85R22013 EES-F
By: Goldman H.B. No. 2279
Substitute the following for H.B. No. 2279:
By: Kuempel C.S.H.B. No. 2279
A BILL TO BE ENTITLED
AN ACT
relating to the regulation of residential service contracts.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 1303.002, Occupations Code, is amended
by adding Subdivisions (2-a) and (3-a) and amending Subdivision (5)
to read as follows:
(2-a) "Executive director" means the executive
director of the Texas Real Estate Commission.
(3-a) "Reimbursement insurance policy" means a policy
of insurance issued to a residential service company to:
(A) provide reimbursement to the residential
service company under the terms of the insured residential service
contracts issued or sold by the residential service company; or
(B) pay on behalf of the residential service
company, in the event of the residential service company's
nonperformance, all covered contractual obligations incurred by
the residential service company under the terms of the insured
residential service contracts issued or sold by the residential
service company.
(5) "Residential service contract" means an agreement
that is entered into for a separately stated consideration and for a
specified term under which [, in exchange for a fee,] a person
agrees to, in the event of the operational or structural failure of
or damage caused by a defect in materials or workmanship or by
normal wear to [undertakes for a specified period to maintain,
repair, or replace all or any part of] a structural component, an
appliance, or an electrical, plumbing, heating, cooling, or
air-conditioning system of a residential property that is attached
to the residential property:
(A) [. The term does not include a service or
maintenance agreement sold, offered for sale, or issued by a
manufacturer or merchant under which the manufacturer or merchant
undertakes to] maintain, repair, or replace all or any part of the
[a product or part of a product, including a] structural component,
[an] appliance, or [an] electrical, plumbing, heating, cooling, or
air-conditioning system;
(B) provide incidental payment of indemnity
under limited circumstances, including food spoilage; or
(C) provide payment instead of repair when a
part, structural component, appliance, or service provider or
technician is unavailable [of a residential property, that is:
[(A) manufactured or sold by the manufacturer or
merchant; or
[(B) installed by the merchant in a building or
residence].
SECTION 2. Section 1303.053, Occupations Code, is amended
by adding Subsection (c) to read as follows:
(c) Information prepared or compiled by the commission
relating to an examination conducted under this section, including
the examination file, is confidential and exempt from disclosure
under Chapter 552, Government Code. The commission may withhold
the information without the necessity of requesting a decision from
the attorney general under Subchapter G, Chapter 552, Government
Code.
SECTION 3. Section 1303.101(b), Occupations Code, is
amended to read as follows:
(b) A person may not sell, offer to sell, arrange or solicit
the sale of, or receive an application for a residential service
contract unless:
(1) the person is:
(A) employed by a residential service company
licensed under this chapter; or
(B) licensed as or employed by a real estate
sales agent [salesperson], real estate broker, mobile home dealer,
or insurance agent in this state; and
(2) the contract is issued by a residential service
company licensed under this chapter.
SECTION 4. Section 1303.103, Occupations Code, is amended
by amending Subsection (b) and adding Subsection (d) to read as
follows:
(b) Each application for a license must contain or be
accompanied by:
(1) a copy of the articles of incorporation, articles
of association, partnership agreement, trust agreement, or any
other basic organizational document of the applicant;
(2) a copy of any amendment to the applicant's basic
organizational document;
(3) a copy of any bylaws, rules, or other similar
document that regulates the conduct of the applicant's internal
affairs;
(4) the name, address, and official position of each
person who will be responsible for the conduct of the applicant's
affairs, including:
(A) each member of the board of directors, board
of trustees, executive committee, or other governing body or
committee of the applicant;
(B) the applicant's principal officer, if the
applicant is a corporation; and
(C) each partner or member of the applicant, if
the applicant is a partnership or association;
(5) a copy of the residential service contract made or
to be made between the applicant and another person;
(6) a general description of the residential service
contract or the contract's coverage or plan;
(7) the most recent [a] financial statements for the
applicant [statement that]:
(A) that are [is]:
(i) prepared by an independent certified
public accountant; or
(ii) certified as accurate by at least two
of the residential service company's principal officers, if the
residential service company uses a reimbursement insurance policy
to insure its outstanding residential service contracts written in
this state in accordance with Section 1303.151(b) [within six
months preceding the date the application is submitted]; and
(B) that show [shows] the applicant's assets,
liabilities, and sources of financial support;
(8) a description of the applicant's proposed method
of marketing a residential service contract;
(9) a statement regarding the applicant's sources of
working capital and any other funding sources;
(10) if the applicant is not domiciled in this state, a
power of attorney appointing the executive director
[administrator] and the executive director's [administrator's]
successors in office, or the executive director's [administrator's]
authorized deputy, as the applicant's agent for service of process
in this state in a legal action arising in this state against the
applicant or the applicant's agents; and
(11) any other information the commission requires to
make a determination required by this chapter.
(d) Any financial information submitted to the commission
in connection with an application is confidential and exempt from
disclosure under Chapter 552, Government Code. The commission may
withhold the financial information without the necessity of
requesting a decision from the attorney general under Subchapter G,
Chapter 552, Government Code.
SECTION 5. Section 1303.151, Occupations Code, is amended
to read as follows:
Sec. 1303.151. RESERVE OR REIMBURSEMENT INSURANCE POLICY
REQUIRED. (a) Except as provided by Subsection (b), a [A]
residential service company shall maintain a funded reserve against
its liability to provide repair and replacement services under its
outstanding residential service contracts written in this state.
(b) Except as provided by Section 1303.152(d), a
residential service company is not required to maintain a funded
reserve if it insures all of its risk under its outstanding
residential service contracts written in this state under a
reimbursement insurance policy issued by:
(1) an admitted insurer; or
(2) a surplus lines insurer or a surplus lines bonding
company if the insurer or bonding company:
(A) is rated A+ or better by a rating service
recognized by the commission; and
(B) submits to the commission for its approval
evidence, in the form of a certified audit and other pertinent
information the commission may require, of the insurer's or bonding
company's ability to meet its contractual obligations.
SECTION 6. Section 1303.152, Occupations Code, is amended
by amending Subsection (c) and adding Subsection (d) to read as
follows:
(c) For purposes of this chapter, to the extent a
residential service company uses a reimbursement insurance policy
described by Section 1303.151(b) to insure an outstanding
residential service contract written in this state, the company's
reserve is not required to include a contract fee on the [a]
residential service contract [to the extent that provision is made
for reinsurance of the outstanding risk on the contract by:
[(1) a residential service company licensed in this
state;
[(2) an admitted insurer; or
[(3) a surplus line insurer or a surplus line bonding
company if the insurer or bonding company:
[(A) is rated A+ or better by a rating service
recognized by the commission; and
[(B) submits to the commission for its approval
evidence, in the form of a certified audit and other pertinent
information the commission may require, of the insurer's or bonding
company's ability to meet its contractual obligations].
(d) If a residential service company's reimbursement
insurance policy is issued by a captive insurance company as
defined by Section 964.001, Insurance Code, the residential service
company shall maintain a funded reserve of at least 25 percent of
the reserve amount described by Subsection (a).
SECTION 7. Subchapter D, Chapter 1303, Occupations Code, is
amended by adding Section 1303.1525 to read as follows:
Sec. 1303.1525. REIMBURSEMENT INSURANCE POLICY. (a) An
insurer that issues a reimbursement insurance policy to a
residential service company is considered to have received the
premiums for the policy on the dates contract holders pay for
residential service contracts issued by the residential service
company.
(b) An insurer may not cancel a reimbursement insurance
policy until the insurer mails or delivers a notice of cancellation
to the executive director. The cancellation of the policy does not
affect the issuer's liability for a residential service contract
issued by the insured residential service company before the
effective date of the cancellation.
SECTION 8. Section 1303.153, Occupations Code, is amended
by amending Subsection (a) and adding Subsection (d) to read as
follows:
(a) Except as provided by Subsection (d), as [As] a
guarantee that a residential service company will meet its
obligations to its contract holders, the company shall maintain
with the commission a bond or other security accepted by the
commission.
(d) This section does not apply to a residential service
company that uses a reimbursement insurance policy to insure its
outstanding residential service contracts written in this state in
accordance with Section 1303.151(b).
SECTION 9. Section 1303.154, Occupations Code, is amended
by amending Subsection (a) and adding Subsection (d) to read as
follows:
(a) Except as provided by Subsection (d), an [An] applicant
for a new license must provide security in the amount of $25,000.
The amount of the security may not be reduced before the residential
service company files a second report under Section 1303.202.
(d) This section does not apply to a residential service
company that uses a reimbursement insurance policy to insure its
outstanding residential service contracts written in this state in
accordance with Section 1303.151(b).
SECTION 10. Sections 1303.202(b) and (c), Occupations Code,
are amended to read as follows:
(b) The report must:
(1) be on a form prescribed by the commission;
(2) be verified by at least two of the residential
service company's principal officers; and
(3) include:
(A) [a] financial statements [statement] of the
residential service company, including its balance sheet and
receipts and disbursements for the preceding year, certified as
accurate by:
(i) an independent public accountant; or
(ii) at least two of the residential
service company's principal officers, if the residential service
company uses a reimbursement insurance policy to insure its
outstanding residential service contracts written in this state in
accordance with Section 1303.151(b);
(B) any material change to the information
submitted under Section 1303.103;
(C) if the residential service company maintains
a reserve required by Section 1303.151(a), the number of
residential service contracts entered into during the year, the
number of contract holders as of the end of the year, and the number
of contracts terminating during the year; and
(D) any other information that:
(i) relates to the performance and solvency
of the residential service company; and
(ii) is necessary for the commission to
perform its duties under this chapter.
(c) Any information [Information] provided by a residential
service company in connection with the report required by this
section or any midyear report required by the commission [under
Subsection (b)(3)(D)] is confidential and exempt from disclosure
under Chapter 552, Government Code. The commission may withhold
the information without the necessity of requesting a decision from
the attorney general under Subchapter G, Chapter 552, Government
Code [:
[(1) confidential ; and
[(2) for the exclusive use of the commission].
SECTION 11. Section 1303.251, Occupations Code, is amended
to read as follows:
Sec. 1303.251. CONTRACT DELIVERY AND FILING [EVIDENCE OF
COVERAGE]. (a) Each contract holder residing in this state is
entitled to receive a copy of the [evidence of coverage under a]
residential service contract not later than the 15th day after the
date the contract holder pays for the residential service contract
or the effective date of the residential service contract,
whichever is later. The residential service company may provide
[that issued] the copy by mail, e-mail, or other means of delivery
acceptable to the commission [contract shall issue evidence of
coverage under the contract].
(b) A residential service company shall file with the
commission for approval [may not issue or deliver evidence of
coverage under] a residential service contract, or an amendment to
a previously filed residential service contract that changes the
residential service contract's coverage or substantially amends a
disclosure required by Section 1303.252 [evidence, to a person in
this state until a copy of the evidence or amendment is filed with
and approved by the commission].
(c) The commission may require a residential service
company to submit relevant information the commission considers
necessary to determine whether to approve or disapprove a filing
made under Subsection (b) [the company's evidence of coverage].
(d) The commission shall approve a filing made under
Subsection (b) [residential service company's evidence of
coverage] if the requirements of this section and Section 1303.252
are met.
(d-1) For a filing made under Subsection (b) after a
residential service company is licensed, the commission shall have
30 days to consider the filing from the date of the filing or the
date that the commission receives any associated filing fee,
whichever is later. On the 31st day after that date, the filing is
considered approved unless the commission issues a written order
disapproving the filing or notifies the residential service company
that the filing violates this section or Section 1303.252.
(d-2) If the commission notifies the residential service
company that the filing violates this section or Section 1303.252,
the residential service company may submit a response to that
notification. On receipt of a response from the residential
service company, the commission shall have 30 days to reconsider
the filing. On the 31st day after the commission receives the
residential service company's response, the filing is considered
approved unless the commission issues a written order disapproving
the filing.
(d-3) The commission may not require a residential service
company to waive a 30-day consideration period provided by this
section or make the approval of a filing contingent on waiving a
30-day consideration period provided by this section.
(e) If the commission disapproves a filing made under
Subsection (b) [residential service company's evidence of
coverage], the commission shall notify the company of the
disapproval and in the notice shall specify in detail the reason for
the disapproval.
(f) A residential service company whose filing under
Subsection (b) [evidence of coverage] is disapproved by the
commission is entitled to a hearing conducted by the State Office of
Administrative Hearings [may request a hearing on the commission's
decision. If a hearing is requested, the commission shall set a
hearing on the decision as soon as reasonably possible. Not later
than the 60th day after the date of the hearing, the commission by
written order shall approve or disapprove the evidence. If the
evidence is disapproved, the commission shall state in the order
the grounds for the disapproval].
(g) A hearing under Subsection (f) is governed by the
contested case procedures under Chapter 2001, Government Code.
SECTION 12. Section 1303.252, Occupations Code, is amended
to read as follows:
Sec. 1303.252. FORM OF CONTRACT AND REQUIRED DISCLOSURES
[CONTENTS OF EVIDENCE OF COVERAGE]. (a) A residential service
contract marketed, sold, offered for sale, issued, made, proposed
to be made, or administered in this state must be written, printed,
or typed in clear, understandable language that is easy to read and
must disclose the following [Evidence of coverage under a
residential service contract must contain a clear and complete
statement, if the evidence is a contract, or a reasonably complete
facsimile, if the evidence is a certificate, of]:
(1) the services or benefits to which the contract
holder is entitled;
(2) any limitation on the services, kinds of services,
or benefits to be provided, including a deductible or co-payment
provision;
(3) where and in what manner information is available
on how to obtain services;
(4) the period during which the coverage is in effect;
(5) the residential service company's agreement to
perform services on the contract holder's telephone request to the
company, without a requirement that a claim form or application be
filed before the services are performed;
(6) the company's agreement that, under normal
circumstances, the company will initiate the performance of
services within 48 hours after the contract holder requests the
services; and
(7) any service fee to be charged for a service call.
(b) A service fee under Subsection (a)(7) is not required to
be preprinted on the residential service contract but must be
disclosed in writing to the contract holder before the purchase of
the residential service contract.
(c) A residential service contract insured under a
reimbursement insurance policy in accordance with Section
1303.151(b) must contain a statement substantially similar to the
following: "The residential service company's obligations under
this residential service contract are insured under a reimbursement
insurance policy." The residential service contract must also:
(1) state the name and address of the insurer; and
(2) state that the contract holder may apply for
reimbursement directly to the insurer if a covered service is not
provided to the contract holder by the residential service company
before the 61st day after the date the contract holder provides
proof of loss.
(d) A residential service contract [Evidence of coverage]
may not contain a provision that encourages misrepresentation or
that is unjust, unfair, inequitable, misleading, deceptive, or
false.
SECTION 13. Section 1303.253, Occupations Code, is amended
to read as follows:
Sec. 1303.253. SCHEDULE OF CHARGES. [(a)] A residential
service company shall file [may not use in conjunction with a
residential service contract] a schedule of charges for services
covered under a residential service [the] contract and any [or an]
amendment to a previously filed [that] schedule with the commission
before implementation of the schedule of charges or amendment. A
filing made under this section is not subject to prior approval and
is made for informational purposes only [until a copy of the
schedule or amendment is filed with and approved by the
commission].
[(b) The commission shall approve a schedule of charges if
the commission determines that the schedule is reasonably related
to the amount, term, and conditions of the contract.
[(c) If the commission determines that the schedule of
charges is not reasonably related to the contract as described by
Subsection (b), the commission may reject the schedule. If the
commission rejects the schedule, the commission shall notify the
company of the rejection and shall specify in detail the reason for
the rejection.
[(d) A residential service company whose schedule of
charges is rejected by the commission may request a hearing on the
commission's decision to be held as soon as reasonably possible.
Not later than the 60th day after the date of the hearing, the
commission by written order shall approve or reject the schedule.
If the schedule is rejected, the commission shall state in the order
the grounds for the rejection.]
SECTION 14. Section 1303.301(a), Occupations Code, is
amended to read as follows:
(a) A residential service company may not cause or permit
the use of:
(1) a false or misleading advertisement or
solicitation; or
(2) any deceptive residential service contract
[evidence of coverage].
SECTION 15. Section 1303.352(a), Occupations Code, is
amended to read as follows:
(a) The commission may discipline a residential service
company under Section 1303.351 if the continued operation of the
company would be hazardous to its contract holders or if the
company:
(1) operates in conflict with its basic organizational
document or in a manner that is contrary to that described in and
reasonably inferred from information submitted under Section
1303.103, unless an amendment to the information has been filed
with and approved by the commission;
(2) issues a residential service contract [evidence of
coverage] that does not comply with Sections 1303.251 and 1303.252;
(3) uses a schedule of charges that has not been filed
with the commission in accordance [does not comply] with Section
1303.253;
(4) is not financially responsible and may be
reasonably expected to be unable to meet the company's obligations
to contract holders;
(5) did not comply with Subchapter D;
(6) advertised or marketed the company's services in a
false, misrepresentative, misleading, deceptive, or unfair manner;
or
(7) otherwise did not substantially comply with this
chapter or a rule adopted under this chapter.
SECTION 16. The changes in law made by this Act apply only
to a residential service contract entered into or renewed on or
after the effective date of this Act. A residential service
contract entered into or renewed before that date 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 17. This Act takes effect September 1, 2017.