TDI Issues Bulletin on Named Driver Policies
As many of you may know, the 86th Texas Legislature passed House Bill 259, (Ed Thompson) which no prevents the use of named driver insurance policies. House Bill 259 prohibits insurers from delivering, issuing for delivery, or renewing named driver policies on or after January 1, 2020. The prohibition does not apply to operators' policies, as defined in Texas Transportation Code Section 601.077 (ex. usually an SR-22). A named driver policy may not be renewed in 2020, but some named driver policies may be in effect after January 1, 2020 if in force before the deadline.
On September 16, 2019 The Texas Department of Insurance issued Bulletin B-0010-19 which can be found at the following link: https://www.tdi.texas.gov/bulletins/2019/B-0010-19.html
The Bulletin clarifies changes to the Texas Insurance Code in that an insurer may continue to write and renew named driver policies that comply with current laws and rules as late as December 31, 2019. This means “regardless of the policy term, a named driver policy written on or before December 31, 2019, may continue in force for the length of its term, but may not be renewed at any time on or after January 1, 2020. No insurer should have any named driver policies in force after December 31, 2020.”
Texas Department of Insurance clarified that “Insurers must provide policyholders with appropriate and timely notice of nonrenewal. HB 259 does not excuse the insurer from the notice requirements in Texas Insurance Code Section 551.105.”
The Department provided the following FAQs:
After January 1, 2020, may an insurer send named driver policyholders a “renewal offer” for a different policy?
No, insurers may not send named driver policyholders a renewal because under HB 259 named driver policies may not be renewed on or after January 1, 2020. Insurers may state in a nonrenewal notice that due to HB 259 the named driver policy is no longer available, and the insurer may simultaneously offer a new policy that complies with HB 259.
How much notice must an insurer give to policyholders and lienholders?
An insurer must give 30 days' notice of nonrenewal under Texas Insurance Code Section 551.105.
May an insurer offer named driver policyholders a new policy with a nonrenewal notice?
Yes, insurers may offer a new policy together with the notice of nonrenewal. Insurers may tell a policyholder that the named driver policy cannot be renewed at the end of its term because HB 259 prohibits renewing them.
Instead of a notice of nonrenewal, may an insurer send a notice of material change under Texas Insurance Code Section 551.1055?
No, an insurer may not send a notice of material change to expand or broaden coverage under a named driver policy, because a “material change,” as defined in Texas Insurance Code Section 551.1055(a), does not include an expansion of coverage. The definition of a “material change” includes reductions of coverage, changes in conditions of coverage, or changes in the duties of the insured. Instead, an insurer may choose to transition its named driver policies to automobile policies that comply with HB 259 by sending a new policy offer with a notice of nonrenewal.
If a named driver policy has not reached its 12-month anniversary on or after January 1, 2020, may an insurer continue to renew it until the 12-month anniversary, as contemplated in Texas Insurance Code Section 551.106(b)?
No. HB 259 prohibits an insurer from renewing a named driver policy on or after January 1, 2020, even if it has not reached the 12-month anniversary of the original effective date of the named driver policy.