By: Martinez Fischer H.B. No. 4658
A BILL TO BE ENTITLED
AN ACT
relating to regulation of property and casualty insurance rates,
required use by insurers of certain standard insurance policy forms
for residential property insurance, and the election of the
commissioner of insurance.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. ARTICLE 1. LEGISLATIVE FINDINGS
SECTION 1. PURPOSE AND FINDINGS. The Legislature finds
that the purchase of insurance coverage is one of the most important
purchases that Texas consumers make. The Legislature finds it is in
the public interest to promote fair competition among insurers by
requiring minimum standards of coverage, while allowing insurers to
offer enhanced and reduced coverage choices; and by requiring that
consumers be fully informed of their coverage choices. The
Legislature further finds that effective regulation to provide fair
rates that balance affordable coverage for consumers with a
reasonable rate of return to maintain insurer solvency is vital to
the financial health of the State. In addition, the Legislature
finds that direct accountability of the Commissioner of Insurance
to the voters of Texas will promote the goals of fair coverage at
fair rates.
ARTICLE 2. STANDARD FORMS
SECTION 2.01. Section 2301.008, Insurance Code, is amended
to read as follows:
Sec. 2301.008. ADOPTION AND USE OF STANDARD FORMS. (a)
The commissioner shall [may] adopt standard insurance policy forms,
printed endorsement forms, and related forms other than insurance
policy forms and printed endorsement forms, that an insurer shall
[may] use in addition to [instead of] the insurer's own forms in
writing insurance subject to this subchapter.
SECTION 2.02. Section 2301.052(b), Insurance Code, is
amended to read as follows:
(b) Subject to Section 2301.0525, an [An] insurer may
continue to use an insurance policy form or endorsement
promulgated, approved, or adopted under Article 5.06 or 5.35 before
June 11, 2003, on written notification to the commissioner that the
insurer will continue to use the form or endorsement.
SECTION 2.03. Subchapter B, Chapter 2301, Insurance Code,
is amended by adding Section 2301.0525 to read as follows:
Sec. 2301.0525. USE OF MINIMUM STANDARD INSURANCE POLICY
FORMS REQUIRED. (a) Each insurer that writes residential property
insurance in this state shall use the standard insurance policy
forms adopted by the commissioner under Section 2301.008 for
residential property insurance and, subject to Subsection (b), may
also use alternative policy forms approved by the commissioner
under Section 2301.006.
(b) An insurer may not deliver or issue for delivery in this
state a residential property insurance policy unless the insurer
informs each applicant for that insurance coverage, in the manner
prescribed by commissioner rule, that an applicant otherwise
qualified for that insurance coverage under this code may elect to
obtain residential property insurance coverage under a standard
insurance policy adopted by the commissioner under Section
2301.008.
(c) An insurer that offers coverage under the standard
policy forms shall disclose to the applicant or insured, at the time
of the initial application and each renewal, each policy limit and
type of coverage available to the insured and the respective costs
for each coverage. The form of the disclosure shall be specified by
the commissioner, subject to the provisions of Section 2301.053(c).
(d) An insurer that offers coverages under approved forms
other than the standard policy forms shall disclose to the
applicant or insured, at the time of the initial application and
each renewal, in comparison to the standard policy forms each
additional coverage that is provided and the additional cost, each
reduction in coverage or exclusion of coverage and the reduced
cost, and each policy limit and type of coverage available to the
insured and the respective costs for each coverage. The form of the
disclosure shall be specified by the commissioner, subject to the
provisions of Section 2301.053(c).
SECTION 2.04. Subchapter B, Chapter 2301, Insurance Code,
is amended by adding Section 2301.056 to read as follows:
Sec. 2301.056. REQUIRED COVERAGES. The standard insurance
policy forms adopted by the commissioner under Section 2301.008
for residential property insurance shall provide, in addition to
other coverages determined by the commissioner, the following:
(a) Wind-driven rain. Damage caused or contributed to by
wind-driven rain shall be covered.
(b) Concurrent causation. An insurer shall be liable for
damage that is caused in whole or in part by a covered cause,
whether by concurrent or sequential causation or otherwise, except
to the extent that the insurer establishes the portion of the loss,
if any, solely caused by an excluded cause.
(c) Animal injuries. Injuries to third parties caused by
pets shall be covered.
(d) Appraisal. Any right to invoke appraisal shall be
invoked within sixty (60) days after a dispute arises and not later
than sixty (60) days after suit is filed relating to the claim.
(e) Additional living expenses. Coverage for additional
living expenses shall be provided whenever the property becomes
uninhabitable, including a mandatory evacuation.
ARTICLE 3. PRIOR APPROVAL OF RATES
SECTION 3.01. Section 706.004, Insurance Code, as effective
April 1, 2009, is amended to read as follows:
Sec. 706.004. RATES AND FORMS. Notwithstanding any other
law, rates and forms for insurance coverage issued under this
chapter are governed by:
(1) Subchapters A-D [A-E], Chapter 2251;
(2) Subchapter A, Chapter 2301; and
(3) Article 5.13-2.
SECTION 3.02. Section 912.002(c), Insurance Code, as
effective April 1, 2009, is amended to read as follows:
(c) Rate regulation for a residential fire and allied lines
insurance policy written by a county mutual insurance company is
subject to Chapters 2251 and [Chapter] 2253. Rate [On and after
December 1, 2004, rate] regulation for a personal automobile
insurance policy and a residential fire and allied lines insurance
policy written by a county mutual insurance company is subject to
Article 5.13-2 and Chapter 2251. A county mutual insurance company
is subject to Chapter 2253. The commissioner may adopt rules as
necessary to implement this subsection.
SECTION 3.03. Section 1806.052, Insurance Code, is amended
to read as follows:
Sec. 1806.052. CONSTRUCTION OF SUBCHAPTER. This subchapter
may not be construed to prohibit the modification of rates by a
rating plan that complies [is filed in accordance] with the
requirements of Chapter 2251 or Article 5.13-2, as applicable,
[that has not been disapproved by the commissioner,] and that is
designed to encourage the prevention of accidents, and to account
for all relevant factors inside and outside this state, including
the peculiar hazards and experience of past and prospective
individual risks.
SECTION 3.04. Section 2151.001(2), Insurance Code, is
amended to read as follows:
(2) "Authorized insurer" means an insurer authorized
by the department to write automobile liability coverage under this
title. [Except as provided by Section 2251.204, the term does not
include a county mutual insurance company organized under Chapter
912.]
SECTION 3.05. Section 2251.003, Insurance Code, is amended
to read as follows:
Sec. 2251.003. APPLICABILITY OF CERTAIN SUBCHAPTERS.
(a) This subchapter and Subchapters B, C, D, and E apply to:
(1) an insurer to which Article 5.13 applies, other than the
Texas Windstorm Insurance Association, the FAIR Plan Association,
and the Texas Automobile Insurance Plan Association; and
(2) [except as provided by Subsection (c), a] A Lloyd's
plan, reciprocal or interinsurance exchange, and county mutual
insurance company with respect to the lines of insurance described
by Subsection (b).
(b) This subchapter and Subchapters B, C, D, and E apply to
all lines of the following kinds of insurance written under an
insurance policy or contract issued by an insurer authorized to
engage in the business of insurance in this state:
(1) general liability insurance;
(2) residential and commercial property insurance,
including farm and ranch insurance and farm and ranch owners
insurance;
(3) personal and commercial casualty insurance, except as
provided by Section 2251.004;
(4) medical professional liability insurance;
(5) fidelity, guaranty, and surety bonds other than
criminal court appearance 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;
(13) hail insurance on farm crops;
(14) personal and commercial automobile insurance;
(15) multi-peril insurance; and
(16) identity theft insurance issued under Chapter 706.
[(c) Sections 2251.008, 2251.052, 2251.101, 2251.102,
2251.103, 2251.104, 2251.105, and 2451.107 do not apply to a
Lloyd's plan or a reciprocal or interinsurance exchange with
respect to commercial property insurance, inland marine insurance,
rain insurance, or hail insurance on farm crops.]
SECTION 3.06. Section 2251.101(a), Insurance Code, is
amended to read as follows:
(a) For [Except as provided by Subchapter D, for] risks
written in this state, each insurer shall file with the
commissioner all rates, applicable rating manuals, supplementary
rating information, and additional information as required by the
commissioner.
SECTION 3.07. The heading of Subchapter D, Chapter 2251,
Insurance Code, is amended to read as follows:
SUBCHAPTER D. PRIOR APPROVAL OF RATES [UNDER CERTAIN CIRCUMSTANCES]
SECTION 3.08. Section 2251.151, Insurance Code, is amended
to read as follows:
Sec. 2251.151. FILING OF [REQUIREMENT TO FILE] RATES FOR
PRIOR APPROVAL [UNDER CERTAIN CIRCUMSTANCES]. (a) An insurer may
not use a rate until the rate has been filed with the department in
accordance with Subchapter C and approved by the commissioner in
accordance with this subchapter.
[The commissioner by order may require an insurer to file
with the department for the commissioner's approval all rates,
supplementary rating information, and any supporting information
in accordance with this subchapter if the commissioner determines
that:
[(1) the insurer's rates require supervision because
of the insurer's financial condition or rating practices; or
[(2) a statewide insurance emergency exists.]
(b) [(a 1)] If an insurer files a petition under Subchapter
D, Chapter 36, for judicial review of an order disapproving a rate
under this chapter, the insurer must use the rates in effect for the
insurer at the time the petition is filed and may not file and use
any higher rate for the same line of insurance subject to this
chapter before the matter subject to judicial review is finally
resolved unless the insurer, in accordance with this subchapter,
files the new rate with the department, along with any applicable
supplementary rating information and supporting information, and
obtains the commissioner's approval of the rate.
(c) [(b)] From the date a [of the filing of the] rate is
filed with the department under this section to the effective date
of the new rate, the insurer's previously approved [filed] rate
that is in effect on the date of the filing remains in effect.
[(c) The commissioner may require an insurer to file the
insurer's rates under this section until the commissioner
determines that the conditions described by Subsection (a) no
longer exist.]
(d) For purposes of this section, a rate is filed with the
department on the date the department receives the rate filing.
[(e) If the commissioner requires an insurer to file the
insurer's rates under this section, the commissioner shall issue an
order specifying the commissioner's reasons for requiring the rate
filing. An affected insurer is entitled to a hearing on written
request made to the commissioner not later than the 30th day after
the date the order is issued.]
SECTION 3.09. Section 2251.152, Insurance Code, is
repealed.
SECTION 3.10. Section 2251.156, Insurance Code, is amended
to read as follows:
Sec. 2251.156. RATE FILING DISAPPROVAL BY COMMISSIONER;
HEARING. (a) If the commissioner disapproves a rate filing under
this chapter [Section 2251.153(a)(2)], the commissioner shall
issue an order specifying in what respects the filing fails to meet
the requirements of this chapter [disapproving the filing in
accordance with Section 2251.103(b)].
(b) An insurer whose rate filing is disapproved is entitled
to a hearing on written request made to the commissioner not later
than the 30th day after the date the order disapproving the rate
filing takes effect [in accordance with Section 2251.103(c)].
ARTICLE 4. ELECTION OF INSURANCE COMMISSIONER.
SECTION 4.01. Section 31.022, Insurance Code, is amended to
read as follows:
Sec. 31.022. ELECTION [APPOINTMENT; TERM]. The
commissioner is elected by the qualified voters at the general
election for state and county officers for a term of four years.
[(a) The governor, with the advice and consent of the senate, shall
appoint the commissioner. The commissioner serves a two-year term
that expires on February 1 of each odd-numbered year.
[(b) The governor shall appoint the commissioner without
regard to the race, color, disability, sex, religion, age, or
national origin of the appointee.]
SECTION 4.02. Section 31.024, Insurance Code, is amended to
read as follows:
Sec. 31.024. INELIGIBILITY FOR PUBLIC OFFICE. The
commissioner is ineligible to be a candidate for another [a] public
elective office in this state, unless the commissioner has resigned
and the governor has accepted the resignation.
SECTION 4.03. Section 31.027(a), Insurance Code, is amended
to read as follows:
(a) It is a ground for removal from office if the
commissioner:
(1) [does not have at the time of appointment the
qualifications required by Section 31.023;
[(2) does not maintain during service as commissioner
the qualifications required by Section 31.023;
[(3)] violates a prohibition established by Section
33.001, 33.003, 33.004, or 33.005; or
(2) [(4)] cannot, because of illness or disability,
discharge the commissioner's duties for a substantial part of the
commissioner's term.
SECTION 4.04. Section 52.092(c), Election Code, is amended
to read as follows:
(c) Statewide offices of the state government shall be
listed in the following order:
(1) governor;
(2) lieutenant governor;
(3) attorney general;
(4) comptroller of public accounts;
(5) commissioner of the General Land Office;
(6) commissioner of agriculture;
(7) commissioner of insurance;
(8) railroad commissioner;
(9) [(8)] chief justice, supreme court;
(10) [(9)] justice, supreme court;
(11) [(10)] presiding judge, court of criminal
appeals;
(12) [(11)] judge, court of criminal appeals.
SECTION 4.05. Section 504.401(d), Transportation Code, is
amended to read as follows:
(d) In this section, "state official" means:
(1) a member of the legislature;
(2) the governor;
(3) the lieutenant governor;
(4) a justice of the supreme court;
(5) a judge of the court of criminal appeals;
(6) the attorney general;
(7) the commissioner of the General Land Office;
(8) the comptroller;
(9) a member of the Railroad Commission of Texas;
(10) the commissioner of agriculture;
(11) the commissioner of insurance;
(12) the secretary of state; or
(13) [(12)] a member of the State Board of Education.
SECTION 4.07. Sections 31.023 and 33.002, Insurance Code,
are repealed.
ARTICLE 5. ELECTION DATE; EFFECTIVE DATE.
SECTION 5.01. (a) The first general election for
commissioner of insurance shall be held November 2, 2010, for a
two-year term beginning on January 1, 2011. Thereafter, the
commissioner of insurance shall be elected to serve a four-year
term.
(b) Until the first commissioner of insurance elected under
this Act takes office, the commissioner serving on the effective
date of this Act shall, unless otherwise removed as provided by law,
continue in office under the prior law that governed the office, and
that prior law is continued in effect for that purpose. If on
January 1, 2011, there is a vacancy in the office of commissioner of
insurance created under this Act because the first
commissioner-elect has died or refuses or is permanently unable to
serve, the commissioner serving on that date shall, unless
otherwise removed as provided by law, continue in office under the
prior law that governed the office until the governor fills the
vacancy by appointment in the manner provided by law. The prior law
that governed the office of the commissioner of insurance is
continued in effect for that purpose.
SECTION 5.02. This Act takes effect September 1, 2009,
except as otherwise provided.
SECTION 5.03. The commissioner of insurance shall adopt all
rules necessary to implement this Act on or before December 1, 2009.
SECTION 5.04. The change in law made by this Act applies to
insurance policies delivered, issued for delivery, or renewed on or
after January 1, 2010, and to rates for those policies. An insurance
policy delivered, issued for delivery, or renewed before January 1,
2010, and rates for the policy are governed by the law as it existed
immediately before the effective date of this Act, and that law is
continued in effect for that purpose.