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.