Texas 2009 - 81st Regular

Texas Senate Bill SB1551 Compare Versions

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1	1	81R10246 PMO-F
2	2	By: Carona S.B. No. 1551
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 provides general liability insurance
23	23	coverage, workers' compensation insurance coverage, or both that
24	24	are incorporated into an insurance program for a single
25	25	construction project or multiple construction projects.
26	26	(3) "Construction project" means construction,
27	27	remodeling, maintenance, or repair of improvements to real
28	28	property, including the immediate construction location and areas
29	29	incidental and necessary to the work as defined in a construction
30	30	document. A construction project under this chapter does not
31	31	include a single-family home, duplex, triplex, or quadruplex.
32	32	(4) "Contractor" means a person enrolled in the
33	33	consolidated insurance program who has entered into a construction
34	34	contract or a professional services contract.
35	35	(5) "Insurer" means an insurance company, including a
36	36	mutual insurance company or a capital stock company, a reciprocal
37	37	or interinsurance exchange, a Lloyd's plan, or another legal entity
38	38	authorized to engage in the business of general liability insurance
39	39	or workers' compensation insurance in this state. The term
40	40	includes an eligible surplus lines insurer.
41	41	(6) "Principal" means the person who procures the
42	42	insurance contract or policy and who is typically the first-named
43	43	insured on a general liability insurance contract or policy.
44	44	Sec. 151.002. RULES. The commissioner shall adopt rules in
45	45	the manner provided by Subchapter A, Chapter 36, as necessary to
46	46	implement and enforce the purpose and intent of this chapter.
47	47	[Sections 151.003-151.050 reserved for expansion]
48	48	SUBCHAPTER B. GENERAL REQUIREMENTS
49	49	Sec. 151.051. COVERAGE OF CONTRACTORS. (a) Each
50	50	contractor on a construction project covered by a consolidated
51	51	insurance program must:
52	52	(1) be included as a named insured on each insurance
53	53	policy under the program; and
54	54	(2) have equal rights under the policy with the
55	55	principal and other contractors, subject to insurance industry
56	56	standard differences between a first-named insured and a named
57	57	insured.
58	58	(b) Subsection (a) does not apply to a policy or contract
59	59	that is issued individually in the name of the contractor as the
60	60	first-named insured under a consolidated insurance program.
61	61	(c) The principal or a contractor may not require, by
62	62	contract or otherwise, another contractor to obtain an additional
63	63	insured endorsement on the other contractor's separately
64	64	maintained insurance policy with respect to a construction project
65	65	covered under a consolidated insurance program that is of the same
66	66	type of insurance coverage as the insurance coverage provided to
67	67	the other contractor by the consolidated insurance program, other
68	68	than an insurance policy covering offsite work for ongoing
69	69	operations related to the project and not covered by the
70	70	consolidated insurance program. Such a requirement is void and
71	71	unenforceable.
72	72	(d) The coverages under the consolidated insurance program
73	73	must be primary and noncontributory to any insurance policy
74	74	separately maintained by a contractor covered by the consolidated
75	75	insurance program that is of the same general type as the insurance
76	76	coverages provided by the consolidated insurance program.
77	77	Sec. 151.052. DURATION OF GENERAL LIABILITY COVERAGE;
78	78	CERTAIN COVERAGE REQUIRED. (a) Except as provided by Subsection
79	79	(b), a consolidated insurance program that provides completed
80	80	operations insurance coverage separate from or together with
81	81	general liability coverage must continue completed operations
82	82	insurance coverage until the expiration of the limitations period
83	83	for bringing an action for damages under Section 16.009, Civil
84	84	Practice and Remedies Code.
85	85	(b) A consolidated insurance program may not provide
86	86	completed operations insurance coverage for a period shorter than
87	87	the limitations period under Section 16.009, Civil Practice and
88	88	Remedies Code, unless the commissioner determines that the coverage
89	89	is not available in the insurance market. If the commissioner
90	90	determines that the coverage is not available, the commissioner
91	91	shall determine the maximum period that the coverage is available,
92	92	and the consolidated insurance program must provide coverage for
93	93	that period. The commissioner shall make a determination under
94	94	this subsection by rule as the commissioner finds necessary or on a
95	95	request of an insurer, administrator, or principal.
96	96	(c) A consolidated insurance program must include premises
97	97	liability coverage, for 18 months after the date of substantial
98	98	completion of the construction project, for ongoing operations for
99	99	the contractor's warranty work, remedial work, or other work on a
100	100	construction project covered by the consolidated insurance
101	101	program.
102	102	(d) A contractor's separately maintained insurance policy
103	103	must include coverage for ongoing operations of the contractor for:
104	104	(1) preconstruction services and initial construction
105	105	work related to the project performed prior to the date of coverage
106	106	for the contractor under the consolidated insurance program; and
107	107	(2) warranty work, remedial work, or other work on a
108	108	construction project covered by a consolidated insurance program
109	109	that occurs after the coverage required under Subsection (c) has
110	110	ended.
111	111	(e) The consolidated insurance program must provide
112	112	completed operations coverage for specially fabricated materials
113	113	or equipment if the installer of the fabricated materials is
114	114	covered under the program and fabricated the materials or
115	115	equipment.
116	116	Sec. 151.053. NOTICE OF CERTAIN CHANGES. (a) Except as
117	117	provided by Subsection (g), the insurer may not reduce coverage,
118	118	nonrenew coverage, or cancel coverage, or change the limits under a
119	119	consolidated insurance program except for:
120	120	(1) nonpayment of premium;
121	121	(2) failure to comply with safety standards required
122	122	by the program;
123	123	(3) failure of the principal to disclose relevant and
124	124	material information on the date on which the parties entered the
125	125	contract for the consolidated insurance program; or
126	126	(4) the provision of materially misleading or false
127	127	information to an insurer before the date on which the parties
128	128	entered the contract for the consolidated insurance program.
129	129	(b) Except as provided by Subsection (c), after work covered
130	130	by the consolidated insurance program has begun, the coverages or
131	131	limits under the consolidated insurance program may not be reduced,
132	132	nonrenewed, or canceled under Subsection (a) without written notice
133	133	provided to the principal and all contractors. The notice required
134	134	under this subsection must be provided by the insurer or
135	135	administrator not later than the 60th day before the effective date
136	136	of the reduction, nonrenewal, or cancellation.
137	137	(c) A notice to cancel coverage due to nonpayment of premium
138	138	is effective only after written notice is provided to the principal
139	139	and all contractors at least 10 days before the scheduled effective
140	140	date of the cancellation due to nonpayment of premium.
141	141	(d) The insurer or administrator shall notify each
142	142	contractor in writing if any coverage or limit is reduced,
143	143	nonrenewed, or canceled. The notice under this subsection must be
144	144	sent not later than the effective date of the reduction,
145	145	nonrenewal, or cancellation of coverage.
146	146	(e) If an insurer fails to comply with this section, a
147	147	reduction, nonrenewal, or cancellation is not effective until the
148	148	insurer complies with this section.
149	149	(f) If the insurer gives notice of cancellation based on one
150	150	of the grounds listed in Subdivision (a)(1) or (a)(2), the
151	151	principal shall have a reasonable opportunity to pay the premium
152	152	due or to fulfill the principal's obligation under the consolidated
153	153	insurance program.
154	154	(g) This section does not apply to a reduction in limits due
155	155	to an insurer incurring losses or expenses for a claim made under
156	156	the policy.
157	157	Sec. 151.054. NOTICE REGARDING REDUCTION IN LIMIT. (a) The
158	158	principal shall notify all contractors in writing not later than
159	159	the 10th day after the date the total limit of liability for any
160	160	type of coverage issued under the consolidated insurance program is
161	161	reduced by:
162	162	(1) 50 percent; and
163	163	(2) each additional 25 percentage point reduction
164	164	after the initial 50 percent reduction.
165	165	(b) The reduction in the limit under Subsection (a) shall be
166	166	computed based on incurred losses and expenses.
167	167	(c) The notice under Subsection (a) must describe:
168	168	(1) the initial limit of liability coverage; and
169	169	(2) the limit of liability coverage that remains as of
170	170	the notice date.
171	171	(d) If the limits of a policy have been expended, triggering
172	172	the limits of another policy, the notice under Subsection (a) is
173	173	required only if the combined limit of all policies providing the
174	174	coverage has been reached.
175	175	Sec. 151.055. INSURER REQUIREMENTS; INSURER RATINGS. (a)
176	176	All insurance coverages under a consolidated insurance program for
177	177	a construction project must be provided by an insurer that has:
178	178	(1) a financial strength rating of at least A- and a
179	179	financial size rating of at least Class VII, as currently reported
180	180	by the A. M. Best Company; or
181	181	(2) an equivalent rating made by a similar rating
182	182	organization recognized by the commissioner.
183	183	(b) Insurance policies providing coverage under the
184	184	consolidated insurance program shall be delivered to the
185	185	first-named insured not later than the 30th day after the date on
186	186	which the coverage takes effect.
187	187	(c) The requirements of this section must be maintained for
188	188	the duration of the construction project.
189	189	Sec. 151.056. DUTY AND COMPLIANCE BY PRINCIPAL. (a) A
190	190	principal under a consolidated insurance program owes a duty to
191	191	each contractor covered under the consolidated insurance program to
192	192	comply with the requirements of this chapter.
193	193	(b) The duty includes:
194	194	(1) paying the premium for the insurance coverage; and
195	195	(2) securing replacement insurance that meets the
196	196	requirements of this chapter, or reimbursing an enrolled contractor
197	197	for the cost of replacement insurance that meets the requirements
198	198	of this chapter, if the insurer of the consolidated insurance
199	199	program fails to provide the coverage under the program.
200	200	Sec. 151.057. CONTRACTOR INSURANCE. This chapter, or a
201	201	requirement of a contract entered into under this chapter, may not
202	202	be construed as preventing a contractor from obtaining any
203	203	insurance coverage not provided by the consolidated insurance
204	204	program to protect the contractor or the construction project.
205	205	Sec. 151.058. INDEMNITY AND SUBROGATION. (a) Rights under
206	206	an indemnity or hold harmless provision between a principal and
207	207	contractor or between contractors for claims or events insured
208	208	under a consolidated insurance program are limited to rights to
209	209	recover only under the consolidated insurance program.
210	210	(b) An insurer providing coverage under the consolidated
211	211	insurance program does not have subrogation rights against a
212	212	contractor or against any insurance policy of the principal or
213	213	contractor for losses paid under the consolidated insurance
214	214	program.
215	215	Sec. 151.059. DEFENSE COVERAGE FOR CLAIM OR SUIT. (a) In a
216	216	lawsuit or arbitration proceeding that is covered by the
217	217	consolidated insurance program, an insurance policy under the
218	218	program must provide coverage for the defense of each contractor.
219	219	This coverage may be provided by a joint defense provision under the
220	220	program or by separate agreement among the affected contractors.
221	221	(b) Defense costs for a contractor under Subsection (a) may
222	222	not be included in the limit of liability of an insurance policy
223	223	under the consolidated insurance program if the defense costs for
224	224	the principal are not included in the limit of liability.
225	225	Sec. 151.060. LIMITED EXCEPTION TO RATING STANDARDS.
226	226	Sections 2053.002 and 2251.052, Insurance Code, and Section 1,
227	227	Chapter 50 (H.B. 32), Acts of the 53rd Legislature, Regular
228	228	Session, 1953 (Article 5.77, Vernon's Texas Insurance Code), do not
229	229	apply to rates used for an insurance policy issued under a
230	230	consolidated insurance program under this chapter to the extent
231	231	that those laws require an insurer to produce rates for individual
232	232	risks.
233	233	Sec. 151.061. PAYMENT OF CERTAIN DEDUCTIBLES, LOSSES, OR
234	234	PENALTIES. (a) A principal shall pay any:
235	235	(1) coverage deductible, self-insured retention, or
236	236	loss in a retrospective rating plan or other loss-sensitive rating
237	237	plan under a consolidated insurance program;
238	238	(2) penalty incurred under the program; and
239	239	(3) deductible or self-insured retention applicable
240	240	to any policy provided under the consolidated insurance program,
241	241	except as provided by Subsection (b).
242	242	(b) A principal may not assess a contractor covered under
243	243	the consolidated insurance program for a deductible, self-insured
244	244	retention, loss, or penalty described by Subsection (a), except for
245	245	a property damage claim deductible or self-insured retention if:
246	246	(1) the action of the contractor caused the property
247	247	damage claim; and
248	248	(2) the insurance carrier assesses the deductible or
249	249	self-insured retention against the principal.
250	250	(c) If the principal fails to pay a deductible, self-insured
251	251	retention, penalty or other item required of the principal by this
252	252	section, a contractor covered under the program may not be required
253	253	to pay the deductible, self-insured retention, penalty or other
254	254	item required of the principal.
255	255	[Sections 151.062-151.100 reserved for expansion]
256	256	SUBCHAPTER C. COVERAGE LIMITS
257	257	Sec. 151.101. GENERAL REQUIREMENTS. Subject to Section
258	258	151.052, aggregate and per-occurrence limits of all general
259	259	liability insurance and employer liability coverages under a
260	260	consolidated insurance program apply collectively to all
261	261	contractors under the program for the duration of each construction
262	262	project covered by the program.
263	263	Sec. 151.102. LIMITS. (a) Except as provided by Subsection
264	264	(b), for a construction project the general liability limit must be
265	265	not less than $25 million.
266	266	(b) For a construction project covered by a rolling
267	267	consolidated insurance program, the general liability limit must be
268	268	not less than $50 million.
269	269	(c) For employer liability coverage under a consolidated
270	270	insurance program, the per-occurrence liability limit may not be
271	271	less than the applicable general liability limits. Any umbrella or
272	272	excess policy limits provided under the consolidated insurance
273	273	program shall extend to a principal's or contractor's employer
274	274	liability coverage regardless of whether that employer liability
275	275	coverage is provided under the consolidated insurance program or by
276	276	the principal's or contractor's separately maintained policy.
277	277	[Sections 151.103-151.150 reserved for expansion]
278	278	SUBCHAPTER D. DISCLOSURE REQUIREMENTS FOR
279	279	ADMINISTRATION OF CONSOLIDATED INSURANCE PROGRAM
280	280	Sec. 151.151. REQUIRED DISCLOSURE AT BID SOLICITATION. (a)
281	281	At the time a principal or contractor is soliciting bids for a
282	282	construction project that may be covered by a consolidated
283	283	insurance program, the principal or contractor must disclose
284	284	prominently in the project specifications, or in any request for
285	285	bids or proposals, that the project may be covered by a consolidated
286	286	insurance program subject to this chapter.
287	287	(b) The disclosure must be sufficient to:
288	288	(1) allow the bidder to compare the bidder's own
289	289	insurance program with the coverages, limits, and operation of the
290	290	consolidated insurance program; and
291	291	(2) accurately predict the credits, deductibles, or
292	292	other costs to the bidder associated with the program.
293	293	Sec. 151.152. REQUIRED PRECONTRACT DISCLOSURE. Not later
294	294	than the 14th day before the date on which a principal or contractor
295	295	executes a contract for a construction project covered by a
296	296	consolidated insurance program, the principal or contractor that
297	297	solicited the bid must make a written disclosure to the contractor
298	298	that contains detailed information concerning the consolidated
299	299	insurance program.
300	300	[Sections 151.153-151.200 reserved for expansion]
301	301	SUBCHAPTER E. PROGRAM ADMINISTRATION
302	302	Sec. 151.201. ADMINISTRATOR. Each principal shall appoint
303	303	a qualified administrator for the consolidated insurance program
304	304	whose primary duty is administration of the program.
305	305	Sec. 151.202. POWERS AND DUTIES OF ADMINISTRATOR. (a) An
306	306	administrator shall comply in a timely manner with the requirements
307	307	of this section.
308	308	(b) The administrator shall administer the enrollment of
309	309	all contractors covered by the consolidated insurance program as
310	310	necessary to ensure prompt coverage, effective on the date that the
311	311	contractor begins work on the construction project.
312	312	(c) The administrator shall:
313	313	(1) maintain a current consolidated insurance program
314	314	manual that contains a detailed description of the consolidated
315	315	insurance program;
316	316	(2) provide all contractors with a current copy of the
317	317	manual that is consistent with the insurance provided and the scope
318	318	of the program:
319	319	(A) on the date of the contractor's enrollment in
320	320	the program; and
321	321	(B) not later than the 10th day after any changes
322	322	are made to the manual; and
323	323	(3) provide each contractor on the date of the
324	324	contractor's enrollment in the program with a certificate that
325	325	evidences the contractor's coverage under the program.
326	326	(d) In addition to the certificate provided under
327	327	Subsection (c)(3), the administrator shall obtain from the insurer
328	328	or a licensed agent of the insurer and deliver a certificate of
329	329	insurance on behalf of a contractor to evidence the coverages and
330	330	limits provided by the consolidated insurance program not later
331	331	than the 10th day after receipt of a request from a contractor.
332	332	(e) If the insurer has issued insurance policies, the
333	333	administrator shall ensure that each contractor receives insurance
334	334	policies, or renewal certificates for previously issued policies,
335	335	for all coverages provided by the consolidated insurance program
336	336	not later than the earlier of:
337	337	(1) the 30th day after the date the contractor is
338	338	enrolled in the program; or
339	339	(2) the date the contractor begins work on the
340	340	project.
341	341	(f) The administrator may comply with the requirements of
342	342	Subsection (e) by providing access to the documents on its Internet
343	343	website or by electronic transmission to the contractor. If the
344	344	contractor expressly requests that the items be provided in written
345	345	form, the administrator shall provide the items in written form to
346	346	the contractor.
347	347	(g) The administrator shall coordinate:
348	348	(1) any regular reporting required of a contractor and
349	349	any audits required of a contractor;
350	350	(2) all meetings with the insurer, whether with the
351	351	principal, a contractor, or any other party; and
352	352	(3) availability of any on-site medical facilities or
353	353	other mandatory initial medical care providers and contact
354	354	information for contractors.
355	355	(h) The administrator shall disseminate to all contractors
356	356	clear procedures for proper filing of claims under the consolidated
357	357	insurance program.
358	358	(i) The administrator shall ensure that:
359	359	(1) all insurance coverages provided by the
360	360	consolidated insurance program are maintained; and
361	361	(2) all contractors are notified in writing promptly
362	362	of any changes or cancellation in coverages provided by the
363	363	consolidated insurance program.
364	364	(j) The administrator shall monitor the financial standing
365	365	of the insurer as provided by Section 151.055 and shall provide
366	366	written notice to the principal and all contractors of any
367	367	significant negative change not later than the 10th day after the
368	368	date of the negative change. This subsection may not be interpreted
369	369	to mean that the principal or administrator is a guarantor of the
370	370	insurer's obligations under an insurance policy.
371	371	(k) The administrator shall provide oversight and
372	372	coordinate the filing of claims for the principal and any affected
373	373	contractor until:
374	374	(1) the construction project is completed;
375	375	(2) the coverage periods have expired; and
376	376	(3) the claims are resolved.
377	377	(l) Before the date on which the operation of the
378	378	consolidated insurance program and administration of the program
379	379	is closed, the administrator shall provide to the principal and
380	380	each contractor a written notice that contains the contact person's
381	381	name, company name, mailing address, telephone number, facsimile
382	382	number, and electronic mail address, and any other necessary
383	383	contact information of the person and company responsible for any
384	384	closed, open, or future claims under the coverages provided by the
385	385	consolidated insurance program.
386	386	(m) For purposes of this chapter and insurance benefits
387	387	under the consolidated insurance program, the administrator owes a
388	388	duty to the principal and each contractor that participates in the
389	389	program to comply with the requirements of this chapter.
390	390	Sec. 151.203. ERRORS AND OMISSIONS COVERAGE REQUIRED;
391	391	PRINCIPAL RESPONSIBLE. (a) The administrator shall maintain
392	392	errors and omissions insurance coverage in the minimum amount of $5
393	393	million per occurrence for any liability of the administrator under
394	394	this chapter.
395	395	(b) The principal may not require the contractor to
396	396	indemnify, hold harmless, or defend the principal or administrator
397	397	for the acts or omissions of the administrator. Any such
398	398	requirements shall be void and against public policy.
399	399	[Sections 151.204-151.250 reserved for expansion]
400	400	SUBCHAPTER F. ACCESS TO INFORMATION
401	401	Sec. 151.251. ACCESS TO RECORDS. The principal shall
402	402	provide access to information, including electronic records,
403	403	relating to the consolidated insurance program to all contractors
404	404	covered by the program until the second anniversary of the
405	405	expiration of any applicable statute of repose.
406	406	[Sections 151.252-151.300 reserved for expansion]
407	407	SUBCHAPTER G. ENFORCEMENT PROVISIONS
408	408	Sec. 151.301. GENERAL ENFORCEMENT; ADMINISTRATIVE
409	409	PENALTIES. The commissioner may impose a sanction under Chapter
410	410	82, issue a cease and desist order under Chapter 83, or assess an
411	411	administrative penalty under Chapter 84 on any person regulated by
412	412	the department who violates this chapter or a rule or order adopted
413	413	by the commissioner under this chapter.
414	414	[Sections 151.302-151.350 reserved for expansion]
415	415	SUBCHAPTER H. VENUE
416	416	Sec. 151.351. VENUE. Venue for a suit brought under this
417	417	chapter is in the county in which the construction project is
418	418	located.
419	419	[Sections 151.352-151.400 reserved for expansion]
420	420	SUBCHAPTER I. NONWAIVER
421	421	Sec. 151.401. NONWAIVER. A provision of this chapter may
422	422	not be waived by contract or otherwise.
423	423	SECTION 2. Chapter 151, Insurance Code, as added by this
424	424	Act, applies only to a new or renewed consolidated insurance
425	425	program for a construction project that begins on or after January
426	426	1, 2010. A consolidated insurance program for a construction
427	427	project that begins before January 1, 2010, is governed by the law
428	428	as it existed immediately before the effective date of this Act, and
429	429	that law is continued in effect for that purpose.
430	430	SECTION 3. This Act takes effect September 1, 2009.