Proposed Action on Rules
The Commissioner of Insurance, at a public hearing under Docket No. 2488
on February 4, 2002 at 9:30 a.m., in Room 100 of the William P. Hobby Jr.
State Office Building, 333 Guadalupe Street in Austin, Texas, will consider
a petition filed by State Farm Fire and Casualty Company, State Farm General
Insurance Company, and State Farm Lloyds (collectively referred to as State
Farm) that requests the adoption of three new residential property policy
forms which include form no. FP-7955 TX (homeowners policy), form no. FP-7954
TX (renters policy), and form no. FP-7956 TX (condominium unitowners policy)
and further requests the adoption of thirty-six new endorsements (as listed
in Exhibit D of the petition) for use in the State of Texas.
These filings were made pursuant to the Insurance Code Article 5.35 (b),
which provides that the Commissioner may adopt policy forms and endorsements
of national insurers. State Farm conforms to the definition of a national
insurer and is, therefore, authorized to file its policies and endorsements
with the Department to be considered by the Commissioner for adoption.
State Farm's original petition on this matter, filed on January 21, 1997,
requested the adoption of a proposed new Texas homeowners policy. Since the
filing of the original petition, State Farm and Department staff have engaged
in extensive discussions and dialogue relating to the proposed form and endorsements.
State Farm has made several modifications to the homeowners policy, as originally
filed, as a result of its discussions with Department staff. On March 15,
2001, State Farm filed an amended petition in which it refiled its proposed
new homeowners policy with the modifications that have been agreed upon by
State Farm and staff and it also filed a proposed new renters policy, condominium
unitowners policy, and thirty-three endorsements as additional items to be
considered by the Commissioner. On June 12, 2001, State Farm amended its petition
by withdrawing endorsement no. FE-7421.1 and substituting in its place endorsement
no. FE-8716. A hearing on the policy forms and endorsements filed with the
March 15, 2001, petition was originally set for July 24, 2001. Notice of the
hearing was published in the June 22, 2001, issue of the Texas Register (26
TexReg 4739). At the request of State Farm, the Texas Department of Insurance
postponed the public hearing, with notice of the postponement published in
the August 3, 2001, issue of the Texas Register (26 TexReg 5857). On November
16, 2001, State Farm filed an amended petition in which it refiled its proposed
new homeowners policy, renters policy, condominium unitowners policy, and
thirty-three endorsements with certain modifications and two new Fungus Exclusion
Endorsements and a Fungus Limited Coverage Endorsement as additional items
to be considered by the Commissioner.
I. State Farm Policies. The State Farm homeowners policy (form No. FP-7955),
renters policy (form No. FP-7954), and condominium unitowners policy (form
No. FP-7956) have not been modified from those that were proposed and noticed
in the June 22, 2001 issue of the Texas Register (26 TexReg 4739). Since these
policies were discussed in the June 22, 2001 exempt filing notification, and
the discussion regarding the coverage in these policies continues to be accurate,
the Department refers persons who are seeking information on these policies
to the prior notification.
A copy of the proposed policy forms is available as Exhibits A-C of the
November 16, 2001, amended petition.
II. Endorsements Previously Proposed.
A. Endorsements Previously Proposed But Not Amended. State Farm proposed
thirty-three new endorsements in the March 15, 2001, petition filed with the
Department. Thirty-one of these endorsements were refiled without revisions
in State Farm's amended petition dated November 16, 2001. A copy of the proposed
endorsements is available as part of Exhibit E of the November 16, 2001, amended
petition.
B. Amendments to Endorsements Previously Proposed. The two Water Damage
Endorsements FE-5369 and FE-5393 that were previously filed in State Farm's
March 15, 2001 petition, were refiled in State Farm's amended petition dated
November 16, 2001, however, they have been revised. Water Damage Endorsement
FE-5369 which may be attached to the homeowners or condominium unitowners
policy and Water Damage Endorsement FE 5393 which may be attached to the renters
policy have been revised to add a broad definition of "fungus" to mean any
type or form of fungus, including mold, mildew, mycotoxins, spores, scents
or byproducts produced or released by fungi. These endorsements have been
further revised to substitute the defined term "fungus" for the undefined
terms "mold or fungus" wherever they appear in the endorsements. Additionally,
in Section 1-Losses Insured, Coverage B-Personal Property a new Item 13.,
relating to sudden and accidental tearing asunder, cracking, burning, or bulging
of a hot water heating system, air conditioning system, or fire protection
sprinkler system, will be added to replace item 13. in the policies to clarify
that the coverage provided under this item is limited to the coverage specifically
provided by this endorsement.
A copy of the proposed amended endorsements is available as part of Exhibit
E of the November 16, 2001 amended petition.
III. New Endorsements.
A. Fungus (Including Mold) Exclusion Endorsements FE-5398 and FE-5399.
Fungus (Including Mold) Exclusion Endorsement FE-5398 which will be attached
to a homeowners or condominium unitowners policy and FE-5399 which will be
attached to a renters policy are intended to exclude losses resulting from
fungus. Fungus is broadly defined in these endorsements to mean any type or
form of fungus including mold, mildew, mycotoxins, spores, scents, or byproducts
that are produced or released by fungi. These endorsements amend Section 1-Losses
Insured, items 12.d. and 13.b. to remove the word "mold" from these exceptions
to coverage to restructure the policies to create a separate and more comprehensive
fungus exclusion. These endorsements amend the Section 1-Losses Not Insured
portion of the policy by adding item g. to item 2. to exclude coverage for
any loss of use or delay in rebuilding, repairing or replacing covered property,
including any associated cost or expense due to interference at the residence
premises or location of the rebuilding, repair or replacement that is caused
by or results from fungus. Remediation is excluded including the cost to remove
fungus from covered property or to repair, restore, or replace damaged property
and tearing out and replacing any part of the building or other property as
needed to gain access to the fungus. The excluded remediation further includes
the cost of any testing or monitoring of air or property to confirm the type,
absence, presence or level of fungus, whether performed prior to, during or
after removal, repair, restoration or replacement of covered property.
A copy of the proposed amended endorsements is available as part of Exhibit
E of the November 16, 2001, amended petition.
B. Fungus (Including Mold) Limited Coverage Endorsement FE-5410. This endorsement
may be attached to homeowners, condominium unitowners, and renters policies
to provide remediation of fungus if the fungus is the result of a covered
cause of loss. Coverage is provided for any loss of use or delay in rebuilding,
repairing or replacing covered property, including any associated cost or
expense due to interference at the residence premises or location of the rebuilding,
repair or replacement, by fungus. Coverage is provided for remediation including
the cost to remove fungus from covered property or to repair, restore or replace
damaged property and tearing out and replacing any part of the building or
other property as needed to gain access to the fungus. Coverage for remediation
also includes the cost of any testing or monitoring of air or property to
confirm the type, absence, presence or level of fungus, whether performed
prior to, during or after removal, repair, restoration or replacement of covered
property.
The endorsement does not provide any coverage for fungus which is the result
of: (1) continuous or repeated seepage or leakage of water or steam from heating,
air conditioning or automatic fire protective sprinkler system, household
appliance or plumbing system; or (2) defect, weakness, inadequacy, fault or
unsoundness in planning, zoning, development, surveying, siting, design, specifications,
workmanship, construction, grading, compaction, materials used in construction
or repair, or maintenance of any property whether on or off the residence
premises.
Fungus coverage is subject to the following conditions: (1) immediate notice
must be provided to the insurer of the occurrence of the covered cause of
loss, (2) remediation must begin as soon as possible, and (3) all reasonable
means must be used to save and preserve the property from further damage.
Coverage is available for up to four different limits: $15,000, $25,000,
$50,000, and the full Coverage A (Dwelling) limit of liability. The limit
of liability will be shown on the policy declarations page. This limit applies
regardless of the number of covered causes of loss that combine or contribute
to the presence of resulting fungus, or the number of claims made during the
policy period. The limit also includes any payments for Section I - Additional
Coverages and Coverage C - Loss of Use. The limit of liability for the Fungus
(Including Mold) Limited Coverage Endorsement is not in addition to the limit
of insurance that applies to covered property.
A copy of the proposed amended endorsement is available as part of Exhibit
E of the November 16, 2001, amended petition.
IV. State Farm's Plan to Phase In the Fungus Endorsements. State Farm has
informed the Department that when the proposed fungus endorsements have been
adopted, State Farm will offer the Fungus (Including Mold) Limited Coverage
Endorsement to new policyholders and existing policyholders currently receiving
mold damage coverage under the HO-B policy form. Existing policyholders can
elect to include mold coverage by adding this coverage by endorsement for
an additional premium charge. State Farm has also agreed to make the Fungus
(Including Mold) Limited Coverage Endorsement available to new and existing
policyholders under the condominium unitowners policy and the renters policy.
If the fungus coverage endorsement is rejected by new or existing policyholders,
it will not be available for purchase at a later date.
V. Consumer Disclosures. State Farm agrees to provide disclosures in an
explanatory letter and summary of coverages noting where there is less coverage
in the State Farm policies and endorsements, including where there is less
fungus coverage, than in the currently prescribed policies. These disclosures
will be provided to the policyholders who are being converted from the currently
prescribed Texas forms to the new State Farm policy forms and endorsements.
The Commissioner has jurisdiction of this matter pursuant to the Insurance
Code, Articles 5.35 and 5.96.
A copy of the amended petition, including the exhibits with the full text
of the proposed policy forms, endorsements, and side by side comparison and
a copy of the exempt filing notice are available for review in the office
of the Chief Clerk of the Texas Department of Insurance, 333 Guadalupe Street,
Austin, Texas. Additionally, a copy of the petition that was noticed for hearing
on July 24, 2001, including the exhibits with the full text of the proposed
policy forms and endorsements and a side by side comparison of the proposed
State Farm homeowners policy and the HO-B, and a copy of the exempt filing
notice are also available for review in the office of the Chief Clerk of the
Texas Department of Insurance, 333 Guadalupe Street, Austin, Texas. For further
information or to request copies of the petitions, side by side comparison,
and the exempt filing notices, please contact Angie Arizpe at (512) 463-6326;
refer to (Ref. No. P-0301-04). A copy of the exempt filing notice that appeared
in the June 22, 2001, issue of the Texas Register (26 TexReg 4739) and this
exempt filing notice that will appear in the January 4,2002 issue of the Texas
Register can be found on our agency home page at http://www.tdi.state.tx.us.
Comments on the proposed changes must be submitted in writing within 30
days after publication of the proposal in the Texas Register, to the Office
of the Chief Clerk, Texas Department of Insurance, P. O. Box 149104, MC 113-2A,
Austin, Texas 78714-9104. An additional copy of the comments is to be submitted
to Marilyn Hamilton, Associate Commissioner, Property and Casualty Program,
Texas Department of Insurance, P. O. Box 149104, MC 104-PC, Austin, Texas
78714-9104.
This notification is made pursuant to the Insurance Code, Article 5.96,
which exempts it from the requirements of the Government Code, Chapter 2001
(Administrative Procedure Act).
TRD-200108208
Lynda H. Nesenholtz
General Counsel and Chief Clerk
Texas Department of Insurance
Filed: December 21, 2001