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.