By Dunnam H.B. No. 1433
77R9999 PB-D
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to prohibition on the disclosure of defense counsel's
1-3 billing statements by certain insurers and on the submission of
1-4 those statements to certain audits; providing a civil penalty.
1-5 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-6 SECTION 1. Subtitle B, Title 2, Insurance Code, is amended by
1-7 adding Chapter 103 to read as follows:
1-8 CHAPTER 103. DISCLOSURE OF FEE STATEMENTS;
1-9 SUBMISSION TO AUDIT
1-10 Sec. 103.001. DEFINITION. In this chapter, "insurer" means a
1-11 partnership, corporation, association, or other group, however
1-12 organized, including a Lloyd's plan, a reciprocal or interinsurance
1-13 exchange, county mutual insurance company, or farm mutual insurance
1-14 company, that is admitted to do business and authorized to write in
1-15 this state:
1-16 (1) liability insurance, whether primary insurance
1-17 coverage, excess insurance coverage, or umbrella insurance
1-18 coverage; or
1-19 (2) casualty insurance.
1-20 Sec. 103.002. APPLICABILITY. This chapter applies only to an
1-21 insurer that:
1-22 (1) issues a liability insurance policy:
1-23 (A) to or covering any resident of this state;
1-24 (B) covering liability incurred by an insured in
2-1 this state; or
2-2 (C) under which the insurer provides a defense
2-3 to an insured in a claim or action pending in this state; or
2-4 (2) is obligated under a casualty insurance policy to
2-5 defend an insured in a suit.
2-6 Sec. 103.003. DISCLOSURE OF FEE STATEMENTS PROHIBITED;
2-7 EXCEPTION. (a) Except as provided by Subsection (c), an insurer
2-8 may not disclose defense counsel fee statements regarding services
2-9 provided for an insured to any person, other than the insured, who
2-10 is not an employee of the insurer.
2-11 (b) An insurer may not require defense counsel to disclose
2-12 the defense counsel's fee statements to any person who is not an
2-13 employee of the insurer.
2-14 (c) To the extent, if any, otherwise permitted by law, an
2-15 insurer may disclose defense counsel's fee statements to a person
2-16 who is not an employee of the insurer for the purpose of reviewing
2-17 the fee statements in connection with a lawsuit over payment of the
2-18 fees. Disclosure under this subsection does not, in itself, waive
2-19 any attorney-client privilege.
2-20 Sec. 103.004. AUDIT OF DEFENSE COUNSEL BILLING. (a) Except
2-21 as provided by Subsection (b), an insurer may not submit to a
2-22 third-party auditor, or require the insured's attorney to submit to
2-23 the auditor, a billing statement that specifies in detail the
2-24 services performed by the attorney for the insured.
2-25 (b) An insurer may take an action described by Subsection
2-26 (a) with the prior written consent of the insured, obtained after
2-27 full disclosure to the insured.
3-1 Sec. 103.005. CONTRACT PROVISIONS VOID; WAIVER PROHIBITED.
3-2 (a) A provision in a contract entered into between an insurer and
3-3 defense counsel or between an insurer and an insured that requires
3-4 or permits disclosure of the defense counsel's fee statements to a
3-5 person who is not an employee of the insurer is against public
3-6 policy and is void and unenforceable.
3-7 (b) A waiver by an insured of the requirements of Section
3-8 103.003(a) or (b) is against public policy and is void and
3-9 unenforceable.
3-10 Sec. 103.006. DAMAGES; INJUNCTIVE RELIEF. (a) A person may
3-11 bring an action against an insurer to:
3-12 (1) recover any actual damages proximately suffered by
3-13 an insured because of a violation of Section 103.003(a) or (b) or
3-14 Section 103.004; and
3-15 (2) obtain injunctive relief to prevent the threatened
3-16 or continued violation of Section 103.003(a) or (b) or Section
3-17 103.004.
3-18 (b) A court shall award reasonable and necessary attorney's
3-19 fees to a person who recovers damages or obtains injunctive relief
3-20 under this section.
3-21 Sec. 103.007. CIVIL PENALTY. An insurer who violates Section
3-22 103.003 or 103.004 is liable for a civil penalty not to exceed
3-23 $10,000 for each act of violation. At the commissioner's request,
3-24 the attorney general shall institute an action in a district court
3-25 in Travis County to recover a civil penalty under this section.
3-26 Sec. 103.008. RULES. The commissioner, in consultation with
3-27 the State Bar of Texas, shall adopt rules to implement this
4-1 chapter.
4-2 SECTION 2. This Act applies only to a disclosure that occurs
4-3 on or after the effective date of this Act. A disclosure that
4-4 occurred before that date is governed by the law as it existed
4-5 immediately before the effective date of this Act, and that law is
4-6 continued in effect for that purpose.
4-7 SECTION 3. This Act takes effect September 1, 2001.