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STATE BOARD OF INSURANCE, 1110 SAN JACINTO, AUSTIN, TEXAS 78786
LYNDON OLSON, JR., Member
W. P. DAVES, JR., Chairman
DURWOOD MANFORD, Member
MRS. PAT WAGNER, Chief Clerk
E. J. VOORHIS, Commissioner of Insurance
August 14, 1979
GENERAL CASUALTY BULLETIN NO. 548
TO ALL INSURANCE COMPANIES, CORPORATIONS, EXCHANGES, MUTUALS, RECIPROCALS, LLOYDS OR OTHER INSURERS WRITING GENERAL LIABILITY INSURANCE IN THE STATE OF TEXAS, THEIR AGENTS AND REPRESENTATIVES.
Boiler and Machinery Insurance
- Revision of Boiler and Machinery Rules and Rates and Guide (a) Rates.
- Revision of Boiler and Machinery Insurance Forms.
The State Board of Insurance has approved the above filings by the Insurance Services Office to become effective October 1, 1979 under the following rule of application:
These changes are applicable to all new and renewal policies effective on or after October 1, 1979. No policy effective prior to October 1, 1979 shall be endorsed or cancelled and rewritten to take advantage of or to avoid the application of these changes except at the request of the insured and at the customary short rate charges as of the date of such request but in no event prior to October 1, 1979.
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Revision of the Boiler and Machinery Premium Adjustment Rating Plan B and Withdrawal of the Boiler and Machinery Premium Adjustment Rating Plan A.
The State Board of Insurance has approved the above filing by the Insurance Services Office to become effective October 1, 1979 under the following rule of application:
These changes are applicable to all ratings effective on or after October 1, 1979.
Manual pages, forms and revisions will be distributed in the normal manner.
Broad Form Nuclear Energy Liability
Exclusion - Definition of Waste
The State Board of Insurance has approved a filing by the Insurance Services Office proposing a correction to the amendatory endorsement approved and announced in General Casualty Bulletin No. 547. The correction changes the words " Waste means any material ..." to read " Waste means any waste material ..."
Companies are instructed to amend the endorsement attached to General Casualty Bulletin No. 547 accordingly, effective July 19, 1979.
Employer's Comprehensive Notary Public
Errors and Omissions Policy
The State Board of Insurance has approved a filing by Lawyers Surety Corporation proposing a program for providing Employer's Comprehensive Notary Public Errors and Omissions insurance. This program supplements the present standard Notary Public Errors and Omissions program and is designed for employers or business establishments having employed notaries.
This filing was approved to become effective August 8, 1979. Interested companies may obtain a copy of the program by specific request to the General Liability Section, State Board of Insurance.
Real Estate Dealers
Errors and Omissions Insurance
The State Board of Insurance has approved a filing by INA Underwriters Insurance Company proposing additional forms and rating procedure for limiting the prior acts coverage provisions as are contained in the standard approved Real Estate Dealers Errors and Omissions Program.
This filing was approved to become effective August 6, 1979. Copies of the endorsements and rating procedure are attached hereto.
Texas Composite Rating Plan
The State Board of Insurance has approved a filing by the Insurance Services Office proposing amendments to the Texas Composite Rating Plan.
This filing was approved to become effective September 1, 1979 in accordance with the following rule of application:
These changes apply to all ratings effective on or after September 1, 1979.
Copies of the amendments are attached hereto.
Liquor Law Liability Insurance
The State Board of Insurance has approved a filing by the Insurance Services Office proposing a revision of Guide (a) Rates for Liquor Liability Insurance.
This filing was approved to become effective October 1, 1979 under the following rule of application:
These changes are applicable to all policies effective on or after October 1, 1979. No policy effective prior to October 1, 1979 shall be endorsed or cancelled and rewritten to take advantage of or to avoid the application of these changes except at the request of the insured and at the customary short rate charges as of the date of such request, but in no event prior to October 1, 1979.
A copy of the revision is attached hereto.
Pat Wagner, Chief Clerk
PW:MST:lp
AMENDATORY ENDORSEMENT
Named Insured ___________________ Endorsement Number___________________
Policy Symbol___ Policy Number___ Policy Period___ Effective Date of Endorsement___
Insured By (Name of Insurance Company)
INA UNDERWRITERS INSURANCE COMPANY
Insert the policy number. The remainder of the information is to be completed only when this endorsement is issued subsequent to the preparation of the policy.
It is agreed that, IV. Policy Period, Territory, Claims Made Provision: as stated in the Policy Provisions, is deleted in its entirety and replaced by:
IV. Policy Period, Territory, Claims Made Provision:
This Policy applies only to covered acts, errors, omissions which occur within the United States of America, its territories or possessions, or Canada during the policy period and then only if claim is first made during the policy period in which the act, error, or omission occurred.
All other conditions and terms remain unchanged.
Accepted by: _________________________
(Owner-Principal, Partner, Director or Officer of the Insured)
Date: _________________________
_________________________
Authorized Agent
UW-13468 Ptd. in U.S.A.
AMENDATORY ENDORSEMENT
Named Insured ___________________ Endorsement Number___________________
Policy Symbol___ Policy Number___ Policy Period___ Effective Date of Endorsement___
Insured By (Name of Insurance Company)
INA UNDERWRITERS INSURANCE COMPANY
Insert the policy number. The remainder of the information is to be completed only when this endorsement is issued subsequent to the preparation of the policy.
It is agreed that, IV. Policy Period Territory, Claims Made Provision: as stated in the Policy Provisions, is deleted in its entirety and replaced by:
IV. Policy Period, Territory, Claims Made Provision:
This Policy applies only to covered acts, errors or omissions which occur within the United States of America, its territories or possessions, or Canada (a) during the policy period and then only if claim is first made during the policy period in which the act, error or omission occurred, or (b) prior to the effective date of the policy and subsequent to the date shown below as the retroactive date if claim is first made during the policy period and providing no Insured at the effective date of the Policy, has knowledge nor could have reasonably foreseen any circumstances which might result in claim arising out of such act, error or omission.
All other conditions and terms remain unchanged.
(Owner-Principal, Partner, Director or Officer of the Insured)
Authorized Agent
UW-13470 Ptd. in U.S.A
- Loss Experience Rating Table
The following credits shall apply to reflect loss free experience if a firm has been in business and had Insurance for the last three years.
- (3) years loss free - 10% Credit
- (4) years loss free - 15% Credit
- (5) years loss free - 20% Credit
- Greater than 5 years - 25% Credit
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Extended Reporting Period
Upon cancellation or non-renewal, the insured may purchase a three (3) year extended reporting period endorsement for 150% of the last annual premium.
- Commercial Real Estate
- Up to 25% of gross income - 0% Surcharge
- 25% to 75% of gross income - 50% Surcharge
- Over 75% of gross income - 100% Surcharge
- Amendatory Endorsements
- UW-13468 (Prior Acts) - 25% Credit
- UW-13470 (Limited Prior Acts) - 15% (1 year) / 10% (2 years)
Texas Composite Rating Plan
Explanatory Memorandum
This filing proposes three changes to the present Texas Composite Rating Plan:
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In the past, as much as 15% of the total GL countrywide premium was composite rated. Products Liability probably represented more of this premium than any other single subline. Consequently, a large percentage of the Products Liability experience was not entering the ISO manual ratemaking process. This loss of experience may have been a significant contributor to the poor underwriting results for Products Liability insurance. To increase the products ratemaking data base and thereby improve the accuracy of the products rates, products exposures have been excluded from Composite Rating in most states.
Therefore, to improve the accuracy of products rates in Texas, we propose that Products Liability no longer be eligible for Composite Rating. However, since manual rates should not be unduly influenced by the experience of large atypical risks which are eligible for loss rating, it is proposed that Products Liability insurance still be rated under Rule 9, the Loss Rating section of the Composite Rating Plan.
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Editorial changes are being made with respect to elimination of the majority of the rules concerning Automobile Liability. This change is proposed to avoid having to reprint this plan whenever there is an Automobile rule change. The proposed new format is similar to that used in the Texas Automobile Manual, specifically Rule 132 - Composite Rating Plan.
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The Expected Loss Ratio is being revised from .47 to .51 to reflect the most current expense provisions and to make this plan consistent with the current Texas GL Experience Rating Plan.
Attached are copies of the appropriate pages of the Texas Composite Rating Plan reflecting the revisions noted above.
New material is underlined, material in brackets [ ] is deleted.
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Introduction
The selection and application of this rating plan shall be optional with the insured.
This is a rating plan applicable to automobile liability insurance, general liability insurance, glass insurance and theft insurance either separately or any combination thereof by which composite rates for a risk may be established on one or more exposure bases, in lieu of the regular underwriting basis and rates of the various Manuals. This Composite Rating Plan also provides an effective procedure for rating those classifications for which the Manual exposures are not readily available and cannot be obtained without excessive difficulty.
Except for a risk rated under the provisions of Rule 9, this plan DOES NOT apply to Products Liability insurance.
An initial survey will be made of the exposures of the risk and composite rates established on special underwriting bases which will reasonably reflect and measure possible fluctuations in the exposures involved. Such special underwriting bases include, but are not limited to, payroll, sales, receipts, contract cost, number of employees, admissions, etc.
Such composite rate may be restricted to any specified premises, operations or coverages.
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Eligibility Requirements
In order to qualify for application of this Plan, the exposures to be rated on a composite rate basis shall produce a total annual basic limits premium at manual rates, for the period indicated in Rule 3(a), for all states of at least,
(a) When Plan is applied to a single kind of insurance:
1. Automobile Liability - $2,500.
2. General Liability - $650.
3. Glass -$500 for the amount of coverage written.
4.Theft -$500 for the amount of coverage written.(b) When Plan is applied to combination of kinds of insurance:
1. Combinations including automobile liability - $2,500.
2. Combinations not including automobile liability - $1,000.However, if a risk does not meet this premium requirement, it may nevertheless be rated under this Plan provided a minimum premium equal to the required premium for eligibility for basic limits is charged for the coverages to be insured on a composite rate basis.
- Computation of Composite Rate
Except for a risk rated under the provisions of Rule 9, each composite rate shall be developed as follows:
ISO 3916C
the regular manual rating procedure and applicable experience modifications shall apply to such additional kinds of insurance, or sub-divisions thereof, or coverages, premises or operations during the period between the inception of coverage for such additional exposures and the date of the adjustment of the composite rate to include such exposures.
9. Loss Rated Risks
If a risk which is to be rated under this Plan has developed total basic limits incurred losses of $100,000 or more for automobile liability coverage or total basic limits incurred losses of $125,000 for general liability coverage alone or in combination with automobile liability to be insured under this Plan during a period of three years beginning not earlier than four years nor later than three years and six months prior to the date on which the composite rate is to be effective, the composite rate applicable to such liability coverages to be insured under this Plan may be developed as follows:
(A) The basic limits incurred losses for the three-year period shall be determined. Such losses may be adjusted to reflect unquestioned changes in the risk's basic operations.
(B) The actual exposures on the special underwriting basis to be used for the composite rate shall be determined for the same three-year period as used in paragraph (A). Such exposures may be adjusted to reflect unquestioned changes in the risk's basic operations, other than exposure changes resulting from fluctuations in the levels of prices or wages.
(C) The required basic limits premium shall be determined as follows:
Divide the losses for each state and kind of insurance or sub-division thereof by its respective expected loss ratio.
Kind of Insurance Texas Expected
or Sub-division thereof Loss Ratio
- Automobile Liability including Medical Payments
Refer to Automobile Liability Rules
[- Taxis, Livery and Buses - .60
- Long Haul Truckmen - .60
- Garages - .54
- All Other Automobiles (including School Buses) - .57 ]
- General Liability including Medical Payments
- All General Liability - [ .47 ] .51
(For risks that are to be written on a deductible basis, a special expected loss ratio shall be established in accordance with the following formulae):
ISO 3916C
composite rate computation shall be made by the company or its authorized rating organization and automatically filed (in duplicate) with the State Board of Insurance.
[ Note: If an automobile increased limits table with additive charges is applicable to the entire fleet or a portion of the fleet, the increased limits factor should be determined as follows:
(a) Extend the exposures in Rule 3(a) at basic limits.
(b) Extend the exposures in Rule 3(a) at the desired increased limits including the applicable additive charges.
(c) Divide the total premium obtained in Paragraph (b) by the total premium obtained in Paragraph (a). The result is the increased limits factor to be applied to the automobile liability basic limits composite rate. ]
5. Experience Rating
Except for a risk rated under the provisions of Rule 9 of this Plan, the prescribed procedure of applicable experience rating plans shall apply.
6. (a) Rated Classifications
Classifications subject to such rating shall be processed in the regular manner before being used in the determination of any composite rate for insurance covering such classifications.
7. Revisions of Composite Rates
The composite rates shall be revised annually to reflect any revisions of manual rates or rating modifications developed under applicable rating plans. When re-ratings are based on a survey used for the development of a previous composite rate, the submitting company shall furnish an affirmative statement to the State Board of Insurance that there have been no changes in basic manual exposures or other relevant conditions to warrant use of a subsequent survey. If this procedure is followed, the insurer must file a re-affirmation and their composite rate computations based upon current manual rates within ninety days but not less than fifteen days prior to the expiration of the current policy.
A complete re-survey of exposures and revisions of the composite rates may be made annually, or at any time at the request of the carrier or the insured, to reflect thereafter the effect of marked exposure changes which would not otherwise be fully reflected by the special underwriting basis selected.
8. New Coverages During a Policy Year
A composite rate may be adjusted to include (1) other kinds of insurance provided for under this Plan or sub-divisions thereof or coverages added after the effective date of the policy, or (2) any additional premises or operations if the rating was originally limited to certain specified premises or operations. If such other coverages are included during the policy period, a re-rating may be made at the time of the addition or at the next rating anniversary date. If the re-rating is not made at the time of the addition,
ISO 3916C
or General Liability Insurance up to the limits of liability stated below may be used in lieu of basic limits to develop the composite rate applicable for such limits in the same manner as (a) to (d) above if the risk has developed total basic limits incurred losses for such lines of insurance of at least the following amounts (the higher amounts apply for a combined automobile and general liability rating) for the three-year period:
LIMITS OF LIABILITY 3 YEAR BASIC LIMITS INCURRED LOSSES
Automobile Liability Automobile Liability
B.I. P.D.
$10,000/10,000/10,000 $100,000
15,000/15,000/15,000 150,000
20,000/20,000/20,000 200,000
25,000/25,000/25,000 250,000
General Liability General Liability
B.I. P.D.
$25,000 $10,000 $125,000
25,000 15,000 175,000
25,000 20,000 250,000
25,000 25,000 300,000
The composite rate so developed shall not be adjusted by any experience rating plan. However, for General Liability, the regular procedures of any applicable experience rating plan may be applied to any increased limits factor for limits in excess of the limits of liability used in the development of such composite rate in accordance with (f) above. For Automobile Liability, this increased limits factor shall not be adjusted by any experience rating plan.
Composite rates so developed shall be revised annually. A risk rated in accordance with this procedure may continue to be so rated for one full policy year after it first fails to qualify.
10. Administration of Plan
The determination of composite rates under this Plan shall be administered in the same way that the Experience Rating Plans are administered.
Requests for treatment under this Plan shall
(1) Be submitted to the State Board of Insurance (in duplicate) after having been correctly calculated by the insurance carrier or by its authorized rating organization. However, requests for rating any Texas automobile liability exposures shall be submitted by the Texas Automobile Insurance Service Office. The State Board of Insurance shall check the calculations to see that the composite rate (or rates) have been determined in accordance with the Plan. If the calculations are found to be in order, copy will be automatically forwarded without charge to the carrier, the rating organization, or Texas Automobile Insurance Service Office, depending on which submitted the filing, with one copy being retained in the State Board of Insurance.
(1) General Liability
a. Determine full-coverage losses* (subject to the limits of liability set forth in Rule 9(g) of the Plan) for the experience period.
b. Determine the exposures in accordance with Rule 9(b) of the Plan.
c. The required premium shall be determined as follows:
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Divide the losses for each kind of insurance or sub-division thereof by its respective full-coverage expected loss ratio.
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a) If deductible is less than or equal to basic limits then divide the result in (1) by an average increased limits factor which reflects the purchase of limits of liability in excess of basic limits.
b) If deductible is greater than basic limits then divide the result in (1) by an average increased limits factor which reflects the purchase of limits of liability in excess of the deductible.
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Multiply the results in (2) by an average deductible discount factor reflecting each kind of insurance.
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Subtract the result in (3) from (1).
d. The deductible composite rate shall be determined by dividing the required premium of c above by the exposure in b.
(2) Automobile Liability
Refer to Automobile Liability Rules.
(D) The basic limits composite rate shall be determined by dividing the required premium in paragraph (C) by the exposure in paragraph (B).
(E) An average increased limits factor shall be determined for each composite rate if more than one increased limits table is applicable to the classifications, kinds of insurance, or subdivisions thereof for which the composite rate is determined.
(F) The basic limits composite rate in paragraph (D) shall not be adjusted by any experience rating plan. However, for General Liability the regular procedures of any applicable experience rating plan shall be applied to the increased limits factor in paragraph (E) using as basic limits premium for the determination of credibility and for the determination of increased limits premium subject to experience rating the premium determined in paragraph (C) or (G) if applicable, for the exposures subject to the experience rating plan. For Automobile Liability the increased limits factor in paragraph (E) shall not be adjusted by any experience rating plan.
* All losses including the deductible amount must be included.
ISO 3916C
INSURANCE SERVICES OFFICE
(Subline Code 314)
The liquor liability exclusion contained in the general liability policies precludes coverage for any insured who is in the business of manufacturing, distributing, selling or serving alcoholic beverages or who is an owner or lessor of premises used by others for such purposes. However, such coverage can be provided by eliminating the liquor liability exclusion. The liquor liability insurance coverage afforded in this manner will be subject to the other policy provisions applicable to the insured.
The following procedure applies when liquor liability insurance coverage is provided:
Nominal statewide basic limit guide (a) rates of $20.00 for bodily injury, and $10.00 for property damage apply per licensed location for elimination of the liquor exclusion in policies covering the operator in the business of furnishing alcoholic beverages. Nominal statewide basic limit guide (a) rates of $10.00 for bodily injury and $5.00 for property damage apply per policy for elimination of the liquor liability exclusion on policies covering the owner or lessor of premises used by others in the business of manufacturing, distributing, selling or serving alcoholic beverages. Liquor liability insurance for the interest of the owner or lessor of the premises may also be provided, under this procedure, on policies covering the lessee who is in the business of furnishing alcoholic beverages, for the following statewide basic limit guide (a) rates: $10.00 for bodily injury, and $5.00 for property damage, per policy. No minimum premiums apply for liquor liability insurance afforded under the policy.
For the purpose of reporting liquor liability insurance statistics, i.e. earned premiums, incurred indemnity losses and incurred number of indemnity claims, the classification "Liquor Liability Insurance - all risks", code 70416 should be used. Statistical territories for liquor liability insurance agree with the rating and statistical territories in the Premises/Operations Liability Section.
EXPLANATORY MEMORANDUM
TEXAS
This memorandum sets forth a revision of guide (a) rates for liquor liability insurance.
The present rates of $10.00 B.I. and $5.00 P.D. per licensed location for the operator in the business of furnishing alcoholic beverages are increased to $20.00 B.I. and $10.00 P.D. Also, the present per policy rates of $5.00 B.I. and $2.50 P.D. for the owner or lessor of premises used by others in the business of manufacturing, distributing, selling or serving alcoholic beverages and the inclusion of the interest of the owner or lessor on the lessee's policy are increased to $10.00 B.I. and $5.00 P.D. Previously, the B.I. rates contemplated B.I. limits of $5,000 each person and $10,000 each occurrence. The new B.I. rates reflect the 1973 revised limits of $25,000 each occurrence.
These increases, in addition to the reflection of providing for a higher policy limit, are also based on judgment since these rates have not been revised during the past decade.