By: Taylor of Galveston S.B. No. 1537     (Bonnen of Galveston)           A BILL TO BE ENTITLED   AN ACT   relating to dispute resolution for certain claims arising under   insurance policies issued by the Fair Access to Insurance   Requirements (FAIR) Plan Association; authorizing fees.          BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:          SECTION 1.  Section 2211.003, Insurance Code, is amended by   adding Subsection (c) to read as follows:          (c)  Subsection (a) does not apply to a person who is   required to resolve a dispute under Subchapter D-1.          SECTION 2.  Subchapter A, Chapter 2211, Insurance Code, is   amended by adding Sections 2211.004 and 2211.005 to read as   follows:          Sec. 2211.004.  CERTAIN CONDUCT IN DISPUTE RESOLUTION   PROHIBITED. (a)  For purposes of this section, "presiding officer"   includes a judge, mediator, arbitrator, appraiser, or panel member.          (b)  If a person insured under this chapter is assigned to   act as presiding officer to preside over or resolve a dispute   involving the association and another person insured under this   chapter, the presiding officer shall, not later than the seventh   day after the date of assignment, give written notice to the   association and to each other party to the dispute, or the   association's or other party's attorney, that the presiding officer   is insured under this chapter.          (c)  In a proceeding with respect to which the commissioner   has authority to designate the presiding officer, the association   or other party that receives notice under Subsection (b) may file   with the commissioner a written objection to the assignment of the   presiding officer to the dispute. The written objection must   contain the factual basis on which the association or other party   objects to the assignment.          (d)  The commissioner shall assign a different presiding   officer to the dispute if, after reviewing the objection filed   under Subsection (c), the commissioner determines that the   presiding officer originally assigned to the dispute has a direct   financial or personal interest in the outcome of the dispute.          (e)  The association or other party must file an objection   under Subsection (c) not later than the earlier of:                (1)  the seventh day after the date the association or   other party receives actual notice that the presiding officer is   insured under this chapter; or                (2)  the seventh day before the date of the first   proceeding concerning the dispute.          (f)  The commissioner may, on a showing of good cause, extend   the deadline to file an objection under Subsection (e).          Sec. 2211.005.  APPLICABILITY OF CERTAIN OTHER LAW. (a)  A   person may not bring a private action against the association,   including a claim against an agent or representative of the   association, under Chapter 541 or 542.  Notwithstanding any other   provision of this code or this chapter, a class action under   Subchapter F, Chapter 541, or under Rule 42, Texas Rules of Civil   Procedure, may be brought against the association only by the   attorney general at the request of the department.          (b)  Chapter 542 does not apply to the processing and   settlement of claims by the association.          SECTION 3.  Subchapter D, Chapter 2211, Insurance Code, is   amended by adding Sections 2211.158 and 2211.159 to read as   follows:          Sec. 2211.158.  REQUIRED POLICY PROVISIONS:  DEADLINE FOR   FILING CLAIM; NOTICE CONCERNING RESOLUTION OF CERTAIN DISPUTES.   (a)  An insurance policy issued by the association must:                (1)  require an insured to file a claim under the policy   not later than the first anniversary of the date on which the damage   to property that is the basis of the claim occurs; and                (2)  contain, in boldface type, a conspicuous notice   concerning the resolution of disputes under the policy, including:                      (A)  the processes and deadlines for appraisal   under Section 2211.174 and alternative dispute resolution under   Section 2211.175;                      (B)  the binding effect of appraisal under Section   2211.174; and                      (C)  the necessity of complying with the   requirements of Subchapter D-1 to seek relief, including judicial   relief.          (b)  The commissioner, on a showing of good cause by a person   insured under this chapter, may extend the one-year period   described by Subsection (a)(1) for a period not to exceed 180 days.          Sec. 2211.159.  VOLUNTARY ARBITRATION OF CERTAIN COVERAGE   AND CLAIM DISPUTES. (a)  A person insured under this chapter may   elect to purchase a binding arbitration endorsement in a form   prescribed by the commissioner.  A person who elects to purchase an   endorsement under this section must arbitrate a dispute involving   an act, ruling, or decision of the association relating to the   payment of, the amount of, or the denial of the claim.          (b)  An arbitration under this section shall be conducted in   the manner and under rules and deadlines prescribed by the   commissioner by rule.          (c)  The association may offer a person insured under this   chapter an actuarially justified premium discount on a policy   issued by the association if the person elects to purchase a binding   arbitration endorsement under this section. The premium discount   may not exceed 10 percent of the premium for the policy, before the   application of the discount.          (d)  The commissioner shall adopt rules necessary to   implement and enforce this section, including rules defining   "actuarially justified" for the purposes of this section.          SECTION 4.  Chapter 2211, Insurance Code, is amended by   adding Subchapter D-1 to read as follows:   SUBCHAPTER D-1.  CLAIMS:  SETTLEMENT AND DISPUTE RESOLUTION          Sec. 2211.171.  DEFINITIONS. In this subchapter:                (1)  "Association policy" means an insurance policy   issued by the association.                (2)  "Claim" means a request for payment under an   association policy. The term also includes any other claim against   the association, or an agent or representative of the association,   relating to an insured loss, under any theory or cause of action of   any kind, regardless of the theory under which the claim is   asserted, the cause of action brought, or the type of damages   sought.                (3)  "Claimant" means a person who makes a claim.          Sec. 2211.172.  EXCLUSIVE REMEDIES AND LIMITATION ON AWARD.   (a)  This subchapter provides the exclusive remedies for a claim   against the association, including an agent or representative of   the association.          (b)  Subject to Section 2211.176, the association may not be   held liable for any amount other than covered losses payable under   the terms of the association policy.          (c)  The association, or an agent or representative of the   association, may not be held liable for damages under Chapter 17,   Business & Commerce Code, or, except as otherwise specifically   provided by this chapter, under any provision of any law providing   for additional damages, exemplary damages, or a penalty.          Sec. 2211.173.  FILING OF CLAIM; CLAIM PROCESSING.   (a)  Subject to Section 2211.158(b), an insured must file a claim   under an association policy not later than the first anniversary of   the date on which the damage to property that is the basis of the   claim occurs.          (b)  The claimant may submit written materials, comments,   documents, records, and other information to the association   relating to the claim. If the claimant fails to submit information   in the claimant's possession that is necessary for the association   to determine whether to accept or reject the claim, the association   may, not later than the 30th day after the date the claim is filed,   request in writing the necessary information from the claimant.          (c)  The association shall, on request, provide a claimant   reasonable access to all information relevant to the determination   of the association concerning the claim. The claimant may copy the   information at the claimant's own cost or may request the   association to provide a copy of all or part of the information to   the claimant. The association may charge a claimant the actual cost   incurred by the association in providing a copy of information   under this section, excluding any amount for labor involved in   making any information or copy of information available to a   claimant.          (d)  Unless the applicable 60-day period described by this   subsection is extended by the commissioner under Section 2211.180,   not later than the later of the 60th day after the date the   association receives a claim or the 60th day after the date the   association receives information requested under Subsection (b),   the association shall provide the claimant, in writing,   notification that:                (1)  the association has accepted coverage for the   claim in full;                (2)  the association has accepted coverage for the   claim in part and has denied coverage for the claim in part; or                (3)  the association has denied coverage for the claim   in full.          (e)  In a notice provided under Subsection (d)(1), the   association must inform the claimant of the amount of loss the   association will pay and of the time limit to demand appraisal under   Section 2211.174.          (f)  In a notice provided under Subsection (d)(2) or (3), the   association must inform the claimant of, as applicable:                (1)  the portion of the loss for which the association   accepts coverage and the amount of loss the association will pay;                (2)  the portion of the loss for which the association   denies coverage and a detailed summary of the manner in which the   association determined not to accept coverage for that portion of   the claim; and                (3)  the time limit to:                      (A)  demand appraisal under Section 2211.174 of   the portion of the loss for which the association accepts coverage;   and                      (B)  provide notice of intent to bring an action   as required by Section 2211.175.          (g)  In addition to a notice provided under Subsection (d)(2)   or (3), the association shall provide a claimant with a form on   which the claimant may provide the association notice of intent to   bring an action as required by Section 2211.175.          Sec. 2211.1731.  PAYMENT OF CLAIM. (a)  Except as provided   by Subsection (b), if the association notifies a claimant under   Section 2211.173(d)(1) or (2) that the association has accepted   coverage for a claim in full or has accepted coverage for a claim in   part, the association shall pay the accepted claim or accepted   portion of the claim not later than the 10th day after the date   notice is made.          (b)  If payment of the accepted claim or accepted portion of   the claim is conditioned on the performance of an act by the   claimant, the association shall pay the claim not later than the   10th day after the date the act is performed.          Sec. 2211.174.  DISPUTES CONCERNING AMOUNT OF ACCEPTED   COVERAGE. (a)  If the association accepts coverage for a claim in   full and a claimant disputes only the amount of loss the association   will pay for the claim, or if the association accepts coverage for a   claim in part and a claimant disputes the amount of loss the   association will pay for the accepted portion of the claim, the   claimant may request from the association a detailed summary of the   manner in which the association determined the amount of loss the   association will pay.          (b)  If a claimant disputes the amount of loss the   association will pay for a claim or a portion of a claim, the   claimant, not later than the 60th day after the date the claimant   receives the notice described by Section 2211.173(d)(1) or (2), may   demand appraisal in accordance with the terms of the association   policy.          (c)  If a claimant, on a showing of good cause and not later   than the 15th day after the expiration of the 60-day period   described by Subsection (b), requests in writing that the 60-day   period be extended, the association may grant an additional 30-day   period in which the claimant may demand appraisal.          (d)  If a claimant demands appraisal under this section:                (1)  the appraisal must be conducted as provided by the   association policy; and                (2)  the claimant and the association are responsible   in equal shares for paying any costs incurred or charged in   connection with the appraisal, including a fee charged under   Subsection (e).          (e)  If a claimant demands appraisal under this section and   the appraiser retained by the claimant and the appraiser retained   by the association are able to agree on an appraisal umpire to   participate in the resolution of the dispute, the appraisal umpire   is the umpire chosen by the two appraisers. If the appraiser   retained by the claimant and the appraiser retained by the   association are unable to agree on an appraisal umpire to   participate in the resolution of the dispute, the commissioner   shall select an appraisal umpire from a roster of qualified umpires   maintained by the department. The department may:                (1)  require appraisers to register with the department   as a condition of being placed on the roster; and                (2)  charge a reasonable registration fee to defray the   cost incurred by the department in maintaining the roster and the   commissioner in selecting an appraisal umpire under this   subsection.          (f)  Except as provided by Subsection (g), the appraisal   decision is binding on the claimant and the association as to the   amount of loss the association will pay for a fully accepted claim   or the accepted portion of a partially accepted claim and is not   appealable or otherwise reviewable. A claimant that does not   demand appraisal before the expiration of the periods described by   Subsections (b) and (c) waives the claimant's right to contest the   association's determination of the amount of loss the association   will pay with reference to a fully accepted claim or the accepted   portion of a partially accepted claim.          (g)  A claimant or the association may, not later than the   second anniversary of the date of an appraisal decision, file an   action in a district court in the county in which the loss that is   the subject of the appraisal occurred to vacate the appraisal   decision and begin a new appraisal process if:                (1)  the appraisal decision was obtained by corruption,   fraud, or other undue means;                (2)  the rights of the claimant or the association were   prejudiced by:                      (A)  evident partiality by an appraisal umpire;                      (B)  corruption in an appraiser or appraisal   umpire; or                      (C)  misconduct or wilful misbehavior of an   appraiser or appraisal umpire; or                (3)  an appraiser or appraisal umpire:                      (A)  exceeded the appraiser's or appraisal   umpire's powers;                      (B)  refused to postpone the appraisal after a   showing of sufficient cause for the postponement;                      (C)  refused to consider evidence material to the   claim; or                      (D)  conducted the appraisal in a manner that   substantially prejudiced the rights of the claimant or the   association.          (h)  Except as provided by Subsection (g), a claimant may not   bring an action against the association with reference to a claim   for which the association has accepted coverage in full.          Sec. 2211.175.  DISPUTES CONCERNING DENIED COVERAGE.   (a)  If the association denies coverage for a claim in part or in   full and the claimant disputes that determination, the claimant,   not later than the expiration of the limitations period described   by Section 2211.177(a) but after the date the claimant receives the   notice described by Section 2211.173(d)(2) or (3), must provide the   association with notice that the claimant intends to bring an   action against the association concerning the partial or full   denial of the claim. A claimant that does not provide notice of   intent to bring an action before the expiration of the period   described by this subsection waives the claimant's right to contest   the association's partial or full denial of coverage and is barred   from bringing an action against the association concerning the   denial of coverage.          (b)  If a claimant provides notice of intent to bring an   action under Subsection (a), the association may require the   claimant, as a prerequisite to filing the action against the   association, to submit the dispute to alternative dispute   resolution by mediation or moderated settlement conference, as   provided by Chapter 154, Civil Practice and Remedies Code.          (c)  The association must request alternative dispute   resolution of a dispute described by Subsection (b) not later than   the 60th day after the date the association receives from the   claimant notice of intent to bring an action.          (d)  Alternative dispute resolution under this section must   be completed not later than the 60th day after the date a request   for alternative dispute resolution is made under Subsection (c).   The 60-day period described by this subsection may be extended by   the commissioner in accordance with Section 2211.180 or by the   association and a claimant by mutual consent.          (e)  If the claimant is not satisfied after completion of   alternative dispute resolution, or if alternative dispute   resolution is not completed before the expiration of the 60-day   period described by Subsection (d) or any extension under that   subsection, the claimant may bring an action against the   association in a district court in the county in which the loss that   is the subject of the coverage denial occurred.  An action brought   under this subsection shall be presided over by a judge appointed by   the judicial panel on multidistrict litigation designated under   Section 74.161, Government Code. A judge appointed under this   section must be an active judge, as defined by Section 74.041,   Government Code, who is a resident of the county in which the loss   that is the basis of the disputed denied coverage occurred or of a   county adjacent to the county in which that loss occurred.          (f)  If a claimant brings an action against the association   concerning a partial or full denial of coverage, the court shall   abate the action until the notice of intent to bring an action has   been provided and, if requested by the association, the dispute has   been submitted to alternative dispute resolution, in accordance   with this section.          (g)  A moderated settlement conference under this section   may be conducted by a panel consisting of one or more impartial   third parties.          (h)  If the association requests mediation under this   section, the claimant and the association are responsible in equal   shares for paying any costs incurred or charged in connection with   the mediation.          (i)  If the association requests mediation under this   section, and the claimant and the association are able to agree on a   mediator, the mediator is the mediator agreed to by the claimant and   the association. If the claimant and the association are unable to   agree on a mediator, the commissioner shall select a mediator from a   roster of qualified mediators maintained by the department. The   department may:                (1)  require mediators to register with the department   as a condition of being placed on the roster; and                (2)  charge a reasonable registration fee to defray the   cost incurred by the department in maintaining the roster and the   commissioner in selecting a mediator under this subsection.          (j)  The commissioner shall establish rules to implement   this section, including provisions for expediting alternative   dispute resolution, facilitating the ability of a claimant to   appear with or without counsel, establishing qualifications   necessary for mediators to be placed on the roster maintained by the   department under Subsection (i), and providing that formal rules of   evidence shall not apply to the proceedings.          Sec. 2211.176.  ISSUES BROUGHT TO SUIT; LIMITATIONS ON   RECOVERY. (a)  The only issues a claimant may raise in an action   brought against the association under Section 2211.175 are:                (1)  whether the association's denial of coverage was   proper; and                (2)  the amount of the damages described by Subsection   (b) to which the claimant is entitled, if any.          (b)  Except as provided by Subsections (c) and (d), a   claimant that brings an action against the association under   Section 2211.175 may recover only:                (1)  the covered loss payable under the terms of the   association policy less, if applicable, the amount of loss already   paid by the association for any portion of a covered loss for which   the association accepted coverage;                (2)  prejudgment interest from the first day after the   date specified in Section 2211.1731 by which the association was or   would have been required to pay an accepted claim or the accepted   portion of a claim, at the prejudgment interest rate provided by   Subchapter B, Chapter 304, Finance Code; and                (3)  court costs and reasonable and necessary   attorney's fees.          (c)  Nothing in this chapter, including Subsection (b), may   be construed to limit the consequential damages, or the amount of   consequential damages, that a claimant may recover under common law   in an action against the association.          (d)  A claimant that brings an action against the association   under Section 2211.175 may, in addition to the covered loss   described by Subsection (b)(1) and any consequential damages   recovered by the claimant under common law, recover damages in an   amount not to exceed the aggregated amount of the covered loss   described by Subsection (b)(1) and the consequential damages   recovered under common law if the claimant proves by clear and   convincing evidence that the association mishandled the claimant's   claim to the claimant's detriment by intentionally:                (1)  failing to meet the deadlines or timelines   established under this subchapter without good cause, including the   applicable deadline established under Section 2211.1731 for   payment of an accepted claim or the accepted portion of a claim;                (2)  failing to provide the notice required under   Section 2211.173(d);                (3)  rejecting a claim without conducting a reasonable   investigation with respect to the claim; or                (4)  denying coverage for a claim in part or in full if   the association's liability has become reasonably clear as a result   of the association's investigation with respect to the portion of   the claim that was denied.          (e)  For purposes of Subsection (d), "intentionally" means   actual awareness of the facts surrounding the act or practice   listed in Subsection (d)(1), (2), (3), or (4), coupled with the   specific intent that the claimant suffer harm or damages as a result   of the act or practice. Specific intent may be inferred from   objective manifestations that the association acted intentionally   or from facts that show that the association acted with flagrant   disregard of the duty to avoid the acts or practices listed in   Subsection (d)(1), (2), (3), or (4).          Sec. 2211.177.  LIMITATIONS PERIOD. (a)  Notwithstanding   any other law, a claimant that brings an action against the   association under Section 2211.175 must bring the action not later   than the second anniversary of the date on which the person receives   a notice described by Section 2211.173(d)(2) or (3).          (b)  This section is a statute of repose and controls over   any other applicable limitations period.          Sec. 2211.178.  CONSTRUCTION WITH OTHER LAW. (a)  To the   extent of any conflict between a provision of this subchapter and   any other law, the provision of this subchapter prevails.          (b)  Notwithstanding any other law, the association may not   bring an action against a claimant, for declaratory or other   relief, before the 180th day after the date an appraisal under   Section 2211.174, or alternative dispute resolution under Section   2211.175, is completed.          Sec. 2211.179.  RULEMAKING. (a)  The commissioner shall   adopt rules regarding the provisions of this subchapter, including   rules concerning:                (1)  qualifications and selection of appraisers for the   appraisal procedure and mediators for the mediation process;                (2)  procedures and deadlines for the payment and   handling of claims by the association as well as the procedures and   deadlines for a review of a claim by the association; and                (3)  any other matters regarding the handling of claims   that are not inconsistent with this subchapter.          (b)  All rules adopted by the commissioner under this section   must promote the fairness of the process, protect the rights of   aggrieved policyholders, and ensure that policyholders may   participate in the claims review process without the necessity of   engaging legal counsel.          Sec. 2211.180.  COMMISSIONER EXTENSION OF DEADLINES.   (a)  The commissioner, on a showing of good cause, may extend any   deadline established under this subchapter.          (b)  For the purposes of Subsection (a), "good cause"   includes military deployment.          Sec. 2211.181.  OMBUDSMAN PROGRAM. (a)  The department   shall establish an ombudsman program to provide information and   educational programs to assist persons insured under this chapter   with the claim processes under this subchapter.          (b)  Not later than March 1 of each year, the department   shall prepare and submit to the commissioner a budget for the   ombudsman program, including approval of all expenditures incurred   in administering and operating the program. The commissioner shall   adopt or modify and adopt the budget not later than April 1 of the   year in which the budget is submitted.          (c)  Not later than May 1 of each year, the association shall   transfer to the ombudsman program money in an amount equal to the   amount of the budget adopted under Subsection (b).  The ombudsman   program, not later than April 30 of each year, shall return to the   association any unexpended funds that the program received from the   association in the previous year.          (d)  The department shall, not later than the 60th day after   the date of a catastrophic event, as defined by the commissioner for   the purposes of this subsection, prepare and submit an amended   budget to the commissioner for approval and report to the   commissioner the approximate number of claimants eligible for   ombudsman services. The commissioner shall adopt rules as   necessary to implement an amended budget submitted under this   section, including rules regarding the transfer of additional money   from the association to the program.          (e)  The ombudsman program may provide to persons insured   under this chapter information and educational programs through:                (1)  informational materials;                (2)  toll-free telephone numbers;                (3)  public meetings;                (4)  outreach centers;                (5)  the Internet; and                (6)  other reasonable means.          (f)  The ombudsman program is administratively attached to   the department.  The department shall provide the staff, services,   and facilities necessary for the ombudsman program to operate,   including:                (1)  administrative assistance and service, including   budget planning and purchasing;                (2)  personnel services;                (3)  office space; and                (4)  computer equipment and support.          (g)  The ombudsman program shall prepare and make available   to each person insured under this chapter information describing   the functions of the ombudsman program.          (h)  The association, in the manner prescribed by the   commissioner by rule, shall notify each person insured under this   chapter concerning the operation of the ombudsman program.          (i)  The commissioner may adopt rules as necessary to   implement this section.          SECTION 5.  (a)  Except as otherwise specifically provided   by this section, this Act applies only to an insurance policy that   is delivered, issued for delivery, or renewed by the Fair Access to   Insurance Requirements Plan Association on or after the 60th day   after the effective date of this Act. An insurance policy that is   delivered, issued for delivery, or renewed by the Fair Access to   Insurance Requirements Plan Association before the 60th day after   the effective date of this Act is governed by the law as it existed   immediately before the effective date of this Act, and that law is   continued in effect for that purpose.          (b)  The deadline to file a claim under an insurance policy   delivered, issued for delivery, or renewed before the 60th day   after the effective date of this Act by the Fair Access to Insurance   Requirements Plan Association is governed by the law as it existed   immediately before the effective date of this Act, and that law is   continued in effect for that purpose.          (c)  If a person insured by the Fair Access to Insurance   Requirements Plan Association disputes the amount the association   will pay for a partially or fully accepted claim filed by the   person, Section 2211.174, Insurance Code, as added by this Act,   applies only if the insurance policy under which the claim is filed   is delivered, issued for delivery, or renewed on or after the 60th   day after the effective date of this Act.          (d)  If a person insured by the Fair Access to Insurance   Requirements Plan Association disputes the amount the association   will pay for a partially or fully accepted claim filed by the person   and the insurance policy under which the claim is filed is   delivered, issued for delivery, or renewed before the 60th day   after the effective date of this Act:                (1)  Section 2211.174, Insurance Code, as added by this   Act, does not apply to the resolution of the dispute; and                (2)  notwithstanding any other provision of this Act,   the claimant must attempt to resolve the dispute through any   appraisal process contained in the association policy under which   the claim is filed before an action may be brought against the Fair   Access to Insurance Requirements Plan Association concerning the   claim.          (e)  The person insured by the Fair Access to Insurance   Requirements Plan Association and the association may agree that an   appraisal conducted under Subsection (d)(2) of this section is   binding on the parties.          (f)  An action brought against the association concerning a   claim described by Subsection (d) of this section shall be abated   until the appraisal process under Subsection (d)(2) of this section   is completed.          (g)  Notwithstanding Sections 2211.175 and 2211.176,   Insurance Code, as added by this Act, Subsection (b) of this   section, or any other provision of this Act, Sections 2211.176(b),   (c), (d), and (e), Insurance Code, apply to any cause of action that   accrues against the Fair Access to Insurance Requirements Plan   Association on or after the effective date of this Act and the basis   of which is a claim filed under an insurance policy that is   delivered, issued for delivery, or renewed by the association,   regardless of the date on which the policy was delivered, issued for   delivery, or renewed.          SECTION 6.  This Act takes effect immediately if it receives   a vote of two-thirds of all the members elected to each house, as   provided by Section 39, Article III, Texas Constitution.  If this   Act does not receive the vote necessary for immediate effect, this   Act takes effect September 1, 2017.