Texas Bills Target ‘Named Driver’ Automobile Policies, Exclusions

A pair of bills filed in the Texas Legislature would prohibit automobile insurers from issuing “named driver” policies in the state, but one would allow named driver exclusions under certain circumstances.

HB 318 by Rep. Mark Keogh, who represents part of Montgomery County, and HB 335 by Rep. Ed Thompson, representing part of Brazoria County, would add Subchapter H to Chapter 1952 of the Insurance Code to address “named driver” policies.

The bills define a named driver policy as one that provides “coverage only for drivers specifically named on the policy and not for individuals residing in a named insured’s household. The term includes an automobile insurance policy that has been endorsed to provide coverage only for drivers specifically named on the policy.”

While both measures would prohibit the issuance of named driver policies, HB 335 would permit a “named driver exclusion” on a policy “if the exclusion specifically names each excluded driver and does not exclude a class of drivers.”

If passed, the bills would apply to all automobile insurance companies in Texas and would affect policies written or renewed on or after Jan. 1, 2016.

The effective date for both HB 318 and HB 335 is Sept. 1, 2015.

A similar bill, HB 1773, was introduced but did not pass in the 2013 regular session of the Legislature.

Required Disclosure

While the Legislature in 2013 allowed the use of named driver policies it passed legislation requiring that consumers be informed of the limitations inherent in such policies.

SB 1567, passed in the 2013 Legislature, Regular Session, created §1952.0545 of the Insurance Code, which requires insurers and agents to provide consumers with “written and oral disclosures, and contemporaneous written confirmation of the oral disclosure, for named driver policies,” according to the Texas Department of Insurance.

In May 2014 Insurance Commissioner Julia Rathgeber adopted amendments that require the named driver disclosure to be included on auto insurance ID cards.

More recently, the commissioner adopted rules that add §5.208, which seeks to clarify the disclosure responsibilities of insurers and agents regarding the issuance of named driver policies, both new and renewals.

According information released by TDI, under the recently approved §5.208 the “oral and written disclosures for named driver policies must include the following: ‘WARNING: A NAMED DRIVER POLICY DOES NOT PROVIDE COVERAGE FOR INDIVIDUALS RESIDING IN THE INSURED’S HOUSEHOLD THAT ARE NOT NAMED ON THE POLICY.'”

In addition, an “agent or insurer must require an applicant or insured to sign a written confirmation that the agent or insurer has provided the oral disclosure. The applicant or insured must sign the written confirmation contemporaneously with receiving the oral disclosure.” Signatures may be original or electronic and need to “be executed specifically for each new and renewal policy.”

The disclosure must be included in the policy and on any proof of insurance document, including the auto insurance ID card issued to the insured.