically provided in the policy;
3-55 (vii) undertaking to enforce a full and
3-56 final release of a claim from a policyholder when only a partial
3-57 payment has been made, provided that this prohibition does not
3-58 apply to a compromise settlement of a doubtful or disputed claim;
3-59 (viii) refusing to pay a claim without
3-60 conducting a reasonable investigation with respect to the claim;
3-61 (ix) with respect to a Texas personal auto
3-62 policy, delaying or refusing settlement of a claim solely because
3-63 there is other insurance of a different type available to satisfy
3-64 all or any part of the loss forming the basis of that claim; or
3-65 (x) requiring a claimant, as a condition
3-66 of settling a claim, to produce the claimant's federal income tax
3-67 returns for examination or investigation by the person unless:
3-68 (A) the claimant is ordered
3-69 to produce those tax returns by a court;
4-1 (B) the claim involves a
4-2 fire loss; or
4-3 (C) the claim involves lost
4-4 profits or income;[.]
4-5 (b) Paragraph (a) of this clause does not
4-6 provide a cause of action to a third party asserting one or more
4-7 claims against an insured covered under a liability insurance
4-8 policy;[.]
4-9 (11) Misrepresentation of Insurance Policy.
4-10 Misrepresenting an insurance policy by:
4-11 (a) making an untrue statement of material fact;
4-12 (b) failing to state a material fact that is
4-13 necessary to make other statements made not misleading, considering
4-14 the circumstances under which the statements were made;
4-15 (c) making a statement in such manner as to
4-16 mislead a reasonably prudent person to a false conclusion of a
4-17 material fact;
4-18 (d) making a material misstatement of law; or
4-19 (e) failing to disclose any matter required by
4-20 law to be disclosed, including a failure to make disclosure in
4-21 accordance with another provision of this code.
4-22 SECTION 2. This Act takes effect September 1, 1999, and
4-23 applies only to a claim that accrues on or after the effective date
4-24 of this Act. A claim that accrues before the effective date of
4-25 this Act is governed by the law as it existed immediately before
4-26 the effective date of this Act, and that law is continued in effect
4-27 for that purpose.
4-28 SECTION 3. The importance of this legislation and the
4-29 crowded condition of the calendars in both houses create an
4-30 emergency and an imperative public necessity that the
4-31 constitutional rule requiring bills to be read on three several
4-32 days in each house be suspended, and this rule is hereby suspended.
4-33 * * * * *