INSURANCE CODE - NOT CODIFIED
CHAPTER 5. RATING AND POLICY FORMS
SUBCHAPTER A. MOTOR VEHICLE OR AUTOMOBILE INSURANCE
Art. 5.01. Fixing Rate of Automobile Insurance
(a) Every insurance company, corporation, interinsurance exchange,
mutual, reciprocal, association, Lloyd's or other insurer,
hereinafter called insurer, writing any form of motor vehicle
insurance in this State, shall annually file with the State Board of
Insurance, hereinafter called Board, on forms prescribed by the
Board, a report showing its premiums and losses on each
classification of motor vehicle risks written in this State.
(b) The Board shall have the sole and exclusive power and authority,
and it shall be its duty to determine, fix, prescribe, and
promulgate just, reasonable and adequate rates of premiums to be
charged and collected by all insurers writing any form of insurance
on motor vehicles in this State, including fleet or other rating
plans designed to discourage losses from fire and theft and similar
hazards and any rating plans designed to encourage the prevention
of accidents. In promulgating any such rating plans the Board shall
give due consideration to the peculiar hazards and experience of
individual risks, past and prospective, within and outside the
State and to all other relevant factors, within and outside the
State. The Board shall have the authority also to alter or amend
any and all of such rates of premiums so fixed and determined and
adopted by it, and to raise or lower the same or any part thereof.
(c) At least annually, the Board shall conduct a hearing to review
the reports of premiums earned and losses incurred in the writing of
motor vehicle insurance in this State and may fix, determine, and
adopt new rates in whole or in part or may alter or amend rates
previously fixed, determined, and adopted by the Board to assure
that those rates comply with the requirements of this subchapter.
(d) Said Board shall have authority to employ clerical help,
inspectors, experts, and other assistants, and to incur such other
expenses as may be necessary in carrying out the provisions of this
law; provided, however, that the number of employees and salary of
each shall be fixed in the General Appropriation Bill passed by the
Legislature. The Board shall ascertain as soon as practicable the
annual insurance losses incurred under all policies on motor
vehicles in this State, make and maintain a record thereof, and
collect such data as will enable said Board to classify the various
motor vehicles of the State according to the risk and usage made
thereof, and to classify and assign the losses according to the
various classes of risks to which they are applicable; the Board
shall also ascertain the amount of premiums on all such policies for
each class of risks, and maintain a permanent record thereof in such
manner as will aid in determining just, reasonable and adequate
rates of premiums.
(e) Motor vehicle or automobile insurance as referred to in this
subchapter shall be taken and construed to mean every form of
insurance on any automobile or other vehicle hereinafter enumerated
and its operating equipment or necessitated by reason of the
liability imposed by law for damages arising out of the ownership,
operation, maintenance, or use in this State of any automobile,
motorcycle, motorbicycle, truck, truck-tractor, tractor, traction
engine, or any other self-propelled vehicle, and including also
every vehicle, trailer or semi-trailer pulled or towed by a motor
vehicle, but excluding every motor vehicle running only upon fixed
rails or tracks. Workers' Compensation Insurance is excluded from
the foregoing definition.
(f) Notwithstanding Subsections (a) through (d) of this article, on
and after the effective date of S.B. No. 14, Acts of the 78th
Legislature, Regular Session, 2003, rates for personal automobile
insurance in this state are determined as provided by Article 5.101
of this code, and rates for commercial motor vehicle insurance in
this state are determined as provided by Article 5.13-2 of this
code. On and after December 1, 2004, rates for personal automobile
insurance and commercial automobile insurance in this state are
determined as provided by Article 5.13-2 of this code.
Acts 1951, 52nd Leg., ch. 491. Amended by Acts 1953, 53rd Leg., p.
64, ch. 50, Sec. 2.
Amended by Acts 1987, 70th Leg., 1st C.S., ch. 1, Sec. 2.06, eff.
Sept. 2, 1987; Subsec. (f) added by Acts 1991, 72nd Leg., ch. 242,
Sec. 2.02, eff. Sept. 1, 1991; Subsec. (f) amended by Acts 1991,
72nd Leg., 2nd C.S., ch. 12, Sec. 8.04, eff. Jan. 1, 1992; amended
by Acts 1995, 74th Leg., ch. 984, Sec. 2, eff. Sept. 1, 1995;
Subsec. (f) amended by Acts 2003, 78th Leg., ch. 206, Sec. 21.01,
eff. June 11, 2003.
Art. 5.01B. Public Information
(a) Information filed or otherwise provided by an insurer to the
State Board of Insurance for the purpose of determining, fixing,
prescribing, promulgating, altering, or amending commercial
automobile liability insurance rates under Article 5.01 of this
code, obtaining a rate deviation under Article 5.03 of this code, or
reporting losses under Article 5.04-1 of this code is public
information unless it is exempt under Section 3(a), Chapter 424,
Acts of the 63rd Legislature, Regular Session, 1973 (Article
6252-17a, Vernon's Texas Civil Statutes), or Section (b) of this
article.
(b) Information provided with an application under Section (d),
Article 5.03, of this code is exempt from the disclosure
requirements of this article.
Added by Acts 1987, 70th Leg., 1st C.S., ch. 1, Sec. 2.03, eff.
Sept. 2, 1987. Sec. (a) amended by Acts 1991, 72nd Leg., ch. 750,
Sec. 1, eff. Sept. 1, 1991.
Art. 5.01C. Short-Term Liability Insurance for Non-Texas Resident
Motorists Visiting This State
Definitions
Sec. 1. In this article:
(1) "Insurer" means an insurance company, interinsurance exchange,
mutual, capital stock company, county mutual, reciprocal
association, Lloyd's plan insurer, or other entity authorized to
write motor vehicle insurance in this state.
(2) "Motor vehicle" means any private passenger vehicle or utility
type vehicle that has a gross weight of 25,000 pounds or less.
(3) "Short-term liability insurance policy" means an insurance
policy that:
(A) provides coverage for at least 24 hours but not for more than
one week;
(B) meets the requirements of Chapter 601, Transportation Code;
(C) covers liability for bodily injury, death, and property damage
arising from the use or operation of a motor vehicle; and
(D) is not insurance assigned to an authorized insurance company by
the Texas Automobile Insurance Plan Association under Section 4(a),
Article 21.81, of this code.
Rules
Sec. 2. (a) The commissioner by rule may establish a program to
provide for the sale of short-term liability insurance policies to
non-Texas resident motorists visiting this state.
(b) The commissioner may negotiate an agreement with any insurer
under which the insurer will sell policies described by Subsection
(a) of this section.
License required
Sec. 3. A person representing an insurer in selling short-term
liability insurance policies under this article must be licensed
under Subchapter A, Chapter 21, of this code.
Forms
Sec. 4. An insurer selling short-term liability insurance policies
under this article must use the policy forms adopted by the
commissioner under Article 5.06 of this code or filed and in effect
as provided by Article 5.145 of this code unless the insurer is
exempt from using those forms.
Added by Acts 2001, 77th Leg., ch. 123, Sec. 1, eff. Sept. 1, 2001;
Sec. 4 amended by Acts 2003, 78th Leg., ch. 206, Sec. 21.02, eff.
June 11, 2003.
Art. 5.01-1. Premium Rating Plans
A rating plan respecting the writing of motor vehicle insurance,
other than insurance written pursuant to Section 35 of the Texas
Motor Vehicle Safety-Responsibility Act (Article 6701h, Vernon's
Texas Civil Statutes), may not assign any rate consequence to a
charge or conviction, or otherwise cause premiums for motor vehicle
insurance to be increased because of a charge or conviction for a
violation of the Uniform Act Regulating Traffic on Highways, as
amended (Article 6701d, Vernon's Texas Civil Statutes).
Acts 1979, 66th Leg., p. 1769, ch. 717, Sec. 1, eff. June 13, 1979.
Amended by Acts 1991, 72nd Leg., ch. 242, Sec. 2.03, eff. Sept. 1,
1991.
Art. 5.01-3. Former Military Vehicles
(a) A rating plan that includes a classification applicable to
antique, private passenger vehicles maintained primarily for use in
exhibitions, club activities, parades, and other functions of
public interest and occasionally used for other purposes must
include in the classification former military vehicles maintained
for those uses.
(b) In this article, "former military vehicle" has the meaning
assigned by Section 502.275, Transportation Code.
Added by Acts 1997, 75th Leg., ch. 1222, Sec. 4, eff. Sept. 1, 1997.
Art. 5.01-4. Time-Based and Mile-Based Rating Plans
Text of article effective until Sept. 1, 2005
Definitions
Sec. 1. In this article:
(1) "Insurer" means an insurance company, interinsurance exchange,
mutual, capital stock company, fraternal benefit society, local
mutual aid association, county mutual, reciprocal, association,
Lloyd's plan, or other entity writing motor vehicle insurance in
this state. The term includes a company affiliated with an insurer.
(2) "Mile-based rating plan" means a rating plan for which a unit of
exposure is one mile traveled by the insured motor vehicle.
(3) "Time-based rating plan" means a rating plan for which a unit of
exposure is a unit of time.
Alternative rating plan pilot program
Sec. 2. (a) An insurer that delivers, issues for delivery, or renews
a policy of motor vehicle insurance in this state may offer each
person who purchases motor vehicle insurance coverage from that
insurer a choice between a mile-based rating plan and a time-based
rating plan for coverage for losses caused by collision or other
driving-related accidents.
(b) The insurer may require a person purchasing coverage to use the
same rating plan for all vehicles covered under the person's motor
vehicle insurance policy.
Filing required; rate regulation
Sec. 3. (a) Each insurer that offers the mile-based rating plan
under this article shall annually file with the commissioner for
the commissioner's approval a schedule of the insurer's premium
rates for motor vehicle insurance based on the mile-based rating
plan and the time-based rating plan used by that insurer. The
insurer shall file with the rate schedule a statement of any fee to
be charged to policyholders or applicants for insurance for
participation in the mile-based rating plan.
(b) The commissioner shall analyze the premium rates filed by an
insurer under Subsection (a) of this section. If the commissioner
determines that the filed rates are excessive in comparison to the
premium rates charged for similar coverage under a time-based
rating plan used by the insurer, the commissioner shall reject the
rates after notice to the insurer and an opportunity for a hearing.
The commissioner must notify the insurer that the rates are
rejected not later than the 60th day after the date on which the
rates are filed under Subsection (a) of this section. An insurer
may not use rates rejected by the commissioner under this
subsection.
(c) Premium rates used by an insurer under the mile-based rating
plan adopted under this article are exempt from other rate
regulation under this subchapter and the benchmark rates
established under Subchapter M of this chapter.
Applicability of certain laws
Sec. 4. (a) In reporting incurred losses and earned premiums as
required under this subchapter or Subchapter M of this chapter, or
on and after December 1, 2004, under Article 5.13-2 of this code, an
insurer shall separately report experience based on use of the
mile-based rating plan and the time-based rating plan.
(b) The classifications used by an insurer for motor vehicles
insured under the mile-based rating plan are exempt from the
provisions of this subchapter other than this article, Subchapter M
of this chapter, and on and after December 1, 2004, Article 5.13-2
of this code.
Commissioner powers and duties; rules
Sec. 5. (a) The commissioner shall:
(1) compile information regarding:
(A) the number of insurers writing motor vehicle insurance based on
mile-based rating plans;
(B) the geographic areas of this state in which mile-based rating
plans are used; and
(C) the premium rates for mile-based rating plans compared to
standard time-based rating plans; and
(2) analyze the effect of mile-based rating plans on:
(A) premium rates offered for motor vehicle insurance based on
time-based rating plans; and
(B) the number of uninsured motorists in this state.
(b) The commissioner shall adopt rules as necessary or appropriate
to govern the use of a mile-based rating plan under this article,
including rules regarding:
(1) prepayment arrangements;
(2) proof of financial responsibility;
(3) auditing of the odometer of a vehicle for the purpose of
determining whether coverage is in force; and
(4) policy forms.
Expiration
Sec. 6. This article expires September 1, 2005.
Added by Acts 2001, 77th Leg., ch. 971, Sec. 1, eff. Sept. 1, 2001;
Sec. 4 amended by Acts 2003, 78th Leg., ch. 206, Sec. 21.04, eff.
June 11, 2003.
Art. 5.02. Authority to Assign Certain Types or Classes to
Appropriate Rating Laws
There shall be excluded from regulation under the provisions of
this subchapter any insurance against liability for damages arising
out of the ownership, operation, maintenance or use of or against
loss of or damage to motor vehicles described in the foregoing
section which may, in the judgment of the Board, be a type or class
of insurance which is also the subject of or may be more properly
regulated under the terms or provisions of other insurance rating
laws heretofore or hereafter enacted covering such insurance. If
such situation shall be found to exist, then the Board shall make an
order declaring which of the said rating laws shall be applicable to
such type or class of insurance, and to any motor vehicle equipment
mentioned in Article 5.01 of this subchapter.
Acts 1951, 52nd Leg., ch. 491.
Art. 5.03. Promulgated Rates as Controlling
(a) On and after the filing and effective date of such
classification of such risks and rates, no such insurer, except as
otherwise provided herein, shall issue or renew any such insurance
at premium rates which are greater or lesser than those promulgated
by the Board as just, reasonable, adequate and not excessive for the
risks to which they respectively apply, and not confiscatory as to
any class of insurance carriers authorized by law to write such
insurance after taking into consideration the deviation provisions
of this Article. Any insurer desiring to write insurance at rates
different from those promulgated by the Board shall make a written
application to the Board for permission to file a uniform
percentage deviation for a lesser or greater rate, on a statewide
basis unless otherwise ordered by the Board, from the class rates or
classes of rates promulgated by the Board. Any insurer desiring to
write insurance under a classification plan different from that
promulgated by the Board shall make written application to the
Board for permission to do so; provided, however, the Board shall
approve the use of only such additions or refinements in its
classification plan as will produce subclassifications which, when
combined, will enable consideration of the insurer's experience
under both the Board classification plan and its own classification
plan. Such application shall be approved in whole or in part by the
Board, provided the Board finds that the resulting premiums will be
just, adequate, reasonable, not excessive and not unfairly
discriminatory, taking into consideration the following:
(1) the financial condition of the insurer;
(2) the method of operation and expenses of such insurer;
(3) the actual paid and incurred loss experience of the insurer;
(4) earnings of the insurer from investments together with a
projection of prospective earnings from investments during the
period for which the application is made; and
(5) such application meets the reasonable conditions, limitations,
and restrictions deemed necessary by the Board.
In considering all matters set forth in such application the Board
shall give consideration to the composite effect of items (2), (3),
and (4) above and the Board shall deny such application if it finds
that the resulting premiums would be inadequate, excessive, or
unfairly discriminatory. Any original or renewal policy of
insurance issued pursuant to an approved plan of deviation shall
have attached to or imprinted on the face of such policy the
following notice: "The premium charged for this policy is greater
than the premium rates promulgated by the State Board of
Insurance." The notice shall be in 10-point or larger prominent
typesize.
Except as the Board may authorize, the deviation provisions in this
Article shall not apply to insurance written pursuant to other
provisions of this Chapter in which a deviation from standard rates
is authorized, including, but not limited to, automobile liability
experience rating and fleet rating plans.
(b) The Board shall issue its order in writing setting forth the
terms of approval or reasons for denial of each application filed
for deviation. On January 1, 1974 and thereafter if the Board has
not issued its order within 30 days after the filing of an
application, the application shall be "deemed approved" by the
Board. Provided, however, that the Board may thereafter require
the applicant insurer to furnish proof to the Board that the matters
set out in the application are true and correct and that such
application meets the requirements of this Article. If after
notice and hearing the Board determines that any application
"deemed to have been approved" by the Board contains false or
erroneous information or the Board determines that the application
does not meet the requirements of this Article the Board may suspend
or revoke the approval "deemed to have been granted."
An insurer that has received approval, or is "deemed to have
received approval" for the use of a deviation may apply for an
amendment to such deviation or by notice to the Board withdraw the
deviation.
(c) From and after the effective date of an application approved by
the Board, or "deemed to have been approved" by the Board, such
insurer may write insurance in accordance with such approval.
Provided, however, that the right to write insurance at a lesser or
greater rate as approved may be suspended or revoked by the Board,
after notice and hearing, if upon examination or at any time it
appears to or is the opinion of the Board that such insurer:
(1) has had a change in its financial condition since the granting
of the application; or
(2) the actual paid and incurred losses of the insurer have
materially changed since the granting of the application; or
(3) there has been a material increase in expenses of such insurer
since the granting of the application; or
(4) there has been a material reduction in earnings from
investments by the insurer since the granting of the application;
or
(5) the insurer has failed or refused to furnish information
required by the Board; or
(6) the insurer has failed to abide by or follow its rate deviation
previously approved by the Board. The Board may suspend the right
of an insurer to write insurance at the rates approved under such
application, pending hearing, provided that the Board in or
accompanying the order suspending such right, sets such hearing
within not less than 10 nor more than 30 days following the issuance
of its order. The Board shall conduct the hearing within not less
than 10 nor more than 30 days following the issuance of its order
suspending such right, unless the insurer subject to the order
requests the Board to delay the hearing beyond 30 days. The right
to write insurance at the lesser or greater rate previously
approved by the Board shall automatically terminate, except as
herein provided, upon the promulgation by the Board of new or
different rates as provided for in the first sentence of "Section
(a)" of this Article, and as further provided in paragraphs one and
two of Article 5.01, Insurance Code, as amended. After the
effective date of the Board's promulgation or authorization of new
or different rates, the insurer may not thereafter write insurance
at a lesser or greater rate, except that an insurer may continue to
write insurance at a deviated rate by applying the percentage of the
previously approved deviation applicable to the prior rates as the
percentage of deviation applicable to the new or different rates
promulgated by the Board, limited, however, to a period of 60 days
after the effective date of the new or different rates, and not
thereafter, and only if such insurer within 30 days following
promulgation by the Board of new or different rates, shall make a
written application to the Board for permission to deviate from the
new or different rates promulgated by the Board. The Board by order
may extend the use of prior approved deviations beyond the 60 day
period hereinabove set out.
(d) It is expressly provided, however, that notwithstanding any
other provision of this chapter to the contrary, a rate or premium
for such insurance greater than the standard rate or premium that
has been promulgated by the Board may be used on any specific risk
if:
(1) a written application is made to the Board naming the insurer
and stating the coverage and rate proposed;
(2) the person to be insured or person authorized to act in relation
to the risk to be insured consents to such rate;
(3) the reasons for requiring such greater rate or premium are
stated in or attached to the application;
(4) the person to be insured or person authorized to act for such
person signs the application; and
(5) the Board approves the application by order or by stamping.
(e) In the administration of this Act the Board shall resolve by
rules and regulations, to the extent permitted by law, any
conflicts or ambiguities as may be necessary to accomplish the
purposes of this Act.
(f) This Article, as amended, is effective September 1, 1973.
(g) Notwithstanding Sections (a) through (e) of this article, on
and after the effective date of S.B. No. 14, Acts of the 78th
Legislature, Regular Session, 2003, rates for personal automobile
insurance in this state are determined as provided by Article 5.101
of this code, and rates for commercial motor vehicle insurance in
this state are determined as provided by Article 5.13-2 of this
code. On and after December 1, 2004, rates for personal automobile
insurance and commercial automobile insurance in this state are
determined as provided by Article 5.13-2 of this code.
Acts 1951, 52nd Leg., ch. 491. Amended by Acts 1971, 62nd Leg., p.
864, ch. 104, Sec. 1, eff. April 30, 1971; Acts 1973, 63rd Leg., p.
1118, ch. 425, Sec. 1, eff. Sept. 1, 1973; Acts 1977, 65th Leg., p.
1981, ch. 792, Sec. 1, eff. Aug. 29, 1977.
Subsec. (g) added by Acts 1991, 72nd Leg., ch. 242, Sec. 2.04, eff.
Sept. 1, 1991; Subsec. (g) amended by Acts 1991, 72nd Leg., 2nd
C.S., ch. 12, Sec. 8.05, eff. Jan. 1, 1992; amended by Acts 1995,
74th Leg., ch. 984, Sec. 4, eff. Sept. 1, 1995; Subsec. (g) amended
by Acts 2003, 78th Leg., ch. 206, Sec. 21.05, eff. June 11, 2003.
Art. 5.03-1. Premium Surcharge
Sec. 1. A premium surcharge in an amount to be prescribed by the
State Board of Insurance shall be assessed by an insurer defined in
Article 5.01, Texas Insurance Code, against an insured for no more
than three years immediately following the date of conviction of
the insured of an offense committed while operating a motor vehicle
under Section 49.04 or 49.07, Penal Code, or an offense under
Section 49.08, Penal Code. The premium surcharge shall be applied
only to private passenger automobile policies as defined by the
State Board of Insurance.
Sec. 2. If an insured assessed a premium surcharge as a result of a
conviction of an offense as set out in Section 1 of this article is
subsequently convicted of a violation of one of those statutes
during the period he is assessed the premium surcharge, the period
for which the premium surcharge shall be imposed is increased by
three additional consecutive years for each conviction.
Added by Acts 1983, 68th Leg., p. 1606, ch. 303, Sec. 26, eff. Jan.
1, 1984. Sec. 1 amended by Acts 1995, 74th Leg., ch. 76, Sec. 14.46,
eff. Sept. 1, 1995.
Art. 5.04. Experience as Factor
(a) To insure the adequacy and reasonableness of rates the Board may
take into consideration past and prospective experience, within and
outside the State, and all other relevant factors, within and
outside the State, gathered from a territory sufficiently broad to
include the varying conditions of the risks involved and the
hazards and liabilities assumed, and over a period sufficiently
long to insure that the rates determined therefrom shall be just,
reasonable and adequate, and to that end the Board may consult any
rate making organization or association that may now or hereafter
exist.
(b) As a basis for motor vehicle rates under this subchapter, the
State Board of Insurance shall use data from within this State to
the extent that the data is credible and available.
(c) Notwithstanding Subsections (a) and (b) of this article, on and
after the effective date of S.B. No. 14, Acts of the 78th
Legislature, Regular Session, 2003, rates for personal automobile
insurance in this state are determined as provided by Article 5.101
of this code, and rates for commercial motor vehicle insurance in
this state are determined as provided by Article 5.13-2 of this
code. On and after December 1, 2004, rates for personal automobile
insurance and commercial automobile insurance in this state are
determined as provided by Article 5.13-2 of this code.
Acts 1951, 52nd Leg., ch. 491. Amended by Acts 1953, 53rd Leg., p.
64, ch. 50, Sec. 3.
Amended by Acts 1987, 70th Leg., 1st C.S., ch. 1, Sec. 2.01, eff.
Sept. 2, 1987; Subsec. (c) added by Acts 1991, 72nd Leg., ch. 242,
Sec. 2.05, eff. Sept. 1, 1991; Subsec. (c) amended by Acts 1991,
72nd Leg., 2nd C.S., ch. 12, Sec. 8.06, eff. Jan. 1, 1992; amended
by Acts 1995, 74th Leg., ch. 984, Sec. 5, eff. Sept. 1, 1995;
Subsec. (c) amended by Acts 2003, 78th Leg., ch. 206, Sec. 21.06,
eff. June 11, 2003.
Art. 5.04-1. Report of Basic Limits Losses
(a) A report filed under Article 5.01(a) of this code must include
the information necessary to compute a Texas automobile experience
modifier as provided by this code or a rule adopted by the State
Board of Insurance. In reporting losses under Article 5.01(a) of
this code, an insurer may include only the following as basic limits
losses:
(1) indemnity losses, up to the basic limits for the losses;
(2) losses based on payments for immediate medical or surgical
treatment;
(3) fees paid to an attorney who is not an employee of the insurer,
if the fees were for services rendered in the trial of an action
arising under a covered claim;
(4) specific expenses incurred as a direct result of defending an
action in connection with which the expense is claimed;
(5) specific expenses, other than claims adjustment expenses,
incurred in connection with the settlement of a claim with respect
to which the expense is claimed;
(6) all medical payments coverage; and
(7) personal injury protection coverage losses.
(b) In reporting its basic limits losses to the State Board of
Insurance, each insurer shall disclose the specific nature of each
loss expense claimed and shall show to the Board's satisfaction
that each specific expense claimed was necessary with respect to
the specific risk involved.
Added by Acts 1991, 72nd Leg., ch. 750, Sec. 2, eff. Sept. 1, 1991.
Art. 5.05. Reports on Experience
(a) Recording and Reporting of Loss Experience and Other Data. The
Board shall, after due consideration, promulgate reasonable rules
and statistical plans, which may be modified from time to time and
which shall be used thereafter by each insurer in the recording and
reporting of its loss experience and such other data as may be
required, in order that the total loss and expense experience of all
insurers may be made available at least annually in such form and
detail as may be necessary to aid in determining whether rates and
rating systems in use under this subchapter comply with the
standards adopted under this subchapter. In promulgating such
rules, the Board shall provide that rules be as uniform as is
practicable to the rules and to the form of the statistical plans
used in other states.
(b) Interchange of Rating Plan Data. Reasonable rules may be
promulgated by the Board after due consideration to allow the
interchange of loss experience information as necessary for the
application of rating plans.
(c) Consultation with other States. In order to further uniform
administration of rating laws, the Board and every insurer and
rating organization may exchange information and experience data
with insurance supervisory officials, insurers and rating
organizations in other states and may consult and cooperate with
them with respect to rate-making and the application of rating
systems.
(d) The Board is hereby authorized and empowered to require sworn
statements from any insurer affected by this article, showing its
experience on any classification or classifications of risks and
such other information which may be necessary or helpful in
performing duties or authority imposed by law. The Board shall
prescribe the necessary forms for such statements and reports,
having due regard to the rules, methods and forms in use in other
states for similar purposes in order that uniformity of statistics
may not be disturbed.
Acts 1951, 52nd Leg., ch. 491. Amended by Acts 1953, 53rd Leg., p.
64, ch. 50, Sec. 4.
Amended by Acts 1991, 72nd Leg., ch. 242, Sec. 2.06, eff. Sept. 1,
1991.
Art. 5.06. Policy Forms and Endorsements
(1) The Board shall adopt a policy form and endorsements for each
type of motor vehicle insurance subject to this subchapter. The
coverage provided by a policy form adopted under this subsection is
the minimum coverage that may be provided under an insurance policy
for that type of insurance in this State. Each policy form must
provide the coverages mandated under Articles 5.06-1 and 5.06-3 of
this code, except that the coverages may be rejected by the named
insured as provided by those articles.
(2) Except as provided by Subsections (3) and (4) of this article,
an insurer may only use a form adopted by the Board under this
section in writing motor vehicle insurance delivered, issued for
delivery, or renewed in this State. A contract or agreement not
written into the application and policy is void and of no effect and
in violation of the provisions of this subchapter, and is
sufficient cause for revocation of license of such insurer to write
automobile insurance within this State.
(3) The Board may approve the use of a policy form adopted by a
national organization of insurance companies, or similar
organization, if the form, with any endorsement to the form
required and approved by the Board, provides coverage equivalent to
the coverage provided by the form adopted by the Board under
Subsection (1) of this section.
(4) An insurer may use an endorsement to the policy form adopted or
approved by the Board under this article if the endorsement is
approved by the Board.
(5) An insurer, if in compliance with applicable requirements and
conditions, may issue and deliver a certificate of insurance as a
substitute for the entire policy of insurance. The certificate of
insurance shall make reference to and identify the policy form
adopted or approved by the Board for which the substitution of
certificate is made. The certificate shall be in such form as is
prescribed by the Board. The certificate will represent the policy
of insurance, and when issued, shall be evidence that the
certificate holder is insured under the identified policy form.
The certificate is subject to the same limitations, conditions,
coverages, selection of options, and other provisions of the policy
as are provided in the policy, and that insurance policy
information is to be shown on and adequately referenced by the
certificate of insurance issued by the insurer to the insured.
Reference shall be made in the certificate, or in subsequent
attachments, to all endorsements to the policy of insurance. The
certificate shall be executed in the same manner as though a policy
were issued. When the certificate is substituted for the policy of
insurance by an insurer, the insurer shall simultaneously furnish
to the insured receiving the certificate an "outline of coverages",
the form and content of which has been approved by the Board. At the
request of an insured at any time, an insurer which has substituted
a certificate for a policy of insurance shall provide a copy of the
policy.
(6) The Board may promulgate such rules as are necessary to
implement the certificate in lieu of policy provision herein,
including a rule limiting the application thereof to private
passenger automobile policies.
(7) The Board may not adopt or approve a policy form for private
passenger automobile insurance or any endorsement to the policy if
the policy or endorsement is not in plain language. For the
purposes of this subsection, a policy or endorsement is written in
plain language if it achieves the minimum score established by the
commissioner on the Flesch reading ease test or an equivalent test
selected by the commissioner, or, at the option of the
commissioner, if it conforms to the language requirements in a
National Association of Insurance Commissioners model act relating
to plain language. This subsection does not apply to policy
language that is mandated by state or federal law.
(8) The Board may withdraw its approval of a policy or endorsement
form at any time, after notice and hearing.
(9) An insurance policy or other document evidencing proof of
purchase of a personal automobile insurance policy written for a
term of less than 30 days if the policy premium is computed using a
time-based rating plan, or written for less than 1,000 miles if the
policy premium is computed using a mile-based rating plan, may not
be used to obtain an original or renewal driver's license, an
automobile registration or license plates, or a motor vehicle
inspection certificate and must contain a statement as follows:
"TEXAS LAW PROHIBITS USE OF THIS DOCUMENT TO OBTAIN A MOTOR VEHICLE
INSPECTION CERTIFICATE, AN ORIGINAL OR RENEWAL DRIVER'S LICENSE, OR
AN AUTOMOBILE REGISTRATION OR LICENSE PLATES."
(10) Before accepting any premium or fee for a personal automobile
insurance policy or binder for a term of less than 30 days if the
policy premium is computed using a time-based rating plan, or
written for less than 1,000 miles if the policy premium is computed
using a mile-based rating plan, an agent or insurer must make the
following written disclosure to the applicant or insured:
"TEXAS LAW PROHIBITS USE OF THIS POLICY OR BINDER TO OBTAIN A MOTOR
VEHICLE INSPECTION CERTIFICATE, AN ORIGINAL OR RENEWAL DRIVER'S
LICENSE, OR AN AUTOMOBILE REGISTRATION OR LICENSE PLATES."
(11) In this article, the terms "time-based rating plan" and
"mile-based rating plan" have the meanings assigned by Article
5.01-4 of this code.
(12)(a) Notwithstanding Subsections (1)-(10) of this article,
policy forms and endorsements for automobile insurance in this
state are regulated under Article 5.13-2 of this code.
(b) An insurer may continue to use the policy forms and endorsements
promulgated, approved, or adopted by the commissioner under this
article before the effective date of S.B. No. 14, Acts of the 78th
Legislature, Regular Session, 2003, on notification in writing to
the commissioner that the insurer will continue to use the policy
forms and endorsements promulgated, approved, or adopted by the
commissioner under this article.
Acts 1951, 52nd Leg., ch. 491. Amended by Acts 1981, 67th Leg., p.
2700, ch. 736, Sec. 1, eff. Jan. 1, 1982.
Amended by Acts 1991, 72nd Leg., ch. 242, Sec. 2.07, eff. Sept. 1,
1991; Subsecs. (9), (10) added by Acts 1993, 73rd Leg., ch. 685,
Sec. 14.04, eff. Sept. 1, 1993; Subsecs. (9), (10) amended by and
(11) added by Acts 2001, 77th Leg., ch. 971, Sec. 2, eff. Sept. 1,
2001; Subsec. (12) added by Acts 2003, 78th Leg., ch. 206, Sec.
21.07, eff. June 11, 2003.
Art. 5.06-1. Uninsured or Underinsured Motorist Coverage
(1) No automobile liability insurance (including insurance issued
pursuant to an Assigned Risk Plan established under authority of
Section 35 of the Texas Motor Vehicle Safety-Responsibility Act),
covering liability arising out of the ownership, maintenance, or
use of any motor vehicle shall be delivered or issued for delivery
in this state unless coverage is provided therein or supplemental
thereto, in at least the limits described in the Texas Motor Vehicle
Safety-Responsibility Act, under provisions prescribed by the
Board, for the protection of persons insured thereunder who are
legally entitled to recover damages from owners or operators of
uninsured or underinsured motor vehicles because of bodily injury,
sickness, or disease, including death, or property damage resulting
therefrom. The coverages required under this Article shall not be
applicable where any insured named in the policy shall reject the
coverage in writing; provided that unless the named insured
thereafter requests such coverage in writing, such coverage need
not be provided in or supplemental to a renewal policy where the
named insured has rejected the coverage in connection with a policy
previously issued to him by the same insurer or by an affiliated
insurer.
(2) For the purpose of these coverages: (a) the term " uninsured
motor vehicle" shall, subject to the terms and conditions of such
coverage, be deemed to include an insured motor vehicle where the
liability insurer thereof is unable to make payment with respect to
the legal liability of its insured within the limits specified
therein because of insolvency.
(b) The term "underinsured motor vehicle" means an insured motor
vehicle on which there is valid and collectible liability insurance
coverage with limits of liability for the owner or operator which
were originally lower than, or have been reduced by payment of
claims arising from the same accident to, an amount less than the
limit of liability stated in the underinsured coverage of the
insured's policy.
(c) The commissioner may, in the policy forms adopted under Article
5.06 of this code, define "uninsured motor vehicle" to exclude
certain motor vehicles whose operators are in fact uninsured. The
commissioner may in the policy forms filed under Article 5.145 of
this code allow the term "uninsured motor vehicle" to be defined to
exclude certain motor vehicles whose operators are in fact
uninsured.
(d) The portion of a policy form adopted under Article 5.06 of this
code or filed under Article 5.145 of this code to provide coverage
under this article shall include provisions that, regardless of the
number of persons insured, policies or bonds applicable, vehicles
involved, or claims made, the total aggregate limit of liability to
any one person who sustains bodily injury or property damage as the
result of any one occurrence shall not exceed the limit of liability
for these coverages as stated in the policy and the total aggregate
limit of liability to all claimants, if more than one, shall not
exceed the total limit of liability per occurrence as stated in the
policy; and shall provide for the exclusion of the recovery of
damages for bodily injury or property damage or both resulting from
the intentional acts of the insured. The portion of a policy form
adopted under Article 5.06 of this code or filed under Article 5.145
of this code to provide coverage under this article shall require
that in order for the insured to recover under the uninsured
motorist coverages where the owner or operator of any motor vehicle
which causes bodily injury or property damage to the insured is
unknown, actual physical contact must have occurred between the
motor vehicle owned or operated by such unknown person and the
person or property of the insured.
(3) The limits of liability for bodily injury, sickness, or
disease, including death, shall be offered to the insured in
amounts not less than those prescribed in the Texas Motor Vehicle
Safety-Responsibility Act and such higher available limits as may
be desired by the insured, but not greater than the limits of
liability specified in the bodily injury liability provisions of
the insured's policy.
(4) (a) Coverage for property damage shall be offered to the insured
in amounts not less than those prescribed in the Texas Motor Vehicle
Safety-Responsibility Act and such higher available limits as may
be desired by the insured, but not greater than limits of liability
specified in the property damage liability provisions of the
insured's policy, subject to a deductible amount of $250.
(b) If the insured has collision coverage and uninsured or
underinsured property damage liability coverage, the insured may
recover under the policy coverage chosen by the insured. In the
event neither coverage is sufficient alone to cover all damage
resulting from a single occurrence, the insured may recover under
both coverages. When recovering under both coverages, the insured
shall designate one coverage as the primary coverage and pay the
deductible applicable to that coverage. The primary coverage must
be exhausted before any recovery is made under the secondary
coverage. If both coverages are utilized in the payment of damages
from a single occurrence, the insured shall not be required to pay
the deductible applicable to the secondary coverage when the amount
of the deductible otherwise applicable to the secondary coverage is
the same as or less than the amount of the deductible applicable to
the primary coverage. If both coverages are utilized in the payment
of damages from a single occurrence and the amount of the deductible
otherwise applicable to the secondary coverage is greater than the
amount of the deductible applicable to the primary coverage, the
insured shall be required to pay in respect of the secondary
coverage only the difference between the amount of the two
deductibles. In no event shall the insured recover under both
coverages more than the actual damages suffered.
(5) The underinsured motorist coverage shall provide for payment to
the insured of all sums which he shall be legally entitled to
recover as damages from owners or operators of underinsured motor
vehicles because of bodily injury or property damage in an amount up
to the limit specified in the policy, reduced by the amount
recovered or recoverable from the insurer of the underinsured motor
vehicle.
(6) In the event of payment to any person under any coverage
required by this Section and subject to the terms and conditions of
such coverage, the insurer making such payment shall, to the extent
thereof, be entitled to the proceeds of any settlement or judgment
resulting from the exercise of any rights of recovery of such person
against any person or organization legally responsible for the
bodily injury, sickness or disease, or death for which such payment
is made, including the proceeds recoverable from the assets of the
insolvent insurer; provided, however, whenever an insurer shall
make payment under a policy of insurance issued pursuant to this
Act, which payment is occasioned by the insolvency of an insurer,
the insured of said insolvent insurer shall be given credit in any
judgment obtained against him, with respect to his legal liability
for such damages, to the extent of such payment, but, subject to
Section 12 of Article 21.28-C of this code, such paying insurer
shall have the right to proceed directly against the insolvent
insurer or its receiver, and in pursuance of such right such paying
insurer shall possess any rights which the insured of the insolvent
company might otherwise have had if the insured of the insolvent
insurer had made the payment.
(7) If a dispute exists as to whether a motor vehicle is uninsured,
the burden of proof as to that issue shall be upon the insurer.
(8) Notwithstanding Section 15.032, Civil Practice and Remedies
Code, an action against an insurer in relation to the coverage
provided under this article, including an action to enforce that
coverage, may be brought only:
(a) in the county in which the policyholder or beneficiary
instituting the suit resided at the time of the accident; or
(b) in the county in which the accident involving the uninsured or
underinsured motor vehicle occurred.
Added by Acts 1967, 60th Leg., p. 448, ch. 202, Sec. 1, eff. Oct. 1,
1967. Amended by Acts 1977, 65th Leg., p. 370, ch. 182, Sec. 1, eff.
Aug. 29, 1977; Acts 1979, 66th Leg., p. 1418, ch. 626, Sec. 1, eff.
Jan. 1, 1980; Acts 1981, 67th Leg., p. 1002, ch. 380, Sec. 1, eff.
Aug. 31, 1981.
Sec. (6) amended by Acts 1989, 71st Leg., ch. 1082, Sec. 6.01, eff.
Sept. 1, 1989; Sec. (2) amended by Acts 1991, 72nd Leg., ch. 242,
Sec. 2.08, eff. Sept. 1, 1991; Sec. (8) added by Acts 1995, 74th
Leg., ch. 138, Sec. 8, eff. Aug. 28, 1995; Subsec. (2) amended by
Acts 2003, 78th Leg., ch. 206, Sec. 21.08, eff. June 11, 2003.
Art. 5.06-2. Garage Insurance
(1) Definitions. As used in this Act:
(a) "Garage Insurance" means motor vehicle or automobile insurance
as defined in Article 5.01 hereof issued to a named insured engaged
in the business of selling, servicing or repairing motor vehicles
as now or hereafter defined by rules, regulations or orders of the
State Board of Insurance;
(b) "Garage Customer" means any person or organization other than
the named insured, or an employee, director, officer, stockholder,
partner, or agent of the named insured; or a resident of the same
household as the named insured, such employee, director, officer,
stockholder, partner, or agent;
(c) "Financial Responsibility Limits" means the minimum limits
specified by the Texas Motor Vehicle Safety-Responsibility Act.
(2) A policy of garage insurance may contain a provision to the
effect that garage customers are not insureds under the garage
insurance policy and that the garage insurance shall not apply to
garage customers, except to the extent that other valid and
collectible insurance, if any, available to the garage customer is
not equal to the financial responsibility limits. Notwithstanding
any provision to the contrary in such other policy or policies of
insurance as to whether such insurance is primary, excess, or
contingent insurance, or otherwise, such other valid and
collectible insurance shall be primary insurance as to the garage
customer. Any garage insurance policy containing such a provision
shall not cover garage customers except to such extent,
notwithstanding the terms and provisions of such other policy or
policies of insurance.
(3) This Act shall apply only to insurance policies issued or
renewed or made subject to this Act by endorsement after the
effective date hereof.
Added by Acts 1969, 61st Leg., 2nd C.S., p. 193, ch. 35, Sec. 1, eff.
Sept. 19, 1969.
Art. 5.06-3. Personal Injury Protection Coverage
(a) No automobile liability insurance policy, including insurance
issued pursuant to an assigned risk plan established under
authority of Section 35 of the Texas Motor Vehicle
Safety-Responsibility Act, covering liability arising out of the
ownership, maintenance, or use of any motor vehicle shall be
delivered or issued for delivery in this state unless personal
injury protection coverage is provided therein or supplemental
thereto. The coverage required by this article shall not be
applicable if any insured named in the policy shall reject the
coverage in writing; provided, unless the named insured thereafter
requests such coverage in writing, such coverage need not be
provided in or supplemental to a renewal policy if the named insured
has rejected the coverage in connection with a policy previously
issued to him by the same insurer or by an affiliated insurer.
(b) "Personal injury protection" consists of provisions of a motor
vehicle liability policy which provide for payment to the named
insured in the motor vehicle liability policy and members of the
insured's household, any authorized operator or passenger of the
named insured's motor vehicle including a guest occupant, up to an
amount of $2,500 for each such person for payment of all reasonable
expenses arising from the accident and incurred within three years
from the date thereof for necessary medical, surgical, X-ray and
dental services, including prosthetic devices, and necessary
ambulance, hospital, professional nursing and funeral services,
and in the case of an income producer, payment of benefits for loss
of income as the result of the accident; and where the person
injured in the accident was not an income or wage producer at the
time of the accident, payments of benefits must be made in
reimbursement of necessary and reasonable expenses incurred for
essential services ordinarily performed by the injured person for
care and maintenance of the family or family household. The insurer
providing loss of income benefits may require, as a condition of
receiving such benefits, that the insured person furnish the
insurer reasonable medical proof of his injury causing loss of
income. The personal injury protection in this paragraph specified
shall not exceed $2,500 for all benefits, in the aggregate, for each
person.
(c) The benefits required by this Act shall be payable without
regard to the fault or non-fault of the named insured or the
recipient in causing or contributing to the accident, and without
regard to any collateral source of medical, hospital, or wage
continuation benefits. An insurer paying benefits pursuant to this
Act shall have no right of subrogation and no claim against any
other person or insurer to recover any such benefits by reason of
the alleged fault of such other person in causing or contributing to
the accident.
(d) All payments of benefits prescribed under this Act shall be made
periodically as the claims therefor arise and within thirty (30)
days after satisfactory proof thereof is received by the insurer
subject to the following limitations:
(1) The coverage described in this Act may prescribe a period of not
less than six months after the date of accident within which the
original proof of loss with respect to a claim for benefits must be
presented to the insurer.
(2) The coverage described in this Act may provide that in any
instance where a lapse occurs in the period of total disability or
in the medical treatment of an injured person who has received
benefits under such coverage and such person subsequently claims
additional benefits based upon an alleged recurrence of the injury
for which the original claim for benefits was made, the insurer may
require reasonable medical proof of such alleged recurrence;
provided, that in no event shall the aggregate benefits payable to
any person exceed the maximum limits prescribed in the policy.
(3) In the event the insurer fails to pay such benefits when due,
the person entitled to such benefits may bring an action in contract
to recover the same; and, in the event the insurer is required to
pay such benefits, the person entitled to such benefits shall be
entitled to recover reasonable attorneys fees plus 12% penalty,
plus interest thereon at the legal rate from the date such sums
became overdue.
(e) An insurer shall exclude benefits to any insured, or his
personal representative, under a policy required by Section 1, when
the insured's conduct contributed to the injury he sustained in any
of the following ways:
(1) Causing injury to himself intentionally.
(2) While in the commission of a felony, or while seeking to elude
lawful apprehension or arrest by a law enforcement official.
(f) This article applies only to motor vehicle insurance policies
subject to this subchapter and does not apply to other accident or
health policies even though they promise indemnity against
automobile-connected injuries.
(g) Nothing contained in this Act shall affect the offering of
medical payments coverage, disability benefits, and accidental
death benefits, as presently prescribed by the State Board of
Insurance; and nothing contained in this Act shall be construed to
prevent an insurer from providing broader benefits than the minimum
benefits enumerated in this Act subject to the rules and forms
prescribed by the State Board of Insurance.
(h) When any liability claim is made by any guest or passenger
described in paragraph (b) hereof against the owner or operator of
the motor vehicle in which he was riding or the owner's or
operator's liability insurance carrier, the owner or operator of
such motor vehicle or his liability insurance carrier shall be
entitled to an offset, credit or deduction against any award made to
such guest or passenger in an amount of money equal to the amounts
paid by the owner, operator or his automobile liability insurance
carrier under "personal injury protection" as defined in this Act
to such guests or passengers; provided, however, that nothing
herein shall be construed to authorize a direct action against a
liability insurance company if such right does not presently exist
at law.
Added by Acts 1973, 63rd Leg., p. 90, ch. 52, Sec. 1, eff. Aug. 27,
1973. Amended by Acts 1981, 67th Leg., p. 100, ch. 51, Sec. 1, eff.
Aug. 31, 1981.
Sec. (f) amended by Acts 1991, 72nd Leg., ch. 242, Sec. 2.09, eff.
Sept. 1, 1991.
Art. 5.06-4. Loss Control Services
(a) Any insurer desiring to write commercial automobile liability
insurance in this state must provide loss control information as a
prerequisite for writing that insurance.
(b) The insurer shall provide loss control information to its
policyholders reasonably commensurate with the risks and exposures
and experience of the insured's business. To provide this
information or services, the insurer may employ qualified
personnel, retain qualified independent contractors, contract with
the policyholder to provide qualified accident prevention
personnel and services, or use a combination of the methods
provided by this section.
(c) If there is evidence that reasonable loss control information
is not being provided by the insurer or is not being used by the
insurer in a reasonable manner to reduce losses, the State Board of
Insurance shall order a hearing to determine if the insurer is not
in compliance with this article. If it is determined that the
insurer is not in compliance, the board may impose any of the
sanctions authorized by Section 7, Article 1.10, of this code.
(d) The State Board of Insurance may promulgate reasonable rules
and regulations for the enforcement of this article after holding a
public hearing on the proposed rules and regulations.
(e) An insurer or its agents, servants, or employees are not liable
for, and no cause of action arises with respect to, any accident
based on the allegation that the accident was caused or could have
been prevented by a program, information, inspection, or other
activity or service undertaken by the insurer for the prevention of
accidents in connection with operations of its insured. However,
this immunity does not affect the liability of an insurer for
compensation or as otherwise provided in a policy of insurance.
(f) Loss control information provided by an insurer to an insured
pursuant to this article is not subject to discovery or admissible
in any civil proceeding as evidence.
Added by Acts 1987, 70th Leg., 1st C.S., ch. 1, Sec. 4.02, eff.
Sept. 2, 1987. Subsec. (a) amended by Acts 2001, 77th Leg., ch.
172, Sec. 1, eff. Sept. 1, 2001.
Art. 5.06-5. Recovery Prohibited for Vehicles Impounded for Drug
Violations
(a) A motor vehicle insurance policy delivered or issued for
delivery in this state may not provide payment on final conviction
of the named insured for loss for a covered motor vehicle that is
seized by federal or state law enforcement officers as evidence in a
case against the named insured under Chapter 481, Health and Safety
Code or the federal Controlled Substances Act, 21 U.S.C. Section
801 et seq. For the purpose of this section a named insured shall be
the person named on the declaration page of an automobile insurance
policy and his or her spouse if the policy is written on an
individual. If a policy is other than an individual policy, a named
insured shall be the company or corporation named on the
declaration page of an automobile insurance policy and any officer,
director, or stockholder of that company or corporation.
(b) An insurer may not deliver or issue for delivery in this state a
motor vehicle insurance policy that provides payment on final
conviction of the named insured for loss for a covered motor vehicle
that is seized by federal or state law enforcement officers as
evidence in a case against the named insured under Chapter 481,
Health and Safety Code or the federal Controlled Substances Act, 21
U.S.C. Section 801 et seq.
Added by Acts 1989, 71st Leg., ch. 568, Sec. 1, eff. Aug. 28, 1989.
Amended by Acts 1991, 72nd Leg., ch. 14, Sec. 284(42), eff. Sept. 1,
1991.
Art. 5.06-6. Coverages for Spouses and Former Spouses
A personal automobile policy or any similar policy form adopted or
approved by the commissioner under Article 5.06 of this code or
filed under Article 5.145 of this code that covers liability
arising out of ownership, maintenance, or use of a motor vehicle of
a spouse, who is otherwise insured by the policy, shall contain a
provision to continue coverage for the spouse during a period of
separation in contemplation of divorce.
Added by Acts 1989, 71st Leg., ch. 377, Sec. 4, eff. Sept. 1, 1989.
Renumbered from art. 5.06-5 and amended by Acts 1991, 72nd Leg., ch.
242, Sec. 2.10, eff. Sept. 1, 1991; Acts 2003, 78th Leg., ch. 206,
Sec. 21.09, eff. June 11, 2003.
Art. 5.07. Participating Policies
Nothing in this subchapter shall be construed to prohibit the
operation hereunder of any stock company, mutual company,
reciprocal or interinsurance exchange or Lloyd's association or to
prohibit any stock company, mutual company, reciprocal or
interinsurance exchange or Lloyd's association issuing
participating policies; provided no distribution of profit or
dividends to insured shall take effect or be paid until the same
shall have been approved by the Board; and provided further that no
such distribution shall be approved until adequate reserves shall
have been provided, such reserves to be computed on the same basis
for all classes of insurers operating under this subchapter.
Acts 1951, 52nd Leg., ch. 491.
Art. 5.07-1. Repair of Motor Vehicles; Disclosure of Consumer
Information
(a) Except as provided by rules duly adopted by the commissioner,
under an auto insurance policy that is delivered, issued for
delivery, or renewed in this state an insurer may not, directly or
indirectly, limit its coverage under a policy covering damage to a
motor vehicle by specifying the brand, type, kind, age, vendor,
supplier, or condition of parts or products that may be used to
repair the vehicle or by limiting the beneficiary of the policy from
selecting a repair person or facility to repair damage to the motor
vehicle covered under the policy.
(b) In connection with the repair of damage to a motor vehicle
covered under an auto insurance policy, an insurer, an employee of
an insurer, an agent of an insurer, a solicitor of insurance for an
insurer, an insurance adjuster, or an entity that employs an
insurance adjuster may not:
(1) solicit or accept a referral fee or gratuity in exchange for
referring a beneficiary or third-party claimant to a repair person
or facility to repair the damage;
(2) state or suggest, either orally or in writing, to a beneficiary
that a specific repair person or facility or a repair person or
facility identified on a preferred list compiled by an insurer must
be used by a beneficiary in order for the damage repair or parts
replacement to be covered by the policy; or
(3) restrict a beneficiary's or third-party claimant's right to
choose a repair person or facility by requiring the beneficiary or
third-party claimant to travel an unreasonable distance to repair
the damage.
(c) A contract between an insurer and a repair person or facility,
including an agreement under which the repair person or facility
agrees to extend discounts for parts or labor to the insurer in
exchange for referrals by the insurer, may not result in a reduction
of coverage under the insured's auto insurance policy.
(d) An insurer may not prohibit a repair person or facility from
providing a beneficiary or third-party claimant with information
that states the description, manufacturer, or source of the parts
used and the amounts charged to the insurer for the parts and
related labor.
(e) At the time the vehicle is presented to an insurer or an
insurance adjuster or other person in connection with a claim for
damage repair, the insurer or insurance adjuster or other person
shall provide to the beneficiary or third-party claimant notice of
the provisions of this article. The commissioner shall adopt a rule
establishing the method or methods insurers shall use to comply
with the notice provisions in this subsection.
(f) Any beneficiary, third-party claimant, or repair person or
facility may submit a written, documented complaint to the
department with respect to an alleged violation of this article.
(g) In the settlement of liability claims by a third party against
an insured for property damage claimed by the third party, an
insurer may not require the third-party claimant to have repairs
made by a particular repair person or facility or to use a
particular brand, type, kind, age, vendor, supplier, or condition
of parts or products.
(h) The commissioner may exercise the rule-making authority under
Article 21.21-2 of this code with respect to any fraudulent
activity of any party to an agreement described by Subsection (c) of
this article.
(i) Any rules adopted by the commissioner to implement this article
shall include, but not be limited to, requirements that:
(1) any limitation described in Subsection (a) of this section is
clearly and prominently displayed on the face of the policy or
certificate in lieu of a policy; and
(2) the insured give written consent to such a limitation,
following both oral and written notification of any limitation at
the time the policy is purchased.
Added by Acts 1991, 72nd Leg., ch. 242, Sec. 2.11, eff. Sept. 1,
1991. Amended by Acts 1997, 75th Leg., ch. 399, Sec. 1, eff. Sept.
1, 1997.
Art. 5.08. Special Favors and Profit Sharing
(a) Except as provided by this article, it shall be unlawful for any
insurer, as defined in this subchapter, or its officers, directors,
general agent, state agents, special agents, local agents or other
representatives, to grant to or contract with insured for any
special favor or advantage in dividends or other profits, or any
commissions or dividends of commissions or profits to accrue
thereon, or any compensation or any valuable consideration not
specified in the policy contract, or any inducement not specified
in the policy contract, for the purpose of writing the insurance of
any insured.
(b) Nothing in this article, however, shall be construed to
prohibit an insurer from sharing its profits after the same have
been earned with its policyholders under and in accordance with an
agreement as to such profit sharing contained in its policy
contract. Any profit sharing under any policy with insured shall be
uniform as between such insured, and shall consist only and solely
of an equitable distribution under and in accordance with the terms
of the policy of earnings between such insured, and no such insurer
shall discriminate in any distribution of profits between insured
of a class, and no classes for such distribution shall be made or
established except on the approval of the commissioner. No part of
any profit shall be distributed to any insured under any such policy
until the expiration of the policy contract. Any violation of the
terms of this subsection shall constitute unjust discrimination and
shall constitute rebating, and shall be sufficient grounds for the
revocation of the permit of the insurer or of the license of the
agent being guilty of such unjust discrimination and rebating.
(c) This article does not prohibit an insurer, on approval by the
commissioner, from distributing to policyholders who are on active
duty in the United States Armed Forces any estimated profits
resulting from service by those policyholders in any foreign
country in a combat theater of operations at any time after January
1, 1990. An insurer that elects to make such distributions shall
file a written description of its distribution program with the
commissioner for approval by the commissioner and shall notify the
commissioner in writing of each distribution made under the
program. The insurer may distribute the estimated profits among
those policyholders based on the length of time served by a
policyholder in a combat theater of operations, the location of the
military service, the duration of the applicable insurance policy,
or any other reasonable basis. The commissioner shall act on the
insurer's distribution program within five business days of receipt
of the insurer's distribution program, otherwise the distribution
program shall be deemed approved.
(d) This article does not prohibit an insurer, on approval by the
commissioner, from sharing profits with policyholders who are part
of a group program established by a nonprofit business association
and who participate in the group program because of membership in
the association. An insurer that elects to make distributions
under this subsection shall file a written description of its
distribution program with the commissioner for approval by the
commissioner and shall notify the commissioner in writing of each
distribution made under the program. The commissioner shall act on
the insurer's distribution program within five business days of
receipt of the insurer's distribution program, otherwise the
distribution program shall be deemed approved. For purposes of
this subsection, "nonprofit business association" means a business
association that is a nonprofit corporation exempt from federal
income tax under Section 501(a) of the Internal Revenue Code of
1986, and its subsequent amendments, by being listed as an exempt
organization under Section 501(c)(6) of that code.
Acts 1951, 52nd Leg., ch. 491.
Amended by Acts 1991, 72nd Leg., ch. 6, Sec. 1, eff. March 19, 1991;
Acts 1999, 76th Leg., ch. 1240, Sec. 1, eff. June 18, 1999.
Art. 5.09. Discriminations or Distinctions
(a) Except as provided by Subsection (b) of this article, no insurer
coming within the terms of this subchapter shall, in its business in
this State, make or permit any distinction or discrimination in
favor of the insured having a like hazard, in the matter of the
charge of premiums for insurance, or in dividends or other benefits
payable under any policy, nor shall any such insurer or agent make
any contract of insurance, or agreement as to such insurance, other
than expressed in the policy, nor shall any such insurer or its
agents or representatives pay, allow or give, or offer to pay, allow
or give, directly or indirectly, as an inducement to insured, any
rebate payable upon the policy or any special favor or advantage in
dividends or other benefits to accrue, or anything of value
whatsoever, not specified in the policy; provided that nothing in
this subchapter shall be construed to prohibit the modification of
rates by rating plans designed to encourage the prevention of
accidents, and to take account of the peculiar hazards and
experience of individual risks, past and prospective, within and
outside the State, and of all other relevant factors, within and
outside the State, provided such plan shall have been approved by
the Board.
(b) This article does not prohibit an insurer, on approval by the
Board, from distributing to policyholders who are on active duty in
the United States Armed Forces any estimated profits resulting from
service by those policyholders in any foreign country in a combat
theater of operations at any time after January 1, 1990. An insurer
that elects to make such distributions shall file a written
description of its distribution program with the Board for approval
by the Board and shall notify the Board in writing of each
distribution made under the program. The insurer may distribute
the estimated profits among those policyholders based on the length
of time served by a policyholder in a combat theater of operations,
the location of the military service, the duration of the
applicable insurance policy, or any other reasonable basis. The
Board shall act on the insurer's distribution program within five
business days of receipt of the insurer's distribution program,
otherwise the distribution program shall be deemed approved.
(c) Notwithstanding Subsection (a) of this article, on and after
the effective date of S.B. No. 14, Acts of the 78th Legislature,
Regular Session, 2003, rates for personal automobile insurance in
this state are determined as provided by Article 5.101 of this code,
and rates for commercial motor vehicle insurance in this state are
determined as provided by Article 5.13-2 of this code. On and after
December 1, 2004, rates for personal automobile insurance and
commercial automobile insurance in this state are determined as
provided by Article 5.13-2 of this code.
Acts 1951, 52nd Leg., ch. 491. Amended by Acts 1953, 53rd Leg., p.
64, ch. 50, Sec. 5.
Amended by Acts 1991, 72nd Leg., ch. 6, Sec. 2, eff. March 19, 1991;
Acts 1991, 72nd Leg., ch. 242, Sec. 2.12, eff. Sept. 1, 1991;
Subsec. (b) amended by Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Sec.
8.07, eff. Jan. 1, 1992. Amended by Acts 1995, 74th Leg., ch. 984,
Sec. 6, eff. Sept. 1, 1995; Subsec. (c) amended by Acts 2003, 78th
Leg., ch. 206, Sec. 21.10, eff. June 11, 2003.
Art. 5.10. Rules and Regulations
The Board is hereby empowered to make and enforce all such
reasonable rules and regulations not inconsistent with the
provisions of this subchapter as are necessary to carry out its
provisions.
Acts 1951, 52nd Leg., ch. 491.
Amended by Acts 1991, 72nd Leg., ch. 242, Sec. 2.13, eff. Sept. 1,
1991.
Art. 5.11. Hearing on Grievances
(a) Any policyholder or insurer shall have the right to a hearing
before the Board on any grievance occasioned by the approval or
disapproval by the Board of any classification, rate, rating plan,
endorsement or policy form, or any rule or regulation established
under the terms hereof, such hearing to be held in conformity with
rules prescribed by the Board. Upon receipt of request that such
hearing is desired, the Board shall forthwith set a date for the
hearing, at the same time notifying all interested parties in
writing of the place and date thereof, which date, unless otherwise
agreed to by the parties at interest, shall not be less than ten
(10) nor more than thirty (30) days after the date of said notice.
Any party aggrieved shall have the right to apply to any court of
competent jurisdiction to obtain redress.
(b) No hearing shall suspend the operation of any classification,
rate, rating plan or policy form unless the Board shall so order.
(c) Notwithstanding Subsections (a) and (b) of this article, on and
after the effective date of S.B. No. 14, Acts of the 78th
Legislature, Regular Session, 2003, rates for personal automobile
insurance in this state are determined as provided by Article 5.101
of this code, and rates for commercial motor vehicle insurance in
this state are determined as provided by Article 5.13-2 of this
code. On and after December 1, 2004, rates for personal automobile
insurance and commercial automobile insurance in this state are
determined as provided by Article 5.13-2 of this code.
Acts 1951, 52nd Leg., ch. 491. Amended by Acts 1953, 53rd Leg., p.
64, ch. 50, Sec. 6.
Amended by Acts 1991, 72nd Leg., ch. 242, Sec. 2.14, eff. Sept. 1,
1991; Subsec. (c) amended by Acts 1991, 72nd Leg., 2nd C.S., ch.
12, Sec. 8.08, eff. Jan. 1, 1992; amended by Acts 1995, 74th Leg.,
ch. 984, Sec. 7, eff. Sept. 1, 1995; Subsec. (c) amended by Acts
2003, 78th Leg., ch. 206, Sec. 21.11, eff. June 11, 2003.
Art. 5.12. Maintenance Tax on Gross Premiums
(a) The State of Texas by and through the commissioner shall
annually determine the rate of assessment of a maintenance tax to be
paid on an annual or semiannual basis, as determined by the
comptroller. The rate of assessment may not exceed one-fifth of one
percent of the correctly reported gross motor vehicle insurance
premiums of all authorized insurers writing motor vehicle insurance
in this state. The comptroller shall collect the maintenance tax.
(b) The tax required by this article is in addition to all other
taxes now imposed or that may be subsequently imposed and that are
not in conflict with this article.
(c) The commissioner, after taking into account the unexpended
funds produced by this tax, if any, shall adjust the rate of
assessment each year to produce the amount of funds that it
estimates will be necessary to pay all the expenses of regulating
motor vehicle insurance during the succeeding year. In making an
estimate under this subsection, the commissioner shall take into
account the requirement that the general revenue fund be reimbursed
under Article 4.19 of this code.
(d) The taxes collected shall be deposited in the State Treasury to
the credit of the general revenue fund to be reallocated to the
Texas Department of Insurance operating fund and shall be spent as
authorized by legislative appropriation only on warrants issued by
the comptroller pursuant to duly certified requisitions of the
commissioner. Amounts reallocated to the Texas Department of
Insurance operating fund under this subsection may be transferred
to the general revenue fund in accordance with Article 4.19 of this
code.
(e) The comptroller may elect to collect on a semiannual or other
periodic basis the tax assessed under this article only from
insurers whose tax liability under this article for the previous
tax year was $2,000 or more.
(f) The commissioner shall advise the comptroller of the applicable
rate of assessment no later than the date 45 days prior to the due
date of the tax return for the period for which such taxes are due.
If the commissioner has not advised the comptroller of the
applicable rate by such date, the applicable rate shall be the rate
applied in the previous tax period. If the commissioner advises the
comptroller of the applicable rate of assessment after taxes have
been assessed pursuant to this subsection, the comptroller shall:
(1) advise each taxpayer in writing of the amount of any additional
taxes due; or
(2) refund any excess taxes paid.
Acts 1951, 52nd Leg., ch. 491. Amended by Acts 1983, 68th Leg., p.
3911, ch. 622, Sec. 16, eff. Sept. 1, 1983.
Amended by Acts 1983, 68th Leg., p. 3911, ch. 622, Sec. 16, eff.
Sept. 1, 1983; Acts 1983, 68th Leg., p. 5013, ch. 902, Sec. 1, eff.
Sept. 1, 1983; Acts 1993, 73rd Leg., ch. 685, Sec. 3.16, eff. Sept.
1, 1993.
Art. 5.12-1. Penalty for Violation of Act
Any insurer or officer or representative thereof which shall
violate any provision of this Act shall be subject to a revocation
of his or its license by the Board of Insurance Commissioners and in
addition shall be deemed guilty of a misdemeanor and, upon
conviction thereof, shall be punished by a fine of not less than One
Hundred ($100.00) Dollars nor more than Five Hundred ($500.00)
Dollars for each such offense.
Acts 1927, 40th Leg., p. 373, ch. 253, Sec. 12. Amended by Acts
1937, 45th Leg., p. 671, ch. 335, Sec. 3.
SUBCHAPTER B. CASUALTY INSURANCE AND FIDELITY, GUARANTY AND SURETY
BONDS
Art. 5.13. Scope of Subchapter
Text of section effective until December 1, 2004
(a) This subchapter applies to every insurance company,
corporation, interinsurance exchange, mutual, reciprocal,
association, Lloyd's plan, or other organization or insurer writing
any of the characters of insurance business herein set forth,
hereinafter called "Insurer"; provided that nothing in this entire
subchapter shall be construed to apply to any county or farm mutual
insurance company or association, as regulated under Chapters 16
and 17 of this code, except that Article 5.13-2 of this code shall
apply to a county mutual insurance company with respect to rates for
commercial automobile insurance.
(b) This subchapter applies to the writing of casualty insurance
and the writing of fidelity, surety, and guaranty bonds, on risks or
operations in this State except as herein stated.
(c) Except as otherwise provided by this subchapter, this
subchapter does not apply to the writing of motor vehicle, life,
health, accident, professional liability, reinsurance, aircraft,
fraternal benefit, fire, lightning, tornado, windstorm, hail,
smoke or smudge, cyclone, earthquake, volcanic eruption, rain,
frost and freeze, weather or climatic conditions, excess or
deficiency of moisture, flood, the rising of the waters of the ocean
or its tributaries, bombardment, invasion, insurrection, riot,
civil war or commotion, military or usurped power, any order of a
civil authority made to prevent the spread of a conflagration,
epidemic or catastrophe, vandalism or malicious mischief, strike or
lockout, water or other fluid or substance, resulting from the
breakage or leakage of sprinklers, pumps, or other apparatus
erected for extinguishing fires, water pipes or other conduits or
containers, or resulting from casual water entering through leaks
or opening in buildings or by seepage through building walls,
including insurance against accidental injury of such sprinklers,
pumps, fire apparatus, conduits or container, workers'
compensation, inland marine, ocean marine, marine, or title
insurance; nor does this subchapter apply to the writing of
explosion insurance, except insurance against loss from injury to
person or property which results accidentally from steam boilers,
heaters or pressure vessels, electrical devices, engines and all
machinery and appliances used in connection therewith or operation
thereby.
(d) This subchapter shall not be construed as limiting in any manner
the types or classes of insurance which may be written by the
several types of insurers under appropriate statutes or their
charters or permits.
(e) The regulatory power herein conferred is vested in the
commissioner.
Acts 1951, 52nd Leg., ch. 491. Amended by Acts 1955, 54th Leg., p.
359, ch. 76, Sec. 1; Acts 2003, 78th Leg., ch. 206, Sec. 5.01, eff.
June 11, 2003.
For text of section effective December 1, 2004, see
Art. 5.13, post.
Art. 5.13. Scope of Subchapter
Text of section effective December 1, 2004.
(a) This subchapter applies to every insurance company,
corporation, interinsurance exchange, mutual, reciprocal,
association, Lloyd's plan, or other organization or insurer writing
any of the characters of insurance business herein set forth,
hereinafter called "Insurer"; provided that nothing in this entire
subchapter shall be construed to apply to any county or farm mutual
insurance company or association, as regulated under Chapters 911
and 912 of this code, except that Article 5.13-2 of this code shall
apply to a county mutual insurance company with respect to personal
automobile and commercial automobile insurance, residential and
commercial property insurance, and inland marine insurance.
(b) This subchapter applies to the writing of casualty insurance
and the writing of fidelity, surety, and guaranty bonds, on risks or
operations in this State except as herein stated.
(c) Except as otherwise provided by this subchapter, this
subchapter does not apply to the writing of motor vehicle, life,
health, accident, professional liability, reinsurance, aircraft,
fraternal benefit, fire, lightning, tornado, windstorm, hail,
smoke or smudge, cyclone, earthquake, volcanic eruption, rain,
frost and freeze, weather or climatic conditions, excess or
deficiency of moisture, flood, the rising of the waters of the ocean
or its tributaries, bombardment, invasion, insurrection, riot,
civil war or commotion, military or usurped power, any order of a
civil authority made to prevent the spread of a conflagration,
epidemic or catastrophe, vandalism or malicious mischief, strike or
lockout, water or other fluid or substance, resulting from the
breakage or leakage of sprinklers, pumps, or other apparatus
erected for extinguishing fires, water pipes or other conduits or
containers, or resulting from casual water entering through leaks
or opening in buildings or by seepage through building walls,
including insurance against accidental injury of such sprinklers,
pumps, fire apparatus, conduits or container, workers'
compensation, noncommercial inland marine, ocean marine, marine,
or title insurance; nor does this subchapter apply to the writing
of explosion insurance, except insurance against loss from injury
to person or property which results accidentally from steam
boilers, heaters or pressure vessels, electrical devices, engines
and all machinery and appliances used in connection therewith or
operation thereby.
(d) This subchapter shall not be construed as limiting in any manner
the types or classes of insurance which may be written by the
several types of insurers under appropriate statutes or their
charters or permits.
(e) The regulatory power herein conferred is vested in the
commissioner.
Acts 1951, 52nd Leg., ch. 491. Amended by Acts 1955, 54th Leg., p.
359, ch. 76, Sec. 1; Acts 2003, 78th Leg., ch. 206, Sec. 5.01, eff.
June 11, 2003; Acts 2003, 78th Leg., ch. 206, Sec. 6.01, eff. Dec.
1, 2004.
For text of section effective until December 1, 2004, see
Art. 5.13,
ante.
Art. 5.13-1. Legal Service Contracts
(a) Every insurer governed by Subchapter B of Chapter 5 of the
Insurance Code, as amended, and every life, health, and accident
insurer governed by Chapter 3 of the Insurance Code, as amended, is
authorized to issue prepaid legal services contracts. Every such
insurer or rating organization authorized under Article 5.16 of the
Insurance Code shall file with the State Board of Insurance all
rules and forms applicable to prepaid legal service contracts in a
manner to be established by the State Board of Insurance.
Certification, by a qualified actuary, to the appropriateness of
the charges, rates, or rating plans, based upon reasonable
assumptions, shall accompany the filing along with adequate
supporting information.
(b) The State Board of Insurance shall, within a reasonable period,
approve any form if the requirements of this section are met. It
shall be unlawful to issue such forms until approved or to use such
schedules of charges, rates, or rating plans until filed. If the
State Board of Insurance has good cause to believe such rates and
rating plans do not comply with the standards of this article, it
shall give notice in writing to every insurer or rating
organization which filed such rates or rating plans, stating
therein in what manner and to what extent such noncompliance is
alleged to exist and specifying therein a reasonable time, not less
than 30 days thereafter, in which such noncompliance may be
corrected. If the board has not acted on any form, rate, rating
plan, or charges within 30 days after the filing of same, they shall
be deemed approved. The board may require the submission of
whatever relevant information is deemed necessary in determining
whether to approve or disapprove a filing made pursuant to this
section.
(c) The right of such insurers to issue prepaid legal services
contracts on individual, group, or franchise bases is hereby
recognized, and qualified agents of such insurers who are licensed
under Article 21.07-1 or 21.14 of this code shall be authorized to
write such coverages under such rules as the commissioner may
prescribe.
(d) The State Board of Insurance is hereby vested with power and
authority under this article to promulgate, after notice of
hearing, and to enforce, rules and regulations concerning the
application to the designated insurers of this article and for such
clarification, amplification, and augmentation as in the
discretion of the State Board of Insurance are deemed necessary to
accomplish the purposes of this article.
(e) This article shall be construed as a specific exception to
Article 3.54 of the Texas Insurance Code.
(f) All legal services contracts and related promotional material
issued pursuant to Chapter 23 and the issuance of legal services
contracts pursuant to Article 5.13-1 shall be truthful and accurate
and shall properly describe the coverage offered. Such description
should include, but not be limited to, a description of coverage
offered as either an indemnity coverage or a contract that provides
only consultation and advice on simple legal matters, either alone
or in combination with a referral service, and that provides fee
discounts for other matters. To provide for the actuarial
soundness of a prepaid legal services contract issued under this
article, the State Board of Insurance may require that prepaid
legal services contracts have rates that are adequate to reasonably
provide the benefits under the prepaid legal services contracts.
This subsection does not apply to a prepaid legal services contract
that provides only consultation and advice on simple legal matters,
either alone or in combination with a referral service, and that
provides fee discounts for other matters.
(g) The State Board of Insurance may not determine, fix, prescribe,
set, or promulgate maximum rates or maximum amounts of premium to be
charged for a prepaid legal services contract issued under this
chapter. Nothing in this Act shall be construed as compelling the
State Board of Insurance to establish standard or absolute rates
and the board is specifically authorized, in its discretion, to
approve different rates for different insurers for the same risk or
risks on the types of insurance covered by this article. The board
shall approve such rates as filed by any insurer unless it finds
that such filing does not meet the requirements of this article.
(h) An insurer may not issue or renew a prepaid legal service
contract under this article after March 1, 2004.
Added by Acts 1975, 64th Leg., p. 134, ch. 60, Sec. 2, eff. Sept. 1,
1975.
Subsecs. (a), (b), (f), (g) amended by Acts 1995, 74th Leg., ch.
873, Sec. 1, eff. Sept. 1, 1995; Subsec. (c) amended by Acts 2001,
77th Leg., ch. 703, Sec. 7.03, eff. Sept. 1, 2001. Subsec. (h)
added by Acts 2003, 78th Leg., ch. 1181, Sec. 2, eff. Sept. 1, 2003.
Art. 5.13-2. Rates and Forms for Certain Property and Casualty
Insurance
Purpose
Sec. 1. This article governs the regulation of insurance described
by Section 2 of this article. The purposes of this article are to:
(1) promote the public welfare by regulating insurance rates to
prohibit excessive, inadequate, or unfairly discriminatory rates;
(2) promote availability of insurance;
(3) promote price competition among insurers to provide rates and
premiums that are responsive to competitive market conditions;
(4) prohibit price-fixing agreements and other anticompetitive
behavior by insurers;
(5) regulate the insurance forms used for lines of insurance
subject to this article to ensure that they are not unjust, unfair,
inequitable, misleading, or deceptive; and
(6) provide regulatory procedures for the maintenance of
appropriate information reporting systems.
Scope
Text of Sec. 2 effective until December 1, 2004
Sec. 2. (a) This article applies to all lines of the following
insurance written under policies or contracts of insurance issued
by an insurer authorized to engage in the business of insurance in
this state:
(1) general liability insurance;
(2) commercial property insurance, including farm and ranch
insurance and farm and ranch owners insurance;
(3) personal and commercial casualty insurance, except as provided
by Subsection (b) of this section;
(4) medical professional liability insurance;
(5) fidelity and surety bonds other than criminal court appearance
bonds;
(6) personal umbrella insurance;
(7) personal liability insurance;
(8) guaranteed auto protection (GAP) insurance;
(9) involuntary unemployment insurance;
(10) financial guaranty insurance;
(11) inland marine insurance;
(12) rain insurance;
(13) hail insurance on farm crops; and
(14) commercial automobile insurance.
(b) Except as otherwise specifically provided by this article, this
article does not apply to a line of insurance regulated under
Subchapter A or C of this chapter.
(c) The commissioner shall adopt rules governing the manner in
which forms and rates for the various classifications of risks
insured under inland marine insurance, as determined by the
commissioner, are regulated.
Text of Sec. 2 effective December 1, 2004
Scope
Sec. 2. (a) This article applies to all lines of the following
insurance written under policies or contracts of insurance issued
by an insurer authorized to engage in the business of insurance in
this state:
(1) general liability insurance;
(2) residential and commercial property insurance, including farm
and ranch insurance and farm and ranch owners insurance;
(3) personal and commercial casualty insurance, except as provided
by Subsection (b) of this section;
(4) medical professional liability insurance;
(5) fidelity and surety bonds other than criminal court appearance
bonds;
(6) personal umbrella insurance;
(7) personal liability insurance;
(8) guaranteed auto protection (GAP) insurance;
(9) involuntary unemployment insurance;
(10) financial guaranty insurance;
(11) inland marine insurance;
(12) rain insurance;
(13) hail insurance on farm crops; and
(14) personal and commercial automobile insurance.
(b) The commissioner shall adopt rules governing the manner in
which forms and rates for the various classifications of risks
insured under inland marine insurance, as determined by the
commissioner, are regulated.
Definitions
Text of Sec. 3 effective until December 1, 2004
Sec. 3. In this article:
(1) "Filer" means an insurer that files rates, prospective loss
costs, or supplementary rating information under this article.
(2) "Insurer" means an insurer to which Article 5.13 of this code
applies, but does not include the Texas Windstorm Insurance
Association or the Texas FAIR Plan Association. However, the
provisions of Sections 4, 5, 6, and 7 of this article shall not
apply to Lloyd's or reciprocals with respect to commercial property
insurance, and the provisions of Sections 4, 5, 6, 7, and 8 of this
article shall not apply to Lloyd's or reciprocals with respect to
inland marine insurance, rain insurance, or hail insurance on farm
crops. The provisions of Sections 4, 5, 6, and 7 of this article
shall apply to county mutual insurance companies with respect to
commercial automobile insurance.
(3) "Prospective loss costs" means that portion of a rate that does
not include provisions for profit or expenses, other than loss
adjustment expenses, that is based on historical aggregate losses
and loss adjustment expenses projected by development to their
ultimate value and through trending to a future point in time.
(4) "Rate" means the cost of insurance per exposure unit, whether
expressed as a single number or as a prospective loss cost, with an
adjustment to account for the treatment of expenses, profit, and
individual insurer variation in loss experience, before any
application of individual risk variations based on loss or expense
considerations. The term does not include a minimum premium.
(5) "Supplementary rating information" means any manual, rating
schedule, plan of rules, rating rules, classification systems,
territory codes and descriptions, rating plans, and other similar
information used by the insurer to determine the applicable premium
for an insured. The term includes factors and relativities, such as
increased limits factors, classification relativities, deductible
relativities, premium discount, and other similar factors and
rating plans such as experience, schedule, and retrospective
rating.
(6) "Supporting information" means:
(A) the experience and judgment of the filer and the experience or
information of other insurers or advisory organizations relied on
by the filer;
(B) the interpretation of any other information relied on by the
filer;
(C) descriptions of methods used in making the rates; and
(D) any other information required by the department to be filed.
Text of Sec. 3 effective December 1, 2004
Definitions
Sec. 3. (a) In this article:
(1) "Disallowed expenses" includes:
(A) administrative expenses, not including acquisition, loss
control, and safety engineering expenses, that exceed 110 percent
of the industry median for those expenses;
(B) lobbying expenses;
(C) advertising expenses, other than for advertising:
(i) directly related to the services or products provided by the
insurer; or
(ii) designed and directed at loss prevention;
(D) amounts paid by an insurer:
(i) as damages in an action brought against the insurer for bad
faith, fraud, or any matters other than payment under the insurance
contract; or
(ii) as fees, fines, penalties, or exemplary damages for a civil or
criminal violation of law;
(E) contributions to:
(i) social, religious, political, or fraternal organizations; or
(ii) organizations engaged in legislative advocacy;
(F) except as authorized by rule by the commissioner, fees and
assessments paid to advisory organizations;
(G) any amount determined by the commissioner to be excess premiums
charged by the insurer; and
(H) any unreasonably incurred expenses, as determined by the
commissioner after notice and hearing.
(2) "Filer" means an insurer that files rates, prospective loss
costs, or supplementary rating information under this article.
(3) "Insurer" means an insurer to which Article 5.13 of this code
applies, but does not include the Texas Windstorm Insurance
Association or the Texas FAIR Plan Association, or the Texas
Automobile Insurance Plan Association. All provisions of this
article shall apply to Lloyd's plans, reciprocals and
interinsurance exchanges, and county mutual insurance companies
with respect to the lines of insurance described in Section 2 of
this article, except that the provisions of Sections 4, 5, 6, and 7
of this article shall not apply to Lloyd's or reciprocals with
respect to commercial property insurance, and the provisions of
Sections 4, 5, 6, 7, and 8 of this article shall not apply to Lloyd's
or reciprocals with respect to inland marine insurance, rain
insurance, or hail insurance on farm crops.
(4) "Prospective loss costs" means that portion of a rate that does
not include provisions for profit or expenses, other than loss
adjustment expenses, that is based on historical aggregate losses
and loss adjustment expenses projected by development to their
ultimate value and through trending to a future point in time.
(5) "Rate" means the cost of insurance per exposure unit, whether
expressed as a single number or as a prospective loss cost, with an
adjustment to account for the treatment of expenses, profit, and
individual insurer variation in loss experience, before any
application of individual risk variations based on loss or expense
considerations.
(6) "Rating manual" means a publication or schedule that lists
rules, classifications, territory codes and descriptions, rates,
premiums, and other similar information used by an insurer to
determine the applicable premium charged an insured.
(7) "Residential property insurance" means insurance coverage
against loss to real or tangible personal property at a fixed
location that is provided through a homeowners policy, including a
tenants policy, a condominium owners policy, or a residential fire
and allied lines policy.
(8) "Supplementary rating information" means any manual, rating
schedule, plan of rules, rating rules, classification systems,
territory codes and descriptions, rating plans, and other similar
information used by the insurer to determine the applicable premium
for an insured. The term includes factors and relativities,
including increased limits factors, classification relativities,
deductible relativities, premium discount, and other similar
factors and rating plans such as experience, schedule, and
retrospective rating.
(9) "Supporting information" means:
(A) the experience and judgment of the filer and the experience or
information of other insurers or advisory organizations relied on
by the filer;
(B) the interpretation of any other information relied on by the
filer;
(C) descriptions of methods used in making the rates; and
(D) any other information required by the department to be filed.
(b) For purposes of this article, a rate is:
(1) excessive if the rate is likely to produce a long-term profit
that is unreasonably high in relation to the insurance coverage
provided;
(2) inadequate if the rate is insufficient to sustain projected
losses and expenses to which the rate applies, and continued use of
the rate:
(A) endangers the solvency of an insurer using the rate; or
(B) has the effect of substantially lessening competition or
creating a monopoly within any market; or
(3) unfairly discriminatory if the rate:
(A) is not based on sound actuarial principles;
(B) does not bear a reasonable relationship to the expected loss and
expense experience among risks; or
(C) is based wholly or partly on the race, creed, color, ethnicity,
or national origin of the policyholder or an insured.
Rate standards
Sec. 4. (a) Rates under this article shall be made in accordance
with the provisions of this section.
Text of subsec. (b) effective until December 1, 2004
(b) In setting rates, an insurer shall consider:
(1) past and prospective loss experience inside and outside this
state;
(2) any applicable catastrophe hazards;
(3) operation expenses;
(4) investment income;
(5) a reasonable margin for profit and contingencies; and
(6) any other relevant factors inside and outside this state.
Text of subsec. (b) effective December 1, 2004
(b) In setting rates, an insurer shall consider:
(1) past and prospective loss experience inside this state, and
outside this state if the state data are not credible;
(2) the peculiar hazards and experiences of individual risks, past
and prospective, inside and outside this state;
(3) the insurer's actuarially credible historical premium,
exposure, loss, and expense experience;
(4) catastrophe hazards within this state;
(5) operating expenses, excluding disallowed expenses;
(6) investment income;
(7) a reasonable margin for profit; and
(8) any other factors inside and outside this state determined to be
relevant by the insurer and not disallowed by the commissioner.
(c) The insurer may group risks by classifications for the
establishment of rates and minimum premiums and may modify
classification rates to produce rates for individual risks in
accordance with rating plans that establish standards for measuring
variations in those risks on the basis of any factor listed in
Subsection (b) of this section.
Text of subsec. (d) effective until December 1, 2004
(d) Rates may not be excessive, inadequate, or unfairly
discriminatory and may not be unreasonable.
Text of subsec. (d) effective December 1, 2004
(d) Rates established under this article may not be excessive,
inadequate, unreasonable, or unfairly discriminatory for the risks
to which they apply.
(e) In setting rates applicable solely to policyholders in this
state, an insurer shall use available premium, loss, claim, and
exposure information from this state to the full extent of the
actuarial credibility of that information. The insurer may use
experience from outside this state as necessary to supplement
information from this state that is not actuarially credible.
Text of subsec. (f) effective December 1, 2004
(f) In determining rating territories and territorial rates, an
insurer shall use methods based on sound actuarial principles.
Rate filings; legislative report
Text of subsec. (a) effective until December 1, 2004
Sec. 5. (a) Each insurer shall file with the commissioner all rates,
supplementary rating information, and reasonable and pertinent
supporting information for risks written in this state.
Text of subsec. (a) effective December 1, 2004
Sec. 5. (a) Except as provided by Section 5A of this article, each
insurer shall file with the commissioner all rates, applicable
rating manuals, supplementary rating information, and additional
information as required by the commissioner for risks written in
this state.
Text of subsec. (a-1) effective December 1, 2004
(a-1) The commissioner by rule shall determine the information
required to be provided in the filing, including:
(1) the categories of supporting information;
(2) the categories of supplementary rating information;
(3) any statistics or other information to support the rates to be
used by the insurer, including information necessary to evidence
that the computation of the rate does not include disallowed
expenses; and
(4) information concerning policy fees, service fees, and other
fees that are charged or collected by the insurer under Article
21.35A or 21.35B of this code.
Text of subsec. (a-2) effective December 1, 2004
(a-2) For an insurer with less than five percent of the market, the
commissioner s
