TX Property & Casualty cheat sheet

The Texas Commissioner of Insurance is appointed by the governor with senate confirmation and adopts rules, sets rates for some lines, and enforces the Texas Insurance Code.

An agent must hold an active license before soliciting or negotiating insurance; a temporary license issued for a deceased or disabled agent's business lasts no more than 90 days.

Continuing education for licensed agents is 24 credit hours every two years, including at least 2 hours of ethics or consumer protection.

Prompt payment rule: acknowledge a claim within 15 days, begin investigation within 30 days, and pay or deny within 60 days after receiving all requested items; send delay notices every 45 days.

Unfair claim settlement practices include misrepresenting policy provisions, failing to investigate promptly, and offering substantially less than the amount ultimately owed.

The Texas Property and Casualty Insurance Guaranty Association pays covered claims of insolvent member insurers up to $300,000 per claimant.

Residual markets: TWIA writes windstorm and hail coverage in designated coastal catastrophe areas, and the FAIR Plan provides property coverage when voluntary markets are unavailable.

Rebating is illegal: an agent may not give any part of a commission, a premium refund, or other valuable consideration not stated in the policy as an inducement to purchase.

Insurance fraud under Texas law includes knowingly presenting a false claim or false application information; penalties can be criminal as well as civil.

Risk is uncertainty about loss; a peril is the cause of loss (fire, wind, theft); a hazard is a condition that increases the chance or severity of loss (physical, moral, morale).

The principle of indemnity restores the insured to approximately the pre-loss financial position and forbids profiting from a loss.

Insurable interest must exist at policy inception for life insurance and at the time of loss for property insurance.

Actual cash value = replacement cost minus depreciation; replacement cost settlement pays the cost to repair or replace with new property of like kind and quality.

Coinsurance settlement: payment = (insurance carried / insurance required) x loss, capped at the policy limit.

Subrogation transfers the insured's right of recovery against a negligent third party to the insurer after the insurer pays the claim.

The insurance contract is a contract of adhesion, aleatory, unilateral, conditional, and requires utmost good faith; ambiguous policy language is construed against the insurer.

A material misrepresentation on the application may allow rescission; concealment is intentional silence about a material fact, and a warranty is a promise that must be literally true.

The law of large numbers lets insurers predict losses across many similar exposure units; adverse selection is the tendency of poorer-than-average risks to seek coverage.

Homeowners forms: HO-2 broad named perils, HO-3 open peril on the dwelling and named perils on personal property, HO-5 open peril on both, HO-4 renters, HO-6 condominium unit owners, HO-8 older homes.

Homeowners coverages: A dwelling, B other structures, C personal property, D loss of use, E personal liability, F medical payments to others.

Dwelling replacement cost settlement generally requires carrying at least 80% of the dwelling's replacement cost to avoid a reduced (actual cash value) settlement.

Texas promulgated homeowners forms: HO-A provides limited named-peril coverage, HO-B provides named-peril coverage with replacement cost, and HO-C provides open-peril (all-risk) coverage.

Dwelling policies DP-1 (basic), DP-2 (broad), and DP-3 (special) cover the structure and personal property but contain no liability coverage.

Commercial property coinsurance commonly requires 80% of the property's value; the coinsurance penalty reduces recovery when the limit carried is below that requirement.

Flood and surface water are excluded by homeowners and commercial property forms; flood coverage must be purchased separately, usually through NFIP with a 30-day waiting period.

A mortgagee clause entitles the lender to loss payment to the extent of its interest, notice of cancellation or nonrenewal, and the right to pay premium and submit proof of loss.

Property forms exclude vandalism, sprinkler leakage, glass breakage, and water damage when a building has been vacant more than 60 consecutive days.

Texas financial responsibility minimums for private passenger autos are $30,000 per person and $60,000 per accident bodily injury plus $25,000 property damage (30/60/25).

Personal injury protection in Texas must be offered at a minimum of $2,500 per person for medical expenses, lost wages, and funeral costs regardless of fault; a written rejection is required.

Uninsured/underinsured motorist coverage must be offered, and the insured's written rejection is required for the insurer to exclude it.

Personal auto policy parts: A liability, B medical payments, C uninsured/underinsured motorist, D damage to your auto (collision and other-than-collision), E duties after an accident, F general provisions.

Commercial general liability limits: general aggregate, products-completed operations aggregate, personal and advertising injury limit, each-occurrence limit, and damage to premises rented to you.

CGL Coverage A pays bodily injury and property damage; Coverage B pays personal and advertising injury offenses such as libel, slander, false arrest, and invasion of privacy; Coverage C pays medical expenses.

Supplementary payments (defense costs, bail bonds, loss of earnings) are paid in addition to the CGL limits of liability.

Workers compensation has Part One (statutory benefits, no dollar limit), Part Two (employers liability with stated limits), and Part Three (other states coverage).

An umbrella policy pays excess over underlying auto, general liability, and employers liability limits and may drop down to cover gaps not insured by the underlying policies, subject to a self-insured retention.