C.S.H.B. 1662 78(R)    BILL ANALYSIS


C.S.H.B. 1662
By: Castro
Insurance
Committee Report (Substituted)



BACKGROUND AND PURPOSE 

Current law stipulates that the automobile insurer of an at-fault party
must pay the third-party claimant for vehicle damages as well as "loss of
use" of the third-party claimant's vehicle due to an accident.  "Loss of
use" can be interpreted in different ways by automobile insurers.  Some
insurers interpret it to mean transportation only, instead of loss of use
of a comparable vehicle.  Many times, a claimant who owns a large vehicle
will only be offered a smaller vehicle by an insurer.  Some insurers
provide comparable vehicles, but only after third-party claimants make
numerous requests. C.S.H.B. 1662 requires coverage under motor vehicle
liability insurance policies for substitute motor vehicles that are
comparable to the damaged motor vehicles of third-party claimants. 

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly grant any
additional rulemaking authority to a state officer, department, agency, or
institution. 

ANALYSIS

C.S.H.B. 1662 amends the Insurance Code to require an insurer that
delivers or issues for delivery a liability insurance policy on a motor
vehicle to indemnify for reasonable rental costs a third-party claimant
who requests a substitute vehicle comparable to a damaged vehicle, if the
third-party claimant's vehicle sustains damage and is inoperable, unsafe
to drive, or out of service for repairs. The bill requires an insurer to
pay for rental costs beginning on the date on which the vehicle is unable
to be used and ending on the date on which the insurer could reasonably
expect the vehicle to be fully repaired and operable.  The bill requires
an insurer to notify the third-party claimant that, on request, the
insurer will indemnify the claimant  for reasonable rental costs for a
substitute vehicle comparable to the damaged vehicle and that the
indemnification may be reduced based on the percentage of responsibility
of the third-party claimant. 

The bill authorizes an insurer to indemnify a third-party claimant for the
entire cost of a requested substitute vehicle or that percentage of the
cost of  a substitute vehicle that is equal to the insureds percentage of
responsibility for the damage sustained. 

EFFECTIVE DATE

September 1, 2003.

COMPARISON OF ORIGINAL TO SUBSTITUTE

C.S.H.B. 1662 modifies the original by authorizing proportionate
indemnification and providing that a notice to a third-party claimant must
include information regarding proportionate indemnification. The
substitute removes the provision that held an insurer liable for rental
costs if the third-party claimant's motor vehicle is a total loss.  The
substitute provides for indemnification for a comparable substitute
vehicle, rather than a substitute vehicle that is equivalent in size and
quality, and specifies the damage that must be sustained to the vehicle
for indemnification to be authorized.