By: Bonnen of Galveston H.B. No. 1774       A BILL TO BE ENTITLED   AN ACT   relating to insurance claims and certain prohibited acts and   practices in the business of insurance.          BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:          SECTION 1.  Section 17.50(a), Business & Commerce Code, is   amended to read as follows:          (a)  A consumer may maintain an action where any of the   following constitute a producing cause of economic damages or   damages for mental anguish:                (1)  the use or employment by any person of a false,   misleading, or deceptive act or practice that is:                      (A)  specifically enumerated in a subdivision of   Subsection (b) of Section 17.46 of this subchapter; and                      (B)  relied on by a consumer to the consumer's   detriment;                (2)  breach of an express or implied warranty;                (3)  any unconscionable action or course of action by   any person; or                (4)  except as provided by Section 541.151, Insurance   Code, the use or employment by any person of an act or practice in   violation of Chapter 541, Insurance Code.          SECTION 2.  Section 541.151, Insurance Code, is amended to   read as follows:          Sec. 541.151.  PRIVATE ACTION FOR DAMAGES AUTHORIZED. (a)   Except as provided by Subsection (b), a [A] person who sustains   actual damages may bring an action against another person for those   damages caused by the other person engaging in an act or practice:                (1)  defined by Subchapter B to be an unfair method of   competition or an unfair or deceptive act or practice in the   business of insurance; or                (2)  specifically enumerated in Section 17.46(b),   Business & Commerce Code, as an unlawful deceptive trade practice   if the person bringing the action shows that the person relied on   the act or practice to the person's detriment.          (b)  A person who brings an action against another person   under this section for an act or practice in violation of Section   541.060 or 541.061 may not bring an action against that other person   under Subchapter E, Chapter 17, Business & Commerce Code, that is   related to the same claim.          SECTION 3.  Section 541.156(a), Insurance Code, is amended   to read as follows:          (a)  A person who receives notice provided under Section   541.154 or 542A.003 may make a settlement offer during a period   beginning on the date notice under Section 541.154 or 542A.003 is   received and ending on the 60th day after that date.          SECTION 4.  The heading to Section 542.060, Insurance Code,   is amended to read as follows:          Sec. 542.060.  LIABILITY FOR DELAY IN PAYMENT [VIOLATION OF   SUBCHAPTER].          SECTION 5.  Section 542.060, Insurance Code, is amended by   amending Subsection (a) and adding Subsection (c) to read as   follows:          (a)  If an insurer that is liable for a claim under an   insurance policy delays payment of the claim in violation of   Section 542.058 [is not in compliance with this subchapter], the   insurer is liable to pay the holder of the policy or the beneficiary   making the claim under the policy, in addition to the amount of the   claim, interest on the amount of the claim as damages at the rate   described by Subsection (c) [of 18 percent a year as damages],   together with reasonable and necessary attorney's fees.          (c)  Interest awarded under Subsection (a) accrues beginning   on the date the claim was required to be paid, and the interest rate   applied is determined by adding three percent to the interest rate   determined under Section 304.003, Finance Code.          SECTION 6.  Subtitle C, Title 5, Insurance Code, is amended   by adding Chapter 542A to read as follows:   CHAPTER 542A. CERTAIN CONSUMER ACTIONS RELATED TO CLAIMS FOR   PROPERTY DAMAGE          Sec. 542A.001.  DEFINITIONS. In this chapter:                (1)  "Agent" means an employee, agent, representative,   or adjuster who performs any act on behalf of an insurer.                (2)  "Claim" means a first-party claim that:                      (A)  is made by an insured or policyholder under   an insurance policy or contract; and                      (B)  must be paid by the insurer directly to the   insured.                (3)  "Claimant" means a person making a claim.          Sec. 542A.002.  APPLICABILITY OF CHAPTER. (a) This chapter   applies to an action brought by a claimant relating to or arising   from the insured's claim for damage to or loss of covered property   under an insurance policy providing coverage against damage to or   loss of improvements to real property, including:                (1)  an action alleging a breach of contract or of a   common law duty; or                (2)  an action brought under:                      (A)  Subchapter D, Chapter 541;                      (B)  Subchapter B, Chapter 542; or                      (C)  Subchapter E, Chapter 17, Business & Commerce   Code.          (b)  Except as provided by subsection (c), this chapter   applies to any insurer authorized or eligible to write property   insurance in this state, including:                (1)  an insurance company;                (2)  a reciprocal or interinsurance exchange;                (3)  a mutual insurance company;                (4)  a capital stock insurance company;                (5)  a county mutual insurance company;                (6)  a farm mutual insurance company;                (7)  a Lloyd's plan;                (8)  an eligible surplus lines insurer; or                (9)  the FAIR Plan Association.          (c)  This chapter does not apply to any insurer operating   under Chapter 2210.          Sec. 542A.003.  NOTICE REQUIRED. (a) In addition to any   other notice required by law or the applicable insurance policy, as   a prerequisite to filing an action seeking damages under this   chapter against any person, a claimant shall give written notice to   the person not later than the 61st day before the date the claimant   files an action to which this chapter applies.          (b)  The notice required under this section must be in   writing and must provide:                (1)  a statement of the acts or omissions giving rise to   the claim;                (2)  the identity of any agent whose act or omission   caused or contributed to the claimant's damage or loss;                (3)  the specific amount alleged to be owed on the claim   by the insurer; and                (4)  the amount of reasonable and necessary attorney's   fees incurred by the claimant, as calculated under Subsection (c).          (c)  The claimant shall calculate the amount of attorney's   fees stated under Subsection (b) by multiplying the number of hours   actually worked by the claimant's attorney, as of the date the   notice is given and as reflected in contemporaneously kept time   records, by an hourly rate that is customary for the same or similar   legal services.          (d)  If an attorney or other representative gives the notice   required under this section on behalf of a claimant, the attorney or   representative shall:                (1)  provide a copy of the notice to the claimant; and                (2)  include in the notice a statement that a copy of   the notice was provided to the claimant.          (e)  A presuit notice under Subsection (a) is not required if   giving notice is impracticable because the action:                (1)  must be filed to prevent limitations from   expiring; or                (2)  is asserted as a counterclaim.          (f)  A claimant who does not give a presuit notice under   Subsection (a) because giving notice is impracticable as described   by Subsection (e)(1) must give notice in accordance with Section   542A.004.          (g)  A claimant who gives notice in accordance with this   chapter is not relieved of the obligation to give notice under any   other applicable law. Notice given under this chapter may be   combined with notice given under any other law.          (h)  Notice given under this chapter is admissible in   evidence in a civil action or alternative dispute resolution   proceeding relating to the claim for which the notice is given.          Sec. 542A.004.  ABATEMENT. (a) A person against whom an   action governed by this chapter is pending who does not receive a   presuit notice complying Section 542A.003 may file a plea in   abatement not later than the 30th day after the date the person   files an original answer in the court in which the action is   pending.          (b)  The court shall abate the action if the court finds that   the person filing the plea in abatement did not receive a presuit   notice complying with Section 542A.003.          (c)  An action is automatically abated without a court order   beginning on the 11th day after the date a plea in abatement is   filed if the plea:                (1)  is verified and alleges that the person against   whom the action is pending did not receive a presuit notice   complying with Section 542A.003; and                (2)  is not controverted by an affidavit filed by the   claimant before the 11th day after the date the plea in abatement is   filed.          (d)  An abatement under this section continues until the 60th   day after the date a notice complying with Section 542A.003 is   given.          (e)  In an action to which this chapter applies,   participation in an alternative dispute resolution proceeding may   not be compelled by a court until after the abatement period   provided by Subsection (d) has expired.          Sec. 542A.005.  INSPECTION. (a) After a claimant gives   notice to an insurer under Section 542A.003(a) and before the date   the claimant files the action for which notice is given, the insurer   may send a written request to the claimant to inspect, photograph,   sample, or test the property that is the subject of the claim,   stating a reasonable date and time for conducting the inspection,   photographing, sampling, or testing.          (b)  A claimant shall respond in writing to a request for   inspection made pursuant to subsection (a) no later than the 10th   day after receipt of the request. The claimant's response shall:                (1)  state that the claimant will allow the inspection,   photographing, sampling, or testing as requested by the insurer;                (2)  propose a date and time for the insurer to conduct   the inspection, photographing, sampling, or testing that is not   later than the 10th day after the date proposed by the insurer; or                (3)  state that the claimant objects to the request for   inspection, photographing, sampling, or testing and the basis of   the objection.          (c)  If a claimant objects to an inspection requested by an   insurer, the claimant shall file a motion for protection in a   district court in the county in which the property is located not   later than the 10th day after making the response required by   Subsection (b).          (d)  The trial court shall hear and decide a claimant's   motion for protection on or before the 10th day after the date the   motion was filed. The court shall sign an order for appropriate   inspection, photographing, sampling, or testing on a specified date   and time, unless the court finds that the request to inspect,   photograph, sample, or test was made in bad faith or for the purpose   of harassing the claimant. If the court finds that the request to   inspect, photograph, sample, or test was made in bad faith or for   the purpose of harassing the claimant, the court must state in a   written order the facts supporting the court's decision.          Sec. 542A.006.  ACTION AGAINST AGENT; INSURER ELECTION OF   LEGAL RESPONSIBILITY. (a) In an action to which this chapter   applies, an insurer that is a party to the action may, by providing   a written notice to the claimant, accept whatever liability the   agent might have for the agent's acts or omissions related to the   claim.          (b)  If an insurer makes the election available to it under   Subsection (a) before the claimant files an action to which this   chapter applies, the claimant shall not file an action against the   agent.          (c)  If a claimant files an action to which this chapter   applies against an agent and the insurer thereafter makes the   election available to it under Subsection (a), the action against   the agent shall be dismissed with prejudice.          (d)  The election made by an insurer under subsection (a)   must be unconditional. A conditional or qualified election by the   insurer shall be ineffective to obtain dismissal of an action   against an agent if the stated qualifications would result in the   insurer avoiding liability for all claim-related damages caused to   the claimant by the agent's acts or omissions.          (e)  An election made by an insurer under Subsection (a) does   not affect an insurer's direct or vicarious liability for the   agent's acts or omissions.          (f)  An insurer may not revoke, and a court may not nullify,   an insurer's election made under Subsection (a).          (g)  In an action tried by a jury, an insurer's election made   under Subsection (a) may not be made known to the jury.          Sec. 542A.007.  AWARD OF ATTORNEY'S FEES. (a) Except as   otherwise provided by this section, the amount of attorney's fees   that may be awarded to a claimant in an action to which this chapter   applies is the lesser of:                (1)  the amount of reasonable and necessary attorney's   fees incurred in bringing the action as determined by the trier of   fact;                (2)  the amount of attorney's fees that may be awarded   under any other law; or                (3)  the amount calculated by:                      (A)  dividing the amount awarded in the judgment   to the claimant for the claimant's claim under the insurance policy   by the amount alleged to be owed on the claim in a notice given under   Section 542A.003 or 542A.004; and                      (B)  multiplying the amount calculated under   Paragraph (A) by the total amount of reasonable and necessary   attorney's fees incurred by the claimant in bringing the action as   determined by the trier of fact.          (b)  Except as provided by Subsection (d), the court shall   award to the claimant the full amount of reasonable and necessary   attorney's fees incurred by the claimant in bringing the action, as   determined by the trier of fact, if the amount calculated under   Subsection (a)(3)(A) is greater than or equal to 0.8, supported by   sufficient evidence, not limited by this section or another law,   and otherwise recoverable under law; and          (c)  The court may not award attorney's fees to the claimant   if the amount calculated under Subsection (a)(3)(A) is less than   0.2.          (d)  The court may not award attorney's fees to the claimant   if a defendant in the action pleads as an affirmative defense, and   proves by a preponderance of the evidence, that representation of   the claimant resulted from conduct violating Section 38.12, Penal   Code, unless the court determines that the claimant's attorney:                (1)  did not have actual knowledge of or reason to know   of the violation of Section 38.12, Penal Code, before accepting   representation of the claimant; and                (2)  reported the violation of Section 38.12, Penal   Code, as required by the Texas Disciplinary Rules of Professional   Conduct of the State Bar of Texas within a reasonable time after   learning facts that would lead a reasonable attorney to believe   that a violation of Section 38.12 had occurred.          (e)  If the court finds that the defendant was entitled to,   but did not, receive a presuit notice at least 61 days before the   action was filed by the claimant, as required by Section 542A.003,   the court may not award to the claimant any attorney's fees incurred   after the date a defendant files a notice of intent to seek   disallowance of fees due to the claimant's failure to provide a   timely presuit notice.          SECTION 7.  (a) Section 17.50(a), Business & Commerce Code,   and Section 541.151, Insurance Code, as amended by this Act, apply   only to an action filed on or after the effective date of this Act.   An action that is filed before 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)  Section 541.156(a), Insurance Code, as amended by this   Act, and Chapter 542A, Insurance Code, as added by this Act, apply   only to an action filed on or after the effective date of this Act.   A claimant who files an action within 60 days after the effective   date of this Act but who did not provide a presuit notice complying   with Section 542A.003 must give notice as provided in section   542A.003(f). An action that is filed before 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.          (c)  Section 542.060, Insurance Code, as amended by this Act,   applies only to a claim, as defined under 542.051, made on or after   the effective date of this Act by an insurer, policyholder, or   beneficiary under an insurance policy or contract. A claim made   before 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.          SECTION 8.  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.