SECTION 5.3800. Voluntary Inspection Program Plan of Operation

(a) Purpose and Scope. The purpose and scope of this section is to adopt a plan of operation for the Voluntary Inspection Program which specifies procedures, standards and forms for the implementation of the inspection program. This section addresses the following:

(1) Procedures, standards and forms governing the independent inspection of the condition of residential property to determine insurability, pursuant to the Insurance Code, Article 5.33B;

(2) Procedures and forms governing the licensing or certification of qualified inspectors to conduct inspections of the condition of residential property to determine the insurability of such property;

(3) Enforcement provisions to protect the integrity of the inspection program; and

(4) Procedures for handling complaints relating to these inspections.

(b) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise.

(1) Article 5.33B--Article 5.33B of the Texas Insurance Code entitled Voluntary Inspection Program.

(2) Certificate of insurability--A certificate issued by an inspector pursuant to Article 5.33B indicating that the condition of the property meets or exceeds the minimum standards for insurability that are specified in subsection (f) of this plan of operation.

(3) Commissioner--Commissioner of Insurance of the State of Texas.

(4) Department--Texas Department of Insurance.

(5) Inspection--The physical inspection of the property for which residential property insurance is sought whether the inspection is for a new or renewal certificate of insurability.

(6) Inspector--A person authorized by the Commissioner to perform inspections under Article 5.33B.

(7) Program--Voluntary Inspection Program pursuant to Article 5.33B of the Insurance Code.

(8) Residential property condition evaluation report--The form completed by an inspector which provides specific information regarding the condition of the property and is used to determine the insurability of the property.

(c) Eligibility for Inspection.

(1) Any person having an insurable interest in real or tangible personal property at a fixed location may request an independent inspection of the condition of the property proposed to be insured.

(2) The independent inspection must be performed by an inspector authorized to perform inspections under Article 5.33B, Insurance Code and this plan of operation.

(d) Procedures to Obtain Inspection.

(1) An individual may request inspection from an inspector licensed or certified by the Department in accordance with Article 5.33B, Insurance Code and this plan of operation. The purpose of the inspection is to complete the Residential Property Condition Evaluation Report (Form VIP-2) to determine the insurability of the residential property.

(2) An individual may obtain names and phone numbers of licensed or certified inspectors from the Inspections and Fire Safety Section of the Department by telephone, fax, or mail.

(e) Fees.

(1) Individuals requesting an inspection of their residential property may be required to pay a fee for the inspection in accordance with this subsection. The fee may be required to be paid prior to the inspection.

(2) An inspector may charge a reasonable fee not to exceed $100 per inspection for the inspection of a residential property risk effective January 1, 2007.

(3) An inspector may charge a reasonable fee not to exceed $50 per follow-up inspection in the event repairs are made within 90 days of the initial inspection effective January 1, 2007.

(4) Inspection fees shall include the cost of photographs.

(5) The maximum fees that may be charged for an inspection and a follow-up inspection shall be automatically increased on an annual basis on January 1 of each year, beginning on January 1, 2008, by the same percentage of increase as the increase in the Consumer Price Index established by the U.S. Department of Labor, Bureau of Labor Statistics for the prior calendar year for all urban consumers for all items and for all regions combined, rounded to the nearest dollar. Current inspector fees and the method used to compute the current inspector fees will be available at the Department's VIP website www.tdi.state.tx.us/consumer/VIPcommish.html effective January 1, 2008, and may be obtained by mail from the Inspections Division, Mail Code 103-1A, Texas Department of Insurance, P.O. Box 149104, Austin, Texas 78714-9104.

(6) An inspector may charge, in addition to the inspection fee and the follow-up inspection fee, a reasonable fee for mileage for each trip to and from the residential property risk, taking the most direct route. The mileage fee shall not exceed the federal standard mileage rate for business use as established by the Internal Revenue Service effective January 1, 2007. The maximum mileage rate for VIP inspectors will change to remain equivalent to the federal standard mileage rate for business use as established by the Internal Revenue Service if the federal standard mileage rate is changed by the Internal Revenue Service. Prior to undertaking an inspection, the inspector must inform the individual requesting the inspection that a mileage fee will be charged and the rate used for computing the mileage fee. The current mileage rate will be available at the Department's VIP website www.tdi.state.tx.us/consumer/VIPcommish.html, effective January 1, 2007, and may be obtained by mail from the Inspections Division, Mail Code 103-1A, Texas Department of Insurance, P.O. Box 149104, Austin, Texas 78714-9104.

(f) Minimum Standards for Insurability. The residential property shall comply with the following requirements for average or better condition of the property to qualify for a certificate of insurability.

(1) The general physical condition of residential property shall indicate:

(A) Good maintenance of structure;

(B) No unrepaired previous damage; and

(C) Any construction, installation and repair to the residential structure have been made in accordance with generally accepted standards applicable at the time of the construction, installation or repair.

(2) Good housekeeping is maintained throughout the residential premises.

(3) The residential property proposed for insurability must meet the requirements for average or better condition, as specified in this subsection. Determination of the condition shall be based on the following criteria:

(A) Exterior.

(i) Structural.

(I) Only minor cosmetic foundation related cracks on the slab or above windows and doors;

(II) No major cracks, separation or evidence of shifting or movement in walls, walks and driveway;

(III) No missing window or door panes;

(IV) No signs of active termites or unrepaired insect damage;

(V) Exposed wood (siding, fascia, soffit, doors, steps, etc.) in good condition with no evidence of significant deterioration or significant peeling of paint;

(VI) Pier and beam foundations enclosed under all outside walls; and

(VII) Additions, modifications, or repairs to the exterior made in accordance with generally accepted standards at the time of construction.

(ii) Premises. No accumulation of trash, brush or other debris in yard.

(B) Roof.

(i) No roof coverings that are curling, cracking or have missing shingles;

(ii) No roof coverings that show signs of significant deterioration; and

(iii) No roofs that have been improperly installed or repaired.

(C) Interior.

(i) No visible water damage;

(ii) No major cracks or separation in interior walls, flooring and ceiling;

(iii) Major appliances in good working condition; and

(iv) Additions, modifications or repairs to the interior made in accordance with generally accepted standards at the time of construction.

(D) Electrical.

(i) Electrical wiring in good working condition;

(ii) No evidence of fuses repeatedly blowing or breakers tripping;

(iii) No flickering lights or evidence of overheating wiring; and

(iv) Additions, modifications, or repairs to electrical wiring made in accordance with generally accepted standards applicable at the time of installation.

(E) Plumbing, Heating, Cooling Systems.

(i) Plumbing, heating and cooling systems in good working condition;

(ii) Free from leaks;

(iii) Space heaters and hot water heaters properly vented and appropriate distance maintained from walls and furnishings; and

(iv) Additions, modifications, or repairs to plumbing, heating and cooling systems made in accordance with generally accepted standards applicable at the time of installation.

(F) Other Conditions.

(i) Outbuildings and fences in good condition;

(ii) No business or commercial exposures on premises;

(iii) No vacancy of the property;

(iv) Property accessible to fire equipment; and

(v) No unfenced swimming pools, hot tubs, fish ponds, bodies of water or trampolines.

(g) Inspection Certification Process.

(1) An inspection for residential property insurability shall be made within 30 days from the date of the request and payment of any applicable fee.

(2) The inspection process shall include the completion and issuance of a Residential Property Condition Evaluation Report (Form VIP-2) promulgated by the Department.

(3) The information obtained in the Residential Property Condition Evaluation Report (Form VIP-2) shall be used to determine the insurability of the residential property. This information includes general information on the age and construction of the risk, the condition of the property, identifiable hazards of the property, and diagrams and photographs of the property.

(4) The individual requesting the residential property inspection shall be provided a copy of the Residential Property Condition Evaluation Report (Form VIP-2) within ten days of the completion of the inspection.

(5) If the residential property inspected meets the minimum standards provided in subsection (f) of this plan of operation, the inspector shall issue within ten days of completion of the inspection a Certificate of Insurability (Form VIP-1).

(6) The Certificate of Insurability (Form VIP-1) is promulgated by the Department.

(7) A Certificate of Insurability (Form VIP-1) is valid for a term of three years from the date of issuance to the individual requesting the inspection so long as no substantial changes have been made to the property. If substantial changes are made to the property, an additional inspection may be required by the insurer.

(h) Insurer Processing.

(1) An individual receiving a Certificate of Insurability (Form VIP-1) may provide to an insurer a copy of the certificate as part of the application for residential property insurance coverage.

(2) The existence of a Certificate of Insurability (Form VIP-1) issued under this program creates a presumption that the property condition is adequate for residential property insurance to be issued.

(3) If a Certificate of Insurability (Form VIP-1) is provided to an insurer as part of an application for residential property insurance, the insurer may not use property condition as grounds for refusing to issue or renew a residential property insurance policy unless the insurer reinspects the property and specifies in its declination letter the conditions of deficiency causing the residential property risk to be uninsurable.

(4) As a condition of issuing a policy, when a Certificate of Insurability (Form VIP-1) is used in whole or in part to determine insurability, an insurer may require a written statement by the applicant for residential property insurance stating that there have been no material or substantial changes to the property condition since the date of the inspection certificate.

(i) Certification or Licensing of Inspectors.

(1) Certification.

(A) The following individuals may be certified by the Department as qualified inspectors under this program:

(i) Persons licensed to perform real property inspections under the Real Estate Licensing Act;

(ii) Designated employees or agents of a county or municipality which elects to establish a voluntary inspection program for the inspection of residential properties within the territorial limits of the county or municipality. These employees or agents must be Certified Building Officials or Building Inspectors certified by a model code organization;

(iii) Persons holding an insurance adjusters license pursuant to the Insurance Code Chapter 4101;

(iv) Persons holding a local recording agents license pursuant to the Insurance Code §§4051.001 - 4051.303;

(v) Persons holding a solicitors license pursuant to the Insurance Code §§4051.001 - 4051.303;

(vi) Licensed Texas Professional Engineers.

(B) Certification procedures shall be as follows:

(i) Each applicant for a certification to act as a qualified inspector for the Voluntary Inspection Program shall file with the Department a completed Application for Residential Property Inspector Licensing/Certification (Form VIP-3) accompanied by such documents and attachments necessary to support the application;

(ii) No certification shall be approved by the Department until a completed Application for Residential Property Inspector Licensing/Certification (Form VIP-3) has been filed with the Department;

(iii) Upon review and approval of each completed application, a certification will be issued by the Department to the applicant;

(iv) If an applicant is disapproved the Department shall issue to the applicant a letter of disapproval specifying the reasons for such disapproval; and

(v) Certification remains valid so long as the applicant remains qualified under subparagraph (A) of this paragraph.

(2) Licensing.

(A) The following individuals may be licensed by the Department as qualified inspectors under this program.

(i) Designated employees or agents of a county or municipality which elects to establish a voluntary inspection program for the inspection of residential property located within the territorial limits of a county or municipality and having at least one year of experience actively performing field inspections of residential property and not licensed as specified in paragraph (1)(A) of this subsection;

(ii) Individuals who complete at least 60 college semester hours of Engineering, Safety, or related fields and one year experience of actively performing inspections of real property for the purpose of rating, underwriting, building code compliance or real estate appraisals;

(iii) Individuals who have two years experience actively performing inspections of real property for the purpose of rating, underwriting, building code compliance or real estate appraisals; or

(iv) Individuals who are employed by an entity that is responsible for and specializes in rating, underwriting, building code compliance or real estate appraisal and who have been actively performing inspections of real property for those purposes for a minimum of one year.

(B) Licensing procedures shall be as follows:

(i) Each applicant for a license to act as a qualified inspector for the Voluntary Inspection Program shall file with the Department a completed Application For Residential Property Inspector License/Certification (Form VIP-3) accompanied by such documents and attachments necessary to support the application;

(ii) No license shall be approved by the Department until a completed Application for Residential Property Inspector Licensing/Certification (Form VIP-3) has been filed with the Department;

(iii) Upon review and approval of each completed application a license will be issued by the Department to the applicant; and

(iv) If an applicant is disapproved the Department shall issue to the applicant a letter of disapproval specifying the reasons for the disapproval.

(3) Expiration and Renewal of Certification or License.

(A) Each license or certification issued to an inspector under the Voluntary Inspection Program shall expire two years following the date of issue unless it is suspended or revoked by the Commissioner prior to this expiration date.

(B) A person may renew an unexpired license or certification by filing a Renewal Application (Form VIP-6) with the Department.

(C) If a person's license or certification has been expired for 90 days or less, the person may renew the license or certification by filing a Renewal Application (Form VIP-6) with the Department.

(D) If a person's license or certification has been expired for longer than 90 days, the person may not renew the license. The person may obtain a new license or certification by complying with the requirements and procedures, as outlined in subsection (i), for obtaining an original license or certification.

(E) At least 30 days before the expiration of a person's license or certification, the Department shall send written notice of the impending expiration to the person at the person's last known address according to the records of the Department.

(F) Each inspector shall at all times keep the Department informed of the inspector's current address. Such address shall be included in each original application and renewal application. In the absence of the submission of a specific written request to change that address, which must be separate from any other submission, the inspector's current address is presumed to be the address on the most recent renewal or original application form, whichever is latest. Such address shall be considered the inspector's last known address for the purposes of notice to the inspector by the Department. Any request for a change of address shall be addressed to the Inspections and Fire Safety Section of the Property and Casualty Program, Texas Department of Insurance, 333 Guadalupe, P.O. Box 149104, Austin, Texas 78714-9104.

(4) Persons Not Eligible for Certification or Licensing. The following individuals may not be certified or licensed as qualified inspectors under this program.

(A) Individuals employed by an insurance company except local recording agents, solicitors or insurance adjusters;

(B) Individuals employed by the Department; or

(C) Individuals whose qualifying license under paragraph (1)(A) of this subsection has been revoked or suspended.

(5) Persons Authorized To Perform Inspections. An inspection of residential property for the purposes of determining property condition insurability pursuant to Article 5.33B, Insurance Code, and this plan of operation shall only be performed by an individual licensed or certified by the Department as a qualified inspector in accordance with this subsection.

(j) Denial, Suspension, Cancellation or Revocation of an Inspector's Certification or License.

(1) The Commissioner may discipline a licensee or certificate holder or deny an application for inspector's license or certification if the Commissioner finds that the licensee or applicant:

(A) Has knowingly, willfully, fraudulently, or with gross negligence, signed or cause to be prepared an inspection report or issued a Certificate of Insurability that contains a false, fictitious, or fraudulent statement or entry;

(B) Has willfully violated any provision of the insurance laws of this State;

(C) Has intentionally made a material misstatement in the application for such license or certification;

(D) Has obtained, or attempted to obtain, such license or certification by fraud or misrepresentation;

(E) Has been guilty of fraudulent or dishonest acts; or

(F) Is convicted of a felony.

(2) After notice and opportunity for a hearing, the Commissioner may cancel or revoke any license or certification issued under this section if the holder or possessor of the license or certification is found to be in violation of, or to have failed to comply with, any provisions of this section or any other rule or regulation of the Department or any specific provision of the Texas Insurance Code. In lieu of cancellation or revocation, the Commissioner, upon determination from the facts that it would be fair, reasonable or equitable, may order one or more of the sanctions specified in subparagraphs (A) - (D) of this paragraph.

(A) The Commissioner may order the suspension of the license or certification for a specific period, not to exceed one year.

(B) The Commissioner may issue an order directing the holder or possessor of the license or certification to cease and desist from the specified activity determined to be in violation of any provisions of this section or any rule or regulation of the Department or any specific provision of the Texas Insurance Code.

(C) The Commissioner may issue an order directing the holder or possessor of the certification or license to pay an administrative penalty in accordance with Chapter 84 of the Insurance Code.

(D) The Commissioner may order any other statutory sanction that may be enacted pursuant to the Insurance Code, Article 5.33B.

(3) If it is found after notice and hearing that any person approved and appointed by the Commissioner to conduct inspections pursuant to this section and Article 5.33B of the Insurance Code has failed to comply with an order lawfully issued by the Commissioner pursuant to this section or Article 5.33B of the Insurance Code, the Commissioner shall, unless the Commissioner's order is lawfully stayed, cancel the license or certification.

(4) The Commissioner may informally dispose of any matter under this subsection by consent order or default.

(k) Complaint Procedures.

(1) The Department shall have the responsibility for handling and processing all complaints relating to property inspections conducted under the Voluntary Inspection Program that have not been resolved within 30 days after receipt by the qualified inspector.

(2) All complaints as specified in paragraph (1) of this subsection shall be forwarded by the qualified inspector to the Department's Inspections and Fire Safety Section. The Inspections and Fire Safety Section shall immediately notify the complainant that the complaint has been forwarded to the Department's Inspections and Fire Safety Section.

(3) All forwarded complaints and all complaints submitted directly to the Department shall be assigned to and handled by the Department's Inspections and Fire Safety Section.

(4) The qualified inspector shall provide assistance in handling complaints as requested by the Department's Inspections and Fire Safety Section.

(5) Until final disposition of any complaint that is forwarded to the Department by a qualified inspector or that is submitted directly to the Department, the complainant shall be notified by the Department's Inspections and Fire Safety Section of the status of the complaint at 30-day intervals.

(6) Any affected insured, any affected insurer, or any affected qualified inspector may appeal the Inspections and Fire Safety Section staff disposition of any complaint to the Commissioner within 30 days after such disposition.

(l) Forms. The Department adopts by reference the Voluntary Inspection Program forms. Specimen copies of these forms are available from the Inspections and Fire Safety Section of the Property and Casualty Program, Texas Department of Insurance, 333 Guadalupe Street, P.O. Box 149104, Austin, Texas 78714-9104. The forms are more specifically identified as follows:

(1) Form VIP-1, Certificate of Insurability.

(2) Form VIP-2, Residential Property Condition Evaluation Report.

(3) Form VIP-3, Application for Residential Property Inspector License/Certification.

(4) Form VIP-4, License.

(5) Form VIP-5, Certificate.

(6) Form VIP-6, Renewal Application.

Source Note: The provisions of this §5.3800 adopted to be effective October 30, 1996, 21 TexReg 10302; amended to be effective November 14, 2006, 31 TexReg 9292