CHAPTER 2307. INSURER INTERESTS IN REPAIR FACILITIES

OCCUPATIONS CODE

TITLE 14. REGULATION OF MOTOR VEHICLES AND TRANSPORTATION

SUBTITLE A. REGULATIONS RELATED TO MOTOR VEHICLES

CHAPTER 2307. INSURER INTERESTS IN REPAIR FACILITIES

Sec. 2307.001. DEFINITIONS. In this chapter:

(1) "Arm's length transaction" means the standard of conduct

under which two parties having substantially equal bargaining

power, each acting in its own interest, would negotiate or carry

out a particular transaction.

(2) "Claims center" means a location designated by an insurer

where a claims adjuster, employee, or agent of the insurer

performs an initial damage estimate on a vehicle under the terms

of an insurance policy.

(3) "Favored facility agreement" means an agreement between an

insurer and a repair facility under which the insurer agrees to

recommend, directly or indirectly, to its policyholders or other

beneficiaries under the insurer's policies, that the policyholder

or other beneficiary obtain repairs at that repair facility or in

any other way agrees to influence its policyholders or other

beneficiaries under the insurer's policies to obtain repairs at

that repair facility.

(4) "Insurer" means an insurer authorized by the Texas

Department of Insurance to write motor vehicle insurance in this

state, including a county mutual insurance company, a Lloyd's

plan, and a reciprocal or interinsurance exchange if that insurer

owns an interest in a repair facility in this state. The term

includes an entity that is an affiliate of an insurer as

described by Section 823.003, Insurance Code.

(5) "Repair facility" has the meaning assigned by Section

2304.001.

(6) "Support services" means basic services, provided

nonspecifically, that are provided internally and to each

affiliate or subsidiary, by an insurer, its parent company, or a

separate affiliate created to provide basic corporate support.

The term does not include a service related to the operation of a

repair facility if that service would have no value, or minimal

value to any other type of business.

(7) "Tied repair facility" means a repair facility in which an

insurer owns an interest.

Added by Acts 2003, 78th Leg., ch. 1045, Sec. 1, eff. Sept. 1,

2003. Amended by Acts 2003, 78th Leg., ch. 206, Sec. 20.01, eff.

Sept. 1, 2003.

Renumbered from Occupations Code, Section 2306.001 by Acts 2005,

79th Leg., Ch.

728, Sec. 23.001(76), eff. September 1, 2005.

Sec. 2307.002. INSURER INTERESTS. (a) Except as provided by

this section, an insurer may not own or acquire an interest in a

repair facility.

(b) An insurer that owns an interest in a tied repair facility

that was open for business, or on which construction had

commenced, on April 15, 2003, may maintain that ownership

interest and may operate that facility.

(c) An insurer may relocate a tied repair facility described by

Subsection (b), but may not obtain an ownership interest in any

additional facility not described by Subsection (b).

(d) Subsections (b) and (c) are applicable to an insurer only if

the insurer and its tied repair facility are otherwise in

compliance with this chapter.

Added by Acts 2003, 78th Leg., ch. 1045, Sec. 1, eff. Sept. 1,

2003.

Renumbered from Occupations Code, Section 2306.002 by Acts 2005,

79th Leg., Ch.

728, Sec. 23.001(76), eff. September 1, 2005.

Sec. 2307.003. FAVORED FACILITY AGREEMENT PRESUMED. An insurer

is presumed to have a favored facility agreement with a repair

facility in which it owns an interest.

Added by Acts 2003, 78th Leg., ch. 1045, Sec. 1, eff. Sept. 1,

2003.

Renumbered from Occupations Code, Section 2306.003 by Acts 2005,

79th Leg., Ch.

728, Sec. 23.001(76), eff. September 1, 2005.

Sec. 2307.004. CONTRACTUAL CONDITIONS. (a) An insurer that

owns an interest in a repair facility may use only one favored

facility agreement.

(b) Except as otherwise provided by this subsection, the terms

under which the insurer enters into a favored facility agreement

must be identical for all repair facilities, including a tied

repair facility. An insurer may vary the terms as necessary to

implement technical differences required by geographical factors

or other legitimate business factors.

(c) Except as provided by Subsection (d), an insurer may not

cancel a favored facility agreement until the expiration of the

30th day after the date on which the insurer provides notice to

the repair facility of the insurer's intent to cancel the

agreement. The insurer shall include with the notice a statement

explaining the reason for the cancellation of the agreement.

(d) An insurer may summarily cancel a favored facility agreement

with a repair facility if the insurer, a policyholder of the

insurer, or another beneficiary under the insurer's policy

establishes reasonable grounds to believe that the repair

facility is fraudulent in its dealings with the insurer or the

policyholder or other beneficiaries under the insurer's policy.

Added by Acts 2003, 78th Leg., ch. 1045, Sec. 1, eff. Sept. 1,

2003.

Renumbered from Occupations Code, Section 2306.004 by Acts 2005,

79th Leg., Ch.

728, Sec. 23.001(76), eff. September 1, 2005.

Sec. 2307.005. NOTICE. (a) An insurer that owns an interest in

a repair facility shall post the following notice in each of its

tied repair facilities:

"THIS REPAIR FACILITY IS OWNED IN WHOLE OR IN PART BY (NAME OF

INSURER). YOU ARE HEREBY NOTIFIED THAT YOU ARE ENTITLED TO SEEK

REPAIRS AT ANY REPAIR FACILITY OF YOUR CHOICE."

(b) The notice required by Subsection (a) must be posted

prominently in a location in which it is likely to be seen and

read by a customer of the repair facility.

Added by Acts 2003, 78th Leg., ch. 1045, Sec. 1, eff. Sept. 1,

2003.

Renumbered from Occupations Code, Section 2306.005 by Acts 2005,

79th Leg., Ch.

728, Sec. 23.001(76), eff. September 1, 2005.

Sec. 2307.006. PROHIBITIONS. An insurer may not:

(1) condition the provision of a product, service, insurance

policy renewal, pricing, or other benefit on the purchase of any

good or service from its tied repair facilities;

(2) share information with its tied repair facilities that is

not made available on identical terms and conditions to other

repair facilities with which the insurer has entered into a

favored facility agreement;

(3) engage in a joint marketing program with its tied repair

facilities;

(4) provide its tied repair facilities a recommendation,

referral, description, advantage, or access to its policyholders

or other beneficiaries under its insurance policies that is not

provided on identical terms to other repair facilities with which

the insurer has entered into a favored facility agreement;

(5) provide a tied repair facility access to the insurer's

products or services on terms and conditions different from those

under which the insurer provides access to the same products or

services to another repair facility with which the insurer has

entered into a favored facility agreement;

(6) allow a tied repair facility to use the insurer's name,

trademark, tradename, brand, or logo in a manner different than

that allowed for any other favored facility;

(7) subsidize the business activities or operating expenses of a

tied repair facility;

(8) directly or indirectly require a policyholder of the insurer

or other beneficiary under the insurer's policy to obtain a

damage estimate on a vehicle covered by the insurance policy at a

tied repair facility;

(9) authorize or allow a person representing the insurer,

whether an employee or an independent contractor, to recommend to

a policyholder or other beneficiary under the insurance policy

that the policyholder or other beneficiary obtain repairs at a

tied repair facility, except to the same extent that the person

recommends other repair facilities with whom the insurer has

entered into a favored facility agreement;

(10) require a policyholder or beneficiary to use a claims

center located on the premises of a tied repair facility;

(11) enter into a favored facility agreement exclusively with

its tied repair facilities;

(12) retaliate or discriminate against a person who:

(A) files an action as provided by this chapter; or

(B) assists or participates in any manner in an investigation,

judicial proceeding, or other action brought or maintained as

provided by this chapter; or

(13) include earnings or losses of a tied repair facility in a

rate filing made under Chapter 5, Insurance Code.

Added by Acts 2003, 78th Leg., ch. 1045, Sec. 1, eff. Sept. 1,

2003.

Renumbered from Occupations Code, Section 2306.006 by Acts 2005,

79th Leg., Ch.

728, Sec. 23.001(76), eff. September 1, 2005.

Sec. 2307.007. CONFLICT OF INTEREST PROHIBITED. Except as

otherwise provided by this chapter, an agreement between an

insurer and its tied repair facility must be negotiated and

executed as an arm's length transaction.

Added by Acts 2003, 78th Leg., ch. 1045, Sec. 1, eff. Sept. 1,

2003.

Renumbered from Occupations Code, Section 2306.007 by Acts 2005,

79th Leg., Ch.

728, Sec. 23.001(76), eff. September 1, 2005.

Sec. 2307.008. SUPPORT SERVICES. (a) Notwithstanding this

chapter, and except as provided by Subsection (b), an insurer may

provide support services to its tied repair facilities if those

services:

(1) are priced at a level that is fair and reasonable to both

the insurer and the tied repair facility; and

(2) do not directly or indirectly confer a competitive advantage

to the tied repair facility.

(b) Notwithstanding Subsection (a), an agreement by an insurer

to provide support services to its tied repair facility may not

create the potential for confusion among the policyholders of the

insurer, other beneficiaries of an insurance policy issued by the

insurer, or other parties.

Added by Acts 2003, 78th Leg., ch. 1045, Sec. 1, eff. Sept. 1,

2003.

Renumbered from Occupations Code, Section 2306.008 by Acts 2005,

79th Leg., Ch.

728, Sec. 23.001(76), eff. September 1, 2005.

Sec. 2307.009. ACTION TO COMPEL COMPLIANCE; DISCIPLINARY ACTION.

(a) A person, including a repair facility, aggrieved by a

violation of this chapter by an insurer may bring an action for

injunctive or other appropriate relief to compel the insurer to

comply with this chapter.

(b) In an action brought under this section, in addition to

other appropriate relief, the court may impose a civil penalty as

provided by this section.

(c) A civil penalty imposed under this section may not be less

than $1,000 or more than $5,000 per violation. Each day during

which a violation occurs is a separate violation.

(d) The amount of a civil penalty under this section is based on

the seriousness of the violation, and must reflect the following

factors:

(1) the nature, circumstances, extent, and gravity of the act or

omission that constitutes the violation;

(2) the economic harm caused by the violation;

(3) the history of previous violations;

(4) the need to deter future violations by the person charged

with a violation;

(5) efforts, if any, made to correct the violation; and

(6) any other factors the court considers appropriate to

implement the remedial intent of this chapter.

(e) A civil penalty collected under this section shall be sent

to the comptroller for deposit in the general revenue fund.

(f) A plaintiff who prevails in an action under this section is

entitled to recover reasonable attorney's fees and court costs.

(g) If a court finds that an action brought under this section

was groundless, brought in bad faith, or brought for the purpose

of harassment, the court may award reasonable attorney's fees to

the prevailing defendant.

Added by Acts 2003, 78th Leg., ch. 1045, Sec. 1, eff. Sept. 1,

2003.

Renumbered from Occupations Code, Section 2306.009 by Acts 2005,

79th Leg., Ch.

728, Sec. 23.001(76), eff. September 1, 2005.

Sec. 2307.010. ANTITRUST ENFORCEMENT. This chapter does not

confer immunity from an antitrust law of this state or the United

States. A sanction or penalty imposed in an action brought under

this chapter is in addition to other relief granted on the basis

of the violation of an antitrust law of this state or the United

States.

Added by Acts 2003, 78th Leg., ch. 1045, Sec. 1, eff. Sept. 1,

2003.

Renumbered from Occupations Code, Section 2306.010 by Acts 2005,

79th Leg., Ch.

728, Sec. 23.001(76), eff. September 1, 2005.

Sec. 2307.011. EXCLUSIVITY. Unless otherwise specifically

provided by this chapter, this chapter provides the exclusive

authority and rules applicable to the regulation of the relations

between an insurer and a tied repair facility.

Added by Acts 2003, 78th Leg., ch. 1045, Sec. 1, eff. Sept. 1,

2003.

Renumbered from Occupations Code, Section 2306.011 by Acts 2005,

79th Leg., Ch.

728, Sec. 23.001(76), eff. September 1, 2005.