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A BILL TO BE ENTITLED
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AN ACT
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relating to the operation and regulation of certain consolidated |
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insurance programs. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Title 2, Insurance Code, is amended by adding |
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Subtitle C to read as follows: |
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SUBTITLE C. PROGRAMS AFFECTING MULTIPLE LINES OF INSURANCE |
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CHAPTER 151. CONSOLIDATED INSURANCE PROGRAMS |
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SUBCHAPTER A. GENERAL PROVISIONS |
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Sec. 151.001. DEFINITIONS. In this chapter: |
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(1) "Administrator" means a person who operates and |
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manages a consolidated insurance program on behalf of a principal. |
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The term includes a person who, in the regular course of business, |
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operates and manages a consolidated insurance program as an agent |
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of a principal. |
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(2) "Consolidated insurance program" means a program |
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under which a principal, for a contractor or contractors on a |
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construction project, provides general liability insurance |
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coverage, workers' compensation insurance coverage, or both that |
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are incorporated into an insurance program for a single |
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construction project or multiple construction projects. |
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(3) "Construction project" means construction, |
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remodeling, maintenance, or repair of improvements to real |
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property. |
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(4) "Construction project site" means the immediate |
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construction location and areas emanating from that location, such |
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as adjacent sidewalks, streets, storage areas, temporary |
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construction yards, and staging areas. |
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(5) "Contractor" includes: |
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(A) a prime contractor; |
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(B) a general contractor; |
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(C) a subcontractor; and |
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(D) any other person who has signed a |
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construction contract covered under the consolidated insurance |
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program. |
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(6) "Insurer" means an insurance company, including a |
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mutual insurance company or a capital stock company, a reciprocal |
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or interinsurance exchange, a Lloyd's plan, or another legal entity |
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authorized to engage in the business of general liability insurance |
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or workers' compensation insurance in this state. The term |
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includes an eligible surplus lines insurer. |
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Sec. 151.002. PRINCIPAL. (a) For purposes of this chapter, |
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"principal" means the person who procures the insurance contract or |
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policy. |
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(b) The principal under a consolidated insurance program is |
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the person responsible for the payment of the premium on the |
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insurance coverage. The principal is typically the first named |
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insured on a general liability insurance contract or policy. |
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Sec. 151.003. RULES. The commissioner shall adopt rules in |
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the manner provided by Subchapter A, Chapter 36, as necessary to |
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implement and enforce the purpose and intent of this chapter. |
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[Sections 151.004-151.050 reserved for expansion] |
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SUBCHAPTER B. GENERAL REQUIREMENTS |
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Sec. 151.051. COVERAGE OF CONTRACTORS. (a) Each |
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contractor on a construction project covered by a consolidated |
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insurance program must: |
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(1) be listed as a named insured on each insurance |
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policy and contract under the program; and |
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(2) have equal rights under the policy or contract |
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with the principal and other contractors, subject to insurance |
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industry standard differences between a first-named insured and a |
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named insured. |
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(b) Subsection (a) does not apply to a policy or contract |
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that is issued individually in the name of the contractor as the |
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first-named insured under a consolidated insurance program. |
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(c) The principal or a contractor may not require a |
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contractor to obtain an additional insured endorsement on the |
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contractor's separately maintained insurance policy that is of the |
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same general type as the insurance coverage provided by the |
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consolidated insurance program other than an insurance policy or |
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contract covering off-site work for ongoing operations that is |
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related to the project and that is not covered by the consolidated |
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insurance program. |
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(d) The coverages under the consolidated insurance program |
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must be primary and noncontributory to any insurance policy |
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separately maintained by a contractor covered by the consolidated |
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insurance program that is of the same general type as the insurance |
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coverages provided by the consolidated insurance program. |
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Sec. 151.052. DURATION OF GENERAL LIABILITY COVERAGE; |
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CERTAIN COVERAGE REQUIRED. (a) A consolidated insurance program |
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that provides completed operations insurance coverage together |
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with general liability coverage must continue completed operations |
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insurance coverage until the expiration of the limitations period |
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for bringing an action for damages under Section 16.009, Civil |
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Practice and Remedies Code. |
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(b) A contractor's separately maintained insurance policy |
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may not exclude coverage for ongoing operations of the contractor |
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for warranty or punch-out work on a construction project covered by |
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a consolidated insurance program that occurs after the contractor |
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has received written notice from the principal, insurer, or |
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administrator that the contractor's coverage under the |
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consolidated insurance program has ended. |
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(c) A consolidated insurance program must provide coverage |
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for: |
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(1) ongoing operations of the contractor for warranty |
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or punch-out work on a construction project covered by the |
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consolidated insurance program; and |
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(2) preconstruction services and initial construction |
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work related to the project. |
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(d) A consolidated insurance program must provide completed |
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operations coverage for specially fabricated materials or |
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equipment if the installer of the fabricated materials or equipment |
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is covered under the program and fabricated the materials or |
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equipment. |
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Sec. 151.053. NOTICE OF CERTAIN CHANGES. (a) Except as |
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provided by Subsection (b), after the execution of a construction |
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contract by the principal, the coverages or limits under the |
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consolidated insurance program may not be reduced, nonrenewed, or |
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canceled without written notice provided to the principal and all |
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contractors. The notice required under this subsection must be |
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provided by the insurer or administrator not later than the 60th day |
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before the effective date of the reduction, nonrenewal, or |
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cancellation. |
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(b) A notice to cancel coverage due to nonpayment of premium |
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is effective only after written notice is provided to the principal |
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at least 10 days before the scheduled effective date of the |
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cancellation due to nonpayment of premium. |
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(c) If any coverage is canceled, the insurer or |
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administrator shall notify each contractor in writing that coverage |
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has been canceled. The notice under this subsection must be sent |
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not later than the effective date of the cancellation of coverage. |
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Sec. 151.054. NOTICE REGARDING REDUCTION IN LIMIT. (a) The |
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insurer shall notify all contractors in writing not later than the |
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10th day after the date the total limit of coverage for any type of |
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liability coverage issued under the consolidated insurance program |
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is reduced by: |
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(1) 50 percent; and |
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(2) each additional 25 percentage point reduction |
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after the initial 50 percent reduction. |
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(b) The reduction in the limit under Subsection (a) shall be |
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computed based on incurred losses and expenses. |
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(c) The notice under Subsection (a) must describe: |
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(1) the initial limit of liability coverage; and |
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(2) the limit of liability coverage that remains as of |
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the notice date. |
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(d) If the limits of a policy have been expended, triggering |
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the limits of another policy, the notice under Subsection (a) is |
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required only if the combined limit of all policies providing the |
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coverage has been reached. |
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Sec. 151.055. INSURER REQUIREMENTS; INSURER RATINGS. (a) |
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All insurance coverages under a consolidated insurance program for |
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a construction project must be provided by an insurer that has: |
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(1) a financial strength rating of at least A- and a |
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financial size rating of at least Class VII, as currently reported |
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by the A. M. Best Company; or |
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(2) an equivalent rating made by a similar rating |
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organization recognized by the commissioner. |
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(b) Insurance policies providing coverage under the |
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consolidated insurance program shall be delivered to the |
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first-named insured not later than the 60th day after the date on |
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which the coverage takes effect. |
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(c) The requirements of this section must be maintained for |
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the duration of the construction project. |
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Sec. 151.056. DUTY AND COMPLIANCE BY PRINCIPAL. A |
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principal under a consolidated insurance program owes a duty to |
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each contractor covered under the consolidated insurance program to |
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comply with the requirements of this chapter. |
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Sec. 151.057. LIMITED EXCEPTION TO RATING STANDARDS. |
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Sections 2053.002 and 2251.052, Insurance Code, and Section 1, |
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Chapter 50 (H.B. 32), Acts of the 53rd Legislature, Regular |
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Session, 1953 (Article 5.77, Vernon's Texas Insurance Code), do not |
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apply to rates used for an insurance policy issued under a |
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consolidated insurance program under this chapter to the extent |
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that those laws require an insurer to produce rates for individual |
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risks. |
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[Sections 151.058-151.100 reserved for expansion] |
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SUBCHAPTER C. COVERAGE LIMITS |
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Sec. 151.101. GENERAL REQUIREMENTS. Subject to Section |
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151.052, aggregate and per-occurrence limits of all general |
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liability insurance and employer liability coverages under a |
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consolidated insurance program apply collectively to all |
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contractors under the program for the duration of each construction |
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project covered by the program. |
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Sec. 151.102. LIMITS. (a) Except as provided by Subsection |
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(b), (c), or (d), for a construction project the general liability |
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limit must be not less than: |
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(1) $25 million, if the construction value is $40 |
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million or less; |
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(2) $75 million, if the construction value is more |
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than $40 million but no more than $100 million; |
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(3) $150 million, if the construction value is more |
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than $100 million but no more than $250 million; and |
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(4) the lesser of $250 million or 50 percent of the |
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construction value, if the construction value is more than $250 |
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million. |
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(b) For a construction project covered by a rolling |
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consolidated insurance program, the general liability limit must |
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not be less than: |
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(1) $40 million, if the construction value is $40 |
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million or less; |
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(2) $75 million, if the construction value is more |
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than $40 million but no more than $100 million; |
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(3) $125 million, if the construction value is more |
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than $100 million but no more than $250 million; and |
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(4) the lesser of $375 million or 50 percent of the |
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construction value, if the construction value is more than $250 |
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million. |
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(c) For purposes of computing the required coverage for a |
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rolling consolidated insurance program under Subsection (b), the |
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construction value may be reduced by the value of a construction |
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project that has dedicated liability limits and is operated under |
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the rolling consolidated insurance program. |
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(d) For purposes of computing the required coverage for a |
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rolling consolidated insurance program under Subsection (b), if a |
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single construction project operated under a rolling consolidated |
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insurance program has a construction value of more than $100 |
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million, the single construction project must have a dedicated |
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limit of $75 million or more. |
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(e) For employer liability coverage under a consolidated |
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insurance program, the per-occurrence liability limit may not be |
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less than the applicable general liability limit. Any umbrella or |
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excess policy limits must extend to employer liability coverage. |
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(f) Construction projects solely for the construction of |
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single-family homes, duplexes, triplexes, or quadraplexes must |
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have a general liability limit of $5 million or more. |
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[Sections 151.103-151.150 reserved for expansion] |
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SUBCHAPTER D. DISCLOSURE REQUIREMENTS FOR |
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ADMINISTRATION OF CONSOLIDATED INSURANCE PROGRAM |
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Sec. 151.151. REQUIRED DISCLOSURE AT BID SOLICITATION. |
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(a) At the time a principal or contractor is soliciting bids for a |
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construction project, the principal or contractor must disclose |
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prominently in the project specifications, or in any request for |
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bids or proposals, that the project may be covered by a consolidated |
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insurance program subject to this chapter. |
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(b) The disclosure must be sufficient to: |
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(1) allow the bidder to compare the bidder's own |
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insurance program with the coverages, limits, and operation of the |
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insurance provided under the consolidated insurance program; and |
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(2) to accurately predict the credits, deductibles, or |
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other costs to the bidder associated with the program. |
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Sec. 151.152. REQUIRED PRECONTRACT DISCLOSURE. Not later |
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than the 14th day before the date on which a principal or contractor |
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executes a contract for a construction project covered by a |
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consolidated insurance program, the principal or contractor that |
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solicited the bid must make a written disclosure to the contractor |
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that contains detailed information concerning the consolidated |
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insurance program. |
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[Sections 151.153-151.200 reserved for expansion] |
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SUBCHAPTER E. PROGRAM ADMINISTRATION |
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Sec. 151.201. ADMINISTRATOR. Each principal shall appoint |
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a qualified administrator for the consolidated insurance program |
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whose primary duty is administration of the program. |
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Sec. 151.202. POWERS AND DUTIES OF ADMINISTRATOR. (a) An |
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administrator shall comply in a timely manner with the requirements |
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of this section. |
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(b) The administrator shall administer the enrollment of |
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all contractors covered by the consolidated insurance program as |
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necessary to ensure prompt coverage, effective on the date that the |
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contractor begins work on the construction project. |
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(c) The administrator shall: |
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(1) maintain a current consolidated insurance program |
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manual that contains a detailed description of the consolidated |
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insurance program; |
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(2) provide all contractors with a current copy of the |
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manual that is consistent with the insurance provided and the scope |
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of the program: |
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(A) on the date of the contractor's enrollment in |
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the program; and |
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(B) not later than the seventh day after any |
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changes are made to the manual; and |
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(3) provide each contractor on the date of the |
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contractor's enrollment in the program with a certificate that |
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evidences the contractor's coverage under the program. |
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(d) In addition to the certificate provided under |
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Subsection (c)(3), the administrator shall obtain from the insurer |
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or a licensed agent of the insurer and deliver a certificate of |
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insurance on behalf of a contractor to evidence the coverages and |
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limits provided by the consolidated insurance program not later |
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than the fifth day after receipt of a request from a contractor. |
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(e) If the insurer has issued insurance policies, the |
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administrator shall ensure that each contractor receives insurance |
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policies, or renewal certificates for previously issued policies, |
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for all coverages provided by the consolidated insurance program |
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not later than the earlier of: |
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(1) the 30th day after the date the contractor is |
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enrolled in the program; or |
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(2) the date the contractor begins work on the |
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project. |
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(f) The administrator shall coordinate: |
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(1) any regular reporting required of the contractors |
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and any audits required of the contractors; |
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(2) all meetings with the insurer, whether with the |
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principal, the contractors, or other parties; and |
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(3) availability of any on-site medical facilities or |
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other mandatory initial medical care providers and contact |
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information for contractors. |
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(g) The administrator shall establish and disseminate to |
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contractors: |
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(1) clear procedures for proper filing of claims; and |
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(2) required loss-control procedures. |
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(h) The administrator shall ensure that: |
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(1) all insurance coverages provided by the |
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consolidated insurance program are maintained; and |
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(2) all contractors are notified in writing promptly |
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of any changes or cancellation in coverages provided by the |
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consolidated insurance program. |
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(i) The administrator shall monitor the financial standing |
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of the insurer as provided by Section 151.055 and shall provide |
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written notice to the principal and all contractors of any |
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significant negative change not later than the 10th day after the |
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date of the negative change. This subsection may not be interpreted |
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to mean that the principal or administrator is a guarantor of the |
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insurer's obligations under an insurance policy. |
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(j) The administrator shall prepare and present to a |
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contractor on at least a bimonthly basis any required payroll |
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reports, claim reviews, and loss-control reviews that relate to |
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that contractor. |
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(k) The administrator shall provide oversight and |
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management of claims for the principal and any affected contractor |
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until the construction project is completed and the operation of |
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the consolidated insurance program and the administration of that |
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program is closed. |
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(l) Before the date on which the operation of the |
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consolidated insurance program and administration of the program |
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is closed, the administrator shall provide to the principal and |
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each contractor a written notice that contains the contact person's |
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name, company name, mailing address, telephone number, fax number, |
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and e-mail address, and any other necessary contact information of |
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the person and company responsible for any closed, open, or future |
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claims under the coverages provided by the consolidated insurance |
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program. |
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Sec. 151.203. DUTY OF ADMINISTRATOR. For purposes of this |
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chapter and insurance benefits under the consolidated insurance |
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program, the administrator owes a duty to each contractor that |
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participates in the program to comply with the requirements of this |
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chapter. |
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Sec. 151.204. ERRORS AND OMISSIONS COVERAGE REQUIRED. The |
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administrator shall maintain errors and omissions insurance |
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coverage in the minimum amount of $5 million per occurrence for any |
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liability of the administrator under this chapter. |
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[Sections 151.205-151.250 reserved for expansion] |
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SUBCHAPTER F. ENFORCEMENT PROVISIONS |
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Sec. 151.251. GENERAL ENFORCEMENT; ADMINISTRATIVE |
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PENALTIES. The commissioner may impose a sanction under Chapter |
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82, issue a cease and desist order under Chapter 83, or assess an |
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administrative penalty under Chapter 84 on any person regulated by |
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the department who violates this chapter or a rule or order adopted |
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by the commissioner under this chapter. |
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[Sections 151.252-151.300 reserved for expansion] |
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SUBCHAPTER G. VENUE |
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Sec. 151.301. VENUE. Venue for a suit brought under this |
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chapter is in the county in which the construction project is |
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located. |
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SECTION 2. Chapter 151, Insurance Code, as added by this |
|
|
Act, applies only to a consolidated insurance program for a |
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construction project that begins on or after January 1, 2010. A |
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consolidated insurance program for a construction project that |
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begins before January 1, 2010, is governed by the law as it existed |
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immediately before the effective date of this Act, and that law is |
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continued in effect for that purpose. |
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SECTION 3. This Act takes effect September 1, 2009. |