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EXEMPT FILING NOTIFICATION PURSUANT TO THE INSURANCE CODE

CHAPTER 5, SUBCHAPTER L, ARTICLE 5.96

The Commissioner of Insurance has approved six new residential property policy forms which include form no. HO 00 02 (Homeowners 2-Broad Form), form no. HO 00 03 (Homeowners 3-Special Form), form no. HO 00 04 (Homeowners 4-Contents Broad Form), form no. HO 00 05 (Homeowners 5-Comprehensive Form), form no. HO 00 06 (Homeowners 6-Unit-Owners Form), and form no. HO 00 08 (Homeowners 8-Modified Coverage Form) and further has approved ninety-three new endorsements for use in the State of Texas as filed by the Insurance Services Office (ISO).

The Commissioner has jurisdiction over this matter pursuant to Texas Insurance Code Article 5.35. Article 5.35(c) provides, in pertinent part, that the Commissioner may approve the use of policy forms and endorsements adopted by a national organization of insurance companies, if such forms or endorsements are filed with and are approved by the Commissioner. Insurance Services Office, Inc. is a national insurance advisory organization, providing products and services to its participating commercial and personal lines insurers. ISO conforms to the definition of a national organization of insurance companies and is, therefore, authorized to file its policies and endorsements with the Texas Department of Insurance to be considered by the Commissioner for approval.

Article 5.35(g) establishes the standards by which a policy form or endorsement filed under that statute will be judged. That subsection provides, in pertinent part, that "The Commissioner may disapprove a policy form or endorsement filed under this article, or withdraw any previous approval thereof, if the policy form or endorsement:

(A) violates or does not comply with the Insurance Code, or any valid rule related thereto duly adopted by the Commissioner, or is otherwise contrary to law; or

(B) contains provisions or has any titles or headings which are unjust, encourage misrepresentation, are deceptive, or violate public policy."

ISO´s original submission on this matter was received on July 16,1997 , and requested the approval of ISO´s 1991 homeowners insurance program. ISO´s subsequent filing on this matter was received on March 4, 2002 , and requested the approval of ISO´s 2000 homeowners insurance program consisting of form no. HO 00 02 (Homeowners 2-Broad Form), form no. HO 00 03 (Homeowners 3-Special Form), form no. HO 00 04 (Homeowners 4-Contents Broad Form), form no. HO 00 05 (Homeowners 5-Comprehensive Form), form no. HO 00 06 (Homeowners 6-Unit-Owners Form), and form no. HO 00 08 (Homeowners 8-Modified Coverage Form) and further requested the approval of ninety-three new endorsements. Since the original submission, ISO and Texas Department of Insurance staff have engaged in discussions and dialogue relating to the forms and endorsements. ISO has made several modifications to the policy forms and endorsements, as originally submitted, as a result of review by Department staff. ISO first amended its March 4, 2002 , filing on March 19, 2002 , by providing Flesch reading scores for each policy form and endorsement, and an updated edition of endorsement no. HO 24 82 (Personal Injury) to replace an out of date version of the Personal Injury endorsement that had been inadvertently included in the original filing. ISO made a second amendment to the March 4, 2002 , filing on March 22, 2002 , by providing a narrative comparison of the ISO forms to the Texas forms. A third amendment to the March 4, 2002, filing made on May 3, 2002, contained new and amended endorsements, which incorporated changes the Department had requested by a letter dated March 28, 2002. A fourth amendment to the March 4, 2002, filing also made on May 3, 2002, provided a general description of the coverage provided by the ISO policies and provided a new complete set of policy forms and endorsements that incorporated all of the previous changes. A fifth amendment to the March 4, 2002, filing made on May 30, 2002 amended the Expected or Intended Injury exclusion, revised the Fungi or Microbes exclusion, and changed the schedule block on the Limited Fungi or Microbes Coverage-Texas endorsement to reflect percentages rather than dollar amounts. A sixth amendment to the March 4, 2002 , filing made on June 17, 2002 , made further revisions to the Fungi or Microbes exclusion. Potential action on these policy forms and endorsements was noticed in the Texas Register (27 TexReg 4731) on May 31, 2002 , to solicit comments. No hearing on this matter was requested. All amendments that were made to the policy forms and endorsements during and after the thirty day comment period were available from the Office of the Chief Clerk upon request. All individuals who requested copies of the ISO proposal have been sent copies of the amended policy forms and endorsements.

After review of ISO´s filings and supporting documentation and other information, public comments, and recommendations by Texas Department of Insurance staff, the Commissioner finds that the policy forms, endorsements, and the agreed-upon conditions as detailed herein meet the requirements of Article 5.35, and should be approved subject to the following provisos. Article 5.35 requires that a filed policy form or endorsement shall not contain provisions that are unjust, encourage misrepresentation, are deceptive, or violate public policy. Under these circumstances, as noted earlier, the Commissioner may disapprove a policy form or endorsement, or withdraw any previous approval of a form or endorsement. The Commissioner believes that there is a reasonable expectation on the part of insureds that the offer of a new policy with less coverage would be at a lower cost than a policy offered with more coverage, and that if this were not the case the filing would not come within the standards of Article 5.35, including the public policy requirement. This is especially true as the current insurance market transitions from a single, prescribed policy to individually filed policies. Accordingly, the Commissioner´s approval of ISO´s filing is predicated on information and representations provided to the Department by ISO, including the preliminary determination that insureds purchasing the new basic policy forms and endorsements can reduce their homeowners premium from 8% to 39% from the amount they otherwise would have paid for the basic HO-B, depending upon geographic location and coverage selection. The Commissioner´s approval is also predicated on the requirement in this order that any insurer who makes a filing for approval with the Department to use any of the approved ISO residential property insurance forms shall file its initial rates and any subsequent rate changes/reductions with the Department for a two year period beginning on the date the new policies are first sold, in order that the Department may monitor impacts related to the policy form approval, including compliance with Article 5.35.

I. General Description of the Coverage Provided by the Approved ISO Residential Property Policy Forms.

A. HO 00 02 (Homeowners 2-Broad Form). This form is similar to the Homeowners 3-Special Form, described herein, except that building and other structures are insured on a named peril basis. This form is analogous to the Texas Homeowners Policy Form-A with the Additional Extended Coverage Endorsement (HO-170) attached.

B. HO 00 03 (Homeowners 3-Special Form). This form is analogous to the Texas Homeowners Policy Form-B.

1. Section I-Property Coverages.

a. The policy covers the dwelling and other private structures on the premises against the risk of direct physical loss, with certain exceptions.

b. It covers personal property on and away from the premises against certain named perils including but not limited to losses by fire or lightning, windstorm or hail, explosion, riot or civil commotion, aircraft, vehicular impact, smoke, vandalism or malicious mischief, and theft.

c. It provides loss of use which covers additional living expenses when the residence becomes uninhabitable and fair rental value when part of the premises is rented to others.

2. Section II-Liability Coverages.

a. Coverage E-Personal Liability. The policy covers payment on behalf of the insured of all sums, up to the stipulated limit, which the insured is legally liable to pay as damages because of bodily injury or property damage arising out of the residence premises or personal activities.

b. Coverage F-Medical Payments to Others. The policy covers medical and related expenses, subject to the stipulated limit, arising out of accidents to persons other than the insured and residents of the premises.

c. Additional Coverages. Additional coverage is provided for claim expenses, first aid expenses, and damage to property of others.

C. HO 00 05 (Homeowners 5-Comprehensive Form). This form is similar to the Homeowners 3-Special Form except that Coverage C-Personal Property provides coverage against the risk of direct physical loss with certain exceptions. This form is analogous to the Texas Homeowners Policy-Form C.

D. HO 00 04 (Homeowners 4-Contents Broad Form). This form is issued to a tenant (non-owner) of a dwelling or an apartment situated in any building or mobile home, or an owner-occupant of a dwelling, cooperative unit of a building containing an apartment not otherwise eligible for a Homeowners Policy Form 2, 3, or 8. The residence premises occupied by the insured must be used exclusively for residential purposes, with specified exceptions, and is not occupied by more than one additional family or more than two boarders or roomers. This is a tenants policy that covers personal property on and away from the premises against certain named perils, including but not limited to, losses by fire or lightning, windstorm or hail, explosion, riot or civil commotion, aircraft, vehicular impact, smoke, vandalism or malicious mischief, and theft. This policy also contains loss of use, additional coverages, and liability coverage provisions that are the same as those described for the Homeowners 3-Special Form. The breadth of coverage is similar to that provided in Coverage C-Personal Property in Forms 00 02, and 00 03, except under the Additional Coverages, Building Additions and Alterations, coverage for tenant acquired or tenant made improvements replaces the Landlords Furnishings coverage not needed by tenants. This form is analogous to the Texas Homeowners Tenant Policy-Form B.

E. HO 00 06 (Homeowners 6-Unit-Owners Form). This form is issued to an owner of a condominium or cooperative unit used for residential purposes. This policy for condominium unit owners covers items of real property which are the insured´s responsibility under the governing rules of a condominium association. This policy contains loss of use, additional coverages, and liability coverage provisions that are the same as those described for the Homeowners 3-Special Form. This policy also covers personal property on and away from the premises against certain named perils, including but not limited to, losses by fire or lightning, windstorm or hail, explosion, riot or civil commotion, aircraft, vehicular impact, smoke, vandalism or malicious mischief, and theft similar to Form 4, except there is no Additional Coverage for Landlord Furnishings or Building Additions and Alterations. Instead, all building and structural items in the unit or on the premises containing the unit for which the unit owner is solely responsible are covered under Coverage A-Dwelling for a basic limit of $5,000. This limit can be increased to meet the unit owner´s exposure need. This form is analogous to the Texas Homeowners Condominium Policy-Form B.

F. HO 00 08 (Homeowners 8-Modified Coverage Form). This form is for insuring owner occupied dwellings but it combines certain characteristics of the Homeowners 3 and Homeowners 2 Forms. This is an owners policy that covers the dwelling, other structures, and personal property on and away from the premises against certain named perils, including but not limited to, losses by fire or lightning, windstorm or hail, explosion, riot or civil commotion, aircraft, vehicles, smoke and vandalism or malicious mischief, and theft. The peril of theft is limited to loss of property on-premises for an amount up to $1,000. By attaching Endorsement HO 04 03-Theft Coverage Increase, the on-premises theft limit may be increased to $3,000 or $5,000 and coverage for loss to property off the residence premises may be added for an amount up to $1,000. This policy also contains loss of use, additional coverages, and liability coverage provisions that are the same as those contained in the HO 00 03. However, the loss settlement provisions for buildings in this policy are more restrictive than in the other Homeowners Forms. Under all of the other Homeowners Forms, loss settlements for buildings are on a replacement cost basis if the Coverage A-Property limit of liability, at the time of loss, is at least 80% of replacement value. If it is less than 80%, the loss settlement is based on the ratio that replacement value of the building bears to the insured amount, but not less than actual cash value of the structure. However, under Form 8, if the insured elects to repair or replace the damaged building, loss settlement is based on the repair or replacement cost of the damaged building up to the policy limits. If the insured elects not to repair or replace, loss settlement is based on the least of: the limit of liability; the market value; or the actual cash value.

II. Changes To the Policies as Proposed. As a result of Department staff review regarding the proposal, the Commissioner has approved the ISO policies with changes to the policies as proposed. The ISO policy forms are approved with the following changes:

A. Form HO 00 03 and HO 00 50 as proposed excluded all first and third party coverage for loss due to fungi, wet or dry rot, or bacteria. (See Special Provisions-Texas Endorsement No. HO 01 42 06 02, Section I Exclusions 10. as proposed) This absolute exclusion has been deleted and a new exclusion has been added that, in addition to the exclusionary language, contains several other provisions that provide limited coverage for fungi or microbes as follows:

1. An exception to the exclusion provides coverage for loss caused by fungi or microbes that result from sudden and accidental discharge or overflow of water or steam if the water loss would otherwise be covered under the policy.

2. A provision is added which clarifies that sudden and accidental includes "a loss event that is hidden or concealed for a period of time until it is detectable." Further, a hidden loss must be reported to the insurer no later than thirty days after the date that the insured detected or should have detected the loss.

3. Provisions are added that specify that the limited mold coverage provided in the exception to the exclusion do not include:

a. the cost to treat, contain, remove, or dispose of the fungi or microbes beyond that which is necessary to repair or replace the covered property physically damaged by water;

b. the cost of testing air or property regardless of when the testing is conducted;

c. the cost of any decontamination of the residence premises; and

d. any increase in expenses under Loss of Use (Coverage D) and Debris Removal (Additional Coverages).

B. ISO has amended Section II-Exclusion, E. 1. entitled "Expected or Intended Injury" through the Special Provisions-Texas endorsement to delete subparagraphs a. and b. of this exclusion. This amendment was necessary because the inclusion of subparagraphs a. and b. broadened the exclusion to exclude coverage for acts that may not have been expected or intended by the insured. The broadening of this exclusion could result in third parties, who are the victims of certain unintended acts, having no avenue of recovery for a loss that would have been covered prior to the addition of subparagraphs a. and b.

III. Comparison of the ISO Policies to the Currently Prescribed Texas Homeowners Policy-Form B (HO-B). The HO-B has traditionally been the predominant policy form used in Texas for owner occupied dwellings. The Department staff´s review of ISO´s homeowners, tenant, and condominium unit-owners policies, identified several differences between the coverage provided in the HO-B and that provided in the ISO policy forms. Since the HO 00 04 (tenants policy) contains the same coverages as the HO 00 03 (except that the tenants policy does not provide the dwelling coverage) and the HO 00 06 (condominium unit-owners policy) contains the same coverages as the HO 00 03 (except that the dwelling coverage is much more limited in the condominium unit-owners policy) the restrictions and enhancements in coverage will be discussed herein in terms of a comparison between the HO 00 03 and the HO-B. However, it should be noted that most of the comparisons of coverage also apply to the ISO tenants and condominium unit-owners policies.

IV. Restrictions In Coverage. The following is a list of some of the restrictions in coverage that are contained in the homeowners policy as compared to the existing HO-B. This list is not intended to cover every restriction in coverage that is contained in the ISO policy forms. If more detailed coverage information is desired, a side by side comparison of the ISO HO 00 03 homeowners policy and the HO-B is available from the Department upon request from the Office of the Chief Clerk.

A. Coverage for Boats, Boat Trailers, and Other Trailers.

The ISO HO 00 03 policy provides up to $1,500 in coverage for watercraft, including their trailers, furnishings, equipment and outboard motors and other trailers or semitrailers not used with watercraft for losses that occur on and off premises for named perils. (See Section I-Property Coverages, Coverage C-Personal Property, Special Limits of Liability, items c. and d.) The ISO HO 00 03 policy provides theft coverage for watercraft, including their trailers, furnishings, equipment and outboard motors and other trailers, semitrailers and campers if the theft occurs on the residence premises; however, if the theft occurs off-residence premises, theft coverage is excluded. (See Section 1-Perils Insured Against, Coverage C­Personal Property, paragraph 9.) The ISO HO 00 03 policy provides windstorm and hail coverage for boats and their trailers, furnishings, equipment, and outboard engines or motors, only if they are inside a fully enclosed building. (See Section 1-Perils Insured Against, Coverage C­Personal Property, paragraph 2.) The HO-B provides coverage up to the limits of liability that apply to Coverage B (Personal Property) for boats and boat trailers while located on land on the residence premises for all perils insured against. Additionally, the HO-B provides coverage up to the limits of liability that apply to Coverage B (Personal Property) for trailers designed for use principally off public roads (e.g., travel trailers) whether on or off premises. (See Section 1-Property Coverage, Coverage B (Personal Property), Property Not Covered, paragraphs 4. and 6.)

B. Coverage for Firearms.

The ISO HO 00 03 policy limits the coverage for firearms to losses by the peril of theft with a maximum limit of liability of $2,500. (See Section I- Property Coverages, Coverage C-Personal Property, Special Limits of Liability, item f.) The HO-B provides coverage for firearms to the extent described under the Perils Insured Against section of the policy, including the peril of theft, up to the limits of liability that apply to Coverage B (Personal Property).

C. Coverage for Goldware and Silverware.

The ISO HO 00 03 policy limits the coverage for goldware, gold-plated ware, silverware, silver-plated ware, platinumware, platinum-plated ware and pewterware (this includes flatware, hollowware, tea sets, trays and trophies made of or including silver, gold or pewter) to losses by the peril of theft with a maximum limit of liability of $2,500. (See Section I-Property Coverages, Coverage C-Personal Property, Special Limits of Liability, item g.) The HO-B provides coverage for goldware and silverware to the extent described under the Perils Insured Against section of the policy, including the peril of theft, up to the limits of liability that apply to Coverage B (Personal Property).

D. Coverage for Golf Carts.

The ISO HO 00 03 policy only covers golf carts if they are used solely to service the residence premises. (See Section I ­ Property Coverages, Coverage C ­ Personal Property, Property Not Covered, c, 2.) The HO-B provides coverage for golf carts up to the limits of liability that apply to Coverage B (Personal Property) to the extent described under the Perils Insured Against section of the policy. (See Section I ­ Property Coverage, Coverage B (Personal Property) Property Not Covered, paragraph 3.c.)

E. Coverage for Tree Debris Removal.

The ISO HO 00 03 policy limits the coverage for the removal of debris from fallen trees to $1,000 in any one loss regardless of the number of trees, but no more than $500 for the removal of any one tree. (See Section I-Property Coverages, Additional Coverages, item 1, b.) The HO-B provides coverage for removal of debris from a fallen tree to the extent described under the Extensions of Coverage section of the policy up to the limits of liability that apply to the damaged property. (See Extensions of Coverage, paragraph 1.)

F. Coverage for Water Damage.

1. The ISO HO 00 03 policy as amended by the Special Provisions-Texas endorsement does not include coverage for losses to a dwelling and other structures caused by constant or repeated seepage or leakage from within a plumbing, heating, air conditioning or automatic fire protective sprinkler system or from within a household appliance. (See Special Provisions-Texas Endorsement No. HO 01 42 06 02, Section I-Perils Insured Against) The HO-B provides coverage for water damage from repeated and continuous seepage or leakage of water or steam from a plumbing system, heating or air conditioning system, or household appliance which occurs over a period of time. (See Section 1-Perils Insured Against, paragraph 9.)

2. The ISO HO 00 03 policy does not cover losses to the dwelling and other structures caused by water which backs up through sewers or drains or which overflows from a sump pump, sump well, or similar device designed to drain water from the foundation area. (See Section I ­ Exclusions, A, 3, b) Further, the ISO HO 00 03 policy does not cover losses to personal property caused by water which overflows from a sump pump, sump, or related equipment or a roof drain, gutter, downspout or similar fixtures or equipment, and it does not cover losses to personal property on the residence premises caused by accidental discharge or overflow which occurs off the residence premises. (See Section I ­ Perils Insured Against, Coverage C ­ Personal Property, number 12.) The HO-B provides coverage for damage to property covered under Coverage A (Dwelling) or Coverage B (Personal Property) for a loss caused by back up or overflow from a sewer, drain, or sump pump of sewage or water even if it is from outside the residence premises. Property covered under Coverage B (Personal Property) is specifically insured for loss caused by accidental discharge, leakage, or overflow of water or steam from within a plumbing system, heating or air conditioning system, or household appliance which may include a loss caused by water or sewage from outside the residence premises that backs up or overflows from a sewer, drain, or sump pump. (See Section 1-Perils Insured Against, Coverage B-Personal Property, paragraph 9.)

3. ISO agrees that the intent of subsection 10., entitled "Fungi" or Microbes, of the Section I -- Exclusions in the Special Provisions-Texas Endorsement No. 01 42 ( which amends Forms HO 00 03 and HO 00 05) is to provide at a minimum the coverage for water damage in the same manner as provided in the HO-B as specified in Section II.A.2. Paragraphs a. through e. of Commissioner´s Order No. 01-1105, concerning Mold, Fungi, or Other Microbes.

G. ISO HO 00 03 Policy Exclusions.

1. The ISO HO 00 03 policy excludes loss caused by faulty, inadequate or defective planning, zoning, development, surveying, siting, design, specifications, workmanship, repair, construction, renovation, remodeling, grading, compaction; materials used in repair, construction, renovation, remodeling or maintenance of part or all of the property whether on or off of the residence premises. (See Section I-Exclusions, item B. 3.) The HO-B does not contain this exclusion.

2. The ISO HO 00 03 does not cover settling, shrinking, bulging or expansion, including resultant cracking of bulkheads, pavements, patios, footings, foundations, walls, floors, roofs or ceilings. (See Section I ­ Perils Insured Against, A, 2, c, (6), (f)). The HO-B provides coverage for an ensuing loss caused by a covered water loss to foundations, walls, floors, ceilings, roof structures, walks, drives, curbs, fences, retaining walls or swimming pools. (See Section I ­ Exclusions 1. h.) In contrast, the HO-B provides dwelling foundation coverage limits up to the total amount of insurance for Coverage A (Dwelling).

H. Coverage for Personal Property.

The ISO HO 00 03 policy does not provide coverage for business data stored in books of account, drawings or other paper records, or computers and related equipment. (See Section I-Property Coverages, Coverage C-Personal Property, item 4, i.) The HO-B does not contain this exception.

V. Coverage Enhancements. The following is a list of some of the areas where the ISO HO 00 03 homeowners policy provides coverage that is broader than the coverage provided in the HO-B. This list is not intended to cover every enhancement in coverage that is contained in the ISO policy forms. If more detailed coverage information is desired, a side by side comparison of the ISO HO 00 03 homeowners policy and the HO-B is available from the Department on request from the Office of the Chief Clerk.

A. Personal Property, Special Limits of Liability.

1. The ISO HO 00 03 policy provides a $200 limit of liability for losses of money, bank notes, bullion, gold other than goldware, silver other than silverware, platinum other than platinumware, coins, medals, scrip, stored value cards and smart cards. (See Section I-Property Coverages, Coverage C-Personal Property, Special Limits of Liability, item a.) The HO-B provides a $100 limit of liability for losses of money. (See Section 1-Property Coverage, Coverage B (Personal Property), Special Limits of Liability, paragraph 1.)

2. The ISO HO 00 03 policy provides a $1500 limit of liability for loss of securities, accounts, deeds, evidences of debt, letters of credit, notes other than bank notes, manuscripts, personal records, passports, tickets, and stamps. (See Section I-Coverages, Coverage C-Personal Property, Special Limits of Liability, item b.) The HO-B provides a $500 limit of liability for "Bullion/Valuable Papers". (See Section I-Property Coverage, Coverage B (Personal Property), Special Limits of Liability, paragraph 2.)

3. The ISO HO 00 03 policy provides a $1500 limit of liability for watercraft of all types, including their trailers, furnishings, equipment, and outboard engines or motors and other trailers or semi-trailers not used with watercraft while away from the residence premises. (See Section I-Coverages, Coverage C-Personal Property, Special Limits of Liability, items c. and d.) The HO-B excludes coverage for boats and boat trailers while away from the residence premises. (See Section I-Property Coverage, Property Not Covered, paragraphs 4. b. and 6.)

4. The ISO HO 00 03 policy provides $1,500 coverage for loss by theft of jewelry, watches, precious and semi-precious stones, and furs. (See Section I-Coverages, Coverage C-Personal Property, Special Limits of Liability, item e.) The HO-B provides a $500 limit of liability for loss by theft of gems, watches, jewelry or furs. (See Section I-Property Coverage, Coverage B (Personal Property), Special Limits of Liability, paragraph 3.)

5. The ISO HO 00 03 policy provides $500 coverage for business property away from the residence. (See Section I-Coverages, Coverage C-Personal Property, Special Limits of Liability, item i.) The HO-B does not provide coverage for business property away from the residence.

B. Additional Coverages.

1. The ISO HO 00 03 policy provides an additional 5% of the limit of liability that applies to the damaged property for debris removal if the actual property damage and debris removal exceeds the limit of liability for the damaged property. (See Section I-Property Coverages, Additional Coverages, item 1, a.) The HO-B´s debris removal coverage is included in the limit of liability that applies to the damaged property and does not add additional coverage. (See Section I-Property Coverage, Coverage B (Personal Property), Extensions of Coverage, paragraph 1.)

2. The ISO HO 00 03 policy provides up to $500 for covered damage to any one tree, shrub or plant. (See Section I-Property Coverages, Additional Coverages, item 3.) The HO-B provides up to $250 for covered damage to any one tree, shrub or plant. (See Section I-Property Coverage, Coverage B (Personal Property), Extensions Of Coverage, paragraph 4.)

3. The ISO HO 00 03 policy pays up to $500 in the aggregate for loss and defense costs relating to the theft or unauthorized use of credit cards, electronic fund transfer cards or access devices, forgery of checks or negotiable instruments, and acceptance in good faith of counterfeit money. This coverage is additional insurance and no deductible applies. (See Section 1-Property Coverages, Additional Coverages, paragraph 6.) The HO-B provides a $100 limit of liability (subject to a deductible) for loss by theft or unauthorized use of bank fund transfer cards. (See Section 1-Property Coverage, Coverage B (Personal Property), Special Limits of Liability, paragraph 1.)

4. The ISO HO 00 03 policy provides coverage up to $1,000 for the insured´s share of a loss assessment charged during the policy period by a corporation or association of property owners when the assessment is made as a result of direct loss to the property owned by all members collectively that was caused by a covered peril. (See Section I-Property Coverages, Additional Coverages, item 7.) The HO-B does not provide this coverage.

5. The ISO HO 00 03 policy provides up to $5,000 for grave markers, including mausoleums, on or away for the residence premises for loss caused by a peril insured against. (See Section I ­Property Coverages, Additional Coverages, item 12.) The HO-B does not provide similar coverage.

6. The ISO HO 00 03 policy provides up to $2,500 for appliances, carpeting and other household furnishings, in each apartment on the residence premises regularly rented or held for rent by an insured, for loss caused by a peril insured against. (See Section I­ Property Coverages, Additional Coverages, item 10.) The HO-B does not provide this coverage.

C. Coverage for Vandalism and Malicious Mischief

The ISO HO 00 03 policy excludes coverage for loss caused by vandalism and malicious mischief if the dwelling has been vacant for more than 60 consecutive days immediately before the loss. (See Section I ­ Perils Insured Against, A., 2., C., (4)) The HO-B suspends all coverage under Coverage A (Dwelling) effective 60 days after the dwelling becomes vacant. (See Section I ­ Conditions, 13.) The ISO HO 00 03 policy also provides coverage for loss caused by vandalism and malicious mischief to trees, shrubs and other plants, in an amount up to 5% of the limit of liability that applies to the dwelling, but no more than $500 for any one tree, shrub or plant. (See Section I ­ Property Coverages, Additional Coverages, item 3).

D. Coverage for Loss of Use

The ISO HO 00 03 policy provides Loss of Use coverage for additional living expenses and fair rental value if a covered loss makes the residence premises where the insured resides unfit to live in. Payment will be for the shortest time required to repair or replace the damage. If the insured relocates, payment will be for the shortest time required for the insured´s household to settle elsewhere. Loss of Use coverage is also provided if a civil authority prohibits use of the residence premises as a result of direct damage to neighboring premises by a peril insured against, to no more than two weeks. (See Section ­ I Property Coverages, D.) The HO-B provides Loss of Use coverage for additional living expenses and fair rental value if a covered loss makes the residence premises wholly or partially untenantable. Payment will be for the reasonable time required to repair or replace the damaged property up to 20% of the Coverage A (Dwelling) limit of limit of liability. (See Section I ­ Property Coverages, Extensions of Coverage 2.)

E. Windstorm or Hail Coverage.

The ISO policy does not exclude windstorm or hail coverage for structures or their contents if located wholly or partially over water . (See Section 1-Perils Insured Against, Coverage C-Personal Property, item 2.) The HO-B excludes loss from windstorm, hurricane and hail to structures wholly or partially over water and their contents. (See Section 1-Exclusions, item 1. c. (1))

VI. ISO Homeowners Endorsements. In addition to the six policy forms, the Commissioner has approved ninety-three endorsements pursuant to Article 5.35 (c). Several of the endorsements provide coverage that is not currently available under a Texas homeowners policy, including (1) a Permitted Incidental Occupancies­Other Residence Endorsement that provides liability coverage for the operation of an incidental business at another residential location owned by the insured, (2) a Structures Rented to Others­Residence Premises Endorsement that provides coverage for structures on the residence premises rented to others for use as a private residence, (3) a Coverage B­Other Structures Away From the Residence Premises Endorsement that provides 10% coverage for other structures located away from the residence premises such as a storage shed or boat dock, (4) and an Earthquake Endorsement that provides coverage for damage resulting from an earthquake. A general description of the coverage that will be provided by the ISO Foundation Coverage-Texas Endorsement and Water Damage Coverage-Texas Endorsement is provided. Additionally, a description of the coverage that will be provided by the ISO Limited Fungi or Microbes Coverage-Texas Endorsement is provided.

A. Foundation Coverage-Texas Endorsement.

The endorsement provides coverage for settling, cracking, shrinking, bulging, or expansion of foundations, floor slab or footings that support the dwelling caused by seepage or leakage of water or steam from within a plumbing, heating, air conditioning, or automatic fire protective sprinkler system. The coverage includes the cost of tearing out and replacing any part of the building necessary to repair the system from which the water or steam escaped. The loss to the system from which the water or steam escaped is not covered. The endorsement limits coverage to 15% of the amount of insurance for Coverage A-Dwelling on the date of loss.

B. Water Damage Coverage-Texas Endorsement.

The endorsement provides coverage for deterioration, wet rot, or dry rot to Coverage A-Dwelling, Coverage B-Other Structures, and Coverage C-Personal Property caused by a constant or repeated seepage or leakage of water or steam from within a heating, air conditioning system or automatic fire sprinkler system, household appliance or plumbing system. The coverage includes the cost of tearing out and replacing any part of the building necessary to repair the system from which the water or steam escaped. The loss to the system or appliance from which the water or steam escaped is not covered. The endorsement does not cover loss caused by, consisting of, or resulting from fungi or microbes, specifically fungi or microbes which are the result of constant or repeated seepage or leakage of water or steam or the presence or condensation of humidity or vapor from within a heating, air conditioning system or automatic fire sprinkler system, household appliance or plumbing system. In addition, the coverage provided in the endorsement does not increase the limit of liability that applies to the damaged covered property.

C. Limited Fungi or Microbes Coverage-Texas Endorsement.

The endorsement provides coverage for: (1) the cost to remove fungi or microbes from property covered under Section I-Property Coverages; (2) the cost to tear out and replace any part of the building or other covered property as needed to gain access to the fungi or microbes; (3) the cost of testing of air or property to confirm the absence, presence, or level of fungi or microbes whether performed prior to, during or after the removal, repair, restoration, or replacement.; and (4) the total of the loss payable under Coverage D-Loss of Use, if the fungi or microbes render the residence premises unfit to live in. The endorsement specifies that the exclusion in the policy for Fungi or Microbes (Exclusion A. 10.) does not apply to the coverage provided in the Limited Fungi or Microbes Coverage Endorsement. The coverage described in this endorsement only applies when such loss or cost are the result of a Peril Insured Against that occurs during the policy period and only if all reasonable means were used to save and preserve the property from further damage following a covered loss. The endorsement specifies that the scheduled amount shown on the endorsement is the most the insurer will pay under this Additional Coverage regardless of: (1) the number of Perils Insured Against that combine or contribute to the presence of the fungi or microbes; (2) the number of locations insured under the endorsement; or (3) the number of claims made during the policy period. The additional coverage in the endorsement does not apply to fungi or microbes which are the result of constant or repeated seepage or leakage of water or steam or the presence or condensation of humidity, moisture, or vapor over a period of weeks, months, or years. Further, the coverage does not increase the limit of liability applying to the damaged covered property. ISO amended the schedule block of this endorsement to reflect that the coverage purchased is a percentage of Coverage A rather than a specific dollar amount.

VII. Requirements for Insurers To Implement the Residential Property Insurance Forms. Any insurer that makes a filing for approval with the Department to use any of the ISO residential property insurance forms will be required as part of the filing to:

A. Agree in writing (1) to abide by all of the conditions and requirements imposed by this order, (2) to offer the Foundation Coverage-Texas Endorsement, the Water Damage Coverage-Texas Endorsement, and the Limited Fungi or Microbes Coverage-Texas Endorsement, and (3) to comply with Section II.A.2. Paragraphs a. through e. of Commissioner´s Order No. 01-1105, concerning Mold, Fungi, or Other Microbes; specifically, all insurers must extend coverage for reasonable and necessary repair or replacement of property physically damaged by a covered water loss which damage shall include mold, fungi, or other microbes, including a water loss that involves hidden and undetected damage, and where the insured has reported the loss within thirty (30) days of its detection.

B. Provide the Department with detailed information on the implementation of the new ISO residential property insurance forms including the Foundation Coverage-Texas Endorsement, Water Damage Coverage-Texas Endorsement, and Limited Fungi or Microbes Coverage-Texas Endorsement for both new business and existing business including (but not limited to) when the new policy forms will be phased in for use with their policyholders and whether the policy forms promulgated by TDI will be discontinued for use with their policyholders.

C. New Business.

Provide the Department with a detailed plan outlining how the insurer intends to phase in the new ISO policies with the new business that the insurer writes. The approved policy forms limit coverage for dwelling foundation losses and water damage losses and exclude mold damage losses. At the time each new residential property policy is written, the insurer will be required to offer the Foundation Coverage-Texas Endorsement, the Water Damage Coverage-Texas Endorsement, and the Limited Fungi or Microbes-Texas Coverage Endorsement to the applicant subject to insurer´s current underwriting guidelines. The insurer will also be required to include information regarding whether these endorsements will be offered on a one-time basis or whether they will continue to be available for purchase in the future after the initial offer subject to the insurer´s underwriting guidelines. The insurer will be required to inform a policyholder in the consumer disclosure letter that if he/she desires to continue the dwelling foundation coverage (subject to the 15% cap), the water damage coverage, and the mold coverage that the policyholder essentially has under the HO-B, the Foundation Coverage-Texas, Water Damage Coverage-Texas, and Limited Fungi or Microbes Coverage-Texas endorsements must be purchased for an additional premium.

D. Existing Business.

1. Provide the Department with a detailed plan outlining how the insurer intends to phase in the new ISO policies with the insurer´s existing business. The insurer will be required to explain its phase in plan for each type of promulgated form (HO-B, HO-A, HO-BT, etc.) that it intends to convert to the new ISO forms.

2. Consumer Disclosures. The insurers must agree in the filing to provide an explanatory letter and a summary of coverages expressly noting where there is less coverage, or in some cases a change in coverage, in the ISO policies than in the currently prescribed policies to the policyholders who are being converted from the currently prescribed Texas forms to the new ISO forms. This notice letter will be sent to the policyholders sixty (60) days in advance of the policy conversion date. This notice letter will be provided to the Department for its review prior to the insurer´s use of this letter.

E. Rating Information.

The insurers must agree in the filing to file their initial rates and any rate changes for policies written through any of their Lloyds companies or reciprocal exchanges with the Department on an informational basis for a period of two years to allow the Department to monitor the rates on the new ISO policies. The filing shall include detailed information showing the rate change and rate reduction that consumers would receive if they purchased the ISO policy (HO 00 030) as compared to purchasing the HO-B. The insurers must also agree in the filing to provide the Department with a copy of their loss cost analyses during the time period they are providing the rating information.

VIII. Severability. If any provision of this order or its application to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of this order that can be given effect without the invalid provision or application, and to this end the provisions of this order are declared to be severable.

The Commissioner has jurisdiction of this matter pursuant to the Insurance Code, Articles 5.35 and 5.96.

The policy forms and endorsements as approved by the Commissioner of Insurance are on file with the Chief Clerk´s Office of the Texas Department of Insurance under Reference No. P-0302-11 and are incorporated by reference by Commissioner Order No. 02-0741.

This notification is made pursuant to the Insurance Code, Article 5.96, which exempts it from the requirements of the Government Code, Chapter 2001 (Administrative Procedure Act).

Consistent with the Insurance Code, Article 5.96 (h), the Department will notify all insurers affected by this section of the adoption by letter summarizing the Commissioner´s action.

IT IS THEREFORE THE ORDER of the Commissioner of Insurance that six new residential property policy forms which include form no. HO 00 02 (Homeowners 2-Broad Form), form no. HO 00 03 (Homeowners 3-Special Form), form no. HO 00 04 (Homeowners 4-Contents Broad Form), form no. HO 00 05 (Homeowners 5-Comprehensive Form), form no. HO 00 06 (Homeowners 6-Unit-Owners Form), and form no. HO 00 08 (Homeowners 8-Modified Coverage Form) and ninety-three new endorsements as specified herein and which are attached to this Order and incorporated into this Order by reference, are approved.



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Last updated: 09/06/2014

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