This website will be unavailable from Friday, April 26, 2024 at 6:00 p.m. through Monday, April 29, 2024 at 7:00 a.m. due to data center maintenance.
79R7882 T
By: Eiland H.B. No. 2616
A BILL TO BE ENTITLED
AN ACT
relating to the operation of the Texas Windstorm Insurance
Association.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. The heading to Article 21.49, Insurance Code, is
amended to read as follows:
Article 21.49. Texas Windstorm Insurance Association
[Catastrophe Property Insurance Pool] Act
SECTION 2. Section 1, Article 21.49, Insurance Code is
amended to read as follows:
Sec. 1. It is hereby declared by the Legislature that an
adequate market for windstorm, hail and fire insurance is necessary
to the economic welfare of the State of Texas and that without such
insurance the orderly growth and development of the State of Texas
would be severely impeded. It is therefore the purpose of this
Article [Act] to provide a method whereby adequate windstorm, hail
and fire insurance may be obtained in certain designated portions
of the State of Texas.
SECTION 3. Section 2, Article 21.49, Insurance Code is
amended to read as follows:
Sec. 2. This Article [Act] shall be known as the "Texas
Windstorm Insurance Association Act."
SECTION 4. Section 3, Article 21.49, Insurance Code, is
amended by amending subsections (a), (b), (c), (d) (e), (f), (h),
(i), (j), (k), and (o) and adding subsection (p) to read as follows:
Sec. 3. In this Article [Act], unless the context clearly
dictates to the contrary:
(a) "Commissioner [Board]" means the Commissioner [State
Board] of Insurance of the State of Texas.
(b) "Association" means the Texas Windstorm Insurance
Association as established pursuant to the provisions of this
Article [Act].
(c) "Plan of Operation" means the plan for providing Texas
windstorm and hail insurance in a catastrophe area and Texas fire
and explosion insurance in an inadequate fire insurance area which
plan has been adopted by the Commissioner [Board] for operation by
the Association pursuant to the provisions of this Article [Act],
which plan may, among other things, provide for limits of liability
for each structure insured, and/or the corporeal movable property
located therein.
(d) "Texas Windstorm and Hail Insurance" means deductible
insurance against direct loss, and indirect losses resulting from a
direct loss, to insurable property as a result of windstorm or hail,
as such terms shall be defined and limited in policies and forms
approved by the Commissioner [State Board]of Insurance.
(e) "Texas Fire and Explosion Insurance" means insurance
against direct loss to insurable property as a result of fire and
explosion as such terms shall be defined and limited in policies and
forms approved by the Commissioner [State Board] of Insurance.
(f) "Insurable Property" means immovable property at fixed
locations in a catastrophe area or corporeal movable property
located therein (as may be designated in the plan of operation)
which property is determined by the Association, pursuant to the
criteria specified in the plan of operation to be in an insurable
condition against windstorm, hail and/or fire and explosion as
appropriate, as determined by normal underwriting standards;
provided, however, that insofar as windstorm and hail insurance is
concerned, any structure located within a catastrophe area,
commenced on or after the 30th day following the publication of the
plan of operation, not built or continuing in compliance with
building specifications set forth in the plan of operation shall
not be an insurable risk under this Article [Act] except as
otherwise provided under this Article [Act]. A structure, or an
addition thereto, which is constructed in conformity with plans and
specifications that comply with the specifications set forth in the
plan of operation at the time construction commences shall not be
declared ineligible for windstorm and hail insurance as a result of
subsequent changes in the building specifications set forth in the
plan of operation. Except as otherwise provided by this
subsection, if repair of damage to a structure involves replacement
of items covered in the building specifications as set forth in the
plan of operation, such repairs must be completed in a manner to
comply with such specifications for the structure to continue
within the definition of Insurable Property for windstorm and hail
insurance. If repair to a structure, other than a roof repair that
exceeds 100 square feet, is less than five percent of the amount of
total property coverage on the structure, the repairs may be
completed in a manner that returns the structure to its condition
immediately before the loss without affecting the eligibility of
the structure to qualify as insurable property. Nothing in this
Article [Act] shall preclude special rating of individual risks as
may be provided in the plan of operation. For purposes of this
Article [Act], all residential structures, other than a
condominium, apartment, duplex, or other multifamily residence, or
a hotel or resort facility, which are located within those areas
designated as units under the federal Coastal Barrier Resources Act
(Public Law 97-348) [FN1] and for which a building permit or plat
has been filed with the municipality, the county, or the United
States Army Corps of Engineers before the effective date of S.B. No.
14, Acts of the 78th Legislature, Regular Session, 2003, are
insurable property.
(h) "Catastrophe Area" means a city or a part of a city or a
county or a part of a county in which it may be determined by the
Commissioner [commissioner], after notice of not less than ten(10)
days and [a] hearing if a hearing is requested by any person within
the ten (10) day notice period, that windstorm and hail insurance is
not reasonably available to a substantial number of owners of
insurable property within that city or a part of that city or a
county or a part of that county, due to such insurable property
being located within a city or a part of that city or a county or a
part of that county that is subject to unusually frequent and severe
damage resulting from windstorms and/or hailstorms. Such
designation shall be revoked by the Commissioner [commissioner] if
the Commissioner [commissioner] determines, after notice of not
less than ten (10) [10] days and [a] hearing if such hearing is
requested by any person within the ten (10) day notice period, that
windstorm and hail insurance in such catastrophe area is no longer
reasonably unavailable to a substantial number of owners of
insurable property within such designated city or a part of that
city or county or a part of that county. If the Association shall
determine that windstorm and hail insurance is no longer reasonably
unavailable to a substantial number of owners of insurable property
in any designated catastrophe area or areas, then the Association
may request in writing that the Commissioner [commissioner] revoke
the designation of any or all of such catastrophe areas and, after
notice of not less than ten (10) [10] days and [a] hearing if such
hearing is requested by any person within the ten (10) day notice
period, but within 30 days of the [such] hearing or expiration of
the notice period, the Commissioner [commissioner] shall either
approve or reject the Association's request and shall, if such
request be approved, revoke such designation or designations.
(i) "Inadequate Fire Insurance Area" means a city or county
which is, or is within an area, designated as a catastrophe area, as
defined in Paragraph (h), above, and in which it may be determined
by the Commissioner [Board], after notice of not less than ten (10)
[10] days and [a] hearing if such hearing is requested by any person
within the ten (10) day notice period, that fire and explosion
insurance is not reasonably available to a substantial number of
owners of insurable property within such city or county. Such
designation shall be revoked by the Commissioner [Board] if it
determines, after ten (10) [10] days' notice and [a] hearing if such
hearing is requested by any person within the ten (10) day notice
period, that fire and explosion insurance in such inadequate fire
insurance area is no longer reasonably unavailable to a substantial
number of owners of insurable property within such designated city
or county. If the Association shall determine that fire and
explosion insurance is no longer reasonably unavailable to a
substantial number of owners of insurable property in any
designated inadequate fire insurance area or areas, then the
Association may request in writing that the Commissioner [Board]
revoke the designation of any or all such inadequate fire insurance
areas, and, after notice of not less than ten (10) [10] days and [a]
hearing if such hearing is requested by any person within the ten
(10) day notice period, but within 30 days of the [such] hearing or
the expiration of the notice period, the Commissioner [Board] shall
either approve or reject the Association's request and shall, if
such request is approved, revoke such designation or designations.
(j) "Insurance" as hereinafter used in this Article [Act]
shall mean the types of insurance described in Subsections
[Paragraphs] (d) and (e) of this Section 3.
(k) "Insurers" means all property insurers authorized to
transact property insurance in this State and specifically includes
and makes this Article [Act] applicable to county mutual companies,
Lloyds and reciprocal or interinsurance exchanges, but shall not
include (a) farm mutual insurance companies as authorized in
Chapter 911 [16] of this Code; (b) county mutual fire insurance
companies which are writing exclusively industrial fire insurance
policies as defined in Article 912.310 [17.02] of this Code; and (c)
any companies now operating under Chapters 12 and 13 of Title 78 of
the Revised Civil Statutes of Texas, 1925, as amended, which have
heretofore been repealed.
(o) "New building code" means any new building standard,
specification, or guideline adopted by the Commissioner
[commissioner] after May 1, 1997, that must be met before any new
residential construction qualifies for a certificate of compliance
that is evidence of insurability of the structure by the
Association.
(p) "Department" means the Texas Department of Insurance.
SECTION 5. Section 4, Article 21.49, Insurance Code, is
amended by amending subsections (c) and (d) to read as follows:
(c) No part of the net earnings of the Association
[association] may inure to the benefit of any private shareholder
or individual. The assets of the Association [association] may not
be used for or diverted to any purpose other than to:
(1) satisfy, in whole or in part, the liability of the
Association [association] regarding a claim made on a policy
written by the Association [association];
(2) make investments authorized under applicable law;
(3) pay reasonable and necessary administrative
expenses incurred in connection with the establishment and
operation of the Association [association] and the processing of
claims against the Association [association]; or
(4) make remittances under the laws of this state to be
used by this state to:
(A) pay claims on policies written by the
Association [association];
(B) purchase reinsurance covering losses under
those policies; or
(C) prepare for or mitigate the effects of
catastrophic natural events.
(d) On dissolution of the Association [association], all
assets of the Association [association] revert to this state's
general revenue fund [state].
SECTION 6. Section 5, Article 21.49, Insurance Code, is
amended to read as follows:
Sec. 5. (a) The Association shall, pursuant to the
provisions of this Article [Act] and the plan of operation, and with
respect to insurance on insurable property, have the power on
behalf of its members to cause to be issued policies of insurance to
applicants, to assume reinsurance from its members, and to cede
reinsurance to its members and to purchase reinsurance on behalf of
its members.
(b) All members of the Association shall participate in the
assessments of the Association [its writings, expenses, profits and
losses] in the proportion that the net direct premiums of such
member written in this State during the preceding calendar year
bears to the aggregate net direct premiums written in this State by
all members of the Association, as furnished to the Association by
the Commissioner [Board] after review of annual statements, other
reports and other statistics the Commissioner [Board] shall deem
necessary to provide the information herein required and which the
Commissioner [Board] is hereby authorized and empowered to obtain
from any member of the Association, provided, however, that a
member shall, in accordance with the plan of operation, be entitled
to receive credit for similar insurance voluntarily written in the
area designated by the Commissioner [Board] and its participation
in the assessments of [writings in] the Association shall be
reduced in accordance with the provisions of the plan of operation.
Each member's participation in the Association shall be determined
annually in the manner provided in the plan of operation. For
purposes of determining participation in the Association, two or
more members having a common ownership or operating in this State
under common management or control shall be treated as if they
constituted a single member and also shall include the net direct
premiums, as defined by this article, of any affiliated insurance
company that is under such common management or control including
affiliated insurance companies that are not authorized to transact
property insurance in this State. Any insurer authorized to write
and engaged in writing any insurance, the writing of which required
such insurer to be a member of the Association, who becomes
authorized to engage in writing such insurance shall become a
member of the Association on the 1st day of January immediately
following such authorization and the determination of such
insurer's participation in the Association shall be made as of the
date of such membership in the same manner as for all other members
of the Association.
(c) The plan of operation of the Association shall provide
for the efficient, economical, fair, and nondiscriminatory
administration of the Association. The plan of operation may
contain provisions allowing the Association to change its methods
and procedures for doing business in ways that allow the
Association to implement new technologies designed to make the
Association up to date and efficient in its operations. The
Commissioner [Board] by rule shall adopt the plan of operation with
the advice of the board of directors of the Association. The
Association may present recommended changes in the plan of
operation to the Commissioner [Board] [at periodic hearings
conducted by the Board for that purpose, or at hearings relating to
property and casualty insurance rates. The Association must
present a proposed change to the Board] in writing in the manner
prescribed by the Commissioner [Board]. A change proposed by the
Association does not take effect unless adopted by the Commissioner
[Board] by rule.
(d) The plan of operation must include:
(1) a plan for the equitable assessment of the members
of the Association to defray losses and expenses;
(2) underwriting standards;
(3) procedures for the acceptance and cession of
reinsurance;
(4) procedures for determining the amount of insurance
to be provided to specific risks;
(5) time limits and procedures for processing
applications for insurance; and
(6) other provisions as deemed necessary by the
Commissioner [Board] to carry out the purposes of this Article
[Act].
(e) The Commissioner [Board] may develop programs to
improve the efficient operation of the Association, including a
program designed to create incentives for insurers to write
windstorm and hail insurance voluntarily to cover property located
in a catastrophe area, especially property located on the barrier
islands.
(f) Any interested person may petition the Commissioner
[Board] to modify the plan of operation in accordance with the
Administrative Procedure [and Texas Register] Act (Government Code §
2001.001 et seq.). [(Article 6252-13a, Vernon's Texas Civil
Statutes).[FN2]]
(g) The board of directors of the Association shall be [is
responsible and accountable to the Board. The board of directors
is] composed of nine members appointed by the Commissioner as
follows:
(1) five members who represent the interests of
insurers [representatives of different insurers who are members of
the Association who shall be elected by members as provided in the
plan of operation];
(2) two representatives of the general public [,
nominated by the office of public insurance counsel,] who, as of the
date of the appointment, reside in a catastrophe area and who are
policyholders, as of the date of the appointment, of the
Association; and
(3) two general lines property and casualty [local
recording] agents licensed under this Code with demonstrated
experience in the Association, and whose principal offices, as of
the date of the appointment, are located in a catastrophe area.
(h) To be eligible to serve on the board of directors as a
representative of insurers, a person must be a full-time employee
of an authorized insurer that is a member of the Association.
(i) Any member of the board of directors may be removed by
the Commissioner without cause and the Commissioner shall appoint a
replacement for such member subject to the board of directors
composition requirements set forth in Sec. 5(g) above.
(j) [(h)] Members of the board of directors of the
Association serve three-year staggered terms [, with the terms of
three members expiring on the third Tuesday of March of each year.]
A person may hold a seat on the board of directors for not more than
three consecutive full terms, not to exceed nine years.
(k) [(i)] The persons appointed as provided by Subsections
(g)(2) and (g)(3) of this section must be from different counties.
(l) [(j)] The board of directors of the Association shall
elect an executive committee consisting of a chairman,
vice-chairman, and secretary-treasurer from its membership. At
least one of those officers must be a member appointed under
Subsection (g)(2) or Subsection (g)(3) of this section.
(m) [(k)] Except for an emergency meeting of the
Association or the board of directors of the Association, the
Association shall notify the Commissioner [Board] not later than
the 11th day before the date of each meeting of the board of
directors of the Association or a meeting of the members of the
Association. Except for closed or executive sessions authorized by
Government Code §551.001 et seq., [Section 2, Chapter 271, Acts of
the 60th Legislature, Regular Session, 1967 (Article 6252-17,
Vernon's Texas Civil Statutes), [FN2]] meetings of the board of
directors of the Association and members of the Association shall
be open to any member of the Board or the member's designated
representative and to members of the public. Notice of meetings of
the Association or board of directors of the Association shall be
given as provided by Government Code §551.001 et seq. [Chapter 271,
Acts of the 60th Legislature, Regular Session, 1967 (Article
6252-17, Vernon's Texas Civil Statutes).]
(n) [(l)] If an occurrence or series of occurrences within
the defined catastrophe area results in insured losses that result
in assessments, payments from the catastrophe reserve trust fund
established under Section 8(i) of this Article, or claims under a
reinsurance contract approved under Section 8(h) of this Article
[tax credits under Section 19(4) of this article in a single
calendar year], the Association shall immediately notify the
Commissioner [Board] of that fact. The Commissioner [Board] on
receiving notice shall immediately notify the Governor and
appropriate committees of each house of the Legislature of the
amount of insured losses eligible for payments using assessment
funds, catastrophe reserve trust funds, or reinsurance proceeds
[tax credits under Section 19(4) of this article].
(o) [(m)] After January 1, 2004, for geographic areas
specified by the Commissioner [commissioner], the Commissioner
[commissioner] by rule may supplement the building specifications
in the plan of operation with the structural provisions of the
International Residential Code for one- and two-family dwellings,
as published by the International Code Council, or by an analogous
entity recognized by the Department [department]. For those
specified geographic areas, the Commissioner [commissioner] by
rule may adopt subsequent editions of that code and may adopt any
supplements published by the International Code Council and
amendments to that code.
(p) As an exception to Chapter 551 of the Government Code
and other law, members of the board of directors may meet by
telephone conference call, video conference or other similar
telecommunication methods. The board may use telephone conference
or other similar telecommunication methods for purposes of
establishing a quorum, for purposes of voting, and for any other
meeting purpose in accordance with this subsection. This subsection
applies without regard to the subject matters discussed or
considered by the members of the board at the meeting.
(q) A meeting held by use of telephonic conference, video
conference, or other similar telecommunication device:
(1) is subject to the notice requirements applicable
to other meetings;
(2) must specify in the notice of the meeting the
location of the meeting;
(3) must be audible to the public at the location
specified in the notice of the meeting as the location of the
meeting; and
(4) must provide two-way audio communication between
all members of the board attending the meeting during the entire
meeting, and if the two-way audio communication link with members
attending the meeting is disrupted at any time so that a quorum of
the board is no longer participating in the meeting, the meeting may
not continue until the two-way audio communication link is
reestablished.
SECTION 7. The heading to Section 5A, Article 21.49,
Insurance Code, is amended read as follows:
Commissioner [Board] Orders
SECTION 8. Section 5A, Article 21.49, Insurance Code, is
amended read as follows:
Sec. 5A. (a) After notice and opportunity for a hearing as
provided in Subsection (b) of this section, the Commissioner
[Board] may issue any orders which he or she [it] considers
necessary to carry out the purposes of this Act relating
[including, but not limited] to[,] maximum rates, competitive
rates, and policy forms.
(b) Before an order issued pursuant to subsection 5A(a) of
this Article is adopted by the Commissioner [Board], he or she [it]
shall post notice of [a hearing on] the order at the Secretary of
State's office in the State Capitol and shall hold a hearing to
consider the proposed order if such hearing is requested by any
person within ten (10) days of notice. Any person may appear and
testify for or against the adoption of the order at such hearing.
SECTION 9. The heading to Section 5B, Article 21.49,
Insurance Code, is amended read as follows:
Examination of Association [association]
SECTION 10. Section 5B, Article 21.49, Insurance Code, is
amended to read as follows:
Sec. 5B. (a) The Association [association] is subject to
Articles 1.15 and 1.16 of this code.
(b) A final examination report of the Association resulting
from an examination under this section is a public record and
available to the public at the Commissioner's [Board's] offices
pursuant to the open records act, Government Code §552.001 et seq.
[law, Chapter 424, Acts of the 63rd Legislature, Regular Session,
1973 (Article 6252-17a, Vernon's Texas Civil Statutes). [FN3]]
[(c) Repealed by Acts 1997, 75th Leg., ch. 879, § 10(2), eff. Sept.
1, 1997.]
SECTION 11. Section 6, Article 21.49, Insurance Code, is
amended to read as follows:
Sec. 6. (a) Any person having an insurable interest in
insurable property located in an area designated by the
Commissioner [Board] shall be entitled to apply to the Association
for insurance provided for under the plan of operation and for an
inspection of the property under such rules [and regulations],
including an inspection fee, if any, as determined by the Board of
Directors of the Association and approved by the Commissioner
[State Board] of Insurance. The term "insurable interest" as used
in this subsection shall be deemed to include any lawful and
substantial economic interest in the safety or preservation of
property from loss, destruction or pecuniary damage. Application
shall be made on behalf of the applicant by a general lines property
and casualty agent [Local Recording Agent] and shall be submitted
on forms prescribed by the Association. [The application shall
contain a statement as to whether or not the applicant has or will
submit the premium in full from personal funds, or if not, to whom a
balance is or will be due.]
(b) If the Association determines that the property is
insurable, the Association, upon payment of the premium, shall
cause to be issued a policy of insurance as may be provided in the
plan for a term of one year.
In the event an agent or some other person, firm, or
corporation shall finance the payment of all or a portion of the
premium and there is a balance due for the financing of such premium
and such balance, or any installment thereof, is not paid within 10
days after the due date, the agent or other person, firm, or
corporation to whom such balance is due may request cancellation of
the insurance by returning the policy, with proof that the insured
was notified of such return, or by requesting the Association to
cancel such insurance by notice mailed to the insured and any others
shown in the policy as having an insurable interest in the property.
Upon completion of cancellation, the Association shall refund the
unearned premium, less any minimum retained premium set forth in
the plan of operation, to the person, firm, or corporation to whom
the unpaid balance is due. In the event an insured requests
cancellation of insurance, the Association shall make refund of
such unearned premium payable to the insured and the holder of an
unpaid balance. The general lines property and casualty agent
[Local Recording Agent], who submitted the application, shall
refund the commission on any unearned premium in the same manner.
(c) Any policy issued pursuant to the provisions of this
Article [Act] may be renewed annually, upon application [therefor],
so long as the property continues to meet the definition of
"insurable property" set forth in Section 3 of this Article [Act].
SECTION 12. Section 6A, Article 21.49, Insurance Code, is
amended read as follows:
Sec. 6A. (a) Except as otherwise provided by this
Subsection, all structures that are constructed or repaired or to
which additions are made on or after January 1, 1988, to be
considered insurable property for windstorm and hail insurance from
the Association, must be inspected or approved by the Department
[Board] for compliance with the plan of operation. After January 1,
2004, for geographic areas specified by the Commissioner
[commissioner], the Commissioner [commissioner] by rule shall
adopt the 2003 International Residential Code for one- and
two-family dwellings published by the International Code Council.
For those geographic areas, the Commissioner [commissioner] by rule
may adopt a subsequent edition of that code and may adopt any
supplements published by the International Code Council and
amendments to the code. A structure constructed, repaired, or to
which additions were made before January 1, 1988, that is located in
an area covered at the time by a building code recognized by the
Association shall be considered an insurable property for windstorm
and hail insurance from the Association without compliance with the
inspection or approval requirements of this Section or the plan of
operation. A structure constructed, repaired, or to which
additions were made before January 1, 1988, that is located in an
area not covered by a building code recognized by the Association
shall be considered an insurable property for windstorm and hail
insurance from the Association without compliance with the
inspection or approval requirements of this Section or the plan of
operation if that structure has been previously insured by a
licensed insurance company authorized to do business in this State
and the risk is in essentially the same condition as when previously
insured, except for normal wear and tear, and without any
structural change other than a change made according to code.
Evidence of previous insurance includes a copy of a previous
policy, copies of canceled checks or agent's records that show
payments for previous policies, and a copy of the title to the
structure or mortgage company records that show previous policies.
After January 1, 2004, a person must submit a notice of a windstorm
inspection to the unit responsible for certification of windstorm
inspections at the Department [department] before beginning to
construct, alter, remodel, enlarge, or repair a structure.
(b) The Department [Board] shall issue for each structure
that qualifies a certificate of compliance that is evidence of
insurability of the structure by the Association.
[(c) Repealed by Acts 2003, 78th Leg., ch. 206, § 9.06, eff.
Jan. 1, 2004.]
(c) [(d)] A windstorm inspection may only be performed by a
qualified inspector. For purposes of this article, a "qualified
inspector" includes:
(1) a person determined by the Department [department]
to be qualified to perform building inspections because of training
or experience;
(2) a licensed professional engineer meeting the
requirements of the rules adopted by the Commissioner
[commissioner] for appointment to conduct windstorm inspections;
and
(3) an inspector who is certified by the International
Code Council, the Building Officials and Code Administrators
International, Inc., the International Conference of Building
Officials, or the Southern Building Code Congress International,
Inc., who has certifications as a buildings inspector and coastal
construction inspector, and who also complies with other
requirements specified by rule by the Commissioner [commissioner].
A qualified inspector must be approved and appointed or employed by
the Department [department] to perform building inspections. The
Department [department] may charge a reasonable fee for the filing
of applications and determining the qualifications of persons for
appointment as qualified inspectors.
[(e) Repealed by Acts 2003, 78th Leg., ch. 206, § 9.06, eff.
Jan. 1, 2004.]
[(f) Repealed by Acts 1999, 76th Leg., ch. 592, § 2, eff.
Sept. 1, 1999.]
(d) [(g)] The Commissioner [Board] may make agreements and
contracts as necessary to effect the provisions of this Section.
(e) [(h)] The Department [department] may charge a
reasonable fee to cover the cost of making building requirements
and inspection standards available to the public.
(f) [(i)] All fees collected by the Department [Board]
under this Section shall be deposited in the State Treasury to the
credit of the Texas Department [State Board] of Insurance operating
fund.
(g) [(j)] After notice and opportunity for a hearing, the
Department [department] may cancel or revoke an appointment made
under this Section if the holder of the appointment is found to be
in violation of, or to have failed to comply with, specific
provisions of this Section or any rule [or regulation] of the
Commissioner [commissioner] made under this Section. In lieu of
cancellation or revocation, the Commissioner [commissioner] may
order sanctions and penalties pursuant to Chapter 82, Insurance
Code, including but not limited to one or more of the following
sanctions, if the Commissioner [commissioner] determines from the
facts that it would be fair, reasonable, or equitable:
(1) suspending the appointment for a specific period,
not to exceed one year;
(2) an order directing the holder of the appointment
to cease and desist from the specified activity determined to be in
violation of specific provisions of this Section or rules [and
regulations] of the Commissioner [commissioner] made pursuant to
this Section or from failing to comply with those provisions of this
Section or the rules [and regulations] promulgated under this
Section; or
(3) if the appointed person is found by the
Commissioner [commissioner] to have knowingly, willfully
[wilfully], fraudulently, or with gross negligence failed to file
the required inspection reports or signed or caused to be prepared
an inspection report that contains a false, fictitious, or
fraudulent statement or entry, directing the appointed person to
remit within a specified time, not to exceed 60 days, a specified
monetary forfeiture not to exceed $5,000 for the violation or
failure to comply.
(h) [(j-1)] If an appointed person is an engineer licensed
by the Texas Board of Professional Engineers who is found by the
Department [department] to have knowingly, willfully [wilfully],
fraudulently, or with gross negligence failed to file the required
inspection reports or signed or caused to be prepared an inspection
report that contains a false or fraudulent statement or entry, the
Commissioner [commissioner] may take action against the appointed
person in the manner provided by Subsection (g) [(j)] of this
Section, but may not levy any monetary fine against an appointed
person who is a licensed engineer.
(i) [(k)] A monetary forfeiture paid as a result of an order
issued under Subsection (g) [(j)](3) of this Section shall be
deposited to the credit of the general revenue fund. If it is found
[after hearing] that any appointed person has failed to comply with
an order issued under Subsection (g) [(j)] of this Section, the
Department [department] shall, unless the order is lawfully stayed,
cancel the appointment of the person. The Department [department]
may informally dispose of any matter under Subsection (g) [(j)] of
this Section by consent order or default.
(j) [(k-1)] The Commissioner [commissioner] shall notify
the Texas Board of Professional Engineers of each order issued by
the Commissioner [commissioner] against an appointed person who is
an engineer licensed by the Texas Board of Professional Engineers,
including an order suspending, canceling, or revoking the
appointment of that person.
SECTION 13. Section 6B, Article 21.49, Insurance Code, is
amended read as follows:
Sec. 6B. (a) The Commissioner [board] shall assess each
insurer who provides property insurance in a first tier coastal
county in accordance with this section.
(b) The total assessment under this section must be in the
amount the Commissioner [board] estimates is necessary to cover the
cost of administration of the windstorm inspection program in the
first tier coastal counties under Section 6A of this article in the
state fiscal year in which the assessment is made[, reduced by the
total amount of fees the board estimates will be collected for that
year under Section 6A(c) of this article].
(c) The assessment must be based on each insurer's
proportionate share of the total extended coverage and other allied
lines premium received by all insurers for property insurance in
the first tier coastal counties in the calendar year preceding the
year in which the assessment is made. The Commissioner [board]
shall adopt rules to implement the assessment of insurers under
this section.
(d) For purposes of this section, "property insurance"
means any commercial or residential policy promulgated or approved
by the Commissioner [board] that provides coverage for the perils
of windstorm and hail, including a Texas Windstorm and Hail
Insurance Policy.
SECTION 14. Section 6C, Article 21.49, Insurance Code, is
amended by amending subsections (b), (c), (e) (f), (g), (h), (j),
(m) and (n) to read as follows:
(b) The Windstorm Building Code Advisory Committee on
Specifications and Maintenance is established as an advisory
committee to the Commissioner [commissioner] to advise and make
recommendations to the Commissioner [commissioner] on building
requirements and maintenance in the plan of operation.
(c) The advisory committee is composed of nine members
appointed by the Commissioner [commissioner] without regard to the
race, color, disability, sex, religion, age, or national origin of
the appointee. The Commissioner [commissioner] or the
Commissioner's [commissioner's] designated representative shall
serve as an ex officio, nonvoting member of the advisory committee.
The voting members of the advisory committee shall be appointed as
follows:
(1) three members must be representatives of the
building industry who reside in designated catastrophe areas:
(A) two of whom are residential builders; and
(B) one of whom is a representative of the
building supply industry;
(2) three members must be representatives of the
insurance industry:
(A) one of whom is a member of the board of
directors of the Association; and
(B) two of whom are full-time employees of an
insurance company authorized to engage in the business of property
and casualty insurance in this state that writes insurance in the
designated catastrophe area; and
(3) three members must be representatives of the
public who reside in a designated catastrophe area, one of whom is a
professional engineer licensed in this state.
(e) The advisory committee shall elect a presiding officer
from its members. The advisory committee shall meet at the call of
the presiding officer with the approval of the Commissioner
[commissioner], but at least two times each year. The advisory
committee shall publish the date and location of the meeting not
later than the 45th day before the date on which the meeting is
scheduled to occur. The Commissioner [commissioner] or the
Commissioner's [commissioner's] designee must be present at each
meeting of the advisory committee.
(f) The advisory committee shall analyze and make
recommendations for changes regarding procedures described under
Section 5(d) of this article that are adopted by the Commissioner
[commissioner] in the plan of operation. In making
recommendations, the advisory committee shall seek to balance the
concerns of all affected parties, including consumers, builders,
and the Association.
(g) Each proposal for a change in an applicable procedure
must be submitted to the Commissioner [commissioner]. Each
proposal must be submitted separately in writing and must contain:
(1) the name, mailing address, and telephone number of
the proponent, or, if the proponent is a group or organization, the
name of the group or organization and the mailing address and
telephone number of the group or organization;
(2) a citation of any applicable statute or rule;
(3) the text of the proposed change, with deletions
from current language struck through with a single line and new
language underlined; and
(4) a statement of the purpose of the proposed change,
with supporting written or printed information.
(h) The Commissioner [commissioner] by rule shall adopt a
form to be used by a person in presenting a proposal for a change in
an applicable procedure to the Commissioner [commissioner].
(j) The Department [department] shall review and organize
each proposal submitted and shall allow the advisory committee and
interested parties to view the proposals to be considered within a
reasonable time before the meeting of the advisory committee. If
requested by a majority of the advisory committee, the Department
[department] shall make recommendations regarding each proposal
submitted and provide to the advisory committee any necessary
technical information.
(m) The advisory committee shall submit its recommendation
on each proposal to the Commissioner [commissioner]. The
Commissioner [commissioner] shall notify the advisory committee of
the acceptance or rejection of each recommendation not later than
the 30th day after the date of receipt by the Commissioner
[commissioner]. Acceptance of a recommendation by the Commissioner
[commissioner] means that the Commissioner [commissioner] will
consider adoption of that recommendation in [at] a rulemaking
proceeding [hearing]. Before adopting a recommendation, the
Commissioner [commissioner] must determine that the proposal, if
adopted, will not weaken the integrity or diminish the
effectiveness of a procedure.
(n) In addition to any other rulemaking authority granted
under this article, the Commissioner [commissioner] may adopt rules
as necessary to implement this section.
SECTION 15. Section 6D, Article 21.49, Insurance Code, is
amended read as follows:
Sec. 6D. (a) The Commissioner [commissioner], on the
request of an engineer licensed by the Texas Board of Professional
Engineers, shall appoint the engineer under this article not later
than the 10th day after the date of the engineer's delivery to the
Commissioner [commissioner] of information demonstrating that the
engineer is qualified to perform windstorm inspections under this
article.
(b) The Commissioner [commissioner] shall adopt rules to
determine the information the Commissioner [commissioner] will
consider in appointing engineers under Subsection (a) of this
section.
SECTION 16. Section 7, Article 21.49, Insurance Code, is
amended read as follows:
Sec. 7. The Department [Board] shall prepare endorsements
and forms applicable to the standard policies which it has
promulgated providing for the deletion of coverages available
through the Association and shall promulgate the applicable
reduction of premiums and rates for the use of such endorsements and
forms.
SECTION 17. Section 8, Article 21.49, Insurance Code, is
amended by amending subsections (a), (c), (d) (e), (f), (g), (h),
and (i) to read as follows:
Sec. 8. (a) The Association shall file with the
Commissioner every manual of classifications, rules, rates which
shall include condition charges, every rating plan, and every
modification of any of the foregoing which it proposes to use.
Every such filing shall indicate the character and the extent of the
coverage contemplated and shall be accompanied by the policies and
endorsements forms proposed to be used, which said forms and
endorsements may be designed specifically for use by the
Association and without regard to other forms filed with, approved
by, or promulgated by the Department [Board] for use in this State.
The Association may make recommendations to the Commissioner that
would result in a reduction of coverages or an increase in an
applicable deductible if any resultant reduction in coverages or
increase in deductibles is accompanied by proposed rate credits.
After notice and hearing if such hearing is requested by any person
within ten (10) days of notice, the Commissioner may accept,
modify, or reject a recommendation made by the Association under
this subsection. Article 1.33B of this code does not apply to an
action taken under this subsection.
(c) Any filing made by the Association pursuant hereto shall
be submitted to the Department [Board] and as soon as reasonably
possible after the filing has been made the Commissioner [Board]
shall, in writing, approve, modify, or disapprove the same;
provided that any filing shall be determined approved unless
modified or disapproved within 30 days after date of filing.
(d) If at any time the Commissioner [Board] finds that a
filing so approved no longer meets the requirements of this Article
[Act], the Commissioner [it] may, after not less than ten (10) days
notice and hearing if such hearing is requested by any person within
the ten (10) day notice period [after a hearing held on not less
than 20 days' notice to the Association specifying the matters to be
considered at such hearing,] issue an order withdrawing [its]
approval [thereof]. Said order shall specify in what respects the
Commissioner [Board] finds that such filing no longer meets the
requirements of this Article [Act] and shall be effective not less
than 30 days after its issuance.
(e) All rates shall be made in accordance with the following
provisions:
(1) Due consideration shall be given to the past and
prospective loss experience within and outside the State of hazards
for which insurance is made available through the plan of
operation, if any, to recognized catastrophe models, to expenses of
operation including acquisition costs, to a reasonable margin for
profit and contingencies, and to all other relevant factors, within
and outside the State.
(2) Risks may be grouped by classifications for the
establishment of rates and minimum premiums. Classification rates
may be modified to produce rates for individual risks in accordance
with rating plans which establish standards for measuring
variations in such risks on the basis of any or all of the factors
mentioned in the preceding paragraph. Such rates may include rules
for classification of risks insured hereunder and rate
modifications thereof. All such provisions, however, as respects
rates, classifications, standards and premiums shall be without
prejudice to or prohibition of provision by the Association for
consent rates on individual risks if the rate and risk are
acceptable to the Association and as is similarly provided for, or
as is provided for, in Article 5.26(a), Texas Insurance Code, and
this provision or exception on consent rates is irrespective of
whether or not any such risk would otherwise be subject to or the
subject of a provision of rate classification or eligibility.
(3) Rates shall be reasonable, adequate, not unfairly
discriminatory, and nonconfiscatory as to any class of insurer.
(4) Commissions paid to agents shall be reasonable,
adequate, not unfairly discriminatory and nonconfiscatory.
(f) For the purpose of this Article [Act] the applicant
under Section 6(a) hereof shall be considered to have consented to
the appropriate rates and classifications authorized by this
Article [Act] irrespective of any and all other rates or
classifications.
(g) All premiums written and losses paid under this Article
[Act] as appropriate shall be included in applicable
classifications for general rate making purposes.
(h)(1) Each rate established by the Commissioner
[commissioner] in accordance with this section must be uniform
throughout the first tier of coastal counties.
(2) Not later than August 15 of each year, the
Association shall file with the Department [department] for
approval by the Commissioner [commissioner] a proposed manual rate
for all types and classes of risks written by the Association.
[Chapter 40 of this code does not apply to a filing made under this
subsection or a department action with respect to the filing.]
(3) Before approving or disapproving a filing, or
modifying a filing, the Commissioner [commissioner] shall provide
all interested persons a reasonable opportunity to review the
filing, obtain copies of the filing on payment of any legally
required copying cost, and submit to the Commissioner
[commissioner] written comments or information related to the
filing.
(4) If requested, the [The] Commissioner
[commissioner] shall schedule an open meeting not later than the
45th day after the date on which the Department [department]
receives the filing at which interested persons may present written
or oral comments relating to the filing. An open meeting under this
subdivision is subject to Chapter 551, Government Code, but is not a
contested case hearing under Chapter 2001, Government Code.
(5) The Department [department] shall file with the
Texas Register notice that a filing has been made under Subdivision
(2) of this subsection not later than the seventh day after the date
the filing is received by the Department [department]. The notice
must include information relating to:
(A) the availability of the filing for public
inspection at the Department [department] during regular business
hours and the procedures for obtaining copies of the filing;
(B) procedures for making written comments
related to the filing; and
(C) the time, place, and date of the open meeting
scheduled under Subdivision (4) of this subsection at which an
interested person may submit either written or oral comments
relating to the filing.
(6) After the conclusion of the open meeting, the
Commissioner [commissioner] shall approve or disapprove or modify
the filing in writing on or before November 15 of the year in which
the filing is made or the filing is deemed approved. If the
Commissioner [commissioner] disapproves a filing, the Commissioner
[commissioner] shall state in writing the reasons for the
disapproval and the criteria to be met by the Association to obtain
approval. The Association may file with the Commissioner
[commissioner], not later than 30 days after the date on which the
Association receives the Commissioner's [commissioner's] written
disapproval, an amended filing bringing the filing into conformity
with all criteria stated in the Commissioner's [commissioner's]
written disapproval.
(7) Before approving or disapproving an amended
filing, the Commissioner [commissioner] shall provide all
interested persons a reasonable opportunity to review the amended
filing, obtain copies of the amended filing on payment of any
legally required copying cost, and submit to the Commissioner
[commissioner] written comments or information related to the
amended filing in the manner provided by Subdivision (3) of this
subsection[, and may hold a hearing not later than the 20th day
after the date on which the department receives the amended filing
in the manner provided by Subdivision (4) of this subsection. Not
later than the 10th day after the date on which the hearing on the
amended filing is concluded, the commissioner shall approve or
disapprove the amended filing]. Within 30 days after the amended
filing is received, the Commissioner [commissioner] shall approve
without changes, approve as modified by the Commissioner
[commissioner], or disapprove an amended filing or it is deemed
approved. [The requirements imposed under Subdivisions (5) and (6)
of this subsection apply to a hearing conducted under this
subdivision.]
(8) In conjunction with the review of a filing or
amended filing, the Commissioner [commissioner] may request the
Association to provide additional supporting information relating
to the filing or amended filing, and any interested person may file
a written request with the Commissioner [commissioner] for
additional supporting information relating to the filing or amended
filing. A request under this subdivision must be reasonable and
must be directly related to the filing or amended filing. The
Commissioner [commissioner] shall submit to the Association all
requests for additional supporting information made under this
subdivision for the Commissioner's [commissioner's] use and the use
of any interested person. Unless a different period is requested by
the Association and approved by the Commissioner [commissioner],
the Association shall provide the information to the Commissioner
[commissioner] not later than the fifth day after the date on which
the written request for additional supporting information is
delivered to the Association. The Department [department] shall
notify an interested person who has requested additional
information of the availability of the information not later than
one business day after the date on which the Commissioner
[commissioner] receives the information from the Association.
(9) A rate established and authorized by the
Commissioner [commissioner] under this subsection may not reflect
an average rate change that is more than 10 percent higher or lower
than the rate for commercial or 10 percent higher or lower than the
rate for noncommercial windstorm and hail insurance in effect on
the date the filing is made. The rate may not reflect a rate change
for an individual rating class that is 15 percent higher or lower
than the rate for that individual class in effect on the date the
filing is made. The Commissioner [commissioner] may[, after notice
and hearing,] suspend this subdivision upon a finding that a
catastrophe loss or series of occurrences resulting in losses in
the catastrophe area justify a need to assure rate adequacy in the
catastrophe area and also justify a need to assure availability of
insurance outside the catastrophe area.
(10) If valid flood or rising water insurance coverage
exists and is maintained on any risk being insured in the pool, the
Commissioner [commissioner] may provide for a rate and reduction in
rate of premium as may be appropriate.
(11) The catastrophe element used to develop rates
under this Article [Act] applicable to risks written by the
Association shall be uniform throughout the seacoast territory. In
developing the [The] catastrophe element of the rates the following
must be considered [developed using]:
(A) 90 percent of both the monoline extended
coverage loss experience and related premium income for all
insurers, other than the Association, for covered property located
in the seacoast territory using not less than the most recent 30
years of experience available; [and]
(B) 100 percent of both the loss experience and
related premium income for the Association for covered property
using not less than the most recent 30 years of experience
available[.]; and
(C) recognized catastrophe models and any other
relevant factors as identified under subsection (e)(1) of this
section.
(12) The noncatastrophe element of the noncommercial
rates must be developed using:
(A) 90 percent of both the monoline extended
coverage loss experience and related premium income for all
insurers, other than the Association, for covered property located
in the catastrophe area of the seacoast territory using the most
recent 10 years of experience available; and
(B) 100 percent of both the loss experience and
related premium income for the Association for covered property
using the most recent 10 years of experience available.
(13) The noncatastrophe element of the commercial
rates must be developed using 100 percent of both the loss
experience and related premium income for the Association for
covered property using the most recent 10 years of experience
available.
(14) Surcharges collected in the past and used in the
development of current rates may not be excluded from future rate
development as long as those surcharges were collected during the
experience period considered by the Commissioner [commissioner].
(15) Not earlier than March 31 of the year before the
year in which a filing is to be made, the Department [department]
shall value the loss and loss adjustment expense data to be used for
the filing.
(16) Not later than June 1 of each year, the Department
[department] shall provide the experience data to be used in
establishing the rates under this subsection in that year to the
Association and other interested persons. On request from the
Department [department], an insurer shall provide the data to the
Department [department] or the Department [department] may obtain
the data from a designated statistical agent, as defined by Section
38.201 of this code.
(17) The Association is authorized to purchase
[association shall either establish a] reinsurance as part of its
annual operating expenses to the extent [program] approved by the
[Texas] Department and to [of Insurance or] make payments into the
catastrophe reserve trust fund established under Subsection (i) of
this section. With the approval of the [Texas] Department [of
Insurance], the Association [association] may use [establish a]
reinsurance [program] that operates in addition to or in concert
with the catastrophe reserve trust fund established under
Subsection (i) of this section and with assessments authorized by
this Act.
(i)(1) The Commissioner [commissioner] shall adopt rules
under which the Association relinquishes its [association members
relinquish their] net equity on an annual basis as provided by those
rules by making payments to a fund known as the catastrophe reserve
trust fund to fund the obligations of that fund under Section 19(a)
of this Article [Act] and to fund the mitigation and preparedness
plan established under this subsection to reduce the potential for
payments by members of the Association [association] giving rise to
tax credits in the event of loss or losses. Until disbursements are
made as provided by this Article [Act] and rules adopted by the
Commissioner [commissioner], all money, including investment
income, deposited in the catastrophe reserve trust fund are state
funds to be held by the comptroller outside the state treasury on
behalf of, and with legal title in, the Department [department].
The fund may be terminated only by law. On termination of the fund,
all assets of the fund revert to the state to be used to provide
funding for the annual loss mitigation and preparedness plan
developed and implemented by the Commissioner [commissioner] under
Subdivision (5) of this subsection.
(2) The catastrophe reserve trust fund shall be kept
and maintained by the [Texas] Department [of Insurance] pursuant to
this Article [Act] and rules adopted by the Commissioner
[commissioner]. The comptroller, as custodian, shall administer
the funds strictly and solely as provided by this Article [Act] and
the Commissioner's [commissioner's] rules.
(3) At the end of either each calendar year or policy
year, the Association [association] shall pay the net gain from
operations [equity] of the Association [a member], including all
premium and other revenue of the Association [association] in
excess of incurred losses and operating expenses (including the
cost of any reinsurance) to the catastrophe reserve trust fund as
established under Section 8(i)(2) of this Article [or a reinsurance
program approved by the commissioner].
(4) The Commissioner's [commissioner's] rules shall
establish the procedure relating to the disbursement of money from
the catastrophe reserve trust fund [to policyholders in the event
of an occurrence or series of occurrences within the defined
catastrophe area that results in a disbursement under Section 19(a)
of this Act]. These rules may provide that money from the
catastrophe reserve trust fund may be used to purchase reinsurance
to protect the fund or to reimburse the Association for the payment
of policyholder claims. Such reinsurance purchases, if any, shall
be included in the reinsurance approved under Section 8(h)(17) of
this Article.
(5) Each state fiscal year, beginning with fiscal year
2002, the Department [department] may use from the investment
income of the fund an amount equal to not less than $1 million and
not more than 10 percent of the investment income of the prior
fiscal year to provide funding for an annual mitigation and
preparedness plan to be developed and implemented each year by the
Commissioner [commissioner]. From that amount and as part of that
plan, the Department [department] may use in each fiscal year $1
million for the windstorm inspection program established under
Section 6A of this Article [Act]. The mitigation and preparedness
plan shall provide for steps to be taken in the seacoast territory
by the Commissioner [commissioner] or by a local government, state
agency, educational institution, or nonprofit organization
designated by the Commissioner [commissioner] in the plan, to
implement programs intended to improve preparedness for windstorm
and hail catastrophes, reduce potential losses in the event of such
a catastrophe, provide research into the means to reduce those
losses, educate or inform the public in determining the
appropriateness of particular upgrades to structures, or protect
infrastructure from potential damage from those catastrophes.
Money in excess of $1 million is not available for use under this
subsection if the Commissioner [commissioner] determines that an
expenditure of investment income from the fund would jeopardize the
actuarial soundness of the fund or materially impair the ability of
the fund to serve the state purposes for which it was established.
SECTION 18. Section 8A, Article 21.49, Insurance Code, is
amended by amending subsections (b), (c), (d), and (e) to read as
follows:
(b) If, at the time of loss, the total amount of insurance
applicable to the dwelling is equal to 80 percent or more of the
full replacement cost of the dwelling or equal to the maximum amount
of insurance otherwise available through the Association, coverage
applicable to the dwelling under the policy is extended to include
the full cost of repair or replacement, without a deduction for
depreciation. If, at the time of loss, the total amount of
insurance applicable to the dwelling is equal to less than 80
percent of the full replacement cost of the dwelling and less than
the maximum amount of insurance available through the Association,
liability for loss under the policy may not exceed the replacement
cost of that part of the dwelling damaged or destroyed, less
depreciation. Notwithstanding any other provision of this Article
[Act] or other law, the Commissioner [commissioner, after notice
and hearing,] may adopt rules to:
(1) authorize the Association to provide actual cash
value coverage instead of replacement cost coverage on the roof
covering of a building insured by the Association; and
(2) determine:
(A) the conditions under which the Association
may provide that actual cash value coverage;
(B) the appropriate premium reductions when
coverage for the roof covering is provided on an actual cash value
basis; and
(C) the disclosure that must be provided to the
policyholder, prominently displayed on the face of the windstorm
and hail insurance policy.
(c) The Commissioner may promulgate such rules [and
regulations] as necessary to implement this section.
[(d) Notwithstanding Article 1.33B of this code, a hearing
under Subsection (b) of this section shall be held before the
commissioner or the commissioner's designee.]
(d) [(e)] For purposes of this section, "roof covering"
means:
(1) the roofing material exposed to the weather;
(2) the underlayments applied for moisture
protection; and
(3) all flashings required in the replacement of a
roof covering.
SECTION 19. Section 8B, Article 21.49, Insurance Code, is
amended to read as follows:
Sec. 8B. (a) Except as provided by Subsections (b) and (c)
of this section, a policy of windstorm and hail insurance issued by
the Association [association] for a dwelling, as that term is
defined by the Commissioner [Texas Department of Insurance] or its
successor, must include coverage for wind-driven rain damage,
regardless of whether an opening is made by the wind, loss of use,
and consequential losses, according to forms approved by the
Department [commissioner] and for a premium paid by the insured
based on rates established by rule adopted by the Commissioner
[commissioner]. A policy of windstorm and hail insurance issued by
the Association [association] for tenant contents of a dwelling or
other residential building must include coverage for loss of use
and consequential losses, according to forms approved by the board
and for a premium paid by the insured based on rates established by
rule adopted by the Commissioner [commissioner]. The Association
[association] shall provide coverage under this section as directed
by rule of the Commissioner [commissioner].
(b) The Association [association] is not required to offer
coverage for indirect losses as provided by Subsection (a) of this
section unless that coverage was excluded from a companion policy
in the voluntary market.
(c) The Association [association] is not required to
provide coverage for (1) "loss of use" if such "loss of use" is loss
of rents or loss of rental value; or (2) "additional living
expenses" when the property insured is a secondary or a non-primary
residence.
SECTION 20. Section 8D, Article 21.49, Insurance Code, is
amended by amending subsections (a), (d), (e),(g) and (i) to read as
follows:
Sec. 8D. (a) The maximum limits of liability under a policy
of windstorm and hail insurance issued by the Association under
this Article [Act] shall be proposed by the board of directors of
the Association and must be approved by the Commissioner. The
maximum limits of liability for coverage on any one insurable
property may not be less than:
(1) $350,000 for a dwelling, including an individually
owned townhouse unit, and the corporeal movable property located in
or about the dwelling, and as an extension of coverage, away from
those premises, as provided under the policy;
(2) $2,192,000 for a building and the corporeal
movable property located in the building that is owned by, and at
least 75 percent of which is occupied by, a governmental entity, or
that is not owned by, but is wholly and exclusively occupied by, a
governmental entity;
(3) $125,000 for individually owned corporeal movable
property located in an apartment unit, residential condominium
unit, or townhouse unit that is occupied by the owner of that
property, and as an extension of coverage, away from those
premises, as provided under the policy; and
(4) $1,500,000 for a structure other than a dwelling
or a public building and the corporeal movable property located in
that structure and, as an extension of coverage, away from those
premises, as provided under the policy.
(d) Not later than September 30 of each year, the board of
directors of the Association shall propose adjustments to the
liability limits for inflation. The proposed adjustments shall be
made in increments of $1,000, rounded to the nearest $1,000,
considering the limits set by Subsection (a) of this section, at a
rate that reflects any change in the BOECKH Index. If the BOECKH
Index ceases to exist, the board of directors of the Association
shall propose adjustments to the nearest $1,000 in round numbers to
the liability limits for inflation based on any other index that the
Association [board] determines accurately reflects changes in the
cost of construction or residential values in the catastrophe area.
An adjustment to the liability limits that is approved by the
Commissioner applies to each policy of windstorm and hail insurance
delivered, issued for delivery, or renewed on or after January 1 of
the year following the approval by the Commissioner of the
adjustment to the liability limits. The indexing of the liability
limits shall adjust for changes occurring on and after January 1,
1997.
(e) The board of directors of the Association may propose
additional increases in the liability limits as it determines
necessary to implement the purposes of this Article [Act].
(g) Not later than the 60th day after the date of receipt of
the filing made under Subsection (f) of this section, [and after
notice and hearing,] the Commissioner by order shall approve,
disapprove, or modify the proposed adjustments to the liability
limits.
[(i) Article 1.33B of this code does not apply to an action
taken under this section.]
SECTION 21. Section 8E, Article 21.49, Insurance Code, is
amended by amending subsection (a) to read as follows:
Sec. 8E. (a) Notwithstanding any other law, the
Association may issue a policy of windstorm and hail insurance that
includes coverage for an amount in excess of a liability limit
proposed by the Association and approved by the Commissioner under
Section 8D of this Article [Act] if the Association first obtains,
from a reinsurer approved by the Commissioner, reinsurance for the
full amount of policy exposure above the limits approved by the
Commissioner for any given type of risk.
SECTION 22. Subsections (d) and(e), Section 8E, Article
21.49, Insurance Code, are repealed.
SECTION 23. Section 9, Article 21.49, Insurance Code, is
amended to read as follows:
Sec. 9. Any person insured pursuant to this Article [Act],
or his duly authorized representative, or any affected insurer who
may be aggrieved by an act, ruling or decision of the Association,
may, within 30 days after such act, ruling or decision, appeal to
the Commissioner [commissioner]. In the event the Association is
aggrieved by the action of the Commissioner [commissioner] with
respect to any ruling, order, or determination of the Commissioner
[commissioner], it may, within 30 days after such action, make a
written request to the Commissioner [commissioner], for a hearing
thereon. The Commissioner [commissioner] shall hear the
Association, or the appeal from an act, ruling or decision of the
Association, within 30 days after receipt of such request or appeal
and shall give not less than 10 days' written notice of the time and
place of hearing to the Association making such request or the
person, or his duly authorized representative, appealing from the
act, ruling or decision of the Association. A hearing on an act,
ruling or decision of the Association relating to the payment of,
the amount of, or the denial of a particular claim shall be held, at
the request of the claimant, in either the county in which the
covered property is located or Travis County. Within 30 days after
the hearing, the Commissioner [commissioner] shall affirm, reverse
or modify its previous action or the act, ruling or decision
appealed to the Commissioner [commissioner]. Pending such hearing
and decision thereon, the Commissioner [commissioner] may suspend
or postpone the effective date of its previous rule or of the act,
ruling or decision appealed to the Commissioner [commissioner].
The Association, or the person aggrieved by any order or decision of
the Commissioner [commissioner], may thereafter appeal to either a
District Court of Travis County, Texas, or a District Court in the
county in which the covered property is located. An action brought
under this section is subject to the procedures established under §
36.201 et seq. [Article 1.04] of this code.
SECTION 24. Section 9A, Article 21.49, Insurance Code, is
amended to read as follows:
Sec. 9A. (a) Except as provided by Section 10 of this
Article, any person insured under this Article [Act] who is
aggrieved by an act, ruling, or decision of the Association
relating to the payment of, the amount of, or the denial of a claim
may elect to bring an action, including an action under Article
21.21 of this code, against the Association in a court of competent
jurisdiction or to appeal the act, ruling, or decision under
Section 9 of this Article. A person may not proceed under both
Section 9 of this Article and this section for the same act, ruling,
or decision.
(b) Except as otherwise provided by this subsection, venue
in a proceeding action against the Association under this section,
including an action under Article 21.21 of this code, is in the
county in which the covered property is located or in a District
Court of Travis County. Venue is only in the District Court of
Travis County if the claimant joins the Commissioner [State Board
of Insurance] as a party to the action.
SECTION 25. Section 10, Article 21.49, Insurance Code, is
amended by amending subsection (c) to read as follows:
(c) There shall be no liability on the part of and no cause
of action of any nature shall arise against a director of the
Association [association], the Board or any of its staff, the
Association or its agents or employees, or against any
participating insurer or its agents or employees, for any
inspections made under the plan of operation or any statements made
in good faith by them in any reports or communications concerning
risks submitted to the Association, or at any administrative
hearings conducted in connection therewith under the provisions of
this Article [Act].
SECTION 26. Section 11, Article 21.49, Insurance Code, is
amended to read as follows:
Sec. 11. Each person serving as a director of the
Association, each member of the Association, and each officer and
employee of the Association shall be indemnified by the Association
against all costs and expenses actually and necessarily incurred by
him or it in connection with the defense of any action, suit, or
proceeding in which he or it is made a party by reason of his or its
being or having been a director or member of the Association, or an
officer or employee of the Association except in relation to
matters as to which he or it has been judged in such action, suit or
proceeding to be liable by reason of misconduct in the performance
of his or its duties as a director of the Association or a member or
officer or employee of the Association, provided, however, that
this indemnification shall in no way indemnify a member of the
Association from participating in the assessments made by
[writings, expenses, profits, and losses of] the Association in the
manner set out in this Article [Act]. Indemnification hereunder
shall not be exclusive of other rights to which such member or
officer may be entitled as a matter of law.
SECTION 27. Section 12, Article 21.49, Insurance Code, is
amended to read as follows:
Sec. 12. The Association shall file in the office of the
Commissioner [Board] annually a statement which shall summarize the
transactions, conditions, operations and affairs of the
Association during the preceding year at such times and covering
such periods as may be designated by the Commissioner [Board]. Such
statement shall contain such matters and information as are
prescribed by the Commissioner [Board] and shall be in such form as
is required by it.
SECTION 28. Section 12A, Article 21.49, Insurance Code, is
amended to read as follows:
Sec. 12A. The Association [association] shall establish a
plan in its plan of operation under which the Association's
[association's] legal representation before the Commissioner
[State Board of Insurance], the [Texas] Department [of Insurance],
and the Texas legislature is without conflict of interest or the
appearance of a conflict of interest as defined in the Texas
Disciplinary Rules of Professional Conduct. The Association
[association] shall also adopt separate and distinct procedures for
legal counsel in the handling of disputes involving policyholder
claims against the Association [association].
SECTION 29. Section 13, Article 21.49, Insurance Code, is
amended to read as follows:
Sec. 13. This Article [Act] shall become effective from and
after passage.
SECTION 30. Section 14, Article 21.49, Insurance Code, is
amended to read as follows:
Sec. 14. All laws or parts of laws in conflict herewith are
hereby repealed to the extent necessary to accomplish the purposes
of this Article [Act].
SECTION 31. Section 15, Article 21.49, Insurance Code, is
amended to read as follows:
Sec. 15. If any provision of this Article [Act] or the
application thereof to any person or circumstance is held to be
invalid, such invalidity shall not affect other provisions or
applications of this Article [Act] which can be given effect
without the invalid provision or application, and to this end the
provisions of this Article [Act] are declared to be severable.
SECTION 32. Section 17, Article 21.49, Insurance Code, is
amended to read as follows:
Sec. 17. This Article [Act] is hereby codified as Article
21.49 of the Texas Insurance Code.
SECTION 33. Section 18, Article 21.49, Insurance Code, is
amended to read as follows:
Sec. 18. This Article [Act] does not apply to farm mutual
insurance companies, as defined in Chapter 911 [Article 16.01] of
this code [the Insurance Code], nor does it apply to any existing
company chartered under old Chapter 12, Title 78, Revised Civil
Statutes of Texas, 1925, repealed by Chapter 40, Acts of the 41st
Legislature, 1st Called Session, 1929, Chapter 40.
SECTION 34. The heading to Section 19, Article 21.49,
Insurance Code, is amended read as follows:
Payment of losses[; premium tax credit]
SECTION 35. Section 19, Article 21.49, Insurance Code, is
amended read as follows:
Sec. 19. (a) If[, in any calendar year,] an occurrence or
series of occurrences, as defined in the plan of operation, within
the defined catastrophe area results in insured losses and
operating expenses of the Association [association] in excess of
premium and other revenue of the Association [association], any
excess losses shall be paid as follows:
(1) up to $100 million per occurrence shall be
assessed to the members of the Association [association] and the
Texas FAIR Plan Association.The loss allocable to the Texas FAIR
Plan Association shall be based on the proportion that the net
direct premiums written by the Texas FAIR Plan Association during
the preceding calendar year bears to the total net direct premiums
written in this State by all members of the Association for the same
period determined pursuant to Section 5(b) of this Article. The
remainder of the assessments shall be allocated [with the
proportion of the loss allocable] to each member insurer
[determined] in the same manner as its participation in the
Association [association] has been determined for the year under
Section 5(b) [5(c)] of this Article [Act]. Assessments made under
this subdivision are not reimbursable under subsection (b) of this
Section;
(2) for each occurrence, any losses in excess of $100
million shall be paid from the catastrophe reserve trust fund
established under Section 8(i) of this Article [Act]. Provided,
however, only up to fifty percent of the amount in the catastrophe
reserve trust fund as of the date of the occurrence, reduced by
anticipated payments from prior occurrences, may be so used, unless
the Commissioner determines a greater percentage should be applied
after not less than ten (10) days notice and hearing if a hearing is
requested by any person within the ten (10) notice period; [and any
reinsurance program established by the association;]
(3) [for] any losses in excess of the amounts
determined in [those paid under] Subdivisions (1) and (2) of this
subsection shall be paid in accordance with a plan developed by the
Association, and approved by the Commissioner after not less than
ten (10) days notice and hearing if a hearing is requested by any
person within the ten (10) notice period, from any or a combination
of the following sources:[, an additional $200 million shall be
assessed to the members of the association with the proportion of
the loss allocable to each insurer determined in the same manner as
its participation in the association has been determined for the
year under Section 5(c) of this Act;]
(A) additional assessments to the members of the
Association and the Texas FAIR Plan Association not to exceed $300
million per calendar year, which shall be based on the proportion of
the member's or the Texas FAIR Plan Association's net direct
premiums for the lines of insurance used to calculate member
participation in the Association's assessments pursuant to Section
5(b) of this Article as reported in its annual statement filed with
the Department for the calendar year immediately preceding the year
in which the assessment is made to the total reported net direct
premiums for such lines of insurance in Texas. The assessments
under this paragraph shall be reimbursable in accordance with
subsection(b) of this Section;
(B) any reinsurance proceeds recoverable by the
Association; and
(C) any revenue bond proceeds received by the
Association in accordance with Section 20 of this Article.
(4) any losses of the Association that are not paid by
the assessments and catastrophe reserve trust fund provided for in
[excess of those paid under] Subdivisions (1)[,] and (2)[,] of this
subsection or that are not paid by the plan approved by the
Commissioner in accordance with Subdivision [and] (3) of this
subsection shall be derived from revenue bond proceeds received by
the Association in accordance with Section 20 of this Article.
[assessed against members of the association, with the proportion
of the total loss allocable to each insurer determined in the same
manner as its participation in the association has been determined
for the year under Section 5c of this Act.]
(b) Any insurer, including the Texas FAIR Plan Association,
that has been assessed and paid the assessments under Subsection
(a)(3) of this Section is eligible to charge a premium surcharge for
reimbursement of the assessment. The premium surcharge, which
shall be a separate charge in addition to premiums collected,
applies to every insurance policy for the lines used to calculate
the assessment issued by such insurer in this state, the effective
date of which policy is within the five year period commencing 90
days after the date of assessment. The amount of the surcharge
shall be calculated on the basis of a uniform percentage of the
premium on such policies not to exceed twenty percent per year of
the amount of such insurer's assessment, such that over the period
of five years the aggregate of all such surcharges by such insurer
shall be equal to, and not exceed, the amount of the assessment of
such insurer. The amount of any assessment paid and recoverable
under this Section may be carried by such insurer [An insurer may
credit any amount paid in accordance with Subsection (a)(4) of this
section in a calendar year against its premium tax under Article
4.10 of this code. The tax credit herein authorized shall be
allowed at a rate not to exceed 20 percent per year for five or more
successive years following the year of payment of the claims. The
balance of payments paid by the insurer and not claimed as such tax
credit may be reflected in the books and records of the insurer] as
an admitted asset of the insurer for all purposes, including
exhibition in annual statements pursuant to §862.001 [Article 6.12]
of this code.
(c) If losses are paid by the procedures set forth in
Subsection (a)(3) of this section, then the Association shall
develop and implement a plan for collection of a premium surcharge,
which shall be a separate charge in addition to premiums collected,
from policyholders of the Association. The Association shall
establish a premium surcharge in an amount at least 100 percent and
no more than 150 percent of the amount of the average per policy
surcharge percentage established under subsection (b) of this
Section on any policy issued or renewed by the Association. The
period for collection of the premium surcharge under this
subsection may not exceed five years. All surcharges collected
under this subsection will be paid into the catastrophe reserve
trust fund.
(d) In addition to the funding described in Subsections (a)
- (c) of this section, the Association may also borrow from, or
enter into other financing arrangements with, any market sources at
prevailing interest rates.
(e) The Commissioner may adopt rules necessary to implement
this section.
SECTION 36. Article 21.49, Insurance Code, is amended by
adding Section 20 to read as follows:
Sec. 20. Revenue Bond Program. (a) Purpose. The
legislature finds that providing the authority to issue public
securities to provide a method to raise funds to provide windstorm,
hail, and fire insurance through the Association in certain
designated portions of the state is for the benefit of the public
and in furtherance of a public purpose.
(b) Definitions. When used in this section:
(1) "Public security resolution" means the resolution
or order authorizing public securities to be issued under this
section.
(2) "Bond" means any debt instrument or public
security issued by the Texas Public Finance Authority.
(3) "Board" means the board of directors of the Texas
Public Finance Authority.
(4) "Insurer" means all property and casualty insurers
authorized to transact property and casualty insurance in this
State and specifically includes and makes this section applicable
to county mutual companies, Lloyds and reciprocal or interinsurance
exchanges, but shall not include county mutual fire insurance
companies which are writing exclusively industrial fire insurance
policies as defined in Section 912.151 of this code.
(c) Public securities authorized; application of Texas
public finance authority act.
(1) At the request of the Association and upon
approval by the Commissioner, the Texas Public Finance Authority
shall issue public securities to:
(A) fund the Association, including:
(i) to establish and maintain reserves to
pay claims;
(ii) to pay incurred claims and operating
expenses; and
(iii) to purchase reinsurance;
(B) pay costs related to issuance of the public
securities; and
(C) pay other costs related to the public
securities as may be determined by the board.
(2) To the extent not inconsistent with this section,
Chapter 1232, Government Code, applies to public securities issued
under this section. In the event of a conflict, this section
controls.
(d) Applicability of other statutes. The following laws
apply to public securities issued under this section to the extent
consistent with this section:
(1) Chapters 1201, 1202, 1204, 1205, 1231, and 1371,
Government Code; and
(2) Subchapter A, Chapter 1206, Government Code.
(e) Limits. The Texas Public Finance Authority may issue,
on behalf of the Association, public securities in an amount
sufficient to fund the losses of the Association as determined by
the Association and approved by the Commissioner after not less
than ten (10) days notice and hearing if a hearing is requested by
any person within the ten (10) day notice period.
(f) Conditions. (1) Public securities issued under this
section may be issued at public or private sale.
(2) Public securities may mature not more than 10
years after the date issued.
(3) Public securities must be issued in the name of the
Association.
(g) Additional covenants. In a public security resolution,
the board may make additional covenants with respect to the public
securities and the designated income and receipts of the
Association pledged to their payment, and may provide for the flow
of funds and the establishment, maintenance, and investment of
funds and accounts with respect to the public securities.
(h) Special accounts. (1) A public security resolution may
establish special accounts, including an interest and sinking fund
account, reserve account, and other accounts.
(2) The Association shall administer the accounts in
accordance with this section.
(i) Security. (1) Public securities are payable only from
the service fee established under subsection (j) of this section or
other amounts that the Association is authorized to levy, charge,
and collect.
(2) Public securities are obligations solely of the
Association. Public securities do not create a pledging, giving,
or lending of the faith, credit, or taxing authority of this state.
(3) Each public security must include a statement that
the state is not obligated to pay any amount on the public security
and that the faith, credit, and taxing authority of this state are
not pledged, given, or lent to those payments.
(4) Each public security issued under this section
must state on its face that the public security is payable solely
from the revenues pledged for that purpose and that the public
security does not and may not constitute a legal or moral obligation
of the state.
(j) Service fee. (1) A service fee may be collected from
policyholders of:
(A) insurers,
(B) the Association, and
(C) the FAIR Plan Association.
(2) Not less frequently than annually, the service fee
shall be determined by the Association and approved by the
Commissioner, after not less than ten (10) days notice and hearing
if a hearing is requested by any person within the ten (10) day
notice period, in an amount sufficient to pay all debt service and
all related expenses on the public securities. The service fee
shall be collected by each insurer, the Association, and the FAIR
Plan Association from their policyholders in the form of a premium
surcharge in accordance with this subsection and remitted to the
Association as required by the Commissioner by rule. The amount of
the service fee shall be based on the amount of the insurer's gross
written premiums for all property and casualty lines, excluding
workers' compensation, accident and health, and medical
malpractice, as reported in the annual statement filed with the
department for the calendar year immediately preceding the year in
which the assessment is made. A premium surcharge, which shall be a
separate charge in addition to premiums collected, shall be
collected by the insurer, the Association, and the FAIR Plan
Association and remitted to the Association on every property and
casualty insurance policy, except workers' compensation, accident
and health, and medical malpractice insurance, issued or renewed by
such insurer, the Association, or the FAIR Plan Association, within
the 12-month period commencing 90 days after the date the amount of
the service fee is determined by the Commissioner. The amount of
the premium surcharge shall be calculated on the basis of a uniform
percentage of the premium on such policies, such that the aggregate
of all such surcharges by the insurer, the Association, and the FAIR
Plan Association shall be equal to and not exceed the amount of the
service fee determined by the Commissioner. The service fees
collected in the form of a policy surcharge under this section are
not subject to the premium tax or commissions and failure to pay
such surcharge by a policyholder is equivalent to failure to pay
premium for purposes of policy cancellation.
(k) Tax exempt. The public securities issued under this
section, any interest from those public securities, and all assets
pledged to secure the payment of the public securities are free from
taxation by the state or a political subdivision of this state.
(l) Authorized investments. The public securities issued
under this section constitute authorized investments under
Articles 2.10 and 3.33 and Subpart A, Part I, Article 3.39 of this
code.
(m) State pledge. The state pledges to and agrees with the
owners of any public securities issued in accordance with this
section that the state will not limit or alter the rights vested in
the Association to fulfill the terms of any agreements made with the
owners of the public securities or in any way impair the rights and
remedies of those owners until the public securities, bond premium,
if any, or interest, and all costs and expenses in connection with
any action or proceeding by or on behalf of those owners, are fully
met and discharged. The Association may include this pledge and
agreement of the state in any agreement with the owners of the
public securities.
(n) Enforcement by mandamus. A writ of mandamus and all
other legal and equitable remedies are available to any party at
interest to require the Association and any other party to carry out
agreements and to perform functions and duties under this section,
the Texas Constitution, or a public security resolution.
SECTION 37. Section 941.003, Insurance Code, is amended by
amending Subsection (b)(5) to read as follows:
(b) A Lloyd's plan is subject to:
(5) Articles 21.21, 21.49, and 21.49-8.
SECTION 38. Section 942.003, Insurance Code, is amended by
amending Subsection (b)(5) to read as follows:
(b) An exchange is subject to:
(5) Articles 21.21, 21.49, and 21.49-8.
SECTION 35. EFFECTIVE DATE. This Act takes effect on
January 1, 2006.