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EXEMPT FILING NOTIFICATION PURSUANT TO THE INSURANCE CODE

CHAPTER 5, SUBCHAPTER L, ARTICLE 5.96

Notice is given that the Commissioner of Insurance will consider a petition filed by United Services Automobile Association and USAA Lloyds Company (collectively referred to as USAA) that requests the adoption of two new dwelling policy forms which include form nos. DP 00 03TX (Dwelling Property 3TX Special Form) and DP 00 02TX (Dwelling Property 2TX Broad Form); six new renters insurance forms which include form nos. RP-1TX (General Provisions), RP-2TX (Broad Personal Property), RP-3TX (Broad Personal Property with Replacement Cost), RP-4TX (Special Personal Property), RP-5TX (Special Personal Property with Replacement Cost), and RP-6TX (Personal Liability) and further requests the adoption of nineteen new endorsements to be used with each of these policies for use in the State of Texas.

A public hearing on this matter will not be held unless a separate request for a hearing is submitted to the Office of the Chief Clerk during the comment period as defined herein.

The USAA petition was filed pursuant to the Texas Insurance Code Article 5.35 (b), which provides that the Commissioner may adopt policy forms and endorsements of national insurers. USAA conforms to the definition of a national insurer and is, therefore, authorized to file its policies and endorsements with the Texas Department of Insurance to be considered by the Commissioner for adoption.

USAA´s original petition on this matter, filed on February 7, 2002, requested the adoption of three new Texas dwelling policies and endorsements and six new renters policies and endorsements. Since the filing of the original petition, USAA and Department staff have engaged in discussions and dialogue relating to the proposed forms and endorsements submitted for adoption. Pursuant to these discussions, USAA has made modifications to the dwelling and renters policies and endorsements, as originally filed. USAA filed revisions to some of the renters policy forms and endorsements as originally filed by a letter dated June 12, 2002, which included the following:

1. Cancellation and non-renewal provisions were revised to comply with Article 21.49-2B;

2. The liability and medical payments exclusion of RP-6TX was revised to remove the pollutants exclusion, lead paint exclusion, asbestos exclusion, and microbial organism exclusion and the liability exclusions portion of the policy was revised to only exclude property damage liability;

3. The R-144TX Mold Coverage endorsement was revised to provide a complete buy back of the microbial organisms coverage that is excluded in the renters forms, the name of the R-144TX has been changed to "Microbial Organisms Coverage", all references to "mold" or "mold and fungus" have been changed to "microbial organisms", and language has been added to the first paragraph to further clarify and define the meaning of term "Microbial Organisms;"

4. The R-56 Additional Insured-Place of Residence endorsement was replaced by the newly created R-56TX which adds language to clarify that coverage under this endorsement does not grant membership status in USAA to the additional person covered under the endorsement and language stating that all policy provisions also apply to this endorsement;

5. The R-58 Additional Residence Rented to Others endorsement was replaced by the newly created R-58TX endorsement which includes an exclusion to the Liability and Medical Payments portion of the policy for liability arising out of mold on an insured location rented to others.

USAA filed revisions to the dwelling policy forms and endorsements as originally filed by a letter dated September 26, 2002, which included the following:

1. The non-renewal provisions of dwelling policy forms DP 00 02TX, and DP 00 03TX have been revised to clarify that only a paid claim may be used for purposes of non-renewal;

2. The DP-141TX Water Damage Coverage endorsement has been revised to conform with the homeowners Water Damage Coverage endorsement to further clarify that a plumbing system includes the shower pan but not the shower stall or bath enclosure and to clarify that water damage coverage includes the cost of replacing any part of the building necessary to provide access to repair the system or appliance from which the seepage occurred;

3. The DP-143TX Slab or Foundation Coverage endorsement has been revised to remove the word "automatic" from the phrase "fire protective system" and language has been added to the last paragraph to clarify that except as modified in the endorsement, all provisions of the policy apply to the endorsement;

4. Mold Coverage endorsement DP-144TX has been revised to provide a complete buy back of the microbial organisms coverage that is excluded in the dwelling forms, to change the name of the DP-144TX to "Microbial Organisms Coverage," to change all references to "mold" or "mold and fungus" to "microbial organisms," to add language to further clarify and to define the meaning of term "Microbial Organisms," to revise the deductible provisions to clarify that in the event of a mold loss the policy deductible will apply, and to delete language and add new language stating that no additional deductible applies to mold coverage once the policy deductible has been met.

USAA also filed revisions to renters endorsement, R-144TX Microbial Organisms Coverage endorsement as originally filed by a separate letter dated September 26, 2002, which added language to clarify that no additional deductible applies to the microbial organisms coverage once the policy deductible has been met.

USAA has withdrawn dwelling form DP 00 01TX by an e-mail dated November 1, 2002, because it does not plan to issue such policy forms in Texas.

DWELLING INSURANCE PROGRAM

I. Dwelling Policies.

A. DP 00 02TX (Dwelling Property 2TX Broad Form). This form provides coverage on a broad named peril basis for dwellings, other structures, and personal property. This is similar to the Dwelling Property 3TX Special Form, described herein, except the building and other structures are insured on a broad named peril basis. This form is analogous to the Texas Dwelling Policy-Form 2 (TDP-2).

B. DP 00 3TX (Dwelling Property 3TX Broad Form). The following is a general description of the coverage provided by the proposed DP 00 3TX policy that has been filed for adoption pursuant to Article 5.35 (b). This form is analogous to the Texas Dwelling Policy Form 3 (TDP-3).

1. It covers the dwelling and other private 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, vehicular impact, smoke, vandalism or malicious mischief, and theft.

3. It provides loss of use and fair rental value which covers additional living expenses when the residence becomes uninhabitable.

II. Comparison of the Proposed USAA Dwelling Policies to the Currently Prescribed Texas Dwelling Policy-Form 3 (TDP-3). The TDP-3 has traditionally been the predominant dwelling policy form issued in Texas. In the course of staff´s review of USAA´s proposed dwelling policies, staff has noted several differences in the coverage provided in the TDP-3 and that provided in the proposed USAA dwelling forms. Since the proposed dwelling forms contain similar coverages (except that the DP 00 2TX is a named peril policy and the DP 00 3TX is an all risk policy) and the DP 00 3TX and the TDP-3 are analogous forms, the restrictions and enhancements in coverage will be discussed in terms of a comparison between the USAA DP 00 3TX and the TDP-3. However, it should be noted that most of the comparisons of coverage also apply to the DP 00 2TX. If more detailed coverage information is desired, a side by side comparison of the proposed DP 00 2TX dwelling policy and the TDP-2 and a side by side comparison of the proposed DP 00 3TX dwelling policy and the TDP-3 are available from the Department upon request.

III. Restrictions In Dwelling Coverage. The following is a list of some of the restrictions in coverage that are contained in the proposed DP 00 3TX dwelling policy as compared to the existing TDP-3. This list is not intended to cover every restriction in coverage that is contained in the proposed USAA policy forms.

A. Coverage for Water Damage.

The USAA policy specifies that it does not include coverage for losses to property described in Coverages A and B caused by constant or repeated seepage or leakage of water or steam over a period of weeks, months, or years from within a plumbing, heating, air conditioning or automatic fire protective sprinkler system or from within a household appliance. (See Perils Insured Against, item 2.g.) The TDP-3 does not exclude coverage for water damage from constant or repeated seepage or leakage of water or steam.

B. Coverage for Vandalism and Malicious Mischief.

The USAA policy excepts loss from vandalism or malicious mischief if the dwelling is vacant for more than 30 days immediately before a loss. (See Perils Insured Against , item 2.f.) The TDP-3 provides coverage for all perils insured against for up to 60 days of vacancy. (See Conditions, item 17.)

C. Coverage for Improvements, Alterations and Additions.

The USAA policy restricts coverage for a tenant of the Described Location to 10% of the Coverage C limit of liability for loss by a Peril Insured Against to improvements, alterations and additions, made or acquired at the tenant´s expense. (See Coverages, Other Coverages, item 3.) The coverage amount provided by the TDP-3 for this coverage is the entire Coverage B (Personal Property) limit of liability. (See Coverages, Extensions of Coverage, item 4.)

D. USAA Policy Exclusions.

1. The USAA policy excludes loss caused by microbial organisms including but not limited to mold, mold spores, fungus, bacterium, and parasitic microorganisms. (See General Exclusions, item 1.i.) Pursuant to Commissioner´s Order No. 01-1105, the TDP-3 modified by Endorsement No. TDP-005A 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 TDP-3 does not provide coverage for the remediation of mold or fungus.

2. The USAA 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 any property whether on or off the Described Location. (See General Exclusions, item 2. c.) The TDP-3 does not contain this exclusion.

3. USAA excludes settling, cracking, shrinking, bulging or expansion of pavements, patios, foundations, walls, floors, roofs or ceilings. (See General Exclusions, 1. j.) The TDP-3 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 General Exclusions 1. i.)

E. Coverage for Personal Property.

1. The USAA policy does not provide coverage for business property. (See Coverages, Coverage C­Personal Property) The TDP-3 provides coverage for business personal property while it is on the described location. (See Coverage B­Personal Property)

2. The USAA policy does not provide coverage for data, including data stored in books of account, drawings or other paper records, or electronic data processing tapes, wires, records, discs or other software media. (See Coverages, Coverage C ­ Personal Property, Property Not Covered, item 6.) The TDP-3 does not contain this exception.

3. The USAA policy does not provide coverage for watercraft, other than rowboats and canoes. (See Coverages, Coverage C, Personal Property, Property Not Covered, item 5.) The TDP-3 provides coverage for watercraft including outboard motors and furnishings or equipment while located on the described location. (See Coverages, Coverage B (Personal Property), Property Not Covered, item 7., exception.)

4. The USAA policy does not provide coverage for credit cards or fund transfer cards. (See Coverages, Coverage C ­ Personal Property, Property Not Covered, item 7.) The TDP-3 does not contain this exception.

IV. Dwelling Coverage Enhancements. The following is a list of some of the areas where the proposed USAA DP 00 3TX provides coverage that is broader than the coverage provided in the TDP-3. This list is not intended to cover every enhancement in coverage that is contained in the proposed USAA dwelling policy forms.

A. The USAA policy provides up to $500 for covered damage to any one tree, shrub or plant. (See Coverages, Other Coverages, item 8.) The TDP-3 provides up to $250 for covered damage to any one tree, shrub or plant. (See Coverages, Extensions Of Coverage, item 3.)

B. The USAA policy provides up to $500 of additional insurance, with no deductible, for liability assumed by contract or agreement for fire department charges incurred when the fire department is called to save or protect covered property from a Peril Insured Against. (See Coverages, Other Coverages, item 9.) The TDP-3 does not provide this coverage.

C. The USAA policy provides coverage for the breakage of glass or safety glazing material which is part of a covered building, storm door or storm window; and damage to covered property by glass or safety glazing material which is part of a building, storm door or storm window. (See Coverages, Other Coverages, item 11.) The TDP-3 does not provide similar coverage.

V. USAA Dwelling Endorsements. In addition to the two proposed dwelling policy forms filed for adoption, USAA has filed endorsements for attachment to each of the policies for adoption pursuant to Article 5.35 (b). Since the proposed USAA policies contain notable restrictions in the water damage coverage and the dwelling foundation coverage as compared to the coverage contained in the TDP-3, a general description of the coverage that will be provided by the proposed USAA Slab or Foundation Coverage endorsement and Water Damage Coverage endorsement is provided. Additionally, a description of the coverage that will be provided by the proposed USAA Microbial Organisms Coverage endorsement is provided.

A. Slab or Foundation Coverage Endorsement.

The proposed endorsement provides coverage up to $15,000 for damage to the slab or foundation of the building, if the damage is caused directly by accidental discharge or leakage of water or steam, including constant or repeated seepage over a period of weeks, months, or years from within a plumbing, heating, air conditioning or fire protective sprinkler system or from within a household appliance. The tear out provisions provide two options: (1) the cost of tearing out and replacing any part of the building necessary to repair or replace the plumbing, heating, air conditioning or fire protective sprinkler system or household appliance from which the water or steam escaped, or (2) the cost to reroute the plumbing, heating, air conditioning or fire protective sprinkler system or household appliance. USAA will pay the cost that is actually incurred for either of these options with the choice of options being up to the insured. The endorsement further specifies that the tear out costs are included in the $15,000 limit of liability. The Slab or Foundation Coverage applies only in the event of accidental discharge or leakage of water or steam, including constant or repeated seepage over a period of weeks, months, or years and does not affect any coverage provided elsewhere in the policy. The loss to the system from which the water or steam escaped is not covered. 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 fire protective sprinkler system or household appliance, except as specifically provided in the Slab or Foundation Coverage endorsement, regardless of any other cause or event contributing concurrently or in any sequence to the loss. The endorsement specifies that the attachment of the Slab or Foundation Coverage Endorsement does not increase the limit of liability that applies to the covered property. The endorsement further specifies that the exclusions in the policy for slab damage caused by constant or repeated leakage or seepage of water or steam (Perils Insured Against, Item 2.g. and General Exclusions Item 1.j.) do not apply to the coverage provided in the Slab or Foundation Coverage Endorsement. In contrast, the TDP-3 provides dwelling foundation coverage up to the total limit of insurance for Coverage A-Dwelling.

B. Water Damage Coverage Endorsement.

The proposed endorsement provides coverage for direct physical loss consisting of water damage to property described in Coverage A­Dwelling, Coverage B-Other Structures, and Coverage C­Personal Property caused by the constant or repeated seepage or leakage of water or steam over a period of weeks, months, or years from within a heating, air conditioning or 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 damage caused by constant or repeated seepage or leakage of steam or water, except as specifically provided in the Water Damage Coverage endorsement, regardless of any other cause or event contributing concurrently or in any sequence to the loss. The endorsement specifies that the attachment of the Water Damage Coverage endorsement does not increase the limit of liability that applies to the covered property. The endorsement further specifies that the exclusion in the policy for water damage caused by constant or repeated leakage or seepage of water or steam (Perils Insured Against, Item 2.g.) does not apply to the coverage provided in the Water Damage Coverage endorsement.

C. Microbial Organisms Coverage Endorsement.

The proposed endorsement provides coverage for direct physical loss to property covered under Coverage A­Dwelling, Coverage B-Other Structures, and Coverage C­Personal Property caused by or consisting of microbial organisms if the microbial organism is the direct result of a Peril Insured Against or coverage provided under Other Coverages. The coverage does not apply if the loss results from the insured´s failure to reasonably maintain or protect the property from further damage following a covered loss. The coverage includes any remediation of the microbial organisms including the following costs to: (1) treat, contain, remove or dispose of microbial organisms from covered property or to repair, restore, or replace the covered property; (2) test to detect, measure, or evaluate microbial organisms and any decontamination of the covered property. The endorsement provides coverage under Coverage D-Fair Rental Value and Coverage E-Additional Living Expenses when the described location is uninhabitable due to a loss caused by microbial organisms which is the direct result of a Peril Insured Against or coverage provided under Other Coverages. The endorsement specifies that the microbial organisms coverage provided in this endorsement is the only coverage provided under Coverage A-Dwelling, Coverage B-Other Structures, and Coverage E-Additional Living Expenses, regardless of any other cause or event contributing concurrently or in any sequence to the loss. The limits of liability available for microbial organisms coverage are $25,000, $50,000, $75,000, or 100% of the Coverage A-Dwelling limit of liability. The endorsement specifies that the most that USAA will pay under the policy for a microbial organisms loss in any one policy period is the Limit of Liability shown on the Microbial Organisms Coverage endorsement regardless of: (1) of the number of covered losses that contribute to the resulting mold; or (2) the number of claims made during the policy period. The endorsement specifies that t he attachment of the Microbial Organisms Coverage endorsement does not increase the limit of liability that applies to the damaged covered property, Fair Rental Value, or Additional Living Expenses and that no deductible applies to this coverage. The endorsement specifies that except as specifically modified in the Microbial Organisms Coverage endorsement, USAA does not provide coverage for damage caused by microbial organisms 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 microbial organisms including mold and fungus (General Exclusions, Item 1.i.) does not apply to the coverage provided in the Microbial Organisms Coverage endorsement. In contrast, the Mold, Fungi, or Other Coverage endorsement that may be attached to the TDP-3 is available with limits of liability in the amounts of 25%, 50%, or 100% of the Coverage A (Dwelling) amount of insurance.

RENTERS INSURANCE PROGRAM

VI. Renters Policies. The foundation of the policy consists of a declarations page and an RP-1TX which is the general provisions form that is attached to each renters policy. If the insured wants only property coverage, then one of the property coverage forms is attached which may include any one of the following: RP-2TX (Broad Personal Property), RP-3TX (Broad Personal Property with Replacement Cost), RP-4TX (Special Personal Property), and RP-5TX (Special Personal Property with Replacement Cost). If an insured wants personal liability coverage, in addition to the property coverage, he/she may also elect to have an RP-6TX (Personal Liability) attached to the renters policy. If the insured wants only liability coverage, then the RP-6TX is attached without the attachment of any of the property coverage forms.

A. RP-1TX (General Provisions). This form is attached to each renters policy and it contains general provisions including (but not limited to) the insuring agreement, definitions, fraud provisions, waiver or policy change provisions, policy period provisions, and cancellation and non-renewal provisions that apply to each policy.

B. RP-2TX (Broad Personal Property). This form covers personal property on and away from the premises against loss by fire, extended coverage, vandalism and malicious mischief, theft, and certain other perils on a broad named peril basis. This form is analogous to the coverage contained in the Texas Homeowners Tenant-Form B (HO-BT).

C. RP-3TX (Broad Personal Property with Replacement Cost). This form covers personal property on and away from the premises against loss by fire, extended coverage, vandalism and malicious mischief, theft, and certain other perils on a broad named peril basis and it includes replacement cost loss settlement provisions.

D. RP-4TX (Special Personal Property). This form provides coverage on an all risk of physical loss basis for personal property on and away from the premises. This form is analogous to the coverage contained in the Texas Homeowners Tenant-Form C (HO-CT).

E. RP-5TX (Special Personal Property with Replacement Cost). This form provides coverage on an all risk of physical loss basis for personal property on and away from the premises and it includes replacement cost loss settlement provisions.

F. RP-6TX (Personal Liability). This form provides personal liability coverage which may be attached to the renters policy at the option of the insured.

VII. Comparison of the Proposed USAA Renters Policies to the Currently Prescribed Texas Homeowners Tenant Policy Form B (HO-BT). The HO-BT has traditionally been the predominant tenant policy form issued in Texas. In the course of staff´s review of USAA´s proposed renters policies, staff has noted several differences in the coverage provided in the HO-BT and that provided in the proposed USAA renters forms. Since the proposed renters forms contain similar coverages (except that the RP-2TX and RP-3TX are named peril policies and the RP-4TX and the RP-5TX are all risk policies) and the RP-2TX and the HO-BT are analogous, forms the restrictions and enhancements in coverage will be discussed in terms of a comparison between the USAA RP-2TX and the HO-BT. However, it should be noted that most of the comparisons of coverage also apply to the RP-3TX, RP-4TX, and the RP-5TX. If more detailed coverage information is desired, side by side comparisons of the proposed RP-1TX, RP-2TX, RP-3TX, RP-4TX, and RP-5TX are available from the Department upon request.

VIII. Restrictions In Renters Coverage. The following is a list of some of the restrictions in coverage that are contained in the proposed Renters Protection Policy-Texas Broad Personal Property policy,RP-2TX, as compared to the existing HO-BT. This list is not intended to cover every restriction in coverage that is contained in the proposed USAA policy forms.

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

The USAA policy provides up to $1,000 in coverage for watercraft, including their trailers, their attached equipment and accessories, and outboard motors and other trailers not used with watercraft for losses that occur on and off premises for named perils. The USAA policy also limits coverage for trailers not used with watercraft to $1,000. (See Dollar Limits on Some Property, items 7. and 8.) The HO-BT 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-BT 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 USAA policy limits the coverage for firearms and their equipment and accessories to losses by the peril of theft with a maximum limit of liability of $2,000. (See Dollar Limits on Some Property, item 4.) The HO-BT 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 USAA 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 Dollar Limits on Some Property, item 2.) The HO-BT 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 USAA policy provides $3,000 coverage for golf carts and their equipment and accessories. (See Dollar Limits on Some Property, item 1.) The HO-BT 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. USAA Policy Exclusions.

The USAA policy excludes loss caused by microbial organisms including but not limited to mold, mold spores, fungus, bacterium, parasitic microorganisms and wet or dry rot. (See Descriptions and Limitations, Causes of Loss Not Covered, item 6.) Pursuant to Commissioner´s Order No. 01-1105, the HO-BT modified by endorsement no. HO-164A 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-BT does not provide coverage for the remediation of mold or fungus.

F. Business Property.

The USAA policy does not provide coverage for business data stored in books of account, drawings or other paper records, or electronic data processing tapes, wires, records, discs, or other software media. (See Property Not Covered, item 5.) The HO-BT does not contain this exception.

G. Coverage for Loss of Use.

The USAA policy limits the time allowable for payment of Additional Living Expense and Fair Rental Value to 12 months. (See The Following Are Additional Coverages, Loss of Use, items 1. and 2.) The HO-BT does not have a time limitation for the payment of Additional Living Expense and Fair Rental Value.

IX. Renters Coverage Enhancements. The following is a list of some of the areas where the proposed USAA Renters Protection Policy-Texas Broad Personal Property policy, RP-2TX, provides coverage that is broader than the coverage provided in the HO-BT. This list is not intended to cover every enhancement in coverage that is contained in the proposed USAA renters policy forms.

A. Personal Property, Special Limits of Liability.

1. The USAA policy provides a $200 limit of liability for losses of money, bank notes, bullion, gold other than goldware, silver other than silverware, platinum, coins, medals, food stamps, gasoline coupons, and tokens. (See Dollar Limits on Some Property, item 9.) The HO-BT provides a $100 limit of liability for losses of money. (See Section I - Property Coverage, Coverage B (Personal Property), Special Limits of Liability, item 1.)

2. The USAA policy provides a $1,000 limit of liability for loss of securities, accounts, deeds, evidences of debt, personal records, letters of credit, notes other than bank notes, manuscripts, passports, airline or other transportation tickets, stamps including postage stamps, and other philatelic property. (See Dollar Limits on Some Property, item 6.) The HO-BT provides a $500 limit of liability for these items. (See Section I - Property Coverage, Coverage B (Personal Property), Special Limits of Liability, item 2.)

3. The USAA policy provides a $1,000 limit of liability for watercraft including their trailers, their attached equipment and accessories, and outboard motors and other trailers not used with watercraft while away from the insured location. The USAA policy also provides up to $1,000 coverage for trailers not used with watercraft while away from the insured location. (See Dollar Limits on Some Property, items 7. and 8.) The HO-BT 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 USAA policy provides $1,000 coverage for loss by theft of jewelry, watches, precious and semi-precious stones, and furs. (See Dollar Limits on Some Property, item 5.) The HO-BT 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.)

5. The USAA policy provides $250 coverage for business property away from the residence. (See Dollar Limits on Some Property, item 3.(b)) The HO-BT does not provide coverage for business property away from the residence premises. (See Section I ­ Property Coverage, Coverage B (Personal Property), Special Limits of Liability, item 4. b.)

B. Additional Coverages.

1. The USAA 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 The Following Are Additional Coverages, Debris Removal) The HO-BT´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 USAA policy pays up to $1,000 for loss and defense costs relating to the theft or unauthorized use of credit cards or fund transfer cards, forgery or alteration of any check or negotiable instrument, acceptance in good faith of counterfeit paper currency. This coverage is additional insurance. No deductible applies to this coverage. (See The Following Are Additional Coverages, Credit Card, Fund Transfer Card, Forgery and Counterfeit Money) The HO-BT 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, item 1.)

3. The USAA policy provides $250 coverage for lock replacement, with no deductible, if the residence door keys are stolen. (See The Following Are Additional Coverages, Lock Replacement) The HO-BT does not provide similar coverage.

4. The USAA policy provides flood coverage. (See Descriptions and Limitations, item 3.) The HO-BT does not provide this coverage.

5. The USAA policy provides coverage for volcanic eruption. (See Descriptions and Limitations, item 17.) The HO-BT does not provide this coverage.

6. The USAA policy provides moving and storage coverage for an insured´s property while in the custody of a public or government carrier. In addition to the Causes of Loss Covered as outlined in the policy, coverage is provided for: loss of property if it cannot be located after reasonable search, when described under a bill of lading, mover´s contract, baggage check, or other form of shipping or storage document; loss or damage caused by the stranding, sinking, overturning, crashing, ditching, derailment, burning or collision of a public conveyance; loss or damage caused by water except as specifically excluded; and the insured´s share of general average and salvage charges. (See The Following are Additional Coverages, Moving and Storage) The HO-BT provide 10% of Coverage B for property in transit.

7. USAA has no dollar limitation on Loss of Use coverage. (See The Following are Additional Coverages, Loss of Use) The HO-BT limits Loss of Use to 20% of the Coverage B (Personal Property) limit of liability. (See Section I ­ Property Coverages, Coverage B (Personal Property), Extensions of Coverage, item 2.)

8. The USAA policy provides up to $500 of additional insurance, with no deductible, for liability assumed by contract or agreement for fire department charges incurred when the fire department is called to save or protect covered property from one of the covered losses. (See The Following are Additional Coverages, Fire Department Service Charge) The HO-BT does not provide this coverage.

X. USAA Renters Endorsements. In addition to the six proposed renters policy forms filed for adoption, USAA has filed endorsements for adoption pursuant to Article 5.35 (b). The proposed USAA renters forms do not exclude water damage caused by constant or repeated seepage from a plumbing system, therefore, a buy back endorsement for water damage coverage is not necessary. Since the proposed USAA renters forms exclude coverage for mold damage losses, a description of the coverage that will be provided by the proposed USAA Microbial Organisms Coverage Endorsement is provided. The Microbial Organisms Coverage endorsement provides coverage for direct physical loss to covered property caused by or consisting of microbial organisms if the microbial organism is the direct result of a Cause of Covered Loss. The coverage does not apply if the loss results from the insured´s failure to reasonably maintain or protect the property from further damage following a covered loss. The coverage includes any remediation of the microbial organisms including the following costs to: (1) treat, contain, remove or dispose of mold or fungus from covered property or to repair, restore, or replace the covered property; (2) test to detect, measure, or evaluate microbial organisms and any decontamination of the covered property. The coverage further includes payment for any necessary increase in costs which the insured incurs to maintain his/her normal standard of living when the place where the insured resides is uninhabitable due to a covered loss caused by microbial organisms which is the direct result of a Cause of Covered Loss. The endorsement specifies that the most USAA will pay under the endorsement for covered property and Loss of Use combined, in any one policy period, is the limit of liability shown on the Microbial Organism 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 endorsement further specifies that it does not change the amount shown on the Declarations Page for Personal Property. The limits of liability available for microbial organisms coverage are $25,000, $50,000, $75,000, or 100% of the limit of liability shown on the Declarations Page for Personal Property. The endorsement specifies that except as specifically modified in the Microbial Organisms Coverage Endorsement, USAA does not provide coverage for damage caused by microbial organisms 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 microbial organisms including mold and fungus (Causes of Loss Not Covered, Item 6.) does not apply to the coverage provided in the Microbial Organisms Coverage Endorsement. The endorsement also specifies that all provisions of the policy apply to the Microbial Organisms Coverage Endorsement, except as specifically modified by the endorsement. In contrast, the Mold, Fungi, or Other Coverage endorsement that may be attached to the TDP-3 is available with limits of liability in the amounts of 25%, 50%, or 100% of the Coverage A (Dwelling) amount of insurance.

XI. USAA´s Plan to Implement the Proposed Dwelling Policy Forms. USAA has informed the Department that when its proposed dwelling policy forms have been adopted, the proposed policy forms will be phased in for use with USAA policyholders while the dwelling policy forms promulgated by TDI will be discontinued for use with USAA policyholders. USAA has outlined the details of its plan to implement the proposed dwelling policy forms as follows:

A. New Business.

Once the proposed dwelling policy forms are adopted, USAA will write all new dwelling business on the DP 00 3TX form. The proposed DP 00 03TX policy form limits coverage for dwelling foundation losses and water damage losses and excludes mold damage losses. At the time each new policy is issued, the applicant will be offered the Slab or Foundation Coverage, Water Damage Coverage, and Microbial Organisms Coverage endorsements subject to USAA´s underwriting guidelines. USAa will write all new rented condominiums and contents only coverage on the DP 00 02TX form. The proposed DP 00 2TX policy form limits coverage for water damage losses and excludes mold damage losses. At the time each new policy is issued, the applicant will be offered the Water Damage Coverage and Microbial Organisms Coverage endorsements subject to USAA´s underwriting guidelines. As a follow up, a notice will be included in the policy packet the customer receives which will explain the coverage and give the customer another chance to purchase the coverage options. Coverage must be requested within 30 days of policy issuance. If a policyholder desires to continue the dwelling foundation coverage (subject to the $15,000 cap), the water damage coverage, and the mold coverage that the policyholder essentially has under the TDP-3, the Slab or Foundation Coverage, Water Damage Coverage, and Microbial Organisms Coverage endorsements must be purchased for an additional premium.

B. Existing Business.

The TDP-3, TDP-2 and TDP-1 dwelling policies other than for rented condominium policies, that are in force at the time of conversion will be non-renewed and the consumer will be offered the DP 00 03TX policy without the Slab or Foundation Coverage, Water Damage Coverage, or Microbial Organisms Coverage endorsements. There will be an exception for policies that were previously endorsed with the TDP-144 or TDP-146 endorsements which will be renewed with the Microbial Organisms Coverage endorsement attached. TDP-2 policies that are in force for rented condominiums at the time of conversion will be non-renewed and offered the DP 00 02TX policy without the Water Damage or Microbial Organisms endorsements. There will be an exception for policies that were previously endorsed with the TDP- 146 endorsement which will be renewed with the Microbial Organisms Coverage endorsement attached. The new policy packet will contain a cover sheet message calling the customer´s attention to information in the packet regarding the various policy changes. This information will also include an explanation of these endorsements and their availability for purchase subject to current underwriting guidelines.

XII. USAA´s Plan to Implement the Proposed Renters Policy Forms. USAA has informed the Department that when its proposed renters policy forms have been adopted, the proposed policy forms will be phased in for use with USAA policyholders while the tenant policy forms promulgated by TDI will be discontinued for use with USAA policyholders. USAA has outlined the details of its plan to implement the proposed renters policy forms as follows:

A. New Business.

Once the proposed renters policy forms are adopted, USAa will write all new business on the proposed new forms. The proposed renters forms exclude coverage for mold damage losses. At the time each new renters policy is issued, the applicant will be offered the Microbial Organisms Coverage endorsement subject to USAA´s underwriting guidelines. As a follow up, a notice will be included in the policy packet the customer receives which will explain the coverage and give the customer another chance to purchase this coverage option. Coverage must be requested within 30 days of policy issuance. If a policyholder desires to continue the mold coverage that the policyholder essentially has under the HO-BT, the Microbial Organisms Coverage endorsement must be purchased for an additional premium.

B. Existing Business.

Texas Homeowners Tenant-Form B (HO-BT) policies that are in force at the time of conversion will be non-renewed and offered the USAA Renters policy without the Microbial Organisms Coverage endorsement. There will be an exception for policies that were previously endorsed with the HO-164T endorsement which will be renewed with the Microbial Organisms Coverage endorsement attached. The new policy packet will contain a cover sheet message calling the customer´s attention to information in the packet regarding the various policy changes. This information will also include an explanation of the Microbial Organisms Coverage endorsement and its availability for purchase subject to current underwriting guidelines.

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

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

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

A copy of the petition, including the exhibits with the full text of the proposed policy forms and endorsements and side by side comparisons of the proposed USAA dwelling and renters policies and the corresponding Texas promulgated forms, and a copy of the exempt filing notice are available for review in the office of the Chief Clerk of the Texas Department of Insurance, 333 Guadalupe Street, Austin, Texas. For further information or to request copies of the petition, side by side comparisons, and the exempt filing notice, please contact Sylvia Gutierrez at (512) 463-6327; refer to (Ref. No. P-0202-4).

Comments on the proposed changes must be submitted in writing no later than 5:00 p.m. on December 30, 2002 to the Office of the Chief Clerk, Texas Department of Insurance, P. O. Box 149104, MC 113-2A, Austin, Texas 78714-9104. An additional copy of the comments is to be simultaneously submitted to Marilyn Hamilton, Associate Commissioner, Property and Casualty Division, Texas Department of Insurance, P. O. Box 149104, MC 104-PC, Austin, Texas 78714-9104.

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).



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