Enrolled Bill Summary

House Bill 3 (1st C.S.)	House Author:  Smithee
Effective:  9-28-11	Senate Sponsor:  Carona

            House Bill 3 amends Insurance Code provisions to continue the Texas Windstorm Insurance Association (TWIA) until September 1, 2015.  Among other provisions, the bill:

·                     sets out provisions relating to a supervision or conservatorship action brought against TWIA by the commissioner of insurance;

·                     prohibits a person from bringing a private action against TWIA or its agents or representatives under the Unfair Claim Settlement Practices Act and Insurance Code provisions related to unfair methods of competition and unfair or deceptive acts or practices;

·                     prohibits the consideration of TWIA as a debtor authorized to file a petition or seek relief when a corporate entity is seeking to reorganize itself under federal bankruptcy law;

·                     makes TWIA subject to audit by the state auditor and requires the commissioner to conduct a random audit of TWIA's claims practices;

·                     authorizes excess insured losses not paid from TWIA's available reserves or the catastrophe reserve to be paid from the proceeds of Class 1 public securities issued before an occurrence that results in a loss, caps the total amount of such securities that may be issued each year, and extends the repayment period for such securities from 10 to 14 years;

·                     revises requirements for the issuance of Class 1, Class 2, and Class 3 public securities;

·                     authorizes a temporary appointment of a member to the TWIA board by the commissioner, revises provisions relating to TWIA's board of directors meetings, and clarifies the applicability of the public information law and the open meetings law with respect to TWIA;

·                     revises and expands ethical requirements that apply to TWIA board members and employees;

·                     requires TWIA to develop a simplified renewal process for the acceptance of an application for renewal coverage and payment of premiums;

·                     requires the commissioner to approve a commission structure for payment of an agent who submits an application for coverage to TWIA on behalf of a person who has an insurable interest in insurable property;

·                     requires a windstorm and hail insurance policy issued by TWIA to require an insured to file a claim under the policy not later than the first anniversary of the date on which the damage to property that is the basis of the claim occurs and to contain a conspicuous notice concerning the resolution of disputes under the policy, authorizes the commissioner to extend that one-year period, and prohibits TWIA from issuing coverage for a wind turbine;

·                     establishes that the Texas Department of Insurance (TDI) has exclusive authority over all matters relating to the appointment and oversight of qualified inspectors, establishes requirements regarding such appointment and oversight, and requires the commissioner to adopt rules;

·                     authorizes the commissioner to provide by rule a discount of, or a credit against, a surcharge assessed against certain noncompliant structures if a policyholder demonstrates that the structure was constructed with at least one structural building component that complies with the applicable building code standards;

·                     authorizes a person who has an insurable interest in a residential structure to obtain insurance coverage through TWIA for that structure without obtaining a certificate of compliance, authorizes TDI to issue an alternative certification to such a person under specified circumstances, and requires the commissioner to adopt rules;

·                     expands the factors that must be considered in adopting rates for TWIA coverage;

·                     authorizes TWIA to offer a person insured under the TWIA Act an actuarially justified premium discount on a TWIA policy or an actuarially justified credit against a surcharge assessed against the person if the alteration to the person's property exceeds applicable building code standards or if the person elects to purchase a binding arbitration endorsement; requires the commissioner to adopt rules;

·                     requires the TWIA board, if TWIA does not purchase reinsurance, to submit a report containing an actuarial plan for paying losses in the event of a catastrophe with estimated damages of $2.5 billion or more and sets out requirements for the report;

·                     requires the board to submit an annual catastrophe report that describes the manner in which TWIA will evaluate and pay losses and process claims after certain windstorms with a low probability of occurring;

·                     authorizes a person insured under the TWIA Act to elect to purchase a binding arbitration endorsement in a form prescribed by the commissioner requiring the person to arbitrate a dispute involving a TWIA act, ruling, or decision  relating to the payment, amount, or denial of the claim;

·                     provides the exclusive remedies for a claim against TWIA, including an agent or representative; sets out the procedure for filing a claim and for TWIA's response to and payment of a claim; sets out an insured's recourse if a dispute arises concerning the amount of accepted coverage or denied coverage; limits the issues that a claimant may raise in an action brought against TWIA and the types of recovery available to a claimant; and establishes a limitations period by which a claimant must bring an action;

·                     requires the commissioner to appoint a panel of experts to advise TWIA concerning the extent to which a loss to insurable property was incurred as a result of wind, waves, tidal surges, or other rising waters and requires the commissioner to publish guidelines based on such advice that TWIA will use to settle claims;

·                     requires the commissioner to adopt rules concerning the claims dispute and resolution process and requires TDI to establish an ombudsman program;

·                     requires TWIA to submit to the commissioner a cost-benefit analysis of various financing methods and funding structures when requesting the issuance of public securities and expands and revises the authorized uses of public security proceeds;

·                     specifies the trust funds in which certain revenue collected from member assessments and premium surcharges must be deposited;

·                     specifies the policyholders to whom a premium surcharge is charged for purposes of paying the cost of Class 2 public securities, includes a policyholder of a policy that covers automobiles principally garaged in a catastrophe area among the policyholders on whom such a premium surcharge is assessed, and revises the policies to which such a premium surcharge applies;

·                     establishes that Texas pledges not to take or permit any action that would interfere with the collection and disposition of money related to TWIA and establishes the preeminence of TWIA's public security obligations over contract rights; and

·                     authorizes a windstorm and hail policy form or printed endorsement to establish a contractual limitations period for filing suit and authorizes such a form or endorsement to require that a claim be filed within a certain period.

House Bill 3 amends the Occupations Code to require the Texas Board of Professional Engineers to review TWIA's plan of operation and the windstorm certification standards; to, in consultation with TDI, adopt rules establishing criteria for determining whether an engineer is qualified to provide engineering design services for TWIA purposes; to prepare and publish a roster of engineers who satisfy such criteria; and to adopt rules, in consultation with TDI, requiring an engineer who is providing engineering design services to comply with windstorm certification standards.