Commissioner’s Bulletin # B-0014-97

House Bill 156, enacted by the Seventy-Third Texas Legislature, amended Section 1. Title 7, Property Code by adding Chapter 82, Uniform Condominium Act. This Chapter sets forth provisions that directly affect policy contracts insuring condominium associations for which the Declaration is recorded on or after January 1, 1994 and in some cases those recorded before January 1, 1994.

Property and general liability policy forms insuring condominium associations under any commercial property, commercial general liability, commercial multi-peril, or businessowner policy should be amended to provide for the following:

• Each unit owner is an insured person under the policy with respect to liability arising out of the person's ownership of an undivided interest in the common elements or membership in the association.
• The insurer waives its right to subrogation against a unit owner and members of the household, the association, members of the board of directors and the developer in his capacity as unit owner or board member, but not as developer.
• No action or omission of a unit owner, unless within the scope of the unit owner's authority on behalf of the association, will void the policy or be a condition to recovery under the policy.
• When there is other insurance in the name of the unit owner covering the same property covered by the association's policy, the association's policy provides primary insurance.
• A claim under the policy must be submitted by and adjusted with the association. The proceeds shall be payable to an insurance trustee designated by the association. If the board of directors does not designate an insurance trustee, the proceeds will be payable to the association, not an individual unit owner or lienholder.
• The policy may not be canceled or nonrenewed less than 30 days after written notice has been mailed to the association and to the mortgage holder. All other cancellation and nonrenewal requirements remain the same. Notice will also be given to unit owners who have been issued a certificate of insurance.
• A vote by 80 percent of unit owners not to repair or rebuild damaged property does not increase an insurer's liability to loss payment obligation and the vote does not cause a presumption of total loss.
• If the Condominium is terminated, the insurer will pay for covered loss of, or damage to, buildings or structures to each mortgage holder shown on the declarations as their interest may appear. All other loss payment conditions remain the same.

To file an amended form or endorsement, insurers should submit the proposed form and a completed Property/Casualty Filing Transmittal Form no later than 60 days from the date of this bulletin. Endorsements or policy forms submitted for review are subject to prior approval as outlined in Article 5.13-2 of the Texas Insurance Code.

Insurance Services Office, Inc. has revised their forms, as announced in Circular No. CL-96-36 to incorporate the changes described above. We have assigned that submission the following TDI Reference Numbers:

Companies may adopt the amended ISO forms or rules by reference by submitting page one of the Property/Casualty Filing Transmittal Form.

Questions regarding this bulletin or requests for copies of House Bill 156 should be addressed to:

David P. Durden
Deputy Commissioner
Property and Casualty Insurance Lines