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.
 1-6           SECTION 1. Subtitle B, Title 2, Insurance Code, is amended by
 1-7     adding Chapter 103 to read as follows:
 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.
 2-7     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.
 3-2     (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.