PART 1. TEXAS DEPARTMENT OF INSURANCE
CHAPTER 1. GENERAL ADMINISTRATION
The commissioner of insurance adopts the repeal of 28 TAC §§1.47 - 1.49, 1.51, 1.52, 1.88, and 1.89; amendments to §1.32; and new §1.47. These sections concern the procedures for responding to notices of hearing, dispositions of contested cases, and appeals of dispositions. The changes modernize and clarify parts of TDI's contested case process. The repealed, amended, and new sections are adopted without changes to the proposed text published in the July 5, 2024, issue of the Texas Register (49 TexReg 4889). The sections will not be republished.
REASONED JUSTIFICATION. The repeal of §§1.47 - 1.49, 1.51, and 1.52 removes regulations that no longer provide relevant guidance because of repealed or recodified statutes. The repeal of §1.88 and §1.89 removes regulations containing outdated procedures that have been superseded by regulations in 1 TAC Chapter 155. New §1.47 and the amendments to §1.32 update the procedure for (1) informing applicants and license or authorization holders about alleged violations, and (2) informally disposing of contested cases when the applicant or license or authorization holder does not participate in the process. The amendments also make nonsubstantive changes for plain language and to reflect current agency drafting style.
SUMMARY OF COMMENTS AND AGENCY RESPONSE. TDI provided an opportunity for public comment on the rule proposal for a period that ended on August 5, 2024.
Commenters: TDI received comments from one commenter, Texas Land Title Association, in support of the proposal with changes.
Comment on §1.32
Comment. The commenter suggests that TDI consider establishing a timeframe within which the requested hearing will take place to establish clear expectations and ensure efficiency in resolving any disagreement involving licensing decisions.
Agency Response. Because of the variable nature of litigation and TDI's inability to control when a hearing is ultimately held at the State Office of Administrative Hearings (SOAH), TDI declines to make the suggested change.
Comments on §1.47
Comment. The commenter recommends that TDI prescribe the text and formatting of the required disclosure about a person's procedural rights in subsection (a). The commenter states that this change would ensure awareness of the consequences of failing to respond to a notice of allegations.
Agency Response. TDI agrees that it is important for license holders to be made aware of the consequences of failing to respond to TDI's allegations but does not believe that prescribing text and formatting is the best way to achieve clear, plain language communications. TDI declines to make the change, as each of the elements in the commenter's suggested language are already addressed in the proposed requirements. The rule will continue to include substantive requirements for disclosures that inform parties of their procedural rights without restricting the wording or formatting of those disclosures.
Comment. The commenter suggests that TDI add a requirement regarding the method of a default order's delivery to clarify how the named party will receive the commissioner's order. The commenter recommends the rule state that the order will be delivered in the same manner as the notice of allegations.
Agency Response. TDI declines to make the suggested change. Insurance Code §81.002 states that when delivering a decision or order, it must be mailed "to each party and the party's attorney of record, by certified mail, return receipt requested. . ." This is consistent with Government Code §2001.142(a)(3), which provides that a state agency may notify each party in a contested case of a decision or order by "service by first class, certified, or registered mail sent to the last known address of the party's attorney of record or of the party if the party is not represented by counsel." TDI does not believe it is necessary to interpret or apply these statutes in rule.
Comment. The commenter suggests that TDI clarify the description of who can file a motion to set aside a default order. Instead of the language "party in the contested case," the commenter suggests "person against whom a default order has been entered." The commenter states the change is appropriate because it appears a "contested case" does not exist at this stage of the process.
Agency Response. TDI declines to make the suggested change. Under the Administrative Procedures Act in Government Code Chapter 2001, a contested case may begin before the formal initiation of a contested case proceeding at SOAH or before the commissioner. There is a contested case at this stage of the process, and the proposed language better encompasses all those persons that may desire to file a motion to set aside a default order.
SUBCHAPTER A. RULES OF PRACTICE AND PROCEDURE
DIVISION 1. GENERAL PROCEDURAL PROVISIONS
STATUTORY AUTHORITY. The commissioner adopts amendments to §1.32 and new §1.47 under Government Code §2001.004 and §2001.056, and Insurance Code §§82.055, 4005.102, and 36.001.
Government Code §2001.004 provides for a state agency's adoption of rules stating the nature and requirements for formal and informal procedures.
Government Code §2001.056 provides that informal disposition of a contested case may be made by default.
Insurance Code §82.055 provides that the commissioner may informally dispose of a matter under Insurance Code Chapter 82, Subchapter B, by default.
Insurance Code §4005.102 lists remedies for violations of the Insurance Code, other insurance laws of Texas, and commissioner rules. This list includes a denial or disciplinary action against an applicant or a regulated person. The section also states that the remedies under the section are in addition to any remedy available under Insurance Code Chapter 82, which includes informal disposition by default.
Insurance Code §36.001 provides that the commissioner may adopt any rules necessary and appropriate to implement the powers and duties of TDI under the Insurance Code and other laws of this state.
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on September 25, 2024.
TRD-202404621
Jessica Barta
General Counsel
Texas Department of Insurance
Effective date: October 15, 2024
Proposal publication date: July 5, 2024
For further information, please call: (512) 676-6555
STATUTORY AUTHORITY. The commissioner adopts the repeal of §§1.47 - 1.49, 1.51, 1.52, 1.88, and 1.89 under Government Code §2001.004 and §2001.056 and Insurance Code §82.055 and §4005.102.
Government Code §2001.004 provides for a state agency's adoption of rules stating the nature and requirements for formal and informal procedures.
Government Code §2001.056 provides that informal disposition of a contested case may be made by default.
Insurance Code §82.055 provides that the commissioner may informally dispose of a matter under Insurance Code Chapter 82, Subchapter B, by default.
Insurance Code §4005.102 lists remedies for violations of the Insurance Code, other insurance laws of Texas, and commissioner rules. This list includes a denial or disciplinary action against an applicant or a regulated person. The section also states that the remedies under the section are in addition to any remedy available under Insurance Code Chapter 82, which includes informal disposition by default.
Insurance Code §36.001 provides that the commissioner may adopt any rules necessary and appropriate to implement the powers and duties of TDI under the Insurance Code and other laws of this state.
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on September 25, 2024.
TRD-202404620
Jessica Barta
General Counsel
Texas Department of Insurance
Effective date: October 15, 2024
Proposal publication date: July 5, 2024
For further information, please call: (512) 676-6555
SUBCHAPTER T. FAIR PLAN
DIVISION 1. PLAN OF OPERATION
28 TAC §§5.9910, 5.9911, 5.9913 - 5.9917, 5.9930 - 5.9933
The commissioner of insurance adopts amended 28 TAC §§5.9910, 5.9911, 5.9913 - 5.9917, and new §§5.9930 - 5.9933, concerning residual market coverage for property owners' associations. The new and amended sections implement House Bill 998, 88th Legislature, 2023, Regular Session. Sections 5.9910, 5.9913, 5.9915, 5.9916, 5.9917, 5.9932, and 5.9933 are adopted without changes to the text as proposed in the June 28, 2024, issue of the Texas Register (49 TexReg 4682). Sections 5.9911, 5.9914, 5.9930, and 5.9931 are adopted with changes to the proposed text to correct errors and in response to comments.
REASONED JUSTIFICATION. The amended and new sections are necessary to implement HB 998, which authorizes the Fair Access to Insurance Requirements Plan (FAIR Plan) to provide property owners' association insurance for condominium owners' and homeowners' associations.
HB 998 requires that the commissioner set, by rule, a designated area for FAIR Plan property owners' association insurance coverage for condominium owners' and homeowners' associations. According to Insurance Code §2211.1515(a), in determining the designated area, the commissioner must "to the extent practicable, ensure the designated area is not more than 10 miles beyond the Texas Windstorm Insurance Association catastrophe area designated under Section 2210.005; and follow geographical features."
After determining the designated area, Insurance Code §2211.051(b) authorizes the commissioner to set underserved areas within that designated area, if the commissioner determines that "property owners' association insurance is not reasonably available in the voluntary market to a substantial number of insurable risks."
The amendments incorporate references to property owners' association insurance in various sections of FAIR Plan's plan of operation where residential property insurance is referenced and remove the term "residential" before "property" where those terms appear, which reflects the expanded property types authorized under Insurance Code Chapter 2211.
In addition, the amendments enhance clarity and consistency with agency style guidelines by deleting "shall" or replacing "shall" with "will" or another context-appropriate word. Amendments also replace "Association" with "FAIR Plan," "Commissioner" with "commissioner," and "pursuant to" with "under," where appropriate.
The amendments also (1) update statutory references to reflect Insurance Code recodification; (2) add or amend Insurance Code section titles and citations for consistency; and (3) correct and revise punctuation, capitalization, and grammar to reflect current agency drafting style and plain language preferences. These nonsubstantive amendments are not noted in the following descriptions of the sections unless it is necessary or appropriate to provide additional context or explanation.
Descriptions of the new and amended sections follow.
Section 5.9910. Purpose. The amendments incorporate property owners' association insurance into the purpose of FAIR Plan and change "qualified citizens of Texas" to "insurable risks" to better align with statutory language and recognize that FAIR Plan may insure entities as well as individuals.
Section 5.9911. Definitions. The amendments add and clarify definitions to align with the broader scope of Insurance Code Chapter 2211, introducing definitions for "property owners' association," "property owners' association insurance," "TDI," and "TWIA." The amendments also add "FAIR Plan" to the current definition of "Association" and replace "Association" with "FAIR Plan." With these changes, both "Association" and "FAIR Plan" have the same meaning in these rules. Using "FAIR Plan" adds clarity because there are many associations. "Association" will be replaced with "FAIR Plan" in future amendments to other FAIR Plan rules.
An amendment adds a reference to property owners' association insurance to the definition of "inspector." This clarifies that an inspector may determine the condition of properties for which property owners' association insurance coverage under FAIR Plan is sought.
Amendments update an Insurance Code citation in the definition of "residential property insurance" and expand the definition of "underserved area" to include both residential property insurance and property owners' association insurance.
An amendment adds a reference to property owners' association insurance to the definition of "underwriting rules" to clarify that the underwriting rules include those for property owners' association insurance.
The proposal incorrectly cited Insurance Code §2211.011(6-a) for the definition of "property owners' association insurance." The correct citation is §2211.001(6-a), which is corrected in the adopted text.
Section 5.9913. Authority of Agents and Commissions. The amendments add "property owners' association" as a type of applicant. The amendments also increase readability of §5.9913(b) by rephrasing it to state that agents may not hold themselves out as agents of FAIR Plan.
Section 5.9914. Maximum Limits of Liability and Limitations. The amendments set the maximum liability limit for property owners' association insurance at $3 million for commercial structures and authorize FAIR Plan to reinsure some or all risks that are within or at the limit.
TDI looked at residual market limits for other states and considered the purpose and funding of FAIR Plan when setting the limit. The maximum liability limit of $3 million acknowledges that property owners' association insurance is commercial and presents different risks than FAIR Plan's residential coverage. In response to a comment, the adopted text removes the term "per location" from subsection (b). This change clarifies that the maximum limit applies on a per-structure basis.
Section 5.9915. Inspections. Amendments make changes throughout the section to add a reference to property owners' association insurance and revise or remove "residential" in addressing property insurance, for consistency with HB 998 and other amendments and new text.
Section 5.9916. Application Forms, Underwriting Rules, Rates, Policy Forms, and Endorsements. The amendments (1) remove the term "residential" in "residential property" to reflect that property under the section includes commercial property in property owners' association, and (2) replace "association policies" with "residential property insurance" in §5.9916(d) to clarify that the prohibition against covering businesses or commercial risks applies only to residential property insurance, not property owners' association insurance.
Section 5.9917. Application, Binder, Policy Issuance, Renewal, and Cancellation. The amendments expand the scope of the section by adding "or property owners' association insurance" after each instance of "residential property insurance." This addition reflects the expanded scope of Insurance Code Chapter 2211 to include property owners' association insurance, as authorized under HB 998.
An amendment updates an incorrectly titled citation to the "Property Tax Code" by removing "Property," so the citation correctly reads "§33.06 of the Tax Code." Amendments also add the title of Tax Code §33.06 so it is consistent with other code citations throughout the rule text.
Section 5.9930. Designated Area for Property Owners' Association Policies. New §5.9930 implements HB 998 by designating the area where FAIR Plan could write property owners' association insurance under Insurance Code §2211.1515. The commissioner designates the region extending 10 miles inland from the geographical features that form the border of the Texas Windstorm Insurance Association (TWIA) catastrophe area as the designated area.
Insurance Code §2211.1515 sets an inland boundary for the designated area--10 miles from the catastrophe area. Setting the coastal side boundary as the catastrophe area boundary and proposing a 10-mile strip as the designated area aligns with information from legislative hearings and comments received on the informal draft.
The text of paragraph (1) as proposed has been changed to correct a reference to an agency order. As adopted, "Commissioner Order No. 16878" is changed to "State Board of Insurance Order No. 16878." In addition, for clarification, a list of the 14 counties referenced by the order is included in the text as adopted.
Section 5.9931. Petition Requirements for Underserved Area for Property Owners' Association Insurance. New §5.9931 specifies the requirements for property owners' associations to petition for an area to be classified as underserved for property owners' association insurance. The section requires the petitioner to provide information that will help the commissioner determine whether an area is underserved. In response to a comment, the requirement in proposed subsection (c)(7) has been removed. As adopted, §5.9931(c)(7)(C) only requires petitioners to provide the names, physical addresses, and contact information of other property owners' associations if known.
Section 5.9932. Petition Procedures for Underserved Area for Property Owners' Association Insurance. New §5.9932 outlines TDI's procedures for assessing petitions from property owners' associations seeking classification of areas as underserved for property owners' association insurance.
New subsection (a) states that TDI will review petitions for compliance with §5.9931. TDI may also gather additional information to determine whether the proposed area qualifies as underserved.
New subsection (b) states that TDI may schedule a public hearing and provide notice as required under Insurance Code §2211.051.
New subsection (c) provides that the commissioner may determine that some, all, or none of the proposed area is underserved.
Section 5.9933. Setting Underserved Areas for Property Owners' Association Insurance. New §5.9933 recognizes the commissioner's statutory authority under Insurance Code §2211.051(b) to issue an order, either in response to a petition or on the commissioner's own initiative, determining that all or part of the designated area is underserved.
SUMMARY OF COMMENTS AND AGENCY RESPONSE. TDI provided an opportunity for public comment on the rule proposal for a period that ended on July 29, 2024. A public hearing on the proposal was held on July 16, 2024; the hearing notice was published in the June 28, 2024, issue of the Texas Register (49 TexReg 4682).
Commenters: TDI received comments from three commenters during the comment period. FAIR Plan's representative spoke in support of the proposal. The Community Associations Institute Texas Legislative Action Committee and a property owner association manager provided written comments in support of the proposal with changes.
Comments on the Maximum Limits of Liability and Limitations (§5.9914)
Comment. One commenter expresses concern about the maximum limit of liability under §5.9914(b), which is currently set at $3 million per structure. The commenter suggests switching to a per-residential-unit basis, similar to the National Flood Insurance Program, to ensure that larger buildings with multiple units are adequately covered.
Agency Response. TDI declines to make the suggested change. The limit of $3 million per structure is consistent with practices in other state residual markets. According to the 2024 Compendium of Property Insurance Plans from the Property Insurance Plans Service Office (PIPSO), most states set limits on the basis of the building rather than individual units (see Table 4 of the Compendium). Setting the limits on a per-unit basis with no maximum structure limit would make it more difficult for FAIR Plan to project and manage its exposure and could complicate reinsurance purchases. The per-structure limit is also consistent with how TWIA handles commercial property policies.
Comment. A commenter states that the $3 million maximum limit of liability is too low and suggests increasing it to $5 million to better match current rebuilding costs and reduce the number of structures for which property owners' associations would need to buy "reinsurance." TDI interprets this to mean an additional policy is needed to cover the remaining amount of insurance necessary to insure a structure.
Agency Response. TDI declines to increase the $3 million limit because it is greater than most other states and is a reasonable amount to provide insureds a first layer of coverage while managing FAIR Plan's exposure with this new insurance. Of the 32 states listed in PIPSO's report, only two are listed with maximum limits for commercial property over $3 million. Another state is listed with no maximum limits for commercial residential property (as opposed to commercial non-residential property). The majority of states have limits below $2 million (see PIPSO's 2024 Compendium of Property Insurance Plans, Table 4).
Insurance Code §2211.054(11) requires that FAIR Plan's plan of operation set maximum limits of liability. The statute necessarily requires balancing the need to make coverage available with the need to limit FAIR Plan's potential exposure. Setting a $3 million maximum limit for this new type of FAIR Plan insurance is a reasonable and measured approach. If needed, TDI can revisit this limit in the future.
Comment. A commenter suggests that FAIR Plan should allow for acting as an excess layer above primary insurance when primary coverage does not fully insure a property owners' association or when a specific peril coverage is unavailable.
Agency Response. TDI declines to make this change, as it is beyond the scope of this rulemaking.
Comment. A commenter states that the current wording on the maximum limit of liability in §5.9914(b) is unclear and suggests removing the term "per location" to avoid confusion.
Agency Response. TDI agrees and has removed the term "per location" in §5.9914(b). This change clarifies that the $3 million limit applies per structure. If there is more than one structure at a location, each structure will have its own limit. The per-structure limit aligns with the way TWIA sets its limits, which will assist with efficiency in FAIR Plan operations.
Comments on Authority of Agents and Commissions (§5.9913)
Comment. A commenter suggests that the phrase "upon request" in §5.9913(a) is unclear about who should make the request and proposes additional language.
Agency Response. TDI disagrees. Section 5.9913(a) is sufficiently clear that residential property owners, property owners' associations, or others with insurable interests may apply for FAIR Plan coverage. The phrase "upon request" has been in §5.9913(a) for many years without reported confusion. Therefore, TDI declines to make this change.
Comment. A commenter suggests adding language to §5.9913(b) to state that only after determining an applicant's eligibility may an agent inform a potential insured that they are appointed as an agent to FAIR Plan. The commenter states that without this addition, residential property owners and property owners' associations might remain unaware of FAIR Plan as an option, even if they are eligible.
Agency Response. TDI declines to make the suggested change. Adding the language could cause confusion. FAIR Plan does not sell policies directly to the public and does not have its own agents. Section 5.9913(f) specifically provides that an applicant may apply to FAIR Plan only through an agent. The purpose of §5.9913(b) is to prohibit agents from misrepresenting themselves as agents of FAIR Plan. Agents are responsible for assisting applicants in finding coverage and may inform them about FAIR Plan as an option.
Comments on Application, Binder, Policy Issuance, Renewal, and Cancellation (§5.9917)
Comment. A commenter seeks clarification on §5.9917(a)(1) and questions whether an offer from a Lloyd's plan qualifies as an offer to insure for determining eligibility for FAIR Plan. The commenter suggests that TDI refer to Insurance Code §551.051(1-a) and says that a Lloyd's plan is a surplus lines insurer and thus excluded as an insurer.
Agency Response. TDI disagrees. Insurance Code Chapter 2211 provides that offers from Lloyd's plan insurers qualify as offers to insure for the purpose of determining eligibility. Insurance Code §2211.1515(b) provides that two declinations from insurers writing property owners' association insurance is evidence that a property owners' association cannot obtain insurance through the voluntary market. Insurance Code §2211.001(5) defines "insurer" to mean "an authorized insurer writing property insurance in this state, including: (A) a Lloyd's plan; and (B) a reciprocal or interinsurance exchange."
Also, Insurance Code §551.051(1-a) specifically includes Lloyd's plans as insurance companies "admitted to engage in business and authorized to write liability insurance or commercial property insurance in this state."
Comment. A commenter suggests that the terminology in §5.9917(a)(1) conflicts with Insurance Code §551.051(1-a) and suggests using "insurers" instead of "insurance companies." The commenter also suggests using the term "admitted" instead of "licensed" in this subsection to align with the definition of "insurer" in Insurance Code §551.051(1-a).
Agency Response. TDI disagrees. Using the term "insurance companies" and the word "licensed" in §5.9917(a)(1) is not contrary to the meaning of the words "insurer" and "authorized" as used in the relevant statutory provisions, Insurance Code §2211.151 and §2211.1515. Section 5.9917(a)(1) has used "insurance companies" and "licensed" for many years, and TDI is not aware of any issues from using those terms. TDI will consider revising or clarifying the subsection in future rulemaking if issues arise.
Comment. A commenter suggests that declinations should be based on whether coverage meets "the level required by lenders, laws, or the property owners' associations governing documents."
Agency Response. TDI declines to make the suggested change. The suggested language lacks specific criteria and could lead to unclear and inconsistent eligibility requirements. Without detailed knowledge of the various laws and documents referenced, this could lead to uneven access to FAIR Plan.
Comment. A commenter expresses concerns that the requirement for two insurance companies to decline providing residential insurance property and property owners' association insurance is too restrictive for FAIR Plan eligibility. The commenter also seeks clarification on whether §5.9917 replaces Insurance Code §2211.1515 and suggests changing "authorized" to "admitted" in Insurance Code §2211.1515.
Agency Response. TDI declines to make changes to the current requirements. Section 5.9917(a)(1), which requires that two insurance companies must decline to provide coverage, aligns with and implements Insurance Code §2211.1515(b), which requires two declinations as evidence of the applicant's inability to obtain insurance. Any modification to this requirement would need legislative action. Likewise, legislation would be required to replace the word "authorized" in Insurance Code §2211.1515 with "admitted."
Comments on Petition Requirements (§5.9931)
Comment. A commenter states that the requirement in §5.9931(c)(7) is difficult to interpret and suggests removing it. The commenter notes that listing every property owners' association within a 1-mile radius is challenging due to the lack of a central database.
Agency Response. TDI agrees and has removed the proposed requirement to list all property owners' associations within a 1-mile radius. As adopted, §5.9931(c)(7)(C) requires petitioners to provide, if known, the names, physical addresses, and contact information of property owners' associations within the proposed underserved area. This simplifies the petition process while still collecting relevant information.
STATUTORY AUTHORITY. The commissioner adopts amendments to §§5.9910, 5.9911, 5.9913 - 5.9917, and new §§5.9930 - 5.9933 under Insurance Code §§2211.051, 2211.053(b), 2211.1515(a), and 36.001.
Insurance Code §2211.051 authorizes the commissioner to include in FAIR Plan the delivery of property owners' association insurance in underserved areas as provided in Insurance Code §2211.1515 if the commissioner determines, after notice and a hearing, that property owners' association insurance is not reasonably available in the voluntary market to a substantial number of insurable risks.
Insurance Code §2211.053(b) requires amendments to FAIR Plan's plan of operation to be adopted by the commissioner by rule.
Insurance Code §2211.1515(a) provides that the commissioner must, when determining the area to be designated by rule, ensure the area is not more than 10 miles beyond the Texas Windstorm Insurance Association catastrophe area designated under §2210.005; and follow geographical features when making this decision.
Insurance Code §36.001 provides that the commissioner may adopt any rules necessary and appropriate to implement the powers and duties of TDI under the Insurance Code and other laws of this state.
§5.9911.Definitions.
The following words and terms, when used in this subchapter, have the following meanings.
(1) Agent--Any person licensed by the commissioner as a general lines property and casualty agent under Insurance Code §4051.051, concerning License Required.
(2) Applicant--Any person applying for insurance from FAIR Plan, including any person designated by the applicant to be the applicant's representative at an inspection.
(3) Association or FAIR Plan--The Fair Access to Insurance Requirements (FAIR) Plan Association created under Insurance Code Chapter 2211, concerning FAIR Plan.
(4) Commissioner--The Texas commissioner of insurance.
(5) Governing Committee--The Governing Committee of FAIR Plan authorized under Insurance Code §2211.052, concerning Administration of FAIR Plan; Composition of Governing Committee.
(6) Inspector--The individual(s) or organization(s) designated by FAIR Plan to make inspections to determine the condition of the properties for which residential property insurance and property owners' association insurance is sought and to perform such other duties as may be authorized by FAIR Plan or the commissioner.
(7) Insurable risk--Property that meets the underwriting rules of FAIR Plan for determining the insurability of the risk.
(8) Member insurer or member--An insurer licensed to write property and casualty insurance in Texas and writing residential property insurance in Texas, including reciprocal exchanges and Lloyds plan insurers.
(9) Property owners' association--Homeowners' or condominium owners' association.
(10) Property owners' association insurance--Has the meaning assigned by Insurance Code §2211.001(6-a), concerning Definitions.
(11) Residential property insurance--Coverage as defined in Insurance Code §2211.001, concerning Definitions, with the exception of farm and ranch owners and farm and ranch insurance as set forth in Insurance Code §2301.003, concerning Applicability of Subchapter.
(12) Residential property insurance premiums--Net direct written premiums for residential property insurance for a calendar year as determined by the Texas residential property statistical plan.
(13) TDI--The Texas Department of Insurance.
(14) Underserved area--
(A) For residential property insurance, the areas designated by the commissioner in §5.3701 of this chapter (relating to Designation of Underserved Areas for Residential Property Insurance for Purposes of the Insurance Code Article 21.49A).
(B) For property owners' association insurance, the areas determined by the commissioner under §5.9933 of this chapter (relating to Determining Underserved Areas for Property Owners' Association Insurance).
(15) TWIA--The Texas Windstorm Insurance Association established under Insurance Code Chapter 2210.
(16) Underwriting rules--The underwriting rules for residential property insurance and property owners' association insurance as developed by FAIR Plan that have been filed with and approved by the commissioner.
§5.9914.Maximum Limits of Liability and Limitations.
(a) The maximum limits of liability for residential property insurance per location through FAIR Plan are $1,000,000 dwelling and $500,000 contents. FAIR Plan is authorized to reinsure some or all risks that are within or at these maximum limits.
(b) The maximum limit of liability for property owners' association insurance through FAIR Plan is $3,000,000 per structure, including business personal property. FAIR Plan is authorized to reinsure some or all risks that are within or at the maximum limit.
(c) FAIR Plan may not provide windstorm and hail insurance coverage for a risk eligible for that coverage under Insurance Code Chapter 2210, concerning Texas Windstorm Insurance Association.
(d) FAIR Plan may issue a policy that includes coverage for an amount in excess of a liability limit set forth in subsection (a) of this section, if FAIR Plan first obtains, from a reinsurer approved by the commissioner, reinsurance for the full amount of policy exposure above the limits for any given type of risk.
(e) The premium charged by FAIR Plan for the excess coverage must be equal to the amount of the reinsurance premium charged to FAIR Plan by the reinsurer, plus any payment to FAIR Plan that is approved by the commissioner.
§5.9930.Designated Area for Property Owners' Association Policies.
For purposes of Insurance Code §2211.1515, concerning Mandatory Property Owners' Association Policies in Certain Areas, the commissioner sets the designated area as the region extending 10 miles inland from the border of the TWIA catastrophe area, which consists of the geographical features of:
(1) the county lines of the 14 first tier coastal counties, which are Aransas, Brazoria, Calhoun, Cameron, Chambers, Galveston, Jefferson, Kenedy, Kleberg, Matagorda, Nueces, Refugio, San Patricio, and Willacy, as designated in State Board of Insurance Order No. 16878;
(2) Highway 146 where it intersects the cities of Seabrook and La Porte, as designated in Commissioner Order No. 95-1200;
(3) the municipal boundary of the City of Morgan's Point, as designated in Commissioner Order No. 96-0380; and
(4) Highway 146 where it intersects the cities of Shoreacres and Pasadena, as designated in Commissioner Order No. 96-1468.
§5.9931.Petition Requirements for Underserved Area for Property Owners' Association Insurance.
(a) A property owners' association may submit a petition to classify an area as an underserved area.
(b) Underserved areas must be located within the area designated in §5.9930 of this title (relating to Designated Area for Property Owners' Association Policies).
(c) The petition must:
(1) be submitted in writing to the Office of the Chief Clerk;
(2) provide contact information for the petitioner;
(3) clearly specify the area proposed as underserved, in a written description, a map, or other method;
(4) explain why the petitioner thinks the area is underserved;
(5) state the names of the petitioner's current and former insurers;
(6) provide:
(A) the names of insurers that have declined to provide coverage in the proposed underserved area; and
(B) detailed information about the risks, coverages, and coverage amounts the insurers are unwilling to offer;
(7) include, if known:
(A) the names of insurers that have or are actively writing property coverage in the proposed underserved area;
(B) the total number of property owners' associations within the proposed underserved area;
(C) the names, physical addresses, and contact information of property owners' associations in the proposed underserved area; and
(D) the number of property owners' associations within the proposed underserved area that have been unable to get coverage.
(d) TDI may request additional information from the petitioner to help complete the review under §5.9932 of this title (relating to Petition Procedures for Underserved Area for Property Owners' Association Insurance).
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on September 25, 2024.
TRD-202404602
Jessica Barta
General Counsel
Texas Department of Insurance
Effective date: October 15, 2024
Proposal publication date: June 28, 2024
For further information, please call: (512) 676-6555
The commissioner adopts amendments to 28 TAC §9.1 and §9.401, which adopt by reference the Basic Manual of Rules, Rates and Forms for the Writing of Title Insurance in the State of Texas (Basic Manual) and the Texas Title Insurance Statistical Plan (Statistical Plan). The commissioner adopts §9.1 and §9.401 and the amendments and new sections of the Basic Manual and the Statistical Plan without changes to the proposed text published in the May 31, 2024, issue of the Texas Register (49 TexReg 3908). The rules will not be republished.
REASONED JUSTIFICATION. The new and amended sections of the Basic Manual and Statistical Plan reflect changes that the commissioner approved for the formal rulemaking proposal in an order dated December 21, 2023. The order followed a hearing on November 15, 2023, where the commissioner presided over a petition by the Texas Land Title Association (TLTA) for most of the changes and a proposal by TDI staff for the remaining changes. The commissioner's order and the exhibits at the hearing provide a detailed justification for the various changes and additions to the Basic Manual and Statistical Plan. These are summarized as follows:
- The rates for several endorsements, mostly associated with commercial-level transactions, increased because they did not compensate the title industry for the labor and risk required for them. Most of these rates had not changed for several decades.
- Endorsements for certain transactions, particularly energy projects, needed to be updated, or new forms needed to be promulgated, to better cover certain risks.
- Some processes unnecessarily required notarization. Removing the notarization requirement from licensing forms and allowing the use of an unsworn declaration for statements related to a prior survey increases efficiency, reduces burdens on licensees and consumers, and reduces consumer expense.
- Some forms needed to be updated to more closely reflect industry updates that have occurred in other states and with other industries, such as accounting and estate planning, that have updated requirements or practices that were not adequately reflected in current forms.
- Some forms and procedures needed to be amended to clarify coverage or remove references to obsolete laws.
- Some rules in the Basic Manual and parts of the Statistical Plan needed corrections.
- Nonsubstantive changes related to plain language and rule drafting preferences needed to be made for clarity and to conform with current TDI style guidelines.
The item numbers below identify the adopted amendments to the Basic Manual and Statistical Plan. Each item number represents amendments to, or the addition of, specific rules or forms in the Basic Manual and parts of the Statistical Plan. The item numbers in this order match the numbers used in the proposal. They are for organizational purposes only and do not represent formal agenda items from a call for rulemaking.
TDI adopts amendments to these items as described in the following paragraphs.
Item 2023-1. TDI adopts amendments to Rate Rule R-11.c, affecting the following Basic Manual items:
1. Form T-3 (Assignment of Mortgage Endorsement): Increases the premium to the minimum Basic Premium Rate plus $100 for each additional full or partial 12-month period after the first anniversary of the initial policy date. Previously, the premium was the minimum Basic Premium Rate.
2. Form T-38 (Partial Release, Release of Additional Collateral, Modification Agreement, Reinstatement Agreement, or Release from Personal Liability Endorsement): Increases the premium to the minimum Basic Premium Rate plus $25 per year between the issuance of the endorsement and the policy. Previously, the premium was $100 plus $10 per year between the issuance of the endorsement and the policy.
3. Form T-3 (Down Date Endorsement): Increases the premium to $100 for nonresidential construction projects. The premium remains $50 for residential construction projects. Previously, the premium was $50 for any construction project, whether residential or nonresidential.
The adopted amendments also change the lettering convention on the subsections from lowercase to uppercase and make plain language edits.
Item 2023-2. TDI adopts amendments to Rate Rule R-15.b to increase the premium for the Form T-3 "down date endorsement" for Owner's Policies to $100 for nonresidential construction projects. The premium remains $50 for residential construction projects. Previously, the premium was $50 for any construction project, whether residential or nonresidential.
Item 2023-3. TDI adopts amendments to Rate Rule R-30 to increase the premium for Access Endorsements (Form T-23) to $100 for each Access Endorsement issued under a policy. Previously, the premium was $100 for all Access Endorsements issued under a policy. The adopted amendments also make plain language edits.
Item 2023-4. TDI adopts an amendment to Form T-1R, Residential Owner's Policy of Title Insurance One-to-Four Family Residences, removing the parenthetical "(Applies to Owner's Policy only)" in Schedule B, Item 3 of the form.
Item 2023-5. TDI adopts amendments to Form T-16, Loan Policy Aggregation Endorsement, to conform more closely to the American Land Title Association (ALTA) form used in other states. The adopted amendments also make plain language edits, renumber the subsections, and restructure the form text for greater clarity and easier reading.
Item 2023-6. TDI adopts amendments to Forms T-19, T-19.1, T-19.2, and T-19.3, which are a series of endorsements that include coverage for damage to improvements because of mineral extraction or development. The amendments make coverage across the forms more consistent and update Forms T-19.2 and T-19.3 to conform with their model form equivalents from ALTA.
Item 2023-7. TDI adopts amendments to Forms T-1 and T-2 to clarify provisions related to survey coverage.
Item 2023-9. TDI adopts amendments to subsection C of Procedural Rule P-20 to allow title insurers to specify for which year the policy insures "taxes not yet due and payable."
Item 2023-11. TDI adopts amendments to Procedural Rule P-57 to allow for more legal entities used in estate planning to be an additional insured on the Additional Insured Endorsement (Form T-26) and to allow the endorsement to be added up to 90 days after title is conveyed to the additional insured.
Item 2023-13. TDI adopts amendments to Procedural Rule P-2 and adopts Form T-47.1 to allow an unsworn declaration to be used to affirm that a property is essentially unchanged since a previous survey was issued. New Form T-47.1 can be used instead of the Form T-47, Survey Affidavit. TDI also adopts amendments to Form T-47 to allow for a single declarant and make plain language edits.
Item 2023-16. TDI adopts amendments to Procedural Rule P-9.b.8, Rate Rule R-11.f, and Form T-35 to clarify that the endorsement covers only revolving credit arrangements for construction projects, not other kinds of future advances.
Item 2023-18. TDI adopts an endorsement, Energy Project - Minerals and Surface Damage Endorsement (Form T-19.4), to provide surface damage coverage for severable improvements that would not be insured under the other forms that cover surface damage related to mineral extraction (Forms T-19, T-19.1, T-19.2, and T-19.3). TDI also adopts Procedural Rule P-50.2 to govern use of the endorsement, and Rate Rule R-29.2 to set a premium for the endorsement: 5% of the Basic Premium Rate. The endorsement can only be used if it is issued simultaneously with an energy project endorsement, as described in Item 2023-B.
Item 2023-21. TDI adopts amendments to Internal Control No. 5 to explicitly allow for electronic signatures on escrow checks.
Item 2023-22. TDI adopts amendments to Form PC-150 to update and align it with the Texas State Board of Public Accountancy standards.
Item 2023-23. TDI adopts an amendment to Form T-11 to correct a clerical error on the form where the last item on a numbered list did not have its corresponding number.
Item 2023-24. TDI adopts amendments to Form PC-417 to update TDI's mailing address on the form.
Item 2023-25. TDI adopts amendments to Licensing Forms FINT 08, FINT 09, FINT 10, FINT 129, and FINT 143 to remove the notarization requirement and replace it with an unsworn declaration.
Item 2023-26. TDI adopts amendments to the Statistical Plan to update codes related to Rate Rule R-8 so that the plan matches the transaction descriptions that changed when Rate Rule R-8 was amended in 2019. The adopted amendments also include codes that match the adopted items described in Items 2023-1, 2023-2, 2023-18, 2023-B, and 2023-C. TDI also adopts the amendments to use clearer and more consistent descriptions and improved style and formatting that reflect current TDI style preferences.
Item 2023-27. TDI adopts amendments to update TDI's mailing address, email address, and physical address where they are listed in the Basic Manual to reflect TDI's move from its previous location in the William P. Hobby Building at 333 Guadalupe Street, Austin, Texas 78701, to the Barbara Jordan State Office Building at 1601 Congress Avenue, Austin, Texas 78701, and also add TDI's Title Examinations email address as another way to communicate with TDI. The adopted amendments change TDI's address in the following places in the Basic Manual:
- Section V, Exhibit & Forms, Report forms for Audit of Trust Funds (TDI Title Forms PC 150)
- Section VI, Administration Rules, Rule D-1: Requirements for Ceasing Operations by Agents and Direct Operations, Section I, A
- Section VI, Administration Rules, Rule S.1: Minimum Capitalization Standards for Title Agents Pursuant to §2651.012 and Certification and Procedure to Determine Value of Assets Pursuant to §2651.158, Section III, C, D, and E
- Section VI, Administration Rules, Rule S.4: Title Company Requirements, Procedures, and Forms for Providing Privileged Title Agent Financial Solvency Information to the Department Pursuant to §2651.011, # A - 2 and 3, # B - 1 and 2
- Section VI, Administration Rules, Rule S.5: Filing of Title Agent's Quarterly Withholding Tax Report, Section III and Section IV
- Section VI, Administration Rules, Rule S.7: Surety Bond for Title Agents to Comply with Minimum Capitalization Standards, Section I, # E
Item 2023-A. TDI adopts amendments to Form T-50, the Insured Closing Service Letter, to conform more closely to recent changes in ALTA's model Closing Protection Letter, including the addition of language that excludes computer-related fraud. TDI also adopts the amendments to update formatting to reflect current TDI style, using plainer language and 12-point Segoe UI font, consistently numbering and lettering paragraphs, and organizing information more clearly.
Item 2023-B. TDI adopts six endorsements that are specifically tailored to provide coverage of severable improvements in different scenarios in connection with electrical energy projects: Forms T-55, T-55.1, T-55.2, T-55.3, T-55.4, and T-55.5. TDI adopts a rate rule to establish a premium for each endorsement: 5% of the Basic Premium Rate (Rate Rule R-37). TDI also adopts amendments to Procedural Rule P-72 to govern use of the six endorsements. TDI also adopts amendments to Procedural Rule P-72 to govern the use of another severable improvements endorsement form, Form T-54; and TDI adopts Rate Rule R-37 to establish a premium of 5% of the Basic Premium Rate for the Form T-54 endorsement. TDI also adopts amendments to update the formatting to reflect TDI style, using plainer language and 12-point Segoe UI font, consistently numbering and lettering paragraphs, and organizing information more clearly.
Item 2023-C. TDI adopts amendments to Procedural Rule P-1.u. to broaden the description of residential real property. The amendments allow immediately contemplated improvements to be considered residential properties on currently unimproved land. The amendments also loosen the acreage restrictions, including removing the agricultural production requirement for large residential properties between 10 and 200 acres. TDI also adopts amendments to Rate Rule R-16 to allow a 5% survey coverage rate to be applied to residential property when an Owner's Policy (Form T-1) is issued, not just when a Residential Owner Policy (Form T-1R) is issued. TDI also adopts amendments to update the formatting to reflect TDI style, using plainer language and 12-point Segoe UI font, consistently numbering and lettering paragraphs, and organizing information more clearly.
Item 2023-D. TDI adopts amendments to subparagraph 2.b of the Equity Loan Mortgage Endorsement (Form T-42) to delete the previous language and insert a statement that the subparagraph is intentionally deleted because of an amendment to the Texas Constitution. The Texas Constitution amendment made the subparagraph obsolete.
Item 2023-E. TDI adopts amendments to subsections B, C, and D of Rate Rule R-5 (Simultaneous Issue of Owner's Policy and Loan Policy) to clarify that the simultaneous issue discount is available in combination with other applicable rate discounts. TDI adopts amendments to subsections F of Rate Rule R-5 to lower the Owner's Policy amount threshold for that subsection to $1 million, restrict the subsection to nonresidential property transactions, and qualify that the subsequent Loan Policy must be issued by the same company that issued the Owner's Policy. TDI also adopts amendments to update the formatting to reflect TDI style, using plainer language and 12-point Segoe UI font, consistently numbering and lettering paragraphs, and organizing information more clearly.
SUMMARY OF COMMENTS AND AGENCY RESPONSE. TDI provided an opportunity for public comment on the rule proposal for a period that ended on July 1, 2024.
Commenters: TDI received comments from three commenters. Commenters in support of the proposal were TLTA and Texas REALTORS. A commenter in support of the proposal with changes was the Texas Society of Professional Surveyors.
Comments on §9.1
Comment. One commentor agrees with the entirety of the proposal and thanks TDI for its diligent work.
Agency Response. TDI appreciates the support.
Comment. One commentor supports the changes to Procedural Rule P-2 and Forms T-47 and T-47.1, allowing unsworn declarations to be used instead of a notary.
Agency Response. TDI appreciates the support.
Comment. One commentor suggests changes to Procedural Rule P-2 and Forms T-47 and T-47.1. The commenter suggests adding a written disclosure form to describe what perjury is and criminal penalties for perjury. The commenter also suggests adding safeguards to prevent survey misuse related to copyright protections and to prevent the reuse of a survey in transactions that do not involve the original purchaser of the survey.
Agency Response. TDI declines to make the suggested changes. The unsworn declaration and affidavit forms already have language warning about the penalty of perjury. A written disclosure form summarizing the meaning of perjury and describing criminal penalties for perjury is unnecessary.
Insurance Code §2704.102, Procedural Rule P-2, and Forms T-47 and T-47.1 are concerned with underwriting area and boundary coverage in a title policy. Insurance Code §2704.102 explicitly gives title companies providing area and boundary coverage the discretion to accept a survey regardless of its age or the identity of the person for whom the survey was prepared. Procedural Rule P-2 and Forms T-47 and T-47.1 enable title companies to exercise the underwriting discretion granted by statute. TDI declines to introduce restrictions that seem unrelated to underwriting.
SUBCHAPTER A. BASIC MANUAL OF RULES, RATES AND FORMS FOR THE WRITING OF TITLE INSURANCE IN THE STATE OF TEXAS
STATUTORY AUTHORITY. The commissioner adopts amended §9.1 under Insurance Code §§2551.003, 2651.002, 2651.007, 2652.051, 2703.054, 2703.101, 2703.151, 2703.208, and 36.001.
Insurance Code §2551.003 authorizes the commissioner to adopt and enforce rules that prescribe underwriting standards and practices, that define risks, and that the commissioner determines are necessary to accomplish the purposes of the Title Insurance Act.
Insurance Code §2651.002 requires that a title agent must file an application for an agent's license on forms provided by TDI.
Insurance Code §2651.007 requires that TDI prescribe title agent licensing renewal forms.
Insurance Code §2652.051 requires that an escrow officer file an application for an escrow officer's license on forms provided by TDI.
Insurance Code §2703.054 authorizes the commissioner to amend owner title insurance policy language and endorsements to implement Insurance Code Chapter 2703, Subchapter A.
Insurance Code §2703.101 requires the commissioner to prescribe an owner title policy form to be used in connection with a transaction involving residential real property in this state.
Insurance Code §2703.151 requires the commissioner to fix and promulgate premiums rates charged by title insurance companies and agents.
Insurance Code §2703.208 provides that any addition or amendment to the Basic Manual may be proposed and adopted by reference by publishing notice in the Texas Register.
Insurance Code §36.001 provides that the commissioner may adopt any rules necessary and appropriate to implement the powers and duties of TDI under the Insurance Code and other laws of this state.
§9.1.Basic Manual of Rules, Rates, and Forms for the Writing of Title Insurance in the State of Texas.
The Texas Department of Insurance adopts by reference the Basic Manual of Rules, Rates, and Forms for the Writing of Title Insurance in the State of Texas (Basic Manual) as amended, effective November 1, 2024. The Basic Manual is available on the TDI website at www.tdi.texas.gov.
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on September 25, 2024.
TRD-202404618
Jessica Barta
General Counsel
Texas Department of Insurance
Effective date: November 1, 2024
Proposal publication date: May 31, 2024
For further information, please call: (512) 676-6555
STATUTORY AUTHORITY. The commissioner adopts amended §9.401 under Insurance Code §§2551.003, 2703.151, 2703.153, 2703.208, and 36.001.
Insurance Code §2551.003 authorizes the commissioner to adopt and enforce rules that prescribe underwriting standards and practices, that define risks, and that the commissioner determines are necessary to accomplish the purposes of the Title Insurance Act.
Insurance Code §2703.151 requires the commissioner to fix and promulgate premiums rates charged by title insurance companies and agents.
Insurance Code §2703.153 requires the commissioner to develop and maintain a statistical report for the use of fixing and promulgating premium rates. The commissioner is required to evaluate the statistical report not less than every five years to see whether changes are required and amend it as necessary.
Insurance Code §2703.208 provides that any addition or amendment to the Basic Manual may be proposed and adopted by reference by publishing notice in the Texas Register.
Insurance Code §36.001 provides that the commissioner may adopt any rules necessary and appropriate to implement the powers and duties of TDI under the Insurance Code and other laws of this state.
§9.401.Texas Title Insurance Statistical Plan.
The Texas Department of Insurance adopts by reference the rules in the Texas Title Insurance Statistical Plan as amended effective January 1, 2025. This document is published by and is available from the Texas Department of Insurance, MC: PC-ACT, P.O. Box 12030, Austin, Texas 78711-2030. This document is also available on the TDI website at www.tdi.texas.gov.
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on September 25, 2024.
TRD-202404619
Jessica Barta
General Counsel
Texas Department of Insurance
Effective date: January 1, 2025
Proposal publication date: May 31, 2024
For further information, please call: (512) 676-6555
CHAPTER 147. DISPUTE RESOLUTION--AGREEMENTS, SETTLEMENTS, COMMUTATIONS
INTRODUCTION. The Texas Department of Insurance, Division of Workers' Compensation (DWC) adopts the amendment of the title of 28 TAC §147.10, concerning commutation of impairment income benefits. DWC adopts §147.10 without changes to the proposed text published in the August 23, 2024, issue of the Texas Register (49 TexReg 6407). The rule will not be republished.
REASONED JUSTIFICATION. The amendment corrects an inadvertent duplication in the title of §147.10. The proposal amending Chapter 147, which was published in the April 5, 2024, issue of the Texas Register (49 TexReg 2165) reorganized the chapter to make it easier to understand and use. In that proposal, the title of §147.10 was inadvertently renamed to duplicate the title of §147.11. Amending §147.10 is necessary to correct the title of §147.10 to Commutation of Impairment Income Benefits to better describe its purpose.
SUMMARY OF COMMENTS AND AGENCY RESPONSE.
Commenters: DWC received one written comment, and no oral comments. Commenters in support of the proposal were: Office of Injured Employee Counsel (OIEC). DWC did not receive any comments against the proposal.
Comment on §147.10. OIEC commented that they support DWC's proposed change to the title of Rule 147.10 to "Commutation of Impairment Income Benefits" to better describe its purpose.
Agency Response to Comment on 147.10. DWC appreciates the comment.
STATUTORY AUTHORITY. The commissioner of workers' compensation adopts the amendment to 28 TAC §147.10 under Labor Code §§408.128, 402.00111, 402.00116, and 402.061.
Labor Code §408.128 allows an employee to elect to commute the remainder of their entitled impairment income benefits if the employee has returned to work for at least three months, earning at least 80% of the employee's average weekly wage.
Labor Code §402.00111 provides that the commissioner of workers' compensation shall exercise all executive authority, including rulemaking authority under Title 5 of the Labor Code.
Labor Code §402.00116 provides that the commissioner of workers' compensation shall administer and enforce this title, other workers' compensation laws of this state, and other laws granting jurisdiction to or applicable to DWC or the commissioner.
Labor Code §402.061 provides that the commissioner of workers' compensation shall adopt rules as necessary to implement and enforce the Texas Workers' Compensation Act.
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on September 27, 2024.
TRD-202404660
Kara Mace
General Counsel
Texas Department of Insurance, Division of Workers' Compensation
Effective date: October 17, 2024
Proposal publication date: August 23, 2024
For further information, please call: (512) 804-4703