H.B. No. 2636

AN ACT

relating to the nonsubstantive revision of statutes relating to the Texas Department of Insurance, the business of insurance, and certain related businesses, to nonsubstantive additions to and corrections in the codified Insurance Code, and to conforming the provisions of that code that were codified by the 79th Legislature to other Acts of that legislature, including conforming amendments, repeals, and penalties.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

ARTICLE 1. REVISION OF THE INSURANCE CODE OF 1951

PART A. ADDITIONS AND CONFORMING AMENDMENTS TO TITLE 2,

INSURANCE CODE

SECTION 1A.001. CONFORMING AMENDMENT. Chapter 30, Insurance Code, is amended to read as follows:

CHAPTER 30. GENERAL PROVISIONS

Sec. 30.001. PURPOSE OF TITLES 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, [AND] 14, AND 20. (a) This title and Titles 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, [and] 14, and 20 are enacted as a part of the state's continuing statutory revision program, begun by the Texas Legislative Council in 1963 as directed by the legislature in the law codified as Section 323.007, Government Code. The program contemplates a topic-by-topic revision of the state's general and permanent statute law without substantive change.

(b) Consistent with the objectives of the statutory revision program, the purpose of this title and Titles 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, [and] 14, and 20 is to make the law encompassed by the titles more accessible and understandable by:

(1) rearranging the statutes into a more logical order;

(2) employing a format and numbering system designed to facilitate citation of the law and to accommodate future expansion of the law;

(3) eliminating repealed, duplicative, unconstitutional, expired, executed, and other ineffective provisions; and

(4) restating the law in modern American English to the greatest extent possible.

Sec. 30.002. CONSTRUCTION. Except as provided by Section 30.003 and as otherwise expressly provided in this code, Chapter 311, Government Code (Code Construction Act), applies to the construction of each provision in this title and in Titles 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, [and] 14, and 20.

Sec. 30.003. DEFINITION OF PERSON. The definition of "person" assigned by Section 311.005, Government Code, does not apply to any provision in this title or in Title 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, [or] 14, or 20.

Sec. 30.004. REFERENCE IN LAW TO STATUTE REVISED BY TITLE 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, [OR] 14, OR 20. A reference in a law to a statute or a part of a statute revised by this title or by Title 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, [or] 14, or 20 is considered to be a reference to the part of this code that revises that statute or part of that statute. SECTION 1A.002. ADDITION. Subchapter A, Chapter 32, Insurance Code, is amended by adding Sections 32.0015 and 32.004 to read as follows:

Sec. 32.0015. FILING ARTICLES OF INCORPORATION AND OTHER PAPERS; CERTIFIED COPIES. (a) The department shall file and maintain in a department office:

(1) all insurance companies' acts or articles of incorporation; and

(2) any other paper required by law to be filed with the department.

(b) The department shall provide a certified copy of a document described by Subsection (a)(1) or (2) to a party interested in the document who:

(1) submits an application; and

(2) pays the fee prescribed by law. (V.T.I.C. Art. 1.10, Sec. 2.)

Sec. 32.004. PUBLICATION OF RESULTS OF EXAMINATION. The department shall publish the results of an examination of a company's affairs if the commissioner determines that publication is in the public interest. (V.T.I.C. Art. 1.10, Sec. 6.)

PART B. ADDITIONS TO TITLE 3, INSURANCE CODE

SECTION 1B.001. ADDITION. Subtitle B, Title 3, Insurance Code, is amended by adding Chapter 228 to read as follows: CHAPTER 228. PREMIUM TAX CREDIT FOR CERTAIN INVESTMENTS SUBCHAPTER A. GENERAL PROVISIONS

Sec.228.001.GENERAL DEFINITIONS. In this chapter:

(1) "Allocation date" means the date on which certified investors are allocated premium tax credits.

(2) "Certified capital" means cash invested by a certified investor that fully funds the purchase price of an equity interest in a certified capital company or a qualified debt instrument issued by the company.

(3) "Certified capital company" means a partnership, corporation, or trust or limited liability company, whether organized on a profit or nonprofit basis, that:

(A) has as the company's primary business activity the investment of cash in qualified businesses; and

(B) is certified as meeting the criteria of this chapter.

(4) "Certified investor" means an insurer or other person that has state premium tax liability and that contributes certified capital pursuant to a premium tax credit allocation under this chapter.

(5) "Early stage business" means a business described by Section 228.152(a).

(6) "Person" means an individual or entity, including a corporation, general or limited partnership, or trust or limited liability company.

(7) "Premium tax credit allocation claim" means a claim for allocation of premium tax credits.

(8) "Qualified business" means a business described by Section 228.201.

(9) "Qualified debt instrument" means a debt instrument issued by a certified capital company, at par value or a premium, that:

(A) has an original maturity date that is a date on or after the fifth anniversary of the date of issuance;

(B) has a repayment schedule that is not faster than a level principal amortization over five years; and

(C) does not have interest, distribution, or payment features that are related to:

(i) the profitability of the company; or

(ii) the performance of the company's investment portfolio.

(10) "Qualified investment" means the investment of cash by a certified capital company in a qualified business for the purchase of any debt, debt participation, equity, or hybrid security of any nature or description, including a debt instrument or security that has the characteristics of debt but that provides for conversion into equity or equity participation instruments such as options or warrants.

(11) "State premium tax liability" means:

(A) any liability incurred by any person under Chapter 221, 222, 223, or 224; or

(B) if the tax liability imposed under Chapter 221, 222, 223, or 224 is eliminated or reduced, any tax liability imposed on an insurer or other person that had premium tax liability under Subchapter A, Chapter 4, or Article 9.59 as those laws existed on January 1, 2003.

(12) "Strategic investment business" means a business described by Section 228.153(a). (V.T.I.C. Art. 4.51, Subdivs. (2), (3), (4), (5), (6) (part), (7), (8), (9) (part), (10), (12), (13), (15) (part).)

Sec.228.002.DEFINITION OF AFFILIATE. In this chapter, "affiliate" of another person means:

(1) a person that is an affiliate for purposes of Section 823.003;

(2) a person that directly or indirectly:

(A) beneficially owns 10 percent or more of the outstanding voting securities or other voting or management interests of the other person, whether through rights, options, convertible interests, or otherwise; or

(B) controls or holds power to vote 10 percent or more of the outstanding voting securities or other voting or management interests of the other person;

(3) a person 10 percent or more of the outstanding voting securities or other voting or management interests of which are directly or indirectly:

(A) beneficially owned by the other person, whether through rights, options, convertible interests, or otherwise; or

(B) controlled or held with power to vote by the other person;

(4) a partnership in which the other person is a general partner;

(5) an officer, director, employee, or agent of the other person; or

(6) an immediate family member of an officer, director, employee, or agent described by Subdivision (5). (V.T.I.C. Art. 4.51, Subdiv. (1).) [Sections 228.003-228.050 reserved for expansion] SUBCHAPTER B. ADMINISTRATION AND PROMOTION

Sec.228.051.ADMINISTRATION BY COMPTROLLER. The comptroller shall administer this chapter. (V.T.I.C. Art. 4.52 (part).)

Sec.228.052.RULES; FORMS. The comptroller shall adopt rules and forms as necessary to implement this chapter, including rules that:

(1) establish the application procedures for certified capital companies; and

(2) facilitate the transfer or assignment of premium tax credits by certified investors. (V.T.I.C. Art. 4.52 (part); Art. 4.53, Sec. (a); Art. 4.71, Sec. (a) (part).)

Sec.228.053.REPORT TO LEGISLATURE. (a) The comptroller shall prepare a biennial report concerning the results of the implementation of this chapter. The report must include:

(1) the number of certified capital companies holding certified capital;

(2) the amount of certified capital invested in each certified capital company;

(3) the amount of certified capital the certified capital company invested in qualified businesses as of January 1, 2006, and the cumulative total for each subsequent year;

(4) the total amount of tax credits granted under this chapter for each year that credits have been granted;

(5) the performance of each certified capital company with respect to renewal and reporting requirements imposed under this chapter;

(6) with respect to the qualified businesses in which certified capital companies have invested:

(A) the classification of the qualified businesses according to the industrial sector and size of the business;

(B) the total number of jobs created by the investment and the average wages paid for the jobs; and

(C) the total number of jobs retained as a result of the investment and the average wages paid for the jobs; and

(7) the certified capital companies that have been decertified or that have failed to renew the certification and the reason for any decertification.

(b) The comptroller shall file the report with the governor, the lieutenant governor, and the speaker of the house of representatives not later than December 15 of each even-numbered year. (V.T.I.C. Art. 4.73.)

Sec.228.054.PROMOTION OF PROGRAM. The Texas Economic Development and Tourism Office shall promote the program established under this chapter in the Texas Business and Community Economic Development Clearinghouse. (V.T.I.C. Art. 4.72.) [Sections 228.055-228.100 reserved for expansion] SUBCHAPTER C. APPLICATION FOR AND GENERAL OPERATION OF CERTIFIED CAPITAL COMPANIES

Sec.228.101.APPLICATION FOR CERTIFICATION. (a) An applicant for certification must file the application in the form prescribed by the comptroller. The application must be accompanied by a nonrefundable application fee of $7,500.

(b) The application must include an audited balance sheet of the applicant, with an unqualified opinion from an independent certified public accountant, as of a date not more than 35 days before the date of the application. (V.T.I.C. Art. 4.53, Sec. (b).)

Sec.228.102.QUALIFICATION. To qualify as a certified capital company:

(1) the applicant must have, at the time of application for certification, an equity capitalization of at least $500,000 in unencumbered cash or cash equivalents;

(2) at least two principals or persons employed to manage the funds of the applicant must have at least four years of experience in the venture capital industry; and

(3) the applicant must satisfy any additional requirement imposed by the comptroller by rule. (V.T.I.C. Art. 4.53, Sec. (c).)

Sec.228.103.MANAGEMENT BY AND CERTAIN OWNERSHIP INTERESTS OF INSURANCE ENTITIES PROHIBITED OF INSURANCE ENTITIES PROHIBITED insurers, or other persons who may have state premium tax liability or the insurer's or person's affiliates may not directly or indirectly:

(1) manage a certified capital company;

(2) beneficially own, whether through rights, options, convertible interests, or otherwise, more than 10 percent of the outstanding voting securities of a certified capital company; or

(3) control the direction of investments for a certified capital company.

(b) Subsection (a) applies without regard to whether the insurer or other person or the affiliate of the insurer or other person is authorized by or engages in business in this state.

(c) Subsections (a) and (b) do not preclude an insurer, certified investor, or any other party from exercising its legal rights and remedies, including interim management of a certified capital company, if authorized by law, with respect to a certified capital company that is in default of the company's statutory or contractual obligations to the insurer, certified investor, or other party.

(d) This chapter does not limit an insurer's ownership of nonvoting equity interests in a certified capital company. (V.T.I.C. Art. 4.54; Art. 4.56, Sec. (d).)

Sec.228.104.ACTION ON APPLICATION. (a) The comptroller shall:

(1) review the application, organizational documents, and business history of each applicant; and

(2) ensure that the applicant satisfies the requirements of this chapter.

(b) Not later than the 30th day after the date an application is filed, the comptroller shall:

(1) issue the certification; or

(2) refuse to issue the certification and communicate in detail to the applicant the grounds for the refusal, including suggestions for the removal of those grounds. (V.T.I.C. Art. 4.53, Secs. (d), (e).)

Sec.228.105.CONTINUATION OF CERTIFICATION. To continue to be certified, a certified capital company must make qualified investments according to the schedule established by Section 228.151. (V.T.I.C. Art. 4.56, Sec. (a) (part).)

Sec.228.106.REPORTS TO COMPTROLLER; AUDITED FINANCIAL STATEMENT STATEMENT comptroller as soon as practicable after the receipt of certified capital:

(1) the name of each certified investor from whom the certified capital was received, including the certified investor's insurance premium tax identification number;

(2) the amount of each certified investor's investment of certified capital and premium tax credits; and

(3) the date on which the certified capital was received.

(b) Not later than January 31 of each year, each certified capital company shall report to the comptroller:

(1) the amount of the company's certified capital at the end of the preceding year;

(2) whether or not the company has invested more than 15 percent of the company's total certified capital in a single business;

(3) each qualified investment that the company made during the preceding year and, with respect to each qualified investment, the number of employees of the qualified business at the time the qualified investment was made; and

(4) any other information required by the comptroller, including any information required by the comptroller to comply with Section 228.053.

(c) Not later than April 1 of each year, each certified capital company shall provide to the comptroller an annual audited financial statement that includes the opinion of an independent certified public accountant. The audit must address the methods of operation and conduct of the business of the company to determine whether:

(1) the company is complying with this chapter and the rules adopted under this chapter;

(2) the funds received by the company have been invested as required within the time provided by Section 228.151; and

(3) the company has invested the funds in qualified businesses. (V.T.I.C. Art. 4.58.)

Sec.228.107.RENEWAL FEE; LATE FEE; EXCEPTION. (a) Not later than January 31 of each year, each certified capital company shall pay a nonrefundable renewal fee of $5,000 to the comptroller.

(b) If a certified capital company fails to pay the renewal fee on or before the date specified by Subsection (a), the company must pay, in addition to the renewal fee, a late fee of $5,000 to continue the company's certification.

(c) Notwithstanding Subsection (a), a renewal fee is not required within six months of the date on which a certified capital company's initial certification is issued under Section 228.104(b). (V.T.I.C. Art. 4.59.)

Sec.228.108.OFFERING MATERIAL USED BY CERTIFIED CAPITAL COMPANY COMPANY the certified capital company must include the following statement:

By authorizing the formation of a certified capital company, the State of Texas does not endorse the quality of management or the potential for earnings of the company and is not liable for damages or losses to a certified investor in the company. Use of the word "certified" in an offering does not constitute a recommendation or endorsement of the investment by the comptroller of public accounts. If applicable provisions of law are violated, the State of Texas may require forfeiture of unused premium tax credits and repayments of used premium tax credits. (V.T.I.C. Art. 4.55.) [Sections 228.109-228.150 reserved for expansion] SUBCHAPTER D. INVESTMENT BY CERTIFIED CAPITAL COMPANIES

Sec.228.151.REQUIRED SCHEDULE OF INVESTMENT. (a) Before the third anniversary of a certified capital company's allocation date, the company must make qualified investments in an amount cumulatively equal to at least 30 percent of the company's certified capital, subject to Section 228.153(b).

(b) Before the fifth anniversary of a certified capital company's allocation date, the company must make qualified investments in an amount cumulatively equal to at least 50 percent of the company's certified capital, subject to Sections 228.152(b) and 228.153(b). (V.T.I.C. Art. 4.56, Sec. (a) (part).)

Sec.228.152.INVESTMENT IN EARLY STAGE BUSINESS REQUIRED. (a) In this section, "early stage business" means a qualified business that:

(1) is involved, at the time of a certified capital company's first investment, in activities related to the development of initial product or service offerings, such as prototype development or establishment of initial production or service processes;

(2) was initially organized less than two years before the date of the certified capital company's first investment; or

(3) during the fiscal year immediately preceding the year of the certified capital company's first investment had, on a consolidated basis with the business's affiliates, gross revenues of not more than $2 million as determined in accordance with generally accepted accounting principles.

(b) A certified capital company must place at least 50 percent of the amount of qualified investments required by Section 228.151(b) in early stage businesses. (V.T.I.C. Art. 4.51, Subdiv. (6); Art. 4.56, Sec. (b) (part).)

Sec.228.153.INVESTMENT IN STRATEGIC INVESTMENT BUSINESS REQUIRED REQUIRED

(1) "Strategic investment area" means an area of this state that qualifies as a strategic investment area under Subchapter O, Chapter 171, Tax Code, or, after the date that subchapter expires, an area that qualified as a strategic investment area under that subchapter immediately before that date.

(2) "Strategic investment business" means a qualified business that:

(A) has the business's principal business operations located in one or more strategic investment areas; and

(B) intends to maintain business operations in the strategic investment areas after receipt of the investment by the certified capital company.

(b) A certified capital company must place at least 30 percent of the amount of qualified investments required by Sections 228.151(a) and (b) in a strategic investment business. (V.T.I.C. Art. 4.51, Subdivs. (14), (15); Art. 4.56, Sec. (b) (part).)

Sec.228.154.CERTIFIED CAPITAL NOT INVESTED IN QUALIFIED INVESTMENTS INVESTMENTS certified capital not invested in qualified investments only in:

(1) cash deposited with a federally insured financial institution;

(2) certificates of deposit in a federally insured financial institution;

(3) investment securities that are:

(A) obligations of the United States or agencies or instrumentalities of the United States; or

(B) obligations that are guaranteed fully as to principal and interest by the United States;

(4) debt instruments rated at least "A" or the equivalent by a nationally recognized credit rating organization, or issued by, or guaranteed with respect to payment by, an entity whose unsecured indebtedness is rated at least "A" or the equivalent by a nationally recognized credit rating organization, and which indebtedness is not subordinated to other unsecured indebtedness of the issuer or the guarantor;

(5) obligations of this state or a municipality or political subdivision of this state; or

(6) any other investment approved in advance in writing by the comptroller. (V.T.I.C. Art. 4.56, Sec. (h).)

Sec.228.155.COMPUTATION OF AMOUNT OF INVESTMENTS. (a) The aggregate cumulative amount of all qualified investments made by a certified capital company after the company's allocation date shall be considered in the computation of the percentage requirements under this subchapter.

(b) A certified capital company may invest proceeds received from a qualified investment in another qualified investment, and that investment counts toward any requirement of this chapter with respect to investments of certified capital. (V.T.I.C. Art. 4.56, Sec. (c).)

Sec.228.156.LIMIT ON QUALIFIED INVESTMENT. A certified capital company may not make a qualified investment at a cost to the company that is greater than 15 percent of the company's total certified capital at the time of investment. (V.T.I.C. Art. 4.56, Sec. (f).)

Sec.228.157.DISTRIBUTIONS BY CERTIFIED CAPITAL COMPANY. (a) In this section, "qualified distribution" means any distribution or payment from certified capital by a certified capital company in connection with:

(1) the reasonable costs and expenses of forming, syndicating, managing, and operating the company, provided that the distribution or payment is not made directly or indirectly to a certified investor, including:

(A) reasonable and necessary fees paid for professional services, including legal and accounting services, related to the company's formation and operation; and

(B) an annual management fee in an amount that does not exceed 2.5 percent of the company's certified capital; and

(2) a projected increase in federal or state taxes, including penalties and interest related to state and federal income taxes, of the company's equity owners resulting from the earnings or other tax liability of the company to the extent that the increase is related to the ownership, management, or operation of the company.

(b) A certified capital company may make a qualified distribution at any time. To make a distribution or payment other than a qualified distribution, a company must have made qualified investments in an amount cumulatively equal to 100 percent of the company's certified capital.

(c) If a business in which a qualified investment is made relocates the business's principal business operations to another state during the term of the certified capital company's investment in the business, the cumulative amount of qualified investments made by the certified capital company for purposes of satisfying the requirements of Subsection (b) only is reduced by the amount of the certified capital company's qualified investments in the business that has relocated.

(d) Subsection (c) does not apply if the business demonstrates that the business has returned the business's principal business operations to this state not later than the 90th day after the date of the relocation. (V.T.I.C. Art. 4.51, Subdiv. (11); Art. 4.60, Secs. (a), (c).)

Sec.228.158.REPAYMENT OF DEBT. Notwithstanding Section 228.157(b), a certified capital company may make repayments of principal and interest on the company's indebtedness without any restriction, including repaying the company's indebtedness on which certified investors earned premium tax credits. (V.T.I.C. Art. 4.60, Sec. (b).) [Sections 228.159-228.200 reserved for expansion] SUBCHAPTER E. QUALIFIED BUSINESS

Sec.228.201.DEFINITION OF QUALIFIED BUSINESS. (a) In this chapter, "qualified business" means a business that complies with this section at the time of a certified capital company's first investment in the business.

(b) A qualified business must:

(1) be headquartered in this state and intend to remain in this state after receipt of the certified capital company's investment; and

(2) have the business's principal business operations located in this state and intend to maintain business operations in this state after receipt of the certified capital company's investment.

(c) A qualified business must agree to use the qualified investment primarily to:

(1) support business operations in this state, other than advertising, promotion, and sales operations which may be conducted outside of this state; or

(2) in the case of a start-up company, establish and support business operations in this state, other than advertising, promotion, and sales operations which may be conducted outside of this state.

(d) A qualified business may not have more than 100 employees and must:

(1) employ at least 80 percent of the business's employees in this state; or

(2) pay 80 percent of the business's payroll to employees in this state.

(e) A qualified business must be primarily engaged in:

(1) manufacturing, processing, or assembling products;

(2) conducting research and development; or

(3) providing services.

(f) A qualified business may not be primarily engaged in:

(1) retail sales;

(2) real estate development;

(3) the business of insurance, banking, or lending; or

(4) the provision of professional services provided by accountants, attorneys, or physicians. (V.T.I.C. Art. 4.51, Subdiv. (9).)

Sec.228.202.RELOCATION OF PRINCIPAL BUSINESS OPERATIONS. If, before the 90th day after the date a certified capital company makes an investment in a qualified business, the qualified business moves the business's principal business operations from this state, the investment may not be considered a qualified investment for purposes of the percentage requirements under this chapter. (V.T.I.C. Art. 4.56, Sec. (g).)

Sec.228.203.EVALUATION OF BUSINESS BY COMPTROLLER. (a) A certified capital company may, before making an investment in a business, request a written opinion from the comptroller as to whether the business in which the company proposes to invest is a qualified business, an early stage business, or a strategic investment business.

(b) Not later than the 15th business day after the date of the receipt of a request under Subsection (a), the comptroller shall:

(1) determine whether the business meets the definition of a qualified business, an early stage business, or a strategic investment business, as applicable, and notify the certified capital company of the determination and provide an explanation of the determination; or

(2) notify the company that an additional 15 days will be needed to review the request and make the determination.

(c) If the comptroller fails to notify the certified capital company with respect to the proposed investment within the period specified by Subsection (b), the business in which the company proposes to invest is considered to be a qualified business, an early stage business, or a strategic investment business, as appropriate. (V.T.I.C. Art. 4.57.)

Sec.228.204.CONTINUATION OF CLASSIFICATION AS QUALIFIED BUSINESS; FOLLOW-ON INVESTMENTS AUTHORIZED BUSINESS; FOLLOW-ON INVESTMENTS AUTHORIZED is classified as a qualified business at the time of the first investment in the business by a certified capital company:

(1) remains classified as a qualified business; and

(2) may receive follow-on investments from any certified capital company.

(b) Except as provided by Subsection (c), a follow-on investment made under Subsection (a) is a qualified investment even though the business may not meet the definition of a qualified business at the time of the follow-on investment.

(c) A follow-on investment does not qualify as a qualified investment if, at the time of the follow-on investment, the qualified business no longer has the business's principal business operations in this state. (V.T.I.C. Art. 4.56, Sec. (e).) [Sections 228.205-228.250 reserved for expansion] SUBCHAPTER F. PREMIUM TAX CREDIT

Sec.228.251.PREMIUM TAX CREDIT. (a) A certified investor who makes an investment of certified capital shall earn in the year of investment a vested credit against state premium tax liability equal to 100 percent of the certified investor's investment of certified capital, subject to the limits imposed by this chapter.

(b) Beginning with the tax report due March 1, 2009, for the 2008 tax year, a certified investor may take up to 25 percent of the vested premium tax credit in any taxable year of the certified investor. The credit may not be applied to estimated payments due in 2008. (V.T.I.C. Art. 4.65, Sec. (a).)

Sec.228.252.LIMIT ON PREMIUM TAX CREDIT. (a) The credit to be applied against state premium tax liability of a certified investor in any one year may not exceed the state premium tax liability of the investor for the taxable year.

(b) A certified investor may carry forward any unused credit against state premium tax liability indefinitely until the premium tax credits are used. (V.T.I.C. Art. 4.65, Sec. (b).)

Sec.228.253.PREMIUM TAX CREDIT ALLOCATION CLAIM REQUIRED. (a) A certified investor must prepare and execute a premium tax credit allocation claim on a form provided by the comptroller.

(b) The certified capital company must have filed the claim with the comptroller on the date on which the comptroller accepted premium tax credit allocation claims on behalf of certified investors under the comptroller's rules.

(c) The premium tax credit allocation claim form must include an affidavit of the certified investor under which the certified investor becomes legally bound and irrevocably committed to make an investment of certified capital in a certified capital company in the amount allocated even if the amount allocated is less than the amount of the claim, subject only to the receipt of an allocation under Section 228.255.

(d) A certified investor may not claim a premium tax credit under Section 228.251 for an investment that has not been funded, without regard to whether the certified investor has committed to fund the investment. (V.T.I.C. Art. 4.66.)

Sec.228.254.TOTAL LIMIT ON PREMIUM TAX CREDITS. (a) The total amount of certified capital for which premium tax credits may be allowed under this chapter for all years in which premium tax credits are allowed is $200 million.

(b) The total amount of certified capital for which premium tax credits may be allowed for all certified investors under this chapter may not exceed the amount that would entitle all certified investors in certified capital companies to take total credits of $50 million in a year.

(c) A certified capital company and the company's affiliates may not file premium tax credit allocation claims in excess of the maximum amount of certified capital for which premium tax credits may be allowed as provided by this section. (V.T.I.C. Art. 4.67.)

Sec.228.255.ALLOCATION OF PREMIUM TAX CREDIT. (a) If the total premium tax credits claimed by all certified investors exceeds the total limits on premium tax credits established by Section 228.254(a), the comptroller shall allocate the total amount of premium tax credits allowed under this chapter to certified investors in certified capital companies on a pro rata basis in accordance with this section.

(b) The pro rata allocation for each certified investor shall be the product of:

(1) a fraction, the numerator of which is the amount of the premium tax credit allocation claim filed on behalf of the investor and the denominator of which is the total amount of all premium tax credit allocation claims filed on behalf of all certified investors; and

(2) the total amount of certified capital for which premium tax credits may be allowed under this chapter.

(c) The maximum amount of certified capital for which premium tax credit allocation may be allowed on behalf of a single certified investor and the investor's affiliates, whether by one or more certified capital companies, may not exceed the greater of:

(1) $10 million; or

(2) 15 percent of the maximum aggregate amount available under Section 228.254(a). (V.T.I.C. Art. 4.68, Secs. (a), (b), (e).)

Sec.228.256.TREATMENT OF CREDITS AND CAPITAL. In any case under this code or another insurance law of this state in which the assets of a certified investor are examined or considered, the certified capital may be treated as an admitted asset, subject to the applicable statutory valuation procedures. (V.T.I.C. Art. 4.69.)

Sec.228.257.TRANSFERABILITY OF CREDIT. (a) A certified investor may transfer or assign premium tax credits only in compliance with the rules adopted under Section 228.052.

(b) The transfer or assignment of a premium tax credit does not affect the schedule for taking the premium tax credit under this chapter. (V.T.I.C. Art. 4.71, Secs. (a) (part), (b).)

Sec.228.258.IMPACT OF PREMIUM TAX CREDIT ON INSURANCE RATEMAKING RATEMAKING amount of premium tax included by the investor in connection with ratemaking for an insurance contract written in this state because of a reduction in the investor's Texas premium tax derived from premium tax credits granted under this chapter. (V.T.I.C. Art. 4.70.)

Sec.228.259.RETALIATORY TAX. A certified investor claiming a credit against state premium tax liability earned through an investment in a company is not required to pay any additional retaliatory tax levied under Chapter 281 as a result of claiming that credit. (V.T.I.C. Art. 4.65, Sec. (c) (part).) [Sections 228.260-228.300 reserved for expansion] SUBCHAPTER G. ENFORCEMENT

Sec.228.301.ANNUAL REVIEW BY COMPTROLLER. (a) The comptroller shall conduct an annual review of each certified capital company to:

(1) ensure that the company:

(A) continues to satisfy the requirements of this chapter; and

(B) has not made any investment in violation of this chapter; and

(2) determine the eligibility status of the company's qualified investments.

(b) Each certified capital company shall pay the cost of the annual review according to a reasonable fee schedule adopted by the comptroller. (V.T.I.C. Art. 4.61, Secs. (a), (b).)

Sec.228.302.DECERTIFICATION OF CERTIFIED CAPITAL COMPANY COMPANY 228.107, 228.151, 228.152, 228.153, 228.154, 228.155, 228.156, 228.202, or 228.204 is grounds for decertification of a certified capital company.

(b) If the comptroller determines that a certified capital company is not in compliance with a law listed in Subsection (a), the comptroller shall notify the company's officers in writing that the company may be subject to decertification after the 120th day after the date the notice is mailed unless the company:

(1) corrects the deficiencies; and

(2) returns to compliance with the law.

(c) The comptroller may decertify a certified capital company, after opportunity for hearing, if the comptroller finds that the company is not in compliance with a law listed in Subsection (a) at the end of the period established by Subsection (b).

(d) Decertification under this section is effective on receipt of notice of decertification by the certified capital company.

(e) The comptroller shall notify any appropriate state agency of a decertification of a certified capital company. (V.T.I.C. Art. 4.61, Secs. (c), (d).)

Sec.228.303.ADMINISTRATIVE PENALTY. (a) The comptroller may impose an administrative penalty on a certified capital company that violates this chapter.

(b) The amount of the penalty may not exceed $25,000. Each day a violation continues or occurs is a separate violation for the purpose of imposing the penalty. The amount of the penalty shall be based on:

(1) the seriousness of the violation, including the nature, circumstances, extent, and gravity of the violation;

(2) the economic harm caused by the violation;

(3) the history of previous violations;

(4) the amount necessary to deter a future violation;

(5) efforts to correct the violation; and

(6) any other matter that justice may require.

(c) A certified capital company assessed a penalty under this chapter may request a redetermination as provided by Chapter 111, Tax Code.

(d) The attorney general may sue to collect the penalty.

(e) A proceeding to impose the penalty is a contested case under Chapter 2001, Government Code. (V.T.I.C. Art. 4.62.) [Sections 228.304-228.350 reserved for expansion] SUBCHAPTER H. RECAPTURE AND FORFEITURE OF PREMIUM TAX CREDITS

Sec.228.351.RECAPTURE AND FORFEITURE OF PREMIUM TAX CREDIT FOLLOWING DECERTIFICATION CREDIT FOLLOWING DECERTIFICATION certified capital company may, in accordance with this section, cause:

(1) the recapture of premium tax credits previously claimed by the company's certified investors; and

(2) the forfeiture of future premium tax credits to be claimed by the investors.

(b) Decertification of a certified capital company on or before the third anniversary of the company's allocation date causes the recapture of any premium tax credits previously claimed and the forfeiture of any future premium tax credits to be claimed by a certified investor with respect to the company.

(c) For a certified capital company that meets the requirements for continued certification under Section 228.151(a) and subsequently fails to meet the requirements for continued certification under Subsection (b) of that section:

(1) any premium tax credit that has been or will be taken by a certified investor on or before the third anniversary of the allocation date is not subject to recapture or forfeiture; and

(2) any premium tax credit that has been or will be taken by a certified investor after the third anniversary of the company's allocation date is subject to recapture or forfeiture.

(d) For a certified capital company that has met the requirements for continued certification under Section 228.151 and is subsequently decertified:

(1) any premium tax credit that has been or will be taken by a certified investor on or before the fifth anniversary of the allocation date is not subject to recapture or forfeiture; and

(2) any premium tax credit to be taken after the fifth anniversary of the allocation date is subject to forfeiture only if the company is decertified on or before the fifth anniversary of the company's allocation date.

(e) For a certified capital company that has invested an amount cumulatively equal to 100 percent of the company's certified capital in qualified investments, any premium tax credit claimed or to be claimed by a certified investor is not subject to recapture or forfeiture under this section. (V.T.I.C. Art. 4.63, Sec. (a).)

Sec.228.352.NOTICE OF RECAPTURE AND FORFEITURE OF PREMIUM TAX CREDIT TAX CREDIT address of each certified investor whose premium tax credit is subject to recapture or forfeiture, using the address shown on the investor's last premium tax filing. (V.T.I.C. Art. 4.63, Sec. (b).)

Sec.228.353.INDEMNITY AGREEMENTS AND INSURANCE AUTHORIZED AUTHORIZED indemnify, or purchase insurance for the benefit of, a certified investor for losses resulting from the recapture or forfeiture of premium tax credits under Section 228.351.

(b) Any guaranty, indemnity, bond, insurance policy, or other payment undertaking made under this section may not be provided by more than one certified investor of the certified capital company or affiliate of the certified investor. (V.T.I.C. Art. 4.64.)

PART C. ADDITIONS TO TITLE 4, INSURANCE CODE

SECTION 1C.001. ADDITION. Subtitle A, Title 4, Insurance Code, is amended by adding Chapter 406 to read as follows: CHAPTER 406. SPECIAL DEPOSITS REQUIRED UNDER POTENTIALLY HAZARDOUS CONDITIONS

Sec.406.001.DEFINITION. In this chapter, "insurer" includes:

(1) a capital stock insurance company;

(2) a reciprocal or interinsurance exchange;

(3) a Lloyd's plan;

(4) a fraternal benefit society;

(5) a mutual company, including a mutual assessment company;

(6) a statewide mutual assessment company;

(7) a local mutual aid association;

(8) a burial association;

(9) a county mutual insurance company;

(10) a farm mutual insurance company;

(11) a fidelity, guaranty, or surety company;

(12) a title insurance company;

(13) a stipulated premium company;

(14) a group hospital service corporation;

(15) a health maintenance organization;

(16) a risk retention group; and

(17) any other organization or person engaged in the business of insurance. (V.T.I.C. Art. 1.33, Sec. 1.)

Sec.406.002.APPLICABILITY OF CHAPTER. This chapter applies to a person or organization engaged in the business of insurance without regard to whether the person or organization is listed in Section 406.001, unless another statute specifically cites this chapter and exempts the person or organization from this chapter. (V.T.I.C. Art. 1.33, Sec. 2.)

Sec.406.003.REQUIRED DEPOSIT: STANDARDS AND CRITERIA. The commissioner, in the commissioner's sole discretion, may require an insurer to make a deposit under this chapter if the commissioner determines that one of the following conditions, if not rectified, may potentially be hazardous to the insurer's policyholders, enrollees, or creditors, or to the public:

(1) the insurer's financial or operating condition, reviewed in conjunction with the kinds and nature of risks insured;

(2) the insurer's method of operation;

(3) the insurer's relationship with affiliates;

(4) the nature and amount of the insurer's investments;

(5) the insurer's contracts that may lead to a contingent liability; or

(6) the insurer's agreements with respect to guaranty and surety. (V.T.I.C. Art. 1.33, Sec. 3.)

Sec.406.004.REQUIRED DEPOSIT: FORM OF SECURITY. A deposit required under Section 406.003 must be made with the comptroller and approved by the commissioner. The deposit must be made in:

(1) cash;

(2) securities authorized under this code to be a legal investment for the insurer that:

(A) are readily marketable over a national exchange with a maturity date of not more than one year, are listed by the Securities Valuation Office of the National Association of Insurance Commissioners, and qualify as admitted assets; or

(B) are clean, irrevocable, and unconditional letters of credit issued or confirmed by a financial institution organized and licensed under the laws of the United States or a state of the United States; or

(3) another form of security acceptable to the commissioner. (V.T.I.C. Art. 1.33, Sec. 4.)

Sec.406.005.DURATION OF DEPOSIT. Subject to Section 406.006, the comptroller shall hold a deposit required under this chapter until the commissioner issues a written order finding that the condition for which the deposit was required no longer exists. (V.T.I.C. Art. 1.33, Sec. 5.)

Sec.406.006.SUBSTITUTION OR WITHDRAWAL OF DEPOSIT. (a) An insurer may file a written application with the commissioner requesting:

(1) withdrawal of all or part of the deposit held by the comptroller under this chapter; or

(2) substitution of all or part of the deposited securities held by the comptroller under this chapter.

(b) The application must state the basis for the request to withdraw the deposit or to substitute the deposited security.

(c) An insurer's application for the substitution of a deposited security must provide specific information regarding the security to be deposited as a substitute for the security held by the comptroller.

(d) The commissioner shall issue an order approving or denying an application under this section not later than the 30th day after the date the department receives the application. If the commissioner does not approve or deny the application within that period, the application is denied.

(e) The commissioner may, in the commissioner's sole discretion, approve an application to withdraw a deposit or substitute a deposited security if the commissioner determines that the withdrawal or substitution will not be hazardous to the insurer's policyholders, enrollees, or creditors, or to the public.

(f) The comptroller may not release a deposit made under this chapter, or any part of the deposit, and may not accept a substitute for a deposited security unless the commissioner issues an order approving the withdrawal or substitution. (V.T.I.C. Art. 1.33, Sec. 6.)

Sec.406.007.APPEAL. An insurer may appeal an action of the commissioner under this chapter in accordance with Subchapter D, Chapter 36. (V.T.I.C. Art. 1.33, Sec. 7.)

Sec.406.008.CUMULATIVE OF OTHER DEPOSITS. A deposit required to be made under this chapter is in addition to any other deposit that the insurer is required or authorized to make under this code. (V.T.I.C. Art. 1.33, Sec. 8.)

PART D. ADDITIONS TO TITLE 5, INSURANCE CODE

SECTION 1D.001. ADDITION. Chapter 542, Insurance Code, is amended by adding Subchapter C-1 to read as follows: SUBCHAPTER C-1. REQUEST FOR CLAIMS INFORMATION BY CERTAIN OFFICIALS

Sec. 542.131. REQUEST BY CERTAIN OFFICIALS ENGAGED IN CRIMINAL INVESTIGATION. (a) This section applies only to a claim for a burglary or robbery loss or a death claim seeking life insurance proceeds that is filed with an insurance company on or after September 1, 2001.

(b) In the course of a criminal investigation and subject to Subsection (c), the state fire marshal, the fire marshal of a political subdivision of this state, the chief of a fire department in this state, a chief of police of a municipality in this state, or a sheriff in this state may request in writing that an insurance company investigating a claimed burglary or robbery loss or a death claim seeking life insurance proceeds release information in the company's possession that relates to that claimed loss. The company shall release the information to any official authorized to request the information under this subsection if the company has reason to believe that the insurance claim is false or fraudulent.

(c) An official who requests information under this section may not request anything other than:

(1) an insurance policy relevant to an insurance claim under investigation and the application for that policy;

(2) policy premium payment records;

(3) the history of the insured's previous claims; and

(4) material relating to the investigation of the insurance claim, including:

(A) statements of any person;

(B) proof of loss; or

(C) other relevant evidence.

(d) This section does not authorize a public official or agency to adopt or require any form of periodic report by an insurance company.

(e) In the absence of fraud or malice, an insurance company or a person who releases information on behalf of an insurance company is not liable for damages in a civil action or subject to criminal prosecution for an oral or written statement made, or any other action taken, that relates to the information required to be released under this section.

(f) An official or department employee receiving information under this section shall maintain the confidentiality of the information until the information is required to be released during a criminal or civil proceeding.

(g) An insurance company or the company's representative may not intentionally refuse to release to an official described by Subsection (b) the information required to be released to that official under this section. (V.T.I.C. Art. 21.49C.)

SECTION 1D.002. ADDITION. Subtitle C, Title 5, Insurance Code, is amended by adding Chapter 560 to read as follows: CHAPTER 560. PROHIBITED RATES

Sec.560.001.DEFINITION OF INSURER. In this chapter, "insurer" means an insurance company, reciprocal or interinsurance exchange, mutual insurance company, farm mutual insurance company, capital stock insurance company, county mutual insurance company, Lloyd's plan, surplus lines insurer, or other legal entity engaged in the business of insurance in this state. The term includes:

(1) an affiliate described by Section 823.003(a);

(2) the Texas Windstorm Insurance Association established under Chapter 2210;

(3) the FAIR Plan Association established under Chapter 2211; and

(4) the Texas Automobile Insurance Plan Association established under Chapter 2151. (V.T.I.C. Art. 1.02, Sec. (a).)

Sec.560.002.USE OF CERTAIN RATES PROHIBITED; RATE REQUIREMENTS REQUIREMENTS chapter.

(b) A rate used under this code:

(1) must be just, fair, reasonable, and adequate; and

(2) may not be:

(A) confiscatory;

(B) excessive for the risks to which the rate applies; or

(C) unfairly discriminatory.

(c) For purposes of this section, a rate is:

(1) inadequate if the rate is insufficient to sustain projected losses and expenses to which the rate applies, and continued use of the rate:

(A) endangers the solvency of an insurer using the rate; or

(B) has the effect of substantially lessening competition or creating a monopoly in any market;

(2) excessive if the rate is likely to produce a long-term profit that is unreasonably high in relation to the insurance coverage provided; or

(3) unfairly discriminatory if the rate:

(A) is not based on sound actuarial principles;

(B) does not bear a reasonable relationship to the expected loss and expense experience among risks; or

(C) is based wholly or partly on the race, creed, color, ethnicity, or national origin of the policyholder or an insured. (V.T.I.C. Art. 1.02, Secs. (b), (c).)

PART E. ADDITIONS TO TITLE 6, INSURANCE CODE

SECTION 1E.001. ADDITION. Subtitle H, Title 6, Insurance Code, is amended by adding Chapter 963 to read as follows: CHAPTER 963. AUTOMOBILE CLUBS

Sec.963.001.DEFINITION. In this chapter, "automobile club" has the meaning assigned by Section 722.002, Transportation Code. (V.T.I.C. Art. 21.80, Sec. (a) (part).)

Sec.963.002.PROVISION OF CERTAIN INSURANCE SERVICES BY AUTOMOBILE CLUB AUTOMOBILE CLUB services only as provided by this chapter.

(b) An automobile club may provide accidental injury and death benefit insurance coverage to a member through purchase of a group policy of insurance issued to the automobile club for the benefit of its members. The coverage must be purchased from an insurance company authorized to engage in the business of that type of coverage in this state. (V.T.I.C. Art. 21.80, Secs. (a) (part), (b) (part).)

Sec.963.003.CERTIFICATE OF PARTICIPATION. (a) The automobile club shall provide each member covered by insurance described by Section 963.002 a certificate of participation.

(b) The certificate of participation must state on its face in at least 14-point black boldfaced type that the certificate is only a certificate of participation in a group accidental injury and death policy and is not automobile liability insurance coverage. (V.T.I.C. Art. 21.80, Sec. (b) (part).)

Sec.963.004. CERTAIN ACTIVITIES PROHIBITED. An automobile club may endorse insurance products and refer members to agents or insurers authorized to provide the insurance products in this state. The automobile club or an agent of the automobile club may not receive consideration for the referral. (V.T.I.C. Art. 21.80, Sec. (c).)

Sec.963.005.CERTAIN TRANSPORTATION-RELATED SERVICES. In addition to reimbursement services described by Section 722.002(2), Transportation Code, an automobile club may contract with a member to:

(1) reimburse the member for expenses the member incurs for towing, emergency road service, and lockout or lost key services; and

(2) provide immediate destination assistance and trip interruption service. (V.T.I.C. Art. 21.80, Sec. (f) (part).)

Sec.963.006.APPLICABILITY OF INSURANCE LAWS. (a) Except as provided by Subsection (b), an automobile club performing services permitted by this chapter is not subject to regulation under the insurance laws of this state because of the performance of those services.

(b) An automobile club may sell insurance products to a member for a consideration separate from the amount that the member pays for membership in the automobile club if the automobile club is properly licensed as an agent under the applicable provisions of this code.

(c) The insurance laws of this state do not apply to reimbursement provided under Section 963.005. (V.T.I.C. Art. 21.80, Secs. (d), (e), (f) (part).)

PART F. ADDITIONS TO TITLE 7, INSURANCE CODE

SECTION 1F.001. ADDITION. Subtitle A, Title 7, Insurance Code, is amended by adding Chapters 1112 and 1113 to read as follows: CHAPTER 1112. CERTAIN GUARANTEES IN LIFE INSURANCE POLICIES

Sec.1112.001.CERTAIN GUARANTEES NOT PROHIBITED. Section 841.253 does not prohibit the issuance of a life insurance policy that guarantees, by coupons or otherwise, definite payments or reductions in premiums. (V.T.I.C. Art. 3.11 (part).)

Sec.1112.002.CERTAIN GUARANTEES CONSTITUTE DEFINITE CONTRACT BENEFIT; VALUATION OF BENEFIT CONTRACT BENEFIT; VALUATION OF BENEFIT Subsection (e), a guarantee described by Section 1112.001 that is in a policy or coupon issued after September 5, 1955, shall be treated as a definite contract benefit and valued according to this section and the reserve requirements of Chapter 425.

(b) Except as provided by Subsection (c), for a policy or coupon issued before the date determined under Section 1105.002(a) or (b), as applicable to the company, a contract benefit described by Subsection (a) shall be valued using the reserve valuation net premium for the benefits that is a uniform percentage of the gross premiums.

(c) A policy described by Subsection (b) that contains a contract benefit described by Subsection (a) may be valued on a basis that provides for not more than one year preliminary term insurance.

(d) For a policy or coupon issued on or after the date determined under Section 1105.002(a) or (b), as applicable to the company, a contract benefit described by Subsection (a) shall be valued using the commissioners reserve valuation method described by Section 425.064.

(e) A provision of this section relating to reserves does not apply to a policy issued before September 7, 1955. (V.T.I.C. Art. 3.11 (part).) CHAPTER 1113. MANAGEMENT, CONTROL, AND DISPOSITION OF CERTAIN LIFE INSURANCE AND ANNUITY CONTRACTS

Sec.1113.001.LIFE INSURANCE AND ANNUITY CONTRACTS OF SPOUSE SPOUSE spouse, has management, control, and disposition of any contract of life insurance or annuity issued in the spouse's name or to the extent provided by the contract or any assignment of the contract, regardless of whether the contract was issued before, on, or after January 1, 1968. (V.T.I.C. Art. 3.49-3.)

PART G. ADDITIONS TO TITLE 8, INSURANCE CODE

SECTION 1G.001. ADDITION. Subtitle A, Title 8, Insurance Code, is amended by adding Chapter 1214 to read as follows: CHAPTER 1214. ADVERTISING FOR CERTAIN HEALTH BENEFITS

Sec.1214.001.APPLICABILITY OF CHAPTER. This chapter applies only to a health benefit plan that provides benefits for medical or surgical expenses incurred as a result of a health condition, accident, or sickness, including an individual, group, blanket, or franchise insurance policy or agreement, a group hospital service contract, or an individual or group evidence of coverage issued by:

(1) an insurance company;

(2) a group hospital service corporation operating under Chapter 842;

(3) a health maintenance organization operating under Section 1367.053, Subchapter A, Chapter 1452, Subchapter B, Chapter 1507, Chapter 222, 251, or 258, as applicable to a health maintenance organization, Chapter 843, Chapter 1271, and Chapter 1272; or

(4) an approved nonprofit health corporation holding a certificate of authority under Chapter 844. (V.T.I.C. Art. 21.20-2, Sec. 1(a).)

Sec.1214.002.EXCEPTION. This chapter does not apply to:

(1) a health benefit plan that provides coverage:

(A) only for a specified disease;

(B) only for accidental death or dismemberment; or

(C) for wages or payments in lieu of wages for a period during which an employee is absent from work because of sickness or injury; or

(2) a long-term care insurance policy, including a nursing home fixed indemnity policy, unless the commissioner determines that the policy provides benefits so comprehensive that the policy is a health benefit plan as described by Section 1214.001. (V.T.I.C. Art. 21.20-2, Sec. 1(b).)

Sec.1214.003.RATE INFORMATION DISCLAIMERS. (a) Subject to Chapter 541 and Section 543.001, an advertisement for a health benefit plan may include rate information without including information about each benefit exclusion or limitation if the advertisement includes prominent disclaimers clearly indicating that:

(1) the rates are illustrative;

(2) a person should not send money to the health benefit plan issuer in response to the advertisement;

(3) a person cannot obtain coverage under the plan until the person completes an application for coverage; and

(4) benefit exclusions or limitations may apply to the plan.

(b) An advertisement that states a rate must also indicate the age, gender, and geographic location on which the rate is based. (V.T.I.C. Art. 21.20-2, Sec. 2.)

SECTION 1G.002. ADDITION. Subtitle H, Title 8, Insurance Code, is amended by adding Chapter 1550 to read as follows: CHAPTER 1550. CERTAIN REQUIREMENTS FOR INSURERS CONTRACTING WITH GOVERNMENTAL ENTITIES SUBCHAPTER A. REPORTING REQUIREMENTS

Sec.1550.001.DEFINITIONS. In this subchapter:

(1) "Governmental entity" means:

(A) a state agency; or

(B) a county, municipality, school district, special purpose district, or other subdivision of state government that has jurisdiction limited to a geographic portion of the state.

(2) "Insurer" means:

(A) an insurance company;

(B) a health maintenance organization operating under Section 1367.053, Subchapter A, Chapter 1452, Subchapter B, Chapter 1507, Chapter 222, 251, or 258, as applicable to a health maintenance organization, Chapter 843, Chapter 1271, and Chapter 1272; or

(C) an approved nonprofit health corporation that holds a certificate of authority issued under Chapter 844. (V.T.I.C. Art. 21.49-15, Sec. 1.)

Sec.1550.002.REPORT REQUIRED. (a) This section applies to a contract subject to competitive bidding under which an insurer delivers, issues for delivery, or renews a health insurance policy or contract or an evidence of coverage.

(b) An insurer that enters into a contract described by Subsection (a) with a governmental entity shall provide to the governmental entity a detailed report that includes:

(1) the claims experience of the governmental entity during the preceding calendar year; and

(2) the dollar amount of each large claim, as defined by the governmental entity, paid by the insurer under the contract during the preceding calendar year. (V.T.I.C. Art. 21.49-15, Sec. 2(a).)

Sec.1550.003.CLAIM INFORMATION. (a) An insurer providing claim information to a governmental entity in the report under Section 1550.002 shall provide the information in the aggregate, without information through which a specific individual covered by the health insurance or evidence of coverage may be identified.

(b) Claim information provided by an insurer to a governmental entity in the report under Section 1550.002:

(1) may be viewed or used only for contract bidding purposes; and

(2) is confidential for purposes of Chapter 552, Government Code. (V.T.I.C. Art. 21.49-15, Sec. 2(b).) [Sections 1550.004-1550.050 reserved for expansion] SUBCHAPTER B. CERTAIN CONTRACTS WITH MUNICIPALITIES

Sec.1550.051.DEFINITION OF INSURER. In this subchapter, "insurer" means:

(1) an insurance company, including a company providing stop-loss or excess loss insurance;

(2) a health maintenance organization operating under Section 1367.053, Subchapter A, Chapter 1452, Subchapter B, Chapter 1507, Chapter 222, 251, or 258, as applicable to a health maintenance organization, Chapter 843, Chapter 1271, and Chapter 1272;

(3) an approved nonprofit health corporation that holds a certificate of authority issued under Chapter 844; or

(4) a third-party administrator that holds a certificate of authority under Chapter 4151. (V.T.I.C. Art. 21.49-16, Sec. 1(1).)

Sec.1550.052.BID REQUIREMENTS. (a) Except as provided by Section 1550.054, an insurer that bids on a contract subject to the competitive bidding and competitive proposal requirements adopted under Section 252.021, Local Government Code, may not submit a bid for a contract to provide stop-loss or other insurance coverage that is subject to any qualification imposed by the insurer that permits the insurer to modify or limit the terms of insurance coverage to be provided after the contract has been made.

(b) An insurer's bid submitted under Section 252.021, Local Government Code, must contain the insurer's entire offer. (V.T.I.C. Art. 21.49-16, Sec. 2(a).)

Sec.1550.053.CERTAIN EXCLUSIONS AND INCREASED DEDUCTIBLES PROHIBITED DEDUCTIBLES PROHIBITED insurer that provides stop-loss or other insurance coverage for health benefits under a contract subject to this subchapter may not, based on an individual's prior medical history:

(1) exclude from coverage an individual who is otherwise eligible for the health benefits coverage; or

(2) assign a higher deductible to the individual. (V.T.I.C. Art. 21.49-16, Sec. 2(b).)

Sec.1550.054.EXCEPTION FOR WRITTEN WAIVER. By executing a written waiver in favor of the insurer, a municipality as defined by Section 1.005, Local Government Code, may waive a requirement of Section 1550.052 or 1550.053(2). (V.T.I.C. Art. 21.49-16, Secs. 1(2), 2(c).)

SECTION 1G.003. ADDITION. Subchapter C, Chapter 1579, Insurance Code, is amended by adding Sections 1579.106, 1579.107, and 1579.108 to read as follows:

Sec. 1579.106. PRIOR AUTHORIZATION FOR CERTAIN DRUGS. (a) In this section, "drug formulary" means a list of drugs preferred for use and eligible for coverage by a health coverage plan.

(b) A health coverage plan provided under this chapter that uses a drug formulary in providing a prescription drug benefit must require prior authorization for coverage of the following categories of prescribed drugs if the specific drug prescribed is not included in the formulary:

(1) a gastrointestinal drug;

(2) a cholesterol-lowering drug;

(3) an anti-inflammatory drug;

(4) an antihistamine drug; and

(5) an antidepressant drug.

(c) Every six months the trustee shall submit to the comptroller and the Legislative Budget Board a report regarding any cost savings achieved in the program through implementation of the prior authorization requirement of this section. The report must cover the previous six-month period. (V.T.I.C. Art. 3.50-7A, as added Acts 78th Leg., R.S., Ch. 213.)

Sec.1579.107.DISEASE MANAGEMENT SERVICES. (a) In this section, "disease management services" means services to assist an individual manage a disease or other chronic health condition, such as heart disease, diabetes, respiratory illness, end-stage renal disease, HIV infection, or AIDS, and with respect to which the trustee identifies populations requiring disease management.

(b) A health coverage plan provided under this chapter must provide disease management services or coverage for disease management services in the manner required by the trustee, including:

(1) patient self-management education;

(2) provider education;

(3) evidence-based models and minimum standards of care;

(4) standardized protocols and participation criteria; and

(5) physician-directed or physician-supervised care. (V.T.I.C. Art. 3.50-7B.)

Sec.1579.108.LIMITATIONS. The trustee may not contract for or provide a health coverage plan that excludes from participation in the network a general hospital that:

(1) is located in the geographical service area or areas of the health coverage plan that includes a county that:

(A) has a population of at least 100,000 and not more than 175,000; and

(B) is located in the Texas-Louisiana border region, as that term is defined in Section 2056.002(e), Government Code; and

(2) agrees to provide medical and health care services under the plan subject to the same terms as other hospital providers under the plan. (V.T.I.C. Art. 3.50-7A, Sec. (b), as added Acts 78th Leg., R.S., Ch. 201.)

PART H. ADDITIONS TO TITLE 10, INSURANCE CODE

SECTION 1H.001. ADDITION. Subtitle C, Title 10, Insurance Code, is amended by adding Chapter 1953 to read as follows: CHAPTER 1953. RATE REGULATION AND RATEMAKING FOR AUTOMOBILE INSURANCE SUBCHAPTER A. RATE REGULATION

Sec.1953.001.EXCLUSION OF CERTAIN TYPES OR CLASSES OF INSURANCE FROM CERTAIN REGULATIONS INSURANCE FROM CERTAIN REGULATIONS to insurance against liability for damages arising out of the ownership, operation, maintenance, or use of a motor vehicle described by Article 5.01 or against loss of or damage to a motor vehicle described by Article 5.01 that, in the judgment of the commissioner, is a type or class of insurance that is also the subject of or is more properly regulated under other insurance rating laws that cover that type or class of insurance.

(b) A type or class of insurance to which this section applies is excluded from regulation under this chapter and:

(1) Articles 5.01, 5.01B, 5.03, 5.04, 5.04-1, 5.06, 5.10, and 5.11;

(2) Chapters 251 and 254;

(3) Subchapters A and B, Chapter 1806; and

(4) Chapters 1951 and 1952.

(c) If the commissioner finds that a type or class of insurance to which this section applies is also the subject of or is more properly regulated under other insurance rating laws that cover that type or class of insurance, the commissioner shall issue an order declaring which other insurance rating laws apply to:

(1) the type or class of insurance; and

(2) any motor vehicle equipment described by Article 5.01. (V.T.I.C. Art. 5.02.) [Sections 1953.002-1953.050 reserved for expansion] SUBCHAPTER B. RATEMAKING

Sec.1953.051.CERTAIN RATING PLANS PROHIBITED. A rating plan regarding the writing of automobile insurance, other than insurance written under Chapter 2151, may not:

(1) assign a rate consequence to a charge or conviction for a violation of Subtitle C, Title 7, Transportation Code; or

(2) otherwise cause premiums for automobile insurance to be increased because of a charge or conviction described by Subdivision (1). (V.T.I.C. Art. 5.01-1.)

Sec.1953.052.PREMIUM SURCHARGE REQUIRED. (a) An insurer described by Section 1952.001 shall assess a premium surcharge in an amount prescribed by the department against an insured for no more than three years immediately following the date the insured is convicted of:

(1) an offense relating to the operating of a motor vehicle while intoxicated in violation of Section 49.04 or 49.07, Penal Code; or

(2) an offense under Section 49.08, Penal Code.

(b) An insurer may apply the premium surcharge described by Subsection (a) only to a private passenger automobile policy, as defined by the department.

(c) If an insured assessed a premium surcharge under Subsection (a) is convicted of an offense under one of the statutes listed in Subsection (a)(1) or (2) during the period the insured is assessed the premium surcharge, the period for which the premium surcharge is assessed is increased by three additional consecutive years for each conviction. (V.T.I.C. Art. 5.03-1.) [Sections 1953.053-1953.100 reserved for expansion] SUBCHAPTER C. LOSS AND EXPENSE EXPERIENCE

Sec.1953.101.RECORDING AND REPORTING OF LOSS AND EXPENSE EXPERIENCE AND OTHER DATA EXPERIENCE AND OTHER DATA reasonable rules and statistical plans for the recording and reporting of loss experience and other required data by insurers. The rules and plans must ensure that each insurer's total loss and expense experience is made available at least as frequently as annually in the form and with the detail necessary to aid in determining whether rates and rating systems in use under the following provisions comply with the standards adopted under those provisions:

(1) this chapter;

(2) Articles 5.01, 5.03, and 5.04, if applicable;

(3) Subchapters A and B, Chapter 1806; and

(4) Chapters 1951 and 1952.

(b) In adopting the rules, the commissioner shall adopt rules that are as uniform as is practicable to the rules and forms of statistical plans used in other states.

(c) Each insurer shall use the statistical plans adopted under this section to record and report loss experience and other required data in accordance with the rules adopted by the commissioner.

(d) The commissioner may modify statistical plans adopted under this section. (V.T.I.C. Art. 5.05, Sec. (a).)

Sec.1953.102.RULES ALLOWING INTERCHANGE OF LOSS EXPERIENCE INFORMATION EXPERIENCE INFORMATION rules to allow the interchange of loss experience information as necessary for the application of rating plans. (V.T.I.C. Art. 5.05, Sec. (b).)

Sec.1953.103.EXCHANGE OF INFORMATION AND EXPERIENCE DATA WITH OTHER STATES WITH OTHER STATES laws, the department or an insurer may:

(1) exchange information and experience data with insurance supervisory officials, insurers, and rating organizations in other states; and

(2) consult and cooperate with the individuals or entities described by Subdivision (1) with respect to ratemaking and the application of rating systems. (V.T.I.C. Art. 5.05, Sec. (c).)

Sec.1953.104.SWORN STATEMENTS. (a) The department may require a sworn statement from an insurer affected by this subchapter that shows:

(1) the insurer's experience on any classification or classifications of risks; and

(2) other information that is necessary or helpful in performing duties or exercising authority imposed by law.

(b) The department shall prescribe the necessary forms for statements and reports required under Subsection (a) with due regard for the rules, methods, and forms in use in other states for similar purposes so that uniformity of statistics is not disturbed. (V.T.I.C. Art. 5.05, Sec. (d).)

SECTION 1H.002. ADDITION. Subtitle D, Title 10, Insurance Code, is amended by adding Chapter 2008 to read as follows: CHAPTER 2008. COVERAGE FOR CERTAIN DAMAGE TO PROPERTY BUILT WHOLLY OR PARTIALLY OVER WATER

Sec.2008.001.APPLICABILITY OF CHAPTER. This chapter applies only to an insurer described by Section 2251.003(a). (V.T.I.C. Art. 5.14, Sec. (a).)

Sec.2008.002.COVERAGE; LIMITS AND DEDUCTIBLES. (a) An insurance policy written by an insurer against loss or damage by windstorm, hurricane, or hail may include coverage for:

(1) a building or other structure that is built wholly or partially over water; and

(2) the corporeal movable property contained in a building or structure described by Subdivision (1).

(b) An insurer that writes coverage described by Subsection (a) may impose appropriate limits of coverage and deductibles for the coverage. (V.T.I.C. Art. 5.14, Secs. (b), (c).)

PART I. ADDITIONS TO TITLE 13, INSURANCE CODE

SECTION 1I.001. ADDITION. Subtitle A, Title 13, Insurance Code, is amended by adding Chapter 4007 to read as follows: CHAPTER 4007. NOTICE TO DEPARTMENT BY CERTAIN PROPERTY AND CASUALTY INSURANCE COMPANIES REGARDING AGENTS

Sec.4007.001.APPLICABILITY OF CHAPTER. This chapter applies only to an insurance company authorized to engage in the business of insurance in this state under:

(1) a provision of:

(A) Chapter 5, 1805, or 2171; or

(B) Subtitle B, C, D, E, F, H, or I, Title 10; or

(2) Chapter 861, 862, 883, 911, 912, 941, 942, 984, or 3503. (V.T.I.C. Art. 21.70, Sec. (a) (part).)

Sec.4007.002.NOTICE TO DEPARTMENT REQUIRED. (a) On forms prescribed by the commissioner, an insurance company shall notify the department not later than the 30th day after the date on which:

(1) balances due from an insurance agent for more than 90 days exceed $1 million or 10 percent of the company's policyholder surplus computed on December 31 of the preceding year or the most recent quarter if a report is specifically required by the department;

(2) an agent's authority to settle claims for the company is withdrawn; or

(3) the contract with an agent is canceled or terminated.

(b) An insurance company may comply with the notification requirement of Subsection (a)(1) by submitting a single annual report if:

(1) the company routinely operates above the limit established by Subsection (a)(1); and

(2) the commissioner verifies that fact under a procedure adopted by the commissioner. (V.T.I.C. Art. 21.70, Secs. (a) (part), (b).)

PART J. ADDITION OF TITLE 20, INSURANCE CODE

SECTION 1J.001. TITLE 20. The Insurance Code is amended by adding Title 20 to read as follows:

TITLE 20. REGULATION OF OTHER OCCUPATIONS

CHAPTER 6001. FIRE EXTINGUISHER SERVICE AND INSTALLATION

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 6001.001. PURPOSE Sec. 6001.002. DEFINITIONS

[Sections 6001.003-6001.050 reserved for expansion]

SUBCHAPTER B. POWERS AND DUTIES OF COMMISSIONER,

DEPARTMENT, AND STATE FIRE MARSHAL

Sec. 6001.051. ADMINISTRATION OF CHAPTER Sec. 6001.052. ADOPTION OF RULES Sec. 6001.053. RULES RESTRICTING ADVERTISING OR

COMPETITIVE BIDDING Sec. 6001.054. GENERAL POWERS AND DUTIES OF DEPARTMENT Sec. 6001.055. FEES Sec. 6001.056. DEPOSIT IN OPERATING ACCOUNT

[Sections 6001.057-6001.100 reserved for expansion]

SUBCHAPTER C. FIRE EXTINGUISHER ADVISORY COUNCIL

Sec. 6001.101. ADVISORY COUNCIL; APPOINTMENT Sec. 6001.102. ADVISORY COUNCIL DUTIES

[Sections 6001.103-6001.150 reserved for expansion]

SUBCHAPTER D. REGISTRATION, LICENSE, AND PERMIT REQUIREMENTS

Sec. 6001.151. FIRM REGISTRATION CERTIFICATE REQUIRED Sec. 6001.152. BRANCH OFFICE REGISTRATION CERTIFICATE

REQUIRED Sec. 6001.153. HYDROSTATIC TESTING; REGISTRATION

CERTIFICATE REQUIRED Sec. 6001.154. REQUIRED INSURANCE COVERAGE FOR

REGISTRATION CERTIFICATE Sec. 6001.155. EMPLOYEE LICENSE REQUIRED Sec. 6001.156. ACTIVITIES NOT REGULATED BY CHAPTER Sec. 6001.157. LICENSE EXAMINATION Sec. 6001.158. EXAMINATION RESULTS Sec. 6001.159. CONTINUING EDUCATION REQUIREMENTS Sec. 6001.160. RECIPROCAL LICENSE Sec. 6001.161. APPRENTICE PERMIT REQUIRED Sec. 6001.162. NOT TRANSFERABLE

[Sections 6001.163-6001.200 reserved for expansion]

SUBCHAPTER E. RENEWAL OF REGISTRATION, LICENSE, OR PERMIT

Sec. 6001.201. RENEWAL REQUIRED; FEE Sec. 6001.202. NOTICE OF EXPIRATION Sec. 6001.203. RENEWAL PROCEDURES

[Sections 6001.204-6001.250 reserved for expansion]

SUBCHAPTER F. PROHIBITED PRACTICES

AND DISCIPLINARY PROCEDURES

Sec. 6001.251. PROHIBITED PRACTICES Sec. 6001.252. DISCIPLINARY ACTIONS Sec. 6001.253. DISCIPLINARY HEARING Sec. 6001.254. REAPPLICATION REQUIREMENTS Sec. 6001.255. REEXAMINATION AFTER REVOCATION

[Sections 6001.256-6001.300 reserved for expansion]

SUBCHAPTER G. CRIMINAL PENALTY

Sec. 6001.301. CRIMINAL PENALTY CHAPTER 6001. FIRE EXTINGUISHER SERVICE AND INSTALLATION SUBCHAPTER A. GENERAL PROVISIONS

Sec.6001.001.PURPOSE. The purpose of this chapter is to safeguard lives and property by:

(1) regulating:

(A) the leasing, selling, installing, and servicing of portable fire extinguishers; and

(B) the planning, certifying, installing, and servicing of fixed fire extinguisher systems; and

(2) prohibiting portable fire extinguishers, fixed fire extinguisher systems, or extinguisher equipment that is not labeled or listed by a testing laboratory approved by the department. (V.T.I.C. Art. 5.43-1, Sec. 1.)

Sec.6001.002.DEFINITIONS. In this chapter:

(1) "Firm" means an individual, partnership, corporation, or association.

(2) "Fixed fire extinguisher system" means an assembly of piping, conduits, or containers that convey liquid, powder, or gases to dispersal openings or devices protecting one or more hazards by suppressing or extinguishing fires.

(3) "Hydrostatic testing" means pressure testing by hydrostatic methods.

(4) "Insurance agent" means:

(A) an individual, firm, or corporation licensed under:

(i) Subchapter E, Chapter 981; or

(ii) Subchapter A, B, C, D, E, or G, Chapter 4051; or

(B) an individual authorized to represent an insurance fund or pool created by a municipality, county, or other political subdivision of this state under Chapter 791, Government Code.

(5) "Portable fire extinguisher" means any device that contains liquid, powder, or gases for suppressing or extinguishing fires.

(6) "Registered firm" means a firm that holds a registration certificate.

(7) "Service" and "servicing" mean servicing a portable fire extinguisher or a fixed fire extinguisher system by inspecting, charging, filling, maintaining, recharging, refilling, repairing, or testing. (V.T.I.C. Art. 5.43-1, Sec. 3.)

[Sections 6001.003-6001.050 reserved for expansion] SUBCHAPTER B. POWERS AND DUTIES OF COMMISSIONER, DEPARTMENT, AND STATE FIRE MARSHAL

Sec.6001.051.ADMINISTRATION OF CHAPTER. (a) The department shall administer this chapter.

(b) The commissioner may issue rules the commissioner considers necessary to administer this chapter through the state fire marshal. (V.T.I.C. Art. 5.43-1, Sec. 2 (part).)

Sec.6001.052.ADOPTION OF RULES. (a) In adopting necessary rules, the commissioner may use recognized standards, including standards:

(1) published by the National Fire Protection Association;

(2) recognized by federal law or regulation;

(3) published by any nationally recognized standards-making organization; or

(4) contained in the manufacturer's installation manuals.

(b) The commissioner shall adopt and administer rules determined essentially necessary for the protection and preservation of life and property regarding:

(1) registration of firms engaged in the business of:

(A) installing or servicing portable fire extinguishers or planning, certifying, installing, or servicing fixed fire extinguisher systems; or

(B) hydrostatic testing of fire extinguisher cylinders;

(2) the examination and licensing of individuals to:

(A) install or service portable fire extinguishers; and

(B) plan, certify, install, or service fixed fire extinguisher systems; and

(3) requirements for:

(A) installing or servicing portable fire extinguishers; and

(B) planning, certifying, installing, or servicing fixed fire extinguisher systems.

(c) The commissioner by rule shall prescribe requirements for applications and qualifications for licenses, permits, and certificates issued under this chapter. (V.T.I.C. Art. 5.43-1, Secs. 2 (part), 7(a), 8 (part).)

Sec. 6001.053. RULES RESTRICTING ADVERTISING OR COMPETITIVE BIDDING. (a) The commissioner may not adopt rules restricting advertising or competitive bidding by the holder of a license, permit, certificate, or approval issued under this chapter except to prohibit false, misleading, or deceptive practices.

(b) In the commissioner's rules to prohibit false, misleading, or deceptive practices, the commissioner may not include a rule that:

(1) restricts the use of any medium for advertising;

(2) restricts the use of a license, permit, certificate, or approval holder's personal appearance or voice in an advertisement;

(3) relates to the size or duration of an advertisement by the license, permit, certificate, or approval holder; or

(4) restricts the license, permit, certificate, or approval holder's advertisement under a trade name. (V.T.I.C. Art. 5.43-1, Sec. 8A.)

Sec.6001.054.GENERAL POWERS AND DUTIES OF DEPARTMENT. (a) The department shall evaluate the qualifications of a firm:

(1) applying for a registration certificate to engage in the business of installing or servicing portable fire extinguishers or planning, certifying, installing, or servicing fixed fire extinguisher systems; or

(2) seeking approval as a testing laboratory.

(b) The department shall issue:

(1) registration certificates for firms that qualify under commissioner rules to engage in the business of installing or servicing portable fire extinguishers or planning, certifying, installing, or servicing fixed fire extinguisher systems; and

(2) licenses, apprentice permits, and authorizations to perform hydrostatic testing to firms or individuals that qualify. (V.T.I.C. Art. 5.43-1, Sec. 8 (part).)

Sec.6001.055.FEES. (a) The commissioner shall set the fee for:

(1) an initial firm registration certificate in an amount not to exceed $450;

(2) the renewal of a firm registration certificate in an amount not to exceed $300 annually;

(3) an initial branch office registration certificate in an amount not to exceed $100;

(4) the renewal of a branch office registration certificate in an amount not to exceed $100 annually;

(5) an initial registration certificate to perform hydrostatic testing of fire extinguishers manufactured in accordance with the specifications and procedures of the United States Department of Transportation in an amount not to exceed $250;

(6) the renewal of a registration certificate to perform hydrostatic testing of fire extinguishers manufactured in accordance with the specifications and procedures of the United States Department of Transportation in an amount not to exceed $150 annually;

(7) an initial employee license fee in an amount not to exceed $70;

(8) the annual renewal of an employee license in an amount not to exceed $50; and

(9) an apprentice permit in an amount not to exceed $30.

(b) Unless the examination or reexamination for an employee license is administered by a testing service, the commissioner shall set a nonrefundable fee for:

(1) the initial examination in an amount not to exceed $30; and

(2) each reexamination in an amount not to exceed $20.

(c) The commissioner shall set a fee in an amount not to exceed $20 for:

(1) a duplicate registration certificate, license, or apprentice permit issued under this chapter; or

(2) any request requiring changes to a registration certificate, license, or permit.

(d) On a change of ownership of a registered firm, the department shall issue a new registration certificate with a new number for a fee set by the commissioner in an amount not to exceed $450. On a change of ownership of a branch office, the commissioner shall charge a fee in an amount not to exceed $100. (V.T.I.C. Art. 5.43-1, Secs. 4(a) (part), (b), (c-1), (d) (part), (e) (part), (f).)

Sec.6001.056.DEPOSIT IN OPERATING ACCOUNT. All money collected under this chapter, other than penalties and monetary forfeitures, shall be paid to the department and deposited in the state treasury to the credit of the Texas Department of Insurance operating account for use in administering this chapter. (V.T.I.C. Art. 5.43-1, Sec. 11.) [Sections 6001.057-6001.100 reserved for expansion] SUBCHAPTER C. FIRE EXTINGUISHER ADVISORY COUNCIL

Sec.6001.101.ADVISORY COUNCIL; APPOINTMENT. (a) The commissioner may delegate the exercise of all or part of the commissioner's functions, powers, and duties under this chapter, other than the issuance of licenses, certificates, and permits, to a fire extinguisher advisory council.

(b) The commissioner shall appoint the members of the advisory council. The members of the council must:

(1) be experienced and knowledgeable in one or more of the following:

(A) fire services;

(B) fire extinguisher manufacturing;

(C) fire insurance inspection or underwriting; or

(D) fire extinguisher servicing; or

(2) be members of a fire protection association or industrial safety association. (V.T.I.C. Art. 5.43-1, Secs. 9(a) (part), (b).)

Sec.6001.102.ADVISORY COUNCIL DUTIES. (a) The fire extinguisher advisory council shall assist in the formulation and review of rules adopted under this chapter.

(b) The advisory council shall periodically:

(1) review rules implementing this chapter; and

(2) recommend rule changes to the commissioner. (V.T.I.C. Art. 5.43-1, Sec. 9(a) (part).) [Sections 6001.103-6001.150 reserved for expansion] SUBCHAPTER D. REGISTRATION, LICENSE, AND PERMIT REQUIREMENTS

Sec.6001.151.FIRM REGISTRATION CERTIFICATE REQUIRED. Unless the firm holds a registration certificate issued by the department, a firm may not engage in the business of:

(1) installing or servicing portable fire extinguishers; or

(2) planning, certifying, installing, or servicing fixed fire extinguisher systems. (V.T.I.C. Art. 5.43-1, Sec. 4(a) (part).)

Sec. 6001.152. BRANCH OFFICE REGISTRATION CERTIFICATE REQUIRED. (a) Each separate office location of a firm holding a registration certificate, other than the location identified on the firm's certificate, must have a branch office registration certificate issued by the department.

(b) Before issuing a branch office registration certificate, the department must determine that the branch office location is part of a registered firm. (V.T.I.C. Art. 5.43-1, Sec. 4(a) (part).)

Sec. 6001.153. HYDROSTATIC TESTING; REGISTRATION CERTIFICATE REQUIRED. (a) A firm may not perform hydrostatic testing of fire extinguishers manufactured in accordance with the specifications and procedures of the United States Department of Transportation unless the firm:

(1) complies with the procedures specified by that department for compressed gas cylinders; and

(2) holds a registration certificate issued by the state fire marshal authorizing hydrostatic testing.

(b) The license of an individual qualified to do work described by Subsection (a) must indicate the authority of the individual to perform that work.

(c) Hydrostatic testing of fire extinguishers that is not performed under the specifications of the United States Department of Transportation must be performed in the manner recommended by the National Fire Protection Association. (V.T.I.C. Art. 5.43-1, Sec. 4(e) (part).)

Sec. 6001.154. REQUIRED INSURANCE COVERAGE FOR REGISTRATION CERTIFICATE. (a) The department may not issue a registration certificate under this chapter unless the applicant files with the department evidence of a general liability insurance policy that includes products and completed operations coverage. The policy must be conditioned to pay on behalf of the insured those amounts that the insured becomes legally obligated to pay as damages because of bodily injury and property damage caused by an occurrence involving the insured or the insured's officer, agent, or employee in the conduct of any activity that requires a registration certificate or license under this chapter.

(b) Unless the commissioner, after notice and an opportunity for a hearing, increases or decreases the limits, the limits of insurance coverage required by Subsection (a) must be at least:

(1) $100,000 combined single limits for bodily injury and property damage for each occurrence; and

(2) $300,000 aggregate for all occurrences for each policy year.

(c) The evidence of insurance required by this section must be in the form of a certificate of insurance executed by an insurer authorized to engage in the business of insurance in this state and countersigned by an insurance agent licensed in this state. A certificate of insurance for surplus lines coverage procured in compliance with Chapter 981 through a surplus lines agent that is licensed under Subchapter E, Chapter 981, and resident in this state may be filed with the department as evidence of the coverage required by this section.

(d) An insurance certificate executed and filed with the department under this section remains in force until the insurer has terminated future liability by the notice required by the department.

(e) Failure to maintain the liability insurance required by this section constitutes grounds for the denial, suspension, or revocation, after notice and opportunity for hearing, of a registration certificate issued under this chapter. (V.T.I.C. Art. 5.43-1, Secs. 4A, 8 (part).)

Sec.6001.155.EMPLOYEE LICENSE REQUIRED. (a) Except as provided by Section 6001.156, an individual, other than an apprentice, must hold a license issued by the department before:

(1) installing or servicing portable fire extinguishers;

(2) installing, servicing, or certifying preengineered fixed fire extinguisher systems; or

(3) planning, supervising, servicing, or certifying the installation of fixed fire extinguisher systems other than preengineered systems.

(b) An individual who holds a license to install or service portable fire extinguishers or install and service fixed fire extinguisher systems must be an employee or agent of a registered firm. (V.T.I.C. Art. 5.43-1, Secs. 4(c), 5(c).)

Sec.6001.156.ACTIVITIES NOT REGULATED BY CHAPTER. (a) The licensing provisions of this chapter do not apply to:

(1) the filling or charging of a portable fire extinguisher by the manufacturer before initial sale of the fire extinguisher;

(2) the servicing by a firm of the firm's portable fire extinguishers or fixed systems by the firm's personnel who are specially trained for that servicing;

(3) the installation of portable fire extinguishers in a building by the building owner, the owner's managing agent, or an employee of the building owner or the owner's managing agent;

(4) the installation or servicing of water sprinkler systems installed in compliance with the National Fire Protection Association's Standards for the Installation of Sprinkler Systems;

(5) a firm that is engaged in the retail or wholesale sale of portable fire extinguishers that carry an approval label or listing of a testing laboratory approved by the department, but that is not engaged in the installation or servicing of those extinguishers;

(6) a fire department that services portable fire extinguishers as a public service without charge, if the members of the fire department are trained in the proper servicing of the fire extinguishers;

(7) a firm that is a party to a contract under which:

(A) the installation of portable fire extinguishers or a fixed fire extinguisher system is performed under the direct supervision of and certified by a firm appropriately registered to install and certify portable extinguishers or fixed systems; and

(B) the registered firm assumes full responsibility for the installation; or

(8) an engineer licensed under Chapter 1001, Occupations Code, while acting solely in the engineer's professional capacity.

(b) Except as provided by Subsection (a), only the holder of a license or an apprentice permit issued under this chapter may:

(1) install or service portable fire extinguishers; or

(2) install and maintain fixed fire extinguisher systems. (V.T.I.C. Art. 5.43-1, Secs. 5(b), 6.)

Sec.6001.157.LICENSE EXAMINATION. (a) The state fire marshal shall:

(1) establish the scope and type of an examination required by this chapter; and

(2) examine each applicant for a license under this chapter.

(b) The state fire marshal may administer the examination or may enter into an agreement with a testing service.

(c) If a testing service is used, the state fire marshal may contract with the testing service regarding requirements for the examination, including:

(1) examination development;

(2) scheduling;

(3) site arrangements;

(4) grading;

(5) reporting;

(6) analysis; or

(7) other administrative duties.

(d) The state fire marshal may require the testing service to:

(1) correspond directly with a license applicant regarding the administration of the examination;

(2) collect a reasonable fee from an applicant for administering the examination; or

(3) administer the examination at a specific location or time.

(e) The state fire marshal shall adopt rules as necessary to implement examination requirements under this chapter. (V.T.I.C. Art. 5.43-1, Secs. 7(e), (f), (j), 8 (part).)

Sec.6001.158.EXAMINATION RESULTS. (a) Not later than the 30th day after the date on which a licensing examination is administered under this chapter, the state fire marshal shall send notice to each examinee of the results of the examination.

(b) If an examination is conducted, graded, or reviewed by a testing service, the state fire marshal shall send notice to the examinees of the results of the examination not later than the 14th day after the date on which the state fire marshal receives the results from the testing service.

(c) If the notice of the examination results will be delayed for more than 90 days after the examination date, the state fire marshal, before the 90th day, shall send notice to the examinee of the reason for the delay.

(d) The state fire marshal may require a testing service to notify an examinee of the results of the examinee's examination under Subsections (a) and (b).

(e) If requested in writing by an individual who fails the licensing examination administered under this chapter, the state fire marshal shall send to the individual an analysis of the individual's performance on the examination. (V.T.I.C. Art. 5.43-1, Secs. 7(g), (g-1).)

Sec.6001.159.CONTINUING EDUCATION REQUIREMENTS. (a) The commissioner may adopt procedures for certifying and may certify continuing education programs for individuals licensed under this chapter.

(b) Participation in the continuing education programs is voluntary. (V.T.I.C. Art. 5.43-1, Sec. 7(h).)

Sec.6001.160.RECIPROCAL LICENSE. The department may waive any license requirement for an applicant who holds a license issued by another state that has license requirements substantially equivalent to the license requirements of this state. (V.T.I.C. Art. 5.43-1, Sec. 7(i).)

Sec.6001.161.APPRENTICE PERMIT REQUIRED. (a) An individual may not install or service portable fire extinguishers or fixed fire extinguisher systems as an apprentice unless the individual holds an apprentice permit issued by the department.

(b) An apprentice may perform a service described by Subsection (a) only under the direct supervision of an individual who holds a license issued under this chapter and who works for the same firm as the apprentice. (V.T.I.C. Art. 5.43-1, Secs. 4(d) (part), 5(b) (part).)

Sec.6001.162.NOT TRANSFERABLE. A registration certificate, license, or permit issued under this chapter is not transferable. (V.T.I.C. Art. 5.43-1, Sec. 5(d).) [Sections 6001.163-6001.200 reserved for expansion] SUBCHAPTER E. RENEWAL OF REGISTRATION, LICENSE, OR PERMIT

Sec.6001.201.RENEWAL REQUIRED; FEE. (a) A renewal of a registration certificate or license issued under this chapter is valid for a period of two years. The license or registration fee for each year of the two-year period is payable on renewal.

(b) An apprentice permit expires on the first anniversary of the date of issuance.

(c) The commissioner by rule may adopt a system under which registration certificates, licenses, and permits expire on various dates during the year. For the year in which an expiration date of a registration certificate, license, or permit is less than one year from its issuance or anniversary date, the fee shall be prorated on a monthly basis so that each holder of a registration certificate, license, or permit pays only that portion of the renewal fee that is allocable to the number of months during which the registration certificate, license, or permit is valid. On each subsequent renewal, the total renewal fee is payable. (V.T.I.C. Art. 5.43-1, Secs. 4(d) (part), 7A(a), (c).)

Sec.6001.202.NOTICE OF EXPIRATION. At least 30 days before the expiration date of a registration certificate or license, the state fire marshal shall send written notice of the impending expiration to the holder of the registration certificate or license at the holder's last known address. (V.T.I.C. Art. 5.43-1, Sec. 7A(b) (part).)

Sec.6001.203.RENEWAL PROCEDURES. (a) The holder of an unexpired registration certificate or license may renew the certificate or license by paying the required renewal fee to the department before the expiration date of the certificate or license.

(b) A firm or individual whose registration certificate or license has been expired for 90 days or less may renew the certificate or license by paying to the department:

(1) the required renewal fee; and

(2) a fee equal to one-half of the initial fee for the certificate or license.

(c) A firm or individual whose registration certificate or license has been expired for more than 90 days but less than two years may renew the certificate or license by paying to the department:

(1) all unpaid renewal fees; and

(2) a fee that is equal to the initial fee for the certificate or license.

(d) A firm or individual whose registration certificate or license has been expired for two years or longer may not renew the certificate or license. The firm or individual may obtain a new registration certificate or license by complying with the requirements and procedures for obtaining an initial registration certificate or license.

(e) This section may not be construed to prevent the department from denying or refusing to renew a license under applicable law or commissioner rules. (V.T.I.C. Art. 5.43-1, Sec. 7A(b) (part).) [Sections 6001.204-6001.250 reserved for expansion] SUBCHAPTER F. PROHIBITED PRACTICES AND DISCIPLINARY PROCEDURES

Sec.6001.251.PROHIBITED PRACTICES. (a) An individual or firm may not:

(1) engage in the business of installing or servicing portable fire extinguishers without holding a registration certificate;

(2) engage in the business of planning, certifying, installing, or servicing fixed fire extinguisher systems without holding a registration certificate;

(3) install, service, or certify the servicing of portable fire extinguishers or plan, certify, service, or install fixed fire extinguisher systems without holding a license;

(4) perform hydrostatic testing of fire extinguisher cylinders manufactured in accordance with the specifications and requirements of the United States Department of Transportation without holding a hydrostatic testing registration certificate;

(5) obtain or attempt to obtain a registration certificate or license by fraudulent representation;

(6) install or service portable fire extinguishers or plan, certify, service, or install fixed fire extinguisher systems in violation of this chapter or the rules adopted and administered under this chapter;

(7) except as provided by Subsection (b), install, service, or hydrostatically test a fire extinguisher that does not have the proper identifying labels;

(8) sell, install, service, or recharge a carbon tetrachloride fire extinguisher; or

(9) except as provided by Subsection (b), lease, sell, service, or install a portable fire extinguisher, a fixed fire extinguisher system, or extinguisher equipment unless it carries an approval label or listing label issued by a testing laboratory approved by the department.

(b) The commissioner by rule shall permit an individual or firm to service a portable fire extinguisher regardless of whether the extinguisher carries a label described by Subsection (a). (V.T.I.C. Art. 5.43-1, Secs. 5(a), (e), 10.)

Sec.6001.252.DISCIPLINARY ACTIONS. (a) The state fire marshal may suspend, revoke, or refuse to issue or renew a registration certificate, license, or permit if, after notice and hearing, the state fire marshal finds that the applicant, registrant, license holder, or permit holder has engaged in acts that:

(1) violate this chapter;

(2) violate rules or standards adopted under this chapter; or

(3) constitute misrepresentation made in connection with:

(A) the sale of products; or

(B) services rendered.

(b) Subject to Section 6001.253, the commissioner may suspend, revoke, or refuse to issue or renew a certificate, license, permit, or approval. (V.T.I.C. Art. 5.43-1, Secs. 7(b), 12(a).)

Sec.6001.253.DISCIPLINARY HEARING. (a) If the state fire marshal proposes to suspend, revoke, or refuse to renew a license, permit, certificate, or approval issued under this chapter, the holder of the license, permit, certificate, or approval is entitled to a hearing conducted by the State Office of Administrative Hearings.

(b) Proceedings for a disciplinary action are governed by Chapter 2001, Government Code.

(c) Rules of practice adopted by the commissioner applicable to the proceedings for a disciplinary action may not conflict with rules adopted by the State Office of Administrative Hearings. (V.T.I.C. Art. 5.43-1, Sec. 13.)

Sec.6001.254.REAPPLICATION REQUIREMENTS. (a) An applicant or holder of a registration certificate, license, or permit whose certificate, license, or permit has been refused or revoked under this chapter, other than for failure to pass a required written examination, may not file another application for a registration certificate, license, or permit before the first anniversary of the effective date of the refusal or revocation.

(b) After the first anniversary of the effective date of the refusal or revocation, the applicant may:

(1) reapply; and

(2) in a public hearing, show good cause why the issuance of the registration certificate, license, or permit is not against the public safety and welfare. (V.T.I.C. Art. 5.43-1, Sec. 7(c).)

Sec.6001.255.REEXAMINATION AFTER REVOCATION. An individual whose license to service portable fire extinguishers or to install or service fixed fire extinguisher systems has been revoked must retake and pass the required written examination before a new license may be issued. (V.T.I.C. Art. 5.43-1, Sec. 7(d).) [Sections 6001.256-6001.300 reserved for expansion] SUBCHAPTER G. CRIMINAL PENALTY

Sec.6001.301.CRIMINAL PENALTY. (a) A person commits an offense if the person knowingly violates Section 6001.251(a).

(b) An offense under this section is a Class B misdemeanor.

(c) Venue for an offense under this section is in Travis County or the county in which the offense is committed. (V.T.I.C. Art. 5.43-1, Secs. 12(b), (c); New.)

CHAPTER 6002. FIRE DETECTION AND ALARM DEVICE INSTALLATION

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 6002.001. PURPOSE Sec. 6002.002. DEFINITIONS Sec. 6002.003. EFFECT ON LOCAL REGULATION Sec. 6002.004. PROVISION OF CERTAIN SERVICES BY

POLITICAL SUBDIVISION

[Sections 6002.005-6002.050 reserved for expansion]

SUBCHAPTER B. POWERS AND DUTIES OF COMMISSIONER, DEPARTMENT,

AND STATE FIRE MARSHAL

Sec. 6002.051. ADMINISTRATION OF CHAPTER; RULES Sec. 6002.052. ADOPTION OF RULES; STANDARDS Sec. 6002.053. RULES RESTRICTING ADVERTISING OR

COMPETITIVE BIDDING Sec. 6002.054. FEES Sec. 6002.055. DEPOSIT IN OPERATING ACCOUNT

[Sections 6002.056-6002.100 reserved for expansion]

SUBCHAPTER C. FIRE DETECTION AND ALARM DEVICES ADVISORY COUNCIL

Sec. 6002.101. ADVISORY COUNCIL; APPOINTMENT Sec. 6002.102. ADVISORY COUNCIL DUTIES

[Sections 6002.103-6002.150 reserved for expansion]

SUBCHAPTER D. REGISTRATION, LICENSE, AND APPROVAL REQUIREMENTS

Sec. 6002.151. FIRM REGISTRATION CERTIFICATE REQUIRED;

LIMITED CERTIFICATE Sec. 6002.152. BRANCH OFFICE REGISTRATION CERTIFICATE

REQUIRED Sec. 6002.153. REQUIRED INSURANCE COVERAGE FOR

REGISTRATION CERTIFICATE Sec. 6002.154. FIRE ALARM TECHNICIAN, RESIDENTIAL FIRE

ALARM SUPERINTENDENT, AND FIRE ALARM

PLANNING SUPERINTENDENT Sec. 6002.155. ACTIVITIES NOT REGULATED BY CHAPTER Sec. 6002.156. LICENSE EXAMINATION Sec. 6002.157. EXAMINATION RESULTS Sec. 6002.158. TRAINING SCHOOLS AND INSTRUCTORS;

APPROVAL Sec. 6002.159. CONTINUING EDUCATION PROGRAMS Sec. 6002.160. RECIPROCAL LICENSE Sec. 6002.161. NOT TRANSFERABLE

[Sections 6002.162-6002.200 reserved for expansion]

SUBCHAPTER E. RENEWAL OF REGISTRATION CERTIFICATE OR LICENSE

Sec. 6002.201. RENEWAL REQUIRED; FEE Sec. 6002.202. NOTICE OF EXPIRATION Sec. 6002.203. RENEWAL PROCEDURES Sec. 6002.204. RENEWAL OF CERTAIN LICENSES

[Sections 6002.205-6002.250 reserved for expansion]

SUBCHAPTER F. SELLING OR LEASING OF FIRE ALARM

OR FIRE DETECTION DEVICES

Sec. 6002.251. REQUIRED LABEL; EXCEPTIONS Sec. 6002.252. REQUIRED PURCHASE AND INSTALLATION

INFORMATION Sec. 6002.253. TRAINING AND SUPERVISION OF CERTAIN

EXEMPT EMPLOYEES

[Sections 6002.254-6002.300 reserved for expansion]

SUBCHAPTER G. PROHIBITED PRACTICES AND DISCIPLINARY PROCEDURES

Sec. 6002.301. PROHIBITED PRACTICES Sec. 6002.302. DISCIPLINARY ACTIONS Sec. 6002.303. DISCIPLINARY HEARING Sec. 6002.304. REAPPLICATION REQUIREMENTS

[Sections 6002.305-6002.350 reserved for expansion]

SUBCHAPTER H. CRIMINAL PENALTY

Sec. 6002.351. CRIMINAL PENALTY CHAPTER 6002. FIRE DETECTION AND ALARM DEVICE INSTALLATION SUBCHAPTER A. GENERAL PROVISIONS

Sec.6002.001.PURPOSE. The purpose of this chapter is to safeguard lives and property by:

(1) regulating the planning, certifying, leasing, selling, servicing, installing, monitoring, and maintaining of fire detection and fire alarm devices and systems; and

(2) except as provided by rules adopted under Section 6002.051 or 6002.052, prohibiting fire detection and fire alarm devices, equipment, and systems not labeled or listed by a nationally recognized testing laboratory. (V.T.I.C. Art. 5.43-2, Sec. 1.)

Sec.6002.002.DEFINITIONS. Except as otherwise provided by this chapter, in this chapter:

(1) "Fire alarm device" means any device capable, through audible or visible means, of warning that fire or combustion has occurred or is occurring.

(2) "Fire alarm planning superintendent" means a licensed individual designated by a registered firm to:

(A) plan a fire alarm or detection system that conforms to applicable adopted National Fire Protection Association standards or other adopted standards; and

(B) certify that each fire alarm or detection system as planned meets the standards as provided by law.

(3) "Fire alarm technician" means a licensed individual designated by a registered firm to:

(A) inspect and certify that each fire alarm or detection system as installed meets the standards provided by law; or

(B) perform or directly supervise the servicing or maintaining of a previously installed fire alarm device or system and certify that service or maintenance.

(4) "Fire detection device" means any arrangement of materials, the sole function of which is to indicate the existence of fire, smoke, or combustion in its incipient stages.

(5) "Individual" means a natural person, including an owner, manager, officer, employee, occupant, or other individual.

(6) "Installation" means:

(A) the initial placement of equipment; or

(B) the extension, modification, or alteration of equipment already in place.

(7) "Insurance agent" means:

(A) an individual, firm, or corporation licensed under:

(i) Subchapter E, Chapter 981; or

(ii) Subchapter A, B, C, D, E, or G, Chapter 4051; or

(B) an individual authorized to represent an insurance fund or pool created by a municipality, county, or other political subdivision of this state under Chapter 791, Government Code.

(8) "Maintenance" means the maintenance of a fire alarm device or a fire detection device in a condition of repair that provides performance as originally designed or intended.

(9) "Monitoring" means the receipt of fire alarm and supervisory signals and the retransmission or communication of those signals to a fire service communications center in this state or serving property in this state.

(10) "Organization" means a corporation, a government or a governmental subdivision or agency, a business trust, an estate, a trust, a partnership, a firm or association, two or more individuals with a joint or common interest, or any other legal or commercial entity.

(11) "Registered firm" means an individual or organization that holds a registration certificate.

(12) "Residential fire alarm superintendent" means a licensed individual designated by a registered firm to:

(A) plan a residential single-family or two-family fire alarm or detection system that conforms to applicable adopted National Fire Protection Association standards or other adopted standards; and

(B) certify that each fire alarm or detection system as planned meets the standards as provided by law.

(13) "Sale" means the sale or offer for sale, lease, or rent of any merchandise, equipment, or service at wholesale or retail, to the public or any individual, for an agreed sum of money or other consideration.

(14) "Service" or "servicing" means inspection, maintenance, repair, or testing of a fire alarm device or a fire detection device. (V.T.I.C. Art. 5.43-2, Secs. 2(1), (2), (5), (6), (7), (8), (9), (10), (11), (12) (part), (13) (part), (14), (15), (16) (part).)

Sec.6002.003.EFFECT ON LOCAL REGULATION. (a) This chapter and the rules adopted under this chapter have uniform force and effect throughout this state. A municipality or county may not enact an ordinance or rule inconsistent with this chapter or rules adopted under this chapter. An inconsistent ordinance or rule is void and has no effect.

(b) Notwithstanding Subsection (a), a municipality or county may:

(1) mandate that a fire alarm or detection system be installed in certain facilities, if the installation conforms to applicable state law;

(2) require a better type of alarm or detection system or otherwise safer condition than the minimum required by state law; and

(3) require regular inspections by local officials of smoke detectors in dwelling units, as that term is defined by Section 92.251, Property Code, and require the smoke detectors to be operational at the time of inspection.

(c) A municipality, county, or other political subdivision of this state may not require, as a condition of engaging in business or performing any activity authorized under this chapter, that a registered firm, a license holder, or an employee of a license holder:

(1) obtain a registration, franchise, or license from the political subdivision;

(2) pay any fee or franchise tax to the political subdivision; or

(3) post a bond.

(d) Notwithstanding any other provision of this section or Section 6002.155, a municipality or county may require a registered firm to obtain a permit and pay a permit fee for the installation of a fire alarm or fire detection device or system and require that the installation of such a system be in conformance with the building code or other construction requirements of the municipality or county and state law.

(e) Notwithstanding Subsection (d), a municipality or county may not impose qualification or financial responsibility requirements other than proof of a registration certificate. (V.T.I.C. Art. 5.43-2, Secs. 3(a), (c).)

Sec. 6002.004. PROVISION OF CERTAIN SERVICES BY POLITICAL SUBDIVISION. (a) In this section, "monitoring" means the receipt of fire alarm or supervisory signals or retransmission or communication of those signals to a fire service communications center that is located in this state or serves property in this state.

(b) Except as provided by Subsection (c), a political subdivision may not offer residential alarm system sales, service, installation, or monitoring unless the political subdivision has been providing monitoring services to residences within the boundaries of the political subdivision as of September 1, 1999. Any fee charged by the political subdivision under this subsection may not exceed the cost of the monitoring.

(c) A political subdivision may:

(1) offer service, installation, or monitoring for property owned by the political subdivision or another political subdivision;

(2) allow for the response to an alarm or detection device by:

(A) a law enforcement agency or fire department; or

(B) a law enforcement officer or firefighter acting in an official capacity; or

(3) offer monitoring to a financial institution, as defined by Section 59.301, Finance Code, that requests, in writing, that the political subdivision provide monitoring service to the financial institution.

(d) Subsection (b) does not apply to a political subdivision:

(1) in a county with a population of less than 80,000; or

(2) in which monitoring is not otherwise provided or available.

(e) This section is not intended to require a political subdivision to hold a license under this chapter. (V.T.I.C. Art. 5.43-2, Secs. 7(b), (c), (d), (e).) [Sections 6002.005-6002.050 reserved for expansion] SUBCHAPTER B. POWERS AND DUTIES OF COMMISSIONER, DEPARTMENT, AND STATE FIRE MARSHAL

Sec.6002.051.ADMINISTRATION OF CHAPTER; RULES. (a) The department shall administer this chapter.

(b) The commissioner may adopt rules as necessary to administer this chapter, including rules the commissioner considers necessary to administer this chapter through the state fire marshal. (V.T.I.C. Art. 5.43-2, Secs. 4 (part), 6(a) (part).)

Sec.6002.052.ADOPTION OF RULES; STANDARDS. (a) In adopting necessary rules, the commissioner may use:

(1) recognized standards, such as, but not limited to:

(A) standards of the National Fire Protection Association;

(B) standards recognized by federal law or regulation; or

(C) standards published by a nationally recognized standards-making organization;

(2) the National Electrical Code; or

(3) information provided by individual manufacturers.

(b) Under rules adopted under Section 6002.051, the department may create specialized licenses or registration certificates for an organization or individual engaged in the business of planning, certifying, leasing, selling, servicing, installing, monitoring, or maintaining fire alarm or fire detection devices or systems. The rules must establish appropriate training and qualification standards for each kind of license and certificate.

(c) The commissioner shall also adopt standards applicable to fire alarm devices, equipment, or systems regulated under this chapter. In adopting standards under this subsection, the commissioner may allow the operation of a fire alarm monitoring station that relies on fire alarm devices or equipment approved or listed by a nationally recognized testing laboratory without regard to whether the monitoring station is approved or listed by a nationally recognized testing laboratory if the operator of the station demonstrates that the station operating standards are substantially equivalent to those required to be approved or listed. (V.T.I.C. Art. 5.43-2, Secs. 4 (part), 6(a) (part), (b).)

Sec. 6002.053. RULES RESTRICTING ADVERTISING OR COMPETITIVE BIDDING. (a) The commissioner may not adopt rules restricting advertising or competitive bidding by the holder of a license or registration certificate issued under this chapter except to prohibit false, misleading, or deceptive practices.

(b) In the commissioner's rules to prohibit false, misleading, or deceptive practices, the commissioner may not include a rule that:

(1) restricts the use of any medium for advertising;

(2) restricts the use of a license or registration certificate holder's personal appearance or voice in an advertisement;

(3) relates to the size or duration of an advertisement by the license or registration certificate holder; or

(4) restricts the license or registration certificate holder's advertisement under a trade name. (V.T.I.C. Art. 5.43-2, Sec. 6A.)

Sec.6002.054.FEES. (a) The commissioner shall set the fee for:

(1) an initial registration certificate in an amount not to exceed $500;

(2) the renewal of a registration certificate for each year in an amount not to exceed $500;

(3) the renewal of a registration certificate for an individual or organization engaged in the business of planning, certifying, leasing, selling, servicing, installing, monitoring, or maintaining exclusively single station devices in an amount not to exceed $250 annually;

(4) an initial branch office registration certificate in an amount not to exceed $150;

(5) the renewal of a branch office registration certificate for each year in an amount not to exceed $150;

(6) an initial or renewal training school approval in an amount not to exceed $500 annually;

(7) an initial or renewal of a training school instructor approval in an amount not to exceed $50 annually;

(8) an initial license in an amount not to exceed $120; and

(9) the renewal of a license for each year in an amount not to exceed $100.

(b) Unless the examination or reexamination for a license is administered by a testing service, the commissioner shall set a nonrefundable fee for:

(1) the initial examination in an amount not to exceed $30; and

(2) each reexamination in an amount not to exceed $20.

(c) The commissioner shall set a fee in an amount not to exceed $20 for:

(1) a duplicate registration certificate or license issued under this chapter; and

(2) any request requiring changes to a registration certificate or license. (V.T.I.C. Art. 5.43-2, Secs. 5(a) (part), (b) (part), (c) (part), (d), (i), 5D(b) (part), (c) (part).)

Sec.6002.055.DEPOSIT IN OPERATING ACCOUNT. The fees collected under this chapter shall be deposited in the state treasury to the credit of the Texas Department of Insurance operating account. (V.T.I.C. Art. 5.43-2, Sec. 8.) [Sections 6002.056-6002.100 reserved for expansion] SUBCHAPTER C. FIRE DETECTION AND ALARM DEVICES ADVISORY COUNCIL

Sec.6002.101.ADVISORY COUNCIL; APPOINTMENT. The commissioner shall appoint an advisory council consisting of seven individuals as follows:

(1) three individuals who are employed by a registered firm in the fire protection industry and who have at least three years' experience in the sale, installation, maintenance, or manufacture of fire alarm or fire detection devices;

(2) two individuals who:

(A) are experienced in the engineering of fire prevention services; or

(B) are members of a fire protection association;

(3) one individual who is an experienced fire prevention officer employed by a municipality or county; and

(4) one individual who:

(A) is employed by a registered firm; and

(B) has at least three years' experience in the operation of a central fire alarm monitoring station. (V.T.I.C. Art. 5.43-2, Sec. 6(d).)

Sec.6002.102.ADVISORY COUNCIL DUTIES. The advisory council shall periodically:

(1) review rules implementing this chapter; and

(2) recommend rule changes to the commissioner. (V.T.I.C. Art. 5.43-2, Sec. 6(c).) [Sections 6002.103-6002.150 reserved for expansion] SUBCHAPTER D. REGISTRATION, LICENSE, AND APPROVAL REQUIREMENTS

Sec. 6002.151. FIRM REGISTRATION CERTIFICATE REQUIRED; LIMITED CERTIFICATE. (a) An individual or organization may not engage in the business of planning, certifying, leasing, selling, installing, servicing, monitoring, or maintaining fire alarm or fire detection devices or systems unless the individual or organization holds a registration certificate issued by the department.

(b) The department may issue a limited registration certificate to an individual or organization whose business is restricted to monitoring.

(c) Applications for registration certificates and qualifications for those certificates are subject to rules adopted by the commissioner. (V.T.I.C. Art. 5.43-2, Secs. 5(a) (part), 7(a) (part), 10(a) (part).)

Sec. 6002.152. BRANCH OFFICE REGISTRATION CERTIFICATE REQUIRED. (a) Except as provided by Subsection (c), each separate office location of a registered firm, other than the location identified on the firm's registration certificate, must have a branch office registration certificate issued by the department.

(b) Before issuing a branch office registration certificate, the department must determine that the branch office location is part of a registered firm.

(c) A registered firm that is engaged in the business of planning, certifying, leasing, selling, servicing, installing, monitoring, or maintaining exclusively single station devices is not required to apply for or obtain a branch office registration certificate for a separate office or location of the firm. (V.T.I.C. Art. 5.43-2, Sec. 5(b) (part).)

Sec. 6002.153. REQUIRED INSURANCE COVERAGE FOR REGISTRATION CERTIFICATE. (a) The department may not issue a registration certificate under this chapter unless the applicant files with the department evidence of a general liability insurance policy that includes products and completed operations coverage. The policy must be conditioned to pay on behalf of the insured those amounts that the insured becomes legally obligated to pay as damages because of bodily injury and property damage caused by an occurrence involving the insured or the insured's officer, agent, or employee in the conduct of any business that requires a registration certificate or license under this chapter.

(b) Unless the commissioner increases or decreases the limits under rules adopted under Section 6002.051(b), the limits of insurance coverage required by Subsection (a) must be at least:

(1) $100,000 combined single limits for bodily injury and property damage for each occurrence; and

(2) $300,000 aggregate for all occurrences for each policy year.

(c) The evidence of insurance required by this section must be in the form of a certificate of insurance executed by an insurer authorized to engage in the business of insurance in this state and countersigned by an insurance agent licensed in this state. A certificate of insurance for surplus lines coverage procured in compliance with Chapter 981 through a surplus lines agent that is licensed under Subchapter E, Chapter 981, and resident in this state may be filed with the department as evidence of the coverage required by this section.

(d) An insurance certificate executed and filed with the department under this section remains in force until the insurer has terminated future liability by the notice required by the department.

(e) Failure to maintain the liability insurance required by this section constitutes grounds for the denial, suspension, or revocation, after notice and opportunity for hearing, of a registration certificate issued under this chapter.

(f) For an individual or organization licensed to install or service burglar alarms under Chapter 1702, Occupations Code, compliance with the insurance requirements of that chapter constitutes compliance with the insurance requirements of this section if the insurance held by the individual or organization complies with the requirements of this section in amounts and types of coverage.

(g) This section does not affect the rights of the insured to negotiate or contract for limitations of liability with a third party, including a customer of the insured. (V.T.I.C. Art. 5.43-2, Secs. 5B(a), (b), (c), (d), (e), (g).)

Sec. 6002.154. FIRE ALARM TECHNICIAN, RESIDENTIAL FIRE ALARM SUPERINTENDENT, AND FIRE ALARM PLANNING SUPERINTENDENT. (a) Each registered firm, including a firm engaged in the business of planning, certifying, leasing, selling, servicing, installing, monitoring, or maintaining exclusively single station devices, must employ at least one employee who is a fire alarm technician, residential fire alarm superintendent, or fire alarm planning superintendent.

(b) A fire alarm technician, residential fire alarm superintendent, or fire alarm planning superintendent must hold a license issued by the department, conditioned on the successful completion of a written license examination.

(c) To engage in the activity for which the license is granted, an individual licensed under this chapter must be an employee or agent of an individual or entity that holds a registration certificate.

(d) A fire alarm technician may perform or supervise monitoring. A fire alarm planning superintendent may act as a fire alarm technician or a residential fire alarm superintendent. A residential fire alarm superintendent may act as a fire alarm technician.

(e) Applications for licenses and qualifications for those licenses are subject to rules adopted by the commissioner. (V.T.I.C. Art. 5.43-2, Secs. 2(12) (part), (13) (part), (16) (part), 5(a) (part), (c) (part), (f), 5D(a) (part), 10(a) (part).)

Sec.6002.155.ACTIVITIES NOT REGULATED BY CHAPTER. The licensing provisions of this chapter do not apply to:

(1) an individual or organization in the business of building construction that installs electrical wiring and devices that may include, in part, the installation of a fire alarm or detection system if:

(A) the individual or organization is a party to a contract that provides that:

(i) the installation will be performed under the direct supervision of and certified by a licensed employee or agent of a firm registered to install and certify such an alarm or detection device; and

(ii) the registered firm assumes full responsibility for the installation of the alarm or detection device; and

(B) the individual or organization does not plan, certify, lease, sell, service, or maintain fire alarms or detection devices or systems;

(2) an individual or organization that:

(A) owns and installs a fire detection or fire alarm device on the individual's or organization's own property; or

(B) if the individual or organization does not charge for the device or its installation, installs the device for the protection of the individual's or organization's personal property located on another's property and does not install the device as a normal business practice on the property of another;

(3) an individual who holds a license or other authority issued by a municipality to practice as an electrician and who installs fire or smoke detection and alarm devices only in a single family or multifamily residence if:

(A) the devices installed are:

(i) single station detectors; or

(ii) multiple station detectors capable of being connected in a manner that actuation of one detector causes all integral or separate alarms to operate if the detectors are not connected to a control panel or to an outside alarm, do not transmit a signal off the premises, and do not use more than 120 volts; and

(B) all installations comply with the adopted edition of Household Fire Warning Equipment, National Fire Protection Association Standard No. 74;

(4) an individual or organization that:

(A) sells fire detection or fire alarm devices exclusively over-the-counter or by mail order; and

(B) does not plan, certify, install, service, or maintain the devices;

(5) a law enforcement agency or fire department or a law enforcement officer or firefighter acting in an official capacity that responds to a fire alarm or detection device;

(6) an engineer licensed under Chapter 1001, Occupations Code, acting solely in the engineer's professional capacity;

(7) an individual or organization that provides and installs at no charge to the property owners or residents a battery-powered smoke detector in a single-family or two-family residence if:

(A) the smoke detector bears a label of listing or approval by a testing laboratory approved by the department;

(B) the installation complies with the adopted edition of National Fire Protection Association Standard No. 74;

(C) the installers are knowledgeable in fire protection and the proper use of smoke detectors; and

(D) the detector is a single station installation and not a part of or connected to any other detection device or system;

(8) a regular employee of a registered firm who is under the direct supervision of a license holder;

(9) a building owner, the owner's managing agent, or an employee of the owner or agent who installs battery-operated single station smoke detectors or monitor fire alarm or fire detection devices or systems in the owner's building, and in which the monitoring:

(A) is performed at the owner's property at no charge to the occupants of the building;

(B) complies with applicable standards of the National Fire Protection Association as may be adopted by rule under this chapter; and

(C) uses equipment approved by a testing laboratory approved by the department for fire alarm monitoring;

(10) an individual employed by a registered firm that sells and installs a smoke or heat detector in a single-family or two-family residence if:

(A) the detector bears a label of listing or approval by a testing laboratory approved by the department;

(B) the installation complies with the adopted edition of National Fire Protection Association Standard No. 74;

(C) the installers are knowledgeable in fire protection and the proper use and placement of detectors; and

(D) the detector is a single station installation and not a part of or connected to any other detection device or system; or

(11) an individual or organization licensed to install or service burglar alarms under Chapter 1702, Occupations Code, that provides and installs in a single-family or two-family residence a combination keypad that includes a panic button to initiate a fire alarm signal if the fire alarm signal:

(A) is monitored by a fire alarm firm registered under this chapter; and

(B) is not initiated by a fire or smoke detection device. (V.T.I.C. Art. 5.43-2, Sec. 3(b).)

Sec.6002.156.LICENSE EXAMINATION. (a) The state fire marshal shall establish the scope and type of an examination required by this chapter. The examination must cover this chapter and commissioner rules and include specific testing of all license categories.

(b) The state fire marshal may administer the examination or may enter into an agreement with a testing service.

(c) If a testing service is used, the state fire marshal may contract with the testing service regarding requirements for the examination, including:

(1) examination development;

(2) scheduling;

(3) site arrangements;

(4) grading;

(5) reporting;

(6) analysis; or

(7) other administrative duties.

(d) The state fire marshal may require the testing service to:

(1) correspond directly with an applicant regarding the administration of the examination;

(2) collect a reasonable fee from an applicant for administering the examination; or

(3) administer the examination at a specific location or time.

(e) Approval for a testing service is valid for one year.

(f) The state fire marshal shall adopt rules as necessary to implement examination requirements under this chapter. (V.T.I.C. Art. 5.43-2, Secs. 5D(a) (part), (b) (part), (f), (g), (h).)

Sec.6002.157.EXAMINATION RESULTS. (a) Not later than the 30th day after the date on which an examination is administered under this chapter, the state fire marshal shall send notice to each examinee of the results of the examination.

(b) If an examination is conducted, graded, or reviewed by a testing service, the state fire marshal shall send notice to each examinee of the results of the examination within two weeks after the date on which the state fire marshal receives the results from the testing service.

(c) If the notice of the examination results will be delayed for more than 90 days after the examination date, the state fire marshal shall send notice to the examinee of the reason for the delay before the 90th day.

(d) The state fire marshal may require a testing service to notify an examinee of the results of the examinee's examination under this section.

(e) If requested in writing by an individual who fails the examination administered under this chapter, the state fire marshal shall send to the individual an analysis of the individual's performance on the examination. (V.T.I.C. Art. 5.43-2, Secs. 5D(a) (part), (a-1).)

Sec.6002.158.TRAINING SCHOOLS AND INSTRUCTORS; APPROVAL. (a) An applicant for approval as a training school must submit an application to the state fire marshal, accompanied by the applicant's complete course or testing curriculum. A registered firm, or an affiliate of a registered firm, is not eligible for approval as a training school.

(b) The state fire marshal shall review the materials submitted for course approval and shall approve or deny approval in a letter provided not later than the 60th day after the date of receipt of the application. A denial of approval must disclose specific reasons for the denial. An applicant whose approval is denied may reapply at any time.

(c) Training school instructors must be approved by the state fire marshal. To be eligible for approval, an instructor must hold a fire alarm planning superintendent license and have at least three years of experience in fire alarm installation, service, or monitoring.

(d) Approval for a training school or instructor is valid for one year.

(e) The curriculum for a fire alarm technician course or a residential fire alarm superintendent course must consist of 16 hours of classroom instruction for each license category.

(f) After approval, each training school must annually conduct, within 125 miles of each county with a population greater than 500,000, at least two classes that are open to the public. (V.T.I.C. Art. 5.43-2, Secs. 5D(b) (part), (c) (part), (d), (e); New.)

Sec.6002.159.CONTINUING EDUCATION PROGRAMS. (a) The commissioner may adopt procedures for certifying and may certify continuing education programs.

(b) Participation in the continuing education programs is voluntary. (V.T.I.C. Art. 5.43-2, Sec. 5E.)

Sec.6002.160.RECIPROCAL LICENSE. The department may waive any license requirement for an applicant who holds a license issued by another state that has license requirements substantially equivalent to the license requirements of this state. (V.T.I.C. Art. 5.43-2, Sec. 5F.)

Sec.6002.161.NOT TRANSFERABLE. A registration certificate or license issued under this chapter is not transferable. (V.T.I.C. Art. 5.43-2, Sec. 5(h).) [Sections 6002.162-6002.200 reserved for expansion] SUBCHAPTER E. RENEWAL OF REGISTRATION CERTIFICATE OR LICENSE

Sec.6002.201.RENEWAL REQUIRED; FEE. (a) A renewal of a registration certificate or license issued under this chapter is valid for a period of two years. The license or registration renewal fee for each year of the two-year period is payable on renewal.

(b) The commissioner by rule may adopt a system under which registration certificates and licenses expire on various dates during the year. For the year in which an expiration date of a registration certificate or license is less than one year from its issuance or anniversary date, the fee shall be prorated on a monthly basis so that each holder of a registration certificate or license pays only that portion of the renewal fee that is allocable to the number of months during which the registration certificate or license is valid. The total renewal fee is payable on renewal on the new expiration date. (V.T.I.C. Art. 5.43-2, Secs. 5A, 5C(b).)

Sec.6002.202.NOTICE OF EXPIRATION. At least 30 days before the expiration date of a registration certificate or license, the state fire marshal shall send written notice of the impending expiration to the holder of the registration certificate or license at the holder's last known address. (V.T.I.C. Art. 5.43-2, Sec. 5C(a) (part).)

Sec.6002.203.RENEWAL PROCEDURES. (a) The holder of an unexpired registration certificate or license may renew the certificate or license by paying the required renewal fee to the department before the expiration date of the certificate or license.

(b) An individual or organization whose registration certificate or license has been expired for 90 days or less may renew the certificate or license by paying to the department:

(1) the required renewal fee; and

(2) a fee that does not exceed one-fourth of the initial fee for the certificate or license.

(c) An individual or organization whose registration certificate or license has been expired for more than 90 days but less than two years may renew the certificate or license by paying to the department:

(1) all unpaid renewal fees; and

(2) a fee that does not exceed the initial fee for the certificate or license.

(d) An individual or organization whose registration certificate or license has been expired for two years or longer may not renew the certificate or license. The individual or organization may obtain a new registration certificate or license by complying with the requirements and procedures for obtaining an initial registration certificate or license.

(e) This section may not be construed to prevent the department from denying or refusing to renew a license under applicable law or commissioner rules.

(f) A license or registration certificate issued under this chapter expires at midnight on the date printed on the license or certificate. A renewal application and fee for the license or registration certificate must be postmarked on or before the expiration date to be accepted as timely.

(g) If a renewal application is not complete but there has been no lapse in the required insurance, the applicant is entitled to 30 days from the date that the applicant is notified by the department of the deficiencies in the renewal application to comply with any additional requirement. If an applicant fails to respond and correct all deficiencies in the renewal application within the 30-day period, the department may charge a late fee. (V.T.I.C. Art. 5.43-2, Secs. 5C(a) (part), (c).)

Sec.6002.204.RENEWAL OF CERTAIN LICENSES. A license holder with an unexpired license who is not employed by a registered firm at the time of the license renewal may renew that license, but the license holder may not engage in any activity for which the license was granted until the license holder is employed by a registered firm. (V.T.I.C. Art. 5.43-2, Sec. 5C(a) (part).) [Sections 6002.205-6002.250 reserved for expansion] SUBCHAPTER F. SELLING OR LEASING OF FIRE ALARM OR FIRE DETECTION DEVICES

Sec.6002.251.REQUIRED LABEL; EXCEPTIONS. (a) Except as provided by Subsections (b) and (c), a detection or alarm device, alarm system, or item of monitoring equipment, a purpose of which is to detect or give alarm of fire, may not be sold, offered for sale, leased, installed, or used to monitor property in this state unless the device, system, or item of equipment carries a label of approval or listing of a testing laboratory approved by the department.

(b) Except as provided by Subsection (c), a detection or alarm device, alarm system, or item of monitoring equipment in a one-family or two-family residence, a purpose of which is to detect or give alarm of fire, may not be sold, offered for sale, leased, installed, or used to monitor property in this state after April 14, 1989, unless the device, system, or equipment carries a label of approval or listing of a testing laboratory approved by the department.

(c) Subsections (a) and (b) do not prohibit the continued use or monitoring of equipment in place if the equipment:

(1) complied with the law applicable on the date of the equipment's original placement; and

(2) has not been extended, modified, or altered.

(d) Fire alarm devices that are not required by this chapter or rules adopted under this chapter and that do not impair the operation of fire alarm or fire detection devices required by this chapter or the rules adopted under this chapter are exempt from the label and listing requirements described by Subsections (a) and (b) if the devices are approved by the local authority with jurisdiction. (V.T.I.C. Art. 5.43-2, Secs. 9(a), (b), (c).)

Sec. 6002.252. REQUIRED PURCHASE AND INSTALLATION INFORMATION. A fire detection or fire alarm device may not be sold or installed in this state unless the device is accompanied by printed information that:

(1) is supplied to the owner by the supplier or installing contractor; and

(2) concerns:

(A) instructions describing the installation, operation, testing, and proper maintenance of the device;

(B) information to aid in establishing an emergency evacuation plan for the protected premises; and

(C) the telephone number and location, including notification procedures, of the nearest fire department. (V.T.I.C. Art. 5.43-2, Sec. 9(d).)

Sec. 6002.253. TRAINING AND SUPERVISION OF CERTAIN EXEMPT EMPLOYEES. Each registered firm that employs an individual who is exempt from the licensing requirements of this chapter under Section 6002.155(10) shall appropriately train and supervise the individual to ensure that:

(1) each installation complies with the adopted provisions of National Fire Protection Standard No. 74 or other adopted standards;

(2) each smoke or heat detector installed or sold carries a label or listing of approval by a testing laboratory approved by the department; and

(3) the individual is knowledgeable in fire protection and the proper use and placement of detectors. (V.T.I.C. Art. 5.43-2, Sec. 9(e).) [Sections 6002.254-6002.300 reserved for expansion] SUBCHAPTER G. PROHIBITED PRACTICES AND DISCIPLINARY PROCEDURES

Sec.6002.301.PROHIBITED PRACTICES. An individual or organization may not:

(1) plan, certify, lease, sell, service, install, monitor, or maintain a fire alarm or fire detection device or system without a license or registration certificate;

(2) obtain or attempt to obtain a registration certificate or license by fraudulent representation; or

(3) plan, certify, lease, sell, service, install, monitor, or maintain a fire alarm or fire detection device or system in violation of this chapter or the rules adopted under this chapter. (V.T.I.C. Art. 5.43-2, Sec. 7(a).)

Sec.6002.302.DISCIPLINARY ACTIONS. (a) The state fire marshal may suspend, revoke, or refuse to issue or renew a registration certificate or license if, after notice and hearing, the state fire marshal finds that the applicant, registrant, or license holder has engaged in acts that:

(1) violate this chapter;

(2) violate rules or standards adopted under this chapter; or

(3) constitute misrepresentation made in connection with the sale of products or services rendered.

(b) An original or renewal registration certificate, license, or testing laboratory approval may be denied, suspended, or revoked, if after notice and public hearing the commissioner, through the state fire marshal, determines from the evidence presented at the hearing that this chapter or a rule adopted under this chapter has been violated. (V.T.I.C. Art. 5.43-2, Secs. 10(b), (c).)

Sec.6002.303.DISCIPLINARY HEARING. (a) If the state fire marshal proposes to suspend, revoke, or refuse to renew a license or registration certificate issued under this chapter, the holder of the license or certificate is entitled to a hearing conducted by the State Office of Administrative Hearings.

(b) Proceedings for a disciplinary action are governed by Chapter 2001, Government Code.

(c) Rules of practice adopted by the commissioner applicable to the proceedings for a disciplinary action may not conflict with rules adopted by the State Office of Administrative Hearings. (V.T.I.C. Art. 5.43-2, Sec. 10A.)

Sec.6002.304.REAPPLICATION REQUIREMENTS. (a) A holder of a registration certificate, license, or testing laboratory approval that has been revoked under this chapter may not file another application for a registration certificate, license, or approval before the first anniversary of the effective date of the revocation.

(b) An individual or organization reapplying under this section must request a public hearing to show cause why the issuance of a new registration certificate, license, or approval should not be denied. (V.T.I.C. Art. 5.43-2, Sec. 10(d).) [Sections 6002.305-6002.350 reserved for expansion] SUBCHAPTER H. CRIMINAL PENALTY

Sec.6002.351.CRIMINAL PENALTY. (a) An individual or organization commits an offense if the individual or organization violates Section 6002.151, 6002.152, or 6002.154.

(b) An offense under this section is a Class B misdemeanor.

(c) Venue for an offense under this section is in Travis County or the county in which the offense is committed. (V.T.I.C. Art. 5.43-2, Sec. 11.)

CHAPTER 6003. FIRE PROTECTION SPRINKLER SYSTEM SERVICE AND

INSTALLATION

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 6003.001. DEFINITIONS Sec. 6003.002. APPLICABILITY OF CHAPTER Sec. 6003.003. EFFECT ON LOCAL REGULATION

[Sections 6003.004-6003.050 reserved for expansion]

SUBCHAPTER B. POWERS AND DUTIES OF COMMISSIONER,

DEPARTMENT, AND STATE FIRE MARSHAL

Sec. 6003.051. ADMINISTRATION OF CHAPTER Sec. 6003.052. ADOPTION OF RULES Sec. 6003.053. RULES RESTRICTING ADVERTISING OR

COMPETITIVE BIDDING Sec. 6003.054. GENERAL POWERS AND DUTIES OF

COMMISSIONER, STATE FIRE MARSHAL, AND

DEPARTMENT Sec. 6003.055. FEES Sec. 6003.056. DEPOSIT IN OPERATING ACCOUNT

[Sections 6003.057-6003.100 reserved for expansion]

SUBCHAPTER C. FIRE PROTECTION ADVISORY COUNCIL

Sec. 6003.101. ADVISORY COUNCIL; APPOINTMENT Sec. 6003.102. ADVISORY COUNCIL DUTIES

[Sections 6003.103-6003.150 reserved for expansion]

SUBCHAPTER D. REGISTRATION AND LICENSE REQUIREMENTS

Sec. 6003.151. FIRE PROTECTION SPRINKLER SYSTEM

CONTRACTOR; REGISTRATION CERTIFICATE

REQUIRED Sec. 6003.152. REQUIRED INSURANCE COVERAGE FOR

REGISTRATION CERTIFICATE Sec. 6003.153. RESPONSIBLE MANAGING EMPLOYEE: LICENSE

REQUIRED Sec. 6003.154. POSTING OF LICENSE OR CERTIFICATE

REQUIRED Sec. 6003.155. DISPLAY OF REGISTRATION CERTIFICATE

NUMBER ON CERTAIN DOCUMENTS REQUIRED Sec. 6003.156. LICENSE EXAMINATION Sec. 6003.157. EXAMINATION RESULTS Sec. 6003.158. CONTINUING EDUCATION REQUIREMENTS Sec. 6003.159. RECIPROCAL LICENSE Sec. 6003.160. NOT TRANSFERABLE

[Sections 6003.161-6003.200 reserved for expansion]

SUBCHAPTER E. RENEWAL OF REGISTRATION CERTIFICATE OR LICENSE

Sec. 6003.201. RENEWAL REQUIRED; FEE Sec. 6003.202. NOTICE OF EXPIRATION Sec. 6003.203. RENEWAL PROCEDURES

[Sections 6003.204-6003.250 reserved for expansion]

SUBCHAPTER F. PROHIBITED PRACTICES

AND DISCIPLINARY PROCEDURES

Sec. 6003.251. PROHIBITED PRACTICES Sec. 6003.252. DISCIPLINARY ACTIONS Sec. 6003.253. DISCIPLINARY HEARING Sec. 6003.254. APPLICABILITY OF ADMINISTRATIVE

PROCEDURE ACT Sec. 6003.255. REAPPLICATION REQUIREMENTS

[Sections 6003.256-6003.300 reserved for expansion]

SUBCHAPTER G. CRIMINAL PENALTY

Sec. 6003.301. CRIMINAL PENALTY CHAPTER 6003. FIRE PROTECTION SPRINKLER SYSTEM SERVICE AND INSTALLATION SUBCHAPTER A. GENERAL PROVISIONS

Sec.6003.001.DEFINITIONS. In this chapter:

(1) "Fire protection sprinkler system" means an assembly of underground or overhead piping or conduits that conveys water with or without other agents to dispersal openings or devices to:

(A) extinguish, control, or contain fire; and

(B) provide protection from exposure to fire or the products of combustion.

(2) "Fire protection sprinkler system contractor" means an individual or organization that offers to undertake, represents itself as being able to undertake, or undertakes the plan, sale, installation, maintenance, or servicing of:

(A) a fire protection sprinkler system; or

(B) any part of a fire protection sprinkler system.

(3) "Individual" means a natural person, including an owner, manager, officer, employee, or occupant.

(4) "Installation" means:

(A) the initial placement of equipment; or

(B) the extension, modification, or alteration of equipment after initial placement.

(5) "Insurance agent" means:

(A) an individual, firm, or corporation licensed under:

(i) Subchapter E, Chapter 981; or

(ii) Subchapter A, B, C, D, E, or G, Chapter 4051; or

(B) an individual authorized to represent an insurance fund or pool created by a municipality, county, or other political subdivision of this state under Chapter 791, Government Code.

(6) "License" means the document issued to a responsible managing employee authorizing the employee to engage in the fire protection sprinkler system business in this state.

(7) "Maintenance" means the maintenance of a fire protection sprinkler system or any part of a fire protection sprinkler system in the condition of repair that provides performance as originally planned.

(8) "Organization" means a corporation, a partnership or other business association, a governmental entity, or any other legal or commercial entity.

(9) "Registration certificate" means the document issued to a fire protection sprinkler system contractor authorizing the contractor to engage in business in this state.

(10) "Responsible managing employee" means an individual designated by a company that plans, sells, installs, maintains, or services fire protection sprinkler systems to ensure that each fire protection sprinkler system, as installed, maintained, or serviced, meets the standards for the system as provided by law.

(11) "Service" means maintenance, repair, or testing. (V.T.I.C. Art. 5.43-3, Secs. 1(1), (2), (5), (6), (7), (8), (9), (10), (11), (12), (13) as added Acts 71st Leg., R.S., Ch. 823.)

Sec.6003.002.APPLICABILITY OF CHAPTER. (a) This chapter does not apply to:

(1) an employee of the United States, this state, or any political subdivision of this state who acts as a fire protection sprinkler system contractor for the employing governmental entity;

(2) the plan, sale, installation, maintenance, or servicing of a fire protection sprinkler system in any property owned by the United States or this state;

(3) an individual or organization acting under court order as authorization;

(4) an individual or organization that sells or supplies products or materials to a registered fire protection sprinkler system contractor;

(5) an installation, maintenance, or service project for which the total contract price for labor, materials, and all other services is less than $100, if:

(A) the project is not a part of a complete or more costly project, whether the complete project is to be undertaken by one or more fire protection sprinkler system contractors; or

(B) the project is not divided into contracts of less than $100 for the purpose of evading this chapter;

(6) an engineer licensed under Chapter 1001, Occupations Code, acting solely in the engineer's professional capacity;

(7) a regular employee of a registered fire protection sprinkler system contractor; or

(8) an owner or lessee of property that:

(A) installs a fire protection sprinkler system on the owned or leased property for the owner's or lessee's own use or for family members' use; and

(B) does not offer the property for sale or lease before the first anniversary of the date of installation of the fire protection sprinkler system.

(b) This chapter does not authorize an individual or organization to practice professional engineering other than in compliance with Chapter 1001, Occupations Code. (V.T.I.C. Art. 5.43-3, Secs. 2(b), 11.)

Sec.6003.003.EFFECT ON LOCAL REGULATION. (a) This chapter and the rules adopted under this chapter have uniform force and effect throughout this state. A municipality or county may not enact an order, ordinance, or rule requiring a fire protection sprinkler system contractor to obtain a registration certificate from the municipality or county. A municipality or county may not impose on a fire protection sprinkler system contractor qualification or financial responsibility requirements other than proof of a registration certificate.

(b) Notwithstanding any other provision of this chapter, a municipality or county may require a fire protection sprinkler system contractor to obtain a permit and pay a permit fee for the installation of a fire protection sprinkler system and require the installation of a fire protection sprinkler system to conform to the building code or other construction requirements of the municipality or county.

(c) A municipal or county order, ordinance, or rule in effect on September 1, 1983, is not invalidated because of any provision of this chapter. (V.T.I.C. Art. 5.43-3, Sec. 2(a).)

[Sections 6003.004-6003.050 reserved for expansion] SUBCHAPTER B. POWERS AND DUTIES OF COMMISSIONER, DEPARTMENT, AND STATE FIRE MARSHAL

Sec.6003.051.ADMINISTRATION OF CHAPTER. (a) The department shall administer this chapter.

(b) The commissioner may issue rules necessary to administer this chapter through the state fire marshal. (V.T.I.C. Art. 5.43-3, Sec. 3(a) (part).)

Sec.6003.052.ADOPTION OF RULES. (a) In adopting necessary rules, the commissioner may use recognized standards, including standards:

(1) adopted by federal law or regulation;

(2) published by a nationally recognized standards-making organization; or

(3) developed by individual manufacturers.

(b) Under rules adopted under Section 6003.051(b), the department may create a specialized licensing or registration program for fire protection sprinkler system contractors. (V.T.I.C. Art. 5.43-3, Secs. 3(a) (part), (b).)

Sec. 6003.053. RULES RESTRICTING ADVERTISING OR COMPETITIVE BIDDING. (a) The commissioner may not adopt rules restricting advertising or competitive bidding by the holder of a license or registration certificate issued under this chapter except to prohibit false, misleading, or deceptive practices.

(b) In the commissioner's rules to prohibit false, misleading, or deceptive practices, the commissioner may not include a rule that:

(1) restricts the use of any medium for advertising;

(2) restricts the use of a license or registration certificate holder's personal appearance or voice in an advertisement;

(3) relates to the size or duration of an advertisement by the license or registration certificate holder; or

(4) restricts the license or registration certificate holder's advertisement under a trade name. (V.T.I.C. Art. 5.43-3, Sec. 7A.)

Sec. 6003.054. GENERAL POWERS AND DUTIES OF COMMISSIONER, STATE FIRE MARSHAL, AND DEPARTMENT. (a) The commissioner may delegate authority to exercise all or part of the commissioner's functions, powers, and duties under this chapter, including the issuance of licenses and registration certificates, to the state fire marshal. The state fire marshal shall implement the rules adopted by the commissioner for the protection and preservation of life and property in controlling:

(1) the registration of an individual or an organization engaged in the business of planning, selling, installing, maintaining, or servicing fire protection sprinkler systems; and

(2) the requirements for the plan, sale, installation, maintenance, or servicing of fire protection sprinkler systems by:

(A) determining the criteria and qualifications for registration certificate and license holders;

(B) evaluating the qualifications of an applicant for a registration certificate to engage in the business of planning, selling, installing, maintaining, or servicing fire protection sprinkler systems;

(C) conducting examinations and evaluating the qualifications of a license applicant; and

(D) issuing registration certificates and licenses to qualified applicants.

(b) The commissioner shall establish a procedure for reporting and processing complaints relating to the business of planning, selling, installing, maintaining, or servicing fire protection sprinkler systems in this state. (V.T.I.C. Art. 5.43-3, Secs. 7(a), (b).)

Sec.6003.055.FEES. (a) The commissioner shall set the fee for:

(1) a registration certificate application in an amount not to exceed $100;

(2) an initial or renewal registration certificate in an amount not to exceed $1,200 annually; and

(3) an initial or renewal responsible managing employee license fee in an amount not to exceed $200 annually.

(b) Unless the examination for a responsible managing employee license is administered by a testing service, the commissioner shall set a nonrefundable fee for each examination in an amount not to exceed $100.

(c) The commissioner shall set a fee in an amount not to exceed $70 for:

(1) a duplicate registration certificate or license issued under this chapter; or

(2) any request requiring changes to a registration certificate or license. (V.T.I.C. Art. 5.43-3, Secs. 4(a) (part), (c) (part), (d) (part), (e), (i) (part), 5A(a) (part).)

Sec.6003.056.DEPOSIT IN OPERATING ACCOUNT. All fees collected under this chapter shall be deposited in the state treasury to the credit of the Texas Department of Insurance operating account for use in administering this chapter. (V.T.I.C. Art. 5.43-3, Sec. 4(i) (part).) [Sections 6003.057-6003.100 reserved for expansion] SUBCHAPTER C. FIRE PROTECTION ADVISORY COUNCIL

Sec.6003.101.ADVISORY COUNCIL; APPOINTMENT. (a) The commissioner shall appoint the members of the fire protection advisory council, who serve at the pleasure of the commissioner.

(b) The advisory council is composed of seven members as follows:

(1) three members who have been actively engaged in the management of a fire protection sprinkler system business for not less than five years preceding appointment;

(2) one member who represents the engineering section of the department's property and casualty program;

(3) one member who is a volunteer firefighter; and

(4) two members who each represent a different municipal fire department in this state.

(c) The State Firemen's and Fire Marshals' Association of Texas, on the commissioner's request, may recommend a volunteer firefighter for appointment to the advisory council. (V.T.I.C. Art. 5.43-3, Secs. 6(a) (part), (c), (e).)

Sec.6003.102.ADVISORY COUNCIL DUTIES. (a) In addition to other duties delegated by the commissioner, the fire protection advisory council shall:

(1) advise the state fire marshal regarding practices in the fire protection sprinkler system industry and the rules necessary to implement and administer this chapter; and

(2) make recommendations to the state fire marshal regarding forms and procedures for registration certificates and licenses.

(b) The advisory council shall periodically:

(1) review rules implementing this chapter; and

(2) recommend rule changes to the commissioner. (V.T.I.C. Art. 5.43-3, Secs. 6(b), (d).) [Sections 6003.103-6003.150 reserved for expansion] SUBCHAPTER D. REGISTRATION AND LICENSE REQUIREMENTS

Sec. 6003.151. FIRE PROTECTION SPRINKLER SYSTEM CONTRACTOR; REGISTRATION CERTIFICATE REQUIRED. (a) Unless the individual or organization holds a registration certificate issued by the department, an individual or organization may not plan, sell, install, maintain, or service a fire protection sprinkler system.

(b) An applicant for a registration certificate must apply to the department on a form prescribed by the commissioner.

(c) An organization that is a partnership or joint venture is not required to register under the name of the organization if each partner or joint venturer holds a registration certificate. (V.T.I.C. Art. 5.43-3, Secs. 4(a) (part), 8 (part).)

Sec. 6003.152. REQUIRED INSURANCE COVERAGE FOR REGISTRATION CERTIFICATE. (a) The department may not issue a registration certificate under this chapter unless the applicant files with the department evidence of a general liability insurance policy that includes products and completed operations coverage. The policy must be conditioned to pay on behalf of the insured those amounts that the insured becomes legally obligated to pay as damages because of bodily injury and property damage caused by an occurrence involving the insured or the insured's officer, agent, or employee in the conduct of any activity that requires a registration certificate or license under this chapter.

(b) Unless the commissioner, after notice and an opportunity for a hearing, increases or decreases the limits, the limits of insurance coverage required by Subsection (a) must be at least:

(1) $100,000 combined single limits for bodily injury and property damage for each occurrence; and

(2) $300,000 aggregate for all occurrences for each policy year.

(c) The evidence of insurance required by this section must be in the form of a certificate of insurance executed by an insurer authorized to engage in the business of insurance in this state and countersigned by an insurance agent licensed in this state. A certificate of insurance for surplus lines coverage procured in compliance with Chapter 981 through a surplus lines agent that is licensed under Subchapter E, Chapter 981, and resident in this state may be filed with the department as evidence of the coverage required by this section.

(d) An insurance certificate executed and filed with the department under this section remains in force until the insurer has terminated future liability by the notice required by the department.

(e) Failure to maintain the liability insurance required by this section constitutes grounds for the denial, suspension, or revocation, after notice and opportunity for hearing, of a registration certificate issued under this chapter. (V.T.I.C. Art. 5.43-3, Secs. 5, 7(c).)

Sec. 6003.153. RESPONSIBLE MANAGING EMPLOYEE: LICENSE REQUIRED. (a) Each fire protection sprinkler system contractor must employ at least one licensed responsible managing employee on a full-time basis.

(b) A person may not act as a responsible managing employee unless the person holds a license issued by the department, conditioned on the successful completion of the license examination and compliance with the requirements of the rules adopted under this chapter.

(c) Notwithstanding Subsection (a), an individual or organization with a current registration certificate may act as a fire protection sprinkler system contractor for 30 days after the death or dissociation of its licensed responsible managing employee or for a longer period approved by the commissioner under the rules adopted under this chapter. (V.T.I.C. Art. 5.43-3, Secs. 4(b), (c) (part), 8 (part).)

Sec.6003.154.POSTING OF LICENSE OR CERTIFICATE REQUIRED. Each registration certificate and license issued under this chapter must be posted in a conspicuous place in the fire protection sprinkler system contractor's place of business. (V.T.I.C. Art. 5.43-3, Sec. 4(f).)

Sec. 6003.155. DISPLAY OF REGISTRATION CERTIFICATE NUMBER ON CERTAIN DOCUMENTS REQUIRED. Each bid, proposal, offer, and installation drawing for a fire protection sprinkler system must prominently display the registration certificate number of the fire protection sprinkler system contractor. (V.T.I.C. Art. 5.43-3, Sec. 4(g).)

Sec.6003.156.LICENSE EXAMINATION. (a) The state fire marshal shall establish the scope and type of an examination required by this chapter.

(b) The state fire marshal may administer the examination or may enter into an agreement with a testing service.

(c) If a testing service is used, the state fire marshal may contract with the testing service regarding requirements for the examination, including:

(1) examination development;

(2) scheduling;

(3) site arrangements;

(4) grading;

(5) reporting;

(6) analysis; or

(7) other administrative duties.

(d) The state fire marshal may require the testing service to:

(1) correspond directly with an applicant regarding the administration of the examination;

(2) collect a reasonable fee from an applicant for administering the examination; or

(3) administer the examination at a specific location or time.

(e) The state fire marshal shall adopt rules as necessary to implement examination requirements under this chapter. (V.T.I.C. Art. 5.43-3, Secs. 5B(a), (b), (e).)

Sec.6003.157.EXAMINATION RESULTS. (a) Not later than the 30th day after the date on which an examination is administered under this chapter, the state fire marshal shall send notice to each examinee of the results of the examination.

(b) If an examination is graded or reviewed by a testing service, the state fire marshal shall send notice to each examinee of the results of the examination not later than the 14th day after the date on which the state fire marshal receives the results from the testing service.

(c) If the notice of the examination results will be delayed for more than 90 days after the examination date, the state fire marshal, before the 90th day, shall send notice to the examinee of the reason for the delay.

(d) The state fire marshal may require a testing service to notify an examinee of the results of the examinee's examination.

(e) If requested in writing by an individual who fails the examination administered under this chapter, the state fire marshal shall send to the individual an analysis of the individual's performance on the examination. (V.T.I.C. Art. 5.43-3, Secs. 5B(c), (d).)

Sec.6003.158.CONTINUING EDUCATION REQUIREMENTS. (a) The commissioner may adopt procedures for certifying and may certify continuing education programs.

(b) Participation in the continuing education programs is voluntary. (V.T.I.C. Art. 5.43-3, Sec. 5C.)

Sec.6003.159.RECIPROCAL LICENSE. The department may waive any license requirement for an applicant who holds a license issued by another state that has license requirements substantially equivalent to the license requirements of this state. (V.T.I.C. Art. 5.43-3, Sec. 5D.)

Sec.6003.160.NOT TRANSFERABLE. A registration certificate or license issued under this chapter is not transferable. (V.T.I.C. Art. 5.43-3, Sec. 4(h).) [Sections 6003.161-6003.200 reserved for expansion] SUBCHAPTER E. RENEWAL OF REGISTRATION CERTIFICATE OR LICENSE

Sec.6003.201.RENEWAL REQUIRED; FEE. (a) Except as otherwise provided by this subsection, an initial registration certificate or license is valid for a period of one year from the date of issue and is renewable on payment of the renewal fee. An initial registration certificate or license issued on or after September 1, 1983, may be issued for a period of less than one year and the renewal fee shall be prorated proportionally.

(b) A renewal of a registration certificate or license issued under this chapter is valid for a period of two years. The license or registration fee for each year of the two-year period is payable on renewal.

(c) The commissioner by rule may adopt a system under which registration certificates and licenses expire on various dates during the year. For the year in which an expiration date of a registration certificate or license is less than one year from its issuance or anniversary date, the fee shall be prorated on a monthly basis so that each holder of a registration certificate or license pays only that portion of the renewal fee that is allocable to the number of months during which the registration certificate or license is valid. On renewal on the new expiration date, the total renewal fee is payable. (V.T.I.C. Art. 5.43-3, Secs. 4(d) (part), 5A(a), (c).)

Sec.6003.202.NOTICE OF EXPIRATION. At least 30 days before the expiration date of a registration certificate or license, the department shall send written notice of the impending expiration to the holder of the registration certificate or license at the holder's last known address. (V.T.I.C. Art. 5.43-3, Sec. 5A(b) (part).)

Sec.6003.203.RENEWAL PROCEDURES. (a) The holder of an unexpired registration certificate or license may renew the certificate or license by paying the required renewal fee to the department before the expiration date of the certificate or license.

(b) An individual or organization whose registration certificate or license has been expired for 90 days or less may renew the certificate or license by paying to the department:

(1) the required renewal fee; and

(2) a fee equal to one-half of the initial fee for the certificate or license.

(c) An individual or organization whose registration certificate or license has been expired for more than 90 days but less than two years may renew the certificate or license by paying to the department:

(1) all unpaid renewal fees; and

(2) a fee that is equal to the initial fee for the certificate or license.

(d) An individual or organization whose registration certificate or license has been expired for two years or longer may not renew the certificate or license. The individual or organization may obtain a new registration certificate or license by complying with the requirements and procedures for obtaining an initial registration certificate or license.

(e) This section may not be construed to prevent the department from denying or refusing to renew a license under applicable law or commissioner rules. (V.T.I.C. Art. 5.43-3, Sec. 5A(b) (part).) [Sections 6003.204-6003.250 reserved for expansion] SUBCHAPTER F. PROHIBITED PRACTICES AND DISCIPLINARY PROCEDURES

Sec.6003.251.PROHIBITED PRACTICES. An individual or organization may not:

(1) obtain or attempt to obtain a registration certificate or license by fraudulent representation; or

(2) plan, sell, install, maintain, or service a fire protection sprinkler system in violation of this chapter or the rules adopted under this chapter. (V.T.I.C. Art. 5.43-3, Sec. 8 (part).)

Sec.6003.252.DISCIPLINARY ACTIONS. The state fire marshal may suspend, revoke, or refuse to issue or renew a registration certificate or license if, after notice and hearing, the state fire marshal finds that the applicant, registrant, or license holder has engaged in acts that:

(1) violate this chapter;

(2) violate rules or standards adopted under this chapter; or

(3) constitute misrepresentation made in connection with:

(A) the sale of products; or

(B) services rendered. (V.T.I.C. Art. 5.43-3, Sec. 9(a).)

Sec.6003.253.DISCIPLINARY HEARING. (a) If the state fire marshal proposes to suspend, revoke, or refuse to renew a license or registration certificate issued under this chapter, the holder of the license or certificate is entitled to a hearing conducted by the State Office of Administrative Hearings.

(b) Rules of practice adopted by the commissioner applicable to the proceedings for a disciplinary action may not conflict with rules adopted by the State Office of Administrative Hearings. (V.T.I.C. Art. 5.43-3, Sec. 9A (part).)

Sec. 6003.254. APPLICABILITY OF ADMINISTRATIVE PROCEDURE ACT. Proceedings for the denial, suspension, or revocation of a registration certificate or license, appeals from those proceedings, and any other proceedings for a disciplinary action are governed by Chapter 2001, Government Code. (V.T.I.C. Art. 5.43-3, Secs. 9(b), 9A (part).)

Sec.6003.255.REAPPLICATION REQUIREMENTS. (a) An applicant or holder of a registration certificate or license whose certificate or license has been denied, refused, or revoked under this chapter, other than for failure to pass a required written examination, may not file another application for a registration certificate or license before:

(1) the first anniversary of the effective date of the denial, refusal, or revocation; or

(2) if judicial review of the denial, refusal, or revocation is sought, before the first anniversary of the date of the final court order or decree affirming the action.

(b) The commissioner may deny an application described by Subsection (a) unless the applicant shows good cause why the denial, refusal, or revocation of the registration certificate or license should not be considered a bar to the issuance of a new registration certificate or license. (V.T.I.C. Art. 5.43-3, Sec. 9(c).) [Sections 6003.256-6003.300 reserved for expansion] SUBCHAPTER G. CRIMINAL PENALTY

Sec.6003.301.CRIMINAL PENALTY. (a) A person commits an offense if the person knowingly violates Section 6003.151(a), 6003.153, or 6003.251.

(b) An offense under this section is a Class B misdemeanor.

(c) Venue for an offense under this section is in Travis County or the county in which the offense is committed. (V.T.I.C. Art. 5.43-3, Sec. 10; New.)

PART K. ADDITIONS TO GOVERNMENT CODE AND LOCAL GOVERNMENT CODE

SECTION 1K.001. ADDITION. Subchapter A, Chapter 533, Government Code, is amended by adding Section 533.019 to read as follows:

Sec.533.019.MANAGED CARE ORGANIZATIONS: FISCAL SOLVENCY AND COMPLAINT SYSTEM GUIDELINES AND COMPLAINT SYSTEM GUIDELINES Insurance, in conjunction with the commission, shall establish fiscal solvency standards and complaint system guidelines for managed care organizations that serve Medicaid recipients.

(b) The guidelines must require that information regarding a managed care organization's complaint process be made available to a recipient in an appropriate communication format when the recipient enrolls in the Medicaid managed care program. (V.T.I.C. Art. 1.61.)

SECTION 1K.002. ADDITION. Subtitle C, Title 5, Local Government Code, is amended by adding Chapter 177 to read as follows: CHAPTER 177. LIFE, HEALTH, AND ACCIDENT INSURANCE FOR OFFICIALS, EMPLOYEES, AND RETIREES OF POLITICAL SUBDIVISIONS SUBCHAPTER A. GENERAL PROVISIONS

Sec.177.001.CERTAIN COVERAGE AUTHORIZED. (a) A county or other political subdivision of this state may procure contracts insuring the political subdivision's officials, employees, and retirees or any class of the political subdivision's officials, employees, and retirees under a policy of group life, group health, accident, accidental death and dismemberment, or hospital, surgical, or medical expense insurance.

(b) The dependents of those officials, employees, and retirees may be insured under a group policy that provides:

(1) health insurance; or

(2) hospital, surgical, or medical expense insurance. (V.T.I.C. Art. 3.51-2, Sec. (a) (part).)

Sec.177.002.PAYMENT OF PREMIUMS. (a) A county or other political subdivision of this state that is authorized to procure a contract insuring the political subdivision's officials, employees, and retirees or any class of the political subdivision's officials, employees, and retirees under a policy of group insurance that covers one or more risks may pay from the local funds of the political subdivision all or any portion of the premiums for the policy. The political subdivision may also pay all or any portion of the premiums on group health, hospital, surgical, or medical expense insurance for dependents of the political subdivision's officials, employees, and retirees.

(b) If authorized by the official, employee, or retiree in writing to make the deduction, the county or other political subdivision may deduct from the person's salary an amount equal to any required contribution by the person to the premiums for the insurance issued under Section 177.001 to the political subdivision as the policyholder. (V.T.I.C. Art. 3.51-2, Secs. (a) (part), (b), (c) (part).)

Sec.177.003.USE OF STATE FUNDS. State funds may not be used to procure a contract under this subchapter or pay premiums under that contract. (V.T.I.C. Art. 3.51-2, Sec. (a) (part).) [Sections 177.004-177.050 reserved for expansion] SUBCHAPTER B. HEALTH AND INSURANCE FUND

Sec.177.051.FUND AUTHORIZED. (a) A county or other political subdivision of this state may establish a fund to provide insurance authorized by Subchapter A.

(b) A fund established under Subsection (a) shall be known as the "health and insurance fund--employees and dependents." (V.T.I.C. Art. 3.51-2, Sec. (c) (part).)

Sec.177.052.PAYMENT OF MONEY INTO FUND. There shall be credited to a fund established under this subchapter:

(1) any salary deduction to which an official, employee, or retiree agrees in writing; and

(2) contributions from the county or other political subdivision. (V.T.I.C. Art. 3.51-2, Sec. (c) (part).)

Sec.177.053.USE OF MONEY IN FUND. Payment from a fund established under this subchapter:

(1) is authorized only for the payment of premiums on life, group health, accident, accidental death and dismemberment, or hospital, surgical, or medical expense insurance for officials, employees, retirees, and their dependents; and

(2) must be made in accordance with rules adopted by the county or other political subdivision establishing the fund. (V.T.I.C. Art. 3.51-2, Sec. (c) (part).)

Sec.177.054.PAYMENT OF CLAIMS FROM FUND. A claim against a fund established under this subchapter shall be payable in the same manner as other claims of the county or other political subdivision. (V.T.I.C. Art. 3.51-2, Sec. (c) (part).)

PART L. REPEALER

SECTION 1L.001. REPEALER. (a) The following Acts and articles as compiled in Vernon's Texas Insurance Code are repealed:

(1) 1.01, 1.02, 1.10, 1.12, 1.13, 1.33, and 1.61;

(2) 3.11, 3.38, 3.49-3, 3.50-7B, and 3.51-2;

(3) 3.50-7A, as added by Chapter 201, Acts of the 78th Legislature, Regular Session, 2003;

(4) 3.50-7A, as added by Chapter 213, Acts of the 78th Legislature, Regular Session, 2003;

(5) 5.01-1, 5.02, 5.03-1, 5.05, 5.14, 5.43-1, 5.43-2, 5.43-3, and 5.66; and

(6) 21.20-2, 21.49-15, 21.49-16, 21.49C, 21.70, and 21.80.

(b) Subsection (b), Article 1.09-1, Insurance Code, is repealed.

(c) Subchapter B, Chapter 4, Insurance Code, is repealed.

PART M. LEGISLATIVE INTENT

SECTION 1M.001. LEGISLATIVE INTENT. This article is enacted under Section 43, Article III, Texas Constitution. This article is intended as a recodification only, and no substantive change in law is intended by this article.

PART N. EFFECTIVE DATE

SECTION 1N.001. EFFECTIVE DATE. This article takes effect April 1, 2009.

ARTICLE 2. UPDATES OF CROSS-REFERENCES IN TITLES 2, 3, 5, 6, 7, 8,

10, 11, AND 13, INSURANCE CODE

PART A. GENERAL PROVISIONS

SECTION 2A.001. This article is enacted as part of the state's continuing statutory revision program under Chapter 323, Government Code. This article is a revision for purposes of Section 43, Article III, Texas Constitution, and has the purpose of making necessary corrections to enacted codifications of the Insurance Code.

SECTION 2A.002. If any provision of this article conflicts with a statute enacted by the 80th Legislature, Regular Session, 2007, the statute controls.

PART B. CROSS-REFERENCE UPDATES: TITLE 2, INSURANCE CODE

SECTION 2B.001. Section 34.004(a), Insurance Code, is amended to correct a cross-reference to read as follows:

(a) A person is not liable in a civil action, including an action for libel or slander, for collecting, reviewing, analyzing, disseminating, or reporting information collected from annual statements filed under Chapter 802 [Article 1.11] if the person is:

(1) the department, the commissioner, or an employee of the department;

(2) a member or employee of or delegate to the National Association of Insurance Commissioners or an authorized committee, subcommittee, or task force of that association; or

(3) another person who is responsible for collecting, reviewing, analyzing, and disseminating information from filed annual statement convention blanks.

SECTION 2B.002. Section 36.002, Insurance Code, is amended to correct cross-references to read as follows:

Sec. 36.002. ADDITIONAL RULEMAKING AUTHORITY. The commissioner may adopt reasonable rules that are:

(1) necessary to effect the purposes of a provision of:

(A) Subchapter B, Chapter 5;

(B) Subchapter C, Chapter 1806;

(C) Subchapter A, Chapter 2301;

(D) Chapter 251, as that chapter relates to casualty insurance and fidelity, guaranty, and surety bond insurance;

(E) Chapter 253;

(F) Chapter 2008, 2251, or 2252; or

(G) Subtitle B, Title 10; or

(2) appropriate to accomplish the purposes of a provision of:

(A) Section 37.051(a), 403.002, 492.051(b) or (c), 501.159, 941.003(b)(1) [941.003(b)(3)] or (c), or 942.003(b)(1) [942.003(b)(3)] or (c);

(B) Subchapter H, Chapter 544;

(C) Chapter 251, as that chapter relates to:

(i) automobile insurance;

(ii) casualty insurance and fidelity, guaranty, and surety bond insurance;

(iii) fire insurance and allied lines;

(iv) workers' compensation insurance; or

(v) aircraft insurance;

(D) Chapter 5, 252, 253, 254, 255, 256, 426, 493, 494, 1804, 1805, 1806, [or] 2171, 6001, 6002, or 6003;

(E) Subtitle B, C, D, E, F, H, or I, Title 10;

(F) Section 417.008, Government Code; or

(G) [Chapter 406A, Labor Code; or

[(H)] Chapter 2154, Occupations Code.

SECTION 2B.003. Section 36.106, Insurance Code, is amended to correct cross-references to read as follows:

Sec. 36.106. WAIVER OF CERTAIN NOTICE REQUIREMENTS. The commissioner may, on written agreement or stipulation of each party and any intervenor, waive or modify the notice publication requirement of Section 822.059 [Article 2.01], 822.157 [2.03], 841.060 [3.04], or 884.058 [22.03].

SECTION 2B.004. Section 38.002(a)(1), Insurance Code, is amended to correct a cross-reference to read as follows:

(1) "Insurer" means an insurance company, reciprocal or interinsurance exchange, mutual insurance company, capital stock company, county mutual insurance company, Lloyd's plan, or other legal entity engaged in the business of personal automobile insurance or residential property insurance in this state. The term includes:

(A) an affiliate as described by [Section 2, Article 21.49-1, or] Section 823.003(a) if that affiliate is authorized to write and is writing personal automobile insurance or residential property insurance in this state;

(B) the Texas Windstorm Insurance Association created and operated under Chapter 2210 [Article 21.49];

(C) the FAIR Plan Association under Chapter 2211 [Article 21.49A]; and

(D) the Texas Automobile Insurance Plan Association under Chapter 2151 [Article 21.81].

SECTION 2B.005. Section 38.003(b), Insurance Code, is amended to correct a cross-reference to read as follows:

(b) For purposes of this section, "insurer" means a reciprocal or interinsurance exchange, mutual insurance company, capital stock company, county mutual insurance company, Lloyd's plan, life, accident, or health or casualty insurance company, health maintenance organization, mutual life insurance company, mutual insurance company other than life, mutual, or natural premium life insurance company, general casualty company, fraternal benefit society, group hospital service company, or other legal entity engaged in the business of insurance in this state. The term includes an affiliate as described by [Section 2, Article 21.49-1, or] Section 823.003(a) if that affiliate is authorized to write and is writing insurance in this state.

SECTION 2B.006. Section 38.051, Insurance Code, is amended to correct cross-references to read as follows:

Sec. 38.051. DEFINITION. In this subchapter, "health benefit plan provider" means an insurance company, group hospital service corporation, or health maintenance organization that issues:

(1) an individual, group, blanket, or franchise insurance policy, an insurance agreement, a group hospital service contract, or an evidence of coverage, that provides benefits for medical or surgical expenses incurred as a result of an accident or sickness; or

(2) a long-term care benefit plan [insurance policy], as defined by Section 1651.003 [2, Article 3.70-12].

SECTION 2B.007. Section 38.101(2), Insurance Code, is amended to correct cross-references to read as follows:

(2) "Health benefit plan coverage" means a group policy, contract, or certificate of health insurance or benefits delivered, issued for delivery, or renewed in this state by:

(A) an insurance company subject to a law described by Section 841.002 [Chapter 3];

(B) a group hospital service corporation under Chapter 842 [20];

(C) a health maintenance organization under Section 1367.053, Subchapter A, Chapter 1452, Subchapter B, Chapter 1507, Chapters 222, 251, and 258, as applicable to a health maintenance organization, and Chapters 843, 1271, and 1272 [the Texas Health Maintenance Organization Act (Chapter 20A, Vernon's Texas Insurance Code)]; or

(D) a self-insurance trust or mechanism providing health care benefits.

SECTION 2B.008. Section 38.152, Insurance Code, is amended to correct a cross-reference to read as follows:

Sec. 38.152. EXEMPTION. This subchapter does not apply to a farm mutual insurance company or to a county mutual fire insurance company writing exclusively industrial fire insurance as described by Section 912.310 [Article 17.02].

SECTION 2B.009. Section 38.252(c), Insurance Code, is amended to correct a cross-reference to read as follows:

(c) The commissioner shall not require reporting of data:

(1) that could reasonably be used to identify a specific enrollee in a health benefit plan;

(2) in any way that violates confidentiality requirements of state or federal law applicable to an enrollee in a health benefit plan; or

(3) in which the health maintenance organization operating under [the Texas Health Maintenance Organization Act (] Section 1367.053, Subchapter A, Chapter 1452, Subchapter B, Chapter 1507, Chapter 222, 251, or 258, as applicable to a health maintenance organization, Chapter 843, Chapter 1271, and Chapter 1272 [20A, Vernon's Texas Insurance Code)] does not directly process the claim or does not receive complete and accurate encounter data.

SECTION 2B.010. Section 82.002(a), Insurance Code, is amended to correct cross-references to read as follows:

(a) This chapter applies to each company regulated by the commissioner, including:

(1) a domestic or foreign, stock or mutual, life, health, or accident insurance company;

(2) a domestic or foreign, stock or mutual, fire or casualty insurance company;

(3) a Mexican casualty company;

(4) a domestic or foreign Lloyd's plan insurer;

(5) a domestic or foreign reciprocal or interinsurance exchange;

(6) a domestic or foreign fraternal benefit society;

(7) a domestic or foreign title insurance company;

(8) an attorney's title insurance company;

(9) a stipulated premium insurance company;

(10) a nonprofit legal service corporation;

(11) a health maintenance organization;

(12) a statewide mutual assessment company;

(13) a local mutual aid association;

(14) a local mutual burial association;

(15) an association exempt under Section 887.102 [Article 14.17];

(16) a nonprofit hospital, medical, or dental service corporation, including a company subject to Chapter 842 [20];

(17) a county mutual insurance company; and

(18) a farm mutual insurance company.

SECTION 2B.011. Section 83.001(4), Insurance Code, is amended to correct cross-references to read as follows:

(4) "Unfair act" means an unfair method of competition, an unfair or deceptive act or practice, or an unfair claim settlement practice as defined under Chapter 541 [Article 21.21] or 542 [21.21-2] or a rule adopted under either chapter [article].

SECTION 2B.012. Section 83.002(a), Insurance Code, is amended to correct cross-references to read as follows:

(a) This chapter applies to each company regulated by the commissioner, including:

(1) a domestic or foreign, stock or mutual, life, health, or accident insurance company;

(2) a domestic or foreign, stock or mutual, fire or casualty insurance company;

(3) a Mexican casualty company;

(4) a domestic or foreign Lloyd's plan insurer;

(5) a domestic or foreign reciprocal or interinsurance exchange;

(6) a domestic or foreign fraternal benefit society;

(7) a domestic or foreign title insurance company;

(8) an attorney's title insurance company;

(9) a stipulated premium insurance company;

(10) a nonprofit legal service corporation;

(11) a statewide mutual assessment company;

(12) a local mutual aid association;

(13) a local mutual burial association;

(14) an association exempt under Section 887.102 [Article 14.17];

(15) a nonprofit hospital, medical, or dental service corporation, including a company subject to Chapter 842 [20];

(16) a county mutual insurance company; and

(17) a farm mutual insurance company.

SECTION 2B.013. Section 83.051(a), Insurance Code, is amended to correct cross-references to read as follows:

(a) The commissioner ex parte may issue an emergency cease and desist order if:

(1) the commissioner believes that:

(A) an authorized person engaging in the business of insurance is:

(i) committing an unfair act; or

(ii) in a hazardous condition or a hazardous financial condition under Section 843.406 [19, Texas Health Maintenance Organization Act (Article 20A.19, Vernon's Texas Insurance Code),] or Subchapter A, Chapter 404 [Article 1.32], as determined by the commissioner; or

(B) an unauthorized person:

(i) is engaging in the business of insurance in violation of Chapter 101 or in violation of a rule adopted under that chapter; or

(ii) is engaging in the business of insurance in violation of Chapter 101 and is committing an unfair act; and

(2) it appears to the commissioner that the alleged conduct:

(A) is fraudulent;

(B) is hazardous or creates an immediate danger to the public safety; or

(C) is causing or can be reasonably expected to cause public injury that:

(i) is likely to occur at any moment;

(ii) is incapable of being repaired or rectified; and

(iii) has or is likely to have influence or effect.

SECTION 2B.014. Section 101.001(a), Insurance Code, is amended to correct a cross-reference to read as follows:

(a) It is a state concern that many residents of this state hold insurance policies issued by persons or insurers who are not authorized to do insurance business in this state and who are not qualified as eligible surplus lines insurers under Chapter 981 [Article 1.14-2]. These residents face often insurmountable obstacles in asserting legal rights under the policies in foreign forums under unfamiliar laws and rules of practice.

SECTION 2B.015. Section 101.002(2), Insurance Code, is amended to correct a cross-reference to read as follows:

(2) "Unfair act" means an unfair method of competition or an unfair or deceptive act or practice as defined under Chapter 541 [Article 21.21] or a rule adopted under that chapter [article].

SECTION 2B.016. Section 101.052, Insurance Code, is amended to correct cross-references to read as follows:

Sec. 101.052. ADVERTISING RELATING TO MEDICARE SUPPLEMENT BENEFIT PLANS [POLICIES]. With respect to a Medicare supplement benefit plan [policy] authorized under Chapter 1652 [Article 3.74], the business of insurance in this state includes using, creating, publishing, mailing, or disseminating in this state an advertisement relating to an act that constitutes the business of insurance under Section 101.051 unless the advertisement is used, created, published, mailed, or disseminated on behalf of an insurer or person who:

(1) is authorized under this code to engage in the business of insurance in this state;

(2) has actual knowledge of the content of the advertisement;

(3) has authorized the advertisement to be used, created, published, mailed, or disseminated on that insurer's or person's behalf; and

(4) is clearly identified by name in the advertisement as the sponsor of the advertisement.

SECTION 2B.017. Section 101.101, Insurance Code, is amended to correct a cross-reference to read as follows:

Sec. 101.101. DEFINITION. In this subchapter, "person" means an individual or entity that is a person for purposes of Section 541.002 [2(a), Article 21.21].

SECTION 2B.018. Section 101.203(c), Insurance Code, is amended to correct cross-references to read as follows:

(c) This section does not apply to:

(1) a transaction in this state that:

(A) involves a policy that:

(i) is lawfully solicited, negotiated, written, and delivered outside this state; and

(ii) covers, at the time the policy is issued, only subjects of insurance that are not resident, located, or expressly to be performed in this state; and

(B) takes place after the policy is issued; or

(2) surplus lines insurance procured through eligible surplus lines insurers [carriers] as defined by Section 981.002 [Article 1.14-2].

SECTION 2B.019. Section 101.301(b), Insurance Code, is amended to correct cross-references to read as follows:

(b) This section does not apply to:

(1) a transaction described by Section 101.053(b)(4); or

(2) surplus lines insurance procured through eligible surplus lines insurers [carriers] as defined by Section 981.002 [Article 1.14-2].

PART C. CROSS-REFERENCE UPDATES: TITLE 3, INSURANCE CODE

SECTION 2C.001. Section 252.002(b), Insurance Code, is amended to correct a cross-reference to read as follows:

(b) The commissioner shall annually adjust the rate of assessment of the maintenance tax so that the tax imposed that year, together with any unexpended funds produced by the tax, produces the amount the commissioner determines is necessary to pay the expenses during the succeeding year of regulating all classes of insurance specified under:

(1) Chapters 1807, 2001-2006, 2171, 6001, 6002, and 6003;

(2) Subchapter C, Chapter 5;

(3) Subchapter H, Chapter 544;

(4) Subchapter D, Chapter 1806;

(5) Section 403.002;

(6) Sections 417.007, 417.008, and 417.009, Government Code; and

(7) Chapter 2154, Occupations Code.

SECTION 2C.002. Section 252.003, Insurance Code, is amended to correct a cross-reference to read as follows:

Sec. 252.003. PREMIUMS SUBJECT TO TAXATION. An insurer shall pay maintenance taxes under this chapter on the correctly reported gross premiums collected from writing insurance in this state against loss or damage by:

(1) bombardment;

(2) civil war or commotion;

(3) cyclone;

(4) earthquake;

(5) excess or deficiency of moisture;

(6) explosion as defined by Section 2002.006(b) [Article 5.52];

(7) fire;

(8) flood;

(9) frost and freeze;

(10) hail;

(11) insurrection;

(12) invasion;

(13) lightning;

(14) military or usurped power;

(15) an order of a civil authority made to prevent the spread of a conflagration, epidemic, or catastrophe;

(16) rain;

(17) riot;

(18) the rising of the waters of the ocean or its tributaries;

(19) smoke or smudge;

(20) strike or lockout;

(21) tornado;

(22) vandalism or malicious mischief;

(23) volcanic eruption;

(24) water or other fluid or substance resulting from the breakage or leakage of sprinklers, pumps, or other apparatus erected for extinguishing fires, water pipes, or other conduits or containers;

(25) weather or climatic conditions; or

(26) windstorm.

SECTION 2C.003. Section 253.002(b), Insurance Code, is amended to correct a cross-reference to read as follows:

(b) The commissioner shall annually adjust the rate of assessment of the maintenance tax so that the tax imposed that year, together with any unexpended funds produced by the tax, produces the amount the commissioner determines is necessary to pay the expenses during the succeeding year of regulating all classes of insurance specified under Section 253.003 [Subchapter B, Chapter 5].

SECTION 2C.004. Section 253.003, Insurance Code, is amended to correct a cross-reference to read as follows:

Sec. 253.003. PREMIUMS SUBJECT TO TAXATION. An insurer shall pay maintenance taxes under this chapter on the correctly reported gross premiums from writing a class of insurance specified under:

(1) Chapters 2008, 2251, and 2252;

(2) Subchapter B, Chapter 5;

(3) Subchapter C, Chapter 1806;

(4) Subchapter A, Chapter 2301; and

(5) Subtitle B, Title 10.

SECTION 2C.005. Section 255.003(a), Insurance Code, is amended to correct a cross-reference to read as follows:

(a) An insurer shall pay maintenance taxes under this chapter on the correctly reported gross workers' compensation insurance premiums from writing workers' compensation insurance in this state, including the modified annual premium of a policyholder that purchases an optional deductible plan under Subchapter E, Chapter 2053 [Article 5.55C].

SECTION 2C.006. Section 256.002(b), Insurance Code, is amended to correct a cross-reference to read as follows:

(b) The commissioner shall annually adjust the rate of assessment of the maintenance tax so that the tax imposed that year, together with any unexpended funds produced by the tax, produces the amount the commissioner determines is necessary to pay the expenses during the succeeding year of regulating all classes of insurance specified under Chapter 2101 [Subchapter K, Chapter 5].

SECTION 2C.007. Section 256.003, Insurance Code, is amended to correct a cross-reference to read as follows:

Sec. 256.003. PREMIUMS SUBJECT TO TAXATION. An insurer shall pay maintenance taxes under this chapter on the correctly reported gross premiums from writing a class of insurance specified under Chapter 2101 [Subchapter K, Chapter 5].

SECTION 2C.008. Section 261.003(b), Insurance Code, is amended to correct a cross-reference to read as follows:

(b) The commissioner shall annually adjust the rate of assessment of the maintenance tax so that the tax imposed that year, together with any unexpended funds produced by the tax, produces the amount the commissioner determines is necessary to pay the expenses during the succeeding year of regulating all classes of insurance specified under Chapter 2204 [Article 1.14-3].

SECTION 2C.009. Section 261.004, Insurance Code, is amended to correct a cross-reference to read as follows:

Sec. 261.004. PREMIUMS SUBJECT TO TAXATION. The exchange shall pay maintenance taxes under this chapter on the correctly reported gross premiums paid through the exchange on all classes of insurance specified under Chapter 2204 [Article 1.14-3].

PART D. CROSS-REFERENCE UPDATES: TITLE 5, INSURANCE CODE

SECTION 2D.001. Section 501.158, Insurance Code, is amended to correct cross-references to read as follows:

Sec. 501.158. CONFIDENTIALITY REQUIREMENTS. Confidentiality requirements applicable to examination reports under Sections 401.105 and 401.106 [Article 1.18] and to the commissioner under Section 441.201 [3A, Article 21.28-A,] apply to the public counsel.

SECTION 2D.002. Section 501.204(a), Insurance Code, is amended to correct a cross-reference and to conform more closely to the source law from which the section is derived to read as follows:

(a) This section applies to each insurer authorized to engage in business in this state under:

(1) [Chapter 25;

[(2)] Chapter 841;

(2) [(3)] Chapter 842;

(3) Section 1367.053, Subchapter A, Chapter 1452, Subchapter B, Chapter 1507, Chapter 222, 251, or 258, as applicable to a health maintenance organization, [(4)] Chapter 843, Chapter 1271, or Chapter 1272;

(4) [(5)] Chapter 882;

(5) [(6)] Chapter 884;

(6) [(7)] Chapter 885;

(7) [(8)] Chapter 887;

(8) [(9)] Chapter 888;

(9) [(10)] Chapter 961;

(10) Chapter 962;

(11) Chapter 982;

(12) Subchapter B, Chapter 1103;

(13) Subchapter A, Chapter 1104;

(14) Chapter 1201, or a provision listed in Section 1201.005;

(15) Chapter 1551;

(16) Chapter 1578; or

(17) Chapter 1601.

SECTION 2D.003. Sections 523.051(a) and (c), Insurance Code, are amended to correct a cross-reference to read as follows:

(a) The market assistance program is a voluntary program designed to assist applicants for insurance and insureds in this state in obtaining residential property insurance coverage in underserved areas. The commissioner by rule shall designate underserved areas using the standards described by Section 2004.002 [1, Article 5.35-3].

(c) The market assistance program may not provide assistance regarding windstorm and hail insurance coverage for a risk eligible for that coverage under Chapter 2210 [Article 21.49].

SECTION 2D.004. Section 523.202(b), Insurance Code, is amended to correct a cross-reference to read as follows:

(b) After each review, the executive committee shall report to the commissioner regarding:

(1) the need to continue operating the voluntary market assistance program;

(2) the need to establish a mandatory market assistance program;

(3) the need to establish a FAIR (Fair Access to Insurance Requirements) Plan under Chapter 2211 [Article 21.49A]; or

(4) other recommendations the executive committee considers appropriate.

SECTION 2D.005. Section 541.005(a), Insurance Code, is amended to correct cross-references to read as follows:

(a) A risk retention group or purchasing group described by Subchapter B, Chapter 2201, or [, as those terms are defined by] Section 2201.251 that is [2, Article 21.54,] not chartered in this state may not engage in a trade practice in this state that is defined as unlawful under this chapter.

SECTION 2D.006. Section 541.454(a), Insurance Code, is amended to correct cross-references to read as follows:

(a) Civil penalties, premium refunds, judgments, compensatory judgments, individual recoveries, orders, class action awards, costs, damages, or attorney's fees assessed or awarded under this chapter:

(1) may be paid only from the capital or surplus funds of the offending insurer; and

(2) may not take precedence over, be in priority to, or in any other manner apply to:

(A) Chapter 462 or 463 [Article 21.28-C or 21.28-D] or any other insurance guaranty act; or

(B) Chapter 422 [Article 21.39-A].

SECTION 2D.007. Section 542.052, Insurance Code, is amended to correct a cross-reference to read as follows:

Sec. 542.052. APPLICABILITY OF SUBCHAPTER. This subchapter applies to any insurer authorized to engage in business as an insurance company or to provide insurance in this state, including:

(1) a stock life, health, or accident insurance company;

(2) a mutual life, health, or accident insurance company;

(3) a stock fire or casualty insurance company;

(4) a mutual fire or casualty insurance company;

(5) a Mexican casualty insurance company;

(6) a Lloyd's plan;

(7) a reciprocal or interinsurance exchange;

(8) a fraternal benefit society;

(9) a stipulated premium company;

(10) a nonprofit legal services corporation;

(11) a statewide mutual assessment company;

(12) a local mutual aid association;

(13) a local mutual burial association;

(14) an association exempt under Section 887.102;

(15) a nonprofit hospital, medical, or dental service corporation, including a corporation subject to Chapter 842;

(16) a county mutual insurance company;

(17) a farm mutual insurance company;

(18) a risk retention group;

(19) a purchasing group;

(20) an eligible surplus lines insurer; and

(21) except as provided by Section 542.053(b), a guaranty association operating under Chapter 462 or 463 [Article 21.28-C or 21.28-D].

SECTION 2D.008. Sections 542.053(a) and (b), Insurance Code, are amended to correct cross-references to read as follows:

(a) This subchapter does not apply to:

(1) workers' compensation insurance;

(2) mortgage guaranty insurance;

(3) title insurance;

(4) fidelity, surety, or guaranty bonds;

(5) marine insurance as defined by Section 1807.001 [Article 5.53]; or

(6) a guaranty association created and operating under Chapter 2602.

(b) A guaranty association operating under Chapter 462 or 463 [Article 21.28-C or 21.28-D] is not subject to the damage provisions of Section 542.060.

SECTION 2D.009. Section 542.102(b), Insurance Code, is amended to correct a cross-reference to read as follows:

(b) This section does not apply to a workers' compensation insurance policy subject to Section 2051.151 [Article 5.65A].

SECTION 2D.010. Section 542.152, Insurance Code, is amended to correct a cross-reference to read as follows:

Sec. 542.152. EXCEPTION. This subchapter does not apply to:

(1) a casualty insurance policy that requires the insured's consent to settle a claim against the insured;

(2) fidelity, surety, or guaranty bonds; or

(3) marine insurance as defined by Section 1807.001 [Article 5.53].

SECTION 2D.011. Section 544.301(1), Insurance Code, is amended to correct cross-references to read as follows:

(1) "Insurer" means an insurance company, reciprocal or interinsurance exchange, mutual insurance company, capital stock company, county mutual insurance company, farm mutual insurance company, Lloyd's plan, or other legal entity authorized to write residential property insurance in this state. The term includes an affiliate, as described by Section 823.003(a), if that affiliate is authorized to write and is writing residential property insurance in this state. The term does not include:

(A) an eligible surplus lines insurer regulated under Chapter 981;

(B) the Texas Windstorm Insurance Association under Chapter 2210 [Article 21.49]; or

(C) the FAIR Plan Association under Chapter 2211 [Article 21.49A].

SECTION 2D.012. Section 551.001, Insurance Code, is amended to correct cross-references by amending Subsection (a) and adding Subsection (a-1) to read as follows:

(a) The commissioner may, as necessary, adopt and enforce reasonable rules, including notice requirements, relating to the cancellation and nonrenewal of any insurance policy regulated by the department under:

(1) Chapter 5;

(2) Chapter 1804, 1805, 2171, or 2301; or

(3) Subtitle C, D, E, or F, Title 10[, other than:

[(1)a policy subject to Subchapter B or C; or

[(2) a marine insurance policy other than inland marine].

(a-1) Notwithstanding Subsection (a), Subsection (a) does not apply to:

(1) an insurance policy subject to Subchapter B or C of this chapter; or

(2) a marine insurance policy other than inland marine.

SECTION 2D.013. Sections 551.107(b) and (e), Insurance Code, are amended to correct cross-references to read as follows:

(b) A claim under this section does not include a claim:

(1) resulting from a loss caused by natural causes;

(2) that is filed but is not paid or payable under the policy; or

(3) that an insurer is prohibited from using under Section 544.353 [3, Article 5.35-4].

(e) An insurer may notify an insured who has filed two claims in a period of less than three years that the insurer may refuse to renew the policy if the insured files a third claim during the three-year period. If the insurer does not notify the insured in accordance with this subsection, the insurer may not refuse to renew the policy because of claims. The notice form must:

(1) list the policyholder's claims; and

(2) contain the sentence: "The filing by you of another claim, except for a claim resulting from a loss caused by natural causes, a claim filed but not paid or payable under the policy under which it was filed, or an appliance-related claim that we are prohibited from using under Section 544.353 [3, Article 5.35-4], Texas Insurance Code, could cause us to refuse to renew your policy."

SECTION 2D.014. Section 553.004(a), Insurance Code, is amended to correct a cross-reference to read as follows:

(a) If the commissioner considers it necessary, the commissioner may initiate an examination of an insurer under Sections 401.051, 401.052, and 401.054-401.062 [Article 1.15].

SECTION 2D.015. Section 558.001, Insurance Code, is amended to correct a cross-reference to read as follows:

Sec. 558.001. DEFINITION. In this chapter, "insurer" means an insurance company or other entity authorized to engage in the business of insurance in this state. The term includes:

(1) a stock life, health, or accident insurance company;

(2) a mutual life, health, or accident insurance company;

(3) a stock fire or casualty insurance company;

(4) a mutual fire or casualty insurance company;

(5) a Mexican casualty insurance company;

(6) a farm mutual insurance company;

(7) a county mutual insurance company;

(8) a Lloyd's plan;

(9) a reciprocal or insurance exchange;

(10) a fraternal benefit society;

(11) a stipulated premium company;

(12) a nonprofit legal services corporation;

(13) a statewide mutual assessment company;

(14) a local mutual aid association;

(15) a local mutual burial association;

(16) an association exempt under Section 887.102;

(17) a nonprofit hospital, medical, or dental service corporation, including a corporation subject to Chapter 842;

(18) a risk retention group;

(19) a purchasing group;

(20) an eligible surplus lines insurer; and

(21) a guaranty association operating under Chapter 462 or 463 [Article 21.28-C or 21.28-D].

SECTION 2D.016. Section 558.002(c), Insurance Code, is amended to correct cross-references to read as follows:

(c) A guaranty association shall promptly refund any unearned premium as described by Subchapter E, Chapter 462 [Section 5(8), Article 21.28-C], or Sections 463.003(9) [5(10)] and 463.259 [8(n), Article 21.28-D].

SECTION 2D.017. Section 706.001(a), Insurance Code, is amended to correct a cross-reference to read as follows:

(a) The definitions adopted under Sections 2251.002 and 2301.002 and the terms described by Sections 2251.003 and 2301.003 [Article 5.13-2] apply to this chapter.

SECTION 2D.018. Section 706.004, Insurance Code, is amended to correct a cross-reference to read as follows:

Sec. 706.004. RATES AND FORMS. Notwithstanding any other law, rates and forms for insurance coverage issued under this chapter are governed by:

(1) Subchapters A-E, Chapter 2251;

(2) Subchapter A, Chapter 2301; and

(3) Article 5.13-2.

PART E. CROSS-REFERENCE UPDATES: TITLE 6, INSURANCE CODE

SECTION 2E.001. Section 802.056, Insurance Code, is amended to correct cross-references to read as follows:

Sec. 802.056. STATUS OF REPORTS AND OTHER INFORMATION. A report or any other information resulting from the collection, review, analysis, and distribution of information developed from the filing of annual statement convention blanks and provided to the department by the National Association of Insurance Commissioners is considered part of the process of examination of insurance companies under this code, including Chapters 86 and 401 [Articles 1.15-1.19].

SECTION 2E.002. Section 803.009, Insurance Code, is amended to correct cross-references to read as follows:

Sec. 803.009. CONFLICTING PROVISIONS. This chapter prevails over a conflicting provision of any other law of this state, including:

(1) Chapters 221, 222, and 223;

(2) Sections 401.151, 401.152, 401.155, and 401.156; and

(3) Section 171.0525, Tax Code [Articles 1.16, 4.10, 4.11, and 9.59].

SECTION 2E.003. Section 804.104, Insurance Code, is amended to correct a cross-reference to read as follows:

Sec. 804.104. RISK RETENTION GROUP NOT CHARTERED IN THIS STATE. A risk retention group that is not chartered but that is registered in this state under Section 2201.152 [4(b)(3), Article 21.54], must designate the commissioner as its agent for service of process and receipt of legal documents.

SECTION 2E.004. Section 804.201(a), Insurance Code, is amended to correct a cross-reference to read as follows:

(a) Process served by serving the commissioner under this chapter must be directed to the defendant and include:

(1) for an unauthorized person or insurer, the name and address of the person or insurer to be served;

(2) for a risk retention group, the name and address of the group to be served;

(3) for a surplus lines insurer, the name and address of the insurer to be served;

(4) for an unincorporated association, trust, or other organization formed under Chapter 1505 [Article 3.71], the name and address of the association, trust, or organization; or

(5) for an authorized company, the name and address of the company as it appears in the department records.

SECTION 2E.005. Section 822.056(e), Insurance Code, is amended to correct a cross-reference to read as follows:

(e) If all of the authorized shares of stock without par value are not subscribed and paid for when the charter is granted or the amendment is filed, respectively, the insurance company shall file with the department a certificate authenticated by a majority of the directors stating the number of shares without par value issued and the consideration received for those shares. An insurance company may issue and dispose of those remaining authorized shares for money or an instrument authorized for minimum capital under:

(1) a provision of Subchapter B, Chapter 424, other than Section 424.052, 424.072, or 424.073; and

(2) Section 822.204 [and Article 2.10].

SECTION 2E.006. Sections 822.061(a) and (b), Insurance Code, are amended to correct a cross-reference to read as follows:

(a) On receipt of a charter fee in the amount determined under Chapter 202 [Article 4.07], the commissioner shall examine the articles of incorporation filed with the department under Section 822.060 and any certificate filed under Section 822.057(a)(4).

(b) If the commissioner approves the articles of incorporation and, if applicable, the certificate filed under Section 822.057(a)(4), the commissioner shall certify and file the approved documents with the department records and, on receipt of a fee in the amount determined under Chapter 202 [Article 4.07], the commissioner shall issue a certified copy of the charter to the incorporators.

SECTION 2E.007. Section 822.155, Insurance Code, is amended to correct a cross-reference to read as follows:

Sec. 822.155. APPLICATION FOR AMENDMENT OF CHARTER. A domestic insurance company may amend its charter by paying to the commissioner a fee in the amount determined under Chapter 202 [Article 4.07] and by filing with the department:

(1) an application for a charter amendment on the form and containing the information prescribed by the commissioner; and

(2) the company's proposed amendment.

SECTION 2E.008. Sections 822.158(a) and (e), Insurance Code, are amended to correct cross-references to read as follows:

(a) Not later than the 60th day after the date the application under Section 822.155 is filed, the commissioner shall determine whether:

(1) the proposed capital structure of the insurance company meets the requirements of this code;

(2) the officers, directors, and managing head of the insurance company have sufficient insurance experience, ability, standing, and good record to make success of the company probable;

(3) the applicants are acting in good faith;

(4) if the proposed amendment relates to a diminution of the insurance company's charter powers with respect to the kinds of insurance business in which the company may be engaged, all liabilities incidental to the exercise of the powers to be eliminated have been terminated or wholly reinsured; and

(5) the property involved in an increase of capital or surplus, or both, is:

(A) properly valued; and

(B) in the form authorized by the following provisions [Section 822.204 and Article 2.10], to the extent those provisions apply:

(i) Subchapter B, Chapter 424, other than Sections 424.052, 424.072, and 424.073; and

(ii) Section 822.204.

(e) On approval of a certificate required under Section 822.156 and receipt of a fee in the amount determined under Chapter 202 [Article 4.07], the commissioner shall issue to the directors a certified copy of an amendment authorizing the issuance of shares of stock without par value that is filed under this section. The amendment is effective on issuance of the certified copy of the amendment.

SECTION 2E.009. Section 822.211, Insurance Code, is amended to correct cross-references to read as follows:

Sec. 822.211. ACTION OF COMMISSIONER WHEN CAPITAL OR SURPLUS REQUIREMENTS NOT SATISFIED. If an insurance company does not comply with the capital and surplus requirements of this chapter, the commissioner may enter an order prohibiting the company from writing new business and may:

(1) place the company under state supervision or conservatorship;

(2) declare the company to be in a hazardous condition as provided by Subchapter A, Chapter 404 [Article 1.32];

(3) declare the company to be impaired as provided by Subchapter B, Chapter 404 [Section 5, Article 1.10]; or

(4) apply to the company any other applicable sanction provided by this code.

SECTION 2E.010. Section 823.001(c), Insurance Code, is amended to read as follows:

(c) The purpose of this chapter [article] is to promote the public interest by:

(1) facilitating the achievement of the objectives described by Subsection (a);

(2) requiring disclosure of pertinent information relating to and approval of changes in control of an insurer;

(3) requiring disclosure and approval of material transactions and relationships between the insurer and the insurer's affiliates, including certain dividends to shareholders paid by the insurer; and

(4) providing standards governing material transactions between the insurer and the insurer's affiliates.

SECTION 2E.011. Section 823.353(a), Insurance Code, is amended to correct a cross-reference to read as follows:

(a) Each registered insurer that complies with an order under Section 823.351(a) shall pay the expense of the examination in accordance with Sections 401.151, 401.152, 401.155, and 401.156 [Article 1.16].

SECTION 2E.012. Section 823.451, Insurance Code, is amended to correct cross-references to read as follows:

Sec. 823.451. RECEIVERSHIP. If it appears to the commissioner that a person's violation of this chapter so impairs the financial condition of a domestic insurer as to threaten the insurer's insolvency or make the further transaction of the insurer's business hazardous to the insurer's policyholders or creditors or the public, the commissioner may proceed under Chapters 441 and 443 [Articles 21.28 and 21.28-A] to take possession of the insurer's property and conduct the business of the insurer.

SECTION 2E.013. Section 824.151(b), Insurance Code, is amended to correct a cross-reference to read as follows:

(b) Except as provided by Section 824.152, the provisions of Subchapter D, Chapter 425, [Article 3.39] that limit investments in the corporate stock of another corporation do not apply to a purchase made under this section.

SECTION 2E.014. Sections 824.152(d) and (g), Insurance Code, are amended to correct a cross-reference to read as follows:

(d) A purchase, offer to purchase, tender offer, request to purchase, or invitation to purchase shares in excess of the limits imposed under Subchapter D, Chapter 425, [Article 3.39] may not be made until it is filed with and approved by the commissioner in accordance with Chapter 823.

(g) If the merger or consolidation does not take effect within the period finally determined and extended by the commissioner, the purchasing corporation must sell or otherwise dispose of the purchased shares that exceed the investment limitations imposed under Subchapter D, Chapter 425, [Article 3.39] within six months of the final effective date.

SECTION 2E.015. Section 828.051, Insurance Code, is amended to correct cross-references to read as follows:

Sec. 828.051. EXCEPTION TO LIMITATION ON PURCHASING SHARES OF OTHER COMPANY. Subchapters C and D, Chapter 425, [Articles 3.33 and 3.39] do not apply to a purchase or contract described by Section 828.001 if all requirements of this subchapter are met.

SECTION 2E.016. Section 828.054, Insurance Code, is amended to correct cross-references to read as follows:

Sec. 828.054. APPROVAL REQUIRED. A purchase, offer to purchase, tender offer, request to purchase, or invitation to purchase shares in excess of the limits imposed under Subchapter C or D, Chapter 425, [Article 3.33 or 3.39] may not be made until it is filed with and approved by the commissioner in accordance with Chapter 823.

SECTION 2E.017. Section 828.056(b), Insurance Code, is amended to correct cross-references to read as follows:

(b) If the reinsurance agreement does not take effect within the period finally determined and extended by the commissioner, the purchasing company shall sell or otherwise dispose of the purchased shares that exceed the investment limitations imposed under Subchapter C or D, Chapter 425, [Article 3.33 or 3.39] within six months of the final effective date.

SECTION 2E.018. Section 841.002, Insurance Code, is amended to correct cross-references to read as follows:

Sec. 841.002. APPLICABILITY OF CHAPTER AND OTHER LAW. Except as otherwise expressly provided by this code, each insurance company incorporated or engaging in business in this state as a life insurance company, an accident insurance company, a life and accident insurance company, a health and accident insurance company, or a life, health, and accident insurance company is subject to:

(1) this chapter;

(2) Chapter 3;

(3) Chapters 425 and 492; [and]

(4) [(3)] Title 7;

(5) Sections 1202.051, 1204.151, 1204.153, and 1204.154;

(6) Subchapter A, Chapter 1202, Subchapters A and F, Chapter 1204, Subchapter A, Chapter 1273, Subchapters A, B, and D, Chapter 1355, and Subchapter A, Chapter 1366;

(7) Subchapter A, Chapter 1507;

(8) Chapters 1203, 1210, 1251-1254, 1301, 1351, 1354, 1359, 1364, 1368, 1505, 1506, 1651, 1652, and 1701; and

(9) Chapter 177, Local Government Code.

SECTION 2E.019. Section 841.054(c), Insurance Code, is amended to correct a cross-reference to read as follows:

(c) At the time of incorporation, the required capital and surplus shall consist only of:

(1) United States currency;

(2) bonds of the United States, this state, or a county or municipality of this state; or

(3) government insured mortgage loans that are authorized by this chapter or Chapter 425 [3], with not more than 50 percent of the required capital invested in first mortgage real property loans.

SECTION 2E.020. Section 841.058(a), Insurance Code, is amended to correct a cross-reference to read as follows:

(a) To obtain a charter for a domestic insurance company, the incorporators must pay to the department the charter fee in an amount determined under Chapter 202 [Article 4.07] and file with the department:

(1) an application for charter on the form and containing the information prescribed by the commissioner;

(2) the company's articles of incorporation; and

(3) an affidavit made by two or more of the incorporators that states that:

(A) the minimum capital and surplus requirements of Section 841.054 are satisfied;

(B) the capital and surplus are the bona fide property of the company; and

(C) the information in the articles of incorporation is true and correct.

SECTION 2E.021. Section 841.061(c), Insurance Code, is amended to correct a cross-reference to read as follows:

(c) If the commissioner does not reject the application under Subsection (b), the commissioner shall approve the application. On approval of an application, the department shall record the information required by Section 841.058 in records maintained for that purpose. On receipt of a fee in the amount determined under Chapter 202 [Article 4.07], the commissioner shall provide to the incorporators a certified copy of the application, articles of incorporation, and submitted affidavit.

SECTION 2E.022. Section 841.207, Insurance Code, is amended to correct a cross-reference to read as follows:

Sec. 841.207. ACTIONS OF COMMISSIONER WHEN CAPITAL AND SURPLUS REQUIREMENTS NOT SATISFIED. If an insurance company does not comply with the capital and surplus requirements of this chapter, the commissioner may order the insurance company to cease writing new business and may:

(1) place the insurance company under state supervision or conservatorship;

(2) declare the insurance company to be in a hazardous condition as provided by Subchapter A, Chapter 404 [Article 1.32];

(3) declare the insurance company to be impaired as provided by Section 841.206; or

(4) apply to the insurance company any other applicable sanction provided by this code.

SECTION 2E.023. Section 841.255(a), Insurance Code, is amended to correct a cross-reference to read as follows:

(a) Not later than March 1 of each year, a domestic insurance company shall:

(1) prepare a statement showing the condition of the company on December 31 of the preceding year; and

(2) deliver the statement to the department accompanied by a filing fee in the amount determined under Chapter 202 [Article 4.07].

SECTION 2E.024. Section 841.257, Insurance Code, is amended to correct cross-references to read as follows:

Sec. 841.257. KINDS OF BUSINESS LIMITED. An insurance company authorized to engage in the business of insurance under this chapter or in accordance with Section 982.051 may not accept a risk or write an insurance policy in this state or any other state or country other than:

(1) a life, accident, or health insurance policy;

(2) reinsurance under Sections 492.051(b) and (c) or Chapter 493 [Article 5.75-1] by a life insurance company authorized to engage in the business of insurance in this state; or

(3) reinsurance under Chapter 494 [Article 5.75-3] by a domestic insurance company.

SECTION 2E.025. Section 842.201(c), Insurance Code, is amended to correct a cross-reference to read as follows:

(c) The department shall charge a fee in an amount determined under Chapter 202 [Article 4.07] for filing the statement.

SECTION 2E.026. Section 842.209, Insurance Code, is amended to correct cross-references to read as follows:

Sec. 842.209. EXAMINATIONS. The following laws [Articles 1.15 and 1.16] apply to a group hospital service corporation:

(1) Subchapter A, Chapter 86; and

(2) Sections 401.051, 401.052, 401.054-401.062, 401.151, 401.152, 401.155, and 401.156.

SECTION 2E.027. Section 842.210, Insurance Code, is amended to correct cross-references to read as follows:

Sec. 842.210. LIQUIDATION, REHABILITATION, OR CONSERVATION OF GROUP HOSPITAL SERVICE CORPORATION. The dissolution, liquidation, rehabilitation, or conservation of a group hospital service corporation is subject to Chapters 441 and 443 [Articles 21.28 and 21.28-A].

SECTION 2E.028. Section 842.253, Insurance Code, is amended to correct a cross-reference to read as follows:

Sec. 842.253. POLICY, CERTIFICATE, AND APPLICATION FORMS. A policy, certificate, or application form used by a group hospital service corporation is subject to Chapter 1701 [Article 3.42].

SECTION 2E.029. Sections 843.002(20), (28), and (30), Insurance Code, are amended to correct cross-references to read as follows:

(20) "Net worth" means the amount by which total liabilities, excluding liability for subordinated debt issued in compliance with Chapter 427 [Article 1.39], is exceeded by total admitted assets.

(28) "Uncovered expenses" means the estimated amount of administrative expenses and the estimated cost of health care services that are not guaranteed, insured, or assumed by a person other than the health maintenance organization. The term does not include the cost of health care services if the physician or provider agrees in writing that an enrollee is not liable, assessable, or in any way subject to making payment for the services except as described in the evidence of coverage issued to the enrollee under Chapter 1271 [Article 20A.09]. The term includes any amount due on loans in the next calendar year unless the amount is specifically subordinated to uncovered medical and health care expenses or the amount is guaranteed by a sponsoring organization.

(30) "Delegated entity" means an entity, other than a health maintenance organization authorized to engage in business under this chapter, that by itself, or through subcontracts with one or more entities, undertakes to arrange for or provide medical care or health care to an enrollee in exchange for a predetermined payment on a prospective basis and that accepts responsibility for performing on behalf of the health maintenance organization a function regulated by this chapter, Section 1367.053, Subchapter A, Chapter 1452, Subchapter B, Chapter 1507, Chapter 222, 251, or 258, as applicable to a health maintenance organization, or Chapter 1271 or 1272 [or Chapter 20A]. The term does not include:

(A) an individual physician; or

(B) a group of employed physicians, practicing medicine under one federal tax identification number, whose total claims paid to providers not employed by the group constitute less than 20 percent of the group's total collected revenue computed on a calendar year basis.

SECTION 2E.030. Section 843.006(a), Insurance Code, is amended to correct a cross-reference to read as follows:

(a) Except as provided by Subsection (b), each application, filing, and report required under this chapter, Section 1367.053, Subchapter A, Chapter 1452, Subchapter B, Chapter 1507, Chapter 222, 251, or 258, as applicable to a health maintenance organization, or Chapter 1271 or 1272 [or Chapter 20A] is a public document.

SECTION 2E.031. Section 843.007(a), Insurance Code, is amended to correct a cross-reference to read as follows:

(a) Any information relating to the diagnosis, treatment, or health of an enrollee or applicant obtained by a health maintenance organization from the enrollee or applicant or from a physician or provider shall be held in confidence and may not be disclosed to any person except:

(1) to the extent necessary to accomplish the purposes of this chapter or:

(A) Section 1367.053;

(B) Subchapter A, Chapter 1452;

(C) Subchapter B, Chapter 1507;

(D) Chapter 222, 251, or 258, as applicable to a health maintenance organization; or

(E) Chapter 1271 or 1272 [Chapter 20A];

(2) with the express consent of the enrollee or applicant;

(3) in compliance with a statute or court order for the production or discovery of evidence; or

(4) in the event of a claim or litigation between the enrollee or applicant and the health maintenance organization in which the information is pertinent.

SECTION 2E.032. Section 843.008, Insurance Code, is amended to correct cross-references to read as follows:

Sec. 843.008. COSTS OF ADMINISTERING HEALTH MAINTENANCE ORGANIZATION LAWS. Money collected under this chapter and Chapters 222, 251, and 258, as applicable to a health maintenance organization, [Article 20A.33] must be sufficient to administer this chapter and:

(1) Section 1367.053;

(2) Subchapter A, Chapter 1452;

(3) Subchapter B, Chapter 1507;

(4) Chapters 222, 251, and 258, as applicable to a health maintenance organization; and

(5) Chapters 1271 and 1272 [Chapter 20A].

SECTION 2E.033. Sections 843.051(a), (b), and (e), Insurance Code, are amended to correct cross-references to read as follows:

(a) Except to the extent that the commissioner determines that the nature of health maintenance organizations, health care plans, or evidences of coverage renders a provision of the following laws clearly inappropriate, Subchapter A, Chapter 542, Subchapters D and E, Chapter 544, and Chapters 541, 543, and 547 [Articles 21.21, 21.21A, 21.21-2, 21.21-5, and 21.21-6, as added by Chapter 522, Acts of the 74th Legislature, Regular Session, 1995, and the Unauthorized Insurers False Advertising Process Act (Article 21.21-1, Vernon's Texas Insurance Code)] apply to:

(1) health maintenance organizations that offer basic, limited, and single health care coverages;

(2) basic, limited, and single health care plans; and

(3) evidences of coverage under basic, limited, and single health care plans.

(b) A health maintenance organization is subject to:

(1) Chapter 402 [Section 3B, Article 3.51-6];

(2) Chapter 827 and is an authorized insurer for purposes of that chapter; and

(3) Subchapter G, Chapter 1251, and Section 1551.064 [Article 21.49-8].

(e) Except for Chapter 251, as applicable to a third-party administrator, and Chapters 259, 4151, and 4201 [Articles 21.07-6 and 21.58A], insurance laws and group hospital service corporation laws do not apply to a physician or provider. Notwithstanding this subsection, a physician or provider who conducts a utilization review during the ordinary course of treatment of patients under a joint or delegated review agreement with a health maintenance organization on services provided by the physician or provider is not required to obtain certification under Subchapter C, Chapter 4201 [Section 3, Article 21.58A].

SECTION 2E.034. Section 843.071(b), Insurance Code, is amended to correct a cross-reference to read as follows:

(b) A person may not use "health maintenance organization" or "HMO" in the course of operation unless the person:

(1) complies with this chapter and:

(A) Section 1367.053;

(B) Subchapter A, Chapter 1452;

(C) Subchapter B, Chapter 1507;

(D) Chapters 222, 251, and 258, as applicable to a health maintenance organization; and

(E) Chapters 1271 and 1272 [Chapter 20A]; and

(2) holds a certificate of authority under this chapter.

SECTION 2E.035. Section 843.073(b), Insurance Code, is amended to correct a cross-reference to read as follows:

(b) Except as provided by Section 843.101 or 843.318(a), a physician or provider that employs or enters into a contractual arrangement with a provider or group of providers to provide basic or limited health care services or a single health care service is subject to this chapter and the following provisions [Chapter 20A] and is required to obtain a certificate of authority under this chapter:

(1) Section 1367.053;

(2) Subchapter A, Chapter 1452;

(3) Subchapter B, Chapter 1507;

(4) Chapters 222, 251, and 258, as applicable to a health maintenance organization; and

(5) Chapters 1271 and 1272.

SECTION 2E.036. Sections 843.078(j), (m), and (n), Insurance Code, are amended to correct cross-references to read as follows:

(j) An application for a certificate of authority must include a description of the procedures and programs to be implemented by the applicant to meet the quality of health care requirements of this chapter and:

(1) Section 1367.053;

(2) Subchapter A, Chapter 1452;

(3) Subchapter B, Chapter 1507; and

(4) Chapters 1271 and 1272 [Chapter 20A].

(m) An application for a certificate of authority must include documentation demonstrating that the applicant will comply with Section 1271.005(c) [Article 20A.09Z].

(n) An application for a certificate of authority must include any other information that the commissioner requires to make the determinations required by this chapter and:

(1) Section 1367.053;

(2) Subchapter A, Chapter 1452;

(3) Subchapter B, Chapter 1507;

(4) Chapters 222, 251, and 258, as applicable to a health maintenance organization; and

(5) Chapters 1271 and 1272 [Chapter 20A].

SECTION 2E.037. Section 843.084, Insurance Code, is amended to correct a cross-reference to read as follows:

Sec. 843.084. DURATION OF CERTIFICATE OF AUTHORITY. A certificate of authority continues in effect:

(1) while the certificate holder meets the requirements of this chapter and:

(A) Section 1367.053;

(B) Subchapter A, Chapter 1452;

(C) Subchapter B, Chapter 1507;

(D) Chapters 222, 251, and 258, as applicable to a health maintenance organization; and

(E) Chapters 1271 and 1272 [Chapter 20A]; or

(2) until the commissioner suspends or revokes the certificate or the commissioner terminates the certificate at the request of the certificate holder.

SECTION 2E.038. Section 843.107, Insurance Code, is amended to correct a cross-reference to read as follows:

Sec. 843.107. INDEMNITY BENEFITS; POINT-OF-SERVICE PROVISIONS. A health maintenance organization may offer:

(1) indemnity benefits covering out-of-area emergency care;

(2) indemnity benefits, in addition to those relating to out-of-area and emergency care, provided through an insurer or group hospital service corporation;

(3) a point-of-service plan under Subchapter A, Chapter 1273 [Article 3.64]; or

(4) a point-of-service rider under Section 843.108.

SECTION 2E.039. Section 843.151, Insurance Code, is amended to correct a cross-reference to read as follows:

Sec. 843.151. RULES. The commissioner may adopt reasonable rules as necessary and proper to:

(1) implement this chapter and Section 1367.053, Subchapter A, Chapter 1452, Subchapter B, Chapter 1507, Chapters 222, 251, and 258, as applicable to a health maintenance organization, and Chapters 1271 and 1272 [Chapter 20A], including rules to:

(A) prescribe authorized investments for a health maintenance organization for all investments not otherwise addressed in this chapter;

(B) ensure that enrollees have adequate access to health care services; and

(C) establish minimum physician-to-patient ratios, mileage requirements for primary and specialty care, maximum travel time, and maximum waiting time for obtaining an appointment; and

(2) meet the requirements of federal law and regulations.

SECTION 2E.040. Section 843.152, Insurance Code, is amended to correct a cross-reference to read as follows:

Sec. 843.152. SUBPOENA AUTHORITY. In implementing this chapter and the following provisions [Chapter 20A], the commissioner may exercise subpoena authority in accordance with Subchapter C, Chapter 36:

(1) Section 1367.053;

(2) Subchapter A, Chapter 1452;

(3) Subchapter B, Chapter 1507;

(4) Chapters 222, 251, and 258, as applicable to a health maintenance organization; and

(5) Chapters 1271 and 1272.

SECTION 2E.041. Section 843.153, Insurance Code, is amended to correct a cross-reference to read as follows:

Sec. 843.153. AUTHORITY TO CONTRACT. In performing duties under this chapter and the following provisions [Chapter 20A], the commissioner may contract with a state agency or, after notice and opportunity for hearing, with a qualified person to make recommendations concerning determinations to be made by the commissioner:

(1) Section 1367.053;

(2) Subchapter A, Chapter 1452;

(3) Subchapter B, Chapter 1507;

(4) Chapters 222, 251, and 258, as applicable to a health maintenance organization; and

(5) Chapters 1271 and 1272.

SECTION 2E.042. Sections 843.155(b) and (c), Insurance Code, are amended to correct cross-references to read as follows:

(b) The report shall:

(1) be verified by at least two principal officers;

(2) be in a form prescribed by the commissioner; and

(3) include:

(A) a financial statement of the health maintenance organization, including its balance sheet and receipts and disbursements for the preceding calendar year, certified by an independent public accountant;

(B) the number of individuals enrolled during the preceding calendar year, the number of enrollees as of the end of that year, and the number of enrollments terminated during that year;

(C) updated financial projections for the next calendar year of the type described in Section 843.078(e), until the health maintenance organization has had a net income for 12 consecutive months; and

(D) other information relating to the performance of the health maintenance organization as necessary to enable the commissioner to perform the commissioner's duties under:

(i) this chapter;

(ii) Section 1367.053;

(iii) Subchapter A, Chapter 1452;

(iv) Subchapter B, Chapter 1507;

(v) Chapters 222, 251, and 258, as applicable to a health maintenance organization; and

(vi) Chapters 1271 and 1272 [and Chapter 20A].

(c) Sections 36.108 and 201.055 and Chapter 802 [and Article 1.11] apply to the annual report of a health maintenance organization.

SECTION 2E.043. Sections 843.156(f), (h), and (i), Insurance Code, are amended to correct cross-references to read as follows:

(f) The commissioner may examine and use the records of a health maintenance organization, including records of a quality of care assurance program and records of a medical peer review committee, as necessary to implement the purposes of this chapter, Section 1367.053, Subchapter A, Chapter 1452, Subchapter B, Chapter 1507, Chapters 222, 251, and 258, as applicable to a health maintenance organization, and Chapters 1271 and 1272 [and Chapter 20A], including commencement of an enforcement action under Section 843.461 or 843.462. Information obtained under this subsection is confidential and privileged and is not subject to the public information law, Chapter 552, Government Code, or to subpoena except as necessary for the commissioner to enforce this chapter, Section 1367.053, Subchapter A, Chapter 1452, Subchapter B, Chapter 1507, Chapter 222, 251, or 258, as applicable to a health maintenance organization, or Chapter 1271 or 1272 [or Chapter 20A]. In this subsection, "medical peer review committee" has the meaning assigned by Section 151.002, Occupations Code.

(h) Chapter 86, Section 401.101, and Subchapters B and D, Chapter 401, [Articles 1.04A, 1.15, 1.16, and 1.19] apply to a health maintenance organization, except to the extent that the commissioner determines that the nature of the examination of a health maintenance organization renders the applicability of those provisions clearly inappropriate.

(i) Section 38.001, Section 81.003, and Chapter 82[, and Article 1.12] apply to a health maintenance organization.

SECTION 2E.044. Section 843.157(a), Insurance Code, is amended to correct cross-references to read as follows:

(a) The rehabilitation, liquidation, supervision, or conservation of a health maintenance organization shall be treated as the rehabilitation, liquidation, supervision, or conservation of an insurer and be conducted under the supervision of the commissioner under Chapter 441 or 443 [Article 21.28 or 21.28-A], as appropriate.

SECTION 2E.045. Sections 843.204(b) and (c), Insurance Code, are amended to correct cross-references to read as follows:

(b) In this chapter, Section 1367.053, Subchapter A, Chapter 1452, Subchapter B, Chapter 1507, Chapters 222, 251, and 258, as applicable to a health maintenance organization, and Chapters 1271 and 1272 [and Chapter 20A], a statement or item of information is:

(1) considered to be untrue if the statement or item does not conform to fact in any respect that is or may be significant to an enrollee of, or person considering enrollment in, a health care plan; and

(2) considered to be misleading, whether or not the statement or item is literally untrue, if, in the total context in which the statement is made or the item is communicated, the statement or item may be reasonably understood by a reasonable person who does not possess special knowledge regarding health care coverage as indicating:

(A) the inclusion of a benefit or advantage that does not exist and that is of possible significance to an enrollee of, or person considering enrollment in, a health care plan; or

(B) the absence of an exclusion, limitation, or disadvantage that does exist and that is of possible significance to an enrollee of, or person considering enrollment in, a health care plan.

(c) In this chapter, Section 1367.053, Subchapter A, Chapter 1452, Subchapter B, Chapter 1507, Chapters 222, 251, and 258, as applicable to a health maintenance organization, and Chapters 1271 and 1272 [and Chapter 20A], an evidence of coverage is considered to be deceptive if the evidence of coverage, taken as a whole and with consideration given to typography and format as well as language, would cause a reasonable person who does not possess special knowledge regarding health care plans and evidences of coverage for health care plans to expect charges or benefits, services, or other advantages that the evidence of coverage does not provide or that the health care plan issuing the evidence of coverage does not regularly make available for enrollees covered under the evidence of coverage.

SECTION 2E.046. Sections 843.261(a), (c), and (d), Insurance Code, are amended to correct cross-references to read as follows:

(a) A health maintenance organization shall implement and maintain an internal appeal system that:

(1) provides reasonable procedures for the resolution of an oral or written appeal concerning dissatisfaction or disagreement with an adverse determination; and

(2) includes procedures for notification, review, and appeal of an adverse determination in accordance with Chapter 4201 [Article 21.58A].

(c) When an enrollee, a person acting on behalf of an enrollee, or an enrollee's provider of record expresses orally or in writing any dissatisfaction or disagreement with an adverse determination, the health maintenance organization or utilization review agent shall:

(1) consider the expression of dissatisfaction or disagreement as an appeal of the adverse determination; and

(2) review and resolve the appeal in accordance with Chapter 4201 [Article 21.58A].

(d) A health maintenance organization may integrate its appeal procedures related to adverse determinations with the complaint and appeal procedures established by the health maintenance organization under Section 843.251 and otherwise governed by this subchapter only if the procedures related to adverse determinations comply with this section and Chapter 4201 [Article 21.58A].

SECTION 2E.047. Section 843.282(a), Insurance Code, is amended to correct a cross-reference to read as follows:

(a) Any person, including a person who has attempted to resolve a complaint through a health maintenance organization's complaint system process and is dissatisfied with the resolution, may submit a complaint to the department alleging a violation of:

(1) this chapter;

(2) Section 1367.053;

(3) Subchapter A, Chapter 1452;

(4) Subchapter B, Chapter 1507;

(5) Chapters 222, 251, and 258, as applicable to a health maintenance organization; or

(6) Chapter 1271 or 1272 [or Chapter 20A].

SECTION 2E.048. Section 843.301, Insurance Code, is amended to correct a cross-reference to read as follows:

Sec. 843.301. PRACTICE OF MEDICINE NOT AFFECTED. This chapter, Section 1367.053, Subchapter A, Chapter 1452, Subchapter B, Chapter 1507, Chapters 222, 251, and 258, as applicable to a health maintenance organization, and Chapters 1271 and 1272 [and Chapter 20A] do not:

(1) authorize any person, other than a licensed physician or practitioner of the healing arts, acting within the scope of the person's license, to engage directly or indirectly in the practice of medicine or a healing art; or

(2) authorize any person to regulate, interfere with, or intervene in any manner in the practice of medicine or a healing art.

SECTION 2E.049. Section 843.337(e), Insurance Code, is amended to correct a cross-reference to read as follows:

(e) Except as provided by Chapter 1213 [Article 21.52Z], a physician or provider may, as appropriate:

(1) mail a claim by United States mail, first class, or by overnight delivery service;

(2) submit the claim electronically;

(3) fax the claim; or

(4) hand deliver the claim.

SECTION 2E.050. Section 843.352, Insurance Code, is amended to correct a cross-reference to read as follows:

Sec. 843.352. CONFLICT WITH OTHER LAW. To the extent of any conflict between this subchapter and Subchapter C, Chapter 1204 [Article 21.52C], this subchapter controls.

SECTION 2E.051. Sections 843.407(a), (b), and (c), Insurance Code, are amended to correct cross-references to read as follows:

(a) In addition to all other remedies available by law, if the commissioner believes that a health maintenance organization or another person is insolvent or does not maintain the net worth required under Sections 843.403, 843.4031, and 843.404, the commissioner may bring an action in a Travis County district court to be named receiver in accordance with Section 843.157 and Chapter 443 [Article 21.28].

(b) The court may:

(1) find that a receiver should take charge of the assets of the health maintenance organization; and

(2) name the commissioner as the receiver of the health maintenance organization in accordance with Section 843.157 and Chapter 443 [Article 21.28].

(c) The operations and business of a health maintenance organization represent the business of insurance for purposes of Section 843.157 and Chapters 441 and 443 [Articles 21.28 and 21.28-A].

SECTION 2E.052. Section 843.461(b), Insurance Code, is amended to correct cross-references to read as follows:

(b) The commissioner may take an enforcement action listed in Subsection (a) against a health maintenance organization if the commissioner finds that the health maintenance organization:

(1) is operating in a manner that is:

(A) significantly contrary to its basic organizational documents or health care plan; or

(B) contrary to the manner described in and reasonably inferred from other information submitted under Section 843.078, 843.079, or 843.080;

(2) issues an evidence of coverage or uses a schedule of charges for health care services that does not comply with the requirements of Sections 843.346, 1271.001-1271.005, 1271.007, 1271.151, 1271.152, and 1271.156, and Subchapters B, C, E, F, and G, Chapter 1271 [Article 20A.09];

(3) does not meet the requirements of Section 843.082(1);

(4) provides a health care plan that does not provide or arrange for basic health care services, provides a limited health care service plan that does not provide or arrange for the plan's limited health care services, or provides a single health care service plan that does not provide or arrange for a single health care service;

(5) cannot fulfill its obligation to provide:

(A) health care services as required under its health care plan;

(B) limited health care services as required under its limited health care service plan; or

(C) a single health care service as required under its single health care service plan;

(6) is no longer financially responsible and may reasonably be expected to be unable to meet its obligations to enrollees or prospective enrollees;

(7) has not implemented the complaint system required by Section 843.251 in a manner to resolve reasonably valid complaints;

(8) has advertised or merchandised its services in an untrue, misrepresentative, misleading, deceptive, or unfair manner or a person on behalf of the health maintenance organization has advertised or merchandised the health maintenance organization's services in an untrue, misrepresentative, misleading, deceptive, or untrue manner;

(9) would be hazardous to its enrollees if it continued in operation;

(10) has not complied substantially with:

(A) this chapter [or Chapter 20A] or a rule adopted under this chapter; or

(B) Section 1367.053, Subchapter A, Chapter 1452, Subchapter B, Chapter 1507, Chapter 222, 251, or 258, as applicable to a health maintenance organization, or Chapter 1271 or 1272 or a rule adopted under one of those provisions [Chapter 20A]; or

(11) has not taken corrective action the commissioner considers necessary to correct a failure to comply with this chapter, any applicable provision of this code, or any applicable rule or order of the commissioner not later than the 30th day after the date of notice of the failure or within any longer period specified in the notice and determined by the commissioner to be reasonable.

SECTION 2E.053. Section 843.463, Insurance Code, is amended to correct a cross-reference to read as follows:

Sec. 843.463. INJUNCTIONS. If the commissioner believes that a health maintenance organization or another person is violating or has violated this chapter [or Chapter 20A] or a rule adopted under this chapter or Section 1367.053, Subchapter A, Chapter 1452, Subchapter B, Chapter 1507, Chapter 222, 251, or 258, as applicable to a health maintenance organization, or Chapter 1271 or 1272 or a rule adopted under one of those provisions [Chapter 20A], the commissioner may bring an action in a Travis County district court to enjoin the violation and obtain other relief the court considers appropriate.

SECTION 2E.054. Section 843.464(a), Insurance Code, is amended to correct a cross-reference to read as follows:

(a) A person, including an agent or officer of a health maintenance organization, commits an offense if the person:

(1) wilfully violates this chapter or [Chapter 20A or] a rule adopted under this chapter or Section 1367.053, Subchapter A, Chapter 1452, Subchapter B, Chapter 1507, Chapter 222, 251, or 258, as applicable to a health maintenance organization, or Chapter 1271 or 1272 or a rule adopted under one of those provisions [Chapter 20A]; or

(2) knowingly makes a false statement with respect to a report or statement required under this chapter or Section 1367.053, Subchapter A, Chapter 1452, Subchapter B, Chapter 1507, Chapter 222, 251, or 258, as applicable to a health maintenance organization, or Chapter 1271 or 1272 [Chapter 20A].

SECTION 2E.055. Section 845.051, Insurance Code, is amended to correct a cross-reference to read as follows:

Sec. 845.051. STATEWIDE RURAL HEALTH CARE SYSTEM. The commissioner shall designate a single organization as the statewide rural health care system. The system is authorized to sponsor, arrange for the provision of, or provide health care services to enrollees in programs in rural areas. The programs are not subject to:

(1) a law requiring the coverage or the offer of coverage for services by a particular health care provider under:

(A) Chapter 62, Health and Safety Code;

(B) Chapter 32, Human Resources Code;

(C) a state-, county-, or local government-sponsored indigent care initiative; or

(D) a federal Medicare Plus Choice program; or

(2) Subchapters A-I, Chapter 1251, Subchapter A, Chapter 1364, Subchapter A, Chapter 1366, or Section 1551.064 [Article 3.51-6] under a state-, county-, or local government-sponsored uninsured or indigent care initiative.

SECTION 2E.056. Section 846.003(b), Insurance Code, is amended to correct cross-references to read as follows:

(b) A multiple employer welfare arrangement is subject to the following laws:

(1) Subchapters C and D, Chapter 36;

(2) Section 38.001;

(3) Section 81.002;

(4) Chapter 82;

(5) Chapter 83;

(6) Chapter 86;

(7) Section 201.003;

(8) Sections 401.051, 401.052, 401.054-401.062, 401.151, 401.152, 401.155, and 401.156;

(9) Chapter 441;

(10) Chapter 443;

(11) Chapter 461;

(12) Section 521.005;

(13) Chapter 541;

(14) Chapter 701;

(15) Chapter 801;

(16) [(7)] Chapter 803;

(17) [(8)] Chapter 804;

(18) [(9)] Subchapter A, Chapter 805; and

(19) [(10)] Sections 841.259, 841.701-841.702, and 841.704-841.705[;

[(11)Section 841.704;

[(12)Section 841.259;

[(13)Article 1.10D;

[(14)Article 1.12;

[(15)Article 1.13;

[(16)Article 1.15;

[(17)Article 1.16;

[(18)Article 1.19;

[(19)Article 1.35;

[(20)Article 1.31;

[(21)Article 3.56;

[(22)Article 21.21;

[(23)Article 21.28;

[(24)Article 21.28A; and

[(25)Article 21.28E].

SECTION 2E.057. Section 846.007(d), Insurance Code, is amended to correct a cross-reference to read as follows:

(d) A multiple employer welfare arrangement may establish premium discounts, rebates, or a reduction in otherwise applicable copayments or deductibles in return for adherence to programs of health promotion and disease prevention. A discount, rebate, or reduction established under this subsection does not violate Section 541.056(a) [4(8), Article 21.21].

SECTION 2E.058. Section 846.158(c), Insurance Code, is amended to correct a cross-reference to read as follows:

(c) Each multiple employer welfare arrangement shall pay the expenses of the examination as provided by Sections 401.151, 401.152, 401.155, and 401.156 [Article 1.16].

SECTION 2E.059. Section 846.202(a), Insurance Code, is amended to correct a cross-reference to read as follows:

(a) In this section, "creditable coverage" has the meaning assigned by Section 1205.004 [Section 3, Article 21.52G, as added by Chapter 955, Acts of the 75th Legislature, Regular Session, 1997].

SECTION 2E.060. Sections 861.052(b) and (d), Insurance Code, are amended to correct a cross-reference to read as follows:

(b) The incorporators shall file with the department:

(1) articles of incorporation for the general casualty company;

(2) a charter fee in the amount determined under Chapter 202 [Article 4.07]; and

(3) an affidavit, made by two or more of the incorporators, that all of the general casualty company's stock is subscribed in good faith and fully paid for.

(d) On receipt of a fee in the amount determined under Chapter 202 [Article 4.07], the department shall provide the incorporators with a certified copy of the articles of incorporation.

SECTION 2E.061. Section 861.154, Insurance Code, is amended to correct a cross-reference to read as follows:

Sec. 861.154. DIVIDENDS. Except as authorized by Sections 403.001 and 403.051 [Article 21.31], the directors of a general casualty company may not issue dividends.

SECTION 2E.062. Section 861.251(b), Insurance Code, is amended to correct a cross-reference to read as follows:

(b) After incorporation and issuance of a certificate of authority, a general casualty company shall invest the minimum capital and surplus as provided by Section 822.204. The company shall invest all other funds of the company in excess of the minimum capital and surplus as provided by:

(1) a provision of Subchapter B, Chapter 424, other than Section 424.052, 424.072, or 424.073; [Article 2.10] and

(2) Section 862.002.

SECTION 2E.063. Section 861.252(a), Insurance Code, is amended to correct a cross-reference to read as follows:

(a) On granting of the charter to a general casualty company, the company shall deposit with the comptroller $50,000 in:

(1) cash; or

(2) securities of the kind described by a provision of Subchapter B, Chapter 424, other than Section 424.052, 424.072, or 424.073 [Article 2.10].

SECTION 2E.064. Section 861.254(h), Insurance Code, is amended to correct a cross-reference to read as follows:

(h) Except as provided by Chapter 202 [Article 4.07], the department shall charge a fee of $20 for filing the annual statement required by this section. The comptroller shall collect the fee.

SECTION 2E.065. Section 861.257, Insurance Code, is amended to correct cross-references to read as follows:

Sec. 861.257. EXAMINATION OF COMPANY. A general casualty company is subject to:

(1) Subchapter A, Chapter 86; and

(2) Sections 401.051, 401.052, 401.054-401.062, 401.151, 401.152, 401.155, and 401.156 [Articles 1.15 and 1.16].

SECTION 2E.066. Section 861.258(d), Insurance Code, is amended to correct a cross-reference to read as follows:

(d) Subsection (b) does not apply to:

(1) real property occupied by buildings used in whole or in part by a general casualty company in the transaction of business;

(2) an interest in minerals or royalty reserved on the sale of real property acquired under Sections 862.002(c)(1)-(3); and

(3) investment real property acquired under Section 424.064 [Article 2.10(e)(11)].

SECTION 2E.067. Section 862.101(f), Insurance Code, is amended to correct cross-references to read as follows:

(f) Reinsurance that is required or permitted by this section must comply with:

(1) Subchapter A, Chapter 491;

(2) Sections 492.051(b) and (c); and

(3) Chapter 493 [Articles 5.75-1 and 21.72].

SECTION 2E.068. Section 862.151, Insurance Code, is amended to correct a cross-reference to read as follows:

Sec. 862.151. REDUCTION OF CAPITAL STOCK AND PAR VALUE OF SHARES. (a) If the minimum surplus of a fire, marine, or inland marine insurance company is impaired in excess of the amount permitted under Subchapter B, Chapter 404 [Section 5, Article 1.10], the commissioner may allow the company to amend its charter as provided by Sections 822.157 and 822.158 to reduce the amount of the company's capital stock and the par value of its shares in proportion to the extent of the permitted amount of impairment.

(b) A company acting under Subsection (a):

(1) may not reduce the par value of its shares below the sum computed under Section 822.055;

(2) may not deduct from the assets and property on hand more than $125,000;

(3) shall retain the remainder of the assets and property on hand as surplus assets;

(4) may not distribute any of the assets or property to the shareholders; and

(5) may not reduce the capital stock or surplus of the company to an amount less than the minimum capital and the minimum surplus required by Sections 822.202, 822.210, and 822.211, subject to Subchapter B, Chapter 404 [Section 5, Article 1.10].

SECTION 2E.069. Sections 862.152(a) and (b), Insurance Code, are amended to correct a cross-reference to read as follows:

(a) This section applies to a fire, marine, or inland marine insurance company that receives notice from the commissioner under Subchapter B, Chapter 404 [Section 5, Article 1.10], to make good within 60 days:

(1) any impairment of the company's required capital; or

(2) the company's surplus.

(b) The company shall promptly call on its shareholders for an amount necessary to make the company's capital and surplus equal to the amount required by Sections 822.054 and 822.210, subject to Subchapter B, Chapter 404 [Section 5, Article 1.10].

SECTION 2E.070. Section 862.153(a), Insurance Code, is amended to correct a cross-reference to read as follows:

(a) If a shareholder of the insurance company who is given notice under Section 862.152 does not pay the amount called for by the company under that section, the company may:

(1) require the return of the original certificate of stock held by the shareholder; and

(2) issue a new certificate for a number of shares that the shareholder may be entitled to in the proportion that the value of the funds of the company, computed without inclusion of any money or other property paid by shareholders in response to the notice under Section 862.152, bears to the total amount of the original capital and the minimum surplus of the company required by Section 822.054 or 822.210, subject to Subchapter B, Chapter 404 [Section 5, Article 1.10].

SECTION 2E.071. Section 862.154(b), Insurance Code, is amended to correct a cross-reference to read as follows:

(b) The insurance company shall sell any new stock created under Subsection (a) for an amount sufficient to make up any impairment of the company's required minimum capital and to make up the surplus of the company as required by Section 822.054 or 822.210, subject to Subchapter B, Chapter 404 [Section 5, Article 1.10], but may not impair the capital of the company.

SECTION 2E.072. Section 881.006(b), Insurance Code, is amended to correct a cross-reference to read as follows:

(b) Sections 201.001 and 201.002 apply [Article 1.31A applies] to the fee.

SECTION 2E.073. Section 882.002, Insurance Code, is amended to correct cross-references to read as follows:

Sec. 882.002. EXAMINATION OF COMPANY. The following provisions [Articles 1.15 and 1.16] apply to a mutual life insurance company organized under this chapter:

(1) Subchapter A, Chapter 86; and

(2) Sections 401.051, 401.052, 401.054-401.062, 401.151, 401.152, 401.155, and 401.156.

SECTION 2E.074. Section 882.056(a), Insurance Code, is amended to correct a cross-reference to read as follows:

(a) To obtain a charter for a mutual life insurance company under this chapter, the incorporators must pay the charter fee in the amount determined under Chapter 202 [Article 4.07] and file with the department:

(1) an application for charter on the form and including the information prescribed by the commissioner;

(2) the company's articles of incorporation; and

(3) an affidavit made by two or more of the incorporators that states that:

(A) the unencumbered surplus requirements of Section 882.055 are satisfied;

(B) the unencumbered surplus is the bona fide property of the company; and

(C) the information in the application and articles of incorporation is true and correct.

SECTION 2E.075. Section 883.202(a), Insurance Code, is amended to correct a cross-reference to read as follows:

(a) A domestic mutual insurance company that writes fidelity and surety bond coverage shall maintain on deposit with the comptroller cash or securities of the kind described by a provision of Subchapter B, Chapter 424, other than Section 424.052, 424.072, or 424.073, [Article 2.10] in an amount equal to the amount of cash or securities required of a domestic stock insurance company.

SECTION 2E.076. Section 884.002(c), Insurance Code, is amended to correct cross-references to read as follows:

(c) The following provisions of this code apply to a stipulated premium company:

(1) Article [1.15;

[(2)Article 1.15A;

[(3)Article 1.16;

[(4)Article 1.19;

[(5)Article 1.32;

[(6)Article 3.10;

[(7)Article 3.39;

[(8)Article 3.40;

[(9)Article 21.07-7;

[(10)Article 21.21;

[(11)Article 21.28;

[(12)Article 21.32;

[(13)Article 21.39;

[(14)Article] 21.47;

(2) [(15)] Section 38.001;

(3) Chapter 86;

(4) Subchapter A, Chapter 401;

(5) Sections 401.051, 401.052, 401.054-401.062, 401.151, 401.152, 401.155, and 401.156;

(6) Sections 403.001, 403.052, and 403.102;

(7) Subchapter A, Chapter 404;

(8) Section 421.001;

(9) Subchapter D, Chapter 425;

(10) Chapter 443;

(11) Chapter 492, other than Sections 492.051(b) and (c);

(12) Chapter 541;

(13) [(16)] Sections 801.001-801.002;

(14) [(17)] Sections 801.051-801.055;

(15) [(18)] Section 801.057;

(16) [(19)] Sections 801.101-801.102;

(17) [(20)] Subchapter A, Chapter 821;

(18) [(21)] Chapter 824;

(19) [(22)] Chapter 828;

(20) [(23)] Section 841.251;

(21) [(24)] Section 841.259;

(22) [(25)] Section 841.261; [and]

(23) [(26)] Section 841.703; and

(24) Chapter 4152.

SECTION 2E.077. Section 884.056(a), Insurance Code, is amended to correct a cross-reference to read as follows:

(a) To obtain a charter for a stipulated premium company under this chapter, the incorporators must pay a charter fee in an amount determined under Chapter 202 [Article 4.07] and file with the department:

(1) an application for charter on the form and containing the information prescribed by the department;

(2) the company's articles of incorporation; and

(3) an affidavit made by two or more of the incorporators that states that:

(A) the minimum capital and surplus requirements of Section 884.054 are satisfied;

(B) the capital and surplus is the bona fide property of the company; and

(C) the information in the application and articles of incorporation is true and correct.

SECTION 2E.078. Section 884.059(c), Insurance Code, is amended to correct a cross-reference to read as follows:

(c) If the commissioner does not reject the application under Subsection (b), the commissioner shall approve the application and on receipt of a fee in the amount determined under Chapter 202 [Article 4.07] shall provide to the incorporators a certified copy of the application, articles of incorporation, and submitted affidavit.

SECTION 2E.079. Section 884.201, Insurance Code, is amended to correct a cross-reference to read as follows:

Sec. 884.201. FORM OF CAPITAL AND SURPLUS. After a charter is granted under this chapter, the stipulated premium company:

(1) shall maintain the company's minimum capital at all times in a form described by Section 884.054(d); and

(2) may invest the company's surplus as provided by Sections 425.203-425.228 [Article 3.39].

SECTION 2E.080. Section 884.253(c), Insurance Code, is amended to correct a cross-reference to read as follows:

(c) A stipulated premium company that complies with Subsection (b) may pay cash dividends in accordance with Sections 403.001 and 403.052 [Article 21.32].

SECTION 2E.081. Sections 884.256(a) and (e), Insurance Code, are amended to correct cross-references to read as follows:

(a) Except as provided by Section 884.406, not later than March 31 of each year a stipulated premium company shall:

(1) prepare a statement showing the condition of the company on December 31 of the preceding year; and

(2) deliver the statement to the department accompanied by a filing fee in the amount determined under Chapter 202 [Article 4.07].

(e) Fees collected under this section shall be deposited to the credit of the Texas Department of Insurance operating account. Sections 201.001 and 201.002 apply [Article 1.31A applies] to fees collected under this section.

SECTION 2E.082. Section 884.307(a), Insurance Code, is amended to correct cross-references to read as follows:

(a) A stipulated premium company that possesses capital and unencumbered surplus in a combined amount of at least $100,000 more than all of its liabilities, including contingent liabilities, may issue annuity contracts as authorized by Chapters [Chapter] 3 and 1701 and Title 7.

SECTION 2E.083. Section 884.310, Insurance Code, is amended to correct a cross-reference to read as follows:

Sec. 884.310. AGENT. Each agent of a stipulated premium company must be licensed under Title 13 [Subchapter A, Chapter 21].

SECTION 2E.084. Sections 884.311(a) and (c), Insurance Code, are amended to correct cross-references to read as follows:

(a) A stipulated premium insurance company issuing life, health, or accident coverages or maintaining policies in force that were issued in accordance with Subchapter I may elect that the company's investments and transactions be governed by Subchapter C, Chapter 425 [Article 3.33 of this code].

(c) After the second anniversary of the effective date of an initial election authorized by this section, the stipulated premium insurance company may elect that the company's investments and transactions be governed by Sections 425.203-425.228 [Article 3.39 of this code].

SECTION 2E.085. Section 884.357, Insurance Code, is amended to correct a cross-reference to read as follows:

Sec. 884.357. FORM APPROVAL. The approval of a form of an insurance policy issued by a stipulated premium company is governed by Chapter 1701 [Article 3.42].

SECTION 2E.086. Section 884.402, Insurance Code, is amended to correct cross-references to read as follows:

Sec. 884.402. ADDITIONAL COVERAGE. A stipulated premium company that, at the time it begins to issue coverages under this subchapter, possesses the amounts of capital and unencumbered surplus equal to or greater than the corresponding amounts required for organization of a life and health company under Sections 841.052, 841.054, 841.204, 841.205, 841.301, and 841.302 may, subject to Section 884.403:

(1) issue any kind of life insurance coverage authorized by Chapter 3, 841, or 1701 or Title 7;

(2) issue any kind of health or accident insurance coverage authorized by:

(A) Title 7;

(B) Chapter 3, 704, 841, 846, 982, 1201, 1202, 1203, 1210, 1251, 1252, 1253, 1254, 1301, 1351, 1354, 1359, 1364, 1368, 1501, 1504, 1505, 1506, 1552, 1575, 1576, 1579, 1581, 1625, 1651, 1652, or 1701;

(C) Chapter 492, other than Sections 492.051(b) and (c);

(D) Subchapter B, Chapter 38, Subchapter D, Chapter 425, Subchapter A or F, Chapter 1204, Subchapter A, Chapter 1273, Subchapter A, B, or D, Chapter 1355, Subchapter A, Chapter 1366, Subchapter A, Chapter 1507;

(E) Section 1204.151, 1204.153, 1204.154, or 1451.051; or

(F) Chapter 177, Local Government Code; or

(3) issue life insurance coverage through policies without cash surrender values or nonforfeiture values and that exceed $10,000 on one life.

SECTION 2E.087. Section 884.405, Insurance Code, is amended to correct cross-references to read as follows:

Sec. 884.405. AGENT; LICENSE. (a) An agent may not solicit or write any coverage authorized by this subchapter unless the agent:

(1) holds a license issued under Chapter 4054 [Chapter 213, Acts of the 54th Legislature, Regular Session, 1955 (Article 21.07-1, Vernon's Texas Insurance Code)]; and

(2) is appointed by the stipulated premium company for which the agent is soliciting and writing coverage under this subchapter.

(b) The commissioner may issue under Chapter 4054 [Chapter 213, Acts of the 54th Legislature, Regular Session, 1955 (Article 21.07-1, Vernon's Texas Insurance Code),] a license for an agent to solicit and write any coverage authorized by this subchapter for a stipulated premium company. Chapter 4054 applies [Chapter 213, Acts of the 54th Legislature, Regular Session, 1955 (Article 21.07-1, Vernon's Texas Insurance Code), applies] to the stipulated premium company as if the company were a legal reserve life insurance company.

SECTION 2E.088. Section 884.455, Insurance Code, is amended to correct a cross-reference to read as follows:

Sec. 884.455. REQUIRED SECURITIES. The commissioner shall require that a stipulated premium company have securities of the class and character required by Sections 425.203-425.228 [Article 3.39] in the amount of the reserve liability computed for the company under Section 884.454 less any deficiency reserve under Section 884.453 after all the debts and claims against the company and the minimum capital required by this chapter have been applied.

SECTION 2E.089. Section 884.601(a), Insurance Code, is amended to correct a cross-reference to read as follows:

(a) The shareholders of a stipulated premium company that possesses capital in an amount equal to at least $700,000, unencumbered surplus in an amount equal to at least $700,000, and sufficient reserves on hand for the company's policies as required under provisions of Chapter 425, other than Sections 425.002-425.005, [Subchapter C, Chapter 3,] may convert the company to a legal reserve company that operates under Chapter 841 by complying with each requirement applicable to a company operating under that chapter.

SECTION 2E.090. Section 884.701, Insurance Code, is amended