SRC-MKV S.B. 1653 77(R)   BILL ANALYSIS


Senate Research Center   S.B. 1653
77R4972 PB-FBy: Bernsen
Business & Commerce
4/18/2001
As Filed


DIGEST AND PURPOSE 

Currently, Texas insurance consumers are entitled to ethical representation
if they find themselves sued in a civil case.  In an effort to help ensure
such ethical representation, the State Bar of Texas Professional Ethics
Committee has recently published Ethics Opinions 532 and 533.  While
speaking to different issues, both opinions stress the fact that the
lawyer's only client is the insured and the lawyer "must at all times
protect the interests of the insured if those interests would be
compromised by the insurer's instructions."  Ethics Opinion 532 stated that
a lawyer's invoice or fee statement describing legal services rendered by
the lawyer constitutes "confidential information."  Without first obtaining
the informed consent of the insured, a lawyer cannot, at the request of the
insurance company paying the fees for the representation, provide fee
statements to a third party auditor describing legal services rendered by
the lawyer for the insured.  As proposed, S.B. 1653 codifies the provisions
of Ethics Opinion 532. 

RULEMAKING AUTHORITY

This bill does not expressly grant any additional rulemaking authority to a
state officer, institution, or agency. 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Title 2B, Insurance Code, by adding Chapter 103, as
follows: 

CHAPTER 103. DISCLOSURE OF FEE STATEMENTS

Sec. 103.001.  DEFINITION.  Defines "insurer." 

Sec. 103.002.  APPLICABILITY.  Provides that this chapter applies only to
an insurer that issues a liability insurance policy under certain
conditions. 

Sec. 103.003.  DISCLOSURE PROHIBITED; EXCEPTION. (a)  Prohibits an insurer,
except as provided by Subsection (c), from disclosing defense counsel fee
statements regarding services provided for an insured to any person, other
than the insured, who is not an employee of the insurer. 

(b)  Prohibits an insurer from requiring defense counsel to disclose the
defense counsel's fee statements to any person who is not an employee of
the insurer. 

(c)  Authorizes an insurer, to the extent, if any, otherwise permitted by
law, to disclose defense counsel's fee statements to a person who is not an
employee of the insurer for the purpose of reviewing the fee statements in
connection with a lawsuit over payment of the fees.  Provides that
disclosure under this subsection does not, in itself, waive any
attorney-client privilege. 

Sec. 103.004.  CONTRACT PROVISIONS VOID; WAIVER PROHIBITED. (a)  Provides
that a provision in a contract entered into between an insurer and defense
counsel or between an insurer and an insured that requires or permits
disclosure of the defense counsel's fee statements to a person who is not
an employee of the insurer is against public policy and is void and
unenforceable. 

(b)  Provides that a waiver by an insured of the requirements of Sections
103.003(a) or (b) is against public policy and is void and unenforceable. 

Sec. 103.005.  DAMAGES; INJUNCTIVE RELIEF. (a)  Authorizes a person to
bring an action against an insurer under certain conditions. 
  
(b)  Requires a court to award reasonable and necessary attorney's fees to
a person who recovers damages or obtains injunctive relief under this
section. 

Sec. 103.006.  CIVIL PENALTY.  Provides that an insurer who violates
Section 103.003(a) or (b) is liable for a civil penalty not to exceed
$10,000 for each act of violation.  Requires the attorney general, at the
request of the commissioner of insurance, to institute an action in a
district court in Travis County to recover a civil penalty under this
section. 

SECTION 2.  Makes application of this Act prospective.

SECTION 3.  Effective date: September 1, 2001.