HBA-NIK H.B. 1613 76(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 1613 By: Burnam Insurance 3/22/1999 Introduced BACKGROUND AND PURPOSE Enacted in 1991, Article 5.07-1 of the Insurance Code is intended to provide Texans freedom of choice under auto insurance policies when repairing damage to their vehicles. In 1997, the legislature enacted H.B. 423, which specified unacceptable practices by insurance companies and required disclosure to consumers of their right of choice under state law. The Texas Department of Insurance was authorized to promulgate rules regarding notice of the article and fraudulent activities. In spite of these protections, the steering of business by insurance companies to "preferred" shops still occurs. H.B. 1613 further clarifies freedom of choice requirements in the repair of autos covered by insurance policies. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Article 5.07-1, Insurance Code, as follows: (a) Prohibits a person subject to this article to this article, rather than an insurer, from limiting its liability for a third-party claimant's property repairs by recommending or requiring a particular brand, rather than by specifying the type, kind, age, vendor, supplier, or condition of the parts or products used to repair the motor vehicle. Makes a conforming change. (b) Prohibits a person subject to this article from soliciting or accepting a referral fee, gratuity, or other form of compensation for referring a beneficiary or third-party claimant to a repair person of facility for repairs. Prohibits a person subject to this article from communicating to a beneficiary that, for the damage repair or parts replacement to be covered by the policy, a beneficiary is required or encouraged to use a specific repair person or facility identified on a list, rather than a preferred list, of repair persons and facilities maintained or compiled by a person subject to this article. Prohibits a person subject to this article from restricting a beneficiary's right to choose a repair person by threatening to remove the beneficiary's or claimant's motor vehicle from a repair person or facility selected by the beneficiary or claimant for any reason. Prohibits a person subject to this article from communicating to a beneficiary or a third party claimant that a repair work is guaranteed by a person other than the person or facility that performs the damage repairs; or alternative communicating that direct billed transportation coverage is allowed following the filing of a claim only if the damaged motor vehicle is repaired by a repair person or facility selected by the insurer or insurer's agent. Makes conforming and nonsubstantive changes. (c) Prohibits a person from prohibiting a repair person or facility from providing a beneficiary or third-party claimant with any information relative to the damage repairs of the beneficiary or the claimant. Deletes text authorizing a contract between an insurer and a repair person to result in a reduction of coverage under the insured's auto insurance policy. (d) Requires a person subject to this article, rather than an insurer or insurance adjuster or other person in connection with a claim for damage repair to provide the beneficiary or third-party claimant notice of the provisions of this article. Redesignates existing Subsection (d) to (c). (e) Adds a consumer group and a representative of a consumer group to the beneficiaries authorized to submit a written complaint to the department with respect to an alleged violation. Redesignated from existing Subsection (f). (f) Deletes text authorizing the commissioner to exercise the rule making authority with respect to fraudulent activity. Makes conforming changes. Redesignated from existing Subsection (g). Redesignates existing Subsection (i) to (g). (h) Requires a person who uses or references survey data to influence persons engaged in collision repair, policy holders, or third-party claimants to ensure that survey data was obtained by statistically sound methods, to publish a report that contains the criteria used for the survey and divides the results of the survey by each market surveyed, and to provide a copy of the report to the commissioner and each person surveyed. (i) Provides that this article applies to the enumerated entities. (j) Provides that a person commits an unfair and deceptive act or practice in the business of insurance if the person violates Subsection (b) and is subject to each penalty or other sanction provided by Article 21.21 (Unfair Competition and Unfair Practices), Insurance Code. (k) Defines "communicate,"and "survey data." SECTION 2. Effective date: September 1, 1999. SECTION 3. Emergency clause.