28 Tex. Admin. Code § 5.9917 - Application, Binder, Policy Issuance, Renewal, and Cancellation

(a) An agent must maintain and submit, at the request of FAIR Plan, written documentation that indicates all of the following.

(1) At least two insurance companies, not in the same holding company as defined in Insurance Code Chapter 823, concerning Insurance Holding Company Systems, licensed to write and actually writing residential property insurance or property owners' association insurance, as applicable, in Texas have declined to provide residential property insurance or property owners' association insurance (the names of the two insurance companies must be identified), and the applicant has not received a valid offer of comparable residential property insurance or property owners' association insurance from an insurance company licensed in Texas, not including any surplus lines insurers.

(2) There are no outstanding taxes, assessments, penalties, or charges with respect to the property to be insured, except those covered under a properly filed deferral affidavit in compliance with § 33.06 of the Tax Code, concerning Deferred Collection of Taxes on Residence Homestead of Elderly or Disabled Person or Disabled Veteran.

(3) The applicant has not received written notice from an authorized public entity stating that the property is in violation of any building, housing, air pollution, sanitation, health, fire, or safety code, ordinance, or rule.

(b) FAIR Plan may specify what documentation would fulfill the requirements of subsection (a)(1) - (3) of this section.

(c) FAIR Plan is under no obligation to issue residential property insurance or property owners' association insurance unless the property constitutes an insurable risk in accordance with FAIR Plan's underwriting rules. FAIR Plan, in determining whether the property is insurable, may not consider the condition of surrounding property or properties, where such condition is not within the control of the applicant.

(d) FAIR Plan must deliver a policy or binder to the agent upon acceptance of the risk. FAIR Plan must pay the authorized commission to the agent.

(e) The effective date of coverage may be no earlier than the date and time that FAIR Plan both accepts and binds the risk. The policy must be issued in the name of FAIR Plan, as insurer.

(f) FAIR Plan may suspend acceptance of applications in the state when issuance of binders and/or policies has been suspended by TWIA. FAIR Plan may also suspend acceptance of applications when and in the part of the state it finds that an ongoing event threatens to create an imminent danger of catastrophic losses.

(g) The policy must be issued for a term of one year.

(h) If the property is found to be an insurable risk but the inspection reveals that there are one or more physical deficiencies, surcharges will be imposed according to the rates and underwriting rules. If the physical deficiencies are corrected and verified, the surcharges must be revised.

(i) In accordance with the underwriting rules of FAIR Plan except for subsection (k) of this section, at least 30 days before the expiration of a FAIR Plan policy, FAIR Plan must do one of the following:

(1) send an offer to the policyholder with a copy to the agent to renew the FAIR Plan policy for a term of one year at the FAIR Plan rates that will be in force on the effective date of the renewal;

(2) send an offer to the policyholder with a copy to the agent to renew the FAIR Plan policy conditioned on a change in coverage, limits, and/or terms or conditions; or

(3) send a notice to the policyholder with a copy to the agent of nonrenewal of FAIR Plan policy.

(j) If a payment for an estimated premium, annual premium, or any installment payment is refused or dishonored by the bank upon which it is drawn for any reason, coverage under FAIR Plan policy must be cancelled for nonpayment of premium, and FAIR Plan must send a notice of cancellation.

(k) Every two years starting with the second renewal, the policyholder must reapply for residential property insurance or property owners' association insurance, as applicable, in the voluntary market. If a diligent effort has been made and the policyholder is unable to obtain residential property insurance or property owners' association insurance, as evidenced by two current declinations from insurers licensed to write property insurance and actually writing residential property insurance or property owners' association insurance, as applicable, in Texas, the policyholder will be eligible for renewal of FAIR Plan coverage. If a FAIR Plan policyholder receives a valid offer of comparable residential property insurance or property owners' association insurance from an insurance company licensed by Texas, other than a surplus lines carrier, then the policyholder is no longer eligible for coverage and FAIR Plan may nonrenew the policy.

(l) FAIR Plan may not issue a policy to an applicant if the applicant or any proposed named insured is indebted to FAIR Plan on a prior FAIR Plan policy. If the new FAIR Plan policy has already been bound or issued, then FAIR Plan must cancel that binder or policy and deduct from any return premium the amount that FAIR Plan is owed from the prior FAIR Plan policy.

(m) Binders must be issued for a definite period, not to exceed 90 days.

(n) Policies issued are not subject to flat cancellation and are subject to a minimum earned premium as stated in the underwriting rules.

(o) If an insurance policy will not be issued, the full earned premium must be charged.

(p) A binder terminates upon the acceptance of a risk by FAIR Plan and the payment of any premium due; or upon the cancellation of a risk and notice of reasons for the cancellation given to the applicant and agent.

(q) FAIR Plan may not cancel a policy or binder issued by it, except:

(1) for a condition that would have been grounds for nonacceptance of the risk had such condition been known to FAIR Plan at the time of acceptance;

(2) for property that does not meet the underwriting rules;

(3) for nonpayment of premium, including nonpayment of premium on a prior FAIR Plan policy;

(4) for fraud;

(5) for material misrepresentation;

(6) for evidence of incendiarism by the insured or another acting on the insured's behalf; or

(7) at the written request of the insured.

(r) FAIR Plan must send notice of cancellation, stating the reasons for cancellation to an insured and agent. The cancellation takes effect according to the policy provisions.

(s) Any cancellation notice to an insured, except for the cancellation set forth in subsection (q)(7) of this section, must be accompanied by a statement that the insured has a right to appeal as provided in § 5.9919 of this subchapter (relating to Right to Appeal).

(t) If a property meets all underwriting requirements, FAIR Plan must calculate the actual annual premium. FAIR Plan must remit a return premium to the applicant if the provisional binder premium exceeds the actual annual premium. FAIR Plan must bill the applicant for additional premium if the actual annual premium exceeds the provisional binder premium.

(u) FAIR Plan must cancel a binder on a pro rata basis. If an applicant requests cancellation of a binder, FAIR Plan must cancel the binder on a pro rata basis.

Notes

28 Tex. Admin. Code § 5.9917

The provisions of this §5.9917 adopted to be effective May 28, 2003, 28 TexReg 4153; Amended by Texas Register, Volume 49, Number 41, October 11, 2024, TexReg 8387, eff. 10/15/2024