2003S0023-3 11/18/02


By:  Smithee                                                      H.B. No. 746


A BILL TO BE ENTITLED
AN ACT
relating to policy forms and endorsements for personal automobile and residential property insurance. BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: SECTION 1. Chapter 5, Insurance Code, is amended by adding Article 5.142 to read as follows: Art. 5.142. POLICY FORMS FOR PERSONAL AUTOMOBILE INSURANCE COVERAGE AND RESIDENTIAL PROPERTY INSURANCE COVERAGE Sec. 1. SCOPE. This article governs the regulation of policy forms and endorsements for personal automobile insurance and residential property insurance. Sec. 2. DEFINITIONS. In this article: (1) "Filer" means an insurer that files forms or any other information required to be filed under this article. (2) "Form" means any insurance policy form or endorsement form used in writing personal automobile insurance or residential property insurance in the state. (3) "Insurer" means an insurance company, reciprocal or interinsurance exchange, mutual, capital stock company, fraternal benefit society, local mutual aid association, county mutual insurance company, association, Lloyd's plan company, or other entity writing personal automobile insurance or residential property insurance in the state. The term includes an affiliate, as described by Section 823.003(a) of this code. The term does not include the Texas Windstorm Insurance Association created and operated under Article 21.49 of this code. (4) "Personal automobile insurance" means an automobile insurance policy providing insurance coverages for the ownership, maintenance, or use of private passenger, utility, and miscellaneous type motor vehicles and trailers including mobile homes and recreational trailers, and not primarily used for the delivery of goods, materials, or services, unless such use is in farm or ranch operations, and provided that such vehicles are owned or leased by an individual or individuals. (5) "Residential property insurance" means insurance against loss to real or tangible personal property at a fixed location provided in a homeowners policy, a tenant policy, a condominium owners policy, or a residential fire and allied lines policy. Sec. 3. FORM FILINGS. (a) Each insurer shall file its forms with the commissioner. The forms may not be delivered or issued for delivery in the state unless the forms have been filed as provided by this article. Insurers may continue to use the standard policy forms and endorsements promulgated under Articles 5.06 and 5.35 of this code on notification to the commissioner in writing that the forms will continue to be used. (b) Unless disapproved by the commissioner as provided by Section 7 of this article, the new form takes effect 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. For the purposes of this section, the date the form is received by the commissioner is the date of filing of the form with the commissioner. From the date of filing of the form with the commissioner to the effective date of the new form, the insurer's previously filed form that is in effect as provided by this article shall remain in effect. (c) The commissioner may 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. The new form may be used on the receipt of the notice of the commissioner's approval. (d) Each personal automobile insurance policy form must provide the coverages mandated under Articles 5.06-1 and 5.06-3 of this code, except that the coverages may be rejected by the named insured as provided by those articles. (e) All filed forms must comply with state and federal law. Sec. 4. PLAIN LANGUAGE REQUIREMENT. A form may not be used if it is not in plain language. For the purposes of this section, a form is written in plain language if it achieves the minimum score established by the commissioner on the Flesch reading ease test or an equivalent test selected by the commissioner or, at the option of the commissioner, if it conforms to the language requirements in a National Association of Insurance Commissioners model act relating to plain language. This section does not apply to policy language that is mandated by state or federal law. Sec. 5. PERSONAL AUTOMOBILE INSURANCE. 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. 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) The commissioner may disapprove a form filed under this article if the form: (1) violates or does not comply with this code, or any valid rule duly adopted by the commissioner, or is otherwise contrary to law; or (2) contains provisions or has any titles or headings which are unjust, encourage misrepresentation, are deceptive, or violate public policy. (b) If the commissioner disapproves a filing before the 60th day after the date of the filing of the form with the commissioner, the commissioner shall issue an order specifying in what respects the form fails to meet the requirements of this article. 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) If the commissioner disapproves a form that is in effect, the commissioner may issue a disapproval order only after a hearing held after at least 20 days' written notice to the insurer that made the filing. The disapproval order must be issued not later than the 15th day after the close of the hearing and must specify how the form fails to meet the requirements of this article. The disapproval order must state the date on which the further use of the disapproved form is prohibited. (d) A commissioner's order disapproving a form must state the grounds for the disapproval in enough detail to reasonably inform the filer of the grounds. (e) An insurer may not use a form in the state after disapproval of the form by the commissioner. Sec. 8. PUBLIC INSURANCE COUNSEL. Notwithstanding Article 1.35A of this code, the office of public insurance counsel may submit written comments to the commissioner and otherwise participate regarding individual company filings made under this article. Sec. 9. HEARINGS. Subject to Chapter 40 of this code, Chapter 2001, Government Code, applies to all hearings conducted under this article. To the extent of any conflict between this article and Chapter 2001, Government Code, the provisions of this article prevail. Sec. 10. RULEMAKING. The commissioner may adopt reasonable and necessary rules to implement this article. SECTION 2. Article 5.06, Insurance Code, is amended by adding Subsection (12) to read as follows: (12) Notwithstanding Subsections (1)-(8) of this article, policy forms and endorsements for personal automobile insurance in this state shall be regulated under Article 5.142 of this code. An insurer may 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. Article 5.35, Insurance Code, is amended by adding Subsection (k) to read as follows: (k) Notwithstanding Subsections (a)-(j) of this article, policy forms for residential property insurance in this state shall be regulated under Article 5.142 of this code. An insurer may 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 4. Section 4, Article 5.01C, Insurance Code, is amended to read as follows: Sec. 4. FORMS. An insurer selling short-term liability insurance policies under this article must use the policy forms adopted by the commissioner under Article 5.06 of this code or filed and in effect as provided by Article 5.142 of this code unless the insurer is exempt from using those forms. SECTION 5. Section (2), Article 5.06-1, Insurance Code, is amended to read as follows: (2) For the purpose of these coverages: (a) the term "uninsured motor vehicle" shall, subject to the terms and conditions of such coverage, be deemed to include an insured motor vehicle where the liability insurer thereof is unable to make payment with respect to the legal liability of its insured within the limits specified therein because of insolvency. (b) The term "underinsured motor vehicle" means an insured motor vehicle on which there is valid and collectible liability insurance coverage with limits of liability for the owner or operator which were originally lower than, or have been reduced by payment of claims arising from the same accident to, an amount less than the limit of liability stated in the underinsured coverage of the insured's policy. (c) The commissioner [Board] may, in the policy forms adopted under Article 5.06 of this code, define "uninsured motor vehicle" to exclude certain motor vehicles whose operators are in fact uninsured. The commissioner may in the policy forms filed under Article 5.142 of this code allow the term "uninsured motor vehicle" to be defined to exclude certain motor vehicles whose operators are in fact uninsured. (d) The portion of a policy form adopted under Article 5.06 of this code or filed under Article 5.142 of this code to provide coverage under this article shall include provisions that, regardless of the number of persons insured, policies or bonds applicable, vehicles involved, or claims made, the total aggregate limit of liability to any one person who sustains bodily injury or property damage as the result of any one occurrence shall not exceed the limit of liability for these coverages as stated in the policy and the total aggregate limit of liability to all claimants, if more than one, shall not exceed the total limit of liability per occurrence as stated in the policy; and shall provide for the exclusion of the recovery of damages for bodily injury or property damage or both resulting from the intentional acts of the insured. The portion of a policy form adopted under Article 5.06 of this code or filed under Article 5.142 of this code to provide coverage under this article shall require that in order for the insured to recover under the uninsured motorist coverages where the owner or operator of any motor vehicle which causes bodily injury or property damage to the insured is unknown, actual physical contact must have occurred between the motor vehicle owned or operated by such unknown person and the person or property of the insured. SECTION 6. Article 5.06-6, Insurance Code, is amended to read as follows: Art. 5.06-6. COVERAGES FOR SPOUSES AND FORMER SPOUSES. A personal automobile policy or any similar policy form adopted or approved by the commissioner [State Board of Insurance] under Article 5.06 of this code or filed under Article 5.142 of this code that covers liability arising out of ownership, maintenance, or use of a motor vehicle of a spouse, who is otherwise insured by the policy, shall contain a provision to continue coverage for the spouse during a period of separation in contemplation of divorce. SECTION 7. Article 5.25-2, Insurance Code, is amended to read as follows: Art. 5.25-2. CITY FIRE LOSS LISTS Sec. 1. In this article, [(1)] "list" means the list of fire and lightning losses in excess of $100 paid under policy forms adopted or approved by the commissioner [board] under Article 5.35 of this code or filed and in effect as provided by Article 5.142 of this code [subchapter] in a particular city or town prepared by the department [State Board of Insurance] for distribution to the city or town[; [(2) "board" means the State Board of Insurance]. Sec. 2. (a) The department [board] shall compile for each city or town in Texas a list of the insured fire losses paid under policy forms adopted or approved by the commissioner [board] under Article 5.35 of this code or filed and in effect as provided by Article 5.142 of this code [subchapter] in that city or town for the preceding statistical year. (b) The list shall include: (1) the names of persons recovering losses under policy forms adopted or approved by the commissioner [board] under Article 5.35 of this code or filed and in effect as provided by Article 5.142 of this code [subchapter]; (2) the addresses or locations where the losses occurred; and (3) the amount paid by the insurance company on each loss. (c) The department [board] shall obtain the information to make the lists from insurance company reports of individual losses during the statistical year. Sec. 3. Upon the request of any city or town, or its duly authorized agent or fire marshall, the department [board] shall provide that city and town with a copy of the list for its particular area. Sec. 4. Each city or town shall investigate its list to determine the losses actually occurring in its limits and shall make a report to the department [board] which report shall include: (1) a list of the losses that actually occurred in the limits of the city or town; (2) a list of any losses not occurring in the limits of the city or town; and (3) other evidence essential to establishing the losses in the city or town. Sec. 5. The department [board] shall make such changes or corrections as to it shall seem appropriate in order to correct the list of insured fire and lightning losses paid under policy forms adopted or approved by the commissioner [board] under Article 5.35 of this code or filed and in effect as provided by Article 5.142 of this code [subchapter] in a particular city or town and said list of losses, as changed or corrected, shall be used to determine the fire record credit or debit for each particular city or town for the next year. Sec. 6. The commissioner [board] shall set and collect a charge for compiling and providing a list of fire and lightning losses paid under policy forms adopted or approved by the commissioner [board] under Article 5.35 of this code or filed and in effect as provided by Article 5.142 of this code [subchapter] in a particular city or town and as the commissioner [board] shall deem appropriate to administer the fire record system. Sec. 7. The department [board] is authorized to require each and every city or town in the State of Texas and each and every insurance company or carrier of every type and character whatsoever doing business in the State of Texas to furnish to it a complete and accurate list of all fire and lightning losses occurring within the State of Texas and reflected in their records for the purpose of accumulating statistical information for the control and prevention of fires. Sec. 8. The department [board] may, at its discretion, furnish such list only during such time as the fire record system remains in force and effect. SECTION 8. Article 5.35-1, Insurance Code, is amended to read as follows: Art. 5.35-1. COVERAGES FOR SPOUSES AND FORMER SPOUSES. A homeowner's policy or fire policy promulgated under Article 5.35 of this code or filed and in effect as provided by Article 5.142 of this code may not be delivered, issued for delivery, or renewed in this state unless the policy contains the following language: "It is understood and agreed that this policy, subject to all other terms and conditions contained in this policy, when covering residential community property, as defined by state law, shall remain in full force and effect as to the interest of each spouse covered, irrespective of divorce or change of ownership between the spouses unless excluded by endorsement attached to this policy until the expiration of the policy or until canceled in accordance with the terms and conditions of this policy." SECTION 9. Article 5.36, Insurance Code, is amended to read as follows: Art. 5.36. WRITTEN EXPLANATION OF CERTAIN ENDORSEMENTS REQUIRED. An insurer may not use an endorsement to a policy form to which Article 5.35 of this code or Article 5.142 of this code applies that reduces the amount of coverage, unless requested by the insured, that would otherwise be provided under the policy unless the insurer provides the policyholder with a written explanation of the change made by the endorsement before the effective date of the change. SECTION 10. Article 5.50, Insurance Code, is amended to read as follows: Art. 5.50. EXCEPTIONS. This subchapter shall not apply to farm mutual insurance companies operating under Chapter 16 of this Code or to any company now operating under Chapter 12 of Title 78 which has heretofore been repealed, and none of the Articles of this subchapter, except Articles 5.35, 5.36, 5.37, 5.38, 5.39, 5.40, and 5.49, shall 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. Article 5.142 of this Code shall 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. Section 8, Article 21.77, Insurance Code, is amended to read as follows: Sec. 8. POLICY FORMS. All policy forms for insurance written under this article shall be prescribed by the commissioner [board] as provided in Article 5.06 of this code or filed and in effect as provided in Article 5.142 of this code[, Insurance Code]. SECTION 12. Section 912.152, Insurance Code, is amended to read as follows: Sec. 912.152. POLICY FORMS. (a) A county mutual insurance company is subject to Articles 5.06, [and] 5.35, and 5.142 of this code. (b) County [The commissioner, in accordance with Article 5.35, may adopt for use by county] mutual insurance companies shall file policy forms under Article 5.142 of this code or continue to use the standard policy forms and endorsements promulgated under Articles 5.06 and 5.35 of this code on notification to the commissioner in writing that the forms will continue to be used [uniform policy forms that differ from the forms adopted for use by other companies and shall prescribe the conditions under which a county mutual insurance company: [(1) may use the policy forms adopted under this subsection; or [(2) shall use the policy forms adopted for other companies]. SECTION 13. Subsection (b), Section 941.003, Insurance Code, is amended to read as follows: (b) A Lloyd's plan is subject to: (1) Section 5, Article 1.10; (2) Article 1.15A; (3) Subchapter A, Chapter 5; (4) Articles 5.142, 5.35, 5.38, 5.39, 5.40, and 5.49; (5) Articles 21.21 and 21.49-8; and (6) Sections 822.203, 822.205, 822.210, and 822.212. SECTION 14. Subsection (b), Section 942.003, Insurance Code, is amended to read as follows: (b) An exchange is subject to: (1) Section 5, Article 1.10; (2) Articles 1.15, 1.15A, and 1.16; (3) Subchapter A, Chapter 5; (4) Articles 5.142, 5.35, 5.37, 5.38, 5.39, and 5.40; (5) Articles 21.21 and 21.49-8; and (6) Sections 822.203, 822.205, 822.210, 822.212, 861.254(a)-(f), 861.255, 862.001(b), and 862.003. SECTION 15. Subsection (d), Section 502.153, Transportation Code, is amended to read as follows: (d) A personal automobile policy used as evidence of financial responsibility under this section must comply with Article 5.06 or Article 5.142, Insurance Code. SECTION 16. Subsection (c), Section 521.143, Transportation Code, is amended to read as follows: (c) A personal automobile insurance policy used as evidence of financial responsibility under this section must comply with Article 5.06 or Article 5.142, Insurance Code. SECTION 17. The commissioner of insurance shall 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. This Act applies only to an insurance policy that is delivered, issued for delivery, or renewed on or after the 120th day after the effective date of this Act. A policy delivered, issued for delivery, or renewed before the 120th day after the effective date of this Act 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 19. This Act takes effect June 1, 2003, if it 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 effect on that date, this Act takes effect September 1, 2003.