28 TAC §5.501
1. INTRODUCTION. The Texas Department of Insurance proposes amendments to §5.501, concerning the procedures an insurer must follow in order to give the proper notice to first- and third-party claimants regarding their motor vehicle repair rights as required by the Insurance Code Article 5.07-1. The changes are proposed to reduce confusion, eliminate consumer frustration, and enable the Department to more efficiently allocate agency resources.
Article 5.07-1(a) provides that except as provided by rules adopted by the Commissioner, under an auto insurance policy that is delivered, issued for delivery, or renewed in this state an insurer may not, directly or indirectly, limit its coverage under a policy covering damage to a motor vehicle by specifying the brand, type, kind, age, vendor, supplier, or condition of parts or products that may be used to repair the vehicle or by limiting the beneficiary of the policy from selecting a repair person or facility to repair damage to the motor vehicle covered under the policy. Article 5.07-1(e) provides that at the time the vehicle is presented to an insurer or an insurance adjuster or other person in connection with a claim for damage repair, the insurer or insurance adjuster or other person must provide to the beneficiary or third-party claimant notice of the provisions of Article 5.07-1. Article 5.07-1(e) also requires the Commissioner to adopt a rule establishing the method or methods insurers must use to comply with the statutorily required notice provisions of this subsection. Article 5.07-1(g) provides that in the settlement of liability claims by a third party against an insured for property damage claimed by the third party, an insurer may not require the third-party claimant to have repairs made by a particular repair person or facility or to use a particular brand, type, kind, age, vendor, supplier, or condition of parts or products.
Many consumers confuse the Department's and insurance company's roles under the current notice requirements outlined in §5.501. The notice does not state how to contact the responsible insurance company nor does it clearly indicate the insurance company's role in the claims process.Instead, it prominently displays the Department's contact information and encourages claimants to call with questions about their rights. As a result, many calls to the Department must be redirected to the appropriate insurance company. These consumers must make an additional phone call to the appropriate insurer.It results in consumer frustration. It also taxes the Department's resources, increasing the amount of time other consumers must wait to have their calls answered.
To address these concerns, the proposed amended §5.501 clarifies the Department's role and distinguishes it from the insurance company's responsibilities by adding new language and requiring special formatting. The proposed language makes clear that the Department is responsible for providing information about Insurance Code Article 5.07-1, while insurance companies are responsible for providing detailed information about the nature of coverage under a particular policy. To emphasize the insurer's role, the proposed amended notice displays the insurance company's name, mailing address, phone number, fax number, and email or web address prominently in bold face type.
The proposed amended §5.501 makes a second important change. In an effort to better serve the Department's increasing number of Spanish-speaking callers, the notice must also be provided in Spanish.In 2002, the Department's Consumer Protection Division received 8,277 calls from Spanish-speaking consumers. By 2005, the inquiries had increased to over 13,000 calls.
2. FISCAL NOTE. Audrey Selden, Senior Associate Commissioner of Consumer Protection, has determined there will be no fiscal impact to state and local governments as a result of the enforcement or administration of this rule for each year of the first five years the proposed amended section is in effect. There will be no measurable effect on local employment or the local economy as a result of the proposal.
3. PUBLIC BENEFIT/COST NOTE. For each year of the first five years this section is in effect, Ms. Selden has determined that the primary public benefit anticipated as a result of the proposed amended section will be less confusion and frustration on the part of first- or third-party claimants who make a claim regarding damage to a motor vehicle. The amended rule will also benefit consumers by enabling the Department to better allocate its resources. By reducing the number of misdirected calls, more calls can be answered and more consumers can be assisted by the Department.
The costs for insurance companies to comply with the amended rule are negligible for two reasons. First, the cost to print the required notice should not increase. The current §5.501 requires the notice be attached to or printed on the reverse side of a copy of the Insurance Code Article 5.07-1. The Spanish notice fits below the English notice on one sheet of paper; therefore, insurers will not incur any additional production costs as a result of compliance with the proposed amendments. Second, an insurer should be able to exhaust its existing stock of notices prior to the effective date of amended §5.501. The Department proposes the revised notice requirements become applicable January 1, 2007. Existing notices printed according to the requirements in current §5.501 may be used through December 31, 2006. New notices can be produced in the regular course of business for use on or before January 1, 2007. Therefore, absent the pressure of immediate compliance insurers will not experience any real economic impact.
The Department does not anticipate that the cost to comply will vary between small, large, or micro-businesses. Although the Department does not anticipate that the proposed amendments will have an adverse effect on small and micro-businesses, the Department has considered the purpose of Article 5.07-1 of the Insurance Code. The statutory provision requires all insurers or insurance adjusters to provide notice to first- or third-party claimants at the time the vehicle is presented in connection with a claim for damage repair; therefore, it is neither legal nor feasible to waive the provisions of the proposed amendments for small or micro businesses. Additionally, it is the Department's position that to waive or modify the requirements of the proposed amendments for small and micro businesses would result in a disparate effect on policyholders and other persons affected by the amendments because they would not receive adequate notice of their rights as required by the statute.
4. REQUEST FOR PUBLIC COMMENT. To be considered, written comments on the proposal must be submitted no later than 5:00 p.m. on July 24, 2006 to Gene C. Jarmon, General Counsel and Chief Clerk, Mail Code 113-2A, Texas Department of Insurance, P. O. Box 149104, Austin, Texas78714-9104. An additional copy of the comment must be simultaneously submitted to Audrey Selden, Senior Associate Commissioner, Consumer Protection, Mail Code 111-1A, Texas Department of Insurance, P.O. Box 149104, Austin, Texas 78714-9104. Any request for a public hearing should be submitted separately to the Office of the Chief Clerk by no later than 5:00 p.m. on July 24, 2006. If a hearing is held, written and oral comments presented at the hearing will be considered.
5. STATUTORY AUTHORITY. The amendments are proposed under the Insurance Code Article 5.07-1, Article 5.98, and §36.001. Article 5.07-1 specifically charges the Commissioner with adopting rules to establish the method insurers must use to provide claimants with notice of their motor vehicle repair rights. Under Article 5.98, the Commissioner is authorized to adopt reasonable rules appropriate to accomplishing the purposes of Chapter 5 of the Insurance Code.Section 36.001 provides that the Commissioner of Insurance may adopt any rules necessary and appropriate to implement the powers and duties of the Texas Department of Insurance under the Insurance Code and other laws of this state.
6. CROSS REFERENCE TO STATUTE. The following statute is affected by this proposal:
§5.501 Insurance Code Article 5.07-1
§5.501. Notice Requirements to Claimants Regarding Motor Vehicle Repairs.
(a) The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise.
(1) Business day--A day other than a Saturday, Sunday, or holiday recognized by the State of Texas.
(2) Insurer--An insurer or any person authorized to act on behalf of an insurer regarding damage to a vehicle, regardless of whether employed by the insurer.
(b) - (g)(No change.)
(h) The written notice must be printed in at least ten point type with the insurer's name, mailing address, phone number, fax number and e-mail address or web address printed in bold face type and[,] must be attached to, or printed on the reverse side of, a copy of the Insurance Code, Article 5.07-1. The written notice [, and] must read as follows:
Figure : 28 TAC §5.501(h)
THIS NOTICE IS REQUIRED BY LAW. IT DOES NOT CONSTITUTE AN ADMISSION OF LIABILITY BY THE INSURANCE COMPANY.
REQUIRED NOTICE TO INSURANCE CLAIMANTS FOR MOTOR VEHICLE REPAIRS
BY LAW, YOU HAVE THE RIGHT TO SELECT WHERE YOUR MOTOR VEHICLE IS REPAIRED AND THE PARTS USED FOR REPAIRS. HOWEVER, AN INSURANCE COMPANY IS NOT REQUIRED TO PAY MORE THAN A REASONABLE AMOUNT FOR SUCH REPAIRS AND PARTS. YOUR STATUTORY RIGHTS REGARDING MOTOR VEHICLE REPAIRS ARE EXPLAINED IN THE COPY OF THE INSURANCE CODE, ARTICLE 5.07-1, PRINTED ON THE REVERSE SIDE OF THIS NOTICE OR ATTACHED TO THIS NOTICE. IF THE DAMAGE TO YOUR VEHICLE IS COVERED BY AN INSURANCE POLICY, THE NATURE OF THE COVERAGE AND YOUR LEGAL RIGHTS UNDER THE CONTRACT ARE DESCRIBED IN MORE DETAIL IN THE APPLICABLE POLICY. [IF YOU ARE INSURED BY THE COMPANY FOR THE DAMAGE, YOUR RIGHTS ARE EXPLAINED IN MORE DETAIL IN YOUR INSURANCE POLICY.] FOR DETAILED INFORMATION REGARDING OUR INSURANCE POLICY, CONTACT:
NAME OF INSURANCE COMPANY:
E-MAIL or WEB ADDRESS:
For questions about your statutory rights regarding motor vehicle repairs under the Insurance Code, Article 5.07-1 contact the Texas Department of Insurance. You may write to the Consumer Protection Division at P.O. Box 149091, Austin, TX 78714-9091, call 800-252-3439, fax 512-475-1771, email ConsumerProtection@tdi.state.tx.us, or visit the Department online at www.tdi.state.tx.us.
[IF YOU HAVE ANY QUESTIONS ABOUT YOUR MOTOR VEHICLE REPAIR RIGHTS, CONTACT THE TEXAS DEPARTMENT OF INSURANCE AT:]
[MAILING ADDRESS: TEXAS DEPARTMENT OF INSURANCE]
[P.O. Box 149091]
[AUSTIN TX 78714-9091]
[FAX NUMBER: 512-475-1771]
[WEB ADDRESS: http://www.tdi.state.tx.us]
LA LEY REQUIERE ESTE AVISO, PERO NO CONSTITUYE ADMISIÓN DE RESPONSABILIDAD CIVIL DE LA COMPAÑÍA ASEGURADORA.
AVISO OBLIGATORIO A LOS QUE PRESENTAN RECLAMACIONES PARA REPARACIÓN DE VEHÍCULO DE MOTOR.
POR LEY, USTED TIENE DERECHO A ESCOGER DONDE DESEA QUE SU VEHÍCULO SEA REPARADO Y LAS REFACCIONES QUE SE USEN EN LA REPARACIÓN. SIN EMBARGO, LA COMPAÑÍA ASEGURADORA NO ESTÁ OBLIGADA A PAGAR MÁS DE LA CANTIDAD RAZONABLE POR LAS REPARACIONES Y REFACCIONES. SUS DERECHOS POR ESTATUTO CONCERNIENTES A LAS REPARACIONES DE VEHÍCULO DE MOTOR ESTÁN DESCRITOS EN LA COPIA DEL CÓDIGO DE SEGUROS, ARTÍCULO 5.07.1, IMPRESO AL REVERSO DE ESTE AVISO O ADJUNTO A ESTE AVISO.SI LOS DAÑOS A SU VEHÍCULO ESTÁN CUBIERTOS BAJO UNA PÓLIZA DE SEGURO, LA NATURALEZA DE LA COBERTURA Y SUS DERECHOS LEGALES BAJO EL CONTRATO ESTÁN DESCRITOS EN MÁS DETALLE EN LA PÓLIZA RESPECTIVA. PARA INFORMACIÓN MÁS DETALLADA REFERENTE A NUESTRA PÓLIZA DE SEGURO, COMUNÍQUESE CON:
NOMBRE DE LA COMPAÑÍA ASEGURADORA:
DIRECCIÓN DE CORREOS:
DIRECCIÓN DE E-MAIL O INTERNET:
Para preguntas sobre sus derechos por estatuto respecto a las reparaciones de vehículo de motor bajo el Código de Seguros, Artículo 5.07-1 comuníquese con el Departamento de Seguros de Texas (Texas Department of Insurance o TDI).Puede escribir a Consumer Protection Division al P. O. Box 149091, Austin, TX 78714-9091, llamar al 800-252-3439, enviar Fax al 512-475-1771, e-mail a ConsumerProtection@tdi.state.tx.us o visitar el sitio electrónico de TDI por internet al www.tdi.state.tx.us.