SUBCHAPTER A. Automobile Insurance Division 6 Notice Requirements to Claimants Regarding Motor Vehicle Repairs

28 TAC §5.501

1. Introduction. The Commissioner of Insurance adopts 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 amendments are adopted with changes to the proposed text published in the June 23, 2006 issue of the Texas Register (31 TexReg 5041).

2. Reasoned Justification. The amendments to §5.501 are necessary to reduce confusion, eliminate consumer frustration, and enable the Department to more efficiently allocate agency resources. Article 5.07-1(a) provides that under an auto insurance policy delivered, issued for delivery, or renewed in this state which covers damage to a motor vehicle, an insurer may not, directly or indirectly, limit its coverage under the policy 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, except as provided by rules adopted by the Commissioner. 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. 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 insurance adjuster or other representative of the insurer 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.

Many consumers confuse the role of the Department and the role of the insurance company under the notice requirements outlined in former §5.501. The notice does not state how to contact the responsible insurance company nor does it clearly indicate the role of the insurance company in the claims process. Instead, it prominently displays the contact information for the Department 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 then make contact with the appropriate insurer. The redirection of initial calls results in confusion and 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, adopted §5.501 clarifies the role of the Department and distinguishes it from the responsibilities of the insurance company by adding new language and requiring special formatting in the notice to indicate the different responsibilities. The new 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 role of the insurer, the new notice requires the insurance company to display its name, mailing address, phone number, and fax number prominently in bold face type. Insurance companies are also encouraged to provide an optional e-mail or website address.

The amendments to §5.501 are also necessary to make 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 more than 13,000 calls. The Department is requiring that the notice be provided in Spanish to address this increased demand.

In response to written comments received from interested parties, the Department has changed some of the proposed language in the text of the rule as adopted. The changes, however, do not introduce new subject matter or affect persons in addition to those subject to the proposal as published. The changes are as follows.

The proposed effective date of the rule is changed from January 1, 2007 to April 1, 2007 after two commenters stated concern that if the effective date remained January 1, 2007, the rule would need revision within 90 days. This revision would be necessary because of the repeal of the Insurance Code Article 5.07-1 effective April 1, 2007, which is referenced in the notice. The repeal and the re-adoption of Article 5.07-1 as §§1952.301 - 1952.307 are part of the nonsubstantive code revision by the 79th Legislature. According to the commenters, it would be more administratively efficient and less costly if the effective date could be delayed to April 1, 2007. The Department agrees. In response to the comments, subsection (j) has been added to the rule to provide for an effective date for the amendments of April 1, 2007 . References to Article 5.07-1 in the text of subsection (h), subsection (i), and the notice have also been updated accordingly.

One commenter said that third-party claimants have no specified or stated rights under an insurance policy issued to a first party, and there is no "description of your legal rights under the contract" in a policy that may be providing funding for a third-party claimant. For this reason, the commenter suggested that the sentence "[i]f 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," be replaced by: "If the costs of repairing your vehicle are to be paid under an insurance policy issued by us, the nature of the coverage is stated in more detail in the applicable policy." The Department agrees and has changed the language in the proposed notice to incorporate the commenter's language.

According to one commenter, the statement in the proposed notice "For detailed information regarding our insurance policy, contact [Name of the insurance company]" could confuse third parties because of the reference to "our insurance policy." The commenter suggested that the words "this notice" be substituted for "our insurance policy" in order to reduce confusion. The Department agrees with the commenter that the language in the proposed notice could cause a third-party claimant some confusion. However, in order to address the concern, the Department has substituted "the" for "our" so that the notice as adopted reads: "For detailed information regarding the insurance policy, contact [Name of the insurance company]."

One commenter expressed concern about the proposed requirement to include the e-mail or web address of the insurance company in the notice. According to the commenter, some insurance companies do not communicate with their customers via e-mail; therefore, it would be expensive and difficult to provide this service by January 1, 2007. The commenter also states that his interpretation of the proposal is that by web address, the Department means a web address to which someone could send an e-mail, which would eliminate the use of already established information sites that do not have that capacity. The proposed inclusion of a web address requirement in the notice is not intended to supersede established information websites. The intent of the notice is to encourage claimants to contact the insurance company with questions about the policy applicable to their motor vehicle repairs claim. However, as a result of the concerns raised by the commenter, the rule as adopted does not require insurance companies to provide an e-mail or web address in the notice, but allows them to do so at their option.

One commenter states that capital letters serve a useful purpose when emphasizing a matter, but when the entire text of a notice is capitalized it may not be delivered with as much force. Therefore, the commenter suggests that the notice should follow the standard usage of capital and lower-case letters with two exceptions: the optional provision and the title of the notice. The Department agrees, and the notice as adopted has been changed to reflect this suggestion.

One commenter states that in the Spanish language notice the word naturaleza should be replaced by propósito because it more accurately reflects the meaning of the word nature used in the English notice. The Department agrees that the word naturaleza should be replaced but has substituted the term naturaleza técnica , which means technical nature. In the context of the Spanish notice, this term is an accurate translation of the word nature as used in the English portion of the notice.

3. How thE section will function. The adopted amendments to §5.501(a), a subsection defining the terms business day and insurer, changes the format of the subsection to include two new paragraphs. In the adopted rule, subsection (a)(1) defines business day while subsection (a)(2) defines insurer. No substantive changes are made to subsection (a).

The adopted amendments to §5.501(h), a subsection regarding the required format for the written notice, requires that the insurer's name, mailing address, phone number, and fax number be provided in bold face type. If the insurer chooses to provide an e-mail address or web address, it must also be provided in bold face type. The revised notice incorporates new language clarifying the responsibilities of the Department and of the insurance company under the notice. The new notice also requires insurers to add their contact information. Furthermore, a Spanish translation of the English version is added to the face of the one-page notice.

Section 5.501(j) provides an effective date for the amendments of April 1, 2007. This change permits insurers to make use of existing inventories and switch to the amended forms when the timing is most appropriate.

4. Summary of comments and agency'S response to comments.

Effective date of the notice

Comment: Two commenters state concern about the effective date of the rule. The commenters note Insurance Code Article 5.07-1 will be repealed effective April 1, 2007 and replaced by Insurance Code §§1952.301 - 1952.307 as part of the nonsubstantive code revision by the 79th Legislature. Therefore, according to the commenters, if the proposed changes were implemented on January 1, 2007, it will be necessary to revise the rule and forms only 90 days after the effective date because of the change in statutory references. The commenters state it would be more administratively efficient and less costly if the effective date could be delayed to April 1, 2007.

Agency's Response: The Department agrees and has changed the effective date to April 1, 2007, and has updated the references to the Insurance Code Article 5.07-1 to the Insurance Code §§1952.301 - 1952.307 in accordance with the nonsubstantive code revision by the 79th Legislature.

Language and formatting of the notice

Comment: One commenter says that third-party claimants have no specified or stated rights under an insurance policy issued to a first party, and there is no "description of your legal rights under the contract" in a policy that may be providing funding for a third-party claimant. For this reason, the commenter suggests that the sentence "[i]f 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," be replaced by: "If the costs of repairing your vehicle are to be paid under an insurance policy issued by us, the nature of the coverage is stated in more detail in the applicable policy."

Agency's Response: The Department agrees. The notice has been revised to reflect this suggestion.

Comment: One commenter states that the language in the notice explaining whom to contact should one have questions about the insurance policy could confuse third-parties because a third-party claimant, as opposed to a first-party claimant, has different rights under an insurance policy. Therefore, the commenter suggests the words "this notice" be substituted for "our insurance policy" in order to reduce confusion.

Agency's Response: The Department agrees that the language in the proposed notice could cause a third-party claimant some confusion; however, in order to address this concern the Department has substituted "the" for "our" so that the notice now reads: "For detailed information regarding the insurance policy. . . ."

Comment: One commenter expresses concern about including the insurance companies' e-mail or web addresses in the notice. The commenter states that some insurance companies do not communicate with their customers via e-mail; therefore, it would be expensive and extremely difficult to provide this service by January 1, 2007. The commenter also states that by requiring an insurer's web address, the Department means a web address to which someone could send an e-mail, which would eliminate the use of already established information sites that do not have that capacity.

Agency's Response: The intent of the Department's proposal was to require a web address as a source for claimants who wanted to gather more information on how they might contact the company. The inclusion of a web address in the notice was not intended to supersede established information sites. The intent of the notice is to encourage claimants to contact the insurance company with questions about the policy applicable to their motor vehicle repairs claim. However, the Department does not want to create unnecessary costs or unrealistic expectations. Therefore, subsection (h) and the notice as adopted have been revised so that insurance companies are not required to provide an e-mail or web address, but may do so at their option.

Comment: One commenter states that capital letters serve a useful purpose when emphasizing a matter, but when the entire text of a notice is capitalized it may not be delivered with as much force. Therefore, the commenter suggests that the notice follow the standard usage of capital and lower-case letters with two exceptions: the optional provision and the title of the notice.

Agency's Response: The Department agrees, and the notice has been changed to reflect this suggestion.

Spanish language notice

Comment: Two commenters express some concern about providing a Spanish language notice with an English language notice. One commenter is not opposed to the Spanish language notice; however, the commenter suggests the notice indicate a Spanish notice would only be provided on request. A second commenter also makes this suggestion, and expresses concern about the cost of complying with the required notice if a Spanish version must be delivered to a recipient in all cases. The commenter states that under the proposed rule it would require an additional page be affixed to the notice it currently provides because of the way the company formats its notice.

Agency's Response: The Department disagrees because the notice can be provided in both English and Spanish on one page.

Comment: One commenter states that in the Spanish notice the word naturaleza should be replaced by propósito because it more accurately reflects the meaning of the word nature as used in the English notice.

Agency Response: The Department agrees that the word naturaleza should be changed but has substituted the term naturaleza técnica , which means technical nature. In the context of the Spanish notice, this term is an accurate translation of the word nature as used in the English portion of the notice.

5. Names of those commenting for and against the section.

For, with recommended changes : Insurance Council of Texas.

Neither for nor against, with recommended changes: Farmers Insurance Group and State Farm Insurance Companies.

6. Statutory authority. The amendments are adopted 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.

7. Text.

§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) An insurer must give the notice prescribed by subsection (h) of this section (hereinafter referred to as the written notice) to any insured or third-party claimant who makes a claim regarding damage to a vehicle. If a claimant presents the vehicle to the insurer in connection with a claim for damage repair, or otherwise makes the claim in person, the written notice must be given to the claimant at that time.

(c) If the claim is made instead in writing (including e-mail or FAX), an insurer must mail the written notice to the claimant within three business days of receiving notice of the claim, unless the insurer otherwise delivers the claimant the written notice within those three business days.

(d) If the claim is made by telephone, an insurer must:

(1) mail the written notice to the claimant within three business days; or

(2) give the verbal notice prescribed by subsection (i) of this section (hereinafter referred to as the verbal notice) to the claimant at the time of the claimant's telephone call and mail the written notice to the claimant within 15 business days of receiving notice of the claim.

(e) An insurer, if it chooses to address the liability issue initially, may send or deliver its own letter along with the written notice. The written and verbal notice may include the Optional Provision. The written notice must be on a separate page from any letter or other material, except as otherwise provided in this section.

(f) Notwithstanding any other subsection of this section, no insurer is required to furnish more than one written notice to the insured or third party claimant in regard to the claim.

(g) These notice requirements do not apply to towing and labor costs coverage.

(h) The written notice must be printed in at least ten-point type with the insurer's name, mailing address, phone number, and fax number printed in bold face type. The insurer may provide an e-mail address or web address printed in bold face type. The notice must be attached to, or printed on the reverse side of, a copy of the Insurance Code §§1952.301 - 1952.307. The written notice must read as follows:

Figure: 28 TAC §5.501(h):

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 §§1952.301 to 1952.307, printed on the reverse side of this notice or attached to this notice. If the costs of repairing your vehicle are to be paid under an insurance policy issued by us, the nature of the coverage is stated in more detail in the applicable policy. For detailed information regarding the insurance policy, contact:

NAME OF INSURANCE COMPANY:

MAILING ADDRESS:

TELEPHONE:

FAX:

[optional] E-MAIL or WEB ADDRESS:

For questions about your statutory rights regarding motor vehicle repairs under the Insurance Code §§1952.301 to 1952.307, 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, e-mail ConsumerProtection@tdi.state.tx.us, or visit the Department online at http://www.tdi.state.tx.us.

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 §§1952.301 a 1952.307, impreso al reverse de este aviso o adjunto a este aviso. Si el costo de reparar su vehículo debe ser pagado bajo una póliza de seguro que nosotros dimos, la naturaleza técnica de la cobertura es establecida en más detalle en la póliza aplicable. Para información detallada acerca de la póliza de seguro, contacte:

NOMBRE DE LA COMPAÑÍA ASEGURADORA:

DIRECCIÓN DE CORREOS:

TELÉFONO:

FAX:

[OPCIONAL] 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 §§1952.301 a 1952.307, 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 http://www.tdi.state.tx.us.

(i) The verbal notice at a minimum must consist of the following: 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 RIGHTS CONCERNING MOTOR VEHICLE REPAIRS ARE EXPLAINED IN THE INSURANCE CODE §§1952.301 - 1952.307, A COPY OF WHICH WILL BE MAILED TO YOU WITHIN 15 BUSINESS DAYS. IF YOU HAVE ANY QUESTIONS ABOUT YOUR MOTOR VEHICLE REPAIR RIGHTS, CONTACT THE TEXAS DEPARTMENT OF INSURANCE AT 800-252-3439.

(j) These amendments are effective April 1, 2007.