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Review Requirements Checklist Fidelity, Guaranty, Surety Bonds Other Than Criminal Court Appearance Bonds, Financial Guaranty Insurance

Updated 10/3/2016 - Return to Index

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

Fidelity, Guaranty, Surety Bonds, and Financial Guaranty Checklist
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.
Not Required to be Filed For Approval Unless Being Made a Part of the Policy
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
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 that 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/Claim Notice
Contractual Limitations Period - Suits - Fidelity and Surety Contractual Limitations Period - Suits - Financial Guaranty §16.070, Civil Practice & Remedies §16.004, 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. (Note: Statutes that require the surety bond may also limit the period to file suit to one year.) 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

Legal action, 4 years if purpose is to pay debt owed.

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.
Prompt Payment of Claims §§542.051 - 542.061, Texas Insurance Code Prompt payment of claims. The exception §542.053(a)(4) is for fidelity, surety or guaranty bonds. A municipal bond policy or financial guaranty policy should include the prompt payment of claims language.
Prompt Payment - Construction Payment Bonds §3503.051 - 3503.057, Texas Insurance Code Prompt payment requirements for surety companies that have issued construction payment bonds, including acknowledgment and investigation of claim, acceptance or rejection of claim, and payment of claim.
Bond Notice Requirements for Filing Claim - Surety §2253.021, Government Code and §53.202, Property Code A bond required or furnished under the above statutes must clearly and prominently display on the bond or on an attachment: (1) the name, mailing address, physical address, and telephone number (including area code) of the surety company to which any notice of claim should be sent or (2) the toll free telephone number maintained by the Texas Department of Insurance under Article 1.35D, Texas Insurance Code, and a statement that the address of the surety company to which any notice of claim should be sent may be obtained from the Texas Department of Insurance by calling the toll free telephone number.
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
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.
Definition of "Convicted"
Business Services Bond - Fidelity Chapter 2301, Texas Insurance Code Definition of "convicted" must be included.
Freestanding Dishonesty Bond - Fidelity Chapter 2301, Texas Insurance Code Definition of "convicted" must be included.
Guaranty Fund NonParticipation
Guaranty Fund Nonparticipation Chapter 461 & Chapter 462, Texas Insurance Code Texas Property and Casualty Insurance Guaranty Act not applicable to Fidelity, Surety and Financial Guaranty in accordance with §462.007(b)(2) & (3). Disclosure of Guaranty Fund Nonparticipation not required in accordance with §461.001(b)(1). This exemption is for a fidelity, surety, or guaranty bond. If a municipal bond policy or financial guaranty policy is being considered, the disclosure of Guaranty Fund Nonparticipation would be required.
Fully Earned Premium/Retention of Minimum Earned Premium
Fully Earned Premium / Retention of Minimum Earned Premium Chapter 2251 & Chapter 2301, Texas Insurance Code and 28 TAC §5.9320, Texas Administrative Code TDI will consider approving fully earned premium only for risks with exposure during a period certain, such as special events and weather policies.

TDI will consider approving minimum earned premium only if it is a nominal amount.

The company must file appropriate rates associated with a minimum or fully earned premium.
General Change Endorsements
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 Chapter 1806, 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.
Notice of Toll-Free Telephone Numbers and Information & Complaint Procedures Indicates new addition since last update.28 TAC §1.601 & §1.602, Texas Administrative Code and Commissioner’s Order 3952 To satisfy requirements for §521.005 and §§521.051 - 521.056 noted above.
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.
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: 10/21/2016

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