HBA-NIK H.B. 2710 76(R)    BILL ANALYSIS


Office of House Bill AnalysisH.B. 2710
By: Thompson
Insurance
3/22/1999
Introduced




BACKGROUND AND PURPOSE 

Currently, there is no protection for an injured person when the negligent
defendant's insurer unreasonably refuses to pay a claim or delays payment
of a claim.  The injured person may choose to sue the defendant, which
leads to delays in receiving compensation and lawsuits against defendants
who are liable and whose insurers should provide the protection that was
paid for.  H.B. 2710 ensures that consumers receive complete information by
establishing codes of conduct and operation for insurance companies.
Provides that insurance consumers may seek relief from insurance companies
for certain practices. 

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 Chapter 21, Subchapter B, Insurance Code, by adding
Article 21.21-10 as follows: 

ARTICLE 21.21-10.  UNFAIR LIABILITY INSURANCE PRACTICES

Sec. 1.  DECLARATION OF PURPOSE.  Sets forth the declaration of purpose.

Sec. 2.  DEFINITIONS.  Defines "person," "insured," "beneficiary," and
"claimant." 

Sec. 3.  REQUIRED DISCLOSURES.  Requires any person representing an insurer
or insured in the investigation or adjustment of any claim or loss to
provide the specified written disclosure to any claimant at the time of the
initial contact or communication with the claimant. 

Sec 4. CLAIMANT'S RIGHT OF CANCELLATION.  (a)  Authorizes a claimant who
accepts a settlement offer in compromise of a liability claim to cancel the
settlement agreement under certain conditions. 

(b)  Requires a claimant who elects to cancel a settlement to tender back
to the insurer any payments received within 30 days of sending the
cancellation notice, unless within that time period the parties renegotiate
a settlement or the claimant files suit against the insured. Requires any
payment to be abated pending the outcome of that suit, if the claimant
files suit against the insured. 

(c) Requires a claimant to be given an additional 30 days in which to send
notice of cancellation, if the claimant sends written notice to the insured
within 30 days starting that the claimant is consulting, or attempting to
consult with an attorney regarding settlement. 

(d)  Requires any settlement agreement tendered to a claimant who is not
represented by an attorney to include the specified notice. 
 
Sec. 5.  UNFAIR LIABILITY CLAIM SETTLEMENT PRACTICES DEFINED.  Provides the
practices that are defined as unfair liability claim settlement practices
in the business of insurance. 

Sec 6.  RELIEF AVAILABLE TO INJURED PARTIES.  (a)  Authorizes any insured,
beneficiary, claimant or other person who has sustained damages caused by
another's engaging in another's unfair liability claim settlement practice
to maintain an action against the person or persons engaging in such acts. 

(b)  Authorizes any plaintiff who prevails to obtain specified forms of
relief which the court deems proper. 

(c)  Requires the insurer's liability for the claim to remain established
if any settlement is canceled at the claimant's election under Section
6(b).  Requires only the amount of the liability to be determined.
Requires the insurer to be additionally liable for a penalty of 18 percent
per annum on the amount owed to the claimant , if the claimant is found to
be entitled to an amount greater than the amount the claimant would have
received under the canceled agreement, or if the claimant receives a
greater amount through any subsequent agreement. 

(d)  Requires the amount of any judgment obtained against the insured to be
presumed reasonable in any suit to recover policy benefits or other damages
from the insurer if an insurer breaches its duty to defend or breaches its
duty to indemnify.  Provides that, to rebut the presumption, the insurer
has the burden of proving that the settlement was unreasonable, or was the
product of fraud and collusion.  Prohibits good faith negotiations between
the claimant and the insured from being considered evidence of collusion.
Requires the fact finder to determine the reasonable amount of damages owed
by the insurer, if the insurer prove that the settlement was unreasonable
or was the product of fraud and collusion. 

SECTION 2.  Amends Title 2, Subtitle C, Chapter 37, Civil Practices and
Remedies Code, by adding Section 37.012 as follows: 

Sec. 37.012  INSURANCE CASES.  Prohibits a claim for declaratory relief
from being filed by a liability insurer before the underlying claim is
finally resolved, if proof of the insurer's claim for relief relies on
factual allegations inconsistent with those in the underlying claim, among
other factors.  Requires the court to award to the opposing party or
parties reasonable and necessary attorney's fees in any case in which a
liability insurer seeks declaratory relief relating to a liability
insurance policy. 

SECTION 3.  Effective date: September 1, 1999.  
            Makes application of this Act prospective.

SECTION 4.  Emergency clause.