The Commissioner of Insurance, under Commissioner's Orders No. 97-0238 and 97-0239, has adopted new 28 TAC § 5.1201, with simultaneous repeal of the previous version of the rule concerning the regulation of umbrella liability insurance. The new rule provides for changes including, but not limited to, the following:
- An insured with some automobile liability exposure must have at least two primary liability policies including an automobile liability policy or legally recognized self-insurance as a condition for obtaining umbrella coverage. Automobile limits shall be no less than 100/300/50 (or $350,000 combined single limits) for Commercial Automobile Liability Coverage and 100/300/25 (or $325,000 CSL) for Private Passenger Automobile Liability Coverage. The same limits apply to retentions by risks who self-insure under Transportation Code § 601.124.
- If the insured does not have an automobile liability exposure, only one type of liability insurance is required as the primary underlying coverage. In this case, the umbrella policy must exclude automobile liability coverage for the insured.
- An umbrella policy may not be written with only automobile liability insurance as the primary underlying coverage.
- The payment provision of an umbrella liability policy shall be written to indemnify the insured, pay to the insured, or pay on behalf of the insured, losses in excess of the specific required retention(s) or underlying coverages.
- Defense coverage is optional. A policy that covers defense, however, must pay certain costs without reducing policy limits. These costs shall include all expenses the insurer incurs, pre-judgment and post-judgment interest, and expenses incurred by the policyholder, including up to $100 a day for loss of earnings while missing work in helping the insurer defend the case.
- On all umbrella liability policies, exposures not covered by primary liability insurance are subject to optional self-insured retentions.
- Minimum required retentions for exposures covered by primary liability insurance, other than automobile liability, are basic limits of liability for each primary liability insurance coverage.
This new rule and the repeal of the former rule became effective April 7, 1997.
Questions regarding this bulletin should be addressed to:
TEXAS DEPARTMENT OF INSURANCE
ATTN.: Charles DuPertuis
General Liability, MC 104-2A
P.O. Box 149094
Austin, TX 78714-9094
David P. Durden
Deputy Commissioner
Property and Casualty Insurance Lines