Texas Reminds Auto Insurance Providers of Rules towards Claimants

Texas Insurance Commissioner Mike Geeslin recently unveiled a bulletin to remind auto insurance companies that it is against state law to "directly or indirectly limit the insurer's coverage under a policy covering damage to a motor vehicle."

Specifically, the Texas Insurance Code documents that insurers are not permitted to specify "the brand, type, kind, age, vendor, supplier, or condition of parts or products that may be used to repair the vehicle;" or limit "the beneficiary of the policy from selecting a repair person or facility to repair damage to the vehicle."

The Texas Department of Insurance reports it is concerned regarding information it has obtained showing "insurers may be providing claimants with additional notice regarding motor vehicle repairs that may be in conflict with" Texas statutes.

Subchapter G, Chapter 1952 of the Texas Insurance Code (TIC) "specifies that an insurer, an employee or agent of an insurer, an insurance adjuster, or an entity that employs an insurance adjuster may not state or suggest, either orally or in writing, to a beneficiary that the beneficiary must use a specific repair person or facility or a repair person or facility identified on a preferred list compiled by an insurer for the damage repair or parts replacement to be covered by the policy", according to the bulletin.

Additionally, Section 5.501 of the Texas Administrative Code (TAC) "requires an insurer to provide a notice to the insured or third-party claimant who makes a claim regarding damage to a vehicle. The required notice specifies that a claimant has the right to select where a motor vehicle is repaired and the parts used for repairs. The notice also specifies that an insurer is not required to pay more than a reasonable amount for such repairs and parts."

The commissioner's bulletin indicated that providing notice to a claimant, either verbally or via written communication, that implies the claimant may be responsible for paying for some repair costs if the claimant selects a repair facility that is not on the insurer's list of preferred repair facilities, may be in conflict with the TIC and TAC. The reasoning behind that is because it would indirectly place a limit on the coverage under the policy by discouraging the claimant from choosing a repair facility that is not listed.

According to the department, there is also concern that setting reimbursement rates artificially low for certain motor vehicle repairs and parts that are used to make the repairs could lead to substandard repairs, which may also impact the warranty on a vehicle.

Most of the personal automobile insurance policies mandate insurers to pay the amount needed to repair or replace the property with other(s) of like kind and quality.

The department asserts that it is an unfair claim settlement practice for insurers to pay claimants an amount for the repair of the vehicle, including parts, that is not a reasonable amount for repairing or replacing the property with other of like kind and quality or is not suffice enough to make the repairs needed for the manufacturer to honor the vehicle warranty.

The department added that it will enforce the rights of claimants to obtain the benefits to which they are contractually entitled.