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Review Requirements Checklist Commercial Automobile

Updated 10/3/2016 - Return to Index

Indicates new addition since last update.Indicates new addition since last update.

Commercial Auto Checklist
REVIEW REQUIREMENTS REFERENCE COMMENTS
FORMS
Filing Standards - Policy forms and endorsements may not be unjust, unfair, inequitable, misleading or deceptive.
Prior Approval of Policy Forms and Endorsements Chapter 2301, Texas Insurance Code An insurance policy form or endorsement may not be delivered or issued for delivery in this state unless the form has been filed with and approved by the commissioner. Each filing shall be made not later than the 60th day before the date of any use or delivery for use.
Large Risk Exemption §2301.004, Texas Insurance Code Policy forms for use with large risks are exempt from filing for prior approval if the forms are to be used with a "large risk". "Large Risk" is defined as an insured that has total insured property values of $5 million or more; an insured that has total annual gross revenues of $10 million or more; or an insured that has a total premium of $25,000 or more for property insurance, $25,000 or more for general liability insurance, or $50,000 or more for multiperil insurance.
Disapproval of Forms; Withdrawal of Approval §2301.007, Texas Insurance Code The commissioner may disapprove a form filed under §2301.006 or withdraw approval of a form if the form (1) violates any law, including a rule adopted under the Texas Insurance Code, or (2) contains a provision or has a title or heading that is unjust or deceptive, encourages misrepresentation, or violates public policy.
Applications
Not Required to be Filed For Approval Unless Being Made a Part of the Policy
Arbitration
Arbitration Chapter 2301, Texas Insurance Code Language used in arbitration agreements is to be consistent with that of the policy: to wit, don't use the word "parties" when you actually mean insured(s) and insurer. Binding arbitration is okay. Arbitration agreements may be mandatory. Arbitration must be held in Texas for Texas policyholders unless mutually agree on an alternate. In general, arbitration language cannot be unjust, misleading or deceptive.
Cancellation & Nonrenewal
Cancellation & Nonrenewal of Certain Liability Insurance Coverage §§551.051-551.055 and §551.004, Texas Insurance Code Cancellation and nonrenewal of certain liability insurance policies.
Elected Officials §§551.151 & 551.152, Texas Insurance Code An insurer may not cancel or refuse to renew an insurance policy based solely on the fact the policyholder is an elected official.
Insured's Right to Cancel Chapter 2301, Texas Insurance Code Insurance company cannot limit or restrict the insured's right to cancel a policy.
Voiding Coverage Chapter 705, Texas Insurance Code "Void Coverage" language must comply with Chapter 705, Subchapter A, and the misrepresentation must be material.
Choice of Law
Texas Laws Govern Policies Article 21.42, Texas Insurance Code Texas must be choice if filing contains choice of law provision.
Claims Settlement
Late Notice of Claims Board Order No. 22582 Late notice provision to be attached to all automobile policy forms that provide liability coverage.
Prompt Payment of Claims §§542.051 - 542.061, Texas Insurance Code Prompt payment of claims.
Notice of Settlement of Liability Claims §§542.151 - 542.154, Texas Insurance Code Notice of settlement of claim under casualty insurance policy. EXCEPTION - This article does not apply to a casualty policy that requires the insured's consent to settlement of a claim against the insured; or to fidelity, surety, or guaranty bonds.
Contractual Limitations Period - Suits §16.070, Civil Practice & Remedies Except as provided by Subsection (b), a person may not enter a stipulation, contract, or agreement that purports to limit the time in which to bring suit on the stipulation, contract, or agreement to a period shorter than two years. A stipulation, contract, or agreement that establishes a limitations period that is shorter than two years is void in this state. The Texas Third Court of Appeals issued an opinion that acknowledges that the language providing 2 years and 1 day from the date the cause of action first accrues satisfies the statutory requirement of §16.070, Civil Practices and Remedy Code. ( http://www.search.txcourts.gov/Case.aspx?cn=03-08-00408-CV) Case #03-08-00408-CV
Notice Requirements §16.071, Civil Practice & Remedies A contract stipulation that requires a claimant to give notice of a claim for damages as a condition precedent to the right to sue on the contract is not valid unless the stipulation is reasonable. A stipulation that requires notification within less than 90 days is void.
Providing Certain Claims Information On Request §§542.101-542.104, Texas Insurance Code; and Commissioner's Bulletin No. B-0043-05 If a policy form or endorsement contains language addressing the request or furnishing of claims information, it would need to comply with the applicable statute(s).
Coverage Issues
Personal Injury Protection Coverage §§1952.151 - 1952.161, Texas Insurance Code Personal injury protection coverage must be provided unless the named insured rejects it in writing. Selection/rejection forms used for PIP are not subject to approval and are not part of the policy.
Uninsured or Underinsured Motorist Coverage §§1952.101 - 1952.110, Texas Insurance Code Uninsured/underinsured motorist coverage must be provided unless the named insured rejects it in writing. Selection/rejection forms used for UM/UIM are not subject to approval and are not part of the policy.
Underinsured Motorist Coverage §1952.103, Texas Insurance Code Statutory definition: "'Underinsured motor vehicle' means an insured motor vehicle on which there is collectible liability insurance coverage with limits of liability for the owner or operator that were originally lower than, or have been reduced by payment of claims arising from the same accident to, an amount less than the limit of liability stated in the underinsured coverage of the insured's policy." The policy must not conflict with §1952.103 or the Texas Supreme Court decision in Stracener v. United Services Automobile Association, 777 S.W.2d 378 (Tex. 1989). Stracener requires underinsured motorist coverage to pay the full amount of damages that the insured is legally entitled to recover, reduced by the amount recovered or recoverable from the insurer of the underinsured motor vehicle, up to policy limits for UM/UIM. Stracener states "a negligent party is underinsured whenever the available proceeds of his liability insurance are insufficient to compensate for the injured party's actual damages."
Recovery Under Underinsured Motorist Coverage §1952.106, Texas Insurance Code Underinsured motorist coverage must provide payment of all amounts that the insured is legally entitled to recover as damages from owners or operators of underinsured motor vehicles because bodily injury or property damage, not to exceed the limit specified in the insurance policy, and reduced by the amount recovered or recoverable from the insurer of the underinsured motor vehicle.
The coverage description for underinsured motorist coverage must not conflict with §1952.106 or the Texas Supreme Court decision in Stracener v. United Services Automobile Association, 777 S.W.2d 378 (Tex. 1989). Stracener states "the set off is to be subtracted from the amount of actual damages incurred as a result of the negligence of the underinsured motorist rather than from the limits in the underinsured motorist insurance policy."
UM/UIM Required Policy Language §§1952.101-1952.110, Texas Insurance Code To ensure that policies comply with §1952.103 and §1952.106, and to ensure that policyholders receive the underinsured motorist coverage to which they are entitled, TDI will not approve a UM/UIM coverage part unless the policy definition for "underinsured motor vehicle" states "an underinsured motor vehicle is one to which a liability bond or policy applies at the time of the accident but its limit of liability either: a. is not enough to pay the full amount the covered person is legally entitled to recover as damages; or b. has been reduced by payment of claims to an amount which is not enough to pay the full amount the covered person is legally entitled to recover as damages."
Recovery Prohibited for Vehicles Impounded for Drug Violation §1952.057, Texas Insurance Code A motor vehicle insurance policy delivered or issued for delivery in the state of Texas may not provide payment on final conviction of the name insured for loss for a covered motor vehicle that is seized by federal or state law enforcement officers as evidence in a case against the named insured under Chapter 481, Health and Safety Code or the federal Controlled Substances Act, 21 U.S.C. Section 801 et seq.
Anti-Stacking Provisions Chapter 2301, Texas Insurance Code "Other insurance" clauses or similar provisions may not contain "anti-stacking" or "non-cumulation" language that excludes or limits coverage in other separate, but applicable policies, that are issued by affiliated companies or by other unaffiliated companies. Anti-stacking language may only apply to policies issued to "you" (named insured) by "us" (underwriting company). Insureds are entitled to the coverage that they pay for. (Texas Supreme Court decision in Stracener v. United Services Automobile Association, 777 S.W.2d 378 (Tex. 1989)).
Defense Chapter 2301, Texas Insurance Code Policies may be amended to provide defense within limits of insurance, but only by endorsement. Must be fully disclosed to consumers and rates need to be adjusted accordingly. Forms/endorsements will not be approved until P&C Actuarial acknowledges that rates are acceptable.
Examination Under Oath Chapter 2301, Texas Insurance Code If policy language requires examination under oath for anyone other than the named insured and spouse, the provision must also state that a parent or guardian may be present during any examination of a minor.
Tie-In Sales Chapter 1806, Texas Insurance Code & 6/1/78 Board Letter Tie-in sales may violate state law.
Vendors' Single Interest Chapter 2301, Texas Insurance Code If the Vendors' Single Interest includes automobiles and watercraft (a nonregulated Inland Marine class), this must be filed as Commercial Multi-Peril.
Damages
Punitive Exemplary Damages Chapter 2301, Texas Insurance Code Exclusions may be considered with appropriate rate analysis. A "rate analysis" is the company's actuarial justification for the rate consideration given, or not given, for use of the exclusion. This would include the reasons for the amount of any rate credit or the justification for the position that no rate credit is given. NOTE: Approval of a punitive/exemplary damage exclusion does not relieve an insurer of any contractual obligation to defend which may otherwise exist in the policy.
Compensatory Damages Chapter 2301, Texas Insurance Code If insuring agreement specifies policy pays for compensatory damages, rate consideration may be necessary as policy may not cover non-compensatory damages such as punitive exemplary damages.
Declarations Page
Specimen Policies §1812.003, Texas Insurance Code (SB 852, 83rd Regular Session) The policy must disclose certain information on the declarations page if the insurer elects to post a specimen policy on its website.
Exclusions
Abuse, Physical Abuse or Molestation Exclusions Chapter 2301, Texas Insurance Code Definition of "abuse" in abuse, physical abuse, or molestation exclusion must be included. Must include wording, "For purposes of this endorsement, abuse means an act which is committed with the intent to cause harm".
Asbestos and Lead Exclusions Chapter 2301, Texas Insurance Code These types of exclusions require a rate analysis and may also require rate consideration. A "rate analysis" is the company's actuarial justification for the rate consideration given, or not given, for use of the exclusion. This would include the reasons for the amount of any rate credit or the justification for the position that no rate credit is given. Must attach a disclosure form to every policy to which the exclusion is attached and manual rules should reflect this requirement.
Communicable Disease Exclusion General Casualty Bulletin No. 708 TDI will not approve a communicable disease exclusion, unless it is limited to disease transmitted through sexual contact.
Transmissible Spongiform Encephalopathy (TSE) Exclusions Chapter 2301, Texas Insurance Code Exclusions for TSE, including all variations of the disease, must be limited to the following: Insureds that 1) import or distribute imported meat, meat by-products or any other bovine part or products containing bovine parts for resale; 2) utilize imported meat, meat by-products, blood or any other bovine part in their manufacturing or processing, or in any product that is injected, applied topically or ingested by humans or any other animal; or 3) operate in the chain of commerce (including but not limited to handling, processing, distributing, selling, or serving) for deer or elk, whether imported or not.
Exclusions -Disclosure Required Chapter 2301, Texas Insurance Code Required for silica, subsidence, tobacco, electromagnetic field and PCB exclusions. Must attach a disclosure form to every policy to which the exclusion is attached. Disclosure form does not have to be signed by the insured.
General Change Endorsement
May Not Manuscript Coverage Once Approved Chapter 2301, Texas Insurance Code Coverage forms are prior approval. Change endorsements may be used to change insured address, etc. but may not be used to change, alter or "clarify" coverage in any way. Company must provide verification that the endorsement will not be used to change, alter, or clarify coverage.
Rebating or Discrimination
Rebating or Discrimination §§1806.053 - 1806.054, Texas Insurance Code Inducements prohibited.
Toll Free Information
Notice of Policyholder Complaint Procedures §521.005, Texas Insurance Code A brief written notice of suggested procedure to be followed by the policyholder in the event of a dispute concerning a policyholder's claim or premium.
Toll-Free Information & Complaint Number §§521.051 - 521.056, Texas Insurance Code Toll-Free number for the Texas Department of Insurance.
Insurer's Toll-Free Information & Complaint Number §§521.101 - 521.103, Texas Insurance Code Insurer's requirement to maintain toll-free number to provide information concerning policies issued by the insurer and to accept complaints from policyholder. Article contains an exception for insurers whose gross initial premium receipts collected in this state are less than $2 million a year or to an insurer with regard to fidelity, surety, or guaranty bonds.
Notice of Toll-Free Telephone Numbers and Information & Complaint Procedures Indicates new addition since last update.28 TAC §1.601 and §1.602, Texas Administrative Code and Commissioner's Order 3952 To satisfy requirements for §521.005, §§521.051 - 521.056, and §§521.101 - 521.103 noted above.
Texas Motor Vehicle Safety Responsibility Act
Motor Vehicle Liability Insurance; Requirements §601.071, Transportation Code Provides requirements of a motor vehicle liability insurance policy for meeting financial responsibility.
Minimum Coverage Amounts §601.072, Transportation Code Provides minimum amounts of motor vehicle liability insurance required when using insurance to establish financial responsibility.
Texas Lloyds, Mutual, Reciprocals and Participating Stock Cos.
Special Policy Conditions General Casualty Bulletins Nos. 276, 443, and 446 Requiring specific language be contained in policies issued by Lloyds, Mutuals, Reciprocals, and Participating Stock Companies.
RATES
Filing Standards
File & Use Chapter 2251, Texas Insurance Code Each insurer shall file with the Commissioner all rates, supplementary rating information, and reasonable and pertinent supporting information for risks written in this state.
Elimination of (a) Rates Commissioner's Bulletin No. B-0022-95 Chapter 2251 does not provide for the filing of rates on an individual basis. Each insurer shall file with the Commissioner all rates, supplementary rating information, and reasonable and pertinent supporting information for risks written in this state.
Use of Motor Vehicle Violations Chapter 1953.051, Texas Insurance Code; Transportation Code (Chapters 541 - 600) Insurers may not "assign a rate consequence to a charge or conviction for a violation of Subtitle C, Title 7 Transportation Code" (Chapters 541 - 600).
RULES
Filing Standards
File & Use Chapter 2301 & Chapter 2251, Texas Insurance Code Manual rules should reflect specific requirements for usage of policy forms, endorsements, and disclosures.
Required Documentation
Refer to Property & Casualty Filings Made Easy Go to Property & Casualty Filings Made Easy now


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Last updated: 10/12/2016

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