Named Driver Policies

Arlington lawyers looking at insurance claims need to be aware of new laws governing the issuance of auto policies. The particular type of policy effected by these new laws are what are known as “Named Driver Automobile Insurance Policies” and knowing whether or not one of these policies is enforceable or not is necessary to properly advise a client about potential claims.
The new law is found in the Texas Insurance Code, Section 1952.0545 and says this:
REQUIRED DISCLOSURE REGARDING NAMED DRIVER POLICIES; PERSONS IN INSURED’S HOUSEHOLD.
(a) In this section, “named driver policy” means an automobile insurance policy that does not provide coverage for an individual residing in a named insured’s household specifically unless the individual is named on the policy. The term includes an automobile insurance policy that has been endorsed to provide coverage only for drivers specifically named on the policy.
(b) Before accepting any premium or fee for a named driver policy, an agent or insurer, including a county mutual insurance company, must make the following disclosure, orally and in writing, to the applicant or insured:
WARNING: A NAMED DRIVER POLICY DOES NOT PROVIDE COVERAGE FOR INDIVIDUALS RESIDING IN THE INSURED’S HOUSEHOLD THAT ARE NOT NAMED ON THE POLICY.
(c) Before accepting any premium or fee for a named driver policy, an agent or insurer, including a county mutual insurance company, must receive a copy of the disclosure described by Subsection (b) that is signed by the applicant or insured.
(d) An agent or insurer, including a county mutual insurance company, that delivers or issues for delivery a named driver policy in this state shall specifically include in the policy and conspicuously identify on the front of any proof of insurance document issued to the insured the required disclosure under Subsection (b).
(e) The agent or insurer shall require the applicant or insured to confirm contemporaneously in writing the provision of oral disclosure pursuant to Subsection (b).
In addition to the above law there is a Texas Department of Insurance Regulation. This regulation is found at 28 TAC, Section 5.208. Here is what it says:
a) Definition.
(1) Under Insurance Code, Section 1952.0545(a), a named driver policy is an automobile insurance policy that does not provide coverage for an individual residing in a named insured’s household specifically unless the individual is named on the policy. The term includes an automobile insurance policy that has been endorsed to provide coverage only for drivers specifically named on the policy.
(2) A policy is a named driver policy if it does not provide coverage for one or more individuals who reside in the named insured’s household and who are not named on the policy.
(3) An automobile insurance policy that provides coverage for all residents of the insured’s household is not a named driver policy, even if the policy or an endorsement excludes one or more drivers from coverage specifically by name.
(b) Applicability. This section applies to:
(1) All new and renewal named driver policies, including:
(A) policies of any term; and (B) policies in which any type of coverage applies only to named drivers.
(2) Agents and insurers offering automobile insurance in this state, including an insurance company, corporation, reciprocal or interinsurance exchange, mutual insurance company, association, Lloyd’s plan or other insurer, and a county mutual insurance company.
(c) Disclosures.
(1) Disclosure requirements. An agent or insurer may not accept a premium or fee for a new or renewal named driver policy until the agent or insurer has:
(A) made the oral disclosure under paragraph (3) of this subsection;
(B) received a contemporaneous written confirmation of the oral disclosure under paragraph (4) of this subsection;
(C) made the written disclosures under paragraph (5) of this subsection; and (D) received a signed copy of the written disclosure under paragraph (5)(B) of this subsection.
(2) Content. 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.”
(3) Oral disclosure. An agent or insurer may comply with the oral disclosure requirement by delivering the disclosure live or using a recording:
(A) in the presence of the applicant or insured;
(B) over the telephone; or (C) over the Internet (for example, by Internet video call).
(4) Signed confirmation of oral disclosure. 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.
(5) Written disclosures must be conspicuous, as that term is defined in Business and Commerce Code, Section 1.201(B)(10). An agent or insurer must:
(A) include the disclosure in the policy and on any proof of insurance document issued to the insured, including an auto ID card issued under Section 5.204 of this title; and
(B) require an applicant or insured to sign a copy of the disclosure.
(6) Signatures. All signatures required by this section must be original or electronic signatures executed specifically for each new and renewal policy.
(A) Electronic signatures must comply with Business and Commerce Code Chapter 322 (Uniform Electronic Transactions Act), Insurance Code Chapter 35 (Electronic Transactions), and any applicable rules.
(B) Signatures must not be:
(i) made before the agent or insurer makes the disclosure;
(ii) reproduced, transferred, referenced to, or otherwise replicated from a signature on file with the agent or insurer; or (iii) merely presumed to exist.
(C) An agent or insurer may not state, require, agree, or assume that a signature requirement is met based on payment received from the applicant or insured.
(7) Language. Agents and insurers must provide the disclosures in English and, in addition, may provide them in other languages.
(d) Installment payments. After complying with the disclosure requirements for each new and renewal policy, an agent or an insurer is not required to comply with subsection (c) of this section each time the agent or insurer accepts an installment payment during that policy’s term.
(e) Failure to comply. An agent or insurer may not use noncompliance with Insurance Code Section 1952.0545 or this section as a reason to avoid liability under the policy. Noncompliance with Insurance Code Section1952.0545 or this section is not grounds for cancellation under Insurance Code Section 551.104.