SRC-SLL H.B. 3158 75(R)   BILL ANALYSIS


Senate Research Center   H.B. 3158
By: Hilbert (Madla)
Economic Development
5-14-97
Engrossed


DIGEST 

The law requires that a performance bond and a payment bond be obtained
from a prime contractor prior to the start of a public works construction
bond.  These bonds are the statutory protection provided to the owner,
subcontractors, and suppliers.  Currently, the only requirement of a
surety issuing such bonds is that the surety be authorized to do business
in Texas.  This can cause problems if the surety does not have the
financial resources to complete a project or pay for the labor and
materials when the general contractor fails to do so.  This bill will
provide regulations for certain bonds executed by sureties. 

PURPOSE

As proposed, H.B. 3158 provides regulations for certain bonds executed by
sureties. 

RULEMAKING AUTHORITY

This bill does not grant any additional rulemaking authority to a state
officer, institution, or agency. 

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Section 1, Article 7.19-1, Insurance Code, by amending
Subsection (a) and by adding Subsections (c) and (d), to authorize a bond
that is made, given, tendered, or filed under Chapter 53, Property Code,
or Chapter 2253, Government Code, to be executed only by a surety company
that is authorized and admitted to write surety bonds in this state.
Requires the surety, if the amount of the bond exceeds $100,00, to meet
certain requirements.  Authorizes a party, in determining whether the
surety on the bond or the reinsurer holds a certificate of authority from
the U.S. secretary of the treasury, to conclusively rely on the list of
companies holding certificates of authority as acceptable sureties on
federal bonds and as acceptable reinsuring companies published in the
Federal Register by the U.S. Department of the Treasury covering the date
on which the bond was executed.  Authorizes certain persons to
conclusively rely on and be protected by a statement on a recorded bond or
a sworn statement by the surety that is recorded and refers to the
specific recorded bond and that states that, at the time the bond was
executed, the surety met certain requirements.  Makes a conforming change. 

SECTION 2. Amends Sections 53.172 and 53.202, Property Code, to make
conforming changes. 

SECTION 3. Amends Chapter 2253B, Government Code, by adding Section
2253.022, as follows: 

Sec.  2253.022.  PERFORMANCE AND PAYMENT BONDS; INSURED LOSS.  Sets forth
regulations regarding the use of performance and payment bonds to insure
against a loss. 

SECTION 4. Effective date: September 1, 1997.
  Makes application of this Act prospective.

SECTION 5. Emergency clause.