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A BILL TO BE ENTITLED
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AN ACT
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relating to the regulation of residential service contracts. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Section 1303.002, Occupations Code, is amended |
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by adding Subdivisions (2-a) and (3-a) and amending Subdivision (5) |
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to read as follows: |
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(2-a) "Executive director" means the executive |
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director of the Texas Real Estate Commission. |
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(3-a) "Reimbursement insurance policy" means a policy |
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of insurance issued to a residential service company to: |
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(A) provide reimbursement to the residential |
|
service company under the terms of the insured residential service |
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contracts issued or sold by the residential service company; or |
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(B) pay on behalf of the residential service |
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company, in the event of the residential service company's |
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nonperformance, all covered contractual obligations incurred by |
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the residential service company under the terms of the insured |
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residential service contracts issued or sold by the residential |
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service company. |
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(5) "Residential service contract" means an agreement |
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that is entered into for a separately stated consideration and for a |
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specified term under which [, in exchange for a fee,] a person |
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agrees to, in the event of the operational or structural failure of |
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or damage caused by a defect in materials or workmanship or by |
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normal wear to [undertakes for a specified period to maintain,
|
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repair, or replace all or any part of] a structural component, an |
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appliance, or an electrical, plumbing, heating, cooling, or |
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air-conditioning system of a residential property that is attached |
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to or located on the residential property: |
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(A) [. The term does not include a service or
|
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maintenance agreement sold, offered for sale, or issued by a
|
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manufacturer or merchant under which the manufacturer or merchant
|
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undertakes to] maintain, repair, or replace all or any part of the |
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[a product or part of a product, including a] structural component, |
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[an] appliance, or [an] electrical, plumbing, heating, cooling, or |
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air-conditioning system; |
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(B) provide incidental payment of indemnity |
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under limited circumstances, including food spoilage; or |
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(C) provide payment instead of repair when a |
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part, structural component, appliance, or service provider or |
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technician is unavailable [of a residential property, that is:
|
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[(A)
manufactured or sold by the manufacturer or
|
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merchant; or
|
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[(B)
installed by the merchant in a building or
|
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residence]. |
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SECTION 2. Section 1303.052(b), Occupations Code, is |
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amended to read as follows: |
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(b) A residential service company shall pay to the |
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commission a fee for: |
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(1) filing a [an annual] report under Section |
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1303.202; and |
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(2) any other filing required by this chapter. |
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SECTION 3. Section 1303.053, Occupations Code, is amended |
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by adding Subsection (c) to read as follows: |
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(c) Information prepared or compiled by the commission |
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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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SECTION 4. Section 1303.103, Occupations Code, is amended |
|
by amending Subsection (b) and adding Subsection (d) to read as |
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follows: |
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(b) Each application for a license must contain or be |
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accompanied by: |
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(1) a copy of the articles of incorporation, articles |
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of association, partnership agreement, trust agreement, or any |
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other basic organizational document of the applicant; |
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(2) a copy of any amendment to the applicant's basic |
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organizational document; |
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(3) a copy of any bylaws, rules, or other similar |
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document that regulates the conduct of the applicant's internal |
|
affairs; |
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(4) the name, address, and official position of each |
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person who will be responsible for the conduct of the applicant's |
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affairs, including: |
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(A) each member of the board of directors, board |
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of trustees, executive committee, or other governing body or |
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committee of the applicant; |
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(B) the applicant's principal officer, if the |
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applicant is a corporation; and |
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(C) each partner or member of the applicant, if |
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the applicant is a partnership or association; |
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(5) a copy of the residential service contract made or |
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to be made between the applicant and another person; |
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(6) a general description of the residential service |
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contract or the contract's coverage or plan; |
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(7) the most recent [a] financial statements for the |
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applicant [statement that]: |
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(A) that are [is]: |
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(i) prepared by an independent certified |
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public accountant; or |
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(ii) certified as accurate by at least two |
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of the residential service company's principal officers, if the |
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residential service company uses a reimbursement insurance policy |
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to insure its outstanding residential service contracts written in |
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this state in accordance with Section 1303.151(b) [within six
|
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months preceding the date the application is submitted]; and |
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(B) that show [shows] the applicant's assets, |
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liabilities, and sources of financial support; |
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(8) a description of the applicant's proposed method |
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of marketing a residential service contract; |
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(9) a statement regarding the applicant's sources of |
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working capital and any other funding sources; |
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(10) if the applicant is not domiciled in this state, a |
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power of attorney appointing the executive director |
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[administrator] and the executive director's [administrator's] |
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successors in office, or the executive director's [administrator's] |
|
authorized deputy, as the applicant's agent for service of process |
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in this state in a legal action arising in this state against the |
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applicant or the applicant's agents; and |
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(11) any other information the commission requires to |
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make a determination required by this chapter. |
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(d) The commission shall maintain the confidentiality of |
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information submitted to the commission by an applicant under this |
|
section that is claimed to be confidential for competitive |
|
purposes. The confidential information is 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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SECTION 5. Section 1303.151, Occupations Code, is amended |
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to read as follows: |
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Sec. 1303.151. RESERVE OR REIMBURSEMENT INSURANCE POLICY |
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REQUIRED. (a) Except as provided by Subsection (b), a [A] |
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residential service company shall maintain a funded reserve against |
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its liability to provide repair and replacement services under its |
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outstanding residential service contracts written in this state. |
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(b) Except as provided by Section 1303.152(d), a |
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residential service company is not required to maintain a funded |
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reserve if it insures all of its risk under its outstanding |
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residential service contracts written in this state under a |
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reimbursement insurance policy issued by: |
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(1) an admitted insurer; or |
|
(2) a surplus lines insurer or a surplus lines bonding |
|
company if the insurer or bonding company: |
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(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 |
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company's ability to meet its contractual obligations. |
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SECTION 6. Section 1303.152, Occupations Code, is amended |
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by amending Subsection (c) and adding Subsection (d) to read as |
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follows: |
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(c) For purposes of this chapter, to the extent a |
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residential service company uses a reimbursement insurance policy |
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described by Section 1303.151(b) to insure an outstanding |
|
residential service contract written in this state, the company's |
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reserve is not required to include a contract fee on the [a] |
|
residential service contract [to the extent that provision is made
|
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for reinsurance of the outstanding risk on the contract by:
|
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[(1)
a residential service company licensed in this
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state;
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[(2) an admitted insurer; or
|
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[(3)
a surplus line insurer or a surplus line bonding
|
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company if the insurer or bonding company:
|
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[(A)
is rated A+ or better by a rating service
|
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recognized by the commission; and
|
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[(B)
submits to the commission for its approval
|
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evidence, in the form of a certified audit and other pertinent
|
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information the commission may require, of the insurer's or bonding
|
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company's ability to meet its contractual obligations]. |
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(d) If a residential service company's reimbursement |
|
insurance policy is issued by a captive insurance company as |
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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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SECTION 7. Subchapter D, Chapter 1303, Occupations Code, is |
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amended by adding Section 1303.1525 to read as follows: |
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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. |
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(b) An insurer may not cancel a reimbursement insurance |
|
policy until the insurer mails or delivers a notice of cancellation |
|
to the commission. 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 8. Section 1303.153, Occupations Code, is amended |
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by amending Subsection (a) and adding Subsection (d) to read as |
|
follows: |
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(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. |
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(d) This section does not apply to a residential service |
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company that uses a reimbursement insurance policy to insure its |
|
outstanding residential service contracts written in this state in |
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accordance with Section 1303.151(b). |
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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: |
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(a) Except as provided by Subsection (d), an [An] applicant |
|
for a new license must provide security in the amount of $25,000. |
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The amount of the security may not be reduced before the residential |
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service company files a second report under Section 1303.202. |
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(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 |
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accordance with Section 1303.151(b). |
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SECTION 10. Section 1303.202, Occupations Code, is amended |
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to read as follows: |
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Sec. 1303.202. [ANNUAL] REPORT. (a) The commission may |
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adopt rules requiring [Not later than April 1 of each year,] each |
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residential service company to [shall] file with the commission a |
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report that meets the requirements in Subsection (b) [covering the
|
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preceding calendar year]. |
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(b) The report must: |
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(1) be on a form prescribed by the commission; |
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(2) be verified by at least two of the residential |
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service company's principal officers; and |
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(3) include: |
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(A) [a] financial statements [statement] of the |
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residential service company, including its balance sheet and |
|
receipts and disbursements for the preceding year, certified as |
|
accurate by: |
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(i) an independent public accountant; or |
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(ii) at least two of the residential |
|
service company's principal officers, if the residential service |
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company 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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(B) any material change to the information |
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submitted under Section 1303.103, except an amendment to a |
|
residential service contract filed with the commission under |
|
Section 1303.251; |
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(C) if the residential service company maintains |
|
a reserve required by Section 1303.151(a), the number of |
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residential service contracts entered into during the year, the |
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number of contract holders as of the end of the year, and the number |
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of contracts terminating during the year; and |
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(D) any other information that: |
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(i) relates to the performance and solvency |
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of the residential service company; and |
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(ii) is necessary for the commission to |
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perform its duties under this chapter. |
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(c) The commission shall maintain the confidentiality of |
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information [Information] provided to the commission by a |
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residential service company under this section that [Subsection
|
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(b)(3)(D)] is claimed to be confidential for competitive purposes. |
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The confidential information is exempt from disclosure under |
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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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[(1) confidential ; and
|
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[(2) for the exclusive use of the commission]. |
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SECTION 11. Section 1303.251, Occupations Code, is amended |
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to read as follows: |
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Sec. 1303.251. CONTRACT DELIVERY AND FILING [EVIDENCE OF
|
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COVERAGE]. (a) Each contract holder residing in this state is |
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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
|
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coverage under the contract]. |
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(b) A residential service company shall file with the |
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commission for approval [may not issue or deliver evidence of
|
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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
|
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this state until a copy of the evidence or amendment is filed with
|
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and approved by the commission]. |
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(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]. |
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(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. |
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(d-1) For a filing made under Subsection (b) after a |
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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 disapproves the filing or |
|
notifies the residential service company in writing 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 written response to |
|
that notification. The commission shall have 30 days to reconsider |
|
the filing from the date that the commission receives the |
|
residential service company's written response. On the 31st day |
|
after the commission receives the residential service company's |
|
written response, the filing is considered approved unless the |
|
commission disapproves the filing. If the residential service |
|
company does not respond in writing before the 61st day after being |
|
notified by the commission that the filing violates this section or |
|
Section 1303.252, the filing is automatically disapproved. |
|
(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. |
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(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. |
|
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. |
|
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 with the commission [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 before implementation of the schedule of charges or |
|
amendment [until a copy of the schedule or amendment is filed with
|
|
and approved by the commission]. |
|
(b) A filing made under Subsection (a) by 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) is not subject to |
|
approval by the commission and is made for informational purposes |
|
only. |
|
(c) A filing made under Subsection (a) by a residential |
|
service company that maintains a reserve required by Section |
|
1303.151(a) may not be implemented until approved by the |
|
commission. |
|
(d) The commission shall approve a filing made under |
|
Subsection (a) [schedule of charges] if the commission determines |
|
that the filing [schedule] is reasonably related to the amount, |
|
term, and conditions of the contract to which the filing applies. |
|
(e) [(c)] If the commission determines that a filing made |
|
under Subsection (a) [the schedule of charges] is not reasonably |
|
related to the contract as described by Subsection (d) [(b)], the |
|
commission may disapprove [reject] the filing [schedule]. If the |
|
commission disapproves [rejects] the filing [schedule], the |
|
commission shall notify the company of the disapproval [rejection] |
|
and shall specify in detail the reason for the disapproval |
|
[rejection]. |
|
(f) For a filing made under Subsection (a) by a residential |
|
service company described by Subsection (c) after the 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 disapproves the filing or notifies the |
|
residential service company in writing that the filing is not |
|
reasonably related to the amount, term, and conditions of the |
|
contract to which the filing applies. |
|
(g) If the commission notifies the residential service |
|
company that the filing is not reasonably related to the amount, |
|
term, and conditions of the contract to which the filing applies, |
|
the residential service company may submit a written response to |
|
that notification. The commission shall have 30 days to reconsider |
|
the filing from the date that the commission receives the |
|
residential service company's written response. On the 31st day |
|
after the commission receives the residential service company's |
|
written response, the filing is considered approved unless the |
|
commission disapproves the filing. If the residential service |
|
company does not respond in writing before the 61st day after being |
|
notified by the commission that the filing is not reasonably |
|
related to the amount, term, and conditions of the contract to which |
|
the filing applies, the filing is automatically disapproved. |
|
(h) 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. |
|
(i) [(d)] A residential service company whose filing under |
|
Subsection (a) [schedule of charges] is disapproved [rejected] by |
|
the commission is entitled to [may request] a hearing conducted by |
|
the State Office of Administrative Hearings [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.] |
|
(j) A hearing under Subsection (i) is governed by the |
|
contested case procedures under Chapter 2001, Government Code. |
|
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]. |
|
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 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 16. The changes in law made by this Act apply only |
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to a residential service contract entered into or renewed on or |
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after the effective date of this Act. A residential service |
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contract entered into or renewed before that date is governed by the |
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law as it existed immediately before the effective date of this Act, |
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and that law is continued in effect for that purpose. |
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SECTION 17. This Act takes effect January 1, 2018. |
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