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2005 Texas Insurance Code CHAPTER 551. PRACTICES RELATING TO DECLINATION, CANCELLATION, AND NONRENEWAL OF INSURANCE POLICIES
INSURANCE CODE CHAPTER 551. PRACTICES RELATING TO DECLINATION, CANCELLATION, AND NONRENEWAL OF INSURANCE POLICIES SUBCHAPTER A. GENERAL PROVISIONS § 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. § 551.004. TRANSFER NOT CONSIDERED A REFUSAL TO RENEW. For purposes of this chapter and Articles 5.06-1 and 5.06-3 of this code, the transfer of a policyholder between admitted companies within the same insurance group is not considered a refusal to renew. Added by Acts 2005, 79th Leg., ch. 1295, § 4, eff. Sept. 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.SUBCHAPTER C. DECLINATION, 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 any insurance policy other than a personal automobile or homeowners insurance policy if the policy has been in effect less than 90 days. An insurer may cancel a personal automobile insurance policy if the policy has been in effect less than 60 days. An insurer may cancel a homeowners insurance policy if the policy has been in effect less than 60 days and: (1) the insurer identifies a condition that: (A) creates an increased risk of hazard; (B) was not disclosed in the application for insurance coverage; and (C) is not the subject of a prior claim; or (2) before the effective date of the policy, the insurer does not accept a copy of a required inspection report that: (A) was completed by an inspector who is licensed by the Texas Real Estate Commission or who is otherwise authorized to perform inspections; and (B) is dated not earlier than the 90th day before the effective date of the policy. (h) For purposes of Subsection (g), an inspection report is considered accepted if an insurer does not reject the inspection report given to the insurer under Subsection (g)(2) before the 11th day after the date the inspection report is received by the insurer. Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005. Amended by Acts 2005, 79th Leg., ch. 728, § 11.019(a), eff. Sept. 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 AND REINSTATEMENT 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. (c) An insurer may reinstate a personal automobile insurance policy canceled for nonpayment of premium if the premium owed is paid not later than the 60th day after date of cancellation. Coverage under the policy lapses on the date of cancellation and is not again effective until the date the payment is received by the insurer. Premium is not owed for any period in which the policy is not in effect. Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005. Amended by Acts 2005, 79th Leg., ch. 1159, § 1, 2, eff. June 18, 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; (2) that is filed but is not paid or payable under the policy; or (3) that an insurer is prohibited from using under Section 3, Article 5.35-4. (c) An insurer may assess a premium surcharge at the time an insurance policy is renewed if the insured has filed one or more claims in the preceding three policy years. The amount of the surcharge must be based on sound actuarial principles. (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 claims. The notice form must: (1) list the policyholder's claims; and (2) contain the sentence: "The filing by you of another claim, except for a claim resulting from a loss caused by natural causes, a claim filed but not paid or payable under the policy under which it was filed, or an appliance-related claim that we are prohibited from using under Section 3, Article 5.35-4, Texas Insurance Code, could cause us to refuse to renew your policy." (f) In this section, "premium surcharge" means an additional amount that is added to the base rate. The term does not include a reduction or elimination of a discount previously received by an insured, reassignment of an insured from one rating tier to another, re-rating an insured, or re-underwriting an insured by using multiple affiliates. (g) The commissioner shall adopt rules as necessary to implement this section. Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005. Amended by Acts 2005, 79th Leg., ch. 291, § 5, eff. Sept. 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. § 551.113. DECLINATION PROHIBITED; CONSIDERATION OF CERTAIN CLAIMS. (a) This section applies only to a standard fire, homeowners, or farm and ranch owners insurance policy. (b) When deciding to issue or to decline to issue an insurance policy to an applicant for insurance, an insurer may not consider a customer inquiry as a basis for declination. (c) For purposes of this section, "customer inquiry" means a telephone call or other communication made to an insurer that does not result in an investigation or claim and that is in regard to the general terms or conditions of or coverage offered under an insurance policy. The term includes a question concerning the process for filing a claim, and whether a policy will cover a loss, unless the question concerns specific damage that has occurred and that results in an investigation or claim. Added by Acts 2005, 79th Leg., ch. 922, § 2, eff. Sept. 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.
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