ADOPTED RULES An agency may take final action on a section 30 days after a proposal has been published in the Texas Register. The section becomes effective 20 days after the agency files the correct document with the Texas Register, unless a later date is specified or unless a federal statute or regulation requires implementation of the action on shorter notice. If an agency adopts the section without any changes to the proposed text, only the preamble of the notice and statement of legal authority will be published. If an agency adopts the section with changes to the proposed text, the proposal will be republished with the changes. TITLE 4. AGRICULTURE Part I. Texas Department of Agriculture Chapter 5. Quarantines Pink Bollworm Quarantine 4 TAC sec.5.178, sec.5.179 The Texas Department of Agriculture (the department) adopts amendments to sec.5.178 and sec.5.179, concerning the pink bollworm quarantine, without changes to the proposed text as published in the April 22, 1994, issue of the Texas Register (19 TexReg 3043). The amendments are made to bring El Paso and Hudspeth counties under the pink bollworm quarantine. This area is currently included in a pest management zone in 4 TAC Chapter 6, for boll weevil control. The department has determined that pink bollworm, not boll weevil, is the significant economic pest in the area and accordingly has determined that the area should be covered by the pink bollworm quarantine. The sections establish a pink bollworm quarantine zone for El Paso County and a portion of Hudspeth County and establish destruction methodology for the zone. Most comments received were general and supported the amendments. Some individuals, concerned with the imposition of new requirements, were assured that all regulations they follow at this time are consistent with or similar to the new amendments to sec.5.178 and sec.5.179. The amendments are adopted under the Texas Agriculture Code, sec.74.054, which provides the Texas Department of Agriculture with the authority to adopt rules necessary for the control and eradication of the pink bollworm. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on June 22, 1994. TRD-9442961 Dolores Alvarado Hibbs Chief Administrative Law Judge Texas Department of Agriculture Effective date: July 14, 1994 Proposal publication date: April 22, 1994 For further information, please call: (512) 463-7583 Chapter 6. Boll Weevil Control Boll Weevil Control 4 TAC sec.6.3, sec.6.4 The Texas Department of Agriculture (the department) adopts amendments to sec.6.3 and sec.6.4, concerning boll weevil control, without changes to the proposed text as published in the April 22, 1994, issue of the Texas Register (19 TexReg 3043). The amendments are made in order to delete the El Paso Valley Pest Management Zone from these regulations because the boll weevil is not a significant economic pest in this area. However, because the pink bollworm is a significant economic pest in this area, the department has, in a separate submission, included the El Paso Valley in a pink bollworm quarantine zone. The amendments will eliminate the El Paso Valley as a regulated Boll Weevil Pest Management Zone and will eliminate the planting dates and the cotton destruction date previously established for the El Paso Valley Pest Management Zone. All comments received were general and supported the amendments. The comments supported the fact that there was no need for the El Paso Valley to operate under boll weevil regulations since the boll weevil is not a significant economic pest. The amendments are adopted under the Texas Agriculture Code, sec.74.006, which provides the Texas Department of Agriculture with the authority to adopt rules necessary for the control and eradication of the boll weevil. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on June 22, 1994. TRD-9442962 Dolores Alvarado Hibbs Chief Administrative Law Judge Texas Department of Agriculture Effective date: July 14, 1994 Proposal publication date: April 22, 1994 For further information, please call: (512) 463-7583 TITLE 10. COMMUNITY DEVELOPMENT Part V. Texas Department of Commerce Chapter 176. Enterprise Zone Program Rules 10 TAC sec.176.5 The Texas Department of Commerce adopts an amendment to sec.176.5 of the rules implementing the Texas Enterprise Zone Act, Chapter 2303, Texas Government Code and sec.sec.481.371-481.375 of Chapter 481 of the Texas Government Code, without changes to the proposed text as published in the May 20, 1994, issue of the Texas Register (19 TexReg 3871). No comments were received regarding adoption of the amendment. Section 176.5 sets forth the requirements for designation of recycling market development zones and for loans and grants for such zones. Adoption of the rule is necessary to inform the public of the requirements for designation of a recycling market development zone and to provide information to the public concerning loans and grants which may be available for such zones. The Texas Government Code, sec.sec.481.371-481.375, are affected by the amendment of sec.176.5. The amendment is adopted under the authority of sec.481. 375 of Chapter 481 of the Texas Government Code, which directs the Texas Department of Commerce to adopt rules to implement and administer the recycling market development subchapter of Chapter 481 of the Texas Government Code. It is also adopted under the Texas Government Code, sec.2001.033, which sets forth the requirements for a state agency order adopting final rules. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on June 23, 1994. TRD-9443029 Deborah C. Kastrin Executive Director Texas Department of Commerce Effective date: July 18, 1994 Proposal publication date: May 20, 1994 For further information, please call: (512) 320-9401 TITLE 22. EXAMINING BOARDS Part XVIII. Texas State Board of Podiatry Examiners Chapter 371. Examinations 22 TAC sec.371.2 The Texas State Board of Podiatry Examiners adopts an amendment to sec.371. 2, concerning application of license, without changes to the proposed text as published in the May 3, 1994, issue of the Texas Register (19 TexReg 3329). The Texas State Board of Podiatry Examiners adopts the amendment to conform with the examination fee changes that have already been adopted in sec.379.1. The section will function by instructing the applicants how much the fee is to take the examination and the types of payment we will accept. No comments were received regarding adoption of the amendment. The amendment is adopted under Texas Civil Statutes, Articles 4568(j) and 4590(e), which provide the Texas State Board of Podiatry Examiners with the authority to adopt all reasonable or necessary rules, regulations, and by-laws not inconsistent with the law regulating the practice of podiatry, the laws of this state, or of the United States; to govern its proceedings and activities, the regulation of the practice of podiatry, and the enforcement of the law regulating the practice of podiatry. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on June 23, 1994. TRD-9442983 Janie Alonzo Staff Services Officer I Texas State Board of Podiatry Examiners Effective date: July 15, 1994 Proposal publication date: May 3, 1994 For further information, please call: (512) 794-0145 Chapter 373. Identification of Practice 22 TAC sec.373.2 The Texas State Board of Podiatry Examiners adopts an amendment to sec.373. 2, concerning practitioner identification, without changes to the proposed text as published in the May 3, 1994, issue of the Texas Register (19 TexReg 3329). The Texas State Board of Podiatry Examiners amends this section to delete the reference to clinic, which can now be used in advertising. The section will function by giving podiatrists better guidelines to follow when identifying their practice. No comments were received regarding adoption of the amendment. The amendment is adopted under Texas Civil Statutes, Articles 4568(j) and 4590(e), which provide the Texas State Board of Podiatry Examiners with the authority to adopt all reasonable or necessary rules, regulations, and by-laws not inconsistent with the law regulating the practice of podiatry, the laws of this state, or of the United States; to govern its proceedings and activities, the regulation of the practice of podiatry, and the enforcement of the law regulating the practice of podiatry. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on June 23, 1994. TRD-9442985 Janie Alonzo Staff Services Officer I Texas State Board of Podiatry Examiners Effective date: July 15, 1994 Proposal publication date: May 3, 1994 For further information, please call: (512) 794-0145 Chapter 378. Continuing Education 22 TAC sec.378.2, sec.378.4 The Texas State Board of Podiatry Examiners adopts an amendments to sec.378.2, and sec.378.4, concerning continuing education, without changes to the proposed text as published in the May 3, 1994, issue of the Texas Register (19 TexReg 3330). The justification for the amendments to this section is to describe the requirements for sending in proof of attendance for continuing education seminars attended. The section will function by allowing them detailed instructions for the methods of reporting continuing education requirements. No comments were received regarding adoption of the amendments. The amendments are adopted under Texas Civil Statutes, Articles 4568(j) and 4590(e), which provide the Texas State Board of Podiatry Examiners with the authority to adopt all reasonable or necessary rules, regulations, and by-laws not inconsistent with the law regulating the practice of podiatry, the laws of this state, or of the United States; to govern its proceedings and activities, the regulation of the practice of podiatry, and the enforcement of the law regulating the practice of podiatry. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on June 23, 1994. TRD-9442986 Janie Alonzo Staff Services Officer I Texas State Board of Podiatry Examiners Effective date: July 15, 1994 Proposal publication date: May 3, 1994 For further information, please call: (512) 794-0145 Chapter 379. Fees and License Renewal 22 TAC sec.379.1 The Texas State Board of Podiatry Examiners adopts an amendment to sec.379. 1, concerning fees, without changes to the proposed text as published in the May 3, 1994, issue of the Texas Register (19 TexReg 3330). The justification for the amendment to this section is to change the charge for copies of public records to comply with the charges established by the General Services Commission. The section will function by charging uniform rates for copies of public records. No comments were received regarding adoption of the amendment. The amendment is adopted under Texas Civil Statutes, Articles 4568(j) and 4590(e), which provide the Texas State Board of Podiatry Examiners with the authority to adopt all reasonable or necessary rules, regulations, and by-laws not inconsistent with the law regulating the practice of podiatry, the laws of this state, or of the United States; to govern its proceedings and activities, the regulation of the practice of podiatry, and the enforcement of the law regulating the practice of podiatry. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on June 23, 1994. TRD-9442987 Janie Alonzo Staff Services Officer I Texas State Board of Podiatry Examiners Effective date: July 15, 1994 Proposal publication date: May 3, 1994 For further information, please call: (512) 794-0145 Part XXIII. Texas Real Estate Commission Chapter 535. Provisions of the Real Estate License Act Requirements of Licensure 22 TAC sec.535.51 The Texas Real Estate Commission adopts an amendment to sec.535.51, concerning general requirements for real estate licensure, without changes to the proposed text as published in the March 29, 1994, issue of the Texas Register (19 TexReg 2180). The amendment adopts by reference a series of application forms which a person may use to apply for a real estate broker or salesman license or for a determination of moral character for licensing. The application forms have been revised to eliminate requests for unnecessary information and to clarify that applicants are not required to reveal their social security numbers. One new form can be used by a currently used broker to obtain a real estate salesman license. No comments were received regarding the adoption of the amendment. The amendment is adopted under Texas Civil Statutes, Article 6573a, sec.5(h), which provide the Texas Real Estate Commission with the authority to make and enforce all rules and regulations necessary for the performance of its duties. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on June 22, 1994. TRD-9443038 Mark A. Moseley General Counsel Texas Real Estate Commission Effective date: July 18, 1994 Proposal publication date: March 29, 1994 For further information, please call: (512) 465-3900 Licenses 22 TAC sec.535.91 The Texas Real Estate Commission adopts an amendment to sec.535.91, concerning license renewal applications, without changes to the proposed text as published in the March 29, 1994, issue of the Texas Register (19 TexReg 2180). The amendment adopts by reference a revised license renewal form. Requests for unnecessary information have been removed from the form, and a question has been added relating to defaults on loans guaranteed by the Texas Guaranteed Student Loan Corporation. No comments were received regarding adoption of the amendment. The amendment is adopted under Texas Civil Statutes, Article 6573a, sec.5(h), which provide the Texas Real Estate Commission with the authority to make and enforce all rules and regulations necessary for the performance of its duties. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on June 22, 1994. TRD-9443037 Mark A. Moseley General Counsel Texas Real Estate Commission Effective date: July 18, 1994 Proposal publication date: March 29, 1994 For further information, please call: (512) 465-3900 Chapter 539. Provisions of the Residential Service Company Act Subchapter G. Application for License 22 TAC sec.539.61 The Texas Real Estate Commission adopts an amendment to sec.539.61, concerning applications for a residential service company license, without changes to the proposed text as published in the March 29, 1994, issue of the Texas Register (19 TexReg 2181). The amendment adopts by reference an application form which would be used by a person to obtain a residential service company license. Questions on the form have been revised for clarity and to obtain a copy of any management agreement relating to services to be provided by another company to the applicant. The amendment also obligates the commission to assign a license number to each company it licenses. Adoption of the amendment ensures that the commission obtains necessary information about a company wishing to be licensed. No comments were received regarding adoption of the amendment. The amendment is adopted under Texas Civil Statutes, Article 6573b, sec.5, which provide the Texas Real Estate Commission with the authority to adopt, promulgate, and enforce rules and regulations necessary to effectuate the intent and provisions of The Residential Service Company Act. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on June 22, 1994. TRD-9443040 Mark A. Moseley General Counsel Texas Real Estate Commission Effective date: July 18, 1994 Proposal publication date: March 29, 1994 For further information, please call: (512) 465-3900 Subchapter I. Funded Reserves 22 TAC sec.539.81 The Texas Real Estate Commission adopts an amendment to sec.539.81, concerning funded reserves held by residential service companies, without changes to the proposed text as published in the March 29, 1994, issue of the Texas Register (19 TexReg 2181). The amendment requires a residential service company licensed by the commission to maintain a level of liquidity equal to or greater than the amount of the company's funded reserves. Funded reserves ensure the performance of the company's contracts with homeowners. The amendment also clarifies that any securities held as funded reserves must be rated BBB or above by a nationally recognized securities rating organization. Adoption of the amendment is necessary to ensure that residential service companies hold funded reserves which are sufficient to meet their obligations to the public. No comments were received regarding adoption of the amendment. The amendment is adopted under Texas Civil Statutes, Article 6573b, sec.5, which provide the Texas Real Estate Commission with the authority to adopt, promulgate, and enforce rules and regulations necessary to effectuate the intent and provisions of The Residential Service Company Act. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on June 22, 1994. TRD-9443041 Mark A. Moseley General Counsel Texas Real Estate Commission Effective date: July 18, 1994 Proposal publication date: March 29, 1994 For further information, please call: (512) 465-3900 Subchapter N. Hazardous Financial Condition 22 TAC sec.539.137 The Texas Real Estate Commission adopts an amendment to sec.539.137, concerning semi-annual reports filed by licensed residential service companies, without changes to the proposed text as published in the March 29, 1994, issue of the Texas Register (19 TexReg 2181). The amendment adopts by reference a revised semi-annual report to be filed with the commission by each company. A number of questions were added to the report so that the commission can obtain information about past due accounts, active lawsuits against the company, funded reserves and stockholder's equity and statement of cash flow. Adoption of the amendment is necessary to develop a more efficient reporting system for residential service companies. No comments were received regarding adoption of the amendment. The amendment is adopted under Texas Civil Statutes, Article 6573b, sec.5, which provide the Texas Real Estate Commission with the authority to adopt, promulgate, and enforce rules and regulations necessary to effectuate the intent and provisions of The Residential Service Company Act. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on June 22, 1994. TRD-9443044 Mark A. Moseley General Counsel Texas Real Estate Commission Effective date: July 18, 1994 Proposal publication date: March 29, 1994 For further information, please call: (512) 465-3900 Subchapter X. Fees 22 TAC sec.539.231 The Texas Real Estate Commission adopts an amendment to sec.539.231, concerning filing fees charged by the agency for license applications, annual reports, evidences of coverage, and schedules of charges by residential service companies, without changes to the proposed text as published in the March 29, 1994, issue of the Texas Register (19 TexReg 2182). The amendment restates the existing fees that are charged by the agency. Adoption of the amendment is necessary to clarify the filing fees for the companies. No comments were received regarding adoption of the amendment. The amendment is adopted under Texas Civil Statutes, Article 6573b, sec.5, which provide the Texas Real Estate Commission with the authority to adopt, promulgate, and enforce rules and regulations necessary to effectuate the intent and provisions of The Residential Service Company Act. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on June 22, 1994. TRD-9443039 Mark A. Moseley General Counsel Texas Real Estate Commission Effective date: July 18, 1994 Proposal publication date: March 29, 1994 For further information, please call: (512) 465-3900 Part XXX. Texas State Board of Examiners of Professional Counselors Chapter 681. Professional Counselors The Texas State Board of Examiners of Professional Counselors (board) adopts amendments to sec.sec.681.40, 681.52, 681.81-681.84, 681.92, and 681.94, without changes to the proposed text as published in the April 19, 1994, issue of the Texas Register (19 TexReg 2825). The amendments clarify the requirements for advertising and announcements; require supervisors to state on board forms any reservations a supervisor may have about an intern; allow interns to count supervised experience hours accumulated after January 1, 1994 if the hours were obtained in a setting exempt under Texas Civil Statutes, Article 4512g, sec.3; ensure that licensed professional counselor interns receive quality supervision; ensure that appropriate relationships are established and maintained between supervisors and interns; and clarify language concerning examination process. Four individuals commented in favor of sec.681.81(b)(2). No other comments were received. Subchapter C. Code of Ethics 22 TAC sec.681.40 The amendment is adopted under Texas Civil Statutes, Article 4512g, sec.6, which authorize the Texas State Board of Examiners of Professional Counselors to adopt rules concerning the regulation and licensure of professional counselors. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on June 24, 1994. TRD-9443005 James O. Mathis, Ed.D. Chair Texas State Board of Examiners of Professional Counselors Effective date: July 15, 1994 Proposal publication date: April 19, 1994 For further information, please call: (512) 834-6658 Subchapter D. Application Procedures 22 TAC sec.681.52 The amendment is adopted under Texas Civil Statutes, Article 4512g, sec.6, which authorize the Texas State Board of Examiners of Professional Counselors to adopt rules concerning the regulation and licensure of professional counselors. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on June 24, 1994. TRD-9443006 James O. Mathis, Ed.D. Chair Texas State Board of Examiners of Professional Counselors Effective date: July 15, 1994 Proposal publication date: April 19, 1994 For further information, please call: (512) 834-6658 Subchapter E. Experience Requirements for Examination and Licensure 22 TAC sec.681.81 The amendments are adopted under Texas Civil Statutes, Article 4512g, sec.6, which authorize the Texas State Board of Examiners of Professional Counselors to adopt rules concerning the regulation and licensure of professional counselors. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on June 24, 1994. TRD-9443007 James O. Mathis, Ed.D. Chair Texas State Board of Examiners of Professional Counselors Effective date: July 15, 1994 Proposal publication date: April 19, 1994 For further information, please call: (512) 834-6658 Subchapter G. Licensure Examinations 22 TAC sec.681.92, sec.681.94 The amendments are adopted under Texas Civil Statutes, Article 4512g, sec.6, which authorize the Texas State Board of Examiners of Professional Counselors to adopt rules concerning the regulation and licensure of professional counselors. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on June 24, 1994. TRD-9443008 James O. Mathis, Ed.D. Chair Texas State Board of Examiners of Professional Counselors Effective date: July 15, 1994 Proposal publication date: April 19, 1994 For further information, please call: (512) 834-6658 TITLE 25. HEALTH SERVICES Part VIII. Interagency Council on Early Childhood Intervention Chapter 621. Early Childhood Intervention Service Delivery The Interagency Council on Early Childhood Intervention (ECI) adopts the repeal of sec.621.3 and sec.621.4, and adopts new sec.621.3, without changes to the proposed text as published in the February 18, 1994, issue of the Texas Register. The repeals allow for reorganization of the rules. The new section combines existing sec.621.3 and sec.621.4 to include policies and procedures, and adds a new subsection that clarifies reimbursement procedures for the Council for child care and attendant care when on official ECI business. The section ensures that the Council will have the necessary financial support to attend Council and/or Advisory Committee meetings. No comments were received regarding adoption of the repeals and new section. Conduct of Council Meetings 25 TAC sec.621.3, sec.621.4 The repeals are adopted under the Human Resources Code, sec.73.003, which provides the Interagency Council on Early Childhood Intervention with the authority to establish rules regarding services provided for children with developmental delays. The amendments will effect the Health and Safety Code, Chapter 73. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on June 23, 1994. TRD-9442943 Tammy Tiner, Ph.D. Chairperson Interagency Council on Early Childhood Intervention Effective date: July 14, 1994 Proposal publication date: February 18, 1994 For further information, please call: (512) 502-4900 25 TAC sec.621.3 The new section is adopted under the Human Resources Code, sec.73.003, which provides the Interagency Council on Early Childhood Intervention with the authority to establish rules regarding services provided for children with developmental delays. The amendments will effect the Health and Safety Code, Chapter 73. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on June 23, 1994. TRD-9442944 Tammy Tiner, Ph.D. Chairperson Interagency Council on Early Childhood Intervention Effective date: July 14, 1994 Proposal publication date: February 18, 1994 For further information, please call: (512) 509-4900 Early Childhood Intervention Advisory Council 25 TAC sec.621.62 The Interagency Council on Early Childhood Intervention (ECI) adopts an amendment to sec.621.62 without changes to the proposed text as published in the February 22, 1994, issue of the Texas Register (19 TexReg 1317). The section concerns policies and procedures on the size, composition and the terms of office for Advisory Committee members. The amendment deletes the length of the term of office for the Chairperson of the Early Childhood Intervention Advisory Committee. The amendment will allow for increased participation of lay members in the governence of the committee. No comments were received regarding the proposed amendment. The amendment is adopted under the Human Resources Code, sec.73.003, which provides the Interagency Council on Early Childhood Intervention with the authority to establish rules regarding services provided for children with developmental delays. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on June 23,1994. TRD-9442945 Tammy Tiner, Ph.D. Chairperson Interagency Council on Early Childhood Intervention Effective date: July 14, 1994 Proposal publication date: February 22, 1994 For further information, please call: (512) 509-4900 TITLE 28. INSURANCE Part I. Texas Department of Insurance Chapter 1. General Administration Subchapter L. Rules of Practice and Procedure for Industry-Wide Rate Cases 28 TAC sec.sec.1.1301-1.1317 The Texas Department of Insurance adopts new sec.sec. 1.1301-1.1317, concerning Rules of Practice and Procedure. Sections 1.1301, 1.1302, 1.1304, 1. 1305, 1.1307, 1.1309, 1.1310, 1.1315, and 1.1317 are adopted with changes to the proposed text as published in the May 3, 1994, issue of the Texas Register at 19 TexReg 3357-3359. Sections 1.1303, 1.1306, 1.1308, 1.1311, 1. 1312, 1.1313, 1.1314, and 1.1316 are adopted without changes and will not be republished. This subchapter is necessary to streamline industry-wide insurance rate cases. The objective of these sections is to obtain a just, fair and equitable determination of insurance rates with the greatest expedition and at the least expense possible to the parties and the state by streamlining the process of rate cases. The adopted sections will shorten the length of the hearing of rate cases, eliminate repetitious testimony and cumulative evidence, eliminate the need for decisions on certain procedural matters, and otherwise streamline the administrative process for rate cases. The sections will ensure due process, provide understandable procedures for those persons who participate in proceedings before the department, give appropriate notice of required filings, and provide the Administrative Law Judge and parties notice of certain policy positions of the commissioner. These sections will also insure that rate cases before the department are conducted in an efficient and economical manner by providing uniform procedures. This adoption includes several changes to the proposed text as published. In sec.1.1301 and sec.1.1302, the adopted sections eliminate the applicability of the sections to title rate cases to permit the department to further consider whether procedures for title rate cases should differ from procedures for other rate cases. In sec.1.1304(b)(2), the deadline for Motions to Intervene has been changed to two working days before the first pre-hearing conference. This change was made to give parties adequate time to review and prepare objections to Motions to Intervene of other parties. The date of the first pre-hearing conference was changed from 15 days after the notice to 17 days to maintain the 15-day period in which a party may file a Motion to Intervene. In sec.1.1305, changes were made to correct grammatical errors. In sec.1.1307, the term "first-class service" was changed to "first class mail" to correct an error in the original publication of the section. Also, the adopted section permits filing by facsimile. The adopted section also eliminates the reference to sec.1.90. That section remains applicable, but the sentence was eliminated to avoid duplication and possible conflict if sec.1.90 is amended. Finally, the section was amended to provide that filings must be made by 5:00 p.m. on the date due, if applicable. In sec.1.1309(a), the requirement that pre-filed testimony be in question-and- answer format has been removed to permit testimony in narrative format. In addition, the adopted section contains a requirement to identify the witness as a fact witness, so that parties will know whether they need to request that the witness appear at the hearing. In sec.1.1309(e), a provision has been added to allow the ALJ, on the ALJ's own motion, to require the attendance of a fact witness. This change permits the ALJ to ask a fact witness questions even if no party to the rate case requests the right to cross-examine the witness. In addition, the provision for fact witnesses was limited to instances where the party who provided the testimony disclosed their position that the testimony was fact testimony. Finally, the word "if" was changed to "is" to correct a typographical error. In sec.1.1310(a), inadvertent repetition of the words "the responding party to supply" in the published section has been eliminated. The adopted section also limits the requirement of responding on computer diskette to items or materials which the party, its representative or its witness maintains in computer format. In sec.1.1310(b), the date for objections to discovery has been changed to run from the date of receipt of service of the discovery requests. In addition, the adopted section clarifies that the ALJ may, for good cause, change the times to respond or object to discovery requests. In sec.1.310(d), a provision has been added to clarify that workpapers are discoverable, subject to valid objections. In sec.1.315(a), the adopted section provides that the ALJ may ask any witness questions prior to, during, or after cross-examination. This change makes it clear that the ALJ may ask a witness questions at any time. The term "good cause" is defined to guide the parties and the ALJ in determining whether additional testimony should be permitted. The adopted section also clarifies that redirect examination is permitted on issues raised during cross- examination. The adopted section also reflects the change to section 1. 1309(a) which permits narrative testimony. Finally, provisions have been added to permit a witness to take up to 15 minutes to summarize his or her prefiled testimony. In sec.1.1317(1), the due date for post-hearing briefs has been changed to run from the date the transcript is made available to the parties to ensure that parties have access to the transcript prior to the filing of briefs. In sec.1.1317(1) and (2), the date for reply briefs has been changed to run from the date of receipt of the initial brief, rather than the date of filing. In sec.1.1317(3), a sentence has been added to provide that rates will not go into effect until 60 days after a final order by the commissioner. The new sections as adopted establish rules of practice and procedure for industry-wide rate hearings held at the State Office of Administrative Hearings, including benchmark/flexibility band hearings held under Article 5. 101 of the Texas Insurance Code, rate cases for assigned risk automobile insurance, rate cases for the Texas Catastrophe Insurance Pool, and credit insurance presumptive rate cases. Section 1.1301 establishes the scope of the subchapter. Section 1.1302 provides definitions of terms used in the sections. Section 1.1303 provides for rules of construction for interpreting the sections. Section 1.1304 provides that notice of the hearing shall be provided at least 60 days prior to the hearing and 17 days prior to the first prehearing conference. Section 1.1305 provides the requirements for pleadings. Section 1.1306 establishes the department's policy of liberal intervention rights in rate cases. Section 1.1307 provides the methods and requirements of service and filing. Section 1.1308 provides for prehearing conferences. Section 1.1309 provides for prefiled direct and rebuttal testimony of fact and expert witnesses and related procedures for each. Section 1.1310 provides procedures for discovery requests, responses and objections. Section 1.1311 requires agreements to be in writing. Section 1.1312 governs pre-hearing rulings by the ALJ and appeals from those. Section 1.1313 provides the order of presentation for both the presentation of witnesses and cross-examination. Section 1.1314 provides for the alignment of parties. Section 1.1315 sets out the procedures for presentation of witnesses and non-party statements. Section 1.1316 provides the requirements for exhibits. Section 1.1317 establishes post-hearing procedures and deadlines. Written or oral comments were received from American National Insurance Company, the Texas Legal Reserve Officials Association, USAA Insurance Company, State Farm Insurance Companies, the National Association of Independent Insurers, Texas Farmers and Mid-Century Insurance Companies, the Texas Automobile Insurance Plan, the Texas Land Title Association, and the Texas Automobile Insurance Service Office. Each had specific provisions for which objections were raised. Consumers Union and the Office of Public Insurance Counsel testified orally in support of the sections. General Comments. A commenter urged that the somewhere the proposed sections need to clarify that the new rates are not effective until at least 60 days after insurers have been notified of the new rate by final order, or, if later, the date the department provides insurers the appropriate documentation which spreads the new rates among the applicable classifications and territories. The department agrees that the rates should not go into effect until 60 days after the commissioner's written order. A provision has been added to sec.1.1317(3) to include this requirement. Comments Relating to sec.1.1301 and sec.1.1302. One commenter objected to the applicability of the sections to title insurance. The commenter claimed there are practical and legal limitations of the advisability of applying the proposed sections to title insurance rate cases. The department has withdrawn the applicability of the sections to title rate cases. Comments Relating to sec.1.1304. Commenters objected to the provision in sec.1.1304(b)(2) that the deadline for intervention of parties is to be no sooner than the date set for the first prehearing conference, on the basis that it is possible, if not probable, that the date of the first prehearing conference would coincide with the deadline for intervention by parties. Since sec.1.1308 provides that the ALJ must rule on all motions to intervene at the first prehearing conference, parties under the proposal as published would not be provided with an appropriate opportunity to file possible objections to intervention. The commenter suggested revising sec.1.1304(b)(2) to provide that the deadline for intervention is two days before the date set for the first prehearing conference. The department agrees. In sec.1.304(b)(2) the deadline for Motions to Intervene has been changed to two working days before the first pre-hearing conference. The date of the first pre-hearing conference was changed from 15 days after the notice to 17 days to maintain the 15-day period in which a party may file a Motion to Intervene. Comments Relating to sec.1.1307. Commenters noted that although sec.1.1307 provides for service of any document on any party by "hand delivery, first-class service, or by certified mail or by facsimile...," the intention was probably to provide for service by first-class mail. The comment recommended changing the term "first-class service" to "first-class mail." A commenter recommended that original filing of a document be permitted by facsimile. A commenter recommended that original filing of a document and service of copies also be permitted through use of a common carrier of envelopes or parcels such as Federal Express, DHL, UPS or others. The department's intention was to provide for service by hand-delivery, first-class mail, or certified mail or by facsimile, and the department concurs with this editorial clarification. With respect to the second recommendation, the department agrees that filing of documents with SOAH or TDI may be by facsimile in rate cases, but only if the filing and attachments are 20 pages or less. Otherwise the agency's fax machines will be unnecessarily burdened. The department also disagrees that the section should expressly state that filing by common carrier is permitted because filing by common carrier comes within the meaning of "hand-delivery." Comments Relating to sec.1.1309. Commenters objected to the provisions of proposed sec.1.1309 which, in conjunction with proposed sec.1.1315, provide that prefiled written direct and rebuttal testimony shall be offered as an exhibit by the party rather than having the witness read or summarize the testimony. Commenters objected to the requirement for direct and rebuttal testimony to be in writing as bad policy which will not result in the streamlining of rate cases, as unconstitutional, as a denial of due process, and in violation of the Rules of Evidence, 28 TAC sec.1.44, Government Code sec.sec. 2001.51(2), 55, 81, 85, 88 and 89, and the Insurance Code Articles 1.33B (c)(2) and 21.81, sec.5. More specifically, the commenters objected to the provisions on the basis that it is important to allow a party to present its witnesses-particularly expert witnesses -in person, so that the ALJ has the opportunity to fully understand the prefiled testimony, ask questions to clarify the testimony, and judge witness credibility. The commenters also objected to the fact that a party opponent's intention to cross-examine a particular witness appears to control whether that witness is to provide oral testimony. The commenters urged that the proposed sec.1.1309 be changed to permit discretion to the ALJ to receive additional testimony, direct and/or rebuttal, to help summarize, explain or more fully develop prefiled testimony. Commenters also objected that pre-filed testimony should be permissive only for fact witnesses. Commenters claimed that the provisions of proposed sec.1. 1309, in conjunction with those of proposed sec.1.1315, defeat the requirement in the Insurance Code, Article 1.33B, which provides that ..."[o]pportunity must be afforded all interested parties to respond to and present evidence and argument concerning all issues involved in the proceeding." The commenters objected that such provisions are also contrary to that portion of Article 1. 33B(c)(2) which provides that the testimony of a witness, other than an expert witness, may be presented either orally by the witness at the hearing or by affidavit. The commenters argued that the provisions in proposed sec.1.1309 are inconsistent with portions of the APA and other agency sections which they asserted are permissive with respect to entering written testimony by affidavit, but which do not allow the agency or an ALJ to restrict testimony only to writing. The commenters continued by asserting that Article 1.33B(c)(2) contemplates that an expert witness will testify at the hearing because of the words "to be called" in the statute. They also urged that the prefiling requirements do not reflect an intention that the witness would not be called at the hearing to testify in person. The department disagrees with these comments. The department has, however, amended sec.1.1315 to provide witnesses with an optional opportunity to provide a summary of the prefiled testimony but limits the summary to 15 minutes. The procedure adopted through these sections limits oral direct and rebuttal testimony for three reasons. First, permitting oral direct testimony by an expert witness that was not pre- filed would be in direct violation of Insurance Code, Article 1.33B sec.(c)(2) which states that the direct testimony of an expert witness must be pre-filed. Second, because all testimony is pre-filed, all parties and the ALJ will review the testimony prior to the hearing. Limitation of repetitious oral testimony will streamline the hearing and reduce the costs of rate cases for parties and the state. Third, limitation of oral direct and rebuttal testimony forecloses the possibility that witnesses will provide testimony that has not been disclosed in pre-filed testimony, which has been a problem in past rate cases at the department. Oral testimony, by necessity, must either be repetitious of written testimony or outside the scope of the written testimony. Therefore, the department has determined that a fairer, less expensive, more orderly and more streamlined hearing will result from the limitation of oral direct and rebuttal testimony. The procedure for written testimony in lieu of oral testimony is an accepted practice at other state agencies. For example, the Public Utility Commission has followed this procedure for several years. Witnesses simply identify pre-filed testimony and swear to its truth. The witness is then tendered for cross-examination. Other insurance departments across the country use a similar procedure. One commenter claims the need for oral testimony is so that "the ALJ has the opportunity to more fully understand the witness' detailed pre-filed testimony, ask questions to clarify his or her understanding of the pre-filed testimony, and most importantly, make judgments as to the credibility of the witness." The adopted sections permit up to a 15-minute summary and permit the ALJ to ask a witness all questions the ALJ finds necessary to clarify testimony or judge the credibility of the witness. Oral testimony can only offer greater insights into the written testimony if the witness offers testimony that was not included in the written prefiled testimony. Allowing an expert witness to provide testimony that was not prefiled would violate Article 1.33B and be unfair to the other parties. The department has the statutory authority to promulgate this section. First, the department has the general power to prescribe the procedure under which rate cases will be held. Second, Article 5. 121 gives the department authority to adopt sections to streamline rate cases and this section will streamline rate cases. Third, Government Code, sec.2001. 081 incorporates the Texas Rules of Evidence, including Rule 403. That rule allows the department to exclude testimony that would cause undue delay or needless presentation of cumulative evidence. Since the prefiled testimony will be entered as an exhibit, further oral testimony would cause undue delay and be needlessly cumulative. The section is not unconstitutional because parties are permitted to submit sworn testimony and argument on any relevant issue. The section simply requires that testimony be in written form and filed prior to the hearing. If good cause is shown, additional testimony may be offered. Parties are provided with all due process rights. The procedure set out in these adopted sections for pre-filed testimony do not conflict with the Texas Rules of Evidence. The commenters fail to cite any provision of the Texas Rules of Evidence which is violated by this section. Nor does the section conflict with 28 TAC sec.1.44. That section is not applicable to rate cases. Moreover, sec.1.44 does not vest the authority over the procedure of presentation of testimony to the parties. That discretionary power always remains with the department. Therefore, even if sec.1.44 applied to rate cases, it would not be in conflict with the adopted sections. Finally, the department has the authority to promulgate rules to amend the application of existing rules in certain circumstances. The section complies with Government Code, sec.2001.51(2), because parties are provided the opportunity to present direct and rebuttal testimony on all issues. It complies with Government Code, sec.2001.55, because there is no denial of the right to an interpreter. It complies with Government Code, sec.2001.81, because there is no violation of the Rules of Evidence. It complies with Government Code, sec.2001.85, which expressly states that evidence may be received in writing; it does not prohibit an agency from requiring that evidence is received in writing. The section complies with Government Code, sec.2001.88, because witnesses are required to be sworn and testify to the truth of their testimony. The section complies with Government Code, sec.2001.89, because witnesses must attend the hearing, except for certain fact witnesses pursuant to Insurance Code, Article 1.33B. The section complies with the Insurance Code, Article 1.33B(c)(2), because no limitation is placed on parties to present evidence or argument concerning any issue in a rate case. Direct and rebuttal testimony may address any issue in the rate case. Post- hearing briefs may present any argument concerning the rate case. If new evidence is raised in cross-examination and the party can show good cause, the ALJ may permit the party to offer further rebuttal testimony pursuant to Sections 1.1309(f) or 1.1315. Thus, the section does not violate the statutory requirement. Insurance Code, Article 1.33B(c)(2) , provides that the testimony of a non-expert witness may be presented either orally by the witness at the hearing or by affidavit. The sections do permit the fact witness to provide oral testimony. However, that oral testimony is limited to identification and adoption of the prefiled testimony and a summary of no more than 15 minutes. The sections could provide that the fact witness also be allowed to read the prefiled testimony. However, the department has determined to exercise its discretion to adopt the procedure that best streamlines the hearing of rate cases. Moreover, the right to present oral testimony is not unlimited; all testimony is subject to the Rules of Evidence, including Rule 403. That rule allows the department to exclude testimony that would cause undue delay or needless presentation of cumulative evidence. Because the prefiled testimony will be entered as an exhibit, further oral testimony would cause undue delay and may be needlessly cumulative. Accordingly, oral testimony is limited to identification of the prefiled testimony and a 15-minute summary. Nor does the section conflict with Insurance Code, Article 1.33B(c)(2), related to expert witness testimony. That statute simply requires the testimony of an expert witness to be pre-filed. The section complies with that requirement. Nor does the section conflict with the statutory requirement that the expert witness "be called." The section requires the expert witness to be called and swear to the truth of the testimony. Thus, the section comports with the statute. Nor do the adopted sections violate Article 21.81. Section 5 of that statute simply provides that the Texas Automobile Insurance Plan Association "shall be permitted as a party to present testimony at the hearing." The sections comply with this statutory requirement: TAIPA is permitted to present testimony at the hearing. That testimony, however, will be in written form and live testimony is limited to identification of the prefiled testimony and a 15-minute summary. Rather than have the witness read the pre-filed testimony, the sections seek to streamline the case by having the written testimony entered as an exhibit. The filing of pre-filed testimony by fact witnesses will streamline the rate case, provide greater notice and fairness to the parties, and reduce the expense of depositions of fact witnesses. The department recognizes that adverse fact witnesses may not be willing to provide written testimony. To ensure notice of such testimony for all parties and to streamline the hearing of the rate case, the department has determined that the party should depose an adverse fact witness who is unwilling to provide pre-filed written testimony. This will eliminate surprise, streamline the actual hearing of the rate case, and eliminate arguments as to whether a fact witness is a "friendly witness" who should have prefiled testimony. Commenters recommended that live testimony be permitted in response to testimony received on cross-examination or in response to pre-filed rebuttal testimony. The department agrees that a party should be permitted to offer re- direct testimony on issues raised during cross-examination of the witness and has clarified sec.1.1315 accordingly. Further, the sections already permit additional testimony for good cause. Good cause is defined in the section and includes instances in which a party responds to late-filed discovery responses that were not filed in time to discuss in prefiled testimony. A commenter recommended that the requirement that pre-filed testimony be in question and answer format be omitted so as to permit pre-filed testimony in narrative format. The department agrees that testimony should be permitted in narrative format and has changed this section accordingly. Section 1.1315 has been amended to reflect this change. One commenter objected that the deadlines set out in subsections (b) and (c) violate the Insurance Code, Article 1.33B(c)(2). The department disagrees with this comment. This statute does not prevent the department from promulgating sections for the ALJ to follow in establishing the deadlines for pre-filed written testimony. In addition, the adopted sections provide that the ALJ may amend the deadlines pursuant to sec.1.1309(f) and sec.1.1315. A commenter objected that the ALJ should be permitted to change the substantive provisions of the section because such a requirement is mandated by Article 1.33B. The department disagrees with this comment. The statute does not give the ALJ the authority to change substantive provisions of an agency's rules. Comments Relating to sec.1.1310. One commenter observed that in sec.1.1310(a) the words "the responding party to supply" are printed twice consecutively. The department has removed the unintentional redundant wording. A commenter objected to time limits for responding to and objecting to discovery requests that differ from those set out in the Texas Rules of Civil Procedure. The commenter argued that these provisions are contrary to the Texas Rules of Civil Procedure and, therefore, violate Article 1.33B(2). The department disagrees with this comment. A commenter incorrectly asserts that Article 1.33B "guarantees the applicability of the provisions of the Texas Rules of Civil Procedure." That is incorrect. The statute merely provides that the Civil Rules shall be used as a guide. The legislature chose not to require the exact provisions of the Civil Rules because they may not all be appropriate. The department has determined that some of the provisions are not appropriate for rate cases. Commenters objected to the requirement in sec.1.1310 that parties provide responses to discovery in specific computer formats, on the basis that such request may be burdensome, costly or impractical under particular circumstances. A commenter urged that the ALJ should have express discretion to determine whether such a request is burdensome, costly or unnecessary in ruling on an objection to such a request. A commenter urged that the requirement should apply only to items/materials which the party maintains in computer or database format that can be translated into an Apple-or DOS-based spreadsheet, and then only to the extent that it is not unduly burdensome, unnecessarily expensive, or subject to other valid discovery objections. A commenter suggested alternatively that the requirement apply only to expert witnesses and only to the extent that data or calculations upon which their testimony is to be based is maintained on a computer or is based on data which has been provided to them in a format that can be translated to an Apple-or DOS-based spreadsheet or database. The department agrees in part and disagrees in part. The department agrees that the provision should be limited to items or materials which the party, its representative, or its witness maintains in computer format and has changed the provision accordingly. The department disagrees that the sections do not give the ALJ authority to sustain objections to burdensome discovery requests, including those made under this section. The section provides that limitations on discovery set out in the Texas Rules of Civil Procedure shall apply to discovery requests in rate cases. This would include objections that the requested discovery is burdensome. Therefore, there is no reason to eliminate the right to discovery provided in this section, as recommended by the commenter. Finally, the department disagrees that the requirement should be limited to expert witnesses. All data a party or its witnesses have reviewed or relied on should be made available in computer format under the section. A commenter objected that proposed sec.1.1310(c) will not help streamline the rate proceeding because it permits unlimited numbers of interrogatories; the commenter also argued that the provision is contrary to TRCP Number 168 limitations on the number of interrogatories, subject to good cause exception. The commenter argued Rule 168 guidelines provide for better practice and would result in a disciplined and efficient discovery process. It also raised the impracticality of receiving an inordinate number of interrogatories and having little time to file objections while simultaneously preparing responses to all of the discovery. The commenter recommended revising the proposed section to embrace limits similar to those of Rule 168. The department disagrees with this comment. The statute sets the Texas Rules of Civil Procedure as a guide, but the legislature chose not to make the provisions of the Civil Rules mandatory. The use of interrogatories reduces the need for depositions. Depositions are expensive and time-consuming for the parties. This provision is intended to offer parties a less expensive alternative to depositions in order to streamline hearings and reduce the costs to the parties and the state. If discovery becomes burdensome and the ten-day requirement is too short, the ALJ may extend the time for responding. A commenter suggested adding a new subsection to proposed sec.1.1310 to specifically provide that data or practices of an individual insurer are not reasonably calculated to lead to discovery of evidence relevant to the rate case unless the data or practices are part of, form the basis for, or have been reviewed by a testifying expert in connection with testimony or other evidence to be presented on behalf of that party. The department disagrees with this comment. Industry-wide rates are normally based, at least in part, on the expenses and losses of all insurers. Thus, the expenses and losses of individual insurers are relevant to the rate determination because a determination that losses or expenses for an individual insurer are inappropriate would reduce the industry-wide rate indication. This issue has been litigated and the commenter's argument has been rejected in district court. A commenter objected to proposed subsection sec.1.1310(d) on the basis that it should be limited only to expert witnesses, and that it should be parallel to and consistent with Texas Rule of Civil Procedure 166b. The commenter urged that the subsection provide that only information or documents reviewed by the expert witness which are relevant to the opinion testimony of the expert should be discoverable. The department disagrees with this comment. If a fact witness has workpapers, those workpapers should be discoverable. Discovery should not be limited to facts relevant to the specific expert's testimony. If the information is prepared by or for the expert and is relevant to the rate case, that information should be discoverable even if not relevant to that expert's testimony. A commenter objected to the incorporation of discovery provisions contained in the Texas Rules of Civil Procedure. The commenter argued that some procedures for discovery set out in the Rules of Civil Procedure differ from those in the Texas Administrative Procedure Act. The department disagrees with this comment. The Administrative Procedure Act only sets minimum standards for discovery; it does not prohibit additional discovery procedures. Insurance Code, Article 1.33B(c)(1), provides that procedures before the commissioner shall be guided by both the Administrative Procedure Act and the Texas Rules of Civil Procedure. Therefore, the department has the authority to adopt discovery procedures that are contained in the Rules of Civil Procedure but not in the Administrative Procedure Act. Moreover, Article 5.121 specifically authorizes the department to adopt and implement procedures for streamlining rate proceedings. A commenter objected to the time when objections to discovery are due because time begins running from the date of service of the discovery requests, rather than date of receipt. The department agrees with this comment and has changed the section accordingly. A commenter objected to the requirement that discovery responses be provided within 10 days. The commenter argued that ten days may not be sufficient in certain circumstances. The department believes that 10 days is adequate in most cases. However, the section has been amended to resolve the concern raised by this comment; the ALJ may extend the time for response upon a showing of good cause. A commenter objected to the requirement that workpapers are discoverable without the right to raise valid objections to the discovery request for workpapers. The department agrees with this comment and has changed the section accordingly. Comments Relating to sec.1.1311. One commenter recommended deletion of the second sentence of proposed sec.1.1311, based on the liberal intervention provisions of proposed sec.1.1306. The commenter urged that the ALJ or commissioner should at least be permitted to consider a settlement regarding an ultimate or underlying fact or conclusion of law even in the absence of unanimous agreement by the parties, because of the potentially large number of parties there might be under proposed sec.1.1306. The department disagrees with this comment. The commissioner is required to set rates based on factors set out in the applicable statutes. The fact that some parties may have settled disputes is not relevant to the underlying facts upon which the commissioner is required to set rates. The right of non-settling parties to have the commissioner set rates based solely on factors permitted by the statute should not be abridged because some parties to the rate case have settled. Nothing in this section prohibits the settling parties from jointly presenting their case. Comments Relating to sec.1.1313. A commenter objected to proposed sec.1.1313, on the basis that the ALJ must be able to understand and evaluate the evidence. For these reasons, the commenter argued, the ALJ should be permitted to organize and decide the order of presentation of the evidence, rather than be constrained by the static order provided in proposed sec.1.1313, which the commenter argues may be confusing in some circumstances. The department disagrees with this comment. The purpose of determining the order of presentation in the sections is to eliminate arguments regarding the order of presentation at the hearing. The elimination of the need to argue and decide the order of presentation will streamline the hearing and save time and money for the parties and the state. Commenters objected to the requirement that a witness must offer both direct and rebuttal pre-filed testimony at the same time. The commenters argued that this procedure provides an unfair advantage to parties who offer their witnesses after other parties because they have the advantage of knowing what evidence has been elicited during cross examination. A commenter suggested language be added to the subsection entitling a party to present additional rebuttal testimony or evidence following presentation of evidence or testimony by other parties that was not prefiled. The commenter suggested rebuttal testimony be presented in the same order as provided in proposed sec.1. 1313(a)(1)-(4). The department disagrees with these comments. Parties that present their testimony after other parties are limited to presenting their pre-filed direct and rebuttal testimony and a summary of the prefiled testimony not to exceed 15 minutes. Thus, the party may not respond to prior evidence elicited through cross-examination. The problem raised by the commenter applies whether a party presents its direct and rebuttal testimony together or separately because there will always be the possibility that evidence will be elicited during cross-examination after the presentation of rebuttal testimony. The solution is to limit live direct or rebuttal testimony except for good cause shown. The department's rules do so and provide greater fairness and due process to all parties than the commenter's suggestion. If new evidence is raised in rebuttal testimony or cross-examination and the party can show good cause, the ALJ may permit the party to offer further rebuttal testimony pursuant to sec.1.1309(f) sec.and 1.1315. One commenter objected to the failure of the proposed sections to provide for presentation of closing arguments, on the basis that the ALJ would benefit from oral argument even if followed by posthearing briefs. The commenter suggested adding a subsection (c) to proposed sec.1.1313 providing essentially that after all evidence has been received, parties may argue the case to the ALJ in the same order as provided in proposed sec.1.1313(a)(1)-(4). The department disagrees with this comment. The sections do not prohibit an ALJ from taking oral arguments at the conclusion of the hearing. The department believes that post-hearing briefs are a better method for parties to present their arguments to the ALJ and, therefore, has not required closing arguments. However, if an ALJ desires to receive oral arguments, he or she may do so without a specific provision in these rules. A commenter argued that the sections do not prohibit the introduction of testimony that was not prefiled. The commenter further argued that parties can not be prohibited from offering testimony in response to new evidence raised in rebuttal testimony or cross-examination. The department disagrees with this comment. Section 1.1315 specifically prevents parties from introducing evidence that was not pre-filed, except for good cause shown. The ALJ is expressly authorized to permit additional testimony in sec.1.1309(f) and 1.1315 for good cause shown. Parties should only be allowed to present new evidence if they could not have reasonably anticipated the need for such testimony in direct or rebuttal testimony and would not gain an unfair advantage. Comments Relating to sec.1.1314. A commenter urged that an individual party should be permitted under proposed sec.1.1314 to align voluntarily and sponsor and present evidence and testimony jointly and share costs with other parties, unless expressly disapproved by the ALJ, to help ease the burden of participating in a rate case and to help streamline proceedings. The department disagrees with this comment. The ALJ should determine whether the alignment of parties is appropriate. The proposed section grants that discretion to the ALJ. A commenter objected to this section on the basis that it may violate certain statutory rights of the parties, including the right to cross-examine witnesses and to be represented by counsel. The department disagrees that any change to this section is necessary. The section provides for the alignment of participants but does not provide that the ALJ shall violate any statutes in doing so. Comments Relating to sec.1.1315. Comments and objections to proposed sec.1. 1315(a), relating to prohibition of live testimony except for good cause, were quite similar to objections about proposed sec.1.1309 and were founded on the same bases. Many of the comments made in response to sec.1.1309 were repeated for this section and no additional comments were made. The department disagrees with these comments for the reasons set out previously in response to the same comments against sec.1.1309. A commenter objected to the last sentence of sec.1.1315(b). The commenter argued that trade associations and advisory organizations should be permitted to offer comments which are included as part of the evidentiary record, including those entities which are prohibited in certain circumstances from participating as a party. The commenter argued that the proposed section provides meaningless testimony. The department disagrees with this comment. This provision is intended to ensure the due process rights of the parties; it is not directed only at trade associations or advisory organizations. If the person or entity seeking to offer testimony is not a party to the case, subject to discovery and pre-filing of testimony, it would be unfair to the parties to permit the testimony to be part of the evidentiary record. Moreover, allowing non-party experts to testify without pre-filing their direct testimony would violate Article 1.33B (c)(2) which requires the direct testimony of each expert witness to be pre-filed. Nor is the testimony meaningless under this section; the purpose of non-party testimony, identified in the section, is to raise issues for the ALJ and the parties. One commenter recommended that "good cause" be defined in subsection (a). The department agrees with this comment and has added a definition. Comments Relating to sec.1.1316. One commenter objected to the requirement that large exhibits be rolled up or folded for inclusion in the record because this detracts from the convenience and utility of such exhibits. The department disagrees with this comment. To be included in the record, large exhibits must be folded or rolled up. This does not prevent the party from unfolding or unrolling the exhibit at the hearing. Comments Relating to sec.1.1317. Commenters urged that time limits for submitting posthearing briefs under 1.1317(1) should be determined subject to availability of transcripts of the proceeding and that the time period for reply briefs should run from the time of receipt of the initial brief. The department agrees with these comments and has changed the section accordingly. A commenter argued that the ALJ should be given the discretion to set the deadlines for post-hearing briefs rather than set the deadlines in the rule. The department disagrees with this comment. The section sets out reasonable time periods for briefs to ensure that contested cases are decided in a reasonable time period. The new sections are adopted under the Insurance Code, Articles 1.03A and 5. 121. Article 1.03A authorizes the commissioner to adopt rules and regulations for the conduct and execution of the duties and functions of the department as authorized by statute. Article 5.121 authorizes the department to adopt procedures to streamline insurance rate proceedings. The following are the articles of the Insurance Code that are affected by these sections: Article 1.33B, Article 1.33C, Article 3.53, Article 5.101, Article 5.121, Article 21.49, and Article 21.81. sec.1.1301. Scope. This subchapter applies to all industry-wide rate cases: benchmark/flexibility band rate cases held under the Insurance Code, Article 5.101, rate cases for assigned risk automobile insurance (Texas Automobile Insurance Plan Association), rate cases for the Texas Catastrophe Insurance Pool, and credit insurance presumptive rate cases. This subchapter does not apply to proceedings to approve the rates of an individual insurer. sec.1.1302. Definitions. The following words and terms, when used in this subchapter, shall have the following meanings, unless the context clearly indicates otherwise. Administrative Procedure Act-Texas Government Code, Title 10, Subtitle A. Article 5.101-Texas Insurance Code, Article 5.101, Subchapter M. Flexible Rating Program For Certain Insurance Lines, as amended from time to time. Department-The Texas Department of Insurance. ALJ-The Administrative Law Judge, an employee of the State Office of Administrative Hearings, who presides over a rate case. Rate case-Any proceeding for the promulgation of industry-wide insurance rates in which the hearing is held at SOAH: benchmark/flexibility band rate cases held under the Insurance Code, Article 5. 101, rate cases for assigned risk automobile insurance (Texas Automobile Insurance Plan Association), rate cases for the Texas Catastrophe Insurance Pool, and credit insurance presumptive rate cases. Register-The Texas Register established by the Texas Register and Administrative Code. SOAH-State Office of Administrative Hearings. sec.1.1304. Notice of Hearing. (a) The department will publish notice of a rate case in the Register no later than 60 days prior to the commencement date of a rate case hearing, with a copy of the notice to any person entitled to such notice by statute. The department shall provide copies of the notice by first-class mail to all parties to the last rate case in that line of insurance and to all persons who requested notice of the rate case, but failure to give notice to these parties or persons shall not invalidate the notice in the Register or be the basis for a continuance of the hearing or extension of any deadlines. (b) In addition to those items required by statute, the notice shall include: (1) the style and docket number of the case; (2) an establishment of a deadline for intervention no sooner than two working days before the date set for the first pre-hearing conference; (3) the time, date and place set for a pre-hearing conference, no sooner than 17 days after publication of the notice in the Register; (4) a statement that the rate making data to be used in the rate case is currently available from the department; and (5) such other matters deemed necessary by the department to insure that all affected parties have a fair and reasonable opportunity to participate in the rate case hearing. sec.1.1305. Pleadings. Regardless of an error in designation, a pleading shall be accorded its true status in the proceeding. No technical form of pleadings or motions is required; however, a pleading which sets forth a claim for relief shall contain a short and plain statement of the grounds and of the claim showing that the pleader is entitled to relief. Unless dictated into the record during a proceeding at which an actual record is made, a motion must be in writing and must state the request sought and the reasons for the motion. A copy of all pleadings must be served on all parties. sec.1.1307. Filing and Service. (a) Filing of any document filed in connection with a rate case may be accomplished by hand delivery, first-class mail, facsimile (if the filing, including attachments, is 20 pages or less and the original document is mailed or hand-delivered on the same day as the filing by facsimile), or by certified mail. All filings shall be filed by 5:00 p.m. on the date due and include a certificate of service certifying that a copy of the filing has been served on all parties to the rate case or their representatives. Service of any document on the parties may be accomplished by hand delivery, first-class mail or by certified mail, or by facsimile if the original document is mailed or hand- delivered on the same day as the service by facsimile. (b) The department shall maintain an indexed, central record of all documents filed in the case. All filings shall be open to public inspection unless stated otherwise in a protective order entered in the case. sec.1.1309. Pre-filed Testimony and Exhibits (a) The ALJ shall require parties to prepare their direct and rebuttal testimony in writing for incorporation into the record in lieu of live direct and rebuttal testimony at the hearing. Testimony shall be pre-filed for both fact and expert witnesses. All pre-filed testimony shall include an affidavit verifying the truth and accuracy of the testimony. The party offering the testimony of a fact witness must identify the witness as a fact witness at the time the testimony is filed. (b) The deadline for the filing of direct testimony shall be no later than 20 calendar days prior to the date of the hearing. The deadline for the filing of rebuttal testimony shall be no later than ten calendar days prior to the date of the hearing. Pre-filed testimony shall include any exhibits referred to in the testimony or that will be offered by the party as part of its direct or rebuttal case. No late-filed or supplemental direct or rebuttal testimony shall be permitted without a showing good cause and a showing that the party will not gain an unfair advantage if the late-filed or supplemental testimony is permitted. (c) Objections to pre-filed direct testimony shall be filed by the date set for the filing of rebuttal testimony. Objections to pre-filed rebuttal testimony shall be filed no later than two working days prior to the hearing. (d) Parties who do not present direct or rebuttal testimony shall file a statement of position on the date pre-filed rebuttal testimony is due. (e) Subject to any objections sustained by the ALJ, pre-filed testimony of a fact witness who was identified as a fact witness in the prefiled testimony shall be admitted without the necessity of having the witness present and subject to cross-examination unless a party or the ALJ files a written request at least two working days before the hearing to cross-examine the witness. If such a request is filed, the testimony shall not be admitted unless the witness appears at the hearing and all parties are given the opportunity to cross- examine the witness. (f) The ALJ, upon good cause shown or upon agreement of all parties, may amend the deadlines set out in this rule. sec.1.1310. Discovery (a) Permissible forms of discovery and discovery procedures shall be governed by the Texas Rules of Civil Procedure, except that the time for responses to written discovery requests shall be governed by this rule. Discovery requests may require the responding party to supply the requested information on computer diskette in a format that can be translated into any Apple- or DOS-based computer spreadsheet or database, in addition to responses on paper, if the party, its witness, or representative maintains the information in computer format. Unless otherwise limited by the commissioner or the ALJ, the scope of discovery shall be the same as provided by the Texas Rules of Civil Procedure 166b, and shall be subject to such limitations as provided therein. (b) Responses to written discovery requests shall be served no later than ten working days after receipt of service of the request. Objections to discovery shall be filed no later than five working days after receipt of service of the request. The ALJ is not required to rule on objections to discovery unless a motion to compel the discovery is filed by the party who propounded the discovery. The ALJ, for good cause shown, may extend the time for responding or objecting to specific discovery requests. (c) In order to reduce the need for and expense of depositions, there shall be no limit on the number of sets or questions for interrogatories. Upon good cause shown, the ALJ may limit the number of interrogatories in the interests of justice. (d) Subject to valid objections, workpapers shall be discoverable. Workpapers consist of all documents prepared by or for a witness in preparation or anticipation of the witness' testimony and evaluation of rates, including, but not limited to, the following: a list of articles, studies, transcripts, reports, law, and other documents reviewed by or relied upon by the witness; computer diskettes containing any data reviewed by or relied upon by the witness in a format that can be translated into any Apple- or DOS-based computer spreadsheet or database; and all notes, memos, data summaries, data analyses and other documents reviewed by or relied upon by the witness. sec.1.1315. Presentation of Evidence. (a) Each witness may take up to 15 minutes to summarize his or her prefiled testimony. No other live direct or rebuttal testimony shall be permitted, unless for good cause shown. Good cause exists when the party could not have reasonably anticipated the need for the testimony and shows that the party will not gain an unfair advantage if the testimony is permitted. A party offering a witness shall be permitted to allow the witness to identify himself or herself, identify the pre-filed direct and/or rebuttal testimony, state that the statements made in the prefiled testimony are true, and provide a summary of the prefiled testimony of no longer than 15 minutes. Objections to pre-filed testimony shall be ruled on at that time. The witness shall then be offered for cross-examination. The ALJ may ask the witness questions at any time prior to, during, or after cross- examination. At the completion of all cross-examination and questions by the ALJ, the party calling the witness may re-examine the witness only on issues raised during cross-examination of the witness or in questions raised by the ALJ. (b) Members of the public who are not parties or employees or agents of a party shall be allowed to present a statement either orally or in writing prior to the presentation of evidence by the parties or at any other time convenient for the member of the public, the parties and the ALJ. The purpose of a statement by a non-party shall be solely to raise issues for the ALJ and commissioner. Non-party statements shall not be made part of the evidentiary record or used to form the basis of a finding of fact or conclusion of law. sec.1.1317. Post-hearing Procedures. The ALJ shall set deadlines for post- hearing pleadings as follows. (1) Parties shall be entitled to file initial post hearing briefs within ten working days after the date the transcript is made available to the parties and reply briefs within five working days after the receipt of the initial briefs. (2) Parties shall be entitled to file exceptions to the proposal for decision within ten working days after receipt of the proposal and replies to exceptions within five working days after the receipt of exceptions. (3) The commissioner shall consider the proposal for decision in an open meeting and permit parties to make oral argument. The commissioner may place time limits on oral argument as the commissioner deems necessary. The commissioner shall set rates by a written order and set an effective date for the new rates of no sooner than 60 days after the date the written order is mailed to the parties. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on June 23, 1994. TRD-9442952 D. J. Powers Legal Counsel to the Commissioner Texas Department of Insurance Effective date: July 14, 1994 Proposal publication date: May 3, 1994 For further information, please call: (512) 463-6327 Subchapter M. Probation of Agents Based on Certain Disabilities 28 TAC sec.sec.1.1501-1.1506 The Texas Department of Insurance adopts new sec.sec.1.1501-1.1506, without changes to the proposed text as published in the March 29, 1994, issue of the Texas Register (19 TexReg 2189). Sections 1.1501-1.1506 will enable the Department to place insurance agents on disability probation if the Department finds that the agent is suffering from a disability in accordance with provisions of the Insurance Code, Article 21.15-6, which was passed by the 72nd Legislature through House Bill 62. Article 21.15-6 requires that an agent be placed on disciplinary probation if the agent can competently demonstrate that the disability can be successfully arrested and treated. These sections will provide for adequate supervision of the agent during the probationary period to ensure that the agent will be able to discharge his professional duties in a competent manner. The adoption of sec.sec.1.1501-1.1506 will result in the agents receiving the appropriate treatment in dealing with drugs or controlled-substance abuse problems without jeopardizing their continued employment. No comments were received regarding adoption of the new sections. The new sections are adopted under the Insurance Code, Articles 21.15-6 and 1.03A, and the Government Code, sec.2001.004, et seq. Article 21.15-6 authorizes the Board to promulgate rules to carry out the provisions of this article; however, this authority is interpreted to be delegated to the Commissioner of Insurance under Article 1.02 of the Insurance Code, as amended by the 73rd Legislature in House Bill 1461. Article 1.02 provides that a reference in the Insurance Code or another insurance law to the State Board of Insurance means the Commissioner of Insurance or the Texas Department of Insurance, consistent with the respective powers and duties of the Commissioner and the Department. Under sec.1.23 of House Bill 1461, as enacted by the 73rd Legislature, effective September 1, 1993, the Commissioner of Insurance shall assume authority over any area of activity of the Texas Department of Insurance not subject to the authority of the State Board of Insurance. Section 1.23 provides also that on September 1, 1993, the Board shall relinquish authority over all areas of activity of the Texas Department of Insurance except for the promulgation and approval of rates, policy forms and endorsements, and hearings, proceedings, and rules related to these activities; such authority shall be exercised by the Board until no later than September 1, 1994. New Article 1.03A, as enacted in House Bill 1461, provides that the Commissioner may adopt rules and regulations, which must be for general and uniform application, and for the conduct and execution of the duties and functions of the Texas Department of Insurance only as authorized by statute. New Article 1.04C of the Insurance Code, as enacted in House Bill 1461, requires the Commissioner of Insurance to develop and implement policies that provide the public with a reasonable opportunity to appear before the Commissioner and to speak on any issue under the Commissioner's jurisdiction. The Government Code, sec.2001.004, et seq authorize and require each state agency to adopt rules of practice setting forth the nature and requirements of available procedures and prescribe the procedures for adoption of rules by a state administrative agency. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on June 23, 1994. TRD-9442951 D. J. Powers Legal Counsel to the Commissioner Texas Department of Insurance Effective date: July 14, 1994 Proposal publication date: March 29, 1994 For further information, please call: (512) 463-6327 Chapter 7. Corporate and Financial Regulation Subchapter B. Insurance Holding Company System Regulatory Act 28 TAC sec.sec.7.201-7.205, 7.209-7.211, 7.213 The Texas Department of Insurance adopts amendments to sec.sec.7.201-7.205, 7.209-7.211 and 7.213, concerning administrative regulation under the Insurance Code, Article 21.49-1, also known as the Insurance Holding Company System Regulatory Act (the Act). Sections 7.201-7.204, 7.209, and 7.210 are adopted with changes to the proposed text as published in the February 11, 1994, issue of the Texas Register (19 TexReg 1012). Sections 7.205, 7. 211, and 7.213 are adopted without changes and will not be republished. Pursuant to Texas Government Code, sec.2001.029, a request for a public hearing on the proposed changes was made, and a public hearing was held on May 16, 1994. The amendments are necessary to implement amendments to Insurance Code, Article 21.49-1, enacted by the passage of House Bill 1461, 73rd Legislature, 1993. This adoption includes several changes to the proposed text as published. Sections 7.201(a)(1) and (2) are amended to include the current mailing address for Financial Monitoring. In sec.7.202(a)(9), the definition of "domestic insurer" is not adopted since it was not properly noticed as a proposed new definition in the publication of the proposed rule. The term "domestic insurer" is similarly defined in the Act, and will be used to define the term when used in these sections. The existing definition of "director" was inadvertently omitted in the publication of the proposed section and is renumbered as (9) in the adopted subsection. In sec.7.202(b)(2), the paragraph has been modified to make it clear that a commercially domiciled insurer must satisfy only one of the criteria specified in the section in order to be granted an exemption; the order granting the exemption will specify the criteria on which the exemption is based; that the insurer, not the officer of the insurer, promises to notify the department if the insurer no longer meets the criteria on which the exemption was granted; and the current mailing address for Financial Monitoring. In sec.7.203(a), language is added to make it clear that a commercially domiciled insurer exempted under sec.7.202(b) is not exempted from filing a registration statement. In sec.7.203(n), language has been added clarifying that if documentation supporting the standards of the Act, sec.4(b), has previously been provided during the current calendar year and the person to whom such documentation was sent is identified, then the documentation need not be provided again; and the mailing address for Financial Monitoring has been updated. In sec.7.204, the adopted section deletes the proposed subparagraph (D) in sec.7.204(a)(2) which added "payment of a bonus to a control person" to that paragraph. The word "satisfaction" in sec.7.204(d)(1)(B) is changed to "documentation to support each" based on an oral comment. Section 7.204(f) and (g) are deleted from the adopted sections to avoid duplication with the Act. In sec.7.209(d), the adopted section sets forth the current mailing address for Financial Monitoring. In sec.7.210, the adopted section provides the current mailing address for Financial Monitoring and deletes the proposed subparagraph (E) in sec.7.210(f)(1), which added "all bonuses paid to a control person" to that paragraph and renumbers the remaining subparagraphs. The adopted amendments will provide for effective and efficient administrative regulation under the Insurance Holding Company System Regulatory Act which will now include the regulation of commercially domiciled insurers that are subject to the Act and stronger regulatory oversight of the payment of dividends. The adopted sections also include adoption by reference of revised Form HCDividend to be utilized pursuant to sec.7.203(n). The department has filed a copy of the revised form with the Secretary of State's Office, Texas Register Section, as part of this adoption. Persons desiring copies of these forms can obtain them from the Texas Department of Insurance, Financial Monitoring Unit, P.O. Box 149099, Mail Code 303-1D, Austin, Texas 78714-9099 or at the Financial Monitoring Unit office at 333 Guadalupe, Austin, Texas. A commenter indicated that certain language contained in proposed sec.7. 201(a)(1) was not highlighted as new language. The commented upon language is required by the Texas Register Manual of Style and is merely stylistic, therefore staff does not believe there is any lack of notice to the public even though the language was not indicated as new language. A commenter indicated that the definition for "director" contained in sec.7. 202(a)(9) was deleted; however, the deletion was not indicated in the proposed text. The definition was omitted in the proposed text in error. Since there is no change to the existing definition, staff does not believe the omission failed to provide notice to the public. The commenter also indicated that the proposed definition for "domestic insurer" was not shown as a new definition in the proposed text. Staff agrees and the proposed definition has been deleted. A substantially similar definition is contained in the Act and the department will use it in applying these sections. A commenter indicated that "...if it does not have a current registration statement on file with the Commissioner..." was being added to sec.7.203(l) but no indication was made that the text was new. That phrase was repealed from the rule in 1992 and inadvertently included in the text of the proposed rule. Staff does not believe the inadvertent inclusion of the phrase is misleading since there is no proposal to add that phrase back to the regulation. The text should read as follows: "The insurer shall, within 15 business days after receipt thereof, unless the time is extended by the commissioner for good cause, respond to the matters raised in the disclaimer." Comments regarding proposed amendments to sec.7.202(b)(2) raised the question of whether the four specified criteria are conjunctive or disjunctive. Section 2(s) of the Act authorizes the commissioner to exempt a commercially domiciled insurer if it has assets in this state or an asset to liability ratio which justifies the commissioner's conclusion that there is no reasonable danger that the insurer could present a danger of loss to Texas policyholders. Subparagraphs (A) and (B) establish the guidelines for assets in this state and asset to liability ratios which a commercially domiciled insurer can use in evaluating whether to apply for an exemption. If a commercially domiciled insurer does not meet or exceed the guidelines, it may bring to the commissioner's attention other positive matters under subparagraph (D) which may otherwise justify that the commercially domiciled insurer has assets in Texas or an asset to liability ratio that would justify the commissioner to exempt the commercially domiciled insurer. On the other hand, a commercially domiciled insurer which meets or exceeds the guidelines may still not justify a conclusion that there is no reasonable danger to Texas policyholders when the financial conditions mentioned in subparagraph (C) are considered. Commenters suggested that subparagraph (D) of sec.7.202(b)(2) be clarified to reflect other positive factors that would be considered. Staff believes such clarification would unnecessarily lengthen the regulation due to the multitude of positive factors that could be listed. A commenter suggests that a criteria be added to sec.7.202(b)(2) for use in the case of a financially sound parent holding company providing a guarantee to the commercially domiciled insurer. Staff believes this additional criteria is unnecessary since it is within the scope of the other positive factors the commissioner may consider. A commenter suggests that proposed sec.7.202(b)(2) set forth the specific criteria under which an exemption to a commercially domiciled insurer is granted. Clarifying language has been added. A commenter suggests that the signed and notarized affidavit of an executive officer of the insurer required by sec.7.202(b)(2) is inappropriate since the officer is swearing to an act which may occur in the future. Staff does not agree; however, the adopted rule is amended to require the insurer to notify the Department within ten days should the insurer no longer meet the criteria under which the exemption was granted. A commenter suggests that an automatic exemption be included in proposed amendments to sec.7.202(b) which would automatically exempt a commercially domiciled insurer from the Act if it meets specific criteria. Staff disagrees. The Act grants the Commissioner the authority to exempt from the Act any commercially domiciled insurer if the commissioner determines that the insurer has assets physically located in this state or an asset to liability ratio sufficient to justify the conclusion that there is no reasonable danger that the operations or conduct of the business of the insurer could present a danger of loss to the policyholders of this state. Automatic exemption would diminish the commissioner's ability to exercise appropriate judgment in granting exemptions. A commenter indicates that a commercially domiciled insurer granted an exemption under sec.7.202(b)(2) is exempt from the filing of a registration statement under sec.7.203(a). Staff disagrees. Section 7.203(a) requires a commercially domiciled insurer to file a registration statement. An exemption granted under sec.7.202(b)(2) exempts a commercially domiciled insurer from the provisions of the Act, sec.4 and sec.5. A commenter suggests language be added setting forth how a registration or exemption is terminated in the event a commercially domiciled insurer no longer meets the definition of commercially domiciled insurer. Staff agrees with the comment and has added language to sec.7.203(a) to provide that the commissioner shall terminate the registration of a commercially domiciled insurer when it no longer meets the definition. A commenter indicates that a commercially domiciled insurer would be required to file a registration statement separate and apart from the registration statement filed with its state of domicile. Pursuant to sec.7. 203(j)(1), a licensed insurer may file a copy of the registration statement or similar report which it is required to file in its state of domicile provided the report contains substantially similar information as specified in sec.7.210 and the filing insurer is the principal insurer in the insurance holding company system or, in the case of a consolidated statement, the statement is in the form required by the principal insurer's domicile. Commenters suggested adding language to sec.7.203(n) that prepayment notices are for informational purposes only to more closely follow the Act. Staff believes this recitation would be duplicative and unnecessarily lengthen the regulation. Commenters suggested that for the purposes of sec.7.203(n) a statement from an insurer declaring a dividend attesting to the adequacy of surplus would be more appropriate than providing documentation to support the standards contained in the Act, sec.4(b). Staff disagrees. An ordinary dividend is payable ten days after receipt by the Department. Some of the standards contained in the Act, sec.4(b), are not readily determinable by Staff. Therefore, Staff believes it appropriate to place the burden on the insurer to provide documentation of meeting the standards contained in the Act, sec.4(b). Language has been added to sec.7.203(n) clarifying that if documentation supporting the standards specified in the Act, sec.4(b), has previously been provided during the current calendar year and the person to whom such documentation was sent is identified, then documentation need not be provided again. Commenters indicated that proposed amendments to sec.7.204(a)(2)(D) and sec.7. 210(f)(1)(E) refer to "control person;" however, no definition is provided. Additionally, the commenters felt that "bonus" should be defined. Commenters suggested that most bonuses are contractual obligations subject to other provisions of these sections. However, salaries of persons in control are not specifically regulated by these sections unless there is a contractual arrangement. Commenters suggested that the usage of the payment of a bonus to an employee or an officer is a common and usual practice. Commenters indicated that the notice requirements of a bonus should be measured by a materiality limit. A commenter indicated that as far as Chapters 3 and 22 companies are concerned, compensation is established by the board of directors. The adopted rule deletes the provisions regarding bonuses for control persons. Staff will give the matter further consideration. Commenters suggested clarification in the proposed language in sec.7.204(d) (1)(B) regarding when an application for the payment of an extraordinary dividend is complete. The required written notice is to be provided in accordance with sec.7.212. Although a response is given to an interrogatory contained in that section, the information provided is oftentimes not sufficient. Similar language to that commented upon is contained in other sections of these rules. A commenter also inquired regarding sec.7.204(d)(1)(B) and what constitutes "satisfaction" of the standards set forth in the Act, sec.4(b), and suggested that "satisfaction" be changed to "documentation to support each" of the standards set forth in the Act, sec.4(b). Staff has modified the language commented upon. 7.204(f) and (g) are copied from the Act. Staff has deleted these from the adopted rule to eliminate unnecessary duplication. One commenter responding to revisions to Form HCDividend commented that providing the analysis of surplus form as of a date not earlier than 90 days prior to the date of the dividend notice rather than as filed for the calendar year immediately preceding the declaration date was burdensome; suggested that providing a balance sheet and statement of income and expenses for the period intervening from the last annual statement and the end of the month preceding the month in which the notice is provided was burdensome; the requirement of the insurer to provide documentation to support the standards specified in the Act, sec.4(b) was not specific as to what is to be provided; and interrogatory 3(B) of the Form HCDividend was more appropriate for a property and casualty insurer rather than a life insurer. Interrogatory 2 of Form HCDividend has been revised to provide for the filing of an analysis of surplus form as of a date not earlier than the most recently filed monthly, quarterly, or annual statement; and, to provide a copy of pages 2-4 of the most recently filed monthly, quarterly, or annual statement. The Texas Department of Insurance received written comments from the Texas- Legal Reserve Officials Association, a trade association composed of Texas domiciled life, health and accident insurance companies; Landmark Life Insurance Company, a domestic stipulated premium insurance company; the firm of Clark, Thomas and Winters; the American Council of Life Insurance, a national trade association of legal reserve life insurance companies; the American Insurance Association, a national trade association of property and casualty insurance companies; American General Corporation; Security Union Title Insurance Company, a commercially domiciled insurer; IDS Life Insurance Company, sole shareholder of American Enterprise Life Insurance Company, a commercially domiciled insurer; the firm of Long, Burner, Parks and Sealy; The Reliable Life Insurance Company, a commercially domiciled insurer; and American National Insurance Company. The amendments are adopted under the authority of Insurance Code, Articles 21.49-1 and 1.03A. Article 21.49-1. Section 11 authorizes the commissioner to issue such rules, regulations, and orders as shall be consistent with and shall carry out the provisions of the Insurance Holding Company System Regulatory Act and to govern the conduct of its business and proceedings under the Act. Article 1.03A provides the commissioner with the authorization to adopt rules and regulations for the conduct and execution of the duties and functions by the department. The following articles of the Insurance Code are affected by these rules: 1. 10, 1.10A, 1.32, 21.28, 21.28-A, 21.31, 21.32, and 21.49-1. sec.7.201. Forms Filings. (a) General requirements. (1) The forms that are specified in sec.sec.7.209-7.213 of this title (relating to Form A, Form B, Form C, Form D, and Form E) are intended to be guides in the preparation of the statements, notices, and applications required by the Insurance Code, Article 21.49-1. They are to provide notice of the information required and the location in which it will be expected to be found. In preparing any statement, notice, or application, the text of the form need not be repeated so long as there is clear identity of the matter to which the answer or material applies. Unless expressly provided otherwise, if any item is inapplicable or the answer thereto is in the negative, an appropriate statement to that effect shall be made. The forms specified in sec. sec.7.209-7.213 of this title (relating to Form A, Form B, Form C, Form D, and Form E) are also referred to in this subchapter as Forms A-E. Form A is also referred to as the acquisition statement, Form B as the registration statement, Form C as a disclaimer, Form D as an extraordinary dividend, and Form E as an exemption statement. For use in accordance with sec.7.209(d) and (f) of this title (relating to Form A) and sec.7.210(e) of this title (relating to Form B), the Texas Department of Insurance adopts by reference the biographical affidavit form published by and available from the Texas Department of Insurance. Copies of this form may be obtained from Financial Monitoring, Mail Code 303-1A, Texas Department of Insurance, P.O. Box 149099, 333 Guadalupe, Austin, Texas 78714- 9099. (2) Three complete originally signed copies of each statement, notice, or application, including exhibits and all other papers and documents filed as a part thereof, in connection with any acquisition statement filed under sec.7. 209 of this title (relating to Form A), and one complete originally signed copy of every other statement, notice, or application, including exhibits and all other papers and documents filed as a part thereof, shall be filed with the commissioner by personal delivery or by mail addressed to: Financial Monitoring, Mail Code 303-1A, Texas Department of Insurance, P.O. Box 149099, 333 Guadalupe, Austin, Texas 78714-9099. Each statement, notice, or application shall be subject to the appropriate filing fee provided for in sec.7.1301 of this title (relating to Regulatory Fees). The appropriate filing fee shall be forwarded to Financial Monitoring of the Texas Department of Insurance under separate cover along with a copy of the letter transmitting the statement, notice, or application. (3)-(4) (No change.) (b)-(e) (No change.) sec.7.202. Definitions. (a) The following words and terms, when used in this subchapter, shall have the following meanings, unless the context clearly indicates otherwise. (1)-(2) (No change.) (3) Commercially domiciled insurer-A foreign or alien insurer authorized to do business in this state that during its three preceding fiscal years taken together, or any lesser period if it has been licensed to transact business in this state only for that lesser period, has written an average of more gross premiums in this state than it has written in its state of domicile during the same period, and such gross premiums constitute 20% or more of its total gross premiums everywhere in the United States for that three-year or lesser period, as reported in its three most recent annual statements. To determine if an insurer is a commercially domiciled insurer, the annual average ratio for premium receipts addressed in subparagraphs (A) and (B) of this paragraph shall be calculated, as follows: (A) total Texas premium for the preceding three fiscal years (or any lesser period if licensed in Texas less than three years) divided by total premium countrywide for the preceding three years; and (B) total premium in the state of domicile for the preceding three years divided by total premium countrywide for the preceding three years. (4) Commissioner-The Commissioner of Insurance of the State of Texas, the Commissioner's associates or deputies, or their designees, as appropriate. (5) Control-The term "control," including the terms "controlling," "controlled by," and "under common control with," means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract other than a commercial contract for goods or nonmanagement services, or otherwise, unless the power is the result of an official position with or corporate office held by the person. Control shall be presumed to exist if any person, directly or indirectly, or with members of the person's immediate family, owns, controls, or holds with the power to vote, or if any person other than a corporate officer or director of a person holds proxies representing, 10% or more of the voting securities or authority of any other person, or if any person by contract or agreement is designated as an attorney-in-fact for a Lloyd's plan insurer under the Insurance Code, Article 18.02, or for a reciprocal or interinsurance exchange under the Insurance Code, Articles 19.02 and 19.10. This presumption may be rebutted by a showing made in the manner provided by the Act, sec.3(j), that control does not exist in fact. The commissioner may determine, after furnishing all persons in interest notice and opportunity to be heard and making specific findings of fact to support such determination, that control exists in fact, notwithstanding the absence of a presumption to that effect, where a person exercises directly or indirectly either alone or pursuant to an agreement with one or more other persons such a controlling influence over the management or policies of an authorized insurer as to make it necessary or appropriate in the public interest or for the protection of the policyholders of the insurer that the person be deemed to control the insurer. (6) Controlled insurer-An insurer controlled directly or indirectly by a holding company (as a holding company is defined in this section). (7) Controlled person-Any person, other than a controlled insurer, who is controlled directly or indirectly by a holding company (as a holding company is defined in this section). (8) Controlling producer-An insurance broker or brokers or any person, firm, association or corporation domiciled, licensed, or operating in a state other than Texas, when, for any compensation, commission or other thing of value, such person, firm, association or corporation acts or aids in any manner in soliciting, negotiating or procuring the making of any insurance contract on behalf of an insured other than such person, firm, association or corporation, and who, directly or indirectly: (A) controls or seeks to control a property and casualty insurer as the term control is defined in paragraph (5) of this subsection; and (B) writes or places, in any calendar year, an aggregate amount of gross written premiums with such controlled property and casualty insurer which is equal to or greater than 5.0% of the admitted assets of such insurer as reported in such insurer's quarterly statement filed as of September 30th of the prior year. The term "producer" or "controlling producer" as used in these sections is not intended to include an agent or any independent agent acting on behalf of the controlled insurer, licensed pursuant to the Insurance Code, Chapter 21, Subchapter A, and any subagent or representative of the agent, who acts as such in the solicitation of, negotiation for, or procurement or making of an insurance contract, if the agent is not also acting on behalf of an insured as set forth in this paragraph, in the transaction in question. The term "producer" or "controlling producer" as used in these sections is not intended to include an attorney-in-fact acting on behalf of a licensed Lloyds or licensed reciprocal or interinsurance exchange. (9) Director-A person elected or appointed as a member of a board of directors responsible for the management of an insurer. The term shall also include an attorney-in-fact of a Lloyds or reciprocal interinsurance exchange who is charged with responsibility for the management of an insurer. (10) Executive officer-The chairman of the board of directors, the president, any vice-president of an applicant in charge of a principal business unit, division, or function (such as sales, administration, finance, or underwriting), any other officer who performs a policy-making function, or any other person who performs similar policy-making functions for an applicant. Executive officers of subsidiaries may be deemed executive officers of an applicant if they perform such policy making functions for an applicant. (11) Foreign insurer-Includes an alien insurer. (12) Holding company-Any person who directly or indirectly controls any insurer except that it shall not be deemed to include: the United States, a state or any political subdivision, agency or instrumentality thereof or any corporation which is wholly-owned, directly or indirectly, by one or more of the foregoing. (13) Immediate family-A person's spouse, father, mother, children, brothers, sisters, and grandchildren, the father, mother, brothers, and sisters of the person's spouse, and the spouse of the person's child, brother or sister, mother, father, or grandparent. (14) Insurance holding company system-Consists of two or more affiliated persons, one or more of which is an insurer. (15) Insurer-Includes all insurance companies organized or chartered under the laws of this state, commercially domiciled insurers, or insurers licensed to do business in this state, including capital stock companies, mutual companies, farm mutual insurance companies, title insurance companies, fraternal benefit societies, local mutual aid associations, local mutual burial associations, statewide mutual assessment companies, county mutual insurance companies, Lloyds' plan companies, reciprocal or interinsurance exchanges, stipulated premium insurance companies and group hospital service companies, and any other entity which is made subject to the Insurance Code, Article 21.49-1, by applicable law, except that it shall not include agencies, authorities, or instrumentalities of the United States, its possessions and territories, the Commonwealth of Puerto Rico, the District of Columbia, or a state or political subdivision of a state. (16) Person-An individual, a corporation, a partnership, an association, a joint stock company, a trust, an unincorporated organization, any similar entity or any combination of the foregoing acting in concert, but shall not include any securities broker performing no more than the usual and customary broker's function. (17) Security holder-Of a specified person is one who owns any security of such person, including common stock, preferred stock, debt obligations, and any other security convertible into or evidencing the right to acquire any of the foregoing. The term "debt obligation" shall not include trade, commercial, or open accounts, matured claims, or agents' commissions. (18) Subsidiary-Of a specified person is an affiliate controlled by such person directly or indirectly through one or more intermediaries. (19) Ultimate controlling person-That person which is not controlled by another person (as defined in this subsection). (20) Voting security-Any security or other instrument giving or granting to the holder the power to vote at a meeting of shareholders of a person for or against the election of directors or any other matter involving the direction of the management and policies of such person, or any other security or instrument which the Texas Department of Insurance deems to be of similar nature including, but not limited to, those described in such rules and regulations as the Texas Department of Insurance may prescribe in the public interest as a voting security. (b) Exemption. (1) Certain insurance holding company systems of the type specified in the Act, sec.2(r), may be exempted or partially exempted from the Act and these sections in the manner provided in the Act, sec.2(r). (2) The commissioner may exempt from the provisions of the Act and these sections, except the registration requirement, any commercially domiciled insurer if the commissioner determines that the insurer has assets physically located in this state or an asset to liability ratio sufficient to justify the conclusion that there is no reasonable danger that the operations or conduct of the business of the insurer could present a danger of loss to the policyholders of this state. The order granting the exemption under this subsection shall set forth the specific criteria under which it is granted and shall be subject to annual review. The commissioner may, after notice and hearing, rescind an exemption granted to a commercially domiciled insurer under the provisions of the Act and these sections. A rescission of an exemption shall set forth the rationale for the rescission. Requests for an exemption under this subsection shall be filed with Financial Monitoring, Mail Code 303-1A, Texas Department of Insurance, P.O. Box 149099, 333 Guadalupe, Austin, Texas 78714-9099. The request must contain a signed and notarized affidavit of an executive officer of the insurer that, should the exemption be granted, the insurer has agreed to notify Financial Monitoring within 10 days after it no longer meets the criteria set out in this section on which the exemption is based. In determining that a commercially domiciled insurer has sufficient assets to justify the conclusion that there is no reasonable danger that the operations or conduct of the business of the insurer could present a danger or loss to policyholders of this state, the commissioner shall give consideration to the matters contained in subparagraphs (A)-(D) of this paragraph in connection with an exemption requested under the Act, sec.2(s), and these sections. (A) Assets in Texas, which are either: (i) permanent, free, and unencumbered and physically located in Texas in an amount equal to the total unpaid losses attributable to Texas risks; or (ii) qualifying authorized investments under the Insurance Code comprising 20% of the insurer's admitted assets and physically located in Texas. (B) Adequacy of policyholder surplus, based upon: (i) an asset-to-liability ratio of two to one, if the insurer is a property and casualty insurer; (ii) an asset-to-liability ratio of one and one-half to one, if the insurer is a life, accident and health insurer; (iii) the insurer having capital and surplus equal to 250% of the minimum risk-based capital described in sec.7.410 of this title (relating to Minimum Risk-Based Capital and Surplus Requirements for Stock Property/Casualty Insurers) or sec.7.401 of this title (relating to Minimum Risk-Based Capital and Surplus Requirements for Life, Accident and Health Insurers); or (iv) the insurer having total capital and surplus of at least $50 million. (C) Consideration may be given to financial conditions specified in sec.8.3 of this title (relating to Hazardous Conditions) to justify the conclusion that there is no reasonable danger that the operations or conduct of the business of the insurer could present a danger of loss to the policyholders of this state. (D) Consideration may be given to other positive factors regarding an insurer's operations or conduct. sec.7.203. Registration of Insurers. (a) Except as provided by the Act, every insurer which is authorized or incorporated to do business in this state and which is a member of an insurance holding company system shall register in accordance with the Act, sec.3. The exemption from registration for a foreign insurer does not apply to a commercially domiciled insurer doing business in this state, nor to a commercially domiciled insurer granted an exemption under sec.7.202 of this title (relating to Definitions). The Commissioner shall terminate the registration of a commercially domiciled insurer when it is demonstrated that it no longer meets the definition of commercially domiciled insurer in subparagraph (3) of sec.7.202 of this title (relating to Definitions). (b)-(d) (No change.) (e) Amendments to registration statements. Each registered insurer shall keep current the information required to be disclosed in its registration statement by reporting all material changes or additions (whether single transactions or cumulative in total). Such amendment shall be in accordance with sec.7.210 of this title (relating to Form B), the registration statement, the cover page requirements of sec.7.201(d) of this title (relating to Forms Filings), and with a positive statement as to the items of the form not being amended instead of setting out such unamended portions. Such amendment shall be filed within 15 days after the end of the month in which the registered insurer learns of each such change or addition. Within 60 days after the effective date of these sections, each insurer shall amend its registration statement to comply with these sections. Any transaction that is formally approved by official order of the commissioner under any of the following enumerated provisions shall be deemed to be an amendment to the registration statement without further action or filing: (1)-(9) (No change.) (10) the Insurance Code, Article 22.15, provided that all requirements of the article are met; (11) the Insurance Code, Article 22.19, provided that the reinsurance is a total direct reinsurance; and (12) any other transaction formally approved by official order of the commissioner under authority authorized by any other provisions of the Insurance Code. (f) (No change.) (g) Annual amendment. Within 120 days after the end of each fiscal year of the ultimate controlling person (that person which is not controlled by another person) of the insurance holding company system, the registrant shall file an amendment to the registration statement which shall make the registration statement current. Within 120 days of the end of each calendar year ending in a five or a zero, the registrant shall file a completely restated up-to-date registration statement as set out in sec.7.210 of this title (relating to Form B), with amendments consolidated therein. The registrant is not required to file an annual amendment to its registration statement under this subsection in the year that it files a completely restated up-to-date registration statement. The registration statement referred to in sec.7.1301(d)(23) of this title (relating to Regulatory Fees) includes each annual amendment to the registration statement and the completely restated up-to-date registration statement. (h)-(j) (No change.) (k) Exemptions. The provisions of this section shall not apply to any insurer, information, or transaction if and to the extent that the commissioner by rule, regulation, or order shall exempt the same. (l) Disclaimer. Any person may file with the commissioner a disclaimer of control or affiliation with any insurer, or such a disclaimer may be filed by such insurer or any member of an insurance holding company system. The disclaimer shall be in accordance with sec.7.211 of this title (relating to Form C) and shall disclose all material relationships and bases for affiliation between such persons and such insurer as well as the basis for disclaiming such affiliation. A copy of any disclaimer filed with the commissioner, if the affected insurer is not a party thereto, shall also be furnished by the applicant to the insurer at the same time it is filed with the commissioner. The insurer shall, within 15 business days after receipt thereof, unless the time is extended by the commissioner for good cause, respond to the matters raised in the disclaimer. After a disclaimer has been filed, the insurer shall be relieved of any duty to register or report under subsection (a) of this section which may arise out of the insurer's relationship with such person unless and until the commissioner disallows such a disclaimer. Unless disallowed by the commissioner, a disclaimer filed under this subsection relieves a person of the duty to comply with the requirements of the Act, sec.5(a)-(c). The commissioner shall disallow such a disclaimer only after furnishing all parties in interest with notice and opportunity to be heard and after making specific findings of fact to support such disallowance. After a disclaimer of control or affiliation has been filed by any person, any acquisition, in any manner, directly or indirectly, of a voting security of the domestic insurer by such person shall be subject to the Act, sec.5, in absence of the filing, within five business days, of an amendment which shall make current the disclaimer of control or affiliation previously filed pursuant to this subsection. (m) (No change.) (n) Dividends and distributions. Each registered insurer shall, by personal delivery or by mail addressed to: Financial Monitoring, Mail Code 303-1D, Texas Department of Insurance, P.O. Box 149099, 333 Guadalupe, Austin, Texas 78714- 9099, provide notice to the commissioner of all dividends and other distributions to shareholders within two business days following the declaration thereof and at least 10 days prior to payment in the form prescribed by the commissioner and adopted herein by reference as Form HCDividend and such notice shall be deemed an amendment to the registration statement without further action or filing. Prepayment notices will be considered promptly. Each prepayment notice shall be accompanied by documentation supporting each of the standards specified in the Act, sec.4(b), unless such documentation has previously been provided during the current calendar year and the person to whom such documentation was sent is identified. Dividends and distributions, including those declared by property and casualty insurers where the dividend exceeds the net income as of the preceding December 31, shall be reviewed by the Commissioner and, if the standards in the Act, sec.4(b) are not met, the Commissioner shall take appropriate action, including but not limited to that provided under the Insurance Code, Articles 1.10, 1.10A, 1.32, 21.28, 21.28-A, 21.31, and 21.32. All reported dividends and distributions shall be reviewed annually in the registration statement filed pursuant to sec.7.210 of this title (relating to Form B). See sec.7.204(d) of this title (relating to Commissioner's Approval Required) for requirements regarding extraordinary dividends and distributions. sec.7.204. Commissioner's Approval Required. (a) Prior approval and notice. (1) (No change.) (2) The following transactions between a domestic insurer and any person in its holding company system may not be entered into unless the insurer has notified the commissioner in writing of its intention to enter into any such transaction at least 30 days prior thereto, or such shorter period as he may permit, and he has not disapproved it within such period: (A)-(C) (No change.) (D) management or service agreements, cost sharing agreements, rental or leasing agreements; (E) agreements to consolidate federal income tax returns, which agreements shall provide that a domestic insurer will be adequately indemnified in the event the Internal Revenue Service levies upon the insurance company's assets for unpaid taxes in excess of the amount paid under the agreement; (F) transactions with affiliated financial institutions, other than fully insured deposits; and (G) any material transactions which the commissioner has determined after notice may adversely affect the interest of the insurer's policyholders or of the public. (3)-(6) (No change.) (b)-(c) (No change.) (d) Extraordinary dividends and other distributions. (1) No insurer subject to registration under sec.7.203(a) of this title (relating to Registration of Insurers) shall pay any extraordinary dividend or make any other extraordinary distribution to its shareholders until: (A) 30 days after the commissioner has received written notice in accordance with sec.7.212 of this title (relating to Form D) of the declaration thereof, including the applicable filing fee pursuant to sec.7.1301(d)(24) of this title (relating to Regulatory Fees), and the commissioner has not within such period disapproved such payment; or (B) the commissioner shall have approved such payment within such 30-day period. The written notice required under this paragraph shall be deemed filed with the commissioner only when all material sufficient to constitute a complete filing, including documentation to support each of the standards set forth in the Act, sec.4(b), and the payment of any required filing fee pursuant to sec.7.1301(d)(24) of this title (relating to Regulatory Fees) have been provided. (2)-(3) (No change.) (e) (No change.) sec.7.209. Form A. (a)-(c) (No change.) (d) Identity and background of individuals associated with the applicant. Furnish biographical data for the applicant if such person is an individual, or for all persons who are directors, executive officers, or owners of 10% or more of the voting securities of the applicant if the applicant is not an individual, with such biographical data in the form of the biographical affidavit form adopted by reference under sec.7.201(a)(1) of this title (relating to Forms Filings). Copies of this form are available from Financial Monitoring, Mail Code 303-1A, Texas Department of Insurance, P. O. Box 149099, 333 Guadalupe, Austin, Texas 78714-9099. (e) Nature, source, and amount of funds or other consideration. (1) (No change.) (2) If the source of the consideration is provided by a commercial lender in the ordinary course of business and if the applicant wishes the identity to remain confidential, he must specifically request that the identity be kept confidential. When confidentiality is requested such identity shall be provided by a separate instrument filed with, but not forming a part of, the acquisition statement. (3) If the consideration is to consist in whole or in part of the insurance business and assets of the insurer or of a person controlled by the insurer, state the value thereof and how such value was arrived at. (f) Future plans for insurer. (1) Provide a business plan which describes any plans or proposals which the applicant may have or may contemplate making to cause the insurer to pay dividends or make other distributions, to liquidate such insurer, to sell any of its assets, to merge or consolidate it with any person or persons, to make any other material change in its business operations or corporate structure or management, or to cause the insurer to enter into material agreements, arrangements, or transactions of any kind with any party, and describe any financial or employment guarantees given to present and contemplated management. (2) (No change.) (3) For the domestic insurer, provide the full name of each individual who will be responsible for major areas of operations of the domestic insurer, including but not limited to, supervision of agents, underwriting, advertising, production of business through agents and through reinsurance, policyholder services, premium accounting, claims processing and litigation, reinsurance cessions, investments, and financial accounting and reporting. For each area, evidence such individual's ability and experience to perform same by providing biographical data in the form of the biographical affidavit form adopted by reference under sec.7.201(a)(1) of this title (relating to Forms Filings). (4) (No change.) (g)-(l) (No change.) (m) Financial statements and exhibits. (1)-(2) (No change.) (3) File as exhibits copies of all tender offers for, requests or invitations for, tenders of, exchange offers for, and agreements to acquire or exchange any voting securities of the insurer and (if distributed) of additional soliciting material relating thereto; and proposed employment, consultation, advisory, or management contracts concerning the insurer; budget projections of the domestic insurer and the applicant for a period equal to the greater of three years or the succeeding length of time of debt service required by applicant in its acquisition of control; and any additional document or papers required by regulation. (4) (No change.) (n) (No change.) sec.7.210. Form B. (a)-(d) (No change.) (e) Biographical information. Furnish biographical data for the ultimate controlling person(s) if such person is an individual, or for the directors and executive officers of the ultimate controlling person if the ultimate controlling person is not an individual, with such biographical data in the form of the biographical affidavit form adopted by reference under sec.7. 201(a)(1) of this title (relating to Forms Filings). Copies of this form are available from Financial Monitoring, Mail Code 303-1A, Texas Department of Insurance, P.O. Box 149099, 333 Guadalupe, Austin, Texas 78714-9099. (f) Transactions, relationships, and agreements. (1) Briefly describe the following agreements in force, relationships subsisting, and transactions currently outstanding between the registrant and its holding company, its subsidiaries, and its affiliates: (A)-(D) (No change.) (E) all management and service contracts and all cost-sharing arrangements; (F) reinsurance agreements covering all or substantially all of one or more lines of insurance of the ceding company; (G) all dividends and other distributions to shareholders; (H) agreements with affiliates to consolidate federal income tax returns; (I) all transactions with affiliated financial institutions; (J) the amount of commissions paid to the controlling producer, the percentage such amount represents of the net premium written, and comparable amounts and percentages paid to noncontrolling producers for placements of the same kinds of insurance; (K) all surplus debentures, surplus notes, premium income notes, bonds, or debentures, and other contingent evidences of indebtedness outstanding; (L) any affiliated transaction not disclosed in subparagraphs (A)-(K) of this paragraph which is subject to the Act, sec.4(d); and (M) any pledge of an insurer's stock, including stock of any subsidiary or controlling affiliate, for a loan made to any member of its insurance holding company system. (2) (No change.) (g)-(j) (No change.) This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on June 23, 1994. TRD-9442954 D. J. Powers Legal Counsel to the Commissioner Texas Department of Insurance Effective date: July 14, 1994 Proposal publication date: February 11, 1994 For further information, please call: (512) 463-6327 TITLE 37. PUBLIC SAFETY AND CORRECTIONS Part I. Texas Department of Public Safety Chapter 15. Drivers License Rules Application Requirements Original, Renewal, Duplicate, Identification Certificates 37 TAC sec.15.44 The Texas Department of Public Safety adopts new sec.15.44, concerning application requirements original, renewal, duplicate, identification certificates, without changes to the proposed text as published in the April 19, 1994, issue of the Texas Register (19 TexReg 2897). The adoption of this section will allow applicants to receive their drivers license or identification certificate within five to seven days, allows for correcting a drivers license or identification certificate without the applicant returning to the drivers license office, improves quality of the photograph, additional security features are added to drivers license or identification certificate to help prevent fraudulent reproduction, information on back of license will be specific to licensee, and addition of magnetic stripe will be beneficial to retailers in the future. The department adopts this section which provides that a color photograph of a licensee may be obtained through any medium which produces a retrievable visual image including, but not limited to, film, video tape, digital or visual imagery, or any other technology which may be approved by the director. No comments were received regarding adoption of this section. The new section is adopted under Texas Civil Statutes, Article 6687b, sec.1A and Texas Government Code, sec.411.006(4), which provides the Texas Department of Public Safety with the authority to adopt rules that it determines are necessary to effectively administer this act. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on June 16, 1994. TRD-9442921 James R. Wilson Director Texas Department of Public Safety Effective date: July 14, 1994 Proposal publication date: April 19, 1994 For further information, please call: (512) 465-2000 Part III. Texas Youth Commission Chapter 81. Administrative Provisions General 37 TAC sec.81.31 The Texas Youth Commission (TYC) adopts new sec.81.31, concerning TYC involvement in family in reducing recidivism advisory committee, without changes to the proposed text as published in the May 13, 1994, issue of the Texas Register (19 TexReg 3633). The new section is justified to implement participation by TYC in the Role of the Family in Reducing Recidivism Advisory Committee as established under Government Code, sec.501.011. The new rule will outline procedures for TYC participation in the study of programs in TYC juvenile facilities. No comments were received regarding adoption of the new section. The new section is adopted under the Human Resources Code, sec.61.034, which provides the Texas Youth Commission with the authority to make rules appropriate to the proper accomplishment of its functions. The proposed rule implements the Human Resource Code, sec.61.034. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on June 22, 1994. TRD-9442939 Steve Robinson Executive Director Texas Youth Commission Effective date: July 14, 1994 Proposal publication date: May 13, 1994 For further information, please call: (512) 483-5244 TITLE 40. SOCIAL SERVICES AND ASSISTANCE Part I. Texas Department of Human Services Chapter 19. Long-Term Care Nursing Facility Requirements for Licensure and Medicaid Certification The Texas Department of Human Services (DHS) adopts amendments to sec.19. 1104 and sec.19.1807, concerning the rehabilitative services system and reimbursement methodology for nursing facilities, in its Long Term Care Nursing Facility Requirements rule chapter, without changes to the proposed text as published in the May 17, 1994, issue of the Texas Register (19 TexReg 3821). The justification for the amendment to sec.19.1807 is to strengthen qualifications for the rehabilitation clinical group. To qualify for the rehabilitative clinical group, there must be a documented restorative treatment plan for the resident and documentation of a resident's response to the treatment plan. The amendment to sec.19.1104 adds a cross reference to sec.19.1807. The amendments will function by providing documentation that nursing facility residents require a treatment plan designed to help them attain a certain level of rehabilitation, and their response to that treatment. No comments were received regarding adoption of the amendments. Subchapter L. Specialized Rehabilitative Services 40 TAC sec.19.1104 The amendment is adopted under the Human Resources Code, Title 2, Chapters 22 and 32, which provides the department with the authority to administer public and medical assistance programs and under Texas Civil Statutes, Article 4413 (502), sec.16, which provide the Health and Human Services Commission with the authority to administer federal medical assistance funds. The amendment implements the Human Resources Code, sec.32.021(c) and sec.32. 024. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on June 23, 1994. TRD-9442947 Nancy Murphy Section Manager, Media and Policy Services Texas Department of Human Services Effective date: August 15, 1994 Proposal publication date: May 7, 1994 For further information, please call: (512) 450-3765 Subchapter S. Reimbursement Methodology for Nursing Facilities 40 TAC sec.19.1807 The amendment is adopted under the Human Resources Code, Title 2, Chapters 22 and 32, which provides the department with the authority to administer public and medical assistance programs and under Texas Civil Statutes, Article 4413 (502), sec.16, which provide the Health and Human Services Commission with the authority to administer federal medical assistance funds. The amendment implements the Human Resources Code, sec.32.021(c) and sec.32. 024. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on June 23, 1994. TRD-9442946 Nancy Murphy Section Manager, Media and Policy Services Texas Department of Human Services Effective date: August 15, 1994 Proposal publication date: May 7, 1994 For further information, please call: (512) 450-3765 Chapter 48. Community Care for Aged and Disabled Eligibility 40 TAC sec.48.2924 The Texas Department of Human Services (DHS) adopts an amendment to sec.48. 2924, without changes to the proposed text as published in the May 6, 1994, issue of the Texas Register (19 TexReg 3444). The justification for the amendment is to change the term "handicapped person" to "person with a disability." The amendment will function by emphasizing the individual and discontinuing use of the word "handicapped." No comments were received regarding adoption of the amendment. The amendment is adopted under the Human Resources Code, Title 2, Chapter 22, which provides the department with the authority to administer public assistance programs. The amendment implements the Human Resources Code, sec. sec.22.001-22.024. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on June 27, 1994. TRD-9443033 Nancy Murphy Section Manager, Media and Policy Services Texas Department of Human Services Effective date: August 1, 1994 Proposal publication date: May 6, 1994 For further information, please call: (512) 450-3765 Chapter 92. Personal Care Facilities Subchapter C. Standards for Licensure 40 TAC sec.92.41 The Texas Department of Human Services (DHS) adopts an amendment to sec.92. 41, concerning standards for personal care facilities, in its Personal Care Facilities rule chapter. The amendment is adopted with changes to the proposed text as published in the May 20, 1994, issue of the Texas Register (19 TexReg 3909). The justification for the amendment is to clarify staffing requirements on the night shift in personal care facilities. The amendment will function by providing clearer rules concerning the availability of staff to care for residents of personal care facilities during the night shift. During the public comment period, DHS received comments from the Texas Association of Homes for the Aging. The commenter expressed support for the amendment, stating that the proposal appears to correct the uncertainty and to conform the rule to the interpretation that has been in effect since the current rule was adopted. DHS is adopting subsection (a)(2)(B) with a correction to delete the reference to "other shift designations" which is no longer needed. The amendment is adopted under the Health and Safety Code, Chapter 247, which provides the department with the authority to regulate personal care facilities, Chapter 22 of the Human Resources Code, and under Texas Civil Statutes, Article 4413 (502), which transferred all functions, programs, and activities related to long-term care licensing, certification, and surveys from the Texas Department of Health to the Texas Department of Human Services. The amendment implements the Health and Safety Code, sec. sec.247.001-247.066. sec.92.41. Standards for Personal Care Facilities. (a) Staffing. (1) (No change.) (2) Attendants. (A) (No change.) (B) The staff-resident ratios described in this subparagraph must be maintained in a Type A or Type B facility. The facility management has the authority to define day, evening, and night shift start and end times. (i) day = 1 to 15; (ii) evening = 1 to 20; and (iii) night = 1 to 40. (I) Type A facility: Night shift staff in a 40 or fewer licensed bed capacity facility must be immediately available. In a 41+ licensed bed capacity facility, the staff must be immediately available and awake. (II) Type B facility: Night shift staff must be immediately available and awake, regardless of the number of licensed beds. (C) (No change.) (b)-(i) (No change.) This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on June 27, 1994. TRD-9443032 Nancy Murphy Section Manager, Media and Policy Services Texas Department of Human Services Effective date: August 15, 1994 Proposal publication date: May 20, 1994 For further information, please call: (512) 450-3765