HBA-NIK H.B. 2710 76(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 2710 By: Thompson Insurance 3/22/1999 Introduced BACKGROUND AND PURPOSE Currently, there is no protection for an injured person when the negligent defendant's insurer unreasonably refuses to pay a claim or delays payment of a claim. The injured person may choose to sue the defendant, which leads to delays in receiving compensation and lawsuits against defendants who are liable and whose insurers should provide the protection that was paid for. H.B. 2710 ensures that consumers receive complete information by establishing codes of conduct and operation for insurance companies. Provides that insurance consumers may seek relief from insurance companies for certain practices. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Chapter 21, Subchapter B, Insurance Code, by adding Article 21.21-10 as follows: ARTICLE 21.21-10. UNFAIR LIABILITY INSURANCE PRACTICES Sec. 1. DECLARATION OF PURPOSE. Sets forth the declaration of purpose. Sec. 2. DEFINITIONS. Defines "person," "insured," "beneficiary," and "claimant." Sec. 3. REQUIRED DISCLOSURES. Requires any person representing an insurer or insured in the investigation or adjustment of any claim or loss to provide the specified written disclosure to any claimant at the time of the initial contact or communication with the claimant. Sec 4. CLAIMANT'S RIGHT OF CANCELLATION. (a) Authorizes a claimant who accepts a settlement offer in compromise of a liability claim to cancel the settlement agreement under certain conditions. (b) Requires a claimant who elects to cancel a settlement to tender back to the insurer any payments received within 30 days of sending the cancellation notice, unless within that time period the parties renegotiate a settlement or the claimant files suit against the insured. Requires any payment to be abated pending the outcome of that suit, if the claimant files suit against the insured. (c) Requires a claimant to be given an additional 30 days in which to send notice of cancellation, if the claimant sends written notice to the insured within 30 days starting that the claimant is consulting, or attempting to consult with an attorney regarding settlement. (d) Requires any settlement agreement tendered to a claimant who is not represented by an attorney to include the specified notice. Sec. 5. UNFAIR LIABILITY CLAIM SETTLEMENT PRACTICES DEFINED. Provides the practices that are defined as unfair liability claim settlement practices in the business of insurance. Sec 6. RELIEF AVAILABLE TO INJURED PARTIES. (a) Authorizes any insured, beneficiary, claimant or other person who has sustained damages caused by another's engaging in another's unfair liability claim settlement practice to maintain an action against the person or persons engaging in such acts. (b) Authorizes any plaintiff who prevails to obtain specified forms of relief which the court deems proper. (c) Requires the insurer's liability for the claim to remain established if any settlement is canceled at the claimant's election under Section 6(b). Requires only the amount of the liability to be determined. Requires the insurer to be additionally liable for a penalty of 18 percent per annum on the amount owed to the claimant , if the claimant is found to be entitled to an amount greater than the amount the claimant would have received under the canceled agreement, or if the claimant receives a greater amount through any subsequent agreement. (d) Requires the amount of any judgment obtained against the insured to be presumed reasonable in any suit to recover policy benefits or other damages from the insurer if an insurer breaches its duty to defend or breaches its duty to indemnify. Provides that, to rebut the presumption, the insurer has the burden of proving that the settlement was unreasonable, or was the product of fraud and collusion. Prohibits good faith negotiations between the claimant and the insured from being considered evidence of collusion. Requires the fact finder to determine the reasonable amount of damages owed by the insurer, if the insurer prove that the settlement was unreasonable or was the product of fraud and collusion. SECTION 2. Amends Title 2, Subtitle C, Chapter 37, Civil Practices and Remedies Code, by adding Section 37.012 as follows: Sec. 37.012 INSURANCE CASES. Prohibits a claim for declaratory relief from being filed by a liability insurer before the underlying claim is finally resolved, if proof of the insurer's claim for relief relies on factual allegations inconsistent with those in the underlying claim, among other factors. Requires the court to award to the opposing party or parties reasonable and necessary attorney's fees in any case in which a liability insurer seeks declaratory relief relating to a liability insurance policy. SECTION 3. Effective date: September 1, 1999. Makes application of this Act prospective. SECTION 4. Emergency clause.