By: Carona S.B. No. 3
A BILL TO BE ENTITLED
AN ACT
relating to the operation and name of the Texas Windstorm Insurance
Association and to the resolution of certain disputes concerning
claims made to that association; 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 or an agent or representative of that 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. Section 2210.003(1), Insurance Code, is amended
to read as follows:
(1) "Association" means the Texas Coastal [Windstorm]
Insurance Plan Association.
SECTION 6. 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 7. 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 of the Texas Rules of
Civil Procedure may only be brought against the association by the
attorney general.
(b) Chapter 542 does not apply to the processing and
settlement of claims by the association or an agent or
representative of 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, employee of the association, or member
of the windstorm insurance legislative oversight board established
under Subchapter N who reasonably suspects that a fraudulent
insurance act has been or is about to be committed by any board
member, employee of the association, or member of the windstorm
insurance legislative oversight board established under Subchapter
N 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 Travis County district attorney or the department.
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 8. Section 2210.053, Insurance Code, is amended by
adding Subsection (c) to read as follows:
(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 9. Subchapter B, Chapter 2210, Insurance Code, is
amended by adding Section 2210.058 to read as follows:
Sec. 2210.058. CLAIMS PRACTICES AUDIT. (a) If the
commissioner determines that 500 or more claims have been filed
under association policies the bases of which are damage to insured
property caused by the same storm, the department shall conduct a
random audit of the claim files of those claims 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 after the filing of the 500th claim
described by Subsection (a) to ensure the quality of the process
with which the association, including an agent or representative of
the association, is handling claims described by Subsection (a).
(c) If, following an audit conducted under this section, the
commissioner determines that the association or an agent or
representative of 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 or an
agent or representative of the association should correct any
deficiencies identified by the commissioner.
SECTION 10. 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 11. 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 if the board of directors
determines, before the date of any occurrence, that the amount
available from premium and other revenue, in combination with the
amounts available from the catastrophe reserve trust fund, may be
insufficient to pay insured losses; 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 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
(2) 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 the calendar year in which the occurrence or
series of occurrences takes place, 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 exhausted before the proceeds of any
securities issued under that subsection after an occurrence or
series of occurrences may be used. Public securities described by
Subsection (a) to be issued after an occurrence or series of
occurrences may be issued before the proceeds of any outstanding
public securities issued under that subsection before an occurrence
or series of occurrences have been exhausted.
(f) To the extent the proceeds of outstanding public
securities described by Subsection (a) that are issued before an
occurrence or series of occurrences are used to pay for losses under
this section, for the purposes of this chapter, those public
securities shall be considered as being issued after the date of the
occurrence or series of occurrences and issued in the catastrophe
year in which the occurrence or series of occurrences resulted in
the payment of losses under this section.
SECTION 12. 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; and
(2) 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 the calendar year in which the occurrence or
series of occurrences takes place, 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 13. 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; and
(2) 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 the calendar year in which the occurrence or
series of occurrences takes place, 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 14. 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 15. Section 2210.104, Insurance Code, is amended to
read as follows:
Sec. 2210.104. OFFICERS AND MANAGERIAL EMPLOYEES; 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 association employee who serves
in a managerial capacity and any bonuses paid to those association
employees.
SECTION 16. 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) 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. The
commissioner or the commissioner's designated representative shall
maintain the confidentiality of, and may not disclose the content
of, any confidential information discussed in a closed meeting
authorized by Subchapter D, Chapter 551, Government Code.
(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 17. 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 18. 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) 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 or adjuster involved 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 not otherwise required
to be disclosed under this section and that is confidential under
Chapter 552, Government Code, or any other law.
SECTION 19. Section 2210.152, Insurance Code, is amended by
adding Subsection (c) to read as follows:
(c) The plan of operation shall require the association,
including an agent or representative of the association, to use the
claim settlement guidelines published by the commissioner under
Section 2210.577(f) in evaluating the extent to which a loss to
insured property is incurred as a result of wind, waves, tidal
surges, rising waters not caused by waves or surges, or wind-driven
rain associated with a storm.
SECTION 20. 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), once
every three calendar years, evidence of one declination otherwise
described by this subsection 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 renewal process that allows for the acceptance of an
application for renewal coverage, and payment of premiums, from a
property and casualty agent or a person insured under this chapter.
An [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).
SECTION 21. 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 consultation with the board of
directors, shall adopt rules governing the rate of agent
commissions on policies renewed under Subsection (c). Rules
adopted under this subsection must require that commission rates be
reasonable and not excessive, based on the time required of, and the
nature of work to be performed by, an agent.
SECTION 22. 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 23. 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 2210.575 and mediation under Section 2210.576; and
(B) 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 a wind turbine,
regardless of whether the turbine is otherwise insurable property
under this chapter.
SECTION 24. Section 2210.254, Insurance Code, is amended by
adding Subsection (e) to read as follows:
(e) The department may establish an annual renewal period
for persons appointed as qualified inspectors.
SECTION 25. Subchapter F, Chapter 2210, Insurance Code, is
amended by adding Section 2210.2551 to read as follows:
Sec. 2210.2551. EXCLUSIVE 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.
(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.
SECTION 26. 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 27. 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 28. 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 January 1, 2012, 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.
SECTION 29. The heading to Subchapter H, Chapter 2210,
Insurance Code, is amended to read as follows:
SUBCHAPTER H. RATES; DISCOUNTS
SECTION 30. Subchapter H, Chapter 2210, Insurance Code, is
amended by adding Section 2210.363 to read as follows:
Sec. 2210.363. PREMIUM DISCOUNTS. (a) The association may
offer a person insured under this chapter an actuarially justified
premium discount on a policy issued by the association if the person
elects to purchase a binding arbitration endorsement under Section
2210.554.
(b) The commissioner shall adopt rules necessary to
implement and enforce this section.
SECTION 31. 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 required under Subsection (c) is for
informational purposes and does not bind the association to a
particular course of action.
SECTION 32. 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 is for informational purposes and
does not bind the association to a particular course of action.
SECTION 33. 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 34. The heading to Section 2210.552, Insurance
Code, is amended to read as follows:
Sec. 2210.552. [CLAIM] DISPUTES OTHER THAN CLAIM DISPUTES;
VENUE.
SECTION 35. Section 2210.552, Insurance Code, is amended by
amending Subsection (a) and adding Subsections (e), (f), (g), and
(h) to read as follows:
(a) Except as provided by Subsection (e) and Sections
2210.007 and 2210.106, and subject to Subchapter L-1, 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 described by Section 2210.5761 that is brought under
Subsection (f)[, including an action under Chapter 541]; or
(2) if applicable, appeal the act, ruling, or decision
under Section 2210.551.
(e) Except as provided by Subsection (f), Subchapter L-1
provides the exclusive remedies for a claimant to resolve a dispute
with the association concerning the payment of, the amount of, or
the denial of a claim. A claimant may not bring an action against
the association concerning the payment of, the amount of, or the
denial of a claim before exhausting all remedies under Subchapter
L-1. If a claimant brings an action against the association
concerning the payment of, the amount of, or the denial of a claim
before exhausting all remedies under that subchapter, the court
shall abate the action until all remedies under that subchapter
have been exhausted. For purposes of this subsection, "claim" and
"claimant" have the meanings assigned by Section 2210.571.
(f) If a claimant, as defined by Section 2210.571, disputes
an act, ruling, or decision of the association concerning a
causation dispute or a coverage dispute, as defined by Section
2210.571, the claimant may bring an action against the association
in a district court in the county in which the loss occurred. An
action brought under this subsection is subject to Sections
2210.576 and 2210.5761.
(g) A person who brings an action against the association
under this section:
(1) may recover only the amount of the covered loss for
an action brought under Subsection (f), or the amount of actual
damages for any other action, plus court costs and reasonable and
necessary attorney's fees; and
(2) may not recover consequential, punitive, or
exemplary damages, including damages under Section 541.152(b) of
this code or Section 17.50, Business & Commerce Code.
(h) For purposes of Subsection (g)(2), "consequential
damages" does not include a loss covered under an association
policy or an endorsement to an association policy.
SECTION 36. Subchapter L, Chapter 2210, Insurance Code, is
amended by adding Sections 2210.553 and 2210.554 to read as
follows:
Sec. 2210.553. LIMITATIONS PERIOD. (a) Notwithstanding
any other law, including Section 541.162, a person insured under
this chapter who brings an action against the association in the
manner described by Section 2210.552(a)(1) must bring the action
not later than the second anniversary of the date of the act,
ruling, or decision of the association by which the insured is
aggrieved.
(b) This section is a statute of repose and controls over
any other applicable limitations period.
Sec. 2210.554. VOLUNTARY ARBITRATION OF CERTAIN COVERAGE
AND CLAIM DISPUTES. (a) A person insured under this chapter may
elect to purchase a binding arbitration endorsement in a form
prescribed by the commissioner. A person who elects to purchase an
endorsement under this section must arbitrate a dispute involving
an act, ruling, or decision of the association relating to the
payment of, the amount of, or the denial of the claim.
(b) An arbitration under this section shall be conducted in
the manner and under rules and deadlines prescribed by the
commissioner by rule.
SECTION 37. 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) "Causation dispute" means a dispute involving the
extent to which damage to property insured under an association
policy was caused by an event or peril covered under the policy.
(3) "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.
(4) "Claimant" means a person who makes a claim.
(5) "Coverage dispute" means a dispute that involves
whether, or the extent to which, an association policy covers
damages to property alleged to be insured under the policy. The
term does not include a causation dispute.
(6) "Damage dispute" means a dispute that involves the
actual cash value, amount of loss, or cost of repairing or replacing
property insured under an association policy. The term does not
include a causation dispute or coverage dispute.
Sec. 2210.572. EXCLUSIVE REMEDIES AND LIMITATION ON AWARD.
(a) Subject to Sections 2210.552(e) and (f), and notwithstanding
any other provision of this chapter or other law, this subchapter
provides the exclusive remedies for a claim against the
association, including an agent or representative of the
association.
(b) Except as provided by Section 2210.552(f), the
association or an agent or representative of the association may
not be held liable for any amount on a claim other than:
(1) amounts payable under any applicable terms of the
association policy; and
(2) any costs and fees awarded under Section 2210.578.
(c) The association or 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 trebling of 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) Except as provided by Subsection (d), not later than the
90th day after the date the association receives a claim, the
association shall:
(1) notify the claimant in writing of the amount of
money, if any, the association will pay the claimant for the claim;
and
(2) provide the claimant with:
(A) a detailed description of the assumptions or
estimates used by the association in determining the amount of the
claim to be paid, including the estimated labor and materials
required and the estimated prices for the labor and materials; or
(B) if the association determines that, in whole
or in part, the property damaged is not insured under the
association policy, or that the property insured under the
association policy was damaged by an event or peril not covered by
the association policy, a detailed description of the factual and
legal basis on which the association determined that a coverage or
causation dispute exists concerning all or part of the claim.
(c) If the association does not notify the claimant within
the period required by Subsection (b), the claim is presumed to be
covered by the association policy.
(d) The association may extend the 90-day period described
by Subsection (b) for a period not to exceed 90 days, if, before the
end of the 90-day period described by Subsection (b), the
association determines that special circumstances require an
extension of the 90-day period described by Subsection (b) and
notifies the claimant in writing of that determination and those
circumstances.
(e) If a claimant fails to submit information necessary for
the association to determine whether to pay a claim or any portion
of a claim or to deny payment of a claim or any portion of a claim,
the association shall, not later than the 15th day after the date
the association receives notice of the claim, request in writing
any necessary information from the claimant. For good cause, the
association may make a request for additional information under
this subsection not later than the 30th day after the date the
association receives notice of a claim. If the association makes a
written request for information, the applicable period described by
Subsection (b) or (d) is tolled from the date the association
requests the information until the date the association receives
from the claimant information responsive to the request.
(f) In addition to the notice and information otherwise
required under this section, the association shall notify a
claimant of the time limits under Section 2210.574 to request
review of the association's determination under Subsection (e).
Sec. 2210.574. REQUEST FOR REVIEW OF ASSOCIATION
DETERMINATION. (a) A claimant aggrieved by a determination of the
association under Section 2210.573 may, not later than the 30th day
after the date the claimant receives the association's
determination, request in writing a review of the determination. A
claimant may submit written comments, documents, records, and other
information to the association with or following the request for
review.
(b) The association shall, on request and free of charge,
provide a claimant requesting review of an association
determination under Subsection (a) reasonable access to all
information relevant to the determination of the association that
is being reviewed. 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.
(c) Not later than the 60th day after the date the
association receives a request for review under Subsection (a), the
association shall notify the claimant in writing of the outcome of
the association's review. The association and the claimant may
agree to extend the 60-day period described by this subsection.
(d) The association's notice to the claimant of the outcome
of the association's review must be in writing, contain the reasons
for the outcome, and notify the claimant of the time limits to
request, as applicable, appraisal under Section 2210.575 or
mediation under Section 2210.576.
Sec. 2210.575. APPRAISAL IN DAMAGE DISPUTES. (a) If, after
review of an association determination under Section 2210.574, a
damage dispute exists with reference to a claim filed under an
association policy, but a coverage or causation dispute does not
exist with reference to that claim, the claimant must request
appraisal of the actual cash value, amount of loss, or cost of
repairing or replacing the property insured under the policy.
(b) A claimant must make a written request for appraisal not
later than the 30th day after the date the claimant receives actual
or constructive notice of the outcome of the association's review
of a determination under Section 2210.574 that is the basis of the
damage dispute. If a claimant, on a showing of good cause and not
later than the 60th day after the expiration of the 30-day period
described by this subsection, requests in writing that the 30-day
period to request appraisal be extended, the commissioner may grant
an additional 30-day period in which the claimant may request
appraisal.
(c) If a claimant requests appraisal under Subsection (b),
the claimant and the association shall resolve the damage dispute
through appraisal, in accordance with the terms of the association
policy. The results of the appraisal:
(1) are binding on the claimant and the association
and are subject to appeal and judicial review only in the manner
provided by Section 2210.578; and
(2) become final and appealable on the 15th day after
the date the appealing party receives actual or constructive notice
of the results.
(d) A request for appraisal, and participation in the
appraisal process, under this section is a condition precedent to
contesting a determination made by the association concerning the
actual cash value, amount of loss, or cost of repairing or replacing
property insured under an association policy. A claimant who does
not request appraisal within the applicable period described by
Subsection (b) waives the claimant's right to contest a
determination of the association concerning the actual cash value,
amount of loss, or cost of repairing or replacing property insured
under an association policy.
(e) If a claimant requests appraisal under this section, the
claimant is responsible for paying any costs incurred or charged by
an appraiser retained by and on behalf of the claimant, the
association is responsible for paying any costs incurred or charged
by an appraiser retained by and on behalf of the association, and
the claimant and the association are responsible in equal shares
for any costs incurred or charged by any other appraiser chosen by
the claimant's and the association's appraisers to participate in
the resolution of the dispute.
(f) The commissioner by rule shall establish policies and
procedures for an appraisal requested and conducted under this
section.
Sec. 2210.576. MEDIATION. (a) If a claimant disputes the
association's determination concerning a causation dispute or
coverage dispute and provides notice of intent to bring an action
that meets the requirements of Section 541.154, the association may
require the claimant, as a prerequisite to filing the action
against the association, to submit the dispute to alternate dispute
resolution by mediation, as provided by Chapter 154, Civil Practice
and Remedies Code. If a claimant brings an action against the
association before mediation under this section is completed, the
court shall abate the action until the mediation is completed. A
claimant described by this subsection that also disputes the
association's determination concerning a damage dispute related to
the causation dispute or coverage dispute that is the subject of
mediation may include in the mediation the damage dispute.
(b) The association shall request mediation of a dispute
described by Subsection (a) not later than the 60th day after the
date the association receives from the claimant notice of intent to
bring an action.
(c) Mediation under this section must be completed not later
than the 60th day after the date a request for mediation is made
under Subsection (b). 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.
(d) If mediation is not completed before the expiration of
the 60-day period described by Subsection (c) or, if applicable,
any extension under that subsection, the claimant may bring an
action against the association as described by Section 2210.5761.
(e) The claimant and the association shall select a mediator
to conduct mediation under this section. If the claimant and the
association cannot agree on a mediator, the commissioner shall
appoint a mediator. The commissioner shall adopt rules concerning
the division of mediation costs between the claimant and the
association.
(f) The commissioner shall establish rules to implement
this section, including provisions for expediting mediation,
facilitating the ability of a claimant to appear with or without
counsel, and providing that formal rules of evidence shall not
apply to the proceedings.
Sec. 2210.5761. ACTION BY CLAIMANT. (a) Subject to
providing notice of intent to bring an action that meets the
requirements of Section 541.154, a claimant aggrieved by the
outcome of mediation under Section 2210.576 may bring an action
against the association.
(b) If six or more claimants file actions against the
association under this section as a result of a weather-related
event, an action brought against the association under this section
must 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 an
active judge in Travis County, for suits filed in Travis County, or
an active judge in the county in which suit is filed, for a suit
filed in a county other than Travis County. For purposes of this
subsection, "active judge" has the meaning assigned by Section
74.041, Government Code.
(c) An action brought against the association is governed by
this subchapter and Sections 2210.552 and 2210.553.
Sec. 2210.577. TECHNICAL PANEL. (a) The commissioner
shall appoint a technical panel of experts to advise the
association concerning the extent to which damage to property
insured under an association policy was incurred as a result of
wind, waves, tidal surges, rising waters not caused by waves or
surges, and wind-driven rain associated with a storm. 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, rising waters not caused by waves or
surges, and wind-driven rain associated with a storm.
(c) The panel shall meet at the request of the commissioner
or the call of the presiding officer of the panel.
(c-1) The commissioner shall adopt rules regarding notice
of panel meetings and the transparency of deliberations of the
technical panel.
(d) The panel shall investigate, collect, and evaluate the
information necessary to provide recommendations under Subsection
(e).
(e) At the request of the commissioner, the technical panel
shall recommend to the commissioner methods for determining the
extent to which damage to property insured under an association
policy resulted from wind, waves, tidal surges, rising waters not
caused by waves or surges, and wind-driven rain associated with a
storm 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 technical 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.
Sec. 2210.578. JUDICIAL REVIEW. (a) A claimant who has
exhausted all administrative remedies under this subchapter and who
is aggrieved by an appraisal under Section 2210.575 is entitled to
judicial review. A claimant may not seek judicial review before
exhausting all administrative remedies under this subchapter.
(b) A claimant may seek judicial review of an appraisal
under Section 2210.575 in the manner provided for the appeal of
contested cases under Subchapter G, Chapter 2001, Government Code.
The standard for judicial review under this section is the
substantial evidence rule.
(c) In a proceeding for judicial review under this section,
the court may award only the amount described by Section
2210.572(b), plus court costs and reasonable and necessary
attorney's fees.
(d) Notwithstanding Subsection (b), a claimant aggrieved by
an appraisal process under Section 2210.575 may appeal to a
district court in the county in which the loss that is the subject
of the appraisal occurred for a determination concerning:
(1) the amount of the loss; and
(2) the amount of court costs and reasonable and
necessary attorney's fees.
(e) An appeal to a district court under Subsection (d) shall
be trial de novo. The only questions that may be presented and
determined at the trial de novo are:
(1) the amount of the loss; and
(2) the amount of court costs and reasonable and
necessary attorney's fees.
(f) The only evidence that may be admitted in a trial de novo
under Subsection (d) is evidence that was admitted or presented in
the appraisal process under Section 2210.575. The Texas Rules of
Evidence govern whether evidence presented during the appraisal
process under Section 2210.575 is admissible in a trial de novo
under Subsection (d).
(g) A petition for trial de novo under Subsection (d) must
be filed with a district court in the county in which the loss that
is the subject of the appraisal occurred not later than the 30th day
after the date on which the determination being appealed is final
and appealable under this subchapter.
(h) The appeal seeking a trial de novo under Subsection (d)
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 an
active judge, as defined by Section 74.041, Government Code, who is
a resident of the county in which the loss occurred or of a first
tier coastal county or a second tier coastal county adjacent to the
county in which the loss occurred.
(i) The Texas Supreme Court shall adopt rules governing the
proceedings of a trial de novo under Subsection (d).
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. MEDIATION; CERTAIN DEADLINES TOLLED. A
deadline imposed on a claimant under Section 2210.574, 2210.575, or
2210.576 is tolled for a single period not to exceed 45 consecutive
days during which the claimant is actively seeking resolution of
the causation dispute, coverage dispute, or damage dispute through
a mediation administered by the department, other than the
mediation described by Section 2210.576.
SECTION 38. 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 [so long as no tranche of commercial paper is
issued under the program until after the catastrophic event].
SECTION 39. 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 40. Section 2210.605(c), Insurance Code, is amended
to read as follows:
(c) Public securities issued under Section 2210.6136 [this
chapter] are eligible obligations under Section 404.027,
Government Code.
SECTION 41. Section 2210.608(a), Insurance Code, is amended
to read as follows:
(a) Public security proceeds, including investment income,
shall be held in trust for the exclusive use and benefit of the
association. The association may use the proceeds to:
(1) pay incurred claims and operating expenses of the
association;
(2) purchase reinsurance for the association;
(3) pay the costs of issuing the public securities,
and public security administrative expenses, if any;
(4) provide a public security reserve; [and]
(5) pay capitalized interest and principal on the
public securities for the period determined necessary by the
association;
(6) pay private financial agreements entered into by
the association as temporary sources of payment of losses and
operating expenses of the association; and
(7) reimburse the association for any cost described
by Subdivisions (1)-(6) paid by the association before issuance of
the public securities.
SECTION 42. Sections 2210.609(a) and (b), Insurance Code,
are amended to read as follows:
(a) The board and the association shall enter into an
agreement under which the association shall provide for the payment
of all public security obligations from available funds collected
by the association and deposited into the public security
obligation revenue fund. If the association determines that it is
unable to pay the public security obligations and public security
administrative expenses, if any, with available funds, the
association shall pay those obligations and expenses in accordance
with Sections 2210.612, 2210.613, [and] 2210.6135, and 2210.6136 as
applicable. Class 1, Class 2, or Class 3 public securities may be
issued on a parity or subordinate lien basis with other Class 1,
Class 2, or Class 3 public securities, respectively.
(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 2210.610(a), Insurance Code, is amended
to read as follows:
(a) Revenues received from the premium surcharges under
Section 2210.613 and member assessments under Sections 2210.613 and
2210.6135 may be applied only as provided by this subchapter.
SECTION 44. 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 and member assessments under
Sections 2210.613 and 2210.6135 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 and member assessments, as applicable, 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 45. Section 2210.612, Insurance Code, is amended to
read as follows:
Sec. 2210.612. PAYMENT OF CLASS 1 PUBLIC SECURITIES. (a)
The association shall pay Class 1 public securities issued under
Section 2210.072 from its net premium and other revenue.
(b) The association may enter financing arrangements as
described by Section 2210.072(d) as necessary to obtain public
securities issued under Section 2210.072 [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 or series of occurrences that
results in insured losses under Section 2210.072(a) [so long as no
tranche of commercial paper is issued under a commercial paper
program until after such an occurrence].
SECTION 46. Sections 2210.613(b), (c), and (d), Insurance
Code, are amended to read as follows:
(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 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 47. Section 2210.6135(a), Insurance Code, is
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 in the amounts
necessary for the repayment of public securities issued in a
principal [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.
SECTION 48. Subchapter M, Chapter 2210, Insurance Code, is
amended by adding Section 2210.6136 to read as follows:
Sec. 2210.6136. COMBINED SOURCES OF PAYMENT. (a) In lieu
of issuing distinct Class 1, Class 2, or Class 3 public securities,
on request of the association and approval by the commissioner, the
board may issue public securities payable from all of the sources
described in Sections 2210.612, 2210.613, and 2210.6135 with:
(1) the first source of payment being as described in
Section 2210.612 to the extent public securities issued under this
section are marketable, in a principal amount not to exceed $1
billion;
(2) the second source of payment being as described in
Section 2210.613, in a principal amount not to exceed $1 billion;
and
(3) the third source of payment being as described in
Section 2210.6135.
(b) The aggregate principal amount of public securities
issued in the manner described by this section may not exceed $2.5
billion in any consecutive 12-month period from the earlier of, as
applicable:
(1) the date on which public securities are issued
under Section 2210.072(a) before an occurrence or series of
occurrences that results in insured losses; or
(2) the date of an occurrence or series of occurrences
in a calendar year that results in insured losses in excess of
premium and other revenue of the association from available
reserves of the association and available amounts in the
catastrophe reserve trust fund.
SECTION 49. Section 2210.614, Insurance Code, is amended to
read as follows:
Sec. 2210.614. REFINANCING PUBLIC SECURITIES. (a) The
association may request the board to refinance any public
securities issued in accordance with Subchapter B-1, whether Class
1, Class 2, or Class 3 public securities, with public securities
payable from the same sources as the original public securities.
(b) Notwithstanding Section 1207.006, Government Code,
public securities refinanced under this section may not have a term
that is greater than 14 years.
SECTION 50. Section 2210.616, Insurance Code, is amended to
read as follows:
Sec. 2210.616. STATE NOT TO IMPAIR PUBLIC SECURITY
OBLIGATIONS. (a) The state pledges for the benefit and protection
of financing parties, the board, and the association that the state
will not take or permit any action that would:
(1) impair the collection of member assessments and
premium surcharges or the deposit of those funds into the member
assessment trust fund or premium surcharge trust fund;
(2) reduce, alter, or impair the member assessments or
premium surcharges to be imposed, collected, and remitted to
financing parties until the principal, interest, and premium, and
any other charges incurred and contracts to be performed in
connection with the related public securities, have been paid and
performed in full; or
(3) [If public securities under this subchapter are
outstanding, the state may not:
[(1) take action to limit or restrict the rights of the
association to fulfill its responsibility to pay public security
obligations; or
[(2)] in any way impair the rights and remedies of the
public security owners until the public securities are fully
discharged.
(b) A party issuing public securities under this subchapter
may include the pledge described by Subsection (a) in any
documentation relating to those securities.
SECTION 51. Subchapter M, Chapter 2210, Insurance Code, is
amended by adding Section 2210.6165 to read as follows:
Sec. 2210.6165. PROPERTY RIGHTS. If public securities
issued under this subchapter are outstanding, the rights and
interests in revenues from a premium surcharge or member assessment
held by the association, a successor to the association, any member
of the association, or any entity required to impose, collect, or
receive a premium surcharge or a member assessment under this
subchapter, to the extent those rights and interests are property
rights, are extinguished once those revenues are first pledged for
the repayment of the association's public security obligations as
provided by Section 2210.609.
SECTION 52. Section 2210.551(e), Insurance Code, is
repealed.
SECTION 53. (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;
(2) 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
(3) 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.
SECTION 54. (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 55. This Act applies only to a Texas windstorm and
hail insurance policy, and a claim or 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 claim or 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 immediately before
the effective date of this Act, and the former law is continued in
effect for that purpose.
SECTION 56. 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 57. 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 58. 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.