82R9750 KCR-D
By: Carona S.B. No. 1432
A BILL TO BE ENTITLED
AN ACT
relating to the operation of the Texas Windstorm Insurance
Association and to the resolution of certain disputes concerning
claims made to that association.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subchapter A, Chapter 2210, Insurance Code, is
amended by adding Sections 2210.010 and 2210.011 to read as
follows:
Sec. 2210.010. APPLICABILITY OF CERTAIN OTHER LAW. (a) A
person insured under this chapter may not bring an action against
the association under Chapter 541.
(b) Chapter 542 does not apply to the processing and
settlement of claims by the association.
Sec. 2210.011. CERTAIN CONDUCT IN DISPUTE RESOLUTION
PROHIBITED. A person insured under this chapter may not preside
over a matter or action to which the association is a party,
including by sitting as a judge or serving as an arbitrator.
SECTION 2. Section 2210.104, Insurance Code, is amended to
read as follows:
Sec. 2210.104. OFFICERS; SALARIES AND BONUSES. (a) The
board of directors shall elect from the board's membership an
executive committee consisting of a presiding officer, assistant
presiding officer, and secretary-treasurer.
(b) The association shall post on the association's
Internet website the salary of each officer of the association and
any bonuses paid to an officer of the association.
SECTION 3. Section 2210.105, Insurance Code, is amended by
amending Subsections (a) and (b) and adding Subsections (b-1) and
(e) to read as follows:
(a) Except for an emergency meeting, the association shall:
(1) notify the department not later than the 11th day
before the date of a meeting of the board of directors or of the
members of the association; and
(2) not later than the seventh day before the date of a
meeting of the board of directors, post notice of the meeting on the
association's Internet website and the department's Internet
website.
(b) Except for a closed meeting authorized by Subchapter D,
Chapter 551, Government Code, a meeting of the board of directors or
of the members of the association is open to[:
[(1) the commissioner or the commissioner's designated
representative; and
[(2)] the public.
(b-1) A meeting of the board of directors or the members of
the association, including a closed meeting authorized by
Subchapter D, Chapter 551, Government Code, is open to the
commissioner or the commissioner's designated representative.
(e) The association shall broadcast live on the
association's Internet website all meetings of the board of
directors.
SECTION 4. Section 2210.107, Insurance Code, is amended to
read as follows:
Sec. 2210.107. PRIMARY BOARD OBJECTIVES; REPORT. (a) The
primary objectives of the board of directors are to ensure that the
association:
(1) operates in accordance with this chapter and
commissioner rules;
(2) complies with sound insurance principles; and
(3) meets all standards imposed under this chapter.
(b) Not later than June 1 of each year, the association
shall submit to the commissioner, the legislative oversight board
established under Subchapter N, the governor, the lieutenant
governor, and the speaker of the house of representatives a report
evaluating the extent to which the board met the objectives
described by Subsection (a) in the 12-month period immediately
preceding the date of the report.
SECTION 5. Subchapter C, Chapter 2210, Insurance Code, is
amended by adding Section 2210.108 to read as follows:
Sec. 2210.108. OPEN MEETINGS AND OPEN RECORDS. Except as
specifically provided by this chapter or another law, the
association is subject to Chapters 551 and 552, Government Code.
SECTION 6. Section 2210.202, Insurance Code, is amended by
adding Subsection (c) to read as follows:
(c) The commissioner shall adopt rules to simplify and
streamline the process through which:
(1) a person who has an insurable interest in
insurable property may apply with the association for insurance
coverage; and
(2) a person insured under this chapter may apply with
the association for renewal of the person's insurance coverage.
SECTION 7. Section 2210.203, Insurance Code, is amended by
amending Subsection (a-1) and adding Subsection (a-2) to read as
follows:
(a-1) [This subsection applies only to a structure
constructed, altered, remodeled, or enlarged on or after September
1, 2009, and only for insurable property located in areas
designated by the commissioner.] Notwithstanding Subsection (a),
if all or any part of the property to be insured [which this
subsection applies] is located in Zone A or another similar zone
with a high level of flood risk or in Zone V or another similar zone
with an additional hazard associated with storm waves, as defined
by the National Flood Insurance Program, [and if flood insurance
under that federal program is available,] the association may not
issue an insurance policy for initial or renewal coverage unless
evidence is submitted to the association that the property to be
covered under the policy is also covered by a flood insurance policy
issued under the National Flood Insurance Program in an amount
equal to or greater than the amount of coverage under the policy to
be issued by the association. This subsection does not apply to
property for which flood insurance is not available under the
National Flood Insurance Program [is submitted to the association].
(a-2) An agent offering or selling a Texas windstorm and
hail insurance policy [in any area designated by the commissioner
under this subsection] shall offer flood insurance coverage
required under Subsection (a-1) to a [the] prospective insured, if
that coverage is available.
SECTION 8. The heading to Subchapter E, Chapter 2210,
Insurance Code, is amended to read as follows:
SUBCHAPTER E. INSURANCE COVERAGE; CLAIMS SETTLEMENT AND PAYMENT
SECTION 9. Subchapter E, Chapter 2210, Insurance Code, is
amended by adding Sections 2210.205, 2210.210, 2210.211, and
2210.212 to read as follows:
Sec. 2210.205. REQUIRED POLICY PROVISIONS: DEADLINE FOR
FILING CLAIM; NOTICE CONCERNING ARBITRATION. (a) A windstorm and
hail insurance policy issued by the association must:
(1) require an insured to file a claim under the policy
not later than the first anniversary of the date on which the damage
or loss that is the basis of the claim occurs; and
(2) contain, in boldface type, a conspicuous notice
concerning the mandatory arbitration of coverage and claim disputes
under Section 2210.553, including the prerequisites and deadlines
for requesting arbitration described by Sections 2210.212 and
2210.553.
(b) The commissioner, on a showing of good cause by a person
insured under this chapter, may extend the one-year period
described by Subsection (a)(1) for a period not to exceed 90 days.
Sec. 2210.210. COVERAGE OF CERTAIN STRUCTURES PROHIBITED.
The association may not issue coverage for the following
structures, regardless of whether the structure is otherwise
insurable property under this chapter:
(1) a wind turbine;
(2) a structure used primarily as a casino or other
gambling establishment; or
(3) a structure used as a sexually oriented business,
as defined by Section 243.002, Local Government Code.
Sec. 2210.211. PROOF OF OTHER COVERAGE REQUIRED FOR
SETTLEMENT OF CERTAIN CLAIMS. (a) This section applies only to a
claim filed under an association policy the issuance or renewal of
which, under Section 2210.203(a-1), requires evidence of coverage
by a flood insurance policy.
(b) The association may not pay or settle a claim described
by Subsection (a) unless the person filing the claim provides
evidence satisfactory to the association that, on the date of the
loss that is the basis of the claim, the property insured under the
association policy was also covered by a flood insurance policy in
the amount required for issuance or renewal of the association
policy under Section 2210.203(a-1).
Sec. 2210.212. NOTICE AND APPRAISAL OF CERTAIN CLAIMS. (a)
Not later than the 30th day after the date a person insured under
this chapter files a claim with the association, the association
shall provide the person notice of whether the claim is accepted or
denied and, if the claim is accepted, a written appraisal of the
damage to the insured property.
(b) A person who receives notice that a claim is denied may,
after providing the association the notice required by Subsection
(f), request binding arbitration under Section 2210.553.
(c) Not later than the 60th day after the date the
association provides a written appraisal under Subsection (a), the
person shall:
(1) accept the written appraisal and request payment
of the person's claim in accordance with the appraisal; or
(2) request a supplemental review of the claim by the
association.
(d) Not later than the 30th day after the date of a request
for a supplemental review under Subsection (c)(2), the association
shall:
(1) conduct the requested supplemental review and, if
necessary, revise the written appraisal originally provided under
Subsection (b) to reflect any changes resulting from the
supplemental review; or
(2) notify the person who filed the claim that the
association will not conduct the requested supplemental review.
(e) On receipt of the results of a supplemental review
conducted under Subsection (d)(1), or notice under Subsection
(d)(2) that the association will not conduct a supplemental review,
the person who filed the claim may:
(1) accept the written appraisal following the
supplemental review and request payment of the claim in accordance
with that appraisal; or
(2) after providing the association the notice
required under Subsection (f), dispute the written appraisal by
requesting binding arbitration in the manner described by Section
2210.553.
(f) Not later than the 30th day before the date a person
requests binding arbitration under Section 2210.553, the person
shall provide the association with written notice of the person's
intent to request binding arbitration. The notice provided under
this subsection must advise the association of each of the person's
specific complaints concerning the association's denial of the
claim or appraisal of the insured property, including the amount of
damage that the person believes should have been but was not
accounted for in any appraisal performed by the association.
(g) In addition to the notice required under Subsection (f),
not later than the 30th day before the date of an arbitration under
Section 2210.553, the person who filed the disputed claim and the
association shall submit to the department all final offers of
settlement concerning the disputed claim. The department, the
person, and the association may not disclose the settlement offers
received under this subsection to an arbitrator assigned under
Section 2210.553.
SECTION 10. Section 2210.259, Insurance Code, is amended by
amending Subsection (a) and adding Subsection (c) to read as
follows:
(a) A noncompliant residential structure insured by the
association as of September 1, 2009, under Section 2210.251(f) that
had been approved for insurability under the approval process
regulations in effect on September 1, 2009, is subject to an annual
premium surcharge in an amount determined under Subsection (c)
[equal to 15 percent of the premium for insurance coverage obtained
through the association]. The surcharge under this subsection
applies to each policy issued or renewed by the association on or
after the effective date of Sections 5 through 49, H.B. No. 4409,
Acts of the 81st Legislature, Regular Session, 2009, and is due on
the issuance or renewal of the policy.
(c) The commissioner, after receiving a recommendation from
the board concerning the amount of the annual premium surcharge
required under Subsection (a), by rule shall establish the amount
of the annual premium surcharge. The amount of the surcharge must
be actuarially justifiable and may not be less than 15 percent of
the premium for insurance coverage obtained through the
association. Before the commissioner by rule establishes the
amount of the annual premium surcharge, the commissioner shall
report to the legislative oversight board established under
Subchapter N concerning the methodology the commissioner used to
determine the amount of the annual premium surcharge.
SECTION 11. Section 2210.355(g), Insurance Code, is amended
to read as follows:
(g) A commission paid to an agent must be reasonable,
adequate, not unfairly discriminatory, and nonconfiscatory and
must comply with rules adopted by the commissioner under Section
2210.356.
SECTION 12. Subchapter H, Chapter 2210, Insurance Code, is
amended by adding Section 2210.356 to read as follows:
Sec. 2210.356. AGENT COMMISSIONS. (a) The commissioner by
rule shall establish a commission structure for payment of an agent
who submits an application for coverage to the association on
behalf of a person who has an insurable interest in insurable
property.
(b) The commission structure adopted by the commissioner
must be fair and reasonable, taking into consideration the amount
of work performed by an agent in submitting an application to the
association and the prevailing commission structure in the private
windstorm insurance market.
SECTION 13. Section 2210.453, Insurance Code, is amended by
adding Subsection (c) to read as follows:
(c) If the association does not purchase reinsurance as
authorized by this section, the board, not later than June 1 of each
year, shall submit to the commissioner, the legislative oversight
board established under Subchapter N, the governor, the lieutenant
governor, and the speaker of the house of representatives a report
containing an actuarial plan for paying losses in the event of a
catastrophe with estimated damages of $2.5 billion or more.
SECTION 14. Section 2210.501, Insurance Code, is amended by
amending Subsection (b) and adding Subsection (d) to read as
follows:
(b) Except as provided by Subsection (d) and subject
[Subject] to Section 2210.502, the maximum liability limits for
coverage on a single insurable property may not be less than:
(1) $350,000 for:
(A) a dwelling, including an individually owned
townhouse unit; and
(B) 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, if the building is:
(A) owned by, and at least 75 percent of which is
occupied by, a governmental entity; or
(B) 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) a structure other than a dwelling or a public
building; and
(B) the corporeal movable property located in
that structure and, as an extension of coverage, away from those
premises, as provided under the policy.
(d) The maximum liability limits for insurable property the
issuance or renewal of coverage by the association of which
requires evidence of coverage by a flood insurance policy under
Section 2210.203(a-1) may not exceed the maximum liability limits
in effect for the property under the National Flood Insurance
Program on the date the association policy is issued.
SECTION 15. Section 2210.502, Insurance Code, is amended by
adding Subsection (e) to read as follows:
(e) The board of directors may not propose, and the
commissioner may not approve, maximum liability limits for
insurable property described by Section 2210.501(d), and for the
corporeal movable property located in or about that property, that
exceed the maximum liability limits in effect for the property or
contents under the National Flood Insurance Program.
SECTION 16. The heading to Subchapter L, Chapter 2210,
Insurance Code, is amended to read as follows:
SUBCHAPTER L. APPEALS AND OTHER ACTIONS; ARBITRATION
SECTION 17. Sections 2210.551(a) and (b), Insurance Code,
are amended to read as follows:
(a) This section:
(1) does not apply to a person insured under this
chapter who is required to resolve a dispute concerning the payment
of, the amount of, or the denial of a particular claim under Section
2210.553; and
(2) applies only to:
(A) [(1)] a person not described by Subdivision
(1) who is insured under this chapter or an authorized
representative of the person; or
(B) [(2)] an affected insurer.
(b) A person or entity described by Subsection (a)(2) [(a)]
who is aggrieved by an act, ruling, or decision of the association
may appeal to the commissioner not later than the 30th day after the
date of that act, ruling, or decision.
SECTION 18. The heading to Section 2210.552, Insurance
Code, is amended to read as follows:
Sec. 2210.552. [CLAIM] DISPUTES OTHER THAN CLAIM AND
COVERAGE DISPUTES; VENUE.
SECTION 19. Section 2210.552, Insurance Code, is amended by
amending Subsection (a) and adding Subsection (e) to read as
follows:
(a) Except as provided by Sections 2210.007, [and]
2210.106, and 2210.553, a person insured under this chapter 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:
(1) bring an action against the association[,
including an action under Chapter 541]; or
(2) appeal the act, ruling, or decision under Section
2210.551.
(e) A person who brings an action against the association
under this section:
(1) may recover the amount of actual damages, plus
court costs and reasonable and necessary attorney's fees; and
(2) may not recover punitive or exemplary damages,
including damages under Section 17.50, Business & Commerce Code.
SECTION 20. Subchapter L, Chapter 2210, Insurance Code, is
amended by adding Sections 2210.553, 2210.554, and 2210.555 to read
as follows:
Sec. 2210.553. ARBITRATION OF COVERAGE AND CLAIM DISPUTES.
(a) A dispute involving an act, ruling, or decision of the
association relating to the payment of, the amount of, or the denial
of a particular claim:
(1) must be resolved through binding arbitration in
accordance with this section; and
(2) may not be resolved in the manner described by
Section 2210.551 or 2210.552.
(b) A person insured under this chapter 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 request
binding arbitration of the person's grievance.
(c) A person insured under this chapter must, in the manner
prescribed by the commissioner by rule, request binding arbitration
under this section not later than the earlier of:
(1) the 90th day after the date the person receives
under Section 2210.212 notice from the association that a claim is
denied or receives notice concerning a supplemental review
requested under Section 2210.212(c); or
(2) the second anniversary of the date on which the
damage or loss that is the basis of the particular claim occurs.
(d) The commissioner, on a showing of good cause by a person
insured under this chapter, may extend each of the deadlines
described by Subsection (c) by a period not to exceed 90 days.
(e) The commissioner by rule shall establish procedures for
the conduct of the arbitration of grievances under this section.
The rules adopted under this subsection must:
(1) be consistent with any applicable rules of the
American Arbitration Association that were in effect on the date on
which the policy under which the denied claim is filed was issued;
(2) establish the qualifications necessary for an
arbitrator to become certified to conduct arbitrations under this
section, including prohibiting a person to whom Section 2210.011
applies from serving as an arbitrator under this section;
(3) establish a procedure through which arbitrators
may become certified to conduct arbitrations under this section;
(4) require an arbitrator conducting an arbitration
under this section to be certified by the department;
(5) provide that the commissioner will randomly assign
a certified arbitrator to conduct an arbitration under this
section;
(6) establish a procedure through which a certified
arbitrator's fees under this section are paid, including the
maximum allowable rate for those fees, which party or parties are
liable for the payment of those fees, and the manner in which an
arbitrator may seek the commissioner's approval of those fees;
(7) establish the parameters for mandatory and
permissible discovery for an arbitration under this section; and
(8) establish deadlines for an arbitration conducted
under this section and require an arbitrator conducting an
arbitration under this section to issue a scheduling order in
accordance with those deadlines.
(f) If a person insured under this chapter or the
association is not satisfied with the commissioner's assignment of
an arbitrator under Subsection (e)(5), either party may, not later
than the 10th day after the date of assignment, request that the
commissioner randomly assign a different arbitrator to the dispute.
Each party may request one reassignment under this section, and the
commissioner shall grant a request for reassignment authorized
under this subsection.
(g) The procedure established by the commissioner under
Subsection (e)(6) must require that an arbitrator's fees be
approved by the commissioner before those fees are paid.
(h) In addition to the rules required under Subsection (e),
the commissioner may adopt any other rules necessary to implement
this section, including rules that are specific to a particular
storm or particular period and are intended to prevent unfair
deviations in, and to encourage fairness in, arbitration awards
under this section.
(i) The department shall maintain and make publicly
available a list of arbitrators certified to conduct arbitrations
under this section.
(j) Except to the extent of any conflict with this section,
Chapter 171, Civil Practice and Remedies Code, applies to an
arbitration conducted under this section.
(k) A person insured under this chapter who requests binding
arbitration under this section may be represented by an attorney.
Sec. 2210.554. ARBITRATION AWARDS; ATTORNEY'S FEES. (a)
If, after an arbitration under Section 2210.553, the arbitrator
awards damages to a person insured under this chapter in an amount
that is 110 percent or more of the final offer of settlement from
the association, the person insured under this chapter may also
recover from the association reasonable and necessary attorney's
fees.
(b) An arbitrator who awards damages to the person insured
under this chapter may assess interest on the damage recovery owed
the insured, at a rate of six percent per annum from the date of loss
through the date of payment of the arbitration award by the
association.
Sec. 2210.555. ABATEMENT OF ARBITRATION. (a) The
association, not later than the 30th day after the date a person
requests binding arbitration under Section 2210.553, may request
from the commissioner an abatement of the arbitration if the
association does not receive the notice required under Section
2210.212(f).
(b) The commissioner shall abate a requested arbitration if
the commissioner finds that a person insured under this chapter did
not provide the notice required under Section 2210.212(f).
(c) An abatement under this section continues until the 30th
day after the date notice is provided in compliance with Section
2210.212(f).
SECTION 21. Section 2210.551(e), Insurance Code, is
repealed.
SECTION 22. This Act applies only to a Texas windstorm and
hail insurance policy, and a dispute arising under a Texas
windstorm and hail insurance policy, delivered, issued for
delivery, or renewed by the Texas Windstorm Insurance Association
on or after the 30th day after the effective date of this Act. A
Texas windstorm and hail insurance policy, and a dispute arising
under a Texas windstorm and hail insurance policy, delivered,
issued for delivery, or renewed by the Texas Windstorm Insurance
Association before the 30th day after the effective date of this
Act, are governed by the law in effect on the date the policy was
delivered, issued for delivery, or renewed, and the former law is
continued in effect for that purpose.
SECTION 23. The Texas Windstorm Insurance Association shall
amend the association's plan of operation to conform to the changes
in law made by this Act not later than January 1, 2012.
SECTION 24. This Act takes effect immediately if it
receives a vote of two-thirds of all the members elected to each
house, as provided by Section 39, Article III, Texas Constitution.
If this Act does not receive the vote necessary for immediate
effect, this Act takes effect September 1, 2011.