Thursday, 19 February 2015 00:00

TX Bills Target ‘Named Driver’ Automobile Policies; Disclosure Rules Adopted

A pair of bills filed in the Texas Legislature would prohibit automobile insurers from issuing “named driver” policies in the state, but one would allow named driver exclusion under certain circumstances, stated insurancejournal.com.

HB 318 by Rep. Mark Keogh, who represents part of Montgomery County, and HB 335 by Rep. Ed Thompson, representing part of Brazoria County, would add Subchapter H to Chapter 1952 of the Insurance Code to address “named driver” policies.
The bills define a named driver policy as one that provides “coverage only for drivers specifically named on the policy and not for individuals residing in a named insured’s household. The term includes an automobile insurance policy that has been endorsed to provide coverage only for drivers specifically named on the policy.”

While both measures would prohibit the issuance of named driver policies, HB 335 would permit a “named driver exclusion” on a policy “if the exclusion specifically names each excluded driver and does not exclude a class of drivers.”

If passed, the bills would apply to all automobile insurance companies in Texas and would affect policies written or renewed on or after Jan. 1, 2016.The effective date for both HB 318 and HB 335 is Sept. 1, 2015.

A similar bill, HB 1773, was introduced but did not pass in the 2013 regular session of the Legislature.

Disclosure Rules

While the Legislature in 2013 allowed the use of named driver policies it passed legislation requiring that consumers be informed of the limitations inherent in such policies.

Senate Bill 1567, passed in the 2013 Legislature, Regular Session created §1952.0545 of the insurance code, which requires insurers and agents to provide consumers with “written and oral disclosures, and contemporaneous written confirmation of the oral disclosure, for named driver policies,” according to the Texas Department of Insurance.

In May 2014, Insurance Commissioner Julie Rathgeber adopted amendments that require the named driver disclosure to be included on auto ID cards.

More recently, the commissioner adopted rules that add §5.208, which seeks to clarify the disclosure responsibilities of insurers and agents regarding the issuance of named driver policies, both new and renewals.

The disclosure section of the newly adopted rules is as follows:

§5.208. (c) Disclosures

(1) Disclosure requirements. An agent or insurer may not accept a premium or fee for a new or renewal named driver policy until the agent or insurer has: (A) made the oral disclosure under paragraph (3) of this subsection;

(B) received a contemporaneous written confirmation of the oral disclosure under paragraph (4) of this subsection;

(C) made the written disclosures under paragraph (5) of this subsection;

and (D) received a signed copy of the written disclosure under paragraph (5) (B) of this subsection.

(2) Content. Oral and written disclosures for named driver policies must include the following, “WARNING: A NAMED DRIVER POLICY DOES NOT PROVIDE COVERAGE FOR INDIVIDUALS RESIDING IN THE INSURED’S HOUSEHOLD THAT ARE NOT NAMED ON THE POLICY.”

(3) Oral disclosure. An agent or insurer may comply with the oral disclosurerequirement by delivering the disclosure live or using a recording:

(A) in the presence of the applicant or insured;

(B) over the telephone;

or (C) over the Internet (for example, by Internet video call).

(4) Signed confirmation of oral disclosure. An agent or insurer must require an applicant or insured to sign a written confirmation that the agent or insurer has provided the oral disclosure. The applicant or insured must sign the written confirmation contemporaneously with receiving the oral disclosure.

(5) Written disclosures must be conspicuous, as that term is defined in Business and Commerce Code §1.201(B)(10).

An agent or insurer must: (A) include the disclosure in the policy and on any proof of insurancedocument issued to the insured, including an auto ID card issued under §5.204 of this title;

and (B) require an applicant or insured to sign a copy of the disclosure.

(6) Signatures. All signatures required by this section must be original or electronic signatures executed specifically for each new and renewal policy.(A) Electronic signatures must comply with Business and Commerce Code Chapter 322 (Uniform Electronic Transactions Act), Insurance Code Chapter 35 (Electronic Transactions), and any applicable rules.

(B) Signatures must not be:

(i) made before the agent or insurer makes the disclosure;

(ii) reproduced, transferred, referenced to, or otherwise replicatedfrom a signature on file with the agent or insurer;

or (iii) merely presumed to exist.

(C) An agent or insurer may not state, require, agree, or assume that a signature requirement is met based on payment received from the applicant or insured.

(7) Language. Agents and insurers must provide the disclosures in English and, in addition, may provide them in other languages.

(d) Installment payments. After complying with the disclosure requirements for each new and renewal policy, an agent or an insurer is not required to comply with subsection (c) of this section each time the agent or insurer accepts an installment payment during that policy’s term.

(e) Failure to comply. An agent or insurer may not use noncompliance with Insurance Code §1952.0545 or this section as a reason to avoid liability under the policy. Noncompliance with Insurance Code §1952.0545 or this section is not grounds for cancellation under Insurance Code §551.10, stated insurancejournal.com.

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