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.