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INTRODUCED
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HOUSE COMMITTEE
SUBSTITUTE
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No
equivalent provision.
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SECTION 1. Section 1303.002,
Occupations Code, is amended by adding Subdivisions (2-a) and (3-a) and
amending Subdivision (5) to read as follows:
(2-a) "Executive
director" means the executive director of the Texas Real Estate Commission.
(3-a) "Reimbursement
insurance policy" means a policy of insurance issued to a residential
service company to:
(A) provide reimbursement
to the residential service company under the terms of the insured
residential service contracts issued or sold by the residential service
company; or
(B) pay on behalf of the
residential service company, in the event of the residential service
company's nonperformance, all covered contractual obligations incurred by
the residential service company under the terms of the insured residential
service contracts issued or sold by the residential service company.
(5) "Residential service
contract" means an agreement that is entered into for a separately
stated consideration and for a specified term under which [, in
exchange for a fee,] a person agrees to, in the event of the
operational or structural failure of or damage caused by a defect in
materials or workmanship or by normal wear to [undertakes for a
specified period to maintain, repair, or replace all or any part of] a
structural component, an appliance, or an electrical, plumbing, heating,
cooling, or air-conditioning system of a residential property that is
attached to the residential property:
(A) [. The term
does not include a service or maintenance agreement sold, offered for sale,
or issued by a manufacturer or merchant under which the manufacturer or
merchant undertakes to] maintain, repair, or replace all or any part
of the [a product or part of a product, including a] structural
component, [an] appliance, or [an] electrical, plumbing,
heating, cooling, or air-conditioning system;
(B) provide incidental
payment of indemnity under limited circumstances, including food spoilage;
or
(C) provide payment
instead of repair when a part, structural component, appliance, or service
provider or technician is unavailable [of a residential property,
that is:
[(A) manufactured or sold
by the manufacturer or merchant; or
[(B) installed by the
merchant in a building or residence].
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SECTION 1. Section 1303.004,
Occupations Code, is amended to read as follows:
Sec. 1303.004.
NONAPPLICABILITY TO CERTAIN PERSONS. (a) This chapter does not apply to a
person who:
(1) manufactures or sells a
product or part of a product; and
(2) sells, offers to sell, or
issues a service or maintenance agreement that provides for the
maintenance, repair, replacement, or performance of the product or part of
the product.
(b) A person described by
Subsection (a) or an employee or agent of a person described by Subsection
(a) is not required to be licensed or regulated under this chapter.
(c) This chapter does not
apply to a person who engages in the business of structural pest control in
compliance with Chapter 1951.
(d) This chapter does not
apply to a person who sells a service contract as defined by Section
1304.003, Occupations Code, but only to the extent the service contract
does not provide benefits with respect to a structural component, or an
electrical or plumbing system of a residential property. However, a
residential service contract providing benefits only with respect to an
appliance or a heating, cooling, or air-conditioning system of a
residential property may be offered pursuant to this Chapter without having
to also comply with Chapter 1304, Occupations Code.
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No
equivalent provision.
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No
equivalent provision.
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SECTION 2. Section 1303.053,
Occupations Code, is amended by adding Subsection (c) to read as follows:
(c) Information prepared
or compiled by the commission relating to an examination conducted under
this section, including the examination file, is confidential and exempt
from disclosure under Chapter 552, Government Code. The commission may
withhold the information without the necessity of requesting a decision
from the attorney general under Subchapter G, Chapter 552, Government Code.
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No
equivalent provision.
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SECTION 3. Section
1303.101(b), Occupations Code, is amended to read as follows:
(b) A person may not sell,
offer to sell, arrange or solicit the sale of, or receive an application
for a residential service contract unless:
(1) the person is:
(A) employed by a residential
service company licensed under this chapter; or
(B) licensed as or
employed by a real estate sales agent [salesperson], real
estate broker, mobile home dealer, or insurance agent in this state; and
(2) the contract is issued by
a residential service company licensed under this chapter.
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SECTION 2. Section 1303.103,
Occupations Code, is amended to add subsection (d) as follows:
(d) Any financial
information submitted to the commission in connection with an application shall be considered confidential and for the exclusive use of the commission.
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SECTION 4. Section 1303.103,
Occupations Code, is amended by amending Subsection (b) and adding
Subsection (d) to read as follows:
(b)
Each application for a license must contain or be accompanied by:
(1)
a copy of the articles of incorporation, articles of association,
partnership agreement, trust agreement, or any other basic organizational
document of the applicant;
(2)
a copy of any amendment to the applicant's basic organizational document;
(3)
a copy of any bylaws, rules, or other similar document that regulates the
conduct of the applicant's internal affairs;
(4)
the name, address, and official position of each person who will be
responsible for the conduct of the applicant's affairs, including:
(A)
each member of the board of directors, board of trustees, executive
committee, or other governing body or committee of the applicant;
(B)
the applicant's principal officer, if the applicant is a corporation; and
(C)
each partner or member of the applicant, if the applicant is a partnership
or association;
(5)
a copy of the residential service contract made or to be made between the
applicant and another person;
(6)
a general description of the residential service contract or the contract's
coverage or plan;
(7)
the most recent [a] financial statements for the applicant
[statement that]:
(A)
that are [is]:
(i) prepared by an
independent certified public accountant; or
(ii) certified as accurate by at least two of the residential
service company's principal officers, if the residential service company
uses a reimbursement insurance policy to insure its outstanding residential
service contracts written in this state in accordance with Section
1303.151(b) [within six
months preceding the date the application is submitted]; and
(B)
that show [shows] the applicant's assets, liabilities, and
sources of financial support;
(8)
a description of the applicant's proposed method of marketing a residential
service contract;
(9)
a statement regarding the applicant's sources of working capital and any
other funding sources;
(10)
if the applicant is not domiciled in this state, a power of attorney appointing
the executive director [administrator] and the executive
director's [administrator's] successors in office, or the executive
director's [administrator's] authorized deputy, as the
applicant's agent for service of process in this state in a legal action
arising in this state against the applicant or the applicant's agents; and
(11)
any other information the commission requires to make a determination
required by this chapter.
(d) Any financial
information submitted to the commission in connection with an application is confidential and exempt from disclosure under Chapter 552,
Government Code. The commission may withhold the financial information
without the necessity of requesting a decision from the attorney general
under Subchapter G, Chapter 552, Government Code.
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No
equivalent provision.
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SECTION 5. Section 1303.151,
Occupations Code, is amended to read as follows:
Sec. 1303.151. RESERVE OR
REIMBURSEMENT INSURANCE POLICY REQUIRED. (a) Except as provided by
Subsection (b), a [A] residential service company shall maintain
a funded reserve against its liability to provide repair and replacement
services under its outstanding residential service contracts written in
this state.
(b) Except as provided by
Section 1303.152(d), a residential service company is not required to
maintain a funded reserve if it insures all of its risk under its
outstanding residential service contracts written in this state under a
reimbursement insurance policy issued by:
(1) an admitted insurer;
or
(2) a surplus lines insurer
or a surplus lines bonding company if the insurer or bonding company:
(A) is rated A+ or better
by a rating service recognized by the commission; and
(B) submits to the
commission for its approval evidence, in the form of a certified audit and other
pertinent information the commission may require, of the insurer's or
bonding company's ability to meet its contractual obligations.
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No
equivalent provision.
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SECTION 6. Section 1303.152,
Occupations Code, is amended by amending Subsection (c) and adding
Subsection (d) to read as follows:
(c) For purposes of this
chapter, to the extent a residential service company uses a
reimbursement insurance policy described by Section 1303.151(b) to insure
an outstanding residential service contract written in this state, the company's
reserve is not required to include a contract fee on the [a]
residential service contract [to the extent that provision is made for
reinsurance of the outstanding risk on the contract by:
[(1) a residential service
company licensed in this state;
[(2) an admitted insurer;
or
[(3) a surplus line
insurer or a surplus line bonding company if the insurer or bonding
company:
[(A) is rated A+ or better
by a rating service recognized by the commission; and
[(B) submits to the
commission for its approval evidence, in the form of a certified audit and
other pertinent information the commission may require, of the insurer's or
bonding company's ability to meet its contractual obligations].
(d) If a residential
service company's reimbursement insurance policy is issued by a captive
insurance company as defined by Section 964.001, Insurance Code, the
residential service company shall maintain a funded reserve of at least 25
percent of the reserve amount described by Subsection (a).
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No
equivalent provision.
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SECTION 7. Subchapter D,
Chapter 1303, Occupations Code, is amended by adding Section 1303.1525 to
read as follows:
Sec. 1303.1525. REIMBURSEMENT
INSURANCE POLICY. (a) An insurer that issues a reimbursement insurance
policy to a residential service company is considered to have received the
premiums for the policy on the dates contract holders pay for residential
service contracts issued by the residential service company.
(b) An insurer may not
cancel a reimbursement insurance policy until the insurer mails or delivers
a notice of cancellation to the executive director. The cancellation of the
policy does not affect the issuer's liability for a residential service
contract issued by the insured residential service company before the
effective date of the cancellation.
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SECTION 3. Section 1303.153,
Occupations Code, is amended to read as follows:
Sec. 1303.153. SECURITY
REQUIRED.
(a) As a guarantee that a
residential service company will meet its obligations to its contract
holders, the company shall maintain with the commission a bond or other
security accepted by the commission.
(b) A bond posted as security
must:
(1) be issued by a carrier
admitted in this state;
(2) be continuous;
(3) be cancellable by the
surety only after not less than 90 days' notice to the commission; and
(4) recognize that the
obligation continues for the terms of the residential service contracts
written by the residential service company while the bond is in force.
(c) Any security provided
under this section in a form other than a bond must be convertible to cash
by the commission for the benefit of contract holders in this state,
without resort to the courts, if the commission determines that the
residential service company is in default of its financial obligations to
the contract holders. Any amount remaining after all contract holders'
claims are paid must be returned to the residential service company not later
than the 120th day after the date the last outstanding residential service
contract expires.
(d) This section shall not be applicable to a
residential service company that
reinsures one hundred percent of its outstanding risk under residential service contracts
issued and outstanding in this
state in accordance with subsection (c)
of Section 1303.152.
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SECTION 8. Section 1303.153,
Occupations Code, is amended by amending Subsection (a) and adding
Subsection (d) to read as follows:
(a) Except as provided by Subsection (d),
as [As] a guarantee that a residential service company will meet
its obligations to its contract holders, the company shall maintain with
the commission a bond or other security accepted by the commission.
(d) This section does not apply to a residential service
company that uses a reimbursement
insurance policy to insure its outstanding residential service
contracts written in this state
in accordance with Section 1303.151(b).
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No
equivalent provision.
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SECTION 9. Section 1303.154,
Occupations Code, is amended by amending Subsection (a) and adding
Subsection (d) to read as follows:
(a) Except as provided by
Subsection (d), an [An] applicant for a new license must provide
security in the amount of $25,000. The amount of the security may not be
reduced before the residential service company files a second report under
Section 1303.202.
(d) This section does not
apply to a residential service company that uses a reimbursement insurance
policy to insure its outstanding residential service contracts written in
this state in accordance with Section 1303.151(b).
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No
equivalent provision.
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SECTION 10. Sections
1303.202(b) and (c), Occupations Code, are amended to read as follows:
(b) The report must:
(1) be on a form prescribed
by the commission;
(2) be verified by at least
two of the residential service company's principal officers; and
(3) include:
(A) [a] financial statements
[statement] of the residential service company, including its
balance sheet and receipts and disbursements for the preceding year,
certified as accurate by:
(i) an independent
public accountant; or
(ii) at least two of the
residential service company's principal officers, if the residential
service company uses a reimbursement insurance policy to insure its
outstanding residential service contracts written in this state in
accordance with Section 1303.151(b);
(B) any material change to
the information submitted under Section 1303.103;
(C) if the residential
service company maintains a reserve required by Section 1303.151(a),
the number of residential service contracts entered into during the year,
the number of contract holders as of the end of the year, and the number of
contracts terminating during the year; and
(D) any other information
that:
(i) relates to the
performance and solvency of the residential service company; and
(ii) is necessary for the
commission to perform its duties under this chapter.
(c) Any information [Information]
provided by a residential service company in connection with the report
required by this section or any midyear report required by the commission
[under Subsection (b)(3)(D)] is confidential and exempt from
disclosure under Chapter 552, Government Code. The commission may withhold
the information without the necessity of requesting a decision from the
attorney general under Subchapter G, Chapter 552, Government Code [:
[(1) confidential ; and
[(2) for the exclusive use
of the commission].
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No
equivalent provision.
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SECTION 11. Section 1303.251,
Occupations Code, is amended to read as follows:
Sec. 1303.251. CONTRACT
DELIVERY AND FILING [EVIDENCE OF COVERAGE]. (a) Each contract
holder residing in this state is entitled to receive a copy of the [evidence
of coverage under a] residential service contract not later than the
15th day after the date the contract holder pays for the residential
service contract or the effective date of the residential service contract,
whichever is later. The residential service company may provide
[that issued] the copy by mail, e-mail, or other means of
delivery acceptable to the commission [contract shall issue evidence
of coverage under the contract].
(b) A residential service
company shall file with the commission for approval [may not
issue or deliver evidence of coverage under] a residential service
contract, or an amendment to a previously filed residential service
contract that changes the residential service contract's coverage or
substantially amends a disclosure required by Section 1303.252 [evidence,
to a person in this state until a copy of the evidence or amendment is
filed with and approved by the commission].
(c) The commission may
require a residential service company to submit relevant information the
commission considers necessary to determine whether to approve or
disapprove a filing made under Subsection (b) [the company's
evidence of coverage].
(d) The commission shall
approve a filing made under Subsection (b) [residential service
company's evidence of coverage] if the requirements of this section and
Section 1303.252 are met.
(d-1) For a filing made
under Subsection (b) after a residential service company is licensed, the
commission shall have 30 days to consider the filing from the date of the
filing or the date that the commission receives any associated filing fee, whichever
is later. On the 31st day after that date, the filing is considered
approved unless the commission issues a written order disapproving the
filing or notifies the residential service company that the filing violates
this section or Section 1303.252.
(d-2) If the commission
notifies the residential service company that the filing violates this
section or Section 1303.252, the residential service company may submit a
response to that notification. On receipt of a response from the
residential service company, the commission shall have 30 days to
reconsider the filing. On the 31st day after the commission receives the
residential service company's response, the filing is considered approved
unless the commission issues a written order disapproving the filing.
(d-3) The commission may
not require a residential service company to waive a 30-day consideration
period provided by this section or make the approval of a filing contingent
on waiving a 30-day consideration period provided by this section.
(e) If the commission
disapproves a filing made under Subsection (b) [residential
service company's evidence of coverage], the commission shall notify
the company of the disapproval and in the notice shall specify in detail
the reason for the disapproval.
(f) A residential service
company whose filing under Subsection (b) [evidence of coverage]
is disapproved by the commission is entitled to a hearing conducted by
the State Office of Administrative Hearings [may request a hearing
on the commission's decision. If a hearing is requested, the commission
shall set a hearing on the decision as soon as reasonably possible. Not
later than the 60th day after the date of the hearing, the commission by
written order shall approve or disapprove the evidence. If the evidence is
disapproved, the commission shall state in the order the grounds for the
disapproval].
(g) A hearing under
Subsection (f) is governed by the contested case procedures under Chapter
2001, Government Code.
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No
equivalent provision.
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SECTION 12. Section 1303.252,
Occupations Code, is amended to read as follows:
Sec. 1303.252. FORM OF
CONTRACT AND REQUIRED DISCLOSURES [CONTENTS OF EVIDENCE OF COVERAGE].
(a) A residential service contract marketed, sold, offered for sale,
issued, made, proposed to be made, or administered in this state must be
written, printed, or typed in clear, understandable language that is easy
to read and must disclose the following [Evidence of coverage under
a residential service contract must contain a clear and complete statement,
if the evidence is a contract, or a reasonably complete facsimile, if the
evidence is a certificate, of]:
(1) the services or benefits
to which the contract holder is entitled;
(2) any limitation on the
services, kinds of services, or benefits to be provided, including a
deductible or co-payment provision;
(3) where and in what manner
information is available on how to obtain services;
(4) the period during which
the coverage is in effect;
(5) the residential service
company's agreement to perform services on the contract holder's telephone
request to the company, without a requirement that a claim form or
application be filed before the services are performed;
(6) the company's agreement
that, under normal circumstances, the company will initiate the performance
of services within 48 hours after the contract holder requests the
services; and
(7) any service fee to be
charged for a service call.
(b) A service fee under
Subsection (a)(7) is not required to be preprinted on the residential
service contract but must be disclosed in writing to the contract holder
before the purchase of the residential service contract.
(c) A residential service
contract insured under a reimbursement insurance policy in accordance with
Section 1303.151(b) must contain a statement substantially similar to the
following: "The residential service company's obligations under this
residential service contract are insured under a reimbursement insurance
policy." The residential service contract must also:
(1) state the name and
address of the insurer; and
(2) state that the
contract holder may apply for reimbursement directly to the insurer if a
covered service is not provided to the contract holder by the residential
service company before the 61st day after the date the contract holder
provides proof of loss.
(d) A residential service
contract [Evidence of coverage] may not contain a provision that
encourages misrepresentation or that is unjust, unfair, inequitable,
misleading, deceptive, or false.
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No
equivalent provision.
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SECTION 13. Section 1303.253,
Occupations Code, is amended to read as follows:
Sec. 1303.253. SCHEDULE OF
CHARGES. [(a)] A residential service company shall file [may
not use in conjunction with a residential service contract] a schedule
of charges for services covered under a residential service [the]
contract and any [or an] amendment to a previously filed
[that] schedule with the commission before implementation of the
schedule of charges or amendment. A filing made under this section is not
subject to prior approval and is made for informational purposes only [until
a copy of the schedule or amendment is filed with and approved by the
commission].
[(b) The commission shall
approve a schedule of charges if the commission determines that the
schedule is reasonably related to the amount, term, and conditions of the
contract.
[(c) If the commission
determines that the schedule of charges is not reasonably related to the
contract as described by Subsection (b), the commission may reject the
schedule. If the commission rejects the schedule, the commission shall
notify the company of the rejection and shall specify in detail the reason
for the rejection.
[(d) A residential service
company whose schedule of charges is rejected by the commission may request
a hearing on the commission's decision to be held as soon as reasonably
possible. Not later than the 60th day after the date of the hearing, the
commission by written order shall approve or reject the schedule. If the
schedule is rejected, the commission shall state in the order the grounds
for the rejection.]
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No
equivalent provision.
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SECTION 14. Section
1303.301(a), Occupations Code, is amended to read as follows:
(a) A residential service
company may not cause or permit the use of:
(1) a false or misleading
advertisement or solicitation; or
(2) any deceptive residential
service contract [evidence of coverage].
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No
equivalent provision.
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SECTION 15. Section
1303.352(a), Occupations Code, is amended to read as follows:
(a) The commission may discipline
a residential service company under Section 1303.351 if the continued
operation of the company would be hazardous to its contract holders or if
the company:
(1) operates in conflict with
its basic organizational document or in a manner that is contrary to that
described in and reasonably inferred from information submitted under
Section 1303.103, unless an amendment to the information has been filed
with and approved by the commission;
(2) issues a residential
service contract [evidence of coverage] that does not comply
with Sections 1303.251 and 1303.252;
(3) uses a schedule of
charges that has not been filed with the commission in accordance [does
not comply] with Section 1303.253;
(4) is not financially
responsible and may be reasonably expected to be unable to meet the
company's obligations to contract holders;
(5) did not comply with
Subchapter D;
(6) advertised or marketed
the company's services in a false, misrepresentative, misleading,
deceptive, or unfair manner; or
(7) otherwise did not substantially
comply with this chapter or a rule adopted under this chapter.
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SECTION 4. The change in law
made by this Act applies only to a contract entered into or renewed on or
after the effective date of this Act. A contract entered into or renewed
before that date is governed by the law in effect immediately before the
effective date of this Act, and that law is continued in effect for that
purpose.
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SECTION 16. The changes in
law made by this Act apply only to a residential
service contract entered into or renewed on or after the effective
date of this Act. A residential service
contract entered into or renewed before that date 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.
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SECTION 5. This Act takes
effect September 1, 2017.
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SECTION 17. Same as
introduced version.
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