Part 1.
TEXAS DEPARTMENT OF INSURANCE
Chapter 1.
GENERAL ADMINISTRATION
Subchapter P. NEGOTIATION AND MEDIATION OF A CLAIM OF BREACH OF CONTRACT
28 TAC §§1.1807, 1.1809, 1.1815
The Texas Department of Insurance (Department) proposes amendments
to §§1.1807, 1.1809, and 1.1815, concerning negotiation and mediation
of certain breach of contract claims asserted by contractors against the Department.
The proposed amendments are necessary to address certain statutory provisions
regarding the negotiation and mediation of certain breach of contract claims.
HB 1940, enacted by the 79th Legislature, Regular Session, effective September
1, 2005, shortened some of the timeframes related to negotiation and mediation
of breach of contract claims against the state. Title 28, Chapter 1, Subchapter
P, of the Texas Administrative Code establishes procedures regarding negotiation
and mediation of certain claims of breach of contract asserted by a contractor
against the Department under the Government Code, Chapter 2260. Chapter 2260
of the Government Code requires state agencies to adopt rules to govern the
negotiation and mediation of certain claims for breach of contract.
The proposed amendments to §§1.1807, 1.1809, and 1.1815 change
the required timeframes for complying with Chapter 2260 to be consistent with
the newly enacted legislation. The proposed amendment to §1.1807(c) changes
the number of days that the notice of counterclaim must be delivered to the
contractor after the Department's receipt of the contractor's notice of claim
from 90 days to 60 days. The proposed amendment to §1.1809(b) changes
the number of days that the parties shall begin negotiations from 60 days
following the later of: (i) the date of termination of the contract; (ii)
the completion date, or substantial completion date in the case of construction
projects, in the original contract; or (iii) the date the Department receives
the contractor's claim of notice to 120 days following the date the Department
receives the contractor's notice of claim. The proposed amendment to §1.1809(h)
changes the number of days that the parties may agree to mediate the dispute
from before the 270th day to the 120th day after the Department receives the
contractor's notice of claim or before the expiration of any extension agreed
to by the parties. The proposed amendment to §1.1815(a) changes the number
of days that the parties may agree to mediate the dispute at any time before
the 270th day to the 120th day after the Department receives notice of the
claim of breach of contract or before the expiration of any extension agreed
to by the parties in writing.
Karen Phillips, Senior Associate Commissioner and Chief of Staff, has determined
that, for each year of the first five years the proposed amendments are in
effect, there will be no fiscal impact on state or local government, local
employment, or local economies as a result of enforcing or administering the
amendments.
Ms. Phillips also has determined that, for each year of the first five
years the proposed amendments are in effect, the public benefits anticipated
as a result of the proposed amendments will be consistency of the Department's
rules concerning negotiation and mediation of certain breach of contract claims
asserted by contractors against the Department with the relevant state law
and shorter timeframes for dealing with these types of claims. There are no
costs associated with the adoption of these rules. However, if there are any
such additional costs, the costs are the result of the legislative enactment
of HB 1940 by the 79th Legislature, Regular Session, effective September 1,
2005, and are not a result of the adoption of the proposed amendments. Accordingly,
the proposed amendments will not have an impact on small and micro businesses.
The Department has considered the purposes of the relevant statute, which
is to establish procedures and timeframes regarding negotiation and mediation
of certain claims of breach of contract asserted by a contractor against the
Department, and has determined that it is neither legal nor feasible to waive
or modify the proposed timeframe requirements for small or micro businesses.
To be considered, written comments on the proposal must be submitted no
later than 5:00 p.m. on February 5, 2007 to Gene C. Jarmon, General Counsel
and Chief Clerk, P.O. Box 149104, MC 113-2A, Austin, Texas 78714-9104. An
additional copy of the comment must be simultaneously submitted to Cynthia
Villarreal-Reyna, Section Chief, Agency Counsel Section, Legal Services Division,
P.O. Box 149104, MC 110-1A, Austin, Texas 78714-9104. Any request for a public
hearing on the proposed amendments should be submitted separately to the Office
of the Chief Clerk before the close of the public comment period. If a hearing
is held, written and oral comments presented at the hearing will be considered.
The amendments are proposed under the Government Code, Chapter
2260 and the Insurance Code, §36.001. The Government Code, §2260.052(c)
provides that each unit of state government with rulemaking authority shall
develop rules to govern the negotiation and mediation of a claim of breach
of contract. The Insurance Code, §36.001 provides that the Commissioner
of Insurance may adopt any rules necessary and appropriate to implement the
powers and duties of the Texas Department of Insurance under the Insurance
Code and other laws of this state.
The proposed amendments affect negotiation and mediation procedures pursuant
to the following statutes: Government Code, §§2260.051, 2260.052,
and 2260.056.
§1.1807.Agency Counterclaim.
(a) - (b)
(No change.)
(c)
The notice of counterclaim shall be delivered to the contractor
no later than
60
[
(d)
(No change.)
§1.1809.Timetable.
(a)
(No change.)
(b)
Subject to subsection (c) of this section, the parties
shall begin negotiations within a reasonable period of time, not to exceed
120
[
[
[
[
(c) - (g)
(No change.)
(h)
The parties may agree to mediate the dispute at any time
before the
120th
[
(i)
(No change.)
§1.1815.Mediation Timetable.
(a)
The contractor and the department may agree to mediate
the dispute at any time before the
120th
[
(b)
(No change.)
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of
the Secretary of State on December 21, 2006.
TRD-200606876
Gene Jarmon
Chief Clerk and General Counsel
Texas Department of Insurance
Earliest possible date of adoption: February 4, 2007
For further information, please call: (512) 463-6327
Subchapter MM. PREFERRED MORTALITY TABLES
28 TAC §§3.9401 - 3.9404
The Texas Department of Insurance proposes new Subchapter
MM, §§3.9401 - 3.9404, concerning the optional use of preferred
mortality tables for life insurance policies issued on and after January 1,
2007, excluding any disability and accidental death benefits in such policies.
These new sections are necessary to allow the use of preferred mortality tables
for valuation purposes only. Insurance Code Article 3.28 authorizes a company
to use any ordinary mortality table that is adopted after 1980 by the National
Association of Insurance Commissioners and approved by regulation promulgated
by the Commissioner. In September 2006, the National Association of Insurance
Commissioners adopted ordinary mortality tables that reflect differences in
mortality between preferred and standard lives in determining minimum reserve
liabilities.
Proposed §3.9401 specifies the purpose of the subchapter. Proposed §3.9402
sets forth definitions used in the subchapter. Proposed §3.9403 allows
an insurer to substitute the 2001 Preferred Class Structure Mortality Table
in place of the 2001 CSO Smoker or Nonsmoker Mortality Table as the minimum
valuation standard for policies issued on or after January 1, 2007 and adopts
the 2001 Preferred Class Structure Mortality Table by reference. Proposed §3.9404
sets out conditions on the use of the 2001 Preferred Class Structure Mortality
Table and requires each insurer that opts to use the preferred mortality tables
to file statistical reports showing experience, which can be used in future
updates to the preferred mortality tables.
Betty Patterson, Senior Associate Commissioner, Financial Program, has
determined that for each year of the first five years the proposed sections
will be in effect, there will be no fiscal implications for state or local
government as a result of enforcing or administering the sections. There will
be no measurable effect on local employment or the local economy as a result
of the proposal.
Ms. Patterson has also determined that for each year of the first five
years the proposed new sections are in effect, the anticipated public benefits
include enhanced availability of life insurance coverage and reduced need
for price increases to cover redundant reserves. Such public benefits are
more prominent for term life insurance covering insureds who are in excellent
health (super preferred risks) and good health (preferred risks) based on
underwriting criteria at issue.
An insurer may use the preferred mortality tables authorized by this rule
at its option. Costs for insurers that choose to implement the 2001 Preferred
Class Structure Mortality Table include actuarial costs and programming costs.
Actuarial costs would include required annual certifications, reserve calculations,
workpapers, and reporting of experience, though reporting experience will
not be required until reporting requirements have been adopted by the Commissioner.
Actuarial hourly rates range from $25 (for actuarial students) to over $200
(for fully credentialed actuaries). Hourly rates for programming would range
from $25 to $120. The Department anticipates, however, that costs of compliance
will be significantly offset by savings in costs otherwise needed to support
redundant reserves such as reinsurance costs. Subsequent and ongoing costs
of compliance are believed to be substantially less than the initial costs
of compliance. For companies that choose to implement these tables, there
will be some fixed costs related to the initial and annual actuarial certification(s).
However, most of the impact of these requirements is believed to be more directly
correlated to the amount of term life business issued to preferred risks for
which a company implements these tables than to the size of the company. Based
on input from the insurance industry, reserves may be expected to decrease
by an average of 15 percent to 18 percent for issue ages 25 and 35 and an
average of 12 percent to 14 percent for issue ages 45 and 55 for term life
products using these preferred tables. This is based on a term life coverage
of 20 years with level premiums, level death benefits, and a prior reserve
table of 2001 CSO Nonsmoker without use of the select factors, with prevalence
factors of 35 percent super preferred, 35 percent preferred, and 30 percent
residual lives. The reserve reductions by company will vary depending on the
prevalence of super preferred, preferred, and residual risks written. (Residual
risks are those insureds that were not deemed super preferred or preferred
risks based on underwriting criteria at issue.) Small or micro businesses
may be affected to the extent that there are small insurance companies who
underwrite preferred risks. Even if the proposal may have an adverse effect
on small and micro-business, the proposal is optional for them, as it is for
all businesses. The Department has considered the purpose of the applicable
statute, which is to enable the use of preferred mortality tables, and has
determined that it is neither legal nor feasible to waive the provisions of
the proposal for insurers that qualify as small or micro-businesses under
Government Code §2006.001 and that opt to use the preferred mortality
tables. Additionally, it is the Department's position that to waive or modify
the requirements of the proposed new sections for small or micro-businesses
could result in a disparate effect on policyholders and other persons affected
by the proposed sections.
To be considered, written comments on the proposal must be submitted no
later than 5:00 p.m. on February 5, 2007, to Gene C. Jarmon, General Counsel
and Chief Clerk, Mail Code 113-2A, Texas Department of Insurance, P.O. Box
149104, Austin, Texas 78714-9104. An additional copy of the comment must be
simultaneously submitted to Betty Patterson, Senior Associate Commissioner,
Financial Program, Mail Code 305-2A, Texas Department of Insurance, P.O. Box
149104, Austin, Texas 78714-9104. Any request for a public hearing should
be submitted separately to the Office of the Chief Clerk before the close
of the public comment period. If a hearing is held, oral and written comments
presented at the hearing will be considered.
The new sections are proposed under the Insurance Code Article
3.28 and §36.001. Article 3.28, §3(a)(iii) provides for the use
of any ordinary mortality table adopted after 1980 by the National Association
of Insurance Commissioners that is approved by regulation promulgated by the
Commissioner for use in determining the minimum standard valuation for life
insurance policies, excluding any disability and accidental death benefits
in such policies. Section 36.001 provides that the Commissioner may adopt
any rules necessary and appropriate to implement the powers and duties of
the Texas Department of Insurance under the Insurance Code and other laws
of this state.
The following statutes are affected by this proposal: Insurance Code Article
3.28
§3.9401.Purpose.
The purpose of this subchapter is to recognize and permit the use of
mortality tables that reflect differences in mortality between preferred and
standard lives in determining minimum reserve liabilities in accordance with
Insurance Code Article 3.28, §3(a)(iii) and §3.4505 of this title
(relating to General Calculation Requirements for Basic Reserves and Premium
Deficiency Reserves).
§3.9402.Definitions.
The following words and terms, when used in this subchapter, shall
have the following meanings, unless the context clearly indicates otherwise.
(1)
2001 CSO Mortality Table--Mortality tables, consisting
of separate rates of mortality for male and female lives, developed by the
American Academy of Actuaries CSO Task Force from the Valuation Basic Mortality
Table developed by the Society of Actuaries Individual Life Insurance Valuation
Mortality Task Force, and adopted by the NAIC in December 2002. The 2001 CSO
Mortality Table is included in the Proceedings of the NAIC (2nd Quarter 2002)
and supplemented by the 2001 CSO Preferred Class Structure Mortality Table
defined below. Unless the context indicates otherwise, the 2001 CSO Mortality
Table includes both the ultimate form of that table and the select and ultimate
form of that table and includes both the smoker and nonsmoker mortality tables
and the composite mortality tables. It also includes both the age-nearest-birthday
and age-last-birthday bases of the mortality tables. Mortality tables in the
2001 CSO Mortality Table include the following:
(A)
2001 CSO Mortality Table (F)--Mortality table consisting
of the rates of mortality for female lives from the 2001 CSO Mortality Table.
(B)
2001 CSO Mortality Table (M)--Mortality table consisting
of the rates of mortality for male lives from the 2001 CSO Mortality Table.
(C)
Composite mortality tables--Mortality tables with rates
of mortality that do not distinguish between smokers and nonsmokers.
(D)
Smoker and nonsmoker mortality tables--Mortality tables
with separate rates of mortality for smokers and nonsmokers.
(2)
2001 CSO Preferred Class Structure Mortality Table--Mortality
tables with separate rates of mortality for super preferred nonsmokers, preferred
nonsmokers, residual standard nonsmokers, preferred smokers, and residual
standard smoker splits of the 2001 CSO Nonsmoker and Smoker tables as adopted
by the NAIC at the September 2006 national meeting and published in the Proceedings
of the NAIC (3rd Quarter 2006). Unless the context indicates otherwise, the
2001 CSO Preferred Class Structure Mortality Table includes both the ultimate
form of that table and the select and ultimate form of that table. It includes
both the smoker and nonsmoker mortality tables. It includes both the male
and female mortality tables and the gender composite mortality tables. It
also includes both the age-nearest-birthday and age-last-birthday bases of
the mortality table.
(3)
Statistical agent--An entity with proven systems for protecting
the confidentiality of individual insured and insurer information, demonstrated
resources for and history of ongoing electronic communications and data transfer
ensuring data integrity with insurers, which are its members or subscribers,
and a history of and means for aggregation of data and accurate promulgation
of the experience modifications in a timely manner.
§3.9403.2001 CSO Preferred Class Structure Table.
(a)
At the election of the insurer, for each calendar year
of issue, for any one or more specified plans of insurance and subject to
satisfying the conditions stated in this subchapter, the 2001 CSO Preferred
Class Structure Mortality Table may be substituted in place of the 2001 CSO
Smoker or Nonsmoker Mortality Table as the minimum valuation standard for
policies issued on or after January 1, 2007. No such election shall be made
until the insurer demonstrates that at least 20 percent of the business to
be valued on this table is in one or more of the preferred classes. A table
from the 2001 CSO Preferred Class Structure Mortality Table used in place
of a 2001 CSO Mortality Table, pursuant to the requirements of this subchapter,
will be treated as part of the 2001 CSO Mortality Table only for purposes
of reserve valuation pursuant to the requirements of §§3.9101 -
3.9106 of this title (relating to 2001 CSO Mortality Table).
(b)
The Commissioner of Insurance adopts by reference the 2001
CSO Preferred Class Structure Mortality Table. The table is available from
the Actuarial Division, Texas Department of Insurance, Mail Code 302-3A, 333
Guadalupe, Austin, Texas 78701 or on the internet by accessing the Department's
website at www.tdi.state.tx.us/company/ficso.html.
§3.9404.Conditions.
(a)
For each plan of insurance with separate rates for preferred
and standard nonsmoker lives, an insurer may use the super preferred nonsmoker,
preferred nonsmoker, and residual standard nonsmoker tables to substitute
for the nonsmoker mortality table found in the 2001 CSO Mortality Table to
determine minimum reserves. At the time of election and annually thereafter,
except for business valued under the residual standard nonsmoker table, the
appointed actuary shall certify that:
(1)
the present value of death benefits over the next ten years
after the valuation date, using the anticipated mortality experience without
recognition of mortality improvement beyond the valuation date for each class,
is less than the present value of death benefits using the valuation basic
table corresponding to the valuation table being used for that class; and
(2)
the present value of death benefits over the future life
of the contracts, using anticipated mortality experience without recognition
of mortality improvement beyond the valuation date for each class, is less
than the present value of death benefits using the valuation basic table corresponding
to the valuation table being used for that class.
(b)
For each plan of insurance with separate rates for preferred
and standard smoker lives, an insurer may use the preferred smoker and residual
standard smoker tables to substitute for the smoker mortality table found
in the 2001 CSO Mortality Table to determine minimum reserves. At the time
of election and annually thereafter, for business valued under the preferred
smoker table, the appointed actuary shall certify that:
(1)
the present value of death benefits over the next ten years
after the valuation date, using the anticipated mortality experience without
recognition of mortality improvement beyond the valuation date for each class,
is less than the present value of death benefits using the preferred smoker
valuation basic table; and
(2)
the present value of death benefits over the future life
of the contracts, using anticipated mortality experience without recognition
of mortality improvement beyond the valuation date for each class, is less
than the present value of death benefits using the preferred smoker valuation
basic table.
(c)
Unless exempted by the commissioner, every insurer using
the 2001 CSO Preferred Class Structure Table shall annually file with the
commissioner, with the NAIC, or with a statistical agent designated by the
NAIC and acceptable to the commissioner, statistical reports showing mortality
and such other information as the commissioner may deem necessary or expedient
for the administration of the provisions of this regulation. The form of the
reports shall be established by the commissioner, or the commissioner may
require the use of a form established by the NAIC or by a statistical agent
designated by the NAIC and acceptable to the commissioner. The form of the
statistical reports shall be promulgated by rule. Insurers are not required
to file such statistical reports until such rule has been adopted by the commissioner.
At the commissioner' discretion, the commissioner may request mortality and
other information at any time.
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of
the Secretary of State on December 20, 2006.
TRD-200606858
Gene C. Jarmon
General Counsel and Chief Clerk
Texas Department of Insurance
Earliest possible date of adoption: February 4, 2007
For further information, please call: (512) 463-6327
The Texas Department of Insurance proposes amendments to §5.4010
and new §5.4011 concerning building code specifications in the plan of
operation of the Texas Windstorm Insurance Association (Association) for structures
to be eligible for windstorm and hail insurance coverage through the Association
and proposes amendments to §5.4603 which adopts by reference the forms
to be used for windstorm inspections to determine compliance with applicable
building code requirements in the plan of operation of the Association. The
proposed amendments to §5.4010(a), (a)(2), and (a)(3) are necessary to
specify the end date of August 31, 2007, for compliance with the 2003 editions
of the International Residential Code (IRC) and the International Building
Code (IBC) with Texas Revisions, which are adopted by reference in the current §5.4010.
The IRC specifies building code standards for residential structures; and
the IBC specifies building code standards for other structures, including
commercial buildings and government buildings. The adoption by reference of
the 2006 editions of the IRC and the IBC, as revised by 2006 Texas Revisions,
is proposed in new §5.4011 to be effective September 1, 2007. Article
21.49 §3(f) and §6A(a) of the Insurance Code require that all structures
that are constructed or repaired or to which additions are made on or after
January 1, 1988, to be considered insurable property for windstorm and hail
insurance from the Association, must be inspected or approved by the Commissioner
for compliance with the building specifications in the plan of operation.
Insurance Code, Article 21.49 §5(c) authorizes the amendment of the Association's
plan of operation; and §6A(a) provides that after January 1, 2004, for
geographic areas specified by the Commissioner, the Commissioner by rule shall
adopt the 2003 International Residential Code for one and two-family dwellings
published by the International Code Council and may adopt a subsequent edition
of that code and any supplements published by the International Code Council
and amendments to the code.
An amendment is also proposed to §5.4010(a)(2) to correct a cross
reference.
New §5.4011(a) proposes the adoption by reference of the 2006 editions
of the IRC and the IBC, as revised by the 2006 Texas Revisions, to be effective
September 1, 2007. The adoption of the latest editions of the IRC and IBC
is necessary to promulgate the most current wind load technology and construction
standards for structures in the designated catastrophe areas to be eligible
for windstorm insurance through the Association. This proposal was recommended
on July 12, 2006, by the Windstorm Building Code Advisory Committee on Specifications
and Maintenance (BCAC) pursuant to the Insurance Code, Article 21.49, §6C,
with the exception of a change in the designated catastrophe areas to which
proposed §R325 in the 2006 edition of the IRC and proposed §1716
of the 2006 edition of the IBC apply.
Both §R325 of the IRC and §1716 of the IBC set standards for
corrosion resistant fasteners and metal connectors. The BCAC recommended these
two standards for structures, including all open structural spaces and vented
or enclosed areas and heated and cooled living spaces, in those designated
catastrophe areas seaward of the Intracoastal Canal and catastrophe areas
inland of the Intracoastal Canal and within 25 miles of the Texas coastline,
but not for structures located in catastrophe areas inland and west of the
specified boundary line in the designated catastrophe areas. In addition to
the BCAC recommendation, this proposal also applies §R325 and §1716
to all open spaces of structures located inland and west of the specified
boundary line in the designated catastrophe areas. Structural open areas include
porches, decks, carports, exterior wall coverings, roof coverings, metal ties
for stone and masonry veneer, underside of elevated structures, anchors for
securing mechanical equipment, garage door attachments, roof vent attachments,
skylight attachments, and impact protective systems (shutters). Therefore,
the proposed new section will provide standards for corrosion resistant fasteners
and metal connectors used in open areas of structures located in designated
catastrophe areas inland and west of the specified boundary line in the designated
catastrophe areas, but will not require corrosion resistant fasteners in vented
or enclosed areas, or in heated and cooled living areas in these structures,
unless otherwise specified in the IRC or IBC.
Subsection (a)(1) - (3) of §5.4010 provides the wind resistance standards
for structures built seaward of the Intracoastal Canal, inland of the Intracoastal
Canal and within approximately 25 miles of the Texas coastline and east of
the specified boundary line and certain areas in Harris County, and areas
inland and west of the specified boundary line, respectively. These wind resistance
standards conform to the 2003 IRC and IBC. The proposed amendments to the
subsection specify the end date for the wind resistance standards for the
2003 IRC and IBC to be September 1, 2007.
Proposed subsection (a)(1) - (3) of §5.4011 provides the wind resistance
standards for structures built seaward of the Intracoastal Canal, inland of
the Intracoastal Canal and within approximately 25 miles of the Texas coastline
and east of the specified boundary line and certain areas in Harris County,
and areas inland and west of the specified boundary line, respectively. The
wind resistance requirements conform to the 2006 IRC and IBC.
Proposed subsection (b) of §5.4011 provides an exemption from §5.4011(a)
for repairs, alterations, and additions necessary for the preservation, restoration,
rehabilitation, or continued use of a historic structure. Subsection (b)(1)
- (3) defines the attributes that make a structure a historic structure.
The proposed amendments to §5.4603(a) are necessary to modify Forms
WPI-2-BC-1, WPI-2-BC-2, WPI-2-BC-3, and WPI-2-BC-4, which are inspection verification
forms pertaining to projects commencing construction at various times in the
past, to include a space to list other as a description of a building modification
not otherwise specified in the printed checklist of the forms; to modify Forms
WPI-2-BC-2, WPI-2-BC-3, and WPI-2-BC-4 to include verification of exposure
category used to define the design conditions for a building or structure;
to provide an end date on Inspection Verification Form WPI-2-BC-4 for projects
that commenced construction between January 1, 2005 and August 31, 2007; to
adopt by reference new Form WPI-2-BC-5, a windstorm inspection verification
form that will be used to document an inspection of a project that commenced
construction on or after September 1 2007; to update the Design Certification
Form WPI-2D to apply to projects that will commence construction on or after
September 1, 2007; and to renumber the references in §5.4603(a) because
of the addition of the new form.
Alexis Dick, Deputy Commissioner, Inspections Division, has determined
that, for each year of the first five years the proposed amendments and new
section will be in effect, there will be no fiscal impact to state and local
governments as a result of the enforcement or administration of the proposal;
and there will be no measurable effect on local employment or the local economy
as a result of the proposal.
Ms. Dick also has determined that, for each year of the first five years
the proposed amendments and new section are in effect, there are various public
benefits anticipated as a result of the proposed amendments and the new section.
The proposed amendments to §5.4010 provide a specific end date for compliance
with the 2003 International Residential Code (IRC) and International Building
Code (IBC) as revised by the 2003 Texas Revisions. This will give architects,
engineers, manufacturers, and the building construction industry sufficient
notice and ample time to prepare for the transition to the 2006 IRC and IBC,
as revised by the 2006 Texas Revisions.
The anticipated public benefit from the adoption in new §5.4011(a)
of the 2006 edition of the IRC and IBC, as revised by the 2006 Texas Revisions,
will be the design and construction of structures in the designated catastrophe
area that are constructed, repaired, or to which additions are made on and
after September 1, 2007, that meet the most current construction standards
and use the most current wind load technology in order to be eligible for
windstorm insurance through the Association. This, in turn, will result in
the mitigation of property damage and resulting human suffering in the designated
catastrophe area in the event of a major hurricane. The 2006 edition references
the most recent American Society of Civil Engineers standard, known as the
ASCE 7-05, which is used by architects, engineers, and structural designers
throughout the construction industry nationwide. The 2006 edition of the IRC
and the IBC will provide guidance and clarification for construction in the
designated catastrophe areas, and when properly employed, will result in consistency
and uniformity in the design, construction, and inspection of residences and
businesses participating in the windstorm inspection process. Section 5.4011(b)(1)
- (3), governing the exemption of historic structures, is also in the 2003
IRC and IBC; therefore, there is no additional cost for compliance as a result
of this proposal.
No individual or entity is required to comply with the proposed new section
because only those structures that are insured through the Association are
required to comply with the new standards. However, in many areas of the designated
catastrophe areas of the Texas sea coast, voluntary wind insurance is difficult
to obtain, leaving many property owners with no option other than to insure
through the Association.
The Department anticipates that the costs resulting from the proposed change
from the current 2003 editions of the IRC and the IBC, as revised by the 2003
Texas Revisions, to the 2006 editions of the IRC and the IBC, as revised by
the 2006 Texas Revisions, will be minimal. The 2006 editions of the IRC and
the IBC do not have any major changes in building code policy or standards
from those in the 2003 editions of the IRC and the IBC. Generally, as one
standardized building code replaces another, costs are absorbed as part of
the natural progression nationwide by the construction industry to adapt to
the most recent standardized code, which is the 2006 edition of the IRC and
IBC. Any residual costs may be offset by greater efficiencies created by technological
changes in the manufacture and assemblage of building components, improved
construction methods, and other standardization and modernization measures
within the building industry. Additionally, any costs to builders to comply
with the international standardized building code in windstorm-affected areas
in Texas, not otherwise absorbed result from the enactment of SB 14 by the
78th Legislature, Regular Session, chap. 206, effective June 11, 2003 which
provides in relevant part that the Commissioner of Insurance by rule shall
adopt the 2003 International Residential Code for one and two-family dwellings
in geographic areas specified by the Commissioner and may adopt by rule any
subsequent edition of that code and supplements and amendments.
The anticipated public benefit from the proposed amendments to §5.4603(a)
will be the availability of appropriate forms for use in windstorm inspections
to document compliance with the new building standards. This will help eliminate
unnecessary confusion for appointed Texas licensed engineers and builders
who use the new building standards. Because the forms are available from the
website of the Inspections Division and are typically downloaded by engineers
and others who use them on an as-needed basis, there will be no additional
costs to print the new forms. The Department does not anticipate any increased
cost in the use of the proposed forms as compared to the current forms.
The Department anticipates that the proposed amendment and new section
will not have an adverse impact on small and micro businesses. The Department
has considered the purpose of the applicable statute and the proposed amendments
and new section and has determined that it is not necessary, reasonable, legal,
or feasible to waive or modify the proposed requirements for small or micro
businesses who opt to comply with the new building standards and inspection
process in order to obtain windstorm coverage through the Association.
To be considered, written comments on the proposal must be submitted no
later than 5:00 p.m. on February 5, 2007, to Gene Jarmon, General Counsel
and Chief Clerk, Mail Code 113-2A, Texas Department of Insurance, P.O. Box
149104, Austin, Texas 78714-9104. An additional copy of the comment must be
simultaneously submitted to Alexis Dick, Deputy Commissioner, Inspections
Division, MC 103-1A, Texas Department of Insurance, P.O. Box 149104, Austin,
Texas 78714-9104.
The Commissioner will consider the adoption of amendments to §5.4010
and §5.4603 and proposed new §5.4011 in a public hearing under Docket
Number 2663, scheduled for 10:00 a.m. on February 13, 2007 in Room 100 of
the William P. Hobby, Jr. State Office Building, 333 Guadalupe Street, Austin,
Texas. Written and oral comments presented at the hearing will be considered.
Subchapter E. TEXAS WINDSTORM INSURANCE ASSOCIATION
1.
PLAN OF OPERATION
28 TAC §5.4010, §5.4011
The amendments and new section are proposed under the Insurance
Code Article 21.49 and §36.001. Article 21.49 §5(c) provides that
the Commissioner of Insurance by rule shall adopt the Association's plan of
operation and any changes to the plan of operation. Article 21.49, §3(f)
and §6A(a) require that all structures that are constructed or repaired
or to which additions are made on or after January 1, 1988, to be considered
insurable property for windstorm and hail insurance from the Association,
must be inspected or approved by the Commissioner for compliance with the
building specifications in the plan of operation. Article 21.49 §6A(a)
also requires, for geographic areas specified by the Commissioner, the Commissioner
to adopt by rule the 2003 International Residential Code for one and two-family
dwellings published by the International Code Council. Section 6A(a) further
provides that, for those geographic areas specified by the Commissioner, the
Commissioner by rule may adopt a subsequent edition of that code and may adopt
any supplements published by the International Code Council and amendments
to the code. Article 21.49, §6C(b) establishes a Windstorm Building Code
Advisory Committee on Specifications and Maintenance to advise and make recommendations
to the Commissioner on building requirements and maintenance in the Association's
plan of operation. Section 36.001 provides that the Commissioner of Insurance
may adopt any rules necessary and appropriate to implement the powers and
duties of the Texas Department of Insurance under the Insurance Code and other
laws of this state.
The following article is affected by this proposal: Insurance Code, Article
21.49.
§5.4010.Applicable Building Code Standards in Designated Catastrophe Areas for Structures Constructed, Repaired or to Which Additions Are Made On and After January 1, 2005 , and before September 1, 2007.
(a)
To be eligible for catastrophe property insurance, structures
located in the designated catastrophe areas specified in §5.4008 of this
chapter (relating to Applicable Building Code Standards in Designated Catastrophe
Areas for Structures Constructed, Repaired or to Which Additions Are Made
On and After September 1, 1998, and before February 1, 2003) and which are
constructed, repaired, or to which additions are made on and after January
1, 2005,
and before September 1, 2007,
shall comply with the 2003
Editions of the International Residential Code and the International Building
Code, as each is revised by the 2003 Texas Revisions, and all of which are
adopted by reference to be effective January 1, 2005. The codes are published
by and available from the International Code Council, Publications, 4051 West
Flossmoor Road, Country Club Hills, Illinois, 60478-5795, (Telephone: 888-422-7233),
and the 2003 Texas Revisions to the 2003 Edition of the International Residential
Code and the 2003 Texas Revisions to the 2003 Edition of the International
Building Code are available from the Windstorm Inspections Section of the
Inspections Division, Texas Department of Insurance, 333 Guadalupe, P.O. Box
149104, MC 103-3A, Austin, Texas, 78714-9104 and the Texas Department of Insurance
website at www.tdi.state.tx.us. The following wind speed requirements shall
apply:
(1)
Areas Seaward of the Intracoastal Canal. To be eligible
for catastrophe property insurance, structures located in designated catastrophe
areas which are seaward of the Intracoastal Canal and constructed, repaired,
or to which additions are made on or after January 1, 2005,
and before
September 1, 2007,
shall be designed and constructed to resist a 3-second
gust of 130 miles per hour.
(2)
Areas Inland of the Intracoastal Canal and Within Approximately
25 Miles of the Texas Coastline and east of the Specified Boundary Line and
Certain Areas in Harris County. To be eligible for catastrophe property insurance,
structures located in designated catastrophe areas specified in
subsection
[
(3)
Areas Inland and West of the Specified Boundary Line. To
be eligible for catastrophe property insurance, structures located in designated
catastrophe areas specified in subsection (c) of §5.4008 of this chapter
and constructed, repaired, or to which additions are made on or after January
1, 2005,
and before September 1, 2007,
shall be designed and constructed
to resist a 3-second gust of 110 miles per hour.
(b)
(No change.)
§5.4011.Applicable Building Code Standards in Designated Catastrophe Areas for Structures Constructed, Repaired or to Which Additions Are Made On and After September 1, 2007.
(a)
To be eligible for catastrophe property insurance, structures
located in the designated catastrophe areas specified in §5.4008 of this
chapter (relating to Applicable Building Code Standards in Designated Catastrophe
Areas for Structures Constructed, Repaired or to Which Additions Are Made
On and After September 1, 1998, and before February 1, 2003) and which are
constructed, repaired, or to which additions are made on and after September
1, 2007, shall comply with the 2006 Editions of the International Residential
Code and the International Building Code, as each is revised by the 2006 Texas
Revisions, and all of which are adopted by reference to be effective September
1, 2007. The codes are published by and available from the International Code
Council, Publications, 4051 West Flossmoor Road, Country Club Hills, Illinois,
60478-5795, (Telephone: 888-422-7233), and the 2006 Texas Revisions to the
2006 Edition of the International Residential Code and the 2006 Texas Revisions
to the 2006 Edition of the International Building Code are available from
the Windstorm Inspections Section of the Inspections Division, Texas Department
of Insurance, 333 Guadalupe, P.O. Box 149104, MC 103-3A, Austin, Texas, 78714-9104
and on the Texas Department of Insurance website at www.tdi.state.tx.us. The
following wind speed requirements shall apply:
(1)
Areas Seaward of the Intracoastal Canal. To be eligible
for catastrophe property insurance, structures located in designated catastrophe
areas which are seaward of the Intracoastal Canal and constructed, repaired,
or to which additions are made on or after September 1, 2007, shall be designed
and constructed to resist a 3-second gust of 130 miles per hour.
(2)
Areas Inland of the Intracoastal Canal and Within Approximately
25 Miles of the Texas Coastline and East of the Specified Boundary Line and
Certain Areas in Harris County. To be eligible for catastrophe property insurance,
structures located in designated catastrophe areas specified in subsection
(b)(2)(A) and (B) of §5.4008 of this chapter and constructed, repaired,
or to which additions are made on or after September 1, 2007, shall be designed
and constructed to resist a 3-second gust of 120 miles per hour.
(3)
Areas Inland and West of the Specified Boundary Line. To
be eligible for catastrophe property insurance, structures located in designated
catastrophe areas specified in subsection (c) of §5.4008 of this chapter
and constructed, repaired, or to which additions are made on or after September
1, 2007, shall be designed and constructed to resist a 3-second gust of 110
miles per hour.
(b)
Repairs, alterations and additions necessary for the preservation,
restoration, rehabilitation, or continued use of a historic structure may
be made without conformance to the requirements of subsection (a) of this
section. In order for a historic structure to be exempted, at least one of
the following conditions shall apply to the structure:
(1)
The structure is listed or is eligible for listing on the
National Register of Historic places.
(2)
The structure is a Recorded Texas Historic Landmark (RTHL).
(3)
The structure has been specifically designated by official
action of a legally constituted municipal or county authority as having special
historical or architectural significance, is at least 50 years old and is
subject to the municipal or county requirements relative to construction,
alteration, or repair of the structure, in order to maintain its historical
designation.
This agency hereby certifies that the proposal has been
reviewed by legal counsel and found to be within the agency's legal authority
to adopt.
Filed with the Office of
the Secretary of State on December 19, 2006.
TRD-200606835
Gene Jarmon
Chief Clerk and General Counsel
Texas Department of Insurance
Earliest possible date of adoption: February 4, 2007
For further information, please call: (512) 463-6327
90
] days after the department's receipt
of the contractor's notice of claim.
60
] days following the [
later of:
]
(1)
the date of termination of
the contract;]
(2)
the completion date, or substantial
completion date in the case of construction projects, in the original contract;
or]
(3)
]
[
the
] date the department receives
the contractor's notice of claim.
270th
] day after the department receives
the contractor's notice of claim or before the expiration of any extension
agreed to by the parties pursuant to subsection (f) of this section. The mediation
shall be governed by §1.1816 of this subchapter (relating to Mediation
of Contract Disputes).
270th
] day
after the department receives a notice of claim of breach of contract, or
before the expiration of any extension agreed to by the parties in writing.
Chapter 3.
LIFE, ACCIDENT AND HEALTH INSURANCE AND ANNUITIES
Chapter 5.
PROPERTY AND CASUALTY INSURANCE
subsections
] (b)(2)(A) and
(B)
[
(b)(2)(B)
] of §5.4008 of this chapter and constructed, repaired, or to which
additions are made on or after January 1, 2005,
and before September
1, 2007,
shall be designed and constructed to resist a 3-second gust
of 120 miles per hour.
7.
INSPECTIONS FOR WINDSTORM AND HAIL INSURANCE