HBA-ATS H.B. 2755 76(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 2755 By: Smithee Insurance 3/21/1999 Introduced BACKGROUND AND PURPOSE Currently, the Insurance Code (code) provides a process for policyholders to collect on claims against motor vehicle insurers (insurers). The code also addresses an insurer's responsibility to notify its customer about the settlement of a liability claim. However, the code does not address the process for an insurer to follow when dealing with a third-party's claim against a policyholder. Insurers are not required to respond to claims brought by a third-party claimant (claimant) within a definite period. In addition, the code also does not address what duties an insurer owes to a claimant. 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. 2755 requires an insurer to respond, in writing, to a third-party claim by the 15th business day after being notified and receiving all the information required from the claimant. In the response, the insurer must state whether it agrees to pay the claim, and, if so, the percentage share to be paid. If an insurer refuses to pay all or a part of the claim, the insurer is required to write the factual bases under which it denies the payment. In addition, this bill requires an insurer to provide for an appraisal of the property damage to a claimant's vehicle by the seventh business day after the 15-day period, unless the claimant requests a delay in writing. An insurer is also required to send a claimant a written statement of the claimant's rights under this article by the seventh business day after the insurer is notified of the claim. An insurer who fails or refuses to comply with these requirements violates the Insurance Code, subjecting the insurer to an administrative penalty. This bill also 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 (Article 21.56A, 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 (vehicle). Sec. 3. INSURER RESPONSE TO NOTICE OF CLAIM. (a) Requires an insurer to respond to a claimant as provided by this article when the claimant notifies the insurer of a claim against the insurer's policyholder. Provides that the insurer must respond, except as provided by Subsection (c), by the 15th business day after being notified of the claim and receiving all the information required. Requires the response to be in writing and to state whether the insurer agrees to pay the claim, and, if the insurer agrees to pay part of the claim, the percentage share to be paid. (b) Requires an insurer, if it refuses to pay all or a part of the claim, to write the factual bases under which it denies the payment for the claim. (c) Authorizes an insurer to extend the 15-day period imposed under Subsection (a) for an additional 30-day period if the insurer notifies in writing a claimant of the specific reason for the delay. Sec. 4. APPRAISAL OF PROPERTY DAMAGE. (a) Requires an insurer to provide for an appraisal of the property damage to a claimant's vehicle, which must be completed by the seventh business day after the applicable date under Section 3(a), unless the claimant requests a delay in writing. (b) Provides that an appraisal must be reasonably specific as to the amount necessary to repair the damage to the vehicle. Sec. 5. STATEMENT OF RIGHTS. (a) Requires an insurer to send a claimant a written statement of the claimant's rights under this article by the seventh business day after the insurer is notified of the claim. (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 of this code 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) for a violation under this section. Sec. 7. CIVIL ACTION; DAMAGES. (a) Authorizes a claimant to sue for a violation of this article if the insurer fails to comply with the requirements imposed under Section 3 or 4, refuses to pay all or part of a claim without reasonable basis for the denial of payment, or appraises the damage to the vehicle in an amount insufficient to repair the damage without a reasonable basis for the amount of the appraisal. (b) Entitles a claimant who prevails to recover the amount necessary to repair the damage to the vehicle, without regard to whether the insurer would otherwise be obligated to pay the claim, and reasonable attorney's fees. Sec. 8. EFFECT ON FIDUCIARY DUTIES. Specifies 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 for a claim brought under a motor vehicle insurance policy that is delivered, issued for delivery, or renewed on or after January 1, 2000. SECTION 3. Effective date: September 1, 1999. SECTION 4. Emergency clause.