TEXAS DEPARTMENT OF INSURANCENotification Pursuant to the Insurance Code, 
Chapter 5, Subchapter LAs required by the Insurance Code, Article 5.96 and 5.97, 
the Texas Register publishes notice of proposed actions by the Texas Board of 
Insurance. Notice of action proposed under Article 5.96 must be published in the 
Texas Register not later than the 30th day before the board adopts the proposal. 
Notice of action proposed under Article 5.97 must be published in the Texas 
Register not later than the 10th day before the Board of Insurance adopts the 
proposal. The Administrative Procedure Act, the Government Code, Chapters 2001 
and 2002, does not apply to board action under Articles 5.96 and 5.97.
The complete text of the proposal summarized here may be examined in the offices 
of the Texas Department of Insurance, 333 Guadalupe Street, Austin, Texas 78714-
9104.)
This notification is made pursuant to the Insurance Code, Article 5.96, which 
exempts it from the requirements of the Administrative Procedure Act.

Texas Department of Insurance
Adopted Action
The Commissioner of Insurance at a public hearing held on December 3, 1997, at 
10:00 a.m. under Docket Number 2312 in Room 100 of the William P. Hobby, Jr. 
State Office Building, 333 Guadalupe Street in Austin, Texas, adopted numerous 
changes to the Homeowners and Dwelling sections of the Texas Personal Lines 
Manual (Manual) to implement the use of Public Protection Classifications (PPCs) 
under the Fire Suppression Rating Schedule and to implement other necessary 
changes to the form and rating rules and rating tables and premium charts in 
these two sections. The Commissioner also adopted amendments to the declarations 
pages of Texas Homeowners Policy forms and Texas Dwelling Policy forms to 
implement the use of Public Protection Classifications under the Fire 
Suppression Rating Schedule. The action taken by the Commissioner was proposed 
by Department staff in a petition filed on October 14, 1997 (Reference Number P-
1097-32-I). Notice was published in the October 24, 1997 issue of the Texas 
Register (22 TexReg 10515 and 10557). The Commissioner adopted the staff's 
petition with changes to the proposal as noticed in the Texas Register. The 
adopted revisions are effective February 1, 1998.
The Commissioner after due consideration has determined that it is necessary and 
in the public interest to adopt the following: (1) in the Homeowners Section of 
the Texas Personal Lines Manual: (a) new rating rules, amendments to rating 
rules, and repeal of rating rules in Subsection VI to implement the use of 
Public Protection Classifications under the Fire Suppression Rating Schedule, in 
lieu of key rates, as a rating component in determining premiums for coverage 
under Texas Homeowners Policy forms; (b) new rate tables and premium charts, 
amendments to current rate tables and premium charts, and the repeal of current 
rate tables and premium charts to implement the use of Public Protection 
Classifications under the Fire Suppression Rating Schedule, in lieu of key 
rates, as a rating component in determining premiums for coverage under Texas 
Homeowners Policy forms; (c) changes to form and rating rules unrelated to 
implementation of the PPC system, including (I) repeal of Rule III-C, Minimum 
Coverage; (ii) amendment of Rule IV-A-14-h, Windstorm, Hurricane, and Hail 
Exclusion Endorsement and of the related Rating Examples; (iii) amendment of 
form rules to move applicable premium charges currently in the rules to new 
premium charts in the Rate Tables and Premium Charts subsection and to reference 
these charts in the rules, including Rule IV-A-12, Personal Computer Coverage; 
Rule IV-A-18, Unit Owners Outbuildings and Other Structures Coverage Endorsement 
HO-180; Rule IV-C-1, Townhouse Loss Assessment Coverage; Rule IV-C-3, 
Condominium Loss Assessment Coverage; and Rule IV-C-4, Neighborhood Homeowners 
Loss Assessment Coverage Endorsement HO-315; (iv) amendment of Rule VI-F, 
Specifically Rated Risks, to include the rating factors for fire resistive and 
semi-fire resistive and sprinklered risks currently in Premium Chart No. 4 - 
Texas Tenants Forms HOB-T and HOC-T or Condominium Forms HO-CON-B and HO-CON-C 
(Premium Chart No. 4 is repealed pursuant to this Order); and (v) amendment of 
Rule VI-M-1, Premium Computation, relating to renewal policies; (d) changes to 
rate tables and premium charts unrelated to implementation of the PPC system, 
including: (I) amendments to specify premiums in dollars and cents in lieu of 
premiums rounded to the nearest dollar; and (ii) amendment of rating tables to 
reflect the fact that there is no longer a property minimum premium rule; (iii) 
new premium charts in Subsection X (Rate Tables and Premium Charts) that have 
been moved from rules in Subsection IV, Optional Additional Coverages and 
Endorsements; (2) in the Dwelling Section of the Texas Personal Lines Manual: 
(a) new rating rules, amendments to rating rules, and repeal of rating rules in 
Subsection VI to implement the use of Public Protection Classifications under 
the Fire Suppression Rating Schedule, in lieu of key rates, as a rating 
component in determining premiums for coverage under Texas Dwelling Policy 
forms; (b) new rate tables and premium charts, amendments to current rate tables 
and premium charts, and the repeal of current rate tables and premium charts to 
implement the use of Public Protection Classifications under the Fire 
Suppression Rating Schedule, in lieu of key rates, as a rating component in 
determining premiums for Texas Dwelling Policy forms; (c) changes to form and 
rating rules unrelated to implementation of the PPC system, including (I) repeal 
of Rule III-C, Minimum Coverage; (ii) amendment of Rule VI-C-2-a, Additional 
Premium Modifications, Tenant Occupancy Charge, to move the premium chart 
currently in the rule to the Rate Tables and Premium Charts subsection and to 
reference the chart in the rule; (iii) amendment of Rule VI-H-1-a on Premium 
Computation, relating to renewal policies and amendment of the rating example to 
provide for the flex calculation after the deductible calculation; and (iv) 
amendment of Rule VI-I, Interpolation of Premium; (d) changes to rate tables and 
premium charts unrelated to implementation of the PPC system, including: (I) 
amendments to specify premiums in dollars and cents in lieu of premiums rounded 
to the nearest dollar; (ii) amendment of rating tables to reflect the fact that 
there is no longer a property minimum premium rule; (iii) new premium chart that 
has been moved from Rule VI-C-2-a, Additional Premium Modifications, Tenant 
Occupancy Charge, to the Rate Tables and Premium Charts subsection; (iv) 
amendment of the instructions in the Deductible Adjustment Percentage Schedule; 
and (v) rearrangement of rating tables; (3) amendments to the declarations pages 
of Texas Homeowners Policy forms and Texas Dwelling Policy forms to implement 
the use of Public Protection Classifications; and (4) non-substantive editorial 
changes in both the Homeowners and Dwelling Sections of the Texas Personal Lines 
Manual, including (a) updating of references, including change of former State 
Board of Insurance to the Texas Department of Insurance, change of Texas 
Catastrophe Property Insurance Association to Texas Windstorm Insurance 
Association, and correction of references to the Farm and Ranch and Farm and 
Ranch Owners Manual; and (b) formatting, organizational, wording, and editorial 
changes for purposes of consistency and readability; and correction of 
misspelled words. The changes to the proposal as noticed include correction of 
four typographical errors and another more substantive change; none of the 
changes, however, introduce new subject matter or affect additional persons than 
those subject to the proposal as originally noticed. The substantive change 
includes new uniform territory multipliers in the Dwelling Extended Coverage 
Table in the Dwelling Section for coastal territories 8, 9, and 10 which were 
not uniform as proposed and therefore were incorrect. Article 21.49, sec.8(h)(1) 
(Texas Windstorm Insurance Association Act) of the Insurance Code requires that 
extended coverage rates for first tier counties be uniform. Two of the 
typographical errors corrected are in the Property Protection Program 
subsections in both the Homeowners and Dwelling sections of the Manual. The 
other two corrections of typographical errors are in two premium charts, Premium 
Chart Number 28 in the Homeowners Section and the Additional Extended Coverage 
Premium Chart in the Dwelling Section.
The Commissioner has determined that it is not necessary at this time to adopt 
changes to the Farm and Ranch and Farm and Ranch Owners Sections of the Texas 
Personal Lines Manual. Pursuant to Senate Bill 1499 enacted by the 75th 
Legislature (Acts 1997, 75th Legislature, page 5030, Chapter 1330, sec.1, 
effective September 1, 1997) farm and ranch and farm and ranch owners insurance 
is no longer regulated as a personal lines coverage but rather is regulated as 
commercial property insurance under Article 5.13-2 of the Insurance Code. 
However, the farm and ranch and farm and ranch owners form and rating rules and 
rate tables and premium charts shall continue to be used by insurers who write 
such coverage under the Property Protection Program for designated underserved 
areas pursuant to Article 5.35-3 of the Insurance Code, and therefore, the Farm 
and Ranch and Farm and Ranch Owners Sections are retained in the Texas Personal 
Lines Manual without change. 
IMPLEMENTATION OF PUBLIC PROTECTION CLASSIFICATIONS. The Commissioner has 
determined that several changes to the Homeowners and Dwelling sections of the 
Texas Personal Lines Manual (Manual) are necessary to implement the use of 
Public Protection Classifications (PPCs) under the Fire Suppression Rating 
Schedule, in lieu of key rates, as a rating component in determining premiums to 
be charged for residential property insurance in Texas. Subsection VI of the 
Homeowners Section and Subsection VI of the Dwelling Section contain rating 
rules for determining the applicable premium to be charged for residential 
property insurance policies in Texas issued on the various Texas Homeowners 
Policy Forms and Texas Dwelling Policy Forms. The current rules include the use 
of a "key rate" component which is based on the available public fire protection 
afforded to individual risks. Pursuant to Commissioner's Order Number 96-1377 
(November 25, 1996), the Commissioner adopted a new rating schedule that no 
longer uses key rates as a rating component for determining residential property 
insurance premiums. Under the new system, the Fire Suppression Rating Schedule 
will be used to determine the PPCs for cities, towns, and unincorporated areas 
based on the fire protection afforded to the individual city, town, or 
unincorporated area. The premium for an individual risk will be developed in 
accordance with the adopted new rating rules by using the applicable PPC of the 
city, town, or unincorporated area in which the risk is located in lieu of the 
key rate of the city or town. In addition, the new classification system no 
longer recognizes protected areas and unprotected areas, as provided in the 
current rating rules and rate tables. The new PPC system recognizes public fire 
protection based on the fire protection afforded a town or area regardless of 
its location to better equipped towns or cities. The new PPC system also does 
not provide for a method to recognize certain unprotected areas which are 
allowed under current Rule VI-3-C in both the Homeowners and Dwelling sections 
of the Manual to fringe rate to a protected first key town. Originally adopted 
over 30 years ago, the "fringe rule" initially applied only to risks located 
within five miles of an incorporated first key town. The rule was adopted as a 
means of rating the growing number of risks located in subdivisions and areas 
immediately surrounding a larger city but outside the city limits of the city. 
Following the enactment of Article 5.25A of the Insurance Code in 1989 (Acts 
1989, 71st Legislature Chapter 481, sec.1, effective September 1, 1989), the 
rule was amended to extend fringe area rating to dwellings located outside of 
unincorporated towns. Article 5.25A was amended by the Legislature in 1991 
(subsection (b) added) to provide that notwithstanding subsection (a) of Article 
5.25A on and after March 1, 1992, rates for homeowners insurance coverage under 
Subchapter C (of Chapter 5 of the Insurance Code) are to be determined as 
provided in Subchapter M (Flexible Rating Program for Certain Insurance Lines, 
i.e., benchmark rate-flex rating procedures) with a December 31, 1995 expiration 
date for this provision. The Legislature in 1995 amended Article 5.25A (Acts 
1995, 74th Legislature, Chapter 984, sec.14, effective September 1, 1995) to 
delete the 1995 expiration provision. The need for fringe area rating was based 
on the fact that fire services were provided to these areas by the city, and in 
many cases, these areas had public or private water systems serving the area; 
therefore, the fire protection afforded these areas was considered much better 
than for other risks located outside the city limits of a city or town in areas 
without any water systems or fire departments willing to respond to fires. The 
conditions that originally supported the fringe area rating concept no longer 
exist. Many city fire departments will no longer respond to any fire outside the 
city limits of the specific city or town. Because of this, areas that were once 
fringe and dependent upon response of a nearby city's fire department have now 
developed fire fighting capabilities with volunteer fire departments and have 
much more developed water distribution systems for fire hydrants. The 
Commissioner has therefore determined that fringe area rating is out-of-date. 
Also, because key rates and public fire protection classifications are not 
directly related to each other, the Commissioner has determined that it is not 
possible to continue the fringe area rating concept under the new Fire 
Suppression Rating Schedule and PPC system. The Fire Suppression Rating Schedule 
requires determination of fire flow (the quantity of water calculated as 
necessary to extinguish fire at each specific location or area in a city or 
town) for communities to be graded, and therefore, it does not allow for the 
fire flow of a city to be considered for an area outside of that city. For 
example, a city may be a bedroom community with no major industrial activity and 
thereby require less fire flow for adequate fire protection purposes, but within 
five miles of that city there may be an area with major industrial development 
with very different fire flow needs. The Commissioner has further determined 
that maintaining fringe area rating is not possible because the PPC system does 
not use as part of the Fire Suppression Rating Schedule the classification of 
cities or towns as first key, second key, and third key (currently determined by 
the actual key rate of each individual city or town) or the equivalent of this 
rating, which is necessary for application of the fringe area rating concept. 
There is no direct relationship between key rates and public protection classes 
that would allow a determination of any equivalent to the first key, second key, 
and third key towns. For example, under the current key rate system, City X can 
have a key rate of 26 cents and be a first key town and City Y can have a key 
rate of 42 cents and be a second key town. Under the Fire Suppression Rating 
Schedule, both of these cities may have a public protection classification of 3, 
meaning that they have equivalent levels of fire protection based on the 
specific needs of each city. In addition, fringe rating is based on certain 
distance requirements to fire hydrants (0 to 500 feet--full key of first key 
town; 500 to 1,000 feet--full key of first key town + $.10; over 1,000 feet--not 
eligible for fringe rating). Under the PPC system, distance of individual risks 
from fire hydrants is not a factor in the grading as it is under the current key 
rate system. The Commissioner has therefore determined that it is necessary to 
repeal the "fringe rule" (Rule VI-3-C) in both the Homeowners and Dwelling 
sections of the Manual. It is the Commissioner's position that, because of the 
"notwithstanding provision" in subsection (b) of Article 5.25A mandating that 
homeowners insurance rates be determined under the benchmark rate-flex rating 
process pursuant to Article 5.101, the Legislature did not intend to require the 
implementation of fringe area rating of unincorporated towns if it is not 
possible to do so under the fire protection classification system adopted by the 
Commissioner pursuant to Article 5.101. The repeal of the fringe rule as part of 
the implementation of the PPC system means that areas for which fire services 
are provided will be graded based on the merits of those services. Therefore, 
areas which have not maintained adequate fire services may be subject to 
increased rates as a result of the repeal of the "fringe rule," while those 
areas which have maintained or improved fire services may experience decreased 
rates. This transition from the key rate system to the PPC system could, in some 
instances, produce wide swings in the premiums for residential risks. These 
swings are addressed in newly adopted rate tables that provide rate capping 
factors for the first two years of the operation of the PPC system. These rate 
capping tables are adopted pursuant to the Commissioner's benchmark rate order 
(Commissioner's Order Number 97-0840, effective February 1, 1998). The 
Commissioner has also determined that it is necessary to adopting rating rules 
to implement the rate capping factors. 
To implement the new benchmark rates adopted pursuant to Commissioner's Order 
Number 97-0840, effective February 1, 1998, and the use of the new Fire 
Suppression Rating Schedule and Public Protection Classifications as a component 
of the homeowners and dwelling insurance rating system, the Commissioner has 
determined that it is necessary to repeal or amend rating rules and rate tables 
in the Homeowners and Dwelling sections of the Manual that use the key rate 
system for the development of homeowners or dwelling premiums and to adopt new 
rating rules and rate tables to implement the use of Public Protection 
Classifications as the method for determining the appropriate premium for 
homeowners and dwelling insurance policies. Therefore, the Commissioner's action 
includes adoption of (i) amendments to rating rules, rate tables and premium 
charts; (ii) new rating rules, rate tables and premium charts; and (iii) repeal 
of rating rules, rate tables and premium charts. 
Homeowners Section Rating Rules. The Commissioner has determined that it is 
necessary to repeal four rating rules in Subsection VI of the Homeowners Section 
of the Manual that are based on key rating and to adopt four new rules based on 
the PPC system to replace these repealed rules. The repealed rules are (i) Rule 
VI-A-2, Rating Classifications relating to Protection Classifications, which 
provides for the key rating of protected and unprotected areas; (ii) Rule VI-A-
3, Determination of Key Rate, which specifies separate procedures for 
determining key rates for residential risks located in Class A protected areas, 
in Class B unprotected areas, in Class A unprotected fringe areas, and in rural 
fire prevention districts or metropolitan county fire protection districts; 
(iii) Rule VI-B, Determination of Basic Premium, which provides procedures for 
determining the basic premium for Texas Homeowners HO-A, HO-B, and HO-C policy 
forms and Tenant Homeowners and Condominium forms using key rates and 
territorial multipliers; and (iv) Rule VI-J, Change in Premium, which provides 
procedures for computation of premium adjustment for change in hazard and 
includes use of key rates. The adopted new rules are (i) Rule VI-A-2, Public 
Protection Classification Codes which specifies the code for each protection 
class; (ii) Rule VI-A-3, Determination of Public Protection Class, which is 
necessary because the PPC system does not recognize protected and unprotected 
areas and does not provide any means to recognize certain unprotected areas 
which currently are allowed to fringe rate to a protected first key town; the 
new rule provides that the Public Protection Classifications approved by the 
Department and listed in the Public Protection Classification Manual apply to 
risks insured under Texas residential property insurance policies, and the rule 
provides methodology for determining the classification code in a municipality 
or classified area where two or more approved classifications are shown; (iii) 
Rule VI-B, Determination of Basic Premium, which is necessary to specify new 
procedures for determining the basic premium for Texas Homeowners Policy forms 
and Texas Tenant Homeowners and Condominium Policy forms which include use of 
the applicable protection class and elimination of the use of the territorial 
multiplier; the new rule includes rating examples; and (iv) Rule VI-J, Change in 
Hazard, which specifies new rating methodology using PPCs for a change in hazard 
during the policy period under a homeowners policy. The Commissioner has also 
determined that amendments to four rules in Subsection VI of the Homeowners 
Section should be adopted to delete provisions based on the key rate system and 
to substitute or add provisions necessary to implement the new PPC system. These 
rules are: (i) Rule VI-C-1-a-(7)(b), Optional Homeowners Credits for Water 
Supply Points (Dry Hydrants); (ii) Rule VI-D, Interpolation, relating to 
determining premiums for any limit of liability in excess of the minimum policy 
amount not shown in the Amount of Insurance Factor Table, including a new 
example; (iii) Rule VI-I, Additional Amounts or Coverages, including an amended 
procedure to determine additional premium for an increase in Coverage A 
(Dwelling) to implement the PPC system; and (iv) Rule VI-M, Rate and Premium 
Computation Rule, including a new example illustrating revised premium 
computation procedure. 
Homeowners Section Rate Tables and Premium Charts. The Commissioner has 
determined that it is necessary to repeal the following tables and charts in the 
Homeowners Section: (i) the table on 1996 Homeowners Territorial Multipliers; 
(ii) Premium Chart Number 1 - Texas Homeowners Form A; (iii) Premium Chart 
Number 2 - Texas Homeowners Form B; and (iv) Premium Chart Number 3 - Texas 
Homeowners Form C; and to adopt three new tables as replacement: (i) Homeowners 
Table A, which specifies annual base premiums for deductible numbers 1 and 2 at 
1.0% of Coverage A for the Form HOA, Form HOB, and Form HOC by territory; (ii) 
Tenant Homeowners - Table B which specifies protection/construction factors by 
type of construction and by Public Protection Class; and (iii) Tenant Homeowners 
- Table C, amount of insurance factor table. These new tables are based on new 
rating methodology and new rates and factors adopted under Commissioner's Order 
Number 97-0840 (August 21, 1997), which adopted benchmark rates for residential 
property, homeowners, tenants, dwelling fire, extended coverage, additional 
extended coverage and physical loss form. Also included in the revised Manual 
are two new tables adopted under Commissioner's Order Number 97-0840: Homeowners 
- Table D-1, 10% Rate Capping Factors (First Year) and Homeowners - Table D-2, 
21% Rate Capping Factors (Second Year). These tables provide factors to be 
applied to the premiums determined under the PPC system to limit during the 
first two years of the implementation of the PPC system the rate changes due 
solely to the conversion from the key rate to the PPC system. 
The Commissioner has also determined that the following tables and charts should 
be repealed: (i) the table on 1996 Tenant Territorial Multipliers and (ii) 
Premium Chart Number 4 - Texas Tenants Forms HOB-T and HOC-T or Condominium 
Forms HO-CON-B and HO-CON-C (except that part of the chart for FR-SFR and 
Sprinklered Risks which is included in adopted amendments to Rule VI-F on 
Specifically Rated Risks and that part of the chart on the additive charge for 
Single Entrance to a Building which is included in adopted new Premium Chart 
Number 39) and that three new tables should be adopted to replace these charts: 
(i) Tenant Homeowners Table A, which specifies annual base premiums for 
deductibles number 3 at 1.0% of Coverage B for Texas Tenants Forms HOB-T and 
HOC-T or Condominium Forms HO-CON-B and HO-CON-C by territory; (ii) Tenant 
Homeowners - Table B, which specifies construction factors by type of 
construction and by Public Protection Class; and (iii) Tenant Homeowners - Table 
C, amount of insurance factor table. These new tables are based on new rating 
methodology and new rates and factors adopted under Commissioner's Order Number 
97-0840 (August 21, 1997), Benchmark Rates for Residential Property, Homeowners, 
Tenants, Dwelling Fire, Extended Coverage, Additional Extended Coverage and 
Physical Loss Form. Also included in the revised Manual are two new tables 
adopted under Commissioner's Order Number 97-0840: Tenant Homeowners - Table D-
1, 20% Rate Capping Factors (First Year) and Homeowners - Table D-2, 44% Rate 
Capping Factors (Second Year). These tables provide factors to be applied to the 
premiums determined under the PPC system to limit during the first two years of 
the implementation of the PPC system the rate changes due solely to the 
conversion from the key rate to the PPC system. 
Dwelling Section Rating Rules. The Commissioner has determined that it is 
necessary to repeal three rating rules in Subsection VI of the Dwelling Section 
of the Manual that are based on key rating and to adopt three new rules based on 
the PPC system to replace these repealed rules. The repealed rules are (i) Rule 
VI-A-2, Rating Classifications relating to Protection Classifications, which 
provides for the key rating of protected and unprotected areas; (ii) Rule VI-A-
3, Determination of Key Rate, which specifies separate procedures for 
determining key rates for risks located in Class A protected areas, in Class B 
unprotected areas, in Class A unprotected fringe areas, and in rural fire 
prevention districts or metropolitan county fire protection districts; and (iii) 
Rule VI-B, Determination of Premium by Peril, which provides that premiums for 
each peril shall be determined for each item of insurance and provides 
procedures using key rates and territorial multipliers. The Commissioner has 
further determined that the following new rules should be adopted to replace the 
repealed rules: (i) Rule VI-A-2, Public Protection Classification Codes, which 
specifies the code for each protection class; (ii) Rule VI-A-3, Determination of 
Public Protection Class, which is necessary because the PPC system does not 
recognize protected and unprotected areas and does not provide any means to 
recognize certain unprotected areas which currently are allowed to fringe rate 
to a protected first key town; the rule provides that the PPCs approved by the 
Department and listed in the Public Protection Classification Manual apply to 
risks insured under Texas residential property insurance policies and provides 
methodology for determining the classification code in a municipality or 
classified area where two or more approved classifications are shown; (iii) Rule 
VI-B, Determination of Premium by Peril, which is necessary to specify new 
procedures for determining the premium for each peril for each item of insurance 
for Texas Dwelling Policy Forms TDP-1, TDP-2, and TDP-3; the rule includes 
rating examples. 
The Commissioner has determined that amendments to five rules in Subsection VI 
of the Dwelling Section should be adopted to delete provisions based on the key 
rate system and to substitute or add provisions necessary to implement the new 
PPC system: (i) Rule VI-C, Additional Premium Modifications relating to Public 
Housing Authority; (ii) Rule VI-D, Change in Policy Form; (iii) Rule VI-E, 
Additional Amounts or Coverage; (iv) Rule VI-H, Rate and Premium Computation 
Rule, including a new example illustrating the revised premium computation 
procedure; and (v) Rule VI-J, Change in Hazard, relating to new procedures using 
PPCs for determining the additional or return premium to be charged or credited 
for a change in hazard during the policy period under a dwelling policy. 
Dwelling Section Rate Tables and Premium Charts. The Commissioner has determined 
that Dwelling Premium Chart Number 1 should be repealed and that two charts 
should be adopted to replace the repealed premium chart: (i) Dwelling - Table A 
which specifies one-year base fire rates for buildings or contents per $1,000 of 
coverage by type of construction and protection class; and (ii) Dwelling - Table 
B, which specifies low value factors, an historical multiplier applied to the 
dwelling fire base rate. These new tables are based on new rating methodology 
and new rates and factors adopted under Commissioner's Order Number 97-0840 
(August 21, 1997), which adopts benchmark rates for residential property, 
homeowners, tenants, dwelling fire, extended coverage, additional extended 
coverage and physical loss form. Also included in the revised Manual are two new 
tables adopted under Commissioner's Order No. 97-0840: Dwelling- Table C-1, 30% 
Rate Capping Factors (First Year) and Dwelling - Table C-2, 69% Rate Capping 
Factors (Second Year). These tables provide factors to be applied to the 
premiums determined under the PPC system to limit during the first two years of 
the implementation of the PPC system the rate changes due solely to the 
conversion from the key rate to the PPC system.
Amendments to Declarations Pages. The Commissioner has determined that it is 
necessary to amend the declarations pages of Texas Homeowners Policy forms and 
Texas Dwelling Policy forms to implement the PPC system. These amendments are 
necessary because the PPC, like the key rate, is a rating component in 
determining the premium for coverage under homeowners and dwelling insurance 
policies. The adopted amendments add a designation for entry of the PPC for the 
risk to be insured. However, because of the capping of premiums for the first 
two years, it is necessary to continue to provide a designation for entry of the 
key rate as well as the PPC. 
IMPLEMENTATION OF OTHER NECESSARY CHANGES. The Commissioner after due 
consideration has determined that it is necessary to adopt numerous other 
changes to the Manual that are unrelated to the implementation of the PPC 
system. 
Changes to Form and Rating Rules Unrelated to Implementation of the Public 
Protection Classification System. The Commissioner has determined that it is 
necessary to repeal rules and to adopt amendments to several rules, including 
both form and rating rules, in the Homeowners and Dwelling sections of the 
Manual to implement other necessary changes that are not related to 
implementation of the PPC system. The Commissioner has determined that Rule III-
C, Minimum Coverage, in both the Homeowners and Dwelling sections, should be 
repealed. The rule provides that the coverage provided by the homeowners and 
dwelling policy forms and endorsements promulgated under Article 5.35 of the 
Insurance Code shall be the minimum coverages that may be provided under 
homeowners and dwelling insurance and permits insurers to file endorsements to 
enhance the coverage provided by the homeowners and dwelling policy forms. The 
75th Legislature enacted Senate Bill 1499 (Acts 1997, 75th Legislature, page 
5032, Chapter 1330, sec.13, effective September 1, 1997) which amends Article 
5.35 to allow other homeowners and dwelling policy forms to be promulgated by 
the Commissioner for use in Texas and to delete the provision that the coverage 
provided by policy forms and endorsements adopted under Article 5.35 is the 
minimum coverage that may be provided. The Commissioner has, therefore, 
determined that the Minimum Coverage rule is no longer valid under Article 5.35, 
and that it is necessary to repeal the rule. The Commissioner has also 
determined that amendments should be adopted to Rule VI-M-1-a, Rate and Premium 
Computation, in the Homeowners Section and Rule VI-H-1-a, Rate and Premium 
Computation, in the Dwelling Section, to change the premium computation for 
renewal policies from the current procedure in the first step of using the 
premium in effect on the policy renewal date to a new procedure that will allow 
insurers to use the base premium in effect on the policy renewal effective date. 
These amendments are necessary to alleviate confusion and ensure uniformity in 
computing premiums for renewal policies. 
Homeowners Section. The Commissioner has also determined that it is necessary to 
amend Rule IV-A-14-h, Windstorm, Hurricane, and Hail Exclusion Endorsement 
relating to Deductible Adjustments in Subsection IV (Optional Additional 
Coverages and Endorsements) of the Homeowners Section. The amendment is 
necessary to exclude Deductible Clause Number 1 from the calculation of the 
total basic homeowners premium when Windstorm, Hurricane, and Hail Exclusion 
Endorsement Number HO-140 is attached to a homeowners policy and to thereby 
eliminate payment by the policyholder for a windstorm and hail deductible 
adjustment when the peril of windstorm, hurricane, hail, or wind driven rain is 
totally excluded from the policy. Under the current rule, Deductible Clause 
Number 1 is part of the calculation of the total basic homeowners premium even 
though coverage for windstorm, hurricane, hail, or wind driven rain is not 
provided under the homeowners policy. 
The Commissioner has determined that amendments to rules in Subsection IV 
(Optional Additional Coverages and Endorsements) of the Homeowners Section 
should be adopted to move applicable premium charges currently in the text of 
the rules to adopted new premium charts in the Rate Tables and Premium Charts 
subsection and to add language to reference these charts in the rules. The 
Commissioner has determined that these changes are necessary for purposes of 
consistency, i.e., to provide that all premium charges are contained in premium 
charts so that the Manual will not have some premium charges in the text of 
rules while other premium charges are in charts as in the current Manual. The 
amended rules are: (i) Rule IV-A-12, Personal Computer Coverage Endorsement, to 
reference new Premium Chart Number 36 for the applicable premium charge for the 
attachment of this endorsement; (ii) Rule IV-A-18, Unit Owners Outbuildings and 
Other Structures Coverage Endorsement HO-180 to reference new Premium Chart 
Number 37 for the applicable premium charge for the attachment of this 
endorsement; (iii) Rule IV-C-1, Townhouse Loss Assessment Coverage to reference 
new Premium Chart Number 38 for the applicable premium charge for the attachment 
of this endorsement; (iv) Rule IV-C-3, Condominium Loss Assessment Coverage to 
reference new Premium Chart Number 38 for the applicable premium charge for the 
attachment of this endorsement; and (v) Rule IV-C-4, Neighborhood Homeowners 
Loss Assessment Coverage Endorsement HO-315 to reference new Premium Chart 
Number 38 for the applicable premium charge for the attachment of this 
endorsement. 
The Commissioner has determined that it is necessary to amend Rule VI-F, 
Specifically Rated Risks, to include the rating factors for fire resistive and 
semi-fire resistive and sprinklered risks currently in Premium Chart Number 4 - 
Texas Tenants Forms HOB-T and HOC-T or Condominium Forms HO-CON-B and HO-CON-C; 
Premium Chart Number 4 is repealed pursuant to this Order. This amendment is 
necessary to incorporate rule provisions that are currently in a premium chart 
in the text of the relevant rule. 
The Commissioner has also determined that new Rule VI-B-2-f, Determination of 
Basic Premium, which is adopted as one of the rules needed to implement the PPC 
system, should also include a reference to newly adopted Premium Chart Number 
39, Tenants Single Entrance to Building Surcharge. The premium charges in new 
Premium Chart Number 39 are currently contained in Premium Chart Number 4 - 
Texas Tenants Forms HOB-T and HOC-T or Condominium Forms HO-CON-B and HO-CON-C; 
Premium Chart Number 4 is repealed pursuant to this Order.
Dwelling Section. The Commissioner has determined that it is necessary to adopt 
an amendment to Rule VI-H, Rate and Premium Computation Rule, to replace the 
current rating example with a new rating example that includes the application 
of the flex calculation after the deductible calculation. This amendment is 
necessary to correct an inadvertent error in the current rating example and to 
conform the rating example to Rule I-B (in the General Instructions Subsection 
of the Dwelling Section) on application of flex bands filed by individual 
insurers. Rule I-B provides that the percentages of flexibility filed by 
individual insurers shall be applied as a final calculation to each coverage or 
peril for which a separate premium is shown. 
The Commissioner has determined that it is necessary to amend Rule VI-C-2-a, 
Additional Premium Modifications, Tenant Occupancy Charge, to move the 
applicable premium charges from the text of the rule to a new Premium Chart 
Number 18 in the Rate Tables and Premium Charts subsection and to add language 
to reference the new chart in the rule. These amendments are necessary to 
incorporate premium charges that are currently in the text of the rule (but 
which are not appropriate for inclusion in the rule text) in a premium chart.
The Commissioner has determined that Rule VI-I, Interpolation of Premium, 
relating to determining premiums for any amount of insurance not shown in the 
premium charts, should be amended, including the addition of a new rating 
example. This amendment is necessary to conform this rule and rating example to 
the parallel rule and example in the Homeowners Section (RuleVI-D) which is 
amended pursuant to this Order because of the implementation of the PPC system. 
Changes to Rate Tables and Premium Charts Unrelated to Implementation of the 
Public Protection Classification System. The Commissioner has determined that it 
is necessary to amend several premium charts in both the Homeowners and Dwelling 
sections of the Manual. These charts include premium charts for endorsements in 
both sections to provide for all premium amounts in dollars and cents in lieu of 
rounding these premium amounts to the nearest dollar. Some premium charts in 
both sections currently contain premium amounts rounded to the nearest dollar, 
but several charts do not. These amendments are necessary for purposes of 
consistency and to more accurately reflect rate changes for the endorsements. 
For example, when the premiums are rounded to the nearest dollar, the rate must 
change 51 cents or more to cause a change in the premium. The Commissioner has 
also determined that it is necessary to amend charts and tables in both the 
Homeowners and Dwelling sections to reflect the fact that there is no longer a 
property minimum premium rule. Prior to 1992 when the Manual was first adopted, 
there was a rule that provided for minimum premiums for coverage under dwelling 
policy forms and endorsements. When the Manual was adopted, the minimum premium 
rule was not included, but premium charts in the new Manual were not changed to 
reflect the fact that there was no longer a minimum premium rule. These 
amendments are necessary to provide that the premium charts no longer implement 
a non-existent rule.
Homeowners Section. The Commissioner has determined that several existing 
premium charts in the Homeowners Section should be amended to provide for all 
premium amounts in dollars and cents in lieu of rounding these premium amounts 
to the nearest dollar, including (i) Premium Chart Number 5, Unscheduled 
Residence Glass Coverage; (ii) Premium Chart Number 6, Jewelry, Watches and Furs 
- Increased Limits; (iii) Premium Chart Number 8, Money/Bank Cards, and 
Bullion/Valuable Papers - Increased Limits; (iv) Premium Chart Number 12, 
Physicians, Surgeons and Dentists Outside Coverage; (v) Premium Chart Number 14, 
Other Structures on the Premises - Additional Amount; (vi) Premium Chart Number 
20, Personal Injury Coverage; (vii) Premium Chart Number 21, Office, Private 
School or Studio; (viii) Premium Chart Number 22, Farmer's Personal Liability; 
(ix) Premium Chart Number 25, Animal Collision Coverage; (x) Premium Chart 
Number 26, Watercraft; (xi) Premium Chart Number 27, Business Pursuits; (xii) 
Premium Chart Number 28, Additional Premiums for Increased Limits of Liability & 
Medical Payments to Others; and (xiii) Premium Chart Number 35, Additional 
Insured. 
The Commissioner has determined that two charts in the Rate Tables and Premium 
Charts subsection of the Homeowners Section should be amended to reflect the 
fact that there is no longer a property minimum premium rule: (i) Premium Chart 
Number 12, Physicians, Surgeons, and Dentists Outside Coverage; and (ii) Premium 
Chart Number 13, Additional Extended Coverage Endorsement (Form HOA only). The 
Commissioner has also determined that it is necessary to adopt such amendments 
to the premium charts that are being moved from current rules to the Rate Tables 
and Premium Charts subsection of the Homeowners Section, including (i) Premium 
Chart Number 36, Personal Computer Coverage; (ii) Premium Chart Number 37, Unit 
Owners Outbuildings and Other Structures Coverage; and (iii) Premium Chart 
Number 38, Condominium Loss Assessment Coverage; and also to Premium Chart 
Number 39, Tenants Single Entrance to Building Surcharge which is adopted as a 
separate premium chart due to the repeal of Premium Chart. Number 4 - Texas 
Tenants Forms HOB-T and HOC-T or Condominium Forms HO-CON-B and HO-CON-C. 
Also included in the revised Manual are changes to premium charts resulting from 
the adoption of Commissioner's Order Number 97-0840 (August 21, 1997) which 
adopts benchmark rates effective February 1, 1998, for residential property, 
homeowners, tenants, dwelling fire, extended coverage, additional extended 
coverage and physical loss form. These premium charts include (i) Premium Chart 
Number 5, Unscheduled Residence Glass Coverage; (ii) Premium Chart Number 6, 
Jewelry, Watches and Furs-Increased Limits; (iii) Premium Chart Number 7, 
Additional Limit on Business Personal Property; (iv) Premium Chart Number 8, 
Money/Bank Cards, and Bullion/Valuable Papers-Increased Limits; (v) Premium 
Chart Number 9, Radio and Television Antenna; (vi) Premium Chart Number 10, 
Greenhouses; (vii) Premium Chart Number 11, Cloth Awnings; (viii) Premium Chart 
Number 12, Physicians, Surgeons and Dentists Outside Coverage; (ix) Premium 
Chart Number 13, Additional Extended Coverage Endorsement (Form HOA only); (x) 
Premium Chart Number 14, Other Structures on the Premises-Additional Amount; 
(xi) Premium Chart Number 20, Personal Injury Coverage; (xii) Premium Chart 
Number 21, Office, Private School or Studio; (xiii) Premium Chart Number 22, 
Farmer's Personal Liability; (xiv) Premium Chart Number 22A, Custom Farming; and 
(xv) Premium Chart Number 23, One Year Rates Farm Employers Liability Rates for 
$100 Payroll; (xvi) Premium Chart Number 25, Animal Collision Coverage; (xvii) 
Premium Chart Number 26, Watercraft; (xviii) Premium Chart Number 27, Business 
Pursuits; (xix) Premium Chart Number 28, Additional Premiums for Increased 
Limits of Liability & Medical Payments to Others; and (xx) Premium Chart Number 
35, Additional Insured; (xxi) Premium Chart Number 36, Personal Computer 
Coverage; (xxii) Premium Chart Number 37, Unit Owners Outbuildings and Other 
Structures Coverage; (xxiii) Premium Chart Number 38, Loss Assessment Coverage; 
and (xxiv) Premium Chart Number 39, Tenants Single Entrance to Building 
Surcharge. 
Dwelling Section. The Commissioner has determined that it is necessary to amend 
three premium charts in the Dwelling Section to provide for all premium amounts 
in dollars and cents in lieu of rounding these premium amounts to the nearest 
dollar: (i) Premium Chart Number 4, Greenhouses Extended Coverage Rates; (ii) 
Premium Chart Number 9, Residential Glass; and (iii) Premium Chart Number 18, 
Tenant Occupancy Charge which is moved from the current Rule VI-C-2-a.
The Commissioner has also determined that it is necessary to amend five charts 
in the Rate Tables and Premium Charts subsection of the Dwelling Section to 
reflect the fact that there is no longer a property minimum premium rule: (i) 
Dwelling Chart Number 1A; (ii) Dwelling Chart Number 1B; (iii) Additional 
Extended Coverage Premium Chart in which the additional extended coverage base 
premiums are specified by zone and therefore, separately from the chart on 
vandalism/malicious mischief premiums which are specified for all territories, 
as provided in Commissioner's Order Number 97-0840; (iv) new Vandalism/Malicious 
Mischief Premium Chart; and (v) All Risk Premium Chart. 
The Commissioner has determined that the existing Deductible Adjustment 
Percentage Schedule in the Rate Tables and Premium Charts subsection of the 
Dwelling Section should be amended to delete the second sentence of the 
instructions to conform the instructions for determining the deductible 
adjustment premium for the building and/or contents insured under a Texas 
Dwelling Policy with Rule I-B (in the General Instructions Subsection of the 
Dwelling Section) on application of the flex bands filed by individual insurers. 
Rule I-B provides that the percentages of flexibility filed by individual 
insurers shall be applied as a final calculation to each coverage or peril for 
which a separate premium is shown. 
The Commissioner has further determined that rate tables in the Rate Tables and 
Premium Charts subsection of the Dwelling Section should be rearranged to more 
closely follow rating methodologies.
Also included in the revised Manual are changes to premium charts resulting from 
the adoption of Commissioner's Order Number 97-0840 (August 21, 1997) which 
adopts benchmark rates for residential property, homeowners, tenants, dwelling 
fire, extended coverage, additional extended coverage and physical loss form 
effective February 1, 1998. These premium charts include (i) Dwelling Extended 
Coverage Territory Multipliers; (ii) Additional Extended Coverage Premium Chart; 
(iii) Vandalism/Malicious Mischief Premium Chart; (iv) All Risk Premium Chart; 
(v) Premium Chart Number 4, Greenhouses Extended Coverage Rates; (vi) Premium 
Chart Number 5, Cloth Awnings Extended Coverage Rate; (vii) Premium Chart Number 
6, Radio and Television Antenna Extended Coverage Rate; (viii) Premium Chart 
Number 11, Vacancy Clause (TDP-011); (ix) Premium Chart Number 12, Miscellaneous 
Property Schedules (TDP-012); and (x) Premium Chart Number 18, Tenant Occupancy 
Charge. Some base rates specified in the premium charts do not change as a 
result of the adoption of new benchmark rates because the benchmark rate change 
is incorporated into the territory multiplier instead of the base rate: (i) 
Dwelling Chart Number 1A, (ii) Dwelling Chart Number 1B, (iii) Additional 
Extended Coverage Premium Chart, and (iv) All Risk Premium Chart. 
NON-SUBSTANTIVE EDITORIAL CHANGES. The Commissioner has determined that numerous 
non-substantive editorial amendments should be adopted throughout both the 
Homeowners and Dwelling sections of the Manual. These amendments include: (i) 
updating of references, including change of former State Board of Insurance to 
the Texas Department of Insurance, change of Texas Catastrophe Property 
Insurance Association to Texas Windstorm Insurance Association, and correction 
of references to the Farm and Ranch and Farm and Ranch Owners Manual; (ii) 
formatting, organizational, wording, and other technical editing changes for 
purposes of consistency and readability, including assigning current subsections 
with Roman numeral designations and renumbering subsequent subsections 
accordingly; and (iii) correction of misspelled words. Updating of references to 
the Texas Department of Insurance are necessary because there is no longer a 
State Board of Insurance (Acts 1993, 73rd Legislature, Chapter 685, sec.1.02, 
effecitve September 1, 1993). Updating of references to the Texas Windstorm 
Insurance Association are necessary because of the enactment of House Bill 1632 
by the 75th Legislature (Acts 1997, 75th Legislature, Chapter 438, sec.3, 
effective September 1, 1997) which changed the name of the Texas Catastrophe 
Property Insurance Association to the Texas Windstorm Insurance Association. 
Correction of references to the Farm and Ranch and Farm and Ranch Owners Manual 
is necessary because of the enactment of Senate Bill 1499 by the 75th 
Legislature (Acts 1997, 75th Legislature, page 5030, Chapter 1330, sec.1, 
effective September 1, 1997) which provides that farm and ranch and farm and 
ranch owners insurance is no longer regulated as a personal lines coverage but 
rather is regulated as commercial property insurance under Article 5.13-2 of the 
Insurance Code. Therefore, insurers are no longer required to follow the form 
and rating rules and rating tables and premium charts in those two sections. 
However, the farm and ranch and farm and ranch owners form and rating rules and 
tables shall continue to be used by insurers who write such coverage under the 
Property Protection Program for designated underserved areas pursuant to Article 
5.35-3 of the Insurance Code, and therefore, the Commissioner has determined to 
retain Farm and Ranch and Farm and Ranch Owners Sections in the Texas Personal 
Lines Manual. 
The Commissioner has jurisdiction of this matter pursuant to the Insurance Code, 
Articles 5.35, 5.96, 5.98, and 5.101. 
The Manual and the declarations pages as amended and adopted by the Commissioner 
are on file in the Chief Clerk's Office of the Texas Department of Insurance 
under Reference Number P-1097-32-I and are incorporated by reference into 
Commissioner's Order Number 97-1258. The documents may be accessed using the 
Department's website on the Internet at www.tdi.state.tx.us. The documents can 
be located using the Quick Access link to "company." 
This notification is made pursuant to the Insurance Code, Article 5.96, which 
exempts action taken under Article 5.96 from the requirements of the 
Administrative Procedure Act (Government Code, Title 10, Chapter 2001).
Consistent with the Insurance Code, Article 5.96(h), prior to the effective date 
of this action, the Texas Department of Insurance will notify all insurers 
affected by this action. 
This agency hereby certifies that the actions adopted in this Order have been 
reviewed by legal counsel and found to be a valid exercise of the agency's legal 
authority. 
IT IS THEREFORE THE ORDER of the Commissioner of Insurance that the revisions to 
the Texas Personal Lines Manual and to the declarations pages of the Texas 
Homeowners Policy Forms and Texas Dwelling Policy Forms, as specified herein and 
attached hereto and made a part of this Order, are adopted to be effective 
February 1, 1998.
Issued in Austin, Texas, on December 17, 1997.
TRD-9716861
Caroline Scott
General Counsel and Chief Clerk
Texas Department of Insurance
Filed: December 17, 1997