HBA-MPM S.B. 1329 77(R) BILL ANALYSIS Office of House Bill AnalysisS.B. 1329 By: Bivins Insurance 4/30/2001 Engrossed BACKGROUND AND PURPOSE Approximately 17 to 26 percent of Texas drivers are currently uninsured. Senate Bill 1329 provides methods to enhance enforcement of the state's laws requiring motorists to possess current liability insurance, provides access to short-term auto liability insurance for visiting motorists, requires standard appearance and form for proof of insurance cards, and permits the insured to waive coverage for noneconomic and exemplary damages. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the Texas Department of Transportation in SECTION 1 (Sections 601.502 and 601.505, Transportation Code) and the commissioner of insurance in SECTION 2.01 (Section 2, Article 5.01C, Insurance Code), SECTION 3.01 (Articles 5.06 -1, Insurance Code), and SECTION 4.01 (Article 5.06-7, Insurance Code) of this bill. ANALYSIS Senate Bill 1329 amends the Transportation Code to require the Texas Department of Transportation (TxDOT) or an agent of TxDOT to randomly select samples of motor vehicle registrations or samples of owners of motor vehicles subject to the Texas Motor Vehicle Safety Responsibility Act to verify whether the owner has established financial responsibility. The Department of Public Safety (DPS) is required to provide TxDOT access to any information that will allow TxDOT to comply with this provision. TxDOT is also authorized to randomly select other persons who own a registered vehicle to verify the person's financial responsibility, including a person who has been convicted of certain violations or who is the subject of deferred suspension, or a person whose driver's license or motor vehicle registration has been suspended during the preceding four years. The bill requires TxDOT to send to the owner of a randomly selected vehicle or a randomly selected vehicle owner a request for information about the vehicle and the owner's method of establishing financial responsibility. TxDOT is required to adopt rules as necessary to implement the provisions of this bill and to establish by rule the frequency of the sample selection and prescribe methods and procedures necessary for the verification process. The bill authorizes TxDOT to require the information provided by the owner to include a statement that the owner had as of the verification date established financial responsibility. The owner to whom the notice is sent is required no later than the 30th day after the verification date, to furnish the requested information accompanied by the owner's signed affirmation to TxDOT, and an owner who fails to respond or indicates that the owner has not established financial responsibility is subject to suspension of the owner's motor vehicle registration. If the owner asserts that financial responsibility had been established as of the verification date, TxDOT may conduct a verification investigation (Sec. 601.502). The bill sets forth the method by which TxDOT conducts a verification investigation (Sec. 601.503). TxDOT is required to send to an owner whose response indicates that the owner has not established financial responsibility or an owner who fails to respond in a timely manner a warning notice informing the owner of the owner's noncompliance and that the owner's motor vehicle registration will be suspended unless the owner within 30 days of the mailing date of the warning establishes financial responsibility or mails to TxDOT a request for a hearing (Sec. 601.504). The bill sets forth provisions regarding a hearing on the fees suspension of an owner's motor vehicle registration, suspension of such a registration, reinstatement of an owner's registration, and provides for exceptions to the provisions. The bill requires TxDOT to adopt rules governing the hearing (Sec. 601.505). TxDOT is required to suspend the owner's registration if TxDOT determines that the proof of financial responsibility submitted by an owner is false and that the owner had knowledge that such proof was false. TxDOT is required to terminate the suspension on or after the 180th day after the effective date of the suspension on payment by the owner of a $500 reinstatement fee and submission of financial responsibility (Sec. 601.506). The bill specifies that an owner who operates a motor vehicle while the registration is suspended under the provisions of this bill commits an offense that is punishable by a fine of between $1,000 and $2,000. The bill provides that it is a defense to prosecution that the person charged with the offense produces in court satisfactory evidence that the owner or operator had established financial responsibility at the time the alleged offense occurred (Sec. 601.507). The bill also provides for a criminal penalty if a person displays or provides evidence of false proof of financial responsibility to a peace officer or officer of the court (Sec. 601.508). The bill requires TxDOT to recover from the reinstatement fees collected its costs in implementing and administering the verification program and to deposit the amounts collected that exceed TxDOT's administrative costs to the credit of the state highway fund (Sec. 601.509). The bill authorizes TxDOT to submit requests for proposals for contracts with private vendors to perform the random sampling and the verification investigations required by this bill as an agent of TxDOT and to enter into contracts as necessary to implement the provisions of this bill (Sec. 601.510). The bill requires TxDOT in performing the sample selection under the provisions of this bill to ensure that at least 500,000 samples are selected before September 1, 2003 (SECTION 1.05). The bill requires TxDOT in cooperation with the Texas Department of Insurance and DPS to conduct an evaluation on the implementation and operation of the verification program and the effectiveness of the program in increasing compliance with financial responsibility requirements established by law. The bill sets forth the information that must be included in the evaluation. The bill requires TxDOT to submit the report to the 81st Legislature no later than February 1, 2009 and to provide written copies to the governor, lieutenant governor, and the speaker of the house of representatives. TxDOT is required to enter into contracts, memoranda of understanding, or interagency agreements as necessary to implement the reporting requirements (SECTION 1.06). S.B. 1329 prohibits the owner of a motor vehicle from permitting another person to operate the vehicle in this state unless financial responsibility is established for the vehicle and provides for a penalty of between $500 and $1,000, rather than between $175 and $1350 if this provision is violated. The bill provides a defense to prosecution that the person charged with this offense produces in court satisfactory evidence that financial responsibility had been established at the time of the alleged offense (Secs. 601. 501, 601.191, and 601.195). Senate Bill 1329 amends the Insurance Code to authorize the commissioner of insurance (commissioner) by rule to establish a program to provide for the sale of short-term liability insurance policies to non-Texas resident motorists visiting this state. The commissioner is authorized to negotiate an agreement with any insurer under which the insurer will sell short-term liability policies (Sec. 2, Art. 5.01C). The bill specifies that a person representing such an insurer must be licensed (Sec. 3, Art.5.01C ). An insurer selling short term liability insurance must use the policy forms adopted by the commissioner unless the insurer is exempt from using the forms (Sec. 4, Art. 5.01C). The bill transfers duties governing uninsured or underinsured motorist coverage from the board of insurance to the commissioner. The bill authorizes the named insured to elect to waive coverage for recovery of noneconomic and exemplary damages resulting from bodily injury, sickness, or disease, including death. If the named insured elects to waive this coverage, existing provisions requiring minimum limits of liability do not apply to the limits of liability that are applicable to coverage provided under the policy issued to the named insured for damages resulting from bodily injury, sickness, or disease, including death. The bill authorizes the commissioner by rule to adopt minimum limits of liability applicable to those damages. The bill specifies that waiver of coverage does not affect the insured's right to bring an action for noneconomic and exemplary damages against a responsible party. The bill specifies that no written rejection of coverage for noneconomic and exemplary damages shall be effective unless the insurer provides the insured with a written notice disclosing the amount of potential coverage that is available, the types of damages that would be covered, and the amount of premium saved because the coverage is rejected (Art. 5.06-1). S.B. 1329 requires the commissioner by rule to prescribe no later than December 1, 2001 a standard appearance and form for a motor vehicle liability insurance card (card) and the commissioner shall require an appearance of the card that is difficult to alter, duplicate, or counterfeit, and that is not cost-prohibitive for consumers. The bill specifies that a card issued on or after January 1, 2002 as proof of motor vehicle liability insurance issued in this state must conform to the form and appearance prescribed by these provisions (Art. 5.06 - 7, SECTION 4.02). EFFECTIVE DATE September 1, 2001. Provisions authorizing a named insured to elect to waive coverage for recovery of noneconomic and exemplary damages apply to a motor vehicle liability insurance policy that is delivered, issued for delivery, or renewed on or after January 1, 2002. Provisions regarding the financial responsibility requirements take effect January 1, 2003.