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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 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, including the immediate construction location and areas |
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incidental and necessary to the work as defined in a construction |
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document. A construction project under this chapter does not |
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include a single-family home, duplex, triplex, or quadruplex. |
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(4) "Contractor" means a person enrolled in the |
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consolidated insurance program who has entered into a construction |
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contract or a professional services contract. |
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(5) "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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(6) "Principal" means the person who procures the |
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insurance contract or policy and who is typically the first-named |
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insured on a general liability insurance contract or policy. |
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Sec. 151.002. 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 151.003-151.050 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 included as a named insured on each insurance |
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policy under the program; and |
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(2) have equal rights under the policy with the |
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principal and other contractors, subject to insurance industry |
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standard differences between a first-named insured and a named |
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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, by |
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contract or otherwise, another contractor to obtain an additional |
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insured endorsement on the other contractor's separately |
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maintained insurance policy with respect to a construction project |
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covered under a consolidated insurance program that is of the same |
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type of insurance coverage as the insurance coverage provided to |
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the other contractor by the consolidated insurance program, other |
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than an insurance policy covering offsite work for ongoing |
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operations related to the project and not covered by the |
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consolidated insurance program. Such a requirement is void and |
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unenforceable. |
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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) Except as provided by Subsection |
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(b), a consolidated insurance program that provides completed |
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operations insurance coverage separate from or together with |
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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 consolidated insurance program may not provide |
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completed operations insurance coverage for a period shorter than |
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the limitations period under Section 16.009, Civil Practice and |
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Remedies Code, unless the commissioner determines that the coverage |
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is not available in the insurance market. If the commissioner |
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determines that the coverage is not available, the commissioner |
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shall determine the maximum period that the coverage is available, |
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and the consolidated insurance program must provide coverage for |
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that period. The commissioner shall make a determination under |
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this subsection by rule as the commissioner finds necessary or on a |
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request of an insurer, administrator, or principal. |
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(c) A consolidated insurance program must include premises |
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liability coverage, for 18 months after the date of substantial |
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completion of the construction project, for ongoing operations for |
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the contractor's warranty work, remedial work, or other work on a |
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construction project covered by the consolidated insurance |
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program. |
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(d) A contractor's separately maintained insurance policy |
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must include coverage for ongoing operations of the contractor for: |
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(1) preconstruction services and initial construction |
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work related to the project performed prior to the date of coverage |
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for the contractor under the consolidated insurance program; and |
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(2) warranty work, remedial work, or other work on a |
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construction project covered by a consolidated insurance program |
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that occurs after the coverage required under Subsection (c) has |
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ended. |
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(e) The consolidated insurance program must provide |
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completed operations coverage for specially fabricated materials |
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or equipment if the installer of the fabricated materials is |
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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 (g), the insurer may not reduce coverage, |
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nonrenew coverage, or cancel coverage, or change the limits under a |
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consolidated insurance program except for: |
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(1) nonpayment of premium; |
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(2) failure to comply with safety standards required |
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by the program; |
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(3) failure of the principal to disclose relevant and |
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material information on the date on which the parties entered the |
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contract for the consolidated insurance program; or |
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(4) the provision of materially misleading or false |
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information to an insurer before the date on which the parties |
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entered the contract for the consolidated insurance program. |
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(b) Except as provided by Subsection (c), after work covered |
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by the consolidated insurance program has begun, the coverages or |
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limits under the consolidated insurance program may not be reduced, |
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nonrenewed, or canceled under Subsection (a) without written notice |
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provided to the principal and all contractors. The notice required |
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under this subsection must be provided by the insurer or |
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administrator not later than the 60th day before the effective date |
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of the reduction, nonrenewal, or cancellation. |
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(c) 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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and all contractors at least 10 days before the scheduled effective |
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date of the cancellation due to nonpayment of premium. |
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(d) The insurer or administrator shall notify each |
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contractor in writing if any coverage or limit is reduced, |
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nonrenewed, or canceled. The notice under this subsection must be |
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sent not later than the effective date of the reduction, |
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nonrenewal, or cancellation of coverage. |
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(e) If an insurer fails to comply with this section, a |
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reduction, nonrenewal, or cancellation is not effective until the |
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insurer complies with this section. |
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(f) If the insurer gives notice of cancellation based on one |
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of the grounds listed in Subdivision (a)(1) or (a)(2), the |
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principal shall have a reasonable opportunity to pay the premium |
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due or to fulfill the principal's obligation under the consolidated |
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insurance program. |
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(g) This section does not apply to a reduction in limits due |
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to an insurer incurring losses or expenses for a claim made under |
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the policy. |
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Sec. 151.054. NOTICE REGARDING REDUCTION IN LIMIT. (a) The |
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principal shall notify all contractors in writing not later than |
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the 10th day after the date the total limit of liability for any |
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type of coverage issued under the consolidated insurance program is |
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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 30th 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) 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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(b) The duty includes: |
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(1) paying the premium for the insurance coverage; and |
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(2) securing replacement insurance that meets the |
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requirements of this chapter, or reimbursing an enrolled contractor |
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for the cost of replacement insurance that meets the requirements |
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of this chapter, if the insurer of the consolidated insurance |
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program fails to provide the coverage under the program. |
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Sec. 151.057. CONTRACTOR INSURANCE. This chapter, or a |
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requirement of a contract entered into under this chapter, may not |
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be construed as preventing a contractor from obtaining any |
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insurance coverage not provided by the consolidated insurance |
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program to protect the contractor or the construction project. |
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Sec. 151.058. INDEMNITY AND SUBROGATION. (a) Rights under |
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an indemnity or hold harmless provision between a principal and |
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contractor or between contractors for claims or events insured |
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under a consolidated insurance program are limited to rights to |
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recover only under the consolidated insurance program. |
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(b) An insurer providing coverage under the consolidated |
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insurance program does not have subrogation rights against a |
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contractor or against any insurance policy of the principal or |
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contractor for losses paid under the consolidated insurance |
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program. |
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Sec. 151.059. DEFENSE COVERAGE FOR CLAIM OR SUIT. (a) In a |
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lawsuit or arbitration proceeding that is covered by the |
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consolidated insurance program, an insurance policy under the |
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program must provide coverage for the defense of each contractor. |
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This coverage may be provided by a joint defense provision under the |
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program or by separate agreement among the affected contractors. |
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(b) Defense costs for a contractor under Subsection (a) may |
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not be included in the limit of liability of an insurance policy |
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under the consolidated insurance program if the defense costs for |
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the principal are not included in the limit of liability. |
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Sec. 151.060. 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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Sec. 151.061. PAYMENT OF CERTAIN DEDUCTIBLES, LOSSES, OR |
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PENALTIES. (a) A principal shall pay any: |
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(1) coverage deductible, self-insured retention, or |
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loss in a retrospective rating plan or other loss-sensitive rating |
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plan under a consolidated insurance program; |
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(2) penalty incurred under the program; and |
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(3) deductible or self-insured retention applicable |
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to any policy provided under the consolidated insurance program, |
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except as provided by Subsection (b). |
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(b) A principal may not assess a contractor covered under |
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the consolidated insurance program for a deductible, self-insured |
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retention, loss, or penalty described by Subsection (a), except for |
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a property damage claim deductible or self-insured retention if: |
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(1) the action of the contractor caused the property |
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damage claim; and |
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(2) the insurance carrier assesses the deductible or |
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self-insured retention against the principal. |
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(c) If the principal fails to pay a deductible, self-insured |
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retention, penalty or other item required of the principal by this |
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section, a contractor covered under the program may not be required |
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to pay the deductible, self-insured retention, penalty or other |
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item required of the principal. |
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[Sections 151.062-151.100 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), for a construction project the general liability limit must be |
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not less than $25 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 be |
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not less than $50 million. |
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(c) 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 limits. Any umbrella or |
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excess policy limits provided under the consolidated insurance |
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program shall extend to a principal's or contractor's employer |
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liability coverage regardless of whether that employer liability |
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coverage is provided under the consolidated insurance program or by |
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the principal's or contractor's separately maintained policy. |
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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. (a) |
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At the time a principal or contractor is soliciting bids for a |
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construction project that may be covered by a consolidated |
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insurance program, 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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consolidated insurance program; and |
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(2) 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 10th day after any changes |
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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 10th 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 may comply with the requirements of |
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Subsection (e) by providing access to the documents on its Internet |
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website or by electronic transmission to the contractor. If the |
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contractor expressly requests that the items be provided in written |
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form, the administrator shall provide the items in written form to |
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the contractor. |
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(g) The administrator shall coordinate: |
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(1) any regular reporting required of a contractor and |
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any audits required of a contractor; |
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(2) all meetings with the insurer, whether with the |
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principal, a contractor, or any other party; 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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(h) The administrator shall disseminate to all contractors |
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clear procedures for proper filing of claims under the consolidated |
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insurance program. |
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(i) 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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(j) 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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(k) The administrator shall provide oversight and |
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coordinate the filing of claims for the principal and any affected |
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contractor until: |
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(1) the construction project is completed; |
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(2) the coverage periods have expired; and |
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(3) the claims are resolved. |
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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, facsimile |
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number, and electronic mail address, and any other necessary |
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contact information of the person and company responsible for any |
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closed, open, or future claims under the coverages provided by the |
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consolidated insurance program. |
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(m) For purposes of this chapter and insurance benefits |
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under the consolidated insurance program, the administrator owes a |
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duty to the principal and each contractor that participates in the |
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program to comply with the requirements of this chapter. |
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Sec. 151.203. ERRORS AND OMISSIONS COVERAGE REQUIRED; |
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PRINCIPAL RESPONSIBLE. (a) The administrator shall maintain |
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errors and omissions insurance coverage in the minimum amount of $5 |
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million per occurrence for any liability of the administrator under |
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this chapter. |
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(b) The principal may not require the contractor to |
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indemnify, hold harmless, or defend the principal or administrator |
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for the acts or omissions of the administrator. Any such |
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requirements shall be void and against public policy. |
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[Sections 151.204-151.250 reserved for expansion] |
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SUBCHAPTER F. ACCESS TO INFORMATION |
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Sec. 151.251. ACCESS TO RECORDS. The principal shall |
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provide access to information, including electronic records, |
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relating to the consolidated insurance program to all contractors |
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covered by the program until the second anniversary of the |
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expiration of any applicable statute of repose. |
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[Sections 151.252-151.300 reserved for expansion] |
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SUBCHAPTER G. ENFORCEMENT PROVISIONS |
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Sec. 151.301. 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 151.302-151.350 reserved for expansion] |
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SUBCHAPTER H. VENUE |
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Sec. 151.351. 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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[Sections 151.352-151.400 reserved for expansion] |
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SUBCHAPTER I. NONWAIVER |
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Sec. 151.401. NONWAIVER. A provision of this chapter may |
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not be waived by contract or otherwise. |
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SECTION 2. Chapter 151, Insurance Code, as added by this |
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Act, applies only to a new or renewed consolidated insurance |
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program for a construction project that begins on or after January |
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1, 2010. A consolidated insurance program for a construction |
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project that begins before January 1, 2010, is governed by the law |
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as it existed immediately before the effective date of this Act, and |
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that law is continued in effect for that purpose. |
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SECTION 3. This Act takes effect September 1, 2009. |