Senate Bill 425 was passed this past legislative term, adding a new chapter to the Texas Insurance Code. The new law requires the Texas Department of Insurance to approve certificates of insurance provided in connection with casualty and property policies. This new bill went into effect on September 1, 2011, and applies to certificates of insurance issued on or after January 1, 2012.
Prior to this law, the Texas Department of Insurance did not approve certificates of insurance, which often resulted in differences between the certificates of insurance and the actual insurance policies. This state of affairs bred litigation. For the most part, the cases have held that certificates of insurance are issued for informational purposes alone and cannot alter the terms of coverage provided by an insurance policy.
The new law codifies this idea by: (1) prohibiting a certificate from conveying a contractual right; (2) providing that a certificate does not amend, extend, or alter the coverage afforded under a policy; and (3) stating that a certificate does not confer new or additional rights beyond the policy. Tex. Ins. Code §§ 1811.051(b); 1811.152; 1811.153.
Under the new legislation, a certificate of insurance form must now be filed and approved by the Texas Department of Insurance. An insurer or agent that violates this chapter will be subject to cease and desist orders, injunctive relief, civil penalties, sanctions, or any combination of those punishments. Additionally, a person found to have violated the statute can be fined $1,000 for each violation.