By: Watson S.B. No. 590
(Lucio III)
A BILL TO BE ENTITLED
AN ACT
relating to the cancellation and nonrenewal of certain liability
and commercial property insurance policies.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. The heading to Subchapter B, Chapter 551,
Insurance Code, is amended to read as follows:
SUBCHAPTER B. CANCELLATION AND NONRENEWAL OF CERTAIN LIABILITY AND
COMMERCIAL PROPERTY INSURANCE POLICIES
SECTION 2. Section 551.051, Insurance Code, is amended by
amending Subdivision (1) and adding Subdivision (1-a) to read as
follows:
(1) "Commercial property insurance" has the meaning
assigned by Section 2251.002.
(1-a) "Insurer" means an insurance company or other
entity admitted to engage in business and authorized to write
liability insurance or commercial property insurance in this state,
including a county mutual insurance company, a Lloyd's plan, and a
reciprocal or interinsurance exchange. The term does not include a
county mutual fire insurance company that writes exclusively
industrial fire insurance as described by Section 912.310 or a farm
mutual insurance company.
SECTION 3. Sections 551.052 and 551.053, Insurance Code,
are amended to read as follows:
Sec. 551.052. CANCELLATION PROHIBITED; EXCEPTIONS.
(a) An insurer may not cancel a liability insurance or commercial
property insurance policy that is a renewal or continuation policy.
(b) An insurer may not cancel a liability insurance or
commercial property insurance policy during the initial policy term
after the 60th day following the date on which the policy was
issued.
(c) Notwithstanding Subsections (a) and (b), an insurer may
cancel a liability insurance or commercial property insurance
policy at any time during the term of the policy for:
(1) fraud in obtaining coverage;
(2) failure to pay premiums when due;
(3) an increase in hazard within the control of the
insured that would produce a rate increase; or
(4) loss of the insurer's reinsurance covering all or
part of the risk covered by the policy.
(d) Notwithstanding Subsections (a) and (b), an insurer may
cancel a liability insurance or commercial property insurance
policy at any time during the term of the policy if the insurer is
placed in supervision, conservatorship, or receivership and the
cancellation or nonrenewal is approved or directed by the
supervisor, conservator, or receiver.
Sec. 551.053. WRITTEN NOTICE OF CANCELLATION REQUIRED. Not
later than the 10th day before the date on which the cancellation of
a liability insurance or commercial property insurance policy takes
effect, an insurer must deliver or mail written notice of the
cancellation to the first-named insured under the policy at the
address shown on the policy.
SECTION 4. Section 551.054(a), Insurance Code, is amended
to read as follows:
(a) An insurer may refuse to renew a liability insurance or
commercial property insurance policy if the insurer delivers or
mails written notice of the nonrenewal to the first-named insured
under the policy at the address shown on the policy.
SECTION 5. Subchapter B, Chapter 551, Insurance Code, is
amended by adding Section 551.056 to read as follows:
Sec. 551.056. CHANGES TO POLICY ON RENEWAL. (a) In this
section, "material change" means a change to a policy that, with
respect to a previous or existing policy:
(1) reduces coverage;
(2) changes conditions of coverage; or
(3) changes the duties of the insured.
(b) A change to a liability insurance or commercial property
insurance policy provision on renewal is not a nonrenewal or
cancellation under this subchapter if the insurer provides the
insured with written notice in accordance with this section of any
material change in each form of the policy offered to the insured on
renewal from the form of the policy held immediately before
renewal.
(c) Notice provided under Subsection (b) must:
(1) appear in a conspicuous place in the notice of
renewal;
(2) clearly indicate each material change to the
policy being made on renewal;
(3) be written in plain language; and
(4) be provided to the insured not later than the 30th
day before the renewal date.
(d) In addition to the notice to the insured provided under
Subsection (b), if an insurer elects to make a material change to a
policy form on renewal, not later than the 30th day before the
earliest renewal date on which the new policy form is used, the
insurer shall provide written notice to each agent of the insurer
that clearly indicates each material change being made to the
policy form. An insurer may provide the notice to the agents in a
single notice given to each agent of the insurer that summarizes
substantially similar material changes to more than one policy
form.
(e) This section does not apply if:
(1) the policy form meets at least one of the
conditions in Section 2301.004 both before and after renewal of the
policy; or
(2) before the renewal date:
(A) the insured requests the change; or
(B) the insured and the insurer agree to the
change.
SECTION 6. The change in law made by this Act applies only
to an insurance policy delivered, issued for delivery, or renewed
on or after January 1, 2020. A policy delivered, issued for
delivery, or renewed before that date 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 7. This Act takes effect September 1, 2019.