By Turner of Harris H.B. No. 3424
77R7076 PB-F
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to coercion as an unfair trade practice in the business of
1-3 insurance.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Section 4, Article 21.21, Insurance Code, is
1-6 amended to read as follows:
1-7 Sec. 4. UNFAIR METHODS OF COMPETITION AND UNFAIR OR
1-8 DECEPTIVE ACTS OR PRACTICES DEFINED. The following are hereby
1-9 defined as unfair methods of competition and unfair and deceptive
1-10 acts or practices in the business of insurance:
1-11 (1) Misrepresentations and False Advertising of Policy
1-12 Contracts. Making, issuing, circulating, or causing to be made,
1-13 issued or circulated, any estimate, illustration, circular or
1-14 statement misrepresenting the terms of any policy issued or to be
1-15 issued or the benefits or advantages promised thereby or the
1-16 dividends or share of the surplus to be received thereon, or making
1-17 any false or misleading statements as to the dividends or share of
1-18 surplus previously paid on similar policies, or making any
1-19 misleading representation or any misrepresentation as to the
1-20 financial condition of any insurer, or as to the legal reserve
1-21 system upon which any life insurer operates, or using any name or
1-22 title of any policy or class of policies misrepresenting the true
1-23 nature thereof, or making any misrepresentation to any policyholder
1-24 insured in any company for the purpose of inducing or tending to
2-1 induce such policyholder to lapse, forfeit, or surrender his
2-2 insurance;
2-3 (2) False Information and Advertising Generally.
2-4 Making, publishing, disseminating, circulating or placing before
2-5 the public, or causing, directly or indirectly, to be made,
2-6 published, disseminated, circulated, or placed before the public,
2-7 in a newspaper, magazine or other publication, or in the form of a
2-8 notice, circular, pamphlet, letter or poster, or over any radio or
2-9 television station, or in any other way, an advertisement,
2-10 announcement or statement containing any assertion, representation
2-11 or statement with respect to the business of insurance or with
2-12 respect to any person in the conduct of his insurance business,
2-13 which is untrue, deceptive or misleading;
2-14 (3) Defamation. Making, publishing, disseminating, or
2-15 circulating, directly or indirectly, or aiding, abetting or
2-16 encouraging the making, publishing, disseminating or circulating of
2-17 any oral or written statement or any pamphlet, circular, article or
2-18 literature which is false, or maliciously critical of or derogatory
2-19 to the financial condition of any insurer, and which is calculated
2-20 to injure any person engaged in the business of insurance;
2-21 (4) Boycott, Coercion and Intimidation. Entering into
2-22 any agreement to commit, or by any concerted action committing, any
2-23 act of boycott, coercion or intimidation resulting in or tending to
2-24 result in unreasonable restraint of, or monopoly in, the business
2-25 of insurance; for purposes of this subdivision, "coercion" includes
2-26 an action or agreement by any entity subject to this code that
2-27 offers multiple health benefit plans or health products and that
3-1 requires a health care provider, as a condition of participation in
3-2 a specific health benefit plan or health product of the entity, to
3-3 participate in any of the entity's other health benefit plans or
3-4 health products;
3-5 (5) False Financial Statements. (a) Filing with any
3-6 supervisory or other public official, or making, publishing,
3-7 disseminating, circulating or delivering to any person, or placing
3-8 before the public, or causing directly or indirectly, to be made,
3-9 published, disseminated, circulated, delivered to any person, or
3-10 placed before the public, any false statement of financial
3-11 condition of an insurer with intent to deceive;
3-12 (b) Making any false entry in any book, report
3-13 or statement of any insurer with intent to deceive any agent or
3-14 examiner lawfully appointed to examine into its condition or into
3-15 any of its affairs, or any public official to whom such insurer is
3-16 required by law to report, or who has authority by law to examine
3-17 into its condition or into any of its affairs, or, with like
3-18 intent, wilfully omitting to make a true entry of any material fact
3-19 pertaining to the business of such insurer in any book, report or
3-20 statement of such insurer;
3-21 (6) Stock Operations and Advisory Board Contracts.
3-22 Issuing or delivering or permitting agents, officers or employees
3-23 to issue or deliver, company stock or other capital stock, or
3-24 benefit certificates or shares in any corporation, or securities or
3-25 any special or advisory board contracts or other contracts of any
3-26 kind promising returns and profits as an inducement to insurance.
3-27 Provided, however, that nothing in this subsection shall be
4-1 construed as prohibiting the issuing or delivery of participating
4-2 insurance policies otherwise authorized by law.
4-3 (7) Unfair Discrimination. [(a)] Making or permitting
4-4 any unfair discrimination between individuals of the same class and
4-5 equal expectation of life in the rates charged for any contract of
4-6 life insurance or of life annuity or in the dividends or other
4-7 benefits payable thereon, or in any other of the terms and
4-8 conditions of such contract;
4-9 (8) Rebates. (a) Except as otherwise expressly
4-10 provided by law, knowingly permitting or offering to make or making
4-11 any contract of life insurance, life annuity or accident and health
4-12 insurance, or agreement as to such contract other than as plainly
4-13 expressed in the contract issued thereon, or paying or allowing, or
4-14 giving or offering to pay, allow, or give, directly or indirectly,
4-15 as inducement to such insurance, or annuity, any rebate of premiums
4-16 payable on the contract, or any special favor or advantage in the
4-17 dividends or other benefits thereon, or any valuable consideration
4-18 or inducement whatever not specified in the contract; or giving, or
4-19 selling, or purchasing or offering to give, sell, or purchase as
4-20 inducement to such insurance or annuity or in connection therewith,
4-21 any stocks, bonds, or other securities of any insurance company or
4-22 other corporation, association, or partnership, or any dividends or
4-23 profits accrued thereon, or anything of value whatsoever not
4-24 specified in the contract;
4-25 (b) Nothing in clause 7 or paragraph (a) of
4-26 clause 8 of this subsection shall be construed as including within
4-27 the definition of discrimination or rebates any of the following
5-1 practices:
5-2 (i) in the case of any contract of life
5-3 insurance or life annuity, paying bonuses to policyholders or
5-4 otherwise abating their premiums in whole or in part out of surplus
5-5 accumulated from non-participating insurance, provided that any
5-6 such bonuses or abatement of premiums shall be fair and equitable
5-7 to policyholders and for the best interests of the company and its
5-8 policyholders;
5-9 (ii) in the case of life insurance
5-10 policies issued on the industrial debit plan, making allowance to
5-11 policyholders who have continuously for a specified period made
5-12 premium payments directly to an office of the insurer in an amount
5-13 which fairly represents the saving in collection expenses;
5-14 (iii) readjustment of the rate of premium
5-15 for a group insurance policy based on the loss or expense
5-16 experience thereunder, at the end of the first or any subsequent
5-17 policy year of insurance thereunder, which may be made retroactive
5-18 only for such policy year.
5-19 (9) Deceptive Name, Word, Symbol, Device, or Slogan.
5-20 Using, displaying, publishing, circulating, distributing, or
5-21 causing to be used, displayed, published, circulated, or
5-22 distributed in any letter, pamphlet, circular, contract, policy,
5-23 evidence of coverage, article, poster, or other document,
5-24 literature, or public media of:
5-25 (a) a name as the corporate or business name of
5-26 a person or entity engaged in an insurance or insurance related
5-27 business in this state that is the same as, or deceptively similar
6-1 to, the name adopted and used by an insurance entity, health
6-2 maintenance organization, third party administrator, or group
6-3 hospital service company authorized to do business under the laws
6-4 of this state; or
6-5 (b) a word, symbol, device, slogan, or any
6-6 combination of these items, whether registered or not registered,
6-7 that is the same as or deceptively similar to one adopted and used
6-8 by an insurance entity, health maintenance organization, third
6-9 party administrator, or group hospital service company to
6-10 distinguish such entities, products, or service from other
6-11 entities, and includes the title, designation, character names, and
6-12 distinctive features of broadcast or other advertising.
6-13 Where two persons or entities are using a name, word,
6-14 symbol, device, slogan, or any combination of these items that are
6-15 the same or deceptively similar and are likely to cause confusion
6-16 or a mistake, the user who can demonstrate the first continuous
6-17 actual use of such name, word, symbol, device, slogan, or
6-18 combination of these items shall not have committed an unfair
6-19 method of competition or deceptive act or practice.
6-20 (10) Unfair Settlement Practices. (a) Engaging in any
6-21 of the following unfair settlement practices with respect to a
6-22 claim by an insured or beneficiary:
6-23 (i) misrepresenting to a claimant a
6-24 material fact or policy provision relating to coverage at issue;
6-25 (ii) failing to attempt in good faith to
6-26 effectuate a prompt, fair, and equitable settlement of a claim with
6-27 respect to which the insurer's liability has become reasonably
7-1 clear;
7-2 (iii) failing to attempt, in good faith,
7-3 to effectuate a prompt, fair, and equitable settlement under one
7-4 portion of a policy of a claim with respect to which the insurer's
7-5 liability has become reasonably clear in order to influence the
7-6 claimant to settle an additional claim under another portion of the
7-7 coverage, provided that this prohibition does not apply if payment
7-8 under one portion of the coverage constitutes evidence of liability
7-9 under another portion of the policy;
7-10 (iv) failing to provide promptly to a
7-11 policyholder a reasonable explanation of the basis in the policy,
7-12 in relation to the facts or applicable law, for the insurer's
7-13 denial of a claim or for the offer of a compromise settlement of a
7-14 claim;
7-15 (v) failing within a reasonable time to:
7-16 (A) affirm or deny coverage of a
7-17 claim to a policyholder; or
7-18 (B) submit a reservation of rights
7-19 to a policyholder;
7-20 (vi) refusing, failing, or unreasonably
7-21 delaying an offer of settlement under applicable first-party
7-22 coverage on the basis that other coverage may be available or that
7-23 third parties are responsible for the damages suffered, except as
7-24 may be specifically provided in the policy;
7-25 (vii) undertaking to enforce a full and
7-26 final release of a claim from a policyholder when only a partial
7-27 payment has been made, provided that this prohibition does not
8-1 apply to a compromise settlement of a doubtful or disputed claim;
8-2 (viii) refusing to pay a claim without
8-3 conducting a reasonable investigation with respect to the claim;
8-4 (ix) with respect to a Texas personal auto
8-5 policy, delaying or refusing settlement of a claim solely because
8-6 there is other insurance of a different type available to satisfy
8-7 all or any part of the loss forming the basis of that claim; or
8-8 (x) requiring a claimant, as a condition
8-9 of settling a claim, to produce the claimant's federal income tax
8-10 returns for examination or investigation by the person unless:
8-11 (A) the claimant is ordered to
8-12 produce those tax returns by a court;
8-13 (B) the claim involves a fire loss;
8-14 or
8-15 (C) the claim involves lost profits
8-16 or income.
8-17 (b) Paragraph (a) of this clause does not
8-18 provide a cause of action to a third party asserting one or more
8-19 claims against an insured covered under a liability insurance
8-20 policy.
8-21 (11) Misrepresentation of Insurance Policy.
8-22 Misrepresenting an insurance policy by:
8-23 (a) making an untrue statement of material fact;
8-24 (b) failing to state a material fact that is
8-25 necessary to make other statements made not misleading, considering
8-26 the circumstances under which the statements were made;
8-27 (c) making a statement in such manner as to
9-1 mislead a reasonably prudent person to a false conclusion of a
9-2 material fact;
9-3 (d) making a material misstatement of law; or
9-4 (e) failing to disclose any matter required by
9-5 law to be disclosed, including a failure to make disclosure in
9-6 accordance with another provision of this code.
9-7 SECTION 2. Section 4, Article 21.21, Insurance Code, as
9-8 amended by this Act, applies only to an insurance policy, contract,
9-9 or evidence of coverage delivered, issued for delivery, or renewed
9-10 on or after January 1, 2002. A policy, contract, or evidence of
9-11 coverage delivered, issued for delivery, or renewed before January
9-12 1, 2002, is governed by the law as it existed immediately before
9-13 the effective date of this Act, and that law is continued in effect
9-14 for that purpose.
9-15 SECTION 3. This Act takes effect September 1, 2001.