C.S.H.B. 922 78(R)    BILL ANALYSIS


C.S.H.B. 922
By: Eiland
Licensing & Administrative Procedures
Committee Report (Substituted)



BACKGROUND AND PURPOSE 

There are a number of cases in Texas involving various establishments who
serve alcoholic beverages to intoxicated individuals who may injure
another person while driving under the influence of alcohol. Dram shop
liability laws are designed to hold servers of alcoholic beverages
responsible for harm that their intoxicated patrons cause to other people.
However, dram shop liability laws do not require an establishment to carry
liability insurance. Some of the establishments that do carry such
insurance do so under what is known as a "shell corporation," which holds
few or no assets to satisfy a judgment. 

All alcoholic beverage license and permit holders are required to maintain
a conduct surety bond in the amount of $5,000 or $10,000 if the licensee
or permittee is within 1,000 feet of a public school for the first 3 years
of operation.  Additionally, Sections 61.13(e)(2) and 11.11(e)(2) of the
Alcoholic Beverage Code requires license and permit holders to maintain a
conduct surety bond if they are subject to a pending license or permit
revocation proceeding.  The Texas Alcoholic Beverage Commission has had
difficulty administering and enforcing this requirement. 
          
CSHB 922 removes the requirement for alcoholic beverage license and permit
holders to maintain a conduct surety bond during a pending license or
permit revocation proceeding. The substitute also requires a person who
holds a license or permit to sell alcoholic beverages to maintain
liability insurance for damages arising out of the operation of the
licensed or permitted premises. 


RULEMAKING AUTHORITY

It is the committee's opinion that rulemaking authority is expressly
granted to the Texas Alcoholic Beverage Commission in SECTION 2 (Section
11.13, Alcoholic Beverage Code), SECTION 4 (Section 61.15, Alcoholic
Beverage Code) of this bill. 

ANALYSIS

Amends Section 11.11(e) and 61.15(e), Alcoholic Beverage Code by deleting
language qualifying surety bond permits by subjects involving in pending
license or permit revocation proceedings. 

Amends Subchapter A, Chapter 11, Alcoholic Beverage Code by adding Section
11.13 and Subchapter A, Chapter 61, Alcoholic Beverage Code by adding
Section 61.15 and entitles both sections "Liability Insurance." Both
sections prohibit a person from holding a permit or a license allowing the
person to sell alcoholic beverages for on-premises consumption, including
a permit or license that is held in conjunction with a food and beverage
certificate, unless the person maintains a liability insurance policy
issued by an insurance company authorized to write liability insurance in
this state that will pay, on the person's behalf, amounts the person
becomes obligated to pay as damages arising out of the operation of the
licensed or permitted premises. The minimum amounts of required insurance
coverage are $100,000 for each person to whom damages covered by the
policy are owed and $300,000 for each single occurrence giving rise to
damages covered by the policy.  

The Texas Alcoholic Beverage Commission (TABC) is required to adopt rules,
no later than December 31, 2003, relating to standards for TABC's approval
of the form of a required liability insurance policy, the method for
filing proof of insurance and obtaining TABC's approval, and verification
by TABC of a license or permit holder's continued maintenance of the
required  insurance coverage. 


EFFECTIVE DATE

September 1, 2003. The Act applies to a person who applies for or holds a
permit or license for the sale of alcoholic beverages for on-premises
consumption, including a permit or license that is held in conjunction
with a food and beverage certificate, on or after January 1, 2004. 


COMPARISON OF ORIGINAL TO SUBSTITUTE

The substitute differs from the original by repealing Sections 61.13(e)(2)
and 11.11(e)(2) of the Alcoholic Beverage Code removing the requirement
for alcoholic beverage license and permit holders to maintain a conduct
surety bond during a pending license or permit revocation proceeding.