SRC-AMY, LBB, TJG S.B. 131 78(R) BILL ANALYSIS
Senate Research Center S.B. 131
By: Fraser/Jackson
Business & Commerce
2/26/2003
As Filed
DIGEST AND PURPOSE
Currently, personal automobile policy forms and endorsements are standard
forms promulgated by the commissioner of insurance. Residential property
insurance forms and endorsements are either standard forms promulgated by
the commissioner or forms filed by national insurers or national
organizations of insurers ("national" forms) that are adopted or approved
by the commissioner. It is the position of the Department of Insurance
that other residential property insurers in Texas may use these national
forms that are adopted or approved by the Commissioner upon filing of the
form with the commissioner; however, copyright or organizational
membership issues may limit the use of these national forms by other
insurers. S.B. 131 regulates policy forms and endorsements for personal
automobile and homeowners insurance under a file and use system with a
60-day waiting period. The file and use regulation applies to all
residential property insurers, regardless of size, and to all personal
auto insurers. The insurer is required to file all policy forms and
endorsements with the commissioner prior to use. Unless disapproved, the
form becomes effective 60 days after it is filed with the commissioner.
The bill also addresses plain language requirements, public disclosure
requirements, and disapproval standards and procedures.
RULEMAKING AUTHORITY
Rulemaking authority is expressly granted to the commissioner of insurance
in SECTION 1 (Section 10, Article 5.142, Insurance Code) of this bill.
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Chapter 5, Insurance Code, by adding Article 5.142, as
follows:
Art. 5.142. POLICY FORMS FOR PERSONAL AUTOMOBILE INSURANCE COVERAGE AND
RESIDENTIAL PROPERTY INSURANCE COVERAGE
Sec. 1. SCOPE. Provides that this article governs the regulation of
policy forms and endorsements for personal automobile insurance and
residential property insurance.
Sec. 2. DEFINITIONS. Defines "filer," "form," "insurer," "personal
automobile insurance," and "residential property insurance."
Sec. 3. FORM FILINGS. (a) Requires each insurer to file its forms with
the commissioner of insurance (commissioner). Prohibits the forms from
being delivered or issued for delivery in the state unless the forms have
been filed as provided by this article. Authorizes insurers to continue
to use the standard policy forms and endorsements promulgated under
Articles 5.06 (Policy Forms and Endorsements) and 5.35 (Policy Forms) of
this code on notification to the commissioner in writing that the forms
will continue to be used.
(b) Provides that the new form takes effect, unless disapproved by the
commissioner as provided by Section 7 of this article, on the date
specified by the insurer in the filing, but not earlier than the 60th day
after the date of filing of the form with the commissioner, except as
provided by Subsection (c) of this section. Provides that, for purposes
of this section, the date the form is received by the commissioner is the
date of filing of the form with the commissioner. Requires the previously
filed form that is in effect as provided by this article to remain in
effect from the date of filing the form with the commissioner to the
effective date of the new form.
(c) Authorizes the commissioner to approve a filing on written or
electronic notification to the filer at any time before the 60th day after
the date of filing of the form with the commissioner or before the
effective date specified by the insurer in the filing. Authorizes the new
form to be used on the receipt of the notice of the commissioner's
approval.
(d) Requires each personal automobile insurance policy form to provide the
coverages mandated under Articles 5.06-1 (Uninsured or Under Insured
Motorist Coverage) and 5.06-3 (Personal Injury Protection Coverage) of
this code, except that the coverages are authorized to be rejected by the
named insured as provided by those articles.
(e) Requires all filed forms to comply with state and federal law.
Sec. 4. PLAIN LANGUAGE REQUIREMENT. Prohibits a form from being used if
it is not in plain language. Defines plain language. Provides that this
section does not apply to policy language that is mandated by state or
federal law.
Sec. 5. PERSONAL AUTOMOBILE INSURANCE. Provides that a contract or
agreement not written into the application and personal automobile
insurance policy is void and of no effect and in violation of the
provisions of this article and Subchapter A of this chapter and is
sufficient cause for the revocation of the license of an insurer to write
personal automobile insurance in the state.
Sec. 6. PUBLIC INFORMATION. Provides that each filing and any supporting
information filed under this article is open to public inspection as of
the date of the filing.
Sec. 7. DISAPPROVAL. (a) Authorizes the commissioner to disapprove a
form filed under this article for certain reasons.
(b) Requires the commissioner, upon disapproving a filing before the 60th
day after the date of the filing of the form with the commissioner, to
issue an order specifying in what respects the form fails to meet the
requirements of this article. Provides that the filer is entitled to a
hearing on written request made to the commissioner not later than the
30th day after the effective date of the disapproval order.
(c) Authorizes the commissioner, upon disapproving a form that is in
effect, to issue a disapproval order only after a hearing held after at
least the 20th days' written notice to the insurer that made the filing.
Requires the disapproval order to be issued not later than the 15th day
after the close of the hearing and to specify how the form fails to meet
the requirements of this article. Requires the disapproval order to state
the date on which the further use of the disapproved form is prohibited.
(d) Requires the commissioner's order disapproving a form to state the
grounds for the disapproval in enough detail to reasonably inform the
filer of the grounds.
(e) Prohibits an insurer from using a form in the state after the
commissioner disapproves the form.
Sec. 8. PUBLIC INSURANCE COUNSEL. Authorizes the office of public
insurance counsel, notwithstanding Article 1.35A (Office of Public
Insurance Counsel) of this code, to submit written comments to the
commissioner and otherwise participate regarding individual company
filings made under this article.
Sec. 9. HEARINGS. Provides that subject to Chapter 40 (Duties of State
Office of Administrative Hearings and Commissioner in Certain Proceedings;
Rate Setting Proceedings), of this code, Chapter 2001 (Administrative
Procedure), Government Code, applies to all hearings conducted under this
article. Provides that to the extent that any conflict between this
article and Chapter 2001, Government Code, the provisions of this article
prevail.
Sec. 10. RULEMAKING. Authorizes the commissioner to adopt rules which
are reasonable and necessary to implement this article.
SECTION 2. Amends Article 5.06, Insurance Code, by adding Subsection
(12), to require policy forms and endorsements for personal automobile
insurance in this state, notwithstanding Subsections (1)-(8) of this
article, to be regulated under Article 5.142 of this code. Authorizes an
insurer to continue to use the standard policy forms and endorsements
promulgated under this article that the insurer used immediately before
the effective date of this subsection on notification to the commissioner
in writing that the forms will continue to be used.
SECTION 3. Amends Article 5.35, Insurance Code, by adding Subsection (k),
to require policy forms for residential property insurance in this state,
notwithstanding Subsections (a)-(j) of this article, to be regulated under
Article 5.142 of this code. Makes a conforming change regarding the use
of standard policy forms and endorsements.
SECTION 4. Amends Article 5.01C, Section 4, Insurance Code, by adding
policy forms filed and in effect as provided by Article 5.142 of this code
as a type of policy form an insurer selling short-term insurance policies
is required to use.
SECTION 5. Amends Article 5.06-1, Section (2), Insurance Code, as follows:
(c) Replaces the Texas Department of Insurance (TDI) with the commissioner
regarding who defines "uninsured motor vehicle." Authorizes the
commissioner to allow the term "uninsured motor vehicle" to be defined to
exclude certain motor vehicles the operators of which are in fact
uninsured in the policy forms filed under Article 5.142 of this code.
(d) Makes conforming changes.
SECTION 6. Amends Article 5.06-6, Insurance Code, by replacing State
Board of Insurance (board) with commissioner referring to the adoption and
approval of policies under Article 5.06 of this code. Makes a conforming
change.
SECTION 7. Amends Article 5.25-2, Insurance Code, by replacing board with
department (TDI) regarding the distributions of lists in the section.
Makes conforming and nonsubstantive changes.
SECTION 8. Amends Article 5.35-1, Insurance Code, by making a conforming
change.
SECTION 9. Amends Article 5.36, Insurance Code, by making a conforming
change.
SECTION 10. Amends Article 5.50, Insurance Code, by requiring Article
5.142 of this code to apply to other purely mutual or to other purely
profit sharing fire insurance companies incorporated or unincorporated
under the laws of this state and carried on by the members thereof solely
for the protection of their property and not for profit.
SECTION 11. Amends Article 21.77, Section 8, Insurance Code, by making
conforming changes.
SECTION 12. Amends Section 912.152, Insurance Code, by making conforming
and nonsubstantive changes. Deletes existing text regarding the
commissioner's authority to adopt different uniform policy forms for use
by county mutual insurance companies.
SECTION 13. Amends Section 941.003(b), Insurance Code, by making a
conforming change.
SECTION 14. Amends Section 942.003(b), Insurance Code, by making a
conforming change.
SECTION 15. Amends Section 502.153(d), Transportation Code, by making a
conforming change.
SECTION 16. Amends Section 521.143(c), Transportation Code, by making a
conforming change.
SECTION 17. Requires the commissioner to adopt rules necessary to
implement Article 5.142, Insurance Code, as added by this Act, not later
than the 120th day after the effective date of this Act.
SECTION 18. Makes application of this Act prospective.
SECTION 19. Effective date: June 1, 2003, or September 1, 2003.