Texas Register
(26 TexReg 5857). On November 16,
2001, State Farm filed another amendment to the petition in which it refiled
its new homeowners policy, renters policy, condominium unitowners policy,
and thirty-three endorsements with certain modifications along with two new
Fungus Exclusion Endorsements and a Fungus Limited Coverage Endorsement, for
a total of thirty-six endorsements to be considered by the Commissioner. Potential
action on these policies and endorsements was noticed in the
Texas Register
(27 TexReg 289) on January 4, 2002 and a public hearing
to solicit comments was held on February 4, 2002.
After review of State Farm's filings and supporting documentation and other
information, public comments, and recommendations by Texas Department of Insurance
staff, the Commissioner finds that the policy forms, endorsements, and the
agreed-upon conditions as detailed herein meet the requirements of Article
5.35, and should be adopted subject to the following provision. Article 5.35
requires that a filed policy form or endorsement shall not contain provisions
that are unjust, encourage misrepresentation, are deceptive, or violate public
policy. Under these circumstances, as noted earlier, the Commissioner may
disapprove a policy form or endorsement, or withdraw any previous approval
of a form or endorsement. The Commissioner believes that there is a reasonable
expectation on the part of insureds that the offer of a new policy with less
coverage would be at a lower cost than a policy offered by the same company
with more coverage, and that if this were not the case the filing would not
come within the standards of Article 5.35, including the public policy requirement.
This is especially true as the current insurance market transitions from a
single, prescribed policy to individually filed policies. Accordingly, the
Commissioner's adoption of State Farm's filing is predicated on information
and representations provided to the Department by State Farm, including the
preliminary determination that insureds purchasing the new basic policy forms
and endorsements can reduce their homeowners premium from 7% to 40% from the
amount they otherwise would have paid for the basic HO-B, depending upon geographic
location and coverage selection. The Commissioner's adoption is also predicated
on the requirement in this order, which State Farm has agreed to, that State
Farm file its initial rates and any subsequent rate changes/reductions with
the Department for a two year period beginning on the date the policies are
first sold, in order that the Department may monitor impacts related to the
policy form adoption, including compliance with Article 5.35.
I. State Farm Homeowners Policy. The following is a general description
of the coverage provided by the new State Farm homeowners policy that is adopted
by the Commissioner pursuant to Article 5.35 (b).
A. Section 1-Property Coverages.
1. The policy covers the dwelling and other private structures on the premises
against the risk of direct physical loss, with certain exceptions.
2. It covers personal property on and away from the premises against losses
by fire or lightning, windstorm or hail, explosion, riot or civil commotion,
aircraft, vehicular impact, smoke, vandalism or malicious mischief, and theft.
3. It provides loss of use which covers additional living expenses when
the residence becomes uninhabitable and fair rental value when part of the
premises is rented to others.
B. Section 2-Liability Coverages.
1. Coverage L-Personal Liability. The policy covers payment on behalf of
the insured of all sums, up to the stipulated limit, which the insured is
legally liable to pay as damages because of bodily injury or property damage
arising out of the residence premises or personal activities.
2. Coverage M-Medical Payments to Others. The policy covers medical and
related expenses, subject to the stipulated limit, arising out of accidents
to persons other than the insured and residents of the premises.
3. Additional Coverages. Additional coverage is provided for claim expenses,
first aid expenses, and damage to property of others.
II. State Farm Condominium Unitowners Policy. This policy for condominium
unitowners covers items of real property which are the insured's responsibility
under the governing rules of a condominium association. This policy covers
personal property on and away from the premises against losses by fire or
lightning, windstorm or hail, explosion, riot or civil commotion, aircraft,
vehicular impact, smoke, vandalism or malicious mischief, and theft. This
policy also contains loss of use, additional coverages, and liability coverage
provisions that are the same as those described for the State Farm homeowners
policy.
III. State Farm Renters Policy. This is a tenants policy that covers personal
property on and away from the premises against losses by fire or lightning,
windstorm or hail, explosion, riot or civil commotion, aircraft, vehicular
impact, smoke, vandalism or malicious mischief, and theft. This policy also
contains loss of use, additional coverages, and liability coverage provisions
that are the same as those described for the State Farm homeowners policy.
IV. Comparison of the State Farm Policies to the Currently Prescribed Texas
Homeowners Policy-Form B (HO-B). The HO-B has traditionally been the predominant
policy form issued in Texas for owner occupied dwellings. In the course of
the Department's review of State Farm's homeowners, renters, and condominium
unitowners policies, several differences were noted in the coverage provided
in the HO-B and that provided in the State Farm policy forms. Since the renters
policy contains the same coverages as the homeowners policy (except that the
renters policy does not provide the dwelling coverage), and since the condominium
unitowners policy also contains the same coverages as the homeowners policy
(except that the dwelling coverage is much more limited), the restrictions
and enhancements in coverage will be discussed in terms of a comparison between
the State Farm homeowners policy and the HO-B. However, it should be noted
that most of the comparisons of coverage also apply to the renters and condominium
unitowners policies.
V. Restrictions In Coverage. The following is a list of some of the major
restrictions in coverage that are contained in the State Farm homeowners policy
as compared to the existing HO-B. This list is not intended to cover every
restriction in coverage that is contained in the State Farm policy forms.
More detailed coverage information is contained in a side by side comparison
of the State Farm homeowners policy and the HO-B, which was part of the record
in the hearing on State Farm's petition, and which is available from the Department
upon request.
A. Coverage for Boats, Boat Trailers, and Other Trailers.
The State Farm policy provides up to $1,000 in coverage for boats, boat
trailers, and other trailers not used with watercraft for losses that occur
on and off premises for all losses insured. (See Section 1-Coverages, Coverage
B-Personal Property, Special Limits of Liability, paragraphs d. and e.) The
State Farm policy provides theft coverage for boats, boat trailers, and other
trailers if the theft occurs on the residence premises; however, if the theft
occurs off of the residence premises, theft coverage is excluded. (See Section
1-Losses Insured, Coverage B-Personal Property, paragraphs 9.c.(2) and (3))
The State Farm policy provides windstorm and hail coverage for boats and their
trailers only if they are inside a fully enclosed building. (See Section 1-Losses
Insured, Coverage B-Personal Property, paragraph 2.) The HO-B provides coverage
up to the limits of liability that apply to Coverage B (Personal Property)
for boats and boat trailers while located on land on the residence premises
for all perils insured against. Additionally, the HO-B provides coverage up
to the limits of liability that apply to Coverage B (Personal Property) for
trailers designed for use principally off public roads (e.g., travel trailers)
whether on or off premises. (See Section 1-Property Coverage, Coverage B (Personal
Property), Property Not Covered, paragraphs 4. and 6.).
B. Coverage for Firearms.
The State Farm policy limits the coverage for firearms to losses by the
peril of theft with a maximum limit of liability of $2,500. (See Section 1-Coverages,
Coverage B-Personal Property, 1. Property Covered, paragraph g.) The HO-B
provides coverage for firearms to the extent described under the Perils Insured
Against section of the policy, including the peril of theft, up to the limits
of liability that apply to Coverage B (Personal Property.).
C. Coverage for Goldware and Silverware.
The State Farm policy limits the coverage for goldware and silverware to
losses by the peril of theft with a maximum limit of liability of $2,500.
(See Section 1-Coverages, Coverage B-Personal Property, 1. Property Covered,
paragraph h.) The HO-B provides coverage for goldware and silverware to the
extent described under the Perils Insured Against section of the policy, including
the peril of theft, up to the limits of liability that apply to Coverage B
(Personal Property.).
D. Coverage for Golf Carts.
The State Farm policy only covers golf carts if they are used to service
the residence premises or while used for golfing purposes. (See Section 1-Coverages,
Coverage B-Personal Property, 2. Property Not Covered, paragraph c.) The HO-B
provides coverage for golf carts up to the limits of liability that apply
to Coverage B (Personal Property) to the extent described under the Perils
Insured Against section of the policy. The golf cart coverage provided in
the HO-B is not limited to golf carts that are used to service the residence
or while used for golfing purposes, (See Section 1-Property Coverage, Coverage
B (Personal Property) Property Not Covered, paragraph 3.c.).
E. Coverage for Tree Debris Removal.
The State Farm policy limits the coverage for the removal of debris from
a fallen tree to $500. (See Section 1-Coverages, Section 1-Additional Coverages,
paragraph 1.) The HO-B provides coverage for removal of debris from a fallen
tree to the extent described under the Extensions of Coverage section of the
policy up to the limits of liability that apply to the damaged property. (See
Extensions of Coverage, paragraph 1.).
F. Coverage for Water Damage.
1. The State Farm policy specifies that an accidental discharge or overflow
of water from a plumbing system, heating or air conditioning system, or household
appliance must be "sudden" before there is water damage coverage under the
policy. (See Section 1-Losses Insured, paragraph 12.) The HO-B provides the
same water damage coverage that is specified in the State Farm policy, but
also provides coverage for water damage from repeated and continuous seepage
or leakage of water or steam from a plumbing system, heating or air conditioning
system, or household appliance which occurs over a period of time. (See Section
1-Perils Insured Against, paragraph 9.)
2. The State Farm policy does not cover a loss caused by water or sewage
from outside the residence premises that backs up or overflows from a sewer,
drain, or sump pump. (See Section 1-Losses Insured, paragraph 12.) The HO-B
does not exclude damage to property covered under Coverage A-Dwelling for
a loss caused by back up or overflow from a sewer, drain, or sump pump of
sewage or water, even if it is from outside the residence premises. Property
covered under Coverage B-Personal Property is specifically insured for loss
caused by accidental discharge, leakage, or overflow of water or steam from
within a plumbing system, heating or air conditioning system, or household
appliance which may include a loss caused by water or sewage from outside
the residence premises that backs up or overflows from a sewer, drain, or
sump pump. (See Section 1-Perils Insured Against, Coverage B-Personal Property,
paragraph 9.)
3. State Farm agrees to extend the coverage for water damage in the same
manner as provided in the HO-B that is specified in Commissioner's Order No.
01-1105, concerning Mold, Fungi, or Other Microbes, to its policyholders.
Specifically, State Farm extends coverage for reasonable and necessary repair
or replacement of property physically damaged by a covered water loss which
damage shall include mold, fungi, or other microbes, including a water loss
that involves hidden and undetected damage, and where the insured has reported
the loss within thirty (30) days of its detection.
G. State Farm Policy Exclusions.
1. The State Farm policy excludes loss from freezing, thawing, pressure
or weight of water or ice to a swimming pool, hot tub or spa. (See Section
1-Losses Not Insured, paragraph 1. c.) The HO-B does not contain this exclusion.
2. The State Farm policy excludes loss from vandalism or malicious mischief
or breakage of glass if the dwelling is vacant for more than 30 days immediately
before the loss. (See Section 1-Losses Not Insured, paragraph 1. e.) The HO-B
provides coverage for all perils insured against for up to 60 days of vacancy.
(See Section 1-Conditions, paragraph 13.)
3. The State Farm policy restates under "Losses Not Insured" that a loss
resulting from continuous or repeated seepage or leakage of water or steam
is excluded. (See Section 1-Losses Not Insured, paragraph 1. f.) The HO-B
does not contain this exclusion.
4 The State Farm policy excludes losses resulting from pressure or presence
of tree, shrub or plant roots. (See Section 1-Losses Not Insured, paragraph
1. n.) The HO-B does not contain this exclusion.
5. The State Farm policy restates under "Losses Not Insured" that a loss
resulting from backup or overflow from a sewer, drain, or sump pump of water
or sewage from outside the residence is excluded. (See Section 1-Losses Not
Insured, paragraph 2. c. (2)) The HO-B does not contain this exclusion.
6. The State Farm policy excludes losses consisting of defect, weakness,
inadequacy, fault or unsoundness in planning, zoning, development, surveying,
siting, design, specifications, workmanship, construction, grading, compaction,
materials used in construction or repair, or maintenance of any property whether
on or off the residence premises. However, any resulting loss from the items
specified above is insured unless the resulting loss is itself a loss not
insured. (See Section 1-Losses Not Insured, paragraph 3. b.) The HO-B does
not contain this exclusion.
7. The State Farm policy excludes coverage for settling, cracking, shrinking,
bulging, or expansion of pavements, patios, walls, floors, roofs, ceilings,
or foundations of the dwelling. (See Section 1-Losses Not Insured, paragraphs
1.l.) The HO-B provides foundation coverage caused by seepage or leakage of
water or steam from within a plumbing, heating, air conditioning, or automatic
fire protective sprinkler system. (See Section 1-Perils Insured Against, paragraph
9. and Section 1-Exclusions paragraph 1. h.)
VI. Coverage Enhancements. The following is a list of some of the areas
where the State Farm homeowners policy provides coverage that is broader than
the coverage provided in the HO-B. More detailed coverage information is contained
in a side by side comparison of the State Farm homeowners policy and the HO-B,
which was part of the record in the hearing on State Farm's petition, and
which is available from the Department upon request.
A. Coverage of Personal Property Off Premises.
The State Farm policy provides coverage for personal property away from
the residence premises up to the full limit of Coverage B. There is an exception
to this coverage that limits personal property coverage to the greater of
$1000 or 10% of Coverage B, if the property is usually situated at an insured's
residence, other than the residence premises. (See Section 1-Coverages, Coverage
B-Personal Property, paragraph 1.) The HO-B limits coverage on losses to personal
property located away from the residence premises to the greater of $1000
or 10% of Coverage B. (See Section 1-Property Coverage, Coverage B (Personal
Property), paragraph 2.) The HO-B excludes theft loss if the personal property
is at any other residence owned by, rented to, or occupied by an insured,
except while an insured is temporarily living there. (See Section 1-Exclusions,
paragraph 1. d. (1).)
B. Special Limits of Liability.
1. The State Farm policy provides a $200 limit of liability for losses
of money. (See Section 1-Coverages, Coverage B-Personal Property, Special
Limits of Liability, paragraph a.) The HO-B provides a $100 limit of liability
for losses of money. (See Section 1-Property Coverage, Coverage B (Personal
Property), Special Limits of Liability, paragraph 1.)
2. The State Farm policy provides a $1000 limit of liability for loss of
securities, checks, money orders, accounts, deeds, passports, tickets, etc.
(See Section 1-Coverages, Coverage B-Personal Property, Special Limits of
Liability, paragraph c.) The HO-B provides a $500 limit of liability for "Bullion/Valuable
Papers". (See Section 1-Property Coverage, Coverage B (Personal Property),
Special Limits of Liability, paragraph 2.)
3. The State Farm policy provides a $1000 limit of liability for boats,
boat trailers, and other trailers while away from the residence premises,
except for the peril of theft. (See Section 1-Coverages, Coverage B-Personal
Property, Special Limits of Liability, paragraphs d. and e.) The HO-B excludes
coverage for boats and boat trailers while away from the residence premises.
(See Section 1-Property Coverage, Property Not Covered, paragraphs 4. b. and
6.)
4. The State Farm policy provides $2,500 coverage for stamps, trading cards,
and comic books. (See Section 1-Coverages, Coverage B-Personal Property, Special
Limits of Liability, paragraph f.) The HO-B provides a $500 limit of liability
for "Bullion/Valuable Papers". (See Section 1-Property Coverage, Coverage
B (Personal Property), Special Limits of Liability, paragraph 2.)
C. Service Vehicle Coverage.
The State Farm policy covers any vehicle not licensed and used solely to
service the residence premises or designed to assist the handicapped. (See
Section 1-Coverages, Coverage B-Personal Property, 2. Property Not Covered,
paragraph c.) The HO-B only covers vehicles which are not subject to motor
vehicle registration and which are devices and equipment to assist the handicapped,
power mowers, golf carts, vehicles used for recreational purposes while on
the residence premises, and farm equipment not designed for use principally
on public roads. (See Section 1-Property Coverage, Coverage B (Personal Property)
Property Not Covered, paragraph 3.)
D. Additional Coverages.
1. The State Farm policy provides an additional 5% of the limit of the
damaged property for debris removal if the property damage and debris removal
exceeds the limit for the damaged property. (See Section 1-Coverages, Section
1-Additional Coverages, paragraph 1.) The HO-B's debris removal coverage is
included in the limit of liability for the damaged property and does not add
additional coverage. (See Section 1-Property Coverage, Coverage B (Personal
Property), Extensions of Coverage, paragraph 1.)
2. The State Farm policy provides up to $500 for covered damage to any
one tree, shrub or plant. (See Section 1-Coverages, Section 1-Additional Coverages,
paragraph 3.) The HO-B provides up to $250 for covered damage to any one tree,
shrub or plant. (See Section 1-Property Coverage, Coverage B (Personal Property),
Extensions Of Coverage, paragraph 4.)
3. The State Farm policy pays up to $1000 for unauthorized use of credit
cards and bank fund transfer cards. There is no deductible for this coverage.
(See Section 1-Coverages, Section 1-Additional Coverages, paragraph 5.) The
HO-B provides a $100 limit of liability (subject to a deductible) for loss
by theft or unauthorized use of bank fund transfer cards. (See Section 1-Property
Coverage, Coverage B (Personal Property), Special Limits of Liability, paragraph
1.)
4. The State Farm policy extends Coverage B to the contents of a deep freeze
or refrigerated units on the residence premises for loss due to power failure
or mechanical failure whether the power failure is on or off premises. (See
Section 1-Coverages, Section 1-Additional Coverages, paragraph 7.) The HO-B
limits consequential loss to $500 if the power failure is a result of damage
to any power, heating, or cooling equipment off of the residence premises
that is caused by an HO-B peril. The HO-B provides coverage to property contained
in a building on the residence premises due to a temperature change resulting
from damage to the dwelling or equipment in the dwelling that is caused by
a peril insured against. (See Section 1-Property Coverage, Coverage B (Personal
Property), Extensions Of Coverage, paragraph 6.)
5. The State Farm policy provides an arson reward of $1000 for information
leading to an arson conviction. (See Section 1-Coverages, Section 1-Additional
Coverages, paragraph 8.) The HO-B does not provide arson reward coverage.
6. The State Farm policy provides coverage for reasonable expenses incurred
to rekey exterior doors to the residence premises if the keys are stolen as
part of a covered theft loss. (See Section 1-Coverages, Section 1-Additional
Coverages, paragraph 11.) The HO-B does not provide similar coverage.
E. Windstorm or Hail Coverage.
The State Farm policy does not exclude windstorm or hail coverage to structures
wholly or partially over water. (See Section 1-Losses Insured, Coverage B-Personal
Property, paragraph 2.) The HO-B excludes loss from windstorm, hurricane and
hail to structures wholly or partially over water and their contents. (See
Section 1-Exclusions, paragraph 1. c. (1))
F. Policy Exclusions.
The State Farm policy pays for a loss not otherwise excluded that results
from destruction of property by order of a governmental authority. (See Section
I - Losses Not Insured, paragraph 3. a.) The HO-B excludes losses caused by
the destruction of property by order of a governmental authority. However,
the HO-B will cover loss caused by order of destruction ordered by a governmental
authority taken at the time of a fire to prevent its spread. (See Section
1-Exclusions, paragraph 2.)
G. Conditions.
The State Farm policy excludes losses only from the perils of vandalism,
malicious mischief, or breakage of glass after 30 days of vacancy. (See Section
1-Losses Not Insured, paragraph 1. e.) The HO-B suspends dwelling coverages
for all perils insured against after 60 days of vacancy. (See Section 1-Conditions,
paragraph 13.)
H. Loss Settlement Provisions.
The State Farm policy pays replacement cost coverage on the dwelling and
other structures on the residence premises without depreciation. (See Section
1-Loss Settlement, Coverage A-Dwelling, paragraphs 1.and 2.) The HO-B's loss
settlement provisions allow initial loss payment of actual cash value with
the difference between actual cash value and replacement cost paid upon replacement
or repair of the damaged property, if the repair or replacement is done within
365 days of the loss. An additional 180 days may be requested by the insured.
(See Section 1-Conditions, paragraph 4.)
VII. State Farm Endorsements. In addition to the three residential property
policy forms, the Commissioner has adopted thirty-six endorsements pursuant
to Article 5.35 (b) that either add or exclude coverage. A general description
of the coverage that will be provided by or excluded by the State Farm Dwelling
Foundation Endorsement, Water Damage Endorsements, Fungus (Including Mold)
Exclusion Endorsements, and Fungus (Including Mold) Limited Coverage Endorsement
is provided.
A. Dwelling Foundation Endorsement FE-5368.
This endorsement provides coverage for settling, cracking, shrinking, bulging,
or expansion of foundations, floor slab or footings that support the dwelling
caused by seepage or leakage of water or steam from within a plumbing, heating,
air conditioning or automatic fire protective sprinkler system. The coverage
includes the cost of tearing out and replacing any part of the building necessary
to repair the system from which the water or steam escaped. The loss to the
system from which the water or steam escaped is not covered. The endorsement
limits coverage to 15% of the amount of insurance for Coverage A - Dwelling
on the date of the loss. In contrast, the HO-B policy provides dwelling foundation
coverage limits up to the total amount of insurance for Coverage A - Dwelling.
B. Water Damage Endorsements FE-5369 and FE-5393.
Water Damage Endorsement FE-5369, which may be attached to a homeowners
policy, provides coverage for deterioration, wet rot, or dry rot to Coverage
A - Dwelling and Coverage B - Personal Property caused by continuous or repeated
seepage or leakage of water or steam from heating, air conditioning systems
or automatic fire sprinkler systems, household appliances, or plumbing systems.
The coverage includes the cost of tearing out and replacing any part of the
building necessary to repair the system or appliance from which the water
or steam escaped, but does not include the loss to the system or appliance
from which the water or steam escaped. Fungus that results from a continuous
or repeated seepage or leakage of water or steam from a heating, air conditioning
or automatic fire sprinkler system, household appliance, or plumbing systems
is excluded; however, fungus that results from a sudden discharge of water
from these systems or appliances is not excluded. The endorsement contains
a broad definition of "fungus" to mean any type or form of fungus, including
mold, mildew, mycotoxins, spores, scents, or byproducts produced or released
by fungi. Additionally, in Section 1-Losses Insured, Coverage B-Personal Property,
Item 13., relating to sudden and accidental tearing asunder, cracking, burning,
or bulging of a hot water heating system, air conditioning system, or fire
protection sprinkler system, replaces item 13. in the policies to clarify
that the coverage provided under this item is limited to the coverage specifically
provided by this endorsement. Water Damage Endorsement FE-5393, which is attached
to a renters or condominium unitowners policy, contains coverages that parallel
those in FE-5369 described above except that the coverages are applicable
only to Coverage B-Personal Property.
C. Fungus (Including Mold) Exclusion Endorsements FE-5398 and FE-5399.
Fungus (Including Mold) Exclusion Endorsement FE-5398, which will be attached
to a homeowners or condominium unitowners policy, and FE-5399, which will
be attached to a renters policy, are intended to exclude losses resulting
from fungus. Fungus is broadly defined in these endorsements to mean any type
or form of fungus including mold, mildew, mycotoxins, spores, scents, or byproducts
that are produced or released by fungi. These endorsements amend Section 1-Losses
Insured, items 12.d. and 13.b. to remove the word "mold" from these exceptions
to coverage with the purpose of restructuring the policies to create a separate
and more comprehensive fungus exclusion. These endorsements amend the Section
1-Losses Not Insured portion of the policy by adding item g. to item 2. to
exclude coverage for any loss of use or delay in rebuilding, repairing or
replacing covered property, including any associated cost or expense due to
interference at the residence premises or location of the rebuilding, repair
or replacement that is caused by or results from fungus. Remediation is excluded
including the cost to remove fungus from covered property or to repair, restore,
or replace damaged property and tearing out and replacing any part of the
building or other property as needed to gain access to the fungus. The excluded
remediation further includes the cost of any testing or monitoring of air
or property to confirm the type, absence, presence or level of fungus, whether
performed prior to, during or after removal, repair, restoration or replacement
of covered property.
D. Fungus (Including Mold) Limited Coverage Endorsement FE-5410.
This endorsement may be attached to homeowners, condominium unitowners,
and renters policies to provide remediation of fungus if the fungus is the
result of a covered cause of loss. Coverage is provided for any loss of use
or delay in rebuilding, repairing or replacing covered property, including
any associated cost or expense due to interference at the residence premises
or location of the rebuilding, repair or replacement that is caused by or
results from the fungus. Coverage is provided for remediation including the
cost to remove fungus from covered property or to repair, restore or replace
damaged property and tearing out and replacing any part of the building or
other property as needed to gain access to the fungus. Coverage for remediation
also includes the cost of any testing or monitoring of air or property to
confirm the type, absence, presence or level of fungus, whether performed
prior to, during or after removal, repair, restoration or replacement of covered
property.
This endorsement does not provide any coverage for fungus which is the
result of: (1) continuous or repeated seepage or leakage of water or steam
from heating, air conditioning or automatic fire protective sprinkler system,
household appliance or plumbing system; or (2) defect, weakness, inadequacy,
fault or unsoundness in planning, zoning, development, surveying, siting,
design, specifications, workmanship, construction, grading, compaction, materials
used in construction or repair, or maintenance of any property whether on
or off the residence premises.
Fungus coverage in Endorsement FE-5410 is subject to the following conditions:
(1) immediate notice must be provided to the insurer of the occurrence of
the covered cause of loss, (2) remediation must begin as soon as possible,
and (3) all reasonable means must be used to save and preserve the property
from further damage.
Coverage is available for up to four different limits: $15,000, $25,000,
$50,000, and the full Coverage A (Dwelling) limit of liability. The limit
of liability will be shown on the policy declarations page. This limit applies
regardless of the number of covered causes of loss that combine or contribute
to the presence of resulting fungus, or the number of claims made during the
policy period. The limit also includes any payments for Section I - Additional
Coverages and Coverage C - Loss of Use. The limit of liability for the Fungus
(Including Mold) Limited Coverage Endorsement is not in addition to the limit
of insurance that applies to covered property.
VIII. Phase In Of the Adopted Policy Forms, Water Damage Endorsements,
and Dwelling Foundation Endorsement. State Farm in its petition has stated
its intent to phase in the adopted policy forms and endorsements for use with
State Farm policyholders as the policy forms promulgated by TDI are discontinued
for use with State Farm policyholders. State Farm has outlined the details
of its plan to phase in the adopted policy forms and endorsements as follows:
A. New Business.
State Farm will write all new business on the adopted policy forms. The
adopted policy forms exclude coverage for dwelling foundation losses and limit
coverage for water damage losses. At the time each new residential property
policy is written, the applicant will be offered a separate dwelling foundation
coverage endorsement and a separate water damage coverage endorsement, subject
to State Farm's current underwriting guidelines. If the applicant declines
the dwelling foundation coverage endorsement or the water damage coverage
endorsement at the inception of the policy, these endorsements will not be
available to be added to a policy in the future. If a policyholder desires
to continue the dwelling foundation coverage (subject to the 15% cap) and
water damage coverage that the policyholder essentially has under the HO-B,
both the dwelling foundation coverage and water damage coverage endorsements
must be purchased for an additional premium.
B. Existing Business.
State Farm will begin to non-renew the in-force HO-A's and HO-B's and offer
the new policy forms at the time that it begins to offer the new policies
to its new business customers.
1. Homeowners-Form A (HO-A). The HO-A's that are in-force will be non-renewed
and offered to the State Farm homeowners policy form without water damage
or dwelling foundation coverage endorsements. Since this form does not cover
water damage as a named peril, there will be no offer made to these HO-A policyholders
allowing them to purchase the water damage or dwelling foundation coverage
endorsements. Furthermore, the water damage and dwelling foundation damage
endorsements will not be available to be added to the State Farm policy in
the future.
2. Homeowners-Form B (HO-B) and Homeowners-Form C (HO-C). The HO-B's and
HO-C's that are in force at the time of the conversion will be non-renewed
and offered the State Farm policy with the water damage and dwelling foundation
damage coverage endorsements attached. State Farm will offer each consumer
the opportunity to delete either or both of these endorsements in exchange
for a premium credit. If a policyholder chooses the option of deleting these
endorsements, they will not be available to be added in the future. The water
damage and dwelling foundation endorsements will be available to the policyholder
who originally receives the new State Farm policy for as long as that policyholder
owns the dwelling insured under the new policy. Water damage and dwelling
foundation endorsements that are deleted from this policy at any time will
not be available to be added at a later date to this policy or any other policy
that may be issued to cover the dwelling originally insured under the new
policy.
3. Homeowners Tenant-Form B (HO-BT), Homeowners Tenant-Form C (HO-CT),
Homeowners Condo-Form B (HO-CON-B), and Homeowners Condo-Form C (HO-CON-C).
The HO-BT's and HO-CT's that are in force at the time of the conversion will
be converted to the State Farm renters policy and the HO-CON-B's and HO-CON-C's
that are in force at the time of the conversion will be converted to the State
Farm condominium unitowners policy with the water damage coverage endorsement
attached. State Farm will offer each consumer the opportunity to delete this
endorsement in exchange for a premium credit. If a policyholder chooses the
option of deleting this endorsement, it will not be available to be added
in the future. The water damage endorsement will be available to the policyholder
who originally receives the new State Farm policy for as long as that policyholder
owns the condominium insured under the new policy or as long as that tenant
occupies the dwelling, apartment or townhouse insured under the new policy.
A water damage endorsement that is deleted from these policies at any time
will not be available to be added at a later date to these policies or any
other policy that may be issued to cover a condominium or tenant occupied
dwelling, apartment, or townhouse originally insured under the new policy.
4. Consumer Disclosures. State Farm agrees to provide an explanatory letter
and a summary of coverages expressly noting where there is less coverage,
or in some cases a change in coverage, in the State Farm policies than in
the currently prescribed policies to the policyholders who are being converted
from the currently prescribed Texas forms to the new State Farm forms. This
notice letter will be sent to the policyholders sixty (60) days in advance
of the policy conversion date. This notice letter will be provided to the
Department for its review prior to State Farm's use of this letter. State
Farm has indicated in a letter to the Commissioner dated June 14, 2000, that
policyholders who convert to the new State Farm policy forms and who purchase
both the dwelling foundation and water damage endorsements will continue to
have essentially the same comprehensive foundation and/or water damage coverage
that they have under the currently prescribed policies.
C. Rating Information.
State Farm has agreed in its petition to file its initial rates and any
rate changes for policies written through State Farm Lloyds with the Department
for a period of two years from the date the policies are first sold to allow
the Department to monitor the rates on the new State Farm policies. This filing
shall include detailed information showing the rate changes and rate reduction
that consumers would receive if they purchased the State Farm Policy as compared
to purchasing the HO-B. State Farm also agrees to provide the Department with
a copy of its loss cost analyses during the time period it is providing the
rating information. State Farm agrees to provide consumers with the opportunity
to reduce their homeowner's premiums based on their coverage selections. State
Farm represents that it does not anticipate that the State Farm Policy with
the water endorsement, foundation endorsement, and mold endorsement will be
priced higher than the modified HO-B with a 100% buy back of the mold coverage.
State Farm further represents that policyholders will be able to reduce their
basic homeowners premium from 7% to 40% depending on their geographic location
in the state and their coverage selections in comparison to the premium that
State Farm would charge for the basic HO-B.
IX. Phase In Of the Fungus (Including Mold) Limited Coverage Endorsement.
State Farm has agreed in its petition to offer the Fungus (Including Mold)
Limited Coverage Endorsement to new policyholders and existing policyholders
currently receiving ensuing mold damage coverage under the HO-B policy form.
Existing policyholders can elect to include mold coverage by adding this coverage
by endorsement for an additional premium charge. State Farm has also agreed
to make the Fungus (Including Mold) Limited Coverage Endorsement available
to new and existing policyholders under the condominium unitowners policy
and the renters policy. Once a policyholder has rejected the Fungus (Including
Mold) Limited Coverage Endorsement, State Farm will not offer to sell the
endorsement at subsequent renewals. However, if the Fungus (Including Mold)
Limited Coverage Endorsement has been rejected by a policyholder, State Farm
has agreed to make the endorsement available only under all of the following
conditions: (1) at the request of the policyholder, (2) at the time of a subsequent
renewal, and (3) subject to State Farm's underwriting guidelines and pricing.
X. Other Insurers Who Elect to Use the State Farm Residential Property
Policy Forms and Endorsements. Article 5.35 was amended by the 75th Texas
Legislature, in pertinent part, to allow the Commissioner to adopt policy
forms and endorsements of national insurers. That bill, SB 1499, in addition
to adding current subsection (b), amended subsection (a), which has historically
been the source of the agency's authority to adopt standard, promulgated forms,
to provide that such forms "may be used by an insurer without filing for approval
to use such form." SB 1499 did not add similar language to subsection (b),
pursuant to which the State Farm filing was made. In addition, subsection
(e) of Article 5.35 states that no form or endorsement can be delivered or
issued for delivery in this state unless adopted or approved pursuant to subsections
(a), (b), (c), or (d). Therefore, any insurer that wishes to use the policy
and endorsements adopted in this order must make a filing for approval with
the Department and agree to abide by the conditions and requirements imposed
by this order including: (1) agree to provide rating information including
detailed information regarding premium reduction for reduced coverage; (2)
agree to offer the Water Damage Endorsements, the Dwelling Foundation Endorsement,
and the Fungus (including Mold) Limited Coverage Endorsement in accordance
with the terms specified herein; (3) agree to provide the consumer disclosures
as specified herein; and (4) agree to comply with Commissioner's Order No.
01-1105, concerning Mold, Fungi, and Other Microbes; specifically, to extend
coverage for reasonable and necessary repair or replacement of property physically
damaged by a covered water loss which damage shall include mold, fungi, or
other microbes, including a water loss that involves hidden and undetected
damage, and where the insured has reported the loss within thirty (30) days
of its detection. This does not preclude other insurers from filing individual
policies or endorsements, which will be subject to Department review and consideration.
XI. Severability. If any provision of this order or its application to
any person or circumstance is held invalid, the invalidity does not affect
other provisions or applications of this order that can be given effect without
the invalid provision or application, and to this end the provisions of this
order are declared to be severable.
The Commissioner has jurisdiction of this matter pursuant to the Insurance
Code, Articles 5.35 and 5.96.
The policy forms and endorsements as adopted by the Commissioner of Insurance
are on file with the Chief Clerk's Office of the Texas Department of Insurance
under Reference No. P-0301-04 and are incorporated by reference by Commissioner
Order No. 02-0208.
This notification is made pursuant to the Insurance Code, Article 5.96,
which exempts it from the requirements of the Government Code, Chapter 2001
(Administrative Procedure Act).
Consistent with the Insurance Code, Article 5.96 (h), the Department will
notify all insurers affected by this section of the adoption by letter summarizing
the Commissioner's action.
IT IS THEREFORE THE ORDER of the Commissioner of Insurance that three new
residential property policy forms which include form no. FP-7955 (homeowner
policy), form no. FP-7954 (renters policy), and FP-7956 (condominium unitowners
policy) and thirty-six endorsements as specified herein and which are attached
to this Order and incorporated into this Order by reference, are adopted.
TRD-200201456
Lynda Nesenholtz
General Counsel and Chief Clerk
Texas Department of Insurance
Filed: March 8, 2002