| FORMS
Instructions for Completing the SORM-201
Chapter 412.051
of the Labor Code, titled "Duties of State Agencies;
Insurance Reporting Requirements", requires state agencies
to report intended insurance purchases to SORM, not later
than 30 days prior to the scheduled date of purchase. To comply
with this statute, SORM adopted TAC rule 252.307
which requires client agencies to complete and submit form
SORM-201 prior to purchasing insurance or bonds.
When accessing the form on our website, there are two formats
available, MSWord and PDF.
The MSWord format allows the user to electronically type in
the blanks before printing or saving. The PDF format only
allows the user to view or print the form for completion by
hand at a later time. After completion, the form should be
sent to the Bonds & Insurance section of SORM by E-mail,
interoffice mail, fax, or post office.
The SORM-201 is a multi-function form, so some areas are
more appropriate than others for certain requests. The first
section of the form identifies “what” a client
state agency is requesting. Each option specifies the number
of days prior to purchase the form is needed and what sections
of the form should be completed. The most recent list of sponsored
and prohibited insurance policies is posted on our website
under Lines of
Insurance Considered.
Section A, titled General Information, gathers information
about the agency. The contact person’s phone number,
fax number, and E-mail address are needed. In addition, the
type of insurance/bond and the reason for the purchase are
also required. The reason for purchase is very important in
this section and usually falls into one of three categories:
(1) statutory/regulatory requirement; (2) contractual requirement;
or (3) unusual or unique risk/hazard/exposure. If the request
is due to the first or second category, the agency must provide
reference to, and a copy of, the statutory/regulatory document
or contract. If the request is due to the third category,
then it is vital for the agency to fully explain the need
to purchase by thoroughly completing Section B of this form.
Section B, titled Purpose and Intent, asks
“why” the agency is purchasing the insurance or
bond. The purpose of this section is to collect details about
exposures and perils unique to the agency’s operations.
Exposures are situations, practices, or conditions
that might lead to a loss, and may be controllable or uncontrollable,
i.e. leasing or owning real property, custody or ownership
of business personal property/inventory, servicing clients,
operating automobiles, handling money, employing workers,
product liability/performance, etc.
Perils are simply the specific cause(s) of loss, i.e. fire,
lightning, flood, tornado, theft, burglary, automobile accident,
machinery breakdown, terrorism, etc.
The likelihood of a loss occurring refers to the
chances of a loss happening. When answering this question,
factors such as location, internal controls/loss prevention
measures, and nature of the business should be taken in consideration.
For example, the occurrence of an earthquake happening in
Texas is almost nil while this same peril in California might
be definite due to the location. The likelihood of a theft
or misappropriation of money by an employee of a bank might
be higher than that of an employee of a public school due
to the nature of business. On the other hand, due to the internal
controls and loss prevention procedures at the bank, the chance
of loss might be lower than that of the school.
Maximum probable or possible loss refers to the
monetary damages that an agency might incur if a loss were
to happen. These questions are more appropriate for damage
to real or personal property, not liability issues, and helps
to ensure policy limits are adequate to cover a loss. As always,
internal controls and loss prevention procedures should be
considered when establishing answers to these questions. Take
for example a business that handles incoming money from customers
of $30,000 a month and is interested in an Employee Dishonesty
(Crime) Policy. Procedures at the business dictate that one
person or department accepts the money, another reconciles
the account daily, and a third deposits the money at the bank
daily. Although $30,000 passes through the agency monthly,
the maximum possible loss would be the daily amount deposited.
With internal controls and loss prevention measures of separating
duties and daily deposits, the business has reduced the potential
severity of a loss.
How will this policy protect these exposures helps
to ensure the policy or bond will provide the necessary coverage
for the exposures and perils identified. Not only should the
direct loss be considered, but also indirect aspects of the
loss such as defense costs and continuing operations while
repairs are being completed.
Section C, titled Previous Coverage, asks
for general information about what the agency has done in
the previous years. To better assist agencies in the decision
process, SORM asks agencies to provide a copy of the previous
year’s policy along with the SORM-201.
Section D, titled Loss Prevention/ Controls,
inquires about loss prevention measures and controls the agency
has in place to prevent or reduce losses from occurring. A
bond or insurance policy cannot stop a loss from happening;
it only assists in financially replacing or paying for damages.
Overall, it is better to avoid the damage in the first place
through loss prevention and internal controls.
Section E, titled Procurement, is simply
a question as to how the agency intends to procure the bond
or insurance.
Section F, titled Miscellaneous, should be
answered depending on what was selected in the first selection.
The bottom section is designated for SORM’s use. After
reviewing the information provided, SORM will determine if
the insurance/bond is necessary to protect the interest of
the state or is economically advantageous to the state. Upon
determination, the SORM-201 will be returned to the designated
contact person in Section A with the appropriate box marked,
comments if applicable, and a decision date.
If you have any questions, please contact:
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