Bill Text: TX SB3 | 2011 | 82nd Legislature 1st Special | Introduced

Bill Title: Relating to the operation and name of the Texas Windstorm Insurance Association and to the resolution of certain disputes concerning claims made to that association; providing penalties.

Spectrum: Partisan Bill (Republican 1-0)

Status: (Introduced - Dead) 2011-06-20 - No action taken in committee [SB3 Detail]

Download: Texas-2011-SB3-Introduced.html
 
 
  By: Carona S.B. No. 3
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to the operation and name of the Texas Windstorm Insurance
  Association and to the resolution of certain disputes concerning
  claims made to that association; providing penalties.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Section 83.002, Insurance Code, is amended by
  adding Subsection (c) to read as follows:
         (c)  This chapter also applies to:
               (1)  a person appointed as a qualified inspector under
  Section 2210.254 or 2210.255; and
               (2)  a person acting as a qualified inspector under
  Section 2210.254 or 2210.255 without being appointed as a qualified
  inspector under either of those sections.
         SECTION 2.  Section 541.152, Insurance Code, is amended by
  amending Subsection (b) and adding Subsection (c) to read as
  follows:
         (b)  Except as provided by Subsection (c), on [On] a finding
  by the trier of fact that the defendant knowingly committed the act
  complained of, the trier of fact may award an amount not to exceed
  three times the amount of actual damages.
         (c)  Subsection (b) does not apply to an action under this
  subchapter brought against the Texas Windstorm Insurance
  Association or an agent or representative of that association.
         SECTION 3.  The heading to Chapter 2210, Insurance Code, is
  amended to read as follows:
  CHAPTER 2210. TEXAS COASTAL [WINDSTORM] INSURANCE PLAN
  [ASSOCIATION]
         SECTION 4.  Section 2210.002(a), Insurance Code, is amended
  to read as follows:
         (a)  This chapter may be cited as the Texas Coastal
  [Windstorm] Insurance Plan [Association] Act. A reference to the
  Texas Windstorm Insurance Association Act means this chapter.
         SECTION 5.  Section 2210.003(1), Insurance Code, is amended
  to read as follows:
               (1)  "Association" means the Texas Coastal [Windstorm]
  Insurance Plan Association.
         SECTION 6.  Section 2210.003, Insurance Code, is amended by
  adding Subdivision (3-b) to read as follows:
               (3-b)  "Catastrophe year" means a calendar year in
  which an occurrence or a series of occurrences results in insured
  losses, regardless of when the insured losses are ultimately paid.
         SECTION 7.  Subchapter A, Chapter 2210, Insurance Code, is
  amended by adding Sections 2210.0081, 2210.010, 2210.012, and
  2210.013 to read as follows:
         Sec. 2210.0081.  CERTAIN ACTIONS BROUGHT AGAINST
  ASSOCIATION BY COMMISSIONER. In an action brought by the
  commissioner against the association under Chapter 441:
               (1)  the association's inability to satisfy obligations
  under Subchapter M related to the issuance of public securities
  under this chapter constitutes a condition that makes the
  association's continuation in business hazardous to the public or
  to the association's policyholders for the purposes of Section
  441.052;
               (2)  the time for the association to comply with the
  requirements of supervision or for the conservator to complete the
  conservator's duties, as applicable, is limited to three years from
  the date the commissioner commences the action against the
  association; and
               (3)  unless the commissioner takes further action
  against the association under Chapter 441, as a condition of
  release from supervision, the association must demonstrate to the
  satisfaction of the commissioner that the association is able to
  satisfy obligations under Subchapter M related to the issuance of
  public securities under this chapter.
         Sec. 2210.010.  APPLICABILITY OF CERTAIN OTHER LAW. (a) A
  person may not bring a private action against the association,
  including a claim against an agent or representative of the
  association, under Chapter 541 or 542.  Notwithstanding any other
  provision of this code or this chapter, a class action under
  Subchapter F, Chapter 541, or under Rule 42 of the Texas Rules of
  Civil Procedure may only be brought against the association by the
  attorney general.
         (b)  Chapter 542 does not apply to the processing and
  settlement of claims by the association or an agent or
  representative of the association.
         Sec. 2210.012.  STANDARDS OF CONDUCT: BOARD OF DIRECTORS AND
  EMPLOYEES; REPORT OF CERTAIN FRAUDULENT CONDUCT. (a) A member of
  the board of directors or an employee of the association may not:
               (1)  accept or solicit any gift, favor, or service that
  might reasonably tend to influence the member or employee in the
  discharge of duties related to the operation or business of the
  association or that the member or employee knows or should know is
  being offered with the intent to influence the member's or
  employee's conduct related to the operation or business of the
  association;
               (2)  accept other employment or engage in a business or
  professional activity that the member or employee might reasonably
  expect would require or induce the member or employee to disclose
  confidential information acquired by reason of the member's or
  employee's position with the association;
               (3)  accept other employment or compensation that could
  reasonably be expected to impair the member's or employee's
  independence of judgment in the performance of the member's or
  employee's duties related to the operation or business of the
  association;
               (4)  make personal investments that could reasonably be
  expected to create a substantial conflict between the member's or
  employee's private interest and the interest of the association; or
               (5)  intentionally or knowingly solicit, accept, or
  agree to accept any benefit for having exercised the member's or
  employee's powers related to the operation or business of the
  association or having performed, in favor of another, the member's
  or employee's duties related to the operation or business of the
  association.
         (b)  An association employee who violates Subsection (a) or a
  code of conduct established under Section 2210.107(a)(4) is subject
  to an employment-related sanction, including termination of the
  employee's employment with the association.
         (c)  A member of the board of directors or an association
  employee who violates Subsection (a) is subject to any applicable
  civil or criminal penalty if the violation also constitutes a
  violation of another statute or rule.
         (d)  A board member, employee of the association, or member
  of the windstorm insurance legislative oversight board established
  under Subchapter N who reasonably suspects that a fraudulent
  insurance act has been or is about to be committed by any board
  member, employee of the association, or member of the windstorm
  insurance legislative oversight board established under Subchapter
  N shall, not later than the 30th day after discovering the conduct,
  report the conduct and identity of the person engaging in the
  conduct to the Travis County district attorney or the department.
         Sec. 2210.013.  CERTAIN EMPLOYMENT AND CONTRACTS
  PROHIBITED. A member of the board of directors or an employee of
  the association may not appoint or employ, or contract with, the
  following individuals for the provision of goods or services in
  connection with the operation or business of the association, if
  the individual to be appointed or employed, or with whom a contract
  is to be entered into, is to be directly or indirectly compensated
  from funds of the association:
               (1)  an individual related to the member or employee
  within a degree of relationship described by Section 573.002,
  Government Code; or
               (2)  an individual related to any member of the board of
  directors or employee of the association within a degree of
  relationship described by Section 573.002, Government Code.
         SECTION 8.  Section 2210.053, Insurance Code, is amended by
  adding Subsection (c) to read as follows:
         (c)  The association may not be considered a debtor
  authorized to file a petition or seek relief in bankruptcy under
  Title 11, United States Code.
         SECTION 9.  Subchapter B, Chapter 2210, Insurance Code, is
  amended by adding Section 2210.058 to read as follows:
         Sec. 2210.058.  CLAIMS PRACTICES AUDIT. (a)  If the
  commissioner determines that 500 or more claims have been filed
  under association policies the bases of which are damage to insured
  property caused by the same storm, the department shall conduct a
  random audit of the claim files of those claims to:
               (1)  determine whether the association is adequately
  and properly documenting claims decisions in each claim file; and
               (2)  ensure that each claim is being handled
  appropriately, including being handled in accordance with the terms
  of the policy under which the claim is filed.
         (b)  The department shall conduct an audit required under
  this section as soon as possible after the filing of the 500th claim
  described by Subsection (a) to ensure the quality of the process
  with which the association, including an agent or representative of
  the association, is handling claims described by Subsection (a).
         (c)  If, following an audit conducted under this section, the
  commissioner determines that the association or an agent or
  representative of the association is not adequately and properly
  documenting claims decisions or that claims described by Subsection
  (a) are not otherwise being handled appropriately, the commissioner
  shall:
               (1)  notify the board of directors of that
  determination; and
               (2)  identify the manner in which the association or an
  agent or representative of the association should correct any
  deficiencies identified by the commissioner.
         SECTION 10.  Section 2210.071(a), Insurance Code, is amended
  to read as follows:
         (a)  If, in a catastrophe year, an occurrence or series of
  occurrences in a catastrophe area results in insured losses and
  operating expenses of the association in excess of premium and
  other revenue of the association, the excess losses and operating
  expenses shall be paid as provided by this subchapter.
         SECTION 11.  Section 2210.072, Insurance Code, is amended by
  amending Subsections (a), (b), and (c) and adding Subsections
  (b-1), (e), and (f) to read as follows:
         (a)  Losses not paid under Section 2210.071(b) [2210.071]
  shall be paid as provided by this section from the proceeds from
  Class 1 public securities authorized to be issued in accordance
  with Subchapter M before, on, or after the date of any occurrence or
  series of occurrences that results in insured losses. Public
  securities issued under this section must be repaid within a period
  not to exceed 14 [10] years, and may be repaid sooner if the board of
  directors elects to do so and the commissioner approves.
         (b)  Public securities described by Subsection (a) that are
  issued before an occurrence or series of occurrences that results
  in incurred losses:
               (1)  may be issued if the board of directors
  determines, before the date of any occurrence, that the amount
  available from premium and other revenue, in combination with the
  amounts available from the catastrophe reserve trust fund, may be
  insufficient to pay insured losses; and
               (2)  may not, in the aggregate, exceed $1 billion at any
  one time, regardless of the calendar year or years in which the
  outstanding public securities were issued.
         (b-1)  Public securities described by Subsection (a):
               (1)  shall be issued as necessary in a principal amount
  not to exceed $1 billion per catastrophe year, in the aggregate, for
  securities issued before the occurrence or series of occurrences
  that results in incurred losses in that year and securities issued
  on or after the date of that occurrence or series of occurrences;
  and
               (2)  may be issued, in one or more issuances or
  tranches, during the calendar year in which the occurrence or
  series of occurrences occurs or, if the public securities cannot
  reasonably be issued in the calendar year in which the occurrence or
  series of occurrences takes place, during the following calendar
  year.
         (c)  If [the losses are paid with] public securities are
  issued as described by this section, the public securities shall be
  repaid in the manner prescribed by Subchapter M from association
  premium revenue.
         (e)  The proceeds of any outstanding public securities
  described by Subsection (a) that are issued before an occurrence or
  series of occurrences shall be exhausted before the proceeds of any
  securities issued under that subsection after an occurrence or
  series of occurrences may be used. Public securities described by
  Subsection (a) to be issued after an occurrence or series of
  occurrences may be issued before the proceeds of any outstanding
  public securities issued under that subsection before an occurrence
  or series of occurrences have been exhausted.
         (f)  To the extent the proceeds of outstanding public
  securities described by Subsection (a) that are issued before an
  occurrence or series of occurrences are used to pay for losses under
  this section, for the purposes of this chapter, those public
  securities shall be considered as being issued after the date of the
  occurrence or series of occurrences and issued in the catastrophe
  year in which the occurrence or series of occurrences resulted in
  the payment of losses under this section.
         SECTION 12.  Section 2210.073, Insurance Code, is amended by
  amending Subsection (b) and adding Subsection (c) to read as
  follows:
         (b)  Public securities described by Subsection (a):
               (1)  may be issued as necessary in a principal amount
  not to exceed $1 billion per catastrophe year; and
               (2)  may be issued, in one or more issuances or
  tranches, during the calendar year in which the occurrence or
  series of occurrences occurs or, if the public securities cannot
  reasonably be issued in the calendar year in which the occurrence or
  series of occurrences takes place, during the following calendar
  year.
         (c)  If the losses are paid with public securities described
  by this section, the public securities shall be repaid in the manner
  prescribed by Subchapter M.
         SECTION 13.  Section 2210.074, Insurance Code, is amended by
  amending Subsection (b) and adding Subsection (c) to read as
  follows:
         (b)  Public securities described by Subsection (a):
               (1)  may be issued as necessary in a principal amount
  not to exceed $500 million per catastrophe year; and
               (2)  may be issued, in one or more issuances or
  tranches, during the calendar year in which the occurrence or
  series of occurrences occurs or, if the public securities cannot
  reasonably be issued in the calendar year in which the occurrence or
  series of occurrences takes place, during the following calendar
  year.
         (c)  If the losses are paid with public securities described
  by this section, the public securities shall be repaid in the manner
  prescribed by Subchapter M through member assessments as provided
  by this section.  The association shall notify each member of the
  association of the amount of the member's assessment under this
  section.  The proportion of the losses allocable to each insurer
  under this section shall be determined in the manner used to
  determine each insurer's participation in the association for the
  year under Section 2210.052. A member of the association may not
  recoup an assessment paid under this subsection through a premium
  surcharge or tax credit.
         SECTION 14.  Section 2210.102, Insurance Code, is amended by
  adding Subsection (i) to read as follows:
         (i)  Notwithstanding Subsection (f), for a vacancy occurring
  in a position under Subsection (b), the commissioner may appoint,
  for the lesser of 120 days or until the vacancy is filled, a person
  who has demonstrated knowledge in insurance principles. This
  subsection does not apply to a vacancy due to the expiration of a
  term occurring under Section 2210.103. This subsection expires
  December 31, 2012, and any appointment in effect on that date is
  continued until the expiration of the term of the appointment.
         SECTION 15.  Section 2210.104, Insurance Code, is amended to
  read as follows:
         Sec. 2210.104.  OFFICERS AND MANAGERIAL EMPLOYEES; SALARIES
  AND BONUSES. (a) The board of directors shall elect from the
  board's membership an executive committee consisting of a presiding
  officer, assistant presiding officer, and secretary-treasurer.
         (b)  The association shall post on the association's
  Internet website the salary of each association employee who serves
  in a managerial capacity and any bonuses paid to those association
  employees.
         SECTION 16.  Section 2210.105, Insurance Code, is amended by
  amending Subsections (a) and (b) and adding Subsections (b-1), (e),
  and (f) to read as follows:
         (a)  Except for an emergency meeting, the association shall:
               (1)  notify the department not later than the 11th day
  before the date of a meeting of the board of directors or of the
  members of the association; and
               (2)  not later than the seventh day before the date of a
  meeting of the board of directors, post notice of the meeting on the
  association's Internet website and the department's Internet
  website.
         (b)  Except for a closed meeting authorized by Subchapter D,
  Chapter 551, Government Code, a meeting of the board of directors or
  of the members of the association is open to[:
               [(1)     the commissioner or the commissioner's designated
  representative; and
               [(2)]  the public.
         (b-1)  A meeting of the board of directors or the members of
  the association, including a closed meeting authorized by
  Subchapter D, Chapter 551, Government Code, is open to the
  commissioner or the commissioner's designated representative.  The
  commissioner or the commissioner's designated representative shall
  maintain the confidentiality of, and may not disclose the content
  of, any confidential information discussed in a closed meeting
  authorized by Subchapter D, Chapter 551, Government Code.
         (e)  The association shall:
               (1)  broadcast live on the association's Internet
  website all meetings of the board of directors, other than closed
  meetings; and
               (2)  maintain on the association's Internet website an
  archive of meetings of the board of directors.
         (f)  A recording of a meeting must be maintained in the
  archive required under Subsection (e) through and including the
  second anniversary of the meeting.
         SECTION 17.  Section 2210.107, Insurance Code, is amended to
  read as follows:
         Sec. 2210.107.  PRIMARY BOARD OBJECTIVES; REPORT. (a) The
  primary objectives of the board of directors are to ensure that the
  board and the association:
               (1)  operate [operates] in accordance with this
  chapter, the plan of operation, and commissioner rules;
               (2)  comply [complies] with sound insurance
  principles; [and]
               (3)  meet [meets] all standards imposed under this
  chapter;
               (4)  establish a code of conduct and performance
  standards for association employees and persons with which the
  association contracts; and
               (5)  establish, and adhere to terms of, an annual
  evaluation of association management necessary to achieve the
  statutory purpose, board objectives, and any performance or
  enterprise risk management objectives established by the board.
         (b)  Not later than June 1 of each year, the association
  shall submit to the commissioner, the legislative oversight board
  established under Subchapter N, the governor, the lieutenant
  governor, and the speaker of the house of representatives a report
  evaluating the extent to which the board met the objectives
  described by Subsection (a) in the 12-month period immediately
  preceding the date of the report.
         SECTION 18.  Subchapter C, Chapter 2210, Insurance Code, is
  amended by adding Section 2210.108 to read as follows:
         Sec. 2210.108.  OPEN MEETINGS AND OPEN RECORDS. (a)  Except
  as specifically provided by this chapter or another law, the
  association is subject to Chapters 551 and 552, Government Code.
         (b)  A settlement agreement to which the association is a
  party:
               (1)  is public information and is not exempted from
  required disclosure under Chapter 552, Government Code; and
               (2)  if applicable, must contain the name of any
  attorney or adjuster involved with the claim that is the basis of
  the settlement.
         (c)  Subsection (b) may not be construed to limit or
  otherwise restrict the categories of information that are public
  information under Section 552.022, Government Code.
         (d)  The association, before disclosing a settlement
  agreement to which the association is a party, shall redact from the
  settlement agreement any information that is not otherwise required
  to be disclosed under this section and that is confidential under
  Chapter 552, Government Code, or any other law.
         SECTION 19.  Section 2210.152, Insurance Code, is amended by
  adding Subsection (c) to read as follows:
         (c)  The plan of operation shall require the association,
  including an agent or representative of the association, to use the
  claim settlement guidelines published by the commissioner under
  Section 2210.577(f) in evaluating the extent to which a loss to
  insured property is incurred as a result of wind, waves, tidal
  surges, rising waters not caused by waves or surges, or wind-driven
  rain associated with a storm.
         SECTION 20.  Section 2210.202, Insurance Code, is amended to
  read as follows:
         Sec. 2210.202.  APPLICATION FOR COVERAGE. (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.  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 and the inability to obtain
  substantially equivalent insurance coverage for the perils of
  windstorm and hail.  Notwithstanding Section 2210.203(c), once
  every three calendar years, evidence of one declination otherwise
  described by this subsection is also required with an application
  for renewal of an association policy.
         (b)  A property and casualty agent must submit an application
  for initial [the] 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 [The] 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)  [.   Each application for initial or renewal
  coverage must also contain] a statement that the agent acting on
  behalf of the applicant possesses proof of the declination
  described by Subsection (a) and proof of flood insurance coverage
  or unavailability of that coverage as described by Section
  2210.203(a-1).
         SECTION 21.  Section 2210.203, Insurance Code, is amended by
  amending Subsection (a) and adding Subsection (d) to read as
  follows:
         (a)  If the association determines that the property for
  which an application for initial insurance coverage is made is
  insurable property, the association, on payment of the premium,
  shall direct the issuance of an insurance policy as provided by the
  plan of operation.
         (d)  The commissioner, after consultation with the board of
  directors, shall adopt rules governing the rate of agent
  commissions on policies renewed under Subsection (c).  Rules
  adopted under this subsection must require that commission rates be
  reasonable and not excessive, based on the time required of, and the
  nature of work to be performed by, an agent.
         SECTION 22.  Sections 2210.204(d) and (e), Insurance Code,
  are amended to read as follows:
         (d)  If an insured requests cancellation of the insurance
  coverage, the association shall refund the unearned premium, less
  any minimum retained premium set forth in the plan of operation,
  payable to the insured and the holder of an unpaid balance.  The
  property and casualty agent who received a commission as the result
  of the issuance of an association policy providing the canceled
  coverage [submitted the application] shall refund the agent's
  commission on any unearned premium in the same manner.
         (e)  For cancellation of insurance coverage under this
  section, the minimum retained premium in the plan of operation must
  be for a period of not less than 90 [180] days, except for events
  specified in the plan of operation that reflect a significant
  change in the exposure or the policyholder concerning the insured
  property, including:
               (1)  the purchase of similar coverage in the voluntary
  market;
               (2)  sale of the property to an unrelated party;
               (3)  death of the policyholder; or
               (4)  total loss of the property.
         SECTION 23.  Subchapter E, Chapter 2210, Insurance Code, is
  amended by adding Sections 2210.205 and 2210.210 to read as
  follows:
         Sec. 2210.205.  REQUIRED POLICY PROVISIONS: DEADLINE FOR
  FILING CLAIM; NOTICE CONCERNING RESOLUTION OF CERTAIN DISPUTES.
  (a)  A windstorm and hail 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 2210.575 and mediation under Section 2210.576; and
                     (B)  the necessity of complying with the
  requirements of Subchapter L-1 to seek administrative or judicial
  relief.
         (b)  The commissioner, on a showing of good cause by a person
  insured under this chapter, may extend the one-year period
  described by Subsection (a)(1) for a period not to exceed 180 days.
         Sec. 2210.210.  COVERAGE OF CERTAIN STRUCTURES PROHIBITED.
  The association may not issue coverage for a wind turbine,
  regardless of whether the turbine is otherwise insurable property
  under this chapter.
         SECTION 24.  Section 2210.254, Insurance Code, is amended by
  adding Subsection (e) to read as follows:
         (e)  The department may establish an annual renewal period
  for persons appointed as qualified inspectors.
         SECTION 25.  Subchapter F, Chapter 2210, Insurance Code, is
  amended by adding Section 2210.2551 to read as follows:
         Sec. 2210.2551.  EXCLUSIVE ENFORCEMENT AUTHORITY; RULES.
  (a) The department has exclusive authority over all matters
  relating to the appointment and oversight of qualified inspectors
  for purposes of this chapter.
         (b)  The commissioner by rule shall establish criteria to
  ensure that a person seeking appointment as a qualified inspector
  under this subchapter, including an engineer seeking appointment
  under Section 2210.255, possesses the knowledge, understanding,
  and professional competence to perform windstorm inspections under
  this chapter and to comply with other requirements of this chapter.
         (c)  Subsection (b) applies only to a determination
  concerning the appointment of a qualified inspector under this
  chapter. The exclusive jurisdiction of the department under this
  section does not apply to the practice of engineering as defined by
  Section 1001.003, Occupations Code, or to a license issued,
  qualification required, determination made, order issued, judgment
  rendered, or other action of a board operating under Chapter 1001,
  Occupations Code. In the event of conflict, the authority of that
  board prevails with regard to the practice of engineering.
         SECTION 26.  The heading to Section 2210.256, Insurance
  Code, is amended to read as follows:
         Sec. 2210.256.  DISCIPLINARY PROCEEDINGS REGARDING
  APPOINTED INSPECTORS AND CERTAIN OTHER PERSONS.
         SECTION 27.  Section 2210.256, Insurance Code, is amended by
  adding Subsection (a-1) to read as follows:
         (a-1)  In addition to any other action authorized under this
  section, the commissioner ex parte may enter an emergency cease and
  desist order under Chapter 83 against a qualified inspector, or a
  person acting as a qualified inspector, if:
               (1)  the commissioner believes that:
                     (A)  the qualified inspector has:
                           (i)  through submitting or failing to submit
  to the department sealed plans, designs, calculations, or other
  substantiating information, failed to demonstrate that a structure
  or a portion of a structure subject to inspection meets the
  requirements of this chapter and department rules; or
                           (ii)  refused to comply with requirements
  imposed under this chapter or department rules; or
                     (B)  the person acting as a qualified inspector is
  acting without appointment as a qualified inspector under Section
  2210.254 or 2210.255; and
               (2)  the commissioner determines that the conduct
  described by Subdivision (1) is fraudulent or hazardous or creates
  an immediate danger to the public.
         SECTION 28.  Subchapter F, Chapter 2210, Insurance Code, is
  amended by adding Section 2210.260 to read as follows:
         Sec. 2210.260.  ALTERNATIVE ELIGIBILITY FOR COVERAGE. (a)  
  On and after January 1, 2012, a person who has an insurable interest
  in a residential structure may obtain insurance coverage through
  the association for that structure without obtaining a certificate
  of compliance under Section 2210.251(g) in accordance with this
  section and rules adopted by the commissioner.
         (b)  The department may issue an alternative certification
  for a residential structure if the person who has an insurable
  interest in the structure demonstrates that at least one qualifying
  structural building component of the structure has been:
               (1)  inspected by a department inspector or by a
  qualified inspector; and
               (2)  determined to be in compliance with applicable
  building code standards, as set forth in the plan of operation.
         (c)  The commissioner shall adopt reasonable and necessary
  rules to implement this section. The rules adopted under this
  section must establish which structural building components are
  considered qualifying structural building components for the
  purposes of Subsection (b), taking into consideration those items
  that are most probable to generate losses for the association's
  policyholders and the cost to upgrade those items.
         (d)  Except as provided in Section 2210.251(f), a person who
  has an insurable interest in a residential structure that is
  insured by the association as of January 1, 2012, but for which the
  person has not obtained a certificate of compliance under Section
  2210.251(g), must obtain an alternative certification under this
  section before the association, on or after January 1, 2013, may
  renew coverage for the structure.
         (e)  Each residential structure for which a person obtains an
  alternative certification under this section must comply with:
               (1)  the requirements of this chapter, including
  Section 2210.258; and
               (2)  the association's underwriting requirements,
  including maintaining the structure in an insurable condition and
  paying premiums in the manner required by the association.
         (f)  The association shall develop and implement an
  actuarially sound rate, credit, or surcharge that reflects the
  risks presented by structures with reference to which alternative
  certifications have been obtained under this section. A rate,
  credit, or surcharge under this subsection may vary based on the
  number of qualifying structural building components included in a
  structure with reference to which an alternative certification is
  obtained under this section.
         SECTION 29.  The heading to Subchapter H, Chapter 2210,
  Insurance Code, is amended to read as follows:
  SUBCHAPTER H. RATES; DISCOUNTS
         SECTION 30.  Subchapter H, Chapter 2210, Insurance Code, is
  amended by adding Section 2210.363 to read as follows:
         Sec. 2210.363.  PREMIUM DISCOUNTS. (a) The association may
  offer a person insured under this chapter an actuarially justified
  premium discount on a policy issued by the association if the person
  elects to purchase a binding arbitration endorsement under Section
  2210.554.
         (b)  The commissioner shall adopt rules necessary to
  implement and enforce this section.
         SECTION 31.  Section 2210.453, Insurance Code, is amended by
  adding Subsections (c), (d), and (e) to read as follows:
         (c)  If the association does not purchase reinsurance as
  authorized by this section, the board, not later than June 1 of each
  year, shall submit to the commissioner, the legislative oversight
  board established under Subchapter N, the governor, the lieutenant
  governor, and the speaker of the house of representatives a report
  containing an actuarial plan for paying losses in the event of a
  catastrophe with estimated damages of $2.5 billion or more. The
  report required by this subsection must:
               (1)  document and denominate the association's
  resources available to pay claims, including cash or other highly
  liquid assets, assessments that the association is projected to
  impose, pre-event and post-event bonding capacity, and
  private-sector recognized risk-transfer mechanisms, including
  catastrophe bonds and reinsurance;
               (2)  include an independent, third-party appraisal of
  the likelihood of an assessment, the maximum potential size of the
  assessment, and an estimate of the probability that the assessment
  would not be adequate to meet the association's needs; and
               (3)  include an analysis of financing alternatives to
  assessments that includes the costs of borrowing and the
  consequences that additional purchase of reinsurance, catastrophe
  bonds, or other private-sector recognized risk-transfer
  instruments would have in reducing the size or potential of
  assessments.
         (d)  A person who prepares a report required by Subsection
  (c) may not contract to provide any other service to the
  association, except for the preparation of similar reports, before
  the third anniversary of the date the last report prepared by the
  person under that subsection is submitted.
         (e)  The report required under Subsection (c) is for
  informational purposes and does not bind the association to a
  particular course of action.
         SECTION 32.  Subchapter J, Chapter 2210, Insurance Code, is
  amended by adding Section 2210.455 to read as follows:
         Sec. 2210.455.  CATASTROPHE PLAN. (a)  Not later than June 1
  of each year, the board shall submit to the commissioner, the
  legislative oversight board established under Subchapter N, the
  governor, the lieutenant governor, and the speaker of the house of
  representatives a catastrophe plan covering the period beginning on
  the date the plan is submitted and ending on the following May 31.
         (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.
         (c)  The catastrophe plan must include a description of how
  losses under association policies will be paid, and how claims
  under association policies will be administered and adjusted,
  during the period covered by the plan.
         (d)  The catastrophe plan is for informational purposes and
  does not bind the association to a particular course of action.
         SECTION 33.  Sections 2210.551(a) and (b), Insurance Code,
  are amended to read as follows:
         (a)  This section:
               (1)  does not apply to a person who is required to
  resolve a dispute under Subchapter L-1; and
               (2)  applies only to:
                     (A) [(1)]  a person not described by Subdivision
  (1) who is insured under this chapter or an authorized
  representative of the person; or
                     (B) [(2)]  an affected insurer.
         (b)  A person or entity described by Subsection (a)(2) [(a)]
  who is aggrieved by an act, ruling, or decision of the association
  may appeal to the commissioner not later than the 30th day after the
  date of that act, ruling, or decision.
         SECTION 34.  The heading to Section 2210.552, Insurance
  Code, is amended to read as follows:
         Sec. 2210.552.  [CLAIM] DISPUTES OTHER THAN CLAIM DISPUTES;
  VENUE.
         SECTION 35.  Section 2210.552, Insurance Code, is amended by
  amending Subsection (a) and adding Subsections (e), (f), (g), and
  (h) to read as follows:
         (a)  Except as provided by Subsection (e) and Sections
  2210.007 and 2210.106, and subject to Subchapter L-1, a person
  insured under this chapter who is aggrieved by an act, ruling, or
  decision of the association [relating to the payment of, the amount
  of, or the denial of a claim] may:
               (1)  bring an action against the association, including
  an action described by Section 2210.5761 that is brought under
  Subsection (f)[, including an action under Chapter 541]; or
               (2)  if applicable, appeal the act, ruling, or decision
  under Section 2210.551.
         (e)  Except as provided by Subsection (f), Subchapter L-1
  provides the exclusive remedies for a claimant to resolve a dispute
  with the association concerning the payment of, the amount of, or
  the denial of a claim. A claimant may not bring an action against
  the association concerning the payment of, the amount of, or the
  denial of a claim before exhausting all remedies under Subchapter
  L-1. If a claimant brings an action against the association
  concerning the payment of, the amount of, or the denial of a claim
  before exhausting all remedies under that subchapter, the court
  shall abate the action until all remedies under that subchapter
  have been exhausted. For purposes of this subsection, "claim" and
  "claimant" have the meanings assigned by Section 2210.571.
         (f)  If a claimant, as defined by Section 2210.571, disputes
  an act, ruling, or decision of the association concerning a
  causation dispute or a coverage dispute, as defined by Section
  2210.571, the claimant may bring an action against the association
  in a district court in the county in which the loss occurred.  An
  action brought under this subsection is subject to Sections
  2210.576 and 2210.5761.
         (g)  A person who brings an action against the association
  under this section:
               (1)  may recover only the amount of the covered loss for
  an action brought under Subsection (f), or the amount of actual
  damages for any other action, plus court costs and reasonable and
  necessary attorney's fees; and
               (2)  may not recover consequential, punitive, or
  exemplary damages, including damages under Section 541.152(b) of
  this code or Section 17.50, Business & Commerce Code.
         (h)  For purposes of Subsection (g)(2), "consequential
  damages" does not include a loss covered under an association
  policy or an endorsement to an association policy.
         SECTION 36.  Subchapter L, Chapter 2210, Insurance Code, is
  amended by adding Sections 2210.553 and 2210.554 to read as
  follows:
         Sec. 2210.553.  LIMITATIONS PERIOD. (a)  Notwithstanding
  any other law, including Section 541.162, a person insured under
  this chapter who brings an action against the association in the
  manner described by Section 2210.552(a)(1) must bring the action
  not later than the second anniversary of the date of the act,
  ruling, or decision of the association by which the insured is
  aggrieved.
         (b)  This section is a statute of repose and controls over
  any other applicable limitations period.
         Sec. 2210.554.  VOLUNTARY ARBITRATION OF CERTAIN COVERAGE
  AND CLAIM DISPUTES. (a) A person insured under this chapter may
  elect to purchase a binding arbitration endorsement in a form
  prescribed by the commissioner.  A person who elects to purchase an
  endorsement under this section must arbitrate a dispute involving
  an act, ruling, or decision of the association relating to the
  payment of, the amount of, or the denial of the claim.
         (b)  An arbitration under this section shall be conducted in
  the manner and under rules and deadlines prescribed by the
  commissioner by rule.
         SECTION 37.  Chapter 2210, Insurance Code, is amended by
  adding Subchapter L-1 to read as follows:
  SUBCHAPTER L-1. CLAIMS: SETTLEMENT AND DISPUTE RESOLUTION
         Sec. 2210.571.  DEFINITIONS. In this subchapter:
               (1)  "Association policy" means a windstorm and hail
  insurance policy issued by the association.
               (2)  "Causation dispute" means a dispute involving the
  extent to which damage to property insured under an association
  policy was caused by an event or peril covered under the policy.
               (3)  "Claim" means a request for payment under an
  association policy. The term also includes any other claim against
  the association, or an agent or representative of the association,
  relating to an insured loss, under any theory or cause of action of
  any kind, regardless of the theory under which the claim is
  asserted, the cause of action brought, or the type of damages
  sought.
               (4)  "Claimant" means a person who makes a claim.
               (5)  "Coverage dispute" means a dispute that involves
  whether, or the extent to which, an association policy covers
  damages to property alleged to be insured under the policy. The
  term does not include a causation dispute.
               (6)  "Damage dispute" means a dispute that involves the
  actual cash value, amount of loss, or cost of repairing or replacing
  property insured under an association policy. The term does not
  include a causation dispute or coverage dispute.
         Sec. 2210.572.  EXCLUSIVE REMEDIES AND LIMITATION ON AWARD.
  (a) Subject to Sections 2210.552(e) and (f), and notwithstanding
  any other provision of this chapter or other law, this subchapter
  provides the exclusive remedies for a claim against the
  association, including an agent or representative of the
  association.
         (b)  Except as provided by Section 2210.552(f), the
  association or an agent or representative of the association may
  not be held liable for any amount on a claim other than:
               (1)  amounts payable under any applicable terms of the
  association policy; and
               (2)  any costs and fees awarded under Section 2210.578.
         (c)  The association or an agent or representative of the
  association may not be held liable for damages under Chapter 17,
  Business & Commerce Code, or under any provision of any law
  providing for trebling of damages or a penalty.
         Sec. 2210.573.  FILING OF CLAIM; CLAIM PROCESSING. (a)
  Subject to Section 2210.205(b), an insured must file a claim under
  an association policy not later than the first anniversary of the
  date on which the damage to property that is the basis of the claim
  occurs.
         (b)  Except as provided by Subsection (d), not later than the
  90th day after the date the association receives a claim, the
  association shall:
               (1)  notify the claimant in writing of the amount of
  money, if any, the association will pay the claimant for the claim;
  and
               (2)  provide the claimant with:
                     (A)  a detailed description of the assumptions or
  estimates used by the association in determining the amount of the
  claim to be paid, including the estimated labor and materials
  required and the estimated prices for the labor and materials; or
                     (B)  if the association determines that, in whole
  or in part, the property damaged is not insured under the
  association policy, or that the property insured under the
  association policy was damaged by an event or peril not covered by
  the association policy, a detailed description of the factual and
  legal basis on which the association determined that a coverage or
  causation dispute exists concerning all or part of the claim.
         (c)  If the association does not notify the claimant within
  the period required by Subsection (b), the claim is presumed to be
  covered by the association policy.
         (d)  The association may extend the 90-day period described
  by Subsection (b) for a period not to exceed 90 days, if, before the
  end of the 90-day period described by Subsection (b), the
  association determines that special circumstances require an
  extension of the 90-day period described by Subsection (b) and
  notifies the claimant in writing of that determination and those
  circumstances.
         (e)  If a claimant fails to submit information necessary for
  the association to determine whether to pay a claim or any portion
  of a claim or to deny payment of a claim or any portion of a claim,
  the association shall, not later than the 15th day after the date
  the association receives notice of the claim, request in writing
  any necessary information from the claimant. For good cause, the
  association may make a request for additional information under
  this subsection not later than the 30th day after the date the
  association receives notice of a claim.  If the association makes a
  written request for information, the applicable period described by
  Subsection (b) or (d) is tolled from the date the association
  requests the information until the date the association receives
  from the claimant information responsive to the request.
         (f)  In addition to the notice and information otherwise
  required under this section, the association shall notify a
  claimant of the time limits under Section 2210.574 to request
  review of the association's determination under Subsection (e).
         Sec. 2210.574.  REQUEST FOR REVIEW OF ASSOCIATION
  DETERMINATION. (a) A claimant aggrieved by a determination of the
  association under Section 2210.573 may, not later than the 30th day
  after the date the claimant receives the association's
  determination, request in writing a review of the determination. A
  claimant may submit written comments, documents, records, and other
  information to the association with or following the request for
  review.
         (b)  The association shall, on request and free of charge,
  provide a claimant requesting review of an association
  determination under Subsection (a) reasonable access to all
  information relevant to the determination of the association that
  is being reviewed. The claimant may copy the information at the
  claimant's own cost or may request the association to provide a copy
  of all or part of the information to the claimant. The association
  may charge a claimant the actual cost incurred by the association in
  providing a copy of information under this section, excluding any
  amount for labor involved in making any information or copy of
  information available to a claimant.
         (c)  Not later than the 60th day after the date the
  association receives a request for review under Subsection (a), the
  association shall notify the claimant in writing of the outcome of
  the association's review. The association and the claimant may
  agree to extend the 60-day period described by this subsection.
         (d)  The association's notice to the claimant of the outcome
  of the association's review must be in writing, contain the reasons
  for the outcome, and notify the claimant of the time limits to
  request, as applicable, appraisal under Section 2210.575 or
  mediation under Section 2210.576.
         Sec. 2210.575.  APPRAISAL IN DAMAGE DISPUTES. (a) If, after
  review of an association determination under Section 2210.574, a
  damage dispute exists with reference to a claim filed under an
  association policy, but a coverage or causation dispute does not
  exist with reference to that claim, the claimant must request
  appraisal of the actual cash value, amount of loss, or cost of
  repairing or replacing the property insured under the policy.
         (b)  A claimant must make a written request for appraisal not
  later than the 30th day after the date the claimant receives actual
  or constructive notice of the outcome of the association's review
  of a determination under Section 2210.574 that is the basis of the
  damage dispute. If a claimant, on a showing of good cause and not
  later than the 60th day after the expiration of the 30-day period
  described by this subsection, requests in writing that the 30-day
  period to request appraisal be extended, the commissioner may grant
  an additional 30-day period in which the claimant may request
  appraisal.
         (c)  If a claimant requests appraisal under Subsection (b),
  the claimant and the association shall resolve the damage dispute
  through appraisal, in accordance with the terms of the association
  policy. The results of the appraisal:
               (1)  are binding on the claimant and the association
  and are subject to appeal and judicial review only in the manner
  provided by Section 2210.578; and
               (2)  become final and appealable on the 15th day after
  the date the appealing party receives actual or constructive notice
  of the results.
         (d)  A request for appraisal, and participation in the
  appraisal process, under this section is a condition precedent to
  contesting a determination made by the association concerning the
  actual cash value, amount of loss, or cost of repairing or replacing
  property insured under an association policy. A claimant who does
  not request appraisal within the applicable period described by
  Subsection (b) waives the claimant's right to contest a
  determination of the association concerning the actual cash value,
  amount of loss, or cost of repairing or replacing property insured
  under an association policy.
         (e)  If a claimant requests appraisal under this section, the
  claimant is responsible for paying any costs incurred or charged by
  an appraiser retained by and on behalf of the claimant, the
  association is responsible for paying any costs incurred or charged
  by an appraiser retained by and on behalf of the association, and
  the claimant and the association are responsible in equal shares
  for any costs incurred or charged by any other appraiser chosen by
  the claimant's and the association's appraisers to participate in
  the resolution of the dispute.
         (f)  The commissioner by rule shall establish policies and
  procedures for an appraisal requested and conducted under this
  section.
         Sec. 2210.576.  MEDIATION. (a) If a claimant disputes the
  association's determination concerning a causation dispute or
  coverage dispute and provides notice of intent to bring an action
  that meets the requirements of Section 541.154, the association may
  require the claimant, as a prerequisite to filing the action
  against the association, to submit the dispute to alternate dispute
  resolution by mediation, as provided by Chapter 154, Civil Practice
  and Remedies Code. If a claimant brings an action against the
  association before mediation under this section is completed, the
  court shall abate the action until the mediation is completed.  A
  claimant described by this subsection that also disputes the
  association's determination concerning a damage dispute related to
  the causation dispute or coverage dispute that is the subject of
  mediation may include in the mediation the damage dispute.
         (b)  The association shall request mediation of a dispute
  described by Subsection (a) not later than the 60th day after the
  date the association receives from the claimant notice of intent to
  bring an action.
         (c)  Mediation under this section must be completed not later
  than the 60th day after the date a request for mediation is made
  under Subsection (b). The 60-day period described by this
  subsection may be extended by the commissioner by rule or by the
  association and a claimant by mutual consent.
         (d)  If mediation is not completed before the expiration of
  the 60-day period described by Subsection (c) or, if applicable,
  any extension under that subsection, the claimant may bring an
  action against the association as described by Section 2210.5761.
         (e)  The claimant and the association shall select a mediator
  to conduct mediation under this section. If the claimant and the
  association cannot agree on a mediator, the commissioner shall
  appoint a mediator. The commissioner shall adopt rules concerning
  the division of mediation costs between the claimant and the
  association.
         (f)  The commissioner shall establish rules to implement
  this section, including provisions for expediting mediation,
  facilitating the ability of a claimant to appear with or without
  counsel, and providing that formal rules of evidence shall not
  apply to the proceedings.
         Sec. 2210.5761.  ACTION BY CLAIMANT. (a) Subject to
  providing notice of intent to bring an action that meets the
  requirements of Section 541.154, a claimant aggrieved by the
  outcome of mediation under Section 2210.576 may bring an action
  against the association.
         (b)  If six or more claimants file actions against the
  association under this section as a result of a weather-related
  event, an action brought against the association under this section
  must be presided over by a judge appointed by the judicial panel on
  multidistrict litigation designated under Section 74.161,
  Government Code.  A judge appointed under this section must be an
  active judge in Travis County, for suits filed in Travis County, or
  an active judge in the county in which suit is filed, for a suit
  filed in a county other than Travis County.  For purposes of this
  subsection, "active judge" has the meaning assigned by Section
  74.041, Government Code.
         (c)  An action brought against the association is governed by
  this subchapter and Sections 2210.552 and 2210.553.
         Sec. 2210.577.  TECHNICAL PANEL. (a) The commissioner
  shall appoint a technical panel of experts to advise the
  association concerning the extent to which damage to property
  insured under an association policy was incurred as a result of
  wind, waves, tidal surges, rising waters not caused by waves or
  surges, and wind-driven rain associated with a storm. The panel
  shall consist of a number of experts to be decided by the
  commissioner. The commissioner shall appoint one member of the
  panel to serve as the presiding officer of the panel.
         (b)  Members of the panel must have professional expertise
  in, and be knowledgeable concerning, the geography and meteorology
  of the Texas seacoast territory, as well as the scientific basis for
  determining the extent to which damage to property is caused by
  wind, waves, tidal surges, rising waters not caused by waves or
  surges, and wind-driven rain associated with a storm.
         (c)  The panel shall meet at the request of the commissioner
  or the call of the presiding officer of the panel.
         (c-1)  The commissioner shall adopt rules regarding notice
  of panel meetings and the transparency of deliberations of the
  technical panel.
         (d)  The panel shall investigate, collect, and evaluate the
  information necessary to provide recommendations under Subsection
  (e).
         (e)  At the request of the commissioner, the technical panel
  shall recommend to the commissioner methods for determining the
  extent to which damage to property insured under an association
  policy resulted from wind, waves, tidal surges, rising waters not
  caused by waves or surges, and wind-driven rain associated with a
  storm for geographic areas or regions designated by the
  commissioner.
         (f)  After consideration of the recommendations made by the
  panel under Subsection (e), the commissioner shall publish
  guidelines that the association will use to settle claims.
         (g)  A member of the technical panel is not individually
  liable for an act or failure to act in the performance of the
  official duties in connection with the individual's work on the
  panel.
         Sec. 2210.578.  JUDICIAL REVIEW. (a) A claimant who has
  exhausted all administrative remedies under this subchapter and who
  is aggrieved by an appraisal under Section 2210.575 is entitled to
  judicial review. A claimant may not seek judicial review before
  exhausting all administrative remedies under this subchapter.
         (b)  A claimant may seek judicial review of an appraisal
  under Section 2210.575 in the manner provided for the appeal of
  contested cases under Subchapter G, Chapter 2001, Government Code.
  The standard for judicial review under this section is the
  substantial evidence rule.
         (c)  In a proceeding for judicial review under this section,
  the court may award only the amount described by Section
  2210.572(b), plus court costs and reasonable and necessary
  attorney's fees.
         (d)  Notwithstanding Subsection (b), a claimant aggrieved by
  an appraisal process under Section 2210.575 may appeal to a
  district court in the county in which the loss that is the subject
  of the appraisal occurred for a determination concerning:
               (1)  the amount of the loss; and
               (2)  the amount of court costs and reasonable and
  necessary attorney's fees.
         (e)  An appeal to a district court under Subsection (d) shall
  be trial de novo. The only questions that may be presented and
  determined at the trial de novo are:
               (1)  the amount of the loss; and
               (2)  the amount of court costs and reasonable and
  necessary attorney's fees.
         (f)  The only evidence that may be admitted in a trial de novo
  under Subsection (d) is evidence that was admitted or presented in
  the appraisal process under Section 2210.575. The Texas Rules of
  Evidence govern whether evidence presented during the appraisal
  process under Section 2210.575 is admissible in a trial de novo
  under Subsection (d).
         (g)  A petition for trial de novo under Subsection (d) must
  be filed with a district court in the county in which the loss that
  is the subject of the appraisal occurred not later than the 30th day
  after the date on which the determination being appealed is final
  and appealable under this subchapter.
         (h)  The appeal seeking a trial de novo under Subsection (d)
  shall be presided over by a judge appointed by the judicial panel on
  multidistrict litigation designated under Section 74.161,
  Government Code. A judge appointed under this section must be an
  active judge, as defined by Section 74.041, Government Code, who is
  a resident of the county in which the loss occurred or of a first
  tier coastal county or a second tier coastal county adjacent to the
  county in which the loss occurred.
         (i)  The Texas Supreme Court shall adopt rules governing the
  proceedings of a trial de novo under Subsection (d).
         Sec. 2210.579.  CONSTRUCTION WITH OTHER LAW. To the extent
  of any conflict between a provision of this subchapter and any other
  law, the provision of this subchapter prevails.
         Sec. 2210.580.  MEDIATION; CERTAIN DEADLINES TOLLED. A
  deadline imposed on a claimant under Section 2210.574, 2210.575, or
  2210.576 is tolled for a single period not to exceed 45 consecutive
  days during which the claimant is actively seeking resolution of
  the causation dispute, coverage dispute, or damage dispute through
  a mediation administered by the department, other than the
  mediation described by Section 2210.576.
         SECTION 38.  Section 2210.602(2), Insurance Code, is amended
  to read as follows:
               (2)  "Class 1 public securities" means public
  securities authorized to be issued before, on, or after an
  occurrence or series of occurrences by Section 2210.072, including
  a commercial paper program authorized before the occurrence of a
  catastrophic event [so long as no tranche of commercial paper is
  issued under the program until after the catastrophic event].
         SECTION 39.  Section 2210.604, Insurance Code, is amended by
  amending Subsection (a) and adding Subsection (a-1) to read as
  follows:
         (a)  At the request of the association and with the approval
  of the commissioner, the Texas Public Finance Authority shall issue
  Class 1, Class 2, or Class 3 public securities. The association
  shall submit to the commissioner a cost-benefit analysis of various
  financing methods and funding structures when requesting the
  issuance of public securities under this subsection.
         (a-1)  The association and the commissioner must approve
  each tranche of commercial paper issued under a commercial paper
  program established under this chapter.
         SECTION 40.  Section 2210.605(c), Insurance Code, is amended
  to read as follows:
         (c)  Public securities issued under Section 2210.6136 [this
  chapter] are eligible obligations under Section 404.027,
  Government Code.
         SECTION 41.  Section 2210.608(a), Insurance Code, is amended
  to read as follows:
         (a)  Public security proceeds, including investment income,
  shall be held in trust for the exclusive use and benefit of the
  association.  The association may use the proceeds to:
               (1)  pay incurred claims and operating expenses of the
  association;
               (2)  purchase reinsurance for the association;
               (3)  pay the costs of issuing the public securities,
  and public security administrative expenses, if any;
               (4)  provide a public security reserve; [and]
               (5)  pay capitalized interest and principal on the
  public securities for the period determined necessary by the
  association;
               (6)  pay private financial agreements entered into by
  the association as temporary sources of payment of losses and
  operating expenses of the association; and
               (7)  reimburse the association for any cost described
  by Subdivisions (1)-(6) paid by the association before issuance of
  the public securities.
         SECTION 42.  Sections 2210.609(a) and (b), Insurance Code,
  are amended to read as follows:
         (a)  The board and the association shall enter into an
  agreement under which the association shall provide for the payment
  of all public security obligations from available funds collected
  by the association and deposited into the public security
  obligation revenue fund.  If the association determines that it is
  unable to pay the public security obligations and public security
  administrative expenses, if any, with available funds, the
  association shall pay those obligations and expenses in accordance
  with Sections 2210.612, 2210.613, [and] 2210.6135, and 2210.6136 as
  applicable.  Class 1,  Class 2, or Class 3 public securities may be
  issued on a parity or subordinate lien basis with other Class 1,
  Class 2, or Class 3 public securities, respectively.
         (b)  The board shall notify the association of the amount of
  the public security obligations and the estimated amount of public
  security administrative expenses, if any, each calendar year in a
  period sufficient, as determined by the association, to permit the
  association to determine the availability of funds and assess a
  premium surcharge if necessary.
         SECTION 43.  Section 2210.610(a), Insurance Code, is amended
  to read as follows:
         (a)  Revenues received from the premium surcharges under
  Section 2210.613 and member assessments under Sections 2210.613 and
  2210.6135 may be applied only as provided by this subchapter.
         SECTION 44.  Section 2210.611, Insurance Code, is amended to
  read as follows:
         Sec. 2210.611.  EXCESS REVENUE COLLECTIONS AND INVESTMENT
  EARNINGS. Revenue collected in any calendar year from a premium
  surcharge under Section 2210.613 and member assessments under
  Sections 2210.613 and 2210.6135 that exceeds the amount of the
  public security obligations and public security administrative
  expenses payable in that calendar year and interest earned on the
  public security obligation fund may, in the discretion of the
  association, be:
               (1)  used to pay public security obligations payable in
  the subsequent calendar year, offsetting the amount of the premium
  surcharge and member assessments, as applicable, that would
  otherwise be required to be levied for the year under this
  subchapter;
               (2)  used to redeem or purchase outstanding public
  securities; or
               (3)  deposited in the catastrophe reserve trust fund.
         SECTION 45.  Section 2210.612, Insurance Code, is amended to
  read as follows:
         Sec. 2210.612.  PAYMENT OF CLASS 1 PUBLIC SECURITIES. (a)
  The association shall pay Class 1 public securities issued under
  Section 2210.072 from its net premium and other revenue.
         (b)  The association may enter financing arrangements as
  described by Section 2210.072(d) as necessary to obtain public
  securities issued under Section 2210.072 [that section].  Nothing
  in this subsection prevents [shall prevent] the authorization and
  creation of one or more programs for the issuance of commercial
  paper before the date of an occurrence or series of occurrences that
  results in insured losses under Section 2210.072(a) [so long as no
  tranche of commercial paper is issued under a commercial paper
  program until after such an occurrence].
         SECTION 46.  Sections 2210.613(b), (c), and (d), Insurance
  Code, are amended to read as follows:
         (b)  Seventy percent of the cost of the public securities
  shall be paid by a [nonrefundable] premium surcharge collected
  under this section in an amount set by the commissioner.  On
  approval by the commissioner, each insurer, the association, and
  the Texas FAIR Plan Association shall assess, as provided by this
  section, a premium surcharge to each policyholder of a policy that
  is in effect on or after the 180th day after the date the
  commissioner issues notice of the approval of the public securities
  [its policyholders as provided by this section].  The premium
  surcharge must be set in an amount sufficient to pay, for the
  duration of the issued public securities, all debt service not
  already covered by available funds and all related expenses on the
  public securities.
         (c)  The premium surcharge under Subsection (b) shall be
  assessed on all policyholders of policies that cover [who reside or
  have operations in, or whose] insured property that is located in a
  catastrophe area, including automobiles principally garaged in a
  catastrophe area. The premium surcharge shall be assessed on [for]
  each Texas windstorm and hail insurance policy and each property
  and casualty insurance 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 [that provide coverage on any premises,
  locations, operations, or property located in the area described by
  this subsection for all property and casualty lines of insurance,
  other than federal flood insurance, workers' compensation
  insurance, accident and health insurance, and medical malpractice
  insurance].
         (d)  A premium surcharge under Subsection (b) is a separate
  [nonrefundable] charge in addition to the premiums collected and is
  not subject to premium tax or commissions.  Failure by a
  policyholder to pay the surcharge constitutes failure to pay
  premium for purposes of policy cancellation.
         SECTION 47.  Section 2210.6135(a), Insurance Code, is
  amended to read as follows:
         (a)  The association shall pay Class 3 public securities
  issued under Section 2210.074 as provided by this section through
  member assessments.  The association, for the payment of the
  losses, shall assess the members of the association in the amounts
  necessary for the repayment of public securities issued in a
  principal [an] amount not to exceed $500 million per catastrophe
  year [for the payment of the losses].  The association shall notify
  each member of the association of the amount of the member's
  assessment under this section.
         SECTION 48.  Subchapter M, Chapter 2210, Insurance Code, is
  amended by adding Section 2210.6136 to read as follows:
         Sec. 2210.6136.  COMBINED SOURCES OF PAYMENT. (a) In lieu
  of issuing distinct Class 1, Class 2, or Class 3 public securities,
  on request of the association and approval by the commissioner, the
  board may issue public securities payable from all of the sources
  described in Sections 2210.612, 2210.613, and 2210.6135 with:
               (1)  the first source of payment being as described in
  Section 2210.612 to the extent public securities issued under this
  section are marketable, in a principal amount not to exceed $1
  billion;
               (2)  the second source of payment being as described in
  Section 2210.613, in a principal amount not to exceed $1 billion;
  and
               (3)  the third source of payment being as described in
  Section 2210.6135.
         (b)  The aggregate principal amount of public securities
  issued in the manner described by this section may not exceed $2.5
  billion in any consecutive 12-month period from the earlier of, as
  applicable:
               (1)  the date on which public securities are issued
  under Section 2210.072(a) before an occurrence or series of
  occurrences that results in insured losses; or
               (2)  the date of an occurrence or series of occurrences
  in a calendar year that results in insured losses in excess of
  premium and other revenue of the association from available
  reserves of the association and available amounts in the
  catastrophe reserve trust fund.
         SECTION 49.  Section 2210.614, Insurance Code, is amended to
  read as follows:
         Sec. 2210.614.  REFINANCING PUBLIC SECURITIES. (a) The
  association may request the board to refinance any public
  securities issued in accordance with Subchapter B-1, whether Class
  1, Class 2, or Class 3 public securities, with public securities
  payable from the same sources as the original public securities.
         (b)  Notwithstanding Section 1207.006, Government Code,
  public securities refinanced under this section may not have a term
  that is greater than 14 years.
         SECTION 50.  Section 2210.616, Insurance Code, is amended to
  read as follows:
         Sec. 2210.616.  STATE NOT TO IMPAIR PUBLIC SECURITY
  OBLIGATIONS. (a) The state pledges for the benefit and protection
  of financing parties, the board, and the association that the state
  will not take or permit any action that would:
               (1)  impair the collection of member assessments and
  premium surcharges or the deposit of those funds into the member
  assessment trust fund or premium surcharge trust fund;
               (2)  reduce, alter, or impair the member assessments or
  premium surcharges to be imposed, collected, and remitted to
  financing parties until the principal, interest, and premium, and
  any other charges incurred and contracts to be performed in
  connection with the related public securities, have been paid and
  performed in full; or
               (3)  [If public securities under this subchapter are
  outstanding, the state may not:
               [(1)     take action to limit or restrict the rights of the
  association to fulfill its responsibility to pay public security
  obligations; or
               [(2)]  in any way impair the rights and remedies of the
  public security owners until the public securities are fully
  discharged.
         (b)  A party issuing public securities under this subchapter
  may include the pledge described by Subsection (a) in any
  documentation relating to those securities.
         SECTION 51.  Subchapter M, Chapter 2210, Insurance Code, is
  amended by adding Section 2210.6165 to read as follows:
         Sec. 2210.6165.  PROPERTY RIGHTS. If public securities
  issued under this subchapter are outstanding, the rights and
  interests in revenues from a premium surcharge or member assessment
  held by the association, a successor to the association, any member
  of the association, or any entity required to impose, collect, or
  receive a premium surcharge or a member assessment under this
  subchapter, to the extent those rights and interests are property
  rights, are extinguished once those revenues are first pledged for
  the repayment of the association's public security obligations as
  provided by Section 2210.609.
         SECTION 52.  Section 2210.551(e), Insurance Code, is
  repealed.
         SECTION 53.  (a)  A legislative interim study committee
  shall conduct a study of alternative ways to provide insurance to
  the seacoast territory of this state through a quasi-governmental
  entity.
         (b)  The committee is composed of 12 members appointed as
  follows:
               (1)  four members of the senate appointed by the
  lieutenant governor, two of whom represent one or more first tier
  coastal counties and two of whom do not represent a first tier
  coastal county;
               (2)  four members of the house of representatives
  appointed by the speaker of the house of representatives, two of
  whom represent one or more first tier coastal counties and two of
  whom do not represent a first tier coastal county; and
               (3)  four public members with a background in actuarial
  science, law, business, or insurance, as follows:
                     (A)  two members who do not reside in a first tier
  coastal county, appointed by the governor;
                     (B)  one member who resides in a first tier
  coastal county, appointed by the lieutenant governor; and
                     (C)  one member who resides in a first tier
  coastal county, appointed by the speaker of the house of
  representatives.
         (c)  The speaker of the house of representatives and the
  lieutenant governor shall jointly designate a chair or,
  alternatively, designate two co-chairs, from among the committee
  membership, one of whom represents or resides in a first tier
  coastal county.
         (d)  The committee shall:
               (1)  examine alternative ways to provide insurance to
  the seacoast territory of this state through a quasi-governmental
  entity;
               (2)  recommend:
                     (A)  the appropriate scope of authority and
  responsibility for the entity to provide insurance to the seacoast
  territory of this state;
                     (B)  an organizational structure to exercise
  authority and responsibility over the provision of insurance to the
  seacoast territory of this state;
                     (C)  a timetable for implementation; and
                     (D)  specific amendments to state laws and rules
  that are necessary to implement the committee's recommendations
  under this subdivision; and
               (3)  estimate funding requirements to implement the
  recommendations.
         (e)  The committee may adopt rules necessary to conduct
  business under and implement this section.
         (f)  Except as specifically provided by this section, the
  committee may operate in the same manner as a joint committee of the
  82nd Legislature.
         (g)  Not later than December 1, 2012, the committee shall
  report to the governor and the legislature the recommendations made
  under this section.
         SECTION 54.  (a)  The name of the Texas Windstorm Insurance
  Association is changed to the Texas Coastal Insurance Plan
  Association.
         (b)  A reference in law to the Texas Windstorm Insurance
  Association or the Texas Windstorm Insurance Association Act means
  the Texas Coastal Insurance Plan Association or the Texas Coastal
  Insurance Plan Act, respectively.
         SECTION 55.  This Act applies only to a Texas windstorm and
  hail insurance policy, and a claim or dispute arising under a Texas
  windstorm and hail insurance policy, delivered, issued for
  delivery, or renewed by the Texas Windstorm Insurance Association
  on or after the 30th day after the effective date of this Act. A
  Texas windstorm and hail insurance policy, and a claim or dispute
  arising under a Texas windstorm and hail insurance policy,
  delivered, issued for delivery, or renewed by the Texas Windstorm
  Insurance Association before the 30th day after the effective date
  of this Act, are governed by the law in effect immediately before
  the effective date of this Act, and the former law is continued in
  effect for that purpose.
         SECTION 56.  The Texas Windstorm Insurance Association shall
  amend the association's plan of operation to conform to the changes
  in law made by this Act not later than January 1, 2012.
         SECTION 57.  If any provision of this Act or its application
  to any person or circumstance is held invalid, the invalidity does
  not affect other provisions or applications of this Act that can be
  given effect without the invalid provision or application, and to
  this end the provisions of this Act are severable.
         SECTION 58.  This Act takes effect immediately if it
  receives a vote of two-thirds of all the members elected to each
  house, as provided by Section 39, Article III, Texas Constitution.  
  If this Act does not receive the vote necessary for immediate
  effect, this Act takes effect on the 91st day after the last day of
  the legislative session.

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