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You are here: Home . rules . 2006 . 0130-059

Subchapter J. Prohibited Trade Practices §21.1007

1. INTRODUCTION. The Texas Department of Insurance proposes amendments to §21.1007, concerning restrictions on the use of underwriting guidelines based on a water damage claim(s), previous mold damage or a mold damage claim(s). The proposed amendments are necessary to implement changes enacted by the 79th Texas Legislature, Regular Session, in HB 941 and HB 1328. HB 941 amended Insurance Code Article 5.35-4 §2 by adding a definition of appliance. HB 1328 amended Insurance Code Article 21.21-11 §3(4)(A) by providing that the certificate of mold remediation issued to the property owner under Occupations Code §1958.154 must establish with reasonable certainty that the underlying cause of the mold at the property has been remediated. This proposal amends the definition of appliance-related claim contained in §21.1007(b)(5) to conform with HB 941. This proposal also includes an amendment that adds the words "with reasonable certainty" to the language of §21.1007(e)(1)(D)(i) to conform with HB 1328. The proposal also includes amendments to the section to delete an obsolete statutory citation and to change references from the Texas Board of Health and Texas Department of Health to Department of State Health Services. The former Texas Department of Health became part of the Department of State Health Services on September 1, 2004.

2. FISCAL NOTE. Marilyn Hamilton, Associate Commissioner, Property and Casualty Program, 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. 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 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 better clarity in the regulation of property and casualty insurers' use of underwriting guidelines relating to appliance-related and mold remediation claims, by more clearly defining what constitutes an appliance, and by specifying that mold remediation certificates must certify with reasonable certainty that the underlying cause of the mold has been remediated, and by specifying that properly remediated mold damage claims cannot be considered in underwriting for residential property insurance. Any costs of compliance with the proposed amendments are the result of the legislative enactment of HB 941 and HB 1328. Accordingly, the proposed amendments will not have an impact on small and micro businesses. The department has considered the purposes of the relevant statutes, which are to protect persons and property from being unfairly stigmatized in obtaining residential property insurance by the filing of a water damage claim or claims under a residential property insurance policy and to prohibit certain underwriting decisions based on previous mold damage or prior mold damage claims and has determined that it is neither legal nor feasible to waive or modify the requirements of this rule 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 March 13, 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 Marilyn Hamilton, Associate Commissioner, Mail Code 104-PC, Texas Department of Insurance, P.O. Box 149104, Austin, Texas 78714-9104. A request for a public hearing should be submitted separately to the Office of Chief Clerk.

5. STATUTORY AUTHORITY. The amendments are proposed under Insurance Code Articles 5.35-4 and 21.21-11 and §36.001. Article 5.35-4 §4 authorizes the Commissioner to adopt rules to accomplish the purposes of Article 5.35-4. Article 21.21-11 §4 authorizes the Commissioner to adopt rules as necessary to implement the provisions of Article 21.21-11. Section 36.001 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:

Rule Statute

§21.1007 Insurance Code Articles 5.35-4

and 21.21-11

7. TEXT.

§21.1007. Restrictions on the Use of Underwriting Guidelines Based On a Water Damage Claim(s), Previous Mold Damage or a Mold Damage Claim(s).

(a) (No change.)

(b) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise.

(1) - (3) (No change.)

(4) Insurer--An insurance company, reciprocal or interinsurance exchange, mutual, capital stock company, county mutual insurance company, farm mutual insurance company, association, Lloyd's plan company, or other entity writing residential property insurance in this state. The term includes an affiliate as described by [Section 2, Article 21.49-1 or Section] §823.003 of the Insurance Code if that affiliate is authorized to write and is writing residential property insurance in this state. The term does not include the Texas Windstorm Insurance Association, the FAIR Plan, or an eligible surplus lines insurer regulated under Chapter 981

(5) Appliance-related claim--A request by an insured for indemnification from an insurer for a loss arising from the discharge or leakage of water or steam from an appliance that is the direct result of the failure of the appliance. An appliance means a household device operated by gas or electric current, including hoses directly attached to the device. The term includes air conditioning units, heating units, refrigerators, dishwashers, icemakers, clothes washers, water heaters, and disposals. [An appliance-related claim shall not include the failure of a plumbing system or an external attachment to the appliance used to transport water to or from the plumbing system.]

(6) (No change.)

(c) (No change.)

(d) Restrictions on underwriting and rating and the inspection and certification process of appliance-related claims.

(1) - (2) (No change.)

(3) The following individuals who hold one or more of the following licenses are inspectors that may have the knowledge and experience in the remediation of water damage to inspect and certify the proper remediation of an appliance-related claim:

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

(C) persons licensed as assessors or remediators by the Department of State Health Services [Texas Board of Health] pursuant to Chapter 1958 of the Occupations Code;

(D) (No change.)

(4) - (8) (No change.)

(e) Restrictions on the use of previous mold damage or a claim for mold damage in underwriting residential property insurance.

(1) An insurer shall not use an underwriting guideline regarding a residential property insurance policy based upon previous mold damage or a prior mold damage claim filed either by the applicant or on the covered property if:

(A) - (C) (No change.)

(D) the property was:

(i) remediated in accordance with the requirements specified in Chapter 1958, Subchapter D of the Occupations Code and any applicable rules promulgated by the Department of State Health Services [Texas Board of Health] pursuant to Chapter 1958 of the Occupations Code; and a Certificate of Mold Damage Remediation (MDR-1) is issued to the property owner under Section 1958.154 of the Occupations Code, which certifies with reasonable certainty that the underlying cause or causes of the mold at the property have been remediated; or

(ii) inspected by an independent mold assessor or adjuster, who is licensed to perform mold assessment in accordance with rules promulgated by the Department of State Health Services [Texas Board of Health] under Chapter 1958 of the Occupations Code, and the independent mold assessor or adjuster provides to the property owner written certification on a Certificate of Mold Damage Remediation (MDR-1) that based on the mold assessment inspection, the property does not contain evidence of mold damage.

(2) The Certificate of Mold Damage Remediation (MDR-1) is a form that is prescribed by the Department for use by mold remediators, assessors, and adjusters who will provide certifications. This form may be obtained from the Texas Department of Insurance website http://www.tdi.state.tx.us or by requesting such form from the Automobile/Homeowners Section or from the [Texas] Department of State Health Services.

(3) (No change.)

(f) - (g) (No change.)

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