By: Bernsen S.B. No. 1653
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to prohibition of disclosure of defense counsel's fee
1-3 statements by liability insurers; providing a civil penalty.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Subtitle B, Title 2, Insurance Code, is amended
1-6 by adding Chapter 103 to read as follows:
1-7 CHAPTER 103. DISCLOSURE OF FEE STATEMENTS
1-8 Sec. 103.001. DEFINITION. In this chapter, "insurer" means
1-9 a partnership, corporation, association, or other group, however
1-10 organized, that issues any form of liability insurance, whether
1-11 primary insurance coverage, excess insurance coverage, or umbrella
1-12 insurance coverage. The term includes a Lloyd's plan, a reciprocal
1-13 or interinsurance exchange, a county mutual insurance company, or a
1-14 farm mutual insurance company.
1-15 Sec. 103.002. APPLICABILITY. This chapter applies only to
1-16 an insurer that issues a liability insurance policy:
1-17 (1) to or covering any resident of this state;
1-18 (2) covering liability incurred by an insured in this
1-19 state; or
1-20 (3) under which the insurer provides a defense to an
1-21 insured in a claim or action pending in this state.
1-22 Sec. 103.003. DISCLOSURE PROHIBITED; EXCEPTION. (a) Except
1-23 as provided by Subsection (c), an insurer may not disclose defense
1-24 counsel fee statements regarding services provided for an insured
1-25 to any person, other than the insured, who is not an employee of
2-1 the insurer.
2-2 (b) An insurer may not require defense counsel to disclose
2-3 the defense counsel's fee statements to any person who is not an
2-4 employee of the insurer.
2-5 (c) To the extent, if any, otherwise permitted by law, an
2-6 insurer may disclose defense counsel's fee statements to a person
2-7 who is not an employee of the insurer for the purpose of reviewing
2-8 the fee statements in connection with a lawsuit over payment of the
2-9 fees. Disclosure under this subsection does not, in itself, waive
2-10 any attorney-client privilege.
2-11 Sec. 103.004. CONTRACT PROVISIONS VOID; WAIVER PROHIBITED.
2-12 (a) A provision in a contract entered into between an insurer and
2-13 defense counsel or between an insurer and an insured that requires
2-14 or permits disclosure of the defense counsel's fee statements to a
2-15 person who is not an employee of the insurer is against public
2-16 policy and is void and unenforceable.
2-17 (b) A waiver by an insured of the requirements of Section
2-18 103.003(a) or (b) is against public policy and is void and
2-19 unenforceable.
2-20 Sec. 103.005. DAMAGES; INJUNCTIVE RELIEF. (a) An insured
2-21 may bring an action against an insurer to:
2-22 (1) recover any actual damages proximately suffered by
2-23 the insured because of a violation of Section 103.003(a) or (b);
2-24 and
2-25 (2) obtain injunctive relief to prevent the threatened
2-26 or continued violation of Section 103.003(a) or (b).
3-1 (b) A court shall award reasonable and necessary attorney's
3-2 fees to a person who recovers damages or obtains injunctive relief
3-3 under this section.
3-4 Sec. 103.006. CIVIL PENALTY. (a) An insurer who violates
3-5 Section 103.003(a) or (b) is liable for a civil penalty. A civil
3-6 penalty assessed under this section may not exceed:
3-7 (1) $5,000 for the first or second act of violation;
3-8 or
3-9 (2) $10,000 for the third and each subsequent act of
3-10 violation.
3-11 (b) At the commissioner's request, the attorney general
3-12 shall file and prosecute a civil action in a district court in
3-13 Travis County to recover a civil penalty under this section.
3-14 SECTION 2. This Act applies only to a disclosure that occurs
3-15 on or after the effective date of this Act. A disclosure that
3-16 occurred before that date is governed by the law as it existed
3-17 immediately before the effective date of this Act, and that law is
3-18 continued in effect for that purpose.
3-19 SECTION 3. This Act takes effect September 1, 2001.