INSURANCE CODE
CHAPTER 551. PROHIBITED PRACTICES RELATING TO DECLINATION,
CANCELLATION, AND NONRENEWAL OF INSURANCE POLICIES
SUBCHAPTER A. GENERAL REQUIREMENTS
§ 551.001. RULES. (a) The commissioner may, as
necessary, adopt and enforce reasonable rules, including notice
requirements, relating to the cancellation and nonrenewal of any
insurance policy regulated by the department under Chapter 5, other
than:
(1) a policy subject to Subchapter B or C; or
(2) a marine insurance policy other than inland
marine.
(b) In adopting rules under this section, the commissioner
shall consider the reasonable needs of the public and the
operations of the insurers.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 551.002. WRITTEN STATEMENT OF REASONS FOR DECLINATION,
CANCELLATION, OR NONRENEWAL. (a) The commissioner shall require
an insurer, on request by an applicant for insurance or a
policyholder, to provide to the applicant or policyholder a written
statement of the reasons for the declination, cancellation, or
nonrenewal of an insurance policy to which Section 551.001 applies.
(b) An insurer's written statement giving the reasons for
the declination, cancellation, or nonrenewal of an insurance policy
must fully explain a decision that adversely affects an applicant
for insurance or a policyholder by denying the applicant or
policyholder insurance coverage or continued coverage.
(c) The statement must:
(1) state the precise incident, circumstance, or risk
factors applicable to the applicant for insurance or the
policyholder that violates any applicable guidelines;
(2) state the source of information on which the
insurer relied regarding the incident, circumstance, or risk
factors; and
(3) specify any other information considered relevant
by the commissioner.
(d) The commissioner shall adopt rules as necessary to
implement this section.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 551.003. IMMUNITY FROM LIABILITY. An insurer or agent
or an employee of an insurer or agent is not liable, and a cause of
action does not arise against that individual or entity, for a
statement, disclosure, or communication made in good faith under
this subchapter. Immunity under this section does not apply to:
(1) disclosure of information known to be false; or
(2) a disclosure made with malice or the wilful intent
to injure any person.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
SUBCHAPTER B. CANCELLATION AND NONRENEWAL OF CERTAIN LIABILITY
INSURANCE POLICIES
§ 551.051. DEFINITIONS. In this subchapter:
(1) "Insurer" means an insurance company or other
entity admitted to engage in business and authorized to write
liability insurance in this state, including a county mutual
insurance company, a Lloyd's plan, and a reciprocal or
interinsurance exchange. The term does not include a county mutual
fire insurance company that writes exclusively industrial fire
insurance as described by Section 912.310 or a farm mutual
insurance company.
(2) "Liability insurance" means:
(A) general liability insurance;
(B) professional liability insurance other than
medical professional liability insurance;
(C) commercial automobile liability insurance;
(D) commercial multiperil insurance; and
(E) any other type or line of liability insurance
designated by the department.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 551.052. CANCELLATION PROHIBITED;
EXCEPTIONS. (a) An insurer may not cancel a liability insurance
policy that is a renewal or continuation policy.
(b) An insurer may not cancel a liability insurance policy
during the initial policy term after the 60th day following the date
on which the policy was issued.
(c) Notwithstanding Subsections (a) and (b), an insurer may
cancel a liability insurance policy at any time during the term of
the policy for:
(1) fraud in obtaining coverage;
(2) failure to pay premiums when due;
(3) an increase in hazard within the control of the
insured that would produce a rate increase; or
(4) loss of the insurer's reinsurance covering all or
part of the risk covered by the policy.
(d) Notwithstanding Subsections (a) and (b), an insurer may
cancel a liability insurance policy at any time during the term of
the policy if the insurer is placed in supervision,
conservatorship, or receivership and the cancellation or
nonrenewal is approved or directed by the supervisor, conservator,
or receiver.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 551.053. WRITTEN NOTICE OF CANCELLATION
REQUIRED. Not later than the 10th day before the date on which the
cancellation of a liability insurance policy takes effect, an
insurer must deliver or mail written notice of the cancellation to
the first-named insured under the policy at the address shown on the
policy.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 551.054. WRITTEN NOTICE OF NONRENEWAL
REQUIRED. (a) An insurer may refuse to renew a liability
insurance policy if the insurer delivers or mails written notice of
the nonrenewal to the first-named insured under the policy at the
address shown on the policy.
(b) The notice must be delivered or mailed not later than
the 60th day before the date on which the policy expires. If the
notice is delivered or mailed later than the 60th day before the
date on which the policy expires, the coverage remains in effect
until the 61st day after the date on which the notice is delivered
or mailed.
(c) Earned premium for any period of coverage that extends
beyond the expiration date of the policy shall be computed pro rata
based on the previous year's rate.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 551.055. REASON FOR CANCELLATION OR NONRENEWAL
REQUIRED. In a notice to an insured relating to cancellation or
refusal to renew, an insurer must state the reason for the
cancellation or nonrenewal. The statement must comply with:
(1) Sections 551.002(b) and (c); and
(2) rules adopted under Section 551.002(d).
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 551.056. TRANSFER NOT CONSIDERED REFUSAL TO
RENEW. For purposes of this subchapter, the transfer of a
policyholder between admitted companies within the same insurance
group is not considered a refusal to renew.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
SUBCHAPTER C. CANCELLATION AND NONRENEWAL OF CERTAIN PROPERTY AND
CASUALTY POLICIES
§ 551.101. DEFINITION. In this subchapter, "insurer"
means any authorized insurer writing property and casualty
insurance in this state, including:
(1) a county mutual insurance company;
(2) a Lloyd's plan;
(3) a reciprocal or interinsurance exchange; and
(4) a farm mutual insurance company.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 551.102. APPLICABILITY OF SUBCHAPTER. This
subchapter applies only to:
(1) a personal automobile insurance policy, other than
a policy written through the Texas Automobile Insurance Plan
Association;
(2) a homeowners or farm or ranch owners insurance
policy;
(3) a standard fire insurance policy insuring:
(A) a one-family dwelling or a duplex; or
(B) the contents of a one-family dwelling, a
duplex, or an apartment; or
(4) an insurance policy providing property and
casualty coverage, other than a fidelity, surety, or guaranty bond,
to:
(A) this state;
(B) an agency of this state;
(C) a political subdivision of this state,
including:
(i) a municipality or county;
(ii) a school district or junior college
district;
(iii) a levee improvement district,
drainage district, or irrigation district;
(iv) a water improvement district, water
control and improvement district, or water control and preservation
district;
(v) a freshwater supply district;
(vi) a navigation district;
(vii) a conservation and reclamation
district;
(viii) a soil conservation district;
(ix) a communication district; and
(x) a river authority; or
(D) any other governmental agency whose
authority is derived from the laws or constitution of this state.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 551.103. CANCELLATION. For the purposes of this
subchapter, an insurer has canceled an insurance policy if the
insurer, without the consent of the insured:
(1) terminates coverage provided under the policy;
(2) refuses to provide additional coverage to which
the insured is entitled under the policy; or
(3) reduces or restricts coverage under the policy by
endorsement or other means.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 551.104. AUTHORIZED CANCELLATION OF
POLICIES. (a) An insurer may cancel an insurance policy only as
provided by this section.
(b) An insurer may cancel any policy if:
(1) the named insured does not pay any portion of the
premium when due;
(2) the insured submits a fraudulent claim; or
(3) the department determines that continuation of the
policy would result in a violation of this code or any other law
governing the business of insurance in this state.
(c) An insurer may cancel a policy, other than a personal
automobile insurance policy, if there is an increase in the hazard
covered by the policy that is within the control of the insured and
that would produce an increase in the premium rate of the policy.
(d) An insurer may cancel a personal automobile insurance
policy if the driver's license or motor vehicle registration of the
named insured or any other motor vehicle operator who resides in the
same household as the named insured or who customarily operates an
automobile covered by the policy is suspended or revoked. An
insurer may not cancel a policy under this subsection if the named
insured consents to an endorsement terminating coverage under the
policy for the person whose license is suspended or revoked.
(e) Cancellation of a policy under Subsection (b), (c), or
(d) does not take effect until the 10th day after the date the
insurer mails notice of the cancellation to the insured.
(f) An insurer may cancel a personal automobile insurance
policy effective on any 12-month anniversary of the original
effective date of the policy if the insurer mails to the named
insured written notice of the cancellation not later than the 30th
day before the effective date of the cancellation.
(g) An insurer may cancel a personal automobile insurance
policy if the policy has been in effect less than 60 days. An
insurer may cancel any other insurance policy if the policy has been
in effect less than 90 days.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 551.105. NONRENEWAL OF POLICIES; NOTICE
REQUIRED. Unless the insurer has mailed written notice of
nonrenewal to the insured not later than the 30th day before the
date on which the insurance policy expires, an insurer must renew an
insurance policy, at the request of the insured, on the expiration
of the policy.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 551.106. RENEWAL OF PERSONAL AUTOMOBILE INSURANCE
POLICIES. (a) An insurer may not refuse to renew a personal
automobile insurance policy solely because of the age of the person
covered by the policy.
(b) An insurer shall renew a personal automobile insurance
policy that was written for a term of less than one year, except
that the insurer may refuse to renew the policy on any 12-month
anniversary of the original effective date of the policy.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 551.107. RENEWAL OF CERTAIN POLICIES; PREMIUM
SURCHARGE AUTHORIZED; NOTICE. (a) This section applies only to a
standard fire, homeowners, or farm or ranch owners insurance
policy.
(b) A claim under this section does not include a claim:
(1) resulting from a loss caused by natural causes; or
(2) that is filed but is not paid or payable under the
policy.
(c) An insurer may assess a premium surcharge at the time an
insurance policy is renewed if the insured has filed two or more
claims in the preceding policy year. The insurer may assess an
additional premium surcharge if an additional claim is made in the
following policy year. The department shall set the amount of any
surcharge that may be assessed under this subsection. The amount of
the surcharge may not exceed 10 percent of the total premium,
including any premium surcharge, actually paid by the insured in
the preceding policy year.
(d) Subject to Subsection (e), an insurer may refuse to
renew an insurance policy if the insured has filed three or more
claims under the policy in any three-year period.
(e) An insurer may notify an insured who has filed two
claims in a period of less than three years that the insurer may
refuse to renew the policy if the insured files a third claim during
the three-year period. If the insurer does not notify the insured
in accordance with this subsection, the insurer may not refuse to
renew the policy because of losses. The notice form must:
(1) list the policyholder's claims; and
(2) contain the sentence: "Another non-weather
related loss could cause us to refuse to renew your policy."
(f) An insurer that renews the insurance policy of an
insured who has filed three or more claims under the policy in a
three-year period may assess a premium surcharge in an amount set by
the department.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 551.108. INSURER RECORDS. (a) An insurer shall
maintain information regarding cancellation or nonrenewal of
insurance policies in accordance with the insurer's ordinary
practices for maintaining records of expired policies.
(b) The insurer shall make the information available to the
department on request.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 551.109. INSURER STATEMENT. An insurer shall, at the
request of an applicant for insurance or an insured, provide a
written statement of the reason for a declination, cancellation, or
nonrenewal of an insurance policy. The statement must comply with:
(1) Sections 551.002(b) and (c); and
(2) rules adopted under Section 551.002(d).
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 551.110. LIABILITY FOR DISCLOSURE. An insurer or
agent or an employee of an insurer or agent is not liable for a
statement or disclosure made in good faith under this subchapter
unless the statement or disclosure was:
(1) known to be false; or
(2) made with malice or wilful intent to injure any
person.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 551.111. EFFECT OF NONCOMPLIANCE. A cancellation of
an insurance policy made in violation of this subchapter has no
effect.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 551.112. RULES. The commissioner may adopt rules
relating to the cancellation and nonrenewal of insurance policies.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
SUBCHAPTER D. CANCELLATION OR NONRENEWAL OF CERTAIN POLICIES ISSUED
TO ELECTED OFFICIALS
§ 551.151. DEFINITION. In this subchapter, "insurer"
has the meaning assigned by Section 551.101.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 551.152. ELECTED OFFICIALS. An insurer may not cancel
or refuse to renew an insurance policy based solely on the fact that
the policyholder is an elected official.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
