By Averitt H.B. No. 362
77R1970 AJA-F
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the definition of unfair competition and unfair and
1-3 deceptive acts or practices in the business of insurance.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Section 4, Article 21.21, Insurance Code, is
1-6 amended to read as follows:
1-7 Sec. 4. The following are hereby defined as unfair methods
1-8 of competition and unfair and deceptive acts or practices in the
1-9 business of insurance:
1-10 (1) Misrepresentations and False Advertising of Policy
1-11 Contracts. Making, issuing, circulating, or causing to be made,
1-12 issued or circulated, any estimate, illustration, circular or
1-13 statement misrepresenting the terms of any policy issued or to be
1-14 issued or the benefits or advantages promised thereby or the
1-15 dividends or share of the surplus to be received thereon, or making
1-16 any false or misleading statements as to the dividends or share of
1-17 surplus previously paid on similar policies, or making any
1-18 misleading representation or any misrepresentation as to the
1-19 financial condition of any insurer, or as to the legal reserve
1-20 system upon which any life insurer operates, or using any name or
1-21 title of any policy or class of policies misrepresenting the true
1-22 nature thereof, or making any misrepresentation to any policyholder
1-23 insured in any company for the purpose of inducing or tending to
1-24 induce such policyholder to lapse, forfeit, or surrender his
2-1 insurance;
2-2 (2) False Information and Advertising Generally.
2-3 Making, publishing, disseminating, circulating or placing before
2-4 the public, or causing, directly or indirectly, to be made,
2-5 published, disseminated, circulated, or placed before the public,
2-6 in a newspaper, magazine or other publication, or in the form of a
2-7 notice, circular, pamphlet, letter or poster, or over any radio or
2-8 television station, or in any other way, an advertisement,
2-9 announcement or statement containing any assertion, representation
2-10 or statement with respect to the business of insurance or with
2-11 respect to any person in the conduct of his insurance business,
2-12 which is untrue, deceptive or misleading;
2-13 (3) Defamation. Making, publishing, disseminating, or
2-14 circulating, directly or indirectly, or aiding, abetting or
2-15 encouraging the making, publishing, disseminating or circulating of
2-16 any oral or written statement or any pamphlet, circular, article or
2-17 literature which is false, or maliciously critical of or derogatory
2-18 to the financial condition of any insurer, and which is calculated
2-19 to injure any person engaged in the business of insurance;
2-20 (4) Boycott, Coercion and Intimidation. Entering into
2-21 any agreement to commit, or by any concerted action committing, any
2-22 act of boycott, coercion or intimidation resulting in or tending to
2-23 result in unreasonable restraint of, or monopoly in, the business
2-24 of insurance;
2-25 (5) False Financial Statements. (a) Filing with any
2-26 supervisory or other public official, or making, publishing,
2-27 disseminating, circulating or delivering to any person, or placing
3-1 before the public, or causing directly or indirectly, to be made,
3-2 published, disseminated, circulated, delivered to any person, or
3-3 placed before the public, any false statement of financial
3-4 condition of an insurer with intent to deceive;
3-5 (b) Making any false entry in any book, report
3-6 or statement of any insurer with intent to deceive any agent or
3-7 examiner lawfully appointed to examine into its condition or into
3-8 any of its affairs, or any public official to whom such insurer is
3-9 required by law to report, or who has authority by law to examine
3-10 into its condition or into any of its affairs, or, with like
3-11 intent, wilfully omitting to make a true entry of any material fact
3-12 pertaining to the business of such insurer in any book, report or
3-13 statement of such insurer;
3-14 (6) Stock Operations and Advisory Board Contracts.
3-15 Issuing or delivering or permitting agents, officers or employees
3-16 to issue or deliver, company stock or other capital stock, or
3-17 benefit certificates or shares in any corporation, or securities or
3-18 any special or advisory board contracts or other contracts of any
3-19 kind promising returns and profits as an inducement to insurance.
3-20 Provided, however, that nothing in this subsection shall be
3-21 construed as prohibiting the issuing or delivery of participating
3-22 insurance policies otherwise authorized by law.
3-23 (7) Unfair Discrimination. [(a)] Making or permitting
3-24 any unfair discrimination between individuals of the same class and
3-25 equal expectation of life in the rates charged for any contract of
3-26 life insurance or of life annuity or in the dividends or other
3-27 benefits payable thereon, or in any other of the terms and
4-1 conditions of such contract[;].
4-2 (8) Rebates. (a) Except as otherwise expressly
4-3 provided by law, knowingly permitting or offering to make or making
4-4 any contract of life insurance, life annuity or accident and health
4-5 insurance, or agreement as to such contract other than as plainly
4-6 expressed in the contract issued thereon, or paying or allowing, or
4-7 giving or offering to pay, allow, or give, directly or indirectly,
4-8 as inducement to such insurance, or annuity, any rebate of premiums
4-9 payable on the contract, or any special favor or advantage in the
4-10 dividends or other benefits thereon, or any valuable consideration
4-11 or inducement whatever not specified in the contract; or giving, or
4-12 selling, or purchasing or offering to give, sell, or purchase as
4-13 inducement to such insurance or annuity or in connection therewith,
4-14 any stocks, bonds, or other securities of any insurance company or
4-15 other corporation, association, or partnership, or any dividends or
4-16 profits accrued thereon, or anything of value whatsoever not
4-17 specified in the contract;
4-18 (b) Nothing in clause 7 or paragraph (a) of
4-19 clause 8 of this subsection shall be construed as including within
4-20 the definition of discrimination or rebates any of the following
4-21 practices:
4-22 (i) in the case of any contract of life
4-23 insurance or life annuity, paying bonuses to policyholders or
4-24 otherwise abating their premiums in whole or in part out of surplus
4-25 accumulated from non-participating insurance, provided that any
4-26 such bonuses or abatement of premiums shall be fair and equitable
4-27 to policyholders and for the best interests of the company and its
5-1 policyholders;
5-2 (ii) in the case of life insurance
5-3 policies issued on the industrial debit plan, making allowance to
5-4 policyholders who have continuously for a specified period made
5-5 premium payments directly to an office of the insurer in an amount
5-6 which fairly represents the saving in collection expenses;
5-7 (iii) readjustment of the rate of premium
5-8 for a group insurance policy based on the loss or expense
5-9 experience thereunder, at the end of the first or any subsequent
5-10 policy year of insurance thereunder, which may be made retroactive
5-11 only for such policy year; or
5-12 (iv) in the case of a life annuity,
5-13 waiving surrender charges under an annuity contract when the
5-14 contract holder exchanges the annuity contract for another annuity
5-15 contract issued by the same insurer, if the waiver and the exchange
5-16 are fully, fairly, and accurately explained to the contract holder
5-17 in a manner that is not deceptive or misleading.
5-18 (9) Deceptive Name, Word, Symbol, Device, or Slogan.
5-19 Using, displaying, publishing, circulating, distributing, or
5-20 causing to be used, displayed, published, circulated, or
5-21 distributed in any letter, pamphlet, circular, contract, policy,
5-22 evidence of coverage, article, poster, or other document,
5-23 literature, or public media of:
5-24 (a) a name as the corporate or business name of
5-25 a person or entity engaged in an insurance or insurance related
5-26 business in this state that is the same as, or deceptively similar
5-27 to, the name adopted and used by an insurance entity, health
6-1 maintenance organization, third party administrator, or group
6-2 hospital service company authorized to do business under the laws
6-3 of this state; or
6-4 (b) a word, symbol, device, slogan, or any
6-5 combination of these items, whether registered or not registered,
6-6 that is the same as or deceptively similar to one adopted and used
6-7 by an insurance entity, health maintenance organization, third
6-8 party administrator, or group hospital service company to
6-9 distinguish such entities, products, or service from other
6-10 entities, and includes the title, designation, character names, and
6-11 distinctive features of broadcast or other advertising.
6-12 Where two persons or entities are using a name, word,
6-13 symbol, device, slogan, or any combination of these items that are
6-14 the same or deceptively similar and are likely to cause confusion
6-15 or a mistake, the user who can demonstrate the first continuous
6-16 actual use of such name, word, symbol, device, slogan, or
6-17 combination of these items shall not have committed an unfair
6-18 method of competition or deceptive act or practice.
6-19 (10) Unfair Settlement Practices. (a) Engaging in any
6-20 of the following unfair settlement practices with respect to a
6-21 claim by an insured or beneficiary:
6-22 (i) misrepresenting to a claimant a
6-23 material fact or policy provision relating to coverage at issue;
6-24 (ii) failing to attempt in good faith to
6-25 effectuate a prompt, fair, and equitable settlement of a claim with
6-26 respect to which the insurer's liability has become reasonably
6-27 clear;
7-1 (iii) failing to attempt, in good faith,
7-2 to effectuate a prompt, fair, and equitable settlement under one
7-3 portion of a policy of a claim with respect to which the insurer's
7-4 liability has become reasonably clear in order to influence the
7-5 claimant to settle an additional claim under another portion of the
7-6 coverage, provided that this prohibition does not apply if payment
7-7 under one portion of the coverage constitutes evidence of liability
7-8 under another portion of the policy;
7-9 (iv) failing to provide promptly to a
7-10 policyholder a reasonable explanation of the basis in the policy,
7-11 in relation to the facts or applicable law, for the insurer's
7-12 denial of a claim or for the offer of a compromise settlement of a
7-13 claim;
7-14 (v) failing within a reasonable time to:
7-15 (A) affirm or deny coverage of a
7-16 claim to a policyholder; or
7-17 (B) submit a reservation of rights
7-18 to a policyholder;
7-19 (vi) refusing, failing, or unreasonably
7-20 delaying an offer of settlement under applicable first-party
7-21 coverage on the basis that other coverage may be available or that
7-22 third parties are responsible for the damages suffered, except as
7-23 may be specifically provided in the policy;
7-24 (vii) undertaking to enforce a full and
7-25 final release of a claim from a policyholder when only a partial
7-26 payment has been made, provided that this prohibition does not
7-27 apply to a compromise settlement of a doubtful or disputed claim;
8-1 (viii) refusing to pay a claim without
8-2 conducting a reasonable investigation with respect to the claim;
8-3 (ix) with respect to a Texas personal auto
8-4 policy, delaying or refusing settlement of a claim solely because
8-5 there is other insurance of a different type available to satisfy
8-6 all or any part of the loss forming the basis of that claim; or
8-7 (x) requiring a claimant, as a condition
8-8 of settling a claim, to produce the claimant's federal income tax
8-9 returns for examination or investigation by the person unless:
8-10 (A) the claimant is ordered to
8-11 produce those tax returns by a court;
8-12 (B) the claim involves a fire loss;
8-13 or
8-14 (C) the claim involves lost profits
8-15 or income.
8-16 (b) Paragraph (a) of this clause does not
8-17 provide a cause of action to a third party asserting one or more
8-18 claims against an insured covered under a liability insurance
8-19 policy.
8-20 (11) Misrepresentation of Insurance Policy.
8-21 Misrepresenting an insurance policy by:
8-22 (a) making an untrue statement of material fact;
8-23 (b) failing to state a material fact that is
8-24 necessary to make other statements made not misleading, considering
8-25 the circumstances under which the statements were made;
8-26 (c) making a statement in such manner as to
8-27 mislead a reasonably prudent person to a false conclusion of a
9-1 material fact;
9-2 (d) making a material misstatement of law; or
9-3 (e) failing to disclose any matter required by
9-4 law to be disclosed, including a failure to make disclosure in
9-5 accordance with another provision of this code.
9-6 SECTION 2. This Act takes effect September 1, 2001.