By: Smithee H.B. No. 3
A BILL TO BE ENTITLED
AN ACT
relating to the operation and name of the Texas Windstorm Insurance
Association, to the resolution of certain disputes concerning
claims made to that association, and to the issuance of windstorm
and hail insurance policies in the private insurance market by
certain insurers; providing penalties.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 83.002, Insurance Code, is amended by
adding Subsection (c) to read as follows:
(c) This chapter also applies to:
(1) a person appointed as a qualified inspector under
Section 2210.254 or 2210.255; and
(2) a person acting as a qualified inspector under
Section 2210.254 or 2210.255 without being appointed as a qualified
inspector under either of those sections.
SECTION 2. Section 541.152, Insurance Code, is amended by
amending Subsection (b) and adding Subsection (c) to read as
follows:
(b) Except as provided by Subsection (c), on [On] a finding
by the trier of fact that the defendant knowingly committed the act
complained of, the trier of fact may award an amount not to exceed
three times the amount of actual damages.
(c) Subsection (b) does not apply to an action under this
subchapter brought against the Texas Windstorm Insurance
Association.
SECTION 3. The heading to Chapter 2210, Insurance Code, is
amended to read as follows:
CHAPTER 2210. TEXAS COASTAL [WINDSTORM] INSURANCE PLAN
[ASSOCIATION]
SECTION 4. Section 2210.002(a), Insurance Code, is amended
to read as follows:
(a) This chapter may be cited as the Texas Coastal
[Windstorm] Insurance Plan [Association] Act. A reference to the
Texas Windstorm Insurance Association Act means this chapter.
SECTION 5. If S.B. No. 652, Acts of the 82nd Legislature,
Regular Session, 2011, becomes law, Section 2210.002(b), Insurance
Code, as amended by that Act, is amended to read as follows:
(b) The association is subject to review under Chapter 325,
Government Code (Texas Sunset Act), but is not abolished under that
chapter. The association shall be reviewed during the period in
which state agencies abolished in 2015 [2013] are reviewed. The
association shall pay the costs incurred by the Sunset Advisory
Commission in performing the review of the association under this
subsection. The Sunset Advisory Commission shall determine the
costs of the review performed under this subsection, and the
association shall pay the amount of those costs promptly on receipt
of a statement from the Sunset Advisory Commission regarding those
costs. This subsection expires September 1, 2015 [2013].
SECTION 6. Section 2210.003(1), Insurance Code, is amended
to read as follows:
(1) "Association" means the Texas Coastal [Windstorm]
Insurance Plan Association.
SECTION 7. Section 2210.003, Insurance Code, is amended by
adding Subdivision (3-b) to read as follows:
(3-b) "Catastrophe year" means a calendar year in
which an occurrence or a series of occurrences results in insured
losses, regardless of when the insured losses are ultimately paid.
SECTION 8. Section 2210.009(a), Insurance Code, is amended
to read as follows:
(a) The department shall maintain a list of all authorized
insurers that engage in the business of property and casualty
insurance in the voluntary market in the seacoast territory.
SECTION 9. Subchapter A, Chapter 2210, Insurance Code, is
amended by adding Sections 2210.0081, 2210.010, 2210.012, and
2210.013 to read as follows:
Sec. 2210.0081. CERTAIN ACTIONS BROUGHT AGAINST
ASSOCIATION BY COMMISSIONER. In an action brought by the
commissioner against the association under Chapter 441:
(1) the association's inability to satisfy obligations
under Subchapter M related to the issuance of public securities
under this chapter constitutes a condition that makes the
association's continuation in business hazardous to the public or
to the association's policyholders for the purposes of Section
441.052;
(2) the time for the association to comply with the
requirements of supervision or for the conservator to complete the
conservator's duties, as applicable, is limited to three years from
the date the commissioner commences the action against the
association; and
(3) unless the commissioner takes further action
against the association under Chapter 441, as a condition of
release from supervision, the association must demonstrate to the
satisfaction of the commissioner that the association is able to
satisfy obligations under Subchapter M related to the issuance of
public securities under this chapter.
Sec. 2210.010. APPLICABILITY OF CERTAIN OTHER LAW. (a) A
person may not bring a private action against the association,
including a claim against an agent or representative of the
association, under Chapter 541 or 542. Notwithstanding any other
provision of this code or this chapter, a class action under
Subchapter F, Chapter 541, or under Rule 42, Texas Rules of Civil
Procedure, may only be brought against the association by the
attorney general at the request of the department.
(b) Chapter 542 does not apply to the processing and
settlement of claims by the association.
Sec. 2210.012. STANDARDS OF CONDUCT: BOARD OF DIRECTORS AND
EMPLOYEES; REPORT OF CERTAIN FRAUDULENT CONDUCT. (a) A member of
the board of directors or an employee of the association may not:
(1) accept or solicit any gift, favor, or service that
might reasonably tend to influence the member or employee in the
discharge of duties related to the operation or business of the
association or that the member or employee knows or should know is
being offered with the intent to influence the member's or
employee's conduct related to the operation or business of the
association;
(2) accept other employment or engage in a business or
professional activity that the member or employee might reasonably
expect would require or induce the member or employee to disclose
confidential information acquired by reason of the member's or
employee's position with the association;
(3) accept other employment or compensation that could
reasonably be expected to impair the member's or employee's
independence of judgment in the performance of the member's or
employee's duties related to the operation or business of the
association;
(4) make personal investments that could reasonably be
expected to create a substantial conflict between the member's or
employee's private interest and the interest of the association; or
(5) intentionally or knowingly solicit, accept, or
agree to accept any benefit for having exercised the member's or
employee's powers related to the operation or business of the
association or having performed, in favor of another, the member's
or employee's duties related to the operation or business of the
association.
(b) An association employee who violates Subsection (a) or a
code of conduct established under Section 2210.107(a)(4) is subject
to an employment-related sanction, including termination of the
employee's employment with the association.
(c) A member of the board of directors or an association
employee who violates Subsection (a) is subject to any applicable
civil or criminal penalty if the violation also constitutes a
violation of another statute or rule.
(d) A board member or employee of the association who
reasonably suspects that a fraudulent insurance act has been or is
about to be committed by any board member or employee of the
association shall, not later than the 30th day after discovering
the conduct, report the conduct and identity of the person engaging
in the conduct to the department and may report the conduct and the
identity of the person engaging in the conduct to another
appropriate governmental authority. The department shall forward a
report received under this subsection to the appropriate
governmental authority if the department does not have the
authority to finally resolve, or jurisdiction over, the matter that
is the subject of the report.
Sec. 2210.013. CERTAIN EMPLOYMENT AND CONTRACTS
PROHIBITED. A member of the board of directors or an employee of
the association may not appoint or employ, or contract with, the
following individuals for the provision of goods or services in
connection with the operation or business of the association, if
the individual to be appointed or employed, or with whom a contract
is to be entered into, is to be directly or indirectly compensated
from funds of the association:
(1) an individual related to the member or employee
within a degree of relationship described by Section 573.002,
Government Code; or
(2) an individual related to any member of the board of
directors or employee of the association within a degree of
relationship described by Section 573.002, Government Code.
SECTION 10. Section 2210.053, Insurance Code, is amended by
amending Subsection (b) and adding Subsection (c) to read as
follows:
(b) The department may develop programs to improve the
efficient operation of the association, including a program for
approving policy forms under Section 2301.010 and a program
designed to create incentives for insurers to write windstorm and
hail insurance voluntarily to cover property located in a
catastrophe area, especially property located on the barrier
islands of this state.
(c) The association may not be considered a debtor
authorized to file a petition or seek relief in bankruptcy under
Title 11, United States Code.
SECTION 11. Subchapter B, Chapter 2210, Insurance Code, is
amended by adding Sections 2210.058 and 2210.061 to read as
follows:
Sec. 2210.058. CLAIMS PRACTICES AUDIT. (a) The
commissioner, in the manner and at the time the commissioner
determines to be necessary, shall conduct a random audit of claim
files concerning claims the bases of which are damage to insured
property caused by a particular storm to:
(1) determine whether the association is adequately
and properly documenting claims decisions in each claim file; and
(2) ensure that each claim is being handled
appropriately, including being handled in accordance with the terms
of the policy under which the claim is filed.
(b) The department shall conduct an audit required under
this section as soon as possible to ensure the quality of the
process with which the association is handling claims described by
Subsection (a).
(c) If, following an audit conducted under this section, the
commissioner determines that the association is not adequately and
properly documenting claims decisions or that claims described by
Subsection (a) are not otherwise being handled appropriately, the
commissioner shall:
(1) notify the board of directors of that
determination; and
(2) identify the manner in which the association
should correct any deficiencies identified by the commissioner and
issue an order to that effect.
Sec. 2210.061. CONTRACTORS AND MANAGERIAL EMPLOYEES:
COMPENSATION AND BONUSES. The association shall post on the
association's Internet website any compensation, monetary or
otherwise, and any bonus that, when aggregated, exceed $100,000 in
a calendar year and that are paid or given by the association to:
(1) a vendor or independent contractor with whom the
association has a contract; or
(2) an association employee.
SECTION 12. Section 2210.071(a), Insurance Code, is amended
to read as follows:
(a) If, in a catastrophe year, an occurrence or series of
occurrences in a catastrophe area results in insured losses and
operating expenses of the association in excess of premium and
other revenue of the association, the excess losses and operating
expenses shall be paid as provided by this subchapter.
SECTION 13. Section 2210.072, Insurance Code, is amended by
amending Subsections (a), (b), and (c) and adding Subsections
(b-1), (e), and (f) to read as follows:
(a) Losses not paid under Section 2210.071(b) [2210.071]
shall be paid as provided by this section from the proceeds from
Class 1 public securities authorized to be issued in accordance
with Subchapter M before, on, or after the date of any occurrence or
series of occurrences that results in insured losses. Public
securities issued under this section must be repaid within a period
not to exceed 14 [10] years, and may be repaid sooner if the board of
directors elects to do so and the commissioner approves.
(b) Public securities described by Subsection (a) that are
issued before an occurrence or series of occurrences that results
in incurred losses:
(1) may be issued on the request of the board of
directors with the approval of the commissioner; and
(2) may not, in the aggregate, exceed $1 billion at any
one time, regardless of the calendar year or years in which the
outstanding public securities were issued.
(b-1) Public securities described by Subsection (a):
(1) shall be issued as necessary in a principal amount
not to exceed $1 billion per catastrophe year, in the aggregate, for
securities issued during that catastrophe year before the
occurrence or series of occurrences that results in incurred losses
in that year and securities issued on or after the date of that
occurrence or series of occurrences, and regardless of whether for
a single occurrence or a series of occurrences; and
(2) subject to the $1 billion maximum described by
Subdivision (1), may be issued, in one or more issuances or
tranches, during the calendar year in which the occurrence or
series of occurrences occurs or, if the public securities cannot
reasonably be issued in that year, during the following calendar
year.
(c) If [the losses are paid with] public securities are
issued as described by this section, the public securities shall be
repaid in the manner prescribed by Subchapter M from association
premium revenue.
(e) The proceeds of any outstanding public securities
described by Subsection (a) that are issued before an occurrence or
series of occurrences shall be depleted before the proceeds of any
securities issued after an occurrence or series of occurrences may
be used. This subsection does not prohibit the association from
issuing securities after an occurrence or series of occurrences
before the proceeds of outstanding public securities issued during
a previous catastrophe year have been depleted.
(f) If, under Subsection (e), the proceeds of any
outstanding public securities issued during a previous catastrophe
year must be depleted, those proceeds shall count against the $1
billion limit on public securities described by this section in the
catastrophe year in which the proceeds must be depleted.
SECTION 14. Section 2210.073, Insurance Code, is amended by
amending Subsection (b) and adding Subsection (c) to read as
follows:
(b) Public securities described by Subsection (a):
(1) may be issued as necessary in a principal amount
not to exceed $1 billion per catastrophe year, in the aggregate,
whether for a single occurrence or a series of occurrences; and
(2) subject to the $1 billion maximum described by
Subdivision (1), may be issued, in one or more issuances or
tranches, during the calendar year in which the occurrence or
series of occurrences occurs or, if the public securities cannot
reasonably be issued in that year, during the following calendar
year.
(c) If the losses are paid with public securities described
by this section, the public securities shall be repaid in the manner
prescribed by Subchapter M.
SECTION 15. Section 2210.074, Insurance Code, is amended by
amending Subsection (b) and adding Subsection (c) to read as
follows:
(b) Public securities described by Subsection (a):
(1) may be issued as necessary in a principal amount
not to exceed $500 million per catastrophe year, in the aggregate,
whether for a single occurrence or a series of occurrences; and
(2) subject to the $500 million maximum described by
Subdivision (1), may be issued, in one or more issuances or
tranches, during the calendar year in which the occurrence or
series of occurrences occurs or, if the public securities cannot
reasonably be issued in that year, during the following calendar
year.
(c) If the losses are paid with public securities described
by this section, the public securities shall be repaid in the manner
prescribed by Subchapter M through member assessments as provided
by this section. The association shall notify each member of the
association of the amount of the member's assessment under this
section. The proportion of the losses allocable to each insurer
under this section shall be determined in the manner used to
determine each insurer's participation in the association for the
year under Section 2210.052. A member of the association may not
recoup an assessment paid under this subsection through a premium
surcharge or tax credit.
SECTION 16. Section 2210.075, Insurance Code, is amended to
read as follows:
Sec. 2210.075. REINSURANCE. (a) Before any occurrence or
series of occurrences, an insurer may elect to purchase reinsurance
to cover an assessment for which the insurer would otherwise be
liable under Section 2210.074(c) [2210.074(b)].
(b) An insurer must notify the board of directors, in the
manner prescribed by the association whether the insurer will be
purchasing reinsurance. If the insurer does not elect to purchase
reinsurance under this section, the insurer remains liable for any
assessment imposed under Section 2210.074(c) [2210.074(b)].
SECTION 17. Section 2210.102, Insurance Code, is amended by
adding Subsection (i) to read as follows:
(i) Notwithstanding Subsection (f), for a vacancy occurring
in a position under Subsection (b), the commissioner may appoint,
for the lesser of 120 days or until the vacancy is filled, a person
who has demonstrated knowledge in insurance principles. This
subsection does not apply to a vacancy due to the expiration of a
term occurring under Section 2210.103. This subsection expires
December 31, 2012, and any appointment in effect on that date is
continued until the expiration of the term of the appointment.
SECTION 18. Section 2210.105, Insurance Code, is amended by
amending Subsections (a) and (b) and adding Subsections (b-1), (e),
and (f) 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) The commissioner or the commissioner's designated
representative may attend 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, except for those
portions of a closed meeting that involve the rendition of legal
advice to the board concerning a regulatory matter or that would
constitute an ex parte communication with the commissioner.
(e) The association shall:
(1) broadcast live on the association's Internet
website all meetings of the board of directors, other than closed
meetings; and
(2) maintain on the association's Internet website an
archive of meetings of the board of directors.
(f) A recording of a meeting must be maintained in the
archive required under Subsection (e) through and including the
second anniversary of the meeting.
SECTION 19. 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
board and the association:
(1) operate [operates] in accordance with this
chapter, the plan of operation, and commissioner rules;
(2) comply [complies] with sound insurance
principles; [and]
(3) meet [meets] all standards imposed under this
chapter;
(4) establish a code of conduct and performance
standards for association employees and persons with which the
association contracts; and
(5) establish, and adhere to terms of, an annual
evaluation of association management necessary to achieve the
statutory purpose, board objectives, and any performance or
enterprise risk management objectives established by the board.
(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 20. 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. (a) Except
as specifically provided by this chapter or another law, the
association is subject to Chapters 551 and 552, Government Code.
(b) A settlement agreement to which the association is a
party:
(1) subject to Subsection (d), is public information
and is not exempted from required disclosure under Chapter 552,
Government Code; and
(2) if applicable, must contain the name of any
attorney representing a claimant or the association in connection
with the claim that is the basis of the settlement.
(c) Subsection (b) may not be construed to limit or
otherwise restrict the categories of information that are public
information under Section 552.022, Government Code.
(d) The association, before disclosing a settlement
agreement to which the association is a party, shall redact from the
settlement agreement any information that is confidential under
Chapter 552, Government Code.
SECTION 21. Section 2210.152, Insurance Code, is amended by
adding Subsection (c) to read as follows:
(c) The plan of operation shall require the association to
use the claim settlement guidelines published by the commissioner
under Section 2210.578(f) in evaluating the extent to which a loss
to insured property is incurred as a result of wind, waves, tidal
surges, or rising waters not caused by waves or surges.
SECTION 22. Section 2210.202, Insurance Code, is amended to
read as follows:
Sec. 2210.202. APPLICATION FOR COVERAGE. (a) A person who
has an insurable interest in insurable property may apply to the
association for insurance coverage provided under the plan of
operation and an inspection of the property, subject to any rules
established by the board of directors and approved by the
commissioner. The association shall make insurance available to
each applicant in the catastrophe area whose property is insurable
property but who, after diligent efforts, is unable to obtain
property insurance through the voluntary market, as evidenced by
one declination from an insurer authorized to engage in the
business of, and writing, property insurance providing windstorm
and hail coverage in the first tier coastal counties. For purposes
of this section, "declination" has the meaning assigned by the plan
of operation and shall include a refusal to offer coverage for the
perils of windstorm and hail and the inability to obtain
substantially equivalent insurance coverage for the perils of
windstorm and hail. Notwithstanding Section 2210.203(c), evidence
of one declination every three calendar years is also required with
an application for renewal of an association policy.
(b) A property and casualty agent must submit an application
for initial [the] insurance coverage on behalf of the applicant on
forms prescribed by the association. The association shall develop
a simplified process that allows for the acceptance of an
application for initial or renewal coverage from, and payment of
premiums by, a property and casualty agent, a person insured under
this chapter, or an applicant for coverage under this chapter. Each
[The] application for initial or renewal coverage must contain:
(1) a statement as to whether the applicant has
submitted or will submit the premium in full from personal funds or,
if not, to whom a balance is or will be due; and
(2) [. Each application for initial or renewal
coverage must also contain] a statement that the agent acting on
behalf of the applicant possesses proof of the declination
described by Subsection (a) and proof of flood insurance coverage
or unavailability of that coverage as described by Section
2210.203(a-1), regardless of whether the agent or the applicant
submits the application for coverage.
SECTION 23. Section 2210.203, Insurance Code, is amended by
amending Subsection (a) and adding Subsection (d) to read as
follows:
(a) If the association determines that the property for
which an application for initial insurance coverage is made is
insurable property, the association, on payment of the premium,
shall direct the issuance of an insurance policy as provided by the
plan of operation.
(d) The commissioner, after receiving a recommendation from
the board of directors, shall approve 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. 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 market.
SECTION 24. Sections 2210.204(d) and (e), Insurance Code,
are amended to read as follows:
(d) If an insured requests cancellation of the insurance
coverage, the association shall refund the unearned premium, less
any minimum retained premium set forth in the plan of operation,
payable to the insured and the holder of an unpaid balance. The
property and casualty agent who received a commission as the result
of the issuance of an association policy providing the canceled
coverage [submitted the application] shall refund the agent's
commission on any unearned premium in the same manner.
(e) For cancellation of insurance coverage under this
section, the minimum retained premium in the plan of operation must
be for a period of not less than 90 [180] days, except for events
specified in the plan of operation that reflect a significant
change in the exposure or the policyholder concerning the insured
property, including:
(1) the purchase of similar coverage in the voluntary
market;
(2) sale of the property to an unrelated party;
(3) death of the policyholder; or
(4) total loss of the property.
SECTION 25. Subchapter E, Chapter 2210, Insurance Code, is
amended by adding Sections 2210.205 and 2210.210 to read as
follows:
Sec. 2210.205. REQUIRED POLICY PROVISIONS: DEADLINE FOR
FILING CLAIM; NOTICE CONCERNING RESOLUTION OF CERTAIN DISPUTES.
(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
to property that is the basis of the claim occurs; and
(2) contain, in boldface type, a conspicuous notice
concerning the resolution of disputes under the policy, including:
(A) the processes and deadlines for appraisal
under Section 2210.574 and alternative dispute resolution under
Section 2210.575;
(B) the binding effect of appraisal under Section
2210.574; and
(C) the necessity of complying with the
requirements of Subchapter L-1 to seek administrative or judicial
relief.
(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 180 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, other than a premises on which bingo may be
conducted under Chapter 2001, Occupations Code;
(3) a structure used as a sexually oriented business,
as defined by Section 243.002, Local Government Code; or
(4) a structure in which, or in any portion of which,
an establishment is located that is used primarily for the
operation of video lottery machines, eight-liners, or other
gambling devices, regardless of whether the gambling devices are
regulated under state law.
SECTION 26. Section 2210.251(g), Insurance Code, is amended
to read as follows:
(g) The department shall issue a certificate of compliance
for each structure that qualifies for coverage. The certificate is
evidence of insurability of the structure by the association. The
decision whether to issue a certificate of compliance for a
structure is wholly within the discretion of the department and is
not dependent on the actions of the Texas Board of Professional
Engineers or any other regulatory agency.
SECTION 27. Section 2210.254, Insurance Code, is amended by
amending Subsection (a) and adding Subsection (e) to read as
follows:
(a) For purposes of this chapter, a "qualified inspector"
includes:
(1) a person determined by the department to be
qualified because of training or experience to perform building
inspections;
(2) a licensed professional engineer who is on the
roster described by Section 1001.652, Occupations Code, and meets
the requirements specified by commissioner rule for appointment to
conduct windstorm inspections; and
(3) an inspector who:
(A) is certified by the International Code
Council, the Building Officials and Code Administrators
International, Inc., the International Conference of Building
Officials, or the Southern Building Code Congress International,
Inc.;
(B) has certifications as a buildings inspector
and coastal construction inspector; and
(C) complies with other requirements specified
by commissioner rule.
(e) The department may establish an annual renewal period
for persons appointed as qualified inspectors.
SECTION 28. Section 2210.255(a), Insurance Code, is amended
to read as follows:
(a) On request of an engineer who is licensed by the Texas
Board of Professional Engineers and is on the roster described by
Section 1001.652, Occupations Code, the commissioner shall appoint
the engineer as an inspector under this subchapter not later than
the 10th day after the date the engineer delivers to the
commissioner information demonstrating that the engineer is
qualified to perform windstorm inspections under this subchapter.
SECTION 29. Subchapter F, Chapter 2210, Insurance Code, is
amended by adding Section 2210.2551 to read as follows:
Sec. 2210.2551. ENFORCEMENT AUTHORITY; RULES. (a) The
department has exclusive authority over all matters relating to the
appointment and oversight of qualified inspectors for purposes of
this chapter and to the physical inspection of structures for the
purposes of this chapter, including the submission of documents to
the department or association regarding the physical inspection of
structures.
(b) The commissioner by rule shall establish criteria to
ensure that a person seeking appointment as a qualified inspector
under this subchapter, including an engineer seeking appointment
under Section 2210.255, possesses the knowledge, understanding,
and professional competence to perform windstorm inspections under
this chapter and to comply with other requirements of this chapter.
(c) Subsection (b) applies only to a determination
concerning the appointment of a qualified inspector under this
chapter. The exclusive jurisdiction of the department under this
section does not apply to the practice of engineering as defined by
Section 1001.003, Occupations Code, or to a license issued,
qualification required, determination made, order issued, judgment
rendered, or other action of a board operating under Chapter 1001,
Occupations Code. In the event of conflict, the authority of that
board prevails with regard to the practice of engineering.
(d) The department shall report to the Texas Board of
Professional Engineers if the department determines that:
(1) after an oversight inspection, the results of a
windstorm inspection performed by a qualified inspector who is
licensed by that board are based on questionable grounds or were the
result of questionable circumstances; or
(2) a qualified inspector on the roster described by
Section 1001.652, Occupations Code, failed to submit to the
department plans, designs, or calculations of other substantiating
information necessary to demonstrate that an inspected structure
meets the requirements of this chapter and department rules.
(e) The department shall include in its biennial report to
the legislature under Section 32.022 the number of matters reported
to the Texas Board of Professional Engineers under this section and
the outcome of those matters.
SECTION 30. The heading to Section 2210.256, Insurance
Code, is amended to read as follows:
Sec. 2210.256. DISCIPLINARY PROCEEDINGS REGARDING
APPOINTED INSPECTORS AND CERTAIN OTHER PERSONS.
SECTION 31. Section 2210.256, Insurance Code, is amended by
adding Subsection (a-1) to read as follows:
(a-1) In addition to any other action authorized under this
section, the commissioner ex parte may enter an emergency cease and
desist order under Chapter 83 against a qualified inspector, or a
person acting as a qualified inspector, if:
(1) the commissioner believes that:
(A) the qualified inspector has:
(i) through submitting or failing to submit
to the department sealed plans, designs, calculations, or other
substantiating information, failed to demonstrate that a structure
or a portion of a structure subject to inspection meets the
requirements of this chapter and department rules; or
(ii) refused to comply with requirements
imposed under this chapter or department rules; or
(B) the person acting as a qualified inspector is
acting without appointment as a qualified inspector under Section
2210.254 or 2210.255; and
(2) the commissioner determines that the conduct
described by Subdivision (1) is fraudulent or hazardous or creates
an immediate danger to the public.
SECTION 32. Section 2210.259, Insurance Code, is amended by
adding Subsection (c) to read as follows:
(c) The commissioner by rule may provide for a discount of,
or a credit against, a surcharge assessed under Subsection (a) in
instances in which a policyholder demonstrates that the
noncompliant structure was constructed with at least one structural
building component that complies with the building code standards
set forth in the plan of operation.
SECTION 33. Subchapter F, Chapter 2210, Insurance Code, is
amended by adding Section 2210.260 to read as follows:
Sec. 2210.260. ALTERNATIVE ELIGIBILITY FOR COVERAGE. (a)
On and after August 31, 2011, a person who has an insurable interest
in a residential structure may obtain insurance coverage through
the association for that structure without obtaining a certificate
of compliance under Section 2210.251(g) in accordance with this
section and rules adopted by the commissioner.
(b) The department may issue an alternative certification
for a residential structure if the person who has an insurable
interest in the structure demonstrates that at least one qualifying
structural building component of the structure has been:
(1) inspected by a department inspector or by a
qualified inspector; and
(2) determined to be in compliance with applicable
building code standards, as set forth in the plan of operation.
(c) The commissioner shall adopt reasonable and necessary
rules to implement this section. The rules adopted under this
section must establish which structural building components are
considered qualifying structural building components for the
purposes of Subsection (b), taking into consideration those items
that are most probable to generate losses for the association's
policyholders and the cost to upgrade those items.
(d) Except as provided in Section 2210.251(f), a person who
has an insurable interest in a residential structure that is
insured by the association as of January 1, 2012, but for which the
person has not obtained a certificate of compliance under Section
2210.251(g), must obtain an alternative certification under this
section before the association, on or after January 1, 2013, may
renew coverage for the structure.
(e) Each residential structure for which a person obtains an
alternative certification under this section must comply with:
(1) the requirements of this chapter, including
Section 2210.258; and
(2) the association's underwriting requirements,
including maintaining the structure in an insurable condition and
paying premiums in the manner required by the association.
(f) The association shall develop and implement an
actuarially sound rate, credit, or surcharge that reflects the
risks presented by structures with reference to which alternative
certifications have been obtained under this section. A rate,
credit, or surcharge under this subsection may vary based on the
number of qualifying structural building components included in a
structure with reference to which an alternative certification is
obtained under this section. A surcharge under this subsection
must be developed and implemented in an amount that does not exceed
the percentage of premium at which a surcharge under Section
2210.259(a) is assessed.
SECTION 34. Section 2210.453, Insurance Code, is amended by
adding Subsections (c), (d), and (e) 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. The
report required by this subsection must:
(1) document and denominate the association's
resources available to pay claims, including cash or other highly
liquid assets, assessments that the association is projected to
impose, pre-event and post-event bonding capacity, and
private-sector recognized risk-transfer mechanisms, including
catastrophe bonds and reinsurance;
(2) include an independent, third-party appraisal of
the likelihood of an assessment, the maximum potential size of the
assessment, and an estimate of the probability that the assessment
would not be adequate to meet the association's needs; and
(3) include an analysis of financing alternatives to
assessments that includes the costs of borrowing and the
consequences that additional purchase of reinsurance, catastrophe
bonds, or other private-sector recognized risk-transfer
instruments would have in reducing the size or potential of
assessments.
(d) A person who prepares a report required by Subsection
(c) may not contract to provide any other service to the
association, except for the preparation of similar reports, before
the third anniversary of the date the last report prepared by the
person under that subsection is submitted.
(e) The report submitted under this section is for
informational purposes only and does not bind the association to a
particular course of action.
SECTION 35. Subchapter J, Chapter 2210, Insurance Code, is
amended by adding Section 2210.455 to read as follows:
Sec. 2210.455. CATASTROPHE PLAN. (a) Not later than June 1
of each year, the board 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 catastrophe plan covering the period beginning on
the date the plan is submitted and ending on the following May 31.
(b) The catastrophe plan must:
(1) describe the manner in which the association will,
during the period covered by the plan, evaluate losses and process
claims after the following windstorms affecting an area of maximum
exposure to the association:
(A) a windstorm with a four percent chance of
occurring during the period covered by the plan;
(B) a windstorm with a two percent chance of
occurring during the period covered by the plan; and
(C) a windstorm with a one percent chance of
occurring during the period covered by the plan; and
(2) include, if the association does not purchase
reinsurance under Section 2210.453 for the period covered by the
plan, an actuarial plan for paying losses in the event of a
catastrophe with estimated damages of $2.5 billion or more.
(c) The catastrophe plan must include a description of how
losses under association policies will be paid, and how claims
under association policies will be administered and adjusted,
during the period covered by the plan.
(d) The catastrophe plan submitted under this section is for
informational purposes only and does not bind the association to a
particular course of action.
SECTION 36. Section 2210.502, Insurance Code, is amended by
adding Subsection (e) to read as follows:
(e) Notwithstanding Subsection (a), the maximum liability
limit for dwellings and corporeal movable property described by
Section 2210.501(b)(1) may not exceed $1.5 million.
SECTION 37. Sections 2210.551(a) and (b), Insurance Code,
are amended to read as follows:
(a) This section:
(1) does not apply to a person who is required to
resolve a dispute under Subchapter L-1; 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 38. Chapter 2210, Insurance Code, is amended by
adding Subchapter L-1 to read as follows:
SUBCHAPTER L-1. CLAIMS: SETTLEMENT AND DISPUTE RESOLUTION
Sec. 2210.571. DEFINITIONS. In this subchapter:
(1) "Association policy" means a windstorm and hail
insurance policy issued by the association.
(2) "Claim" means a request for payment under an
association policy. The term also includes any other claim against
the association, or an agent or representative of the association,
relating to an insured loss, under any theory or cause of action of
any kind, regardless of the theory under which the claim is
asserted, the cause of action brought, or the type of damages
sought.
(3) "Claimant" means a person who makes a claim.
Sec. 2210.572. EXCLUSIVE REMEDIES AND LIMITATION ON AWARD.
(a) This subchapter provides the exclusive remedies for a claim
against the association, including an agent or representative of
the association.
(b) Subject to Section 2210.576, the association may not be
held liable for any amount other than covered losses payable under
the terms of the association policy.
(c) The association, and an agent or representative of the
association, may not be held liable for damages under Chapter 17,
Business & Commerce Code, or under any provision of any law
providing for additional damages, punitive damages, or a penalty.
Sec. 2210.573. FILING OF CLAIM; CLAIM PROCESSING. (a)
Subject to Section 2210.205(b), an insured must file a claim under
an association policy not later than the first anniversary of the
date on which the damage to property that is the basis of the claim
occurs.
(b) The claimant may submit written materials, comments,
documents, records, and other information to the association
relating to the claim. If the claimant fails to submit information
in the claimant's possession that is necessary for the association
to determine whether to accept or reject a claim, the association
may, not later than the 30th day after the date the claim is filed,
request in writing the necessary information from the claimant.
(c) The association shall, on request, provide a claimant
reasonable access to all information relevant to the determination
of the association concerning the claim. The claimant may copy the
information at the claimant's own cost or may request the
association to provide a copy of all or part of the information to
the claimant. The association may charge a claimant the actual cost
incurred by the association in providing a copy of information
under this section, excluding any amount for labor involved in
making any information or copy of information available to a
claimant.
(d) Unless the applicable 60-day period described by this
subsection is extended by order of the commissioner, not later than
the later of the 60th day after the date the association receives a
claim or the 60th day after the date the association receives
information requested under Subsection (b), the association shall
provide the claimant, in writing, notification that:
(1) the association has accepted coverage for the
claim in full;
(2) the association has accepted coverage for the
claim in part and has denied coverage for the claim in part; or
(3) the association has denied coverage for the claim
in full.
(e) In a notice described by Subsection (d)(1), the
association must inform the claimant of the amount of loss the
association will pay and of the time limit to request appraisal
under Section 2210.574.
(f) In a notice described by Subsection (d)(2) or (3), the
association must inform the claimant of, as applicable:
(1) the portion of the loss for which the association
accepts coverage and the amount of loss the association will pay;
(2) the portion of the loss for which the association
denies coverage and a detailed summary of the manner in which the
association determined not to accept coverage for that portion of
the claim; and
(3) the time limit to:
(A) request appraisal under Section 2210.574 of
the portion of the loss for which the association accepts coverage;
and
(B) provide notice of intent to bring an action
as required by Section 2210.575.
(g) In addition to the notice required under Subsection
(d)(2) or (3), the association shall provide a claimant with a form
on which the claimant may provide the association notice of intent
to bring an action as required by Section 2210.575.
Sec. 2210.574. DISPUTES CONCERNING AMOUNT OF ACCEPTED
COVERAGE. (a) If the association accepts coverage for a claim in
full and a claimant disputes only the amount of loss the association
will pay for the claim, or if the association accepts coverage for a
claim in part and a claimant disputes the amount of loss the
association will pay for the accepted portion of the claim, the
claimant may request from the association a detailed summary of the
manner in which the association determined the amount of loss the
association will pay.
(b) If a claimant disputes the amount of loss the
association will pay for a claim or a portion of a claim, the
claimant, not later than the 60th day after the date the claimant
receives the notice described by Section 2210.573(d)(1) or (2), may
demand appraisal in accordance with the terms of the association
policy.
(c) If a claimant, on a showing of good cause and not later
than the 15th day after the expiration of the 60-day period
described by Subsection (b), requests in writing that the 60-day
period be extended, the association may grant an additional 30-day
period in which the claimant may demand appraisal.
(d) If a claimant demands appraisal under this section:
(1) the appraisal must be conducted as provided by the
association policy; and
(2) the claimant and the association are responsible
in equal shares for paying any costs incurred or charged in
connection with the appraisal, including a fee charged under
Subsection (e).
(e) If a claimant demands appraisal under this section and
the appraiser retained by the claimant and the appraiser retained
by the association are able to agree on an appraisal umpire to
participate in the resolution of the dispute, the appraisal umpire
is the umpire chosen by the two appraisers. If the appraiser
retained by the claimant and the appraiser retained by the
association are unable to agree on an appraisal umpire to
participate in the resolution of the dispute, the commissioner
shall select an appraisal umpire from a roster of qualified umpires
maintained by the department. The department may:
(1) require appraisers to register with the department
as a condition of being placed on the roster of umpires; and
(2) charge a reasonable registration fee to defray the
cost incurred by the department in maintaining the roster and the
commissioner in selecting an appraisal umpire under this
subsection.
(f) The appraisal decision is binding on the claimant and
the association as to the amount of loss the association will pay
for a fully accepted claim or the accepted portion of a partially
accepted claim and is not appealable or otherwise reviewable. A
claimant that does not demand appraisal before the expiration of
the periods described by Subsections (b) and (c) waives the
claimant's right to contest the association's determination of the
amount of loss the association will pay with reference to a fully
accepted claim or the accepted portion of a partially accepted
claim.
(g) A claimant may not bring an action against the
association with reference to a claim for which the association has
accepted coverage in full.
Sec. 2210.575. DISPUTES CONCERNING DENIED COVERAGE. (a)
If the association denies coverage for a claim in part or in full
and the claimant disputes that determination, the claimant, not
later than the expiration of the limitations period described by
Section 2210.577(a), but after the date the claimant receives the
notice described by Section 2210.573(d)(2) or (3), must provide the
association with notice that the claimant intends to bring an
action against the association concerning the partial or full
denial of the claim.
(b) If a claimant provides notice of intent to bring an
action under Subsection (a), the association may require the
claimant, as a prerequisite to filing the action against the
association, to submit the dispute to alternative dispute
resolution by mediation or moderated settlement conference, as
provided by Chapter 154, Civil Practice and Remedies Code. A
claimant that does not provide notice of intent to bring an action
before the expiration of the period described by Subsection (a)
waives the claimant's right to contest the association's partial or
full denial of coverage and is barred from bringing an action
against the association concerning the denial of coverage.
(c) The association must request alternative dispute
resolution of a dispute described by Subsection (b) not later than
the 60th day after the date the association receives from the
claimant notice of intent to bring an action.
(d) Alternative dispute resolution under this section must
be completed not later than the 60th day after the date a request
for alternative dispute resolution is made under Subsection (c).
The 60-day period described by this subsection may be extended by
the commissioner by rule or by the association and a claimant by
mutual consent.
(e) If the claimant is not satisfied after completion of
alternative dispute resolution, or if alternative dispute
resolution is not completed before the expiration of the 60-day
period described by Subsection (d) or any extension under that
subsection, the claimant may bring an action against the
association in a district court in the county in which the loss that
is the subject of the coverage denial occurred. An action brought
under this subsection shall be presided over by a judge appointed by
the judicial panel on multidistrict litigation designated under
Section 74.161, Government Code. A judge appointed under this
section must be a resident of a first tier coastal county or a
second tier coastal county.
(f) If a claimant brings an action against the association
concerning a partial or full denial of coverage, the court shall
abate the action until the notice of intent to bring an action has
been provided and, if requested by the association, the dispute has
been submitted to alternative dispute resolution, in accordance
with this section.
(g) A moderated settlement conference under this section
may be conducted by a panel consisting of one or more impartial
third parties.
(h) If the association requests mediation under this
section, the claimant and the association are responsible in equal
shares for paying any costs incurred or charged in connection with
the mediation.
(i) If the association requests mediation under this
section, and the claimant and the association are able to agree on a
mediator, the mediator is the mediator agreed to by the claimant and
the association. If the claimant and the association are unable to
agree on a mediator, the commissioner shall select a mediator from a
roster of qualified mediators maintained by the department. The
department may:
(1) require mediators to register with the department
as a condition of being placed on the roster; and
(2) charge a reasonable registration fee to defray the
cost incurred by the department in maintaining the roster and the
commissioner in selecting a mediator under this section.
(j) The commissioner shall establish rules to implement
this section, including provisions for expediting alternative
dispute resolution, facilitating the ability of a claimant to
appear with or without counsel, establishing qualifications
necessary for mediators to be placed on the roster maintained by the
department under Subsection (i), and providing that formal rules of
evidence shall not apply to the proceedings.
Sec. 2210.576. ISSUES BROUGHT TO SUIT; LIMITATIONS ON
RECOVERY. (a) The only issues a claimant may raise in an action
brought against the association under Section 2210.575 are:
(1) whether the association's denial of coverage was
proper; and
(2) the amount of the damages described by Subsection
(b) to which the claimant is entitled, if any.
(b) A claimant that brings an action against the association
under Section 2210.575 may recover only:
(1) the covered loss payable under the terms of the
association policy less, if applicable, the amount of loss already
paid by the association for any portion of a covered loss for which
the association accepted coverage;
(2) prejudgment interest from the 30th day after the
date specified in Section 2210.573(d), at the prejudgment interest
rate provided in Subchapter B, Chapter 304, Finance Code; and
(3) court costs and reasonable and necessary
attorney's fees.
Sec. 2210.577. LIMITATIONS PERIOD. (a) Notwithstanding
any other law, a claimant who brings an action against the
association under Section 2210.575 must bring the action not later
than the second anniversary of the date on which the person receives
a notice described by Section 2210.573(d)(2) or (3).
(b) This section is a statute of repose and controls over
any other applicable limitations period.
Sec. 2210.578. EXPERT PANEL. (a) The commissioner shall
appoint a panel of experts to advise the association concerning the
extent to which a loss to insurable property was incurred as a
result of wind, waves, tidal surges, or rising waters not caused by
waves or surges. The panel shall consist of a number of experts to
be decided by the commissioner. The commissioner shall appoint one
member of the panel to serve as the presiding officer of the panel.
(b) Members of the panel must have professional expertise
in, and be knowledgeable concerning, the geography and meteorology
of the Texas seacoast territory, as well as the scientific basis for
determining the extent to which damage to property is caused by
wind, waves, tidal surges, or rising waters not caused by waves or
surges.
(c) The panel shall meet at the request of the commissioner
or the call of the presiding officer of the panel.
(d) The panel shall investigate, collect, and evaluate the
information necessary to provide recommendations under Subsection
(e). The cost and expense incurred by the panel associated with the
work of the panel under this section shall be paid or reimbursed by
the association.
(e) At the request of the commissioner, the panel shall
recommend to the commissioner methods or models for determining the
extent to which a loss to insurable property may be or was incurred
as a result of wind, waves, tidal surges, or rising waters not
caused by waves or surges for geographic areas or regions
designated by the commissioner.
(f) After consideration of the recommendations made by the
panel under Subsection (e), the commissioner shall publish
guidelines that the association will use to settle claims.
(g) A member of the panel is not individually liable for an
act or failure to act in the performance of the official duties in
connection with the individual's work on the panel.
(h) In any review of a claim under this subchapter, and in
any action brought against the association under Section 2210.575,
the guidelines published by the commissioner under Subsection (f)
govern the claim and are presumed to be accurate and correct, unless
clear and convincing evidence supports a deviation from the
guidelines.
Sec. 2210.579. CONSTRUCTION WITH OTHER LAW. To the extent
of any conflict between a provision of this subchapter and any other
law, the provision of this subchapter prevails.
Sec. 2210.580. RULEMAKING. (a) The commissioner shall
adopt rules regarding the provisions of this subchapter, including
rules concerning:
(1) qualifications and selection of appraisers for the
appraisal procedure, mediators for the mediation process, and
members of the expert panel;
(2) procedures and deadlines for the payment and
handling of claims by the association as well as the procedures and
deadlines for a review of a claim by the association;
(3) notice of expert panel meetings and the
transparency of deliberations of the panel; and
(4) any other matters regarding the handling of claims
that are not inconsistent with this subchapter.
(b) All rules adopted by the commissioner under this section
shall promote the fairness of the process, protect the rights of
aggrieved policyholders, and ensure that policyholders may
participate in the claims review process without the necessity of
engaging legal counsel.
SECTION 39. Section 2210.602(2), Insurance Code, is amended
to read as follows:
(2) "Class 1 public securities" means public
securities authorized to be issued before, on, or after an
occurrence or series of occurrences by Section 2210.072, including
a commercial paper program authorized before the occurrence of a
catastrophic event but in which [so long as] no tranche of
commercial paper is issued under the program until after the
catastrophic event.
SECTION 40. Section 2210.604, Insurance Code, is amended by
amending Subsection (a) and adding Subsection (a-1) to read as
follows:
(a) At the request of the association and with the approval
of the commissioner, the Texas Public Finance Authority shall issue
Class 1, Class 2, or Class 3 public securities. The association
shall submit to the commissioner a cost-benefit analysis of various
financing methods and funding structures when requesting the
issuance of public securities under this subsection.
(a-1) The association and the commissioner must approve
each tranche of commercial paper issued under a commercial paper
program established under this chapter.
SECTION 41. Section 2210.608, Insurance Code, is amended by
adding Subsection (c) to read as follows:
(c) Notwithstanding Subsection (a)(2), the proceeds from
public securities issued under Section 2210.072 before an
occurrence or series of occurrences that results in incurred
losses, including investment income, may not be used to purchase
reinsurance for the association.
SECTION 42. Section 2210.609(b), Insurance Code, is amended
to read as follows:
(b) The board shall notify the association of the amount of
the public security obligations and the estimated amount of public
security administrative expenses, if any, each calendar year in a
period sufficient, as determined by the association, to permit the
association to determine the availability of funds and assess a
premium surcharge if necessary.
SECTION 43. Section 2210.611, Insurance Code, is amended to
read as follows:
Sec. 2210.611. EXCESS REVENUE COLLECTIONS AND INVESTMENT
EARNINGS. Revenue collected in any calendar year from a premium
surcharge under Section 2210.613 that exceeds the amount of the
public security obligations and public security administrative
expenses payable in that calendar year and interest earned on the
public security obligation fund may, in the discretion of the
association, be:
(1) used to pay public security obligations payable in
the subsequent calendar year, offsetting the amount of the premium
surcharge that would otherwise be required to be levied for the year
under this subchapter;
(2) used to redeem or purchase outstanding public
securities; or
(3) deposited in the catastrophe reserve trust fund.
SECTION 44. Section 2210.612(b), Insurance Code, is amended
to read as follows:
(b) The association may enter financing arrangements as
described by Section 2210.072(d) as necessary to obtain public
securities issued under that section. Nothing in this subsection
prevents [shall prevent] the authorization and creation of one or
more programs for the issuance of commercial paper before the date
of an occurrence that results in insured losses under Section
2210.072(a) but in which [so long as] no tranche of commercial paper
is issued under a commercial paper program until after such an
occurrence.
SECTION 45. Section 2210.613, Insurance Code, is amended to
read as follows:
Sec. 2210.613. PAYMENT OF CLASS 2 PUBLIC SECURITIES. (a)
The association shall pay Class 2 public securities issued under
Section 2210.073 as provided by this section. Thirty percent of the
cost of the public securities shall be paid through member
assessments as provided by this section. The association shall
notify each member of the association of the amount of the member's
assessment under this section. The proportion of the losses
allocable to each insurer under this section shall be determined in
the manner used to determine each insurer's participation in the
association for the year under Section 2210.052. A member of the
association:
(1) may not recoup an assessment paid under this
subsection through a premium surcharge or tax credit; and
(2) notwithstanding Section 2210.073(a), may elect to
pay an assessment under this subsection in a lump sum.
(b) Seventy percent of the cost of the public securities
shall be paid by a [nonrefundable] premium surcharge collected
under this section in an amount set by the commissioner. On
approval by the commissioner, each insurer, the association, and
the Texas FAIR Plan Association shall assess, as provided by this
section, a premium surcharge to each policyholder of a policy that
is in effect on or after the 180th day after the date the
commissioner issues notice of the approval of the public securities
[its policyholders as provided by this section]. The premium
surcharge must be set in an amount sufficient to pay, for the
duration of the issued public securities, all debt service not
already covered by available funds and all related expenses on the
public securities.
(c) The premium surcharge under Subsection (b) shall be
assessed on all policyholders of policies that cover [who reside or
have operations in, or whose] insured property that is located in a
catastrophe area, including automobiles principally garaged in a
catastrophe area. The premium surcharge shall be assessed on [for]
each Texas windstorm and hail insurance policy and each property
and casualty insurance policy, including an automobile insurance
policy, issued for automobiles and other property located in the
catastrophe area. A premium surcharge under Subsection (b) applies
to:
(1) all policies written under the following lines of
insurance:
(A) fire and allied lines;
(B) farm and ranch owners;
(C) residential property insurance;
(D) private passenger automobile liability and
physical damage insurance; and
(E) commercial passenger automobile liability
and physical damage insurance; and
(2) the property insurance portion of a commercial
multiple peril insurance [that provide coverage on any premises,
locations, operations, or property located in the area described by
this subsection for all property and casualty lines of insurance,
other than federal flood insurance, workers' compensation
insurance, accident and health insurance, and medical malpractice
insurance].
(d) A premium surcharge under Subsection (b) is a separate
[nonrefundable] charge in addition to the premiums collected and is
not subject to premium tax or commissions. Failure by a
policyholder to pay the surcharge constitutes failure to pay
premium for purposes of policy cancellation.
SECTION 46. Sections 2210.6135(a) and (c), Insurance Code,
are amended to read as follows:
(a) The association shall pay Class 3 public securities
issued under Section 2210.074 as provided by this section through
member assessments. The association, for the payment of the
losses, shall assess the members of the association an amount not to
exceed $500 million per catastrophe year [for the payment of the
losses]. The association shall notify each member of the
association of the amount of the member's assessment under this
section.
(c) A member of the association:
(1) may not recoup an assessment paid under this
section through a premium surcharge or tax credit; and
(2) notwithstanding Section 2210.074(a), may elect to
pay an assessment under this section in a lump sum.
SECTION 47. Subchapter A, Chapter 2301, Insurance Code, is
amended by adding Section 2301.010 to read as follows:
Sec. 2301.010. CONTRACTUAL LIMITATIONS PERIOD AND CLAIM
FILING PERIOD IN CERTAIN PROPERTY INSURANCE FORMS. (a) This
section applies only to an insurer that issues windstorm and hail
insurance in the catastrophe area, as defined by Section 2210.003.
(b) Notwithstanding Section 16.070, Civil Practice and
Remedies Code, and for the purpose described by Section
2210.053(b), a policy form or printed endorsement form for
residential or commercial property insurance that is filed by an
insurer described by Subsection (a) or adopted by the department
under this subchapter for use by an insurer described by Subsection
(a) may provide for a contractual limitations period for filing
suit on a first-party claim under the policy. The contractual
limitations period may not end before the earlier of:
(1) two years from the date the insurer accepts or
rejects the claim; or
(2) three years from the date of the loss that is the
subject of the claim.
(c) A policy or endorsement described by Subsection (b) may
also contain a provision requiring that a claim be filed with the
insurer not later than one year after the date of the loss that is
the subject of the claim. A provision under this subsection must
include a provision allowing the filing of claims after the first
anniversary of the date of the loss for good cause shown by the
person filing the claim.
(d) A contractual provision contrary to Subsection (b) or
(c) is void. If a contractual provision is voided under this
subsection, the voiding of the provision does not affect the
validity of other provisions of a contract that may be given effect
without the voided provision to the extent those provisions are
severable.
(e) The department, to encourage the authorized insurers to
write windstorm and hail insurance in the catastrophe area, as
defined by Section 2210.003, and in other areas of the state, may
approve policy or contractual provisions other than those described
by Subsections (b) and (c) that are consistent with sound
underwriting and insurance principles, provided that the policy or
contractual provisions meet the requirements of Sections
2301.007(a) and 2301.053.
(f) An insurer using a policy form or endorsement form in
this state that includes a provision described by Subsection (b) or
(c) shall, at the time the policy or endorsement is issued or
renewed, disclose in writing to an applicant or insured the
contractual limitations or claims filing period, as applicable, in
the policy or endorsement.
SECTION 48. Chapter 1001, Occupations Code, is amended by
adding Subchapter N to read as follows:
SUBCHAPTER N. WINDSTORM-RELATED DESIGN SERVICES
Sec. 1001.651. DEFINITIONS. In this subchapter:
(1) "Association" means the Texas Windstorm Insurance
Association.
(2) "Plan of operation" means the plan of operation of
the association.
(3) "Windstorm certification standards" means the
building specifications and building codes applicable to insurable
property under Subchapter F, Chapter 2210, Insurance Code, and the
plan of operation, and applicable rules of the Texas Department of
Insurance.
Sec. 1001.652. QUALIFICATIONS; ROSTER. (a) The board
shall:
(1) review the plan of operation and the windstorm
certification standards; and
(2) in consultation with the Texas Department of
Insurance, adopt rules establishing criteria for determining
whether an engineer possesses the knowledge, understanding, and
professional competence to be qualified to provide engineering
design services related to compliance with applicable windstorm
certification standards under Subchapter F, Chapter 2210,
Insurance Code.
(b) The board shall prepare and publish a roster of
engineers who satisfy the criteria adopted under Subsection (a)(2)
and shall make the roster available to the public without cost in an
online computer database format.
Sec. 1001.653. COMPLIANCE WITH BUILDING CODES;
ENFORCEMENT. (a) The board, in consultation with the Texas
Department of Insurance, shall adopt rules requiring an engineer
who is providing engineering design services to comply with
windstorm certification standards.
(b) The board may inspect a structure to ensure an
engineer's compliance with Subsection (a).
(c) If the board determines that an engineer's engineering
design services related to windstorm certification standards do not
comply with the standards, the board may:
(1) issue an emergency order prohibiting the engineer
from entering into a contract to provide design services related to
compliance with applicable windstorm certification standards for a
period not to exceed 30 days;
(2) remove the engineer from the roster described by
Section 1001.652(b); or
(3) determine that a structure was not constructed,
altered, remodeled, enlarged, repaired, or added to according to
the applicable windstorm certification standards and report that
finding to the association and the Texas Department of Insurance.
(d) The board shall give the engineer notice of any action
under this section.
(e) A violation of this subchapter, including a violation of
the windstorm inspection standards, is grounds for disciplinary
action under Section 1001.452.
SECTION 49. Sections 2210.551(e) and 2210.552, Insurance
Code, are repealed.
SECTION 50. Section 2301.010, Insurance Code, as added by
this Act, applies only to an insurance policy that is delivered,
issued for delivery, or renewed on or after January 1, 2012. A
policy delivered, issued for delivery, or renewed before January 1,
2012, 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 51. Not later than December 1, 2011, the Texas Board
of Professional Engineers shall adopt rules to implement Subchapter
N, Chapter 1001, Occupations Code, as added by this Act.
SECTION 52. (a) A legislative interim study committee
shall conduct a study of alternative ways to provide insurance to
the seacoast territory of this state through a quasi-governmental
entity.
(b) The committee is composed of 12 members appointed as
follows:
(1) four members of the senate appointed by the
lieutenant governor, two of whom represent one or more first tier
coastal counties and two of whom do not represent a first tier
coastal county;
(2) four members of the house of representatives
appointed by the speaker of the house of representatives, two of
whom represent one or more first tier coastal counties and two of
whom do not represent a first tier coastal county; and
(3) four public members with a background in actuarial
science, law, business, or insurance, as follows:
(A) two members who do not reside in a first tier
coastal county, appointed by the governor;
(B) one member who resides in a first tier
coastal county, appointed by the lieutenant governor; and
(C) one member who resides in a first tier
coastal county, appointed by the speaker of the house of
representatives.
(c) The speaker of the house of representatives and the
lieutenant governor shall jointly designate a chair or,
alternatively, designate two co-chairs, from among the committee
membership, one of whom represents or resides in a first tier
coastal county.
(d) The committee shall:
(1) examine alternative ways to provide insurance to
the seacoast territory of this state through a quasi-governmental
entity, including providing insurance coverage through a system or
program in which insurers in this state provide insurance in the
seacoast territory of this state in proportion to the percentage of
insurance coverage provided in geographic areas of this state other
than the seacoast territory;
(2) study the residual markets for windstorm and hail
insurance in other states to determine if those markets operate
more efficiently and effectively than the residual market for
windstorm and hail insurance coverage in this state;
(3) study windstorm-related building codes and
mitigation strategies to determine which codes or strategies are
most effective;
(4) recommend:
(A) the appropriate scope of authority and
responsibility for the entity to provide insurance to the seacoast
territory of this state;
(B) an organizational structure to exercise
authority and responsibility over the provision of insurance to the
seacoast territory of this state;
(C) a timetable for implementation; and
(D) specific amendments to state laws and rules
that are necessary to implement the committee's recommendations
under this subdivision; and
(5) estimate funding requirements to implement the
recommendations.
(e) The committee may adopt rules necessary to conduct
business under and implement this section.
(f) Except as specifically provided by this section, the
committee may operate in the same manner as a joint committee of the
82nd Legislature.
(g) Not later than December 1, 2012, the committee shall
report to the governor and the legislature the recommendations made
under this section.
(h) This section expires June 1, 2013.
SECTION 53. (a) The name of the Texas Windstorm Insurance
Association is changed to the Texas Coastal Insurance Plan
Association.
(b) A reference in law to the Texas Windstorm Insurance
Association or the Texas Windstorm Insurance Association Act means
the Texas Coastal Insurance Plan Association or the Texas Coastal
Insurance Plan Act, respectively.
SECTION 54. (a) Except as otherwise specifically provided
by this section, this Act applies only to a Texas windstorm and hail
insurance policy, and to a dispute under a Texas windstorm and hail
insurance policy, that is delivered, issued for delivery, or
renewed by the Texas Windstorm Insurance Association on or after
the 60th day after the effective date of this Act. A Texas
windstorm and hail insurance policy, and a dispute under a Texas
windstorm and hail insurance policy, that is delivered, issued for
delivery, or renewed by the Texas Windstorm Insurance Association
before the 60th day after the effective date of this Act is governed
by the law in effect immediately before the effective date of this
Act, and the former law is continued in effect for that purpose.
(b) The deadline to file a claim under a Texas windstorm and
hail insurance policy delivered, issued for delivery, or renewed
before the effective date of this Act by the Texas Windstorm
Insurance Association is governed by the law in effect on the date
the policy under which the claim is filed was delivered, issued for
delivery, or renewed, and that law is continued in effect for that
purpose.
(c) If a person insured by the Texas Windstorm Insurance
Association disputes the amount the association will pay for a
partially or fully accepted claim filed by the person, Section
2210.574, Insurance Code, as added by this Act, applies only if the
claim is filed on or after the 60th day after the effective date of
this Act.
(d) If a person insured by the Texas Windstorm Insurance
Association disputes the amount the association will pay for a
partially or fully accepted claim filed by the person and the claim
is filed before the 60th day after the effective date of this Act:
(1) Section 2210.574, Insurance Code, as added by this
Act, does not apply to the resolution of the dispute; and
(2) notwithstanding Section 2210.574, Insurance Code,
as added by this Act, or any other provision of this Act, the
claimant must attempt to resolve the dispute through the appraisal
process contained in the association policy under which the claim
is filed before an action may be brought against the Texas Windstorm
Insurance Association concerning the claim.
(e) The person insured by the Texas Windstorm Insurance
Association and the association may agree that an appraisal
conducted under Subsection (d)(2) of this section is binding on the
parties.
(f) An action brought against the association concerning a
claim described by Subsection (d) of this section shall be abated
until the appraisal process under Subsection (d)(2) of this section
is completed.
(g) Notwithstanding Sections 2210.575 and 2210.576,
Insurance Code, as added by this Act, Subsection (b) of this
section, or any other provision of this Act, Sections
2210.576(b)(1)-(3), Insurance Code, apply to any cause of action
that accrues against the Texas Windstorm Insurance Association on
or after the effective date of this Act and the basis of which is a
claim filed under a Texas windstorm and hail policy that is
delivered, issued for delivery, or renewed by the association,
regardless of the date on which the policy was delivered, issued for
delivery, or renewed.
SECTION 55. 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 the 60th day after the
effective date of this Act.
SECTION 56. If any provision of this Act or its application
to any person or circumstance is held invalid, the invalidity does
not affect other provisions or applications of this Act that can be
given effect without the invalid provision or application, and to
this end the provisions of this Act are severable.
SECTION 57. 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 on the 91st day after the last day of
the legislative session.