Subchapter D. Fire and Allied Lines Insurance Division 9. Voluntary Inspection Program Plan of Operation

28 TAC §5.3800

1. INTRODUCTION. The Texas Department of Insurance proposes amendments to §5.3800, concerning the Voluntary Inspection Program fees charged for initial residential property inspections and follow-up inspections. These fees are specified in the Voluntary Inspection Program (VIP) Plan of Operation in §5.3800(e). The VIP was created in 1995 by the 74th Legislature to provide a mechanism for any person having an insurable interest in real or tangible personal property at a fixed location to procure an independent inspection of the condition of the property for purposes of purchasing residential property insurance. The proposed amendments to §5.3800(e) are necessary to increase the fees that may be charged by inspectors in the program to individuals who request an inspection of their residential property and to provide for automatic annual increases in the fees based on the Consumer Price Index of the U.S. Department of Labor, Bureau of Labor Statistics. The current fees were established in 1996 when the Plan of Operation was first adopted and are now too low to attract enough inspectors to perform inspections for the Voluntary Inspection Program. Many inspectors are certified real estate inspectors, and based on an informal survey of various areas of the state, the Department determined that these inspectors generally charge approximately $150 to $400 for a real estate inspection. The Department has also determined that in many instances the VIP fee is added on to the real estate fee when an inspection is conducted for purposes of VIP certification of insurability. Despite this fact, an informal Department survey indicates that the current VIP fee of $50 does not provide enough financial incentive for qualified inspectors to participate. The informal Department survey of qualified inspectors also indicates that many more inspectors would be willing to conduct the inspections if the fee were set at $100 or more. Therefore, the Department is proposing to amend the current fee amounts, increasing them from an amount not to exceed $50 to an amount not to exceed $100 for initial inspections, and from an amount not to exceed $25 to an amount not to exceed $50 for follow-up inspections. The fees are proposed to be effective January 1, 2007. In order to ensure that inspection fees are competitive enough to ensure the continued availability of inspectors for homeowners who want to utilize the inspection program, the proposal includes a provision to provide for automatic annual increases in the fees by the same percentage of increase as the increase in the Consumer Price Index established by the U.S. Department of Labor, Bureau of Labor Statistics for the prior calendar year for all urban consumers for all items and for all regions combined, rounded to the nearest dollar. Under this proposed provision, the maximum amount that could be charged for the initial VIP inspections and follow-up inspections would be automatically increased annually in accordance with the Consumer Price Index beginning on January 1, 2008. Also beginning January 1, 2008, persons interested in requesting inspections and in conducting inspections will be able to obtain the latest fee amounts, along with the method for computing the fees, at the Department's VIP website www.TDI.state.tx.us/consumer/VIPcommish.html, as well as from the Department by regular mail. Additionally, in order to ensure adequate financial incentive for inspectors to perform the inspections, the proposal would allow inspectors to charge the individual requesting the inspection for mileage for the most direct route to and from the residential property that is inspected; such fees are required to be the same as the federal standard mileage rate for business use established by the Internal Revenue Service. The mileage fees are proposed to be effective January 1, 2007, and if the Internal Revenue Service adjusts the mileage rate for business use, the VIP inspector mileage rate will change to remain equivalent. Beginning January 1, 2007, the latest mileage rate will be available at the Department's VIP website www.tdi.state.tx.us/consumer/VIPcommish.html and will also be available by regular mail from the Department.

The Department is also proposing changes to §§5.3800(i)(1)(A)(iii), (iv), (v), and (j)(2)(C) to delete obsolete statutory citations and to correct a typographical error. Insurance Code Article 21.07-4, which is referenced in §5.3800(i)(1)(A)(iii), was repealed in the non-substantive Insurance Code revision, Acts 2003, 78th Legislature, Chapter 1274, §26(a)(1), effective April 1, 2005. Article 21.07-4 was re-adopted as Chapter 4101 in the same non-substantive Insurance Code revision. Insurance Code Article 21.14, which is referenced in §§5.3800(i)(1)(A)(iv) and (v), was repealed in the non-substantive Insurance Code revision, Acts 2003, 78th Legislature, Chapter 1274, §26(a)(1), effective April 1, 2005. Article 21.14 was re-adopted as §§4051.001 - 4051.303 in the same non-substantive Insurance Code revision. Article 1.10E of the Insurance Code, which is referenced in §5.3800(j)(2)(C), was repealed in the non-substantive Insurance Code revision, Acts 1999, 76th Legislature, Ch. 101, §5, effective September 1, 1999. Article 1.10E was re-adopted as Chapter 84 in the same non-substantive Insurance Code revision. Therefore, all current references to the repealed articles are deleted, and the updated and correct references are substituted. A typographical error in §5.3800(j)(2)(C), the changing of the word of to the word or, is corrected.

2. FISCAL NOTE. Alexis Dick, Deputy Commissioner, Inspections Division, has determined that for each year of the first five years the proposed amendments will be in effect, there will be no fiscal impact to state and local governments as a result of the enforcement or administration of the proposed amendments. Ms. Dick has also determined that there will be no measurable effect on local employment or the local economy as a result of the proposal.

3. PUBLIC BENEFIT/COST NOTE. Ms. Dick has further determined that for each year of the first five years the amendments are in effect, the public benefits anticipated as a result of the proposed amendments will be the availability of more inspectors willing to participate in the Voluntary Inspection Program. This increased availability will result in individual residential property owners being able to find qualified inspectors more easily and if circumstances make it appropriate, obtain an inspection certificate which creates a presumption that the property condition is adequate for residential property insurance to be issued.

Both residential property owner and inspector participation in the VIP is voluntary, and any costs of compliance with the proposed amendments would be incurred solely as the result of voluntary action taken by individuals. Accordingly, the proposed amendments will not have an impact on small and micro businesses. The Department has considered the purpose of the applicable statute and proposed amendments and has determined that because of the voluntary nature of this program for both residential property owners who are requesting inspections and persons who are conducting the inspections that it is not necessary, reasonable, legal nor feasible to waive or modify the proposed requirements for small or micro businesses.

4. REQUEST FOR PUBLIC COMMENT. To be considered, written comments on the proposal must be submitted no later than 5:00 p.m. on September 18,2006 to Gene C. Jarmon, General Counsel and Chief Clerk, Mail Code 113-2A, Texas Department of Insurance, P.O. Box 149104, Austin, Texas 78714-9104. An additional copy of the comment must be simultaneously submitted to Alexis Dick, Deputy Commissioner, Inspections Division, Mail Code 103-1A, Texas Department of Insurance, P.O. Box 149104, Austin, Texas 78714-9104. Any request for a public hearing should be submitted separately to the Office of Chief Clerk by no later than 5:00 p.m. on September 18, 2006. If a hearing is held, written and oral comments presented at the hearing will be considered.

5. STATUTORY AUTHORITY. The amendments are proposed under Insurance Code Articles 5.33B and 5.98 and §36.001. Article 5.33B authorizes the Commissioner to adopt a Plan of Operation for the Voluntary Inspection Program which shall include rules setting the fee which may be charged to the person requesting the inspection. Article 5.98 provides that the Commissioner may adopt reasonable rules to accomplish the purposes of Chapter Five of the Insurance Code. 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.

6. CROSS REFERENCE TO STATUTE. The following statutes are affected by this proposal:

Insurance Code Article 5.33B

7. TEXT.

§5.3800. Voluntary Inspection Program Plan of Operation.

(a) - (d) (No change.)

(e) Fees.

(1) (No change.)

(2) An inspector may charge a reasonable fee not to exceed $100 [$50] per inspection for the inspection of a residential property risk effective January 1, 2007.

(3) An inspector may charge a reasonable fee not to exceed $50 [$25] per follow-up inspection in the event repairs are made within 90 days of the initial inspection effective January 1, 2007.

(4) (No change.)

(5) The maximum fees that may be charged for an inspection and a follow-up inspection shall be automatically increased on an annual basis on January 1 of each year, beginning on January 1, 2008, by the same percentage of increase as the increase in the Consumer Price Index established by the U.S. Department of Labor, Bureau of Labor Statistics for the prior calendar year for all urban consumers for all items and for all regions combined, rounded to the nearest dollar. Current inspector fees and the method used to compute the current inspector fees will be available at the Department's VIP website www.tdi.state.tx.us/consumer/VIPcommish.html effective January 1, 2008, and may be obtained by mail from the Inspections Division, Mail Code 103-1A, Texas Department of Insurance, P.O. Box 149104, Austin, Texas 78714-9104.

(6) An inspector may charge, in addition to the inspection fee and the follow-up inspection fee, a reasonable fee for mileage for each trip to and from the residential property risk, taking the most direct route. The mileage fee shall not exceed the federal standard mileage rate for business use as established by the Internal Revenue Service effective January 1, 2007 . The

maximum mileage rate for VIP inspectors will change to remain equivalent to the federal standard mileage rate for business use as established by the Internal Revenue Service if the federal standard mileage rate is changed by the Internal Revenue Service. The current mileage rate will be available at the Department's VIP website www.tdi.state.tx.us/consumer/VIPcommish.html, effective January 1, 2007, and may be obtained by mail from the Inspections Division, Mail Code 103-1A, Texas Department of Insurance, P.O. Box 149104, Austin, Texas 78714-9104 .

(f) - (h) (No change.)

(i) Certification or Licensing of Inspectors.

(1) Certification.

(A) The following individuals may be certified by the Department as qualified inspectors under this program:

(i) - (ii) (No change.)

(iii) Persons holding an insurance adjusters license pursuant to [Article 21.07-4,] the Insurance Code Chapter 4101;

(iv) Persons holding a local recording agents license pursuant to [Article 21.14,] the Insurance Code §§4051.001 - 4051.303;

(v) Persons holding a solicitors license pursuant to [Article 21.14,] the Insurance Code §§4051.001 - 4051.303; or

(vi) (No change.)

(B) (No change.)

(2) - (5) (No change.)

(j) Denial, Suspension, Cancellation or Revocation of an Inspector's Certification or License.

(1) (No change.)

(2) After notice and opportunity for a hearing, the Commissioner may cancel or revoke any license or certification issued under this section if the holder or possessor of the license or certification is found to be in violation of, or to have failed to comply with, any provisions of this section or any other rule or regulation of the Department or any specific provisions of the Texas Insurance Code. In lieu of cancellation or revocation, the Commissioner, upon determination from the facts that it would be fair, reasonable or equitable, may order one or more of the sanctions specified in subparagraphs (A) - (D) of this paragraph.

(A) - (B) (No change.)

(C) The Commissioner may issue an order directing the holder or [of] possessor of the certification or license to pay an administrative penalty in accordance with Chapter 84 [Article 1.10E] of the Insurance Code.

(D) (No change.)

(3) - (4) (No change.)

(k) - (l) (No change.)