By Dutton, Duncan, De La Garza H.B. No. 1367
Substitute the following for H.B. No. 1367:
By Counts C.S.H.B. No. 1367
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to certain acts of unfair discrimination in the business
1-3 of insurance and certain methods, programs, and mechanisms for
1-4 providing property and casualty insurance in underserved areas.
1-5 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-6 SECTION 1. Subchapter B, Chapter 21, Insurance Code, is amended by
1-7 adding Article 21.21-6 to read as follows:
1-8 Art. 21.21-6. UNFAIR DISCRIMINATION. Sec. 1. PROHIBITIONS.
1-9 No person shall engage in any practice of unfair discrimination
1-10 which is defined in this article or is determined pursuant to this
1-11 article to be a practice of unfair discrimination in the business
1-12 of insurance.
1-13 Sec. 2. APPLICATION AND SCOPE. This article shall apply to
1-14 any legal entity engaged in the business of insurance in this
1-15 state, including:
1-16 (a) a capital stock company;
1-17 (b) a mutual company;
1-18 (c) a title insurance company;
1-19 (d) a fraternal benefit society;
1-20 (e) a local mutual aid association;
1-21 (f) a statewide mutual assessment company;
1-22 (g) a county mutual insurance company;
1-23 (h) a Lloyd's plan company;
1-24 (i) a reciprocal or interinsurance exchange;
2-1 (j) a stipulated premium insurance company;
2-2 (k) a group hospital service company;
2-3 (l) a health maintenance organization;
2-4 (m) a farm mutual insurance company;
2-5 (n) a risk retention group;
2-6 (o) a surplus lines carrier; and
2-7 (p) agents, brokers, adjusters, and life insurance
2-8 counselors.
2-9 Sec. 3. UNFAIR DISCRIMINATION DEFINED. "Unfair
2-10 discrimination" means: (a) Refusing to insure; refusing to
2-11 continue to insure; limiting the amount, extent, or kind of
2-12 coverage available; or charging an individual a different rate for
2-13 the same coverage solely because of race, color, religion, or
2-14 national origin;
2-15 (b) Refusing to insure; refusing to continue to insure;
2-16 limiting the amount, extent, or kind of coverage available; or
2-17 charging an individual a different rate for the same coverage
2-18 solely because of the age, gender or marital status of the
2-19 individual; however, nothing in this paragraph shall prohibit an
2-20 insurer from taking marital status into account for the purpose of
2-21 defining persons eligible for dependent benefits;
2-22 (c) Refusing to insure; refusing to continue to insure;
2-23 limiting the amount, extent, or kind of coverage; or charging an
2-24 individual a different rate for the same coverage solely because of
2-25 handicap or partial handicap; however, this paragraph shall not be
2-26 interpreted to modify any other provision of law relating to the
2-27 termination, modification, issuance or renewal of any insurance
3-1 policy or contract.
3-2 Sec. 4. EXCEPTIONS. (a) A legal entity engaged in the
3-3 business of insurance as specified in section 2 of this article
3-4 shall not be considered to be in violation of the prohibited acts
3-5 defined in or determined pursuant to section 3(b) and 3(c) of this
3-6 article if the refusal to insure; refusal to continue to insure;
3-7 the limiting of the amount, extent, or kind of coverage; or the
3-8 charging of an individual a different rate for the same coverage is
3-9 based upon sound underwriting or actuarial principles reasonably
3-10 related to actual or anticipated loss experience.
3-11 (b) A legal entity engaged in the business of insurance as
3-12 specified in section 2 of this article shall not be considered to
3-13 be in violation of the prohibited acts defined in or determined
3-14 pursuant to section 3(b) and 3(c) of this article if the insured or
3-15 prospective insured is required to obtain or maintain membership or
3-16 qualification for membership in a club, group, or organization, if
3-17 membership is a uniform requirement of the insurer as a condition
3-18 of providing insurance, and is applied uniformly throughout this
3-19 state.
3-20 (c) A legal entity engaged in the business of insurance as
3-21 specified in section 2 of this article shall not be considered to
3-22 be in violation of the prohibited acts defined in or determined
3-23 pursuant to section 3 of this article if the refusal to insure;
3-24 refusal to continue to insure; the limiting of the amount, extent,
3-25 or kind of coverage; or the charging of an individual a different
3-26 rate for the same coverage is required by law or regulatory
3-27 mandate.
4-1 Sec. 5. SANCTIONS. Any legal entity engaged in the business
4-2 of insurance in this state found to be in violation of or failing
4-3 to comply with this article is subject to the sanctions authorized
4-4 in Article 1.10 of this code including administrative penalties
4-5 authorized under Article 1.10E of this code. The Commissioner may
4-6 also utilize the cease and desist procedures authorized by Article
4-7 1.10A of this code.
4-8 SECTION 2. Section 1, Article 17.25, Insurance Code, is amended to
4-9 read as follows:
4-10 Sec. 1. Regulation. County mutual insurance companies
4-11 operating under the provisions of this Chapter shall be authorized
4-12 to write insurance against loss or damage from any hazard provided
4-13 therein or that any other fire or windstorm insurance company
4-14 operating in Texas may write on property describe in Article 17.01
4-15 of this Chapter. County mutual insurance companies qualifying to
4-16 write casualty lines for state wide operation may write all lines
4-17 of automobile insurance, personal liability insurance, residential
4-18 fire insurance, residential allied lines insurance, homeowners
4-19 insurance, and farm and ranch owners insurance, provided that no
4-20 such company shall assume a risk on any one hazard greater than
4-21 five (5%) per cent of its assets, unless such excess shall be
4-22 promptly reinsured.
4-23 SECTION 3. Subchapter C, Chapter 5, Insurance Code, is amended by
4-24 adding Article 5.35-3 to read as follows:
4-25 Art. 5.35-3. PROPERTY PROTECTION PROGRAM FOR UNDERSERVED
4-26 AREAS. Sec. 1. By rule the Commissioner may determine and
4-27 designate areas as underserved areas for residential property
5-1 insurance. In determining which areas will be designated as
5-2 underserved, the Commissioner shall consider whether residential
5-3 property insurance is not reasonably available to a substantial
5-4 number of owners of insurable property in the underserved area and
5-5 any other relevant factors as determined by the Commissioner. For
5-6 purposes of this article, residential property insurance means
5-7 insurance provided on one-family or two-family dwellings.
5-8 Sec. 2. All insurers authorized to write property or
5-9 casualty insurance in this state and writing residential property
5-10 insurance in this state, including those insurers licensed under
5-11 chapters 17, 18 and 19 of this code, are authorized to write
5-12 insurance on the forms adopted under this article.
5-13 Sec. 3. The Commissioner shall adopt policy forms for
5-14 residential property insurance specifically for use in the
5-15 designated underserved areas. The policy forms adopted pursuant to
5-16 this article shall include a basic policy covering fire and allied
5-17 lines perils with endorsements providing additional coverages at
5-18 the option of the insured. The adopted policy forms may be used by
5-19 all insurers writing insurance in underserved areas.
5-20 Sec. 4. The rates for residential property insurance subject
5-21 to this article shall be determined in accordance with the
5-22 provisions of this code applicable to each insurer.
5-23 Sec. 5. In the designated underserved areas, all insurers
5-24 specified in section 2 of this article shall make available to
5-25 their agents and all agents shall offer all insureds, the full
5-26 range of coverages promulgated under this article subject to the
5-27 applicable rates and underwriting guidelines of each such insurer.
6-1 Sec. 6. The premium on all policies written pursuant to this
6-2 article will not be subject to tax under Art. 4.10 of this code.
6-3 Sec. 7. The premium on all policies written pursuant to this
6-4 article will not be considered net direct premiums under the
6-5 provisions of section 3(g) of Article 21.49 of this code.
6-6 SECTION 4. Subchapter E, Chapter 21, Insurance Code, is amended by
6-7 adding Article 21.79 to read as follows:
6-8 Art. 21.79. GROUP INSURANCE OF PRIVATE PASSENGER AUTO AND
6-9 RESIDENTIAL PROPERTY INSURANCE IN UNDERSERVED AREAS.
6-10 Sec. 1. By rule the Commissioner may determine and designate
6-11 areas as underserved areas for private passenger auto insurance or
6-12 residential property insurance. In determining which areas will be
6-13 designated as underserved, the Commissioner shall consider whether
6-14 such insurance is not reasonably available to a substantial number
6-15 of insurable risks and the availability of insurance and any other
6-16 relevant factors as determined by the Commissioner. For purposes
6-17 of this article, residential property insurance shall mean property
6-18 insurance on one-family or two-family dwellings.
6-19 Sec. 2. All insurers authorized to write property or
6-20 casualty insurance in this state and writing private passenger auto
6-21 insurance or residential property insurance in this state,
6-22 including insurers licensed under chapters 17, 18 and 19 of this
6-23 code, are authorized to write such insurance on a group basis in
6-24 underserved areas as designated by the Commissioner.
6-25 Sec. 3. A group may be formed solely for the purpose of
6-26 purchasing insurance subject to this article.
6-27 Sec. 4. All policy forms and certificates for use in
7-1 underserved areas as designated by the Commissioner shall be
7-2 adopted by the Commissioner.
7-3 Sec. 5. The rates for coverage shall be subject to the
7-4 applicable statutory provisions relating to the respective
7-5 insurers.
7-6 Sec. 6. The Commissioner may adopt any other rules that are
7-7 appropriate and necessary to implement this article.
7-8 SECTION 5. Article 21.49-12, Insurance Code, is amended to read as
7-9 follows:
7-10 Art. 21.49-12. Market Assistance Programs. Sec. 1.
7-11 Creation of programs. The Commissioner <State Board of Insurance>
7-12 may establish a voluntary mechanism to be called a market
7-13 assistance program to assist insureds in Texas in obtaining
7-14 residential property <liability> insurance coverage in underserved
7-15 areas which shall be determined and designated by the Commissioner
7-16 by rule using the standards specified in Section 1 of Article
7-17 5.35-3 of this Code <where it has been shown not to be readily
7-18 available>. For purposes of this article, residential property
7-19 insurance means property insurance on one-family or two-family
7-20 dwellings. The types of risks to be assisted under the <each>
7-21 market assistance program will be established by the Commissioner
7-22 <board>. A market assistance program division shall be established
7-23 in and operated by the Texas Department of Insurance.
7-24 Sec. 2. Plan of operation. (a) The executive committee
7-25 shall develop and submit the plan of operation to the Commissioner
7-26 for adoption by rule and shall be available to advise and consult
7-27 with the Commissioner with regard to the administration of the
8-1 program. If the executive committee fails to submit a suitable
8-2 plan of operation within 180 days following the effective date of
8-3 this Act, or if at any time thereafter the executive committee
8-4 fails to submit suitable amendments to the plan of operation, the
8-5 department shall develop and submit to the Commissioner a plan of
8-6 operation and thereafter any amendments thereto, and the
8-7 Commissioner shall, after notice and hearing, adopt by rule the
8-8 plan of operation developed by the department or any amendments to
8-9 the plan of operation. <Each market assistance program shall be
8-10 administered under a plan of operation promulgated by the board.>
8-11 The <Each> plan of operation shall indicate types of coverage,
8-12 policy forms and terms application forms, eligibility, and overall
8-13 operation of the program. All insurers licensed to write property
8-14 or casualty insurance and actually writing residential property
8-15 insurance in this state, including lloyds, reciprocals or
8-16 interinsurance exchanges and county mutuals, <The board may require
8-17 an insurer to> may participate in the program unless insurer
8-18 participation is made mandatory by the Commissioner based on
8-19 criteria provided in the plan of operation, but the Commissioner
8-20 <board> may not permit an insurer to condition its participation in
8-21 a manner that is inequitable to the participants.
8-22 (b) The plan of operation shall include, but is not limited
8-23 to, the following provisions:
8-24 (1) Applications will be accepted only from agents duly
8-25 licensed by the Department of Insurance. Applications from all
8-26 other sources will be returned for referral to duly licensed agents
8-27 of the applicant's choice for preparation and resubmission to the
9-1 program.
9-2 (2) Applications for assistance shall be addressed to Market
9-3 Assistance Program at the Department of Insurance. Each
9-4 application must be accompanied by a copy of a current nonrenewal
9-5 or cancellation notice and a current declination letter from at
9-6 least one other insurer writing the coverage sought. Applicants
9-7 not having previous residential property insurance coverage must
9-8 provide copies of current declination letters from at least two
9-9 different insurers writing the coverage sought.
9-10 (3) Each insurer has the right to individually evaluate the
9-11 risk and apply the rates in accordance with the provisions of this
9-12 code applicable to each insurer.
9-13 (4) Each insurer has the option of providing a premium quote
9-14 on the same coverage basis for which it normally provides insurance
9-15 in this state using its own underwriting guidelines and the rates
9-16 determined in accordance with the provisions of this code
9-17 applicable to each insurer.
9-18 (5) An insurer shall make its premium quote, indicate its
9-19 refusal to quote, or make a request for additional time within 30
9-20 days of receiving the application.
9-21 (6) If a premium quote is made, the applicant's agent shall
9-22 be notified by the program so that the agent may complete the
9-23 placement of the insurance, if the applicant accepts the coverage
9-24 at the premium quoted.
9-25 (7) An applicant is not eligible to apply to the program
9-26 again for the same coverage for the same risk if the insurer
9-27 cancels or nonrenews coverage for nonpayment of premium or
10-1 submission of a fraudulent claim.
10-2 (8) The plan of operation shall contain criteria under which
10-3 the Commissioner may make insurer participation in the program
10-4 mandatory.
10-5 (c) The plan of operation may provide for subcommittees that
10-6 are necessary to carry out the functions of a program.
10-7 Sec. 3. Executive committee. (a) The program shall be
10-8 administered by an executive committee composed of nine members
10-9 appointed by the Commissioner:
10-10 (1) five members who represent the interests of insurers;
10-11 (2) two public members; and
10-12 (3) two members who are licensed local recording agents.
10-13 <An executive committee shall administer each market assistance
10-14 program.>
10-15 (b) To be eligible to serve on the executive committee as a
10-16 representative of insurers, a person must be a full-time employee
10-17 of an authorized insurer. <The board shall appoint the members of
10-18 an executive committee.>
10-19 (c) The Commissioner or the Commissioner's designated
10-20 representative shall be an ex officio member of the executive
10-21 committee and must be present in every meeting of the executive
10-22 committee.
10-23 <(d) The plan of operation may provide for subcommittees
10-24 that are necessary to carry out the functions of a program.>
10-25 <(e) A representative of the board must be present in every
10-26 meeting of an executive committee of sub committee.>
10-27 Sec. 4. Agents. (a) Notwithstanding any other provision of
11-1 law, a market assistance program may have two categories of agents:
11-2 (1) an originating agent; and
11-3 (2) an issuing agent.
11-4 (b) An originating agent may complete an application for
11-5 insurance on behalf of an insured for submission to the program
11-6 without being appointed to represent the ultimate insurer.
11-7 (c) An issuing agent must be appointed to represent the
11-8 ultimate insurer and shall perform all of the customary duties of a
11-9 local recording agent including but not limited to the following:
11-10 (1) signing, executing, and delivering policies of
11-11 insurance;
11-12 (2) maintaining, a record of the business;
11-13 (3) examining and inspecting the risk; and
11-14 (4) receiving and collecting premiums.
11-15 (d) An originating agent may share commissions, as
11-16 negotiated on an individual basis, with the issuing agent if the
11-17 originating agent holds a license as either a local recording agent
11-18 or as a salaried representative for those companies whose plan of
11-19 operation does not contemplate the use of local recording agents.
11-20 (e) The originating and issuing agent may be the same
11-21 person. If the originating agent and the issuing agent are not the
11-22 same person, the originating agent may not be held to be the agent
11-23 of the insurer unless there is an appointment as specified by
11-24 Article 21.14 of this code.
11-25 (f) The program may not share in commissions.
11-26 <Sec. 5. FEES. The plan of operation may provide reasonable
11-27 application fees to be used to cover expenses of the program.
12-1 These fees must be maintained in a separate account under the
12-2 control of a fiscal agent designated in the plan of operation.>
12-3 Sec. 5 <6>. Confidentially. (a) The Department of
12-4 Insurance <State Board of Insurance> shall maintain as confidential
12-5 all application files and related documents received under this
12-6 article.
12-7 (b) In maintaining confidentially, the Department of
12-8 Insurance <State Board of Insurance> shall not permit the files and
12-9 related documents to be made available to the public except that
12-10 the Department of Insurance <State Board of Insurance> shall allow
12-11 access to those files and related documents to originating or
12-12 issuing agents or to an applicant for his own file or to an insurer
12-13 who agrees to insure the applicant.
12-14 Sec. 6. PERIODIC REVIEW. (a) Information concerning the
12-15 number and type of applications received and placed, and such other
12-16 information, as deemed appropriate by the executive committee or
12-17 the Commissioner, shall be collected.
12-18 (b) The executive committee shall review the demand for and
12-19 performance of the program six months following the approval of the
12-20 plan of operation, and at least annually thereafter, as necessary.
12-21 After each such review the executive committee shall report to the
12-22 Commissioner of Insurance as to the necessity for continued
12-23 operation of the voluntary program, need for establishment of a
12-24 mandatory program or the need for establishment of a FAIR Plan
12-25 pursuant to Article 21.49A of this code, or other recommendations
12-26 the executive committee deems appropriate. The program shall be
12-27 terminated only upon approval of the Commissioner.
13-1 Sec. 7. IMMUNITY FROM LIABILITY. The program, executive
13-2 committee members, and participating insurers and agents are not
13-3 personally liable for any act performed in good faith within the
13-4 scope of the person's authority as determined under this article or
13-5 for damages occasioned by his or her official acts or omissions
13-6 except for an act or omission that is corrupt or malicious.
13-7 Sec. 8. RULEMAKING AUTHORITY. The Commissioner is
13-8 authorized to adopt rules in addition to the plan of operation that
13-9 are appropriate to accomplish the purposes of this Act.
13-10 SECTION 6. Subchapter E, Chapter 21, Insurance Code, is amended by
13-11 adding Article 21.49A, to read as follows:
13-12 Article 21.49A. FAIR PLAN (FAIR ACCESS TO INSURANCE
13-13 REQUIREMENTS) ACT. Sec. 1. AUTHORITY; PURPOSE. If the
13-14 Commissioner determines, after a public hearing, that in all or any
13-15 part of the state, residential property insurance is not reasonably
13-16 available in the voluntary market to a substantial number of
13-17 insurable risks and that at least fifty percent of the applicants
13-18 to the residential property market assistance program in the
13-19 previous 12 month period could not be placed with an insurer, the
13-20 Commissioner may establish a FAIR (Fair Access to Insurance
13-21 Requirements) Plan to deliver residential property insurance to
13-22 citizens of this state in underserved areas which shall be
13-23 determined and designated by the Commissioner by rule. Each
13-24 insurer, as defined herein, as a condition of its authority to
13-25 transact residential property insurance in this state, shall
13-26 participate in the FAIR Plan Association in accordance with this
13-27 Act.
14-1 Sec. 2. DEFINITIONS. (1) "FAIR Plan Association" or
14-2 "Association" means a non-profit association established pursuant
14-3 to this Act to develop and administer a program to provide
14-4 residential property insurance in designated underserved areas in
14-5 this state.
14-6 (2) "Insurer" means any licensed insurer writing property
14-7 and casualty insurance in this state, including:
14-8 (A) a county mutual insurance company;
14-9 (B) a Lloyd's plan company; and
14-10 (C) a reciprocal or interinsurance exchange.
14-11 (3) "Residential Property Insurance" means the coverage
14-12 against direct loss to real or tangible personal property at a
14-13 fixed location provided in a homeowners policy, residential fire
14-14 and allied lines policy, or farm and ranch owners policy.
14-15 (4) "Inspection Bureau" means the organization or
14-16 organizations designated by the FAIR Plan Association with the
14-17 approval of the Commissioner to make inspections to determine the
14-18 condition of the properties for which residential property
14-19 insurance is sought and to perform such other duties as may be
14-20 authorized by the FAIR Plan Association or the Commissioner. The
14-21 manner and scope of the inspection and evaluation report for
14-22 residential property shall be prescribed by the Association
14-23 pursuant to the plan of operation.
14-24 (5) "Net Direct Premiums" means gross direct written
14-25 premiums less return premiums upon canceled contracts (irrespective
14-26 of reinsurance assumed or ceded) written on residential property
14-27 pursuant to this Act.
15-1 (6) "Underserved Area(s)" means area(s) designated as
15-2 underserved by the Commissioner by rule. In determining which
15-3 areas will be designated as underserved, the Commissioner shall
15-4 consider the factors specified in Section 1 of Article 5.35-3 of
15-5 this Code.
15-6 Sec. 3. GOVERNING COMMITTEE; PLAN OF OPERATION. (a) The
15-7 FAIR Plan shall be administered by the Governing Committee of the
15-8 Association pursuant to a plan of operation. Subject to the
15-9 approval of the Commissioner, the Governing Committee shall develop
15-10 the plan of operation and propose amendments thereto. The plan of
15-11 operation and any amendments thereto shall be adopted by the
15-12 Commissioner by rule. The Governing Committee may on its own
15-13 initiative or at the request of the Commissioner amend the plan of
15-14 operation.
15-15 (b) The Governing Committee shall be composed of nine
15-16 members appointed by the Commissioner as follows:
15-17 (1) five members who represent the interests of insurers;
15-18 (2) two public members; and
15-19 (3) two members who are licensed local recording agents.
15-20 (4) the Commissioner or the Commissioner's designated
15-21 representative from within the Department of Insurance shall serve
15-22 as an ex officio member.
15-23 (c) To be eligible to serve on the governing committee as a
15-24 representative of insurers, a person must be a full-time employee
15-25 of an authorized insurer.
15-26 (d) The plan of operation shall provide:
15-27 (1) for establishment of a FAIR Plan Association for the
16-1 issuing of residential property insurance pursuant to this Act and
16-2 the distribution of the losses and the expenses in the writing of
16-3 such insurance in this state;
16-4 (2) that all insurers licensed to write property insurance
16-5 and writing residential property insurance shall participate in the
16-6 writings, expenses, profits, and losses of the Association, in the
16-7 proportion that the net direct premiums, of each participating
16-8 insurer, written in this state during the preceding calendar year,
16-9 bears to the aggregate net direct premium written in this state by
16-10 all participating insurers; such information shall be determined in
16-11 accordance with the residential property statistical plan adopted
16-12 by the Commissioner;
16-13 (3) that a participating insurer is entitled to receive
16-14 credit for similar insurance voluntarily written in a designated
16-15 underserved area and its participation in the writings in the
16-16 Association shall be reduced in accordance with the provisions of
16-17 the plan of operation;
16-18 (4) for the immediate binding of eligible risks; for the use
16-19 of premium installment payment plans, adequate marketing and
16-20 service facilities; and for the establishment of reasonable service
16-21 standards;
16-22 (5) procedures for efficient, economical, fair, and
16-23 nondiscriminatory administration of the FAIR Plan Association;
16-24 (6) procedures for determining the net level of
16-25 participation required for each insurer in the FAIR Plan
16-26 Association;
16-27 (7) for the use of deductibles, and other underwriting
17-1 devices and for assessment of all members in amounts sufficient to
17-2 operate the Association; and establish maximum limits of liability
17-3 to be placed through the program; and commissions to be paid to the
17-4 licensed agents submitting applications;
17-5 (8) that the Association issue policies in its own name;
17-6 (9) reasonable underwriting standards for determining
17-7 insurability of the risk;
17-8 (10) procedures for the assumption and ceding of reinsurance
17-9 by the Association; and
17-10 (11) any other procedures or operational matters deemed
17-11 necessary by the Governing Committee or the Commissioner.
17-12 Sec. 4. FAIR Plan Association. Pursuant to procedures and
17-13 requirements set forth in the plan of operation, the FAIR Plan
17-14 Association (Association) shall develop and administer a program
17-15 for participation by all insurers licensed to write property
17-16 insurance in this state and writing residential property insurance
17-17 in this state. The Association shall make residential property
17-18 insurance available to applicants in underserved areas whose
17-19 property is insurable in accordance with reasonable underwriting
17-20 standards, but who, after diligent efforts, are unable to procure
17-21 such insurance through the voluntary market, as evidenced by two
17-22 declinations from insurers licensed to write and actually writing
17-23 residential property insurance in the state.
17-24 Sec. 5. POWERS OF THE ASSOCIATION; CENTRALIZED OPERATIONS
17-25 AUTHORIZED. (a) The Association is authorized, for FAIR Plan
17-26 purposes only, to issue policies of insurance and endorsements
17-27 thereto in its own name or a trade name duly adopted for that
18-1 purpose, and to act on behalf of all participating insurers in
18-2 connection with said policies and otherwise in any manner necessary
18-3 to accomplish the purposes of this Act, including but not limited
18-4 to issuance of policies, collection of premiums, issuance of
18-5 cancellations, and payment of commissions, losses, judgments and
18-6 expenses.
18-7 (b) The participating insurers shall be liable to the
18-8 Association as provided in this Act and the plan of operation for
18-9 the expenses and liabilities so incurred by the Association, and
18-10 the Association shall make assessments against the participating
18-11 insurers as required to meet such expenses and liabilities. In
18-12 connection with any policy issued by the Association:
18-13 (1) service of any notice, proof of loss, legal process or
18-14 other communication with respect to the policy shall be made upon
18-15 the Association; and
18-16 (2) any action by the insured constituting a claim under the
18-17 policy shall be brought only against the Association, and the
18-18 Association shall be the proper party for all purposes in any
18-19 action brought under or in connection with any such policy. The
18-20 foregoing requirements shall be set forth in any policy issued by
18-21 the Association and the form and content of any such policy shall
18-22 be subject to the approval of the Commissioner of Insurance.
18-23 (c) The Association is authorized to assume and cede
18-24 reinsurance in conformity with the plan of operation.
18-25 (d) Each insurer must participate in the writings, expenses,
18-26 profits, and losses of the Association in the proportion that its
18-27 net direct premiums written bear to the aggregate net direct
19-1 premiums written by all insurers.
19-2 Sec. 6. PROPERTY INSPECTION; FAIR PLAN PROCEDURE. (a) Any
19-3 person having an insurable interest in real or tangible personal
19-4 property at a fixed location in an underserved area who, after
19-5 diligent effort has been unable to obtain residential property
19-6 insurance, as evidenced by two current declinations from insurers
19-7 licensed to write property insurance and actually writing
19-8 residential property insurance in the state, is entitled upon
19-9 application to the Association to an inspection and evaluation of
19-10 the property by representatives of the Inspection Bureau.
19-11 (b) Applications may be made on behalf of the applicant by a
19-12 licensed local recording agent and shall be submitted on forms
19-13 prescribed by the Association.
19-14 (c) Promptly after the request for inspection is received an
19-15 inspection must be made and an inspection report filed with the
19-16 Association and made available to the applicant upon request.
19-17 (d) If the Inspection Bureau finds that the residential
19-18 property meets the reasonable underwriting standards established in
19-19 the plan of operation, the applicant shall be so informed in
19-20 writing and a policy or binder shall be issued by the Association.
19-21 If the residential property does not meet the criteria, the
19-22 applicant shall be informed, in writing, of the reasons for the
19-23 failure of the residential property to meet the criteria.
19-24 (e) If, at any time, the applicant makes improvements in the
19-25 residential property or its condition which the applicant believes
19-26 are sufficient to make the residential property meet the criteria,
19-27 a representative of the Inspection Bureau shall reinspect the
20-1 residential property upon request. In any case, the applicant for
20-2 residential property insurance shall be eligible for one
20-3 reinspection any time beginning 60 days after the initial FAIR plan
20-4 inspection. If upon reinspection the residential property meets
20-5 the reasonable underwriting standards established in the plan of
20-6 operation, the applicant shall be so informed in writing and a
20-7 policy or binder shall be issued by the Association.
20-8 Sec. 7. APPROVAL OF RATES. The Association shall file with
20-9 the Commissioner for approval the proposed rates and supplemental
20-10 rate information to be used in connection with the issuance of
20-11 policies or endorsements. Rates shall be set in an amount
20-12 sufficient to carry all claims to maturity and to meet the expenses
20-13 incurred in the writing and servicing of the business. Within 60
20-14 days of the filing of the proposed rates, the Commissioner shall
20-15 enter an order either approving or disapproving, in whole or in
20-16 part, the proposed rates. The Commissioner may, upon notice to the
20-17 Association, extend the period for entering an order under this
20-18 section an additional 30 days. No such policies or endorsements
20-19 shall be issued until such time as the Commissioner approves the
20-20 rates to be applied to the policy or endorsement. An order
20-21 disapproving a rate shall state the grounds for the disapproval and
20-22 the findings in support thereof.
20-23 Sec. 8. APPEALS; JUDICIAL REVIEW. (a) Any applicant or
20-24 affected insurer has the right of appeal to the Association. A
20-25 decision of the Association may be appealed to the Commissioner
20-26 within 30 days after such decision.
20-27 (b) All orders or decisions of the Commissioner made
21-1 pursuant to this Act are subject to judicial review in accordance
21-2 with the Administrative Procedure Act (Government Code, ch. 2001).
21-3 Sec. 9. IMMUNITY FROM LIABILITY. There is no liability on
21-4 the part of, and no cause of action against insurers, the
21-5 Inspection Bureau, the Association, the Governing Committee, their
21-6 agents or employees, or the Commissioner or the Commissioner's
21-7 authorized representatives, with respect to any inspections
21-8 required to be undertaken by this Act or for any acts or omissions
21-9 in connection therewith, or for any statements made in any report
21-10 and communication concerning the insurability of the property, or
21-11 in the findings required by the provisions of this Act, or at the
21-12 hearings conducted in connection with such inspections.
21-13 Sec. 10. INSOLVENCY. In the event any participating
21-14 insurer fails, by reason of insolvency, to pay any assessment, the
21-15 Association shall cause the reimbursement ratios to be immediately
21-16 recalculated, excluding therefrom the amount of the insolvent
21-17 insurer's assessment determined by the Commissioner to be
21-18 uncollectible, so that such uncollectible amount is, in effect,
21-19 assumed and redistributed among the remaining participating
21-20 insurers.
21-21 Sec. 11. ASSESSMENTS AND PREMIUM SURCHARGES. Should a
21-22 deficit occur in the Association, the Association shall assess
21-23 participating insurers in accordance with this section and each
21-24 insurer may charge a premium surcharge on every property insurance
21-25 policy issued by it insuring property in this state, the effective
21-26 date of which policy is within the three-year period commencing 90
21-27 days after the date of assessment by the Association. The amount
22-1 of the surcharge shall be calculated on the basis of a uniform
22-2 percentage of the premium on such policies equal to one-third of
22-3 the ratio of the amount of an insurer's assessment to the amount of
22-4 its direct earned premiums as reported in its financial statement
22-5 to the Department for the calendar year immediately preceding the
22-6 year in which the assessment is made, such that over the period of
22-7 three years the aggregate of all such surcharges by an insurer
22-8 shall be equal to the amount of the assessment of such insurer.
22-9 The minimum surcharges on a policy may be $1.00; all surcharges may
22-10 be rounded to the nearest dollar.
22-11 Sec. 12. SANCTIONS. If the Association, Inspection Bureau,
22-12 or participating insurer is found to be in violation of or in
22-13 failure to comply with this Act, each entity shall be subject to
22-14 the sanctions authorized in Article 1.10 of this code, including
22-15 administrative penalties authorized under Article 1.10E of this
22-16 code. The Commissioner may also utilize any other disciplinary
22-17 procedures authorized by this code, including the cease and desist
22-18 procedures authorized by Article 1.10A of this code.
22-19 Sec. 13. ANNUAL REPORT. The Association shall compile a
22-20 calendar year annual operating report, and submit such annual
22-21 report to the Commissioner on or before March 31 of the following
22-22 calendar year. This annual report shall be a matter of public
22-23 record.
22-24 Sec. 14. POWERS OF THE COMMISSIONER. (a) In addition to
22-25 any powers conferred upon the Commissioner by this or any other
22-26 law, the Commissioner is charged with the authority to supervise
22-27 the Association and the Inspection Bureau. In addition, the
23-1 Commissioner has the power:
23-2 (1) to examine the operation of the Association and the
23-3 Inspection Bureau through free access to all the books, records,
23-4 files, papers and documents relating to their operation and may
23-5 summon, qualify and examine as witnesses all persons having
23-6 knowledge of such operations including the Governing Committee,
23-7 officers, or employees thereof;
23-8 (2) to do all things necessary to enable the state of Texas
23-9 and the Association to fully participate in any federal program of
23-10 reinsurance which may be enacted for purposes similar to the
23-11 purposes of this Act;
23-12 (3) to require such reports from the Association concerning
23-13 risks insured by the Association pursuant to this Act as may be
23-14 deemed necessary; and
23-15 (4) to adopt policy forms, endorsements, rates, and rating
23-16 and rule manuals for use by the Association.
23-17 SECTION 7. Subchapter E, Chapter 21, Insurance Code, is amended by
23-18 adding Article 21.49B to read as follows:
23-19 Article 21.49B. PROPERTY AND CASUALTY INSURANCE INITIATIVES
23-20 TASK FORCE. The Commissioner may establish a task force to study
23-21 the utility and feasibility of instituting various property and
23-22 casualty insurance initiatives in this state. The initiatives to
23-23 be studied may include, but are not limited to:
23-24 (1) possible coordination with the Department of Commerce to
23-25 make certain property and casualty insurance an enterprise zone
23-26 program pursuant to Chapter 2303, Tex. Govt. Code;
23-27 (2) possible coordination with Neighborhood Housing Service
24-1 (NHS) Programs to establish voluntary NHS-Insurance Industry
24-2 Partnerships;
24-3 (3) possible insurance agent programs to increase minority
24-4 agency access to standard insurance companies, including minority
24-5 intern programs with insurance companies;
24-6 (4) possible tax incentives for insurance written in
24-7 underserved areas.
24-8 SECTION 8. The following laws are repealed:
24-9 Articles 21.21-5 and 21.21-3, Insurance Code.
24-10 SECTION 9. The importance of this legislation and the crowded
24-11 condition of the calendars in both houses create an emergency and
24-12 an imperative public necessity that the constitutional rule
24-13 requiring bills to be read on three several days in each house be
24-14 suspended, and this rule is hereby suspended, and that this Act
24-15 take effect and be in force from and after its passage, and it is
24-16 so enacted.