PART 1. TEXAS DEPARTMENT OF INSURANCE

CHAPTER 9. TITLE INSURANCE

The Texas Department of Insurance proposes amendments to §9.1 and §9.401, concerning the adoption by reference of certain amendments to the Basic Manual of Rules, Rates and Forms for the Writing of Title Insurance in the State of Texas (Basic Manual) and to the Texas Title Insurance Statistical Plan (Statistical Plan). The proposed amendments to §9.1 and §9.401 revise the date of the amended Basic Manual and Statistical Plan. The proposed amendments to the Basic Manual and Statistical Plan, which the proposed amended sections will adopt by reference, were considered at the rulemaking phase of the 2008 Texas Title Insurance Biennial Public Hearing held on October 2, 2008, Docket Number 2690. The rulemaking phase of the hearing was conducted pursuant to the Insurance Code §2703.205. At the close of the October 2 hearing, the Commissioner directed that the record be held open until October 31, 2008, in order to allow additional written comments to be submitted for all of the agenda items. In accordance with the Insurance Code §2703.205(d), the ratemaking phase of the hearing was referred to the State Office of Administrative Hearings. This proposal is necessary to adopt new rules and forms and modify or replace currently existing rules and forms in the Basic Manual and Statistical Plan to facilitate the administration and regulation of title insurance and to clarify or standardize the rules and forms regulating the business of title insurance in the State of Texas.

The proposed amendments to the Basic Manual and Statistical Plan are identified by the item number used in the October 2 hearing. The proposal consists of 51 items. Publication of this proposal is necessary to incorporate the items proposed for approval into the Basic Manual and Statistical Plan. Items proposed for approval are detailed below along with a brief explanation of any substantive changes to the filings made subsequent to the October 2 hearing. The Department has also made changes to the filings to correct statutory references, typographical errors, and formatting errors. Items 2008-29, 2008-34, 2008-35, 2008-36, and 2008-45 were withdrawn from consideration during the rulemaking phase of the hearing upon the respective request of the entities that originally filed the items for consideration.

The following items are proposed for approval:

Item 2008-1 - Submission to amend the Residential Real Property Affidavit (Form T-47) to remove a duplicate reference to the title insurance company in paragraph 6 of the form.

Item 2008-2 - Submission to amend Procedural Rule P-36 to allow for the deletion of the arbitration provision on Schedule A of the Loan Policy or the Owner's Policy and to amend outmoded references to the Mortgagee and Owner Policy forms.

Item 2008-3 - Submission to amend Procedural Rule P-21 to conform the language of the rule with the language of the form by amending outmoded references relating to the Mortgagee and Owner Policy forms and to amend an outmoded reference to the State Board of Insurance.

Item 2008-4 - Submission to amend Procedural Rule P-9.b(8) to conform the language of the rule with the proposed Future Advance/Revolving Credit Form (T-35) and to delete the requirement that the Loan Policy show by endorsement that the lien being insured secures a revolving credit type of indebtedness.

Item 2008-5 - Submission to amend Procedural Rule P-9.b(6) to conform the language of the rule with the language of the Variable Rate Mortgage Endorsement (T-33) and the Variable Rate Mortgage-Negative Amortization Endorsement (T-33.1).

Item 2008-6 - Submission to adopt a new form to provide for a Limited Coverage Residential Chain of Title Policy (T-___).

Item 2008-7 - Submission to adopt new Procedural Rule (P-___) relating to the Limited Coverage Residential Chain of Title Policy (T-___).

Item 2008-8 - Submission to amend the Assignment of Rents/Leases Endorsement (T-27) to correct typos.

Item 2008-9 - Submission to amend the Texas Residential Owner Policy of Title Insurance - One-To-Four Residences (T-1R), the Texas Short Form Residential Mortgagee Policy of Title Insurance (T-2R), and the Mortgagee Title Policy Binder on Interim Construction Loan (T-13) to conform with the language of the Owner's Policy (T-1) and the Loan Policy (T-2) by changing the term "Owner" to "Owner's" and changing the term "Mortgagee" to "Loan."

Item 2008-10 - Submission to amend Procedural Rule P-7 to change the language in paragraphs B and C to conform with the language of the Owner's Policy (T-1) and the Loan Policy (T-2) and the proposed changes to the Texas Residential Owner Policy of Title Insurance - One-To-Four Residences (T-1R), the Texas Short Form Residential Mortgagee Policy of Title Insurance (T-2R), and the Mortgagee Title Policy Binder on Interim Construction Loan (T-13).

Item 2008-11 - Submission to amend Schedule B of the Loan Policy (T-2) to correct a typo.

Item 2008-12 - Submission to amend Schedule A of the Loan Policy (T-2) to remove the Tax Deletion Endorsement (T-30) from the list of optional endorsements on Schedule A and to remove language from Schedule A regarding deleted provisions from affected endorsements, which will require such deletions to be included as a special exception on Schedule B of the commitment.

Item 2008-13 - Submission to amend the Deletion of Arbitration Provision of the Commitment for Title Insurance (T-7) to increase the threshold amount for arbitral matters to $2 million in conformity with Procedural Rule P-36.

Item 2008-14 - Submission to amend Procedural Rule P-17 to allow a pass-through to consumers of electronic filing fees in accordance with HB 3073, as enacted by the 81st Legislature, Regular Session, effective January 1, 2010.

Item 2008-15 - Submission to amend Specific Areas and Procedures 5 of the Minimum Standards to allow a pass-through to consumers of tax search service fees and certain notary fees in accordance with HB 3073, as enacted by the 81st Legislature, Regular Session, effective January 1, 2010.

Item 2008-16 - Submission to amend the Commitment for Title Insurance (Form T-7) to conform the language of the form with the changed name of the policies referenced therein.

Item 2008-17 - Amended submission to amend Procedural Rule P-18 to require that a copy of the Commitment for Title Insurance (T-7) on an Owner's Policy be delivered to the proposed insured as soon as practicable, but in no event later than 5 business days prior to closing the transaction.

Item 2008-18 - Submission to amend Procedural Rule P-21 to remove language from Schedule D of the commitment for Title Insurance (T-7) regarding optional advanced disclosure of settlement charges and optional advanced issuance of a Commitment for Title Insurance in conformity with the proposed amendment to Procedural Rule 18.

Item 2008-19 - Submission to amend the Owner's Policy of Title Insurance (T-1) to remove indemnity language from the form in conformity with the 2006 American Land Title Association Owner's Policy.

Item 2008-20 - Submission to amend the Loan Policy of Title Insurance (T-2) to remove indemnity language from the form in conformity with the 2006 American Land Title Association Loan Policy.

Item 2008-21 - Amended submission to adopt new form (T-24.1) titled Non-Imputation Endorsement (Mezzanine Financing) to allow non-imputation coverage provided in paragraph 4 of the Owner's Policy to be assigned by the Insured to a Mezzanine Lender.

Item 2008-22 - Amended submission to adopt New Procedural Rule (P-__) titled Issuance of Insured Closing Letters to prohibit the issuance of Insured Closing Letter by attorneys operating pursuant to Procedural Rule P-22.

Item 2008-23 - Amended submission to adopt New Procedural Rule (P-__) titled, Cancellation Fees; Fees for Services Rendered, to define and prohibit cancellation fees and to otherwise allow fees for furnishing title evidence or furnishing title evidence and examination.

Item 2008-24 - Submission to amend the Insured Closing Service form (T-50) to substantially conform to the American Land Title Association Standard Closing Protection Letter except that it is proposed to maintain the current two year coverage period.

Item 2008-25 - Amended submission to amend the Co-Insurance Endorsement (T-48) to substantially conform to the American Land Title Association Standard Co-Insurance - Single Policy Endorsement.

Item 2008-26 - Submission to rescind the Last Dollar Endorsement (T-15) in its entirety.

Item 2008-27 - Submission to amend Procedural Rule P-9 to rescind the procedure for issuance of the Last Dollar Endorsement (T-15), which has also been proposed for rescission.

Item 2008-28 - Submission to amend P-55 to provide that the proposed Non-Imputation Endorsement (Mezzanine Financing) (T-24.1) be issued in accordance with the same procedural provisions currently set forth by the rule for the Non-Imputation Endorsement (T-24).

Item 2008-30 - Amended submission to amend Administrative Rule L-1 to provide that a Title Insurance Company may cancel an agent's license for cause without giving the required advance notice of 30 days. The Department has modified the notice provisions to add a new requirement to specify that if the company is the sole underwriter at the time of cancellation then the company must submit an orderly plan for the winding down of the title agent's operations that is in compliance with Administrative Rule D-1.

Item 2008-31 - Amended submission to amend the Future Advance/Revolving Credit Endorsement (T-35) to substantially conform the language of the endorsement to the American Land Title Association Future Advance Endorsement and to conform the language of the endorsement to the Loan Policy (T-2).

Item 2008-32 - Amended submission to amend the Leasehold Loan Policy Endorsement (T-5) to conform the language of the endorsement to the American Land Title Association Leasehold Loan Endorsement and to conform the language of the endorsement to the Loan Policy (T-2).

Item 2008-33 - Amended submission to amend the Leasehold Owner's Policy Endorsement (T-4) to conform the language of the endorsement to the American Land Title Association Leasehold Owner's Endorsement and to conform the language of the endorsement to the Owner's Policy (T-1).

Item 2008-37 - Amended submission to amend Procedural Rule P-54, titled Access Endorsement, to authorize issuance of the Access Endorsement (T-23) and to remove redundant language.

Item 2008-38 - Amended submission to amend Procedural Rule P-56 pertaining to (T-25) Contiguity Endorsement to include new requirements for new Contiguity Endorsement (T-25.1) that insures against loss or damage sustained by reason of the presence of any gaps, strips, or gores lying between contiguous parcels of insured lands and does not require the contiguous boundary lines of the various parcels of land to be specifically identified. The Department has amended new subsection D. by adding the clarifying language "non-residential " in two places to ensure that it is clear that the new Contiguity Endorsement (T-25.1) would only apply to non-residential property.

Item 2008-39 - Submission to adopt a New Contiguity Endorsement (T-25.1) to insure against loss or damage sustained by reason of the presence of any gaps, strips, or gores lying between contiguous parcels of insured lands and that does not require the contiguous boundary lines of the various parcels of land to be specifically identified.

Item 2008-40 - Amended submission to amend Procedural Rule P- 20 Amendment of Standard Exception in Mortgagee Policy or Mortgagee Title Policy Binder on Interim Construction Loan (Interim Binder) Relating to Taxes to organize procedural rules regarding the standard tax exception and Bulletin 153 into one rule. This submission provides guidance to the title industry regarding current year and rollback taxes and it merges Procedural Rule 29, titled Amendment of Standard Exception in Mortgagee Policy Binder on Interim Construction Loan (Interim Binder) Relating to Taxes Not Yet Due and Payable to make it a part of Procedural Rule P-20 subsection C.

Item 2008-41 - Submission to amend the Title Insurance Agent (L-1) administrative rule in Section VI of the Basic Manual to update statutory references in the rule.

Item 2008-42 - Submission to amend the Audit and Review of the Agent/Direct Operations Escrow and Trust Accounts (G.2) administrative rule in Section VI of the Basic Manual to update statutory references in the rule.

Item 2008-43 - Submission to amend the Policy Guaranty Fee Remittance (T-G1) form in Section V of the Basic Manual to update the policy guaranty fee amount shown on the remittance form to reflect the correct amount due for each policy.

Item 2008-44 - Amended submission to amend the Requirements for Ceasing Operation by Agents and Direct Operations (D-1) administrative rule in Section VI of the Basic Manual to clarify the requirements of ceasing operation by agents or direct operations and to update statutory references in the rule.

Item 2008-46 - Amended submission to amend the Reasonable Time for Furnishing Title Evidence (P-25) procedural rule in Section IV of the Basic Manual to provide a requirement for title agents and direct operations to maintain auditable records and documents that demonstrate compliance with the rule and to update statutory references in the rule.

Item 2008-47 - Submission to amend the Statement of Assessment Received from and Recoupments Distributed to Title Insurance Company (T-G3) form in Section V of the Basic Manual.

Item 2008-48 - Submission to amend the Guaranty Assessment Recoupment Charge Remittance (T-G2) form in Section V of the Basic Manual.

Item 2008-49 - Submission to amend the Supplemental Coverage Manufactured Housing Unit Endorsement (T-31.1) in Section II of the Basic Manual to remove a reference to "serial number" in the form and to insert a reference to the "policy number."

Item 2008-50 - Submission to amend the Leasehold Mortgagee Policy Endorsement (T-5) in Section II of the Basic Manual to remove a reference to "serial number" in the form.

Item 2008-51 - Submission to amend the Leasehold Owner Policy Endorsement (T-4) in Section II of the Basic Manual to remove a reference to "serial number" in the form.

Item 2008-52 - Amended submission to amend the Policy Guaranty Fee (G.1) administrative rule in Section VI of the Basic Manual to update statutory references in the rule.

Item 2008-53 - Submission to amend the Title Insurance Escrow Officer (L-2) rule in Section VI of the Basic Manual to provide a procedure for a title agent or direct operation to notify the Department upon a change of name of a licensed escrow officer and to update statutory references in the rule.

Item 2008-54 - Submission to amend the Statistical Plan to provide a Rate Code for the new Co-Insurance Endorsement (T-48) and to add reporting codes for the new personal property title insurance forms and endorsements.

The following items have been withdrawn:

Item 2008-29 - Submission to amend the Texas Title Insurance Information form to increase the threshold amount for arbitral matters to $2 million and to conform the language of the form to the Owner's Policy (T-1), the Loan Policy (T-2), and the Deletion of the Arbitration Provision (P-36).

Item 2008-34 - Submission to propose a new Tax Parcel Endorsement covering a single tract.

Item 2008-35 - Submission to propose a new Tax Parcel Endorsement covering multiple tracts.

Item 2008-36 - Submission to amend Procedural Rule P-9 to authorize a title company to issue the Tax Parcel Endorsements.

Item 2008-45 - Submission to amend P-24 to clarify payments for services rendered among title agents, companies and direct operations.

The Department has filed a copy of each of the proposed items with the Secretary of State's Texas Register Section. Persons desiring copies of the proposed items may obtain them from the Office of the Chief Clerk, Texas Department of Insurance, 333 Guadalupe Street, Austin, Texas 78701-3938. To request copies, please contact Sylvia Gutierrez at (512) 463-6327.

FISCAL NOTE. Robert R. Carter, Jr., Deputy Commissioner for the Title Division, has determined that, for each year of the first five years the proposal is in effect, there will be no fiscal impact on state or local government as a result of enforcing or administering the amendments. Mr. Carter has also determined that there will be no measurable effect on local employment or the local economy.

PUBLIC BENEFIT/COST NOTE. Mr. Carter also has determined that for each year of the first five years the amendments are in effect there are a number of public benefits anticipated as a result of the amendments to the Basic Manual and Statistical Plan. The updating and revising of the administrative rules, procedural rules, forms, endorsements, definitions, reporting forms, and Statistical Plan allow for consistent administration, facilitate the efficiencies of the Department, and the closing of title transactions. The new and updated promulgated forms will impose no additional regulatory costs on companies participating in the title insurance market, and the costs of reproducing forms, estimated to be no more than $.15 per page for the cost of a photocopy, should be fully compensated by the existing premium schedule. As to all proposals, the department anticipates no differential impact between small, large, and micro businesses.

ECONOMIC IMPACT STATEMENT AND REGULATORY FLEXIBILITY ANALYSIS FOR SMALL AND MICRO BUSINESSES. As required by the Government Code §2006.002(c), the Department has determined that the proposed amendments will not have an adverse economic effect on small or micro businesses. The Department's analysis of any possible costs for compliance with the proposal that are detailed in the Public Benefit/Cost Note section of this proposal are also applicable for small and micro businesses that opt to write title insurance. Additionally, the proposed rules and forms provide an economic opportunity for the businesses in the title insurance industry, and businesses will be profitably compensated by a fee schedule. 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 COMMENTS. To be considered, written comments on the proposal must be submitted no later than 5:00 p.m. on September 21, 2009, 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 comments must be submitted simultaneously to Robert R. Carter, Jr., Deputy Commissioner, Title Division, Mail Code 106-2T, 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 the Chief Clerk before the close of the public comment period. If a hearing is held, written and oral comments presented at the hearing will be considered. Also, any comments received during or within 30 days of the hearing held on October 2, 2008, Docket Number 2690, are part of the record and have already been considered for purposes of this proposal.

SUBCHAPTER A. BASIC MANUAL OF RULES, RATES AND FORMS FOR THE WRITING OF TITLE INSURANCE IN THE STATE OF TEXAS

28 TAC §9.1

STATUTORY AUTHORITY. The amendments are proposed pursuant to Insurance Code §§2551.003, 2703.153, 2703.203, 2703.205 and 36.001. Section 2551.003 authorizes the Commissioner to adopt and enforce rules that prescribe underwriting standards and practices on which a title insurance contract must be issued, that define risks that may not be assumed under a title insurance contract, including risks that may not be assumed because of the insolvency of the parties to the transaction, and that the Commissioner determines are necessary to accomplish the purposes Insurance Code Title 11, which concerns the regulation of title insurance. Section 2703.153 authorizes and requires the Commissioner to collect data from each title insurance company and title insurance agent engaged in the business of title insurance relating to loss experience, expense of operation, and other material matters necessary for the fixing of premium rates. Section 2703.203 authorizes and requires the Commissioner to hold a biennial public hearing to consider adoption of premium rates and other matters relating to regulating the business of title insurance that an association, title insurance company, title insurance agent, or member of the public requests to be considered or that the Commissioner determines necessary to consider. Section 2703.205 authorizes and requires the Commissioner to consider rules, forms, endorsements, and related matters that do not have rate implications at the rulemaking phase of the biennial public hearing. Section 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 STATUTES. The following statutes are affected by this proposal: Insurance Code Chapters 2551 and 2703

§9.1.Basic Manual of Rules, Rates and Forms for the Writing of Title Insurance in the State of Texas.

The Texas Department of Insurance adopts by reference the Basic Manual of Rules, Rates and Forms for the Writing of Title Insurance in the State of Texas as amended effective October 1, 2009 [ May 1, 2008]. The document is available from and on file at the Texas Department of Insurance, Title Division, Mail Code 106-2T, 333 Guadalupe Street, Austin, Texas 78701-3938.

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 August 10, 2009.

TRD-200903468

Gene Jarmon

General Counsel and Chief Clerk

Texas Department of Insurance

Earliest possible date of adoption: September 20, 2009

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

28 TAC §9.401

STATUTORY AUTHORITY. The amendments are proposed pursuant to Insurance Code §§2551.003, 2703.153, 2703.203, 2703.205 and 36.001. Section 2551.003 authorizes the Commissioner to adopt and enforce rules that prescribe underwriting standards and practices on which a title insurance contract must be issued, that define risks that may not be assumed under a title insurance contract, including risks that may not be assumed because of the insolvency of the parties to the transaction, and that the Commissioner determines are necessary to accomplish the purposes Insurance Code Title 11, which concerns the regulation of title insurance. Section 2703.153 authorizes and requires the Commissioner to collect data from each title insurance company and title insurance agent engaged in the business of title insurance relating to loss experience, expense of operation, and other material matters necessary for the fixing of premium rates. Section 2703.203 authorizes and requires the Commissioner to hold a biennial public hearing to consider adoption of premium rates and other matters relating to regulating the business of title insurance that an association, title insurance company, title insurance agent, or member of the public requests to be considered or that the Commissioner determines necessary to consider. Section 2703.205 authorizes and requires the Commissioner to consider rules, forms, endorsements, and related matters that do not have rate implications at the rulemaking phase of the biennial public hearing. Section 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 STATUTES. The following statutes are affected by this proposal: Insurance Code Chapters 2551 and 2703

§9.401.Texas Title Insurance Statistical Plan.

The Texas Department of Insurance adopts by reference the rules contained in the Texas Title Insurance Statistical Plan as amended effective October 1, 2009 [May 1, 2008]. This document is published by the Texas Department of Insurance and is available from the Property and Casualty Data Services Division, Mail Code 105-5D, Texas Department of Insurance, William P. Hobby, Jr. State Office Building, 333 Guadalupe Street, P.O. Box 149104, Austin, Texas 78714-9104.

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 August 10, 2009.

TRD-200903467

Gene Jarmon

General Counsel and Chief Clerk

Texas Department of Insurance

Earliest possible date of adoption: September 20, 2009

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

SUBCHAPTER C. STANDARDS FOR STATE FIRE MARSHAL INSPECTIONS

28 TAC §34.303

The Texas Department of Insurance proposes an amendment to §34.303, concerning standards for State Fire Marshal inspections of buildings and premises in certain geographic areas of Texas. The proposed amendment is necessary to update the currently adopted Life Safety Code, which is used by the State Fire Marshal as standards for inspection of buildings and premises pursuant to Government Code §417.008. Section 417.008 authorizes the State Fire Marshal to enter, upon the complaint of any person, any building or premises in the state at any reasonable time to examine the structure for certain dangerous conditions. The Government Code §417.008 authorizes the Commissioner to adopt by rule any appropriate standard developed by a nationally recognized standards-making association under which the State Fire Marshal may enforce §417.008. The standards adopted by rule do not apply in a geographic area under the jurisdiction of a local government that has adopted fire protection ordinances that apply in the geographic area. Additionally, the Government Code §417.005 authorizes the Commissioner, after consulting with the State Fire Marshal, to adopt necessary rules to guide the State Fire Marshal and fire and arson investigators commissioned by the State Fire Marshal in the investigation of arson, fire, and suspected arson and in the performance of other duties for the Commissioner. Section 34.303, which adopts by reference certain standards and recommendations of the National Fire Protection Association (NFPA), is amended to update the currently adopted 2006 Life Safety Code to the 2009 version. The adoption of the most recent Life Safety Code is necessary because as the technology for fire protection and prevention develops, the minimum standards of inspection also change. The NFPA is a nationally recognized standards-making association that classifies the most recent Life Safety Code as the minimum standards for fire protection and prevention, and as such, these standards also constitute the minimum standards for inspection for potential fire dangers. This results in better protection of the public from fire by the application of the most recent standards and recommendations for inspection. Additionally, other units of government in Texas are adopting these standards, and uniformity of standards enables both the fire protection industry and the public to know what standards are applicable in all jurisdictions. The NFPA adopted changes to the 2006 standards to: (i) add provisions relating to air traffic control towers, electrically controlled egress doors, certain horizontal sliding doors, elevator lobby access door locking, door inspection and maintenance, emergency evacuations and escape devices and systems, the placement and usage of alcohol-based hand sanitizer in educational and day care settings, and door locking in settings where occupants need specialized protection; (ii) standardize the usage of certain technical terms, including stories in height, finished ground level, grade plane, basement, and level of exit discharge; (iii) revise the situations in which public address systems are acceptable for occupant alarm notification; and (iv) amend provisions relating to fire curtains, patient sleeping room windows in health care settings, and sprinkler requirements in high-rise health care settings. As provided in §417.008(e) of the Government Code, these proposed changes in standards do not apply in a geographic area under the jurisdiction of a local government that has adopted fire protection ordinances that apply in the geographic area.

FISCAL NOTE. Paul Maldonado, State Fire Marshal, has determined that for each year of the first five years that the proposed amendment will be in effect, there will be no fiscal implications to state or local government 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. Mr. Maldonado also has determined that for each year of the first five years the proposed section is in effect, the anticipated public benefit as a result of the proposal is the employment of the most recent standards of inspection of buildings and premises in the state in order to examine whether conditions exist that are dangerous or are liable to cause or promote fire or create danger for fire fighters, occupants, or buildings or structures. This means that inspections conducted by the State Fire Marshal in accordance with these most recent nationally recognized standards for detection of potential fire dangers will result in individual citizens, fire fighters, and buildings and structures being better protected. In order to properly protect life and property, it is necessary that the latest current nationally recognized standards for inspection of buildings and premises be utilized. This is consistent with the Government Code §417.008(e) which authorizes the adoption of "any appropriate standard developed by a nationally recognized standards-making association. . . ." but also provides that the adopted standards do not apply in a geographic area under the jurisdiction of a local government that has adopted fire protection ordinances that apply in the geographic area. There will be nominal costs to persons and entities required to purchase the updated standards. The estimated cost to purchase the proposed updated Life Safety Code is approximately $82.50 and will be the same cost for all persons and entities. Any other costs that result from compliance with the updated standards is the result of the legislative enactment of the Government Code §417.008 which imposes responsibility upon the State Fire Marshal to enter and inspect buildings and premises in the state in order to examine whether conditions exist that are dangerous or are liable to cause or promote fire or create danger for fire fighters, occupants, or buildings or structures.

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 §2006.002(f) requires a state agency to adopt provisions concerning micro businesses that are uniform with those provisions outlined in the Government Code §2006.002(b) - (d) for small businesses.

This proposal specifies minimum fire and related hazard safety requirements for structures and buildings in Texas. All small or micro businesses in Texas will be required to comply with the proposed requirement. The cost analysis in the Public Benefit/Cost Note part of this proposal is also applicable to these small and micro businesses. The estimated cost for the purchase of the 2009 Life Safety Code from the NFPA is $82.50. Any other costs that result to small and micro businesses from compliance with the updated standards is the result of the legislative enactment of the Government Code §417.008 which imposes responsibility upon the State Fire Marshal to enter and inspect buildings and premises in the state in order to examine whether conditions exist that are dangerous or are liable to cause or promote fire or create danger for fire fighters, occupants, or buildings or structures.

As required by the Government Code §2006.002(c), the Department has determined that the estimated costs of purchasing the 2009 Life Safety Code are nominal and will likely not have an adverse economic impact on small or micro businesses that are required to comply with this proposal. However, in the event that the proposal does have an adverse economic effect on small or micro-businesses that are required to comply with the proposal, the proposal does not require the statutorily mandated regulatory flexibility analysis specified by the Government Code §2006.002(c)(2). Section 2006.002(c)(2) requires that a state agency, before adopting a rule that may have an adverse economic effect on small businesses, prepare a regulatory flexibility analysis that includes the agency's consideration of alternative methods of achieving the purpose of the proposed rule. Section 2006.002(c-1) of the Government Code requires that the regulatory flexibility analysis "consider, if consistent with the health, safety, and environmental and economic welfare of the state, using regulatory methods that will accomplish the objectives of applicable rules while minimizing adverse impacts on small businesses." Therefore, an agency is not required to consider alternatives that, while possibly minimizing adverse impacts on small and micro businesses, would not be protective of the health, safety, and environmental and economic welfare of the state.

The purpose of the statute authorizing this proposal, the Government Code §417.008, is to ensure compliance with the most recent fire and related hazards standards of safety for the purpose of protecting life and property in this state. The proposed amendment establishes the most recent Life Safety Code as a minimum standard of compliance for buildings and structures.

The purpose of this proposal is to protect the health and safety of the fire fighters, individual citizens, and buildings and structures of Texas through the adoption of safety standards. In order to protect life and property in this state, it is necessary that all businesses, regardless of size, comply with the minimum safety requirements. The requirements in this proposal are consistent with the Government Code §417.008 which specifies that on the complaint of any person, the State Fire Marshal is entitled to enter any building or premises in Texas at any reasonable time for the purpose of inspection for dangerous conditions.

Therefore, the Department has determined in accordance with §2006.002(c-1) of the Government Code that because the purpose of this proposal and the authorizing statute, Government Code §417.008, is to protect the safety of life and property in this state, there are no regulatory alternatives to the requirements in this proposal that will sufficiently protect the safety of people, buildings and structures in this state.

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 September 21, 2009, to Gene C. Jarmon, General Counsel & Chief Clerk, Mail Code 1132A, Texas Department of Insurance, P.O. Box 149104, Austin, Texas 787149104. An additional copy of the comments must be submitted simultaneously to Paul Maldonado, State Fire Marshal, Mail Code 108-FM, Texas Department of Insurance, P.O. Box 149221, Austin, Texas 787149221. Any request for a public hearing should be submitted separately to the Office of the Chief Clerk before the close of the public comment period. If a hearing is held, written and oral comments presented at the hearing will be considered.

STATUTORY AUTHORITY. The amendment is proposed pursuant to the Government Code §417.008 and §417.005 and the Insurance Code §36.001. The Government Code §417.008 authorizes the Commissioner to adopt by rule any appropriate standard developed by a nationally recognized standards-making association under which the State Fire Marshal may enforce §417.008, relating to the State Fire Marshal's right of entry and examination and correction of dangerous conditions; the standards adopted by rule do not apply in a geographic area under the jurisdiction of a local government that has adopted fire protection ordinances that apply in the geographic area. The Government Code §417.005 authorizes the Commissioner, after consulting with the State Fire Marshal, to adopt necessary rules to guide the State Fire Marshal and fire and arson investigators commissioned by the State Fire Marshal in the investigation of arson, fire, and suspected arson and in the performance of other duties for the Commissioner. 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 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: Government Code §417.008

§34.303.Adopted Standards.

The Commissioner adopts by reference: NFPA Life Safety Code 101-2009 [101-2006, except for Chapter 43, and NFPA 101-203, Sections 4.6.7 (Additions) and 4.6.8 (Modernization and Renovation)]. These copyrighted standards and recommendations are adopted, except to the extent they are in conflict with sections of this chapter or any Texas statutes or federal law. The standards are published by and are available from the National Fire Protection Association, Quincy, Massachusetts.

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 August 7, 2009.

TRD-200903428

Gene Jarmon

General Counsel and Chief Clerk

Texas Department of Insurance

Earliest possible date of adoption: September 20, 2009

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