HBA-TBM H.B. 1383 77(R)    BILL ANALYSIS


Office of House Bill AnalysisH.B. 1383
By: Dunnam
Insurance
3/14/2001
Introduced



BACKGROUND AND PURPOSE 

Currently, insurers are obligated to provide a defense to third party
claims against their policy holders.  In many instances, a large number of
property and casualty insurers in Texas provide that defense under a
reservation of rights through the services of their attorneys.  This
reservation of rights may create a conflict of interest.  Counsel that is
under the employ of or contract to the insurer owes allegiance to the
insurer, and if allowed to control the insured's defense may manipulate the
defense of the case to the benefit of the insurer and the detriment of the
insured.  In situations in which a conflict of interest exists, an insurer
is obligated to provide and pay for independent counsel to defend its
insured.  However, many policyholders are not aware of this obligation.
House Bill 1383 requires the commissioner of insurance, in consultation
with the State Bar of Texas, to adopt rules to ensure the independence of
counsel provided to an insured under a casualty insurance policy.   

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 21.56B, Insurance Code) and SECTION 2 of this bill.  
ANALYSIS

House Bill 1383 amends the Insurance Code to require the commissioner of
insurance (commissioner) in consultation with the State Bar of Texas to
adopt rules, no later than December 15, 2001, to ensure the independence of
counsel provided to an insured under a casualty insurance policy.  The
rules must include notice to the insured of the insured's right to
independent counsel and specify circumstances in which an insurer may not
offer or provide to the insured the services of an attorney in the employ
of or under contract to the insurer.  An insurer that is obligated to
defend an insured in a suit may not offer to provide the services of an
attorney in the employ of or under contract to the insurer unless the
insurer complies with rules adopted by the commissioner.   

EFFECTIVE DATE

September 1, 2001, and applies only to an attorney's services offered or
provided to an insured under a casualty insurance policy, that is
delivered, issued for delivery, or renewed on or after January 1,  2002.