Bill Text: TX HB3074 | 2019-2020 | 86th Legislature | Introduced
Bill Title: Relating to the coverage of damage from tornadoes and wildfires by the Texas Windstorm Insurance Association.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced - Dead) 2019-03-13 - Referred to Insurance [HB3074 Detail]
Download: Texas-2019-HB3074-Introduced.html
86R14231 PMO-D | ||
By: King of Hemphill | H.B. No. 3074 |
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relating to the coverage of damage from tornadoes and wildfires by | ||
the Texas Windstorm Insurance Association. | ||
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: | ||
SECTION 1. Section 2210.001, Insurance Code, is amended to | ||
read as follows: | ||
Sec. 2210.001. PURPOSE. The primary purpose of the Texas | ||
Windstorm Insurance Association is the provision of an adequate | ||
market for windstorm and hail insurance in the seacoast territory | ||
of this state and tornado insurance and wildfire insurance | ||
statewide. The legislature finds that the provision of adequate | ||
windstorm and hail insurance, tornado insurance, and wildfire | ||
insurance is necessary to the economic welfare of this state, and | ||
without that insurance, the orderly growth and development of this | ||
state would be severely impeded. This chapter provides a method by | ||
which adequate windstorm and hail insurance may be obtained in | ||
certain designated portions of the seacoast territory of this state | ||
and tornado insurance and wildfire insurance may be obtained | ||
statewide. The association is intended to serve as a residual | ||
insurer of last resort for windstorm and hail insurance in the | ||
seacoast territory and tornado insurance and wildfire insurance | ||
statewide. The association shall: | ||
(1) function in such a manner as to not be a direct | ||
competitor in the private market; and | ||
(2) provide windstorm and hail insurance coverage, | ||
tornado insurance coverage, and wildfire insurance coverage to | ||
those who are unable to obtain [ |
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market. | ||
SECTION 2. Section 2210.003, Insurance Code, is amended by | ||
amending Subdivision (6) and adding Subdivisions (14), (15), and | ||
(16) to read as follows: | ||
(6) "Insurance" means: | ||
(A) Texas windstorm and hail insurance; | ||
(B) tornado insurance; and | ||
(C) wildfire insurance. | ||
(14) "Tornado insurance" means insurance against: | ||
(A) direct loss to insurable property incurred as | ||
a result of a tornado, as those terms are defined and limited in | ||
policies and forms approved by the department; and | ||
(B) indirect losses resulting from the direct | ||
loss. | ||
(15) "Wildfire" means an uncontrolled blaze fueled by | ||
weather, wind, and dry underbrush, trees, grasses, and other | ||
flammable material. | ||
(16) "Wildfire insurance" means insurance against: | ||
(A) direct loss to insurable property incurred as | ||
a result of wildfire, as those terms are defined and limited in | ||
policies and forms approved by the department; and | ||
(B) indirect losses resulting from the direct | ||
loss. | ||
SECTION 3. Sections 2210.004(a), (b), (c), and (d), | ||
Insurance Code, are amended to read as follows: | ||
(a) Except as provided by Subsection (h), for purposes of | ||
this chapter and subject to this section, "insurable property" | ||
means immovable property at a fixed location in a catastrophe area | ||
or corporeal movable property located in that immovable property, | ||
as designated in the plan of operation, that is determined by the | ||
association according to the criteria specified in the plan of | ||
operation to be in an insurable condition against windstorm and | ||
hail, tornado, and wildfire, as determined by normal underwriting | ||
standards. The term includes property described by Section | ||
2210.209. | ||
(b) A structure located in a catastrophe area, construction | ||
of which began on or after the 30th day after the date of | ||
publication of the plan of operation, that is not built in | ||
compliance with building specifications set forth in the plan of | ||
operation or continued in compliance with those specifications, | ||
does not constitute an insurable risk for purposes of windstorm and | ||
hail insurance, tornado insurance, or wildfire insurance except as | ||
otherwise provided by this chapter. | ||
(c) A structure, or an addition to a structure, that is | ||
constructed in conformity with plans and specifications that comply | ||
with the specifications set forth in the plan of operation at the | ||
time construction begins may not be declared ineligible for | ||
windstorm and hail insurance, tornado insurance, or wildfire | ||
insurance as a result of subsequent changes in the building | ||
specifications set forth in the plan of operation. | ||
(d) Except as otherwise provided by this section, if repair | ||
of damage to a structure involves replacement of items covered in | ||
the building specifications set forth in the plan of operation, the | ||
repairs must be completed in a manner that complies with those | ||
specifications for the structure to continue to be insurable | ||
property for windstorm and hail insurance, tornado insurance, and | ||
wildfire insurance. | ||
SECTION 4. Sections 2210.005(a) and (c), Insurance Code, | ||
are amended to read as follows: | ||
(a) After at least 10 days' notice and a hearing, the | ||
commissioner may designate, with respect to windstorm and hail | ||
insurance, an area of the seacoast territory of this state as a | ||
catastrophe area or, with respect to tornado insurance and wildfire | ||
insurance, any area of this state as a catastrophe area if the | ||
commissioner determines, unless such a determination results in an | ||
adverse impact to the exposure of the association, that windstorm | ||
and hail insurance, tornado insurance, or wildfire insurance is not | ||
reasonably available to a substantial number of the owners of | ||
insurable property located in the area [ |
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area [ |
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resulting from windstorms, [ |
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wildfires. | ||
(c) If the association determines that windstorm and hail | ||
insurance, tornado insurance, or wildfire insurance is no longer | ||
reasonably unavailable to a substantial number of owners of | ||
insurable property in a territory designated as a catastrophe area, | ||
the association may request in writing that the commissioner revoke | ||
the designation. After at least 10 days' notice and a hearing, but | ||
not later than the 30th day after the date of the hearing, the | ||
commissioner shall: | ||
(1) approve the request and revoke the designation; or | ||
(2) reject the request. | ||
SECTION 5. Section 2210.015(a), Insurance Code, is amended | ||
to read as follows: | ||
(a) Each biennium, the department shall conduct a study of | ||
market incentives to promote participation in the voluntary | ||
windstorm and hail insurance, tornado insurance, and wildfire | ||
insurance markets [ |
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state. The study must address as possible incentives the mandatory | ||
or voluntary issuance of windstorm and hail insurance, tornado | ||
insurance, and wildfire insurance in conjunction with the issuance | ||
of a homeowners policy [ |
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SECTION 6. Section 2210.053(b), Insurance Code, is amended | ||
to read as follows: | ||
(b) The department may develop programs to improve the | ||
efficient operation of the association, including a program for | ||
approving policy forms under Section 2301.010 and a program | ||
designed to create incentives for insurers to write windstorm and | ||
hail insurance, tornado insurance, and wildfire insurance | ||
voluntarily to cover property located in a catastrophe area, | ||
especially property located on the barrier islands of this state. | ||
SECTION 7. Section 2210.102(b), Insurance Code, is amended | ||
to read as follows: | ||
(b) Three members must be representatives of the insurance | ||
industry who actively write and renew tornado insurance or wildfire | ||
insurance or write and renew windstorm and hail insurance in the | ||
first tier coastal counties. | ||
SECTION 8. Section 2210.151, Insurance Code, is amended to | ||
read as follows: | ||
Sec. 2210.151. ADOPTION OF PLAN OF OPERATION. With the | ||
advice of the board of directors, the commissioner by rule shall | ||
adopt the plan of operation to provide Texas windstorm and hail | ||
insurance, tornado insurance, and wildfire insurance in a | ||
catastrophe area. | ||
SECTION 9. Section 2210.152(a), Insurance Code, is amended | ||
to read as follows: | ||
(a) The plan of operation must: | ||
(1) provide for the efficient, economical, fair, and | ||
nondiscriminatory administration of the association; and | ||
(2) include: | ||
(A) a plan for the equitable assessment of the | ||
members of the association to defray losses and expenses; | ||
(B) underwriting standards; | ||
(C) procedures for accepting and ceding | ||
reinsurance; | ||
(D) procedures for obtaining and repaying | ||
amounts under any financial instruments authorized under this | ||
chapter; | ||
(E) procedures for determining the amount of | ||
insurance to be provided to specific risks; | ||
(F) time limits and procedures for processing | ||
applications for insurance; | ||
(G) a requirement that a nonresident agent | ||
licensed under Section 4056.052 may not offer or sell a Texas | ||
windstorm and hail insurance policy, tornado insurance policy, or | ||
wildfire insurance policy under this chapter unless the nonresident | ||
agent's state of residence authorizes a resident agent licensed in | ||
this state to act in the nonresident agent's state as an agent for | ||
that state's residual insurer of last resort for windstorm and hail | ||
insurance, tornado insurance, or wildfire insurance; and | ||
(H) other provisions as considered necessary by | ||
the department to implement the purposes of this chapter. | ||
SECTION 10. Sections 2210.202(a) and (b), Insurance Code, | ||
are amended to read as follows: | ||
(a) A person who has an insurable interest in insurable | ||
property may apply to the association for insurance coverage | ||
provided under the plan of operation and an inspection of the | ||
property, subject to any rules established by the board of | ||
directors and approved by the commissioner. The association shall | ||
make insurance available to each applicant in the catastrophe area | ||
whose property is insurable property but who, after diligent | ||
efforts, is unable to obtain property insurance through the | ||
voluntary market, as evidenced by one declination from an insurer | ||
authorized to engage in the business of, and writing, property | ||
insurance providing windstorm and hail coverage in the first tier | ||
coastal counties or tornado insurance or wildfire insurance in this | ||
state. For purposes of this section, "declination" has the meaning | ||
assigned by the plan of operation and shall include a refusal to | ||
offer coverage for the perils of windstorm and hail, tornado, or | ||
wildfire and the inability to obtain substantially equivalent | ||
insurance coverage for the perils of windstorm and hail, tornado, | ||
or wildfire. Notwithstanding Section 2210.203(c), evidence of one | ||
declination every three calendar years is also required with an | ||
application for renewal of an association policy. | ||
(b) A property and casualty agent must submit an application | ||
for initial insurance coverage on behalf of the applicant on forms | ||
prescribed by the association. The association shall develop a | ||
simplified renewal process that allows for the acceptance of an | ||
application for renewal coverage, and payment of premiums, from a | ||
property and casualty agent or a person insured under this chapter. | ||
An application for initial or renewal coverage must contain: | ||
(1) a statement as to whether the applicant has | ||
submitted or will submit the premium in full from personal funds or, | ||
if not, to whom a balance is or will be due; and | ||
(2) a statement that the agent acting on behalf of the | ||
applicant possesses proof of the declination described by | ||
Subsection (a) and, with respect to windstorm and hail insurance, | ||
proof of flood insurance coverage or unavailability of that | ||
coverage as described by Section 2210.203(a-1). | ||
SECTION 11. Section 2210.203(a-1), Insurance Code, is | ||
amended to read as follows: | ||
(a-1) This subsection applies only to windstorm and hail | ||
insurance and a structure constructed, altered, remodeled, or | ||
enlarged on or after September 1, 2009, and only for insurable | ||
property located in areas designated by the commissioner. | ||
Notwithstanding Subsection (a), if all or any part of the property | ||
to which this subsection applies is located in Zone V or another | ||
similar zone with an additional hazard associated with storm waves, | ||
as defined by the National Flood Insurance Program, and if flood | ||
insurance under that federal program is available, the association | ||
may not issue an insurance policy for initial or renewal coverage | ||
unless evidence that the property is covered by a flood insurance | ||
policy is submitted to the association. An agent offering or | ||
selling a Texas windstorm and hail insurance policy in any area | ||
designated by the commissioner under this subsection shall offer | ||
flood insurance coverage to the prospective insured, if that | ||
coverage is available. | ||
SECTION 12. Section 2210.205(a), Insurance Code, is amended | ||
to read as follows: | ||
(a) A windstorm and hail insurance policy, tornado | ||
insurance policy, or wildfire insurance policy issued by the | ||
association must: | ||
(1) require an insured to file a claim under the policy | ||
not later than the first anniversary of the date on which the damage | ||
to property that is the basis of the claim occurs; and | ||
(2) contain, in boldface type, a conspicuous notice | ||
concerning the resolution of disputes under the policy, including: | ||
(A) the processes and deadlines for appraisal | ||
under Section 2210.574 and alternative dispute resolution under | ||
Section 2210.575; | ||
(B) the binding effect of appraisal under Section | ||
2210.574; and | ||
(C) the necessity of complying with the | ||
requirements of Subchapter L-1 to seek relief, including judicial | ||
relief. | ||
SECTION 13. The heading to Section 2210.207, Insurance | ||
Code, is amended to read as follows: | ||
Sec. 2210.207. WINDSTORM AND HAIL INSURANCE, TORNADO | ||
INSURANCE, AND WILDFIRE INSURANCE: REPLACEMENT COST COVERAGE. | ||
SECTION 14. Sections 2210.207(b) and (e), Insurance Code, | ||
are amended to read as follows: | ||
(b) Subject to any applicable deductibles and the limits for | ||
the coverage purchased by the insured, a windstorm and hail | ||
insurance policy, tornado insurance policy, or wildfire insurance | ||
policy issued by the association may include replacement cost | ||
coverage for one- and two-family dwellings, including | ||
outbuildings, as provided under the dwelling extension coverage in | ||
the policy. | ||
(e) Notwithstanding this chapter or any other law, the | ||
commissioner, after notice and hearing, may adopt rules to: | ||
(1) authorize the association to provide actual cash | ||
value coverage instead of replacement cost coverage on the roof | ||
covering of a building insured by the association; and | ||
(2) establish: | ||
(A) the conditions under which the association | ||
may provide that actual cash value coverage; | ||
(B) the appropriate premium reductions when | ||
coverage for the roof covering is provided on an actual cash value | ||
basis; and | ||
(C) the disclosure that must be provided to the | ||
policyholder, prominently displayed on the face of the windstorm | ||
and hail insurance policy, tornado insurance policy, or wildfire | ||
insurance policy. | ||
SECTION 15. The heading to Section 2210.208, Insurance | ||
Code, is amended to read as follows: | ||
Sec. 2210.208. WINDSTORM AND HAIL INSURANCE, TORNADO | ||
INSURANCE, AND WILDFIRE INSURANCE: COVERAGE FOR CERTAIN INDIRECT | ||
LOSSES. | ||
SECTION 16. Sections 2210.208(a) and (b), Insurance Code, | ||
are amended to read as follows: | ||
(a) Except as provided by Subsections (e) and (f), a | ||
windstorm and hail insurance policy, tornado insurance policy, or | ||
wildfire insurance policy issued by the association for a dwelling, | ||
as that term is defined by the department or a successor to the | ||
department, must include coverage for: | ||
(1) with respect to a windstorm and hail insurance | ||
policy, wind-driven rain damage, regardless of whether an opening | ||
is made by the wind; | ||
(2) loss of use; and | ||
(3) consequential losses. | ||
(b) A windstorm and hail insurance policy, tornado | ||
insurance policy, or wildfire insurance policy issued by the | ||
association for tenant contents of a dwelling or other residential | ||
building must include coverage for loss of use and consequential | ||
losses. | ||
SECTION 17. The heading to Subchapter F, Chapter 2210, | ||
Insurance Code, is amended to read as follows: | ||
SUBCHAPTER F. PROPERTY INSPECTIONS [ |
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SECTION 18. Section 2210.253, Insurance Code, is amended to | ||
read as follows: | ||
Sec. 2210.253. INITIAL INSURER ASSESSMENT[ |
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commercial or residential insurance policy prescribed or approved | ||
by the department that provides coverage for windstorm and hail | ||
damage, including a Texas windstorm and hail insurance policy, or | ||
loss from tornado or wildfire. | ||
(b) The department shall assess each insurer that provides | ||
property insurance in [ |
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with this section. | ||
(c) The total assessment under this section in a state | ||
fiscal year must be in the amount estimated by the department as | ||
necessary to cover the administrative costs of the [ |
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inspection program under Section 2210.251 to be incurred in [ |
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(d) The assessment must be based on each insurer's | ||
proportionate share of the total extended coverage and other allied | ||
lines premium received by all insurers for property insurance in | ||
the state [ |
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preceding the year in which the assessment is made. | ||
(e) The commissioner shall adopt rules to implement the | ||
assessment of insurers under this section. | ||
SECTION 19. Section 2210.2551(b), Insurance Code, is | ||
amended to read as follows: | ||
(b) The commissioner by rule shall establish criteria to | ||
ensure that a person seeking appointment as a qualified inspector | ||
under this subchapter possesses the knowledge, understanding, and | ||
professional competence to perform [ |
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issuance of a certificate of compliance under Section 2210.2515(d) | ||
and to comply with other requirements of this chapter. | ||
SECTION 20. Section 2210.258, Insurance Code, is amended by | ||
adding Subsection (a-1) to read as follows: | ||
(a-1) This section applies only to windstorm and hail | ||
insurance. | ||
SECTION 21. Section 2210.355(g), Insurance Code, is amended | ||
to read as follows: | ||
(g) A commission paid to an agent for a windstorm and hail | ||
insurance policy, tornado insurance policy, or wildfire insurance | ||
policy issued by the association must comply with the commission | ||
structure approved by the commissioner under Section 2210.203(d) | ||
and be reasonable, adequate, not unfairly discriminatory, and | ||
nonconfiscatory. | ||
SECTION 22. Section 2210.359(a), Insurance Code, is amended | ||
to read as follows: | ||
(a) Except as otherwise provided by this subsection, a rate | ||
approved by the commissioner under this subchapter may not reflect | ||
an average rate change that is more than 10 percent higher or lower | ||
than the rate for commercial windstorm and hail insurance, | ||
commercial tornado insurance, or commercial wildfire insurance or | ||
10 percent higher or lower than the rate for noncommercial | ||
windstorm and hail insurance, noncommercial tornado insurance, or | ||
noncommercial wildfire insurance in effect on the date the filing | ||
is made. The rate may not reflect a rate change for an individual | ||
rating class that is 15 percent higher or lower than the rate for | ||
that individual rating class in effect on the date the filing is | ||
made. This subsection does not apply to a rate filed under Sections | ||
2210.351(a)-(d). | ||
SECTION 23. Section 2210.455(b), Insurance Code, is amended | ||
to read as follows: | ||
(b) The catastrophe plan must: | ||
(1) describe the manner in which the association will, | ||
during the period covered by the plan, evaluate losses and process | ||
claims after the following windstorms affecting an area of maximum | ||
exposure to the association: | ||
(A) a windstorm with a four percent chance of | ||
occurring during the period covered by the plan; | ||
(B) a windstorm with a two percent chance of | ||
occurring during the period covered by the plan; and | ||
(C) a windstorm with a one percent chance of | ||
occurring during the period covered by the plan; [ |
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(2) include, if the association does not purchase | ||
reinsurance under Section 2210.453 for the period covered by the | ||
plan, an actuarial plan for paying losses in the event of a | ||
catastrophe with estimated damages of $2.5 billion or more; and | ||
(3) describe the manner in which the association will, | ||
during the period covered by the plan, evaluate losses and process | ||
claims after tornadoes or wildfires affecting an area of maximum | ||
exposure to the association. | ||
SECTION 24. Section 2210.501(a), Insurance Code, is amended | ||
to read as follows: | ||
(a) The board of directors shall propose the maximum | ||
liability limits under a windstorm and hail insurance policy, | ||
tornado insurance policy, and wildfire insurance policy issued by | ||
the association under this chapter. The maximum liability limits | ||
must be approved by the commissioner. | ||
SECTION 25. Section 2210.502(b), Insurance Code, is amended | ||
to read as follows: | ||
(b) An adjustment to the maximum liability limits that is | ||
approved by the commissioner applies to each windstorm and hail | ||
insurance policy, tornado insurance policy, and wildfire insurance | ||
policy delivered, issued for delivery, or renewed on or after | ||
January 1 of the year following the date of the approval. The | ||
indexing of the limits shall adjust for changes occurring on and | ||
after January 1, 1997. | ||
SECTION 26. Section 2210.505(a), Insurance Code, is amended | ||
to read as follows: | ||
(a) Notwithstanding any other law, the association may | ||
issue a windstorm and hail insurance policy, tornado insurance | ||
policy, or wildfire insurance policy that includes coverage for an | ||
amount in excess of a maximum liability limit established under | ||
Sections 2210.501-2210.504 if the association first obtains from a | ||
reinsurer approved by the commissioner reinsurance for the full | ||
amount of policy exposure above that limit. | ||
SECTION 27. Section 2210.571(1), Insurance Code, is amended | ||
to read as follows: | ||
(1) "Association policy" means a windstorm and hail | ||
insurance policy, tornado insurance policy, or wildfire insurance | ||
policy issued by the association. | ||
SECTION 28. Section 2210.601, Insurance Code, is amended to | ||
read as follows: | ||
Sec. 2210.601. PURPOSE. The legislature finds that | ||
authorizing the issuance of public securities to provide a method | ||
to raise funds to provide [ |
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the association windstorm and hail insurance in certain designated | ||
portions of the state and tornado insurance and wildfire insurance | ||
statewide is for the benefit of the public and in furtherance of a | ||
public purpose. | ||
SECTION 29. Section 2210.6132(c), Insurance Code, is | ||
amended to read as follows: | ||
(c) The premium surcharge under this section shall be | ||
assessed on all policyholders of policies that cover insured | ||
property that is located in a catastrophe area, including | ||
automobiles principally garaged in a catastrophe area. The premium | ||
surcharge shall be assessed on each Texas windstorm and hail | ||
insurance policy, each tornado insurance policy, and each wildfire | ||
insurance policy issued by the association and each property and | ||
casualty policy, including an automobile insurance policy, issued | ||
for automobiles and other property located in the catastrophe area. | ||
A premium surcharge under Subsection (b) applies to: | ||
(1) all policies written under the following lines of | ||
insurance: | ||
(A) fire and allied lines; | ||
(B) farm and ranch owners; | ||
(C) residential property insurance; | ||
(D) private passenger automobile liability and | ||
physical damage insurance; and | ||
(E) commercial automobile liability and physical | ||
damage insurance; and | ||
(2) the property insurance portion of a commercial | ||
multiple peril insurance policy. | ||
SECTION 30. Section 2210.652, Insurance Code, is amended to | ||
read as follows: | ||
Sec. 2210.652. COMPOSITION OF BOARD. The [ |
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as follows: | ||
(1) four members of the senate appointed by the | ||
lieutenant governor, including the chairperson of the Senate | ||
Business and Commerce Committee, who shall serve as co-chairperson | ||
of the board; and | ||
(2) four members of the house of representatives | ||
appointed by the speaker of the house of representatives. | ||
SECTION 31. Section 2210.653(a), Insurance Code, is amended | ||
to read as follows: | ||
(a) The board shall: | ||
(1) receive information about rules proposed by the | ||
department relating to windstorm and hail insurance, tornado | ||
insurance, and wildfire insurance, and may submit comments to the | ||
commissioner on the proposed rules; | ||
(2) monitor windstorm and hail insurance, tornado | ||
insurance, and wildfire insurance in this state, including: | ||
(A) the adequacy of rates; | ||
(B) the operation of the association; and | ||
(C) the availability of coverage; and | ||
(3) review recommendations for legislation proposed | ||
by the department or the association. | ||
SECTION 32. Section 2210.654(b), Insurance Code, is amended | ||
to read as follows: | ||
(b) The report must include: | ||
(1) an analysis of any problems identified; and | ||
(2) recommendations for any legislative action | ||
necessary to address those problems and to foster stability, | ||
availability, and competition within the windstorm and hail | ||
insurance, tornado insurance, and wildfire insurance industries | ||
[ |
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SECTION 33. (a) The plan of operation adopted under | ||
Chapter 2210, Insurance Code, as amended by this Act, must provide | ||
that the Texas Windstorm Insurance Association issue tornado | ||
insurance policies and wildfire insurance policies under that | ||
chapter not later than January 1, 2020. | ||
(b) The commissioner of insurance shall adopt rules | ||
necessary to ensure that the Texas Windstorm Insurance Association | ||
issue insurance policies under Chapter 2210, Insurance Code, as | ||
amended by this Act, not later than January 1, 2020. | ||
SECTION 34. This Act takes effect September 1, 2019. |