Texas Insurance Code - Not Codified - Article 21.49. Catastrophe Property Insurance Pool Act
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Art. 21.49. CATASTROPHE PROPERTY INSURANCE POOL ACT.
Article repealed effective April 1, 2007
Declaration and Purpose
Sec. 1. It is hereby declared by the Legislature that an
adequate market for windstorm, hail and fire insurance is necessary
to the economic welfare of the State of Texas and that without such
insurance the orderly growth and development of the State of Texas
would be severely impeded. It is therefore the purpose of this Act
to provide a method whereby adequate windstorm, hail and fire
insurance may be obtained in certain designated portions of the
State of Texas.
Name of Act
Sec. 2. This Act shall be known as the "Texas Windstorm
Insurance Association Act."
Definitions
Sec. 3. In this Act, unless the context clearly dictates to
the contrary:
(a) "Board" means the State Board of Insurance of the State
of Texas.
(b) "Association" means the Texas Windstorm Insurance
Association as established pursuant to the provisions of this Act.
(c) "Plan of Operation" means the plan for providing Texas
windstorm and hail insurance in a catastrophe area and Texas fire
and explosion insurance in an inadequate fire insurance area which
plan has been adopted by the Board for operation by the Association
pursuant to the provisions of this Act, which plan may, among other
things, provide for limits of liability for each structure insured,
and/or the corporeal movable property located therein.
(d) "Texas Windstorm and Hail Insurance" means deductible
insurance against direct loss, and indirect losses resulting from a
direct loss, to insurable property as a result of windstorm or hail,
as such terms shall be defined and limited in policies and forms
approved by the State Board of Insurance.
(e) "Texas Fire and Explosion Insurance" means insurance
against direct loss to insurable property as a result of fire and
explosion as such terms shall be defined and limited in policies and
forms approved by the State Board of Insurance.
(f) "Insurable Property" means immovable property at fixed
locations in a catastrophe area or corporeal movable property
located therein (as may be designated in the plan of operation)
which property is determined by the Association, pursuant to the
criteria specified in the plan of operation to be in an insurable
condition against windstorm, hail and/or fire and explosion as
appropriate, as determined by normal underwriting standards;
provided, however, that insofar as windstorm and hail insurance is
concerned, any structure located within a catastrophe area,
commenced on or after the 30th day following the publication of the
plan of operation, not built or continuing in compliance with
building specifications set forth in the plan of operation shall
not be an insurable risk under this Act except as otherwise provided
under this Act. A structure, or an addition thereto, which is
constructed in conformity with plans and specifications that comply
with the specifications set forth in the plan of operation at the
time construction commences shall not be declared ineligible for
windstorm and hail insurance as a result of subsequent changes in
the building specifications set forth in the plan of operation.
Except as otherwise provided by this subsection, if repair of
damage to a structure involves replacement of items covered in the
building specifications as set forth in the plan of operation, such
repairs must be completed in a manner to comply with such
specifications for the structure to continue within the definition
of Insurable Property for windstorm and hail insurance. If repair
to a structure, other than a roof repair that exceeds 100 square
feet, is less than five percent of the amount of total property
coverage on the structure, the repairs may be completed in a manner
that returns the structure to its condition immediately before the
loss without affecting the eligibility of the structure to qualify
as insurable property. Nothing in this Act shall preclude special
rating of individual risks as may be provided in the plan of
operation. For purposes of this Act, all residential structures,
other than a condominium, apartment, duplex, or other multifamily
residence, or a hotel or resort facility, which are located within
those areas designated as units under the federal Coastal Barrier
Resources Act (Public Law 97-348) and for which a building permit
or plat has been filed with the municipality, the county, or the
United States Army Corps of Engineers before June 11, 2003, are
insurable property. "Insurable Property" includes property
described by Section 3A of this article.
(g) "Net Direct Premiums" means gross direct written
premiums less return premiums upon canceled contracts
(irrespective of reinsurance assumed or ceded) written on property
in this State as defined by the Board of Directors of the
Association.
(h) "Catastrophe Area" means a city or a part of a city or a
county or a part of a county in which it may be determined by the
commissioner, after notice of not less than 10 days and a hearing,
that windstorm and hail insurance is not reasonably available to a
substantial number of owners of insurable property within that city
or a part of that city or a county or a part of that county, due to
such insurable property being located within a city or a part of
that city or a county or a part of that county that is subject to
unusually frequent and severe damage resulting from windstorms
and/or hailstorms. Such designation shall be revoked by the
commissioner if the commissioner determines, after notice of not
less than 10 days and a hearing, that windstorm and hail insurance
in such catastrophe area is no longer reasonably unavailable to a
substantial number of owners of insurable property within such
designated city or a part of that city or county or a part of that
county. If the Association shall determine that windstorm and hail
insurance is no longer reasonably unavailable to a substantial
number of owners of insurable property in any designated
catastrophe area or areas, then the Association may request in
writing that the commissioner revoke the designation of any or all
of such catastrophe areas and, after notice of not less than 10 days
and a hearing, but within 30 days of such hearing, the commissioner
shall either approve or reject the Association's request and shall,
if such request be approved, revoke such designation or
designations.
(i) "Inadequate Fire Insurance Area" means a city or county
which is, or is within an area, designated as a catastrophe area, as
defined in Paragraph (h), above, and in which it may be determined
by the Board, after notice of not less than 10 days and a hearing,
that fire and explosion insurance is not reasonably available to a
substantial number of owners of insurable property within such city
or county. Such designation shall be revoked by the Board if it
determines, after 10 days' notice and a hearing, that fire and
explosion insurance in such inadequate fire insurance area is no
longer reasonably unavailable to a substantial number of owners of
insurable property within such designated city or county. If the
Association shall determine that fire and explosion insurance is no
longer reasonably unavailable to a substantial number of owners of
insurable property in any designated inadequate fire insurance area
or areas, then the Association may request in writing that the Board
revoke the designation of any or all such inadequate fire insurance
areas, and, after notice of not less than 10 days and a hearing, but
within 30 days of such hearing, the Board shall either approve or
reject the Association's request and shall, if such request is
approved, revoke such designation or designations.
(j) "Insurance" as hereinafter used in this Act shall mean
the types of insurance described in Paragraphs (d) and (e) of this
Section 3.
(k) "Insurers" means all property insurers authorized to
transact property insurance in this State and specifically includes
and makes this Act applicable to county mutual companies, Lloyds
and reciprocal or interinsurance exchanges, but shall not include:
(1) farm mutual insurance companies operating under Chapter
911 of this Code;
(2) nonaffiliated county mutual fire insurance companies
described by Section 912.310 of this code which are writing
exclusively industrial fire insurance policies as described by
Subsection (a)(2) of that section; and
(3) any companies now operating under Chapters 12 and 13 of
Title 78 of the Revised Civil Statutes of Texas, 1925, as amended,
which have heretofore been repealed.
(l) "First Tier Coastal County" means:
(1) Aransas County;
(2) Brazoria County;
(3) Calhoun County;
(4) Cameron County;
(5) Chambers County;
(6) Galveston County;
(7) Jefferson County;
(8) Kenedy County;
(9) Kleberg County;
(10) Matagorda County;
(11) Nueces County;
(12) Refugio County;
(13) San Patricio County; or
(14) Willacy County.
(m) "Second Tier Coastal County" means:
(1) Bee County;
(2) Brooks County;
(3) Fort Bend County;
(4) Goliad County;
(5) Hardin County;
(6) Harris County;
(7) Hidalgo County;
(8) Jackson County;
(9) Jim Wells County;
(10) Liberty County;
(11) Live Oak County;
(12) Orange County;
(13) Victoria County; or
(14) Wharton County.
(n) "Seacoast Territory" means the area of this state
composed of the first tier coastal counties and the second tier
coastal counties.
(o) "New building code" means any new building standard,
specification, or guideline adopted by the commissioner after May
1, 1997, that must be met before any new residential construction
qualifies for a certificate of compliance that is evidence of
insurability of the structure by the Association.
Coverage for Certain Property Located Over Water
Sec. 3A. (a) A policy of windstorm and hail insurance issued
by the association may include coverage for:
(1) a building or other structure located in the seacoast
territory that is built wholly or partially over water; and
(2) the corporeal movable property contained in a building
or structure described by Subdivision (1) of this subsection.
(b) The association may impose appropriate limits of
coverage and deductibles for coverage described by Subsection (a)
of this section.
(c) The board of directors of the association shall submit
any proposed changes to the plan of operation necessary to
implement Subsections (a) and (b) of this section to the
commissioner in the manner provided by Section 5(c) of this
article.
(d) The commissioner shall adopt rules as necessary to
implement this section, including any rules necessary to implement
changes in the plan of operation proposed under Subsection (c) of
this section.
Creation of the Texas Windstorm Insurance Association
Sec. 4. (a) The Association which is hereby created shall
consist of all property insurers authorized to transact property
insurance in this State, except those companies that are prevented
by law from writing coverages available through the pool on a
Statewide basis. Every such insurer shall be a member of the
Association and shall remain a member of the Association so long as
the Association is in existence, as a condition of its authority to
transact the business of insurance in this State. Any insurer which
ceases to be a member of the Association shall remain liable on
contracts of insurance entered into during its membership in the
Association to the same extent and effect as if its membership in
the Association had not been terminated.
(b) The organizational plan of certain types of insurers
precludes such insurers from writing insurance coverage for the
State of Texas, any city, political subdivision or agency of the
State. When insuring property of the State of Texas, any city,
political subdivision or agency of the State, the Association shall
not cause such policies to be issued in such companies, nor shall
such companies be included as reinsurers for any policies of
insurance in this category.
(c) No part of the net earnings of the association may inure
to the benefit of any private shareholder or individual. The assets
of the association may not be used for or diverted to any purpose
other than to:
(1) satisfy, in whole or in part, the liability of the
association regarding a claim made on a policy written by the
association;
(2) make investments authorized under applicable law;
(3) pay reasonable and necessary administrative expenses
incurred in connection with the establishment and operation of the
association and the processing of claims against the association;
or
(4) make remittances under the laws of this state to be used
by this state to:
(A) pay claims on policies written by the association;
(B) purchase reinsurance covering losses under those
policies; or
(C) prepare for or mitigate the effects of catastrophic
natural events.
(d) On dissolution of the association, all assets of the
association revert to this state.
Operation of the Texas Windstorm Insurance Association;
Association Board of Directors
Sec. 5. (a) The Association shall, pursuant to the provisions
of this Act and the plan of operation, and with respect to insurance
on insurable property, have the power on behalf of its members to
cause to be issued policies of insurance to applicants, to assume
reinsurance from its members, and to cede reinsurance to its
members and to purchase reinsurance on behalf of its members.
(b) All members of the Association shall participate in its
writings, expenses, profits and losses in the proportion that the
net direct premiums of such member written in this State during the
preceding calendar year bears to the aggregate net direct premiums
written in this State by all members of the Association, as
furnished to the Association by the Board after review of annual
statements, other reports and other statistics the Board shall deem
necessary to provide the information herein required and which the
Board is hereby authorized and empowered to obtain from any member
of the Association, provided, however, that a member shall, in
accordance with the plan of operation, be entitled to receive
credit for similar insurance voluntarily written in the area
designated by the Board and its participation in the writings in the
Association shall be reduced in accordance with the provisions of
the plan of operation. Each member's participation in the
Association shall be determined annually in the manner provided in
the plan of operation. For purposes of determining participation
in the Association, two or more members having a common ownership or
operating in this State under common management or control shall be
treated as if they constituted a single member and also shall
include the net direct premiums, as defined by this article, of any
affiliated insurance company that is under such common management
or control including affiliated insurance companies that are not
authorized to transact property insurance in this State. Any
insurer authorized to write and engaged in writing any insurance,
the writing of which required such insurer to be a member of the
Association, who becomes authorized to engage in writing such
insurance shall become a member of the Association on the 1st day of
January immediately following such authorization and the
determination of such insurer's participation in the Association
shall be made as of the date of such membership in the same manner as
for all other members of the Association.
(c) The plan of operation of the Association shall provide
for the efficient, economical, fair, and nondiscriminatory
administration of the Association. The Board by rule shall adopt
the plan of operation with the advice of the board of directors of
the Association. The Association may present recommended changes
in the plan of operation to the Board at periodic hearings conducted
by the Board for that purpose, or at hearings relating to property
and casualty insurance rates. The Association must present a
proposed change to the Board in writing in the manner prescribed by
the Board. A change proposed by the Association does not take
effect unless adopted by the Board by rule.
(d) The plan of operation must include:
(1) a plan for the equitable assessment of the members of
the Association to defray losses and expenses;
(2) underwriting standards;
(3) procedures for the acceptance and cession of
reinsurance;
(4) procedures for determining the amount of insurance to be
provided to specific risks;
(5) time limits and procedures for processing applications
for insurance; and
(6) other provisions as deemed necessary by the Board to
carry out the purposes of this Act.
(e) The Board may develop programs to improve the efficient
operation of the Association, including a program designed to
create incentives for insurers to write windstorm and hail
insurance voluntarily to cover property located in a catastrophe
area, especially property located on the barrier islands.
(f) Any interested person may petition the Board to modify
the plan of operation in accordance with the Administrative
Procedure and Texas Register Act (Article 6252-13a, Vernon's Texas
Civil Statutes).
(g) The board of directors of the Association is responsible
and accountable to the Board. The board of directors is composed of
nine members as follows:
(1) five representatives of different insurers who are
members of the Association who shall be elected by members as
provided in the plan of operation;
(2) two representatives of the general public, nominated by
the office of public insurance counsel, who, as of the date of the
appointment, reside in a catastrophe area and who are
policyholders, as of the date of the appointment, of the
Association; and
(3) two local recording agents licensed under this Code with
demonstrated experience in the Association, and whose principal
offices, as of the date of the appointment, are located in a
catastrophe area.
(h) Members of the board of directors of the Association
serve three-year staggered terms, with the terms of three members
expiring on the third Tuesday of March of each year. A person may
hold a seat on the board of directors for not more than three
consecutive full terms, not to exceed nine years.
(i) The persons appointed as provided by Subsections (g)(2)
and (g)(3) of this section must be from different counties.
(j) The board of directors of the Association shall elect an
executive committee consisting of a chairman, vice-chairman, and
secretary-treasurer from its membership. At least one of those
officers must be a member appointed under Subsection (g)(2) or
Subsection (g)(3) of this section.
(k) Except for an emergency meeting of the Association or
the board of directors of the Association, the Association shall
notify the Board not later than the 11th day before the date of each
meeting of the board of directors of the Association or a meeting of
the members of the Association. Except for closed or executive
sessions authorized by Section 2, Chapter 271, Acts of the 60th
Legislature, Regular Session, 1967 (Article 6252-17, Vernon's
Texas Civil Statutes), meetings of the board of directors of the
Association and members of the Association shall be open to any
member of the Board or the member's designated representative and
to members of the public. Notice of meetings of the Association or
board of directors of the Association shall be given as provided by
Chapter 271, Acts of the 60th Legislature, Regular Session, 1967
(Article 6252-17, Vernon's Texas Civil Statutes).
(l) If an occurrence or series of occurrences within the
defined catastrophe area results in insured losses that result in
tax credits under Section 19(4) of this article in a single calendar
year, the Association shall immediately notify the Board of that
fact. The Board on receiving notice shall immediately notify the
Governor and appropriate committees of each house of the
Legislature of the amount of insured losses eligible for tax
credits under Section 19(4) of this article.
(m) After January 1, 2004, for geographic areas specified by
the commissioner, the commissioner by rule may supplement the
building specifications in the plan of operation with the
structural provisions of the International Residential Code for
one- and two-family dwellings, as published by the International
Code Council, or by an analogous entity recognized by the
department. For those specified geographic areas, the commissioner
by rule may adopt subsequent editions of that code and may adopt any
supplements published by the International Code Council and
amendments to that code.
Board Orders
Sec. 5A. (a) After notice and a hearing as provided in
Subsection (b) of this section, the Board may issue any orders which
it considers necessary to carry out the purposes of this Act
including, but not limited to, maximum rates, competitive rates,
and policy forms.
(b) Before an order is adopted by the Board, it shall post
notice of a hearing on the order at the Secretary of State's office
in the State Capitol and shall hold a hearing to consider the
proposed order. Any person may appear and testify for or against
the adoption of the order.
Examination of association
Sec. 5B. (a) The association is subject to Articles 1.15 and
1.16 of this code.
(b) A final examination report of the Association resulting
from an examination under this section is a public record and
available to the public at the Board's offices pursuant to the open
records law, Chapter 424, Acts of the 63rd Legislature, Regular
Session, 1973 (Article 6252-17a, Vernon's Texas Civil Statutes).
(c) Repealed by Acts 1997, 75th Leg., ch. 879, Sec. 10(2),
eff. Sept. 1, 1997.
Eligibility: Application
Sec. 6. (a) Any person having an insurable interest in
insurable property located in an area designated by the Board shall
be entitled to apply to the Association for insurance provided for
under the plan of operation and for an inspection of the property
under such rules and regulations, including an inspection fee, if
any, as determined by the Board of Directors of the Association and
approved by the State Board of Insurance. The term "insurable
interest" as used in this subsection shall be deemed to include any
lawful and substantial economic interest in the safety or
preservation of property from loss, destruction or pecuniary
damage. Application shall be made on behalf of the applicant by a
Local Recording Agent and shall be submitted on forms prescribed by
the Association. The application shall contain a statement as to
whether or not the applicant has or will submit the premium in full
from personal funds, or if not, to whom a balance is or will be due.
(b) If the Association determines that the property is
insurable, the Association, upon payment of the premium, shall
cause to be issued a policy of insurance as may be provided in the
plan for a term of one year.
In the event an agent or some other person, firm, or
corporation shall finance the payment of all or a portion of the
premium and there is a balance due for the financing of such premium
and such balance, or any installment thereof, is not paid within 10
days after the due date, the agent or other person, firm, or
corporation to whom such balance is due may request cancellation of
the insurance by returning the policy, with proof that the insured
was notified of such return, or by requesting the Association to
cancel such insurance by notice mailed to the insured and any others
shown in the policy as having an insurable interest in the property.
Upon completion of cancellation, the Association shall refund the
unearned premium, less any minimum retained premium set forth in
the plan of operation, to the person, firm, or corporation to whom
the unpaid balance is due. In the event an insured requests
cancellation of insurance, the Association shall make refund of
such unearned premium payable to the insured and the holder of an
unpaid balance. The Local Recording Agent, who submitted the
application, shall refund the commission on any unearned premium in
the same manner.
(c) Any policy issued pursuant to the provisions of this Act
may be renewed annually, upon application therefor, so long as the
property continues to meet the definition of "insurable property"
set forth in Section 3 of this Act.
(d) Deleted by Acts 1973, 63rd Leg., p. 1043, ch. 406, Sec.
4.
Inspections for windstorm and hail insurance
Sec. 6A. (a) Except as otherwise provided by this Subsection,
all structures that are constructed or repaired or to which
additions are made on or after January 1, 1988, to be considered
insurable property for windstorm and hail insurance from the
Association, must be inspected or approved by the Board for
compliance with the plan of operation. After January 1, 2004, for
geographic areas specified by the commissioner, the commissioner by
rule shall adopt the 2003 International Residential Code for one-
and two-family dwellings published by the International Code
Council. For those geographic areas, the commissioner by rule may
adopt a subsequent edition of that code and may adopt any
supplements published by the International Code Council and
amendments to the code. A structure constructed, repaired, or to
which additions were made before January 1, 1988, that is located in
an area covered at the time by a building code recognized by the
Association shall be considered an insurable property for windstorm
and hail insurance from the Association without compliance with the
inspection or approval requirements of this Section or the plan of
operation. A structure constructed, repaired, or to which
additions were made before January 1, 1988, that is located in an
area not covered by a building code recognized by the Association
shall be considered an insurable property for windstorm and hail
insurance from the Association without compliance with the
inspection or approval requirements of this Section or the plan of
operation if that structure has been previously insured by a
licensed insurance company authorized to do business in this State
and the risk is in essentially the same condition as when previously
insured, except for normal wear and tear, and without any
structural change other than a change made according to code.
Evidence of previous insurance includes a copy of a previous
policy, copies of canceled checks or agent's records that show
payments for previous policies, and a copy of the title to the
structure or mortgage company records that show previous policies.
After January 1, 2004, a person must submit a notice of a windstorm
inspection to the unit responsible for certification of windstorm
inspections at the department before beginning to construct, alter,
remodel, enlarge, or repair a structure.
(b) The Board shall issue for each structure that qualifies
a certificate of compliance that is evidence of insurability of the
structure by the Association.
(c) Repealed by Acts 2003, 78th Leg., ch. 206, Sec. 9.06,
eff. Jan. 1, 2004.
(d) A windstorm inspection may only be performed by a
qualified inspector. For purposes of this article, a "qualified
inspector" includes:
(1) a person determined by the department to be qualified to
perform building inspections because of training or experience;
(2) a licensed professional engineer meeting the
requirements of the rules adopted by the commissioner for
appointment to conduct windstorm inspections; and
(3) an inspector who is certified by the International Code
Council, the Building Officials and Code Administrators
International, Inc., the International Conference of Building
Officials, or the Southern Building Code Congress International,
Inc., who has certifications as a buildings inspector and coastal
construction inspector, and who also complies with other
requirements specified by rule by the commissioner. A qualified
inspector must be approved and appointed or employed by the
department to perform building inspections. The department may
charge a reasonable fee for the filing of applications and
determining the qualifications of persons for appointment as
qualified inspectors.
(e) Repealed by Acts 2003, 78th Leg., ch. 206, Sec. 9.06,
eff. Jan. 1, 2004.
(f) Repealed by Acts 1999, 76th Leg., ch. 592, Sec. 2, eff.
Sept. 1, 1999.
(g) The Board may make agreements and contracts as necessary
to effect the provisions of this Section.
(h) The department may charge a reasonable fee to cover the
cost of making building requirements and inspection standards
available to the public.
(i) All fees collected by the Board under this Section shall
be deposited in the State Treasury to the credit of the State Board
of Insurance operating fund.
(j) After notice and hearing, the department may cancel or
revoke an appointment made under this Section if the holder of the
appointment is found to be in violation of, or to have failed to
comply with, specific provisions of this Section or any rule or
regulation of the commissioner made under this Section. In lieu of
cancellation or revocation, the commissioner may order one or more
of the following sanctions, if the commissioner determines from the
facts that it would be fair, reasonable, or equitable:
(1) suspending the appointment for a specific period, not to
exceed one year;
(2) an order directing the holder of the appointment to
cease and desist from the specified activity determined to be in
violation of specific provisions of this Section or rules and
regulations of the commissioner made pursuant to this Section or
from failing to comply with those provisions of this Section or the
rules and regulations promulgated under this Section; or
(3) if the appointed person is found by the commissioner to
have knowingly, wilfully, fraudulently, or with gross negligence
signed or caused to be prepared an inspection report that contains a
false, fictitious, or fraudulent statement or entry, directing the
appointed person to remit within a specified time, not to exceed 60
days, a specified monetary forfeiture not to exceed $5,000 for the
violation or failure to comply.
(j-1) If an appointed person is an engineer licensed by the
Texas Board of Professional Engineers who is found by the
department to have knowingly, wilfully, fraudulently, or with gross
negligence signed or caused to be prepared an inspection report
that contains a false or fraudulent statement or entry, the
commissioner may take action against the appointed person in the
manner provided by Subsection (j) of this Section, but may not levy
any monetary fine against an appointed person who is a licensed
engineer.
(k) A monetary forfeiture paid as a result of an order
issued under Subsection (j)(3) of this Section shall be deposited
to the credit of the general revenue fund. If it is found after
hearing that any appointed person has failed to comply with an order
issued under Subsection (j) of this Section, the department shall,
unless the order is lawfully stayed, cancel the appointment of the
person. The department may informally dispose of any matter under
Subsection (j) of this Section by consent order or default.
(k-1) The commissioner shall notify the Texas Board of
Professional Engineers of each order issued by the commissioner
against an appointed person who is an engineer licensed by the Texas
Board of Professional Engineers, including an order suspending,
canceling, or revoking the appointment of that person.
Assessment for Inspections
Sec. 6B. (a) The board shall assess each insurer who provides
property insurance in a first tier coastal county in accordance
with this section.
(b) The total assessment under this section must be in the
amount the board estimates is necessary to cover the cost of
administration of the windstorm inspection program in the first
tier coastal counties under Section 6A of this article in the state
fiscal year in which the assessment is made, reduced by the total
amount of fees the board estimates will be collected for that year
under Section 6A(c) of this article.
(c) The assessment must be based on each insurer's
proportionate share of the total extended coverage and other allied
lines premium received by all insurers for property insurance in
the first tier coastal counties in the calendar year preceding the
year in which the assessment is made. The board shall adopt rules
to implement the assessment of insurers under this section.
(d) For purposes of this section, "property insurance"
means any commercial or residential policy promulgated or approved
by the board that provides coverage for the perils of windstorm and
hail, including a Texas Windstorm and Hail Insurance Policy.
Advisory Committee on Building Code Specifications and Maintenance
Sec. 6C. (a) In this section, "advisory committee" means the
Windstorm Building Code Advisory Committee on Specifications and
Maintenance.
(b) The Windstorm Building Code Advisory Committee on
Specifications and Maintenance is established as an advisory
committee to the commissioner to advise and make recommendations to
the commissioner on building requirements and maintenance in the
plan of operation.
(c) The advisory committee is composed of nine members
appointed by the commissioner without regard to the race, color,
disability, sex, religion, age, or national origin of the
appointee. The commissioner or the commissioner's designated
representative shall serve as an ex officio, nonvoting member of
the advisory committee. The voting members of the advisory
committee shall be appointed as follows:
(1) three members must be representatives of the building
industry who reside in designated catastrophe areas:
(A) two of whom are residential builders; and
(B) one of whom is a representative of the building supply
industry;
(2) three members must be representatives of the insurance
industry:
(A) one of whom is a member of the board of directors of the
Association; and
(B) two of whom are full-time employees of an insurance
company authorized to engage in the business of property and
casualty insurance in this state that writes insurance in the
designated catastrophe area; and
(3) three members must be representatives of the public who
reside in a designated catastrophe area, one of whom is a
professional engineer licensed in this state.
(d) A member of the advisory committee serves a three-year
term. A member of the advisory committee is not entitled to
compensation but is entitled to reimbursement for actual and
necessary expenses incurred in performing duties as an advisory
committee member, subject to any applicable limitation on
reimbursement provided by the General Appropriations Act.
(e) The advisory committee shall elect a presiding officer
from its members. The advisory committee shall meet at the call of
the presiding officer with the approval of the commissioner, but at
least two times each year. The advisory committee shall publish the
date and location of the meeting not later than the 45th day before
the date on which the meeting is scheduled to occur. The
commissioner or the commissioner's designee must be present at each
meeting of the advisory committee.
(f) The advisory committee shall analyze and make
recommendations for changes regarding procedures described under
Section 5(d) of this article that are adopted by the commissioner in
the plan of operation. In making recommendations, the advisory
committee shall seek to balance the concerns of all affected
parties, including consumers, builders, and the Association.
(g) Each proposal for a change in an applicable procedure
must be submitted to the commissioner. Each proposal must be
submitted separately in writing and must contain:
(1) the name, mailing address, and telephone number of the
proponent, or, if the proponent is a group or organization, the name
of the group or organization and the mailing address and telephone
number of the group or organization;
(2) a citation of any applicable statute or rule;
(3) the text of the proposed change, with deletions from
current language struck through with a single line and new language
underlined; and
(4) a statement of the purpose of the proposed change, with
supporting written or printed information.
(h) The commissioner by rule shall adopt a form to be used by
a person in presenting a proposal for a change in an applicable
procedure to the commissioner.
(i) Each proposal shall be submitted not later than the 30th
day before the date of a scheduled advisory committee meeting. A
proposal that does not comply with the requirements adopted under
Subsection (g) of this section and is not submitted within the time
specified in this subsection may not be considered at that
scheduled meeting.
(j) The department shall review and organize each proposal
submitted and shall allow the advisory committee and interested
parties to view the proposals to be considered within a reasonable
time before the meeting of the advisory committee. If requested by
a majority of the advisory committee, the department shall make
recommendations regarding each proposal submitted and provide to
the advisory committee any necessary technical information.
(k) At an advisory committee meeting, any interested person
may present the person's views on a proposal for a change in an
applicable procedure that is included on the advisory committee's
published agenda. The advisory committee shall consider each
comment presented in its action on the disposition of each
proposal.
(l) After consideration of a proposal for a change in an
applicable procedure, the advisory committee by vote shall:
(1) recommend adoption of the proposal as initially
submitted;
(2) recommend adoption of the proposal with modifications;
(3) recommend rejection of the proposal; or
(4) suspend consideration of the proposal and request
additional evaluation and study of the proposal.
(m) The advisory committee shall submit its recommendation
on each proposal to the commissioner. The commissioner shall
notify the advisory committee of the acceptance or rejection of
each recommendation not later than the 30th day after the date of
receipt by the commissioner. Acceptance of a recommendation by the
commissioner means that the commissioner will consider adoption of
that recommendation at a rulemaking hearing. Before adopting a
recommendation, the commissioner must determine that the proposal,
if adopted, will not weaken the integrity or diminish the
effectiveness of a procedure.
(n) In addition to any other rulemaking authority granted
under this article, the commissioner may adopt rules as necessary
to implement this section.
Appointment of Engineers; Rules
Sec. 6D. (a) The commissioner, on the request of an engineer
licensed by the Texas Board of Professional Engineers, shall
appoint the engineer under this article not later than the 10th day
after the date of the engineer's delivery to the commissioner of
information demonstrating that the engineer is qualified to perform
windstorm inspections under this article.
(b) The commissioner shall adopt rules to determine the
information the commissioner will consider in appointing engineers
under Subsection (a) of this section.
Deletion of Coverages From Other Policies
Sec. 7. The Board shall prepare endorsements and forms
applicable to the standard policies which it has promulgated
providing for the deletion of coverages available through the
Association and shall promulgate the applicable reduction of
premiums and rates for the use of such endorsements and forms.
Rates, rating plans and rate rules applicable
Sec. 8. (a) The Association shall file with the Commissioner
every manual of classifications, rules, rates which shall include
condition charges, every rating plan, and every modification of any
of the foregoing which it proposes to use. Every such filing shall
indicate the character and the extent of the coverage contemplated
and shall be accompanied by the policies and endorsements forms
proposed to be used, which said forms and endorsements may be
designed specifically for use by the Association and without regard
to other forms filed with, approved by, or promulgated by the Board
for use in this State. The Association may make recommendations to
the Commissioner that would result in a reduction of coverages or an
increase in an applicable deductible if any resultant reduction in
coverages or increase in deductibles is accompanied by proposed
rate credits. After notice and hearing, the Commissioner may
accept, modify, or reject a recommendation made by the Association
under this subsection. Article 1.33B of this code does not apply to
an action taken under this subsection.
(b) Repealed by Acts 1991, 72nd Leg., ch. 242, Sec.
12.01(7), eff. Sept. 1, 1991.
(c) Any filing made by the Association pursuant hereto shall
be submitted to the Board and as soon as reasonably possible after
the filing has been made the Board shall, in writing, approve,
modify, or disapprove the same; provided that any filing shall be
determined approved unless modified or disapproved within 30 days
after date of filing.
(d) If at any time the Board finds that a filing so approved
no longer meets the requirements of this Act, it may, after a
hearing held on not less than 20 days' notice to the Association
specifying the matters to be considered at such hearing, issue an
order withdrawing its approval thereof. Said order shall specify
in what respects the Board finds that such filing no longer meets
the requirements of this Act and shall be effective not less than 30
days after its issuance.
(e) All rates shall be made in accordance with the following
provisions:
(1) Due consideration shall be given to the past and
prospective loss experience within and outside the State of hazards
for which insurance is made available through the plan of
operation, if any, to expenses of operation including acquisition
costs, to a reasonable margin for profit and contingencies, and to
all other relevant factors, within and outside the State.
(2) Risks may be grouped by classifications for the
establishment of rates and minimum premiums. Classification rates
may be modified to produce rates for individual risks in accordance
with rating plans which establish standards for measuring
variations in such risks on the basis of any or all of the factors
mentioned in the preceding paragraph. Such rates may include rules
for classification of risks insured hereunder and rate
modifications thereof. All such provisions, however, as respects
rates, classifications, standards and premiums shall be without
prejudice to or prohibition of provision by the Association for
consent rates on individual risks if the rate and risk are
acceptable to the Association and as is similarly provided for, or
as is provided for, in Article 5.26(a), Texas Insurance Code, and
this provision or exception on consent rates is irrespective of
whether or not any such risk would otherwise be subject to or the
subject of a provision of rate classification or eligibility.
(3) Rates shall be reasonable, adequate, not unfairly
discriminatory, and nonconfiscatory as to any class of insurer.
(4) Commissions paid to agents shall be reasonable,
adequate, not unfairly discriminatory and nonconfiscatory.
(f) For the purpose of this Act the applicant under Section
6(a) hereof shall be considered to have consented to the
appropriate rates and classifications authorized by this Act
irrespective of any and all other rates or classifications.
(g) All premiums written and losses paid under this Act as
appropriate shall be included in applicable classifications for
general rate making purposes.
(h)(1) Each rate established by the commissioner in
accordance with this section must be uniform throughout the first
tier of coastal counties.
(2) Not later than August 15 of each year, the Association
shall file with the department for approval by the commissioner a
proposed manual rate for all types and classes of risks written by
the Association. Chapter 40 of this code does not apply to a filing
made under this subsection or a department action with respect to
the filing.
(3) Before approving or disapproving a filing, or modifying
a filing, the commissioner shall provide all interested persons a
reasonable opportunity to review the filing, obtain copies of the
filing on payment of any legally required copying cost, and submit
to the commissioner written comments or information related to the
filing.
(4) The commissioner shall schedule an open meeting not
later than the 45th day after the date on which the department
receives the filing at which interested persons may present written
or oral comments relating to the filing. An open meeting under this
subdivision is subject to Chapter 551, Government Code, but is not a
contested case hearing under Chapter 2001, Government Code.
(5) The department shall file with the Texas Register notice
that a filing has been made under Subdivision (2) of this subsection
not later than the seventh day after the date the filing is received
by the department. The notice must include information relating
to:
(A) the availability of the filing for public inspection at
the department during regular business hours and the procedures for
obtaining copies of the filing;
(B) procedures for making written comments related to the
filing; and
(C) the time, place, and date of the open meeting scheduled
under Subdivision (4) of this subsection at which an interested
person may submit either written or oral comments relating to the
filing.
(6) After the conclusion of the open meeting, the
commissioner shall approve or disapprove or modify the filing in
writing on or before November 15 of the year in which the filing is
made or the filing is deemed approved. If the commissioner
disapproves a filing, the commissioner shall state in writing the
reasons for the disapproval and the criteria to be met by the
Association to obtain approval. The Association may file with the
commissioner, not later than 30 days after the date on which the
Association receives the commissioner's written disapproval, an
amended filing bringing the filing into conformity with all
criteria stated in the commissioner's written disapproval.
(7) Before approving or disapproving an amended filing, the
commissioner shall provide all interested persons a reasonable
opportunity to review the amended filing, obtain copies of the
amended filing on payment of any legally required copying cost, and
submit to the commissioner written comments or information related
to the amended filing in the manner provided by Subdivision (3) of
this subsection, and may hold a hearing not later than the 20th day
after the date on which the department receives the amended filing
in the manner provided by Subdivision (4) of this subsection. Not
later than the 10th day after the date on which the hearing on the
amended filing is concluded, the commissioner shall approve or
disapprove the amended filing. Within 30 days after the amended
filing is received, the commissioner shall approve without changes,
approve as modified by the commissioner, or disapprove an amended
filing or it is deemed approved. The requirements imposed under
Subdivisions (5) and (6) of this subsection apply to a hearing
conducted under this subdivision.
(8) In conjunction with the review of a filing or amended
filing, the commissioner may request the Association to provide
additional supporting information relating to the filing or amended
filing, and any interested person may file a written request with
the commissioner for additional supporting information relating to
the filing or amended filing. A request under this subdivision must
be reasonable and must be directly related to the filing or amended
filing. The commissioner shall submit to the Association all
requests for additional supporting information made under this
subdivision for the commissioner's use and the use of any
interested person. Unless a different period is requested by the
Association and approved by the commissioner, the Association shall
provide the information to the commissioner not later than the
fifth day after the date on which the written request for additional
supporting information is delivered to the Association. The
department shall notify an interested person who has requested
additional information of the availability of the information not
later than one business day after the date on which the commissioner
receives the information from the Association.
(9) A rate established and authorized by the commissioner
under this subsection may not reflect an average rate change that is
more than 10 percent higher or lower than the rate for commercial or
10 percent higher or lower than the rate for noncommercial
windstorm and hail insurance in effect on the date the filing is
made. The rate may not reflect a rate change for an individual
rating class that is 15 percent higher or lower than the rate for
that individual class in effect on the date the filing is made. The
commissioner may, after notice and hearing, suspend this
subdivision upon a finding that a catastrophe loss or series of
occurrences resulting in losses in the catastrophe area justify a
need to assure rate adequacy in the catastrophe area and also
justify a need to assure availability of insurance outside the
catastrophe area.
(10) If valid flood or rising water insurance coverage
exists and is maintained on any risk being insured in the pool, the
commissioner may provide for a rate and reduction in rate of premium
as may be appropriate.
(11) The catastrophe element used to develop rates under
this Act applicable to risks written by the Association shall be
uniform throughout the seacoast territory. The catastrophe element
of the rates must be developed using:
(A) 90 percent of both the monoline extended coverage loss
experience and related premium income for all insurers, other than
the Association, for covered property located in the seacoast
territory using not less than the most recent 30 years of experience
available; and
(B) 100 percent of both the loss experience and related
premium income for the Association for covered property using not
less than the most recent 30 years of experience available.
(12) The noncatastrophe element of the noncommercial rates
must be developed using:
(A) 90 percent of both the monoline extended coverage loss
experience and related premium income for all insurers, other than
the Association, for covered property located in the catastrophe
area of the seacoast territory using the most recent 10 years of
experience available; and
(B) 100 percent of both the loss experience and related
premium income for the Association for covered property using the
most recent 10 years of experience available.
(13) The noncatastrophe element of the commercial rates
must be developed using 100 percent of both the loss experience and
related premium income for the Association for covered property
using the most recent 10 years of experience available.
(14) Surcharges collected in the past and used in the
development of current rates may not be excluded from future rate
development as long as those surcharges were collected during the
experience period considered by the commissioner.
(15) Not earlier than March 31 of the year before the year in
which a filing is to be made, the department shall value the loss
and loss adjustment expense data to be used for the filing.
(16) Not later than June 1 of each year, the department
shall provide the experience data to be used in establishing the
rates under this subsection in that year to the Association and
other interested persons. On request from the department, an
insurer shall provide the data to the department or the department
may obtain the data from a designated statistical agent, as defined
by Section 38.201 of this code.
(17) The association shall either establish a reinsurance
program approved by the Texas Department of Insurance or make
payments into the catastrophe reserve trust fund established under
Subsection (i) of this section. With the approval of the Texas
Department of Insurance, the association may establish a
reinsurance program that operates in addition to or in concert with
the catastrophe reserve trust fund established under Subsection (i)
of this section.
(i)(1) The commissioner shall adopt rules under which the
association members relinquish their net equity on an annual basis
as provided by those rules by making payments to a fund known as the
catastrophe reserve trust fund to fund the obligations of that fund
under Section 19(a) of this Act and to fund the mitigation and
preparedness plan established under this subsection to reduce the
potential for payments by members of the association giving rise to
tax credits in the event of loss or losses. Until disbursements are
made as provided by this Act and rules adopted by the commissioner,
all money, including investment income, deposited in the
catastrophe reserve trust fund are state funds to be held by the
comptroller outside the state treasury on behalf of, and with legal
title in, the department. The fund may be terminated only by law.
On termination of the fund, all assets of the fund revert to the
state to be used to provide funding for the annual loss mitigation
and preparedness plan developed and implemented by the commissioner
under Subdivision (5) of this subsection.
(2) The catastrophe reserve trust fund shall be kept and
maintained by the Texas Department of Insurance pursuant to this
Act and rules adopted by the commissioner. The comptroller, as
custodian, shall administer the funds strictly and solely as
provided by this Act and the commissioner's rules.
(3) At the end of either each calendar year or policy year,
the association shall pay the net equity of a member, including all
premium and other revenue of the association in excess of incurred
losses and operating expenses to the catastrophe reserve trust fund
or a reinsurance program approved by the commissioner.
(4) The commissioner's rules shall establish the procedure
relating to the disbursement of money from the catastrophe reserve
trust fund to policyholders in the event of an occurrence or series
of occurrences within the defined catastrophe area that results in
a disbursement under Section 19(a) of this Act.
(5) Each state fiscal year, beginning with fiscal year 2002,
the department may use from the investment income of the fund an
amount equal to not less than $1 million and not more than 10
percent of the investment income of the prior fiscal year to provide
funding for an annual mitigation and preparedness plan to be
developed and implemented each year by the commissioner. From that
amount and as part of that plan, the department may use in each
fiscal year $1 million for the windstorm inspection program
established under Section 6A of this Act. The mitigation and
preparedness plan shall provide for steps to be taken in the
seacoast territory by the commissioner or by a local government,
state agency, educational institution, or nonprofit organization
designated by the commissioner in the plan, to implement programs
intended to improve preparedness for windstorm and hail
catastrophes, reduce potential losses in the event of such a
catastrophe, provide research into the means to reduce those
losses, educate or inform the public in determining the
appropriateness of particular upgrades to structures, or protect
infrastructure from potential damage from those catastrophes.
Money in excess of $1 million is not available for use under this
subsection if the commissioner determines that an expenditure of
investment income from the fund would jeopardize the actuarial
soundness of the fund or materially impair the ability of the fund
to serve the state purposes for which it was established.
Replacement cost coverage
Sec. 8A. (a) A policy of windstorm and hail insurance issued
by the Association may include replacement cost coverage for one
and two-family dwellings, including outbuildings, as provided
under the dwelling extension coverage in the policy, subject to any
applicable deductibles and the limits for the coverage purchased by
the insured.
(b) If, at the time of loss, the total amount of insurance
applicable to the dwelling is equal to 80 percent or more of the
full replacement cost of the dwelling or equal to the maximum amount
of insurance otherwise available through the Association, coverage
applicable to the dwelling under the policy is extended to include
the full cost of repair or replacement, without a deduction for
depreciation. If, at the time of loss, the total amount of
insurance applicable to the dwelling is equal to less than 80
percent of the full replacement cost of the dwelling and less than
the maximum amount of insurance available through the Association,
liability for loss under the policy may not exceed the replacement
cost of that part of the dwelling damaged or destroyed, less
depreciation. Notwithstanding any other provision of this Act or
other law, the commissioner, after notice and hearing, may adopt
rules to:
(1) authorize the Association to provide actual cash value
coverage instead of replacement cost coverage on the roof covering
of a building insured by the Association; and
(2) determine:
(A) the conditions under which the Association may provide
that actual cash value coverage;
(B) the appropriate premium reductions when coverage for
the roof covering is provided on an actual cash value basis; and
(C) the disclosure that must be provided to the
policyholder, prominently displayed on the face of the windstorm
and hail insurance policy.
(c) The Commissioner may promulgate such rules and
regulations as necessary to implement this section.
(d) Notwithstanding Article 1.33B of this code, a hearing
under Subsection (b) of this section shall be held before the
commissioner or the commissioner's designee.
(e) For purposes of this section, "roof covering" means:
(1) the roofing material exposed to the weather;
(2) the underlayments applied for moisture protection; and
(3) all flashings required in the replacement of a roof
covering.
Indirect losses; personal lines
Sec. 8B. (a) Except as provided by Subsections (b) and (c) of
this section, a policy of windstorm and hail insurance issued by the
association for a dwelling, as that term is defined by the Texas
Department of Insurance or its successor, must include coverage for
wind-driven rain damage, regardless of whether an opening is made
by the wind, loss of use, and consequential losses, according to
forms approved by the commissioner and for a premium paid by the
insured based on rates established by rule adopted by the
commissioner. A policy of windstorm and hail insurance issued by
the association for tenant contents of a dwelling or other
residential building must include coverage for loss of use and
consequential losses, according to forms approved by the board and
for a premium paid by the insured based on rates established by rule
adopted by the commissioner. The association shall provide
coverage under this section as directed by rule of the
commissioner.
(b) The association is not required to offer coverage for
indirect losses as provided by Subsection (a) of this section
unless that coverage was excluded from a companion policy in the
voluntary market.
(c) The association is not required to provide coverage for
(1) "loss of use" if such "loss of use" is loss of rents or loss of
rental value; or (2) "additional living expenses" when the
property insured is a secondary or a non-primary residence.
Liability limits
Sec. 8D. (a) The maximum limits of liability under a policy of
windstorm and hail insurance issued by the Association under this
Act shall be proposed by the board of directors of the Association
and must be approved by the Commissioner. The maximum limits of
liability for coverage on any one insurable property may not be less
than:
(1) $350,000 for a dwelling, including an individually
owned townhouse unit, and the corporeal movable property located in
or about the dwelling, and as an extension of coverage, away from
those premises, as provided under the policy;
(2) $2,192,000 for a building and the corporeal movable
property located in the building that is owned by, and at least 75
percent of which is occupied by, a governmental entity, or that is
not owned by, but is wholly and exclusively occupied by, a
governmental entity;
(3) $125,000 for individually owned corporeal movable
property located in an apartment unit, residential condominium
unit, or townhouse unit that is occupied by the owner of that
property, and as an extension of coverage, away from those
premises, as provided under the policy; and
(4) $1,500,000 for a structure other than a dwelling or a
public building and the corporeal movable property located in that
structure and, as an extension of coverage, away from those
premises, as provided under the policy.
(b) Notwithstanding Subsection (a) of this section, the
liability limit imposed under Subsection (a)(2) of this section is
frozen, and the indexing and adjustments provided by this section
do not apply to that liability limit, until the liability limit
imposed on a structure subject to Subsection (a)(4) of this section
and the corporeal property located in that structure reaches or
exceeds $2,192,000, at which time the liability limit shall be
indexed and adjusted as provided for a risk under Subsection (a)(4)
of this section.
(c) Liability limits for insurable property that is not
covered under Subsection (a) of this section shall be established
by the plan of operation.
(d) Not later than September 30 of each year, the board of
directors of the Association shall propose adjustments to the
liability limits for inflation. The proposed adjustments shall be
made in increments of $1,000, rounded to the nearest $1,000,
considering the limits set by Subsection (a) of this section, at a
rate that reflects any change in the BOECKH Index. If the BOECKH
Index ceases to exist, the board of directors of the Association
shall propose adjustments to the nearest $1,000 in round numbers to
the liability limits for inflation based on any other index that the
board determines accurately reflects changes in the cost of
construction or residential values in the catastrophe area. An
adjustment to the liability limits that is approved by the
Commissioner applies to each policy of windstorm and hail insurance
delivered, issued for delivery, or renewed on or after January 1 of
the year following the approval by the Commissioner of the
adjustment to the liability limits. The indexing of the liability
limits shall adjust for changes occurring on and after January 1,
1997.
(e) The board of directors of the Association may propose
additional increases in the liability limits as it determines
necessary to implement the purposes of this Act.
(f) Not later than the 10th day after the date on which the
proposed adjustment to the liability limits is determined under
Subsection (a), (b), (d), or (e) of this section, the Association
shall file its proposed adjustments with the Commissioner in
writing. The filing must include:
(1) a statement of the proposed adjusted liability limits;
(2) a statement of the liability limits in effect
immediately preceding the effective date of the proposed
adjustment;
(3) a brief summary of the changes to the BOECKH Index or
other index on which the proposed adjustments are based; and
(4) a brief summary of the computations used in determining
the proposed adjustments.
(g) Not later than the 60th day after the date of receipt of
the filing made under Subsection (f) of this section, and after
notice and hearing, the Commissioner by order shall approve,
disapprove, or modify the proposed adjustments to the liability
limits.
(h) Notwithstanding Subsections (c)-(g) of this section,
the Commissioner may not approve adjustments of liability limits to
amounts lower than the amounts prescribed under Subsection (a) of
this section.
(i) Article 1.33B of this code does not apply to an action
taken under this section.
Text of section 8E as added by Acts 1997, 75th Leg., ch. 642, Sec. 4
Reinsured excess limits
Sec. 8E. (a) Notwithstanding any other law, the Association
may issue a policy of windstorm and hail insurance that includes
coverage for an amount in excess of a liability limit proposed by
the Association and approved by the Commissioner under Section 8D
of this Act if the Association first obtains, from a reinsurer
approved by the Commissioner, reinsurance for the full amount of
policy exposure above the limits approved by the Commissioner for
any given type of risk.
(b) The premium charged by the Association for the excess
coverage shall be equal to the amount of the reinsurance premium
charged to the Association by the reinsurer, plus any payment to the
Association that is approved by the Commissioner.
(c) The Commissioner shall adopt rules as necessary to
implement this section. The Association may not issue excess
coverage under this section until those rules are adopted.
(d) Article 1.33B of this code does not apply to an action
taken under this section.
Appeals
Sec. 9. Any person insured pursuant to this Act, or his duly
authorized representative, or any affected insurer who may be
aggrieved by an act, ruling or decision of the Association, may,
within 30 days after such act, ruling or decision, appeal to the
commissioner. In the event the Association is aggrieved by the
action of the commissioner with respect to any ruling, order, or
determination of the commissioner, it may, within 30 days after
such action, make a written request to the commissioner, for a
hearing thereon. The commissioner shall hear the Association, or
the appeal from an act, ruling or decision of the Association,
within 30 days after receipt of such request or appeal and shall
give not less than 10 days' written notice of the time and place of
hearing to the Association making such request or the person, or his
duly authorized representative, appealing from the act, ruling or
decision of the Association. A hearing on an act, ruling or
decision of the Association relating to the payment of, the amount
of, or the denial of a particular claim shall be held, at the
request of the claimant, in either the county in which the covered
property is located or Travis County. Within 30 days after the
hearing, the commissioner shall affirm, reverse or modify its
previous action or the act, ruling or decision appealed to the
commissioner. Pending such hearing and decision thereon, the
commissioner may suspend or postpone the effective date of its
previous rule or of the act, ruling or decision appealed to the
commissioner. The Association, or the person aggrieved by any
order or decision of the commissioner, may thereafter appeal to
either a District Court of Travis County, Texas, or a District Court
in the county in which the covered property is located. An action
brought under this section is subject to the procedures established
under Article 1.04 of this code.
Disputes relating to claims
Sec. 9A. (a) Except as provided by Section 10 of this Article,
any person insured under this Act who is aggrieved by an act,
ruling, or decision of the Association relating to the payment of,
the amount of, or the denial of a claim may elect to bring an action,
including an action under Article 21.21 of this code, against the
Association in a court of competent jurisdiction or to appeal the
act, ruling, or decision under Section 9 of this Article. A person
may not proceed under both Section 9 of this Article and this
section for the same act, ruling, or decision.
(b) Except as otherwise provided by this subsection, venue
in a proceeding action against the Association under this section,
including an action under Article 21.21 of this code, is in the
county in which the covered property is located or in a District
Court of Travis County. Venue is only in the District Court of
Travis County if the claimant joins the State Board of Insurance as
a party to the action.
Immunity from Liability
Sec. 10. (a) A director or officer of the Association is not
individually liable for any act or failure to act in the performance
of official duties in connection with the Association.
(b) Subsection (a) does not apply to:
(1) an act or failure to act of an employee of the
Association;
(2) an act or failure to act of the Association;
(3) an act or omission involving a motor vehicle; or
(4) an act or failure to act that constitutes bad faith,
intentional misconduct, or gross negligence.
(c) There shall be no liability on the part of and no cause
of action of any nature shall arise against a director of the
association, the Board or any of its staff, the Association or its
agents or employees, or against any participating insurer or its
agents or employees, for any inspections made under the plan of
operation or any statements made in good faith by them in any
reports or communications concerning risks submitted to the
Association, or at any administrative hearings conducted in
connection therewith under the provisions of this Act.
Indemnification
Sec. 11. Each person serving as a director of the
Association, each member of the Association, and each officer and
employee of the Association shall be indemnified by the Association
against all costs and expenses actually and necessarily incurred by
him or it in connection with the defense of any action, suit, or
proceeding in which he or it is made a party by reason of his or its
being or having been a director or member of the Association, or an
officer or employee of the Association except in relation to
matters as to which he or it has been judged in such action, suit or
proceeding to be liable by reason of misconduct in the performance
of his or its duties as a director of the Association or a member or
officer or employee of the Association, provided, however, that
this indemnification shall in no way indemnify a member of the
Association from participating in the writings, expenses, profits,
and losses of the Association in the manner set out in this Act.
Indemnification hereunder shall not be exclusive of other rights to
which such member or officer may be entitled as a matter of law.
Annual Report
Sec. 12. The Association shall file in the office of the Board
annually a statement which shall summarize the transactions,
conditions, operations and affairs of the Association during the
preceding year at such times and covering such periods as may be
designated by the Board. Such statement shall contain such matters
and information as are prescribed by the Board and shall be in such
form as is required by it.
Legal counsel
Sec. 12A. The association shall establish a plan in its plan
of operation under which the association's legal representation
before the State Board of Insurance, the Texas Department of
Insurance, and the Texas legislature is without conflict of
interest or the appearance of a conflict of interest as defined in
the Texas Disciplinary Rules of Professional Conduct. The
association shall also adopt separate and distinct procedures for
legal counsel in the handling of disputes involving policyholder
claims against the association.
Effective Date
Sec. 13. This Act shall become effective from and after
passage.
Conflicting Laws
Sec. 14. All laws or parts of laws in conflict herewith are
hereby repealed to the extent necessary to accomplish the purposes
of this Act.
Partial Invalidity
Sec. 15. If any provision of this Act or the application
thereof to any person or circumstance is held to be invalid, such
invalidity shall not affect other provisions or applications of
this Act which can be given effect without the invalid provision or
application, and to this end the provisions of this Act are declared
to be severable.
Sec. 16. [Emergency provision].
Codification
Sec. 17. This Act is hereby codified as Article 21.49 of the
Texas Insurance Code.
Application of Act
Sec. 18. This Act does not apply to farm mutual insurance
companies, as defined in Article 16.01 of the Insurance Code, nor
does it apply to any existing company chartered under old Chapter
12, Title 78, Revised Civil Statutes of Texas, 1925, repealed by
Chapter 40, Acts of the 41st Legislature, 1st Called Session, 1929,
Chapter 40.
Payment of losses; premium tax credit
Sec. 19. (a) If, in any calendar year, an occurrence or series
of occurrences within the defined catastrophe area results in
insured losses and operating expenses of the association in excess
of premium and other revenue of the association, any excess losses
shall be paid as follows:
(1) $100 million shall be assessed to the members of the
association with the proportion of the loss allocable to each
insurer determined in the same manner as its participation in the
association has been determined for the year under Section 5(c) of
this Act;
(2) any losses in excess of $100 million shall be paid from
the catastrophe reserve trust fund established under Section 8(i)
of this Act and any reinsurance program established by the
association;
(3) for losses in excess of those paid under Subdivisions
(1) and (2) of this subsection, an additional $200 million shall be
assessed to the members of the association with the proportion of
the loss allocable to each insurer determined in the same manner as
its participation in the association has been determined for the
year under Section 5(c) of this Act;
(4) any losses in excess of those paid under Subdivisions
(1), (2), and (3) of this subsection shall be assessed against
members of the association, with the proportion of the total loss
allocable to each insurer determined in the same manner as its
participation in the association has been determined for the year
under Section 5(c) of this Act.
(b) An insurer may credit any amount paid in accordance with
Subsection (a)(4) of this section in a calendar year against its
premium tax under Article 4.10 of this code. The tax credit herein
authorized shall be allowed at a rate not to exceed 20 percent per
year for five or more successive years following the year of payment
of the claims. The balance of payments paid by the insurer and not
claimed as such tax credit may be reflected in the books and records
of the insurer as an admitted asset of the insurer for all purposes,
including exhibition in annual statements pursuant to Article 6.12
of this code.
Added by Acts 1971, 62nd Leg., p. 843, ch. 100, eff. April 29, 1971.
Amended by Acts 1971, 62nd Leg., p. 2862, ch. 940, Sec. 1, eff. June
15, 1971; Acts 1972, 62nd Leg., 4th C.S., p. 45, ch. 21, Sec. 1, 2,
eff. Nov. 2, 1972; Acts 1973, 63rd Leg., p. 1042, ch. 406, Sec. 1,
3, 5, eff. Aug. 27, 1973; Acts 1979, 66th Leg., p. 1599, ch. 675,
Sec. 1, eff. Aug. 27, 1979.
Sec. 5(c) amended by Acts 1983, 68th Leg., p. 1114, ch. 254, Sec. 1,
eff. Aug. 29, 1983; Acts 1987, 70th Leg., ch. 127, Sec. 1, eff. May
20, 1987; Sec. 5(d) amended by Acts 1987, 70th Leg., ch. 407, Sec.
2, eff. Sept. 1, 1987; Sec. 6A added by Acts 1987, 70th Leg., ch.
407, Sec. 1, eff. Sept. 1, 1987; Sec. 5(e), (f) added by Acts 1989,
71st Leg., ch. 852, Sec. 1, eff. Aug. 28, 1989; Sec. 5B added by
Acts 1989, 71st Leg., ch. 852, Sec. 2, eff. Aug. 28, 1989; Sec. 3(c)
amended by Acts 1991, 72nd Leg., ch. 242, Sec. 11.41, eff. Sept. 1,
1991; Sec. 3(d) amended by Acts 1991, 72nd Leg., ch. 242, Sec.
11.34, eff. Sept. 1, 1991; Sec. 3(f) amended by Acts 1991, 72nd
Leg., ch. 242, Sec. 11.38, eff. Sept. 1, 1991; Sec. 3(l) to (n)
added by Acts 1991, 72nd Leg., ch. 242, Sec. 11.39, eff. Sept. 1,
1991; Sec. 5 amended by Acts 1991, 72nd Leg., ch. 242, Sec. 11.42,
eff. Sept. 1, 1991; Sec. 6A(a) amended by Acts 1991, 72nd Leg., ch.
242, Sec. 11.40, eff. Sept. 1, 1991; Sec. 6A(f) amended by Acts
1991, 72nd Leg., ch. 242, Sec. 1.12, eff. Sept. 1, 1991; Sec. 8(a)
amended by Acts 1991, 72nd Leg., ch. 242, Sec. 11.43, eff. Sept. 1,
1991; Sec. 8(b) amended by Acts 1991, 72nd Leg., ch. 242, Sec.
12.01(7), eff. Sept. 1, 1991; Sec. 8(h) amended by and 8(i) added
by Acts 1991, 72nd Leg., ch. 242, Sec. 11.43, eff. Sept. 1, 1991;
Sec. 8A added by Acts 1991, 72nd Leg., ch. 242, Sec. 11.35, eff.
Sept. 1, 1991; Sec. 8D added by Acts 1991, 72nd Leg., ch. 242, Sec.
11.36, eff. Sept. 1, 1991; Sec. 8D(e) added by Acts 1991, 72nd
Leg., 2nd C.S., ch. 12, Sec. 22.01, eff. Jan. 1, 1992; Sec. 8E added
by Acts 1991, 72nd Leg., ch. 242, Sec. 11.44, eff. Sept. 1, 1991;
Sec. 9 amended by Acts 1991, 72nd Leg., ch. 242, Sec. 1.13, eff.
Sept. 1, 1991; Sec. 9 amended by and Sec. 9A added by Acts 1991,
72nd Leg., ch. 242, Sec. 11.37, eff. Sept. 1, 1991; Sec. 12A added
by Acts 1991, 72nd Leg., ch. 242, Sec. 11.45, eff. Sept. 1, 1991;
Sec. 3(d) amended by Acts 1993, 73rd Leg., ch. 685, Sec. 17.01, eff.
Sept. 1, 1993; Sec. 5(e), (h), (l) amended by Acts 1993, 73rd Leg.,
ch. 685, Sec. 17.03, eff. Sept. 1, 1993; Sec. 6B added by Acts 1993,
73rd Leg., ch. 685, Sec. 17.02, eff. Aug. 30, 1993; Sec. 8(h), (i)
amended by Acts 1993, 73rd Leg., ch. 685, Sec. 17.04, eff. Sept. 1,
1993; Sec. 8B added by Acts 1993, 73rd Leg., ch. 685, Sec. 17.05,
eff. Sept. 1, 1993; Sec. 8E repealed by Acts 1993, 73rd Leg., ch.
685, Sec. 17.07, eff. Sept. 1, 1993; Sec. 9 amended by Acts 1993,
73rd Leg., ch. 685, Sec. 22.06, eff. Sept. 1, 1993; Secs. 10, 12A,
19 amended by Acts 1993, 73rd Leg., ch. 685, Sec. 17.06, eff. Sept.
1, 1993; Sec. 3(h) amended by Acts 1995, 74th Leg., ch. 944, Sec. 1,
eff. Sept. 1, 1995; Sec. 8(h) amended by Acts 1995, 74th Leg., ch.
944, Sec. 2, eff. Sept. 1, 1995; Sec. 2 amended by Acts 1997, 75th
Leg., ch. 438, Sec. 2, eff. Sept. 1, 1997; Sec. 3(b) amended by Acts
1997, 75th Leg., ch. 438, Sec. 3, eff. Sept. 1, 1997; Sec. 3(o)
added by Acts 1997, 75th Leg., ch. 1000, Sec. 2, eff. Sept. 1, 1997;
Sec. 4 amended by Acts 1997, 75th Leg., ch. 438, Sec. 4, eff. Sept.
1, 1997; Sec. 5 amended by Acts 1997, 75th Leg., ch. 438, Sec. 5,
eff. Sept. 1, 1997; Sec. 5B(a) amended by Acts 1997, 75th Leg., ch.
879, Sec. 8, eff. Sept. 1, 1997; Sec. 5B(c) repealed by Acts 1997,
75th Leg., ch. 879, Sec. 8(h)(13), eff. Sept. 1, 1997; Sec. 8(a)
amended by Acts 1997, 75th Leg., ch. 805, Sec. 1, eff. Sept. 1,
1997; Sec. 8(h)(13) amended by Acts 1997, 75th Leg., ch. 642, Sec.
1, eff. Sept. 1, 1997; Sec. 8(i) amended by Acts 1997, 75th Leg.,
ch. 1423, Sec. 11.57, eff. Sept. 1, 1997; Sec. 8A(a) amended by
Acts 1997, 75th Leg., ch. 642, Sec. 2, eff. Sept. 1, 1997; Sec.
8A(b) amended by Acts 1997, 75th Leg., ch. 1326, Sec. 1, eff. Sept.
1, 1997; Sec. 8A(c) amended by Acts 1997, 75th Leg., ch. 642, Sec.
2, eff. Sept. 1, 1997; Sec. 8A(d), (e) added by Acts 1997, 75th
Leg., ch. 1326, Sec. 1, eff. Sept. 1, 1997; Sec. 8D amended by Acts
1997, 75th Leg., ch. 642, Sec. 3, eff. Sept. 1, 1997; Sec. 8E added
by Acts 1997, 75th Leg., ch. 642, Sec. 4, eff. Sept. 1, 1997; added
by Acts 1997, 75th Leg., ch. 1000, Sec. 3, eff. Sept. 1, 1997; Sec.
9A(a) amended by Acts 1997, 75th Leg., ch. 862, Sec. 1, eff. Sept.
1, 1997; Sec. 10 amended by Acts 1997, 75th Leg., ch. 862, Sec. 2,
eff. Sept. 1, 1997; Sec. 19(a) amended by Acts 1997, 75th Leg., ch.
642, Sec. 5, eff. Sept. 1, 1997; Sec. 4(c), (d) added by Acts 1999,
76th Leg., ch. 920, Sec. 2.01, eff. Sept. 1, 1999; Sec. 6A(f)
repealed by Acts 1999, 76th Leg., ch. 592, Sec. 2, eff. Sept. 1,
1999; Sec. 6C added by Acts 1999, 76th Leg., ch. 592, Sec. 1, eff.
June 18, 1999; Sec. 8(h)(10) amended by Acts 1999, 76th Leg., ch.
919, Sec. 1, eff. Sept. 1, 1999; Sec. 8(h)(13) amended by Acts
1999, 76th Leg., ch. 920, Sec. 2.02, eff. Sept. 1, 1999; Sec. 8(i)
amended by Acts 1999, 76th Leg., ch. 920, Sec. 2.03, eff. Sept. 1,
1999; Sec. 6A(a), (d) amended by Acts 2001, 77th Leg., ch. 120,
Sec. 2, eff. Jan. 1, 2002; Sec. 8(h) amended by Acts 2001, 77th
Leg., ch. 304, Sec. 1, eff. Sept. 1, 2001; Sec. 3(f) amended by Acts
2003, 78th Leg., ch. 206, Sec. 9.01, eff. June 11, 2003; Sec. 5(m)
added by Acts 2003, 78th Leg., ch. 206, Sec. 9.02, eff. Jan. 1,
2004; Sec. 6A(a) amended by Acts 2003, 78th Leg., ch. 206, Sec.
9.03, eff. Jan. 1, 2004; Sec. 6A(d) amended by Acts 2003, 78th
Leg., ch. 206, Sec. 9.06, eff. Jan. 1, 2004; Sec. 6A(h) amended by
Acts 2003, 78th Leg., ch. 206, Sec. 9.03, eff. Jan. 1, 2004; Sec.
6A(j) amended by Acts 2003, 78th Leg., ch. 206, Sec. 9.03, eff. Jan.
1, 2004; Sec. 6A(j-1) added by Acts 2003, 78th Leg., ch. 206, Sec.
9.03, eff. Jan. 1, 2004; Sec. 6A(k) amended by Acts 2003, 78th
Leg., ch. 206, Sec. 9.03, eff. Jan. 1, 2004; Sec. 6A(k-1) added by
Acts 2003, 78th Leg., ch. 206, Sec. 9.03, eff. Jan. 1, 2004; Sec.
6C(b) amended by Acts 2003, 78th Leg., ch. 206, Sec. 9.04, eff. Jan.
1, 2004; Sec. 6C(f) amended by Acts 2003, 78th Leg., ch. 206, Sec.
9.04, eff. Jan. 1, 2004; Sec. 6C(g) amended by Acts 2003, 78th
Leg., ch. 206, Sec. 9.04, eff. Jan. 1, 2004; Sec. 6C(h) amended by
Acts 2003, 78th Leg., ch. 206, Sec. 9.04, eff. Jan. 1, 2004; Sec.
6C(k) amended by Acts 2003, 78th Leg., ch. 206, Sec. 9.04, eff. Jan.
1, 2004; Sec. 6C(l) amended by Acts 2003, 78th Leg., ch. 206, Sec.
9.04, eff. Jan. 1, 2004; Sec. 6C(m) amended by Acts 2003, 78th
Leg., ch. 206, Sec. 9.04, eff. Jan. 1, 2004; Sec. 6D added by Acts
2003, 78th Leg., ch. 206, Sec. 9.05, eff. Jan. 1, 2004; Sec.
8(h)(9) amended by Acts 2003, 78th Leg., ch. 206, Sec. 9.07, eff.
Jan. 1, 20041; Sec. 3(f) amended by Acts 2005, 79th Leg., ch. 1153,
Sec. 1, eff. Sept. 1, 2005; Sec. 3(k) amended by Acts 2005, 79th
Leg., ch. 1251, Sec. 1, eff. Sept. 1, 2005; Sec. 3A added by Acts
2005, 79th Leg., ch. 1153, Sec. 2, eff. Sept. 1, 2005; Sec. 8E
repealed by Acts 2005, 79th Leg., ch. 222, Sec. .
Article: 21.39 21.39-A 21.39-B 21.40 21.41 21.42 21.47 21.49 21.49-2V 21.49-3 21.49-3a 21.49-3b 21.49-3c 21.49-3d 21.49-4
Last modified: August 11, 2007
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