81R10246 PMO-F
By: Carona S.B. No. 1551
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 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, including the immediate construction location and areas
incidental and necessary to the work as defined in a construction
document. A construction project under this chapter does not
include a single-family home, duplex, triplex, or quadruplex.
(4) "Contractor" means a person enrolled in the
consolidated insurance program who has entered into a construction
contract or a professional services contract.
(5) "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.
(6) "Principal" means the person who procures the
insurance contract or policy and who is typically the first-named
insured on a general liability insurance contract or policy.
Sec. 151.002. 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 151.003-151.050 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 included as a named insured on each insurance
policy under the program; and
(2) have equal rights under the policy 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, by
contract or otherwise, another contractor to obtain an additional
insured endorsement on the other contractor's separately
maintained insurance policy with respect to a construction project
covered under a consolidated insurance program that is of the same
type of insurance coverage as the insurance coverage provided to
the other contractor by the consolidated insurance program, other
than an insurance policy covering offsite work for ongoing
operations related to the project and not covered by the
consolidated insurance program. Such a requirement is void and
unenforceable.
(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) Except as provided by Subsection
(b), a consolidated insurance program that provides completed
operations insurance coverage separate from or 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 consolidated insurance program may not provide
completed operations insurance coverage for a period shorter than
the limitations period under Section 16.009, Civil Practice and
Remedies Code, unless the commissioner determines that the coverage
is not available in the insurance market. If the commissioner
determines that the coverage is not available, the commissioner
shall determine the maximum period that the coverage is available,
and the consolidated insurance program must provide coverage for
that period. The commissioner shall make a determination under
this subsection by rule as the commissioner finds necessary or on a
request of an insurer, administrator, or principal.
(c) A consolidated insurance program must include premises
liability coverage, for 18 months after the date of substantial
completion of the construction project, for ongoing operations for
the contractor's warranty work, remedial work, or other work on a
construction project covered by the consolidated insurance
program.
(d) A contractor's separately maintained insurance policy
must include coverage for ongoing operations of the contractor for:
(1) preconstruction services and initial construction
work related to the project performed prior to the date of coverage
for the contractor under the consolidated insurance program; and
(2) warranty work, remedial work, or other work on a
construction project covered by a consolidated insurance program
that occurs after the coverage required under Subsection (c) has
ended.
(e) The consolidated insurance program must provide
completed operations coverage for specially fabricated materials
or equipment if the installer of the fabricated materials is
covered under the program and fabricated the materials or
equipment.
Sec. 151.053. NOTICE OF CERTAIN CHANGES. (a) Except as
provided by Subsection (g), the insurer may not reduce coverage,
nonrenew coverage, or cancel coverage, or change the limits under a
consolidated insurance program except for:
(1) nonpayment of premium;
(2) failure to comply with safety standards required
by the program;
(3) failure of the principal to disclose relevant and
material information on the date on which the parties entered the
contract for the consolidated insurance program; or
(4) the provision of materially misleading or false
information to an insurer before the date on which the parties
entered the contract for the consolidated insurance program.
(b) Except as provided by Subsection (c), after work covered
by the consolidated insurance program has begun, the coverages or
limits under the consolidated insurance program may not be reduced,
nonrenewed, or canceled under Subsection (a) 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.
(c) A notice to cancel coverage due to nonpayment of premium
is effective only after written notice is provided to the principal
and all contractors at least 10 days before the scheduled effective
date of the cancellation due to nonpayment of premium.
(d) The insurer or administrator shall notify each
contractor in writing if any coverage or limit is reduced,
nonrenewed, or canceled. The notice under this subsection must be
sent not later than the effective date of the reduction,
nonrenewal, or cancellation of coverage.
(e) If an insurer fails to comply with this section, a
reduction, nonrenewal, or cancellation is not effective until the
insurer complies with this section.
(f) If the insurer gives notice of cancellation based on one
of the grounds listed in Subdivision (a)(1) or (a)(2), the
principal shall have a reasonable opportunity to pay the premium
due or to fulfill the principal's obligation under the consolidated
insurance program.
(g) This section does not apply to a reduction in limits due
to an insurer incurring losses or expenses for a claim made under
the policy.
Sec. 151.054. NOTICE REGARDING REDUCTION IN LIMIT. (a) The
principal shall notify all contractors in writing not later than
the 10th day after the date the total limit of liability for any
type of 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 30th 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) 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.
(b) The duty includes:
(1) paying the premium for the insurance coverage; and
(2) securing replacement insurance that meets the
requirements of this chapter, or reimbursing an enrolled contractor
for the cost of replacement insurance that meets the requirements
of this chapter, if the insurer of the consolidated insurance
program fails to provide the coverage under the program.
Sec. 151.057. CONTRACTOR INSURANCE. This chapter, or a
requirement of a contract entered into under this chapter, may not
be construed as preventing a contractor from obtaining any
insurance coverage not provided by the consolidated insurance
program to protect the contractor or the construction project.
Sec. 151.058. INDEMNITY AND SUBROGATION. (a) Rights under
an indemnity or hold harmless provision between a principal and
contractor or between contractors for claims or events insured
under a consolidated insurance program are limited to rights to
recover only under the consolidated insurance program.
(b) An insurer providing coverage under the consolidated
insurance program does not have subrogation rights against a
contractor or against any insurance policy of the principal or
contractor for losses paid under the consolidated insurance
program.
Sec. 151.059. DEFENSE COVERAGE FOR CLAIM OR SUIT. (a) In a
lawsuit or arbitration proceeding that is covered by the
consolidated insurance program, an insurance policy under the
program must provide coverage for the defense of each contractor.
This coverage may be provided by a joint defense provision under the
program or by separate agreement among the affected contractors.
(b) Defense costs for a contractor under Subsection (a) may
not be included in the limit of liability of an insurance policy
under the consolidated insurance program if the defense costs for
the principal are not included in the limit of liability.
Sec. 151.060. 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.
Sec. 151.061. PAYMENT OF CERTAIN DEDUCTIBLES, LOSSES, OR
PENALTIES. (a) A principal shall pay any:
(1) coverage deductible, self-insured retention, or
loss in a retrospective rating plan or other loss-sensitive rating
plan under a consolidated insurance program;
(2) penalty incurred under the program; and
(3) deductible or self-insured retention applicable
to any policy provided under the consolidated insurance program,
except as provided by Subsection (b).
(b) A principal may not assess a contractor covered under
the consolidated insurance program for a deductible, self-insured
retention, loss, or penalty described by Subsection (a), except for
a property damage claim deductible or self-insured retention if:
(1) the action of the contractor caused the property
damage claim; and
(2) the insurance carrier assesses the deductible or
self-insured retention against the principal.
(c) If the principal fails to pay a deductible, self-insured
retention, penalty or other item required of the principal by this
section, a contractor covered under the program may not be required
to pay the deductible, self-insured retention, penalty or other
item required of the principal.
[Sections 151.062-151.100 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), for a construction project the general liability limit must be
not less than $25 million.
(b) For a construction project covered by a rolling
consolidated insurance program, the general liability limit must be
not less than $50 million.
(c) For employer liability coverage under a consolidated
insurance program, the per-occurrence liability limit may not be
less than the applicable general liability limits. Any umbrella or
excess policy limits provided under the consolidated insurance
program shall extend to a principal's or contractor's employer
liability coverage regardless of whether that employer liability
coverage is provided under the consolidated insurance program or by
the principal's or contractor's separately maintained policy.
[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 that may be covered by a consolidated
insurance program, 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
consolidated insurance program; and
(2) 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 10th 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 10th 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 may comply with the requirements of
Subsection (e) by providing access to the documents on its Internet
website or by electronic transmission to the contractor. If the
contractor expressly requests that the items be provided in written
form, the administrator shall provide the items in written form to
the contractor.
(g) The administrator shall coordinate:
(1) any regular reporting required of a contractor and
any audits required of a contractor;
(2) all meetings with the insurer, whether with the
principal, a contractor, or any other party; and
(3) availability of any on-site medical facilities or
other mandatory initial medical care providers and contact
information for contractors.
(h) The administrator shall disseminate to all contractors
clear procedures for proper filing of claims under the consolidated
insurance program.
(i) 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.
(j) 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.
(k) The administrator shall provide oversight and
coordinate the filing of claims for the principal and any affected
contractor until:
(1) the construction project is completed;
(2) the coverage periods have expired; and
(3) the claims are resolved.
(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, facsimile
number, and electronic 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.
(m) For purposes of this chapter and insurance benefits
under the consolidated insurance program, the administrator owes a
duty to the principal and each contractor that participates in the
program to comply with the requirements of this chapter.
Sec. 151.203. ERRORS AND OMISSIONS COVERAGE REQUIRED;
PRINCIPAL RESPONSIBLE. (a) 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.
(b) The principal may not require the contractor to
indemnify, hold harmless, or defend the principal or administrator
for the acts or omissions of the administrator. Any such
requirements shall be void and against public policy.
[Sections 151.204-151.250 reserved for expansion]
SUBCHAPTER F. ACCESS TO INFORMATION
Sec. 151.251. ACCESS TO RECORDS. The principal shall
provide access to information, including electronic records,
relating to the consolidated insurance program to all contractors
covered by the program until the second anniversary of the
expiration of any applicable statute of repose.
[Sections 151.252-151.300 reserved for expansion]
SUBCHAPTER G. ENFORCEMENT PROVISIONS
Sec. 151.301. 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 151.302-151.350 reserved for expansion]
SUBCHAPTER H. VENUE
Sec. 151.351. VENUE. Venue for a suit brought under this
chapter is in the county in which the construction project is
located.
[Sections 151.352-151.400 reserved for expansion]
SUBCHAPTER I. NONWAIVER
Sec. 151.401. NONWAIVER. A provision of this chapter may
not be waived by contract or otherwise.
SECTION 2. Chapter 151, Insurance Code, as added by this
Act, applies only to a new or renewed 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.