Bill Text: TX SB425 | 2011-2012 | 82nd Legislature | Enrolled

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Bill Title: Relating to property and casualty certificates of insurance and approval of property and casualty certificate of insurance forms by the Texas Department of Insurance; providing penalties.

Spectrum: Partisan Bill (Republican 3-0)

Status: (Passed) 2011-06-17 - Effective on 9/1/11 [SB425 Detail]

Download: Texas-2011-SB425-Enrolled.html

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S.B. No. 425

AN ACT
relating to property and casualty certificates of insurance and
approval of property and casualty certificate of insurance forms by
the Texas Department of Insurance; providing penalties.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subtitle A, Title 10, Insurance Code, is amended
by adding Chapter 1811 to read as follows:
CHAPTER 1811. CERTIFICATES OF PROPERTY AND CASUALTY INSURANCE
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 1811.001. DEFINITIONS. In this chapter:
(1) "Agent" means a person required to hold a license
as a property and casualty agent or surplus lines agent.
(2) "Certificate holder" means a person, other than a
policyholder:
(A) who is designated on a certificate of
insurance as a certificate holder; or
(B) to whom a certificate of insurance has been
issued by an insurer or agent at the request of the policyholder.
(3) "Certificate of insurance" means a document,
instrument, or record, including an electronic record, no matter
how titled or described, that is executed by an insurer or agent and
issued to a third person not a party to the subject insurance
contract, as a statement or summary of property or casualty
insurance coverage. The term does not include an insurance binder
or policy form.
(4) "Electronic record" has the meaning assigned by
Section 322.002, Business & Commerce Code.
(5) "Insurance" means an insurance contract for
property or casualty insurance.
(6) "Insurer" means a company or insurance carrier
that is engaged in the business of making property or casualty
insurance contracts. The term includes:
(A) a stock fire or casualty insurance company;
(B) a mutual fire or casualty insurance company;
(C) a Mexican casualty insurance company;
(D) a Lloyd's plan;
(E) a reciprocal or interinsurance exchange;
(F) a county mutual insurance company;
(G) a farm mutual insurance company;
(H) a risk retention group;
(I) the Medical Liability Insurance Joint
Underwriting Association under Chapter 2203;
(J) the Texas Windstorm Insurance Association
under Chapter 2210;
(K) the FAIR Plan Association under Chapter 2211;
(L) an eligible surplus lines insurer; and
(M) any other insurer authorized to write
property or casualty insurance in this state.
(7) "Lender" has the meaning assigned by Section
549.001.
(8) "Person" means:
(A) an individual; or
(B) a partnership, corporation, limited
liability company, association, trust, or other legal entity,
including an insurer or a political subdivision or agency of this
state.
(9) "Policyholder" means a person who has contracted
with a property or casualty insurer for insurance coverage.
(10) "Record" has the meaning assigned by Section
322.002, Business & Commerce Code.
Sec. 1811.002. APPLICABILITY. (a) This chapter applies to
a certificate holder, policyholder, insurer, or agent with regard
to a certificate of insurance issued on property or casualty
operations or a risk located in this state, regardless of where the
certificate holder, policyholder, insurer, or agent is located.
(b) This chapter may not be construed to apply to:
(1) a statement, summary, or evidence of property
insurance required by a lender in a lending transaction involving:
(A) a mortgage;
(B) a lien;
(C) a deed of trust; or
(D) any other security interest in real or
personal property as security for a loan;
(2) a certificate issued under:
(A) a group or individual policy for:
(i) life insurance;
(ii) credit insurance;
(iii) accident and health insurance;
(iv) long-term care benefit insurance; or
(v) Medicare supplement insurance; or
(B) an annuity contract; or
(3) standard proof of motor vehicle liability
insurance under Section 601.081, Transportation Code.
Sec. 1811.003. RULES. The commissioner may adopt rules as
necessary or proper to accomplish the purposes of this chapter.
Sec. 1811.004. FILING FEE. (a) The department may collect
a fee in an amount determined by the commissioner for the filing of
a new or amended certificate of insurance form under this chapter.
(b) The fee may not exceed $100.
(c) A fee collected under this section shall be deposited to
the credit of the Texas Department of Insurance operating account.
[Sections 1811.005-1811.050 reserved for expansion]
SUBCHAPTER B. PROHIBITED ACTS AND PRACTICES
Sec. 1811.051. ALTERING, AMENDING, OR EXTENDING THE TERMS
OF AN INSURANCE POLICY; CONTRACTUAL RIGHTS OF CERTIFICATE HOLDER.
(a) A property or casualty insurer or agent may not issue a
certificate of insurance or any other type of document purporting
to be a certificate of insurance if the certificate or document
alters, amends, or extends the coverage or terms and conditions
provided by the insurance policy referenced on the certificate or
document.
(b) A certificate of insurance or any other type of document
may not convey a contractual right to a certificate holder.
Sec. 1811.052. USE OF APPROVED CERTIFICATE OF INSURANCE
FORMS. (a) An insurer or an agent may not issue a certificate of
insurance unless the form of the certificate:
(1) has been filed with and approved by the department
under Section 1811.101; or
(2) is a standard form deemed approved by the
department under Section 1811.103.
(b) A person may not execute, issue, or require the issuance
of a certificate of insurance for risks located in this state,
unless the certificate of insurance form has been filed with and
approved by the department.
Sec. 1811.053. ALTERATION OR MODIFICATION OF APPROVED
CERTIFICATE OF INSURANCE FORMS. A person may not alter or modify a
certificate of insurance form approved under Section 1811.101
unless the alteration or modification is approved by the
department.
Sec. 1811.054. ISSUANCE OF FALSE OR MISLEADING CERTIFICATE
OF INSURANCE. A person may not require the issuance of a
certificate of insurance from an insurer, agent, or policyholder
that contains any false or misleading information concerning the
policy of insurance to which the certificate refers.
Sec. 1811.055. REQUEST FOR DOCUMENTS IN LIEU OF CERTIFICATE
OF INSURANCE. A person may not require an agent or insurer, either
in addition to or in lieu of a certificate of insurance, to issue
any other document or correspondence, instrument, or record,
including an electronic record, that is inconsistent with this
chapter.
Sec. 1811.056. USE OF DISAPPROVED CERTIFICATE OF INSURANCE
FORMS. A person who receives written notice under Section 1811.102
that a certificate of insurance form filed under this chapter has
been disapproved by the commissioner shall immediately stop using
the form.
[Sections 1811.057-1811.100 reserved for expansion]
SUBCHAPTER C. CERTIFICATE OF INSURANCE FORMS
Sec. 1811.101. FILING AND APPROVAL OF FORMS. (a) Except
as provided by Subsection (b), an insurer or agent may not deliver
or issue for delivery in this state a certificate of insurance
unless the certificate's form:
(1) has been filed with and approved by the
commissioner; and
(2) contains the phrase "for information purposes
only" or similar language.
(b) If a certificate of insurance form does not contain the
language required by Subsection (a)(2), the commissioner may
approve the form if the form states:
(1) that the certificate of insurance does not confer
any rights or obligations other than the rights and obligations
conveyed by the policy referenced on the form; and
(2) that the terms of the policy control over the terms
of the certificate of insurance.
(c) A filed form is approved at the expiration of 60 days
after the date the form is filed unless the commissioner by order
approves or disapproves the form during the 60-day period beginning
the date the form is filed. The commissioner's approval of a filed
form constitutes a waiver of any unexpired portion of the 60-day
period.
(d) The commissioner may extend by not more than 10 days the
60-day period described by Subsection (c) during which the
commissioner may approve or disapprove a form filed by an insurer or
agent. The commissioner shall notify the insurer or agent of the
extension before the expiration of the 60-day period.
(e) A filed form for which an extension has been granted
under Subsection (d) is considered approved at the expiration of
the extension period described by that subsection absent an earlier
approval or disapproval of the form.
(f) A person may not use a form unless the form has been
filed with and approved by the commissioner.
Sec. 1811.102. DISAPPROVAL OF FORMS; WITHDRAWAL OF
APPROVAL. (a) The commissioner shall disapprove a form filed
under Section 1811.101 or withdraw approval of a form if the form:
(1) contains a provision or has a title or heading that
is misleading, is deceptive, or violates public policy;
(2) violates any state law, including a rule adopted
under this code;
(3) requires an agent to provide certification of
insurance coverage that is not available in the line or type of
insurance coverage referenced on the form; or
(4) directly or indirectly requires the commissioner
to make a coverage determination under a policy of insurance or
insurance transaction.
(b) The commissioner may not disapprove a form filed under
Section 1811.101 or withdraw approval of a form based solely on the
fact that the form contains language described by Section
1811.101(b).
(c) An order issued by the commissioner disapproving a form,
or a notice of the commissioner's intention to withdraw approval of
a form, must state the grounds for the disapproval or withdrawal of
approval in sufficient detail to reasonably inform the person
filing the form of those grounds and the changes to the form
necessary to obtain approval.
(d) An order disapproving a form or withdrawing approval of
a form takes effect on the date prescribed by the commissioner in
the order. An order withdrawing approval of a form may not become
effective until the 30th day after the date of the order.
Sec. 1811.103. STANDARD CERTIFICATE OF INSURANCE FORMS. A
standard certificate of insurance form promulgated by the
Association for Cooperative Operations Research and Development,
the American Association of Insurance Services, or the Insurance
Services Office (ISO) is deemed approved on the date the form is
filed with the department. Notwithstanding this section, the
commissioner may withdraw approval of a standard form under Section
1811.102.
Sec. 1811.104. PUBLIC INSPECTION OF INFORMATION. A
certificate of insurance form and any supporting information filed
with the department under this subchapter is open to public
inspection as of the date of the filing.
[Sections 1811.105-1811.150 reserved for expansion]
SUBCHAPTER D. EFFECT OF APPROVAL OF CERTIFICATE OF INSURANCE FORM
Sec. 1811.151. CONFIRMATION OF POLICY ISSUANCE. A
certificate of insurance form that has been approved by the
commissioner and properly executed and issued by a property and
casualty insurer or an agent constitutes a confirmation that the
referenced insurance policy has been issued or that coverage has
been bound. This section applies regardless of whether the face of
the certificate includes the phrase "for information purposes only"
or similar language.
Sec. 1811.152. CERTIFICATE OF INSURANCE NOT POLICY OF
INSURANCE. A certificate of insurance is not a policy of insurance
and does not amend, extend, or alter the coverage afforded by the
referenced insurance policy.
Sec. 1811.153. RIGHTS CONFERRED BY CERTIFICATE OF
INSURANCE. A certificate of insurance shall not confer to a
certificate holder new or additional rights beyond what the
referenced policy or any executed endorsement of insurance
provides.
Sec. 1811.154. REFERENCE TO OTHER CONTRACTS. A certificate
of insurance may not contain a reference to a legal or insurance
requirement contained in a contract other than the underlying
contract of insurance, including a contract for construction or
services.
Sec. 1811.155. NOTICE. (a) A person may have a legal right
to notice of cancellation, nonrenewal, or material change or any
similar notice concerning a policy of insurance only if:
(1) the person is named within the policy or an
endorsement to the policy; and
(2) the policy or endorsement or a law, including a
rule, of this state requires notice to be provided.
(b) A certificate of insurance may not alter the terms and
conditions of the notice required by a policy of insurance or the
law of this state.
Sec. 1811.156. CERTIFICATE OF INSURANCE ISSUED IN VIOLATION
OF CHAPTER. A certificate of insurance that is executed, issued, or
required and that is in violation of this chapter is void and has no
effect.
[Sections 1811.157-1811.200 reserved for expansion]
SUBCHAPTER E. ENFORCEMENT AND REMEDIES
Sec. 1811.201. POWERS OF COMMISSIONER. (a) If the
commissioner has reason to believe that an insurer or agent has
violated or is threatening to violate this chapter or a rule adopted
under this chapter, the commissioner may:
(1) issue a cease and desist order;
(2) seek an injunction under Section 1811.203;
(3) request that the attorney general recover a civil
penalty under Section 1811.203;
(4) impose sanctions on the insurer or agent as
provided by Chapter 82; or
(5) take any combination of those actions.
(b) This section does not prevent or limit any action by or
remedy available to the commissioner under applicable law.
Sec. 1811.202. HEARING; NOTICE. (a) The commissioner may
hold a hearing on whether to issue a cease and desist order under
Section 1811.201 if the commissioner has reason to believe that:
(1) an insurer or agent has violated or is threatening
to violate this chapter or a rule adopted under this chapter; or
(2) an insurer or agent has engaged in or is
threatening to engage in an unfair act related to a certificate of
insurance.
(b) The commissioner shall serve on the insurer or agent a
statement of charges and a notice of hearing in the form provided by
Section 2001.052, Government Code.
(c) A hearing under this section is a contested case under
Chapter 2001, Government Code.
Sec. 1811.203. CIVIL PENALTY; INJUNCTION. (a) A person,
including an insurer or agent, who wilfully violates this chapter
is subject to a civil penalty of not more than $1,000 for each
violation.
(b) The commissioner may request that the attorney general
institute a civil suit in a district court in Travis County for
injunctive relief to restrain a person, including an insurer or
agent, from continuing a violation or threat of violation of
Subchapter B. On application for injunctive relief and a finding
that a person, including an insurer or agent, is violating or
threatening to violate Subchapter B, the district court shall grant
the injunctive relief and issue an injunction without bond.
(c) On request by the commissioner, the attorney general may
institute and conduct a civil suit in the name of the state for
injunctive relief, to recover a civil penalty, or for both
injunctive relief and a civil penalty, as authorized under this
subchapter.
Sec. 1811.204. INVESTIGATION OF COMPLAINTS. (a) The
commissioner may:
(1) investigate a complaint or allegation of specific
violations by a person, including an insurer or agent, who has
allegedly engaged in an act or practice prohibited by Subchapter B;
and
(2) enforce the provisions of this chapter.
(b) If the commissioner has reason to believe that a person,
including an insurer or agent, is performing an act in violation of
Subchapter B, the person shall immediately provide to the
commissioner, on written request of the commissioner, information
relating to that act.
SECTION 2. The changes in law made by this Act apply only to
a certificate of insurance issued on or after January 1, 2012. A
certificate of insurance issued before January 1, 2012, is governed
by the law in effect immediately before the effective date of this
Act, and that law is continued in effect for that purpose.
SECTION 3. This Act takes effect September 1, 2011.
______________________________ ______________________________
President of the Senate Speaker of the House
I hereby certify that S.B. No. 425 passed the Senate on
March 17, 2011, by the following vote: Yeas 31, Nays 0; and that
the Senate concurred in House amendments on May 27, 2011, by the
following vote: Yeas 31, Nays 0.
______________________________
Secretary of the Senate
I hereby certify that S.B. No. 425 passed the House, with
amendments, on May 23, 2011, by the following vote: Yeas 143,
Nays 1, two present not voting.
______________________________
Chief Clerk of the House
Approved:
______________________________
Date
______________________________
Governor