This website will be unavailable from Thursday, May 30, 2024 at 6:00 p.m. through Monday, June 3, 2024 at 7:00 a.m. due to data center maintenance.
78R12849 DLF-F
By: Van Arsdale H.B. No. 3031
Substitute the following for H.B. No. 3031:
By: Van Arsdale C.S.H.B. No. 3031
A BILL TO BE ENTITLED
AN ACT
relating to the regulation of certain lines of property and
casualty insurance.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Article 5.13, Insurance Code, is amended to read
as follows:
Art. 5.13. SCOPE OF SUBCHAPTER [SUB-CHAPTER]. (a) This
subchapter [Sub-chapter] applies to every insurance company,
corporation, interinsurance exchange, mutual, reciprocal,
association, Lloyd's plan, [Lloyds] or other organization or
insurer writing any of the characters of insurance business herein
set forth, hereinafter called "Insurer"; provided that nothing in
this entire subchapter [Sub-chapter] shall [ever] be construed to
apply to any county or farm mutual insurance company or
association, as regulated under Chapters 16 and 17 of this code
[Code].
(b) This subchapter [Sub-chapter] applies to the writing of
casualty insurance and the writing of fidelity, surety, and
guaranty bonds, on risks or operations in this State except as
herein stated.
(c) Except as provided by Article 5.13-2 of this code, this
subchapter [This Sub-chapter] does not apply to the writing of
motor vehicle, life, health, accident, professional liability,
reinsurance, aircraft, fraternal benefit, fire, lightning,
tornado, windstorm, hail, smoke or smudge, cyclone, earthquake,
volcanic eruption, rain, frost and freeze, weather or climatic
conditions, excess or deficiency of moisture, flood, the rising of
the waters of the ocean or its tributaries, bombardment, invasion,
insurrection, riot, civil war or commotion, military or usurped
power, any order of a civil authority made to prevent the spread of
a conflagration, epidemic or catastrophe, vandalism or malicious
mischief, strike or lockout, water or other fluid or substance,
resulting from the breakage or leakage of sprinklers, pumps, or
other apparatus erected for extinguishing fires, water pipes or
other conduits or containers, or resulting from casual water
entering through leaks or opening in buildings or by seepage
through building walls, including insurance against accidental
injury of such sprinklers, pumps, fire apparatus, conduits or
container, workers' [workmen's] compensation, inland marine, ocean
marine, marine, or title insurance; nor does this subchapter
[Sub-chapter] apply to the writing of explosion insurance, except
insurance against loss from injury to person or property which
results accidentally from steam boilers, heaters or pressure
vessels, electrical devices, engines and all machinery and
appliances used in connection therewith or operation thereby.
(d) This subchapter [Sub-chapter] shall not be construed as
limiting in any manner the types or classes of insurance which may
be written by the several types of insurers under appropriate
statutes or their charters or permits.
(e) The regulatory power herein conferred is vested in the
commissioner [Board of Insurance Commissioners of the State of
Texas. Within the Board, the Casualty Insurance Commissioner shall
have primary supervision of regulation herein provided, subject
however to the final authority of the entire Board].
SECTION 2. The heading of Article 5.13-2, Insurance Code,
is amended to read as follows:
Art. 5.13-2. RATES AND FORMS FOR CERTAIN [GENERAL LIABILITY
AND COMMERCIAL] PROPERTY AND CASUALTY INSURANCE [COVERAGE].
SECTION 3. Sections 1 and 2, Article 5.13-2, Insurance
Code, are amended to read as follows:
Sec. 1. PURPOSE. This article governs the regulation of
insurance described by Section 2 of this article [general
liability, commercial property, which shall include farm and ranch
owners and farm and ranch policies, all commercial casualty, and
medical professional liability insurance rates and forms. It does
not govern automobile, fidelity, surety, or guaranty bonds]. The
purposes of this article are to:
(1) promote the public welfare by regulating insurance
rates to prohibit excessive, inadequate, or unfairly
discriminatory rates;
(2) promote availability of insurance;
(3) promote price competition among insurers to
provide rates and premiums that are responsive to competitive
market conditions;
(4) prohibit price-fixing agreements and other
anticompetitive behavior by insurers;
(5) regulate the insurance forms used for lines of
insurance subject to this article to ensure that they are not
unjust, unfair, inequitable, misleading, or deceptive; and
(6) provide regulatory procedures for the maintenance
of appropriate information reporting systems.
Sec. 2. SCOPE. (a) This article applies to all lines of the
following insurance written under policies or contracts of
insurance issued by an insurer authorized to engage in the business
of insurance in this state:
(1) general liability insurance;
(2) [,] commercial property insurance;
(3) personal and[, all] commercial casualty
insurance, except as provided by Subsection (b) of this section;
(4) [, and] medical professional liability insurance;
(5) fidelity and surety bonds;
(6) personal umbrella insurance;
(7) personal liability insurance;
(8) guaranteed auto protection (GAP) insurance;
(9) involuntary unemployment insurance;
(10) financial guaranty insurance;
(11) inland marine insurance;
(12) rain insurance; and
(13) hail insurance on farm crops [written under
policies or contracts of insurance issued by a licensed insurer,
other than a fidelity, surety, or guaranty bond or an automobile
insurance policy].
(b) This article does not apply to a line of insurance
regulated under Subchapter A or C of this chapter.
(c) The commissioner shall adopt rules governing the manner
in which forms and rates for the various classifications of risks
insured under inland marine insurance, as determined by the
commissioner, are regulated.
SECTION 4. Section 3(2), Article 5.13-2, Insurance Code, is
amended to read as follows:
(2) "Insurer" means an insurer to which Article 5.13
of this code applies, but does not include the Texas Windstorm
Insurance Association or the Texas FAIR Plan Association. However,
the provisions of Sections 4, 5, 6, and 7 of this article shall not
apply to Lloyd's or reciprocals with respect to commercial property
insurance, and the provisions of Sections 4, 5, 6, 7, and 8 of this
article shall not apply to Lloyd's or reciprocals with respect to
inland marine insurance, rain insurance, or hail insurance on farm
crops.
SECTION 5. Article 5.52, Insurance Code, is amended to read
as follows:
Art. 5.52. PROVISIONS GOVERNING LIGHTNING, WINDSTORM,
HAIL, INVASION, RIOT, VANDALISM, STRIKES, LOCKOUTS AND OTHER
INSURANCE; "EXPLOSION" DEFINED. (a) The writing of insurance
against loss by lightning, tornado, windstorm, hail, smoke or
smudge, cyclone, earthquake, volcanic eruption, rain, frost and
freeze, weather or climatic conditions, excess or deficiency of
moisture, flood, the rising of the waters of the ocean or its
tributaries, bombardment, invasion, insurrection, riot, civil war
or commotion, military or usurped power, any order of a civil
authority made to prevent the spread of a conflagration, epidemic
or catastrophe, vandalism or malicious mischief, strike or lockout,
explosion, water or other fluid or substance, resulting from the
breakage or leakage of sprinklers, pumps, or other apparatus
erected for extinguishing fires, water pipes or other conduits or
containers, or resulting from casual water entering through leaks
or openings in buildings, or by seepage through building walls,
including insurance against accidental injury of such sprinklers,
pumps, fire apparatus, conduits or containers, and the rates to be
collected therefor in this State, and all matters pertaining to
such insurance except as hereinafter set out as to [inland] marine
insurance as defined by Article 5.53 of this code, [rain insurance
and insurance against loss by hail on farm crops,] shall be governed
and controlled by the provisions of Articles 5.25 to 5.48,
inclusive, and also Articles 5.50 to 5.51, inclusive, of this
subchapter and Article 5.67 of Subchapter D of this Chapter, in the
same manner and to the same extent as fire insurance and fire
insurance rates are now affected by the provisions of said articles
of this code.
(b) Notwithstanding Subsection (a) of this section, rain
insurance and hail insurance on farm crops are governed by Article
5.13-2 of this code.
(c) The term "explosion" as used in this article [above]
shall not include insurance against loss of or damage to any
property of the insured, resulting from the explosion of or injury
to (a) any boiler, heater, or other fired pressure vessel; (b) any
unfired pressure vessel; (c) pipes or containers connected with any
of said boilers or vessels; (d) any engine, turbine, compressor,
pump, or wheel; (e) any apparatus generating, transmitting or using
electricity; (f) any other machinery or apparatus connected with or
operating by any of the previously named boilers, vessels or
machines; nor shall same include the making of inspections and
issuance of certificates of inspections upon any such boiler,
apparatus or machinery, whether insured or otherwise. Said term
shall include, but shall not be limited to (1) the explosion of
pressure vessels (except steam boilers of more than fifteen pounds
pressure) in buildings designed and used solely for residential
purposes by not more than four (4) families; (2) explosion of any
kind originating outside of the insured buildings or outside of the
building containing the property insured; (3) explosion of pressure
vessels which do not contain steam or which are not operated with
steam coils or steam jets; (4) electric disturbance causing or
concomitant with an explosion in public service or public utility
property.
SECTION 6. Article 5.53, Insurance Code, is amended to read
as follows:
Art. 5.53. APPLICATION TO [INLAND] MARINE INSURANCE[, RAIN
INSURANCE, OR HAIL INSURANCE ON FARM CROPS; DEFINITIONS; RATES AND
RATING PLANS FILED; POLICY FORMS; CHECKING OFFICES]. The
provisions of this article shall apply to all insurance which is now
or hereafter defined by statute, by rules of the commissioner
[ruling of the Board of Insurance Commissioners], or by lawful
custom, as [inland] marine insurance[, rain insurance, or insurance
against loss by hail on farm crops]. None of the terms contained in
[this article and] Article 5.52 shall be deemed to include
insurance of vessels or craft, their cargoes, marine builder's
risk, marine protection and indemnity, or other risk commonly
insured under marine as distinguished from inland marine insurance
policies.
The [Whenever used in this article the] term "Marine
Insurance" shall mean and include insurance and reinsurance against
any and all kinds of loss or damage to the following subject matters
of insurance interest therein:
Marine Insurance. Hulls, vessels and craft of every kind,
aids to navigation, dry docks and marine railways, including marine
builders' and repairers' risks, and whether complete or in process
of or awaiting construction; also all marine protection and
indemnity risks; also all goods, freights, cargoes, merchandise,
effects, disbursements, profits, moneys, bullion, precious stones,
securities, choses in action, evidences of debt, valuable papers,
bottomry and respondentia interests, and all other kinds of
property and interests therein, in respect to, appertaining to or
in connection with any and all risks or perils of navigation,
transit or transportation on or under any seas, lakes, rivers, or
other waters or in the air, or on land in connection with or
incident to export, import or waterborne risks, or while being
assembled, packed, crated, baled, compressed or similarly prepared
for such shipment or while awaiting the same, or during any delays,
storage, transshipment or reshipment incident thereto, including
the insurance of war risks in respect to any or all of the aforesaid
subject matters of insurance.
[(a) As to all classes of insurance contained in this
article, for which class rates or rating plans are customarily
fixed by rating bureaus or associations of underwriters, rates or
rating plans, together with applicable policy forms and
endorsements, shall be filed by all authorized insurers writing
such classes with the Board in such manner and form as it shall
direct; and all rates on risks not falling within a recognized class
fixed by any such bureau or association, together with applicable
policy forms and endorsements, shall be similarly filed. Due
consideration shall be given to past and prospective loss
experience within and outside the State, including catastrophe
hazard, to a reasonable margin for profit and contingencies, and to
all other relevant factors within and outside the State.
[(b) As soon as reasonably possible after the filing has
been made, the Board shall in writing approve or disapprove the
same; provided that any filing of class rates or rating plans,
together with applicable policies and endorsements, shall be deemed
approved unless disapproved within thirty (30) days; provided the
Board may by official order postpone action for such further time
not exceeding thirty (30) days, as it deems necessary for proper
consideration; and provided further that rates on risks not falling
within a recognized class fixed by a rating bureau or association of
underwriters, together with applicable policies and endorsements,
shall be deemed approved from the date of filing to the date of
formal approval or disapproval. The Board may investigate rates
not required to be filed under the provisions of this article and
may require the filing of any particular rate, together with
applicable policies and endorsements, not otherwise required to be
filed.
[(c) Any filing by an insurer of a rate less than an approved
rate relative to any of the rates mentioned in sub-division (a) of
this article may be used by such insurer after same shall have been
approved by the Board, or after same shall have been on file with
the Board without action for thirty (30) days.
[(d) If at any time the Board finds that an approved filing
no longer meets the requirements of this article, it may after
hearing issue an order withdrawing its approval thereof.
[(e) An insurer may satisfy its obligation to make such
filings by becoming a member of, or a subscriber to, a licensed
rating organization which makes such filings, and by authorizing
the Board to accept such filings on its behalf. A corporation, an
un-incorporated association, a partnership, or an individual,
whether located within or outside the State, may be licensed as a
rating organization in connection with any of the sorts of
insurance mentioned in this article, subject to the conditions, not
inconsistent herewith, prescribed by law for such organizations in
connection with other kinds of insurance, provided two or more
insurers have designated it to act for them as to any such class or
classes of insurance in the manner prescribed herein. An insurer
may belong or subscribe to rating bureaus or associations for other
types of insurance.
[(f) Insurers may, subject to the supervision of the Board,
operate any checking office or offices deemed necessary or
advisable.
[(g) The writing of inland marine insurance, rain insurance
and insurance against loss by hail on farm crops, shall be governed
by the provisions of Articles 5.25 to 5.48, inclusive, and also
Articles 5.50 to 5.51, inclusive, of this subchapter and Article
5.67 of Subchapter D. of this chapter, in the same manner and to the
same extent as fire insurance and fire insurance rates are now
affected by the provisions of said articles, except that wherever
in any of said articles reference is made to making, fixing,
prescribing, determination or promulgation by the Board of rates or
policy forms or endorsements, the provisions of this article shall
control. Notwithstanding any other provision of this subchapter,
the flexible rating program created under Subchapter M of this
chapter does not apply to this article.
[(h)] The provisions of Chapter 5 of this code, other than
this article, shall not apply to marine insurance as defined [other
than inland marine insurance governed] by this article.
SECTION 7. Section 1(a), Article 5.53-A, Insurance Code, is
amended to read as follows:
(a) Any company licensed to engage in the business of fire
insurance and its allied lines, or inland marine insurance, or
both, is authorized to write home warranty insurance or home
protection insurance in this state.
SECTION 8. Subsections (a), (b), (c), (d), (f), (g), (h),
(i), (j), (k), (l), and (m), Article 5.97, Insurance Code, are
amended to read as follows:
(a) The department [State Board of Insurance] may take
action on filings for standard and uniform rates, rating plans,
manual rules, classification plans, statistical plans, and policy
and endorsement forms, or any modification of any of these for the
lines of insurance regulated in Subchapter B, Chapter 5, of this
code [and for the regulated lines of insurance in Article 5.53 and
Article 5.53-A of this code] under the procedure specified in this
article.
(b) Any interested person may initiate proceedings before
the commissioner [board] with respect to any matter specified in
Section (a) of this article by filing a petition with the department
[State Board of Insurance] that includes the following:
(1) specific identification of the matter that is
proposed to be adopted, approved, amended, or repealed;
(2) the wording of the matter proposed to be adopted,
approved, amended, or repealed; and
(3) justification for the proposed action in
sufficient particularity to inform the commissioner [board] and any
interested person of the petitioner's reasons and arguments.
(c) A copy of each petition initiating a proceeding shall be
marked with the date it was received by the department [State Board
of Insurance] and shall be made available for public inspection at
the office of the chief clerk of the department [board] throughout
the period the petition is pending. Except for emergency matters
acted on under Section (j) of this article, the commissioner
[board] may not act on a petition until it has been available for
public inspection for at least 15 days after the date of filing and
notice has been given in accordance with this section. Not later
than the 10th day before the date the commissioner [board] takes
action on any rule, rating plan, classification plan, statistical
plan, or policy or endorsement form under this article, the
department [board] shall publish in the Texas Register [a notice of
the meeting or hearing at which the action will be taken. The
notice must include] a brief summary of the substance of the
proposed rule, rating plan, classification plan, statistical plan,
or policy or endorsement form, and a statement that the full text of
the rule, rating plan, classification plan, statistical plan, or
policy or endorsement form is available for review in the office of
the chief clerk of the department [State Board of Insurance].
(d) Any interested person may request [the board to hold] a
hearing before the commissioner [it] acts on a pending petition.
Except as provided by Article 5.97A of this code, the commissioner
[board] has discretion whether or not to hold such a hearing.
(f) The commissioner may [board shall] hold a hearing to
consider the proposal or may [shall] enter an order implementing or
denying the proposal. If the commissioner [board] denies a
proposal, the commissioner [it] shall specify the reasons for the
denial in the commissioner's [its] order.
(g) On its own motion, the department [board] may initiate a
proceeding with respect to any matter specified in Section (a) of
this article.
(h) If a hearing is scheduled to consider a proposal, the
department [board] shall publish notice in the Texas Register not
less than 10 days before the hearing and shall state the time,
place, and legal authority for the hearing and the matters to be
considered.
(i) After entering an order with respect to any matter
specified in Section (a) of this article, the department [board]
shall file a notice of the commissioner's [its] action for
publication in the adopted rule section of the Texas Register. In
addition, before the effective date of the action, the department
[board] shall cause notice of the order to be mailed to the
applicant, to all insurers writing the affected line of insurance
in this state, and to all other persons who have made timely written
request for notification. Failure to mail this notice will not
invalidate any action taken.
(j) The commissioner's [board's] action takes effect 15 days
after the date that notice of the action is published in the Texas
Register or on a later specified date. If the commissioner [board]
finds that an imminent peril to the public health, safety, or
welfare, or a requirement of state or federal law requires the
commissioner's [its] action to be effective before the end of the
15-day period, the commissioner [it] may take emergency action to
be effective at an earlier time. The commissioner's [board's]
action on an emergency matter may be effective for 120 days, and
renewable once for a period not exceeding 60 days immediately
following the 120-day period. The permanent adoption of an
identical change is not precluded.
(k) Any person aggrieved by an order of the commissioner
[board] is entitled to redress as provided by [Article 5.15,]
Article 5.23[, Article 5.53, or Article 5.53-A] of this code[,
whichever is applicable to the line of insurance addressed in the
order].
(l) Chapters 2001 and 2002, Government Code, do [The
Administrative Procedure and Texas Register Act (Article 6252-13a,
Vernon's Texas Civil Statutes), does] not apply to commissioner or
department [board] action taken under this article.
(m) The department [board] or the office of public insurance
counsel may require that a person who has filed a petition under
Subsection (b) of this article or who has otherwise presented
materials to the department [board] in connection with a proceeding
under this article provide additional information to the department
[board] or office, including any statistical, actuarial, or other
information on which the petition or other materials were based.
SECTION 9. Subsection (c), Article 21.28-E, Insurance Code,
is amended to read as follows:
(c) The provisions of this article shall not apply to marine
insurance as defined [other than inland marine insurance governed]
by Article 5.53.
SECTION 10. Sections 4(b)(4) and (5), Article 21.49-3,
Insurance Code, are amended to read as follows:
(4) After the initial year of operation, rates, rating
plans, and rating rules, and any provision for recoupment should be
based upon the association's loss and expense experience, together
with such other information based upon such experience as the
department [board] may deem appropriate. The resultant premium
rates shall be on an actuarially sound basis and shall be calculated
to be self-supporting.
(5) In the event that sufficient funds are not
available for the sound financial operation of the association, in
addition to assessments paid pursuant to the plan of operation in
accordance with Section 3(c)(2) of this article and contributions
from the policyholder's stabilization reserve fund, all members
shall, on a basis authorized by the department [board], as long as
the department [board] deems it necessary, contribute to the
financial requirements of the association in the manner provided
for in Section 5. Any assessment or contribution shall be
reimbursed to the members with interest at a rate to be approved by
the department [board]. Pending recoupment or reimbursement of
assessments or contributions paid to the association by a member,
the unrepaid balance of such assessments and contributions may be
reflected in the books and records of the insurer as an admitted
asset of the insurer for all purposes, including exhibition in
annual statements pursuant to Section 862.001 [Article 6.12] of
this code.
SECTION 11. Section 5(a), Article 21.55, Insurance Code, is
amended to read as follows:
(a) This article does not apply to:
(1) workers' compensation insurance;
(2) mortgage guaranty insurance;
(3) title insurance;
(4) fidelity, surety, or guaranty bonds;
(5) marine insurance as defined [other than inland
marine insurance governed] by Article 5.53 of this code; or
(6) a guaranty association created and operating under
Article 9.48 of this code.
SECTION 12. Article 21.56(e), Insurance Code, is amended to
read as follows:
(e) The provisions of this article shall not apply to marine
insurance as defined [other than inland marine insurance governed]
by Article 5.53 of this code.
SECTION 13. Article 21.79E, Insurance Code, is amended to
read as follows:
Art. 21.79E. CREDIT INVOLUNTARY UNEMPLOYMENT INSURANCE.
Any insurer authorized to write any form of casualty insurance in
this state shall also be authorized to write group or individual
credit involuntary unemployment insurance indemnifying a debtor
for installment or other periodic payments on the indebtedness
while the debtor is involuntarily unemployed, including policy
forms and endorsements which define involuntary unemployment to
provide coverage and a premium charge for interruption or reduction
of a debtor's income during periods of leave (paid or otherwise)
authorized by the Federal Family and Medical Leave Act of 1993 (29
U.S.C. Section 2601 et seq.), as amended, or other state or federal
laws. Such insurance may be written alone or in conjunction with
credit life insurance, credit accident and health insurance, or
both, in policies issued by any authorized insurer, but not in
contravention of the Texas Free Enterprise and Antitrust Act of
1983 (Chapter 15, Business & Commerce Code). Rates and forms for
such insurance may be made and filed in accordance with Article
5.13-2 [Articles 5.14 and 5.15] of this code.
SECTION 14. The following laws are repealed:
(1) Articles 5.14, 5.15, and 5.15B, Insurance Code;
(2) Article 5.97(e), Insurance Code; and
(3) Section 4(b)(2), Article 21.49-3, Insurance Code.
SECTION 15. This Act takes effect September 1, 2003.