2005 Texas Insurance Code - Not Codified CHAPTER 7. SURETY AND TRUST COMPANIES


INSURANCE CODE - NOT CODIFIED
CHAPTER 7. SURETY AND TRUST COMPANIES
Art. 7.01. VENUE OF SUIT ON BOND.
Article repealed effective April 1, 2007
If any suit shall be instituted upon any bond or obligation of any insurance company licensed in this State and having authority to act as surety and guarantor of the fidelity of employees, trustees, executors, administrators, guardians or others appointed to, or assuming the performance of any trust, public or private, under appointment of any court or tribunal, or under contract between private individuals or corporations, or upon any bond or bonds that may be required to be filed in any judicial proceedings, or to guarantee any contract or undertaking between individuals, or between private corporations, or between individuals or private corporations and the State and municipal corporations or counties or between corporations and individuals, or on any bond or bonds that may be required of any state official, district official, county official or official of any school district or of any municipality, the proper court of the county wherein said bond is filed shall have jurisdiction of said cause. Service therein shall be had as provided by Section 2, 3, or 4, Article 1.36 of this code, as applicable. Such guaranty, fidelity and surety companies shall be deemed resident of the counties wherever they may do business, and the doing or performing of any business in any county shall be deemed an acceptance of the provisions of this Act. Added by Acts 1959, 56th Leg., 2nd C.S., p. 159, ch. 39, Sec. 1. Amended by Acts 1987, 70th Leg., ch. 46, Sec. 3, eff. Sept. 1, 1987. Art. 7.02. WITHDRAWAL OF UNNECESSARY DEPOSITS.
Article repealed effective April 1, 2007
When two or more companies authorized to write fidelity, guaranty and surety insurance in the State of Texas merge or consolidate, and, incident to such merger or consolidation, enter into a total reinsurance contract by which the merged or ceding company is dissolved, and its assets acquired and liabilities assumed by the new or surviving company, the Commissioner of Insurance, upon finding that the contracting companies have on deposit with the comptroller two or more deposits made for the same or similar purposes under either former Article 7.03 (repealed by Acts 1957, 55th Legislature, Regular Session, Chapter 388, p. 1162) or Article 8.05 of the Insurance Code of Texas, shall authorize the comptroller to retain for a single purpose only the deposit of greater or greatest amount and value and to permit the new or surviving reinsuring company, upon proper showing that there is such duplication of deposits and that the new or surviving company is the owner thereof, to withdraw any or all duplicate or excessive deposits. Added by Acts 1971, 62nd Leg., p. 1904, ch. 569, Sec. 1, eff. June 1, 1971. Amended by Acts 1997, 75th Leg., ch. 1423, Sec. 11.28, eff. Sept. 1, 1997. Art. 7.19-1. BOND OF SURETY COMPANY.
Article repealed effective April 1, 2007
(a) Whenever any bond, undertaking, recognizance or other obligation is, by law or the charter, ordinances, rules and regulations of a municipality, board, body, organization, court, judge or public officer, required or permitted to be made, given, tendered or filed, and whenever the performance of any act, duty or obligation, or the refraining from any act, is required or permitted to be guaranteed, such bond, undertaking, obligation, recognizance or guarantee may be executed by a surety company duly authorized to do business in this state; and, except as provided by Subsection (b), (c), or (d) of this section, such execution by such company of such bond, undertaking, obligation, recognizance or guarantee shall be in all respects a full and complete compliance with every law, charter, rule or regulation that such bond, undertaking, obligation, recognizance or guarantee shall be executed by one surety or by one or more sureties, or that such sureties shall be residents, or householders, or freeholders, or either, or both, or possess any other qualification and all courts, judges, heads of departments, boards, bodies, municipalities, and public officers of every character shall accept and treat such bond, undertaking, obligation, recognizance or guarantee when so executed by such company, as conforming to, and fully and completely complying with, every requirement of every such law, charter, ordinance, rule or regulation. Provided, however, that any municipality may require in any specifications for work or supplies, on which sealed bids are required, that any corporate surety tender shall designate, in a manner satisfactory to it, an agent resident in the county of such municipality to whom any requisite notices may be delivered and on whom service of process may be had in matters arising out of such suretyship. (b) If any bond, undertaking, recognizance, or other obligation described in Subsection (a) of this section is in an amount in excess of 10 percent of the surety company's capital and surplus, the municipality, board, body, organization, court, judge, or public officer may require, as a condition to accepting the bond, undertaking, obligation, recognizance, or other obligation, written certification that the surety company has reinsured the portion of the risk that exceeds 10 percent of the surety company's capital and surplus with one or more reinsurers who are duly authorized, accredited, or trusteed to do business in this state. For the purposes of this subsection, the amount reinsured by any reinsurer may not exceed 10 percent of the reinsurer's capital and surplus. The State Board of Insurance shall furnish, on request, the amount of the allowed capital and surplus as of the date of the last annual statutory financial statement for a surety company or reinsurer authorized and admitted to do business in this state. (c) A bond that is made, given, tendered, or filed under Chapter 53, Property Code, or Chapter 2253, Government Code, may be executed only by a surety company that is authorized and admitted to write surety bonds in this state. If the amount of the bond exceeds $100,000, the surety must also: (1) hold a certificate of authority from the United States secretary of the treasury to qualify as a surety on obligations permitted or required under federal law; or (2) have obtained reinsurance for any liability in excess of $100,000 from a reinsurer that is authorized and admitted as a reinsurer in this state and is the holder of a certificate of authority from the United States secretary of the treasury to qualify as a surety or reinsurer on obligations permitted or required under federal law. (d) In determining whether the surety on the bond or the reinsurer holds a certificate of authority from the United States secretary of the treasury, a party may conclusively rely on the list of companies holding certificates of authority as acceptable sureties on federal bonds and as acceptable reinsuring companies published in the Federal Register by the United States Department of the Treasury covering the date on which the bond was executed. A purchaser, insurer of title, or lender acquiring or insuring an interest or title to real property may also conclusively rely on and is protected by a statement on a recorded bond or a sworn statement by the surety that is recorded and refers to the specific recorded bond and that states that, at the time the bond was executed, the surety: (1) was a holder of a certificate of authority from the United States secretary of the treasury to qualify as a surety on obligations permitted or required under federal law; or (2) had reinsured any liability in excess of $100,000 by a reinsurer holding a certificate of authority described by Subdivision (1) of this subsection. Acts 1959, 56th Leg., p. 146, ch. 87, Sec. 1. Amended by Acts 1991, 72nd Leg., ch. 242, Sec. 11.28, eff. Sept. 1, 1991. Subsec. (b) amended by Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Sec. 5.01, eff. Jan. 1, 1992; Subsec. (a) amended by and Subsecs. (c), (d) added by Acts 1997, 75th Leg., ch. 1132, Sec. 1, eff. Sept. 1, 1997. Article 7.19-1 was not enacted as part of the Insurance Code of 1951. Art. 7.20. CONSTRUCTION PAYMENT BOND OF SURETY COMPANY; PROMPT PAYMENT.
Article repealed effective April 1, 2007
Definitions
Sec. 1. In this article: (1) "Claimant" means a person directly entitled to payment under a construction payment bond. (2) "Construction payment bond" means a surety agreement or obligation issued to guarantee or assure payment by a principal obligor for work performed or materials supplied or specially fabricated for a public or private construction project. (3) "Notice of claim" means a written notification by a claimant who makes a claim for payment from the surety company. The term does not include a routine statutory notice required by Section 53.056(b), 53.057, 53.058, 53.252(b), or 53.253, Property Code, or Section 2253.047, Government Code. (4) "Surety company" means a licensed surety or guaranty company that executes and delivers a construction payment bond as a surety for a principal obligor.
Acknowledgment and investigation of claim
Sec. 2. (a) A surety company that has issued a construction payment bond shall, not later than the 15th day after the date of receipt of notice of claim under the bond: (1) acknowledge receipt of the claim; (2) begin any review or investigation necessary to determine whether the surety company is obligated to satisfy the claim under the bond; and (3) request from the claimant each document, item of information, accounting, statement, or form that the surety company then reasonably believes will be required from the claimant. (b) Nothing in this article exempts a claimant from compliance with any applicable statutory or contractual notice requirement. (c) If the construction payment bond provides an address of the surety company to which claims should be submitted, the notice of claim is effective on receipt of the notice at that address.
Acceptance or rejection of claim
Sec. 3. (a) Except as provided by Subsection (c) of this section, a surety company shall notify a claimant in writing of the acceptance or rejection of a claim not later than the 30th day after the date the surety company receives all documents, items of information, accountings, statements, and forms requested by the surety company as provided by Section 2 of this article. (b) If the surety company rejects all or part of the claim, the notice required by Subsection (a) of this section must state in specific terms the reasons for the rejection known to the surety company at that time. (c) If the surety company is unable to accept or reject the claim within the period specified by Subsection (a) of this section, the surety company shall provide written notice to the claimant, not later than the date specified under Subsection (a), that the surety company is unable to accept or reject the claim within that period. The notice provided under this subsection must: (1) state the reasons for which the surety company needs additional time to accept or reject the claim; and (2) include a request for any additional information reasonably needed by the surety company to process the claim. (d) Not later than the 30th day after the date a surety company notifies a claimant under Subsection (c) of this section, the surety company shall notify the claimant in writing of the acceptance or rejection of the claim. If the surety company rejects all or part of the claim, the surety company shall state in specific terms the reasons for the rejection known to the surety company at that time. (e) In addition to any other contractual or statutory basis for denying a claim, the surety company may reject all or any part of a claim: (1) that is the subject of a legitimate dispute between the principal obligor and the claimant; or (2) for which the claimant has failed to provide supporting documents or information reasonably requested by the surety company. (f) The time limits provided by this section and Section 2 of this article may be varied by any statute requiring a construction payment bond. (g) This section does not preclude a surety company from asserting any defense in any action brought by a claimant against the construction payment bond if a good faith effort is made to inform the claimant in accordance with this section of reasons for rejecting all or part of the claim.
Payment of claim
Sec. 4. (a) If a surety company notifies a claimant under Section 3 of this article that the surety company accepts a claim or part of a claim, the surety company shall pay the claim not later than the 15th day after the date of the notice. (b) If payment of the claim or part of the claim is conditioned on the execution of a document or performance of an act by the claimant, the surety company shall pay the claim not later than the seventh day after the date the surety company receives the executed document or evidence that the act has been performed. (c) For purposes of this section, payment of a claim occurs when the surety company places the surety company's check or draft in the United States mail properly addressed to the claimant or the claimant's representative.
Rules
Sec. 5. The commissioner may adopt rules enforcing this article in cases in which a surety company violates this article as a general business practice.
Construction
Sec. 6. (a) This article shall be construed to encourage prompt payment of just claims made under construction payment bonds of surety companies. This article does not foreclose any other remedy available to a claimant by law or contract. (b) This article may not be construed to: (1) create a private cause of action; (2) be a precondition to judicially enforcing obligations under a construction payment bond; (3) diminish any other obligation of a surety company that exists by law; or (4) prohibit a surety company from asserting a defense against a construction payment bond claim in a proceeding to enforce a claim.
Modification prohibited
Sec. 7. Any term contained in a construction payment bond that is inconsistent with this article is void. Added by Acts 2001, 77th Leg., ch. 470, Sec. 1, eff. Sept. 1, 2001. Art. 7.20-1. BAIL BOND CERTIFICATES ISSUED BY AUTOMOBILE CLUBS; SURETIES.
Article repealed effective April 1, 2007
Any insurance company which has qualified to transact fidelity and surety insurance business in this state may, in any year, become surety in an amount not to exceed $200 with respect to each bail bond certificate issued in such year by an automobile club, duly licensed to transact business within this state, or by any truck and bus association incorporated in this state. Bail bond certificate means a printed card or other certificate issued by an automobile club, authorized to transact business within this state, or by any truck and bus association incorporated in this state to any of its members, which is signed by such member, and contains a printed statement that a fidelity and surety company authorized to do business in this state guarantees the appearance of the person whose signature appears on the card or certificate, and that such company will, in the event of the failure of said person to appear in court at the time of trial, pay any fine or forfeiture imposed on such person in an amount not to exceed $200. Acts 1969, 61st Leg., p. 2033, ch. 697, Sec. 1, eff. Sept. 1, 1969. Article 7.20-1 was not enacted as part of the Insurance Code of 1951.

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