SECTION 5.6408. Fidelity and Performance Bonds

(a) Fidelity bonds required of an administrator under the Labor Code §407A.051(c)(12) and §5.6403(c)(6) of this division (relating to Application for Initial Certificate of Approval) and a service company under the Labor Code §407A.051(c)(13) and §5.6403(c)(7) of this division must protect against loss caused directly by an act of fraud or dishonesty by the employees of the administrator or service company and such fidelity bond shall include the group as a loss payee.

(b) A performance bond required under the Labor Code §407A.057(a) and §5.6403(c)(8) of this division for a service company providing claims services to or on behalf of a group shall be in substantially the form set forth in subsection (c) of this section.

(c) A performance bond required under the Labor Code §407A.057(a) and §5.6403(c)(8) of this division shall contain the following text and shall be in the following format:

Attached Graphic

(d) Administrators and service companies may only obtain a fidelity or performance bond from a surety company authorized to engage in business in this state as a surety or an eligible surplus lines insurer in compliance with the Insurance Code Chapter 981 and regulations adopted thereunder.

(e) An administrator or service company that has a fidelity or performance bond cancelled or terminated and not replaced with new coverage that meets the requirements of the Labor Code Chapter 407A and this division and that is effective concurrently upon the date of the cancellation or termination shall:

(1) immediately inform the commissioner in writing, which in no event shall be later than five business days from the date the administrator or service company first becomes aware of the cancellation or termination; and

(2) immediately inform the group in writing, which in no event shall be later than five business days from the date the administrator or service company first becomes aware of the cancellation or termination.

Source Note: The provisions of this §5.6408 adopted to be effective August 31, 2004, 29 TexReg 8353; amended to be effective February 15, 2009, 34 TexReg 813