HBA-TYH H.B. 1091 76(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 1091 By: Burnam Insurance 3/8/1999 Introduced BACKGROUND AND PURPOSE Currently, the Insurance Code provides a process for policyholders to collect on an insurance claim. It also addresses the insurance company's responsibility to notify the named insured regarding the settlement of a liability claim against the policyholder. However, the code does not address the process for the insurance company to follow when dealing with a third-party's claim against the policyholder. The code also does not address what rights are afforded a third party. Since there is no official relationship between the insurance company and the third party, problems have arisen, including communication difficulties and delays in the payment of claims. H.B. 1091 requires the insurance company to respond to notice of claim within 15 days of receipt of notice, to provide for an appraisal of property damage to a claimant's motor vehicle within seven days of receipt of notice, and to send a statement of rights to the claimant. This bill also imposes an administrative penalty for violation of this code, authorizes the claimant to bring a civil action, and provides for recovery of damages. This bill does not create or affect fiduciary relationships or duties. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the commissioner of insurance in SECTION 1 (Section 5, Article 21.56A, Subchapter E, Chapter 21, Insurance Code) of this bill. SECTION BY SECTION ANALYSIS SECTION 1. Amends Subchapter E, Chapter 21, Insurance Code, by adding Article 21.56A, as follows: Art. 21.56A. THIRD-PARTY CLAIMS PROCEDURES UNDER MOTOR VEHICLE INSURANCE COVERAGE Sec. 1. DEFINITIONS. Defines "claimant," "insurer," and "motor vehicle." Sec. 2. APPLICATION. Provides that this article applies only to a third-party claim for property damage to the claimant's motor vehicle. Sec. 3. INSURER RESPONSE TO NOTICE OF CLAIM. (a) Requires the insurer to respond to the claimant on notification by a claimant to an insurer of a claim against a policyholder of the insurer for property damage to the claimant's motor vehicle. Provides that within 15 business days of the date on which the insurer is notified of the claim and receives all items, statements, and forms required by the insurer, the insurer must respond to the claimant in writing and must state: (1) whether the insurer admits or denies liability for the claim or why the insurer cannot admit or deny liability for the claim; and (2) if the insurer does admit liability for the claim, the percentage share of liability that the insurer does admit. (b) Requires the insurer to provide a written statement of the factual bases under which it denies liability, if the insurer denies all or a percentage of liability for the claim. (c) Authorizes an insurer, on notification in writing to a claimant of the specific reason for the delay, to extend the 15-day period for an additional period not to exceed 45 days. Sec. 4. APPRAISAL OF PROPERTY DAMAGE. (a) Requires the insurer to provide for an appraisal of the damage to the claimant's motor vehicle. Provides that the appraisal must be completed not later than the seventh business day after the applicable date under Section 3(a) of this article, unless the claimant requests a delay in writing. (b) Provides that an appraisal must specify the amount necessary to repair the property damage to the vehicle. Sec. 5. STATEMENT OF RIGHTS. (a) Requires the insurer, on receipt of notification of a claim by a claimant, to send the claimant a written statement of the claimant's rights under this article. Provides that the insurer must send the statement not later than the seventh business day after the date on which the insurer is notified by the claimant. (b) Requires the commissioner of insurance (commissioner) by rule to specify the form of the statement required under this section. Sec. 6. VIOLATION; ADMINISTRATIVE PENALTY. (a) Provides that an insurer commits a violation if the insurer fails or refuses to comply with the requirements imposed under this article. (b) Authorizes the commissioner to impose an administrative penalty under Article 1.10E (Administrative Penalties) of this code for a violation under this section. Sec. 7. CIVIL ACTION; DAMAGES. (a) Authorizes a claimant to bring an action for a violation of this article if the insurer fails to comply with the requirements imposed under Section 3 or 4 of this article, denies all or a percentage of liability for the claim without a reasonable basis for the denial of liability, or appraises the property damage to the motor vehicle in an amount insufficient to repair that damage without a reasonable basis for the amount of the appraisal. (b) Provides that a claimant who prevails in a cause of action brought under this section is entitled to recover the amount necessary to repair the property damage to the motor vehicle, a penalty equal to 12 percent of the amount recovered under this subsection, and reasonable attorney's fees. Sec. 8. EFFECT ON FIDUCIARY DUTIES. Provides that this article does not create new fiduciary relationships or duties or affect fiduciary relationships or duties in effect on September 1, 1999. SECTION 2.Makes application of this Act prospective, as of January 1, 2000. SECTION 3.Effective date: September 1, 1999. SECTION 4.Emergency clause.