1-1 By: Averitt (Senate Sponsor - Sibley) H.B. No. 362
1-2 (In the Senate - Received from the House April 25, 2001;
1-3 April 26, 2001, read first time and referred to Committee on
1-4 Business and Commerce; May 3, 2001, reported favorably by the
1-5 following vote: Yeas 7, Nays 0; May 3, 2001, sent to printer.)
1-6 A BILL TO BE ENTITLED
1-7 AN ACT
1-8 relating to the definition of unfair competition and unfair and
1-9 deceptive acts or practices in the business of insurance.
1-10 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-11 SECTION 1. Section 4, Article 21.21, Insurance Code, is
1-12 amended to read as follows:
1-13 Sec. 4. The following are hereby defined as unfair methods
1-14 of competition and unfair and deceptive acts or practices in the
1-15 business of insurance:
1-16 (1) Misrepresentations and False Advertising of Policy
1-17 Contracts. Making, issuing, circulating, or causing to be made,
1-18 issued or circulated, any estimate, illustration, circular or
1-19 statement misrepresenting the terms of any policy issued or to be
1-20 issued or the benefits or advantages promised thereby or the
1-21 dividends or share of the surplus to be received thereon, or making
1-22 any false or misleading statements as to the dividends or share of
1-23 surplus previously paid on similar policies, or making any
1-24 misleading representation or any misrepresentation as to the
1-25 financial condition of any insurer, or as to the legal reserve
1-26 system upon which any life insurer operates, or using any name or
1-27 title of any policy or class of policies misrepresenting the true
1-28 nature thereof, or making any misrepresentation to any policyholder
1-29 insured in any company for the purpose of inducing or tending to
1-30 induce such policyholder to lapse, forfeit, or surrender his
1-31 insurance;
1-32 (2) False Information and Advertising Generally.
1-33 Making, publishing, disseminating, circulating or placing before
1-34 the public, or causing, directly or indirectly, to be made,
1-35 published, disseminated, circulated, or placed before the public,
1-36 in a newspaper, magazine or other publication, or in the form of a
1-37 notice, circular, pamphlet, letter or poster, or over any radio or
1-38 television station, or in any other way, an advertisement,
1-39 announcement or statement containing any assertion, representation
1-40 or statement with respect to the business of insurance or with
1-41 respect to any person in the conduct of his insurance business,
1-42 which is untrue, deceptive or misleading;
1-43 (3) Defamation. Making, publishing, disseminating, or
1-44 circulating, directly or indirectly, or aiding, abetting or
1-45 encouraging the making, publishing, disseminating or circulating of
1-46 any oral or written statement or any pamphlet, circular, article or
1-47 literature which is false, or maliciously critical of or derogatory
1-48 to the financial condition of any insurer, and which is calculated
1-49 to injure any person engaged in the business of insurance;
1-50 (4) Boycott, Coercion and Intimidation. Entering into
1-51 any agreement to commit, or by any concerted action committing, any
1-52 act of boycott, coercion or intimidation resulting in or tending to
1-53 result in unreasonable restraint of, or monopoly in, the business
1-54 of insurance;
1-55 (5) False Financial Statements. (a) Filing with any
1-56 supervisory or other public official, or making, publishing,
1-57 disseminating, circulating or delivering to any person, or placing
1-58 before the public, or causing directly or indirectly, to be made,
1-59 published, disseminated, circulated, delivered to any person, or
1-60 placed before the public, any false statement of financial
1-61 condition of an insurer with intent to deceive;
1-62 (b) Making any false entry in any book, report
1-63 or statement of any insurer with intent to deceive any agent or
1-64 examiner lawfully appointed to examine into its condition or into
2-1 any of its affairs, or any public official to whom such insurer is
2-2 required by law to report, or who has authority by law to examine
2-3 into its condition or into any of its affairs, or, with like
2-4 intent, wilfully omitting to make a true entry of any material fact
2-5 pertaining to the business of such insurer in any book, report or
2-6 statement of such insurer;
2-7 (6) Stock Operations and Advisory Board Contracts.
2-8 Issuing or delivering or permitting agents, officers or employees
2-9 to issue or deliver, company stock or other capital stock, or
2-10 benefit certificates or shares in any corporation, or securities or
2-11 any special or advisory board contracts or other contracts of any
2-12 kind promising returns and profits as an inducement to insurance.
2-13 Provided, however, that nothing in this subsection shall be
2-14 construed as prohibiting the issuing or delivery of participating
2-15 insurance policies otherwise authorized by law.
2-16 (7) Unfair Discrimination. [(a)] Making or permitting
2-17 any unfair discrimination between individuals of the same class and
2-18 equal expectation of life in the rates charged for any contract of
2-19 life insurance or of life annuity or in the dividends or other
2-20 benefits payable thereon, or in any other of the terms and
2-21 conditions of such contract[;].
2-22 (8) Rebates. (a) Except as otherwise expressly
2-23 provided by law, knowingly permitting or offering to make or making
2-24 any contract of life insurance, life annuity or accident and health
2-25 insurance, or agreement as to such contract other than as plainly
2-26 expressed in the contract issued thereon, or paying or allowing, or
2-27 giving or offering to pay, allow, or give, directly or indirectly,
2-28 as inducement to such insurance, or annuity, any rebate of premiums
2-29 payable on the contract, or any special favor or advantage in the
2-30 dividends or other benefits thereon, or any valuable consideration
2-31 or inducement whatever not specified in the contract; or giving, or
2-32 selling, or purchasing or offering to give, sell, or purchase as
2-33 inducement to such insurance or annuity or in connection therewith,
2-34 any stocks, bonds, or other securities of any insurance company or
2-35 other corporation, association, or partnership, or any dividends or
2-36 profits accrued thereon, or anything of value whatsoever not
2-37 specified in the contract;
2-38 (b) Nothing in clause 7 or paragraph (a) of
2-39 clause 8 of this subsection shall be construed as including within
2-40 the definition of discrimination or rebates any of the following
2-41 practices:
2-42 (i) in the case of any contract of life
2-43 insurance or life annuity, paying bonuses to policyholders or
2-44 otherwise abating their premiums in whole or in part out of surplus
2-45 accumulated from non-participating insurance, provided that any
2-46 such bonuses or abatement of premiums shall be fair and equitable
2-47 to policyholders and for the best interests of the company and its
2-48 policyholders;
2-49 (ii) in the case of life insurance
2-50 policies issued on the industrial debit plan, making allowance to
2-51 policyholders who have continuously for a specified period made
2-52 premium payments directly to an office of the insurer in an amount
2-53 which fairly represents the saving in collection expenses;
2-54 (iii) readjustment of the rate of premium
2-55 for a group insurance policy based on the loss or expense
2-56 experience thereunder, at the end of the first or any subsequent
2-57 policy year of insurance thereunder, which may be made retroactive
2-58 only for such policy year; or
2-59 (iv) in the case of a life annuity,
2-60 waiving surrender charges under an annuity contract when the
2-61 contract holder exchanges the annuity contract for another annuity
2-62 contract issued by the same insurer, if the waiver and the exchange
2-63 are fully, fairly, and accurately explained to the contract holder
2-64 in a manner that is not deceptive or misleading.
2-65 (9) Deceptive Name, Word, Symbol, Device, or Slogan.
2-66 Using, displaying, publishing, circulating, distributing, or
2-67 causing to be used, displayed, published, circulated, or
2-68 distributed in any letter, pamphlet, circular, contract, policy,
2-69 evidence of coverage, article, poster, or other document,
3-1 literature, or public media of:
3-2 (a) a name as the corporate or business name of
3-3 a person or entity engaged in an insurance or insurance related
3-4 business in this state that is the same as, or deceptively similar
3-5 to, the name adopted and used by an insurance entity, health
3-6 maintenance organization, third party administrator, or group
3-7 hospital service company authorized to do business under the laws
3-8 of this state; or
3-9 (b) a word, symbol, device, slogan, or any
3-10 combination of these items, whether registered or not registered,
3-11 that is the same as or deceptively similar to one adopted and used
3-12 by an insurance entity, health maintenance organization, third
3-13 party administrator, or group hospital service company to
3-14 distinguish such entities, products, or service from other
3-15 entities, and includes the title, designation, character names, and
3-16 distinctive features of broadcast or other advertising.
3-17 Where two persons or entities are using a name, word,
3-18 symbol, device, slogan, or any combination of these items that are
3-19 the same or deceptively similar and are likely to cause confusion
3-20 or a mistake, the user who can demonstrate the first continuous
3-21 actual use of such name, word, symbol, device, slogan, or
3-22 combination of these items shall not have committed an unfair
3-23 method of competition or deceptive act or practice.
3-24 (10) Unfair Settlement Practices. (a) Engaging in any
3-25 of the following unfair settlement practices with respect to a
3-26 claim by an insured or beneficiary:
3-27 (i) misrepresenting to a claimant a
3-28 material fact or policy provision relating to coverage at issue;
3-29 (ii) failing to attempt in good faith to
3-30 effectuate a prompt, fair, and equitable settlement of a claim with
3-31 respect to which the insurer's liability has become reasonably
3-32 clear;
3-33 (iii) failing to attempt, in good faith,
3-34 to effectuate a prompt, fair, and equitable settlement under one
3-35 portion of a policy of a claim with respect to which the insurer's
3-36 liability has become reasonably clear in order to influence the
3-37 claimant to settle an additional claim under another portion of the
3-38 coverage, provided that this prohibition does not apply if payment
3-39 under one portion of the coverage constitutes evidence of liability
3-40 under another portion of the policy;
3-41 (iv) failing to provide promptly to a
3-42 policyholder a reasonable explanation of the basis in the policy,
3-43 in relation to the facts or applicable law, for the insurer's
3-44 denial of a claim or for the offer of a compromise settlement of a
3-45 claim;
3-46 (v) failing within a reasonable time to:
3-47 (A) affirm or deny coverage of a
3-48 claim to a policyholder; or
3-49 (B) submit a reservation of rights
3-50 to a policyholder;
3-51 (vi) refusing, failing, or unreasonably
3-52 delaying an offer of settlement under applicable first-party
3-53 coverage on the basis that other coverage may be available or that
3-54 third parties are responsible for the damages suffered, except as
3-55 may be specifically provided in the policy;
3-56 (vii) undertaking to enforce a full and
3-57 final release of a claim from a policyholder when only a partial
3-58 payment has been made, provided that this prohibition does not
3-59 apply to a compromise settlement of a doubtful or disputed claim;
3-60 (viii) refusing to pay a claim without
3-61 conducting a reasonable investigation with respect to the claim;
3-62 (ix) with respect to a Texas personal auto
3-63 policy, delaying or refusing settlement of a claim solely because
3-64 there is other insurance of a different type available to satisfy
3-65 all or any part of the loss forming the basis of that claim; or
3-66 (x) requiring a claimant, as a condition
3-67 of settling a claim, to produce the claimant's federal income tax
3-68 returns for examination or investigation by the person unless:
3-69 (A) the claimant is ordered to
4-1 produce those tax returns by a court;
4-2 (B) the claim involves a fire loss;
4-3 or
4-4 (C) the claim involves lost profits
4-5 or income.
4-6 (b) Paragraph (a) of this clause does not
4-7 provide a cause of action to a third party asserting one or more
4-8 claims against an insured covered under a liability insurance
4-9 policy.
4-10 (11) Misrepresentation of Insurance Policy.
4-11 Misrepresenting an insurance policy by:
4-12 (a) making an untrue statement of material fact;
4-13 (b) failing to state a material fact that is
4-14 necessary to make other statements made not misleading, considering
4-15 the circumstances under which the statements were made;
4-16 (c) making a statement in such manner as to
4-17 mislead a reasonably prudent person to a false conclusion of a
4-18 material fact;
4-19 (d) making a material misstatement of law; or
4-20 (e) failing to disclose any matter required by
4-21 law to be disclosed, including a failure to make disclosure in
4-22 accordance with another provision of this code.
4-23 SECTION 2. This Act takes effect September 1, 2001.
4-24 * * * * *