HBA-ALS C.S.H.B. 3041 76(R)BILL ANALYSIS Office of House Bill AnalysisC.S.H.B. 3041 By: Smithee Insurance 4/16/1999 Committee Report (Substituted) BACKGROUND AND PURPOSE The purpose of this bill is to clarify the requirements of an insurer in responding to a claimant. C.S.H.B. 3041 changes the time period in which an eligible surplus lines insurer is required to acknowledge the receipt of a claim, commence investigation of a claim, and request specified information from the claimant. Under this bill, if an insurer receives unwritten notice of a claim the insurer is allowed to notify the claimant that written notice is required, as long as the notice is given on or before the third business day after the date that the insurer receives the unwritten notice. This bill removes exemptions currently granted to certain types of insurance and bonds under this article. In addition, this bill provides damages and penalties for an insurer's noncompliance with this article. 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 Section 1(4), Article 21.55, Chapter 21, Subchapter E, Insurance Code, to redefine "insurer." SECTION 2. Amends Section 2, Article 21.55, Insurance Code, by amending Subsection (a) and adding Subsection (c), as follows: (a) Requires an eligible surplus lines insurer to perform specified acts no later than the 15th day after receipt of notice of a claim or the 30th business day after receiving the notice of claim, if the insurer performs specified acts, except as provided by Subsection (c), rather than Subsection (d). (c) Authorizes an insurer who receives nonwritten notice of a claim to advise the claimant, on or before the third business day after the date that the insurer receives notice, that written notice is required. Provides that an insurer who does not request written notice is subject to the same requirements that apply to a written notice of claim, beginning on the date the insurer receives the nonwritten notice. Requires an insurer to respond to a written notice it receives after requesting the notice, required by this article. SECTION 3. Amends Sections 3(a) and (b), Article 21.55, Insurance Code, to make nonsubstantive changes. SECTION 4. Amends Section 6, Article 21.55, Insurance Code, to prohibit an insurer from denying liability for a claim made pursuant to an insurance policy if the insurer does not comply with this article. Provides that damages begin to accrue on the date of violation and end on the date the claims paid in full. Makes nonsubstantive changes. SECTION 5.Effective date: September 1, 1999. Makes application of this Act prospective. SECTION 6.Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE The substitute modifies the original in SECTION 1 (Section 1, Article 21.55, Insurance Code) in Subsection (4) to make nonsubstantive changes. Modifies Subsection (5) to delete the proposed definition of "notice." In SECTION 2 (Section 2, Article 21.55, Insurance Code), the substitute modifies the original in Subsection (a) by reinstating the proposed deletion of a provision requiring an eligible surplus lines insurer to perform specified acts regarding the claim no later than the 15th day after receipt of notice of a claim or the 30th business day after receiving the notice of claim if the insurer performs specified acts and provides an exception under Subsection (c), rather than Subsection (d), which is a conforming change. The substitute modifies the original in Subsection (c) to authorize an insurer who receives unwritten notice of a claim to advise the claimant on or before the third business day after the date that the insurer receives notice, rather than within three business days. Provides that an insurer who does not request written notice is subject to the same requirements that apply to a written notice of claim, beginning on the date the insurer receives the nonwritten notice. Deletes proposed language providing that if an insurer does not request required written notice, the insurer's time limits for acknowledging the claim, commencing its investigation, and requesting information run from the date the insurer received nonwritten notice. Adds language requiring an insurer to respond in the manner specified by this article to a written notice it receives after requesting the notice from a claimant. The substitute modifies the original by deleting changes to Section 4, Article 21.55, Insurance Code, in the original, which required surplus lines insurers to pay a claim no later than the 20th day after the notice or date the act is performed. Deletes changes to Section 5, Article 21.55, Insurance Code, which removed the exemption of certain types of insurance and bonds from this article and which deleted specified exemptions to which this article does not apply and redesignated existing Subsection (d) to Subsection (c). The substitute modifies the original in SECTION 4 (Section 6, Article 21.55, Insurance Code) to provide that damages begin to accrue on the date of the violation of this article and end on the date the claim is paid in full and deletes proposed language requiring the accrual of an 18 percent penalty. The substitute modifies the original by redesignating SECTIONS 3 (emergency clause) and to SECTIONS 5 and 6, respectively. The substitute modifies the original bill to conform to Legislative Council format and to make other nonsubstantive changes.