HBA-TBM H.B. 1383 77(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 1383 By: Dunnam Insurance 3/14/2001 Introduced BACKGROUND AND PURPOSE Currently, insurers are obligated to provide a defense to third party claims against their policy holders. In many instances, a large number of property and casualty insurers in Texas provide that defense under a reservation of rights through the services of their attorneys. This reservation of rights may create a conflict of interest. Counsel that is under the employ of or contract to the insurer owes allegiance to the insurer, and if allowed to control the insured's defense may manipulate the defense of the case to the benefit of the insurer and the detriment of the insured. In situations in which a conflict of interest exists, an insurer is obligated to provide and pay for independent counsel to defend its insured. However, many policyholders are not aware of this obligation. House Bill 1383 requires the commissioner of insurance, in consultation with the State Bar of Texas, to adopt rules to ensure the independence of counsel provided to an insured under a casualty insurance policy. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the commissioner of insurance in SECTION 1 (Article 21.56B, Insurance Code) and SECTION 2 of this bill. ANALYSIS House Bill 1383 amends the Insurance Code to require the commissioner of insurance (commissioner) in consultation with the State Bar of Texas to adopt rules, no later than December 15, 2001, to ensure the independence of counsel provided to an insured under a casualty insurance policy. The rules must include notice to the insured of the insured's right to independent counsel and specify circumstances in which an insurer may not offer or provide to the insured the services of an attorney in the employ of or under contract to the insurer. An insurer that is obligated to defend an insured in a suit may not offer to provide the services of an attorney in the employ of or under contract to the insurer unless the insurer complies with rules adopted by the commissioner. EFFECTIVE DATE September 1, 2001, and applies only to an attorney's services offered or provided to an insured under a casualty insurance policy, that is delivered, issued for delivery, or renewed on or after January 1, 2002.