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.
79R8273 T
By: Carona S.B. No. 868
A BILL TO BE ENTITLED
AN ACT
relating to the operation and regulation of certain consolidated
insurance programs.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Title 2, Insurance Code, is amended by adding
Subtitle C to read as follows:
SUBTITLE C. PROGRAMS AFFECTING MULTIPLE LINES OF INSURANCE
CHAPTER 151. CONSOLIDATED INSURANCE PROGRAMS.
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 151.001. DEFINITIONS. In this chapter:
(1) "Consolidated insurance program" means a program
under which a principal, for a contractor or contractors on
construction projects, provides insurance coverages that are
bundled into one insurance program for a single construction
project or multiple construction projects.
(2) "Construction project" means construction,
remodeling, maintenance or repair of improvements to real property.
(3) "Contractor" includes:
(A) a prime contractor;
(B) a general contractor;
(C) a subcontractor; and
(D) any other person who receives insurance
coverage as an additional insured under an insurance policy or
contract subject to this chapter.
(4) "Insurance credit" means a discount on a contract
price offered to a principal by a contractor bidding on a
construction project contract in consideration of the principal
providing insurance coverage for the construction project that
covers the contractor.
Sec. 151.002. PRINCIPAL. (a) For purposes of this chapter,
"principal" means the person who procures the insurance contract or
policy.
(b) The principal under a consolidated insurance program is
the person responsible for the payment of the premium on the
insurance coverage. The principal is typically the named insured
on the insurance contract or policy.
Sec. 151.003. MINIMUM SIZE OF CONSTRUCTION PROJECT. To be
eligible to use a consolidated insurance program under this
chapter, the amount of the contract between the owner and the prime
contractor for any construction project must be greater than $100
million, whether the project is a single construction project or is
part of a multiple construction project.
Sec. 151.004. WAIVER OF GOVERNMENTAL IMMUNITY. (a) In this
section, "governmental unit" has the meaning assigned by Section
2259.001, Government Code.
(b) A governmental unit is liable for damages resulting from
negligence by the governmental unit in the procurement or coverage
of insurance under a consolidated insurance program.
(c) Sovereign immunity to suit is waived and abolished to
the extent of the liability created by this section.
[Sections 151.005-151.050 reserved for expansion]
SUBCHAPTER B. GENERAL REQUIREMENTS FOR A
CONSOLIDATED INSURANCE PROGRAM
Sec. 151.051. GENERAL REQUIREMENTS. An insurance contract
or policy issued under a consolidated insurance program must:
(1) provide coverages in the manner required by the
department under this code; and
(2) comply with the requirements adopted under this
chapter.
Sec. 151.052. REQUIRED COVERAGES. (a) An insurance policy
or contract issued under a consolidated insurance program must
provide coverages for all operations that are necessary and
incidental to the construction project.
(b) The consolidated insurance program must provide
professional liability coverage for any errors or omissions
regarding any design work or program administrative work, including
any safety-related services or drug or substance abuse services
that are required of the contractor, with separate limits of
liability not less than the limits provided by the program for
commercial general liability insurance coverage.
(c) Except as provided by Subsection (d), after the award of
a construction contract by the principal, the operations or
coverages under the consolidated insurance program may not be
materially changed or cancelled without written notice provided to
the principal and all contractors 60 days prior to the effective
date of the material change or cancellation.
(d) A notice to cancel coverage due to non-payment of
premium shall be effective only after written notice is provided to
the principal and all contractors 30 days prior to the effective
date of the cancellation due to non-payment of premium.
(e) If the operations or coverages under a consolidated
insurance program are materially changed or cancelled and not
replaced with equivalent operations or coverages, a contractor
shall be entitled to:
(1) an increase in its construction project contract
price to cover the contractor's cost and overhead for procuring
insurance to replace the coverage provided by the consolidated
insurance program; or
(2) cancel its construction project contract without
recourse or liability for damage to any person.
(f) For purposes of Subsection (e) equivalent operations or
coverages includes, where applicable, an insurer that meets the
requirements in Sec. 151.060.
(g) A contractor that elects to cancel its construction
project contract under Subsection (e)(2) shall be entitled to
payment for all properly performed labor or properly furnished
materials supplied by the contractor to the construction project
prior to the effective date of cancellation of its construction
project contract.
(h) A contractor who submits a price proposal for work on a
construction project under a consolidated insurance program is
entitled to written notification from the principal or contractor
of any material change in the consolidated insurance program by the
date that is no less than 7 days prior to the date the contractor
executes the contract for work on the construction project.
(i) After receipt of notice under Subsection (h) a
contractor may withdraw its price proposal for work on the
construction project without recourse or liability for damage to
any person.
Sec. 151.053. COVERAGE OF CONTRACTORS; EFFECT OF SEPARATE
COVERAGE. (a) Each contractor on a construction project covered by
a consolidated insurance program must be listed as an additional
insured on each insurance policy and contract under this program
and have equal rights under the policy or contract with the
principal and other contractors.
(b) The principal or a contractor may not require a
contractor to obtain additional insured endorsements on the
contractor's separately maintained insurance contracts or policies
that are of the same general type as the insurance coverages
provided by the consolidated insurance program except for offsite
work for ongoing operations related to the project.
(c) The coverages under the consolidated insurance program
must be primary and non-contributory to any insurance policy or
contract separately maintained by a contractor that is of the same
general type as the insurance coverages provided by the
consolidated insurance program.
(d) A contractor covered by a consolidated insurance
program shall have standing in any hearing or proceeding involving
workers' compensation or liability claims, including any claim
adjustment and settlement negotiations, and shall be entitled to
representation by legal counsel selected by the contractor and
whose expense shall be covered under the consolidated insurance
program. The principal shall have the right to approve the legal
counsel selected by the contractor, but such approval shall not be
unreasonably withheld.
Sec. 151.054. COMPLIANCE BY PRINCIPAL. A principal under a
consolidated insurance program who does not comply with the
requirements of this chapter may not, directly or indirectly,
including by deduction from a payment or by requesting an insurance
credit, charge a contractor for any insurance coverage provided to
the contractor by the program.
Sec. 151.055. SUBROGATION. (a) The principal and a
contractor do not have subrogation rights against each other for
claims covered by the consolidated insurance program.
(b) A contractor and another contractor do not have
subrogation rights against each other for claims covered by the
consolidated insurance program.
(c) A waiver of a right of subrogation contained in an
insurance policy or contract separately maintained by a contractor
that is of the same general type as the insurance coverage provided
under the consolidated insurance program is void.
Sec. 151.056. LIMITS OF COVERAGE. (a) Subject to Section
151.058, aggregate and per-occurrence limits of all insurance
coverages under a consolidated insurance program apply to all
contractors under the program for the term of each construction
project covered by the program.
(b) The per-occurrence limit shall be no less than
$100,000,000 for each single construction project or for each
construction project that is part of a multiple construction
project.
(d) The consolidated insurance program must reinstate
annually the liability limits for each policy or contract subject
to the program.
Sec. 151.057. APPLICATION TO GENERAL LIABILITY COVERAGE.
If a consolidated insurance program includes general liability
coverage, coverage must:
(1) be provided for a negligent act of a contractor,
whether caused by a direct act of the contractor or assumed under
contract;
(2) be provided for each product and completed
operation of the construction project; and
(3) not exclude contractual liability coverage.
Sec. 151.058. DURATION OF COVERAGE. A consolidated
insurance program that provides coverage of products and completed
operations coverage must continue the insurance coverage until the
date that is five years from the date on which the construction
project is finally complete.
Sec. 151.059. NOTICE OF PROPOSED CHANGES IN COVERAGE
REQUIRED. (a) An insurer shall provide to the principal and each
contractor covered under a consolidated insurance program a notice
of any change, cancellation of coverage, or refusal to renew
coverage under the insurance policies or contracts subject to the
consolidated insurance program.
(b) Except as provided by Subsections (c) and (d), a
proposed change described under Subsection (a) does not take effect
until the expiration of the 30th day after the date on which the
principal and each contractor receive the notice required by
Subsection (a).
(c) A proposed change regarding a cancellation of coverage
or a refusal to renew coverage does not take effect until the
expiration of the 60th day after the date on which the principal and
each contractor receive the notice required by Subsection (a).
(d) If the operations or coverages under a consolidated
insurance program are materially changed or cancelled and not
replaced with equivalent operations or coverages, a contractor
shall be entitled to:
(1) an increase in its construction project contract
price to cover the contractor's cost and overhead for procuring
insurance to replace the coverage provided by the consolidated
insurance program; or
(2) cancel its construction project contract without
recourse or liability for damage to any person.
Sec. 151.060. INSURER REQUIREMENTS; INSURER RATINGS. (a)
All insurance coverages under a consolidated insurance program must
be provided by an insurer that has:
(1) a financial strength rating of at least A- and a
financial size rating of at least Class XIII, as currently reported
by the A.M. Best Company; or
(2) an equivalent rating made by a similar rating
organization recognized by the commissioner.
(b) The requirements in Subsection (a) must be maintained
for the duration of the construction project.
Sec. 151.061. BONDS. (a) A consolidated insurance program
may not provide a performance bond or payment bond for any
contractor.
(b) Subsection (a) does not prohibit the specifications for
a construction project from including requirements for bonds that
must be obtained directly by the contractor.
Sec. 151.062. INDEMNIFICATION. A contractor may not be
required to indemnify, hold harmless, or defend any claim for any
action assumed under a contract on a construction project covered
by a consolidated insurance program under which the contractor is a
participant, that exceeds the insurance liability limits under the
consolidated insurance program and any such requirement in a
construction project contract covered by a consolidated insurance
program is void.
(b) On a construction project covered by a consolidated
insurance program, the consolidated insurance program must provide
liability insurance to cover the indemnity obligation of a
contractor insured under the consolidated insurance program.
Sec. 151.062A. DEFENSE COVERAGE FOR CLAIM OR SUIT. (a)
Except as provided in Subsection (b), in the event of a claim or
lawsuit that is covered by the consolidated insurance program, the
insurance policy or contract shall provide for the defense of each
contractor with the defense to be conducted by legal counsel
selected by each contractor. The principal shall have the right to
approve the legal counsel selected by the contractor, but such
approval shall not be unreasonably withheld.
(b) Subsection (a) shall not apply if:
(1) the insurance carrier unconditionally agrees to
defend and indemnify the contractor; and
(2) after application of all per occurrence and
aggregate limits, including any unpaid pending claims, there is
sufficient coverage to satisfy the full amount of the claim or
lawsuit.
Sec. 151.063. PAYMENT OF CERTAIN DEDUCTIBLES, LOSSES, OR
PENALTIES. (a) A principal shall pay:
(1) any coverage deductibles or losses in a
retrospective rating plan or other loss-sensitive rating plan under
a consolidated insurance program;
(2) any penalties incurred under the program; and
(3) all deductibles applicable to any policy provided
under the consolidated insurance program, except as provided under
Subsection (b).
(b) A principal may not assess a contractor covered under
the program for a deductible, loss, or penalty described by
Subsection (a), except for a bodily injury or property damage claim
deductible if:
(1) the action of the contractor caused the bodily
injury or property damage claim; and
(2) the insurance carrier assesses the deductible
against the principal.
(c) The limit of the deductible assessed to the contractor
under Subsection (b) shall be the lesser of:
(1) the amount the insurance carrier assesses the
principal; or
(2) $2,500.
Sec. 151.064. PREMIUMS ASSESSED TO CONTRACTOR. If any
premiums for coverage under a consolidated insurance program are
assessed to a contractor, either directly or as an insurance credit
against a contract price:
(1) the contractor shall share in any dividends or
refunds received from the insurer by the owner or contractor on a
pro rata basis based on premiums;
(2) for a single construction project covered under
the consolidated insurance program, the contractor's most recent
experience modifier, as of the date on which the construction
project begins, must be used in the computation of the premium to be
assessed to the contractor until the completion of that project;
(3) for multiple construction projects covered under
the consolidated insurance program, the contractor's most recent
experience modifier may be used for a contractor at the beginning of
each individual construction project and shall be used for the
duration of each individual project;
(4) the amount of the premium assessed to the
contractor must be reduced by 10 percent to compensate the
contractor for the increased cost of administration associated with
the consolidated insurance program.
Sec. 151.064A. PAYMENT OF DIVIDENDS OR REFUNDS; INTEREST
DUE. (a) Any dividend or premium refund due under section 151.064
shall be paid or credited to each entitled contractor no later than
the 14th day after payment or credit is issued by the insurance
carrier.
(b) A dividend or premium refund not paid in accordance with
subsection (a) shall bear interest at the rate of 1–1/2 per cent per
month from the date of credit or payment by the carrier until the
date of payment in full to the contractor entitled to the payment.
(c) A dividend or premium refund received by or credited to
a principal shall constitute trust funds to be held by the principal
and shall be subject to Subchapter B, Chapter 162, Property Code.
Sec. 151.065. AUDIT REQUIREMENTS. Any audit of a
contractor covered by a consolidated insurance program who is
subject to a premium charge for the coverage must be completed not
later than the 45th day after the date on which the contractor
substantially completes the work performed by the contractor on the
construction project.
Sec. 151.066. DATA REPORTS. (a) The program
administrator, insurer, or the principal shall report general
liability and workers' compensation loss and premium data in detail
to:
(1) each contractor at least monthly; and
(2) the appropriate rating bureau annually not later
than the 60th day after the ending date of the experience rating
period of each contractor, with a final report not later than the
60th day after the completion date of the construction project.
(b) The initial report under Subsection (a)(1) must be sent
not later than the 30th day after the date on which work begins on
the construction project, with subsequent monthly reports sent not
later than the 15th day of the month following the month covered by
the report.
(c) A report under Subsection (a)(2) must include data that
has been corrected after the investigation of any discrepancies
reported by a contractor.
(d) On written notice of any erroneous information
submitted to a rating bureau, the program administrator, insurer,
or principal shall notify the rating bureau of the correct
information. Failure to correct an erroneous report not later than
the 30th day after the date on which the written notice is received
by the principal subjects the principal to liability for any
damages that result from the erroneous information, and to
exemplary damages as may be just and equitable resulting from the
principal's breach of its fiduciary duty to each contractor.
[Sections 151.067-151.100 reserved for expansion]
SUBCHAPTER C. DISCLOSURE REQUIREMENTS FOR ADMINISTRATION OF A
CONSOLIDATED INSURANCE PROGRAM
Sec. 151.101. REQUIRED DISCLOSURE AT BID SOLICITATION. At
the time a principal or contractor is soliciting bids for a
construction project, the principal or contractor must disclose in
the project plans or specifications that the project will be
covered by a consolidated insurance program subject to this
chapter.
Sec. 151.102. GENERAL ELEMENTS OF BID SOLICITATION
DISCLOSURE. Each disclosure made under Section 151.101 must
include:
(1) the scope of coverage and limits for each
insurance policy or contract under the consolidated insurance
program, including an accurate specimen copy of full and complete
declarations, policy conditions, limitations, coverages, and
endorsements;
(2) the scope of coverage and limits for each policy or
contract of excess insurance covering the consolidated insurance
program, including an accurate specimen copy of full and complete
declarations, policy conditions, limitations, coverages, and
endorsements; and
(3) a complete description of the safety program
required by Subchapter D.
Sec. 151.101A. REQUIRED DISCLOSURE PRIOR TO CONTRACT
EXECUTION. Not less than 5 days prior to the time a principal or
contractor executes a contract for a construction project covered
by a consolidated insurance program, the principal or contractor
must make a written disclosure to the contractor that contains
detailed information concerning the consolidated insurance
program.
Sec. 151.101B. GENERAL ELEMENTS OF PRE-CONTRACT
DISCLOSURE. Each disclosure made under Section 151.101A must
include:
(1) the name and address of each insurer providing an
insurance policy or contract under the consolidated insurance
program and identification of the coverage each insurer will
provide;
(2) the name, address, and telephone number of the
insurance producer, if any, acting as agent for the insurer;
(3) the name of the primary contact person of the
insurance producer for the consolidated insurance program;
(4) the name, street address, city, state, and zip
code, and the name of the employer, if any, of any person who
receives a commission or fee for the placement of any insurance
policy or contract that is part of the consolidated insurance
program, and the amount or means of calculation of such commission
or fee;
(5) a copy of each form, including enrollment forms,
claim forms, and payroll forms, that a contractor may be required to
submit to the principal, program administrator, or insurer; and
(6) a detailed description of any differences in the
items disclosed under Section 151.102 and the actual scope and
limits of coverage for the consolidated insurance program,
including any deviations from the specimen copy provided.
Sec. 151.103. FORMULA FOR INSURANCE CREDITS. (a) The
disclosure required under Section 151.101 must include the formula
to be used by a contractor in computing any insurance credits.
(b) The formula must include:
(1) the discounts, credits, and rate variances used by
the contractor;
(2) examples of credit computations;
(3) a method to incorporate any scheduled credits,
premium discounts, or other items of credit or discount that apply
specifically to the contractor; and
(4) a method to allow contractor that loses premium
volume discounts under its separately maintained insurance program
due to its participation in the consolidated insurance program to
offset such lost discounts against any premium assessed to the
contractor for the consolidated insurance program.
(c) A principal may not require an insurance credit of a
contractor for flat rate coverages maintained by the contractor.
Sec. 151.104. CONTRACT AWARD; BASIS. (a) The disclosure
required under Section 151.101 must state the basis on which the
principal will award the contract, including a specific explanation
of how any premium overruns or underruns will be applied and whether
the contract award will be made one basis that
(1) excludes the cost of insurance coverages; or
(2) includes the cost of insurance coverage.
(b) A contractor awarding a contract to another contractor
must use the basis described under Subsection (a) for any
contractor insured under the consolidated insurance program.
Sec. 151.105. INJURED EMPLOYEES. The disclosure required
under Section 151.101. must fully describe any light duty
return-to-work program required for a contractor's injured
employees. A return-to-work program must include a formula under
which the reasonable compensation due the contractor for the lost
productivity of the light duty employee may be computed.
[Sections 151.106-151.150 reserved for expansion]
SUBCHAPTER D. SAFETY PROGRAM
Sec. 151.151. SAFETY PROGRAM REQUIRED. (a) A principal
shall adopt a comprehensive, professionally developed safety
program designed to reduce the frequency and severity of worker
injuries. The principal shall require participation in the safety
program by all persons working on the construction project.
(b) The safety program must include a program for detection
of drug use and other substance abuse.
(c) A qualified third-party safety company may administer
and operate a safety program required under this section.
Sec. 151.152. SAFETY PROFESSIONALS. (a) For every 100
workers on the construction project, a safety program conducted
under this subchapter must have at least one qualified safety
professional who works not less that 40 hours weekly at the work
site of the construction project.
(b) To be qualified to serve as a safety professional under
Subsection (a), a person must have demonstrable knowledge of Title
29, Code of Federal Regulations, and related regulations adopted by
the federal Occupational Safety and Health Administration and:
(1) hold a bachelor of science degree conferred by an
accredited institution of higher education, with a major in safety
engineering, industrial hygiene, or a related field; or
(2) hold a current certification as a certified safety
professional issued by an entity recognized by the commissioner; or
(3) have at least eight years of primary safety
responsibility experience in the construction industry.
[Sections 151.153-151.200 reserved for expansion]
SUBCHAPTER E. PROGRAM ADMINISTRATION
Sec. 151.201. PROGRAM ADMINISTRATOR. (a) Each principal
shall appoint a qualified administrator for the consolidated
insurance program whose only duty is administration of the program.
(b) To be eligible to serve as the program administrator, a
person must:
(1) hold a risk manager license under Chapter 4153, a
general property and casualty agent license under Chapter 4051, or
another license as an insurance professional that is:
(A) recognized as appropriate by the
commissioner; and
(B) issued under Title 13; and
(2) have been licensed under this code for at least the five
years preceding the date of the appointment as program
administrator.
Sec. 151.202. POWERS AND DUTIES OF PROGRAM ADMINISTRATOR;
RELATIONSHIP WITH CONTRACTORS; RULES. (a) Each program
administrator shall ensure that the administrator's clients comply
with the requirements of this chapter. For purposes of this
subsection, each contractor on the construction project is
considered a client of the program administrator.
(b) The Commissioner shall adopt rules as necessary to
enforce this section and may impose sanctions under Chapter 82 for a
violation of this section by a program administrator. Sanctions
under this subsection may include revocation of the license held by
the program administrator under this code.
Sec.151.203. CONTRACTOR AS BENEFICIARY. For purposes of
insurance benefits under the consolidated insurance program, each
contractor is considered a beneficiary of the administrator and the
administrator shall owe a fiduciary duty to each contractor that
participates in the program.
SECTION 2. Chapter 151, Insurance Code, as added by this
Act, applies only to an insurance policy or contract delivered,
issued for delivery, or renewed on or after January 1, 2006. A
policy or contract delivered, issued for delivery, or renewed
before January 1, 2006, is governed by the law as it existed
immediately before the effective date of this Act, and that law is
continued in effect for that purpose.
SECTION 3. This Act takes effect September 1, 2005.