77R9942 DLF-F
By Dunnam H.B. No. 1383
Substitute the following for H.B. No. 1383:
By Eiland C.S.H.B. No. 1383
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to certain attorneys employed by or under contract to
1-3 insurers and related conduct by insurers.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Subchapter E, Chapter 21, Insurance Code, is
1-6 amended by adding Article 21.56B to read as follows:
1-7 Art. 21.56B. INDEPENDENCE OF COUNSEL; UNAUTHORIZED PRACTICE
1-8 OF LAW BY INSURERS PROHIBITED
1-9 Sec. 1. APPLICABILITY. (a) This article applies to an
1-10 insurer that issues any form of casualty or liability insurance
1-11 that is delivered, issued for delivery, or renewed in this state,
1-12 whether primary insurance coverage, excess insurance coverage, or
1-13 umbrella insurance coverage, including a Lloyd's plan, reciprocal
1-14 or interinsurance exchange, county mutual insurer, or farm mutual
1-15 insurer.
1-16 (b) This article applies only to an insurer that issues a
1-17 casualty or liability insurance policy:
1-18 (1) to or covering any resident of this state;
1-19 (2) covering liability incurred by an insured in this
1-20 state; or
1-21 (3) under which the insurer provides a defense to an
1-22 insured in a claim or action pending in this state.
1-23 Sec. 2. UNAUTHORIZED PRACTICE OF LAW. (a) In providing a
1-24 defense for an insured against a claim or action under an insurance
2-1 policy, an insurer may not use, or require an insured to use, an
2-2 attorney who is:
2-3 (1) an employee of an insurer; or
2-4 (2) an employee, owner, partner, or shareholder of a
2-5 law firm that works solely for the insurer or solely for a group of
2-6 affiliated insurers.
2-7 (b) An insurer who violates this section commits an act that
2-8 constitutes the practice of law for purposes of Section 81.101,
2-9 Government Code.
2-10 Sec. 3. INDEPENDENCE OF COUNSEL; RULES. (a) The
2-11 commissioner, in consultation with the State Bar of Texas, shall
2-12 adopt rules under this article to ensure the independence of
2-13 counsel provided to an insured under an insurance policy. The
2-14 rules must require notice to the insured of the insured's right to
2-15 independent counsel to represent the insured's interests.
2-16 (b) Rules adopted under this section may specify
2-17 circumstances not otherwise governed by this article in which,
2-18 because of conflict of interest or other relevant issues, an
2-19 insurer may not offer or provide to the insured the services of an
2-20 attorney with a contractual or other relationship with the insurer.
2-21 Sec. 4. DAMAGES; INJUNCTIVE RELIEF. (a) A person may bring
2-22 an action against an insurer to:
2-23 (1) recover any actual damages proximately suffered by
2-24 an insured because of a violation of this article or a rule adopted
2-25 under this article; and
2-26 (2) obtain injunctive relief to prevent the threatened
2-27 or continued violation of this article or a rule adopted under this
3-1 article.
3-2 (b) A court shall award reasonable and necessary attorney's
3-3 fees to a person who recovers damages or obtains injunctive relief
3-4 under this section.
3-5 Sec. 5. DISQUALIFICATION. A court, on its own motion or on
3-6 the motion of any party, shall disqualify an attorney who is
3-7 representing an insured before that court in violation of this
3-8 article or a rule adopted under this article.
3-9 SECTION 2. (a) Except as provided by Subsection (b) of this
3-10 section, this Act applies only to the use of an attorney to defend
3-11 a claim or action on or after the effective date of this Act.
3-12 (b) Notwithstanding Article 21.56B, Insurance Code, as added
3-13 by this Act, in a claim asserted or action commenced before the
3-14 effective date of this Act, an attorney representing the insured on
3-15 the effective date of this Act may continue to represent an insured
3-16 until December 31, 2001. Not later than December 31, 2001, an
3-17 attorney continuing to represent an insured under this subsection
3-18 shall take appropriate steps to withdraw from representation and
3-19 the insurer shall provide an attorney to the insured in accordance
3-20 with Article 21.56B, Insurance Code, as added by this Act.
3-21 SECTION 3. This Act takes effect September 1, 2001.