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RULE §14.2034Self-Insurance Requirements

(a) This section applies to a licensee's general liability insurance, including premises and operations coverage. This section shall not apply to worker's compensation insurance, including employer's liability coverage.

(b) A licensee applying for self-insurance shall file LNG Form 2027 with AFS along with materials which will allow AFS to determine whether:

  (1) the net worth of the applicant is adequate in relationship to the size of operations and the extent of its request for self-insurance authority. The applicant shall demonstrate that it will maintain a net worth sufficient to ensure that it will meet its statutory obligations to the public to pay all claims relating to general liability, including premises and operations coverage; and

  (2) the applicant has a sound self-insurance program. The applicant shall demonstrate that it has established and shall maintain an insurance program that will protect the public against all claims involving LNG activities to the same extent as the minimum limits specified in Table 1 of §14.2031 of this title (relating to Insurance Requirements). Such a program may include but not be limited to one or more of the following: reserves; irrevocable letter of credit, as specified in subsection (h) of this section; sinking funds; third-party financial guarantees; parent company or affiliate sureties; excess insurance coverage; or other similar arrangements.

(c) AFS may consider applications for approval of other securities or agreements, or may require any other information which may be necessary to ensure the application satisfies that the security or agreement offered will afford adequate security for protection of the public.

(d) AFS may approve a licensee's application for self-insurance if the licensee demonstrates to AFS its ability to satisfy its obligations for the minimum insurance requirements specified in §14.2031 of this title. AFS may approve the licensee as a self-insurer for a specific time period or for an indefinite period until further action is taken by AFS.

(e) The applicant shall file semi-annual reports and annual statements with the applicant's financial status and status of its self-insurance program with AFS during the period of its self-insurer status by March 10 and September 10 of each year.

(f) After ten days' notice to the applicant, AFS may require the applicant to appear and demonstrate that it continues to have adequate financial resources to pay all general liability, including premises and operations coverage claims, and that it remains in compliance with the other requirements of this section. If the applicant fails to do so, AFS shall revoke its self-insurer status and may order that the licensee is ineligible for self-insurance in the future.

(g) A state agency or institution, county, municipality, school district, or other governmental subdivision may meet the requirements for workers' compensation coverage or general liability and/or motor vehicle liability insurance if permitted by the Texas Workers' Compensation Act, Texas Labor Code, Title 5, Subtitle A; and Texas Natural Resources Code, §116.036, by submitting LNG Form 2995 to AFS.

(h) Letters of credit filed with LNG Form 2028 shall:

  (1) be issued by a federally chartered and federally insured bank authorized to do business in the United States;

  (2) be irrevocable during their terms;

  (3) be payable to the Commission in part or in full upon demand and receipt from the Commission of a notice of forfeiture; and

  (4) not apply to the licensing requirements for worker's compensation insurance, including employer's liability coverage.

Source Note: The provisions of this §14.2034 adopted to be effective May 26, 2003, 28 TexReg 4100; amended to be effective June 5, 2006, 31 TexReg 4607; amended to be effective December 24, 2012, 37 TexReg 9921; amended to be effective February 15, 2021, 46 TexReg 1044

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