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  By: Smithee H.B. No. 3
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to the operation and name of the Texas Windstorm Insurance
  Association, to the resolution of certain disputes concerning
  claims made to that association, and to the issuance of windstorm
  and hail insurance policies in the private insurance market by
  certain insurers; providing penalties.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Section 83.002, Insurance Code, is amended by
  adding Subsection (c) to read as follows:
         (c)  This chapter also applies to:
               (1)  a person appointed as a qualified inspector under
  Section 2210.254 or 2210.255; and
               (2)  a person acting as a qualified inspector under
  Section 2210.254 or 2210.255 without being appointed as a qualified
  inspector under either of those sections.
         SECTION 2.  Section 541.152, Insurance Code, is amended by
  amending Subsection (b) and adding Subsection (c) to read as
  follows:
         (b)  Except as provided by Subsection (c), on [On] a finding
  by the trier of fact that the defendant knowingly committed the act
  complained of, the trier of fact may award an amount not to exceed
  three times the amount of actual damages.
         (c)  Subsection (b) does not apply to an action under this
  subchapter brought against the Texas Windstorm Insurance
  Association.
         SECTION 3.  The heading to Chapter 2210, Insurance Code, is
  amended to read as follows:
  CHAPTER 2210. TEXAS COASTAL [WINDSTORM] INSURANCE PLAN
  [ASSOCIATION]
         SECTION 4.  Section 2210.002(a), Insurance Code, is amended
  to read as follows:
         (a)  This chapter may be cited as the Texas Coastal
  [Windstorm] Insurance Plan [Association] Act. A reference to the
  Texas Windstorm Insurance Association Act means this chapter.
         SECTION 5.  If S.B. No. 652, Acts of the 82nd Legislature,
  Regular Session, 2011, becomes law, Section 2210.002(b), Insurance
  Code, as amended by that Act, is amended to read as follows:
         (b)  The association is subject to review under Chapter 325,
  Government Code (Texas Sunset Act), but is not abolished under that
  chapter.  The association shall be reviewed during the period in
  which state agencies abolished in 2015 [2013] are reviewed.  The
  association shall pay the costs incurred by the Sunset Advisory
  Commission in performing the review of the association under this
  subsection.  The Sunset Advisory Commission shall determine the
  costs of the review performed under this subsection, and the
  association shall pay the amount of those costs promptly on receipt
  of a statement from the Sunset Advisory Commission regarding those
  costs.  This subsection expires September 1, 2015 [2013].
         
         SECTION 6.  Section 2210.003(1), Insurance Code, is amended
  to read as follows:
               (1)  "Association" means the Texas Coastal [Windstorm]
  Insurance Plan Association.
         SECTION 7.  Section 2210.003, Insurance Code, is amended by
  adding Subdivision (3-b) to read as follows:
               (3-b)  "Catastrophe year" means a calendar year in
  which an occurrence or a series of occurrences results in insured
  losses, regardless of when the insured losses are ultimately paid.
         SECTION 8.  Section 2210.009(a), Insurance Code, is amended
  to read as follows:
         (a)  The department shall maintain a list of all authorized
  insurers that engage in the business of property and casualty
  insurance in the voluntary market in the seacoast territory.
         SECTION 9.  Subchapter A, Chapter 2210, Insurance Code, is
  amended by adding Sections 2210.0081, 2210.010, 2210.012, and
  2210.013 to read as follows:
         Sec. 2210.0081.  CERTAIN ACTIONS BROUGHT AGAINST
  ASSOCIATION BY COMMISSIONER. In an action brought by the
  commissioner against the association under Chapter 441:
               (1)  the association's inability to satisfy obligations
  under Subchapter M related to the issuance of public securities
  under this chapter constitutes a condition that makes the
  association's continuation in business hazardous to the public or
  to the association's policyholders for the purposes of Section
  441.052;
               (2)  the time for the association to comply with the
  requirements of supervision or for the conservator to complete the
  conservator's duties, as applicable, is limited to three years from
  the date the commissioner commences the action against the
  association; and
               (3)  unless the commissioner takes further action
  against the association under Chapter 441, as a condition of
  release from supervision, the association must demonstrate to the
  satisfaction of the commissioner that the association is able to
  satisfy obligations under Subchapter M related to the issuance of
  public securities under this chapter.
         Sec. 2210.010.  APPLICABILITY OF CERTAIN OTHER LAW. (a) A
  person may not bring a private action against the association,
  including a claim against an agent or representative of the
  association, under Chapter 541 or 542.  Notwithstanding any other
  provision of this code or this chapter, a class action under
  Subchapter F, Chapter 541, or under Rule 42, Texas Rules of Civil
  Procedure, may only be brought against the association by the
  attorney general at the request of the department.
         (b)  Chapter 542 does not apply to the processing and
  settlement of claims by the association.
         Sec. 2210.012.  STANDARDS OF CONDUCT: BOARD OF DIRECTORS AND
  EMPLOYEES; REPORT OF CERTAIN FRAUDULENT CONDUCT. (a) A member of
  the board of directors or an employee of the association may not:
               (1)  accept or solicit any gift, favor, or service that
  might reasonably tend to influence the member or employee in the
  discharge of duties related to the operation or business of the
  association or that the member or employee knows or should know is
  being offered with the intent to influence the member's or
  employee's conduct related to the operation or business of the
  association;
               (2)  accept other employment or engage in a business or
  professional activity that the member or employee might reasonably
  expect would require or induce the member or employee to disclose
  confidential information acquired by reason of the member's or
  employee's position with the association;
               (3)  accept other employment or compensation that could
  reasonably be expected to impair the member's or employee's
  independence of judgment in the performance of the member's or
  employee's duties related to the operation or business of the
  association;
               (4)  make personal investments that could reasonably be
  expected to create a substantial conflict between the member's or
  employee's private interest and the interest of the association; or
               (5)  intentionally or knowingly solicit, accept, or
  agree to accept any benefit for having exercised the member's or
  employee's powers related to the operation or business of the
  association or having performed, in favor of another, the member's
  or employee's duties related to the operation or business of the
  association.
         (b)  An association employee who violates Subsection (a) or a
  code of conduct established under Section 2210.107(a)(4) is subject
  to an employment-related sanction, including termination of the
  employee's employment with the association.
         (c)  A member of the board of directors or an association
  employee who violates Subsection (a) is subject to any applicable
  civil or criminal penalty if the violation also constitutes a
  violation of another statute or rule.
         (d)  A board member or employee of the association who
  reasonably suspects that a fraudulent insurance act has been or is
  about to be committed by any board member or employee of the
  association shall, not later than the 30th day after discovering
  the conduct, report the conduct and identity of the person engaging
  in the conduct to the department and may report the conduct and the
  identity of the person engaging in the conduct to another
  appropriate governmental authority. The department shall forward a
  report received under this subsection to the appropriate
  governmental authority if the department does not have the
  authority to finally resolve, or jurisdiction over, the matter that
  is the subject of the report.
         Sec. 2210.013.  CERTAIN EMPLOYMENT AND CONTRACTS
  PROHIBITED. A member of the board of directors or an employee of
  the association may not appoint or employ, or contract with, the
  following individuals for the provision of goods or services in
  connection with the operation or business of the association, if
  the individual to be appointed or employed, or with whom a contract
  is to be entered into, is to be directly or indirectly compensated
  from funds of the association:
               (1)  an individual related to the member or employee
  within a degree of relationship described by Section 573.002,
  Government Code; or
               (2)  an individual related to any member of the board of
  directors or employee of the association within a degree of
  relationship described by Section 573.002, Government Code.
         SECTION 10.  Section 2210.053, Insurance Code, is amended by
  amending Subsection (b) and adding Subsection (c) to read as
  follows:
         (b)  The department may develop programs to improve the
  efficient operation of the association, including a program for
  approving policy forms under Section 2301.010 and a program
  designed to create incentives for insurers to write windstorm and
  hail insurance voluntarily to cover property located in a
  catastrophe area, especially property located on the barrier
  islands of this state.
         (c)  The association may not be considered a debtor
  authorized to file a petition or seek relief in bankruptcy under
  Title 11, United States Code.
         SECTION 11.  Subchapter B, Chapter 2210, Insurance Code, is
  amended by adding Sections 2210.058 and 2210.061 to read as
  follows:
         Sec. 2210.058.  CLAIMS PRACTICES AUDIT. (a) The
  commissioner, in the manner and at the time the commissioner
  determines to be necessary, shall conduct a random audit of claim
  files concerning claims the bases of which are damage to insured
  property caused by a particular storm to:
               (1)  determine whether the association is adequately
  and properly documenting claims decisions in each claim file; and
               (2)  ensure that each claim is being handled
  appropriately, including being handled in accordance with the terms
  of the policy under which the claim is filed.
         (b)  The department shall conduct an audit required under
  this section as soon as possible to ensure the quality of the
  process with which the association is handling claims described by
  Subsection (a).
         (c)  If, following an audit conducted under this section, the
  commissioner determines that the association is not adequately and
  properly documenting claims decisions or that claims described by
  Subsection (a) are not otherwise being handled appropriately, the
  commissioner shall:
               (1)  notify the board of directors of that
  determination; and
               (2)  identify the manner in which the association
  should correct any deficiencies identified by the commissioner and
  issue an order to that effect.
         Sec. 2210.061.  CONTRACTORS AND MANAGERIAL EMPLOYEES:
  COMPENSATION AND BONUSES. The association shall post on the
  association's Internet website any compensation, monetary or
  otherwise, and any bonus that, when aggregated, exceed $100,000 in
  a calendar year and that are paid or given by the association to:
               (1)  a vendor or independent contractor with whom the
  association has a contract; or
               (2)  an association employee.
         SECTION 12.  Section 2210.071(a), Insurance Code, is amended
  to read as follows:
         (a)  If, in a catastrophe year, an occurrence or series of
  occurrences in a catastrophe area results in insured losses and
  operating expenses of the association in excess of premium and
  other revenue of the association, the excess losses and operating
  expenses shall be paid as provided by this subchapter.
         SECTION 13.  Section 2210.072, Insurance Code, is amended by
  amending Subsections (a), (b), and (c) and adding Subsections
  (b-1), (e), and (f) to read as follows:
         (a)  Losses not paid under Section 2210.071(b) [2210.071]
  shall be paid as provided by this section from the proceeds from
  Class 1 public securities authorized to be issued in accordance
  with Subchapter M before, on, or after the date of any occurrence or
  series of occurrences that results in insured losses. Public
  securities issued under this section must be repaid within a period
  not to exceed 14 [10] years, and may be repaid sooner if the board of
  directors elects to do so and the commissioner approves.
         (b)  Public securities described by Subsection (a) that are
  issued before an occurrence or series of occurrences that results
  in incurred losses:
               (1)  may be issued on the request of the board of
  directors with the approval of the commissioner; and
               (2)  may not, in the aggregate, exceed $1 billion at any
  one time, regardless of the calendar year or years in which the
  outstanding public securities were issued.
         (b-1)  Public securities described by Subsection (a):
               (1)  shall be issued as necessary in a principal amount
  not to exceed $1 billion per catastrophe year, in the aggregate, for
  securities issued during that catastrophe year before the
  occurrence or series of occurrences that results in incurred losses
  in that year and securities issued on or after the date of that
  occurrence or series of occurrences, and regardless of whether for
  a single occurrence or a series of occurrences; and
               (2)  subject to the $1 billion maximum described by
  Subdivision (1), may be issued, in one or more issuances or
  tranches, during the calendar year in which the occurrence or
  series of occurrences occurs or, if the public securities cannot
  reasonably be issued in that year, during the following calendar
  year.
         (c)  If [the losses are paid with] public securities are
  issued as described by this section, the public securities shall be
  repaid in the manner prescribed by Subchapter M from association
  premium revenue.
         (e)  The proceeds of any outstanding public securities
  described by Subsection (a) that are issued before an occurrence or
  series of occurrences shall be depleted before the proceeds of any
  securities issued after an occurrence or series of occurrences may
  be used. This subsection does not prohibit the association from
  issuing securities after an occurrence or series of occurrences
  before the proceeds of outstanding public securities issued during
  a previous catastrophe year have been depleted.
         (f)  If, under Subsection (e), the proceeds of any
  outstanding public securities issued during a previous catastrophe
  year must be depleted, those proceeds shall count against the $1
  billion limit on public securities described by this section in the
  catastrophe year in which the proceeds must be depleted.
         SECTION 14.  Section 2210.073, Insurance Code, is amended by
  amending Subsection (b) and adding Subsection (c) to read as
  follows:
         (b)  Public securities described by Subsection (a):
               (1)  may be issued as necessary in a principal amount
  not to exceed $1 billion per catastrophe year, in the aggregate,
  whether for a single occurrence or a series of occurrences; and
               (2)  subject to the $1 billion maximum described by
  Subdivision (1), may be issued, in one or more issuances or
  tranches, during the calendar year in which the occurrence or
  series of occurrences occurs or, if the public securities cannot
  reasonably be issued in that year, during the following calendar
  year.
         (c)  If the losses are paid with public securities described
  by this section, the public securities shall be repaid in the manner
  prescribed by Subchapter M.
         SECTION 15.  Section 2210.074, Insurance Code, is amended by
  amending Subsection (b) and adding Subsection (c) to read as
  follows:
         (b)  Public securities described by Subsection (a):
               (1)  may be issued as necessary in a principal amount
  not to exceed $500 million per catastrophe year, in the aggregate,
  whether for a single occurrence or a series of occurrences; and
               (2)  subject to the $500 million maximum described by
  Subdivision (1), may be issued, in one or more issuances or
  tranches, during the calendar year in which the occurrence or
  series of occurrences occurs or, if the public securities cannot
  reasonably be issued in that year, during the following calendar
  year.
         (c)  If the losses are paid with public securities described
  by this section, the public securities shall be repaid in the manner
  prescribed by Subchapter M through member assessments as provided
  by this section.  The association shall notify each member of the
  association of the amount of the member's assessment under this
  section.  The proportion of the losses allocable to each insurer
  under this section shall be determined in the manner used to
  determine each insurer's participation in the association for the
  year under Section 2210.052. A member of the association may not
  recoup an assessment paid under this subsection through a premium
  surcharge or tax credit.
         SECTION 16.  Section 2210.075, Insurance Code, is amended to
  read as follows:
         Sec. 2210.075.  REINSURANCE. (a) Before any occurrence or
  series of occurrences, an insurer may elect to purchase reinsurance
  to cover an assessment for which the insurer would otherwise be
  liable under Section 2210.074(c) [2210.074(b)].
         (b)  An insurer must notify the board of directors, in the
  manner prescribed by the association whether the insurer will be
  purchasing reinsurance. If the insurer does not elect to purchase
  reinsurance under this section, the insurer remains liable for any
  assessment imposed under Section 2210.074(c) [2210.074(b)].
         SECTION 17.  Section 2210.102, Insurance Code, is amended by
  adding Subsection (i) to read as follows:
         (i)  Notwithstanding Subsection (f), for a vacancy occurring
  in a position under Subsection (b), the commissioner may appoint,
  for the lesser of 120 days or until the vacancy is filled, a person
  who has demonstrated knowledge in insurance principles. This
  subsection does not apply to a vacancy due to the expiration of a
  term occurring under Section 2210.103. This subsection expires
  December 31, 2012, and any appointment in effect on that date is
  continued until the expiration of the term of the appointment.
         SECTION 18.  Section 2210.105, Insurance Code, is amended by
  amending Subsections (a) and (b) and adding Subsections (b-1), (e),
  and (f) to read as follows:
         (a)  Except for an emergency meeting, the association shall:
               (1)  notify the department not later than the 11th day
  before the date of a meeting of the board of directors or of the
  members of the association; and
               (2)  not later than the seventh day before the date of a
  meeting of the board of directors, post notice of the meeting on the
  association's Internet website and the department's Internet
  website.
         (b)  Except for a closed meeting authorized by Subchapter D,
  Chapter 551, Government Code, a meeting of the board of directors or
  of the members of the association is open to[:
               [(1)     the commissioner or the commissioner's designated
  representative; and
               [(2)]  the public.
         (b-1)  The commissioner or the commissioner's designated
  representative may attend a meeting of the board of directors or the
  members of the association, including a closed meeting authorized
  by Subchapter D, Chapter 551, Government Code, except for those
  portions of a closed meeting that involve the rendition of legal
  advice to the board concerning a regulatory matter or that would
  constitute an ex parte communication with the commissioner.
         (e)  The association shall:
               (1)  broadcast live on the association's Internet
  website all meetings of the board of directors, other than closed
  meetings; and
               (2)  maintain on the association's Internet website an
  archive of meetings of the board of directors.
         (f)  A recording of a meeting must be maintained in the
  archive required under Subsection (e) through and including the
  second anniversary of the meeting.
         SECTION 19.  Section 2210.107, Insurance Code, is amended to
  read as follows:
         Sec. 2210.107.  PRIMARY BOARD OBJECTIVES; REPORT. (a) The
  primary objectives of the board of directors are to ensure that the
  board and the association:
               (1)  operate [operates] in accordance with this
  chapter, the plan of operation, and commissioner rules;
               (2)  comply [complies] with sound insurance
  principles; [and]
               (3)  meet [meets] all standards imposed under this
  chapter;
               (4)  establish a code of conduct and performance
  standards for association employees and persons with which the
  association contracts; and
               (5)  establish, and adhere to terms of, an annual
  evaluation of association management necessary to achieve the
  statutory purpose, board objectives, and any performance or
  enterprise risk management objectives established by the board.
         (b)  Not later than June 1 of each year, the association
  shall submit to the commissioner, the legislative oversight board
  established under Subchapter N, the governor, the lieutenant
  governor, and the speaker of the house of representatives a report
  evaluating the extent to which the board met the objectives
  described by Subsection (a) in the 12-month period immediately
  preceding the date of the report.
         SECTION 20.  Subchapter C, Chapter 2210, Insurance Code, is
  amended by adding Section 2210.108 to read as follows:
         Sec. 2210.108.  OPEN MEETINGS AND OPEN RECORDS. (a)  Except
  as specifically provided by this chapter or another law, the
  association is subject to Chapters 551 and 552, Government Code.
         (b)  A settlement agreement to which the association is a
  party:
               (1)  subject to Subsection (d), is public information
  and is not exempted from required disclosure under Chapter 552,
  Government Code; and
               (2)  if applicable, must contain the name of any
  attorney representing a claimant or the association in connection
  with the claim that is the basis of the settlement.
         (c)  Subsection (b) may not be construed to limit or
  otherwise restrict the categories of information that are public
  information under Section 552.022, Government Code.
         (d)  The association, before disclosing a settlement
  agreement to which the association is a party, shall redact from the
  settlement agreement any information that is confidential under
  Chapter 552, Government Code.
         SECTION 21.  Section 2210.152, Insurance Code, is amended by
  adding Subsection (c) to read as follows:
         (c)  The plan of operation shall require the association to
  use the claim settlement guidelines published by the commissioner
  under Section 2210.578(f) in evaluating the extent to which a loss
  to insured property is incurred as a result of wind, waves, tidal
  surges, or rising waters not caused by waves or surges.
         SECTION 22.  Section 2210.202, Insurance Code, is amended to
  read as follows:
         Sec. 2210.202.  APPLICATION FOR COVERAGE. (a) A person who
  has an insurable interest in insurable property may apply to the
  association for insurance coverage provided under the plan of
  operation and an inspection of the property, subject to any rules
  established by the board of directors and approved by the
  commissioner.  The association shall make insurance available to
  each applicant in the catastrophe area whose property is insurable
  property but who, after diligent efforts, is unable to obtain
  property insurance through the voluntary market, as evidenced by
  one declination from an insurer authorized to engage in the
  business of, and writing, property insurance providing windstorm
  and hail coverage in the first tier coastal counties.  For purposes
  of this section, "declination" has the meaning assigned by the plan
  of operation and shall include a refusal to offer coverage for the
  perils of windstorm and hail and the inability to obtain
  substantially equivalent insurance coverage for the perils of
  windstorm and hail.  Notwithstanding Section 2210.203(c), evidence
  of one declination every three calendar years is also required with
  an application for renewal of an association policy.
         (b)  A property and casualty agent must submit an application
  for initial [the] insurance coverage on behalf of the applicant on
  forms prescribed by the association.  The association shall develop
  a simplified process that allows for the acceptance of an
  application for initial or renewal coverage from, and payment of
  premiums by, a property and casualty agent, a person insured under
  this chapter, or an applicant for coverage under this chapter. Each 
  [The] application for initial or renewal coverage must contain:
               (1)  a statement as to whether the applicant has
  submitted or will submit the premium in full from personal funds or,
  if not, to whom a balance is or will be due; and
               (2)  [.   Each application for initial or renewal
  coverage must also contain] a statement that the agent acting on
  behalf of the applicant possesses proof of the declination
  described by Subsection (a) and proof of flood insurance coverage
  or unavailability of that coverage as described by Section
  2210.203(a-1), regardless of whether the agent or the applicant
  submits the application for coverage.
         SECTION 23.  Section 2210.203, Insurance Code, is amended by
  amending Subsection (a) and adding Subsection (d) to read as
  follows:
         (a)  If the association determines that the property for
  which an application for initial insurance coverage is made is
  insurable property, the association, on payment of the premium,
  shall direct the issuance of an insurance policy as provided by the
  plan of operation.
         (d)  The commissioner, after receiving a recommendation from
  the board of directors, shall approve a commission structure for
  payment of an agent who submits an application for coverage to the
  association on behalf of a person who has an insurable interest in
  insurable property. The commission structure adopted by the
  commissioner must be fair and reasonable, taking into consideration
  the amount of work performed by an agent in submitting an
  application to the association and the prevailing commission
  structure in the private windstorm market.
         SECTION 24.  Sections 2210.204(d) and (e), Insurance Code,
  are amended to read as follows:
         (d)  If an insured requests cancellation of the insurance
  coverage, the association shall refund the unearned premium, less
  any minimum retained premium set forth in the plan of operation,
  payable to the insured and the holder of an unpaid balance.  The
  property and casualty agent who received a commission as the result
  of the issuance of an association policy providing the canceled
  coverage [submitted the application] shall refund the agent's
  commission on any unearned premium in the same manner.
         (e)  For cancellation of insurance coverage under this
  section, the minimum retained premium in the plan of operation must
  be for a period of not less than 90 [180] days, except for events
  specified in the plan of operation that reflect a significant
  change in the exposure or the policyholder concerning the insured
  property, including:
               (1)  the purchase of similar coverage in the voluntary
  market;
               (2)  sale of the property to an unrelated party;
               (3)  death of the policyholder; or
               (4)  total loss of the property.
         SECTION 25.  Subchapter E, Chapter 2210, Insurance Code, is
  amended by adding Sections 2210.205 and 2210.210 to read as
  follows:
         Sec. 2210.205.  REQUIRED POLICY PROVISIONS: DEADLINE FOR
  FILING CLAIM; NOTICE CONCERNING RESOLUTION OF CERTAIN DISPUTES.
  (a)  A windstorm and hail insurance policy issued by the association
  must:
               (1)  require an insured to file a claim under the policy
  not later than the first anniversary of the date on which the damage
  to property that is the basis of the claim occurs; and
               (2)  contain, in boldface type, a conspicuous notice
  concerning the resolution of disputes under the policy, including:
                     (A)  the processes and deadlines for appraisal
  under Section 2210.574 and alternative dispute resolution under
  Section 2210.575;
                     (B)  the binding effect of appraisal under Section
  2210.574; and
                     (C)  the necessity of complying with the
  requirements of Subchapter L-1 to seek administrative or judicial
  relief.
         (b)  The commissioner, on a showing of good cause by a person
  insured under this chapter, may extend the one-year period
  described by Subsection (a)(1) for a period not to exceed 180 days.
         Sec. 2210.210.  COVERAGE OF CERTAIN STRUCTURES PROHIBITED.
  The association may not issue coverage for the following
  structures, regardless of whether the structure is otherwise
  insurable property under this chapter:
               (1)  a wind turbine;
               (2)  a structure used primarily as a casino or other
  gambling establishment, other than a premises on which bingo may be
  conducted under Chapter 2001, Occupations Code;
               (3)  a structure used as a sexually oriented business,
  as defined by Section 243.002, Local Government Code; or
               (4)  a structure in which, or in any portion of which,
  an establishment is located that is used primarily for the
  operation of video lottery machines, eight-liners, or other
  gambling devices, regardless of whether the gambling devices are
  regulated under state law.
         SECTION 26.  Section 2210.251(g), Insurance Code, is amended
  to read as follows:
         (g)  The department shall issue a certificate of compliance
  for each structure that qualifies for coverage. The certificate is
  evidence of insurability of the structure by the association. The
  decision whether to issue a certificate of compliance for a
  structure is wholly within the discretion of the department and is
  not dependent on the actions of the Texas Board of Professional
  Engineers or any other regulatory agency.
         SECTION 27.  Section 2210.254, Insurance Code, is amended by
  amending Subsection (a) and adding Subsection (e) to read as
  follows:
         (a)  For purposes of this chapter, a "qualified inspector"
  includes:
               (1)  a person determined by the department to be
  qualified because of training or experience to perform building
  inspections;
               (2)  a licensed professional engineer who is on the
  roster described by Section 1001.652, Occupations Code, and meets
  the requirements specified by commissioner rule for appointment to
  conduct windstorm inspections; and
               (3)  an inspector who:
                     (A)  is certified by the International Code
  Council, the Building Officials and Code Administrators
  International, Inc., the International Conference of Building
  Officials, or the Southern Building Code Congress International,
  Inc.;
                     (B)  has certifications as a buildings inspector
  and coastal construction inspector; and
                     (C)  complies with other requirements specified
  by commissioner rule.
         (e)  The department may establish an annual renewal period
  for persons appointed as qualified inspectors.
         SECTION 28.  Section 2210.255(a), Insurance Code, is amended
  to read as follows:
         (a)  On request of an engineer who is licensed by the Texas
  Board of Professional Engineers and is on the roster described by
  Section 1001.652, Occupations Code, the commissioner shall appoint
  the engineer as an inspector under this subchapter not later than
  the 10th day after the date the engineer delivers to the
  commissioner information demonstrating that the engineer is
  qualified to perform windstorm inspections under this subchapter.
         SECTION 29.  Subchapter F, Chapter 2210, Insurance Code, is
  amended by adding Section 2210.2551 to read as follows:
         Sec. 2210.2551.  ENFORCEMENT AUTHORITY; RULES. (a) The
  department has exclusive authority over all matters relating to the
  appointment and oversight of qualified inspectors for purposes of
  this chapter and to the physical inspection of structures for the
  purposes of this chapter, including the submission of documents to
  the department or association regarding the physical inspection of
  structures.
         (b)  The commissioner by rule shall establish criteria to
  ensure that a person seeking appointment as a qualified inspector
  under this subchapter, including an engineer seeking appointment
  under Section 2210.255, possesses the knowledge, understanding,
  and professional competence to perform windstorm inspections under
  this chapter and to comply with other requirements of this chapter.
         (c)  Subsection (b) applies only to a determination
  concerning the appointment of a qualified inspector under this
  chapter. The exclusive jurisdiction of the department under this
  section does not apply to the practice of engineering as defined by
  Section 1001.003, Occupations Code, or to a license issued,
  qualification required, determination made, order issued, judgment
  rendered, or other action of a board operating under Chapter 1001,
  Occupations Code. In the event of conflict, the authority of that
  board prevails with regard to the practice of engineering.
         (d)  The department shall report to the Texas Board of
  Professional Engineers if the department determines that:
               (1)  after an oversight inspection, the results of a
  windstorm inspection performed by a qualified inspector who is
  licensed by that board are based on questionable grounds or were the
  result of questionable circumstances; or
               (2)  a qualified inspector on the roster described by
  Section 1001.652, Occupations Code, failed to submit to the
  department plans, designs, or calculations of other substantiating
  information necessary to demonstrate that an inspected structure
  meets the requirements of this chapter and department rules.
         (e)  The department shall include in its biennial report to
  the legislature under Section 32.022 the number of matters reported
  to the Texas Board of Professional Engineers under this section and
  the outcome of those matters.
         SECTION 30.  The heading to Section 2210.256, Insurance
  Code, is amended to read as follows:
         Sec. 2210.256.  DISCIPLINARY PROCEEDINGS REGARDING
  APPOINTED INSPECTORS AND CERTAIN OTHER PERSONS.
         SECTION 31.  Section 2210.256, Insurance Code, is amended by
  adding Subsection (a-1) to read as follows:
         (a-1)  In addition to any other action authorized under this
  section, the commissioner ex parte may enter an emergency cease and
  desist order under Chapter 83 against a qualified inspector, or a
  person acting as a qualified inspector, if:
               (1)  the commissioner believes that:
                     (A)  the qualified inspector has:
                           (i)  through submitting or failing to submit
  to the department sealed plans, designs, calculations, or other
  substantiating information, failed to demonstrate that a structure
  or a portion of a structure subject to inspection meets the
  requirements of this chapter and department rules; or
                           (ii)  refused to comply with requirements
  imposed under this chapter or department rules; or
                     (B)  the person acting as a qualified inspector is
  acting without appointment as a qualified inspector under Section
  2210.254 or 2210.255; and
               (2)  the commissioner determines that the conduct
  described by Subdivision (1) is fraudulent or hazardous or creates
  an immediate danger to the public.
         SECTION 32.  Section 2210.259, Insurance Code, is amended by
  adding Subsection (c) to read as follows:
         (c)  The commissioner by rule may provide for a discount of,
  or a credit against, a surcharge assessed under Subsection (a) in
  instances in which a policyholder demonstrates that the
  noncompliant structure was constructed with at least one structural
  building component that complies with the building code standards
  set forth in the plan of operation.
         SECTION 33.  Subchapter F, Chapter 2210, Insurance Code, is
  amended by adding Section 2210.260 to read as follows:
         Sec. 2210.260.  ALTERNATIVE ELIGIBILITY FOR COVERAGE. (a)  
  On and after August 31, 2011, a person who has an insurable interest
  in a residential structure may obtain insurance coverage through
  the association for that structure without obtaining a certificate
  of compliance under Section 2210.251(g) in accordance with this
  section and rules adopted by the commissioner.
         (b)  The department may issue an alternative certification
  for a residential structure if the person who has an insurable
  interest in the structure demonstrates that at least one qualifying
  structural building component of the structure has been:
               (1)  inspected by a department inspector or by a
  qualified inspector; and
               (2)  determined to be in compliance with applicable
  building code standards, as set forth in the plan of operation.
         (c)  The commissioner shall adopt reasonable and necessary
  rules to implement this section. The rules adopted under this
  section must establish which structural building components are
  considered qualifying structural building components for the
  purposes of Subsection (b), taking into consideration those items
  that are most probable to generate losses for the association's
  policyholders and the cost to upgrade those items.
         (d)  Except as provided in Section 2210.251(f), a person who
  has an insurable interest in a residential structure that is
  insured by the association as of January 1, 2012, but for which the
  person has not obtained a certificate of compliance under Section
  2210.251(g), must obtain an alternative certification under this
  section before the association, on or after January 1, 2013, may
  renew coverage for the structure.
         (e)  Each residential structure for which a person obtains an
  alternative certification under this section must comply with:
               (1)  the requirements of this chapter, including
  Section 2210.258; and
               (2)  the association's underwriting requirements,
  including maintaining the structure in an insurable condition and
  paying premiums in the manner required by the association.
         (f)  The association shall develop and implement an
  actuarially sound rate, credit, or surcharge that reflects the
  risks presented by structures with reference to which alternative
  certifications have been obtained under this section. A rate,
  credit, or surcharge under this subsection may vary based on the
  number of qualifying structural building components included in a
  structure with reference to which an alternative certification is
  obtained under this section.  A surcharge under this subsection
  must be developed and implemented in an amount that does not exceed
  the percentage of premium at which a surcharge under Section
  2210.259(a) is assessed.
         SECTION 34.  Section 2210.453, Insurance Code, is amended by
  adding Subsections (c), (d), and (e) to read as follows:
         (c)  If the association does not purchase reinsurance as
  authorized by this section, the board, not later than June 1 of each
  year, shall submit to the commissioner, the legislative oversight
  board established under Subchapter N, the governor, the lieutenant
  governor, and the speaker of the house of representatives a report
  containing an actuarial plan for paying losses in the event of a
  catastrophe with estimated damages of $2.5 billion or more. The
  report required by this subsection must:
               (1)  document and denominate the association's
  resources available to pay claims, including cash or other highly
  liquid assets, assessments that the association is projected to
  impose, pre-event and post-event bonding capacity, and
  private-sector recognized risk-transfer mechanisms, including
  catastrophe bonds and reinsurance;
               (2)  include an independent, third-party appraisal of
  the likelihood of an assessment, the maximum potential size of the
  assessment, and an estimate of the probability that the assessment
  would not be adequate to meet the association's needs; and
               (3)  include an analysis of financing alternatives to
  assessments that includes the costs of borrowing and the
  consequences that additional purchase of reinsurance, catastrophe
  bonds, or other private-sector recognized risk-transfer
  instruments would have in reducing the size or potential of
  assessments.
         (d)  A person who prepares a report required by Subsection
  (c) may not contract to provide any other service to the
  association, except for the preparation of similar reports, before
  the third anniversary of the date the last report prepared by the
  person under that subsection is submitted.
         (e)  The report submitted under this section is for
  informational purposes only and does not bind the association to a
  particular course of action.
         SECTION 35.  Subchapter J, Chapter 2210, Insurance Code, is
  amended by adding Section 2210.455 to read as follows:
         Sec. 2210.455.  CATASTROPHE PLAN. (a)  Not later than June 1
  of each year, the board shall submit to the commissioner, the
  legislative oversight board established under Subchapter N, the
  governor, the lieutenant governor, and the speaker of the house of
  representatives a catastrophe plan covering the period beginning on
  the date the plan is submitted and ending on the following May 31.
         (b)  The catastrophe plan must:
               (1)  describe the manner in which the association will,
  during the period covered by the plan, evaluate losses and process
  claims after the following windstorms affecting an area of maximum
  exposure to the association:
                     (A)  a windstorm with a four percent chance of
  occurring during the period covered by the plan;
                     (B)  a windstorm with a two percent chance of
  occurring during the period covered by the plan; and
                     (C)  a windstorm with a one percent chance of
  occurring during the period covered by the plan; and
               (2)  include, if the association does not purchase
  reinsurance under Section 2210.453 for the period covered by the
  plan, an actuarial plan for paying losses in the event of a
  catastrophe with estimated damages of $2.5 billion or more.
         (c)  The catastrophe plan must include a description of how
  losses under association policies will be paid, and how claims
  under association policies will be administered and adjusted,
  during the period covered by the plan.
         (d)  The catastrophe plan submitted under this section is for
  informational purposes only and does not bind the association to a
  particular course of action.
         SECTION 36.  Section 2210.502, Insurance Code, is amended by
  adding Subsection (e) to read as follows:
         (e)  Notwithstanding Subsection (a), the maximum liability
  limit for dwellings and corporeal movable property described by
  Section 2210.501(b)(1) may not exceed $1.5 million.
         SECTION 37.  Sections 2210.551(a) and (b), Insurance Code,
  are amended to read as follows:
         (a)  This section:
               (1)  does not apply to a person who is required to
  resolve a dispute under Subchapter L-1; and
               (2)  applies only to:
                     (A) [(1)]  a person not described by Subdivision
  (1) who is insured under this chapter or an authorized
  representative of the person; or
                     (B) [(2)]  an affected insurer.
         (b)  A person or entity described by Subsection (a)(2) [(a)]
  who is aggrieved by an act, ruling, or decision of the association
  may appeal to the commissioner not later than the 30th day after the
  date of that act, ruling, or decision.
         SECTION 38.  Chapter 2210, Insurance Code, is amended by
  adding Subchapter L-1 to read as follows:
  SUBCHAPTER L-1. CLAIMS: SETTLEMENT AND DISPUTE RESOLUTION
         Sec. 2210.571.  DEFINITIONS. In this subchapter:
               (1)  "Association policy" means a windstorm and hail
  insurance policy issued by the association.
               (2)  "Claim" means a request for payment under an
  association policy. The term also includes any other claim against
  the association, or an agent or representative of the association,
  relating to an insured loss, under any theory or cause of action of
  any kind, regardless of the theory under which the claim is
  asserted, the cause of action brought, or the type of damages
  sought.
               (3)  "Claimant" means a person who makes a claim.
         Sec. 2210.572.  EXCLUSIVE REMEDIES AND LIMITATION ON AWARD.
  (a) This subchapter provides the exclusive remedies for a claim
  against the association, including an agent or representative of
  the association.
         (b)  Subject to Section 2210.576, the association may not be
  held liable for any amount other than covered losses payable under
  the terms of the association policy.
         (c)  The association, and an agent or representative of the
  association, may not be held liable for damages under Chapter 17,
  Business & Commerce Code, or under any provision of any law
  providing for additional damages, punitive damages, or a penalty.
         Sec. 2210.573.  FILING OF CLAIM; CLAIM PROCESSING. (a)
  Subject to Section 2210.205(b), an insured must file a claim under
  an association policy not later than the first anniversary of the
  date on which the damage to property that is the basis of the claim
  occurs.
         (b)  The claimant may submit written materials, comments,
  documents, records, and other information to the association
  relating to the claim. If the claimant fails to submit information
  in the claimant's possession that is necessary for the association
  to determine whether to accept or reject a claim, the association
  may, not later than the 30th day after the date the claim is filed,
  request in writing the necessary information from the claimant.
         (c)  The association shall, on request, provide a claimant
  reasonable access to all information relevant to the determination
  of the association concerning the claim. The claimant may copy the
  information at the claimant's own cost or may request the
  association to provide a copy of all or part of the information to
  the claimant. The association may charge a claimant the actual cost
  incurred by the association in providing a copy of information
  under this section, excluding any amount for labor involved in
  making any information or copy of information available to a
  claimant.
         (d)  Unless the applicable 60-day period described by this
  subsection is extended by order of the commissioner, not later than
  the later of the 60th day after the date the association receives a
  claim or the 60th day after the date the association receives
  information requested under Subsection (b), the association shall
  provide the claimant, in writing, notification that:
               (1)  the association has accepted coverage for the
  claim in full;
               (2)  the association has accepted coverage for the
  claim in part and has denied coverage for the claim in part; or
               (3)  the association has denied coverage for the claim
  in full.
         (e)  In a notice described by Subsection (d)(1), the
  association must inform the claimant of the amount of loss the
  association will pay and of the time limit to request appraisal
  under Section 2210.574.
         (f)  In a notice described by Subsection (d)(2) or (3), the
  association must inform the claimant of, as applicable:
               (1)  the portion of the loss for which the association
  accepts coverage and the amount of loss the association will pay;
               (2)  the portion of the loss for which the association
  denies coverage and a detailed summary of the manner in which the
  association determined not to accept coverage for that portion of
  the claim; and
               (3)  the time limit to:
                     (A)  request appraisal under Section 2210.574 of
  the portion of the loss for which the association accepts coverage;
  and
                     (B)  provide notice of intent to bring an action
  as required by Section 2210.575.
         (g)  In addition to the notice required under Subsection
  (d)(2) or (3), the association shall provide a claimant with a form
  on which the claimant may provide the association notice of intent
  to bring an action as required by Section 2210.575.
         Sec. 2210.574.  DISPUTES CONCERNING AMOUNT OF ACCEPTED
  COVERAGE. (a) If the association accepts coverage for a claim in
  full and a claimant disputes only the amount of loss the association
  will pay for the claim, or if the association accepts coverage for a
  claim in part and a claimant disputes the amount of loss the
  association will pay for the accepted portion of the claim, the
  claimant may request from the association a detailed summary of the
  manner in which the association determined the amount of loss the
  association will pay.
         (b)  If a claimant disputes the amount of loss the
  association will pay for a claim or a portion of a claim, the
  claimant, not later than the 60th day after the date the claimant
  receives the notice described by Section 2210.573(d)(1) or (2), may
  demand appraisal in accordance with the terms of the association
  policy.
         (c)  If a claimant, on a showing of good cause and not later
  than the 15th day after the expiration of the 60-day period
  described by Subsection (b), requests in writing that the 60-day
  period be extended, the association may grant an additional 30-day
  period in which the claimant may demand appraisal.
         (d)  If a claimant demands appraisal under this section:
               (1)  the appraisal must be conducted as provided by the
  association policy; and
               (2)  the claimant and the association are responsible
  in equal shares for paying any costs incurred or charged in
  connection with the appraisal, including a fee charged under
  Subsection (e).
         (e)  If a claimant demands appraisal under this section and
  the appraiser retained by the claimant and the appraiser retained
  by the association are able to agree on an appraisal umpire to
  participate in the resolution of the dispute, the appraisal umpire
  is the umpire chosen by the two appraisers. If the appraiser
  retained by the claimant and the appraiser retained by the
  association are unable to agree on an appraisal umpire to
  participate in the resolution of the dispute, the commissioner
  shall select an appraisal umpire from a roster of qualified umpires
  maintained by the department. The department may:
               (1)  require appraisers to register with the department
  as a condition of being placed on the roster of umpires; and
               (2)  charge a reasonable registration fee to defray the
  cost incurred by the department in maintaining the roster and the
  commissioner in selecting an appraisal umpire under this
  subsection.
         (f)  The appraisal decision is binding on the claimant and
  the association as to the amount of loss the association will pay
  for a fully accepted claim or the accepted portion of a partially
  accepted claim and is not appealable or otherwise reviewable. A
  claimant that does not demand appraisal before the expiration of
  the periods described by Subsections (b) and (c) waives the
  claimant's right to contest the association's determination of the
  amount of loss the association will pay with reference to a fully
  accepted claim or the accepted portion of a partially accepted
  claim.
         (g)  A claimant may not bring an action against the
  association with reference to a claim for which the association has
  accepted coverage in full.
         Sec. 2210.575.  DISPUTES CONCERNING DENIED COVERAGE. (a)
  If the association denies coverage for a claim in part or in full
  and the claimant disputes that determination, the claimant, not
  later than the expiration of the limitations period described by
  Section 2210.577(a), but after the date the claimant receives the
  notice described by Section 2210.573(d)(2) or (3), must provide the
  association with notice that the claimant intends to bring an
  action against the association concerning the partial or full
  denial of the claim.
         (b)  If a claimant provides notice of intent to bring an
  action under Subsection (a), the association may require the
  claimant, as a prerequisite to filing the action against the
  association, to submit the dispute to alternative dispute
  resolution by mediation or moderated settlement conference, as
  provided by Chapter 154, Civil Practice and Remedies Code. A
  claimant that does not provide notice of intent to bring an action
  before the expiration of the period described by Subsection (a)
  waives the claimant's right to contest the association's partial or
  full denial of coverage and is barred from bringing an action
  against the association concerning the denial of coverage.
         (c)  The association must request alternative dispute
  resolution of a dispute described by Subsection (b) not later than
  the 60th day after the date the association receives from the
  claimant notice of intent to bring an action.
         (d)  Alternative dispute resolution under this section must
  be completed not later than the 60th day after the date a request
  for alternative dispute resolution is made under Subsection (c).
  The 60-day period described by this subsection may be extended by
  the commissioner by rule or by the association and a claimant by
  mutual consent.
         (e)  If the claimant is not satisfied after completion of
  alternative dispute resolution, or if alternative dispute
  resolution is not completed before the expiration of the 60-day
  period described by Subsection (d) or any extension under that
  subsection, the claimant may bring an action against the
  association in a district court in the county in which the loss that
  is the subject of the coverage denial occurred. An action brought
  under this subsection shall be presided over by a judge appointed by
  the judicial panel on multidistrict litigation designated under
  Section 74.161, Government Code. A judge appointed under this
  section must be a resident of a first tier coastal county or a
  second tier coastal county.
         (f)  If a claimant brings an action against the association
  concerning a partial or full denial of coverage, the court shall
  abate the action until the notice of intent to bring an action has
  been provided and, if requested by the association, the dispute has
  been submitted to alternative dispute resolution, in accordance
  with this section.
         (g)  A moderated settlement conference under this section
  may be conducted by a panel consisting of one or more impartial
  third parties.
         (h)  If the association requests mediation under this
  section, the claimant and the association are responsible in equal
  shares for paying any costs incurred or charged in connection with
  the mediation.
         (i)  If the association requests mediation under this
  section, and the claimant and the association are able to agree on a
  mediator, the mediator is the mediator agreed to by the claimant and
  the association. If the claimant and the association are unable to
  agree on a mediator, the commissioner shall select a mediator from a
  roster of qualified mediators maintained by the department. The
  department may:
               (1)  require mediators to register with the department
  as a condition of being placed on the roster; and
               (2)  charge a reasonable registration fee to defray the
  cost incurred by the department in maintaining the roster and the
  commissioner in selecting a mediator under this section.
         (j)  The commissioner shall establish rules to implement
  this section, including provisions for expediting alternative
  dispute resolution, facilitating the ability of a claimant to
  appear with or without counsel, establishing qualifications
  necessary for mediators to be placed on the roster maintained by the
  department under Subsection (i), and providing that formal rules of
  evidence shall not apply to the proceedings.
         Sec. 2210.576.  ISSUES BROUGHT TO SUIT; LIMITATIONS ON
  RECOVERY. (a) The only issues a claimant may raise in an action
  brought against the association under Section 2210.575 are:
               (1)  whether the association's denial of coverage was
  proper; and
               (2)  the amount of the damages described by Subsection
  (b) to which the claimant is entitled, if any.
         (b)  A claimant that brings an action against the association
  under Section 2210.575 may recover only:
               (1)  the covered loss payable under the terms of the
  association policy less, if applicable, the amount of loss already
  paid by the association for any portion of a covered loss for which
  the association accepted coverage;
               (2)  prejudgment interest from the 30th day after the
  date specified in Section 2210.573(d), at the prejudgment interest
  rate provided in Subchapter B, Chapter 304, Finance Code; and
               (3)  court costs and reasonable and necessary
  attorney's fees.
         Sec. 2210.577.  LIMITATIONS PERIOD. (a) Notwithstanding
  any other law, a claimant who brings an action against the
  association under Section 2210.575 must bring the action not later
  than the second anniversary of the date on which the person receives
  a notice described by Section 2210.573(d)(2) or (3).
         (b)  This section is a statute of repose and controls over
  any other applicable limitations period.
         Sec. 2210.578.  EXPERT PANEL. (a) The commissioner shall
  appoint a panel of experts to advise the association concerning the
  extent to which a loss to insurable property was incurred as a
  result of wind, waves, tidal surges, or rising waters not caused by
  waves or surges. The panel shall consist of a number of experts to
  be decided by the commissioner. The commissioner shall appoint one
  member of the panel to serve as the presiding officer of the panel.
         (b)  Members of the panel must have professional expertise
  in, and be knowledgeable concerning, the geography and meteorology
  of the Texas seacoast territory, as well as the scientific basis for
  determining the extent to which damage to property is caused by
  wind, waves, tidal surges, or rising waters not caused by waves or
  surges.
         (c)  The panel shall meet at the request of the commissioner
  or the call of the presiding officer of the panel.
         (d)  The panel shall investigate, collect, and evaluate the
  information necessary to provide recommendations under Subsection
  (e). The cost and expense incurred by the panel associated with the
  work of the panel under this section shall be paid or reimbursed by
  the association.
         (e)  At the request of the commissioner, the panel shall
  recommend to the commissioner methods or models for determining the
  extent to which a loss to insurable property may be or was incurred
  as a result of wind, waves, tidal surges, or rising waters not
  caused by waves or surges for geographic areas or regions
  designated by the commissioner.
         (f)  After consideration of the recommendations made by the
  panel under Subsection (e), the commissioner shall publish
  guidelines that the association will use to settle claims.
         (g)  A member of the panel is not individually liable for an
  act or failure to act in the performance of the official duties in
  connection with the individual's work on the panel.
         (h)  In any review of a claim under this subchapter, and in
  any action brought against the association under Section 2210.575,
  the guidelines published by the commissioner under Subsection (f)
  govern the claim and are presumed to be accurate and correct, unless
  clear and convincing evidence supports a deviation from the
  guidelines.
         Sec. 2210.579.  CONSTRUCTION WITH OTHER LAW. To the extent
  of any conflict between a provision of this subchapter and any other
  law, the provision of this subchapter prevails.
         Sec. 2210.580.  RULEMAKING. (a) The commissioner shall
  adopt rules regarding the provisions of this subchapter, including
  rules concerning:
               (1)  qualifications and selection of appraisers for the
  appraisal procedure, mediators for the mediation process, and
  members of the expert panel;
               (2)  procedures and deadlines for the payment and
  handling of claims by the association as well as the procedures and
  deadlines for a review of a claim by the association;
               (3)  notice of expert panel meetings and the
  transparency of deliberations of the panel; and
               (4)  any other matters regarding the handling of claims
  that are not inconsistent with this subchapter.
         (b)  All rules adopted by the commissioner under this section
  shall promote the fairness of the process, protect the rights of
  aggrieved policyholders, and ensure that policyholders may
  participate in the claims review process without the necessity of
  engaging legal counsel.
         SECTION 39.  Section 2210.602(2), Insurance Code, is amended
  to read as follows:
               (2)  "Class 1 public securities" means public
  securities authorized to be issued before, on, or after an
  occurrence or series of occurrences by Section 2210.072, including
  a commercial paper program authorized before the occurrence of a
  catastrophic event but in which [so long as] no tranche of
  commercial paper is issued under the program until after the
  catastrophic event.
         SECTION 40.  Section 2210.604, Insurance Code, is amended by
  amending Subsection (a) and adding Subsection (a-1) to read as
  follows:
         (a)  At the request of the association and with the approval
  of the commissioner, the Texas Public Finance Authority shall issue
  Class 1, Class 2, or Class 3 public securities. The association
  shall submit to the commissioner a cost-benefit analysis of various
  financing methods and funding structures when requesting the
  issuance of public securities under this subsection.
         (a-1)  The association and the commissioner must approve
  each tranche of commercial paper issued under a commercial paper
  program established under this chapter.
         SECTION 41.  Section 2210.608, Insurance Code, is amended by
  adding Subsection (c) to read as follows:
         (c)  Notwithstanding Subsection (a)(2), the proceeds from
  public securities issued under Section 2210.072 before an
  occurrence or series of occurrences that results in incurred
  losses, including investment income, may not be used to purchase
  reinsurance for the association.
         SECTION 42.  Section 2210.609(b), Insurance Code, is amended
  to read as follows:
         (b)  The board shall notify the association of the amount of
  the public security obligations and the estimated amount of public
  security administrative expenses, if any, each calendar year in a
  period sufficient, as determined by the association, to permit the
  association to determine the availability of funds and assess a
  premium surcharge if necessary.
         SECTION 43.  Section 2210.611, Insurance Code, is amended to
  read as follows:
         Sec. 2210.611.  EXCESS REVENUE COLLECTIONS AND INVESTMENT
  EARNINGS. Revenue collected in any calendar year from a premium
  surcharge under Section 2210.613 that exceeds the amount of the
  public security obligations and public security administrative
  expenses payable in that calendar year and interest earned on the
  public security obligation fund may, in the discretion of the
  association, be:
               (1)  used to pay public security obligations payable in
  the subsequent calendar year, offsetting the amount of the premium
  surcharge that would otherwise be required to be levied for the year
  under this subchapter;
               (2)  used to redeem or purchase outstanding public
  securities; or
               (3)  deposited in the catastrophe reserve trust fund.
         SECTION 44.  Section 2210.612(b), Insurance Code, is amended
  to read as follows:
         (b)  The association may enter financing arrangements as
  described by Section 2210.072(d) as necessary to obtain public
  securities issued under that section.  Nothing in this subsection
  prevents [shall prevent] the authorization and creation of one or
  more programs for the issuance of commercial paper before the date
  of an occurrence that results in insured losses under Section
  2210.072(a) but in which [so long as] no tranche of commercial paper
  is issued under a commercial paper program until after such an
  occurrence.
         SECTION 45.  Section 2210.613, Insurance Code, is amended to
  read as follows:
         Sec. 2210.613.  PAYMENT OF CLASS 2 PUBLIC SECURITIES. (a)
  The association shall pay Class 2 public securities issued under
  Section 2210.073 as provided by this section.  Thirty percent of the
  cost of the public securities shall be paid through member
  assessments as provided by this section.  The association shall
  notify each member of the association of the amount of the member's
  assessment under this section.  The proportion of the losses
  allocable to each insurer under this section shall be determined in
  the manner used to determine each insurer's participation in the
  association for the year under Section 2210.052. A member of the
  association:
               (1)  may not recoup an assessment paid under this
  subsection through a premium surcharge or tax credit; and
               (2)  notwithstanding Section 2210.073(a), may elect to
  pay an assessment under this subsection in a lump sum.
         (b)  Seventy percent of the cost of the public securities
  shall be paid by a [nonrefundable] premium surcharge collected
  under this section in an amount set by the commissioner.  On
  approval by the commissioner, each insurer, the association, and
  the Texas FAIR Plan Association shall assess, as provided by this
  section, a premium surcharge to each policyholder of a policy that
  is in effect on or after the 180th day after the date the
  commissioner issues notice of the approval of the public securities
  [its policyholders as provided by this section].  The premium
  surcharge must be set in an amount sufficient to pay, for the
  duration of the issued public securities, all debt service not
  already covered by available funds and all related expenses on the
  public securities.
         (c)  The premium surcharge under Subsection (b) shall be
  assessed on all policyholders of policies that cover [who reside or
  have operations in, or whose] insured property that is located in a
  catastrophe area, including automobiles principally garaged in a
  catastrophe area. The premium surcharge shall be assessed on [for]
  each Texas windstorm and hail insurance policy and each property
  and casualty insurance policy, including an automobile insurance
  policy, issued for automobiles and other property located in the
  catastrophe area.  A premium surcharge under Subsection (b) applies
  to:
               (1)  all policies written under the following lines of
  insurance:
                     (A)  fire and allied lines;
                     (B)  farm and ranch owners;
                     (C)  residential property insurance;
                     (D)  private passenger automobile liability and
  physical damage insurance; and
                     (E)  commercial passenger automobile liability
  and physical damage insurance; and
               (2)  the property insurance portion of a commercial
  multiple peril insurance [that provide coverage on any premises,
  locations, operations, or property located in the area described by
  this subsection for all property and casualty lines of insurance,
  other than federal flood insurance, workers' compensation
  insurance, accident and health insurance, and medical malpractice
  insurance].
         (d)  A premium surcharge under Subsection (b) is a separate
  [nonrefundable] charge in addition to the premiums collected and is
  not subject to premium tax or commissions.  Failure by a
  policyholder to pay the surcharge constitutes failure to pay
  premium for purposes of policy cancellation.
         SECTION 46.  Sections 2210.6135(a) and (c), Insurance Code,
  are amended to read as follows:
         (a)  The association shall pay Class 3 public securities
  issued under Section 2210.074 as provided by this section through
  member assessments.  The association, for the payment of the
  losses, shall assess the members of the association an amount not to
  exceed $500 million per catastrophe year [for the payment of the
  losses].  The association shall notify each member of the
  association of the amount of the member's assessment under this
  section.
         (c)  A member of the association:
               (1)  may not recoup an assessment paid under this
  section through a premium surcharge or tax credit; and
               (2)  notwithstanding Section 2210.074(a), may elect to
  pay an assessment under this section in a lump sum.
         SECTION 47.  Subchapter A, Chapter 2301, Insurance Code, is
  amended by adding Section 2301.010 to read as follows:
         Sec. 2301.010.  CONTRACTUAL LIMITATIONS PERIOD AND CLAIM
  FILING PERIOD IN CERTAIN PROPERTY INSURANCE FORMS. (a)  This
  section applies only to an insurer that issues windstorm and hail
  insurance in the catastrophe area, as defined by Section 2210.003.
         (b)  Notwithstanding Section 16.070, Civil Practice and
  Remedies Code, and for the purpose described by Section
  2210.053(b), a policy form or printed endorsement form for
  residential or commercial property insurance that is filed by an
  insurer described by Subsection (a) or adopted by the department
  under this subchapter for use by an insurer described by Subsection
  (a) may provide for a contractual limitations period for filing
  suit on a first-party claim under the policy. The contractual
  limitations period may not end before the earlier of:
               (1)  two years from the date the insurer accepts or
  rejects the claim; or
               (2)  three years from the date of the loss that is the
  subject of the claim.
         (c)  A policy or endorsement described by Subsection (b) may
  also contain a provision requiring that a claim be filed with the
  insurer not later than one year after the date of the loss that is
  the subject of the claim.  A provision under this subsection must
  include a provision allowing the filing of claims after the first
  anniversary of the date of the loss for good cause shown by the
  person filing the claim.
         (d)  A contractual provision contrary to Subsection (b) or
  (c) is void.  If a contractual provision is voided under this
  subsection, the voiding of the provision does not affect the
  validity of other provisions of a contract that may be given effect
  without the voided provision to the extent those provisions are
  severable.
         (e)  The department, to encourage the authorized insurers to
  write windstorm and hail insurance in the catastrophe area, as
  defined by Section 2210.003, and in other areas of the state, may
  approve policy or contractual provisions other than those described
  by Subsections (b) and (c) that are consistent with sound
  underwriting and insurance principles, provided that the policy or
  contractual provisions meet the requirements of Sections
  2301.007(a) and 2301.053.
         (f)  An insurer using a policy form or endorsement form in
  this state that includes a provision described by Subsection (b) or
  (c) shall, at the time the policy or endorsement is issued or
  renewed, disclose in writing to an applicant or insured the
  contractual limitations or claims filing period, as applicable, in
  the policy or endorsement.
         SECTION 48.  Chapter 1001, Occupations Code, is amended by
  adding Subchapter N to read as follows:
  SUBCHAPTER N. WINDSTORM-RELATED DESIGN SERVICES
         Sec. 1001.651.  DEFINITIONS. In this subchapter:
               (1)  "Association" means the Texas Windstorm Insurance
  Association.
               (2)  "Plan of operation" means the plan of operation of
  the association.
               (3)  "Windstorm certification standards" means the
  building specifications and building codes applicable to insurable
  property under Subchapter F, Chapter 2210, Insurance Code, and the
  plan of operation, and applicable rules of the Texas Department of
  Insurance.
         Sec. 1001.652.  QUALIFICATIONS; ROSTER. (a) The board
  shall:
               (1)  review the plan of operation and the windstorm
  certification standards; and
               (2)  in consultation with the Texas Department of
  Insurance, adopt rules establishing criteria for determining
  whether an engineer possesses the knowledge, understanding, and
  professional competence to be qualified to provide engineering
  design services related to compliance with applicable windstorm
  certification standards under Subchapter F, Chapter 2210,
  Insurance Code.
         (b)  The board shall prepare and publish a roster of
  engineers who satisfy the criteria adopted under Subsection (a)(2)
  and shall make the roster available to the public without cost in an
  online computer database format.
         Sec. 1001.653.  COMPLIANCE WITH BUILDING CODES;
  ENFORCEMENT. (a) The board, in consultation with the Texas
  Department of Insurance, shall adopt rules requiring an engineer
  who is providing engineering design services to comply with
  windstorm certification standards.
         (b)  The board may inspect a structure to ensure an
  engineer's compliance with Subsection (a).
         (c)  If the board determines that an engineer's engineering
  design services related to windstorm certification standards do not
  comply with the standards, the board may:
               (1)  issue an emergency order prohibiting the engineer
  from entering into a contract to provide design services related to
  compliance with applicable windstorm certification standards for a
  period not to exceed 30 days;
               (2)  remove the engineer from the roster described by
  Section 1001.652(b); or
               (3)  determine that a structure was not constructed,
  altered, remodeled, enlarged, repaired, or added to according to
  the applicable windstorm certification standards and report that
  finding to the association and the Texas Department of Insurance.
         (d)  The board shall give the engineer notice of any action
  under this section.
         (e)  A violation of this subchapter, including a violation of
  the windstorm inspection standards, is grounds for disciplinary
  action under Section 1001.452.
         SECTION 49.  Sections 2210.551(e) and 2210.552, Insurance
  Code, are repealed.
         SECTION 50.  Section 2301.010, Insurance Code, as added by
  this Act, applies only to an insurance policy that is delivered,
  issued for delivery, or renewed on or after January 1, 2012.  A
  policy delivered, issued for delivery, or renewed before January 1,
  2012, is governed by the law as it existed immediately before the
  effective date of this Act, and that law is continued in effect for
  that purpose.
         SECTION 51.  Not later than December 1, 2011, the Texas Board
  of Professional Engineers shall adopt rules to implement Subchapter
  N, Chapter 1001, Occupations Code, as added by this Act.
         SECTION 52.  (a)  A legislative interim study committee
  shall conduct a study of alternative ways to provide insurance to
  the seacoast territory of this state through a quasi-governmental
  entity.
         (b)  The committee is composed of 12 members appointed as
  follows:
               (1)  four members of the senate appointed by the
  lieutenant governor, two of whom represent one or more first tier
  coastal counties and two of whom do not represent a first tier
  coastal county;
               (2)  four members of the house of representatives
  appointed by the speaker of the house of representatives, two of
  whom represent one or more first tier coastal counties and two of
  whom do not represent a first tier coastal county; and
               (3)  four public members with a background in actuarial
  science, law, business, or insurance, as follows:
                     (A)  two members who do not reside in a first tier
  coastal county, appointed by the governor;
                     (B)  one member who resides in a first tier
  coastal county, appointed by the lieutenant governor; and
                     (C)  one member who resides in a first tier
  coastal county, appointed by the speaker of the house of
  representatives.
         (c)  The speaker of the house of representatives and the
  lieutenant governor shall jointly designate a chair or,
  alternatively, designate two co-chairs, from among the committee
  membership, one of whom represents or resides in a first tier
  coastal county.
         (d)  The committee shall:
               (1)  examine alternative ways to provide insurance to
  the seacoast territory of this state through a quasi-governmental
  entity, including providing insurance coverage through a system or
  program in which insurers in this state provide insurance in the
  seacoast territory of this state in proportion to the percentage of
  insurance coverage provided in geographic areas of this state other
  than the seacoast territory;
               (2)  study the residual markets for windstorm and hail
  insurance in other states to determine if those markets operate
  more efficiently and effectively than the residual market for
  windstorm and hail insurance coverage in this state;
               (3)  study windstorm-related building codes and
  mitigation strategies to determine which codes or strategies are
  most effective;
               (4)  recommend:
                     (A)  the appropriate scope of authority and
  responsibility for the entity to provide insurance to the seacoast
  territory of this state;
                     (B)  an organizational structure to exercise
  authority and responsibility over the provision of insurance to the
  seacoast territory of this state;
                     (C)  a timetable for implementation; and
                     (D)  specific amendments to state laws and rules
  that are necessary to implement the committee's recommendations
  under this subdivision; and
               (5)  estimate funding requirements to implement the
  recommendations.
         (e)  The committee may adopt rules necessary to conduct
  business under and implement this section.
         (f)  Except as specifically provided by this section, the
  committee may operate in the same manner as a joint committee of the
  82nd Legislature.
         (g)  Not later than December 1, 2012, the committee shall
  report to the governor and the legislature the recommendations made
  under this section.
         (h)  This section expires June 1, 2013.
         SECTION 53.  (a)  The name of the Texas Windstorm Insurance
  Association is changed to the Texas Coastal Insurance Plan
  Association.
         (b)  A reference in law to the Texas Windstorm Insurance
  Association or the Texas Windstorm Insurance Association Act means
  the Texas Coastal Insurance Plan Association or the Texas Coastal
  Insurance Plan Act, respectively.
         SECTION 54.  (a) Except as otherwise specifically provided
  by this section, this Act applies only to a Texas windstorm and hail
  insurance policy, and to a dispute under a Texas windstorm and hail
  insurance policy, that is delivered, issued for delivery, or
  renewed by the Texas Windstorm Insurance Association on or after
  the 60th day after the effective date of this Act. A Texas
  windstorm and hail insurance policy, and a dispute under a Texas
  windstorm and hail insurance policy, that is delivered, issued for
  delivery, or renewed by the Texas Windstorm Insurance Association
  before the 60th day after the effective date of this Act is governed
  by the law in effect immediately before the effective date of this
  Act, and the former law is continued in effect for that purpose.
         (b)  The deadline to file a claim under a Texas windstorm and
  hail insurance policy delivered, issued for delivery, or renewed
  before the effective date of this Act by the Texas Windstorm
  Insurance Association is governed by the law in effect on the date
  the policy under which the claim is filed was delivered, issued for
  delivery, or renewed, and that law is continued in effect for that
  purpose.
         (c)  If a person insured by the Texas Windstorm Insurance
  Association disputes the amount the association will pay for a
  partially or fully accepted claim filed by the person, Section
  2210.574, Insurance Code, as added by this Act, applies only if the
  claim is filed on or after the 60th day after the effective date of
  this Act.
         (d)  If a person insured by the Texas Windstorm Insurance
  Association disputes the amount the association will pay for a
  partially or fully accepted claim filed by the person and the claim
  is filed before the 60th day after the effective date of this Act:
               (1)  Section 2210.574, Insurance Code, as added by this
  Act, does not apply to the resolution of the dispute; and
               (2)  notwithstanding Section 2210.574, Insurance Code,
  as added by this Act, or any other provision of this Act, the
  claimant must attempt to resolve the dispute through the appraisal
  process contained in the association policy under which the claim
  is filed before an action may be brought against the Texas Windstorm
  Insurance Association concerning the claim.
         (e)  The person insured by the Texas Windstorm Insurance
  Association and the association may agree that an appraisal
  conducted under Subsection (d)(2) of this section is binding on the
  parties.
         (f)  An action brought against the association concerning a
  claim described by Subsection (d) of this section shall be abated
  until the appraisal process under Subsection (d)(2) of this section
  is completed.
         (g)  Notwithstanding Sections 2210.575 and 2210.576,
  Insurance Code, as added by this Act, Subsection (b) of this
  section, or any other provision of this Act, Sections
  2210.576(b)(1)-(3), Insurance Code, apply to any cause of action
  that accrues against the Texas Windstorm Insurance Association on
  or after the effective date of this Act and the basis of which is a
  claim filed under a Texas windstorm and hail policy that is
  delivered, issued for delivery, or renewed by the association,
  regardless of the date on which the policy was delivered, issued for
  delivery, or renewed.
         SECTION 55.  The Texas Windstorm Insurance Association shall
  amend the association's plan of operation to conform to the changes
  in law made by this Act not later than the 60th day after the
  effective date of this Act.
         SECTION 56.  If any provision of this Act or its application
  to any person or circumstance is held invalid, the invalidity does
  not affect other provisions or applications of this Act that can be
  given effect without the invalid provision or application, and to
  this end the provisions of this Act are severable.
         SECTION 57.  This Act takes effect immediately if it
  receives a vote of two-thirds of all the members elected to each
  house, as provided by Section 39, Article III, Texas Constitution.  
  If this Act does not receive the vote necessary for immediate
  effect, this Act takes effect on the 91st day after the last day of
  the legislative session.