By: Madla, Wentworth S.B. No. 1026
A BILL TO BE ENTITLED
AN ACT
1-1 relating to certain bonds executed by sureties.
1-2 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-3 SECTION 1. Section 1, Chapter 87, Acts of the 56th
1-4 Legislature, Regular Session, 1959 (Article 7.19-1, Vernon's Texas
1-5 Insurance Code), is amended by amending Subsection (a) and by
1-6 adding Subsections (c) and (d) to read as follows:
1-7 (a) Whenever any bond, undertaking, recognizance or other
1-8 obligation is, by law or the charter, ordinances, rules and
1-9 regulations of a municipality, board, body, organization, court,
1-10 judge or public officer, required or permitted to be made, given,
1-11 tendered or filed, and whenever the performance of any act, duty or
1-12 obligation, or the refraining from any act, is required or
1-13 permitted to be guaranteed, such bond, undertaking, obligation,
1-14 recognizance or guarantee may be executed by a surety company duly
1-15 authorized to do business in this state; and, except as provided by
1-16 Subsection (b) or (c) of this section, such execution by such
1-17 company of such bond, undertaking, obligation, recognizance or
1-18 guarantee shall be in all respects a full and complete compliance
1-19 with every law, charter, rule or regulation that such bond,
1-20 undertaking, obligation, recognizance or guarantee shall be
1-21 executed by one surety or by one or more sureties, or that such
1-22 sureties shall be residents, or householders, or freeholders, or
1-23 either, or both, or possess any other qualification and all courts,
2-1 judges, heads of departments, boards, bodies, municipalities, and
2-2 public officers of every character shall accept and treat such
2-3 bond, undertaking, obligation, recognizance or guarantee when so
2-4 executed by such company, as conforming to, and fully and
2-5 completely complying with, every requirement of every such law,
2-6 charter, ordinance, rule or regulation.
2-7 Provided, however, that any municipality may require in any
2-8 specifications for work or supplies, on which sealed bids are
2-9 required, that any corporate surety tender shall designate, in a
2-10 manner satisfactory to it, an agent resident in the county of such
2-11 municipality to whom any requisite notices may be delivered and on
2-12 whom service of process may be had in matters arising out of such
2-13 suretyship.
2-14 (c) A bond for an amount that exceeds $100,000 that is made,
2-15 given, tendered, or filed under Subchapter H, I, or J, Chapter 53,
2-16 Property Code, or Chapter 2253, Government Code, may be executed
2-17 only by a surety company that is authorized and admitted to write
2-18 surety bonds in this state and is the holder of a certificate of
2-19 authority from the United States secretary of the treasury to
2-20 qualify as a surety on obligations permitted or required under
2-21 federal law. A bond for an amount that exceeds $100,000 that is
2-22 made, given, tendered, or filed under Subchapter H or I, Chapter
2-23 53, Property Code, must state that the surety is a current holder
2-24 of a certificate of authority from the United States secretary of
2-25 the treasury. A third party afforded protection under Section
3-1 53.174 or 53.204, Property Code, may conclusively rely on the
3-2 statement and the record of the bond as provided in those sections.
3-3 (d) Subsection (c) of this section does not apply if the
3-4 amount of the bond in excess of $100,000 is reinsured by an entity
3-5 that is authorized and admitted in this state as a surety or
3-6 reinsurer and that is the holder of a certificate of authority from
3-7 the United States secretary of the treasury to qualify on
3-8 obligations permitted or required under federal law. A bond for an
3-9 amount that exceeds $100,000 that is made, given, tendered, or
3-10 filed under Subchapter H or I, Chapter 53, Property Code, and that
3-11 is so reinsured must state that the reinsurer of the surety is a
3-12 current holder of a certificate of authority from the United States
3-13 secretary of the treasury. A third party afforded protection under
3-14 Section 53.174 or 53.204, Property Code, may conclusively rely on
3-15 the statement and the record of the bond as provided in those
3-16 sections.
3-17 SECTION 2. Sections 53.172, 53.202, and 53.237, Property
3-18 Code, are amended to read as follows:
3-19 Sec. 53.172. Bond Requirements. The bond must:
3-20 (1) describe the property on which the liens are
3-21 claimed;
3-22 (2) refer to each lien claimed in a manner sufficient
3-23 to identify it;
3-24 (3) be in an amount that is double the amount of the
3-25 liens referred to in the bond unless the total amount claimed in
4-1 the liens exceeds $40,000, in which case the bond must be in an
4-2 amount that is the greater of 1 1/2 times the amount of the liens
4-3 or the sum of $40,000 and the amount of the liens;
4-4 (4) be payable to the parties claiming the liens;
4-5 (5) be executed by:
4-6 (A) the party filing the bond as principal; and
4-7 (B) a corporate surety authorized and admitted
4-8 to do business under the law in this state and licensed by this
4-9 state to execute the bond as surety, subject to Section 1(c),
4-10 Chapter 87, Acts of the 56th Legislature, Regular Session, 1959
4-11 (Article 7.19-1, Vernon's Texas Insurance Code); and
4-12 (6) be conditioned substantially that the principal
4-13 and sureties will pay to the named obligees or to their assignees
4-14 the amount that the named obligees would have been entitled to
4-15 recover if their claims had been proved to be valid and enforceable
4-16 liens on the property.
4-17 Sec. 53.202. Bond Requirements. The bond must:
4-18 (1) be in a penal sum at least equal to the total of
4-19 the original contract amount;
4-20 (2) be in favor of the owner;
4-21 (3) have the written approval of the owner endorsed on
4-22 it;
4-23 (4) be executed by:
4-24 (A) the original contractor as principal; and
4-25 (B) a corporate surety authorized and admitted
5-1 to do business in this state and licensed by this state to execute
5-2 bonds as surety, subject to Section 1(c), Chapter 87, Acts of the
5-3 56th Legislature, Regular Session, 1959 (Article 7.19-1, Vernon's
5-4 Texas Insurance Code); and
5-5 (5) be conditioned on prompt payment for all labor,
5-6 subcontracts, materials, specially fabricated materials, and normal
5-7 and usual extras not exceeding 15 percent of the contract price.
5-8 Sec. 53.237. Bond Requirements. The bond must be:
5-9 (1) in an amount double the amount of the claims
5-10 filed;
5-11 (2) payable to the claimants;
5-12 (3) executed by:
5-13 (A) the party filing the bond as principal; and
5-14 (B) a corporate surety authorized, admitted to
5-15 do business, and licensed by the law of this state to execute the
5-16 bond as surety, subject to Section 1(c), Chapter 87, Acts of the
5-17 56th Legislature, Regular Session, 1959 (Article 7.19-1, Vernon's
5-18 Texas Insurance Code); and
5-19 (4) conditioned that:
5-20 (A) the principal and surety will pay to the
5-21 obligees named or to their assignees the amount of the claims or
5-22 the portions of the claims proved to be liens under this
5-23 subchapter; and
5-24 (B) the principal and surety will pay all court
5-25 costs adjudged against the principal in actions brought by a
6-1 claimant on the bond.
6-2 SECTION 3. Subdivision (4), Section 2253.001, Government
6-3 Code, is amended to read as follows:
6-4 (4) "Public work contract" means a contract for
6-5 constructing, altering, or repairing a public building or carrying
6-6 out or completing any public work. The term includes a contract
6-7 for constructing, altering, or repairing a public building or
6-8 carrying out or completing any public work in which an insurance
6-9 company is fulfilling its obligation under a contract of insurance
6-10 by arranging for the replacement of a loss rather than making a
6-11 cash payment directly to the governmental entity. The term does
6-12 not include a contract with a surety company complying with an
6-13 obligation under a bond.
6-14 SECTION 4. Chapter 7, Insurance Code, is amended by adding
6-15 Article 7.03 to read as follows:
6-16 Art. 7.03. DISCRIMINATION IN RATES OR ISSUANCE. A surety
6-17 company authorized to do business in this state may not
6-18 discriminate on the basis of race, color, religion, national
6-19 origin, or sex in the setting of rates or the issuance of a bond,
6-20 undertaking, obligation, recognizance, or guarantee.
6-21 SECTION 5. This Act takes effect September 1, 1995, and
6-22 applies only to a bond made, given, tendered, or filed on or after
6-23 that date. A bond made, given, tendered, or filed before the
6-24 effective date of this Act is governed by the law as it existed
6-25 immediately before the effective date of this Act, and that law is
7-1 continued in effect for that purpose.
7-2 SECTION 6. The importance of this legislation and the
7-3 crowded condition of the calendars in both houses create an
7-4 emergency and an imperative public necessity that the
7-5 constitutional rule requiring bills to be read on three several
7-6 days in each house be suspended, and this rule is hereby suspended.