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Review Requirements Checklist - Commercial Umbrella

Updated June 2014 - Return to Index

Indicates new addition since last update

Commercial Umbrella 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, Subchapter A, 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 (Commercial Umbrella) §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.
Regulation of Umbrella Liability Insurance 28 TAC, Subchapter B, Division 2, §5.1201, Texas Administrative Code Specifies procedures and requirements for insurers writing personal and commercial umbrella liability insurance in Texas.
Applications
Not Required to be Filed For Approval Unless Being Made a Part of the Policy
Arbitration
Arbitration Chapter 2301, Subchapter A, 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.
Automobile Requirements
Total Auto Exclusion - Umbrella 28 TAC, Subchapter B, Division 2, §5.1201, Texas Administrative Code Total auto exclusion allowed only when there is no automobile exposure. Form and/or endorsement must include wording, "when coverage is not included in any underlying insurance".
Underlying Automobile Limits 28 TAC, Subchapter B, Division 2, §5.1201, Texas Administrative Code Minimum underlying auto limits of 100/300/50 or 350 CSL are required for Commercial Umbrella.
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 that the policyholder is an elected official.
Insured's Right to Cancel Chapter 2301, Subchapter A, Texas Insurance Code Insurance company cannot limit or restrict the insured's right to cancel a policy.
Voiding Coverage Chapter 705, Subchapter A, 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 Made Coverage
Disclosure Required Chapter 2301, Subchapter A, Texas Insurance Code If the policy is a claims made policy a disclosure to that effect must be prominently displayed on either or both the declaration sheet or the first page of the policy. The disclosure must be plainly readable bold type.
30-Day Extended Reporting Period Required Chapter 2301, Subchapter A, Texas Insurance Code The insured must be given at least an automatic 30-day extended reporting period to report claims becoming known too late to report before the end of the policy period.
Policy Provision Required Chapter 2301, Subchapter A, Texas Insurance Code A policy provision advising the insureds of a right to purchase an extended reporting endorsement. The policy must give the insured a minimum of thirty days to purchase the extended reporting endorsement and the minimum term of the extended reporting period must be at least one year. An extended reporting period unlimited in time must be available.
Claims Settlement
Prompt Payment of Claims §§542.051 - 542.061, Texas Insurance Code Prompt payment of claims. (1st Party Coverage - "Pay to," "indemnify," or "reimburse" the insured. Not "pay on behalf of".)
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
Additional Insured Provisions Chapter 151, Texas Insurance Code (HB 2093, 82nd Legislative Regular Session) Affects indemnification agreements and additional insured provisions in certain construction contracts. Refer to this chapter to ensure compliance.
Anti-Stacking Provisions Chapter 2301, Subchapter A, Texas Insurance Code
  • "Other insurance" clauses or similar provisions should not contain "anti-stacking" or "non-cumulation" language that excludes or limits coverage in other separate but applicable policies that are issued by the same company, affiliated companies, or by other unaffiliated companies.
  • It is permissible to state whether the coverage in one policy is primary or excess over other applicable policies, or to coordinate limits in proportion to total limits available in applicable policies.
  • TDI will consider for approval anti-stacking language if:
    • the anti-stacking provision is limited to the same "occurrence" and the other coverages are in the same policy or package issued by the same company.
      OR
    • the anti-stacking provision is on a separate endorsement, is limited to the same "occurrence," and
      • the company issued the policy for different operations or locations, and intended that only one policy limit apply to prevent unintended duplication of coverage for which no premium has been paid, and the applicable operations and locations are scheduled on the endorsement; or
      • the company or affiliated companies issued separate policies and the applicable policies are scheduled on the endorsement.
  • Before TDI can approve anti-stacking language, the company must provide appropriate rate consideration and rate analysis. A "rate analysis" is the company's actuarial justification for the rate consideration given, or not given, for use of the exclusion or limitation. This would include the reasons for the amount of any rate credit or the justification for the position that no rate credit is given.
Continuous or Repeated Trigger / Revised Definition of Occurrence Chapter 2301, Subchapter A, Texas Insurance Code If the coverage form or endorsement contains a provision amending the insuring agreement or the definition of occurrence to limit or eliminate coverage for continuous or repeated trigger losses, the restriction must be limited to that injury or damage "KNOWN" to the insured.
Defense & Supplementary Payments 28 TAC, Subchapter B, Division 2, §5.1201(d)(2), Texas Administrative Code It is optional whether umbrella liability insurance policies provide for defense as a coverage. However, the policy must clearly state if defense is provided. The policy should include the language "will defend" or "shall defend" in lieu of "may defend". If defense is provided, coverage must include the seven supplementary payment items and defense must be outside the policy limits. There can be no cap on amount of loss of earnings paid to the insured.
Self-Insured Retention 28 TAC, Subchapter B, Division 2, §5.1201, Texas Administrative Code Company may offer a self insured retention.
Tie-In Sales Chapter 1806, Texas Insurance Code & 6/1/78 Board Letter Tie-in sales may violate state law.
Nuclear Energy Liability Exclusion General Casualty Bulletin Nos. 547 & 548 If there is a Nuclear energy liability exclusion endorsement, must include definition of "waste" as per General Casualty Bulletins 547 & 548.
Damages
Punitive Exemplary Damages Chapter 2301, Subchapter A, 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, Subchapter A, 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.
Exclusions
Abuse, Physical Abuse or Molestation Exclusions Chapter 2301, Subchapter A, 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".
Communicable Disease Exclusion Not Approved - Exception General Casualty Bulletin No. 708 Communicable disease exclusion will not be approved. EXCEPTION: Consideration for approval will be given to an exclusion with wording similar to that contained in "Exclusion of Sexually Transmitted Disease" as set forth in General Casualty Bulletin No. 708.
Transmissible Spongiform Encephalopathy (TSE) Exclusions Chapter 2301, Subchapter A, 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 Form Chapter 2301, Subchapter A, Texas Insurance Code Required for asbestos exclusions, silica exclusions, PCB exclusions, lead exclusions, electromagnetic fields, benzene, and drywall 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.
Fully Earned Premium/Retention of Minimum Earned Premium
Fully Earned Premium / Retention of Minimum Earned Premium is unacceptable - Exceptions Chapter 2251 & Chapter 2301, Texas Insurance Code and 28 TAC §5.9320, Texas Administrative Code Fully earned premium or retention of minimum earned premium is unacceptable. However, a nominal amount is considered acceptable. Fully earned would be considered where coverage is being provided for risks such as special events and weather policies.
General Change Endorsements
May Not Manuscript Coverage Once Approved Chapter 2301, Subchapter A, 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.
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 28 TAC §1.601, Texas Administrative Code and Commissioner's Bulletin No. B-0023-07 To satisfy requirements for §521.005, §§521.051 - 521.056, and §§521.101 - 521.103 noted above.
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.
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: 06/12/2014



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