SUBCHAPTER E. TEXAS WINDSTORM INSURANCE ASSOCIATION

DIVISION 4. Endorsements 28 TAC §5.4201

DIVISION 6. Manual 28 TAC §5.4501

1. INTRODUCTION. The Commissioner of Insurance adopts amendments to §5.4201 and §5.4501, concerning a new Texas Windstorm Insurance Association (TWIA) endorsement for use with the TWIA Commercial Policy and an update to the existing TWIA rules manual to reflect the availability of the new endorsement. The sections are adopted without change to the proposed text published in the July 4, 2008 issue of the Texas Register ( 33 TexReg 5238).

2.REASONED JUSTIFICATION. The Insurance Code §2210.001 provides that the purpose of Chapter 2210 of the Insurance Code, the Texas Windstorm Insurance Association Act, is to provide an adequate market for windstorm and hail insurance. Chapter 2210 provides a method by which adequate windstorm and hail insurance may be obtained in catastrophe areas of the state. The TWIA is an association composed of all property insurers authorized to engage in the business of property insurance in Texas. The Insurance Code §2210.203 directs the TWIA to issue on payment of the premium a policy of windstorm and hail insurance as provided by the plan of operation if the TWIA has determined that the property for which an application of insurance coverage is made is insurable property.

The Insurance Code §2210.351 requires that the TWIA must file with the Department modifications of policy and endorsement forms that the TWIA proposes to use and authorizes the Commissioner to approve, disapprove, or modify the modifications of policy forms and endorsements in writing. The Insurance Code §2210.207(e) authorizes the Commissioner, after notice and a hearing, to adopt rules to authorize the TWIA to provide actual cash value coverage instead of replacement cost coverage on the roof covering of a building insured by the TWIA. The Insurance Code §2210.008 authorizes the Commissioner to approve policy forms by order, after notice and a hearing. The Insurance Code §2210.351 also requires that the TWIA must file with the Department each modification of the rules manual it proposes to use and authorizes the Commissioner to approve, disapprove or modify in writing each modification of the rules manual submitted.

The new endorsement and the amendments are necessary to make replacement cost coverage, excluding the roof and roofing materials, available to TWIA insureds and applicants on commercial buildings that would not otherwise qualify for such coverage. Purchase of the new endorsement is at the option of insureds and applicants.

The adoption of amended §5.4201 is necessary to approve a new optional endorsement, Form No. TWIA-165, Replacement Cost Endorsement, Excluding Roof Coverings, for the TWIA Commercial Policy. The new optional commercial endorsement provides replacement cost coverage, excluding roof coverings, for commercial buildings. This new endorsement will be offered to insureds and applicants who have an otherwise insurable commercial structure but are declined replacement cost coverage under Form No. TWIA-164, Replacement Cost Endorsement (Without Deduction for Depreciation) because of the condition of the structure's roof. The adoption of the new endorsement will allow these insureds and applicants to obtain replacement cost coverage for their building, but not for the roof, until the roof is repaired or replaced.

The adoption of amended §5.4501 is necessary to implement an update to the existing TWIA rules manual that reflects the availability of the new commercial endorsement (Rules Manual Section II, Policy Forms and Endorsements, subsection b.(15)).

3. HOW THE SECTIONS WILL FUNCTION. Section §5.4201 is amended as follows: (i) new subparagraph (F) is added to adopt by reference new Form No. TWIA-165, Replacement Cost Endorsement, Excluding Roof Coverings, effective October 1, 2008, and (ii) existing subparagraphs (F) - (J) are redesignated and adopted as subparagraphs (G) - (K).

The amendment to §5.4501 adopts by reference, effective October 1, 2008, an update to the existing TWIA rules manual to reflect the availability of the new commercial endorsement (Rules Manual Section II, Policy Forms and Endorsements).

4. SUMMARY OF COMMENTS AND AGENCY RESPONSE.

Comment: One commenter notes that an endorsement providing replacement cost coverage excluding roof coverings currently exists for residential properties and states that the rationale for providing the coverage for commercial properties is the same as the rationale for providing it for residential properties.

Agency Response: The Department appreciates the supportive comment.

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

For: Galveston Windstorm Action Committee, Inc.

Against: None.

6. STATUTORY AUTHORITY. The amendments are adopted pursuant to the Insurance Code Chapter 2210 and §36.001. The Insurance Code §2210.207(e) authorizes the Commissioner, after notice and a hearing, to adopt rules to authorize the TWIA to provide actual cash value coverage instead of replacement cost coverage on the roof covering of a building insured by the TWIA. The Insurance Code §2210.008 authorizes the Commissioner, after notice and hearing, to issue any orders which the Commissioner considers necessary to carry out the purposes of the Insurance Code Chapter 2210, including orders regarding maximum rates, competitive rates, and policy forms. The Insurance Code §2210.351(c) authorizes the Commissioner to approve, modify, or disapprove each rules manual and each modification of the rules manual that the TWIA proposes to use. The Insurance Code §2210.351(b) requires that the TWIA file proposed policy and endorsement forms with the Department along with proposed manuals of classifications, rules, rates, rating plans and each modification of those items that the TWIA proposes to use. The Insurance Code §36.001 authorizes the Commissioner of Insurance to 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 .

7. TEXT.

DIVISION 4. ENDORSEMENTS

§5.4201. Endorsements for Use with TWIA Policy Forms. The Texas Department of Insurance adopts by reference endorsements for use with the Texas Windstorm Insurance Association (TWIA) Policy Forms. Specimen copies of these endorsements are available from the Texas Windstorm Insurance Association, P. O. Box 99090, Austin, Texas 78709-9090. They are also available from the Personal Lines Division, Mail Code 104-1A, Texas Department of Insurance, 333 Guadalupe Street, Austin, Texas 78701. The endorsement forms are more specifically identified as follows.

(1) Endorsements for use with the TWIA Dwelling Policy and the TWIA Commercial Policy Form No. TWIA-1, Blank Schedule Form, effective June 15, 1999.

(2) Endorsements for use with the TWIA Dwelling Policy and the TWIA Commercial Policy and the Texas Special Mobile Home Windstorm and Hail Insurance Policy.

(A) Form No. TWIA-12, Assignment of Interest or Change in Mortgagee or Trustee, effective June 15, 1999.

(B) Form No. TWIA-23, Cancellation Report, effective June 15, 1999.

(D) Form No. TWIA-112, Loss Payable Clause, effective June 15, 1999.

(E) Form No. TWIA-113, Lost Policy Voucher, effective June 15, 1999.

(F) Form No. TWIA-130, Mortgage Clause (Without Contribution), effective June 15, 1999.

(G) Form No. TWIA-151A, Premium Assignment Clause, effective June 15, 1999.

(H) Form No. TWIA-175, Sale Contract Clause, effective June 15, 1999.

(I) Form No. TWIA-195, Sworn Statement in Proof of Loss, effective June 15, 1999.

(3) Endorsements for use with the TWIA Commercial Policy.

(A) Form No. TWIA-18, Builders Risk – Stated Value Form, effective June 15, 1999.

(B) Form No. TWIA-21, Builders Risk – Actual Completed Value Form, effective June 15, 1999.

(D) Form No. TWIA-115, Lumber Form – Specific – Retail Yard, effective June 15, 1999.

(E) Form No. TWIA-164, Replacement Cost Endorsement, effective June 15, 1999.

(F) Form No. TWIA-165, Replacement Cost Endorsement, Excluding Roof Coverings, effective October 1, 2008.

(G) Form No. TWIA-176, School Form, effective June 15, 1999.

(H) Form No. TWIA-280, Condominium Property Form – Additional Policy Provisions, effective June 15, 1999.

(I) Form No. TWIA-282, Condominium Property Form – Additional Property Provisions, amended June 15, 1999.

(J) Form No. TWIA-17, Business Income Coverage, effective May 1, 2001.

(K) Form No. TWIA-432, Extension of Coverage – Increased Cost of Construction (Commercial), effective April 1, 2008.

(4) Endorsements for use with the TWIA Dwelling Policy.

(A) Form No. TWIA-310, Extensions of Coverage, amended June 15, 1999.

(B) Form No. TWIA-315, Extensions of Coverage, amended June 15, 1999.

(D) Form No. TWIA-325, Extensions of Coverage, amended June 15, 1999.

(E) Form No. TWIA-326, Extensions of Coverage, amended June 15, 1999.

(F) Form No. TWIA-328, Extensions of Coverage, amended June 15, 1999.

(G) Form No. TWIA-410, Conversion to Farm and Ranch Dwelling Policy, effective June 15, 1999.

(H) Form No. TWIA-431, Extension of Coverage – Increased Cost of Construction (Dwelling), effective April 1, 2008.

(I) Form No. TWIA-330, Extensions of Coverage, amended June 15, 1999.

(J) Form No. TWIA-335, Extensions of Coverage, amended June 15, 1999.

(K) Form No. TWIA-340, Extensions of Coverage, amended June 15, 1999.

(L) Form No. TWIA-345, Extensions of Coverage, amended June 15, 1999.

(M) Form No. TWIA-350, Extensions of Coverage, amended June 15, 1999.

(N) Form No. TWIA-365, Replacement Cost Endorsement – Personal Property, amended June 15, 1999.

(O) Form No. TWIA-400, Actual Cash Value – Roofs (One or Two Family Dwellings), effective June 15, 1999.

(P) Form No. TWIA-420, Exclusion of Cosmetic Damage to Roof Coverings Caused by Hail, effective June 15, 1999.

(Q) Form No. TWIA-200, Adjusted Building Cost Endorsement, effective April 1, 2008.

(5) Endorsements for use with the Texas Special Mobile Home Windstorm and Hail Insurance Policy.

(A) Form No. TWIA-29, Mandatory Endorsement, amended June 15, 1999.

(B) Form No. TWIA-570, Mobile Home Percentage Deductible Clause (Coastal Area), amended June 15, 1999.

DIVISION 6. MANUAL

§5.4501. Rules for the Texas Windstorm Insurance Association. The Texas Department of Insurance adopts by reference a rules manual for the Texas Windstorm Insurance Association as amended effective October 1, 2008. A specimen copy of the rules manual is available from the Texas Windstorm Insurance Association, P. O. Box 99090, Austin, Texas 78709-9090. Copies may also be obtained by contacting the Personal Lines Division, Mail Code 104-1A, Texas Department of Insurance, 333 Guadalupe Street, Austin, Texas 78701.