1-1 By: Madla, Wentworth S.B. No. 1026
1-2 (In the Senate - Filed March 8, 1995; March 9, 1995, read
1-3 first time and referred to Committee on Economic Development;
1-4 April 26, 1995, reported adversely, with favorable Committee
1-5 Substitute by the following vote: Yeas 8, Nays 0; April 26, 1995,
1-6 sent to printer.)
1-7 COMMITTEE SUBSTITUTE FOR S.B. No. 1026 By: Madla
1-8 A BILL TO BE ENTITLED
1-9 AN ACT
1-10 relating to certain bonds executed by sureties.
1-11 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-12 SECTION 1. Section 1, Chapter 87, Acts of the 56th
1-13 Legislature, Regular Session, 1959 (Article 7.19-1, Vernon's Texas
1-14 Insurance Code), is amended by amending Subsection (a) and by
1-15 adding Subsections (c) and (d) to read as follows:
1-16 (a) Whenever any bond, undertaking, recognizance or other
1-17 obligation is, by law or the charter, ordinances, rules and
1-18 regulations of a municipality, board, body, organization, court,
1-19 judge or public officer, required or permitted to be made, given,
1-20 tendered or filed, and whenever the performance of any act, duty or
1-21 obligation, or the refraining from any act, is required or
1-22 permitted to be guaranteed, such bond, undertaking, obligation,
1-23 recognizance or guarantee may be executed by a surety company duly
1-24 authorized to do business in this state; and, except as provided by
1-25 Subsection (b) or (c) of this section, such execution by such
1-26 company of such bond, undertaking, obligation, recognizance or
1-27 guarantee shall be in all respects a full and complete compliance
1-28 with every law, charter, rule or regulation that such bond,
1-29 undertaking, obligation, recognizance or guarantee shall be
1-30 executed by one surety or by one or more sureties, or that such
1-31 sureties shall be residents, or householders, or freeholders, or
1-32 either, or both, or possess any other qualification and all courts,
1-33 judges, heads of departments, boards, bodies, municipalities, and
1-34 public officers of every character shall accept and treat such
1-35 bond, undertaking, obligation, recognizance or guarantee when so
1-36 executed by such company, as conforming to, and fully and
1-37 completely complying with, every requirement of every such law,
1-38 charter, ordinance, rule or regulation.
1-39 Provided, however, that any municipality may require in any
1-40 specifications for work or supplies, on which sealed bids are
1-41 required, that any corporate surety tender shall designate, in a
1-42 manner satisfactory to it, an agent resident in the county of such
1-43 municipality to whom any requisite notices may be delivered and on
1-44 whom service of process may be had in matters arising out of such
1-45 suretyship.
1-46 (c) A bond for an amount that exceeds $100,000 that is made,
1-47 given, tendered, or filed under Subchapter H, I, or J, Chapter 53,
1-48 Property Code, or Chapter 2253, Government Code, may be executed
1-49 only by a surety company that is authorized and admitted to write
1-50 surety bonds in this state and is the holder of a certificate of
1-51 authority from the United States secretary of the treasury to
1-52 qualify as a surety on obligations permitted or required under
1-53 federal law. A bond for an amount that exceeds $100,000 that is
1-54 made, given, tendered, or filed under Subchapter H or I, Chapter
1-55 53, Property Code, must state that the surety is a current holder
1-56 of a certificate of authority from the United States secretary of
1-57 the treasury. A third party afforded protection under Section
1-58 53.174 or 53.204, Property Code, may conclusively rely on the
1-59 statement and the record of the bond as provided in those sections.
1-60 (d) Subsection (c) of this section does not apply if the
1-61 amount of the bond in excess of $100,000 is reinsured by an entity
1-62 that is authorized and admitted in this state as a surety or
1-63 reinsurer and that is the holder of a certificate of authority from
1-64 the United States secretary of the treasury to qualify on
1-65 obligations permitted or required under federal law. A bond for an
1-66 amount that exceeds $100,000 that is made, given, tendered, or
1-67 filed under Subchapter H or I, Chapter 53, Property Code, and that
1-68 is so reinsured must state that the reinsurer of the surety is a
2-1 current holder of a certificate of authority from the United States
2-2 secretary of the treasury. A third party afforded protection under
2-3 Section 53.174 or 53.204, Property Code, may conclusively rely on
2-4 the statement and the record of the bond as provided in those
2-5 sections.
2-6 SECTION 2. Sections 53.172, 53.202, and 53.237, Property
2-7 Code, are amended to read as follows:
2-8 Sec. 53.172. Bond Requirements. The bond must:
2-9 (1) describe the property on which the liens are
2-10 claimed;
2-11 (2) refer to each lien claimed in a manner sufficient
2-12 to identify it;
2-13 (3) be in an amount that is double the amount of the
2-14 liens referred to in the bond unless the total amount claimed in
2-15 the liens exceeds $40,000, in which case the bond must be in an
2-16 amount that is the greater of 1 1/2 times the amount of the liens
2-17 or the sum of $40,000 and the amount of the liens;
2-18 (4) be payable to the parties claiming the liens;
2-19 (5) be executed by:
2-20 (A) the party filing the bond as principal; and
2-21 (B) a corporate surety authorized and admitted
2-22 to do business under the law in this state and licensed by this
2-23 state to execute the bond as surety, subject to Section 1(c),
2-24 Chapter 87, Acts of the 56th Legislature, Regular Session, 1959
2-25 (Article 7.19-1, Vernon's Texas Insurance Code); and
2-26 (6) be conditioned substantially that the principal
2-27 and sureties will pay to the named obligees or to their assignees
2-28 the amount that the named obligees would have been entitled to
2-29 recover if their claims had been proved to be valid and enforceable
2-30 liens on the property.
2-31 Sec. 53.202. Bond Requirements. The bond must:
2-32 (1) be in a penal sum at least equal to the total of
2-33 the original contract amount;
2-34 (2) be in favor of the owner;
2-35 (3) have the written approval of the owner endorsed on
2-36 it;
2-37 (4) be executed by:
2-38 (A) the original contractor as principal; and
2-39 (B) a corporate surety authorized and admitted
2-40 to do business in this state and licensed by this state to execute
2-41 bonds as surety, subject to Section 1(c), Chapter 87, Acts of the
2-42 56th Legislature, Regular Session, 1959 (Article 7.19-1, Vernon's
2-43 Texas Insurance Code); and
2-44 (5) be conditioned on prompt payment for all labor,
2-45 subcontracts, materials, specially fabricated materials, and normal
2-46 and usual extras not exceeding 15 percent of the contract price.
2-47 Sec. 53.237. Bond Requirements. The bond must be:
2-48 (1) in an amount double the amount of the claims
2-49 filed;
2-50 (2) payable to the claimants;
2-51 (3) executed by:
2-52 (A) the party filing the bond as principal; and
2-53 (B) a corporate surety authorized, admitted to
2-54 do business, and licensed by the law of this state to execute the
2-55 bond as surety, subject to Section 1(c), Chapter 87, Acts of the
2-56 56th Legislature, Regular Session, 1959 (Article 7.19-1, Vernon's
2-57 Texas Insurance Code); and
2-58 (4) conditioned that:
2-59 (A) the principal and surety will pay to the
2-60 obligees named or to their assignees the amount of the claims or
2-61 the portions of the claims proved to be liens under this
2-62 subchapter; and
2-63 (B) the principal and surety will pay all court
2-64 costs adjudged against the principal in actions brought by a
2-65 claimant on the bond.
2-66 SECTION 3. Subdivision (4), Section 2253.001, Government
2-67 Code, is amended to read as follows:
2-68 (4) "Public work contract" means a contract for
2-69 constructing, altering, or repairing a public building or carrying
2-70 out or completing any public work. The term includes a contract
3-1 for constructing, altering, or repairing a public building or
3-2 carrying out or completing any public work in which an insurance
3-3 company is fulfilling its obligation under a contract of insurance
3-4 by arranging for the replacement of a loss rather than making a
3-5 cash payment directly to the governmental entity. The term does
3-6 not include a contract with a surety company complying with an
3-7 obligation under a bond.
3-8 SECTION 4. Chapter 7, Insurance Code, is amended by adding
3-9 Article 7.03 to read as follows:
3-10 Art. 7.03. DISCRIMINATION IN RATES OR ISSUANCE. A surety
3-11 company authorized to do business in this state may not
3-12 discriminate on the basis of race, color, religion, national
3-13 origin, or sex in the setting of rates or the issuance of a bond,
3-14 undertaking, obligation, recognizance, or guarantee.
3-15 SECTION 5. This Act takes effect September 1, 1995, and
3-16 applies only to a bond made, given, tendered, or filed on or after
3-17 that date. A bond made, given, tendered, or filed before the
3-18 effective date of this Act is governed by the law as it existed
3-19 immediately before the effective date of this Act, and that law is
3-20 continued in effect for that purpose.
3-21 SECTION 6. The importance of this legislation and the
3-22 crowded condition of the calendars in both houses create an
3-23 emergency and an imperative public necessity that the
3-24 constitutional rule requiring bills to be read on three several
3-25 days in each house be suspended, and this rule is hereby suspended.
3-26 * * * * *