81R5579 PMO-F
By: Smithee H.B. No. 3759
A BILL TO BE ENTITLED
AN ACT
relating to the operation and regulation of certain consolidated
insurance programs.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Title 2, Insurance Code, is amended by adding
Subtitle C to read as follows:
SUBTITLE C. PROGRAMS AFFECTING MULTIPLE LINES OF INSURANCE
CHAPTER 151. CONSOLIDATED INSURANCE PROGRAMS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 151.001. DEFINITIONS. In this chapter:
(1) "Administrator" means a person who operates and
manages a consolidated insurance program on behalf of a principal.
The term includes a person who, in the regular course of business,
operates and manages a consolidated insurance program as an agent
of a principal.
(2) "Consolidated insurance program" means a program
under which a principal, for a contractor or contractors on a
construction project, provides general liability insurance
coverage, workers' compensation insurance coverage, or both that
are incorporated into an insurance program for a single
construction project or multiple construction projects.
(3) "Construction project" means construction,
remodeling, maintenance, or repair of improvements to real
property.
(4) "Construction project site" means the immediate
construction location and areas emanating from that location, such
as adjacent sidewalks, streets, storage areas, temporary
construction yards, and staging areas.
(5) "Contractor" includes:
(A) a prime contractor;
(B) a general contractor;
(C) a subcontractor; and
(D) any other person who has signed a
construction contract covered under the consolidated insurance
program.
(6) "Insurer" means an insurance company, including a
mutual insurance company or a capital stock company, a reciprocal
or interinsurance exchange, a Lloyd's plan, or another legal entity
authorized to engage in the business of general liability insurance
or workers' compensation insurance in this state. The term
includes an eligible surplus lines insurer.
Sec. 151.002. PRINCIPAL. (a) For purposes of this chapter,
"principal" means the person who procures the insurance contract or
policy.
(b) The principal under a consolidated insurance program is
the person responsible for the payment of the premium on the
insurance coverage. The principal is typically the first named
insured on a general liability insurance contract or policy.
Sec. 151.003. RULES. The commissioner shall adopt rules in
the manner provided by Subchapter A, Chapter 36, as necessary to
implement and enforce the purpose and intent of this chapter.
[Sections 151.004-151.050 reserved for expansion]
SUBCHAPTER B. GENERAL REQUIREMENTS
Sec. 151.051. COVERAGE OF CONTRACTORS. (a) Each
contractor on a construction project covered by a consolidated
insurance program must:
(1) be listed as a named insured on each insurance
policy and contract under the program; and
(2) have equal rights under the policy or contract
with the principal and other contractors, subject to insurance
industry standard differences between a first-named insured and a
named insured.
(b) Subsection (a) does not apply to a policy or contract
that is issued individually in the name of the contractor as the
first-named insured under a consolidated insurance program.
(c) The principal or a contractor may not require a
contractor to obtain an additional insured endorsement on the
contractor's separately maintained insurance policy that is of the
same general type as the insurance coverage provided by the
consolidated insurance program other than an insurance policy or
contract covering off-site work for ongoing operations that is
related to the project and that is not covered by the consolidated
insurance program.
(d) The coverages under the consolidated insurance program
must be primary and noncontributory to any insurance policy
separately maintained by a contractor covered by the consolidated
insurance program that is of the same general type as the insurance
coverages provided by the consolidated insurance program.
Sec. 151.052. DURATION OF GENERAL LIABILITY COVERAGE;
CERTAIN COVERAGE REQUIRED. (a) A consolidated insurance program
that provides completed operations insurance coverage together
with general liability coverage must continue completed operations
insurance coverage until the expiration of the limitations period
for bringing an action for damages under Section 16.009, Civil
Practice and Remedies Code.
(b) A contractor's separately maintained insurance policy
may not exclude coverage for ongoing operations of the contractor
for warranty or punch-out work on a construction project covered by
a consolidated insurance program that occurs after the contractor
has received written notice from the principal, insurer, or
administrator that the contractor's coverage under the
consolidated insurance program has ended.
(c) A consolidated insurance program must provide coverage
for:
(1) ongoing operations of the contractor for warranty
or punch-out work on a construction project covered by the
consolidated insurance program; and
(2) preconstruction services and initial construction
work related to the project.
(d) A consolidated insurance program must provide completed
operations coverage for specially fabricated materials or
equipment if the installer of the fabricated materials or equipment
is covered under the program and fabricated the materials or
equipment.
Sec. 151.053. NOTICE OF CERTAIN CHANGES. (a) Except as
provided by Subsection (b), after the execution of a construction
contract by the principal, the coverages or limits under the
consolidated insurance program may not be reduced, nonrenewed, or
canceled without written notice provided to the principal and all
contractors. The notice required under this subsection must be
provided by the insurer or administrator not later than the 60th day
before the effective date of the reduction, nonrenewal, or
cancellation.
(b) A notice to cancel coverage due to nonpayment of premium
is effective only after written notice is provided to the principal
at least 10 days before the scheduled effective date of the
cancellation due to nonpayment of premium.
(c) If any coverage is canceled, the insurer or
administrator shall notify each contractor in writing that coverage
has been canceled. The notice under this subsection must be sent
not later than the effective date of the cancellation of coverage.
Sec. 151.054. NOTICE REGARDING REDUCTION IN LIMIT. (a) The
insurer shall notify all contractors in writing not later than the
10th day after the date the total limit of coverage for any type of
liability coverage issued under the consolidated insurance program
is reduced by:
(1) 50 percent; and
(2) each additional 25 percentage point reduction
after the initial 50 percent reduction.
(b) The reduction in the limit under Subsection (a) shall be
computed based on incurred losses and expenses.
(c) The notice under Subsection (a) must describe:
(1) the initial limit of liability coverage; and
(2) the limit of liability coverage that remains as of
the notice date.
(d) If the limits of a policy have been expended, triggering
the limits of another policy, the notice under Subsection (a) is
required only if the combined limit of all policies providing the
coverage has been reached.
Sec. 151.055. INSURER REQUIREMENTS; INSURER RATINGS. (a)
All insurance coverages under a consolidated insurance program for
a construction project must be provided by an insurer that has:
(1) a financial strength rating of at least A- and a
financial size rating of at least Class VII, as currently reported
by the A. M. Best Company; or
(2) an equivalent rating made by a similar rating
organization recognized by the commissioner.
(b) Insurance policies providing coverage under the
consolidated insurance program shall be delivered to the
first-named insured not later than the 60th day after the date on
which the coverage takes effect.
(c) The requirements of this section must be maintained for
the duration of the construction project.
Sec. 151.056. DUTY AND COMPLIANCE BY PRINCIPAL. A
principal under a consolidated insurance program owes a duty to
each contractor covered under the consolidated insurance program to
comply with the requirements of this chapter.
Sec. 151.057. LIMITED EXCEPTION TO RATING STANDARDS.
Sections 2053.002 and 2251.052, Insurance Code, and Section 1,
Chapter 50 (H.B. 32), Acts of the 53rd Legislature, Regular
Session, 1953 (Article 5.77, Vernon's Texas Insurance Code), do not
apply to rates used for an insurance policy issued under a
consolidated insurance program under this chapter to the extent
that those laws require an insurer to produce rates for individual
risks.
[Sections 151.058-151.100 reserved for expansion]
SUBCHAPTER C. COVERAGE LIMITS
Sec. 151.101. GENERAL REQUIREMENTS. Subject to Section
151.052, aggregate and per-occurrence limits of all general
liability insurance and employer liability coverages under a
consolidated insurance program apply collectively to all
contractors under the program for the duration of each construction
project covered by the program.
Sec. 151.102. LIMITS. (a) Except as provided by Subsection
(b), (c), or (d), for a construction project the general liability
limit must be not less than:
(1) $25 million, if the construction value is $40
million or less;
(2) $75 million, if the construction value is more
than $40 million but no more than $100 million;
(3) $150 million, if the construction value is more
than $100 million but no more than $250 million; and
(4) the lesser of $250 million or 50 percent of the
construction value, if the construction value is more than $250
million.
(b) For a construction project covered by a rolling
consolidated insurance program, the general liability limit must
not be less than:
(1) $40 million, if the construction value is $40
million or less;
(2) $75 million, if the construction value is more
than $40 million but no more than $100 million;
(3) $125 million, if the construction value is more
than $100 million but no more than $250 million; and
(4) the lesser of $375 million or 50 percent of the
construction value, if the construction value is more than $250
million.
(c) For purposes of computing the required coverage for a
rolling consolidated insurance program under Subsection (b), the
construction value may be reduced by the value of a construction
project that has dedicated liability limits and is operated under
the rolling consolidated insurance program.
(d) For purposes of computing the required coverage for a
rolling consolidated insurance program under Subsection (b), if a
single construction project operated under a rolling consolidated
insurance program has a construction value of more than $100
million, the single construction project must have a dedicated
limit of $75 million or more.
(e) For employer liability coverage under a consolidated
insurance program, the per-occurrence liability limit may not be
less than the applicable general liability limit. Any umbrella or
excess policy limits must extend to employer liability coverage.
(f) Construction projects solely for the construction of
single-family homes, duplexes, triplexes, or quadraplexes must
have a general liability limit of $5 million or more.
[Sections 151.103-151.150 reserved for expansion]
SUBCHAPTER D. DISCLOSURE REQUIREMENTS FOR
ADMINISTRATION OF CONSOLIDATED INSURANCE PROGRAM
Sec. 151.151. REQUIRED DISCLOSURE AT BID SOLICITATION.
(a) At the time a principal or contractor is soliciting bids for a
construction project, the principal or contractor must disclose
prominently in the project specifications, or in any request for
bids or proposals, that the project may be covered by a consolidated
insurance program subject to this chapter.
(b) The disclosure must be sufficient to:
(1) allow the bidder to compare the bidder's own
insurance program with the coverages, limits, and operation of the
insurance provided under the consolidated insurance program; and
(2) to accurately predict the credits, deductibles, or
other costs to the bidder associated with the program.
Sec. 151.152. REQUIRED PRECONTRACT DISCLOSURE. Not later
than the 14th day before the date on which a principal or contractor
executes a contract for a construction project covered by a
consolidated insurance program, the principal or contractor that
solicited the bid must make a written disclosure to the contractor
that contains detailed information concerning the consolidated
insurance program.
[Sections 151.153-151.200 reserved for expansion]
SUBCHAPTER E. PROGRAM ADMINISTRATION
Sec. 151.201. ADMINISTRATOR. Each principal shall appoint
a qualified administrator for the consolidated insurance program
whose primary duty is administration of the program.
Sec. 151.202. POWERS AND DUTIES OF ADMINISTRATOR. (a) An
administrator shall comply in a timely manner with the requirements
of this section.
(b) The administrator shall administer the enrollment of
all contractors covered by the consolidated insurance program as
necessary to ensure prompt coverage, effective on the date that the
contractor begins work on the construction project.
(c) The administrator shall:
(1) maintain a current consolidated insurance program
manual that contains a detailed description of the consolidated
insurance program;
(2) provide all contractors with a current copy of the
manual that is consistent with the insurance provided and the scope
of the program:
(A) on the date of the contractor's enrollment in
the program; and
(B) not later than the seventh day after any
changes are made to the manual; and
(3) provide each contractor on the date of the
contractor's enrollment in the program with a certificate that
evidences the contractor's coverage under the program.
(d) In addition to the certificate provided under
Subsection (c)(3), the administrator shall obtain from the insurer
or a licensed agent of the insurer and deliver a certificate of
insurance on behalf of a contractor to evidence the coverages and
limits provided by the consolidated insurance program not later
than the fifth day after receipt of a request from a contractor.
(e) If the insurer has issued insurance policies, the
administrator shall ensure that each contractor receives insurance
policies, or renewal certificates for previously issued policies,
for all coverages provided by the consolidated insurance program
not later than the earlier of:
(1) the 30th day after the date the contractor is
enrolled in the program; or
(2) the date the contractor begins work on the
project.
(f) The administrator shall coordinate:
(1) any regular reporting required of the contractors
and any audits required of the contractors;
(2) all meetings with the insurer, whether with the
principal, the contractors, or other parties; and
(3) availability of any on-site medical facilities or
other mandatory initial medical care providers and contact
information for contractors.
(g) The administrator shall establish and disseminate to
contractors:
(1) clear procedures for proper filing of claims; and
(2) required loss-control procedures.
(h) The administrator shall ensure that:
(1) all insurance coverages provided by the
consolidated insurance program are maintained; and
(2) all contractors are notified in writing promptly
of any changes or cancellation in coverages provided by the
consolidated insurance program.
(i) The administrator shall monitor the financial standing
of the insurer as provided by Section 151.055 and shall provide
written notice to the principal and all contractors of any
significant negative change not later than the 10th day after the
date of the negative change. This subsection may not be interpreted
to mean that the principal or administrator is a guarantor of the
insurer's obligations under an insurance policy.
(j) The administrator shall prepare and present to a
contractor on at least a bimonthly basis any required payroll
reports, claim reviews, and loss-control reviews that relate to
that contractor.
(k) The administrator shall provide oversight and
management of claims for the principal and any affected contractor
until the construction project is completed and the operation of
the consolidated insurance program and the administration of that
program is closed.
(l) Before the date on which the operation of the
consolidated insurance program and administration of the program
is closed, the administrator shall provide to the principal and
each contractor a written notice that contains the contact person's
name, company name, mailing address, telephone number, fax number,
and e-mail address, and any other necessary contact information of
the person and company responsible for any closed, open, or future
claims under the coverages provided by the consolidated insurance
program.
Sec. 151.203. DUTY OF ADMINISTRATOR. For purposes of this
chapter and insurance benefits under the consolidated insurance
program, the administrator owes a duty to each contractor that
participates in the program to comply with the requirements of this
chapter.
Sec. 151.204. ERRORS AND OMISSIONS COVERAGE REQUIRED. The
administrator shall maintain errors and omissions insurance
coverage in the minimum amount of $5 million per occurrence for any
liability of the administrator under this chapter.
[Sections 151.205-151.250 reserved for expansion]
SUBCHAPTER F. ENFORCEMENT PROVISIONS
Sec. 151.251. GENERAL ENFORCEMENT; ADMINISTRATIVE
PENALTIES. The commissioner may impose a sanction under Chapter
82, issue a cease and desist order under Chapter 83, or assess an
administrative penalty under Chapter 84 on any person regulated by
the department who violates this chapter or a rule or order adopted
by the commissioner under this chapter.
[Sections 151.252-151.300 reserved for expansion]
SUBCHAPTER G. VENUE
Sec. 151.301. VENUE. Venue for a suit brought under this
chapter is in the county in which the construction project is
located.
SECTION 2. Chapter 151, Insurance Code, as added by this
Act, applies only to a consolidated insurance program for a
construction project that begins on or after January 1, 2010. A
consolidated insurance program for a construction project that
begins before January 1, 2010, is governed by the law as it existed
immediately before the effective date of this Act, and that law is
continued in effect for that purpose.
SECTION 3. This Act takes effect September 1, 2009.