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You are here: Home . rules . 2002 . 1127-059
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Subchapter E. Texas Windstorm Insurance Association

Division 3.

Policy Forms

28 TAC §5.4101

Division 5

Texas Special Mobile Home Windstorm and Hail Insurance Policy

28 TAC §5.4401

The Texas Department of Insurance proposes amendments to §5.4101 concerning the adoption by reference of the dwelling and commercial policy forms for windstorm and hail insurance coverage by the Texas Windstorm Insurance Association (Association or TWIA), and §5.4401 concerning the adoption by reference of the Texas Special Mobile Home Windstorm and Hail Insurance Policy. The purpose of the Association is to provide windstorm and hail coverage to residents in designated catastrophe areas who are unable to obtain such coverage in the voluntary market. The adoption of three amended policy forms has been requested by the Association in a petition filed with the department on March 12, 2002, and amended on November 13, 2002 (Ref. No. P-0302-8). The department staff supports the proposed amended policy forms as filed by the Association with modifications agreed upon by both department staff and the Association. These proposed policy amendments concern provisions relating to mold coverage in the dwelling, commercial, and mobile home policies. The amendment to §5.4101 proposes the adoption by reference of an amended dwelling policy form and an amended commercial policy form. The proposed amendment to the dwelling policy would add a new exclusion no. 9 entitled "Mold, Fungi, or Other Microorganisms" and the proposed amendment to the commercial policy would add a new exclusion no. 10 entitled "Mold, Fungi, or Other Microorganisms" to the exclusions sections of these policies. The language in the proposed exclusions is essentially the same for both the policies. The exclusion defines mold, fungi or other microorganisms as the presence, growth, proliferation, spread, or any activity of fungi or mold and other microorganisms. The exclusion applies to the cost to remove mold, fungi or other microorganisms from covered property, the cost to tear out and replace any part of the building or other property required to gain access to the mold, fungi or other microorganisms, and the co st of testing to confirm the absence or presence or level of mold, fungi or other microorganisms. The exclusion contains an exception that coverage is provided for mold, fungi or other microorganisms located upon the portion of covered property which must be repaired or replaced because of sudden, accidental, direct physical damage resulting from wind or hail that is a covered loss under the policy. The exception also specifies that sudden and accidental damage shall include a loss event that is hidden or concealed for a period of time until it is detected provided the loss was reported no later than 30 days after the date it was detected or should have been detected. The exception further specifies that the mold, fungi or other microorganisms coverage in the exception does not include coverage for: 1) the cost to treat, contain, remove or dispose of the mold, fungi or other microorganisms beyond that which is reasonably necessary to repair or replace the covered property; 2) the cost of testing for the absence or presence of mold, fungi or other microorganisms; 3) the cost of decontamination of the residence premises; and 4) any increase in Loss of Use or Debris Removal coverage or diminution in value. The amendment to §5.4401 proposes the adoption by reference of an amended Texas Special Mobile Home Windstorm and Hail Insurance Policy (mobile home policy). The proposed amendment to the mobile home policy would add a new exclusion entitled "Mold, Fungi, or Other Microorganisms" to the policy. The language of the exclusion is essentially the same as that described in the proposed exclusions in the dwelling and commercial policy forms. Basically, this exclusion provides a new, broad mold, fungi or other microorganisms exclusion, but it contains the same exception as previously described for the dwelling and commercial policies. The other provisions in the proposed exclusion limit the mold, fungi or other microorganisms coverage to provide that there is no mold, fungi or other microorganisms coverage beyond the physical damage to the covered property and that only reasonable and necessary costs to repair or replace the damaged covered property are covered. Any expenses beyond this due to mold, fungi or other microorganisms, such as remediation, testing, decontamination, or any increase in expenses for Loss of Use and/or Debris Removal due to remediation or testing are not covered.

A copy of the petition along with the proposed amended policy forms is available for review in the Office of the Chief Clerk, Texas Department of Insurance, 333 Guadalupe Street, Austin, Texas, 78714-9104. To request a copy of the petition with the attachments, please contact Angela Arizpe at 512/322-4147, and refer to Ref. No. P-0302-8. The department will consider the adoption of amendments to §§5.4101 and 5.4401 in a public hearing under Docket Number 2540, scheduled for 9:30 o´clock, a.m. on January 8, 2003, in Room 100 of the William P. Hobby, Jr. State Office Building, 333 Guadalupe Street, Austin, Texas.

Marilyn Hamilton, Associate Commissioner, Property and Casualty Program, has determined that for each year of the first five years the proposed amendments are in effect, there will be no fiscal implications for state government or local government as a result of enforcing or administering the proposed amendments. Ms. Hamilton has also determined that for each year of the first five years the proposed amendments will be in effect, there will be no adverse effect on local employment or the local economy.

Ms. Hamilton has further determined that for each year of the first five years the proposed amendments are in effect, the public benefit anticipated as a result of administering the proposed amendments will be to protect and maintain the assets of the catastrophe reserve trust fund to shelter the state´s general revenue fund from dissipation through the loss of premium taxes in the event of catastrophic losses by reducing the overall exposure of TWIA to excessive losses from a proliferation of mold, fungi or other microorganisms claims against TWIA policies. The Association will incur costs for printing the new policies; however, the Association has agreed to bear such costs by filing the petition. Since there will be no new costs, other than printing new policies, to the Association, there is no anticipated adverse economic effect regarding the regulatory cost of compliance with the proposal. Additionally, Government Code §2006.001 defines "small business" and "micro-business" in pertinent part as a legal entity, including a corporation, partnership, or sole proprietorship that is formed for the purpose of making a profit. Since the Association was not formed for the purpose of making a profit, it does not meet the definition, and thus it is not necessary to include a small or micro-business analysis for the Association in this proposal.

To be considered, written comments on the proposed amendments must be submitted no later than 5:00 p.m. on January 13, 2003, to Gene C. Jarmon, Acting General Counsel and Chief Clerk, MC 113-2A, Texas Department of Insurance, P. O. Box 149104, Austin, Texas, 78714-9104. An additional copy of the comment should be simultaneously submitted to Marilyn Hamilton, Associate Commissioner, Property and Casualty Program, MC 104-PC, Texas Department of Insurance, P. O. Box 149104, Austin, Texas, 78714-9104.

The amendments are proposed pursuant to the Insurance Code, Article 21.49 and §36.001. Pursuant to Article 21.49, §8, the Commissioner is authorized to promulgate policy forms for use by the Association in providing windstorm and hail insurance coverage without regard to other forms filed with, approved by, or promulgated by the Commissioner for use in this state. Article 21.49, §5A provides that the Commissioner may, after notice and hearing, issue any orders which the Commissioner considers necessary to carry out the purposes of Article 21.49, including, but not limited to, maximum rates, competitive rates, and policy forms. Insurance Code §36.001 authorizes the Commissioner of Insurance to adopt rules which must be for general and uniform application, for the conduct and execution of the duties and functions of the Texas Department of Insurance only as authorized by statute.

The following statute is affected by this proposal: Insurance Code Article 21.49

§5.4101. Association Dwelling and Commercial Policy Forms. The Texas Department of Insurance adopts by reference the Texas Windstorm Insurance Association Dwelling Policy and the Texas Windstorm Insurance Association Commercial Policy as amended effective March 1, 2003 [ June 15, 1999]. These documents are published by and available from the Texas Windstorm Insurance Association, P.O. Box 99090 [ 2930], Austin, Texas 78709-9090 [ 78768-2930]. They may also be obtained by contacting the Automobile and Homeowners Division, Mail Code 104-1A [ 104-5A], Texas Department of Insurance, 333 Guadalupe Street, P.O. Box 149104, Austin, Texas 78714-9104.

§5.4401. Texas Special Mobile Home Windstorm and Hail Insurance Policy-Deductible Coverage. The Department [ State Board] of Insurance adopts by reference the Texas special mobile home windstorm and hail insurance policy--deductible coverage, as amended effective March 1, 2003 [ January 1, 1992]. This document is published by and available from the Texas Windstorm [ Catastrophe Property] Insurance Association, P.O. Box 99090 [ 2930], Austin, Texas 78709-9090 [ 78769]. It may also be obtained by contacting the Automobile and Homeowners [ Property] Division, Mail Code 104-1A [ 103-1A], Texas Department of Insurance, 333 Guadalupe Street, P.O. Box 149104, Austin, Texas 78714-9104.



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