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TEXAS DEPARTMENT OF INSURANCE EXEMPT FILING NOTIFICATION PURSUANT TO THE INSURANCE CODE CHAPTER 5, SUBCHAPTER L, ARTICLE 5.96

The Commissioner of Insurance has adopted three new residential property policy forms which include form no. HO-542 (homeowners policy), form no. HC-542 (condominium policy), and form no. HT-542 (tenants policy) filed by Nationwide Lloyds Insurance Company (Nationwide) and further has adopted fourteen new endorsements that may be attached to the new residential property policy forms for use in the State of Texas.

The Commissioner has jurisdiction over this matter pursuant to Texas Insurance Code Article 5.35. Article 5.35(b) provides in pertinent part that the Commissioner may adopt policy forms and endorsements of a national insurer, which is defined as an insurer subject to that article that, either directly or together with its affiliates as part of an insurance holding company system as defined by Article 21.49-1, is licensed to do business and write the kinds of insurance that are subject to Texas Insurance Code Chapter 5, Subchapter C (fire and allied lines) in 26 or more states and maintains minimum annual direct written premiums for residential property insurance of $750 million in the aggregate for all states. Based on information furnished to the Texas Department of Insurance (Department), Nationwide is a national insurer under this section and is thus authorized to file its policies and endorsements with the Texas Department of Insurance to be considered by the Commissioner for adoption.

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:

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."

Nationwide´s original petition on this matter, filed on June 10, 2002, requested the adoption of a new Texas homeowners policy, tenants policy, and condominium policy. Since the filing of the original petition, Nationwide and Department staff have engaged in discussions and dialogue relating to the new forms and endorsements. Nationwide has made several modifications to the homeowners, tenants, and condominium policies, as originally filed, as a result of discussions with Department staff. Nationwide amended its June 10, 2002, filing on July 17, 2002, by providing Flesch scores for the policy forms and endorsements and by making editorial revisions to the policy forms including changing the form numbers from HO-142 to HO-542, HC-142 to HC-542, and HT-142 to HT-542 to avoid potential confusion with TDI endorsement no. HO-142. In letters dated July 26, 2002, August 21, 2002, and September 16, 2002 Nationwide made additional changes in response to concerns expressed by staff during the policy and endorsement review. Potential action on these policy forms and endorsements was noticed in the Texas Register (27 TexReg 7193) on August 9, 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 Nationwide proposal have been sent copies of the amended policy forms and endorsements.

After review of Nationwide´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 adopted 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 by the same company 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 adoption of Nationwide´s filing is predicated on information and representations provided to the Department by Nationwide, including the preliminary determination that insureds purchasing the new basic policy forms and endorsements can reduce their homeowners premium from 9% to 27% from the amount they otherwise would have paid for the basic HO-B, depending upon geographic location and coverage selection. The Commissioner´s adoption is also predicated on the requirement in this order, which Nationwide has agreed to, that Nationwide file its initial rates and any subsequent rate changes/reductions with the Department for a two year period beginning on the date the policies are first sold, in order that the Department may monitor impacts related to the policy fo rm adoption, including compliance with Article 5.35.

I. Nationwide Homeowners Policy. The following is a general description of the coverage provided by the new Nationwide homeowners policy that is adopted by the Commissioner pursuant to Article 5.35 (b).

A. Section I-Property Coverages.

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

2. It covers personal property on and away from the premises against losses by fire or lightning, windstorm or hail, explosion, riot or civil commotion, aircraft, vehicles, smoke, vandalism and malicious mischief, theft, falling objects, weight of ice, snow, or sleet, sudden and accidental discharge or overflow or water or steam, sudden and accidental tearing apart, and freezing.

3. It provides loss of use which covers additional living expenses if a covered loss requires the insured to leave the residence premises and fair rental value when part of the premises is rented to others.

4. The policy excludes loss caused by mold, fungus or other microbes. However, as an exception to the exclusion, Nationwide will provide coverage if the mold, fungus or other microbes is caused by or results from sudden and accidental discharge or overflow of water which otherwise would be covered under the policy. Sudden and accidental shall include a loss event that is hidden or concealed for a period of time until it is detectable. A hidden loss must be reported to Nationwide no later than 30 days after the date the loss was detected or should have been detected. The cost to treat, contain, remove or dispose of mold, fungus or other microbes beyond that which is required to repair or replace the covered property physically damaged by water; the cost of testing or monitoring of air or property; and the cost of any decontamination of the residence premises is excluded. (See Section I-Property Exclusions, item 1.l.) Pursuant to Commissioner´s Order No. 01-1105, the HO-B modified by endorsement no. HO-162A provides coverage for removal of ensuing mold, fungi, or other microbial losses caused by sudden and accidental discharge, leakage or overflow of water if the water loss is a covered loss. However, the modified HO-B does not provide coverage for the remediation of mold or fungus.

B. Section II-Liability Coverages.

1. 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 obligated to pay as damages because of bodily injury or property damage arising out of the residence premises or personal activities.

2. 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.

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

II. Nationwide Condominium Policy. This policy for a condominium covers items of real property which are the insured´s responsibility under the governing rules of a condominium. This policy covers personal property on and away from the premises against losses by fire or lightning; windstorm or hail; explosion; riot or civil commotion; aircraft; vehicles; smoke; vandalism and malicious mischief; theft; falling objects; weight of ice, snow, or sleet; sudden and accidental discharge or overflow of water or steam; accidental electrical damage to electrical appliances; sudden and accidental tearing apart; and freezing. This policy also contains loss of use, additional coverages, and liability coverage provisions that are the same as those described for the Nationwide homeowners policy. Additionally, this policy contains provisions similar to those described in the Nationwide homeowners policy relating to mold, fungi, and other microbes.

III. Nationwide Tenants Policy. This is a tenants policy that covers personal property on and away from the premises against losses by fire or lightning; windstorm or hail; explosion; riot or civil commotion; aircraft; vehicles; smoke; vandalism and malicious mischief; theft; falling objects; weight of ice, snow, or sleet; sudden and accidental discharge or overflow of water or steam; accidental electrical damage to electrical appliances; accidental tearing apart; and freezing. This policy also contains loss of use, additional coverages, and liability coverage provisions that are the same as those described for the Nationwide homeowners policy. Additionally, this policy contains provisions similar to those described in the Nationwide homeowners policy relating to mold, fungi, and other microbes.

IV. Changes To the Policies and Endorsements as Proposed. As a result of comments on the proposal, the Commissioner has adopted the homeowners, condominium, and tenants policies and endorsements with changes as proposed. Form no. HO-542 (homeowners policy), form no. HC-542 (condominium policy), and form no. HT-542 (tenants policy) and the endorsements were adopted with the following changes:

A. With respect to all three policies, Section I-Exclusions, item 1.f., the Increased Hazard exclusion was deleted. This exclusion enabled Nationwide to exclude any loss if there was an increase in hazard within the knowledge and control of the insured. The language of this exclusion conflicted with the intent of Article 21.49-2B which provides that an insurer may cancel a homeowners policy if there is an increase in hazard that would produce an increase in the premium rate of the policy. However, while the insurer may cancel a policy under Article 21.49-2B because of an increased hazard that would produce an increase in the premium rate, it does not authorize an insurer to exclude losses and deny payment of a claim due to an increase in hazard.

B. With respect to all three policies, the remaining paragraph 1 exclusions were relettered to reflect the new sequence of the exclusions that resulted from the deletion of the Increased Hazard exclusion.

C. With respect to the homeowners and condominium policies, a reference to certain Section I Policy Exclusions in the Section 1-Additional Property Coverages, Household Supplies was revised due to the relettering of paragraph 1 exclusions.

D. In response to concerns expressed by Department staff, Nationwide revised its Certificate of Liability Insurance form, Cas. 6300 to clarify that it could only be used with the homeowners policies and also provided Nationwide´s own version of the Sworn Proof of Loss, form no. Fire 3919.

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

VI. 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 Nationwide policy forms. If more detailed coverage information is desired, a side by side comparison of the Nationwide homeowners policy and the HO-B, a side by side comparison of the Nationwide condominium policy and the HO-B-CON, and a side by side comparison of the Nationwide tenant policy and the HO-BT are available from the Department upon request from the Office of the Chief Clerk.

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

The Nationwide policy provides up to $1,000 in coverage for watercraft and outboard motors, including trailers, furnishings, and equipment; and other utility type trailers 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 10. and 11.) The Nationwide policy provides theft coverage for watercraft, including their trailers, furnishings, equipment and outboard motors or trailers and campers if the theft occurs on the residence premises; however, if the theft occurs off of the residence premises, theft coverage is excluded. (See Section 1-Perils Insured Against, item 9.) The Nationwide policy provides windstorm and hail coverage for boats and their trailers only if they are inside a fully enclosed building. (See Section 1-Perils Insured Against, item 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, items 4. and 6.)

B. Coverage for Firearms.

The Nationwide policy limits the coverage for firearms to losses by the peril of theft with a maximum limit of liability of $1,000. (See Section I- Property Coverages, Coverage C-Personal Property, Special Limits of Liability, item 2.) 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 Nationwide policy limits the coverage for goldware, gold-plated ware, silverware, silver-plated ware, and pewterware 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 4.) 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 Nationwide policy does not cover golf carts unless used to service the residence premises or while used for golfing purposes. (See Section I ­ Property Coverages, Coverage C ­ Personal Property, Property Not Covered, item 4. c.) 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, item 3.c.)

E. Coverage for Business Property.

The Nationwide policy limits coverage for business property on the residence premises, except computers including their hardware and software to $500. (See Section I-Property Coverages, Coverage C-Personal Property, Special Limits of Liability, item 9.) The HO-B provides $2,500 coverage for business personal property, except samples or articles for sale or delivery, while on the residence premises. (See Coverage B (Personal Property) Special Limits of Liability, item 4.)

F. Debris Removal.

Nationwide provides reasonable expense incurred for removing debris of covered property if the peril causing the loss is covered. This includes debris of trees that cause damage to covered property or covered structures, or that obstruct access to covered structures if such access is necessary to repair or replace the structure. However, coverage is only provided to move away from, or off of, covered property the debris of trees that cause damage to covered property. (See Additional Property Coverages, item 1.) The HO-B will pay the expense for removal from the residence premises of a tree that has damaged covered property if a peril insured against causes the tree to fall. (See Extensions of Coverage, item 1.)

G. Coverage for Water Damage.

1. The Nationwide policy specifies that it does not include coverage for losses to the dwelling and other structures caused by continuous or repeated seepage or leakage of water or steam over a period of time from a heating, air conditioning or automatic fire protective sprinkler system, household appliance, or plumbing system. (See Section I Property Exclusions, item 3.e.) 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, item 9.)

2. The Nationwide policy does not cover losses caused by water which backs up through sewers or drains from outside the dwelling´s plumbing system or which overflows from a sump pump, sump pump well, or similar device designed to remove subsurface water or water-borne material from the foundation area. (See Section I-Exclusions, item 1.b.(2).) 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, item 9.)

H. Coverage for Vandalism and Malicious Mischief.

The Nationwide policy excludes loss from vandalism and malicious mischief or breakage of glass if the dwelling is vacant for more than 30 consecutive days immediately before a loss. (See Section I-Exclusions, item 2.d.) The HO-B provides coverage for all perils insured against for up to 60 days of vacancy. (See Section 1-Conditions, item 13.)

I. Nationwide Policy Exclusions.

1. The Nationwide policy excludes loss caused by a fault, weakness, defect or inadequacy in specifications, planning, zoning, design, workmanship, construction, materials, surveying, grading, backfilling, development or maintenance of any property whether on or off of the residence premises. (See Section I-Exclusions, item 2. a.) The HO-B does not contain this exclusion.

2. Nationwide excludes settling, cracking, shrinking, bulging or expansion of pavements, patios, foundations, walls, floors, roofs or ceilings. (See Section I ­ Exclusions, item 1. 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, item 1. h.)

J. Coverage for Loss of Use.

The Nationwide policy limits the time allowable for payment of Additional Living Expense and Fair Rental Value to 12 months. (See Section I-Property Coverages, Coverage D-Loss of Use, item 1. 2.) The HO-B does not have a time limitation for the payment of Additional Living Expense and Fair Rental Value.

VII. Coverage Enhancements. The following is a list of some of the areas where the Nationwide 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 Nationwide policy forms. If more detailed coverage information is desired, a side by side comparison of the Nationwide homeowners policy and the HO-B, a side by side comparison of the Nationwide condominium policy and the HO-B-CON, and a side by side comparison of the Nationwide tenants policy and the HO-BT are available from the Office of the Chief Clerk on request.

A. Personal Property, Special Limits of Liability.

1. The Nationwide policy provides a $200 limit of liability for losses of money, bank notes, bullion, gold other than goldware, silver other than silverware, platinum, coins, stored value cards, smart cards, gift certificates, and medals. (See Section I-Property Coverages, Coverage C-Personal Property, Special Limits of Liability, item 6.) 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, item 1.)

2. The Nationwide policy provides a $1,000 limit of liability for loss of securities, accounts, deeds, documents, evidences of debt, letters of credit, notes other than bank notes, passports, stamps and tickets. (See Section I-Coverages, Coverage C-Personal Property, Special Limits of Liability, item 7.) 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, item 2.)

3. The Nationwide policy provides a $1,000 limit of liability for watercraft and outboard motors, including trailers , furnishings, and equipment; and other utility type trailers while away from the residence premises. (See Section I-Coverages, Coverage C-Personal Property, Special Limits of Liability, items 10. and 11.) The HO-B excludes coverage for boats and boat trailers while away from the residence premises. (See Section I-Property Coverage, Property Not Covered, items 4. b. and 6.)

4. The Nationwide policy provides $1,000 coverage for loss by theft of jewelry, watches, furs, and precious and semi-precious stones. (See Section I-Coverages, Coverage C-Personal Property, Special Limits of Liability, item 1.) 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, item 3.)

B. Additional Property Coverages.

1. The Nationwide policy provides an additional 5% of the limit of liability for the damaged property for debris removal when the amount payable for the property loss plus debris removal expense exceeds the limit of liability for the damaged property. (See Section I-Property Coverages, Additional Property Coverages, item 1.) 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, item 1.)

2. The Nationwide policy provides up to $500 for live tree debris removal. In the event of a loss by a covered peril, Nationwide will pay the reasonable expense incurred for the removal of live tree debris from the residence premises that does not cause damage to covered property or covered structures. (See Additional Property Coverages, item 2.) The HO-B does not provide this coverage.

3. The Nationwide policy provides up to $500 for covered damage to any one tree, shrub or plant. (See Section I-Coverages, Additional Property Coverages, item 4.) 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, item 4.)

4. The Nationwide policy provides up to $500 for fire department service charge for the insured´s liability under contract or agreement for customary fire department charges. The HO-B does not provide similar coverage.

5. The Nationwide policy provides up to $1,000 for credit card, electronic fund transfer card, access device and forgery coverage for the legal obligation of an insured to pay theft or unauthorized use of credit cards, including electronic fund transfer cards or access devices, issued to or registered in an insured´s name. (See Section 1-Coverages, Additional Property Coverages, item 7.) The HO-B provides a $100 limit of liability 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, item 1.)

6. The Nationwide policy provides $100 coverage for lock replacement, with no deductible, if the keys to the residence premises are stolen. (See Section I-Coverages, Additional Property Coverages, item 11.) The HO-B does not provide similar coverage.

VIII. Nationwide Homeowners Endorsements. In addition to the three residential property policy forms, the Commissioner has adopted fourteen endorsements pursuant to Article 5.35 (b). Since the Nationwide policies contain notable restrictions in the water damage coverage and the dwelling foundation coverage as compared to the coverage contained in the HO-B, a general description of the coverage that will be provided by the Nationwide Dwelling Foundation Endorsement and Water Damage Endorsement is provided. Additionally, a description of the coverage that will be provided by the Nationwide Fungus (Including Mold) Limited Coverage Endorsement is provided. Two endorsements provide coverage that is not currently available under a Texas homeowners policy. H-6005, Home Care Services provides liability coverage arising out of home care services provided by or at the direction of an insured on or from the residence premises; and H-6006, Watercraft Endorsement provides physical damage for boats, motors, trailers, and portable equipment and accessories.

A. Dwelling Foundation Endorsement.

The endorsement provides coverage up to 15% of the amount of insurance for Coverage A-Dwelling for damage to the slab or foundation of the building, if the damage is caused by accidental discharge or leakage of water or steam, including constant or repeated seepage over a period of time from within a plumbing, heating, air conditioning or automatic fire protective sprinkler system or from within a household appliance. The loss to the system from which the water or steam escaped is not covered. The tear out provisions include the cost of tearing out and replacing any part of the building necessary to repair or replace the plumbing, heating, air conditioning or automatic fire protective sprinkler system or household appliance from which the water or steam escaped. The endorsement does not provide coverage for settling, cracking, shrinking, bulging, or expansion of pavements, patios, walls, floors, roofs, or ceilings whether caused directly or indirectly by accidental discharge or leakage of water including constant or repeated seepage or leakage of steam or water over a period of time from within a plumbing, heating, air conditioning or automatic fire protective sprinkler system or household appliance, except as specifically provided in the Dwelling Foundation Endorsement, regardless of any other cause or event contributing concurrently or in any sequence to the loss. The endorsement further specifies that the exclusion in the policy for foundation damage caused by constant or repeated leakage or seepage of water or steam (Section I-Policy Exclusions) does not apply to the coverage provided in the Dwelling Foundation Endorsement.

B. Water Damage Endorsement.

The endorsement provides coverage for direct physical loss consisting of water damage to property described in Coverage A ­ Dwelling, Coverage B - Other Structures, and Coverage C ­ Personal Property caused by the continuous or repeated seepage or leakage of water or steam from a heating, air conditioning or automatic fire protective sprinkler system; household appliances; or plumbing system. A plumbing system includes a shower pan, but does not include the shower stall or shower bath enclosure. The coverage includes the cost of tearing out and replacing any part of the building necessary to provide access to repair the system or appliance from which the seepage or leakage occurred. The endorsement does not provide coverage for fungus caused by continuous or repeated seepage or leakage of steam or water from a heating, air conditioning or automatic fire protective sprinkler system; household appliances; or plumbing system; loss caused by, consisting of, or resulting from fungus; and loss to the system or appliance from which the water or steam escaped. The endorsement further specifies that Coverage C-Personal Property peril 12 (Section I-Perils Insured Against, item 12.) concerning damage caused by constant or repeated leakage or seepage of water or steam is amended such that the exclusion for loss: (a) caused by water that backs up and enters through the sewers or drains, (b) due to continuous or repeated leakage or seepage of water or steam over a period of time; (c) due to freezing; and (d) to the system or appliance from which the water or steam escaped does not apply to the coverage provided in the Water Damage Endorsement.

C. Fungus (Including Mold) Limited Coverage Endorsement.

The endorsement provides coverage for remediation of fungus if the fungus is the result of a covered loss. The coverage includes remediation of the mold or fungus including the following costs to: (1) remove the fungus from covered property or to repair, restore, or replace that property; and (2) tear out and replace any part of the building or other property as needed to gain access to the fungus. The coverage further includes the cost of any testing or monitoring of air or property to confirm the type, absence, presence, or level of fungus, whether performed prior to, during, or after remediation of covered property. The coverage further includes any loss of use or delay in rebuilding, repairing, or replacing covered property. The endorsement specifies that the mold or fungus that is the result of continuous or repeated seepage or leakage of water or steam from a heating, air conditioning or automatic fire protective sprinkler system; household appliances; or plumbing system and that is the result of a defect, weakness, inadequacy, fault, or unsoundness in planning; zoning; development; surveying; siting; design; specifications; workmanship; construction; grading; compaction; or materials used in construction, repair, or maintenance of any property or improvements whether on or off the residence premises is not covered. The fungus coverage applies only if the insurer receives immediate notice of the occurrence that resulted in the fungus and remediation begins as soon as possible and all reasonable means were used to save and preserve the property from further damage following a covered loss. The endorsement specifies that the most that Nationwide will pay under the policy for a mold loss in any one policy period is the Limit of Liability shown on the declarations for the Fungus (Including Mold) Limited Coverage Endorsement regardless of:(1) the number of covered losses that contribute to the resulting mold; or (2) the number of claims made during the policy period. The limits of liability available for mold or fungus coverage are 25%, 50%, or 100% of the Coverage A-Dwelling, Coverage B-Other Structures, and Coverage C-Personal Property limit of liability and includes any payments for Section I-Additional Property Coverages and Coverage D-Loss of Use.

IX. Phase In Of the Adopted Policy Forms, Dwelling Foundation Endorsement, Water Damage Endorsement, and Fungus (Including Mold) Limited Coverage Endorsement. Nationwide has informed the Department that the adopted policy forms will be phased in for use with Nationwide policyholders while the policy forms promulgated by TDI are discontinued for use with Nationwide policyholders. Nationwide has outlined the details of its plan to implement the adopted policy forms as follows:

A. New Business.

Nationwide will write all new business on the new policy forms as soon as the new policy forms are effective and upon implementation by Nationwide. The new policy forms limit coverage for dwelling foundation losses and water damage losses and exclude certain mold damage losses. At the time each new residential property policy is written, the applicant will be offered the Dwelling Foundation Endorsement, the Water Damage Endorsement, and the Fungus (Including Mold) Limited Coverage Endorsement subject to Nationwide´s current underwriting guidelines. If a policyholder desires to continue the dwelling foundation coverage (subject to 15% of Coverage A-Dwelling) and the water damage coverage that the policyholder essentially has under the HO-B, the Dwelling Foundation Endorsement and Water Damage Endorsement must be purchased for an additional premium. These endorsements will be available for purchase at a later date subject to underwriting review. The Fungus (Including Mold) Limited Coverage Endorsement will be made available for an additional premium subject to underwriting review.

B. Existing Business.

Nationwide will begin converting renewal business to the new forms as soon as new policy forms are effective and are implemented.

1. Homeowners-Form B (HO-B), Homeowners-Form C (HO-C). The HO-B´s and HO-C´s that are in force at the time of the conversion will be non-renewed and offered the Nationwide policy with the Dwelling Foundation Endorsement and Water Damage Endorsement attached. The renewal policy packet will contain a cover sheet message informing the consumer of information in the packet regarding the various policy changes. The information will include an explanation of the Dwelling Foundation Endorsement and Water Damage Endorsement with an offer to exclude the endorsements for a decrease in premium. The information will further include an explanation of the Fungus (Including Mold) Limited Coverage Endorsement with an offer to purchase this endorsement for an additional premium subject to underwriting. The endorsements will also be available for purchase at a later date subject to underwriting review.

2. Homeowners-Form A (HO-A). The HO-A´s that are in force at the time of the conversion will be non-renewed and offered the Nationwide homeowners policy without the Water Damage Endorsement and Dwelling Foundation Endorsement attached. The renewal policy packet will contain a cover sheet message informing the consumer of information in the packet regarding the various policy changes. The information will include an explanation of the Water Damage Coverage, Dwelling Foundation Coverage, and Mold Coverage endorsements with an offer to purchase the endorsements for an additional premium. The endorsements will also be available for purchase at a later date subject to underwriting review.

3. Homeowners Tenant­Form B (HO-BT) and Homeowners Condo-Form B (HO-CON-B). The HO-BT´s and HO-CON-B´s that are in force at the time of the conversion will be non-renewed and offered the corresponding Nationwide policy with the Water Damage Endorsement attached. The renewal policy packet will contain a cover sheet message informing the consumer of information in the packet regarding the various policy changes. The information will include an explanation of the Water Damage Endorsement with an offer to exclude the endorsement for a decrease in premium. The information will further include an explanation of the Fungus (Including Mold) Limited Coverage Endorsement with an offer to purchase this endorsement for an additional premium subject to underwriting. The endorsements will also be available for purchase at a later date subject to underwriting review.

4. Consumer Disclosures. Nationwide agrees to provide an explanatory letter and a summary of coverages expressly noting where there is less coverage in the Nationwide policies than in the currently prescribed policies to the policyholders who are being converted from the currently prescribed Texas forms to the new Nationwide 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 Nationwide´s use of this letter.

C. Rating Information.

Nationwide agrees to file its initial rates and any rate changes for policies written through Nationwide Lloyds with the Department on an informational basis for a period of two years from implementation to allow the Department to monitor the rates on the new Nationwide policies. Nationwide also agrees to provide the Department with a copy of its loss cost analyses during the time period it is providing the rating information.

X. Other Insurers Who Elect to Use the Nationwide Residential Property Policy Forms and Endorsements. Article 5.35 was amended by the 75 th Texas Legislature, in pertinent part, to allow the Commissioner to adopt policy forms and endorsements of national insurers. That bill, SB 1499, in addition to adding current subsection (b), amended subsection (a), which has historically been the source of the agency´s authority to adopt standard, promulgated forms, to provide that such forms "may be used by an insurer without filing for approval to use such form." SB 1499 did not add similar language to subsection (b), pursuant to which the Nationwide filing was made. In addition, subsection (e) of Article 5.35 states that no form or endorsement can be delivered or issued for delivery in this state unless adopted or approved pursuant to subsections (a), (b), (c), or (d). Therefore, any insurer that wishes to use the policy and endorsements adopted in this order must make a filing for approval with the Department and agree to abide by the conditions and requirements imposed by this order including: (1) agree to provide rating information including detailed information regarding premium reduction for reduced coverage; (2) agree to offer the Water Damage Endorsement, the Dwelling Foundation Endorsement, and the Fungus (Including Mold) Limited Coverage Endorsement in accordance with the terms specified herein; (3) agree to provide the consumer disclosures as specified herein; (4) agree 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.

XI. 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 adopted by the Commissioner of Insurance are on file with the Chief Clerk´s Office of the Texas Department of Insurance under Reference No. P-0602-22 and are incorporated by reference by Commissioner Order No. 02-0975.

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 three new residential property policy forms which include form no. HO-542 (homeowners policy), form no. HT-542 (tenants policy), and form no. HC-542 (condominium policy) and fourteen endorsements as specified herein and which are attached to this Order and incorporated into this Order by reference, are adopted.



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