BILL ANALYSIS C.S.H.B. 2501 By: Averitt 04-19-95 Committee Report (Substituted) BACKGROUND Article 5.43-2, Texas Insurance Code, Section 5B, provides that a registered fire alarm firm shall carry a general liability insurance policy that includes products and completed operations. The limits of the coverage are to be $100,000 combined single limits per occurrence and $300,000 aggregate per year. Such insurance is required in most states and similar insurance is required for other businesses in Texas. Most fire alarm contracts have historically included a limitation on liability. The alarm company frequently does not know the uses of the property, the value or nature of the contents nor have information about the people using the alarm. It is not in a position to evaluate the risks involved and does not charge a fee that would cover those risks. Prior to this year, no one has ever raised the issue that the requirement for insurance and the contract limitations of liability are in conflict. There are no reported cases in the United States where anyone has taken that position. The issue has, however, been raised in Texas this year and this bill is designed to clearly state that the insurance requirements are not in conflict with the liability limitations in alarm contracts. PURPOSE As substituted, H.B. 2501 will clarify the limitation of liability in an alarm company contract is not in conflict with the state requirement that the alarm company carry general liability insurance. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 5B, Article 5.43-2, Insurance Code by adding Subsection (g) as follows: (g) This section does not affect the rights of the insured to negotiate or contract for limitations of liability with a third party, including a customer of the insured. SECTION 2. Effective Date SECTION 3. Emergency Clause. COMPARISON OF ORIGINAL TO SUBSTITUTE As substituted, H.B. 2501 is almost the identical document. Both documents contain the same amending language, however, the substitute amends Subsection (g), Article 5.43-2, Insurance Code, where the filed bill amends Subsection (a), Article 5.43-2, Insurance Code. SUMMARY OF COMMITTEE ACTION In accordance with House rules, H.B. 2501 was heard in a public hearing on April 19, 1995. The Chair laid out H.B. 2501 and a substitute to H.B. 2501 and recognized Representative Averitt to explain the difference between the substitute to H.B. 2501 and the filed bill. The Chair recognized the following persons to testify in support of H.B. 2501: Bob Leonard, Jr.; Texas Burglar & Fire Alarm Association; James Allen Moseley, Brinks Home Security Inc. Malcolm R. Reed, Texas Burglar & Fire Alarm Association. The Chair recognized Representative Averitt who moved the Committee adopt the substitute to H.B. 2501. The Chair heard no objections and the substitute to H.B. 2501 was adopted. The Chair recognized Representative Driver who moved the Committee report H.B. 2501 as substituted to the full House with the recommendation that it do pass, be printed, and sent to the Committee on Local and Consent Calendars. Representative Shields seconded the motion and the motion prevailed by the following vote: AYES (8); NAYES (0); ABSENT (1); PNV (0).