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You are here: Home . rules . 2007 . 1220E-059

SUBCHAPTER K. TERMINATION OF FINANCIAL ASSURANCE FOR UNDERGROUND STORAGE TANKS

28 TAC §§5.9101 - 5.9107

1. INTRODUCTION. The Texas Department of Insurance proposes new Subchapter K, §§5.9101 - 5.9107, concerning the required notice of the cancellation or non-renewal of insurance or other financial assurance for an underground storage tank. The proposal implements the new provisions in the Water Code §26.352 that require an insurer or other entity providing financial assurance for the purposes of meeting the statutory financial responsibility requirements for owners or operators of underground storage tanks provide notice to the Texas Commission on Environmental Quality (TCEQ) within 30 days after termination of insurance or other financial assurance. The requirement to provide such notice was enacted by amendments to the Water Code §26.352 in HB 1956, 80th Legislature, effective September 1, 2007. The TCEQ regulates underground storage tanks pursuant to the Water Code §§26.341 - 26.367.

The Water Code §26.352(a) requires the TCEQ to establish requirements for owners or operators of underground storage tanks to maintain evidence of financial responsibility for taking corrective action and compensating third parties for bodily injury and property damage caused by sudden and nonsudden accidental releases arising from the operation of an underground storage tank. New subsection (e-1) of the Water Code §26.352 mandates that the notice be provided to the TCEQ and requires the Department to adopt rules to implement and enforce the new termination notice requirements. New subsection (e-1) of Water Code §26.352 also requires the insurance company or other entity providing financial assurance to mail, fax, or email the notice of the cancellation or non-renewal to the TCEQ not later than the 30th day after the date the coverage terminates.

Under the proposal, the specific new notice requirements apply only to notices required to be issued under the Water Code §26.352(e-1) that are issued on or after April 1, 2008. In accordance with HB 1956, insurers and other entities providing financial assurance for underground storage tanks are required to comply with the general notice provisions of the Water Code §26.352(e-1) for insurance or other financial assurance terminating after January 1, 2008.

The proposed new sections are necessary to implement the new termination notice requirements. Proposed new §5.9101 states the purpose of the new sections, which is to specify the requirements and procedures for insurers or other entities providing financial assurance for the purposes of meeting financial responsibility requirements for underground storage tank owners or operators under the Water Code §26.352 to notify the TCEQ after insurance or other financial assurance for an underground storage tank is canceled or not renewed. Proposed new §5.9102 provides definitions for financial assurance and insurer. Financial assurance is defined as a financial instrument used to comply with financial responsibility requirements established under the Water Code §26.352; insurer is defined as an entity operating under the Insurance Code providing insurance or other financial assurance to an owner or operator of underground storage tanks for the purposes of meeting financial responsibility requirements established under the Water Code §26.352, including all entities operating under the Insurance Code Chapters 941 (Lloyd's plans), 942 (reciprocals and interinsurance exchanges), 981 (surplus lines insurers), and 2201 (risk retention groups and purchasing groups).

Subsection (a) of proposed new §5.9103 provides that the new sections apply to all insurers providing insurance or other financial assurance to an owner or operator of underground storage tanks for the purposes of meeting financial responsibility requirements established under the Water Code §26.352. Subsection (b) of proposed new §5.9103 provides that all provisions of the subchapter except §5.9107 (relating to Disciplinary Actions by the Commissioner of Insurance) apply to other entities providing financial assurance for the owners or operators of underground storage tanks for the purposes of meeting financial responsibility requirements established under the Water Code §26.352. Referral to the Attorney General may be made for disciplinary actions against the small percentage of other entities providing financial assurance for the owners or operators of underground storage tanks. Proposed new §5.9103(c) provides that the specific new notice requirements of §§5.9104 and 5.9105 shall apply only to notices required to be issued on and after April 1, 2008.

Proposed new §5.9104 addresses the content of the termination notice. Subsection (a) of proposed new §5.9104 requires that an insurer or other entity providing financial assurance for the owners or operators of underground storage tanks provide notice to the TCEQ of the termination of the insurance or other financial assurance. Subsection (a) of proposed new §5.9104 also specifies the information that must be included with the notice of termination, including the effective date that the insurance or financial assurance was cancelled or non-renewed and the reason for the termination. Subsection (b) of proposed new §5.9104 requires that the notice to the TCEQ must be accurate and complete.

Proposed new §5.9105 specifies the procedures for submission of the notice. Proposed new §5.9105(a) requires that the insurer, or other entity providing, holding, or maintaining financial assurance for an underground storage tank must send the notice of termination not later than the 30th day after the date the coverage terminates. Proposed new §5.9105(b) requires that the insurer, or other entity providing financial assurance, mail, fax or email the notice to the TCEQ, and specifies mail, fax and email listings for the provision of such notice.

Proposed new §5.9106 specifies requirements and procedures in the event of rescindment of the notice of termination. Proposed new §5.9106(a) requires that an insurer or other entity providing financial assurance that rescinds a notice of termination provided to the TCEQ must send written notice to the TCEQ of such rescindment in accordance with §5.9105(b) not later than the 10th day after the termination is rescinded. Proposed new §5.9106(b) requires that the notice of rescindment include a copy of the notice under §5.9104 that is being rescinded or the policy number or other financial assurance identification number and the facility identification number(s) assigned by the TCEQ for the underground storage tank(s) insured or otherwise financially assured. Proposed new §5.9106(c) requires that the notice of rescindment must be accurate and contain all the information required under §5.9106(b).

Proposed new §5.9107 specifies the possible disciplinary actions by the Commissioner of Insurance for violations of the statutory and rule requirements.

2. FISCAL NOTE. Marilyn Hamilton, Associate Commissioner, Property and Casualty Division, has determined that for each year of the first five years the proposal will be in effect, there will be no fiscal impact to state and local governments as a result of the enforcement or administration of these rules. 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. Hamilton has further determined that the public benefit of the new sections is that they will aid the TCEQ in administering subsections (a), (e), and (e-1) of the Water Code §26.352. Subsection (a) of the Water Code §26.352 authorizes the TCEQ to establish by rule requirements for tank owners or operators to maintain evidence of financial responsibility for taking corrective action and compensating third parties for bodily injury and property damage caused by sudden and nonsudden accidental releases from underground storage tanks. New subsection (e) of the Water Code §26.352 requires that an owner or operator of an underground storage tank submit annually proof that the owner or operator maintains financial responsibility as required by §26.352(a). However, some owners or operators of underground storage tanks are not taking the necessary measures to ensure that they are financially responsible for the costs of taking corrective action and compensating third parties for bodily injury and property damage caused by sudden and nonsudden accidental releases arising from the operation of underground storage tanks. A number of owners or operators of underground storage tanks have terminated their insurance coverage or financial assurance, forcing the state to assume the costs of taking corrective action for leaks from underground storage tanks not insured or otherwise financially assured by the owners and operators. New subsection (e-1) of the Water Code §26.352 requires that an insurance company or other entity that provides financial assurance to an owner or operator of an underground storage tank notify the TCEQ if the insurance coverage or other financial assurance is canceled or not renewed not later than the 30th day after the date the coverage terminates. The proposal will provide specific guidance regarding the procedures to follow in notifying the TCEQ if the insurance or other financial assurance is canceled or not renewed, and will thereby provide necessary information to assist the TCEQ in enforcing the statutory requirements for maintenance of insurance coverage or other financial assurance for owners or operators of underground storage tanks before a costly accidental release occurs from an underground storage tank not insured or otherwise financially assured by the owner or operator.

The cost for insurers or other entities providing financial assurance for underground storage tanks required to comply with the proposed sections will be based on (i) the cost of labor in identifying insurance or other financial assurance for underground storage tanks that is canceled or not renewed; (ii) the cost of labor in reprogramming existing systems to meet the requirements of the proposed sections; and (iii) the cost of providing notice of the termination of insurance or other financial assurance for underground storage tanks to the TCEQ. These costs, however, are the result of the legislative enactment of HB 1956, and not the result of the adoption, enforcement, or administration of the proposed sections.

4. ECONOMIC IMPACT STATEMENT AND REGULATORY FLEXIBILITY ANALYSIS FOR SMALL AND MICRO BUSINESSES. In accordance with the Government Code §2006.002(c), the Department and the TCEQ have determined that there are no small or micro businesses required to comply with the proposed rule. This determination is based on a compilation of profiles of all known insurers or other entities providing financial assurance for underground storage tanks. The Department and the TCEQ are not aware, nor have any knowledge, of any entity insuring or providing financial assurance for underground storage tanks that has fewer than 100 employees or less than $6 million in annual gross receipts. Further, any costs that are incurred by any business, regardless of size, that is required to comply with the proposal are the result of the enactment of HB 1956, and not the result of the adoption, enforcement, or administration of the proposed amendments. In accordance with the Government Code §2006.002(c), the Department has therefore determined that a regulatory flexibility analysis is not required because the proposal will not have an adverse impact on small or micro businesses.

5. TAKINGS IMPACT ASSESSMENT. The Department has determined that no private real property interests are affected by this proposal and that this proposal does not restrict or limit an owner's right to property that would otherwise exist in the absence of government action, and therefore, does not constitute a taking or require a takings impact assessment under the Government Code §2007.043.

6. REQUEST FOR PUBLIC COMMENT. To be considered, written comments on the proposal must be submitted no later than 5:00 p.m. on February 4, 2008 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 Marilyn Hamilton, Associate Commissioner, Property & Casualty Division, Mail Code 104-PC, 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 prior to the close of the public comment period. No hearing will be held unless requested. If a hearing is held, written and oral comments presented at the hearing will be considered.

7. STATUTORY AUTHORITY. The new sections are proposed under the Water Code §26.352(e-1) and the Insurance Code §36.001. Subsection (e-1) of the Water Code §26.352 requires that an insurance company or other entity that provides insurance coverage or another form of financial assurance to an owner or operator of an underground storage tank for purposes of the Water Code §26.352 notify the TCEQ if the insurance coverage or other financial assurance is canceled or not renewed not later than the 30th day after the date the coverage terminates. Subsection (e-1) of the Water Code §26.352 further requires that the Department adopt rules to implement and enforce this subsection. The Insurance Code §36.001 provides that the Commissioner of Insurance may adopt any rules necessary and appropriate to implement the powers and duties of the Department under the Insurance Code and other laws of this state.

8. CROSS REFERENCE TO STATUTE. The following statute is affected by the proposal:

Rule No. Statute

§§5.9101 - 5.9105 Water Code §26.352

9. TEXT.

SUBCHAPTER K. TERMINATION OF FINANCIAL ASSURANCE
FOR UNDERGROUND STORAGE TANKS

§5.9101. Purpose . In accordance with the Water Code §26.352(e-1), this subchapter specifies the requirements and procedures for an insurer or other entity providing financial assurance for the purposes of meeting financial responsibility requirements for underground storage tank owners or operators under the Water Code §26.352 to provide notice to the Texas Commission on Environmental Quality (TCEQ) after insurance or other financial assurance for an underground storage tank is canceled or not renewed.

§5.9102. Definitions. The following words and terms when used in this subchapter shall have the following meanings unless the context clearly indicates otherwise:

(1) Financial assurance--A financial instrument that as provided by rules adopted by the TCEQ may be used to comply with financial responsibility requirements established under the Water Code §26.352.

(2) Insurer--An entity operating under the Insurance Code providing insurance or other financial assurance to an owner or operator of underground storage tanks for the purposes of meeting financial responsibility requirements established under the Water Code §26.352, including all entities operating under the Insurance Code Chapters 941 (Lloyd's plans), 942 (reciprocals and interinsurance exchanges), 981 (surplus lines insurers), and 2201 (risk retention groups and purchasing groups).

(3) TCEQ-- Texas Commission on Environmental Quality.

§5.9103. Applicability.

(a) This subchapter is applicable to all insurers providing insurance or other financial assurance to owners or operators of underground storage tanks for the purposes of meeting financial responsibility requirements established under the Water Code §26.352.

(b) All provisions of this subchapter except §5.9107 (relating to Disciplinary Actions by the Commissioner of Insurance) also apply to any other entity providing, holding, or maintaining financial assurance for the owners or operators of underground storage tanks for the purposes of meeting financial responsibility requirements established under the Water Code §26.352.

(c) This subchapter applies only to notices required to be issued under the Water Code §26.352(e-1) and that are issued on or after April 1, 2008, regardless of when the insurance policy or other form of financial assurance was issued or created.

§5.9104. Content of Notice.

(a) Pursuant to the Water Code §26.352(e-1), an insurer or other entity that provides insurance coverage or another form of financial assurance to an owner or operator of an underground storage tank for the purpose of showing or maintaining evidence of financial responsibility must send written notice to the TCEQ if the insurance coverage or other financial assurance for an underground storage tank is canceled or not renewed as provided in §5.9105 of this title (relating to Submission of Notice). The notice must contain the following information:

(1) the name of the insured, or assured, as appropriate;

(2) the street address or specific location of each underground storage tank for which insurance or financial assurance is being canceled or not renewed ;

(3) the business address of the named insured or assured;

(4) the name, address, and telephone number of the insurer or other entity providing, holding, or maintaining the financial assurance;

(5) the effective date that the insurance coverage or financial assurance was terminated;

(6) the insurer's or other entity's reason(s) for the cancellation or non-renewal of the insurance or other financial assurance;

(7) the policy number or other financial assurance identification number; and

(8) the facility identification number assigned by the TCEQ for each underground storage tank that insurance coverage or other financial assurance was canceled or not renewed.

(b) The notice must be accurate and contain all the information required under subsection (a) of this section. It is the sole responsibility of the insurer or other entity providing, holding, or maintaining financial assurance to obtain and maintain the information necessary to complete the required notice.

§5.9105. Submission of Notice.

(a) As provided under the Water Code §26.352(e-1), the insurer or other entity providing, holding, or maintaining financial assurance for an underground storage tank must send the notice required pursuant to the Water Code §26.352(e-1) and §5.9104(a) and (c) (relating to Content of Notice) not later than the 30th day after the date the coverage terminates.

(b) As provided under the Water Code §26.352(e-1), the insurer, or other entity providing, holding, or maintaining financial assurance for an underground storage tank shall mail, fax, or email the notice required under the Water Code §26.352(e-1) and §5.9104(a) and (c) of this subchapter (relating to Content of Notice) to the TCEQ. The notice must be submitted to one of the following addresses, or as otherwise directed by the executive director of the TCEQ:

(1) TCEQ, Financial Assurance Cancellations, MC-234, P.O. Box 13087 , Austin , Texas 78711-3087 (mail);

(2) TCEQ, Financial Assurance Cancellations, MC-234, 12100 Park 35 Circle, Austin , Texas 78753 (overnight delivery);

(3) (512) 239-6242 (fax); or

(4) txustfa@tceq.state.tx.us (email).

§5.9106. Rescindment of Cancellation or Non-Renewal.

(a) An insurer or other entity that rescinds a cancellation or non-renewal noticed to TCEQ pursuant to the Water Code §26.352(e-1) and §5.9104 of this subchapter (relating to Content of Notice) must send written notice to the TCEQ of such rescindment in accordance with §5.9105(b) of this subchapter (relating to Submission of Notice) not later than the 10th day after the cancellation or non-renewal is rescinded.

(b) The notice of rescindment required in subsection (a) of this section must include:

(1) a copy of the notice under §5.9104 of this subchapter that is being rescinded; or

(2) both of the following:

(A) the policy number or other financial assurance identification number, and

(B) the facility identification number(s) assigned by the TCEQ for the underground storage tank(s) insured or otherwise financially assured.

(c) The notice required by subsection (a) of this section must be accurate and contain all the information required under subsection (b) of this section. It is the sole responsibility of the insurer or other entity providing, holding, or maintaining financial assurance to obtain and maintain the information necessary to complete the required notice.

§5.9107. Disciplinary Actions by the Commissioner of Insurance. The Commissioner of Insurance may, after notice and an opportunity for a hearing, discipline an insurer under the Insurance Code Chapters 82, 83, 84, and 2201 for violations of the requirements of this subchapter and any other applicable law the Commissioner determines the insurer to be in violation of, or with which the insurer has failed to comply.



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