By Burnam H.B. No. 2893
77R4443 MXM-D
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to certain unfair practices by motor vehicle insurers;
1-3 providing penalties.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 ARTICLE 1. UNFAIR UNDERWRITING PRACTICES
1-6 SECTION 1.01. Section 4, Article 21.21, Insurance Code, is
1-7 amended to read as follows:
1-8 Sec. 4. UNFAIR METHODS OF COMPETITION AND UNFAIR OR
1-9 DECEPTIVE ACTS OR PRACTICES DEFINED. The following are hereby
1-10 defined as unfair methods of competition and unfair and deceptive
1-11 acts or practices in the business of insurance:
1-12 (1) Misrepresentations and False Advertising of Policy
1-13 Contracts. Making, issuing, circulating, or causing to be made,
1-14 issued or circulated, any estimate, illustration, circular or
1-15 statement misrepresenting the terms of any policy issued or to be
1-16 issued or the benefits or advantages promised thereby or the
1-17 dividends or share of the surplus to be received thereon, or making
1-18 any false or misleading statements as to the dividends or share of
1-19 surplus previously paid on similar policies, or making any
1-20 misleading representation or any misrepresentation as to the
1-21 financial condition of any insurer, or as to the legal reserve
1-22 system upon which any life insurer operates, or using any name or
1-23 title of any policy or class of policies misrepresenting the true
1-24 nature thereof, or making any misrepresentation to any policyholder
2-1 insured in any company for the purpose of inducing or tending to
2-2 induce such policyholder to lapse, forfeit, or surrender his
2-3 insurance;
2-4 (2) False Information and Advertising Generally.
2-5 Making, publishing, disseminating, circulating or placing before
2-6 the public, or causing, directly or indirectly, to be made,
2-7 published, disseminated, circulated, or placed before the public,
2-8 in a newspaper, magazine or other publication, or in the form of a
2-9 notice, circular, pamphlet, letter or poster, or over any radio or
2-10 television station, or in any other way, an advertisement,
2-11 announcement or statement containing any assertion, representation
2-12 or statement with respect to the business of insurance or with
2-13 respect to any person in the conduct of his insurance business,
2-14 which is untrue, deceptive or misleading;
2-15 (3) Defamation. Making, publishing, disseminating, or
2-16 circulating, directly or indirectly, or aiding, abetting or
2-17 encouraging the making, publishing, disseminating or circulating of
2-18 any oral or written statement or any pamphlet, circular, article or
2-19 literature which is false, or maliciously critical of or derogatory
2-20 to the financial condition of any insurer, and which is calculated
2-21 to injure any person engaged in the business of insurance;
2-22 (4) Boycott, Coercion and Intimidation. Entering into
2-23 any agreement to commit, or by any concerted action committing, any
2-24 act of boycott, coercion or intimidation resulting in or tending to
2-25 result in unreasonable restraint of, or monopoly in, the business
2-26 of insurance;
2-27 (5) False Financial Statements. (a) Filing with any
3-1 supervisory or other public official, or making, publishing,
3-2 disseminating, circulating or delivering to any person, or placing
3-3 before the public, or causing directly or indirectly, to be made,
3-4 published, disseminated, circulated, delivered to any person, or
3-5 placed before the public, any false statement of financial
3-6 condition of an insurer with intent to deceive;
3-7 (b) Making any false entry in any book, report
3-8 or statement of any insurer with intent to deceive any agent or
3-9 examiner lawfully appointed to examine into its condition or into
3-10 any of its affairs, or any public official to whom such insurer is
3-11 required by law to report, or who has authority by law to examine
3-12 into its condition or into any of its affairs, or, with like
3-13 intent, wilfully omitting to make a true entry of any material fact
3-14 pertaining to the business of such insurer in any book, report or
3-15 statement of such insurer;
3-16 (6) Stock Operations and Advisory Board Contracts.
3-17 Issuing or delivering or permitting agents, officers or employees
3-18 to issue or deliver, company stock or other capital stock, or
3-19 benefit certificates or shares in any corporation, or securities or
3-20 any special or advisory board contracts or other contracts of any
3-21 kind promising returns and profits as an inducement to insurance.
3-22 Provided, however, that nothing in this subsection shall be
3-23 construed as prohibiting the issuing or delivery of participating
3-24 insurance policies otherwise authorized by law.
3-25 (7) Unfair Discrimination. (a) Making or permitting
3-26 any unfair discrimination between individuals of the same class and
3-27 equal expectation of life in the rates charged for any contract of
4-1 life insurance or of life annuity or in the dividends or other
4-2 benefits payable thereon, or in any other of the terms and
4-3 conditions of such contract;
4-4 (8) Rebates. (a) Except as otherwise expressly
4-5 provided by law, knowingly permitting or offering to make or making
4-6 any contract of life insurance, life annuity or accident and health
4-7 insurance, or agreement as to such contract other than as plainly
4-8 expressed in the contract issued thereon, or paying or allowing, or
4-9 giving or offering to pay, allow, or give, directly or indirectly,
4-10 as inducement to such insurance, or annuity, any rebate of premiums
4-11 payable on the contract, or any special favor or advantage in the
4-12 dividends or other benefits thereon, or any valuable consideration
4-13 or inducement whatever not specified in the contract; or giving, or
4-14 selling, or purchasing or offering to give, sell, or purchase as
4-15 inducement to such insurance or annuity or in connection therewith,
4-16 any stocks, bonds, or other securities of any insurance company or
4-17 other corporation, association, or partnership, or any dividends or
4-18 profits accrued thereon, or anything of value whatsoever not
4-19 specified in the contract;
4-20 (b) Nothing in clause 7 or paragraph (a) of
4-21 clause 8 of this subsection shall be construed as including within
4-22 the definition of discrimination or rebates any of the following
4-23 practices:
4-24 (i) in the case of any contract of life
4-25 insurance or life annuity, paying bonuses to policyholders or
4-26 otherwise abating their premiums in whole or in part out of surplus
4-27 accumulated from non-participating insurance, provided that any
5-1 such bonuses or abatement of premiums shall be fair and equitable
5-2 to policyholders and for the best interests of the company and its
5-3 policyholders;
5-4 (ii) in the case of life insurance
5-5 policies issued on the industrial debit plan, making allowance to
5-6 policyholders who have continuously for a specified period made
5-7 premium payments directly to an office of the insurer in an amount
5-8 which fairly represents the saving in collection expenses;
5-9 (iii) readjustment of the rate of premium
5-10 for a group insurance policy based on the loss or expense
5-11 experience thereunder, at the end of the first or any subsequent
5-12 policy year of insurance thereunder, which may be made retroactive
5-13 only for such policy year.
5-14 (9) Deceptive Name, Word, Symbol, Device, or Slogan.
5-15 Using, displaying, publishing, circulating, distributing, or
5-16 causing to be used, displayed, published, circulated, or
5-17 distributed in any letter, pamphlet, circular, contract, policy,
5-18 evidence of coverage, article, poster, or other document,
5-19 literature, or public media of:
5-20 (a) a name as the corporate or business name of
5-21 a person or entity engaged in an insurance or insurance related
5-22 business in this state that is the same as, or deceptively similar
5-23 to, the name adopted and used by an insurance entity, health
5-24 maintenance organization, third party administrator, or group
5-25 hospital service company authorized to do business under the laws
5-26 of this state; or
5-27 (b) a word, symbol, device, slogan, or any
6-1 combination of these items, whether registered or not registered,
6-2 that is the same as or deceptively similar to one adopted and used
6-3 by an insurance entity, health maintenance organization, third
6-4 party administrator, or group hospital service company to
6-5 distinguish such entities, products, or service from other
6-6 entities, and includes the title, designation, character names, and
6-7 distinctive features of broadcast or other advertising.
6-8 Where two persons or entities are using a name, word, symbol,
6-9 device, slogan, or any combination of these items that are the same
6-10 or deceptively similar and are likely to cause confusion or a
6-11 mistake, the user who can demonstrate the first continuous actual
6-12 use of such name, word, symbol, device, slogan, or combination of
6-13 these items shall not have committed an unfair method of
6-14 competition or deceptive act or practice.
6-15 (10) Unfair Settlement Practices. (a) Engaging in any
6-16 of the following unfair settlement practices with respect to a
6-17 claim by an insured or beneficiary:
6-18 (i) misrepresenting to a claimant a
6-19 material fact or policy provision relating to coverage at issue;
6-20 (ii) failing to attempt in good faith to
6-21 effectuate a prompt, fair, and equitable settlement of a claim with
6-22 respect to which the insurer's liability has become reasonably
6-23 clear;
6-24 (iii) failing to attempt, in good faith,
6-25 to effectuate a prompt, fair, and equitable settlement under one
6-26 portion of a policy of a claim with respect to which the insurer's
6-27 liability has become reasonably clear in order to influence the
7-1 claimant to settle an additional claim under another portion of the
7-2 coverage, provided that this prohibition does not apply if payment
7-3 under one portion of the coverage constitutes evidence of liability
7-4 under another portion of the policy;
7-5 (iv) failing to provide promptly to a
7-6 policyholder a reasonable explanation of the basis in the policy,
7-7 in relation to the facts or applicable law, for the insurer's
7-8 denial of a claim or for the offer of a compromise settlement of a
7-9 claim;
7-10 (v) failing within a reasonable time to:
7-11 (A) affirm or deny coverage of a
7-12 claim to a policyholder; or
7-13 (B) submit a reservation of rights
7-14 to a policyholder;
7-15 (vi) refusing, failing, or unreasonably
7-16 delaying an offer of settlement under applicable first-party
7-17 coverage on the basis that other coverage may be available or that
7-18 third parties are responsible for the damages suffered, except as
7-19 may be specifically provided in the policy;
7-20 (vii) undertaking to enforce a full and
7-21 final release of a claim from a policyholder when only a partial
7-22 payment has been made, provided that this prohibition does not
7-23 apply to a compromise settlement of a doubtful or disputed claim;
7-24 (viii) refusing to pay a claim without
7-25 conducting a reasonable investigation with respect to the claim;
7-26 (ix) with respect to a Texas personal auto
7-27 policy, delaying or refusing settlement of a claim solely because
8-1 there is other insurance of a different type available to satisfy
8-2 all or any part of the loss forming the basis of that claim; or
8-3 (x) requiring a claimant, as a condition
8-4 of settling a claim, to produce the claimant's federal income tax
8-5 returns for examination or investigation by the person unless:
8-6 (A) the claimant is ordered to
8-7 produce those tax returns by a court;
8-8 (B) the claim involves a fire loss;
8-9 or
8-10 (C) the claim involves lost profits
8-11 or income.
8-12 (b) Paragraph (a) of this clause does not
8-13 provide a cause of action to a third party asserting one or more
8-14 claims against an insured covered under a liability insurance
8-15 policy.
8-16 (11) Misrepresentation of Insurance Policy.
8-17 Misrepresenting an insurance policy by:
8-18 (a) making an untrue statement of material fact;
8-19 (b) failing to state a material fact that is
8-20 necessary to make other statements made not misleading, considering
8-21 the circumstances under which the statements were made;
8-22 (c) making a statement in such manner as to
8-23 mislead a reasonably prudent person to a false conclusion of a
8-24 material fact;
8-25 (d) making a material misstatement of law; or
8-26 (e) failing to disclose any matter required by
8-27 law to be disclosed, including a failure to make disclosure in
9-1 accordance with another provision of this code.
9-2 (12) Other Unfair Practices. Violating this code
9-3 through:
9-4 (a) the improper use of a credit rating or
9-5 credit history in underwriting an insurance policy, as provided by
9-6 Article 21.21-11, Insurance Code; or
9-7 (b) the improper issuance, renewal, or
9-8 cancellation of an insurance policy for a good driver, as provided
9-9 by Section 4A, Article 21.49-2B.
9-10 ARTICLE 2. RESTRICTIONS ON USE OF CERTAIN UNDERWRITING GUIDELINES
9-11 SECTION 2.01. Subchapter B, Chapter 21, Insurance Code, is
9-12 amended by adding Article 21.21-11 to read as follows:
9-13 Art. 21.21-11. PROHIBITION ON USE IN MOTOR VEHICLE INSURANCE
9-14 OF UNDERWRITING GUIDELINES BASED ON CREDIT HISTORY OR CREDIT RATING
9-15 Sec. 1. DEFINITIONS. In this article:
9-16 (1) "Insurer" means an insurer authorized to write
9-17 motor vehicle insurance in this state, including:
9-18 (A) a county mutual insurance company;
9-19 (B) a Lloyd's plan insurer; and
9-20 (C) a reciprocal or interinsurance exchange.
9-21 (2) "Underwriting guideline" means a rule, standard,
9-22 marketing decision, or practice that is used by an insurer or an
9-23 agent of an insurer to examine, bind, accept, reject, cancel, or
9-24 limit insurance coverage to groups of consumers of insurance.
9-25 Sec. 2. APPLICATION. This article applies only to a
9-26 personal automobile insurance policy.
9-27 Sec. 3. PROHIBITION; EXEMPTION. (a) An insurer may not use
10-1 an underwriting guideline that is based in whole or in part on the
10-2 credit history or credit rating of an insured, an applicant for
10-3 insurance coverage, or any person other than the named insured or
10-4 the applicant who would be insured under the policy.
10-5 (b) This section does not apply to the use of a credit
10-6 history or credit rating by an insurer solely to determine whether
10-7 the insurer will offer an installment payment plan for the payment
10-8 of premiums to an insured or applicant for insurance.
10-9 Sec. 4. PENALTY. An insurer who violates this article
10-10 commits an unfair practice in violation of Article 21.21 of this
10-11 code and is subject to the penalties imposed under that article.
10-12 ARTICLE 3. INSURANCE COVERAGE FOR GOOD DRIVERS
10-13 SECTION 3.01. The heading to Article 21.49-2B, Insurance
10-14 Code, is amended to read as follows:
10-15 Art. 21.49-2B. AVAILABILITY, CANCELLATION, AND NONRENEWAL OF
10-16 CERTAIN PROPERTY AND CASUALTY POLICIES
10-17 SECTION 3.02. Article 21.49-2B, Insurance Code, is amended
10-18 by adding Section 4A to read as follows:
10-19 Sec. 4A. COVERAGE FOR GOOD DRIVERS. (a) In this section:
10-20 (1) "Good driver" means an individual who:
10-21 (A) has been licensed for at least three years
10-22 to drive the type of motor vehicle to be insured;
10-23 (B) during the previous three years, has not:
10-24 (i) been substantially at fault in a motor
10-25 vehicle accident that resulted in bodily injury, death, or property
10-26 damage;
10-27 (ii) been convicted of a violation of a
11-1 traffic safety regulation that involved a moving vehicle;
11-2 (iii) had more than one dismissal of a
11-3 charge under Subchapter B, Chapter 543, Transportation Code; and
11-4 (iv) been convicted of an offense under
11-5 Section 49.04, Penal Code, or Section 106.041, Alcoholic Beverage
11-6 Code; and
11-7 (C) has never made a fraudulent insurance claim.
11-8 (2) "Traffic safety regulation" means a law or
11-9 ordinance of this state or a political subdivision of this state
11-10 relating to the operation of a motor vehicle other than a
11-11 regulation relating to the conduct of a pedestrian or the parking
11-12 of a motor vehicle.
11-13 (b) Except as otherwise provided by this article, a motor
11-14 vehicle insurer may not cancel, nonrenew, or refuse to offer a
11-15 policy of motor vehicle insurance to a good driver.
11-16 (c) At least 30 days before the date a motor vehicle insurer
11-17 who does not offer a policy regulated by Article 5.101 of this code
11-18 is required to renew a policy under which a good driver is an
11-19 insured, or on application for a policy by an individual who
11-20 qualifies as a good driver, the motor vehicle insurer shall provide
11-21 to the named insured or applicant a notice, in the form prescribed
11-22 by the commissioner, that includes:
11-23 (1) an explanation of the different types of motor
11-24 vehicle insurance companies in this state and the manner in which
11-25 the rates for the policies of those insurance companies are subject
11-26 to regulation under this code;
11-27 (2) a list of the affiliates of that insurer who offer
12-1 a policy regulated under Article 5.101 of this code; and
12-2 (3) other information the commissioner by rule
12-3 requires.
12-4 (d) A violation of this section is an unfair and deceptive
12-5 practice in the business of insurance under Article 21.21 of this
12-6 code. Compliance with this section does not create an exemption
12-7 from Article 21.21-6 of this code, as added by Chapter 415, Acts of
12-8 the 74th Legislature, Regular Session, 1995, or other requirements.
12-9 ARTICLE 4. TRANSITION; EFFECTIVE DATE
12-10 SECTION 4.01. Article 21.21-11, Insurance Code, as added by
12-11 this Act, and Articles 21.21 and 21.49-2B, Insurance Code, as
12-12 amended by this Act, apply only to an insurance policy delivered,
12-13 issued for delivery, or renewed on or after January 1, 2002. A
12-14 policy delivered, issued for delivery, or renewed before January 1,
12-15 2002, is governed by the law as it existed immediately before the
12-16 effective date of this Act, and that law is continued in effect for
12-17 that purpose.
12-18 SECTION 4.02. This Act takes effect September 1, 2001.