INSURANCE CODE - NOT CODIFIED
CHAPTER 7. SURETY AND TRUST COMPANIES
Art. 7.01. Venue of Suit on Bond
If any suit shall be instituted upon any bond or obligation of any
insurance company licensed in this State and having authority to
act as surety and guarantor of the fidelity of employees, trustees,
executors, administrators, guardians or others appointed to, or
assuming the performance of any trust, public or private, under
appointment of any court or tribunal, or under contract between
private individuals or corporations, or upon any bond or bonds that
may be required to be filed in any judicial proceedings, or to
guarantee any contract or undertaking between individuals, or
between private corporations, or between individuals or private
corporations and the State and municipal corporations or counties
or between corporations and individuals, or on any bond or bonds
that may be required of any state official, district official,
county official or official of any school district or of any
municipality, the proper court of the county wherein said bond is
filed shall have jurisdiction of said cause. Service therein shall
be had as provided by Section 2, 3, or 4, Article 1.36 of this code,
as applicable. Such guaranty, fidelity and surety companies shall
be deemed resident of the counties wherever they may do business,
and the doing or performing of any business in any county shall be
deemed an acceptance of the provisions of this Act.
Added by Acts 1959, 56th Leg., 2nd C.S., p. 159, ch. 39, Sec. 1.
Amended by Acts 1987, 70th Leg., ch. 46, Sec. 3, eff. Sept. 1, 1987.
Art. 7.02. Withdrawal of Unnecessary Deposits
When two or more companies authorized to write fidelity, guaranty
and surety insurance in the State of Texas merge or consolidate,
and, incident to such merger or consolidation, enter into a total
reinsurance contract by which the merged or ceding company is
dissolved, and its assets acquired and liabilities assumed by the
new or surviving company, the Commissioner of Insurance, upon
finding that the contracting companies have on deposit with the
comptroller two or more deposits made for the same or similar
purposes under either former Article 7.03 (repealed by Acts 1957,
55th Legislature, Regular Session, Chapter 388, p. 1162) or Article
8.05 of the Insurance Code of Texas, shall authorize the
comptroller to retain for a single purpose only the deposit of
greater or greatest amount and value and to permit the new or
surviving reinsuring company, upon proper showing that there is
such duplication of deposits and that the new or surviving company
is the owner thereof, to withdraw any or all duplicate or excessive
deposits.
Added by Acts 1971, 62nd Leg., p. 1904, ch. 569, Sec. 1, eff. June 1,
1971.
Amended by Acts 1997, 75th Leg., ch. 1423, Sec. 11.28, eff. Sept. 1,
1997.
Art. 7.19-1. Bond of Surety Company
(a) Whenever any bond, undertaking, recognizance or other
obligation is, by law or the charter, ordinances, rules and
regulations of a municipality, board, body, organization, court,
judge or public officer, required or permitted to be made, given,
tendered or filed, and whenever the performance of any act, duty or
obligation, or the refraining from any act, is required or
permitted to be guaranteed, such bond, undertaking, obligation,
recognizance or guarantee may be executed by a surety company duly
authorized to do business in this state; and, except as provided by
Subsection (b), (c), or (d) of this section, such execution by such
company of such bond, undertaking, obligation, recognizance or
guarantee shall be in all respects a full and complete compliance
with every law, charter, rule or regulation that such bond,
undertaking, obligation, recognizance or guarantee shall be
executed by one surety or by one or more sureties, or that such
sureties shall be residents, or householders, or freeholders, or
either, or both, or possess any other qualification and all courts,
judges, heads of departments, boards, bodies, municipalities, and
public officers of every character shall accept and treat such
bond, undertaking, obligation, recognizance or guarantee when so
executed by such company, as conforming to, and fully and
completely complying with, every requirement of every such law,
charter, ordinance, rule or regulation.
Provided, however, that any municipality may require in any
specifications for work or supplies, on which sealed bids are
required, that any corporate surety tender shall designate, in a
manner satisfactory to it, an agent resident in the county of such
municipality to whom any requisite notices may be delivered and on
whom service of process may be had in matters arising out of such
suretyship.
(b) If any bond, undertaking, recognizance, or other obligation
described in Subsection (a) of this section is in an amount in
excess of 10 percent of the surety company's capital and surplus,
the municipality, board, body, organization, court, judge, or
public officer may require, as a condition to accepting the bond,
undertaking, obligation, recognizance, or other obligation,
written certification that the surety company has reinsured the
portion of the risk that exceeds 10 percent of the surety company's
capital and surplus with one or more reinsurers who are duly
authorized, accredited, or trusteed to do business in this state.
For the purposes of this subsection, the amount reinsured by any
reinsurer may not exceed 10 percent of the reinsurer's capital and
surplus. The State Board of Insurance shall furnish, on request,
the amount of the allowed capital and surplus as of the date of the
last annual statutory financial statement for a surety company or
reinsurer authorized and admitted to do business in this state.
(c) A bond that is made, given, tendered, or filed under Chapter 53,
Property Code, or Chapter 2253, Government Code, may be executed
only by a surety company that is authorized and admitted to write
surety bonds in this state. If the amount of the bond exceeds
$100,000, the surety must also:
(1) hold a certificate of authority from the United States
secretary of the treasury to qualify as a surety on obligations
permitted or required under federal law; or
(2) have obtained reinsurance for any liability in excess of
$100,000 from a reinsurer that is authorized and admitted as a
reinsurer in this state and is the holder of a certificate of
authority from the United States secretary of the treasury to
qualify as a surety or reinsurer on obligations permitted or
required under federal law.
(d) In determining whether the surety on the bond or the reinsurer
holds a certificate of authority from the United States secretary
of the treasury, a party may conclusively rely on the list of
companies holding certificates of authority as acceptable sureties
on federal bonds and as acceptable reinsuring companies published
in the Federal Register by the United States Department of the
Treasury covering the date on which the bond was executed. A
purchaser, insurer of title, or lender acquiring or insuring an
interest or title to real property may also conclusively rely on and
is protected by a statement on a recorded bond or a sworn statement
by the surety that is recorded and refers to the specific recorded
bond and that states that, at the time the bond was executed, the
surety:
(1) was a holder of a certificate of authority from the United
States secretary of the treasury to qualify as a surety on
obligations permitted or required under federal law; or
(2) had reinsured any liability in excess of $100,000 by a reinsurer
holding a certificate of authority described by Subdivision (1) of
this subsection.
Acts 1959, 56th Leg., p. 146, ch. 87, Sec. 1.
Amended by Acts 1991, 72nd Leg., ch. 242, Sec. 11.28, eff. Sept. 1,
1991. Subsec. (b) amended by Acts 1991, 72nd Leg., 2nd C.S., ch.
12, Sec. 5.01, eff. Jan. 1, 1992; Subsec. (a) amended by and
Subsecs. (c), (d) added by Acts 1997, 75th Leg., ch. 1132, Sec. 1,
eff. Sept. 1, 1997.
Article 7.19-1 was not enacted as part of the Insurance Code of
1951.
Art. 7.20. Construction Payment Bond of Surety Company; Prompt
Payment
Definitions
Sec. 1. In this article:
(1) "Claimant" means a person directly entitled to payment under a
construction payment bond.
(2) "Construction payment bond" means a surety agreement or
obligation issued to guarantee or assure payment by a principal
obligor for work performed or materials supplied or specially
fabricated for a public or private construction project.
(3) "Notice of claim" means a written notification by a claimant who
makes a claim for payment from the surety company. The term does
not include a routine statutory notice required by Section
53.056(b), 53.057, 53.058, 53.252(b), or 53.253, Property Code, or
Section 2253.047, Government Code.
(4) "Surety company" means a licensed surety or guaranty company
that executes and delivers a construction payment bond as a surety
for a principal obligor.
Acknowledgment and investigation of claim
Sec. 2. (a) A surety company that has issued a construction payment
bond shall, not later than the 15th day after the date of receipt of
notice of claim under the bond:
(1) acknowledge receipt of the claim;
(2) begin any review or investigation necessary to determine
whether the surety company is obligated to satisfy the claim under
the bond; and
(3) request from the claimant each document, item of information,
accounting, statement, or form that the surety company then
reasonably believes will be required from the claimant.
(b) Nothing in this article exempts a claimant from compliance with
any applicable statutory or contractual notice requirement.
(c) If the construction payment bond provides an address of the
surety company to which claims should be submitted, the notice of
claim is effective on receipt of the notice at that address.
Acceptance or rejection of claim
Sec. 3. (a) Except as provided by Subsection (c) of this section, a
surety company shall notify a claimant in writing of the acceptance
or rejection of a claim not later than the 30th day after the date
the surety company receives all documents, items of information,
accountings, statements, and forms requested by the surety company
as provided by Section 2 of this article.
(b) If the surety company rejects all or part of the claim, the
notice required by Subsection (a) of this section must state in
specific terms the reasons for the rejection known to the surety
company at that time.
(c) If the surety company is unable to accept or reject the claim
within the period specified by Subsection (a) of this section, the
surety company shall provide written notice to the claimant, not
later than the date specified under Subsection (a), that the surety
company is unable to accept or reject the claim within that period.
The notice provided under this subsection must:
(1) state the reasons for which the surety company needs additional
time to accept or reject the claim; and
(2) include a request for any additional information reasonably
needed by the surety company to process the claim.
(d) Not later than the 30th day after the date a surety company
notifies a claimant under Subsection (c) of this section, the
surety company shall notify the claimant in writing of the
acceptance or rejection of the claim. If the surety company rejects
all or part of the claim, the surety company shall state in specific
terms the reasons for the rejection known to the surety company at
that time.
(e) In addition to any other contractual or statutory basis for
denying a claim, the surety company may reject all or any part of a
claim:
(1) that is the subject of a legitimate dispute between the
principal obligor and the claimant; or
(2) for which the claimant has failed to provide supporting
documents or information reasonably requested by the surety
company.
(f) The time limits provided by this section and Section 2 of this
article may be varied by any statute requiring a construction
payment bond.
(g) This section does not preclude a surety company from asserting
any defense in any action brought by a claimant against the
construction payment bond if a good faith effort is made to inform
the claimant in accordance with this section of reasons for
rejecting all or part of the claim.
Payment of claim
Sec. 4. (a) If a surety company notifies a claimant under Section 3
of this article that the surety company accepts a claim or part of a
claim, the surety company shall pay the claim not later than the
15th day after the date of the notice.
(b) If payment of the claim or part of the claim is conditioned on
the execution of a document or performance of an act by the
claimant, the surety company shall pay the claim not later than the
seventh day after the date the surety company receives the executed
document or evidence that the act has been performed.
(c) For purposes of this section, payment of a claim occurs when the
surety company places the surety company's check or draft in the
United States mail properly addressed to the claimant or the
claimant's representative.
Rules
Sec. 5. The commissioner may adopt rules enforcing this article in
cases in which a surety company violates this article as a general
business practice.
Construction
Sec. 6. (a) This article shall be construed to encourage prompt
payment of just claims made under construction payment bonds of
surety companies. This article does not foreclose any other remedy
available to a claimant by law or contract.
(b) This article may not be construed to:
(1) create a private cause of action;
(2) be a precondition to judicially enforcing obligations under a
construction payment bond;
(3) diminish any other obligation of a surety company that exists by
law; or
(4) prohibit a surety company from asserting a defense against a
construction payment bond claim in a proceeding to enforce a claim.
Modification prohibited
Sec. 7. Any term contained in a construction payment bond that is
inconsistent with this article is void.
Added by Acts 2001, 77th Leg., ch. 470, Sec. 1, eff. Sept. 1, 2001.
Art. 7.20-1. Bail Bond Certificates Issued by Automobile Clubs;
Sureties
Any insurance company which has qualified to transact fidelity and
surety insurance business in this state may, in any year, become
surety in an amount not to exceed $200 with respect to each bail
bond certificate issued in such year by an automobile club, duly
licensed to transact business within this state, or by any truck and
bus association incorporated in this state. Bail bond certificate
means a printed card or other certificate issued by an automobile
club, authorized to transact business within this state, or by any
truck and bus association incorporated in this state to any of its
members, which is signed by such member, and contains a printed
statement that a fidelity and surety company authorized to do
business in this state guarantees the appearance of the person
whose signature appears on the card or certificate, and that such
company will, in the event of the failure of said person to appear
in court at the time of trial, pay any fine or forfeiture imposed on
such person in an amount not to exceed $200.
Acts 1969, 61st Leg., p. 2033, ch. 697, Sec. 1, eff. Sept. 1, 1969.
Article 7.20-1 was not enacted as part of the Insurance Code of
1951.
