By: Hancock, et al. S.B. No. 10
A BILL TO BE ENTITLED
AN ACT
relating to insurance claims and certain prohibited acts and
practices in the business of insurance.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 17.50(a), Business & Commerce Code, is
amended to read as follows:
(a) A consumer may maintain an action where any of the
following constitute a producing cause of economic damages or
damages for mental anguish:
(1) the use or employment by any person of a false,
misleading, or deceptive act or practice that is:
(A) specifically enumerated in a subdivision of
Subsection (b) of Section 17.46 of this subchapter; and
(B) relied on by a consumer to the consumer's
detriment;
(2) breach of an express or implied warranty;
(3) any unconscionable action or course of action by
any person; or
(4) except as provided by Section 541.151, Insurance
Code, the use or employment by any person of an act or practice in
violation of Chapter 541, Insurance Code.
SECTION 2. Section 541.151, Insurance Code, is amended to
read as follows:
Sec. 541.151. PRIVATE ACTION FOR DAMAGES AUTHORIZED.
(a) Except as provided by Subsection (b), a [A] person who
sustains actual damages may bring an action against another person
for those damages caused by the other person engaging in an act or
practice:
(1) defined by Subchapter B to be an unfair method of
competition or an unfair or deceptive act or practice in the
business of insurance; or
(2) specifically enumerated in Section 17.46(b),
Business & Commerce Code, as an unlawful deceptive trade practice
if the person bringing the action shows that the person relied on
the act or practice to the person's detriment.
(b) A person who brings an action against another person
under this section for an act or practice in violation of Section
541.060 or 541.061 may not bring an action against that other person
under Subchapter E, Chapter 17, Business & Commerce Code, that is
related to the same claim.
SECTION 3. Section 541.156(a), Insurance Code, is amended
to read as follows:
(a) A person who receives notice provided under Section
541.154 or 542A.003 may make a settlement offer during a period
beginning on the date notice under Section 541.154 or 542A.003 is
received and ending on the 60th day after that date.
SECTION 4. The heading to Section 542.060, Insurance Code,
is amended to read as follows:
Sec. 542.060. LIABILITY FOR DELAY IN PAYMENT [VIOLATION OF
SUBCHAPTER].
SECTION 5. Section 542.060, Insurance Code, is amended by
amending Subsection (a) and adding Subsection (c) to read as
follows:
(a) If an insurer that is liable for a claim under an
insurance policy delays payment of the claim in violation of
Section 542.058 [is not in compliance with this subchapter], the
insurer is liable to pay the holder of the policy or the beneficiary
making the claim under the policy, in addition to the amount of the
claim, interest on the amount of the claim as damages at the rate
described by Subsection (c) [of 18 percent a year as damages],
together with reasonable and necessary attorney's fees.
(c) Interest awarded under Subsection (a) accrues beginning
on the date the claim was required to be paid, and the interest rate
applied is determined by adding three percent to the interest rate
determined under Section 304.003, Finance Code.
SECTION 6. Subtitle C, Title 5, Insurance Code, is amended
by adding Chapter 542A to read as follows:
CHAPTER 542A. CERTAIN CONSUMER ACTIONS RELATED TO CLAIMS FOR
PROPERTY DAMAGE
Sec. 542A.001. DEFINITIONS. In this chapter:
(1) "Agent" means an employee, agent, representative,
or adjuster who performs any act on behalf of an insurer.
(2) "Claim" means a first-party claim that:
(A) is made by an insured or policyholder under
an insurance policy or contract; and
(B) must be paid by the insurer directly to the
insured.
(3) "Claimant" means a person making a claim.
Sec. 542A.002. APPLICABILITY OF CHAPTER. (a) This chapter
applies to an action brought by a claimant relating to or arising
from the insured's claim for damage to or loss of covered property
under an insurance policy providing coverage against damage to or
loss of improvements to real property, including:
(1) an action alleging a breach of contract or of a
common law duty; or
(2) an action brought under:
(A) Subchapter D, Chapter 541;
(B) Subchapter B, Chapter 542; or
(C) Subchapter E, Chapter 17, Business & Commerce
Code.
(b) Except as provided by subsection (c), this chapter
applies to any insurer authorized or eligible to write property
insurance in this state, including:
(1) an insurance company;
(2) a reciprocal or interinsurance exchange;
(3) a mutual insurance company;
(4) a capital stock insurance company;
(5) a county mutual insurance company;
(6) a farm mutual insurance company;
(7) a Lloyd's plan;
(8) an eligible surplus lines insurer; or
(9) the FAIR Plan Association.
(c) This chapter does not apply to any insurer operating
under Chapter 2210.
Sec. 542A.003. NOTICE REQUIRED. (a) In addition to any
other notice required by law or the applicable insurance policy, as
a prerequisite to filing an action seeking damages under this
chapter against any person, a claimant shall give written notice to
the person not later than the 61st day before the date the claimant
files an action to which this chapter applies.
(b) The notice required under this section must be in
writing and must provide:
(1) a statement of the acts or omissions giving rise to
the claim;
(2) the identity of any agent whose act or omission
caused or contributed to the claimant's damage or loss;
(3) the specific amount alleged to be owed on the claim
by the insurer; and
(4) the amount of reasonable and necessary attorney's
fees incurred by the claimant, as calculated under Subsection (c).
(c) The claimant shall calculate the amount of attorney's
fees stated under Subsection (b) by multiplying the number of hours
actually worked by the claimant's attorney, as of the date the
notice is given and as reflected in contemporaneously kept time
records, by an hourly rate that is customary for the same or similar
legal services.
(d) If an attorney or other representative gives the notice
required under this section on behalf of a claimant, the attorney or
representative shall:
(1) provide a copy of the notice to the claimant; and
(2) include in the notice a statement that a copy of
the notice was provided to the claimant.
(e) A presuit notice under Subsection (a) is not required if
giving notice is impracticable because the action:
(1) must be filed to prevent limitations from
expiring; or
(2) is asserted as a counterclaim.
(f) A claimant who does not give a presuit notice under
Subsection (a) because giving notice is impracticable as described
by Subsection (e)(1) must give notice in accordance with Section
542A.004.
(g) A claimant who gives notice in accordance with this
chapter is not relieved of the obligation to give notice under any
other applicable law. Notice given under this chapter may be
combined with notice given under any other law.
(h) Notice given under this chapter is admissible in
evidence in a civil action or alternative dispute resolution
proceeding relating to the claim for which the notice is given.
Sec. 542A.004. ABATEMENT. (a) A person against whom an
action governed by this chapter is pending who does not receive a
presuit notice complying Section 542A.003 may file a plea in
abatement not later than the 30th day after the date the person
files an original answer in the court in which the action is
pending.
(b) The court shall abate the action if the court finds that
the person filing the plea in abatement did not receive a presuit
notice complying with Section 542A.003.
(c) An action is automatically abated without a court order
beginning on the 11th day after the date a plea in abatement is
filed if the plea:
(1) is verified and alleges that the person against
whom the action is pending did not receive a presuit notice
complying with Section 542A.003; and
(2) is not controverted by an affidavit filed by the
claimant before the 11th day after the date the plea in abatement is
filed.
(d) An abatement under this section continues until the 60th
day after the date a notice complying with Section 542A.003 is
given.
(e) In an action to which this chapter applies,
participation in an alternative dispute resolution proceeding may
not be compelled by a court until after the abatement period
provided by Subsection (d) has expired.
Sec. 542A.005. INSPECTION. (a) After a claimant gives
notice to an insurer under Section 542A.003(a) and before the date
the claimant files the action for which notice is given, the insurer
may send a written request to the claimant to inspect, photograph,
sample, or test the property that is the subject of the claim,
stating a reasonable date and time for conducting the inspection,
photographing, sampling, or testing.
(b) A claimant shall respond in writing to a request for
inspection made pursuant to subsection (a) no later than the 10th
day after receipt of the request. The claimant's response shall:
(1) state that the claimant will allow the inspection,
photographing, sampling, or testing as requested by the insurer;
(2) propose a date and time for the insurer to conduct
the inspection, photographing, sampling, or testing that is not
later than the 10th day after the date proposed by the insurer; or
(3) state that the claimant objects to the request for
inspection, photographing, sampling, or testing and the basis of
the objection.
(c) If a claimant objects to an inspection requested by an
insurer, the claimant shall file a motion for protection in a
district court in the county in which the property is located not
later than the 10th day after making the response required by
Subsection (b).
(d) The trial court shall hear and decide a claimant's
motion for protection on or before the 10th day after the date the
motion was filed. The court shall sign an order for appropriate
inspection, photographing, sampling, or testing on a specified date
and time, unless the court finds that the request to inspect,
photograph, sample, or test was made in bad faith or for the purpose
of harassing the claimant. If the court finds that the request to
inspect, photograph, sample, or test was made in bad faith or for
the purpose of harassing the claimant, the court must state in a
written order the facts supporting the court's decision.
Sec. 542A.006. ACTION AGAINST AGENT; INSURER ELECTION OF
LEGAL RESPONSIBILITY. (a) In an action to which this chapter
applies, an insurer that is a party to the action may, by providing
a written notice to the claimant, accept whatever liability the
agent might have for the agent's acts or omissions related to the
claim.
(b) If an insurer makes the election available to it under
Subsection (a) before the claimant files an action to which this
chapter applies, the claimant shall not file an action against the
agent.
(c) If a claimant files an action to which this chapter
applies against an agent and the insurer thereafter makes the
election available to it under Subsection (a), the action against
the agent shall be dismissed with prejudice.
(d) The election made by an insurer under subsection (a)
must be unconditional. A conditional or qualified election by the
insurer shall be ineffective to obtain dismissal of an action
against an agent if the stated qualifications would result in the
insurer avoiding liability for all claim-related damages caused to
the claimant by the agent's acts or omissions.
(e) An election made by an insurer under Subsection (a) does
not affect an insurer's direct or vicarious liability for the
agent's acts or omissions.
(f) An insurer may not revoke, and a court may not nullify,
an insurer's election made under Subsection (a).
(g) In an action tried by a jury, an insurer's election made
under Subsection (a) may not be made known to the jury.
Sec. 542A.007. AWARD OF ATTORNEY'S FEES. (a) Except as
otherwise provided by this section, the amount of attorney's fees
that may be awarded to a claimant in an action to which this chapter
applies is the lesser of:
(1) the amount of reasonable and necessary attorney's
fees incurred in bringing the action as determined by the trier of
fact;
(2) the amount of attorney's fees that may be awarded
under any other law; or
(3) the amount calculated by:
(A) dividing the amount awarded in the judgment
to the claimant for the claimant's claim under the insurance policy
by the amount alleged to be owed on the claim in a notice given under
Section 542A.003 or 542A.004; and
(B) multiplying the amount calculated under
Paragraph (A) by the total amount of reasonable and necessary
attorney's fees incurred by the claimant in bringing the action as
determined by the trier of fact.
(b) Except as provided by Subsection (d), the court shall
award to the claimant the full amount of reasonable and necessary
attorney's fees incurred by the claimant in bringing the action, as
determined by the trier of fact, if the amount calculated under
Subsection (a)(3)(A) is greater than or equal to 0.8, supported by
sufficient evidence, not limited by this section or another law,
and otherwise recoverable under law; and
(c) The court may not award attorney's fees to the claimant
if the amount calculated under Subsection (a)(3)(A) is less than
0.2.
(d) The court may not award attorney's fees to the claimant
if a defendant in the action pleads as an affirmative defense, and
proves by a preponderance of the evidence, that representation of
the claimant resulted from conduct violating Section 38.12, Penal
Code, unless the court determines that the claimant's attorney:
(1) did not have actual knowledge of or reason to know
of the violation of Section 38.12, Penal Code, before accepting
representation of the claimant; and
(2) reported the violation of Section 38.12, Penal
Code, as required by the Texas Disciplinary Rules of Professional
Conduct of the State Bar of Texas within a reasonable time after
learning facts that would lead a reasonable attorney to believe
that a violation of Section 38.12 had occurred.
(e) If the court finds that the defendant was entitled to,
but did not, receive a presuit notice at least 61 days before the
action was filed by the claimant, as required by Section 542A.003,
the court may not award to the claimant any attorney's fees incurred
after the date a defendant files a notice of intent to seek
disallowance of fees due to the claimant's failure to provide a
timely presuit notice.
SECTION 7. (a) Section 17.50(a), Business & Commerce Code,
and Section 541.151, Insurance Code, as amended by this Act, apply
only to an action filed on or after the effective date of this Act.
An action that is filed before the effective date of this Act is
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.
(b) Section 541.156(a), Insurance Code, as amended by this
Act, and Chapter 542A, Insurance Code, as added by this Act, apply
only to an action filed on or after the effective date of this Act.
A claimant who files an action within 60 days after the effective
date of this Act but who did not provide a presuit notice complying
with Section 542A.003 must give notice as provided in section
542A.003(f). An action that is filed before the effective date of
this Act is 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.
(c) Section 542.060, Insurance Code, as amended by this Act,
applies only to a claim, as defined under 542.051, made on or after
the effective date of this Act by an insurer, policyholder, or
beneficiary under an insurance policy or contract. A claim made
before the effective date of this Act is 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.
SECTION 8. 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, 2017.