By Hilbert, Wohlgemuth H.B. No. 3158
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to certain bonds executed by sureties.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Section 1, Chapter 87, Acts of the 56th
1-5 Legislature, Regular Session, 1959 (Article 7.19-1, Vernon's Texas
1-6 Insurance Code), is amended by amending Subsection (a) and by
1-7 adding Subsections (c) and (d) to read as follows:
1-8 (a) Whenever any bond, undertaking, recognizance or other
1-9 obligation is, by law or the charter, ordinances, rules and
1-10 regulations of a municipality, board, body, organization, court,
1-11 judge or public officer, required or permitted to be made, given,
1-12 tendered or filed, and whenever the performance of any act, duty or
1-13 obligation, or the refraining from any act, is required or
1-14 permitted to be guaranteed, such bond, undertaking, obligation,
1-15 recognizance or guarantee may be executed by a surety company duly
1-16 authorized to do business in this state; and, except as provided by
1-17 Subsection (b), (c), or (d) of this section, such execution by such
1-18 company of such bond, undertaking, obligation, recognizance or
1-19 guarantee shall be in all respects a full and complete compliance
1-20 with every law, charter, rule or regulation that such bond,
1-21 undertaking, obligation, recognizance or guarantee shall be
1-22 executed by one surety or by one or more sureties, or that such
1-23 sureties shall be residents, or householders, or freeholders, or
1-24 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 that is made, given, tendered, or filed under
2-15 Chapter 53, Property Code, or Chapter 2253, Government Code, may be
2-16 executed only by a surety company that is authorized and admitted
2-17 to write surety bonds in this state. If the amount of the bond
2-18 exceeds $100,000, the surety must also:
2-19 (1) hold a certificate of authority from the United
2-20 States secretary of the treasury to qualify as a surety on
2-21 obligations permitted or required under federal law; or
2-22 (2) have obtained reinsurance for any liability in
2-23 excess of $100,000 from a reinsurer that is authorized and admitted
2-24 as a reinsurer in this state and is the holder of a certificate of
2-25 authority from the United States secretary of the treasury to
2-26 qualify as a surety or reinsurer on obligations permitted or
2-27 required under federal law.
3-1 (d) In determining whether the surety on the bond or the
3-2 reinsurer holds a certificate of authority from the United States
3-3 secretary of the treasury, a party may conclusively rely on the
3-4 list of companies holding certificates of authority as acceptable
3-5 sureties on federal bonds and as acceptable reinsuring companies
3-6 published in the Federal Register by the United States Department
3-7 of the Treasury covering the date on which the bond was executed.
3-8 A purchaser, insurer of title, or lender acquiring or insuring an
3-9 interest or title to real property may also conclusively rely on
3-10 and is protected by a statement on a recorded bond or a sworn
3-11 statement by the surety that is recorded and refers to the specific
3-12 recorded bond and that states that, at the time the bond was
3-13 executed, the surety:
3-14 (1) was a holder of a certificate of authority from
3-15 the United States secretary of the treasury to qualify as a surety
3-16 on obligations permitted or required under federal law; or
3-17 (2) had reinsured any liability in excess of $100,000
3-18 by a reinsurer holding a certificate of authority described by
3-19 Subdivision (1) of this subsection.
3-20 SECTION 2. Sections 53.172 and 53.202, Property Code, are
3-21 amended to read as follows:
3-22 Sec. 53.172. Bond Requirements. The bond must:
3-23 (1) describe the property on which the liens are
3-24 claimed;
3-25 (2) refer to each lien claimed in a manner sufficient
3-26 to identify it;
3-27 (3) be in an amount that is double the amount of the
4-1 liens referred to in the bond unless the total amount claimed in
4-2 the liens exceeds $40,000, in which case the bond must be in an
4-3 amount that is the greater of 1 1/2 times the amount of the liens
4-4 or the sum of $40,000 and the amount of the liens;
4-5 (4) be payable to the parties claiming the liens;
4-6 (5) be executed by:
4-7 (A) the party filing the bond as principal; and
4-8 (B) a corporate surety authorized and admitted
4-9 to do business under the law in this state and licensed by this
4-10 state to execute the bond as surety, subject to Section 1, Chapter
4-11 87, Acts of the 56th Legislature, Regular Session, 1959 (Article
4-12 7.19-1, Vernon's Texas Insurance Code); and
4-13 (6) be conditioned substantially that the principal
4-14 and sureties will pay to the named obligees or to their assignees
4-15 the amount that the named obligees would have been entitled to
4-16 recover if their claims had been proved to be valid and enforceable
4-17 liens on the property.
4-18 Sec. 53.202. Bond Requirements. The bond must:
4-19 (1) be in a penal sum at least equal to the total of
4-20 the original contract amount;
4-21 (2) be in favor of the owner;
4-22 (3) have the written approval of the owner endorsed on
4-23 it;
4-24 (4) be executed by:
4-25 (A) the original contractor as principal; and
4-26 (B) a corporate surety authorized and admitted
4-27 to do business in this state and licensed by this state to execute
5-1 bonds as surety, subject to Section 1, Chapter 87, Acts of the 56th
5-2 Legislature, Regular Session, 1959 (Article 7.19-1, Vernon's Texas
5-3 Insurance Code); and
5-4 (5) be conditioned on prompt payment for all labor,
5-5 subcontracts, materials, specially fabricated materials, and normal
5-6 and usual extras not exceeding 15 percent of the contract price.
5-7 SECTION 3. Subchapter B, Chapter 2253, Government Code, is
5-8 amended by adding Section 2253.022 to read as follows:
5-9 Sec. 2253.022. PERFORMANCE AND PAYMENT BONDS; INSURED LOSS.
5-10 (a) A governmental entity shall ensure that an insurance company
5-11 that is fulfilling its obligation under a contract of insurance by
5-12 arranging for the replacement of a loss, rather than by making a
5-13 cash payment directly to the governmental entity, furnishes or has
5-14 furnished by a contractor, in accordance with this chapter:
5-15 (1) a performance bond as described by Section
5-16 2253.021(b) for the benefit of the governmental entity; and
5-17 (2) a payment bond as described in Section 2253.021(c)
5-18 for the benefit of the beneficiaries described by that subsection.
5-19 (b) The bonds required to be furnished under Subsection (a)
5-20 must be furnished before the contractor begins work.
5-21 (c) It is an implied obligation under a contract of
5-22 insurance for the insurance company to furnish the bonds required
5-23 by this section.
5-24 (d) To recover in a suit with respect to which the insurance
5-25 company has furnished or caused to be furnished a payment bond, the
5-26 only notice required of a payment bond beneficiary is the notice
5-27 given to the surety in accordance with Subchapter C.
6-1 (e) This section does not apply to a governmental entity
6-2 when a surety company is complying with an obligation under a bond
6-3 that had been issued for the benefit of the governmental entity.
6-4 (f) If the payment bond required by Subsection (a) is not
6-5 furnished, the governmental entity is subject to the same liability
6-6 that a surety would have if the surety had issued the payment bond
6-7 and the governmental entity had required the bond to be provided.
6-8 To recover in a suit under this subsection, the only notice
6-9 required of a payment bond beneficiary is a notice given to the
6-10 governmental entity, as if the governmental entity were the surety,
6-11 in accordance with Subchapter C.
6-12 SECTION 4. This Act takes effect September 1, 1997, and
6-13 applies only to a bond made, given, tendered, or filed on or after
6-14 that date. A bond made, given, tendered, or filed before the
6-15 effective date of this Act is governed by the law as it existed
6-16 immediately before the effective date of this Act, and that law is
6-17 continued in effect for that purpose.
6-18 SECTION 5. The importance of this legislation and the
6-19 crowded condition of the calendars in both houses create an
6-20 emergency and an imperative public necessity that the
6-21 constitutional rule requiring bills to be read on three several
6-22 days in each house be suspended, and this rule is hereby suspended.