81R11555 TJS-F
By: Eiland H.B. No. 2539
A BILL TO BE ENTITLED
AN ACT
relating to a disaster recovery insurance claims mediation program.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Chapter 542, Insurance Code, is amended by
adding Subchapter H to read as follows:
SUBCHAPTER H. DISASTER RECOVERY INSURANCE CLAIMS MEDIATION PROGRAM
Sec. 542.351. PURPOSE. This subchapter establishes a
nonadversarial mediation program to promote effective, fair, and
timely handling of unresolved residential property insurance
claims arising from damage caused by hurricanes, cyclones,
tornados, or other disasters in an area designated a disaster area
by the president of the United States.
Sec. 542.352. GENERAL DEFINITIONS. In this subchapter:
(1) "Administrator" means the department or its
designee.
(2) "Business day" means a day other than a Saturday, a
Sunday, or a holiday recognized by this state.
(3) "Insurer" has the meaning assigned by Section
801.001.
(4) "Mediator" means an individual designated by the
administrator to mediate disputes under this subchapter.
(5) "Party" means an insured or insurer that
participates in mediation under this subchapter.
(6) "Program" means the disaster recovery insurance
claims mediation program established under this subchapter.
(7) "Residential property insurance" has the meaning
assigned by Section 2301.002, and includes coverage under:
(A) an industrial fire insurance policy, as
described by Section 912.310;
(B) a residential windstorm and hail insurance
policy under Chapter 2210; and
(C) a policy issued by the Texas FAIR Plan under
Chapter 2211.
Sec. 542.353. CLAIMS. (a) For purposes of this subchapter,
"claim" means a first-party insurance loss that is disputed or for
which the insurer has denied payment.
(b) A claim is limited to a loss that is:
(1) covered under a residential property insurance
policy that is in effect at the time of the loss; and
(2) incurred as a result of a declared disaster.
(c) The total amount of a loss under Subsection (b) must be
at least $1,000. The difference between the positions of the
parties must be at least $500 after any applicable deductible is
applied.
(d) A claim includes a dispute regarding the cause of a loss
that may be resolved through a forensic mediation conference in
which experts on meteorology, engineering, geography, and
construction present information regarding:
(1) the extent of damage caused by wind or other peril;
(2) the structural soundness of the property before
and after the disaster; and
(3) the cost of repairs.
Sec. 542.354. APPLICABILITY OF SUBCHAPTER; EXCEPTIONS. (a)
This subchapter applies only to first-party claims resulting from
damage to property located in this state that is covered under
residential property insurance issued by:
(1) an insurer;
(2) an eligible surplus lines insurer;
(3) the Texas Windstorm Insurance Association; or
(4) the Texas FAIR Plan.
(b) This subchapter does not apply to:
(1) a policy issued under the national flood insurance
program;
(2) a commercial insurance policy;
(3) a private passenger automobile insurance policy;
or
(4) liability coverage under a residential property
insurance policy.
Sec. 542.355. GENERAL POWERS AND DUTIES OF DEPARTMENT AND
COMMISSIONER; RULES. (a) The department may designate and
contract with a person to serve as its administrator to develop and
oversee the program.
(b) The commissioner may adopt rules as reasonable and
necessary to implement this subchapter.
(c) The commissioner shall enforce this subchapter.
Sec. 542.356. REPORTING REQUIREMENTS. (a) In the biennial
report submitted to the governor and the legislature under Section
32.022, the commissioner shall report regarding the status of the
program, including:
(1) statistics about the number of cases suitable for
mediation, the number sent to mediation, the number of mediations
accepted, and the number of mediations rejected; and
(2) other similar information concerning the
operation of the program.
(b) At three-month intervals, the department shall collect
from any administrator with which it contracts for services under
this subchapter information regarding:
(1) the number of persons to whom mediation was
offered;
(2) the number of insurers that accepted and declined
mediation;
(3) the number of settlement offers;
(4) the number of completed settlement agreements and
the amounts initially claimed and ultimately settled;
(5) the number of settlement agreements offered but
rescinded during the rescission period; and
(6) any other information required by the
commissioner.
(c) Not later than the fifth day after the conclusion of a
mediation conference, the mediator shall file with the
administrator a status report indicating whether the parties
reached a settlement. If the parties reached a settlement, the
mediator shall include a copy of the settlement agreement with the
status report. The settlement agreement is subject to the
confidentiality requirements of Section 542.371.
Sec. 542.357. PROGRAM IMPLEMENTATION. (a) After a
disaster is declared by the president of the United States, the
commissioner, by order, may implement the disaster recovery
insurance claims mediation program under this subchapter.
(b) The program is available to a party only after the party
has had adequate time, as determined by the commissioner, to
inspect the damaged property, assess the damage, obtain
information, and attempt to resolve a claim without resorting to
the program.
(c) Mediation is not required under the program with regard
to a claim that:
(1) based on agreed facts between the parties
concerning the cause of the loss, is not covered under the policy;
or
(2) the insurer has alleged to be fraudulent and has
reported as fraudulent to the department.
(d) The commissioner's order must include a termination
date for requests for mediation regarding losses incurred because
of the declared disaster. The commissioner may extend the
termination date by order.
Sec. 542.358. NOTICE TO INSUREDS OF RIGHT TO MEDIATION. (a)
Each insurer shall provide, in the manner prescribed by
commissioner rule, notice to its insureds of their right to mediate
claims following an order of the commissioner under Section
542.357.
(b) The insurer shall send the notice to a policyholder:
(1) whose reported loss under a policy issued by the
insurer has not been paid as of the effective date of the order; or
(2) who has disputed a denial or partial denial of a
claim during the mediation period established by the commissioner's
order.
(c) Notice under this section must be in the form prescribed
by the commissioner by rule, and must include instructions about
how to request mediation, including the address, telephone number,
fax number, and Internet website for requesting mediation through
the administrator. The notice must state that, except as provided
by Section 542.363, the administrator may schedule a mediation
conference not earlier than the 21st day after the date of the
notice.
(d) The commissioner may by rule require additional
information to be included in the notice.
Sec. 542.359. REQUEST FOR MEDIATION. (a) An insured may
request mediation by completing a request form prescribed by the
department for that purpose and delivering the form to the
administrator.
(b) The insured must include in a mediation request form:
(1) the name, mailing address, and telephone numbers
of the insured, including a cell phone number, if any;
(2) the location of the property that is the subject of
the dispute, if different from the mailing address provided;
(3) the name of the insurer, the claim number, and the
policy number of the insured; and
(4) a brief description of the dispute.
(c) If an insurer receives a request for mediation from an
insured, the insurer shall:
(1) instruct the insured to call the department's
toll-free number as established by Section 521.051; or
(2) provide the insured with the mediation request
form not later than one business day after receiving the request for
mediation.
(d) The administrator shall notify the parties on receipt of
a completed mediation request form that mediation has been
requested. The administrator shall use an electronic notification
process to inform insurers of mediation requests, mediation
conference schedules and locations, and statistics relating to
participation in mediation. The administrator shall provide
parties notice of the date, time, and location of a mediation
conference not later than the 14th day before the date on which the
conference is scheduled.
(e) An insurer may reject a mediation request if the dispute
does not involve a claim as described by Section 542.353. If the
insurer rejects the request, the insurer shall notify the insured
and the administrator in writing of the rejection and specify the
reasons for the rejection.
Sec. 542.360. FEES. (a) Except as provided by Subsection
(c), the insurer shall pay reasonable fees for scheduled mediation
conferences. The total fee for mediation under this subchapter is
$350, with $300 paid as the mediator fee and $50 as the
administrator fee.
(b) The administrator shall bill insurers separately for
mediation fees and administrative fees. The administrator shall
bill insureds for mediation fees as provided by Subsection (e) and
Section 542.365.
(c) If the parties reach an agreement before the mediation
conference is scheduled, no mediation fee is owed.
(d) If the mediation conference is canceled for any reason
by the insured or the insurer after the conference has been
scheduled, the insurer shall pay the mediator $100 as the mediator
fee and the administrator the entire $50 administrator fee, except
as provided by Subsection (e).
(e) If the insured fails to appear at the mediation
conference and does not show good cause for the failure to appear,
the mediation conference shall be considered to have been held, and
the insurer shall pay the fees in accordance with Subsection (d).
If the insured wishes to schedule a new conference after failing to
appear without good cause, the insured shall pay the fees for the
new mediation conference. A new mediation conference may be
rescheduled only on the insured's payment of the mediation fees in
the amounts specified under Subsection (a).
Sec. 542.361. PAYMENT OF EXPENSES. Except as provided by
Section 542.365, any expenses associated with participation in a
mediation conference, such as travel, telephone, postage, meals,
lodging, facilities, and other related expenses, shall be borne by
the party or other person incurring the expense.
Sec. 542.362. SELECTION OF MEDIATOR. (a) The
administrator shall select mediators from a list created by the
administrator of qualified mediators. To be qualified, a mediator:
(1) must meet the requirements under Section 154.052,
Civil Practice and Remedies Code;
(2) must follow the standards provided by the ethical
guidelines for mediators promulgated by the supreme court;
(3) may not be the subject of an administrative action
by another agency or governmental entity, regardless of whether the
action relates to mediation; and
(4) may not have been found guilty of or have plead
nolo contendere to a felony or a crime punishable by imprisonment
for one year or more under a law of any state or country, without
regard to whether a judgment or conviction has been entered by the
court having jurisdiction of the case.
(b) The administrator, in the administrator's sole
discretion, may remove a mediator from the list of qualified
mediators. The circumstances in which the administrator may remove
a mediator from the list include:
(1) alleged instances of dishonest, incompetent,
fraudulent, or unethical behavior on the part of the mediator;
(2) an instance in which the mediator allegedly failed
to respond promptly and completely to requests from the
administrator, or in which the acts or omissions of the mediator are
counter to the standards provided by this chapter; or
(3) a determination that the mediator does not meet
the requirements of Subsection (a)(3) or (4).
(c) Each mediator shall be selected in a manner determined
by the administrator. In the notice regarding the scheduling of a
mediation conference sent under Section 542.359(d), the
administrator shall provide biographical information about the
mediator to the parties. In selecting a mediator, the
administrator shall consider the costs associated with travel to
the mediation conference for the mediator and the parties. A
mediator serves at the sole discretion of the administrator.
(d) Each party may object once to the appointment of a
mediator without showing cause why the mediator should not serve.
If a party objects to the appointment of a mediator, the
administrator shall dismiss that mediator and appoint a replacement
mediator.
(e) A party may request that a mediator be disqualified for
good cause without exhausting the party's right to object to a
mediator under Subsection (d). A request under this subsection
must be submitted to the administrator in writing at any time before
the conclusion of the mediation conference. A party may show good
cause by demonstrating that:
(1) there is a conflict of interest between a party and
the mediator;
(2) the mediator cannot competently handle the
mediation conference; or
(3) other reasons exist why the mediation conference
would be impaired under the continued service of the mediator.
(f) A complaint regarding a mediator must be submitted to
the administrator in writing.
Sec. 542.363. SCHEDULING OF MEDIATION CONFERENCE;
RESOLUTION PERIOD BEFORE CONFERENCE. (a) Not later than the 30th
day after the date the administrator receives a request for
mediation, the administrator shall contact the parties and schedule
a mediation conference. If practicable, the administrator shall
schedule the conference to occur not later than the 45th day after
the date on which the administrator receives the mediation request
form.
(b) If a residential property insurance claim remains
unresolved, the administrator shall notify the parties that the
dispute will be referred to a mediation conference if the parties do
not resolve the dispute not later than the 21st day after the date
of the administrator's notice. The administrator, for good cause,
may extend the resolution period under this subsection for an
additional seven days.
Sec. 542.364. MEDIATION CONFERENCE LOCATION. To the extent
practicable, the mediation conference shall be located in or near
the area that was the subject of the disaster declaration by the
president. The administrator may designate within a particular
county multiple locations for mediation conferences.
Sec. 542.365. DUTIES OF PARTIES; EFFECT OF FAILURE TO
APPEAR. (a) Each party to a mediation conducted under this
subchapter must negotiate in good faith and must have the authority
to settle claims, subject to the rescission period under Section
542.367.
(b) An insurer that fails to appear for a scheduled
mediation conference at which the insured appears shall pay:
(1) the insured for the insured's actual expenses
incurred in attending the conference, plus the value of any lost
wages; and
(2) the total fees for the rescheduled conference.
(c) An insured who fails to appear for a scheduled mediation
conference for good cause may reschedule once for a time set by the
administrator. If the insured subsequently fails to appear, that
insured loses the insured's right to mediate the claim under this
subchapter, and shall pay all the fees charged by the administrator
up to the time of the conference at which the insured failed to
appear.
Sec. 542.366. CONDUCT OF MEDIATION CONFERENCE. (a) An
insured is not required to retain counsel to participate in a
mediation conference. The insured or the insured's representative
shall inform the administrator if the insured will be represented
by counsel at the mediation conference not later than the seventh
day before the date the mediation conference is scheduled to occur.
(b) The administrator shall inform the insurer as soon as
practicable if the insured will be represented by counsel. If the
insured is represented by counsel at the mediation conference, the
insurer's counsel may also be present. If the insured is not
represented by counsel, the insurer's counsel may not be present.
(c) A party may have the assistance of persons at the
mediation conference who may assist in the presentation of the
claim, including public insurance adjusters, contractors,
engineers, and interpreters. A party who wishes to use the
assistance of such a person must notify the administrator not later
than the seventh day before the date the mediation conference is
scheduled to occur.
(d) Representatives from the department may be present to
observe the mediation conference but are not parties to the
conference.
(e) Video and audio electronic recordings of mediation
conferences are prohibited.
Sec. 542.367. MEDIATION NONBINDING; RESCISSION PERIOD. (a)
Except as provided by Subsection (c), mediation conducted under the
program is nonbinding, and the insured and the insurer are not
required to accept an agreement proposed during the mediation.
(b) If the parties agree to a settlement for the disputed
matters resolved as a result of the mediation, the insured may
rescind the agreement until the end of the third business day after
the date of the settlement if the insured has not, in relation to
the settlement agreement:
(1) cashed or deposited any check or draft disbursed
to the insured; or
(2) agreed in writing to accept an electronic funds
transfer.
(c) If counsel for the insured is present at the mediation
conference and the parties concur in a settlement agreement that is
signed by the insured's counsel, the agreement is immediately
effective on the insured and may not be rescinded.
(d) If the insured rescinds a settlement agreement, the
agreement may not be admitted in evidence or disclosed unless the
insured and all other parties to the agreement expressly agree to
its disclosure.
(e) If the settlement agreement is not rescinded by the
insured, the agreement acts as a release of all specific claims for
damages that were known at the time of the mediation and were
presented and agreed to at the mediation conference.
(f) This section does not affect rights under existing law
for residential property insurance claims for damage that was
undetected as of the date of the mediation conference.
Sec. 542.368. OTHER DISPUTE RESOLUTION. If the insured
elects not to participate in mediation, or, if after participating
in the program the parties do not resolve the claim, the parties may
proceed:
(1) under the appraisal process, if applicable, in the
insured's insurance policy;
(2) by litigation;
(3) by any other dispute resolution procedure
available under the laws of this state; or
(4) by unmediated private negotiation.
Sec. 542.369. EFFECT OF INSURER REFUSAL TO MEDIATE. (a) In
addition to any other remedy available under Chapter 82, the
commissioner, on a determination that an insurer has engaged in an
arbitrary or unreasonable refusal to mediate, may enter an order
requiring that the insurer participate in mediation in all cases
determined by the commissioner to be appropriate for mediation
under this subchapter.
(b) An insurer that the commissioner has ordered to
participate in mandatory mediation under Subsection (a) may seek
judicial review of the order not later than the 30th day after the
date the order was entered by the commissioner. The commissioner's
order to participate in mediation may not be stayed during the
pendency of a judicial proceeding for more than 60 calendar days
after the date the order was entered. The basis of the
commissioner's decision to require an insurer to mediate may not be
made public unless judicial review is sought.
(c) An arbitrary or unreasonable refusal by an insurer to
participate in mediation under this subchapter is a deceptive trade
practice under Chapter 541 and an unfair claims settlement practice
under Subchapter A.
Sec. 542.370. EFFECT ON LITIGATION. (a) Referral to
mediation or the pendency of mediation under this subchapter does
not operate as a basis to prevent or stay the filing of civil
litigation arising wholly or partly out of the facts that are the
basis of the mediation.
(b) Any applicable statute of limitations or limitation on
the insured's right to sue is tolled, beginning on the date the
insurer was notified of the mediation conference under Section
542.363 and ending on the date:
(1) mediation is completed or declined;
(2) the insured loses the right to mediate because of a
failure to appear; or
(3) if a settlement agreement is completed, the
rescission period established under Section 542.367 expires.
Sec. 542.371. CONFIDENTIALITY REQUIREMENTS. (a)
Statements made by the parties, negotiations between the parties,
and documents produced during a mediation conducted under this
subchapter are confidential.
(b) Mediation documents, including settlement agreements,
obtained by the department are confidential and are not subject to
disclosure under Chapter 552, Government Code. This subchapter
does not affect the discoverability or admissibility of documents
that are otherwise discoverable or admissible.
(c) The confidentiality required under this section does
not restrict department access to documents or other information
the department seeks in order to evaluate the program or to comply
with reporting requirements.
SECTION 2. This Act takes effect immediately 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 immediate effect, this
Act takes effect September 1, 2009.