The Texas Real Estate Commission (TREC) proposes amendments to 22 TAC §535.211, Professional Liability Insurance, or Any Other Insurance that Provides Coverage for Violations of Subchapter G of Chapter 1102, in Subchapter R, Real Estate Inspectors.

The proposed amendments to §535.211 clarify the minimum standards of financial liability that an inspector must maintain during the period an inspector is licensed. The Legislature has enacted §1102.1141, Texas Occupations Code, which requires an inspector to maintain a minimum of $100,000 financial responsibility in the form of an insurance policy, bond, or other acceptable security, to provide for professional liability coverage to protect the public against a violation of Subchapter G, Chapter 1102, Texas Occupations Code. TREC has long interpreted the language in §1102.1141 to require inspectors who choose to maintain financial responsibility through an insurance policy to obtain a policy with the minimum liability coverage required in the statute excluding any offsets or reductions in coverage for attorney's fees, defense costs, or other costs. The basis for this long-standing interpretation is found in subsection (a)(1)(B), which requires the insurance policy to "provide{} for professional liability coverage to protect the public against a violation of {law}."

TREC has received questions about whether certain clauses in an insurance policy, such as a defense within limits or wasting clause, which reduce the limits of liability insurance coverage available under the policy, comply with the statutory requirements in §1102.1141. Because these and other similar clauses reduce the amount of liability insurance coverage available to protect the public against a violation of Subchapter G, Chapter 1102, Texas Occupations Code, TREC proposes these amendments to clarify its interpretation that an insurance policy containing such clauses does not satisfy the statutory requirements to maintain financial responsibility in §1102.1141.

Kristen Worman, Deputy General Counsel, has determined that for the first five-year period the proposed amendments are in effect there will be no fiscal implications for the state or for units of local government as a result of enforcing or administering the sections. There is no anticipated impact on small businesses, micro-businesses or local or state employment as a result of implementing the sections. There will be an economic cost to persons who are required to comply with the proposed amendments due to an expected increase in license holder insurance premiums of approximately 10 to 20 percent.

Ms. Worman also has determined that for each year of the first five years the amendments as proposed are in effect the public benefits anticipated as a result of enforcing the sections will be improved clarity for license holders and protection for consumers.

Comments on the proposal may be submitted to Kristen Worman, Deputy General Counsel, Texas Real Estate Commission, P.O. Box 12188, Austin, Texas 78711-2188 or via email to general.counsel@trec.texas.gov. The deadline for comments is 30 days after publication in the Texas Register.

The amendments are proposed under Texas Occupations Code §1101.151, which authorizes the Texas Real Estate Commission to adopt and enforce rules necessary to administer Chapters 1101 and 1102; and to establish standards of conduct and ethics for its license holders to fulfill the purposes of Chapters 1101 and 1102.

The statute affected by this proposal is Chapter 1102, Texas Occupations Code. No other statute, code or article is affected by the proposed amendments.