Texas 2009 - 81st Regular

Texas House Bill HB3759 Compare Versions

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1	1	81R5579 PMO-F
2	2	By: Smithee H.B. No. 3759
3	3
4	4
5	5	A BILL TO BE ENTITLED
6	6	AN ACT
7	7	relating to the operation and regulation of certain consolidated
8	8	insurance programs.
9	9	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
10	10	SECTION 1. Title 2, Insurance Code, is amended by adding
11	11	Subtitle C to read as follows:
12	12	SUBTITLE C. PROGRAMS AFFECTING MULTIPLE LINES OF INSURANCE
13	13	CHAPTER 151. CONSOLIDATED INSURANCE PROGRAMS
14	14	SUBCHAPTER A. GENERAL PROVISIONS
15	15	Sec. 151.001. DEFINITIONS. In this chapter:
16	16	(1) "Administrator" means a person who operates and
17	17	manages a consolidated insurance program on behalf of a principal.
18	18	The term includes a person who, in the regular course of business,
19	19	operates and manages a consolidated insurance program as an agent
20	20	of a principal.
21	21	(2) "Consolidated insurance program" means a program
22	22	under which a principal, for a contractor or contractors on a
23	23	construction project, provides general liability insurance
24	24	coverage, workers' compensation insurance coverage, or both that
25	25	are incorporated into an insurance program for a single
26	26	construction project or multiple construction projects.
27	27	(3) "Construction project" means construction,
28	28	remodeling, maintenance, or repair of improvements to real
29	29	property.
30	30	(4) "Construction project site" means the immediate
31	31	construction location and areas emanating from that location, such
32	32	as adjacent sidewalks, streets, storage areas, temporary
33	33	construction yards, and staging areas.
34	34	(5) "Contractor" includes:
35	35	(A) a prime contractor;
36	36	(B) a general contractor;
37	37	(C) a subcontractor; and
38	38	(D) any other person who has signed a
39	39	construction contract covered under the consolidated insurance
40	40	program.
41	41	(6) "Insurer" means an insurance company, including a
42	42	mutual insurance company or a capital stock company, a reciprocal
43	43	or interinsurance exchange, a Lloyd's plan, or another legal entity
44	44	authorized to engage in the business of general liability insurance
45	45	or workers' compensation insurance in this state. The term
46	46	includes an eligible surplus lines insurer.
47	47	Sec. 151.002. PRINCIPAL. (a) For purposes of this chapter,
48	48	"principal" means the person who procures the insurance contract or
49	49	policy.
50	50	(b) The principal under a consolidated insurance program is
51	51	the person responsible for the payment of the premium on the
52	52	insurance coverage. The principal is typically the first named
53	53	insured on a general liability insurance contract or policy.
54	54	Sec. 151.003. RULES. The commissioner shall adopt rules in
55	55	the manner provided by Subchapter A, Chapter 36, as necessary to
56	56	implement and enforce the purpose and intent of this chapter.
57	57	[Sections 151.004-151.050 reserved for expansion]
58	58	SUBCHAPTER B. GENERAL REQUIREMENTS
59	59	Sec. 151.051. COVERAGE OF CONTRACTORS. (a) Each
60	60	contractor on a construction project covered by a consolidated
61	61	insurance program must:
62	62	(1) be listed as a named insured on each insurance
63	63	policy and contract under the program; and
64	64	(2) have equal rights under the policy or contract
65	65	with the principal and other contractors, subject to insurance
66	66	industry standard differences between a first-named insured and a
67	67	named insured.
68	68	(b) Subsection (a) does not apply to a policy or contract
69	69	that is issued individually in the name of the contractor as the
70	70	first-named insured under a consolidated insurance program.
71	71	(c) The principal or a contractor may not require a
72	72	contractor to obtain an additional insured endorsement on the
73	73	contractor's separately maintained insurance policy that is of the
74	74	same general type as the insurance coverage provided by the
75	75	consolidated insurance program other than an insurance policy or
76	76	contract covering off-site work for ongoing operations that is
77	77	related to the project and that is not covered by the consolidated
78	78	insurance program.
79	79	(d) The coverages under the consolidated insurance program
80	80	must be primary and noncontributory to any insurance policy
81	81	separately maintained by a contractor covered by the consolidated
82	82	insurance program that is of the same general type as the insurance
83	83	coverages provided by the consolidated insurance program.
84	84	Sec. 151.052. DURATION OF GENERAL LIABILITY COVERAGE;
85	85	CERTAIN COVERAGE REQUIRED. (a) A consolidated insurance program
86	86	that provides completed operations insurance coverage together
87	87	with general liability coverage must continue completed operations
88	88	insurance coverage until the expiration of the limitations period
89	89	for bringing an action for damages under Section 16.009, Civil
90	90	Practice and Remedies Code.
91	91	(b) A contractor's separately maintained insurance policy
92	92	may not exclude coverage for ongoing operations of the contractor
93	93	for warranty or punch-out work on a construction project covered by
94	94	a consolidated insurance program that occurs after the contractor
95	95	has received written notice from the principal, insurer, or
96	96	administrator that the contractor's coverage under the
97	97	consolidated insurance program has ended.
98	98	(c) A consolidated insurance program must provide coverage
99	99	for:
100	100	(1) ongoing operations of the contractor for warranty
101	101	or punch-out work on a construction project covered by the
102	102	consolidated insurance program; and
103	103	(2) preconstruction services and initial construction
104	104	work related to the project.
105	105	(d) A consolidated insurance program must provide completed
106	106	operations coverage for specially fabricated materials or
107	107	equipment if the installer of the fabricated materials or equipment
108	108	is covered under the program and fabricated the materials or
109	109	equipment.
110	110	Sec. 151.053. NOTICE OF CERTAIN CHANGES. (a) Except as
111	111	provided by Subsection (b), after the execution of a construction
112	112	contract by the principal, the coverages or limits under the
113	113	consolidated insurance program may not be reduced, nonrenewed, or
114	114	canceled without written notice provided to the principal and all
115	115	contractors. The notice required under this subsection must be
116	116	provided by the insurer or administrator not later than the 60th day
117	117	before the effective date of the reduction, nonrenewal, or
118	118	cancellation.
119	119	(b) A notice to cancel coverage due to nonpayment of premium
120	120	is effective only after written notice is provided to the principal
121	121	at least 10 days before the scheduled effective date of the
122	122	cancellation due to nonpayment of premium.
123	123	(c) If any coverage is canceled, the insurer or
124	124	administrator shall notify each contractor in writing that coverage
125	125	has been canceled. The notice under this subsection must be sent
126	126	not later than the effective date of the cancellation of coverage.
127	127	Sec. 151.054. NOTICE REGARDING REDUCTION IN LIMIT. (a) The
128	128	insurer shall notify all contractors in writing not later than the
129	129	10th day after the date the total limit of coverage for any type of
130	130	liability coverage issued under the consolidated insurance program
131	131	is reduced by:
132	132	(1) 50 percent; and
133	133	(2) each additional 25 percentage point reduction
134	134	after the initial 50 percent reduction.
135	135	(b) The reduction in the limit under Subsection (a) shall be
136	136	computed based on incurred losses and expenses.
137	137	(c) The notice under Subsection (a) must describe:
138	138	(1) the initial limit of liability coverage; and
139	139	(2) the limit of liability coverage that remains as of
140	140	the notice date.
141	141	(d) If the limits of a policy have been expended, triggering
142	142	the limits of another policy, the notice under Subsection (a) is
143	143	required only if the combined limit of all policies providing the
144	144	coverage has been reached.
145	145	Sec. 151.055. INSURER REQUIREMENTS; INSURER RATINGS. (a)
146	146	All insurance coverages under a consolidated insurance program for
147	147	a construction project must be provided by an insurer that has:
148	148	(1) a financial strength rating of at least A- and a
149	149	financial size rating of at least Class VII, as currently reported
150	150	by the A. M. Best Company; or
151	151	(2) an equivalent rating made by a similar rating
152	152	organization recognized by the commissioner.
153	153	(b) Insurance policies providing coverage under the
154	154	consolidated insurance program shall be delivered to the
155	155	first-named insured not later than the 60th day after the date on
156	156	which the coverage takes effect.
157	157	(c) The requirements of this section must be maintained for
158	158	the duration of the construction project.
159	159	Sec. 151.056. DUTY AND COMPLIANCE BY PRINCIPAL. A
160	160	principal under a consolidated insurance program owes a duty to
161	161	each contractor covered under the consolidated insurance program to
162	162	comply with the requirements of this chapter.
163	163	Sec. 151.057. LIMITED EXCEPTION TO RATING STANDARDS.
164	164	Sections 2053.002 and 2251.052, Insurance Code, and Section 1,
165	165	Chapter 50 (H.B. 32), Acts of the 53rd Legislature, Regular
166	166	Session, 1953 (Article 5.77, Vernon's Texas Insurance Code), do not
167	167	apply to rates used for an insurance policy issued under a
168	168	consolidated insurance program under this chapter to the extent
169	169	that those laws require an insurer to produce rates for individual
170	170	risks.
171	171	[Sections 151.058-151.100 reserved for expansion]
172	172	SUBCHAPTER C. COVERAGE LIMITS
173	173	Sec. 151.101. GENERAL REQUIREMENTS. Subject to Section
174	174	151.052, aggregate and per-occurrence limits of all general
175	175	liability insurance and employer liability coverages under a
176	176	consolidated insurance program apply collectively to all
177	177	contractors under the program for the duration of each construction
178	178	project covered by the program.
179	179	Sec. 151.102. LIMITS. (a) Except as provided by Subsection
180	180	(b), (c), or (d), for a construction project the general liability
181	181	limit must be not less than:
182	182	(1) $25 million, if the construction value is $40
183	183	million or less;
184	184	(2) $75 million, if the construction value is more
185	185	than $40 million but no more than $100 million;
186	186	(3) $150 million, if the construction value is more
187	187	than $100 million but no more than $250 million; and
188	188	(4) the lesser of $250 million or 50 percent of the
189	189	construction value, if the construction value is more than $250
190	190	million.
191	191	(b) For a construction project covered by a rolling
192	192	consolidated insurance program, the general liability limit must
193	193	not be less than:
194	194	(1) $40 million, if the construction value is $40
195	195	million or less;
196	196	(2) $75 million, if the construction value is more
197	197	than $40 million but no more than $100 million;
198	198	(3) $125 million, if the construction value is more
199	199	than $100 million but no more than $250 million; and
200	200	(4) the lesser of $375 million or 50 percent of the
201	201	construction value, if the construction value is more than $250
202	202	million.
203	203	(c) For purposes of computing the required coverage for a
204	204	rolling consolidated insurance program under Subsection (b), the
205	205	construction value may be reduced by the value of a construction
206	206	project that has dedicated liability limits and is operated under
207	207	the rolling consolidated insurance program.
208	208	(d) For purposes of computing the required coverage for a
209	209	rolling consolidated insurance program under Subsection (b), if a
210	210	single construction project operated under a rolling consolidated
211	211	insurance program has a construction value of more than $100
212	212	million, the single construction project must have a dedicated
213	213	limit of $75 million or more.
214	214	(e) For employer liability coverage under a consolidated
215	215	insurance program, the per-occurrence liability limit may not be
216	216	less than the applicable general liability limit. Any umbrella or
217	217	excess policy limits must extend to employer liability coverage.
218	218	(f) Construction projects solely for the construction of
219	219	single-family homes, duplexes, triplexes, or quadraplexes must
220	220	have a general liability limit of $5 million or more.
221	221	[Sections 151.103-151.150 reserved for expansion]
222	222	SUBCHAPTER D. DISCLOSURE REQUIREMENTS FOR
223	223	ADMINISTRATION OF CONSOLIDATED INSURANCE PROGRAM
224	224	Sec. 151.151. REQUIRED DISCLOSURE AT BID SOLICITATION.
225	225	(a) At the time a principal or contractor is soliciting bids for a
226	226	construction project, the principal or contractor must disclose
227	227	prominently in the project specifications, or in any request for
228	228	bids or proposals, that the project may be covered by a consolidated
229	229	insurance program subject to this chapter.
230	230	(b) The disclosure must be sufficient to:
231	231	(1) allow the bidder to compare the bidder's own
232	232	insurance program with the coverages, limits, and operation of the
233	233	insurance provided under the consolidated insurance program; and
234	234	(2) to accurately predict the credits, deductibles, or
235	235	other costs to the bidder associated with the program.
236	236	Sec. 151.152. REQUIRED PRECONTRACT DISCLOSURE. Not later
237	237	than the 14th day before the date on which a principal or contractor
238	238	executes a contract for a construction project covered by a
239	239	consolidated insurance program, the principal or contractor that
240	240	solicited the bid must make a written disclosure to the contractor
241	241	that contains detailed information concerning the consolidated
242	242	insurance program.
243	243	[Sections 151.153-151.200 reserved for expansion]
244	244	SUBCHAPTER E. PROGRAM ADMINISTRATION
245	245	Sec. 151.201. ADMINISTRATOR. Each principal shall appoint
246	246	a qualified administrator for the consolidated insurance program
247	247	whose primary duty is administration of the program.
248	248	Sec. 151.202. POWERS AND DUTIES OF ADMINISTRATOR. (a) An
249	249	administrator shall comply in a timely manner with the requirements
250	250	of this section.
251	251	(b) The administrator shall administer the enrollment of
252	252	all contractors covered by the consolidated insurance program as
253	253	necessary to ensure prompt coverage, effective on the date that the
254	254	contractor begins work on the construction project.
255	255	(c) The administrator shall:
256	256	(1) maintain a current consolidated insurance program
257	257	manual that contains a detailed description of the consolidated
258	258	insurance program;
259	259	(2) provide all contractors with a current copy of the
260	260	manual that is consistent with the insurance provided and the scope
261	261	of the program:
262	262	(A) on the date of the contractor's enrollment in
263	263	the program; and
264	264	(B) not later than the seventh day after any
265	265	changes are made to the manual; and
266	266	(3) provide each contractor on the date of the
267	267	contractor's enrollment in the program with a certificate that
268	268	evidences the contractor's coverage under the program.
269	269	(d) In addition to the certificate provided under
270	270	Subsection (c)(3), the administrator shall obtain from the insurer
271	271	or a licensed agent of the insurer and deliver a certificate of
272	272	insurance on behalf of a contractor to evidence the coverages and
273	273	limits provided by the consolidated insurance program not later
274	274	than the fifth day after receipt of a request from a contractor.
275	275	(e) If the insurer has issued insurance policies, the
276	276	administrator shall ensure that each contractor receives insurance
277	277	policies, or renewal certificates for previously issued policies,
278	278	for all coverages provided by the consolidated insurance program
279	279	not later than the earlier of:
280	280	(1) the 30th day after the date the contractor is
281	281	enrolled in the program; or
282	282	(2) the date the contractor begins work on the
283	283	project.
284	284	(f) The administrator shall coordinate:
285	285	(1) any regular reporting required of the contractors
286	286	and any audits required of the contractors;
287	287	(2) all meetings with the insurer, whether with the
288	288	principal, the contractors, or other parties; and
289	289	(3) availability of any on-site medical facilities or
290	290	other mandatory initial medical care providers and contact
291	291	information for contractors.
292	292	(g) The administrator shall establish and disseminate to
293	293	contractors:
294	294	(1) clear procedures for proper filing of claims; and
295	295	(2) required loss-control procedures.
296	296	(h) The administrator shall ensure that:
297	297	(1) all insurance coverages provided by the
298	298	consolidated insurance program are maintained; and
299	299	(2) all contractors are notified in writing promptly
300	300	of any changes or cancellation in coverages provided by the
301	301	consolidated insurance program.
302	302	(i) The administrator shall monitor the financial standing
303	303	of the insurer as provided by Section 151.055 and shall provide
304	304	written notice to the principal and all contractors of any
305	305	significant negative change not later than the 10th day after the
306	306	date of the negative change. This subsection may not be interpreted
307	307	to mean that the principal or administrator is a guarantor of the
308	308	insurer's obligations under an insurance policy.
309	309	(j) The administrator shall prepare and present to a
310	310	contractor on at least a bimonthly basis any required payroll
311	311	reports, claim reviews, and loss-control reviews that relate to
312	312	that contractor.
313	313	(k) The administrator shall provide oversight and
314	314	management of claims for the principal and any affected contractor
315	315	until the construction project is completed and the operation of
316	316	the consolidated insurance program and the administration of that
317	317	program is closed.
318	318	(l) Before the date on which the operation of the
319	319	consolidated insurance program and administration of the program
320	320	is closed, the administrator shall provide to the principal and
321	321	each contractor a written notice that contains the contact person's
322	322	name, company name, mailing address, telephone number, fax number,
323	323	and e-mail address, and any other necessary contact information of
324	324	the person and company responsible for any closed, open, or future
325	325	claims under the coverages provided by the consolidated insurance
326	326	program.
327	327	Sec. 151.203. DUTY OF ADMINISTRATOR. For purposes of this
328	328	chapter and insurance benefits under the consolidated insurance
329	329	program, the administrator owes a duty to each contractor that
330	330	participates in the program to comply with the requirements of this
331	331	chapter.
332	332	Sec. 151.204. ERRORS AND OMISSIONS COVERAGE REQUIRED. The
333	333	administrator shall maintain errors and omissions insurance
334	334	coverage in the minimum amount of $5 million per occurrence for any
335	335	liability of the administrator under this chapter.
336	336	[Sections 151.205-151.250 reserved for expansion]
337	337	SUBCHAPTER F. ENFORCEMENT PROVISIONS
338	338	Sec. 151.251. GENERAL ENFORCEMENT; ADMINISTRATIVE
339	339	PENALTIES. The commissioner may impose a sanction under Chapter
340	340	82, issue a cease and desist order under Chapter 83, or assess an
341	341	administrative penalty under Chapter 84 on any person regulated by
342	342	the department who violates this chapter or a rule or order adopted
343	343	by the commissioner under this chapter.
344	344	[Sections 151.252-151.300 reserved for expansion]
345	345	SUBCHAPTER G. VENUE
346	346	Sec. 151.301. VENUE. Venue for a suit brought under this
347	347	chapter is in the county in which the construction project is
348	348	located.
349	349	SECTION 2. Chapter 151, Insurance Code, as added by this
350	350	Act, applies only to a consolidated insurance program for a
351	351	construction project that begins on or after January 1, 2010. A
352	352	consolidated insurance program for a construction project that
353	353	begins before January 1, 2010, is governed by the law as it existed
354	354	immediately before the effective date of this Act, and that law is
355	355	continued in effect for that purpose.
356	356	SECTION 3. This Act takes effect September 1, 2009.