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SUBCHAPTER E . TEXAS WINDSTORM INSURANCE ASSOCIATION

 

DIVISION 3.  POLICY FORMS

28 TAC §5.4101

 

DIVISION 4.  ENDORSEMENTS

28 TAC §5.4201

 

DIVISION 5.  TEXAS SPECIAL MOBILE HOME WINDSTORM AND HAIL INSURANCE POLICY

28 TAC §5.4401

 

DIVISION 6.  MANUAL

28 TAC §5.4501

1.  INTRODUCTION.  The Commissioner of Insurance adopts amendments to §§5.4101, 5.4201, 5.4401 and 5.4501 concerning the adoption by reference of Texas Windstorm Insurance Association (TWIA) dwelling, commercial, and mobile home policy forms, new increased cost of construction endorsements for use with the dwelling and commercial policy forms, and manual rules and rates applicable to the two new endorsements.  The proposed amendments were published in the September 23, 2005 issue of the Texas Register (30 TexReg 6030).  The amendments to §5.4101, which adopt by reference the amended dwelling policy and commercial policy forms, are adopted with changes to the proposed text of both the amendments to §5.4101 and to the policy forms.  The amendments to §5.4401, which adopt by reference the amended mobile home policy form, are adopted with changes to the proposed text of both the amendments to §5.4401 and to the policy form.  The amendments to §5.4201, which adopt by reference two new endorsements, Form No. TWIA-431, Extension of Coverage Increased Cost of Construction (Dwelling) and Form No. TWIA-432, Extension of Coverage Increased Cost of Construction (Commercial) are adopted with changes to the proposed text of the amendments to §5.4201 and without changes to the proposed text of the two endorsements.  The amendment to §5.4201, which proposed to adopt by reference an amended endorsement Form No. TWIA-320, Extensions of Coverage, is withdrawn.  The amendments to §5.4501, which adopt by reference new manual rules and rates for use with the increased cost of construction endorsements are adopted with changes to the proposed text of the amendments to §5.4501 and without changes to the proposed text of the manual rules and rates. 

 

2.  REASONED JUSTIFICATION.  The adoption of the amendments to §§5.4101, 5.4201, 5.4401 and 5.4501 was proposed by the TWIA in a petition filed with the Texas Department of Insurance (Department) on December 1, 2004 (Ref. No. P-1204-22).  The Commissioner held a public hearing on the proposed amendments on October 20, 2005, Docket No. 2624. 

            The purpose of the TWIA, which was created pursuant to the Insurance Code Article 21.49, is to provide windstorm and hail insurance coverage to residents and businesses in the designated catastrophe areas along the Texas coast that are unable to obtain such coverage in the voluntary market.  The availability of such coverage encourages economic development and stability in the designated areas. The amendments to the TWIA dwelling and commercial policy forms, which are adopted by reference in §5.4101, exclude coverage under the dwelling and commercial policies for any loss or damage caused by or resulting from asbestos as well as for any additional cost or expense to test for, clean up, or remove the effects of asbestos or asbestos-containing materials.  The amendments are necessary in order to clarify that the coverage provided under each policy is for direct physical loss caused by windstorm or hail to covered property containing asbestos materials.  The petition filed by the TWIA requested an exclusion in the coverage in the dwelling and commercial policies for asbestos that included a provision that the TWIA would not in any way respond to or assess the effects of asbestos or asbestos-containing materials.  A commenter objected to this part of the exclusion because the proposed language is overly broad and could potentially exclude coverage that should be provided in the TWIA policies.  In response to the comment, the proposed exclusion is changed to delete the language that provided that TWIA would not in any way respond to or assess the effects of asbestos or asbestos-containing materials.  Also in response to comment, the proposed exclusion is changed to clarify that TWIA does provide coverage for direct physical loss caused by windstorm or hail to covered property containing asbestos materials.  This change is necessary to clarify coverage because windstorm reconstruction may involve the removal of components of a building that were made of asbestos or asbestos-containing materials, therefore, it is necessary to provide coverage for direct physical loss caused by windstorm or hail to covered property containing asbestos materials.  The exclusion as adopted is consistent with the proposed exclusion in that it excludes coverage for the additional cost or expense to test for, monitor, clean up, remove, contain, treat, abate or assess the effects of asbestos or asbestos-containing materials.  The amendments to the dwelling and commercial policy forms also make the current mold, fungi and other microorganisms exclusion in both policy forms more consistent in wording with the other exclusions contained in the policies.  This is necessary for consistency in policy exclusions and for purposes of clarity; no change in coverage results from the amendment.  The proposed amendment to the rain exclusion in the dwelling policy, which was also part of the proposed changes to the dwelling policy adopted by reference in §5.4101, was withdrawn by the TWIA.  The petition filed by the TWIA proposed to change the rain exclusion in the dwelling policy to exclude rain damage unless direct force of wind or hail first makes an opening in the walls or roof, and the loss is caused “immediately” by rain entering a hole created by direct force of wind or hail.  A commenter objected to the use of the term “immediately” because the current rain exclusion already eliminates coverage for the types of losses targeted by the expanded exclusion.  The commenter also expressed concerns that the additional language would conflict with other areas of the policy, specifically coverage for mold damaged material that must be repaired or replaced due to a loss caused by windstorm or hail, including a loss that is hidden and concealed for a period of time until detectable.  As a result of the comment, the TWIA withdrew the proposed amendment, and the current rain exclusion in the dwelling policy is unchanged.  This exclusion provides that loss or damage caused by rain, whether driven by wind or not, is not covered unless the direct force of wind or hail makes an opening in a roof or wall and rain enters through the opening and causes the damage.  The commercial policy currently has a rain exclusion similar to the one proposed by the TWIA for the dwelling policy.

            The new increased cost of construction endorsements, which are adopted by reference in §5.4201, and the manual rules and rates for use with the endorsements, which are adopted by reference in §5.4501, are necessary to make available windstorm and hail coverage that is sufficient to pay for windstorm and hail losses resulting from the increased cost of construction due to an ordinance or law or the windstorm building code.  Another proposed amendment to §5.4201, which would have amended Form No. TWIA 320, Extensions of Coverage, to provide additional coverage to rain-damaged property, was withdrawn by the TWIA.  The petition filed by the TWIA proposed the amendment which provided that in consideration of additional premium, coverage would be provided for sudden and accidental loss to the dwelling and personal property caused immediately by wind-driven rain during a windstorm whether or not an opening was first made in the dwelling by the direct force of wind or hail.  A commenter opposed the amendment because of the addition of the "sudden and accidental" language to the cause of loss and the provision that the loss must occur "immediately" during a windstorm.  The commenter opined that because the policy is limited to providing coverage for windstorm losses, the additional language is redundant and would conflict with other provisions of the policy.  As a result of the comment, the TWIA withdrew the proposed amendment to Form No. TWIA-320, Extensions of Coverage.

            The amendments to §5.4401, which adopt by reference a revised Texas Special Mobile Home Windstorm and Hail Insurance Policy (Mobile Home Policy) add an asbestos exclusion and non-substantively amend the mold, fungi, or other microorganism exclusion currently in the policy.  The asbestos exclusion, which is the same as the asbestos exclusion adopted for inclusion in the commercial and dwelling policies, excludes coverage for any loss or damage caused by or resulting from asbestos as well as any additional cost or expense to test for, clean up, or remove the effects of asbestos or asbestos-containing materials.  This amendment to the policy form is necessary to clarify that the coverage provided under the mobile home policy is for direct physical loss caused by windstorm or hail to covered property containing asbestos materials.  The petition filed by the TWIA requested an exclusion in the mobile home policy for asbestos that included the provision that the TWIA would not in any way respond to or assess the effects of asbestos or asbestos-containing materials.  A commenter objected to this part of the exclusion because the proposed language is overly broad and could potentially exclude coverage that should be provided in the TWIA policies.  In response to the comment, the proposed exclusion is changed to delete the language that provided that TWIA would not in any way respond to or assess the effects of asbestos or asbestos-containing materials.  Also in response to comment, the proposed exclusion is changed to clarify that TWIA does provide coverage for direct physical loss caused by windstorm or hail to covered property containing asbestos materials.  This change is necessary because covered windstorm reconstruction may involve the removal of components of a building that were made of asbestos or asbestos-containing materials, and therefore, it is necessary to continue coverage for direct physical loss caused by windstorm or hail to covered property containing asbestos materials.  The exclusion as adopted is consistent with the proposed exclusion in that it excludes coverage for the additional cost or expense to test for, monitor, clean up, remove, contain, treat, abate or assess the effects of asbestos or asbestos-containing materials.  The amendment to the mold, fungi, or other microorganism exclusion in the mobile home policy, which is the same as the amendment adopted for inclusion in the commercial and dwelling policies, adds introductory language to the exclusion that makes the wording more consistent with the other exclusions contained in the mobile home policy.  This is necessary for consistency in policy exclusions and for purposes of clarity; no change in coverage results from the amendment.

            Lastly, amendments to the sections are needed to update titles and addresses; incorporate consistent language in the rules:  indicate a change in the effective dates of the policy forms, endorsements, and manual rules and rates for use with the endorsements; and eliminate obsolete references.  The proposed effective date for the amended dwelling, commercial, and mobile home policies; the two new endorsements, Form No. TWIA-431 and Form No. TWIA-432; and the manual rules and rates applicable to the new endorsements is changed from January 1, 2006 to July 15, 2006.  This change is in response to a comment by the TWIA and is necessary to enable the TWIA to send out renewals 90 days in advance with the correct rates and premiums.

            None of the changes that have been made to the proposal as published introduce new subject matter or affect additional persons other than those subject to the proposal as originally published.

 

3.  HOW THE SECTIONS WILL FUNCTION.  The amendment to §5.4101 adopts by reference an amended TWIA dwelling policy form and an amended TWIA commercial policy form.  The amendments to the dwelling policy add an Exclusion No. 10 entitled “Asbestos” and add non-substantive clarifying language to Exclusion No. 9, entitled “Mold, Fungi, or Other Microorganisms.”  The amendments to the commercial policy add an Exclusion No. 11 entitled “Asbestos” and add non-substantive clarifying language to Exclusion No. 10 entitled “Mold, Fungi, or Other Microorganisms.”  The language in the exclusions is essentially the same for both policies.  The asbestos exclusion adopted in both policy forms specifies that coverage is not provided for loss or damage caused by or resulting from asbestos, including additional cost or expense to test for, monitor, clean up, remove, contain, treat, abate or assess the effects of asbestos or asbestos-containing materials.  The exclusion, however, clarifies that coverage is provided for direct physical loss caused by windstorm or hail to covered property containing asbestos materials.  The amendment to the mold, fungi, or other microorganisms exclusion adds introductory language to the exclusion to make the exclusion more consistent with the other exclusions contained in the policies.  The introductory language does not result in any substantive change in policy provisions and reads as follows:  “We do not cover loss or damage caused by or resulting from fungi or mold, and other microorganisms, except as provided [below].”  The substantive provisions of the policy then follow.

            The amendments to §5.4201 adopt by reference two new increased cost of construction endorsements and repeal the current increased cost of construction endorsement.  The new endorsements, Form No. TWIA-431, Extension of Coverage – Increased Cost of Construction, for use on dwelling policies and Form No. TWIA-432, Extension of Coverage – Increased Cost of Construction, for use on commercial policies, provide coverage for increased cost of construction to rebuild to current building laws or ordinances, including the increased cost of construction to rebuild to the applicable windstorm building code.  The new endorsements also provide coverage for the demolition or repair of an undamaged portion of a covered structure if necessary to meet the requirements of the law or ordinance.  Form No. TWIA-430, Extension of Coverage – Increased Cost in Construction is repealed because it is replaced by the two new endorsements. 

            The amendments to §5.4401 adopt by reference an amended Texas Special Mobile Home Windstorm and Hail Insurance Policy (Mobile Home Policy).  The amendments to the mobile home policy add a new exclusion entitled “Asbestos” and non-substantively amend the exclusion for mold, fungi, or other microorganisms.  The language in the exclusions is essentially the same as the exclusions in the dwelling and commercial policies.  The asbestos exclusion specifies that coverage is not provided for loss or damage caused by or resulting from asbestos or the cost to test for, monitor, clean up, remove, contain, treat, abate or in any way respond to or assess the effects of asbestos or asbestos-containing materials.  However, coverage continues to be provided for direct physical loss caused by windstorm or hail to covered property containing asbestos materials.  The amendment to the mold, fungi, or other microorganisms exclusion adds introductory language to the exclusion to make the exclusion more consistent in wording with the other exclusions contained in the policies.  The introductory language does not result in any substantive change in policy provisions.

            The amendments to §5.4501 adopt by reference the manual rules for the attachment of the new increased cost of construction endorsements and the corresponding rates for each of the new endorsements based on the limit of liability for each building item selected by the insured.  The limits of liability available for both policies is 5%, 10%, 15%, or 25% of Coverage A limit of liability.  The rates for both policies are 7.0% of structure premium, if 5% of Coverage A limit of liability is selected; 11.6% of structure premium, if 10% of Coverage A limit of liability is selected; 14.0% of structure premium, if 15% of Coverage A limit of liability is selected; and 15.7% of structure premium, if 25% of Coverage A limit of liability is selected. 

 

4.  SUMMARY OF COMMENTS. 

Comment:  A commenter opposes the proposed amendment to the rain exclusion in the dwelling policy, which would exclude rain damage unless direct force of wind or hail first made an opening in the walls or roof of the described building, and loss is caused “immediately” by rain entering through such openings.  The commenter asserts that the additional term “immediately” is unnecessary because the exclusion already eliminates coverage for the types of losses targeted by the additional language.  The commenter also expresses concerns that the additional language would conflict with other areas of the policy, specifically coverage for mold damaged material that must be repaired or replaced due to a loss caused by windstorm or hail, including a loss that is hidden and concealed for a period of time until detectable. 

Agency Response:  The Department staff drafted alternative language to address the commenter’s concerns; however, as a result of the comment, the TWIA withdrew the proposed amendment to the dwelling policy. 

 

Comment:  A commenter opposes the proposed amendment to Form No. TWIA-320, Extensions of Coverage, which would have added “sudden and accidental” language to the cause of loss and specified that the loss must occur “immediately” by wind-driven rain “during a windstorm.”  The commenter opines that because the policy is limited to providing coverage for windstorm losses, the additional language is redundant and would conflict with other provisions of the policy.

Agency Response:  Based on the comment, the TWIA withdrew the proposed amendments to the wind-driven rain coverage provided in Form No. TWIA-320, Extensions of Coverage.

 

Comment:  A commenter opposes language in the proposed asbestos exclusion in the commercial policy, the dwelling policy, and the mobile home policy, because it is overly broad, and could potentially exclude coverage that should be provided in the TWIA policies.  The specific language in question reads:  ”[TWIA would not] in any way respond to or assess the effects of asbestos or asbestos-containing material.”

Agency Response:  The Department agrees.  The Department staff worked with the TWIA and the commenter to resolve this concern.  TWIA agreed to delete the phrase “in any way respond to or assess the effects of asbestos or asbestos-containing materials” from the proposed amendment to the commercial policy, the dwelling policy and the mobile home policy.  In addition, the proposed exclusion is changed to specify that the TWIA does provide coverage for direct physical loss caused by windstorm or hail to covered property containing asbestos materials.  The exclusion as adopted is consistent with the proposed exclusion in that it excludes coverage for the additional cost or expense to test for, monitor, clean up, remove, contain, treat, abate or assess the effects of asbestos or asbestos-containing materials.

 

Comment:  The Texas Windstorm Insurance Association requests that the effective date of the new policy forms and endorsements be changed from May 1, 2006 to July 15, 2006 in order for the Association to send out renewals 90 days in advance with the correct rates and premiums. 

Agency Response:  The Department agrees, and the effective date for the dwelling, commercial, and mobile home policies, the endorsements Form No. TWIA-431 and Form No. TWIA-432, and the manual rules and corresponding rates for the new endorsements is changed to July 15, 2006.

 

5.  NAMES OF THOSE COMMENTING FOR AND AGAINST THE SECTIONS.

For with changes:  Office of Public Insurance Counsel and Texas Windstorm Insurance Association. 

 

6.  STATUTORY AUTHORITYThe amendments are adopted pursuant to Insurance Code Article 21.49 and §36.001.  Pursuant to Article 21.49 §8, the Commissioner is authorized to promulgate policy forms and endorsements for use by the TWIA 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, and further, the Commissioner is authorized to approve, modify, or disapprove every manual of classifications, rules, rates, rating plans, and every modification of any of the foregoing used by the TWIA.  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.  Section 36.001 of the Insurance Code provides that the Commissioner of Insurance may adopt any rules necessary and appropriate to implement the powers and duties of the Texas Department of Insurance under the Insurance Code and other laws of this state.

 

7.  TEXT.

DIVISION 3.  POLICY FORMS

§5.4101.  TWIA 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 July 15, 2006.  Specimen copies of these policy forms are available from the Texas Windstorm Insurance Association, P.O. Box 99090, Austin, Texas 78709-9090.  They may also be obtained by contacting the Personal Lines Division, Mail Code 104-1A, Texas Department of Insurance, 333 Guadalupe Street, Austin, Texas 78701.

 

DIVISION 4.  ENDORSEMENTS

§5.4201.  Endorsements for Use with TWIA Policy Forms.  The Texas Department of Insurance adopts by reference endorsements for use with the Texas Windstorm Insurance Association (TWIA) Policy Forms.  Specimen copies of these endorsements are available from the Texas Windstorm Insurance Association, P.O. Box 99090, Austin, Texas 78709-9090.  They are also available from the Personal Lines Division, Mail Code 104-1A, Texas Department of Insurance, 333 Guadalupe Street, Austin, Texas 78701.  The endorsement forms are more specifically identified as follows.

                        (1)  Endorsements for use with the TWIA Dwelling Policy and the TWIA Commercial Policy.  Form No. TWIA-1, Blank Schedule Form, effective June 15, 1999.

                        (2)  Endorsements for use with the TWIA Dwelling Policy and the TWIA Commercial Policy and the Texas Special Mobile Home Windstorm and Hail Insurance Policy.

                                    (A)  Form No. TWIA-12, Assignment of Interest or Change in Mortgagee or Trustee, effective June 15, 1999.

                                    (B)  Form No. TWIA-23, Cancellation Report, effective June 15, 1999.

                                    (C)  Form No. TWIA-77, General Change Endorsement, effective June 15, 1999.

                                    (D)  Form No. TWIA-112, Loss Payable Clause, effective June 15, 1999.

                                    (E)  Form No. TWIA-113, Lost Policy Voucher, effective June 15, 1999.

                                    (F)  Form No. TWIA-130, Mortgage Clause (Without Contribution), effective June 15, 1999.

                                    (G)  Form No. TWIA-151A, Premium Assignment Clause, effective June 15, 1999.

                                    (H)  Form No. TWIA-175, Sale Contract Clause, effective June 15, 1999.

                                    (I)  Form No. TWIA-195, Sworn Statement in Proof of Loss, effective June 15, 1999.

                        (3)  Endorsements for use with the TWIA Commercial Policy.

                                    (A)  Form No. TWIA-18, Builders Risk – Stated Value Form, effective June 15, 1999.

                                    (B)  Form No. TWIA-21, Builders Risk – Actual Completed Value Form, effective June 15, 1999.

                                    (C)  Form No. TWIA-26, Church Form, effective June 15, 1999.

                                    (D)  Form No. TWIA-65, Large Deductible Endorsement, effective June 15, 1999.

                                    (E)  Form No. TWIA-115, Lumber Form – Specific – Retail Yard, effective June 15, 1999.

                                    (F)  Form No. TWIA-164, Replacement Cost Endorsement, effective June 15, 1999.

                                    (G)  Form No. TWIA-176, School Form, effective June 15, 1999.

                                    (H)  Form No. TWIA-280, Condominium Property Form – Additional Policy Provisions, effective June 15, 1999.

                                    (I)  Form No. TWIA-282, Condominium Property Form – Additional Property Provisions, amended June 15, 1999.

                                    (J)  Form No. TWIA-17, Business Income Coverage, effective May 1, 2001

                                    (K)  Form No. TWIA-432, Extension of Coverage – Increased Cost of Construction (Commercial) effective July 15, 2006.

                        (4)  Endorsements for use with the TWIA Dwelling Policy.

                                    (A)  Form No. TWIA-310, Extensions of Coverage, amended June 15, 1999.

                                    (B)  Form No. TWIA-315, Extensions of Coverage, amended June 15, 1999.

                                    (C)  Form No. TWIA-320, Extensions of Coverage, amended June 15, 1999.

(D)  Form No. TWIA-325, Extensions of Coverage, amended June 15, 1999.

                                    (E)  Form No. TWIA-326, Extensions of Coverage, amended June 15, 1999.

                                    (F)  Form No. TWIA-328, Extensions of Coverage, amended June 15, 1999.

                                    (G)  Form No. TWIA-410, Conversion to Farm and Ranch Dwelling Policy, effective June 15, 1999.

                                    (H)  Form No. TWIA-431, Extension of Coverage – Increased Cost of Construction (Dwelling), effective July 15, 2006

                        (5)  Endorsements for use with the TWIA Dwelling Policy.

                                    (A)  Form No. TWIA-330, Extensions of Coverage, amended June 15, 1999.

                                    (B)  Form No. TWIA-335, Extensions of Coverage, amended June 15, 1999.

                                    (C)  Form No. TWIA-340, Extensions of Coverage, amended June 15, 1999.

                                    (D)  Form No. TWIA-345, Extensions of Coverage, amended June 15, 1999.

                                    (E)  Form No. TWIA-350, Extensions of Coverage, amended June 15, 1999.

                                    (F)  Form No. TWIA-365, Replacement Cost Endorsement – Personal Property, amended June 15, 1999.

                                    (G)  Form No. TWIA-400, Actual Cash Value – Roofs (One or Two Family Dwellings), effective June 15, 1999.

                                    (H)  Form No. TWIA-420, Exclusion of Cosmetic Damage to Roof Coverings Caused by Hail, effective June 15, 1999.

                        (6)  Endorsements for use with the Texas Special Mobile Home Windstorm and Hail Insurance Policy.

                                    (A)  Form No. TWIA-29, Mandatory Endorsement, amended June 15, 1999.

                                    (B)  Form No. TWIA-570, Mobile Home Percentage Deductible Clause (Coastal Area), amended June 15, 1999.

                                    (C)  Form No. TWIA-575, Mobile Home Percentage Deductible Clause (Beach Area), amended June 15, 1999.

 

DIVISION 5.  TEXAS SPECIAL MOBILE HOME WINDSTORM AND HAIL INSURANCE POLICY

§5.4401.  Texas Special Mobile Home Windstorm and Hail Insurance Policy--Deductible Coverage.  The Texas Department of Insurance adopts by reference the Texas Special Mobile Home Windstorm and Hail Insurance Policy – Deductible Coverage, as amended effective July 15, 2006.  Specimen copies of this policy are available from the Texas Windstorm Insurance Association, P.O. Box 99090, Austin, Texas 78709-9090.  Copies may also be obtained by contacting the Personal Lines Division, Mail Code 104-1A, Texas Department of Insurance, 333 Guadalupe Street, Austin, Texas 78701.

 

DIVISION 6.  MANUAL

§5.4501.  Rules for the Texas Windstorm Insurance Association.  The Texas Department of Insurance adopts by reference a rules manual for the Texas Windstorm Insurance Association as amended effective July 15, 2006.  A specimen copy of the rules manuals is available from the Texas Windstorm Insurance Association, P.O. Box 99090, Austin, Texas  78709-9090.  Copies may also be obtained by contacting the Personal Lines Division, Mail Code 104-1A, Texas Department of Insurance, 333 Guadalupe Street, Austin, Texas 78701.




Last updated: 03/14/2006



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