Adopted Sections An agency may take final action on a section 30 days after a proposal has been published in the Texas Register. The section becomes effective 20 days after the agency files the correct document with the Texas Register, unless a later date is specified or unless a federal statute or regulation requires implementation of the action on shorter notice. If an agency adopts the section without any changes to the proposed text, only the preamble of the notice and statement of legal authority will be published. If an agency adopts the section with changes to the proposed text, the proposal will be republished with the changes. TITLE 1. ADMINISTRATION Part XV. Health and Human Services Commission Chapter 351. Coordinated Planning and Delivery of Health and Human Services 1 TAC sec.351.1 The Health and Human Services Commission (HHSC) adopts new sec.351.1, concerning Health and Human Services Commission Review of Component Agency Rules, with changes to the proposed text as published in the July 16, 1993, issue of the Texas Register (18 TexReg 4556). The justification for the new section is to ensure that rules promulgated by component agencies comply with the commission's coordinated strategic plan, existing statutory authority, and rules of other health and human services agencies. Additionally, the commission is to review rules for budgetary implications. The new rule describes the commission's procedures for review of all component agencies' rules except for Medicaid rules. The Sate Medicaid Office, a function of HHSC, approves and issues Medicaid rules. The new section will function by providing a more efficient, coordinated, and cost effective service delivery system for health and human services. HHSC recieved comments from the Texas Department of Protective and Regulatory Services, Texas Department of Health, Texas Department of Human Services, Texas Commission on Alcohol and Drug Abuse, Texas Association of Regional Councils, and the Texas Medical Association. The following comments were received concerning the proposed rule. Comment. One commenter recommended that the following sentence be added to sec.351.1(c). "The commission's review of emergency rules will take place after those emergency rules are published as proposed rules." Response. HHSC agrees and has added this phrase. Comment. One commentor questioned HHSC's authority to review public comments. Response. There may be instances in which HHSC should consider all public comments received by the rulemaking agency in order to fully understand the issues of the proposed rule. Comment. One commentor requested that the HHSC amend sec.351.1(d) to notify component agencies when a proposed rule meets with approval. Response. HHSC believes that the absence of a request to withdraw or amend a proposed rules serves as notification that the HHSC does not object to a proposed rule; therefore, HHSC is adopting the rule without the recommended change. Comment. One commentor recommended that sec.351.1(d) be revised to require that HHSC notify a component agency of the reason it requires withdrawal or amendment of a proposed rule. Response: HHSC agrees, and has added the phrase "of its reasons for the request." Comment. Two commentors requested that HHSC amend the proposed rule to define the "designated review period" to be the public comment period for the proposed rule. Response. HHSC will consider issues raised in public comments on rules. Therefore, HHSC is adopting the rule without the recommended change. Comment. One commentor requested that cost implications for local governments be built into the commission's review process of agency rules. Response. State law requires this. See Texas Civil Statutes, Article 6252-13a, sec.5(a)(4). Comment. One commentor recommended that decentralizing program administration be encouraged as policy by the HHSC. Response. HHSC will consider this recommendation in connection with its strategic planning. The new rule is adopted under Texas Civil Statutes, Article 4413(502), sec.15, which provide the commission with authority to review all proposed rules of health and human services agencies for compliance with its coordinated strategic plan, existing statutory authority, rules of other health and human services agencies, and budgetary implication; and the authority to notify an agency within the designated reviewed period for a proposed rule if the commission requires withdrawal or amendment of the proposed rule. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on September 10, 1993. TRD-9328678 Debby Gardner General Counsel Health and Human Services Commission Effective date: October 1, 1993 Proposal publication date: July 16, 1993 For further information, please call: (512) 502-3200 TITLE 16. ECONOMIC REGULATION Part I. Railroad Commission of Texas Chapter 5. Transportation Division Subchapter P. Commercial Zones 16 TAC sec.5.291 The Railroad Commission of Texas adopts an amendment to sec.5.291, concerning designation of commercial zones, without changes to the proposed text as published in the July 20, 1993, issue of the Texas Register (18 TexReg 4726). The amendment is adopted in order to bring commission regulations into conformity with Senate Bill 1313 of the 73rd Legislature, 1993, which amends the Texas Motor Carrier Act. The section will require that a commercial zone consist of one or more whole counties. Three public comments were received regarding this rule. All three urged its adoption as published. The associations that commented in favor of the rule were Texas Motor Transportation Association and Texas Association for Competitive Transportation. The amendment is adopted pursuant to Texas Civil Statutes, Article 911b, sec.4(a), which provide the commission with power and authority to prescribe all rules and regulations necessary for the government of motor carriers, and to supervise and regulate motor carriers in all matters affecting the relationship between such carriers and the shipping public. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on August 30, 1993. TRD-9328532 Mary Ross McDonald Assistant Director, Legal Division-Gas Utilities/LP Gas Railroad Commission of Texas Effective date: September 29, 1993 Proposal publication date: July 20, 1993 For further information, please call: (512) 463-7096 16 TAC sec.5.294 The Railroad Commission of Texas adopts the repeal of existing sec.5.294 and adopts new sec.5.294, concerning existing commercial zones, without changes to the proposed text as published in the July 20, 1993, issue of the Texas Register (18 TexReg 4726). The new rule is adopted in order to bring commission regulations into conformity with senate Bill 1313 of the 73rd Legislature, 1993, which amends to Texas Motor Carrier Act. Existing sec.5.294 has become obsolete as a result of Senate Bill 1313, which requires the commission to define commercial zones by counties. New sec.5. 294 defines the six existing commercial zones in accordance with Senate Bill 1313. Three comments were received regarding this rule. All three urged its adoption as published. The associations that commented in favor of the rule were Texas Motor Transportation Association and Texas Association for Competitive Transportation. The existing rule is repealed pursuant to Texas Civil Statutes, Article 911b, sec.4(a), which provide the commission with the power and authority to prescribe all rules and regulations necessary for the government of motor carriers, and to supervise and regulate motor carriers in all matters affecting the relationship between such carriers and the shipping public. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on August 30, 1993. TRD-9328600 Mary Ross McDonald Assistant Director, Legal Division-Gas Utilities/LP Gas Railroad Commission of Texas Effective date: September 30, 1993 Proposal publication date: July 20, 1993 For further information, please call: (512) 463-7094 The new rule is adopted pursuant to Texas Civil Statutes, Article 911b, sec.4(a), which provide the commission with the power and authority to prescribe all rules and regulations necessary for the government of motor carriers, and to supervise and regulate motor carriers in all matters affecting the relationship between such carriers and the shipping public. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on August 30, 1993. TRD-9328599 Mary Ross McDonald Assistant Director, Legal Division-Gas Utilities/LP Gas Railroad Commission of Texas Effective date: September 30, 1993 Proposal publication date: July 20, 1993 For further information, please call: (512) 463-7096 Subchapter U. General and Special Rules of Practice and Procedure 16 TAC sec.5.401 The Railroad Commission of Texas adopts an amendment to sec.5.401, concerning definitions, without changes to the proposed text as published in the July 20, 1993, issue of the Texas Register (18 TexReg 4730). The amendment will bring the commission's regulations into conformity with Senate Bill 1313, passed by the 73rd Legislature, 1993, which amends the Texas Motor Carrier Act. The amended section defines "petitioner to suspend," a new party in interest rate applications. The amendment also clear up some ambiguity that currently exists within the commission's rules by eliminating the term "agency" and using the term "commission" in its place. Comments received were generally opposed to the inclusion of the commission or commission staff in the definition of the term "petitioner to suspend." At least one comment received, however, was in favor of such inclusion, stating that the commission's involvement in otherwise unopposed rate applications would help prevent predatory pricing, and would encourage continued consistency of various tariff provisions among the different tariffs authorized by the commission. Comments received also assert that the changes made by Senate Bill 1313 to the Motor Carrier Act concerning rate application proceedings indicate a legislative intent to allow the marketplace, rather than the commission, to determine the reasonableness of any proposed rate, charge, or other tariff provision. While the commission generally agrees with this proposition, it also recognizes that certain segments of the shipping public do not have as strong a "voice" as others in this regard, and, therefore, may sometimes require representation by the commission or a member of its staff, in order to ensure that the public interest is taken into consideration by the commission in such proceedings that are otherwise unopposed. Several of those who filed comments requested, as an alternative to eliminating commission participation from rate application proceedings altogether, that the rule be amended to allow such participation only in instances involving an increase in a rate, charge or other tariff provision. The commenters assert that predatory pricing is much less likely to occur than unwarranted rate increases, due to the limited number of motor carriers with intrastate authority from the commission, and that no provision is required allowing potential commission participation in otherwise unopposed proceedings involving decreases in rates, charges, or other tariff provisions. The commission disagrees with those who submitted comments against the proposed definition of "petitioner to suspend" because, despite the presence of a legislative intent to simplify and expedite rate application proceedings, the legislature has not taken away from the commission its duty to ensure that rates, charges, and other tariff provisions are both reasonable to the shipping public and reasonably compensatory to the involved carriers. The public interest will be served by the inclusion of the commission or a member of the commission's staff in the definition of the term "petitioner to suspend, " which enables the commission to continue to satisfy this legislatively imposed responsibility. Comments in favor of the amendment were received from Building Materials Carriers Bureau, Inc. The following groups or associations comments against the amendment were received from the Texas Association for Competitive Transportation; Texas Motor Transportation Association, Inc.; Highway Transportation Committee of Texas Mid- Continent Oil and Gas Association; Association of Texas Warehousemen; Shippers Oilfield Traffic Association; and Common Carrier Motor Freight Association, Inc. The amendment is adopted pursuant to Texas Civil Statutes, Article 911b, sec.4(a), which provide the commission with power and authority to prescribe all rules and regulations necessary for the government of motor carriers and to supervise and regulate motor carriers in all matters affecting the relationship between such carriers and the shipping public. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on August 30, 1993. TRD-9328533 Mary Ross McDonald Assistant Director, Legal Division-Gas Utilities/LP Gas Railroad Commission of Texas Effective date: September 29, 1993 Proposal publication date: July 20, 1993 For further information, please call: (512) 463-7095 16 TAC sec.5.423 The Railroad Commission of Texas adopts an amendment to sec.5.423, concerning applications to establish or change rates, with changes to the proposed text as published in the July 20, 1993, issue of the Texas Register (18 TexReg 4731). The amendment will bring the commission's regulations into conformity with Senate Bill 1313, passed by the 73rd Legislature, 1993, which amends the Texas Motor Carrier Act. Changes to the proposed text are in sec.5.423(a)-(c) and (g). They reflect some suggested changes contained in comments received, as well as clarifying language that makes the rule as amended more consistent with the legislative changes made by Senate Bill 1313. The amendment provides for rate applications to be granted automatically 15 days after they are published in the commission's weekly publication if no suspension petition is filed within a ten-day time period provided by the rule. The amendment also eliminates requirements that rate applications be submitted together with evidence establishing a justification for the application based on cost. Finally, the amendment changes from 15 to ten days the timeframe in which other carriers are permitted to file a request to either participate or not participate, or to intervene in rate applications. Comments received were generally opposed to the rule's allowing the commission or commission staff to oppose rate applications. At least one comment received, however, was in favor of such inclusion, stating that the commission's involvement in otherwise unopposed rate applications would help prevent predatory pricing, and would encourage continued consistency of various tariff provisions among the different tariffs authorized by the commission. Comments received also assert that the changes made by Senate Bill 1313 to the Motor Carrier Act concerning rate application proceedings indicate a legislative intent to allow the marketplace, rather than the commission, to determine the reasonableness of any proposed rate, charge, or other tariff provision. While the commission generally agrees with this proposition, it also recognizes that certain segments of the shipping public do not have as strong a "voice" as others in this regard, and, therefore, may sometimes require representation by the commission or a member of its staff, in order to ensure that the public interest is taken into consideration by the commission in such proceedings that are otherwise unopposed. Several of those who filed comments requested, as an alternative to eliminating commission participation from rate application proceedings altogether, that the rule be amended to allow such participation only in instances involving an increase in a rate, charge, or other tariff provision. The commenters assert that predatory pricing is much less likely to occur than unwarranted rate increases, due to the limited number of motor carriers with intrastate authority from the commission, and that no provision is required allowing potential commission participation in otherwise unopposed proceedings involving decreases in rates, charges, or other tariff provisions. The commission disagrees with those who submitted comments against the proposed amendment because, despite the presence of a legislative intent to simplify and expedite rate application proceedings, the legislature has not taken away from the commission its duty to ensure that rates, charges, and other tariff provisions are both reasonable to the shipping public and reasonably compensatory to the involved carriers. The public interest will be served by the inclusion of the commission or a member of the commission's staff as a potential interested party in rate applications, by enabling the commission to continue to satisfy this legislatively imposed responsibility. Comments in favor of the amendment were received from Building Materials Carriers Bureau, Inc. Comments against the amendment were received from the following groups: Texas Association for Competitive Transportation; Texas Motor Transportation Association, Inc.; Highway Transportation Committee of Texas Mid-Continent Oil and Gas Association; Association of Texas Warehousemen; Shippers Oilfield Traffic Association; and Common Carrier Motor Freight Association, Inc. The amendment is adopted pursuant to Texas Civil Statutes, Article 911b, sec.4(a), which provide the commission with power and authority to prescribe all rules and regulations necessary for the government of motor carriers and for the safety of operations of motor carriers. sec.5.423. Applications to Establish or Change Rates. (a) Filing of application. (1) Generally. Applications to establish or change rates, charges, or other tariff provisions may be submitted and prosecuted, or opposed by any person or entity having an administratively cognizable or justiciable interest, including carriers, shippers, consignees, associations, and the commission or commission staff. Unless a petition to suspend a proposed rate, charge, or other tariff provision is filed, an applicant shall not be required to provide a justification of its proposal based on cost. (2) (No change.) (b) Procedures for motor carrier rate applications. Not later than the tenth day after the date the notice of an application to establish a rate, charge, or other provision is published in the commission's weekly publication of such applications, a petitioner to suspend may file a petition requesting that the commission suspend the proposed rate, charge, or other provision. (1) If no suspension petition is filed within the ten-day period, the proposed rate, charge, or other provision shall take effect on the 15th day after the date of the weekly notice in which the application was published, without a hearing or an order of the commission. Notice of the newly effective rate, charge, or other provision shall be published by the commission as soon as practicable after its effective date. (2) If a suspension petition is filed within the ten-day period, the proposed rate, charge, or other provision shall not take effect automatically. Instead, the commission shall conduct a hearing on the merits to consider the application, and shall enter an interim order suspending or affirming the proposed rate, charge, or other provision not later than the 30th day after notice of the application is published. (3) If a suspension petition is filed within the ten-day period, but it is later withdrawn or dismissed, the proposed rate, charge, or other provision shall take effect without a hearing or order of the commission, either on the 15th day after the date of the weekly notice in which the application was published, or on the date the suspension petition is withdrawn or dismissed whichever date is later. Notice of the newly effective rate, charge, or other provision shall be published by the commission as soon as practicable after its effective date. (c) Evidence in support of motor bus rate applications. (1) Evidence submitted in support of a motor bus application to establish or change rates shall include, but is not limited to: (A) a description of pertinent current rates, if any; (B) revenues at proposed rates-a statement of operating revenues projected to be received under the proposed rates by any motor bus company(s) for which rates would apply; (C) expenses at proposed rates-a statement of operating expenses incurred, or which would be incurred, by any motor bus company(s) for which rates would apply; (D) operating ratio-a statement of resulting operating ratio (operating expenses divided by operating revenues) based upon projected revenues and expenses at proposed rates; and (E) allocations, methodology, or special studies-a statement of any allocation, methodology, or special study used in preparation of the evidence in support of an application to establish or change rates. (2) Where the application does not directly seek establishment of a rate or change of an existing rate, it must include evidence to show that the proposal would be reasonable and not unduly discriminatory. (3) The commission may require that the evidence included in rate applications demonstrate that the revenues and expenses submitted are representative of the revenues and expenses of motor bus company(s) for which the rates would apply. (4) Unless otherwise specified in the application or as provided in subsections (d) and (e) of this section, rates shall apply to all motor bus companies having authority to provide transportation services under the application. (d) Within ten days after the date of the published transportation notice of hearing of an application for a reduction in rates, a motor carrier or motor bus company may request in writing that it be allowed to participate or not to participate in the application as published. A copy of the request shall be timely served upon the applicant. The request will be granted upon good cause shown. If the request is not granted, it may be refiled as a separate application, subject to all applicable commission rules. (e) On any application for an increase in rates: (1) any motor carrier or motor bus company may file a written request with the commission within ten days after the date of the published transportation notice of hearing of the application, that it not be subject to the rates as proposed. A copy of the request shall be timely served upon the applicant. The request will be granted upon good cause shown. If the request is not granted, it may be refiled as a separate application, subject to all applicable commission rules; (2) any motor carrier or motor bus company seeking to participate in the rates proposed for the account of a named motor carrier(s) or motor bus company(s) must file as an intervenor in support thereof in accordance with sec.5.411 of this title (relating to Parties in Interest) and offer evidence supporting its participation. (f) Applications seeking rate changes based on overall revenue needs will not be subject to the provisions of subsections (d) and (e) of this section. (g) In all motor bus rate applications, and in motor carrier rate applications in which a petition to suspend is filed, documents and workpapers which underlie evidence submitted by a party shall be made available for inspection on request by a party or the commission. (h) Applicability. The provisions of this section shall not apply to annual review of base rates or charges held pursuant to sec.5.586 of this title (relating to Procedures for Annual Base Rate Adjustment Hearings), deviation procedures held pursuant to sec.5.587 of this title (relating to Base Rate Deviation Procedures), or suspension procedures held pursuant to sec.5.588 of this title (relating to Procedures for Deviation Suspension Proceedings). This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on August 30, 1993. TRD-9328535 Mary Ross McDonald Assistant Director, Legal Division-Gas Utilities/LP Gas Railroad Commission of Texas Effective date: September 29, 1993 Proposal publication date: July 20, 1993 For further information, please call: (512) 463-7095 16 TAC sec.5.461 The Railroad Commission of Texas adopts an amendment to sec.5.461, concerning commission surveys of fuel prices, without changes to the proposed text as published in the July 20, 1993, issue of the Texas Register (18 TexReg 4732). The amendment will bring the commission's regulations into conformity with Senate Bill 1313, passed by the 73rd Legislature, 1993, which amends the Texas Motor Carrier Act. Because of legislative changes made to simplify and expedite rate application procedures for motor carriers, emergency procedures and requirements for rate applications based on increased fuel costs are no longer necessary. The amendment, therefore, eliminates such procedures and requirements. The Texas Motor Transportation Association and the Common Carrier Motor Freight Association commented against the proposed amendment. Comments received regarding the proposed amendment addressed the commission's inability to increase fuel adjustment charges based on fuel price levels reflected by a commission fuel price survey. However, the amended section does not change the existing rule in this regard, and paragraph (4) of the amended section does provide for an increased fuel adjustment charge under certain described circumstances. Thus, the proposed rule adequately provides the commission with a means of protecting the public interest in reducing such charges when warranted, and likewise provides carriers with a means of establishing that there is a basis for increasing such charges when an increase is warranted. The amendment is adopted pursuant to Texas Civil Statutes, Article 911b, sec.4(a), which provide the commission with power and authority to prescribe all rules and regulations necessary for the regulation of motor carriers and for the safety of operations of motor carriers. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on August 30, 1993. TRD-9328536 Mary Ross McDonald Assistant Director, Legal Division-Gas Utilities/LP Gas Railroad Commission of Texas Effective date: September 29, 1993 Proposal publication date: July 20, 1993 For further information, please call: (512) 463-7095 TITLE 22. EXAMINING BOARDS Part XV. Texas State Board of Pharmacy Chapter 291. Pharmacies. All Classes of Pharmacy 22 TAC sec.sec.291.5, 291.7, 291.12, 291.15-291.17 The Texas State Board of Pharmacy adopts amendments to sec.sec.291.5, 291.7, 291.12, and 291.15-291.17, concerning Closed Pharmacies, Change of Pharmacist Employment, Fire or Other Disaster, Notification of Theft or Loss of a Controlled Substance, Definitions, and Controlled Substance Inventory Requirements without changes to the proposed text as published in the March 12, 1993 issue of the Texas Register (18 TexReg 1613). The agency adopts the amendments requiring more stringent recordkeeping requirements for these drugs because of continued abuse of these drugs by pharmacists, other health professionals, and the general public. This abuse is documented by a growing body of evidence including actual cases of abuse investigated by the Board, testimony from police and law enforcement personnel, and articles in professional literature. The agency believes that the stricter accountability standards imposed by the amendments will assist in determining if illegal diversion of these drugs has occurred from a pharmacy. The amendments require pharmacies to: inventory butorphanol (Stadol), nalbuphine (Nubain) and carisoprodol (Soma) annually, on closing a pharmacy, and on change of pharmacist-in-charge; make a written record of the destruction of butorphanol (Stadol), nalbuphine (Nubain) and carisoprodol (Soma); and report a theft or significant loss of dangerous drugs. A public hearing on the rules was held on April 27, 1993. At the public hearing Paul F. Davis, R.Ph., Executive Director, Texas Pharmaceutical Association, presented comments against the adoption of the rules. The agency also received three letters of comment against adoption of the rules. These letters were from Albert Lucero on behalf of the El Paso Pharmaceutical Association and from two individuals. Mr. Davis' comments of behalf of Texas Pharmaceutical Association stated the following: "At the heart of our concern is what we believe to be a very real legal question as to whether the Board of Pharmacy has the authority to place additional controls on non-controlled substances. This, we believe, establishes a third category of drugs-which only the Texas Legislature can do -without any statutory basis in either the Dangerous Drug Act or State Pharmacy Practice Act.... The requirement for inventorying is time consuming and unnecessary. It will not prevent abuse or theft of the products ..." The comments of Mr. Lucero in behalf of the El Paso Pharmaceutical Association also questioned the Board's authority and stated: "...The El Paso Pharmaceutical Association strongly objects to such an establishment of another class of pharmaceutical material, that would be extremely difficult if not impossible to comply with." The two individuals that commented noted concerns about the additional "burden" being placed on all pharmacists. Linda Romeo, R.Ph., Irving stated: "While I admit there is possible abuse of these items and diversion, I believe it to be minimal in comparison to the burden being considered for all pharmacists. Have other avenues been explored?" Mrs. Travis H. Thrasher, R.Ph., Houston stated: "[While] this would seem to be a minor requirement, it would be added to a number of other requirements which put together are making pharmacy a very stressful occupation." The Board disagrees with the comments questioning the authority to adopt these rules. The agency has the authority to require an inventory of prescription drugs, first, under the Texas Pharmacy Act (Texas Civil Statutes, Article 4542a- 1). Section 16(b) and sec.17(b)(3) of the Texas Pharmacy Act give the Board the authority to adopt rules for the proper administration and enforcement of the Pharmacy Act and to specify the minimum standards for maintenance of prescription drug records in a pharmacy. Second, sec.483.002 and sec.483.024 of the Texas Dangerous Drug Act (Chapter 483, Health and Safety Code) give the Board the authority to adopt rules for the proper administration and enforcement of Chapter 483 and specify that pharmacies must maintain records of acquisition and disposal of dangerous drugs. The Board adopts these amendments in order to enforce requirements that pharmacies maintain accurate records of the acquisition and disposal of these drugs, as required under the Dangerous Drug Act. These amendments are therefore necessary for the proper administration and enforcement of the Dangerous Drug Act, and to reduce the risk of abuse of the three drugs. The Board disagrees with the comments regarding the additional burden these rules place on pharmacies. The rules add three drugs to the list of drugs which must be inventoried by a pharmacy annually, at change of ownership, and on closing. Currently pharmacies are required to inventory all controlled substances maintained by the pharmacy. This list of drugs may vary depending on the volume of the pharmacy. It is estimated that the average pharmacy is now required to inventory approximately 50-100 different drugs for this controlled substance inventory. The addition of three drugs does not impose a significant burden, particularly in light of the corresponding benefits to the public welfare. The amendments are adopted under the Texas Pharmacy Act (Texas Civil Statutes, Article 4542a-1) sec.16(a), which provide the Texas State Board of Pharmacy the authority to adopt rules for the proper administration and enforcement of the Act, sec.17(b), which provides the Board with the authority to specify the minimum standards for maintenance of prescription drug records in a pharmacy, and under the Texas Dangerous Drug Act (the Health and Safety Code, Chapter 483) sec.483.002, which gives the Board the Authority to adopt rules for the proper administration and enforcement of this chapter. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on September 9, 1993. TRD-9328609 Fred S. Brinkley, Jr. Executive Director/Secretary Texas State Board of Pharmacy Effective date: September 30, 1993 Proposal publication date: March 12, 1993 For further information, please call: (512) 832-0661 22 TAC sec.291.11 The Texas State Board of Pharmacy adopts the repeal of sec.291.11, concerning Regulation. The repeal is adopted without changes to the proposed text as published in the March 12, 1993, issue of the Texas Register (18 TexReg 1616). The repeal of this adoption eliminates a section of the rules which is no longer necessary because of adoption of other rules. No comments were received on the repeal of this rule. The repeal is adopted under the Texas Pharmacy Act (Texas Civil Statutes, Article 4542a-1) sec.16(a), which provide the Texas State Board of Pharmacy the authority to adopt rules for the proper administration and enforcement of the Act. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on January 1, 1988. TRD-9328608 Fred S. Brinkley, Jr. Executive Director/Secretary Texas State Board of Pharmacy Effective date: September 30, 1993 Proposal publication date: March 12, 1993 For further information, please call: (512) 832-0661 Community Pharmacy (Class A) 22 TAC sec.sec.291.32, 291.34, 291.36 The Texas State Board of Pharmacy adopts amendments to sec.sec.291.32, 291. 34, and 291.36, concerning Personnel, Records, and Class A Pharmacies Compounding Sterile Pharmaceuticals. The amendments are adopted without changes to the proposed text as published in the March 12, 1993, issue of the Texas Register (18 TexReg 1616). These amendments correct references to rule citations in the Class A Pharmacy rules in conjunction with amendments to the rules relating to inventory requirements. No comments were received on the adoption of these rules. The amendments are adopted under the Texas Pharmacy Act (Texas Civil Statutes, Article 4542a-1), sec.16(a), which provides the Texas State Board of Pharmacy the authority to adopt rules for the proper administration and enforcement of the Act, and sec.17(b), which provides the Board with the authority to specify the minimum standards for maintenance of prescription drug records in a pharmacy. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on September 9, 1993. TRD-9328607 Fred S. Brinkley, Jr. Executive Director/Secretary Texas State Board of Pharmacy Effective date: September 30, 1993 Proposal publication date: March 12, 1993 For further information, please call: (512) 832-0661 Institutional Pharmacy (Class C) 22 TAC sec.sec.291.72-291.76 The Texas State Board of Pharmacy adopts amendments to 291.72-291.76 concerning Definitions, Personnel, Operational Standards, and Records in a Class C Pharmacy and Class C Pharmacies Located in a Free Standing Ambulatory Surgical Center. Sections 291.72-291.75 are adopted with changes to the proposed text as published in the March 9, 1993, issue of the Texas Register (18 TexReg 1485). Section 291.76 is adopted without changes and will not be republished. The amendments implement the recommendations of the Senate Interim Committee on Health and Human Services and correct certain reference citations within the sections. The Senate Interim Committee on Health and Human Services recommended that the Texas State Board of Pharmacy amend the rules to require: that pharmacists perform a more detailed recording and monitoring of drug distribution in hospitals, including drug use reviews of orders filled during the pharmacist's absence; and that a pharmacist review records in hospitals with 100 beds or less every 72 hours instead of every seven days. The amendments are consistent with the intent of the "1991-1992 Practice Standards of the American Society of Hospital Pharmacists," TSBP rules for Class A Pharmacies Compounding Sterile Pharmaceuticals, and to some extent, recently adopted federal requirements. A public hearing regarding the proposed rules was held on April 27, 1993. At that hearing, nine persons testified and 57 letters of comment were received concerning the rules. Comments in favor of the rules were received from the following organization Texas Society of Hospital Pharmacists. Comments in opposition to the rules were received from the following: Organizations: Texas Pharmaceutical Association, Texas Hospital Association, Texas Organization of Rural and Community Hospitals, Section of Consultant Pharmacists, Texas Pharmaceutical Association. Legislators: Representative John R. Cook, Breckenridge; Representative David Counts, Knox City; Representative Jerry K. Johnson, Nacogdoches; Senator Jim Turner, Crockett. Hospitals: Ballinger Memorial Hospital, Ballinger; Bethania Regional Health Care Center, Wichita Falls; Bowie Memorial Hospital, Bowie; Burleson Memorial Hospital, Caldwell; Childress Regional Medical Center, Childress; Coleman County Medical Center, Coleman; Coon Memorial Hospital, Dalhart; Culberson County Hospital District, Van Horn; Mary E. Dickerson Memorial Hospital, Jasper; Eagle Lake Community Hospital, Eagle Lake; East Texas Medical Center, Pittsburg; Faith community Hospital, Jacksboro; Frio Hospital, Pearsall; Goliad County Hospital, Goliad; Hamilton General Hospital, Hamilton; Haskell Memorial Hospital, Haskell; Hi-Plains Hospital, Hale Center; Lillian M. Hudspeth Memorial Hospital, Sonora; Knox County Hospital, Knox City; Llano Memorial Hospital, Llano; Lockney General Hospital, Lockney; McCamey Hospital and Convalescent Center, McCamey; Madison County Hospital, Madisonville; Medina Community Hospital, Hondo; Navasota Regional Hospital, Navasota; Parkview Hospital, Wheeler; Pecos County General Hospital, Iraan; Polk County Hospital, Livingston; Reagan Memorial Hospital, Big Lake; San Augustine Memorial Hospital, San Augustine; Shackelford County Hospital District, Albany; Shamrock General Hospital, Shamrock; Stephens Memorial Hospital, Breckenridge; Stonewall Memorial Hospital, Aspermont; Throkmorton County Memorial Hospital, Throckmorton; Tri-City Community Hospital, Jourdanton; Twin Oaks Medical Center, Fort Worth; Wilbarger General Hospital, Vernon; Wood County Central Hospital, Quitman. Corporations/Businesses: Hunter Pharmacy Services, Inc.; San Augustine Drug Company, Inc., San Augustine; Premier Pharmacy Management Corp., Austin; Reynolds Drug, Inc., Hamlin. Individuals: Richard R. Bixler, R.Ph, Lubbock; Doyle High, R.Ph., Roberta High, R.Ph., Consultant Pharmacist, Haskell; Chuck Lathan; Cynthia Laney-Fisher, R.Ph., Navasota; and Janis Miller, R.Ph., Brady. All of these comments were opposed to the portion of the rule which changed the requirement that a pharmacist visit a small hospital every 72 hours rather than the current every seven days. The Board agrees with these commenters and has amended the rules to maintain the current every seven-day review of records by pharmacists in hospitals with a part-time/consultant pharmacist. The other changes from the proposed language were made to bring this section into compliance with amendments to the Texas Pharmacy Act passed by the 73rd legislature. Specifically these changes involve changing the previous definition of confidential health information to confidential record and drug review to drug regimen review to match the new language in the pharmacy Act. In addition, the confidentiality section of the rules was amended to match requirements in the amended Pharmacy Act. The amendments are adopted under Texas Pharmacy Act (Texas Civil Statutes, Article 4542a-1), sec.16(a), which provides the Texas State Board of Pharmacy the authority to adopt rules for the proper administration and enforcement of the Act, and sec.17(b), which provides the Board with the authority to specify the minimum standards for drug storage, maintenance of prescription drug records, and procedures for the delivery, dispensing in a suitable container appropriately labeled, or providing of prescription drugs or devices within the practice of pharmacy. sec.291.72. Definitions. The following words and terms, when used in these sections, shall have the following meanings, unless the context clearly indicates otherwise: Confidential record -any health-related record maintained by a pharmacy or pharmacist, such as a patient medication record, prescription drug order, or medication drug order. Drug regimen review- (A) An evaluation of medication orders and patient medication records for: (i) known allergies; (ii) rational therapy-contraindications; (iii) reasonable dose and route of administration; (iv) reasonable directions for use; (v) duplication of therapy; (vi) drug-drug interactions; (vii) drug-food interactions; (viii) drug-disease interactions; (ix) adverse drug reactions; and (x) proper utilization, including overutilization or underutilization. (B) The drug regimen review may be conducted prior to administration of the first dose (prospective) or after administration of the first dose (retrospective). sec.291.73. Personnel. (a) (No change.) (b) Pharmacist-in-charge. (1) (No change.) (2) Responsibilities. The pharmacist-in-charge shall have the responsibility for, at a minimum, the following: (A)-(N) (No change.) (O) maintenance of records in a data processing system such that the data processing system is in compliance with Class C (Institutional) pharmacy requirements; (P) assuring that a reasonable effort is made to obtain, record, and maintain patient medication records; and (Q) meeting all inspection and other requirements of the Texas Pharmacy Act and these sections. (c) Consultant Pharmacists. (d) (No change.) (1) (No change.) (2) Duties. Duties of the pharmacist-in-charge and other pharmacists shall include, but need not be limited to the following: (A)-(B) (No change.) (C) interpreting patient medication records and performing drug regimen reviews. (3) (No change.) (e)-(f) (No change.) sec.291.74. Operational Standards. (a)-(d) (No change.) (e) Absence of a pharmacist. (1) Medication orders. (A) In facilities with a full-time pharmacist, if a practitioner orders a drug for administration to a bona fide patient of the facility when the pharmacy is closed, the following is applicable. (i)-(iv) (No change.) (v) The pharmacist shall verify the withdrawal and perform a drug regimen review as specified in subsection (f)(5)(B) of this section as soon as practical, but in no event more than 72 hours from the time of such withdrawal. (B) In facilities with a part-time or consultant pharmacist, if a practitioner orders a drug for administration to a bona fide patient of the facility when the pharmacist is not on duty, or when the pharmacy is closed, the following is applicable. (i)-(iii) (No change.) (iv) The pharmacist shall verify the withdrawal and perform a drug regimen review as specified in subsection (f)(5)(B) of this section after a reasonable interval, but in no event may such interval exceed seven days. (2) (No change.) (f) Drugs. (1)-(4) (No change.) (5) Distribution. (A) Medication Orders. (i)-(v) (No change.) (B) Drug Regimen Review. (i) For the purpose of promoting therapeutic appropriateness, a pharmacist shall evaluate medication orders and patient medication records for: (I) known allergies; (II) rational therapy-contraindications; (III) reasonable dose and route of administration; (IV) reasonable directions for use; (V) duplication of therapy; (VI) drug-drug interactions; (VII) drug-food interactions; (VIII) drug-disease interactions; (IX) adverse drug reactions; and (X) proper utilization, including overutilization or underutilization. (ii) The drug regimen review shall be conducted on a prospective basis when a pharmacist is on duty and on a retrospective basis as specified in subsection (e)(1) of this section when a pharmacist is not on duty. (ii) Any questions regarding the order must be resolved with the prescriber and a written notation of these discussions made in the patient's medication record or chart. (C) Procedures. (i) (No change.) (ii) The written policies and procedures for the drug distribution system shall include, but not be limited to, procedures regarding the following: (I)-(XXI) (No change). (XXII) use of automated drug dispensing systems; (XXIII) use of data processing and direct imaging systems; and (XXIV) clinical services. (g) Clinical Services. (1) A systematic ongoing process of drug regimen review shall be developed in conjunction with the medical staff to increase the probability of desired patient outcomes and decrease the probability of undesired outcomes from drug therapy. (2) There must be documentation of ongoing drug therapy monitoring and evaluation, including assessment of: (A) the therapeutic appropriateness of the patient's drug regimen; (B) therapeutic duplication in the patient's drug regimen; (C) the appropriateness of the delivery device, dose, frequency, and route of administration; (D) potential drug, food, or diagnostic test interactions or disease limitations on drug use (or any combination of these); and (E) clinical laboratory or clinical monitoring methods to monitor and evaluate drug effectiveness, side effects, toxicity, or adverse effects, and appropriateness to continued use of the drug in its current regimen. (h) Emergency rooms. (1)-(2) (No change.) (i) Radiology departments. (1)-(2) (No change.) sec.291.75. Records. (a)-(b) (No change.) (c) Inpatient records. (1) Original Medication Orders. (A) Each original medication order or set of orders issued together shall bear the following information: (i) patient name and room number or identification number; (ii) drug name, strength, and dosage form; (iii) directions for use; (iv) date; and (v) signature or electronic signature of the practitioner or that of his or her authorized agent. (B) Original medication order shall be maintained with the medication administration records of the patients. (2) Patient Medication Records (PMR). A patient medication record shall be maintained for each inpatient of the facility. The PMR shall contain at a minimum the following information. (A) Patient Information. (i) patient name and room number or identification number; (ii) gender, and date of birth or age; (iii) weight and height; (iv) known drug sensitivities and allergies to drugs and/or food; (v) primary diagnoses and chronic conditions; (vi) primary physician; and (vii) other drugs the patient is receiving. (B) Medication order information. (i) date of distribution; (ii) drug name, strength, and dosage form; and (iii) directions for use. (3)-(9) (No change.) (d) (No change.) (e) Other Records. Other records to be maintained by a pharmacy: (1)-(5) (No change.) (6) a hard copy of inventories required by sec.291.17 of this title (relating to Inventory Requirements) except that a perpetual inventory of controlled substances listed in Schedule II may be kept in a data processing system if the data processing system is capable of producing a hard-copy of the perpetual inventory on-site. (7)-(10) (No change.) (f) (No change.) (g) Confidentiality. (1) A pharmacist shall provide adequate security of prescription drug orders, medication orders, and patient medication records to prevent indiscriminate or unauthorized access to confidential health information. (2) Confidential records are privileged and may be released only to: (A) the patient or the patient's agent; (B) practitioners and other pharmacists when, in the pharmacist's professional judgment, such release is necessary to protect the patient's health and well- being; (C) other persons, the board, or other state or federal agencies authorized by law to receive such confidential records; (D) a law enforcement agency engaged in investigation of suspected violations of the Controlled Substances Act or the Dangerous Drug Act; (E) a person employed by any state agency which licenses a practitioner as defined in this Act if such person is engaged in the performance of the person's official duties; or (F) an insurance carrier or other third party payor authorized by a patient to receive such information. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on September 9, 1993. TRD-9328606 Fred S. Brinkley, Jr. Executive Director/Secretary Texas State Board of Pharmacy Effective date: September 30, 1993 Proposal publication date: March 9, 1993 For further information, please call: (512) 832-0661 Chapter 303. Destruction of Dangerous Drugs and Controlled Substances 22 TAC sec.303.1, sec.303.2 The Texas State Board of Pharmacy adopts amendments to sec.301.1, and sec.303.2, concerning Destruction of Dispensed Drugs and Disposal of Stock Prescription Drugs. The amendments are adopted without changes to the proposed text as published in the March 12, 1993, issue of the Texas Register , (18 TexReg 1616). The amendments outline procedures for the destruction of butorphanol (Stadol), nalbuphine (Nubain) and carisoprodol (Soma) and require a pharmacy to maintain a record of destruction of these drugs. The agency adopts the amendments requiring more stringent recordkeeping requirements for these drugs because of continued abuse of these drugs by pharmacists, other health professionals, and the general public. This abuse is documented by a growing body of evidence including actual cases of abuse investigated by the Board, testimony from police and law enforcement personnel, and articles in professional literature. The agency believes that the stricter accountability standards imposed by these rule amendments will assist in determining if illegal diversion of these drugs has occurred from a pharmacy. A public hearing on the rules was held on April 27, 1993. At the public hearing Paul F. Davis, R.Ph., Executive Director, Texas Pharmaceutical Association, presented comments against the adoption of the rules. The agency also received three letters of comment against adoption of the rules. These letters were from Albert Lucero on behalf of the El Paso Pharmaceutical Association and from two individuals. Mr. Davis' comments of behalf of Texas Pharmaceutical Association stated the following: "At the heart of our concern is what we believe to be a very real legal question as to whether the Board of Pharmacy has the authority to place additional controls on non-controlled substances. This, we believe, establishes a third category of drugs-which only the Texas Legislature can do -without any statutory basis in either the Dangerous Drug Act or State Pharmacy Practice Act .... The requirement for inventorying is time-consuming and unnecessary. It will not prevent abuse or theft of the products..." The comments of Mr. Lucero in behalf of the El Paso Pharmaceutical Association also questioned the Board's authority and stated: "...The El Paso Pharmaceutical Association strongly objects to such an establishment of another class of pharmaceutical material, that would be extremely difficult if not impossible to comply with." The two individuals that commented noted concerns about the additional "burden" being placed on all pharmacists. Linda Romeo, R.Ph., Irving stated: "While I admit there is possible abuse of these items and diversion, I believe it to be minimal in comparison to the burden being considered for all pharmacists. Have other avenues been explored?" Mrs. Travis H. Thrasher, R.Ph., Houston stated: "[While] this would seem to be a minor requirement, it would be added to a number of other requirements which put together are making pharmacy a very stressful occupation." The Board disagrees with the comments questioning the authority to adopt these rules. The agency has the authority to require an inventory of prescription drugs, first, under the Texas Pharmacy Act (Texas Civil Statutes, Article 4542a- 1). Section 16(b) and sec.17(b)(3) of the Texas Pharmacy Act give the Board the authority to adopt rules for the proper administration and enforcement of the Pharmacy Act and to specify the minimum standards for maintenance of prescription drug records in a pharmacy. Second, sec.483.002 and sec.483.024 of the Texas Dangerous Drug Act (Health and Safety Code, Chapter 483) give the Board the authority to adopt rules for the proper administration and enforcement of Chapter 483 and specify that pharmacies must maintain records of acquisition and disposal of dangerous drugs. The Board adopts these amendments in order to determine if pharmacies are maintaining accurate records of the acquisition and disposal of these drugs, as they are required to do under the Dangerous Drug Act. These amendments are therefore necessary for the proper administration and enforcement of the Dangerous Drug Act. The board disagrees with the comments regarding the additional burden the rules place on pharmacies. The rules add three drugs to the list of drugs which must be inventoried by a pharmacy annually, at change of ownership, and on closing. Currently pharmacies are required to to keep a record of the destruction of all controlled substances, plus one dangerous drug, triplenamine (e.g., PBZ). This list of drugs may vary depending on the volume of the pharmacy. It is estimated that for the average pharmacy this would include approximately 50-100 different drugs. The addition of three drugs does not impose a significant burden, particularly in light of the corresponding benefits to the public welfare. The amendments are adopted under the Texas Pharmacy Act (Texas Civil Statutes, Article 4542a-1) sec.16(a), which provides the Texas State Board of Pharmacy the authority to adopt rules for the proper administration and enforcement of the Act; sec.17(b), which provides the Board with the authority to specify the minimum standards for maintenance of prescription drug records in a pharmacy, and under the Texas Dangerous Drug Act (the Health and Safety Code, Chapter 483) sec.483.002 which gives the Board the Authority to adopt rules for the proper administration and enforcement of this chapter. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on September 9, 1993. TRD-9328610 Fred S. Brinkley, Jr. Executive Director/Secretary Texas State Board of Pharmacy Effective date: September 30, 1993 Proposal publication date: March 12, 1993 For further information, please call: (512) 832-0661 TITLE 25. HEALTH SERVICES Part II. Texas Department of Mental Health and Mental Retardation Chapter 405. Client (Patient) Care Subchapter FF. Consent to Treatment with Psychoactive Medication 25 TAC sec.sec.405.801-405.810 The Texas Department of Mental Health and Mental Retardation (TXMHMR) adopts the repeal of sec.sec.405.801-405.810, concerning consent to treatment with psychoactive medication without changes to the proposed text as published in the August 10, 1993, issue of the Texas Register (18 TexReg 5296). The repeal of the sections is adopted contemporaneously with the adoption of the subchapter which replaces them with new Chapter 405, Subchapter FF, also concerning consent to treatment with psychoactive medication. The new subchapter implements provisions of Senate Bill 207 (73rd Legislature) which became effective September 1, 1993. The key provision requires a physician to obtain a court order prior to administering medication to a person receiving involuntary mental health services under provisions of the Texas Health and Safety Code when the individual refuses the medication. No comments were received regarding adoption of the repeals. The repeals are adopted under the Texas Health and Safety Code, sec.532.015 (Texas Civil Statutes, Article 5547-202, sec.2.11), which provide the Texas Department of Mental Health and Mental Retardation with broad rulemaking powers. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on September 10, 1993. TRD-9328726 Anne K. Utley Chairman Texas Mental Health and Mental Retardation Effective date: October 1, 1993 Proposal publication date: August 10, 1993 For further information, please call: (512) 206-4516 Subchapter FF. Consent to Treatment with Psychoactive Medication 25 TAC sec.sec.405.801-405.812 The Texas Department of Mental Health and Mental Retardation (TXMHMR) adopts new sec.sec.405.805, 405.807-405.809, and 405.811-405.812 without changes to the proposed text as published in the August 10, 1993, issue of the Texas Register (18 TexReg 5289) and with an editor's note in the August 6, 1993, issue (18 TexReg 5292). Sections 405.801-405.804, 405.806, and 405.810 are adopted with changes. The new sections are adopted simultaneously with the adoption of the repeal of existing Chapter 405, Subchapter FF (concerning Consent to Treatment with Psychoactive Medication). The new subchapter implements provisions of Senate Bill 207 (73rd Legislature) which became effective September 1, 1993. The key provision requires a physician to obtain a court order prior to administering medication to a person receiving involuntary mental health services under provisions of the Texas Health and Safety Code when the individual refuses the medication. Language addressing the philosophical intent of the subchapter is deleted in sec.405.801. In sec.405.802, it is clarified that the subchapter extends to services provided by a mental health facility when the services are funded or exchanged through a contract or agreement with the department or a community mental health and mental retardation center. The definition of "informed consent" in sec.405.803 is revised to clarify intent. The definition of "psychoactive medication" is also revised to reference the department's established classes of medication. The definition of "refusal to consent to administration of psychoactive medication" is revised to clarify legislative intent. Section 405.804 is revised to clarify that information should be given to the individual in the individual's primary language, if possible. Section 405. 804(a)(3) is revised to delete specific consequences of not taking medication. Section 405.804(a)(4) is revised to require information about why the physician rejects any alternative treatments. Section 405.804(a)(7) is revised to specify the common side effects of the medication. The section is also revised to require that a summary of the information be mailed to a legal representative who is not present within 24 hours. Section 405.806 is revised to clarify that a form other than the MHRS 9-7 may be used provided that the alternate form includes all the information included on the MHRS 9-7 form. Section 405.810 is revised to clarify that the attorney must meet with the patient as soon as possible prior to the hearing. Reference to provisions regarding PRNs are deleted from the section. The section is further revised to clarify that the patient shall receive written notification of findings at the conclusion of the hearing. Section 405.810 is revised to clarify the patient's right to be present at the hearing. The section is further revised to clarify that the patient is entitled to written notification of the reasons for the court's determination and the evidence the court relied on in making its determination. Comments on the proposed subchapter were received from nine individuals or organizations, including: Advocacy, Inc., Life Management Center for MH/MR Services, El Paso; Texas Pharmaceutical Association, Austin; Mary Dees, Austin; Les Breeding, Wichita Falls; M. Lynn Crismon, Pharm. D., Austin; Peter G. Dorson, Pharm. D., Austin; Jayme C. Trott, Pharm. D., San Antonio; and Julia E. Vertrees, B.S., Pharm. D., San Antonio. All commenters offered recommendations for changes. With regard to the concept of consent to treatment, a commenter noted that the department should look for an opportunity to put into practice the use of advance directives. The commenter recommended the development of a process by which both inpatient and outpatient service providers would solicit and document individuals' preferences regarding treatment modalities when the individual is in remission. The department agrees that this is an important issue. While it exceeds the scope of this subchapter, the issue will be looked at in the future for potential policy development. Another commenter questioned whether patients have any more or less of a right to refuse receiving psychotropic medications than any other type of pharmacotherapy. The commenter noted that the issue is primarily a rights issue, but questioned whether the relative benefit-to-risk ratio with psychotropic medications is substantially different than the pharmacotherapy of most other medical conditions. The commenter recommended that consideration be given to requiring informed consent for all types of significant pharmacotherapy. The department responds that the purpose of this subchapter is to implement provisions of Senate Bill 207. The question of broader consent requirements has merit and will be explored as part of revisions to rules governing prescribing of medications. Another commenter expressed concern that county officials need the relevant information for the subchapter in order to implement it. The commenter also recommended exploring cost saving measures that can be implemented to go along with the subchapter. The department agrees that county officials need information about the new requirements and has attempted to provide this information. As the procedures are implemented various courts may devise methods of better addressing the provisions, and the department is open will be happy to assist to ensure the procedures are carried out in a way that is efficient for county officials yet cognizant and respectful of the rights and best interests of persons receiving mental health services. Concerning section 405.803, several commenters recommended the addition of various classes of psychoactive medications to the definition. The department responds that the list is not intended to be inclusive. Furthermore, Senate Bill 207 includes a provision which states that the classes of medication authorized by order of the court must conform to classes determined by the department. For purposes of obtaining consent, the department has established a listing of "Classes of Medication Requiring Consent when Used for Psychiatric Indications. The listing is available from the Texas Department of Mental Health and Mental Retardation, P.O. Box 12668, Austin, Texas 78711-2668. Also concerning sec.405.803, a commenter expressed concern about the inclusion of emotional harm in the definition of an emergency situation. The commenter noted the possibility of abuse of this rather vague category. The department responds that the definition of emergency situation only includes emotional harm to others. Determining the need for emergency medication in such a situation is a training issue which will be addressed. With respect to sec.405.804, several commenters noted that registered pharmacists should be included among those health care professionals qualified to explain the information to be given in the event the physician cannot be present. The department agrees, and language has been revised. Another commenter asked that the information be given both orally and in written form. The department agrees, and the information is currently required to be given in both oral and written form. The same commenter asked that patients be advised of both medical and non- medical interventions for side effects. The department agrees, but the issue is primarily one of application. The patient is advised to inform staff immediately if they experience any side effects; at that point, they will be advised of interventions. Also regarding sec.405.804, a commenter noted that language outlining what information should be given to the individual regarding consequences of not taking medication was coercive and threatening. The commenter noted that it directly ties the consequences to the individual's willingness or refusal to provide consent to take medication rather than focusing on symptoms which may persist with the treatment. The department agrees, and the language has been deleted. Two commenters noted that individuals should also be informed of the basis of the preference by the physician of one treatment over another. The department agrees, and language requiring provision of this information has been added. Concerning sec.405.805, a commenter noted that a provision noting that persons who have admitted themselves under the voluntary provisions of Texas statutes are presumed to have legal capacity to consent could be a dangerous practice. The commenter expressed concern that the provision could be misused if the facility knows that the person does not have the capacity to consent and ignores or pretends that the individual does. The commenter did not offer any wording changes, noting that the potential difficulty is more an issue of application than wording. The department responds that training on this subchapter will address the issue. With regard to sec.405.806, a commenter asked whether everyone was forced to use the MHRS 9-7 form from the department. The commenter asked whether it would be permissible to use another form approved by an attorney. The department responds that an alternate form may be utilized provided it contained all the information found on the MHRS 9-7. Language has been revised to reflect this option. A commenter noted that the requirement to review consents every 90 days as outlined in sec.405.806 appears excessive for outpatient programs. The department responds that the provisions of this subchapter apply only to inpatient mental health services. Regarding sec.405.809, a commenter noted that no timeframe is placed on the appeal of an order authorizing medication. The department notes that the legislation states that the appeal will be conducted in the same fashion as an appeal of an order requiring court-ordered services, and statutory language addressing such an appeal does not include a timeframe. A commenter noted that the patient should have the right to elect not to attend the hearing if he or she so chose. The department agrees. Although the patient is given the right to attend the hearing, the patient is free to waive that right. The new sections are adopted under the Texas Health and Safety Code, sec.532. 015 (Texas Civil Statutes, Article 5547-202, sec.2.11), which provides the Texas Department of Mental Health and Mental Retardation with broad rulemaking powers. sec.405.801. Purpose. The purpose of these rules is to prescribe procedures to be followed in administering psychoactive medications to certain patients served by the department. sec.405.802. Application. These rules apply to all persons receiving inpatient mental health services at state hospitals, state centers, and other mental health facilities operated by the department or a community mental health and mental retardation center (CMHMRC). The provisions of this subchapter also apply to persons receiving inpatient services in other mental health facilities when the services are funded or exchanged through a contract or agreement between a mental health facility and the department or a mental health facility and a CMHMRC. sec.405.803. Definitions. The following words and terms, when used in this subchapter, shall have the following meanings, unless the context clearly indicates otherwise: Capacity-A patient's ability to: (1) understand the nature and consequences of a proposed treatment, including the benefits, risks, and alternatives to the proposed treatment; and (2) make a decision whether to undergo the proposed treatment. Emergency situation -A situation in which it is immediately necessary to administer medication to a patient to prevent: (1) imminent probable death or substantial bodily harm to the patient because the patient: (A) overtly or continually is threatening or attempting to commit suicide or serious bodily harm; or (B) is behaving in a manner that indicates that the patient is unable to satisfy the patient's need for nourishment, essential medical care, or self- protection; or (2) imminent physical or emotional harm to others because of threats, attempts, or other acts the patient overtly or continually makes or commits. Informed consent -Consent given by a person admitted to a mental health facility or the person's legally authorized representative when each of the following conditions have been met: (1) Comprehension of information. The person giving the consent has been provided the information outlined in sec.405.804 of this title (relating to Information to Be Given) and has the capacity to give consent; and (2) Voluntariness. The consent has been given voluntarily. Legally authorized representative-The parent, managing conservator, or guardian of a minor; or the guardian of the person of an adult. Medically appropriate treatment-Treatment with psychoactive medication based on a physician's judgment that such medication is clinically indicated and that the medication's potential benefits outweigh its potential risks. Medication class -A group of medications with similar actions and indications for use, as outlined in "Classes of Medications Requiring Consent to Treatment with Psychoactive Medication," copies of which are available from the Texas Department of Mental Health and Mental Retardation, P.O. Box 12668, Austin, Texas 78711-2668. Mental health facility-All state hospitals, state centers, and other facilities which provide inpatient mental health services. Minor-A person under 18 years of age who is not and has not been married or who has not had his/her disabilities of minority removed for general purposes. A person 16 or 17 years of age who has voluntarily admitted himself/herself to a mental health facility is not considered to be a minor. Psychoactive medication -A medication prescribed for the treatment of symptoms of psychosis or other severe mental or emotional disorders and that is used to exercise an effect on the central nervous system to influence and modify behavior, cognition, or affective state when treating the symptoms of mental illness. Classes of medication are identified in the department's "Classes of Medication Requiring Consent When Used for Psychiatric Indications." "Psychoactive medication" includes the following categories when used as described in this subchapter: (1) antipsychotics or neuroleptics; (2) antidepressants; (3) agents for control of mania or depression; (4) antianxiety agents; (5) sedatives, hypnotics, or other sleep-promoting drugs; and (6) psychomotor stimulants. Refusal to consent to administration of psychoactive medication (refusal)- Actions which include the following behaviors: (1) The individual or legally authorized representative communicates orally, through sign language, or in writing that he/she refuses psychoactive medication. (2) The patient communicates through behavior that he/she refuses psychoactive medication, e.g., refusing to swallow oral medication, refusing to submit to hypodermic injection of psychoactive medication. (3) The individual pretends to swallow oral psychoactive medications, and the attending physician determines that the pretending behavior is due to an unwillingness to take the medication. (4) The individual gives an unacceptable response, which is a lack of response, no response, or an inadequate or noncommittal response from the individual after he/she has received the standard risk/benefit explanation. sec.405.804. Information Required to be Given. (a) Before administering psychoactive medication to any patient in a mental health facility, the treating physician shall explain to the patient and/or to the patient's legally authorized representative, if the representative is available, the following in simple, nontechnical language in the person's primary language, if possible (this explanation may be given by the registered nurse (RN) licensed vocational nurse (LVN), physician's assistant (PA), or registered pharmacist (R.Ph.) if the treating physician cannot be present, but the treating physician must confirm the explanation with the patient and/or the patient's legally authorized representative, if the representative is available, within two working days, not including weekends or legal holidays): (1) the nature of the patient's mental illness and condition; (2) the beneficial effects on the patient's mental illness and/or condition expected as a result of treatment with the medication; (3) the probable health and mental health consequences to the patient of not taking the medication, including the occurrence, increase, or reoccurrence of symptoms of mental illness; (4) the existence of generally accepted alternative forms of treatment, if any, that could reasonably be expected to achieve the same benefits as the medication and why the physician rejects the alternative treatment; (5) a description of the proposed course of treatment with medication; (6) the fact that side effects of varying degrees of severity are a risk of all medication; (7) the relevant side effects of the medication, including: (A) any side effects which are known to frequently occur in most persons; (B) any side effects to which the particular patient may be predisposed; and (C) the nature and possible occurrence of the potentially irreversible symptoms of tardive dyskinesia; (8) the need to advise mental health facility staff immediately if any of these side effects occur; (9) an instruction that the patient may withdraw consent at any time without negative actions on the part of staff; and (10) the patient's rights under this rule (as outlined in the MHRS 9-7.1 form, copies of which are available from the Texas Department of Mental Health and Mental Retardation, P.O. Box 12668, Austin, Texas 78711). (b) The patient and his/her legal representative must also be provided a summary of this information in writing, along with an offer to answer any questions concerning the treatment. If the representative is not present, the information must be mailed to the representative (via certified letter) within 24 hours, except on weekends or holidays when the information shall be mailed on the next business day. sec.405.806. Documentation of Informed Consent. (a) Informed consent for the administration of psychoactive medication will be evidenced by a completed copy of the department's form for consent to treatment with psychoactive medication (MHRS 9-7 form, copies of which are available from the Texas Department of Mental Health and Mental Retardation, P.O. Box 12668, Austin, Texas 78711) or another form which includes all the information found on the MHRS 9-7 form executed by the patient or his/her legally authorized representative. The executed form will establish a rebuttable presumption of valid consent and will be retained in the patient's record. (1) Any time the medication regimen is altered in a way which would result in a significant change in the risks or benefits for the patient, an explanation of the change will be provided to the patient and/or the patient's legally authorized representative. The explanation will include notification of the right to withdraw consent at any time. (2) A new consent shall be obtained if a change in medication class is proposed. (b) If the patient or his/her legally authorized representative consents to the administration of psychoactive medication but refuses or is unable to execute the form, the treating physician will document the consent in the patient's record and on the MHRS 9-7 form (or other form including the same information). (c) The treating physician and/or RN/LVN/PA/R.Ph. will discuss the administration of psychoactive medication with all patients for whom such medication has been prescribed, and will provide to them the explanation described in sec.405.804 of this title (relating to Information Required to be Given). This requirement shall include patients for whom an order to authorize the administration of psychoactive medications is filed. If the RN/LVN/PA/R.Ph. gives the initial explanation for the consent information to the patient, then the treating physician must confirm the explanation and sign the MHRS 9-7 form (or other form including the same information) within 2 working days, not including weekends or legal holidays. (d) A patient's refusal or attempt to refuse to receive psychoactive medication, whether given verbally or by other indications or means, shall be documented in the patient's clinical record, in the progress notes, and on the consent form (MHRS 9-7 form (or other form including the same information). (e) All consents will be reviewed with the patient or his/her legally authorized representative at least every 90 days. The review will include a discussion of the information outlined in sec.405.804 of this title (relating to Information to Be Given) as well as a discussion of the patient's or his/her legally authorized representative's wishes regarding continuation of the medication. sec.405.810. Rights of Patients for Whom an Order to Authorize the Administration of Psychoactive Medication is Filed. A patient for whom a petition for an order to authorize the administration of a psychoactive medication is filed is entitled to: (1) a hearing on the petition within seven days after the date the petition to authorize the administration of a psychoactive medication is filed; (2) have the hearing scheduled for a different date than the date of a hearing on an application for temporary court-ordered mental health services unless the patient and the patient's attorney agree in writing to have the hearings on the same date; (3) representation by a court-appointed attorney who is knowledgeable about issues to be adjudicated at the hearing; (4) meet with that attorney as soon as is practicable prior to the hearing to prepare for the hearing and to discuss any of the patient's questions or concerns; (5) receive, immediately after the time of the hearing is set, a copy of the petition and written notice of the time, place, and date of the hearing; (6) be told, at the time personal notice of the hearing is given, of the patient's right to a hearing and right to the assistance of an attorney to prepare for the hearing and to answer any questions or concerns; (7) be present at the hearing; (8) request from the court an independent expert; (9) oral notification, at the conclusion of the hearing, of the court's determinations of the patient's capacity and best interests; and (10) written notification, as soon as possible after the conclusion of the hearing, of the reasons for the court's determination and the evidence on which the court relied in making its determination. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on September 10, 1993. TRD-9328725 Anne K. Utley Chairman Texas Board of Mental Health and Mental Retardation Effective date: October 1, 1993 Proposal publication date: August 10, 1993 For further information, please call: (512) 206-4516 Chapter 409. Medicaid Programs Subchapter A. General Reimbursement Methodology for Medical Assistance Programs 25 TAC sec.sec.409.1-409.7 The Texas Department of Mental Health and Mental Retardation (TXMHMR) adopts new sec.sec.409.1-409.7, concerning general reimbursement methodology for medical assistance programs, without changes to the proposed text as published in the August 3, 1993, issue of the Texas Register (18 TexReg 5013). The sections will not be republished. The rules in Subchapter A provide the basis of Medicaid reimbursement for all medical assistance programs in Texas. The new rules are substantially the same as rules of the Texas Department of Human Services (TDHS) contained in Title 40, Texas Administrative Code, sec.sec.24.101-24.102, 24.201, 24.301, 24. 401, 24.501, and 24.601, governing the same matters. These rules apply only to the following Medicaid programs even though other programs may be referenced in the rules: case management for the mentally ill, case management for the mentally retarded, home and community-based services, home and community-based services- Omnibus Budget Reconciliation Act (OBRA), diagnostic services, and rehabilitative services. The only difference in the documents is that references to TDHS have been changed to reference TXMHMR as appropriate to enable the transfer from TDHS to TXMHMR of Medicaid state operating agency functions. This transfer is enacted under the authority of the Health and Human Services Commission as the Medicaid single state agency pursuant to House Bill 7 of the 72nd Texas Legislature and pursuant to the provisions of the Medicaid State Plan. A public hearing was held from 8:00 a.m.-5:00 p.m. on August 20, 1993. No public testimony was offered. Written comments on the proposal were received from the Texas Council of Community Mental Health and Mental Retardation Centers, Inc., Austin; and Abilene Regional Center Mental Health and Mental Retardation, Abilene. One commenter acknowledged the "housekeeping" function inherent in the publication of the proposal as part of the transfer to TXMHMR of responsibilities as the Medicaid state operating agency, but noted that the department urgently needs to develop policy governing implementation of the program. The commenter specified that the policy should address: program operations, i.e., standards of acceptable performance; actions the department will take when standards are not followed; policy governing the determination of fraud and abuse; and monitoring/auditing functions. The department agrees with the observations and intends to proceed with development of the needed policies within the coming months. A commenter noted that cost report due dates among the various programs vary widely and are not in accordance with a guideline distributed by TDHS which established January 31 as the due date. The department notes that the proposed language is the same as the existing TDHS rules, both of which included a clause permitting an extension for the submission of cost reports; it is upon this clause that TDHS relied in designating January 31 as the due date. TXMHMR will be contracting with TDHS to continue performing the cost reporting function for fiscal year 1994; no change is anticipated in the due date. A commenter questioned why half the programs permitted the inclusion of indirect overhead costs in the cost report and the others did not. The commenter suggested that indirect overhead be approved by the department and that community MHMR centers who receive a rate be allowed to use this in all cost reports. The commenter also noted that the inclusion of maintenance is in contradiction to the department's FY 1994 contract instructions and suggested that maintenance be allowed in the overhead rate and not as it appears in contract instructions. The department responds that as the Medicaid rules are revisited in the coming months, TDHS efforts of the past few years to establish consistency for cost reports across all programs will be continued. Concerning maintenance, the department notes that the definition for management and support costs including the FY 1994 contract instruction was proposed by a committee of community MHMR center fiscal officers and was accepted by the department. However, this issue also may be reconsidered as the rules are revisited in the coming months. A commenter requested that guidance be provided concerning depreciation to allow accounting procedures to be established up-front rather than after the fact. The department responds that property valued at more than $500 at the time of purchase must be depreciated or amortized and included in cost reports for all Medicaid programs. When the Medicaid rules are revisited in the coming months, the department intends that guidance on this and other cost report issues will be explicit. The sections are adopted under the Health and Safety Code, Title 7, sec.532. 015(a), which provides the Texas Mental Health and Mental Retardation Board with rulemaking powers; and under the provisions of Texas Civil Statutes, Article 4413(502) sec.16, which provide the Health and Human Services Commission with the authority to administer federal medical assistance funds. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on September 10, 1993. TRD-9328707 Anne K. Utley Chairman Texas Mental Health and Mental Retardation Effective date: October 1, 1993 Proposal publication date: August 3, 1993 For further information, please call: (512) 206-4516 Subchapter B. Contract Appeals 25 TAC sec.sec.409.31-409.44 The Texas Department of Mental Health and Mental Retardation (TXMHMR) adopts new sec.sec.409.031-409.044, concerning contract appeals without changes to the proposed text as published in the August 3, 1993, issue of the Texas Register (18 TexReg 5017). The sections will not be republished. The rules in Subchapter B provide the basis for contract appeals by providers receiving Medicaid reimbursement. The new rules are basically identical to rules of the Texas Department of Human Services (TDHS) contained in Title 40, Texas Administrative Code, sec.sec.79.1601-79.1614, governing the same matters. The primary difference in the documents is that references to TDHS have been changed to reference TXMHMR to enable the transfer from TDHS to TXMHMR of Medicaid state operating agency functions for programs in case management, rehabilitative services, home and community-based services, home and community-based services- Omnibus Budget Reconciliation Act (OBRA), and diagnostic services. This transfer is enacted under the authority of the Health and Human Services Commission as the Medicaid single state agency pursuant to House Bill 7 of the 72nd Texas Legislature and in keeping with provisions of the Medicaid State Plan. A public hearing was held from 8:00 a.m.-5:00 p.m. on August 20, 1993. No public testimony was offered. Written comments on the proposal were received from the Texas Council of Community Mental Health and Mental Retardation Centers, Inc., Austin. The commenter acknowledged the "housekeeping" function inherent in the publication of the proposal as part of the transfer to TXMHMR of responsibilities as the Medicaid state operating agency, but noted that the department urgently needs to develop policy governing implementation of the program. The commenter specified that the policy should address: program operations, i.e., standards of acceptable performance; actions the department will take when standards are not followed; policy governing the determination of fraud and abuse; and monitoring/auditing functions. The department agrees with the observations and intends to proceed with development of the needed policies within the coming months. The sections are adopted under the Health and Safety Code, Title 7, sec.532. 015(a), which provides the Texas Mental Health and Mental Retardation Board with rulemaking powers; and under the provisions of Texas Civil Statutes, Article 4413(502) sec.16, which provide the Health and Human Services Commission with the authority to administer federal medical assistance funds. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on September 10, 1993. TRD-9328715 Anne K. Utley Chairman Texas Mental Health and Mental Retardation Effective date: October 1, 1993 Proposal publication date: August 3, 1993 For further information, please call: (512) 206-4516 Subchapter C. Fraud and Abuse and Recovery of Benefits 25 TAC sec.sec.409.51-409.68 The Texas Department of Mental Health and Mental Retardation (TXMHMR) adopts new sec.sec.409.051-409.068, concerning fraud and abuse and recovery of benefits, without changes to the text as proposed in the August 3, 1993 issue of the Texas Register (18 TexReg 5023). The sections will not be republished. The provisions of Subchapter C provide the basis for Medicaid fraud and abuse investigation, prosecution, and recovery for all medical assistance programs in Texas. The new rules are substantially the same as rules of the Texas Department of Human Services (TDHS) contained in Title 40, Texas Administrative Code, sec.sec.79.2101-79.2105, 79.2110-79.2119 and 79.2301- 79. 2304, governing the same matters. The primary difference in the documents is that references to TDHS have been changed to reference TXMHMR as appropri- ate to enable the transfer from TDHS to TXMHMR of Medicaid state operating agency functions for programs in case management for the mentally ill, case management for the mentally retarded, rehabilitative services, home and community-based services and home and community-based services - Omnibus Budget Reconciliation Act (OBRA), and diagnostic services. This transfer is enacted under the authority of the Health and Human Services Commission as the Medicaid single state agency pursuant to House Bill 7 of the 72nd Texas Legislature and pursuant to the provisions of the Medicaid State Plan. Another transfer of authority, i.e., the transfer of the DHS Fraud and Abuse Division to the Texas Department of Health, is also reflected. A public hearing was held from 8:00 a.m.- 5:00 p.m. on August 20, 1993. No public testimony was offered. Written comments on the proposal were received from the Texas Council of Community Mental Health and Mental Retardation Centers. The commenter acknowledged the "housekeeping" function inherent in the publication of the proposal as part of the transfer to TXMHMR of responsibili- ties as the Medicaid state operating agency, but noted that the department urgently needs to develop policy governing implementation of the program. The commenter specified that the policy should address: program operations, i.e., standards of acceptable performance; actions the department will take when standards are not followed; policy governing the determination of fraud and abuse; and monitoring/auditing functions. The department agrees with the observations and intends to proceed with development of the needed policies within the coming months. The sections are adopted under the Health and Safety Code, Title 7, sec.532. 015(a), which provides the Texas Board of Mental Health and Mental Retardation with rulemaking powers; and under the provisions of Texas Civil Statutes, Article 4413(502) sec.16, which provide the Health and Human Services Commission with the authority to administer federal medical assis- tance funds. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on September 10, 1993. TRD-9328706 Anne K. Utley Chairman Texas Mental Health and Mental Retardation Effective date:October 1, 1993 Proposal publication date:August 10, 1993 For further information, please call:(512) 206-4516 Subchapter D. Home and Community-based Services 25 TAC sec.sec.409.101-409.118 The Texas Department of Mental Health and Mental Retardation (TXMHMR) adopts new sec.sec.409.101-409.102 and 409.117, concerning home and community-based services, with changes to the proposed text as published in the August 3, 1993, issue of the Texas Register (18 TexReg 5029). New sec. sec.409.103-409.116 and 409.118 are adopted without changes to the proposed text and will not be republished. The provisions of Subchapter D govern the administration of the Medicaid home and community-based services program in Texas. The new rules are substantially the same as rules of the Texas Department of Human Services (TDHS) contained in Title 40, Texas Administrative Code, sec.sec.48.2201-48.2217 and 48.9802, governing the same matters. The only differences in the documents are that references to TDHS have been changed to reference TXMHMR, when appropriate, to enable the transfer from TDHS to TXMHMR of Medicaid state operating agency functions. This transfer is enacted under the authority of the Health and Human Services Commission as the Medicaid single state agency pursuant to House Bill 7 of the 72nd Texas Legislature and the Medicaid State Plan. In a technical correction, reference in sec.409.101(a)(4)(C) to private nonprofit child care institutions licensed by the Texas Department of Protective and Regulatory Services has been deleted because such institutions are not eligible for reimbursement under the waiver. In addition, sec.409.117(c) has been deleted in response to a determination by the Health Care Financing Administration (HCFA) that federal provisions for protecting the income and resources for the ineligible spouse do not apply in determining the amount of the individual's contribution to the cost of services after eligibility has been established. A public hearing was held from 8:00 a.m.-5:00 p.m. on August 20, 1993. No public testimony was offered. Written comments on the proposal were received from Pecan Valley Mental Health and Mental Retardation Center, Stephenville; and Austin-Travis County Mental Health and Mental Retardation Center, Austin. A commenter questioned whether TDHS or TXMHMR would determine an applicant's eligibility for services as described in sec.409.101(a) and (b). The department responds that determinations of eligibility will be made by TXMHMR and has revised the language of the section accordingly. A commenter questioned why a comprehensive diagnosis and evaluation is required in sec.409.101(b)(3) when this is no longer a statutory requirement. The commenter also recommended that the rule should reflect the changes in the proposed HCS Waiver Renewal Document. The department responds that the language in sec.409.101(b)(3) has been revised to reflect recent changes in state law concerning this provision. In addition, the department notes that the subchapter will be amended, as necessary, at a future date to reflect any changes that may be made in the HCS Waiver Renewal Document. A commenter questioned whether an appeals request as described in sec.409. 102 is to be submitted to TXMHMR or TDHS. The department responds that appeals should be submitted to TXMHMR and has added clarifying language to the section. A commenter questioned why the per diem rate reimbursement methodology is continued as described in sec.409.103, and suggested that unless the per diem rate is raised significantly, a more reasonable method of reimbursement may be a fee for services method which fairly and adequately reimburses the actual costs of required services. The same commenter also stated that there is inadequate reimbursement for day activities and vocational training and the available community resources are inadequate. The department responds that room and board are not reimbursable Medicaid Waiver services except as included in respite services. Pre-vocational and supported employment services have been excluded from the HCS Waiver Renewal 1993-1998 until the department can conduct further analysis. A commenter noted that the proposal does not address the medical and dental needs of individuals, and stated that the assumption that community resources and Medicaid access are available is false. The department responds that dental services are not a reimbursable Medicaid Waiver Service. Persons are expected to access medical services in the community using their Medicaid card. It is acknowledged that it is sometimes difficult to access medical services in the community through Medicaid, and the department is forwarding the commenter's concerns to the Medical Care Advisory Committee of the Health and Health Services Commission. The sections are adopted under the Health and Safety Code, Title 7, sec.532. 015(a), which provides the Texas Mental Health and Mental Retardation Board with rulemaking powers; and under the provisions of Texas Civil Statutes, Article 4413(502) sec.16, which provides the Health and Human Services Commission with the authority to administer federal medical assistance funds. sec.409.101. Client Eligibility Criteria. (a) To be determined eligible by the Texas Department of Mental Health and Mental Retardation (TXMHMR) for Home and Community-based Services (HCS), an applicant must: (1) be categorically eligible for Supplemental Security Income (SSI) benefits; or (2) have once been eligible for and received SSI benefits and continue to be eligible for Medicaid as a result of protective coverage mandated by federal law, or (3) be under age 18 and reside with parents or spouses. Clients under 18 must satisfy all of the following: (A) be eligible for Medicaid benefits only if institutionalized; (B) meet the SSI criteria for disability as documented on the appropriate Texas Department of Human Services (TDHS) forms; (C) meet the SSI criteria for institutional deeming; and (D) have income and resources which meet the requirements of the SSI program; or (4) be an individual under 19 years of age for whom the Texas Department of Protective and Regulatory Services (PRS) assumes financial responsibility, in whole or in part (not to exceed Level II foster care payment), and who is being cared for in: (A) a family foster home which is licensed or certified and supervised by PRS, or (B) a family foster home which is licensed or certified and supervised by a licensed public or private nonprofit child placing agency; or (5) be a member of a family who receives full Medicaid benefits as a result of qualifying for Aid to Families with Dependent Children; or (6) be eligible for SSI benefits in the community, except on the basis of income, and meet the special institutional income limit for Medicaid benefits in Texas without regard to spousal income. (b) To be determined eligible by TXMHMR TDHS for HCS services, clients must also: (1) meet the ICF-MR I, V, or VI level of care criteria as determined by the Texas Department of Health (TDH) according to applicable state and federal regulations and as verified by a current Level of Care Assessment form. (A) A preadmission Level of Care Assessment form by TXMHMR expires 90 calendar days from its issuance. For clients who are enrolled into the HCS program within 30 calendar days of discharge from an ICF-MR or another HCS provider, the current level of care assessment may be used for enrollment and is valid until the expiration date on the Level of Care Assessment form. (B) Reevaluations of ICF-MR level-of-care criteria are performed annually by the Texas Department of Mental Health and Mental Retardation (TXMHMR). An initial reevaluation of level of care must be performed no later than 364 calendar days from the date of enrollment. Subsequent level-of-care reevaluations must be performed no later than 364 calendar days from the effective date of the prior level of care assignment. (C) Any gaps in level of care coverage periods result in loss of payment to the provider. (2) live in the contracted provider's geographic catchment area as defined in the waiver request. If an applicant has been removed from his home and community because of ICF-MR institutional placement, he may be considered for placement in the HCS program even though his original county of residence is outside the provider's geographic catchment area. (3) have had a determination of mental retardation performed according to state law. (4) have an Individual Plan of Care for Home and Community-based Services form developed by the providers' interdisciplinary team; the team must be composed of a case management services provider, nurse, and social worker who meet the qualifications specified in the waiver. (A) The Individual Plan of Care for Home and Community-based Services form must specify the type of waiver services required to keep an individual in the community, the units of waiver services, and their frequency and duration. (B) The Individual Plan of Care for Home and Community-based Services form must be signed and dated by the interdisciplinary team prior to implementation. The interdisciplinary team must certify in writing that the waiver services authorized on the Individual Plan of Care are necessary to avoid ICF-MR institutional placement and are appropriate to meet the applicant's needs in the community, as recommended. (C) The Individual Plan of Care for Home and Community-based Services form must be approved by the Texas Department of Mental Health and Mental Retardation (TXMHMR) and updated by the provider at least annually. Any gaps in the coverage periods of the individual plans of care approved by TXMHMR result in loss of payment to the provider. (c) The estimated annual cost of the applicant's Individual Plan of Care for Home and Community-based Services form must not exceed $37,781 annually, the individual client cost ceiling used to determine eligibility. (d) Enrollment into the HCS Program is limited to the number of clients approved by Health Care Financing Administration (HCFA) and allocated to the provider. sec.409.102. Right to Appeal. Any applicant or client who is denied Home and Community-based Services is entitled to a fair hearing conducted by the TDHS according to applicable TDHS rules. Requests for hearings should be submitted to TXMHMR. sec.409.117. Spousal Impoverishment Provisions. (a) For waiver recipients with spouses who live in the community, the income and resource eligibility requirements are determined according to the spousal impoverishment provisions in the Social Security Act, sec.1924, and as specified in the Medicaid State Plan, and in sec.409.101 of this title (relating to Financial Eligibility Criteria.) (b) After the recipient is determined to be eligible for Medicaid, the TDHS determines the amount of the recipient's income applicable to payment. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on September 10, 1993. TRD-9328714 Anne K. Utley Chairman Texas Board of Mental Health and Mental Retardation Effective date: October 1, 1993 Proposal publication date: August 3, 1993 For further information, please call: (512) 206-4516 Subchapter E. Home and Community-based Waiver Services-OBRA 25 TAC sec.sec.409.151-409.166 The Texas Department of Mental Health and Mental Retardation (TXMHMR) adopts new sec.sec.409.151-409.157. and 409.159-409.166, concerning home and community- based waiver services, without changes to the proposed text as published in the August 3, 1993, issue of the Texas Register (18 TexReg 5035) and will not be republished. New sec.409.158 is adopted with changes to the text as proposed. The provisions of Subchapter E govern the administration of the Medicaid home and community-based waiver services program in Texas. The new rules are substantially the same as rules of the Texas Department of Human Services (TDHS) contained in Title 40, Texas Administrative Code, sec.sec.48.2401-48.2416, governing the same matters. The primary difference in the documents is that references to TDHS have been changed to reference TXMHMR, where appropriate, to enable the transfer from TDHS to TXMHMR of Medicaid state operating agency functions for home and community-based waiver services. This transfer is enacted under the authority of the Health and Human Services Commission as the Medicaid single state agency pursuant to House Bill 7 of the 72nd Texas Legislature and the Medicaid State Plan. A public hearing was held from 8:00 a.m.-5:00 p.m. on August 20, 1993. No public testimony was offered. Written comments on the proposal were received from Pecan Valley Mental Health and Mental Retardation Region, Stephenville. The commenter questioned whether an appeal request in sec.409.158 is to be submitted to TXMHMR or TDHS. The department responds that appeals should be submitted to TXMHMR and has added clarifying language to the section. The sections are adopted under the Health and Safety Code, Title 7, sec.532. 015(a), which provides the Texas Mental Health and Mental Retardation Board with rulemaking powers; and under the provisions of Texas Civil Statutes, Article 4413(502) sec.16, which provide the Health and Human Services Commission with the authority to administer federal medical assistance funds. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on September 10, 1993. TRD-9328713 Anne K. Utley Chairman Texas Board of Mental Health and Mental Retardation Effective date: October 1, 1993 Proposal publication date: August 3, 1993 For further information, please call: (512) 206-4516 Subchapter F. Case Management Program Requirements 25 TAC sec.sec.409.201-409.213 The Texas Department of Mental Health and Mental Retardation (TXMHMR) adopts new sec.sec.409.201-409.212, concerning case management program requirements. Section 409.213 is adopted with changes to the proposed text as published in the August 3, 1993, issue of the Texas Register (18 TexReg 5041); sec. sec.409.201- 409.212 are adopted without change and will not be republished. The provisions of Subchapter F govern the administration of the Medicaid case management program requirements in Texas. The new rules are substantially the same as rules of the Texas Department of Human Services (TDHS) contained in Title 40, Texas Administrative Code, sec.sec.31.1-31.13, governing the same matters. The primary difference in the documents is that references to TDHS have been changed to reference TXMHMR, where appropriate, to enable the transfer from TDHS to TXMHMR of Medicaid state operating agency functions. This transfer is enacted under the authority of the Health and Human Services Commission as the Medicaid single state agency pursuant to House Bill 7 of the 72nd Texas Legislature and the Medicaid State Plan. A public hearing was held from 8:00 a.m.-5:00 p.m. on August 20, 1993. No public testimony was offered. Written comments on the proposal were received from the Texas Council of Community Mental Health and Mental Retardation Centers, Inc.; and Pecan Valley Mental Health and Mental Retardation Region, Stephenville. A commenter questioned whether an appeal request in sec.409.213 is to be submitted to TXMHMR or TDHS. The department responds that appeals should be submitted to TXMHMR and has added clarifying language to the section. One commenter acknowledged the "housekeeping" function inherent in the publication of the proposal as part of the transfer to TXMHMR of responsibilities as the Medicaid state operating agency, but noted that the department urgently needs to develop policy governing implementation of the program. The commenter specified that the policy should address: program operations, i.e., standards of acceptable performance; actions the department will take when standards are not followed; policy governing the determination of fraud and abuse; and monitoring/auditing functions. The department agrees with the observations and intends to proceed with development of the needed policies within the coming months. The sections are adopted under the Health and Safety Code, Title 7, sec.532. 015(a), which provides the Texas Mental Health and Mental Retardation Board with rulemaking powers; and under the provisions of Texas Civil Statutes, Article 4413(502) sec.16, which provide the Health and Human Services Commission with the authority to administer federal medical assistance funds. sec.409.213. Right to Appeal. Applicants have the right to appeal TDHS decisions according to TDHS's fair hearing rules contained in Title 40, TAC, Chapter 79. Requests for hearings should be submitted to TXMHMR. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on September 10, 1993. TRD-9328712 Anne K. Utley Chairman Texas Board of Mental Health and Mental Retardation Effective date: October 1, 1993 Proposal publication date: August 3, 1993 For further information, please call: (512) 206-4516 Subchapter G. Case Management for Persons with Chronic Mental Illness 25 TAC sec.sec.409.251-409.255 The Texas Department of Mental Health and Mental Retardation (TXMHMR) adopts new sec.sec.409.251-409.255, concerning case management for persons with chronic mental illness, without changes to the proposed text as published in the August 3, 1993, issue of the Texas Register (18 Tex Reg 5046). The text of the sections will not be republished. The provisions of Subchapter G govern the administration of the Medicaid program for case management for persons with chronic mental illness in Texas. The new rules are substantially the same as rules of the Texas Department of Human Services (TDHS) contained in Title 40, Texas Administrative Code, sec.sec.31.201-31.205, governing the same matters. The primary difference in the documents is that references to TDHS have been changed to reference TXMHMR to enable the transfer from TDHS to TXMHMR of Medicaid state operating agency functions. This transfer is enacted under the authority of the Health and Human Services Commission as the Medicaid single state agency pursuant to House Bill 7 of the 72nd Texas Legislature and the Medicaid State Plan. A public hearing was held from 8:00 a.m.-5:00 p.m. on August 20, 1993. No public testimony was offered. Written comments on the proposal were received from the Texas Council for Mental Health and Mental Retardation Centers, Inc, Austin; and Pecan Valley Mental Health and Mental Retardation Region, Stephenville. One commenter acknowledged the "housekeeping" function inherent in the publication of the proposal as part of the transfer to TXMHMR of responsibilities as the Medicaid state operating agency, but noted that the department urgently needs to develop policy governing implementation of the program. The commenter specified that the policy should address: program operations, i.e., standards of acceptable performance; actions the department will take when standards are not followed; policy governing the determination of fraud and abuse; and monitoring/auditing functions. The department agrees with the observations and intends to proceed with development of the needed policies within the coming months. A commenter noted that the DSM-III-R does not define "chronic mental disorder" as referenced in sec.409.251 and recommended that the department adopt a specific list of disorders. The same commenter questioned whether the department will automatically adopt the DSM-IV upon its publication in early 1994 and suggested that in sec.409.251 reference be made to the edition of the DSM adopted by the department rather than to the "latest edition." The department responds that since the primary purpose of this rule action is to accomplish the transfer of Medicaid state operating agency functions under the authority of the Texas Health and Human Services Commission from TDHS to TXMHMR, substantive issues will be addressed in the near future (see previous response) as the department settles into this new role; the commenter's suggestions will be considered at that time. The sections are adopted under the Health and Safety Code, Title 7, sec.532. 015(a), which provides the Texas Board of Mental Health and Mental Retardation with rulemaking powers; and under the provisions of Texas Civil Statutes, Article 4413(502) sec.16, which provides the Health and Human Services Commission with the authority to administer federal medical assistance funds. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on September 10, 1993. TRD-9328711 Anne K. Utley Chairman Texas Mental Health and Mental Retardation Effective date: October 1, 1993 Proposal publication date: August 10, 1993 For further information, please call: (512) 206-4516 Subchapter I. Rehabilitative Services for Persons with Mental Illness 25 TAC sec.sec.409.351-409.357 The Texas Department of Mental Health and Mental Retardation (TXMHMR) adopts new sec.sec.409.351-409.357, concerning rehabilitative services for persons with a mental illness, without changes to the proposed text as published in the August 3, 1993, issue of Texas Register (18 TexReg 5050). The sections will not be republished. The provisions of Subchapter I govern the administration of the Medicaid program for rehabilitative services for persons with a mental illness in Texas. The new rules are basically identical to rules of the Texas Department of Human Services (TDHS) contained in Title 40, Texas Administrative Code, sec.sec.29.2301-29.2306, governing the same matters. The only difference in the documents is that references to TDHS have been changed to reference TXMHMR, as appropriate to enable the transfer from TDHS to TXMHMR of Medicaid state operating agency functions for rehabilitative services for persons with a mental illness. This transfer is enacted under the authority of the Health and Human Services Commission as the Medicaid single state agency pursuant to House Bill 7 of the 72nd Texas Legislature and the Medicaid State Plan. A public hearing was held from 8:00 a.m.-5:00 p.m. on August 20, 1993. No public testimony was offered. Written comments on the proposal were received from the Texas Council of Mental Health and Mental Retardation Center, Inc., Austin; Pecan Valley Mental Health and Mental Retardation Center, Stephenville; and the Texas Alliance for the Mentally Ill. One commenter acknowledged the "housekeeping" function inherent in the publication of the proposal as part of the transfer to TXMHMR of responsibilities as the Medicaid state operating agency, but noted that the department urgently needs to develop policy governing implementation of the program. The commenter specified that the policy should address: program operations, i.e., standards of acceptable performance; actions the department will take when standards are not followed; policy governing the determination of fraud and abuse; and monitoring/auditing functions. The department agrees with the observations and intends to proceed with development of the needed policies within the coming months. A commenter noted that in sec.409.351, the definition of "professional" refers to a certified social worker although recent legislation has changed certification to licensure. The commenter also noted that the reference to Certified Alcohol and Drug Abuse Counselor should be dropped since there has been licensure for some years by the Texas Commission on Alcohol and Drug Abuse. The commenter requested clarification in sec.409.351 concerning what constitutes "experience in mental health services" as discussed in the definition of "professional" and suggested that the language would permit secretaries to be so classified. The commenter suggested consulting the recommendations of the TXMHMR Quality Services Council regarding updating the Mental Health Community Service Standards. The department responds that the purpose of the proposal was to effect the transfer of Medicaid state operating agency functions for rehabilitative services for persons with a mental illness to TXMHMR. Substantive issues such as these will be addressed when the subchapter is revisited in the coming months. A commenter requested that in sec.409.353(b)(2) the department state what constitutes "appropriate" crisis resolution, not just a menu of possible crisis alternatives. The commenter stated that although such services shouldn't be just a referral to make an appointment, this is often what happens. The same commenter also questioned whether the department was still in the detoxification business. The department responds that as the purpose of the proposal was to affect the transfer of Medicaid state operating agency functions for rehabilitative services for persons with a mental illness to TXMHMR, substantive issues such as these will be addressed when the subchapter is revisited in the coming months. A commenter noted that the reference to "severe mental disorder" in sec.409. 352 is inappropriate since the DSM-III-R does not define this term. The department responds that as the purpose of the proposal was to affect the transfer of Medicaid state operating agency functions for rehabilitative services for persons with a mental illness to TXMHMR, substantive issues such as these will be addressed when the subchapter is revisited in the coming months. The sections are adopted under the Health and Safety Code, Title 7, sec.532. 015(a), which provides the Texas Mental Health and Mental Retardation Board with rulemaking powers; and under the provisions of Texas Civil Statutes, Article 4413(502) sec.16, which provide the Health and Human Services Commission with the authority to administer federal medical assistance funds. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on September 10, 1993. TRD-9328708 Anne K. Utley Chairman Texas Mental Health and Mental Retardation Effective date: October 1, 1993 Proposal publication date: August 10, 1993 For further information, please call: (512) 206-4516 TITLE 28. INSURANCE Part I. Texas Department of Insurance Chapter 5. Property and Casualty Insurance Subchapter B. Insurance Code, Chapter 5, Subchapter B 28 TAC sec.sec.5.1001-5.1002 The State Board of Insurance of the Texas Department of Insurance adopts the repeal of sec.5.1001 and sec.5.1002 concerning property and casualty insurance without changes to the proposed text as published in the July 16, 1993, issue of the Texas Register (18 TexReg 4617). Section 5.1001 and sec.5.1002 relate to approval of general liability (a) rate or individual risk filings and the distribution of these filings upon approval by the State Board of Insurance. The sections are repealed because the (a) rate filing procedure is no longer applicable to these types of individual risks. With the enactment of Article 5.13-2 of the Insurance Code, general liability rates are now regulated under a file and use system. Article 5.15 relating to the filing of individual risk submissions, including those for general liability, and on which this regulation is based, is no longer applicable to these types of risks. The repeal of sec.5.1001 and sec.5.1002 will eliminate unnecessary regulation from this title of the Texas Administrative Code. No comments were received regarding adoption of the repeals. The repeals are adopted pursuant to the Insurance Code, Articles 5.98, 5. 13-2, and 1.04, and Texas Civil Statutes, Article 6252-13a, sec.4 and sec.5. Article 5.98 authorizes the State Board of Insurance to adopt reasonable rules appropriate to accomplish the purposes of Chapter 5 of the Insurance Code. Article 5.13-2 authorizes the State Board of Insurance to approve or disapprove rate filings for general liability insurance. Article 1.04(b) authorizes the State Board of Insurance to determine rules and rates in accordance with the laws of this state. Texas Civil Statutes, Article 6252-13a, sec.4 and sec.5, authorize and require each state agency to adopt rules of practice setting forth the nature and requirement of available procedures and to prescribe the procedures for adoption of rules by a state administrative agency. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on September 8, 1993. TRD-9328520 Linda K. von Quintus-Dorn Chief Clerk Texas Department of Insurance Effective date: September 29, 1993 Proposal publication date: July 16, 1993 For further information, please call: (512) 463-6328 Subchapter D. Fire and Allied Lines Insurance Rate Deviation Rules 28 TAC sec.5.3102 The State Board of Insurance of the Texas Department of Insurance adopts the repeal of sec.5.3102 concerning rate deviation rules, without changes to the proposed text as published in the July 16, 1993, issue of the Texas Register (18 TexReg 4617). Section 5.3102 specifies rate deviation regulations for fire, extended coverage, homeowners, and farm and ranch owners insurance. The section is repealed because rate deviations are no longer applicable to these lines of insurance. With the enactment of the Insurance Code, Articles 5.101 and 5. 13-2, by the 72nd Texas Legislature, these lines are now regulated under the flexible rating program and the file and use system. Article 5.26 of the Insurance Code, relating to deviations from the promulgated maximum rate and on which this regulation is based, is no longer applicable to the rate regulation of these lines. The repeal will eliminate unnecessary regulation from this title of the Texas Administrative Code. No comments were received regarding adoption of the repeal. The repeal is adopted under the Insurance Code, Articles 5.98, 5.101, 5. 13-2, and 1.04, and Texas Civil Statutes, Article 6252-13a, sec.4 and sec.5. Article 5.98 authorizes the State Board of Insurance to adopt reasonable rules that are appropriate to accomplish the purposes of Chapter 5 (Rating and Policy Forms) of the Insurance Code. Article 5.101, sec.3, authorizes the State Board of Insurance to promulgate a benchmark rate and a flexibility band for all lines of residential property insurance. Article 5.13-2 authorizes the State Board of Insurance to approve or disapprove rate filings for commercial property insurance. Article 1.04(b) authorizes the State Board of Insurance to determine rules and rates in accordance with the laws of this state. Texas Civil Statutes, Article 6252-13a, sec.4 and sec.5, authorize and require each state agency to adopt rules of practice setting forth the nature and requirement of available procedures and to prescribe the procedures for adoption of rules by a state administrative agency. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on September 8, 1993. TRD-9328521 Linda K. von Quintus-Dorn Chief Clerk Texas Department of Insurance Effective date: September 29, 1993 Proposal publication date: July 16, 1993 For further information, please call: (512) 463-6328 Subchapter D. Fire and Allied Lines 28 TAC sec.5.3103 The State Board of Insurance of the Texas Department of Insurance adopts the repeal of sec.5.3103 concerning rte deviation; Texas Commercial Multiperil Insurance, without changes to the proposed text as published in the July 16, 1993, issue of the Texas Register (18 TexReg 4618). Section 5.3103 specifies rate deviation regulations for commercial multiperil insurance. The section is repealed because rate deviations are no longer applicable to this line of insurance. With the enactment of Article 5. 13-2 of the Insurance Code by the 72nd Texas Legislature, commercial property regulation was changed to a file and use system. Pursuant to the authority granted to the Board in Article 5.81, which authorizes the Board to approve rules for regulating commercial multiperil insurance that are in the best judgment of the Board necessary and desirable in carrying out the purposes and objectives of Article 5.81, the Board adopted the file and use system for commercial multiperil insurance as provided in sec.5.9101 of this title. Article 5.26 of the Insurance Code, relating to deviations from the promulgated maximum rate and on which this section is based, is no longer applicable to the rate regulation of commercial multiperil insurance. The repeal of sec.5.3103 will eliminate unnecessary regulation from this title of the Texas Administrative Code. No comments were received regarding adoption of the repeal. The repeal is adopted under the Insurance Code, Articles 5.81, 5.13-2, and 1.04, and Texas Civil Statutes, Article 6252-13a, sec.4 and sec.5. Article 5.81 authorizes the Board to approve rules for regulating commercial multiperil insurance that are in the best judgment of the Board necessary and desirable in carrying out the purposes and objectives of Article 5.81. Article 5.13-2 authorizes the State Board of Insurance to approve or disapprove rate filings for commercial property insurance. Article 1.04(b) authorizes the State Board of Insurance to determine rules and rates in accordance with the laws of this state. Texas Civil Statutes, Article 6252-13a, sec.4 and sec.5, authorize and require each state agency to adopt rules of practice setting forth the nature and requirement of available procedures and to prescribe the procedures for adoption of rules by a state administrative agency. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on September 8, 1993. TRD-9328522 Linda K. von Quintus-Dorn Chief Clerk Texas Department of Insurance Effective date: September 29, 1993 Proposal publication date: July 16, 1993 For further information, please call: (512) 463-6328 Subchapter G. Workers' Compensation Insurance Workers' Compensation Insurance Subscriber Notices 28 TAC sec.sec.5.6702-5.6707 The State Board of Insurance of the Texas Department of Insurance adopts the repeal of sec.sec.5.6702-5.6707 relating to workers' compensation insurance subscriber notices, without changes to the proposed text as published in the July 23, 1993, issue of the Texas Register (18 TexReg 4828). These sections are repealed and the collection of subscriber notice data is transferred to the Texas Workers' Compensation Commission, pursuant to sec.sec.1. 16-1.20 of House Bill Number 1461 (Sunset Bill), 73rd Texas Legislature, effective September 1, 1993. The repeal of these sections is necessary since the collection of subscriber notice data is transferred to the Texas Workers' compensation commission, pursuant to sec.sec.1.16-1.20 of House Bill Number 1461 (Sunset Bill), 73rd Texas Legislature, effective September 1, 1993. The repeal eliminates requirements as a result of the transfer of collection and maintenance of subscriber notice data from the Texas Department of Insurance to the Texas Workers' Compensation Commission effective September 1, 1993. No comments were received regarding adoption of the repeals. The repeals are adopted under Insurance Code, Article 1.04, and Texas Civil Statutes, Article 6252-13a, sec.4 and sec.5, and implements sec.sec.1.16-1.20 of House Bill 1461 (Sunset Bill) 73rd Texas Legislature. The Insurance Code, Article 1.04(b), authorizes the Board to determine rules in accordance with the laws of this state. Vernon's Texas Civil Statutes, Article 6252-13a, sec.4 and sec.5, authorize and require each state agency to adopt rules of practice setting forth the nature and requirements of available procedures and prescribe the procedures for adoption of rules by state administrative agency. The repeal affects the collection and maintenance of subscriber notice data required to be collected and maintained in accordance with Texas Civil Statutes, Article 8308 (Texas Workers' Compensation Act) sec.3.27. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on September 8, 1993. TRD-9328524 Linda K. von Quintus-Dorn Chief Clerk Texas Department of Insurance Effective date: September 29, 1993 Proposal publication date: July 16, 1993 For further information, please call: (512) 463-6328 Subchapter I. Rules Supplementary to the Insurance Code, Chapter 5 Subchapter L 28 TAC sec.5.8002 The State Board of Insurance of the Texas Department of Insurance adopts the repeal of sec.5.8002, without changes to the proposed text as published in the July 16, 1993, issue of the Texas Register (18 TexReg 4618). Section 5.8002 relates to the notice requirements for advisory organizations on matters filed pursuant to the Insurance Code, Articles 5.96 and 5.97. The section is repealed because the special notice requirements of this section are no longer necessary. Article 5.73 of the Insurance Code, relating to advisory organizations and on which this regulation is based, was amended pursuant to House Bill 2 by the 72nd Texas Legislature to greatly diminish the role of advisory organizations in the regulatory process. The State Board of Insurance will follow the same notice requirements and procedures for advisory organizations as for other persons interested in matters considered by the Board pursuant to Articles 5.96 and 5.97. The repeal of sec.5.8002 will eliminate unnecessary regulation from this title of the Texas Administrative Code. No comments were received regarding adoption of the repeal. The repeal is adopted under the Insurance Code, Articles 5.98, 5.73, and 1. 04, and Texas Civil Statutes, Article 6252-13a, sec.4 and sec.5. Article 5.98 authorizes the State Board of Insurance to adopt reasonable rules that are appropriate to accomplish the purposes of Chapter 5. Article 5.73 grants the State Board of Insurance regulatory authority over advisory organizations. Article 1.04(b) authorizes the State Board of Insurance to determine rules, rates and forms in accordance with the laws of this state. Texas Civil Statutes, Article 6252-13a, sec.4 and sec.5, authorize and require each state agency to adopt rules of practice setting forth the nature and requirement of available procedures and to prescribe the procedures for adoption of rules by a state administrative agency. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on September 8, 1993. TRD-9328523 Linda K. von Quintus-Dorn Chief Clerk Texas Department of Insurance Effective date: September 29, 1993 Proposal publication date: July 16, 1993 For further information, please call: (512) 463-6328 Subchapter J. Rules to Implement the Amusement Ride Safety and Inspection Insurance 28 TAC sec.sec.5.9005-5.9008 The State Board of Insurance of the Texas Department of Insurance adopts the repeal of sec.sec.5.9005-5.9008 concerning property and casualty insurance, without changes to the proposed text as published in the July 23, 1993, issue of the Texas Register (18 TexReg 4828). Sections 5.9005-5.9008 concern the requirements for the Amusement Ride Safety Inspection and Insurance Act, Article 21.60 of the Insurance Code. The repeal of sec.sec.5.9005-5.9008 is necessary to enable the Board simultaneously to adopt new sec.5.9005 and sec.5.9006, which replace the repealed sec.5.9005 and sec.5.9006 with new provisions concerning the Amusement Ride Safety Inspection and Insurance Act and renumber and make administrative changes to sec.sec.5.9005-5. 9008 as sec.sec.5.9007-5.9010. The repeal of sec.sec.5.9005-5.9008 permits the adoption of new sections and lets the agency make administrative changes and renumber sec.sec.5.9005-5.9008 as sec.sec.5.9007-5.9010. No comments were received regarding adoption of the repeals. The repeals are adopted under the Insurance Code, Articles 21.60 and 1.04, and Texas Civil Statutes, Article 6252-13a sec.4 and sec.5. The Insurance Code, Article 21.60 authorizes rules relating to the administration and enforcement of the Amusement Ride Safety Inspection and Insurance Act. Article 1.04(b) authorizes the Board to determine rules in accordance with the laws of this state for uniform application. Texas Civil Statutes, Article 6252-13a, sec.4 and sec.5, authorize and require each state agency to adopt rules of practice setting forth the nature and requirement of available procedures, and prescribe the procedures for adoption of rules of a state administrative agency. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on September 8, 1993. TRD-9328528 Linda K. von Quintus-Dorn Chief Clerk Texas Department of Insurance Effective date: September 29, 1993 Proposal publication date: July 16, 1993 For further information, please call: (512) 463-6328 28 TAC sec.sec.5.9001-5.9014 The State Board of Insurance of the Texas Department of Insurance adopts amendments to sec.sec.5.9001-5.9004 and new sec. sec.5.9005-5.9014, concerning the Amusement Ride Safety Inspection and Insurance Act, with changes to the proposed text as published in the July 23, 1993, issue of the Texas Register (18 Tex Reg 4829). Sections 5.9001-5.9014 are necessary to clarify and to better define the scope of amusement rides operating in Texas; to clarify the criteria for amusement ride inspections; to establish a system to validate the qualifications of inspectors conducting amusement ride inspections; and to clarify the requirements of the Act. These sections provide safety inspection standards and insurance minimums on amusement ride owners/operators to protect the public in their expectation of a safe, controlled, and insured amusement ride. The adoption contains a number of changes to the sections as proposed and published. The definition of Inspection in sec.5.9002 was changed to add the date of adoption of these rules to specify the date of ASTM standards to be adopted as standards for amusement ride inspections. The change to sec.5. 9004(1)(B) added the words "if applicable" regarding the requirement to include the name and serial number of the amusement ride/device on the inspection certificate. The change was made to accommodate those home-made and other amusement rides that do not have or are not issued serial numbers by the manufacturer. The change to sec.5.9004(2) added the words "should if possible" to the requirement to submit both insurance policy and inspection certificate with the same date. In addition the phrase "and is covered by the insurance required by sec.5.9004(1) of this title (relating to Amusement Ride Operations Requirements)" was deleted. Section 5.9004(2)(I)(iv) was changed to clarify when an amusement ride should be closed and reinspected due to an injury. The change to sec.5.9008(2) adds the words "due to the requirements of this subchapter" to eliminate the requirement for owner/operators to submit inspection certificates on every inspection performed. The change to sec.5. 9011(l) adds the sentence, "Water rides that present no fire hazard will not require a fire extinguisher" to clarify what kind of rides require fire extinguishers. Sections 5.9001-5.9014 are necessary to regulate the Amusement Ride Safety Inspection and Insurance Act. The sections are necessary to clarify and to better define the scope of amusement rides operating in Texas; to clarify the criteria for amusement ride inspections; to establish a system to validate the qualifications of inspectors conducting amusement ride inspections; and to clarify the requirements of the Act. The sections provide safety inspection standards and insurance minimums on amusement ride owners/operators to protect the public in their expectation of a safe, controlled, and insured amusement ride. The adoption of new sec.5.9005 and sec.5.9006 is simultaneous with the repeal of present sec.sec.5.9005-5.9008. commenters expressed confusion regarding the Fiscal Note. One operator states that his costs for inspections approximate $2,000 to $2,500 for his entire operation and the Fiscal Note references costs of $100 up to $300. The commenter also does not believe that there will be any additional public benefit from the proposed sections. RESPONSE: The $100 to $300 cost used in the Fiscal Note is a general cost factor provided to staff by several amusement ride inspectors for each ride inspected, dependent upon the number and complexity of the ride inspected. Without knowing what the commenter is currently paying for inspections per ride inspected, the agency is unable to determine if the sections will have an increased financial impact on his operation. The sections also include bungee jumping and water theme parks which were not previously included and regulating these areas will benefit the public. The only procedural requirements changed as a result of these rules is to establish "standards" for the required inspections that include ASTM standards, the manufacturers' standards or insurance company standards. GENERAL COMMENTS. A: A commenter expressed concern over being overcome with paperwork. RESPONSE: The agency does not feel the adopted sections will create any additional paperwork requirements. The commenter is currently meeting the insurance and inspection requirements of the current rule, and the sections will not create any new paperwork. Staff will clarify this issue with the commenter personally. B: A commenter addressed concerns as to whether the regulatory implications of the proposed rules over waterpark operators would also extend to governmental entities such as cities and municipalities. As a private operator, this commenter felt the sections should be equally applied; otherwise it would be discriminatory and defeat the intended purpose of the rule change which is to protect the public. RESPONSE: The agency feels that most municipality playgrounds and aquatic centers, do not include rides or devices that fall under the definition of amusement rides. There are, however, a few municipalities that are breaking the traditional mold and venturing into more sophisticated water slides and charging admission to use these slides. If a municipality has a ride that fits within the definition of amusement ride it will have to comply with the Act and these sections. C: Comments were received of a general nature endorsing the adoption of ASTM standards for inspections and applauding the efforts to establish criteria for inspectors as reasonable and certainly the minimum expected of any person inspecting equipment for the safety of others. RESPONSE: The agency concurs. D: A commenter feels the sections, in their entirety, are vague, weighted in favor of industry, and do little to protect the public against specific dangers. It is felt that the requirements for inspectors should also apply to amusement ride owners/operators. Also, owners/operators should understand the safety aspects of their rides. RESPONSE: The agency disagrees. The agency feels that by including ASTM standards for inspections and more specific criteria for amusement ride inspectors, the sections are slanted towards increased public protection. The agency does not feel the criteria established for inspectors would be appropriate for owners/operators, but the sections do include operator/operational requirements ( sec.5.9011) that strengthen both qualification and conduct of operators. The agency concurs with the commenter's final statement that owners/operators should understand the safety aspects of their rides. The agency believes understanding and adherence to these rules will help many owners/operators to develop a better understanding of the safety aspects of their rides. E: A commenter feels that bungee jumping operations do not properly fit within the amusement ride industry and that bungee operations should be regulated under a separate, specially created regulatory framework. RESPONSE: At the present time there is no legislative authority for setting up a separate regulatory framework for bungee operations. At the present time the only legislative authority for regulating bungee operations is Article 21. 60. F: A commenter expressed concern that bringing water parks under the regulation of Article 21.60 would hamper his right to design and build his own rides since he was not an engineer. RESPONSE: The agency does not have problem with amusement rides being built by a non-engineer owner/operator provided that the owner/operator complies with the insurance and safety inspection requirements of Article 21.60. sec.5.9002. Definition of Amusement Ride. A commenter wants clarification as to the meaning of "gravity or water device". He questions whether the meaning includes wave pools, lazy river, kiddie rides, municipal pools, etc. Commenters feel that adding water rides to the sections introduces a great deal of subjectivity to an area that is currently somewhat objective. One commenter notes that a lot of the standards for amusement rides have been established and fall under ASTM. Concern was expressed over the criteria that an inspector will use when inspecting a water ride. Another commenter thought that the definition of amusement ride that specifically excludes playground equipment including swings, seesaws, stationary spring-mounted animal features, rider-propelled merry-go-rounds, etc., should be better defined to state more specifically how high a swing or how high a slide can be before it should be considered under the definition of amusement ride. RESPONSE: The agency agrees with the comment that the addition of water rides to the sections requires a degree of subjectivity to an area that has not been reviewed in the past. The agency believes that this element of subjectivity is important, and if there is any doubt, the rides should be inspected rather than ignored. By the inclusion of water rides, the department will start to build some objective standards not only for what constitutes a ride/device but for the inspection criteria and guidelines for water rides. Water rides were included as part of the sections to provide the element of consumer protection authorized by the Texas Amusement Ride Safety Inspection and Insurance Act (the Act), Article 21.60, Texas Insurance Code. The agency believes that some degree of subjectivity will always be required as new innovations are made in the amusement ride industry. the agency does feel that if a ride is controlled and requires an operator to maintain control, that the ride will probably be considered to fall under the Act. If there is any doubt, the agency currently discusses with well recognized inspectors, insurance carriers, trade associations and other operators as to whether a ride should be considered covered by the Act. It is believed that most municipalities with playgrounds, swimming pools, basketball courts, etc. do not fall under the definition of amusement rides either in the sections or the Act. Devices such as slides and swings in a recreational facility should be safety inspected for general safety considerations and should be covered under a park owner's general liability policy, but do not fall under the interpretations of "amusement ride" because the Act specifically excludes these items. sec.5.9002. Definition of Inspector. Comments were received regarding the definition and qualification of "inspector" and whether insurance companies are qualified to set standards for inspectors to follow. RESPONSE: Inspector is defined as: "A person qualified by training, education or experience to conduct safety inspections of amusement rides or devices on behalf of an insurance company and in accordance with: the American Society for Testing and Materials, the manufacturer's standards and criteria; or standards established by the insurance company." The agency believes that in many cases, the insurance companies do not have inspectors qualified to inspect amusement rides and do not have set standards for inspection. The Act, sec.4(a)(1), requires an annual inspection of the amusement ride by an insurer or person with whom the insurer contracts, and the provision of a written certificate by that insurer or person that the amusement ride meets the standards for coverage. The addition of ASTM, manufacturer's standards, or standards established by the insurance company provides opportunity and guidance for the insurance company to use established standards in the event they have none of their own or in addition to any standards they may have. sec.5.9004(1). Comments were received concerning the issue of obtaining insurance coverage and any provisions for self insurance. Another commenter express concern that smaller operators have difficulty obtaining insurance and are more likely to be non-renewed. RESPONSE: Article 21.60, sec.4(a)(2), is very specific on this issue and states: "a person may not operate an amusement ride unless he; has an insurance policy currently in force written by an insurance company authorized to do business in this state, a surplus lines insurer, or an independently procured policy." There is no provision for self insurance. The department plans to educate amusement ride owners/operators on the TDI Market Assistance Program, and provide whatever assistance is available in finding insurance. sec.5.9004(1)(A). A commenter expressed concern that this section seems to exclude an owner/operator from using a certificate of insurance to fulfill the insurance requirement even if a policy has not been issued. RESPONSE: The agency will accept a certificate of insurance for purposes of processing the inspection report and issuing the certificate in cases where a policy has not yet been issued. However, as soon as a policy is issued to the owner/operator a complete policy must be filed under a duty to provide a certified copy of the policy to the agency within a reasonable period of time. sec.5.9004(1)(B). A commenter suggested that the schedule of rides not be made a part of the insurance policy. The contention was made that a liability policy insures a company, rather than a ride, against liability claims. The commenter asserted that the endorsement listing the covered amusement rides can serve to construe limiting coverage to those rides only. RESPONSE: The agency disagrees with the comment. Insurance companies will not insure an amusement ride operator unless each ride to be insured is specifically identified and listed on the policy. Insurance companies also will not cover rides not listed on the policy. This was a requirement in the existing sections and was not changed in the adopted sections. sec.5.9004(1)(B). A commenter stated that very few slides have serial numbers on them and the requirement that "the policy must contain a schedule listing by name and serial number of each amusement ride insured by the policy. .." would be hard to meet. RESPONSE: The requirement of the serial number is not a change to paragraph (1)(B) and when this issue surfaced previously with "homemade" amusement rides, the agency accepted the name of the ride as identification. This subparagraph was changed to read: "The policy must contain a schedule listing by name and serial number (if applicable) of each amusement ride insured by the policy.... " sec.5.9004(1)(D). A commenter does not agree with the requirement that the owner/operator provide to any sponsor, lessor, landowner, or other person responsible for an amusement ride offered for use by the public a copy of the required insurance policy limits of coverage and the inspection certificate. RESPONSE: This is a specific requirement of the Act, sec.4(a)(4) and serves to prevent third party liability as a result of amusement ride operations. sec.5.9004(1)(E). A question was raised regarding the following language: "If the owner/operator obtains a new amusement ride device from the manufacturer, the new ride shall be added to the insurance policy and a copy of the endorsement submitted to TDI. However, inspection of said ride may be delayed at the discretion of the insurance company until the next cycle of annual inspections are required." RESPONSE: The agency is of the opinion that if a new ride (free of wear related damage) is installed under the manufacturer's guidelines, the insurance company has the discretion of delaying the inspection of the ride to coincide with the regular annual inspection. sec.5.9004(2). Comments were received addressing concerns over the effective date of the insurance policy coinciding with the inspection certificate, for expedience in processing. Another commenter asserts that the insurer should determine if the amusement ride is covered by the insurance required by sec.5. 9004. RESPONSE: Although having dates that "coincide" simplifies the agency's administrative process in maintaining suspense dates on insurance policies and inspection certificates, the agency considers that both the insurance policy and the inspection certificate are good for one year from issuance. Currently, a suspense system is in effect that will track both suspense dates and notify the operator 30 days before expiration. The agency concurs with the comment regarding the insurer's determination if the amusement ride is covered by the insurance required by sec.5.9004. Section 5.9004(2) is changed to read: "Such person must also file the original amusement ride inspection certificate (TDI From AR-100, Revised 6/93) certifying with respect to each amusement ride the matters required by the Act. A separate inspection certificate is required for each amusement ride showing the name, serial number, manufacturer of the ride, the inspector's name, the owner/operator, a picture of the ride in an operable state taken at the time of the inspection, and other information as requested. The serial number and name/description of the amusement ride shall coincide with the same information identified on the insurance policy. If major components of the ride, i.e., the crane used in a bungee operation are interchangeable; the name, serial number, and manufacturer of the inspected component shall be included on the inspection certificate. The inspection certificate is valid for a one year period and for expedience in processing, should if possible coincide with the effective date of the insurance policy. The inspection shall be conducted by the insurer or a person with whom the insurer has contracted. The inspector shall provide both the insurer and owner/operator with a written certificate that the inspection has been made and that the amusement ride meets the standards for coverage (and is covered by the insurance required by sec.5.9004(1) of this title (relating to Amusement Ride Operations Requirements))." The agency will be able to determine if the amusement ride is covered by the insurance required by sec.5.9004 through a review of the insurance policy." sec.5.9004(2). A comment was received regarding the requirement to include a picture of the ride in an operable state taken at the time of inspection. RESPONSE: This requirement was added because in the past the agency has received inspection certificates of rides and it was verified that the inspection was conducted while the ride was disassembled or while packed up for transit. The commenter was concerned about obtaining a picture that would show all of the ride, i.e., a large roller coaster. The required picture only has to show a representative portion of the ride to substantiate that it was assembled and running at the time of inspection. sec.5.9004(2)(B). A commenter noted that during their 15 years of operation of waterparks, very few manufacturers have provided the waterpark with checklists or guidelines. RESPONSE: Although the waterpark industry does not receive checklists or guidelines from manufacturers, the agency feels that inspection standards are available and being used. Both the International Association of Amusement Parks (IAAPA) and the World Waterpark Association are currently developing standards which have not been formally accepted. Once formal industry standards have been adopted for waterparks, the agency will, at that time, recommend that the adopted standards be proposed for incorporation into the sections. Until that time, the agency will continue to coordinate with the waterpark industry to develop and define effective standards and criteria. sec.5.9004(2)(C). Commenters expressed concern over the change that requires a new inspection if: major interchangeable components are changed, or if a major component is replaced by another unit. The concern is what is considered to be a major component and is a reinspection required if a motor is changed? RESPONSE: This is another of those areas requiring some subjective judgment, however, any component involving the structural integrity of the ride falls under the definition. Changing of motors, electrical parts, decorative facing, minor mechanical components, etc. will not require reinspection. sec.5.9004(2)(I)(iii). Comments were received that addressed the requirement to provide insurance policy and inspection certificates to the TDI a minimum of ten days in advance of any public operation. Concern was expressed over the amount of turn-around time and the financial impact to the operation. RESPONSE: This ten-day period was added as the maximum time for the agency to review documentation under worse case scenarios. The normal turn-around is two days and the agency does not anticipate many cases that will take the ten-day period. In some instances the agency has given interim approval to continue operations while processing of documents is completed. The agency intends to establish a working relationship with the operators and believes they will be satisfied with the turn-around time. sec.5.9004(2)(I)(iv). Comments were received concerning the requirement that a ride be closed immediately after any injury or death involving operator error, until a new inspection was performed and an inspection certificate was submitted to the TDI. The concern is over the requirement to close the ride until a re- inspection has been performed if the cause is operator error and is no fault of, or causes no damage to the equipment. RESPONSE: The agency concurs with these concerns and feels it will be of little use to require an inspection of equipment which was not damaged or at fault. Section 5.9004(2)(I)(iv) has been changed to read: Immediately after any injury or death involving major equipment failure or structural failure, the amusement ride/device shall be closed for public use until repairs have been made and a new inspection is performed and the inspection certificate submitted to the TDI. If an injury resulting in death occurs as a result of operator error and no equipment damage occurs, the amusement ride owner/operator will conduct an accident investigation to determine the cause of the accident, and the ride will not be re-opened until procedures are implemented to prevent recurrence, and all operators are trained on the new procedures. In the event of an injury that does not result in death, the owner/operator will take appropriate action to review the cause of injury, to review operator procedures, and to brief/train operators to prevent recurrence. In the event of injury as a result of operator error and no equipment is damaged or at fault, no new inspection will be required. sec.5.9004(2)(K). A commenter expressed concern over the requirement to affix Form AR-101 to a major component of a water ride so that it is in a location visible to ride participants. RESPONSE: The agency is confident that a suitable location can be found so that the inspection sticker will be visible to ride participants. The agency concurs that a location visible to every patron will be difficult to find, however, the intent of the AR-101 sticker is to provide a visible display of compliance with the Act for those patrons who are interested in such things and for local and state officials that inspect for such items. sec.5.9004(2)(L). A commenter is concerned that a safety services inspector from the Loss Control Regulation Division of TDI can inspect any ride at any time for compliance with the Code. The concern is whether these inspectors will be qualified in the amusement ride industry and the "at any time" provision could subject an operator to undue financial stress. RESPONSE: The agency does not intend for the inspections to cause an undue burden for operators. The purpose in inspection of an amusement ride operation by TDI is to determine the overall safety of the operation and compliance with the Act. The agency will not send out inspectors from TDI who do not have the qualifications specified for inspectors in sec.5.9005. There will be no cost to the operator for these inspections. sec.5.9005. A comment was received regarding the qualification system for amusement ride inspectors which defines qualification by degree of education, experience and training. The commenter stated that an amusement ride inspector that meets the qualifications based on "iron rides" may not be qualified to inspect "water rides." RESPONSE: The agency concurs with the commenter. It is difficult to draft qualification criteria for amusement ride inspectors that cover every specific amusement ride or device. It will always be the responsibility of the owner/operator to have the amusement ride inspected by his insurer or a person with whom the insurer has contracted to conduct an inspection that meets the insurer's underwriting standards. The agency believes there is a common sense implication in the term "qualified inspector" that the inspector used is knowledgeable and qualified in the type of ride inspected. sec.5.9007. Comments were received regarding "what constitutes an injury for the purpose of reporting injuries to TDI on the quarterly injury report?" Clarification was requested regarding the term "injury." Do precautionary x-rays constitute a reportable injury? Also comments were made regarding when are injuries "caused by the ride" as opposed to other forms of casualty? i.e. Was the injury caused "by the ride" or was it caused by a patron on the ride? RESPONSE: Section 5.9007 requires a report to be filed with TDI to include a description of each injury caused by a ride that results in death or injury that requires medical treatment. "... The term "medical treatment" includes treatment (other than first aid) administered by a physician or by registered professional personnel under the standing orders of a physician ... of medical treatment" does not include first-aid treatment (one time treatment and subsequent observation of minor scratches, cuts, burns, splinters, and any other minor injuries that do not ordinarily require medical care) even though treatment is provided by a physician or by registered professional personnel." Precautionary x-rays do not constitute medical treatment in the agency's opinion. However if medical treatment is administered as a result of the x-ray, this would fall under the definition of medical treatment. The agency considers the definition of "injury" to be adequate. The definition of injury or medical treatment is consistent with statute. The Quarterly Injury Report will be changed to provide for "cause of injury" and the circumstances of the injury (if appropriate) to allow operators to document if the injury was due to patron actions or circumstances outside the control of the operator or equipment. The purpose of the Quarterly Injury Report is to provide TDI with data to analyze the loss experience of the industry as a whole and the loss experience of specific operators, to determine if the agency needs to alter, strengthen, or find more effective ways to emphasize amusement ride safety. sec.5.9007. Comments were received concerning public disclosure of injury reports, which are required to be filed with TDI each quarter. RESPONSE: This is not a change from the existing provision and has not caused a problem to date. TDI has an internal policy that if asked for this information by anyone, the agency notifies the owner/operator of the request. The format of the injury report is being changed to make the name/address of the injured an optional item, eliminating the line entry for the name of the physician; and adding line items to include: sex/age of the injured person, body part injured, description/type of injury, cause of injury, and other circumstances if appropriate. This revision will provide more information to analyze the safety of the industry, the safety of individual operators, and allow TDI to better serve both patrons and operators. sec.5.9007. A comment was received regarding the requirement for quarterly injury reports that there should be a requirement that the injured and the physician cooperate in providing this information. RESPONSE: The agency disagrees with the comment. The agency does not know of a situation where the owner/operator could not obtain sufficient information on an injured patron to complete the injury reports. sec.5.9008(2). Concern was expressed that the requirement to file a supplemental inspection certificate with TDI if the amusement ride is inspected more than once a year may impact loss control efforts. The commenter stated that often the insurance company or their representative will do multiple inspections each year, and the additional paperwork may cause these entities to reduce their loss control efforts. RESPONSE: The agency concurs with the comment and does not want to stifle aggressive loss control. Language was added to sec.5.9008(2) to address this concern as follows: "If the amusement ride is inspected more than once a year due to the requirements of this subchapter, a supplemental inspection certificate (TDI Form AR-100 Revised 6/93) must be submitted to TDI not later than 15 days after each subsequent inspection. An additional annual $20 administration fee is not required for supplemental inspection certificates." sec.5.9011 and sec.5.9012. A comment was received regarding denial of entry to amusement rides. The commenter stated that the Operator/Operational requirements are probably the best that can be written, but they place a large responsibility on the operator to make determinations regarding the physical and mental conditions of patrons and an equal burden should be placed on the guests under "rider responsibility laws." RESPONSE: The agency concurs that patron responsibility laws need to be adopted and included in the Act. This will require legislative action, however, and cannot be addressed under the sections currently under consideration by the Board. There will continue to be a large responsibility on operators to identify and screen patrons who are, in their judgment, not fit to ride an amusement device. sec.5.9011(b). Commenters expressed concern over subsection (b) which requires a ride operator to operate no more than one amusement ride, device or attraction at any time. In the waterslide industry it is common to have several identical water slides originating from a common platform and terminating in a common pool. The concern is twofold: whether this type of operation will require four separate operators, and whether this operation will be considered four separate amusement devices requiring four inspection certificates. RESPONSE: The agency considers these types of rides to be one ride, requiring one operator and one inspection certificate. This determination was made through coordination with insurance carriers which list these types of attractions as one ride. Operators have been advised, however, if the launching platform becomes overloaded with patrons and one operator cannot maintain safe control that additional operators should be available. sec.5.9011(l). Comments were received from waterpark operators regarding the requirement that a suitable fire extinguisher be present on or nearby every ride or device. In a waterpark this would be an additional expense and serve no real purpose. RESPONSE: The agency concurs with the comments and has made the following change: "A suitable fire extinguisher, meeting the standards of state fire officials shall be present on or nearby every ride or device presenting a fire hazard and must be properly charged and operable at all times." sec.5.9012(c). A comment was made regarding denial of entry to amusement rides and the provision that "the operator will prohibit the carrying of any article which might be dropped or thrown from the ride or device." It is felt this will be difficult to enforce. The commenter also suggested that the requirement only apply to Class B rides or those that exceed a speed of 30 feet/second or "high speed" ride. The commenter felt the department should differentiate between dangerous and non-dangerous rides. RESPONSE: Once again, this becomes a judgmental factor for the operator. There is a difference between carrying a purse and a handful of rocks or brick on a ferris wheel or roller coaster. There are also some rides where a purse may be a hazard and difficult to manage due to the nature of the ride. In this case, signage should be used to absolutely prohibit the carrying of any loose articles. For - American Recreational Equipment Association, Cumberland Valley Shows, Fiesta Texas, Haas & Wilkerson Insurance, SeaWorld of Texas, Six Flags Over Texas/Astroworld, World Waterpark Association. Against - Lookout Mountain Waterpark and Ski Training Center, Thomas Carnival, Inc. and Wet 'N Wild. Neither For or Against - An independent inspector and Schlitterbahn. The sections are adopted under the Insurance Code, Articles 21.60 and 1.04 and Texas Civil Statutes, Article 6252-13a, sec.4 and sec.5. The Insurance Code, Article 21.60, authorizes rules relating to the administration and enforcement of the Amusement Ride Safety Inspection and Insurance Act. Article 1.04(b) authorizes the Board to determine rules in accordance with the laws of this state for uniform application. Texas Civil Statutes, Article 6252-13a, sec.4 and sec.5 authorize and require each state agency to adopt rules of practice setting forth the nature and requirement of available procedures, and prescribe the procedures for adoption of rules of a state administrative agency. sec.5.9001. Purpose and Scope. It is the purpose of this subchapter to aid in implementing the Amusement Ride Safety Inspection and Insurance Act (hereinafter referred to as the Act). The provisions of this subchapter are in addition to, and not in lieu of, the provisions of the Act (the Insurance Code, Article 21.60). This subchapter applies to: (1)-(4) (No change.) (5) any agent or representative of any insurer, including surplus lines agents, as defined in the Insurance Code, Article 1.14-2, and agents of any nonadmitted company; (6) any independently procured policy subject to the Insurance Code, Article 1.14-1, providing bodily injury liability insurance for amusement rides; and (7) any inspector working as an independent operator or as an employee of an insurance carrier performing amusement ride inspections on behalf of, or under contract with, an insurance carrier. sec.5.9002. Definitions. The following words and terms, when used in this subchapter, shall have the following meanings, unless the context clearly indicates otherwise. Act-The Amusement Ride Safety Inspection and Insurance Act (the Insurance Code, Article 21.60). Amusement ride -Any mechanical, gravity or water device or devices that carry or convey passengers along, around, or over a fixed or restricted route or course or within a defined area for the purpose of giving its passengers amusement, pleasure, or excitement, but such term does not include: (A) any coin-operated ride that is manually, mechanically, or electrically operated and customarily placed in a public location and that does not normally require the supervision or services of an operator; or (B) nonmechanized playground equipment, including, but not limited to, swings, seesaws, stationary spring-mounted animal features, rider-propelled merry-go- rounds, climbers, playground slides, trampolines, and physical fitness devices. ASTM-The American Society for Testing and Materials. Class A amusement ride-An amusement ride designed primarily for use by children 12 years of age or younger. Class B amusement ride-Any amusement ride not defined as a Class A amusement ride. Inspector-A person qualified by training, education, or experience to conduct safety inspections of amusement rides or devices on behalf of an insurance company and in accordance with; the American Society for Testing and Materials (ASTM), the manufacturer's standards and criteria; or standards established by the insurance company. Inspection-A procedure to be conducted by a competent individual to determine whether an amusement ride or device is being assembled, maintained, tested, operated, and inspected in accordance with the ASTM standards in effect as of August 26, 1993, the manufacturer's, or insurer's standards, whichever is the most stringent, and that determines the current operational safety of the ride or device. TDI-The Texas Department of Insurance. sec.5.9003. Administration and Enforcement. The Texas Department of Insurance is required by the Act, sec.3, to administer and enforce the Act. Persons operating amusement rides must pay a fee of $20 per year for each amusement ride subject to the Act. The fee payment shall accompany the insurance policy and amusement ride inspection certificate (TDI Form AR-100, Revised 6/93) required by the Act and by sec.5.9004 of this title (relating to Amusement Ride Operator Requirements). The fees shall be paid by certified check or money order made payable to the Texas Department of Insurance. The applicant shall attach the certified check or money order to the inspection certificate (TDI Form AR-100, Revised 6/93). The certified check or money order may be one check or money order for the total amount of fees for all rides or a separate check for each ride. sec.5.9004. Amusement Ride Operation Requirements. A person may not operate an amusement ride unless such person has satisfied and is continuing to satisfy the following requirements. (1) Such person must file with TDI the insurance policy or a photocopy of the insurance policy certifying that the policy is a true copy of the insurance policy provided to the insured as required by the Act, sec.4(a)(2). The Act, sec.4(a)(2), requires that any person who operates an amusement ride must have currently in force an insurance policy written by an insurance company authorized to do business in this state or by a surplus lines insurer, as defined by the Insurance Code, Article 1.14-2, or an independently procured policy subject to the Insurance Code, Article 1.14-1, in an amount of not less than $100,000 per occurrence with a $300,000 annual aggregate for Class A amusement rides and an amount of not less than $1 million per occurrence for Class B amusement rides insuring the owner or operator against liability for injury to persons arising out of the use of the amusement ride. The policy shall apply on a per occurrence basis to bodily injury. Combined single limit policies covering bodily injury and property damage or any other coverage combined with bodily injury will not be acceptable. The following requirements must also be met. (A) The policy or certified photocopy of the policy must be complete, including all applicable coverage forms and endorsements. Certificates of insurance will not be acceptable for this purpose. (B) The policy must contain a schedule listing by name and serial number if applicable of each amusement ride insured by the policy. In the event of additions or deletions of amusement rides during the policy term, such changes shall be shown on a change endorsement, a copy of which must be submitted to TDI. Additions will also require an inspection certificate (TDI Form AR-100, Revised 6/93) and a $20 annual administration fee for each amusement ride to be submitted to TDI prior to any operation of the added amusement ride. Additions or deletions shall be filed no later than ten days after the change. (C) In the event of policy cancellation by either the insured owner/operator or the insurance company, the company shall furnish notice of such cancellation to TDI as soon as possible, but not later than ten days prior to cancellation. (D) The owner/operator will provide to any sponsor, lessor, landowner, or other person responsible for an amusement ride offered for use by the public, a copy of the required insurance policy limits of coverage and the inspection certificate. (E) If the owner/operator obtains a new amusement ride device from the manufacturer, the new ride shall be added to the insurance policy and a copy of the endorsement submitted to TDI. However, inspection of said ride may be delayed at the discretion of the insurance company until the next cycle of annual inspections are required. (2) Such person must also file the original amusement ride inspection certificate (TDI Form AR-100, Revised 6/93) certifying with respect to each amusement ride the matters required by the Act. A separate inspection certificate is required for each amusement ride showing the name, serial number, manufacturer of the ride, the inspector's name, the owner/operator, a picture of the ride in an operable state taken at the time of the inspection, and other information as requested. The serial number and name/description of the amusement ride shall coincide with the same information identified on the insurance policy. If major components of the ride, i.e., the crane used in a bungee operation, are interchangeable; the name, serial number, and manufacturer of the inspected component shall be included on the inspection certificate. The inspection certificate is valid for a period of one year, and for expedience in processing, should if possible coincide with the effective date of the insurance policy. The inspection shall be conducted by the insurer or a person with whom the insurer has contracted. The inspector shall provide both the insurer and owner/operator with a written certificate that the inspection has been made and that the amusement ride meets the standards for coverage. (A) The inspection certificate shall not be submitted by the inspector or insurer until all discrepancies have been resolved and all necessary repair(s) or replacement(s) required for the amusement ride to meet the standards for coverage have been made. (B) The methods to test the stress and wear related damage of critical parts shall be through the use of the manufacturer's checklist/guidelines, ASTM standards in effect as of August 26, 1993 for amusement rides and devices, or the insurer's criteria, whichever is the most stringent. The inspection shall include a review of the owner/operator's inspection and maintenance program in accordance with ASTM practice or the manufacturer's guidelines/inspection criteria. The inspection shall be conducted with the amusement ride or device in an operable state and include an evaluation of the device for a minimum of one complete operating cycle. (C) If the amusement ride or device consists of interchangeable major components, such as cranes used in bungee jumping operations, the crane or major component used during the inspection shall be considered an integral part of the amusement ride and the inspection certificate shall include the manufacturer and serial number of the crane or major component inspected with the amusement ride. If the inspected crane or major component is replaced by another unit, a new inspection is required to include the new identification and serial number of the replacement unit. (D) Any bungee jumping amusement device shall include a safety net or air bag as an integral part of the ride. The safety net or air bag shall be of sufficient size to cover the jump zone. The safety net or air bag shall be rated for the maximum free fall height possible from the jump platform used. If the jump area is over water, the water must be of sufficient depth to provide an adequate safety cushion. The safety net or air bag shall be inspected as an integral part of the amusement ride. (E) The inspection certificate shall include a schedule of operating locations and dates for the one year duration of the certificate. If the dates and locations are not known at the time of inspection, this information shall be provided by the owner/operator to TDI, Loss Control Regulation Division, a minimum of ten days in advance of any public operation. Failure to provide a current location itinerary shall constitute adequate grounds for forfeiture of approval to operate in the State and may subject the owner/operator to enforcement action by the Attorney General's Office or appropriate local authority on behalf of TDI. (F) The inspection certificate shall be signed by a representative of the insurer. (G) If the amusement ride or device does not meet the inspection standards, the amusement ride shall not be operated until all necessary repair(s) and/or replacement(s) have been made and the ride reinspected and an inspection certificate issued. (H) The insurer or safety inspector with whom the insurer has contracted to make the inspection must be professionally qualified to perform the inspection, as set forth in sec.5.9005 of this title (relating to Qualifications of Personnel Conducting Safety Inspections of Amusement Rides and Devices). (I) It shall be the responsibility of the amusement ride owner/operator to complete the following prior to any operation of the ride: (i) request the insurer to certify that the insurance policy and the inspection certificate are true copies by an official of the insurer; (ii) receive the completed policy and inspection certificate from the insurer if they elect to provide coverage; (iii) submit a certified copy of the insurance policy and the original inspection certificate to TDI for review. A planning factor of ten days should be allowed for TDI review and approval prior to any operation of the ride. Errors of omission or commission on either policy or inspection certificate may delay TDI approval; (iv) immediately after any injury or death involving equipment failure, structural failure or operator error, the amusement ride/device shall be closed for public use until a new inspection is performed and an inspection certificate is submitted to TDI; (J) TDI Form AR-100, Revised 6/93, is adopted herein by reference and shall be used for each filing of an amusement ride inspection certificate required by this subchapter. This form (the Amusement Ride Inspection Certificate) is published by the Texas Department of Insurance and copies of the form may be obtained from the Amusement Ride Regulation Section, Loss Control Regulation Division, Mail Code 105-9A, Texas Department of Insurance, P.O. Box 149104, Austin, Texas 78714-9104. (K) The inspection certificate, insurance policy, and administration fee shall be submitted to TDI, Loss Control Regulation Division, for review. If the inspection certificate and insurance policy meet the requirements of this subchapter, the inspection certificate will be date-stamped and forwarded to the owner/operator with TDI Form AR-101. Form AR-101 will indicate the expiration date of the insurance certificate and shall be affixed to a major component of the amusement ride in a location visible to the ride participants. (L) Safety services inspectors from the Loss Control Regulation Division of TDI may inspect any amusement ride at any time for compliance with the Insurance Code, Article 21.60, or this subchapter. (3) Renewal of the policy or inspection certificate shall be completed with sufficient lead time to provide these documents to TDI with a minimum of ten working days to review and approve the documents prior to the expiration of either the policy or the inspection certificate. (A) In the event of policy cancellation or expiration, the policy shall promptly be replaced or renewed without any lapse in coverage while the amusement ride is offered for use by the public. Any operation without a valid and current insurance policy and current inspection certificate constitutes an illegal operation and is subject to issuance of an injunction to cease operation. The sponsor, lessor, landowner, or other person responsible for an amusement ride offered for use by the public shall be notified of the coverage discontinuance. (B) A renewal certificate of insurance will be acceptable for the purpose of this paragraph, if the renewal certificate shows: (i) insurance coverage against liability for injury to persons arising out of the use of the amusement ride/device; (ii) an amount of insurance of not less than $100,000 per bodily injury occurrence with a $300,000 annual aggregate for Class A amusement rides and an amount of insurance of not less than $1 million per bodily injury occurrence for Class B amusement rides; and (iii) a policy term that includes the period of time during which the amusement ride will be offered for public use. sec.5.9005. Qualifications of Personnel Conducting Safety Inspections of Amusement Rides and Devices. (a) To conduct required safety inspections on amusement rides and devices in accordance with the Act, the insurer may employ qualified inspectors, retain qualified independent contractors, or contract with the insured to have the amusement ride or device inspected by a qualified inspector. If the inspector does not have personal qualifications on record with TDI through the procedures established in sec.5.9006 of this title (relating to Designation of Safety Inspector for Amusement Rides and Devices), the insurer shall provide on request of TDI, the qualifications of the person or persons conducting the inspection. At the discretion of TDI, this qualification shall be provided to TDI prior to public operation of the amusement ride or device. To be qualified to conduct safety inspections on amusement rides or devices in Texas, an individual shall obtain a minimum of ten points using the criteria described in paragraphs (1)- (3) of this subsection. (1) Education: Two points may be considered for each year of college education in science or engineering. A maximum of four points may be accrued through education. (2) Training: One point may be considered for each major amusement ride inspection/maintenance school attended or one point accrued for each five hours of continuing education credit (CEU) in a recognized and approved course of training in amusement ride safety and inspections. A maximum of six points may be accrued through training. (3) Experience: Two points may be considered for each year of experience in amusement ride safety, maintenance or inspections. A maximum of six points may be accrued through experience. Credits for experience must be documented sufficiently for verification by TDI. (b) In addition to the criteria submitted under paragraphs (1)-(3) of this section, additional criteria of instructor experience, extensive inspection or education experience, letters of credit, or participation in formal trade association activities, may be submitted for review by TDI. sec.5.9006. Designation of Safety Inspector for Amusement Rides and Devices. The designation as Safety Inspector for amusement rides and devices may be made by TDI and is based on the qualifications in sec.5.9005 of this title (relating to Qualifications of Personnel Conducting Safety Inspections of Amusement Rides and Devices). To be designated as a Safety Inspector for amusement rides and devices, a candidate must obtain an application form titled "Qualification Review for Inspectors of Carnival - Amusement Rides and Devices." The application form must be completed and returned with appropriate documentation of education, training and experience to the Director for review of qualifications. The application form is adopted by the board by reference and is published by TDI. Copies of the application form may be obtained from the Director of Loss Control Regulation, Mail Code 105-9A, Texas Department of Insurance, P.O. Box 149104, Austin, Texas 78714-9104. sec.5.9007. Quarterly Injury Reports. A person who operates an amusement ride (the operator) shall maintain accurate records of each injury caused by the ride which injury results in death or requires medical treatment. (1) The Texas Department of Insurance adopts and incorporates herein by reference TDI AR-800 (Quarterly Injury Report). This form is published by TDI and copies of the form may be obtained from the Loss Control Regulation Division, Mail Code 105-9A, Texas Department of Insurance, P.O. Box 149104, Austin, Texas 78714-9104. The operator shall file an injury report on TDI Form AR-800 with TDI on a quarterly basis and shall include in the report a description of each verifiable injury caused by a ride that results in death or injury that requires medical treatment. (2) For purposes of this section, the term "medical treatment" includes treatment (other than first aid) administered by a physician or by registered professional personnel under the standing orders of a physician. (3) For purposes of this section, the term "medical treatment" does not include first-aid treatment (one-time treatment and subsequent observation of minor scratches, cuts, burns, splinters, and any other minor injuries that do not ordinarily require medical care) even though treatment is provided by a physician or by registered professional personnel. (4) The quarterly injury report is not required of the operator for any quarter in which no reportable injury occurs. sec.5.9008. Filing Affidavit. In addition to the requirements of the Act, sec.5, the following requirements apply. (1) In the event a contract for use of an amusement ride provides that the amusement ride will not be operated until after July 1 but prior to December 31 of any year, then timely filing of the insurance policy and inspection certificate shall be made with TDI prior to the operation of the amusement ride. In no event may an amusement ride be operated before the inspection certificate and policy are submitted to TDI as required by sec.5. 9004 of this title (relating to Amusement Ride Operation Requirements). (2) If the amusement ride is inspected more than once a year due to the requirements of this subchapter, a supplemental inspection certificate (TDI Form AR-100 Revised 6/93) must be submitted to TDI not later than 15 days after each subsequent inspection. An additional annual $20 administration fee is not required for supplemental inspection certificates. sec.5.9009. Information Request. TDI may request, from the sponsor, lessor, landowner, or other person responsible for an amusement ride offered for use by the public, information concerning whether or not insurance in the amount required by the Insurance Code, Article 21.60 or this subchapter is in effect on the amusement ride. The sponsor, lessor, landowner, or other person to whom the information request is made shall respond to TDI within 15 days after the request is made. The response must be by written verification. For the purpose of verification, the written response shall include a copy of the declarations page of the policy insuring the amusement ride owner or operator. sec.5.9010. Confirmation of Required Insurance and Inspection Certificate; Rule Construction. (a) After the required insurance policy and inspection certificate, including certified check or money order for the total amount of annual administration fee have been received by TDI and found to be in compliance with the Act and this subchapter, the original amusement ride inspection certificate (TDI Form AR-100 Revised 6/93) will be stamped "Texas Department of Insurance Amusement Ride Program", include the date of approval and be returned to the insured owner or operator as evidence of compliance with filing requirements. The returned inspection certificate must be kept on the premises at which the amusement ride is offered for public use and made available to any person granted authority under the Act to investigate compliance with the Act. A TDI Form AR-101 will be returned with each inspection certificate. This weatherproof form shall be affixed to the appropriate ride or device in a place easily visible to all ride participants. (b) If the required insurance policy, inspection certificate, and/or annual administration fee is found not to be in compliance with the Act, this subchapter, or other applicable law, notice will be provided to the insured owner or operator by TDI indicating the necessary action(s) for compliance. If a response to compliance is not received within ten days and the amusement ride/device is continuing to be used by the public, the Attorney General's Office will be notified for appropriate action. If noncompliance is due to mechanical problems or failure to meet insurance standards, another TDI Form AR- 100 Revised 6/93 shall be submitted to TDI for approval after the necessary corrective action(s) or repair(s) have been completed by the owner or operator. After the necessary actions have been completed by the owner/operator to the satisfaction of TDI, TDI Form AR-100 Revised 6/93 will be stamped and mailed to the insured owner or operator as described in subsection (a) of this section. (c) Nothing in this subchapter may be construed to authorize the operation of an amusement ride until all applicable requirements of law are met. sec.5.9011. Operator/Operational Requirements (a) The ride operator shall be a competent and trained operator of sufficient age and maturity. (b) The ride operator shall operate no more than one amusement ride, device, or attraction at any given time, even if automatic timing devices are used to control the time cycle of the ride. (c) The ride operator shall be trained in the proper use and operation of the ride/device as provided for in ASTM F770-88 and ASTM F853-91. (d) The ride operator shall ensure that all passenger safety devices are in place around ride participants before starting the ride/device. (e) The ride operator shall be within arm's length of the operating controls when the ride or device is in motion. (f) The ride operator shall not operate any ride or device while under the influence of alcohol, drugs, or medicines that will affect his/her performance. (g) The operator shall ensure that no one is permitted on a ride while carrying any article i.e., food, beverages, packages, lighted cigarettes, etc., which could endanger the rider, other patrons, or spectators. (h) Adequate fencing or barriers must be provided for the protection of spectators and riders from the action of the ride or device and its associated power units. In the case of aerial rides or swings, these barriers must provide a safe distance from the outermost arc of such swing or aerial ride. (i) Any amusement ride or device or its power unit shall be so located to prevent a fire hazard to adjacent buildings, exhibits, structures, other amusement rides or devices. In the case of rides or devices using gasoline engines, storage of gasoline must be in approved safety containers, and so located to prevent a safety hazard. Gasoline engines shall be so located to have adequate ventilation for exhaust and fumes ventilation. (j) All electrical wires leading to and from a ride or device shall be protected and insulated to prevent shock hazard. All electrical equipment shall be properly grounded with ground fault circuit interrupters if warranted. All electrical junction boxes shall be properly identified as such and be locked or sealed against public access. All wiring shall conform to manufacturer's and electrical code practices. (k) Any ride or device requiring patron restraint shall be equipped with lap bars, seat belts, roll bars, shoulder straps, or other safety restraints as appropriate. Height and weight, age, or health restrictions, may be required on any ride or device by the inspector or the ride owner/operator. (l) A suitable fire extinguisher, meeting the standards of state fire officials shall be present on or nearby every ride or device and must be properly charged and operable at all times. Water rides that present no fire hazard will not require a fire extinguisher. sec.5.9012. Denial of Entry to Amusement Rides. (a) The owner/operator of an amusement ride or device shall have the ability to view patrons so that no one is permitted on such ride or device who appears to be in an intoxicated, drugged or other condition of health that could be detrimental to the safety of themselves, other patrons, the operator, or spectators. (b) The owner/operator shall exercise reasonable control to prohibit the wearing of improper attire or lack of attire as deemed appropriate for the ride or device. (c) The owner/operator will prohibit the carrying of any article which might be dropped or thrown from the ride or device. (d) The restrictions set forth in this section and others that will preclude participation on an amusement ride or device shall be posted in plain view at the entrance to the ride. No operator may waive such restrictions. sec.5.9013. Injunctions. Any person who operates an amusement ride, amusement attraction, or amusement device, and offers such for the public, must meet the requirements of the Texas Amusement Ride Safety Inspection and Insurance Act. Failure to comply or violations of the Act constitute a Class C - Misdemeanor. Each day of public operation shall constitute a separate and distinct offense. The district attorney of each county in which an amusement ride or device is operated or, on request of the Commissioner of Insurance, the State Attorney General or one of his/her agents may seek an injunction against any person operating an amusement ride or device in violation of the Act and this subchapter. sec.5.9014. Penalties; Local Enforcement. An amusement ride owner/operator commits an offense if he/she fails to comply with any requirement under sec.5.9004 of this title (relating to Amusement Ride Operation Requirements). A sponsor, lessor, landowner, or other person responsible for an amusement ride offered for use by the public commits an offense if he/she fails to provide information required by this subchapter or provides false information under subsection (a)(2)(I) of sec.5.9004. Any offense under this subchapter is considered a Class C misdemeanor. Each time a violation of this subchapter is committed constitutes a separate offense. In addition to action by the State Attorney General, local municipal, or county law enforcement officials may be solicited to determine compliance with this subchapter in conjunction with TDI, and may institute an action in a court of competent jurisdiction to enforce the Insurance Code, Article 21.60, and this subchapter. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on September 8, 1993. TRD-9328529 Linda K. von Quintus-Dorn Chief Clerk Texas Department of Insurance Effective date:September 29, 1993 Proposal publication date:July 16, 1993 For further information, please call:(512) 463-6328 Subchapter K. Commercial Multi-Peril Policies 28 TAC sec.5.9101 The State Board of Insurance of the Texas Department of Insurance adopts an amendment to sec.5.9101, concerning commercial multi-peril insurance and the filing of rates and policy forms for a commercial multi-peril policy, without changes to the proposed text as published in the July 23, 1993, issue of the Texas Register (18 TexReg 4835). The amendments also clarify the term "commercial casualty insurance"; broaden the rule to include premium discounts and rating plans as part of the supplementary rating information required to be submitted for each line of insurance; and clarify that policy forms and endorsements for use with "large risks", as defined in the Insurance Code, Article 5.13-2, sec.8(f), are exempt from filing requirements for commercial multi-peril policies. In addition, the amendments delete references to the State Board of Insurance and substitute the Texas Department of Insurance. The State Board of Insurance of the Texas Department of Insurance adopts the amendment because recent amendments to the Insurance Code, Article 5.13-2, enacted under House Bill 1461 by the 73rd Texas Legislature make it necessary to add commercial casualty insurance and medical professional liability insurance as eligible lines of insurance under a commercial multi-peril policy for the file and use of rates and prior approval of policy forms. The amendments are necessary to enable the Texas Department of Insurance to regulate these lines of insurance for both monoline and multi-peril coverages in the same manner. In addition, the amendments are needed to clarify that large risks, as defined in the Insurance Code, Article 5.13-2, sec.8(f), are exempt from any filing requirements of policy forms and to provide clear direction to insurers writing policy forms in connection with large risks. The amended section adds commercial casualty insurance and medical professional liability insurance as eligible lines of insurance for a commercial multi-peril policy and defines commercial casualty insurance. The amended rule also exempts the filing for prior approval of the policy forms and endorsements for use with large risks. In addition, the amendments add premium discounts and rating plans as part of the supplementary rating information required to be included in a multi-peril rate filing. Reference to the State Board of Insurance is deleted and the Texas Department of Insurance is substituted because of the changes to the structure and operation of the Texas Department of Insurance enacted in House Bill 1461. No comments were received regarding the adoption of the amendment. The amendment is adopted pursuant to the Insurance Code, Articles 5.81, and 5.98, and 1.04, and Texas Civil Statutes, Article 6252-13a, sec.4 and sec.5. Article 5.81 authorizes the State Board of Insurance to approve forms for multi- peril policies of insurance and to adopt rules as in the best judgment of the Board are necessary and desirable to carry out the purposes and objectives of this article. Article 5.98 authorizes the State Board of Insurance to adopt reasonable rules that are appropriate to accomplish the purposes of Chapter 5 of the Insurance Code, which regulates rating and policy forms for property and casualty insurance. Article 1.04(b) authorizes the State Board of Insurance to adopt rules in accordance with the laws of this state. Texas Civil Statutes, Articles 6252-13a, sec.4 and sec.5, authorize and require each state agency to adopt rules of practice setting forth the nature and requirement of available procedures and to prescribe the procedures for adoption of rules by a state administrative agency. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on September 8, 1993. TRD-9328527 Linda K. von Quintus-Dorn Chief Clerk Texas Department of Insurance Effective date: September 29, 1993 Proposal publication date: July 23, 1993 For further information, please call: (512) 463-6328 Subchapter M. Filing Requirements 28 TAC sec.5.9301 The State Board of Insurance of the Texas Department of Insurance adopts new sec.5.9301, concerning the policy form and endorsement filing requirements for insurers sharing insurance coverage on a single commercial risk or account on a pro rata basis, without changes to the proposed text as published in the July 23, 1993, issue of the Texas Register (18 TexReg 4836). The State Board of Insurance of the Texas Department of Insurance adopts the rule because commercial property insurers and general liability insurers, pursuant to the Insurance Code, Article 5.13-2, sec.8, and commercial multi- peril insurers, pursuant to the Insurance Code, Article 5.81, and sec.5. 9101 of this title (relating to Multi-Peril Policies) are required to file, on an individual insurer basis, policy forms and endorsements for approval by the board in all instances, including when several insurers are insuring the same risk or account on a shared pro rata basis. The need exists to except those insurers that are providing shared commercial insurance coverage on a single commercial risk or a account from the requirement that each individual insurer separately file policy forms and endorsements. If this exception is not granted, there is the possibility of non-concurrence of coverage on a such a risk. The rule provides for one of the participating insurers on a shared commercial risk or account to be designated as the lead insurer, and the policy forms and endorsements approved by the board for that lead insurer are to be used by the other insurers, without the other insurers being required to file for approval the policy forms and endorsements of the lead insurer. The lead insurer is defined as the insurer providing the largest percentage of coverage for a single commercial risk or account or the insurer designated by the insured as the lead insurer. No comments were received regarding adoption of the new section. New sec.5.9301 is adopted pursuant to the Insurance Code, Articles 5.13-2, 5. 81, 5.98 and 1.04(b), and Texas Civil Statutes, Article 6252-13a, sec.4 and sec.5. Article 5.13-2, sec.8, requires individual insurers to file commercial property and general liability policy forms and endorsements with the board for approval before such policy forms and endorsements can be delivered or issued for delivery in this state. Article 5.81 authorizes the board to approve multi- peril insurance policy forms and endorsements. Article 5.98 authorizes the State Board of Insurance to adopt reasonable rules to accomplish the purposes of Chapter 5 of the Insurance Code. Article 1.04(b) authorizes the State Board of Insurance to determine policy, rules, and forms in accordance with the laws of this state. Article 6252-13a, sec.4 and sec.5 authorize and require each state agency to adopt rules of practice setting forth the nature and requirement of available procedures and to prescribe the procedures for adoption of rules by a state administrative agency. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on September 8, 1993. TRD-9328525 Linda K. von Quintus-Dorn Chief Clerk Texas Department of Insurance Effective date: September 29, 1993 Proposal publication date: July 23, 1993 For further information, please call: (512) 463-6328 28 TAC sec.5.9302 The State Board of Insurance of the Texas Department of Insurance adopts an amendment to sec.5.9302, concerning the requirements for equivalent coverage, as provided for in the Insurance Code, Article 5.13-2, sec.8(e), for policy forms filed by individual insurers for commercial property insurance, general liability insurance, commercial casualty insurance and medical professional liability insurance, and as provided in 28 TAC sec.5.9101(f)(J) (relating to Multi-Peril Policies) for policy forms filed by individual insurers for commercial multi-peril insurance, without changes to the proposed text as published in the July 23, 1993, issue of the Texas Register (18 TexReg 4836). The State Board of Insurance of the Texas Department of Insurance adopts these amendments because recent amendments to Insurance Code, Article 5.13-2, enacted by the 73rd Texas Legislature in House Bill 1461 have added commercial casualty insurance and medical professional liability insurance as being subject to the equivalent coverage requirements for policy forms and endorsements filed under Article 5.13-2. In addition, amendments are needed to exempt policy forms used with large risks from the requirement to be filed with the Commissioner of Insurance for approval and to conform the definition of large risks to the House Bill 1461 amendments to Article 5.13-2 of the Insurance Code. The amended section incorporates the amendments enacted by House Bill 1461 by extending the equivalent coverage requirements to commercial casualty insurance and medical professional liability insurance and by clarifying the meaning of commercial casualty insurance. The amendments exempt policy forms used with large risks from the requirement to be filed with the Commissioner of Insurance for approval and conforms the requirement of the amount of a total premium for eligibility as a large risk to House Bill 1461 amendments to the Insurance Code, Article 5.13-2. The section is amended to indicate that policy forms are to be filed with the Texas Department of Insurance instead of the State Board of Insurance, in accordance with changes in the structure and operation of the Texas Department of Insurance enacted by House Bill 1461. No comments were received regarding adoption of the amendment. The amendment to sec.5.9302 are adopted pursuant to the Insurance Code, Articles 5.98, 5.13-2, 5.81, and 1.04; and Texas Civil Statutes, Article 6252- 13a, sec.4 and sec.5. Article 5.98 authorizes the State Board of Insurance to adopt reasonable rules that are appropriate to accomplish the purposes of Chapter 5 of the Insurance Code, which regulates rating and policy forms for property and casualty insurance. Article 5.13-2, sec.8(e), requires that policy forms submitted by insurers for approval in general liability lines, commercial property lines, commercial casualty lines and medical professional liability lines must provide coverage equivalent to that provided in the policy forms used for those lines prior to and in effect on October 1, 1991. Article 5.81 authorizes the State Board of Insurance to approve forms for multi-peril policies of insurance and to adopt rules as in the best judgment of the Board are necessary and desirable to carry out the purposes and objectives of this article. Article 1.04(b) authorizes the State Board of Insurance to adopt rules in accordance with the laws of this state. Texas Civil Statutes, Articles 6252- 13a, sec.4 and sec.5, authorize and require each state agency to adopt rules of practice setting forth the nature and requirement of available procedures and to prescribe the procedures for adoption of rules by a state administrative agency. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on September 8, 1993. TRD-9328526 Linda K. von Quintus-Dorn Chief Clerk Texas Department of Insurance Effective date: September 29, 1993 Proposal publication date: July 23, 1993 For further information, please call: (512) 463-6328 Chapter 7. Corporate and Financial Regulation Subchapter A. Examination and Corporate Custodian and Tax 28 TAC sec.7.4 The State Board of Insurance of the Texas Department of Insurance adopts an amendment to sec.7.4, concerning admissible assets of insurance companies. The amendment is adopted with changes to the proposed text as published in the July 16, 1993, issue of the Texas Register (18 TexReg 4619). The amendment is necessary to clarify the insurance commissioner's authority to require an insurance company to dispose of an asset that does not qualify as legal investment. Some insurance companies have argued that they do not have to dispose of unlawful investments. The rule makes it clear that the agency has the authority to require an insurance company to dispose of unlawful investments. When a company disagrees with agency staff and refuses to dispose of an asset, the commissioner may, after notice and hearing, issue an order directing the company to dispose of the asset. One comment was received regarding adoption of the rule. The Texas Legal Reserve Officials Association questioned whether the commissioner had the authority to issue an order directing an insurance company to dispose of an asset. The Board disagrees with the comment. The commissioner of insurance is charged with the duty of enforcing the insurance laws of this state. When an insurance company is holding an unlawful investment, it is the duty of the commissioner to see that the company complies with the law or lose its certificate of authority to do business in Texas. Prior to the issuance of Attorney General's Opinion WW-293A, it had been the practice of the agency to not admit unlawful investments without further action. The Attorney General frequently declared in the opinion that the agency must make the insurance company dispose of the unlawful investment. The amendment is adopted under the Insurance Code, Articles 3.33 and 1.04, and Texas Civil Statutes, Article 6252-13a, sec.4 and sec.5. Article 3.33, sec.9, authorizes the board to adopt rules which are appropriate for the implementation of Article 3.33. Article 1.04(b) authorizes the board to determine rules in accordance with the laws of this state for uniform application. Texas Civil Statutes, Article 6252-13a, sec.4 and sec.5 authorize and require each state agency to adopt rules of practice setting forth the nature and requirements of available procedures and prescribe the procedure for adoption of rules of a state administrative agency. sec.7.4. Admissible Assets. The portion of any asset not qualifying as a legal investment shall not be admitted. The companies shall dispose of such inadmissible assets or take such action as is necessary to bring the investment into legal compliance. Companies will not be required to dispose of inadmissible contributed assets. After notice and hearing, the commissioner of insurance may order a company to dispose of assets (other than contributed assets) not qualifying as a legal investment. Any commissioner's order requiring disposition of assets shall, however, provide in such order for the company to have a reasonable period of time (taking into account the nature, complexity and size of the inadmissible assets, the then prevailing economic conditions and the effect of the disposal of such assets relative to the going concern solvency of the company) to dispose of the inadmissible assets. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on September 9, 1993. TRD-9328627 Linda K. von Quintus-Dorn Chief Clerk Texas Department of Insurance Effective date: September 30, 1993 Proposal publication date: July 16, 1993 For further information, please call: (512) 463-6327 Subchapter A. Examination and Corporate Custodian and Tax 28 TAC sec.7.25 sec.7.26 The State Board of Insurance of the Texas Department of Insurance adopts amendments to sec.7.25 and sec.7.26, with changes to the proposed text as published in the July 27, 1993 issue of the Texas Register (18 TexReg 4931). Sections 7.25 and 7.26 concern the relocation of books and records outside the State of Texas. This adoption includes several changes to the proposed text for the reasons explained in the following sentences. A change was made to sec.7.25(b) to add the words "or a non-profit legal service corporation" to be included for the types of companies that can avail themselves of Article 1. 28. A change was made to sec.7.25(b) to delete the word "application" and substitute the words "notice of intent to relocate books and records" based on comments received. A change was made to sec.7.25(b) to delete the word "the" and substitute the words "any new or amended" as well as adding the phrase "which have not been previously filed" regarding the filing of contracts, agreements or arrangements to clarify which contracts would be filed. A change was made to sec.7.25(b) based on comments received to delete the sentence regarding necessary filings under the Insurance Code, Article 21.49-1 and any outstanding Article 1.28 matters. The sentence now reads, "The notice of intent to relocate books and records will not be considered complete until the applicant is in compliance with Article 21.49-1, with regard to any contracts, arrangements or agreements required under that article. The notice of intent to relocate books and records will also not be considered complete if there are any outstanding unpaid fines or penalties or any issuance of a notice of intent to institute disciplinary action regarding prior relocation of books and records without proper notification to the agency". A change was made to sec.7.25(b), based on comments, by deleting the words "certain" and "in mailing address" and the sentence was changed to read: "A domestic or alien insurer that has already received approval under this section to move its books, records, accounts and/or offices and now desires to amend information such as a change in location of books and records must submit another notice of intent to relocate books and records." A change was made to sec.7.25(b) to add the words "mailing address" to the items that do not necessitate a new filing. A change was made to sec.7.25(b)(4) to include the words, "ultimate or immediate or intermediate" regarding the controlling person. A change was made to sec.7. 25(b)(5) to include the words "or an officer of a non-profit legal services corporation." A change was made to sec.7.25(b)(6) to delete the word "application" and substitute the words "notice of intent to relocate books and records." A change was made based on a comment regarding the required filing to return books and records to Texas and new subsection (c) was added to read as follows: "If a domestic or alien insurer wishes to return its books and records to Texas, an affidavit must be filed that sets forth the following information: (1) mailing address, (2) date of return, (3) physical location of books and records, and (4) revocation of power of attorney appointing a person in Texas to accept service of process." Previous subsection (c) was renumbered to subsection (d) and the remaining subsections were renumbered accordingly. A change was made to subsection (f) to delete the word "application" and substitute the words "notice of intent to relocate books and records." A change was made to subsection (f) to delete the word "Justification" and substitute the word "Reason" for the purpose of providing additional information. A change was made to sec.7.26 to delete the words "may approve" with regard to the disposition of the notice of intent by the Commissioner based on comments received. A change was made to sec.7.26 to delete the word "application" and substitute the words "notice of intent to relocate books and records." Section 7.25 and sec.7.26 are necessary to regulate the relocation of the principal office(s), books, records, or accounts of a domestic insurer outside the State of Texas. The amendments to the sections are necessary to implement changes to Article 1.36 regarding service of process on an insurer approved to operate under Article 1.28 and revise outdated forms. The amendments provide instructions and definitions used in filing a notice of intent to relocate books and records and will establish more effective and efficient procedures for the processing of Article 1.28 notices. A commenter contends that there is no authority for the Board or the Commissioner to adopt rules relating to the location of corporate offices or books and records in Article 1.28. Response: Article 1.28 concerns the relocation of books and records outside the State of Texas. Under the Board's general rule making authority in Article 1.04, it has sufficient authority to adopt rules regarding other provisions of the Code which may not contain specific rule making authority. 7.25(a)(3)-(6) contains definitions almost identical to those contained in Article 21.49-1. Response: the agency concurs but believes that it is more convenient for a person reading the sections to not have to refer to the Code, including the Holding Company Act, or some other provision to define a term. A commenter asserts that sec.7.25(b) directs that certain filing requirements of insurers, including an application and certain contracts, agreements or arrangements for the furnishing or receiving of services or facilities on a regular or systematic basis pursuant to Article 21.49-1 sec.4(d) (2), as well as an additional fee for such filings, be made. The commenter proposes that the form to be filed by insurers should be a notice of intention to relocate the offices or books and records, not an application for approval. The position is taken that the statute does not authorize or require either an application or affirmative approval by the Commissioner. The commenter also believes that any contracts, agreements or arrangement filings should be required to be filed, if such contracts or agreements will exist between the insurer and an affiliate and have not previously been filed and approved by the Commissioner under Article 21.49-1. Response: the agency concurs and has deleted the term "application" from the sections, as well as changing the requirement for filing all transactions to requiring the filing of new or amended transactions which have not been previously filed and approved by the Commissioner. Usually when an insurer is relocating records, there is an agreement/transaction for the rendering of services on a regular or systematic basis which is subject to Article 21.49-1 sec.4. The notice of intent is reviewed to determine if any insurer meets the requirements of the Code. Any transaction which necessitates a review under Article 1.28 and Article 21.49-1 will be reviewed concurrently. A commenter contends that sec.7.25(b) attempts to delay the start of the 30-day statutory notice and required disapproval period. The commenter feels that Article 1.28 is clear that insurers have the right to relocate offices, books, and records unless the Commissioner has disapproved the notice of intent within 30 days of the filing of the notice. The commenter propounds that there is no authority for an extension or delay in starting the 30-day period, and the insurers have the statutory right to relocate the offices and records if the Commissioner has not disapproved the relocation within 30 days of the notice. A commenter contends that certification section "K" requires that records will not be moved without prior approval which is in conflict with Article 1.28 1(a), which provides that records may be located and maintained out of the state if the commissioner has not disapproved the written notice within 30 days after notice is given. Response: the agency believes that it is necessary that it be able to assure itself that the provisions of Articles 1.28 and 21.49-1 have been met before a notice of intent to move books and records is deemed filed. If the agency cannot assure itself that these minimum requirements have been met, then it would have to deny the notice of intent within the 30-day timeframe. This would result in the insurer having to file a new notice of intent and expend an additional filing fee. The agency is merely defining the notice requirements so that an insurer's notice of intent will not be denied because an item essential to reviewing the notice of intent is not filed. It is also felt that the requirement for compliance with Article 21.49-1, among other factors, refers to the approval of the underlying transactions between the companies regarding the relocation of the books and records. The agency concurs that the insurer may move its books and records if the Commissioner has not disapproved the application within 30 days of the notice. A commenter indicates that the requirement that all necessary filings required under Article 21.49-1 be resolved before an application would be considered complete is in conflict with Article 1.28 sec.1(b)(1), which only requires that all necessary filings under Article 21.49-1 be made, not resolved, before the giving of written notice. The commenter also suggests that the phrase "any outstanding Article 1.28 matters" is an undefined term, vague, and does not provide proper notice of which situations may cause the application to be incomplete. Response: the agency disagrees that Article 1.28 only requires that all necessary filings under Article 21.49-1 be made. Article 21.49-1(b)(1) requires that the domestic insurance company must be an affiliate of an insurance holding company system that has made the necessary filings as required by Article 21.49-1 and that the insurer is in compliance with Article 21.49-1. Although the agency equates compliance with a matter being resolved, it has changed this subsection to clarify that compliance with Article 21.49-1 is required. The agency concurs and has changed this provision to cover any outstanding unpaid monetary forfeitures or penalties or any issuance of a notice of intent to institute disciplinary action for the relocation of books and records without proper notification. The intent is to cover any enforcement matters which may be pending that are associated with the moving of books and records without providing proper notice and require the payment of a monetary forfeiture or for the books and records to be moved back. A commenter suggests limiting the filing of a complete application to certain situations, such as moving the principal office or books and records to another location outside of Texas. It is suggested that a simple change in a mailing address should not require an entire new completed application to be filed but rather a simple notification. The commenter recommends simple notification should be sufficient if an insurer is moving the principal office or the books and records back to Texas. Response: the agency concurs and has deleted the requirement of filing a complete application for a change in mailing address. Notification of the change will still be necessary for the agency to update the charter files on the company. The agency has changed the requirement for the filing of a complete application if the books and records are being returned to Texas by requiring the filing of an affidavit which sets forth the new mailing address of the company, the date of return to Texas, the physical location of the books and records, and the revocation of the power of attorney appointing an agent for service of process. This affidavit is necessary for the agency to maintain current, accurate information on the company in the company's charter file. A commenter suggests that sec.7.25(b) appears to ignore the possibility that the domestic insurer giving notice may be a non-profit legal service corporation whose claims and daily affairs are handled under contract by a foreign insurer licensed to do a similar business in this state as allowed by Article 1.28 sec.1(b)(2). Response: the agency concurs with and has amended subsection (b) to include a non-profit legal service corporation. A commenter asserts that sec.7.25(c) and (d) are in conflict with the requirement in Article 1.28 sec.1(e) that the Commissioner be appointed for service of process. Response: the agency disagrees. Article 1.36 was amended by the 72nd Legislature, 2nd Called Session, and changes the service of process requirements of Article 1.28. Article 1.36, sec.2(b), provides : "As a condition of being authorized to conduct the business of insurance in this state, a domestic carrier... that has moved its principal offices and any portion of its books, records, and accounts outside this state under Article 1. 28 of this code must appoint and maintain a person in this state as attorney for service of process on whom all judicial and administrative processes, notices, or demands may be served...." commenters assert that sec.7.25(e) (2)-(5) amount to a requirement for filing a justification plan which is beyond the scope of information required by Article 1.28 and that paragraphs (2)-(4) of that subsection exceed the statutory requirements of Article 1.28 and are inappropriate. The contention is made that there is no need to convince or persuade the Commissioner to approve the relocation of books and records. Response:The agency disagrees. The agency believes that authority for paragraph (2) exists in Articles 1.28 and 21.49-1. The authority for paragraph (3) exists in Article 21.55. The authority for paragraphs (4) and (5) exists in Article 1.28 sec.1(d). The Commissioner needs to be able to make an informed decision and the various statutes which are relied upon for the amendments to this section provide the Commissioner with the ability to request a minimum of information to make an informed decision if the Commissioner decides to deny the notice of intent. A commenter contends that the proposed amendment to sec.7.26 adding "may approve", and to change the current rule's "company's intent" to "company's application to move its books and records outside the state" changes the statutory right of insurers and is contrary to Article 1.28. It is propounded that the Commissioner has no authority under Article 1.28 to require an application for approval and the Commissioner has no discretion to deny a notice of intent to relocate books and records if an insurer meets the requirements of Article 1.28. Response:The agency concurs with the commenter in part and has changed the term "application" to "notice of intent to relocate books and records" and deleted the phrase "approve or" from sec.7.26. The agency disagrees with the commenter that the Commissioner does not have discretion to deny a notice of intent to relocate books and records and that the Commissioner is limited to whether the insurer has met the requirements of Article 1.28. It is felt that the notice of intent should contain sufficient information for the Commissioner to make an informed decision and has a statutory obligation to protect the interests of Texas policyholders. A commenter contends that there is no statutory requirement that the Commissioner affirmatively approve an application for the relocation of the insurer's office or records. Response:The agency concurs and has changed sec.7. 26 to reflect only disapproval and not approval. The agency does believe that companies must meet the minimum criteria for an application to be deemed filed. A commenter objects to the provision that a company must have received its certificate of authority before it may submit an application to move its books, records, accounts an/or principal offices outside the state. Response:The agency disagrees. Article 1.28 provides in part: "On giving written notice of intent to the commissioner of insurance, and if the commissioner of insurance does not disapprove within 30 days after that notice is given, a domestic insurance company,... or any other entity licensed under the Insurance Code or chartered or organized under the laws of this state that is an affiliated member of an insurance holding company system,... may locate and maintain... " (emphasis added). It is the agency's opinion that this requires a company to have received its certificate of authority before it can file a notice of intent to move its books and records. The department has always required that a company have its certificate of authority before it would process notices of intent to move books and records and the inclusion of this provision is merely setting forth the established procedure the department has consistently followed. In addition, to avoid a piecemeal review process, it is vital that notices of intent under Article 1.28 and transactions under Article 21.49-1 relating to the moving of those books and records be reviewed at one time. Filings under Article 21.49-1 are not routinely available until the insurer is licensed and capable of producing business in the State of Texas. Comments against the adoption were received from the law office of Long, Burner, Parks & Sealy. Comments in favor of the of adoption were recived from the Texas Legal Reserve Officials Association. The sections are adopted under the Insurance Code, Articles 1.28, 21.49-1, 1.36, 1.19, 1.15, 21.55, and 1.04, and Texas Civil Statutes, Article 6252-13a, sec.4 and sec.5. The Insurance Code, Article 1.28, authorizes certain domestic insurance companies to move all or any portion of their books, records, accounts and offices outside the State of Texas upon giving 30 days written notice of intent to the commissioner of insurance, if the commissioner does not disapprove. Article 21.49-1 authorizes the regulation of holding company transactions and domestic insurance company registration. Article 1.36 authorizes the domestic insurer and its controlling person of the affiliated insurance holding company system to appoint a person in Texas as attorney for service for all judicial and administrative processes. Articles 1.19 and 1.15 provide access to books and records. Article 21.55 assures proper policyholder/claimant service. Article 1.04(b) authorizes the Board to determine rules in accordance with the laws of this state for uniform application. Texas Civil Statutes, Article 6252-13a, sec.4 and sec.5 authorize and require each state agency to adopt rules of practice setting forth the nature and requirement of available procedures, and prescribe the procedures for adoption of rules of a state administrative agency. The proposed amendments affect regulation of the books, records, accounts and offices of a domestic insurer and the service of process on domestic insurers approved to operate under the Insurance Code, Articles 1.28 and 1.36. sec.7.25. Records Under the Insurance Code, Article 1.28. (a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise. (1) Domestic insurance company-An insurance company or other entity licensed under the Insurance Code and organized under the laws of the State of Texas. (2) Alien insurance company-An insurance company organized under the laws of any foreign country that has obtained original entry into the United States through the State of Texas. (3) Affiliate-A person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified. (4) Control-The term control, including the terms controlling, controlled by, and under common control with, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract other than a commercial contract for goods or non-management services, or otherwise, unless the power is the result of an official position with or corporate office held by the person. Control shall be presumed to exist if any person, directly or indirectly, or with members of the person's immediate family, owns, controls, or holds with the power to vote, or if any person other than a corporate officer or director of a person holds proxies representing, 10 percent or more of the voting securities or authority of any other person, or if any person by contract or agreement is designated as an attorney-in-fact for a Lloyd's Plan insurer under the Insurance Code, Article 18.02, or for a reciprocal or inter-insurance exchange under the Insurance Code, Articles 19.02 and 19.10. This presumption may be rebutted by a showing made in the manner provided by Article 21.49-1, sec.3(j), that control does not exist in fact and that the person rebutting the presumption is in compliance with sec.5(a)-(c) of that article. (5) Insurance holding company system-A company structure which consists of two or more affiliated persons, one or more of which is an insurer. (6) Person-An individual, a corporation, a partnership, an association, a joint stock company, a trust, an unincorporated organization, any similar entity or any combination of the foregoing acting in concert. The term does not include any securities broker performing no more than the usual and customary broker's function. (b) Filing Requirements. The domestic insurer must be a member of an insurance holding company system or a non-profit legal service corporation in order to avail itself of the provisions of the Insurance Code, Article 1.28. A health maintenance organization (HMO) may only avail itself of the provisions of the Insurance Code, Article 1.28, if it is a member of an insurance holding company system which has an insurer within the system licensed in Texas. The notice of intent to relocate books and records consists of Form TDI/BR-93 or TDI/BR-93-NP, as appropriate, and any new or amended contract(s), agreement(s) or arrangement(s) for the furnishing or receiving of services or facilities on a regular or systematic basis, pursuant to the Insurance Code, Article 21.49-1 sec.4(d)(2), and sec.7.204(b) of this title (relating to Commissioner's Approval Required), which have not been previously filed. A filing fee of $150 shall accompany the notice of intent to relocate books and records in addition to any filing fee required by sec.7.201(a)(2) of this title (relating to Forms Filings). Submit the complete notice of intent to relocate books and records to: Holding Company Activity, Mail Code 305-4A, Texas Department of Insurance, P.O. Box 149104, Austin, Texas 78714-9104. The notice of intent to relocate books and records will not be considered complete until the applicant is in compliance with Article 21.49-1, with regard to any contracts, arrangements, or agreements required under that article. The notice of intent to relocate books and records will also not be considered complete if there are any outstanding unpaid fines or penalties or any issuance of a notice of intent to institute disciplinary action regarding prior relocation of books and records without proper notification to the agency. A domestic or alien insurer that has already received approval under this section to move its books, records, accounts, and/or offices and now desires to amend information, such as a change in location of books and records must submit another complete notice of intent to relocate books and records. If the company is only changing its mailing address or chartered name or chartered home office, a new filing is not necessary. (1) Item 1. Provide information regarding the domestic insurance company's name, chartered city, and state of domicile, exactly as it appears on the company's Certificate of Authority. (2) Item 2. Provide the office location address of the books and records. Do NOT use a post office box only. If more than one location is to be maintained, attach a separate sheet to Form TDI/BR-93 describing the specific types of books, records, and accounts being maintained at each location and the complete street and mailing address of each location. In the case of principal offices, describe the type of activity to be conducted at each location. (3) Item 3. Provide the mailing address for the domestic insurance company. This will be the only mailing address utilized by the Texas Department of Insurance. (4) Item 4. Provide the name and complete address of the ultimate or immediate or intermediate controlling person of the affiliated insurance holding company system of the domestic insurer. If there is more than one controlling person, attach a separate sheet setting forth the name, street and mailing address for each. (5) Item 5. The certification must be completed by an officer of the domestic insurer that is an affiliate of an insurance holding company system or by an officer of a non-profit legal services corporation. (6) Item 6. This certification must be completed if the notice of intent to relocate books and records is being made by a Texas Health Maintenance Organization that DOES NOT have a Texas-domiciled affiliate within an insurance holding company system. The certification by affidavit must indicate that the principal insurer in the holding company system is in compliance with the holding company statutes of that state. An affidavit accompanying a copy of the original certification from the appropriate domiciliary state insurance department may be submitted in lieu of the certification required by Item 6. An organizational chart showing the state of domicile of each insurer within the holding company system is required with this certification. (c) If a domestic or alien insurer wishes to return its books and records to Texas, an affidavit must be filed that sets forth the following information: (1) mailing address; (2) date of return; (3) physical location of books and records; and (4) revocation of power of attorney appointing a person in Texas to accept service of process. (d) Form TDI/SOP. Form TDI/SOP must be completed by the domestic insurer to appoint a person located in the State of Texas to accept service of process on its behalf. (e) Form TDI/SOP-CP. Form TDI/SOP-CP must be completed by the controlling person to appoint a person located in the State of Texas to accept service of process on its behalf. If the controlling person is a natural person, it will not be necessary for the service of process Form TDI/SOP-CP to be completed for that individual. (f) Additional Requirements. In addition to the filing requirements under subsection (b) of this section, the notice of intent to relocate books and records shall also include at least the following: (1) current location of books and records; (2) reason for moving the books, records, accounts, and/or principal office(s); (3) impact of the relocation of the books, records, accounts, and/or principal office(s) on the policyholders; (4) explanation and description of control mechanisms in place to assure the effectiveness, efficiency, and reconciliation of the books, records and accounts to the corporate records; and (5) explanation of how the relocation of the books, records, accounts, and/or office(s) outside the state of Texas maintains the domestic insurer's direct supervision, management, and control of the books, records, accounts, and/or office(s). (g) The Texas Department of Insurance adopts by reference forms with instructions to be used by a domestic insurance company as the means of giving written notice to the commissioner of insurance of its intent to move all or any portion of its books, records, accounts, and office(s) outside the State of Texas under the provisions of the Insurance Code, Article 1.28. The forms are identified as Form TDI/BR-93 Notice of Intent of Domestic Insurance Company to Move its Books, Records, Accounts, and/or Principal Office(s) Outside the State of Texas; Form TDI/BR-93-NP, Notice of Intent of Domestic Insurance Company That is a Nonprofit Legal Services Corporation to Move its Books, Records, Accounts, and/or Principal Office(s) Outside the State of Texas; Form TDI/SOP, Service of Process Form for Corporate Controlling Person. These forms are published by the Texas Department of Insurance and may be obtained from the Holding Company Activity, Mail Code 305-4A, Texas Department of Insurance, 333 Guadalupe, P.O. Box 149104, Austin, Texas 78714-9104. sec.7.26. Commencement of 30-Day Review Period under the Insurance Code, Article 1.28. The 30-day period during which the commissioner of insurance may disapprove the domestic insurance company's notice of intent to relocate its books and records outside the state shall commence on the date the Holding Company Activity of the Texas Department of Insurance receives from the domestic insurance company properly completed Forms TDI/BR-93, TDI/BR-93-NP, TDI/SOP and TDI/SOP-CP and complies with the filing requirements contained in sec.7.25(b) of this title (relating to Filing Requirements). The company must have received its Certificate of Authority from the Texas Department of Insurance to do the business of insurance in the state before it may submit a notice of intent to relocate its books, records, accounts, and/or principal office(s) outside the state. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on September 9, 1993. TRD-9328621 Linda K. von Quintus-Dorn Chief Clerk Texas Department of Insurance Effective date: September 30, 1993 Proposal publication date: July 27, 1993 For further information, please call: (512) 463-6327 Subchapter C. Transfer of Securities Under Certain Agreements 28 TAC sec.7.306 The State Board of Insurance of the Texas Department of Insurance adopts amendments to sec.7.306, concerning the transfer of securities under certain agreements. This section is being adopted with changes to the proposed text as published in the July 16, 1993, issue of the Texas Register (18 TexReg 4626). The present rule is obsolete. The amendments are necessary to bring the section into conformity with NAIC accounting manuals which have been adopted by the State Board of Insurance. The amendment was revised to minimize regulatory requirements but maintain the safety of insurance company assets. The amended section will function by establishing the standards an insurance company must follow when it loans securities to a broker. The amended section will also direct insurance companies in the manner such transactions must be reported in their annual statements. Comments were received regarding adoption of the amendments from the Texas Legal Reserve Officials Association and American General Corporation. The comments centered on the necessity of an escrow account when the collateral was in the possession of the lending insurance company. The Board agrees with the comments and has revised the amendment to the section to eliminate this requirement when the collateral is in possession of the insurance company. The amendment is adopted under authority of the Insurance Code, Articles 1. 11 and 1.04, and Texas Civil Statutes, Article 6252-13a, sec.4 and sec.5. Article 1.11 authorizes the board to adopt rules which are appropriate for the implementation of Article 1.11. Article 1.04(b) authorizes the board to determine rules in accordance with the laws of this state for uniform application. Texas Civil Statutes, Article 6252-13a, sec.4 and sec.5, authorize and require each state agency to adopt rules of practice setting forth the nature and requirements of available procedures and prescribe the procedure for adoption of rules of a state administrative agency. sec.7.306. Reporting of Loaned Securities. (a) Reporting of Loaned Equity Securities. Paragraphs (1) and (2) of this subsection shall be applicable to loaned equity securities. (1) When an equity security is loaned to the broker, collateral shall be pledged to the insurance company. The pledged collateral shall be maintained in the possession and sole control of the lending insurance company or in an appropriate escrow account. The market value of equity securities loaned to the broker shall be treated as an admitted asset, if otherwise eligible. (2) Each insurer shall identify the collateral and any reinvestment of such collateral in its annual statement notes. If the collateral consisting of cash and/or cash equivalents is available for the general use of the insurance company, such collateral shall be recognized as an asset of the insurance company and a liability for the return of that collateral shall be established. Noncash collateral shall not be recognized as an asset of the company. If balance sheet accounts are used for noncash collateral control, then a contra account shall be used to zero out the balance sheet accounts so that net asset value as related to the noncash collateral is not shown as an asset of the insurance company. (b) Reporting of Loaned Fixed Income Securities. When a bond is loaned to the broker, collateral consisting of cash and/or cash equivalents shall be pledged to the insurance company. The pledged collateral shall be maintained in the possession and sole control of the lending insurance company or in an appropriate escrow account. The amortized book value of the fixed income security loaned to the broker by the insurance company continues to be treated as an admitted asset, if otherwise eligible. (c) Income and Expense Treatment. Income received during the year on the collateral or received on any reinvestment of the collateral is reported in the investment income exhibit of the annual statement as a separate item, specifically identified. Amounts remitted to the broker as compensation are reported as an investment expense in the appropriate exhibit, to the annual statement. (d) Return of Loaned Securities. Upon return to the insurance company of the loaned securities, such securities are presented in the annual statement in the same form and at the same values as such securities would have been presented prior to the transaction. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on September 9, 1993. TRD-9328625 Linda K. von Quintus-Dorn Chief Clerk Texas Department of Insurance Effective date: September 30, 1993 Proposal publication date: July 16, 1993 For further information, please call: (512) 463-6327 Subchapter A. Examination and Financial Analysis 28 TAC sec.sec.7.604, 7.606, 7.607, 7.610 The State Board of Insurance of the Texas Department of Insurance adopts amendments to sec.sec.7.604, 7.606, 7.607, and 7.610, concerning the allowance for reinsurance credit to ceding insurers. Sections 7.604, 7.606, 7.607, and 7. 610 are adopted without changes to the proposed text as published in the July 9, 1993, issue of the Texas Register (18 TexReg 4447). The adopted amendments are necessary to more effectively regulate who may reinsure, the allowance for reinsurance credit, and to facilitate implementation of statutory amendments to the Insurance Code, Articles 3.10 and 5.75-1, enacted in House Bill 2 by the 72nd Legislature of Texas. The adopted amendments make the sections consistent with statutory amendments to the Insurance Code, Articles 3.10 and 5.75-1. In each section, references to the "State Board" are replaced with the "Texas Department" of Insurance and the term Reinsurance "Division" has been changed to Reinsurance "Activity". In sec.7.604 and sec.7.606, the description of insurers affected by each section is expanded to include all insurers licensed to do business in this state, as is consistent with statutory amendments. In addition, sec.7.604 clarifies what is included in the required submission to the department when a company reinsures its entire business. Section 7.606 clarifies the documents to be filed with the department by a non-licensed insurer seeking to become an accredited reinsurer. Section 7.607 includes a new subpart concerning a third type of trusteed reinsurer, the authority for which was added to the Insurance Code, Article 5.75-1 by amendment. Section 7.610 was amended to correct grammatical errors. One commenter objected to amending sec.7.604 to include any insurers "licensed to do the business of insurance in this state" because affected foreign insurers would have to obtain prior approval from the commissioner. Additionally the commenter analogized that if all states adopted an identical rule an insurer would be required to obtain prior approval from every state which could lead to dual and conflicting decisions among the states about the validity of the same transaction. The commenter believes that the amendment could delay or hamper such transactions even though the approval process may be beneficial to the financial solvency of the company involved. The commenter suggested that the department either limit the section to domestic companies, or adopt the NAIC's Model Assumption Reinsurance Act when it is finalized in the future. The department believes that the commenter's objections concern the change in recent legislation reflected in the statutory amendments to the Insurance Code Articles 3.10 and 5.75-1. The legislative amendments expanded the scope of the Insurance Code Articles 3.10 and 5.75-1 from domestic insurers to include all insurers licensed to do the business of insurance in Texas. The department believes that the State of Texas is the only state which has expanded its statutes in this regard to apply to all licensed insurers; therefore, although there is a chance of dual and conflicting decisions in the future if these statutory changes occur in other states, this chance is currently remote. Regarding the suggestion to adopt the NAIC's Model Act, such an adoption would require legislative action before the department could adopt the act as a rule. The department is charged with enforcing legislation which is currently in effect; therefore, it would be inappropriate to wait for the possible finalization of a draft of a Model Act which may or may not ultimately be adopted by the Texas Legislature. Consequently, the department has adopted the section as proposed. One commenter objected to amending sec.7. 604 to include any insurer "licensed to do the business of insurance," without also including the exception for ceding insurers domiciled in another state that regulates credit for reinsurance under statutes, rules, or regulations substantially similar in substance or effect to the Insurance Code, Article 3. 10. The department believes that adding the statutory exception is unnecessary and redundant as it is already provided for in statute as regards credit for reinsurance issues which arise from indemnity reinsurance contracts. Written comments on the proposed amendments with recommendations for change were received from the Alliance of American Insurers, a national property- casualty trade association, and the American Council of Life Insurance, a national trade association. No comments were received in favor of the proposed section as published. The amendments are adopted under the Insurance Code, Articles 3.10, 5.75-1, and 1.04, and Texas Civil Statutes, Article 6252-13a sec.4 and sec.5. The Insurance Code, Articles 3.10 and 5.75-1 authorize rules relating to the treatment of reinsurance agreements between insurers, set forth parameters for non-licensed insurers participating as reinsurers, and provide for the accounting and financial statement requirements for reinsurers. Article 1.04(b) authorizes the Board to determine rules in accordance with the laws of this state for uniform application. Texas Civil Statutes, Article 6252-13a sec.4 and sec.5 authorize and require each state agency to adopt rules of practice setting forth the nature and requirement of available procedures, and prescribe the procedures for adoption of rules of a state administrative agency. The following articles of the Insurance Code are affected by these rules: The Insurance Code, Articles 3.10 and 5.75-1. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on September 8, 1993. TRD-9328626 Linda K. von Quintus-Dorn Chief Clerk Texas Department of Insurance Effective date: September 30, 1993 Proposal publication date: July 9, 1993 For further information, please call: (512) 463-6327 Chapter 21. Trade Practices Subchapter J. Prohibited Trade Practices 28 TAC sec.21.1000 The State Board of Insurance of the Texas Department of Insurance adopts new sec.21.1000, concerning the use of underwriting decisions of other companies as a basis to refuse to insure or submit an application or binder for an applicant for personal automobile, residential property, life, accident or health insurance. Section 21.1000 is adopted changes to the proposed text as published in the July 27, 1993, issue of the Texas Register (18 TexReg 4935). The new section will prohibit an insurer or agent from considering the fact that an applicant for personal automobile, residential property, or life, accident, or health insurance was denied coverage, non-renewed, or canceled by another company. However, the new section will not prohibit an insurer or agent from inquiring of an applicant for personal automobile, residential property, or life, accident, or health insurance about the applicant's experience with other insurers. Section 21.1000 also prohibits an insurer or agent writing or offering personal automobile or residential property insurance from refusing to insure or submit an application or binder or conditional receipt because the applicant was previously insured by a county mutual or surplus lines insurer. Insurers should, on an independent basis, determine whether to insure an applicant in accordance with their individual underwriting guidelines. The fact that another insurer has declined to write, canceled, or nonrenewed a policy for an applicant, should not in whole or in part be the basis for an insurer declining to write the applicant. Such action is anti-competitive and results in the blacklisting of some consumers from the insurance market. This section will ensure that the possibility of unfair competition and unfair practices do not occur in the marketplace, and when it does, that there are appropriate remedies for the consumer. The section will require insurers to rely on their own underwriting guidelines when considering an applicant for personal automobile, residential property, or life, accident, or health insurance, and will result in greater fairness in the personal automobile insurance and residential property insurance marketplaces, increased competition, and better informed consumers by prohibiting an insurer or agent from considering the fact that an applicant for personal automobile, residential property, or life, accident, or health insurance was denied coverage, non-renewed, or canceled by another company. The section provides that the fact that an applicant was previously insured by a county mutual or surplus lines insurer, shall not be a reason in whole or in part for an insurer or agent writing or offering to write personal automobile or residential property to refuse to insure or submit an application or binder or conditional receipt for that applicant. The section will allow an insurer to base its decision to insure an applicant on the same factor on which another insurer made its adverse decision, if the insurer would have based its decision on that factor without knowledge of the previous insurer's actions. The failure to comply with this section would constitute unfair competition and unfair practices under the Insurance Code, Article 21.21, and would be subject to the provisions of that article. Comments in favor of adoption were received from Consumers Union, Wayne Northcutt (Licensed Local Recording Agent and Group I, Legal Reserve Life Insurance Agent), and the Office of Public Insurance Counsel. Comments against adoption were received from the American Council of Life Insurance, Association of Fire and Casualty Companies in Texas, CNA Insurance Companies, Farmers Insurance Group, Landmark Life Insurance Company, National Association of Independent Insurers, Progressive, State Farm Insurance Companies, Texas Association of Life Insurance Officials, Texas Legal Reserve Officials Association, Texas Life Insurance Association, and The Paul Revere Life Insurance Company. Three commenters support the new section. Eight commenters challenged the Board's statutory authority to adopt the new section. The comments include: Article 1.35(h)(1) clearly does not authorize Office of Public Insurance Counsel to initiate rules. The Department disagrees. This objection is irrelevant and untimely. Although Office of Public Insurance Counsel originally proposed the rule, the Board choose to publish the rule. The Board had the authority to publish the rule whether or not Office of Public Insurance Counsel has the right to petition the Board to do so. Since the Board did so, Office of Public Insurance Counsel's authority is irrelevant. Even if Office of Public Insurance Counsel's authority were relevant, Office of Public Insurance Counsel clearly has the authority to petition the Board for the adoption of rules. Office of Public Insurance Counsel's statutory authority can be found in the Administrative Procedure and Texas Register Act sec.11, and in the Insurance Code, Article 1.35A. The Administrative Procedure and Texas Register Act, sec.11, provides that any "person" may petition for the adoption of a rule. The Administrative Procedure and Texas Register Act, sec.3(6), defines persons to exclude "agencies". However, an agency is defined under sec.3(1) as "any state board, commission, department, or officer having statewide jurisdiction, ... that makes rules or determines contested cases." Office of Public Insurance Counsel is not an "agency" under Administrative Procedure and Texas Register Act because it does not have "jurisdiction" over any persons or property, much less statewide jurisdiction, does not make rules and does not determine contested cases. Thus, Office of Public Insurance Counsel has the statutory right to petition the Board for the adoption of rules. The Insurance Code, Article 1.35A, sec.h(1)(A), permits the public counsel to appear or intervene as a matter of right before the State Board of Insurance as a party or otherwise on behalf of insurance consumers as a class in matters involving rules affecting property and casualty insurance. Black's Law Dictionary defines "appear" to be simply the coming into court, whether as a plaintiff or defendant. Black's Law Dictionary (5th ed., 1979). Thus, petitioning for a tribunal, such as an agency to take some action, as a plaintiff does, constitutes an appearance. Office of Public Insurance Counsel's right to appear before the Board, therefore, must include the right to petition the Board to invoke its rule making jurisdiction. Since no one but the agency can "initiate" a proceeding at the administrative level, the legislature properly used the term "appear" instead of "initiate" when it created Office of Public Insurance Counsel's powers before the Board. One commenter suggested that the rule is not authorized by any statute and would exceed the Board's authority in the Insurance Code. The commenter also suggested there is no rulemaking authority to apply to life, health and accident companies and that Article 1.04(b) does not grant any independent rule making authority to the Board, but only authorizes the Board to adopt such rules "...as provided by law." Another commenter suggested the cited statutory authorizations provide no authority for the agency's action. The Department disagrees. The Board has general rulemaking authority under Article 1.04(b). of Article 21.21, sec.13(a) explicitly provides the Board with broad statutory authorization to promulgate rules and regulations "as is necessary in the accomplishment of the purposes of this article and Article 21.20, including, but not limited to such express provisions within the purposes of these articles as it deems necessary..." The rulemaking authority is not limited to the express provisions of Article 21.21 but rather extends to any rule necessary to accomplish the regulation of "trade practices in the business of insurance... by defining, or providing for the determination of, all such practices in this state which constitute unfair methods of competition or unfair or deceptive acts or practices and by prohibiting the trade practices so defined or determined (Texas the Insurance Code, Article 21. 21, sec.1(a)). Article 21.21, sec.1(b), provides that the act is to be liberally construed and applied to promote the underlying purpose as set forth in sec.1. The other articles cited as statutory authority provide the Board with authorization to regulate auto and residential property rates and forms. One commenter suggested that the rule violates Article 21.49-2B, which grants no authority to pass rules with respect to an insurer's initial decision whether to insure or not, and which limits the rulemaking authority to the matters of cancellation and non-renewal. The Department does not rely on this article as statutory authority. Rulemaking authority under 21.49-2B only prohibits rules not in conflict with that article, but it does not prohibit adoption of rules regulating cancellation and non-renewals pursuant to other statutory authority. One commenter suggested that Article 5.09 does not authorize the Board to promulgate these rules. The Department believes that because of the general rulemaking authority granted in Article 1.04(b), the duty mandated to the Board in the Insurance Code to see that the insurance laws of this state are faithfully executed, and the prohibitions against discriminations or distinctions in Article 5.09 provide authority for this rule. One commenter suggested that the rule fails to cite any provision in Chapter 3 of the Insurance Code dealing with life, accident, or health insurance as authority for the rule. The statutes cited as authority allow the Board to promulgate or regulate "rates" for certain types of insurance but not for life, accident or health insurance. The statutes cited do not authorize the Board to regulate the underwriting practices of insurers for any line including life, accident and health. The Department disagrees. The Board has general rulemaking authority under Article 1.04(b) and rulemaking authority under Article 21.21. Eleven commenters challenged the Board's authority to adopt the new section under Article 21.21. The objections include: the rule exceeds the statutory authority of Article 21.21; the rule violates Article 21.21, sec.13 and sec.4; and the application of Article 21.21 is an unreasonable extension of law which constitutes an improper application of the Board's authority. The Department disagrees. Article 21.21, sec.13(a), explicitly provides the Board with broad statutory authorization to promulgate rules and regulations "as is necessary in the accomplishment of the purposes of this article and Article 21.20, including, but not limited to such express provisions within the purposes of these articles as it deems necessary..." The rulemaking authority is not limited to the express provisions of the Article but rather extends to any rule necessary to accomplish the regulation of "trade practices in the business of insurance... by defining, or providing for the determination of, all such practices in this state which constitute unfair methods of competition or unfair or deceptive acts or practices and by prohibiting the trade practices so defined or determined." (Texas Insurance Code, Article sec.1(a)). Article 21.21, sec.1(b), provides that the act is to be liberally construed and applied to promote the underlying purpose as set forth in sec.1. One commenter suggested that the rule violates Article 21.21, sec.4, because the conduct to be prohibited is not inherently wrong. The Department disagrees. There is no requirement for conduct to be inherently wrong and the Board's rulemaking authority is not limited to refining the laundry list in sec.4. One commenter requested that subsection (c) of the new section be deleted. The Department disagrees. The Department believes the conduct prohibited is properly defined as an unfair practice and unfair method of competition. One commenter suggested that nowhere in the agency's rule is there any explanation as to why the determination of this action as an unfair or deceptive trade practice is necessary for the purposes of Article 21.21. The Department disagrees. The Department complied with the requirements of sec.5 of the Administrative Procedure and Texas Register Act concerning notice of the rule. One commenter suggested that the rule inaccurately incorporates the term "unfair competition" as an injury related to consumers of insurance as opposed to insurers. The Department disagrees. The term "unfair competition" under Article 21.21 may apply to consumers of insurance when consumers may be victims of an unfair trade practice. One commenter suggested that the rule fails to describe the consumer injury that has occurred by reason of an insurer acting on the basis of information about another insurance company's activity with an applicant. The Department disagrees. The Department complied with the requirements of the Administrative Procedure and Texas Register Act, sec.5, concerning notice of the proposed rule. One commenter suggested that this rule will spawn litigation. The Department believes this rule is a necessary regulation for consumers and any litigation spawned will be because of violations by insurers. One commenter requested that the cite to Article 21.21 be removed. The Department disagrees. The Department believes the conduct prohibited is properly defined as an unfair practice and unfair method of competition. One commenter suggested that the impact of the rule is that insurers may only write, cancel, or refuse to renew a policy based on written underwriting guidelines. The Department disagrees. The Department recognizes that an insurer's decision to write, cancel, or refuse to renew a policy may be based on factors other than as provided in written guidelines. The rule does not require that an insurer's underwriting guidelines be in written form. Three commenters stated that insurers should not be prevented from asking about experiences with other applications. The Department believes that the rule does not prevent the insurer from asking questions of applicants about previous declinations. An insurer may base its decision whether to insure an applicant on the same factor as the previously declining insurer if the insurer would have used that reason without knowledge of the previous insurer's action. One commenter suggested that the rule was unclear as to how it would operate within an insurance company group. The Department believes that the rule operates on an individual company basis; whether the company is a member of a group is not relevant to the operation of the rule. Two commenters challenged whether the new section's adoption complied with the requirement of the Administrative Procedure and Texas Register Act. One commenter held that the rule was not proposed in accordance with sec.5(a)(3), which requires the statutory authority to be set out with specificity. The Department disagrees. Numerous statutory cites were provided because three lines of insurance are affected by the rule, and these cites were specific in their nature. The other commenter maintained that the rule violates sec.5 because the August 3, 1993, amended notice did not include a fiscal and cost-benefit analysis. The Department disagrees. Notice of the rule was published in the July 27, 1993, issue of the Texas Register (18 TexReg 4935) in compliance with sec.5. One commenter stated that the rule places an underwriter in an unfair position. The Department disagrees. An underwriter's function is to underwrite risk based on an individual company's underwriting guidelines. Five commenters suggested that the rule was vague and ambiguous. The comments include: the rule is vague and ambiguous and can reasonably be anticipated to lead to regulatory problems; unwarranted accusations against insurers; and unreasonable expectations of insureds. The Department disagrees. Plain reading of the rule shows the rule is complete, not vague and not ambiguous. One commenter stated that the rule is vague and does not sufficiently establish standards to which conduct can be conformed. The Department disagrees. The standard to be met is clear-the company is to use its own underwriting guidelines in determining whether to insure and is not to base its decision on a previous insurer's actions of cancellation, nonrenewal, or refusal to insure. Two commenters stated that grammatically, the rule is confusing as to what is intended in these three areas: refusing to insure; submit an application; or a binder of insurance. The Department disagrees. The rule is written in simple language and uses simple, understandable terms. Plain reading of the rule shows the meaning of these three phrases to be perfectly clear and understandable both to the consumer and the insurer. Two commenters stated that the rule requires action "without knowledge" of a previous insurer's actions. The mere fact that a life application has been denied may itself be important. The denial may either be immaterial or may be the result of suspected fraud. The commenters suggested that the potential for material misrepresentations, fraud, or abuse against insurers is exacerbated. The Department disagrees. The rule does not require action without knowledge but it does require action based on the company's own underwriting criteria, so potential for exacerbated material misrepresentations, etc., is not valid. One commenter indicated that the term "residential property insurance" is not defined and it is not known what types of coverages and insurance policies are meant to be covered by these proposed rules. The Department disagrees. "Residential property insurance" is a term commonly used in the Texas industry to refer to homeowners, dwelling, farm and ranch, and farm and ranch owner's insurance or any other policy providing coverage on residential premises. However, the Department does not object to defining the term in the rule although the Department does not feel it is necessary. One commenter suggested that the rule is unfair and overbroad in that it will permit the suppression of information resulting in an underwriter being denied full knowledge regarding the applicant. The Department disagrees. The rule does not require action without knowledge of a previous insurer's actions or suppression of information from an underwriter. One commenter did not object to this regulation provided the commenter can continue to ask applicants about refusals, denials or modifications of coverage by other insurers. The commenter suggested adding a sentence to subsection (a): "Knowledge of the previous action may be obtained by questions on the applications." The Department believes that the rule does not require action without knowledge of a previous insurer's actions or suppression of information from an underwriter. One commenter did not object to this rule in principle and suggested adding to rule: "Nothing precludes an insurer from asking questions about applicant's experience with other insurers." The Department does not object to incorporating the suggested language into the rule. One commenter posed no objection to this rule in principle, but believed that insurers and their agents must have the right to non-bind applicants who have potentially negative factors in their underwriting history. The commenter believed that in order to clarify that a decision of an agent to non-bind an applicant is not considered a "refusal to insure" language to that effect should be added to the rule. The Department believes that agents who do not have binding authority for certain types of risks would not be in violation of this rule based on refusal to insure. One commenter indicated the rule imposes an impractical requirement. The commenter suggested that there are so many circumstances that can affect a decision to insure that they simply cannot be reduced into written form. Nor would it be wise to impose such an impractical requirement upon the companies, particularly in view of the circumstance that the Legislature has never seen fit to create any such restriction. The Department is unaware that a company would base a decision to insure on circumstances that are not in a written underwriting guideline or manual. One commenter suggested that the Board has no authority to dictate underwriting standards. The Department believes that the purpose of the rule is not to dictate underwriting standards but rather to ensure the fair and equitable application of existing guidelines. One commenter strongly believed insurers should not be prohibited from asking whether another insurer had acted adversely and should not be prohibited from further investigating the applicant because of a prior adverse action. The Department believes that the rule does not prohibit this. One commenter proposed revising the rule to state explicitly that an insurer is not prohibited from asking whether another insurer has acted adversely and that the company has the right to investigate that decision as part of the underwriting process. The Department does not believe that this revision is necessary because the rule does not prohibit such action. One commenter believed that insurers should be able to require that such applicants be discussed with an underwriter to determine whether to bind or non- bind. The Department disagrees. This is in direct violation of the intent of the rule. One commenter suggested that the rule eliminates an underwriter's ability to prove that an applicant misrepresented a material fact on the application as a condition for canceling or refusing to renew applicant's policy. The Department disagrees. The rule does not prohibit the insurer from rescinding a contract of insurance if an applicant makes a material misrepresentation on the application for insurance. One commenter suggested that the rule makes immaterial or irrelevant any answer to a question by the insurer concerning applicant's history or experience with previous insurers. The Department disagrees. The rule does not address an applicant's material misrepresentations on an application. The rule does not abrogate the legal effect of an applicant's making of a material false statement on the application for insurance. The new section is adopted pursuant to the Insurance Code, Articles 1.04(b), 5.06, 5.09, 5.10, 5.35, 5.98, 5.101, 21.07, sec.13; 21.07-3, sec.21; 21.14; and 21.21, sec.13; and Texas Revised Civil Statutes, Article 6252-13a, sec.4 and sec.5. Article 1.04(b) authorizes the State Board of Insurance to determine rules in accordance with the laws of this state. Article 5.06 provides the State Board of Insurance with the authority to adopt or approve personal automobile insurance policy forms and endorsements. Article 5.09 prohibits any insurer coming within the terms of the Insurance Code Chapter 5, Subchapter A from any discrimination or distinctions in favor of or against an insured having a like hazard in the charge of premiums. Article 5.10 authorizes the State Board of Insurance to make and enforce rules and regulations necessary to carry out the provisions of the automobile insurance statutes. Article 5.35 authorizes the State Board of Insurance to adopt or approve policy forms and endorsements for residential property insurance. Article 5.98 authorizes the State Board of Insurance to adopt reasonable rules that are appropriate to accomplish the purposes of the Insurance Code, Chapter 5. Article 5.101 empowers the State Board of Insurance to regulate automobile and residential property insurance rates. Article 21.07, sec.13, provides the State Board of Insurance with the authority to establish reasonable rules and regulations for the licensing of agents. Article 21.07-3, sec.21, provides the State Board of Insurance with the authority to establish reasonable rules and regulations for the licensing of managing general agents. Article 21.14 provides the State Board of Insurance with the authority to license local recording agents and solicitors. Article 21.21, sec.13, authorizes the State Board of Insurance to promulgate rules and regulations as necessary to carry out the provisions of Article 21.21. Texas Revised Civil Statutes, Article 6252-13a, sec.4 and sec.5, authorize and require each state agency to adopt rules of practice setting forth the nature and requirement of available procedures and to prescribe the procedures for adoption of rules by a state administrative agency. sec.21.1000. Prohibition Against Insurer's Refusal to Insure Based on the Underwriting Decision of Another Company. (a) The fact that another insurer canceled, non-renewed, or refused to insure an applicant shall not be a reason, in whole or in part, for an insurer or agent writing or offering personal automobile, residential property, life, accident or health insurance to refuse to insure or submit an application or binder or conditional receipt for that applicant. An insurer may base its decision whether to insure an applicant on the same factor on which another insurer made its adverse decision if that insurer would have based its decision on that factor without knowledge of the previous insurer's actions. (b) The fact that an applicant was previously insured by a county mutual or surplus lines insurer shall not be a reason, in whole or in part, for an insurer or agent writing or offering personal automobile or residential property insurance to refuse to insure or submit an application or binder or conditional receipt for that applicant. (c) The failure to comply with this rule shall constitute unfair competition and unfair practices under the Insurance Code, Article 21.21, and shall be subject to the provisions thereof. This rule does not prohibit an insurer or agent from asking if another insurer canceled, non-renewed, or refused to insure the applicant. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on September 9, 1993. TRD-9328622 Linda K. von Quintus-Dorn Chief Clerk Texas Department of Insurance Effective date: September 30, 1993 Proposal publication date: July 27, 1993 For further information, please call: (512) 463-6327 28 TAC sec.21.1001 The State Board of Insurance of the Texas Department of Insurance adopts new sec.21.1001, concerning prohibiting insurers from refusing to renew a personal auto policy or from requiring a named-driver exclusion for any family member as a condition of renewal solely because a family member of the insured reaches driving age. Section 21.1001 is adopted with changes to the proposed text as published in the July 27, 1993, issue of the Texas Register (18 TexReg 4936). The section will implement the Insurance Code, Article 21.49-2B, sec.6(a), which prohibits an insurer from declining to renew a personal auto policy solely because of the age of the person covered by the policy. The new section will reinforce Article 21.49-2B, sec.6(a), and further ensures that insurers cannot legally decline to renew a policy solely because of the age of a person covered by the policy. The age of a driver is reflected in the appropriate classification in automobile rating and it would be unwarranted to arbitrarily nonrenew a policy because of the age of the driver. The section is adopted without the subsection (b) it included in the published proposed text because the Department withdrew the subsection based on the belief that such language would be redundant of provisions in the Texas Business and Commission Code sec.17.41 et seq, Deceptive Trade Practices Act (DTPA). The section will allow families with children reaching driving age to continue their auto insurance coverage with the same insurer and to have the young driver covered under the policy. The section prohibits an insurer from refusing to renew a policy solely on the basis of a family member reaching driving age. Comments in favor of the adoption were received from the Office of Public Insurance Counsel and Consumers Union. Comments against adoption were received from Farmers Insurance Group, National Association of Independent Insurers (NAII), Progressive Insurance Companies, State Farm Insurance Companies, Texas Automobile Insurance Service Office (TAISO), and United Services Automobile Association (USAA). Commenters suggested that the Insurance Code, Article 1.35(h)(1), clearly does not authorize the Office of Public Insurance Counsel (OPIC) to initiate rules and it lacks authority to initiate rulemaking under Texas Civil Statutes, Article 6252-13a, sec.3. The Department disagrees because Texas Civil Statutes, Article 6252-13a, sec.11 authorizes any interested person to petition an agency requesting the adoption of a rule. In addition, this objection is irrelevant and untimely. Although OPIC originally proposed the rule, the Board chose to publish the rule. The Board had the authority to publish the rule whether or not OPIC has the right to petition the Board to do so. Since the Board did so, OPIC's authority is irrelevant. Even if OPIC's authority were relevant, OPIC clearly has the authority to petition the Board for the adoption of rules. OPIC's statutory authority can be found in Texas Civil Statutes, Article 6252-13a, Administrative Procedure and Texas Register Act (APTRA) sec.11 and in the Insurance Code, Article 1.35A. APTRA, sec. 11 provides that any "person" may petition for the adoption of a rule, and APTRA sec. 3(6) defines persons to exclude "agencies". However, an agency is defined under sec. 3(1) as "any state board, commission, department, or officer having statewide jurisdiction, ... that makes rules, or determines contested cases." OPIC is not an "agency" under APTRA because it does not have "jurisdiction" over any persons or property, much less statewide jurisdiction, does not make rules and does not determine contested cases. Thus, OPIC has the statutory right to petition the Board for the adoption of rules. The Insurance Code, Article 1. 35A, sec.h(1)(a) permits the public counsel to appear or intervene as a matter of right before the State Board of Insurance as a party or otherwise on behalf of insurance consumers as a class in matters involving rules affecting property and casualty insurance. Black's Law Dictionary defines "appear" to be simply the coming into court, whether as a plaintiff or defendant. Black's Law Dictionary 89 (5th ed., 1979). Thus, petitioning for a tribunal such as an agency to take some action, as a plaintiff does, constitutes an appearance. OPIC's right to appear before the Board, therefore, must include the right to petition the Board to invoke its rulemaking jurisdiction. Since no one but the agency can "initiate" a proceeding at the administrative level, the legislature properly used the term "appear" instead of "initiate" when it created OPIC's powers before the Board. One commenter suggested that no law in Texas governs the use of named-driver exclusions and that restricting their use exceeds the Board's statutory authority. The Department disagrees because the Board has general rulemaking authority under the Insurance Code, Article 1. 04(b) which includes rulemaking authority over insurer's use of named-driver exclusions. In addition, the Department believes that the Board has the authority under the Insurance Code, Article 21.21, sec.13, to promulgate the rule. The Department also believes that offering to renew a policy only with a named-driver exclusion that was not in the previous policy is a non-renewal of the existing policy. The named-driver exclusion changes the coverage of the policy. Thus, requiring a named-driver exclusion as a condition for renewal constitutes a refusal to renew and violates the Insurance Code, Article 21. 49-2B, sec.6(a). Two commenters suggested that the scope of the Insurance Code, Article 21. 49- 2B, sec.6(a), relied on as authority for this regulation is not broad enough to encompass persons not covered by the policy at the time of its issuance. The Department disagrees because the auto policy will extend to cover all members of the household of the named insured during the policy period unless specifically excluded. Two commenters suggested that the legislature intended the phrase "person covered by the policy" in the Insurance Code, Article 21.49-2B, sec.6(a), to mean the "named insured." The Department disagrees because if the Legislature had intended the phrase "person covered by the policy" to mean "named insured, " they could have used that term. Two commenters suggested that as it applies to "named insureds", the Insurance Code, Article 21.49-2B, sec.6(a), was intended primarily to prohibit the nonrenewal of auto insurance policies of older drivers. The Department disagrees because it appears from a plain reading of the statute that the term "age" is not limited to older drivers. In addition, no such limitation is contained in the statute. One commenter suggested that the section is unnecessary if the rule is valid, and if it is valid, it is valid only to the extent it is an appropriate interpretation of the Insurance Code, Article 21.49-2B, sec.6(a). The Department disagrees because the staff believes the rule is valid and that it is not limited by the scope of the Insurance Code, Article 21.49-2B, sec.6(a), because of the Board's general rulemaking authority under the Insurance Code, Articles 1.04(b) and 21.21 sec.13. One commenter suggested that it is beyond the authority of the Board in the Insurance Code, Article 21.49-2B, sec.11, to make a violation of Article 21. 49- 2B an act of "unfair competition and unfair practices." The Department disagrees because the Insurance Code, Article 21.49-2B, sec.11, speaks only to failure to give notice of non-renewal and not to the act of non-renewal. However, based on other comments, the Department has deleted the subsection of the rule concerning "unfair competition and unfair practices." Two commenters suggested that the section is unnecessary because it is duplicative of the Insurance Code, Article 21.49-2B sec.6(a), which states that an insurer may not decline to renew a personal auto policy solely because of the age of the person covered by the policy. The commenter also stated that "age" means any age and that the sole function of this section is to impose the Insurance Code, Article 21.21, sanctions. The Department disagrees because the purpose of the rule is to ensure that young drivers and their families are not treated unfairly by restricting coverage or by non-renewing policies. However, based on other comments received, the Department has deleted the subsection of the rule imposing the Insurance Code, Article 21.21, sanctions. One commenter suggested that the section exceeds statutory rulemaking authority of the Insurance Code, Article 21.21. The Department disagrees because the Insurance Code, Article 21.21, sec.13, provides the Board with broad rulemaking authority "as is necessary in the accomplishment of the purposes" of Article 21.21, including but not limited to the express provisions within the purposes of the article as it deems necessary. Although the Department believes the Board has the authority to promulgate this rule under the Insurance Code, Article 21.21, the Department recommends that subsection (b) and the reference to Article 21.21 as a basis for statutory authority be removed for two reasons. First, the Board has sufficient authority under the Insurance Code, Articles 1.04 and 21.49-2B, sec.12, to promulgate this rule. Since, consumers already have the Article 21.21 remedies available to them through the Texas Business and Commission Code, sec.17.41, et seq., Deceptive Trade Practices Act (DTPA), if a company sends a notice of non-renewal or represents that it will not renew unless the consumer agrees to a named-driver exclusion, the company has made a misrepresentation of their rights and the consumers rights in violation of DTPA, sec.17.49(b)(12). Thus consumers already have the remedies that would be provided if this rule were adopted under Article 21.21. One commenter suggested that the section violates the Insurance Code, Article 21.21, sec.4 and sec.13. The Department disagrees because sec.13 of Article 21.21 provides the Board with broad rulemaking authority "as is necessary in the accomplishment of the purposes" of Article 21.21, including but not limited to the express provisions within the purposes of the article as it deems necessary. In addition the Department believes that the Board has authority to make rules to accomplish all of the purposes of the Insurance Code, Article 21.21, not just to refine the laundry list in the Insurance Code, Article 21.21sec.4. However, based on other comments received, the Department has deleted subsection (b) and withdrawn Article 21.21 as statutory authority for the promulgation of this rule. One commenter suggested that subsection (b) be deleted. While the department believes that the conduct prohibited is properly defined as an unfair practice and unfair method of competition, the Department has deleted subsection (b) based on other comments submitted. One commenter suggested that the section violates the provision in the Insurance Code, Article 21.21, sec.13(b), which requires signatures by 100 interested persons and supporting evidence before a rule may be adopted under that article. The Department disagrees because Texas Civil Statutes, Article 6252-13a, sec.22, results in Texas Civil Statutes, Article 6252-13a, sec.11, petitioning requirements superceding the Insurance Code, Article 21.21, sec.13(b) and other Administrative Procedure and Texas Register Act requirements supercede other conflicting requirements of the Insurance Code, Article 21.21. However, based on other comments, the Department has deleted subsection (b) which in turn eliminates the necessity of citing the Insurance Code, Article 21.21 as statutory authority for promulgation of this rule. One commenter suggested that the application of the Insurance Code, Article 21.21 is an unreasonable extension of law which is an improper application of Board authority. The Department disagrees because the Insurance Code, Article 21.21, sec.13 provides the Board with broad rulemaking authority "as is necessary in the accomplishment of the purposes" of Article 21.21, including but not limited to the express provisions within the purposes of the article as it deems necessary. The Board has authority to make rules to accomplish all of the purposes of the Insurance Code, Article 21.21, not just to refine the laundry list in Article 21.21, sec.4. In addition, although the Department believes the Board has the authority to promulgate this rule under the Insurance Code, Article 21.21, the Department has removed subsection (b) and the reference to Article 21.21 as a basis for statutory authority for two reasons. First, the Board has sufficient authority under the Insurance Code, Articles 1.04 and 21.49-2B, sec.12 to promulgate this rule. Since, consumers already have the Article 21.21 remedies available to them through the Business and Commission Code, sec.17.41, et seq, Deceptive Trade Practices Act (DTPA). If a company sends a notice of non-renewal or represents that it will not renew unless the consumer agrees to a named-driver exclusion, the company has made a misrepresentation of their rights and the consumers rights in violation of DTPA, sec.17.49(b)(12). Thus consumers already have the remedies that would be provided if this rule were adopted under the Insurance Code, Article 21.21. One commenter suggested that the citation to the Insurance Code, Article 21. 21 be removed. The Department agrees because based on other comments, the Department has deleted subsection (b) from the rule and thus eliminates the necessity for the citation of the Insurance Code, Article 21.21. One commenter suggested that the section violates Texas Civil Statutes, Article 6252-13a, sec.5, because the August 3, 1993, amended notice did not include fiscal or cost-benefit analysis. The Department disagrees because notice of the proposed rule was published in the July 27, 1993, issue of Texas Register (18 TexReg 4935) in compliance with Texas Civil Statutes, Article 6252-13a, sec.5. Two commenters suggested that the section is vague and ambiguous because it fails to address the question of whether the family member of the insured who reaches driving age must be licensed to operate a motor vehicle before being added to the policy. The Deparment responds that the rule does not need to address licensing because coverage under the auto policy is not contingent on a driver having a license. In addition, the rule contains no language forcing an insurer to include a child on a policy even if the child is not licensed. The rule merely prohibits the non-renewal solely based on age. If the decision is because a driver is unlicensed, the rule is inapplicable. One commenter stated that the Department failed to follow the procedures set out in Texas Civil Statutes, Article 6252-13a, because it failed to set out with specificity the statutory and other authority under which the rule is proposed to be promulgated. The Department disagrees because the Department complied with Texas Civil Statutes, Article 5(a)(3). The notice includes a concise statement of the statutory authority on which the Board proposes to base the rule. The commenter's belief that some of the cited authority is insufficient to promulgate a rule is irrelevant. The Department provided the required statement about the Department's statutory authority relied on in proposing the rule. One commenter stated that the Board lacks statutory authority to promulgate the rule. The Department disagrees because as the regulatory agency, the Board has the authority to interpret the statute. Rather than impose its interpretation on insurers through disciplinary proceedings, the Board should put all companies on notice of the agency's interpretation of the statutes first. The rule accomplishes that goal. The Board also has the authority to promulgate this rule under the Insurance Code, Articles 1.04 and 21.49-2B. The latter article expressly provides the Board with rulemaking authority for the non-renewal of policies. One commenter suggested that a company should be able to non-renew when a child reaches driving age because the reason for non-renewal is the addition of a new driver on the policy. Article 21.49-2B does not prohibit that action. The Department disagrees because the auto policy covers all family members, even if not named on the policy. Thus, when a child reaches driving age there is no addition of a new driver on the policy. The action referenced is in violation of the statute and establishes the need for the adoption of this rule. One commenter stated that young drivers are riskier drivers. The Department agrees but the commenter failed to point out that insurers will receive substantially higher premiums when the child becomes a principal operator of a car. Thus, the higher cost to insure will be matched with higher premiums because the auto(s) being operated by the child will be reclassified. One commenter stated that the rule reinforces and clarifies the legislature's intent in passing Article 21.49-2B, sec.6. The Department agrees. One commenter stated that the rule will assist insurers and insureds alike in understanding their respective rights and responsibilities under this provision of the statute. The Department agrees. The new section is adopted pursuant to the Insurance Code, Articles 21. 49-2B and 1.04 and Texas Civil Statutes, Article 6252-13a, sec.4 and sec.5. Article 21.49-2B, sec.6(a) prohibits an insurer from declining to renew a personal auto policy solely because of the age of the person covered by the policy. Article 21.49-2B, sec.12, authorizes the State Board of Insurance to adopt rules relating to the cancellation and nonrenewal of policies covered by that article. Article 1.04(b) authorizes the State Board of Insurance to determine rules in accordance with the laws of this state. Texas Civil Statutes, Article 6252-13a, sec.4 and sec.5 authorize and require each state agency to adopt rules of practice setting forth the nature and requirement of available procedures and to prescribe the procedures for adoption of rules by a state administrative agency. sec.21.1001. Prohibition Against Insurer's Nonrenewing Personal Auto Policy Solely Because of Age of Young Driver. No insurer may refuse to renew a personal auto policy or require a named driver exclusion for any family member as a condition of renewal solely on the basis that a family member of the insured reaches driving age. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on September 9, 1993. TRD-9328623 Linda K. von Quintus-Dorn Chief Clerk Texas Department of Insurance Effective date: September 30, 1993 Proposal publication date: July 27, 1993 For further information, please call: (512) 463-6327 28 TAC sec.21.1003 The State Board of Insurance of the Texas Department of Insurance adopts new sec.21.1003, concerning prohibiting insurers or agents from conditioning the issuance, renewal, price, continuation, or amount of coverage of personal automobile insurance on the number of vehicles to be insured on the policy or on the purchase of any other policy or policies from the policyholder's personal auto insurer or any affiliate of that insurer. Section 21.1003 is adopted without changes to the proposed text as published in the July 27, 1993, issue of the Texas Register (18 TexReg 4937). The new section is necessary to prohibit insurers or agents from conditioning the issuance, renewal, price, continuation, or amount of coverage of personal automobile insurance on the number of vehicles to be insured on the policy or on the purchase of any other policy or policies from the policyholder's personal auto insurer or any affiliate of that insurer. Section 21.1003, however, would not preclude the application of a type of discount as provided in a rate manual approved by the Texas Department of Insurance or the conditioning of the sale of any umbrella or excess coverage policy on the purchase of the underlying policy. Section 21.1003 will result in eliminating any practice of determining the company, coverage or price of personal automobile insurance on the basis of the number of vehicles to be insured on the policy. In addition, this section will also eliminate the practice of tying the sale of a personal automobile insurance policy to another policy, except in specific instances that such tie-in is allowed by the rule. This will result in greater fairness in the personal automobile insurance marketplace and greater availability and affordability of personal automobile insurance. Section 21.1003 will prohibit an insurer or agent from conditioning the issuance, renewal, price, continuation, or amount of coverage of personal automobile insurance on the number of vehicles to be insured on the policy or on the purchase of any other policy or policies from the policyholder's personal auto insurer or any affiliate of that insurer. The section will allow the sale of a personal automobile insurance policy conditioned upon the sale of any umbrella or excess coverage policy if the personal automobile policy is required as an underlying policy. The section will not preclude the application of a type of discount allowed by the approved rating manual when conditioned upon the issuance of another policy in the same company. Comments in favor of adoption were received from Consumers Union, Office of Public Insurance Council (OPIC), and Jim Mallett. Comments against adoption were received from the Association of Fire and Casualty Companies (AFACT); Texas Automobile Insurance Service Office (TAISO); National Association of Independent Insurers (NAII); Alliance of American Insurers; Progressive Ins. Company; and Farmers Insurance Group. Two commenters suggested that the section was unnecessary because auto insurance is always available to any person desiring coverage. The Department disagrees that insurance is always available because some insureds are denied preferred rates because they own only one auto or do not have another type coverage with the insurer. Another commenter suggested that sec.21.1003 was unnecessary and will add costs to the already high cost of doing business. The Department disagrees and believes such discriminatory practices are currently being used by some insurers. Two commenters suggested that the section was not justified because it does not right any perceived wrong, but instead, attempts to limit an insurer's ability to bargain and deal with insureds in an open market context. The Department disagrees and believes the section will eliminate current practices of some insurers. Another commenter suggested that the rule is unnecessary and unworkable. The Department disagrees and believes the rule to be necessary and to be workable. Another commenter suggested that the differentials in pricing for incremental vehicles should be permitted to the extent that actuarial information supports such differentials. The Department agrees on the basis that such differentials are available through multi-car discounts. The commenter urges that if these regulations are to be considered that they require consideration of actuarial differences with respect to the number of vehicles insured or policies purchased. The commenter also asserts there is no demonstrated need for a regulation prohibiting consideration of the number of vehicles insured or the number of policies purchased and issuing, renewing, or pricing personal automobile insurance. The Department disagrees because it has received complaints indicating preferred rates were not available to consumers owning only one automobile. Four commenters suggested that there was no statutory authority and the cites of authority provided by the Department furnished no insight into the legislative rationale for the actions taken by the Department. The commenters asserted that statutes cited have no application and provide no authority for the proposed rule and that it is based on unclear statutory authority. The Department disagrees. The statutory authority cited by the agency supports the Board's authority to enact the rule. The Insurance Code, Article 21.21, sec.3, prohibits a person from engaging in a trade practice defined in or determined pursuant to this Act to be an unfair method of competition or an unfair or deceptive act or practice in the business of insurance. It is proper for the Board to determine under sec.3 and Article 21.21, sec.13, that the practices prohibited by this rule constitute unfair trade practices. The Insurance Code, Article 5.09, prohibits any insurer coming within the terms of Chapter 5, Subchapter A from any discrimination or distinctions in favor of or against an insured having a like hazard in the charge of premiums. Article 5.10 authorizes the Board to make and enforce rules and regulations necessary to carry out the provisions of the automobile insurance statutes. These two articles supplement Article 21.21 to give additional authority for the rule. Another commenter suggested that references to Article 21.21 are inappropriate in that the Department has approved and adopted rates and rules permitting insurers to consider the number of vehicles insured. A second commenter suggested the application of Article 21.21 is unreasonable, will increase potential for unproductive litigation, and will raise costs for all consumers without affording material benefits. Commenters suggested there was no particular authority for the rule and the cross-reference to Article 21.21 creates ambiguities and confusion. A commenter suggested there was no attempt to describe the consumer injury of the nature envisioned by Article 21.21 that has or might occur by reason of such volume discounts. A commenter asserted that the section exceeds the rulemaking authority of Article 21.21, sec.13. The Department disagrees with all of the commenters and states it is unnecessary to cite Article 21.21 expressly in the rule for the violation to be subject to Article 21.21 sanctions because placement of the rule in sec.21.1003 shows the Board's intent to carry out the above objectives. Further, the Department disagrees with the contentions that the Department is without statutory authority to adopt this section based on the reasons outlined above. Two commenters suggested that the staff did not attempt to articulate why volume discounts are not discriminatory or not "unfair method of competition" or "unfair or deceptive acts of practices" if they have been filed and approved by the Department, but are otherwise if not so filed and approved, and that it violates Article 21.21 because the conduct to be prohibited is not inherently wrong. Also, two commenters suggested that the insurers generally prefer to write all primary coverages. There is nothing inherently wrong in such a preference, and insureds may benefit from this preference in discounted rates. The Department disagrees because discounts are not the subject of the rules. The subject is the discriminatory practice of refusing to accept a risk at a preferred rate due to the risk of owning only one auto. Multiple car discounts will remain available, inclusive of County Mutual insurers, that offer an approved type of discount, or a similar type of discount by a County Mutual insurer. Three commenters suggested the section is vague and ambiguous in that it provides that an insurer may not condition price on the number of vehicles to be insured and that it is unclear as to whether it applies to all coverages provided on personal automobile insurance policies, or only specific policies. The Department disagrees and believes that the rule is clear in meaning. Another commenter suggested that the rule draws a blanket prohibition over tying arrangements without making provision for special situations. For instance, will insurers be required to offer the same low price to individuals as to those who seek coverage for a large volume of vehicles? The Department disagrees and states that this comment has no validity because the rule applies only to personal auto coverage, and large volumes of autos are not involved. Two commenters suggested that it is beyond the rulemaking authority of the Board authorized by APTRA, sec.10 which requires that rules "be reasonable" and that they be "necessary in the accomplishment of the purposes" of Article 21. 21, and also there is a failure to comply with APTRA, sec.5(a)(3), because the statutory authority does not specifically authorize the rule. The Department disagrees. The Board has sufficient authority to enact the rule. The Insurance Code, Article 21.21, sec.3, prohibits a person from engaging in a trade practice defined in or determined pursuant to this Act to be an unfair method of competition or an unfair or deceptive act or practice in the business of insurance. It is proper for the Board to determine under sec.3 and Article 21. 21, sec.13, that the practices prohibited by this rule constitute unfair trade practices. The Insurance Code, Article 5.09 prohibits any insurer coming within the terms of Chapter 5, Subchapter A from any discrimination or distinctions in favor of or against an insured having a like hazard in the charge of premiums. Article 5.10 authorizes the Board to make and enforce rules and regulations necessary to carry out the provisions of the automobile insurance statutes. These two articles supplement Article 21.21 to give additional authority for the proposed rule. One commenter suggested that the notice does not delineate the necessity for the rule. The Department disagrees based on the notification previously published in the Texas Register, which shows the necessity. Two commenters stated that the rule is necessary to prevent the practices of tying-in and discrimination by some insurers. One commenter stated that the rule is necessary to prevent anti-competitive practices. The Department agrees. A commenter questioned whether the language of the rule concerning type of discount would prohibit a county mutual from applying a discount that is not subject to approval by the Board. The Department feels that use of the phrase "type of a discount" is intended, as a broad term, to permit a county mutual to apply a discount that is similar to those discounts in the rate manual approved by the Texas Department of Insurance. This language is not intended to subject county mutuals to different treatment. The new section is adopted pursuant to the Insurance Code, Articles 1.04, 5. 06, 5.09, 5.10, 5.98, 5.101, 21.49-2B, 21.07, sec.13, 21.07-3, sec.21, 21.14, and 21.21, sec.13; and Texas Civil Statutes, Article 6252-13a, sec.4 and sec.5. Article 1.04(b) authorizes the State Board of Insurance to determine rules in accordance with the laws of this state. Article 5.06 provides the State Board of Insurance with the authority to adopt or approve personal automobile insurance policy forms and endorsements. Article 5.09 prohibits any insurer coming within the terms of the Insurance Code Chapter 5, Subchapter A from any discrimination or distinctions in favor of or against an insured having a like hazard in the charge of premiums. Article 5.10 authorizes the State Board of Insurance to make and enforce rules and regulations necessary to carry out the provisions of the automobile insurance statutes. Article 5.98 authorizes the State Board of Insurance to adopt reasonable rules that are appropriate to accomplish the purposes of the Insurance Code, Chapter 5, which regulates rating and policy forms for automobile insurance. Article 5.101 empowers the State Board of Insurance to regulate automobile insurance rates. Article 21. 49-2B authorizes the State Board of Insurance to adopt rules relating to the cancellation and nonrenewal of personal automobile insurance policies. Article 21.07, sec.13, provides the State Board of Insurance with the authority to establish reasonable rules and regulations for the licensing of agents. Article 21.07-3, sec.21, provides the State Board of Insurance with the authority to establish reasonable rules and regulations for the licensing of managing general agents. Article 21.14 provides the State Board of Insurance with the authority to license local recording agents and solicitors. Article 21.21, sec.13, authorizes the State Board of Insurance to promulgate reasonable rules and regulations as necessary to accomplish the purposes of Article 21.21. Texas Civil Statutes, Article 6252- 13a, sec.4 and sec.5 authorize and require each state agency to adopt rules of practice setting forth the nature and requirement of available procedures and to prescribe the procedures for adoption of rules by a state administrative agency. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on September 9, 1993. TRD-9328624 Linda K. von Quintus-Dorn Chief Clerk Texas Department of Insurance Effective date: September 30, 1993 Proposal publication date: July 27, 1993 For further information, please call: (512) 463-6327 Chapter 31. Liquidation Subchapter B. Audit Coverages Required for the Receiver and Special Deputy Receivers 28 TAC sec.sec.31.101-31.107 The State Board of Insurance of the Texas Department of Insurance adopts new sec.sec.31.101-31.107, concerning the requirements for, and audit coverages applicable to, the receiver and any special deputy receiver appointed under the Insurance Code, Article 21.28. These adopted rules were developed by the Texas Department of Insurance with review and comment by the Office of the State Auditor as required by Insurance Code, Article 22.28, sec.12(j). Sections 31.103 and 31.105 are adopted with changes to the proposed text as published in the July 23, 1993, issue of the Texas Register (18 TexReg 4840). Sections 31.101, 31.102, 31.104, 31.106, and 31.107 are adopted without changes and will not be republished. The rules are required by Insurance Code, Article 21.28, sec.12(j), which directs the Board to adopt rules relating to the scope, frequency, reporting requirements, and costs of audits. The rules are necessary to provide guidance on the types and scope of audits as well as the frequency of the audits. Paragraphs (1)-(3) of sec.31.103 were amended to change "shall" to "may" so it would be clear that the different types of audits were to be chosen with discretion, not that each type of audit was mandatory. Sections 31.101 and 31.102 describe the purpose and applicability of the subchapter to the receiver and special deputy receivers. Section 1.103 describes types of audits which may be performed on the receiver and special deputy receivers. Section 1.104 describes the scope and frequency of the types of audits which may be performed on the receiver and special deputy receivers. Section 31.105 requires that a written report be prepared whenever an audit is conducted pursuant to these sections. It describes the content of such reports and directs how they shall be distributed. Section 31.106 directs that the cost of audit shall be assessed against the receiver or special deputy receiver and shall be a cost of the receivership. Section 31.107 is a severability clause. One comment was received regarding adoption of the rules. The comment was in support of the rule and recommended that sec.31.103 be amended to make it clear that the various types of audits described in sec.31.103 were to be selected as facts and circumstances warranted. The comment also suggested sec.31.105 be amended to make it clear the State Auditor could contract with auditing firms to perform the audits. The comment also suggested that sec.31. 105(c) be amended to make it clear that an opinion on the financial statements was mandatory. The Board agrees with the comments and has amended the sections to reflect the recommendations. The Office of the State Auditor commented in favor of the regulation. The new sections are adopted under the Insurance Code, Articles 21.28 and 1. 04, and Texas Civil Statutes, Article 6252-13a, sec.4 and sec.5. The Insurance Code, Article 21.28, sec.12(d) requires the State Auditor to conduct an annual audit of the liquidator as defined in Article 21.28, sec.1(d). Article 21.28, sec.12(e) outlines the contents of the auditor's reports. Article 21.28, sec.12(f) provides the manner of filing the audit reports. Article 21.28, sec.12(j) authorizes the Board to determine rules related to scope, frequency, reporting requirements and costs of audits. Article 1.04(b) authorizes the State Board of Insurance to determine rules in accordance with the laws of this state for uniform application. Texas Civil Statutes, Article 6252-13a, sec.4 and sec.5 authorize and require each state agency to adopt rules of practice setting forth the nature and requirements of available procedures, and prescribe the procedures for adoption of rules of a state administrative agency. sec.31.103. Nature of Audits. Audits applicable to entities subject to the provisions of these sections shall take the form of performance or operational audits, and may include, but not be limited to, the types of audits which are described in paragraphs (1)-(3) of this section. (1) Compliance audit. The compliance audit may be undertaken to determine whether the following objectives are being met: (A) The audited entity has obligated, expended, received, and used funds in accordance with the purpose for which those funds have been appropriated or otherwise authorized by law; (B) The audited entity has obligated, expended, received, and used funds in accordance with any limitations, restrictions, conditions, or mandatory directions imposed by law on those obligations, expenditures, receipts, or uses; (C) The audited entity has maintained its books, records, and accounts in a manner which accurately reflects its financial and fiscal operations relating to the obligation, receipt, expenditure, and use of funds including, but not limited to, state funds or funds represented as being collected for a state purpose; (D) The audited entity has collected all revenues and receipts in accordance with the applicable laws and regulations of this State; and (E) The audited entity has properly and legally handled or administered any money, negotiable securities, or similar assets received on behalf of the state, or received from the state and held in trust by the audited entity. (2) Economy and efficiency audit. The economy and efficiency audit may be undertaken to determine whether the objectives set out in subparagraphs (A) and (B) of this paragraph are being met and shall make the identifications set out in subparagraph (C) of this paragraph, as follows: (A) The audited entity is managing or utilizing its resources, including funds, personnel, property, equipment, and space in an economical and efficient manner; (B) The audited entity has presented financial, program, and statistical reports in a fair manner, and such reports contain useful data; and (C) The causes of inefficiencies or uneconomical practices, including inadequacies in management information systems, internal and administrative procedures, organizational structure, use of resources, allocation of personnel, purchasing, policies, and equipment have been identified. (3) Effectiveness audit. The effectiveness audit may be undertaken to determine whether the following objectives are being met: (A) The audited entity is attaining program objectives established pursuant to statutes and regulations, or by program criteria or program evaluation standards applicable to it, in an efficient and effective manner; (B) The audited entity is contributing to achievement of those benefits intended by program design in an efficient and effective manner; (C) The audited entity is discharging its duties and responsibilities under statutes and regulations or according to program performance criteria or program evaluation standards applicable to it in an efficient and effective manner; and (D) The audited entity is performing its duties and responsibilities in connection with a program which does not duplicate, overlap or conflict with the duties, functions and responsibilities of another entity with respect to the same program, or with another program designed and intended to be applied to the same persons served by the audited entity. sec.31.105. Audit Reporting Requirements. (a) Report required. The State Auditor or any entity contracted to audit a receivership as authorized or required pursuant to these sections shall prepare a written report for each audit conducted by such auditing entity. (b) Contents of report. The written report must include a management letter with comments about the following items, as applicable: (1) the criteria selected to measure effectiveness and efficiency; (2) internal controls; (3) compliance with state or federal laws; (4) conditions found by auditors and the effects of such conditions; and (5) any recommendations for improving operations or program effectiveness. (c) Financial statement opinion requirement. The written report also must include an opinion on fair presentation of financial statements when included as part of the scope of the audit. (d) Supplemental items to be reported. The auditing entity's report should also include, to the extent necessary, each of the following items: (1) an analysis of the overall performance of the entity being audited; (2) an analysis of the audited entity's financial operations and condition; (3) an analysis of receipts and expenditures made by each audited entity in connection with receiverships covered by the audit, and an analysis of the adequacy of any required bond under the Insurance Code, Article 21.28, sec.12(a) in relation to assets, receipts, and expenditures of the audited entity; (4) in the instance of an audit of the receiver or any special deputy receiver, the amount of funds made available to such receiver or special deputy receiver by a guaranty association in connection with each receivership covered by the audit, and a detail of the purpose and manner of expenditure of such funds; (5) the ratio of the total amount of claims paid to the total costs incurred in connection with each receivership covered by the audit; and/or (6) the ratio of the administrative expenses of the receiver or special deputy receiver to the total costs incurred in connection with each receivership covered by the audit. (e) Filing requirements for audit of receiver. For audits conducted in accordance with the provisions of the Insurance Code, Article 21.28, sec.12(d) and (e), copies of the auditor's report shall be filed in the manner required by the Government Code, sec.321.014 (c), no later than March 31 of the year following the year covered by the audit. (f) Filing requirements for audit of special deputy receiver. For audits other than those addressed in subsection (e) of this section, copies of the auditing entity's report shall be filed no later than March 31 of the year following the year or portion of the year covered by the audit to the following recipients: (1) the Chair of the State Board of Insurance; (2) the Commissioner of Insurance; (3) the members of the legislature on a committee with oversight responsibility for the entity or program that is the subject of the report; and (4) the Office of the State Auditor. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on September 9, 1993. TRD-9328628 Linda K. von Quintus-Dorn Chief Clerk Texas Department of Insurance Effective date: September 30, 1993 Proposal publication date: July 23, 1993 For further information, please call: (512) 463-3627 TITLE 30. ENVIRONMENTAL QUALITY Part I. Texas Natural Resource Conservation Commission Chapter 298. Edwards Underground River Subchapter A. General Provisions 30 TAC sec.sec.298.1-298.7 The Texas Natural Resource Conservation Commission (TNRCC) adopts the repeal of sec.sec.298.1-298.7, 298.11-298.20, 298.21-298.23, 298.31-298.32, 298. 41- 298.42, 298.51, and 298.61 concerning Edwards Underground River, without changes to the proposed text as published in the August 3, 1993, issue of the Texas Register (18 TexReg 5057) concerning the regulation of the withdrawal and use of water from the Edwards Aquifer. The repeals are in response to the recent enactment of Senate Bill 1477 (1993), which provides for the creation of the Edwards Aquifer Authority to regulate the withdrawal and use of the Edwards Aquifer. One comment was received in response to the proposed rules. This comment was in opposition to the proposed repeal and was prepared by an attorney representing the Sierra Club, Guadalupe-Blanco River Authority, City of San Marcos, City of New Braunfels, New Braunfels Utilities, Green Valley Special Utility District, Atascosa Rural Water Supply Corporation, and Bexar Metropolitan Water District. The comment requests that the commission not repeal its rules until and unless legal challenges to Senate Bill 1477 are defeated and the new Authority has taken the necessary steps to regulate withdrawals and protect minimum springflows in accordance with a recent federal court order. The comment further argues that Senate Bill 1477 does not contain sufficiently expressed language conveying state title, if any, to the Edwards Aquifer to the overlying landowners and, thus, the legal basis of state control remains valid until finally determined by the state courts. Without addressing the merits of any legal issue currently pending in federal or state court, the commission respectfully disagrees with the request that it not repeal its rules. The rules were adopted to fill a serious and pressing regulatory void to protect a limited and vital water resource that had been subject to use without limitation. The legislature has acted to fill that gap through the enactment of Senate Bill 1477. The repeals are adopted under the Texas Water Code, sec. sec.5.102, 5.103, and 5. 120, which provides the commission with the authority to promulgate rules as necessary to carry out its powers and duties under the Texas Water Code and other laws of the state. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on September 10, 1993. TRD-9328643 Mary Ruth Holder Director, Legal Division Texas Natural Resource Conservation Commission Effective date: October 1, 1993 Proposal publication date: August 3, 1993 For further information, please call: (512) 463-8069 Subchapter B. Permits and Other Authorizations 30 TAC sec.sec.298.11-298.20 The repeals are adopted under the Texas Water Code (Vernon 1992), sec.sec.5. 103, 5.105, and 5.120, which provides the commission with the authority to promulgate rules as necessary to carry out its powers and duties under the Texas Water Code and other laws of the state This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on September 10, 1993. TRD-9328644 Mary Ruth Holder Director, Legal Division Texas Natural Resource Conservation Commission Effective date: October 1, 1993 Proposal publication date: August 3, 1993 For further information, please call: (512) 463-8069 Subchapter C. Conveyances 30 TAC sec.298.21, sec.298.23 The repeals are adopted under the Texas Water Code (Vernon 1992), sec.sec.5. 103, 5.105, and 5.120, which provides the commission with the authority to promulgate rules as necessary to carry out its powers and duties under the Texas Water Code and other laws of the state This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on September 10, 1993. TRD-9328645 Mary Ruth Holder Director, Legal Division Texas Natural Resource Conservation Commission Effective date: October 1, 1993 Proposal publication date: August 3, 1993 For further information, please call: (512) 463-8069 Subchapter D. Water Use Measurement and Reporting 30 TAC sec.298.31, sec.298.32 The repeals are adopted under the Texas Water Code (Vernon 1992), sec.sec.5. 103, 5.105, and 5.120, which provides the commission with the authority to promulgate rules as necessary to carry out its powers and duties under the Texas Water Code and other laws of the state This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on September 10, 1993. TRD-9328646 Mary Ruth Holder Director, Legal Division Texas Natural Resource Conservation Commission Effective date: October 1, 1993 Proposal publication date: August 3, 1993 For further information, please call: (512) 463-8069 Subchapter E. Regulation of Diversions-General 30 TAC sec.298.41, sec.298.42 The repeals are adopted under the Texas Water Code (Vernon 1992), sec.sec.5. 103, 5.105, and 5.120, which provides the commission with the authority to promulgate rules as necessary to carry out its powers and duties under the Texas Water Code and other laws of the state This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on September 10, 1993. TRD-9328647 Mary Ruth Holder Director, Legal Division Texas Natural Resource Conservation Commission Effective date: October 1, 1993 Proposal publication date: August 3, 1993 For further information, please call: (512) 463-8069 Subchapter F. Regulation of Diversions-Emergency 30 TAC sec.298.51 The repeal is adopted under the Texas Water Code (Vernon 1992), sec.sec.5.103, 5.105, and 5.120, which provides the commission with the authority to promulgate rules as necessary to carry out its powers and duties under the Texas Water Code and other laws of the state This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on September 10, 1993. TRD-9328648 Mary Ruth Holder Director, Legal Division Texas Natural Resource Conservation Commission Effective date: October 1, 1993 Proposal publication date: August 3, 1993 For further information, please call: (512) 463-8069 Subchapter G. Local Government 30 TAC sec.298.61 The repeal is adopted under the Texas Water Code (Vernon 1992), sec.sec.5.103, 5.105, and 5.120, which provides the commission with the authority to promulgate rules as necessary to carry out its powers and duties under the Texas Water Code and other laws of the state This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on September 10, 1993. TRD-9328649 Mary Ruth Holder Director, Legal Division Texas Natural Resource Conservation Commission Effective date: October 1, 1993 Proposal publication date: August 3, 1993 For further information, please call: (512) 463-8069 TITLE 31. NATURAL RESOURCES AND CONSERVATION Part II. Texas Parks and Wildlife Department Chapter 53. Finance Stamps 31 TAC sec.53.15 The Texas Parks and Wildlife Commission adopts new sec.53.15, concerning stamp exemptions authorized by the Commission. Section 53.15 is adopted with one change to the proposed text as published in the July 23, 1993, issue of the Texas Register (18 TexReg 4844). The change allows the Executive Director to exempt "persons," as opposed to youth only, from stamp requirements. The section is needed to delegate Commission authority to the Director so that appropriate exemptions may be granted in a timely manner. The section will have the effect of allowing the Executive Director to waive stamp requirements on the Commission's behalf. No comments were received regarding adoption of the section. The new section is adopted under the authority of the Parks and Wildlife Code, sec.sec.43.011(b), 43.201(c), 43.251(b), 43.302(b), 43.402(c), and 43.502(c), which provides that the commission by regulation may exempt persons from stamp requirements. sec.53.15. Stamp Exemptions. The Commission grants the Director authority to exempt persons participating in any event organized for the primary purpose of promoting participation in fishing or hunting activities from the requirement to purchase the following stamps: (1) white-winged dove stamp; (2) archery hunting stamp; (3) turkey stamp; (4) waterfowl stamp; (5) saltwater sportfishing stamp; and (6) freshwater trout stamp. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on September 9, 1993. TRD-9328572 Paul M. Shinkawa Director, Legal Services Texas Parks and Wildlife Department Effective date: October 1, 1993 Proposal publication date: July 23, 1993 For further information, please call: 1 (800) 792-1112, Ext. 4433 or (512) 389- 4433 Chapter 55. Law Enforcement Deputy Game Warden Commission 31 TAC sec.55.63 The Texas Parks and Wildlife Commission adopts an amendment to sec.55.63, concerning regulating the Deputy Game Warden Program, without changes to the proposed text as published in the July 23, 1993, issue of the Texas Register (18 TexReg 4844). The amendment will require a Deputy Game Warden training school to be scheduled when a minimum of 12 Deputy Game Wardens have been appointed since the last training school, or at such time as established by the Executive Director of the Parks and Wildlife Department. No comments were received regarding adoption of the section. The amendment is adopted under the Parks and Wildlife Code, Subchapter B, Chapter 11, sec.11.020(b), which authorizes the Director to implement training for Deputy Game Wardens. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on September 9, 1993. TRD-9328571 Paul M. Shinkawa Director, Legal Services Texas Parks and Wildlife Department Effective date: October 30, 1993 Proposal publication date: (512) 389-4419 For further information, please call: 1 (800) 792-1112, Ext. 4433 or (512) 389- 4433 TITLE 34. PUBLIC FINANCE Part I. Comptroller of Public Accounts Chapter 5. Funds Management (Fiscal Affairs) Claims Processing-Payroll 34 TAC sec.sec.5.41-5.44 The comptroller of public accounts adopts the repeal of sec.sec.5.41-5.44, concerning claims processing-payroll, without changes to the proposed text as published in the June 25, 1993, issue of the Texas Register (18 TexReg 4183). The sections are being repealed so that substantially revised sections may be adopted. No comments were received regarding adoption of the repeals. The repeals are adopted under the Texas Civil Statutes, Article 4348e, sec.3(h), which requires the comptroller to adopt rules for the effective operation of the uniform statewide accounting system, and the Government Code, sec.403.011, which authorizes the comptroller to adopt rules concerning the expenditure of state funds. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on September 9, 1993. TRD-9328604 Martin E. Cherry Chief, General Law Section Comptroller of Public Accounts Effective date: September 30, 1993 Proposal publication date: June 25, 1993 For further information, please call: (512) 463-4028 The Comptroller of Public Accounts adopts new sec.sec.5.41-5.44, concerning claims processing-payroll, without changes to the proposed text as published in the June 25, 1993, issue of the Texas Register (18 TexReg 4183). The new sections cover requirements for the content and submission by state agencies to the comptroller of payroll vouchers and payroll warrant cancellation vouchers; the submission by state agencies of payroll conversion information to the comptroller and the state auditor; reporting by state agencies to the human resource information system; special payroll interpretations about certain payroll issues; and payroll deductions and garnishments. No comments were received regarding adoption of the new sections. The new sections are adopted under the Texas Civil Statutes, Article 4348e, sec.3(h), which requires the comptroller to adopt rules for the effective operation of the uniform statewide accounting system, and the Government Code, sec.403.011, which authorizes the comptroller to adopt rules concerning the expenditure of state funds. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on September 9, 1993. TRD-9328603 Martin E. Cherry Chief, General Law Section Comptroller of Public Accounts Effective date: September 30, 1993 Proposal publication date: June 25, 1993 For further information, please call: (512) 463-4028 TITLE 37. PUBLIC SAFETY AND CORRECTIONS Part III. Texas Youth Commission Chapter 91. Discipline and Control Disciplinary Practices 37 TAC sec.91.10 The Texas Youth Commission (TYC) adopts new sec.91.10, concerning protective custody for treatment, without changes to the proposed text as published in the August 6, 1993, issue of the Texas Register (18 TexReg 5196). The new rule will bring about a more efficient method of treating youth who have been found to have caused, attempted to cause, or threatened to cause substantial bodily injury to himself or herself. The new rule allows for placement of a youth who is at risk of causing substantial bodily injury to himself or herself to a residential treatment center or psychiatric hospital when protective custody or specialized treatment is not available at the youth's present location. No comments were received regarding adoption of the amendment. The new section is adopted under the Human Resources Code, sec.61.076, which provides the Texas Youth Commission with the authority to provide medical or psychiatric treatment that is necessary. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on September 9, 1993. TRD-9328640 Ron Jackson Executive Director Texas Youth Commission Effective date: October 1, 1993 Proposal publication date: July 27, 1993 For further information, please call: (512) 483-5244 TITLE 40. SOCIAL SERVICES AND ASSISTANCE Part I. Texas Department of Human Services Chapter 79. Legal Services Subchapter Q. Formal Appeals 40 TAC sec.sec.79.1601, 79.1602, 79.1604, 79.1605, 79.1610 The Texas Department of Human Services (DHS) adopts amendments to sec.sec.79.1601, 79.1602, 79.1604, 79.1605, and 79.1610, concerning definitions, right to a hearing, notice of adverse action, request for a hearing, and conduct of hearings-general requirements, in its Legal Services chapter, the without changes to the proposed text as published in the August 6, 1993, issue of the Texas Register (18 TexReg 5206). The justification for the amendments is to allow DHS to use these sections as a basis for conducting any hearing it holds under the Administrative Procedure and Texas Register Act. DHS is adopting the amendments under Subchapter Q which is now entitled "Formal Appeals" in place of "Contract Appeals." The amendments will function by providing DHS with greater flexibility in applying the sections to hearings DHS conducts. No comments were received regarding adoption of the amendments. The amendments are adopted under the Human Resources Code, Title 2, Chapter 22, which provides the department with the authority to administer public assistance programs. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on September 10, 1993. TRD-9328636 Nancy Murphy Chief Clerk Texas Department of Human Services Effective date: November 1, 1993 Proposal publication date: August 6, 1993 For further information, please call: (512) 450-3765 Texas Department of Insurance Exempt Filing Notification Pursuant to the Insurance Code, Chapter 5, Subchapter L (Editor's Note: As required by the Insurance Code, Article 5.96 and 5. 97, the Texas Register publishes notices of actions taken by the State Board of Insurance pursuant to Chapter 5, Subchapter L, of the Code. Board action taken under these articles is not subject to the Administrative Procedure and Texas Register Act. These actions become effective 15 days after the date of publication or on a later specified date. The text of the material being adopted will not be published, but may be examined in the offices of the State Board of Insurance, 333 Guadalupe, Austin. ) The State Board of Insurance of the Texas Department of Insurance, at a Board meeting held at 9:00 a.m. on July 21, 1993, at a continuation of Docket Number 2004, in Room 100 of the Texas Department of Insurance Building, 333 Guadalupe Street, Austin, adopted a modified version of a proposal by the Office of Public Insurance Counsel (OPIC) to amend the Personal Auto Policy, Part E, "DUTIES AFTER AN ACCIDENT OR LOSS," Section B.4., which requires a person seeking coverage to authorize the company to obtain medical reports. The policy amendment is to be implemented by amending Amendatory Endorsement 593A (renumbered as 593B) in the Texas Automobile Rules and Rating Manual (the Manual) and the Texas Standard Provisions for Automobile Policies (the Standard Provisions). OPIC's petition (Reference Number A-0593-10) was published in the June 18, 1993, issue of the Texas Register (18 TexReg 4017). Endorsement 593B will differ from the current Endorsement 593A only in reference to Part E, Section B.4., which section shall provide: "4. Authorize us to obtain: a. medical records which are reasonably related to the injury or damage asserted; and b. other pertinent records." The amendment as adopted by the State Board of Insurance is shown in an exhibit which was filed with the Chief Clerk under Reference Number A-0593-09-I, and is incorporated by reference into Board Order Number 60485. This notification is made pursuant to the Insurance Code, Article 5.96, which exempts it from the requirements of the Administrative Procedure and Texas Register Act. Consistent with the Texas Insurance Code, Article 5.96(h), the Department will notify all insurers writing automobile insurance of this adoption by letter summarizing the Board's action. This agency hereby certifies that the adopted amendments herein have been reviewed by legal counsel and found to be within the agency's authority to adopt. Issued in Austin, Texas, on September 10, 1993. TRD-9328699 Linda K. von Quintus-Dorn Chief Clerk Texas Department of Insurance For further information, please call: (512) 463-6328 The State Board of Insurance of the Texas Department of Insurance, at a public hearing held at 9:00 a.m. on August 31, 1993, under Docket Number 2037 and 2038, in Room 100 of the Texas Department of Insurance Building, 333 Guadalupe Street, Austin, adopted a "Consumer Bill of Rights for Personal Automobile Insurance" and a "Consumer Bill of Rights for Homeowners and Renters Insurance" and separate manual rules for automobile insurance and for homeowners and renters insurance to be included in the Texas Automobile Rule and Rating Manual and the homeowners section of the Texas Personal Lines Manual respectively, as proposed by the Office of Public Insurance Counsel in a petition filed in the Chief Clerk's Office on June 15, 1993, with an amended petition filed in the Chief Clerk's Office on July 12, 1993. The consumer bill of rights set forth the consumers' most important rights with regard to each line of insurance including consumers' rights to receive information from the Texas Department of Insurance and their insurer, rights relating to buying insurance, rights regarding cancellation and refusal to renew policies, rights regarding claims made under such policies, rights regarding non-discrimination and enforcement rights. The rules contained in the Texas Automobile Rule and Rating Manual and in the homeowners section of the Texas Personal Lines Manual require insurers writing personal automobile insurance and homeowners and tenants policies to provide a copy of the "Consumer Bill of Rights" for each such line of insurance with each new policy of such insurance issued and to provide such bill of rights with each renewal notice for such insurance unless previously delivered to the insured. The rules will require each bill of rights to be printed in no less than ten point type, without change to the wording or order of the rights and may not contain any other text than the approved text of the consumer bill of rights. The rules will also require insurers to provide a Board-promulgated Spanish language version of the bill of rights to any consumer who requests it. The Board solicited comments on the personal automobile and homeowners and renters bills of rights and received both written and oral comments as part of the record of Dockets 2037 and 2038. All comments were reviewed by the Board and the Texas Department of Insurance staff with appropriate responses to the comments provided by the Texas Department of Insurance staff in written form. Copies of the proposed comments and responses of the Texas Department of Insurance staff are available from the Chief Clerk's Office, Texas Department of Insurance, Mail Code #113-2A, 333 Guadalupe, Austin, Texas 78701. The Office of Public Insurance Counsel's petition (Reference Number O-0693-16) was published in the July 27, 1993, issue of the Texas Register (18 TexReg 4944). The State Board of Insurance has jurisdiction over this matter pursuant to the Insurance Code, Articles 1.35A, 5.06, 5.101, 5.98, 5.35, and 5.96. Consistent with the Insurance Code, Article 5.96(h), prior to the effective date of October 2, 1993, of this action, the Board will notify all insurers writing property and casualty insurance. This notification is made pursuant to the Insurance Code, Article 5.96, which exempts it from the requirements of the Administrative Procedures and Texas Register Act. This agency hereby certifies that the adopted consumer bill of rights and manual rules referenced herein have been reviewed by legal counsel and found to be within the agency's authority to adopt. Issued in Austin, Texas, on September 8, 1993. TRD-9328530 Linda K. von Quintus-Dorn Chief Clerk Texas Department of Insurance For further information, please call: (512) 463-6328 The State Board of Insurance of the Texas Department of Insurance at a hearing held at 11:00 a.m. on August 25, 1993, under Docket Number 2050, in Room 100 of the Texas Department of Insurance Building, 333 Guadalupe Street, Austin, approved the withdrawal of the application of the Texas Fire Record System to determine dwelling policy fire premiums as proposed by Staff of the Texas Department of Insurance (Department hereinafter). The State Board of Insurance (Board hereinafter) also adopted amendments to the Texas General Basis Schedules and the Dwelling Section of the Texas Personal Lines Manual to repeal all requirements and guidelines on the application of a fire record credit or penalty to the fire premium charged for a dwelling policy. The withdrawal of the system will be over a five-year period beginning on October 1, 1993 by ceasing to calculate any new credits or penalties. Staff's petition (Reference Number P- 0693-14-I) was published in the July 16, 1993, issue of the Texas Register (18 TexReg 4634). The Board's approval of the withdrawal of the application of the Texas Fire Record System is based on the determination that the system, which originated in 1912, is no longer a viable or necessary means for determining dwelling policy fire premiums because of the enactment of the more competitive, benchmark- flexible rating system enacted in Article 5.101 of the Insurance Code by the 72nd Texas Legislature in House Bill 2; there is no actuarial basis for the formula to determine the fire record credit or penalty or the application of the fire record credit or penalty; and the fire record system does not reflect the effectiveness of a fire department of a city or town in Texas. The transition for eliminating the fire record system will coincide with benchmark rate effective dates so that the change may be taken into account in the setting of the annual benchmark rates and in individual company flex rate filings. Effective October 2, 1993, no new fire record system credits or penalties will be calculated. On the 1994 benchmark rate effective date all credits and penalties will be reduced by five percent and any zero percent fire records will be eliminated, and on each subsequent benchmark rate effective date thereafter through 1997, all credits and penalties will be reduced by an additional five percent and any zero percent fire records will be eliminated. On the 1998 benchmark rate effective date, the fire record system will be eliminated. The State Board of Insurance has jurisdiction of these matters pursuant to the Insurance Code, Articles 5.25-2, 5.33, 5.101, 5.98, 5.96, and 1.04. The withdrawal of the Texas Fire Record System and the amendments to the rules in the Texas General Basis Schedules and the rules in the Dwelling Section of the Texas Personal Lines Manual as approved by the State Board of Insurance are filed with the Chief Clerk under Reference Number P-0693-14-I and are incorporated by reference by Board Order Number 60459. Consistent with the Insurance Code, Article 5.96(h), prior to the effective date of October 2, 1993, of this action, the Board will notify all insurers writing the lines of insurance affected by this Order. This notification of Board action is made pursuant to the Insurance Code, Article 5.96, which exempts Board action taken pursuant to this article from the requirements of the Administrative Procedure and Texas Register Act. This agency hereby certifies that the withdrawal of the Texas Fire Record System and the amendments to the rules in the Texas General Basis Schedules and the Dwelling Section of the Texas Personal Lines Manual have been reviewed by legal counsel and found to be within the agency's authority to adopt. Issued in Austin, Texas, September 8, 1993. TRD-9328531 Linda K. von Quintus-Dorn Chief Clerk Texas Department of Insurance For further information, please call: (512) 463-6328 The State Board of Insurance of the Texas Department of Insurance at a public hearing held at 9:00 a.m. on June 29, 1993, under Docket Number 2004, in Room 100 of the Texas Department of Insurance Building, 333 Guadalupe Street, Austin, adopted optional endorsement TE 99 54A and amendments to endorsements in the Texas Automobile Rules and Rating Manual, to clarify existing coverages. Agenda item 36-93 was proposed by the Texas Automobile Insurance Service Office (TAISO); agenda items 43-93 and 44-93 were proposed by Staff of the Texas Department of Insurance. The proposals (Reference Number A-0593-09-1) were published by agenda item number in the May 21, 1993, issue of the Texas Register (18 TexReg 3273). The optional endorsement TE 99 54A and amendments, by agenda item number, adopted by the State Board of Insurance are as follows: Agenda Item 36-93. Optional endorsement TE 99 54A to be used with the Business Auto, Garage, and Truckers Coverage Forms, to permit a covered auto to be designated by a selected symbol shown in this endorsement, which symbol can then be used on the Declarations page to designate the autos that are covered autos. Agenda Item 43-93. Amendments to Endorsement 511A, Extended Non-Owned Coverage for Named Individual, and Endorsement 573A, Supplementary Death Benefit, to correct a typographical error in each endorsement. Agenda Item 44-93. Amendments to Endorsement 544A, Texas Automobile Insurance Plan-Amendment to Termination Provision, to require Personal Auto Policies issued pursuant to the Texas Automobile Insurance Plan (the Plan) to include (by insertion of a sentence into Endorsement 544A) the same automatic termination provision that is currently included in all other Personal Auto Policies, clarifying that cancellation is effective on the effective date of a new policy obtained by the insured. Other changes in this Endorsement (renumbered as 544B) will require policies issued under the Plan to include all termination provisions that appear in the Plan itself. The optional endorsement TE 99 54A and amendments to endorsements in the Texas Automobile Rules and Rating Manual as adopted by the State Board of Insurance are filed with the Chief Clerk under Reference Number A-0593-09-I and are incorporated by reference by Board Order Number 60487. Also at the June 29, 1993, hearing and under the same docket number, the State Board of Insurance disapproved a proposed amendment to the Texas Personal Auto Policy in the Texas Standard Provisions for Automobile Policies which would have provided that any vehicle acquired during the policy term would have automatic coverage that is the same as the broadest coverage extended to any vehicle shown in the Declarations. This agenda item (42-93) was proposed by Independant Insurance Agents of Texas. Some testimony indicated this proposed amendment could cause confusion and would result in higher premiums. The proposal (Reference Number A-0593-09-1) was published by agenda item number in the May 21, 1993, issue of the Texas Register (18 TexReg 3273). The proposed amendment, by agenda item number, disapproved by the State Board of Insurance is: Agenda Item 42-93. Amendment to Definitions, clause G.2.11., ("your covered auto"), to provide that any vehicle acquired during the policy term would have automatic coverage that is the same as the broadest coverage extended to any vehicle shown in the Declarations. The State Board of Insurance has jurisdiction over these matters pursuant to the Insurance Code, Articles 5.06 and 5.96. This notification of Board action is made pursuant to the Insurance Code, Article 5.96, which exempts Board action taken pursuant to this article from the requirements of the Administrative Procedure and Texas Register Act. This agency hereby certifies that the adopted amendments herein have been reviewed by legal counsel and found to be within the agency's authority to adopt. Issued in Austin, Texas, on September 10, 1993. TRD-9328698 Linda K. von Quintus-Dorn Chief Clerk Texas Department of Insurance For further information, please call: (512) 463-6328 The State Board of Insurance of the Texas Department of Insurance at a public hearing held at 9:00 a.m. on June 29, 1993, under Docket Number 2004, in Room 100 of the Texas Department of Insurance Building, 333 Guadalupe Street, Austin, first considered proposed amendments to policy forms and endorsements for homeowners, dwelling, farm and ranch, and farm and ranch owners insurance and then finally adopted three of these proposed amendments with revisions to the original proposals at a public hearing reconvened at 9: 00 a.m. on July 8, 1993, under the same docket number, and at the same place and address as the June 29, 1993 hearing. These amendments were adopted to clarify existing coverages, provide additional coverages, and exclude inappropriate policy provisions. Agenda items 20-93 and 21-93 were proposed by the Office of Public Insurance Counsel, and agenda item 6-93 was proposed by the Independent Insurance Agents of Texas. The proposals (Reference Number A-0593-09-1) were published by agenda item number in the May 21, 1993, issue of the Texas Register (18 TexReg 3273). The amendments, by agenda item number, adopted by the State Board of Insurance are as follows: Agenda Item 6-93. Amendment to Homeowners Endorsements HO-380 and HO-381, Unit Owners Rental to Other, to clarify that the endorsements are applicable to condominium units that are either occasionally rented or rented on a full-time basis. Agenda Item 20-93. Amendments to the homeowners, dwelling, farm and ranch, and farm and ranch owners policy forms to eliminate the condition entitled "Our Option" as an unnecessary policy condition and to add a condition entitled "Salvage Rights" which will enable the company to retain the option for the salvage rights to damaged property. Agenda Item 21-93. Amendment to Endorsements HO-101, FRO-401, TDP-002 and TFR- 052, Reimbursement for Replacement of Personal Property, to provide that replacement cost coverage will be provided for the first $1,500 of a loss without requiring the property to be replaced. The State Board of Insurance has jurisdiction of these matters pursuant to the Insurance Code, Articles 5.35, 5.98, 5.96, and 1.04. The amendments to the policy forms and endorsements, as adopted by the State Board of Insurance, are filed with the Chief Clerk under Reference Number A- 0593-09-1 and are incorporated by reference by Board Order Number 60486. This notification of Board action is made pursuant to the Insurance Code, Article 5.96, which exempts Board action taken pursuant to this article from the requirements of the Administrative Procedure and Texas Register Act. This agency hereby certifies that the adopted amendments herein have been reviewed by legal counsel and found to be within the agency's authority to adopt. Issued in Austin, Texas, on September 10, 1993. TRD-9328697 Linda K. von Quintus-Dorn Chief Clerk Texas Department of Insurance For further information, please call: (512) 463-6328 The State Board of Insurance of the Texas Department of Insurance at a public hearing held at 9:00 a.m. on June 29, 1993, under Docket Number 2004, in Room 100 of the Texas Department of Insurance Building, 333 Guadalupe Street, Austin, adopted optional endorsements and amendments to the policy forms, endorsements, and rules in the Texas Personal Lines Manual for homeowners, dwelling, farm and ranch, and farm and ranch owners insurance to clarify existing coverages and deductibles, provide additional and optional coverages with appropriate rates, exclude certain inappropriate coverages, and provide certain coverages as separate coverages with appropriate rates. Agenda items 3-93, 5-93, 7-93, and 10-93 were proposed by the Independent Insurance Agents of Texas; agenda item 11-93 was proposed by the Professional Insurance Agents of Texas; and agenda item 16-93 was proposed by the Texas Farm Bureau Insurance Companies; and agenda items 22-93, 23-93, 24-93, 25-93, 26-93, 27-93, 28-93, 30-93, and 31-93 were proposed by the Staff of the Texas Department of Insurance. The proposals (Reference Number A-0593-09-I) were published by agenda item number in the May 21, 1993, issue of the Texas Register (18 TexReg 3273). The optional endorsements and amendments, by agenda item number, adopted by the State Board of Insurance are as follows: Agenda Item 3-93. Amendment to the Texas Farm and Ranch Policy, Forms 1, 2, and 3, to clarify that coverage provided under Coverage D (Scheduled Farm Property) must be scheduled on the declarations page and to clarify under Coverage D, Property Not Covered, that coverage is not provided for any property covered as personal property under Coverage B (Personal Property). Agenda Item 5-93. Optional endorsement to provide coverage for damage caused by the weight of ice, snow or sleet to scheduled farm and ranch property insured under a Texas Farm and Ranch Owners Policy, and amendments to the rules of the farm and ranch owners section of the Texas Personal Lines Manual to provide an appropriate rate for the coverage. Agenda Item 7-93. Amendment to the definition of insureds under the Texas Homeowners Policies to broaden the definition under Section II-Liability Coverage regarding the use of motor vehicles to include any employee of an insured while engaged in the employment of the insured and any person using the vehicle on an insured location with the consent of the insured. Agenda Item 10-93. Amendment to Homeowners Endorsement HO-205, Office, Private School and Studio, Section II Liability, to exclude coverage for professional liability and the coverage for acts and omissions at the insured location or other locations, as being inappropriate coverage for inclusion under a homeowners policy. Agenda Item 11-93. Amendments to the rules in the homeowners section of the Texas Personal Lines Manual to allow the attachment of endorsements HO-310, Townhouse Loss Assessment Coverage, HO-315, Neighborhood Homeowners Loss Assessment Coverage and HO-382, Condominium Loss Assessment Coverage to a homeowners policy to extend loss assessment coverage to a townhouse, dwelling or condominium not occupied by the owner when Endorsement HO-225, Additional Premises Liability Coverage, has also been attached to the homeowners policy. Agenda Item 16-93. Amendments to Endorsement HO-210, Farmers Personal Liability, to provide liability coverage for custom farming operations and to the rules in the homeowners section of the Texas Personal Lines Manual, to provide an appropriate rate for the coverage. This coverage would allow individuals who live in the city and farm owned acreage and acreage belonging to others to purchase liability coverage under the homeowners policy to insure not only the farm liability exposure of the owned acreage, but also the liability exposure for the farming of acreage belonging to other individuals. Agenda Item 22-93. Amendments to Endorsement FRO-459, Scheduled Farm and Ranch Property, and to the rules in the farm and ranch section of the Texas Personal Lines Manual to provide the peril of vandalism and malicious mischief as a separate coverage to be available on the Endorsement FRO-459 at a rate of .02 per $100. Agenda item 23-93. Optional endorsement for use with the Texas Farm and Ranch Owners Policy to provide coverage for an insured and family members that own and occupy additional residences located on the same farm premises to eliminate the need to issue separate policies to provide coverage on the additional residences. Agenda Item 24-93. Amendments to the rules in the farm and ranch section of the Texas Personal Lines Manual to provide a rate for additional extended coverage perils when the coverage is provided on farm buildings. Agenda Item 25-93. Optional endorsement to be used with the Texas Farm and Ranch Policy to permit items to be scheduled and insured for separate perils on a specific form. Under the current Texas Farm and Ranch Policy, all items insured on the same policy must be insured for the same perils. This new endorsement eliminates the need to issue separate policies when different perils are desired for different types of property. Agenda Item 26-93. Amendments to the rules in the dwelling section and the farm and ranch section of the Texas Personal Lines Manual to clarify that the deductible adjustment percentage applies to all insured perils under a dwelling policy and a farm and ranch policy, except for the perils of fire and lightning. Agenda Item 27-93. Amendments to the rules in the dwelling section and the farm and ranch section of the Texas Personal Lines Manual to clarify the deductible that applies to property described under the miscellaneous property schedule and to clarify that for certain property described under the schedule, no deductible is applicable. Agenda Item 28-93. Amendments to Endorsement HO-210, Farmers Personal Liability and Endorsement FRO-500, Mandatory Farm and Ranch Owners Endorsement, and to the rating rules in the farm and ranch section of the Texas Personal Lines Manual to clarify the sequence of coverages listed on the endorsement to the sequence of rating rules used in rating the two endorsements. Agenda Item 30-93. Amendments to the rating rules in the farm and ranch section of the Texas Personal Lines Manual to provide a rate for insuring submersible pumps and equipment described under the miscellaneous property schedule. Agenda Item 31-93. Amendments to the rules in the homeowners section and the farm and ranch owners section of the Texas Personal Lines Manual to remove the 20% limitation for optional credits and thereby allowing the actual aggregate amount of credits applicable to an individual policy to be applied without any limitation on the total; and amendments to the residential property statistical plan to allow for the specific coding of each optional credit applied to a policy. The optional endorsements and amendments to the policy forms, endorsements, and rules in the Texas Personal Lines Manual as adopted by the State Board of Insurance are filed with the Chief Clerk under Reference Number A-0593-09-I and are incorporated by reference by Board Order Number 60488. Also at the June 29, 1993, hearing and under the same docket number, the State Board of Insurance disapproved two proposed amendments to the Texas homeowners policy forms and endorsements which would have eliminated coverage currently provided for losses resulting from sexual molestation by any insured and for losses arising from lead paint. Agenda items 13-93 and 14-93 were both proposed by the Liberty Mutual Insurance Group. In disapproving the two proposed amendments, the Board followed the Department staff's recommendations to disapprove because the proposals would have eliminated two types of vital coverage for policyholders without any statistical justification to indicate that there are currently sufficient losses from sexual molestation or lead paint to affect homeowners policy rates. The proposed amendments, by agenda item number, disapproved by the State Board of Insurance are: Agenda Item 13-93. Amendment to Section II-Liability Coverage of the Texas Homeowners Policy to include an exclusion for losses resulting from sexual molestation by any insured. Agenda Item 14-93. Amendment to Section I-Property Coverage and Section II- Liability Coverage of the Texas Homeowners Policy to include an exclusion for losses arising from lead paint. The State Board of Insurance has jurisdiction of these matters pursuant to the Insurance Code, Articles 1.04, 5.35, 5.96, and 5.98. This notification of Board action is made pursuant to the Insurance Code, Article 5.96, which exempts Board action taken pursuant to this article from the requirements of the Administrative Procedure and Texas Register Act. This agency hereby certifies that the adopted amendments herein have been reviewed by legal counsel and found to be within the agency's authority to adopt. Issued in Austin, Texas, on September 10, 1993. TRD-9328696 Linda K. von Quintus-Dorn Chief Clerk Texas Department of Insurance For further information, please call: (512) 463-6328