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

INSURANCE CODE - NOT CODIFIED

CHAPTER 7. SURETY AND TRUST COMPANIES


	Art. 7.01. VENUE OF SUIT ON BOND.                                              

Article repealed effective April 1, 2007
	If any suit shall be instituted upon any bond or obligation of 
any insurance company licensed in this State and having authority 
to act as surety and guarantor of the fidelity of employees, 
trustees, executors, administrators, guardians or others appointed 
to, or assuming the performance of any trust, public or private, 
under appointment of any court or tribunal, or under contract 
between private individuals or corporations, or upon any bond or 
bonds that may be required to be filed in any judicial proceedings, 
or to guarantee any contract or undertaking between individuals, or 
between private corporations, or between individuals or private 
corporations and the State and municipal corporations or counties 
or between corporations and individuals, or on any bond or bonds 
that may be required of any state official, district official, 
county official or official of any school district or of any 
municipality, the proper court of the county wherein said bond is 
filed shall have jurisdiction of said cause.  Service therein shall 
be had as provided by Section 2, 3, or 4, Article 1.36 of this code, 
as applicable.  Such guaranty, fidelity and surety companies shall 
be deemed resident of the counties wherever they may do business, 
and the doing or performing of any business in any county shall be 
deemed an acceptance of the provisions of this Act.

Added by Acts 1959, 56th Leg., 2nd C.S., p. 159, ch. 39, Sec. 1.              

Amended by Acts 1987, 70th Leg., ch. 46, Sec. 3, eff. Sept. 1, 1987.          


	Art. 7.02. WITHDRAWAL OF UNNECESSARY DEPOSITS.                                 

Article repealed effective April 1, 2007
	When two or more companies authorized to write fidelity, 
guaranty and surety insurance in the State of Texas merge or 
consolidate, and, incident to such merger or consolidation, enter 
into a total reinsurance contract by which the merged or ceding 
company is dissolved, and its assets acquired and liabilities 
assumed by the new or surviving company, the Commissioner of 
Insurance, upon finding that the contracting companies have on 
deposit with the comptroller two or more deposits made for the same 
or similar purposes under either former Article 7.03 (repealed by 
Acts 1957, 55th Legislature, Regular Session, Chapter 388, p. 1162) 
or Article 8.05 of the Insurance Code of Texas, shall authorize the 
comptroller to retain for a single purpose only the deposit of 
greater or greatest amount and value and to permit the new or 
surviving reinsuring company, upon proper showing that there is 
such duplication of deposits and that the new or surviving company 
is the owner thereof, to withdraw any or all duplicate or excessive 
deposits.

Added by Acts 1971, 62nd Leg., p. 1904, ch. 569, Sec. 1, eff. June 1, 
1971. 

Amended by Acts 1997, 75th Leg., ch. 1423, Sec. 11.28, eff. Sept. 1, 
1997.  


	Art. 7.19-1. BOND OF SURETY COMPANY.                                           

Article repealed effective April 1, 2007
	(a) Whenever any bond, undertaking, recognizance or other 
obligation is, by law or the charter, ordinances, rules and 
regulations of a municipality, board, body, organization, court, 
judge or public officer, required or permitted to be made, given, 
tendered or filed, and whenever the performance of any act, duty or 
obligation, or the refraining from any act, is required or 
permitted to be guaranteed, such bond, undertaking, obligation, 
recognizance or guarantee may be executed by a surety company duly 
authorized to do business in this state;  and, except as provided by 
Subsection (b), (c), or (d) of this section, such execution by such 
company of such bond, undertaking, obligation, recognizance or 
guarantee shall be in all respects a full and complete compliance 
with every law, charter, rule or regulation that such bond, 
undertaking, obligation, recognizance or guarantee shall be 
executed by one surety or by one or more sureties, or that such 
sureties shall be residents, or householders, or freeholders, or 
either, or both, or possess any other qualification and all courts, 
judges, heads of departments, boards, bodies, municipalities, and 
public officers of every character shall accept and treat such 
bond, undertaking, obligation, recognizance or guarantee when so 
executed by such company, as conforming to, and fully and 
completely complying with, every requirement of every such law, 
charter, ordinance, rule or regulation.
	Provided, however, that any municipality may require in any 
specifications for work or supplies, on which sealed bids are 
required, that any corporate surety tender shall designate, in a 
manner satisfactory to it, an agent resident in the county of such 
municipality to whom any requisite notices may be delivered and on 
whom service of process may be had in matters arising out of such 
suretyship.
	(b)  If any bond, undertaking, recognizance, or other 
obligation described in Subsection (a) of this section is in an 
amount in excess of 10 percent of the surety company's capital and 
surplus, the municipality, board, body, organization, court, 
judge, or public officer may require, as a condition to accepting 
the bond, undertaking, obligation, recognizance, or other 
obligation, written certification that the surety company has 
reinsured the portion of the risk that exceeds 10 percent of the 
surety company's capital and surplus with one or more reinsurers 
who are duly authorized, accredited, or trusteed to do business in 
this state.  For the purposes of this subsection, the amount 
reinsured by any reinsurer may not exceed 10 percent of the 
reinsurer's capital and surplus.  The State Board of Insurance 
shall furnish, on request, the amount of the allowed capital and 
surplus as of the date of the last annual statutory financial 
statement for a surety company or reinsurer authorized and admitted 
to do business in this state.
	(c)  A bond that is made, given, tendered, or filed under 
Chapter 53, Property Code, or Chapter 2253, Government Code, may be 
executed only by a surety company that is authorized and admitted to 
write surety bonds in this state.  If the amount of the bond exceeds 
$100,000, the surety must also:
	(1)  hold a certificate of authority from the United States 
secretary of the treasury to qualify as a surety on obligations 
permitted or required under federal law;  or
	(2)  have obtained reinsurance for any liability in excess of 
$100,000 from a reinsurer that is authorized and admitted as a 
reinsurer in this state and is the holder of a certificate of 
authority from the United States secretary of the treasury to 
qualify as a surety or reinsurer on obligations permitted or 
required under federal law.
	(d)  In determining whether the surety on the bond or the 
reinsurer holds a certificate of authority from the United States 
secretary of the treasury, a party may conclusively rely on the list 
of companies holding certificates of authority as acceptable 
sureties on federal bonds and as acceptable reinsuring companies 
published in the Federal Register by the United States Department 
of the Treasury covering the date on which the bond was executed.  A 
purchaser, insurer of title, or lender acquiring or insuring an 
interest or title to real property may also conclusively rely on and 
is protected by a statement on a recorded bond or a sworn statement 
by the surety that is recorded and refers to the specific recorded 
bond and that states that, at the time the bond was executed, the 
surety:
	(1)  was a holder of a certificate of authority from the 
United States secretary of the treasury to qualify as a surety on 
obligations permitted or required under federal law;  or
	(2)  had reinsured any liability in excess of $100,000 by a 
reinsurer holding a certificate of authority described by 
Subdivision (1) of this subsection.

Acts 1959, 56th Leg., p. 146, ch. 87, Sec. 1.                                 

Amended by Acts 1991, 72nd Leg., ch. 242, Sec. 11.28, eff. Sept. 1, 
1991.  Subsec. (b) amended by Acts 1991, 72nd Leg., 2nd C.S., ch. 
12, Sec. 5.01, eff. Jan. 1, 1992;  Subsec. (a) amended by and 
Subsecs. (c), (d) added by Acts 1997, 75th Leg., ch. 1132, Sec. 1, 
eff. Sept. 1, 1997.

Article 7.19-1 was not enacted as part of the Insurance Code of 
1951.       


	Art. 7.20. CONSTRUCTION PAYMENT BOND OF SURETY COMPANY;  
PROMPT PAYMENT.     

Article repealed effective April 1, 2007
	                                                                               

Definitions
	Sec. 1. In this article:                                                       
	(1)  "Claimant" means a person directly entitled to payment 
under a construction payment bond.
	(2)  "Construction payment bond" means a surety agreement or 
obligation issued to guarantee or assure payment by a principal 
obligor for work performed or materials supplied or specially 
fabricated for a public or private construction project.
	(3)  "Notice of claim" means a written notification by a 
claimant who makes a claim for payment from the surety company.  The 
term does not include a routine statutory notice required by 
Section 53.056(b), 53.057, 53.058, 53.252(b), or 53.253, Property 
Code, or Section 2253.047, Government Code.
	(4)  "Surety company" means a licensed surety or guaranty 
company that executes and delivers a construction payment bond as a 
surety for a principal obligor.

Acknowledgment and investigation of claim
	Sec. 2. (a) A surety company that has issued a construction 
payment bond shall, not later than the 15th day after the date of 
receipt of notice of claim under the bond:
	(1)  acknowledge receipt of the claim;                                         
	(2)  begin any review or investigation necessary to 
determine whether the surety company is obligated to satisfy the 
claim under the bond;  and
	(3)  request from the claimant each document, item of 
information, accounting, statement, or form that the surety company 
then reasonably believes will be required from the claimant.
	(b)  Nothing in this article exempts a claimant from 
compliance with any applicable statutory or contractual notice 
requirement.
	(c)  If the construction payment bond provides an address of 
the surety company to which claims should be submitted, the notice 
of claim is effective on receipt of the notice at that address.

Acceptance or rejection of claim
	Sec. 3. (a) Except as provided by Subsection (c) of this 
section, a surety company shall notify a claimant in writing of the 
acceptance or rejection of a claim not later than the 30th day after 
the date the surety company receives all documents, items of 
information, accountings, statements, and forms requested by the 
surety company as provided by Section 2 of this article.
	(b)  If the surety company rejects all or part of the claim, 
the notice required by Subsection (a) of this section must state in 
specific terms the reasons for the rejection known to the surety 
company at that time.
	(c)  If the surety company is unable to accept or reject the 
claim within the period specified by Subsection (a) of this 
section, the surety company shall provide written notice to the 
claimant, not later than the date specified under Subsection (a), 
that the surety company is unable to accept or reject the claim 
within that period.  The notice provided under this subsection 
must:
	(1)  state the reasons for which the surety company needs 
additional time to accept or reject the claim;  and
	(2)  include a request for any additional information 
reasonably needed by the surety company to process the claim.
	(d)  Not later than the 30th day after the date a surety 
company notifies a claimant under Subsection (c) of this section, 
the surety company shall notify the claimant in writing of the 
acceptance or rejection of the claim.  If the surety company rejects 
all or part of the claim, the surety company shall state in specific 
terms the reasons for the rejection known to the surety company at 
that time.
	(e)  In addition to any other contractual or statutory basis 
for denying a claim, the surety company may reject all or any part 
of a claim:
	(1)  that is the subject of a legitimate dispute between the 
principal obligor and the claimant;  or
	(2)  for which the claimant has failed to provide supporting 
documents or information reasonably requested by the surety 
company.
	(f)  The time limits provided by this section and Section 2 
of this article may be varied by any statute requiring a 
construction payment bond.
	(g)  This section does not preclude a surety company from 
asserting any defense in any action brought by a claimant against 
the construction payment bond if a good faith effort is made to 
inform the claimant in accordance with this section of reasons for 
rejecting all or part of the claim.

Payment of claim
	Sec. 4. (a) If a surety company notifies a claimant under 
Section 3 of this article that the surety company accepts a claim or 
part of a claim, the surety company shall pay the claim not later 
than the 15th day after the date of the notice.
	(b)  If payment of the claim or part of the claim is 
conditioned on the execution of a document or performance of an act 
by the claimant, the surety company shall pay the claim not later 
than the seventh day after the date the surety company receives the 
executed document or evidence that the act has been performed.
	(c)  For purposes of this section, payment of a claim occurs 
when the surety company places the surety company's check or draft 
in the United States mail properly addressed to the claimant or the 
claimant's representative.

Rules
	Sec. 5. The commissioner may adopt rules enforcing this 
article in cases in which a surety company violates this article as 
a general business practice.

Construction
	Sec. 6. (a) This article shall be construed to encourage 
prompt payment of just claims made under construction payment bonds 
of surety companies.  This article does not foreclose any other 
remedy available to a claimant by law or contract.
	(b)  This article may not be construed to:                                     
	(1)  create a private cause of action;                                         
	(2)  be a precondition to judicially enforcing obligations 
under a construction payment bond;
	(3)  diminish any other obligation of a surety company that 
exists by law;  or
	(4)  prohibit a surety company from asserting a defense 
against a construction payment bond claim in a proceeding to 
enforce a claim.

Modification prohibited
	Sec. 7. Any term contained in a construction payment bond 
that is inconsistent with this article is void.

Added by Acts 2001, 77th Leg., ch. 470, Sec. 1, eff. Sept. 1, 2001.           


	Art. 7.20-1. BAIL BOND CERTIFICATES ISSUED BY AUTOMOBILE 
CLUBS;  SURETIES.   

Article repealed effective April 1, 2007
	Any insurance company which has qualified to transact 
fidelity and surety insurance business in this state may, in any 
year, become surety in an amount not to exceed $200 with respect to 
each bail bond certificate issued in such year by an automobile 
club, duly licensed to transact business within this state, or by 
any truck and bus association incorporated in this state.  Bail bond 
certificate means a printed card or other certificate issued by an 
automobile club, authorized to transact business within this state, 
or by any truck and bus association incorporated in this state to 
any of its members, which is signed by such member, and contains a 
printed statement that a fidelity and surety company authorized to 
do business in this state guarantees the appearance of the person 
whose signature appears on the card or certificate, and that such 
company will, in the event of the failure of said person to appear 
in court at the time of trial, pay any fine or forfeiture imposed on 
such person in an amount not to exceed $200.

Acts 1969, 61st Leg., p. 2033, ch. 697, Sec. 1, eff. Sept. 1, 1969.           

Article 7.20-1 was not enacted as part of the Insurance Code of 
1951.