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.