Amend HB 2871 by adding the following appropriately numbered
SECTIONS and renumbering existing SECTIONS of the bill
appropriately:
SECTION __. Subchapter O, Chapter 5, Insurance Code, is
amended by adding Article 5.132 to read as follows:
Art. 5.132. RATE ROLLBACK FOR CERTAIN LINES OF INSURANCE
Sec. 1. FINDINGS. The legislature finds that:
(1) the cost of litigation against insureds and their
insurers, the possibility of large and unjust judgments, and the
uncertainty created by a litigious environment within this state
have been significant factors in the high cost of certain lines of
insurance;
(2) legislation enacted by regular sessions of the
75th, 76th, and 77th legislatures, and legislation passed by or
pending in the Congress of the United States, is intended to
meaningfully reform the civil justice system of this state and this
nation and will result in reductions in the cost of litigation and
in the size of judgments;
(3) certain decisions by the Supreme Court of Texas
and federal appellate courts during the years 1995-2001 have
resulted in reductions in the size of certain judgments;
(4) it can be reasonably anticipated that there will
be additional legislation and court decisions in the future that
will result in reductions in the cost of litigation and in the size
of judgments;
(5) while the monetary effect of the legislative
changes can be actuarially determined within a reasonable degree of
certainty, insurers will delay implementation of rate reductions
until they have data evidencing actual loss experience;
(6) the delay described by Subdivision (5) of this
section will result in a windfall for the insurers benefited by the
changes described by Subdivisions (2), (3), and (4) of this
section, and this benefit should be passed on to their insureds;
and
(7) legislative action in the public interest and
within the police power of the state is required to eliminate
unnecessary delays to pass these benefits on to the insured public
of this state.
Sec. 2. APPLICABILITY OF ARTICLE; REPORTING. (a) This
article applies to any insurer that is authorized to engage in
business in this state and that is authorized to write the type of
coverage described by Subsection (b) of this section, including:
(1) a capital stock company;
(2) a mutual company;
(3) a Lloyd's plan; and
(4) a reciprocal or interinsurance exchange.
(b) It is the intent of the legislature that all insurers,
including county mutual insurers, joint underwriting associations,
and others whose rates are not regulated, pass through the savings
that accrue from the legislation and court decisions described by
Section 1 of this article to their policyholders on a prospective
basis. To monitor compliance with this legislative directive, the
commissioner may require information in rate filings, special data
calls, or informational hearings or through any other means
consistent with other provisions of this code applicable to the
affected insurers. Information provided under this subsection is
privileged and confidential only to the extent the information is
privileged and confidential under this code or other laws for other
insurers licensed and writing the same line of insurance in this
state. The information remains privileged and confidential unless
and until introduced into evidence at an administrative hearing or
in a court of competent jurisdiction. Sections 3 and 4 of this
article do not apply to the nonrate regulated insurers covered by
this subsection.
(c) This article applies only to rates for:
(1) private passenger automobile liability insurance
policies or coverage;
(2) the liability portion of homeowners, farm and
ranch owners, and renters insurance policies or coverage; and
(3) garage liability insurance policies or coverage.
Sec. 3. RATE ROLLBACK. (a) Notwithstanding Chapter 40 of
this code, on or before September 1 of each year, the commissioner
shall hold a rulemaking hearing under Chapter 2001, Government
Code, to:
(1) determine a percentage of equitable
across-the-board reductions in insurance rates required for each
line of coverage described by Section 2 of this article; and
(2) adopt those rate reductions by rule.
(b) A rate reduction adopted under this section shall be
based on the evidence presented at the hearing required by
Subsection (a) of this section. The rates resulting from the rate
reductions adopted under this section must be reasonable,
adequate, and nonconfiscatory and may not be unfairly
discriminatory or excessive.
(c) A rate reduction adopted under this section applies only
to a policy delivered, issued for delivery, or renewed on or after
the 90th day after the date the rule establishing the rate
reduction is adopted.
(d) Any rule or order of the commissioner that determines,
approves, or sets a rate reduction under this section that is
appealed or challenged remains in effect during the pendency of the
appeal or challenge. During the pendency of the appeal or
challenge, an insurer shall use the rate reduction provided in the
order being appealed or challenged, and the rate reduction is
lawful and valid during the period of the appeal or challenge.
(e) The commissioner shall consider the effect of the
legislation and court decisions described by Section 1 of this
article in determining rates under Section 5, Article 21.81, of
this code.
Sec. 4. ADMINISTRATIVE RELIEF. (a) Except as provided by
Subsection (b) of this section, a rate filed for a line of coverage
described by Section 2 of this article on or after the effective
date of a rate reduction for that line adopted under Section 3 of
this article shall reflect the rate reduction. The commissioner
shall disapprove a rate if the commissioner finds that the filed
rate does not reflect that reduction.
(b) The commissioner is not required to disapprove a filed
rate that reflects less than the full amount of the rate reduction
imposed under Section 3 of this article if:
(1) the commissioner determines based on clear and
convincing evidence that an insurer will be financially unable to
continue writing the line of coverage; or
(2) the rate reduction would likely result in placing
the insurer in a hazardous financial condition.
Sec. 5. CONTINUATION OF REDUCTION. After the conclusion of
each regular legislative session, beginning with the 78th
legislative session, the commissioner shall conduct a review of
state and federal legislation and court decisions analogous to the
legislation and court decisions described by Section 1 of this
article to determine if any legislation or court decisions can
reasonably be anticipated to reduce the cost of litigation or the
amount of damages. If the commissioner determines that a reduction
is likely, the commissioner shall order an additional rate
rollback, as provided by this article, to begin on January 1 of the
following even-numbered year.
Sec. 6. MODIFICATION. The commissioner by bulletin or
directive may, based on the evidence accumulated by the
commissioner before the bulletin or directive is issued, modify a
rate reduction adopted under this article if a final, unappealable
judgment of a court with appropriate jurisdiction stays the effect
of, enjoins, or otherwise modifies or declares unconstitutional any
of the legislation described by Section 1 of this article on which
the commissioner based the rate reduction.
Sec. 7. HEARINGS AND ORDERS. Notwithstanding Chapter 40 of
this code, a rulemaking hearing under this article shall be held
before the commissioner or the commissioner's designee. The
rulemaking procedures established by this section do not apply to
any other rate promulgation proceeding.
Sec. 8. RECOMMENDATIONS TO LEGISLATURE. The commissioner
shall assemble information, conduct hearings, and take other
appropriate measures to assess and evaluate changes in the
marketplace resulting from the implementation of this article and
shall report the commissioner's findings and recommendations to the
legislature.
SECTION ___. (a) A rate reduction adopted under this section
or Article 5.132, Insurance Code, as added by this Act, does not
apply to a policy or coverage delivered, issued for delivery, or
renewed before January 1, 2002.
(b) Notwithstanding Section 3(a), Article 5.132, Insurance
Code, as added by this Act, on or before October 1, 2001, the
commissioner of insurance by rule shall adopt an appropriate rate
reduction for each line of coverage described by Section 2 of that
article. A rate reduction adopted under this subsection shall be
developed without consideration of the effect of the legislation
and court decisions described by Section 1, Article 5.132.
(c) Notwithstanding Subsection (b) of this section, if the
commissioner of insurance has not adopted rate reductions required
by that subsection before January 1, 2002, the following
reductions, measured from the base rates in effect on April 1,
2001, apply to each line of coverage described by Section 2,
Article 5.132, Insurance Code, as added by this Act, delivered,
issued for delivery, or renewed on or after January 1, 2002:
(1) private passenger automobile liability insurance,
15 percent;
(2) the liability portions of homeowners, farm and
ranch owners, and renters insurance, 5 percent; and
(3) garage liability insurance, 15 percent.
(d) A rate filed under an order of the commissioner of
insurance issued before May 1, 2001, is not subject to the rate
reduction required by this section or Article 5.132, Insurance
Code, as added by this Act, before January 1, 2002.