By Bailey H.B. No. 2678
77R8717 PB-F
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the repair of a motor vehicle under an insurance
1-3 policy; providing penalties.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Article 5.07-1, Insurance Code, is amended to read
1-6 as follows:
1-7 Art. 5.07-1. REPAIR OF MOTOR VEHICLES; DISCLOSURE OF
1-8 CONSUMER INFORMATION. (a) Except as provided by rules duly adopted
1-9 by the commissioner, under an auto insurance policy that is
1-10 delivered, issued for delivery, or renewed in this state a person
1-11 subject to this article [an insurer] may not, directly or
1-12 indirectly:
1-13 (1) specify on any damage report, estimate, or
1-14 appraisal[, limit its coverage under a policy covering damage to a
1-15 motor vehicle by specifying] the brand, type, kind, age, vendor,
1-16 supplier, or condition of the parts or products that may be used to
1-17 repair the motor vehicle;
1-18 (2) require the use of any part or product in the
1-19 repair of a motor vehicle; or
1-20 (3) require a repair person or facility to specify on
1-21 any damage report, estimate, or appraisal the brand, type, kind,
1-22 age, vendor, supplier, or condition of a part or product that may
1-23 be used to repair the motor vehicle.
1-24 (b) Under an auto insurance policy that is delivered, issued
2-1 for delivery, or renewed in this state, a person subject to this
2-2 article may not directly or indirectly limit [by limiting] the
2-3 beneficiary of the policy or a third-party claimant from selecting
2-4 a repair person or facility to repair damage to the motor vehicle
2-5 covered under the policy.
2-6 (c) [(b)] In connection with the repair of damage to a motor
2-7 vehicle covered under an auto insurance policy, a person subject to
2-8 this article [an insurer, an employee of an insurer, an agent of an
2-9 insurer, a solicitor of insurance for an insurer, an insurance
2-10 adjuster, or an entity that employs an insurance adjuster] may not:
2-11 (1) solicit or accept a referral fee, [or] gratuity,
2-12 discount, or other form of compensation in exchange for referring a
2-13 beneficiary of a policy or third-party claimant to one or more [a]
2-14 repair persons [person] or facilities [facility] to repair the
2-15 damage;
2-16 (2) communicate [state or suggest, either orally or in
2-17 writing,] to a beneficiary of a policy or a third-party claimant
2-18 that, for the damage repair or parts replacement to be covered by
2-19 the policy, the beneficiary of a policy or third-party claimant is
2-20 required to use one or more [a specific] repair persons [person] or
2-21 facilities;
2-22 (3) communicate to a beneficiary of a policy or a
2-23 third-party claimant that one or more [facility or a] repair
2-24 persons [person] or facilities [facility] identified on a
2-25 [preferred] list of repair persons and facilities maintained by or
2-26 compiled by a person subject to this article is preferred or
2-27 recommended [an insurer must be used by a beneficiary in order for
3-1 the damage repair or parts replacement to be covered by the
3-2 policy]; [or]
3-3 (4) [(3)] restrict the right of a beneficiary of a
3-4 policy [beneficiary's] or third-party claimant [claimant's right]
3-5 to choose a repair person or facility;
3-6 (5) require [by requiring] the beneficiary of a policy
3-7 or third-party claimant to travel an unreasonable distance to
3-8 repair the damage;
3-9 (6) threaten to remove the motor vehicle of a
3-10 beneficiary of a policy or a third-party claimant from a repair
3-11 person or facility selected by the beneficiary or third-party
3-12 claimant for any reason;
3-13 (7) communicate to a beneficiary of a policy or a
3-14 third-party claimant that any repairs, including parts, materials,
3-15 or labor, are guaranteed by a person other than the repair person
3-16 or facility that performs the damage repairs;
3-17 (8) communicate to a beneficiary of a policy or a
3-18 third-party claimant that alternative direct-billed transportation
3-19 coverage is allowed following the filing of a claim only if the
3-20 damaged motor vehicle is repaired by a repair person or facility
3-21 selected or recommended by the insurer or an agent of the insurer;
3-22 (9) provide any other incentive to induce the
3-23 beneficiary of a policy or a third-party claimant to waive the
3-24 right to select the repair person or facility to repair damage to
3-25 the beneficiary's or the claimant's motor vehicle; or
3-26 (10) reduce the amount paid for repairs by applying
3-27 predesignated limits on the quantity of or charges for materials
4-1 that are used to repair a motor vehicle.
4-2 [(c) A contract between an insurer and a repair person or
4-3 facility, including an agreement under which the repair person or
4-4 facility agrees to extend discounts for parts or labor to the
4-5 insurer in exchange for referrals by the insurer, may not result in
4-6 a reduction of coverage under the insured's auto insurance policy.]
4-7 (d) An insurer may not contract with a repair person or
4-8 facility for any purpose other than for the provision of damage
4-9 reports, estimates, or appraisals.
4-10 (e) A person subject to this article [An insurer] may not
4-11 directly or indirectly prohibit a repair person or facility from
4-12 providing a beneficiary of a policy or third-party claimant with
4-13 any information about the damage repairs to the beneficiary's or
4-14 the claimant's vehicle [that states the description, manufacturer,
4-15 or source of the parts used and the amounts charged to the insurer
4-16 for the parts and related labor].
4-17 (f) [(e)] At the time the vehicle is presented to a person
4-18 subject to this article [an insurer or an insurance adjuster or
4-19 other person in connection with a claim for damage repair], the
4-20 [insurer or insurance adjuster or other] person shall provide to
4-21 the beneficiary or third-party claimant notice of the provisions of
4-22 this article. The commissioner shall adopt a rule establishing the
4-23 method or methods insurers shall use to comply with the notice
4-24 provisions in this subsection.
4-25 (g) [(f)] Any beneficiary of a policy, third-party claimant,
4-26 consumer group, representative of a consumer, insurer, [or] repair
4-27 person, or repair facility may submit a written, documented
5-1 complaint to the department with respect to an alleged violation of
5-2 this article.
5-3 (h) [(g)] In the settlement of liability claims by a third
5-4 party against an insured for property damage claimed by the third
5-5 party, a person subject to this article [an insurer] may not
5-6 communicate to a third-party claimant that:
5-7 (1) in order for repairs to be covered, the
5-8 third-party claimant is required to use a specific [require the
5-9 third-party claimant to have repairs made by a particular] repair
5-10 person or facility; or
5-11 (2) the person prefers or recommends that the
5-12 third-party claimant use a repair person or facility identified on
5-13 a list of repair persons and facilities maintained by or compiled
5-14 by a person subject to this article.
5-15 (i) In the settlement of liability claims by a third party
5-16 against an insured for property damage claimed by the third party,
5-17 a person subject to this article may not:
5-18 (1) specify on a damage report, estimate, or appraisal
5-19 the [to use a particular] brand, type, kind, age, vendor, supplier,
5-20 or condition of parts or products that may be used to repair the
5-21 motor vehicle;
5-22 (2) require the use of any specific parts in the
5-23 repair of a motor vehicle; or
5-24 (3) require any repair person or facility to specify
5-25 on any damage report, estimate, or appraisal the brand, type, kind,
5-26 age, vendor, supplier, or condition of a part or product that may
5-27 be used to repair the motor vehicle.
6-1 (j) [(h)] The commissioner may exercise the rule-making
6-2 authority under Article 21.21-2 of this code with respect to any
6-3 fraudulent activity of any party under [to an agreement described
6-4 by Subsection (c) of] this article.
6-5 (k) The [(i) Any] rules adopted by the commissioner to
6-6 implement this article shall include, but not be limited to,
6-7 requirements that:
6-8 (1) any limitation described in Subsection (a) of this
6-9 article [section] is clearly and prominently displayed on the face
6-10 of the policy or certificate in lieu of a policy; and
6-11 (2) the insured give written consent to such a
6-12 limitation, following both oral and written notification of any
6-13 limitation at the time the policy is purchased.
6-14 (l) The commissioner may not adopt a rule that allows an
6-15 insurer to specify a non-original equipment manufacturer part as
6-16 the basis for a damage report, estimate, or appraisal as a limit to
6-17 the cost of a repair to a part damaged in an accident in a case in
6-18 which:
6-19 (1) the vehicle of the beneficiary of the policy or
6-20 third-party claimant is still under the manufacturer's original
6-21 warranty;
6-22 (2) the part lacks a warranty that is at least equal
6-23 to the warranty provided by the original equipment manufacturer for
6-24 the same part;
6-25 (3) the use of that part would reduce the market value
6-26 of the vehicle once repairs are completed to a greater extent than
6-27 would the use of an aftermarket part made by the original equipment
7-1 manufacturer;
7-2 (4) the use of that part would lessen the safety of
7-3 the vehicle in any respect; or
7-4 (5) a person subject to this article cannot
7-5 satisfactorily demonstrate the suitability for use of the part to
7-6 the commissioner.
7-7 (m) A person subject to this article who uses or references
7-8 survey data to directly or indirectly determine reasonable costs
7-9 for damage repairs or costs shall:
7-10 (1) ensure that the survey data was obtained by
7-11 statistically sound survey and research methods;
7-12 (2) publish a report that:
7-13 (A) contains the results of the survey;
7-14 (B) contains the complete and factual criteria
7-15 used for the survey; and
7-16 (C) divides the results of the survey by each
7-17 market surveyed;
7-18 (3) provide a copy of the report to the commissioner;
7-19 and
7-20 (4) on request, provide a copy of the report to:
7-21 (A) a repair person or facility that
7-22 participated in the survey; and
7-23 (B) any person whose claim is decided or
7-24 influenced by the results of the survey.
7-25 (n) This article applies to:
7-26 (1) an insurer;
7-27 (2) an insurance holding company;
8-1 (3) an investment entity to which an insurer belongs;
8-2 (4) an affiliate corporation of an insurer;
8-3 (5) a person described by Subdivisions (1) through (4)
8-4 of this subsection who owns, controls, or has a significant
8-5 interest in the business of a person who is engaged in the
8-6 collision repair of motor vehicles;
8-7 (6) an employee or agent of a person described by
8-8 Subdivisions (1) through (4) of this subsection;
8-9 (7) a solicitor of insurance for a person described by
8-10 Subdivisions (1) through (4) of this subsection;
8-11 (8) a person who is directly or indirectly controlled
8-12 by a person described by Subdivisions (1) through (4) of this
8-13 subsection, either contractually or by other means;
8-14 (9) an insurance adjuster or a person who employs an
8-15 insurance adjuster; or
8-16 (10) an appraiser.
8-17 (o) A person commits an unfair and deceptive act or practice
8-18 in the business of insurance if the person violates this article
8-19 and is subject to each penalty or other sanction provided by
8-20 Article 21.21 of this code for that violation.
8-21 (p) In this article:
8-22 (1) "Communicate" means to infer, imply, or state a
8-23 proposition or idea, either directly or indirectly, orally or in
8-24 writing.
8-25 (2) "Survey data" means data that:
8-26 (A) results from a survey, evaluation, or other
8-27 determination of market pricing for:
9-1 (i) labor, parts, or other items relating
9-2 to collision repair of a motor vehicle;
9-3 (ii) the quality or quantity of parts or
9-4 materials used for collision repair of a motor vehicle; or
9-5 (iii) the rates charged for collision
9-6 repair of a motor vehicle; and
9-7 (B) is used to determine or to influence,
9-8 directly or indirectly, prevailing market pricing or practice in
9-9 specific markets.
9-10 SECTION 2. This Act takes effect September 1, 2001.
9-11 SECTION 3. Subsection (d), Article 5.07-1, Insurance Code, as
9-12 amended by this Act, applies only to a contract entered into on or
9-13 after the effective date of this Act. A contract that is entered
9-14 into before the effective date of this Act is governed by the law
9-15 in effect immediately before that date, and that law is continued
9-16 in effect for that purpose.