1-1 By: Junell (Senate Sponsor - Duncan) H.B. No. 1408 1-2 (In the Senate - Received from the House May 7, 2001; 1-3 May 7, 2001, read first time and referred to Committee on Business 1-4 and Commerce; May 11, 2001, reported favorably by the following 1-5 vote: Yeas 7, Nays 0; May 11, 2001, sent to printer.) 1-6 A BILL TO BE ENTITLED 1-7 AN ACT 1-8 relating to the refund of unearned premiums by an insurer. 1-9 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-10 SECTION 1. Subchapter E, Chapter 21, Insurance Code, is 1-11 amended by adding Article 21.29 to read as follows: 1-12 Art. 21.29. REFUND OF UNEARNED PREMIUM REQUIRED. (a) In 1-13 this article, "insurer" means an insurance company or other entity 1-14 that is authorized to engage in the business of insurance in this 1-15 state, including: 1-16 (1) a domestic or foreign, stock or mutual, life, 1-17 health, or accident insurance company; 1-18 (2) a domestic or foreign, stock or mutual, fire and 1-19 casualty insurance company; 1-20 (3) a Mexican casualty company; 1-21 (4) a farm mutual insurance company; 1-22 (5) a county mutual insurance company; 1-23 (6) a domestic or foreign Lloyd's plan insurer; 1-24 (7) a domestic or foreign reciprocal or insurance 1-25 exchange; 1-26 (8) a domestic or foreign fraternal benefit society; 1-27 (9) a stipulated premium insurance company; 1-28 (10) a nonprofit legal service corporation; 1-29 (11) a statewide mutual assessment company; 1-30 (12) a local mutual aid association; 1-31 (13) a local mutual burial association; 1-32 (14) an association exempt under Article 14.17 of this 1-33 code; 1-34 (15) a nonprofit hospital, medical, or dental service 1-35 corporation, including a company subject to Chapter 20 of this 1-36 code; 1-37 (16) a risk retention group; 1-38 (17) a purchase group; 1-39 (18) a surplus lines carrier; and 1-40 (19) a guaranty association created and operating 1-41 under Article 21.28-C or 21.28-D of this code. 1-42 (b) If an insurer issues a policy of insurance that requires 1-43 the insurer to maintain an unearned premium reserve for the portion 1-44 of the written policy premium applicable to the unexpired or unused 1-45 part of the policy period for which the premium has been paid and 1-46 the policy is canceled or terminated by the insured or the insurer 1-47 before the end of the policy term with a remaining unearned premium 1-48 reserve on the policy, the insurer shall promptly refund to the 1-49 policyholder the appropriate portion of the unearned premium. 1-50 (c) A guaranty association shall promptly refund an unearned 1-51 premium to the special assigned deputy receiver on receipt of 1-52 applicable information. 1-53 (d) The commissioner shall adopt rules necessary to 1-54 implement this article and provide appropriate guidelines for 1-55 determining the portion of an unearned premium that must be 1-56 refunded to a policyholder under this article. 1-57 (e) Nothing in this article affects the obligation of an 1-58 insurer to pay an unearned premium to a premium finance company in 1-59 accordance with Article 24.17(f) of this code. 1-60 SECTION 2. (a) This Act takes effect September 1, 2001. 1-61 (b) The change in law made by Article 21.29, Insurance Code, 1-62 as added by this Act, applies only to an insurance premium paid to 1-63 an insurer on or after January 1, 2002. An insurance premium paid 1-64 before January 1, 2002, is governed by the law in effect 2-1 immediately before the effective date of this Act, and that law is 2-2 continued in effect for that purpose. 2-3 * * * * *