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.