CHAPTER 2003.  PROCEDURES FOR EVALUATING FIRE LOSS RISK

SUBCHAPTER A.  EVALUATING FIRE LOSS RISK

Revised Law

Sec. 2003.001.  FIRE LOSS INFORMATION.  (a)  The department shall:

     (1)  ascertain as soon as practicable the annual fire loss in this state; and

     (2)  obtain and maintain records regarding the annual fire loss in this state.

(b)  The department shall collect data concerning the annual fire loss as necessary to enable the department to classify:

     (1)  fire losses in this state;

     (2)  the causes of those fire losses;

     (3)  the amount of the premiums collected for fire loss for each class of risk; and

     (4)  the amount paid for the fire losses.

(c)  The department shall collect the data in a manner that aids in determining methods of reducing fire losses.

(d)  The commissioner may designate one or more advisory organizations or other agencies to gather, audit, and compile the fire loss experience of insurers.  The insurers shall bear the costs incurred under this subsection.

(e)  To implement this section, the department may:

     (1)  employ clerical personnel, inspectors, experts, and other assistants; and

     (2)  incur other necessary expenses.  (V.T.I.C. Art. 5.25, Sec. (a) (part).)

Source Law

Art. 5.25.  (a)  [The State Board of Insurance … .] Said Board shall have authority to employ clerical help, inspectors, experts and other assistants, and to incur such other expenses as may be necessary in carrying out the provisions of this law.  Said Board shall ascertain as soon as practicable the annual fire loss in this State;  obtain, make and maintain a record thereof and collect such data with respect thereto as will enable said Board to classify the fire losses of this State, the causes thereof, and the amount of premiums collected therefor for each class of risks and the amount paid thereon, in such manner as will aid in determining equitable insurance rates, methods of reducing such fire losses and reducing the insurance rates of the State, or subdivisions of the State.  The Board may designate one or more advisory organizations or other agencies to gather, audit, and compile such experience of insurers, and the cost thereof shall be borne by such insurers.

Revisor's Note

(1)  Section (a), V.T.I.C. Article 5.25, refers to the "State Board of Insurance."  Chapter 685, Acts of the 73rd Legislature, Regular Session, 1993, abolished that board and transferred its functions to the commissioner of insurance and the Texas Department of Insurance.  Throughout this chapter, references to the State Board of Insurance have been changed appropriately.

(2)  Section (a), V.T.I.C. Article 5.25, states that the State Board of Insurance (now the Texas Department of Insurance) shall  "obtain, make and maintain a record" of the annual fire losses. The revised law omits "make" from the quoted language because the meaning of "making" a record is included in the meaning of "maintaining" that record.

(3)  Section (a), V.T.I.C. Article 5.25, states that the State Board of Insurance (now the Texas Department of Insurance) shall collect data on fire losses in a manner that will aid in determining "equitable insurance rates" and in "reducing the insurance rates of the State, or subdivisions of the State."  The revised law omits the quoted language as impliedly repealed by Section 21.12, Chapter 206, Acts of the 78th Legislature, Regular Session, 2003.  That section amended Section (b), V.T.I.C. Article 5.25, to provide that, beginning December 1, 2004, rates for residential fire and allied lines insurance are determined as provided by V.T.I.C. Article 5.13-2, revised in this code as Chapter ______.  Before the enactment of Chapter 206, Acts of the 78th Legislature, Regular Session, 2003, the commissioner of insurance promulgated rates for various lines of insurance, including residential fire and allied lines insurance.  Under V.T.I.C. Article 5.13-2, however, insurers now file proposed rates with the commissioner for approval.  Therefore, because the commissioner no longer promulgates these rates, the provisions with respect to determining equitable rates and reducing rates are impliedly repealed.  For additional information, see the revisor's note to the end of this subtitle.

Revised Law

Sec. 2003.002.  FIRE SUPPRESSION RATINGS FOR BORDER MUNICIPALITIES.  In assigning or evaluating a fire suppression rating for a municipality at or near the border between this state and another state or the United Mexican States, the commissioner shall consider the existence and capabilities of a fire department or volunteer fire department that:

     (1)  serves an adjoining or nearby municipality in the other state or the United Mexican States; and

     (2)  by agreement or by long-standing practice provides fire suppression services to the municipality in this state.  (V.T.I.C. Art. 5.25-3.)

Source Law

Art. 5.25-3.  The commissioner, in adopting fire insurance rates or in assigning or evaluating a fire suppression rating for a municipality at or near the border between this state and another state or the United Mexican States, shall take into account the existence and capabilities of a fire department or volunteer fire department that serves an adjoining or nearby municipality in the other state or the United Mexican States and that by agreement or by long-standing practice provides fire suppression services to the Texas municipality.

Revisor's Note

V.T.I.C. Article 5.25-3 requires the commissioner of insurance to consider certain factors in "adopting fire insurance rates" for border municipalities.  The revised law omits the quoted language for the reason stated in Revisor's Note (3) to Section 2003.001.

Revised Law

Sec. 2003.003.  CREDIT FOR REDUCING FIRE HAZARD.  The commissioner may give a locality, municipality, or other political subdivision credit for:

     (1)  each fire hazard that the locality, municipality, or other political subdivision reduces or removes;

     (2)  additional fire-fighting equipment, increased police protection, or any other equipment or improvement that tends to reduce the fire hazard of the locality, municipality, or other political subdivision; and

     (3)  a good fire record made by the locality, municipality, or other political subdivision.  (V.T.I.C. Art. 5.33, Sec. (a).)

Source Law

Art. 5.33.  (a)  The commissioner may give each city, town, village, locality, or other political subdivision credit for each and every hazard they may reduce or entirely remove, and also for all added fire fighting equipment, increased police protection, or any other equipment or improvement that has a tendency to reduce the fire hazard of any such city, town, village, locality, or other political subdivision, and also to give credit for a good fire record made by any city, town, village, locality, or other political subdivision.

Revisor's Note

(1)  Section (a), V.T.I.C. Article 5.33, refers to a "city, town, [or] village."  The revised law substitutes "municipality" for "city, town, [or] village" because that is the term used in the Local Government Code.

(2)  Section (a), V.T.I.C. Article 5.33, states that the commissioner of insurance may give credit for a fire hazard that a locality, municipality, or other political subdivision may "entirely remove."  The revised law omits the term "entirely" because to "remove" something means to "entirely remove" it.

Revised Law

Sec. 2003.004.  POLICYHOLDER CREDIT FOR REDUCING HAZARD.  (a)  The commissioner may require an insurer to give credit to a policyholder for a hazard that the policyholder reduces or removes.

(b)  For purposes of this section, the following actions constitute a reduction in hazard by a policyholder:

     (1)  the installation of a new standard fire hydrant approved by the department within the required distance of a risk, as prescribed by the department; or

     (2)  the use of compressed air foam technology in fire-fighting equipment.

(c)  The insurer shall give credit in the proportion that the hazard is reduced or removed and shall refund to the policyholder the proportional part of the unearned premium charged for the hazard that is reduced or removed.  (V.T.I.C. Art. 5.33, Secs. (b), (c), (d).)

Source Law

(b)  The commissioner may also compel any company to give any or all policy holders credit for any and all hazards said policy holder or holders may reduce or remove.

(c)  For the purposes of this Article, the installation of a new standard fire hydrant approved by the department within the required distance of a risk, as prescribed by the department, or the use of compressed air foam technology in fire-fighting equipment shall constitute a reduction in hazard by the policy holder or holders.

(d)  Said credit shall be in proportion to such reduction or removal of such hazard and said company or companies shall return to such policy holder or holders such proportional part of the unearned premium charged for such hazard that may be reduced or removed.

[Sections 2003.005-2003.050 reserved for expansion]

SUBCHAPTER B.  MUNICIPAL FIRE LOSS LISTS

Revised Law

Sec. 2003.051.  ANNUAL LIST OF INSURED FIRE LOSSES BY MUNICIPALITY.  (a)  The department shall compile for each municipality in this state a list for distribution to the municipality of the insured fire and lightning losses that:

     (1)  exceed $100; and

     (2)  are paid in the municipality for the preceding statistical year under policy forms:

          (A)  prescribed or approved by the commissioner and authorized for use by Section ____ [[[V.T.I.C. Art. 5.145, Sec. 2(b)]]]; or

          (B)  filed and in effect as provided by Section ____ [[[V.T.I.C. Art. 5.145, Sec. 2(a)]]].

(b)  Each list must include:

     (1)  the name of each person recovering a loss under a policy form described by Subsection (a);

     (2)  the address or location where the loss occurred; and

     (3)  the amount paid by the insurer on the loss.

(c)  The department shall develop each list from information obtained from insurer reports of individual losses during the statistical year.  (V.T.I.C. Art. 5.25-2, Secs. 1, 2.)

Source Law

Art. 5.25-2

Sec. 1.  In this article, "list" means the list of fire and lightning losses in excess of $100 paid under policy forms adopted or approved by the commissioner under Article 5.35 of this code or filed and in effect as provided by Article 5.145 of this code in a particular city or town prepared by the department for distribution to the city or town.

Sec. 2.  (a)  The department shall compile for each city or town in Texas a list of the insured fire losses paid under policy forms adopted or approved by the commissioner under Article 5.35 of this code or filed and in effect as provided by Article 5.145 of this code in that city or town for the preceding statistical year.

(b)  The list shall include:

     (1)  the names of persons recovering losses under policy forms adopted or approved by the commissioner under Article 5.35 of this code or filed and in effect as provided by Article 5.145 of this code;

     (2)  the addresses or locations where the losses occurred; and

     (3)  the amount paid by the insurance company on each loss.

(c)  The department shall obtain the information to make the lists from insurance company reports of individual losses during the statistical year.

Revisor's Note

(1)  Sections 1 and 2, V.T.I.C. Article 5.25-2, refer to "policy forms adopted or approved by the commissioner under Article 5.35 of this code or filed and in effect as provided by Article 5.145 of this code."  Under V.T.I.C. Article 5.35, policy forms for fire and allied lines insurance were  adopted or approved by the commissioner of insurance.  The 78th Legislature enacted Chapter 206, Acts of the 78th Legislature, Regular Session, 2003, which became effective June 11, 2003.  Section 21.22 of that act amended Article 5.35 to provide that policy forms for residential property insurance, including fire and allied lines insurance, are now regulated under V.T.I.C. Article 5.13-2.  However, under Section 2(b), V.T.I.C. Article 5.145, enacted by Section 2.01 of Chapter 206, an insurer may continue to use policy forms previously promulgated, approved, or adopted under Article 5.35. For clarity and to fully reflect the changes made by Chapter 206, the revised law substitutes "prescribed or approved by the commissioner and authorized for use by ____," the revision of Section 2(b), V.T.I.C. Article 5.145, for "policy forms adopted or approved by the commissioner under Article 5.35 of this code."

(2)  Section 1, V.T.I.C. Article 5.25-2, refers to a "city or town."  Throughout this subchapter, the revised law substitutes "municipality" for "city or town" because "municipality" is the term used in the Local Government Code.

Revised Law

Sec. 2003.052.  MUNICIPALITY'S REQUEST FOR LIST; RETURN REPORT.  (a)  The department shall provide to a municipality a copy of the list compiled under Section 2003.051 for the municipality on the request of the municipality or the municipality's authorized agent or fire marshal.

(b)  Each municipality shall investigate the information contained in the list to determine the losses actually occurring within the limits of the municipality. The municipality shall report to the department:

     (1)  a list of the losses that actually occurred within the limits of the municipality;

     (2)  a list of the losses that did not occur within the limits of the municipality; and

     (3)  other evidence essential to establishing the losses occurring in the municipality.  (V.T.I.C. Art. 5.25-2, Secs. 3, 4.)

Source Law

Sec. 3.  Upon the request of any city or town, or its duly authorized agent or fire marshall, the department shall provide that city and town with a copy of the list for its particular area.

Sec. 4. Each city or town shall investigate its list to determine the losses actually occurring in its limits and shall make a report to the department, which report shall include:

     (1)  a list of the losses that actually occurred in the limits of the city or town;

     (2)  a list of any losses not occurring in the limits of the city or town; and

     (3)  other evidence essential to establishing the losses in the city or town.

Revisor's Note

Section 3, V.T.I.C. Article 5.25-2, refers to a request made by the "duly authorized agent or fire marshall" of a municipality.  The revised law omits "duly" because the requirement that an agent be authorized is sufficient to ensure that the agent has proper authority to make the request.

Revised Law

Sec. 2003.053.  LIST CORRECTIONS; USE.  The department shall:

     (1)  make changes that the department considers appropriate to correct the list compiled under Section 2003.051 for a municipality; and

     (2)  use the corrected list to determine the fire record credit or debit for the municipality for the next year.  (V.T.I.C. Art. 5.25-2, Sec. 5.)

Source Law

Sec. 5.  The department shall make such changes or corrections as to it shall seem appropriate in order to correct the list of insured fire and lightning losses paid under policy forms adopted or approved by the commissioner under Article 5.35 of this code or filed and in effect as provided by Article 5.145 of this code in a particular city or town and said list of losses, as changed or corrected, shall be used to determine the fire record credit or debit for each particular city or town for the next year.

Revised Law

Sec. 2003.054.  CHARGE FOR LIST AND FIRE RECORD SYSTEM.  The commissioner shall set and collect a charge for compiling and providing a list under this subchapter and as the commissioner considers appropriate for administering the fire record system.  (V.T.I.C. Art. 5.25-2, Sec. 6.)

Source Law

Sec. 6.  The commissioner shall set and collect a charge for compiling and providing a list of fire and lightning losses paid under policy forms adopted or approved by the commissioner under Article 5.35 of this code or filed and in effect as provided by Article 5.145 of this code in a particular city or town and as the commissioner shall deem appropriate to administer the fire record system.

Revised Law

Sec. 2003.055.  DEPARTMENT AUTHORITY TO REQUIRE PROVISION OF FIRE LOSS INFORMATION.  To accumulate statistical information for the control and prevention of fires, the department may require each municipality in this state and each insurer engaged in business in this state to provide to the department a complete and accurate report that lists all fire and lightning losses occurring in this state that are reflected in the municipality's or insurer's records.  (V.T.I.C. Art. 5.25-2, Sec. 7.)

Source Law

Sec. 7.  The department is authorized to require each and every city or town in the State of Texas and each and every insurance company or carrier of every type and character whatsoever doing business in the State of Texas to furnish to it a complete and accurate list of all fire and lightning losses occurring within the State of Texas and reflected in their records for the purpose of accumulating statistical information for the control and prevention of fires.

Revised Law

Sec. 2003.056.  DISCRETIONARY PROVISION OF LIST.  The department is not required to provide a list compiled under this subchapter if the fire record system is not in effect.  (V.T.I.C. Art. 5.25-2, Sec. 8.)

Source Law

Sec. 8.  The department may, at its discretion, furnish such list only during such time as the fire record system remains in force and effect.

Revisor's Note

Section 8, V.T.I.C. Article 5.25-2, states that the Texas Department of Insurance has discretion to provide a list while the fire record system remains "in force and effect."  The revised law omits "force" from the quoted language because "in force" is included in the meaning of "in effect."

[Sections 2003.057-2003.100 reserved for expansion]

SUBCHAPTER C.  VOLUNTARY INSPECTION PROGRAM

Revised Law

Sec. 2003.101.  DEFINITIONS.  In this subchapter:

     (1)  "Inspection" means a physical inspection of property for which residential property insurance is sought.

     (2)  "Inspection certificate" means a certificate issued under this subchapter by an inspector indicating that the condition of property meets or exceeds minimum standards.

     (3)  "Inspector" means a person authorized by the commissioner to perform inspections under this subchapter.

     (4)  "Minimum standards" means the standards adopted by the commissioner by rule regarding the insurability of property under this subchapter.

     (5)  "Residential property insurance" means insurance against loss to real or tangible personal property at a fixed location that is provided though a homeowners insurance policy, a residential fire and allied lines insurance policy, or a farm and ranch owners insurance policy.  (V.T.I.C. Art. 5.33B, Sec. 2.)

Source Law

Sec. 2.  In this article:

     (a)  "Residential property insurance" means insurance against loss to real or tangible personal property at a fixed location provided in a homeowners policy, residential fire and allied lines policy, or farm and ranch owners policy.

     (b)  "Inspection" means a physical inspection of the property for which residential property insurance is sought.

     (c)  "Inspection certificate" means a certificate issued by an inspector pursuant to this article indicating that the condition of the property meets or exceeds minimum standards.

     (d)  "Minimum standards" are those standards for property condition insurability under this article as the commissioner shall determine by rule.

     (e)  "Inspector" means a person authorized by the commissioner to perform inspections under this article.

Revised Law

Sec. 2003.102.  RIGHT TO VOLUNTARY INSPECTION OF PROPERTY CONDITION.  A person with an insurable interest in real or tangible personal property at a fixed location who desires to purchase residential property insurance may obtain an independent inspection of the condition of the property by an inspector authorized to perform inspections under this subchapter.  (V.T.I.C. Art. 5.33B, Sec. 1.)

Source Law

     Art. 5.33B

Sec. 1.  Any person having an insurable interest in real or tangible personal property at a fixed location who desires to purchase residential property insurance may procure an independent inspection of the condition of the property by an inspector authorized to perform inspections under this article of the property proposed to be insured.

Revised Law

Sec. 2003.103.  PLAN OF OPERATION.  (a)  The commissioner shall adopt a plan of operation for the voluntary inspection program.

(b)  The plan of operation must include rules and standards for the voluntary inspection program, including:

     (1)  the manner and scope of the inspections to be performed;

     (2)  the contents of the written evaluation report;

     (3)  the form of the inspection certificate to be issued;

     (4)  the term during which an inspection certificate is valid;

     (5)  rules for the certification or licensing of persons authorized to perform inspections under the program; and

     (6)  the fee that may be charged a person requesting an inspection under the program.  (V.T.I.C. Art. 5.33B, Sec. 3(a) (part).)

Source Law

Sec. 3.  (a)  The commissioner shall adopt a plan of operation for the Voluntary Inspection Program.  The plan of operation shall include rules and standards for the inspection program, including but not limited to the following:

     (1)  the manner and scope of the inspections to be performed;

     (2)  the contents of the written evaluation report;

     (3)  the form of the inspection certificate to be issued;

     (4)  the term during which an inspection certificate shall remain valid;

     (5)  rules for the certification and licensing of persons who are authorized to perform inspections under this program, … and

     (6)  the fee which may be charged to the person requesting the inspection.

Revisor's Note

Section 3(a), V.T.I.C. Article 5.33B, refers to rules and standards for the voluntary inspection program "including but not limited to" specified items. Throughout this subchapter, the revised law omits "but not limited to" and similar phrases because Section 311.005(13), Government Code (Code Construction Act), applicable to the revised law, and Section 312.011(19), Government Code, provide that "includes" and "including" are terms of enlargement and not of limitation and do not create a presumption that components not expressed are excluded.

Revised Law

Sec. 2003.104.  ELIGIBLE INSPECTORS.  Persons who may be certified or licensed to perform inspections under this subchapter include:

     (1)  a person licensed to perform real property inspections under Chapter 1102, Occupations Code; and

     (2)  a designated employee or agent of a county or municipality that chooses to establish a voluntary inspection program to inspect residential properties within the territorial limits of the county or municipality.  (V.T.I.C. Art. 5.33B, Sec. 3(a) (part).)

Source Law

Sec. 3.  (a)  …  [The plan of operation shall include]  …

     (5)  [rules for the certification and licensing of persons who are authorized to perform inspections under this program,] which group shall include, but not be limited to:

          (i)  persons licensed to perform real property inspections under the Real Estate Licensing Act;

          (ii)  designated employees or agents of a county or municipality which elects to establish a voluntary inspection program to inspect properties for residential properties within the territorial limits of the county or municipality; … .

Revisor's Note

Section 3(a)(5), V.T.I.C. Article 5.33B, refers to persons licensed to perform inspections of real property under the "Real Estate Licensing Act," meaning Article 6573a, Vernon's Texas Civil Statutes. The relevant part of that act was codified in 2001 as Chapter 1102, Occupations Code, which took effect in 2003.  For the convenience of the reader, the revised law substitutes a reference to Chapter 1102, Occupations Code.

Revised Law

Sec. 2003.105.  PRESUMPTION OF INSURABILITY.  (a)  The existence of an inspection certificate issued under this subchapter creates a presumption that the condition of the property inspected is adequate for the issuance of residential property insurance.

(b)  If an inspection certificate is used in whole or in part to determine insurability, an insurer may require as a condition of issuing a residential property insurance policy that the applicant for that insurance provide a written statement that there has not been a material or substantial change to the property condition since the date of the inspection certificate.

(c)  An insurer who receives an inspection certificate may not use the condition of the property as grounds to refuse to issue or renew residential property insurance unless the insurer:

     (1)  reinspects the property; and

     (2)  specifies the areas of deficiency in the insurer's declination letter.  (V.T.I.C. Art. 5.33B, Sec. 4.)

Source Law

Sec. 4.  (a)  The existence of an inspection certificate issued under this article creates a presumption that the property condition is adequate for residential property insurance to be issued.

(b)  As a condition of issuing a policy if an inspection certificate is used in whole or in part to determine insurability, an insurer may require a written statement by the applicant for residential property insurance stating that there have been no material or substantial changes to the property condition since the date of the inspection certificate.

(c)  An insurer who receives an inspection certificate may not use property condition as grounds for refusing to issue or renew residential property insurance unless the insurer reinspects the property and specifies the areas of deficiency in its declination letter.

Revised Law

Sec. 2003.106.  ENFORCEMENT.  The commissioner by rule may provide for the use of any disciplinary procedure authorized by this code to:

     (1)  maintain the integrity of the voluntary inspection program; or

     (2)  ensure compliance with this subchapter.  (V.T.I.C. Art. 5.33B, Sec. 5.)

Source Law

Sec. 5.  The commissioner may by rule provide for the use of any of the disciplinary procedures authorized in this code to maintain the integrity of the program or ensure compliance with this article.

Revisor's Note

(End of Subchapter)

(1)  Section 3(b), V.T.I.C. Article 5.33B, states that the commissioner of insurance by rule may encourage the coordination of inspections under the article with inspections under V.T.I.C. Article 5.33A.  The revised law omits this provision as impliedly repealed because Article 5.33A was repealed by Section 21.48, Chapter 206, Acts of the 78th Legislature, Regular Session, 2003.  The omitted law reads:

(b)  The commissioner may adopt rules to encourage the coordination of inspections under this article with inspections performed under article 5.33A.

(2)  Section 6, V.T.I.C. Article 5.33B, refers to the adoption of rules by the commissioner of insurance.  The revised law omits the provision as unnecessary.  Section 36.001 of this code authorizes the commissioner to adopt any rules necessary and appropriate to implement this code.  The omitted law reads:

Sec. 6.  The commissioner is authorized to adopt rules in addition to the plan of operation that are appropriate to accomplish the purposes of this article.