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You are here: Home . rules . 2008 . 0320-059

SUBCHAPTER K. TERMINATION OF FINANCIAL ASSURANCE FOR UNDERGROUND STORAGE TANKS

28 TAC §§5.9101 - 5.9107

1. INTRODUCTION. The Commissioner of Insurance adopts new Subchapter K, §§5.9101 - 5.9107, concerning required notice to the Texas Commission on Environmental Quality (TCEQ) by an insurer or other entity providing financial assurance for an underground storage tank if the insurance or other financial assurance is cancelled or non-renewed. The sections are adopted with changes to the proposed text published in the January 4, 2008 issue of the Texas Register (33 TexReg 58).

2. REASONED JUSTIFICATION. The new sections are necessary to specify the requirements and procedures for insurers or other entities providing financial assurance for underground storage tanks to provide notice to the TCEQ after the insurance or other financial assurance for underground storage tanks is canceled or non-renewed. The TCEQ regulates underground storage tanks pursuant to the Water Code §§26.341 - 26.367. New amendments to the Water Code §26.352, enacted by HB 1956, 80th Legislature, effective September 1, 2007, 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 to provide notice to the TCEQ within 30 days after termination of insurance or other financial assurance. The new amendments to the Water Code §26.352 also require the Department to adopt rules to implement and enforce the new termination notice requirements. The adopted new sections are necessary to implement the new termination notice requirements.

The rule proposal was published for public comment in the Texas Register January 4, 2008. On February 4, 2008, the TCEQ filed a comment with the Department. No other comments were received.

The TCEQ comments that there are approximately 20,000 underground storage tank facilities in Texas, and there is an ongoing potential threat of releases from those systems into the soil and groundwater of the state. According to the TCEQ, clean up of contamination can be costly, so it is essential that releases be reported to the TCEQ and that the responsible parties have the financial ability to perform the necessary clean up. The TCEQ comments that the new sections will assist in identifying underground storage tank facilities that are operating without proper financial assurance. Currently, according to the TCEQ, it relies on "candid self-reporting" by tank owners and operators of compliance with financial assurance requirements, combined with random or targeted inspections. The TCEQ comments that the new sections greatly strengthen compliance by requiring insurers and other entities providing financial assurance for underground storage tanks to notify the TCEQ any time a tank owner or operator is effectively without financial assurance.

Further, the TCEQ comments favorably on three specific aspects of the adopted sections: (i) an insurance company or other entity providing financial assurance is required to provide the TCEQ with notice any time an underground storage tank owner or operator is effectively without insurance or other financial assurance, regardless of who initiates the termination, enabling the TCEQ to respond to all instances of insurance or other financial assurance termination; (ii) adopted new §5.9104(a)(7) requires the insurer or other entity providing financial assurance for an underground storage tank to provide the TCEQ with the facility identification number assigned by the TCEQ within 30 days of termination of the insurance or financial assurance, enabling the TCEQ to quickly identify the specific tank system and respond accordingly; (iii) adopted new §5.9106 requires the insurer or other entity providing financial assurance to provide a notice of rescindment if the insurance or financial assurance is reinstated, enabling the TCEQ to focus compliance efforts on cases that truly represent a threat to state funds.

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) of the Water Code §26.352 requires that an owner or operator of an underground storage tank submit annual proof to the TCEQ that the owner or operator maintains financial responsibility as required by §26.352(a). 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. New subsection (e-1) of the 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.

The new sections will aid the TCEQ in administering subsections (a), (e), and (e-1) of the Water Code §26.352. The new sections 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 only two changes to the proposed sections as published are (i) the addition of the article the to the first reference to the TCEQ in the text of §5.9106(a); and (ii) the change of the proposed effective date from April 1, 2008, to May 1, 2008, for an insurer or other entity providing financial assurance for an underground storage tank to provide notice to the TCEQ if the insurance or other financial assurance is terminated. The new sections apply only to notices required to be issued under the Water Code §26.352(e-1) and that are issued on or after May 1, 2008, regardless of when the insurance policy or other form of financial assurance was issued or created. The change in effective date from April 1, 2008, to May 1, 2008, is necessary to provide more advance notice to insurance companies and other entities providing financial assurance to owners/operators of underground storage tanks so that they may prepare for compliance with the new sections. The changes do not materially alter issues raised in the proposal, introduce new subject matter, or affect persons other than those previously on notice.

3. HOW THE SECTIONS WILL FUNCTION. Adopted 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. Adopted 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 adopted 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 adopted 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. Adopted 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 May 1, 2008.

Adopted new §5.9104 addresses the content of the termination notice. Subsection (a) of adopted 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 adopted new §5.9104 also specifies the information that must be included with the notice of termination. Section 5.9104(a)(1) - (8) specifies the information required to be provided to the TCEQ, including the location of the underground storage tank, the effective date that the insurance or financial assurance was cancelled or non-renewed, the reason for the termination, and the facility identification number assigned by the TCEQ for each underground storage tank that has insurance coverage or other financial assurance canceled or not renewed. Subsection (b) of adopted new §5.9104 requires accurate and complete notice to the TCEQ.

Adopted new §5.9105 specifies the procedures for submission of the notice. Adopted new §5.9105(a) requires that the insurer, or other entity providing, holding, or maintaining financial assurance for an underground storage tank send the notice of termination not later than the 30th day after the date the coverage terminates. Adopted 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.

Adopted new §5.9106 specifies requirements and procedures in the event of rescindment of the notice of termination. Adopted new §5.9106(a) requires that an insurer or other entity providing financial assurance that rescinds a notice of termination provided to the TCEQ 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. Adopted 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. Adopted new §5.9106(c) requires accuracy and complete information in the notice of rescindment required under §5.9106(b).

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

4. SUMMARY OF COMMENTS.

Comment: One commenter states that there are approximately 20,000 underground storage tank facilities in Texas, and there is an ongoing potential threat of releases from those systems into the soil and groundwater. According to the commenter, clean up of contamination can be costly, so it is essential that releases be reported to the TCEQ and that the responsible parties have the financial ability to perform the necessary clean up. The commenter states that the adopted sections will assist the TCEQ in identifying underground storage tank facilities that are operating without proper financial assurance. Currently, according to the commenter, the TCEQ relies on candid self-reporting by tank owners and operators of compliance with financial assurance requirements, combined with random or targeted inspections. The commenter states that the adopted sections greatly strengthen compliance by requiring insurers and other entities providing financial assurance to notify the TCEQ any time a tank owner or operator is effectively without financial assurance.

The commenter specifically supports three aspects of the new sections: (i) an insurance company or other entity providing financial assurance is required to provide the TCEQ with notice any time an underground storage tank owner or operator is effectively without insurance or other financial assurance, regardless of who initiates the termination, enabling the TCEQ to respond to all instances of insurance or other financial assurance termination; (ii) adopted new §5.9104(a)(7) requires the insurer or other entity providing financial assurance for an underground storage tank to provide the TCEQ with the facility identification number assigned by the TCEQ within 30 days of termination of the insurance or financial assurance, enabling the TCEQ to quickly identify the specific tank system and respond accordingly; (iii) adopted new §5.9106 requires the insurer or other entity providing financial assurance to provide a notice of rescindment to the TCEQ if the insurance or financial assurance is reinstated, enabling the TCEQ to focus efforts on cases that truly represent a threat to state funds.

Agency Response: The Department appreciates the supportive comment.

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

For: Texas Commission on Environmental Quality.

Against: None.

6. STATUTORY AUTHORITY. The new sections are adopted 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.

7. 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 May 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 the 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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