PROPOSED 
 RULES 
 
 Before an agency may permanently adopt a new or amended section or repeal an 
existing section, a proposal detailing the action must be published in the  
Texas Register at least 30 days before action is taken. The 30-day time period 
gives interested persons an opportunity to review and make oral or written 
comments on the section. Also, in the case of substantive action, a public 
hearing must be granted if requested by at least 25 persons, a governmental 
subdivision or agency, or an association having at least 25 members. 
  Symbology in proposed amendments. New language added to an existing section is 
indicated by the use of  bold text. [Brackets] indicate deletion of existing 
material within a section. 
 
   
  TITLE 4. AGRICULTURE 
 Part I. Texas Department of Agriculture 
  Chapter 5. Quarantines 
  
  Sweet Potato Weevil Quarantine 
 
  4 TAC sec.5.62, sec.5.63 
 
  The Texas Department of Agriculture (the department) proposes amendments to 
sec.5.62 and sec.5.63, concerning the sweet potato weevil quarantine. The 
amendment to sec.5.62 is proposed to clarify the designated weevil-free areas of 
Texas. The amendment to sec.5.63 is proposed in order to remove Merced and 
Stanislaus counties located in the state of California, from the list of sweet 
potato weevil regulated areas, and to add to the list the sweet potato weevil 
regulated areas within the state of Texas making this section consistent with 
the proposed amendment to sec.5.62. An official sweet potato weevil eradication 
program has eliminated the weevil in Merced and Stanislaus counties. The 
department has determined that since the introduction of the sweet potato weevil 
into Texas from Merced and Stanislaus counties is unlikely, the counties should 
be removed from the list of regulated areas under the sweet potato weevil 
quarantine. 
 Danny Johnson, coordinator, quarantine programs, has determined that for the 
first five-year period the sections are in effect there will be no fiscal 
implications for state or local government as a result of enforcing or 
administering the sections. 
 Mr. Johnson also has determined that for each year of the first five years the 
sections are in effect the public benefit anticipated as a result of enforcing 
the sections will be additional sweet potato growing areas from which weevil-
free sweet potatoes may be purchased and a clearer description of areas in Texas 
regulated for the sweet potato weevil. There will be no effect on small 
businesses. There is no anticipated economic cost to persons who are required to 
comply with the sections as proposed. 
 Comments on the proposal may be submitted to Danny Johnson, Coordinator, 
Quarantine Programs, Texas Department of Agriculture, P.O. Box 12847, Austin, 
Texas 78711. Comments must be received no later than 30 days from the date of 
publication of the proposal in the Texas Register. 
 The amendments are proposed under the Texas Agriculture Code, sec.71.003, which 
provides the Texas Department of Agriculture with the authority to establish 
quarantines in areas surrounding pest free zones, and under sec.71. 001, which 
provides the Texas Department of Agriculture with the authority to establish 
quarantines against out-of-state diseases and pests. 
 The Texas Agriculture Code, Chapter 71 is affected by the proposed amendments. 
 
 
  sec.5.62. Texas Weevil-Free Area. The Texas weevil-free <nl> areas are all 
areas within the state of Texas not designated in sec.5.63 (relating to 
Regulated Areas). <ol> [area is as follows:] [The counties of Andrews, 
Armstrong, Archer, Brewster, Bailey, Borden, Bosque, Briscoe, Baylor, Brown, 
Bowie, Culberson, Castro, Cochran, Carson, Crane, Crosby, Concho, Collingsworth, 
Crockett, Childress, Cottle, Coke, Callahan, Coleman, Comanche, Clay, Cook, 
Collin, Cass, Camp, Dallam, Deaf Smith, Dawson, Donley, Dickens, Denton, Dallas, 
Delta, El Paso, Ector, Eastland, Erath, Ellis, Floyd, Fisher, Foard, Fannin, 
Franklin, Gaines, Garza, Glasscock, Gray, Grayson, Gregg, Gillespie, Hudspeth, 
Hockley, Hartley, Hill, Hansford, Hutchinson, Hamilton, Howard, Hale, Hemphill, 
Hall, Hardeman, Haskell, Hood, Henderson, Hunt, Hopkins, Harrison, Irion, Jack, 
Johnson, Jeff Davis, Jones, Kaufman, Kimble, Kent, King, Knox, Loving, Leon, 
Lamb, Lubbock, Lynn, Lipscomb, Lamar, Limestone, Llano, Mills, Mason, Moore, 
Marion, Martin, McCulloch, McLennan, Menard, Midland, Motley, Mitchell, 
Montague, Morris, Nolan, Navarro, Oldham, Ochiltree, Potter, Parmer, Palo Pinto, 
Parker, Panola, Pecos, Presidio, Reeves, Roberts, Reagan, Randall, Robertson, 
Runnels, Rockwall, Rains, Red River, San Saba, Sherman, Schleicher, Smith, 
Sutton, Swisher, Sterling, Stonewall, Scurry, Shackelford, Stephens, Somervell, 
Terry, Taylor, Throckmorton, Tarrant, Terrell, Titus, Tom Green, Upshur, Upton, 
Van Zandt, Wood, Ward, Winkler, Wheeler, Wilbarger, Wichita, Wise, Yoachum, and 
Young.] 
 
   
  sec.5.63. Regulated Areas. <nl>The regulated areas are as follows: 
 
  [(a) The regulated areas within the state of Texas are all areas not 
designated in sec.5.62 (relating to Texas Weevil-Free Area).] 
   
  [(b) The regulated areas outside the state of Texas are as follows:] 
 
  (1) (No change.) 
   
  (2) <nl>Arkansas. Ouachita County. <ol> [Florida. Entire state.] 
   
  (3) <nl>Florida. Entire state. <ol> [Georgia. Appling, Bacon, Brooks, Bryan, 
Camden, Chatham, Colquitt, Cook, Decatur, Dougherty, Echols, Grady, Glynn, 
Liberty, Lowndes, McIntosh, Pierce, Thomas, Ware, and Wayne.] 
   
  (4) <nl>Georgia. Appling, Bacon, Brooks, Bryan, Camden, Chatham, Colquitt, 
Cook, Decatur, Dougherty, Echols, Grady, Glynn, Liberty, Lowndes, McIntosh, 
Pierce, Thomas, Ware, and Wayne.<ol> [Louisiana. Acadia, Allen, Ascension, 
Assumption, Avoyelles, Beauregard, Calcasieu, Cameron, East Baton Rouge, 
Evangeline, East Feliciana, Iberia, Iberville, Jefferson, Jefferson Davis, 
Lafayette, Lafourche, Livingston, Natchitoches, Orleans, Plaquemines, Pointe 
Coupee, Rapides, Sabine, Statutes Bernard, Statutes Charles, Statutes James, 
Statutes John the Baptist, Statutes Helena, Statutes Landry, Statutes Martin, 
Statutes Mary, Statutes Tammany, Tangipahoa, Terrebonne, Vermilion, Vernon, 
Washington, West Baton Rouge, West Feliciana.] 
   
  (5) <nl>Louisiana. Acadia, Allen, Ascension, Assumption, Avoyelles, 
Beauregard, Calcasieu, Cameron, East Baton Rouge, Evangeline, East Feliciana, 
Iberia, Iberville, Jefferson, Jefferson Davis, Lafayette, Lafourche, Livingston, 
Natchitoches, Orleans, Plaquemines, Pointe Coupee, Rapides, Sabine, Saint<ol> 
[Statutes] Bernard, <nl>Saint <ol> [Statutes] Charles,  <nl>Saint<ol> [Statutes] 
James, <nl>Saint<ol> [Statutes] John the Baptist, <nl>Saint <ol> [Statutes] 
Helena,<nl>Saint <ol> [Statutes] Landry,  <nl>Saint<ol> [Statutes] Martin, 
<nl>Saint<ol> [Statutes] Mary, <nl>Saint<ol> [Statutes] Tammany, Tangipahoa, 
Terrebonne, Vermilion, Vernon, Washington, West Baton Rouge, West Feliciana. 
[Mississippi. Adams, Copiah, Covington, Forrest, George, Greene, Hancock, 
Harrison, Jackson, Lamar, Lawrence, Lincoln, Marion, Pearl River, Perry, Pike, 
Simpson, Smith, Stone, and Walthall.] 
   
  (6) <nl>Mississippi. Adams, Copiah, Covington, Forrest, George, Greene, 
Hancock, Harrison, Jackson, Lamar, Lawrence, Lincoln, Marion, Pearl River, 
Perry, Pike, Simpson, Smith, Stone, and Walthall. <ol> [South Carolina. 
Beaufort, Charleston, and Jasper.] 
   
  (7) <nl>South Carolina. Beaufort, Charleston, and Jasper.<ol> [Arkansas. 
Ouachita County.] 
   
  (8) <nl>Texas. Anderson, Angelina, Aransas, Atascosa, Austin, Bandera, 
Bastrop, Bee, Bell, Bexar, Blanco, Brazoria, Brazos, Brooks, Burleson, Burnet, 
Caldwell, Calhoun, Cameron, Chambers, Cherokee, Colorado, Comal, Coryell, 
DeWitt, Dimmitt, Duval, Edwards, Falls, Fayette, Fort Bend, Freestone, Frio, 
Galveston, Goliad, Gonzales, Grimes, Guadalupe, Hardin, Harris, Hays, Hidalgo, 
Houston, Jackson, Jasper, Jefferson, Jim Hogg, Jim Wells, Karnes, Kendall, 
Kenedy, Kerr, Kinney, Kleberg, Lampasas, La Salle, Lavaca, Lee, Leon, Liberty, 
Live Oak, Madison, Matagorda, Maverick, McMullen, Medina, Milam, Montgomery, 
Nacogdoches, Newton, Nueces, Orange, Panola, Polk, Real, Refugio, Rusk, Sabine, 
San Augustine, San Jacinto, San Patricio, Shelby, Starr, Travis, Trinity, Tyler, 
Uvalde, Val Verde, Victoria, Walker, Waller, Washington, Webb, Wharton, Willacy, 
Williamson, Wilson, Zapata, and Zavala.<ol> [California. Merced County and 
Stanislaus County.] 
 
  This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt. 
 Issued in Austin, Texas, on January 5, 1995. 
 TRD-9500176 
  Dolores Alvarado Hibbs 
 Chief Administrative Law Judge 
 Texas Department of Agriculture 
    Earliest possible date of adoption: February 13, 1995 
 For further information, please call: (512) 463-7583 
         
                     
  TITLE 13. CULTURAL RESOURCES 
 Part I. Texas State Library and Archives Commission 
  Chapter 6. State Records 
  
  Standards and Procedures for Management of Electronic Records 
 
  13 TAC sec.sec.6.91-6.98 
 
  The Texas State Library and Archives Commission proposes amendments to 
sec.sec.6.91-6.98 concerning standards and procedures for the management of 
electronic records of state agencies. Amendments are proposed to sec.6.91 to 
remove distinctions between records of varying retention periods, as these 
distinctions serve no purpose in the context of the requirements of these 
sections. Amendments are proposed to sec.6.96(b)(1)(B) and sec.6.98(c) to set 
out in full, rather than by reference, requirements concerning temperature and 
humidity requirements for the storage of optical disks and the expungement of 
information from a certain type of optical disk. Amendments are proposed in all 
sections to remove references to local governments in order to make these 
sections language specific to state agencies. Simultaneous amendments are being 
proposed to sec.sec.7.71-7.78 of 13 TAC to remove references to state agencies 
to make those sections language specific to local governments. An amendment is 
proposed to  s6.96(g)(4) to establish a standard for the scanning of microfilm. 
 William L. Dyess, director, State and Local Records Management Division, has 
determined that for the first five year period the sections are in effect there 
will no fiscal implications for state and local government as a result of 
enforcing or administering the sections. 
 Mr. Dyess has determined that for each year of the first five years the 
sections are in effect the public benefits anticipated as a result of enforcing 
the sections will be that the requirements are more clearly stated and 
accessible to state agency officials. All amendments are proposed as the result 
of comments received from those whom the sections effect. There will be no 
effect on small businesses. There is no anticipated economic cost to persons 
required to comply with the sections as proposed. 
 Comments on the proposal may be submitted to Michael Heskett, Policy and 
Program Development Manager, State and Local Records Management Division, Texas 
State Library, P.O. Box 12927, Austin, TX 78711-2927, within 30 days of 
publication in the Texas Register. 
 The amendments are proposed under the Government Code,  s441.032(b)(1) and 
sec.441.037(5), which provides the Texas State Library and Archives Commission 
with the authority to manage all state records with the cooperation of the heads 
of the various departments and institutions in charge of the records and to 
issue rules, standards, and procedures for the efficient management of state 
records. 
 The Government Code, sec.sec.441.032(b)(1) and 441.037(5), are affected by the 
proposed amendments. 
 
 
  sec.6.91. Definitions.  The following words and terms, when used in this 
chapter, shall have the following meanings, unless the context clearly indicates 
otherwise. [For local governments, terms not defined in these rules shall have 
the meanings defined in the Local Government Code, Title 6, Subtitle C, Chapter 
201. For state agencies,] <nl>Terms<ol> [terms] not defined in these 
<nl>sections <ol> [rules] shall have the meanings defined in the Government 
Code, sec. s441.031-441.039 and sec.sec.441.051-441.062. 
   
   AIIM-The Association for Information and Image Management. 
   
   ANSI-The American National Standards Institute. 
   
   Archival record -A record of a state agency scheduled to be reviewed by or 
that has been approved by an archives for permanent preservation. 
   
   Database- 
 
  (A) collection of digitally stored data records; 
   
  (B) collection of data elements within records within files that have 
relationships with other records within other files. 
     
   Database Management System (DBMS)-Set of programs designed to organize, 
store, and retrieve machine-readable information from a computer-maintained 
database or data bank. 
   
   Data file-Related numeric, textual, sound, or graphic information that is 
organized in a strictly prescribed form and format. 
   
   Electronic media -All media capable of being read by a computer including 
computer hard disks, magnetic tapes, optical disks, or similar machine-readable 
media. 
   
   Electronic record -Any information that is recorded in a form for computer 
processing and that satisfies the definition of a state record in the Government 
Code, sec.441.031(5)[, or the definition of local government record data in the 
Local Government Code, sec.205.001]. 
   
   Electronic records system-Any information system that produces, manipulates, 
and stores state [or local government] records by using a computer. 
   
   [IEC-International Electrotechnical Commission. 
   
   [ISO-International Organization for Standardization. 
   
   [Long-term record -A record for which the retention period on a records 
retention schedule is 100 years or more but less than permanent. 
   
   [Medium-term record -A record for which the retention period on a records 
retention schedule is ten years or more but less than 100 years.] 
   
   Records administrator -The person appointed by the head of each state agency 
to act as the agency's representative in all issues of records management 
policy, responsibility, and statutory compliance. 
   
   [Records custodian -The appointed or elected public officer who by the state 
constitution, state law, ordinance, or administrative policy is in charge of an 
office that creates or receives local government records. 
   
   [Records management officer-Each elected county officer or the person 
designated by the governing body of each local government pursuant to the Local 
Government Code, sec.203.025. 
   
   [Short-term record -A record for which the retention period on a records 
retention schedule is less than ten years. 
   
   [Permanent record -A record for which the retention period on a records 
retention schedule is permanent.] 
   
   Text documents -Narrative or tabular documents, such as letters, memorandums, 
and reports, in loosely prescribed form and format. 
 
   
  sec.6.92. General. 
 
  (a) These <nl>sections<ol> [rules] establish the minimum requirements for the 
maintenance, use, retention, and storage of <nl>: 
 
  <nl>(1) any electronic record of a state agency whose retention period on the 
agency's records retention schedule, certified under sec.6.4 of this title 
(relating to Certification of Records Retention Schedules and Amendments) , is 
ten years or more; 
   
  <nl>(2) any electronic record of a state agency whose retention period on the 
Texas State Records Retention Schedule, adopted under  s6.10 of this title 
(relating to Texas State Records Retention Schedule), is ten years or more, if 
the agency does not have a certified records retention schedule; and 
   
  <nl>(3) any archival electronic record of a state agency <ol>[all medium-term, 
long-term, and permanent electronic records of state agencies and local 
governments. These rules do not apply to short-term electronic records, but the 
short-term electronic records of local governments are subject to the applicable 
provisions of the Local Government Code, Chapter 205]. 
     
  (b) (No change.) 
   
  (c) An electronic storage authorization request certifying that <nl>the 
requirements of <ol> these <nl>sections <ol> [rules] will be followed must be 
submitted to and approved by the director and librarian for all existing 
electronic storage [of medium-term, long-term, and permanent state or local 
government records and state archival records], and before any new electronic 
storage<nl>, <ol> of [medium-term, long-term, and permanent state or local 
government] records  <nl>subject to this section <ol> [and state archival 
records]. The authorization request must be submitted in a form and manner to be 
determined by the director and librarian and must be signed by the agency head 
or designated records administrator [(for state agencies), or the records 
management officer (for local governments)]. 
   
  (d) The agency head or designated records administrator [(for state agencies), 
and the governing body or records management officer in cooperation with records 
custodians (for local governments)] must: 
 
  (1)-(7) (No change.) 
     
  [(e) With the exception of subsections (c) and (f) of this section, which are 
effective immediately, state agencies and local governments must be in 
compliance with the standards and procedures for electronic records on or before 
January 2, 1995.] 
 
  <nl>(e)<ol>[(f)] Any electronic recordkeeping system not meeting the 
provisions of these <nl>sections<ol> [rules] may be utilized for [medium-term, 
long-term, or permanent state or local government records and state archival] 
records <nl>subject to this section <ol> provided the source document, if any, 
or a paper copy is maintained, or the record is microfilmed in accordance with 
the specifications in American National Standard for Imaging Media (Film) -
Silver-Gelatin Type-Specifications for Stability <ol> (ANSI IT9. 1-<nl>1992 <ol> 
[1989 or latest revision]) [for state records or in accordance with the 
provisions of Local Government Code, Chapter 204, and the rules adopted under it 
for local government records]. 
 
       
  sec.6.93. Creation and Use of Data Files. 
 
  (a) (No change.) 
   
  (b) State agencies [and local governments] must maintain up-to-date technical 
documentation for each electronic records system that produces, uses, and stores 
data files. Minimum documentation required is: 
 
  (1)-(3) (No change.) 
 
       
  sec.6.94. Creation and Use of Text Documents. 
 
  (a) Electronic records systems that maintain the official file copy of text 
documents or data used to generate the official file copy of text documents on 
electronic media must meet the following minimum requirements: 
 
  (1)-(2) (No change.) 
   
  (3) provide a standard interchange format when determined to be necessary by 
the agency [or local government] to permit the exchange of documents on 
electronic media among the components of the agency [or local government] using 
different software/operating systems; and 
   
  (4) (No change.) 
     
  (b) (No change.) 
 
     
  sec.6.95. Security of Electronic Records. 
 
  (a) State agencies [and local governments] must implement and maintain an 
electronic records security program for office and storage areas that: 
 
  (1)-(5) (No change.) 
     
  (b) (No change.) 
   
  (c) For all [permanent] records stored on rewritable electronic media 
<nl>whose retention period is permanent<ol>, the system must ensure that 
read/write privileges are controlled and that an audit trail of rewrites is 
maintained. 
 
     
  sec.6.96. Maintenance of Electronic Records Storage Media. 
 
  (a) State agencies [and local governments] must ensure that the accuracy, 
completeness, and accessibility of information are not lost prior to its 
authorized destruction date because of changing technology or media 
deterioration, by converting electronic storage media and taking other action as 
required to provide compatibility with current hardware and software. The 
migration strategy for upgrading equipment as technology evolves must be 
documented and include: 
 
  (1)-(2) (No change.) 
     
  (b) Paragraphs (1)-(3) of this section outline the maintenance of backup 
electronic media stored offsite. 
 
  (1) (No change.) 
   
  (2) The storage areas for electronic media must be maintained within the 
following temperatures and relative humidities: 
 
  (A) (No change.) 
   
  (B) for optical disks-<nl>14 degrees Fahrenheit to 122 degrees Fahrenheit, and 
10% to 90% relative humidity<ol> [storage environmental conditions as specified 
in Information technology-130 mm optical disk cartridge, write once, for 
information interchange<ol> (ISO/IEC 9171-1, 1990 or latest revision)]. 
     
  (3) (No change.) 
     
  (c) State agencies [and local governments] must recopy data maintained on 
electronic media according to the following schedule. 
 
  (1)-(3) (No change.) 
     
  (d) Floppy disks (diskettes) or any type of flexible disk system may not be 
used for the exclusive storage of [medium-term, long-term, or permanent records 
and state archival] records  <nl>subject to these sections <ol>. 
   
  (e) (No change.) 
 
  (1)-(6) (No change.) 
     
  (f) (No change.) 
 
  (1)-(10) (No change.) 
     
  (g) The following standards must be met for electronic records stored as 
digital images on optical media. 
 
  (1)-(3) (No change.) 
   
  (4) Scanner quality must be evaluated based on the standard procedures in 
American National Standard for Information and Image Management-Recommended 
Practice for Quality Control of Image Scanners<ol> (ANSI/AIIM MS44-1988 [or 
latest revision])  <nl>andAmerican National Standard for Information and Image 
Management-Recommended Practice for Monitoring Image Quality of Roll Microfilm 
and Microfiche Scanners<ol> (ANSI/AIIM MS49-1993). 
   
  (5)-(11) (No change.) 
     
  (h) (No change.) 
 
     
  sec.6.97. Retention of Electronic Records. 
 
  (a) State agencies [and local governments] must establish policies and 
procedures to ensure that electronic records and any software, hardware, and/or 
documentation, including maintenance documentation, required to retrieve and 
read the electronic records are retained as long as the approved retention 
period for the electronic records. 
   
  (b) (No change.) 
 
  (1)-(2) (No change.) 
     
  (c) State records having archival value and scheduled to be preserved at the 
State Archives must be transferred to the State Archives as the source document, 
or printed out on alkaline paper for computer generated information, or on 
microforms that meet the specifications in American National Standard for 
Imaging Media (Film)-Silver-Gelatin Type-Specifications for Stability<ol> (ANSI 
IT9.1-<nl>1992<ol>[1989 or latest revision]). 
 
     
  sec.6.98. Destruction of Electronic Records. 
 
  (a) Electronic records may be destroyed only in accordance with a records 
<nl>retention<ol> schedule approved by the director and librarian <nl>and the 
state auditor<ol> [or designee] or, in lieu of an approved records 
<nl>retention<ol> schedule, an approved records disposition authorization 
request. 
   
  (b) Each state agency [and local government] must ensure that: 
 
  (1)-(2) (No change.) 
     
  (c) <nl>The following requirements must be met for the court ordered 
expungement of information recorded on an optical Write-Once-Read-Many (WORM) 
system: 
 
  <nl>(1) Two methods are allowed for expunging information from a WORM disk: 
 
  <nl>(A) the information may be overwritten to obliterate the original image, 
leaving no evidence of the original information, or; 
   
  <nl>(B) all of the indices, pages, or documents on a disk, other than the 
expunged document(s), must be rewritten to a new disk and the old disk must be 
physically destroyed. 
     
  <nl>(2) In cases where a complete page or record is expunged, all reference to 
the page or record must be removed from the index. If the index has been copied, 
the index must be recopied after the reference to the page or record has been 
removed. 
   
  <nl>(3) Copies of the original WORM disk and copies of the information removed 
by expungement must be destroyed or changed to reflect the court order. All 
copies of the record, index, or reference to the original unrevised information 
on WORM disk copies or copies in any other media must be destroyed <ol>[The 
court ordered expungement of information recorded on an optical write-once-read-
many (WORM) system must be implemented according to the recommendations provided 
in Technical Report for Information and Image Management-The Expungement of 
Information Recorded on Optical Write-Once-Read-Many (WORM) Systems (AIIM TR28-
1991 or latest revision]. 
 
  This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt. 
 Issued in Austin, Texas, on January 4, 1995. 
 TRD-9500081 
  Raymond Hitt 
 Assistant State Librarian 
 Texas State Library and Archives Commission 
    Earliest possible date of adoption: February 13, 1995 
 For further information, please call: (512) 463-5460 
         
                 Chapter 7. Local Records 
  
  Standards and Procedures for Management of Electronic Records 
 
  13 TAC sec.sec.7.71-7.78 
 
  The Texas State Library and Archives Commission proposes amendments to 
sec.sec.7.71-7.78, concerning standards and procedures for the management of 
electronic records of local governments. Amendments are proposed to sec.7.71 to 
remove distinctions between records of varying retention periods, as these 
distinctions serve no purpose in the context of the requirements of these 
sections. Amendments are proposed to sec.7.76(b)(2)(B) and sec.7.78(c) to set 
out in full, rather than by reference, requirements concerning temperature and 
humidity requirements for the storage of optical disks and the expungement of 
information from a certain type of optical disk. Amendments are proposed in all 
sections to remove references to state agencies in order to make these sections 
language specific to local governments. Simultaneous amendments are being 
proposed to sec.sec.6.91-6.98 of 13 TAC to remove references to local 
governments to make those sections language specific to state agencies. An 
amendment is proposed to sec.7.76(g)(4) to establish a standard for the scanning 
of microfilm. 
 William L. Dyess, director, State and Local Records Management Division, has 
determined that for the first five year period the sections are in effect there 
will no fiscal implications for state and local government as a result of 
enforcing or administering the sections. 
 Mr. Dyess has determined that for each year of the first five years the 
sections are in effect the public benefits anticipated as a result of enforcing 
the sections will be that the requirements are more clearly stated and 
accessible to local government officials. All amendments are proposed as the 
result of comments received from those whom the sections effect. There will be 
no effect on small businesses. There is no anticipated economic cost to persons 
required to comply with the sections as proposed. 
 Comments on the proposal may be submitted to Michael Heskett, Policy and 
Program Development Manager, State and Local Records Management Division, Texas 
State Library, P.O. Box 12927, Austin, Texas 78711-2927, within 30 days of 
publication in the Texas Register. 
 The amendments are proposed under the Local Government Code, sec.205.003(a), 
which provides the Texas State Library and Archives Commission with the 
authority to adopt rules establishing standards and procedures for the 
electronic storage of local government records. 
 The Local Government Code, sec.205.003, is affected by the proposed amendments. 
 
 
  sec.7.71. Definitions.  The following words and terms, when used in this 
chapter, shall have the following meanings, unless the context clearly indicates 
otherwise. [For local governments,]  <nl>Terms<ol> [terms] not defined in these 
<nl>sections <ol> [rules] shall have the meanings defined in the Local 
Government Code, Title 6, Subtitle C, Chapter 201. [For state agencies, terms 
not defined in these rules shall have the meanings defined in the Government 
Code, sec.sec.441.031-441.039 and sec. s441.051-441.062.] 
   
   AIIM-The Association for Information and Image Management. 
   
   ANSI-The American National Standards Institute. 
   
   [Archival record -A record of a state agency scheduled to be reviewed by or 
that has been approved by an archives for permanent preservation.] 
   
   Database- 
 
  (A) collection of digitally stored data records; 
   
  (B) collection of data elements within records within files that have 
relationships with other records within other files. 
     
   Database Management System (DBMS)-Set of programs designed to organize, 
store, and retrieve machine-readable information from a computer-maintained 
database or data bank. 
   
   Data file-Related numeric, textual, sound, or graphic information that is 
organized in a strictly prescribed form and format. 
   
   Electronic media -All media capable of being read by a computer including 
computer hard disks, magnetic tapes, optical disks, or similar machine-readable 
media. 
   
   Electronic record -Any information that is recorded in a form for computer 
processing and that satisfies the definition of [a state record in the 
Government Code, sec.441.031(5), or the definition of] local government record 
data in the Local Government Code, sec.205.001. 
   
   Electronic records system-Any information system that produces, manipulates, 
and stores [state or] local government records by using a computer. 
   
   [IEC-International Electrotechnical Commission. 
   
   [ISO-International Organization for Standardization. 
   
   [Long-term record -A record for which the retention period on a records 
retention schedule is 100 years or more but less than permanent. 
   
   [Medium-term record -A record for which the retention period on a records 
retention schedule is ten years or more but less than 100 years.] 
   
   [Records administrator -The person appointed by the head of each state agency 
to act as the agency's representative in all issues of records management 
policy, responsibility, and statutory compliance.] 
   
   Records custodian -The appointed or elected public officer who by the state 
constitution, state law, ordinance, or administrative policy is in charge of an 
office that creates or receives local government records. 
   
   Records management officer-Each elected county officer or the person 
designated by the governing body of each local government pursuant to the Local 
Government Code, sec.203.025. 
   
   Short-term record -A record for which the retention period on a records 
retention schedule is less than ten years. 
   
   [Permanent record -A record for which the retention period on a records 
retention schedule is permanent.] 
   
   Text documents -Narrative or tabular documents, such as letters, memorandums, 
and reports, in loosely prescribed form and format. 
 
   
  sec.7.72. General. 
 
  (a) These <nl>sections<ol> [rules] establish the minimum requirements for the 
maintenance, use, retention, and storage of <nl>any electronic record of a local 
government whose retention period is ten years or more on a records retention 
schedule adopted under sec.7.125 of this title (relating to Records Retention 
Schedules)<ol> [all medium-term, long-term, and permanent electronic records of 
state agencies and local governments, and archival electronic records of state 
agencies]. These <nl>sections<ol> [rules] do not apply to [short-term] 
electronic records <nl>with retention periods of less than ten years <ol>, but 
<nl>they<ol> [the short-term electronic records of local governments] are 
subject to the applicable provisions of the Local Government Code, Chapter 205. 
   
  (b) (No change.) 
   
  (c) An electronic storage authorization request certifying that <nl>the 
requirements of <ol> these <nl>sections <ol> [rules] will be followed must be 
submitted to and approved by the director and librarian for all existing 
electronic storage [of medium-term, long-term, and permanent state or local 
government records and state archival records], and before any new electronic 
storage<nl>, <ol> of [medium-term, long-term, and permanent state or local 
government] records  <nl>subject to this section <ol> [and state archival 
records]. The authorization request must be submitted in a form and manner to be 
determined by the director and librarian and must be signed by the [agency head 
or designated records administrator (for state agencies), or the] records 
management officer [(for local governments)]. 
   
  (d) The [agency head or designated records administrator (for state agencies), 
and the] governing body <nl>of a local government and <ol> [or] <nl>its<ol> 
records management officer in cooperation with records custodians [(for local 
governments)] must: 
 
  (1) (No change.) 
   
  (2) integrate the management of electronic records with other records and 
information resources management programs [of the agency]; 
   
  (3) incorporate electronic records management objectives, responsibilities, 
and authorities in pertinent [agency] directives; 
   
  (4)-(7) (No change.) 
     
  [(e) With the exception of subsections (c) and (f) of this section, which are 
effective immediately, state agencies and local governments must be in 
compliance with the Standards and Procedures for Electronic Records on or before 
January 2, 1995.] 
   
  <nl>(e)<ol>[(f)] Any electronic recordkeeping system not meeting the 
provisions of these <nl>sections<ol> [rules] may be utilized for [medium-term, 
long-term, or permanent state or local government records and state archival] 
records <nl>subject to this section <ol> provided the source document, if any, 
or a paper copy is maintained, or the record is microfilmed in accordance with 
the [specifications in American National Standard for Imaging Media (Film) -
Silver-Gelatin Type-Specifications for Stability <ol> (ANSI IT9.1-1989 or latest 
revision) for state records or in accordance with the] provisions of Local 
Government Code, Chapter 204, and the rules adopted under it [for local 
government records]. 
 
     
  sec.7.73. Creation and Use of Data Files. 
 
  (a) (No change.) 
   
  (b) [State agencies and] <nl>Local<ol> [local] governments must maintain up-
to-date technical documentation for each electronic records system that 
produces, uses, and stores data files. Minimum documentation required is: 
 
  (1)-(3) (No change.) 
 
       
  sec.7.74. Creation and Use of Text Documents. 
 
  (a) Electronic records systems that maintain the official file copy of text 
documents or data used to generate the official file copy of text documents on 
electronic media must meet the following minimum requirements: 
 
  (1)-(2) (No change.) 
   
  (3) provide a standard interchange format when determined to be necessary by 
the [agency or] local government to permit the exchange of documents on 
electronic media among the components of the [agency or] local government using 
different software/operating systems; and 
   
  (4) provide for the disposition of the documents [including, when necessary, 
the requirements for transferring archival records to the state archives as 
detailed in sec.7.77 of this title (relating to Retention of Electronic 
Records)]. 
     
  (b) A document created on an electronic records system must be identified 
sufficiently to enable authorized personnel to retrieve, protect, and carry out 
the disposition of documents in the system. <nl>Local governments<ol> [Agencies] 
must ensure that records maintained in such systems can be correlated with 
related records on paper, microform, or other media. 
 
     
  sec.7.75. Security of Electronic Records. 
 
  (a) [State agencies and] <nl>Local<ol> [local] governments must implement and 
maintain an electronic records security program for office and storage areas 
that: 
 
  (1)-(5) (No change.) 
     
  (b) (No change.) 
   
  (c) For all [permanent] records stored on rewritable electronic media 
<nl>whose retention period is permanent<ol>, the system must ensure that 
read/write privileges are controlled and that an audit trail of rewrites is 
maintained. 
 
     
  sec.7.76. Maintenance of Electronic Records Storage Media. 
 
  (a) [State agencies and] <nl>Local<ol> [local] governments must ensure that 
the accuracy, completeness, and accessibility of information are not lost prior 
to its authorized destruction date because of changing technology or media 
deterioration, by converting electronic storage media and taking other action as 
required to provide compatibility with current hardware and software. The 
migration strategy for upgrading equipment as technology evolves must be 
documented and include: 
 
  (1)-(2) (No change.) 
     
  (b) Paragraphs (1)-(3) of this subsection outline the maintenance of backup 
electronic media stored offsite. 
 
  (1) (No change.) 
   
  (2) The storage areas for electronic media must be maintained within the 
following temperatures and relative humidities: 
 
  (A) (No change.) 
   
  (B) for optical disks-<nl>14 degrees Fahrenheit to 122 degrees Fahrenheit, and 
10% to 90% relative humidity<ol> [storage environmental conditions as specified 
in Information technology-130 mm optical disk cartridge, write once, for 
information interchange<ol> (ISO/IEC 9171-1, 1990 or latest revision)]. 
     
  (3) (No change.) 
     
  (c) [State agencies and] <nl>Local<ol> [local] governments must recopy data 
maintained on electronic media according to the following schedule. 
 
  (1)-(3) (No change.) 
     
  (d) Floppy disks (diskettes) or any type of flexible disk system may not be 
used for the exclusive storage of [medium-term, long-term, or permanent records 
and state archival] records  <nl>subject to these sections <ol>. 
   
  (e) (No change.) 
 
  (1)-(6) (No change.) 
     
  (f) (No change.) 
 
  (1)-(10) (No change.) 
     
  (g) The following standards must be met for electronic records stored as 
digital images on optical media. 
 
  (1)-(3) (No change.) 
   
  (4) Scanner quality must be evaluated based on the standard procedures in 
American National Standard for Information and Image Management-Recommended 
Practice for Quality Control of Image Scanners<ol> (ANSI/AIIM MS44-1988 [or 
latest revision])  <nl>and American National Standard for Information and Image 
Management-Recommended Practice for Monitoring Image Quality of Roll Microfilm 
and Microfiche Scanners<ol> (ANSI/AIIM MS49-1993). 
   
  (5)-(11) (No change.) 
     
  (h) (No change.) 
 
     
  sec.7.77. Retention of Electronic Records. 
 
  (a) [State agencies and] <nl>Local<ol> [local] governments must establish 
policies and procedures to ensure that electronic records and any software, 
hardware, and/or documentation, including maintenance documentation, required to 
retrieve and read the electronic records are retained as long as the approved 
retention period for the electronic records. 
   
  (b) (No change.) 
 
  (1)-(2) (No change.) 
     
  [(c) State records having archival value and scheduled to be preserved at the 
State Archives must be transferred to the State Archives as the source document, 
or printed out on alkaline paper for computer generated information, or on 
microforms that meet the specifications in American National Standard for 
Imaging Media (Film)-Silver-Gelatin Type-Specifications for Stability<ol> (ANSI 
IT9.1-1989 or latest revision).] 
 
     
  sec.7.78. Destruction of Electronic Records. 
 
  (a) Electronic records may be destroyed only in accordance <nl>with the Local 
Government Code, sec.202.001<ol> [with a records schedule approved by the 
director and librarian or designee or, in lieu of an approved records schedule, 
an approved records disposition authorization request]. 
   
  (b) Each [state agency and] local government must ensure that: 
 
  (1)-(2) (No change.) 
     
  (c) <nl>The following requirements must be met for the court ordered 
expungement of information recorded on an optical Write-Once-Read-Many (WORM) 
system: 
 
  <nl>(1) Two methods are allowed for expunging information from a WORM disk: 
 
  <nl>(A) the information may be overwritten to obliterate the original image, 
leaving no evidence of the original information; or 
   
  <nl>(B) all of the indices, pages, or documents on a disk, other than the 
expunged document(s), must be rewritten to a new disk and the old disk must be 
physically destroyed. 
     
  <nl>(2) In cases where a complete page or record is expunged, all reference to 
the page or record must be removed from the index. If the index has been copied, 
the index must be recopied after the reference to the page or record has been 
removed. 
   
  <nl>(3) Copies of the original WORM disk and copies of the information removed 
by expungement must be destroyed or changed to reflect the court order. All 
copies of the record, index, or reference to the original unrevised information 
on WORM disk copies or copies in any other media must be destroyed <ol>[The 
court ordered expungement of information recorded on an optical write-once-read-
many (WORM) system must be implemented according to the recommendations provided 
in<nl> Technical Report for Information and Image Management-The Expungement of 
Information Recorded on Optical Write-Once-Read-Many (WORM) Systems<ol> (AIIM 
TR28-1991 or latest revision]. 
 
  This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt. 
 Issued in Austin, Texas, on January 4, 1995. 
 TRD-9500105 
  Raymond Hitt 
 Assistant State Librarian 
 Texas State Library and Archives Commission 
    Earliest possible date of adoption: February 13, 1995 
 For further information, please call: (512) 463-5460 
         
                     
  TITLE 22. EXAMINING BOARDS 
 Part IV. Texas Cosmetology Commission 
  Chapter 89. General Rules and Regulations 
  
  22 TAC sec.sec.89.15, 89.17, 89.20, 89.31, 89.33, 89.35, 89.39, 89.53, 89.55, 
89.76 
 
  The Texas Cosmetology Commission proposes amendments to  s89.15, concerning 
definition of license authorizations;  s89.17, concerning instructor applicants; 
sec.89.20, concerning length of courses; sec.89.31, concerning examination; 
sec.89.33, concerning cosmetology instructor, manicure instructor, facial 
instructor exam; sec.89.35, concerning uniforms; sec.89.39, concerning new salon 
requirements; sec.89.53, concerning minimum requirements for both private and 
public cosmetology schools; sec.89.55, concerning refresher course; and 
sec.89.76, concerning minimum requirements for cosmetology school separate 
facility. 
 Dick Strader, Executive Director, Texas Cosmetology Commission, has determined 
that for the first five-year period the rules are in effect there will be no 
fiscal implications for state or local government as a result of enforcing or 
administering the rules. 
 Mr. Strader also has determined that for each year of the first five years the 
rules are in effect, the public benefit anticipated as a result of enforcing the 
rules will be to ensure that all certificate holders and licensees comply with 
the requirements of the rules of the commission. There will be no effect on 
small businesses. There is no anticipated economic costs to persons who are 
required to comply with the rules as proposed. 
 Comments on the proposals may be submitted to Dick Strader, Texas Cosmetology 
Commission, P.O. Box 26700, Austin, Texas 78755-0700. 
 The amendments and new section are proposed under Texas Civil Statutes, Article 
8451a, sec.4(a), which provide the Texas Cosmetology Commission with the 
authority to "issue rules consistent with this Act after a public hearing", to 
protect the public's health and welfare. 
 Texas Civil Statutes, Article 8451a, is affected by these proposed amendments. 
 
 
  sec.89.15. Definition of License Authorizations. 
 
  (a)  Cosmetology Instructor License. A Cosmetology Instructor license 
authorizes the holder to instruct in any approved private cosmetology school, or 
program, and practice all phases of cosmetology in a beauty salon and any of the 
specialties in a licensed specialty salon. A photograph approximately 1 1/2 
inches by 1 1/2 inches of the licensee shall be attached to the front of the 
license. 
   
  <nl>(b) Manicure Specialty Instructor License. A Manicure Specialty Instructor 
license authorizes the holder to instruct manicuring in any approved private 
cosmetology school, or program, and practice all phases of manicuring in a 
beauty salon or a licensed specialty salon. A photograph approximately 1 1/2 
inches by 1 1/2 inches of the licensee shall be attached to the front of the 
license. 
   
  <nl>(c) Facial Specialty Instructor License. A Facial Specialty Instructor 
license authorizes the holder to instruct facials in any phase of an approved 
private cosmetology school, or program, and practice all phases of the 
application of Facial cosmetics, manipulations, eye tabbing, arches, lash and 
brow tints, and the temporary removal of superfluous hair by the use of 
depilatory, mechanical tweezers, or wax in a beauty salon and in a licensed 
specialty salon. A photograph approximately 1 1/2 inches by 1 1/2 inches of the 
licensee shall be attached to the front of the license. 
   
  <nl>(d)<ol>[(b)] Cosmetologist. A cosmetologist (operator) license authorizes 
the holder to practice all phases of cosmetology in a beauty salon or any 
specialties in a specialty salon. A photograph of the licensee approximately 1 
1/2 inches by 1 1/2 inches shall be attached to the front of the license. 
   
  <nl>(e)<ol>[(c)] Wig Specialist. A wig specialist certificate authorizes the 
holder to practice wiggery, or perform eye tabbing in a beauty or specialty 
salon. A photograph of the licensee approximately 1 1/2 inches by 1 1/2 inches 
shall be attached to the front of the license. 
   
  <nl>(f)<ol>[(d)] Manicurist. A manicurist license authorizes the holder to 
practice manicuring and pedicuring in a licensed beauty or specialty salon. A 
manicurist shall not treat or remove calluses, soft calluses, or ingrown nails. 
A photograph of the licensee approximately 1 1/2 inches by 1 1/2 inches shall be 
attached to the front of the license. 
   
  <nl>(g)<ol>[(e)] Shampoo-Conditioning Specialist. A shampoo specialist 
certificate authorizes the holder to practice the art of shampooing, application 
of conditioners and rinses, scalp manipulation, and shampooing hair goods in a 
licensed beauty salon. A photograph of the licensee approximately 1 1/2 inches 
by 1 1/2 inches shall be attached to the front of the certificate. 
   
  <nl>(h)<ol>[(f)] Facial Specialist. A facial specialist license authorizes the 
holder to practice facial, application of facial cosmetics, manipulations, eye 
tabbing, arches, lash and brow tints, and the temporary removal of superfluous 
hair by the use of depilatory, mechanical tweezers, or wax in a licensed beauty 
or specialty salon. A photograph of the licensee approximately 1 1/2 inches by 1 
1/2 inches shall be attached to the front of the license. 
   
  <nl>(i)<ol>[(g)] Hairweaving Specialist. A hairweaving , specialist 
certificate authorizes the holder to practice the art of hairweaving in a 
licensed beauty or specialty salon. A photograph of the licensee approximately 1 
1/2 inches by 1 1/2 inches shall be attached to the front of the certificate. No 
other service may be performed. To do so will lead to revocation of a specialty 
certificate. 
   
  <nl>(j)<ol>[(h)]  Temporary License. A temporary license authorizes the holder 
of a valid license from another state or nation to practice cosmetology in the 
State of Texas for 60 days while waiting for reciprocity clearance or waiting to 
take the Commission examination. A temporary license is not renewable. A 
photograph of the licensee approximately 1 1/2 inches by 1 1/2 inches shall be 
attached to the front of the license. 
   
  <nl>(k)<ol>[(i)] Student Permit. A student permit authorizes the holder to 
practice cosmetology only in an approved school, and only after 10% of the 
required hours for graduation (150 hours for public school students) are 
accrued. A photograph of the licensee approximately 1 1/2 inches by 1 1/2 inches 
shall be attached to the front of the permit. 
   
  <nl>(l)<ol>[(j)] Corporate License or Permit Application: 
 
  (1) General. Each corporate applicant for any license or permit defined or 
listed in Article 8451a, Vernon's Annotated Civil Statutes, The Cosmetology Act, 
must certify, before the license or permit is issued, that its state franchise 
taxes are current. Corporations exempt from the payment of the franchise tax and 
out-of-state corporation must certify that they are exempt and specify the 
reason. 
   
  (2) A false statement regarding corporate franchise tax status will subject 
the corporation to suspension or cancellation of the license or permit. 
     
  <nl>(m)<ol>[(k)] Corporate Contractors Doing Business with the Cosmetology 
Commission: 
 
  (1)  General. Each corporate contractor doing business with the Cosmetology 
Commission must certify, before the contract is executed, that its franchise 
taxes are current. Corporations exempt from the payment of the franchise tax and 
out-of-state corporation must certify that they are exempt and specify the 
reason. 
   
  (2) False Statements. A false statement regarding corporate franchise tax 
status will be treated as a material breach of contract and may be grounds for 
its cancellation at the option of the State. 
     
  <nl>(n) <ol>[(l)] Exemption. Persons licensed in this state to practice 
medicine, surgery, dentistry, podiatry, osteopathy, chiropractic, or nursing who 
practiced any phase of cosmetology as authorized in Texas Civil Statutes, 
Article 8451a, sec.39(2), concerning exemptions, may no longer continue this 
practice without a current license from the Texas Cosmetology Commission unless 
they are operating within the scope of their license. 
 
     
  sec.89.17. Instructor Applicants. 
 
  <nl>(a) Cosmetology Instructor Applicants.<ol> The student seeking an 
Instructor License must have a valid Operators license before re-entering a 
cosmetology school to complete 750 hours in methods of teaching the student, 
must provide a high school diploma, or a <nl>State of Texas recognized General 
Equivalency Diploma<ol> [GED equivalent] and a properly completed registration 
form prior to entering school. A person holding a current Operator license from 
this state or any other state that can verify two years of Operator experience 
in a licensed beauty salon may also qualify for the Instructor exam provided 
they complete 250 hours of student Instructor training in an approved school and 
meet the other Instructor requirements. 
   
  <nl>(b) Manicure Instructor Applicant. The student seeking a Manicure 
Instructor Specialty License must have a valid Operator or Manicure license 
before re-entering a cosmetology school to complete 750 hours in methods of 
teaching the student. The student must provide a high school diploma, or a State 
of Texas recognized General Equivalency Diploma, and a properly completed 
registration form prior to entering school. A person holding a current Operator 
or Manicure license from this state or any other state that can verify two years 
of Manicure experience in a licensed beauty salon or Manicure specialty salon, 
may also qualify for the Manicure Instructor exam provided they complete 250 
hours of student Instructor training in an approved school and meet the other 
Instructor requirements. 
   
  <nl>(c) Facial Instructor Applicant. The student seeking a Facial Instructor 
Specialty License must have a valid Operator or Facial license before re-
entering a cosmetology school to complete 750 hours in methods of teaching the 
student. The student must provide a high school diploma or a State of Texas 
recognized General Equivalency Diploma, and a properly completed registration 
form prior to entering school. A person holding a current Operator or Facial 
license from this state or any other state that can verify two years of facial 
experience in a licensed beauty salon or facial specialty salon, may also 
qualify for the Facial Instructor exam provided they complete 250 hours of 
student Instructor training in an approved school and meet the other Instructor 
requirements. 
 
     
  sec.89.20. Length of Courses. 
 
  (a) <nl>Cosmetology<ol> Instructor. A <nl>Cosmetology<ol> Instructor course 
shall be 750 hours in an approved school or two years of licensed operator 
experience in this state or any other state plus, 250 hours of Instructor 
training in an approved school. 
   
  <nl>(b) Manicure Specialty Instructor. A Manicure Specialty Instructor course 
shall be 750 hours in an approved school or two years of licensed Manicure 
specialty experience in this state or any other state, plus 250 hours of 
Instructor training in an approved school. 
   
  <nl>(c)  Facial Specialty Instructor. A Facial Specialty Instructor course 
shall be 750 hours in an approved school or two years of licensed Facial 
Specialty experience in this state or any other state, plus 250 hours of 
Instructor training in an approved school. 
   
  <nl>(d)<ol>[(b)] Operator. The operator course shall be 1,500 hours (1,000 
hours plus 500 academic hours in a public high school) in an approved school in 
not less than nine months from date of enrollment. 
   
  <nl>(e)<ol>[(c)] Wig Specialist. A wig specialist course shall be for 300 
hours in an approved school in not less than eight weeks from date of 
enrollment. 
   
  <nl>(f)<ol>[(d)] Shampoo-Conditioning Specialist. The shampoo specialist 
course shall be for 150 hours in an approved school in not less than four weeks 
from date of enrollment. 
   
  <nl>(g)<ol>[(e)] Facial Specialist. A facial specialist course shall be for 
600 hours in an approved school. 
   
  <nl>(h)<ol>[(f)] Hairweaving Specialist. A hairweaving specialist course shall 
be for 300 hours in an approved school in not less than eight weeks from date of 
enrollment. 
   
  <nl>(i)<ol>[(g)] Manicurist. The manicuring course shall be for 250 hours in 
an approved school. 
   
  <nl>(j)<ol>[(h)] Hours. Once hours are accrued they will be valid for 48 
months after withdrawal or graduation. <nl>After the 48 months, the student must 
appeal to the commission to revalidate the hours. The commission will review the 
student's status and/or approve the hours or assign additional refresher hours 
to be completed before the student can take or retake the exam. 
   
  <nl>(k) The hours earned by a student cannot be taken away from them; however, 
the commission can require refresher hours to make certain the student 
knowledgeable about the industry. 
   
  <nl>(l) Recommendations for approving validation of hours: 
 
  <nl>(1) over 48 months less than 60 months; 1 test or fail both parts 150 
hours; did not appear 150 hours; 1 test, fail written or practical, 150 hours in 
area failed; 
   
  <nl>(2) over 60 months less than 72 months; 1 test or fail both parts, 250 
hours; did not appear, 250 hours; 1 test fail written or practical, 200 hours in 
area failed; 
   
  <nl>(3) over 72 months less that 84 months; 1 test or fail both parts, 350 
hours; did not appear 350 hours; 1 test fail written or practical, 300 hours in 
area failed; 
   
  <nl>(4) over 84 months less than 96 months, 1 test or fail both parts, 400 
hours; did not appear, 400 hours, 1 test or fail written or practical, 350 hours 
in area failed; 
   
  <nl>(5) over 96 months less that 108 months; 1 test or fail both parts, 500 
hours; did not appear, 500 hours, 1 test or fail written or practical, 450 hours 
in area failed; 
   
  <nl>(6) over 108 months less than 120 months, 1 test or fail both parts, 550 
hours, did not appear, 550 hours; 1 test or fail written or practical, 500 hours 
in area failed; 
   
  <nl>(7) anything over 120 months, 600 hours in all areas. 
     
  <nl>(m) Add 50 hours for each time the student fails all or part of the exam 
after taking the exam one time. The student will be required to complete a 50 
hour refresher course each time the exam is failed. 
   
  <nl>(n)  If students have less than 1,000 hours that are over 40 months there 
is no additional refresher courses required. 
   
  <nl>(o) If students have more than 1,001 hours that are over 48 months, the 
student must take an additional 50 hours for each year or part of a year beyond 
48 months. The time gap will be determined by the last month in attendance and 
the month of the appeal to the commission. 
 
     
  sec.89.31. Examination. 
 
  (a)-(d) (No change.) 
   
  (e) The Cosmetology Commission may issue a temporary work permit to students 
who wish to work in a licensed beauty salon prior to taking the operator 
examination. To obtain a work permit the following guidelines will apply. 
 
  (1)-(3)  (No change.) 
   
  (4) <nl>The temporary work permit must be returned to TCC when the student 
comes to the commission office to take the exam. The commission may approve the 
work permit and allow the applicant an additional fifteen days while waiting for 
the result letter. <ol> [The temporary work permit must be turned in when the 
student appears on the exam floor, or the Commission may stamp the work permit 
on exam day and allow the applicant to work for 15 more days while they wait for 
their result letter and mail in their money order for licensing.] 
   
  (5) (No change.) 
   
  <nl>(6)  The operator, facial, manicure, wig, hairweaving, and shampoo 
examinations are scored on a 2/3 practical and 1/3 written grade. The examinee 
must make a composite score of 75% to pass the examination. 
 
       
  sec.89.33. <nl>Cosmetology Instructor, Manicure Instructor, Facial Instructor 
Exam. <ol> The Instructor exam shall consist of three parts, written, clinical, 
and oral. An applicant who fails to make a passing grade on any part of the exam 
must retake the failed portion of the exam within one year in order to receive 
credit for having successfully completed that portion. The evaluation of an 
applicant's performance on the Instructor examination by the examining staff 
shall be final. No requests for re-evaluation will be accepted by the staff or 
the Commission. 
 
   
  sec.89.35. Uniforms. 
 
  (a) (No change.) 
   
  (b) <nl>School employees,<ol> salon employees and independent contractors 
shall wear an attire of washable material with armpits and chest covered. Tank 
tops, lingerie, see-through fabrics, topless uniforms, and bare feet are not 
allowed. 
   
  (c) Applicants for a commission examination must appear in a lab coat, and 
black or white dress slacks or skirt, or an all white professional uniform. 
 
  (1)-(4) (No change.) 
   
  (5) Shoes: (black or white, <nl>no combination <ol>), no heels over one inch 
tall. Must be clean and plain: no sandals, no boots, no demi-boots, no open-
heeled, [or] open-toed shoes, <nl>or open side shoes,<ol> no high-topped tennis 
shoes. Any shoe which has loops or holes for laces must be laced. Slip-on style 
shoes are acceptable. 
 
       
  sec.89.39. New Salon. 
 
  (a) (No change.) 
   
  (b) Beauty salon requirements. 
 
  (1) (No change.) 
   
  (2) Required equipment as follows: 
 
  (A)-(D) (No change.) 
   
  (E) one wet <nl>disinfectant soaking container<ol> [sanitizer]; 
   
  (F) one dry <nl>storage container <ol> [sanitizer or an EPA registered 
disinfectant/storage system]. 
       
  (c)-(d) (No change.) 
   
  (e) Facial salon requirements. 
 
  (1) (No change.) 
   
  (2) required equipment is as follows. 
 
  (A) (No change.) 
   
  (B) One wet <nl>disinfectant soaking container<ol> [sanitizer]; 
   
  (C) one dry <nl>storage container <ol> [sanitizer or an EPA registered 
disinfectant/storage system]; 
   
  (D)-(E) (No change.) 
     
  (3) (No change.) 
     
  (f) Manicurist salon requirements. 
 
  (1) (No change.) 
   
  (2) required equipment is as follows: 
 
  (A)-(C) (No change.) 
   
  (D) one wet <nl>disinfectant soaking container<ol> and one dry <nl>storage 
container <ol> [sanitizer or an EPA registered disinfectant/storage system] at 
each table; and 
   
  (E) (No change.) 
     
  (3) (No change.) 
     
  (g) Manicure/Facial specialty salon requirements. 
 
  (1) (No change.) 
   
  (2) Required facial equipment is as follows: 
 
  (A) (No change.) 
   
  (B) one wet <nl>disinfectant soaking container<ol> [sanitizer]; 
   
  (C) one dry <nl>storage container <ol> [sanitizer or an EPA registered 
disinfectant/storage system]; and 
   
  (D) (No change.) 
     
  (3) (No change.) 
   
  (4) Required manicure equipment is as follows: 
 
  (A)-(C) (No change.) 
   
  (D) one wet <nl>disinfectant soaking container<ol> and one dry <nl>storage 
container <ol> [sanitizer or an EPA registered disinfectant/storage system at 
each table]; and 
   
  (E) (No change.) 
     
  (5) Each manicure/facial salon must have hot and cold running water within the 
facility. 
     
  <nl>(h) Wig salon requirements. 
 
  <nl>(1)  required floor space shall be a minimum of 180 square feet for the 
first operator and not less than an additional 110 square feet of working, 
dispensary, and reception area for each operator, exclusive of rest rooms, 
utility, heating and/or cooling facilities and retail area. 
   
  <nl>(2)  Required equipment as follows: 
 
  <nl>(A) mannequin table(s), styling stations, or styling bar to accommodate a 
minimum of ten hairpieces; 
   
  <nl>(B) one large sink with hot and cold running water; 
   
  <nl>(C)  one wig dryer large enough to dry six hairpieces; 
   
  <nl>(D) one dry storage container; 
   
  <nl>(E) one wet disinfectant soaking container; and 
   
  <nl>(F) two large covered trash containers. 
       
  <nl>(i)<ol>[(h)]  Licensed cosmetologists or specialists who are practicing as 
independent contractors must obtain the appropriate booth rental license. 
   
  <nl>(j) <ol>[(i)] Salon licenses will be issued as a specialty salon with the 
notation which specialties are being practiced. 
   
  <nl>(k)<ol>[(j)] No cosmetology establishment shall, in any manner, represent 
or permit a representation to be made in its behalf that it is a barber shop, 
whether made by use of a display or device similar to a barber pole or 
otherwise. It may, however, advertise that services for males are available, 
with the exception of trimming and/or shaving beards or mustaches. 
 
     
  sec.89.53. Minimum Requirements for Both Private and Public Cosmetology 
Schools. 
 
  (a) The following are the requirements for a private cosmetology school as 
authorized by the Texas Cosmetology Commission as approved on June 1, 1985. 
 
  (1)-(3) (No change.) 
   
  (4) The Junior Department must contain the following: 
 
  (A)-(E) (No change.) 
   
  (F) at least one large wet <nl>disinfectant soaking container<ol> [sanitizer]. 
     
  (5) The Senior Department must contain the following: 
 
  (A)-(F) (No change.) 
   
  (G) wet <nl>disinfectant soaking container<ol> [sanitizer]. 
     
  (6) -(7) (No change.) 
   
  (8) The school shall have at least one dry <nl>storage container<ol> 
[sanitizer or an EPA registered disinfectant/storage system] (large enough to 
accommodate junior and senior departments). 
   
  (9)-(15) (No change.) 
     
  (b) The following are the requirements for a public school cosmetology 
program. 
 
  (1)-(4) (No change.) 
   
  (5) The school equipment list shall contain: 
 
  (A)-(N) (No change.) 
   
  (O) one large wet <nl>disinfectant soaking container<ol> [sanitizer]; 
   
  (P) one dry <nl>storage<ol> container[or EPA registered disinfectant/storage 
system] for disinfected implements. 
     
  (6)-(7) (No change.) 
 
       
  sec.89.55. Refresher Course. <ol> Schools of cosmetology may enroll applicants 
for the refresher course. A person who holds a valid Texas license may service 
clients in the school for a 60 <nl>calendar <ol> day period of time, once, every 
three years. The school may receive compensation for services performed by a 
student holding a valid Texas license; however, the student may not receive 
compensation. 
 
   
  sec.89.76. Minimum Requirements for Cosmetology School Separate Facility. 
 
  (a)-(c) (No change.) 
   
  (d) The practical work area shall contain the following: 
 
  (1)-(19) (No change.) 
   
  (20) at least one wet <nl>disinfectant storage container<ol> [sanitizer]; 
   
  (21) at least one dry <nl>storage container <ol> [sanitizer or an EPA 
registered disinfectant/storage system]; 
   
  (22)-(24) (No change.) 
     
  (e)-(r) (No change.) 
 
  This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt. 
 Issued in Austin, Texas, on January 6, 1995. 
 TRD-9500257 
  Dick G. Strader 
 Executive Director 
 Texas Cosmetology Commission 
    Earliest possible date of adoption: February 13, 1995 
 For further information, please call: (512) 454-4674 
         
                 
  TITLE 28. INSURANCE 
 Part I. Texas Department of Insurance 
  Chapter 5. Property and Casualty Insurance 
  
  Subchapter E. Texas Catastrophe Property Insurance Association 
 
  28 TAC sec.5.4001 
 
  The Texas Department of Insurance proposes an amendment to sec.5.4001, the 
plan of operation of the Texas Catastrophe Property Insurance Association 
(TCPIA). Pursuant to the Catastrophe Property Insurance Pool Act (Article 21. 49 
of the Insurance Code), the TCPIA was created by the Texas legislature in 1971 
and is composed of all property insurers authorized to transact property 
insurance in Texas. The purpose of the TCPIA is to provide windstorm and hail 
insurance coverage to coastal residents who are unable to obtain such coverage 
in the voluntary market. Currently the TCPIA provides this coverage to residents 
of 14 coastal counties, including Aransas, Brazoria, Calhoun, Cameron, Chambers, 
Galveston, Jefferson, Kenedy, Kleberg, Matagorda, Nueces, Refugio, San Patricio 
and Willacy counties. The TCPIA petitioned for the publication and adoption of 
the proposed amendment pursuant to the Insurance Code, Article 21.49, sec.5, and 
the Administrative Procedure Act, sec.2001.021 (Government Code title 10, 
subtitle A, chapter 2001). The proposed amendment is necessary to update 
sec.5.4001 (hereafter referred to as the "plan of operation" or "the plan") to 
incorporate amendment to Article 21.49 of the Insurance Code enacted by the 72nd 
Texas Legislature in House Bill 2 and the 73rd Legislature in House Bill 1461 
and to incorporate changes resulting from the adoption of certain Departmental 
administrative rules. Amendments are proposed throughout the plan of operation 
for technical editing purposes to correct words, phrases, definitions, internal 
references, gender references, and punctuation; to update statutory cites as a 
result of codification; to revise subsection headings; and to re-designate 
paragraphs, subparagraphs, clauses, subclauses, items and subitems where 
necessary. In addition, all references to "Board" or "State Board of Insurance" 
have been amended throughout the plan where necessary to reflect either the 
"Department" or "Commissioner," whichever term is appropriate in the context of 
the amended provision. The terms "Board" and "State Board of Insurance" are 
retained in those provisions that reference actions occurring prior to the 
elimination of the Board enacted in House Bill 1461 by the 73rd Legislature. 
These technical editing amendments have no substantive impact on the plan of 
operation. Proposed substantive amendments to subsection (a) of the plan include 
incorporating a definition of "indirect losses" based on the Insurance Code, 
Article 21.49, sec.8B. Subsection (b) is amended in paragraph (1)(C) to provide 
that the annual meeting of the TCPIA members shall be held at such time and 
place in March of each year as may be designated by the TCPIA board of 
directors. This amendment will allow flexibility to the TCPIA in scheduling and 
holding its annual meeting. Subsection (b)(2)(D), relating to the term of office 
of directors, is amended to conform to the Insurance Code, Article 21. 49, 
sec.5(h), to provide that a person may hold a seat on the board of directors for 
not more than three consecutive full terms, not to exceed nine years. Subsection 
(b)(2)(M) is amended to provide that the executive committee shall consist of at 
least three, and not more than four, of the directors of the association 
(currently there are only three members, the chairman, vice chairman, and 
secretary-treasurer), and that the board of directors may elect an additional 
director to be a member of the executive committee to ensure inclusion of at 
least one company, one agent, and one public member on the executive committee. 
Subsection (b)(3)(A), relating to number of officers of the TCPIA, is amended to 
conform this provision to the changes proposed to subsection (b)(2)(M). A new 
paragraph (4), relating to legal counsel for the TCPIA, is proposed to be added 
to subsection (b). This proposal is needed to comply with the requirements of 
sec.12A of Article 21.49. Section 12A provides that the TCPIA shall establish a 
plan in its plan of operation under which the TCPIA's legal representation 
before the Commissioner, the Department, and the Texas legislature is without 
conflict of interest or the appearance of a conflict of interest as defined in 
the Texas Disciplinary Rules of Professional Conduct. Section 12A also requires 
the TCPIA to adopt procedures for legal counsel in the handling of disputes 
involving policyholder claims against the TCPIA. Amendments to subsection 
(b)(7), relating to indemnification of directors, members, officers, and 
employees, are proposed to provide that the indemnification shall include all 
costs as well as expenses as specified in that paragraph. Other amendments to 
that paragraph provide that indemnification is not authorized for reasons of 
willful malfeasance or dishonesty in addition to those reasons already 
specified. A new subparagraph is proposed to be added to subsection (c)(3), 
relating to distributions to members, to address the disbursement of funds from 
the catastrophe reserve trust fund, established under sec.8(i) of Article 21.49 
pursuant to House Bill 1461 passed by the legislature in 1993. This proposal 
provides that the disbursement of these funds to the TCPIA may only be spent by 
the TCPIA to pay losses and loss adjustment expenses of policyholders in the 
event of an occurrence that results in insured losses and operating expenses of 
the TCPIA greater than $100 million. Subsection (c)(4)(E), relating to use of 
funds, is amended to provide that moneys collected or received by the TCPIA may 
be used to either pay premiums for reinsurance under a reinsurance program 
approved by the Commissioner or to make payment of net equity of a member to a 
catastrophe reserve trust fund held by the Department. Subsection (d)(2)(E)(i), 
relating to receipt of the application for catastrophe insurance, is amended to 
delete language requiring a policy to be issued or the agent or applicant to be 
advised that the risk is not acceptable within 15 days after receipt of the 
application. The 15 days provision is no longer needed since binders are 
automatically issued upon receipt of the application and the full amount of the 
premium. Subsection (d)(E)(ii), relating to new or increased coverage, is 
amended to enable the TCPIA board of directors to approve mailing procedures 
other than those specified for applications and renewals. Subsection (e)(2), 
relating to the code for windstorm resisting construction applicable to the area 
inland of the Intracoastal Canal, is amended to delete the reference to the 
application of the inland building code to properties protected by a seawall 
constructed by the Corps of Engineers or by other adequate structures or natural 
physical features of the terrain. This is necessary because the inland building 
code no longer applies to these properties. 
 Lyndon Anderson, associate commissioner, property and casualty program, has 
determined that for each year of the first five years the proposed amendment 
will be in effect, there will be no fiscal implications to state government. Mr. 
Anderson has also determined that for each year of the first five years the 
proposed amendment will be in effect, there will be no fiscal implications to 
local government nor to small business as a result of enforcing or administering 
the section, and there will be no effect on local employment or local economy. 
 Mr. Anderson has determined that for each year for the first five years the 
proposed amendment is in effect, the public benefit anticipated as a result of 
enforcing the section will be better and more efficient operation of the TCPIA 
and better service for TCPIA policyholders. There will be no economic costs to 
any persons required to comply with the section as proposed. 
 Comments on the proposal must be submitted within 30 days after publication of 
the proposed section in the Texas Register to the Office of the Chief Clerk, 
Texas Department of Insurance, P.O. Box 149104, MC #113-2A, Austin, Texas, 
78714-9104. An additional copy of the comment is to be submitted to Lyndon 
Anderson, Associate Commissioner, Property and Casualty Group, Texas Department 
of Insurance, P.O. Box 149104, MC #103-1A, Austin, Texas, 78714-9104. Any 
request for a public hearing on this proposal should be submitted separately to 
the Office of the Chief Clerk. 
 The amendment is proposed pursuant to the Insurance Code, Articles 21.49 and 
1.03A, and the Government Code, sec.sec.2001.004 et seq, Article 21.49, sec.5(c) 
of the Insurance Code provides that the Commissioner of Insurance by rule shall 
adopt the TCPIA plan of operation with the advice of the TCPIA board of 
directors. Section 5(f) of Article 21.49 provides that any interested person may 
petition the Commissioner to modify the plan of operation in accordance with the 
Administrative Procedure Act (Government Code title 10, subtitle A, chapter 
2001). Article 21.49, sec.5, subsections (c) and (f), by their terms delegate 
the foregoing authority to the State Board of Insurance. However, under Article 
1.02 of the Insurance Code, as amended by the 73rd Texas Legislature in House 
Bill 1461 (Acts 1993, 73rd Legislature, Regular Session, chapter 685, sec.1.01), 
a reference in the Insurance Code or another insurance law to the State Board of 
Insurance means the Commissioner of Insurance or the Texas Department of 
Insurance, as consistent with the respective powers and duties of the 
Commissioner and the Department under Article 1.02. Article 1. 03A, as enacted 
by the 73rd Texas Legislature in House Bill 1461 (Acts 1993, 73rd Legislature, 
Regular Session, chapter 685, sec.1.03), provides that the Commissioner of 
Insurance may adopt rules and regulations, which must be for general and uniform 
application, for the conduct and execution of the duties and functions of the 
Texas Department of Insurance only as authorized by a statute. The Government 
Code, sec.sec.2001.004 et seq (Administrative Procedure Act) 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 agency. 
 The following statute is affected by this rule: Insurance Code, Article 21. 49. 
 
 
  sec.5.4001. Plan of Operation. 
 
  (a) Definitions. 
 
  (1) (No change.) 
   
  (2) Definitions in the section. The following words and terms, when used in 
this section, shall have the following meanings, unless the context clearly 
indicates otherwise. 
 
  (A)-(B) (No change.) 
   
  <nl>(C) Association-The Texas Catastrophe Property Insurance Association. 
   
  <nl>(D) Board-The State Board of Insurance. 
   
  <nl>(E)<ol>[(C)] Board of directors-The board of directors of the Texas 
Catastrophe Property Insurance Association. 
   
  <nl>(F)<ol>[(D)]  Catastrophe insurance-For the purpose of this plan of 
operation, means Texas windstorm and hail insurance. 
   
  <nl>(G)<ol>[(E)] Catastrophe loss -A loss to property insurance by a policy of 
Texas windstorm and hail insurance. Catastrophe losses means more than one 
catastrophe loss. 
   
  <nl>(H)<ol>[(F)] <nl>Chair <ol> [Chairman] of the board-The <nl>chair<ol> 
[chairman] of the board of directors of the Texas Catastrophe Property Insurance 
Association. 
   
  (I)  <nl>Commissioner-Commissioner of Insurance of the State of Texas. 
   
  <nl>(J)<ol>[(G)] Corporeal property -Tangible personal property. 
   
  <nl>(K) Department-Texas Department of Insurance. 
   
  <nl>(L)  Indirect losses -Personal Lines. 
 
  <nl>(i)<nl> Except as provided in clause (iii) of this subparagraph, a policy 
of windstorm and hail insurance issued by the association for a dwelling as 
defined by the Department in the association's rates and rules manual, must 
include coverage for: 
 
  <nl>(I) wind-driven rain damage, regardless of whether an opening is made by 
the wind; 
   
  <nl>(II) loss of use, meaning additional living expenses; and 
   
  <nl>(III) consequential losses. 
     
  <nl>(ii)<nl> Except as provided in clause (iii) of this subparagraph, a policy 
of windstorm and hail insurance issued by the association for tenant contents of 
a dwelling or other residential building must include coverage for: 
 
  <nl>(I) loss of use, meaning additional living expenses; and 
   
  <nl>(II) consequential losses. 
     
  <nl>(iii)<nl> The association is not required to: 
 
  <nl>(I) offer coverage for indirect losses as provided in clauses (i) and (ii) 
of this subparagraph unless the coverage was excluded from a companion policy 
issued in the voluntary market; or 
   
  <nl>(II) provide loss of rents or loss of rental value coverage as part of a 
loss of use coverage or additional living expense coverage to a secondary or 
non-primary residence. 
       
  <nl>(M)<ol>[(H)] Member-An insurer required to be a member of the association 
by the Act, sec.4, or where the context indicates, any duly authorized agent or 
representative of such insurer. Members shall mean more than one member. 
   
  <nl>(N)<ol>[(I)]  Net direct premiums- 
 
  <nl>(i)<ol>[(iv)] For association policies with inception dates on and after 
January 1, 1993, "net direct premiums" shall mean all statewide direct written 
premiums (excluding direct written premiums in catastrophe area as designated by 
the <nl>Commissioner <ol> [State Board of Insurance]) and shall be the sum of 
the following: 
 
  (I) 90% of the direct written premiums of the extended coverage line of 
business and 90% of the direct written premiums on the other allied lines of 
business as reported in accordance with the property statistical plan 
promulgated by the <nl>Commissioner <ol> [board] for property insurance, which 
the association shall obtain from the <nl>Department<ol> [board], and as may be 
furnished to the association by the <nl>Department<ol> [board] after review of 
the insurer's annual statement, other reports, and other statistics the 
<nl>Department <ol> [board] shall deem necessary; 
   
  (II) 90% of the extended coverage and other allied lines portion of the direct 
written premiums on the multiple peril line of business as reported in 
accordance with the property statistical plan promulgated by the 
<nl>Commissioner <ol> [board] for property insurance, which the association 
shall obtain from the <nl>Department<ol> [board], and as may be furnished to the 
association by the <nl>Department<ol> [board] after review of the insurer's 
annual statement, other reports, and other statistics the <nl>Department <ol> 
[board] shall deem necessary; and 
   
  (III) 50% of the direct written premium or such other percentage as may be 
determined by the board of directors of the association, without further action 
by the <nl>Commissioner <ol> [State Board of Insurance], upon analysis of 
appropriate statistics for wind, hail, water damage, and all other perils, on 
the homeowner's multiple peril line of business as reported in accordance with 
the property statistical plan promulgated by the <nl>Commissioner <ol> [board] 
for property insurance, which the association shall obtain from the 
<nl>Department<ol> [board], and as may be furnished to the association by the 
<nl>Department<ol> [board] after review of the insurer's annual statement, other 
reports, and other statistics the <nl>Department <ol> [board] shall deem 
necessary and farm and ranch owners' multiple peril line of business as reported 
in accordance with the property statistical plan promulgated by the 
<nl>Commissioner <ol> [board] for property insurance, which the association 
shall obtain from the <nl>Department<ol> [board], and as may be furnished to the 
association by the <nl>Department<ol> [board] after review of the insurer's 
annual statement, other reports, and other statistics the <nl>Department <ol> 
[board] shall deem necessary, provided, no adjustment of five percentage points 
or less shall be made, and further provided, that no adjustment shall be made in 
less than three years from the last prior adjustment; 
   
  (IV) the extended coverage and other allied lines portion of the following 
policies, which shall be calculated as follows: 
 
  (-a-) 40% of the total premium for any commercial policy issued under a 
composite rate; or 
   
  (-b-) 40% of the total policy premium or the combined actual extended coverage 
and other allied lines premium charged whichever is greater, for any property 
insurance policy written by an insurance company that is not authorized to 
transact property insurance in Texas, and which is affiliated under common 
management or control of an insurance company licensed to transact property 
insurance in Texas. 
       
  <nl>(ii)<ol>[(i)] For association policies with inception dates on and after 
January 1, 1988, through December 31, 1992, "net direct premiums" shall mean all 
statewide direct written premiums (excluding direct written premiums in the 
catastrophe area as designated by the State Board of Insurance) restored to 
manual level and further adjusted to the manual rate level applicable to the 
catastrophe area as designated by the State Board of Insurance and shall be the 
sum of the following: 
 
  (I) 90% of the direct written premiums of the extended coverage line of 
business and 90% of the direct written premiums on the other allied lines of 
business as reported in accordance with the property statistical plan 
promulgated by the <nl>Commissioner <ol> [board] for property insurance which 
the association shall obtain from the <nl>Department<ol> [board] and as may be 
furnished to the association by the <nl>Department<ol> [board] after review of 
the insurer's annual statement, other reports, and other statistics the 
<nl>Department <ol> [board] shall deem necessary; 
   
  (II) 90% of the extended coverage and other allied lines portion of the direct 
written premiums on the multiple peril line of business as reported in 
accordance with the property statistical plan promulgated by the 
<nl>Commissioner <ol> [board] for property insurance, which the association 
shall obtain from the <nl>Department<ol> [board], and as may be furnished to the 
association by the <nl>Department<ol> [board] after review of the insurer's 
annual statement, other reports, and other statistics the <nl>Department <ol> 
[board] shall deem necessary; 
   
  (III) 50% of the direct written premium or such other percentages as may be 
determined by the board of directors of the association, without further action 
by the <nl>Commissioner <ol> [State Board of Insurance], upon analysis of 
appropriate statistics for wind, hail, water damage, and all other perils, on 
the homeowner's multiple peril line of business as reported in accordance with 
the property statistical plan promulgated by the <nl>Commissioner <ol> [board] 
for property insurance, which the association shall obtain from the 
<nl>Department<ol> [board], and as may be furnished to the association by the 
<nl>Department<ol> [board] after review of the insurer's annual statement, other 
reports, and other statistics the <nl>Department <ol> [board] shall deem 
necessary and farm and ranch owners' multiple peril line of business as reported 
in accordance with the property statistical plan promulgated by the 
<nl>Commissioner <ol> [board] for property insurance, which the association 
shall obtain from the <nl>Department<ol> [board], and as may be furnished to the 
association by the <nl>Department<ol> [board] after review of the insurer's 
annual statement, other reports, and other statistics the <nl>Department <ol> 
[board] shall deem necessary, provided, no adjustment of five percentage points 
or less shall be made, and further provided, that no adjustment shall be made in 
less than three years from the last prior adjustment. 
   
  (IV) the extended coverage and other allied lines portion of the following 
policies, which shall not be restored to manual rate levels, and which shall be 
calculated as follows: 
 
  (-a-) [40% of the total policy premium for any commercial policy issued under 
the highly protected risk rating plan; or] 
   
  [(-b-)] 40% of the total policy premium or the combined actual extended 
coverage and other allied lines premium charged, whichever is the greater, for 
any commercial policy issued pursuant to the Insurance Code, Article <nl>5. 13-2 
or Article<ol> 5.26(c), or for policies issued pursuant to the Insurance Code, 
Article 5.31; or 
   
  <nl>(-b-)<ol>[(-c-)] 40% of the total policy premium or the combined actual 
extended coverage and other allied lines premium charged, whichever is greater, 
for any property insurance policy written by an insurance company that is not 
authorized to transact property insurance in Texas, and which is affiliated 
under common management or control of an insurance company licensed to transact 
property insurance in Texas. 
       
  <nl>(iii)<ol>[(ii)] For association policies with inception dates on and after 
<nl>December 31, 1987, through<ol> January 1, 1993, [through December 31, 1987,] 
inclusive, net direct premiums means the sum of the following premiums: 
 
  (I) 90% of the direct written premiums on the extended coverage line of 
business as reflected on line two, column (1), of the insurer's last Texas 
annual statement; 
   
  (II) 90% of the extended coverage portion of the direct written premiums on 
the multiple peril line of business as reported on line eight, column (1), of 
the insurer's last Texas annual statement; and (III) 40% of the direct written 
premiums on the homeowners' multiple peril line of business as reported on line 
four, column (1), of the insurer's last Texas annual statement. 
     
  <nl>(iv)<ol>[(iii)] For association policies with inception dates on and after 
January 1, 1978, through December 31, 1982, inclusive, net direct premiums means 
the sum of the following premiums: 
 
  (I) 90% of the direct written premiums on the extended coverage line of 
business as reflected on line two, column (1), of the insurer's last Texas 
annual statement; 
   
  (II) 90% of the extended coverage portion of the direct written premiums on 
the multiple peril line of business as reported on line eight, column (1), of 
the insurer's last Texas annual statement; and (III) 40% of the direct written 
premiums on the homeowners' multiple peril line of business as reported on line 
four, column (1), of the insurer's last Texas annual statement. 
       
  <nl>(O)<ol>[(J)] Secretary-treasurer -The secretary-treasurer of the Texas 
Catastrophe Property Insurance Association. 
   
  <nl>(P)<ol>[(K)] Texas windstorm and hail insurance-Deductible insurance 
against direct loss <nl>and indirect losses resulting from a direct loss<ol> to 
insurable property as a result of windstorm or hail as such terms shall be 
defined and limited in policies and forms approved by the <nl>Commissioner <ol> 
[State Board of Insurance]. The deductible amount which shall be applied to all 
risks written by the association shall be determined by the board of directors 
and approved by the  <nl>Commissioner<ol> [State Board of Insurance]. 
   
  <nl>(Q)<ol>[(L)] Vice  <nl>chair<ol> [chairman] or vice <nl>chair<ol> 
[chairman] of the board-The vice <nl>chair<ol> [chairman] of the board of 
directors of the Texas Catastrophe Property Insurance Association. 
   
  [(M) Association-The Texas Catastrophe Property Insurance Association. 
   
  [(N) Board-The State Board of Insurance of the State of Texas.] 
       
  (b) <nl>Operational<ol> [Operation] <nl>Procedures<ol> of the Texas 
Catastrophe Property Insurance Association. 
 
  (1) Members. 
 
  (A) (No change.) 
   
  (B) Notice of meetings. Written or printed notice stating the place, day, and 
hours of the meeting, and in case of a special meeting, the purpose or purposes 
for which the meeting is called, shall be delivered not less than ten nor more 
than 50 days before the date of the meeting, either personally or by mail, by or 
at the direction of the <nl>chair<ol> [chairman] of the board of directors, the 
secretary-treasurer, or other person calling the meeting, to each member 
entitled to vote as such meeting. 
   
  (C) Meetings. The annual meeting of the members shall be held <nl>at such time 
and place<ol> [on the third Tuesday] in March of each year [at the hour of 9:00 
a.m., or at such other hour] as may be designated by the board of directors, for 
the purpose of electing directors and for the transaction of such other business 
as may come before the meeting. [If the day fixed for the annual meeting shall 
be on a legal holiday in the State of Texas, the meeting shall be held on the 
next succeeding business day.] If the election of directors shall not be held on 
the day designated [herein] for any annual meeting of the members, the board of 
directors shall cause the election to be held at a special meeting of the 
members as soon thereafter as conveniently may be. The board of directors shall 
designate the place for the annual meeting of the members, but if no place is so 
designated, then the meeting shall be held at the office of the association. The 
board of directors, the <nl>chair<ol> [chairman] of the board of directors, or 
25% of the members of the association may call a special meeting of the members 
and designate any place as the place of such meeting. If no such designation is 
made, the place of such meeting shall be the aforesaid office of the 
association. 
   
  (D) Quorum. Twenty-five percent of the members represented by person or by 
proxy shall constitute a quorum at a meeting of the members. If less than 25% of 
the members are represented at a meeting, a majority of the outstanding members 
so represented may adjourn the meeting from time to time without further notice. 
At the next meeting after adjournment at which a quorum shall be present or 
represented, any business may be transacted at the meeting as originally 
notified. The members represented at a duly organized meeting may continue to 
transact business until adjournment, notwithstanding the withdrawal of enough 
persons to leave less than a quorum. 
   
  (E) Voting. 
 
  (i) The secretary-treasurer of the association shall make, at least ten days 
before each meeting of the members of the association, a complete list of the 
members entitled to vote at such meeting, arranged in alphabetical order, with 
the address of each member and the number of votes allocated to each member 
which list, for a period of ten days prior to such meeting, shall be kept on 
file at the principal office of the association and shall be subject to 
inspection by any member or its agent at any time during usual business hours. 
Such list shall also be produced and kept open at the time and place of the 
meeting and shall be subject to inspection by any member during the whole time 
of such meeting. Failure to comply with the requirements of this clause shall 
not affect the validity of any action taken at such meeting. 
   
  (ii) There shall be 1,000 outstanding votes allocated to the members of the 
association by the secretary-treasurer. The secretary-treasurer shall determine 
the percentage of each member's participation in the writings, expenses, 
profits, and losses of the association computed on the date of the end of the 
last calendar year preceding such annual meeting at which information necessary 
to make such computation is available from the <nl>Department <ol> [State Board 
of Insurance], and shall allocate to each member a like percentage of the total 
outstanding votes allocated to the members of the association. Each member shall 
be entitled to vote its allocated number of outstanding shares at the annual 
meeting and each special meeting until the next annual meeting of the 
association at which time the outstanding votes shall be again allocated to the 
members in the manner set forth previously. 
   
  (iii) A member may vote by proxy executed in writing by the member. No proxy 
shall be valid after the next annual meeting after the date of its execution 
unless otherwise provided in the proxy. Each proxy shall be revocable unless 
expressly provided therein to be irrevocable. 
   
  (iv) The votes allocated to a member may be voted by such officer, agent, or 
proxy as the bylaws of such member may authorize or, in the absence of such 
authorization, as such member may determine. 
   
  (v) Voting on any question or in any election may be by voice vote or by show 
of hands unless the presiding officer shall order, or any member shall demand, 
that voting be by written ballot. 
     
  (F) Rules. To the extent applicable, Robert's Rules of Order shall govern the 
conduct of and procedure at all meetings of the members. 
     
  (2) Directors. 
 
  (A)  (No change.) 
   
  (B) Directors elected from the membership. 
 
  (i)-(ii) (No change.) 
   
  (iii) No later than 60 days prior to the annual meetings [occurring after 
March 1992], the <nl>chair <ol> [chairman] shall appoint a nominating committee 
of not less than three, nor more than seven, member companies, each to act 
through its designated representative, said committee to represent as far as 
possible the view of the member companies. Said committee shall prepare and 
present to member companies a list of nominations for the board of directors. 
   
  (iv) Members also have the right to nominate any member by submitting such 
nominee's name to the nomination committee. In order to be eligible for election 
to the board of directors, a member must be nominated at least 30 days prior to 
the annual meeting at which directors are elected. 
     
  (C) Directors appointed by the <nl>Commissioner <ol> [State Board of 
Insurance]. The number of directors composed of licensed local recording agents 
and members of the public shall be four. Each of these directors must be from 
different counties in the designated catastrophe area. 
 
  (i) The <nl>Commissioner <ol> [State Board of Insurance] shall appoint two 
public representatives nominated by the Office of the Public Insurance Counsel 
to serve on the board of directors. The public representatives shall be persons 
who are policyholders of the association as of the date of appointment. 
   
  (ii) The <nl>Commissioner <ol> [State Board of Insurance] shall appoint two 
licensed local recording agent representatives to serve on the board of 
directors. 
     
  (D) Term of office. Each director shall hold office for the term of three 
years from the date of the election or appointment or until a successor shall 
have been elected or appointed. The terms of the directors shall be staggered so 
that three directors shall be elected by the membership of the association 
and/or appointed by the <nl>Commissioner<ol> [State Board of Insurance] 
annually. <nl>A person may hold a seat on the board of directors for not more 
than three consecutive full terms, not to exceed nine years. <ol> [At the first 
annual meeting of the members subsequent to the adoption of this rule, five 
directors shall be elected by the membership and on or before the March 1992 
annual meeting, the State Board of Insurance shall appoint the remaining four 
directors. Such directors shall draw lots to determine whether their initial 
terms shall be one, two, or three years. If a director has served two full 
three-year terms, such member shall provide for a reasonable rotation of persons 
designated to serve on the board of directors.] 
   
  (E) Regular meetings. A regular meeting of the board of directors shall be 
held with notice to the directors at least ten days before each regular meeting 
as provided for <nl>in this subsection<ol> [herein]. Notice of any regular 
meeting of the directors shall also be given to the <nl>Department<ol> [Texas 
Department of Insurance] in care of the  <nl>associate<ol> [deputy] commissioner 
of property<nl>-casualty, or such other person as may be designated by the 
Commissioner,<ol> as required by the Texas Insurance Code, Article 21.49, 
sec.5(k). Public notice of meetings shall be given as required by the  
<nl>Government Code, Chapter 551 <ol> [Texas Civil Statutes, Article 6252-17]. 
   
  (F) Notice of regular or emergency meeting. 
 
  (i)  Notice of any regular meeting shall be given to the directors at least 
ten days prior thereto by notice delivered personally or mailed to each director 
at his<nl>/her <ol> business address or by telegram, or such other reasonable 
means of notice to provide actual notice to each director. If mailed, such 
notice shall be deemed to be delivered when deposited in the United States mail, 
so addressed with postage thereon prepaid. If the notice be given by telegram, 
such notice shall be deemed to be delivered when the telegram is delivered to 
the telegraph company. If the notice is by other reasonable means, the 
association shall maintain a written record of the method of notification. Any 
director may waive notice of any meeting. The attendance of a director at a 
meeting shall constitute a waiver of notice to the director of such meeting, 
except where a director attends a meeting for the express purpose of objection 
to the transaction of any business because the meeting is not lawfully called or 
convened. 
   
  (ii) In case of emergency or urgent public necessity, notice to directors and 
to the <nl>Department <ol> [Texas Department of Insurance] shall be given at 
least two hours before a meeting is convened. Notice to the public shall be 
given as required for an emergency meeting pursuant to the <nl>Government Code, 
sec.551. 045<ol> [Texas Civil Statutes, Article 6252-17, sec.3A]. 
   
  (iii) (No change.) 
     
  (G) Regular or emergency meetings. Regular or emergency meetings of the board 
of directors may be called by the  <nl>chair<ol> [chairman] of the board or at 
the request of any two directors. The person or persons authorized to call a 
meeting of the board of directors may fix any place as the place for holding any 
meeting of the board of directors called by them. If no place is designated, 
then the office of the association shall serve as the place of such meeting. 
   
  (H) Statement of purpose of meeting required. The business to be transacted 
at, and the purpose of, any regular or emergency meeting of the board of 
directors shall be specified in the notice to directors and in notice required 
by statute as required by the <nl>Government Code, Chapter 551<ol> [Texas Civil 
Statutes, Article 6252-17]. 
   
  (I)  (No change.) 
   
  (J) Presumption of assent. A director of the association who is present at the 
meeting of the board of directors at which action on any matter is taken shall 
be presumed to have assented to the action taken unless <nl>the director's <ol> 
[his] dissent shall be entered in the minutes of the meeting, or unless <nl>the 
director<ol> [he] shall file a [his] written dissent to such action with the 
person acting as secretary of the meeting before the adjournment thereof, or 
shall forward such dissent by registered mail to the secretary of the 
association immediately after the adjournment of the meeting. Such right to 
dissent shall not be available to a director who voted in favor of such action. 
   
  (K) (No change.) 
   
  (L) General powers. The board of directors shall have the management of the 
business and affairs of the association and may exercise all of the powers 
herein enumerated and all other powers incidental or appropriate thereto, 
subject only to the restrictions imposed by law. Included among the powers of 
the board of directors, but not in limitation thereof, are the following: 
 
  (i)-(x) (No change.) 
     
  (M) Executive committee. An executive committee shall consist of three of the 
directors of the association comprised of the <nl>chair<ol> [chairman], vice-
<nl>chair<ol> [chairman], and secretary-treasurer. At least one director 
appointed by the <nl>Commissioner<ol> [State Board of Insurance] must be elected 
as a member of the executive committee. To the extent provided by resolution or 
resolutions of the board of directors, the executive committee shall have and 
may exercise the powers delegated by the board of directors in the day-to-day 
administrative management of the association. Such committee shall keep regular 
minutes of its proceedings and report the same to the board of directors. The 
delegation to a committee of authority consistent with this section shall not 
operate to relieve the board of directors, or any member thereof, of any 
responsibility imposed upon <nl>the board of directors<ol> [it] or 
<nl>member<ol> [him] by law. 
   
  (N) Vacancies. 
 
  (i) A particular  <nl>directorship<ol> [director] shall be considered to be 
vacant upon the resignation of the member holding such directorship. 
   
  (ii) Any vacancy occurring in the directors elected from the membership may be 
filled at the next meeting of the board of directors following the occurrence of 
such vacancy. Subject to the provisions of subparagraph (B) <nl>of this 
paragraph<ol> [hereof], such vacancy shall be filled by the affirmative vote of 
a majority of the remaining directors elected from the membership though less 
than a quorum. A director elected to fill a vacancy shall be elected for the 
unexpired term of <nl>the<ol> [its] predecessor in such directorship. 
   
  (iii) Any vacancy occurring in the directors appointed by the <nl>Commissioner 
<ol> [State Board of Insurance] shall be filled by appointment of a new director 
in accordance with the provisions of subparagraph (C) <nl>of this paragraph<ol> 
[hereof]. 
       
  (3)  Officers. 
 
  (A) Number. The officers of the association shall be the <nl>chair<ol> 
[chairman] of the board of directors, the vice <nl>chair<ol> [chairman] of the 
board of directors, and the secretary-treasurer, all of whom shall be elected by 
the board of directors. No two offices may be held by the same person. The 
<nl>chair<ol> [chairman], vice-<nl>chair<ol> [chairman], and secretary-treasurer 
shall comprise the executive committee. At least one director appointed by the 
<nl>Commissioner <ol> [State Board of Insurance] must be elected as a member of 
the executive committee. 
   
  (B) Election and term of office. The officers of the association may be 
elected annually by the board of directors at the first meeting of the board of 
directors held after each annual meeting of the members. If the election of 
officers shall not be held at such meeting, such election shall be held as soon 
thereafter as conveniently may be. Each officer shall hold office until <nl>the 
officer's<ol> [his] successor shall have been duly elected and shall have 
qualified or until <nl>the officer's <ol> [his] death or until <nl>the 
officer<ol> [he] shall resign or shall have been otherwise removed. The board of 
directors shall provide for a rotation of directors elected as officers at least 
every two years. 
   
  (C)  Removal of <nl>officers<ol> [vacancies]. Any officer or agent elected or 
appointed by the board of directors may be removed by the board of directors 
whenever in its judgment the best interests of the association would be served 
thereby or otherwise in accordance with this section, but such removal shall be 
without prejudice to the contract rights, if any, of the person so removed. A 
vacancy in any office because of death, resignation, removal, disqualification, 
or otherwise may be filled by the board of directors for the unexpired portion 
of the term. 
   
  (D) <nl>Chair<ol> [chairman] of the board of directors. The <nl>chair<ol> 
[chairman] of the board of directors shall preside at all meetings of the 
members and at all meetings of the directors, appoint and discharge employees 
and persons representing the association subject to the approval of the 
directors, fix the compensation of employees and such representatives, make and 
sign contracts and agreements in the name of the association, and appoint 
committees.  <nl>The chair<ol> [He] shall see that the books, reports, 
statements, and certificates are properly kept, made, and filed if necessary, 
and [he] shall generally do and perform all acts incident to the office of 
<nl>chair<ol> [chairman] of the board of directors or which may be authorized or 
required by law, by this section, or by the board of directors, not inconsistent 
herewith. 
   
  (E) Vice <nl>chair<ol> [chairman] of the board of directors. The vice 
<nl>chair<ol> [chairman] of the board of directors elected by the board of 
directors shall have such powers and shall perform such duties as shall be 
assigned [to him] by the board of directors not inconsistent herewith. 
   
  (F)  Secretary-treasurer. The secretary-treasurer shall: 
 
  (i) (No change.) 
   
  (ii) see that all notices are duly given as required by the provisions of this 
plan of operation. In case of the secretary-treasurer's absence or refusal or 
neglect to give the required notice, such notice may be given at the direction 
of the <nl>chair<ol> [chairman] of the board of directors, of the directors, or 
of the members upon whose request the meeting is called; 
   
  (iii)-(v) (No change.) 
   
  (vi) have the custody of all funds, securities, evidences of indebtedness, and 
other valuable documents of the association, <nl>the secretary-treasurer<ol> 
[he] shall receive and give or cause to be given receipts and acquittances for 
monies paid in on account of the association and shall pay out of the funds on 
hand all just debts of the association of whatever nature upon maturity of the 
same, he shall enter or cause to be entered in the books of the association to 
be kept for that purpose full and accurate accounts of all monies received and 
paid out on account of the association, and whenever required by the board of 
directors, he shall keep or cause to be kept such other books as would show a 
true record of the reserves, expenses, losses, gains, assets, and liabilities of 
the association; and 
   
  (vii) in general, perform all duties incident to the officer of secretary-
treasurer and such other duties as from time to time may be delegated [to him] 
by the <nl>chair <ol> [chairman] of the board of directors or by the board of 
directors. 
       
  <nl>(4) Legal Counsel. 
 
  <nl>(A)  Types of Representation. The association may engage one or more 
attorneys to provide the following: 
 
  <nl>(i)<nl> legal representation, in matters other than disputes involving 
policyholder claims, before the Commissioner, the Department and the Texas 
Legislature; 
   
  <nl>(ii) <nl> legal representation in any dispute involving a policyholder 
claim against the association; and 
   
  <nl>(iii)<nl> legal advice and assistance relating to any other matter within 
the authority and responsibility of the association. 
     
  <nl>(B) Legal Representation, in Matters Other than Disputes Involving 
Policyholder Claims, Before the Commissioner, the Department and the Texas 
Legislature. 
 
  <nl>(i) <nl> Selection. The association board of directors shall select, in 
accordance with this plan of operation, legal counsel to provide legal 
representation on behalf of the association, in matters other than disputes 
involving policyholder claims, before the Commissioner, the Department and the 
Texas Legislature. 
   
  <nl>(ii)<nl> Qualifications. 
 
  <nl>(I) To be engaged to provide such legal representation, an attorney must: 
 
  <nl>(-a-) be licensed to practice law in Texas for at least five years; 
   
  <nl>(-b-) maintain professional liability insurance with an insurer authorized 
to do business in Texas in an amount of not less than $1 million; 
   
  <nl>(-c-) be experienced in and practice primarily in the areas of insurance 
and administrative law; 
   
  <nl>(-d-) have no impermissible conflict of interest before representation is 
undertaken, in accordance with the Texas Disciplinary Rules of Professional 
Conduct adopted by the Texas Supreme Court and the Comments prepared by the 
Model Rules Committee of the State Bar of Texas and amended by Supreme Court 
Order (Government Code, Title 2, Subtitle G, Appendix A, Article 10, sec.9); and 
   
  <nl>(-e-) have never been suspended or disbarred from the practice of law or 
convicted of a felony. 
     
  <nl>(II) The board of directors of the association may adopt additional 
qualifying criteria for legal counsel representing the association in matters 
specified in this subparagraph by amending this plan of operation. 
     
  <nl>(iii)<nl> Conflict of Interest. 
 
  <nl>(I) In representing the association pursuant to this subparagraph, legal 
counsel shall be governed by the conflict-of-interest and the-appearance-of-
conflict-of-interest rules under the Texas Disciplinary Rules of Professional 
Conduct and the official Comments to these rules. 
   
  <nl>(II) A decision relating to a conflict of interest or appearance of a 
conflict of interest on the part of legal counsel under this subparagraph shall 
be based on the Texas Disciplinary Rules of Professional Conduct and the 
official Comments to these rules. No other laws or rules shall apply in 
determining the existence of conflict of interest or the appearance of conflict 
of interest under this plan of operation. 
   
  <nl>(III) Procedures for Handling Conflict of Interest Issues Raised by Legal 
Counsel. 
 
  <nl>(-a-) If legal counsel has reason to believe that legal counsel's 
representation of the association pursuant to this paragraph may result in a 
conflict of interest or the appearance of a conflict of interest, legal counsel 
shall immediately report, either verbally or in writing, such fact and the 
surrounding circumstances, including full disclosure of the existence, nature, 
implications, and possible adverse consequences of the common representation and 
any advantages involved, to the chair of the board and the general manager and 
either: 
 
 </vsh> <nl>(-1-) withdraw from such representation, or 
 </vsb> </vsec> 
 </vsh> <nl>(-2-) if the legal counsel believes that there will be no materially 
adverse effect upon the association by such representation, request the approval 
of the association board of directors for legal counsel to engage in such 
representation. Such request should not be made nor should representation be 
provided even with the association's consent, if a disinterested lawyer would 
conclude that the association should not agree to the representation. 
 </vsb> </vsec>   
  <nl>(-b-) After review of all disclosed facts relating to the potential 
conflict of interest or appearance of conflict of interest, if the board of 
directors approve legal counsel's request to continue representation in the 
matter reported and the legal counsel also believes that there will be no 
materially adverse effect upon the association by such representation, the legal 
counsel may continue such representation. 
   
  <nl>(-c-) The chair of the board and the general manager shall prepare the 
written decision of the board of directors as to continued representation or 
denial of continued representation in such matter together with the reasons for 
that decision and file the written decision with the association's official 
records and forward a copy of the decision to legal counsel. 
     
  <nl>(IV) Procedures for Handling Conflict of Interest Issues Raised by Persons 
Other than Legal Counsel. 
 
  <nl>(-a-) If a member of the association's board, the chair of the board, or 
the general manager believe that representation by legal counsel in any matter 
pursuant to this subparagraph may result in a conflict of interest or the 
appearance of a conflict of interest, such person shall report the perceived 
conflict of interest or appearance of a conflict of interest to the chair of the 
board. 
   
  <nl>(-b-) The chair of the board shall contact legal counsel and request a 
meeting or a telephone conference with the board of directors and legal counsel 
to discuss such perceived conflict. 
   
  <nl>(-c-) During such meeting or teleconference the board of directors shall 
determine, in accordance with the Texas Disciplinary Rules of Professional 
Conduct and the official Comments to these rules, whether a conflict of interest 
or the appearance of a conflict of interest exists and following such meeting or 
teleconference, the board of directors shall adopt and issue a written decision. 
 
 </vsh> <nl>(-1-) If the board of directors determine that no conflict of 
interest or appearance of conflict of interest exists, the written decision 
shall state the reasons for such decision and that the legal counsel may 
continue to represent the association in the particular matter. 
 </vsb> </vsec> 
 </vsh> <nl>(-2-) If the board of directors determine that a conflict of 
interest exists, the written decision shall state the reasons for such decision 
and state either: that the legal counsel may not represent the association in 
the matter or that the board of directors consent to the representation by legal 
counsel and that legal counsel may represent the association in the matter so 
long as the legal counsel also believes that there will be no materially adverse 
effect upon the association by such representation. 
 </vsb> </vsec>   
  <nl>(-d-) A written decision prepared under this subdivision shall be included 
in the official records of the association and a copy of the decision shall be 
forwarded to the legal counsel. 
       
  <nl>(iv)<nl> Review and Termination. 
 
  <nl>(I) The association's executive committee, together with the general 
manager of the association, shall review annually with the legal counsel the 
performance of such legal counsel and report their findings to the board of 
directors in executive session. Representation of the association by legal 
counsel may be terminated at any time by the board of directors. 
   
  <nl>(II) Legal counsel's service with the association may be terminated if 
legal counsel engaged in continual conflicts of interest and appearances of 
conflicts of interest as determined by the board of directors. 
   
  <nl>(III) Legal counsel's service may be terminated for any other reason as 
determined by the association's board of directors. 
       
  <nl>(C)  Legal Representation in Any Dispute Involving a Policyholder Claim 
Against the Association. 
 
  <nl>(i)<nl> Selection. The general manager of the association shall select, in 
accordance with this plan of operation, legal counsel to represent the 
association in handling disputes involving policyholder claims against the 
association. Selection of legal counsel to represent the association in such 
disputes shall be made on a case-by-case basis. 
   
  <nl>(ii)<nl> Qualifications. 
 
  <nl>(I) To be engaged to provide such legal representation, an attorney must: 
 
  <nl>(-a-) be licensed to practice law in Texas for at least five years; 
   
  <nl>(-b-) maintain professional liability insurance with an insurer authorized 
to do business in Texas in an amount of not less than $1 million; 
   
  <nl>(-c-) be experienced in the defense of claims against insurers; 
   
  <nl>(-d-) have no impermissible conflict of interest before representation is 
undertaken, in accordance with the Texas Disciplinary Rules of Professional 
Conduct adopted by the Texas Supreme Court and the Comments prepared by the 
Model Rules Committee of the State Bar of Texas and amended by Supreme Court 
Order (Government Code, Title 2, Subtitle G, Appendix A, Article 10, sec.9); and 
   
  <nl>(-e-) have never been suspended or disbarred from the practice of law or 
convicted of a felony. 
     
  <nl>(II) The board of directors of the association may adopt additional 
qualifying criteria for legal counsel representing the association in matters 
involving policyholder claims against the association by amending this plan of 
operation. 
     
  <nl>(iii)<nl> Conflict of Interest. 
 
  <nl>(I) In representing the association pursuant to this subparagraph, legal 
counsel shall be governed by the conflict-of-interest and the-appearance-of-
conflict-of-interest rules under the Texas Disciplinary Rules of Professional 
Conduct and the official Comments to these rules. 
   
  <nl>(II) A decision relating to a conflict of interest or appearance of a 
conflict of interest on the part of legal counsel under this subparagraph shall 
be based on the Texas Disciplinary Rules of Professional Conduct and the 
official Comments to these rules. No other laws or rules shall apply in 
determining the existence of conflict of interest or the appearance of conflict 
of interest under this plan of operation. 
   
  <nl>(III) In determining whether legal counsel has a conflict of interest, as 
defined in the Texas Disciplinary Rules of Professional Conduct and the official 
Comments to these rules, the general manager shall require the legal counsel to 
submit to the general manager in writing evidence that a thorough conflicts 
check has been conducted to assure that no conflict of interest exists. Such 
evidence of a conflicts check shall be maintained by the general manager in the 
association's records as confidential and not available for public inspection. 
   
  <nl>(IV) The general manager may approve, in accordance with Rule 1. 06(c) of 
the Texas Disciplinary Rules of Professional Conduct and the official Comments 
to this rule, an attorney to represent the association in a matter involving a 
policyholder claim against the association in which a potential conflict of 
interest may exist if: 
 
  <nl>(-a-) the attorney reasonably believes the representation of the 
association will not be materially adversely affected; and 
   
  <nl>(-b-) the general manager consents to such representation after full 
disclosure of the existence, nature, implications, and possible adverse 
consequences of the common representation and the advantages involved, if any. 
     
  <nl>(V) If legal counsel accepts an engagement from the association to 
represent it in a dispute involving a policyholder claim against the association 
and fails to disclose a conflict of interest, as required in this clause, such 
legal counsel shall be barred for a period of five years, from the date on which 
the conflict of interest is disclosed to the association, from representing the 
association as legal counsel in any dispute involving a policyholder claim 
against the association. 
     
  <nl>(iv)<nl> Review and Termination. 
 
  <nl>(I) The general manager shall report to the executive committee at each of 
its regular meetings all information relating to the selection of and the 
service of legal counsel in handling policyholder claims against the 
association. 
   
  <nl>(II) At the general manager's discretion or at the direction of the 
executive committee, the general manager shall discharge legal counsel from any 
matter involving a policyholder claim against the association on five days' 
written notice to the legal counsel. 
   
  <nl>(III) Such termination may be for failure to competently and timely handle 
a legal matter or for conflict of interest or failure to disclose a conflict of 
interest or for any other reason as determined by the general manager or the 
executive committee. 
         
  <nl>(5)<ol>[(4)] Fiscal year. The fiscal year of the association shall be the 
calendar year. 
   
  <nl>(6)<ol>[(5)] Waiver of notice. Whenever any notice is required to be given 
to any <nl>member<ol> [members] or director of the association under the 
provision of this section a waiver thereof in writing signed by the person or 
persons entitled to such notice, whether before or after the time stated 
therein, shall be deemed equivalent to the giving of such notice. 
   
  <nl>(7)<ol>[(6)] Protection of directors, members, officers, and employees. 
The association shall indemnify each former, present, and future director, 
member, officer, and employee of the association against, and each such 
director, member, officer, and employee shall be entitled without further act on 
his<nl>/her<ol> part of indemnity from the association for, all <nl>costs 
and<ol> expenses (including the amount of judgments and the amount of reasonable 
settlements made with a view to the curtailment of costs of litigation, other 
than amounts paid to the association itself) reasonably incurred by 
him/<nl>her<ol> in connection with or arising out of any action, suit, or 
proceeding in which he/ <nl>she<ol> may be involved by reason of his/<nl>her 
<ol> being or having been a director, member, officer, or employee of the 
association or of any other association or company which he/<nl>she <ol> serves 
as a director, member, officer, or employee at the request of the association, 
whether or not he/<nl>she<ol> continues to be such director, member, officer, or 
employee at the time of incurring such <nl>costs or<ol> expenses; provided, 
however, that such indemnity shall not include any <nl>costs or<ol> expenses 
incurred by any such director, member, officer, or employee in respect of 
matters as to which he/<nl>she <ol> shall be finally adjudged in any such 
action, suit, or proceeding to be liable for willful misconduct in the 
performance of his/<nl>her<ol> duty as such director, member, officer, or 
employee, or in respect of any matter in which any settlement is effected in any 
amount in excess of the amount of expenses which might reasonably have been 
incurred by such director, member, officer, or employee had such litigation been 
conducted to a final conclusion; provided, further, that in no event shall 
anything herein contained be so construed as to protect, or to authorize the 
association to indemnify such director, member, officer, or employee against any 
liability to the association or to its members to which he/<nl>she<ol> would 
otherwise be subject by reason of his/<nl>her<ol> willful misfeasance <nl>or 
malfeasance <ol>, bad faith, <nl>dishonesty, <ol> gross negligence, or reckless 
disregard of the duties <nl>or responsibilities <ol> involved in the conduct of 
his/<nl>her<ol> office <nl>or employment<ol> as such director, member, officer, 
or employee. The foregoing right of indemnification shall inure to the benefit 
of the heirs, executors, or administrators of each such director, member, 
officer, or employee and shall be in addition to all other rights to which such 
director, member, officer, or employee may be entitled as a matter of law. This 
indemnification shall in no way indemnify a member of the association from 
participating in the writings, expenses, profits, and losses of the association 
in the manner set out in this plan of operation or the Act. 
   
  <nl>(8)<ol>[(7)] Annual report. The secretary-treasurer shall file with the 
<nl>Department <ol> [State Board of Insurance] annually a statement which shall 
summarize the transactions, conditions, operation, and affairs of the 
association during the preceding calendar year at such times and covering such 
periods as may be designated by the <nl>Department <ol> [State Board of 
Insurance]. Such statement shall contain such matters and information as are 
prescribed by the <nl>Department<ol> [State Board of Insurance] and shall be in 
such form as required by  <nl>the Department<ol> [it]. 
     
  (c) <nl>Financial<ol> Operation of the Association [association]. 
 
  (1) Collection, investment, and allocation of funds. 
 
  (A) (No change.) 
   
  (B) Investment. All funds collected by the association which are not otherwise 
required to be expended as provided in paragraph (4) of this subsection may be 
retained in a checking account or accounts in any bank or banks doing business 
in the State of Texas and/or may be invested only in the following: 
 
  (i)-(iii) (No change.) 
   
  (iv) in such other investments as may be proposed by the board of directors 
and approved by the <nl>Commissioner <ol> [State Board of Insurance]. The board 
of directors shall determine what portion of such funds shall be retained in a 
checking account or accounts and what portion of such reserve shall be invested 
in the investments listed <nl>in this subparagraph <ol> [previously], as well as 
which specific investments, if any, shall be made. 
     
  (C) (No change.) 
     
  (2) Assessment of members. 
 
  (A) Assessment. If the <nl>chair<ol> [chairman] of the board of directors or 
any members of the board of directors determine that an assessment of the 
members is necessary, a special meeting of the board of directors shall be 
called to determine if the funds then available to the association are: 
 
  (i)-(ii) (No change.) 
     
  (B) Amount of assessment. The board of directors shall determine which members 
of the association shall participate in any assessment for operating expenses 
and/or catastrophe losses. This determination shall be computed on a syndicate 
year basis rather than on a calendar year basis. The designated members of the 
association shall participate in any assessment levied in the proportion that 
the net direct premiums of such member written in this state during the 
preceding calendar year bears to the aggregate net direct premiums written in 
this state by all members of the association as furnished to the association by 
the <nl>Department<ol> [board] after review of annual statements, other reports, 
and required statistics; provided, however, that if at the time of such 
assessment the <nl>Department<ol> [board] has not furnished to the association 
information necessary to compute a member's participation during the preceding 
calendar year, then each member's participation shall be based upon information 
furnished to the association from the last calendar year in which such 
information is available and, upon obtaining the necessary information from the 
<nl>Department <ol> [board], the association shall reassess or refund to each 
member such amounts as are necessary to properly reflect such member's 
participation; provided, further, that a member shall be entitled to receive the 
following credit for insurance, similar to catastrophe insurance, written in 
such catastrophe area, except that in no event shall the final percentage of 
participation after application for credit for voluntary writings in the 
catastrophe area be less than 20% nor more than 190% of the company's percentage 
of statewide windstorm and hail premiums modified by applicable offset factors, 
nor more than 170% of the company's percentage of statewide windstorm and hail 
premium modified by applicable offset factors for policies with inception dates 
on and after January 1, 1984. 
 
  (i) (No change.) 
   
  (ii) Participation in Texas Catastrophe Property Insurance Association for 
policies after January 1, 1983. Procedure for determining the percent of 
participation respecting association policies with inception dates on and after 
January 1, 1983, through December 31, 987, inclusive, for members of the Texas 
Catastrophe Property Insurance Association reflecting credit for voluntary 
premiums written in the designated area. (All premiums are for the most recent 
preceding calendar year ending December 31.) Column 1(a) Statewide direct 
written premiums for extended coverage from Texas annual statement, page 14, 
line 2, column 1, and other allied lines from line 3, column 1. Column 1(b) 
Statewide direct written premiums for the extended coverage and other allied 
lines portion of the multiple peril line from Texas annual statement, page 14, 
line 8, column 1. Column 1(c) Statewide direct written premiums for homeowners 
and farm and ranch owners from Texas annual statement, page 14, line 4, column 
1, and line 5, column 1. Column 2 The sum of the statewide direct written 
premiums at 90% of the extended coverage and other allied lines, and 50% of the 
homeowners and farm and ranch owners, or such percentage as may be determined in 
accordance with [Part One, Article I, Section 2, paragraph 1, subparagraph 3, of 
the plan of operation (being] subsection (a)(2)<nl>(M) <ol>[(I)] (i)(III) of 
this section[)]. 90% of column 1(a) %+ 90% of column 1(b) %+ 50% of column 
1(c).) Column 3 Each company's percentage of the net direct premiums as 
described in column 2, which is the basis for indicating normal required 
participation in the Texas Catastrophe Property Insurance Association prior to 
credits for voluntary writings in the designated area. Column 4 Total windstorm 
and hail premiums in the designated area (<nl>association<ol> [TCPIA] premiums 
plus voluntary premiums). Column 5 Normal company quota of total windstorm and 
hail premiums: column 3 x column 4. Column 6 Each company's voluntary writings 
in the designated area multiplied by the same percentage as shown in column 2 
previously. Note: Maximum credit shall be limited to company's normal quota. 
Column 7 Each company's maximum possible allocation after applying credits for 
voluntary writings (column 5 minus column 6). Negative allocation to be shown as 
zero. Column 8 Percentage participation of each member company in Texas 
Catastrophe Property Insurance Association, prior to application of offset. 
Note: The offset figure measures the excess premiums developed by maximum 
credits in column 6. Column 9 Percentage participation of each member company in 
Texas Catastrophe Property Insurance Association prior to application of 
minimum-maximum factors. Column 10 Assignment after application of 20% minimum 
or 190% maximum of column 3 for policies with an inception date during 1983 or 
170% maximum of column 3 for policies with inception dates on or after January 
1, 1984. Column 11 Net assignment in association. (After application of offset 
following minimum-maximum limitations.) 
   
  (iii) Participation in Texas Catastrophe Property Insurance Association for 
policies after January 1, 1978. Procedure for determining the percent of 
participation respecting association policies with inception dates on and after 
January 1, 1978, through December 31, 1982, inclusive, for members of the Texas 
Catastrophe Property Insurance Association reflecting credit for voluntary 
premiums written in the designated area. (All premiums are for the most recent 
preceding calendar year ending December 31.) Column 1(a) Statewide direct 
written premiums for extended coverage from Texas annual statement, page 14, 
line 2, column 1. Column 1(b) Statewide direct written premiums for the extended 
coverage portion of the multiple peril line from Texas annual statement, page 
14, line 8, column 1. Column 1(c) Statewide direct written premiums for 
homeowners and farm and ranch owners from Texas annual statement, page 14, line 
4, column 1. Column 2 The sum of the statewide direct written premiums at 90% of 
the extended coverage and 40% of the homeowners. (90% column 1(a) %+ 90% of 
column 1(b) %+ 40% of column 1(c).) Column 3 Each company's percentage of the 
net direct premiums as described in Column 2, which is the basis for indicating 
normal required participation in the Texas Catastrophe Property Insurance 
Association prior to credits for voluntary writings in the designated area. 
Column 4 Total windstorm and hail premiums in the designated area. 
(<nl>association <ol> [TCPIA] premiums plus voluntary premiums). Column 5 Normal 
company quota of total windstorm and hail premiums: column 3 x 4. Column 6 Each 
company's voluntary writings in the designated area multiplied by the same 
percentages as shown in column 2 previously. Note: Maximum credit shall be 
limited to company's normal quota. Column 7 Each company's maximum possible 
allocation after applying credits for voluntary writings (column 5 minus column 
6). Negative allocation to be shown as zero. Column 8 Percentage participation 
of each member company in the Texas Catastrophe Property Insurance Association, 
prior to application of offset. Note: The offset figure measures the excess 
premiums developed by maximum credits in column 6. Column 9 Percentage 
participation of each member company in Texas Catastrophe Property Insurance 
Association prior to application of minimum-maximum factors. Column 10 
Assignment after application of 20% minimum or 190% maximum of column 3. Column 
11 Net assignment in association. (After application of offset following 
minimum-maximum limitations.) 
           
  <ol>FIGURE 1: 28 TAC sec.5.4001(c)(2)(B)(iii) 
 
  (iv) The <nl>Department <ol> [board] shall furnish to the association the 
amount of net direct premiums of each member company written on property in this 
state and the aggregate net direct premiums written on property in this state by 
all member companies during the preceding calendar year as reported by member 
companies to the <nl>Department<ol> [board]. Within a reasonable time after the 
receipt of same from the  <nl>Department<ol> [board], the association shall 
notify each member company, in writing, sent by certified mail, the amount of 
the net direct premiums written on property in this state during the preceding 
calendar year by the member company to whom notice is given, including the net 
direct premiums on similar insurance voluntarily written in the catastrophe 
area, upon which such company's percentage of participation will be determined. 
Such notice shall state that such notification, and the content thereof, is an 
act, ruling, or decision of the association and that the member company to whom 
such notice is given shall be entitled to appeal therefrom within 30 days from 
the date of such act, ruling, or decision as shown on said notice in accordance 
with the Insurance Code, Article 21.49, sec.9. Thereafter, the association shall 
determine the percentage of participation for each member company in the manner 
provided in the plan of operation and shall notify each member company thereof, 
in writing, sent by certified mail. Such notice shall state that such 
notification, and the content thereof, is an act, ruling, or decision of the 
association insofar as the mathematical determination of the percentage of 
participation is concerned and that the member company to whom such notice is 
given shall be entitled to appeal therefrom within 30 days from the date of such 
act, ruling, or decision as shown on said notice in accordance with the 
Insurance Code, Article 21.49, sec.9. 
   
  (C) Notice of assessment. Notice of assessment shall be sent to each member, 
within 30 days of the meeting of the board of directors at which such assessment 
was levied, by certified mail, return receipt requested, addressed to the office 
of such member as it appears on the books of the association. Such notice shall 
state the member's allocated amount of assessment and shall inform each member 
of the sanctions imposed by subparagraph (D) of this paragraph for the failure 
to pay such assessment within the time prescribed by this section. Such notice 
shall also state that such notification, and the content thereof, is an act, 
ruling, or decision of the association insofar as the amount of the assessment 
for such company is concerned and that a member company to whom such notice is 
given shall be entitled to appeal therefrom within 30 days from the date of such 
act, ruling, or decision as shown on said notice, in accordance with the 
Insurance Code, Article 21.49, sec.9; provided, however, that the right of 
appeal provided for herein shall not include the subject matter of any act, 
ruling, or decision of the association determining the amount of net direct 
premium of such member company or the percentage of participation for such 
member company when notice of the amount of such net direct premium or such 
percentage of participation has previously been given by the association in 
accordance with subparagraph (B)(iv)[(iii)] of this paragraph. The time period 
for an appeal of an act, ruling, or decision of the association respecting net 
direct premiums or percentage of participation is computed from the date of the 
act, ruling, or decision of the association respecting same. 
   
  (D) Failure to pay assessment. 
 
  (i) Each member shall remit to the association payment in full of its assessed 
amount of any assessment levied by the board of directors within 30 days of 
receipt of notice of assessment. If the association has not received payment in 
full of a member's allocated amount of assessment within 40 days of notice of 
the receipt by the member of the notice of assessment, then the association 
shall report to the <nl>Commissioner <ol> [State Board of Insurance] the fact 
that such assessment has not been paid, and the <nl>Commissioner<ol> [State 
Board of Insurance] shall immediately issue an order suspending such member's 
certificate of authority to transact the business of insurance in the State of 
Texas until such time as the association certifies to the <nl>Commissioner <ol> 
[State Board of Insurance] that such assessment has been paid in full. Removal 
of a member's certificate of authority to transact business in the State of 
Texas by the  <nl>Commissioner<ol> [State Board of Insurance] shall in no way 
affect the right of the association to proceed against such member in any court 
of law or equity in the United States for any remedy provided by law or contract 
to the association, including, but not limited to, the right to collect such 
member's assessment. In addition to any other remedy provided herein, the board 
of directors may offset assessments due from a member against any amounts in any 
account of such delinquent member. 
   
  (ii) A member by mailing payment of its allocated amount of assessment, as 
provided herein, shall not thereby waive any right it may have to contest the 
computation of its allocated amount of assessment. Such contest shall not, 
however, toll the time within which assessments shall be paid or the report to 
be made to the <nl>Commissioner<ol> [State Board of Insurance] or the action to 
be taken by the <nl>Commissioner <ol> [State Board of Insurance] upon receipt of 
such report, all as set out in clause (i) of this subparagraph. 
     
  (E) Inability to pay assessment by reason of insolvency. In the event a member 
of the association is placed in temporary or permanent receivership under order 
of a court of competent jurisdiction based upon a finding of insolvency, and 
such member has been designated an impaired insurer by the Commissioner [of 
Insurance of Texas], and in the event it is necessary to obtain additional funds 
to provide for operating expenses and losses in the year the insurer is declared 
impaired, the aggregate net amount not recovered from such insolvent insurer 
shall be reallocated among the remaining members of the association in 
accordance with the method of determining participation as determined in the 
plan of operation. 
   
  (3) Distributions to the members. 
 
  <nl>(A) The only distributions to members which may be made on or after May 1, 
1985, without the prior approval of the <nl>Commissioner<ol> [State Board of 
Insurance] are for the recovery of assessments made on or after May 1, 1985, 
which are not recoverable as a tax credit by the members under the Insurance 
Code, Article 21.49, sec.19. Any other distribution shall be for the sole 
purpose of paragraph (4)(C) or <nl>(4)(G)<ol>[(F)] of this subsection and 
requires the prior approval of the <nl>Commissioner <ol> [State Board of 
Insurance]. The <nl>Commissioner<ol> [State Board of Insurance] may not 
unreasonably refuse to approve a request to distribute funds. In making any 
distribution, the board of directors may offset amounts otherwise due to a 
member with amounts then due from that member. 
   
  <nl>(B) If the association obtains a disbursement of funds from the 
catastrophe reserve trust fund maintained by the Department pursuant to Section 
8(i) of the Act, the funds disbursed to the association may be spent by the 
association only to pay losses and loss adjustment expenses of policyholders in 
the event of an occurrence or a series of occurrences within the defined 
catastrophe area that results in insureds losses and operating expenses of the 
association greater than $100 million. Funds disbursed from the catastrophe 
reserve trust fund maintained by the Department may not be distributed to any 
member of the association for any purpose, and any of these amounts disbursed to 
the association from the catastrophe reserve trust fund that remain unspent 
after payment of all losses and loss adjustment expenses arising out of such 
occurrence or series of occurrences shall be remitted to the Department or to 
the Treasurer of the State of Texas for deposit in the catastrophe reserve trust 
fund. 
     
  (4)  Use of funds. All monies collected or received by the association on or 
after May 1, 1985, are required to be expended in the following ways and in the 
following sequence: 
 
  (A)-(D) (No change.) 
   
  (E) fifth, to <nl>either<ol> pay premiums for reinsurance  <nl>under a 
reinsurance program approved by the Commissioner <ol> to cover some or all of 
the claims liabilities of the association<nl>, <ol>[.] <nl>or to make payment of 
the net equity of a member, including all premium and other revenue of the 
association in excess of incurred losses and operating expenses, to a 
catastrophe reserve trust fund to be held by the Texas Department of 
Insurance<ol> [This provision applies only if reinsurance is available at a 
reasonable price and term]; 
   
  (F) (No change.) 
   
  (G) seventh, as distribution to members of the association after approval by 
the <nl>Commissioner<ol> [State Board of Insurance]. 
     
  (d)  Catastrophe <nl>Insurance<ol> [insurance]. 
 
  (1) The policy. 
 
  (A) Approval. The association shall cause to be issued policies providing for 
catastrophe insurance and application forms therefor. The board of directors 
shall submit such policies and application forms to the <nl>Commissioner<ol> 
[State Board of Insurance] for approval. The <nl>Commissioner <ol> [State Board 
of Insurance] shall approve or reject such policies and application forms within 
30 days of their submission. If the <nl>Commissioner<ol> [State Board of 
Insurance] takes no action regarding such forms and applications within such 30-
day period, the forms and applications shall be deemed to have been approved by 
the <nl>Commissioner<ol> [State Board of Insurance]. The <nl>Commissioner<ol> 
[State Board of Insurance] shall not be required to approve or reject such forms 
and applications as a group--<nl>the Commissioner<ol> [it] may approve some 
policies and/or forms and reject other policies and/or forms provided, however, 
that if <nl>the<ol>  <nl>Commissioner<ol> [it] rejects a form, <nl>the 
Commissioner <ol> [it] shall send to the association <nl>the <ol> [its] reasons 
for such rejection. No application for or policy of catastrophe insurance shall 
be used by the association prior to its approval by the <nl>Commissioner<ol> 
[State Board of Insurance]. 
   
  (B) (No change.) 
   
  (C) Limits of liability. 
 
  (i) (No change.) 
   
  (ii) In the event that the value of any risk exceeds the maximum amounts set 
forth in the rules manual, the association may waive the coinsurance 
requirements and charge a rate on a negotiated basis in accordance with 
procedures subject to review by the <nl>Department<ol> [State Board of 
Insurance]. 
   
  (iii) Limits of liability for risks required to be insured by the association 
shall be adjusted for inflation as part of the annual hearing on property rates 
by the <nl>Commissioner<ol> [State Board of Insurance after January 1, 1992,] to 
reflect any changes in the cost of construction or residential values in the 
catastrophe areas as determined by credible indexes. Indexing of liability 
limits shall apply after January 1, <nl>1992<ol> [1991]. 
     
  (D) (No change.) 
     
  (2) Application, acceptance, and rejection. 
 
  (A) Forms. Any person having an insurable interest in insurable property 
located in a catastrophe area shall be entitled to apply to the association for 
catastrophe insurance in the manner provided herein. All applications for 
catastrophe insurance shall be made on forms prescribed by the board of 
directors of the association and approved by the <nl>Commissioner <ol> [State 
Board of Insurance] as provided in paragraph (1)(A) of this subsection. Such 
application forms shall contain a statement as to whether or not there are any 
unpaid premiums due from the applicant for insurance on the property. All 
applications shall be made on behalf of the applicant by a local recording 
agent. 
   
  (B)-(C) (No change.) 
   
  (D) Inspection of the risk. The board of directors shall determine the manner 
and scope which risks are to be inspected prior to the issuance of a policy of 
catastrophe insurance. The board of directors may issue a policy of catastrophe 
insurance on certain types of risks without an inspection provided that the 
application is accompanied by such information as the board of directors may 
require. The board of directors shall prepare a set of regulations dealing with 
the inspection of risks. Such regulations shall be submitted to the 
<nl>Commissioner <ol> [State Board of Insurance] for approval. The 
<nl>Commissioner <ol> [State Board of Insurance] may reject all or any portion 
of such regulations within ten days of the date of their submission [to it]. If 
the  <nl>Commissioner<ol> [State Board of Insurance] shall fail to reject all or 
any part of such regulations within 30 days of the date of their submission, 
then such regulations shall be deemed to have been approved [by it] . 
   
  (E) Receipt of the application. 
 
  (i) After receipt of the application, the full amount of the premium (and 
inspection fee, if any) and any required inspection report, the association 
shall[, within 15 days]: 
 
  (I)-(II) (No change.) 
   
  (III) advise the agent or applicant that the risk is not acceptable, and state 
the reasons <nl>therefor <ol> [therefore]. The reasons for which a risk shall 
[be] not <nl>be<ol> acceptable for catastrophe insurance are: 
 
  (-a-) (No change.) 
   
  (-b-) the amount of insurance requested is in excess of the limits of 
liability as set forth in <nl>this plan of operation or by law<ol> [subsection 
(b)(1)(C) of this section]; 
   
  (-c-) (No change.) 
   
  (-d-) such other reason as may be determined by the board of directors and 
approved by the <nl>Commissioner <ol> [State Board of Insurance]. 
       
  (ii) New or increased coverage will be effective on the date received by the 
<nl>association <ol> [Texas Catastrophe Property Insurance Association] or 
effective on the date the application is mailed if sent by registered or 
certified mail, or by United States Postal Service Express Mail, or if sent by 
regular mail that is hand cancelled by the United States Postal Service, <nl>or 
if sent by such other similar mailing procedure as approved by the board of 
directors,<ol> prior to the time specified in this clause as an exception, 
unless the application for new or increased coverage stipulates a later date. 
Renewal policies will be effective to provide continuous coverage if the request 
for a renewal is received on or before the expiration of the existing policy. 
Exception: no new or increased coverage shall be accepted when a windstorm 
designated as a hurricane by the United States Weather Bureau is in the Gulf of 
Mexico or within the boundaries of 80 <nl>degrees<ol> [degree] west longitude 
and 20 degrees north latitude. This exception does not apply to any renewal 
policy affording windstorm coverage if the expiring policy was written by the 
Texas Catastrophe Property Insurance Association and if the application for 
renewal was received by the Texas Catastrophe Property Insurance Association on 
or before the expiration of the existing Texas Catastrophe Property Insurance 
Association policy or if mailed by registered or certified mail or United States 
Postal Service Express Mail or by regular mail that is hand-cancelled by the 
United States Postal Service<nl>, or if sent by such other similar mailing 
procedure as approved by the board of directors,<ol> prior to the expiration of 
the existing Texas Catastrophe Property Insurance Association policy. 
       
  (3) Cancellation. 
 
  (A) By the association. 
 
  (i) (No change.) 
   
  (ii) Upon cancellation of a policy of catastrophe insurance issued under this 
paragraph, the association shall send to the insured notice of cancellation 
together with a statement of the reason <nl>therefor<ol> [therefore] and a 
statement of the reason the insured has the right to appeal as hereinafter 
provided. Upon cancellation of a policy of catastrophe insurance by the 
association, the association shall refund to the insured the excess of paid 
premium according to the standard pro rata table. 
     
  (B)  By the insured. 
 
  (i) (No change.) 
   
  (ii) A policy of catastrophe insurance may be reduced at any time in which 
case the association shall, upon demand [and surrender of the policy], refund 
the excess of paid premium according to the standard short rate table [and shall 
issue to the insured a new policy in the amount requested by the insured]. 
       
  (4) Payment of claims. 
 
  (A) (No change.) 
   
  (B) Adjustment of loss. All losses shall be adjusted in the manner designated 
by the board of directors. The assignment of losses shall be on an equitable 
basis to [General Adjustment Bureau, Underwriters Adjustment Company, and other] 
qualified insurance adjusters at such fee as shall be determined by the board of 
directors. 
   
  (C) (No change.) 
   
  (D) Notice of appeal. 
 
  (i) The association shall, immediately upon total or partial denial of a claim 
of any person insured pursuant to the Insurance Code, Article 21.49, give 
written notice by certified mail, return receipt requested, to such person of 
the right to appeal such total or partial denial under the Insurance Code, 
Article 21.49, sec.9 and/or sec.9A. An offer of less than the amount claimed on 
the claimant's proof of loss is considered a partial or total denial of a claim. 
The notice must, at a minimum, contain the following information placed in a 
prominent position: 
 
  (I) (No change.) 
   
  (II) a statement that the person has the right to appeal the association's 
determination either to the <nl>Commissioner <ol> [commissioner of insurance] 
under the Insurance Code, Article 21.49, sec.9; or bring an action against the 
association in the county in which the covered property is located or in a 
district court of Travis County under the Insurance Code, Article 21.49, sec.9A. 
A person may not proceed under both the Insurance Code, sec.9 and sec.9A, for 
the same determination by the association; 
   
  (III) a statement that, under applicable law, an aggrieved person who chooses 
to appeal to the <nl>Commissioner <ol> [commissioner of insurance] must make a 
written request to the <nl>Commissioner <ol> [commissioner] within 30 days after 
such determination of the association; 
   
  (IV) (No change.) 
   
  (V) a statement that a person who files a written notice of appeal to the 
<nl>Commissioner<ol> [commissioner of insurance] is entitled to a hearing in 
either the county in which the covered property is located or in Travis County; 
and 
   
  (VI) (No change.) 
     
  (ii) An act, ruling, or decision of the association is deemed to be timely 
filed with the <nl>Commissioner <ol> [commissioner of insurance] if an appeal is 
sent to the chief clerk of the <nl>Department<ol> [State Board of Insurance] by 
first-class or by certified or registered United States mail in an envelope or 
wrapper properly addressed and stamped and deposited in the mail one day or more 
before the last day for filing the appeal, if the appeal is received by the 
chief clerk's office not more than ten days subsequent to the due date for 
filing. 
         
  (e)  Building <nl>Codes<ol> [codes]. 
 
  (1) Code for windstorm-resisting construction applicable to the area seaward 
of the Intracoastal Canal. This code contains requirements for the construction 
of buildings to minimize damage to such buildings by severe windstorms which 
occur along the Gulf Coast. Where specific requirements for particular devices 
or methods of construction are specified, alternate methods or practices which 
are considered equal may be used. Such consideration is to based on sound 
engineering practice and experience. The degree of protection against damage 
from windstorm provided by these requirements cannot be assured for tornadoes, 
but such compliance should be helpful to some degree in reducing tornado damage. 
The requirements herein are applicable only to properties located seaward of the 
Intracoastal Canal on the Texas coastline (or seaward of the boundary authorized 
to be established by the <nl>Commissioner<ol> [State Board of Insurance] by the 
Insurance Code, Article 21.49, as amended). The requirements herein shall apply, 
on or after October 10, 1988, to new construction of, and additions or repairs 
to, structures located seaward of the Intracoastal Canal in areas previously 
exempt from the requirements of this paragraph. The property previously exempt 
was that property protected by a sea wall constructed by the Corps of Engineers. 
 
  (A) Wind pressure. 
 
  (i) When considered. All buildings and structures shall be designed to resist 
a horizontal wind pressure on all surfaces exposed to the wind, allowing for 
wind in any direction, in accordance with the following table. No allowance 
shall be made for the shielding effect of other buildings or structures. The 
height is to be measured above the average level of the ground adjacent to the 
building or structure. 
           
  <ol>FIGURE 2: 28 TAC sec.5.4001(e)(1)(A)(i) 
 
  (ii) Exterior walls. Exterior walls shall be designed to withstand the 
pressures specified in clause (i) of this subparagraph, acting either inward or 
outward. 
   
  (iii)-(vi) (No change.) 
   
  (vii) Roofing materials. Roofing materials must pass the U.L. Standard 997 or 
a comparable test certified by the <nl>Commissioner <ol> [State Board of 
Insurance] and be installed as required by the <nl>Department<ol> [State Board 
of Insurance], to promote wind resistance of the materials. 
   
  (B) Anchorage. 
 
  (i) Heavy timber construction (as defined in <nl>the <ol> Texas <nl>Commercial 
Property Rating Manual in effect prior to September 1, 1994<ol> [general basis 
schedules]). Every roof girder and every roof beam shall be anchored to an 
exterior or interior wall or to a properly designed interior column. Wall beams 
and plates shall be anchored to the wall with approved type anchors not more 
than four feet apart. Roof planking where supported by a wall shall be anchored 
to such wall at intervals not exceeding four feet. Roof trusses shall be 
securely anchored to masonry walls at point of bearing. Monitor and saw tooth 
construction shall be anchored to the main roof construction. Anchors shall 
consist of steel or iron bolts or straps of sufficient strength and ample 
anchorage to resist vertical uplift of the roof as required in subparagraph (A) 
(iii) of this paragraph. 
   
  (ii)-(iii) (No change.) 
     
  (C)-(D) (No change.) 
   
  (2) Code for windstorm resisting construction applicable to the area inland of 
the Intracoastal Canal. To be eligible for catastrophe insurance properties 
located inland of the Intracoastal Canal on the Texas coastline (or inland of 
the boundary authorized to be established by the <nl>Commissioner<ol> [State 
Board of Insurance] by the Insurance Code, Article 21.49 as amended) [and 
properties located seaward of the Intracoastal Canal if such properties are 
protected by a sea wall constructed by the Corps of Engineers and properties 
determined by the board to be protected by other adequate structure or by any 
natural physical feature of the terrain that provides protection] shall be 
designated in the manner indicated in the Standard Building Code, as amended as 
of May 8, 1973. 
   
  (3)-(4) (No change.) 
   
  (f) Mobile <nl>Homes<ol> [homes]. 
 
  (1)-(2) (No change.) 
   
  (3) Underwriting requirements. In order for a mobile home to be insured by the 
association, it must meet the following underwriting requirements: 
 
  (A)-(F) (No change.) 
   
  (G) This association shall not be liable for loss or damage caused by: 
 
  (i)-(v) (No change.) 
   
  (vi) for any loss or damage caused by rain, whether driven by wind or not,[;] 
unless the wind or hail shall first make an opening in the walls or roof of the 
described building, and shall then be liable only for loss to the interior of 
the building, or the insured property therein, caused immediately by rain 
entering the building through such openings. This association shall not be 
liable under this coverage for damage caused by ensuing fire. 
     
  (H)  The liability of the association for loss or damage to a mobile home 
shall: 
 
  (i) (No change.) 
   
  (ii) in any loss involving part of a pair, set, or series of objects, pieces, 
or panels (whether interior or exterior), be determined by reference to: 
 
  (I)-(II) (No change.) 
   
  (III) the reasonable cost of providing a reasonably acceptable alternative 
decorative effect or utilization,[;] as the circumstances may warrant. The 
association does not guarantee the availability of parts or replacements and 
shall not, in the event of such damage to or loss of a part, be obligated for 
the value of, or to repair or replace, the entire pair, set, or series. 
       
  (I) (No change.) 
   
  (J) No forms may be used to provide catastrophe insurance for a mobile home 
risk unless such form has been specifically approved by the <nl>Commissioner<ol> 
[State Board of Insurance] for use in insuring mobile homes risks by the 
association. 
   
  (K)-(L) (No change.) 
     
  (4) Application. 
 
  (A) (No change.) 
   
  (B) An applicant for catastrophe insurance shall apply to the association for 
a policy of insurance, and such application shall contain a declaration to the 
effect that the mobile home is physically attached to the land, immovable, and 
such application shall be accompanied by the following: 
 
  (i)-(iii) (No change.) 
   
  (iv) in the event an inspector is designated by the association for any of the 
purposes set forth herein, the person applying for catastrophe insurance shall 
pay a reasonable fee to the association for each such inspection. The 
reasonableness of the fee shall be subject to review by the  
<nl>Commissioner<ol> [State Board of Insurance]. 
 
  This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt. 
 Issued in Austin, Texas, on December 23, 1994. 
 TRD-9500274 
  D. J. Powers 
 Chief Clerk and General Counsel 
 Texas Department of Insurance 
    Earliest possible date of adoption: February 13, 1995 
 For further information, please call: (512) 463-6327 
         
                     Chapter 7. Corporate and Financial Regulation 
  
  Subchapter A. Examination and Corporate Custodian and Tax 
 
  28 TAC sec.7.16 
 
  The Commissioner of Insurance of the Texas Department of Insurance proposes an 
amendment to sec.7.16, concerning the National Association of Insurance 
Commissioners Purposes and Procedures of the Securities Valuation Office manual. 
The amendment to  s7.16 clarifies which version of the NAIC Purposes and 
Procedures of the Securities Valuation Office manual has been officially adopted 
by reference by the Texas Department of Insurance. The amendment to sec.7.16 is 
proposed to comply with a newly enacted provision of the Insurance Code, Article 
1.27, which recites that the Department may not require an insurer to comply 
with any rule, regulation, directive, or standard adopted by the National 
Association of Insurance Commissioners unless it is expressly authorized by and 
approved by the Commissioner. The amendment will allow interested persons notice 
and opportunity for a hearing if the Department proposes to adopt a particular 
version of the NAIC Purposes and Procedures of the Securities Valuation Office 
manual. 
 This amendment to sec.7.16 is proposed as part of Title 28, Part 1, Chapter 7, 
Subchapter A, relating to the general provisions for examinations and reporting 
requirements for insurance entities. 
 A. W. Pogue, associate commissioner for the financial division, has determined 
that for each year of the first five years the amendment is in effect there will 
be no fiscal implications for state and local governments as the result of 
administering this section. There is no anticipated additional effect on local 
employment or the local economy, reduction in costs to local governments, or 
loss or increase in revenue to the state or local governments as a result of 
administering and enforcing the proposed amendment. 
 Mr. Pogue also has determined that for each year of the first five years the 
amendment is in effect there will be no anticipated economic cost to persons who 
must comply with the amendment. Mr. Pogue has determined the public benefit 
resulting from administration of the proposed section will be the ability to 
receive notice and opportunity for a hearing if the Department proposes to adopt 
a particular version of the NAIC Purposes and Procedures of the Securities 
Valuation Office manual. 
 Comments on this proposal must be submitted in writing within 30 days after 
publication of this section in the Texas Register to the Chief Clerk of the 
Texas Department of Insurance, Mail Code 113-2A, P.O. Box 149104, Austin, Texas, 
78714-9104, with a copy to A. W. Pogue, Associate Commissioner of Financial, 
Mail Code 305-2A, P.O. Box 149104, Austin, Texas, 78714-9104. 
 The amendment is proposed pursuant to the Insurance Code, Article 1.03A. 
Article 1.03A authorizes the Commissioner of Insurance to promulgate and adopt 
rules and regulations for the conduct and execution of duties and functions by 
the Department. 
 The proposed rule affects Insurance Code, Article 1.27. 
 
 
  sec.7.16. [The National Association of Insurance Commissioners' Valuations of 
Securities Manual.] <nl>National Association of Insurance Commissioners Purposes 
and Procedures of the Securities Valuation Office Manual. <ol> [Except where 
otherwise provided by law, or where the board has adopted rules which provide 
otherwise, the National Association of Insurance Commissioners' Valuations of 
Securities Manual will continue to be used by the State Board of Insurance in 
the valuation of securities.] 
 
  <nl>(a)  Definitions. The following words and terms, when used in this 
section, shall have the following meanings, unless the context clearly indicates 
otherwise. 
 
  <nl>(1) Commissioner-The Commissioner of Insurance. 
   
  <nl>(2) Department-The Texas Department of Insurance. 
   
  <nl>(3)  NAIC-The National Association of Insurance Commissioners. 
     
  <nl>(b)  The Commissioner adopts by reference the NAIC Purposes and Procedures 
of the Securities Valuation Office manual (effective for 1994 Annual Statements) 
as the standard for the Department in the evaluation of securities, except where 
otherwise provided by law or where the Commissioner has adopted rules which 
provide otherwise. Whenever the Purposes and Procedures of the Securities 
Valuation Office manual (or sometimes referred to as the Valuation of Securities 
Manual) is referred to by statute or rule it shall mean the above-referenced 
version of the NAIC Purposes and Procedures of the Securities Valuation Office 
manual unless specifically stated otherwise. 
   
  <nl>(c) The following exception is made to the NAIC Purposes and Procedures of 
the Securities Valuation Office manual: Because Texas domestic companies 
historically have not been required to establish an Asset Valuation Reserve 
(AVR) or Interest Maintenance Reserve (IMR), they are not required to do so 
unless the company is licensed in a state that requires an AVR or IMR, in which 
case the reserve must be calculated in accordance with the instructions 
established by the NAIC. 
 
  This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt. 
 Issued in Austin, Texas, on December 16, 1994. 
 TRD-9452567 
  D. J. Powers 
 Chief Clerk and General Counsel 
 Texas Department of Insurance 
    Earliest possible date of adoption: February 13, 1995 
 For further information, please call: (512) 463-6327 
         
           
  28 TAC sec.7.18 
 
  The Commissioner of Insurance of the Texas Department of Insurance proposes 
new sec.7.18, concerning the National Association of Insurance Commissioners 
Accounting Practices and Procedures manuals. The new section clarifies which 
versions of the NAIC Accounting Practices and Procedures manuals have been 
officially adopted by reference by the Texas Department of Insurance. The new 
section is proposed to comply with a newly enacted provision of the Insurance 
Code, Article 1.27, which recites that the Department may not require an insurer 
to comply with any rule, regulation, directive, or standard adopted by the 
National Association of Insurance Commissioners unless it is expressly 
authorized by and approved by the Commissioner. The new section will allow 
interested persons notice and opportunity for a hearing if the Department 
proposes to adopt a particular version of any NAIC Accounting Practices and 
Procedures manual. 
 New sec.7.18 is proposed as part of Title 28, Part 1, Chapter 7, Subchapter A, 
relating to the general provisions for examinations and reporting requirements 
for insurance entities. 
 A. W. Pogue, associate commissioner for the financial division, has determined 
that for each year of the first five years the new section is in effect there 
will be no fiscal implications for state and local governments as the result of 
administering this section. There is no anticipated additional effect on local 
employment or the local economy, reduction in costs to local governments, or 
loss or increase in revenue to state or local governments as a result of 
administering and enforcing the proposed section. 
 Mr. Pogue also has determined that for each year of the first five years the 
new section is in effect there will be no anticipated economic cost to persons 
who must comply with the section. Mr. Pogue has determined the public benefit 
resulting from administration of the proposed section will be the ability to 
receive notice and opportunity for a hearing if the Department proposes to adopt 
a particular version of any NAIC Accounting Practices and Procedures manual. 
 Comments on this proposal must be submitted in writing within 30 days after 
publication of this section in the Texas Register to the Chief Clerk of the 
Texas Department of Insurance, Mail Code 113-2A, P.O. Box 149104, Austin, Texas, 
78714-9104, with a copy to A. W. Pogue, Associate Commissioner of Financial, 
Mail Code 305-2A, P.O. Box 149104, Austin, Texas, 78714-9104. A request for 
public hearing on the new section should be submitted separately to the Office 
of the Chief Clerk. 
 The new section is proposed pursuant to the Insurance Code, Article 1.03A. 
Article 1.03A authorizes the Commissioner of Insurance to promulgate and adopt 
rules and regulations for the conduct and execution of duties and functions by 
the Department. 
 The proposed rule affects Insurance Code, Article 1.27. 
 
 
  sec.7.18. National Association of Insurance Commissioners Accounting Practices 
and Procedures Manuals. 
 
  (a) Definitions. The following words and terms, when used in this section, 
shall have the following meanings, unless the context clearly indicates 
otherwise. 
 
  (1) Commissioner-The Commissioner of Insurance. 
   
  (2) Department-The Texas Department of Insurance. 
   
  (3) NAIC-The National Association of Insurance Commissioners. 
     
  (b) The commissioner adopts by reference the NAIC Accounting Practices and 
Procedures manuals as the accounting standard for the department when examining 
financial reports and for conducting statutory examinations and rehabilitations 
of insurers licensed in Texas, except where otherwise provided by law or where 
the Commissioner has adopted rules which provide otherwise. Specifically, these 
manuals are the NAIC Accounting Practices and Procedures Manual for Life, 
Accident and Health Insurance Companies (October, 1994), the NAIC Accounting 
Practices and Procedures Manual for Property and Casualty Companies (October, 
1994), and the NAIC Accounting Practices and Procedures Manual for Health 
Maintenance Organizations (June, 1991). Whenever any NAIC Accounting Practices 
and Procedures manual is referred to by statute or rule, it shall mean the 
particular NAIC Accounting Practices and Procedures manual (as specified in this 
subsection by name and publication date) for the line of insurance regulated by 
the statute or rule in question. 
   
  (c) The following exceptions are made to the NAIC Accounting Practices and 
Procedures Manual for Life, Accident and Health Insurance Companies. 
 
  (1) Goodwill shall not be allowed as an admitted asset of an insurer or an 
insurer's insurance subsidiaries on any filing with the Department or the NAIC 
by Texas domestic insurers or on any filing with the Department by insurers 
domiciled outside the State of Texas. 
   
  (2)  For trusts whose holdings include collateralized mortgage obligations 
(CMOs), the procedures in Chapter 1, (relating to NAIC Accounting Practices and 
Procedures Manual for Life, Accident and Health Insurnce Companies) are to be 
applied separately to each holding in the trust. The value of the trust is the 
sum of the values of the individual holdings of the trust. The effective yield 
of the trust is based on the effective yields of the individual holdings of the 
trust. 
     
  (d) The following exceptions are made to the NAIC Accounting Practices and 
Procedures Manual for Property and Casualty Companies. 
 
  (1) Goodwill shall not be allowed as an admitted asset of an insurer or an 
insurer's insurance subsidiaries on any filing with the Department or the NAIC 
by Texas domestic insurers or on any filing with the Department by insurers 
domiciled outside the State of Texas. 
   
  (2) For trusts whose holdings include collateralized mortgage obligations 
(CMOs), the procedures in Chapter 1 of this title (relating to NAIC Accounting 
Practices and Procedures Manual for Property and Casualty Companies) are to be 
applied separately to each holding in the trust. The value of the trust is the 
sum of the values of the individual holdings of the trust. The effective yield 
of the trust is based on the effective yields of the individual holdings of the 
trust. 
   
  (3) No loss reserve discounts, other than fixed and determinable payments such 
as those emanating from workers' compensation tabular indemnity reserves and 
long-term disability claims for which specific segregated investments have been 
established, shall be allowed. However, any company that claimed loss reserve 
discounts, other than fixed and determinable payments such as those emanating 
from workers' compensation tabular indemnity reserves and long-term disability 
claims, as of December 31, 1991, shall be allowed to claim such reserved 
discounts at the applicable percentage. The applicable percentage for claiming 
such loss reserve discounts shall be 100% for 1992, 75% for 1993, 50% for 1994, 
25% for 1995, and 0% for 1996 and subsequent years. In no event shall the dollar 
amount of discounts, other than fixed and determinable payments such as those 
emanating from workers' compensation tabular indemnity reserves and long-term 
disability claims, claimed as of December 31, 1991, and subject to the 
applicable percentage, be increased as of December 31, 1992, and thereafter. The 
Commissioner shall have authority to determine the appropriateness of, and may 
disapprove, discounts taken from fixed and determinable payments such as those 
emanating from workers' compensation tabular indemnity reserves and long-term 
disability claims. 
   
  (4) The Commissioner shall have the authority to determine the appropriateness 
of and may disapprove anticipated salvage and subrogation. 
     
  (e) The following exception is made to the NAIC Accounting Practices and 
Procedures Manual for Health Maintenance Organizations. Goodwill shall not be 
allowed as an admitted asset of an insurer or an insurer's insurance 
subsidiaries on any filing with the Department or the NAIC by Texas domestic 
insurers or on any filing with the Department by insurers domiciled outside the 
State of Texas. 
 
  This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt. 
 Issued in Austin, Texas, on December 16, 1994. 
 TRD-9452565 
  D. J. Powers 
 Chief Clerk and General Counsel 
 Texas Department of Insurance 
    Earliest possible date of adoption: February 13, 1995 
 For further information, please call: (512) 463-6327 
         
             
  Subchapter M. Regulatory Fees 
 
  28 TAC sec.7.1301 
 
  The Commissioner of Insurance of the Texas Department of Insurance proposes an 
amendment to sec.7.1301, concerning regulatory fees. The amendment is necessary 
to implement House Bill 1461, 73rd Legislature, which amended Insurance Code, 
Article 4.07, to require that all authorized insurers writing classes of 
insurance in Texas be charged fees for the use of the state in an amount to be 
determined by the Texas Department of Insurance. The amendment to sec.7.1301 is 
proposed as part of Title 28, Part 1, Chapter 7, Subchapter M, relating to 
regulated entities subject to regulatory fees. The amendment also reflects the 
updated title of the Texas Department of Insurance and corrects a typographical 
error in sec.7.1301(d)(13). 
 A. W. Pogue, associate commissioner of the financial division, Texas Department 
of Insurance, has determined that there will be fiscal implications as a result 
of enforcing or administering this section. The effect on state government for 
the first five-year period the rule will be in effect will be fees paid by all 
authorized insurers, other than the fees already collected from companies 
regulated by Chapter 3 of the Insurance Code, to the state government for the 
filings specified in sec.7.1301 of this title. There will be no effect on local 
government for the first five-year period the rule will be in effect. There is 
no anticipated additional effect on local employment or the local economy, or 
reduction in costs or revenue to local governments. There is an anticipated 
increase in revenue of approximately $24,000 to the state as a result of 
administering or enforcing the proposed amendment. 
 Mr. Pogue also has determined that for each year of the first five years the 
amendment is in effect that the anticipated economic cost to persons who must 
comply with the section shall depend upon the number and type of filings 
completed by an admitted insurer pursuant to the filing fees set for the 
insurer's particular class of insurance. The maximum filing fees are established 
in the Insurance Code, Article 4.07, and the current fees charged by the 
department for the various types of filings are set out in sec.7.1301 of this 
title and in this proposed amendment. 
 Comments on this proposal must be submitted in writing within 30 days after 
publication of this section in the Texas Register to the Chief Clerk of the 
Texas Department of Insurance, Mail Code 113-2A, P.O. Box 149104, Austin, Texas 
78714-9104, with a copy to A. W. Pogue, Associate Commissioner of Financial, 
Mail Code 305-2A, P.O. Box 149104, Austin, Texas 78714-9104. 
 The amendment is proposed pursuant to the Insurance Code, Articles 1.03A and 
4.07. Article 1.03A authorizes the Commissioner of Insurance to promulgate and 
adopt rules and regulations for the conduct and execution of duties and 
functions by the Department. Article 4.07 authorizes the Texas Department of 
Insurance to charge and receive fees for the use of the State by all authorized 
insurers writing classes of insurance in Texas. 
 The proposed rule affects Insurance Code, Article 4.07. 
 
 
  sec.7.1301. Regulatory Fees. 
 
  (a) Regulated entities subject to fees. The regulated entities subject to the 
fees imposed by this section shall include all authorized insurers writing 
<nl>any class <ol> [classes] of insurance in this state which are regulated by 
the Insurance Code, <nl>Chapters 1, 2, 3, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 
16, 17, 18, 19, 20, 20A, 22, and 23<ol> [Chapter 3, all stipulated premium 
insurance companies, all prepaid legal services corporations regulated by the 
Insurance Code, Chapter 23, all health maintenance organizations, and all group 
hospital service plans corporations. Affected entities would include any and all 
stock and mutual insurance companies, local mutual aid associations, statewide 
mutual assessment companies, stipulated premium insurance companies, prepaid 
legal services corporations regulated by the Insurance Code, Chapter 23, health 
maintenance organizations, and all group hospital service plan corporations]. 
For filings and other actions on and after September 1, 1987, the <nl>Texas 
Department<ol> [State Board] of Insurance shall charge these entities fees in 
amounts in accordance with the provisions of this section. 
   
  (b) Fees for insurers with annual gross premium receipts less than $450,000. 
As provided in the Insurance Code, Article 4.07, any insurer to which the 
Article applies and whose gross premium receipts are less than $450, 000 
according to its annual statement for the preceding year ending December 31, 
shall be required to pay only one-half the amount of the fees required to be 
paid under subsection (d) or subsection (e) of this section. The fees will be 
collected at the higher rate unless the applicant can provide the <nl>Texas 
Department<ol> [State Board] of Insurance with satisfactory documentation that 
gross premium receipts were less than $450,000. 
   
  (c)  (No change.) 
   
  (d) Fees for authorized insurers writing classes of insurance in this state 
which are regulated by the Insurance Code,  <nl>Chapters 1, 2, 3, 6, 7, 8, 9, 
10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 20A, 22, and 23<ol> [Chapter 3]. For 
the following filings and actions, the fees shall be as follows. 
 
  (1) For <nl>classes of insurance for which statutory authority exists for 
collecting annual statement fees<ol> [filing annual statements], the fee <nl>for 
filing annual statements<ol> shall be $250 <nl>unless otherwise specified<ol>. 
   
  (2)-(12) (No change.) 
   
  (13) For filing a direct reinsurance agreement pursuant to the Insurance Code, 
Article 22.19, the fee shall be <nl>$150 <ol> [$750]. 
   
  (14)-(25) (No change.) 
     
  (e) (No change.) 
   
  (f)  Administrative procedures. 
 
  [(1) Property and casualty insurance companies, Lloyds, and reciprocals which 
have the authority to write accident and health insurance are considered 
regulated entities subject to fees imposed by this section.] 
   
  <nl>(1)<ol>[(2)] When a reinsurance agreement or merger agreement is filed 
with the <nl>Texas Department <ol> [State Board] of Insurance, as enumerated in 
subsection (d)(11)-(15) of this section, the ceding or merged company will be 
the company upon which the determination of the appropriate fee to be assessed 
will be based. 
   
  <nl>(2)<ol>[(3)]  The fee relating to reinsurance transactions entered into 
pursuant to the Insurance Code, Article 21.49-1, sec.4, and subsection (d)(24) 
of this section shall be determined using the ceding company as a basis for such 
fee. 
   
  <nl>(3)<ol>[(4)] When an amendment to a reinsurance agreement between 
affiliated insurers is filed with this board, as mentioned in paragraph (2) of 
this subsection, the ceding company will be the insurer upon which the 
determination of the appropriate fee to be charged will be based. 
   
  <nl>(4) <ol>[(5)] An amendment to the charter would constitute any change in 
the original charter, including, but not limited to, name change, home office 
change, increase in capital, conversion, and increase in lines. 
   
  <nl>(5) <ol>[(6)] The fee relating to affixing the official seal and 
certifying to the seal, shall be applied to all requests for certification, 
irrespective of requesting party. 
   
  (6) [(7)] The fees for filing an acquisition statement pursuant to the 
Insurance Code, Article 21.49-1,  s5, and subsection (d)(21) and (22) of this 
section shall apply to and be collected from the applicant whenever: 
 
  (A) the applicant is a regulated entity subject to this section; or 
   
  (B) the company being acquired is a regulated entity subject to this section. 
       
  (g) Fees pursuant to the Texas Health Maintenance Organization Act, sec.32. 
For the following filings and actions, the fees shall be as follows. 
 
  (1)-(2) (No change.) 
   
  (3) For all examinations made on behalf of the State of Texas by the <nl>Texas 
Department of Insurance<ol> [board] or under its authority, the fee shall be in 
such amounts as the commissioner shall certify to be just and reasonable. 
   
  (4)-(5) (No change.) 
     
  (h)-(i) (No change.) 
   
  <nl>(j) Fees under the Insurance Code, Chapter 3. For the following filings 
and actions, the fees shall be as follows. 
 
  <nl>(1) For valuing policies of life insurance, and for each one million 
dollars of insurance or fraction thereof, $10. 
   
  <nl>(2) For filing the annual statement, $250. 
 
  This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt. 
 Issued in Austin, Texas, on January 6, 1995. 
 TRD-9500199 
  D. J. Powers 
 Chief Clerk and General Counsel 
 Texas Department of Insurance 
    Earliest possible date of adoption: February 13, 1995 
 For further information, please call: (512) 463-6327 
         
                     
  TITLE 30. ENVIRONMENTAL QUALITY 
 Part I. Texas Natural Resource Conservation Commission 
  Chapter 335. Industrial Solid Waste and Municipal Hazardous Waste 
  
  Subchapter O. Land Disposal Restrictions 
 
  30 TAC sec.335.431 
 
  The Texas Natural Resources Conservation Commission (TNRCC) proposes an 
amendment to sec.335.431, concerning land disposal restrictions. The amendment 
is proposed in order to adopt by reference certain federal regulations 
promulgated by the United States Environmental Protection Agency (EPA) relating 
to hazardous waste land disposal restrictions, under Title 40 Code of Federal 
Regulations (CFR) Part 268. 
 Section 335.431 is proposed to be amended at subsection (c)(1) to adopt by 
reference, subject to the conditions denoted in this subsection, the 
aforementioned EPA regulations as amended through January 3, 1995, in 60 FedReg 
242. Subsection (c)(3) is proposed to be amended to adopt by reference an 
additional appendix of 40 CFR Part 268 (i.e., Appendix X), as amended by the EPA 
through January 3, 1995, in 60 FedReg 242. The existing rule language citing an 
earlier Federal Register promulgation dated February 16, 1993 is proposed to be 
deleted from sec.335.431(c)(1) and (3). 
 The aforementioned January 3, 1995 federal regulations, along with the EPA 
regulation promulgated September 19, 1994 at 59 FedReg 48043 include a major 
improvement in the land disposal restrictions program that simplifies and 
provides consistency in these requirements, through the promulgation of 
"universal" treatment standards. In addition, these federal regulations also 
establish treatment standards for certain newly listed and identified hazardous 
wastes, and prohibit injection into deep wells of high Total Organic Carbon 
ignitable wastes and Toxicity Characteristic organic pesticides unless they are 
treated to meet applicable treatment standards, or the deep well has received a 
no-migration variance. The regulations also change requirements for land 
disposal of lab packs containing prohibited hazardous wastes, and simplify 
paperwork requirements. Once effective, the state rules would match the 
aforementioned federal regulations. 
 It should be noted that the aformentioned requirements promulgated by the EPA 
contain requirements, such as the universal treatment standards, that are less 
stringent, in certain regards, than the requirements which they replaced. Since 
the existing TNRCC rules adopt the earlier, more stringent EPA regulations, this 
means that the existing TNRCC rules are now more stringent than current EPA 
regulations in this area. If the TNRCC subsequently adopts these proposed rules, 
then the state rules would no longer be generally more stringent than these 
existing federal regulations, once the rules become effective. 
 Finally, sec.335.431 is proposed to be amended at subsection (d)(5) to correct 
a typographical error. The existing reference to "sec.268.501(a)(1)" is proposed 
to be changed to "sec.268.50(a)(1)." 
 Stephen Minick, Division of Budget and Planning, has determined that, for the 
first five-year period this section as proposed is in effect, there are no 
significant fiscal implications anticipated for state or local government as a 
result of enforcement or administration of the section. 
 Mr. Minick also has determined that for the first five years this section as 
proposed is in effect, the public benefit anticipated as a result of 
administration of and compliance with the section will be more effective 
management of the state's efforts to regulate disposal of hazardous wastes and 
improved protection of the public health due to the improvements in the land 
disposal restrictions program. There will be no effect on small businesses. The 
statewide annual costs required to comply with this section as proposed, 
estimated at $30 million, will be significantly offset by operation cost savings 
brought on by the new universal treatment standards. Although these savings are 
not quantifiable on a broad basis, EPA received comment from representatives of 
The Dow Chemical Company's Freeport, Texas facility that their annual savings in 
this regard would amount to approximately $740,000. 
 Comments on this proposal may be submitted to Ray Henry Austin, P.E., Waste 
Policy and Regulations Division, Texas Natural Resource Conservation Commission, 
P.O. Box 13087, Austin, Texas 78711-3087. The deadline for the submission of 
written comments will be 30 days after the date of publication of this proposal 
in the  Texas Register. 
 The amendment is proposed under Texas Water Code, sec. s5.103, 5.105, and 26. 
011, which provides the TNRCC the authority to adopt rules necessary to carry 
out its powers, duties, and policies and to protect water quality in the state. 
The amendment is also proposed under the Health and Safety Code, sec.361.024, 
which provides the TNRCC the authority to adopt rules necessary to manage solid 
waste. 
 The proposed amendment affects Health and Safety Code, Chapter 361. 
 
 
  sec.335.431. Purpose, Scope, and Applicability. 
 
  (a)-(b) (No change.) 
   
  (c) Adoption by Reference. 
 
  (1) Except as provided in paragraph (2) of this subsection, and subject to the 
changes indicated in subsection (d) of this section, the regulations contained 
in 40 CFR, Part 268, as amended through <nl>January 3, 1995, in 60 FedReg 
242<ol> [February 16, 1993, in 58 FedReg 8685] are adopted by reference. 
   
  (2) (No change.) 
   
  (3) Appendices I-<nl>X<ol> [IX] of 40 CFR, Part 268 are adopted by reference 
as amended through <nl>January 3, 1995, in 60 FedReg 242<ol> [February 16, 1993, 
in 58 FedReg 8685]. 
     
  (d) Changes to Adopted Parts. The parts of the CFR that are adopted by 
reference in subsection (c) of this section are changed as follows: 
 
  (1)-(4) (No change.) 
   
  (5) In sec.268.50[1](a)(1), the citation to "sec.262.34" is changed to 
"sec.335.69." 
 
  This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt. 
 Issued in Austin, Texas, on January 9, 1994. 
 TRD-9500175 
  Kevin McCalla 
 Director, Legal Services Division 
 Texas Natural Resource Conservation Commission 
    Earliest possible date of adoption: February 13, 1995 
 For further information, please call (512) 239-6087 
         
                     
  TITLE 31. NATURAL RESOURCE CONSERVATION COMMISSION 
 Part X. Texas Water Development Board 
  Chapter 363. Financial Assistance Programs 
  
  Subchapter A. General Provisions 
 
  The Texas Water Development Board (board) proposes amendments to sec.363. 15, 
concerning Required Water Conservation Plan, and sec.363.71, concerning General 
Responsibilities. Amended sec.363.15(c) will describe the requirements of a 
water conservation plan to include evaluation of the utility system, and 
establishment of goals for water conservation measures. The plan shall consist 
of a long term water conservation plan and an emergency water demand management 
plan. The section will specify the three essential elements of long-term water 
conservation plans to be education, methods to determine and minimize 
unaccounted for water, and rate structures which do not promote excessive use of 
water. Amended sec.363.71(a)(2) will change the length of time required to 
submit reports on the water conservation programs from the life of the financial 
assistance to three years from the date of loan closing. If the executive 
administrator determines that the water conservation program is not in 
compliance with the water conservation plan, additional annual reports may be 
required. The amendments will eliminate those requirements which do not provide 
a benefit to water conservation and will ensure that all essential requirements 
for efficient water conservation are met. 
 The board also proposes the repeal of sec.363.224, relating to Hardship 
Applications. This section is no longer used as a method of financial 
assistance. 
 Pamela Ansboury, the Director of Finance, has determined that for the first 
five-year period the rules are in effect there will be no fiscal implications 
for state government as a result of enforcing or administering the rules. Ms. 
Ansboury has determined that for the first five-year period the rules are in 
effect the fiscal implications on local government will be cost reductions of 
$3,400 for 1995, $2,700 for 1996, $700 for 1997, $200 for 1998, and $1,000 for 
1999. 
 Ms. Ansboury also has determined that for each year of the first five years 
that the proposed rules are in effect the public benefit anticipated as a result 
of enforcing the rules as proposed will be to streamline the application 
process, reduce the cost to the political subdivision for implementing the water 
conservation program, and clarify existing rule language by deleting a method of 
financial assistance which is no longer used. There will be no effect on small 
businesses. Ms. Ansboury has determined that there will not be anticipated 
economic cost to persons who are required to comply with these amendments as 
proposed. 
 Comments on the proposal may be submitted within 30 days from the date of the 
publication hereof to Lisa Adelman, Attorney, Texas Water Development Board, 
P.O. Box 13231, Austin, Texas, 78711-3231, (512) 475-2051. 
   
  General Application Procedures 
   
  31 TAC sec.363.15 
 
  The amendment is proposed under Texas Water Code, sec.6.101, which requires 
the board to adopt rules to carry out the powers and duties of the board, under 
the Texas Water Code, and other laws of this state. 
 The proposed section affects Texas Water Code, Chapter 15, Subchapters C and D; 
Texas Water Code, Chapter 16, Subchapter E; Texas Water Code, Chapter 17, 
Subchapters D, F, and I. 
 
 
  sec.363.15. Required Water Conservation Plan. 
 
  (a)-(b) (No change.) 
   
  (c) The water conservation plan required under this section [shall be 
consistent with the guidelines for water conservation planning available from 
the executive administrator, and] shall include <nl>an evaluation of the 
applicant's water and wastewater system and shall set goals to be accomplished 
by water conservation measures. The plan shall include <ol> a long-term water 
conservation plan and an emergency water demand management plan. <nl>In addition 
to any elements deemed appropriate by the political subdivision, the long-term 
water conservation plan shall include the following: 
 
  <nl>(1) a water conservation education and information program; 
   
  <nl>(2) methods to determine and minimize unaccounted for water; and 
   
  <nl>(3) a non-promotional rate structure which is cost-based and does not 
promote the excessive use of water. 
     
  (d)  (No change.) 
   
  <nl>(e) The board will accept a water conservation plan considered 
administratively complete by the commission. 
 
  This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt. 
 Issued in Austin, Texas, on January 9, 1995. 
 TRD-9500259 
  Craig D. Pedersen 
 Executive Administrator 
 Texas Water Development Board 
    Proposed date of adoption: February 16, 1995 
 For further information, please call: (512) 463-7981 
         
           
  Post-Construction Responsibilities 
 
  31 TAC sec.363.71 
 
  The amendment is proposed under Texas Water Code, sec.6.101, which requires 
the board to adopt rules to carry out the powers and duties of the board, under 
the Texas Water Code, and other laws of this state. 
 
 
  sec.363.71. General Responsibilities. 
 
  (a) After the satisfactory completion of the project, the political 
subdivision shall be held responsible by the board for the continued compliance 
with all representations and assurances made to the board. To protect the 
state's monetary investment and the public interest, the following provisions 
shall be observed. 
 
  (1) (No change.) 
   
  (2) Political subdivisions [with required water conservation programs] shall 
report annually to the executive administrator on the implementation [,] 
<nl>and<ol> status [, and effectiveness] of <nl>required<ol> [the] water 
conservation programs  <nl>for three years after the date of loan closing. If 
the executive administrator determines that the water conservation program is 
not in compliance with the approved water conservation plan, political 
subdivisions shall continue to supply annual reports beyond the three years 
until the executive administrator determines that deficiencies in the plan have 
been resolved. Annual reports prepared for the commission providing the 
information required by this subparagraph may be provided to the board to 
fulfill the board's reporting requirements. <ol> [until all of their financial 
obligations to the state have been discharged.] 
     
  (b) (No change.) 
 
  This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt. 
 Issued in Austin, Texas, on January 9, 1995. 
 TRD-9500260 
  Craig D. Pedersen 
 Executive Administrator 
 Texas Water Development Board 
    Proposed date of adoption: February 16, 1995 
 For further information, please call: (512) 463-7981 
         
               
  Subchapter B. State Water Pollution Control Revolving Fund 
 
  Applications for Assistance 
 
  31 TAC sec.363.224 
 
  (Editor's note: The text of the following section proposed for repeal will not 
be published. The section may be examined in the offices of the Texas Water 
Development Board or in the Texas Register office, Room 245, James Earl Rudder 
Building, 1019 Brazos Street, Austin.) 
   
  The repeal is proposed under Texas Water Code, sec.6.101, which requires the 
board to adopt rules to carry out the powers and duties of the board, under the 
Texas Water Code, and other laws of this state. 
 
 
  sec.363.224. Hardship Applications. 
 
  This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt. 
 Issued in Austin, Texas, on January 9, 1995. 
 TRD-9500261 
  Craig D. Pedersen 
 Executive Administrator 
 Texas Water Development Board 
    Proposed date of adoption: February 16, 1995 
 For further information, please call: (512) 463-7981 
         
               Chapter 370. Colonia Plumbing Loan Program 
  
  Policy Declarations 
 
  31 TAC sec.370.29 
 
  The Texas Water Development Board (board) proposes an amendment to sec.370. 
29, concerning Eligible Households. Amended  s370.29 expands eligible borrowers 
under the Colonia Plumbing Loan Program to include homes all located in colonias 
in existence prior to November 9, 1989. The rule as it currently exists requires 
a home to have been owned by the current owner prior to November 9, 1989. The 
proposed amendment also limits eligibility to colonias outside incorporated 
municipalities or other colonias approved by the U.S. Environmental Protection 
Agency. This change is consistent with the Environmental Protection Agency's 
Operating Agreement with the board for the Colonia Plumbing Loan Program. 
 Pamela Ansboury, the Director of Finance, has determined that for the first 
five-year period the rule is in effect there will not be fiscal implications for 
state or local government as a result of enforcing or administering the rule. 
 Ms. Ansboury also has determined that for each year of the first five years 
that the proposed rule is in effect the public benefit anticipated as a result 
of enforcing the rule as proposed will be to enable more homes to be eligible 
for a loan under the Colonia Plumbing Loan Program in order to hookup to water 
and wastewater services and alleviate the public health threat. There will be no 
effect on small businesses. Ms. Ansboury has determined that there will be no 
anticipated economic cost to persons who are required to comply with this 
amendment as proposed. Board staff has determined that for the first five years 
that the rule is in effect there will be no economic impact on local economies. 
 Comments on the proposal may be submitted within 30 days from the date of the 
publication hereof to Lisa Adelman, Attorney, Texas Water Development Board, 
P.O. Box 13231, Austin, Texas, 78711-3231, (512) 463-8249. 
 The amendment is proposed under Texas Water Code, sec.6.101 and sec.15.737, 
which requires the board to adopt rules to carry out the powers and duties of 
the board under the Texas Water Code including Chapter 15, Subchapter L, 
relating to Plumbing and Improvement Loans, and other laws of this state. 
 The statutory provisions affected by this amendment are Texas Water Code, 
Chapter 15, Subchapter L. 
 
 
  sec.370.29. Eligible Households. <ol> Borrowers may provide loans to the 
following individuals for plumbing improvements: 
 
  (1) residents <nl>of a colonia outside an unincorporated municipality or such 
other colonia approved by the United States Environmental Protection Agency that 
existed on <ol> [in project areas who are the owners of the household for which 
improvements are to be made, occupied their property prior to] November 9, 1989, 
and whose income is below the HUD Section 8 low-to-moderate income limits for 
the particular county in which the household is located; and 
   
  (2) owners of real property who receive loans for plumbing improvements for 
real property leased to others in the project areas, provided the owner owned 
the property <nl>in a colonia outside an unincorporated municipality or such 
other colonia approved by the United States Environmental Protection Agency that 
existed on<ol> [prior to] November 9, 1989, agrees to rent the household unit(s) 
only to persons of low-to-moderate income until the loan is repaid in full, 
provides evidence of adequate collateral and credit history, and agrees not to 
displace the family currently living in any household unit which will receive 
the plumbing improvements, except for breach of a valid contract or lease. 
 
  This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt. 
 Issued in Austin, Texas, on January 9, 1995. 
 TRD-9500262 
  Craig D. Pedersen 
 Executive Administrator 
 Texas Water Development Board 
    Proposed date of adoption: February 16, 1995 
 For further information, please call: (512) 463-7981 
         
               Chapter 375. State Water Pollution Control Revolving Fund 
  
  The Texas Water Development Board (board) proposes amendments to sec.375. 37, 
concerning Required Water Conservation Plan and sec.375.101, concerning 
Responsibilities of Applicant. Amended sec.375.37(c) will describe the 
requirements of a water conservation plan to include evaluation of the utility 
system, and establishment of goals for water conservation measures. The plan 
shall consist of a long-term water conservation plan and an emergency water 
demand management plan. The section will specify the three essential elements of 
long-term water conservation plans to be education, methods to determine and 
minimize unaccounted for water, and rate structures which do not promote 
excessive use of water. Amended sec.375.101(c) will change the length of time 
required to submit reports on the water conservation programs from the life of 
the financial assistance to three years from the date of loan closing. If the 
executive administrator determines that the water conservation program is not in 
compliance with the water conservation plan, additional annual reports may be 
required. The amendments will eliminate those requirements which do not provide 
a benefit to water conservation and will ensure that all essential requirements 
for efficient water conservation are met. 
 Pamela Ansboury, Director of Finance, has determined that for each year of the 
first five years the sections are in effect, there will be no fiscal 
implications for state government as a result of enforcing or administering the 
sections. Ms. Ansboury has determined that for the first five-year period the 
rules are in effect the fiscal implications on local government will be cost 
reductions of $5,000 for 1995, $3,900 for 1996, $1,000 for 1997, $400 for 1998, 
and $1,400 for 1999. 
 Ms. Ansboury also has determined that for each year of the first five years the 
sections are in effect, the public benefit anticipated as a result of enforcing 
the sections will be to streamline the application process and reduce the cost 
to the political subdivision for implementing the water conservation program. 
There will be no effect on small businesses. There is no anticipated economic 
cost to individuals. 
 Comments on the proposed sections may be submitted to Lisa Adelman, Texas Water 
Development Board, General Counsel's Office, P.O. Box 13231, Austin, Texas 
78711-3231, (512) 463-8249. 
   
  Applications for Assistance 
 
  31 TAC sec.375.37 
 
  The amendment is proposed under the authority of Texas Water Code, sec.6. 101 
and sec.15.605, which requires the board to adopt rules necessary to carry out 
the powers and duties of the board provided by Texas Water Code, and adopt rules 
for the State Water Pollution Control Revolving Fund. 
 Texas Water Code, Chapter 15, Subchapter J is the statutory provision affected 
by the proposed rule. 
 
 
  sec.375.37. Required Water Conservation Plan. 
 
  (a)-(b) (No change.) 
   
  (c) The [long-term] water conservation plan required under subsections (a) or 
(b) of this section [shall be consistent with the guidelines for water 
conservation planning available from the executive administrator. The plan shall 
serve as the basis for developing and implementing a conservation program. At a 
minimum, the plan shall consider, and as appropriate]  <nl>shall<ol> include[,]  
<nl>an evaluation of the applicant's water and wastewater system and shall set 
goals to be accomplished by water conservation measures. The plan shall include 
a long-term water conservation plan and an emergency water demand management 
plan. In addition to any elements deemed appropriate by the political 
subdivision, the long-term water conservation plan shall include the following: 
 
  <nl>(1) a water conservation education and information program; 
   
  <nl>(2) methods to determine and minimize unaccounted for water; and 
   
  <nl>(3) a non-promotional rate structure which is cost-based and does not 
promote the excessive use of water.<ol> [each of the elements in sec.375.32(10) 
of this title (relating to Required General Information). Reasons for not 
including any of the elements stated in sec.375.32(10) of this title (relating 
to Required General Information) shall be clearly stated. The plan shall 
effectively address the following: 
   
  [(1) need for the goals of a water conservation program; 
   
  [(2) methods to reduce water consumption; 
   
  [(3) methods to reduce the loss or waste of water; 
   
  [(4)  methods to improve efficiency in use of water; and 
   
  [(5) methods to increase the recycling and reuse of water.] 
     
  (d) (No change.) 
   
  <nl>(e) The board will accept a water conservation plan considered 
administratively complete by the commission. 
 
  This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt. 
 Issued in Austin, Texas, on January 9, 1995. 
 TRD-9500263 
  Craig D. Pedersen 
 Executive Administrator 
 Texas Water Development Board 
    Proposed date of adoption: February 16, 1995 
 For further information, please call: (512) 463-7981 
         
             
  Post Building Phase 
 
  31 TAC sec.375.101 
 
  The amendment is proposed under the authority of Texas Water Code, sec.6. 101 
and sec.15.605, which requires the board to adopt rules necessary to carry out 
the powers and duties of the board provided by Texas Water Code, and adopt rules 
for the State Water Pollution Control Revolving Fund. 
 
 
  sec.375.101. Responsibilities of Applicant. After the satisfactory completion 
of the project, the applicant shall be held accountable by the board for the 
continued validity of all representations and assurances made to the board. 
Continuing cooperation with the board is required. To facilitate such 
cooperation and to enable the board to protect the state's investment and the 
public interest, the following provisions shall be observed. 
 
  (1)-(3) (No change.) 
   
  (4) Applicants [with required water conservation programs] shall report 
annually to the executive administrator on the implementation[,] <nl>and<ol> 
status[, public acceptance, and effectiveness] of <nl>required<ol> [the] water 
conservation programs  <nl>for three years after the date of loan closing. If 
the executive administrator determines that the water conservation program is 
not in compliance with the approved water conservation plan, political 
subdivisions shall continue to supply annual reports beyond the three years 
until the executive administrator determines that deficiencies in the plan have 
been resolved. Annual reports prepared for the commission providing the 
information required by this subparagraph may be provided to the board to 
fulfill the board's reporting requirements. <ol> [until all of their financial 
obligations to the state have been discharged. The executive administrator may 
require an applicant which is not effectively implementing its conservation 
program to take corrective action. The executive administrator may refer further 
noncompliance by a applicant to the attorney general, or may take other 
corrective actions deemed appropriate to assure compliance.] 
   
  (5) (No change.) 
 
  This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt. 
 Issued in Austin, Texas, on January 9, 1995. 
 TRD-9500264 
  Craig D. Pedersen 
 Executive Administrator 
 Texas Water Development Board 
    Proposed date of adoption: February 16, 1995 
 For further information, please call: (512) 463-7981 
         
                   
  TITLE 34. PUBLIC FINANCE 
 Part I. Comptroller of Public Accounts 
  Chapter 5. Funds Management (Fiscal Affairs) 
  
  Claims Processing Witness Allowances 
 
  34 TAC sec.sec.5.71-5.74 
 
  (Editor's note: The text of the following sections proposed for repeal will 
not be published. The sections may be examined in the offices of the Comptroller 
of Public Accounts or in the Texas Register office, Room 245, James Earl Rudder 
Building, 1019 Brazos Street, Austin.) 
   
  The Comptroller of Public Accounts proposes the repeal of sec.sec.5.71-5.74, 
concerning claims processing-witness allowances. The sections are being repealed 
because they are no longer consistent with the various statutes that govern 
witness allowances. Those statutes were amended by House Bill 1952, 73rd 
Legislature, 1993. 
 The comptroller does not believe that new sections are needed to reflect this 
legislation. The witness allowance statutes now provide much more detail than 
previously, and the comptroller's general rules about the processing of payment 
documents in the uniform statewide accounting system will sufficiently cover 
witness allowance payments. 
 Mike Reissig, chief revenue estimator, has determined that for the first five-
year period the repeals are in effect there will be no fiscal implications for 
state or local government as a result of enforcing or administering the repeals. 
 Mr. Reissig also has determined that for each year of the first five years the 
repeals are in effect the public benefit anticipated as a result of enforcing 
the repeals is providing the public and state agencies with new information 
regarding their responsibilities regarding claims processing and witness 
allowances. There will be no effect on small businesses. There is no anticipated 
economic cost to persons who are required to comply with the repeals. 
 Comments on the repeals may be submitted to Kenny McLeskey, Manager of Claims 
Division, P.O. Box 13528, Austin, Texas 78711. 
 The repeals are proposed under the Government Code, sec.2101.035, which 
authorizes the comptroller to adopt rules for the effective operation of the 
uniform statewide accounting system. 
 The repeals implement the Government Code, sec.2101.035. 
 
 
  sec.5.71. Definitions. 
 
   
  sec.5.72. Procedure for Submission of Claims. 
 
   
  sec.5.73. Voucher Requirements. 
 
   
  sec.5.74. Special Requirements. 
 
  This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt. 
 Issued in Austin, Texas, on January 5, 1995. 
 TRD-9500146 
  Martin E. Cherry 
 Chief, General Law Section 
 Comptroller of Public Accounts 
    Earliest possible date of adoption: February 13, 1995 
 For further information, please call: (512) 463-4028 
         
                 
  TITLE 40. SOCIAL SERVICES AND ASSISTANCE 
 Part XII. Texas Board of Occupational Therapy Examiners 
  Chapter 373. Examinations 
  
  40 TAC sec.373.1 
 
  (Editor's note: The text of the following section proposed for repeal will not 
be published. The section may be examined in the offices of the Texas Board of 
Occupational Therapy Examiners or in the Texas Register office, Room 245, James 
Earl Rudder Building, 1019 Brazos Street, Austin.) 
   
  The Texas Board of Occupational Therapy Examiners proposes the repeal of 
sec.373.1, concerning Examinations, for the purpose of expanding and clarifying 
the rules. 
 Nina Hurter, Interim Executive Director of the Executive Council of Physical 
Therapy and Occupational Therapy Examiners, has determined that for the first 
five-year period the repeal is in effect there will be no fiscal implications 
for state or local government as a result of enforcing or administering the 
repeal. 
 Ms. Hurter also has determined that for each year of the first five years the 
repeal is in effect the public benefit anticipated as a result of repealing the 
rule will be the increase of consumer protection and the clarification of 
licensing requirements. There will be no effect on small businesses. There are 
no anticipated economic cost to persons who are required to comply with the 
repeal as proposed. 
 Comments on the proposed repeal may be submitted to Josephine Sanchez, OT 
Coordinator, Texas Board of Occupational Therapy Examiners, 3001 South Lamar 
Boulevard, Suite 101, Austin, Texas 78704. 
 The repeal is proposed under the Occupational Therapy Practice Act, Texas Civil 
Statutes, Article 8851, which provide the Texas Board of Occupational Therapy 
Examiners with the authority to adopt rules consistent with this Act to carry 
out its duties in administering this Act. 
 No other statute, code, or article is affected by this repeal. 
 
 
  sec.373.1. Examinations. 
 
  This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt. 
 Issued in Austin, Texas, on January 6, 1995. 
 TRD-9500255 
  Nina Hurter 
 Interim Executive Director 
 Executive Council of Physical Therapy and Occupational Therapy Examiners 
    Earliest possible date of adoption: February 13, 1995 
 For further information, please call: (512) 443-8202 
         
 Supervision 

point=10.04p set=10.04p <nl>40 TAC  s373.1 
       
  The Texas Board of Occupational Therapy Examiners proposes new sec.373.1, 
concerning Supervision, requiring supervision of certified occupational therapy 
assistants by occupational therapists registered; supervision of OT aides and 
orderlies; and supervision of OTs and OTAs with temporary licenses. 
 Nina Hurter, Interim Executive Director of the Executive Council of Physical 
Therapy and Occupational Therapy Examiners, has determined that for the first 
five-year period the rule is in effect there will be no fiscal implications for 
state or local government as a result of enforcing or administering the rule. 
 Ms. Hurter also has determined that for each year of the first five years the 
rule is in effect the public benefit anticipated as a result of enforcing the 
rule will be the increase of consumer protection and the clarification of 
licensing requirements. There will be no effect on small businesses. There are 
no anticipated economic cost to persons who are required to comply with the rule 
as proposed. 
 Comments on the proposed rule may be submitted to Josephine Sanchez, OT 
Coordinator, Texas Board of Occupational Therapy Examiners, 3001 South Lamar 
Boulevard, Suite 101, Austin, Texas 78704. 
 The new section is proposed under the Occupational Therapy Practice Act, Texas 
Civil Statutes, Article 8851, which provide the Texas Board of Occupational 
Therapy Examiners with the authority to adopt rules consistent with this Act to 
carry out its duties in administering this Act. 
 No other statute, code, or article is affected by this new section. 
 
 
  sec.373.1. Supervision. 
 
  (a) Supervision of COTAs. 
 
  (1) The OTR shall delegate responsibilities to the COTA that are within the 
scope of his or her training. 
   
  (2) A COTA shall provide occupational therapy services only under the general 
supervision of a licensed OTR. 
 
  (A) A minimum of eight hours of supervision per month for full time COTAs must 
be documented on a "COTA Supervision Form" prescribed by the board. (COTAs 
employed part time shall prorate the required supervision. If the COTA is 
employed less than 20 hours per month, a minimum of four hours of supervision is 
required.) The "COTA Supervision Form" must be submitted by the COTA with his or 
her annual license renewal. 
   
  (B) The manner of supervision shall depend on the treatment setting, 
patient/client caseload, and the competency of the COTA as determined by the 
supervising OTR. 
   
  (C) The supervising OTR need not be physically present or on the premises at 
all times. 
     
  (3) The OTR is responsible for completing the patient's evaluation/assessment. 
The supervising OTR may delegate any evaluative task to a COTA that the OTR and 
COTA agree is within the competency level of that COTA. 
   
  (4) The supervising OTR is responsible for developing and modifying the 
patient's treatment plan. The treatment plan must include the following 
components: goals, interventions/modalities, frequency, and duration. 
   
  (5) The supervising OTR has overall responsibility for providing the 
supervision necessary to protect the health and welfare of the consumer 
receiving treatment by a COTA. However, this does not absolve the COTA from his 
or her professional responsibilities. 
   
  (6) The supervising OTR is responsible for writing the patient's discharge 
summary. 
   
  (7) It is the responsibility of the OTR and the COTA to ensure that all 
documentation prepared by the COTA which becomes part of the patient's/client's 
permanent record is co-signed by the supervising OTR. 
   
  (8) These rules shall not preclude the COTA from responding to emergency 
situations in the patient's condition which require immediate action. 
   
  (9) It is the responsibility of the COTA to notify the board within thirty 
days of a change in the primary OTR supervisor on a form provided by the board. 
     
  (b) Supervision of an "OT Aide" or "OT Orderly." 
 
  (1) The OTR or COTA is responsible for the actions of the "OT Aide" or "OT 
Orderly" during patient contact. 
   
  (2) An OTR or COTA using "OT Aide" or "OT Orderly" personnel to assist with 
the provision of occupational therapy services must provide close personal 
supervision in order to protect the health and welfare of the consumer. 
   
  (3) Delegation of tasks to "OT Aides" or "OT Orderlies." 
 
  (A) The primary function of an "OT Aide" or "OT Orderly" functioning in an 
occupational therapy setting is to perform designated routine tasks related to 
the operation of an occupational therapy service. An OTR or COTA may delegate to 
an "OT Aide" or "OT Orderly" only specific tasks which are not evaluative or 
recommending in nature, and only after insuring that the "OT Aide" or "OT 
Orderly" has been properly trained for the performance of the tasks. Such tasks 
include, but are not limited to: 
 
  (i) routine department maintenance; 
   
  (ii) transportation of patients/clients; 
   
  (iii) preparation or setting up of treatment equipment and work area; 
   
  (iv) assisting patients'/clients' with their personal needs during treatment; 
   
  (v) assisting in the construction of adaptive equipment and splints; 
   
  (vi) clerical, secretarial, administrative activities; 
   
  (vii) carrying out a predetermined segment or task in the patient's care. 
     
  (B) The OTR or COTA shall not delegate to an "OT Aide" or "OT Orderly": 
 
  (i) performance of occupational therapy evaluative procedures; 
   
  (ii) initiation, planning, adjustment, modification, or performance of 
occupational therapy procedures requiring the skills or judgment of an OTR or 
COTA; 
   
  (iii) making occupational therapy entries directly in patients' or clients' 
official records; 
   
  (iv) Acting on behalf of the occupational therapist in any matter related to 
occupational therapy which requires decision making or professional judgment. 
         
  (c) Supervision of an occupational therapist or an occupational therapy 
assistant with a temporary license. 
 
  (1) Temporary License Pending Passage of Certification Examination. 
 
  (A) A person issued a temporary occupational therapy license pending passage 
of the certification examination must practice occupational therapy under the 
continuing supervision of an OTR. 
   
  (B) A minimum of sixteen hours of documented supervision per month is required 
for an OTA. An OTA employed part time shall prorate the required supervision. 
(If the OTA is employed less than 20 hours per month, a minimum of four hours of 
supervision is required.) 
   
  (C) The temporary licensee will certify to the board as to the name, license 
number, and address of his or her supervisor on a form provided by the board 
during the application process. 
   
  (D) The temporary licensee must notify the board within 15 days of a change in 
the OTR supervisor. 
   
  (E) The temporary licensee shall not supervise an occupational therapy 
student, an occupational therapy assistant, or an "OT Aide" or "OT Orderly." 
   
  (F) All documentation completed by an individual holding a temporary license 
pending passage of the certification examination which becomes part of the 
patient's/client's permanent file must be co-signed by the supervising OTR. 
     
  (2) Provisional Licenses. 
 
  (A) OTRs with provisional licenses are excluded from supervision requirements. 
   
  (B) COTAs with provisional licenses will require general supervision by a 
licensed OTR. 
 
  This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt. 
 Issued in Austin, Texas, on January 6, 1995. 
 TRD-9500256 
  Nina Hurter 
 Interim Executive Director 
 Executive Council of Physical Therapy and Occupational Therapy Examiners 
    Earliest possible date of adoption: February 13, 1995 
 For further information, please call: (512) 443-8202