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
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  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 [that] coverage in the private
  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 [that territory] because the
  area [territory] is subject to unusually frequent and severe damage
  resulting from windstorms, [or] hailstorms, tornadoes, or
  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 [market] in [the seacoast territory of] this
  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 [in the seacoast territory].
         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 [FOR WINDSTORM AND HAIL
  INSURANCE]
         SECTION 18.  Section 2210.253, Insurance Code, is amended to
  read as follows:
         Sec. 2210.253.  INITIAL INSURER ASSESSMENT[: FIRST TIER
  COASTAL COUNTY]. (a) In this section, "property insurance" means a
  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 [a first tier coastal county in] accordance
  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 [windstorm]
  inspection program under Section 2210.251 to be incurred in [the
  first tier coastal counties in] that fiscal year.
         (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 [first tier coastal counties] in the calendar year
  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 [windstorm] inspections for the
  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; [and]
               (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 [windstorm and hail insurance] through
  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 [windstorm
  insurance legislative oversight] board is composed of eight members
  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
  [industry].
         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.
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