Part 1. TEXAS DEPARTMENT OF INSURANCE

Chapter 5. PROPERTY AND CASUALTY INSURANCE

Subchapter J. RULES TO IMPLEMENT THE AMUSEMENT RIDE SAFETY INSPECTION AND INSURANCE ACT

28 TAC §§5.9001, 5.9002, 5.9004

The Commissioner of Insurance adopts amendments to §§5.9001, 5.9002, and 5.9004, concerning the Amusement Ride Safety Inspection and Insurance Act, Occupations Code §§2151.001 - 2151.153. The amendments are adopted without changes to the proposed text published in the November 30, 2007, issue of the Texas Register (32 TexReg 8667).

REASONED JUSTIFICATION. The adopted amendments are necessary to implement HB 1070, enacted by the 80th Legislature, Regular Session, effective June 15, 2007. Prior to the enactment of HB 1070, there were only two classes of amusement rides regulated under the Occupations Code: Class A rides primarily for children under thirteen at a fixed location, and Class B rides defined as all amusement rides other than Class A rides. This meant that low-risk Class B amusement rides were regulated for purposes of liability insurance in the same class as higher risk rides, like roller coasters. Thus, the owners and operators of low-risk Class B rides were required to purchase the same high-cost insurance coverage as owners and operators of the high-speed or high-risk amusement rides.

HB 1070 establishes new minimum liability insurance requirements for a certain defined Class B amusement ride that operates similar to a five-mile-an-hour train and authorizes a local government to obtain liability insurance required under existing §2151.101 or under new §2151.1011 of the Occupations Code through an interlocal agreement. Specifically, HB 1070 amends the Occupations Code §2151.101(a) to exclude a Class B amusement ride that meets the definition in new §2151.1011 from the §2151.101 minimum insurance requirements. The §2151.101 minimum insurance requirements for a Class B amusement ride are that an owner/operator must maintain a liability insurance policy for each ride in the amount of not less than $1,000,000 bodily injury and $500,000 property damage per occurrence or not less than $1,500,000 per occurrence combined single limit. New §2151.1011 requires certain defined Class B amusement rides to obtain liability insurance in the amount of not less than $1 million in aggregate for all liability claims occurring in a policy year. New §2151.101 only applies to a Class B amusement ride that consists of a motorized vehicle that tows one or more separate non-rotating passenger cars in a manner similar to a train but without regard to whether the vehicle and cars operate on a fixed course, as long as the vehicle does not run on an elevated track, nor travel under its own power more than five miles per hour, has safety belts for all passengers, and passenger seating areas enclosed by guardrails or doors. HB 1070 also adds subsection (c) to the Occupations Code §2151.101 to provide that a local government may meet the §2151.101 insurance requirements for amusement rides through an interlocal agreement. New §2151.1011 also authorizes a local government to satisfy the new §2151.1011 insurance requirements for a Class B motorized train amusement ride by obtaining liability coverage through an interlocal agreement.

The adopted amendments to §5.9001(4) and (5) are necessary to update an obsolete statutory citation. The Insurance Code Article 1.14-2, referenced in both paragraphs, was re-adopted without substantive change as Chapter 981 in the nonsubstantive Insurance Code revision, Acts 2001, 77th Legislature, Chapter 1419, §1, effective June 1, 2003.

Adopted amendments to §5.9002 are necessary to add three new definitions: Class B motorized train amusement ride, interlocal agreement, and local government. In new §5.9002(6), a Class B motorized train amusement ride is defined as a Class B amusement ride that consists of a motorized vehicle that tows one or more separate passenger cars in a manner similar to a train but without regard to whether the vehicle and cars operate on a fixed track or course, does not travel under its own power in excess of five miles per hour, has safety belts for all passengers, does not run on an elevated track, has passenger seating areas enclosed by guardrails or doors, and does not have passenger cars that rotate independently from the motorized vehicle. This definition conforms to the definition enacted in the Occupations Code §2151.1011 for rides that qualify for the exemption from the insurance requirements of the Occupations Code §2151.101 for Class B amusement rides. Existing §5.9002(6) - §5.9002(8) are renumbered because of the addition of the new definition. In adopted new §5.9002(10), the definition for an interlocal agreement references the definition for interlocal contract in the Government Code §791.003(2), which is defined as a contract or agreement under the Government Code, Chapter 791, the Texas Interlocal Cooperation Act. In new §5.9002(11), the term local government is defined consistent with the Texas Interlocal Cooperation Act, Government Code §791.003(4). The remaining definitions in §5.9002 are renumbered because of the addition of the two new definitions.

Adopted §5.9004 re-formats the rule structure for purposes of clarity in amending the existing rule to include the HB 1070 amendments. The re-formatting of the rule structure results in designation of existing paragraphs as subsections, existing subparagraphs as paragraphs, and existing clauses as subparagraphs. Minor, non-substantive amendments are proposed for purposes of organization and readability, including the addition of subheadings. Punctuation has been changed where necessary. Other minor, nonsubstantive amendments include: (i) revision of citations to the Insurance Code to conform to agency style; (ii) correction of verb tense; (iii) correction of errors and inconsistency in capitalization; and (iv) correction of internal cross-references. None of the re-formatting or editorial revisions results in any substantive change to §5.9004.

In redesignated §5.9004(b)(1), language relating to "insuring the owner or operator against liability for injury to persons arising out of use of the amusement ride" is deleted for purposes of accuracy and clarity. In redesignated §5.9004(d)(2)(A), language relating to "for injury to persons" is deleted for the same purposes.

New §5.9004(b)(1)(B) exempts a Class B motorized train amusement ride from the Occupations Code §2151.101 insurance requirements for a Class B amusement ride. New §5.9004(b)(2) is necessary to require, consistent with new §2151.1011 of the Occupations Code, that a Class B motorized train amusement ride maintain liability insurance of not less than $1 million in aggregate for all liability claims occurring in a policy year.

New §5.9004(b)(3) provides that a local government that owns or operates an amusement ride may satisfy the prescribed insurance requirements through an interlocal agreement. This paragraph is added to implement the Occupations Code §§2151.101(c) and 2151.1011(c) enacted by HB 1070.

Redesignated §5.9004(d) governs the yearly renewal of the inspection certificate for an amusement ride. Under the existing rules, in the process of renewing an inspection certificate for an amusement ride, an owner or operator must show proof of continuing liability insurance for the ride. This requirement may be satisfied by the submission of a certificate of insurance reflecting insurance in the required amount for the particular classification of the ride. The necessary amount of insurance to be shown on the certificate is specified in redesignated §5.9004(d)(2)(A)(i) and (ii). Therefore, new §5.9004(d)(2)(A)(iii) is added to include the new §2151.1011 liability insurance requirements for Class B motorized train amusement rides.

HOW THE SECTIONS WILL FUNCTION. The amendments to §5.9001 are non-substantive, and the purpose of the subchapter remains to aid in the implementation of the Amusement Ride Safety Inspection and Insurance Act. The scope of the subchapter remains as provided in paragraphs (1) - (7) of §5.9001.

Amendments to §5.9002 add three new definitions necessary for implementing the legislative amendments to the Occupations Code §§2151.001 - 2151.153: Class B motorized train amusement ride, interlocal agreement, and local government. All existing definitions of §5.9002 are retained, but paragraphs (6) - (11) are renumbered because of the addition of the three new definitions. In new §5.9002(6), a Class B motorized train amusement ride is defined as a Class B amusement ride that consists of a motorized vehicle that tows one or more separate passenger cars in a manner similar to a train but without regard to whether the vehicle and cars operate on a fixed track or course, does not travel under its own power in excess of five miles per hour, has safety belts for all passengers, does not run on an elevated track, has passenger seating areas enclosed by guardrails or doors, and does not have passenger cars that rotate independently from the motorized vehicle.

New §5.9002(10) defines an interlocal agreement as a contract or agreement under the Government Code, Chapter 791, the Texas Interlocal Cooperation Act.

In new §5.9002(11), the term local government is defined as a county, municipality, or special district; a junior college district, or other political subdivision of this state or another state; a local government corporation created under Transportation Code Subchapter D, Chapter 431; a political subdivision corporation created under the Local Government Code Chapter 304; a local workforce development board created under the Government Code §2308.253; or a combination of two or more of such entities, consistent with the Texas Interlocal Cooperation Act, Government Code §791.003(4).

Section 5.9004 is re-formatted for purposes of clarity in amending the existing rule to include the HB 1070 amendments. The re-formatting of the rule structure results in designation of existing paragraphs as subsections, existing subparagraphs as paragraphs, and existing clauses as subparagraphs. None of the re-formatting results in any substantive change to §5.9004.

New §5.9004(b)(1)(B) exempts a Class B motorized train amusement ride from the Occupations Code §2151.101 insurance requirements for a Class B amusement ride. New §5.9004(b)(2) requires that a Class B motorized train amusement ride maintain liability insurance of not less than $1 million in aggregate for all liability claims occurring in a policy year.

New §5.9004(b)(3) provides that a local government that owns or operates an amusement ride may satisfy the prescribed insurance requirements through an interlocal agreement.

Redesignated §5.9004(d)(2)(A)(i) and (ii) specify the necessary amount of liability insurance to be shown on the certificate submitted to the Department for the yearly renewal of the inspection certificate for Class A and Class B amusement rides. New §5.9004(d)(2)(A)(iii) specifies the necessary amount of liability insurance to be shown on the certificate submitted to the Department for the yearly renewal of the inspection certificate for a Class B motorized train amusement ride.

SUMMARY OF COMMENTS. The Department did not receive any comments on the published proposal.

STATUTORY AUTHORITY. The amendments are adopted under the Occupations Code §§2151.101, 2151.1011, and 2151.051, and the Insurance Code §36.001. The Occupations Code §2151.101 exempts a Class B amusement ride that meets the definition in the Occupations Code §2151.1011 from the §2151.101 minimum insurance requirements for Class B amusement rides. The Occupations Code §2151.1011 establishes new minimum liability insurance requirements for a certain statutorily defined Class B amusement ride that operates similar to a five-mile-an-hour train. The Occupations Code §§2151.101 and 2151.1011 authorize a local government to satisfy liability insurance requirements for amusement rides through interlocal agreements. The Occupations Code §2151.051 provides that the Commissioner of Insurance shall administer and enforce Chapter 2151 of the Occupations Code. 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.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 15, 2008.

TRD-200800969

Gene C. Jarmon

General Counsel and Chief Clerk

Texas Department of Insurance

Effective date: March 6, 2008

Proposal publication date: November 30, 2007

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