SECTION 5.3201. Joint Insurance

(a) This section applies to policies or contracts of insurance where a risk is insured by more than one insurer, the insured has a direct right of action against each insurer, and the company originally insuring the risk and the so-called "reinsuring," "assuming," or "jointly insuring" company or companies are permitted by law to charge the same rate or rates of premium for the particular risk insured.

(b) The following statements may be printed in or endorsed on the types of insurance policies specified in subsection (a) of this section.

(1) If the statement is to be printed in the policy, it must be as follows: "The liability of this policy is jointly insured by __________ (print full name and address of jointly insuring company), and the insured is hereby given and granted the same rights of recovery against __________ (print full name of jointly insuring company) as the insured has against __________ (print name of original issuing company). It is hereby agreed and acknowledged that the liability created hereunder is a joint and several obligation. (Two facsimile signatures of officers of the jointly insuring company)."

(2) If the statement is to be used as an endorsement, it must be as follows: "The liability of this policy is jointly insured by __________ (print full name and address of jointly insuring company), and the insured is hereby given and granted the same rights of recovery against __________ (print full name of jointly insuring company) as the insured has against __________ (print name of original issuing company). It is hereby agreed and acknowledged that the liability created hereunder is a joint and several obligation. (Two facsimile signatures of officers of the jointly insuring company). Attached to and forming a part of Policy Number _____ of the __________ (print name of original issuing company) of __________ (city and state), issued at its __________ (print address), Texas, agency. Dated __________, Agents."

(3) If the endorsement specified in paragraph (1) of this subsection is used, the policy must be issued and endorsed by duly authorized agents or persons entitled under the laws of this state to bind each of the companies on the policy. If the endorsement specified in paragraph (2) of this subsection is used, the original policy must be issued and endorsed by a duly authorized agent entitled under the laws of this state to bind the original issuing company on the policy, and the endorsement must be issued and authenticated by a duly authorized agent entitled under the laws of this state to bind the jointly insuring company on the policy. Companies assuming liability by use of either of these statements and agreements must set up in the regular course of business the proper unearned premium reserve.

(c) Any activity specified in the Insurance Code, Article 21.02, and performed on behalf of the original issuing company or the "reinsuring," "assuming," or "jointly insuring" company must be performed by a person duly authorized by the laws of this state to engage in those activities on behalf of each company.

(d) Except as provided in this section, no provision of so-called "reinsurance," "joint insurance," or "guarantee" as described in this section, may be printed in or endorsed on policies by companies. The use of any other provision in or upon such policies is prohibited. No such "joint insurance," "reinsurance," or "guarantee" is permissible unless each company insuring the risk is permitted or authorized to collect the rate of premium charged.

(e) This section does not apply to an ordinary standard reinsurance program or contract whereby one company indemnifies itself against excessive losses through reinsurance and where no attempt is made to give to the insured a direct right of recourse against the reinsuring company. No statement may be printed or endorsed on a policy form which gives notice of this type of indemnification reinsurance contract; provided companies are not prohibited from notifying the insured in any lawful manner of the existence of such indemnification reinsurance.

Source Note: The provisions of this §5.3201 adopted to be effective January 1, 1976; amended to be effective August 9, 1983, 8 TexReg 2810.