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A BILL TO BE ENTITLED
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AN ACT
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relating to regulation of property and casualty insurance rates, |
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required use by insurers of certain standard insurance policy forms |
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for residential property insurance, and the election of the |
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commissioner of insurance. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. ARTICLE 1. LEGISLATIVE FINDINGS |
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SECTION 1. PURPOSE AND FINDINGS. The Legislature finds |
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that the purchase of insurance coverage is one of the most important |
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purchases that Texas consumers make. The Legislature finds it is in |
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the public interest to promote fair competition among insurers by |
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requiring minimum standards of coverage, while allowing insurers to |
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offer enhanced and reduced coverage choices; and by requiring that |
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consumers be fully informed of their coverage choices. The |
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Legislature further finds that effective regulation to provide fair |
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rates that balance affordable coverage for consumers with a |
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reasonable rate of return to maintain insurer solvency is vital to |
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the financial health of the State. In addition, the Legislature |
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finds that direct accountability of the Commissioner of Insurance |
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to the voters of Texas will promote the goals of fair coverage at |
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fair rates. |
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ARTICLE 2. STANDARD FORMS |
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SECTION 2.01. Section 2301.008, Insurance Code, is amended |
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to read as follows: |
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Sec. 2301.008. ADOPTION AND USE OF STANDARD FORMS. (a) |
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The commissioner shall [may] adopt standard insurance policy forms, |
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printed endorsement forms, and related forms other than insurance |
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policy forms and printed endorsement forms, that an insurer shall |
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[may] use in addition to [instead of] the insurer's own forms in |
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writing insurance subject to this subchapter. |
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SECTION 2.02. Section 2301.052(b), Insurance Code, is |
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amended to read as follows: |
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(b) Subject to Section 2301.0525, an [An] insurer may |
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continue to use an insurance policy form or endorsement |
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promulgated, approved, or adopted under Article 5.06 or 5.35 before |
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June 11, 2003, on written notification to the commissioner that the |
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insurer will continue to use the form or endorsement. |
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SECTION 2.03. Subchapter B, Chapter 2301, Insurance Code, |
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is amended by adding Section 2301.0525 to read as follows: |
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Sec. 2301.0525. USE OF MINIMUM STANDARD INSURANCE POLICY |
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FORMS REQUIRED. (a) Each insurer that writes residential property |
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insurance in this state shall use the standard insurance policy |
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forms adopted by the commissioner under Section 2301.008 for |
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residential property insurance and, subject to Subsection (b), may |
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also use alternative policy forms approved by the commissioner |
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under Section 2301.006. |
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(b) An insurer may not deliver or issue for delivery in this |
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state a residential property insurance policy unless the insurer |
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informs each applicant for that insurance coverage, in the manner |
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prescribed by commissioner rule, that an applicant otherwise |
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qualified for that insurance coverage under this code may elect to |
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obtain residential property insurance coverage under a standard |
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insurance policy adopted by the commissioner under Section |
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2301.008. |
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(c) An insurer that offers coverage under the standard |
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policy forms shall disclose to the applicant or insured, at the time |
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of the initial application and each renewal, each policy limit and |
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type of coverage available to the insured and the respective costs |
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for each coverage. The form of the disclosure shall be specified by |
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the commissioner, subject to the provisions of Section 2301.053(c). |
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(d) An insurer that offers coverages under approved forms |
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other than the standard policy forms shall disclose to the |
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applicant or insured, at the time of the initial application and |
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each renewal, in comparison to the standard policy forms each |
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additional coverage that is provided and the additional cost, each |
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reduction in coverage or exclusion of coverage and the reduced |
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cost, and each policy limit and type of coverage available to the |
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insured and the respective costs for each coverage. The form of the |
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disclosure shall be specified by the commissioner, subject to the |
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provisions of Section 2301.053(c). |
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SECTION 2.04. Subchapter B, Chapter 2301, Insurance Code, |
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is amended by adding Section 2301.056 to read as follows: |
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Sec. 2301.056. REQUIRED COVERAGES. The standard insurance |
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policy forms adopted by the commissioner under Section 2301.008 |
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for residential property insurance shall provide, in addition to |
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other coverages determined by the commissioner, the following: |
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(a) Wind-driven rain. Damage caused or contributed to by |
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wind-driven rain shall be covered. |
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(b) Concurrent causation. An insurer shall be liable for |
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damage that is caused in whole or in part by a covered cause, |
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whether by concurrent or sequential causation or otherwise, except |
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to the extent that the insurer establishes the portion of the loss, |
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if any, solely caused by an excluded cause. |
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(c) Animal injuries. Injuries to third parties caused by |
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pets shall be covered. |
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(d) Appraisal. Any right to invoke appraisal shall be |
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invoked within sixty (60) days after a dispute arises and not later |
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than sixty (60) days after suit is filed relating to the claim. |
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(e) Additional living expenses. Coverage for additional |
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living expenses shall be provided whenever the property becomes |
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uninhabitable, including a mandatory evacuation. |
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ARTICLE 3. PRIOR APPROVAL OF RATES |
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SECTION 3.01. Section 706.004, Insurance Code, as effective |
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April 1, 2009, is amended to read as follows: |
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Sec. 706.004. RATES AND FORMS. Notwithstanding any other |
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law, rates and forms for insurance coverage issued under this |
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chapter are governed by: |
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(1) Subchapters A-D [A-E], Chapter 2251; |
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(2) Subchapter A, Chapter 2301; and |
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(3) Article 5.13-2. |
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SECTION 3.02. Section 912.002(c), Insurance Code, as |
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effective April 1, 2009, is amended to read as follows: |
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(c) Rate regulation for a residential fire and allied lines |
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insurance policy written by a county mutual insurance company is |
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subject to Chapters 2251 and [Chapter] 2253. Rate [On and after
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December 1, 2004, rate] regulation for a personal automobile |
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insurance policy and a residential fire and allied lines insurance |
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policy written by a county mutual insurance company is subject to |
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Article 5.13-2 and Chapter 2251. A county mutual insurance company |
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is subject to Chapter 2253. The commissioner may adopt rules as |
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necessary to implement this subsection. |
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SECTION 3.03. Section 1806.052, Insurance Code, is amended |
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to read as follows: |
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Sec. 1806.052. CONSTRUCTION OF SUBCHAPTER. This subchapter |
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may not be construed to prohibit the modification of rates by a |
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rating plan that complies [is filed in accordance] with the |
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requirements of Chapter 2251 or Article 5.13-2, as applicable, |
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[that has not been disapproved by the commissioner,] and that is |
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designed to encourage the prevention of accidents, and to account |
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for all relevant factors inside and outside this state, including |
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the peculiar hazards and experience of past and prospective |
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individual risks. |
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SECTION 3.04. Section 2151.001(2), Insurance Code, is |
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amended to read as follows: |
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(2) "Authorized insurer" means an insurer authorized |
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by the department to write automobile liability coverage under this |
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title. [Except as provided by Section 2251.204, the term does not
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include a county mutual insurance company organized under Chapter
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912.] |
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SECTION 3.05. Section 2251.003, Insurance Code, is amended |
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to read as follows: |
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Sec. 2251.003. APPLICABILITY OF CERTAIN SUBCHAPTERS. |
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(a) This subchapter and Subchapters B, C, D, and E apply to: |
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(1) an insurer to which Article 5.13 applies, other than the |
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Texas Windstorm Insurance Association, the FAIR Plan Association, |
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and the Texas Automobile Insurance Plan Association; and |
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(2) [except as provided by Subsection (c), a] A Lloyd's |
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plan, reciprocal or interinsurance exchange, and county mutual |
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insurance company with respect to the lines of insurance described |
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by Subsection (b). |
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(b) This subchapter and Subchapters B, C, D, and E apply to |
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all lines of the following kinds of insurance written under an |
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insurance policy or contract issued by an insurer authorized to |
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engage in the business of insurance in this state: |
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(1) general liability insurance; |
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(2) residential and commercial property insurance, |
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including farm and ranch insurance and farm and ranch owners |
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insurance; |
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(3) personal and commercial casualty insurance, except as |
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provided by Section 2251.004; |
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(4) medical professional liability insurance; |
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(5) fidelity, guaranty, and surety bonds other than |
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criminal court appearance bonds; |
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(6) personal umbrella insurance; |
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(7) personal liability insurance; |
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(8) guaranteed auto protection (GAP) insurance; |
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(9) involuntary unemployment insurance; |
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(10) financial guaranty insurance; |
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(11) inland marine insurance; |
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(12) rain insurance; |
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(13) hail insurance on farm crops; |
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(14) personal and commercial automobile insurance; |
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(15) multi-peril insurance; and |
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(16) identity theft insurance issued under Chapter 706. |
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[(c)
Sections 2251.008, 2251.052, 2251.101, 2251.102,
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2251.103, 2251.104, 2251.105, and 2451.107 do not apply to a
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Lloyd's plan or a reciprocal or interinsurance exchange with
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respect to commercial property insurance, inland marine insurance,
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rain insurance, or hail insurance on farm crops.] |
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SECTION 3.06. Section 2251.101(a), Insurance Code, is |
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amended to read as follows: |
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(a) For [Except as provided by Subchapter D, for] risks |
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written in this state, each insurer shall file with the |
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commissioner all rates, applicable rating manuals, supplementary |
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rating information, and additional information as required by the |
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commissioner. |
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SECTION 3.07. The heading of Subchapter D, Chapter 2251, |
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Insurance Code, is amended to read as follows: |
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SUBCHAPTER D. PRIOR APPROVAL OF RATES [UNDER CERTAIN CIRCUMSTANCES] |
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SECTION 3.08. Section 2251.151, Insurance Code, is amended |
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to read as follows: |
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Sec. 2251.151. FILING OF [REQUIREMENT TO FILE] RATES FOR |
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PRIOR APPROVAL [UNDER CERTAIN CIRCUMSTANCES]. (a) An insurer may |
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not use a rate until the rate has been filed with the department in |
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accordance with Subchapter C and approved by the commissioner in |
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accordance with this subchapter. |
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[The commissioner by order may require an insurer to file
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with the department for the commissioner's approval all rates,
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supplementary rating information, and any supporting information
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in accordance with this subchapter if the commissioner determines
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that:
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[(1)
the insurer's rates require supervision because
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of the insurer's financial condition or rating practices; or
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[(2) a statewide insurance emergency exists.] |
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(b) [(a 1)] If an insurer files a petition under Subchapter |
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D, Chapter 36, for judicial review of an order disapproving a rate |
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under this chapter, the insurer must use the rates in effect for the |
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insurer at the time the petition is filed and may not file and use |
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any higher rate for the same line of insurance subject to this |
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chapter before the matter subject to judicial review is finally |
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resolved unless the insurer, in accordance with this subchapter, |
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files the new rate with the department, along with any applicable |
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supplementary rating information and supporting information, and |
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obtains the commissioner's approval of the rate. |
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(c) [(b)] From the date a [of the filing of the] rate is |
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filed with the department under this section to the effective date |
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of the new rate, the insurer's previously approved [filed] rate |
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that is in effect on the date of the filing remains in effect. |
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[(c)
The commissioner may require an insurer to file the
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insurer's rates under this section until the commissioner
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determines that the conditions described by Subsection (a) no
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longer exist.] |
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(d) For purposes of this section, a rate is filed with the |
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department on the date the department receives the rate filing. |
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[(e)
If the commissioner requires an insurer to file the
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insurer's rates under this section, the commissioner shall issue an
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order specifying the commissioner's reasons for requiring the rate
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filing.
An affected insurer is entitled to a hearing on written
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request made to the commissioner not later than the 30th day after
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the date the order is issued.] |
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SECTION 3.09. Section 2251.152, Insurance Code, is |
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repealed. |
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SECTION 3.10. Section 2251.156, Insurance Code, is amended |
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to read as follows: |
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Sec. 2251.156. RATE FILING DISAPPROVAL BY COMMISSIONER; |
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HEARING. (a) If the commissioner disapproves a rate filing under |
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this chapter [Section 2251.153(a)(2)], the commissioner shall |
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issue an order specifying in what respects the filing fails to meet |
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the requirements of this chapter [disapproving the filing in
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accordance with Section 2251.103(b)]. |
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(b) An insurer whose rate filing is disapproved is entitled |
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to a hearing on written request made to the commissioner not later |
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than the 30th day after the date the order disapproving the rate |
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filing takes effect [in accordance with Section 2251.103(c)]. |
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ARTICLE 4. ELECTION OF INSURANCE COMMISSIONER. |
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SECTION 4.01. Section 31.022, Insurance Code, is amended to |
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read as follows: |
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Sec. 31.022. ELECTION [APPOINTMENT; TERM]. The |
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commissioner is elected by the qualified voters at the general |
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election for state and county officers for a term of four years. |
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[(a) The governor, with the advice and consent of the senate, shall
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appoint the commissioner. The commissioner serves a two-year term
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that expires on February 1 of each odd-numbered year.
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[(b)
The governor shall appoint the commissioner without
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regard to the race, color, disability, sex, religion, age, or
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national origin of the appointee.] |
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SECTION 4.02. Section 31.024, Insurance Code, is amended to |
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read as follows: |
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Sec. 31.024. INELIGIBILITY FOR PUBLIC OFFICE. The |
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commissioner is ineligible to be a candidate for another [a] public |
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elective office in this state, unless the commissioner has resigned |
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and the governor has accepted the resignation. |
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SECTION 4.03. Section 31.027(a), Insurance Code, is amended |
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to read as follows: |
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(a) It is a ground for removal from office if the |
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commissioner: |
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(1) [does not have at the time of appointment the
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qualifications required by Section 31.023;
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[(2)
does not maintain during service as commissioner
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the qualifications required by Section 31.023;
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[(3)] violates a prohibition established by Section |
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33.001, 33.003, 33.004, or 33.005; or |
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(2) [(4)] cannot, because of illness or disability, |
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discharge the commissioner's duties for a substantial part of the |
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commissioner's term. |
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SECTION 4.04. Section 52.092(c), Election Code, is amended |
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to read as follows: |
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(c) Statewide offices of the state government shall be |
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listed in the following order: |
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(1) governor; |
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(2) lieutenant governor; |
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(3) attorney general; |
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(4) comptroller of public accounts; |
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(5) commissioner of the General Land Office; |
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(6) commissioner of agriculture; |
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(7) commissioner of insurance; |
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(8) railroad commissioner; |
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(9) [(8)] chief justice, supreme court; |
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(10) [(9)] justice, supreme court; |
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(11) [(10)] presiding judge, court of criminal |
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appeals; |
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(12) [(11)] judge, court of criminal appeals. |
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SECTION 4.05. Section 504.401(d), Transportation Code, is |
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amended to read as follows: |
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(d) In this section, "state official" means: |
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(1) a member of the legislature; |
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(2) the governor; |
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(3) the lieutenant governor; |
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(4) a justice of the supreme court; |
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(5) a judge of the court of criminal appeals; |
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(6) the attorney general; |
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(7) the commissioner of the General Land Office; |
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(8) the comptroller; |
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(9) a member of the Railroad Commission of Texas; |
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(10) the commissioner of agriculture; |
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(11) the commissioner of insurance; |
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(12) the secretary of state; or |
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(13) [(12)] a member of the State Board of Education. |
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SECTION 4.07. Sections 31.023 and 33.002, Insurance Code, |
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are repealed. |
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ARTICLE 5. ELECTION DATE; EFFECTIVE DATE. |
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SECTION 5.01. (a) The first general election for |
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commissioner of insurance shall be held November 2, 2010, for a |
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two-year term beginning on January 1, 2011. Thereafter, the |
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commissioner of insurance shall be elected to serve a four-year |
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term. |
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(b) Until the first commissioner of insurance elected under |
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this Act takes office, the commissioner serving on the effective |
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date of this Act shall, unless otherwise removed as provided by law, |
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continue in office under the prior law that governed the office, and |
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that prior law is continued in effect for that purpose. If on |
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January 1, 2011, there is a vacancy in the office of commissioner of |
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insurance created under this Act because the first |
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commissioner-elect has died or refuses or is permanently unable to |
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serve, the commissioner serving on that date shall, unless |
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otherwise removed as provided by law, continue in office under the |
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prior law that governed the office until the governor fills the |
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vacancy by appointment in the manner provided by law. The prior law |
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that governed the office of the commissioner of insurance is |
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continued in effect for that purpose. |
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SECTION 5.02. This Act takes effect September 1, 2009, |
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except as otherwise provided. |
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SECTION 5.03. The commissioner of insurance shall adopt all |
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rules necessary to implement this Act on or before December 1, 2009. |
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SECTION 5.04. The change in law made by this Act applies to |
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insurance policies delivered, issued for delivery, or renewed on or |
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after January 1, 2010, and to rates for those policies. An insurance |
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policy delivered, issued for delivery, or renewed before January 1, |
|
2010, and rates for the policy are governed by the law as it existed |
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immediately before the effective date of this Act, and that law is |
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continued in effect for that purpose. |