TDI Commissioner’s Bulletin B-0067-02 – Reimbursement Policy

TO: All Property and Casualty Insurers and Eligible Surplus Lines Insurers

RE: Senate Bill 714. Relating to the regulation of certain warrantors of vehicle protection products (Adds Article 9035, Chapter 20, Title 132. Revised Statutes) 

Senate Bill 714, “Vehicle Protection Product Regulatory Act” (Act) enacted by the 77th Texas Legislature, establishes regulation of vehicle protection products by the Texas Department of Licensing and Regulation (TDLR). The Act requires warrantors of vehicle protection products, as defined therein, to register with the TDLR. To ensure adequate performance of a warrantor’s obligations to a consumer each warrantor shall comply with one of two options to establish financial security. One option is to insure the warrantor’s vehicle protection products under a reimbursement insurance policy issued by an insurer authorized to transact insurance in Texas or under a surplus lines insurance policy issued by an insurer eligible to place coverage in Texas as regulated under Article 1.14-2, Insurance Code.

Reimbursement insurance policies issued pursuant to this legislation must contain the following language.

“Notwithstanding any other definition, term, condition, limitation, exclusion, endorsement or other provision of this policy or any other insurance policy: (1) the Named Company shall reimburse or pay on behalf of the Insured (Warrantor) any covered amounts the Warrantor is legally obligated to pay or shall provide the service that the Warrantor is legally obligated to perform according to the Warrantor’s obligations under any insured vehicle protection product issued or sold by the Warrantor dwing the term of this policy; and (2) ff the covered amounts are not paid or the covered service is not provided to a consumer within 60 days after the consumer provides proof of loss, payment shall be made directly from the Named Company to the consumer or the Named Company shall provide the required service.”

The TDLR requires additional language for reimbursement insurance policies as stated in the attached TDLR letter to vehicle protection product warrantors.

Insurers may not cancel a reimbursement policy until the insurer delivers to the warrantor a written notice of cancellation pursuant to Articles 21 .49-2A, Insurance Code. Cancellation of a reimbursement insurance policy does not reduce the insurer’s responsibility ‘or vehicle protection products issued by the warrantor and insured under the policy before the date of the cancellation.

While eligible surplus lines insures are not required to file policy forms with the Texas Department of Insurance (TDI) for approval. they must comply with the requirements set forth in the Act and outlined in this bulletin for reimbursement policies covering vehicle protection products purchased on or after January 1 2002. All other insurers planning to write reimbursement insurance policies to cover vehicle protection products purchased on or after January 1, 2002 must file their policy forms, rules and rates with TDI or amend existing filings to comply with these requirements. Programs accepted on an individual risk submission basis do not comply with this Act and must be filed with TDI as a new filing. Reimbursement policies and endorsements are subject to prior approval and the rates and rules for these forms are file and use. All flings must be submitted in accordance with the filing requirements contained in “Property and Casualty Filings Made Easy,” accessible on our website.

This notice provides a summary description of the insurance requirements of Senate Bill 714 and ts not intended to provide a detailed presentation of the law. To view the entire text of the bill, please view www.capitol.state.tx.us.

Questions regarding this bulletin should be addressed to:

Melvin Smith
Commercial Property/Casualty Section, MC 104-PC
Texas Department of Insurance
P O Box 149104
Austin, TX 78714-9104

Sincerely,
Marilyn Hamilton, Associate Commissioner
Property & Casualty Program, MC 104-PC

Notice of Insufficient Reimbursement Insurance Policy
View Sample Letter