1-1     By:  Bernsen                                          S.B. No. 1653
 1-2           (In the Senate - Filed March 9, 2001; March 14, 2001, read
 1-3     first time and referred to Committee on Business and Commerce;
 1-4     April 24, 2001, reported favorably by the following vote:  Yeas 4,
 1-5     Nays 0; April 24, 2001, sent to printer.)
 1-6                            A BILL TO BE ENTITLED
 1-7                                   AN ACT
 1-8     relating to prohibition of disclosure of defense counsel's fee
 1-9     statements by liability insurers; providing a civil penalty.
1-10           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-11           SECTION 1.  Subtitle B, Title 2, Insurance Code, is amended
1-12     by adding Chapter 103 to read as follows:
1-13                 CHAPTER 103.  DISCLOSURE OF FEE STATEMENTS
1-14           Sec. 103.001.  DEFINITION.  In this chapter, "insurer" means
1-15     a partnership, corporation, association, or other group, however
1-16     organized, admitted to do business and authorized to write
1-17     liability insurance in this state, whether primary insurance
1-18     coverage, excess insurance coverage, or umbrella insurance
1-19     coverage.  The term includes a Lloyd's plan insurer, reciprocal or
1-20     interinsurance exchange, county mutual insurance company, or farm
1-21     mutual insurance company.
1-22           Sec. 103.002.  APPLICABILITY.  This chapter applies only to
1-23     an insurer that issues a liability insurance policy:
1-24                 (1)  to or covering any resident of this state;
1-25                 (2)  covering liability incurred by an insured in this
1-26     state; or
1-27                 (3)  under which the insurer provides a defense to an
1-28     insured in a claim or action pending in this state.
1-29           Sec. 103.003.  DISCLOSURE PROHIBITED; EXCEPTION.  (a)  Except
1-30     as provided by Subsection (c), an insurer may not disclose defense
1-31     counsel fee statements regarding services provided for an insured
1-32     to any person, other than the insured, who is not an employee of
1-33     the insurer.
1-34           (b)  An insurer may not require defense counsel to disclose
1-35     the defense counsel's fee statements to any person who is not an
1-36     employee of the insurer.
1-37           (c)  To the extent, if any, otherwise permitted by law, an
1-38     insurer may disclose defense counsel's fee statements to a person
1-39     who is not an employee of the insurer for the purpose of reviewing
1-40     the fee statements in connection with a lawsuit over payment of the
1-41     fees.  Disclosure under this subsection does not, in itself, waive
1-42     any attorney-client privilege.
1-43           Sec. 103.004.  CONTRACT PROVISIONS VOID; WAIVER PROHIBITED.
1-44     (a)  A provision in a contract entered into between an insurer and
1-45     defense counsel or between an insurer and an insured that requires
1-46     or permits disclosure of the defense counsel's fee statements to a
1-47     person who is not an employee of the insurer is against public
1-48     policy and is void and unenforceable.
1-49           (b)  A waiver by an insured of the requirements of Section
1-50     103.003(a) or (b) is against public policy and is void and
1-51     unenforceable.
1-52           Sec. 103.005.  DAMAGES; INJUNCTIVE RELIEF.  (a)  A person may
1-53     bring an action against an insurer to:
1-54                 (1)  recover any actual damages proximately suffered by
1-55     an insured because of a violation of Section 103.003(a) or (b); and
1-56                 (2)  obtain injunctive relief to prevent the threatened
1-57     or continued violation of Section 103.003(a) or (b).
1-58           (b)  A court shall award reasonable and necessary attorney's
1-59     fees to a person who recovers damages or obtains injunctive relief
1-60     under this section.
1-61           Sec. 103.006.  CIVIL PENALTY.  An insurer who violates
1-62     Section 103.003(a) or (b) is liable for a civil penalty not to
1-63     exceed  $10,000 for each act of violation.  At the commissioner's
1-64     request, the attorney general shall institute an action in a
 2-1     district court in Travis County to recover a civil penalty under
 2-2     this section.
 2-3           SECTION 2.  This Act applies only to a disclosure that occurs
 2-4     on or after the effective date of this Act.  A disclosure that
 2-5     occurred before that date is governed by the law as it existed
 2-6     immediately before the effective date of this Act, and that law is
 2-7     continued in effect for that purpose.
 2-8           SECTION 3.  This Act takes effect September 1, 2001.
 2-9                                  * * * * *