82R9885 AJA-D

By: Smithee H.B. No. 3024

A BILL TO BE ENTITLED

AN ACT

relating to the Fair Access to Insurance Requirements (FAIR) Plan Association.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Subchapter A, Chapter 541, Insurance Code, is amended by adding Section 541.0051 to read as follows:

Sec. 541.0051. EXEMPTION: FAIR PLAN. This chapter does not apply to the Fair Access to Insurance Requirements (FAIR) Plan Association or an action brought against the association by a person who is insured under Chapter 2211.

SECTION 2. Subchapter A, Chapter 542, Insurance Code, is amended by adding Section 542.0021 to read as follows:

Sec. 542.0021. EXEMPTION: FAIR PLAN. This chapter does not apply to the Fair Access to Insurance Requirements (FAIR) Plan Association or a claim made against the association by a person who is insured under Chapter 2211.

SECTION 3. Subchapter A, Chapter 2211, Insurance Code, is amended by adding Sections 2211.004 and 2211.005 to read as follows:

Sec. 2211.004. FAIR POLICYHOLDER AS ARBITRATOR OR JUDGE. A person who holds a policy issued by the association may not serve as an arbitrator or judge in an arbitration or judicial or administrative proceeding in which the association is a party.

Sec. 2211.005. EXEMPLARY DAMAGES; ATTORNEY'S FEES. (a) The association is not subject to exemplary damages or multiplied damages under any other law.

(b) The association may be required to pay another party's attorney's fees only as provided by this chapter.

SECTION 4. Section 2211.0521, Insurance Code, is amended by adding Subsections (c), (d), (e), and (f) to read as follows:

(c) The association is subject to Chapter 551, Government Code.

(d) Notice of a meeting of the association's governing committee must, not later than the seventh day before the date the meeting is scheduled, be conspicuously posted on the department's Internet website and on the association's Internet website. This subsection does not apply to a meeting subject to Section 551.0411(b) or 551.045, Government Code.

(e) Meetings of the association's governing committee must be made readily accessible to the public by video or audio on the Internet.

(f) The association's governing committee shall allow a representative of the department to be present at meetings of the association's governing committee, physically or otherwise, at the department's option. This subsection applies to a closed meeting authorized by Subchapter D, Chapter 551, Government Code.

SECTION 5. Subchapter B, Chapter 2211, Insurance Code, is amended by adding Sections 2211.0522, 2211.0541, and 2211.0542 to read as follows:

Sec. 2211.0522. RECORDS OF ASSOCIATION. The association is subject to Chapter 552, Government Code.

Sec. 2211.0541. AGENT COMMISSIONS. The commissioner shall ensure that the agent commissions adopted under Section 2211.054 are fair and reasonable with respect to the work performed by the agents and the prevailing compensation of agents in the private residential property insurance market.

Sec. 2211.0542. REINSURANCE. The association may recoup the costs of ceding reinsurance by imposing a pro rata premium surcharge on policies issued by the association.

SECTION 6. Subchapter D, Chapter 2211, Insurance Code, is amended by adding Sections 2211.158, 2211.159, 2211.160, 2211.161, and 2211.162 to read as follows:

Sec. 2211.158. FLOOD INSURANCE. (a) The association may not issue an insurance policy for initial or renewal coverage unless evidence is submitted to the association that the property to be covered under the policy is also covered by a flood insurance policy issued under the National Flood Insurance Program in an amount equal to or greater than the amount of coverage under the policy to be issued by the association. This section does not apply to property for which flood insurance is not available under the National Flood Insurance Program.

(b) An insurance agent who submits an application for a policy under this chapter shall offer flood insurance coverage required by this section to the prospective insured if that coverage is available.

Sec. 2211.159. COVERAGE LIMITS IN CERTAIN FLOOD ZONES. A policy issued by the association to cover property all or part of which is located in Zone A or Zone V, as defined by the Federal Emergency Management Agency, must contain coverage limits that are the same as any applicable coverage limits for flood insurance coverage provided under the National Flood Insurance Program.

Sec. 2211.160. REQUIRED POLICY PROVISION: EVIDENCE OF FLOOD INSURANCE. A policy issued by the association must require an insured to submit to the association evidence of coverage required by Section 2211.158(a) before the association will be required to pay the insured's claim under the policy.

Sec. 2211.161. REQUIRED POLICY PROVISIONS: DEADLINE FOR FILING CLAIM; NOTICE CONCERNING MANDATORY ARBITRATION. (a) A policy issued by the association must:

(1) require an insured to file a claim under the policy not later than the first anniversary of the date on which the damage or loss that is the basis of the claim occurs unless an extension is obtained from the commissioner under this section; and

(2) contain, in boldface type, a conspicuous notice concerning the mandatory arbitration of coverage and claim disputes under Subchapter H, including the deadline for requesting arbitration.

(b) The commissioner for good cause shown may extend the deadline for filing a claim prescribed by this section for up to 90 days.

Sec. 2211.162. CLAIMS HANDLING. (a) Not later than the 30th day after the date a policyholder submits a claim, the association shall provide the policyholder a written appraisal of the damages that are the subject of the claim.

(b) On or before the 60th day after the date a policyholder receives an appraisal under Subsection (a), the policyholder may:

(1) contest the appraisal; or

(2) request a supplemental review or payment.

(c) The commissioner for good cause shown may extend a deadline prescribed by this section.

(d) Not later than the 30th day after the date a policyholder contests an appraisal or makes a request under Subsection (b), the association shall respond to the contest or request.

SECTION 7. Chapter 2211, Insurance Code, is amended by adding Subchapter H to read as follows:

SUBCHAPTER H. ARBITRATION

Sec. 2211.351. ARBITRATION OF CLAIM DISPUTES REQUIRED. A dispute between the association and a person insured under this chapter relating to the payment of, the amount of, or the denial of a particular claim must be resolved through binding arbitration in accordance with this subchapter.

Sec. 2211.352. NOTICE OF CLAIM; DEMAND FOR ARBITRATION. (a) Not later than the 30th day before the date an insured submits a demand for arbitration under this section, the insured must provide the association with a notice of claim that states the amount of damages or additional damages demanded by the insured and details each specific complaint of the insured.

(b) The insured may request arbitration under this section by submitting a written demand to the department not later than the second anniversary of the date on which the damage or loss that is the basis of the particular claim occurs. The commissioner by rule shall prescribe the method for filing a demand for arbitration under this section, which may allow or require submission by mail or the Internet or by a method of local submission in the county in which the loss that is the subject of the claim occurred.

(c) An arbitration under this section may not commence until the notice of claim required by this section has been given and the prescribed notice period has expired.

(d) The commissioner for good cause shown may extend the deadline for requesting arbitration under this section for up to 90 days.

Sec. 2211.353. ARBITRATION PROCEDURES. (a) The commissioner by rule shall establish procedures for conducting an arbitration under this subchapter. The procedures must:

(1) be consistent with any applicable rules of the American Arbitration Association in effect on the date on which a policy under which a claim arbitrated under this subchapter was issued;

(2) provide for the parameters of mandatory and permissible discovery; and

(3) establish deadlines for various stages of the arbitration proceeding.

(b) Rules adopted under this section must contain provisions to ensure that awards under this subchapter are fair and to prevent unfair deviations in awards under this subchapter.

(c) A policyholder may be represented by an attorney in an arbitration conducted under this subchapter.

(d) An arbitrator conducting an arbitration under this subchapter shall issue scheduling orders for the arbitration in accordance with commissioner rules.

Sec. 2211.354. QUALIFICATION AND CERTIFICATION OF ARBITRATOR. (a) The commissioner by rule shall:

(1) require an arbitrator conducting an arbitration under this subchapter to be certified by the department;

(2) prescribe qualifications for being certified as an arbitrator under this section; and

(3) establish a procedure through which an arbitrator may become certified to conduct arbitrations under this subchapter.

(b) A member of the legislature or a person who holds a policy issued by the association may not be certified or serve as an arbitrator under this section.

Sec. 2211.355. LIST OF ARBITRATORS. The department shall make publicly available a list of the arbitrators certified to conduct arbitrations under this subchapter.

Sec. 2211.356. SELECTION OF ARBITRATOR. (a) The commissioner shall randomly assign a certified arbitrator to conduct an arbitration demanded under this subchapter.

(b) Subject to this subsection, on or before the 10th day after the date the commissioner notifies the insured or the association of the assigned arbitrator, the insured or the association may strike the assigned arbitrator. The insured and the association are each entitled to strike only one assigned arbitrator under this subsection.

(c) If an assigned arbitrator is struck under this section, the commissioner shall promptly assign another certified arbitrator.

Sec. 2211.357. COMPENSATION OF ARBITRATOR. (a) The commissioner shall adopt rules governing the compensation of a certified arbitrator for conducting an arbitration under this subchapter, including the amount of compensation, which party or parties are liable for the payment of the compensation, and other necessary billing and payment procedures.

(b) The commissioner shall approve all final requests for compensation by an arbitrator who conducts an arbitration under this subchapter.

Sec. 2211.358. SETTLEMENT OFFERS. (a) Not later than the 30th day before the date an arbitration proceeding under this subchapter is scheduled to commence, the association and the insured must each submit a settlement offer to the department. The arbitrator assigned to conduct the arbitration may not be informed of or consider the content of the settlement offers.

(b) If the arbitrator's award is at least 10 percent greater than the settlement amount offered by the association under this section, the insured is entitled to the insured's reasonable and necessary attorney's fees in connection with the arbitration. The commissioner by rule shall adopt guidelines for an arbitrator to consider in awarding attorney's fees under this subsection.

(c) An arbitrator may award interest on the amount otherwise awarded to pay the insured's claim at a rate of six percent annually, computed from the 30th day after the date the association received the required notice of the claim until the date the claim is paid.

Sec. 2211.359. APPLICABILITY OF CERTAIN OTHER LAW TO ARBITRATION. Except to the extent of any conflict with this subchapter, Chapter 171, Civil Practice and Remedies Code, applies to an arbitration conducted under this subchapter.

Sec. 2211.360. ADDITIONAL RULES. In addition to the rules otherwise required by this subchapter, the commissioner may adopt any other rules necessary to implement this subchapter.

SECTION 8. (a) The changes in law made by Sections 541.0051 and 542.0021, Insurance Code, as added by this Act, apply only to conduct of the Fair Access to Insurance Requirements (FAIR) Plan Association that occurs on or after the effective date of this Act. Conduct of the association that occurs before the effective date of this Act is governed by the law in effect immediately before the effective date of this Act, and that law is continued in effect for that purpose.

(b) Section 2211.004, Insurance Code, as added by this Act, applies to an arbitration or judicial or administrative proceeding commenced on or after the effective date of this Act.

(c) Section 2211.005, Insurance Code, as added by this Act, applies to a cause of action that is not to recover the amount of a claim under an insurance policy issued under Chapter 2211, Insurance Code, that accrues on or after the effective date of this Act. With respect to a claim under an insurance policy issued under Chapter 2211, Insurance Code, Section 2211.005, Insurance Code, as added by this Act, applies only to a claim under a policy delivered, issued for delivery, or renewed on or after the effective date of this Act.

(d) Subchapter D, Chapter 2211, Insurance Code, as amended by this Act, and Subchapter H, Chapter 2211, Insurance Code, as added by this Act, apply only to an insurance policy delivered, issued for delivery, or renewed on or after January 1, 2012, and a claim under that policy. A policy delivered, issued for delivery, or renewed before January 1, 2012, and a claim under that policy are governed by the law in effect immediately before the effective date of this Act, and that law is continued in effect for that purpose.

SECTION 9. This Act takes effect September 1, 2011.