B-0060-98

I. Purpose

The purpose of this bulletin is to provide insurers with filing information and the requirements for submission of rules, endorsements and coverage forms related to the Year 2000 exposure.

II. Acceptance/Approval of Submissions

The Texas Department of Insurance will condition approval of the use of Year 2000 endorsements based on specific requirements outlined in this bulletin. Insurers may either submit individual filings for approval or file to reference the Insurance Services Office, Inc. (ISO) submissions. The Department has not accepted the ISO submission for Boiler and Machinery, Commercial Crime, Commercial Inland Marine, and Commercial Property. (See filing requirements in Item III.4. for these lines of insurance.) The Department has accepted only the following ISO rule and endorsement submissions for use in connection with Year 2000 exposures.

Line of Insurance	Type of Submission	ISO Submission No.	TDI Reference No.
General Liability	Rules	GL 98-OY2KR	TDI-98-GL-ISO-Y2K-MR
General Liability	Endorsements	GL 97-OY2KF GL 98-OY2KF	TDI-98-GL-ISO-Y2K-PF
Professional Liability	Rules	PR 98-OY2KR	TDI-98-PL-ISO-Y2K-MR
Professional Liability	Endorsements	PR 97-OY2KF PR 98-OY2KF	TDI-98-PL-ISO-Y2K-PF

III. Filing Requirements

Reference and individual insurer filings excluding or limiting coverage for Year 2000 exposures are subject to the following conditions and requirements:

1. The Department will not approve general liability or professional liability exclusion or limiting endorsements for use on a blanket basis.

2. The Department will not approve the attachment of exclusion or limiting endorsements for use with general liability coverage to mercantile, lodging and habitational, or institutional (churches or schools only) classes of risks unless the insurer complies with the following exceptions:

Exception 1: Specified Classes. An insurer may file exclusion or limiting endorsements by specific subclass or subclasses of the above classes of risks. The filing must identify and justify the exposure to be excluded or limited in the specific subclass or subclasses.

Exception 2: Individual Underwriting. An insurer may file to use exclusion or limiting Year 2000 endorsements for individual risks within the classes specified under Item III.2. The insurer must:

(i) specify in the filing the intent to use such exclusion or limiting endorsements on an individual risk basis;

(ii) maintain documentation in the underwriting file of each individual risk that identifies and justifies the exposure that warrants the exclusion or limiting endorsement based on the exposure presented by that particular risk; and

(iii) maintain documentation that the insurer has provided loss control information to the insured.

3. Other filings for general liability coverage and filings for professional liability coverage must:

(i) specify the class of risk(s) targeted for exclusion or limitation;

(ii) indicate the exposure presented by the targeted risk(s) that justifies the use of a coverage exclusion or limiting endorsement; and,

(iii) provide a statement that loss control information is being provided to these policyholders for Year 2000 exposures.

4. Individual insurer Year 2000 exclusion endorsements filed for use with commercial property, commercial inland marine, commercial crime, and boiler and machinery policies must contain exceptions to provide coverage for losses resulting from a covered cause of loss.

5. ISO participating insurers may reference the ISO endorsements and rules by submitting the Property/Casualty Filing Transmittal Form indicating the appropriate TDI reference number and an explanatory memorandum providing the information required in this bulletin.

IV. Policyholder Disclosure

Insurers must provide the following disclosure (or similar wording) to the policyholder when a policy is issued with a Year 2000 exclusion or limiting endorsement attached to the policy:

NOTICE:

"The coverage in your policy (Policy No. ______________) has been modified to exclude coverage or limit coverage for loss caused by the inability or failure of a computer, or of computerized or other electronic equipment, to properly recognize a particular date or time."

V. Exception

"Large risks" as defined in Article 5.13-2, Sec. 8(f), Texas Insurance Code, are not subject to the requirements in this bulletin since such risks are exempt from the form filing requirements contained in Article 5.13-2, Sec. 8.

VI. Cancellation and Nonrenewal of Policies

Insurers are subject to the cancellation and nonrenewal provisions pursuant to Article 21.49-2A, Texas Insurance Code. It is the Department´s position that the renewal of a policy means providing like and similar coverage to the existing policy. Those policies specified in Article 21.49-2A may not be renewed with an exclusion for Year 2000 exposures without the consent of the insured. Insurers must issue notice of nonrenewal in accordance with Article 21.49-2A and may include an offer to write a new policy with limited or excluded coverage. The disclosure required under Item IV. of this bulletin must be included with the offer to write the new policy. A copy of Article 21.49-2A is attached for reference.

The provisions outlined in this bulletin do not apply to residential property or automobile lines of insurance. The Department will review all Year 2000 exclusion or limitation endorsements filed by an insurer for residential property or automobile insurance based on the content and use of the filed endorsement(s).

Reference filings by insurers of the ISO Year 2000 endorsements or individual insurer filings of Year 2000 endorsements will be given priority status for review by the Department. The filing and approval of Year 2000 endorsements will, however, be subject to the filing requirements contained in this bulletin. Failure of an insurer to provide the information required by this bulletin will result in the rejection of the filing as an incomplete filing which will be returned to the filing insurer.

Approval of Year 2000 endorsements is conditioned on the requirements contained in this bulletin. The Department will implement market conduct review to ensure compliance. Policies issued with Year 2000 endorsements attached which do not meet these filing requirements shall be considered to be in violation of Articles 5.13-2, 5.15, or 5.53, Texas Insurance Code, for the use of unapproved policy forms and endorsements subjecting an insurer to formal action by the Department.

Questions regarding this bulletin should be directed to:

David Nardecchia, Manager
Commercial Property/Casualty Group MC 104-PC
Texas Department of Insurance
P. O. Box 149094
Austin, TX 78714-9094
(512)322-2243

Marilyn Hamilton
Deputy Commissioner
Commercial Property/Casualty Group MC 104-PC