78R1587 DLF/PB-D
By: Burnam H.B. No. 113
A BILL TO BE ENTITLED
AN ACT
relating to the regulation and reform of certain consumer lines of
property and casualty insurance; providing a penalty.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
ARTICLE 1. APPLICATION OF BENCHMARK PROGRAM TO CERTAIN INSURERS
SECTION 1.01. Section 1, Article 5.101, Insurance Code, is
amended by adding Subsection (d) to read as follows:
(d) This article applies to the rates for insurance
described by this section that is written by any insurer engaged in
business in this state, including a county mutual insurance
company, a farm mutual insurance company, a Lloyd's plan, and a
reciprocal or interinsurance exchange.
SECTION 1.02. Section 912.002(a), Insurance Code, is
amended to read as follows:
(a) A county mutual insurance company is exempt from the
operation of all insurance laws of this state, [including the
flexible rating program under Article 5.101,] except laws that are
made applicable by their specific terms or except as specifically
provided by this chapter.
SECTION 1.03. The following laws are repealed:
(1) Section 941.003(c), Insurance Code; and
(2) Section 942.003(c), Insurance Code.
ARTICLE 2. WITHDRAWAL OF INSURERS FROM MARKET
SECTION 2.01. Subsections (a)(1) and (3), Article 21.49-2C,
Insurance Code, are amended to read as follows:
(1) An [authorized] insurer shall file with the
commissioner a plan for orderly withdrawal if the insurer proposes
to withdraw from writing a line of insurance in this state or to
reduce its total annual premium volume by 75 percent or more or
proposes, in a personal line of motor vehicle comprehensive or
residential property insurance, to reduce its total annual premium
volume in a rating territory by 50 percent or more. The insurer's
plan shall be constructed to protect the interests of the people of
this state and shall indicate the date it intends to begin and
complete its withdrawal plan and must contain provisions for:
(A) meeting the insurer's contractual
obligations;
(B) providing service to its Texas policyholders
and claimants; and
(C) meeting any applicable statutory
obligations, such as the payment of assessments to the guaranty
fund and participation in any assigned risk plans or joint
underwriting arrangements.
(3) In this article:
(A) "Insurer" means any insurer authorized to
engage in business in this state, including a county mutual
insurance company, farm mutual insurance company, Lloyd's plan, or
reciprocal or interinsurance exchange.
(B) "Rating territory" means a rating territory
established by the department [Texas Department of Insurance].
ARTICLE 3. RESIDENTIAL PROPERTY INSURANCE PLAN
SECTION 3.01. Subchapter F, Chapter 21, Insurance Code, is
amended by adding Article 21.82 to read as follows:
Art. 21.82. TEXAS RESIDENTIAL PROPERTY INSURANCE PLAN
Sec. 1. DEFINITIONS. In this article:
(1) "Association" means the Texas Residential
Property Insurance Plan Association established under this
article.
(2) "Board" means the governing board of the
association.
(3) "Insurer" means an insurer authorized to write
residential property insurance under Chapter 5 of this code,
including a county mutual insurance company, farm mutual insurance
company, Lloyd's plan, or reciprocal or interinsurance exchange.
(4) "Plan of operation" means the plan of operation
adopted under Section 4 of this article.
(5) "Residential property insurance" means homeowners
or residential fire and allied lines insurance.
Sec. 2. TEXAS RESIDENTIAL PROPERTY INSURANCE PLAN
ASSOCIATION. The Texas Residential Property Insurance Plan
Association is a nonprofit corporate body composed of all insurers.
Each insurer is a member of the association and remains a member of
the association as long as the association is in existence as a
condition of the insurer's authority to write residential property
insurance in this state.
Sec. 3. ADMINISTRATION OF ASSOCIATION; GOVERNING
BOARD. (a) The association has the powers granted to a nonprofit
corporation under the Texas Non-Profit Corporation Act (Article
1396-1.01 et seq., Vernon's Texas Civil Statutes).
(b) The association is administered by a governing board
composed of 15 members as follows:
(1) eight members who represent the interests of
member insurers, selected in accordance with the plan of operation;
(2) two members who are general property and casualty
agents, selected in accordance with the plan of operation; and
(3) five public members nominated by the office of
public insurance counsel and selected by the commissioner.
(c) To be eligible to serve on the board as a representative
of insurers, a person must be a full-time employee of an insurer.
(d) A person may not serve on the board as a public member if
that person, an individual related to that person within the second
degree by consanguinity or affinity, or an individual residing in
the same household with that person is:
(1) required to be authorized, registered, or licensed
under this code;
(2) employed by or acts as a consultant to a person
required to be authorized, registered, or licensed under this code;
(3) the owner of, has a financial interest in, or
participates in the management of an organization required to be
authorized, registered, or licensed under this code;
(4) an officer, employer, or consultant of a trade
association in the field of insurance; or
(5) required to register as a lobbyist under Chapter
305, Government Code.
Sec. 4. PLAN OF OPERATION. (a) The board shall administer
the association in accordance with the plan of operation.
(b) The plan of operation must provide for the efficient,
economical, fair, and nondiscriminatory administration of the
association.
(c) Subject to the approval of the commissioner, the board
may adopt and amend the plan of operation.
(d) If the commissioner at any time believes that any part
of the plan of operation is not consistent with the purposes of this
article, the commissioner shall notify the board in writing so that
the board may take corrective action.
Sec. 5. ASSESSMENTS. (a) The association may assess the
member insurers to provide funds for the operation of the
association.
(b) An assessment made on an insurer must be in proportion
to that insurer's writings of residential property insurance in
this state.
(c) If an insurer does not pay an assessment within a
reasonable time, the association may bring an action to collect the
assessment. In addition, the association may report to the
commissioner the failure to pay, and the commissioner may institute
a disciplinary action under Chapter 82 of this code.
Sec. 6. INCENTIVE PROGRAMS. (a) The plan of operation
must include incentive programs to encourage member insurers to
write residential property insurance on a voluntary basis and to
minimize the use of the association as a means to obtain insurance.
(b) One of the incentive programs must target underserved
geographic areas, which shall be determined and designated by the
commissioner by rule. In determining which areas will be
designated as underserved, the commissioner shall consider the
availability of insurance, the number of persons insured through
the association, and any other relevant factor.
(c) An incentive program is effective on approval of the
commissioner.
Sec. 7. LIMITED ASSIGNMENT DISTRIBUTION PLAN. (a) The
plan of operation must include a voluntary, competitive limited
assignment distribution plan that allows members to contract
directly with a servicing carrier to accept assignments to that
carrier by the association.
(b) A servicing carrier must be an insurer authorized to
write residential property insurance in this state. An insurer is
qualified if the insurer has written residential property insurance
in this state for at least five years or is currently engaged as a
servicing carrier for assigned risk insurance business in at least
one other state.
(c) After notice and hearing, the commissioner may prohibit
an insurer from acting as a servicing carrier.
(d) The terms of the contract between the servicing carrier
and the insurer, including the buy-out fee, shall be determined by
negotiation between the parties.
(e) The board may adopt reasonable rules for the conduct of
business under the contract and may establish reasonable standards
of eligibility for servicing carriers.
Sec. 8. ASSIGNMENT OF INSURANCE THROUGH ASSOCIATION. (a)
The association shall provide a means by which an applicant for
insurance coverage may obtain residential property insurance
through assignment of that insurance to a member insurer.
(b) An applicant is not eligible for residential property
insurance through the association unless the applicant and the
servicing agent certify to the association as part of the
application that the applicant has been rejected for insurance by
at least two insurers authorized to engage in the business of
insurance in this state and actually writing residential property
insurance in this state.
Sec. 9. POLICY FORMS. Residential property insurance made
available through the association shall be written on policy forms
and endorsements adopted or approved under Article 5.35 of this
code, in accordance with the plan of operation.
Sec. 10. RATES; HEARING. (a) Rates to be charged for
residential property insurance provided through the association
shall be established in accordance with this section.
(b) The rates must be just, reasonable, adequate, not
excessive, not confiscatory, and not unfairly discriminatory for
the risks to which the rates apply. Rates shall be set in an amount
sufficient to carry all claims to maturity and to meet the expenses
incurred in the writing and servicing of the business. In making a
determination, the commissioner shall consider the reports of
aggregated premiums earned and losses and expenses incurred in the
writing of residential property insurance through the association
collected under the statistical plans required under Subsection (c)
of this section.
(c) The commissioner shall adopt statistical plans to be
used by each insurer to record and report:
(1) premium, loss, and expense experience, reported
separately for business assigned to the insurer; and
(2) other information required by the commissioner.
(d) The association shall file annually with the
department, for approval by the commissioner, the rates to be
charged for residential property insurance provided through the
association. The association may not make the filing more than once
in any 12-month period. Subchapter B, Chapter 40, of this code does
not apply to:
(1) a filing made under this subsection;
(2) Subsections (e)-(i) of this section; or
(3) a department action with respect to a filing made
under this subsection.
(e) Before approving, disapproving, or modifying a filing
made under Subsection (d) of this section, the commissioner shall
provide all interested persons a reasonable opportunity to:
(1) review the filing;
(2) obtain copies of the filing on payment of any
legally required copying cost; and
(3) submit to the commissioner written comments,
analyses, or information related to the filing.
(f) Not later than the 45th day after the date on which the
department receives the filing required under Subsection (d) of
this section, the commissioner shall schedule a hearing at which
interested persons may present written or oral comments relating to
the filing. A hearing under this subsection is not a contested case
hearing under Chapter 2001, Government Code. The association, the
office of public insurance counsel, and any other interested person
or entity that has submitted proposed changes or actuarial analyses
may ask questions of any person testifying at the hearing.
(g) The department shall file with the Texas Register notice
that a filing has been made under Subsection (d) of this section not
later than the seventh day after the date the filing is received by
the department. The notice must include information relating to:
(1) the availability of the filing for public
inspection at the department during regular business hours and the
procedures for obtaining copies of the filing;
(2) procedures for making written comments related to
the filing; and
(3) the time, place, and date of the hearing scheduled
under Subsection (f) of this section.
(h) After the conclusion of the hearing, the commissioner
shall approve, disapprove, or modify the filing in writing. If the
commissioner disapproves a filing, the commissioner shall state in
writing the reasons for the disapproval and the criteria to be met
by the association to obtain approval. The association may file
with the commissioner, not later than the 10th day after the date on
which the association receives the commissioner's written
disapproval, an amended filing to comply with the commissioner's
comments.
(i) Before approving or disapproving an amended filing, the
commissioner:
(1) shall provide all interested persons a reasonable
opportunity to review the amended filing, obtain copies of the
amended filing on payment of any legally required copying cost, and
submit to the commissioner written comments, analyses, or
information related to the amended filing in the manner provided by
Subsection (e) of this section; and
(2) may hold a hearing not later than the 20th day
after the date on which the department receives the amended filing
in the manner provided by Subsection (f) of this section.
(j) Not later than the 10th day after the date on which the
hearing under Subsection (i) on the amended filing is concluded,
the commissioner shall approve or disapprove the amended filing.
If, not later than the 30th day after the date on which the amended
filing is received by the department the commissioner has not
disapproved the amended filing, the amended filing is considered
approved. The requirements adopted under Subsections (g) and (h)
of this section apply to a hearing conducted under Subsection (i).
(k) A person aggrieved by a decision of the commissioner
under this section may, not later than the 30th day after the date
of the commissioner's decision, appeal the decision. An appeal of a
commissioner's decision under this section must be made in
accordance with Subchapter D, Chapter 36, of this code.
Sec. 11. IMMUNITY FROM LIABILITY. (a) The association, a
member of the board, and any employee of the association is not
personally liable for any act performed in good faith within the
scope of the person's authority as determined under this article or
the plan of operation or for damages occasioned by the person's
official acts or omissions except for an act or omission that is
corrupt or malicious. The association shall provide counsel to
defend any action brought against a member of the board or an
employee by reason of the person's official act or omission whether
or not at the time of the institution of the action the defendant
has terminated service with the association.
(b) This section is cumulative with and does not affect or
modify any common law or statutory privilege or immunity.
SECTION 3.02. Subchapter F, Chapter 21, Insurance Code, is
amended by amending the subchapter heading to read as follows:
SUBCHAPTER F. CERTAIN INSURANCE PLANS [JUDICIAL REVIEW]
SECTION 3.03. (a) Not later than November 1, 2003, the
commissioner of insurance shall appoint an initial governing board
for the Texas Residential Property Insurance Plan Association
composed of:
(1) eight members who represent the interests of
insurers, as that term is defined by Article 21.82, Insurance Code,
as added by this article, and appointed in accordance with Section
3(c), Article 21.82, Insurance Code, as added by this article;
(2) two members who are general property and casualty
agents; and
(3) five public members nominated by the Office of
Public Insurance Counsel.
(b) Not later than March 1, 2004, the initial governing
board shall submit a proposed plan of operation to the commissioner
of insurance for approval in accordance with Article 21.82,
Insurance Code, as added by this article.
(c) The Texas Residential Property Insurance Plan
Association shall make residential property insurance available in
accordance with Article 21.82, Insurance Code, as added by this
article, beginning not later than September 1, 2004.
(d) The terms of the initial governing board appointed under
this section expire February 1, 2005.
ARTICLE 4. TRAINING FOR INSURANCE ADJUSTERS
SECTION 4.01. Chapter 407, Acts of the 63rd Legislature,
Regular Session, 1973 (Article 21.07-4, Vernon's Texas Insurance
Code), is amended by adding Section 7B to read as follows:
Sec. 7B. SPECIALIZED TRAINING REGARDING WATER AND MOLD
CLAIMS; CERTIFICATE. (a) The commissioner, by rule, shall
prescribe a specialized training program for adjusters who handle
claims involving water or mold damage. The training program must
include training on how to prevent or reduce mold damage in
water-related claims. The training program may be offered in
conjunction with a continuing education program conducted under
Section 7A of this Act.
(b) An adjuster may not handle a claim involving water or
mold damage unless the adjuster has successfully completed the
specialized training program prescribed by the commissioner in the
adjustment of those claims.
(c) The department shall issue a certificate of completion
to each adjuster who satisfies the requirements of this section. A
certificate issued under this section is valid until the first
anniversary of the date of issuance and may be renewed in the manner
prescribed by the department. The department shall collect from
each applicant for a certificate a certification fee set by the
department in an amount reasonable and necessary to cover the costs
of administering this section.
(d) An adjuster who violates Subsection (b) of this section
is subject to disciplinary action under Section 17 of this Act.
SECTION 4.02. (a) Not later than November 1, 2003, the
commissioner of insurance shall adopt rules as required by Section
7B, Chapter 407, Acts of the 63rd Legislature, Regular Session,
1973 (Article 21.07-4, Vernon's Texas Insurance Code), as added by
this article.
(b) A person licensed as an insurance adjuster by the Texas
Department of Insurance on September 1, 2003, is not required to
comply with the requirements of Section 7B, Chapter 407, Acts of the
63rd Legislature, Regular Session, 1973 (Article 21.07-4, Vernon's
Texas Insurance Code), as added by this article, and the rules
adopted under that section until March 1, 2004.
SECTION 4.03. Section 7B, Chapter 407, Acts of the 63rd
Legislature, Regular Session, 1973 (Article 21.07–4, Vernon's Texas
Insurance Code), as added by this article, applies only to an
insurance claim filed with an insurer on or after March 1, 2004.
ARTICLE 5. TRANSITION; EFFECTIVE DATE
SECTION 5.01. This Act applies only to an insurance policy
that is delivered, issued for delivery, or renewed on or after
January 1, 2004. A policy that is delivered, issued for delivery,
or renewed before January 1, 2004, is governed by the law as it
existed immediately before the effective date of this Act, and that
law is continued in effect for that purpose.
SECTION 5.02. (a) Except as provided by Subsection (b) of
this section, this Act takes effect September 1, 2003.
(b) Article 2 of this Act takes effect immediately if this
Act receives a vote of two-thirds of all the members elected to each
house, as provided by Section 39, Article III, Texas Constitution.
If this Act does not receive the vote necessary for immediate
effect, Article 2 of this Act takes effect September 1, 2003.