82R6568 PMO-F

By: Van de Putte S.B. No. 1337

A BILL TO BE ENTITLED

AN ACT

relating to the operation and regulation of certain consolidated insurance programs; providing administrative penalties.

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

SECTION 1. Title 2, Insurance Code, is amended by adding Subtitle C to read as follows:

SUBTITLE C. PROGRAMS AFFECTING MULTIPLE LINES OF INSURANCE

CHAPTER 151. CONSOLIDATED INSURANCE PROGRAMS

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 151.001. DEFINITIONS. In this chapter:

(1) "Consolidated insurance program" means a program under which a principal provides general liability insurance coverage, workers' compensation insurance coverage, or both that are incorporated into an insurance program for a single construction project or multiple construction projects.

(2) "Construction project" means construction, remodeling, maintenance, or repair of improvements to real property. The term includes the immediate construction location and areas incidental and necessary to the work as defined in the construction contract documents. A construction project under this chapter does not include a single-family home, duplex, triplex, or quadruplex.

(3) "Contractor" means any person who has entered into a construction contract or a professional services contract and is enrolled in the consolidated insurance program.

(4) "Insurer" means an insurance company, including a mutual insurance company or a capital stock company, a reciprocal or interinsurance exchange, a Lloyd's plan, or another legal entity authorized to engage in the business of general liability insurance or workers' compensation insurance in this state. The term includes an eligible surplus lines insurer.

(5) "Principal" means the person who procures the insurance policy under a consolidated insurance program.

Sec. 151.002. RULES. The commissioner shall adopt rules in the manner provided by Subchapter A, Chapter 36, as necessary to implement and enforce the purpose and intent of this chapter.

[Sections 151.003-151.050 reserved for expansion]

SUBCHAPTER B. GENERAL REQUIREMENTS

Sec. 151.051. COVERAGE OF CONTRACTORS. (a) Each contractor on a construction project covered by a consolidated insurance program must:

(1) be included as a named insured on each insurance policy under the program; and

(2) have equal rights under the policy with the principal and other contractors, subject to insurance industry standard differences between a first-named insured and a named insured.

(b) Subsection (a) does not apply to a policy that is issued individually in the name of the contractor as the first-named insured under a consolidated insurance program.

Sec. 151.052. DURATION OF GENERAL LIABILITY COVERAGE. A consolidated insurance program that provides completed operations insurance coverage separate from or together with general liability coverage must continue completed operations insurance coverage until the expiration of the limitations period for bringing an action for damages under Section 16.009, Civil Practice and Remedies Code.

Sec. 151.053. NOTICE REGARDING REDUCTION IN LIMIT. (a) Each contractor shall be notified in writing not later than the 10th day after the date that the principal becomes aware that the total limit of liability for any type of coverage issued under the consolidated insurance program is reduced by:

(1) 50 percent; and

(2) each additional 25 percentage point reduction after the initial 50 percent reduction.

(b) The reduction in the limit under Subsection (a) shall be computed based on incurred losses and expenses.

Sec. 151.054. DUTY AND COMPLIANCE BY PRINCIPAL. A principal under a consolidated insurance program owes a duty to each contractor covered under the consolidated insurance program to comply with the requirements of this chapter. The duty includes:

(1) payment of the premium for the insurance coverage; and

(2) securing replacement insurance that meets the requirements of this chapter, or reimbursing an enrolled contractor for the cost of replacement insurance that meets the requirements of this chapter, if the insurer of the consolidated insurance program fails to continue to provide the coverage required under the program or if the principal elects to discontinue providing coverage under the program.

Sec. 151.055. CONTRACTOR INSURANCE. This chapter, or a requirement of a contract entered into under this chapter, may not be construed to prevent a contractor from obtaining any insurance coverage not provided by the consolidated insurance program to protect the contractor or the construction project.

Sec. 151.056. LIMITED EXCEPTION TO RATING STANDARDS. Sections 2053.002 and 2251.052, Insurance Code, and Section 1, Chapter 50 (H.B. 32), Acts of the 53rd Legislature, Regular Session, 1953 (Article 5.77, Vernon's Texas Insurance Code), do not apply to rates used for an insurance policy issued under a consolidated insurance program under this chapter to the extent that those laws require an insurer to produce rates for individual risks.

Sec. 151.057. PAYMENT OF CERTAIN DEDUCTIBLES OR LOSSES. (a) A principal shall pay:

(1) any coverage deductible, self-insured retention, or loss in a retrospective rating plan or other loss-sensitive rating plan under a consolidated insurance program; and

(2) all deductible and self-insured retention applicable to any policy provided under the consolidated insurance program, except as provided by Subsection (b).

(b) A principal may not assess a contractor covered under the consolidated insurance program for a deductible, self-insured retention, or loss described by Subsection (a), except for a first-party property damage claim deductible or self-insured retention if:

(1) the action of the contractor caused the property damage claim; and

(2) the insurance carrier assesses the deductible or self-insured retention against the principal.

(c) If the principal fails to pay a deductible, self-insured retention, or other item required of the principal by this section, a contractor covered under the program may not be required to pay the deductible, self-insured retention, or other item required of the principal.

[Sections 151.058-151.100 reserved for expansion]

SUBCHAPTER C. COVERAGE LIMITS

Sec. 151.101. GENERAL REQUIREMENTS. Subject to Section 151.052, aggregate and per-occurrence limits of all general liability insurance and employer liability coverages under a consolidated insurance program apply collectively to all contractors under the program for the duration of each construction project covered by the program.

[Sections 151.102-151.150 reserved for expansion]

SUBCHAPTER D. DISCLOSURE REQUIREMENTS FOR

ADMINISTRATION OF CONSOLIDATED INSURANCE PROGRAM

Sec. 151.151. REQUIRED DISCLOSURE AT BID SOLICITATION. At the time a principal or contractor is soliciting bids for a construction project that may be covered by a consolidated insurance program, the principal or contractor must disclose prominently in the project specifications or any request for bids or proposals that the project may be covered by a consolidated insurance program subject to this chapter and provide information about the consolidated insurance program sufficient for a bidder to understand the program's cost to and coverage for the bidder.

[Sections 151.152-151.200 reserved for expansion]

SUBCHAPTER E. PROGRAM ADMINISTRATION

Sec. 151.201. ADMINISTRATOR. Each principal shall appoint a qualified administrator for the consolidated insurance program whose primary duties to the principal and each contractor are to:

(1) administer the program; and

(2) comply with the requirements of this chapter.

[Sections 151.202-151.250 reserved for expansion]

SUBCHAPTER F. ENFORCEMENT PROVISIONS

Sec. 151.251. GENERAL ENFORCEMENT; ADMINISTRATIVE PENALTIES. The commissioner may impose a sanction under Chapter 82, issue a cease and desist order under Chapter 83, or assess an administrative penalty under Chapter 84 on any person regulated by the department who violates this chapter or a rule or order adopted by the commissioner under this chapter.

[Sections 151.252-151.300 reserved for expansion]

SUBCHAPTER G. NONWAIVER

Sec. 151.301. NONWAIVER. A provision of this chapter may not be waived by contract or otherwise.

SECTION 2. Chapter 151, Insurance Code, as added by this Act, applies only to a new or renewed consolidated insurance program for a construction project that begins on or after January 1, 2012. A consolidated insurance program for a construction project that begins before January 1, 2012, is governed by the law as it existed immediately before the effective date of this Act, and that law is continued in effect for that purpose.

SECTION 3. This Act takes effect September 1, 2011.