2005 Texas Insurance Code - Not Codified CHAPTER 5. RATING AND POLICY FORMS


INSURANCE CODE - NOT CODIFIED
CHAPTER 5. RATING AND POLICY FORMS
SUBCHAPTER A. MOTOR VEHICLE OR AUTOMOBILE INSURANCE
Art. 5.01. FIXING RATE OF AUTOMOBILE INSURANCE. (a) Every insurance company, corporation, interinsurance exchange, mutual, reciprocal, association, Lloyd's or other insurer, hereinafter called insurer, writing any form of motor vehicle insurance in this State, shall annually file with the State Board of Insurance, hereinafter called Board, on forms prescribed by the Board, a report showing its premiums and losses on each classification of motor vehicle risks written in this State. (b) The Board shall have the sole and exclusive power and authority, and it shall be its duty to determine, fix, prescribe, and promulgate just, reasonable and adequate rates of premiums to be charged and collected by all insurers writing any form of insurance on motor vehicles in this State, including fleet or other rating plans designed to discourage losses from fire and theft and similar hazards and any rating plans designed to encourage the prevention of accidents. In promulgating any such rating plans the Board shall give due consideration to the peculiar hazards and experience of individual risks, past and prospective, within and outside the State and to all other relevant factors, within and outside the State. The Board shall have the authority also to alter or amend any and all of such rates of premiums so fixed and determined and adopted by it, and to raise or lower the same or any part thereof. (c) At least annually, the Board shall conduct a hearing to review the reports of premiums earned and losses incurred in the writing of motor vehicle insurance in this State and may fix, determine, and adopt new rates in whole or in part or may alter or amend rates previously fixed, determined, and adopted by the Board to assure that those rates comply with the requirements of this subchapter. (d) Said Board shall have authority to employ clerical help, inspectors, experts, and other assistants, and to incur such other expenses as may be necessary in carrying out the provisions of this law; provided, however, that the number of employees and salary of each shall be fixed in the General Appropriation Bill passed by the Legislature. The Board shall ascertain as soon as practicable the annual insurance losses incurred under all policies on motor vehicles in this State, make and maintain a record thereof, and collect such data as will enable said Board to classify the various motor vehicles of the State according to the risk and usage made thereof, and to classify and assign the losses according to the various classes of risks to which they are applicable; the Board shall also ascertain the amount of premiums on all such policies for each class of risks, and maintain a permanent record thereof in such manner as will aid in determining just, reasonable and adequate rates of premiums. (e) Motor vehicle or automobile insurance as referred to in this subchapter shall be taken and construed to mean every form of insurance on any automobile or other vehicle hereinafter enumerated and its operating equipment or necessitated by reason of the liability imposed by law for damages arising out of the ownership, operation, maintenance, or use in this State of any automobile, motorcycle, motorbicycle, truck, truck-tractor, tractor, traction engine, or any other self-propelled vehicle, and including also every vehicle, trailer or semi-trailer pulled or towed by a motor vehicle, but excluding every motor vehicle running only upon fixed rails or tracks. Workers' Compensation Insurance is excluded from the foregoing definition. (f) Notwithstanding Subsections (a) through (d) of this article, on and after the effective date of S.B. No. 14, Acts of the 78th Legislature, Regular Session, 2003, rates for personal automobile insurance in this state are determined as provided by Article 5.101 of this code, and rates for commercial motor vehicle insurance in this state are determined as provided by Article 5.13-2 of this code. On and after December 1, 2004, rates for personal automobile insurance and commercial automobile insurance in this state are determined as provided by Article 5.13-2 of this code. Acts 1951, 52nd Leg., ch. 491. Amended by Acts 1953, 53rd Leg., p. 64, ch. 50, Sec. 2. Amended by Acts 1987, 70th Leg., 1st C.S., ch. 1, Sec. 2.06, eff. Sept. 2, 1987; Subsec. (f) added by Acts 1991, 72nd Leg., ch. 242, Sec. 2.02, eff. Sept. 1, 1991; amended by Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Sec. 8.04, eff. Jan. 1, 1992; amended by Acts 1995, 74th Leg., ch. 984, Sec. 2, eff. Sept. 1, 1995; Subsec. (f) amended by Acts 2003, 78th Leg., ch. 206, Sec. 21.01, eff. June 11, 2003. Art. 5.01B. PUBLIC INFORMATION. (a) Information filed or otherwise provided by an insurer to the State Board of Insurance for the purpose of determining, fixing, prescribing, promulgating, altering, or amending commercial automobile liability insurance rates under Article 5.01 of this code, obtaining a rate deviation under Article 5.03 of this code, or reporting losses under Article 5.04-1 of this code is public information unless it is exempt under Section 3(a), Chapter 424, Acts of the 63rd Legislature, Regular Session, 1973 (Article 6252-17a, Vernon's Texas Civil Statutes), or Section (b) of this article. (b) Information provided with an application under Section (d), Article 5.03, of this code is exempt from the disclosure requirements of this article. Added by Acts 1987, 70th Leg., 1st C.S., ch. 1, Sec. 2.03, eff. Sept. 2, 1987. Sec. (a) amended by Acts 1991, 72nd Leg., ch. 750, Sec. 1, eff. Sept. 1, 1991. Art. 5.01C. SHORT-TERM LIABILITY INSURANCE FOR NON-TEXAS RESIDENT MOTORISTS VISITING THIS STATE.
Article repealed effective April 1, 2007
Definitions
Sec. 1. In this article: (1) "Insurer" means an insurance company, interinsurance exchange, mutual, capital stock company, county mutual, reciprocal association, Lloyd's plan insurer, or other entity authorized to write motor vehicle insurance in this state. (2) "Motor vehicle" means any private passenger vehicle or utility type vehicle that has a gross weight of 25,000 pounds or less. (3) "Short-term liability insurance policy" means an insurance policy that: (A) provides coverage for at least 24 hours but not for more than one week; (B) meets the requirements of Chapter 601, Transportation Code; (C) covers liability for bodily injury, death, and property damage arising from the use or operation of a motor vehicle; and (D) is not insurance assigned to an authorized insurance company by the Texas Automobile Insurance Plan Association under Section 4(a), Article 21.81, of this code.
Rules
Sec. 2. (a) The commissioner by rule may establish a program to provide for the sale of short-term liability insurance policies to non-Texas resident motorists visiting this state. (b) The commissioner may negotiate an agreement with any insurer under which the insurer will sell policies described by Subsection (a) of this section.
License required
Sec. 3. A person representing an insurer in selling short-term liability insurance policies under this article must be licensed under Subchapter A, Chapter 21, of this code.
Forms
Sec. 4. An insurer selling short-term liability insurance policies under this article must use the policy forms adopted by the commissioner under Article 5.06 of this code or filed and in effect as provided by Article 5.145 of this code unless the insurer is exempt from using those forms. Added by Acts 2001, 77th Leg., ch. 123, Sec. 1, eff. Sept. 1, 2001; Sec. 4 amended by Acts 2003, 78th Leg., ch. 206, Sec. 21.02, eff. June 11, 2003. Art. 5.01-1. PREMIUM RATING PLANS. A rating plan respecting the writing of motor vehicle insurance, other than insurance written pursuant to Section 35 of the Texas Motor Vehicle Safety-Responsibility Act (Article 6701h, Vernon's Texas Civil Statutes), may not assign any rate consequence to a charge or conviction, or otherwise cause premiums for motor vehicle insurance to be increased because of a charge or conviction for a violation of the Uniform Act Regulating Traffic on Highways, as amended (Article 6701d, Vernon's Texas Civil Statutes). Acts 1979, 66th Leg., p. 1769, ch. 717, Sec. 1, eff. June 13, 1979. Amended by Acts 1991, 72nd Leg., ch. 242, Sec. 2.03, eff. Sept. 1, 1991. Art. 5.01-3. FORMER MILITARY VEHICLES.
Article repealed effective April 1, 2007
(a) A rating plan that includes a classification applicable to antique, private passenger vehicles maintained primarily for use in exhibitions, club activities, parades, and other functions of public interest and occasionally used for other purposes must include in the classification former military vehicles maintained for those uses. (b) In this article, "former military vehicle" has the meaning assigned by Section 502.275, Transportation Code. Added by Acts 1997, 75th Leg., ch. 1222, Sec. 4, eff. Sept. 1, 1997. Art. 5.02. AUTHORITY TO ASSIGN CERTAIN TYPES OR CLASSES TO APPROPRIATE RATING LAWS. There shall be excluded from regulation under the provisions of this subchapter any insurance against liability for damages arising out of the ownership, operation, maintenance or use of or against loss of or damage to motor vehicles described in the foregoing section which may, in the judgment of the Board, be a type or class of insurance which is also the subject of or may be more properly regulated under the terms or provisions of other insurance rating laws heretofore or hereafter enacted covering such insurance. If such situation shall be found to exist, then the Board shall make an order declaring which of the said rating laws shall be applicable to such type or class of insurance, and to any motor vehicle equipment mentioned in Article 5.01 of this subchapter. Acts 1951, 52nd Leg., ch. 491. Art. 5.03. PROMULGATED RATES AS CONTROLLING. (a) On and after the filing and effective date of such classification of such risks and rates, no such insurer, except as otherwise provided herein, shall issue or renew any such insurance at premium rates which are greater or lesser than those promulgated by the Board as just, reasonable, adequate and not excessive for the risks to which they respectively apply, and not confiscatory as to any class of insurance carriers authorized by law to write such insurance after taking into consideration the deviation provisions of this Article. Any insurer desiring to write insurance at rates different from those promulgated by the Board shall make a written application to the Board for permission to file a uniform percentage deviation for a lesser or greater rate, on a statewide basis unless otherwise ordered by the Board, from the class rates or classes of rates promulgated by the Board. Any insurer desiring to write insurance under a classification plan different from that promulgated by the Board shall make written application to the Board for permission to do so; provided, however, the Board shall approve the use of only such additions or refinements in its classification plan as will produce subclassifications which, when combined, will enable consideration of the insurer's experience under both the Board classification plan and its own classification plan. Such application shall be approved in whole or in part by the Board, provided the Board finds that the resulting premiums will be just, adequate, reasonable, not excessive and not unfairly discriminatory, taking into consideration the following: (1) the financial condition of the insurer; (2) the method of operation and expenses of such insurer; (3) the actual paid and incurred loss experience of the insurer; (4) earnings of the insurer from investments together with a projection of prospective earnings from investments during the period for which the application is made; and (5) such application meets the reasonable conditions, limitations, and restrictions deemed necessary by the Board. In considering all matters set forth in such application the Board shall give consideration to the composite effect of items (2), (3), and (4) above and the Board shall deny such application if it finds that the resulting premiums would be inadequate, excessive, or unfairly discriminatory. Any original or renewal policy of insurance issued pursuant to an approved plan of deviation shall have attached to or imprinted on the face of such policy the following notice: "The premium charged for this policy is greater than the premium rates promulgated by the State Board of Insurance." The notice shall be in 10-point or larger prominent typesize. Except as the Board may authorize, the deviation provisions in this Article shall not apply to insurance written pursuant to other provisions of this Chapter in which a deviation from standard rates is authorized, including, but not limited to, automobile liability experience rating and fleet rating plans. (b) The Board shall issue its order in writing setting forth the terms of approval or reasons for denial of each application filed for deviation. On January 1, 1974 and thereafter if the Board has not issued its order within 30 days after the filing of an application, the application shall be "deemed approved" by the Board. Provided, however, that the Board may thereafter require the applicant insurer to furnish proof to the Board that the matters set out in the application are true and correct and that such application meets the requirements of this Article. If after notice and hearing the Board determines that any application "deemed to have been approved" by the Board contains false or erroneous information or the Board determines that the application does not meet the requirements of this Article the Board may suspend or revoke the approval "deemed to have been granted." An insurer that has received approval, or is "deemed to have received approval" for the use of a deviation may apply for an amendment to such deviation or by notice to the Board withdraw the deviation. (c) From and after the effective date of an application approved by the Board, or "deemed to have been approved" by the Board, such insurer may write insurance in accordance with such approval. Provided, however, that the right to write insurance at a lesser or greater rate as approved may be suspended or revoked by the Board, after notice and hearing, if upon examination or at any time it appears to or is the opinion of the Board that such insurer: (1) has had a change in its financial condition since the granting of the application; or (2) the actual paid and incurred losses of the insurer have materially changed since the granting of the application; or (3) there has been a material increase in expenses of such insurer since the granting of the application; or (4) there has been a material reduction in earnings from investments by the insurer since the granting of the application; or (5) the insurer has failed or refused to furnish information required by the Board; or (6) the insurer has failed to abide by or follow its rate deviation previously approved by the Board. The Board may suspend the right of an insurer to write insurance at the rates approved under such application, pending hearing, provided that the Board in or accompanying the order suspending such right, sets such hearing within not less than 10 nor more than 30 days following the issuance of its order. The Board shall conduct the hearing within not less than 10 nor more than 30 days following the issuance of its order suspending such right, unless the insurer subject to the order requests the Board to delay the hearing beyond 30 days. The right to write insurance at the lesser or greater rate previously approved by the Board shall automatically terminate, except as herein provided, upon the promulgation by the Board of new or different rates as provided for in the first sentence of "Section (a)" of this Article, and as further provided in paragraphs one and two of Article 5.01, Insurance Code, as amended. After the effective date of the Board's promulgation or authorization of new or different rates, the insurer may not thereafter write insurance at a lesser or greater rate, except that an insurer may continue to write insurance at a deviated rate by applying the percentage of the previously approved deviation applicable to the prior rates as the percentage of deviation applicable to the new or different rates promulgated by the Board, limited, however, to a period of 60 days after the effective date of the new or different rates, and not thereafter, and only if such insurer within 30 days following promulgation by the Board of new or different rates, shall make a written application to the Board for permission to deviate from the new or different rates promulgated by the Board. The Board by order may extend the use of prior approved deviations beyond the 60 day period hereinabove set out. (d) It is expressly provided, however, that notwithstanding any other provision of this chapter to the contrary, a rate or premium for such insurance greater than the standard rate or premium that has been promulgated by the Board may be used on any specific risk if: (1) a written application is made to the Board naming the insurer and stating the coverage and rate proposed; (2) the person to be insured or person authorized to act in relation to the risk to be insured consents to such rate; (3) the reasons for requiring such greater rate or premium are stated in or attached to the application; (4) the person to be insured or person authorized to act for such person signs the application; and (5) the Board approves the application by order or by stamping. (e) In the administration of this Act the Board shall resolve by rules and regulations, to the extent permitted by law, any conflicts or ambiguities as may be necessary to accomplish the purposes of this Act. (f) This Article, as amended, is effective September 1, 1973. (g) Notwithstanding Sections (a) through (e) of this article, on and after the effective date of S.B. No. 14, Acts of the 78th Legislature, Regular Session, 2003, rates for personal automobile insurance in this state are determined as provided by Article 5.101 of this code, and rates for commercial motor vehicle insurance in this state are determined as provided by Article 5.13-2 of this code. On and after December 1, 2004, rates for personal automobile insurance and commercial automobile insurance in this state are determined as provided by Article 5.13-2 of this code. Acts 1951, 52nd Leg., ch. 491. Amended by Acts 1971, 62nd Leg., p. 864, ch. 104, Sec. 1, eff. April 30, 1971; Acts 1973, 63rd Leg., p. 1118, ch. 425, Sec. 1, eff. Sept. 1, 1973; Acts 1977, 65th Leg., p. 1981, ch. 792, Sec. 1, eff. Aug. 29, 1977. Subsec. (g) added by Acts 1991, 72nd Leg., ch. 242, Sec. 2.04, eff. Sept. 1, 1991 and amended by Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Sec. 8.05, eff. Jan. 1, 1992; amended by Acts 1995, 74th Leg., ch. 984, Sec. 4, eff. Sept. 1, 1995; Subsec. (g) amended by Acts 2003, 78th Leg., ch. 206, Sec. 21.05, eff. June 11, 2003. Art. 5.03-1. PREMIUM SURCHARGE. Sec. 1. A premium surcharge in an amount to be prescribed by the State Board of Insurance shall be assessed by an insurer defined in Article 5.01, Texas Insurance Code, against an insured for no more than three years immediately following the date of conviction of the insured of an offense committed while operating a motor vehicle under Section 49.04 or 49.07, Penal Code, or an offense under Section 49.08, Penal Code. The premium surcharge shall be applied only to private passenger automobile policies as defined by the State Board of Insurance. Sec. 2. If an insured assessed a premium surcharge as a result of a conviction of an offense as set out in Section 1 of this article is subsequently convicted of a violation of one of those statutes during the period he is assessed the premium surcharge, the period for which the premium surcharge shall be imposed is increased by three additional consecutive years for each conviction. Added by Acts 1983, 68th Leg., p. 1606, ch. 303, Sec. 26, eff. Jan. 1, 1984. Sec. 1 amended by Acts 1995, 74th Leg., ch. 76, Sec. 14.46, eff. Sept. 1, 1995. Art. 5.04. EXPERIENCE AS FACTOR. (a) To insure the adequacy and reasonableness of rates the Board may take into consideration past and prospective experience, within and outside the State, and all other relevant factors, within and outside the State, gathered from a territory sufficiently broad to include the varying conditions of the risks involved and the hazards and liabilities assumed, and over a period sufficiently long to insure that the rates determined therefrom shall be just, reasonable and adequate, and to that end the Board may consult any rate making organization or association that may now or hereafter exist. (b) As a basis for motor vehicle rates under this subchapter, the State Board of Insurance shall use data from within this State to the extent that the data is credible and available. (c) Notwithstanding Subsections (a) and (b) of this article, on and after the effective date of S.B. No. 14, Acts of the 78th Legislature, Regular Session, 2003, rates for personal automobile insurance in this state are determined as provided by Article 5.101 of this code, and rates for commercial motor vehicle insurance in this state are determined as provided by Article 5.13-2 of this code. On and after December 1, 2004, rates for personal automobile insurance and commercial automobile insurance in this state are determined as provided by Article 5.13-2 of this code. Acts 1951, 52nd Leg., ch. 491. Amended by Acts 1953, 53rd Leg., p. 64, ch. 50, Sec. 3. Amended by Acts 1987, 70th Leg., 1st C.S., ch. 1, Sec. 2.01, eff. Sept. 2, 1987; Subsec. (c) added by Acts 1991, 72nd Leg., ch. 242, Sec. 2.05, eff. Sept. 1, 1991; Subsec. (c) amended by Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Sec. 8.06, eff. Jan. 1, 1992; amended by Acts 1995, 74th Leg., ch. 984, Sec. 5, eff. Sept. 1, 1995; Subsec. (c) amended by Acts 2003, 78th Leg., ch. 206, Sec. 21.06, eff. June 11, 2003. Art. 5.04-1. REPORT OF BASIC LIMITS LOSSES. (a) A report filed under Article 5.01(a) of this code must include the information necessary to compute a Texas automobile experience modifier as provided by this code or a rule adopted by the State Board of Insurance. In reporting losses under Article 5.01(a) of this code, an insurer may include only the following as basic limits losses: (1) indemnity losses, up to the basic limits for the losses; (2) losses based on payments for immediate medical or surgical treatment; (3) fees paid to an attorney who is not an employee of the insurer, if the fees were for services rendered in the trial of an action arising under a covered claim; (4) specific expenses incurred as a direct result of defending an action in connection with which the expense is claimed; (5) specific expenses, other than claims adjustment expenses, incurred in connection with the settlement of a claim with respect to which the expense is claimed; (6) all medical payments coverage; and (7) personal injury protection coverage losses. (b) In reporting its basic limits losses to the State Board of Insurance, each insurer shall disclose the specific nature of each loss expense claimed and shall show to the Board's satisfaction that each specific expense claimed was necessary with respect to the specific risk involved. Added by Acts 1991, 72nd Leg., ch. 750, Sec. 2, eff. Sept. 1, 1991. Art. 5.05. REPORTS ON EXPERIENCE. (a) Recording and Reporting of Loss Experience and Other Data. The Board shall, after due consideration, promulgate reasonable rules and statistical plans, which may be modified from time to time and which shall be used thereafter by each insurer in the recording and reporting of its loss experience and such other data as may be required, in order that the total loss and expense experience of all insurers may be made available at least annually in such form and detail as may be necessary to aid in determining whether rates and rating systems in use under this subchapter comply with the standards adopted under this subchapter. In promulgating such rules, the Board shall provide that rules be as uniform as is practicable to the rules and to the form of the statistical plans used in other states. (b) Interchange of Rating Plan Data. Reasonable rules may be promulgated by the Board after due consideration to allow the interchange of loss experience information as necessary for the application of rating plans. (c) Consultation with other States. In order to further uniform administration of rating laws, the Board and every insurer and rating organization may exchange information and experience data with insurance supervisory officials, insurers and rating organizations in other states and may consult and cooperate with them with respect to rate-making and the application of rating systems. (d) The Board is hereby authorized and empowered to require sworn statements from any insurer affected by this article, showing its experience on any classification or classifications of risks and such other information which may be necessary or helpful in performing duties or authority imposed by law. The Board shall prescribe the necessary forms for such statements and reports, having due regard to the rules, methods and forms in use in other states for similar purposes in order that uniformity of statistics may not be disturbed. Acts 1951, 52nd Leg., ch. 491. Amended by Acts 1953, 53rd Leg., p. 64, ch. 50, Sec. 4. Amended by Acts 1991, 72nd Leg., ch. 242, Sec. 2.06, eff. Sept. 1, 1991. Art. 5.06. POLICY FORMS AND ENDORSEMENTS. (1) The Board shall adopt a policy form and endorsements for each type of motor vehicle insurance subject to this subchapter. The coverage provided by a policy form adopted under this subsection is the minimum coverage that may be provided under an insurance policy for that type of insurance in this State. Each policy form must provide the coverages mandated under Articles 5.06-1 and 5.06-3 of this code, except that the coverages may be rejected by the named insured as provided by those articles. (2) Except as provided by Subsections (3) and (4) of this article, an insurer may only use a form adopted by the Board under this section in writing motor vehicle insurance delivered, issued for delivery, or renewed in this State. A contract or agreement not written into the application and policy is void and of no effect and in violation of the provisions of this subchapter, and is sufficient cause for revocation of license of such insurer to write automobile insurance within this State. (3) The Board may approve the use of a policy form adopted by a national organization of insurance companies, or similar organization, if the form, with any endorsement to the form required and approved by the Board, provides coverage equivalent to the coverage provided by the form adopted by the Board under Subsection (1) of this section. (4) An insurer may use an endorsement to the policy form adopted or approved by the Board under this article if the endorsement is approved by the Board.
Text of subsec (5) effective until April 1, 2007
(5) An insurer, if in compliance with applicable requirements and conditions, may issue and deliver a certificate of insurance as a substitute for the entire policy of insurance. The certificate of insurance shall make reference to and identify the policy form adopted or approved by the Board for which the substitution of certificate is made. The certificate shall be in such form as is prescribed by the Board. The certificate will represent the policy of insurance, and when issued, shall be evidence that the certificate holder is insured under the identified policy form. The certificate is subject to the same limitations, conditions, coverages, selection of options, and other provisions of the policy as are provided in the policy, and that insurance policy information is to be shown on and adequately referenced by the certificate of insurance issued by the insurer to the insured. Reference shall be made in the certificate, or in subsequent attachments, to all endorsements to the policy of insurance. The certificate shall be executed in the same manner as though a policy were issued. When the certificate is substituted for the policy of insurance by an insurer, the insurer shall simultaneously furnish to the insured receiving the certificate an "outline of coverages", the form and content of which has been approved by the Board. At the request of an insured at any time, an insurer which has substituted a certificate for a policy of insurance shall provide a copy of the policy.
Text of subsec (6) effective until April 1, 2007
(6) The Board may promulgate such rules as are necessary to implement the certificate in lieu of policy provision herein, including a rule limiting the application thereof to private passenger automobile policies. (7) The Board may not adopt or approve a policy form for private passenger automobile insurance or any endorsement to the policy if the policy or endorsement is not in plain language. For the purposes of this subsection, a policy or endorsement is written in plain language if it achieves the minimum score established by the commissioner on the Flesch reading ease test or an equivalent test selected by the commissioner, or, at the option of the commissioner, if it conforms to the language requirements in a National Association of Insurance Commissioners model act relating to plain language. This subsection does not apply to policy language that is mandated by state or federal law. (8) The Board may withdraw its approval of a policy or endorsement form at any time, after notice and hearing.
Text of subsec (9) effective until April 1, 2007
(9) An insurance policy or other document evidencing proof of purchase of a personal automobile insurance policy written for a term of less than 30 days if the policy premium is computed using a time-based rating plan, or written for less than 1,000 miles if the policy premium is computed using a mile-based rating plan, may not be used to obtain an original or renewal driver's license, an automobile registration or license plates, or a motor vehicle inspection certificate and must contain a statement as follows: "TEXAS LAW PROHIBITS USE OF THIS DOCUMENT TO OBTAIN A MOTOR VEHICLE INSPECTION CERTIFICATE, AN ORIGINAL OR RENEWAL DRIVER'S LICENSE, OR AN AUTOMOBILE REGISTRATION OR LICENSE PLATES."
Text of subsec (10) effective until April 1, 2007
(10) Before accepting any premium or fee for a personal automobile insurance policy or binder for a term of less than 30 days if the policy premium is computed using a time-based rating plan, or written for less than 1,000 miles if the policy premium is computed using a mile-based rating plan, an agent or insurer must make the following written disclosure to the applicant or insured: "TEXAS LAW PROHIBITS USE OF THIS POLICY OR BINDER TO OBTAIN A MOTOR VEHICLE INSPECTION CERTIFICATE, AN ORIGINAL OR RENEWAL DRIVER'S LICENSE, OR AN AUTOMOBILE REGISTRATION OR LICENSE PLATES."
Text of subsec (11) effective until April 1, 2007
(11) In this article, the terms "time-based rating plan" and "mile-based rating plan" have the meanings assigned by Article 5.01-4 of this code. (12)(a) Notwithstanding Subsections (1)-(10) of this article, policy forms and endorsements for automobile insurance in this state are regulated under Article 5.13-2 of this code.
Text of subsec (12)(b) effective until April 1, 2007
(b) An insurer may continue to use the policy forms and endorsements promulgated, approved, or adopted by the commissioner under this article before the effective date of S.B. No. 14, Acts of the 78th Legislature, Regular Session, 2003, on notification in writing to the commissioner that the insurer will continue to use the policy forms and endorsements promulgated, approved, or adopted by the commissioner under this article. Acts 1951, 52nd Leg., ch. 491. Amended by Acts 1981, 67th Leg., p. 2700, ch. 736, Sec. 1, eff. Jan. 1, 1982. Amended by Acts 1991, 72nd Leg., ch. 242, Sec. 2.07, eff. Sept. 1, 1991; Subsecs. (9), (10) added by Acts 1993, 73rd Leg., ch. 685, Sec. 14.04, eff. Sept. 1, 1993; Subsecs. (9), (10) amended by and (11) added by Acts 2001, 77th Leg., ch. 971, Sec. 2, eff. Sept. 1, 2001; Subsec. (12) added by Acts 2003, 78th Leg., ch. 206, Sec. 21.07, eff. June 11, 2003; Subsecs. (5), (6), (9), (10), and (12)(b) are repealed by Acts 2005, 79th Leg., ch. 727, Sec. 18(c), eff. April 1, 2007. Art. 5.06-1. UNINSURED OR UNDERINSURED MOTORIST COVERAGE.
Article repealed effective April 1, 2007
(1) No automobile liability insurance (including insurance issued pursuant to an Assigned Risk Plan established under authority of Section 35 of the Texas Motor Vehicle Safety-Responsibility Act), covering liability arising out of the ownership, maintenance, or use of any motor vehicle shall be delivered or issued for delivery in this state unless coverage is provided therein or supplemental thereto, in at least the limits described in the Texas Motor Vehicle Safety-Responsibility Act, under provisions prescribed by the Board, for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured or underinsured motor vehicles because of bodily injury, sickness, or disease, including death, or property damage resulting therefrom. The coverages required under this Article shall not be applicable where any insured named in the policy shall reject the coverage in writing; provided that unless the named insured thereafter requests such coverage in writing, such coverage need not be provided in or supplemental to a reinstated policy or renewal policy where the named insured has rejected the coverage in connection with that policy or a policy previously issued to him by the same insurer or by an affiliated insurer. (2) For the purpose of these coverages: (a) the term " uninsured motor vehicle" shall, subject to the terms and conditions of such coverage, be deemed to include an insured motor vehicle where the liability insurer thereof is unable to make payment with respect to the legal liability of its insured within the limits specified therein because of insolvency. (b) The term "underinsured motor vehicle" means an insured motor vehicle on which there is valid and collectible liability insurance coverage with limits of liability for the owner or operator which were originally lower than, or have been reduced by payment of claims arising from the same accident to, an amount less than the limit of liability stated in the underinsured coverage of the insured's policy. (c) The commissioner may, in the policy forms adopted under Article 5.06 of this code, define "uninsured motor vehicle" to exclude certain motor vehicles whose operators are in fact uninsured. The commissioner may in the policy forms filed under Article 5.145 of this code allow the term "uninsured motor vehicle" to be defined to exclude certain motor vehicles whose operators are in fact uninsured. (d) The portion of a policy form adopted under Article 5.06 of this code or filed under Article 5.145 of this code to provide coverage under this article shall include provisions that, regardless of the number of persons insured, policies or bonds applicable, vehicles involved, or claims made, the total aggregate limit of liability to any one person who sustains bodily injury or property damage as the result of any one occurrence shall not exceed the limit of liability for these coverages as stated in the policy and the total aggregate limit of liability to all claimants, if more than one, shall not exceed the total limit of liability per occurrence as stated in the policy; and shall provide for the exclusion of the recovery of damages for bodily injury or property damage or both resulting from the intentional acts of the insured. The portion of a policy form adopted under Article 5.06 of this code or filed under Article 5.145 of this code to provide coverage under this article shall require that in order for the insured to recover under the uninsured motorist coverages where the owner or operator of any motor vehicle which causes bodily injury or property damage to the insured is unknown, actual physical contact must have occurred between the motor vehicle owned or operated by such unknown person and the person or property of the insured. (3) The limits of liability for bodily injury, sickness, or disease, including death, shall be offered to the insured in amounts not less than those prescribed in the Texas Motor Vehicle Safety-Responsibility Act and such higher available limits as may be desired by the insured, but not greater than the limits of liability specified in the bodily injury liability provisions of the insured's policy. (4) (a) Coverage for property damage shall be offered to the insured in amounts not less than those prescribed in the Texas Motor Vehicle Safety-Responsibility Act and such higher available limits as may be desired by the insured, but not greater than limits of liability specified in the property damage liability provisions of the insured's policy, subject to a deductible amount of $250. (b) If the insured has collision coverage and uninsured or underinsured property damage liability coverage, the insured may recover under the policy coverage chosen by the insured. In the event neither coverage is sufficient alone to cover all damage resulting from a single occurrence, the insured may recover under both coverages. When recovering under both coverages, the insured shall designate one coverage as the primary coverage and pay the deductible applicable to that coverage. The primary coverage must be exhausted before any recovery is made under the secondary coverage. If both coverages are utilized in the payment of damages from a single occurrence, the insured shall not be required to pay the deductible applicable to the secondary coverage when the amount of the deductible otherwise applicable to the secondary coverage is the same as or less than the amount of the deductible applicable to the primary coverage. If both coverages are utilized in the payment of damages from a single occurrence and the amount of the deductible otherwise applicable to the secondary coverage is greater than the amount of the deductible applicable to the primary coverage, the insured shall be required to pay in respect of the secondary coverage only the difference between the amount of the two deductibles. In no event shall the insured recover under both coverages more than the actual damages suffered. (5) The underinsured motorist coverage shall provide for payment to the insured of all sums which he shall be legally entitled to recover as damages from owners or operators of underinsured motor vehicles because of bodily injury or property damage in an amount up to the limit specified in the policy, reduced by the amount recovered or recoverable from the insurer of the underinsured motor vehicle. (6) In the event of payment to any person under any coverage required by this Section and subject to the terms and conditions of such coverage, the insurer making such payment shall, to the extent thereof, be entitled to the proceeds of any settlement or judgment resulting from the exercise of any rights of recovery of such person against any person or organization legally responsible for the bodily injury, sickness or disease, or death for which such payment is made, including the proceeds recoverable from the assets of the insolvent insurer; provided, however, whenever an insurer shall make payment under a policy of insurance issued pursuant to this Act, which payment is occasioned by the insolvency of an insurer, the insured of said insolvent insurer shall be given credit in any judgment obtained against him, with respect to his legal liability for such damages, to the extent of such payment, but, subject to Section 12 of Article 21.28-C of this code, such paying insurer shall have the right to proceed directly against the insolvent insurer or its receiver, and in pursuance of such right such paying insurer shall possess any rights which the insured of the insolvent company might otherwise have had if the insured of the insolvent insurer had made the payment. (7) If a dispute exists as to whether a motor vehicle is uninsured, the burden of proof as to that issue shall be upon the insurer. (8) Notwithstanding Section 15.032, Civil Practice and Remedies Code, an action against an insurer in relation to the coverage provided under this article, including an action to enforce that coverage, may be brought only: (a) in the county in which the policyholder or beneficiary instituting the suit resided at the time of the accident; or (b) in the county in which the accident involving the uninsured or underinsured motor vehicle occurred. Added by Acts 1967, 60th Leg., p. 448, ch. 202, Sec. 1, eff. Oct. 1, 1967. Amended by Acts 1977, 65th Leg., p. 370, ch. 182, Sec. 1, eff. Aug. 29, 1977; Acts 1979, 66th Leg., p. 1418, ch. 626, Sec. 1, eff. Jan. 1, 1980; Acts 1981, 67th Leg., p. 1002, ch. 380, Sec. 1, eff. Aug. 31, 1981. Sec. (6) amended by Acts 1989, 71st Leg., ch. 1082, Sec. 6.01, eff. Sept. 1, 1989; Sec. (2) amended by Acts 1991, 72nd Leg., ch. 242, Sec. 2.08, eff. Sept. 1, 1991; Sec. (8) added by Acts 1995, 74th Leg., ch. 138, Sec. 8, eff. Aug. 28, 1995; Sec. (2) amended by Acts 2003, 78th Leg., ch. 206, Sec. 21.08, eff. June 11, 2003; Sec. (1) amended by Acts 2005, 79th Leg., ch. 1159, Sec. 3, eff. June 18, 2005. Art. 5.06-2. GARAGE INSURANCE.
Article repealed effective April 1, 2007
(1) Definitions. As used in this Act: (a) "Garage Insurance" means motor vehicle or automobile insurance as defined in Article 5.01 hereof issued to a named insured engaged in the business of selling, servicing or repairing motor vehicles as now or hereafter defined by rules, regulations or orders of the State Board of Insurance; (b) "Garage Customer" means any person or organization other than the named insured, or an employee, director, officer, stockholder, partner, or agent of the named insured; or a resident of the same household as the named insured, such employee, director, officer, stockholder, partner, or agent; (c) "Financial Responsibility Limits" means the minimum limits specified by the Texas Motor Vehicle Safety-Responsibility Act. (2) A policy of garage insurance may contain a provision to the effect that garage customers are not insureds under the garage insurance policy and that the garage insurance shall not apply to garage customers, except to the extent that other valid and collectible insurance, if any, available to the garage customer is not equal to the financial responsibility limits. Notwithstanding any provision to the contrary in such other policy or policies of insurance as to whether such insurance is primary, excess, or contingent insurance, or otherwise, such other valid and collectible insurance shall be primary insurance as to the garage customer. Any garage insurance policy containing such a provision shall not cover garage customers except to such extent, notwithstanding the terms and provisions of such other policy or policies of insurance. (3) This Act shall apply only to insurance policies issued or renewed or made subject to this Act by endorsement after the effective date hereof. Added by Acts 1969, 61st Leg., 2nd C.S., p. 193, ch. 35, Sec. 1, eff. Sept. 19, 1969. Art. 5.06-3. PERSONAL INJURY PROTECTION COVERAGE.
Article repealed effective April 1, 2007
(a) No automobile liability insurance policy, including insurance issued pursuant to an assigned risk plan established under authority of Section 35 of the Texas Motor Vehicle Safety-Responsibility Act, covering liability arising out of the ownership, maintenance, or use of any motor vehicle shall be delivered or issued for delivery in this state unless personal injury protection coverage is provided therein or supplemental thereto. The coverage required by this article shall not be applicable if any insured named in the policy shall reject the coverage in writing; provided, unless the named insured thereafter requests such coverage in writing, such coverage need not be provided in or supplemental to a reinstated policy or renewal policy if the named insured has rejected the coverage in connection with that policy or a policy previously issued to him by the same insurer or by an affiliated insurer. (b) "Personal injury protection" consists of provisions of a motor vehicle liability policy which provide for payment to the named insured in the motor vehicle liability policy and members of the insured's household, any authorized operator or passenger of the named insured's motor vehicle including a guest occupant, up to an amount of $2,500 for each such person for payment of all reasonable expenses arising from the accident and incurred within three years from the date thereof for necessary medical, surgical, X-ray and dental services, including prosthetic devices, and necessary ambulance, hospital, professional nursing and funeral services, and in the case of an income producer, payment of benefits for loss of income as the result of the accident; and where the person injured in the accident was not an income or wage producer at the time of the accident, payments of benefits must be made in reimbursement of necessary and reasonable expenses incurred for essential services ordinarily performed by the injured person for care and maintenance of the family or family household. The insurer providing loss of income benefits may require, as a condition of receiving such benefits, that the insured person furnish the insurer reasonable medical proof of his injury causing loss of income. The personal injury protection in this paragraph specified shall not exceed $2,500 for all benefits, in the aggregate, for each person. (c) The benefits required by this Act shall be payable without regard to the fault or non-fault of the named insured or the recipient in causing or contributing to the accident, and without regard to any collateral source of medical, hospital, or wage continuation benefits. Except as provided by Subsection (i) of this article, an insurer paying benefits pursuant to this Act shall have no right of subrogation and no claim against any other person or insurer to recover any such benefits by reason of the alleged fault of such other person in causing or contributing to the accident. (d) All payments of benefits prescribed under this Act shall be made periodically as the claims therefor arise and within thirty (30) days after satisfactory proof thereof is received by the insurer subject to the following limitations: (1) The coverage described in this Act may prescribe a period of not less than six months after the date of accident within which the original proof of loss with respect to a claim for benefits must be presented to the insurer. (2) The coverage described in this Act may provide that in any instance where a lapse occurs in the period of total disability or in the medical treatment of an injured person who has received benefits under such coverage and such person subsequently claims additional benefits based upon an alleged recurrence of the injury for which the original claim for benefits was made, the insurer may require reasonable medical proof of such alleged recurrence; provided, that in no event shall the aggregate benefits payable to any person exceed the maximum limits prescribed in the policy. (3) In the event the insurer fails to pay such benefits when due, the person entitled to such benefits may bring an action in contract to recover the same; and, in the event the insurer is required to pay such benefits, the person entitled to such benefits shall be entitled to recover reasonable attorneys fees plus 12% penalty, plus interest thereon at the legal rate from the date such sums became overdue. (e) An insurer shall exclude benefits to any insured, or his personal representative, under a policy required by Section 1, when the insured's conduct contributed to the injury he sustained in any of the following ways: (1) Causing injury to himself intentionally. (2) While in the commission of a felony, or while seeking to elude lawful apprehension or arrest by a law enforcement official. (f) This article applies only to motor vehicle insurance policies subject to this subchapter and does not apply to other accident or health policies even though they promise indemnity against automobile-connected injuries. (g) Nothing contained in this Act shall affect the offering of medical payments coverage, disability benefits, and accidental death benefits, as presently prescribed by the State Board of Insurance; and nothing contained in this Act shall be construed to prevent an insurer from providing broader benefits than the minimum benefits enumerated in this Act subject to the rules and forms prescribed by the State Board of Insurance. (h) When any liability claim is made by any guest or passenger described in paragraph (b) hereof against the owner or operator of the motor vehicle in which he was riding or the owner's or operator's liability insurance carrier, the owner or operator of such motor vehicle or his liability insurance carrier shall be entitled to an offset, credit or deduction against any award made to such guest or passenger in an amount of money equal to the amounts paid by the owner, operator or his automobile liability insurance carrier under "personal injury protection" as defined in this Act to such guests or passengers; provided, however, that nothing herein shall be construed to authorize a direct action against a liability insurance company if such right does not presently exist at law. (i) An insurer paying benefits pursuant to this Act, including a county mutual insurance company, shall have a right of subrogation and a claim against a person causing or contributing to the accident if, on the date of loss, financial responsibility as required by Chapter 601, Transportation Code, has not been established for a motor vehicle involved in the accident and operated by that person. Added by Acts 1973, 63rd Leg., p. 90, ch. 52, Sec. 1, eff. Aug. 27, 1973. Amended by Acts 1981, 67th Leg., p. 100, ch. 51, Sec. 1, eff. Aug. 31, 1981. Sec. (f) amended by Acts 1991, 72nd Leg., ch. 242, Sec. 2.09, eff. Sept. 1, 1991; Sec. (c) amended by and (i) added by Acts 2005, 79th Leg., ch. 1074, Sec. 2, eff. Sept. 1, 2005; Sec. (a) amended by Acts 2005, 79th Leg., ch. 1159, Sec. 4, eff. June 18, 2005. Art. 5.06-4. LOSS CONTROL SERVICES.
Article repealed effective April 1, 2007
(a) Any insurer desiring to write commercial automobile liability insurance in this state must provide loss control information as a prerequisite for writing that insurance. (b) The insurer shall provide loss control information to its policyholders reasonably commensurate with the risks and exposures and experience of the insured's business. To provide this information or services, the insurer may employ qualified personnel, retain qualified independent contractors, contract with the policyholder to provide qualified accident prevention personnel and services, or use a combination of the methods provided by this section. (c) If there is evidence that reasonable loss control information is not being provided by the insurer or is not being used by the insurer in a reasonable manner to reduce losses, the State Board of Insurance shall order a hearing to determine if the insurer is not in compliance with this article. If it is determined that the insurer is not in compliance, the board may impose any of the sanctions authorized by Section 7, Article 1.10, of this code. (d) The State Board of Insurance may promulgate reasonable rules and regulations for the enforcement of this article after holding a public hearing on the proposed rules and regulations. (e) An insurer or its agents, servants, or employees are not liable for, and no cause of action arises with respect to, any accident based on the allegation that the accident was caused or could have been prevented by a program, information, inspection, or other activity or service undertaken by the insurer for the prevention of accidents in connection with operations of its insured. However, this immunity does not affect the liability of an insurer for compensation or as otherwise provided in a policy of insurance. (f) Loss control information provided by an insurer to an insured pursuant to this article is not subject to discovery or admissible in any civil proceeding as evidence. Added by Acts 1987, 70th Leg., 1st C.S., ch. 1, Sec. 4.02, eff. Sept. 2, 1987. Subsec. (a) amended by Acts 2001, 77th Leg., ch. 172, Sec. 1, eff. Sept. 1, 2001. Art. 5.06-5. RECOVERY PROHIBITED FOR VEHICLES IMPOUNDED FOR DRUG VIOLATIONS.
Article repealed effective April 1, 2007
(a) A motor vehicle insurance policy delivered or issued for delivery in this state may not provide payment on final conviction of the named insured for loss for a covered motor vehicle that is seized by federal or state law enforcement officers as evidence in a case against the named insured under Chapter 481, Health and Safety Code or the federal Controlled Substances Act, 21 U.S.C. Section 801 et seq. For the purpose of this section a named insured shall be the person named on the declaration page of an automobile insurance policy and his or her spouse if the policy is written on an individual. If a policy is other than an individual policy, a named insured shall be the company or corporation named on the declaration page of an automobile insurance policy and any officer, director, or stockholder of that company or corporation. (b) An insurer may not deliver or issue for delivery in this state a motor vehicle insurance policy that provides payment on final conviction of the named insured for loss for a covered motor vehicle that is seized by federal or state law enforcement officers as evidence in a case against the named insured under Chapter 481, Health and Safety Code or the federal Controlled Substances Act, 21 U.S.C. Section 801 et seq. Added by Acts 1989, 71st Leg., ch. 568, Sec. 1, eff. Aug. 28, 1989. Amended by Acts 1991, 72nd Leg., ch. 14, Sec. 284(42), eff. Sept. 1, 1991. Art. 5.06-6. COVERAGES FOR SPOUSES AND FORMER SPOUSES.
Article repealed effective April 1, 2007
A personal automobile policy or any similar policy form adopted or approved by the commissioner under Article 5.06 of this code or filed under Article 5.145 of this code that covers liability arising out of ownership, maintenance, or use of a motor vehicle of a spouse, who is otherwise insured by the policy, shall contain a provision to continue coverage for the spouse during a period of separation in contemplation of divorce. Added by Acts 1989, 71st Leg., ch. 377, Sec. 4, eff. Sept. 1, 1989. Renumbered from art. 5.06-5 and amended by Acts 1991, 72nd Leg., ch. 242, Sec. 2.10, eff. Sept. 1, 1991; Acts 2003, 78th Leg., ch. 206, Sec. 21.09, eff. June 11, 2003. Art. 5.07. PARTICIPATING POLICIES.
Article repealed effective April 1, 2007
Nothing in this subchapter shall be construed to prohibit the operation hereunder of any stock company, mutual company, reciprocal or interinsurance exchange or Lloyd's association or to prohibit any stock company, mutual company, reciprocal or interinsurance exchange or Lloyd's association issuing participating policies; provided no distribution of profit or dividends to insured shall take effect or be paid until the same shall have been approved by the Board; and provided further that no such distribution shall be approved until adequate reserves shall have been provided, such reserves to be computed on the same basis for all classes of insurers operating under this subchapter. Acts 1951, 52nd Leg., ch. 491. Art. 5.07-1. REPAIR OF MOTOR VEHICLES; DISCLOSURE OF CONSUMER INFORMATION.
Article repealed effective April 1, 2007
(a) Except as provided by rules duly adopted by the commissioner, under an auto insurance policy that is delivered, issued for delivery, or renewed in this state an insurer may not, directly or indirectly, limit its coverage under a policy covering damage to a motor vehicle by specifying the brand, type, kind, age, vendor, supplier, or condition of parts or products that may be used to repair the vehicle or by limiting the beneficiary of the policy from selecting a repair person or facility to repair damage to the motor vehicle covered under the policy. (b) In connection with the repair of damage to a motor vehicle covered under an auto insurance policy, an insurer, an employee of an insurer, an agent of an insurer, a solicitor of insurance for an insurer, an insurance adjuster, or an entity that employs an insurance adjuster may not: (1) solicit or accept a referral fee or gratuity in exchange for referring a beneficiary or third-party claimant to a repair person or facility to repair the damage; (2) state or suggest, either orally or in writing, to a beneficiary that a specific repair person or facility or a repair person or facility identified on a preferred list compiled by an insurer must be used by a beneficiary in order for the damage repair or parts replacement to be covered by the policy; or (3) restrict a beneficiary's or third-party claimant's right to choose a repair person or facility by requiring the beneficiary or third-party claimant to travel an unreasonable distance to repair the damage. (c) A contract between an insurer and a repair person or facility, including an agreement under which the repair person or facility agrees to extend discounts for parts or labor to the insurer in exchange for referrals by the insurer, may not result in a reduction of coverage under the insured's auto insurance policy. (d) An insurer may not prohibit a repair person or facility from providing a beneficiary or third-party claimant with information that states the description, manufacturer, or source of the parts used and the amounts charged to the insurer for the parts and related labor. (e) At the time the vehicle is presented to an insurer or an insurance adjuster or other person in connection with a claim for damage repair, the insurer or insurance adjuster or other person shall provide to the beneficiary or third-party claimant notice of the provisions of this article. The commissioner shall adopt a rule establishing the method or methods insurers shall use to comply with the notice provisions in this subsection. (f) Any beneficiary, third-party claimant, or repair person or facility may submit a written, documented complaint to the department with respect to an alleged violation of this article. (g) In the settlement of liability claims by a third party against an insured for property damage claimed by the third party, an insurer may not require the third-party claimant to have repairs made by a particular repair person or facility or to use a particular brand, type, kind, age, vendor, supplier, or condition of parts or products. (h) The commissioner may exercise the rule-making authority under Article 21.21-2 of this code with respect to any fraudulent activity of any party to an agreement described by Subsection (c) of this article. (i) Any rules adopted by the commissioner to implement this article shall include, but not be limited to, requirements that: (1) any limitation described in Subsection (a) of this section is clearly and prominently displayed on the face of the policy or certificate in lieu of a policy; and (2) the insured give written consent to such a limitation, following both oral and written notification of any limitation at the time the policy is purchased. Added by Acts 1991, 72nd Leg., ch. 242, Sec. 2.11, eff. Sept. 1, 1991. Amended by Acts 1997, 75th Leg., ch. 399, Sec. 1, eff. Sept. 1, 1997. Art. 5.08. SPECIAL FAVORS AND PROFIT SHARING.
Article repealed effective April 1, 2007
(a) Except as provided by this article, it shall be unlawful for any insurer, as defined in this subchapter, or its officers, directors, general agent, state agents, special agents, local agents or other representatives, to grant to or contract with insured for any special favor or advantage in dividends or other profits, or any commissions or dividends of commissions or profits to accrue thereon, or any compensation or any valuable consideration not specified in the policy contract, or any inducement not specified in the policy contract, for the purpose of writing the insurance of any insured. (b) Nothing in this article, however, shall be construed to prohibit an insurer from sharing its profits after the same have been earned with its policyholders under and in accordance with an agreement as to such profit sharing contained in its policy contract. Any profit sharing under any policy with insured shall be uniform as between such insured, and shall consist only and solely of an equitable distribution under and in accordance with the terms of the policy of earnings between such insured, and no such insurer shall discriminate in any distribution of profits between insured of a class, and no classes for such distribution shall be made or established except on the approval of the commissioner. No part of any profit shall be distributed to any insured under any such policy until the expiration of the policy contract. Any violation of the terms of this subsection shall constitute unjust discrimination and shall constitute rebating, and shall be sufficient grounds for the revocation of the permit of the insurer or of the license of the agent being guilty of such unjust discrimination and rebating. (c) This article does not prohibit an insurer, on approval by the commissioner, from distributing to policyholders who are on active duty in the United States Armed Forces any estimated profits resulting from service by those policyholders in any foreign country in a combat theater of operations at any time after January 1, 1990. An insurer that elects to make such distributions shall file a written description of its distribution program with the commissioner for approval by the commissioner and shall notify the commissioner in writing of each distribution made under the program. The insurer may distribute the estimated profits among those policyholders based on the length of time served by a policyholder in a combat theater of operations, the location of the military service, the duration of the applicable insurance policy, or any other reasonable basis. The commissioner shall act on the insurer's distribution program within five business days of receipt of the insurer's distribution program, otherwise the distribution program shall be deemed approved. (d) This article does not prohibit an insurer, on approval by the commissioner, from sharing profits with policyholders who are part of a group program established by a nonprofit business association and who participate in the group program because of membership in the association. An insurer that elects to make distributions under this subsection shall file a written description of its distribution program with the commissioner for approval by the commissioner and shall notify the commissioner in writing of each distribution made under the program. The commissioner shall act on the insurer's distribution program within five business days of receipt of the insurer's distribution program, otherwise the distribution program shall be deemed approved. For purposes of this subsection, "nonprofit business association" means a business association that is a nonprofit corporation exempt from federal income tax under Section 501(a) of the Internal Revenue Code of 1986, and its subsequent amendments, by being listed as an exempt organization under Section 501(c)(6) of that code. Acts 1951, 52nd Leg., ch. 491. Amended by Acts 1991, 72nd Leg., ch. 6, Sec. 1, eff. March 19, 1991; Acts 1999, 76th Leg., ch. 1240, Sec. 1, eff. June 18, 1999. Art. 5.09. DISCRIMINATIONS OR DISTINCTIONS.
Article repealed effective April 1, 2007
(a) Except as provided by Subsection (b) of this article, no insurer coming within the terms of this subchapter shall, in its business in this State, make or permit any distinction or discrimination in favor of the insured having a like hazard, in the matter of the charge of premiums for insurance, or in dividends or other benefits payable under any policy, nor shall any such insurer or agent make any contract of insurance, or agreement as to such insurance, other than expressed in the policy, nor shall any such insurer or its agents or representatives pay, allow or give, or offer to pay, allow or give, directly or indirectly, as an inducement to insured, any rebate payable upon the policy or any special favor or advantage in dividends or other benefits to accrue, or anything of value whatsoever, not specified in the policy; provided that nothing in this subchapter shall be construed to prohibit the modification of rates by rating plans designed to encourage the prevention of accidents, and to take account of the peculiar hazards and experience of individual risks, past and prospective, within and outside the State, and of all other relevant factors, within and outside the State, provided such plan shall have been approved by the Board. (b) This article does not prohibit an insurer, on approval by the Board, from distributing to policyholders who are on active duty in the United States Armed Forces any estimated profits resulting from service by those policyholders in any foreign country in a combat theater of operations at any time after January 1, 1990. An insurer that elects to make such distributions shall file a written description of its distribution program with the Board for approval by the Board and shall notify the Board in writing of each distribution made under the program. The insurer may distribute the estimated profits among those policyholders based on the length of time served by a policyholder in a combat theater of operations, the location of the military service, the duration of the applicable insurance policy, or any other reasonable basis. The Board shall act on the insurer's distribution program within five business days of receipt of the insurer's distribution program, otherwise the distribution program shall be deemed approved. (c) Notwithstanding Subsection (a) of this article, on and after the effective date of S.B. No. 14, Acts of the 78th Legislature, Regular Session, 2003, rates for personal automobile insurance in this state are determined as provided by Article 5.101 of this code, and rates for commercial motor vehicle insurance in this state are determined as provided by Article 5.13-2 of this code. On and after December 1, 2004, rates for personal automobile insurance and commercial automobile insurance in this state are determined as provided by Article 5.13-2 of this code. Acts 1951, 52nd Leg., ch. 491. Amended by Acts 1953, 53rd Leg., p. 64, ch. 50, Sec. 5. Amended by Acts 1991, 72nd Leg., ch. 6, Sec. 2, eff. March 19, 1991; Acts 1991, 72nd Leg., ch. 242, Sec. 2.12, eff. Sept. 1, 1991; Subsec. (b) amended by Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Sec. 8.07, eff. Jan. 1, 1992. Amended by Acts 1995, 74th Leg., ch. 984, Sec. 6, eff. Sept. 1, 1995; Subsec. (c) amended by Acts 2003, 78th Leg., ch. 206, Sec. 21.10, eff. June 11, 2003. Art. 5.10. RULES AND REGULATIONS. The Board is hereby empowered to make and enforce all such reasonable rules and regulations not inconsistent with the provisions of this subchapter as are necessary to carry out its provisions. Acts 1951, 52nd Leg., ch. 491. Amended by Acts 1991, 72nd Leg., ch. 242, Sec. 2.13, eff. Sept. 1, 1991. Art. 5.11. HEARING ON GRIEVANCES. (a) Any policyholder or insurer shall have the right to a hearing before the Board on any grievance occasioned by the approval or disapproval by the Board of any classification, rate, rating plan, endorsement or policy form, or any rule or regulation established under the terms hereof, such hearing to be held in conformity with rules prescribed by the Board. Upon receipt of request that such hearing is desired, the Board shall forthwith set a date for the hearing, at the same time notifying all interested parties in writing of the place and date thereof, which date, unless otherwise agreed to by the parties at interest, shall not be less than ten (10) nor more than thirty (30) days after the date of said notice. Any party aggrieved shall have the right to apply to any court of competent jurisdiction to obtain redress. (b) No hearing shall suspend the operation of any classification, rate, rating plan or policy form unless the Board shall so order. (c) Notwithstanding Subsections (a) and (b) of this article, on and after the effective date of S.B. No. 14, Acts of the 78th Legislature, Regular Session, 2003, rates for personal automobile insurance in this state are determined as provided by Article 5.101 of this code, and rates for commercial motor vehicle insurance in this state are determined as provided by Article 5.13-2 of this code. On and after December 1, 2004, rates for personal automobile insurance and commercial automobile insurance in this state are determined as provided by Article 5.13-2 of this code. Acts 1951, 52nd Leg., ch. 491. Amended by Acts 1953, 53rd Leg., p. 64, ch. 50, Sec. 6. Amended by Acts 1991, 72nd Leg., ch. 242, Sec. 2.14, eff. Sept. 1, 1991; Subsec. (c) amended by Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Sec. 8.08, eff. Jan. 1, 1992; amended by Acts 1995, 74th Leg., ch. 984, Sec. 7, eff. Sept. 1, 1995; Subsec. (c) amended by Acts 2003, 78th Leg., ch. 206, Sec. 21.11, eff. June 11, 2003. Art. 5.12-1. PENALTY FOR VIOLATION OF ACT.
Article repealed effective April 1, 2007
Any insurer or officer or representative thereof which shall violate any provision of this Act shall be subject to a revocation of his or its license by the Board of Insurance Commissioners and in addition shall be deemed guilty of a misdemeanor and, upon conviction thereof, shall be punished by a fine of not less than One Hundred ($100.00) Dollars nor more than Five Hundred ($500.00) Dollars for each such offense. Acts 1927, 40th Leg., p. 373, ch. 253, Sec. 12. Amended by Acts 1937, 45th Leg., p. 671, ch. 335, Sec. 3.
SUBCHAPTER B. CASUALTY INSURANCE AND FIDELITY, GUARANTY AND SURETY BONDS
Art. 5.13. SCOPE OF SUBCHAPTER. (a) This subchapter applies to every insurance company, corporation, interinsurance exchange, mutual, reciprocal, association, Lloyd's plan, or other organization or insurer writing any of the characters of insurance business herein set forth, hereinafter called "Insurer"; provided that nothing in this entire subchapter shall be construed to apply to any county or farm mutual insurance company or association, as regulated under Chapters 911 and 912 of this code, except that: (1) Article 5.13-2 of this code shall apply to a county mutual insurance company with respect to personal automobile and commercial automobile insurance, residential and commercial property insurance, and inland marine insurance; (2) Article 5.20 of this code shall apply to a county mutual insurance company with respect to each line of insurance that a county mutual insurance company is authorized to write under Section 912.151; and (3) Article 5.20 of this code shall apply to a farm mutual insurance company with respect to each line of insurance that a farm mutual insurance company is authorized to write under Section 911.151. (b) This subchapter applies to the writing of casualty insurance and the writing of fidelity, surety, and guaranty bonds, on risks or operations in this State except as herein stated. (c) Except as otherwise provided by this subchapter, this subchapter does not apply to the writing of motor vehicle, life, health, accident, professional liability, reinsurance, aircraft, fraternal benefit, fire, lightning, tornado, windstorm, hail, smoke or smudge, cyclone, earthquake, volcanic eruption, rain, frost and freeze, weather or climatic conditions, excess or deficiency of moisture, flood, the rising of the waters of the ocean or its tributaries, bombardment, invasion, insurrection, riot, civil war or commotion, military or usurped power, any order of a civil authority made to prevent the spread of a conflagration, epidemic or catastrophe, vandalism or malicious mischief, strike or lockout, water or other fluid or substance, resulting from the breakage or leakage of sprinklers, pumps, or other apparatus erected for extinguishing fires, water pipes or other conduits or containers, or resulting from casual water entering through leaks or opening in buildings or by seepage through building walls, including insurance against accidental injury of such sprinklers, pumps, fire apparatus, conduits or container, workers' compensation, noncommercial inland marine, ocean marine, marine, or title insurance; nor does this subchapter apply to the writing of explosion insurance, except insurance against loss from injury to person or property which results accidentally from steam boilers, heaters or pressure vessels, electrical devices, engines and all machinery and appliances used in connection therewith or operation thereby. (d) This subchapter shall not be construed as limiting in any manner the types or classes of insurance which may be written by the several types of insurers under appropriate statutes or their charters or permits. (e) The regulatory power herein conferred is vested in the commissioner. Acts 1951, 52nd Leg., ch. 491. Amended by Acts 1955, 54th Leg., p. 359, ch. 76, Sec. 1; Acts 2003, 78th Leg., ch. 206, Sec. 5.01, eff. June 11, 2003; Acts 2003, 78th Leg., ch. 206, Sec. 6.01, eff. Dec. 1, 2004; Acts 2005, 79th Leg., ch. 631, Sec. 1, eff. Sept. 1, 2005. Art. 5.13-1. LEGAL SERVICE CONTRACTS. (a) Every insurer governed by Subchapter B of Chapter 5 of the Insurance Code, as amended, and every life, health, and accident insurer governed by Chapter 3 of the Insurance Code, as amended, is authorized to issue prepaid legal services contracts. Every such insurer or rating organization authorized under Article 5.16 of the Insurance Code shall file with the State Board of Insurance all rules and forms applicable to prepaid legal service contracts in a manner to be established by the State Board of Insurance. Certification, by a qualified actuary, to the appropriateness of the charges, rates, or rating plans, based upon reasonable assumptions, shall accompany the filing along with adequate supporting information. (b) The State Board of Insurance shall, within a reasonable period, approve any form if the requirements of this section are met. It shall be unlawful to issue such forms until approved or to use such schedules of charges, rates, or rating plans until filed. If the State Board of Insurance has good cause to believe such rates and rating plans do not comply with the standards of this article, it shall give notice in writing to every insurer or rating organization which filed such rates or rating plans, stating therein in what manner and to what extent such noncompliance is alleged to exist and specifying therein a reasonable time, not less than 30 days thereafter, in which such noncompliance may be corrected. If the board has not acted on any form, rate, rating plan, or charges within 30 days after the filing of same, they shall be deemed approved. The board may require the submission of whatever relevant information is deemed necessary in determining whether to approve or disapprove a filing made pursuant to this section. (c) The right of such insurers to issue prepaid legal services contracts on individual, group, or franchise bases is hereby recognized, and qualified agents of such insurers who are licensed under Article 21.07-1 or 21.14 of this code shall be authorized to write such coverages under such rules as the commissioner may prescribe. (d) The State Board of Insurance is hereby vested with power and authority under this article to promulgate, after notice of hearing, and to enforce, rules and regulations concerning the application to the designated insurers of this article and for such clarification, amplification, and augmentation as in the discretion of the State Board of Insurance are deemed necessary to accomplish the purposes of this article. (e) This article shall be construed as a specific exception to Article 3.54 of the Texas Insurance Code. (f) All legal services contracts and related promotional material issued pursuant to Chapter 23 and the issuance of legal services contracts pursuant to Article 5.13-1 shall be truthful and accurate and shall properly describe the coverage offered. Such description should include, but not be limited to, a description of coverage offered as either an indemnity coverage or a contract that provides only consultation and advice on simple legal matters, either alone or in combination with a referral service, and that provides fee discounts for other matters. To provide for the actuarial soundness of a prepaid legal services contract issued under this article, the State Board of Insurance may require that prepaid legal services contracts have rates that are adequate to reasonably provide the benefits under the prepaid legal services contracts. This subsection does not apply to a prepaid legal services contract that provides only consultation and advice on simple legal matters, either alone or in combination with a referral service, and that provides fee discounts for other matters. (g) The State Board of Insurance may not determine, fix, prescribe, set, or promulgate maximum rates or maximum amounts of premium to be charged for a prepaid legal services contract issued under this chapter. Nothing in this Act shall be construed as compelling the State Board of Insurance to establish standard or absolute rates and the board is specifically authorized, in its discretion, to approve different rates for different insurers for the same risk or risks on the types of insurance covered by this article. The board shall approve such rates as filed by any insurer unless it finds that such filing does not meet the requirements of this article. (h) An insurer may not issue or renew a prepaid legal service contract under this article after March 1, 2004. Added by Acts 1975, 64th Leg., p. 134, ch. 60, Sec. 2, eff. Sept. 1, 1975. Subsecs. (a), (b), (f), (g) amended by Acts 1995, 74th Leg., ch. 873, Sec. 1, eff. Sept. 1, 1995; Subsec. (c) amended by Acts 2001, 77th Leg., ch. 703, Sec. 7.03, eff. Sept. 1, 2001. Subsec. (h) added by Acts 2003, 78th Leg., ch. 1181, Sec. 2, eff. Sept. 1, 2003. Art. 5.13-2. RATES AND FORMS FOR CERTAIN PROPERTY AND CASUALTY INSURANCE .
Purpose
Sec. 1. This article governs the regulation of insurance described by Section 2 of this article. The purposes of this article are to: (1) promote the public welfare by regulating insurance rates to prohibit excessive, inadequate, or unfairly discriminatory rates; (2) promote availability of insurance; (3) promote price competition among insurers to provide rates and premiums that are responsive to competitive market conditions; (4) prohibit price-fixing agreements and other anticompetitive behavior by insurers; (5) regulate the insurance forms used for lines of insurance subject to this article to ensure that they are not unjust, unfair, inequitable, misleading, or deceptive; and (6) provide regulatory procedures for the maintenance of appropriate information reporting systems.
Scope
Text of Sec. 2 effective until April 1, 2007
Sec. 2. (a) This article applies to all lines of the following insurance written under policies or contracts of insurance issued by an insurer authorized to engage in the business of insurance in this state: (1) general liability insurance; (2) residential and commercial property insurance, including farm and ranch insurance and farm and ranch owners insurance; (3) personal and commercial casualty insurance, except as provided by Subsection (b) of this section; (4) medical professional liability insurance; (5) fidelity, guaranty, and surety bonds other than criminal court appearance bonds; (6) personal umbrella insurance; (7) personal liability insurance; (8) guaranteed auto protection (GAP) insurance; (9) involuntary unemployment insurance; (10) financial guaranty insurance; (11) inland marine insurance; (12) rain insurance; (13) hail insurance on farm crops; (14) personal and commercial automobile insurance; and
Text of Subsec. (a)(15) as added by Acts 2005, 79th Leg., ch. 71, Sec. 1.
(15) multi-peril insurance.
Text of Subsec. (a)(15) as added by Acts 2005, 79th Leg., ch. 102, Sec. 4.
(15) identity theft insurance coverage issued under Chapter 706. (b) The commissioner shall adopt rules governing the manner in which forms and rates for the various classifications of risks insured under inland marine insurance, as determined by the commissioner, are regulated.
Definitions
Text of Sec. 3 effective until April 1, 2007
Sec. 3. (a) In this article: (1) "Disallowed expenses" includes: (A) administrative expenses, not including acquisition, loss control, and safety engineering expenses, that exceed 110 percent of the industry median for those expenses; (B) lobbying expenses; (C) advertising expenses, other than for advertising: (i) directly related to the services or products provided by the insurer; or (ii) designed and directed at loss prevention; (D) amounts paid by an insurer: (i) as damages in an action brought against the insurer for bad faith, fraud, or any matters other than payment under the insurance contract; or (ii) as fees, fines, penalties, or exemplary damages for a civil or criminal violation of law; (E) contributions to: (i) social, religious, political, or fraternal organizations; or (ii) organizations engaged in legislative advocacy; (F) except as authorized by rule by the commissioner, fees and assessments paid to advisory organizations; (G) any amount determined by the commissioner to be excess premiums charged by the insurer; and (H) any unreasonably incurred expenses, as determined by the commissioner after notice and hearing. (2) "Filer" means an insurer that files rates, prospective loss costs, or supplementary rating information under this article. (3) "Insurer" means an insurer to which Article 5.13 of this code applies, but does not include the Texas Windstorm Insurance Association or the Texas FAIR Plan Association, or the Texas Automobile Insurance Plan Association. All provisions of this article shall apply to Lloyd's plans, reciprocals and interinsurance exchanges, and county mutual insurance companies with respect to the lines of insurance described in Section 2 of this article, except that the provisions of Sections 4, 5, 6, and 7 of this article shall not apply to Lloyd's or reciprocals with respect to commercial property insurance, and the provisions of Sections 4, 5, 6, 7, and 8 of this article shall not apply to Lloyd's or reciprocals with respect to inland marine insurance, rain insurance, or hail insurance on farm crops. (4) "Prospective loss costs" means that portion of a rate that does not include provisions for profit or expenses, other than loss adjustment expenses, that is based on historical aggregate losses and loss adjustment expenses projected by development to their ultimate value and through trending to a future point in time. (5) "Rate" means the cost of insurance per exposure unit, whether expressed as a single number or as a prospective loss cost, with an adjustment to account for the treatment of expenses, profit, and individual insurer variation in loss experience, before any application of individual risk variations based on loss or expense considerations. (6) "Rating manual" means a publication or schedule that lists rules, classifications, territory codes and descriptions, rates, premiums, and other similar information used by an insurer to determine the applicable premium charged an insured. (7) "Residential property insurance" means insurance coverage against loss to real or tangible personal property at a fixed location that is provided through a homeowners policy, including a tenants policy, a condominium owners policy, or a residential fire and allied lines policy. (8) "Supplementary rating information" means any manual, rating schedule, plan of rules, rating rules, classification systems, territory codes and descriptions, rating plans, and other similar information used by the insurer to determine the applicable premium for an insured. The term includes factors and relativities, including increased limits factors, classification relativities, deductible relativities, premium discount, and other similar factors and rating plans such as experience, schedule, and retrospective rating. (9) "Supporting information" means: (A) the experience and judgment of the filer and the experience or information of other insurers or advisory organizations relied on by the filer; (B) the interpretation of any other information relied on by the filer; (C) descriptions of methods used in making the rates; and (D) any other information required by the department to be filed. (b) For purposes of this article, a rate is: (1) excessive if the rate is likely to produce a long-term profit that is unreasonably high in relation to the insurance coverage provided; (2) inadequate if the rate is insufficient to sustain projected losses and expenses to which the rate applies, and continued use of the rate: (A) endangers the solvency of an insurer using the rate; or (B) has the effect of substantially lessening competition or creating a monopoly within any market; or (3) unfairly discriminatory if the rate: (A) is not based on sound actuarial principles; (B) does not bear a reasonable relationship to the expected loss and expense experience among risks; or (C) is based wholly or partly on the race, creed, color, ethnicity, or national origin of the policyholder or an insured.
Rate standards
Text of Sec. 4 effective until April 1, 2007
Sec. 4. (a) Rates under this article shall be made in accordance with the provisions of this section. (b) In setting rates, an insurer shall consider: (1) past and prospective loss experience inside this state, and outside this state if the state data are not credible; (2) the peculiar hazards and experiences of individual risks, past and prospective, inside and outside this state; (3) the insurer's actuarially credible historical premium, exposure, loss, and expense experience; (4) catastrophe hazards within this state; (5) operating expenses, excluding disallowed expenses; (6) investment income; (7) a reasonable margin for profit; and (8) any other factors inside and outside this state determined to be relevant by the insurer and not disallowed by the commissioner. (c) The insurer may group risks by classifications for the establishment of rates and minimum premiums and may modify classification rates to produce rates for individual risks in accordance with rating plans that establish standards for measuring variations in those risks on the basis of any factor listed in Subsection (b) of this section. (d) Rates established under this article may not be excessive, inadequate, unreasonable, or unfairly discriminatory for the risks to which they apply. (e) In setting rates applicable solely to policyholders in this state, an insurer shall use available premium, loss, claim, and exposure information from this state to the full extent of the actuarial credibility of that information. The insurer may use experience from outside this state as necessary to supplement information from this state that is not actuarially credible. (f) In determining rating territories and territorial rates, an insurer shall use methods based on sound actuarial principles.
Rate filings; legislative report
Text of Sec. 5 effective until April 1, 2007
Sec. 5. (a) Except as provided by Section 5A of this article, each insurer shall file with the commissioner all rates, applicable rating manuals, supplementary rating information, and additional information as required by the commissioner for risks written in this state. (a-1) The commissioner by rule shall determine the information required to be provided in the filing, including: (1) the categories of supporting information; (2) the categories of supplementary rating information; (3) any statistics or other information to support the rates to be used by the insurer, including information necessary to evidence that the computation of the rate does not include disallowed expenses; and (4) information concerning policy fees, service fees, and other fees that are charged or collected by the insurer under Article 21.35A or 21.35B of this code. (a-2) For an insurer with less than five percent of the market, the commissioner shall consider insurer and market-specific attributes, as applicable, and shall promulgate filing requirements accordingly to accommodate premium volume and loss experience, targeted markets, limitations on coverage, and any potential barriers to market entry or growth. (b) Repealed by Acts 2003, 78th Leg., ch. 206, Sec. 21.47. (c) An insured that is aggrieved with respect to any filing in effect, or the public insurance counsel, may make a written application to the commissioner for a hearing on the filing. The application must specify the grounds on which the applicant bases the grievance. If the commissioner finds that the application is made in good faith, that the applicant would be so aggrieved if the grounds in the application are established, and that those grounds otherwise justify holding the hearing, the commissioner shall hold a hearing not later than the 30th day after the date of receipt of the application. The commissioner must give at least 10 days' written notice to the applicant and to each insurer that made the filing in question. (d) If, after the hearing, the commissioner finds that the filing does not meet the requirements of this article, the commissioner shall issue an order specifying how the filing fails to meet the requirements of this article and stating the date on which, within a reasonable period after the order date, the filing is no longer in effect. The commissioner shall send copies of the order to the applicant and to each affected insurer. (e) The commissioner shall require each insurer subject to this article to file information with the commissioner on a quarterly basis. Each insurer shall provide the commissioner with information relating to changes in losses, premiums, and market share since January 1, 1993. The commissioner shall report to the governor, lieutenant governor, and speaker of the house of representatives on a quarterly basis, relating to the information provided by the insurers' reports and to market conduct, especially consumer complaints.
Prior Approval Required for Certain Insurers
Text of Sec. 5A effective until April 1, 2007
Sec. 5A. (a) The commissioner by order may require an insurer to file with the commissioner all rates, supplementary rate information, and any supporting information as prescribed by this section if the commissioner determines that: (1) an insurer's rates require supervision because of the insurer's financial condition; (2) an insurer's rates require supervision because of the insurer's rating practices; or (3) a statewide insurance emergency exists. (b) Except as provided by Subsection (k) of this section, an insurer may not use a rate until the rate has been filed with the department and approved by the commissioner as provided by this section. For purposes of this section, a rate is filed with the department on the date the rate filing is received by the department. (c) Not later than the 30th day after the date the rate is filed with the department, the commissioner shall: (1) approve the rate if the commissioner determines that the rate complies with the requirements of this article; or (2) disapprove the rate if the commissioner determines that the rate does not comply with the requirements of this article. (d) Except as provided by Subsection (f) of this section, if the rate has not been approved or disapproved by the commissioner before the expiration of the 30-day period described by Subsection (c) of this section, the rate is considered approved and the insurer may use the rate unless the rate proposed in the filing represents an increase of 12.5 percent or more from the insurer's prior filed rate. (e) The commissioner and the insurer may not by agreement extend the 30-day period described by Subsection (c) of this section. (f) For good cause, the commissioner may extend the period for approval or disapproval of a rate for one additional 30-day period on the expiration of the 30-day period described by Subsection (c) of this section. (g) If the department determines that the information filed by the insurer under this article is incomplete or otherwise deficient, the department may request additional information from the insurer. If the department requests additional information from the insurer during the first 30-day review period provided under Subsection (c) of this section or under the second 30-day review period provided under Subsection (f) of this section, the period of time between the date of the department's submission of the request for additional information to the insurer and the date of the receipt of the additional information by the department from the insurer is not counted to determine what constitutes the first 30-day review period or the second 30-day review period. For purposes of this subsection, the date of the department's submission of the request for additional information is the date of the electronic mailing or telephone call or the postmarked date on the department's letter relating to the request for additional information. (h) The commissioner shall approve the rate filing if the proposed rate is adequate, not excessive, and not unfairly discriminatory. (i) If the commissioner approves a rate filing, the commissioner shall provide written or electronic notification of the approval to the insurer. On receipt of the notice of the commissioner's approval of a rate, the insurer may use the rate. (j) From the date of the filing of the rate with the department to the effective date of the new rate, the insurer's previously filed rate that is in effect on the date of the filing remains in effect. (k) After approval of a rate filing under this section, an insurer may use any rate subsequently filed by the insurer, without prior approval of the commissioner, if the subsequently filed rate does not exceed the lesser of 107.5 percent of the rate approved by the commissioner or 110 percent of any rate used by the insurer within the previous 12-month period. Filed rates under this subsection take effect on the date specified by the insurer. (l) If the commissioner disapproves a rate filing under Subsection (c)(2) of this section, the commissioner shall issue an order in the manner prescribed by Section 7(b) of this article. The insurer is entitled to a hearing in accordance with Section 7(b) of this article. (m) The commissioner may require an insurer to file the insurer's rates under this section until the commissioner determines that the conditions described by Subsection (a) of this section no longer exist.
Public information
Text of Sec. 6 effective until April 1, 2007
Sec. 6. Each filing and any supporting information filed under this article is open to public inspection as of the date of the filing.
Disapproval
Text of Sec. 7 effective until April 1, 2007
Sec. 7. (a) The commissioner shall disapprove a rate if the commissioner determines that the rate filing made under this article does not meet the standards established under that section. (b) If the commissioner disapproves a filing, the commissioner shall issue an order specifying in what respects the filing fails to meet the requirements of this article. The filer is entitled to a hearing on written request made to the commissioner not later than the 30th day after the effective date of the disapproval order. (c) If the commissioner disapproves a rate that is in effect, the commissioner may issue a disapproval order only after a hearing held after at least 20 days' written notice to the insurer that made the filing. The disapproval order must be issued not later than the 15th day after the close of the hearing and must specify how the rate fails to meet the requirements of this article. The disapproval order must state the date on which the further use of that rate is prohibited. The commissioner shall set the date not earlier than the 45th day after the date on which the hearing closes.
Forms
Text of Sec. 8 effective until April 1, 2007
Sec. 8. (a) An insurance policy or printed endorsement form for use in writing the types of insurance subject to this article may not be delivered or issued for delivery in this state unless the form has been filed with and approved by the commissioner. (b) Each filing shall be made not later than the 60th day before the date of any use or delivery for use. At the expiration of the 60-day period a filed form is approved unless, before the expiration of the 60 days, the commissioner approves or disapproves the form by order. Approval of a form by the commissioner constitutes a waiver of any unexpired portion of the 60-day period. The commissioner may extend by not more than an additional 10 days the period during which it may approve or disapprove a form by giving notice to the filer of the extension before the expiration of the initial period. At the expiration of any extension and in the absence of any earlier approval or disapproval, the form shall be considered approved. For good cause shown, the commissioner may withdraw the commissioner's approval at any time after notice and a hearing. (c) A commissioner's order disapproving any form or any notice of the commissioner's intention to withdraw a previous approval must state the grounds for the disapproval in enough detail to reasonably inform the filer of the grounds. An order of withdrawal of a previously approved form takes effect on the expiration of the prescribed period, but not sooner than the 30th day after the effective date of the withdrawal order, as prescribed by the commissioner. (d) An insurer may not use in this state any form after disapproval of the form or withdrawal of approval by the commissioner. (e) The commissioner may promulgate standard insurance policy forms, endorsements, and other related forms that may be used, at the discretion of the insurer, by an insurer instead of the insurer's own forms in writing insurance subject to this article. The commissioner may disapprove a form or endorsement filed under this section, or withdraw any previous approval thereof, if the form or endorsement: (1) violates or does not comply with this code, or any valid rule relating thereto duly adopted by the commissioner, or is otherwise contrary to law; or (2) contains provisions or has any titles or headings which are unjust, encourage misrepresentation, are deceptive, or violate public policy. (f) Policy forms for use with large risks are exempt from the requirements of Subsections (a), (b), and (e) of this section. For purposes of this subsection, "large risk" means: (1) an insured that has total insured property values of $5 million or more; (2) an insured that has total annual gross revenues of $10 million or more; or (3) an insured that has a total premium of $25,000 or more for property insurance, $25,000 or more for general liability insurance, or $50,000 or more for multiperil insurance.
Commissioner authority
Sec. 9. If the commissioner determines at any time that the implementation of this article or any part thereof is contrary to the public interest and has resulted in or may result in imminent peril to the insurance consumers of this state, the commissioner may issue an order stating the harm to the public and shall thereafter rely upon Subchapters A-L of this chapter, or parts thereof, in the regulation of property and casualty insurance.
Administrative Procedure Act applicable
Text of Sec. 10 effective until April 1, 2007
Sec. 10. Chapter 2001, Government Code (the Administrative Procedure Act), applies to all rate hearings conducted under this article.
Standard Rate Index for Personal Automobile Insurance; Exemption
Text of Sec. 13 effective until April 1, 2007
Sec. 13. (a) This section governs rate regulation of personal automobile insurance issued by a county mutual insurance company as prescribed by this section. (b) Using standard and generally accepted actuarial techniques, the commissioner shall annually compute and publish a statewide standard rate index that accurately reflects the average statewide rates for classifications for each of the following coverages for personal automobile insurance policies: (1) bodily injury liability; (2) property damage liability; (3) personal injury protection; (4) medical payments; (5) uninsured and underinsured motorists; (6) physical damage--collision; and (7) physical damage--other than collision. (c) The commissioner shall compute the rate index using the benchmark rate in effect for personal automobile insurance under Article 5.101 of this code on the effective date of S.B. No. 14, Acts of the 78th Legislature, Regular Session, 2003, and adjusted annually thereafter by the commissioner to reflect average changes in claims costs in the personal automobile insurance market in this state. After the effective date of S.B. No. 14, Acts of the 78th Legislature, Regular Session, 2003, and before the first annual adjustment by the commissioner, the commissioner may adjust the computation of the rate index under this section as the commissioner determines necessary. (d) The commissioner may compute and establish standard rate indexes other than the rate index required under Subsection (b) of this section for any of the personal automobile insurance coverages listed under that subsection as necessary to implement this section. (e) For purposes of this section, "nonstandard rates" means rates that are 30 percent or more above the standard rate index as determined by the commissioner under this section. (f) A county mutual insurance company that issues personal automobile insurance policies only at nonstandard rates is subject to filing requirements as determined by the commissioner by rule if the insurer and the insurer's affiliated companies or group have a market share of less than 3.5 percent. In setting rates, an insurance company subject to this subsection must comply with the rating standards established by this article. Not later than the first day on which any change in the rates becomes effective, the company shall for informational purposes file the rates and any additional information required by the department. The commissioner by rule shall determine the information required to be provided in the filing under this subsection. The commissioner may inspect the books and records of the company at any time to ensure compliance with the rating standards. An insurance company described by this subsection is subject to Article 5.144 of this code. A county mutual insurance company not described by this section is subject to Article 21.81 of this code and is required to comply with the filing requirements of this article and any other provision of this code applicable to a county mutual insurance company. (g) The commissioner by rule may designate other types of insurers that historically and as of the effective date of S.B. No. 14, Acts of the 78th Legislature, Regular Session, 2003, have served exclusively or are serving exclusively the high-risk, nonstandard market and meet capitalization and solvency requirements set by the commissioner. An insurer designated by the commissioner under this subsection is governed by this section. (h) An insurer is subject to the filing requirements determined by the commissioner by rule under Subsection (f) of this section if: (1) the insurer, along with the insurer's affiliated companies or group, issues personal automobile liability insurance policies only below 101 percent of the minimum limits required by Chapter 601, Transportation Code; and (2) the insurer, along with the insurer's affiliated companies or group, has a market share of less than 3.5 percent of the personal automobile insurance market in this state.
Review of Rates
Text of Sec. 14 effective until April 1, 2007
Sec. 14. In reviewing rates under this article, the commissioner shall consider any state or federal legislation that has been enacted and that may impact rates for liability coverage included in a policy subject to this article.
Notice of Rate Increase
Text of Sec. 15 effective until April 1, 2007
Sec. 15. (a) An insurer shall send a policyholder of a policy of residential property insurance issued by the insurer notice of any rate increase scheduled to take effect on the renewal of the policy that will result in an increase in the premium amount to be paid by the policyholder that is at least 10 percent greater than the lesser of the premium amount paid by the policyholder for coverage under the policy during: (1) the 12-month period preceding the renewal date of the policy; or (2) the policy period preceding the renewal date of the policy. (b) An insurer shall send the notice required by Subsection (a) of this section before the renewal date but not later than the 30th day before the date the rate increase is scheduled to take effect. (c) In addition to the mandatory notice under Subsection (a) of this section, the insurer may send the notice required by Subsection (a) of this section to any policyholder of residential property insurance issued by the insurer, regardless of whether that policyholder's premium amount to be paid will increase as a result of the scheduled rate change. (d) The commissioner by rule may exempt an insurer from the notice requirements under this section for a short-term policy, as defined by the commissioner, that is written by the insurer.
Rights of Public Insurance Counsel
Text of Sec. 16 effective until April 1, 2007
Sec. 16. (a) On request to the commissioner, the public insurance counsel may review all rate filings and additional information provided by an insurer under this article. Confidential information reviewed under this subsection remains confidential. (b) The public insurance counsel, not later than the 30th day after the date of a rate filing under this article, may object to an insurer's rate filing or the criteria relied on by the insurer to determine the rate by filing a written objection with the commissioner. The written objection must contain the reasons for the objection. Added by Acts 1991, 72nd Leg., ch. 242, Sec. 2.15, eff. Sept. 1, 1991. Sec. 8(e) amended by Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Sec. 8.01, eff. Jan. 1, 1992; Secs. 1 and 2 amended by Acts 1993, 73rd Leg., ch. 685, Sec. 6.07, eff. Sept. 1, 1993; Sec. 3(5), (6) amended by Acts 1993, 73rd Leg., ch. 685, Sec. 6.08, eff. Sept. 1, 1993; Secs. 5, 7 to 9 amended by Acts 1993, 73rd Leg., ch. 685, Sec. 6.09, eff. Sept. 1, 1993; Sec. 1 amended by Acts 1995, 74th Leg., ch. 984, Sec. 8, eff. Sept. 1, 1995; Sec. 3(2) amended by Acts 1995, 74th Leg., ch. 984, Sec. 9, eff. Sept. 1, 1995; Sec. 10 amended by Acts 1995, 74th Leg., ch. 984, Sec. 10, eff. Sept. 1, 1995; Sec. 1 amended by Acts 1997, 75th Leg., ch. 1330, Sec. 1, eff. Sept. 1, 1997; Sec. 3(2) amended by Acts 1997, 75th Leg., ch. 438, Sec. 1, eff. Sept. 1, 1997; Sec. 8(e) amended by Acts 1997, 75th Leg., ch. 1330, Sec. 2, eff. Sept. 1, 1997; Sec. 8(f) amended by Acts 1997, 75th Leg., ch. 1426, Sec. 1, eff. Sept. 1, 1997; Section heading amended by Acts 2003, 78th Leg., ch. 206, Sec. 5.02, eff. June 11, 2003, and Acts 2003, 78th Leg., ch. 206, Sec. 6.02, eff. Dec. 1, 2004; Secs. 1, 2 amended by Acts 2003, 78th Leg., ch. 206, Sec. 5.03, eff. June 11, 2003, and ch. 206, Sec. 6.03, eff. Dec. 1, 2004. Sec. 3 amended by Acts 2003, 78th Leg., ch. 206, Sec. 6.04, eff. Dec. 1, 2004. Sec. 3(2) amended by Acts 2003, 78th Leg., ch. 206, Sec. 5.04, eff. June 11, 2003; Sec. 4(b) amended by Acts 2003, 78th Leg., ch. 206, Sec. 6.05, eff. Dec. 1, 2004; Sec. 4(d) amended by Acts 2003, 78th Leg., ch. 206, Sec. 6.05, eff. Dec. 1, 2004; Sec. 4(f) added by Acts 2003, 78th Leg., ch. 206, Sec. 6.05, eff. Dec. 1, 2004; Sec. 5(a) amended by and Secs. 5(a-1), (a-2) added by Acts 2003, 78th Leg., ch. 206, Sec. 6.06, eff. Dec. 1, 2004; Sec. 5(b) amended by Acts 2003, 78th Leg., ch. 206, Sec. 21.47(3), eff. June 11, 2003; Sec. 5A added by Acts 2003, 78th Leg., ch. 206, Sec. 6.07, eff. Dec. 1, 2004; Sec. 13 added by Acts 2003, 78th Leg., ch. 206, Sec. 6.08, eff. Dec. 1, 2004; Sec. 14 added by Acts 2003, 78th Leg., ch. 206, Sec. 6.09, eff. June 11, 2003; Sec. 15 added by Acts 2003, 78th Leg., ch. 206, Sec. 6.10, eff. June 11, 2003; Sec. 16 added by Acts 2003, 78th Leg., ch. 206, Sec. 6.11, eff. Dec. 1, 2004; Sec. 2(a) amended by Acts 2005, 79th Leg., ch.102, Sec. 4, eff. Sept. 1, 2005; Sec. 2(a) amended by Acts 2005, 79th Leg., ch. 70, Sec. 1, eff. Sept. 1, 2005; Sec. 2(a) amended by Acts 2005, 79th Leg., ch. 71, Sec. 1, eff. Sept. 1, 2005; Sec. 13(h) added by Acts 2005, 79th Leg., ch. 1118, Sec. 1, eff. June 18, 2005; Secs. 2 to 8 and 10 to 16 are repealed by Acts 2005, 79th Leg., ch. 727 Sec. 18(d), eff. April 1, 2007. Art. 5.13-2C. EXEMPTIONS FORM RATE FILING AND APPROVAL REQUIREMENTS.
Article repealed effective April 1, 2007
Definitions
Sec. 1. In this article: (1) "Insurer" means an insurance company, reciprocal or interinsurance exchange, mutual insurance company, capital stock company, county mutual insurance company, Lloyd's plan, or other legal entity authorized to write residential property insurance in this state. The term includes an affiliate, as described by this code, if that affiliate is authorized to write residential property insurance. (2) "Residential property insurance" means insurance coverage against loss to real or tangible personal property at a fixed location that is provided through a homeowners policy, including a tenants policy, a condominium owners policy, or a residential fire and allied lines policy.
Applicability
Sec. 2. (a) Except as provided by Subsection (b) of this section, this article applies only to an insurer that, during the calendar year preceding the date filing is otherwise required under Article 5.13-2 or 5.142 of this code, issued residential property insurance policies in this state that accounted for less than two percent of the total amount of premiums collected by insurers for residential property insurance policies issued in this state, more than 50 percent of which cover property: (1) valued at less than $100,000; and (2) located in an area designated by the commissioner as underserved for residential property insurance under Article 5.35-3 of this code. (b) If an insurer described by Subsection (a) of this section is a member of an affiliated insurance group, this article applies to the insurer only if the total aggregate premium collected by the group accounts for less than two percent of the total amount of premiums collected by insurers for residential property insurance policies issued in this state.
Exemption
Sec. 3. (a) Except as provided by Subsection (b) of this section, an insurer described by Section 2 of this article is exempt from the rate filing and approval requirements of Article 5.142 and of Article 5.13-2 of this code. (b) An insurer described by Section 2 of this article that proposes to increase the premium rates charged policyholders for a residential property insurance product by 10 percent or more than the amount the insurer charged policyholders for the same or an equivalent residential property insurance product during the preceding calendar year must file the insurer's proposed rates in accordance with Article 5.142 or 5.13-2 of this code, as applicable, and obtain approval of the proposed rates as provided by the applicable article. (c) Except as provided by Subsection (b) of this section, Article 5.142 of this code does not apply to an insurer described by Section 2 of this article. Added by Acts 2003, 78th Leg., ch. 206, Sec. 7.01, eff. June 11, 2003. Art. 5.14. COVERAGE FOR CERTAIN LOSS OR DAMAGE CAUSED BY WINDSTORM, HURRICANE, OR HAIL. (a) In this article, "insurer" has the meaning assigned by Section 3, Article 5.13-2, of this code. (b) An insurance policy written by an insurer against loss or damage by windstorm, hurricane, or hail may include coverage for: (1) a building or other structure that is built wholly or partially over water; and (2) the corporeal movable property contained in a building or structure described by Subdivision (1) of this subsection. (c) An insurer that writes coverage described by Subsection (b) of this section may impose appropriate limits of coverage and deductibles for the coverage described by Subsection (b). Added by Acts 2005, 79th Leg., ch. 1153, Sec. 6, eff. Sept. 1, 2005. Art. 5.15-1. PROFESSIONAL LIABILITY INSURANCE FOR PHYSICIANS AND HEALTH CARE PROVIDERS.
Scope of Article
Text of Sec. 1 effective until April 1, 2007
Sec. 1. This article shall apply to the making and use of insurance rates by every insurer licensed to write or engaged in writing professional liability insurance for any physician or any health care provider including rating organizations, acting on behalf of insurers.
Definitions
Text of Sec. 2 effective until April 1, 2007
Sec. 2. In this article: (1) "Physician" means a person licensed to practice medicine in this state. (2) "Health care provider" means any person, partnership, professional association, corporation, facility, or institution licensed or chartered by the State of Texas to provide health care as a registered nurse, hospital, dentist, podiatrist, chiropractor, optometrist, pharmacist, veterinarian, not-for-profit kidney dialysis center, blood bank that is a nonprofit corporation chartered to operate a blood bank and which is accredited by the American Association of Blood Banks, for-profit nursing home or not-for-profit nursing home, for-profit assisted living facility or not-for-profit assisted living facility, or an officer, employee, or agent of any of them acting in the course and scope of his employment, or a health care practitioner or facility that the commissioner, in accordance with Section 3B(b), Article 21.49-3, of this code, determines is eligible for coverage under this article. (3) "Hospital" means a licensed public or private institution as defined in Chapter 241, Health and Safety Code, or in Section 88, Chapter 243, Acts of the 55th Legislature, Regular Session, 1957 (Article 5547-88, Vernon's Texas Civil Statutes).
Rate Standards
Text of Sec. 3 effective until April 1, 2007
Sec. 3. Rates shall be made in accordance with the following provisions: (a) Consideration shall be given to past and prospective loss and expense experience for all professional liability insurance for physicians and health care providers written in this state, unless the department shall find that the group or risk to be insured is not of sufficient size to be deemed credible, in which event, past and prospective loss and expense experience for all professional liability insurance for physicians and health care providers written outside this state shall also be considered, to a reasonable margin for underwriting profit and contingencies, to investment income, to dividends or savings allowed or returned by insurers to their policyholders or members. (b) The department shall consider the impact of risk management courses taken by physicians and health care providers in this state in approving rates under this article. (c) For the establishment of rates, risks may be grouped by classifications, by rating schedules, or by any other reasonable methods. Classification rates may be modified to produce rates for individual risks in accordance with rating plans which establish standards for measuring variations in hazards or expense provisions, or both. Those standards may measure any difference among risks that can be demonstrated to have a probable effect upon losses or expenses. (d) Rates shall be reasonable and shall not be excessive or inadequate, as defined in this subsection, nor shall they be unfairly discriminatory. No rate shall be held to be excessive unless the rate is unreasonably high for the insurance coverage provided. No rate shall be held to be inadequate unless the rate is unreasonably low for the insurance coverage provided and is insufficient to sustain projected losses and expenses; or unless the rate is unreasonably low for the insurance coverage provided and the use of the rate has or, if continued, will have the effect of destroying competition or creating a monopoly.
Filing Rates
Text of Sec. 4 effective until April 1, 2007
Sec. 4. (a) The provisions of Article 5.13-2 of this code shall apply to the filing of rates and rating information required under this article. (b) Nothing contained in this article or other provisions of this subchapter concerning the regulation of rates, rating plans, and rating classifications shall, as applies to the writing of professional liability insurance for health care providers and physicians, give the board the power to prescribe uniform or absolute rates; nor shall anything therein be construed as preventing the filing of different rates for risks in a given classification or modified rates for individual risks made in accordance with rating plans, as filed by different insurers or organizations authorized to file such rates. As used in this subsection, "absolute rates" means rates, rating classifications, or rating plans filed by an insurer or authorized rating organization in accordance with this subchapter and the rates, rating classifications, or rating plans so filed are required to be used, to the exclusion of all others, by each insurer lawfully engaged in writing policies. (c) The State Board of Insurance shall prescribe standardized policy forms for occurrence, claims-made and claims-paid policies of professional liability insurance covering health care providers and physicians, and no insurer may use any other forms in writing professional liability insurance for health care providers and physicians without the prior approval of the State Board of Insurance. However, an insurer writing professional liability insurance for health care providers and physicians may use any form of endorsement if the endorsement is first submitted to and approved by the board.
Text of Sec. 4A effective until April 1, 2007
Sec. 4A. Repealed by Acts 1993, 73rd Leg., ch. 685, Sec. 6.12, eff. Sept. 1, 1993.
Rate appeals
Text of Sec. 4B effective until April 1, 2007
Sec. 4B. (a) Each insurer covered by this article shall adopt a procedure for reconsideration of a rate or premium charged a physician or health care provider for professional liability insurance coverage. The procedure shall include an opportunity for a hearing before officers or employees who have responsibility for determining rates and premiums to be charged for professional liability insurance and a requirement that the insurer reconsider the rate or premium and provide the physician or health care provider a written explanation of the rate or premium being charged. (b) If a physician or health care provider is not satisfied with a decision under procedures established under Subsection (a) of this section, the physician or health care provider may appeal to the State Board of Insurance for a review of the rate or premium and a determination if the rate or premium being charged complies with criteria under Section 3 of this article. (c) The State Board of Insurance by rule shall establish criteria to be followed by insurers in establishing reconsideration procedures under Subsection (a) of this section and standards and procedures to be followed in review of rates and premiums by the board.
Reporting of Claims and Claims Information
Text of Sec. 5 effective until April 1, 2007
Sec. 5. Each insurer who issues policies of professional liability insurance covering physicians and health care providers shall file annually with the State Board of Insurance a report of all claims and amount of claims, amounts of claims reserves, investment income of the company derived from medical professional liability premiums, information relating to amounts of judgments and settlements paid on claims, and other information required by the board. The board may formulate and promulgate a form on which this information shall be reported. The form shall be so devised as to require the information to be reported in an accurate manner, reasonably calculated to facilitate interpretation and to protect the confidentiality of the health care provider or physician.
Annual Premiums
Text of Sec. 6 effective until April 1, 2007
Sec. 6. Policies of professional liability insurance under this article shall be written on not less than an annual premium basis.
Notice of Cancellation or Nonrenewal
Text of Sec. 7 effective until April 1, 2007
Sec. 7. An insurer who issues a policy of professional liability insurance covered by this article shall give at least 90 days' written notice to an insured if premiums on the insurance are to be increased or the policy is to be cancelled or is not to be renewed other than for nonpayment of premiums or because the insured is no longer licensed. If the premiums are to be increased, the notice shall state the amount of the increase, and if the policy is to be cancelled or is not to be renewed, the insurer shall state in the notice the reason for cancellation or nonrenewal. Notice of cancellation under this section may only be given within the first 90 days from the effective date of the policy.
Exemplary Damages Under Medical Professional Liability Insurance
Text of Sec. 8 effective until April 1, 2007
Sec. 8. No policy of medical professional liability insurance issued to or renewed for a health care provider or physician in this state may include coverage for exemplary damages that may be assessed against the health care provider or physician; provided, however, that the commissioner may approve an endorsement form that provides for coverage for exemplary damages to be used on a policy of medical professional liability insurance issued to a hospital, as the term "hospital" is defined in this article, or to a for-profit or not-for-profit nursing home or assisted living facility.
Claim Surcharges
Text of Sec. 9 effective until April 1, 2007
Sec. 9. A claim surcharge assessed by an insurer against a health care provider or physician under a professional liability insurance policy may be based only on claims actually paid by an insurer as a result of a settlement or an adverse judgment or an adverse decision of a court.
Premium Discount Recoupment
Sec. 10. (a) Eligibility. Effective January 1, 1999, each insurer that has filed and issued premium discounts to health care professionals pursuant to Article 5.15-4 of this code shall be eligible to elect to receive a premium tax credit in lieu of indemnification for claims filed with the Attorney General under Chapter 110, Civil Practice and Remedies Code. (b) Amount of Tax Credit. An eligible company may elect to recoup premium discounts issued to eligible health care professionals in lieu of indemnification from the State of Texas for claims filed under Chapter 110, Civil Practice and Remedies Code. Such election shall be made as a credit that is part of the annual premium tax return filed on or before March 1, 1999. An insurer may credit the total amount of any discounts issued less any reimbursements received prior to January 1, 1999, by the insurer for claims filed under Chapter 110, Civil Practice and Remedies Code, against its premium tax under Article 4.10 of this code. The tax credit herein authorized shall be allowed at a rate not to exceed 20 percent of the credit per year for five or more successive years following the initial election made in March 1999. The balance of payments due the insurer and not claimed as a tax credit may be reflected in the books and records of the insurer as an admitted asset for all purposes, including exhibition in annual statements pursuant to Article 6.12 of this code. The tax credit allowed in any one year may not exceed the premium tax due in that year. (c) An eligible insurer that elects to receive tax credits shall not be eligible to file claims for indemnity under Chapter 110, Civil Practice and Remedies Code after January 1, 1999. Any claims of an eligible insurer filed with the Attorney General prior to January 1, 1999, that have not been reimbursed shall also be deemed to have been waived by the insurer by making its election. An insurer that elects not to recoup its discount through tax credit will continue to remain eligible for indemnification of eligible claims under Chapter 110, Civil Practice and Remedies Code. (d) The elections provided herein shall not affect the right of a self-insurance trust created under Article 21.49-4 of this code from seeking indemnification for eligible claims. (e) The provisions of Article 21.46 of this code shall not apply to the credits authorized herein.
Vendor's Endorsement
Text of Sec. 11 effective until April 1, 2007
Sec. 11. An insurer may not exclude or otherwise limit coverage for physicians or health care providers under a vendor's endorsement issued to a manufacturer, as that term is defined by Section 82.001, Civil Practice and Remedies Code. A physician or health care provider shall be considered a vendor for purposes of coverage under a vendor's endorsement or a manufacturer's general liability or products liability policy.
Text of Sec. 12 as added by Acts 2005, 79th Leg., ch. 184.
Coverage for Volunteer Health Care Providers
Sec. 12. (a) In this section: (1) "Charitable organization" has the meaning assigned by Section 84.003, Civil Practice and Remedies Code. (2) "Volunteer health care provider" has the meaning assigned by Section 84.003, Civil Practice and Remedies Code. (b) An insurer may make available professional liability insurance covering a volunteer health care provider for an act or omission resulting in death, damage, or injury to a patient while the person is acting in the course and scope of the person's duties as a volunteer health care provider as described by Chapter 84, Civil Practice and Remedies Code. (c) This section does not affect the liability of a volunteer health care provider who is serving as a direct service volunteer of a charitable organization. Section 84.004(c), Civil Practice and Remedies Code, applies to the volunteer health care provider without regard to whether the volunteer health care provider obtains liability insurance under this section. (d) An insurer may make professional liability insurance available under this section to a volunteer health care provider without regard to whether the volunteer health care provider is a "health care provider" as defined by Section 2 of this article.
Prohibition of Use of Certain Information for Physician or Health Care Provider
Text of Sec. 12 as added by Acts 2005, 79th Leg., ch. 1135.
Sec. 12. (a) For the purpose of writing professional liability insurance for physicians and health care providers, an insurer may not consider whether, or the extent to which, a physician or health care provider provides services in this state to individuals who are recipients of Medicaid or covered by the state child health plan program established by Chapter 62, Health and Safety Code, including any consideration resulting in: (1) denial of coverage; (2) refusal to renew coverage; (3) cancellation of coverage; (4) limitation of the amount, extent, or kind of coverage available; or (5) a determination of the rate or premium to be paid. (b) The commissioner may adopt rules as necessary to implement this section.
Use in Underwriting of Certain Information Related to Lawsuits; Refund
Sec. 13. (a) Notwithstanding any other provision of this code, an insurer may not consider for the purpose of setting premiums or reducing a claims-free discount for a particular insured physician's professional liability insurance a lawsuit filed against the physician if: (1) before trial, the lawsuit was dismissed by the claimant or nonsuited; and (2) no payment was made to the claimant under a settlement agreement. (b) An insurer that, in setting premiums or reducing a claims-free discount for a physician's professional liability insurance, considers a lawsuit filed against the physician shall refund to the physician any increase in premiums paid by the physician that is attributable to that lawsuit or reinstate the claims-free discount if the lawsuit is dismissed by the claimant or nonsuited without payment to the claimant under a settlement agreement. The insurer shall issue the refund or reinstate the discount on or before the 30th day after the date the insurer receives written evidence that the lawsuit was dismissed or nonsuited without payment to the claimant under a settlement agreement. (c) This section does not prohibit an insurer from considering and using aggregate historical loss and expense experience applicable generally to a classification of physicians' professional liability insurance to set rates for that classification to the extent authorized by Article 5.13-2 of this code. Notwithstanding Section 4(c), Article 5.13-2, of this code, an insurer may not assign a physician to a particular classification based on a factor described by Subsection (a) of this section. Added by Acts 1977, 65th Leg., p. 2054, ch. 817, Sec. 31.01, eff. Aug. 29. 1977; Sec. 2(2) amended by Acts 1987, 70th Leg., ch. 718, Sec. 1, eff. Sept. 1, 1987; Sec. 4A added by Acts 1987, 70th Leg., 1st C.S., ch. 1, Sec. 2.05, eff. Sept. 2, 1987; Sec. 8 amended by Acts 1987, 70th Leg., 1st C.S., ch. 1, Sec. 7.01, eff. Sept. 2, 1987; Sec. 3 amended by Acts 1989, 71st Leg., ch. 1027, Sec. 15, eff. Sept. 1, 1989; Sec. 4B added by Acts 1989, 71st Leg., ch. 1027, Sec. 16, eff. Sept. 1 1989; Sec. 2(3) amended by Acts 1991, 72nd Leg., ch. 14, Sec. 284(15), eff. Sept. 1, 1991; Sec. 3 amended by Acts 1991, 72nd Leg., ch. 606, Sec. 1, eff. Sept. 1, 1991; Sec. 4A amended by Acts 1991, 72nd Leg., ch. 242, Sec. 2.17D, eff. Sept. 1, 1991; Sec. 4B(b) amended by Acts 1991, 72nd Leg., ch. 606, Sec. 2, eff. Sept. 1, 1991; Sec. 4(a) amended by Acts 1993, 73rd Leg., ch. 685, Sec. 6.11, eff. Sept. 1, 1993; Sec. 4A repealed by Acts 1993, 73rd Leg., ch. 685, Sec. 6.12, eff. Sept. 1, 1993; Sec. 8 amended by Acts 1997, 75th., ch. 746, Sec. 1, eff. Sept. 1, 1997; Sec. 10 added by Acts 1997, 75th Leg., ch. 991, Sec. 1, eff. Sept. 1, 1997; Sec. 2(2) amended by Acts 2001, 77th Leg., ch. 1284, Sec. 5.01, eff. June 15, 2001; Sec. 8 amended by Acts 2001, 77th Leg., ch. 1284, Sec. 5.02, eff. June 15, 2001; Sec. 2(2) amended by Acts 2003, 78th Leg., ch. 141, Sec. 1, eff. Sept. 1, 2003; Sec. 8 amended by Acts 2003, 78th Leg., ch. 141, Sec. 2, eff. Sept. 1, 2003; Sec. 11 added by Acts 2003, 78th Leg., ch. 204, Sec. 10.08, eff. Sept. 1, 2003; Sec. 3 amended by Acts 2005, 79th Leg., ch. 1135, Sec. 1, eff. Sept. 1, 2005; Sec. 12 added by Acts 2005, 79th Leg., ch. 184, Sec. 1, eff. May 27, 2005; Secs. 12, 13 added by Acts 2005, 79th Leg., ch. 1135, Sec. 2, eff. Sept. 1, 2005; Secs. 1 to 9 and 11 are repealed by Acts 2005, 79th Leg., ch. 727, Sec. 18(e), eff. April 1, 2007. Art. 5.15-2. LOSS CONTROL SERVICES.
Article repealed effective April 1, 2007
(a) Any insurer desiring to write professional liability insurance for hospitals in Texas shall maintain or provide loss control facilities as a prerequisite for writing such insurance. Such facilities shall be adequate to furnish loss control services required by the nature of its policyholder's operations and shall include surveys, recommendations, training programs, consultations, and analyses of accident causes. Each field safety representative shall be either a college graduate who shall have a bachelor's degree in science or engineering, a bachelor of arts degree in nursing, a bachelor of science degree in nursing, pharmacy, or physical therapy, or a master's degree in hospital administration, or shall be a registered professional engineer, a certified safety professional, a certified industrial hygienist, an individual with 10 years' experience in occupational safety and health, or an individual who shall have completed a course of training in loss control services approved by the State Board of Insurance. (b) The insurer shall render loss control services to its policyholders reasonably commensurate with the risks and exposures and experience of the insured's business. To provide such facilities, the insurer may employ qualified personnel, retain qualified independent contractors, contract with the policyholder to provide qualified loss control personnel and services, or use a combination of the methods enumerated in this subsection. Such personnel shall have the qualification required for field safety representatives as provided in Subsection (a) of this article. (c) If the Commissioner of Insurance shall determine that reasonable loss control services are not being maintained or provided by the insurer or are not being used by the insurer in a reasonable manner to prevent injury to patients of its policyholders, the fact shall be reported to the State Board of Insurance, and the board shall order a hearing to determine if the insurer is not in compliance with this article. If it is determined that the insurer is not in compliance, the board may impose any sanctions authorized by Section 7, Article 1.10, of this code. (d) The State Board of Insurance may promulgate reasonable rules and regulations for the enforcement of this article after holding a public hearing on the proposed rules and regulations. (e) In this article, "hospital" means a licensed public or private institution as defined in Chapter 241, Health and Safety Code, or in Section 88, Chapter 243, Acts of the 55th Legislature, Regular Session, 1957 (Article 5547-88, Vernon's Texas Civil Statutes). (f) This article does not apply to insurance policies that provide excess coverage issued by the Texas Medical Liability Insurance Underwriting Association under Article 21.49-3 of this code, and does not apply to those policies if serviced by an insurer acting as a servicing carrier under an agreement entered into between the Texas Medical Liability Insurance Underwriting Association and the insurer and approved by the State Board of Insurance. (g) An insurer, its agents, servants, or employees are not liable for and no cause of action arises with respect to any accident based on the allegation that the accident was caused or could have been prevented by a program, inspection, or other activity or service undertaken by the insurer for the prevention of accidents in connection with operations of its insured. However, this immunity does not affect the liability of an insurer as otherwise provided in a policy of insurance. (h) Loss control information provided by an insurer to an insured is not discoverable or admissible in any civil proceeding as evidence. Added by Acts 1977, 65th Leg., p. 2057, ch. 817, Sec. 31.02, eff. Jan. 1, 1978. Amended by Acts 1987, 70th Leg., 1st C.S., ch. 1, Sec. 4.01, eff. Sept. 2, 1987; Subsec. (e) amended by Acts 1991, 72nd Leg., ch. 14, Sec. 284(15), eff. Sept. 1, 1991; Subsec. (a) amended by Acts 2001, 77th Leg., ch. 172, Sec. 2, eff. Sept. 1, 2001. Art. 5.15-3. LOSS CONTROL INFORMATION.
Article repealed effective April 1, 2007
(a) Any insurer desiring to write professional liability insurance for insureds other than hospitals, general liability insurance, or medical professional liability insurance for insureds other than hospitals in this state must provide loss control information as a prerequisite for writing that insurance. (b) The insurer shall provide loss control information to its policyholders reasonably commensurate with the risks and exposures and experience of the insured's business. To provide this information or services, the insurer may employ qualified personnel, retain qualified independent contractors, contract with the policyholder to provide qualified accident prevention personnel and services, or use a combination of the methods provided by this article. (c) If there is evidence that reasonable loss control information is not being provided by the insurer or is not being used by the insurer in a reasonable manner to reduce losses, the State Board of Insurance shall order a hearing to determine if the insurer is not in compliance with this article. If it is determined that the insurer is not in compliance, the board may impose any of the sanctions authorized by Section 7, Article 1.10, of this code. (d) After opportunity for a hearing, the State Board of Insurance may promulgate reasonable rules and regulations for the enforcement of this article. (e) An insurer, its agents, servants, or employees are not liable and no cause of action arises with respect to any accident based on the allegation that the accident was caused or could have been prevented by a program, information, inspection, or other activity or service undertaken by the insurer for the prevention of accidents or control of losses in connection with operations of its insured. However, this immunity does not affect the liability of an insurer otherwise provided by a policy of insurance. (f) Any loss control information provided by an insurer to an insured is not subject to discovery or admissible in any civil proceeding as evidence. Added by Acts 1987, 70th Leg., 1st C.S., ch. 1, Sec. 4.03, eff. Sept. 2, 1987. Subsec. (a) amended by Acts 2001, 77th Leg., ch. 172, Sec. 3, eff. Sept. 1, 2001. Art. 5.15-4. BEST PRACTICES FOR NURSING HOMES.
Article repealed effective April 1, 2007
(a) The commissioner shall adopt best practices for risk management and loss control that may be used by for-profit and not-for-profit nursing homes. (b) In determining rates for professional liability insurance applicable to a for-profit or not-for-profit nursing home, an insurance company or the Texas Medical Liability Insurance Underwriting Association may consider whether the nursing home adopts and implements the best practices adopted by the commissioner under Subsection (a) of this article. (c) In developing or amending best practices for for-profit and not-for-profit nursing homes, the commissioner shall consult with the Health and Human Services Commission and a task force appointed by the commissioner. The task force must be composed of representatives of: (1) insurance companies that write professional liability insurance for nursing homes; (2) the Texas Medical Liability Insurance Underwriting Association; (3) nursing homes; and (4) consumers. (d) The best practices for risk management and loss control adopted under this article do not establish standards of care for nursing homes applicable in a civil action against a nursing home. Added by Acts 2001, 77th Leg., ch. 1284, Sec. 5.03, eff. June 15, 2001. Art. 5.18. INFORMATION TO BE FURNISHED INSUREDS; HEARINGS AND APPEALS OF INSUREDS.
Article repealed effective April 1, 2007
(a) Every insurer subject to this subchapter shall, within a reasonable time after receiving written request therefor and upon payment of such reasonable charges as it may make, furnish to any person then or thereafter affected by a rate used by the insurer or any modification thereof properly made, or to the authorized representative of such person, all information pertinent thereto. (b) Every insurer subject to this subchapter shall provide within this State reasonable means whereby any person aggrieved by the application of its rating system may be heard, in person or by his authorized representative, on his written request to review the manner in which such rating system has been applied in connection with the insurance afforded him. Any party affected by the action of such rating organization or such insurer on such request may, within ten (10) days after written notice of such action, appeal to the Board. Acts 1951, 52nd Leg., ch. 491. Amended by Acts 1991, 72nd Leg., ch. 242, Sec. 2.18, eff. Sept. 1, 1991. Art. 5.19. RATE ADMINISTRATION.
Article repealed effective April 1, 2007
(a) Recording and Reporting of Loss Experience and Other Data. The Board shall, after due consideration, promulgate reasonable rules and statistical plans which may be modified from time to time and which shall be used thereafter by each insurer in the recording and reporting of its loss experience and such other data as may be required, in order that the total loss and expense experience of all insurers may be made available at least biennially in such form and detail as may be necessary to aid in determining whether rating plans comply with the standards set forth in this subchapter. In promulgating such rules and plans, the Board shall have due regard for the rating plans used under this subchapter, and in order that such rules and plans may be as uniform as is practicable, to the rules and to the form of the plans used in other states. The Board may designate other agencies to gather and compile such experience. (b) Interchange of Rating Plan Data. Reasonable rules and plans may be promulgated by the Board after due consideration, requiring the interchange of loss experience necessary for the application of rating plans. (c) Consultation with Other States. In order to further uniform administration of rating laws, the Board and every insurer may exchange information and experience data with insurance supervisory officials, insurers and rating organizations in other states and may consult and cooperate with them with respect to rate making and the application of rating systems. (d) Rules and Regulations. The Board may make reasonable rules and regulations necessary to effect the purposes of this subchapter. Acts 1951, 52nd Leg., ch. 491. Subsecs. (a), (c) amended by Acts 1991, 72nd Leg., ch. 242, Sec. 2.19, eff. Sept. 1, 1991. Art. 5.20. REBATES PROHIBITED.
Article repealed effective April 1, 2007
(a) Except as provided by this article, no insurer or employee thereof, and no broker or agent shall knowingly issue any policy of insurance nor charge, demand or receive a premium thereon except in accordance with the applicable filing. No insurer or employee thereof, and no broker or agent shall pay, allow or give, or offer to pay, allow, or give, directly or indirectly, as an inducement to insurance, or after insurance has been effected, any rebate, discount, abatement, credit or reduction of the premium named in a policy of insurance, or any special favor or advantage in the dividends or other benefits to accrue thereon, or any valuable consideration or inducement whatever, not specified in the policy of insurance, except to the extent provided for in such applicable filing. No insured named in a policy of insurance, nor any employee of such insured shall knowingly receive or accept, directly or indirectly, any such rebate, discount, abatements, or reduction of premium, or any special favor or advantage or valuable consideration or inducement. (b) Nothing in this article, however, shall be construed to prohibit an insurer from sharing its profits after the same have been earned with its policyholders under and in accordance with an agreement as to such profit sharing contained in its policy contract. Any profit sharing under any policy with insured shall be uniform as between such insured, and shall consist only and solely of the equitable distribution under and in accordance with the terms of the policy of earnings between such insured, and no such insurer shall discriminate in any distribution of profits between insured of a class, and no classes for such distribution shall be made or established except on the approval of the commissioner. No part of any profit shall be distributed to any insured under any such policy until the expiration of the policy contract, provided no distribution of profits or dividends to insured shall take effect or be paid until the same shall have been approved by the commissioner; and provided further, that no such distribution shall be approved until adequate reserves shall have been provided, such reserves to be computed on the same basis for all classes of insurers operating under this subchapter. Any violation of the terms of this article shall constitute unjust discrimination and shall constitute rebating, and shall be sufficient grounds for the revocation of the permit of the insurer or of the license of the agent being guilty of such unjust discrimination and rebating; provided further, that nothing in this subchapter shall be construed to prohibit the modification of rates by any rating plan authorized under this subchapter. (c) This article does not prohibit an insurer, on approval by the commissioner, from sharing profits with policyholders who are part of a group program established by a nonprofit business association and who participate in the group program because of membership in the association. An insurer that elects to make distributions under this subsection shall file a written description of its distribution program with the commissioner for approval by the commissioner and shall notify the commissioner in writing of each distribution made under the program. If the commissioner does not act on the insurer's distribution program within five business days of receipt of the insurer's distribution program, the distribution program is considered approved. For purposes of this subsection, "nonprofit business association" means a business association that is a nonprofit corporation exempt from federal income tax under Section 501(a) of the Internal Revenue Code of 1986, and its subsequent amendments, by being listed as an exempt organization under Section 501(c)(6) of that code. (d) As used in this article: (1) "Insurance" includes suretyship. (2) "Insurer" means an insurance company or other legal entity described by Subsection (a), Article 5.13, of this code. (3) "Policy" includes a bond. Acts 1951, 52nd Leg., ch. 491. Amended by Acts 1991, 72nd Leg., ch. 242, Sec. 2.20, eff. Sept. 1, 1991; Acts 1999, 76th Leg., ch. 1240, Sec. 2, eff. June 18, 1999; Acts 2005, 79th Leg., ch. 631, Sec. 2, eff. Sept. 1, 2005. Art. 5.21. FALSE OR MISLEADING INFORMATION.
Article repealed effective April 1, 2007
No person or organization shall knowingly give false or misleading information to the Board, to any insurer, or to any other entity, which will in any manner affect the proper determination of rates or premiums. An insurer or agent who knowingly misrepresents the actual or replacement value of real or personal property for the purpose of achieving an unfair competitive rate advantage commits an offense. Acts 1951, 52nd Leg., ch. 491. Amended by Acts 1991, 72nd Leg., ch. 242, Sec. 2.21, eff. Sept. 1, 1991. Art. 5.22. PENALTIES. (a) The Board may suspend the license of any advisory organization licensed under Article 5.73 of this code, insurer or agent which fails to comply with an order of the Board within the time limited by such order, or any extension thereof which the Board may grant. The Board shall not suspend the license of any advisory organization, agent or insurer for failure to comply with an order until the time prescribed for an appeal therefrom has expired or, if an appeal has been taken, until such order has been affirmed. The Board may determine when a suspension of license shall become effective and it shall remain in effect for the period fixed by it, unless it modifies or rescinds such suspension or until the order upon which such suspension is based is modified, rescinded or reversed. (b) No license shall be suspended except upon a written order of the Board, stating its findings, made after a hearing held upon not less than ten (10) days' notice to such person or organization specifying the alleged violation. Acts 1951, 52nd Leg., ch. 491. Amended by Acts 1991, 72nd Leg., ch. 242, Sec. 2.22, eff. Sept. 1, 1991. Art. 5.23. JUDICIAL REVIEW. Any order or decision of the Board shall be subject to review, which shall be on the basis of the record of the proceedings before the Board and shall not be limited to questions of law, by direct action in the District Court of Travis County, instituted by any party aggrieved by any action taken under this subchapter. Pending final disposition of any proceedings which attack the correctness of a rate, any insurer affected by such order may continue to charge the rate which obtained prior to such order of decrease or may charge the rate resulting from such order of increase, on condition that the difference in the premiums be deposited in a special account by said insurer, to be held in trust by said insurer, and to be retained by said insurer or paid to the holders of policies issued after the order of the Board, as the court may determine. In all other cases, the court shall determine whether the filing of the appeal shall operate as a stay. The court may, in disposing of the issue before it, modify, affirm or reverse the order or decision of the Board in whole or in part. Acts 1951, 52nd Leg., ch. 491.
SUBCHAPTER C. FIRE INSURANCE AND ALLIED LINES
Art. 5.25. BOARD SHALL FIX RATES.
Text of article effective until April 1, 2007
(a) The State Board of Insurance shall have the sole and exclusive power and authority and it shall be its duty to prescribe, fix, determine and promulgate the rates of premiums to be charged and collected by fire insurance companies transacting business in this State. Said Board shall also have authority to alter or amend any and all such rates of premiums so fixed and determined and adopted by it, and to raise or lower the same, or any part thereof, as herein provided. Said Board shall have authority to employ clerical help, inspectors, experts and other assistants, and to incur such other expenses as may be necessary in carrying out the provisions of this law. Said Board shall ascertain as soon as practicable the annual fire loss in this State; obtain, make and maintain a record thereof and collect such data with respect thereto as will enable said Board to classify the fire losses of this State, the causes thereof, and the amount of premiums collected therefor for each class of risks and the amount paid thereon, in such manner as will aid in determining equitable insurance rates, methods of reducing such fire losses and reducing the insurance rates of the State, or subdivisions of the State. The Board may designate one or more advisory organizations or other agencies to gather, audit, and compile such experience of insurers, and the cost thereof shall be borne by such insurers. (b) Notwithstanding Subsection (a) of this article, on and after the effective date of S.B. No. 14, Acts of the 78th Legislature, Regular Session, 2003, rates for homeowners and residential fire and residential allied lines insurance coverage under this subchapter are determined as provided by Subchapter Q of this chapter, and rates for other lines of insurance subject to this subchapter are determined as provided by Article 5.13-2 of this code, except that on and after December 1, 2004, rates for all lines of insurance subject to this subchapter are determined as provided by Article 5.13-2 of this code. This subsection does not affect the requirement for the commissioner to conduct inspections of commercial property and prescribe a manual of rules and rating schedules for commercial property under this subchapter. Acts 1951, 52nd Leg., ch. 491. Amended by Acts 1985, 69th Leg., ch. 861, Sec. 1, eff. June 15, 1985; Acts 1991, 72nd Leg., ch. 242, Sec. 2.23, eff. Sept. 1, 1991; Acts 1991, 72nd Leg., ch. 628, Sec. 10, eff. Sept. 1, 1991; Subsec. (b) amended by Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Sec. 8.10, eff. Jan. 1, 1992; amended by Acts 1995, 74th Leg., ch. 984, Sec. 13, eff. Sept. 1, 1995; Subsec. (b) amended by Acts 1997, 75th Leg., ch. 1330, Sec. 3, eff. Sept. 1, 1997; Subsec. (b) amended by Acts 2003, 78th Leg., ch. 206, Sec. 21.12, eff. June 11, 2003. For text of section effective April 1, 2007, see Art. 5.25, post Art. 5.25. BOARD SHALL FIX RATES.
Text of section effective April 1, 2007
(a) The State Board of Insurance shall have the sole and exclusive power and authority and it shall be its duty to prescribe, fix, determine and promulgate the rates of premiums to be charged and collected by fire insurance companies transacting business in this State. Said Board shall also have authority to alter or amend any and all such rates of premiums so fixed and determined and adopted by it, and to raise or lower the same, or any part thereof, as herein provided. (b) Notwithstanding Subsection (a) of this article, on and after the effective date of S.B. No. 14, Acts of the 78th Legislature, Regular Session, 2003, rates for homeowners and residential fire and residential allied lines insurance coverage under this subchapter are determined as provided by Subchapter Q of this chapter, and rates for other lines of insurance subject to this subchapter are determined as provided by Article 5. 13-2 of this code, except that on and after December 1, 2004, rates for all lines of insurance subject to this subchapter are determined as provided by Article 5.13-2 of this code. Acts 1951, 52nd Leg., ch. 491. Amended by Acts 1985, 69th Leg., ch. 861, Sec. 1, eff. June 15, 1985; Acts 1991, 72nd Leg., ch. 242, Sec. 2.23, eff. Sept. 1, 1991; Acts 1991, 72nd Leg., ch. 628, Sec. 10, eff. Sept. 1, 1991; Subsec. (b) amended by Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Sec. 8.10, eff. Jan. 1, 1992; amended by Acts 1995, 74th Leg., ch. 984, Sec. 13, eff. Sept. 1, 1995; Subsec. (b) amended by Acts 1997, 75th Leg., ch. 1330, Sec. 3, eff. Sept. 1, 1997; Subsec. (b) amended by Acts 2003, 78th Leg., ch. 206, Sec. 21.12, eff. June 11, 2003; Amended by Acts 2005, 79th Leg., ch. 727, Sec. 5, eff. April 1, 2007. For text of section effective until April 1, 2007, see Art. 5.25, ante Art. 5.25A. RATES APPLICABLE TO CERTAIN LOCATIONS. (a) The State Board of Insurance in adopting fire insurance and homeowners insurance rates under this subchapter shall authorize a fringe area rating as defined under its general basis rating schedule for any dwelling located within five miles of the outer boundary of a platted subdivision classified by the board under board criteria as a first key town. (b) Notwithstanding Subsection (a) of this article, on and after the effective date of S.B. No. 14, Acts of the 78th Legislature, Regular Session, 2003, rates for homeowners and residential fire and residential allied lines insurance coverage under this subchapter are determined as provided by Subchapter Q of this chapter, and rates for other lines of insurance subject to this subchapter are determined as provided by Article 5.13-2 of this code, except that on and after December 1, 2004, rates for all lines of insurance subject to this subchapter are determined as provided by Article 5.13-2 of this code. Added by Acts 1989, 71st Leg., ch. 481, Sec. 1, eff. Sept. 1, 1989. Amended by Acts 1991, 72nd Leg., ch. 242, Sec. 2.24, eff. Sept. 1, 1991; Subsec. (b) amended by Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Sec. 8.11, eff. Jan. 1, 1992; amended by Acts 1995, 74th Leg., ch. 984, Sec. 14, eff. Sept. 1, 1995; Subsec. (b) amended by Acts 1997, 75th Leg., ch. 1330, Sec. 4, eff. Sept. 1, 1997; Subsec. (b) amended by Acts 2003, 78th Leg., ch. 206, Sec. 21.13, eff. June 11, 2003. Art. 5.25-1. PUBLIC GUIDE RELATING TO COMMERCIAL PROPERTY RATING.
Article repealed effective April 1, 2007
(a) The commissioner shall make available to the public a generalized guide that: (1) summarizes the procedures used by the department or other rating agency to rate nonresidential commercial buildings in this state; and (2) specifies how different construction elements and techniques used in a building project affect the insurance rating of the completed building. (b) The commissioner may charge a reasonable fee to cover the administrative costs of producing and distributing the guide. (c) The commissioner shall review the information in the guide in January of each odd-numbered year and shall revise the guide as necessary to incorporate any changes that have occurred in the preceding biennium that affect the information. (d) For purposes of this article, "rating agency" means a public or private legal entity that is authorized to conduct commercial property rating in this state. Added by Acts 1995, 74th Leg., ch. 440, Sec. 1, eff. Sept. 1, 1995. Art. 5.25-2. CITY FIRE LOSS LISTS.
Article repealed effective April 1, 2007
Sec. 1. In this article, "list" means the list of fire and lightning losses in excess of $100 paid under policy forms adopted or approved by the commissioner under Article 5.35 of this code or filed and in effect as provided by Article 5.145 of this code in a particular city or town prepared by the department for distribution to the city or town. Sec. 2. (a) The department shall compile for each city or town in Texas a list of the insured fire losses paid under policy forms adopted or approved by the commissioner under Article 5.35 of this code or filed and in effect as provided by Article 5.145 of this code in that city or town for the preceding statistical year. (b) The list shall include: (1) the names of persons recovering losses under policy forms adopted or approved by the commissioner under Article 5.35 of this code or filed and in effect as provided by Article 5.145 of this code; (2) the addresses or locations where the losses occurred; and (3) the amount paid by the insurance company on each loss. (c) The department shall obtain the information to make the lists from insurance company reports of individual losses during the statistical year. Sec. 3. Upon the request of any city or town, or its duly authorized agent or fire marshall, the department shall provide that city and town with a copy of the list for its particular area. Sec. 4. Each city or town shall investigate its list to determine the losses actually occurring in its limits and shall make a report to the department, which report shall include: (1) a list of the losses that actually occurred in the limits of the city or town; (2) a list of any losses not occurring in the limits of the city or town; and (3) other evidence essential to establishing the losses in the city or town. Sec. 5. The department shall make such changes or corrections as to it shall seem appropriate in order to correct the list of insured fire and lightning losses paid under policy forms adopted or approved by the commissioner under Article 5.35 of this code or filed and in effect as provided by Article 5.145 of this code in a particular city or town and said list of losses, as changed or corrected, shall be used to determine the fire record credit or debit for each particular city or town for the next year. Sec. 6. The commissioner shall set and collect a charge for compiling and providing a list of fire and lightning losses paid under policy forms adopted or approved by the commissioner under Article 5.35 of this code or filed and in effect as provided by Article 5.145 of this code in a particular city or town and as the commissioner shall deem appropriate to administer the fire record system. Sec. 7. The department is authorized to require each and every city or town in the State of Texas and each and every insurance company or carrier of every type and character whatsoever doing business in the State of Texas to furnish to it a complete and accurate list of all fire and lightning losses occurring within the State of Texas and reflected in their records for the purpose of accumulating statistical information for the control and prevention of fires. Sec. 8. The department may, at its discretion, furnish such list only during such time as the fire record system remains in force and effect. Added by Acts 1967, 60th Leg., p. 2063, ch. 765, Sec. 1, eff. Aug. 28, 1967. Secs. 1, 2, 5, 6 amended by Acts 1991, 72nd Leg., ch. 242, Sec. 2.25, eff. Sept. 1, 1991; Acts 2003, 78th Leg., ch. 206, Sec. 21.14, eff. June 11, 2003. Art. 5.25-3. FIRE INSURANCE RATES AND FIRE SUPPRESSION RATINGS FOR BORDER MUNICIPALITY.
Text of section effective until April 1, 2007
The commissioner, in adopting fire insurance rates or in assigning or evaluating a fire suppression rating for a municipality at or near the border between this state and another state or the United Mexican States, shall take into account the existence and capabilities of a fire department or volunteer fire department that serves an adjoining or nearby municipality in the other state or the United Mexican States and that by agreement or by long-standing practice provides fire suppression services to the Texas municipality. Added by Acts 1997, 75th Leg., ch. 1413, Sec. 1, eff. Sept. 1, 1997. For text of section effective April 1, 2007, see Art. 5.25-3, post Art. 5.25-3. FIRE INSURANCE RATES AND FIRE SUPPRESSION RATINGS FOR BORDER MUNICIPALITY.
Text of section effective April 1, 2007
The commissioner, in adopting fire insurance rates for a municipality at or near the border between this state and another state or the United Mexican States, shall take into account the existence and capabilities of a fire department or volunteer fire department that serves an adjoining or nearby municipality in the other state or the United Mexican States and that by agreement or by long-standing practice provides fire suppression services to the Texas municipality. For text of section effective until April 1, 2007, see Art. 5.25-3, ante Added by Acts 1997, 75th Leg., ch. 1413, Sec. 1, eff. Sept. 1, 1997; Amended by Acts 2005, 79th Leg., ch. 727, Sec. 6, eff. April 1, 2007. Art. 5.26. MAXIMUM RATE FIXED, AND DEVIATIONS THEREFROM. (a) A maximum rate of premiums to be charged or collected by all companies transacting in this state the business of fire insurance, as herein defined, shall be exclusively fixed and determined and promulgated by the Board, and no such fire insurance company shall charge or collect any premium or other compensation for or on account of any policy or contract of fire insurance as herein defined in excess of the maximum rate as herein provided for; provided, however, upon the written application of the insured stating his reasons therefor, filed with and approved by the Board, a rate in excess of the maximum rate promulgated by the Board may be used on any specific risk. (b) Any insurer desiring to write insurance at a less rate than the maximum rate provided for in paragraph (a) above shall make a written application to the Board for permission to file a uniform percentage deviation for a lesser rate than the maximum rate, on a state-wide basis or by reasonable territories as approved by the Board, from the class rates or schedules or rating plans respecting fire insurance and its allied lines of insurance or class of risk within such kind of insurance or a combination thereof promulgated by the Board. Such application shall specify the basis of the deviation, and shall be accompanied by the data upon which the applicant relies; provided, however, such application, data and all other information filed in connection with such deviation shall be public records open to inspection at any reasonable time. The provisions of this paragraph shall not be construed to prohibit the application of a uniform scale of percentage deviations from the maximum rate provided the general standards fixed in paragraph (d) hereof are met. (c) Provided further, that any insurer desiring to write insurance at a lesser net rate than the maximum rate provided for in paragraph (a) above, either individually or as a member of a group or association, said lesser net rate being obtained by the application of a rating plan or procedure in use by it or by a group or association of which it is a member, which said rating plan or procedure shall apply only to special types or classes of risk in connection with which an inspection or engineering service and set of standards all acceptable to the Board are used, and which inspection or engineering services and set of standards have been and will continue to be maintained, shall make a written application to the Board for permission to file its said rating plan or procedure, the application of which would produce such lesser net rate. Said application shall specify the basis of the modification and shall be accompanied by the data on which applicant relies. Every insurer or group or association which avails itself of the provisions of this paragraph shall thereafter follow in the conduct of its business as to such classes or types of risks, only such rating plan or procedure ordered as permitted by the Board for its use as to said special types or classes of risks. If the Board shall issue an order permitting such deviation, such insurer or such group or association for it shall file with the Board all rates of premium or deposit for individual risks underwritten by it, which rates shall be considered as deviations from the rates that would have been promulgated by the Board on such risks. (d) In considering any application provided for in (b) or (c) above, the Board shall give consideration to the factors applied by insurers in determining the bases for rates; the financial condition of the insurer; the method of operation and expenses of such insurer; the loss experience of the insurer, past and prospective, including where pertinent the conflagration and catastrophe hazards, if any, both within and without this state; to all factors reasonably related to the kind of insurance involved; to a reasonable margin for an underwriting profit for the insurer, and, in the case of participating insurers, to policyholders' dividends. The Board shall issue an order permitting the deviation for such insurer to be filed if it is found to be justified upon the applicant's showing that the resulting premiums would be adequate and not unfairly discriminatory. The Board shall issue an order denying such application if it finds that the resulting premiums would be inadequate or unfairly discriminatory. As soon as reasonably possible after such application has been made the Board shall in writing permit or deny the same; provided, that any such application shall be deemed permitted unless denied within thirty (30) days; provided, that the Board may by official order postpone action for one additional period not exceeding thirty (30) days if deemed necessary for proper consideration; except that deviations in effect at the time this Act becomes effective shall be controlled by subdivision (f) hereof. Each deviation permitted to be filed shall be effective for a period of one (1) year from the date of final granting of such permission whether by the Board in the first instance or upon direction of the court. However, a deviation may be withdrawn at any time with the approval of the Board or terminated by order of the Board, which order must specify the reasons for such termination. All deviations from maximum rates shall be governed by this Article. (e) No policy of insurance in force prior to the taking effect of any changes in rate that result from the provisions of this Act shall be affected thereby, unless there shall be a change in the hazard of the risk necessitating a change in the rate applicable to such risk, in which event such policy shall be subject to new rates developed under the provisions hereof. (f) Any deviations from maximum rates on file with the Board and in effect until the effective time of this Act shall remain in effect for a period of thirty (30) days after such effective time, and if during such thirty (30) day period a written application to the Board is made for permission to file such deviations under this Act, same shall remain in effect until the Board has entered its order either permitting or denying the application and during the full course of any hearings on and appeal from any such order. (g) The Board may call a public hearing on any application for permission to file a deviation or a hearing on a permitted deviation and shall call a hearing upon the request of any aggrieved policyholder of the company filing the deviation made within thirty (30) days after the granting or denying of any deviation. The Board shall give reasonable notice of such hearings and shall hear witnesses respecting such matters. Any applicant dissatisfied with any order of the Board made without a hearing under this Article may within thirty (30) days after entry of such order make written request of the Board for a hearing thereon. The Board shall hear such applicant within twenty (20) days after receiving such request and shall give not less than ten (10) days written notice of the time and place of the hearing. Within fifteen (15) days after such hearing the Board shall affirm, reverse or modify by order its previous action, specifying in such order its reasons therefor. Any applicant who may be dissatisfied with any order of the Board respecting its application may appeal in accordance with Article 1.04 of this code. The judgment of the District Court shall be appealable as in any other civil case. Such action shall have precedence over other civil cases on the dockets of the appellate courts. Should the Board terminate or refuse to renew a permitted deviation or refuse permission for filing of a deviation under subdivision (f) hereof, then such deviation shall remain in effect during the course of any hearing thereon and thirty (30) days thereafter, and during the course of any appeal taken from such order and until final judgment of the courts. (h) Repealed by Acts 2003, 78th Leg., ch. 206, Sec. 21.47(2). (i) Notwithstanding Subsections (a)-(h) of this article, on and after the effective date of S.B. No. 14, Acts of the 78th Legislature, Regular Session, 2003, rates for homeowners and residential fire and residential allied lines insurance coverage under this subchapter are determined as provided by Subchapter Q of this chapter, and rates for other lines of insurance subject to this subchapter are determined as provided by Article 5.13-2 of this code, except that on and after December 1, 2004, rates for all lines of insurance subject to this subchapter are determined as provided by Article 5.13-2 of this code. Acts 1951, 52nd Leg., ch. 491. Amended by Acts 1957, 55th Leg., p. 1443, ch. 497, Sec. 1; Acts 1981, 67th Leg., p. 2637, ch. 707, Sec. 4(23), eff. Aug. 31, 1981. Subsec. (d) amended by and Subsec. (i) added by Acts 1991, 72nd Leg., ch. 242, Sec. 2.26, eff. Sept. 1, 1991; Subsec. (i) amended by Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Sec. 8.12, eff. Jan. 1, 1992; Subsec. (g) amended by Acts 1993, 73rd Leg., ch. 685, Sec. 4.03, eff. Sept. 1, 1993; Subsec. (i) amended by Acts 1995, 74th Leg., ch. 984, Sec. 15, eff. Sept. 1, 1995; Subsec. (i) amended by Acts 1997, 75th Leg., ch. 1330, Sec. 5, eff. Sept. 1, 1997; Subsec. (h) repealed by Acts 2003, 78th Leg., ch. 206, Sec. 21.47(2), eff. June 11, 2003; Subsec. (i) amended by Acts 2003, 78th Leg., ch. 206, Sec. 21.15, eff. June 11, 2003. Art. 5.27. NO COMPANY EXEMPT. Every fire insurance company, every marine insurance company, every fire and marine insurance company, every fire and tornado insurance company, and each and every insurance company of every kind and name issuing a contract or policy of insurance, or contracts or policies of insurance against loss by fire on property within this State, whether such property be fixed or movable, stationary or in transit, or whether such property is consigned or billed for shipment within or beyond the boundary of this State or to some foreign county, whether such company is organized under the laws of this State or under the laws of any other state, territory or possession of the United States, or foreign country, or by authority of the Federal Government, now holding certificate of authority to transact business in this State, shall be deemed to have accepted such certificate and to transact business thereunder, upon condition that it consents to the terms and provisions of this subchapter and that it agrees to transact business in this State, subject thereto; it being intended that every contract or policy of insurance against the hazard of fire shall be issued in accordance with the terms and provisions of this subchapter, and the company issuing the same governed thereby, regardless of the kind and character of such property and whether the same is fixed or movable, stationary or in transit, including the shore end of all marine risks insured against loss by fire. Acts 1951, 52nd Leg., ch. 491. Art. 5.28. STATEMENTS AND BOOKS.
Text of subsec. (a) effective until April 1, 2007
(a) Said Board is authorized and empowered to require sworn statements for any period of time from any insurance company affected by this law and from any of its directors, officers, representatives, general agents, state agents, special agents, and local agents of the rates and premiums collected for fire insurance on each class of risks, on all property in this State and of the causes of fire, if such be known, if they are in possession of such data, and information, or can obtain it at a reasonable expense; and said Board is empowered to require such statements showing all necessary facts and information to enable said Board to make, amend and maintain the general basis schedules provided for in this law and the rules and regulations for applying same and to determine reasonable and proper maximum specific rates and to determine and assist in the enforcement of the provisions of this law.
Text of subsec. (a) effective April 1, 2007
(a) Said Board is authorized and empowered to require sworn statements for any period of time from any insurance company affected by this law and from any of its directors, officers, representatives, general agents, state agents, special agents, and local agents of the rates and premiums collected for fire insurance on each class of risks, on all property in this State and of the causes of fire, if such be known, if they are in possession of such data, and information, or can obtain it at a reasonable expense; and said Board is empowered to require such statements showing all necessary facts and information to enable said Board to make, amend and maintain the general basis schedules provided for in this law and the rules and regulations for applying same and to determine reasonable and proper maximum specific rates.
Text of subsec. (b) effective until April 1, 2007
(b) The said Board shall also have the right, at its discretion, either personally, or by someone duly authorized by it, to visit the office whether general, local or otherwise, of any insurance company doing business in this State, and the home office of said company outside of this State, if there be such, and the office of any officers, directors, general agents, state agents, local agents or representatives of such company, and there require such company, its officers, agents or representatives, to produce for inspection by said Board or any of its duly authorized representatives all books, records and papers of such company or such agents and representatives; and the said Board or its duly authorized agents or representatives shall have the right to examine such books and papers and make or cause to be made copies thereof; and shall have the right to take testimony under oath with reference thereto, and to compel the attendance of witnesses for such purpose.
Text of subsec. (c) effective until April 1, 2007
(c) Said Board shall be further empowered to require the fire insurance companies transacting business in this State or any of them, to furnish said Board with any and all data which may be in their possession, either jointly or severally, including maps, tariffs, inspection reports and any and all data affecting fire insurance risks in this State, or in any portion thereof, and said Board shall be empowered to require any two (2) or more of said companies, or any joint agent or representative of them, to turn over any and all such data in their possession, or any part thereof, to said Board for its use in carrying out the provisions of this law. (d) Notwithstanding Subsection (a) of this article, on and after the effective date of S.B. No. 14, Acts of the 78th Legislature, Regular Session, 2003, rates for homeowners and residential fire and residential allied lines insurance coverage under this subchapter are determined as provided by Subchapter Q of this chapter, and rates for other lines of insurance subject to this subchapter are determined as provided by Article 5.13-2 of this code, except that on and after December 1, 2004, rates for all lines of insurance subject to this subchapter are determined as provided by Article 5.13-2 of this code. Acts 1951, 52nd Leg., ch. 491. Amended by Acts 1991, 72nd Leg., ch. 242, Sec. 2.27, eff. Sept. 1, 1991; Subsec. (d) amended by Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Sec. 8.13, eff. Jan. 1, 1992; amended by Acts 1995, 74th Leg., ch. 984, Sec. 16, eff. Sept. 1, 1995; Subsec. (d) amended by Acts 1997, 75th Leg., ch. 1330, Sec. 6, eff. Sept. 1, 1997; Subsec. (d) amended by Acts 2003, 78th Leg., ch. 206, Sec. 21.16, eff. June 11, 2003; Subsec. (a) amended by Acts 2005, 79th Leg., ch. 727, Sec. 7, eff. April 1, 2007; Subsecs. (b) and (c) are repealed by Acts 2005, 79th Leg., ch. 727, Sec. 18(f), eff. April 1, 2007. Art. 5.29. SCHEDULE AND REPORT. (a) The rates of premium fixed by said Board in pursuance of the provision of this subchapter shall be at all times reasonable and the schedules thereof made and promulgated by said Board shall be in such forms as will in the judgment of the Board most clearly and in detail disclose the rate so fixed and determined by said Board to be charged and collected for policies of fire insurance. Said Board may employ and use any facts obtainable from and concerning fire insurance companies transacting business in this State, showing their expense and charges for fire insurance premiums for any period or periods said Board may deem advisable, which in their opinion will enable them to devise and fix and determine reasonable rates of premiums for fire insurance. The said Board in making and publishing schedules of the rates fixed and determined by it shall show all charges, credits, terms, privileges and conditions which in anywise affect such rates, and copies of all such schedules shall be furnished by said Board to any and all companies affected by this subchapter applying therefor, and the same shall be furnished to any citizens of this State applying therefor, upon the payment of the actual cost thereof. No rate or rates fixed or determined by the Board shall take effect until it shall have entered an order or orders fixing and determining same, and shall give notice thereof to all fire insurance companies affected by this subchapter, authorized to transact business in the State. The Board, and any inspector or other agent or employee thereof, who shall inspect any risk for the purpose of enabling the Board to fix and determine the reasonable rate to be charged thereon, shall furnish to the owner of such risk at the date of such inspection a copy of the inspection report, showing all defects that may operate as charges to increase the insurance rate. (b) Notwithstanding Subsection (a) of this article, on and after the effective date of S.B. No. 14, Acts of the 78th Legislature, Regular Session, 2003, rates for homeowners and residential fire and residential allied lines insurance coverage under this subchapter are determined as provided by Subchapter Q of this chapter, and rates for other lines of insurance subject to this subchapter are determined as provided by Article 5.13-2 of this code, except that on and after December 1, 2004, rates for all lines of insurance subject to this subchapter are determined as provided by Article 5.13-2 of this code. Acts 1951, 52nd Leg., ch. 491. Amended by Acts 1991, 72nd Leg., ch. 242, Sec. 2.28, eff. Sept. 1, 1991; Subsec. (b) amended by Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Sec. 8.14, eff. Jan. 1, 1992; amended by Acts 1995, 74th Leg., ch. 984, Sec. 17, eff. Sept. 1, 1995; Subsec. (b) amended by Acts 1997, 75th Leg., ch. 1330, Sec. 7, eff. Sept. 1, 1997; Subsec. (b) amended by Acts 2003, 78th Leg., ch. 206, Sec. 21.17, eff. June 11, 2003. Art. 5.30. ANALYSIS OF RATE.
Text of subsec. (a) effective until April 1, 2007
(a) When a policy of fire insurance shall be issued by any company transacting the business of fire insurance in this State, such company shall furnish the policyholder with a written or printed analysis of the rate or premium charged for such policy, showing the items of charge and credit which determine the rate, unless such policyholder has theretofore been furnished with such analysis of such rate. All schedules of rates promulgated by said Board shall be open to the public, and every local agent of such fire insurance company shall have and exhibit to the public copies of such schedules covering all risks upon which he is authorized to write insurance.
Text of subsec. (a) effective April 1, 2007
(a) All schedules of rates promulgated by said Board shall be open to the public, and every local agent of any company engaging in the business of fire insurance in this state shall have and exhibit to the public copies of such schedules covering all risks upon which he is authorized to write insurance. (b) Notwithstanding Subsection (a) of this article, on and after the effective date of S.B. No. 14, Acts of the 78th Legislature, Regular Session, 2003, rates for homeowners and residential fire and residential allied lines insurance coverage under this subchapter are determined as provided by Subchapter Q of this chapter, and rates for other lines of insurance subject to this subchapter are determined as provided by Article 5.13-2 of this code, except that on and after December 1, 2004, rates for all lines of insurance subject to this subchapter are determined as provided by Article 5.13-2 of this code. Acts 1951, 52nd Leg., ch. 491. Amended by Acts 1991, 72nd Leg., ch. 242, Sec. 2.29, eff. Sept. 1, 1991; Subsec. (b) amended by Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Sec. 8.15, eff. Jan. 1, 1992; amended by Acts 1995, 74th Leg., ch. 984, Sec. 18, eff. Sept. 1, 1995; Subsec. (b) amended by Acts 1997, 75th Leg., ch. 1330, Sec. 8, eff. Sept. 1, 1997; Subsec. (b) amended by Acts 2003, 78th Leg., ch. 206, Sec. 21.18, eff. June 11, 2003; Subsec. (a) amended by Acts 2005, 79th Leg., ch. 727, Sec. 8, eff. April 1, 2007. Art. 5.31. CHANGE OR LIMIT OF RATE. (a) Said Board shall have full power and authority to alter, amend, modify or change any rate fixed and determined by it on thirty (30) days' notice, or to prescribe that any such rate or rates shall be in effect for a limited time, and said Board shall also have full power and authority to prescribe reasonable rules whereby in cases where no rate of premium shall have been fixed and determined by the Board, for certain risks or classes of risks, policies may be written thereon at rates to be determined by the company. Such company or companies shall immediately report to said Board such risk so written, and the rates collected therefor, and such rates shall always be subject to review by the Board. (b) Notwithstanding Subsection (a) of this article, on and after the effective date of S.B. 14, Acts of the 78th Legislature, Regular Session, 2003, rates for homeowners and residential fire and residential allied lines insurance coverage under this subchapter are determined as provided by Subchapter Q of this chapter, and rates for other lines of insurance subject to this subchapter are determined as provided by Article 5.13-2 of this code, except that on and after December 1, 2004, rates for all lines of insurance subject to this subchapter are determined as provided by Article 5.13-2 of this code. Acts 1951, 52nd Leg., ch. 491. Amended by Acts 1991, 72nd Leg., ch. 242, Sec. 2.30, eff. Sept. 1, 1991; Subsec. (b) amended by Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Sec. 8.16, eff. Jan. 1, 1992; amended by Acts 1995, 74th Leg., ch. 984, Sec. 19, eff. Sept. 1, 1995; Subsec. (b) amended by Acts 1997, 75th Leg., ch. 1330, Sec. 9, eff. Sept. 1, 1997; Subsec. (b) amended by Acts 2003, 78th Leg., ch. 206, Sec. 21.19, eff. June 11, 2003. Art. 5.32. PETITION FOR CHANGE. (a) Any such fire insurance company shall have the right at any time to petition the Board for an order changing or modifying any rate or rates fixed and determined by the Board, and the Board shall consider such petition in the manner provided in this subchapter and enter such order thereon as it may deem just and equitable. (b) Notwithstanding Subsection (a) of this article, on and after the effective date of S.B. No. 14, Acts of the 78th Legislature, Regular Session, 2003, rates for homeowners and residential fire and residential allied lines insurance coverage under this subchapter are determined as provided by Subchapter Q of this chapter, and rates for other lines of insurance subject to this subchapter are determined as provided by Article 5.13-2 of this code, except that on and after December 1, 2004, rates for all lines of insurance subject to this subchapter are determined as provided by Article 5.13-2 of this code. Acts 1951, 52nd Leg., ch. 491. Amended by Acts 1991, 72nd Leg., ch. 242, Sec. 2.31, eff. Sept. 1, 1991; Subsec. (b) amended by Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Sec. 8.17, eff. Jan. 1, 1992; amended by Acts 1995, 74th Leg., ch. 984, Sec. 20, eff. Sept. 1, 1995; Subsec. (b) amended by Acts 1997, 75th Leg., ch. 1330, Sec. 10, eff. Sept. 1, 1997; Subsec. (b) amended by Acts 2003, 78th Leg., ch. 206, Sec. 21.20, eff. June 11, 2003. Art. 5.33. CREDIT FOR REDUCING HAZARD.
Article repealed effective April 1, 2007
(a) The commissioner may give each city, town, village, locality, or other political subdivision credit for each and every hazard they may reduce or entirely remove, and also for all added fire fighting equipment, increased police protection, or any other equipment or improvement that has a tendency to reduce the fire hazard of any such city, town, village, locality, or other political subdivision, and also to give credit for a good fire record made by any city, town, village, locality, or other political subdivision. (b) The commissioner may also compel any company to give any or all policy holders credit for any and all hazards said policy holder or holders may reduce or remove. (c) For the purposes of this Article, the installation of a new standard fire hydrant approved by the department within the required distance of a risk, as prescribed by the department, or the use of compressed air foam technology in fire-fighting equipment shall constitute a reduction in hazard by the policy holder or holders. (d) Said credit shall be in proportion to such reduction or removal of such hazard and said company or companies shall return to such policy holder or holders such proportional part of the unearned premium charged for such hazard that may be reduced or removed. Acts 1951, 52nd Leg., ch. 491. Amended by Acts 1971, 62nd Leg., p. 3005, ch. 992, Sec. 1, eff. June 15, 1971. Amended by Acts 1999, 76th Leg., ch. 1292, Sec. 1, eff. Sept. 1, 1999. Art. 5.33B. VOLUNTARY INSPECTION PROGRAM.
Article repealed effective April 1, 2007
Text of article as added by Acts 1995, 74th Leg., ch. 415, Sec. 10
Right to Voluntary Inspection of Property Condition
Sec. 1. Any person having an insurable interest in real or tangible personal property at a fixed location who desires to purchase residential property insurance may procure an independent inspection of the condition of the property by an inspector authorized to perform inspections under this article of the property proposed to be insured.
Definitions
Sec. 2. In this article: (a) "Residential property insurance" means insurance against loss to real or tangible personal property at a fixed location provided in a homeowners policy, residential fire and allied lines policy, or farm and ranch owners policy. (b) "Inspection" means a physical inspection of the property for which residential property insurance is sought. (c) "Inspection certificate" means a certificate issued by an inspector pursuant to this article indicating that the condition of the property meets or exceeds minimum standards. (d) "Minimum standards" are those standards for property condition insurability under this article as the commissioner shall determine by rule. (e) "Inspector" means a person authorized by the commissioner to perform inspections under this article.
Plan of Operation
Sec. 3. (a) The commissioner shall adopt a plan of operation for the Voluntary Inspection Program. The plan of operation shall include rules and standards for the inspection program, including but not limited to the following: (1) the manner and scope of the inspections to be performed; (2) the contents of the written evaluation report; (3) the form of the inspection certificate to be issued; (4) the term during which an inspection certificate shall remain valid; (5) rules for the certification and licensing of persons who are authorized to perform inspections under this program, which group shall include, but not be limited to: (i) persons licensed to perform real property inspections under the Real Estate Licensing Act; (ii) designated employees or agents of a county or municipality which elects to establish a voluntary inspection program to inspect properties for residential properties within the territorial limits of the county or municipality; and (6) the fee which may be charged to the person requesting the inspection. (b) The commissioner may adopt rules to encourage the coordination of inspections under this article with inspections performed under article 5.33A.
Effect of Certificate
Sec. 4. (a) The existence of an inspection certificate issued under this article creates a presumption that the property condition is adequate for residential property insurance to be issued. (b) As a condition of issuing a policy if an inspection certificate is used in whole or in part to determine insurability, an insurer may require a written statement by the applicant for residential property insurance stating that there have been no material or substantial changes to the property condition since the date of the inspection certificate. (c) An insurer who receives an inspection certificate may not use property condition as grounds for refusing to issue or renew residential property insurance unless the insurer reinspects the property and specifies the areas of deficiency in its declination letter.
Enforcement
Sec. 5. The commissioner may by rule provide for the use of any of the disciplinary procedures authorized in this code to maintain the integrity of the program or ensure compliance with this article.
Rulemaking Authority
Sec. 6. The commissioner is authorized to adopt rules in addition to the plan of operation that are appropriate to accomplish the purposes of this article. Added by Acts 1995, 74th Leg., ch. 415, Sec. 10, eff. Aug. 28, 1995. For text of article as added by Acts 1995, 74th Leg., ch. 337, Sec. 2, see Art. 5.33B, ante Art. 5.33E. OPTIONAL PREMIUM DISCOUNT FOR USE OF INSULATING CONCRETE FORM SYSTEM.
Article repealed effective April 1, 2007
Definitions
Sec. 1. In this article: (1) "Applicant for insurance coverage" includes an applicant for new coverage and a policyholder renewing coverage. (2) "Insurer" means an insurer authorized to write property and casualty insurance in this state. The term includes: (A) a county mutual insurance company; (B) a farm mutual insurance company; (C) a Lloyd's plan; and (D) a reciprocal or interinsurance exchange. (3) "Insulating concrete form system" means a building construction system primarily used to frame exterior walls in which polystyrene foam forms are placed in walls of a structure under construction and filled with concrete and steel reinforcing material to become a permanent part of the structure.
Optional Premium Discount
Sec. 2. (a) On receipt of written verification from an applicant for insurance coverage, an insurer may grant a discount, in accordance with the rules adopted by the commissioner under this article, in the applicant's homeowners' insurance premiums for covered property that is constructed using an insulating concrete form system. (b) Verification under this section must comply with the requirements prescribed under Section 3 of this article.
Rules; Inspection
Sec. 3. (a) The commissioner: (1) shall adopt rules that prescribe the requirements for determining that a structure has been built using an insulating concrete form system; and (2) may adopt other rules as necessary to implement this article. (b) If determined necessary by the commissioner, the rules adopted under this section may require an inspection of the property to be insured. The applicant for insurance coverage shall pay the costs of any inspection required under this subsection.
Amount of Premium Discount
Sec. 4. (a) The commissioner shall establish by rule the amount of the premium discount applicable under this article based on sound actuarial principles. (b) The commissioner may approve a discount greater or less than the discount established under Subsection (a) of this section if: (1) the insurer files the proposed discount with the department; and (2) the commissioner determines that the proposed discount is actuarially justified. Added by Acts 2003, 78th Leg., ch. 1180, Sec. 1, eff. Sept. 1, 2003. Art. 5.34. REVISING RATES. (a) The Board shall have authority after having given reasonable notice, not exceeding thirty (30) days, of its intention to do so, to alter, amend or revise any rates of premium fixed and determined by it in any schedules of such rates promulgated by it, and to give reasonable notice of such alteration, amendment or revision to the public, or to any company or companies affected thereby. Such altered, amended or revised rates shall be the rates thereafter to be charged and collected by all fire insurance companies affected by this subchapter. No policy in force prior to the taking effect of such changes or amendments shall be affected thereby, unless there shall be a change in the hazard of the risk, necessitating a change in the rate applicable to such risk, in which event such policy shall be subject to the new rates. (b) Notwithstanding Subsection (a) of this article, on and after the effective date of S.B. No. 14, Acts of the 78th Legislature, Regular Session, 2003, rates for homeowners and residential fire and residential allied lines insurance coverage under this subchapter are determined as provided by Subchapter Q of this chapter, and rates for other lines of insurance subject to this subchapter are determined as provided by Article 5.13-2 of this code, except that on and after December 1, 2004, rates for all lines of insurance subject to this subchapter are determined as provided by Article 5.13-2 of this code. Acts 1951, 52nd Leg., ch. 491. Amended by Acts 1991, 72nd Leg., ch. 242, Sec. 2.32, eff. Sept. 1, 1991; Subsec. (b) amended by Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Sec. 8.18, eff. Jan. 1, 1992; amended by Acts 1995, 74th Leg., ch. 984, Sec. 21, eff. Sept. 1, 1995; Subsec. (b) amended by Acts 1997, 75th Leg., ch. 1330, Sec. 12, eff. Sept. 1, 1997; Subsec. (b) amended by Acts 2003, 78th Leg., ch. 206, Sec. 21.21, eff. June 11, 2003. Art. 5.35. POLICY FORMS. (a) The commissioner shall adopt policy forms and endorsements for each kind of insurance subject to this subchapter other than a line regulated under Article 5.13-2 of this code that may be used by an insurer without filing for approval to use such forms. (b) The commissioner may also adopt policy forms and endorsements of national insurers or policy forms and endorsements adopted by a national organization of insurance companies or similar organization on policy forms and endorsements. Policy forms and endorsements may be adopted under this subsection for each kind of insurance subject to this subchapter other than a line regulated under Article 5.13-2 of this code on the request of an insurer. For purposes of this subsection, "national insurer" means an insurer subject to this article that, either directly or together with its affiliates as part of an insurance holding company system as those terms are defined by Article 21.49-1 of this code, is licensed to do business and write the kinds of insurance that are subject to this subchapter in 26 or more states and maintains minimum annual direct written premiums for residential property insurance of $750 million in the aggregate for all states. (c) The commissioner may approve the use of policy forms and endorsements adopted by a national organization of insurance companies or a similar organization, if such forms or endorsements are filed with and are approved by the commissioner in accordance with this article. (d) An insurer may use an endorsement to the policy forms adopted or approved by the commissioner under this article if the endorsement is approved by the commissioner pursuant to this article. (e) Unless adopted or approved by the commissioner pursuant to Subsection (a), (b), or (c) of this article or, in the case of an endorsement, under Subsection (d) of this article, an insurance policy or endorsement for use in writing the types of insurance subject to this article may not be delivered or issued for delivery in this state. (f) Each filing pursuant to Subsection (c) or (d) of this article shall be made not later than the 60th day before the date of any use or delivery for use. At the expiration of the 60-day period, a filed form or endorsement is approved unless before the expiration of the 60 days the commissioner either disapproves the form or endorsement by order or approves the form or endorsement. Approval of a form or endorsement by the commissioner constitutes a waiver of any unexpired portion of the 60-day period. The commissioner may extend, by not more than an additional 30 days, the period during which the commissioner may approve or disapprove a form or endorsement by giving notice to the filer of the extension before the expiration of the initial period. At the expiration of any extension and in the absence of any earlier approval or disapproval, the form or endorsement shall be considered approved. For good cause shown, the commissioner may withdraw the commissioner's approval at any time after notice and hearing. (g)(1) The commissioner may disapprove a policy form or endorsement filed under this article, or withdraw any previous approval thereof, if the policy form or endorsement: (A) violates or does not comply with this code, or any valid rule relating thereto duly adopted by the commissioner, or is otherwise contrary to law; or (B) contains provisions or has any titles or headings which are unjust, encourage misrepresentation, are deceptive, or violate public policy. (2) The commissioner's order disapproving any form or endorsement or any notice of the commissioner's intention to withdraw a previous approval must state the grounds for the disapproval in enough detail to reasonably inform the filer of the grounds. An order of withdrawal of a previously filed form or endorsement takes effect on the expiration of the prescribed period but not sooner than the 60th day after the effective date of the withdrawal order, as prescribed by the commissioner. (h) The commissioner may not adopt or approve policy forms for personal fire or homeowner's insurance or any endorsement to the policy if the policy or endorsement is not in plain language. For the purposes of this subsection, a policy or endorsement is written in plain language if it achieves the minimum score established by the commissioner on the Flesch reading ease test or an equivalent test selected by the commissioner or, at the option of the commissioner, if it conforms to the language requirements in a National Association of Insurance Commissioners model act relating to plain language. This subsection does not apply to policy language that is mandated by state or federal law. (i) An insurer may not use in this state any form or endorsement after disapproval of the form or endorsement or withdrawal of approval by the commissioner. (j) Notwithstanding Article 1.35A of this code, the office of public insurance counsel may submit written comments to the commissioner and otherwise participate regarding individual company filings made pursuant to this article.
Text of subsec. (k) as added by Acts 2003, 78th Leg., ch. 206, Sec. 21.22, effective until April 1, 2007
(k)(1) Notwithstanding Subsections (a)-(j) of this article, policy forms and endorsements for residential property insurance in this state are regulated under Article 5.13-2 of this code. (2) An insurer may continue to use the policy forms and endorsements promulgated, approved, or adopted by the commissioner under this article before the effective date of S.B. No. 14, Acts of the 78th Legislature, Regular Session, 2003, on notification in writing to the commissioner that the insurer will continue to use the policy forms and endorsements promulgated, approved, or adopted by the commissioner under this article.
Text of subsec. (k) as added by Acts 2003, 78th Leg., ch. 797, Sec. 2
(k)(1) For any policy form and endorsements approved by the commissioner under Subsections (a), (b), or (c) of this article, the commissioner shall promulgate a comparison form for that policy. (2) The comparison form shall be developed with the assistance of the office of public insurance counsel and with input from the public and shall be designed to explain the features and limitations of the policy compared to other approved policies. An insurer using a policy form may be required to develop the comparison form and submit it for approval by the commissioner. The comparison form shall be made available by an insurer to anyone inquiring about the policy and shall be made available by the department via the Internet and other means as prescribed by the commissioner. (3) The comparison form shall be designed to be easily read and understood in order to facilitate comparison and understanding of the policy and must meet the requirements of Subsection (h) of this article. At a minimum, the comparison form shall show the features of the policy compared to the HO-B, HO-A, and at least one other policy form widely in use in this state. (4) The commissioner may adopt rules to carry out the purposes of this subsection. Acts 1951, 52nd Leg., ch. 491. Amended by Acts 1991, 72nd Leg., ch. 242, Sec. 2.33, eff. Sept. 1, 1991; Acts 1997, 75th Leg., ch. 1330, Sec. 13, eff. Sept. 1, 1997; Subsec. (k) added by Acts 2003, 78th Leg., ch. 206, Sec. 21.22, eff. June 11, 2003; Subsec. (k) added by Acts 2003, 78th Leg., ch. 797, Sec. 2, eff. June 20, 2003; Subsec. (k) repealed by Acts 2005, 79th Leg., ch.727, Sec. 18(g), eff. April 1, 2007. Art. 5.35-1. COVERAGES FOR SPOUSES AND FORMER SPOUSES.
Article repealed effective April 1, 2007
A homeowner's policy or fire policy promulgated under Article 5.35 of this code or filed and in effect as provided by Article 5.145 of this code may not be delivered, issued for delivery, or renewed in this state unless the policy contains the following language: "It is understood and agreed that this policy, subject to all other terms and conditions contained in this policy, when covering residential community property, as defined by state law, shall remain in full force and effect as to the interest of each spouse covered, irrespective of divorce or change of ownership between the spouses unless excluded by endorsement attached to this policy until the expiration of the policy or until canceled in accordance with the terms and conditions of this policy." Added by Acts 1989, 71st Leg., ch. 377, Sec. 4, eff. Sept. 1, 1989; Amended by Acts 2003, 78th Leg., ch. 206, Sec. 21.23, eff. June 11, 2003. Art. 5.35-2. JEWELRY COVERAGE.
Article repealed effective April 1, 2007
Sec. 1. Definition In this article, "personal property insurance" means insurance against damage to or loss of tangible personal property, including coverage provided in a homeowners policy, residential fire and allied lines policy, or farm and ranch owners policy. Sec. 2. Applicability This article applies to each insurer that provides personal property insurance in this state, including a county mutual insurer, farm mutual insurer, Lloyd's plan, or reciprocal or interinsurance exchange. Sec. 3. Election of Stated Value or Actual Replacement of the Jewelry Item with one of Like Kind and Quality An insurer that provides personal property insurance coverage in this state for jewelry will have the option to elect either to pay the stated value or actual replacement of the jewelry item with one of like kind and quality. Added by Acts 2003, 78th Leg., ch. 1279, Sec. 1, eff. Sept. 1, 2003. Art. 5.35-3. PROPERTY PROTECTION PROGRAM FOR UNDERSERVED AREAS.
Article repealed effective April 1, 2007
Sec. 1. (a) By rule the commissioner may determine and designate areas as underserved areas for residential property insurance. In determining which areas will be designated as underserved, the commissioner shall consider whether residential property insurance is not reasonably available to a substantial number of owners of insurable property in the underserved area and any other relevant factors as determined by the commissioner. For purposes of this article, residential property insurance means insurance coverage against loss to real or tangible personal property at a fixed location provided in a homeowners policy, residential fire and allied lines policy, or farm and ranch owners policy. (b) The property protection program for underserved areas operated under this article may not include windstorm and hail insurance coverage for a risk eligible for that coverage under Article 21.49 of this code. Sec. 2. All insurers authorized to write property or casualty insurance in this state and writing residential property insurance in this state, including those insurers licensed under Chapters 18 and 19 of this code, are authorized to write insurance on the forms adopted under this article. Sec. 3. The commissioner shall adopt policy forms for residential property insurance specifically for use in the designated underserved areas. The policy forms adopted pursuant to this article shall include a basic policy covering fire and allied lines perils with endorsements providing additional coverages at the option of the insured. The adopted policy forms may be used by all insurers writing insurance in underserved areas. Sec. 4. The rates for residential property insurance subject to this article shall be determined in accordance with the provisions of this code applicable to each insurer. Sec. 5. In the designated underserved areas, all insurers specified in Section 2 of this article shall make available to their agents and all agents shall offer all insureds the full range of coverages promulgated under this article subject to the applicable rates and underwriting guidelines of each such insurer. Sec. 6. The premium on all policies written pursuant to this article will not be subject to tax under Article 4.10 of this code. Sec. 7. The premium on all policies written pursuant to this article will not be considered net direct premiums under the provisions of Section 3(g), Article 21.49, of this code. Added by Acts 1995, 74th Leg., ch. 415, Sec. 3, eff. Aug. 28, 1995. Art. 5.36. WRITTEN EXPLANATION OF CERTAIN ENDORSEMENTS REQUIRED.
Article repealed effective April 1, 2007
An insurer may not use an endorsement to a policy form to which Article 5.35 of this code or Article 5.145 of this code applies that reduces the amount of coverage, unless requested by the insured, that would otherwise be provided under the policy unless the insurer provides the policyholder with a written explanation of the change made by the endorsement before the effective date of the change. Added by Acts 2001, 77th Leg., ch. 415, Sec. 1, eff. Sept. 1, 2001; Amended by Acts 2003, 78th Leg., ch. 206, Sec. 21.24, eff. June 11, 2003. Art. 5.37. LIEN ON INSURED PROPERTY.
Article repealed effective April 1, 2007
Any provision in any policy of insurance issued by any company subject to the provisions of this subchapter to the effect that if said property is encumbered by a lien of any character or shall after the issuance of such policy become encumbered by a lien of any character, then such encumbrance shall render such policy void, shall be of no force and effect. Any such provision within or placed upon any such policy shall be null and void. Acts 1951, 52nd Leg., p. 868, ch. 491. Art. 5.38. CO-INSURANCE CLAUSES.
Article repealed effective April 1, 2007
No company subject to the provisions of this subchapter may issue any policy or contract of insurance covering property in this State, which shall contain any clause or provision requiring the assured to take out or maintain a larger amount of insurance than expressed in such policy, nor in any way providing that the assured shall be liable as a co-insurer with the company issuing the policy for any part of the loss or damage which may be caused by fire to the property described in such policy, and any such clause or provisions, except as herein provided, shall be null and void, and of no effect; provided, co-insurance clauses and provisions may be inserted in policies written upon cotton, grain, or other products in process of marketing, shipping, storing or manufacturing. Provided, further, it shall be optional with an insured to accept a policy or contract of insurance containing such clause or provision covering other classes of property, except private dwellings, and except stocks of merchandise offered for sale at retail when of a value less than Ten Thousand ($10,000.00) Dollars, when a reduction in the rate is allowed for such policy, and said clause in such policy shall be valid and binding; and the Board of Insurance Commissioners shall have power to name the rates to apply when such co-insurance clause or provision shall be used. Provided, further, that by appropriate order the Board of Insurance Commissioners may authorize, and in its discretion require the use of any form of co-insurance clauses on or in connection with insurance policies covering against the hazards of tornado, windstorm and hail, on any or all classes of property; the Board to make such rules and regulations with reference to such clauses and the use thereof, as well as credits in premium rates for the use thereof on policies covering against the hazards mentioned as it may deem proper. Acts 1951, 52nd Leg., p. 868, ch. 491. Art. 5.39. COMPLAINT OF RATES OR ORDERS. (a) Any citizen or number of citizens of this State or any policyholder or policyholders, or any insurance company affected by this subchapter, or any board of trade, chamber of commerce, or other civic organization, or the civil authorities of any town, city, or village, shall have the right to file a petition with the Board, setting forth any cause of complaint that they may have as to any order made by this Board, or any rate fixed and determined by the Board, and they shall have the right to offer evidence in support of the allegations of such petition by witnesses, or by depositions, or by affidavits; upon the filing of such petition, the party complained of, if other than the Board, shall be notified by the Board of the filing of such petition and a copy thereof furnished the party or parties, company or companies, of whom complaint is made, and the said petition shall be set down for a hearing at a time not exceeding thirty (30) days after the filing of such petition and the Board shall hear and determine said petition; but it shall not be necessary for the petitioners or any one of them to be present to present the cause to the Board, but they shall consider the testimony of all witnesses, whether such witnesses testify in person or by depositions, or by affidavits, and if it be found that the complaint made in such petition is a just one, then the matter complained of shall be corrected or required to be corrected by said Board. (b) Notwithstanding Subsection (a) of this article, on and after the effective date of S.B. No. 14, Acts of the 78th Legislature, Regular Session, 2003, rates for homeowners and residential fire and residential allied lines insurance coverage under this subchapter are determined, and hearings related to those rates are conducted, as provided by Subchapter Q of this chapter, and rates for other lines of insurance subject to this subchapter are determined as provided by Article 5.13-2 of this code, except that on and after December 1, 2004, rates for all lines of insurance subject to this subchapter are determined as provided by Article 5.13-2 of this code. Acts 1951, 52nd Leg., p. 868, ch. 491. Amended by Acts 1991, 72nd Leg., ch. 242, Sec. 2.34, eff. Sept. 1, 1991; Subsec. (b) amended by Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Sec. 8.19, eff. Jan. 1, 1992; amended by Acts 1995, 74th Leg., ch. 984, Sec. 22, eff. Sept. 1, 1995; Subsec. (b) amended by Acts 1997, 75th Leg., ch. 1330, Sec. 14, eff. Sept. 1, 1997; Subsec. (b) amended by Acts 2003, 78th Leg., ch. 206, Sec. 21.25, eff. June 11, 2003. Art. 5.40. HEARING OF PROTESTS. (a) The Board shall give the public and all insurance companies to be affected by its orders or decisions, reasonable notice thereof, not exceeding thirty (30) days, and an opportunity to appear and be heard with respect to the same; which notice to the public shall be published in one or more daily papers of the State, and such notice to any insurance company to be affected thereby shall be mailed addressed to the State or general agent of such company, if such address be known to the Board, or if not known, then such letter shall be addressed to some local agent of such company, or if the address of a local agent be unknown to the Board, then by publication in one or more of the daily papers of the State, and the Board shall hear all protests or complaints from any insurance company or any citizen or any city, or town, or village or any commercial or civic organization as to the inadequacy or unreasonableness of any rates fixed by it or approved by it, or as to the inadequacy or unreasonableness of any general basis schedules promulgated by it or the injustice of any order or decision by it, and if any insurance company, or other person, or commercial or civic organization, or any city, town or village, which shall be interested in any such order or decision shall be dissatisfied with any regulation, schedule or rate adopted by such Board, such company or person, commercial or civic organization, city, town or village shall have the right, within thirty (30) days after the making of such regulation or order, or rate, or schedule or within thirty (30) days after hearing above provided for, to bring an action against said Board in the District Court of Travis County to have such regulation or order or schedule or rate vacated or modified; and shall set forth in a petition therefor the principal grounds of objection to any or all of such regulations, schedules, rates or orders. In any such suit the issue shall be formed and the controversy tried and determined as in other civil cases. The court may set aside and vacate or annul any or all or any part of any regulation, schedule, order or rate promulgated or adopted by said Board, which shall be found by the court to be unreasonable, unjust, excessive or inadequate, without disturbing others. No injunction, interlocutory order or decree suspending or restraining, directly or indirectly, the enforcement of any schedule, rate, order or regulation of said Board shall be granted. In such suit, the court, by interlocutory order, may authorize the writing and acceptance of fire insurance policies at any rate which in the judgment of court is fair and reasonable, during the pending of such suit, upon condition that the party to such suit in whose favor the said interlocutory order of said court may be, shall execute and file with the Board a good and sufficient bond to be first approved by said court, conditioned that the party giving said bond will abide the final judgment of said court and will pay to the Board whatever difference in the rate of insurance, it may be finally determined to exist between the rates as fixed by the Board complained of in such suit, and the rate finally determined to be fair and reasonable by the court in said suit, and the said Board, when it receives such difference in money, shall transmit the same to the parties entitled thereto. (b) Whenever any action shall be brought by any company under any provision of this article within said period of thirty (30) days, no penalties nor forfeitures shall attach or accrue on account of the failure of the plaintiff to comply with the orders, schedules, rates or regulations sought to be vacated in such action until the final determination of the same. (c) Either party to any such action, if dissatisfied with the judgment or decree of said court, may appeal therefrom as in other civil cases. No action shall be brought in any court of the United States to set aside any orders, rates, schedules or regulations made by said Board under the provisions of this law until all of the remedies provided herein shall have been exhausted by the party complaining. (d) Notwithstanding Subsections (a)-(c) of this article, on and after the effective date of S.B. No. 14, Acts of the 78th Legislature, Regular Session, 2003, rates for homeowners and residential fire and residential allied lines insurance coverage under this subchapter are determined, and hearings related to those rates are conducted, as provided by Subchapter Q of this chapter, and rates for other lines of insurance subject to this subchapter are determined as provided by Article 5.13-2 of this code, except that on and after December 1, 2004, rates for all lines of insurance subject to this subchapter are determined as provided by Article 5.13-2 of this code. Acts 1951, 52nd Leg., p. 868, ch. 491. Amended by Acts 1991, 72nd Leg., ch. 242, Sec. 2.35, eff. Sept. 1, 1991; Subsec. (d) amended by Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Sec. 8.20, eff. Jan. 1, 1992; amended by Acts 1995, 74th Leg., ch. 984, Sec. 23, eff. Sept. 1, 1995; Subsec. (d) amended by Acts 1997, 75th Leg., ch. 1330, Sec. 15, eff. Sept. 1, 1997; Subsec. (d) amended by Acts 2003, 78th Leg., ch. 206, Sec. 21.26, eff. June 11, 2003. Art. 5.41. REBATING OR DISCRIMINATION.
Text of subsec. (a) effective until April 1, 2007
(a) No company shall engage or participate in the insuring or reinsuring of any property in this State against loss or damage by fire except in compliance with the terms and provisions of this law; nor shall any such company knowingly write insurance at any lesser rate than the rates herein provided for, and it shall be unlawful for any company so to do, unless it shall thereafter file an analysis of same with the Board, and it shall be unlawful for any company, or its officers, directors, general agents, state agents, special agents, local agents, or its representatives, to grant or contract for any special favor or advantages in the dividends or other profits to come thereon, or in commissions in the dividends or other profits to accrue thereon, or in commissions or division of commission, or any position or any valuable consideration or any inducement not specified in the policy contract of insurance; nor shall such company give, sell or purchase, offer to give, sell or purchase, directly or indirectly, as an inducement to insure or in connection therewith, any stocks, bonds or other securities of any insurance company or other corporation, partnership or individual, or any dividends or profits accrued or to accrue thereon, or anything of value whatsoever, not specified in the policy. Nothing in this law shall be construed to prohibit a company from sharing its profits with its policyholders, if such agreement as to profit sharing shall be placed on or in the face of the policy, and such profit sharing shall be uniform and shall not discriminate between individuals or between classes. No part of the profit shall be paid until the expiration of the policy. Any company, or any of its officers, directors, general agents, state agents, special agents, local agents or its representatives, doing any of the acts in this article prohibited, shall be deemed guilty of unjust discrimination. If any agent or company shall issue a policy without authority, and any policyholder holding such policy shall sustain a loss or damage thereunder, said company or companies shall be liable to the policyholder thereunder, in the same manner and to the same extent as if said company had been authorized to issue said policies, although the company issued said policy in violation of the provisions of this subchapter. But this shall not be construed to give any company the right to issue any contract or policy of insurance other than as provided in this subchapter.
Text of subsec. (a) effective April 1, 2007
(a) A company engaging or participating in the insuring or reinsuring of any property in this state against loss or damage by fire may not knowingly write insurance at any lesser rate than the rates herein provided for, and it shall be unlawful for any company so to do, unless it shall thereafter file an analysis of same with the Board. (b) Notwithstanding Subsection (a) of this article, on and after the effective date of S.B. No. 14, Acts of the 78th Legislature, Regular Session, 2003, rates for homeowners and residential fire and residential allied lines insurance coverage under this subchapter are determined as provided by Subchapter Q of this chapter, and rates for other lines of insurance subject to this subchapter are determined as provided by Article 5.13-2 of this code, except that on and after December 1, 2004, rates for all lines of insurance subject to this subchapter are determined as provided by Article 5.13-2 of this code. Acts 1951, 52nd Leg., p. 868, ch. 491. Amended by Acts 1991, 72nd Leg., ch. 242, Sec. 2.36, eff. Sept. 1, 1991; Subsec. (b) amended by Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Sec. 8.21, eff. Jan. 1, 1992; amended by Acts 1995, 74th Leg., ch. 984, Sec. 24, eff. Sept. 1, 1995; Subsec. (b) amended by Acts 1997, 75th Leg., ch. 1330, Sec. 16, eff. Sept. 1, 1997; Subsec. (b) amended by Acts 2003, 78th Leg., ch. 206, Sec. 21.27, eff. June 11, 2003; Subsec. (a) amended by Acts 2005, 79th Leg., ch. 727, Sec. 9, eff. April 1, 2007. Art. 5.41-1. PENALTY FOR ACCEPTING REBATES.
Article repealed effective April 1, 2007
Whoever shall knowingly receive or accept from any insurance company or from any of its agents, sub-agents, brokers, solicitors, employés, intermediaries or representatives, or any other person, any rebate of premium payable on policy, or any special favor or advantage in the dividends or other financial profits accrued or to accrue thereon, or any valuable consideration, position or inducement not specified in the policy of insurance, shall be fined not exceeding one hundred dollars or be imprisoned in jail not exceeding ninety days, or both. Acts 1913, p. 205. Art. 5.41-2. MULTIPLE LINE DIVIDENDS.
Article repealed effective April 1, 2007
Sec. 1. An insurer may pay to a commercial policyholder or group of commercial policyholders a dividend which covers more than one class or line of commercial business. This dividend may only be paid to the policyholder or group of policyholders after adequate loss reserves are established on an aggregate basis for the classes or lines of commercial insurance included within the dividend, and the insurer must have sufficient surplus from which to pay the dividend. An insurer shall file a notice of its intent to pay such dividend with the department at least 15 days prior to the payment of the dividend. Sec. 2. Limitation of the payment of a dividend on one or more classes or lines of commercial business to a group of commercial policyholders shall not be unfair discrimination so long as the group has clearly identifiable underwriting characteristics or is an association or group of business entities engaged in similar undertakings. Sec. 3. The classes or lines of commercial business for which dividends are authorized under this article include any or all of the commercial classes or lines of commercial business regulated by this chapter. Added by Acts 1997, 75th Leg., ch. 1322, Sec. 1, eff. Sept. 1, 1997. Art. 5.41-3. COMMERCIAL GROUP PROPERTY INSURANCE.
Article repealed effective April 1, 2007
(a) An insurer may write commercial group property insurance for a group of businesses or for an association that constitutes a large risk as that term is described by Section 8(f), Article 5.13-2, of this code if: (1) the members of a group of businesses have clearly identifiable underwriting characteristics; or (2) the members of an association are engaged in similar undertakings. (b) An insurer, before using a policy form for a group of businesses or an association described by Subsection (a) of this article in which each member of the group or association is not a large risk as that term is described by Section 8(f), Article 5.13-2, of this code, shall file the policy form with the commissioner. A filing made under this subsection is for informational purposes only. (c) An insurer, in accordance with Sections 3 through 7, Article 5.13-2, of this code, shall file with the commissioner all rates, supplementary rating information, and pertinent supporting information for commercial group property insurance written under this article in this state. (d) An insurer filing a policy form or rates and related information under Subsection (b) or (c) of this article shall clearly identify the group of businesses or the association to be insured. Added by Acts 2003, 78th Leg., ch. 607, Sec. 1, eff. June 20, 2003. Art. 5.42. NOT RETROACTIVE.
Article repealed effective April 1, 2007
The provisions of this subchapter shall not deal with the collection of premiums, but each company shall be permitted to make such rules and regulations as it may deem just between the company, its agents, and its policyholders; and no bona fide extension of credit shall be construed as a discrimination, or in violation of the provisions of this subchapter. All policies heretofore issued which provide that said policies shall be void for non-payment of premiums at a certain specified time, shall be and the same are in full force and effect, provided, that the company or any of its agents have accepted the premium on said policies after the expiration of the dates named in said provisions fixing the date of payment. Acts 1951, 52nd Leg., p. 868, ch. 491. Art. 5.43. OPTIONAL PREMIUM DISCOUNT FOR CERTAIN RESIDENTIAL PROPERTY INSURANCE POLICIES.
Article repealed effective April 1, 2007
(a) In this article: (1) "Affiliate" means an entity classified as an affiliate of an insurer under Section 823.003 of this code. (2) "Insurer" means an insurer authorized to write residential property insurance, including a county mutual insurance company, farm mutual insurance company, Lloyd's plan, or reciprocal or interinsurance exchange. (3) "Residential property insurance" means property or property and casualty insurance covering a dwelling, including homeowners insurance, residential fire and allied lines insurance, farm and ranch insurance, or farm and ranch owners insurance. (a-1) A residential property insurance claim under this article does not include a claim: (1) resulting from a loss caused by natural causes; (2) that is filed but is not paid or payable under the policy; or (3) that an insurer is prohibited from using under Section 3, Article 5.35-4, of this code. (b) An insurer that issues a residential property insurance policy in this state may: (1) provide a discount of not less than three percent in the premiums that would otherwise be charged for the policy if the policyholder has continuously been a residential property insurance policyholder with that insurer or an affiliate of that insurer but has not filed a residential property insurance claim during the three years before the effective date of the policy; and (2) increase the amount of the discount by one percent for each subsequent year in which the policyholder has been a residential property insurance policyholder with that insurer or an affiliate of that insurer but has not filed a residential property insurance claim. (c) An insurer that provides a discount under this article is not required to provide a discount under this article that exceeds 10 percent of the premiums that would otherwise be charged for the residential property insurance policy. (d) This article applies to an insurer that uses a tier classification or discount program that has a premium consequence based in whole or in part on claims experience without regard to whether any of the policies that continuously covered the policyholder, as described by Subsections (b)(1) and (2) of this article, was a different type of residential property insurance policy from the policy eligible for the discount. (e) The commissioner shall adopt rules as necessary to implement this article and shall establish by rule guidelines under which an insurer that provides a discount under this article shall determine the appropriate discount based on sound actuarial principles. The commissioner may approve a discount filed with the department that is greater or less than the discount specified by this article if the commissioner determines the discount is actuarially justified. (f) Any change in the amount of a discount provided under this article must comply with the requirements of Section 551.107 of this code. Added by Acts 2003, 78th Leg., ch. 796, Sec. 1, eff. June 20, 2003; Subsec. (a-1) and (f) added by Acts 2005, 79th Leg., ch. 291, Sec. 4, eff. Sept. 1, 2005; Subsec. (d) amended by Acts 2005, 79th Leg., ch. 291, Sec. 6, eff. Sept. 1, 2005. Art. 5.43-1. FIRE EXTINGUISHERS.
Purpose
Sec. 1. The purpose of this article is to regulate the leasing, renting, selling, installing, and servicing of portable fire extinguishers and the planning, certifying, installing, or servicing of fixed fire extinguisher systems, and to prohibit portable fire extinguishers, fixed fire extinguisher systems, and extinguisher equipment not labeled or listed by a testing laboratory approved by the State Board of Insurance, in the interest of safeguarding lives and property.
Administration
Sec. 2. The State Board of Insurance shall administer this article and it may issue rules and regulations which it considers necessary to its administration through the State Fire Marshal. The board, in adopting necessary rules and regulations, may use recognized standards such as, but not limited to, those of the National Fire Protection Association, those recognized by federal law or regulation, and those published by any nationally recognized standards-making organization, or the manufacturer's installation manuals. Sec. 2A. Repealed by Acts 1997, 75th Leg., ch. 1172, Sec. 4.14(1), eff. Sept. 1, 1997.
Definitions
Sec. 3. As used in this article the following terms have the meanings specified in this section. (a) "Firm" means any person, partnership, corporation, or association. (b) "Hydrostatic testing" means pressure testing by hydrostatic methods. (c) "Portable fire extinguisher" means any device that contains liquid, powder, or gases for suppressing or extinguishing fires. (d) "Service and servicing" means servicing portable fire extinguishers or fixed fire extinguisher systems by inspecting, charging, filling, maintaining, recharging, refilling, repairing, or testing. (e) "Fixed fire extinguisher systems" means those assemblies of piping, conduits, or containers that convey liquid, powder, or gases to dispersal openings or devices protecting one or more hazards by suppressing or extinguishing fires.
Text of (f) as added by Acts 1989, 71st Leg., ch. 762, Sec. 2
(f) "Registered firm" means a person, partnership, corporation, or association that holds a current certificate of registration.
Text of (f) as added by Acts 1989, 71st Leg., ch. 823, Sec. 1
(f) "Insurance agent" means: (1) a person, firm, or corporation licensed under Article 21.14 or 1.14-2 of this code; (2) a salaried, state, or special agent; or (3) a person authorized to represent an insurance fund or pool created by a city, county, or other political subdivision of the state under The Interlocal Cooperation Act (Article 4413(32c), Vernon's Texas Civil Statutes).
Registration, Licensing, and Fees
Sec. 4. (a) Each firm engaged in the business of installing or servicing portable fire extinguishers or planning, certifying, installing, or servicing fixed fire extinguisher systems must have a certificate of registration issued by the State Board of Insurance. The initial fee for the certificate of registration must be in an amount not to exceed $450 and the renewal fee for each year thereafter must be in an amount not to exceed $300. Each separate office location of a firm engaged in the business of installing or servicing portable fire extinguishers or planning, certifying, installing, or servicing fixed extinguisher systems, other than the location identified on the certificate of registration, must have a branch office registration certificate issued by the board. The initial fee for a branch office registration certificate must be in an amount not to exceed $100, and the renewal fee for each year thereafter must be in an amount not to exceed $100. The board shall identify each branch office location as a part of a registered firm before a branch office registration certificate may be issued. (b) A fee in an amount not to exceed $20 shall be charged for a duplicate certificate of registration, license, or apprentice permit issued under this article or for any request requiring changes to a certificate of registration, license, or permit. A new certificate of registration with a new number shall be issued to a registered firm on a change of ownership for a fee in an amount not to exceed $450. A fee in an amount not to exceed $100 shall be charged for a change of ownership of a branch office. (c) Each employee, other than an apprentice, of registered firms engaged in the business of installing or servicing portable fire extinguishers or planning, installing, or servicing fixed fire extinguisher systems, must have a license issued by the State Board of Insurance before engaging in the following: (1) installing or servicing portable fire extinguishers; (2) installing, servicing, or certifying preengineered fixed fire extinguisher systems; or (3) planning, supervising, or certifying the installation of fixed fire extinguisher systems other than preengineered systems or the servicing of such systems. (c-1) The initial fee for the license required by Subsection (c) of this section must be in an amount not to exceed $70 and the license renewal fee for each year thereafter must be in an amount not to exceed $50. Unless the examination is administered by a testing service, a nonrefundable fee for the initial examination must be in an amount not to exceed $30. Unless the reexamination is administered by a testing service, a nonrefundable fee in an amount not to exceed $20 shall be charged for each reexamination. (d) Each person installing or servicing portable fire extinguishers or installing or servicing fixed fire extinguisher systems as an apprentice shall, before engaging in installing or servicing, apply to the State Board of Insurance for an apprentice permit. The fee for the apprentice permit must be in an amount not to exceed $30. An apprentice may perform the services only under direct supervision of a person holding a valid license under this article who works for the same firm as the apprentice. An apprentice permit is valid for one year from the date of issuance. (e) Each firm performing hydrostatic testing of fire extinguishers manufactured in accordance with the specifications and procedures of the United States Department of Transportation shall do so in accordance with the procedures specified by that department for compressed gas cylinders and shall be required to have a hydrostatic testing certificate of registration authorizing such testing issued by the state fire marshal. Persons qualified to do this work shall be given such authority on their licenses. The initial fee must be in an amount not to exceed $250, and the renewal fee for each year thereafter must be in an amount not to exceed $150. Hydrostatic testing of fire extinguishers not performed pursuant to the United States Department of Transportation specifications shall be performed as recommended by the National Fire Protection Association. (f) The State Board of Insurance shall, within the limits fixed by this section, prescribe the fees to be charged under this section.
Required insurance
Sec. 4A. (a) The board shall not issue a certificate of registration under this article unless the applicant files with the board evidence of a general liability insurance policy that includes products and completed operations coverage. The policy must be conditioned to pay on behalf of the insured those sums that the insured becomes legally obligated to pay as damages because of bodily injury and property damage caused by an occurrence involving the insured or the insured's servant, officer, agent, or employee in the conduct of any business registered or licensed under this article. (b) The limits of insurance coverage required by Subsection (a) of this section shall not be less than $100,000 combined single limits for bodily injury and property damage for each occurrence and not less than $300,000 aggregate for all occurrences per policy year, unless the board increases or decreases the limits under Section 8 of this article. (c) The evidence of insurance required by this section must be in the form of a certificate of insurance executed by an insurer authorized to do business in this state and countersigned by an insurance agent licensed in this state. A certificate of insurance for surplus lines coverage procured in compliance with Article 1.14-2 of this code through a licensed Texas surplus lines agent resident in this state may be filed with the board as evidence of coverage required by this section. Insurance certificates executed and filed with the board under this section remain in force until the insurer has terminated future liability by the notice required by the board. (d) Failure to maintain the liability insurance required under this section constitutes grounds for the denial, suspension, or revocation of a certificate of registration issued under this article after notice and opportunity for hearing.
Selling or Leasing of Portable Fire Extinguishers or Fixed Fire Extinguisher Systems
Sec. 5. (a) Except as provided by Subsection (e) of this section, no portable fire extinguisher, fixed fire extinguisher system, or extinguisher equipment may be leased, sold, rented, serviced, or installed in this state unless it carries a label of approval or listing of a testing laboratory approved by the department. (b) Except as provided in Section 6 of this article, only the holder of a valid license or an apprentice permit issued pursuant to this article may install or service portable fire extinguishers or install and maintain fixed fire extinguisher systems. (c) A person who has been issued a license pursuant to this article to install or service portable fire extinguishers or install and service fixed fire extinguisher systems must be an employee, agent, or servant of a firm that holds a certificate of registration issued pursuant to this article. (d) A certificate of registration, license, or permit issued under this article is not transferable. (e) The commissioner by rule shall permit a person to service a portable fire extinguisher regardless of whether it carries a label described by Subsection (a) of this section.
Exceptions
Sec. 6. The licensing provisions of this article do not apply to the following: (a) the filling or charging of a portable fire extinguisher by the manufacturer prior to its initial sale; (b) the servicing by a firm of its own portable fire extinguishers and/or fixed systems by its own personnel specially trained for such servicing or the installation of portable fire extinguishers in a building by the building owner, the owner's managing agent, or their employees; (c) the installation or servicing of water sprinkler systems installed in compliance with the National Fire Protection Association's Standards for the Installation of Sprinkler Systems; (d) firms engaged in the retailing or wholesaling of portable fire extinguishers that carry a label of approval or listing of a testing laboratory approved by the State Board of Insurance, but not engaged in the installation or servicing of them; (e) fire departments servicing portable fire extinguishers as a public service where no charge is made, provided, however, that the members of the fire department are trained in the proper servicing of the fire extinguishers; (f) a firm that is party to a contract which provides that the installation of portable fire extinguishers or a fixed fire extinguisher system will be performed under the direct supervision of and certified by a firm appropriately registered to install and certify portable extinguishers or fixed systems and that the registered firm assumes full responsibility for the installation; or (g) a Texas registered professional engineer acting solely in his professional capacity.
Applications and Hearings on Licenses, Permits and Certificates
Sec. 7. (a) Applications and qualifications for licenses, permits, and certificates issued hereunder shall be made pursuant to regulations adopted by the State Board of Insurance. (b) The commissioner, through the State Fire Marshal, may suspend, revoke, or refuse to issue or renew a license, apprentice permit, hydrostatic testing certificate, certificate of registration, or approval of a testing laboratory in accordance with Section 13 of this article. (c) An applicant, registrant, licensee, or permit holder whose certificate of registration, license, or permit has been refused or revoked under this article, except for failure to pass a required written examination, may not file another application for a certificate of registration, license, or permit within one year from the effective date of the refusal or revocation. After one year from that date, the applicant may reapply and in a public hearing show good cause why the issuance of his certificate of registration, license, or permit is not against the public safety and welfare. (d) A person whose license to service portable fire extinguishers or to install or service fixed fire extinguisher systems has been revoked must retake and pass the required written examination before a new license may be issued. (e) The state fire marshal shall examine each applicant for a license issued under this article and shall establish the scope and type of an examination required by this article. The state fire marshal may administer the examination or may enter into an agreement with a testing service. (f) The state fire marshal may contract with the testing service regarding requirements for the examination, including examination development, scheduling, site arrangements, grading, reporting, analysis, or other administrative duties. The state fire marshal may require the testing service to: (1) correspond directly with an applicant regarding the administration of the examination; (2) collect a reasonable fee from an applicant for administering the examination; or (3) administer the examination at a specific location or time. (g) Not later than the 30th day after the day on which a licensing examination is administered under this article, the State Fire Marshal shall send notice to each examinee of the results of the examination. If an examination is conducted, graded, or reviewed by a testing service, the State Fire Marshal shall send notice to the examinees of the results of the examination within two weeks after the date on which the State Fire Marshal receives the results from the testing service. If the notice of the examination results will be delayed for longer than 90 days after the examination date, the State Fire Marshal shall send notice to the examinee of the reason for the delay before the 90th day. If requested in writing by a person who fails the licensing examination administered under this article, the State Fire Marshal shall send to the person an analysis of the person's performance on the examination. (g-1) The state fire marshal may require a testing service to notify a person of the results of the person's examination under Subsection (g). (h) The State Board of Insurance may adopt procedures for certifying and may certify continuing education programs for persons licensed under this Act. Participation in the programs is voluntary. (i) The State Board of Insurance may waive any license requirement for an applicant with a valid license from another state having license requirements substantially equivalent to those of this state. (j) The state fire marshal shall adopt rules as necessary to implement examination requirements under this article.
Renewal of certificates and licenses
Sec. 7A. (a) Each renewal of a license or certificate of registration issued under this article is valid for a period of two years. The license or registration fee for each year of the two-year period is payable on renewal. (b) An unexpired license or registration may be renewed by paying the required renewal fee to the State Board of Insurance before the expiration of the license or registration. If a license or registration has been expired for not longer than 90 days, the license or registration may be renewed by paying to the State Board of Insurance the required renewal fee and a fee that is equal to one-half of the original fee for the license or registration. If a license or registration has been expired for longer than 90 days but less than two years, the license or registration may be renewed by paying to the State Board of Insurance all unpaid renewal fees and a fee that is equal to the original fee for the license or registration. If a license or registration has been expired for two years or longer, the license or registration may not be renewed. A new license or certificate of registration may be obtained by complying with the requirements and procedures for obtaining an original license or registration. At least 30 days before the date of the expiration of a license or registration, the State Fire Marshal shall send written notice of the impending license or registration expiration to the licensee or registrant at his or its last known address. This subsection may not be construed to prevent the State Board of Insurance from denying or refusing to renew a license under applicable law or rules of the board. (c) The State Board of Insurance by rule may adopt a system under which certificates of registration, licenses, and permits expire on various dates during the year. For the year in which the certificate of registration, license, or permit expiration date is less than one year from its issuance or anniversary date, the fee shall be prorated on a monthly basis so that each registrant, licensee, or permittee shall pay only that portion of the fee that is allocable to the number of months during which the certificate of registration, license, or permit is valid. On each subsequent renewal of a license or registration, the total renewal fee is payable.
Powers and duties of State Board of Insurance
Sec. 8. The State Board of Insurance shall: (a) formulate and administer such rules as may be determined essentially necessary for the protection and preservation of life and property, in controlling: (1) the registration of firms engaging in the business of installing or servicing portable fire extinguishers or planning, certifying, installing, or servicing fixed fire extinguisher systems; (2) the registration of firms engaged in the business of hydrostatic testing of fire extinguisher cylinders; (3) the examination of persons applying for a license; (4) the licensing of persons to install or service portable fire extinguishers and to plan, certify, install, or service fixed fire extinguisher systems; and (5) the requirements for the installing or servicing of portable fire extinguishers and the planning, certifying, installing, or servicing of fixed fire extinguisher systems; (b) evaluate the qualifications of firms or individuals for a certificate of registration to engage in the business of installing or servicing portable fire extinguishers or planning, certifying, installing, or servicing fixed fire extinguisher systems; (c) conduct examinations to ascertain the qualifications and fitness of applicants for a license to install or service portable fire extinguishers or to plan, certify, install, or service fixed fire extinguisher systems; (d) issue certificates of registration for those firms that qualify under the rules to engage in the business of installing or servicing portable fire extinguishers or planning, certifying, installing, or servicing fixed fire extinguisher systems, and issue licenses, apprentice permits, and authorizations to perform hydrostatic testing to the firms or individuals who qualify; (e) evaluate the qualifications of firms seeking approval as testing laboratories; and (f) have authority, after notice and opportunity for hearing, to increase or decrease the limits of insurance coverage.
Certain Rules Prohibited
Sec. 8A. (a) The commissioner may not adopt rules restricting competitive bidding or advertising by the holder of a license, permit, certificate, or approval issued under this article except to prohibit false, misleading, or deceptive practices. (b) In the commissioner's rules to prohibit false, misleading, or deceptive practices, the commissioner may not include a rule that: (1) restricts the use of any medium for advertising; (2) restricts the use of a license, permit, certificate, or approval holder's personal appearance or voice in an advertisement; (3) relates to the size or duration of an advertisement by the license, permit, certificate, or approval holder; or (4) restricts the license, permit, certificate, or approval holder's advertisement under a trade name.
Fire Extinguisher Advisory Council
Sec. 9. (a) The commissioner may delegate the exercise of all or part of the commissioner's functions, powers, and duties under this article, except for the issuance of licenses, certificates, and permits, to a Fire Extinguisher Advisory Council whose members shall be appointed by the commissioner. The council shall assist in the review and formulation of rules adopted under this article and shall periodically review rules implementing this article and recommend changes in the rules to the commissioner. (b) The members of the council shall be experienced and knowledgeable in one or more of the following areas: fire services, fire extinguisher manufacturing, fire insurance inspection or underwriting, fire extinguisher servicing, or be a member of a fire protection association or industrial safety association.
Certain Acts Prohibited
Sec. 10. No person or firm may do any of the following: (1) engage in the business of installing or servicing portable fire extinguishers without a valid certificate of registration; (2) engage in the business of planning, certifying, installing, or servicing fixed fire extinguisher systems without a valid certificate of registration; (3) install or service or certify the servicing of portable fire extinguishers or plan, certify, service, or install fixed fire extinguisher systems without a valid license; (4) perform hydrostatic testing of fire extinguisher cylinders manufactured in accordance with the specifications and requirements of the United States Department of Transportation without a valid hydrostatic testing certificate of registration; (5) obtain or attempt to obtain a certificate of registration or license by fraudulent representation; (6) install or service portable fire extinguishers or plan, certify, service, or install fixed fire extinguisher systems contrary to the provisions of this article or the rules formulated and administered under the authority of this article; (7) install, service, or hydrostatic test a fire extinguisher that does not have the proper identifying labels, except as provided by Subsection (e) of Section 5 of this article; (8) sell, install, service, or recharge a carbon tetrachloride fire extinguisher; or (9) violate Subsection (a) of Section 5 of this article.
Use of Funds
Sec. 11. All funds collected through the licensing and other provisions of this article, excepting penalties and monetary forfeitures, shall be paid to the State Board of Insurance and be deposited in the State Treasury to the credit of the State Board of Insurance operating fund for use in carrying out the administration of this article.
Penalties
Sec. 12. (a) The State Fire Marshal may refuse the issuance or renewal of, suspend, or revoke a certificate of registration, license, or permit if, after notice and hearing, he finds that the applicant, registrant, licensee, or permit holder has engaged in acts: (1) that violate this article; (2) that violate rules or standards adopted pursuant to this article; or (3) constituting misrepresentation made in connection with the sale of products or services rendered. (b) A person commits an offense if the person knowingly or intentionally violates Section 10 of this article. (c) An offense under Subsection (b) of this section is a Class B misdemeanor. Venue for the offense is in Travis County or the county in which the offense is committed.
Disciplinary Hearing
Sec. 13. If the State Fire Marshal proposes to suspend, revoke, or refuse to renew a license, permit, certificate, or approval issued under this article, the holder of the license, permit, certificate, or approval is entitled to a hearing conducted by the State Office of Administrative Hearings. Proceedings for a disciplinary action are governed by the administrative procedure law, Chapter 2001, Government Code. Rules of practice adopted by the commissioner applicable to the proceedings for a disciplinary action may not conflict with rules adopted by the State Office of Administrative Hearings. Acts 1971, 62nd Leg., p. 1993, ch. 616, eff. June 4, 1971. Amended by Acts 1975, 64th Leg., p. 899, ch. 335, Sec. 1, eff. June 19, 1975; Acts 1979, 66th Leg., p. 903, ch. 412, Sec. 1, eff. Aug. 27, 1979; Acts 1981, 67th Leg., p. 416, ch. 175, Sec. 1, eff. Sept. 1, 1981. Sec. 1 amended by Acts 1983, 68th Leg., p. 1091, ch. 245, Sec. 1, eff. May 27, 1983; Secs. 4, 7 amended by Acts 1983, 68th Leg., p. 3951, ch. 622, Sec. 47, eff. Sept. 1, 1983; Sec. 5 amended by Acts 1983, 68th Leg., p. 1092, ch. 245, Sec. 2, eff. May 27, 1983; Sec. 10 amended by Acts 1983, 68th Leg., p. 1092, ch. 245, Sec. 3, eff. May 27, 1983; Sec. 11 amended by Acts 1983, 68th Leg., p. 3934, ch. 622, Sec. 24, eff. Sept. 1, 1983; Sec. 1 amended by Acts 1987, 70th Leg., ch. 267, Sec. 1, eff. June 5, 1987; Sec. 3(c) to (e) amended by Acts 1987, 70th Leg., ch. 267, Sec. 2, eff. June 5, 1987; Sec. 4(a), (c) amended and (c-1) added by Acts 1987, 70th Leg., ch. 267, Sec. 3, eff. June 5, 1987; Sec. 4A added by Acts 1987, 70th Leg., ch. 267, Sec. 4, eff. June 5, 1987; Sec. 5(a) amended by Acts 1987, 70th Leg., ch. 267, Sec. 5, eff. June 5, 1987; Sec. 6 amended by Acts 1987, 70th Leg., ch. 267, Sec. 6, eff. June 5, 1987; Sec. 7(g) amended by Acts 1987, 70th Leg., ch. 267, Sec. 7, eff. June 5, 1987; Sec. 8 amended by Acts 1987, 70th Leg., ch. 267, Sec. 8, eff. June 5, 1987; Sec. 10 amended by Acts 1987, 70th Leg. ch. 267, Sec. 9, eff. June 5, 1987; Sec. 12(c) amended by Acts 1987, 70th Leg., ch. 267, Sec. 10, eff. June 5, 1987; Sec. 1 amended by Acts 1989, 71st Leg., ch. 762, Sec. 1, eff. June 15, 1989; Sec. 3(f) added by Acts 1989, 71st Leg., ch. 762, Sec. 2, eff. June 15, 1989; Sec. 3(f) added by Acts 1989, 71st Leg., ch. 823, Sec. 1, eff. June 14, 1989; Sec. 4(c), (d) amended by Acts 1989, 71st Leg., ch. 762, Sec. 3, eff. Sept. 1, 1989; Sec. 4A(a) to (c) amended by Acts 1989, 71st Leg., ch. 823, Sec. 2, eff. June 14, 1989; Sec. 5(a) to (c) amended by Acts 1989, 71st Leg., ch. 762, Sec. 4, eff. June 15, 1989; Sec. 6 amended by Acts 1989, 71st Leg., ch. 762, Sec. 5, eff. June 15, 1989; Sec. 7 amended by Acts 1989, 71st Leg., ch. 762, Sec. 21, eff. June 15, 1989; Sec. 7A added by Acts 1989, 71st Leg., ch. 762, Sec. 6, eff. June 15, 1989; Secs. 8, 10 amended by Acts 1989, 71st Leg., ch. 762, Sec. 7, eff. June 15, 1989; Acts 1989, 71st Leg., ch. 823, Sec. 3, eff. June 14, 1989; Sec. 12(a) amended by Acts 1989, 71st Leg., ch. 762, Sec. 8, eff. June 15, 1989; Sec. 2A added by Acts 1991, 72nd Leg., ch. 628, Sec. 11, eff. Sept. 1, 1991; Sec. 9 amended by Acts 1991, 72nd Leg., ch. 628, Sec. 12, eff. Sept. 1, 1991; Sec. 2A repealed by Acts 1997, 75th Leg., ch. 1172, Sec. 4.14(1), eff. Sept. 1, 1997; Sec. 7(b) amended by Acts 1997, 75th Leg., ch. 1172, Sec. 4.01, eff. Sept. 1, 1997; Sec. 8A added by Acts 1997, 75th Leg., ch. 1172, Sec. 4.02, eff. Sept. 1, 1997; Sec. 9 amended by Acts 1997, 75th Leg., ch. 1172, Sec. 4.03, eff. Sept. 1, 1997; Sec. 13 added by Acts 1997, 75th Leg., ch. 1172, Sec. 4.04, eff. Sept. 1, 1997; Sec. 5(a) amended by and (e) added by Acts 2001, 77th Leg., ch. 235, Sec. 1, eff. May 22, 2001; Sec. 10 amended by Acts 2001, 77th Leg., ch. 235, Sec. 2, eff. May 22, 2001; Sec. 4(c-1) amended by Acts 2003, 78th Leg., ch. 1014, Sec. 1, eff. June 20, 2003; Secs. 7(e), (f), (g-1), (j) added by Acts 2003, 78th Leg., ch. 1014, Sec. 2, eff. June 20, 2003. Art. 5.43-2. FIRE DETECTION AND ALARM DEVICES.
Purpose
Sec. 1. The purpose of this article is to regulate the planning, certifying, leasing, selling, servicing, installing, monitoring, and maintaining of fire detection and fire alarm devices and systems and, except as provided by rules adopted under Section 6 of this article, to prohibit fire detection and fire alarm devices, equipment, and systems not labeled or listed by a nationally recognized testing laboratory, in the interest of safeguarding lives and property.
Definitions
Sec. 2. As used in this article: (1) "Person" means a natural person, including an owner, manager, officer, employee, occupant, or individual. (2) "Organization" means a corporation, government, or governmental subdivision or agency, business trust, estate, trust, partnership, firm or association, two or more persons having a joint or common interest, or any other legal or commercial entity. (3) Repealed by Acts 1997, 75th Leg., ch. 1172, Sec. 4.14(2), eff. Sept. 1, 1997. (4) "Board" means the State Board of Insurance. (5) "Sale" means sale or offering for sale, lease, or rent any merchandise, equipment, or service at wholesale or retail, to the public or any person, for an agreed sum of money or other consideration. (6) "Installation" means the initial placement of equipment and/or the extension, modification, or alteration of equipment already in place. (7) "Maintenance" means to maintain in a condition of repair that will allow performance as originally designed or intended. (8) "Monitoring" means the receipt of fire alarm and supervisory signals and retransmission or communication of those signals to a fire service communications center that is located in this state or serves property in this state. (9) "Service, servicing" means inspecting, maintaining, repairing, or testing. (10) "Fire detection device" means any arrangement of materials, the sole function of which is to provide indication of fire, smoke, or combustion in its incipient stages. (11) "Fire alarm device" means any device capable, through audible and/or visible means, of sounding a warning that fire or combustion has taken or is taking place. (12) "Fire alarm technician" means a licensed individual who shall be designated by a registered firm to: (A) inspect and certify that each fire alarm or detection system as installed meets the standards as provided for by law; or (B) perform or directly supervise the servicing or maintaining of a previously installed fire alarm device or system and to certify such service or maintenance. A fire alarm technician may perform or supervise monitoring. (13) "Fire alarm planning superintendent" means a licensed individual who shall be designated by a registered firm to plan any fire alarm or detection system conforming to applicable adopted National Fire Protection Association standards or other adopted standards and to certify that each fire alarm or detection system as planned meets the standards as provided by law. A fire alarm planning superintendent can function as a fire alarm technician or a residential fire alarm superintendent. (14) "Insurance agent" means: (A) a person, firm, or corporation licensed under Article 21.14 or 1.14-2 of this code; (B) a salaried, state, or special agent; or (C) a person authorized to represent an insurance fund or pool created by a city, county, or other political subdivision of the state under The Interlocal Cooperation Act (Article 4413(32c), Vernon's Texas Civil Statutes). (15) "Registered firm" means a person or organization holding a certificate of registration. (16) "Residential fire alarm superintendent" means a licensed individual who shall be designated by a registered firm to plan a residential single-family or two-family fire alarm or detection system conforming to applicable adopted National Fire Protection Association standards or other adopted standards and to certify that each fire alarm or detection system as planned meets the standards as provided by law. A residential fire alarm superintendent can function as a fire alarm technician.
Exceptions
Sec. 3. (a) The provisions of this article and the rules and regulations promulgated under this article shall have uniform force and effect throughout the state and no municipality or county shall enact any ordinances, rules, or regulations inconsistent with the provisions of this article or rules and regulations promulgated pursuant to this article and any such ordinances, rules, or regulations are void and shall have no effect; provided, however, that a municipality or county shall have the right to: (1) mandate that a fire alarm or detection system be installed in certain facilities, so long as said installation conforms to applicable state law; (2) require a better type of alarm or detection system or otherwise safer conditions than the minimum required by state law; and (3) require regular inspections by local officials of smoke detectors in dwelling units, as defined by Section 92.251, Property Code, and require the smoke detectors to be operational at the time of inspection. (b) The licensing provisions of this article shall not apply to: (1) a person or organization in the business of building construction that installs electrical wiring and devices that may include in part the installation of a fire alarm or detection system if: (A) the person or organization is a party to a contract that provides that the installation will be performed under the direct supervision of and certified by a licensed employee or agent of a firm registered to install and certify such an alarm or detection device and that the registered firm assumes full responsibility for the installation of the alarm or detection device; and (B) the person or organization does not plan, certify, lease, sell, service, or maintain fire alarms or detection devices or systems; (2) a person or organization that owns and installs fire detection or fire alarm devices on the person's or organization's own property or, if the person or organization does not charge for the device or its installation, installs it for the protection of the person's or organization's personal property located on another's property and does not install the devices as a normal business practice on the property of another; (3) a person who holds a license or other form of permission issued by an incorporated city or town to practice as an electrician and who installs fire or smoke detection and alarm devices in no building other than a single family or multifamily residence if: (A) the devices installed are: (i) single station detectors; or (ii) multiple station detectors capable of being connected in such a manner that actuation of one detector causes all integral or separate alarms to operate, if the detectors are not connected to a control panel or to an outside alarm, do not transmit a signal off the premises, and do not use more than 120 volts; and (B) all installations comply with provisions of the adopted edition of Household Fire Warning Equipment, National Fire Protection Association Standard No. 74; (4) a person or organization that sells fire detection or fire alarm devices if the sales are exclusively over-the-counter or by mail order and if the person or organization does not plan, certify, install, service, or maintain this equipment; (5) response to a fire alarm or detection device by a law enforcement agency or fire department or by a law enforcement officer or fireman acting in an official capacity; (6) a Texas registered professional engineer acting solely in his professional capacity; (7) a person or an organization that provides and installs at no charge to the property owners or residents a battery-powered smoke detector in a single-family or two-family residence if: (A) the smoke detector bears a label of listing or approval by a testing laboratory approved by the State Board of Insurance; (B) the installation complies with provisions of the adopted edition of National Fire Protection Association Standard No. 74; (C) the installers are knowledgeable in fire protection and the proper use of smoke detectors; and (D) the detector is a single station installation and not a part of or connected to any other detection device or system; (8) a regular employee of a registered firm who is under the direct supervision of a licensee; (9) a building owner, the owner's managing agent, or their employees who install battery-operated single-station smoke detectors or who monitor fire alarm or fire detection devices or systems in the owner's building, and in which the monitoring is performed at the owner's property and monitored at no charge to the occupants of the building, and complies with applicable standards of the National Fire Protection Association as may be adopted by rule promulgated under this Act, and utilizes equipment approved by a testing laboratory approved by the State Board of Insurance for fire alarm monitoring; (10) a person employed by a registered firm that sells and installs a smoke or heat detector in a single-family or two-family residence if: (A) the detector bears a label of listing or approval by a testing laboratory approved by the State Board of Insurance; (B) the installation complies with provisions of the adopted edition of National Fire Protection Association Standard No. 74; (C) the installers are knowledgeable in fire protection and the proper use and placement of detectors; and (D) the detector is a single station installation and not a part of or connected to any other detection device or system; or (11) a person or organization licensed to install or service burglar alarms under the Private Investigators and Private Security Agencies Act (Article 4413(29bb), Vernon's Texas Civil Statutes) that provides and installs in a single-family or two-family residence a combination keypad that includes a panic button to initiate a fire alarm signal if the fire alarm signal: (A) is monitored by a fire alarm firm registered under this article; and (B) is not initiated by any fire or smoke detection device. (c) Registered companies, licensees, and employees of licensees shall not be required to obtain any registration, franchise, or license from or pay any fee or franchise tax to or post any bond by any municipality, county, or other political subdivision of this state to engage in business or perform any activities authorized under this Act. Notwithstanding any other provisions of this section, a municipality or county may require a registered firm to obtain a permit and pay a fee therefor for the installation of a fire alarm or fire detection device or system and require that the installation of such system be in conformance with the building code or other construction requirements of the municipality or county and state law but may not impose qualification or financial responsibility requirements other than proof of a valid certificate of registration.
Administration
Sec. 4. The board shall administer this article and it may issue rules and regulations which it considers necessary to its administration through the state fire marshal. The board, in promulgating necessary rules and regulations, may utilize recognized standards such as, but not limited to, those of the National Fire Protection Association, the National Electrical Code, those recognized by federal law or regulation, those published by any nationally recognized standards-making organization, or any information furnished by individual manufacturers. Sec. 4A. Repealed by Acts 1997, 75th Leg., ch. 1172, Sec. 4.14(3), eff. Sept. 1, 1997.
Registration and Licensing
Sec. 5. (a) Each person or organization engaged in the business of planning, certifying, leasing, selling, servicing, installing, monitoring, or maintaining fire alarm or fire detection devices or systems shall have a certificate of registration issued by the commissioner. The initial fee for the certificate of registration must be in an amount not to exceed $500 and the renewal fee for each year thereafter must be in an amount not to exceed $500. The renewal fee for a person or organization engaged in the business of planning, certifying, leasing, selling, servicing, installing, monitoring, or maintaining exclusively single station devices shall be in an amount not to exceed $250. A registered person or firm shall retain at least one fire alarm technician, residential fire alarm superintendent or fire alarm planning superintendent as an employee. A registered person or firm that is engaged in the business of planning, certifying, leasing, selling, servicing, installing, monitoring, or maintaining exclusively single station devices shall have at least one fire alarm technician, residential fire alarm superintendent, or fire alarm planning superintendent. A limited certificate of registration may be issued to persons or organizations whose business is restricted to monitoring. (b) Each separate office location of a registered firm, other than the location identified on the certificate of registration, shall have a branch office registration certificate issued by the commissioner. The initial fee for this branch office registration certificate must be in an amount not to exceed $150 and the renewal fee for each year thereafter must be in an amount not to exceed $150. The commissioner shall identify each branch office location as a part of a registered organization before a branch office registration certificate may be issued. A registered person or firm that is engaged in the business of planning, certifying, leasing, selling, servicing, installing, monitoring, or maintaining exclusively single station devices shall not be required to apply for or obtain a branch office registration certificate for a separate office or location of the registered firm. (c) Each fire alarm technician, residential fire alarm superintendent or fire alarm planning superintendent must obtain a license issued by the board. The initial fee for the license must be in an amount not to exceed $120 and the renewal fee for each year thereafter must be in an amount not to exceed $100. Unless the examination is administered by a testing service, a nonrefundable fee for the initial examination must not exceed $30. Unless the reexamination is administered by a testing service, a nonrefundable fee not to exceed $20 shall be charged for each reexamination. (d) A fee in an amount not to exceed $20 shall be charged for a duplicate certificate of registration or license issued by the board and for any requested change to a certificate of registration or license. (e) Repealed by Acts 1989, 71st Leg., ch. 762, Sec. 21, eff. June 15, 1989. (f) A person licensed pursuant to this article shall be an employee or agent of an organization that holds a valid certificate of registration in order to engage in the activity for which the license was granted. (g) Repealed by Acts 1989, 71st Leg., ch. 762, Sec. 21, eff. June 15, 1989. (h) A certificate of registration or license issued under this article is not transferable. (i) The board shall, within the limits fixed by this section, prescribe the fees to be charged under this section.
Expiration Dates of Licenses
Sec. 5A. Each renewal of a certificate of registration or license issued under this article is valid for a period of two years. The fee for both years is payable on renewal.
Required insurance
Sec. 5B. (a) The board shall not issue a certificate of registration under this article unless the applicant files with the board evidence of a general liability insurance policy that includes products and completed operations coverage. The policy shall be conditioned to pay on behalf of the insured those sums that the insured becomes legally obligated to pay as damages because of bodily injury and property damage caused by an occurrence involving the insured or the insured's servant, officer, agent, or employee in the conduct of any business registered or licensed under this article. (b) The limits of insurance coverage required by Subsection (a) of this section shall not be less than $100,000 combined single limits for bodily injury and property damage for each occurrence and not less than $300,000 aggregate for all occurrences per policy year, unless the board increases or decreases those limits under Section 6 of this article. (c) The evidence of general liability insurance required by this section must be in the form of a certificate of insurance executed by an insurer authorized to do business in this state and countersigned by an insurance agent licensed in this state. A certificate of insurance for surplus lines coverage procured in compliance with Article 1.14-2 of this code through a licensed Texas surplus lines agent resident in this state may be filed with the board as evidence of coverage required by this section. Insurance certificates executed and filed with the board under this section remain in force until the insurer has terminated future liability by the notice required by the board. (d) Failure to maintain the liability insurance required under this section constitutes grounds for the denial, suspension, or revocation of a certificate of registration issued under this article after notice and opportunity for hearing. (e) For a person who is licensed to install or service burglar alarms under the Private Investigators and Private Security Agencies Act, as amended (Article 4413(29bb), Vernon's Texas Civil Statutes), compliance with the insurance requirements of that Act constitutes compliance with the insurance requirements of this section if the insurance held by the person complies with the requirements of this section in amounts and types of coverage. (f) For a person who is licensed to install or service burglar alarms under the Private Investigators and Private Security Agencies Act, as amended (Article 4413(29bb), Vernon's Texas Civil Statutes), compliance with the bond and insurance requirements of that Act constitutes compliance with the bond and insurance requirements of this section. (g) This section does not affect the rights of the insured to negotiate or contract for limitations of liability with a third party, including a customer of the insured.
Renewal
Sec. 5C. (a) An unexpired license or registration may be renewed by paying the required renewal fee to the board before the expiration of the license or registration. If a license or registration has been expired for not longer than 90 days, the license or registration may be renewed by paying to the board the required renewal fee and a fee that is not to exceed one-fourth of the original fee for the license or registration. If a license or registration has been expired for longer than 90 days but less than two years, the license or registration may be renewed by paying to the board all unpaid renewal fees and a fee that is not to exceed the original fee for the license or registration. If a license or registration has been expired for two years or longer, the license or registration may not be renewed. A new license or registration may be obtained by complying with the requirements and procedures for obtaining an original license or registration. At least 30 days before the expiration of a license or registration, the State Fire Marshal shall send written notice of the impending license or registration expiration to the licensee or registrant at his or its last known address. This section may not be construed to prevent the board from denying or refusing to renew a license under applicable law or rules of the State Board of Insurance. A licensee with an unexpired license who is not employed by a registered firm at the time of the licensee's renewal may renew that license; however, the licensee may not engage in any activity for which the license was granted until the licensee is employed and qualified under a registered firm. (b) The State Board of Insurance by rule may adopt a system under which licenses and registrations expire on various dates during the year. For the year in which the license or registration expiration date is less than one year from its issuance or anniversary date, the fee shall be prorated on a monthly basis so that each licensee or registrant shall pay only that portion of the fee that is allocable to the number of months during which the license or registration is valid. On each subsequent renewal, the total renewal fee is payable. (c) A license or registration issued under this Act shall expire at 12 midnight on the date printed on the license or registration. A renewal application and fee for license or registration must be postmarked on or before the date of expiration to be accepted as timely. If a renewal application is not complete but there has been no lapse in the required insurance, the applicant shall have 30 days from the time that the applicant is notified by the board of the deficiencies in the renewal application to submit any additional requirement. If an applicant fails to respond and correct all deficiencies in a renewal application within the 30-day period, a late fee may be charged.
Examination
Sec. 5D. (a) Each applicant for a license must pass a written examination. Examinations shall be conducted by the State Fire Marshal or a testing service selected by the State Fire Marshal. Examinations shall cover this article and board rules and shall include specific testing of all categories of licensure. Not later than the 30th day after the day on which an examination is administered under this article, the State Fire Marshal shall send notice to each examinee of the results of the examination. If an examination is conducted, graded, or reviewed by a testing service, the State Fire Marshal shall send notice to the examinees of the results of the examination within two weeks after the date on which the State Fire Marshal receives the results from the testing service. If the notice of the examination results will be delayed for longer than 90 days after the examination date, the State Fire Marshal shall send notice to the examinee of the reason for the delay before the 90th day. If requested in writing by a person who fails the examination administered under this article, the State Fire Marshal shall send to the person an analysis of the person's performance on the examination. (a-1) The state fire marshal may require a testing service to notify a person of the results of the person's examination under Subsection (a). (b) A training school shall make an application for approval to the State Fire Marshal. Applications shall include complete course or testing curriculum. The State Fire Marshal shall review the materials for course approval and shall provide a letter of course approval or a letter of denial within 60 days. Denials of approval shall be in writing and shall disclose specific reasons for the denial. Denied applicants may reapply at any time. Approval for a training school or testing service shall be valid for one year, and the initial and renewal fee for a training school approval shall not exceed $500. A registered firm, or an affiliate of a registered firm, shall not be approved as a training school. (c) Instructors for training schools shall be approved by the State Fire Marshal. Instructors must have a minimum of three years of experience in fire alarm installation, service, or monitoring and shall have a valid fire alarm planning superintendent license. An instructor's approval shall be effective for one year, and the initial or renewal fee for approval of an instructor shall not exceed $50. (d) The training curriculum for a fire alarm technician and a residential fire alarm superintendent course shall consist of 16 hours of classroom instruction on all categories of licensure. (e) Training schools must conduct two or more classes, open to the public, each calendar year from the issuance of registration, within 125 miles of each county in the state that has a population in excess of 500,000 people according to the last decennial census. (f) The state fire marshal shall establish the scope and type of an examination required by this article. The state fire marshal may administer the examination or may enter into an agreement with a testing service. (g) The state fire marshal may contract with the testing service regarding requirements for the examination, including examination development, scheduling, site arrangements, grading, reporting, analysis, or other administrative duties. The state fire marshal may require the testing service to: (1) correspond directly with an applicant regarding the administration of the examination; (2) collect a reasonable fee from an applicant for administering the examination; or (3) administer the examination at a specific location or time. (h) The state fire marshal shall adopt rules as necessary to implement examination requirements under this article.
Continuing Education
Sec. 5E. The State Board of Insurance may adopt procedures for certifying and may certify continuing education programs. Participation in the programs is voluntary.
License by Reciprocity
Sec. 5F. The board may waive any license requirement for an applicant with a valid license from another state having license requirements substantially equivalent to those of this state.
Powers and Duties of the Commissioner
Sec. 6. (a) The commissioner may adopt rules as necessary to administer this article. The rules may establish specialized licenses and certificates of registration for organizations or persons engaged in the business of planning, certifying, leasing, selling, servicing, installing, monitoring, or maintaining fire alarm or fire detection devices or systems. The rules shall establish appropriate training and qualification standards for each kind of license and certificate of registration. (b) The commissioner shall also adopt standards applicable to any fire alarm device, equipment, or system regulated under this article. In adopting standards under this subsection, the commissioner may permit the operation of a fire alarm monitoring station that relies on fire alarm devices or equipment that is approved or listed by a nationally recognized testing laboratory, without regard to whether the monitoring station is approved or listed by a nationally recognized testing laboratory as long as the operator of the station demonstrates that its operating standards are substantially equivalent to those required in order to be approved or listed. (c) An advisory council appointed in accordance with Subsection (d) of this section shall periodically review rules implementing this article and recommend changes in the rules to the commissioner. (d) The advisory council is appointed by the commissioner and is composed of seven individuals as follows: (1) three individuals employed by any registered firm in the fire protection industry who have a minimum of three years experience in the sale, installation, maintenance, or manufacturing of fire alarm or fire detection devices; (2) two individuals who must either be experienced in the engineering of fire prevention services or be a member of a fire protection association; (3) one person experienced and employed by a municipality or county as a fire prevention officer; and (4) one person who is employed by any registered firm and who has at least three years experience in the operation of a central fire alarm monitoring station.
Certain Rules Prohibited
Sec. 6A. (a) The commissioner may not adopt rules restricting competitive bidding or advertising by the holder of a license or registration issued under this article except to prohibit false, misleading, or deceptive practices. (b) In the commissioner's rules to prohibit false, misleading, or deceptive practices, the commissioner may not include a rule that: (1) restricts the use of any medium for advertising; (2) restricts the use of a license or registration holder's personal appearance or voice in an advertisement; (3) relates to the size or duration of an advertisement by the license or registration holder; or (4) restricts the license or registration holder's advertisement under a trade name.
Certain Acts Prohibited
Sec. 7. (a) No person or organization may do any of the following: (1) plan, certify, lease, sell, service, install, monitor, or maintain fire alarm or fire detection devices or systems without a valid license or certificate of registration; (2) obtain or attempt to obtain a license or certificate of registration by fraudulent representation; or (3) plan, certify, lease, sell, service, install, monitor, or maintain fire alarm or fire detection devices or systems contrary to the provisions of this article or the rules formulated by the board under the authority of this article. (b) Except as provided by Subsection (c), a political subdivision may not offer residential alarm system sales, service, installation, or monitoring unless it has been providing monitoring services to residences within the boundaries of the political subdivision as of September 1, 1999. Any fee charged by the political subdivision may not exceed the cost of the monitoring. (c) A political subdivision may: (1) offer service, installing, or monitoring for property owned by the political subdivision or another political subdivision; (2) allow for the response of an alarm or detection device by a law enforcement agency or fire department or by a law enforcement officer or firefighter acting in an official capacity; or (3) offer monitoring to a financial institution, as defined by Section 59.301, Finance Code, that requests, in writing, that the political subdivision provide monitoring service to the financial institution. (d) The limitations in Subsection (b) do not apply to a political subdivision in a county with a population of less than 80,000 or in a political subdivision where monitoring is not otherwise provided or available. (e) For purposes of Subsections (b), (c), and (d), the definition of "monitoring" means the receipt of fire alarm or supervisory signals or retransmission or communication of those signals to a fire service communications center that is located in this state or serves property in this state. This is not intended to require a political subdivision to be licensed under Article 5.43-2, Insurance Code.
Fees Collected
Sec. 8. The fees herein provided for, when collected, shall be deposited in the State Treasury to the credit of the State Board of Insurance operating fund.
Selling or leasing fire alarm or fire detection devices
Sec. 9. (a) Except as provided in Subsection (b) of this section, no detection or alarm device, alarm system, or monitoring equipment, a purpose of which is to detect and/or give alarm of fire, may be sold, offered for sale, leased, installed, or used to monitor property in this state unless it carries a label of approval or listing of a testing laboratory approved by the State Board of Insurance; provided, however, that the continued use or monitoring of equipment in place which complied with applicable law at the time of its original placement, without extension, modification, or alteration is not prohibited. (b) No detection or alarm device, alarm system, or monitoring equipment in one-family or two-family residences, a purpose of which is to detect and/or give alarm of fire, may be sold, offered for sale, leased, installed, or used to monitor property in this state after April 14, 1989, unless it carries a label of approval or listing of a testing laboratory approved by the State Board of Insurance; provided, however, that the continued use or monitoring of equipment in place which otherwise complied with applicable law at the time of its original placement, without extension, modification, or alteration is not prohibited. (c) Fire alarm devices that are not required by this statute or rules adopted under this statute and that do not impair the operation of fire alarm or fire detection devices required by this statute or the rules adopted under this statute are exempt from the requirement of a label of approval or listing of a testing laboratory approved by the Board if such devices are approved by the local authority having jurisdiction. (d) No fire detection or fire alarm device may be sold or installed in this state unless accompanied by printed information supplied to the owner by the supplier or installing contractor concerning: (1) instructions describing the installation, operation, testing, and proper maintenance of the device; (2) information which will aid in establishing an emergency evacuation plan for the protected premises; and (3) the telephone number and location, including notification procedures, of the nearest fire department. (e) Each registered firm that employs persons that are exempt from the licensing provisions of this article pursuant to Section 3(b)(10) of this article is required to appropriately train and supervise such exempt persons so as to ensure that each installation complies with the adopted provisions of National Fire Protection Standard No. 74 or other adopted standards, that each smoke or heat detector installed or sold carries a label or listing of approval by a testing laboratory approved by the State Board of Insurance, and that such exempt persons are knowledgeable in fire protection and the proper use and placement of detectors.
Applications and hearings on licenses and certificates
Sec. 10. (a) Applications and qualifications for certificates and licenses issued hereunder shall be made pursuant to rules and regulations adopted by the board. (b) The State Fire Marshal may refuse to issue or renew or may suspend or revoke a certificate of registration or license if, after notice and hearing, he finds that the applicant, registrant, or licensee has engaged in acts: (1) that violate this article; (2) that violate rules or standards adopted pursuant to this article; or (3) constituting misrepresentation made in connection with the sale of products or services rendered. (c) A certificate of registration, license, or testing laboratory approval may be denied, or same duly issued may be suspended or revoked, or the renewal thereof refused, if after notice and public hearing, the board, through the State Fire Marshal, finds from the evidence presented at said hearing that one or more provisions of this article or of any rule or regulation promulgated under this article has been violated. (d) A person or organization that has had a certificate of registration, license, or testing laboratory approval revoked may not reapply for the certificate, license, or approval within one year from the date of revocation. A person or organization reapplying under this subsection must request a public hearing to show cause why a certificate of registration, license, or testing laboratory approval should not be denied.
Disciplinary Hearing
Sec. 10A. If the State Fire Marshal proposes to suspend, revoke, or refuse to renew a license or certificate of registration of a person, the person is entitled to a hearing conducted by the State Office of Administrative Hearings. Proceedings for a disciplinary action are governed by the administrative procedure law, Chapter 2001, Government Code. Rules of practice adopted by the commissioner applicable to the proceedings for a disciplinary action may not conflict with rules adopted by the State Office of Administrative Hearings.
Penalties
Sec. 11. In addition to any other penalties, any person or organization that performs a function that requires a certificate of registration or license as described herein without first obtaining such certificate of registration or license commits a Class B misdemeanor, venue for which is in Travis County or in the county in which the offense is committed. Added by Acts 1975, 64th Leg., p. 853, ch. 326, Sec. 1, eff. May 30, 1975. Amended by Acts 1977, 65th Leg., p. 363, ch. 178, Sec. 1, eff. Aug. 29, 1977; Acts 1979, 66th Leg., p. 2173, ch. 830, Sec. 1, eff. Sept. 1, 1979; Acts 1981, 67th Leg., p. 421, ch. 175, Sec. 2, 3, eff. Sept. 1, 1981. Sec. 3(b) amended by Acts 1983, 68th Leg., p. 1093, ch. 245, Sec. 4, eff. May 27, 1983; Secs. 5(a), (b) (d) amended by Acts 1983, 68th Leg., p. 3956, ch. 622, Sec. 48, eff. Sept. 1, 1983; Sec. 5(c) amended by Acts 1983, 68th Leg., p. 1094, ch. 245, Sec. 5, eff. May 27, 1983; Secs. 5(a), (b), (d) Acts 1983, 68th Leg., p. 3956, ch. 622, Sec. 48, eff. Sept. 1, 1983; Sec. 5(d) amended by Acts 1983, 68th Leg., p. 3956, ch. 622, Sec. 48, eff. Sept. 1, 1983; Sec. 5(i) added by Acts 1983, 68th Leg., p. 3957, ch. 622, Sec. 49, eff. Sept. 1, 1983; Sec. 5A amended by, and Secs. 5C to 5F added by Acts 1983, 68th Leg., p. 3957, ch. 622, Sec. 50, eff. Sept. 1, 1983; Sec. 8 amended by Acts 1983, 68th Leg., p. 3935, ch. 622, Sec. 25, eff. Sept. 1, 1983; Sec. 1 amended by Acts 1987, 70th Leg., ch. 267, Sec. 11, eff. June 5, 1987; Sec. 2(7), (9), (12), (13) amended by Acts 1987, 70th Leg., ch. 267, Sec. 12, eff. June 5, 1987; Sec. 3(b) amended by Acts 1987, 70th Leg., ch. 267, Sec. 13, eff. June 5, 1987; Acts 1987, 70th Leg., ch. 866, Sec. 1, eff. Aug. 31, 1987; Sec. 5(a) to (c), (e) to (g) amended by Acts 1987, 70th Leg., ch. 267, Sec. 14, eff. June 5, 1987; Sec. 5A amended by Acts 1987, 70th Leg., ch. 267, Sec. 15, eff. June 5, 1987; Sec. 5B (a) to (c), (e) amended by Acts 1987, 70th Leg., ch. 267, Sec. 16, eff. June 5, 1987; Sec. 5D amended by Acts 1987, 70th Leg., ch. 267, Sec. 17, eff. June 5, 1987; Sec. 6 amended by Acts 1987, 70th Leg., ch. 267, Sec. 18, eff. June 5, 1987; Sec. 7 amended by Acts 1987, 70th Leg., ch. 267, Sec. 19, eff. June 5, 1987; Sec. 9(a) amended by Acts 1987, 70th Leg., ch. 267, Sec. 20, eff. June 5, 1987; Sec. 11 amended by Acts 1987, 70th Leg., ch. 267, Sec. 21, eff. June 5, 1987; Secs. 1, 2 amended by Acts 1989, 71st Leg., ch. 762, Sec. 9, eff. June 15, 1989; Sec. 2(14) added by Acts 1989, 71st Leg., ch. 823, Sec. 4, eff. June 14, 1989; Sec. 3(b) amended by Acts 1989, 71st Leg., ch. 762, Sec. 10, eff. June 15, 1989; Sec. 5(a), (b), (e), (f), (g) amended by Acts 1989, 71st Leg., ch. 762, Sec. 11, 21, eff. June 15, 1989; Sec. 5B amended by Acts 1989, 71st Leg., ch. 823, Sec. 5, eff. June 14, 1989; Sec. 5C(a) amended by Acts 1989, 71st Leg., ch. 762, Sec. 12, eff. June 15, 1989; Sec. 6(a) amended by Acts 1989, 71st Leg., ch. 762, Sec. 13, eff. June 15, 1989; Sec. 6(b) amended by Acts 1989, 71st Leg., ch. 823, Sec. 6, eff. June 14, 1989; Sec. 7 amended by Acts 1989, 71st Leg., ch. 762, Sec. 14, eff. June 15, 1989; Sec. 9(a) amended by Acts 1989, 71st Leg., ch. 762, Sec. 15, eff. June 15, 1989; Sec. 10(b), (d) amended by Acts 1989, 71st Leg., ch. 762, Sec. 16, eff. June 15, 1989; Sec. 2 amended by Acts 1991, 72nd Leg., ch. 857, Sec. 1, eff. Aug. 26, 1991; Sec. 3 amended by Acts 1991, 72nd Leg., ch. 857, Sec. 2, eff. Aug. 26, 1991; Sec. 4A added by Acts 1991, 72nd Leg., ch. 628, Sec. 13, eff. Sept. 1, 1991; Sec. 5(a), (c) amended by Acts 1991, 72nd Leg., ch. 857, Sec. 3, eff. Aug. 26, 1991; Sec. 5C(a), (c) amended by Acts 1991, 72nd Leg., ch. 857, Sec. 4, eff. Aug. 26, 1991; Sec. 6(a) amended by Acts 1991, 72nd Leg., ch. 628, Sec. 14, eff. Sept. 1, 1991; amended by Acts 1991, 72nd Leg., ch. 857, Sec. 5, eff. Aug. 26, 1991; Sec. 9 amended by Acts 1991, 72nd Leg., ch. 242, Sec. 2.36A, eff. Sept. 1, 1991; amended by Acts 1991, 72nd Leg., ch. 857, Sec. 6, eff. Aug. 26, 1991; Sec. 3(b) amended by Acts 1995, 74th Leg., ch. 331, Sec. 1, eff. June 8, 1995; Sec. 5B(g) added by Acts 1995, 74th Leg., ch. 939, Sec. 1, eff. Sept. 1, 1995; Sec. 1 amended by Acts 1997, 75th Leg., ch. 1172, Sec. 4.05, eff. Sept. 1, 1997; Sec. 2(3) repealed by Acts 1997, 75th Leg., ch. 1172, Sec. 4.14(2), eff. Sept. 1, 1997; Sec. 3(a) amended by Acts 1997, 75th Leg., ch. 1205, Sec. 14, eff. Sept. 1, 1997; Sec. 4A repealed by Acts 1997, 75th Leg., ch. 1172, Sec. 4.14(3), eff. Sept. 1, 1997; Sec. 5(a), (b), (f) amended by Acts 1997, 75th Leg., ch. 1172, Sec. 4.06, eff. Sept. 1, 1997; Sec. 5C(a) amended by Acts 1997, 75th Leg., ch. 1172, Sec. 4.07, eff. Sept. 1, 1997; Sec. 5D amended by Acts 1997, 75th Leg., ch. 1172, Sec. 4.08, eff. Sept. 1, 1997; Sec. 6 amended by Acts 1997, 75th Leg., ch. 1172, Sec. 4.09, eff. Sept. 1, 1997; Secs. 6A and 10A added by Acts 1997, 75th Leg., ch. 1172, Sec. 4.10, eff. Sept. 1, 1997; Sec. 3(b) amended by Acts 1999, 76th Leg., ch. 1465, Sec. 1, eff. Sept. 1, 1999; Sec. 7 amended by Acts 1999, 76th Leg., ch. 1465, Sec. 2, eff. Sept. 1, 1999; Sec. 5(c) amended by Acts 2003, 78th Leg., ch. 1014, Sec. 3, eff. June 20, 2003; Sec. 5D(a) amended by and Secs. 5D(a-1), 5D(f) to (h) added by Acts 2003, 78th Leg., ch. 1014, Sec. 4, eff. June 20, 2003. Art. 5.43-3. FIRE PROTECTION SPRINKLER SYSTEMS.
Definitions
Sec. 1. In this article: (1) "Person" means a natural person, including an owner, manager, officer, employee, or occupant. (2) "Organization" means a corporation, a partnership or other business association, a governmental entity, or any other legal or commercial entity. (3) "Board" means the State Board of Insurance. (4) Repealed by Acts 1997, 75th Leg., ch. 1172, Sec. 4.14(4), eff. Sept. 1, 1997. (5) "Installation" means the initial placement of equipment or the extension, modification, or alteration of equipment after the initial placement. (6) "Maintenance" means to maintain in the condition of repair that provides performance as originally planned. (7) "Service" means to maintain, repair, or test. (8) "Fire protection sprinkler system contractor" means a person or organization that offers to undertake, represents itself as being able to undertake, or does undertake the plan, sale, installation, maintenance, or servicing of a fire protection sprinkler system or any part of such a system. (9) "Fire protection sprinkler system" means an assembly of underground or overhead piping or conduits that conveys water with or without other agents to dispersal openings or devices to extinguish, control, or contain fire and to provide protection from exposure to fire or the products of combustion. (10) "Responsible managing employee" means an individual or individuals who shall be designated by each company that plans, sells, installs, maintains, or services a fire protection sprinkler system to assure that each fire protection sprinkler system as installed, maintained, or serviced meets the standards as provided for by law. (11) "Certificate of Registration" means the document issued to a fire protection sprinkler system contractor authorizing same to conduct business in this state. (12) "License" means the document issued to a responsible managing employee authorizing same to engage in the fire protection sprinkler system business in this state.
Text of (13) as added by Acts 1989, 71st Leg., ch. 762, Sec. 17
(13) "Registered firm" means a firm holding a valid certificate of registration.
Text of (13) as added by Acts 1989, 71st Leg., ch. 823, Sec. 7
(13) "Insurance agent" means: (A) a person, firm, or corporation licensed under Article 21.14 or 1.14-2 of this code; (B) a salaried, state, or special agent; or (C) a person authorized to represent an insurance fund or pool created by a city, county, or other political subdivision of the state under The Interlocal Cooperation Act (Article 4413(32c), Vernon's Texas Civil Statutes).
Exceptions
Sec. 2. (a) The provisions of this article and the rules and regulations promulgated under this article shall have uniform force and effect throughout the state. A municipality or county may not enact an order, ordinance, rule, or regulation requiring a fire protection sprinkler system contractor to obtain a certificate of registration from the municipality or county. Notwithstanding any other provisions of this Act, a municipality or county may require a fire protection sprinkler system contractor to obtain a permit and pay a fee therefor for the installation of a fire protection sprinkler system and require the installation of such system in conformance with the building code or other construction requirements of the municipality or county, but may not impose qualification or financial responsibility requirements other than proof of a valid certificate of registration. A municipal or county order, ordinance, rule, or regulation that is in effect on the effective date of this article is not invalidated because of any provisions of this article. (b) This article does not apply to: (1) an employee of the United States, this state, or any political subdivision of this state who acts as a fire protection sprinkler system contractor for the employing governmental entity; (2) the plan, sale, installation, maintenance, or servicing of a fire protection sprinkler system in any property owned by the United States or this state; (3) a person or organization acting under court order as authorization; (4) a person or organization that sells or supplies products or materials to a registered fire protection sprinkler system contractor; (5) an installation, maintenance, or service project for which the total contract price for labor, materials, and all other services is less than $100, if: (A) the project is not a part of a complete or more costly project, whether the complete project is to be undertaken by one or more fire protection sprinkler system contractors; or (B) the project is not divided into contracts of less than $100 for the purpose of evading this article; (6) a registered professional engineer acting solely in such professional capacity; (7) a regular employee of a registered fire protection sprinkler system contractor; or (8) an owner or lessee of property that installs a fire protection sprinkler system on the owned or leased property for its own use or for the use by family members and does not offer such property for sale or lease within one year after installation of a fire protection sprinkler system.
Administration
Sec. 3. (a) The board shall administer this article and may issue rules necessary to its administration through the State Fire Marshal. Under rules adopted under this subsection, the board may create a specialized licensing or registration program for fire protection sprinkler system contractors. (b) The board, in adopting necessary rules, may utilize recognized standards such as those adopted by a federal law or regulation, those published by nationally recognized standards-making organizations, or those developed by individual manufacturers. Sec. 3A. Repealed by Acts 1997, 75th Leg., ch. 1172, Sec. 4.14(5), eff. Sept. 1, 1997.
Registration; Licensing; Fees
Sec. 4. (a) A fire protection sprinkler system contractor must apply to the board for a certificate of registration on a form prescribed by the board. If the contractor is a partnership or joint venture, it need not register in its own name if each partner or joint venturer is registered. The application fee for the certificate of registration must be in an amount not to exceed $100, and the fee for issuance of either the initial or the renewal certificate of registration must be in an amount not to exceed $1,200. (b) Each fire protection sprinkler system contractor must employ at least one licensed responsible managing employee on a full-time basis. (c) Each responsible managing employee must obtain a license issued by the board and conditioned on the successful completion of the examination requirement and other requirements prescribed by the rules adopted under this article. Unless the examination is administered by a testing service, a nonrefundable examination fee must be in an amount not to exceed $100 per examination. The fee for the issuance of either the initial or the renewal responsible managing employee license must be in an amount not to exceed $200. (d) A certificate of registration and a license are valid for a period of one year from the date of issue and are renewable annually on payment of the annual fee; provided, however, that the initial certificates of registration or licenses issued on or after September 1, 1983, may be issued for periods of less than one year and the annual fee shall be prorated proportionally. (e) The fee charged by the board for any request for a duplicate certificate of registration or license or any request requiring change to a certificate of registration or license must be in an amount not to exceed $70. (f) Each certificate of registration and license issued under this article must be posted in a conspicuous place in the fire protection sprinkler system contractor's place of business. (g) All bids, proposals, offers, and installation drawings for fire protection sprinkler systems must prominently display the fire protection sprinkler system contractor's certificate of registration number. (h) A certificate of registration or license issued under this article is not transferable. (i) The board shall, within the limits fixed by this section, prescribe the fees to be charged under this section. All fees collected under the provisions of this article shall be deposited in the State Treasury to the credit of the State Board of Insurance operating fund for use in carrying out the administration of this article.
Required insurance
Sec. 5. (a) The board shall not issue a certificate of registration under this article unless the applicant files with the board evidence of a general liability insurance policy that includes products and completed operations coverage. The limits of insurance coverage required by this section shall be in an amount not less than $100,000 combined single limits for bodily injury and property damage for each occurrence and not less than $300,000 aggregate for all occurrences per policy year, unless the board increases or decreases the amounts under Section 7 of this article. The policy shall be conditioned to pay on behalf of the insured those amounts that the insured is legally obligated to pay as damages because of bodily injury and property damage caused by an occurrence involving the insured or the insured's servant, officer, agent, or employee in the conduct of any business registered under this article. (b) The evidence of general liability insurance required by this section must be in the form of a certificate of insurance executed by an insurer authorized to do business in this state and countersigned by an insurance agent licensed in this state. A certificate of insurance for surplus lines coverage procured in compliance with Article 1.14-2 of this code by a licensed Texas surplus lines agent resident in this state may be filed with the board as evidence of coverage required by this section. Insurance certificates executed and filed with the board under this section remain in force until the insurer has terminated future liability by the notice required by the board. (c) Failure to maintain liability insurance required under this section constitutes grounds for the denial, suspension, or revocation of a certificate of registration issued under this article after notice and opportunity for hearing.
Renewal
Sec. 5A. (a) Each renewal of a license or certificate of registration issued under this article is valid for a period of two years. The license or registration fee for each year of the two-year period is payable on renewal. (b) An unexpired license or registration may be renewed by paying the required renewal fee to the board before the expiration date of the license or registration. If a license or registration has been expired for not longer than 90 days, the license or registration may be renewed by paying to the board the required renewal fee and a fee that is one-half of the original fee for the license or registration. If a license or registration has been expired for longer than 90 days but less than two years, the license or registration may be renewed by paying to the board all unpaid renewal fees and a fee that is equal to the original fee for the license or registration. If a license or registration has been expired for two years or longer, the license or registration may not be renewed. A new license or registration may be obtained by complying with the requirements and procedures for obtaining an initial license or registration. At least 30 days before the expiration of a license or registration, the board shall send written notice of the impending license or registration expiration to the licensee or registrant at his or its last known address. This section may not be construed to prevent the board from denying or refusing to renew a license under applicable law or rules of the board. (c) The board by rule may adopt a system under which licenses and registrations expire on various dates during the year. For the year in which the license or registration expiration date is less than one year from its issuance or anniversary date, the fee shall be prorated on a monthly basis so that each licensee or registrant shall pay only that portion of the fee that is allocable to the number of months during which the license or registration is valid. On each subsequent renewal, the total renewal fee is payable.
Examination
Sec. 5B. (a) The state fire marshal shall establish the scope and type of an examination required by this article. The state fire marshal may administer the examination or may enter into an agreement with a testing service. (b) The state fire marshal may contract with the testing service regarding requirements for the examination, including examination development, scheduling, site arrangements, grading, reporting, analysis, or other administrative duties. The state fire marshal may require the testing service to: (1) correspond directly with an applicant regarding the administration of the examination; (2) collect a reasonable fee from an applicant for administering the examination; or (3) administer the examination at a specific location or time. (c) Not later than the 30th day after the day on which an examination is administered under this article, the state fire marshal shall send notice to each examinee of the results of the examination. If an examination is graded or reviewed by a testing service, the state fire marshal shall send notice to each examinee of the results of the examination within two weeks after the date on which the state fire marshal receives the results from the testing service. If the notice of the examination results will be delayed for longer than 90 days after the examination date, the state fire marshal shall send notice to each examinee of the reason for the delay before the 90th day. If requested in writing by a person who fails the examination administered under this article, the state fire marshal shall send to the person an analysis of the person's performance on the examination. (d) The state fire marshal may require a testing service to notify a person of the results of the person's examination. (e) The state fire marshal shall adopt rules as necessary to implement examination requirements under this article.
Continuing Education
Sec. 5C. The board may adopt procedures for certifying and may certify continuing education programs. Participation in the programs is voluntary.
License by Reciprocity
Sec. 5D. The board may waive any license requirement for an applicant with a valid license from another state having license requirements substantially equivalent to those of this state.
Advisory Council
Sec. 6. (a) The Fire Protection Advisory Council is created. The commissioner shall appoint the members of the advisory council, who shall serve at the pleasure of the commissioner. (b) The advisory council, in addition to other duties delegated by the commissioner, shall: (1) advise the State Fire Marshal concerning practices in the fire protection sprinkler system industry and the rules necessary to implement and administer this article; and (2) make recommendations to the State Fire Marshal regarding forms and procedures for certificates of registration and licenses. (c) The advisory council shall have seven members as follows: (1) three individuals who have been actively engaged in the management of a fire protection sprinkler system business for not less than five years preceding their appointment; (2) one representative of the engineering section of the board's property division; (3) one volunteer fire fighter; and (4) one member from each of two fire departments of incorporated cities of this state. (d) The advisory council shall periodically review rules implementing this article and recommend changes in the rules to the commissioner. (e) The State Firemen's and Fire Marshals' Association of Texas may, on request by the commissioner, recommend a volunteer fire fighter for appointment to the advisory council.
Powers and Duties of Board
Sec. 7. (a) The board may delegate authority to exercise all or part of its functions, powers, and duties under this article, including the issuance of licenses and certificates of registration, to the State Fire Marshal, who shall implement the rules adopted by the board for the protection and preservation of life and property in controlling: (1) the registration of a person or an organization engaged in the business of planning, selling, installing, maintaining, or servicing fire protection sprinkler systems; and (2) the requirements for the plan, sale, installation, maintenance, or servicing of fire protection sprinkler systems by: (A) determining the criteria and qualifications for certificates of registration holders; (B) evaluating the qualifications of an applicant for a certificate of registration to engage in the business of planning, selling, installing, maintaining, or servicing fire protection sprinkler systems and issuing certificates to qualified applicants; (C) determining the criteria and qualifications for licenses; and (D) conducting examinations and evaluating the qualifications of applicants for licenses and issuing licenses to qualified applicants. (b) The board shall establish a procedure for reporting and processing complaints relating to the business of planning, selling, installing, maintaining, or servicing fire protection sprinkler systems in Texas. (c) The board may, after notice and opportunity for hearing, increase or decrease the limits of insurance coverage.
Certain Rules Prohibited
Sec. 7A. (a) The commissioner may not adopt rules restricting competitive bidding or advertising by the holder of a certificate of registration, license, or permit issued under this article except to prohibit false, misleading, or deceptive practices. (b) In the commissioner's rules to prohibit false, misleading, or deceptive practices, the commissioner may not include a rule that: (1) restricts the use of any medium for advertising; (2) restricts the use of a certificate, license, or permit holder's personal appearance or voice in an advertisement; (3) relates to the size or duration of an advertisement by the certificate, license, or permit holder; or (4) restricts the certificate, license, or permit holder's advertisement under a trade name.
Prohibited Acts
Sec. 8. A person or organization may not: (1) plan, sell, install, maintain, or service a fire protection sprinkler system without a valid certificate of registration; (2) act as a fire protection sprinkler system contractor under a certificate of registration without having at least one full-time employee who holds a valid responsible managing employee license; provided, however, that a person or organization with a current certificate of registration may act as a fire protection sprinkler system contractor for 30 days after the death or dissociation of its licensed responsible managing employee or for such longer period as may be approved by the board pursuant to the rules adopted hereunder; (3) act as a responsible managing employee for a fire protection sprinkler system contractor without a valid license; (4) obtain or attempt to obtain a certificate of registration or license by fraudulent representation; or (5) plan, sell, install, maintain, or service a fire protection sprinkler system in violation of this article or the rules adopted under this article.
Denial, Suspension, or Revocation of Certificate of Registration or License
Sec. 9. (a) The State Fire Marshal may refuse to issue or renew or may suspend or revoke a certificate of registration, license, or permit if, after notice and hearing, he finds that the applicant, registrant, licensee, or permit holder has engaged in acts: (1) that violate this article; (2) that violate rules or standards adopted pursuant to this article; or (3) constituting misrepresentation made in connection with the sale of products or services rendered. (b) Proceedings for the denial, suspension, or revocation of a certificate of registration or license and appeals from those proceedings are governed by the Administrative Procedure and Texas Register Act, as amended (Article 6252-13a, Vernon's Texas Civil Statutes). (c) No applicant, certificate of registration holder, or licensee whose certificate of registration or license has been denied, refused, or revoked hereunder (except for the failure to pass a required written examination) shall be entitled to file another application for a certificate of registration or license in the fire protection sprinkler system business in this state within one year from the effective date of such denial, refusal, or revocation or, if judicial review of such denial, refusal, or revocation is sought, within one year from the date of final court order or decree affirming such action. Such application, when filed after one year, may be denied unless the applicant shows good cause why the denial, refusal, or revocation of the certificate of registration or license shall not be deemed a bar to the issuance of a new certificate of registration or license.
Disciplinary Hearings
Sec. 9A. If the State Fire Marshal proposes to suspend, revoke, or refuse to renew a certificate of registration, license, or permit of a person, the person is entitled to a hearing conducted by the State Office of Administrative Hearings. Proceedings for a disciplinary action are governed by the administrative procedure law, Chapter 2001, Government Code. Rules of practice adopted by the commissioner applicable to the proceedings for a disciplinary action may not conflict with rules adopted by the State Office of Administrative Hearings.
Penalties
Sec. 10. (a) A person commits an offense if the person knowingly or intentionally violates Section 8 of this article. (b) An offense under this section is a Class B misdemeanor. (c) Venue for the offense is in Travis County or in the county in which the offense is committed.
Prohibited Practice
Sec. 11. Nothing in this article shall authorize a person or organization to practice professional engineering except in compliance with The Texas Engineering Practice Act, as amended (Article 3271a, Vernon's Texas Civil Statutes). Added by Acts 1983, 68th Leg., p. 534, ch. 113, Sec. 1, eff. Sept. 1, 1983; Sec. 4(c) amended by Acts 1987, 70th Leg., ch. 267, Sec. 22, eff. June 5, 1987; Sec. 5(a), (b), (d) amended by Acts 1987, 70th Leg., ch. 267, Sec. 23, eff. June 5, 1987; Sec. 7(c) added by Acts 1987, 70th Leg., ch. 267, Sec. 24, eff. June 5, 1987; Sec. 10(c) amended by Acts 1987, 70th Leg., ch. 267, Sec. 25, eff. June 5, 1987; Sec. 1(13) added by Acts 1989, 71st Leg., ch. 762, Sec. 17, eff. June 15, 1989; Sec. 1(13) added by Acts 1989, 71st Leg., ch. 823, Sec. 7, eff. June 14, 1989; Sec. 5 amended by Acts 1989, 71st Leg., ch. 823, Sec. 8, eff. June 14, 1989; Secs. 5A, 5D amended by Acts 1989, 71st Leg., ch. 762, Sec. 18, eff. June 15, 1989; Sec. 7(c) amended by Acts 1989, 71st Leg., ch. 823, Sec. 9, eff. June 14, 1989; Sec. 9(a) amended by Acts 1989, 71st Leg., ch. 762, Sec. 19, eff. June 15, 1989; Sec. 3A added by Acts 1991, 72nd Leg., ch. 628, Sec. 15, eff. Sept. 1, 1991; Sec. 6(b) amended by Acts 1991, 72nd Leg., ch. 628, Sec. 16, eff. Sept. 1, 1991; Sec. 3(a) amended by Acts 1995, 74th Leg., ch. 337, Sec. 1, eff. Sept. 1, 1995; Sec. 1(4) repealed by Acts 1997, 75th Leg., ch. 1172, Sec. 4.14(4), eff. Sept. 1, 1997; Sec. 3A repealed by Acts 1997, 75th Leg., ch. 1172, Sec. 4.14(5), eff. Sept. 1, 1997; Sec. 6 amended by Acts 1997, 75th Leg., ch. 1172, Sec. 4.11, eff. Sept. 1, 1997; Secs. 7A, 9A added by Acts 1997, 75th., ch. 1172, Sec. 4.12, eff. Sept. 1, 1997; Sec. 4(c) amended by Acts 2003, 78th Leg., ch. 1014, Sec. 5, eff. June 20, 2003; Sec. 5B amended by Acts 2003, 78th Leg., ch. 1014, Sec. 6, eff. June 20, 2003. Art. 5.45. NOTICE ON RENEWAL OF CERTAIN POLICIES.
Article repealed effective April 1, 2007
(a) An insurer, including a farm mutual insurance company, county mutual insurance company, Lloyd's plan, or reciprocal or interinsurance exchange, that renews a policy of homeowners insurance, fire and residential allied lines insurance, farm and ranch owners insurance, or farm and ranch insurance must provide the policy holder with written notice of any difference in each form of the policy offered to the policy holder on renewal and the form of the policy held immediately before renewal. (b) A notice provided under this article must be written in plain language. (c) The commissioner may adopt rules as necessary to implement this article. Added by Acts 2003, 78th Leg., ch. 797, Sec. 1, eff. June 20, 2003. Art. 5.46. REPORT OF INFORMATION.
Article repealed effective April 1, 2007
(A) The State Fire Marshal, any fire marshal of a political subdivision in Texas, or the chief of any established fire department in Texas, or any peace officer in Texas, may request any insurance company investigating a fire loss of real or personal property in which damages or losses exceed $1,000 to release information in its possession relative to that loss. The company shall release the information and cooperate with any official authorized to request such information pursuant to this section. The information may include but not exceed: (1) any insurance policy relevant to a fire loss under investigation and any application for such a policy; (2) policy premium payment records; (3) history of previous claims made by the insured for fire loss; (4) material relating to the investigation of the loss, including statements of any person, proof of loss, or other relevant evidence. (5) The provisions of this section shall not be construed to authorize a public official or agency to promulgate or require any type or form of periodic report by an insurer. (B) If an insurance company has reason to suspect that a fire loss to its insured's real or personal property was caused by incendiary means and if it receives a request for information pursuant to Section (A) of this article, the company shall notify the requesting official and furnish him with all relevant material acquired during its investigation of the fire loss, cooperate with and take such action as may be requested of it by any law enforcement agency, and permit any person ordered by a court to inspect any of its records pertaining to the policy and the loss. (C) In the absence of fraud or malice no insurance company or person who furnished information on its behalf is liable for damages in a civil action or subject to criminal prosecution for oral or written statement made or any other action taken that is necessary to supply information required pursuant to this section. (D) The officials and departmental and agency personnel receiving any information furnished pursuant to this section shall hold the information in confidence until such time as its release is required pursuant to a criminal or civil proceeding. (E) Any official referred to in Section (A) of this article may be required to testify as to any information in his possession regarding the fire loss of real or personal property in any civil action in which any person seeks recovery under a policy against an insurance company for the fire loss. (F)(1) No person shall purposely refuse to release any information requested pursuant to Section (A) of this article. (2) No person shall purposely refuse to notify the fire marshal of a fire loss required to be reported pursuant to Section (B) of this article. (3) No person shall purposely refuse to supply the fire marshal with pertinent information required to be furnished pursuant to Section (B) of this article. (4) No person shall purposely fail to hold in confidence information required to be held in confidence by Section (D) of this article. Acts 1951, 52nd Leg., p. 868, ch. 491. Amended by Acts 1977, 65th Leg., p. 2003, ch. 800, Sec. 2, eff. Aug. 29, 1977; Acts 1979, 66th Leg., p. 1099, ch. 515, Sec. 1, eff. June 11, 1979. Art. 5.47. TO CANCEL AUTHORITY.
Article repealed effective April 1, 2007
If any insurance company affected by the provisions of this subchapter shall violate any provision of this subchapter, the Board shall, by and with the consent of the Attorney General, cancel its certificate of authority to transact business in this State. Acts 1951, 52nd Leg., p. 868, ch. 491. Art. 5.48. REVOCATION OF CERTIFICATE.
Article repealed effective April 1, 2007
The Board, upon ascertaining that any insurance company or officer, agent or representative thereof, has violated any provision of this subchapter, may, at its discretion, and with the consent and approval of the Attorney General, revoke the certificate of authority of such company, officer, agent, or representative but such revocation of any certificate shall in no manner affect the liability of such company, officer, agent, or representative to the infliction of any other penalty provided by law. Any action, decision or determination of the Board and the Attorney General in such cases shall be subject to the review of the courts of this State as herein provided. Acts 1951, 52nd Leg., p. 868, ch. 491. Art. 5.48-1. PENALTY FOR VIOLATION OF FIRE INSURANCE LAW.
Article repealed effective April 1, 2007
Any officer or director of any fire insurance company affected by the statutes of this State creating the State Insurance Commission, or any agent, or any one acting or employed by such company who alone or in conjunction with any corporation, company or person, shall wilfully do or cause to be done any act prohibited or declared to be unlawful by such statutes, or who wilfully fails to do any act required to be done by such statutes, or who shall wilfully permit any act directed not to be done, or who shall be guilty of any wilful infraction of such statutes, shall be fined not less than three hundred nor more than one thousand dollars. Acts 1913, p. 205. Art. 5.48-2. WITNESS MUST TESTIFY.
Article repealed effective April 1, 2007
No person shall be excused from giving testimony or producing evidence when legally called upon to do so at the trial of another charged with violating any provision of the laws relating to fire insurance on the ground that it may incriminate him under the laws of this State; but no person shall be prosecuted or subjected to any penalty or forfeiture for, or on account of, any transaction, matter or thing concerning which he may testify or produce evidence under this law. Acts 1910, p. 125. Amended by Acts 1913, p. 206. Art. 5.51. COMPENSATION OF BOARD.
Article repealed effective April 1, 2007
The necessary compensation of experts, clerical force, and other persons employed by said Board, and all necessary traveling expenses, and such other expenses as may be necessary, incurred in carrying out the provisions of this subchapter, shall be paid by warrants drawn by the Comptroller upon the order of said Board. The total amount of all salaries and said other expenses shall not exceed the sum produced by the assessments on the gross premiums of all fire insurance companies doing business in this State. Acts 1951, 52nd Leg., p. 868, ch. 491. Amended by Acts 1997, 75th Leg., ch. 1423, Sec. 11.24, eff. Sept. 1, 1997. Art. 5.52. PROVISIONS GOVERNING LIGHTNING, WINDSTORM, HAIL, INVASION, RIOT, VANDALISM, STRIKES, LOCKOUTS AND OTHER INSURANCE; "EXPLOSION" DEFINED.
Article repealed effective April 1, 2007
(a) The writing of insurance against loss by lightning, tornado, windstorm, hail, smoke or smudge, cyclone, earthquake, volcanic eruption, rain, frost and freeze, weather or climatic conditions, excess or deficiency of moisture, flood, the rising of the waters of the ocean or its tributaries, bombardment, invasion, insurrection, riot, civil war or commotion, military or usurped power, any order of a civil authority made to prevent the spread of a conflagration, epidemic or catastrophe, vandalism or malicious mischief, strike or lockout, explosion, water or other fluid or substance, resulting from the breakage or leakage of sprinklers, pumps, or other apparatus erected for extinguishing fires, water pipes or other conduits or containers, or resulting from casual water entering through leaks or openings in buildings, or by seepage through building walls, including insurance against accidental injury of such sprinklers, pumps, fire apparatus, conduits or containers, and the rates to be collected therefor in this State, and all matters pertaining to such insurance except as hereinafter set out as to marine insurance as defined by Article 5.53 of this code, shall be governed and controlled by the provisions of Articles 5.25 to 5.48, inclusive, and also Articles 5.50 to 5.51, inclusive, of this subchapter and Article 5.67 of Subchapter D of this Chapter, in the same manner and to the same extent as fire insurance and fire insurance rates are now affected by the provisions of said articles of this code. (b) Notwithstanding Subsection (a) of this section, rain insurance and hail insurance on farm crops are governed by Article 5.13-2 of this code. (c) The term "explosion" as used in this article shall not include insurance against loss of or damage to any property of the insured, resulting from the explosion of or injury to (a) any boiler, heater, or other fired pressure vessel; (b) any unfired pressure vessel; (c) pipes or containers connected with any of said boilers or vessels; (d) any engine, turbine, compressor, pump, or wheel; (e) any apparatus generating, transmitting or using electricity; (f) any other machinery or apparatus connected with or operating by any of the previously named boilers, vessels or machines; nor shall same include the making of inspections and issuance of certificates of inspections upon any such boiler, apparatus or machinery, whether insured or otherwise. Said term shall include, but shall not be limited to (1) the explosion of pressure vessels (except steam boilers of more than fifteen pounds pressure) in buildings designed and used solely for residential purposes by not more than four (4) families; (2) explosion of any kind originating outside of the insured buildings or outside of the building containing the property insured; (3) explosion of pressure vessels which do not contain steam or which are not operated with steam coils or steam jets; (4) electric disturbance causing or concomitant with an explosion in public service or public utility property. Acts 1951, 52nd Leg., p. 868, ch. 491. Amended by Acts 2003, 78th Leg., ch. 206, Sec. 21.28, eff. June 11, 2003. Art. 5.53. APPLICATION TO MARINE INSURANCE.
Article repealed effective April 1, 2007
The provisions of this article shall apply to all insurance which is now or hereafter defined by statute, by rules of the commissioner, or by lawful custom, as marine insurance. None of the terms contained in Article 5.52 shall be deemed to include insurance of vessels or craft, their cargoes, marine builder's risk, marine protection and indemnity, or other risk commonly insured under marine as distinguished from inland marine insurance policies. The term "Marine Insurance" shall mean and include insurance and reinsurance against any and all kinds of loss or damage to the following subject matters of insurance interest therein: Marine Insurance. Hulls, vessels and craft of every kind, aids to navigation, dry docks and marine railways, including marine builders' and repairers' risks, and whether complete or in process of or awaiting construction; also all marine protection and indemnity risks; also all goods, freights, cargoes, merchandise, effects, disbursements, profits, moneys, bullion, precious stones, securities, choses in action, evidences of debt, valuable papers, bottomry and respondentia interests, and all other kinds of property and interests therein, in respect to, appertaining to or in connection with any and all risks or perils of navigation, transit or transportation on or under any seas, lakes, rivers, or other waters or in the air, or on land in connection with or incident to export, import or waterborne risks, or while being assembled, packed, crated, baled, compressed or similarly prepared for such shipment or while awaiting the same, or during any delays, storage, transshipment or reshipment incident thereto, including the insurance of war risks in respect to any or all of the aforesaid subject matters of insurance. The provisions of Chapter 5 of this code, other than this article, shall not apply to marine insurance as defined by this article. Acts 1951, 52nd Leg., p. 868, ch. 491. Subsec. (g) amended by and Subsec. (h) added by Acts 1991, 72nd Leg., ch. 242, Sec. 2.38, eff. Sept. 1, 1991; Amended by Acts 2003, 78th Leg., ch. 206, Sec. 21.29, eff. June 11, 2003. Art. 5.53-A. HOME WARRANTY INSURANCE; HOME PROTECTION INSURANCE.
Article repealed effective April 1, 2007
Insurance Coverage; Limitations
Sec. 1. (a) Any company licensed to engage in the business of fire insurance and its allied lines, or inland marine insurance, or both, is authorized to write home warranty insurance or home protection insurance in this state. (b) Insurance subject to this article is not inland marine insurance, but shall be governed in the same manner and to the same extent as inland marine insurance. (c) The amount of coverage under a policy of home protection insurance may not exceed $2,000 for any single occurrence.
Definitions
Sec. 2. In this article: (1) "Home warranty insurance" means coverage insuring: (A) performance by builders of residential property of their warranty obligations to purchasers of such property; or (B) against named defects arising from failure of the builder to construct residential property in accordance with specified construction standards. (2) "Home protection insurance" means coverage insuring purchasers of home protection services or products against actual property loss. (3) "Home protection service or product" means a service or product used for the protection of residential property, including a service or product provided by a person regulated under the Private Investigators and Private Security Agencies Act (Article 4413(29bb), Vernon's Texas Civil Statutes). Added by Acts 1975, 64th Leg., p. 56, ch. 32, Sec. 1, eff. April 3, 1975. Amended by Acts 1999, 76th Leg., ch. 1028, Sec. 1, eff. Sept. 1, 1999; Sec. 1(a) amended by Acts 2003, 78th Leg., ch. 206, Sec. 21.30, eff. June 11, 2003. Art. 5.54. ASSOCIATIONS EXCEPTED.
Article repealed effective April 1, 2007
Nothing in Articles 5.49, 5.52 and 5.53 of this subchapter shall ever be construed to apply to any farm mutual insurance company operating under Chapter 16 of this Code or to any company now operating under Chapter 12, of Title 78, which has heretofore been repealed. Nothing in Articles 5.52 and 5.53 of this subchapter shall ever be construed to apply to any county mutual insurance company operating under Chapter 17 of this Code. Acts 1951, 52nd Leg., p. 868, ch. 491. Amended by Acts 1955, 54th Leg., p. 413, ch. 117, Sec. 14.
SUBCHAPTER D. WORKERS' COMPENSATION INSURANCE
Art. 5.55. WORKERS' COMPENSATION RATES.
Article repealed effective April 1, 2007
Definitions
Sec. 1. In this article: (1) "Filer" means an insurer that files rates, prospective loss costs, or supplementary rating information under this article. (2) "Insurer" means a person authorized and admitted by the department to engage in the business of insurance in this state under a certificate of authority that includes authorization to write workers' compensation insurance. The term includes: (A) the Texas Mutual Insurance Company; (B) a Lloyd's plan under Chapter 941 of this code; and (C) a reciprocal and interinsurance exchange under Chapter 942 of this code. (2-a) "Premium" means the amount charged for a workers' compensation insurance policy, including any endorsements, after the application of individual risk variations based on loss or expense considerations. (3) "Prospective loss cost" means that portion of a rate that does not include provisions for expenses or profit, other than loss adjustment expenses, and that is based on historical aggregate losses and loss adjustment expenses projected by development to their ultimate value and through trending to a future point in time. (4) "Rate" means the cost of workers' compensation insurance per exposure unit, whether expressed as a single number or as a prospective loss cost, with an adjustment to account for the treatment of expenses, profit, and individual insurer variation in loss experience, before any application of individual risk variations based on loss or expense considerations. The term does not include a minimum premium. (5) "Rate change date" means the later of March 1, 1992, or the 60th day after the date of issuance of the first insurance policy by the Texas Workers' Compensation Insurance Fund under Article 5.76-3 of this code. The department shall publish notice of the rate change date in the Texas Register. (6) "Supplementary rating information" means any manual, rating schedule, plan of rules, rating rules, classification systems, territory codes and descriptions, rating plans, and other similar information required to determine the applicable premium for an insured. The term includes factors and relativities, such as increased limits factors, classification relativities, deductible relativities, or other similar factors. (7) "Supporting information" means: (A) the experience and judgment of the filer and the experience or information of other insurers; (B) the interpretation of any other information relied on by the filer; (C) descriptions of methods used in making the rates; and (D) any other information required by the department to be filed.
Rate standards
Sec. 2. (a) Rates under this article shall be made in accordance with the provisions of this section. (b) In setting rates, an insurer shall consider: (1) past and prospective loss cost experience; (2) operation expenses; (3) investment income; (4) a reasonable margin for profit and contingencies; (5) the effect on premiums of individual risk variations based on loss or expense considerations; and (6) any other relevant factors. (c) The insurer may group risks by classifications for the establishment of rates and minimum premiums and may modify classification rates to produce rates for individual risks in accordance with rating plans that establish standards for measuring variations in those risks on the basis of any factor listed in Subsection (b) of this section. (d) Rates and premiums established under this article may not be excessive, inadequate, or unfairly discriminatory. (e) In setting rates applicable solely to policyholders in this state, an insurer shall use available premium, loss, claim, and exposure information from this state to the full extent of the actuarial credibility of that information. The insurer may use experience from outside this state as necessary to supplement information from this state that is not actuarially credible. (f) Premium rates promulgated by the State Board of Insurance for 1991 continue to apply to all workers' compensation insurance policies issued before the rate change date. (g) Expired July 1, 1993. (h) Expired January 1, 1994.
Rate filings
Sec. 3. (a) Each insurer shall file with the Texas Department of Insurance all rates, supplementary rating information, and reasonable and pertinent supporting information for risks written in this state. An insurer may not make such filing more frequently than every six months. Subject to Subsection (b) of this section, a rate proposed in a filing made under this subsection does not take effect until all necessary information required for the filing is received by the department. (b) A filer shall designate the date on which the filing is to take effect. The filing takes effect on the designated date unless the board, not later than the 30th day after the date of the receipt of the filing, advises the filer of what specific information that is required for the filing has not been included in the filing. The filer must provide the missing information not later than the 30th day after the date on which the filer is notified by the board of the missing information. If the filer in good faith believes that the requested information has already been provided, the filer may request a hearing. The board shall hold the hearing not later than the 30th day after the receipt of the hearing request from the filer. The board shall issue a decision not later than the 30th day after the date of the hearing. If the board determines that necessary information is still missing, the board shall specify in the decision the information that was not included in the filing. (c) An insured that is aggrieved with respect to any filing in effect or the office of public insurance counsel may make a written application to the board for a hearing on the filing. The application must specify the grounds on which the applicant bases the grievance. If the board finds that the application is made in good faith, that the applicant would be so aggrieved if the grounds in the application are established, and that those grounds otherwise justify holding the hearing, the board shall hold a hearing not later than the 30th day after the date of receipt of the application. The board must give at least 10 days' written notice to the applicant and to each insurer that made the filing in question. The notice must specify which of the grounds in the application are in question and whether the hearing is limited to consideration of the specific application of the aggrieved insured or to the entire filing. (d) If, after the hearing, the board finds that the filing does not meet the requirements of this article, the board shall issue an order specifying how the filing fails to meet the requirements of this article and stating the date on which, within a reasonable period of not less than 60 days after the order date, the filing is no longer in effect. The board order must specify whether the order applies only to the applicant or to all insureds affected by the filing. The board shall send copies of the order to the applicant and to each affected insurer. An order issued under this subsection does not affect a contract or policy made or issued before the expiration of the period established in the order. (e) Not later than December 1 of each even-numbered year, the commissioner shall report to the governor, lieutenant governor, and speaker of the house of representatives regarding the impact that legislation enacted during the regular session of the 79th Legislature reforming the workers' compensation system of this state has had on the affordability and availability of workers' compensation insurance for the employers of this state. The report must include an analysis of: (1) the projected workers' compensation premium savings realized by employers as a result of the reforms; (2) the impact of the reforms on: (A) the percentage of employers who provide workers' compensation insurance coverage for their employees; and (B) to the extent possible, economic development and job creation; (3) the effects of the reforms on market competition and carrier financial solvency, including an analysis of how carrier loss ratios, combined ratios, and use of individual risk variations have changed since implementation of the reforms; and (4) the extent of participation in workers' compensation health care networks by small and medium-sized employers. (f) If the commissioner determines that workers' compensation rate filings or premium levels analyzed by the department do not appropriately reflect the savings associated with the reforms described by Subsection (e) of this section, the commissioner shall include in the report required under Subsection (e) of this section any recommendations, including any recommended legislative changes, necessary to identify the tools needed by the department to more effectively regulate workers' compensation rates. (g) At the request of the department, each insurer shall submit to the department all data and other information considered necessary by the commissioner to generate the report required under Subsection (e) of this section. Failure by an insurer to submit the data and information in a timely fashion, as determined by commissioner rule, constitutes grounds for sanctions under Chapter 82 of this code. (h) In reviewing rates under this article, the commissioner shall consider any state or federal legislation that has been enacted and that may impact rates and premiums for workers' compensation insurance coverage in this state.
Public information
Sec. 4. Each filing and any supporting information filed under this article is open to public inspection as of the date of the filing.
Disapproval of filing
Sec. 5. (a) The State Board of Insurance shall disapprove a rate filing if the board determines that the rate filing made under Section 3 of this article does not meet the standards established under this article. (b) If the board disapproves a rate filing, the board shall issue an order specifying in what respects the rate filing fails to meet the requirements of this article. The filer is entitled to a hearing on written request made to the board not later than the 30th day after the effective date of the disapproval order.
Disapproval of rate
Sec. 6. (a) The State Board of Insurance may issue a disapproval order only after notice and hearing. The board must provide at least 10 days' written notice to the insurer that made the rate filing. (b) The disapproval order must be issued not later than the 15th day after the close of a hearing and must specify how the rate fails to meet the requirements of this article. The disapproval order must state the date on which the further use of that rate is prohibited.
Effect of Disapproval; Penalty
Sec. 7. (a) If a policy is issued and the commissioner subsequently disapproves the rate or filing that governs the premium charged on the policy: (1) the policyholder may continue the policy at the original rate; (2) the policyholder may cancel the policy without penalty; or (3) the policyholder and the insurer may agree to amend the policy to reflect the premium that would have been charged based on the insurer's most recently approved rate; the amendment may not take effect before the date on which further use of the rate is prohibited under the disapproval order. (b) If a policy is issued and the commissioner subsequently disapproves the rate or filing on which the premium is based, the commissioner, after notice and the opportunity for a hearing, may: (1) impose sanctions under Chapter 82 of this code; (2) issue a cease and desist order under Chapter 83 of this code; (3) impose administrative penalties under Chapter 84 of this code; or (4) take any combination of these actions.
Exclusive Jurisdiction
Sec. 8. The department has exclusive jurisdiction over all rates and premiums subject to this article. Acts 1951, 52nd Leg., p. 868, ch. 491. Amended by Acts 1953, 53rd Leg., p. 64, ch. 50, Sec. 7. Amended by Acts 1989, 71st Leg., 2nd C.S., ch. 1, Sec. 13.04, eff. Jan. 1, 1991; Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Sec. 18.01, eff. April 1, 1992; Sec. 1(2) amended by Acts 2001, 77th Leg., ch. 1195, Sec. 2.03, eff. Sept. 1, 2001; Sec. 1(2) amended by , and 1(2-a) added by Acts 2005 79th Leg., ch. 265, Sec. 5.01, eff. Sept. 1, 2005; Secs. 3(e) to (h) added by Acts 2005, 79th Leg., ch. 265, Sec. 5.03, eff. Sept. 1, 2005; Sec. 6(b) amended by Acts 2005, 79th Leg., ch. 265, Sec. 5.04, eff. Sept. 1, 2005; Sec. 7 amended by Acts 2005, 79th Leg., ch. 265, Sec. 5.05, eff. Sept. 1, 2005. Sec. 8 added by Acts 2005, 79th Leg., ch. 265, Sec. 5.055, eff. Sept. 1, 2005. Art. 5.55A. UNDERWRITING GUIDELINES.
Definitions
Sec. 1. In this article: (1) "Insurer" has the meaning assigned by Section 1(2), Article 5.55, of this code. (2) "Underwriting guideline" means a rule, standard, guideline, or practice, whether written, oral, or electronic, that is used by an insurer or its agent to decide whether to accept or reject an application for coverage under a workers' compensation insurance policy or to determine how to classify those risks that are accepted for the purpose of determining a rate.
Underwriting Guidelines
Sec. 2. Each underwriting guideline used by an insurer in writing workers' compensation insurance must be sound, actuarially justified, or otherwise substantially commensurate with the contemplated risk. An underwriting guideline may not be unfairly discriminatory.
Enforcement
Sec. 3. This article may be enforced in the manner provided by Section 38.003(g) of this code.
Filing Requirements
Sec. 4. Each insurer shall file with the department a copy of the insurer's underwriting guidelines. The insurer shall update its filing each time the underwriting guidelines are changed. If a group of insurers files one set of underwriting guidelines for the group, the group shall identify which underwriting guidelines apply to each insurer in the group.
Applicability of Section 38.003
Sec. 5. Section 38.003 of this code applies to this article to the extent consistent with this article. Added by Acts 2005, 79th Leg., ch. 265, Sec. 5.06, eff. Sept. 1, 2005. Art. 5.55B. PREMIUM INCENTIVES FOR SMALL EMPLOYERS.
Article repealed effective April 1, 2007
(a) In this article "small employer" means an employer who is not experience-rated by the State Board of Insurance for workers' compensation insurance purposes and whose annual workers' compensation premium is less than $5,000. (b) The Board shall promulgate a plan by which all insurance companies writing workers' compensation insurance in this state shall grant a discount to small employers who qualify under this article and by which surcharges are assessed against small employers who experience two or more employee compensable lost-time injuries during a one-year period. (c) A small employer who has not experienced a compensable employee lost-time injury during the most recent one-year period for which statistics are available shall receive a discount of 10 percent on the amount of the employer's workers' compensation insurance premium. (d) A small employer who has not experienced a compensable employee lost-time injury during the most recent two-year period for which statistics are available shall receive a discount of 15 percent on the amount of the employer's workers' compensation insurance premium. (e) A small employer who has experienced one compensable employee lost-time injury during the most recent one-year period for which statistics are available is not eligible for a discount on the amount of the employer's workers' compensation insurance premium. (f) A small employer who has experienced two or more compensable employee lost-time injuries during the most recent one-year period for which statistics are available shall be assessed a surcharge of 10 percent on the amount of the employer's workers' compensation premium. (g) The discounts and surcharges established under this article are not cumulative; however, a small employer is entitled to receive the discount provided by this article in addition to any lesser deviation in the rate at which a policy is written under Article 5.60 of this code. For any annual workers' compensation premium, a small employer may not receive a discount of more than 15 percent, and a small employer may not be required to pay a surcharge of more than 10 percent. Added by Acts 1989, 71st Leg., 2nd C.S., ch. 1, Sec. 13.08, eff. Jan. 1, 1991. Art. 5.55C. OPTIONAL DEDUCTIBLE PLANS.
Article repealed effective April 1, 2007
(a) The Board shall require each company or association that writes workers' compensation insurance in this state to offer optional deductible plans to allow policyholders to self-insure for the deductible amount. (b) Not later than January 1, 1992, the Board shall promulgate at least three plans with varying deductible options. In addition, the Board by rule shall permit an employer to enter into an agreement with an insurer for a negotiated deductible in excess of the largest promulgated deductible. (c) The Board shall perform an actuarial analysis to determine the amount of rate reduction applicable to policies under this article as opposed to standard policies without a deductible. In subsequent years, the Board shall determine the amount of rate reduction according to rating procedures adopted by the Board. When establishing procedures for the calculation of experience modifiers, the Board may allow the exclusion of the claim amount paid under the deductible by the employer. (d) A deductible policy must provide that the company or association will make all payments for benefits that are payable from the deductible amount and that reimbursement by the policyholder shall be made periodically, rather than at the time claim costs are incurred. The State Board of Insurance shall promulgate rules that provide for adequate security for reimbursement of the amount paid by the company or association which is payable from the deductible. (e) The company or association shall service all claims that arise during the policy period, including those claims payable, in whole or in part, from the deductible amount. (f) A person who is employed by a policyholder who self-insures the deductible amount as provided under this article may not be required to pay any of the deductible amount. (g)(1) A person who is employed by a policyholder who self-insures the deductible amount as provided under this article may not be harassed, discharged, or otherwise discriminated against because the employee, in good faith: (A) is considering initiating a workers' compensation claim; (B) has initiated a workers' compensation claim; (C) has retained a representative to represent the employee regarding a claim; (D) has testified or is about to testify at an administrative or judicial proceeding under the Texas Workers' Compensation Act (S.B. No. 1, Acts of the 71st Legislature, 2nd Called Session, 1989); (E) has reported a hazardous working condition or hazardous practice to the commission; or (F) has taken any other action or is considering taking any other action that may result in the policyholder being required to pay a deductible amount through the self-insurance plan. (2) Liability for damages for violations of this article shall be determined exclusively pursuant to the Texas Workers' Compensation Act (S.B. No. 1, Acts of the 71st Legislature, 2nd Called Session, 1989). (h) Any person who engages in conduct prohibited under this article commits a Class A administrative violation under the Texas Workers' Compensation Act (S.B. No. 1, Acts of the 71st Legislature, 2nd Called Session, 1989). Added by Acts 1989, 71st Leg., 2nd C.S., ch. 1, Sec. 13.08, eff. Jan. 1, 1991. Art. 5.56. TO PRESCRIBE STANDARD FORMS.
Article repealed effective April 1, 2007
The Board shall prescribe standard policy forms to be used by all companies or associations writing workmen's compensation insurance in this State. No company or association authorized to write workmen's compensation insurance in this State shall, except as hereinafter provided for, use any classifications of hazards, rates of premium, or policy forms other than those made, established and promulgated and prescribed by the Board. Acts 1951, 52nd Leg., p. 868, ch. 491. Art. 5.57. UNIFORM POLICY.
Article repealed effective April 1, 2007
The Board shall prescribe a uniform policy for workmen's compensation insurance and no company or association shall thereafter use any other form in writing workmen's compensation insurance in this State, provided that any company or association may use any form of endorsement appropriate to its plan of operation, if such endorsement shall be first submitted to and approved by the Board, and any contract or agreement not written into the application and policy shall be void and of no effect and in violation of the provisions of this subchapter, and shall be sufficient cause for revocation of license to write workmen's compensation insurance within this State. Acts 1951, 52nd Leg., p. 868, ch. 491. Art. 5.57A. GROUP PURCHASE OF WORKERS' COMPENSATION INSURANCE.
Article repealed effective April 1, 2007
(a) In this article: (1) "Board" means the State Board of Insurance. (2) "Business entity" means a business enterprise owned by a single person or a corporation, organization, business trust, trust, partnership, joint venture, association, or other business entity. (3) "Group" means: (A) two or more business entities that join together with the approval of the Board to purchase individual workers' compensation insurance policies covering each business entity that is a part of the group; or (B) two or more members of a trade association of business entities that join together with the approval of the commissioner to purchase individual workers' compensation insurance policies covering each participating trade association member. (b) On receiving approval of the Board as provided by this article, two or more business entities or two or more members of a trade association may join together to form a group to purchase individual workers' compensation insurance policies covering each member of the group. (c) To be eligible to join a group, a business entity must be: (1) engaged in a business pursuit that is the same as or similar to the other business entities participating in the group as determined by the Board; or (2) a member of the same trade association as the other business entities participating in the group. (d) The Board shall establish a certification program for groups organized under this article and shall issue certificates of approval to eligible business entities authorizing formation and maintenance of a group. (e) The Board by rule shall adopt forms, criteria, and procedures for the issuance of certificates of approval to groups under this article. (f) A group certified under this article may purchase individual workers' compensation insurance policies covering each member of the group from any insurer authorized to write workers' compensation insurance in this state. Under such a policy, the group is entitled to any premium or volume discount that would be applicable to a policy of the combined premium amount. (g) A group shall apportion any discount or policyholder dividend received on workers' compensation insurance coverage among the members of the group according to a formula adopted in the plan of operation for the group. (h) Manual rules and rates shall be used in computing the rates for policies under this article, and the Board shall determine any experience rating factor that shall be applied to those group policies as provided by the Board's rules. (i) A group shall adopt a plan of operation that shall include the composition and selection of a governing board, the methods for administering the group, and guidelines for the workers' compensation insurance coverage obtained by the group including the payment of premiums, the distribution of discounts, and the methods for providing risk management. A group shall file a copy of its plan of operation with the Board. (j) A group established under this article is entitled to any deviation applicable under Article 5.60 of this code. A member of a group is not subject to the discounts and surcharges established under Article 5.55B of this code. Added by Acts 1989, 71st Leg., 2nd C.S., ch. 1, Sec. 13.08, eff. Jan. 1, 1991. Subsecs. (a)(3), (b), (c) amended by Acts 2003, 78th Leg., ch. 275, Sec. 3, 4, eff. Sept. 1, 2003; Acts 2003, 78th Leg., ch. 607, Sec. 2, 3, eff. June 20, 2003. Art. 5.58. RATE ADMINISTRATION FOR WORKERS' COMPENSATION INSURANCE POLICIES; CLAIMS REPORTS.
Article repealed effective April 1, 2007
(a) Recording and Reporting of Loss Experience and Other Data. The commissioner shall develop reasonable statistical plans, which may be modified from time to time and which shall be used thereafter by each insurer in the recording and reporting of its loss experience and such other data as may be required, in order that the total loss and expense experience of all insurers may be made available at least annually in such form and detail as may be necessary to aid in determining whether rates meet the standards imposed under Section 2, Article 5.55 of this code. If the commissioner determines that any insurer's rates do not meet those standards, the commissioner may order the insurer to adjust its rates to meet those standards. An order of the commissioner under this article may be appealed under Article 1.04 of this code. The commissioner may designate or contract with a qualified organization to serve as the statistical agent for the commissioner under this article as provided by Article 21.69 of this code. The statistical agent may provide to one or more advisory organizations the information provided by the statistical agent to the commissioner under this article. (b) Standards and Procedures. For purposes of Subsection (c) of this article, the commissioner shall establish standards and procedures for categorizing insurance and medical benefits reported on each workers' compensation claim. The commissioner shall consult with the commissioner of workers' compensation in establishing these standards to ensure that the data collection methodology will also yield data necessary for research and medical cost containment efforts. (c) Content of Detailed Claim Information Reports. The following information shall be reported on each workers' compensation claim: (1) the hazard classification of the affected employee; (2) the date of injury; (3) the social security number of the claimant; (4) the severity classification of the claim, including separate classifications for claims in which death benefits are paid, claims in which lifetime income benefits are paid, claims in which only temporary income benefits are paid, claims in which impairment benefits are paid, claims in which supplemental benefits are paid, and claims in which only medical benefits are paid; (5) the amount paid in periodic payments; (6) the amount paid in lump-sum payments; (7) the amount paid for temporary income benefits; (8) the amount paid for impairment income benefits; (9) the amount paid for supplemental income benefits; (10) the amount paid for death and burial benefits; (11) the total amount paid for income, death, or burial benefits; (12) the total amount of incurred losses for income, death, or burial benefits; (13) the amount paid to doctors and other health care providers; (14) the amount paid to hospitals and other health care facilities; (15) the total amount paid for medical benefits; (16) the total amount of incurred losses for medical benefits; and (17) other information required by the commissioner. (d) Information Confidential. A person may not distribute or otherwise disclose a social security number or any other information collected under Subsection (c) of this article which would disclose the identity of any claimant. (e) Payments Excluded From Rates. In any statistical plan developed by the commissioner, direct expenditures by an insurer to influence public policy and any amounts paid by an insurer as damages in a suit against the insurer for malice or bad faith or as fines or penalties shall be reported separately, and the expenditures and payments shall not be considered as a loss or expense for the calculation of any premium rate modifier or surcharge of an insured. (f) Transmission of Claims Reports. The claims reports filed under Subsection (c) of this article shall be updated by each insurer and transmitted to the commissioner or the commissioner's statistical agent in accordance with the filing requirements of the commissioner's statistical plan. Each insurer writing at least one-half of one percent of the workers' compensation insurance in this state shall report its data in a compatible electronic format prescribed by the commissioner. The commissioner shall take necessary measures to ensure the accuracy of the data and the adequacy of the format for data reported in an electronic format. (g) Reports of Aggregate Data. The commissioner may permit the information required by Subsection (c) of this article to be reported in the aggregate for each risk for claims in which benefit payments are less than $5,000. The commissioner may adjust the dollar threshold for aggregate reporting to account for inflationary changes. (h) Interchange of Rating Plan Data. Reasonable rules and plans may be promulgated by the commissioner after due consideration, requiring the interchange of loss experience necessary for the application of rating plans promulgated by the commissioner under this subchapter. (i) Consultation with Other States. In order to further uniform administration of rating laws, the commissioner and every insurer may exchange information and experience data with the National Association of Insurance Commissioners, insurance supervisory officials, insurers, and advisory organizations in other states and may consult and cooperate with them with respect to rate-making and the application of rating systems. Acts 1951, 52nd Leg., p. 868, ch. 491. Amended by Acts 1953, 53rd Leg., p. 64, ch. 50, Sec. 8. Amended by Acts 1989, 71st Leg., 2nd C.S., ch. 1, Sec. 13.05, eff. Jan. 1, 1991; Subsecs. (a), (e), (f), (g), (i) amended by Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Sec. 18.02, eff. April 1, 1992; Subsec. (j) amended by Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Sec. 18.23(c), eff. Jan. 1, 1992. Amended by Acts 1997, 75th Leg., ch. 810, Sec. 1, eff. June 17, 1997; Subsec. (b) amended by Acts 2005, 79th Leg., ch. 265, Sec. 5.07, eff. Sept. 1, 2005. Art. 5.59. MAY REQUIRE SWORN STATEMENTS.
Article repealed effective April 1, 2007
The department may require sworn statements from any insurance company, including the Texas Mutual Insurance Company, showing the payroll reported to the company and incurred losses by classifications and such other information which in the judgment of the department may be necessary to carry out its duties. The department shall prescribe the necessary forms for such statements and reports, having due regard to the methods and forms in use in other states for similar purpose in order that uniformity of statistics may not be disturbed. Acts 1951, 52nd Leg., p. 868, ch. 491. Amended by Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Sec. 18.04, eff. April 1, 1992; Acts 2001, 77th Leg., ch. 1195, Sec. 2.04, eff. Sept. 1, 2001. Art. 5.60. RATING.
Article repealed effective April 1, 2007
(a) For workers' compensation insurance, the Board shall determine hazards by classes and fix classification relativities applicable to the payroll in each of the classes as shall be adequate to the risks to which they apply. The relativities: (1) shall be designed to encourage safety; (2) may be territorially based; and (3) may reflect differences in losses between employers of high and low wage earners within the same class. (b) The Board shall adopt a uniform experience rating plan. The rating plan shall encourage the prevention of accidents and consider the peculiar hazard and experience of individual risks, past and prospective, within and outside this state, and all other relevant factors. (c) This subchapter may not be construed to prohibit any stock company, mutual company, including the Texas Mutual Insurance Company, reciprocal or interinsurance exchange, or Lloyd's plan from issuing participating policies; however, a dividend to policyholders under Subtitle A, Title 5, Labor Code, may not take effect until approved by the department. Such a dividend may not be approved until adequate reserves have been provided, those reserves to be computed on the same basis for all classes of companies operating under this subchapter. (d) The Board shall revise the classification system and rating plans not later than March 1, 1993, and subsequently shall revise the system and plans at least once every five years. Acts 1951, 52nd Leg., p. 868, ch. 491. Amended by Acts 1953, 53rd Leg., p. 64, ch. 50, Sec. 9. Amended by Acts 1989, 71st Leg., 2nd C.S., ch. 1, Sec. 13.06, eff. Jan. 1, 1991; Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Sec. 18.05, eff. April 1, 1992; Subsec. (c) amended by Acts 2001, 77th Leg., ch. 1195, Sec. 2.05, eff. Sept. 1, 2001. Art. 5.60A. RATE HEARINGS.
Article repealed effective April 1, 2007
(a) The commissioner shall conduct a public hearing each biennium, beginning not later than December 1, 2008, to review rates to be charged for workers' compensation insurance written in this state. A public hearing under this article is not a contested case as defined by Section 2001.003, Government Code. (b) Not later than the 30th day before the date of the public hearing required under Subsection (a) of this article, each insurer subject to this subchapter shall file the insurer's rates, supporting information, and supplementary rating information with the commissioner. (c) The commissioner shall review the information submitted under Subsection (b) of this article to determine the positive or negative impact of the enactment of workers' compensation reform legislation enacted by the 79th Legislature, Regular Session, 2005, on workers' compensation rates and premiums. The commissioner may consider other factors, including relativities under Article 5.60 of this code, in determining whether a change in rates has impacted the premium charged to policyholders. (d) The commissioner shall implement rules as necessary to mandate rate reductions or to modify the use of individual risk variations if the commissioner determines that the rates or premiums charged by insurers do not meet the rating standards as defined in this code. (e) The commissioner shall adopt rules as necessary to mandate rate or premium reductions by insurers for the use of cost-containment strategies that result in savings to the workers' compensation system, including use of a workers' compensation health care network health care delivery system, as described by Chapter 1305 of this code. Added by Acts 1989, 71st Leg., 2nd C.S., ch. 1, Sec. 13.08, eff. Jan. 1, 1991. Amended by Acts 2005, 79th Leg., ch. 265, Sec. 5.08, eff. Sept. 1, 2005. Art. 5.61. ADEQUATE RESERVES.
Article repealed effective April 1, 2007
(a) Each workers' compensation insurer transacting business in this state shall maintain reserves in an amount estimated in the aggregate to provide for the payment of all losses and claims incurred, whether reported or unreported, but not in an amount greater than reasonably required for those purposes. The reserves shall be computed in accordance with any rules adopted by the commissioner for the purpose of adequately protecting the insureds, securing the solvency of the insurer, and preventing unreasonably large reserves. (b) If the reserves are determined to be inadequate, the commissioner shall notify the insurer and require the insurer to establish and maintain reasonable additional reserves. If the reserves are determined to be unreasonably large, the commissioner shall notify the insurer and require the insurer to reduce its reserves to a reasonable amount. (c) Not later than the 60th day after the date of the notification by the commissioner that its reserves have been determined not to be in compliance with the requirements of this article, the insurer shall restore compliance and file a statement of restored compliance, together with such documentation as the commissioner may require. Acts 1951, 52nd Leg., p. 868, ch. 491. Amended by Acts 1989, 71st Leg., 2nd C.S., ch. 1, Sec. 13.07, eff. Jan. 1, 1991; Acts 1999, 76th Leg., ch. 1426, Sec. 19, eff. Sept. 1, 1999. Art. 5.62. BOARD TO MAKE RULES.
Article repealed effective April 1, 2007
The Board is hereby empowered to make and enforce all such reasonable rules and regulations not inconsistent with the provisions of this subchapter as are necessary to carry out its provisions. Acts 1951, 52nd Leg., p. 868, ch. 491. Art. 5.63. DEFINITIONS.
Article repealed effective April 1, 2007
The words "Company" and "Association" used in this subchapter mean the Texas Employers Insurance Association, or any stock company, or any mutual company, or any reciprocal, or any interinsurance exchange, or Lloyd's association authorized to write Workmen's Compensation Insurance in this State. Acts 1951, 52nd Leg., p. 868, ch. 491. Art. 5.64. CANCELLATION OF LICENSE.
Article repealed effective April 1, 2007
The Board shall cancel the license of any insurance company or association of persons to transact workmen's compensation insurance business in this State upon a second conviction of any officer or representative of such company or association for a violation of any provision of this subchapter relating to such business. Acts 1951, 52nd Leg., p. 868, ch. 491. Art. 5.65A. NOTIFICATION TO POLICYHOLDER.
Article repealed effective April 1, 2007
(a) A company or association that writes workers' compensation insurance in this state shall notify each policyholder of any claim that is filed against the policy. Thereafter a company shall notify the policyholder of any proposal to settle a claim or, on receipt of a written request from the policyholder, of any administrative or judicial proceeding relating to the resolution of a claim. (b) Each company or association that writes workers' compensation insurance in this state, on the written request of the policyholder, shall provide the policyholder with a list of claims charged against the policy, payments made and reserves established on each claim, and a statement explaining the effect of claims on premium rates. The company or association shall provide the information to the policyholder in writing not later than the 30th day after the date on which the company or association receives the policyholder's written request for the information. The information is considered to be provided on the date that the information is received by the United States Postal Service or personally delivered. (c) An insurance carrier that fails to comply with this article commits a Class D administrative violation under the Texas Workers' Compensation Act (S.B. No. 1, Acts of the 71st Legislature, 2nd Called Session, 1989). (d) Any policyholder may elect to waive the notification required by Subsection (a) of this article. Added by Acts 1989, 71st Leg., 2nd C.S., ch. 1, Sec. 13.08, eff. Jan. 1, 1991. Subsec. (b) amended by Acts 1995, 74th Leg., ch. 813, Sec. 1, eff. Sept. 1, 1995; Subsec. (a) amended by Acts 2005, 79th Leg., ch. 265, Sec. 6.062, eff. Sept. 1, 2005. Art. 5.65B. DISCLOSURE BY POLICYHOLDER.
Article repealed effective April 1, 2007
(a) A policyholder shall make full disclosure to its insurance company of information concerning its true ownership, change of ownership, operations, or payroll and any of its records pertaining to workers' compensation insurance. (b) To the end that no employer shall evade an unfavorable or high cost experience, incurred experience shall be used in future ratings regardless of any change in ownership, control, management, or operations. (c) The board, on application of an affected party, may modify the rating on proof that a change in management or operations is clearly probable to reduce the loss experience of the insured. (d) The board shall promulgate rules necessary to implement this article. Added by Acts 1989, 71st Leg., 2nd C.S., ch. 1, Sec. 13.08, eff. Jan. 1, 1991. Art. 5.65C. WRONGFUL ACTS; PENALTY.
Article repealed effective April 1, 2007
(a) A person commits an administrative violation if the person, to obtain workers' compensation insurance coverage for himself or another, intentionally or knowingly: (1) makes a false statement; (2) misrepresents or conceals a material fact; (3) makes a false entry in, fabricates, alters, conceals, or destroys a document; or (4) conspires to commit an act listed in Subdivision (1), (2), or (3) of this subsection. (b) An administrative violation under Subsection (a) of this article is punishable by an administrative penalty not to exceed $5,000 assessed in accordance with the procedures established for an administrative violation under Article 10, Texas Workers' Compensation Act (Article 8308-10.01 et seq., Vernon's Texas Civil Statutes). (c) The State Board of Insurance shall sanction an agent who commits an administrative violation under this article in accordance with Section 7, Article 1.10 of this code. (d) If a policyholder commits an administrative violation under this article and obtains workers' compensation insurance coverage at a premium less than the premium that would have been charged had the policyholder not committed the administrative violation, the policyholder is liable to the insurer for the difference between the premium due and the premium actually charged, plus reasonable interest and reasonable attorney fees. For the purposes of this subsection, "insurer" includes the Texas Mutual Insurance Company. (e) An insurer commits an administrative violation if the insurer directly or indirectly requires a person to apply for or purchase a policy of insurance other than workers' compensation insurance as a condition attached to the issuance of a workers' compensation insurance policy by the insurer. An insurer that violates this subsection is subject to the administrative penalties under Article 1.10 of this code. (f) A person commits an administrative violation if the person knowingly and intentionally obtains or maintains workers' compensation insurance coverage from an insurer that is not authorized to do business in this state or obtains or maintains alternative coverage from an insurer in violation of this code. An administrative violation under this subsection is punishable by an administrative penalty not to exceed $5,000 assessed in accordance with the procedures established under Article 10, Texas Workers' Compensation Act (Article 8308-10.01 et seq., Vernon's Texas Civil Statutes). Each day of noncompliance is a separate violation. Added by Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Sec. 18.06, eff. Jan. 1, 1992. Subsec. (d) amended by Acts 2001, 77th Leg., ch. 1195, Sec. 2.06, eff. Sept. 1, 2001. Art. 5.66. SCOPE OF LAW. No provision of Chapter 5, subchapter C of this code, with regard to the fixing and promulgation of rates for fire insurance or the prescribing of fire insurance policies and forms shall be applicable to the fixing of compensation insurance classifications or the making of compensation insurance rates or the prescribing of compensation insurance policy forms; but the provisions of this subchapter shall be construed and applied independently of any other law or laws, or parts of laws, having to do with the matter of insurance rates and forms or of fixing the duties of the Board. Acts 1951, 52nd Leg., p. 868, ch. 491. Art. 5.67. ADDITIONAL COMPENSATION.
Article repealed effective April 1, 2007
The necessary compensation of experts, the clerical force and other persons employed by the Board to carry out the purposes of this subchapter, and all necessary traveling expenses and such other expenses as may be necessarily incurred in carrying out such provisions shall be paid by warrants drawn by the Comptroller upon the order of said Board. The total amount of all salaries and said other expenses shall not exceed the sum assessed and collected from companies and associations writing workmen's compensation insurance in this State. Acts 1951, 52nd Leg., p. 868, ch. 491. Amended by Acts 1997, 75th Leg., ch. 1423, Sec. 11.25, eff. Sept. 1, 1997. Art. 5.68-1. PENALTY FOR VIOLATION OF ACT.
Article repealed effective April 1, 2007
Any officer or representative of any insurance company or association authorized to write workmen's compensation insurance in this State, who shall violate any provision of the laws relating to such business contained in chapter 10, Title "Insurance" of the Revised Statutes, relating to the State Insurance Commission and such business, shall be fined not less than one hundred nor more than five hundred dollars. Acts 1923, p. 411.
SUBCHAPTER E. NATIONAL DEFENSE PROJECTS
Art. 5.69. NATIONAL DEFENSE PROJECTS; SPECIAL RATES AND RATING PLANS FOR WORKMEN'S COMPENSATION, MOTOR VEHICLE, AND OTHER CASUALTY INSURANCE.
Article repealed effective April 1, 2007
The Board of Insurance Commissioners of Texas is hereby authorized and empowered to make and promulgate special rates and special rating plans for Workmen's Compensation, Motor Vehicle and other lines of Casualty insurance to be applicable only to the construction or operation of National Defense Projects in Texas, and to make such special rates and special rating plans separately for each class of insurance, or in combination of all such classes. The Board shall also have authority to make and promulgate such rules and regulations as may be necessary, proper or advisable in placing such rates and plans in effect. Acts 1951, 52nd Leg., p. 868, ch. 491. Art. 5.70. SPECIAL RATES AND FORMS FOR FIRE, WINDSTORM, OTHER TYPES OF MATERIAL DAMAGE INSURANCE.
Article repealed effective April 1, 2007
The Board of Insurance Commissioners is hereby authorized and empowered to promulgate special rates and forms for fire and windstorm insurance, and other types of material damage insurance required or used upon such National Defense Projects, and the Board may also promulgate rules and regulations incidental to said business and necessary to place its special rates and forms in effect. Acts 1951, 52nd Leg., p. 868, ch. 491. Art. 5.71. CUMULATIVE; EXCEPTION TO EXISTING LAWS.
Article repealed effective April 1, 2007
This subchapter shall be cumulative of existing laws and applicable only to rates upon insurance in relation to National Defense Projects, and to the extent of such subject constitutes an exception to existing laws. Acts 1951, 52nd Leg., p. 868, ch. 491.
SUBCHAPTER F. JOINT UNDERWRITING AND REINSURANCE; ADVISORY ORGANIZATIONS
Art. 5.72. JOINT UNDERWRITING OR JOINT REINSURANCE.
Article repealed effective April 1, 2007
(a) Every group, association or other organization of insurers which engages in joint underwriting or joint reinsurance, shall be subject to regulation with respect thereto as herein provided. (b) If, after a hearing, the Board of Insurance Commissioners finds that any activity or practice of any such group, association or other organization is unfair or unreasonable or otherwise inconsistent with the provisions of this subchapter or with the laws applicable thereto, it may issue a written order specifying in what respects such activity or practice is unfair or unreasonable or otherwise inconsistent with the provisions of the applicable laws, and requiring the discontinuance of such activity or practice. Acts 1951, 52nd Leg., p. 868, ch. 491. Art. 5.73. ADVISORY ORGANIZATIONS.
Article repealed effective April 1, 2007
Sec. 1. Except as provided by Section 4A(c) of this article, an insurer transacting business in the state may, but is not required to, subscribe to an advisory organization and is permitted to submit to and receive from any advisory organization statistical plans, historical data, prospective loss costs, supplementary rating information, policy forms and endorsements, research, rates of individual insurers that are effective at the time the information is submitted or received or that have been effective, and performance of inspections except recommendations regarding profit or expense provisions, other than loss adjustment expenses. Sec. 2. No advisory organization shall compile or distribute, and no insurer may accept from an advisory organization, recommendations for rates or for profit and expenses other than loss adjustment expenses. Sec. 3. (a) An insurer or advisory organization may not: (1) attempt to monopolize, combine, or conspire with any other person to monopolize an insurance market; or (2) engage in a boycott, on a concerted basis, of an insurance market. (b) An insurer or advisory organization may not make an agreement with any other insurer, advisory organization, or other person if the agreement has the purpose or effect of restraining trade unreasonably or of substantially lessening competition in the business of insurance. (c) If, after a hearing, the Board finds that the furnishing of specified services by an advisory organization involves any act or practice which is unfair or unreasonable or otherwise inconsistent with the provisions of this subchapter or with the applicable laws of this State, it may issue a written order specifying in what respects such act or practice is unfair or unreasonable or otherwise inconsistent with the provisions of law and requiring the discontinuance of such act or practice. In addition to any other remedies available at law, the Board may impose any sanction authorized under Article 1.10 of this code. Sec. 4. (a) The Board shall annually require an audit of any advisory organization that provides statistics or other information to the Board in a proceeding to set rates. The audit shall be conducted under rules adopted by the Board, at the expense of the advisory organization. The audit must examine the advisory organization's method of collecting, analyzing, and reporting data to assure the accuracy of data. The audit may examine source documents within individual companies. Except for individual company information, an audit is public information. (b) An advisory organization is subject to examination under Article 5.74 of this code. (c) Notwithstanding any provision to the contrary, reporting of data by an insurer under this article does not relieve the insurer of responsibility of reporting that data directly to the Board at the Board's request. Sec. 4A. (a) An advisory organization may file prospective loss costs, supplementary rating information, and policy forms with the commissioner. An insurer that subscribes to an advisory organization may use this information and may incorporate the information into the insurer's filings. A filing made by an advisory organization under this section is subject to the provisions of this code or the other insurance laws of this state governing rate filings. (b) A corporation, unincorporated association, partnership, or individual may apply to the commissioner for a license as an advisory organization for the types of insurance the applicant specifies in the application. An applicant must: (1) file with the commissioner: (A) a copy of the applicant's: (i) constitution and bylaws; (ii) article of agreement or association, or certificate of incorporation; and (iii) rules governing the applicant's activities as an advisory organization; and (B) a statement of qualifications to act as an advisory organization; and (2) pay a $100 license fee. (c) An insurer may not submit information to or receive information from an advisory organization as described by Section 1 of this article unless the advisory organization holds a license issued under this article. (d) The commissioner shall issue a license to an applicant, without regard to the state of domicile or residence of the applicant or the location of the applicant's place of business if the commissioner determines that the applicant is qualified. (e) The commissioner shall grant or deny a license to an applicant on or before the 60th day after the date the commissioner receives the application. (f) A license issued under this article remains in effect until the commissioner suspends or revokes the license. (g) Each advisory organization shall file with the commissioner a list showing each subscriber company doing business in this state and the products or information the subscriber company purchases. The filing required by this subsection shall be made at least quarterly. (h) On request by the commissioner, each advisory organization shall report to the department a summary of the actuarial assumptions, trend factors, economic factors, and other criteria used in trending data for companies doing business in this state. Sec. 4B. The commissioner may review the rate filing of an insurer that relies on the prospective loss costs provided by an advisory organization and may require the insurer to provide the insurer's actual data and loss experience in addition to the information provided by the advisory organization. Sec. 4C. Repealed by Acts 2003, 78th Leg., ch. 206, Sec. 21.47. Sec. 4D. The select committee on rate and form regulation created under Article 1.50 of this code shall appoint an independent consulting firm to evaluate the activities of advisory organizations in this state, including their impact on competition in the insurance market, their use by insurers, and their impact on availability and affordability of coverage, and any other matters relevant to determining their continued authorization. The committee shall include in its report to the legislature a recommendation for the future role of advisory organizations in this state. Sec. 5. The authority granted under this article shall be reviewed during the normal Sunset cycle of the Texas Department of Insurance . Sec. 6. To the extent that this article conflicts with the provisions of Articles 5.55, 5.58, and 5.58A of this code with respect to the setting of rates for workers' compensation insurance, the provisions of those articles control. Acts 1951, 52nd Leg., p. 868, ch. 491. Amended by Acts 1991, 72nd Leg., ch. 242, Sec. 2.39, eff. Sept. 1, 1991; Secs. 2, 6 amended by Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Sec. 18.21, eff. Jan. 1, 1992; Sec. 4(a) amended by Acts 1993, 73rd Leg., ch. 685, Sec. 24.01, eff. Sept. 1, 1993; Secs. 4A to 4D added by Acts 1993, 73rd Leg., ch. 685, Sec. 24.02, eff. Sept. 1, 1993; Sec. 5 amended by Acts 1993, 73rd Leg., ch. 685, Sec. 24.03, eff. Sept. 1, 1993; amended by Acts 1997, 75th Leg., ch. 1330, Sec. 17, eff. Sept. 1, 1997; Sec. 1 amended by Acts 1999, 76th Leg., ch. 987, Sec. 1, eff. Sept. 1, 1999; Sec. 4A amended by Acts 1999, 76th Leg., ch. 987, Sec. 2, eff. Sept. 1, 1999; Sec. 4B amended by Acts 1999, 76th Leg., ch. 987, Sec. 3, eff. Sept. 1, 1999; Sec. 4C repealed by Acts 2003, 78th Leg., ch. 206, Sec. 21.47(4), eff. June 11, 2003. Art. 5.74. EXAMINATIONS.
Article repealed effective April 1, 2007
The said Board may, as often as it may deem it expedient, make or cause to be made an examination of each group, association, or other organization referred to in Articles 5.72 and 5.73 of this subchapter. The reasonable costs of any such examination shall be paid by the group, association or other organization examined upon presentation to it of a detailed account of such costs. The officer, manager, agents and employees of such group, association or other organization may be examined at any time under oath and shall exhibit all books, records, accounts, documents, or agreements governing its method of operation. In lieu of any such examination the Board may accept the report of an examination made by the insurance supervisory official of another state, pursuant to the laws of such state. Acts 1951, 52nd Leg., p. 868, ch. 491. Art. 5.75. SCOPE OF SUBCHAPTER.
Article repealed effective April 1, 2007
This subchapter applies to the kinds of insurance and to the insurers subject to Subchapters A, B, C, and D of Chapter 5 of this code. Acts 1951, 52nd Leg., ch. 491. Amended by Acts 1985, 69th Leg., ch. 56, Sec. 1, eff. Aug. 26, 1985; Acts 1991, 72nd Leg., ch. 242, Sec. 2.40, eff. Sept. 1, 1991. Art. 5.75-1. REINSURANCE.
Article repealed effective April 1, 2007
(a) Any insurer licensed to do the business of insurance in this state may reinsure in any solvent assuming insurer any risk or part of a risk that both are authorized to assume under authority of law. A credit for reinsurance, either as an asset or a deduction from liability, may not be taken by the ceding insurer except as provided by this article. This article applies to all insurers, including stock and mutual property and casualty insurers, Mexican casualty companies, Lloyd's plan insurers, reciprocal or interinsurance exchanges, nonprofit legal service corporations, county mutual insurance companies, farm mutual insurance companies, risk retention groups, or any insurer writing any line of insurance regulated by this chapter. No such company shall have the power to reinsure its entire outstanding business to an assuming insurer unless the assuming insurer is licensed in this state and until the contract therefor shall be submitted to the Commissioner and approved as protecting fully the interests of all the policyholders. This article does not apply to ceding insurers domiciled in another state that regulates credit for reinsurance under statutes, rules, or regulations substantially similar in substance and effect to this article. To qualify for this exception, the ceding insurer must provide the Commissioner on request with evidence of the similarity in the form of statutes, rules, or regulations and an interpretation of the standards used by the state of domicile. This Article is supplementary to and cumulative of other provisions of this Code pertaining to reinsurance to the extent those provisions are not in conflict with this article. (b) Credit for reinsurance shall be allowed a ceding insurer as either an asset or a deduction from liability on account of reinsurance ceded only when: (1) the reinsurance is ceded to an assuming insurer which is licensed to transact insurance or reinsurance in this state; or (2) the reinsurance is ceded to an assuming insurer which is accredited as a reinsurer in this state. An accredited reinsurer is one which: submits to this state's jurisdiction; submits to this state's authority to examine its books and records; is domiciled and licensed to transact insurance or reinsurance in at least one state, or in the case of a United States branch of an alien assuming insurer is entered through and licensed to transact insurance or reinsurance in at least one state; files annually a copy of its annual statement, filed with the insurance department of its state of domicile, with the State Board of Insurance; and maintains a surplus as regards policyholders in an amount not less than $20 million; or (3) the reinsurance is ceded to an assuming insurer which maintains a trust fund in a qualified United States financial institution, as defined in Subsection (e)(2), for the payment of the valid claims of its United States policyholders and ceding insurers, their assigns, and successors in interest. The trusteed assuming insurer shall report annually not later than March 1 to the State Board of Insurance information substantially the same as that required to be reported on the NAIC Annual Statement form by licensed insurers to enable the State Board of Insurance to determine the sufficiency of the trust fund. In the case of a single assuming insurer, the trust shall consist of a trusteed account representing the assuming insurer's liabilities attributable to business written in the United States and, in addition, include a trusteed surplus of not less than $20 million. In the case of a group of insurers, which group includes unincorporated individual insurers, the trust shall consist of a trusteed account representing the group's liabilities attributable to business written in the United States and, in addition, include a trusteed surplus of not less than $100 million; and the group shall make available to the State Board of Insurance an annual certification by the group's domiciliary regulator and its independent public accountants of the solvency of each underwriter. In the case of a group of incorporated insurers under common administration which has continuously transacted an insurance business for at least three years, which is under the supervision of the Department of Trade and Industry of the United Kingdom, and which has aggregate policyholder's surplus of $10 billion, the trust shall consist of a trusteed account representing the group's several liabilities attributable to business written in the United States pursuant to reinsurance contracts issued in the name of the group and, in addition, include a trusteed surplus of not less than $100 million which shall be held jointly for the benefit of United States insurers ceding business to any member of the group, and each member of the group shall make available to the State Board of Insurance an annual certification by the member's domiciliary regulator and its independent public accountants of the solvency of each member. Such trust shall be established in a form approved by the State Board of Insurance. The trust instrument shall provide that contested claims shall be valid and enforceable upon the final order of any court of competent jurisdiction in the United States. The trust shall vest legal title to its assets in the trustees of the trust for its United States policyholders and ceding insurers, their assigns, and successors in interest. The trust and the assuming insurer shall be subject to examination as determined by the State Board of Insurance. The trust described herein must remain in effect for as long as the assuming insurer shall have outstanding obligations due under the reinsurance agreements subject to the trust. Not later than February 28 of each year the trustees of the trust shall report to the State Board of Insurance in writing setting forth the balance of the trust and listing the trust's investments at the preceding year end and shall certify the date of termination of the trust, if so planned, or certify that the trust shall not expire prior to the next following December 31; or (4) the reinsurance is ceded to an assuming insurer not meeting the requirements of Subdivision (1), (2), or (3), but only with respect to the insurance of risks located in a jurisdiction where such reinsurance is required by applicable law or regulation of that jurisdiction to be ceded to an assuming insurer that does not meet the requirements of Subdivision (1), (2), or (3) of this subsection. (c) If the assuming insurer is not licensed or accredited to transact insurance or reinsurance in this state, the credit permitted by Subsection (b)(3) of this article shall not be allowed unless the assuming insurer agrees in the reinsurance agreements: (1) that in the event of the failure of the assuming insurer to perform its obligations under the terms of the reinsurance agreement, the assuming insurer, at the request of the ceding insurer, shall submit to the jurisdiction of any court of competent jurisdiction in any State of the United States, will comply with all requirements necessary to give such court jurisdiction, and will abide by the final decision of such court or of any Appellate Court in the event of an appeal; and (2) to designate the State Board of Insurance or a designated attorney as its true and lawful attorney upon whom may be served any lawful process in any action, suit or proceeding instituted by or on behalf of the ceding company. This provision, however, is not intended to conflict with or override the obligation of the parties to a reinsurance agreement to arbitrate their disputes, if such an obligation is created in the agreement. (d) Any asset or deduction from liability for the reinsurance ceded to an assuming insurer not meeting the requirements of Subsection (b) shall be allowed in an amount not exceeding the liabilities carried by the ceding insurer, and such asset or deduction shall be in the amount of funds held by or on behalf of the ceding insurer, including funds held in trust for the ceding insurer, under a reinsurance contract with such assuming insurer as security for the payment of obligations thereunder, if such security is held in the United States subject to withdrawal solely by and under the exclusive control of the ceding insurer or, in the case of a trust, held in a qualified United States financial institution, as defined in Subsection (e). This security may be in the form of: (1) cash; (2) securities readily marketable over a national exchange with a maturity date of not more than one year listed by the Securities Valuation Office of the National Association of Insurance Commissioners and qualifying as admitted assets; (3) clean, irrevocable, unconditional letters of credit, issued or confirmed by a qualified United States financial institution, as defined in Subsection (e)(1). Letters of credit meeting applicable standards of issuer acceptability as of the dates of their issuance or confirmation shall, notwithstanding the issuing or confirming institution's subsequent failure to meet applicable standards of issuer acceptability, continue to be acceptable as security until their expiration, extension, renewal, modification or amendment, whichever first occurs; provided, however, such letter of credit shall be replaced within three months after the date of the institution's failure to meet applicable standards of issuer acceptability. (4) any other form of security acceptable to the Commissioner. (e) Qualified United States Financial Institutions. (1) For the purposes of Subsection (d)(3), a "qualified United States financial institution" means an institution that: (A) is organized or, in the case of a United States office of a foreign banking organization, licensed, under the laws of the United States or any state thereof; (B) is regulated, supervised, and examined by United States federal or state authorities having regulatory authority over banks and trust companies; and (C) has been determined by either the Commissioner or the Securities Valuation Office of the National Association of Insurance Commissioners to meet such standards of financial condition and standing as are considered necessary and appropriate to regulate the quality of financial institutions whose letters of credit will be acceptable to the Commissioner. (2) A "qualified United States financial institution" means, for the purposes of those provisions of this law specifying those institutions that are eligible to act as a fiduciary of a trust, an institution that: (A) is organized, or, in the case of a United States branch or agency office of a foreign banking organization, licensed, under the laws of the United States or any state thereof and has been granted the authority to operate with fiduciary powers; and (B) is regulated, supervised, and examined by federal or state authorities having regulatory authority over banks and trust companies. (f) Subsections (a) through (e) of this article shall apply to all reinsurance agreements having an inception, anniversary, or renewal date not less than four months after the effective date of this statute. (g) A person does not have any rights against a reinsurer that are not specifically set forth in the contract of reinsurance or in a specific agreement between the reinsurer and the person. (h) The State Board of Insurance shall require schedules of reinsurance to be filed by every insurer at the time of making the annual report and at such other times as the board may direct. (i) Credit may not be given in the accounting and financial statements, either as an asset or a deduction from liability, unless the reinsurance is payable by the assuming insurer on the basis of the liability of the ceding insurer under the contracts reinsured without diminution because of the insolvency of the ceding insurer, and is payable directly to the ceding insurer or to its domiciliary liquidator or receiver, except: (1) where the contract of reinsurance specifically provides another payee of the reinsurance in the event of insolvency of the ceding insurer; or (2) where the assuming insurer, with the consent of the direct insured, has assumed the policy obligations of the ceding insurer as direct obligations of the assuming insurer to the payee under the policies and in substitution for the obligations of the ceding insurer to the payee. (j) "Assuming insurer" means the insurer who under a contract of reinsurance incurs to the ceding insurer an obligation of which the performance is contingent on incurring of liability or loss by the ceding insurer under its contract or contracts of insurance made with third persons. (k) Each company authorized to do business in this state, writing any line of insurance regulated by this chapter, and while in compliance with all laws applicable to it, may provide reinsurance as provided by Subsection (a) of this article. (l) A life insurance company authorized to do business in this state may provide reinsurance on the same basis as companies described in Subsection (k) of this article. (m) The State Board of Insurance may adopt necessary and reasonable rules under this article to protect the public interest. (n) An insurer shall account for reinsurance agreements and shall record those agreements in the insurer's financial statements in a manner that accurately reflects the effect of the reinsurance agreements on the financial condition of the insurer. The State Board of Insurance may adopt reasonable rules relating to the accounting and financial statement requirements of this subsection and the treatment of reinsurance agreements between insurers, including minimum risk transfer standards, asset debits or credits, reinsurance debits or credits, and reserve debits or credits relating to the transfer of all or any part of an insurer's risks or liabilities by reinsurance agreements and to any contingencies arising from reinsurance agreements. Reinsurance agreements may contain a provision allowing the offset of mutual debts and credits between the ceding insurer and the assuming insurer whether arising out of one or more reinsurance agreements. (o) The Commissioner may request the filing of financial statements certified and audited by an independent certified public accountant, certified copies of the certificate or letter of authority from the domiciliary jurisdiction, and information on the principals and management of any assuming insurer that does not meet the requirements of Subsection (b) of this article. The failure of an assuming insurer that does not meet the requirements of Subsection (b) of this article to comply with a request for information by the Commissioner may result in the Commissioner issuing a directive prohibiting all licensed insurers from taking credit for business ceded with any such assuming insurer after the effective date of such directive. A nonlicensed insurer that is included in the most recent quarterly listing published by the Non-admitted Insurers Information Office of the National Association of Insurance Commissioners is considered to have complied with a request for information by the Commissioner. Added as art. 5.76 by Acts 1955, 54th Leg., p. 413, ch. 117, Sec. 15. Renumbered as art. 5.75-1 by Acts 1981, 67th Leg., p. 201, ch. 94, Sec. 5, eff. Aug. 31, 1981. Amended by Acts 1983, 68th Leg., p. 429, ch. 88, Sec. 1, eff. May 10, 1983; Subsecs. (g) to (i) added by Acts 1987, 70th Leg., 1st C.S., ch. 1, Sec. 6.01, eff. Sept. 2, 1987. Amended by Acts 1989, 71st Leg., ch. 1082, Sec. 7.01, eff. Sept. 1, 1989; Subsecs. (a), (b), (e) amended by and Subsecs. (n), (o) added by Acts 1991, 72nd Leg., ch. 242, Sec. 3.02, eff. Sept. 1, 1991; Subsec. (b) amended by Acts 1993, 73rd Leg., ch. 685, Sec. 13.05, eff. Sept. 1, 1993; Subsec. (n) amended by Acts 1993, 73rd Leg., ch. 685, Sec. 13.03, eff. Sept. 1, 1993; Subsec. (n) amended by Acts 1995, 74th Leg., ch. 614, Sec. 4, eff. Sept. 1, 1995. Art. 5.75-3. REINSURANCE OF AIRCRAFT AND SPACE EQUIPMENT RISKS.
Article repealed effective April 1, 2007
(a) In this article, "aircraft" means an object capable of moving through the atmosphere, whether powered or unpowered, tethered or untethered, which is capable of lifting the weight of the object and a payload in addition thereto, and "space equipment" means spacecraft, satellites, rockets, or other manmade objects that may be launched from earth into orbit around a celestial body or for space travel or may be placed into orbit around a celestial body. (b) A domestic company as defined by Section 5 of Article 3.01 of this code, either by itself or together with other insurance companies, may, subject to such just and reasonable limitations as may be imposed by the State Board of Insurance, reinsure any liability, property, casualty, collision, personal injury, death, or other risks relating to, arising from, or incident to the manufacture, ownership, custody, or operation of an aircraft or any space equipment. Any limitations imposed by the State Board of Insurance shall be consistent with the purposes underlying this article. (c) The ceding insurer in a reinsurance agreement entered into under Section (b) of this article must be licensed to do business in this state. Added by Acts 1983, 68th Leg., p. 153, ch. 42, Sec. 1, eff. Aug. 29, 1983.
SUBCHAPTER G. WORKERS' COMPENSATION AND LONGSHOREMEN'S AND HARBOR WORKERS' COMPENSATION INSURANCE
Art. 5.76-3. TEXAS MUTUAL INSURANCE COMPANY.
Article repealed effective April 1, 2007
Definitions
Sec. 1. In this article: (1) "Board" means the board of directors of the company. (2) Repealed by Acts 2005, 79th Leg., ch. 265, Sec. 7.01(1). (3) "Company" means the Texas Mutual Insurance Company. (4) "Fund" means the Texas Workers' Compensation Insurance Fund. (5) "Workers' compensation insurance" means the insurance for any risk under: (A) Subtitle A, Title 5, Labor Code (the Texas Workers' Compensation Act); (B) the Longshore and Harbor Workers' Compensation Act (33 U.S.C. Section 901); (C) the Federal Mine Safety and Health Act of 1977 (33 U.S.C. Section 801 et seq.); (D) the Defense Base Act (42 U.S.C. Sections 1651-1654); (E) the federal Employers' Liability Act (45 U.S.C. Section 51 et seq.); (F) the Nonappropriated Fund Instrumentalities Act (5 U.S.C. Sections 8171-8173); (G) the Outer Continental Shelf Lands Act (43 U.S.C. Section 1331 et seq.); (H) the Merchant Marine Act of 1920 (46 U.S.C. Section 861 et seq.); or (I) Chapter 504, Labor Code.
Creation; operation
Sec. 2. (a) Effective September 1, 2001, the Texas Workers' Compensation Insurance Fund shall operate as, and exercise the powers of, a domestic mutual insurance company in accordance with Chapter 15 of this code, and shall be called the Texas Mutual Insurance Company. A reference in the laws of this state to the Texas Workers' Compensation Insurance Fund means the Texas Mutual Insurance Company. The commissioner shall issue a certificate of authority to the company as provided by Chapter 15 of this code to write workers' compensation insurance, not later than September 1, 2001. (b) The company is subject to Chapter 15 of this code, other than Article 15.22 of this code. In the event of a conflict between this article and Chapter 15 of this code or another law of this state applicable to a nonlife mutual insurance company, this article controls. (c) The company shall: (1) serve as a competitive force in the marketplace; (2) guarantee the availability of workers' compensation insurance in this state; and (3) serve as an insurer of last resort as provided under Article 5.76-4 of this code. (d) Except as otherwise provided by this subsection, the company is subject to the open meetings law, Chapter 551, Government Code, and the open records law, Chapter 552, Government Code. The board may hold closed meetings to consider and refuse to release information relating to claims, rates, the company's underwriting guidelines, and other information that would give advantage to competitors or bidders. (e) A decision by the company to deny, cancel, or refuse to renew a policy or risk insured under Article 5.76-4 of this code is appealable to the board not later than the 30th day after the date on which the affected party received actual notice that the act occurred or that the decision was made. The company shall hear the appeal not later than the 30th day after the date on which the request for hearing is made and shall notify the appellant in writing of the time and place of the hearing not later than the 10th day before the date of the hearing. Not later than the 30th day after the last day of the hearing, the board shall affirm, reverse, or modify the act appealed to the board. A hearing under this subsection does not suspend the operation of any act, ruling, decision, or order of the company, unless the board specifically so orders. (f) A decision of the board under this section is subject to review by the commissioner in the manner provided by the administrative procedure law, Chapter 2001, Government Code. The commissioner's review of a decision by the board does not suspend the operation of any act, ruling, decision, or order of the company unless the commissioner specifically so orders on a showing by an aggrieved party of: (1) immediate, irreparable injury, loss, or damage; and (2) probable success on the merits. (g) A person aggrieved by the decision of the commissioner may appeal that decision to the district court. Judicial review under this section is governed by the substantial evidence rule. (h) In addition to other rights of the company under this article, the company has the legal rights of a mutual insurance company operating under Chapter 15 of this code, and of a private person in this state, and has the power to sue in its own name. No procedure is a prerequisite to the exercise of the power by the company to sue. (i) The company shall prepare annually a complete and detailed written report accounting for all funds received and disbursed by the company during the preceding fiscal year. (j) The company may not be dissolved.
Board of directors
Sec. 3. (a) The company is governed by a board of directors composed of nine members, all of whom shall be citizens of this state. Five members shall be appointed by the governor with the advice and consent of the senate. The remaining members shall be elected by the company's policyholders. (b) The members of the board of directors serve staggered six-year terms, with the terms of three members expiring July 1 of each odd-numbered year. A member of the board whose term has expired shall continue to serve until the member's replacement is elected by the policyholders or appointed by the governor, as applicable. (c) The governor shall fill a vacancy in the appointed directors by appointment with the advice and consent of the senate. A vacancy in the elected directors shall be filled as provided by the company's bylaws. If a vacancy occurs before the date on which the vacating member's term is set to expire, the successor member shall be elected or appointed for a term to expire on the same date as the vacating member's term. (d) A person may not serve as a member of the board if the person, an individual related to the person within the second degree by consanguinity or affinity, or an individual residing in the same household with the person: (1) is registered or licensed under this code or is required to be registered or licensed under this code; (2) is employed by or acts as a consultant to a person registered or licensed under this code or required to be registered or licensed under this code; (3) owns, controls, has a financial interest in, or participates in the management of an organization registered or licensed under this code or required to be registered or licensed under this code; (4) receives a substantial tangible benefit from the company or the Texas Department of Insurance; or (5) is an officer, employee, or consultant of an association in the field of insurance. (e) It is a ground for removal from the board if a member: (1) does not have at the time of appointment the qualifications required by this section; (2) does not maintain during service on the board the qualifications required by this section; (3) cannot because of illness or disability discharge the member's duties for a substantial part of the term for which the member is appointed; or (4) is absent from more than half of the regularly scheduled board meetings that the member is eligible to attend during a calendar year. (f) The validity of an action of the board is not affected by the fact that it is taken when a ground for removal of a board member exists. (g) If the president has knowledge that a potential ground for removal exists, the president shall notify the chairman of the board of the potential ground. If the potential ground for removal involves an appointed board member, the chairman shall then notify the governor and the attorney general that a potential ground for removal exists. If the potential ground for removal involves the chairman, the president shall notify the next highest officer of the board, who shall notify the governor and the attorney general that a potential ground for removal exists. If the potential ground for removal involves a board member elected by the policyholders, the board shall act on the potential ground for removal as provided by the company's bylaws. (h) Subsection (d) of this section does not prohibit a person who is only a policyholder or a consumer of insurance or insurance products from serving as a member of the board. (i) A person who is ineligible to serve on the board under Subsection (d) of this section may not serve as a member of the board for one year after the date on which the condition that makes the person ineligible ends. (j) Each member shall receive fees for service on the board commensurate with industry standards and actual and necessary travel expenses and expenses incurred in the performance of the member's duties as a member. (k) The governor shall designate a member of the board as the chairman of the board to serve in that capacity at the pleasure of the governor. The members of the board shall elect annually any other officers the board considers necessary for the performance of its duties. The board may create committees and subcommittees. (l) The board shall hold meetings at least once each calendar quarter and at other times at the call of the chairman and at times established in the company's bylaws. Special meetings may be called by any two members of the board on two days notice. (m) Five board members constitutes a quorum. (n) The board shall maintain the principal office of the company in Travis County, Texas.
Powers and duties of board of directors
Sec. 4. (a) The board has full power, authority, and jurisdiction over the company. The board may perform all acts necessary or convenient in the administration of the company or in connection with the insurance business to be carried on by the company. In this regard, the board is empowered to function in all aspects as a governing body of a domestic mutual insurance company. The board shall: (1) provide for the delivery in this state of workers' compensation insurance and for the transaction of workers' compensation insurance business to the same extent as any other insurance carrier transacting workers' compensation insurance business in this state; (2) propose rates for workers' compensation insurance issued by the company; and (3) exercise any other authority necessary to conduct a workers' compensation insurance business. (b) The company may not have affiliates, interlocking boards of directors, spinoffs, or subsidiaries that write lines of insurance other than workers' compensation insurance. (c) The board shall appoint an internal auditor. The internal auditor serves at the pleasure of the board. (d) The board shall appoint a president who shall serve at the pleasure of the board. The president must have proven successful experience as an executive at the general management level in the business of insurance. The president shall receive compensation as set by the board. (e) The company shall provide requested information to appropriate legislative committees in the manner requested by those committees.
Applications
Sec. 5. (a) Applications to the company for workers' compensation insurance coverage shall be submitted on forms prescribed by the company and shall be made: (1) directly by the applicant; or (2) on behalf of the applicant by a local recording agent. (b) If an applicant is identified by the company as a credit risk, the company may refuse to write insurance coverage if the applicant does not: (1) pay the total estimated premium and related charges before the policy is issued; or (2) provide security for payment of the total estimated premium and related charges before the policy is issued. (c) If the policy is written through a licensed agent, the company shall pay the agent a reasonable commission. (d) Notwithstanding any other provision of this code or another insurance law of this state, the company is not required to appoint a local recording agent to act as an agent for the company. An agent transacting business with the company does so as an agent for the applicant and not as an agent for the company, unless there is an express written agreement between the company and the agent that the agent acts on behalf of the company. (e) Information submitted to the company by a licensed agent on behalf of an employer, including a policy expiration date, is the work product of that agent, and the company may not use that information in any marketing or direct sales activity. Except as required or permitted by the open records law, Chapter 552, Government Code, the company may not provide information obtained from a licensed agent to any other licensed agent. This subsection does not prevent an employer from designating another licensed agent or the company as the agent of record and does not prevent the company from using the information submitted to the company under this subsection for the purpose of underwriting or fraud investigation.
Liability
Sec. 6. Neither a member of the board nor the president or any officer or employee of the company is personally liable in the person's private capacity for any act performed or for any contract or other obligation entered into or undertaken in an official capacity in good faith and without intent to defraud, in connection with the administration, management, or conduct of the company, its business, or other related affairs.
Rates
Sec. 7. (a) Except as otherwise provided by this subsection, the board shall have full power and authority to propose rates to be charged by the company for insurance. The board shall engage the services of an independent actuary who is a member in good standing with the Casualty Actuarial Society or the American Academy of Actuaries to develop and recommend actuarially sound rates. The company is subject to the requirements of Article 5.55 of this code and shall include the recommendations of its independent actuary as part of its filing under that article. (b) Rates shall be set in amounts sufficient, when invested, to: (1) carry all claims to maturity; (2) meet the reasonable expenses of conducting the business of the company; and (3) maintain a reasonable surplus. (c) Notwithstanding any other provision of this code or any other insurance law of this state, the company may establish multitiered premium systems to price workers' compensation insurance policies to insureds in the company's competitive programs, as well as to insureds to whom policies are offered by the company under Article 5.76-4 of this code. Those multitiered systems shall be filed in accordance with Article 5.55 of this code. The systems may provide for higher or lower premium payments by insureds based on the company's evaluation of the underwriting characteristics of the individual risk and the appropriate premium to be charged for the policy coverages.
Accident prevention
Sec. 8. (a) The company may make and enforce requirements for the prevention of injuries to employees of its policyholders or applicants for insurance under this article. For this purpose, representatives of the company or representatives of the department on reasonable notice shall be granted free access to the premises of each policyholder or applicant during regular working hours. (b) Failure or refusal by any such policyholder or applicant to comply with any requirement prescribed by the company for the prevention of injuries, or failure or refusal to make full disclosure of all information pertinent to the insuring or servicing of the policyholder or applicant, constitutes sufficient grounds for the company to cancel a policy or deny an application for insurance. (c) A policyholder in the company who is insured under Article 5.76-4 of this code shall obtain a safety consultation if the policyholder: (1) has a Texas experience modifier greater than 1.25; (2) has a national experience modifier greater than 1.25 and estimated premium allocable to Texas of $2,500 or more; or (3) does not have an experience modifier but has had a loss ratio greater than 0.70 in at least two of the three most recent policy years for which information is available. (d) A policyholder in the company who is insured under Article 5.76-4 of this code shall obtain a safety consultation as required by the company if the policyholder: (1) has been in business for less than three years; and (2) meets criteria for a safety consultation established by the company, which may include the number and classification of employees, the policyholder's industry, and the policyholder's previous workers' compensation experience in this state or another jurisdiction. (e) The policyholder shall obtain the safety consultation not later than the 30th day after the effective date of the policy and shall obtain the safety consultation from the division of workers' compensation of the department, the company, or another professional source approved for that purpose by the division of workers' compensation. The safety consultant shall file a written report with the division and the policyholder setting out any hazardous conditions or practices identified by the safety consultation. (f) The policyholder and the consultant shall develop a specific accident prevention plan that addresses the hazards identified by the consultant. The safety consultant may approve an existing accident prevention plan. The policyholder shall comply with the accident prevention plan. (g) The division of workers' compensation of the department may investigate accidents occurring at the work sites of a policyholder for whom a plan has been developed under Subsection (f) of this section, and the division may otherwise monitor the implementation of the accident prevention plan as it finds necessary. (h) In accordance with rules adopted by the commissioner of workers' compensation, not earlier than 90 days or later than six months after the development of an accident prevention plan under Subsection (f) of this section, the division of workers' compensation of the department shall conduct a follow-up inspection of the policyholder's premises. The division may require the participation of the safety consultant who performed the initial consultation and developed the safety plan. If the commissioner of workers' compensation determines that the policyholder has complied with the terms of the accident prevention plan or has implemented other accepted corrective measures, the commissioner of workers' compensation shall so certify. If a policyholder fails or refuses to implement the accident prevention plan or other suitable hazard abatement measures, the policyholder may elect to cancel coverage not later than the 30th day after the date of the determination. If the policyholder does not elect to cancel, the company may cancel the coverage or the commissioner of workers' compensation may assess an administrative penalty not to exceed $5,000. Each day of noncompliance constitutes a separate violation. Penalties collected under this section shall be deposited in the general revenue fund and may be appropriated to the division of workers' compensation of the department to offset the costs of implementing and administering this section. (i) In assessing an administrative penalty, the commissioner of workers' compensation may consider any matter that justice may require and shall consider: (1) the seriousness of the violation, including the nature, circumstances, consequences, extent, and gravity of the prohibited act; (2) the history and extent of previous administrative violations; (3) the demonstrated good faith of the violator, including actions taken to rectify the consequences of the prohibited act; (4) any economic benefit resulting from the prohibited act; and (5) the penalty necessary to deter future violations. (j) The procedures established under this section must be followed each year the policyholder meets the qualifications established under Subsection (c) of this section and is insured through Article 5.76-4 of this code. (k) The division of workers' compensation of the department shall charge the policyholder for the reasonable cost of services provided under Subsections (e), (f), and (h) of this section. The fees for those services shall be set at a cost-reimbursement level including a reasonable allocation of the division's administrative costs. (l) The division of workers' compensation of the department shall enforce compliance with this section through the administrative violation proceedings under Chapter 415, Labor Code.
Control of fraud
Sec. 9. (a) The company shall develop and implement a program to identify and investigate fraud and violations of this code relating to workers' compensation insurance by an applicant, policyholder, claimant, agent, insurer, health care provider, or other person. The company shall cooperate with the division of workers' compensation of the department to compile and maintain information necessary to detect practices or patterns of conduct that violate this code relating to the workers' compensation insurance or Subtitle A, Title 5, Labor Code (the Texas Workers' Compensation Act). (b) The company may conduct investigations of cases of suspected fraud and violations of this code relating to workers' compensation insurance. The company may: (1) coordinate its investigations with those conducted by the division of workers' compensation of the department to avoid duplication of efforts; and (2) refer cases that are not otherwise resolved by the company to the division of workers' compensation of the department to: (A) perform any further investigations that are necessary under the circumstances; (B) conduct administrative violation proceedings; and (C) assess and collect penalties and restitution. (c) The company may enter into funding agreements with local prosecutors for the prosecution of offenses against the company. (d) Restitution collected under Subsection (b) of this section shall be paid to the company. (e) Penalties collected under Subsection (b) of this section shall be deposited in the Texas Department of Insurance operating account and shall be appropriated to the division of workers' compensation of the department to offset the costs of this program. (f) The board, company, and employees of the company are not liable in a civil action for any action made in good faith in the execution of duties under this section including the identification and referral of a person for investigation and prosecution for a possible administrative violation or criminal offense.
Investigation files confidential
Sec. 10. (a) Information maintained in the investigation files of the company is confidential and may not be disclosed except: (1) in a criminal proceeding; (2) in a hearing conducted by the division of workers' compensation of the department; (3) on a judicial determination of good cause; or (4) to a governmental agency, political subdivision, or regulatory body if the disclosure is necessary or proper for the enforcement of the laws of this or another state or of the United States. (b) Company investigation files are not open records for purposes of the open records law, Chapter 552, Government Code. (c) Information in an investigation file that is information in or derived from a claim file, or an employer injury report or occupational disease report, is governed by the confidentiality provisions relating to that information. (d) For purposes of this section, "investigation file" means any information compiled or maintained by the company with respect to a company investigation authorized by law.
Payment of taxes and fees; guaranty association
Sec. 11. (a) The company shall pay premium taxes, maintenance taxes, and the maintenance tax surcharge established under Article 5.76-5 of this code in the same manner as a domestic mutual insurance carrier authorized by the department to write workers' compensation insurance in this state. (b) The company shall pay taxes and fees or any payments due in lieu of taxes in the same manner as a domestic mutual insurance carrier authorized and admitted by the department to engage in the business of insurance in this state under a certificate of authority that includes authorization to write workers' compensation insurance. (c) The company is a member of and is protected by the Texas Property and Casualty Insurance Guaranty Association. The company is subject to assessment under the Texas Property and Casualty Insurance Guaranty Act (Article 21.28-C, Insurance Code). (d) Notwithstanding any other provision of this section, the company is only liable for assessments by the Texas Property and Casualty Insurance Guaranty Association regarding, and that association, with respect to an insolvency of the company, is only liable for, a claim with a date of injury that occurs on or after January 1, 2000.
Financial administration; no state liability
Sec. 12. (a) All revenues, monies, and assets of the company belong solely to the company and are governed by the laws applicable to domestic mutual insurance companies. The State of Texas covenants with the policyholders of the company, persons receiving workers' compensation benefits, and the company's creditors that the state will not borrow, appropriate, or direct payments from those revenues, monies, and/or assets for any purpose. The state has no liability to or responsibility to the policyholders, persons receiving workers' compensation benefits, or the creditors of the company if the company is placed in conservatorship or receivership, or becomes insolvent. (b) The company shall establish and maintain reserves for losses on an actuarially sound basis in accordance with Article 5.61 of this code. (c) The company must maintain a ratio of net written premiums on policies written after reinsurance to surplus of not more than 3.0 to one. (d) The company may pay cash dividends or allow a credit on renewal premium for policyholders insured with the company other than a policyholder insured under Article 5.76-4 of this code, in accordance with criteria approved by the board, which may consider the policyholder's safety record and performance. A dividend or credit requires prior approval of the department. (e) The company shall file annual statements with the department in the same manner as required of other workers' compensation insurance carriers, and the commissioner shall include a report on the company's condition in the commissioner's annual report under Section 32.021 of this code. (f) Expired.
Report to board
Sec. 13. The president shall make periodic reports to the board with regard to the status of the company and its investments.
Policy forms
Sec. 14. The company shall use the uniform policy and standard policy forms prescribed by the department under Articles 5.56 and 5.57 of this code.
Cancellation and nonrenewal
Sec. 15. The company may cancel or refuse to renew coverage on a policyholder as provided by Section 406.008, Labor Code.
Annual report; other reports
Sec. 16. (a) The board shall publish an independently audited report analyzing the company's activities and fiscal condition during the preceding fiscal year and shall file the report with the department. The board shall file the audited report with the department for submission simultaneously with its annual financial report. (b) The company shall file with the department all reports required of other workers' compensation insurers.
Additional audit requirements; internal audit report
Sec. 17. Repealed by Acts 2003, 78th Leg., ch. 785, Sec. 75(6).
Examination of company
Sec. 18. (a) The department shall conduct an examination of the company in the manner and under the conditions provided by Articles 1.15 through 1.19 of this code for the examination of insurance carriers. (b) The company shall pay the costs of the examination. (c) The company is subject to all provisions of this code and to the jurisdiction of the commissioner and the department in the same manner as private insurance carriers.
Public information; accessibility
Sec. 19. (a) The company shall prepare information of public interest describing the functions of the company and the procedures by which complaints are filed with and resolved by the company. The company shall make the information available to the public and appropriate state agencies. (b) The company shall establish methods by which consumers and service recipients are notified of the name, mailing address, and telephone number of the company for the purpose of directing complaints to the company. The company may provide for that notification: (1) by a supplement or endorsement to a written policy; (2) on a sign prominently displayed in the place of business of each regional office of the company; or (3) in a bill for services provided by the company. (c) The company shall comply with federal and state laws related to program and facility accessibility. The president shall also prepare and maintain a written plan that describes how a person who does not speak English can be provided reasonable access to the company's programs and services. (d) The board shall develop and implement policies that provide the public with a reasonable opportunity to appear before the board and to speak on any issue under the jurisdiction of the company.
Complaint resolution
Sec. 20. (a) The company shall keep information about each written complaint submitted to the company. The information shall include: (1) the date the complaint is received; (2) the name of the complainant; (3) the subject matter of the complaint; (4) a record of all persons contacted in relation to the complaint; (5) a summary of the results of the review or investigation of the complaint; and (6) for complaints for which the company took no action, an explanation of the reason the complaint was closed without action. (b) For each written complaint that the company has authority to resolve, the company shall provide to the person filing the complaint and the persons or entities complained about the company's policies and procedures pertaining to complaint investigation and resolution. The company, at least quarterly and until final disposition of the complaint, shall notify the person filing the complaint and the persons or entities complained about of the status of the complaint unless the notice would jeopardize an undercover investigation.
Applicability of other statutes; company not state agency
Sec. 21. (a) The company is an insurance company for purposes of Subtitle A, Title 5, Labor Code (the Texas Workers' Compensation Act). (b) All regulatory authority granted to the commissioner relating to a mutual insurance company is applicable to the company. (c) The company is not a state agency. Added by Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Sec. 18.17, eff. Aug. 30, 1991. Sec. 2(c) amended by and (e) added by Acts 1993, 73rd Leg., ch. 885, Sec. 4, eff. Sept. 1, 1993; Sec. 7(b) amended by Acts 1993, 73rd Leg., ch. 885, Sec. 5, eff. Sept. 1, 1993; Sec. 10(c) amended by Acts 1993, 73rd Leg., ch. 685, Sec. 15.02, eff. Sept. 1, 1993; Sec. 13(d), (f) amended by Acts 1993, 73rd Leg., ch. 885, Sec. 6, eff. Sept. 1, 1993; Sec. 1(4) amended by Acts 1995, 74th Leg., ch. 94, Sec. 1, eff. Sept. 1, 1995; Sec. 2 amended by Acts 1995, 74th Leg., ch. 94, Sec. 2, eff. Sept. 1, 1995; Sec. 3 amended by Acts 1995, 74th Leg., ch. 94, Sec. 3, eff. Sept. 1, 1995; Sec. 3A added by Acts 1995, 74th Leg., ch. 94, Sec. 4, eff. Sept. 1, 1995; Sec. 4(c) to (e) amended by Acts 1995, 74th Leg., ch. 94, Sec. 5, eff. Sept. 1, 1995; Sec. 6(f) to (l) added by Acts 1995, 74th Leg., ch. 94, Sec. 6, eff. Sept. 1, 1995; Sec. 7(f), (g) added by Acts 1995, 74th Leg., ch. 94, Sec. 7, eff. Sept. 1, 1995; Sec. 10(k), (l) amended by Acts 1995, 74th Leg., ch. 94, Sec. 8, eff. Sept. 1, 1995; Sec. 11(a), (b) amended by Acts 1995, 74th Leg., ch. 94, Sec. 9, eff. Sept. 1, 1995; Sec. 11A added by Acts 1995, 74th Leg., ch. 94, Sec. 10, eff. Sept. 1, 1995; Sec. 16 amended by Acts 1995, 74th Leg. ch. 94, Sec. 11, eff. Sept. 1, 1995; Sec. 17(a) amended by Acts 1995, 74th Leg., ch. 94, Sec. 12, eff. Sept. 1, 1995; Sec. 17A added by Acts 1995, 74th Leg., ch. 94, Sec. 13, eff. Sept. 1, 1995; Secs. 19A, 19B added by Acts 1995, 74th Leg., ch. 94, Sec. 14, eff. Sept. 1, 1995; Sec. 21(a) amended by Acts 1995, 74th Leg., ch. 94, Sec. 15, eff. Sept. 1, 1995; Secs. 2(a), 3(a), 3(m), 7(c), 13 amended by Acts 1997, 75th Leg., ch. 334, Sec. 1, eff. Sept. 1, 1997; Sec. 13(d) amended by Acts 1997, 75th Leg., ch. 1311, Sec. 8, eff. Sept. 1, 1997 and by Acts 1997, 75th Leg., ch. 1423, Sec. 11.27, eff. Sept. 1, 1997; Sec. 17(a) amended by Acts 1997, 75th Leg., ch. 1035, Sec. 68, eff. Sept. 1, 1997; Sec. 3 amended by Acts 1999, 76th Leg., ch. 677, Sec. 1, eff. June 18, 1999; Sec. 9(c) amended by Acts 1999, 76th Leg., ch. 1126, Sec. 1, eff. Aug. 30, 1999; Sec. 12 amended by Acts 1999, 76th Leg., ch. 1126, Sec. 2, eff. Aug. 30, 1999; Sec. 13(l) added by Acts 1999, 76th Leg., ch. 1426, Sec. 20, eff. Sept. 1, 1999. Amended by Acts 2001, 77th Leg., ch. 1195, Sec. 1.01, eff. Sept. 1, 2001; Sec. 17 repealed by Acts 2003, 78th Leg., ch. 785, Sec. 75(6), eff. Sept. 1, 2003; Sec. 1(2) repealed by Acts 2005, 79th Leg., ch. 265, Sec. 7.01(1), eff. Sept. 1, 2005; Sec. 8(a), (e), (g) to (i), (k), (l) amended by Acts 2005, 79th Leg., ch. 265, Sec. 6.063, eff. Sept. 1, 2005; Sec. 9(a), (b), (e) amended by Acts 2005, 79th Leg., ch. 265, Sec. 6.064, eff. Sept. 1, 2005; Sec. 10(a) amended by Acts 2005, 79th Leg., ch. 265, Sec. 6.065, eff. Sept. 1, 2005; Sec. 12(e) amended by Acts 2005, 79th Leg., ch. 265, Sec. 6.066, eff. Sept. 1, 2005; Sec. 16(b) amended by Acts 2005, 79th Leg., ch. 265, Sec. 6.067, eff. Sept. 1, 2005. Art. 5.76-4. COMPANY AS INSURER OF LAST RESORT.
Article repealed effective April 1, 2007
(a) The Texas Mutual Insurance Company may not, except as otherwise provided by this article and by Section 15, Article 5.76-3 of this code, refuse to insure any risk that tenders the necessary premium and any applicable accident prevention service fees. (b) If an applicant to the company would be rejected for workers' compensation insurance under the company's underwriting standards, the risk may not be rejected, but shall be insured at a higher premium as provided by the company's requirements. The risk may be required to meet other conditions considered necessary to protect the company's interests. (c) The company shall develop statistical and other information as necessary to allow the company to distinguish between its writings in the voluntary market and its writings as the insurer of last resort. (d) The company shall decline to insure any risk if insuring that risk would cause the company to exceed the premium-to-surplus ratios established by Article 5.76-3 of this code or if the risk is not in good faith entitled to insurance through the company. For purposes of this subsection only, "good faith" means honesty in fact in any conduct or transaction. (e) The department shall develop and publish classification relativities specifically designed for the risks insured under this article. (f) The company and the Texas workers' compensation insurance facility may exchange information relating to actual or suspected fraud by any applicant, policyholder, claimant, agent, or insurer with respect to workers' compensation insurance policies issued by, or applications for coverage submitted to, the facility or the company. That information may be kept confidential and is not subject to disclosure under the open records act, Chapter 424, Acts of the 63rd Legislature, Regular Session, 1973 (Article 6252-17a, Vernon's Texas Civil Statutes). (g) If the company suspects fraud or identifies conditions that may result in acts of fraud, the company may require an applicant for workers' compensation insurance coverage who is identified as a risk for purposes of Subsection (b) of this article to insure all business entities that are commonly owned or commonly controlled by the applicant. (h) The company shall report the statistical and other information developed under Subsection (c) of this article on request to the Research and Oversight Council on Workers' Compensation, or to any successor entity for research and oversight of the workers' compensation system of this state. Added by Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Sec. 18.18, eff. Jan. 1, 1994. Subsec. (d) amended by Acts 1993, 73rd Leg., ch. 685, Sec. 15.03, eff. Sept. 1, 1993; Subsec. (f) added by Acts 1993, 73rd Leg., ch. 885, Sec. 7, eff. Jan. 1, 1994; Subsecs. (g), (h) added by Acts 1995, 74th Leg., ch. 94, Sec. 16, eff. Sept. 1, 1995. Amended by Acts 2001, 77th Leg., ch. 1195, Sec. 2.01, eff. Sept. 1, 2001. Art. 5.76-5. REVENUE BOND PROGRAM AND PROCEDURES.
Article repealed effective April 1, 2007
Legislative finding; purpose
Sec. 1. The legislature finds that the issuance of bonds for the purposes of providing a method to raise funds to provide workers' compensation insurance coverage through the Texas Workers' Compensation Insurance Fund and workers' compensation insurance coverage for employers in this state is for the benefit of the public and in furtherance of a public purpose.
Definitions
Sec. 2. In this article: (1) "Bond resolution" means the resolution or order authorizing the bonds to be issued under this article. (2) "Board" means the board of directors of the Texas Public Finance Authority. (3) "Fund" means the Texas Workers' Compensation Insurance Fund.
Bonds authorized; application of Texas public finance authority act
Sec. 3. (a) On behalf of the fund, the Texas Public Finance Authority shall issue revenue bonds to: (1) establish the initial surplus of the fund; (2) establish and maintain reserves; (3) pay initial operating costs; (4) pay costs related to issuance of the bonds; and (5) pay other costs related to the bonds as may be determined by the board. (b) To the extent not inconsistent with this article, the Texas Public Finance Authority Act (Article 601d, Vernon's Texas Civil Statutes) applies to bonds issued under this article. In the event of a conflict, this article controls.
Applicability of other statutes
Sec. 4. The following Acts apply to bonds issued under this article to the extent consistent with this article: (1) Chapter 656, Acts of the 68th Legislature, Regular Session, 1983 (Article 717q, Vernon's Texas Civil Statutes); (2) Chapter 3, Acts of the 61st Legislature, Regular Session, 1969 (Article 717k-2, Vernon's Texas Civil Statutes); (3) the Bond Procedures Act of 1981 (Article 717k-6, Vernon's Texas Civil Statutes); (4) Chapter 1078, Acts of the 70th Legislature, Regular Session, 1987 (Article 717k-7, Vernon's Texas Civil Statutes); (5) Article 3, Chapter 53, Acts of the 70th Legislature, 2nd Called Session, 1987 (Article 717k-8, Vernon's Texas Civil Statutes); (6) Article 717k-9, Revised Statutes; and (7) Chapter 400, Acts of the 66th Legislature, 1979 (Article 717m-1, Vernon's Texas Civil Statutes).
Limits
Sec. 5. The Texas Public Finance Authority may issue, on behalf of the fund, bonds in a total amount not to exceed $300 million.
Conditions
Sec. 6. (a) Bonds may be issued at public or private sale. (b) Bonds may mature not more than 20 years after the date issued. (c) Bonds must be issued in the name of the fund.
Additional covenants
Sec. 7. In a bond resolution, the board may make additional covenants with respect to the bonds and the designated income and receipts of the fund pledged to their payment and may provide for the flow of funds and the establishment, maintenance, and investment of funds and accounts with respect to the bonds.
Special accounts
Sec. 8. (a) A bond resolution may establish special accounts including an interest and sinking fund account, reserve account, and other accounts. (b) The president of the fund or the president's designee shall administer the accounts in accordance with Article 5.76-3 of this code.
Security
Sec. 9. (a) Bonds are payable only from the maintenance tax surcharge established in Section 10 of this article or other sources the fund is authorized to levy, charge, and collect in connection with paying any portion of the bonds. (b) Bonds are obligations solely of the fund. Bonds do not create a pledging, giving, or lending of the faith, credit, or taxing authority of this state. (c) Each bond must include a statement that the state is not obligated to pay any amount on the bond and that the faith, credit, and taxing authority of this state are not pledged, given, or lent to those payments. (d) Each bond issued under this article must state on its face that the bond is payable solely from the revenues pledged for that purpose and that the bond does not and may not constitute a legal or moral obligation of the state.
Maintenance tax surcharge
Sec. 10. (a) A maintenance tax surcharge is assessed against: (1) each insurance company writing workers' compensation insurance in this state; (2) each certified self-insurer under Chapter 407, Labor Code; and (3) the fund. (b) The maintenance tax surcharge shall be set in an amount sufficient to pay all debt service on the bonds. The maintenance tax surcharge is set by the commissioner in the same time and shall be collected by the comptroller on behalf of the fund in the same manner as provided under Article 5.68 of this code. (c) On determining the rate of assessment under Section 403.003, Labor Code, the commissioner shall increase the tax rate to a rate sufficient to pay all debt service on the bonds subject to the maximum tax rate established by Section 403.002, Labor Code. If the resulting tax rate is insufficient to pay all costs for the department under this article and all debt service on the bonds, the commissioner may assess an additional surcharge not to exceed one percent of gross workers' compensation premiums to cover all debt service on the bonds. In this code, the maintenance tax surcharge includes the additional maintenance tax assessed under this subsection and the surcharge assessed under this subsection to pay all debt service of the bonds. (d) The fund and each insurance company may pass through the maintenance tax surcharge to each of its policyholders. (e) As a condition of engaging in the business of insurance in this state, an insurance company writing workers' compensation insurance in this state agrees that if the company leaves the workers' compensation insurance market in this state it remains obligated to pay, until the bonds are retired, the company's share of the maintenance tax surcharge assessed under this section in an amount proportionate to that company's share of the workers' compensation insurance market in this state as of the last complete reporting period before the date on which the company ceases to engage in the insurance business in this state. The proportion assessed against the company shall be based on the company's workers' compensation insurance gross premiums for the company's last reporting period. However, a company is not required to pay the proportionate amount in any year in which the surcharge assessed against insurance companies continuing to write workers' compensation insurance in this state is sufficient to service the bond obligation. The abolition of the fund under Section 2(d), Article 5.76-3, Insurance Code, does not affect the liability of an insurance company for a maintenance tax surcharge assessed under this section. Sec. 10A. Expired.
Tax exempt
Sec. 11. The bonds issued under this article, and any interest from the bonds, and all assets pledged to secure the payment of the bonds are free from taxation by the state or a political subdivision of this state.
Authorized investments
Sec. 12. The bonds issued under this article constitute authorized investments under Article 2.10 and Subpart A, Part I, Article 3.39 of this code.
State pledge
Sec. 13. The state pledges to and agrees with the owners of any bonds issued in accordance with this article that the state will not limit or alter the rights vested in the fund to fulfill the terms of any agreements made with the owners of the bonds or in any way impair the rights and remedies of those owners until the bonds, any premium or interest, and all costs and expenses in connection with any action or proceeding by or on behalf of those owners are fully met and discharged. The fund may include this pledge and agreement of the state in any agreement with the owners of the bonds.
Enforcement by mandamus
Sec. 14. A writ of mandamus and all other legal and equitable remedies are available to any party at interest to require the fund and any other party to carry out agreements and to perform functions and duties under this article, the Texas Constitution, or a bond resolution.
Application to Texas Mutual Insurance Company
Sec. 15. (a) Notwithstanding any other provision of this article, effective September 1, 2001: (1) the fund is operated as the Texas Mutual Insurance Company as provided by Article 5.76-3 of this code; and (2) additional bonds may not be issued under this article. (b) The Texas Mutual Insurance Company may exercise any power, and is liable to perform any duty, imposed on the fund as this article existed immediately before September 1, 2001. Added by Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Sec. 18.19, eff. Aug. 30, 1991. Sec. 10(b) amended by Acts 1993, 73rd Leg., ch. 685, Sec. 3.17, eff. Sept. 1, 1993; Sec. 10A added by Acts 1999, 76th Leg., ch. 1126, Sec. 3, eff. Aug. 30, 1999; Sec. 15 added by Acts 2001, 77th Leg., ch. 1195, Sec. 2.02, eff. Sept. 1, 2001; Sec. 10(a), (c) amended by Acts 2005, 79th Leg., ch. 265, Sec. 6.068, eff. Sept. 1, 2005.
SUBCHAPTER H. PREMIUM RATING PLANS
Art. 5.77. PREMIUM RATING PLANS; POWERS OF BOARD. The Board of Insurance Commissioners is hereby authorized and empowered to make or approve and promulgate premium rating plans designed to encourage the prevention of accidents, to recognize the peculiar hazards of individual risks and to give due consideration to interstate as well as intrastate experience of such risks for Workmen's Compensation, Motor Vehicle and other lines of Casualty Insurance to be applicable separately for each class of insurance, or in combination of two or more of such classes. Such plans may be approved on an optional basis to apply prospectively, or retrospectively and may include premium discount plans, retrospective rating plans or other systems, plans or formulas, however named, if the rates thereby provided are not excessive, inadequate or unfairly discriminatory. The Board shall also have authority to make or approve and promulgate such reasonable rules and regulations as may be necessary, not in conflict with provisions of this Act. Acts 1953, 53rd Leg., p. 64, ch. 50, Sec. 1. Art. 5.78. CONSIDERATION OF ALL RELEVANT FACTORS. Before the Board of Insurance Commissioners approves class rates or rating plans, due consideration shall be given to all relevant factors to the end that no unfair discrimination shall exist in class rates or rating plans as they may affect risks of various size. Acts 1953, 53rd Leg., p. 64, ch. 50, Sec. 1a. Art. 5.79. OPTIONAL SELECTION AND APPLICATION. If for any form of casualty insurance affected by this Act more than one rating plan is approved for optional selection and application, the selection of the plan shall rest with the applicant. Acts 1953, 53rd Leg., p. 64, ch. 50, Sec. 1b.
SUBCHAPTER K. POLICY FORMS AND ENDORSEMENTS FOR CERTAIN AIRCRAFT
Art. 5.90. POLICY FORMS AND ENDORSEMENTS.
Article repealed effective April 1, 2007
When the State Board of Insurance finds that a public need exists for the regulation of aircraft hull and aircraft liability insurance, it may, by board order, require all insurers issuing any form of aircraft hull and aircraft liability insurance in Texas to file with the board all policy forms and endorsements used by each insurer in the writing of such insurance. The board may disapprove the use of any form or endorsement so filed and no insurer may thereafter use such disapproved form or endorsement. Any contract or agreement not written into the application, if any, or policy shall be void and of no effect and in violation of the provisions of this subchapter and shall be sufficient cause for revocation of license of the insurer to write aircraft insurance within this state. Added by Acts 1977, 65th Leg., p. 1455, ch. 593, Sec. 1, eff. Aug. 29, 1977. Amended by Acts 1979, 66th Leg., p. 1070, ch. 501, Sec. 1, eff. June 7, 1979. Art. 5.92. RULES.
Article repealed effective April 1, 2007
When the State Board of Insurance acts under Article 5.90, it shall have authority to make any rules that are necessary to carry out the provisions of this subchapter. Added by Acts 1977, 65th Leg., p. 1455, ch. 593, Sec. 1, eff. Aug. 29, 1977. Amended by Acts 1979, 66th Leg., p. 1071, ch. 501, Sec. 1, eff. June 7, 1979.
SUBCHAPTER L. ADMINISTRATIVE PROCEDURE FOR CHANGES IN MANUAL RULES, CLASSIFICATION PLANS, STATISTICAL PLANS, AND POLICY AND ENDORSEMENT FORMS AND FOR CERTAIN RATES AND RATING PLANS
Art. 5.96. PROMULGATED LINES. (a) The State Board of Insurance may prescribe, promulgate, adopt, approve, amend, or repeal standard and uniform manual rules, rating plans, classification plans, statistical plans, and policy and endorsement forms for motor vehicle insurance, fire and allied lines insurance, workers' compensation insurance, and multiperil insurance under the procedure specified in this article. (a-1) This article does not apply to the setting of rates for personal automobile insurance under Article 5.101 of this code, rates for fire and allied lines insurance under Subchapter Q of this chapter or, on and after December 1, 2004, rates for personal automobile insurance and fire and allied lines insurance under Article 5.13-2 of this code. (b) Any interested person may initiate proceedings before the board with respect to any matter specified in Section (a) of this article by filing a written petition with the chief clerk of the board that includes the following: (1) specific identification of the matter that is proposed to be prescribed, promulgated, adopted, approved, amended, or repealed; (2) the wording of the matter proposed to be prescribed, promulgated, adopted, approved, amended, or repealed; and (3) justification for the proposed action in sufficient particularity to inform the board and any interested person of the petitioner's reasons and arguments. (c) A copy of each petition initiating a proceeding shall be marked with the date it was received by the chief clerk of the board and shall be made available for public inspection at the office of the chief clerk of the board during the period the petition is pending. Except for emergency matters acted on under Section (i) of this article, the board may not act on a petition until it has been available for public inspection for at least 15 days after the date of filing and notice has been given in accordance with this section. Not later than the 30th day before the date the board takes action on any rule, rating plan, classification plan, statistical plan, or policy or endorsement form under this article, the board shall publish in the Texas Register a notice of the meeting or hearing at which the action will be taken. The notice must include a brief summary of the substance of the proposed rule, rating plan, classification plan, statistical plan, or policy or endorsement form, and a statement that the full text of the rule, rating plan, classification plan, statistical plan, or policy or endorsement form is available for review in the office of the chief clerk of the State Board of Insurance. (d) Any interested person may request the board to hold a hearing before it acts on a pending petition. Except as provided by Article 5.96A of this code, the board has discretion whether or not to hold such a hearing. (e) Within 60 days after the receipt of a petition, the board shall hold a hearing to consider the proposal or shall enter an order implementing or denying the proposal. If the board denies the proposal, it shall specify the reasons for the denial in its order. (f) On its own motion, the board may initiate a proceeding with respect to any matter specified in Section (a) of this article. (g) If a hearing is scheduled to consider a proposal, the board shall publish notice in the Texas Register not less than 10 days before the hearing and shall state the time, place, legal authority for the hearing, and the matters to be considered. (h) After entering an order with respect to any matter specified in Section (a) of this article, the board shall file a notice of its action for publication in the adopted rule section of the Texas Register. In addition, before the effective date of the action, the board shall cause notice of the order to be mailed to the applicant, to all insurers writing the affected line of insurance in this state, and to all other persons who have made timely written request for notification. Failure to mail this notice does not invalidate any action taken. (i) The board's action takes effect 15 days after notice of that action appears in the Texas Register or on a later specified date. If the board finds that an imminent peril to the public health, safety, or welfare, or a requirement of state or federal law requires its action to be effective before the end of the 15-day period, it may take emergency action to be effective at an earlier time. The board's action on an emergency matter may be effective for 120 days, and renewable one time for a period not exceeding 60 days immediately following the 120-day period. The permanent adoption of an identical change is not precluded. (j) Any person aggrieved by an order of the board is entitled to redress as provided by Article 5.11, Article 5.39, or Article 5.65 of this code, whichever is applicable to the line of insurance covered by the order. (k) The Administrative Procedure and Texas Register Act (Article 6252-13a, Vernon's Texas Civil Statutes), does not apply to board action taken under this article. (l) The board or the office of public insurance counsel may require that a person who has filed a petition under Subsection (b) of this article or who has otherwise presented materials to the board in connection with a proceeding under this article provide additional information to the board or office, including any statistical, actuarial, or other information on which the petition or other materials were based. Added by Acts 1983, 68th Leg., p. 1252, ch. 272, Sec. 1, eff. May 28, 1983. Sec. (d) amended by Acts 1987, 70th Leg., 1st C.S., ch. 1, Sec. 2.09, eff. Sept. 2, 1987; Secs. (a-1), (l) added by and Subsecs. (c), (i) amended by Acts 1991, 72nd Leg., ch. 242, Sec. 2.41, eff. Sept. 1, 1991; Subsec. (a-1) amended by Acts 1995, 74th Leg., ch. 984, Sec. 25, eff. Sept. 1, 1995; Subsec. (a-1) amended by Acts 2003, 78th Leg., ch. 206, Sec. 21.31, eff. June 11, 2003. Art. 5.96A. HEARING ON POLICY FORMS AND ENDORSEMENTS. (a) This article applies to any policy or endorsement form for commercial automobile insurance or commercial multiperil insurance. (b) If a hearing is requested by at least 25 persons, by a governmental subdivision or agency, or by an association that has at least 25 members and if the persons, subdivision, agency, or association is affected by the policy or endorsement form, the board must hold a public hearing before a policy or endorsement form is prescribed, adopted, amended, approved, or repealed. (c) The provisions of Article 5.96 of this code that are not inconsistent with this article apply to the policy or endorsement. (d) Notwithstanding Subsections (a) through (c) of this article, on or after September 1, 1992, policy or endorsement forms for commercial motor vehicle insurance are adopted as provided by Article 5.06 of this code. Added by Acts 1987, 70th Leg., 1st C.S., ch. 1, Sec. 2.08, eff. Sept. 2, 1987. Subsec. (d) added by Acts 1991, 72nd Leg., ch. 242, Sec. 2.42, eff. Sept. 1, 1991; Subsec. (d) amended by Acts 1995, 74th Leg., ch. 984, Sec. 26, eff. Sept. 1, 1995. Art. 5.97. LINES OF INSURANCE FOR WHICH FILING IS REQUIRED. (a) The department may take action on filings for standard and uniform rates, rating plans, manual rules, classification plans, statistical plans, and policy and endorsement forms, or any modification of any of these for the lines of insurance regulated in Subchapter B, Chapter 5, of this code under the procedure specified in this article. (b) Any interested person may initiate proceedings before the commissioner with respect to any matter specified in Section (a) of this article by filing a petition with the department that includes the following: (1) specific identification of the matter that is proposed to be adopted, approved, amended, or repealed; (2) the wording of the matter proposed to be adopted, approved, amended, or repealed; and (3) justification for the proposed action in sufficient particularity to inform the commissioner and any interested person of the petitioner's reasons and arguments. (c) A copy of each petition initiating a proceeding shall be marked with the date it was received by the department and shall be made available for public inspection at the office of the chief clerk of the department throughout the period the petition is pending. Except for emergency matters acted on under Section (j) of this article, the commissioner may not act on a petition until it has been available for public inspection for at least 15 days after the date of filing and notice has been given in accordance with this section. Not later than the 10th day before the date the commissioner takes action on any rule, rating plan, classification plan, statistical plan, or policy or endorsement form under this article, the department shall publish in the Texas Register a brief summary of the substance of the proposed rule, rating plan, classification plan, statistical plan, or policy or endorsement form, and a statement that the full text of the rule, rating plan, classification plan, statistical plan, or policy or endorsement form is available for review in the office of the chief clerk of the department. (d) Any interested person may request a hearing before the commissioner acts on a pending petition. Except as provided by Article 5.97A of this code, the commissioner has discretion whether or not to hold such a hearing. (e) Repealed by Acts 2003, 78th Leg., ch. 206, Sec. 21.47. (f) The commissioner may hold a hearing to consider the proposal or may enter an order implementing or denying the proposal. If the commissioner denies a proposal, the commissioner shall specify the reasons for the denial in the commissioner's order. (g) On its own motion, the department may initiate a proceeding with respect to any matter specified in Section (a) of this article. (h) If a hearing is scheduled to consider a proposal, the department shall publish notice in the Texas Register not less than 10 days before the hearing and shall state the time, place, and legal authority for the hearing and the matters to be considered. (i) After entering an order with respect to any matter specified in Section (a) of this article, the department shall file a notice of the commissioner's action for publication in the adopted rule section of the Texas Register. In addition, before the effective date of the action, the department shall cause notice of the order to be mailed to the applicant, to all insurers writing the affected line of insurance in this state, and to all other persons who have made timely written request for notification. Failure to mail this notice will not invalidate any action taken. (j) The commissioner's action takes effect 15 days after the date that notice of the action is published in the Texas Register or on a later specified date. If the commissioner finds that an imminent peril to the public health, safety, or welfare, or a requirement of state or federal law, requires the commissioner's action to be effective before the end of the 15-day period, the commissioner may take emergency action to be effective at an earlier time. The commissioner's action on an emergency matter may be effective for 120 days, and renewable once for a period not exceeding 60 days immediately following the 120-day period. The permanent adoption of an identical change is not precluded. (k) Any person aggrieved by an order of the commissioner is entitled to redress as provided by Article 5.23 of this code. (l) Chapters 2001 and 2002, Government Code, do not apply to commissioner or department action taken under this article. (m) The department or the office of public insurance counsel may require that a person who has filed a petition under Subsection (b) of this article or who has otherwise presented materials to the department in connection with a proceeding under this article provide additional information to the department or office, including any statistical, actuarial, or other information on which the petition or other materials were based. (n) Notwithstanding Subsections (a) through (l) of this article, this article does not apply to a line of insurance subject to Article 5.13-2 of this code. Added by Acts 1983, 68th Leg., p. 1252, ch. 272, Sec. 1, eff. May 28, 1983. Sec. (d) amended by Acts 1987, 70th Leg., 1st C.S., ch. 1, Sec. 2.10, eff. Sept. 2, 1987; Subsecs. (c), (j) amended by and Subsecs. (m), (n), added by Acts 1991, 72nd Leg., ch. 242, Sec. 2.43, eff. Sept. 1, 1991; Subsec. (n) amended by Acts 1995, 74th Leg., ch. 984, Sec. 27, eff. Sept. 1, 1995; Subsecs. (a) to (d), (f) to (m), amended by Acts 2003, 78th Leg., ch. 206, Sec. 21.32, eff. June 11, 2003; Subsec. (e) amended by Acts 2003, 78th Leg., ch. 206, Sec. 21.47(7), eff. June 11, 2003. Art. 5.97A. HEARING ON POLICY AND ENDORSEMENT FORMS. (a) This article applies to any policy or endorsement form for general liability insurance. (b) If a hearing is requested by at least 25 persons, by a governmental subdivision or agency, or by an association that has at least 25 members and if the persons, subdivision, agency, or association is affected by the policy or endorsement form, the board must hold a public hearing before a policy or endorsement form is prescribed, adopted, amended, approved, or repealed. (c) The provisions of Article 5.97 of this code that are not inconsistent with this article apply to the policy or endorsement. Added by Acts 1987, 70th Leg., 1st C.S., ch. 1, Sec. 2.08, eff. Sept. 2, 1987. Art. 5.98. RULEMAKING.
Article repealed effective April 1, 2007
The State Board of Insurance may adopt reasonable rules that are appropriate to accomplish the purposes of this chapter. Added by Acts 1983, 68th Leg., p. 1252, ch. 272, Sec. 1, eff. May 28, 1983. Amended by Acts 1991, 72nd Leg., ch. 242, Sec. 2.54, eff. Sept. 1, 1991.
SUBCHAPTER M. FLEXIBLE RATING PROGRAM FOR CERTAIN INSURANCE LINES
Art. 5.102. ASSESSMENT FOR RURAL FIRE PROTECTION.
Article repealed effective April 1, 2007
Definitions
Sec. 1. In this article: (1) "Insurer" means an insurer authorized to engage in business in this state, including a stock company, mutual, farm mutual, county mutual, Lloyd's plan, or reciprocal or interinsurance exchange. (2) "Net direct premium" means the gross direct premium written and reported by an insurer on annual financial statements on: (A) policies of: (i) homeowner's insurance; (ii) fire insurance; (iii) farm and ranch owner's insurance; (iv) private passenger automobile physical damage insurance; and (v) commercial automobile physical damage insurance; and (B) the nonliability portion of a commercial multiple peril policy.
Applicability
Sec. 2. This article applies only to an insurer that writes an insurance policy described by Section 1(2) of this article.
Assessment
Sec. 3. (a) The comptroller shall assess all insurers in an amount that totals $15 million for each 12-month period. Each insurer shall pay a portion of the assessment in the proportion that the insurer's net direct premiums for the period for which the assessment is made bear to the aggregate net direct premiums written in this state for that period. (b) The comptroller shall assess the insurers on or before September 1 of each year. (c) An insurer shall pay the amount assessed under this section on or after the 60th day after the date the comptroller assesses the insurer. (d) An insurer may recover an assessment under this section by: (1) reflecting the assessment as an expense in a rate filing required under this code; or (2) charging the insurer's policyholders. (e) An insurer that recovers an assessment under this section from the insurer's policyholders shall provide a notice to each policyholder of the amount of the assessment being recovered. The notice required by this subsection may be included on a declarations page, renewal certificate, or billing statement. The commissioner by rule may adopt a form for providing notice under this subsection. (f) The comptroller shall credit assessments collected under this article to the volunteer fire department assistance fund created under Section 614.104, Government Code.
Rules; cooperation
Sec. 4. (a) The comptroller and the commissioner shall adopt rules as necessary to implement this article. (b) The comptroller and the department shall cooperate as necessary to implement this article.
Expiration
Sec. 5. This article expires September 1, 2011. Added by Acts 2001, 77th Leg., ch. 1129, Sec. 2, eff. Sept. 1, 2001. Amended by Acts 2003, 78th Leg., ch. 1275, Sec. 3(30), eff. Sept. 1, 2003.
SUBCHAPTER O. RATE ROLLBACK
Art. 5.131. TEMPORARY RATE ROLLBACK FOR CERTAIN LINES OF INSURANCE.
Article repealed effective April 1, 2007
Findings
Sec. 1. The legislature finds that: (1) the cost of litigation against insureds and their insurers, the possibility of large and unjust judgments, and the uncertainty created by a litigious environment within this state have been significant factors in the high cost of certain lines of insurance; (2) legislation enacted by regular sessions of the 73rd and 74th legislatures, which may be aided by legislation under consideration by the 104th Congress of the United States, is intended to meaningfully reform the civil justice system of this state and will result in reductions in the cost of litigation and in the size of judgments; (3) while the monetary effect of the legislative changes can be actuarially determined within a reasonable degree of certainty, insurers will delay implementation of rate reductions until they have data evidencing actual loss experience; (4) the delay described by Subdivision (3) of this section will result in a windfall for the insurers benefited by the legislation described by Subdivision (2) of this section, and this benefit should be passed on to their insureds; and (5) legislative action in the public interest and within the police power of the state is required to eliminate unnecessary delays to pass these benefits on to the insured public of this state.
Scope of article
Sec. 2. (a) This article applies to any insurer that is authorized to do business in this state and that is authorized to write any of the types of coverages or lines and sublines listed in Subsection (b) of this section, including: (1) a capital stock company; (2) a mutual company; (3) a Lloyd's plan company; and (4) a reciprocal or interinsurance exchange. (b) It is the intent of the legislature that all insurers, including county mutual insurers, joint underwriting associations, and others whose rates are not regulated, pass through the savings that accrue from the legislation described by Section 1 of this article to their policyholders on a prospective basis. To monitor compliance with this legislative directive, the commissioner may require information in rate filings, special data calls, informational hearings, and any other means consistent with other provisions of this code applicable to the affected insurers. Information provided under this subsection is privileged and confidential to the same extent as the information is privileged and confidential under this code or other laws for other insurers licensed and writing the same line of insurance in this state. The information remains privileged and confidential unless and until introduced into evidence at an administrative hearing or in a court of competent jurisdiction. Sections 3 and 4 of this subchapter do not apply to the nonrate regulated insurers covered by this subsection. (c) This article applies only to policies or coverages in the following lines or sublines that are issued, issued for delivery, or renewed on and after January 1, 1996: (1) professional liability insurance for a physician, other health care provider, or hospital; (2) commercial liability insurance for damages arising out of the manufacture, design, importation, distribution, packaging, labeling, lease, or sale of a product or for completed operations coverage; (3) private passenger automobile liability insurance for bodily injury; (4) commercial automobile liability insurance for bodily injury; (5) private umbrella and excess liability insurance; (6) the liability portion of commercial multi-peril insurance; (7) the liability portion of homeowner's, farm and ranch owner's, and renter's insurance; (8) the employer's liability portion of workers' compensation insurance; and (9) other commercial liability insurance, including the following lines and sublines: (A) premises medical; (B) fire legal liability; (C) personal advertising injury; (D) contractual liability; (E) liability for all premises; (F) pollution liability; (G) owners and contractors protective liability; (H) railroad protective liability; (I) liquor liability; (J) farm liability; (K) commercial umbrella and excess liability; (L) professional liability other than insurance described by Subdivision (1) of this subsection; and (M) garage liability.
Rate rollback
Sec. 3. (a) Notwithstanding Article 1.33B of this code, on or before September 1 of each year, the commissioner shall hold a rulemaking hearing under Chapter 2001, Government Code, to determine the percentage of equitable across-the-board reductions in insurance rates required of insurers writing the lines and sublines of liability coverage described by Section 2(c) of this article. (b) Not later than October 1, 1995, the commissioner shall issue rules mandating the appropriate rate reductions to rates for the lines and sublines of liability coverage described by Section 2(c) of this article and developed without consideration of the effect of the legislation described by Section 1 of this article. (c) The commissioner may set the percentage of the rate reduction by line and subline within any of the coverages described by Section 2(c) of this article and may set a percentage either above or below the percentages listed in Subsection (e) of this section. The commissioner's order establishing the rate reductions must be based on the evidence adduced at the rulemaking hearing. It is the intent of the legislature that the rates resulting from the rate reductions imposed by this article be reasonable, adequate, not unfairly discriminatory, nonconfiscatory, and not excessive. (d) The rate reductions adopted under this section are applicable to each policy or coverage issued, issued for delivery, or renewed on and after January 1, 1996, and to each policy or coverage issued, issued for delivery, or renewed on and after the 90th day after the date of each subsequent rule adopted under Subsection (a) of this section. (e) Notwithstanding Subsection (d) of this section, if, on January 1, 1996, the commissioner has not issued an order establishing rate reductions for a line or subline under this section, the following reductions, as measured from the base rates in effect on April 1, 1995, apply to each insurer for each affected policy or coverage issued, issued for delivery, or renewed on and after January 1, 1996: LINE or SUBLINE PERCENTAGE REDUCTION (1) professional liability insurance for physician, other health care provider, or hospital: 30% (2) commercial liability insurance for damages arising out of the manufacture, design, importation, distribution, packaging, labeling, lease, or sale of a product or for completed operations coverage: 25% (3) private passenger automobile liability insurance for bodily injury: 15% (4) commercial automobile liability insurance for bodily injury: 20% (5) private umbrella and excess liability insurance: 20% (6) the liability portion of commercial multi-peril insurance: 10% (7) the liability portion of homeowner's, farm and ranch owner's, and renter's insurance: 5% (8) the employer's liability portion of workers' compensation insurance: 10% (9) all lines and sublines of other commercial liability insurance: 15% (f) Any rule or order of the commissioner which determines, approves, or sets a rate reduction under this section and is appealed or challenged shall be and remain in effect during the pendency of the appeal or challenge. During the pendency of the appeal or challenge, an insurer shall use the rate reduction provided in the order being appealed or challenged. Such rate reduction shall be lawful and valid during such appeal or challenge. (g) The commissioner shall consider the effect of the legislation described by Section 1 of this article in determining rates under Section 5 of Article 21.81 of this code.
Administrative relief
Sec. 4. (a) Except as provided by Subsection (b) of this section, a rate filed as to a line or subline of insurance coverage affected by this article on and after January 1, 1996, and a rate filed on and after the 90th day following the effective date of a subsequent rule adopted under Section 3(a) of this article, shall reflect the rate reduction imposed by Section 3 of this article. The commissioner shall disapprove a rate, subject to the procedures established by Section 7, Article 5.13-2, of this code if the commissioner finds that the filed rate does not reflect that reduction. (b) The commissioner is not required to disapprove a filed rate that reflects less than the full amount of the rate reduction imposed by Section 3 of this article if: (1) the commissioner determines that based on clear and convincing evidence that an insurer will be financially unable in a particular line of insurance to continue writing that line; or (2) the rate reduction required by Section 3 of this article would likely result in placing the insurer in a hazardous financial condition described by Section 2, Article 1.32, of this code.
Declaration of inapplicability to certain lines
Sec. 5. The commissioner shall, by order, declare this article inapplicable to a line or subline of insurance otherwise subject to this article at the time the commissioner finds, based on actuarially credible data, that rates in that line or subline reflect the actual experience under the legislation described by Section 1 of this article.
Duration of reduction
Sec. 6. Unless the commissioner grants relief under Section 4 or 5 of this article, each rate resulting from the reduction required under Section 3 of this article remains in effect until January 1, 2001.
Modification
Sec. 7. The commissioner may, by bulletin or directive, based on the evidence accumulated by the commissioner before the bulletin or directive is issued, modify a rate reduction mandated by the commissioner under this article if a final, unappealable judgment of a court with appropriate jurisdiction stays the effect of, enjoins, or otherwise modifies or declares unconstitutional any of the legislation described by Section 1 of this article on which the commissioner based the rate reduction.
Hearings and orders
Sec. 8. Notwithstanding Article 1.33B of this code, a rulemaking hearing under this article shall be held before the commissioner or the commissioner's designee. Article 1.09-5 of this code does not apply to hearings under this article. The rulemaking procedures established by this section do not apply to any other rate promulgation proceeding.
Pending rate matters
Sec. 9. A rate filed pursuant to a commissioner's order issued before May 1, 1995, is not subject to the rate reductions required by this article before January 1, 1996.
Recommendations to legislature
Sec. 10. The commissioner shall assemble information, conduct hearings, and take other appropriate measures to assess and evaluate changes in the marketplace resulting from the implementation of this article and to report findings and recommendations to the legislature. Added by Acts 1995, 74th Leg., ch. 984, Sec. 28, eff. Sept. 1, 1995.
SUBCHAPTER S. REFUND
Art. 5.144. REFUND OF EXCESSIVE OR DISCRIMINATORY PREMIUM; DISCOUNT.
Article repealed effective April 1, 2007
(a) In this article: (1) "Insurer" means an insurance company, reciprocal or interinsurance exchange, mutual insurance company, capital stock company, county mutual insurance company, Lloyd's plan, or other legal entity authorized to write residential property insurance or personal automobile insurance in this state. The term includes an affiliate, as described by this code, if that affiliate is authorized to write residential property insurance. The term does not include: (A) the Texas Windstorm Insurance Association under Article 21.49 of this code; or (B) the FAIR Plan Association under Article 21.49A of this code. (2) "Personal automobile insurance" means motor vehicle insurance coverage for the ownership, maintenance, or use of a private passenger, utility, or miscellaneous type motor vehicle, including a motor home, trailer, or recreational vehicle, that is: (A) owned or leased by an individual or individuals; and (B) not primarily used for the delivery of goods, materials, or services, other than for use in farm or ranch operations. (3) "Residential property insurance" means insurance coverage against loss to real or tangible personal property at a fixed location that is provided through a homeowners policy, including a tenants policy, a condominium owners policy, or a residential fire and allied lines policy. (b) Except as provided by Subsection (d) of this article, if the commissioner determines that an insurer has charged a rate for personal automobile insurance or residential property insurance that is excessive or unfairly discriminatory, as described by Article 5.13-2 of this code, the commissioner may order the insurer to: (1) issue a refund of the excessive or unfairly discriminatory portion of the premium, plus interest on that amount, directly to each affected policyholder if the amount of that portion of the premium is at least 7.5 percent of the total premium charged for the coverage; or (2) if the amount of that portion of the premium is less than 7.5 percent: (A) provide each affected policyholder who renews the policy a future premium discount in the amount of the excessive or unfairly discriminatory portion of the premium, plus interest on that amount; and (B) provide each affected policyholder who does not renew or whose coverage is otherwise terminated a refund in the amount described by Subdivision (1) of this subsection.
Text of subsec. (b-1) as added by Acts 2005, 79th Leg., ch. 291.
(b-1) The rate for interest assessed under Subsection (b) of this article is the lesser of 18 percent or the sum of six percent and the prime rate for the calendar year in which the commissioner's order finding that the rate is excessive or unfairly discriminatory is issued. For purposes of this subsection, the prime rate is the prime rate as published in The Wall Street Journal for the first day of the calendar year that is not a Saturday, Sunday, or legal holiday. The period for the refund and interest begins on the date the department first provides the insurer with formal written notice that the insurer's filed rate is excessive or unfairly discriminatory, and interest continues to accrue until the refund is paid. An insurer may not be required to pay any interest penalty if the insurer prevails in an appeal of the commissioner's order under Subchapter D, Chapter 36, of this code.
Text of subsec. (b-1) as added by Acts 2005, 79th Leg., ch. 899
(b-1) The rate for interest assessed under Subsection (b) of this article is the prime rate for the calendar year in which the order is issued plus six percent. For purposes of this subsection, the prime rate is the prime rate as published in The Wall Street Journal for the first day of the calendar year that is not a Saturday, Sunday, or legal holiday. The interest accrues beginning on the date on which the department first provides the insurer with formal written notice that the insurer's filed rate is excessive or unfairly discriminatory, as determined by the commissioner, and continues to accrue until the refund is paid. An insurer may not be required to pay any interest penalty or refund if the insurer prevails in a final appeal of the commissioner's order under Subchapter D, Chapter 36 of this code.
Text of subsec. (b-2) as added by Acts 2005, 79th Leg., ch. 291.
(b-2) An insurer may not claim a premium tax credit to which the insurer is otherwise entitled unless the insurer complies with Subsection (b) of this article.
Text of subsec. (b-2) as added by Acts 2005, 79th Leg., ch. 899.
(b-2) An insurer may not claim a premium tax credit to which the insurer is otherwise entitled unless the insurer has complied with this article. (c) On or before the 20th day after the date an order is issued under this article, an insurer may request a rate hearing to be conducted by the State Office of Administrative Hearings to determine whether the rate that is subject to the order is excessive and discriminatory. The office of public insurance counsel may participate in a hearing conducted under this subsection and present evidence at the hearings. (d) After completion of the rate hearing under Subsection (c) of this section, the administrative law judge shall prepare a proposal for decision under Section 40.058 of this code and remand the case to the commissioner recommending: (1) that the commissioner affirm the commissioner's order; or (2) additional review of the order by the commissioner to be completed not later than the 10th day after the date the commissioner receives the administrative law judge's proposal, that the parties enter into negotiations, or that the commissioner take other appropriate action with respect to the order within a time period specified by the administrative law judge. (e) An action or failure to act of the commissioner under Subsection (d) of this section is subject to appeal under Subchapter D, Chapter 36 of this code. (f) This article does not apply to rates for personal automobile insurance or residential property insurance for which an insurer has obtained prior approval of those rates under Section 5A, Article 5.13-2 of this code. (g) Subsection (b) of this section applies prospectively to a rate filed on or after the effective date of S.B. No. 14, Acts of the 78th Legislature, Regular Session, 2003. Added by Acts 2003, 78th Leg., ch. 206, Sec. 1.01, eff. June 11, 2003. Amended by Acts 2005, 79th Leg., ch. 291, Sec. 1, eff. Sept. 1, 2005; Acts 2005, 79th Leg., ch. 899, Sec. 1, 16.01, eff. Aug. 29, 2005.
SUBCHAPTER T. POLICY FORMS FOR CERTAIN LINES
Art. 5.145. POLICY FORMS FOR PERSONAL AUTOMOBILE INSURANCE COVERAGE AND RESIDENTIAL PROPERTY INSURANCE COVERAGE.
Article repealed effective April 1, 2007
Definitions
Sec. 1. In this article: (1) "Insurer" means an insurance company, reciprocal or interinsurance exchange, mutual insurance company, capital stock company, county mutual insurance company, Lloyd's plan, or other legal entity authorized to write personal automobile insurance or residential property insurance in this state. The term includes an affiliate, as described by this code, if that affiliate is authorized to write and is writing personal automobile insurance or residential property insurance in this state. The term does not include: (A) the Texas Windstorm Insurance Association under Article 21.49 of this code; (B) the FAIR Plan Association under Article 21.49A of this code; or (C) the Texas Automobile Insurance Plan Association under Article 21.81 of this code. (2) "Personal automobile insurance" means motor vehicle insurance coverage for the ownership, maintenance, or use of a private passenger, utility, or miscellaneous type motor vehicle, including a motor home, trailer, or recreational vehicle, that is: (A) owned or leased by an individual or individuals; and (B) not primarily used for the delivery of goods, materials, or services, other than for use in farm or ranch operations. (3) "Residential property insurance" means insurance coverage against loss to residential real property at a fixed location, or tangible personal property, that is provided in a homeowners policy, including a tenants policy, a condominium owners policy, or a residential fire and allied lines policy.
Regulation of policy forms and endorsements
Sec. 2. (a) Notwithstanding any other provision in this code and except as provided by this section, an insurer is governed by the provisions of Section 8, Article 5.13-2 of this code, relating to policy forms and endorsements for personal automobile insurance and residential property insurance. (b) An insurer may continue to use the policy forms and endorsements promulgated, approved, or adopted under Articles 5.06 and 5.35 of this code on notification to the commissioner in writing that the insurer will continue to use those forms.
Requirements for forms; plain language requirement
Sec. 3. (a) Each form filed under this article must comply with applicable state and federal law. (b) Each form for a policy of personal automobile insurance must provide the coverages mandated under Articles 5.06-1 and 5.06-3 of this code unless the coverages are rejected by the named insured in the manner provided by those articles. (c) A form may not be used if it is not in plain language. For the purposes of this section, a form is written in plain language if it achieves the minimum score established by the commissioner on the Flesch reading ease test or an equivalent test selected by the commissioner or, at the option of the commissioner, if it conforms to the language requirements in a National Association of Insurance Commissioners model act relating to plain language. This section does not apply to policy language that is mandated by state or federal law.
Personal automobile insurance
Sec. 4. (a) A contract or agreement that is not written into the application for insurance coverage and the personal automobile insurance policy: (1) is void and of no effect; and (2) violates this article and Subchapter A of this chapter. (b) A contract or agreement described by Subsection (a) of this section constitutes grounds for the revocation of the certificate of authority of an insurer to write personal automobile insurance in this state.
Public insurance counsel
Sec. 5. Notwithstanding Article 1.35A of this code, the office of public insurance counsel may submit written comments to the commissioner and otherwise participate regarding individual company filings made under Article 5.13-2 of this code.
Rulemaking
Sec. 6. The commissioner may adopt reasonable and necessary rules to implement this article. Added by Acts 2003, 78th Leg., ch. 206, Sec. 2.01, eff. June 11, 2003.
SUBCHAPTER U. RATING TERRITORIES FOR CERTAIN LINES
Art. 5.171. RATING TERRITORIES.
Article repealed effective April 1, 2007
Notwithstanding any other provision of this code, an insurer, in writing residential property or personal automobile insurance, may not use rating territories that subdivide a county unless: (1) the county is subdivided; and (2) the rate for any subdivisions within that county is not greater than 15 percent higher than the rate used in any other subdivisions in the county by that insurer, except that the commissioner may by rule allow a greater rate difference. Added by Acts 2003, 78th Leg., ch. 206, Sec. 1.01, eff. June 11, 2003. Amended by Acts 2005, 79th Leg., ch. 291, Sec. 2, eff. Sept. 1, 2005. Art. 5.172. APPLICATION TO CERTAIN INSURERS.
Article repealed effective April 1, 2007
Notwithstanding Sections 912.002, 941.003, 942.003, or any other provision of this code, this subchapter does not apply to a county mutual insurance company, a Lloyd's plan, and a reciprocal or interinsurance exchange, before January 1, 2004. Added by Acts 2003, 78th Leg., ch. 206, Sec. 1.01, eff. June 11, 2003.

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