Proposed Rules Title 28

TITLE 28. INSURANCE

Part 1. TEXAS DEPARTMENT OF INSURANCE

Chapter 5. PROPERTY AND CASUALTY INSURANCE

Subchapter E. TEXAS WINDSTORM INSURANCE ASSOCIATION

The Texas Department of Insurance (Department) proposes amendments to §§5.4101, 5.4201, 5.4401, and 5.4501 concerning Texas Windstorm Insurance Association (TWIA) policy forms, endorsements, and manual rules. The Department is proposing to adopt by reference: (i) modifications to existing TWIA Dwelling and Commercial Policy forms, (ii) a new endorsement for use with the TWIA Dwelling Policy, (iii) modifications to two existing endorsements for TWIA Commercial and Dwelling Policies, (iv) modifications to the existing Texas Special Mobile Home Windstorm and Hail Insurance Policy form, and (v) updates to the existing rules manual for TWIA; and to repeal an existing obsolete endorsement used with the TWIA Commercial Policy.

Amended §5.4101 is necessary to adopt modifications to existing TWIA Commercial and Dwelling Policies that would replace the current flood exclusion clause with a clarified flood exclusion clause (specifically excluding losses or damages caused by floods, surface water, waves, storm surge, tides, tidal water, tidal waves, tsunami, seiche, overflow of streams or other bodies of water, or spray from any of these, all whether driven by wind or not) and replace the existing deductible clause with a clarified deductible clause that specifies that deductibles apply on a per item per occurrence basis. References to the Insurance Code in existing TWIA Commercial and Dwelling Policies are updated to conform to the non-substantive code revision enacted by the 79th Legislature in H.B. 2017, effective April 1, 2007. Amended §5.4201 is necessary to adopt an optional new endorsement for the TWIA Dwelling Policy that provides for an annual increase in the dwelling limit of liability by a percentage established by a building cost index to be designated by TWIA. Amended §5.4201 is also necessary to update references to the Insurance Code in existing endorsements for TWIA Commercial and Dwelling Policies to conform to the non-substantive code revision enacted by the 79th Legislature in H.B. 2017 and to delete an endorsement for the TWIA Commercial Policy (Form No. TWIA-65, Large Deductible Endorsement) that is obsolete following the approval of new commercial deductible options in Commissioner's Order No. 06-1110, issued October 16, 2006. Amended §5.4401 is necessary to adopt modifications to the existing Texas Special Mobile Home Windstorm and Hail Insurance Policy that replace the current flood exclusion clause with a clarified flood exclusion clause (specifically excluding the same losses or damages as the proposed modified TWIA Dwelling and Commercial Policies) and change references to the Insurance Code to conform to the non-substantive code revision enacted by the 79th Legislature in H.B. 2017. Amended §5.4501 is necessary to adopt updates to the existing TWIA rules manual that reflect commercial deductible options and associated credits established by Commissioner's Order No. 06-1110 and delete outdated options and associated credits; clarify that commercial deductibles apply on a per item per occurrence basis; make known the availability of an optional new Dwelling Policy endorsement that annually adjusts the limit of liability by a percentage established by a building cost index to be designated by TWIA; and designate as unavailable an obsolete Commercial Policy endorsement.

The purpose of TWIA, as stated in the Insurance Code §2210.001, is to provide windstorm and hail coverage to residents and businesses in the designated catastrophe areas that are unable to obtain such coverage in the voluntary market. The Insurance Code, §2210.351, requires that TWIA must file with the Department modifications of policy and endorsement forms that TWIA proposes to use and authorizes the Commissioner to approve, disapprove or modify the modifications of policy forms and endorsements in writing. The Insurance Code, §2210.008, requires that the Commissioner approve TWIA policy forms by order after notice and a hearing. The Insurance Code, §2210.351, also requires that TWIA must file with the Department each modification of the rules manual it proposes to use and authorizes the Commissioner to approve, modify, or disapprove in writing each modification of the rules manual submitted.

TWIA filed a petition (Ref. No. P-0407-03) with the Department on April 30, 2007, requesting that §5.4101 and §5.4401 be amended to adopt by reference modifications to the existing TWIA Dwelling and Commercial Policies and the existing Texas Special Mobile Home Windstorm and Hail Insurance Policy to clarify the flood exclusion clause in each policy form.

TWIA filed a petition (Ref. No. P-0807-07) with the Department on August 15, 2007, requesting that §§5.4101, 5.4201, and 5.4401 be amended to adopt by reference modifications to the existing TWIA Dwelling Policy, the existing TWIA Commercial Policy, two existing endorsements (Form No. TWIA-432, Extension of Coverage--Increased Cost of Construction (Commercial) and Form No. TWIA-431, Extension of Coverage--Increased Cost of Construction (Dwelling)), and the existing Texas Special Mobile Home Windstorm and Hail Insurance Policy to update a reference to the Government Code in each policy form, to update restatements of and references to the Insurance Code in the existing policy forms and endorsements, and to correct an obsolete reference to the Board of Insurance in the existing Texas Special Mobile Home Windstorm and Hail Insurance Policy.

TWIA filed a petition (Ref. No. P-1007-14) with the Department on October 9, 2007, requesting that §5.4101 be amended to adopt by reference modifications to the existing TWIA Dwelling and Commercial Policies to clarify the deductible clause in each and that §5.4201 be amended to repeal an obsolete existing commercial endorsement (Form No. TWIA-65, Large Deductible Endorsement). The petition also requested that §5.4501 be amended to adopt by reference rules manual updates that reflect the commercial deductible options and associated credits adopted under Commissioner's Order No. 06-1110 and delete outdated options and associated credits (Rules Manual Section I, General Rules, subsection J. 2); clarify that commercial deductibles apply on a per item per occurrence basis (Rules Manual Section I, General Rules, subsection J. 2); and designate as unavailable an obsolete Commercial Policy endorsement (Form No. TWIA-65, Large Deductible Endorsement) (Rules Manual Section II, Policy Forms and Endorsements, subsection (b)(7)).

TWIA filed a petition (Ref. No. P-1007-16) with the Department on October 31, 2007, requesting that §5.4201 be amended to adopt by reference a new optional Dwelling Policy endorsement (Form No. TWIA 200- Adjusted Building Cost Endorsement), and §5.4501 be amended to adopt by reference a rules manual update that reflects the availability of the additional endorsement (Rules Manual Section II, Policy Forms and Endorsements, subsections (a)(11) and (c)(11)).

The proposed modifications of the flood exclusion clause clarify existing language in the TWIA Dwelling Policy, the TWIA Commercial Policy, and the Texas Special Mobile Home Windstorm and Hail Insurance Policy. The modified flood exclusion clause will specifically exclude any and all losses or damages caused by floods, surface water, waves, storm surge, tides, tidal water, tidal waves, tsunami, seiche, overflow of streams or other bodies of water, or spray from any of these, all whether driven by wind or not. The existing flood exclusion clauses in all three policies currently exclude flood losses, but do not contain as detailed a list of exclusions as the proposed modified clauses.

The proposed modification of the deductible clause in both the Commercial and Dwelling Policies clarifies that deductibles apply on a per item per occurrence basis. This modification reflects the current practice and is not a substantive change in the TWIA application of deductibles following a loss. In addition, Commissioner's Order No. 06-1110, dated October 16, 2006, addressed requests in an earlier TWIA petition (Ref. No. P-0806-12), by establishing three commercial deductible options of one percent, two percent, and five percent, based on the limit of insurance for the covered item and associated credits for each option. The TWIA Commercial Policy is also proposed to be updated by using a new value for a hypothetical deductible in two examples in the policy form illustrating the effect of coinsurance on coverage. The new value for a hypothetical deduction is taken from the current range of commercial deductibles recently adopted in Commissioner's Order No. 06-1110. A Commercial Policy endorsement (Form No. TWIA-65, Large Deductible Endorsement), is proposed to be repealed because it is obsolete following the revision in TWIA commercial deductible options. Updates to the existing TWIA rules manual are proposed to be adopted to include new commercial deductible options and a schedule of credits for the new options adopted by Commissioner's Order No. 06-1110, dated October 16, 2006 (Section I, General Rules, subsection J.2); to delete from the rules manual outdated commercial deductible options and schedules of credits for the outdated options (Section I, General Rules, subsection J.2); to provide that commercial deductibles apply per item per occurrence (Section I, General Rules, subsection J.2); and to advise that Commercial Policy endorsement Form No. TWIA-65 is no longer available (Section II, Policy Forms and Endorsements, subsection (b)(7)).

Additional proposed modifications to the existing TWIA Dwelling Policy, the existing TWIA Commercial Policy, and the existing Texas Special Mobile Home Windstorm and Hail Insurance Policy update references to the Government Code, Chapter 418, concerning the declaration of a disaster and provide a lengthier disclosure of Insurance Code appeal procedures in each existing policy form. The lengthier disclosure of Insurance Code appeal procedures does not substantively change the legal procedures available to policyholders through the existing policies, but does update the Insurance Code references to conform to the non-substantive code revision enacted by the 79th Legislature in H.B. 2017. A proposed modification of the existing Texas Special Mobile Home Windstorm and Hail Insurance Policy deletes an obsolete reference to the Board of Insurance and replaces it with the Texas Department of Insurance. The proposed modifications of two existing endorsements (Form No. TWIA-432, Extension of Coverage--Increased Cost of Construction (Commercial) and Form No. TWIA-431, Extension of Coverage--Increased Cost of Construction (Dwelling)), do not change the substantive terms of the endorsements, but provide updated references to the Insurance Code Chapter 2210 to conform to the non-substantive code revision enacted by the 79th Legislature in H.B. 2017.

A new optional dwelling endorsement (Form No. TWIA-200, Adjusted Building Cost Endorsement), proposed to be adopted by reference in amended §5.4201, provides for an annual increase in the dwelling limit of liability by a percentage established by a building cost index to be designated by TWIA. This endorsement will be provided, at the insured's option, at no additional premium. The resulting increases in limits are not mandatory and may be subsequently modified or rejected by the insured. An update to the existing TWIA rules manual is proposed to be adopted to reflect the availability of the new dwelling endorsement (Rules Manual Section II, Policy Forms and Endorsements, subsections (a) (11) and (c)(11)).

Amended §5.4101 proposes to adopt by reference, effective March 1, 2008, modifications to existing TWIA Dwelling and Commercial Policies to incorporate in each existing policy a clarified flood exclusion clause, a clarified deductible clause, and a lengthier disclosure of Insurance Code appeal procedures; to update in each existing policy a reference to the Government Code, Chapter 418; and to provide Insurance Code references in each existing policy conforming to the non-substantive code revision enacted by the 79th Legislature in H.B. 2017. An additional modification to the existing TWIA Commercial Policy is also proposed to be adopted to use a new value for a hypothetical commercial deductible, taken from the range of commercial deductibles adopted in Commissioner's Order No. 06-1110, in two examples in the policy form illustrating the effect of coinsurance on coverage. No other modifications of existing TWIA Dwelling and Commercial policies are proposed to be adopted.

Amended §5.4201(3) proposes to delete existing subparagraph (D) because it adopts by reference existing commercial endorsement Form No. TWIA-65, Large Deductible Endorsement, made obsolete by Commissioner's Order No. 06-1110 adopting new commercial deductible options. Amended §5.4201(3) proposes to redesignate existing subparagraphs (E) - (K) as subparagraphs (D) - (J) because of the proposed deletion of existing subparagraph (D). Amended redesignated §5.4201(3)(J) and amended §5.4201(4)(H) propose to adopt by reference, effective March 1, 2008, modifications to two existing endorsements, Form No. TWIA-432, Extension of Coverage-Increased Cost of Construction (Commercial) and Form No. TWIA-431, Extension of Coverage-Increased Cost of Construction (Dwelling), respectively, to conform the Insurance Code references in the endorsements to the non-substantive code revision enacted by the 79th Legislature in H.B. 2017.

The proposal combines the listing of TWIA Dwelling Policy Endorsements that are in two separate paragraphs (§5.4201(4) and (5)) in the existing rule into a single listing under paragraph (4). Therefore, amended §5.4201 proposes to delete the caption in existing paragraph (5) because the text is a repetition of the text of existing §54201(4). Existing subparagraphs (A) - (H) of §5.4201(5) are proposed to be redesignated as subparagraphs (I) - (P) of amended §5.4201(4). Existing §5.4201(6) is proposed to be renumbered as amended §5.4201(5) because of the proposed deletion of existing §5.4201(5).

Section 5.4201(4)(Q) proposes to adopt by reference new Form No. TWIA-200, Adjusted Building Cost Endorsement, effective March 1, 2008.

No other modifications of existing TWIA endorsements are proposed to be adopted.

Amended §5.4401 proposes to adopt by reference, effective March 1, 2008, modifications to the existing Texas Special Mobile Windstorm and Hail Insurance Policy, incorporating in the policy a clarified flood exclusion clause, a lengthier disclosure of Insurance Code appeal procedures, and an updated reference to Government Code, Chapter 418; conforming Insurance Code references in the existing policy to the non-substantive code revision enacted by the 79th Legislature in H.B. 2017; and replacing an obsolete reference in the policy to the Board of Insurance with the Texas Department of Insurance. No other modifications of the existing Texas Special Mobile Windstorm and Hail Insurance Policy are proposed to be adopted.

Amended §5.4501 proposes to adopt by reference, effective March 1, 2008, updates to the existing TWIA rules manual that reflect commercial deductible options and associated credits adopted by Commissioner's Order No. 06-1110 and delete outdated options and associated credits (Rules Manual Section I, General Rules, subsection J.2); clarify that commercial deductibles apply on a per item per occurrence basis (Rules Manual Section I, General Rules, subsection J.2); make known the availability of an optional new Dwelling Policy endorsement that annually adjusts the limit of liability by a percentage established by a building cost index to be designated by TWIA (Rules Manual Section II, Policy Forms and Endorsements, subsections (a)(11) and (c)(11)); and designate as unavailable an obsolete Commercial Policy endorsement (Rules Manual Section II, Policy Forms and Endorsements, subsection (b)(7)). Non-substantive changes in Rules Manual Section II are also proposed to be made to the lettered and numbered designations of endorsements listed after the additions of new subsections (a)(11) and (c)(13). No other updates or modifications to the existing TWIA rules manual are proposed to be adopted. A typographical error occurring in the second sentence of amended §5.4501 is proposed to be corrected by replacing the existing word manuals with the word manual.

Copies of proposed modified policy forms, the proposed modified endorsements for extension of coverage due to increased cost of construction for the Dwelling and Commercial Policies, the existing Commercial Policy endorsement proposed to be repealed, the Dwelling Policy endorsement proposed to be added, and the proposed updates to the rules manual, may be obtained by contacting the Personal Lines Division, Mail Code 104-1A, Texas Department of Insurance, 333 Guadalupe Street, Austin, Texas 78701, (512) 322-2266.

FISCAL NOTE. Marilyn Hamilton, Associate Commissioner of the Property and Casualty Program, has determined that, for each year of the first five years the proposed sections will be in effect, there will be no fiscal impact to state and local governments as a result of the enforcement or administration of the proposal. There will be no measurable effect on local employment or the local economy as a result of the proposal.

PUBLIC BENEFIT/COST NOTE. Ms. Hamilton has further determined that, for each year of the first five years the proposed amendments are in effect, the public benefit anticipated as a result of administering the proposed amendments will be the offering of windstorm and hail policy forms that more clearly state the coverage provided by and excluded under TWIA policies. It is particularly important that TWIA policy forms incorporate a clarified flood damage clause; so that policyholders fully understand that the risk of flood damage is not covered under the TWIA policies, and may consider the separate purchase of federal flood insurance if available. The modified language in the deductible clauses of the Dwelling and Commercial Policies unambiguously states that deductibles apply on a per item per occurrence basis. The updating of legal references in the policy forms and endorsements will assist policyholders and agents locate and review applicable law. The adoption of the proposed dwelling endorsement and the amendment of the rules manual to reflect the availability of the new endorsement will assist policyholders and agents maintain adequate windstorm and hail insurance coverage. The amendment to the rules manual will also assist agents by providing a correct schedule of credits for current commercial policy deductible options. Clarifying through modified policy forms, endorsements, and the rules manual what is covered and what is excluded under TWIA policies benefits TWIA policyholders by enabling TWIA to pay only for losses that were intended to be covered by its policies and eliminating unnecessary costs that could lead to higher rates. TWIA members also benefit by avoiding assessments for losses not intended to be covered by TWIA policies, and the general revenue of the state avoids the loss of premium taxes. The proposed modifications will assist TWIA to continue to achieve its statutory purpose of providing a method by which adequate windstorm and hail insurance may be made available in certain designated portions of this state.

TWIA will incur costs for printing and distributing the modified policies and endorsements; however, TWIA has agreed to bear such costs by filing the petitions. Under proposed §5.4501, TWIA will not incur the costs in printing and distributing the updated pages of the rules manual because the rules manual is printed and distributed by ICT Services (ICT) and Wolters Kluwer Financial Services. Agents who utilize the rules manual subscribe to it directly from one of these sources. ICT charges $15 for new subscriptions and $15 to renew a subscription which includes providing the rules manual and all updates to the rules manual. Wolters Kluwer Financial Services charges $109 for new subscriptions and $85 to renew a subscription which includes providing the rules manual and all updates to the rules manual. ICT and Wolters Kluwer have informed the Department that they will print and distribute the updated rules manual pages to their subscribers at no additional charge.

ECONOMIC IMPACT STATEMENT AND REGULATORY FLEXIBILITY ANALYSIS FOR SMALL AND MICRO BUSINESSES. The Government Code, §2006.002(c), requires that, if a proposed rule may have an economic impact on small businesses, state agencies must prepare as part of the rulemaking process an Economic Impact Statement that assesses the potential impact of the proposed rule on small businesses and a Regulatory Flexibility Analysis that considers alternative methods of achieving the purpose of the rule. The Government Code, §2006.001(a)(2), defines small business as a legal entity, including a corporation, partnership, or sole proprietorship, that is formed for the purpose of making a profit; is independently owned and operated and has fewer than 100 employees or less than $6 million in annual gross receipts. The Government Code, §2006.001(a)(1), defines micro business similarly to small business but specifies that such a business may not have more than 20 employees. The Government Code, §2006.001(a)(1), does not specify a maximum level of gross receipts for a micro business.

TWIA does not meet the definition of a small business under the Government Code, §2006.001(a)(2). TWIA is an association . . . composed of all property insurers authorized to engage in the business of property insurance in this state, formed under the authority of the Insurance Code, §2210.051. It is not a corporation, partnership, nor sole proprietorship. It is not formed for the purpose of making a profit, but to provide a method by which adequate windstorm and hail insurance may be made available in certain designated portions of this state, as mandated by the Insurance Code, §2210.001. Under the Insurance Code, §2210.056, the net earnings of TWIA may not inure to the benefit of private shareholders or individuals; and the assets of TWIA may not be used other than to satisfy claims on policies, make investments authorized under applicable law, pay reasonable and necessary administrative expenses, and purchase reinsurance or prepare for or mitigate the effects of catastrophic natural events. Under the Insurance Code, §2210.452, all premium and other revenue of TWIA in excess of incurred losses and operating expenses is paid to a catastrophe reserve trust fund or a reinsurance program approved by the Commissioner. Further, under the Insurance Code, §2210.056 and §2210.452, on the dissolution of TWIA, all assets revert to the state. TWIA is not independently owned and operated. In addition to not being owned by its members, under the Insurance Code, §2210.101 and §2210.102, TWIA operates with a nine member board of directors responsible and accountable to the Commissioner. TWIA provides windstorm and hail insurance according to a plan of operation as specified by the Insurance Code, §2210.152 and adopted by the Commissioner by rule pursuant to the Insurance Code, §2210.151. Further, TWIA has approximately 150 employees (including employees who are providing services by contract to the Fair Access to Insurance Requirements (FAIR) Plan) and net receipts well over $6 million. An analysis of the rule's economic impact on TWIA is not statutorily required.

Agents who write windstorm and hail insurance through TWIA may meet the definition of small business or micro business in the Government Code, §2006.001. As previously noted, costs for printing and distributing the modified policy forms and endorsements will be borne by TWIA. There will be no new costs to agents to obtain the updated rules manual because updates to the rules manual are included in the cost of a subscription to ICT Services or Wolters Kluwer Financial Services. There is no anticipated adverse economic effect on small or micro businesses regarding the regulatory cost of compliance with the rule proposal; therefore, preparation of an Economic Impact Statement and Regulatory Flexibility Analysis is not statutorily required.

TAKINGS IMPACT ASSESSMENT. The Department has determined that no private real property interests are affected by this proposal and that this proposal does not restrict or limit an owner's right to property that would otherwise exist in the absence of government action and, therefore, does not constitute a taking or require a takings impact assessment under the Government Code, §2007.043.

REQUEST FOR PUBLIC COMMENT. To be considered, written comments on the proposal must be submitted no later than 5:00 p.m. on February 4, 2008, to Gene C. Jarmon, General Counsel and Chief Clerk, Mail Code 113-2A, Texas Department of Insurance, P. O. Box 149104, Austin, Texas 78714-9104. An additional copy of the comment must be simultaneously submitted to Marilyn Hamilton, Associate Commissioner, Property and Casualty Program, Mail Code 104PC, Texas Department of Insurance, P.O. Box 149104, Austin, Texas 78714-9104.

The Commissioner will consider the adoption of the proposed amendments in a public hearing under Docket No. 2679, scheduled for January 29, 2008, at 9:30 a.m., in Room 100 of the William P. Hobby, Jr., State Office Building, 333 Guadalupe Street, Austin, Texas. Written and oral comments presented at the hearing will be considered.

Division 3. POLICY FORMS

28 TAC §5.4101

STATUTORY AUTHORITY. The amendments are proposed pursuant to the Insurance Code, Chapter 2210, and §36.001. The Insurance Code, §2210.008, authorizes the Commissioner, after notice and hearing, to issue any orders which the Commissioner considers necessary to carry out the purposes of the Insurance Code, Chapter 2210, including orders regarding maximum rates, competitive rates, and policy forms. The Insurance Code, §2210.351(a), authorizes the Commissioner to approve, modify, or disapprove each rules manual and each modification of the rules manual TWIA proposes to use. The Insurance Code, §2210.351(b), requires that proposed policy and endorsement forms must be filed with the Department along with proposed manuals of classifications, rules, rates, rating plans, and each modification of those items that TWIA proposes to use. The Insurance Code, §36.001, authorizes the Commissioner of Insurance to adopt any rules necessary and appropriate to implement the powers and duties of the Texas Department of Insurance under the Insurance Code and other laws of this state.

CROSS REFERENCE TO STATUTE. The following statutes are affected by this proposal: Insurance Code Chapter 2210.

§5.4101.TWIA Dwelling and Commercial Policy Forms.

The Texas Department of Insurance adopts by reference the Texas Windstorm Insurance Association Dwelling Policy and the Texas Windstorm Insurance Association Commercial Policy as amended effective March 1, 2008 [ ~~July 15, 2006~~ ]. Specimen copies of these policy forms are available from the Texas Windstorm Insurance Association, P.O. Box 99090, Austin, Texas 78709-9090. They may also be obtained by contacting the Personal Lines Division, Mail Code 104-1A, Texas Department of Insurance, 333 Guadalupe Street, Austin, Texas 78701.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on December 20, 2007.

TRD-200706540

Gene C. Jarmon

General Counsel and Chief Clerk

Texas Department of Insurance

Earliest possible date of adoption: February 3, 2008

For further information, please call: (512) 463-6327

Division 4. ENDORSEMENTS

28 TAC §5.4201

CROSS REFERENCE TO STATUTE. The following statutes are affected by this proposal: Insurance Code Chapter 2210.

§5.4201.Endorsements for Use with TWIA Policy Forms.

The Texas Department of Insurance adopts by reference endorsements for use with the Texas Windstorm Insurance Association (TWIA) Policy Forms. Specimen copies of these endorsements are available from the Texas Windstorm Insurance Association, P.O. Box 99090, Austin, Texas 78709-9090. They are also available from the Personal Lines Division, Mail Code 104-1A, Texas Department of Insurance, 333 Guadalupe Street, Austin, Texas 78701. The endorsement forms are more specifically identified as follows.

(1) - (2) (No change.)

(3) Endorsements for use with the TWIA Commercial Policy.

(A) Form No. TWIA-18, Builders Risk--Stated Value Form, effective June 15, 1999.

(B) Form No. TWIA-21, Builders Risk--Actual Completed Value Form, effective June 15, 1999.

~~[ ~~(D)~~ Form No. TWIA-65, Large Deductible Endorsement, effective June 15, 1999.]~~

(D) [ ~~(E)~~ ] Form No. TWIA-115, Lumber Form--Specific--Retail Yard, effective June 15, 1999.

(E) [ ~~(F)~~ ] Form No. TWIA-164, Replacement Cost Endorsement, effective June 15, 1999.

(F) [ ~~(G)~~ ] Form No. TWIA-176, School Form, effective June 15, 1999.

(G) [ ~~(H)~~ ] Form No. TWIA-280, Condominium Property Form--Additional Policy Provisions, effective June 15, 1999.

(H) [ ~~(I)~~ ] Form No. TWIA-282, Condominium Property Form--Additional Property Provisions, amended June 15, 1999.

(I) [ ~~(J)~~ ] Form No. TWIA-17, Business Income Coverage, effective May 1, 2001.

(J) [ ~~(K)~~ ] Form No. TWIA-432, Extension of Coverage--Increased Cost of Construction (Commercial) effective March 1, 2008 [ ~~July 15, 2006~~ ].

(4) Endorsements for use with the TWIA Dwelling Policy.

(A) Form No. TWIA-310, Extensions of Coverage, amended June 15, 1999.

(B) Form No. TWIA-315, Extensions of Coverage, amended June 15, 1999.

(D) Form No. TWIA-325, Extensions of Coverage, amended June 15, 1999.

(E) Form No. TWIA-326, Extensions of Coverage, amended June 15, 1999.

(F) Form No. TWIA-328, Extensions of Coverage, amended June 15, 1999.

(G) Form No. TWIA-410, Conversion to Farm and Ranch Dwelling Policy, effective June 15, 1999.

(H) Form No. TWIA-431, Extension of Coverage--Increased Cost of Construction (Dwelling), effective March 1, 2008 [ ~~July 15, 2006~~ ].

[ ~~(5)~~ ~~Endorsements for use with the TWIA Dwelling Policy.~~ ]

(I) [ ~~(A)~~ ] Form No. TWIA-330, Extensions of Coverage, amended June 15, 1999.

(J) [ ~~(B)~~ ] Form No. TWIA-335, Extensions of Coverage, amended June 15, 1999.

(K) [ ~~(C)~~ ] Form No. TWIA-340, Extensions of Coverage, amended June 15, 1999.

(L) [ ~~(D)~~ ] Form No. TWIA-345, Extensions of Coverage, amended June 15, 1999.

(M) [ ~~(E)~~ ] Form No. TWIA-350, Extensions of Coverage, amended June 15, 1999.

(N) [ ~~(F)~~ ] Form No. TWIA-365, Replacement Cost Endorsement--Personal Property, amended June 15, 1999.

(O) [ ~~(G)~~ ] Form No. TWIA-400, Actual Cash Value--Roofs (One or Two Family Dwellings), effective June 15, 1999.

(P) [ ~~(H)~~ ] Form No. TWIA-420, Exclusion of Cosmetic Damage to Roof Coverings Caused by Hail, effective June 15, 1999.

(Q) Form No. TWIA-200, Adjusted Building Cost Endorsement, effective March 1, 2008.

(5) [ ~~(6)~~ ] Endorsements for use with the Texas Special Mobile Home Windstorm and Hail Insurance Policy.

(A) Form No. TWIA-29, Mandatory Endorsement, amended June 15, 1999.

(B) Form No. TWIA-570, Mobile Home Percentage Deductible Clause (Coastal Area), amended June 15, 1999.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on December 20, 2007.

TRD-200706541

Gene C. Jarmon

General Counsel and Chief Clerk

Texas Department of Insurance

Earliest possible date of adoption: February 3, 2008

For further information, please call: (512) 463-6327

Division 5. TEXAS SPECIAL MOBILE HOME WINDSTORM AND HAIL INSURANCE POLICY

28 TAC §5.4401

CROSS REFERENCE TO STATUTE. The following statutes are affected by this proposal: Insurance Code, Chapter 2210.

§5.4401.Texas Special Mobile Home Windstorm and Hail Insurance Policy--Deductible Coverage.

The Texas Department of Insurance adopts by reference the Texas Special Mobile Home Windstorm and Hail Insurance Policy--Deductible Coverage as amended effective March 1, 2008 [ ~~July 15, 2006~~ ]. Specimen copies of this policy are available from the Texas Windstorm Insurance Association, P.O. Box 99090, Austin, Texas 78709-9090. Copies may also be obtained by contacting the Personal Lines Division, Mail Code 104-1A, Texas Department of Insurance, 333 Guadalupe Street, Austin, Texas 78701.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on December 20, 2007.

TRD-200706538

Gene C. Jarmon

General Counsel and Chief Clerk

Texas Department of Insurance

Earliest possible date of adoption: February 3, 2008

For further information, please call: (512) 463-6327

Division 6. MANUAL

28 TAC §5.4501

CROSS REFERENCE TO STATUTE. The following statutes are affected by this proposal: Insurance Code, Chapter 2210.

§5.4501.Rules for the Texas Windstorm Insurance Association.

The Texas Department of Insurance adopts by reference a rules manual for the Texas Windstorm Insurance Association as amended effective March 1, 2008 [ ~~July 15, 2006~~ ]. A specimen copy of the rules manual [ ~~manuals~~ ] is available from the Texas Windstorm Insurance Association, P.O. Box 99090, Austin, Texas 78709-9090. Copies may also be obtained by contacting the Personal Lines Division, Mail Code 104-1A, Texas Department of Insurance, 333 Guadalupe Street, Austin, Texas 78701.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on December 20, 2007.

TRD-200706539

Gene C. Jarmon

General Counsel and Chief Clerk

Texas Department of Insurance

Earliest possible date of adoption: February 3, 2008

For further information, please call: (512) 463-6327

Subchapter K. TERMINATION OF FINANCIAL ASSURANCE FOR UNDERGROUND STORAGE TANKS

28 TAC §5.9101 - 5.9107

The Texas Department of Insurance proposes new Subchapter K, §§5.9101 - 5.9107, concerning the required notice of the cancellation or non-renewal of insurance or other financial assurance for an underground storage tank. The proposal implements the new provisions in the Water Code §26.352 that require an insurer or other entity providing financial assurance for the purposes of meeting the statutory financial responsibility requirements for owners or operators of underground storage tanks provide notice to the Texas Commission on Environmental Quality (TCEQ) within 30 days after termination of insurance or other financial assurance. The requirement to provide such notice was enacted by amendments to the Water Code §26.352 in HB 1956, 80th Legislature, effective September 1, 2007. The TCEQ regulates underground storage tanks pursuant to the Water Code §§26.341 - 26.367.

The Water Code §26.352(a) requires the TCEQ to establish requirements for owners or operators of underground storage tanks to maintain evidence of financial responsibility for taking corrective action and compensating third parties for bodily injury and property damage caused by sudden and nonsudden accidental releases arising from the operation of an underground storage tank. New subsection (e-1) of the Water Code §26.352 mandates that the notice be provided to the TCEQ and requires the Department to adopt rules to implement and enforce the new termination notice requirements. New subsection (e-1) of Water Code §26.352 also requires the insurance company or other entity providing financial assurance to mail, fax, or email the notice of the cancellation or non-renewal to the TCEQ not later than the 30th day after the date the coverage terminates.

Under the proposal, the specific new notice requirements apply only to notices required to be issued under the Water Code §26.352(e-1) that are issued on or after April 1, 2008. In accordance with HB 1956, insurers and other entities providing financial assurance for underground storage tanks are required to comply with the general notice provisions of the Water Code §26.352(e-1) for insurance or other financial assurance terminating after January 1, 2008.

The proposed new sections are necessary to implement the new termination notice requirements.

Proposed new §5.9101 states the purpose of the new sections, which is to specify the requirements and procedures for insurers or other entities providing financial assurance for the purposes of meeting financial responsibility requirements for underground storage tank owners or operators under the Water Code §26.352 to notify the TCEQ after insurance or other financial assurance for an underground storage tank is canceled or not renewed.

Proposed new §5.9102 provides definitions for financial assurance and insurer. Financial assurance is defined as a financial instrument used to comply with financial responsibility requirements established under the Water Code §26.352; insurer is defined as an entity operating under the Insurance Code providing insurance or other financial assurance to an owner or operator of underground storage tanks for the purposes of meeting financial responsibility requirements established under the Water Code §26.352, including all entities operating under the Insurance Code Chapters 941 (Lloyd's plans), 942 (reciprocals and interinsurance exchanges), 981 (surplus lines insurers), and 2201 (risk retention groups and purchasing groups).

Subsection (a) of proposed new §5.9103 provides that the new sections apply to all insurers providing insurance or other financial assurance to an owner or operator of underground storage tanks for the purposes of meeting financial responsibility requirements established under the Water Code §26.352. Subsection (b) of proposed new §5.9103 provides that all provisions of the subchapter except §5.9107 (relating to Disciplinary Actions by the Commissioner of Insurance) apply to other entities providing financial assurance for the owners or operators of underground storage tanks for the purposes of meeting financial responsibility requirements established under the Water Code §26.352. Referral to the Attorney General may be made for disciplinary actions against the small percentage of other entities providing financial assurance for the owners or operators of underground storage tanks. Proposed new §5.9103(c) provides that the specific new notice requirements of §5.9104 and §5.9105 shall apply only to notices required to be issued on and after April 1, 2008.

Proposed new §5.9104 addresses the content of the termination notice. Subsection (a) of proposed new §5.9104 requires that an insurer or other entity providing financial assurance for the owners or operators of underground storage tanks provide notice to the TCEQ of the termination of the insurance or other financial assurance. Subsection (a) of proposed new §5.9104 also specifies the information that must be included with the notice of termination, including the effective date that the insurance or financial assurance was cancelled or non-renewed and the reason for the termination. Subsection (b) of proposed new §5.9104 requires that the notice to the TCEQ must be accurate and complete.

Proposed new §5.9105 specifies the procedures for submission of the notice. Proposed new §5.9105(a) requires that the insurer, or other entity providing, holding, or maintaining financial assurance for an underground storage tank must send the notice of termination not later than the 30th day after the date the coverage terminates. Proposed new §5.9105(b) requires that the insurer, or other entity providing financial assurance, mail, fax or email the notice to the TCEQ, and specifies mail, fax and email listings for the provision of such notice. Proposed new §5.9106 specifies requirements and procedures in the event of rescindment of the notice of termination.

Proposed new §5.9106(a) requires that an insurer or other entity providing financial assurance that rescinds a notice of termination provided to the TCEQ must send written notice to the TCEQ of such rescindment in accordance with §5.9105(b) not later than the 10th day after the termination is rescinded. Proposed new §5.9106(b) requires that the notice of rescindment include a copy of the notice under §5.9104 that is being rescinded or the policy number or other financial assurance identification number and the facility identification number(s) assigned by the TCEQ for the underground storage tank(s) insured or otherwise financially assured. Proposed new §5.9106(c) requires that the notice of rescindment must be accurate and contain all the information required under §5.9106(b). Proposed new §5.9107 specifies the possible disciplinary actions by the Commissioner of Insurance for violations of the statutory and rule requirements.

FISCAL NOTE. Marilyn Hamilton, Associate Commissioner, Property and Casualty Division, has determined that for each year of the first five years the proposal will be in effect, there will be no fiscal impact to state and local governments as a result of the enforcement or administration of these rules. There will be no measurable effect on local employment or the local economy as a result of the proposal.

PUBLIC BENEFIT/COST NOTE. Ms. Hamilton has further determined that the public benefit of the new sections is that they will aid the TCEQ in administering subsections (a), (e), and (e-1) of the Water Code §26.352. Subsection (a) of the Water Code §26.352 authorizes the TCEQ to establish by rule requirements for tank owners or operators to maintain evidence of financial responsibility for taking corrective action and compensating third parties for bodily injury and property damage caused by sudden and nonsudden accidental releases from underground storage tanks. New subsection (e) of the Water Code §26.352 requires that an owner or operator of an underground storage tank submit annually proof that the owner or operator maintains financial responsibility as required by §26.352(a). However, some owners or operators of underground storage tanks are not taking the necessary measures to ensure that they are financially responsible for the costs of taking corrective action and compensating third parties for bodily injury and property damage caused by sudden and nonsudden accidental releases arising from the operation of underground storage tanks. A number of owners or operators of underground storage tanks have terminated their insurance coverage or financial assurance, forcing the state to assume the costs of taking corrective action for leaks from underground storage tanks not insured or otherwise financially assured by the owners and operators. New subsection (e-1) of the Water Code §26.352 requires that an insurance company or other entity that provides financial assurance to an owner or operator of an underground storage tank notify the TCEQ if the insurance coverage or other financial assurance is canceled or not renewed not later than the 30th day after the date the coverage terminates. The proposal will provide specific guidance regarding the procedures to follow in notifying the TCEQ if the insurance or other financial assurance is canceled or not renewed, and will thereby provide necessary information to assist the TCEQ in enforcing the statutory requirements for maintenance of insurance coverage or other financial assurance for owners or operators of underground storage tanks before a costly accidental release occurs from an underground storage tank not insured or otherwise financially assured by the owner or operator.

The cost for insurers or other entities providing financial assurance for underground storage tanks required to comply with the proposed sections will be based on (i) the cost of labor in identifying insurance or other financial assurance for underground storage tanks that is canceled or not renewed; (ii) the cost of labor in reprogramming existing systems to meet the requirements of the proposed sections; and (iii) the cost of providing notice of the termination of insurance or other financial assurance for underground storage tanks to the TCEQ. These costs, however, are the result of the legislative enactment of HB 1956, and not the result of the adoption, enforcement, or administration of the proposed sections.

ECONOMIC IMPACT STATEMENT AND REGULATORY FLEXIBILITY ANALYSIS FOR SMALL AND MICRO BUSINESSES. In accordance with the Government Code §2006.002(c), the Department and the TCEQ have determined that there are no small or micro businesses required to comply with the proposed rule. This determination is based on a compilation of profiles of all known insurers or other entities providing financial assurance for underground storage tanks. The Department and the TCEQ are not aware, nor have any knowledge, of any entity insuring or providing financial assurance for underground storage tanks that has fewer than 100 employees or less than $6 million in annual gross receipts. Further, any costs that are incurred by any business, regardless of size, that is required to comply with the proposal are the result of the enactment of HB 1956, and not the result of the adoption, enforcement, or administration of the proposed amendments. In accordance with the Government Code §2006.002(c), the Department has therefore determined that a regulatory flexibility analysis is not required because the proposal will not have an adverse impact on small or micro businesses.

TAKINGS IMPACT ASSESSMENT. The Department has determined that no private real property interests are affected by this proposal and that this proposal does not restrict or limit an owner's right to property that would otherwise exist in the absence of government action, and therefore, does not constitute a taking or require a takings impact assessment under the Government Code §2007.043.

REQUEST FOR PUBLIC COMMENT. To be considered, written comments on the proposal must be submitted no later than 5:00 p.m. on February 4, 2008 to Gene C. Jarmon, General Counsel and Chief Clerk, Mail Code 113-2A, Texas Department of Insurance, P.O. Box 149104, Austin, Texas 78714-9104. An additional copy of the comment must be simultaneously submitted to Marilyn Hamilton, Associate Commissioner, Property and Casualty Division, Mail Code 104-PC, Texas Department of Insurance, P.O. Box 149104, Austin, Texas 78714-9104. Any request for a public hearing should be submitted separately to the Office of Chief Clerk prior to the close of the public comment period. No hearing will be held unless requested. If a hearing is held, written and oral comments presented at the hearing will be considered.

STATUTORY AUTHORITY. The new sections are proposed under the Water Code §26.352(e-1) and the Insurance Code §36.001. Subsection (e-1) of the Water Code §26.352 requires that an insurance company or other entity that provides insurance coverage or another form of financial assurance to an owner or operator of an underground storage tank for purposes of the Water Code §26.352 notify the TCEQ if the insurance coverage or other financial assurance is canceled or not renewed not later than the 30th day after the date the coverage terminates. Subsection (e-1) of the Water Code §26.352 further requires that the Department adopt rules to implement and enforce this subsection. The Insurance Code §36.001 provides that the Commissioner of Insurance may adopt any rules necessary and appropriate to implement the powers and duties of the Department under the Insurance Code and other laws of this state.

CROSS REFERENCE TO STATUTE. The following statute is affected by the proposal: Water Code §26.352.

§5.9101.Purpose.

In accordance with the Water Code §26.352(e-1), this subchapter specifies the requirements and procedures for an insurer or other entity providing financial assurance for the purposes of meeting financial responsibility requirements for underground storage tank owners or operators under the Water Code §26.352 to provide notice to the Texas Commission on Environmental Quality (TCEQ) after insurance or other financial assurance for an underground storage tank is canceled or not renewed.

§5.9102.Definitions.

The following words and terms when used in this subchapter shall have the following meanings unless the context clearly indicates otherwise:

(1) Financial assurance--A financial instrument that as provided by rules adopted by the TCEQ may be used to comply with financial responsibility requirements established under the Water Code §26.352.

(2) Insurer--An entity operating under the Insurance Code providing insurance or other financial assurance to an owner or operator of underground storage tanks for the purposes of meeting financial responsibility requirements established under the Water Code §26.352, including all entities operating under the Insurance Code Chapters 941 (Lloyd's plans), 942 (reciprocals and interinsurance exchanges), 981 (surplus lines insurers), and 2201 (risk retention groups and purchasing groups).

(3) TCEQ--Texas Commission on Environmental Quality.

§5.9103.Applicability.

(a) This subchapter is applicable to all insurers providing insurance or other financial assurance to owners or operators of underground storage tanks for the purposes of meeting financial responsibility requirements established under the Water Code §26.352.

(b) All provisions of this subchapter except §5.9107 (relating to Disciplinary Actions by the Commissioner of Insurance) also apply to any other entity providing, holding, or maintaining financial assurance for the owners or operators of underground storage tanks for the purposes of meeting financial responsibility requirements established under the Water Code §26.352.

(c) This subchapter applies only to notices required to be issued under the Water Code §26.352(e-1) and that are issued on or after April 1, 2008, regardless of when the insurance policy or other form of financial assurance was issued or created.

§5.9104.Content of Notice.

(a) Pursuant to the Water Code §26.352(e-1), an insurer or other entity that provides insurance coverage or another form of financial assurance to an owner or operator of an underground storage tank for the purpose of showing or maintaining evidence of financial responsibility must send written notice to the TCEQ if the insurance coverage or other financial assurance for an underground storage tank is canceled or not renewed as provided in §5.9105 of this title (relating to Submission of Notice). The notice must contain the following information:

(1) the name of the insured, or assured, as appropriate;

(2) the street address or specific location of each underground storage tank for which insurance or financial assurance is being canceled or not renewed;

(3) the business address of the named insured or assured;

(4) the name, address, and telephone number of the insurer or other entity providing, holding, or maintaining the financial assurance;

(5) the effective date that the insurance coverage or financial assurance was terminated;

(6) the insurer's or other entity's reason(s) for the cancellation or non-renewal of the insurance or other financial assurance;

(7) the policy number or other financial assurance identification number; and

(8) the facility identification number assigned by the TCEQ for each underground storage tank that insurance coverage or other financial assurance was canceled or not renewed.

(b) The notice must be accurate and contain all the information required under subsection (a) of this section. It is the sole responsibility of the insurer or other entity providing, holding, or maintaining financial assurance to obtain and maintain the information necessary to complete the required notice.

§5.9105.Submission of Notice.

(a) As provided under the Water Code §26.352(e-1), the insurer or other entity providing, holding, or maintaining financial assurance for an underground storage tank must send the notice required pursuant to the Water Code §26.352(e-1) and §5.9104(a) and (c) (relating to Content of Notice) not later than the 30th day after the date the coverage terminates.

(b) As provided under the Water Code §26.352(e-1), the insurer, or other entity providing, holding, or maintaining financial assurance for an underground storage tank shall mail, fax, or email the notice required under the Water Code §26.352(e-1) and §5.9104(a) and (c) of this subchapter (relating to Content of Notice) to the TCEQ. The notice must be submitted to one of the following addresses, or as otherwise directed by the executive director of the TCEQ:

(1) TCEQ, Financial Assurance Cancellations, MC-234, P.O. Box 13087, Austin, Texas 78711-3087 (mail);

(2) TCEQ, Financial Assurance Cancellations, MC-234, 12100 Park 35 Circle, Austin, Texas 78753 (overnight delivery);

(3) (512) 239-6242 (fax); or

(4) txustfa@tceq.state.tx.us (email).

§5.9106.Rescindment of Cancellation or Non-Renewal.

(a) An insurer or other entity that rescinds a cancellation or non-renewal noticed to TCEQ pursuant to the Water Code §26.352(e-1) and §5.9104 of this subchapter (relating to Content of Notice) must send written notice to the TCEQ of such rescindment in accordance with §5.9105(b) of this subchapter (relating to Submission of Notice) not later than the 10th day after the cancellation or non-renewal is rescinded.

(b) The notice of rescindment required in subsection (a) of this section must include:

(1) a copy of the notice under §5.9104 of this subchapter that is being rescinded; or

(2) both of the following:

(A) the policy number or other financial assurance identification number, and

(B) the facility identification number(s) assigned by the TCEQ for the underground storage tank(s) insured or otherwise financially assured.

(c) The notice required by subsection (a) of this section must be accurate and contain all the information required under subsection (b) of this section. It is the sole responsibility of the insurer or other entity providing, holding, or maintaining financial assurance to obtain and maintain the information necessary to complete the required notice.

§5.9107.Disciplinary Actions by the Commissioner of Insurance.

The Commissioner of Insurance may, after notice and an opportunity for a hearing, discipline an insurer under the Insurance Code Chapters 82, 83, 84, and 2201 for violations of the requirements of this subchapter and any other applicable law the Commissioner determines the insurer to be in violation of, or with which the insurer has failed to comply.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on December 20, 2007.

TRD-200706545

Gene C. Jarmon

General Counsel and Chief Clerk

Texas Department of Insurance

Earliest possible date of adoption: February 3, 2008

For further information, please call: (512) 463-6327