Rep. John Smithee (R-Amarillo), chair of the House Insurance Committee, has filed legislation that requires the commissioner of insurance to adopt rules ensuring “prompt and equitable settlement of a third-party property damage claim.” The bill calls for quick settlement standards in circumstances in which the insured’s liability is reasonably clear, and the amount of the claim is within policy limits. The bill applies to any insurer that delivers, issues for delivery, or renews a Texas private passenger automobile insurance policy.
Under the bill, the minimum standards must include reasonable deadlines for the insurer to acknowledge and pay a claim, the required notice the insurer must provide to the claimant or the insured, and the items, statements, and forms that an insurer may require a claimant or insured to submit in relation to the claim. An insurer is required to comply with the standards.
The bill also contains provisions relating to arbitration of claims. A claimant may require an insurer to submit a dispute concerning the payment, amount, or denial of a claim to binding arbitration. A claimant who elects arbitration waives the right to bring an action against the insured or insurer (except to enforce the arbitration award), and agrees to accept payment for the claim within the policy limits. Arbitration is generally governed by Chapter 171, CPRC, though the commissioner shall adopt rules governing the procedures for requesting and conducting an arbitration, for selecting one or more arbitrators to conduct the proceeding, the qualifications of arbitrators, and procedures for the payment of the costs of arbitration. TDI must also compile and maintain a list of qualified arbitrators.
Finally, HB 1407 prohibits an insurer from delivering or renewing a Texas private passenger automobile insurance policy unless the policy or endorsement includes a provision that requires the insurer to participate in binding arbitration under the above provisions.