Texas Legislative Update: Insurance Laws Passed During the 2015 Regular Session
The 84th Regular Session of the Texas Legislature ended on June 1, 2015. Texas legislators filed more than 11,350 bills this session, and, of those, 6,083 bills passed. Governor Abbott vetoed 44 bills on a variety of topics.
This article focuses on insurance-related bills enacted during the 84th Legislature. One of the more widely publicized new laws relates to public insurance adjusters (PIAs) and the handling of property damage claims. According to the bill analysis, SB 1060 is intended to address the recent spate of hail damage lawsuits and public adjusters that funneled claims to lawyers, which have resulted in increased claim costs and, in turn, increased homeowners’ premiums.
SB 1060 requires PIAs to be licensed by the Texas Department of Insurance ("TDI"). Among other things, the new law prohibits PIAs: from accepting money from or having any financial interest in any firm providing repairs for property damage; from participating in any repairs; from soliciting claimants and signing them with particular attorneys; from advancing money to claimants; from paying referral fees to non-PIAs for claimant referrals; and from accepting any money from any attorney, appraiser, contractor, or others in exchange from a referral. This law takes effect Sept. 1, 2015.
Another fairly complex insurance bill that passed is SB 876, which relates to changes in licensing for insurance agents and adjusters. According to the bill analysis, the TDI currently processes 23 types of individual licenses and 22 types of business entity licenses, and it has seen an unprecedented 60% increase in license applications over the last decade. SB 876 is intended to streamline the licensing process.
SB 876 changes the licensing period to two years for every licensee and ties the renewal date to the individual licensee’s birth date. The new law also combines renewals for those holding multiple licenses so that only one renewal will have to be made per license period. The new law also changes the continuing education requirement from 15 hours per year to 24 hours per license period. The new law also states a failure to complete CE precludes renewal of the license, unless the deficiency is cured within 90 days of expiration and the individual pays up to a $500 fine. The new law adds requirements for out-of-state licensees to obtain Texas licenses, including submitting proof of good standing from the former state of license and submitting fingerprints for a criminal background check. And, the new law authorizes the TDI Commissioner to make special rules for issuance of temporary licenses. This law also takes effect Sept. 1, 2015.
SB 956 adds a new chapter 525 to the Texas Insurance Code relating to deadlines for delivery of insurance policies. The new chapter applies to companies writing personal auto and residential property insurance, as well as to TWIA, FAIR Plan Association, and Texas Automobile Insurance Plan Association policies. The new law provides that an insurer must deliver the policy to the insured, or deliver the policy to the agent for delivery to the insured, by certain deadlines based on the type of policy: for policies longer than 30 days, not later than the 30th day after the effective date; for policies 10-31 days long, not later than the 10th day after the effective date; and for policies less than 10 days long, within the policy period. As for renewals of policies, the insurer only needs to provide a copy within 15 days of receipt of written request for a copy of the policy from the insured. SB 956 applies to policies delivered, issued for delivery, or renewed after Sept. 1, 2015.
HB 1733 relates to automobile insurance for ride-sharing companies like Uber and Lyft, known as “transportation networking companies,” or TNCs. The emergence of these TNCs has exposed gaps in auto policy coverage. Most auto policies do not provide coverage for accidents occurring while the driver is transporting passengers for money. HB 1733 requires TNC drivers to carry primary auto insurance covering use of the vehicle while transporting TNC passengers for compensation. The insurance must be active while the TNC driver is logged on to the TNC’s digital network and while transporting passengers. The driver, the TNC, or a combination of the two could subscribe to the policy as long as the driver is covered.
Under HB 1733, the required coverage minimums are: (a) while the TNC driver is logged on to the TNC network, $50,000 for injury or death coverage for each person in an incident, $100,000 for injury or death coverage per incident, and $25,000 for property damage coverage per incident; and (b) while the TNC driver is carrying a passenger, minimum total aggregate limit of liability of $1 million for death, bodily injury, and property damage per incident. If the TNC driver’s coverage lapses or is insufficient, the TNC is required to provide the coverage. The new law requires the TNCs to keep detailed records of when drivers log into and out of the network, for use in the claims investigation process. This law takes effect Jan. 1, 2016.
SB 188 and SB 189 add more types of insurance to the prohibition against using a consumer’s inquiry about policy coverage against the consumer in setting rates, premiums, or deductibles. A “consumer inquiry” has the same meaning as “customer inquiry” under section 551.113 of the Insurance Code. Both mean:
[A] telephone call or other communication made to an insurer that does not result in an investigation or claim and that is in regard to the general terms or conditions of or coverage offered under an insurance policy. The term includes a question concerning the process for filing a claim, and whether a policy will cover a loss, unless the question concerns specific damage that has occurred and that results in an investigation or claim.
Last session, the Legislature passed SB 736, which prohibited underwriting and rating decisions to be based solely on a “consumer inquiry” about coverage for standard fire, homeowners, or farm and ranch owners insurance policies. SB 188 and SB 189, passed this session, add to the types of policies bound by the law. SB 188 clarifies that the law applies to standard fire, homeowners, or farm and ranch owners insurance policies, including those issued by (1) a farm mutual insurance company; (2) a county mutual insurance company; (3) a Lloyd's plan; and (4) a reciprocal or interinsurance exchange. SB 189 adds personal automobile insurance policies, including a policy written by a county mutual insurance company.
Here’s some other insurance-related laws that passed:
SB 734 amends the Texas Insurance Code to authorize the formation of pure captive insurance companies and segregated account captive insurance companies in Texas and sets rules for such captives.
HB 3106 relates to compensatory payments and reinsurance agreements made in connection with the issuance of title insurance.
SB 653 increases the burial benefit cap under worker’s compensation insurance from $6,000 to $10,000.
SB 531 clarifies that a governmental unit that creates a self-insurance fund may purchase reinsurance, and when a Texas statute or regulation requires a political subdivision or its employees to obtain insurance, the political subdivision may obtain the coverage through a self-insurance fund authorized by the Legislature.
SB 951 conforms Chapter 981 of the Texas Insurance Code to the Non-Admitted and Reinsurance Reform Act, which is a part of the federal Dodd-Frank Act relating to regulation of surplus lines insurance and reinsurance. Specifically, SB 951 clarifies that Chapter 981 applies to surplus lines insurance if the insured’s home state is Texas, provides applicable definitions, exempts commercial purchasers, and states that agreements regarding uniform surplus lines insurance standards made between Texas and other states are binding.
HB 1047 clarifies the financial requirements affecting bail bond insurers by clarifying the taxability of premium receipts or service fees in order to continue the effective issuance of bail bonds.
These are just a few of the insurance-related bills passed during the 84th Legislature. You can search for additional ones and read more about these on the Texas Legislature Online website, www.capitol.state.tx.us.