By: Flores, et al. (Senate Sponsor - Carona) H.B. No. 1131
(In the Senate - Received from the House April 10, 2003;
April 14, 2003, read first time and referred to Committee on
Business and Commerce; May 24, 2003, reported adversely, with
favorable Committee Substitute by the following vote: Yeas 9, Nays
0; May 24, 2003, sent to printer.)
COMMITTEE SUBSTITUTE FOR H.B. No. 1131 By: Armbrister
A BILL TO BE ENTITLED
AN ACT
relating to insurer interests in certain motor vehicle repair
facilities; providing a civil penalty.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subtitle A, Title 14, Occupations Code, is
amended by adding Chapter 2306 to read as follows:
CHAPTER 2306. INSURER INTERESTS IN REPAIR FACILITIES
Sec. 2306.001. DEFINITIONS. In this chapter:
(1) "Arm's length transaction" means the standard of
conduct under which two parties having substantially equal
bargaining power, each acting in its own interest, would negotiate
or carry out a particular transaction.
(2) "Claims center" means a location designated by an
insurer where a claims adjuster, employee, or agent of the insurer
performs an initial damage estimate on a vehicle under the terms of
an insurance policy.
(3) "Favored facility agreement" means an agreement
between an insurer and a repair facility under which the insurer
agrees to recommend, directly or indirectly, to its policyholders
or other beneficiaries under the insurer's policies, that the
policyholder or other beneficiary obtain repairs at that repair
facility or in any other way agrees to influence its policyholders
or other beneficiaries under the insurer's policies to obtain
repairs at that repair facility.
(4) "Insurer" means an insurer authorized by the Texas
Department of Insurance to write motor vehicle insurance in this
state, including a county mutual insurance company, a Lloyd's plan,
and a reciprocal or interinsurance exchange. The term includes an
entity that is an affiliate of an insurer as described by Section
823.003, Insurance Code.
(5) "Repair facility" has the meaning assigned by
Section 2304.001.
(6) "Support services" means basic services, provided
nonspecifically, that are provided internally and to each affiliate
or subsidiary, by an insurer, its parent company, or a separate
affiliate created to provide basic corporate support. The term does
not include a service related to the operation of a repair facility
if that service would have no value, or minimal value to any other
type of business.
(7) "Tied repair facility" means a repair facility in
which an insurer owns an interest.
Sec. 2306.002. INSURER INTERESTS. (a) Except as provided
by this section, an insurer may not own or acquire an interest in a
repair facility.
(b) An insurer that owns an interest in a tied repair
facility that was open for business, or on which construction had
commenced, on April 15, 2003, may maintain that ownership interest
and may operate that facility.
(c) An insurer may relocate a tied repair facility described
by Subsection (b), but may not obtain an ownership interest in any
additional facility not described by Subsection (b).
(d) Subsections (b) and (c) are applicable to an insurer
only if the insurer and its tied repair facility are otherwise in
compliance with this chapter.
Sec. 2306.003. FAVORED FACILITY AGREEMENT PRESUMED. An
insurer is presumed to have a favored facility agreement with a
repair facility in which it owns an interest.
Sec. 2306.004. CONTRACTUAL CONDITIONS. (a) An insurer
that owns an interest in a repair facility may use only one favored
facility agreement.
(b) Except as otherwise provided by this subsection, the
terms under which the insurer enters into a favored facility
agreement must be identical for all repair facilities, including a
tied repair facility. An insurer may vary the terms as necessary to
implement technical differences required by geographical factors
or other legitimate business factors.
(c) Except as provided by Subsection (d), an insurer may not
cancel a favored facility agreement until the expiration of the
30th day after the date on which the insurer provides notice to the
repair facility of the insurer's intent to cancel the agreement.
The insurer shall include with the notice a statement offering the
repair facility a reasonable opportunity to cure the alleged
failure to meet the requirements of the favored facility agreement.
(d) An insurer may summarily cancel a favored facility
agreement with a repair facility if the insurer, a policyholder of
the insurer, or another beneficiary under the insurer's policy
establishes reasonable grounds to believe that the repair facility
is guilty of fraudulent conduct in its dealings with the insurer.
Sec. 2306.005. NOTICE. (a) An insurer that owns an interest
in a repair facility shall post the following notice in each of its
tied repair facilities:
"THIS REPAIR FACILITY IS OWNED IN WHOLE OR IN PART BY (NAME OF
INSURER). YOU ARE HEREBY NOTIFIED THAT YOU ARE ENTITLED TO SEEK
REPAIRS AT ANY REPAIR FACILITY OF YOUR CHOICE."
(b) The notice required by Subsection (a) must be posted
prominently in a location in which it is likely to be seen and read
by a customer of the repair facility.
Sec. 2306.006. PROHIBITIONS. An insurer may not:
(1) condition the provision of a product, service,
insurance policy renewal, pricing, or other benefit on the purchase
of any good or service from its tied repair facilities;
(2) share information with its tied repair facilities
that is not made available on identical terms and conditions to
other repair facilities with which the insurer has entered into a
favored facility agreement;
(3) engage in a joint marketing program with its tied
repair facilities;
(4) provide its tied repair facilities a
recommendation, referral, description, advantage, or access to its
policyholders or other beneficiaries under its insurance policies
that is not provided on identical terms to other repair facilities
with which the insurer has entered into a favored facility
agreement;
(5) provide a tied repair facility access to the
insurer's products or services on terms and conditions different
from those under which the insurer provides access to the same
products or services to another repair facility with which the
insurer has entered into a favored facility agreement;
(6) allow a tied repair facility to use the insurer's
name, trademark, tradename, brand, or logo;
(7) subsidize the business activities or operating
expenses of a tied repair facility;
(8) directly or indirectly require a policyholder of
the insurer or other beneficiary under the insurer's policy to
obtain a damage estimate on a vehicle covered by the insurance
policy at a tied repair facility;
(9) authorize or allow a person representing the
insurer, whether an employee or an independent contractor, to
recommend to a policyholder or other beneficiary under the
insurance policy that the policyholder or other beneficiary obtain
repairs at a tied repair facility, except to the same extent that
the person recommends other repair facilities with whom the insurer
has entered into a favored facility agreement;
(10) locate a temporary or permanent claims center on
the premises of a tied repair facility, except for a period not to
exceed 30 days immediately following a weather-related catastrophe
or a major natural disaster, as declared by the commissioner of
insurance in the manner provided by law;
(11) enter into a favored facility agreement
exclusively with its tied repair facilities;
(12) retaliate or discriminate against a person who:
(A) files an action as provided by this chapter;
or
(B) assists or participates in any manner in an
investigation, judicial proceeding, or other action brought or
maintained as provided by this chapter; or
(13) include earnings or losses of a tied repair
facility in a rate filing made under Chapter 5, Insurance Code.
Sec. 2306.007. CONFLICT OF INTEREST PROHIBITED. Except as
otherwise provided by this chapter, an agreement between an insurer
and its tied repair facility must be negotiated and executed as an
arm's length transaction.
Sec. 2306.008. SUPPORT SERVICES. (a) Notwithstanding this
chapter, and except as provided by Subsection (b), an insurer may
provide support services to its tied repair facilities if those
services:
(1) are priced at a level that is fair and reasonable
to both the insurer and the tied repair facility; and
(2) do not directly or indirectly confer a competitive
advantage to the tied repair facility.
(b) Notwithstanding Subsection (a), an agreement by an
insurer to provide support services to its tied repair facility may
not create the potential for confusion among the policyholders of
the insurer, other beneficiaries of an insurance policy issued by
the insurer, or other parties.
Sec. 2306.009. ACTION TO COMPEL COMPLIANCE; DISCIPLINARY
ACTION. (a) A person, including a repair facility, aggrieved by a
violation of this chapter by an insurer may bring an action for
injunctive or other appropriate relief to compel the insurer to
comply with this chapter.
(b) In an action brought under this section, in addition to
other appropriate relief, the court may impose a civil penalty as
provided by this section.
(c) A civil penalty imposed under this section may not be
less than $1,000 or more than $5,000 per violation. Each day during
which a violation occurs is a separate violation.
(d) The amount of a civil penalty under this section is
based on the seriousness of the violation, and must reflect the
following factors:
(1) the nature, circumstances, extent, and gravity of
the act or omission that constitutes the violation;
(2) the economic harm caused by the violation;
(3) the history of previous violations;
(4) the need to deter future violations by the person
charged with a violation;
(5) efforts, if any, made to correct the violation;
and
(6) any other factors the court considers appropriate
to implement the remedial intent of this chapter.
(e) A civil penalty collected under this section shall be
sent to the comptroller for deposit in the general revenue fund.
(f) A plaintiff who prevails in an action under this section
is entitled to recover reasonable attorney's fees and court costs.
(g) If a court finds that an action brought under this
section was groundless, brought in bad faith, or brought for the
purpose of harassment, the court may award reasonable attorney's
fees to the prevailing defendant.
Sec. 2306.010. ANTITRUST ENFORCEMENT. This chapter does
not confer immunity from an antitrust law of this state or the
United States. A sanction or penalty imposed in an action brought
under this chapter is in addition to other relief granted on the
basis of the violation of an antitrust law of this state or the
United States.
Sec. 2306.011. EXCLUSIVITY. Unless otherwise specifically
provided by this chapter, this chapter provides the exclusive
authority and rules applicable to the regulation of the relations
between an insurer and a tied repair facility.
SECTION 2. This Act takes effect September 1, 2003.
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