1-1 AN ACT
1-2 relating to the refund of unearned premiums by an insurer.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Subchapter E, Chapter 21, Insurance Code, is
1-5 amended by adding Article 21.29 to read as follows:
1-6 Art. 21.29. REFUND OF UNEARNED PREMIUM REQUIRED. (a) In
1-7 this article, "insurer" means an insurance company or other entity
1-8 that is authorized to engage in the business of insurance in this
1-9 state, including:
1-10 (1) a domestic or foreign, stock or mutual, life,
1-11 health, or accident insurance company;
1-12 (2) a domestic or foreign, stock or mutual, fire and
1-13 casualty insurance company;
1-14 (3) a Mexican casualty company;
1-15 (4) a farm mutual insurance company;
1-16 (5) a county mutual insurance company;
1-17 (6) a domestic or foreign Lloyd's plan insurer;
1-18 (7) a domestic or foreign reciprocal or insurance
1-19 exchange;
1-20 (8) a domestic or foreign fraternal benefit society;
1-21 (9) a stipulated premium insurance company;
1-22 (10) a nonprofit legal service corporation;
1-23 (11) a statewide mutual assessment company;
1-24 (12) a local mutual aid association;
2-1 (13) a local mutual burial association;
2-2 (14) an association exempt under Article 14.17 of this
2-3 code;
2-4 (15) a nonprofit hospital, medical, or dental service
2-5 corporation, including a company subject to Chapter 20 of this
2-6 code;
2-7 (16) a risk retention group;
2-8 (17) a purchase group;
2-9 (18) a surplus lines carrier; and
2-10 (19) a guaranty association created and operating
2-11 under Article 21.28-C or 21.28-D of this code.
2-12 (b) If an insurer issues a policy of insurance that requires
2-13 the insurer to maintain an unearned premium reserve for the portion
2-14 of the written policy premium applicable to the unexpired or unused
2-15 part of the policy period for which the premium has been paid and
2-16 the policy is canceled or terminated by the insured or the insurer
2-17 before the end of the policy term with a remaining unearned premium
2-18 reserve on the policy, the insurer shall promptly refund to the
2-19 policyholder the appropriate portion of the unearned premium.
2-20 (c) A guaranty association shall promptly refund any
2-21 unearned premium defined in Section 5(8), Article 21.28-C, and
2-22 Section 5(10), Article 21.28-D.
2-23 (d) The commissioner shall adopt rules necessary to
2-24 implement this article and provide appropriate guidelines for
2-25 determining the portion of an unearned premium that must be
2-26 refunded to a policyholder under this article.
2-27 (e) Nothing in this article affects the obligation of an
3-1 insurer to pay an unearned premium to a premium finance company in
3-2 accordance with Article 24.17(f) of this code.
3-3 SECTION 2. (a) This Act takes effect September 1, 2001.
3-4 (b) The change in law made by Article 21.29, Insurance Code,
3-5 as added by this Act, applies only to an insurance premium paid to
3-6 an insurer on or after January 1, 2002. An insurance premium paid
3-7 before January 1, 2002, is governed by the law in effect
3-8 immediately before the effective date of this Act, and that law is
3-9 continued in effect for that purpose.
_______________________________ _______________________________
President of the Senate Speaker of the House
I certify that H.B. No. 1408 was passed by the House on May
5, 2001, by a non-record vote; and that the House concurred in
Senate amendments to H.B. No. 1408 on May 24, 2001, by a non-record
vote.
_______________________________
Chief Clerk of the House
I certify that H.B. No. 1408 was passed by the Senate, with
amendments, on May 21, 2001, by a viva-voce vote.
_______________________________
Secretary of the Senate
APPROVED: __________________________
Date
__________________________
Governor