75R9497 DLF-F
By Hilbert H.B. No. 3158
Substitute the following for H.B. No. 3158:
By Eiland C.S.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 for an amount that exceeds $100,000 that is made,
2-15 given, tendered, or filed under Subchapter H or I, 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 that is the holder of a certificate
2-19 of 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, at the time the
2-24 bond is made, given, tendered, or filed, a holder of a certificate
2-25 of authority from the United States secretary of the treasury as
2-26 described by this subsection. A third party afforded protection
2-27 under Section 53.174 or 53.204, Property Code, may conclusively
3-1 rely on that statement and the record of the bond as provided in
3-2 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 company
3-6 or reinsurer and that is the holder of a certificate of authority
3-7 from the United States secretary of the treasury to qualify as a
3-8 surety on obligations permitted or required under federal law.
3-9 SECTION 2. Sections 53.172 and 53.202, Property Code, are
3-10 amended to read as follows:
3-11 Sec. 53.172. Bond Requirements. The bond must:
3-12 (1) describe the property on which the liens are
3-13 claimed;
3-14 (2) refer to each lien claimed in a manner sufficient
3-15 to identify it;
3-16 (3) be in an amount that is double the amount of the
3-17 liens referred to in the bond unless the total amount claimed in
3-18 the liens exceeds $40,000, in which case the bond must be in an
3-19 amount that is the greater of 1 1/2 times the amount of the liens
3-20 or the sum of $40,000 and the amount of the liens;
3-21 (4) be payable to the parties claiming the liens;
3-22 (5) be executed by:
3-23 (A) the party filing the bond as principal; and
3-24 (B) a corporate surety authorized and admitted
3-25 to do business under the law in this state and licensed by this
3-26 state to execute the bond as surety, subject to Section 1, Chapter
3-27 87, Acts of the 56th Legislature, Regular Session, 1959 (Article
4-1 7.19-1, Vernon's Texas Insurance Code); and
4-2 (6) be conditioned substantially that the principal
4-3 and sureties will pay to the named obligees or to their assignees
4-4 the amount that the named obligees would have been entitled to
4-5 recover if their claims had been proved to be valid and enforceable
4-6 liens on the property.
4-7 Sec. 53.202. Bond Requirements. The bond must:
4-8 (1) be in a penal sum at least equal to the total of
4-9 the original contract amount;
4-10 (2) be in favor of the owner;
4-11 (3) have the written approval of the owner endorsed on
4-12 it;
4-13 (4) be executed by:
4-14 (A) the original contractor as principal; and
4-15 (B) a corporate surety authorized and admitted
4-16 to do business in this state and licensed by this state to execute
4-17 bonds as surety, subject to Section 1, Chapter 87, Acts of the 56th
4-18 Legislature, Regular Session, 1959 (Article 7.19-1, Vernon's Texas
4-19 Insurance Code); and
4-20 (5) be conditioned on prompt payment for all labor,
4-21 subcontracts, materials, specially fabricated materials, and normal
4-22 and usual extras not exceeding 15 percent of the contract price.
4-23 SECTION 3. Subchapter B, Chapter 2253, Government Code, is
4-24 amended by adding Section 2253.022 to read as follows:
4-25 Sec. 2253.022. PERFORMANCE AND PAYMENT BONDS; INSURED LOSS.
4-26 (a) A governmental entity shall ensure that an insurance company
4-27 that is fulfilling its obligation under a contract of insurance by
5-1 arranging for the replacement of a loss, rather than by making a
5-2 cash payment directly to the governmental entity, furnishes or has
5-3 furnished by a contractor, in accordance with this chapter:
5-4 (1) a performance bond as described by Section
5-5 2253.021(b) for the benefit of the governmental entity; and
5-6 (2) a payment bond as described in Section 2253.021(c)
5-7 for the benefit of the beneficiaries described by that subsection.
5-8 (b) The bonds required to be furnished under Subsection (a)
5-9 must be furnished before the contractor begins work.
5-10 (c) It is an implied obligation under a contract of
5-11 insurance for the insurance company to furnish the bonds required
5-12 by this section.
5-13 (d) To recover in a suit with respect to which the insurance
5-14 company has furnished or caused to be furnished a payment bond, the
5-15 only notice required of a payment bond beneficiary is the notice
5-16 given to the surety in accordance with Subchapter C.
5-17 (e) This section does not apply to a governmental entity
5-18 when a surety company is complying with an obligation under a bond
5-19 that had been issued for the benefit of the governmental entity.
5-20 (f) If the payment bond required by Subsection (a) is not
5-21 furnished, the governmental entity is subject to the same liability
5-22 that a surety would have if the surety had issued the payment bond
5-23 and the governmental entity had required the bond to be provided.
5-24 To recover in a suit under this subsection, the only notice
5-25 required of a payment bond beneficiary is a notice given to the
5-26 governmental entity, as if the governmental entity were the surety,
5-27 in accordance with Subchapter C.
6-1 SECTION 4. This Act takes effect September 1, 1997, and
6-2 applies only to a bond made, given, tendered, or filed on or after
6-3 that date. A bond made, given, tendered, or filed before the
6-4 effective date of this Act is governed by the law as it existed
6-5 immediately before the effective date of this Act, and that law is
6-6 continued in effect for that purpose.
6-7 SECTION 5. The importance of this legislation and the
6-8 crowded condition of the calendars in both houses create an
6-9 emergency and an imperative public necessity that the
6-10 constitutional rule requiring bills to be read on three several
6-11 days in each house be suspended, and this rule is hereby suspended.