By Eiland H.B. No. 1853
75R7733 T
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to replacement cost coverage and adjustment of liability
1-3 limits for windstorm and hail insurance coverage through the Texas
1-4 Catastrophe Property Insurance Association.
1-5 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-6 SECTION 1. Section 8A, Article 21.49, Insurance Code, is
1-7 amended to read as follows:
1-8 Sec. 8A. Replacement cost coverage. (a) A policy of
1-9 windstorm and hail insurance issued by the Association may include
1-10 replacement cost coverage for one and two-family dwellings,
1-11 including outbuildings, as provided under the dwelling extension in
1-12 the windstorm and hail policy [as that term is defined in the
1-13 General Basis Schedule], subject to any applicable deductibles and
1-14 the limits for the coverage purchased by the insured. [The
1-15 replacement cost coverage does not apply to outdoor antennas,
1-16 aerials, carpeting, awnings, appliances, or other outdoor
1-17 equipment, whether or not attached to the insured dwelling.]
1-18 (b) If, at the time of loss, the total amount of insurance
1-19 applicable to the dwelling is equal to 80 percent or more of the
1-20 full replacement cost of the dwelling or equal to the maximum
1-21 amount of insurance otherwise available through the Association,
1-22 coverage applicable to the dwelling under the policy is extended to
1-23 include the full cost of repair or replacement, without a deduction
1-24 for depreciation. If, at the time of loss, the total amount of
2-1 insurance applicable to the dwelling is equal to less than 80
2-2 percent of the full replacement cost of the dwelling and less than
2-3 the maximum amount of insurance available through the Association,
2-4 liability for loss under the policy may not exceed the replacement
2-5 cost of that part of the dwelling damaged or destroyed, less
2-6 depreciation.
2-7 (c) The Commissioner [Board] may promulgate such rules and
2-8 regulations as necessary to implement this section.
2-9 SECTION 2. Section 8D, Article 21.49, Insurance Code, is
2-10 amended to read as follows:
2-11 Sec. 8D. Liability limits. (a) The maximum limits of
2-12 liability under a [A] policy of windstorm and hail insurance
2-13 issued by the Association under this Act shall be proposed by the
2-14 board of directors of the Association and approved by the
2-15 Commissioner. In no event shall the maximum limits of liability
2-16 for coverage on any one insurable property be less than: [provide
2-17 coverage for any one insurable property in amounts equal to]:
2-18 (1) $350,000 [$250,000] for a dwelling, including an
2-19 individually owned townhouse unit; and the corporeal movable
2-20 property located in or about the dwelling, and as an extension of
2-21 coverage, away from such premises, as provided under the windstorm
2-22 and hail insurance policy [as the term "dwelling" is defined in the
2-23 special dwelling, homeowners, or farm and ranch property owners
2-24 schedules of the General Basis Schedule];
2-25 (2) $2,192,000 [$2 million] for a building and the
2-26 corporeal movable property located in the building that is owned
2-27 by, and at least 75 percent of which is occupied by, a governmental
3-1 entity, or that is not owned by, but is wholly and exclusively
3-2 occupied by, a governmental entity; provided, however, that the
3-3 $2,192,000 liability limit shall be frozen and the indexing and
3-4 adjustments as provided for in this section shall not apply to this
3-5 liability limit until such time as the liability limit for a
3-6 paragraph (a)(4) structure and the corporeal movable property
3-7 located in that structure reaches or exceeds $2,192,000, at which
3-8 time the liability limit for a paragraph (a)(2) building and the
3-9 corporeal movable property located therein shall be indexed and
3-10 adjusted in the same manner as the risks specified in paragraph
3-11 (a)(4);
3-12 (3) [$750,000 per building for an apartment,
3-13 condominium, or townhouse defined as a risk under the apartment
3-14 house rating schedule, residential condominium rating schedule, or
3-15 townhouse unit rating schedule of the General Basis Schedule and
3-16 the corporeal movable property of the owner of the structure in
3-17 which the apartment, condominium, or townhouse is located;]
3-18 $125,000 [(4) $100,000] for individually owned corporeal movable
3-19 property located in an apartment unit, residential condominium
3-20 unit, or townhouse unit that is occupied by the owner of that
3-21 property,[;] and as an extension of coverage, away from such
3-22 premises, as provided under the windstorm and hail insurance
3-23 policy; and
3-24 (4) $1,500,000 [(5) $1 million] for a structure other
3-25 than a dwelling or a public building and the corporeal movable
3-26 property located in that structure, and as an extension of
3-27 coverage, away from such premises, as provided under the windstorm
4-1 and hail insurance policy.
4-2 (b) Liability limits for insurable property that is not
4-3 covered under Subsection (a) of this section shall be established
4-4 by the plan of operation.
4-5 (c)(1) The board of directors of the Association, not later
4-6 than September 1, 1997 and not later than each September 1
4-7 thereafter, shall propose adjustments to the nearest $1,000 in
4-8 round numbers to [The Board, as part of the annual rate hearings
4-9 conducted by the Board, shall adjust] the liability limits for
4-10 inflation, including the limits set by Subsection (a) of this
4-11 section, at a rate that reflects any change in the BOECKH [BOECK]
4-12 Index. If the BOECKH Index ceases to exist, the board of directors
4-13 of the Association shall propose adjustments to the nearest $1,000
4-14 in round numbers to the liability limits for inflation based on any
4-15 other index that accurately reflects [or other index that may
4-16 accurately reflect] changes in the cost of construction or
4-17 residential values in the catastrophe area. An adjustment in
4-18 liability limits approved by the Commissioner applies to all
4-19 policies of windstorm and hail insurance with an effective date on
4-20 or after January 1 of the year following the approval by the
4-21 Commissioner of the liability limits. The indexing of the limits
4-22 of liability shall apply [as determined by the Board] on and after
4-23 January 1,1997 [1992].
4-24 (2) [(d)] The board of directors of the Association
4-25 may propose additional increases in the limits of liability as it
4-26 deems necessary for the purposes of this Act.
4-27 (d) Within 10 days following the determination of the
5-1 proposed adjustment of liability limits under Subsection (c) of
5-2 this section, the Association shall make a written filing with the
5-3 Commissioner proposing adjustment of the liability limits which
5-4 shall include a statement of the proposed adjusted liability
5-5 limits, a statement of liability limits in effect immediately
5-6 preceding such proposed adjustment, a brief summary of the changes
5-7 to the BOECKH Index on which the proposed adjustments are based,
5-8 and a brief summary of the calculations used for making the
5-9 proposed adjustments. The Commissioner, after at least 10 days
5-10 notice and hearing, shall by order approve, disapprove, or modify
5-11 the proposed adjustments to the liability limits.
5-12 (e) Notwithstanding Subsections (b), [and] (c), and (d) of
5-13 this section, the Commissioner [Board] may not approve adjustments
5-14 of [adjust] liability limits to amounts lower than the amounts
5-15 prescribed [adopted] under Subsection (a) of this section.
5-16 (f) [(e)] A policyholder who is insured on September 1, 1997
5-17 [1991], for an amount higher than the liability limits prescribed
5-18 by Subsection (a) of this section may not be required to reduce the
5-19 insurance coverage to an amount lower than the amount in effect on
5-20 September 1, 1997 [1991].
5-21 SECTION 3. This Act takes effect September 1, 1997.
5-22 SECTION 4. The importance of this legislation and the
5-23 crowded condition of the calendars in both houses create an
5-24 emergency and an imperative public necessity that the
5-25 constitutional rule requiring bills to be read on three several
5-26 days in each house be suspended, and this rule is hereby suspended.