2005 Texas Insurance Code - Not Codified CHAPTER 21. GENERAL PROVISIONS


INSURANCE CODE - NOT CODIFIED
CHAPTER 21. GENERAL PROVISIONS
SUBCHAPTER A. AGENTS AND AGENTS' LICENSES
Art. 21.11-2. AGENCY CONTRACTS WITH INSOLVENT INSURERS.
Article repealed effective April 1, 2007
Sec. 1. Every agency contract entered into on and after the effective date of this Act by an insurance company writing fire and casualty insurance in Texas shall contain, or shall be construed to contain, the following provision: Notwithstanding any other provision of this contract, the obligation of the agent to remit written premiums to the company shall be changed upon the commencement of delinquency proceedings as defined in Article 21.28, Insurance Code of Texas of 1951, as amended. Subsequent to the commencement of delinquency proceedings, the obligation of the agent to remit premiums shall be confined to premiums earned prior to the date of cancellation of policies stated in the order of a court of competent jurisdiction under Article 21.28 of this code canceling the policies. The agent shall not owe or remit to the company or to the Liquidator-Receiver any premiums that are unearned as of the date of the cancellation stated in the order canceling the policies. Sec. 2. On or after the effective date of the cancellation of policies stated in the court's order canceling policies, the agent shall promptly account to the receiver for all premiums to be returned to the insured or the replacement coverage to be obtained and the earned premiums to be paid to the receiver. Any of those unearned premiums in the hands of the agent on the effective date of the policy cancellations shall be returned promptly by the agent to the insured who paid them or, with the approval of the insured, shall be used to purchase new coverage for the insured with a different insurer. Any of the earned premiums in the hands of the agent shall be remitted promptly to the receiver. Sec. 3. This article does not prejudice any cause of action by the receiver against any agent for the recovery of unearned premiums that were not returned to policyholders and earned premiums that were not promptly remitted to the receiver. Sec. 4. This article may not be construed to render the agent an agent of the receiver for earned or unearned premiums. Added by Acts 1973, 63rd Leg., p. 1263, ch. 462, Sec. 1, eff. Aug. 27, 1973. Amended by Acts 1989, 71st Leg., ch. 1082, Sec. 6.04, eff. Sept. 1, 1989.
SUBCHAPTER B. MISREPRESENTATION AND DISCRIMINATION
Art. 21.20-2. ADVERTISEMENTS FOR CERTAIN HEALTH BENEFIT PLANS.
Scope of Article
Sec. 1. (a) This article applies only to a health benefit plan that provides benefits for medical or surgical expenses incurred as a result of a health condition, accident, or sickness, including an individual, group, blanket, or franchise insurance policy or agreement, a group hospital service contract, or an individual or group evidence of coverage issued by: (1) an insurance company; (2) a group hospital service corporation operating under Chapter 20 of this code; (3) a health maintenance organization operating under the Texas Health Maintenance Organization Act (Chapter 20A, Vernon's Texas Insurance Code); or (4) an approved nonprofit health corporation that is certified under Section 5.01(a), Medical Practice Act (Article 4495b, Vernon's Texas Civil Statutes), and that holds a certificate of authority issued by the commissioner under Article 21.52F of this code. (b) This article does not apply to: (1) a health benefit plan that provides coverage: (A) only for a specified disease; (B) only for accidental death or dismemberment; or (C) for wages or payments in lieu of wages for a period during which an employee is absent from work because of sickness or injury; or (2) a long-term care policy, including a nursing home fixed indemnity policy, unless the commissioner determines that the policy provides benefit coverage so comprehensive that the policy is a health benefit plan as described by Subsection (a) of this section.
Disclaimers
Sec. 2. (a) Subject to Article 21.21 of this code, an advertisement for a health benefit plan may include rate information without including information about all benefit exclusions and limitations if the advertisement includes prominent disclaimers that clearly indicate that: (1) the rates are illustrative; (2) a person should not send money to the issuer of the health benefit plan in response to the advertisement; (3) a person cannot obtain coverage under the health benefit plan until the person completes an application for coverage; and (4) benefit exclusions and limitations may apply to the health benefit plan. (b) Any rate mentioned in the advertisement shall indicate the age, gender, and geographic location on which that rate is based. Added by Acts 1997, 75th Leg., ch. 489, Sec. 1, eff. Sept. 1, 1997.
SUBCHAPTER D. CONSOLIDATION, LIQUIDATION, REHABILITATION, REORGANIZATION OR CONSERVATION OF INSURERS
Art. 21.28-A. INSURER DELINQUENCIES AND PREVENTION OF INSURER DELINQUENCIES; SUPERVISION OF INSURERS AND PROCEEDINGS, CONSERVATORSHIPS, LIQUIDATIONS--ADDITIONAL AND ALTERNATE PROVISIONS.
Article repealed effective April 1, 2007
Purposes and findings
Sec. 1. It is the sense of the Legislature that existing provisions and conditions of law and the ordered procedures of law are sometimes not adequate, nor appropriate under all circumstances, in respect of a need to remedy the financial condition and the management of certain insurers. Neither are the laws adequate for the rehabilitation of insurers who voluntarily request rehabilitation. A void exists in the laws with respect to those insurers most susceptible to rehabilitation or the regaining of solvency. The Legislature finds and determines that the placing of an insurer in receivership often destroys or diminishes, or is likely to destroy or diminish, one or more of the following values or assets: (a) the value of the insurance account or in-force business of the insurer, (b) the value of the insurer as a going concern, (c) the value of its agency force, and (d) the value of other of its assets. The Legislature declares that such values and assets should be preserved if the circumstances of the insurer's financial condition warrant an attempt to conserve or rehabilitate such insurer and such rehabilitation or conservation is otherwise feasible, but in cases in which rehabilitation or conservation would be inefficient or impracticable, the board is directed to promulgate rules that encourage the merger of insurers in weak financial condition with insurers in strong financial condition. It is the purpose of the Legislature to provide for rehabilitation and conservation of insurers by authorizing and requiring the additional facility of supervision and conservatorship by the commissioner, to authorize action to resolve whether an attempt be made to rehabilitate and conserve an insurer, and to avoid, if possible and feasible, the necessity of temporary or permanent receivership. It is the further purpose of this Act to provide for protection of the assets of an insurer pending determination of whether or not an insurer can be successfully rehabilitated. It is not the sense of the Legislature that rehabilitation will be accomplished in every case, but it is the purpose of this Article to provide a facility and direction for attempting the rehabilitation without immediate resort to the harsher remedy of receivership. The rules and procedures authorized for conservatorship may not be employed without following the rules and procedures promulgated to promote the merger of insurers in weak financial condition. In the event that receivership ultimately becomes necessary, it is nevertheless the belief and finding of the Legislature that the preliminary supervision and conservatorship is preventive of a dissipation of assets and will thus benefit policyholders, creditors and owners; and the commissioner is directed, in its discretion, to the use of this authorization. The Legislature further finds that an insurer delinquency, or the state's incapacity to properly proceed in a threatened delinquency, directly or indirectly affects other insurers by creating a lack of public confidence in insurance and in insurance companies. As respects the state, insurer delinquencies are destructive of public confidence in the capacity of the state to regulate insurers. These and other harmful results of insurer delinquency are properly minimized by a further enactment designed to protect and in aid of insureds, creditors and owners. The Legislature intends and expects that the inappropriate as well as the appropriate concerns in respect of insurance and insurers will be reduced by the existence and operation of this law. The Legislature declares that it is a proper concern of this state and proper policy to attempt to correct or remedy insurer misconduct, ineptness or misfortune. It is the purpose of the Legislature to express, or to imply from context when not expressed, an authorization, provision and enabling of the promulgation of rules and regulations by the board as directed in these legislative findings and in the augmentation of this law; and to provide also for any other requisite administrative action. In consequence of the foregoing, the substance and procedure of this Article is here declared to be the public policy of this state and necessary to the public welfare. Such policy and welfare requires the availability of this law and the application of this law whenever circumstances warrant; and it is therefore a condition of doing an insurance business in this state; and it is made applicable and is a consequence of any other transactions in respect of an insurer or insurance. And in conjunction with existing law, the rationale is effected in the provision herein for a generally ordered sequence, and review at each such step, of supervision, concurrent conservation and rehabilitation (including reinsurance), and, as may at any time or ultimately be indicated or determined, cessation of the conservation by accomplishment of rehabilitation or by receivership and liquidation.
Definition, application and scope
Sec. 2. As used in this Article, the following words, terms and phrases (in single quotes in this Section of the Article but not in quotes in other Sections) include the meanings, significance or application described in this Section, except as another meaning is clearly requisite from the purposes or is otherwise clearly indicated by the context. (a) "Insurance Company" (used interchangeably with "insurer") is any person, organization, association or company, (authorized or unauthorized, admitted or non-admitted) acting as an insurer, or as principal or agent of an insurer, including stock companies, reciprocals or interinsurance exchanges, Lloyds associations, fraternal benefit societies, stipulated premium companies, title insurance companies, and mutual companies of all kinds, including state-wide mutual assessment corporations, local mutual aids, burial associations, and county mutual insurance companies and farm mutual insurance companies. (b) In respect of an insurance company or insurer, "insolvent" or "insolvency" and the phrases in further identity of insurer delinquency and threatened insurer delinquency, mean and include, and the conditions to which this Article is applicable include, but are not limited to, any one or more of the following circumstances or conditions. (1) if an insurance company's required surplus, capital, or capital stock is impaired to an extent prohibited by law, or (2) if an insurance company continues to write new business when it is not possessed of the surplus, capital or capital stock which is required of it by law to permit it to do so, or (3) if the business of any such insurance company is being conducted fraudulently, or (4) if any such insurance company attempts to dissolve or liquidate without first having made provisions, satisfactory to the Commissioner of Insurance, for liabilities arising from policies of insurance issued by such company. (c) "Exceeded its Powers" includes and means but is not limited to the following circumstances: (1) if an insurance company has refused to permit examination of its books, papers, accounts, records, or affairs by the Commissioner of Insurance, his deputy, or duly commissioned examiners; or if any insurance company, organized in the State of Texas, has removed from the state such books, papers, accounts or records necessary for an examination of such insurance company, or (2) if an insurance company has failed to promptly answer inquiries authorized by Article 1.24 of this Code, or (3) if an insurance company has neglected or refused to observe an order of the Commissioner to make good, within the time prescribed by law, any prohibited deficiency in its capital, capital stock, or surplus, or (4) if an insurance company without first having obtained written approval of the Commissioner has by contract or otherwise: (i) totally reinsured its entire outstanding business, or (ii) merged or consolidated substantially its entire property or business with another insurer; or (5) if any insurance company is continuing to write business after its license has been revoked or suspended; or (6) if an insurance company is in a condition that renders the continuance of its business hazardous to the public or to holders of its policies or certificates of insurance. (d) "Consent," as used in this Act, includes and means agreement to either supervision or conservatorship by the insurance company.
Notice to comply with written requirements of commissioner; noncompliance; taking charge as conservator
Sec. 3. If upon examination or at any other time it appears to or is the opinion of the Commissioner of Insurance that any insurance company is insolvent, or its condition is such as to render the continuance of its business hazardous to the public or to holders of its policies or certificates of insurance, or if such company appears to have exceeded its powers (as defined herein) or has failed to comply with the law, or if such insurance company gives its consent (as defined herein), then the Commissioner of Insurance shall upon his determination (a) notify the insurance company of his determination, and (b) furnish to the insurance company a written list of the Commissioner's requirements to abate his determination, and (c) if the Commissioner makes a further determination to supervise he shall notify the insurance company that it is under the supervision of the Commissioner of Insurance and that the Commissioner is applying and effecting the provisions of this Article. Such insurance company shall comply with the lawful requirements of the Commissioner of Insurance. If placed under supervision, the insurance company shall have not more than one hundred-eighty (180) days from the date of the Commissioner's notice of supervision to comply with the requirements of the Commissioner. During the period of supervision, the insurance company shall continue to pay claims according to terms of the insurance policy, and the Commissioner may schedule a hearing relating to the insurance company in supervision with not less than ten (10) days' written notice to all parties of record on his own motion or that of any party of record. However, notice may be waived by the parties of record. If after hearing it is determined that the insurance company has failed to comply with the lawful requirements of the Commissioner, it has not been rehabilitated, it is insolvent, or it is otherwise in such a condition as to render the continuance of its business hazardous to the public or to holders of its policies or certificates of insurance, or if the company appears to have exceeded its powers as defined in this Article, the Commissioner of Insurance, acting for himself, or through a conservator appointed by the Commissioner of Insurance for that purpose, shall take charge as conservator of the insurance company and all of the property and effects thereof. If after hearing it is determined that the insurance company has been rehabilitated or its condition has otherwise been remedied such that the continuance of its business is no longer hazardous to the public or to holders of its policies or certificates of insurance, the Commissioner may release that insurance company from supervision. Section 15, Administrative Procedure and Texas Register Act (Article 6252-13a, Vernon's Texas Civil Statutes), does not apply to hearings held by the Commissioner or his representative under this Article.
Confidentiality of certain proceedings and records
Sec. 3A. (a) All hearings, orders, notices, correspondence, reports, records, and other information in the possession of the Texas Department of Insurance relating to the supervision or conservatorship of any insurance company are confidential during the period of supervision and conservatorship. On termination of the supervision and conservatorship, the information in the custody of the department that relates to the supervision and conservatorship becomes public information. (b) This section does not prohibit access to hearings, orders, notices, correspondence, reports, records, and other information by the State Board of Insurance. (c) The provisions of the Administrative Procedure and Texas Register Act (Article 6252-13a, Vernon's Texas Civil Statutes) relating to discovery apply to the parties of record in these proceedings. (d) The Commissioner of Insurance or the State Board of Insurance may open the proceedings or disclose the information to a department, agency, or instrumentality of this or another state or the United States if the Commissioner of Insurance or the State Board of Insurance determines that the disclosure is necessary or proper for the enforcement of the laws of this or another state or the United States. (e) An officer or employee of the Texas Department of Insurance is not liable for release of information without a showing that the release of information was accomplished with actual malice. This section does not apply to information (1) if the insureds of the insurance company are not protected by Article 9.48, 21.28-C, or 21.28-D of this code or by statutes substantially similar to those Articles, or (2) on the appointment of a receiver for the insurance company by a court of competent jurisdiction.
Prohibited acts during period of supervision
Sec. 4. (a) During the period of supervision, the Commissioner may appoint a supervisor to supervise such insurance company and may provide that the insurance company may not do any of the following things, during the period of supervision, without the prior approval of the Commissioner or his supervisor: (1) Dispose of, convey or encumber any of its assets or its business in force; (2) Withdraw any of its bank accounts; (3) Lend any of its funds; (4) Invest any of its funds; (5) Transfer any of its property; (6) Incur any debt, obligation or liability; (7) Merge or consolidate with another company; (8) Enter into any new reinsurance contract or treaty; or (9) Terminate, surrender, forfeit, convert, or lapse any policy or contract of insurance, except for nonpayment of premiums due, or to release, pay, or refund premium deposits, accrued cash or loan values, unearned premiums, or other reserves on any insurance policy or contract. (b) The Liquidator of the State Board of Insurance, or his duly appointed deputy, may be appointed to serve as the supervisor.
Insurance agent of record
Sec. 4A. (a) Unless otherwise prohibited, the supervisor, conservator, or receiver shall furnish the agent of record with a copy of each communication provided to the insured, if in the judgment of the supervisor, conservator, or receiver, furnishing such copy will serve to materially protect the interests of policyholders. The supervisor, conservator, or receiver may also request the assistance of any statewide associations of insurance agents to furnish their members with information that in the judgment of the supervisor, conservator, or receiver may serve to materially protect the interests of policyholders. (b) In the event the supervisor, conservator, or receiver sells the insurance policies of a delinquent insurer to another insurer, the pecuniary interest of the agent of record in the insurance policies being sold shall be recognized by the purchaser, whether or not the purchaser customarily conducts its business through insurance agents. (c) The insurer purchasing such insurance policies shall conduct its business with the insured through the agent of record and shall furnish the agent of record with a written limited agency contract providing for the terms and conditions that shall serve to guide the conduct of their business together. Such limited agency contract shall provide a level of commission that shall be reasonable, adequate, and nonconfiscatory. (d) Nothing contained in this Act shall be construed to prohibit the agent of record from renewing insurance policies purchased by the insurer from a delinquent insurer with another insurer. (e) This section does not apply to: (1) any life, accident, or health insurance policy or contract delivered or issued for delivery by an insurer that is subject to any provision of Chapter 3, 11, 14, or 22 of this code; (2) any contract or certificate that is delivered or issued for delivery by a group hospital service corporation organized under Chapter 20 of this code; or (3) any contract or evidence of coverage delivered or issued for delivery by a health maintenance organization operating under a certificate of authority issued under the Texas Health Maintenance Organization Act (Chapter 20A, Vernon's Texas Insurance Code).
Conservatorship or liquidation
Sec. 5. If, after notice and opportunity for hearing, it is determined that such insurance company is insolvent, or its condition is such as to render the continuance of its business hazardous to the public or to holders of its policies or certificates of insurance, or if the company appears to have exceeded its powers as defined in this Article, or has failed to comply with any lawful requirements of the Commissioner, or upon consent by an insurance company, and if it is determined that supervision is inadequate to accomplish the rehabilitation of the company, the Commissioner in his discretion may appoint a conservator, who shall immediately take charge of such insurance company and all of the property, books, records, and effects thereof, and conduct the business thereof, and take such steps toward the removal of the causes and conditions, which have necessitated such order, as the Commissioner may direct. During the pendency of conservatorship, the conservator shall make such reports to the Commissioner from time to time as may be required by the Commissioner, and shall be empowered to take all necessary measures to preserve, protect, and recover any assets or property of such insurance company, including claims or causes of action belonging to or which may be asserted by such insurance company, and to deal with the same in his own name as conservator, and shall be empowered to file, prosecute, and defend any suit or suits which have been filed or which may thereafter be filed by or against such insurance company which are deemed by the conservator to be necessary to protect all of the interested parties or any property affected thereby. If at the time of appointment of a conservator or at any time during the pendency of such conservatorship it appears that the interest of the policy holders or certificate holders of such insurance company can best be protected by reinsuring the same, the conservator may, with the approval of or at the direction of the Commissioner: (1) reinsure all or any part of such insurance company's policies or certificates of insurance with some solvent insurance company authorized to transact business in this state, and (2) to the extent that such insurance company in conservatorship is possessed of reserves attributable to such policies or certificates of insurance, the conservator may transfer to the reinsuring company such reserves or any portion thereof as may be required to consummate the reinsurance of such policies, and any such reserves so transferred shall not be deemed a preference of creditors. The liquidator of the State Board of Insurance, or his duly appointed deputy, may be appointed to serve as the conservator. During the pendency of a conservatorship, the Commissioner may schedule a hearing relating to the insurance company in conservatorship with not less than ten (10) days' written notice to all parties of record on his own motion or that of any party of record; provided, however, that notice may be waived by the parties of record. If the Commissioner of Insurance is satisfied at any time and regardless of the presence or absence of any state of supervision or conservatorship, that such insurance company is not in condition to continue business in the interest of its policy or certificate holders, the Commissioner of Insurance shall give notice to the Attorney General who shall thereupon apply to any Court in Travis County, Texas, having jurisdiction thereof for leave to file a suit in the nature of quo warranto to forfeit the charter of such insurance company or to require it to comply with the law or to satisfy the Commissioner of Insurance as to its solvency, and to satisfy the requirement that its condition is such as to render the continuance of its business not hazardous to the public or to the holders of its policies or certificates of insurance. It shall be in the discretion of the Commissioner of Insurance to determine at any time whether or not the insurance company is placed in supervision or he will operate the insurance company through a conservator, as provided above, or report it to the Attorney General for the purpose of taking any remedial action including, without limitation, applying for appointment of a receiver under Article 21.28 of this code. No period of supervision or conservatorship is necessary as a prerequisite for the Attorney General to take that remedial action. When all the policies of an insurance company are reinsured or terminated, and all of its affairs concluded, as herein provided, the Commissioner of Insurance shall report the same to the Attorney General, who shall take such action as may be necessary to effect the forfeiture or cancellation of the charter of the insurance company so reinsured and liquidated. Where the Commissioner of Insurance lends his approval to the merger, consolidation or reinsurance of all the policies of one insurance company with that of another, the same shall be reported to the Attorney General who shall proceed to effect the forfeiture or cancellation of the charter of the insurance company from which the policies were merged, consolidated or reinsured, in the same manner as is provided for the charters of companies totally reinsured or liquidated. The cost incident to the supervisor's and conservator's service shall be fixed and determined by the Commissioner of Insurance and, subject to Subsection (a) of Section 8 of Article 21.28 of this code, shall be a charge against the assets and funds of the insurance company to be allowed and paid as the Commissioner of Insurance may determine. A conservator and his agents and employees are not liable for and a cause of action may not be brought against any of them for an action taken or not taken by them relating to the adjustment, negotiation, or settlement of claims.
Publication of notice of conservatorship
Sec. 5A. (a) On appointment of a conservator as provided by Sections 5 and 6 of this Article, the Commissioner of Insurance shall publish notice of the conservatorship in at least one newspaper with general circulation in each county that has a population of at least 100,000 according to the most recent federal decennial census. (b) The notice must include: (1) the name of the insurer placed in conservatorship; (2) the date on which the insurer was placed in conservatorship in this state; (3) the reasons for placing the insurer in conservatorship; and (4) any courses of action with relation to the insurer available to policyholders and any duties with which the policyholders may be required to comply. (c) The Commissioner of Insurance must publish the notice required by this section not later than the seventh day after the date the Commissioner enters an order placing the insurer in conservatorship.
Out of state companies
Sec. 6. This Article shall apply to insurance companies doing an insurance business but not domiciled in the State of Texas, whether authorized to do business in this state or not. In the event that the Commissioner of Insurance makes any of the findings provided for in Section 3 of this Article concerning any such insurance company or finds that any such insurance company is not possessed of the minimum surplus or capital or capital stock required by the Insurance Code of the State of Texas for similar type domestic companies, or if the insurance company gives its consent as defined herein, the Commissioner of Insurance shall have the same power and jurisdiction to appoint an ancillary supervisor or ancillary conservator as to the assets of such out of state insurer located in this state as provided herein for domestic insurance companies. In the event that any such out of state insurance company shall fail to comply with the provisions of Section 4 of this Article with respect to any of its assets or policies located within this state during any period of supervision, such act or violation shall constitute sufficient grounds for the immediate revocation of its certificate of authority to do business in this state and for the immediate appointment of an ancillary conservator to take charge of its assets located within this state. In addition, if a conservator, rehabilitator, receiver, or liquidator or his equivalent has been appointed in the state of domicile with respect to the insurance company, the Commissioner of Insurance in his discretion may immediately and without prior notice and hearing appoint an ancillary conservator for the assets, property, and books and records of the out of state insurer located in this state subject to Section 7 of this Article. Any ancillary supervisor or ancillary conservator appointed with respect to assets, property, and books and records located in this state belonging to an out of state insurance company shall have all of the powers and authority provided for in Section 5 of this Article with respect to such assets, property, and books and records located in this state and, in addition, any ancillary conservator so appointed may reinsure all or any part of such insurance company's policyholders or certificate holders located within this state with some solvent insurance company authorized to transact business in this state and may transfer to the reinsuring company, as reserve funds, assets or any portion thereof in his possession as may be required to consummate the reinsurance of such policies and any of such assets transferred as reserve funds shall not be deemed a preference of creditors. The Commissioner of Insurance, on any grounds permitting referral to the Attorney General for remedial action against a domestic insurance company, may at any time and without prior action having been taken in the state of domicile, report an out of state insurance company for remedial action including, without limitation, making application for appointment of a receiver under Article 21.28 of this code.
Review and Stay of Action
Sec. 7. During the period of supervision and during the period of conservatorship, the insurance company may request the Commissioner of Insurance or in his absence, the duly appointed deputy for such purpose, to review an action taken or proposed to be taken by the supervisor or conservator, specifying wherein the action complained of is believed not to be in the best interests of the insurance company, and such request shall stay the action specified pending review of such action by the Commissioner or his duly appointed deputy. Any order entered by the Commissioner appointing a supervisor and providing that the insurance company shall not do certain acts as provided in Section 4 of this Article, any order entered by the Commissioner appointing a conservator, and any order by the Commissioner following the review of an action of the supervisor or conservator as hereinabove provided may be appealed under Article 1.04 of this code. Either party to said action may appeal to the Appellate Court having jurisdiction of said cause and said appeal shall be at once returnable to said Appellate Court having jurisdiction of said cause and said action so appealed shall have precedence in said Appellate Court over all causes of a different character therein pending.
Venue
Sec. 8. Except for causes of action based upon terms of an insurance policy or policy or policies issued by an insurance company placed in conservatorship, any suit filed against an insurance company or its conservator, after the entrance of an order by the Commissioner of Insurance placing such insurance company in conservatorship and while such order is in effect, shall be brought in a court of competent jurisdiction in Travis County, Texas, and not elsewhere. The conservator appointed hereunder for such company may file suit in any court of competent jurisdiction in Travis County, Texas, against any person for the purpose of preserving, protecting, or recovering any assets or property of such insurance company including claims or causes of action belonging to or which may be asserted by such insurance company.
Duration of conservatorship
Sec. 9. The conservator shall complete his duties and responsibilities as required by this Act not later than the ninetieth (90th) day after the date on which he is appointed conservator. The Commissioner of Insurance may extend the conservatorship for additional successive periods of thirty (30) days each for a total period of extensions not to exceed one hundred and eighty (180) successive days, if the Commissioner determines and issues written findings that there is a substantial likelihood of rehabilitation and no hearing is required before the Commissioner makes his determination. During the period of conservatorship, the insurance company shall continue to pay claims according to the terms of the insurance policy. If rehabilitated, the rehabilitated insurance company shall be returned to management or new management under such reasonable conditions as will best tend to prevent the defeat of the purposes for which it was placed in conservatorship.
Administrative Election of Proceedings
Sec. 10. (a) If the Commissioner determines to act under authority of this Article, or is directed by the State Board of Insurance or a court of competent jurisdiction to act under this Article, the sequence of his acts and proceedings shall be as set forth herein. However, it is a purpose and substance of this Article to authorize administrative discretion--to allow the State Board of Insurance and the Commissioner administrative discretion in the event of insurance company delinquencies--and in furtherance of that purpose, the Commissioner is hereby authorized in respect of insurance company delinquencies or suspected delinquencies to proceed and administer either under this Article or under any other applicable law, or under this law in conjunction with other law, either as such law is now existing or as is hereafter enacted, and it is so provided.
Rules and Regulations
Sec. 11. The State Board of Insurance shall be empowered to adopt and promulgate such reasonable rules and regulations as may be necessary for the augmentation and accomplishment of this Act, including its purposes.
Other laws; conflicts
Sec. 12. (a) Other statutes authorized for use and application in conjunction with this Article are Section 14 of Article 17.25, and Articles 14.33 and 22.22 of the Insurance Code. Also authorized for use, in conjunction with this Article, in delinquency proceedings or threatened insolvencies of insurers, are any other statutes or laws possible of application with this Act or in the procedures of this Act, or in augmentation of this Act whether or not directed as applicable by such other statute; but in the event of conflict between this Article and any other Article, the provisions of this Article shall govern. (b) Notwithstanding any other provision of law, the Commissioner may meet with a supervisor or conservator appointed under this Article and with the attorney or other representative of the supervisor or conservator, without the presence of any other person, at the time of any proceeding or during the pendency of any proceeding held under authority of this Article to carry out his duties under this Article or for the supervisor or conservator to carry out his duties under this Article.
Insurer's attorney, actuary, and accountant
Sec. 13. (a) Notwithstanding any other provision of this article, during a supervision proceeding, the insurer may employ an attorney, actuary, and accountant of the insurer's choice to assist the insurer during the supervision. (b) The supervisor shall authorize the payment of reasonable fees and expenses from the insurer for the attorney, actuary, or accountant. Secs. 14 to 16. [Blank]
Fees from rehabilitated entities
Sec. 17. (a) The State Board of Insurance may collect fees from any entity that is regulated by the board as provided by Subsection (h) of Section 7 of Article 1.10 of this code and that is successfully rehabilitated by the board. The fees shall be in amounts sufficient to cover but not exceed the costs of rehabilitation of that entity. The board shall use the fees for the sole purpose of the rehabilitation of the entity from which they are collected. Fees collected under this subsection shall be deposited in and expended through the State Board of Insurance Operating Fund. The supervisor, conservator, or commissioner shall use the employees of the entity being rehabilitated, to the maximum extent possible, instead of outside consultants, actuaries, attorneys, accountants, other personnel or departmental employees, in order to minimize the expense of rehabilitation or the necessity of fees for rehabilitation. (b) The Commissioner may determine the terms of the collection or repayment of the fees from any successfully rehabilitated entity. Added by Acts 1967, 60th Leg., p. 671, ch. 281, Sec. 1, eff. Aug. 28, 1967. Amended by Acts 1981, 67th Leg., p. 2641, ch. 707, Sec. 4(29), eff. Aug. 31, 1981. Sec. 7 amended by Acts 1983, 68th Leg., p. 284, ch. 57, Sec. 1, eff. May 3, 1983; Sec. 2 amended by Acts 1987, 70th Leg., ch. 1073, Sec. 2, eff. Sept. 1, 1987; Sec. 3 amended by and Sec. 3A added by Acts 1987, 70th Leg., ch. 1073, Sec. 34, eff. Sept. 1, 1987; Secs. 4 to 6, 12 amended by Acts 1987, 70th Leg., ch. 1073, Sec. 34, eff. Sept. 1, 1987; Sec. 2(c) amended by Acts 1989, 71st Leg., ch. 1082, Sec. 6.11, eff. Sept. 1, 1989; Sec. 3 amended by Acts 1989, 71st Leg., ch. 1082, Sec. 5.01, eff. Sept. 1, 1989; Sec. 3A amended by Acts 1989, 71st Leg., ch. 1082, Sec. 4.02, eff. Sept. 1, 1989; Sec. 4A added by Acts 1989, 71st Leg., ch. 480, Sec. 1, eff. Sept. 1, 1989; Sec. 5 amended by Acts 1989, 71st Leg., ch. 1082, Sec. 6.12, eff. Sept. 1, 1989; Sec. 5A added by Acts 1989, 71st Leg., ch. 1082, Sec. 4.02, eff. Sept. 1, 1989; Sec. 9 amended by Acts 1989, 71st Leg., ch. 1082, Sec. 5.01, eff. Sept. 1, 1989; Sec. 17 added by Acts 1989, 71st Leg., ch. 1082, Sec. 5.01, eff. Sept. 1, 1989; Sec. 1 amended by Acts 1991, 72nd Leg., ch. 242, Sec. 11.11, eff. Sept. 1, 1991; Sec. 4A(e) added by Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Sec. 1.22, eff. Jan. 1, 1992; Sec. 3 amended by Acts 1993, 73rd Leg., ch. 685, Sec. 8.08, eff. Sept. 1, 1993; Sec. 3A(a), (e) amended by Acts 1993, 73rd Leg., ch. 685, Sec. 8.09, eff. Sept. 1, 1993; Sec. 7 amended by Acts 1993, 73rd Leg., ch. 685, Sec. 4.07, eff. Sept. 1, 1993; Sec. 13 added by Acts 1993, 73rd Leg., ch. 685, Sec. 8.10, eff. Sept. 1, 1993; Sec. 17(a) amended by Acts 1993, 73rd Leg., ch. 685, Sec. 8.11, eff. Sept. 1, 1993; Sec. 12(a) amended by Acts 1995, 74th Leg., ch. 76, Sec. 14.47, eff. Sept. 1, 1995. Art. 21.28-C. PROPERTY AND CASUALTY INSURANCE GUARANTY ACT.
Article repealed effective April 1, 2007
Short title
Sec. 1. This article shall be known as the Texas Property and Casualty Insurance Guaranty Act.
Purpose
Sec. 2. The purpose of this Act is to: (1) provide a mechanism for the payment of covered claims under certain insurance policies to avoid excessive delay in payment; (2) avoid financial loss to claimants or policyholders because of the impairment of an insurer; (3) assist in the detection and prevention of insurer insolvencies; and (4) provide an association to assess the cost of that protection among insurers.
Scope
Sec. 3. (a) This Act applies to all kinds of direct insurance, and except as provided in Section 12 of this Act, is not applicable to the following: (1) life, annuity, health, or disability insurance; (2) mortgage guaranty, financial guaranty, or other forms of insurance offering protection against investment risks; (3) fidelity or surety bonds, or any other bonding obligations; (4) credit insurance, vendors' single-interest insurance, collateral protection insurance, or any similar insurance protecting the interests of a creditor arising out of a creditor-debtor transaction; (5) insurance of warranties or service contracts; (6) title insurance; (7) ocean marine insurance; (8) any transaction or combination of transactions between a person, including an affiliate of such a person, and an insurer, including an affiliate of such an insurer, that involves the transfer of investment or credit risk unaccompanied by the transfer of insurance risk, including transactions, except for workers' compensation insurance, involving captive insurers, policies in which deductible or self-insured retention is substantially equal in amount to the limit of the liability under the policy, and transactions in which the insured retains a substantial portion of the risk; or (9) any insurance provided by or guaranteed by government. (b) This Act applies to insurance written through the Texas Mutual Insurance Company only as provided by this subsection. The application of this article to the Texas Mutual Insurance Company is on a prospective basis on and after January 1, 2000. That company is only liable for assessments for a claim with a date of injury that occurs on or after January 1, 2000. The association, with respect to an insolvency of the company, is only liable for a claim with a date of injury that occurs on or after January 1, 2000.
Construction
Sec. 4. This Act shall be liberally construed to effect the purposes under Section 2 of this Act, which will constitute an aid and guide to interpretation.
Definitions
Sec. 5. In this Act: (1) "Account" means any one of the three accounts created under Section 6 of this Act. (2) "Affiliate" means a person who, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with an impaired insurer on December 31 of the year next preceding the date the insurer becomes an impaired insurer. (3) "Association" means the Texas Property and Casualty Insurance Guaranty Association. (4) "Board" means the board of directors of the association. (5) "Claimant" means any insured making a first-party claim or any person instituting a liability claim. A person who is an affiliate of the impaired insurer may not be a claimant. (6) "Commissioner" means the commissioner of insurance. (7) "Control" means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract other than a commercial contract for goods or nonmanagement services, or otherwise, unless the power is the result of an official position with or corporate office held by the person. Control is presumed to exist if any person, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing 10 percent or more of the voting securities of any other person. This presumption may be rebutted by a showing that control does not exist in fact. (8) "Covered claim" means an unpaid claim of an insured or third-party liability claimant that arises out of and is within the coverage and not in excess of the applicable limits of an insurance policy to which this Act applies, issued or assumed (whereby an assumption certificate is issued to the insured) by an insurer licensed to do business in this state, if that insurer becomes an impaired insurer and the third-party claimant or liability claimant or insured is a resident of this state at the time of the insured event, or the claim is a first-party claim for damage to property that is permanently located in this state. A corporation or other entity that is not an individual is considered to be a resident of the state in which the entity's principal place of business is located. "Covered claim" shall also include unearned premiums, but in no event shall a covered claim for unearned premiums exceed $25,000. Individual covered claims (including any and all derivative claims by more than one person which arise from the same occurrence, which shall be considered collectively as a single claim under this Act) shall be limited to $300,000, except that the association shall pay the full amount of any covered claim arising out of a workers' compensation claim made under a workers' compensation policy. "Covered claim" shall not include any amount sought as a return of premium under a retrospective rating plan or any amount that is directly or indirectly due any reinsurer, insurer, self-insurer, insurance pool, or underwriting association, as subrogation recoveries, reinsurance recoveries, contribution, indemnification, or otherwise, and the insured of an impaired insurer is not liable, and the reinsurer, insurer, self-insurer, insurance pool, or underwriting association is not entitled to sue or continue a suit against that insured, for any subrogation recovery, reinsurance recovery, contribution, indemnity, or any other claim asserted directly or indirectly by a reinsurer, insurer, insurance pool, or underwriting association to the extent of the applicable liability limits of the policy written and issued to the insured by the insolvent insurer. "Covered claim" shall not include supplementary payment obligations, including adjustment fees and expenses, attorney's fees and expenses, court costs, interest and penalties, and interest and bond premiums incurred prior to the determination that an insurer is an impaired insurer under this Act. "Covered claim" shall not include any prejudgment or postjudgment interest that accrues subsequent to the determination that an insurer is an impaired insurer under this Act. "Covered claim" shall not include any claim for recovery of punitive, exemplary, extracontractual, or bad-faith damages, whether sought as a recovery against the insured, insurer, guaranty association, receiver, special deputy receiver, or commissioner, awarded in a court judgment against an insured or insurer. Notwithstanding any other provision of this Act, the association's liability for shareholder derivative actions or other claims for economic loss incurred by a claimant in the claimant's capacity as a shareholder under an insurance policy placed in force on or after January 1, 1992, is limited to $300,000 for each policy, inclusive of defense costs, regardless of the number of claimants under each policy. "Covered claim" shall not include, and the association shall not have any liability to an insured or third-party liability claimant, for its failure to settle a liability claim within the limits of a covered claim under this Act. With respect to a covered claim for unearned premiums, both persons who were residents of this state at the time the policy was issued and persons who are residents of this state at the time the company is found to be an impaired insurer shall be considered to have covered claims under this Act. If the impaired insurer has insufficient assets to pay the expenses of administering the receivership or conservatorship estate, that portion of the expenses of administration incurred in the processing and payment of claims against the estate shall also be a covered claim under this Act. (9) "Impaired insurer" means: (A) a member insurer that is placed in temporary or permanent receivership or liquidation under an order of a court of competent jurisdiction, including the courts of any other state, based on a finding of insolvency and that has been designated an impaired insurer by the commissioner; or (B) a member insurer placed in conservatorship after it has been determined by the commissioner to be insolvent and that has been designated an impaired insurer by the commissioner. (10) "Member insurer" means any insurer who: (A) writes any kind of insurance to which this Act applies under Section 3 of this Act, including the exchange of reciprocal or inter-insurance contracts; and (B) is licensed to transact insurance in this state, including any stock, mutual, Lloyds insurer, reciprocal or inter-insurance exchange, or county mutual insurance company. (11) "Net direct written premiums", when assessing other than the workers' compensation line of business, means direct premiums written in this state on insurance policies to which this Act applies, less return premiums on those policies and dividends paid or credited to policyholders on that direct business. The term does not include premiums on contracts between insurers or reinsurers. When assessing the workers' compensation line of business, the term "net direct written premiums" includes the modified annual premium prior to the application of any deductible premium credit, less return premiums on those policies and dividends paid or credited to policyholders on that direct business. The term does not include premiums on contracts between insurers or reinsurers. (12) "Person" means any individual, corporation, partnership, association, or voluntary organization.
Association
Sec. 6. The Texas Property and Casualty Insurance Guaranty Association is a nonprofit, unincorporated legal entity composed of all member insurers, who must be members of the association as a condition of their authority to transact insurance in this state. The association shall perform its functions under a plan of operation approved under Section 9 of this Act and shall exercise its powers through the board of directors. For purposes of administration and assessment, the association is divided into the workers' compensation insurance account, the automobile insurance account, and the account for all other lines of insurance to which this Act applies.
Board of directors
Sec. 7. (a) The board of directors of the association is composed of nine persons who serve terms as established in the plan of operation. Five members shall be selected by member insurers, subject to the approval of the commissioner. To be eligible to serve as an insurance industry board member, a person must be a full-time employee of a member insurer. The remaining members shall be representatives of the general public appointed by the commissioner. Vacancies on the board shall be filled for the remaining period of the term by a majority vote of the remaining board members, subject to the approval of the commissioner. (b) In approving selections to the board, the commissioner shall consider whether all member insurers are fairly represented. (c) Members of the board of directors may be reimbursed from the assets of the association for expenses incurred by them as members of the board of directors. (d) A public representative may not be: (1) an officer, director, or employee of an insurance company, insurance agency, agent, broker, solicitor, adjuster, or any other business entity regulated by the Texas Department of Insurance; (2) a person required to register with the Texas Ethics Commission under Chapter 305, Government Code, in connection with the person's representation of clients in the field of insurance; or (3) related to a person described by Subdivision (1) or (2) of this subsection within the second degree of affinity or consanguinity. (e) Each member of the board of directors shall file a financial statement with the secretary of state in accordance with Sections 3 and 4, Chapter 421, Acts of the 63rd Legislature, Regular Session, 1973 (Article 6252-9b, Vernon's Texas Civil Statutes). (f) A director of the association or any member company or other entity represented by the director may not receive any money or valuable thing directly, indirectly, or through any substantial interest in any other corporation, firm, or business unit for negotiating, procuring, participating, recommending, or aiding in a transaction, reinsurance agreement, merger, purchase, sale, or exchange of assets, policies of insurance, or property made by the association or the supervisor, conservator, or receiver on behalf of an impaired insurer. The director, company, or entity may not be pecuniarily or contractually interested, as principal, co-principal, agent, or beneficiary, directly, indirectly, or through any substantial interest in any other corporation, firm, or business unit, in the transaction, reinsurance agreement, merger, purchase, sale, or exchange.
Powers and duties of association
Sec. 8. (a) The association shall pay covered claims that exist before the designation of impairment or that arise within 30 days after the date of the designation of impairment, before the policy expiration date if the policy expiration date is within 30 days after the date of the designation of impairment, or before the insured replaces the policy or causes its cancellation if the insured does so within 30 days after the date of the designation. The obligation is satisfied by paying to the claimant the full amount of a covered claim for benefits. The association's liability is limited to the payment of covered claims. The association has no liability for any other claim or damages, including claims for recovery of attorney's fees, prejudgment or postjudgment interest, or penalties, extracontractual damages, multiple damages, or exemplary damages, or any other amount sought by or on behalf of any insured or claimant or any other provider of goods or services retained by any insured or claimant in connection with the assertion or prosecution of any claims, without regard to whether the claims are covered, against the insured or an impaired insurer, the impaired insurer, the guaranty association, the receiver, the special deputy receiver, the commissioner, or the liquidator. This subsection does not exclude the payment of workers' compensation benefits or other liabilities or penalties authorized by Title 5, Labor Code, arising from the association's processing and payment of workers' compensation benefits after the designation of impairment. (b) The association shall undertake to discharge the policy obligations of the impaired insurer, including the duty to defend insureds under a liability policy, to the extent that the policy obligations are covered claims under this Act. In performing its statutory obligations, the association may also enforce any duty imposed on the insured party or beneficiary under the terms of any policy of insurance within the scope of this Act. In performing its statutory obligations under this Act, the association shall not be considered to be in the business of insurance, shall not be considered to have assumed or succeeded to any liabilities of the impaired insurer, and shall not be considered to otherwise stand in the shoes of the impaired insurer for any purpose, including the issue of whether the association is amenable to the personal jurisdiction of the courts of any other state. (c) The association shall assess insurers amounts necessary to pay the obligations of the association under Subsection (a) of this section after an insolvency, the expenses of handling covered claims subsequent to an insolvency, and other expenses authorized by this Act. The assessments of each member insurer shall be in the proportion that the net direct written premiums of the member insurer for the calendar year preceding the assessment bears to the net direct written premiums of all member insurers for the calendar year preceding the assessment. Each member insurer shall be notified of the assessment not later than the 30th day before the date on which the assessment is due. A member insurer may not be assessed in any year an amount greater than two percent of that member insurer's net direct written premiums for the calendar year preceding the assessment. If the maximum assessment, with the other assets of the association, does not provide in any one year an amount sufficient to make all necessary payments, the funds available shall be prorated, and the unpaid portion shall be paid as soon thereafter as funds become available. The association shall pay claims in any order it considers reasonable, including the payment of claims as they are received from the claimants or in groups or categories of claims. The association may defer, in whole or in part, the assessment of any member insurer if the assessment would cause the member insurer's financial statement to reflect amounts of capital or surplus less than the minimum amounts required for a certificate of authority by any jurisdiction in which the member insurer is authorized to transact insurance; provided, however, that during the period of deferment, dividends may not be paid to shareholders or policyholders. Deferred assessments shall be paid when the payment will not reduce capital or surplus below required minimums. The payments shall be refunded to those companies receiving larger assessments by virtue of the deferment, or at the election of such a company, credited against future assessments. (d) The association shall investigate and adjust, compromise, settle, and pay covered claims to the extent of the association's obligation and deny all other claims. The association may review settlements, releases, and judgments to which the impaired insurer or its insureds were parties to determine the extent to which those settlements, releases, and judgments may be properly contested. Any judgment taken before the designation of impairment in which an insured under a liability policy or the insurer failed to exhaust all appeals, any judgment taken by default or consent against an insured or the impaired insurer, and any settlement, release, or judgment entered into by the insured or the impaired insurer, is not binding on the association, and may not be considered as evidence of liability or of damages in connection with any claim brought against the association or any other party under this Act. Notwithstanding any other provision of this Act or any other law to the contrary, a covered claim shall not include any claim filed with the guaranty association on a date that is later than eighteen months after the date of the order of liquidation and also shall not include claims that are unknown and unreported as of the date, provided, however, that a claim for workers' compensation benefits is governed by Title 5, Labor Code, and the applicable rules of the commissioner of workers' compensation. (e) The association shall give notice as the commissioner directs under Section 10(c) of this Act. (f) The association shall handle claims through its employees or through one or more insurers or other persons designated as servicing facilities. Designation of a servicing facility is subject to the approval of the commissioner, but such a designation may be declined by a member insurer. (g) The association shall reimburse each servicing facility for obligations of the association paid by the facility and for expenses incurred by the facility while handling claims on behalf of the association and shall pay the other expenses of the association authorized by this Act. (h) The association may: (1) employ or retain persons as necessary to handle claims and perform other duties of the association; (2) borrow funds necessary to implement this Act in accordance with the plan of operation; (3) sue or be sued; (4) negotiate and become a party to contracts as necessary to implement this Act, including lump-sum or structured compromise and settlement agreements with claimants who have claims for medical or indemnity benefits for a period of three years or more other than a settlement or lump-sum payment in violation of the Texas Workers' Compensation Act (Article 8308-1.01 et seq., Vernon's Texas Civil Statutes); (5) perform other acts as necessary or proper to implement this Act; or (6) refund to the member insurers in proportion to the contribution of each member insurer to the association that amount by which the assets of the association exceed the liabilities, if at the end of any calendar year the board of directors finds that the assets of the association exceed the liabilities of the association as estimated by the board of directors for the coming year. (i) The association may bring an action against any third-party administrator, agent, attorney, or other representative of an insurer for which a receiver has been appointed to obtain custody and control of all information, including files, records, and electronic data, related to the insurer that is appropriate or necessary for the association, or a similar association in other states, to carry out its duties under this Act or a similar law of another state. The association has the absolute right to obtain information under this subsection through emergency equitable relief, regardless of where the information is physically located. In bringing an action under this subsection, the association is not subject to any defense, possessory lien or other type of lien, or other legal or equitable ground for refusal to surrender the information that may be asserted against the receiver of the insurer. The association is entitled to an award of reasonable attorney's fees and costs incurred by the association in any action to obtain information under this subsection. The rights granted to the association under this subsection do not affect the receiver's title to information, and information obtained under this subsection remains the property of the receiver while in the custody of the association. (j) The board of directors may deposit all money collected by the association into the Texas Treasury Safekeeping Trust Company in accordance with procedures established by the comptroller. The funds deposited shall be accounted for separately from all other funds by the comptroller to the association. (k)(1) Notwithstanding Chapter 271, Acts of the 60th Legislature, Regular Session, 1967 (Article 6252-17, Vernon's Texas Civil Statutes), the board may hold an open meeting by telephone conference call if immediate action is required and the convening at one location of a quorum of the board is not reasonable or practical. (2) The meeting is subject to the notice requirements applicable to other meetings. (3) The notice of the meeting must specify as the location of the meeting the location where meetings of the board are usually held. (4) Each part of the meeting that is required to be open to the public shall be audible to the public at the location specified in the notice of the meeting as the location of the meeting and shall be tape recorded. The tape recording shall be made available to the public.
Plan of operation
Sec. 9. (a) The association shall submit to the commissioner a plan of operation and any amendments necessary or suitable to ensure the fair, reasonable, and equitable administration of the association. The plan of operation and any amendments take effect on approval in writing by the commissioner. (b) If the association fails to submit suitable amendments to the plan, the commissioner, after notice and hearing, shall adopt reasonable rules as necessary or advisable to implement this Act. Those rules shall continue in force until modified by the commissioner or superseded by a plan submitted by the association and approved by the commissioner. (c) All member insurers shall comply with the plan of operation. (d) The plan of operation must: (1) establish the procedures under which the powers and duties of the association are performed; (2) establish procedures for handling assets of the association; (3) establish the amount and method of reimbursing members of the board of directors; (4) provide for the establishment of a claims filing procedure that includes, but is not limited to, notice by the association to claimants, procedures for filing claims seeking recovery from the association, and a procedure for appealing the denial of claims by the association; and (5) establish acceptable forms of proof of covered claims. (e) A list of claims shall be submitted periodically to the association or similar organization in another state by the receiver. (f) The plan of operation must: (1) establish regular places and times for meetings of the board of directors; (2) establish procedures for records to be kept of all financial transactions of the association, its agents, and the board of directors; (3) provide that any member insurer aggrieved by any final action or decision of the association may appeal to the commissioner not later than the 30th day after the date of the action or decision; (4) establish the procedures under which selections for the board of directors are submitted to the commissioner; and (5) contain additional provisions as necessary or proper for the execution of the powers and duties of the association. (g) The plan of operation may provide that any or all powers and duties of the association, except those under Section 8(c) and 8(h)(2) of this Act, are delegated by contract to a corporation, association, or other organization that performs or will perform functions similar to those of the association or its equivalent in two or more states. The corporation, association, or organization shall be reimbursed as a servicing facility would be reimbursed and shall be paid for the performance of any other functions of the association. A delegation under this subsection takes effect only with the approval of both the board of directors and the commissioner and may be made only to a corporation, association, or organization that extends protection not substantially less favorable and effective than that provided by this Act. A contract entered into under this subsection is subject to the performance standards imposed under Section 2(a), Article 21.28, of this code.
Duties and powers of commissioner
Sec. 10. (a) The commissioner shall notify the association of the existence of an impaired insurer not later than three days after the commissioner gives notice of the designation of impairment. The association is entitled to a copy of any complaint seeking an order of receivership with a finding of insolvency against a member company at the same time that the complaint is filed with a court of competent jurisdiction. (b) On request of the board of directors, the commissioner shall provide the association with a statement of the net direct written premiums of each member insurer. (c) The commissioner may require that the association notify the insureds of the impaired insurer and any other interested parties of the designation of impairment and of their rights under this Act. The notification shall be by mail at the last known address, if available, but if sufficient information for notification by mail is not available, notice by publication in a newspaper of general circulation is sufficient. (d) The commissioner shall suspend or revoke, after notice and hearing, the certificate of authority to transact insurance in this state of any member insurer that fails to pay an assessment when due or otherwise fails to comply with the plan of operation. As an alternative, the commissioner may assess a fine on any member insurer that fails to pay an assessment when due. The fine may not exceed the lesser of five percent of the unpaid assessment per month or $100 per month. (e) The commissioner may revoke the designation of any servicing facility if the commissioner finds that claims are being handled unsatisfactorily. (f) Any final action or order of the commissioner under this Act is subject to judicial review by a court of competent jurisdiction. (g) Venue in a suit by or against the association or commissioner relating to any action or ruling of the association or commissioner made under this Act is in Travis County. The association or commissioner is not required to give an appeal bond in an appeal of a cause of action arising under this Act.
Effect of paid claims
Sec. 11. (a) A person recovering under this Act is considered to have assigned to the association the person's right under the policy, and the person's rights to recover for the occurrence made the basis of the claim under this Act under any policy of insurance issued by an unimpaired insurer to the extent of the person's recovery from the association. The association may pursue any such claims to which it is subrogated under this provision in its own name or in the name of the person recovering under this Act. Each insured or claimant seeking the protection of this Act shall cooperate with the association to the same extent as that person would have been required to cooperate with the impaired insurer. The association does not have a cause of action against the insured of the impaired insurer for any sums it has paid out except those causes of action the impaired insurer would have had if the sums had been paid by the impaired insurer and except as provided in Subsection (b) of this section. In the case of an impaired insurer operating on a plan with assessment liability, payments of claims of the association do not reduce the liability of the insureds to the receiver or statutory successor for unpaid assessments. (b) The association is entitled to recover: (1) the amount of any covered claim for workers' compensation insurance benefits and the costs of administration and defense of those claims paid under this Act from any insured employer, other than an insured who is exempt from federal income tax under Section 501(a) of the Internal Revenue Code of 1986 (26 U.S.C. Section 501(a)) by being described by Section 501(c)(3) of that code, whose net worth on December 31 of the year next preceding the date the insurer becomes an impaired insurer exceeds $50 million, provided that an insured's net worth on that date shall be deemed to include the aggregate net worth of the insured and all of the insured's parent, subsidiary, and affiliated companies as computed on a consolidated basis; and (2) the amount of any covered claim and the costs of defense paid on behalf of any person who is an affiliate of the impaired insurer and whose liability obligations to other persons are satisfied in whole or in part by payments made under this Act. (c) The receiver or statutory successor of an impaired insurer is bound by settlements of covered claims by the association or a similar organization in another state. The court having jurisdiction shall grant those claims priority equal to that which the claimant would have been entitled to in the absence of this Act against the assets of the impaired insurer. The expenses of the association or similar organization in handling claims shall be accorded the same priority as the receiver's expenses. (d) The association shall file periodically with the receiver of the impaired insurer statements of the covered claims paid by the association and estimates of anticipated claims on the association that shall preserve the rights of the association against the assets of the impaired insurer.
Net Worth Exclusion
Sec. 11A. (a) Except for a workers' compensation claim governed by Title 5, Labor Code, a covered claim does not include and the association is not liable for any claim arising from a policy of insurance of any insured whose net worth on December 31 of the year next preceding the date the insurer becomes an impaired insurer exceeds $50 million. (b) The net worth of an insured for purposes of this section includes the aggregate net worth of the insured and all of the insured's parent, subsidiary, and affiliated companies computed on a consolidated basis. (c) This section does not apply: (1) to third-party claims against an insured that has: (A) applied for or consented to the appointment of a receiver, trustee, or liquidator for all or a substantial part of the insurer's assets; (B) filed a voluntary petition in bankruptcy; or (C) filed a petition or an answer seeking a reorganization or arrangement with creditors or to take advantage of any insolvency law; or (2) if an order, judgment, or decree is entered by a court of competent jurisdiction, on the application of a creditor, adjudicating the insured bankrupt or insolvent or approving a petition seeking reorganization of the insured or of all or a substantial part of its assets. (d) In an instance described by Subsection (c) of this section, the association is entitled to assert a claim in the bankruptcy or receivership proceeding to recover the amount of any covered claim and costs of defense paid on behalf of the insured. (e) The association may establish procedures for requesting financial information from an insured or claimant on a confidential basis for the purpose of applying sections concerning the net worth of first-party and third-party claimants, subject to any information requested under this subsection being shared with any other association similar to the association and with the liquidator for the impaired insurer on the same confidential basis. If the insured or claimant refuses to provide the requested financial information, the association requests an auditor's certification of that information, and the auditor's certification is available but not provided, the association may deem the net worth of the insured or claimant to be in excess of $50 million at the relevant time. (f) In any lawsuit contesting the applicability of Section 11(b) of this article or this section when the insured or claimant has declined to provide financial information under the procedure provided in the plan of operation pursuant to Section 9 of this article, the insured or claimant bears the burden of proof concerning its net worth at the relevant time. If the insured or claimant fails to prove that its net worth at the relevant time was less than the applicable amount, the court shall award the association its full costs, expenses, and reasonable attorney's fees in contesting the claim.
Nonduplication of Recovery
Sec. 12. (a) Any person who has a claim under an insurance policy, without regard to whether the policy is issued by a member insurer, other than a policy of an impaired insurer, that arises from the same facts, injury, or loss that gave rise to a claim against an impaired insurer or its insured, is required to first exhaust the person's rights under the policy, including any claim for indemnity or medical benefits under any workers' compensation, health, disability, uninsured motorist, personal injury protection, medical payment, liability, or other policy, and the right to defense under the policy. An amount payable as a covered claim under this Act is reduced by the full applicable limits of the other insurance policy and the association shall receive a full credit in the amount of the full applicable limits, except that a covered claim for workers' compensation benefits is subject only to reduction by a third-party liability recovery under Section 417.002, Labor Code. Subject to the provisions of Subsection (a-1) below, the association's credit or setoff under this section shall be deducted from damages incurred by the claimant, and the remaining sum shall be the maximum amount payable by the association, except that the association's liability shall not exceed $300,000 or the limits of the policy under which the claim is made, whichever is less. To the extent that the association's obligation is reduced by the application of this subsection, the liability of the person insured by the impaired insurer's policy for the claim is reduced in the same amount. (a-1) Notwithstanding Subsection (a) of this section, if a claimant is seeking recovery of policy benefits that, but for the insolvency of the impaired insurer, would be subject to lien or subrogation by a workers' compensation insurer, health insurer or any other insurer, whether impaired or not, then the association's credit or offset shall be deducted from the damages incurred by the claimant or the limits of the policy under which the claim is made, whichever is less. In no event shall a claimant's recovery under this Act result in a total recovery to the claimant that is greater than that which would have resulted but for the insolvency of the impaired insurer. Subject to Section 5(8) of this Act and Title 5, Labor Code, a claim for workers' compensation benefits under this Act may not result in a recovery to the claimant that is less than that which would have resulted but for the insolvency of the impaired insurer. (b) A person who has a claim that may be recovered under more than one insurance guaranty association or its equivalent shall seek recovery first from the association of the place of residence of the insured, except that if it is a first-party claim for damage to property with a permanent location, the person shall seek recovery first from the association of the location of the property, and if it is a workers' compensation claim the person shall seek recovery first from the association of the residence of the claimant. The association shall have a credit or setoff against any amount of benefits under this Act, in the amount of the claimant's recovery from the guaranty association or equivalent. Subject to the provisions of Subsection (b-1) below, the association's credit or setoff under this Section shall be deducted from the damages incurred by the claimant, and the remaining sum shall be the maximum amount payable by the association, except that the association's liability shall not exceed $300,000. (b-1) Notwithstanding Subsection (b) of this section, if a claimant is seeking recovery of policy benefits that, but for the insolvency of the impaired insurer, would be subject to lien or subrogation by a workers' compensation insurer, health insurer or any other insurer, whether impaired or not, then the association's credit or offset shall be deducted from the damages incurred by the claimant or the limits of the policy under which the claim is made, whichever is less. In no event shall a claimant's recovery under this Act result in a total recovery to the claimant that is greater than that which would have resulted but for the insolvency of the impaired insurer. Subject to Section 5(8) of this Act and Title 5, Labor Code, a claim for workers' compensation benefits under this Act shall not result in a recovery to the claimant that is less than that which would have resulted but for the insolvency of the impaired insurer.
Financial condition of member insurers; prevention of insolvencies
Sec. 13. (a) The association shall have access to the books and records of a member insurer in receivership, in order to make a determination of the extent of the impact on the association in the event such member becomes impaired. The association shall have the authority to perform or cause to be performed an actuarial and operational analysis of the member insurer and prepare a report on matters relating to the impact or potential impact on the association in the event of impairment. Such reports shall not be public documents. (b) At the conclusion of any domestic insurer insolvency in which the association was obligated to pay covered claims, the board of directors may prepare a report on the history and causes of the insolvency, based on the information available to the association, and may submit the report to the commissioner. (c) There shall be no liability on the part of, and no cause of action of any nature shall arise against the association or its agents or employees, the board of directors, member insurers, or the commissioner or the commissioner's authorized representative for any statement made in good faith by them in any report or recommendation made under this section.
Examination of the association
Sec. 14. Not later than April 30 of each year, the association shall submit an audited financial statement to the state auditor for the preceding calendar year in a form approved by the state auditor's office.
Tax exemption
Sec. 15. The association is exempt from payment of all fees and all taxes levied by this state or any of its subdivisions except taxes levied on real or personal property.
Immunity; attorney general representation
Sec. 16. (a) There is no liability on the part of, and no cause of action of any nature arises against, any member insurer, the association or its agents or employees, the board of directors, receiver, special deputy receiver or its agents or employees, or the commissioner or the commissioner's representatives for any good faith action or failure to act in the performance of powers and duties under this Act. (b) The attorney general shall defend any action to which Subsection (a) applies that is brought against a member insurer or its agents or employees, the association or its agents or employees, members of the association's board of directors, a special deputy receiver to its agents or employees, or the commissioner or the commissioner's representatives. This subsection continues to apply to an action instituted after the defendant's service with the guaranty association, commissioner, or department has terminated. This subsection does not require the attorney general to defend any person or entity with respect to an issue other than the applicability or effect of the immunity created by Subsection (a). The attorney general is not required to defend any member insurer of the association or its agents or employees, the association or its agents or employees, members of the association's board of directors, a special deputy receiver or its agents or employees with respect to any actions filed regarding the disposition of a claim filed with the guaranty association under this Act or to an issue other than the applicability or effect of the immunity created by Subsection (a). The association may contract with the attorney general under the Interagency Cooperation Act (Article 4413(32), Vernon's Texas Civil Statutes) to provide legal services not covered under this subsection.
Stay of Proceedings
Sec. 17. (a) All proceedings in which an impaired insurer is a party or is obligated to defend a party in any court in this state, except proceedings directly related to the receivership or instituted by the receiver, shall be stayed as to all parties and for all purposes for six months and any additional time thereafter as may be determined by the court from the date of the designation of impairment or an ancillary proceeding is instituted in the state, whichever is later, to permit proper defense by the association of all pending causes of action. A deadline imposed under the Texas Rules of Civil Procedure or the Texas Rules of Appellate Procedure is tolled during the stay. Statutes of limitation or repose are not tolled during the stay, and any action filed during the stay is stayed upon the filing of the action. The court in which the delinquency proceeding is pending has exclusive jurisdiction regarding the application, enforcement, and extension of the stay and may issue injunctions or other similar orders to enforce the stay. If the impaired insurer is not domiciled in this state, the commissioner may bring an ancillary conservation proceeding under Section 21A.401 of this code, for the purpose of determining the application, enforcement, and extension of the stay. (b) As to any covered claims arising from a judgment under any decision, verdict, or finding based on the default of the impaired insurer or its failure to defend an insured, the association either on its own behalf or on behalf of the insured shall be entitled, upon application, to have the judgment, order, decision, verdict, or finding set aside by the same court or administrator that made the judgment, order, decision, verdict, or finding and shall be permitted to defend the claim on the merits. The receiver or statutory successor of an impaired insurer covered by this Act shall permit access by the board or its authorized representative to records of the impaired insurer as are necessary for the board in carrying out its functions under this Act with regard to covered claims. In addition, the receiver or statutory successor shall provide the board or its representative with copies of the records on request of the board and at the expense of the board.
Assessments
Sec. 18. (a) If the commissioner determines that an insurer has become an impaired insurer, the association shall promptly estimate the amount of additional funds, by lines of business, needed to supplement the assets of the impaired insurer immediately available to pay covered claims. The board shall make additional funds available as the actual need arises for each impaired insurer. (b) If the board of directors determines that additional funds are needed in any of the three accounts, it shall make assessments as necessary to produce the necessary funds. The association, in determining the proportionate amount to be paid by individual insurers under an assessment, shall take into consideration the lines of business written by the impaired insurer and shall assess individual insurers in proportion to the ratio that the total net direct written premium collected in this state by the insurer for those lines of business bears to the total net direct written premium collected by all insurers, other than impaired insurers, in this state for those lines of business. The association shall determine the total net direct written premium of an individual insurer and for all insurers in the state from the insurers' annual statements for the year preceding assessment. Except as otherwise provided by this subsection, assessments under this subsection during a calendar year may be made up to, but not in excess of, two percent of each insurer's net direct written premium for the preceding calendar year in the lines of business for which the assessments are being made. In the event of a natural disaster or other catastrophic event, the association may apply to the governor, in the manner prescribed by the plan of operation, for authority to assess each member insurer that writes insurance coverage, other than motor vehicle coverage or workers' compensation coverage, an additional amount not to exceed two percent of the insurer's net direct written premiums for the preceding calendar year. If the maximum assessment in any calendar year does not provide an amount sufficient for payment of covered claims of impaired insurers, assessments may be made in the next and successive calendar years. (c) It shall be the duty of each insurer to pay the amount of an assessment under Subsection (b) of this section to the association not later than the 30th day after the association gives notice of the assessment. (d) Assessments may be collected on behalf of the association by the commissioner through suits brought for that purpose. Venue for those suits is in Travis County. Either party to the action may appeal to the appellate court having jurisdiction over the cause, the appeal shall be at once returnable to the appellate court having jurisdiction over the cause, and the action so appealed shall have precedence in the appellate court over all causes of a different character pending before the court. The commissioner is not required to give an appeal bond in any cause arising under this subsection. (e) An insurer designated as an impaired insurer by the commissioner is exempt from assessment from and after the date of the designation and until the commissioner determines that the insurer is no longer an impaired insurer. (f) Funds advanced by the association under this Act shall not become assets of the impaired insurer but are considered a special fund loaned to the impaired insurer for payment of covered claims. That loan is repayable to the extent available from the funds of the insurer. (g) Income from the investment of any of the funds of the association may be transferred to the administrative account authorized under this Act. The funds in the account may be used by the association for the purpose of meeting administrative costs and other general expenses of the association. On notification by the association of the amount of any additional funds needed for the administrative account, the association shall assess member insurers to obtain the needed funds in the manner set out in this section. The commissioner shall consider the net direct written premium collected in this state for all lines of business covered by this Act. An assessment for administrative expenses incurred by a supervisor or conservator appointed by the commissioner or a receiver appointed by a court of competent jurisdiction for a nonmember of the association or unauthorized insurer operating in this state may not exceed $1,000,000 each calendar year. (h) Expired.
Purpose of assessment
Sec. 19. (a) The amounts provided under assessments made under this Act are in addition to the marshaling of assets by the receiver under Article 21.28 of this code for the purpose of making payments on behalf of an impaired insurer. (b) This section does not require the receiver to exhaust the assets of the impaired insurer before an assessment is made or before funds derived from an assessment may be used to pay covered claims.
Accounting for and repayment of assessments
Sec. 20. (a) On receipt from an insurer of payment of an assessment or partial assessment required by the association under Section 18(b) of this Act, the association shall provide the insurer with a participation receipt, which shall create a liability against the account for the line or lines of business for which the assessment was made. (b) The account from which an advance is made to an impaired insurer for the payment of covered claims shall be regarded as a general creditor of the impaired insurer for the amount of funds so advanced; provided, however, that with reference to the remaining balance of any advances not expended in payment of covered claims, the claim of the account has preference over other general creditors. The association of any impaired insurer shall adopt accounting procedures reflecting the expenditure and use of all funds and shall make a final report of the expenditure and use of the funds to the commissioner, which final report shall set forth the remaining balance, if any, from the moneys advanced. The association shall also make any interim reports concerning such accounting as may be required by the commissioner or requested by the conservator. On completion of the final report, the association shall, as soon thereafter as is practicable, refund by line of business the remaining balance of those advances to the accounts maintained by the association. (c) If the association at any time determines that there exist moneys in the account for any line of business in excess of those reasonably necessary for efficient future operation under the terms of this Act, it shall cause those excess moneys to be returned pro rata to the holders of any participation receipts on which there is a balance outstanding after deducting any credits taken against premium taxes as authorized in Section 21 of this Act, which receipts were issued for an assessment on the same line of business as that for which the excess moneys are found to exist. If after such a distribution the association finds that an excess amount still exists in the fund, or if there are no such participation receipts on which there is an outstanding balance, it shall cause the excess amount to be deposited with the comptroller to the credit of the general revenue fund.
Recognition of assessments in premium tax offset; assignment of credit
Sec. 21. (a) One hundred percent of any assessment paid by an insurer under this Act shall be allowed to that insurer as a credit against its premium tax under Article 4.10 of this code. The tax credit referred to in this section shall be allowed at a rate of 10 percent per year for 10 successive years following the date of assessment and, at the option of the insurer, may be taken over an additional number of years. The balance of any tax credit not claimed in a particular year may be reflected in the books and records of the insurer as an admitted asset of the insurer for all purposes, including exhibition in annual statements under Article 6.12 of this code. (b) Available credit against premium tax allowed under Subsection (a) of this section may be transferred or assigned among or between insurers if: (1) a merger, acquisition, or total assumption of reinsurance among or between the insurers occurs; or (2) the commissioner by order approves the transfer or assignment.
Release from receivership
Sec. 22. An impaired insurer placed in receivership for which advances have been made under this Act may not be authorized, on release from receivership, to issue new or renewal insurance policies until the impaired insurer has repaid in full to the association the funds advanced by it. However, the commissioner may, on application of the association and after hearing, permit the issuance of new policies in accordance with a plan of operations by the released insurer for repayment of advances. The commissioner, in approving the plan, may place restrictions on the issuance of new or renewal policies as the commissioner considers necessary to the implementation of the plan.
Rules and regulations
Sec. 23. The State Board of Insurance is authorized and directed to issue such reasonable rules and regulations as may be necessary to carry out the various purposes and provisions of this article, and in augmentation thereof. Sec. 24. Blank.
Controlling law
Sec. 25. (a) Except as provided in Subsection (b) of this section, if a conflict exists between this Act and any other statutory provision relating to the association, this Act shall control. (b) This section does not apply to a conflict between this Act and: (1) Subtitle A, Title 5, Labor Code, except that this Act controls with respect to subrogation rights of an insurance carrier under Chapter 417, Labor Code, against an insured of an impaired insurer or the association; (2) Subchapter D, Chapter 5, of this code; or (3) Article 5.76-2, 5.76-3, 5.76-4, or 5.76-5 of this code.
Coverage for Workers' Compensation Insurance Policies Issued by Texas Workers' Compensation Insurance Facility
Sec. 26. (a) Notwithstanding any other provision of this article, this article applies to each policy of insurance issued under Article 5.76 of this code or Article 5.76-2 of this code, as that article existed before its repeal. (b) Notwithstanding any other provision of this article, after the conversion of the Texas workers' compensation insurance facility to a stock insurance company, that converted facility shall be considered an impaired insurer for purposes of this article if any of the actions described by Section 5(9)(A) or (B) of this article occur to the converted facility. (c) A claim under such an insurance policy is a covered claim for purposes of this article if the claim satisfies the definition under Section 5(8) of this article, whether or not the converted facility: (1) issued or assumed the policy; or (2) was licensed to do business in this state at the time: (A) the policy was written; or (B) the converted facility became an impaired insurer. (d) If a conflict exists between this section and any other statute relating to the Texas workers' compensation insurance facility or the Texas Property and Casualty Insurance Guaranty Association, this section controls.
Immunity
Sec. 27. There is no liability on the part of, and a cause of action does not arise against, any member insurer of the association, the association, an agent or employee of the association, a member of the board of directors of the association, or the commissioner or the commissioner's representative for any act or omission in the performance of any activity related to the negotiations relating to the privatization of the Texas workers' compensation insurance facility. This section applies to each activity undertaken by such a person or entity, regardless of the date of the act or omission. Added by Acts 1971, 62nd Leg., p. 1362, ch. 360, Sec. 1, eff. May 25, 1971. Amended by Acts 1975, 64th Leg., p. 56, ch. 32, Sec. 3, eff. April 3, 1975; Acts 1975, 64th Leg., p. 1094, ch. 414, Sec. 1, eff. Sept. 1, 1975; Acts 1977, 65th Leg., p. 1950, ch. 775, Sec. 1, eff. Aug. 29, 1977; Acts 1977, 65th Leg., p. 2110, ch. 845, Sec. 1 to 12, eff. Aug. 29, 1977; Acts 1979, 66th Leg., p. 1057, ch. 487, Sec. 1, eff. Aug. 27, 1979; Acts 1981, 67th Leg., p. 2641, ch. 707, Sec. 4(30), eff. Aug. 31, 1981; Sec. 3 amended by Acts 1983, 68th Leg., p. 282, ch. 56, Sec. 1, eff. May 3, 1983; Acts 1985, 69th Leg., ch. 904, Sec. 1, eff. June 15, 1985; Sec. 5(2) amended by Acts 1985, 69th Leg., ch. 904, Sec. 2, eff. June 15, 1985; Sec. 14C amended by Acts 1985, 69th Leg., ch. 904, Sec. 5, eff. June 15, 1985; Sec. 3 amended by Acts 1987, 70th Leg., ch. 1073, Sec. 35, eff. Sept. 1, 1987; Sec. 5(2), (7) amended by Acts 1987, 70th Leg., ch. 1073, Sec. 36, eff. Sept. 1, 1987; Sec. 5(11), (12) added by Acts 1987, 70th Leg., ch. 1073, Sec. 28, eff. Sept. 1, 1987; Sec. 7 amended by Acts 1987, 70th Leg., ch. 1073, Sec. 29, eff. Sept. 1, 1987; Sec. 14, subsec. E amended by Acts 1987, 70th Leg., ch. 1073, Sec. 30, 37, eff. Sept. 1, 1987; Sec. 20 amended by Acts 1987, 70th Leg., ch. 1073, Sec. 37, eff. Sept. 1, 1987; Sec. 3 amended by Acts 1989, 71st Leg., ch. 273, Sec. 7, eff. Aug. 28, 1989; Sec. 5(2) amended by Acts 1989, 71st Leg., ch. 1082, Sec. 6.13, eff. Sept. 1, 1989; Sec. 5(3), (12) amended by Acts 1989, 71st Leg., ch. 273, Sec. 8, eff. Aug. 28, 1989; Secs. 6, 7 amended by Acts 1989, 71st Leg., ch. 1082, Sec. 6.14, eff. Sept. 1, 1989; Sec. 7A added by Acts 1989, 71st Leg., ch. 1082, Sec. 6.23, eff. Sept. 1, 1989; Sec. 7B added by Acts 1989, 71st Leg., ch. 1082, Sec. 6.15, eff. Sept. 1, 1989; Sec. 8 amended by Acts 1989, 71st Leg., ch. 1082, Sec. 6.16, eff. Sept. 1, 1989; Secs. 12, 16 amended by Acts 1989, 71st Leg., ch. 1082, Sec. 6.14, eff. Sept. 1, 1989; Secs. 7, 7A, 9, 11 amended by Acts 1991, 72nd Leg., ch. 242, Sec. 11.05, eff. Sept. 1, 1991; Sec. 14(B)(1) amended by Acts 1991, 72nd Leg., ch. 242, Sec. 9.09, eff. Sept. 1, 1991; Sec. 14(B)(3) added by Acts 1991, 72nd Leg., ch. 242, Sec. 11.25, Sept. 1, 1991; Sec. 15 amended by Acts 1991, 72nd Leg., ch. 242, Sec. 11.05, eff. Sept. 1, 1991. Amended by Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Sec. 1.20, eff. Jan. 1, 1992; Sec. 3 amended by Acts 1993, 73rd Leg., ch. 685, Sec. 9.01, eff. Sept. 1, 1993; Sec. 5(8) amended by Acts 1993, 73rd Leg., ch. 685, Sec. 9.02, eff. Sept. 1, 1993; Sec. 5(9) amended by Acts 1993, 73rd Leg., ch. 685, Sec. 9.03, eff. Sept. 1, 1993; Sec. 5(11) amended by Acts 1993, 73rd Leg., ch. 685, Sec. 9.04, eff. Sept. 1, 1993; Sec. 7(d) amended by Acts 1993, 73rd Leg., ch. 685, Sec. 9.05, eff. Sept. 1, 1993; Sec. 7(f) added by Acts 1993, 73rd Leg., ch. 685, Sec. 9.06, eff. Sept. 1, 1993; Sec. 8(b) amended by Acts 1993, 73rd Leg., ch. 685, Sec. 9.07, eff. Sept. 1, 1993; Sec. 8(d) amended by Acts 1993, 73rd Leg., ch. 685, Sec. 9.08, eff. Sept. 1, 1993; Sec. 8(h) amended by Acts 1993, 73rd Leg., ch. 685, Sec. 9.09, eff. Sept. 1, 1993; Sec. 8(i) repealed by Acts 1993, 73rd Leg., ch. 685, Sec. 9.10, eff. Sept. 1, 1993; Sec. 8(k) added by Acts 1993, 73rd Leg., ch. 685, Sec. 9.11, eff. Sept. 1, 1993; Sec. 9(d) amended by Acts 1993, 73rd Leg., ch. 685, Sec. 9.12, eff. Sept. 1, 1993; Sec. 9(e) amended by Acts 1993, 73rd Leg., ch. 685, Sec. 9.13, eff. Sept. 1, 1993; Sec. 11(a) amended by Acts 1993, 73rd Leg., ch. 685, Sec. 9.14, eff. Sept. 1, 1993; Sec. 12(a) amended and Sec. 12 (a-1) added by Acts 1993, 73rd Leg., ch. 685, Sec. 9.15, eff. Sept. 1, 1993; Sec. 12(b) amended and Sec. 12(b-1) added by Acts 1993, 73rd Leg., ch. 685, Sec. 9.16, eff. Sept. 1, 1993; Sec. 13 amended by Acts 1993, 73rd Leg., ch. 685, Sec. 9.17, eff. Sept. 1, 1993; Sec. 14 amended by Acts 1993, 73rd Leg., ch. 685, Sec. 9.18, eff. Sept. 1, 1993; Sec. 16(a) amended by Acts 1993, 73rd Leg., ch. 685, Sec. 9.19, eff. Sept. 1, 1993; Sec. 17 amended by Acts 1993, 73rd Leg., ch. 685, Sec. 9.20, eff. Sept. 1, 1993; Sec. 18(h) added by Acts 1993, 73rd Leg., ch. 685, Sec. 9.21, eff. Sept. 1, 1993; Sec. 25 added by Acts 1993, 73rd Leg., ch. 685, Sec. 9.22, eff. Sept. 1, 1993; Sec. 5(8) amended by Acts 1995, 74th Leg., ch. 1055, Sec. 4, eff. June 17, 1995; Sec. 7(a) amended by Acts 1995, 74th Leg., ch. 1055, Sec. 5, eff. June 17, 1995; Sec. 8(b) amended by Acts 1995, 74th Leg., ch. 1055, Sec. 6, eff. June 17, 1995; Sec. 11(b) amended by Acts 1995, 74th Leg., ch. 275, Sec. 1, eff. June 5, 1995; Sec. 12(a) amended by Acts 1995, 74th Leg., ch. 1055, Sec. 7, eff. June 17, 1995; Sec. 14 amended by Acts 1995, 74th Leg., ch. 1055, Sec. 8, eff. June 17, 1995; Sec. 17 amended by Acts 1995, 74th Leg., ch. 1055, Sec. 9, eff. June 17, 1995; Sec. 18(b), (c) and (h) amended by Acts 1995, 74th Leg., ch. 1055, Sec. 10, eff. June 17, 1995; Sec. 5(8) amended by Acts 1997, 75th Leg., ch. 1412, Sec. 1, eff. Sept. 1, 1997; Sec. 8(j) amended by Acts 1997, 75th Leg., ch. 1423, Sec. 11.52, eff. Sept. 1, 1997; Sec. 20(c) amended by Acts 1997, 75th Leg., ch. 1423, Sec. 11.53, eff. Sept. 1, 1997; Sec. 21 amended by Acts 1997, 75th Leg., ch. 764, Sec. 1, eff. Sept. 1, 1997; Secs. 26, 27 added by Acts 1997, 75th Leg., ch. 594, Sec. 1.13, eff. June 9, 1997; Sec. 3 amended by Acts 1999, 76th Leg., ch. 1126, Sec. 5, eff. Aug. 30, 1999; Sec. 5(10) amended by Acts 1999, 76th Leg., ch. 1126, Sec. 6, eff. Aug. 30, 1999; Sec. 3(b) amended by Acts 2001, 77th Leg., ch. 1195, Sec. 2.07, eff. Sept. 1, 2001; Sec. 5(8) amended by Acts 2003, 78th Leg., ch. 1218, Sec. 1, eff. June 20, 2003; Sec. 5(9) amended by Acts 2003, 78th Leg., ch. 1218, Sec. 1, eff. June 20, 2003; Sec. 8(a) amended by Acts 2003, 78th Leg., ch. 1218, Sec. 2, eff. June 20, 2003; Sec. 8(d) amended by Acts 2003, 78th Leg., ch. 1218, Sec. 2, eff. June 20, 2003; Sec. 11(b) amended by Acts 2003, 78th Leg., ch. 1218, Sec. 3, eff. June 20, 2003; Sec. 11A added by Acts 2003, 78th Leg., ch. 1218, Sec. 4, eff. June 20, 2003; Sec. 12 amended by Acts 2003, 78th Leg., ch. 1218, Sec. 5, eff. June 20, 2003; Sec. 17 amended by Acts 2003, 78th Leg., ch. 1218, Sec. 6, eff. June 20, 2003; Sec. 25(b) amended by Acts 2003, 78th Leg., ch. 1218, Sec. 7, eff. June 20, 2003; Sec. 3(a) amended by Acts 2005, 79th Leg., ch. 995, Sec. 2, eff. Sept. 1, 2005; Sec. 5(8) amended by Acts 2005, 79th Leg., ch. 995, Sec. 3, eff. Sept. 1, 2005; Sec. 8(d) amended by Acts 2005, 79th Leg., ch. 265, Sec. 6.070, eff. Sept. 1, 2005; Sec. 8(d) amended by Acts 2005, 79th Leg., ch. 995, Sec. 4, eff. Sept. 1, 2005; Sec. 8(i) added by Acts 2005, 79th Leg., ch. 995, Sec. 4, eff. Sept. 1, 2005; Sec. 10(g) amended by Acts 2005, 79th Leg., ch. 995, Sec. 5, eff. Sept. 1, 2005; Sec. 11(b) amended by Acts 2005, 79th Leg., ch. 995, Sec. 6, eff. Sept. 1, 2005; Sec. 11A amended by Acts 2005, 79th Leg., ch. 995, Sec. 7, eff. Sept. 1, 2005; Sec. 17(a) amended by Acts 2005, 79th Leg., ch. 995, Sec. 8, eff. Sept. 1, 2005. Art. 21.28-D. LIFE, ACCIDENT, HEALTH, AND HOSPITAL SERVICE INSURANCE GUARANTY ASSOCIATION.
Article repealed effective April 1, 2007
Short title
Sec. 1. This Act shall be known and may be cited as the Life, Accident, Health, and Hospital Service Insurance Guaranty Association Act.
Purpose
Sec. 2. The purpose of this Act is to protect, subject to certain limitations, the persons specified in Section 3(a) of this Act against failure in the performance of contractual obligations, under life, accident, and health insurance policies and annuity contracts specified in Section 3(b) of this Act, because of the impairment or insolvency of the member insurer that issued the policies or contracts. To provide this protection, an association of insurers is created to pay benefits and to continue coverages as limited in this Act, and members of the association are subject to assessment to provide funds to carry out the purpose of this Act.
Coverage and Limitations
Sec. 3. (a) Subject to Subsections (a-1) and (a-2) of this section, this Act provides coverage for a policy or contract specified in Subsection (b) of this section to the following persons: (1) a person, other than a nonresident certificate holder under a group policy or contract, who is the beneficiary, assignee, or payee of a person covered under Paragraph (2) of this subsection; (2) a person who is an owner of or certificate holder under the policy or contract, other than an unallocated annuity contract or structured settlement annuity, and who: (A) is a resident; or (B) is not a resident, but only under all of the following conditions: (i) the insurers that issued the policies or contracts are domiciled in this state; (ii) the state in which the person resides has an association similar to the association created by this Act; and (iii) the person is not eligible for coverage by an association in any other state because the insurers were not licensed in the state at the time specified in that state's guaranty association law; (3) a person who is the owner of an unallocated annuity contract issued to or in connection with: (A) a benefit plan whose plan sponsor has the sponsor's principal place of business in this state; or (B) a government lottery, if the owner is a resident; and (4) a person who is the payee under a structured settlement annuity, or beneficiary of the payee if the payee is deceased, if: (A) the payee is a resident, regardless of where the contract owner resides; (B) the payee is not a resident, the contract owner of the structured settlement annuity is a resident, and the payee is not eligible for coverage by the association in the state in which the payee resides; or (C) the payee and the contract owner are not residents, the insurer that issued the structured settlement annuity is domiciled in this state, the state in which the contract owner resides has an association similar to the association created by this Act, and neither the payee or, if applicable, the payee's beneficiary, nor the contract owner is eligible for coverage by the association in the state in which the payee or contract owner resides. (a-1) This Act does not provide coverage to: (1) a person who is a payee or the beneficiary of a payee with respect to a contract the owner of which is a resident of this state, if the payee or the payee's beneficiary is afforded any coverage by the association of another state; or (2) a person otherwise described by Subsection (a)(3) of this section, if any coverage is provided by the association of another state to that person. (a-2) This Act is intended to provide coverage to persons who are residents of this state, and in those limited circumstances as described in this Act, to nonresidents. In order to avoid duplicate coverage, if a person who would otherwise receive coverage under this Act is provided coverage under the laws of any other state, the person may not be provided coverage under this Act. In determining the application of the provisions of this subsection in situations in which a person could be covered by the association of more than one state, whether as an owner, payee, beneficiary, or assignee, this Act shall be construed in conjunction with other state laws to result in coverage by only one association. (b) This Act provides coverage to the persons specified in Subsection (a) of this section, and subject to Subsections (a-1) and (a-2) of this section, for direct, non-group life, health, accident, annuity, and supplemental policies or contracts, for certificates under direct group policies and contracts, group hospital service contracts, and for unallocated annuity contracts issued by member insurers, except as limited by this Act. This Act also provides coverage for all other insurance coverages written by mutual assessment corporations, local mutual aid associations, statewide mutual assessment companies, and stipulated premium companies licensed to do business in this state. Annuity contracts and certificates under group annuity contracts include guaranteed investment contracts, deposit administration contracts, unallocated funding agreements, allocated funding agreements, structured settlement annuities, annuities issued to or in connection with government lotteries, and any immediate or deferred annuity contracts. (c) This Act does not provide coverage for: (1) a portion of a policy or contract not guaranteed by the insurer, or under which the risk is borne by the policy or contract owner; (2) a policy or contract of reinsurance, unless assumption certificates have been issued; (3) a portion of a policy or contract to the extent that the rate of interest on which it is based: (A) averaged over the period of four years before the date on which the member insurer becomes impaired or insolvent under this Act, whichever is earlier, exceeds a rate of interest determined by subtracting two percentage points from Moody's Corporate Bond Yield Average averaged for that same four-year period or for a lesser period if the policy or contract was issued less than four years before the member insurer becomes impaired or insolvent under this Act, whichever is earlier; and (B) on and after the date on which the member insurer becomes impaired or insolvent under this Act, whichever is earlier, exceeds the rate of interest determined by subtracting three percentage points from Moody's Corporate Bond Yield Average as most recently available; (4) a portion of a policy or contract issued to a plan or program of an employer, association, similar entity, or other person to provide life, health, or annuity benefits to its employees, members, or others, to the extent that the plan or program is self-funded or uninsured, including but not limited to benefits payable by an employer, association, or similar entity under: (A) a multiple employer welfare arrangement as defined by the Employee Retirement Income Security Act of 1974 (29 U.S.C. Section 1002); (B) a minimum premium group insurance plan; (C) a stop-loss group insurance plan; or (D) an administrative services-only contract; (5) a portion of a policy or contract, to the extent that it provides dividends or experience rating credits, voting rights, or provides that fees or allowances be paid to any person, including the policy or contract owner, in connection with the service to or administration of the policy or contract; (6) a policy or contract issued in this state by a member insurer at a time when it was not licensed to issue the policy or contract in this state; (7) an unallocated annuity contract issued to or in connection with a benefit plan protected under the federal Pension Benefit Guaranty Corporation, regardless of whether the Pension Benefit Guaranty Corporation has not yet become liable to make any payments with respect to the benefit plan; (8) a portion of an unallocated annuity contract that is not issued to or in connection with a specific employee, benefit plan for a union or association of natural persons, or a government lottery; (9) any portion of a financial guarantee, funding agreement, or guaranteed investment contract which (1) contains no mortality guarantees and (2) is not issued to or in connection with a specific employee, benefit plan, or a governmental lottery; (10) a portion of a policy or contract to the extent that the assessments required by Section 9 of this Act with respect to the policy or contract are preempted by federal or state law; (11) a contractual agreement that established the member insurer's obligations to provide a book value accounting guaranty for defined contribution benefit plan participants by reference to a portfolio of assets that is owned by the benefit plan or the plan's trustee in a case in which neither the benefit plan sponsor nor its trustee is an affiliate of the member insurer; and (12) a portion of a policy or contract to the extent the policy or contract provides for interest or other changes in value that are to be determined by the use of an index or external reference stated in the policy or contract, but that have not been credited to the policy or contract, or as to which the policy or contract owner's rights are subject to forfeiture, as of the date the member insurer becomes an impaired or insolvent insurer under this Act, whichever date is earlier; provided, however, if a policy's or contract's interest or changes in value are credited less frequently than annually, for purposes of determining the values that have been credited and are not subject to forfeiture as described by this paragraph, the interest or change in value determined by using the procedures defined in the policy or contract is credited as if the contractual date of crediting interest or changing values is the earlier of the date of impairment or the date of insolvency, and is not subject to forfeiture. (d) The benefits for which the association may become liable shall not exceed the contractual obligations for which the insurer is liable or would have been liable if it were not an impaired or insolvent insurer. The association has no obligation to provide benefits outside the express written terms of the policy or contract, including: (1) claims based on marketing materials; (2) claims based on side letters, riders, or other documents that were issued without meeting applicable policy form filing or approval requirements; (3) claims based on misrepresentation of or regarding policy benefits; (4) extracontractual claims; or (5) claims for penalties or consequential or incidental damages. (e) The limitations set forth in this Act are limitations on the benefits for which the association is obligated before taking into account either the association's subrogation and assignment rights or the extent to which those benefits could be provided out of the assets of the impaired or insolvent insurer attributable to covered policies. The costs of the association's obligations under this Act may be met by the use of assets attributable to covered policies or reimbursed to the association pursuant to the association's subrogation and assignment rights.
Construction
Sec. 4. This Act shall be liberally construed to effect the purpose under Section 2 of this Act. Section 2 of this Act shall be used as an aid and guide to interpretation.
Definitions
Sec. 5. As used in this Act: (1) "Account" means the four accounts created under Section 6 of this Act. (2) "Association" means the Texas Life, Accident, Health, and Hospital Service Insurance Guaranty Association created under Section 6 of this Act. (2-a) "Benefit plan" means a specific employee, union, or association of natural persons benefit plan. (3) "Contractual obligation" means an obligation under a policy or contract or certificate under a group policy or contract, or portion thereof for which coverage is provided under Section 3 of this Act. A contractual obligation does not include: (A) death benefits in an amount in excess of $300,000 or a net cash surrender or net cash withdrawal value in an amount in excess of $100,000 under one or more covered policies on any one life; (B) an amount in excess of $100,000 in the present value under one or more annuity contracts within the scope of this Act issued with respect to one life under individual annuity policies or group annuity policies or an amount in excess of $5,000,000 in unallocated annuity contract benefits with respect to any one contract holder irrespective of the number of such contracts; (C) an amount in excess of the following amounts, including any net cash surrender or cash withdrawl values, under one or more accident and health, accident, health, or long-term care insurance policies on any one life: (i) $500,000 for basic hospital, medical-surgical, or major medical insurance, as those terms are defined in this code or rules adopted by the commissioner; (ii) $300,000 for disability and long-term care insurance, as those terms are defined in this code or rules adopted by the commissioner; or (iii) $200,000 for coverages that are not defined as basic hospital, medical-surgical, major medical, disability, or long-term care insurance; (D) an amount in excess of $100,000 in present value annuity benefits, in the aggregate, including any net cash surrender and net cash withdrawal values, with respect to each individual participating in a governmental retirement benefit plan established under Section 401, 403(b), or 457, Internal Revenue Code of 1986 (26 U.S.C. Sections 401, 403(b), and 457), covered by an unallocated annuity contract or the beneficiary or beneficiaries of the individual if the individual is deceased; (E) an amount in excess of $100,000 in present value annuity benefits, in the aggregate, including any net cash surrender and net cash withdrawal values, with respect to each payee of a structured settlement annuity or the beneficiary or beneficiaries of the payee if the payee is deceased; (F) aggregate benefits in an amount in excess of $300,000 with respect to one life, except with respect to: (i) benefits paid under basic hospital, medical-surgical, or major medical insurance policies, described by Paragraph (C)(i) of this subdivision, in which case the aggregate benefits are $500,000; and (ii) benefits paid to one owner of multiple nongroup policies of life insurance, whether the policy owner is an individual, firm, corporation, or other person, and whether the persons insured are officers, managers, employees, or other persons, in which case the maximum benefits are $5,000,000 regardless of the number of policies and contracts held by the owner; (G) an amount in excess of $5,000,000 in benefits, with respect to either one plan sponsor whose plans own directly or in trust one or more unallocated annuity contracts not included in Paragraph (D) of this subdivision irrespective of the number of contracts with respect to the contract owner or plan sponsor or one contract owner provided coverage under Section 3(a)(3)(B) of this Act, except that, if one or more unallocated annuity contracts are covered contracts under this Act and are owned by a trust or other entity for the benefit of two or more plan sponsors, coverage shall be afforded by the association if the largest interest in the trust or entity owning the contract or contracts is held by a plan sponsor whose principal place of business is in this state and in no event shall the association be obligated to cover more than $5,000,000 in benefits with respect to all these unallocated contracts; (H) any contractual obligations of the insolvent or impaired insurer under a covered policy or contract that do not materially affect the economic value of economic benefits of the covered policy or contract; or (I) punitive, exemplary, extracontractual, or bad faith damages, whether agreed to or assumed by an insurer or insured or imposed by a court of competent jurisdiction. (4) "Covered policy" means any policy or contract, or portion of a policy or contract, within the scope of this Act under Section 3 of this Act. (5) "Impaired insurer" means a member insurer that is designated an "impaired insurer" by the commissioner and is: (A) placed by a court in this state or another state under an order of supervision, liquidation, rehabilitation, or conservation; (B) placed under an order of liquidation or rehabilitation under the provisions of Article 21.28 of this code; or (C) placed under an order of supervision or conservation by the commissioner under the provisions of Article 21.28-A of this code. (6) "Insolvent insurer" means a member insurer that has been placed under an order of liquidation with a finding of insolvency by a court in this state or another state. (7) "Member insurer" means any insurer licensed or that holds a certificate of authority to transact in this state any kind of insurance for which coverage is provided under Section 3 of this Act, and includes any insurer whose license or certificate of authority in this state may have been suspended, revoked, not renewed, or voluntarily withdrawn, including a mutual assessment corporation, a local mutual association, a statewide mutual assessment company, and a stipulated premium company licensed to do business in this state, but does not include: (A) a health maintenance organization; (B) a fraternal benefit society; (C) a mandatory state pooling plan; (D) an insurance exchange; (E) an organization which has a certificate of authority or license limited to the issuance of charitable gift annuities as defined in this code or rules adopted by the commissioner; or (F) any entity similar to any of those described by Paragraphs (A)-(E) of this subdivision. (8) "Moody's Corporate Bond Yield Average" means the Monthly Average Corporates as published by Moody's Investors Service, Inc., or any successor to that entity. (8-a) "Owner" means the owner of a policy or contract and "policy owner" and "contract owner" mean the person who is identified as the legal owner under the terms of the policy or contract or who is otherwise vested with legal title to the policy or contract through a valid assignment completed in accordance with the terms of the policy or contract and is properly recorded as the owner on the books of the insurer. The terms owner, contract owner, and policy owner do not include persons with a mere beneficial interest in a policy or contract. (9) "Person" means any individual, corporation, limited liability company, partnership, association, governmental body or entity, or voluntary organization. (9-a) "Plan sponsor" means: (A) the employer in the case of a benefit plan established or maintained by a single employer; (B) the employee organization in the case of a benefit plan established or maintained by an employee organization; or (C) in a case of a benefit plan established or maintained by two or more employers or jointly by one or more employers and one or more employee organizations, the association, committee, joint board of trustees, or other similar group of representatives of the parties who establish or maintain the benefit plan. (10) "Premiums" means amounts received on covered policies or contracts less premiums, considerations, and deposits returned on those policies or contracts, and less dividends and experience credits on those policies or contracts. "Premiums" does not include amounts received for policies or contracts or for the portions of any policies or contracts for which coverage is not provided under Section 3(b) of this Act, except that assessable premiums shall not be reduced on account of Section 3(c)(3) of this Act relating to interest limitations and Section 5(3) of this Act relating to limitations with respect to any one individual, any one participant, any one annuitant, and any one contract owner. "Premiums" does not include premiums in excess of $5,000,000 on any unallocated annuity contract not issued under a governmental benefit plan established under Section 401, 403(b), or 457 of the United States Internal Revenue Code (26 U.S.C. Sections 401, 403(b) and 457). "Premiums" does not include premiums in excess of $5,000,000 with respect to multiple nongroup policies of life insurance owned by one owner, whether the policy owner is an individual, firm, corporation, or other person, and whether the persons insured are officers, managers, employees, or other persons, regardless of the number of policies or contracts held by the owner. "Premiums" also does not include premiums received from the Treasury of the State of Texas or from the Treasury of the United States for insurance contracted for by the state or federal government for the purpose of providing welfare benefits to designated welfare recipients or for insurance contracted for by the state or federal government in accordance with or in furtherance of the provisions of Title 2, Human Resources Code, or the Federal Social Security Act. (11) "Resident" means any person who resides in this state on the earlier of the date a member insurer becomes an impaired insurer or the date of entry of a court order that determines a member insurer to be an impaired insurer or the date of entry of a court order that determines a member insurer to be an insolvent insurer and to whom a contractual obligation is owed. A person may be a resident of only one state, which in the case of a person other than a natural person is its principal place of business. A United States citizen that is either a resident of a foreign country or a resident of a United States possession, territory, or protectorate that does not have an association similar to the association created by this Act is considered a resident of the state of domicile of the insurer that issued the policy or contract. (11-a) "Structured settlement annuity" means an annuity purchased to fund periodic payments for a plaintiff or other claimant in payment for or with respect to personal injury suffered by the plaintiff or other claimant. (12) "Supplemental contract" means any written agreement entered into for the distribution of policy or contract proceeds. (13) "Unallocated annuity contract" means any annuity contract or group annuity certificate that is not issued to and owned by an individual, except to the extent of any annuity benefits guaranteed to an individual by an insurer under the contract or certificate.
Definition of Principal Place of Business of Plan Sponsor or Other Person
Sec. 5A. (a) Except as otherwise provided by this section, in this Act, the "principal place of business" of a plan sponsor or a person other than an individual means the single state in which the individuals who establish policy for the direction, control, and coordination of the operations of the plan sponsor or person as a whole primarily exercise that function, as determined by the association in its reasonable judgment by considering the following factors: (1) the state in which the primary executive and administrative headquarters of the plan sponsor or person is located; (2) the state in which the principal office of the chief executive officer of the plan sponsor or person is located; (3) the state in which the board of directors, or similar governing person or persons, of the plan sponsor or person conduct the majority of their meetings; (4) the state in which the executive or management committee of the board of directors, or similar governing person or persons, of the plan sponsor or person conduct the majority of their meetings; (5) the state from which the management of the overall operations of the plan sponsor or person is directed; and (6) in the case of a benefit plan sponsored by affiliated companies comprising a consolidated corporation, the state in which the holding company or controlling affiliate has its principal place of business as determined using the factors described by Subdivisions (1)-(5) of this subsection. (b) In the case of a plan sponsor, if more than 50 percent of the participants in the benefit plan are employed in a single state, that state is the principal place of business of the plan sponsor. (c) The principal place of business of a plan sponsor of a benefit plan described in Section 5(9-a)(C) of this Act is the principal place of business of the association, committee, joint board of trustees, or other similar group of representatives of the parties who establish or maintain the benefit plan that, in lieu of a specific or clear designation of a principal place of business, shall be deemed to be the principal place of business of the employer or employee organization that has the largest investment in that benefit plan.
Creation of association
Sec. 6. (a) The Texas Life, Accident, Health, and Hospital Service Insurance Guaranty Association is a nonprofit legal entity. All member insurers shall be and remain members of the association as a condition of their authority to transact insurance in this state. The association shall perform its functions under the plan of operation established and approved under Section 10 of this Act and shall exercise its powers through a board of directors established under Section 7 of this Act. For purposes of administration and assessment, the association shall maintain four accounts: (1) the accident, health, and hospital services insurance account; (2) the life insurance account; (3) the annuity account; and (4) the administrative account. (b) The association is under the immediate supervision of the commissioner and is subject to the applicable provisions of this code and any other law governing insurance in this state.
Board of directors
Sec. 7. (a) The commissioner shall appoint a board of directors of the association consisting of nine members, three of whom shall be chosen from employees or officers chosen from the 50 member companies having the largest total direct premium income based on the latest financial statement on file at date of appointment, two of whom shall be chosen from the other companies to give fair representation to member insurers based on due consideration of their varying categories of premium income and geographical location, and four of whom shall be representatives of the general public. Members serve for six-year staggered terms, with the terms of three members expiring each odd-numbered year. All directors shall serve until their successors are appointed, except that in the case of any vacancy, the unexpired term of office shall be filled by the appointment of a director by the commissioner. If a director ceases to be an officer or employee of a member insurer during the director's term of office, that office becomes vacant until the director's successor is appointed. All directors are eligible to succeed themselves in office. A public representative may not be: (1) an officer, director, or employee of an insurance company, insurance agency, agent, broker, solicitor, adjuster, or any other business entity regulated by the department; (2) a person required to register with the secretary of state under Chapter 305, Government Code; or (3) related to a person described by Subparagraph (1) or (2) of this paragraph within the second degree of affinity or consanguinity. (b) Each director of the association shall file a financial statement with the secretary of state in accordance with Sections 3 and 4, Chapter 421, Acts of the 63rd Legislature, Regular Session, 1973 (Article 6252-9b, Vernon's Texas Civil Statutes). (c) Members of the board may be reimbursed from the assets of the association for expenses incurred by them as members of the board of directors but members of the board may not otherwise be compensated by the association for their services. (d) A director of the association may not receive any money or valuable thing directly, indirectly, or through any substantial interest in any other corporation, firm, or business unit for negotiating, procuring, participating, recommending, or aiding in a transaction, reinsurance agreement, merger, purchase, sale, contribution, or exchange of assets, policies of insurance, or property made by the association or the supervisor, conservator, or receiver on behalf of an impaired insurer. A director of the association may not have a pecuniary interest, as principal, co-principal, agent, or beneficiary, directly, indirectly, or through any substantial interest in any other corporation, firm, or business unit, in the transaction, reinsurance agreement, merger, purchase, sale, contribution, or exchange.
Powers and duties of the association
Sec. 8. (a) If a member insurer is an impaired domestic insurer, the association may, subject to the approval of the commissioner, and subject to any conditions imposed by the association that do not impair the contractual obligations of the impaired insurer that are approved by the commissioner, and that are, except in cases of court-ordered conservation or rehabilitation, also approved by the impaired insurer: (1) guarantee, assume, or reinsure, or cause to be guaranteed, assumed, or reinsured, any or all of the policies or contracts of the impaired insurer; (2) provide the moneys, pledges, notes, guarantees, or other means as are proper to effectuate Subdivision (1) of this subsection and assure payment of the contractual obligations of the impaired insurer pending action under Subdivision (1) of this subsection; or (3) loan money to the impaired insurer. (b) If a member insurer is an impaired insurer, whether domestic, foreign or alien, and the insurer is not paying claims timely, subject to the conditions specified in Subsection (c) of this section, the association shall: (1) take any of the actions specified in Subsection (a) of this section, subject to the conditions in that subsection; or (2) provide substitute benefits in lieu of the contractual obligations of the impaired insurer solely for health claims, periodic annuity benefit payments, death benefits, supplemental benefits, and cash withdrawals for policy or contract owners who petition for substitute benefits under claims of emergency or hardship under standards proposed by the association and approved by the commissioner. (c) The association is subject to Subsection (b) of this section only if: (1) the laws of the impaired insurer's state of domicile provided that, until all payments of or on account of the impaired insurer's contractual obligations by all guaranty associations, along with all expenses of the associations and interest on all those payments and expenses have been repaid to the guaranty associations or a plan of repayment by the impaired insurer has been approved by the guaranty associations: (A) the delinquency proceeding may not be dismissed; (B) the impaired insurer and its assets may not be returned to the control of its shareholders or private management; and (C) the impaired insurer may not solicit or accept new business or have any suspended or revoked license restored; and (2) the impaired insurer is a domestic insurer, and has been placed under an order of rehabilitation by a court of competent jurisdiction in this state; or (3) the impaired insurer is a foreign or alien insurer and: (A) it has been prohibited from soliciting or accepting new business in this state; (B) its certificate of authority has been suspended or revoked in this state; and (C) a petition for rehabilitation or liquidation has been filed in a court of competent jurisdiction in its state of domicile by the commissioner of the state. (d) Except as provided by Subsection (e) of this section, if a member insurer is an insolvent insurer, the association shall provide the moneys, pledges, guarantees, or other means as are reasonably necessary to discharge the duties of the insolvent insurer and: (1) guarantee, assume, or reinsure, or cause to be guaranteed, assumed, or reinsured, the policies or contracts of the insolvent insurer; or (2) assure payment of the contractual obligations of the insolvent insurer. (e) When proceeding under Subsections (b)(2) or (d) of this section, with respect to only life and health insurance policies the association shall: (1) assure payment of benefits for premiums identical to the premiums and benefits, except for terms of conversion and renewability that would have been payable under the policies of the impaired or insolvent insurer, for claims incurred: (A) with respect to a group policy or contract, the later of: (i) the earlier of the next renewal date under the policy or contract or the 45th day after the date the association becomes obligated with respect to the policy; or (ii) the 30th day after the date the association becomes obligated with respect to the policy; or (B) with respect to an individual policy, the later of: (i) the earlier of the next renewal date under the policy, if any, or the date one year after the date the association becomes obligated with respect to the policy; or (ii) the 30th day after the date the association becomes obligated with respect to the policy; (2) make diligent efforts to provide all known insureds or group policyholders notice before the 30th day before the benefits provided are terminated; and (3) with respect to individual policies, make available to each known insured, or owner if other than the insured, and with respect to an individual formerly insured under a group policy who is not eligible for replacement group coverage, substitute coverage on an individual basis in accordance with the provisions of Subsection (f) of this section, if the insureds had a right under law or the terminated policy to convert coverage to individual coverage or to continue an individual policy in force until a specified age or for a specified time, during which the insurer had no right unilaterally to make changes in any provision of the policy or had a right only to make changes in premium by class. (f) In providing the substitute coverage required under Subsection (e)(3) of this section, the association may offer either to reissue the terminated coverage or to issue an alternative policy. Alternative or reissued policies shall be offered without requiring evidence of insurability, and may not provide for any waiting period or exclusion that would not have applied under the terminated policy. The association may reinsure any alternative or reissued policy. (g) An alternative policy adopted by the association is subject to the approval of the commissioner. The association may adopt alternative policies of various types for future issuance without regard to any particular impairment or insolvency. (h) An alternative policy issued by the association must contain at least the minimum statutory provisions required in this state and provide benefits that are not unreasonable in relation to the premium charged. The association shall set the premium in accordance with a table of rates adopted by the association. The premium shall reflect the amount of insurance to be provided and the age and class of risk of each insured, but may not reflect any changes in the health of the insured after the original policy was last underwritten. (i) An alternative policy issued by the association must provide coverage of a type similar to that of the policy issued by the impaired or insolvent insurer, as determined by the association. (j) If the association elects to reissue terminated coverage at a premium rate different from that charged under the terminated policy, the premium shall be set by the association in accordance with the amount of insurance provided and the age and class of risk, subject to approval of the commissioner or by a court of competent jurisdiction. (k) The association's obligations with respect to coverage under any policy of the impaired or insolvent insurer or under any reissued or alternative policy cease on the date the coverage or policy is replaced by another similar policy by the policyholder, the insured, or the association. (l) When proceeding under Subsection (b)(2) or (d) of this section with respect to a policy or contract carrying guaranteed minimum interest rates, the association shall assure the payment or crediting of a rate of interest consistent with Section 3(c)(3) of this Act. (m) Failure to pay premiums before the 32nd day after the date required under the terms of any guaranteed, assumed, alternative, or reissued policy or contract or substitute coverage terminates the association's obligations under the policy or coverage under this Act with respect to that policy or coverage, except with respect to any claims incurred or any net cash surrender value due in accordance with the provisions of this Act. (n) Premiums due for coverage after entry of an order of receivership of an impaired or insolvent insurer belong to and are payable at the direction of the association, and the association is liable for unearned premiums due to policy or contract owners arising after the entry of the order. (o) The protection provided by this Act does not apply if any guaranty protection is provided to residents of this state by the laws of the domiciliary state or jurisdiction of the impaired or insolvent insurer other than this state. (p) In carrying out its duties under this section, the association may, subject to approval by the court: (1) impose permanent policy or contract liens in connection with any guarantee, assumption, or reinsurance agreement if the association finds that the amounts that can be assessed under this Act are less than the amounts needed to assure full and prompt performance of the association's duties under this Act, or that the economic or financial conditions as they affect member insurers are sufficiently adverse to make the imposition of the permanent policy or contract liens in the public interest; or (2) impose temporary moratoriums or liens on payments of cash values and policy loans, or any other right to withdraw funds held in conjunction with policies or contracts, in addition to any contractual provisions for deferral of cash or policy loan value. (q) If the association fails to act within a reasonable period of time as provided in Subsections (b)(2), (d), and (e) of this section, the commissioner may assume the powers and duties of the association under this Act with respect to impaired or insolvent insurers. (r) The association may render assistance and advice to the commissioner, on request, concerning rehabilitation, payment of claims, continuance of coverage, or the performance of other contractual obligations of an impaired or insolvent insurer. (s) The association may appear before any court in this state with jurisdiction over an impaired or insolvent insurer concerning which the association is or may become obligated under this Act. This right extends to all matters germane to the powers and duties of the association, including proposals for reinsuring, modifying, or guaranteeing the policies or contracts of the impaired or insolvent insurer and the determination of the policies or contracts and contractual obligations. The association may appear or intervene before a court in another state with jurisdiction over an impaired or insolvent insurer for which the association is or may become obligated or with jurisdiction over a third party against whom the association may have rights through subrogation of the insurer's policyholders. (t) A person receiving benefits under this Act is considered to have assigned the rights under, and any causes of action relating to, the covered policy or contract to the association to the extent of the benefits received under this Act, whether the benefits are payments of or on account of contractual obligations, continuation of coverage, or provision of substitute or alternative coverages. The association may require an assignment to it of the rights and cause of action by any payee, policy or contract owner, beneficiary, insured, or annuitant as a condition to the receipt of a right or benefit under this Act. The subrogation rights of the association under this subsection have the same priority against the assets of the impaired or insolvent insurer as that possessed by the person entitled to receive benefits under this Act. (u) The association has all common-law rights of subrogation and any other equitable or legal remedy that would have been available to the impaired or insolvent insurer or holder of a policy or contract with respect to such a policy or contract. (u-1) The rights of the association under Subsection (u) include, in the case of a structured settlement annuity, any rights of the owner, beneficiary, or payee of the annuity, to the extent of benefits received under this Act, against any person originally or by succession responsible for the losses arising from the personal injury relating to the annuity or payment for the annuity, other than a person responsible solely by reason of serving as an assignee in respect of a qualified assignment under Section 130, Internal Revenue Code of 1986 (26 U.S.C. Section 130). (u-2) If a provision of Subsection (t), (u), or (u-1) of this section is invalid or ineffective with respect to any person or claim for any reason, the amount payable by the association with respect to the related covered obligations is reduced by the amount realized by any other person with respect to the person or claim that is attributable to the policies, or portion of the policies, covered by the association. If the association has provided benefits with respect to a covered obligation and a person recovers amounts as to which the association has rights described in Subsection (t), (u), or (u-1) of this section, the person shall pay to the association the portion of the recovery attributable to the policies, or portion of the policies, covered by the association. (u-3) A deposit in this state, held under law or required by the commissioner for the benefit of creditors, including policy owners, that is not turned over to the domiciliary liquidator upon the entry of a final order of liquidation or order approving a rehabilitation plan of an insurer domiciled in this state or a reciprocal state in accordance with Section 13, Article 21.28, of this code, shall be promptly paid to the association. The association is entitled to retain a portion of any amount paid to the association under this subsection equal to the percentage determined by dividing the aggregate amount of policy owners' claims related to that insolvency for which the association has provided statutory benefits by the aggregate amount of all policy owners' claims in this state related to that insolvency and shall remit to the domiciliary receiver the amount paid to the association and retained under this subsection. The amount paid to the association under this subsection, less the amount retained by the association under this subsection, is treated as a distribution of estate assets under Section 7A(a), Article 21.28, of this code, or the similar law of the state of domicile of the impaired or insolvent insurer. (v) The association may: (1) enter into contracts as are necessary or proper to carry out the provisions and purposes of this Act; (2) sue or be sued, including taking any legal actions necessary or proper to recover any unpaid assessments under Section 9 of this Act and to settle claims or potential claims against it; (3) borrow money to effect the purposes of this Act, and any notes or other evidence of indebtedness of the association not in default are legal investments for domestic insurers and may be carried as admitted assets; (4) employ or retain employees or contractors to handle the financial transactions of the association and to perform other functions under this Act; (5) take legal action as may be necessary to avoid payment of improper claims; (6) exercise, for the purposes of this Act and to the extent approved by the commissioner, the powers of a domestic life, accident, health, or hospital service insurer, but the association may not issue insurance policies or annuity contracts other than those issued to perform its obligations under this Act; (7) request information from a person seeking coverage from the association in determining its obligations under this Act with respect to the person, and the person shall promptly comply with the request; and (8) take any other necessary or appropriate action to discharge the association's duties and obligations under this Act or to exercise the association's powers under this Act. (w) The association may join an organization of one or more other state associations of similar purposes to further the purposes and administer the powers and duties of the association. (x) The board of directors of the association shall have discretion and may exercise reasonable business judgment to determine the means by which the association is to provide the benefits of this Act in an economical and efficient manner. (y) If the association arranges or offers to provide the benefits of this Act to a covered person under a plan or arrangement that fulfills the association's obligations under this Act, the person is not entitled to benefits from the association in addition to or other than those provided under the plan or arrangement.
Assessments
Sec. 9. (a) For the purpose of providing the funds necessary to carry out the powers and duties of the association, the board of directors shall determine the amount necessary and the association shall assess the member insurers, separately for each account established by Section 6(a) of this Act, at such times and for such amounts as the board of directors finds necessary. All assessments are due on a date specified by the association that may not be earlier than the 30th day after the date on which prior written notice is given to the member insurers. Interest accrues on the unpaid amount at a rate of 10 percent beginning on the due date. (b) There are two classes of assessments, as follows: (1) Class A assessments are authorized and called to meet administrative costs of the association, administrative expenses properly incurred under this Act relating to any unauthorized insurer or nonmember of the association, and other general expenses not related to a particular insolvent or impaired insurer; and (2) Class B assessments are authorized and called to the extent necessary to carry out the powers and duties of the association under Section 8 with regard to an insolvent or impaired insurer. (b-1) For purposes of Subsection (b) of this section, an assessment is authorized at the time a resolution by the board of directors is passed under which an assessment will be called immediately or in the future from member insurers for a specified amount and an assessment is called at the time a notice has been issued by the association to member insurers requiring that an authorized assessment be paid within a period stated in the notice. An authorized assessment becomes a called assessment at the time notice is mailed by the association to member insurers. (c) The amount of a Class A assessment for each account is determined by the board of directors taking into consideration one or more of the following: annual premium receipts, admitted assets, or insurance in force, as reflected in the annual statements for the year preceding the assessment. (d) The amount of a Class B assessment shall be allocated among the separate accounts in accordance with an allocation formula that may be based on: (1) the premiums or reserves of the impaired or insolvent insurer; or (2) any other standard deemed by the board of directors in the board's sole discretion as being fair and reasonable under the circumstances. (e) Class A assessments shall be allowed as a credit on the amount of premium taxes in the manner provided by Article 1.16 of this code. (f) Class B assessments against member insurers for each account shall be in the proportion that the premiums received on business in this state by each assessed member insurer on policies or contracts covered by each account for the three most recent calendar years for which information is available preceding the year in which the insurer became impaired or insolvent bear to premiums received on business in this state for those calendar years by all assessed member insurers. (g) Assessments for funds to meet the requirements of the association with respect to an insolvent or impaired insurer may not be authorized and called until necessary to implement the purposes of this Act. Classification of assessments under Subsection (b) of this section and computation of assessments under this section shall be made with a reasonable degree of accuracy, recognizing that exact determinations may not always be possible. The association shall notify each member insurer of its anticipated pro rata share of an authorized assessment not yet called not later than the 180th day after the date the assessment is authorized. (h) The association may defer, in whole or in part, the assessment of a member insurer if, in the opinion of the association, payment of the assessment would endanger the ability of the member insurer to fulfill its contractual obligations. The total of all assessments on a member insurer for each account may not exceed two percent of the insurer's premiums on the policies covered by the account during the three calendar years preceding the year in which the insurer became an impaired or insolvent insurer. If two or more assessments are authorized in a calendar year with respect to insurers that become impaired or insolvent in different calendar years, the average annual premiums for purposes of the aggregate assessment percentage limitation described by this subsection shall be equal to the higher of the three-year average annual premiums for the applicable subaccount or account as computed in accordance with this section. (i) If an assessment against a member insurer is deferred under Subsection (h) of this section, in whole or in part, the amount by which the assessment is deferred may be assessed against the other member insurers in a manner consistent with the basis for assessments set forth in this subsection. If the maximum assessment, together with the other assets of the association, does not provide in any one year an amount sufficient to carry out the responsibilities of the association, the necessary additional funds shall be assessed as soon thereafter as permitted by this Act. (j) The board of directors may, by an equitable method as established in the plan of operation, refund to member insurers, in proportion to the contribution of each member insurer, the amount by which the assets exceed the amount the board of directors finds is necessary to carry out during the coming year the obligations of the association with regard to that amount, including assets accruing from net realized gains and income from investments. A reasonable amount may be retained to provide funds for the continuing expenses of the association and for future losses if refunds are impractical. (k) The association shall issue to each insurer paying a Class B assessment under this Act a certificate of contribution, in a form prescribed by the commissioner, for the amount so paid. All outstanding certificates shall be of equal dignity and priority without reference to amounts or date of issue. (l) Any insurer whose certificate of authority to do business in this state is canceled or surrendered shall be liable for any unpaid assessments made prior to the date of such cancellation or surrender. (m) The amounts provided according to assessments made under this section are supplemental to the marshaling of assets for the purpose of making payments on behalf of an impaired insurer. (n) All assessments collected by the association may be deposited into the Texas Treasury Safekeeping Trust Company in accordance with procedures established by the comptroller. The funds deposited shall be accounted for separately from all other funds by the comptroller to the association.
Plan of operation
Sec. 10. (a) The association operates under a plan of operation approved by the commissioner. The association may amend the plan, subject to the approval of the commissioner. An amendment to the plan becomes effective on the date on which the commissioner approves the amendment, or on the 30th day after the date the amendment is submitted to the commissioner for approval, if the commissioner does not approve or disapprove the amendment before that date. (b) All member insurers shall comply with the plan of operation. (c) The plan of operation must, in addition to requirements of this Act: (1) establish procedures for handling the assets of the association; (2) establish the amount and method of reimbursing members of the board of directors under Section 7 of this Act; (3) establish regular places and times for meetings, including telephone conference calls, of the board of directors; (4) establish procedures for records to be kept of all financial transactions of the association, its agents, and the board of directors; (5) establish any additional procedures for assessments under Section 9 of this Act; and (6) contain additional provisions necessary or proper for the execution of the powers and duties of the association. (d) The plan of operation may provide that any or all powers and duties of the association, except those under Sections 8(u) and 9 of this Act, are delegated to a corporation, association, or other organization that performs functions similar to those of this association, or its equivalent, in two or more states. The corporation, association, or organization shall be reimbursed for any payments made on behalf of the association and shall be paid for its performance of any function of the association. A delegation under this subsection may take effect only with the approval of both the board of directors and the commissioner, and may be made only to a corporation, association, or organization that extends protection not substantially less favorable and effective than that provided by this Act.
Duties and powers of the commissioner
Sec. 11. (a) In addition to the duties and powers enumerated elsewhere in this Act, the commissioner shall provide the association, on request, with a statement of the premiums in this and any other appropriate states for each member insurer. (b) When an impairment is declared and the amount of the impairment is determined, the commissioner shall serve a demand upon the impaired insurer to make good the impairment within a reasonable time. Notice to the impaired insurer constitutes notice to its shareholders, if any. The failure of the insurer to promptly comply with the demand does not excuse the association from the performance of its powers and duties under this Act. (c) The commissioner may suspend or revoke, after notice and hearing, the certificate of authority to transact insurance in this state of any member insurer that fails to pay an assessment when due or fails to comply with the plan of operation. As an alternative, the commissioner may levy a forfeiture on any member insurer that fails to pay an assessment when due. The forfeiture may not exceed five percent of the unpaid assessment per month and may not be less than $100 per month. (d) An action of the board of directors or the association may be appealed to the commissioner by a member insurer if the appeal is taken before the 61st day after the final action being appealed. If a member company is appealing an assessment, the amount assessed shall be paid to the association and available to meet association obligations during the pendency of an appeal. If the appeal on the assessment is upheld, the amount paid in error or excess shall be returned to the member company. (e) The commissioner, as receiver of an impaired insurer, may notify all interested persons of the effect of this Act.
Prevention of insolvencies
Sec. 12. (a) The commissioner shall: (1) notify the commissioners of all the other states, territories of the United States, and the District of Columbia by mail not later than the 30th day after the commissioner takes any of the following actions against a member insurer: (A) revokes a license; (B) suspends a license; or (C) makes any formal order that the insurer restrict its premium writing, obtain additional contributions to surplus, withdraw from the state, reinsure all or any part of its business, or increase capital, surplus, or any other account for the security of policyholders or creditors; (2) report to the board of directors when the commissioner has taken any of the actions set forth in Subdivision (1) of this subsection or has received a report from any other commissioner indicating that a similar action has been taken in another state; the report to the board of directors must contain all significant details of the action taken or the report received from the other commissioner; (3) report to the board of directors when the commissioner has reasonable cause to believe from any examination, whether completed or in process, of any member insurer that the insurer may be an impaired or insolvent insurer; and (4) furnish to the board of directors the National Association of Insurance Commissioners Insurance Regulatory Information System ratios and listings of companies not included in the ratios developed by the National Association of Insurance Commissioners. (b) The board may use the information described by Subsection (a) of this section in carrying out its duties and responsibilities under this Act. The board shall keep the report and the information contained in the report confidential until it is made public by the commissioner or other lawful authority. (c) The commissioner may seek the advice and recommendations of the board of directors concerning any matter affecting the commissioner's duties and responsibilities regarding the financial condition of member insurers and companies seeking admission to transact insurance business in this state. (d) The board of directors, on majority vote, may make reports and recommendations to the commissioner upon any matter germane to the solvency, liquidation, rehabilitation, or conservation of any member insurer or germane to the solvency of any company seeking to do an insurance business in this state. These reports and recommendations are not public documents and are not subject to the open records law, Chapter 424, Acts of the 63rd Legislature, Regular Session, 1973 (Article 6252-17a, Vernon's Texas Civil Statutes), until such time as an insurer is declared to be impaired. (e) The board of directors, on majority vote, shall notify the commissioner of information indicating a member insurer may be an impaired or insolvent insurer. (f) The board of directors, on majority vote, may request that the commissioner order an examination of any member insurer that the board in good faith believes may be an impaired or insolvent insurer. Not later than the 30th day after the receipt of the request, the commissioner shall begin the examination. The examination may be conducted as a National Association of Insurance Commissioners examination or may be conducted by persons designated by the commissioner. The cost of the examination shall be paid by the association and the examination report shall be treated as are other examination reports. In no event shall the examination report be released to the board of directors before its release to the public, but this does not preclude the commissioner from complying with Subsection (a) of this section. The commissioner shall notify the board of directors when the examination is completed. The request for an examination shall be kept on file by the commissioner but it is open to public inspection before the release of the examination report to the public. (g) The board of directors, on majority vote, may make recommendations to the commissioner for the detection and prevention of insurer insolvencies. (h) The board of directors, at the conclusion of any insurer insolvency in which the association was obligated to pay covered claims, shall prepare a report to the commissioner containing any information as it has in its possession bearing on the history and causes of the insolvency. The board shall cooperate with the boards of directors of guaranty associations in other states in preparing a report on the history and causes of insolvency of a particular insurer, and may adopt by reference any report prepared by the other associations.
Credits for assessments paid
Sec. 13. (a) Unless a longer period of time has been required by the commissioner, a member insurer shall at its option have the right to show a certificate of contribution as an admitted asset in the form approved by the commissioner under Section 9(k) of this Act at percentages of the original face amount approved by the commissioner, for calendar years as follows: 100 percent for the calendar year of issuance, which shall be reduced 20 percent a year for each year thereafter for a period of five years. (b) The insurer may offset the amount written off by it in a calendar year under Subsection (a) of this section against its premium tax liability to this state accrued with respect to business transacted in that year. An insurer may not be required to write off in any one year, an amount in excess of its premium tax liability to this state accruing within the year. (c) Any sums acquired by refund, pursuant to Section 9(j) of this Act, from the association which have theretofore been written off by contributing insurers and offset against premium taxes as provided in Subsection (b) of this section, and are not then needed for purposes of this Act, shall be paid by the association to the commissioner and by him deposited with the comptroller for credit to the general fund of this state. (d) A member insurer may assign or transfer a credit against premium tax to another member insurer if: (1) an acquisition, merger, or total assumption of reinsurance has occurred between the insurers; or (2) the commissioner by order approves the assignment or transfer. (e) Not later than November 1 or the 60th day after the date of an assignment or transfer under Subsection (d) of this section, whichever is later, each member insurer shall report, on a form prescribed by the comptroller, the assignment or transfer to the comptroller. The member insurer shall provide with the report any documents from the commissioner that show approval of the assignment or transfer.
Miscellaneous provisions
Sec. 14. (a) This Act does not reduce the liability for unpaid assessments of the insureds of an impaired or insolvent insurer operating under a plan with assessment liability. (b) The association shall maintain records of all negotiations and meetings in which the association or its representatives discuss the activities of the association in carrying out its powers and duties under Section 8 of this Act. Records of the negotiations or meetings may be made public only on the termination of a liquidation, rehabilitation, or conservation proceeding involving the impaired or insolvent insurer, on the termination of the impairment or insolvency of the insurer, or on the order of a court of competent jurisdiction. This subsection does not limit the duty of the association to report on its activities under Section 15 of this Act. (c) To carry out its obligations under this Act, the association is considered a creditor of the impaired or insolvent insurer to the extent of assets attributable to covered policies reduced by any amounts to which the association is entitled as subrogee under Sections 8(t) and (u) of this Act. Assets of the impaired or insolvent insurer attributable to covered policies shall be used to continue all covered policies and pay all contractual obligations of the impaired or insolvent insurer as required by this Act. Assets attributable to covered policies, as used in this subsection, are that proportion of the assets that the reserves that should have been established for the policies bear to the reserves that should have been established for all policies of insurance written by the impaired or insolvent insurer. (d) Before the termination of any receivership, the court may take into consideration the contributions of the respective parties, including the association, the shareholders, and policyholders of the impaired or insolvent insurer, and any other party with a bona fide interest, in making an equitable distribution of the ownership rights of the impaired or insolvent insurer. In making this determination, the court shall consider the welfare of the policyholders of the continuing or successor insurer. (e) A distribution to stockholders of an impaired or insolvent insurer may not be made until the total amount of valid claims of the association for funds expended in carrying out its powers and duties under Section 8 of this Act with respect to the insurer have been recovered with interest by the association. (f) If an order of receivership of an insurer domiciled in this state has been entered, the receiver appointed under the order may recover on behalf of the insurer, from any affiliate that controlled it, the amount of distributions, other than stock dividends paid by the insurer on its capital stock, made at any time during the five years preceding the petition for liquidation or rehabilitation subject to the limitations of Subsections (g), (h), and (i) of this section. (g) A distribution to stockholders is not recoverable under Subsection (f) of this section if the insurer shows that when paid the distribution was lawful and reasonable, and that the insurer did not know and could not reasonably have known that the distribution might adversely affect the ability of the insurer to fulfill its contractual obligations. (h) A person that was an affiliate that controlled the insurer at the time distributions subject to Subsection (f) of this section were paid is liable for the amount of distributions received. A person that was an affiliate that controlled the insurer at the time the distributions were declared is liable for the amount of distributions the person would have received if they had been paid immediately. If two or more persons are liable with respect to the same distributions, they are jointly and severally liable. (i) The maximum amount recoverable under Subsections (f) and (h) of this section is the amount needed in excess of all other available assets of the impaired or insolvent insurer to pay the contractual obligations of the impaired or insolvent insurer. (j) If a person liable under Subsection (h) of this section is insolvent, all its affiliates that controlled it at the time the distribution was paid are jointly and severally liable for any resulting deficiency in the amount recovered from the insolvent affiliate. (k) An impaired insurer placed in conservatorship or receivership for which assessments have been made under the provisions of this article, or for which guaranty fees have been provided, may not, on release from conservatorship or receivership, issue new or renewal insurance policies until the insurer has repaid in full the amount of guaranty fees furnished by the association. The commissioner may, on application of the association and after hearing, permit the issuance of new policies in accordance with a plan of operation by the released insurer for repayment. The commissioner may, in approving such plan, place restrictions on the issuance of new or renewal policies as necessary to the implementation of the plan. The commissioner shall give 10 days' notice of a hearing under this subsection to the association, and the association and member insurers that paid assessments in relation to the impaired insurer are entitled to appear at and participate in the hearing. Money recovered by the association under this subsection shall be repaid to the member insurers that paid assessments in relation to the impaired insurer on return of the appropriate certificate of contribution.
Examination of the association; annual report
Sec. 15. The association shall be subject to examination and regulation by the commissioner in the same manner as other insurers under this code. The board of directors shall submit to the commissioner each year, not later than the 120th day after the last day of the association's fiscal year, a financial report in a form approved by the commissioner and a report of the association's activities during the preceding fiscal year.
Tax exemptions
Sec. 16. The association is exempt from payment of all fees and all taxes levied by this state or any of its subdivisions, except taxes levied on real or personal property.
Immunity; attorney general representation
Sec. 17. (a) There is no liability on the part of and no cause of action of any nature arises against any member insurer or its agents or employees, the association or its agents or employees, members of the board of directors, the receiver, the special deputy or its agents or employees, or the commissioner or the commissioner's representatives, for any good faith action or omission in the performance of powers and duties under this Act. This immunity extends to the participation in any organization of one or more other state associations of similar purposes and to any similar organization and its agents or employees. (b) The attorney general shall defend any action to which Subsection (a) applies that is brought against a member insurer or its agents or employees, the association or its agents or employees, members of the association's board of directors, a special deputy receiver to its agents or employees, or the commissioner or the commissioner's representatives. This subsection continues to apply to an action instituted after the defendant's service with the guaranty association, commissioner, or department has terminated. This subsection does not require the attorney general to defend any person or entity with respect to an issue other than the applicability or effect of the immunity created by Subsection (a). The attorney general is not required to defend any member insurer of the association or its agents or employees, the association or its agents or employees, members of the association's board of directors, a special deputy receiver or its agents or employees with respect to any actions filed regarding the disposition of a claim filed with the guaranty association under this Act or to an issue other than the applicability or effect of the immunity created by Subsection (a). The association may contract with the attorney general under the Interagency Cooperation Act (Article 4413(32), Vernon's Texas Civil Statutes) to provide legal services not covered under this subsection.
Stay of proceedings
Sec. 18. All proceedings in which an impaired insurer is a party or is obligated to defend a party in any court in this state, except proceedings directly related to the receivership or instituted by the receiver, shall be stayed for six months and any additional time thereafter as may be determined by the court from the date of the designation of impairment or an ancillary proceeding is instituted in the state, whichever is later, to permit proper defense by the receiver or the association of all pending causes of action. As to any covered claims arising from a judgment under any decision, verdict, or finding based on the default of the impaired insurer or its failure to defend an insured, the association either on its own behalf or on behalf of the insured may apply to have the judgment, order, decision, verdict, or finding set aside by the same court or administrator that made the judgment, order, decision, verdict, or finding and shall be permitted to defend the claim on the merits. The receiver or statutory successor of an impaired insurer covered by this Act shall permit access by the board or its authorized representative to records of the impaired insurer as are necessary for the board in carrying out its functions under this Act with regard to covered claims. In addition, the receiver or statutory successor shall provide the board or its representative with copies of the records on request of the board and at the expense of the board.
Prohibited advertisement of insurance guaranty association act in insurance sales; notice to policyholders
Sec. 19. (a) A person may not make, publish, disseminate, circulate, or place before the public or cause, directly or indirectly, to be made, published, disseminated, circulated, or placed before the public, in any newspaper, magazine or other publication, or in the form of a notice, circular, pamphlet, letter, or poster, or over any radio station or television station, or in any other way, any advertisement, announcement, or statement, written or oral, that uses the existence of the association for the purpose of sales, solicitation, or inducement to purchase any form of insurance covered by this Act. This section does not apply to the association or any other entity which does not sell or solicit insurance. The use of the protection afforded by this Act, other than as provided by this section, by any person in the sale of insurance constitutes unfair competition and unfair practices under Article 21.21 of this code, and is subject to the sanctions imposed under that article. (b) The association shall prepare a summary document describing the general purposes and current limitations of the Act and complying with Subsection (c) of this section. This document shall be submitted to the commissioner for approval. Unless Subsection (d) of this section applies, at the expiration of the 60th day after the date on which the commissioner approves the document, an insurer may not deliver a policy or contract described in Section 3 of this Act to a policy or contract holder unless the summary document is delivered to the policy or contract holder before or at the time of delivery of the policy or contract. The document shall be available on request by a policyholder. The distribution, delivery, or contents or interpretation of this document does not guarantee that the policy or the contract or the holder of the contract or policy is covered in the event of the impairment or insolvency of a member insurer. The document shall be revised by the association as amendments to the Act may require. Failure to receive this document does not give the policyholder, contract holder, certificate holder, or insured any greater rights than those stated in this Act. (c) The document prepared under Subsection (b) of this section must contain a clear and conspicuous disclaimer on its face. The commissioner shall promulgate a rule establishing the form and content of the disclaimer. The disclaimer shall: (1) state the name and address of the association and insurance department; (2) warn the policy or contract holder that the association may not cover the policy or, if coverage is available, it will be subject to substantial limitations and exclusions and conditioned on continued residence in the state; (3) state that the insurer and its agents are prohibited by law from using the existence of the association for the purpose of sales, solicitation, or inducement to purchase any form of insurance; (4) state that the policy or contract holder should not rely on coverage under the association when selecting an insurer; and (5) provide other information as directed by the commissioner. (d) An insurer or agent may not deliver a policy or contract described in Section 3(b) of this Act and excluded under Section 3(c) of this Act from coverage under this Act unless the insurer or agent, before or at the time of delivery, gives the policy or contract holder a separate written notice that clearly and conspicuously discloses that the policy or contract is not covered by the association. The commissioner shall by rule specify the form and content of the notice.
Suits against association
Sec. 20. (a) Venue in a suit against the association arising under this article is in Travis County. (b) The association is not required to give an appeal bond in an appeal of a cause of action under this article.
Rules and regulations
Sec. 21. The State Board of Insurance is authorized and directed to issue such reasonable rules and regulations as may be necessary to carry out the various purposes and provisions of this article, and in augmentation thereof. Added by Acts 1973, 63rd Leg., p. 1052, ch. 408, Sec. 1, eff. Aug. 27, 1973. Amended by Acts 1981, 67th Leg., p. 429, ch. 181, Sec. 1, 2, eff. May 20, 1981. Sec. 5(4) amended by Acts 1983, 68th Leg., p. 3999, ch. 622, Sec. 90, eff. Sept. 1, 1983; Sec. 3 amended by Acts 1987, 70th Leg., ch. 1073, Sec. 38, eff. Sept. 1, 1987; Sec. 5(1), (4), (9) amended and (11) to (14) added by Acts 1987, 70th Leg., ch. 1073, Sec. 39, eff. Sept. 1, 1987; Sec. 6(1) amended by Acts 1987, 70th Leg., ch. 1073, Sec. 40, eff. Sept. 1, 1987; Sec. 9(1) to (3) amended by Acts 1987, 70th Leg., ch. 1073, Sec. 41, eff. Sept. 1, 1987; Sec. 10(1), (4) amended by Acts 1987, 70th Leg., ch. 1073, Sec. 42, eff. Sept. 1, 1987; Secs. 11, 12 amended by Acts 1987, 70th Leg., ch. 1073, Sec. 43, eff. Sept. 1, 1987; Sec. 13(2), (3) amended by Acts 1987, 70th Leg., ch. 1073, Sec. 44, eff. Sept. 1, 1987; Sec. 17 amended by Acts 1987, 70th Leg., ch. 1073, Sec. 45, eff. Sept. 1, 1987; Sec. 20A added by Acts 1987, 70th Leg., ch. 1073, Sec. 46, eff. Sept. 1, 1987; Sec. 5(4) amended by Acts 1989, 71st Leg., ch. 1082, Sec. 6.17, eff. Sept. 1, 1989; Sec. 9(1) amended by Acts 1989, 71st Leg., ch. 1082, Sec. 6.18, eff. Sept. 1, 1989; Sec. 9(3) amended by Acts 1989, 71st Leg., ch. 1082, Sec. 6.19, eff. Sept. 1, 1989; Sec. 9(10) added by Acts 1989, 71st Leg., ch. 1082, Sec. 6.24, eff. Sept. 1, 1989; Sec. 13(5)(f), (g) added by Acts 1989, 71st Leg., ch. 1082, Sec. 6.20, eff. Sept. 1, 1989; Sec. 5(9) amended by Acts 1991, 72nd Leg., ch. 242, Sec. 11.06, eff. Sept. 1, 1991; Sec. 7(1) amended by Acts 1991, 72nd Leg., ch. 242, Sec. 9.10, eff. Sept. 1, 1991; Sec. 7(3) added by Acts 1991, 72nd Leg., ch. 242, Sec. 11.26, Sept. 1, 1991; Sec. 19(1) amended by Acts 1991, 72nd Leg., ch. 242, Sec. 11.07, eff. Sept. 1, 1991. Amended by Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Sec. 1.21, eff. Jan. 1, 1992; Sec. 7(d) added by Acts 1993, 73rd Leg., ch. 685, Sec. 10.01, eff. Sept. 1, 1993; Sec. 17(a) amended by Acts 1993, 73rd Leg., ch. 685, Sec. 10.02, eff. Sept. 1, 1993; Sec. 7(a) and (d) amended by Acts 1997, 75th Leg., ch. 184, Sec. 1, eff. Sept. 1, 1997; Sec. 9(n) amended by Acts 1997, 75th Leg., ch. 1423, Sec. 11.54, eff. Sept. 1, 1997; Sec. 13(c) amended by Acts 1997, 75th Leg., ch. 1423, Sec. 11.55, eff. Sept. 1, 1997; Sec. 13(d), (e) added by Acts 2001, 77th Leg., ch. 848, Sec. 1, eff. Sept. 1, 2001; Sec. 3 amended by Acts 2005, 79th Leg., ch. 753, Sec. 1, eff. Sept. 1, 2005; Sec. 5(2), (3), (4), (5), (6), (7), (9), (10), (11), (12) amended by Acts 2005, 79th Leg., ch. 753, Sec. 2, eff. Sept. 1, 2005; Sec. 5(2-a), (8-a), (9-a), (11-a) added by Acts 2005, 79th Leg., ch. 753, Sec. 2, eff. Sept. 1, 2005; Sec. 5A added by Acts 2005, 79th Leg., ch. 753, Sec. 3, eff. Sept. 1, 2005; Sec. 6(a) amended by Acts 2005, 79th Leg., ch. 753, Sec. 4, eff. Sept. 1, 2005; Sec. 8(e), (n), (v) amended by Acts 2005, 79th Leg., ch. 753, Sec. 5, eff. Sept. 1, 2005; Sec. 8(u-1), (u-2), (u-3), (x), (y) added by Acts 2005, 79th Leg., ch. 753, Sec. 5, eff. Sept. 1, 2005; Sec. 9(b), (d), (f), (g), (h) amended by Acts 2005, 79th Leg., ch. 753, Sec. 6, eff. Sept. 1, 2005; Sec. 9(b-1) added by Acts 2005, 79th Leg., ch. 753, Sec. 6, eff. Sept. 1, 2005; Sec. 13(a) amended by Acts 2005, 79th Leg., ch. 753, Sec. 7, eff. Sept. 1, 2005; Sec. 14(d), (i) amended by Acts 2005, 79th Leg., ch. 753, Sec. 8, eff. Sept. 1, 2005. Art. 21.28-E. DISCLOSURE OF GUARANTY FUND NONPARTICIPATION IN INSURANCE POLICIES, CONTRACTS, AND APPLICATIONS AND IN CERTIFICATES AND EVIDENCES OF COVERAGE.
Article repealed effective April 1, 2007
(a) Each insurance policy or contract or application or certificate or evidence of coverage, other than a fidelity, surety, or guaranty bond, delivered or issued for delivery in this state that is not covered by an insurance guaranty fund or other solvency protection arrangement authorized by this code must have affixed to the first page in 10-point type a statement to the effect that, in the event the insurer is unable to fulfill its contractual obligation under this policy or contract or the certificate or evidence of coverage, the insurer is not covered by an insurance guaranty fund or other solvency protection arrangement. (b) The State Board of Insurance by rule shall promulgate the statements that must be used by insurers to comply with this article, and an insurer may not include in an insurance policy, contract, or application or a certificate or evidence of coverage a statement that does not conform to the appropriate statement promulgated by the board. (c) The provisions of this article shall not apply to marine insurance as defined by Article 5.53. Added by Acts 1989, 71st Leg., ch. 1082, Sec. 6.25, eff. Sept. 1, 1989. Subsec. (a) amended by Acts 1991, 72nd Leg., ch. 242, Sec. 11.08, eff. Sept. 1, 1991; Subsec. (c) added by Acts 1991, 72nd Leg., ch. 242, Sec. 2.49, Sept. 1, 1991; Subsec. (c) amended by Acts 2003, 78th Leg., ch. 206, Sec. 21.33, eff. June 11, 2003.
SUBCHAPTER E. MISCELLANEOUS PROVISIONS
Art. 21.31. UNLAWFUL DIVIDENDS.
Article repealed effective April 1, 2007
It shall not be lawful for any insurance company organized under the laws of this State to make any dividend, except from surplus profits arising from its business. In estimating such profits, there shall be reserved therefrom the lawful reserve on all unexpired risks and also the amount of all unpaid losses, whether adjusted or unadjusted, and all other debts due and payable, or to become due and payable, by the company. Any dividends made contrary to any provision of this article shall subject the company making them to a forfeiture of its charter; and the Board shall forthwith revoke its certificate of authority. The Board shall give such company at least ten (10) days' notice in writing of its intention to revoke such certificate, stating specifically the reasons why it intends to revoke same. Acts 1951, 52nd Leg., ch. 491. Art. 21.32. UNLAWFUL DIVIDEND.
Article repealed effective April 1, 2007
No life, health, fire, marine, or inland insurance company, organized under the laws of this state, shall make any dividend except from the surplus profits arising from its business. In estimating such profits, there shall be reserved therefrom the lawful reserve on all unexpired risks computed in the manner as provided elsewhere in this Code, and also there shall be reserved the amount of all unpaid losses, whether adjusted or unadjusted; all sums due the company on bonds, mortgages, stocks and book-accounts, of which no part of the principal or the interest thereon has been paid during the year preceding such estimate of profits, and upon which suit for foreclosures or collections has not been commenced, or which after judgment has been obtained thereon shall have remained more than two years unsatisfied, and upon which interest shall not have been paid. In case of any such judgment, the interest due or accrued thereon and remaining unpaid shall also be reserved. Any dividend made contrary to the provisions of this Article shall subject the company making it to a forfeiture of its charter, and the Board shall forthwith revoke its certificate of authority. Acts 1951, 52nd Leg., ch. 491. Amended by Acts 1959, 56th Leg., p. 637, ch. 291, Sec. 2. Art. 21.32A. LEGALITY OF DIVIDEND.
Article repealed effective April 1, 2007
For the purpose of determining the legality of a dividend to shareholders paid by stock domestic insurance companies authorized to transact life, accident, and health insurance business in Texas, all stock foreign and alien life, health, and accident insurance companies, stock insurance companies authorized to transact property and casualty business and fire insurance business and domestic Lloyds', reciprocals, and title insurance companies under the laws of the State of Texas, the "earned surplus" or "surplus profits arising from the business" of the insurance company may include the acquired "earned surplus" of an insurance subsidiary which has been acquired by the insurance company, to the extent allowed by an order of the commissioner made in accordance with the rules of the board but only to the extent that the "earned surplus" of the acquired subsidiary on the date of acquisition, and in existence on the date of the order, is not otherwise reflected in the "earned surplus" of the insurance company. Added by Acts 1977, 65th Leg., p. 844, ch. 315, Sec. 1, eff. Aug. 29, 1977. Art. 21.39. LOSS OR CLAIM RESERVES.
Article repealed effective April 1, 2007
Every insurer shall maintain reserves in an amount estimated in the aggregate to provide for the payment of all losses or claims incurred on or prior to the date of statement, whether reported or unreported, which are unpaid as of such date and for which such insurer may be liable, and also reserves in an amount estimated to provide for the expenses of adjustment or settlement of such claims. The Board of Insurance Commissioners shall adopt each current formula for establishing reserves applicable to each line of insurance recommended by the National Association of Insurance Commissioners and all companies writing the line of insurance to which each such adopted formula is applicable shall establish reserves in compliance therewith. Acts 1951, 52nd Leg., ch. 491. Amended by Acts 1955, 54th Leg., p. 413, ch. 117, Sec. 52. Art. 21.39-A. ASSET PROTECTION ACT.
Article repealed effective April 1, 2007
Title
Sec. 1. This article shall be known and may be cited as the Asset Protection Act.
Purpose
Sec. 2. This Act is for the purpose of requiring insurers to have and maintain unencumbered assets in an amount equal to reserve liabilities; to provide preferential claims against assets in favor of owners, beneficiaries, assignees, certificate holders, or third party beneficiaries of insurance policies; and to prevent the hypothecation or encumbrance of assets in excess of certain amounts without prior written order of the Commissioner of Insurance.
Scope
Sec. 3. This Act shall apply to all of the following types of domestic insurance companies and to all kinds of insurance written by such companies; and where used herein "insurer" shall mean: all domestic stock and mutual life, health and accident, fire, casualty, fire and casualty and title insurance companies, including mutual assessment companies, local mutual aid associations, local mutual burial associations, Statewide mutual assessment companies, stipulated premium insurance companies, fraternal benefit societies, group hospital service insurance companies, county mutual insurance companies, Lloyd's and reciprocal exchanges, farm mutual companies, and mortgage guaranty insurance companies. This Act shall not apply to variable contracts for which separate accounts are required to be maintained and shall not apply to assessment as needed companies nor to insurance coverage written by assessment as needed companies. This Act shall not apply to an insurance company while subject to a conservatorship order issued by the Commissioner of Insurance nor to an insurance company while a court appointed receiver is in charge of its affairs.
Exception
Sec. 3A. (a) This Act shall not apply to those reserve assets of an insurer which are held, deposited, pledged, hypothecated, or otherwise encumbered as provided herein to secure, offset, protect, or meet those reserve liabilities of such insurer which are established, incurred, or required under the provisions of a reinsurance agreement whereby such insurer has reinsured the insurance policy liabilities of a ceding insurer, provided: (1) the ceding insurer and the reinsurer are both licensed to transact business in this state; (2) pursuant to a written agreement between the ceding insurer and the reinsurer, reserve assets substantially equal to the reserve liabilities required to be established by the reinsurer on the reinsured business are either (a) deposited by or are withheld from the reinsurer and are in the custody of the ceding insurer as security for the payment of the reinsurer's obligations under the reinsurance agreement, and such assets are held subject to withdrawal by and under the separate or joint control of the ceding insurer, or (b) are deposited and held in a trust account for such purpose and under such conditions with a state or national bank domiciled in this state. (b) The Commissioner of Insurance shall have the right to examine any of such assets, reinsurance agreements, or deposit arrangements at any time in accordance with the authority to make examinations of insurance companies as conferred by other provisions of this code. (c) This Act does not apply to a reinsurance agreement or any trust account related to the reinsurance agreement if the agreement and trust account meet the requirements of Article 3.10 or 5.75-1 of this code.
Definitions
Sec. 4. As used in this Act: 1. "Reserve liabilities" are those liabilities which are required to be established by the insurer for all of its outstanding insurance policies in accordance with the Insurance Code, as amended or as hereafter amended; 2. "Reserve assets" are those assets of an insurer which are authorized investments for policy reserves in accordance with the Insurance Code, as amended or as hereafter amended; 3. "Assets" are all property, real or personal, tangible or intangible, legal or equitable, owned by an insurer; 4. "Claimants" are any owners, beneficiaries, assignees, certificate holders, or third party beneficiaries of any insurance benefit or right arising out of and within the coverage of an insurance policy covered by this Act.
Prohibition of Hypothecation
Sec. 5. Every insurer subject to the provisions of this Act shall at all times have and maintain free and unencumbered assets in an amount equal to its reserve liabilities, and no such insurer shall pledge, hypothecate, or otherwise encumber its assets in an amount in excess of the amount of its capital and surplus; nor shall such insurer pledge, hypothecate or otherwise encumber more than ten per cent (10%) of its reserve assets as herein defined; provided, however, that the Commissioner of Insurance, upon application made to him, may issue a written order approving the hypothecation or encumbrance of any of the assets of such an insurer in any amount upon a finding that such hypothecation or encumbrance will not adversely affect the solvency of such insurer. Any such insurer which shall pledge, hypothecate, or otherwise encumber any of its assets shall within (10) days thereafter report in writing to the Commissioner of Insurance the amount and identity of the assets so pledged, hypothecated, or encumbered and the terms and conditions of such transaction. In addition, each such insurer shall annually or more often if required by the Commissioner file with the Commissioner a statement sworn to by the chief executive officer of the insurer that (a) title to assets in an amount equal to the reserve liability of the insurer which are not pledged, hypothecated or otherwise encumbered is vested in the insurer, (b) the only assets of the insurer which are pledged, hypothecated or otherwise encumbered are as identified and reported in such sworn statement and no other assets of the insurer are pledged, hypothecated or otherwise encumbered, and (c) the terms and provisions of any such transaction of pledge, hypothecation, or encumbrance are as reported in such sworn statement. Any person, corporation, association or legal entity which accepts a pledge, hypothecation or encumbrance of any asset of an insurer as security for a debt or other obligation of such insurer not in accordance with the terms and limitations of this Act shall be deemed to have accepted such asset subject to a superior, preferential and automatically perfected lien in favor of claimants; provided, however, that such superior, preferential and automatically perfected lien in favor of claimants shall not apply to assets of an insurance company in conservatorship or receivership if the Commissioner of Insurance, in the conservatorship proceeding, or the court in which the receivership is pending, approves the pledge, hypothecation or encumbrance of such assets. In the event of involuntary or voluntary liquidation of any insurer subject to this Act, claimants of such insurer shall have a prior and preferential claim against all assets of the insurer except those which have been pledged, hypothecated or encumbered in accordance with the terms and limitations of this Act. All claimants shall have equal status and their prior and preferential claim shall be superior to any claim or cause of action against the insurer by any person, corporation, association or legal entity.
Control Over Conflicts
Sec. 6. The provisions of this Act and the powers and functions authorized by this Act are to be exercised to the end that its purposes be accomplished. This Act is cumulative of existing laws, but in the event of conflict between this Act and any other law relating to the subject matter of this Act or its application, the provisions of this Act shall control.
Unconstitutional Application Prohibited
Sec. 7. This Act does not apply to any insurer or other person to whom, under the Constitution of the United States or the Constitution of the State of Texas, it cannot validly apply.
Severance Clause
Sec. 8. If any provision of this Act or the application thereof to any person or circumstance is held invalid by any court of competent jurisdiction, such invalidity shall not affect other provisions or applications of the Act which can be given effect without the invalid provision or application, and to this end the provisions of this Act are declared to be severable. Added by Acts 1971, 62nd Leg., p. 1372, ch. 361, Sec. 1, eff. May 25, 1971. Amended by Acts 1981, Leg., p. 401, ch. 164, Sec. 1, eff. Aug. 31, 1981. Sec. 3 amended by Acts 1989, 71st Leg., ch. 273, Sec. 5, eff. Aug. 28, 1989; Sec. 3A(c) added by Acts 1993, 73rd Leg., ch. 685, Sec. 7.14, eff. Sept. 1, 1993. Art. 21.39-B. RESTRICTION ON TRANSACTIONS WITH FUNDS AND ASSETS.
Article repealed effective April 1, 2007
Sec. 1. Any director, member of a committee, or officer, or any clerk of a domestic company, who is charged with the duty of handling or investing its funds, shall not: (1) invest such funds, except in the corporate name of such company, provided, however, that securities kept under a custodial agreement or trust agreement with a bank, federal home loan bank, or trust company may be issued in the name of a nominee of such bank, federal home loan bank, or trust company if such bank, federal home loan bank, or trust company has corporate trust powers and is duly authorized to act as a custodian or trustee and is organized under the laws of the United States of America or any state thereof and either (i) is a member of the Federal Reserve System, (ii) is a member of or is eligible to receive deposits which are insured by the Federal Deposit Insurance Corporation, (iii) maintains an account with a Federal Reserve Bank and is subject to supervision and examination by the Board of Governors of the Federal Reserve System, or (iv) is subject to supervision and examination by the Federal Housing Finance Board; (2) deposit such funds except in the corporate name of such company, or in a pooling account with one or more affiliates, or in accordance with a reinsurance agreement; (3) borrow the funds of such company; (4) be interested in any way in any loan, pledge, security, or property of such company, except as stockholder; or (5) take or receive to his own use any fee, brokerage, commission, gift, or other consideration for, or on account of, a loan made by or on behalf of such company. Sec. 2. If funds of a domestic company are deposited in a pooling account, only the domestic company and its affiliate, as defined in Article 21.49-1 of this code, may hold funds in a pooling account. The accounting and operational records and books of the companies must be adequately detailed to identify specific insurance policies and policyholders with premium funds received by the particular company issuing the insurance. A reinsurance agreement between the domestic company and one or more affiliates must specifically authorize the deposit of premium funds to the account of the affiliate which is assuming the reinsurance. Sec. 3. The State Board of Insurance may promulgate such regulations as may be deemed necessary to carry out the provisions of this article. Sec. 4. The provisions of this article are applicable to all domestic insurance companies subject to regulation by the Insurance Code, as amended, and any provision of exemption or any provision of inapplicability or applicability limiting such regulation in any chapter of the code are not in limitation of the provisions of this article, and in the event of conflict between this article and any other article of the code or in the event of any ambiguity, the provisions of this article shall govern. As used herein, the term "insurance companies" includes stock companies, reciprocals or inter-insurance exchanges, Lloyds associations, fraternal benefit societies, stipulated premium companies, and mutual companies of all kinds, including state-wide mutual assessment corporations, local mutual aids, burial associations, and county mutual insurance companies and farm mutual insurance companies and all other organizations, corporations, or persons transacting an insurance business, unless such insurance companies are by statute specifically, by naming this article, exempted from the operation of this article. Sec. 5. (a) A domestic insurance company may evidence its ownership of securities either through definitive certificates or through uncertificated securities as defined by the Business & Commerce Code and as provided by Section 6 of this article. The insurance company may deposit or arrange through its agents, brokers, or dealers for the deposit of securities held in or purchased for its general account or its separate accounts in either a clearing corporation or the Federal Reserve Book Entry System. When securities are deposited with a clearing corporation directly or deposited indirectly through a participating custodian bank, certificates representing securities of the same class of the same issuer may be merged and held in bulk in the name of nominee of such clearing corporation with any other securities deposited with such clearing corporation by any person, regardless of the ownership of such securities, and certificates representing securities of small denominations may be merged into one or more certificates of larger denominations. The records of any agent, broker, dealer, or member banks through which an insurance company holds securities in the Federal Reserve Book Entry System and the record of any custodian banks through which an insurance company holds securities in a clearing corporation shall at all times show that such securities are held for such insurance company and for which accounts thereof. To be eligible to act as a participating custodian bank under this subsection, a bank must enter a custodial agreement with the insurance company for which it is to act as a participating custodian bank. (b) As used in this article, a clearing corporation is: (1) a corporation defined in Section 8.102(c) of the Business & Commerce Code; or (2) a clearance system that: (A) is organized or operating under the law of one or more foreign countries; (B) provides for the book entry settlement and custody of internationally traded securities; and (C) has been organized and in operation for a period of not less than 15 consecutive years. (c) Whenever an insurance company is required to deposit securities as a condition of commencing or continuing to do an insurance business in this state, such deposit may be made through the use of a clearing corporation or the Federal Reserve Book Entry System. Securities deposited with a clearing corporation or held in the Federal Reserve Book Entry System and used to meet the deposit requirements under the insurance laws of this state shall be under the control of the commissioner and shall not be withdrawn by the insurance company without the approval of the commissioner. Any insurance company making a deposit in this manner shall provide to the commissioner evidence issued by its custodian or member bank through which such insurance company has deposited securities with a clearing corporation or in the Federal Reserve Book Entry System or when making the deposit directly with the clearing corporation as a participant, respectively, in order to establish that the securities are actually recorded in an account in the name of the custodian or direct participant or member bank, and shall also provide to the commissioner evidence that the records of the custodian, participant, or member bank and clearing corporation reflect that such securities are held subject to the order of the commissioner. (d) The State Board of Insurance by rule may prescribe a reasonable maximum limit on the percentage of a domestic insurance company's assets that may be deposited in a clearing corporation as defined by Subsection (b)(2) of this section, but the maximum limit may not exceed five percent of a company's total assets as reflected by its annual statement filed with the State Board of Insurance for the year preceding the year for which the limit is prescribed. (e) A domestic insurance company may deposit assets in a clearing corporation defined by Subsection (b)(2) of this section only if the insurance company: (1) is a member of an insurance company holding company system with total assets of at least $5 billion as reflected by annual statements of member companies for the preceding year; (2) uses that clearing corporation only as a depository for investments in internationally traded securities; (3) has a total investment in those internationally traded securities that does not exceed the company's policyholders' surplus; and (4) does not use those securities deposited with that clearing corporation as security for reinsurance. Sec. 6. The State Board of Insurance shall adopt rules authorizing a domestic insurance company to demonstrate ownership of an uncertificated security consistent with common practices of securities exchanges and markets. The rules shall establish: (1) standards for the types of uncertificated securities that may be held; (2) the manner in which ownership of the security may be demonstrated; and (3) adequate financial safeguards relating to the ownership of uncertificated securities. Added by Acts 1975, 64th Leg., p. 464, ch. 198, Sec. 1, eff. May 15, 1975. Sec. 4 added by Acts 1983, 68th Leg., p. 1239, ch. 267, Sec. 1, eff. Aug. 29, 1983; Sec. 1 amended by Acts 1985, 69th Leg., ch. 812, Sec. 1, eff. June 15, 1985; Sec. 5 added by Acts 1985, 69th Leg., ch. 812, Sec. 2, eff. June 15, 1985; Sec. 4(a), (b) amended by Acts 1989, 71st Leg., ch. 187, Sec. 1, eff. Aug. 28, 1989; Sec. 4(d), (e) added by Acts 1989, 71st Leg., ch. 187, Sec. 2, eff. Aug. 28, 1989; Sec. 1 amended by Acts 1993, 73rd Leg., ch. 685, Sec. 7.15, eff. Sept. 1, 1993; Sec. 4(a) amended by Acts 1993, 73rd Leg., ch. 685, Sec. 7.16, eff. Sept. 1, 1993; Sec. 6 added by Acts 1993, 73rd Leg., ch. 685, Sec. 7.17, eff. Sept. 1, 1993; Sec. 5 repealed by Acts 1997, 75th Leg., ch. 556, Sec. 10, eff. Sept. 1, 1997. Amended by Acts 1999, 76th Leg., ch. 1436, Sec. 1, eff. Sept. 1, 1999. Art. 21.40. CERTIFICATES FROM OTHER STATES.
Article repealed effective April 1, 2007
The Board, in calculating the reserve liability of any such company, may accept the certificate of the officer of any other state charged with the duty of supervising such company as to any such company organized under the laws of such state; provided, such certificate shows that such liability has been computed in accordance with the provisions of Article 21.39 of this code. Acts 1951, 52nd Leg., ch. 491. Art. 21.41. OTHER LAWS FOR CERTAIN COMPANIES. No provision of this chapter shall apply to companies carrying on the business of life or casualty insurance on the assessment or annual premium plan, under the provisions of this code. Acts 1951, 52nd Leg., ch. 491. Art. 21.42. TEXAS LAWS GOVERN POLICIES. Any contract of insurance payable to any citizen or inhabitant of this State by any insurance company or corporation doing business within this State shall be held to be a contract made and entered into under and by virtue of the laws of this State relating to insurance, and governed thereby, notwithstanding such policy or contract of insurance may provide that the contract was executed and the premiums and policy (in case it becomes a demand) should be payable without this State, or at the home office of the company or corporation issuing the same. Acts 1951, 52nd Leg., ch. 491. Art. 21.47. FALSE STATEMENT IN WRITTEN INSTRUMENT; PENALTY. (a) A person commits an offense if the person knowingly or intentionally makes, files or uses any instrument in writing required to be made to or filed with the State Board of Insurance or the Insurance Commissioner, either by the Insurance Code or by rule or regulation of the State Board of Insurance, when the instrument in writing contains any false, fictitious, or fraudulent statement or entry with regard to any material fact. (b) For purposes of this article, "Texas Department of Insurance" includes but is not limited to the executive director of the Texas Department of Insurance, the State Board of Insurance, or any association, corporation, or person created by the Insurance Code. (c) An offense under this article is a felony of the third degree. Added by Acts 1971, 62nd Leg., p. 2449, ch. 789, Sec. 2, eff. June 8, 1971. Amended by Acts 1991, 72nd Leg., ch. 565, Sec. 7, eff. Sept. 1, 1991. Art. 21.49. CATASTROPHE PROPERTY INSURANCE POOL ACT.
Article repealed effective April 1, 2007
Declaration and Purpose
Sec. 1. It is hereby declared by the Legislature that an adequate market for windstorm, hail and fire insurance is necessary to the economic welfare of the State of Texas and that without such insurance the orderly growth and development of the State of Texas would be severely impeded. It is therefore the purpose of this Act to provide a method whereby adequate windstorm, hail and fire insurance may be obtained in certain designated portions of the State of Texas.
Name of Act
Sec. 2. This Act shall be known as the "Texas Windstorm Insurance Association Act."
Definitions
Sec. 3. In this Act, unless the context clearly dictates to the contrary: (a) "Board" means the State Board of Insurance of the State of Texas. (b) "Association" means the Texas Windstorm Insurance Association as established pursuant to the provisions of this Act. (c) "Plan of Operation" means the plan for providing Texas windstorm and hail insurance in a catastrophe area and Texas fire and explosion insurance in an inadequate fire insurance area which plan has been adopted by the Board for operation by the Association pursuant to the provisions of this Act, which plan may, among other things, provide for limits of liability for each structure insured, and/or the corporeal movable property located therein. (d) "Texas Windstorm and Hail Insurance" means deductible insurance against direct loss, and indirect losses resulting from a direct loss, to insurable property as a result of windstorm or hail, as such terms shall be defined and limited in policies and forms approved by the State Board of Insurance. (e) "Texas Fire and Explosion Insurance" means insurance against direct loss to insurable property as a result of fire and explosion as such terms shall be defined and limited in policies and forms approved by the State Board of Insurance. (f) "Insurable Property" means immovable property at fixed locations in a catastrophe area or corporeal movable property located therein (as may be designated in the plan of operation) which property is determined by the Association, pursuant to the criteria specified in the plan of operation to be in an insurable condition against windstorm, hail and/or fire and explosion as appropriate, as determined by normal underwriting standards; provided, however, that insofar as windstorm and hail insurance is concerned, any structure located within a catastrophe area, commenced on or after the 30th day following the publication of the plan of operation, not built or continuing in compliance with building specifications set forth in the plan of operation shall not be an insurable risk under this Act except as otherwise provided under this Act. A structure, or an addition thereto, which is constructed in conformity with plans and specifications that comply with the specifications set forth in the plan of operation at the time construction commences shall not be declared ineligible for windstorm and hail insurance as a result of subsequent changes in the building specifications set forth in the plan of operation. Except as otherwise provided by this subsection, if repair of damage to a structure involves replacement of items covered in the building specifications as set forth in the plan of operation, such repairs must be completed in a manner to comply with such specifications for the structure to continue within the definition of Insurable Property for windstorm and hail insurance. If repair to a structure, other than a roof repair that exceeds 100 square feet, is less than five percent of the amount of total property coverage on the structure, the repairs may be completed in a manner that returns the structure to its condition immediately before the loss without affecting the eligibility of the structure to qualify as insurable property. Nothing in this Act shall preclude special rating of individual risks as may be provided in the plan of operation. For purposes of this Act, all residential structures, other than a condominium, apartment, duplex, or other multifamily residence, or a hotel or resort facility, which are located within those areas designated as units under the federal Coastal Barrier Resources Act (Public Law 97-348) and for which a building permit or plat has been filed with the municipality, the county, or the United States Army Corps of Engineers before June 11, 2003, are insurable property. "Insurable Property" includes property described by Section 3A of this article. (g) "Net Direct Premiums" means gross direct written premiums less return premiums upon canceled contracts (irrespective of reinsurance assumed or ceded) written on property in this State as defined by the Board of Directors of the Association. (h) "Catastrophe Area" means a city or a part of a city or a county or a part of a county in which it may be determined by the commissioner, after notice of not less than 10 days and a hearing, that windstorm and hail insurance is not reasonably available to a substantial number of owners of insurable property within that city or a part of that city or a county or a part of that county, due to such insurable property being located within a city or a part of that city or a county or a part of that county that is subject to unusually frequent and severe damage resulting from windstorms and/or hailstorms. Such designation shall be revoked by the commissioner if the commissioner determines, after notice of not less than 10 days and a hearing, that windstorm and hail insurance in such catastrophe area is no longer reasonably unavailable to a substantial number of owners of insurable property within such designated city or a part of that city or county or a part of that county. If the Association shall determine that windstorm and hail insurance is no longer reasonably unavailable to a substantial number of owners of insurable property in any designated catastrophe area or areas, then the Association may request in writing that the commissioner revoke the designation of any or all of such catastrophe areas and, after notice of not less than 10 days and a hearing, but within 30 days of such hearing, the commissioner shall either approve or reject the Association's request and shall, if such request be approved, revoke such designation or designations. (i) "Inadequate Fire Insurance Area" means a city or county which is, or is within an area, designated as a catastrophe area, as defined in Paragraph (h), above, and in which it may be determined by the Board, after notice of not less than 10 days and a hearing, that fire and explosion insurance is not reasonably available to a substantial number of owners of insurable property within such city or county. Such designation shall be revoked by the Board if it determines, after 10 days' notice and a hearing, that fire and explosion insurance in such inadequate fire insurance area is no longer reasonably unavailable to a substantial number of owners of insurable property within such designated city or county. If the Association shall determine that fire and explosion insurance is no longer reasonably unavailable to a substantial number of owners of insurable property in any designated inadequate fire insurance area or areas, then the Association may request in writing that the Board revoke the designation of any or all such inadequate fire insurance areas, and, after notice of not less than 10 days and a hearing, but within 30 days of such hearing, the Board shall either approve or reject the Association's request and shall, if such request is approved, revoke such designation or designations. (j) "Insurance" as hereinafter used in this Act shall mean the types of insurance described in Paragraphs (d) and (e) of this Section 3. (k) "Insurers" means all property insurers authorized to transact property insurance in this State and specifically includes and makes this Act applicable to county mutual companies, Lloyds and reciprocal or interinsurance exchanges, but shall not include: (1) farm mutual insurance companies operating under Chapter 911 of this Code; (2) nonaffiliated county mutual fire insurance companies described by Section 912.310 of this code which are writing exclusively industrial fire insurance policies as described by Subsection (a)(2) of that section; and (3) any companies now operating under Chapters 12 and 13 of Title 78 of the Revised Civil Statutes of Texas, 1925, as amended, which have heretofore been repealed. (l) "First Tier Coastal County" means: (1) Aransas County; (2) Brazoria County; (3) Calhoun County; (4) Cameron County; (5) Chambers County; (6) Galveston County; (7) Jefferson County; (8) Kenedy County; (9) Kleberg County; (10) Matagorda County; (11) Nueces County; (12) Refugio County; (13) San Patricio County; or (14) Willacy County. (m) "Second Tier Coastal County" means: (1) Bee County; (2) Brooks County; (3) Fort Bend County; (4) Goliad County; (5) Hardin County; (6) Harris County; (7) Hidalgo County; (8) Jackson County; (9) Jim Wells County; (10) Liberty County; (11) Live Oak County; (12) Orange County; (13) Victoria County; or (14) Wharton County. (n) "Seacoast Territory" means the area of this state composed of the first tier coastal counties and the second tier coastal counties. (o) "New building code" means any new building standard, specification, or guideline adopted by the commissioner after May 1, 1997, that must be met before any new residential construction qualifies for a certificate of compliance that is evidence of insurability of the structure by the Association.
Coverage for Certain Property Located Over Water
Sec. 3A. (a) A policy of windstorm and hail insurance issued by the association may include coverage for: (1) a building or other structure located in the seacoast territory that is built wholly or partially over water; and (2) the corporeal movable property contained in a building or structure described by Subdivision (1) of this subsection. (b) The association may impose appropriate limits of coverage and deductibles for coverage described by Subsection (a) of this section. (c) The board of directors of the association shall submit any proposed changes to the plan of operation necessary to implement Subsections (a) and (b) of this section to the commissioner in the manner provided by Section 5(c) of this article. (d) The commissioner shall adopt rules as necessary to implement this section, including any rules necessary to implement changes in the plan of operation proposed under Subsection (c) of this section.
Creation of the Texas Windstorm Insurance Association
Sec. 4. (a) The Association which is hereby created shall consist of all property insurers authorized to transact property insurance in this State, except those companies that are prevented by law from writing coverages available through the pool on a Statewide basis. Every such insurer shall be a member of the Association and shall remain a member of the Association so long as the Association is in existence, as a condition of its authority to transact the business of insurance in this State. Any insurer which ceases to be a member of the Association shall remain liable on contracts of insurance entered into during its membership in the Association to the same extent and effect as if its membership in the Association had not been terminated. (b) The organizational plan of certain types of insurers precludes such insurers from writing insurance coverage for the State of Texas, any city, political subdivision or agency of the State. When insuring property of the State of Texas, any city, political subdivision or agency of the State, the Association shall not cause such policies to be issued in such companies, nor shall such companies be included as reinsurers for any policies of insurance in this category. (c) No part of the net earnings of the association may inure to the benefit of any private shareholder or individual. The assets of the association may not be used for or diverted to any purpose other than to: (1) satisfy, in whole or in part, the liability of the association regarding a claim made on a policy written by the association; (2) make investments authorized under applicable law; (3) pay reasonable and necessary administrative expenses incurred in connection with the establishment and operation of the association and the processing of claims against the association; or (4) make remittances under the laws of this state to be used by this state to: (A) pay claims on policies written by the association; (B) purchase reinsurance covering losses under those policies; or (C) prepare for or mitigate the effects of catastrophic natural events. (d) On dissolution of the association, all assets of the association revert to this state.
Operation of the Texas Windstorm Insurance Association; Association Board of Directors
Sec. 5. (a) The Association shall, pursuant to the provisions of this Act and the plan of operation, and with respect to insurance on insurable property, have the power on behalf of its members to cause to be issued policies of insurance to applicants, to assume reinsurance from its members, and to cede reinsurance to its members and to purchase reinsurance on behalf of its members. (b) All members of the Association shall participate in its writings, expenses, profits and losses in the proportion that the net direct premiums of such member written in this State during the preceding calendar year bears to the aggregate net direct premiums written in this State by all members of the Association, as furnished to the Association by the Board after review of annual statements, other reports and other statistics the Board shall deem necessary to provide the information herein required and which the Board is hereby authorized and empowered to obtain from any member of the Association, provided, however, that a member shall, in accordance with the plan of operation, be entitled to receive credit for similar insurance voluntarily written in the area designated by the Board and its participation in the writings in the Association shall be reduced in accordance with the provisions of the plan of operation. Each member's participation in the Association shall be determined annually in the manner provided in the plan of operation. For purposes of determining participation in the Association, two or more members having a common ownership or operating in this State under common management or control shall be treated as if they constituted a single member and also shall include the net direct premiums, as defined by this article, of any affiliated insurance company that is under such common management or control including affiliated insurance companies that are not authorized to transact property insurance in this State. Any insurer authorized to write and engaged in writing any insurance, the writing of which required such insurer to be a member of the Association, who becomes authorized to engage in writing such insurance shall become a member of the Association on the 1st day of January immediately following such authorization and the determination of such insurer's participation in the Association shall be made as of the date of such membership in the same manner as for all other members of the Association. (c) The plan of operation of the Association shall provide for the efficient, economical, fair, and nondiscriminatory administration of the Association. The Board by rule shall adopt the plan of operation with the advice of the board of directors of the Association. The Association may present recommended changes in the plan of operation to the Board at periodic hearings conducted by the Board for that purpose, or at hearings relating to property and casualty insurance rates. The Association must present a proposed change to the Board in writing in the manner prescribed by the Board. A change proposed by the Association does not take effect unless adopted by the Board by rule. (d) The plan of operation must include: (1) a plan for the equitable assessment of the members of the Association to defray losses and expenses; (2) underwriting standards; (3) procedures for the acceptance and cession of reinsurance; (4) procedures for determining the amount of insurance to be provided to specific risks; (5) time limits and procedures for processing applications for insurance; and (6) other provisions as deemed necessary by the Board to carry out the purposes of this Act. (e) The Board may develop programs to improve the efficient operation of the Association, including a program designed to create incentives for insurers to write windstorm and hail insurance voluntarily to cover property located in a catastrophe area, especially property located on the barrier islands. (f) Any interested person may petition the Board to modify the plan of operation in accordance with the Administrative Procedure and Texas Register Act (Article 6252-13a, Vernon's Texas Civil Statutes). (g) The board of directors of the Association is responsible and accountable to the Board. The board of directors is composed of nine members as follows: (1) five representatives of different insurers who are members of the Association who shall be elected by members as provided in the plan of operation; (2) two representatives of the general public, nominated by the office of public insurance counsel, who, as of the date of the appointment, reside in a catastrophe area and who are policyholders, as of the date of the appointment, of the Association; and (3) two local recording agents licensed under this Code with demonstrated experience in the Association, and whose principal offices, as of the date of the appointment, are located in a catastrophe area. (h) Members of the board of directors of the Association serve three-year staggered terms, with the terms of three members expiring on the third Tuesday of March of each year. A person may hold a seat on the board of directors for not more than three consecutive full terms, not to exceed nine years. (i) The persons appointed as provided by Subsections (g)(2) and (g)(3) of this section must be from different counties. (j) The board of directors of the Association shall elect an executive committee consisting of a chairman, vice-chairman, and secretary-treasurer from its membership. At least one of those officers must be a member appointed under Subsection (g)(2) or Subsection (g)(3) of this section. (k) Except for an emergency meeting of the Association or the board of directors of the Association, the Association shall notify the Board not later than the 11th day before the date of each meeting of the board of directors of the Association or a meeting of the members of the Association. Except for closed or executive sessions authorized by Section 2, Chapter 271, Acts of the 60th Legislature, Regular Session, 1967 (Article 6252-17, Vernon's Texas Civil Statutes), meetings of the board of directors of the Association and members of the Association shall be open to any member of the Board or the member's designated representative and to members of the public. Notice of meetings of the Association or board of directors of the Association shall be given as provided by Chapter 271, Acts of the 60th Legislature, Regular Session, 1967 (Article 6252-17, Vernon's Texas Civil Statutes). (l) If an occurrence or series of occurrences within the defined catastrophe area results in insured losses that result in tax credits under Section 19(4) of this article in a single calendar year, the Association shall immediately notify the Board of that fact. The Board on receiving notice shall immediately notify the Governor and appropriate committees of each house of the Legislature of the amount of insured losses eligible for tax credits under Section 19(4) of this article. (m) After January 1, 2004, for geographic areas specified by the commissioner, the commissioner by rule may supplement the building specifications in the plan of operation with the structural provisions of the International Residential Code for one- and two-family dwellings, as published by the International Code Council, or by an analogous entity recognized by the department. For those specified geographic areas, the commissioner by rule may adopt subsequent editions of that code and may adopt any supplements published by the International Code Council and amendments to that code.
Board Orders
Sec. 5A. (a) After notice and a hearing as provided in Subsection (b) of this section, the Board may issue any orders which it considers necessary to carry out the purposes of this Act including, but not limited to, maximum rates, competitive rates, and policy forms. (b) Before an order is adopted by the Board, it shall post notice of a hearing on the order at the Secretary of State's office in the State Capitol and shall hold a hearing to consider the proposed order. Any person may appear and testify for or against the adoption of the order.
Examination of association
Sec. 5B. (a) The association is subject to Articles 1.15 and 1.16 of this code. (b) A final examination report of the Association resulting from an examination under this section is a public record and available to the public at the Board's offices pursuant to the open records law, Chapter 424, Acts of the 63rd Legislature, Regular Session, 1973 (Article 6252-17a, Vernon's Texas Civil Statutes). (c) Repealed by Acts 1997, 75th Leg., ch. 879, Sec. 10(2), eff. Sept. 1, 1997.
Eligibility: Application
Sec. 6. (a) Any person having an insurable interest in insurable property located in an area designated by the Board shall be entitled to apply to the Association for insurance provided for under the plan of operation and for an inspection of the property under such rules and regulations, including an inspection fee, if any, as determined by the Board of Directors of the Association and approved by the State Board of Insurance. The term "insurable interest" as used in this subsection shall be deemed to include any lawful and substantial economic interest in the safety or preservation of property from loss, destruction or pecuniary damage. Application shall be made on behalf of the applicant by a Local Recording Agent and shall be submitted on forms prescribed by the Association. The application shall contain a statement as to whether or not the applicant has or will submit the premium in full from personal funds, or if not, to whom a balance is or will be due. (b) If the Association determines that the property is insurable, the Association, upon payment of the premium, shall cause to be issued a policy of insurance as may be provided in the plan for a term of one year. In the event an agent or some other person, firm, or corporation shall finance the payment of all or a portion of the premium and there is a balance due for the financing of such premium and such balance, or any installment thereof, is not paid within 10 days after the due date, the agent or other person, firm, or corporation to whom such balance is due may request cancellation of the insurance by returning the policy, with proof that the insured was notified of such return, or by requesting the Association to cancel such insurance by notice mailed to the insured and any others shown in the policy as having an insurable interest in the property. Upon completion of cancellation, the Association shall refund the unearned premium, less any minimum retained premium set forth in the plan of operation, to the person, firm, or corporation to whom the unpaid balance is due. In the event an insured requests cancellation of insurance, the Association shall make refund of such unearned premium payable to the insured and the holder of an unpaid balance. The Local Recording Agent, who submitted the application, shall refund the commission on any unearned premium in the same manner. (c) Any policy issued pursuant to the provisions of this Act may be renewed annually, upon application therefor, so long as the property continues to meet the definition of "insurable property" set forth in Section 3 of this Act. (d) Deleted by Acts 1973, 63rd Leg., p. 1043, ch. 406, Sec. 4.
Inspections for windstorm and hail insurance
Sec. 6A. (a) Except as otherwise provided by this Subsection, all structures that are constructed or repaired or to which additions are made on or after January 1, 1988, to be considered insurable property for windstorm and hail insurance from the Association, must be inspected or approved by the Board for compliance with the plan of operation. After January 1, 2004, for geographic areas specified by the commissioner, the commissioner by rule shall adopt the 2003 International Residential Code for one- and two-family dwellings published by the International Code Council. For those geographic areas, the commissioner by rule may adopt a subsequent edition of that code and may adopt any supplements published by the International Code Council and amendments to the code. A structure constructed, repaired, or to which additions were made before January 1, 1988, that is located in an area covered at the time by a building code recognized by the Association shall be considered an insurable property for windstorm and hail insurance from the Association without compliance with the inspection or approval requirements of this Section or the plan of operation. A structure constructed, repaired, or to which additions were made before January 1, 1988, that is located in an area not covered by a building code recognized by the Association shall be considered an insurable property for windstorm and hail insurance from the Association without compliance with the inspection or approval requirements of this Section or the plan of operation if that structure has been previously insured by a licensed insurance company authorized to do business in this State and the risk is in essentially the same condition as when previously insured, except for normal wear and tear, and without any structural change other than a change made according to code. Evidence of previous insurance includes a copy of a previous policy, copies of canceled checks or agent's records that show payments for previous policies, and a copy of the title to the structure or mortgage company records that show previous policies. After January 1, 2004, a person must submit a notice of a windstorm inspection to the unit responsible for certification of windstorm inspections at the department before beginning to construct, alter, remodel, enlarge, or repair a structure. (b) The Board shall issue for each structure that qualifies a certificate of compliance that is evidence of insurability of the structure by the Association. (c) Repealed by Acts 2003, 78th Leg., ch. 206, Sec. 9.06, eff. Jan. 1, 2004. (d) A windstorm inspection may only be performed by a qualified inspector. For purposes of this article, a "qualified inspector" includes: (1) a person determined by the department to be qualified to perform building inspections because of training or experience; (2) a licensed professional engineer meeting the requirements of the rules adopted by the commissioner for appointment to conduct windstorm inspections; and (3) an inspector who is certified by the International Code Council, the Building Officials and Code Administrators International, Inc., the International Conference of Building Officials, or the Southern Building Code Congress International, Inc., who has certifications as a buildings inspector and coastal construction inspector, and who also complies with other requirements specified by rule by the commissioner. A qualified inspector must be approved and appointed or employed by the department to perform building inspections. The department may charge a reasonable fee for the filing of applications and determining the qualifications of persons for appointment as qualified inspectors. (e) Repealed by Acts 2003, 78th Leg., ch. 206, Sec. 9.06, eff. Jan. 1, 2004. (f) Repealed by Acts 1999, 76th Leg., ch. 592, Sec. 2, eff. Sept. 1, 1999. (g) The Board may make agreements and contracts as necessary to effect the provisions of this Section. (h) The department may charge a reasonable fee to cover the cost of making building requirements and inspection standards available to the public. (i) All fees collected by the Board under this Section shall be deposited in the State Treasury to the credit of the State Board of Insurance operating fund. (j) After notice and hearing, the department may cancel or revoke an appointment made under this Section if the holder of the appointment is found to be in violation of, or to have failed to comply with, specific provisions of this Section or any rule or regulation of the commissioner made under this Section. In lieu of cancellation or revocation, the commissioner may order one or more of the following sanctions, if the commissioner determines from the facts that it would be fair, reasonable, or equitable: (1) suspending the appointment for a specific period, not to exceed one year; (2) an order directing the holder of the appointment to cease and desist from the specified activity determined to be in violation of specific provisions of this Section or rules and regulations of the commissioner made pursuant to this Section or from failing to comply with those provisions of this Section or the rules and regulations promulgated under this Section; or (3) if the appointed person is found by the commissioner to have knowingly, wilfully, fraudulently, or with gross negligence signed or caused to be prepared an inspection report that contains a false, fictitious, or fraudulent statement or entry, directing the appointed person to remit within a specified time, not to exceed 60 days, a specified monetary forfeiture not to exceed $5,000 for the violation or failure to comply. (j-1) If an appointed person is an engineer licensed by the Texas Board of Professional Engineers who is found by the department to have knowingly, wilfully, fraudulently, or with gross negligence signed or caused to be prepared an inspection report that contains a false or fraudulent statement or entry, the commissioner may take action against the appointed person in the manner provided by Subsection (j) of this Section, but may not levy any monetary fine against an appointed person who is a licensed engineer. (k) A monetary forfeiture paid as a result of an order issued under Subsection (j)(3) of this Section shall be deposited to the credit of the general revenue fund. If it is found after hearing that any appointed person has failed to comply with an order issued under Subsection (j) of this Section, the department shall, unless the order is lawfully stayed, cancel the appointment of the person. The department may informally dispose of any matter under Subsection (j) of this Section by consent order or default. (k-1) The commissioner shall notify the Texas Board of Professional Engineers of each order issued by the commissioner against an appointed person who is an engineer licensed by the Texas Board of Professional Engineers, including an order suspending, canceling, or revoking the appointment of that person.
Assessment for Inspections
Sec. 6B. (a) The board shall assess each insurer who provides property insurance in a first tier coastal county in accordance with this section. (b) The total assessment under this section must be in the amount the board estimates is necessary to cover the cost of administration of the windstorm inspection program in the first tier coastal counties under Section 6A of this article in the state fiscal year in which the assessment is made, reduced by the total amount of fees the board estimates will be collected for that year under Section 6A(c) of this article. (c) The assessment must be based on each insurer's proportionate share of the total extended coverage and other allied lines premium received by all insurers for property insurance in the first tier coastal counties in the calendar year preceding the year in which the assessment is made. The board shall adopt rules to implement the assessment of insurers under this section. (d) For purposes of this section, "property insurance" means any commercial or residential policy promulgated or approved by the board that provides coverage for the perils of windstorm and hail, including a Texas Windstorm and Hail Insurance Policy.
Advisory Committee on Building Code Specifications and Maintenance
Sec. 6C. (a) In this section, "advisory committee" means the Windstorm Building Code Advisory Committee on Specifications and Maintenance. (b) The Windstorm Building Code Advisory Committee on Specifications and Maintenance is established as an advisory committee to the commissioner to advise and make recommendations to the commissioner on building requirements and maintenance in the plan of operation. (c) The advisory committee is composed of nine members appointed by the commissioner without regard to the race, color, disability, sex, religion, age, or national origin of the appointee. The commissioner or the commissioner's designated representative shall serve as an ex officio, nonvoting member of the advisory committee. The voting members of the advisory committee shall be appointed as follows: (1) three members must be representatives of the building industry who reside in designated catastrophe areas: (A) two of whom are residential builders; and (B) one of whom is a representative of the building supply industry; (2) three members must be representatives of the insurance industry: (A) one of whom is a member of the board of directors of the Association; and (B) two of whom are full-time employees of an insurance company authorized to engage in the business of property and casualty insurance in this state that writes insurance in the designated catastrophe area; and (3) three members must be representatives of the public who reside in a designated catastrophe area, one of whom is a professional engineer licensed in this state. (d) A member of the advisory committee serves a three-year term. A member of the advisory committee is not entitled to compensation but is entitled to reimbursement for actual and necessary expenses incurred in performing duties as an advisory committee member, subject to any applicable limitation on reimbursement provided by the General Appropriations Act. (e) The advisory committee shall elect a presiding officer from its members. The advisory committee shall meet at the call of the presiding officer with the approval of the commissioner, but at least two times each year. The advisory committee shall publish the date and location of the meeting not later than the 45th day before the date on which the meeting is scheduled to occur. The commissioner or the commissioner's designee must be present at each meeting of the advisory committee. (f) The advisory committee shall analyze and make recommendations for changes regarding procedures described under Section 5(d) of this article that are adopted by the commissioner in the plan of operation. In making recommendations, the advisory committee shall seek to balance the concerns of all affected parties, including consumers, builders, and the Association. (g) Each proposal for a change in an applicable procedure must be submitted to the commissioner. Each proposal must be submitted separately in writing and must contain: (1) the name, mailing address, and telephone number of the proponent, or, if the proponent is a group or organization, the name of the group or organization and the mailing address and telephone number of the group or organization; (2) a citation of any applicable statute or rule; (3) the text of the proposed change, with deletions from current language struck through with a single line and new language underlined; and (4) a statement of the purpose of the proposed change, with supporting written or printed information. (h) The commissioner by rule shall adopt a form to be used by a person in presenting a proposal for a change in an applicable procedure to the commissioner. (i) Each proposal shall be submitted not later than the 30th day before the date of a scheduled advisory committee meeting. A proposal that does not comply with the requirements adopted under Subsection (g) of this section and is not submitted within the time specified in this subsection may not be considered at that scheduled meeting. (j) The department shall review and organize each proposal submitted and shall allow the advisory committee and interested parties to view the proposals to be considered within a reasonable time before the meeting of the advisory committee. If requested by a majority of the advisory committee, the department shall make recommendations regarding each proposal submitted and provide to the advisory committee any necessary technical information. (k) At an advisory committee meeting, any interested person may present the person's views on a proposal for a change in an applicable procedure that is included on the advisory committee's published agenda. The advisory committee shall consider each comment presented in its action on the disposition of each proposal. (l) After consideration of a proposal for a change in an applicable procedure, the advisory committee by vote shall: (1) recommend adoption of the proposal as initially submitted; (2) recommend adoption of the proposal with modifications; (3) recommend rejection of the proposal; or (4) suspend consideration of the proposal and request additional evaluation and study of the proposal. (m) The advisory committee shall submit its recommendation on each proposal to the commissioner. The commissioner shall notify the advisory committee of the acceptance or rejection of each recommendation not later than the 30th day after the date of receipt by the commissioner. Acceptance of a recommendation by the commissioner means that the commissioner will consider adoption of that recommendation at a rulemaking hearing. Before adopting a recommendation, the commissioner must determine that the proposal, if adopted, will not weaken the integrity or diminish the effectiveness of a procedure. (n) In addition to any other rulemaking authority granted under this article, the commissioner may adopt rules as necessary to implement this section.
Appointment of Engineers; Rules
Sec. 6D. (a) The commissioner, on the request of an engineer licensed by the Texas Board of Professional Engineers, shall appoint the engineer under this article not later than the 10th day after the date of the engineer's delivery to the commissioner of information demonstrating that the engineer is qualified to perform windstorm inspections under this article. (b) The commissioner shall adopt rules to determine the information the commissioner will consider in appointing engineers under Subsection (a) of this section.
Deletion of Coverages From Other Policies
Sec. 7. The Board shall prepare endorsements and forms applicable to the standard policies which it has promulgated providing for the deletion of coverages available through the Association and shall promulgate the applicable reduction of premiums and rates for the use of such endorsements and forms.
Rates, rating plans and rate rules applicable
Sec. 8. (a) The Association shall file with the Commissioner every manual of classifications, rules, rates which shall include condition charges, every rating plan, and every modification of any of the foregoing which it proposes to use. Every such filing shall indicate the character and the extent of the coverage contemplated and shall be accompanied by the policies and endorsements forms proposed to be used, which said forms and endorsements may be designed specifically for use by the Association and without regard to other forms filed with, approved by, or promulgated by the Board for use in this State. The Association may make recommendations to the Commissioner that would result in a reduction of coverages or an increase in an applicable deductible if any resultant reduction in coverages or increase in deductibles is accompanied by proposed rate credits. After notice and hearing, the Commissioner may accept, modify, or reject a recommendation made by the Association under this subsection. Article 1.33B of this code does not apply to an action taken under this subsection. (b) Repealed by Acts 1991, 72nd Leg., ch. 242, Sec. 12.01(7), eff. Sept. 1, 1991. (c) Any filing made by the Association pursuant hereto shall be submitted to the Board and as soon as reasonably possible after the filing has been made the Board shall, in writing, approve, modify, or disapprove the same; provided that any filing shall be determined approved unless modified or disapproved within 30 days after date of filing. (d) If at any time the Board finds that a filing so approved no longer meets the requirements of this Act, it may, after a hearing held on not less than 20 days' notice to the Association specifying the matters to be considered at such hearing, issue an order withdrawing its approval thereof. Said order shall specify in what respects the Board finds that such filing no longer meets the requirements of this Act and shall be effective not less than 30 days after its issuance. (e) All rates shall be made in accordance with the following provisions: (1) Due consideration shall be given to the past and prospective loss experience within and outside the State of hazards for which insurance is made available through the plan of operation, if any, to expenses of operation including acquisition costs, to a reasonable margin for profit and contingencies, and to all other relevant factors, within and outside the State. (2) Risks may be grouped by classifications for the establishment of rates and minimum premiums. Classification rates may be modified to produce rates for individual risks in accordance with rating plans which establish standards for measuring variations in such risks on the basis of any or all of the factors mentioned in the preceding paragraph. Such rates may include rules for classification of risks insured hereunder and rate modifications thereof. All such provisions, however, as respects rates, classifications, standards and premiums shall be without prejudice to or prohibition of provision by the Association for consent rates on individual risks if the rate and risk are acceptable to the Association and as is similarly provided for, or as is provided for, in Article 5.26(a), Texas Insurance Code, and this provision or exception on consent rates is irrespective of whether or not any such risk would otherwise be subject to or the subject of a provision of rate classification or eligibility. (3) Rates shall be reasonable, adequate, not unfairly discriminatory, and nonconfiscatory as to any class of insurer. (4) Commissions paid to agents shall be reasonable, adequate, not unfairly discriminatory and nonconfiscatory. (f) For the purpose of this Act the applicant under Section 6(a) hereof shall be considered to have consented to the appropriate rates and classifications authorized by this Act irrespective of any and all other rates or classifications. (g) All premiums written and losses paid under this Act as appropriate shall be included in applicable classifications for general rate making purposes. (h)(1) Each rate established by the commissioner in accordance with this section must be uniform throughout the first tier of coastal counties. (2) Not later than August 15 of each year, the Association shall file with the department for approval by the commissioner a proposed manual rate for all types and classes of risks written by the Association. Chapter 40 of this code does not apply to a filing made under this subsection or a department action with respect to the filing. (3) Before approving or disapproving a filing, or modifying a filing, the commissioner shall provide all interested persons a reasonable opportunity to review the filing, obtain copies of the filing on payment of any legally required copying cost, and submit to the commissioner written comments or information related to the filing. (4) The commissioner shall schedule an open meeting not later than the 45th day after the date on which the department receives the filing at which interested persons may present written or oral comments relating to the filing. An open meeting under this subdivision is subject to Chapter 551, Government Code, but is not a contested case hearing under Chapter 2001, Government Code. (5) The department shall file with the Texas Register notice that a filing has been made under Subdivision (2) of this subsection not later than the seventh day after the date the filing is received by the department. The notice must include information relating to: (A) the availability of the filing for public inspection at the department during regular business hours and the procedures for obtaining copies of the filing; (B) procedures for making written comments related to the filing; and (C) the time, place, and date of the open meeting scheduled under Subdivision (4) of this subsection at which an interested person may submit either written or oral comments relating to the filing. (6) After the conclusion of the open meeting, the commissioner shall approve or disapprove or modify the filing in writing on or before November 15 of the year in which the filing is made or the filing is deemed approved. If the commissioner disapproves a filing, the commissioner shall state in writing the reasons for the disapproval and the criteria to be met by the Association to obtain approval. The Association may file with the commissioner, not later than 30 days after the date on which the Association receives the commissioner's written disapproval, an amended filing bringing the filing into conformity with all criteria stated in the commissioner's written disapproval. (7) Before approving or disapproving an amended filing, the commissioner shall provide all interested persons a reasonable opportunity to review the amended filing, obtain copies of the amended filing on payment of any legally required copying cost, and submit to the commissioner written comments or information related to the amended filing in the manner provided by Subdivision (3) of this subsection, and may hold a hearing not later than the 20th day after the date on which the department receives the amended filing in the manner provided by Subdivision (4) of this subsection. Not later than the 10th day after the date on which the hearing on the amended filing is concluded, the commissioner shall approve or disapprove the amended filing. Within 30 days after the amended filing is received, the commissioner shall approve without changes, approve as modified by the commissioner, or disapprove an amended filing or it is deemed approved. The requirements imposed under Subdivisions (5) and (6) of this subsection apply to a hearing conducted under this subdivision. (8) In conjunction with the review of a filing or amended filing, the commissioner may request the Association to provide additional supporting information relating to the filing or amended filing, and any interested person may file a written request with the commissioner for additional supporting information relating to the filing or amended filing. A request under this subdivision must be reasonable and must be directly related to the filing or amended filing. The commissioner shall submit to the Association all requests for additional supporting information made under this subdivision for the commissioner's use and the use of any interested person. Unless a different period is requested by the Association and approved by the commissioner, the Association shall provide the information to the commissioner not later than the fifth day after the date on which the written request for additional supporting information is delivered to the Association. The department shall notify an interested person who has requested additional information of the availability of the information not later than one business day after the date on which the commissioner receives the information from the Association. (9) A rate established and authorized by the commissioner under this subsection may not reflect an average rate change that is more than 10 percent higher or lower than the rate for commercial or 10 percent higher or lower than the rate for noncommercial windstorm and hail insurance in effect on the date the filing is made. The rate may not reflect a rate change for an individual rating class that is 15 percent higher or lower than the rate for that individual class in effect on the date the filing is made. The commissioner may, after notice and hearing, suspend this subdivision upon a finding that a catastrophe loss or series of occurrences resulting in losses in the catastrophe area justify a need to assure rate adequacy in the catastrophe area and also justify a need to assure availability of insurance outside the catastrophe area. (10) If valid flood or rising water insurance coverage exists and is maintained on any risk being insured in the pool, the commissioner may provide for a rate and reduction in rate of premium as may be appropriate. (11) The catastrophe element used to develop rates under this Act applicable to risks written by the Association shall be uniform throughout the seacoast territory. The catastrophe element of the rates must be developed using: (A) 90 percent of both the monoline extended coverage loss experience and related premium income for all insurers, other than the Association, for covered property located in the seacoast territory using not less than the most recent 30 years of experience available; and (B) 100 percent of both the loss experience and related premium income for the Association for covered property using not less than the most recent 30 years of experience available. (12) The noncatastrophe element of the noncommercial rates must be developed using: (A) 90 percent of both the monoline extended coverage loss experience and related premium income for all insurers, other than the Association, for covered property located in the catastrophe area of the seacoast territory using the most recent 10 years of experience available; and (B) 100 percent of both the loss experience and related premium income for the Association for covered property using the most recent 10 years of experience available. (13) The noncatastrophe element of the commercial rates must be developed using 100 percent of both the loss experience and related premium income for the Association for covered property using the most recent 10 years of experience available. (14) Surcharges collected in the past and used in the development of current rates may not be excluded from future rate development as long as those surcharges were collected during the experience period considered by the commissioner. (15) Not earlier than March 31 of the year before the year in which a filing is to be made, the department shall value the loss and loss adjustment expense data to be used for the filing. (16) Not later than June 1 of each year, the department shall provide the experience data to be used in establishing the rates under this subsection in that year to the Association and other interested persons. On request from the department, an insurer shall provide the data to the department or the department may obtain the data from a designated statistical agent, as defined by Section 38.201 of this code. (17) The association shall either establish a reinsurance program approved by the Texas Department of Insurance or make payments into the catastrophe reserve trust fund established under Subsection (i) of this section. With the approval of the Texas Department of Insurance, the association may establish a reinsurance program that operates in addition to or in concert with the catastrophe reserve trust fund established under Subsection (i) of this section. (i)(1) The commissioner shall adopt rules under which the association members relinquish their net equity on an annual basis as provided by those rules by making payments to a fund known as the catastrophe reserve trust fund to fund the obligations of that fund under Section 19(a) of this Act and to fund the mitigation and preparedness plan established under this subsection to reduce the potential for payments by members of the association giving rise to tax credits in the event of loss or losses. Until disbursements are made as provided by this Act and rules adopted by the commissioner, all money, including investment income, deposited in the catastrophe reserve trust fund are state funds to be held by the comptroller outside the state treasury on behalf of, and with legal title in, the department. The fund may be terminated only by law. On termination of the fund, all assets of the fund revert to the state to be used to provide funding for the annual loss mitigation and preparedness plan developed and implemented by the commissioner under Subdivision (5) of this subsection. (2) The catastrophe reserve trust fund shall be kept and maintained by the Texas Department of Insurance pursuant to this Act and rules adopted by the commissioner. The comptroller, as custodian, shall administer the funds strictly and solely as provided by this Act and the commissioner's rules. (3) At the end of either each calendar year or policy year, the association shall pay the net equity of a member, including all premium and other revenue of the association in excess of incurred losses and operating expenses to the catastrophe reserve trust fund or a reinsurance program approved by the commissioner. (4) The commissioner's rules shall establish the procedure relating to the disbursement of money from the catastrophe reserve trust fund to policyholders in the event of an occurrence or series of occurrences within the defined catastrophe area that results in a disbursement under Section 19(a) of this Act. (5) Each state fiscal year, beginning with fiscal year 2002, the department may use from the investment income of the fund an amount equal to not less than $1 million and not more than 10 percent of the investment income of the prior fiscal year to provide funding for an annual mitigation and preparedness plan to be developed and implemented each year by the commissioner. From that amount and as part of that plan, the department may use in each fiscal year $1 million for the windstorm inspection program established under Section 6A of this Act. The mitigation and preparedness plan shall provide for steps to be taken in the seacoast territory by the commissioner or by a local government, state agency, educational institution, or nonprofit organization designated by the commissioner in the plan, to implement programs intended to improve preparedness for windstorm and hail catastrophes, reduce potential losses in the event of such a catastrophe, provide research into the means to reduce those losses, educate or inform the public in determining the appropriateness of particular upgrades to structures, or protect infrastructure from potential damage from those catastrophes. Money in excess of $1 million is not available for use under this subsection if the commissioner determines that an expenditure of investment income from the fund would jeopardize the actuarial soundness of the fund or materially impair the ability of the fund to serve the state purposes for which it was established.
Replacement cost coverage
Sec. 8A. (a) A policy of windstorm and hail insurance issued by the Association may include replacement cost coverage for one and two-family dwellings, including outbuildings, as provided under the dwelling extension coverage in the policy, subject to any applicable deductibles and the limits for the coverage purchased by the insured. (b) If, at the time of loss, the total amount of insurance applicable to the dwelling is equal to 80 percent or more of the full replacement cost of the dwelling or equal to the maximum amount of insurance otherwise available through the Association, coverage applicable to the dwelling under the policy is extended to include the full cost of repair or replacement, without a deduction for depreciation. If, at the time of loss, the total amount of insurance applicable to the dwelling is equal to less than 80 percent of the full replacement cost of the dwelling and less than the maximum amount of insurance available through the Association, liability for loss under the policy may not exceed the replacement cost of that part of the dwelling damaged or destroyed, less depreciation. Notwithstanding any other provision of this Act or other law, the commissioner, after notice and hearing, may adopt rules to: (1) authorize the Association to provide actual cash value coverage instead of replacement cost coverage on the roof covering of a building insured by the Association; and (2) determine: (A) the conditions under which the Association may provide that actual cash value coverage; (B) the appropriate premium reductions when coverage for the roof covering is provided on an actual cash value basis; and (C) the disclosure that must be provided to the policyholder, prominently displayed on the face of the windstorm and hail insurance policy. (c) The Commissioner may promulgate such rules and regulations as necessary to implement this section. (d) Notwithstanding Article 1.33B of this code, a hearing under Subsection (b) of this section shall be held before the commissioner or the commissioner's designee. (e) For purposes of this section, "roof covering" means: (1) the roofing material exposed to the weather; (2) the underlayments applied for moisture protection; and (3) all flashings required in the replacement of a roof covering.
Indirect losses; personal lines
Sec. 8B. (a) Except as provided by Subsections (b) and (c) of this section, a policy of windstorm and hail insurance issued by the association for a dwelling, as that term is defined by the Texas Department of Insurance or its successor, must include coverage for wind-driven rain damage, regardless of whether an opening is made by the wind, loss of use, and consequential losses, according to forms approved by the commissioner and for a premium paid by the insured based on rates established by rule adopted by the commissioner. A policy of windstorm and hail insurance issued by the association for tenant contents of a dwelling or other residential building must include coverage for loss of use and consequential losses, according to forms approved by the board and for a premium paid by the insured based on rates established by rule adopted by the commissioner. The association shall provide coverage under this section as directed by rule of the commissioner. (b) The association is not required to offer coverage for indirect losses as provided by Subsection (a) of this section unless that coverage was excluded from a companion policy in the voluntary market. (c) The association is not required to provide coverage for (1) "loss of use" if such "loss of use" is loss of rents or loss of rental value; or (2) "additional living expenses" when the property insured is a secondary or a non-primary residence.
Liability limits
Sec. 8D. (a) The maximum limits of liability under a policy of windstorm and hail insurance issued by the Association under this Act shall be proposed by the board of directors of the Association and must be approved by the Commissioner. The maximum limits of liability for coverage on any one insurable property may not be less than: (1) $350,000 for a dwelling, including an individually owned townhouse unit, and the corporeal movable property located in or about the dwelling, and as an extension of coverage, away from those premises, as provided under the policy; (2) $2,192,000 for a building and the corporeal movable property located in the building that is owned by, and at least 75 percent of which is occupied by, a governmental entity, or that is not owned by, but is wholly and exclusively occupied by, a governmental entity; (3) $125,000 for individually owned corporeal movable property located in an apartment unit, residential condominium unit, or townhouse unit that is occupied by the owner of that property, and as an extension of coverage, away from those premises, as provided under the policy; and (4) $1,500,000 for a structure other than a dwelling or a public building and the corporeal movable property located in that structure and, as an extension of coverage, away from those premises, as provided under the policy. (b) Notwithstanding Subsection (a) of this section, the liability limit imposed under Subsection (a)(2) of this section is frozen, and the indexing and adjustments provided by this section do not apply to that liability limit, until the liability limit imposed on a structure subject to Subsection (a)(4) of this section and the corporeal property located in that structure reaches or exceeds $2,192,000, at which time the liability limit shall be indexed and adjusted as provided for a risk under Subsection (a)(4) of this section. (c) Liability limits for insurable property that is not covered under Subsection (a) of this section shall be established by the plan of operation. (d) Not later than September 30 of each year, the board of directors of the Association shall propose adjustments to the liability limits for inflation. The proposed adjustments shall be made in increments of $1,000, rounded to the nearest $1,000, considering the limits set by Subsection (a) of this section, at a rate that reflects any change in the BOECKH Index. If the BOECKH Index ceases to exist, the board of directors of the Association shall propose adjustments to the nearest $1,000 in round numbers to the liability limits for inflation based on any other index that the board determines accurately reflects changes in the cost of construction or residential values in the catastrophe area. An adjustment to the liability limits that is approved by the Commissioner applies to each policy of windstorm and hail insurance delivered, issued for delivery, or renewed on or after January 1 of the year following the approval by the Commissioner of the adjustment to the liability limits. The indexing of the liability limits shall adjust for changes occurring on and after January 1, 1997. (e) The board of directors of the Association may propose additional increases in the liability limits as it determines necessary to implement the purposes of this Act. (f) Not later than the 10th day after the date on which the proposed adjustment to the liability limits is determined under Subsection (a), (b), (d), or (e) of this section, the Association shall file its proposed adjustments with the Commissioner in writing. The filing must include: (1) a statement of the proposed adjusted liability limits; (2) a statement of the liability limits in effect immediately preceding the effective date of the proposed adjustment; (3) a brief summary of the changes to the BOECKH Index or other index on which the proposed adjustments are based; and (4) a brief summary of the computations used in determining the proposed adjustments. (g) Not later than the 60th day after the date of receipt of the filing made under Subsection (f) of this section, and after notice and hearing, the Commissioner by order shall approve, disapprove, or modify the proposed adjustments to the liability limits. (h) Notwithstanding Subsections (c)-(g) of this section, the Commissioner may not approve adjustments of liability limits to amounts lower than the amounts prescribed under Subsection (a) of this section. (i) Article 1.33B of this code does not apply to an action taken under this section.
Text of section 8E as added by Acts 1997, 75th Leg., ch. 642, Sec. 4
Reinsured excess limits
Sec. 8E. (a) Notwithstanding any other law, the Association may issue a policy of windstorm and hail insurance that includes coverage for an amount in excess of a liability limit proposed by the Association and approved by the Commissioner under Section 8D of this Act if the Association first obtains, from a reinsurer approved by the Commissioner, reinsurance for the full amount of policy exposure above the limits approved by the Commissioner for any given type of risk. (b) The premium charged by the Association for the excess coverage shall be equal to the amount of the reinsurance premium charged to the Association by the reinsurer, plus any payment to the Association that is approved by the Commissioner. (c) The Commissioner shall adopt rules as necessary to implement this section. The Association may not issue excess coverage under this section until those rules are adopted. (d) Article 1.33B of this code does not apply to an action taken under this section.
Appeals
Sec. 9. Any person insured pursuant to this Act, or his duly authorized representative, or any affected insurer who may be aggrieved by an act, ruling or decision of the Association, may, within 30 days after such act, ruling or decision, appeal to the commissioner. In the event the Association is aggrieved by the action of the commissioner with respect to any ruling, order, or determination of the commissioner, it may, within 30 days after such action, make a written request to the commissioner, for a hearing thereon. The commissioner shall hear the Association, or the appeal from an act, ruling or decision of the Association, within 30 days after receipt of such request or appeal and shall give not less than 10 days' written notice of the time and place of hearing to the Association making such request or the person, or his duly authorized representative, appealing from the act, ruling or decision of the Association. A hearing on an act, ruling or decision of the Association relating to the payment of, the amount of, or the denial of a particular claim shall be held, at the request of the claimant, in either the county in which the covered property is located or Travis County. Within 30 days after the hearing, the commissioner shall affirm, reverse or modify its previous action or the act, ruling or decision appealed to the commissioner. Pending such hearing and decision thereon, the commissioner may suspend or postpone the effective date of its previous rule or of the act, ruling or decision appealed to the commissioner. The Association, or the person aggrieved by any order or decision of the commissioner, may thereafter appeal to either a District Court of Travis County, Texas, or a District Court in the county in which the covered property is located. An action brought under this section is subject to the procedures established under Article 1.04 of this code.
Disputes relating to claims
Sec. 9A. (a) Except as provided by Section 10 of this Article, any person insured under this Act who is aggrieved by an act, ruling, or decision of the Association relating to the payment of, the amount of, or the denial of a claim may elect to bring an action, including an action under Article 21.21 of this code, against the Association in a court of competent jurisdiction or to appeal the act, ruling, or decision under Section 9 of this Article. A person may not proceed under both Section 9 of this Article and this section for the same act, ruling, or decision. (b) Except as otherwise provided by this subsection, venue in a proceeding action against the Association under this section, including an action under Article 21.21 of this code, is in the county in which the covered property is located or in a District Court of Travis County. Venue is only in the District Court of Travis County if the claimant joins the State Board of Insurance as a party to the action.
Immunity from Liability
Sec. 10. (a) A director or officer of the Association is not individually liable for any act or failure to act in the performance of official duties in connection with the Association. (b) Subsection (a) does not apply to: (1) an act or failure to act of an employee of the Association; (2) an act or failure to act of the Association; (3) an act or omission involving a motor vehicle; or (4) an act or failure to act that constitutes bad faith, intentional misconduct, or gross negligence. (c) There shall be no liability on the part of and no cause of action of any nature shall arise against a director of the association, the Board or any of its staff, the Association or its agents or employees, or against any participating insurer or its agents or employees, for any inspections made under the plan of operation or any statements made in good faith by them in any reports or communications concerning risks submitted to the Association, or at any administrative hearings conducted in connection therewith under the provisions of this Act.
Indemnification
Sec. 11. Each person serving as a director of the Association, each member of the Association, and each officer and employee of the Association shall be indemnified by the Association against all costs and expenses actually and necessarily incurred by him or it in connection with the defense of any action, suit, or proceeding in which he or it is made a party by reason of his or its being or having been a director or member of the Association, or an officer or employee of the Association except in relation to matters as to which he or it has been judged in such action, suit or proceeding to be liable by reason of misconduct in the performance of his or its duties as a director of the Association or a member or officer or employee of the Association, provided, however, that this indemnification shall in no way indemnify a member of the Association from participating in the writings, expenses, profits, and losses of the Association in the manner set out in this Act. Indemnification hereunder shall not be exclusive of other rights to which such member or officer may be entitled as a matter of law.
Annual Report
Sec. 12. The Association shall file in the office of the Board annually a statement which shall summarize the transactions, conditions, operations and affairs of the Association during the preceding year at such times and covering such periods as may be designated by the Board. Such statement shall contain such matters and information as are prescribed by the Board and shall be in such form as is required by it.
Legal counsel
Sec. 12A. The association shall establish a plan in its plan of operation under which the association's legal representation before the State Board of Insurance, the Texas Department of Insurance, and the Texas legislature is without conflict of interest or the appearance of a conflict of interest as defined in the Texas Disciplinary Rules of Professional Conduct. The association shall also adopt separate and distinct procedures for legal counsel in the handling of disputes involving policyholder claims against the association.
Effective Date
Sec. 13. This Act shall become effective from and after passage.
Conflicting Laws
Sec. 14. All laws or parts of laws in conflict herewith are hereby repealed to the extent necessary to accomplish the purposes of this Act.
Partial Invalidity
Sec. 15. If any provision of this Act or the application thereof to any person or circumstance is held to be invalid, such invalidity shall not affect other provisions or applications of this Act which can be given effect without the invalid provision or application, and to this end the provisions of this Act are declared to be severable. Sec. 16. [Emergency provision].
Codification
Sec. 17. This Act is hereby codified as Article 21.49 of the Texas Insurance Code.
Application of Act
Sec. 18. This Act does not apply to farm mutual insurance companies, as defined in Article 16.01 of the Insurance Code, nor does it apply to any existing company chartered under old Chapter 12, Title 78, Revised Civil Statutes of Texas, 1925, repealed by Chapter 40, Acts of the 41st Legislature, 1st Called Session, 1929, Chapter 40.
Payment of losses; premium tax credit
Sec. 19. (a) If, in any calendar year, an occurrence or series of occurrences within the defined catastrophe area results in insured losses and operating expenses of the association in excess of premium and other revenue of the association, any excess losses shall be paid as follows: (1) $100 million shall be assessed to the members of the association with the proportion of the loss allocable to each insurer determined in the same manner as its participation in the association has been determined for the year under Section 5(c) of this Act; (2) any losses in excess of $100 million shall be paid from the catastrophe reserve trust fund established under Section 8(i) of this Act and any reinsurance program established by the association; (3) for losses in excess of those paid under Subdivisions (1) and (2) of this subsection, an additional $200 million shall be assessed to the members of the association with the proportion of the loss allocable to each insurer determined in the same manner as its participation in the association has been determined for the year under Section 5(c) of this Act; (4) any losses in excess of those paid under Subdivisions (1), (2), and (3) of this subsection shall be assessed against members of the association, with the proportion of the total loss allocable to each insurer determined in the same manner as its participation in the association has been determined for the year under Section 5(c) of this Act. (b) An insurer may credit any amount paid in accordance with Subsection (a)(4) of this section in a calendar year against its premium tax under Article 4.10 of this code. The tax credit herein authorized shall be allowed at a rate not to exceed 20 percent per year for five or more successive years following the year of payment of the claims. The balance of payments paid by the insurer and not claimed as such tax credit may be reflected in the books and records of the insurer as an admitted asset of the insurer for all purposes, including exhibition in annual statements pursuant to Article 6.12 of this code. Added by Acts 1971, 62nd Leg., p. 843, ch. 100, eff. April 29, 1971. Amended by Acts 1971, 62nd Leg., p. 2862, ch. 940, Sec. 1, eff. June 15, 1971; Acts 1972, 62nd Leg., 4th C.S., p. 45, ch. 21, Sec. 1, 2, eff. Nov. 2, 1972; Acts 1973, 63rd Leg., p. 1042, ch. 406, Sec. 1, 3, 5, eff. Aug. 27, 1973; Acts 1979, 66th Leg., p. 1599, ch. 675, Sec. 1, eff. Aug. 27, 1979. Sec. 5(c) amended by Acts 1983, 68th Leg., p. 1114, ch. 254, Sec. 1, eff. Aug. 29, 1983; Acts 1987, 70th Leg., ch. 127, Sec. 1, eff. May 20, 1987; Sec. 5(d) amended by Acts 1987, 70th Leg., ch. 407, Sec. 2, eff. Sept. 1, 1987; Sec. 6A added by Acts 1987, 70th Leg., ch. 407, Sec. 1, eff. Sept. 1, 1987; Sec. 5(e), (f) added by Acts 1989, 71st Leg., ch. 852, Sec. 1, eff. Aug. 28, 1989; Sec. 5B added by Acts 1989, 71st Leg., ch. 852, Sec. 2, eff. Aug. 28, 1989; Sec. 3(c) amended by Acts 1991, 72nd Leg., ch. 242, Sec. 11.41, eff. Sept. 1, 1991; Sec. 3(d) amended by Acts 1991, 72nd Leg., ch. 242, Sec. 11.34, eff. Sept. 1, 1991; Sec. 3(f) amended by Acts 1991, 72nd Leg., ch. 242, Sec. 11.38, eff. Sept. 1, 1991; Sec. 3(l) to (n) added by Acts 1991, 72nd Leg., ch. 242, Sec. 11.39, eff. Sept. 1, 1991; Sec. 5 amended by Acts 1991, 72nd Leg., ch. 242, Sec. 11.42, eff. Sept. 1, 1991; Sec. 6A(a) amended by Acts 1991, 72nd Leg., ch. 242, Sec. 11.40, eff. Sept. 1, 1991; Sec. 6A(f) amended by Acts 1991, 72nd Leg., ch. 242, Sec. 1.12, eff. Sept. 1, 1991; Sec. 8(a) amended by Acts 1991, 72nd Leg., ch. 242, Sec. 11.43, eff. Sept. 1, 1991; Sec. 8(b) amended by Acts 1991, 72nd Leg., ch. 242, Sec. 12.01(7), eff. Sept. 1, 1991; Sec. 8(h) amended by and 8(i) added by Acts 1991, 72nd Leg., ch. 242, Sec. 11.43, eff. Sept. 1, 1991; Sec. 8A added by Acts 1991, 72nd Leg., ch. 242, Sec. 11.35, eff. Sept. 1, 1991; Sec. 8D added by Acts 1991, 72nd Leg., ch. 242, Sec. 11.36, eff. Sept. 1, 1991; Sec. 8D(e) added by Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Sec. 22.01, eff. Jan. 1, 1992; Sec. 8E added by Acts 1991, 72nd Leg., ch. 242, Sec. 11.44, eff. Sept. 1, 1991; Sec. 9 amended by Acts 1991, 72nd Leg., ch. 242, Sec. 1.13, eff. Sept. 1, 1991; Sec. 9 amended by and Sec. 9A added by Acts 1991, 72nd Leg., ch. 242, Sec. 11.37, eff. Sept. 1, 1991; Sec. 12A added by Acts 1991, 72nd Leg., ch. 242, Sec. 11.45, eff. Sept. 1, 1991; Sec. 3(d) amended by Acts 1993, 73rd Leg., ch. 685, Sec. 17.01, eff. Sept. 1, 1993; Sec. 5(e), (h), (l) amended by Acts 1993, 73rd Leg., ch. 685, Sec. 17.03, eff. Sept. 1, 1993; Sec. 6B added by Acts 1993, 73rd Leg., ch. 685, Sec. 17.02, eff. Aug. 30, 1993; Sec. 8(h), (i) amended by Acts 1993, 73rd Leg., ch. 685, Sec. 17.04, eff. Sept. 1, 1993; Sec. 8B added by Acts 1993, 73rd Leg., ch. 685, Sec. 17.05, eff. Sept. 1, 1993; Sec. 8E repealed by Acts 1993, 73rd Leg., ch. 685, Sec. 17.07, eff. Sept. 1, 1993; Sec. 9 amended by Acts 1993, 73rd Leg., ch. 685, Sec. 22.06, eff. Sept. 1, 1993; Secs. 10, 12A, 19 amended by Acts 1993, 73rd Leg., ch. 685, Sec. 17.06, eff. Sept. 1, 1993; Sec. 3(h) amended by Acts 1995, 74th Leg., ch. 944, Sec. 1, eff. Sept. 1, 1995; Sec. 8(h) amended by Acts 1995, 74th Leg., ch. 944, Sec. 2, eff. Sept. 1, 1995; Sec. 2 amended by Acts 1997, 75th Leg., ch. 438, Sec. 2, eff. Sept. 1, 1997; Sec. 3(b) amended by Acts 1997, 75th Leg., ch. 438, Sec. 3, eff. Sept. 1, 1997; Sec. 3(o) added by Acts 1997, 75th Leg., ch. 1000, Sec. 2, eff. Sept. 1, 1997; Sec. 4 amended by Acts 1997, 75th Leg., ch. 438, Sec. 4, eff. Sept. 1, 1997; Sec. 5 amended by Acts 1997, 75th Leg., ch. 438, Sec. 5, eff. Sept. 1, 1997; Sec. 5B(a) amended by Acts 1997, 75th Leg., ch. 879, Sec. 8, eff. Sept. 1, 1997; Sec. 5B(c) repealed by Acts 1997, 75th Leg., ch. 879, Sec. 8(h)(13), eff. Sept. 1, 1997; Sec. 8(a) amended by Acts 1997, 75th Leg., ch. 805, Sec. 1, eff. Sept. 1, 1997; Sec. 8(h)(13) amended by Acts 1997, 75th Leg., ch. 642, Sec. 1, eff. Sept. 1, 1997; Sec. 8(i) amended by Acts 1997, 75th Leg., ch. 1423, Sec. 11.57, eff. Sept. 1, 1997; Sec. 8A(a) amended by Acts 1997, 75th Leg., ch. 642, Sec. 2, eff. Sept. 1, 1997; Sec. 8A(b) amended by Acts 1997, 75th Leg., ch. 1326, Sec. 1, eff. Sept. 1, 1997; Sec. 8A(c) amended by Acts 1997, 75th Leg., ch. 642, Sec. 2, eff. Sept. 1, 1997; Sec. 8A(d), (e) added by Acts 1997, 75th Leg., ch. 1326, Sec. 1, eff. Sept. 1, 1997; Sec. 8D amended by Acts 1997, 75th Leg., ch. 642, Sec. 3, eff. Sept. 1, 1997; Sec. 8E added by Acts 1997, 75th Leg., ch. 642, Sec. 4, eff. Sept. 1, 1997; added by Acts 1997, 75th Leg., ch. 1000, Sec. 3, eff. Sept. 1, 1997; Sec. 9A(a) amended by Acts 1997, 75th Leg., ch. 862, Sec. 1, eff. Sept. 1, 1997; Sec. 10 amended by Acts 1997, 75th Leg., ch. 862, Sec. 2, eff. Sept. 1, 1997; Sec. 19(a) amended by Acts 1997, 75th Leg., ch. 642, Sec. 5, eff. Sept. 1, 1997; Sec. 4(c), (d) added by Acts 1999, 76th Leg., ch. 920, Sec. 2.01, eff. Sept. 1, 1999; Sec. 6A(f) repealed by Acts 1999, 76th Leg., ch. 592, Sec. 2, eff. Sept. 1, 1999; Sec. 6C added by Acts 1999, 76th Leg., ch. 592, Sec. 1, eff. June 18, 1999; Sec. 8(h)(10) amended by Acts 1999, 76th Leg., ch. 919, Sec. 1, eff. Sept. 1, 1999; Sec. 8(h)(13) amended by Acts 1999, 76th Leg., ch. 920, Sec. 2.02, eff. Sept. 1, 1999; Sec. 8(i) amended by Acts 1999, 76th Leg., ch. 920, Sec. 2.03, eff. Sept. 1, 1999; Sec. 6A(a), (d) amended by Acts 2001, 77th Leg., ch. 120, Sec. 2, eff. Jan. 1, 2002; Sec. 8(h) amended by Acts 2001, 77th Leg., ch. 304, Sec. 1, eff. Sept. 1, 2001; Sec. 3(f) amended by Acts 2003, 78th Leg., ch. 206, Sec. 9.01, eff. June 11, 2003; Sec. 5(m) added by Acts 2003, 78th Leg., ch. 206, Sec. 9.02, eff. Jan. 1, 2004; Sec. 6A(a) amended by Acts 2003, 78th Leg., ch. 206, Sec. 9.03, eff. Jan. 1, 2004; Sec. 6A(d) amended by Acts 2003, 78th Leg., ch. 206, Sec. 9.06, eff. Jan. 1, 2004; Sec. 6A(h) amended by Acts 2003, 78th Leg., ch. 206, Sec. 9.03, eff. Jan. 1, 2004; Sec. 6A(j) amended by Acts 2003, 78th Leg., ch. 206, Sec. 9.03, eff. Jan. 1, 2004; Sec. 6A(j-1) added by Acts 2003, 78th Leg., ch. 206, Sec. 9.03, eff. Jan. 1, 2004; Sec. 6A(k) amended by Acts 2003, 78th Leg., ch. 206, Sec. 9.03, eff. Jan. 1, 2004; Sec. 6A(k-1) added by Acts 2003, 78th Leg., ch. 206, Sec. 9.03, eff. Jan. 1, 2004; Sec. 6C(b) amended by Acts 2003, 78th Leg., ch. 206, Sec. 9.04, eff. Jan. 1, 2004; Sec. 6C(f) amended by Acts 2003, 78th Leg., ch. 206, Sec. 9.04, eff. Jan. 1, 2004; Sec. 6C(g) amended by Acts 2003, 78th Leg., ch. 206, Sec. 9.04, eff. Jan. 1, 2004; Sec. 6C(h) amended by Acts 2003, 78th Leg., ch. 206, Sec. 9.04, eff. Jan. 1, 2004; Sec. 6C(k) amended by Acts 2003, 78th Leg., ch. 206, Sec. 9.04, eff. Jan. 1, 2004; Sec. 6C(l) amended by Acts 2003, 78th Leg., ch. 206, Sec. 9.04, eff. Jan. 1, 2004; Sec. 6C(m) amended by Acts 2003, 78th Leg., ch. 206, Sec. 9.04, eff. Jan. 1, 2004; Sec. 6D added by Acts 2003, 78th Leg., ch. 206, Sec. 9.05, eff. Jan. 1, 2004; Sec. 8(h)(9) amended by Acts 2003, 78th Leg., ch. 206, Sec. 9.07, eff. Jan. 1, 20041; Sec. 3(f) amended by Acts 2005, 79th Leg., ch. 1153, Sec. 1, eff. Sept. 1, 2005; Sec. 3(k) amended by Acts 2005, 79th Leg., ch. 1251, Sec. 1, eff. Sept. 1, 2005; Sec. 3A added by Acts 2005, 79th Leg., ch. 1153, Sec. 2, eff. Sept. 1, 2005; Sec. 8E repealed by Acts 2005, 79th Leg., ch. 222, Sec. . Art. 21.49-2V. MEMBERSHIP DUES; ISSUANCE AND RENEWAL OF POLICY. (a) Except as otherwise provided by law, an insurer may require that membership dues in its sponsoring organization be paid as a condition for issuance or renewal of a policy. (b) For purposes of this article, "insurer" includes a county mutual insurance company, a Lloyd's plan, and a reciprocal or interinsurance exchange. Added by Acts 2003, 78th Leg., ch. 206, Sec. 8.02, eff. June 11, 2003. Art. 21.49-3. MEDICAL LIABILITY INSURANCE UNDERWRITING ASSOCIATION ACT.
Short title
Text of Sec. 1 effective until April 1, 2007
Section 1. This Act shall be known as the "Texas Medical Liability Insurance Underwriting Association Act."
Definitions
Sec. 2. (1) "Medical liability insurance" means primary and excess insurance coverage against the legal liability of the insured and against loss, damage, or expense incident to a claim arising out of the death or injury of any person as the result of negligence in rendering or the failure to render professional service by a health care provider or physician who is in one of the categories eligible for coverage by the association. (2) "Association" means the joint underwriting association established pursuant to the provisions of this article. (3) "Net direct premiums" means gross direct premiums written on automobile liability and liability other than auto insurance written pursuant to the provisions of the Insurance Code, less policyholder dividends, return premiums for the unused or unabsorbed portion of premium deposits and less return premiums upon cancelled contracts written on such liability risks. (4) "Board" means the State Board of Insurance of the State of Texas. (5) "Physician" means a person licensed to practice medicine in this state. (6) "Health care provider" means: (A) any person, partnership, professional association, corporation, facility, or institution duly licensed or chartered by the State of Texas to provide health care as defined in Section 1.03(a)(2), Medical Liability and Insurance Improvement Act of Texas (Article 4590i, Vernon's Texas Civil Statutes), as: (i) a registered nurse, hospital, dentist, podiatrist, pharmacist, chiropractor, or optometrist; (ii) a for-profit or not-for-profit nursing home; (iii) a radiation therapy center that is independent of any other medical treatment facility and which is licensed by the Texas Department of Health in that agency's capacity as the Texas Radiation Control Agency pursuant to the provisions of Chapter 401, Health and Safety Code, and which is in compliance with the regulations promulgated under that chapter; (iv) a blood bank that is a nonprofit corporation chartered to operate a blood bank and which is accredited by the American Association of Blood Banks; (v) a nonprofit corporation which is organized for the delivery of health care to the public and which is certified under Chapter 162, Occupations Code; (vi) a health center as defined by 42 U.S.C. Section 254b, as amended; or (vii) a for-profit or not-for-profit assisted living facility; or (B) an officer, employee, or agent of an entity listed in Paragraph (A) of this subdivision acting in the course and scope of that person's employment.
Joint underwriting association
Text of Sec. 3 effective until April 1, 2007
Sec. 3. (a) A joint underwriting association is hereby created, consisting of all insurers authorized to write and engaged in writing, within this state, on a direct basis, automobile liability and liability other than auto insurance on or after January 1, 1975, as provided in the Insurance Code, specifically including and applicable to Lloyds and reciprocal or interinsurance exchanges, but excluding farm mutual insurance companies as authorized by Chapter 16 of this code, and county mutual insurance companies as authorized by Chapter 17 of this code. Every such insurer shall be a member of the association and shall remain a member as a condition of its authority to continue to transact such kind of insurance in this state. The purpose of the association shall be to provide medical liability insurance on a self-supporting basis. The association shall not be a licensed insurer within the meaning of Article 1.14-2, Insurance Code, relating to medical liability insurance for physicians as defined in this article. (b) The association shall, pursuant to the provisions of this article and the plan of operation with respect to medical liability insurance, have the power on behalf of its members: (1) to issue, or to cause to be issued, policies of insurance to applicants, including primary, excess, and incidental coverages and subject to limits as specified in the plan of operation; provided that no individual or organization may be insured by policies issued by the association for an amount exceeding a total of $1 million per occurrence and $3 million aggregate per annum; (2) to underwrite such insurance and to adjust and pay losses with respect thereto, or to appoint service companies to perform those functions; (3) to either or both accept and refuse the assumption of reinsurance from its members; and (4) to cede and purchase reinsurance. (c)(1) The board shall, after consultation with the joint underwriting association, representatives of the public, the Texas Medical Association, the Texas Podiatry Association, the Texas Hospital Association, and other affected individuals and organizations, promulgate a plan of operation consistent with the provisions of this article, to become effective and operative no later than 90 days after the effective date of this Act. (2) The plan of operation shall provide for economic, fair, and nondiscriminatory administration and for the prompt and efficient provision of medical liability insurance, and shall contain other provisions including, but not limited to, preliminary assessment of all members for initial expenses necessary to commence operations, establishment of necessary facilities, management of the association, assessment of members and assessment of policyholders to defray losses and expenses, administration of the policyholder's stabilization reserve fund, commission arrangements, reasonable and objective underwriting standards, acceptance, assumption, and cession of reinsurance, appointment of servicing carriers, and procedures for determining amounts of insurance to be provided by the association. (3) The plan of operation shall provide that any balance remaining in the funds of the association at the close of its fiscal year, meaning its then excess of revenue over expenditures after reimbursement of members' contributions in accordance with Section 4(b)(5) of this article by the association shall be added to the reserves of the association. (4) Amendments to the plan of operation may be made by the directors of the association, subject to the approval of the board, or shall be made at the direction of the board. (d) The association may provide general liability insurance coverage to be issued in connection with medical liability insurance issued by the association.
Eligibility for Coverage
Text of Sec. 3A effective until April 1, 2007
Sec. 3A. (a) The commissioner shall establish by order the categories of physicians and health care providers who are eligible to obtain coverage from the association and may, from time to time, revise its order to include or exclude from eligibility particular categories of such physicians and health care providers. (b) If a category of physicians or health care providers has been excluded from eligibility to obtain coverage from the association, the commissioner may determine, after notice of at least 10 days and a hearing, that medical liability insurance is not available. On that determination, the category of physicians or health care providers is eligible to obtain insurance coverage from the association. (c) A for-profit or not-for-profit nursing home or assisted living facility not otherwise eligible under this section for coverage from the association is eligible for coverage if the nursing home or assisted living facility demonstrates, in accordance with the requirements of the association, that the nursing home or assisted living facility made a verifiable effort to obtain coverage from authorized insurers and eligible surplus lines insurers and was unable to obtain substantially equivalent coverage and rates. (d) In consultation with the Texas Department of Human Services, the commissioner shall, by rule, adopt minimum rating standards for for-profit nursing homes and for-profit assisted living facilities that must be met before a for-profit nursing home or for-profit assisted living facility may obtain coverage through the association. The standards must promote the highest practical level of care for residents of those nursing homes and assisted living facilities.
Eligibility of Other Health Care Practitioners and Facilities
Text of Sec. 3B effective until April 1, 2007
Sec. 3B. (a) In this section: (1) "Health care" includes any medical or health care service, including an examination, treatment, medical diagnosis, or evaluation, and care provided in an inpatient, outpatient, or residential setting. (2) "Health care facility" means a facility providing health care, other than a facility described by Section 2(6) of this article. (3) "Health care practitioner" means an individual, other than an individual described by Section 2(6) of this article, who: (A) is licensed to provide health care; or (B) is not licensed to provide health care but provides health care under the direction or supervision of a licensed individual. (b) After notice and opportunity for hearing, the commissioner may: (1) determine that appropriate liability insurance coverage written by insurers authorized to engage in business in this state is not reasonably available to a type of health care practitioner or health care facility; and (2) by order designate that type of health care practitioner or health care facility to be included as a health care provider eligible to receive coverage under this article. (c) A health care practitioner or facility designated under Subsection (b) of this section is entitled to receive coverage provided under this article in accordance with Article 5.15-1 of this code in the same manner as other health care providers described by Section 2 of this article and Section 2, Article 5.15-1, of this code. (d) The commissioner's order may indicate whether a health care practitioner or facility designated under Subsection (b) of this section is included under the policyholder's stabilization reserve fund established under Section 4A or 4B of this article or whether a separate policyholder's stabilization reserve fund is created. A separate policyholder's stabilization reserve fund established under this subsection operates in the same manner as a stabilization reserve fund created under Section 4B of this article.
Coverage for Volunteer Health Care Providers
Text of Sec. 3C effective until April 1, 2007
Sec. 3C. (a) In this section: (1) "Charitable organization" has the meaning assigned by Section 84.003, Civil Practice and Remedies Code. (2) "Volunteer health care provider" has the meaning assigned by Section 84.003, Civil Practice and Remedies Code. (b) The association shall make available medical liability insurance or appropriate health care liability insurance covering a volunteer health care provider for the legal liability of the person against any loss, damage, or expense incident to a claim arising out of the death or injury of any person as the result of negligence in rendering or the failure to render professional service while acting in the course and scope of the person's duties as a volunteer health care provider as described by Chapter 84, Civil Practice and Remedies Code. (c) A volunteer health care provider who is serving as a direct service volunteer of a charitable organization is eligible to obtain from the association the liability insurance made available under this section. A volunteer health care provider who obtains coverage under this section is subject to Section 4A of this article and the other provisions of this article in the same manner as physicians who are eligible to obtain medical liability insurance from the association. (d) This section does not affect the liability of a volunteer health care provider who is serving as a direct service volunteer of a charitable organization. Section 84.004(c), Civil Practice and Remedies Code, applies to the volunteer health care provider without regard to whether the volunteer health care provider obtains liability insurance under this section.
Procedures
Text of Sec. 4 effective until April 1, 2007
Sec. 4. (a)(1) Any health care provider or physician included in one of the categories of health care providers eligible for coverage by the association shall, on or after the effective date of the plan of operation, be entitled to apply to the association for such coverage. Such application may be made on behalf of an applicant by an agent authorized pursuant to Article 21.14 of this code. (2) If the association determines that the applicant meets the underwriting standards of the association as prescribed in the plan of operation and there is no unpaid, uncontested premium, policyholder stabilization reserve fund charge, or assessment due from the applicant for prior insurance (as shown by the insured having failed to pay or make written objection to such charges within 30 days after billing) then the association, upon receipt of the premium and the policyholder stabilization reserve fund charge, or such portion thereof as is prescribed in the plan of operation, shall cause to be issued a policy of medical liability insurance for a term of one year or less, as determined by the association. (b)(1) Subject to Subdivision (6) of this subsection, the rates, rating plans, rating rules, rating classification, territories, and policy forms applicable to the insurance written by the association and statistics relating thereto shall be subject to Subchapter B of Chapter 5 of the Insurance Code, as amended, giving due consideration to the past and prospective loss and expense experience for medical professional liability insurance within and without this state of all of the member companies of the association, trends in the frequency and severity of losses, the investment income of the association, and such other information as the commissioner may require; provided, that if any article of the above subchapter is in conflict with any provision of this Act, this Act shall prevail. For purposes of this article, rates, rating plans, rating rules, rating classifications, territories, and policy forms for for-profit nursing homes and for-profit assisted living facilities are subject to the requirements of Article 5.15-1 of this code to the same extent as not-for-profit nursing homes and not-for-profit assisted living facilities. (2) Repealed by Acts 2003, 78th Leg., ch. 206, Sec. 21.47(8). (3) Any deficit sustained by the association with respect to physicians and health care providers, other than for-profit and not-for-profit nursing homes and assisted living facilities, or by for-profit and not-for-profit nursing homes and assisted living facilities in any one year shall be recouped, pursuant to the plan of operation and the rating plan then in effect, by one or more of the following procedures in this sequence: First, a contribution from the policyholder's stabilization reserve fund for physicians and health care providers, other than for-profit and not-for-profit nursing homes and assisted living facilities, established under Section 4A of this article or from the stabilization reserve fund for for-profit and not-for-profit nursing homes and assisted living facilities, established under Section 4B of this article, as appropriate, until the respective fund is exhausted; Second, an assessment upon the policyholders pursuant to Section 5(a) of this article; Third, an assessment upon the members pursuant to Section 5(b) of this article. To the extent a member has paid one or more assessments and has not received reimbursement from the association in accordance with Subdivision (5) of this subsection, a credit against premium taxes under Article 4.10 of this code, as amended, shall be allowed. The tax credit shall be allowed at a rate of 20 percent per year for five successive years following the year in which said deficit was sustained and at the option of the insurer may be taken over an additional number of years. (4) After the initial year of operation, rates, rating plans, and rating rules, and any provision for recoupment should be based upon the association's loss and expense experience, together with such other information based upon such experience as the department may deem appropriate. The resultant premium rates shall be on an actuarially sound basis and shall be calculated to be self-supporting. (5) In the event that sufficient funds are not available for the sound financial operation of the association, in addition to assessments paid pursuant to the plan of operation in accordance with Section 3(c)(2) of this article and contributions from the policyholder's stabilization reserve fund, all members shall, on a basis authorized by the department, as long as the department deems it necessary, contribute to the financial requirements of the association in the manner provided for in Section 5. Any assessment or contribution shall be reimbursed to the members, or to the state to the extent that the members have recouped their assessments using premium tax credits as provided under Subsection (b)(3) of this section, with interest at a rate to be approved by the commissioner, subject to the approval of the commissioner. Pending recoupment or reimbursement of assessments or contributions paid to the association by a member, the unrepaid balance of such assessments and contributions may be reflected in the books and records of the insurer as an admitted asset of the insurer for all purposes, including exhibition in annual statements pursuant to Section 862.001 of this code. (6) The rates applicable to professional liability insurance provided by the association that cover nursing homes and assisted living facilities that are not for profit must reflect a discount of 30 percent from the rates for the same coverage provided to others in the same category of insureds. The commissioner shall ensure compliance with this subdivision. (c) Excess insurance coverage written for a health care provider or a physician by the association under this article shall be written on a following form basis to the primary insurance coverage of that health care provider. (d) A policy of medical liability insurance issued to or renewed for a physician or health care provider by the association under this article may not include coverage for punitive damages assessed against the physician or health care provider. (e) The association may offer an installment payment plan for coverage obtained through the association. (f) Section 7, Article 5.15-1 of this code, does not apply to a medical liability insurance policy issued by the association for a term of less than one year. With respect to a policy subject to this subsection, the association shall ensure that appropriate written notice is provided to an insured if premiums are increased or the policy is to be canceled or is not to be renewed other than for nonpayment of premiums or because the insured is no longer licensed.
Policyholder's Stabilization Reserve Fund for Physicians and Certain Health Care Providers
Text of Sec. 4A effective until April 1, 2007
Sec. 4A. (a) There is hereby created a policyholder's stabilization reserve fund for physicians and health care providers, other than for-profit and not-for-profit nursing homes and assisted living facilities, which shall be administered as provided herein and in the plan of operation of the association. The stabilization reserve fund created by this section is separate and distinct from the stabilization reserve fund for for-profit and not-for-profit nursing homes and assisted living facilities created by Section 4B of this article. (b) Each policyholder shall pay annually into the stabilization reserve fund a charge, the amount of which shall be established annually by advisory directors chosen by health care providers, other than for-profit and not-for-profit nursing homes and assisted living facilities, and physicians eligible for insurance in the association in accordance with the plan of operation. The charge shall be in proportion to each premium payment due for liability insurance through the association. Such charge shall be separately stated in the policy, but shall not constitute a part of premiums or be subject to premium taxation, servicing fees, acquisition costs, or any other such charges. If the association offers an installment payment plan for coverage obtained through the association, the association may permit payment of the stabilization reserve fund charge on an installment basis or may require the policyholder to pay the charge as an annual lump sum. (c) The stabilization reserve fund shall be collected and administered by the association and shall be treated as a liability of the association along with and in the same manner as premium and loss reserves. The fund shall be valued annually by the board of directors as of the close of the last preceding year. (d) Collections of the stabilization reserve fund charge shall continue until such time as the net balance of the stabilization reserve fund is not less than the projected sum of premiums for physicians and health care providers, other than for-profit and not-for-profit nursing homes and assisted living facilities, to be written in the year following valuation date. (e) The stabilization reserve fund shall be credited with all stabilization reserve fund charges collected from physicians and health care providers, other than for-profit and not-for-profit nursing homes and assisted living facilities, and shall be charged with any deficit sustained by physicians and health care providers, other than for-profit and not-for-profit nursing homes and assisted living facilities, from the prior year's operation of the association.
Stabilization reserve fund for for-profit and not-for-profit nursing homes
Text of Sec. 4B effective until April 1, 2007
Sec. 4B. (a) There is hereby created a stabilization reserve fund for for-profit and not-for-profit nursing homes and assisted living facilities that shall be administered as provided in this section and in the plan of operation of the association. The stabilization reserve fund created by this section is separate and distinct from the policyholder's stabilization reserve fund for physicians and health care providers, other than for-profit and not-for-profit nursing homes and assisted living facilities, created by Section 4A of this article. (b) Each policyholder shall pay annually into the stabilization reserve fund a charge, the amount of which shall be established annually by advisory directors chosen by for-profit and not-for-profit nursing homes and assisted living facilities eligible for insurance in the association in accordance with the plan of operation. The charge shall be in proportion to each premium payment due for liability insurance through the association. The charge shall be separately stated in the policy, but shall not constitute a part of premiums or be subject to premium taxation, servicing fees, acquisition costs, or any other similar charges. If the association offers an installment payment plan for coverage obtained through the association, the association may permit payment of the stabilization reserve fund charge on an installment basis or may require the policyholder to pay the charge as an annual lump sum. (c) The stabilization reserve fund shall be collected and administered by the association and shall be treated as a liability of the association along with and in the same manner as premium and loss reserves. The fund shall be valued annually by the board of directors as of the close of the last preceding year. (d) Collections of the stabilization reserve fund charge shall continue only until such time as the net balance of the stabilization reserve fund is not less than the projected sum of premiums for for-profit and not-for-profit nursing homes and assisted living facilities to be written in the year following the valuation date. (e) The stabilization reserve fund shall be credited with all stabilization reserve fund charges collected from for-profit and not-for-profit nursing homes and assisted living facilities and the net earnings on liability insurance policies issued to for-profit and not-for-profit nursing homes and assisted living facilities and shall be charged with any deficit sustained by for-profit and not-for-profit nursing homes and assisted living facilities from the prior year's operation of the association. (f) The stabilization reserve fund established under this section, and any earnings of the fund, are state funds and shall be held by the comptroller outside the state treasury on behalf of, and with legal title in, the department. No part of the fund, or the earnings of the fund, may inure to the benefit of a member of the association, a policyholder, or any other individual, and the assets of the fund may be used in accordance with the association's plan of operation only to implement this article and for the purposes of the association, including making payment to satisfy, in whole or in part, the liability of the association regarding a claim made on a policy written by the association. (g) Notwithstanding Sections 11, 12, and 13 of this article, the stabilization reserve fund established under this section may be terminated only by law. (h) Notwithstanding Section 11 of this article, on termination of the stabilization reserve fund established under this section, all assets of the fund shall be transferred to the general revenue fund to be appropriated for purposes related to ensuring the kinds of liability insurance coverage that may be provided by the association under this article for for-profit and not-for-profit nursing homes and assisted living facilities.
Liability for exemplary damages; expiration
Text of section effective until January 1, 2007.
Sec. 4C. (a) The association is not liable for exemplary damages under a professional liability insurance policy that covers a for-profit or not-for-profit nursing home or assisted living facility and that excludes coverage for exemplary damages awarded in relation to a covered claim awarded under Chapter 41, Civil Practice and Remedies Code, or any other law. This subsection applies without regard to the application of the common law theory of recovery commonly known in Texas as the "Stowers Doctrine." This subsection does not affect the application of that doctrine to the liability of the association for compensatory damages. (b) This section does not affect the contractual duties imposed under an insurance policy. (c) This section does not prohibit a for-profit or not-for-profit nursing home or assisted living facility from purchasing a policy to cover exemplary damages. (d) This section applies only to the liability of the association for exemplary damages under an insurance policy delivered, issued for delivery, or renewed by the association to a for-profit or not-for-profit nursing home on or after January 1, 2002, and applies only to coverage provided under the policy for any portion of the term of the policy that occurs before January 1, 2006. This section applies only to the liability of the association for exemplary damages with respect to a claim for which a notice of loss or notice of occurrence was made, or should have been made, in accordance with the terms of the policy, on or after January 1, 2002, but before January 1, 2006. (d-1) This section applies only to the liability of the association for exemplary damages under an insurance policy delivered, issued for delivery, or renewed by the association to a for-profit or not-for-profit assisted living facility on or after September 1, 2003, and applies only to coverage provided under the policy for any portion of the term of the policy that occurs before January 1, 2006. This section applies only to the liability of the association for exemplary damages with respect to a claim for which a notice of loss or notice of occurrence was made, or should have been made, in accordance with the terms of the policy, on or after September 1, 2003, but before January 1, 2006. (e) This section expires January 1, 2007.
Participation
Text of Sec. 5 effective until April 1, 2007
Sec. 5. (a) Each policyholder within the group of physicians and health care providers, other than for-profit and not-for-profit nursing homes and assisted living facilities, or within the group of for-profit and not-for-profit nursing homes and assisted living facilities shall have contingent liability for a proportionate share of any assessment of policyholders in the applicable group made under the authority of this article. Whenever a deficit, as calculated pursuant to the plan of operation, is sustained with respect to the group of physicians and health care providers, other than for-profit and not-for-profit nursing homes and assisted living facilities, or the group of for-profit and not-for-profit nursing homes and assisted living facilities in any one year, its directors shall levy an assessment only upon those policyholders in the applicable group who held policies in force at any time within the two most recently completed calendar years in which the association was issuing policies preceding the date on which the assessment was levied. The aggregate amount of the assessment shall be equal to that part of the deficit not recouped from the applicable stabilization reserve fund. The maximum aggregate assessment per policyholder in the applicable group shall not exceed the annual premium for the liability policy most recently in effect. Subject to such maximum limitation, each policyholder in the applicable group shall be assessed for that portion of the deficit reflecting the proportion which the earned premium on the policies of such policyholder bears to the total earned premium for all policies of the association in the applicable group in the two most recently completed calendar years. (b) All insurers which are members of the association shall participate in its writings, expenses, and losses in the proportion that the net direct premiums, as defined herein, of each such member, excluding that portion of premiums attributable to the operation of the association, written during the preceding calendar year bears to the aggregate net direct premiums written in this state by all members of the association. Each insurer's participation in the association shall be determined annually on the basis of such net direct premiums written during the preceding calendar year, as reported in the annual statements and other reports filed by the insurer that may be required by the board. No member shall be obligated in any one year to reimburse the association on account of its proportionate share in the deficits from operations of the association in that year in excess of one percent of its surplus to policyholders and the aggregate amount not so reimbursed shall be reallocated among the remaining members in accordance with the method of determining participation prescribed in this subdivision, after excluding from the computation the total net direct premiums of all members not sharing in such excess deficits. In the event that the deficits from operations allocated to all members of the association in any calendar year shall exceed one percent of their respective surplus to policyholders, the amount of such deficits shall be allocated to each member in accordance with the method of determining participation prescribed in this subdivision.
Directors
Text of Sec. 6 effective until April 1, 2007
Sec. 6. (a) The association shall be governed by a board of nine directors, to be selected annually as follows: (1) five representatives of insurers required to be members of the association who are elected by members of the association; (2) one physician who is appointed by the Texas Medical Association or its successor; (3) one representative of hospitals appointed by the Texas Hospital Association or its successor; and (4) two members of the public to be appointed by the State Board of Insurance. (b) Members of the association's board of directors take office on October 1 each year.
Appeals
Text of Sec. 7 effective until April 1, 2007
Sec. 7. (a) Any person insured or applying for insurance pursuant to this Act, or his duly authorized representative, or any affected insurer who may be aggrieved by an act, ruling, or decision of the association, may, within 30 days after such act, ruling, or decision, appeal to the board of directors of the association. At the time the person is notified of the act, ruling, or decision of the association, the association shall provide to the person written notice of the person's right to appeal under this subsection. (b) The board of directors of the association shall hear said appeal within 30 days after receipt of such request or appeal and shall give not less than 10 days' written notice of the time and place of hearing to the person making such request or the duly authorized representative. Within 10 days after such hearing, the board of directors of the association shall affirm, reverse, or modify its previous action or the act, ruling, or decision appealed to the board of directors of the association. At the time the person is notified of the final action of the board of directors of the association, the association shall provide to the person written notice of the person's right to appeal under Subsection (c) of this section. (c) In the event any person insured or applying for insurance is aggrieved by the final action of the board of directors of the association, the aggrieved party may, within 30 days after such action, make a written request to the commissioner for a hearing thereon. The commissioner shall hear the appeal from an act, ruling, or decision of the association, within 30 days after receipt of such request or appeal and shall give not less than 10 days' written notice of the time and place of hearing to the person, or his duly authorized representative, appealing from the act, ruling, or decision of the board of directors of the association. Within 30 days after such hearing, the commissioner shall affirm, reverse, or modify the act, ruling, or decision appealed to the commissioner. Pending such hearing and decision thereon, the commissioner may suspend or postpone the effective date of the rule or of the act, ruling, or decision appealed. (d) The association, or the person aggrieved by any order or decision of the commissioner, may thereafter appeal in accordance with Article 1.04 of this code. At the time the person is notified of the decision of the commissioner, the commissioner shall provide to the person written notice of the person's right to appeal under this subsection.
Privileged communications
Text of Sec. 8 effective until April 1, 2007
Sec. 8. There shall be no liability on the part of, and no cause of action of any nature shall arise against the association, its agents or employees, an insurer, any licensed agent, or the board or its authorized representatives, for any statements made in good faith by them in any reports or communications, concerning risks insured or to be insured by the association, or at any administrative hearings conducted in connection therewith.
Annual statements
Text of Sec. 9 effective until April 1, 2007
Sec. 9. The association shall file in the office of the board, annually on or before the first day of March, a statement which shall contain information with respect to its transactions, condition, operations, and affairs during the preceding calendar year. Such statement shall contain such matters and information as are prescribed and shall be in such form as is approved by the board. The board may, at any time, require the association to furnish additional information with respect to its transactions, condition, or any matter connected therewith considered to be material and of assistance in evaluating the scope, operation, and experience of the association.
Examinations
Text of Sec. 10 effective until April 1, 2007
Sec. 10. The association is subject to Articles 1.15 and 1.16 of this code.
Dissolution of the association
Sec. 11. Upon the effective date of this article, the board shall, after consultation with the joint underwriting association, representatives of the public, the Texas Medical Association, the Texas Podiatry Association, the Texas Hospital Association, and other affected individuals and organizations, promulgate a plan of suspension consistent with the provisions of this article, to become effective and operative on December 31, 1985, unless the board determines before that time that the association may be suspended or is no longer needed to accomplish the purposes for which it was created. The plan of suspension shall contain provisions for maintaining reserves for losses which may be reported subsequent to the expiration of all policies in force at the time of such suspension. If, after the date of suspension ordered by the board, the board finds, after notice and hearing, that all known claims have been paid, provided for, or otherwise disposed of by the association, relating to policies issued prior to such suspension, then the board may wind up the affairs of the association, relating to policies issued prior to such suspension, by paying all funds remaining in the association to a special fund created by the statutory liquidator of the board as a reasonable reserve to be administered by said liquidator for unknown claims and claims expenses and for reimbursing assessments and contributions in accordance with Section 4(b)(5) of this article. The board shall, after consultation with the representatives of the public, the Texas Medical Association, the Texas Podiatry Association, the Texas Hospital Association, and other affected individuals and organizations, promulgate a plan for distribution of funds, if any, less reasonable and necessary expenses, to the policyholders ratably in proportion to premiums and assessments paid during the period of time prior to suspension in which the association issued policies. When all claims have been paid and no further liability of this association exists, the statutory liquidator shall distribute all funds in its possession to the applicable policyholders in accordance with the plan promulgated by the board. If such reserve fund administered by the statutory liquidator proves inadequate, the association shall be treated as an insolvent insurer in respect to the applicable provisions of Articles 21.28, 21.28A and 21.28-C, Insurance Code, not inconsistent with this article. Notice of claim shall be made upon the board.
Authority of the board over dissolution
Sec. 12. At any time the board finds that the association is no longer needed to accomplish the purposes for which it was created, the board may issue an order suspending the association as of a certain date stated in the order. As soon as may be reasonably practical after December 31, 1984, the board shall determine whether or not medical liability insurance is reasonably available to physicians, health care providers, or any category of physicians or health care providers in this state through facilities other than the association and the need for the continuation of the operation of the association as to physicians, health care providers, or any category of physicians or health care providers. The board shall not make such determination until a public meeting has been held. Prior notice of such meeting shall be given at least 10 days to the same persons or entities as are required for consultation in Section 11 of this article.
Termination of policies
Sec. 13. After the date ordered for suspension by the board, no policies will be issued by the association. All then issued policies shall continue in force until terminated in accordance with the terms and conditions of such policies. Acts 1975, 64th Leg., p. 867, ch. 331, Sec. 1, eff. June 3, 1975. Amended by Acts 1977, 65th Leg., p. 129, ch. 59, Sec. 1, 2, eff. April 13, 1977; Acts 1977, 65th Leg. p. 2057, ch. 817, Sec. 31.03 to 31.12, eff. Aug. 29, 1977; Acts 1979, 66th Leg., p. 147, ch. 79, Sec. 1, 2, eff. Aug. 27, 1979; Acts 1981, 67th Leg., p. 3159, ch. 829, Sec. 1, eff. June 17, 1981. Secs. 3, 11 to 13 amended by Acts 1983, 68th Leg., p. 5027, ch. 904, Sec. 1, eff. Aug. 29, 1983; Sec. 2(6) amended by Acts 1986, 69th Leg., 3rd C.S., ch. 11, Sec. 1, eff. Oct. 2, 1986; Sec. 3(b) amended by Acts 1987, 70th Leg., 1st C.S., ch. 1, Sec. 7.02, eff. Sept. 2, 1987; Sec. 2(6) amended by Acts 1991, 72nd Leg., ch. 14, Sec. 284(89), eff. Sept. 1, 1991; Sec. 6 amended by Acts 1991, 72nd Leg., ch. 242, Sec. 9.11, eff. Sept. 1, 1991; Sec. 7(b) amended by Acts 1991, 72nd Leg., ch. 242, Sec. 1.14, eff. Sept. 1, 1991; Sec. 7(b) amended by Acts 1993, 73rd Leg., ch. 685, Sec. 22.07, eff. Sept. 1, 1993; Sec. 10 amended by Acts 1997, 75th Leg., ch. 879, Sec. 9, eff. Sept. 1, 1997; Sec. 7 amended by Acts 1999, 76th Leg., ch. 779, Sec. 1, eff. Sept. 1, 1999; Sec. 2(6) amended by Acts 2001, 77th Leg., ch. 921, Sec. 1, eff. Sept. 1, 2001; Sec. 2(6) amended by Acts 2001, 77th Leg., ch. 1284, Sec. 5.04, eff. June 15, 2001; Sec. 3A(c) added by Acts 2001, 77th Leg., ch. 921, Sec. 2, eff. Sept. 1, 2001; Sec. 3A(c) added by Acts 2001, 77th Leg., ch. 1284, Sec. 5.05, eff. June 15, 2001; Sec. 4(b)(1) amended by Acts 2001, 77th Leg., ch. 921, Sec. 3, eff. Sept. 1, 2001; Sec. 4(b)(1), (3) amended by Acts 2001, 77th Leg., ch. 1284, Sec. 5.06, eff. June 15, 2001; Sec. 4(b)(6) added by Acts 2001, 77th Leg., ch. 1284, Sec. 5.06, eff. June 15, 2001; Sec. 4(d) added by Acts 2001, 77th Leg., ch. 921, Sec. 4, eff. Sept. 1, 2001; Sec. 4A amended by Acts 2001, 77th Leg., ch. 921, Sec. 5, eff. Sept. 1, 2001; Sec. 4A amended by Acts 2001, 77th Leg., ch. 1284, Sec. 5.07, eff. June 15, 2001; Secs. 4B, 4C added by Acts 2001, 77th Leg., ch. 1284, Sec. 5.08, eff. June 15, 2001; Sec. 5 amended by Acts 2001, 77th Leg., ch. 1284, Sec. 5.09, eff. June 15, 2001; Sec. 2(6) amended by Acts 2003, 78th Leg., ch. 141, Sec. 3, eff. Sept. 1, 2003; Sec. 3(d), added by Acts 2003, 78th Leg., ch. 1195, Sec. 1, eff. Sept. 1, 2003; Sec. 3A amended by Acts 2003, 78th Leg., ch. 141, Sec. 4, eff. Sept. 1, 2003; Sec. 3B added by Acts 2003, 78th Leg., ch. 141, Sec. 5, eff. Sept. 1, 2003; Sec. 4(a)(2) amended by Acts 2003, 78th Leg., ch. 56, Sec. 1, eff. Sept. 1, 2003; Sec. 4(b)(1) amended by Acts 2003, 78th Leg., ch. 141, Sec. 6, eff. Sept. 1, 2003; Sec. 4(b)(2) amended by Acts 2003, 78th Leg., ch. 206, Sec. 21.47(8), eff. June 11, 2003; Sec. 4(b)(3), amended by Acts 2003, 78th Leg., ch. 141, Sec. 6, eff. Sept. 1, 2003; Sec. 4(b)(4) amended by Acts 2003, 78th Leg., ch. 206, Sec. 21.34, eff. June 11, 2003; Sec. 4(b)(5) amended by Acts 2003, 78th Leg., ch. 206, Sec. 18.01, eff. June 11, 2003; Sec. 4(b)(6) amended by Acts 2003, 78th Leg., ch. 141, Sec. 6, eff. Sept. 1, 2003; Sec. 4(e), (f) added by Acts 2003, 78th Leg., ch. 56, Sec. 2, eff. Sept. 1, 2003; Sec. 4A amended by Acts 2003, 78th Leg., ch. 141, Sec. 7, eff. Sept. 1, 2003; amended by Acts 2003, 78th Leg., ch. 1195, Sec. 2, eff. Sept. 1, 2003; Sec. 4A(b) amended by Acts 2003, 78th Leg., ch. 56, Sec. 3, eff. Sept. 1, 2003; Sec. 4B(a) amended by Acts 2003, 78th Leg., ch. 141, Sec. 9, eff. Sept. 1, 2003; Sec. 4B(b) amended by Acts 2003, 78th Leg., ch. 56, Sec. 4, eff. Sept. 1, 2003; amended by Acts 2003, 78th Leg. ch. 141, Sec. 9, eff. Sept. 1, 2003; Sec. 4B(d), (e), (h) amended by Acts 2003, 78th Leg., ch. 141, Sec. 9, eff. Sept. 1, 2003; Sec. 4C(a), (c) amended by Acts 2003, 78th Leg., ch. 141, Sec. 10, eff. Sept. 1, 2003, Sec. 4C(d-1) added by Acts 2003, 78th Leg., ch. 141, Sec. 10, eff. Sept. 1, 2003; Sec. 5(a) amended by Acts 2003, 78th Leg., ch. 141, Sec. 11, eff. Sept. 1, 2003; Acts 2005, 79th Leg., ch. 1136, Sec. 2, eff. June 18, 2005; Secs. 1, 3 to 4B, and 5 to 10 are repealed by Acts 2005, 79th Leg., ch. 727, Sec. 18(h), eff. April 7, 2007; Sec. 3C added by Acts 2005, 79th Leg., ch. 246, Sec. 1, eff. May 30, 2005. Art. 21.49-3a. REACTIVATION OF JOINT UNDERWRITING ASSOCIATIONS . Sec. 1. Subsequent to the suspension of the operation of the Joint Underwriting Association created by the Texas Medical Liability Insurance Underwriting Association Act (Article 21.49-3, Insurance Code), it may be reactivated in conformity with the terms of Section 3 of this article. The board may also, if it deems such action to be appropriate, direct the statutory liquidator to secure reinsurance for all claims which potentially might be brought on policies issued by the Joint Underwriting Association or take any other action which will reduce to a minimum the participation and activities of the Joint Underwriting Association until such time as the association may be reactivated under the terms of Section 3 of this article. Sec. 2. All terms used in this article have the same meanings as those specifically set out in Section 2, Article 21.49-3, Insurance Code. Sec. 3. The State Board of Insurance, after notice and hearing as hereinafter provided, is authorized to reactivate the Joint Underwriting Association created by Article 21.49-3, Insurance Code. A hearing to determine the need for reactivation shall be set by the State Board of Insurance on petition of the Texas Medical Association, the Texas Podiatry Association, or the Texas Hospital Association or as many as 15 physicians or health care providers practicing or operating in this state, or such hearing may be set by the State Board of Insurance on its own finding that physicians or health care providers, or any category thereof, in this state are threatened with the possibility of being unable to secure medical liability insurance. At least 15 days prior to the date set, notice of the hearing shall be given to each insurer which, if reactivation is ordered, would be a member of the association as provided in Section 3(a), Article 21.49-3, Insurance Code. If the board finds that reactivation of the Joint Underwriting Association will be in the public interest, the board shall order the reactivation, designating the category or categories of physicians or health care providers who shall be eligible to secure medical liability insurance coverage from the association and specifying in the order a date not fewer than 15 nor more than 60 days thereafter on which the provisions of Article 21.49-3, Insurance Code, shall become effective as if the same had been reenacted to be effective on the date specified in the order. Added by Acts 1983, 68th Leg., p. 5031, ch. 904, Sec. 2, eff. Aug. 29, 1983. Art. 21.49-3b. JOINT UNDERWRITING ASSOCIATIONS.
Article repealed effective April 1, 2007
Short title
Sec. 1. This article may be cited as the Joint Underwriting Association Licensing Act.
Definitions
Sec. 2. In this article: (1) "Board" means the State Board of Insurance. (2) "Commissioner" means the commissioner of insurance. (3) "Insurer" means any insurance company, corporation, inter-insurance exchange, mutual or reciprocal association, county mutual insurance company, Lloyd's, or other insurance carrier licensed to do business in this state. The term does not include a carrier that writes only life, health, or accident insurance, variable life insurance, or variable annuity contracts. (4) "Joint underwriting association" means a voluntary unincorporated association of admitted insurers authorized to do business in this state that has been authorized by its member insurers to act on behalf of those insurers in joint underwriting or in the issuance of syndicate policies of insurance on a several but not joint basis.
Acting without license prohibited
Sec. 3. An association of insurers may not act as a joint underwriting association in this state on behalf of its member insurers unless it holds a license issued under this article.
Application
Sec. 4. (a) Each association of insurers that applies for a license under this article must file a written application on forms prescribed by the commissioner. (b) The application shall include: (1) the names and addresses of the officers and directors of the association; (2) a copy of the association's constitution, articles of agreement or association, bylaws, rules, powers of attorney, or other agreements governing its activities; (3) a list of the insurers licensed to do business in this state who are members of the association and the addresses of their principal administrative offices; (4) the name and address of a resident of this state who shall act as the association's agent for receipt of notices or orders of the board and for service of process; and (5) other information as required by the commissioner. (c) The application shall be sworn to by at least one officer of the association.
Issuance of license
Sec. 5. The commissioner shall issue a license to a voluntary unincorporated association of insurers that complies with the requirements of this article.
License by Reciprocity
Sec. 6. The board may waive any of the license requirements for an applicant with a valid license from another state that has license requirements substantially equivalent to those of this state.
Authority to act
Sec. 7. (a) A joint underwriting association may act only on behalf of members of the association who are admitted and licensed to do business in this state. (b) A joint underwriting association may engage in only those activities it is authorized to perform by the members of the association.
Requirements for licensed associations
Sec. 8. (a) Each association licensed under this article shall file a list of the names and addresses of its officers and directors and a list of its members with the application for a renewal license filed under Section 11 of this article. The list shall be sworn to by at least one officer of the association. (b) Each association licensed under this article shall notify the commissioner of any change in any of the information required to be filed under Section 4 of this article not later than the 30th day after the date on which the change takes effect.
Maintenance of information
Sec. 9. (a) Each joint underwriting association shall maintain at its principal administrative office adequate records of all transactions. (b) The association shall maintain the records in accordance with prudent recognized industry standards of recordkeeping. (c) The commissioner or the commissioner's designated representative is entitled to access to those records for examination, audit, and inspection. (d) Trade secrets, including the identity and addresses of policyholders and certificate holders, are confidential, except that the commissioner may use information otherwise confidential in proceedings instituted against an association.
Independent audits and examination
Sec. 10. (a) The books of accounts of joint underwriting associations shall be audited annually as provided by Article 1.15A of this code by an independent certified public accountant, and a copy of that audit shall be filed with the commissioner. (b) The board may require an examination of each joint underwriting association as often as it considers necessary. The reasonable costs of the examination shall be paid by the association on presentation to the association of a detailed account of those costs. The officers and employees of the association may be examined at any time, under oath, and shall exhibit on request all books, records, accounts, documents, or agreements governing the operations of the association. Instead of the examination, the board may accept the report of an examination made by the insurance supervisory official of another state under the laws of that state.
Term of license; renewal
Sec. 11. Each license issued under this article expires three years from the date of issuance unless renewed. To renew the license, an application for renewal must be filed with the commissioner by the renewal applicant and the renewal fee paid on or before the expiration of the license. A renewed license continues in effect for three years after the date of renewal unless otherwise revoked or suspended.
Fees
Sec. 12. An applicant for an original or renewal joint underwriting association license shall pay a nonrefundable fee when the application is filed in an amount set by the board, but not to exceed $200.
Denial, refusal, suspension, or revocation of license
Sec. 13. A license may be denied, suspended, or revoked or the renewal of the license refused if, after notice and hearing as provided by Section 14 of this article, the commissioner finds that the license applicant or license holder, or an officer or director of a license applicant or license holder, has: (1) wilfully violated or participated in the violation of this article or any other insurance law of this state; (2) intentionally made a material misstatement in the original or renewal license application; (3) obtained or attempted to obtain the license by fraud or misrepresentation; (4) misappropriated or converted to a personal or other inappropriate use or illegally withheld money required to be held in a fiduciary capacity; (5) been convicted of a felony, or of any misdemeanor of which criminal fraud is an essential element; or (6) been found by the commissioner to be incompetent or untrustworthy.
Notice; hearings
Sec. 14. (a) Before a license may be denied, suspended, or revoked or the renewal of the license refused, the commissioner shall give notice by certified mail to the applicant or license holder and shall set a date on which the applicant or license holder may appear to be heard and to produce evidence. The hearing date must be not less than 20 days or more than 30 days after the date on which the notice is mailed. The notice must contain specific reasons for the hearing and a list of the matters to be considered at the hearing. At the hearing, the commissioner or any regular employee of the board designated to conduct the hearing may administer oaths, require the appearance of witnesses, examine any person under oath, and require the production of books, records, or papers relevant to the inquiry on the initiative of the commissioner or on the request of the applicant or license holder. (b) On the termination of the hearing the findings shall be written and, on approval by the commissioner, shall be filed with the board. The commissioner shall issue an order showing the findings, and shall send the order by certified mail to the applicant or license holder. The applicant or license holder may appeal the order of the commissioner to the board. (c) If the commissioner refuses an application for a license as provided by this article, or suspends, revokes, or refuses to renew a license at a hearing as provided by this article, the applicant or license holder may appeal from that action as provided by Article 1.04 of this code. (d) An applicant or license holder whose license has been denied, refused, or revoked under this article may not file another license application before the first anniversary of the effective date of the denial, refusal, or revocation or, if judicial review of the denial, refusal, or revocation is sought, before the first anniversary of the date of the final court order or decree affirming that action. If an application is filed after that first anniversary, the commissioner may refuse the application unless the applicant shows good cause why the denial, refusal, or revocation of the original license should not be a bar to the issuance of a new license.
Exemption
Sec. 15. This article does not apply to the transaction of life, health, or accident insurance business.
Disposition of fees
Sec. 16. Fees collected under this article shall be deposited in the state treasury to the credit of the State Board of Insurance operating fund. Funds may not be appropriated from the general revenue fund to administer this article.
Violations; enforcement
Sec. 17. (a) An association that violates this article or any rule or order adopted under this article is subject to sanctions under Section 7, Article 1.10 of this code. (b) The attorney general, a district or county attorney, the commissioner, or the board may institute an injunction proceeding or any other proceeding necessary to enforce this article.
Effective date
Sec. 18. A joint underwriting association is not required to hold a license issued under Article 21.49-3b, Insurance Code, before January 1, 1992. Added by Acts 1991, 72nd Leg., ch. 242, Sec. 11.105, eff. Sept. 1, 1991. Sec. 17(a) amended by Acts 1993, 73rd Leg., ch. 685, Sec. 5.07, eff. Sept. 1, 1993. Art. 21.49-3c. TEXAS NONPROFIT ORGANIZATION LIABILITY INSURANCE UNDERWRITING ASSOCIATION.
Definitions
Sec. 1. In this article: (1) "Association" means the Texas Nonprofit Organization Liability Insurance Underwriting Association. (2) "Board" means the State Board of Insurance. (3) "Board of directors" means the board of directors of the association. (4) "Fund" means the policyholder stabilization reserve fund. (5) "Net direct premiums" means gross direct premiums written on automobile liability and liability other than automobile insurance written under this code, less the total of the policyholder dividends, return premiums for the unused or unabsorbed portion of premium deposits, and return premiums on canceled contracts written on those liability risks. (6) "Nonprofit organization" means an organization that is listed under Section 501(c)(3) or (4), Internal Revenue Code of 1986. (7) "Nonprofit organization liability insurance" means primary insurance coverage against the legal liability of the insured organization and its officers and employees acting on behalf of the organization and against any loss, damage, or expense incident to a claim arising out of the acts of the insured organization or its officers and employees acting on behalf of the organization.
Creation; composition of the association; dissolution
Sec. 2. (a) The Texas Nonprofit Organization Liability Insurance Underwriting Association is created if, after notice and hearing, the board determines that a market assistance program created under Article 21.49-12 of this code has not alleviated a problem in the availability of liability insurance to nonprofit organizations. The board may not make this determination until a market assistance program has been in operation for at least 180 days. (b) The association is composed of all insurers authorized to write and engaged in writing, on or after January 1, 1987, automobile liability insurance and liability other than automobile insurance in this state on a direct basis as provided by this code and includes Lloyd's and reciprocal or interinsurance exchanges. (c) The association does not include farm mutual insurance companies authorized by Chapter 16 of this code and mutual insurance companies authorized by Chapter 17 of this code. (d) Each insurer covered by Subsection (b) of this section must be a member of the association as a condition of its authority to continue to transact a liability insurance business in this state. (e) The association is not a licensed insurer under Article 1.14-2 of this code. (f) Not later than the first anniversary of the creation of the association under this section, the board shall give notice and hold a hearing to determine whether it is necessary to continue the association beyond the first anniversary of its creation. If the association is continued beyond the first anniversary of its creation, the board shall give notice and hold a hearing annually to determine whether it is necessary to continue the association for another year.
Insurer participation in association
Sec. 3. (a) Each insurer that is a member of the association shall participate in its writings, expenses, and losses in the proportion that the net direct premiums of each member, excluding that portion of premiums attributable to the operation of the association, written during the preceding calendar year bears to the aggregate net direct premiums written in this state by all members of the association. (b) Each insurer's participation in the association shall be determined annually on the basis of net direct premiums written during the preceding calendar year, as reported in the annual statements and other reports filed by the insurer with the board. (c) A member of the association is not obligated in any one year to reimburse the association in excess of one percent of its surplus to policyholders on account of its proportionate share in the deficit from the operations of the association in that year. The aggregate amount not reimbursed shall be reallocated among the remaining members under the method of determining participation provided by this section, after excluding from the computation the total net direct premiums of all members not sharing in the excess deficit. (d) If the deficit from the operations allocated to all members of the association in a calendar year exceeds one percent of their respective surplus to policyholders, the amount of the deficit shall be allocated to each member under the method of determining participation under this section.
General responsibility of association
Sec. 4. The association shall provide liability insurance on a self-supporting basis to nonprofit organizations.
General authority
Sec. 5. Pursuant to this article and the plan of operation, the association may: (1) issue, or cause to be issued, nonprofit organization liability insurance policies that include primary and incidental coverages in amounts not to exceed $750,000 per occurrence and $1.5 million aggregate a year for an individual insured; (2) underwrite association insurance and adjust and pay losses with respect to that insurance; (3) appoint service companies to adjust and pay losses for the association; and (4) purchase reinsurance.
Board of directors
Sec. 6. (a) The association is governed by a board of directors composed of nine members. (b) Members of the board of directors serve for terms of one year. (c) Four members of the board of directors shall be members of the general public, appointed by the board. The remaining members of the board of directors shall be selected by members of the association and must be selected so that they fairly represent various classes of insurers and organizations that are members of the association. (d) The plan of operation shall provide a process for the selection of members of the board of directors who are representatives of the insurance industry. (e) A public representative who is a member of the board of directors may not be: (1) an officer, director, or employee of an insurance company, insurance agency, agent, broker, solicitor, adjuster, or any other business entity regulated by the State Board of Insurance; (2) a person required to register with the secretary of state under Chapter 305, Government Code; or (3) related to a person described by Subdivision (1) or (2) of this subsection within the second degree of affinity or consanguinity.
Plan of operation
Sec. 7. (a) The initial board of directors of the association shall prepare and adopt a plan of operation that is consistent with this article. (b) The plan must provide for: (1) economic, fair, and nondiscriminatory administration of the association and its duties; (2) prompt and efficient provision of primary liability insurance for nonprofit organizations; (3) preliminary assessment of association members for initial expenses necessary to begin operations; (4) establishing necessary facilities; (5) management of the association; (6) assessment of members and policyholders to defray losses and expenses; (7) administration of the policyholder stabilization reserve fund; (8) commission arrangements; (9) reasonable and objective underwriting standards; (10) obtaining reinsurance; (11) appointment of servicing carriers; and (12) determining amounts of insurance to be provided by the association. (c) The plan of operation must provide that any balance remaining in the various funds of the association at the close of its fiscal year shall be added to the reserves of the association. A balance remaining at the close of the fiscal year means the excess of revenue over expenditures after reimbursement of members' contributions as provided by Section 12 of this article. (d) The board of directors may amend the plan of operation with the approval of the board and shall amend the plan of operation at the direction of the board.
Eligibility for coverage
Sec. 8. (a) The board, by order, shall establish the categories of nonprofit organizations that are eligible to obtain coverage from the association and may amend the order to include or exclude from eligibility particular categories of nonprofit organizations. (b) If a category of nonprofit organizations is excluded from eligibility to obtain coverage from the association, the board, after notice and hearing, may determine that liability insurance for nonprofit organizations in that category is not available, and on that determination that category of nonprofit organizations is eligible to obtain insurance coverage from the association.
Application for coverage
Sec. 9. (a) A nonprofit organization included in a category eligible for coverage by the association is entitled to submit an application to the association for coverage as provided by this article and the plan of operation. (b) An agent authorized under Article 21.14 of this code may submit the application to the association on behalf of an applicant. (c) If the association determines that the applicant meets the underwriting standards provided by the plan of operation and that there is no unpaid, uncontested premium, policyholder stabilization reserve fund charge, or assessment owed by the applicant for prior insurance, the association, on receipt of the premium and the policyholder stabilization reserve fund charge or the portion of that charge required by the plan of operation, shall cause a liability insurance policy to be issued to the nonprofit organization for one year.
Rates and policy forms
Sec. 10. (a) The rates, rating plans, rating rules, rating classification, territories, and policy forms that apply to liability insurance written by the association and the statistics relating to that insurance coverage are governed by Subchapter B, Chapter 5, of this code, except to the extent that this article is in conflict. This article prevails over any conflict with Subchapter B, Chapter 5, of this code. (b) In carrying out its responsibilities under Subsection (a) of this section, the board shall give due consideration to the past and prospective loss and expense experience, as available, for liability insurance covering nonprofit organizations inside and outside this state for all member companies of the association, trends in frequency and severity of losses, the investment income of the association, and other information the board may require. (c) After the initial year of operation for the association, rates, rating plans, and rating rules and any provision for recoupment shall be based on the association's loss and expense experience to the extent credible, together with other information based on that experience. The board of directors shall engage the services of an independent actuarial firm to develop and recommend actuarially sound rates, rating plans, and rating rules and classifications. Those recommendations shall become effective unless, after hearing and not later than the 30th day after the date the recommendations are submitted, the commissioner determines the recommendations to be arbitrary and capricious.
Association deficit
Sec. 11. (a) A deficit sustained by the association in any year shall be recouped pursuant to the plan of operation and the rating plan that is in effect at the time of the deficit. (b) The association shall recoup the deficit by following one or more of the following procedures in this sequence: (1) a contribution from the policyholder stabilization reserve fund until that fund is exhausted; (2) an assessment on the policyholders under Section 13 of this article; and (3) an assessment on the members of the association as provided by Section 12 of this article.
Assessment of association members
Sec. 12. (a) In addition to assessments paid as provided by the plan of operation and contributions from the policyholder stabilization reserve fund, if sufficient funds are not available for the sound financial operation of the association, the members of the association shall contribute to the financial requirements of the association on the basis and for the period considered necessary by the board. (b) A member of the association shall be reimbursed for any assessment or contribution made under this section plus interest at a rate determined by the board. (c) Pending the recoupment or reimbursement of assessments or contributions paid by a member to the association, the unrepaid balance of the assessments and contributions may be reflected in the books of the member of the association as an admitted asset of the insurer for all purposes including exhibition in the annual statement under Article 6.12 of this code. (d) To the extent that a member of the association has paid one or more assessments and has not received reimbursement from the association as provided by Subsection (b) of this section, the member is entitled to a credit against its premium taxes under Article 4.10 of this code. The tax credit shall be allowed at a rate of 20 percent a year over a period of five successive years following the year in which the deficit is sustained or over a different number of years at the option of the member.
Policyholder assessment
Sec. 13. (a) Each policyholder of the association has a contingent liability for a proportionate share of any assessment of policyholders made under this article. (b) If a deficit as calculated under the plan of operation is sustained by the association in any year, the board of directors shall levy an assessment only on those policyholders who had policies in force at any time during the two most recently completed calendar years in which the association issued policies preceding the date on which the assessment is levied. (c) The aggregate amount of the assessment shall be equal to that part of the deficit that is not paid from the policyholder stabilization reserve fund. (d) The maximum aggregate assessment for each policyholder may not exceed the annual premium for the liability policy from the association most recently in effect. (e) Subject to the limitation provided by Subsection (d) of this section, each policyholder shall be assessed for that portion of the deficit that reflects the proportion that the earned premium on the policies of the policyholder bears to the total earned premium for all policies of the association in the two most recently completed calendar years.
Policyholder stabilization reserve fund
Sec. 14. (a) The policyholder stabilization reserve fund is created and shall be administered as provided by this article and the plan of operation. (b) Each policyholder shall pay to the fund annually an amount determined annually by the board of directors as provided by the plan of operation. (c) The charge shall be computed in proportion to each premium payment due for liability insurance through the association. (d) The policy shall state the charge separately. The charge is not part of the premium and is not subject to premium taxes, servicing fees, acquisition costs, or any other similar charges. (e) The association shall collect money for and administer the fund, and the fund shall be treated as a liability of the association along with and in the same manner as premium and loss reserves. (f) The board of directors shall value the fund annually at the close of the last preceding year. (g) The association shall continue to collect the charge until the time the net balance of the fund is not less than the projected sum of premiums to be written in the year following the valuation date under Subsection (f) of this section. (h) All charges collected from policyholders shall be credited to the fund, and the fund shall be charged with any deficit from operations of the association during the previous year.
Appeal
Sec. 15. (a) A person insured or applying for insurance under this article or his authorized representative or an affected insurer who may be aggrieved by an act, ruling, or decision of the association may appeal the act, ruling, or decision to the board of directors not later than the 30th day after the date on which the act took place or the ruling or decision was issued. (b) The board of directors shall hold a hearing on the appeal not later than the 30th day after the date the appeal is filed and shall give at least 10 days' written notice of the time and place of the hearing to the person filing the appeal or his authorized representative. (c) Not later than the 10th day after the date the hearing ends, the board of directors shall issue an order affirming, reversing, or modifying the appealed act, ruling, or decision. (d) A person or entity that is a party to an appeal under Subsection (a) of this section may appeal the board of directors' decision to the board. (e) The board shall hold a hearing on an appeal filed under Subsection (d) of this section not later than the 30th day after the date on which the appeal is filed with the board and shall give written notice to any person or entity filing the appeal or his authorized representative not later than the 10th day before the date on which the appeal is to be heard. (f) Not later than the 30th day after the date on which the board's hearing ends, the board shall decide the appeal and shall issue an order. (g) Pending a hearing and decision on an appeal to the board, the board may suspend or postpone the effective date of the decision appealed. (h) A final decision of the board may be appealed as provided by Subsection (f), Article 1.04, of this code.
Immunity
Sec. 16. The association, its agents and employees, an insurer, a licensed agent, or the board or its authorized representatives are not liable for any statements made in good faith by them.
Annual statements
Sec. 17. (a) The association shall file with the board a statement that includes information with respect to its transactions, condition, operations, and affairs during the preceding calendar year. This statement must be filed each year on or before March 1. (b) The statement shall include those matters and that information that is required by the board and shall be in the form approved by the board. (c) The board may require the association to furnish additional information with regard to the association's transactions, condition, or any matter connected with its transactions and condition considered to be material and of assistance in evaluating the scope, operation, and experience of the association.
Examinations
Sec. 18. The board shall make an examination into the affairs of the association at least annually. The examination shall be conducted, the report of the examination filed, and the expenses borne and paid in the manner provided by Articles 1.15 and 1.16 of this code.
Filing information with state
Sec. 19. The association shall collect the data, information, and statements and shall file with the board the reports and statements required by Articles 1.24A and 1.24B of this code. Added by Acts 1987, 70th Leg., 1st C.S., ch. 1, Sec. 5.06, eff. Sept. 2, 1987. Sec. 6 amended by Acts 1991, 72nd Leg., ch. 242, Sec. 9.13, eff. Sept. 1, 1991. Art. 21.49-3d. REVENUE BOND PROGRAM AND PROCEDURES FOR CERTAIN LIABILITY INSURANCE.
Article repealed effective April 1, 2007
Legislative Finding; Purpose
Sec. 1. The legislature finds that the issuance of bonds to provide a method to raise funds to provide professional liability insurance through the association for nursing homes and assisted living facilities in this state is for the benefit of the public and in furtherance of a public purpose.
Definitions
Sec. 2. In this article: (1) "Association" means the joint underwriting association established under Article 21.49-3 of this code. (2) "Bond resolution" means the resolution or order authorizing the bonds to be issued under this article. (3) "Board" means the board of directors of the Texas Public Finance Authority. (4) "Insurer" means any insurer required to be a member of the association under Section 3, Article 21.49-3 of this code.
Bonds authorized; application of Texas Public Finance Authority Act
Sec. 3. (a) On behalf of the association, the Texas Public Finance Authority shall issue revenue bonds to: (1) fund the stabilization reserve fund for for-profit and not-for-profit nursing homes and assisted living facilities established under Section 4B, Article 21.49-3 of this code; (2) pay costs related to issuance of the bonds; and (3) pay other costs related to the bonds as may be determined by the board. (b) To the extent not inconsistent with this article, Chapter 1232, Government Code, applies to bonds issued under this article. In the event of a conflict, this article controls.
Applicability of other statutes
Sec. 4. The following laws apply to bonds issued under this article to the extent consistent with this article: (1) Chapters 1201, 1202, 1204, 1205, 1231, and 1371, Government Code; and (2) Subchapter A, Chapter 1206, Government Code.
Limits
Sec. 5. The Texas Public Finance Authority may issue, on behalf of the association, bonds in a total amount not to exceed $75 million.
Conditions
Sec. 6. (a) Bonds may be issued at public or private sale. (b) Bonds may mature not more than 10 years after the date issued. (c) Bonds must be issued in the name of the association.
Additional covenants
Sec. 7. In a bond resolution, the board may make additional covenants with respect to the bonds and the designated income and receipts of the association pledged to their payment and may provide for the flow of funds and the establishment, maintenance, and investment of funds and accounts with respect to the bonds.
Special accounts
Sec. 8. (a) A bond resolution may establish special accounts, including an interest and sinking fund account, reserve account, and other accounts. (b) The association shall administer the accounts in accordance with Article 21.49-3 of this code.
Security
Sec. 9. (a) Bonds are payable only from the surcharge fee established in Section 10 of this article or other sources the association is authorized to levy, charge, and collect in connection with paying any portion of the bonds. (b) Bonds are obligations solely of the association. Bonds do not create a pledging, giving, or lending of the faith, credit, or taxing authority of this state. (c) Each bond must include a statement that the state is not obligated to pay any amount on the bond and that the faith, credit, and taxing authority of this state are not pledged, given, or lent to those payments. (d) Each bond issued under this article must state on its face that the bond is payable solely from the revenues pledged for that purpose and that the bond does not and may not constitute a legal or moral obligation of the state.
Surcharge fee
Sec. 10. (a) A surcharge fee is assessed against: (1) each insurer; and (2) the association. (b) The surcharge fee shall be set by the commissioner in an amount sufficient to pay all debt service on the bonds. The surcharge shall be paid by each insurer and the association as required by commissioner rule. (c) The comptroller shall collect the surcharge fee and the department shall reimburse the comptroller in the manner described by Article 4.19 of this code. (d) The commissioner, in consultation with the comptroller, may coordinate payment and collection of the surcharge fee with other payments made by insurers and collected by the comptroller. (e) As a condition of engaging in the business of insurance in this state, an insurer agrees that if the company leaves the market for liability insurance in this state the insurer remains obligated to pay, until the bonds are retired, the insurer's share of the surcharge fee assessed under this section in an amount proportionate to that insurer's share of the market for liability insurance, including motor vehicle liability insurance, in this state as of the last complete reporting period before the date on which the insurer ceases to engage in that insurance business in this state. The proportion assessed against the insurer shall be based on the insurer's gross premiums for liability insurance, including motor vehicle liability insurance, for the insurer's last reporting period. However, an insurer is not required to pay the proportionate amount in any year in which the surcharge fee assessed against insurers continuing to write liability insurance in this state is sufficient to service the bond obligation.
Tax exempt
Sec. 11. The bonds issued under this article, and any interest from the bonds, and all assets pledged to secure the payment of the bonds are free from taxation by the state or a political subdivision of this state.
Authorized investments
Sec. 12. The bonds issued under this article constitute authorized investments under Article 2.10 and Subpart A, Part I, Article 3.39, of this code.
State pledge
Sec. 13. The state pledges to and agrees with the owners of any bonds issued in accordance with this article that the state will not limit or alter the rights vested in the association to fulfill the terms of any agreements made with the owners of the bonds or in any way impair the rights and remedies of those owners until the bonds, any premium or interest, and all costs and expenses in connection with any action or proceeding by or on behalf of those owners are fully met and discharged. The association may include this pledge and agreement of the state in any agreement with the owners of the bonds.
Enforcement by mandamus
Sec. 14. A writ of mandamus and all other legal and equitable remedies are available to any party at interest to require the association and any other party to carry out agreements and to perform functions and duties under this article, the Texas Constitution, or a bond resolution. Added by Acts 2001, 77th Leg., ch. 1284, Sec. 5.10, eff. June 15, 2001; Sec. 1 amended by Acts 2003, 78th Leg., ch. 141, Sec. 12, eff. Sept. 1, 2003; Sec. 3(a) amended by Acts 2003, 78th Leg., ch. 141, Sec. 13, eff. Sept. 1, 2003. Art. 21.49-4. SELF-INSURANCE TRUSTS.
Article repealed effective April 1, 2007
(a) In this article: (1) "Physician" means a person licensed to practice medicine in this state. (2) "Dentist" means a person licensed to practice dentistry in this state. (3) "Health care liability claim" means a cause of action against a physician or dentist for treatment, lack of treatment, or other claimed departure from accepted standards of health care or safety which proximately results in injury to or death of the patient, whether the patient's claim or cause of action sounds in tort or contract. (4) "Charitable organization" has the meaning assigned by Section 84.003, Civil Practice and Remedies Code. (5) "Volunteer health care provider" has the meaning assigned by Section 84.003, Civil Practice and Remedies Code. (b) An incorporated association, the purpose of which, among other things, shall be to federate and bring into one compact organization the entire profession licensed to practice medicine and surgery or dentistry in the State of Texas, or a portion of the members of the profession licensed to practice medicine who are practicing a particular specialty within the practice of medicine or surgery in the state or are practicing within a particular region of the state, may create a trust to self-insure physicians or dentists and by contract or otherwise agree to insure other members of the organization or association against health care liability claims and related risks on complying with the following conditions: (1) the organization or association must have been in continuing existence for a period of at least two years; (2) establishment of a health care liability claim trust or other agreement to provide coverage against health care liability claims and related risks; and (3) employment of appropriate professional staff and consultants for program management. (c) The trust may purchase, on behalf of the members of the organizing association, medical professional liability insurance, specific excess insurance, aggregate excess insurance, and reinsurance, as in the opinion of the trustees are necessary. The trust fund is further authorized to purchase such risk management services as may be required and pay claims that arise under any deductible provisions. (c-1) The trust, in accordance with Subsection (c) of this article, may make available professional liability insurance covering a volunteer health care provider for an act or omission resulting in death, damage, or injury to a patient while the person is acting in the course and scope of the person's duties as a volunteer health care provider as described by Chapter 84, Civil Practice and Remedies Code. This subsection does not affect the liability of a volunteer health care provider who is serving as a direct service volunteer of a charitable organization. Section 84.004(c), Civil Practice and Remedies Code, applies to the volunteer health care provider without regard to whether the volunteer health care provider obtains liability insurance under this subsection. The trust may make professional liability insurance available under this subsection to a volunteer health care provider without regard to whether the volunteer health care provider is a physician or dentist. (d) The trust investment powers and limitations shall be the same as those of any state bank with trust powers. The trust shall adopt rules and regulations to guarantee all contingent liabilities in the event of dissolution. (e) The trust is not engaged in the business of insurance under this code and other laws of this state and the provisions of any chapters or sections of this code are declared inapplicable to a trust organized and operated under this article, provided that the State Board of Insurance may require any trust created under this article to satisfy reasonable minimum requirements to insure the capability of the trust to satisfy its contractual obligations. (f) On request, the trust shall furnish such books, records and documents as are required by the State Board of Insurance to fulfill its obligations under Subsection (e) of this article relating to the solvency of the trust. (g) The trust shall file, for informational purposes only, all rates and forms with the State Board of Insurance. (h) The trust shall file with the State Board of Insurance all liability claims reports which are required pursuant to Articles 1.24A and 1.24B, Insurance Code. (i) If the trust is found to be in violation of or to have failed to comply with any provision of this code or any duly promulgated rule or regulation of the State Board of Insurance which is declared applicable to a trust organized and operated under this article, the State Board of Insurance, pursuant to Section 7, Article 1.10, Insurance Code, may order sanctions for such violation. (j) The trust shall file its independently audited annual financial statement with the State Board of Insurance; this audit shall not be considered an examination document. Added by Acts 1977, 65th Leg., p. 2063, ch. 817, Sec. 31.13, eff. Aug. 29, 1977. Subsecs. (f) to (j) added by Acts 1991, 72nd Leg., ch. 608, Sec. 1, eff. Sept. 1, 1991; Subsec. (b) amended by Acts 2003, 78th Leg., ch. 206, Sec. 19.01, eff. June 11, 2003; Subsec. (a)(4), (5) added by Acts 2005, 79th Leg., ch. 184, Sec.2, eff. May 27, 2005; Acts 2005, 79th Leg., ch. 246, Sec. 2, eff. May 30, 2005; Acts 2005, 79th Leg., ch. 1136, Sec. 3, eff. June 18, 2005; Subsec. (c-1) added by Acts 2005, 79th Leg., ch. 184, Sec. 3, eff. May 27, 2005; Acts 2005, 79th Leg., ch. 246, Sec. 3, eff. May 30, 2005; Acts 2005, 79th Leg., ch. 1136, Sec. 4, eff. June 18, 2005. Art. 21.49-4a. COVERAGE OF PHYSICIANS UNDER CONTRACTS OF PROFESSIONAL LIABILITY INSURANCE ISSUED BY HEALTH CARE LIABILITY CLAIM TRUSTS.
Article repealed effective April 1, 2007
Contracts of professional liability insurance issued by a health care liability claim trust created under Article 21.49-4, Insurance Code, may include any of the following: (1) Coverage of professional associations and partnerships of physicians against health care liability claims and related risks where a majority of the persons having a proprietary interest in the professional association or partnership to be insured are members of the association that created such trust. (2) Coverage of proprietary members, associates, and stockholders of such professional associations and partnerships and executive officers and directors thereof, with respect to potential vicarious liability for acts or omissions of others giving rise to health care liability claims and related risks. (3) Coverage of insured physicians and, as applicable, insured professional associations and partnerships (including proprietary members, associates, and stockholders thereof and executive officers and directors thereof) with respect to liability on the part of any applicable insured arising out of: (i) injuries to patients related to ownership, maintenance, or use of premises for the practice of medicine, including operations necessary or incidental thereto; or (ii) service by an insured physician as a member of a duly established committee, board, or similar group of a hospital medical staff or of a professional association or society with respect to medical staff privileges, accreditation, or disciplinary matters relating to competency or patient safety and risk reduction programs; or (iii) health care liability claims or related risks based in whole or in part upon any act or omission occurring prior to the date a contract of professional insurance is issued by such trust. (4) Coverage of an applicant for membership in the association that created such trust, pending final action upon such application, with respect to health care liability claims and related risks, including coverages described in the preceding Subparagraphs (1), (2), and (3), as applicable. Added by Acts 1979, 66th Leg., p. 335, ch. 152, Sec. 1, eff. May 11, 1979. Art. 21.49-5. [BLANK]. Art. 21.49-6. SELF-INSURANCE TRUSTS FOR BANKS.
Article repealed effective April 1, 2007
Definitions
Sec. 1. In this article: (1) "Bank" means any bank chartered under the provisions of federal or state law. (2) "Board" means the State Board of Insurance. (3) "Trustees" means the trustees of a self-insurance trust created under this article.
Authorization to create trusts to self-insure banks
Sec. 2. On approval of its plan of organization and operation as provided in Section 3 of this article, a group or association of banks or bankers, composed of any number of members, may create a trust to self-insure banks that are members of the group or association or any of whose officers are members of the group or association against losses resulting from (a) dishonest acts and criminal acts of employees or losses resulting from robbery or other acts commonly included within a bank's bond coverage, and (b) indemnification for wrongful acts committed by directors, officers, and employees of a member of the group or association subject to the limitations contained in Article 2.02-1, Texas Business Corporation Act.
Plan of Organization and Operation
Sec. 3. Before organizing and operating a trust as provided in this article, the group or association proposing to organize the trust shall select trustees to administer the trust and shall prepare a detailed plan of organization and operation in the form and manner prescribed by the board. The plan shall be submitted to the board for examination, suggested changes, and final approval, and may be amended from time to time with the approval of the board.
Approval of Plan
Sec. 4. The board shall approve a self-insurance plan under this article only if it is satisfied that the trust has and will continue to possess the ability to pay valid claims made against it.
Creation of Trust Fund
Sec. 5. (a) The trustees of the self-insurance trust shall create a trust fund to pay claims made under the coverage provided in Section 2 of this article. (b) The fund shall be under the administration and control of the trustees and shall be paid out on claims and shall be invested as provided in the plan.
Participation in trust; contributions
Sec. 6. Any bank that is a member or any of whose officers are members of the group or association organizing the trust may participate in the self-insurance trust by entering into contract or agreement with the trustees for insurance under the trust against losses resulting from (a) dishonest acts or criminal acts of its employees or losses resulting from robbery or other acts commonly included within a bank's bond coverage, and (b) indemnification for wrongful acts committed by directors, officers, and employees of a member of the group or association subject to the limitations contained in Article 2.02-1, Texas Business Corporation Act. The bank or officers shall pay the required contribution to the trust fund.
Amount of Coverage
Sec. 7. The amount of coverage to be provided banks participating in the trust and the amount of contributions to be paid by those banks shall be determined by the trustees as provided in the plan.
Professional Staff and Consultants
Sec. 8. (a) The trustees shall employ appropriate professional staff and consultants for program management. (b) Salaries for professional staff and consultants and for paying the costs of administering the trust program shall be paid from the trust fund; provided that, the total amount for payment of salaries and administration shall not exceed an amount fixed by the board but in no event to exceed 35 percent of the total amount of money in the trust fund in any one year.
Continuing Supervision
Sec. 9. A self-insurance trust approved by the board under the provisions of this article is subject to the continuing supervision of the board relating to its solvency and to approval of its policy forms, and the board may set certain minimum requirements to ensure the capability of the trust to satisfy its contractual obligations.
Rules
Sec. 10. The board may adopt necessary rules to carry out the provisions of this article.
Trust Not Engaged in Business of Insurance
Sec. 11. A self-insurance trust created under this article is not engaged in the business of insurance under this code and under other laws of this state, and the provisions of any chapters or articles of this code, including Article 21.28-C, are declared inapplicable to a trust organized and operated under this article. Added by Acts 1977, 65th Leg., p. 1698, ch. 674, Sec. 1, eff. June 15, 1977. Sec. 2 amended by Acts 1987, 70th Leg., ch. 164, Sec. 1, eff. May 25, 1987; Sec. 6 amended by Acts 1987, 70th Leg., ch. 164, Sec. 2, eff. May 25, 1987. Art. 21.49-7. SELF-INSURANCE TRUST FOR SAVINGS AND LOAN ASSOCIATIONS.
Article repealed effective April 1, 2007
Definitions
Sec. 1. In this article: (1) "Savings and loan association" means a savings and loan association chartered under federal or state law whose principal office is located in this state. (2) "Board" means the State Board of Insurance. (3) "Trustees" means the trustees of a self-insurance trust created under this article.
Creation of Trust; Coverage
Sec. 2. (a) Two or more savings and loan associations may create a trust under this article to provide insurance and indemnity coverage for its members and their officers and directors. (b) Insurance and indemnity coverage provided by the trust shall be limited to savings and loan blanket bonds covering losses resulting from dishonest acts and criminal acts of employees or losses resulting from robbery or both.
Organizing Trust; Trust Plan
Sec. 3. Before organizing and operating a trust under this article, the savings and loan associations proposing to organize the trust shall select trustees to administer the trust and shall prepare a detailed plan of organization and operation in the form and manner prescribed by the board. The proposed plan shall be submitted to the board for examination, suggested changes, and final approval. After final approval the plan may be amended with the approval of the board.
Condition for Plan Approval
Sec. 4. The board shall approve a proposed plan under this article only if it is satisfied that the trust has and will continue to possess the ability to pay valid claims made to it.
Trust Fund
Sec. 5. (a) The trustees of the trust shall create a trust fund to pay claims made under the coverage provided by the trust. (b) The trustees shall administer and control the trust fund and shall pay claims and invest money of the trust fund as provided by the plan.
Trust Participation
Sec. 6. A savings and loan association that is one of the associations organizing the trust may participate in the trust by entering into contracts or agreements with the trustees for insurance and indemnity coverage that the trust may provide and paying the required contribution to the trust fund.
Trustee Determinations
Sec. 7. The trustees shall determine in accordance with the plan the amount of coverage to be provided savings and loan associations participating in the trust and the amount of contributions to be paid by those associations.
Staff and Consultants; Salaries and Costs
Sec. 8. (a) The trustees shall employ appropriate professional staff and consultants for management of the trust program. (b) The trustees shall pay the salaries of professional staff and consultants and other costs of administering the trust program from the trust fund. The total amount paid for payment of salaries and administration may not exceed an amount fixed by the board, which amount may not exceed 35 percent of the total amount of money in the trust fund in any one year.
Board Supervision
Sec. 9. A trust whose plan is approved by the board under this article is subject to the continuing supervision of the board relating to its solvency and to approval of its policy forms. The board may set certain minimum requirements to ensure the capability of the trust to satisfy its contractual obligations.
Rules
Sec. 10. The board may adopt reasonable rules that are necessary to carry out this article.
Application of Insurance Laws
Sec. 11. A trust created under this article is not engaged in the business of insurance under this code and under other laws of this state, and this code, including the Texas Property and Casualty Insurance Guaranty Act (Article 21.28-C, Vernon's Texas Insurance Code), is inapplicable to a trust organized and operated under this article. Added by Acts 1985, 69th Leg., ch. 229, eff. June 3, 1985. Art. 21.49-8. DISCLOSURE OF MATERIAL TRANSACTIONS REPORT.
Article repealed effective April 1, 2007
Application; Exemption
Sec. 1. (a) Except as provided by Subsection (b) of this section, this article applies to the following domestic insurers and commercially domiciled insurers: (1) a capital stock company; (2) a mutual company; (3) a title insurance company; (4) a fraternal benefit society; (5) a Lloyd's plan company; (6) a reciprocal or interinsurance exchange; (7) a group hospital service corporation; (8) a health maintenance organization; (9) a risk retention group; (10) a nonprofit legal service corporation; and (11) a nonprofit hospital, medical, or dental service corporation. (b) A domestic insurer listed under Subsection (a) of this section that does business only in this state is exempt from the application of this article until the insurer obtains authority to conduct the business of insurance in another state.
Report
Sec. 2. (a) Unless the material acquisition and disposition of assets and the nonrenewal, cancellation, or revisions of material ceded reinsurance agreements have been submitted to the commissioner for review, approval, or information under other provisions of this code or other laws, regulations, or requirements, each insurer shall file a report with the commissioner that discloses: (1) material acquisitions and dispositions of assets; or (2) material nonrenewals, cancellations, or revisions of ceded reinsurance agreements. (b) The report required under Subsection (a) of this section must be filed not later than the 15th day after the last day of the calendar month in which any of the affected transactions occur. (c) The insurer also shall file one complete copy of the report, including any necessary exhibits or other attachments, with the department. (d) A report obtained by or disclosed to the commissioner under this article is confidential and is not subject to a subpoena, other than a grand jury subpoena. The report may not be disclosed by the commissioner, the National Association of Insurance Commissioners, or any other person, except to the insurance department of another state or another authorized governmental agency, without the prior written consent of the affected insurer, unless the commissioner, after notice to the affected insurer and an opportunity for a hearing, determines that the interest of policyholders, shareholders, or the public will be served by the publication of the report. If the commissioner does so determine, the department may disclose a report to the public and may publish all or any part of the report in any manner considered appropriate by the commissioner.
Acquisitions and Dispositions of Assets
Sec. 3. (a) An insurer is not required to report an acquisition or disposition of assets under Section 2 of this article if the acquisition or disposition is not material. For purposes of this article, an acquisition, or the aggregate of a series of related acquisitions during a 30-day period, or a disposition, or the aggregate of a series of related dispositions during a 30-day period, is material if it: (1) is not recurring; (2) is not in the ordinary course of business; and (3) involves more than five percent of the reporting insurer's total admitted assets as reported in its most recent statutory statement filed with the department. (b) An asset acquisition subject to this article includes each purchase, lease, exchange, merger, consolidation, succession, or other acquisition, other than the construction or development of real property by or for the reporting insurer or the acquisition of materials for that purpose. (c) An asset disposition subject to this article includes each sale, lease, exchange, merger, consolidation, mortgage, hypothecation, assignment, whether for the benefit of creditors or otherwise, abandonment, destruction, or other disposition. (d) The following information must be disclosed in a report of a material acquisition or disposition of assets: (1) the date of the transaction; (2) the manner of acquisition or disposition; (3) a description of the assets involved; (4) the nature and amount of the consideration given or received; (5) the purpose of or reason for the transaction; (6) the manner by which the amount of consideration was determined; (7) the gain or loss recognized or realized as a result of the transaction; and (8) the name of each person from whom the assets were acquired or to whom they were disposed. (e) An insurer shall report material acquisitions and dispositions on a nonconsolidated basis unless the insurer: (1) is part of a consolidated group of insurers that uses a pooling arrangement or a 100 percent reinsurance agreement that affects the solvency and integrity of the insurer's reserves; and (2) ceded substantially all of its direct and assumed business to the pooling arrangement. (f) For purposes of Subsection (e), an insurer is considered to have ceded substantially all of its direct and assumed business to a pooling arrangement if: (1) the insurer has, during a calendar year, less than $1 million total direct and assumed written premiums that are not subject to a pooling arrangement; and (2) the net income of the business not subject to the pooling arrangement represents less than five percent of the insurer's capital and surplus.
Nonrenewals, Cancellations, or Revisions of Ceded Insurance
Sec. 4. (a) An insurer is not required to report a nonrenewal, cancellation, or revision of a ceded reinsurance agreement under Section 2 of this article if the nonrenewal, cancellation, or revision is not material. For purposes of this article, a nonrenewal, cancellation, or revision is material if it affects, on an annual basis, as indicated in the insurer's most recently filed statutory statement: (1) for property and casualty business, including accident and health business when written as property and casualty business, more than 50 percent of an insurer's ceded written premium; or (2) for life, annuity, and accident and health business, more than 50 percent of the total reserve credit taken for business ceded. (b) An insurer is not required to report if the insurer's ceded written premium of the total reserve credit taken for business ceded represents, on an annual basis, less than: (1) 10 percent of direct and assumed written premiums; or (2) 10 percent of the statutory reserve requirement before a cession. (c) Subject to the requirements imposed under Subsections (a) and (b) of this section, an insurer shall file a report without regard to which party initiated the nonrenewal, cancellation, or revision of ceded reinsurance when one or more of the following conditions exist: (1) the entire cession has been canceled, nonrenewed, or revised, and ceded indemnity and loss adjustment expense reserves after the nonrenewal, cancellation, or revision represent less than 50 percent of the comparable reserves that would have been ceded had the nonrenewal, cancellation, or revision not occurred; (2) an authorized or accredited reinsurer has been replaced on an existing cession by an unauthorized reinsurer; or (3) collateral requirements previously established for unauthorized reinsurers have been reduced in that the requirement to collateralize incurred but not reported claim reserves has been waived for one or more unauthorized reinsurers newly participating in an existing cession. (d) Subject to the requirement of materiality, for purposes of Subsections (c)(2) and (3) of this section, an insurer shall file a report if the result of the revision affects more than 10 percent of the cession. (e) An insurer shall disclose the following information in a report of a material nonrenewal, cancellation, or revision of a ceded reinsurance agreement: (1) the effective date of the nonrenewal, cancellation, or revision; (2) a description of the transaction that identifies the initiator of the transaction; (3) the purpose of or reason for the transaction; and (4) if applicable, the identity of the replacement reinsurers. (f) An insurer shall report all material nonrenewals, cancellations, or revisions of ceded reinsurance agreements on a nonconsolidated basis unless the insurer: (1) is part of a consolidated group of insurers that uses a pooling arrangement or 100 percent reinsurance agreement that affects the solvency and integrity of the insurer's reserves; and (2) ceded substantially all of its direct and assumed business to the pooling arrangement. (g) For purposes of Subsection (f) of this section, an insurer is considered to have ceded substantially all of its direct and assumed business to a pooling arrangement if: (1) the insurer has, during a calendar year, less than $1 million total direct and assumed written premiums that are not subject to the pooling arrangement; and (2) the net income of the business not subject to the pooling arrangement represents less than five percent of the insurer's capital and surplus. Added by Acts 1995, 74th Leg., ch. 614, Sec. 13. Art. 21.49-11. TEXAS PUBLIC ENTITY EXCESS INSURANCE POOL.
Article repealed effective April 1, 2007
Definitions
Sec. 1. In this article: (1) "Pool" means the Texas public entity excess insurance pool. (2) "Fund" means the Texas public entity excess insurance fund. (3) "Board" means the board of trustees of the pool. (4) "Public entity" means a city or a group of cities who have formed an insurance pool under the provisions of The Interlocal Cooperation Act (Article 4413(32c), Vernon's Texas Civil Statutes). (5) "Association" means an association whose governing board is designated by this article to administer the pool. (6) "Insurance" means liability insurance or workers' compensation insurance.
Creation of pool
Sec. 2. (a) On written agreement of the presiding officers of not fewer than 25 public entities in this state, the Texas public entity excess insurance pool is created to provide excess liability and workers' compensation insurance coverage to a public entity and its officers and employees as provided by this article. (b) Under the excess insurance coverage, the pool shall pay that portion of a claim against a public entity and its officers and employees that is finally determined or settled or is included in a final judgment of a court and that is in excess of $1 million, but the amount paid by the pool may not be in excess of the amount determined by the board to be actuarially sound for the pool. (c) Under the insurance coverage, the pool may participate in the evaluation or defense of any claim.
Participation in pool
Sec. 3. A public entity is entitled to coverage from the pool on: (1) submitting a complete application; (2) providing any other relevant information required by the pool; (3) meeting the underwriting guidelines established by the pool; and (4) paying the premiums required for the coverage.
Payment of contributions and premiums
Sec. 4. A public entity purchasing excess insurance coverage from the pool may use funds of the public entity to pay any contributions or premiums required by the pool for the coverage.
Board of trustees
Sec. 5. (a) The members of the governing board of an association that has been in operation providing pooled self-insurance within this state for more than five years on the effective date of this article and that has as its members the public entities that entered into the written agreement under Section 2 of this article shall serve as the board of trustees of the pool and shall administer the pool. (b) Members of the board are not entitled to compensation for their service on the board. (c) Members of the board must represent members of the pool. (d) The persons who serve as officers of the governing board of the association shall serve as officers of the board. (e) The board shall hold meetings at the call of the chairman and at times established by its rules. (f) A majority of the members of the board constitutes a quorum. (g) In addition to other duties provided by this article and the plan of operation, the board shall: (1) approve contracts other than excess insurance contracts issued to public entities by the pool; (2) consider and adopt premium rate schedules for the pool; (3) consider and adopt policy forms for the pool; (4) receive service of summons on behalf of the pool; and (5) appoint and supervise the activities of the pool manager. (h) In addition to other authority provided by this article, the board may: (1) adopt necessary rules; (2) delegate specific responsibilities to the pool manager; and (3) amend the plan of operation to assure the orderly management and operation of the pool. (i) A member of the board is not liable with respect to any claim or judgment for which coverage is provided by the pool or for any claim or judgment against a public entity covered by the pool against whom a claim is made.
Plan of operation
Sec. 6. (a) Within 30 days after creation of the pool under Section 2(a) of this article, the board shall meet to prepare a detailed plan of operation for the pool. (b) The plan of operation may include any matters relating to the organization and operation of the pool and the pool's finances. The plan must include: (1) the organizational structure of the pool, the method of procedure and operation of the board, and a summary of the method for managing and operating the pool; (2) a description of the financial arrangements necessary to cover the initial expenses of the pool and estimates supported by statistical data of the amounts of those contributions or other financial arrangements; (3) underwriting guidelines and procedures for the evaluation of risks; (4) procedures for purchase of reinsurance; (5) methods, procedures, and guidelines for establishing rates for premiums for and maximum limits of excess coverage available from the pool; (6) procedures for the processing and payment of claims; (7) methods and procedures for defraying any losses and expenses of the pool; (8) methods, procedures, and guidelines for the management and investment of the fund; and (9) guidelines for nonrenewal of coverage.
Pool manager
Sec. 7. (a) The board shall appoint a pool manager who shall serve at the pleasure of the board. (b) The pool manager is entitled to receive the compensation authorized by the board. (c) The pool manager shall manage and conduct the affairs of the pool under the general supervision of the board and shall perform any other duties directed by the board. (d) In addition to any other duties provided by this article or by the board, the pool manager shall: (1) receive and pass on applications from public entities for insurance coverage from the pool; (2) negotiate contracts for the pool; (3) prepare premium rate schedules for the approval of the board; (4) collect and compile statistical data relating to the insurance coverage provided by the pool, including relevant loss, expense, and premium data, and make that information available to the board; and (5) prepare and submit to the board for approval proposed policy forms for pool coverage. (e) The pool manager may refuse to renew the coverage of any public entity insured by the pool based on the guidelines provided by the plan of operation.
Employees and other personnel
Sec. 8. (a) The pool manager shall employ or contract with persons necessary to assist the board and pool manager in carrying out the powers and duties of the pool. (b) The board shall approve compensation paid to employees of the pool and contracts made with other persons under this section. (c) The board may require any employee or person with whom it contracts under this section to execute a bond in an amount determined by the board, payable to the board, and conditioned on the faithful performance of the employee's or person's duties or responsibilities to the pool. (d) An employee or person with whom the pool has contracted under this section is not liable with respect to any claim or judgment for which coverage is provided by the pool or for any claim or judgment against any public entity covered by the pool against whom a claim is made.
Office
Sec. 9. (a) The pool shall maintain its principal office in Austin, Texas. (b) The records, files, and other documents and information relating to the pool must be maintained in the pool's principal office.
Rules
Sec. 10. The board may adopt and amend rules to carry out this article.
General powers and duties
Sec. 11. (a) The pool shall: (1) issue insurance coverage to each public entity entitled to coverage under this article; (2) collect premiums for coverage issued or renewed by the pool; (3) process and pay valid claims; and (4) maintain detailed data regarding the pool. (b) The pool may: (1) enter into contracts; (2) purchase reinsurance; (3) cancel or refuse to renew coverage; and (4) perform any other acts necessary to carry out this article, the plan of operation, and the rules adopted by the board.
Texas public entity excess insurance fund
Sec. 12. (a) On creation of the pool, the board shall create the Texas public entity excess insurance fund. (b) The fund is composed of: (1) premiums paid by public entities for coverage by the pool; (2) proceeds from bonds and other money received by the pool to cover the expenses of the fund; (3) investments and money earned from investments of the fund; and (4) any other money received by the pool. (c) The pool manager shall manage the fund under the general supervision of the board. (d) Administrative expenses of the pool may be paid from the fund. (e) Money in the fund may not be used to pay punitive damages, fines or penalties for violation of a civil or criminal statute, or fines or penalties imposed for violation of an administrative rule or regulation or a public entity order or ordinance. (f) Money for a claim may not be paid from the fund under excess insurance coverage unless and until all benefits payable under any other underlying policy or self-insurance covering the claim or judgment are exhausted. (g) The board may select one or more banks to serve as depository for money of the fund. Before the pool manager deposits fund money in a depository bank in an amount that exceeds the maximum amount secured by the Federal Deposit Insurance Corporation, the bank must execute a bond or provide other security in an amount sufficient to secure from loss the fund money that exceeds the amount secured by the Federal Deposit Insurance Corporation.
Investments
Sec. 13. (a) The fund manager, under the general supervision of the board, shall manage and invest the money in the fund in the manner provided by the plan of operation. (b) Money earned by investment of money in the fund must be deposited in the fund or reinvested for the fund.
Premium rates; limits of coverage
Sec. 14. (a) The board shall determine the rates for premiums that will be charged and the maximum limits of coverage provided to assure that the pool is actuarially sound. (b) The pool manager shall prepare the statistical data and other information and the proposed rate schedules and maximum limits of insurance coverage for consideration of the board. (c) The board shall periodically reexamine the rate schedules and the maximum limits of insurance coverage as conditions change.
Coverage period
Sec. 15. (a) On accepting insurance coverage from the pool, a public entity is authorized to and shall maintain that coverage for a period not less than 35 calendar months following the month the coverage is issued. (b) A public entity that voluntarily discontinues insurance coverage in the pool may not again obtain coverage from the pool for at least 36 calendar months following the month in which the coverage was discontinued.
Coverage
Sec. 16. Excess coverage provided by the pool may be provided on a claims-made or an occurrence basis.
Punitive damages
Sec. 17. Excess coverage provided by the pool may not provide coverage for punitive damages.
Nonrenewal
Sec. 18. (a) The pool may refuse to renew the insurance coverage of any public entity that fails to comply with the pool's underwriting or risk management guidelines. (b) A public entity whose insurance coverage is not renewed by the pool is not eligible to apply for new coverage during the 11 calendar months beginning after the month in which the pool gave written notice that it would not renew the coverage.
Shortage of available money
Sec. 19. (a) If money in the fund will be exhausted by payment of all final and settled claims and final judgments during the fiscal year, the amount paid by the pool to each person having a claim or judgment shall be prorated, with each person receiving an amount that is equal to the percentage the amount owed to him by the pool bears to the total amount owed, outstanding, and payable by the pool. (b) The remaining amount that is due and unpaid to a person who receives prorated payment under Subsection (a) of this section must be paid by the member city incurring the original liability.
Application of other laws
Sec. 20. (a) Except as provided by Subsection (b) of this section, the pool is not considered insurance under the Insurance Code and other laws of this state, and the State Board of Insurance has no jurisdiction over the pool. (b) The pool is subject to Articles 1.24A, 1.24B, and 21.21 of this code. Sec. 21. Expired. Added by Acts 1987, 70th Leg., 1st C.S., ch. 1, Sec. 5.09, eff. Sept. 2, 1987. Art. 21.49-13. EXCESS LIABILITY POOLS.
Article repealed effective April 1, 2007
Definitions
Sec. 1. In this article: (1) "Pool" means an excess liability pool created under this article. (2) "Fund" means an excess liability fund. (3) "Board" means the board of trustees of a pool. (4) "County" means a county in this state. (5) "School district" means a public school district created under the laws of this state. (6) "Junior college district" means a junior college district organized under the laws of this state. (7) "Entity" means a county, school district, or junior college district.
Creation of pools
Sec. 2. (a) Separate excess liability pools may be created for counties, school districts, and junior college districts as provided by this article. (b) An excess liability pool may be created: (1) for counties, on written agreement to create the pool by the county judges of not fewer than five counties in this state; (2) for school districts, on written agreement to create the pool by the presidents of the boards of trustees, acting on behalf of their boards, of not fewer than five school districts in this state; or (3) for junior college districts, on written agreement to create the pool by the presiding officers of the boards of trustees, acting on behalf of their boards, of not fewer than five junior college districts in this state. (c) An excess liability pool is created to provide excess liability insurance coverage as provided by this article and the plan. (d) An entity may participate only in a pool created for that type of entity. There may not be more than one county excess liability pool, one school district excess liability pool, and one junior college district excess liability pool.
Scope of coverage
Sec. 3. (a) A pool shall insure an entity and its officers and employees against liability for acts and omissions under the laws governing that entity and its officers and employees in their official or employment capacities. (b) Under excess liability insurance coverage, a pool shall pay that portion of a claim against an entity and its officers and employees that is finally determined or settled or is included in a final judgment of a court and that is in excess of $500,000, but the amount paid by the pool may not be in excess of the amount determined by the board to be actuarially sound for the pool. (c) Under the insurance coverage, the pool may participate in the evaluation, settlement, or defense of any claim.
Participation in pool
Sec. 4. An entity is entitled to coverage from the pool on: (1) submitting a complete application; (2) providing any other information required by the pool; (3) meeting the underwriting standards established by the pool; and (4) paying the premiums required for the coverage.
Payment of contributions and premiums
Sec. 5. An entity purchasing excess liability insurance coverage from the pool may use funds of the entity to pay any contributions or premiums required by the pool for the coverage.
Plan of operation
Sec. 6. (a) At the time the written agreement is executed under Section 2 of this article, the creators shall select nine persons to serve as a temporary board to draft the plan of operation for a pool. (b) Within 30 days after selection, the members of a temporary board shall meet to prepare a detailed plan of operation for the pool. (c) The plan of operation may include any matters relating to the organization and operation of the pool and the pool's finances. The plan must include: (1) the organizational structure of the pool, including the method of selection of the board, the method of procedure and operation of the board, and a summary of the method for managing and operating the pool; (2) a description of the contributions and other financial arrangements necessary to cover the initial expenses of the pool and estimates supported by statistical data of the amounts of those contributions or other financial arrangements; (3) underwriting standards and procedures for the evaluation of risks; (4) procedures for purchase of reinsurance; (5) methods, procedures, and guidelines for establishing rates for premiums for and maximum limits of excess coverage available from the pool; (6) procedures for the processing and payment of claims; (7) methods and procedures for defraying any losses and expenses of the pool; (8) methods, procedures, and guidelines for the management and investment of the fund; (9) guidelines for nonrenewal of coverage; (10) minimum limits of capital and surplus to be maintained by the pool; and (11) minimum standards for reserve requirements for the pool. (d) The temporary board shall complete and adopt the plan of operation within 90 days after the date of the appointment of the temporary board. (e) Within 15 days following the day on which the plan of operation is adopted, the first board must be selected as provided by the plan of operation. The members of the first board shall take office not later than the 30th day following the date of the adoption of the plan of operation.
Board of trustees
Sec. 7. (a) A pool is governed by a board of nine trustees selected as provided by the plan of operation. (b) Members of the board serve for terms of two years with the terms expiring at the time provided by the plan of operation. (c) A vacancy on the board shall be filled as provided by the plan of operation. (d) A person serving on the board who is an officer or employee of an entity covered by the pool performs duties on the board as additional duties required of his original office or employment. (e) Each member of the board shall execute a bond in the amount required by the plan of operation payable to the pool and conditioned on the faithful performance of his duties. The pool shall pay the cost of the bond. (f) Members of the board are not entitled to compensation for their service on the board. (g) The board shall select from its membership persons to serve as chairman, vice-chairman, and secretary. The persons selected serve for terms of one year that expire as provided by the plan of operation. (h) The board shall hold meetings at the call of the chairman and at times established by its rules. (i) A majority of the members of the board constitutes a quorum. (j) In addition to other duties provided by this article and the plan of operation, the board shall: (1) approve contracts other than excess liability insurance contracts issued to entities by the pool; (2) consider and adopt premium rate schedules for the pool; (3) consider and adopt policy forms for the pool; (4) receive service of summons on behalf of the pool; and (5) appoint and supervise the activities of the pool manager. (k) In addition to other authority provided by this article, the board may: (1) adopt necessary rules; (2) delegate specific responsibilities to the pool manager; and (3) amend the plan of operation to assure the orderly management and operation of the pool. (l) A member of the board is not liable with respect to a claim or judgment for which coverage is provided by the pool or for a claim or judgment against an entity covered by the pool against whom a claim is made.
Pool manager
Sec. 8. (a) The board shall appoint a pool manager who shall serve at the pleasure of the board. (b) The pool manager is entitled to receive the compensation authorized by the board. (c) The pool manager shall execute a bond in the amount determined by the board, payable to the pool, conditioned on the faithful performance of his duties. The pool shall pay the cost of the bond. (d) The pool manager shall manage and conduct the affairs of the pool under the general supervision of the board and shall perform any other duties directed by the board. (e) In addition to any other duties provided by this article or by the board, the pool manager shall: (1) receive and pass on applications from entities for excess liability coverage from the pool; (2) negotiate contracts for the pool; (3) prepare premium rate schedules for the approval of the board; (4) collect and compile statistical data relating to the excess liability coverage provided by the pool, including relevant loss, expense, and premium data, and make that information available to the board and to the public; and (5) prepare and submit to the board for approval proposed policy forms for pool coverage. (f) The pool manager may refuse to renew the coverage of any entity insured by the pool based on the guidelines provided by the plan of operation.
Employees and other personnel
Sec. 9. (a) The pool manager shall employ or contract with persons necessary to assist the board and pool manager in carrying out the powers and duties of the pool. (b) The board shall approve compensation paid to employees of the pool and contracts made with other persons under this section. (c) The board may require any employee or person with whom it contracts under this section to execute a bond in an amount determined by the board, payable to the board, and conditioned on the faithful performance of the employee's or person's duties or responsibilities to the pool. (d) An employee or person with whom the pool has contracted under this section is not liable with respect to any claim or judgment for which coverage is provided by the pool or for any claim or judgment against any entity covered by the pool against whom a claim is made.
Office
Sec. 10. (a) A pool shall maintain its principal office in Austin, Texas. (b) The records, files, and other documents and information relating to the pool must be maintained in the pool's principal office.
Rules
Sec. 11. The board may adopt and amend rules to carry out this article.
General powers and duties
Sec. 12. (a) A pool shall: (1) issue excess liability coverage to each entity entitled to coverage under this article; (2) collect premiums for coverage issued or renewed by the pool; (3) process and pay valid claims; and (4) maintain detailed data regarding the pool. (b) The pool may: (1) enter into contracts; (2) purchase reinsurance; (3) cancel or refuse to renew coverage; and (4) perform any other acts necessary to carry out this article, the plan of operation, and the rules adopted by the board.
Excess liability fund
Sec. 13. (a) On creation of a pool, the first board shall create an excess liability fund. (b) The fund is composed of: (1) premiums paid by entities for coverage by the pool; (2) contributions and other money received by the pool to cover the initial expenses of the fund; (3) investments and money earned from investments of the fund; and (4) any other money received by the pool. (c) The pool manager shall manage the fund under the general supervision of the board. (d) Administrative expenses of the pool may be paid from the fund, but payments for this purpose during any fiscal year of the pool may not exceed the amount established by the board. (e) Money in the fund may not be used to pay punitive damages, fines or penalties for violation of a civil or criminal statute, or fines or penalties imposed for violation of an administrative rule or regulation, or an order, rule, or ordinance. (f) Money for a claim may not be paid from the fund under excess liability insurance coverage unless and until all benefits payable under any other underlying policy of liability insurance covering the claim or judgment are exhausted. (g) The board may select one or more banks to serve as depository for money of the fund. Before the pool manager deposits fund money in a depository bank in an amount that exceeds the maximum amount secured by the Federal Deposit Insurance Corporation, the bank must execute a bond or provide other security in an amount sufficient to secure from loss the fund money that exceeds the amount secured by the Federal Deposit Insurance Corporation. (h) Each year as provided by the plan of operation, the board shall have an actuary who is a member of the American Academy of Actuaries audit the capital, surplus, and reserves of the pool and prepare for the pool and its members a formal report.
Investments
Sec. 14. (a) The fund manager, under the general supervision of the board, shall manage and invest the money in the fund in the manner provided by the plan of operation. (b) Money earned by investment of money in the fund must be deposited in the fund or reinvested for the fund.
Contributions
Sec. 15. The board shall determine the amount of any contributions necessary to meet initial expenses of the pool. The board shall make this determination based on the data provided in the plan of operation.
Premium rates; limits of coverage
Sec. 16. (a) The board shall determine the rates for premiums that will be charged and the maximum limits of coverage provided to assure that the pool is actuarially sound. (b) The pool manager shall prepare the statistical data and other information and the proposed rate schedules and maximum limits of coverage for consideration of the board. (c) The board shall periodically reexamine the rate schedules and the maximum limits of coverage as conditions change.
Coverage period
Sec. 17. (a) On accepting coverage from the pool, an entity shall maintain that coverage for a period not less than 36 calendar months following the month the coverage is issued. (b) An entity that voluntarily discontinues coverage in the pool may not again obtain coverage from the pool for at least 36 calendar months following the month in which the coverage was discontinued.
Coverage
Sec. 18. Excess liability coverage provided by the pool may be provided on a claims-made or an occurrence basis.
Nonrenewal
Sec. 19. (a) Except as provided by Subsection (b) of this section, the pool may refuse to renew the coverage of any entity that fails to comply with the pool's underwriting standards. (b) The pool may not refuse to renew the coverage of an entity for the first 36 calendar months following the month in which the entity was first insured by the pool. (c) Section 17(b) of this article does not apply to discontinuance of an entity's coverage if the pool refuses renewal under this section. An entity whose coverage is not renewed is not eligible to apply for new coverage during the 12 calendar months beginning after the month in which the pool gave written notice that it would not renew the coverage.
Shortage of available money
Sec. 20. (a) If money in the fund will be exhausted by payment of all final and settled claims and final judgments during the fiscal year, the amount paid by the pool to each person having a claim or judgment shall be prorated, with each person receiving an amount that is equal to the percentage the amount owed to him by the pool bears to the total amount owed, outstanding, and payable by the pool. (b) The remaining amount that is due and unpaid to a person who receives prorated payment under Subsection (a) of this section must be paid in the immediately following fiscal year.
Commissions
Sec. 21. A pool may pay commissions from the fund on approval of the board.
Application of other laws
Sec. 22. (a) Except as provided by Subsection (b) of this section, the pool is not considered insurance under the Insurance Code and other laws of this state, and the State Board of Insurance has no jurisdiction over the pool. (b) The pool shall collect the necessary data, information, and statements and shall file with the State Board of Insurance the reports and statements required by Articles 1.24A and 1.24B and is subject to 21.21 of this code. Added by Acts 1987, 70th Leg., 1st C.S., ch. 1, Sec. 5.08, eff. Sept. 2, 1987. Renumbered from Sec. 21.49-14 by Acts 1993, 73rd Leg., ch. 685, Sec. 22.03, eff. Sept. 1, 1993. Art. 21.49-14. TEXAS NONPROFIT ORGANIZATIONS LIABILITY POOL.
Article repealed effective April 1, 2007
Definitions
Sec. 1. In this article: (1) "Pool" means the Texas Nonprofit Organizations Liability Pool. (2) "Fund" means the Texas nonprofit organizations liability fund. (3) "Board" means the board of trustees of the pool. (4) "Nonprofit organization" means an organization that is exempt under Section 501(c)(3) or (4), Internal Revenue Code of 1986.
Creation of pool
Sec. 2. On written agreement of the chief executive officers of not fewer than 15 nonprofit organizations, the Texas Nonprofit Organizations Liability Pool is created to provide primary and excess liability insurance coverage as provided by this article.
Scope of coverage
Sec. 3. (a) The pool shall insure a nonprofit organization and its officers and employees against liability for acts and omissions under the laws of this state. (b) Under the liability insurance coverage, the pool shall provide primary and excess liability coverage to nonprofit organizations that qualify under this article and the plan of operation for the pool. (c) The pool may provide primary liability coverage to a nonprofit organization in an amount not to exceed $250,000. The pool may provide excess liability coverage to a nonprofit organization in an amount that is found by the board to be actuarially sound. (d) The pool may participate in the evaluation, settlement, and defense of a claim against a nonprofit organization insured by the pool if the claim is covered by pool coverage. (e) Under pool coverage, the pool is liable on any claim only to the limit provided by the coverage of the nonprofit organization against which the claim is made.
Participation in the pool
Sec. 4. A nonprofit organization is entitled to coverage from the pool on: (1) submitting a complete application; (2) providing any other information required by the pool; (3) meeting the underwriting standards established by the pool; and (4) paying the premiums required for the coverage.
Plan of operation
Sec. 5. (a) At the time the chief executive officers of the nonprofit organizations enter into the written agreement under Section 2 of this article, the chief executive officers shall select nine persons to serve as a temporary board to draft the plan of operation for the pool. (b) Within 30 days after selection, the members of the temporary board shall meet to prepare a detailed plan of operation for the pool. (c) The plan of operation may include any matters relating to the organization and operation of the pool and the pool's finances. The plan must include: (1) the organizational structure of the pool, including the method of selection of the board, the method of procedure and operation of the board, and a summary of the method for managing and operating the pool; (2) a description of the contributions and other financial arrangements necessary to cover the initial expenses of the pool and estimates supported by statistical data of the amounts of those contributions or other financial arrangements; (3) underwriting standards and procedures for the evaluation of risks; provided that such standards shall include, but not be limited to, the requirement that all participants in the pool receive on-going training in the methods of controlling liability losses; (4) procedures for purchase of reinsurance; (5) methods, procedures, and guidelines for establishing rates for premiums for and maximum limits of excess coverage available from the pool; (6) methods, procedures, and guidelines for negotiating and paying settlements, defense of claims, and paying judgments; (7) procedures for the processing and payment of claims; (8) methods and procedures for defraying any losses and expenses of the pool; (9) methods, procedures, and guidelines for the management and investment of the fund; and (10) guidelines for nonrenewal of coverage. (d) The temporary board shall complete and adopt the plan of operation within 90 days after the date of the appointment of the temporary board. (e) On completion of the plan of operation, the temporary board shall submit the plan to the State Board of Insurance for examination, suggested changes, and final approval. The State Board of Insurance shall approve the plan of operation under this subsection only if it is satisfied that the pool has and will continue to possess the ability to pay valid claims made against it. (f) The plan of operation may be amended by the board with the approval of the State Board of Insurance; provided that such plan shall maintain the requirement that all participants in the pool receive on-going training in the methods of controlling liability losses. (g) Within 15 days after the day on which the plan of operation is approved by the State Board of Insurance, the first board must be selected as provided by the plan of operation. The members of the first board shall take office not later than the 30th day after the date of the adoption of the plan of operation.
Board of trustees
Sec. 6. (a) The pool is governed by a board of nine trustees selected as provided by the plan of operation. Four of the members of the board of trustees shall be representatives of the general public. A public representative may not be: (1) an officer, director, or employee of an insurance company, insurance agency, agent, broker, solicitor, adjuster, or any other business entity regulated by the State Board of Insurance; (2) a person required to register with the secretary of state under Chapter 305, Government Code; or (3) related to a person described by Subdivision (1) or (2) of this subsection within the second degree of affinity or consanguinity. (b) Members of the board serve for staggered terms of two years with the terms of four trustees expiring in odd-numbered years as provided by the plan of operation. (c) A vacancy on the board shall be filled as provided by the plan of operation. (d) Each member of the board shall execute a bond in the amount required by the plan of operation payable to the pool and conditioned on the faithful performance of his duties. The pool shall pay the cost of the bond. (e) Members of the board are not entitled to compensation for their service on the board. (f) The board shall select from its membership persons to serve as chairman, vice-chairman, and secretary. The persons selected serve in that capacity for terms of one year that expire as provided by the plan of operation. (g) The board shall hold meetings at the call of the chairman and at times established by its rules. (h) A majority of the members of the board constitutes a quorum. (i) In addition to other duties provided by this article and the plan of operation, the board shall: (1) approve contracts other than insurance contracts issued to nonprofit organizations by the pool; (2) consider and adopt premium rate schedules for the pool; (3) consider and adopt policy forms for the pool; (4) receive service of summons on behalf of the pool; and (5) appoint and supervise the activities of the pool manager. (j) In addition to other authority provided by this article, the board may: (1) adopt necessary rules; (2) delegate specific responsibilities to the pool manager; and (3) amend the plan of operation to assure the orderly management and operation of the pool. (k) A member of the board is not liable with respect to any claim or judgment for which coverage is provided by the pool or for a claim or judgment against a nonprofit organization covered by the pool against whom a claim is made.
Pool manager
Sec. 7. (a) The board shall appoint a pool manager who shall serve at the pleasure of the board. (b) The pool manager is entitled to receive the compensation authorized by the board. (c) The pool manager shall execute a bond in the amount determined by the board, payable to the pool, conditioned on the faithful performance of his duties. The pool shall pay the cost of the bond. (d) The pool manager shall manage and conduct the affairs of the pool under the general supervision of the board and shall perform any other duties directed by the board. (e) In addition to any other duties provided by this article or by the board, the pool manager shall: (1) receive and pass on applications from nonprofit organizations for liability coverage from the pool; (2) negotiate contracts for the pool; (3) prepare premium rate schedules for the approval of the board; (4) collect and compile statistical data relating to the liability coverage provided by the pool, including relevant loss, expense, and premium data, and make that information available to the board and to the public; and (5) prepare and submit to the board for approval proposed policy forms for pool coverage. (f) The pool manager may refuse to renew the coverage of any nonprofit organization insured by the pool based on the guidelines provided by the plan of operation.
Employees and other personnel
Sec. 8. (a) The pool manager shall employ or contract with persons necessary to assist the board and pool manager in carrying out the powers and duties of the pool. (b) The board shall approve compensation paid to employees of the pool and contracts made with other persons under this section. (c) The board may require any employee or person with whom it contracts under this section to execute a bond in an amount determined by the board, payable to the board, and conditioned on the faithful performance of the employee's or person's duties or responsibilities to the pool. (d) An employee or person with whom the pool has contracted under this section is not liable with respect to any claim or judgment for which coverage is provided by the pool or for any claim or judgment against a nonprofit organization covered by the pool against whom a claim is made.
Records; information
Sec. 9. The records, files, and other documents and information relating to the pool must be maintained in the pool's principal office.
Rules
Sec. 10. The board may adopt and amend rules to carry out this article.
General powers and duties
Sec. 11. (a) The pool shall: (1) issue primary and excess liability coverage to each nonprofit organization entitled to coverage under this article; (2) collect premiums for coverage issued or renewed by the pool; (3) process and pay valid claims; (4) maintain detailed data regarding the pool; and (5) establish a plan to conduct loss control training or contract with an outside organization or individual to establish on-going training and facilities inspection programs designed to reduce the potential liability losses of participants in the pool. (b) The pool may: (1) enter into contracts; (2) purchase reinsurance; (3) cancel or refuse to renew coverage; and (4) perform any other acts necessary to carry out this article, the plan of operation, and the rules adopted by the board.
Texas nonprofit organizations liability fund
Sec. 12. (a) On creation of the pool, the first board shall create the Texas nonprofit organizations liability fund. (b) The fund is composed of: (1) premiums paid by nonprofit organizations for coverage by the pool; (2) contributions and other money received by the pool to cover the initial expenses of the fund; (3) investments and money earned from investments of the fund; and (4) any other money received by the pool. (c) The pool manager shall manage the fund under the general supervision of the board. (d) Administrative expenses of the pool may be paid from the fund, but payments for this purpose during any fiscal year of the pool may not exceed 10 percent of the total amount of the money in the fund during that fiscal year. (e) Money in the fund may not be used to pay punitive damages, fines or penalties for violation of a civil or criminal statute, or fines or penalties imposed for violation of an administrative rule or regulation of a state agency or an ordinance or order of a local government. (f) The board may select one or more banks to serve as depository for money of the fund. Before the pool manager deposits fund money in a depository bank in an amount that exceeds the maximum amount secured by the Federal Deposit Insurance Corporation, the bank must execute a bond or provide other security in an amount sufficient to secure from loss the fund money that exceeds the amount secured by the Federal Deposit Insurance Corporation.
Investments
Sec. 13. (a) The fund manager, under the general supervision of the board, shall manage and invest the money in the fund in the manner provided by the plan of operation. (b) Money earned by investment of money in the fund must be deposited in the fund or reinvested for the fund.
Contributions
Sec. 14. The board shall determine the amount of any contributions necessary to meet initial expenses of the pool. The board shall make this determination based on the data provided in the plan of operation.
Premium rates; limits of coverage
Sec. 15. (a) The board shall determine the rates for premiums that will be charged and the maximum limits of coverage provided to assure that the pool is actuarially sound. (b) The pool manager shall prepare the statistical data and other information and the proposed rate schedules and maximum limits of coverage for consideration of the board. (c) The board shall periodically reexamine the rate schedules and the maximum limits of coverage as conditions change.
Coverage period
Sec. 16. (a) On accepting coverage from the pool, a nonprofit organization shall maintain that coverage for a period of not less than 24 calendar months following the month the coverage is issued. (b) A nonprofit organization that voluntarily discontinues coverage in the pool may not again obtain coverage from the pool for at least 12 calendar months following the month in which the coverage was discontinued.
Claims-made coverage
Sec. 17. Liability insurance coverage provided by the pool may be provided on a claims-made basis on forms approved by the State Board of Insurance.
Punitive damages
Sec. 18. Liability insurance coverage provided by the pool may not provide coverage for punitive damages.
Nonrenewal
Sec. 19. (a) Except as provided by Subsection (b) of this section, the pool may refuse to renew the coverage of any nonprofit organization that fails to comply with the pool's underwriting standards. (b) The pool may not refuse to renew the coverage of a nonprofit organization for the first 24 calendar months following the month in which the nonprofit organization was first insured by the pool; provided that the pool participant maintains underwriting standards established by the plan of operation. (c) Subsection (b) of Section 16 of this article does not apply to discontinuance of a nonprofit organization's coverage if the pool refuses renewal under this section. A nonprofit organization whose coverage is not renewed is not eligible to apply for new coverage during the 12 calendar months beginning after the month in which the pool gave written notice that it would not renew the coverage.
Shortage of available money
Sec. 20. (a) If money in the fund will be exhausted by payment of all final and settled claims and final judgments during the fiscal year, the amount paid by the pool to each person having a claim or judgment shall be prorated, with each person receiving an amount that is equal to the percentage the amount owed to that person by the pool bears to the total amount owed, outstanding, and payable by the pool. (b) The remaining amount that is due and unpaid to a person who receives prorated payment under Subsection (a) of this section must be paid in the immediately following fiscal year.
Jurisdiction of insurance board; application of Insurance Code
Sec. 21. (a) Except as provided by Subsection (c) of this section, the pool is not engaged in the business of insurance under this code and other laws of this state, and this code and other insurance laws of this state do not apply to the pool. (b) In addition to this article, the pool is subject to: (1) the requirement of this code and the State Board of Insurance relating to reporting liability claims data; (2) the requirements of Subchapter B, Chapter 5, of this code relating to the making, filing, and approval of rates; and (3) the continuing supervision of the State Board of Insurance relating to the pool's solvency. (c) The State Board of Insurance may set certain minimum requirements to assure the capability of the pool to satisfy its obligations. (d) Article 21.28-C of this code does not apply to the pool. (e) The State Board of Insurance shall charge the pool reasonable fees for services performed by the board pursuant to this Act. Added by Acts 1987, 70th Leg., 1st C.S., ch. 6, Sec. 1, eff. Sept. 2, 1987. Sec. 6(a), (b) amended by Acts 1991, 72nd Leg., ch. 242, Sec. 9.14, eff. Sept. 1, 1991. Art. 21.49-15. INFORMATION REQUIRED TO BE PROVIDED BY INSURER TO GOVERNMENTAL ENTITY WITH WHICH INSURER CONTRACTS.
Definitions
Sec. 1. In this article: (1) "Governmental entity" means a state agency or political subdivision of this state. (2) "Insurer" means: (A) an insurance company; (B) a health maintenance organization operating under the Texas Health Maintenance Organization Act (Chapter 20A, Vernon's Texas Insurance Code); or (C) an approved nonprofit health corporation that holds a certificate of authority issued by the commissioner under Article 21.52F of this code. (3) "Political subdivision" means a county, municipality, school district, special purpose district, or other subdivision of state government that has jurisdiction limited to a geographic portion of the state.
Required Information
Sec. 2. (a) Each insurer that enters into a contract with a governmental entity that is subject to competitive bidding requirements and under which the insurer delivers, issues for delivery, or renews a policy or contract for health insurance or an evidence of coverage shall provide to the governmental entity a detailed report that includes: (1) the claims experience of the governmental entity during the preceding calendar year; and (2) the dollar amount of each large claim, as defined by the governmental entity, paid by the insurer under the contract during the preceding calendar year. (b) Claim information provided by an insurer to the governmental entity under this section: (1) shall be provided in the aggregate, without information through which a specific individual covered by the health insurance or evidence of coverage may be identified; (2) may be viewed or used only for contract bidding purposes; and (3) is confidential for purposes of Chapter 552, Government Code. Added by Acts 1999, 76th Leg., ch. 822, Sec. 1, eff. Sept. 1, 1999. Art. 21.49-15A. INSURER REPORT TO STATE OFFICE OF RISK MANAGEMENT.
Article repealed effective April 1, 2007
Definitions
Sec. 1. In this article: (1) "Insurer" means an insurance company, inter-insurance exchange, mutual or reciprocal association, county mutual insurance company, Lloyd's plan, or other entity that is authorized by the Texas Department of Insurance to engage in the business of insurance in this state. (2) "Office" means the State Office of Risk Management. (3) "State agency" has the meaning assigned by Section 412.001, Labor Code.
Reporting Requirements
Sec. 2. (a) Each insurer that enters into an insurance policy or other contract or agreement with a state agency for the purchase of property, casualty, or liability insurance coverage by the state agency, including a policy, contract, or agreement subject to competitive bidding requirements, shall report the intended sale to the office in the manner prescribed by that office. (b) The insurer shall report the intended sale not later than the 30th day before the date the sale of the insurance coverage is scheduled to occur. (c) The office may require an insurer to submit copies of insurance forms, policies, and other relevant information. (d) The office shall adopt rules as necessary to implement this article. In adopting those rules, the office shall consult with the commissioner. (e) Failure by an insurer to comply with the reporting requirements adopted under this article constitutes grounds for the imposition of sanctions against that insurer under Chapter 82. Added by Acts 2001, 77th Leg., ch. 1017, Sec. 1.09, eff. Sept. 1, 2002. Art. 21.49-16. BID REQUIREMENTS FOR INSURERS WHO CONTRACT WITH MUNICIPALITIES.
Definitions
Sec. 1. In this article: (1) "Insurer" means: (A) an insurance company, including a company providing stop-loss or excess loss insurance; (B) a health maintenance organization operating under the Texas Health Maintenance Organization Act (Chapter 20A, Vernon's Texas Insurance Code); (C) an approved nonprofit health corporation that holds a certificate of authority issued by the commissioner under Article 21.52F of this code; or (D) a third party administrator that holds a certificate of authority under Article 21.07-6 of this code. (2) "Municipality" has the meaning assigned by Section 1.005, Local Government Code.
Requirements; Exception
Sec. 2. (a) Except as provided by Subsection (c) of this section, an insurer who bids on a contract subject to the competitive bidding and competitive proposal requirements adopted under Section 252.021, Local Government Code, may not submit a bid for a contract to provide stop-loss or other insurance coverage that is subject to any qualification imposed by the insurer that permits the insurer to modify or limit the terms of insurance coverage to be provided after the contract has been made. An insurer's bid submitted under Section 252.021, Local Government Code, must contain the entire offer made by the insurer. (b) Except as provided by Subsection (c) of this section, an insurer who provides stop-loss or other insurance coverage for health benefits under a contract subject to this article may not, based on an individual's prior medical history, exclude an individual who is otherwise eligible for the health benefits coverage from coverage or assign a higher deductible to the individual. (c) By executing a written waiver in favor of the insurer, a municipality may waive the requirements of: (1) Subsection (a) of this section; or (2) Subsection (b) of this section regarding the assignment of a higher deductible to the individual. Added by Acts 1999, 76th Leg., ch. 821, Sec. 1, eff. Sept. 1, 1999. Sec. 2 amended by Acts 2001, 77th Leg., ch. 406, Sec. 1, eff. Sept. 1, 2001. Art. 21.49-17. RISK MANAGEMENT POOLS.
Article repealed effective April 1, 2007
Definitions
Sec. 1. In this article: (1) "School district" means a public school district created under the laws of this state. (2) "Junior college district" means a junior college district organized under the laws of this state. (3) "Entity" means a school district or junior college district. (4) "Pool" means a risk management pool created under this article. (5) "Fund" means a risk management fund. (6) "Board" means the board of trustees of a pool. (7) "Plan" means a pool's plan of operation.
Creation of pools
Sec. 2. (a) Separate risk management pools may be created for school districts and for junior college districts as provided by this article. (b) On the adoption of a resolution by not fewer than five boards of trustees of school districts to create the school district risk management pool or not fewer than five boards of trustees of junior college districts to create the junior college risk management pool, the risk management pool for the type of governmental entity is created. (c) The risk management pool for school districts is created to insure each school district that purchases coverage in the pool against liability for its acts and omissions under the law. The risk management pool for junior college districts is created to insure each junior college district that purchases coverage in the pool against liability for its acts and omissions under the law. (d) School districts may not participate in the junior college district risk management pool and junior college districts may not participate in the school district risk management pool. (e) There may not be more than one school district risk management pool and not more than one junior college district risk management pool created under this article.
Membership in a pool
Sec. 3. A school district or a junior college district in this state that meets the criteria established by its respective pool in that pool's plan may purchase from that pool coverage insuring the district against liability for its acts or omissions under the law and may use funds of the district to pay any fees, contributions, or premiums required to be a part of the pool and to obtain that coverage.
Meeting; guidelines and temporary board
Sec. 4. (a) On authorization to create a pool as provided by Section 2 of this article, each board adopting a resolution to create the pool shall select one representative to meet with representatives of the other school districts or junior college districts adopting the resolution. (b) At the meeting, the representatives shall adopt guidelines for developing an organizational plan for the pool and shall select nine persons to serve as a temporary board of trustees.
Plan of operation
Sec. 5. (a) Within 30 days after selection, the members of the temporary board shall meet and begin to prepare a detailed plan of operation for the pool. (b) The plan may include any matters relating to the organization and operation of the pool and its finances and shall include: (1) the organizational structure of the pool, including the number, method of selection, and method of procedure and operation of the regular board for the pool and a summary of the method for managing and operating the pool; (2) a description of the fees, contributions, or financial arrangements necessary to cover the initial expenses of the pool and estimates supported by statistical data of the amounts of those fees, contributions, or other financial arrangements; (3) underwriting guidelines and procedures for the evaluation of risks; (4) procedures for purchase of reinsurance; (5) methods, procedures, and guidelines for establishing rates for premiums for and limits of coverage in the pool; (6) procedures for the processing and payment of claims; (7) methods and procedures for defraying losses and expenses of the pool; (8) methods, procedures, and guidelines for the management and investment of the fund; (9) minimum limits of capital and surplus to be maintained by the pool; and (10) minimum standards for reserve requirements for the pool. (c) The temporary board shall complete the plan within 90 days after the date of the appointment of the temporary board.
Board of trustees
Sec. 6. (a) The pool is governed by a board of trustees as provided in the plan. (b) Not later than the 15th day after the plan is completed by the temporary board, the initial regular board must be selected and take office as provided by the plan. (c) A person serving on the board who is an officer or employee of an entity covered by the pool performs duties on the board as additional duties required of his original office or employment. (d) The general administration and operation of the pool and its fund are vested in the board. (e) A member or employee of the board is not liable with respect to any claim or judgment for which coverage is provided by the pool or for a claim or judgment against any entity covered by the pool against whom a claim is made. (f) Each member of the board and each employee of the board who has any authority over money in the fund or money collected or invested by the pool shall execute a bond in an amount determined by the board, payable to the pool, conditioned on the faithful performance of his duties. The cost of the bond shall be paid by the pool.
Risk management fund
Sec. 7. (a) Immediately after taking office, the initial regular board shall create a risk management fund. The fund must include: (1) fees, contributions, and premiums collected by the pool; (2) investments of money in the fund; (3) interest earned on investments made by the pool; and (4) any other income received by the pool from any sources. (b) The board shall manage and invest the money in the fund in the manner provided by the plan. (c) The money in the fund shall be used to pay liability claims and judgments against entities that are participants in the pool up to the limits of the coverage provided by the pool. Also, money in the fund may be used to pay the administrative and management costs of the pool and the fund up to the limits provided in the plan.
Rates and coverage
Sec. 8. The board shall determine the rates for premiums that will be charged and the limits of coverage provided to assure that the pool and the fund are actuarially sound.
Reinsurance
Sec. 9. The board may purchase reinsurance for any risks covered by the pool.
General authority
Sec. 10. The board may exercise any powers and may enter into any contracts necessary to carry out this article and the plan.
Personnel
Sec. 11. (a) The board may employ a fund manager and other persons necessary to carry out this article and the plan. (b) The board may employ or contract with persons or insurance carriers for underwriting, accounting, claims, and other services.
Initial coverage
Sec. 12. (a) An entity that applies for initial coverage from a pool is entitled to coverage for an initial period of not less than one year regardless of loss history. (b) The board may approve a longer period of initial coverage. (c) To obtain coverage for the initial period, the board may require that the entity participate in a risk management appraisal and comply with the recommendations obtained from the appraisal. (d) If risk management techniques suggested by the appraisal do not sufficiently reduce losses during the initial coverage period to meet the pool's underwriting standards, the board may deny an entity further coverage by the pool. (e) A pool may assess a surcharge to any risk covered during the initial period if the risk does not meet the basic underwriting guidelines for the pool.
Commissions
Sec. 13. A pool may pay commissions from the fund on approval of the board.
Rules
Sec. 14. The board may adopt rules to carry out this article and the plan.
Application of insurance laws
Sec. 15. (a) Except as provided by Subsection (b) of this section, a pool provided by this article is not considered insurance under this code and other laws of this state and the State Board of Insurance has no jurisdiction over the pool. (b) The pool shall collect the necessary data, information, and statements and shall file with the State Board of Insurance the reports and statements required by Articles 1.24A and 1.24B and is subject to 21.21 of this code. Added by Acts 1987, 70th Leg., 1st C.S., ch. 1, Sec. 5.07, eff. Sept. 2, 1987. Art. 21.49-18. TEXAS CHILD-CARE FACILITY LIABILITY POOL.
Article repealed effective April 1, 2007
Definitions
Sec. 1. In this article: (1) "Board" means the board of trustees of the pool. (2) "Child-care facility" has the meaning assigned to that term by Section 42.002, Human Resources Code. (3) "Fund" means the Texas child-care facility liability fund. (4) "Pool" means the Texas child-care facility liability pool.
Creation of pool
Sec. 2. The Texas Child-Care Facility Liability Pool is created when the governing bodies of at least 10 child-care facilities have entered into a written agreement for participation in the pool.
Scope of coverage
Sec. 3. (a) The pool shall insure a child-care facility and its officers and employees against liability for acts and omissions under the laws of this state in their official or employment capacities and shall provide primary and excess liability coverage to child-care facilities that qualify under this article and under the pool's plan of operation. (b) The pool may provide primary liability coverage to a child-care facility in an amount not to exceed $300,000. The pool may provide excess liability coverage to a child-care facility only in an amount determined by the board to be actuarially sound. The pool is liable on any claim only to the limit provided by the coverage of the child-care facility against which the claim is made. (c) The pool may participate in the evaluation, settlement, and defense of a claim against a child-care facility insured by the pool.
Participation in pool
Sec. 4. A child-care facility is entitled to coverage from the pool if it: (1) submits a complete application; (2) provides other information required by the pool; (3) meets the underwriting standards established by the pool; and (4) pays the premiums required for the coverage.
Plan of operation
Sec. 5. (a) The governing bodies of the child-care facilities that create the pool under Section 2 of this article shall, when the agreement is executed, appoint nine persons to serve as a temporary board to draft the plan of operation of the pool. (b) Not later than the 30th day after the selection of the last member of the temporary board, the temporary board shall meet to prepare a plan of operation for the pool. (c) The plan of operation may include any matters relating to the organization and operation of the pool and the pool's finances. The plan must include: (1) the organizational structure of the pool, including the method of selection of the board, the methods of procedure and operation of the board, and a summary of the methods of management and operation of the pool; (2) a description of the contributions and other financial arrangements necessary to cover the initial expenses of the pool and estimates supported by statistical information of the amounts of those contributions or other financial arrangements; (3) underwriting standards and procedures for the evaluation of risks; (4) a requirement that each participant in the pool receive continuing training in methods of controlling liability losses; (5) procedures for the purchase of reinsurance; (6) procedures and guidelines for establishing premium rates and maximum limits of excess liability coverage available from the pool; (7) procedures and guidelines for negotiation and payment of settlements, defense of claims, and payments of judgments; (8) procedures for the processing and payment of claims; (9) procedures for defraying any losses or expenses of the pool; (10) procedures and guidelines for the management and investment of the fund; (11) guidelines for nonrenewal of coverage; (12) minimum limits of capital and surplus to be maintained by the pool; and (13) minimum standards for reserve requirements for the pool. (d) The temporary board shall complete and adopt the plan of operation not later than the 90th day after the date of the appointment of the last member of the temporary board. (e) On completion of the plan of operation, the temporary board shall submit the plan to the State Board of Insurance for examination, suggested changes, and final approval. The State Board of Insurance shall approve the plan of operation on the determination that the pool has and will continue to have the ability to pay valid claims made against it. (f) The plan of operation may be amended by the board with the approval of the State Board of Insurance. The amended plan must maintain the requirement that each participant receive continuing training in methods of controlling liability losses. (g) The first board shall be selected as provided by the plan of operation not later than the 15th day after the date on which the plan of operation is approved by the State Board of Insurance. The members of the first board shall take office not later than the 30th day after the date of the adoption of the plan of operation.
Board of trustees
Sec. 6. (a) The pool is governed by a nine-member board of trustees. The trustees shall be selected as provided by the plan of operation. (b) Members of the board serve for two-year terms, with the terms expiring as provided by the plan of operation. (c) A vacancy on the board shall be filled as provided by the plan of operation. (d) Each member of the board shall execute a bond payable to the pool and conditioned on the faithful performance of the member's duties. The bond shall be executed in the amount required by the plan of operation. The pool shall pay the cost of the bond. (e) A member of the board is not entitled to compensation for the member's service on the board. (f) The board shall elect a presiding officer and other officers from its membership as provided by the plan of operation. Each officer shall serve a one-year term that expires as provided by the plan of operation. (g) The board shall meet at the call of the presiding officer and at times established by its rules. (h) A member of the board is not liable with respect to any claim of judgment for which coverage is provided by the pool, or for a claim or judgment against a child-care facility covered by the pool against which a claim is made.
Board powers and duties
Sec. 7. (a) The board shall: (1) approve contracts, other than liability insurance contracts issued to child-care facilities by the pool; (2) adopt policy forms and premium rate schedules for the pool; and (3) supervise the activities of the pool manager. (b) The board may: (1) adopt rules as necessary for the operation of the pool; (2) delegate specific responsibilities to the pool manager; and (3) amend the plan of operation as necessary to assure the orderly management and operation of the pool.
Pool manager
Sec. 8. (a) The board shall appoint a pool manager who serves at the pleasure of the board. The pool manager shall direct the general operation of the pool and shall perform other duties as directed by the board. (b) The pool manager shall execute a bond in the amount determined by the board, payable to the pool, and conditioned on the faithful performance of the manager's duties. (c) The pool manager shall: (1) receive and approve applications received from child-care facilities for liability coverage from the pool; (2) negotiate contracts for the pool; (3) prepare premium rate schedules and proposed policy forms for board approval; and (4) collect and compile statistical information relating to the liability coverage provided by the pool, including relevant loss, expense, and premium information, and make the information available to the board and the public. (d) The pool manager may refuse to renew the coverage of any child-care facility insured by the pool that fails to meet the guidelines provided by the plan of operation.
Pool employees; contracts
Sec. 9. (a) The pool manager may employ or contract with persons as necessary to assist the board and pool manager in implementing the powers and duties of the pool. (b) The board must approve compensation paid to pool employees and contracts made with other persons. (c) The board may require any employee or person with whom it contracts under this section to execute a bond in an amount determined by the board, payable to the board, and conditioned on the faithful performance of the employee's or person's duties to the pool. (d) An employee or person with whom the pool has contracted is not liable with respect to any claim or judgment against a child-care facility covered by the pool against whom a claim is made.
Office
Sec. 10. (a) The pool shall maintain its principal office in Austin, Texas. (b) The records and other information relating to the operation of the pool shall be maintained in the pool's principal office.
Pool powers and duties
Sec. 11. (a) The pool shall: (1) issue primary and excess liability coverage to each child-care facility entitled to coverage under this article; (2) collect premiums for coverage issued or renewed by the pool; (3) process and pay valid claims; (4) maintain detailed information regarding the pool; and (5) establish a plan to conduct loss control training or contract with an outside entity to establish continuing training and inspections programs designed to reduce the potential liability losses of participants in the pool. (b) The pool may: (1) contract; (2) purchase reinsurance; (3) cancel or refuse to renew coverage; and (4) perform other acts necessary to implement this article, the plan of operation, and the rules adopted by the board.
Texas child-care facility liability fund
Sec. 12. (a) The Texas child-care facility liability fund is created on the creation of the pool. (b) The fund is composed of: (1) premiums paid by child-care facilities for coverage by the pool; (2) contributions and other money received by the pool to cover the initial expenses of the fund; (3) investments and money earned from investments of the fund; and (4) any other money received by the pool. (c) The pool manager shall manage the fund under the general supervision of the board. (d) Administrative expenses of the pool may be paid from the fund. Payments for administrative expenses in any fiscal year may not exceed 10 percent of the total amount of money in the fund during that fiscal year. (e) The fund may not be used to pay punitive damages, fines or penalties for violation of a civil or criminal statute, or fines or penalties imposed for the violation of a rule of a state agency or an ordinance or order of a local government. (f) A claim or judgment may not be paid from the fund under excess liability insurance coverage unless and until all benefits payable under any other underlying liability insurance policy covering that claim or judgment are exhausted. (g) The board may select one or more banks to serve as depository for the fund. Before the deposit of fund money in a depository bank in an amount that exceeds the maximum secured by the Federal Deposit Insurance Corporation, the bank must provide security in an amount sufficient to secure from loss the fund money that exceeds the amount secured by the Federal Deposit Insurance Corporation. (h) The board shall require an annual audit of the capital, surplus, and reserves of the pool to be conducted by an actuary who is a member of the American Academy of Actuaries or a similar national organization of actuaries recognized by the board.
Investments
Sec. 13. (a) The pool manager shall manage and invest the fund in the manner provided by the plan of operation. (b) Money earned by the investment of the fund shall be deposited in the fund or reinvested for the fund.
Initial contributions
Sec. 14. From information provided in the plan of operation, the board shall determine the amount of contributions necessary to meet the initial expenses of the pool.
Premium rates; limits of coverage
Sec. 15. (a) The board shall determine the premium rates charged and the maximum limits of coverages provided to assure that the pool is actuarially sound. (b) The pool manager shall prepare statistical information and other necessary information, proposed rate schedules, and maximum limits of coverage for consideration by the board. (c) The board shall reexamine periodically the rate schedules and the maximum limits of coverage.
Coverage period
Sec. 16. (a) On accepting coverage from the pool, a child-care facility shall maintain the coverage for not less than 24 consecutive months after the date that the coverage is issued. (b) A child-care facility that voluntarily discontinues coverage in the pool is ineligible to obtain coverage from the pool for at least 12 months after the date on which the coverage was discontinued.
Coverage
Sec. 17. Liability insurance coverage provided by the pool may be provided on a claims-made basis or on an occurrence basis.
Nonrenewal
Sec. 18. (a) Except as provided by Subsection (b) of this section, the pool may refuse to renew the coverage of any child-care facility that fails to comply with the pool's underwriting standards. (b) If a participant in the pool maintains underwriting standards established by the plan of operation, the pool may not refuse to renew the coverage of a child-care facility for the first 24 months after the date on which the facility was first insured by the pool.
Shortage of available money
Sec. 19. (a) If money in the fund will be exhausted by payment of all final and settled claims and final judgments during a fiscal year, the amount paid by the pool to each person who has a claim or judgment shall be prorated, with each person receiving an amount equal to the percentage that the amount owed to that person bears to the total amount owed, outstanding, and payable by the pool. (b) The balance of the amount due and unpaid to a person who receives prorated payment under Subsection (a) of this section shall be paid in the subsequent fiscal year.
Jurisdiction of insurance board; application of code
Sec. 20. (a) Except as provided by Subsection (c) of this section, the pool is not engaged in the business of insurance under this code and other state laws, and this code and other state insurance laws do not apply to the pool. (b) In addition to this article, the pool is subject to: (1) the requirements under this code and State Board of Insurance rules relating to the reporting of liability claims information; (2) the requirements of Subchapter B, Chapter 5 of this code relating to the making, filing, and approval of rates; and (3) continuing supervision by the State Board of Insurance relating to the pool's solvency. (c) The State Board of Insurance may set minimum requirements to assure the capability of the pool to satisfy its obligations. Added by Acts 1991, 72nd Leg., ch. 684, Sec. 1, eff. Aug. 26, 1991. Art. 21.49-20. PROPERTY AND CASUALTY LEGISLATIVE OVERSIGHT COMMITTEE.
Article repealed effective April 1, 2007
(a) In this section, "committee" means the property and casualty insurance legislative oversight committee. (b) The committee is composed of seven members as follows: (1) the chair of the Senate Business and Commerce Committee and the chair of the House Committee on Insurance, who shall serve as joint chairs of the committee; (2) two members of the senate appointed by the lieutenant governor; (3) two members of the house of representatives appointed by the speaker of the house of representatives; and (4) the public insurance counsel. (c) An appointed member of the committee serves at the pleasure of the appointing official. In making appointments to the committee, the appointing officials shall attempt to appoint persons who represent the gender composition, minority populations, and geographic regions of the state. (d) Repealed by Acts 2005, 79th Leg., ch. 1227, Sec. 5.01(4). (e) The committee shall: (1) meet at least annually with the commissioner; (2) receive information about rules relating to property and casualty insurance proposed by the department, and may submit comments to the commissioner on those proposed rules; (3) monitor the progress of property and casualty insurance regulation reform, including the fairness of rates, underwriting guidelines, and rating manuals, the availability of coverage, the effect of rate rollbacks, credit scoring, and regulation of homeowners and automobile insurance markets; (4) review recommendations for legislation proposed by the department; and (5) review the necessity of having the department periodically examine the market conduct of an insurer or group of insurers, including the business practices, performance, and operations of the insurer or group of insurers. (f) The committee may request reports and other information from the department as necessary to carry out this section. (g) Not later than November 15 of each even-numbered year, the committee shall report to the governor, lieutenant governor, and speaker of the house of representatives on the committee's activities under Subsection (e) of this section. The report shall include: (1) an analysis of any problems caused by property and casualty insurance regulation reform; and (2) recommendations of any legislative action necessary to address those problems and to foster stability, availability, and competition within the property and casualty insurance industry. Added by Acts 2003, 78th Leg., ch. 206, Sec. 14.01, eff. June 11, 2003. Subsec. (d) amended by Acts 2005, 79th Leg., ch. 1227, Sec. 5.01(4), eff. Sept. 1, 2005. Art. 21.49A. FAIR PLAN (FAIR ACCESS TO INSURANCE REQUIREMENTS) ACT.
Article repealed effective April 1, 2007
Authority; Purpose
Sec. 1. (a) If the commissioner determines, after a public hearing, that in all or any part of the state residential property insurance is not reasonably available in the voluntary market to a substantial number of insurable risks or that at least 25 percent of the applicants to the residential property market assistance program who are qualified under the plan of operation have not been placed with an insurer in the previous six-month period, the commissioner may establish a FAIR (Fair Access to Insurance Requirements) Plan to deliver residential property insurance to citizens of this state in underserved areas, which shall be determined and designated by the commissioner by rule. (a-1) Expired. (b) Except as provided by this subsection, each insurer, as defined herein, as a condition of its authority to transact residential property insurance in this state, shall participate in the FAIR Plan Association in accordance with this Act. The Texas Windstorm Insurance Association established by Article 21.49 of this code may not participate in the FAIR Plan Association for any purpose. (c) The FAIR Plan may not provide windstorm and hail insurance coverage for a risk eligible for that coverage under Article 21.49 of this code.
Definitions
Sec. 2. (1) "FAIR Plan Association" or "association" means a nonprofit association established pursuant to this Act to develop and administer a program to provide residential property insurance in designated underserved areas in this state. (2) "Insurer" means any licensed insurer writing property and casualty insurance in this state, including: (A) a Lloyd's plan company; and (B) a reciprocal or interinsurance exchange. (3) "Residential property insurance" means the coverage against loss to real or tangible personal property at a fixed location provided in a homeowners policy, residential fire and allied lines policy, or farm and ranch owners policy. (4) "Inspection bureau" means the organization or organizations designated by the FAIR Plan Association with the approval of the commissioner to make inspections to determine the condition of the properties for which residential property insurance is sought and to perform such other duties as may be authorized by the FAIR Plan Association or the commissioner. The manner and scope of the inspection and evaluation report for residential property shall be prescribed by the association pursuant to the plan of operation. (5) "Net direct premiums" means gross direct written premiums less return premiums upon canceled contracts (irrespective of reinsurance assumed or ceded) written on residential property pursuant to this Act. (6) "Underserved area(s)" means area(s) designated as underserved by the commissioner by rule. In determining which areas will be designated as underserved, the commissioner shall consider the factors specified in Section 1, Article 5.35-3, of this code.
Governing Committee; Plan of Operation
Sec. 3. (a) The FAIR Plan shall be administered by the governing committee of the association pursuant to a plan of operation. Subject to the approval of the commissioner, the governing committee shall develop the plan of operation and propose amendments thereto. The plan of operation and any amendments thereto shall be adopted by the commissioner by rule. The governing committee may on its own initiative or at the request of the commissioner amend the plan of operation. (b) The governing committee shall be composed of 11 members appointed by the commissioner as follows: (1) five members who represent the interests of insurers; (2) four public members who reside in this state; and (3) two members who are licensed general property and casualty agents. (c) The commissioner or the commissioner's designated representative from within the Texas Department of Insurance shall serve as an ex officio member. (d) To be eligible to serve on the governing committee as a representative of insurers, a person must be a full-time employee of an authorized insurer that is a member of the association. A member of the governing committee may be removed by the commissioner without cause and replaced in accordance with Subsection (b) of this section. (e) The plan of operation shall provide: (1) for establishment of a FAIR Plan Association for the issuing of residential property insurance pursuant to this Act and the distribution of the losses and the expenses in the writing of such insurance in this state; (2) that all insurers licensed to write property insurance and writing residential property insurance shall participate in the assessments of the association, in the proportion that the net direct premiums, of each participating insurer, written in this state during the preceding calendar year, bear to the aggregate net direct premium written in this state by all participating insurers; such information shall be determined in accordance with the residential property statistical plan adopted by the commissioner; (3) that a participating insurer is entitled to receive credit for similar insurance voluntarily written in a designated underserved area and its participation in the assessments of the association shall be reduced in accordance with the provisions of the plan of operation; (4) for the immediate binding of eligible risks; for the use of premium installment payment plans, adequate marketing, and service facilities; and for the establishment of reasonable service standards; (5) procedures for efficient, economical, fair, and nondiscriminatory administration of the FAIR Plan Association; (6) procedures for determining the net level of participation required for each insurer in the FAIR Plan Association; (7) for the use of deductibles and other underwriting devices and for assessment of all members in amounts sufficient to operate the association; and establish maximum limits of liability to be placed through the program; and commissions to be paid to the licensed agents submitting applications; (8) that the association issue policies in its own name; (9) reasonable underwriting standards for determining insurability of the risk; (10) procedures for the assumption and ceding of reinsurance by the association; and (11) any other procedures or operational matters deemed necessary by the governing committee or the commissioner. (f) Notwithstanding Chapter 551, Government Code, or any other law, members of the governing committee may meet by telephone conference call, video conference, or other similar telecommunication method. The governing committee may use telephone conference call, video conference, or other similar telecommunication method for purposes of establishing a quorum or voting or for any other meeting purpose in accordance with this subsection and Subsection (g) of this section. This subsection applies without regard to the subject matter discussed or considered by the members of the governing committee at the meeting. (g) A meeting held by telephone conference call, video conference, or other similar telecommunication method: (1) is subject to the notice requirements applicable to other meetings of the governing committee; (2) may not be held unless notice of the meeting specifies the location of the meeting at which at least one member of the governing committee is physically present; (3) must be audible to the public at the location specified in the notice under Subdivision (2) of this subsection; and (4) must provide two-way audio communication between all members of the governing committee attending the meeting during the entire meeting, and if the two-way audio communication link with members attending the meeting is disrupted so that a quorum of the governing committee is no longer participating in the meeting, the meeting may not continue until the two-way audio communication link is reestablished.
FAIR Plan Association
Sec. 4. Pursuant to procedures and requirements set forth in the plan of operation, the FAIR Plan Association (association) shall develop and administer a program for participation by all insurers licensed to write property insurance in this state and writing residential property insurance in this state. The association shall make residential property insurance available to applicants in underserved areas whose property is insurable in accordance with reasonable underwriting standards but who, after diligent efforts, are unable to procure such insurance through the voluntary market, as evidenced by two declinations from insurers licensed to write and actually writing residential property insurance in the state.
Powers of the Association; Centralized Operations Authorized
Sec. 5. (a) The association is authorized, for FAIR Plan purposes only, to issue policies of insurance and endorsements thereto in its own name or a trade name duly adopted for that purpose, and to act on behalf of all participating insurers in connection with said policies and otherwise in any manner necessary to accomplish the purposes of this Act, including but not limited to issuance of policies, collection of premiums, issuance of cancellations, and payment of commissions, losses, judgments, and expenses. (b) The participating insurers shall be liable to the association as provided in this Act and the plan of operation for the expenses and liabilities so incurred by the association, and the association shall make assessments against the participating insurers as required to meet such expenses and liabilities. In connection with any policy issued by the association: (1) service of any notice, proof of loss, legal process, or other communication with respect to the policy shall be made upon the association; and (2) any action by the insured constituting a claim under the policy shall be brought only against the association, and the association shall be the proper party for all purposes in any action brought under or in connection with any such policy. The foregoing requirements shall be set forth in any policy issued by the association and the form and content of any such policy shall be subject to the approval of the commissioner. (c) The association is authorized to assume and cede reinsurance in conformity with the plan of operation. (d) Each insurer must participate in the assessments of the association in the proportion that its net direct premiums written bear to the aggregate net direct premiums written by all insurers.
Coverage for Windstorm and Hail Insurance; Coverage for Certain Property Located Over Water
Sec. 5A. (a) A policy issued by the association may include coverage against loss or damage by windstorm or hail for: (1) a building or other structure that is built wholly or partially over water; and (2) the corporeal movable property contained in a building or structure described by Subdivision (1) of this subsection. (b) The association may impose appropriate limits of coverage and deductibles for coverage described by Subsection (a) of this section. (c) The governing committee of the association shall submit any proposed changes to the plan of operation necessary to implement Subsections (a) and (b) of this section to the commissioner for the approval of the commissioner in the manner provided by Section 3(a) of this article. (d) The commissioner shall adopt rules as necessary to implement this section, including any rules necessary to implement changes in the plan of operation proposed under Subsections (a) and (b) of this section.
Property Inspection; FAIR Plan Procedure
Sec. 6. (a) Any person having an insurable interest in real or tangible personal property at a fixed location in an underserved area who, after diligent effort has been unable to obtain residential property insurance, as evidenced by two current declinations from insurers licensed to write property insurance and actually writing residential property insurance in the state, is entitled upon application to the association to an inspection and evaluation of the property by representatives of the inspection bureau. (b) Applications may be made on behalf of the applicant by a licensed general lines property and casualty agent and shall be submitted on forms prescribed by the association. (c) Promptly after the request for inspection is received, an inspection must be made and an inspection report filed with the association and made available to the applicant upon request. (d) If the inspection bureau finds that the residential property meets the reasonable underwriting standards established in the plan of operation, the applicant shall be so informed in writing and a policy or binder shall be issued by the association. If the residential property does not meet the criteria, the applicant shall be informed, in writing, of the reasons for the failure of the residential property to meet the criteria. (e) If, at any time, the applicant makes improvements in the residential property or its condition which the applicant believes are sufficient to make the residential property meet the criteria, a representative of the inspection bureau shall reinspect the residential property upon request. In any case, the applicant for residential property insurance shall be eligible for one reinspection any time within 60 days after the initial FAIR Plan inspection. If upon reinspection the residential property meets the reasonable underwriting standards established in the plan of operation, the applicant shall be so informed in writing and a policy or binder shall be issued by the association.
Approval of Rates
Sec. 7. The association shall file with the commissioner for approval the proposed rates and supplemental rate information to be used in connection with the issuance of policies or endorsements. Rates shall be set in an amount sufficient to carry all claims to maturity and to meet the expenses incurred in the writing and servicing of the business. Within 60 days of the filing of the proposed rates, the commissioner shall enter an order either approving or disapproving, in whole or in part, the proposed rates. The commissioner may, upon notice to the association, extend the period for entering an order under this section an additional 30 days. No such policies or endorsements shall be issued until such time as the commissioner approves the rates to be applied to the policy or endorsement. An order disapproving a rate shall state the grounds for the disapproval and the findings in support thereof.
Appeals; Judicial Review
Sec. 8. (a) Any applicant or affected insurer has the right of appeal to the association. A decision of the association may be appealed to the commissioner within 30 days after such decision. (b) All orders or decisions of the commissioner made pursuant to this Act are subject to judicial review in accordance with Subchapter D, Chapter 36, of this code.
Immunity from Liability
Sec. 9. There is no liability on the part of, and no cause of action against insurers, the inspection bureau, the association, the governing committee, their agents or employees, or the commissioner or the commissioner's authorized representatives, with respect to any inspections required to be undertaken by this Act or for any acts or omissions in connection therewith, or for any statements made in any report and communication concerning the insurability of the property, or in the findings required by the provisions of this Act, or at the hearings conducted in connection with such inspections.
Insolvency
Sec. 10. In the event any participating insurer fails, by reason of insolvency, to pay any assessment, the association shall cause the reimbursement ratios to be immediately recalculated, excluding therefrom the amount of the insolvent insurer's assessment determined by the commissioner to be uncollectible, so that such uncollectible amount is, in effect, assumed and redistributed among the remaining participating insurers.
Assessments and Premium Surcharges
Sec. 11. Should a deficit occur in the association, the association, at the direction of the commissioner, shall either request the issuance of public securities as authorized by Article 21.49A-1 of this code or assess participating insurers in accordance with this section. As reimbursement for assessments paid under this section or service fees paid under Article 21.49A-1 of this code, each insurer may charge a premium surcharge on every property insurance policy issued by it insuring property in this state, the effective date of which policy is within the three-year period commencing 90 days after the date of assessment by the association under this section or commencing 90 days after payment of a service fee under Article 21.49A-1 of this code. The amount of the surcharge shall be calculated on the basis of a uniform percentage of the premium on such policies equal to one-third of the ratio of the amount of an insurer's assessment or service fee payment to the amount of its direct earned premiums as reported in its financial statement to the department for the calendar year immediately preceding the year in which the assessment is made, such that over the period of three years the aggregate of all such surcharges by an insurer shall be at least equal to the amount of the assessment or service fee payment of such insurer. The amount of any assessment paid and surcharged under this section may be carried by the member insurer as an admitted asset of the insurer for all purposes, including exhibition in annual statements under Section 862.001 of this code, until collected. The commissioner shall adopt rules and procedures as necessary to implement this section.
Sanctions
Sec. 12. If the association, inspection bureau, or participating insurer is found to be in violation of or in failure to comply with this Act, each entity shall be subject to the sanctions authorized in Chapter 82 of this code and administrative penalties authorized under Chapter 84 of this code. The commissioner may also utilize any other disciplinary procedures authorized by this code, including the cease and desist procedures authorized by Chapter 83 of this code.
Annual Report
Sec. 13. The association shall compile a calendar year annual operating report and submit such annual report to the commissioner on or before March 31 of the following calendar year. This annual report shall be a matter of public record.
Powers of the Commissioner
Sec. 14. (a) In addition to any powers conferred upon the commissioner by this or any other law, the commissioner is charged with the authority to supervise the association and the inspection bureau. In addition, the commissioner has the power: (1) to examine the operation of the association and the inspection bureau through free access to all the books, records, files, papers, and documents relating to their operation and may summon, qualify, and examine as witnesses all persons having knowledge of such operations, including the governing committee, officers, or employees thereof; (2) to do all things necessary to enable the State of Texas and the association to fully participate in any federal program of reinsurance which may be enacted for purposes similar to the purposes of this Act; (3) to require such reports from the association concerning risks insured by the association pursuant to this Act as may be deemed necessary; and (4) to adopt policy forms, endorsements, rates, and rating and rule manuals for use by the association.
Retention of Profits
Sec. 15. The association shall retain any profits of the association to be used for the purposes of the association. The profits of the association shall be used to mitigate losses, including the purchase of reinsurance and the offset of future assessments, and may not be distributed to insurers.
Assets of Association
Sec. 16. On dissolution of the association, all assets of the association shall be deposited in the general revenue fund. Added by Acts 1995, 74th Leg., ch. 415, Sec. 6, eff. Aug. 28, 1995. Sec. 1 amended by Acts 2003, 78th Leg., ch. 964, Sec. 1, eff. June 20, 2003; Sec. 3(e) amended by Acts 2003, 78th Leg., ch. 206, Sec. 11.02, eff. June 11, 2003; Sec. 5(d) amended by Acts 2003, 78th Leg., ch. 206, Sec. 11.03, eff. June 11, 2003; Sec. 6(b) amended by Acts 2003, 78th Leg., ch. 964, Sec. 2, eff. June 20, 2003; Sec. 8(b) amended by Acts 2003, 78th Leg., ch. 964, Sec. 3, eff. June 20, 2003; Sec. 11 amended by Acts 2003, 78th Leg., ch. 206, Sec. 11.04, eff. June 11, 2003; Sec. 12 amended by Acts 2003, 78th Leg., ch. 964, Sec. 4, eff. June 20, 2003; Sec. 15 added by Acts 2003, 78th Leg., ch. 206, Sec. 11.05, eff. June 11, 2003; Sec. 1(a), (b) amended by Acts 2005, 79th Leg., ch. 1082, Sec. 1, eff. June 18, 2005; Sec. 3(b), (d), (e) amended by Acts 2005, 79th Leg., ch. 1082, Sec. 2, eff. June 18, 2005; Sec. 3(f), (g) added by Acts 2005, 79th Leg., ch. 1082, Sec. 2, eff. June 18, 2005; Sec. 5(d) amended by Acts 2005, 79th Leg., ch. 1082, Sec. 3, eff. June 18, 2005; Sec. 5A added by Acts 2005, 79th Leg., ch. 1153, Sec. 3, eff. Sept. 1, 2005; Sec. 11 amended by Acts 2005, 79th Leg., ch. 1082, Sec. 4, eff. June 18, 2005; Sec. 16 added by Acts 2005, 79th Leg., ch. 1082, Sec. 5, eff. June 18, 2005. Art. 21.49A-1. REVENUE BOND PROGRAM FOR FAIR PLAN ASSOCIATION.
Article repealed effective April 1, 2007
Purpose
Sec. 1. The legislature finds that the issuance of public securities to provide a method to raise funds to provide residential property insurance through the FAIR Plan Association in this state is for the benefit of the public and in furtherance of a public purpose.
Definitions
Sec. 2. In this article: (1) "Association" means the FAIR Plan Association established under Article 21.49A of this code. (2) "Public security resolution" means the resolution or order authorizing public securities to be issued under this article. (3) "Bond" means any debt instrument or public security issued by the Texas Public Finance Authority. (4) "Board" means the board of directors of the Texas Public Finance Authority. (5) "Insurer" means any insurer required to participate in the association under Section 5, Article 21.49A of this code, including a Lloyd's plan or a reciprocal or interinsurance exchange.
Public securities authorized; application of Texas public finance authority act.
Sec. 3. (a) At the request of the association, the Texas Public Finance Authority shall issue public securities to: (1) fund the association, including: (A) to establish and maintain reserves to pay claims; (B) to pay operating expenses; and (C) to purchase reinsurance; (2) pay costs related to issuance of the public securities; and (3) pay other costs related to the public securities as may be determined by the board. (b) To the extent not inconsistent with this article, Chapter 1232, Government Code, applies to public securities issued under this article. In the event of a conflict, this article controls.
Applicability of other statutes
Sec. 4. The following laws apply to public securities issued under this article to the extent consistent with this article: (1) Chapters 1201, 1202, 1204, 1205, 1231, and 1371, Government Code; and (2) Subchapter A, Chapter 1206, Government Code.
Limits
Sec. 5. The Texas Public Finance Authority may issue, on behalf of the association, public securities in a total amount not to exceed $75 million.
Conditions
Sec. 6. (a) Public securities issued under this article may be issued at public or private sale. (b) Public securities may mature not more than 10 years after the date issued. (c) Public securities must be issued in the name of the association.
Additional covenants
Sec. 7. In a public security resolution, the board may make additional covenants with respect to the public securities and the designated income and receipts of the association pledged to their payment, and may provide for the flow of funds and the establishment, maintenance, and investment of funds and accounts with respect to the public securities.
Special accounts
Sec. 8. (a) A public security resolution may establish special accounts, including an interest and sinking fund account, reserve account, and other accounts. (b) The association shall administer the accounts in accordance with Article 21.49A of this code.
Security
Sec. 9. (a) Public securities are payable only from the service fee established under Section 10 of this article or other amounts that the association is authorized to levy, charge, and collect. (b) Public securities are obligations solely of the association. Public securities do not create a pledging, giving, or lending of the faith, credit, or taxing authority of this state. (c) Each public security must include a statement that the state is not obligated to pay any amount on the public security and that the faith, credit, and taxing authority of this state are not pledged, given, or lent to those payments. (d) Each public security issued under this article must state on its face that the public security is payable solely from the revenues pledged for that purpose and that the public security does not and may not constitute a legal or moral obligation of the state.
Service fee
Sec. 10. (a) A service fee may be assessed against: (1) each insurer; and (2) the association. (b) The service fee shall be set by the commissioner in an amount sufficient to pay all debt service on the public securities. The service fee shall be paid by each insurer and the association as required by the commissioner by rule. (c) The comptroller shall collect the service fee and the department shall reimburse the comptroller in the manner described by Article 4.19 of this code. (d) The commissioner, in consultation with the comptroller, may coordinate payment and collection of the service fee with other payments made by insurers and collected by the comptroller. (e) As a condition of engaging in the business of insurance in this state, an insurer agrees that if the company leaves the property insurance market in this state the insurer remains obligated to pay, until the public securities are retired, the insurer's share of the service fee assessed under this section in an amount proportionate to that insurer's share of the property insurance market, including residential property insurance, in this state as of the last complete reporting period before the date on which the insurer ceases to engage in that insurance business in this state. The proportion assessed against the insurer shall be based on the insurer's gross premiums for property insurance, including residential property insurance, for the insurer's last reporting period.
Tax exempt
Sec. 11. The public securities issued under this article, any interest from those public securities, and all assets pledged to secure the payment of the public securities are free from taxation by the state or a political subdivision of this state.
Authorized investments
Sec. 12. The public securities issued under this article constitute authorized investments under Articles 2.10 and 3.33 and Subpart A, Part I, Article 3.39 of this code.
State pledge
Sec. 13. The state pledges to and agrees with the owners of any public securities issued in accordance with this article that the state will not limit or alter the rights vested in the association to fulfill the terms of any agreements made with the owners of the public securities or in any way impair the rights and remedies of those owners until the public securities, bond premium, if any, or interest, and all costs and expenses in connection with any action or proceeding by or on behalf of those owners, are fully met and discharged. The association may include this pledge and agreement of the state in any agreement with the owners of the public securities.
Enforcement by mandamus
Sec. 14. A writ of mandamus and all other legal and equitable remedies are available to any party at interest to require the association and any other party to carry out agreements and to perform functions and duties under this article, the Texas Constitution, or a public security resolution. Added by Acts 2003, 78th Leg., ch. 206, Sec. 11.01, eff. June 11, 2003. Art. 21.49B. PROPERTY AND CASUALTY INSURANCE INITIATIVES TASK FORCE.
Article repealed effective April 1, 2007
The commissioner may establish a task force to study the utility and feasibility of instituting various property and casualty insurance initiatives in this state. The initiatives to be studied may include, but are not limited to: (1) possible coordination with the Texas Economic Development Bank to make certain property and casualty insurance an enterprise zone program pursuant to Chapter 2303, Government Code; (2) possible coordination with Neighborhood Housing Service (NHS) Programs to establish voluntary NHS-Insurance Industry Partnerships; (3) possible insurance agent programs to increase minority agency access to standard insurance companies, including minority intern programs with insurance companies; (4) possible tax incentives for insurance written in underserved areas; and (5) a consumer education program designed to increase the ability of consumers to differentiate among different products and providers in the property and casualty market. Added by Acts 1995, 74th Leg., ch. 415, Sec. 7, eff. Aug. 28, 1995. Amended by Acts 2003, 78th Leg., ch. 814, Sec. 3.61, eff. Sept. 1, 2003. Art. 21.49C. REPORT OF CLAIMS INFORMATION ABOUT BURGLARY, ROBBERY, OR DEATH. (a) Subject to Subsection (b), the state fire marshal, the fire marshal of a political subdivision in this state, the chief of a fire department in this state, a chief of police of a municipality in this state, or a sheriff in this state may, in the course of a criminal investigation, request in writing that an insurance company investigating a claimed burglary or robbery loss or a death claim seeking life insurance proceeds release information in the company's possession that relates to that claimed loss. The company shall release the information to any official authorized to request the information under this article if the company has reason to believe that the insurance claim is false or fraudulent. (b) An official who requests information under this article may not request anything other than: (1) an insurance policy relevant to an insurance claim under investigation and the application for that policy; (2) policy premium payment records; (3) the history of previous claims made by the insured; and (4) material relating to the investigation of the insurance claim, including statements of any person, proof of loss, or other relevant evidence. (c) This article does not authorize a public official or agency to adopt or require any form of periodic report by an insurance company. (d) In the absence of fraud or malice, an insurance company or a person who releases information on behalf of an insurance company is not liable for damages in a civil action or subject to criminal prosecution for an oral or written statement made, or any other action taken, that relates to the information required to be released under this article. (e) The officials and department personnel receiving information under this article shall maintain the information in confidence until the release of the information is required during a criminal or civil proceeding. (f) An insurance company or the company's representative may not intentionally refuse to release to an official described by Subsection (a) of this article the information required to be released to that official under this article. Added by Acts 2001, 77th Leg., ch. 288, Sec. 1, eff. Sept. 1, 2001. Art. 21.50. MORTGAGE GUARANTY INSURANCE.
Article repealed effective April 1, 2007
Definitions
Sec. 1. The definitions set forth herein shall govern the construction of the terms used in this Article but shall not affect any other provisions of this Code. (a) "Mortgage guaranty insurance" means: (1) Insurance against financial loss by reason of nonpayment of principal, interest and other sums agreed to be paid under the terms of any note or bond or other evidence of indebtedness secured by an authorized real estate security constituting a lien or charge on real estate, provided the improvement on such real estate is a residential building or buildings designed for occupancy by not more than four families, or a condominium unit. (2) Insurance against financial loss by reason of nonpayment of principal, interest and other sums agreed to be paid under the terms of any note or bond or other evidence of indebtedness secured by an authorized real estate security constituting a lien or charge on real estate, provided the improvement on such real estate is a building or buildings designed for occupancy by five or more families or designed to be occupied for industrial or commercial purposes. (3) Insurance against financial loss by reason of nonpayment of rent and other sums agreed to be paid under the terms of a written lease for the possession, use or occupancy of real estate, provided the improvement on such real estate is a building or buildings designed to be occupied for industrial or commercial purposes. (b) "Authorized real estate security" for the purposes of Paragraphs (1) and (2) of Subdivision (a) of this section means either: (1) A note, bond or other evidence of indebtedness, secured by a mortgage, deed of trust, wraparound mortgage or other instrument which constitutes or is considered by the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, the Federal Home Loan Bank Board, their successors, or agency of this State or of the federal government to be the equivalent of a first lien or charge on real estate; provided: (A) The real estate loan secured in such manner is a type of loan which a bank, savings and loan association, credit union or an insurance company, which is supervised and regulated by a department of this State or an agency of the federal government or a mortgage banker which is an approved seller-servicer of the Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, or their successors, is authorized to make, or a type of loan which is approved by the Secretary of Housing and Urban Development for participation in any mortgage insurance program. (B) The improvement on such real estate is a building or buildings designed for occupancy as specified by Paragraphs (1) and (2) of Subdivision (a) of this section. (C) The lien on such real estate may be subject and subordinate to the following: (i) The lien of any public bond, assessment, or tax, when no installment, call or payment of or under such bond, assessment or tax is delinquent. (ii) Outstanding mineral, oil or timber rights, rights-of-way, easements or rights-of-way support, sewer rights, building restrictions or other restrictions or covenants, conditions or regulations of use, or outstanding leases upon such real property under which rents or profits are reserved to the owner thereof. (2) A note, bond or other evidence of indebtedness secured by a proprietary lease and a stock membership certificate issued to a tenant stockholder or resident member of a fee simple cooperative housing corporation as defined in Section 216 of the United States Internal Revenue Code. (c) "Contingency reserve" means an additional premium reserve established for the protection of policyholders against the effect of adverse economic cycles or losses.
Policy Forms; Rates and Rate Information; Filing Requirements
Sec. 1A. (a) The procedures as set forth herein shall govern mortgage guaranty insurance as defined in this article but shall not affect any other of the provisions of this code. (b) All policy forms, related forms, classifications, and rules used by a mortgage guaranty insurer in this state shall be exempt from approval by the board, but all such policy forms, related forms, classifications, and rules which are to be used in this state, except those filed under Subsection (l), shall be filed with the board at least 15 days before they are to become effective. The board may, after a hearing held on not less than 20 days' notice, specifying the matters to be considered at such hearing, to every insurer which made such filing, and upon finding that such filing is no longer in the best interest of the public of this state, issue an order suspending such exemption as to any or all insurers which made such filings and ordering such insurers to cease and desist from the use of such policy forms, related forms, classifications, and rules as the board may specify in its order. (c) No policy of mortgage guaranty insurance shall contain a provision which allows subrogation rights or any other claim by the insurer against the borrower for a deficiency arising from a foreclosure sale of a single-family dwelling occupied by the borrower as the principal residence of the borrower. The commissioner shall disapprove any such form if: (1) It is in any respect in violation of or does not comply with this code or rules adopted by the commissioner. (2) It contains provisions which encourage misrepresentation or are unjust, unfair, inequitable, misleading, deceptive, or contrary to law or to the public policy of this state. (d) The commissioner may, after notice and hearing, adopt reasonable rules relating to the minimum standards for coverage under such policy forms consistent with the purpose of this article and the public policy of this state. (e) The board may, after notice and hearing, adopt reasonable rules and amendments to rules that are necessary for it to establish guidelines, procedures, methods, standards, and criteria by which the various and different types of forms and documents submitted to the board are to be reviewed and acted on by the board. (f) A mortgage guaranty insurer shall file with the board all rates and supplementary rate information and all changes and amendments thereto which are to be used in this state at least 15 days before they are to become effective. Rates, rating plans, and charges shall not be excessive, inadequate, or unfairly discriminatory and shall be reasonable with respect to the benefits provided. (g) On any filing of rates or changes and amendments to these rates, the insurer shall file adequate supporting data, including: (1) information on past and prospective loss experience within and outside the state, on catastrophe hazards, on expenses of operation, on a reasonable margin for profit and contingencies; (2) an explanation of the filer's interpretation of any statistical data relied on by it; (3) an explanation and description of the methods used in making the rates; (4) certification by an appropriate official of the insurer relating to the appropriateness of the charges, rates or rating plans based on reasonable assumptions and accompanied by adequate supporting information. (h) The board may establish requirements for data and information to be filed under this article. (i) The board shall, after due consideration, promulgate reasonable rules and statistical plans which may be modified from time to time and which shall be used thereafter by each insurer in the recording and reporting of its loss experience and such other data as may be required, in order that the total loss and expense experience of all insurers may be made available in such form and detail as may be deemed necessary by the board. (j) Nothing in this Act shall be considered as compelling the State Board of Insurance to establish standard and absolute rates and the board is specifically authorized, in its discretion, to accept different rates for different insurers for the same risk or risks on the types of insurance covered by this article; nor shall this article be construed as to require the board to establish a single and uniform rate for each risk or risks or to compel all insurers to adhere to such rates previously filed by other insurers; and the board is empowered to accept such different rates for different insurers as filed by any qualified insurer unless it finds that such filing does not meet the requirements of this article. (k) If at any time the board finds that a policy form or rate filing no longer meets the requirements of this code, it may, after a hearing held on not less than 20 days' notice, specifying the matters to be considered at such hearing, to every insurer which made such filing, issue an order withdrawing its approval thereof. Said order shall specify in what respects the board finds that such filing no longer meets the requirements of this code and shall be effective not less than 30 days after its issuance. (l) Policies providing coverage for a pool or group of loans in connection with the issuance of mortgage-backed securities or bonds shall be exempt from approval by the board under Subsection (b) of this section, but all such policy forms, related forms, classifications, and rules which are to be used in this state shall be filed with the board at least 15 days after they are to become effective. Mortgage guaranty insurers are prohibited from discrimination in the issuance or extension of mortgage guaranty insurance on the basis of the applicant's sex, marital status, race, color, creed, national origin, disability, age, or solely on the geographic location of the property unless (1) the discrimination related to geographic location of the property is for a business purpose that is not a mere pretext for unfair discrimination; or (2) the refusal, cancellation, or limitation is required by law or regulatory mandate.
Notice to Borrower
Sec. 1B. (a) A lender that requires a borrower to purchase mortgage guaranty insurance shall provide annually to the borrower a copy of the following written notice printed in at least 10-point bold-faced type: "NOTICE OF RIGHT TO CANCEL PRIVATE MORTGAGE INSURANCE: If you currently pay private mortgage insurance premiums, you may have the right to cancel the insurance and cease paying premiums. This would permit you to make a lower total monthly mortgage payment and to possibly receive a refund of any unearned premiums on the policy. In most cases, you have the right to cancel private mortgage insurance if the principal balance of your loan is 80 percent or less of the current fair market appraised value of your home. If you want to learn whether you are eligible to cancel this insurance, please contact us at (address and telephone number of lender) or the Texas Department of Insurance consumer help line at (the appropriate toll-free telephone number)." (b) If a lender receives a refund of an unearned mortgage guaranty insurance premium paid by a borrower, the lender shall remit the refund to the borrower not later than the 10th business day after the date on which the lender receives the refund. (c) If federal law requires a lender to provide a borrower with a written notice containing substantially the same information required by Subsection (a) of this section, a lender who provides the notice required by federal law within the period prescribed by federal law satisfies the notice requirement of Subsection (a) of this section. (d) In this section, "lender" has the meaning assigned by Section 1(1), Article 21.48A, of this code.
Qualifications of Insurers
Sec. 2. Qualifications for mortgage guaranty insurers shall be as follows: (1) An insurer, in order to qualify for writing mortgage guaranty insurance, must have the same minimum capital and surplus as that required of a company by Chapter 8, Texas Insurance Code. (2) A foreign or alien insurer writing mortgage guaranty insurance shall not be eligible for the issuance of a certificate of authority in Texas unless it has demonstrated a satisfactory operating experience in its state of domicile. (3) A mortgage guaranty insurer which anywhere transacts any class of insurance other than mortgage guaranty insurance is not eligible for the issuance of a certificate of authority to transact mortgage guaranty insurance in this State nor for the renewal or continuance thereof. (4) A mortgage guaranty insurer which anywhere transacts the classes of insurance defined in Paragraphs (2) and (3) of Subdivision (a) of Section 1 is not eligible for the issuance or continuance of a certificate of authority to transact in this State the class of mortgage guaranty insurance defined in Paragraph (1) of Subdivision (a) of Section 1.
Unearned Premium Reserve; Computation
Sec. 3. The unearned premium reserve on mortgage guaranty insurance shall be computed in accordance with the other applicable sections of this Code, except that on all policies covering a risk period of more than one year the unearned premium reserve shall be computed in accordance with standards promulgated by the State Board of Insurance after appropriate hearings.
Loss Reserve; Determination
Sec. 4. On such insurance, the case basis method shall be used to determine the loss reserve, which shall include a reserve for claims incurred but not reported.
Contingency Reserve; Withdrawals; Releases to Surplus
Sec. 5. In addition to the capital, surplus and reserves specified in Sections 2, 3 and 4 hereof, each mortgage guaranty insurer shall establish a contingency reserve, which shall be reported as a liability in the insurer's financial statements. To provide for and maintain such reserve, the company shall annually contribute to such reserve fifty per cent (50%) of the earned premiums on its mortgage guaranty insurance business. The earned premiums so reserved may be released to the insurer's surplus, annually, after they have been so maintained for 120 months. However, withdrawals may be made from such reserve by the insurer in any given year in which the insurer can demonstrate to the State Board of Insurance that the incurred losses for such year exceed thirty-five per cent (35%) of the corresponding earned premiums for such year. The amount so withdrawn and released for such losses shall reduce any subsequent annual release to surplus from the established contingency reserve by an amount equal to the amount so withdrawn, and any balance in excess of the normal annual release from such reserve shall carry over and be deducted from subsequent annual releases.
Outstanding Total Liability; Limit
Sec. 6. A mortgage guaranty insurer shall not at any time have outstanding a total liability, net of reinsurance, under its aggregate mortgage guaranty insurance policies exceeding 25 times its capital, surplus and contingency reserve, such liability to be computed on the basis of the insurer's liability under its election as provided in Section 7 and such liability for leases to be computed on the basis of the insurer's liability as determined by the State Board of Insurance. In the event that any insurer has outstanding total liability exceeding 25 times its capital, surplus and contingency reserve, it shall cease transacting new mortgage guaranty business until such time as its total liability no longer exceeds 25 times its capital, surplus and contingency reserve.
Limit on Coverage to Amount of Indebtedness; Election to Pay Entire Indebtedness
Sec. 7. A mortgage guaranty insurer shall limit its coverage, net of reinsurance, for the class of insurance defined in Paragraphs (1) and (2) of Subdivision (a) of Section 1 to a maximum of twenty-five per cent (25%) of the entire indebtedness to the insured, or in lieu thereof, a mortgage guaranty insurer may elect to pay the entire indebtedness to the insured and acquire title to the authorized real estate security.
Loans Secured by Properties in Single-housing or Contiguous Tracts; Limit
Sec. 8. A mortgage guaranty insurer shall not insure loans secured by properties in a single housing tract or a contiguous tract in excess of ten per cent (10%) of the insurer's capital, surplus and contingency reserve. In determining the amount of such risk, applicable reinsurance in any assuming insurer authorized to transact mortgage guaranty insurance in this State shall be deducted from the total direct risk insured. "Contiguous," for the purposes of this section, means not separated by more than one-half mile.
Advertising of "Insured Loans"
Sec. 9. No bank, savings and loan association or insurance company, or an approved seller-servicer of the Federal National Mortgage Association, any of whose authorized real estate securities are insured by a mortgage guaranty insurance company, may state in any brochure, pamphlet, report or any form of advertising that the real estate loans of the bank, savings and loan association, insurance company or an approved seller-servicer of the Federal National Mortgage Association are "insured loans" unless the brochure, pamphlet, report or advertising also clearly states that the loans are insured by private insurers and the names of the private insurers are given and shall not make any such statement at all unless such insurance is by an insurer certificated to write in this State.
Application of Other Laws
Sec. 10. All the applicable provisions of this Code and of other statutes of this State, except as the same may be in conflict herewith, shall apply to the operation and conduct of mortgage guaranty insurance business. Added by Acts 1971, 62nd Leg., p. 1066, ch. 222, Sec. 1, eff. Aug. 30, 1971. Amended by Acts 1973, 63rd Leg., p. 22, ch. 19, Sec. 1, eff. March 28, 1973. Secs. 1, 2, 7 amended by Acts 1983, 68th Leg., p. 5395, ch. 998, Sec. 1, eff. Aug. 29, 1983; Sec. 1A added by Acts 1985, 69th Leg., ch. 147, Sec. 1, eff. Sept. 1, 1985; Sec. 1A amended by Acts 1993, 73rd Leg., ch. 685, Sec. 20.18, eff. Sept. 1, 1993; Sec. 1B added by Acts 1997, 75th Leg., ch. 870, Sec. 1, eff. Jan. 1, 1998. Art. 21.52B. PHARMACEUTICAL SERVICES.
Definitions
Sec. 1. In this article: (1) "Health insurance policy" means an individual, group, blanket, or franchise insurance policy, insurance policy or agreement, or group hospital service contract that provides benefits for pharmaceutical services that are necessary as a result of or to prevent an accident or sickness, but does not include evidence of coverage provided by a health maintenance organization under the Texas Health Maintenance Organization Act (Chapter 20A, Vernon's Texas Insurance Code). (2) "Pharmaceutical services" means services, including dispensing prescription drugs, that are ordinarily and customarily rendered by a pharmacy or pharmacist licensed to practice pharmacy under the Texas Pharmacy Act (Article 4542a-1, Vernon's Texas Civil Statutes). (3) "Pharmacist" means a person licensed to practice pharmacy under the Texas Pharmacy Act (Article 4542a-1, Vernon's Texas Civil Statutes). (4) "Pharmacy" means a facility licensed as a pharmacy under the Texas Pharmacy Act (Article 4542a-1, Vernon's Texas Civil Statutes). (5) "Drugs" and "prescription drugs" have the meanings assigned by Section 5, Texas Pharmacy Act (Article 4542a-1, Vernon's Texas Civil Statutes). (6) "Managed care plan" means a health maintenance organization, a preferred provider organization, or another organization that, under a contract or other agreement entered into with a participant in the plan: (A) provides health care benefits, or arranges for health care benefits to be provided, to a participant in the plan; and (B) requires or encourages those participants to use health care providers designated by the plan.
Prohibited contractual provisions
Sec. 2. (a) A health insurance policy or managed care plan that is delivered, issued for delivery, or renewed or for which a contract or other agreement is executed may not: (1) prohibit or limit a person who is a beneficiary of the policy from selecting a pharmacy or pharmacist of the person's choice to be a provider under the policy to furnish pharmaceutical services offered or provided by that policy or interfere with that person's selection of a pharmacy or pharmacist; (2) deny a pharmacy or pharmacist the right to participate as a contract provider under the policy or plan if the pharmacy or pharmacist agrees to provide pharmaceutical services that meet all terms and requirements and to include the same administrative, financial, and professional conditions that apply to pharmacies and pharmacists who have been designated as providers under the policy or plan; or (3) require a beneficiary of a policy or a participant in a plan to obtain or request a specific quantity or dosage supply of pharmaceutical products. (b) Notwithstanding Subsection (a)(3) of this section, a health insurance policy or managed care plan may allow the physician of a beneficiary or participant to prescribe drugs in a quantity or dosage supply the physician determines appropriate and that is in compliance with state and federal statutes. (c) This section does not prohibit: (1) a provision of a policy or plan from limiting the quantity or dosage supply of pharmaceutical products for which coverage is provided or providing financial incentives to encourage the beneficiary or participant and the prescribing physician to use a program that provides pharmaceutical products in quantities that result in cost savings to the insurance program or managed care plan and the beneficiary or participant if the provision applies equally to all designated providers of pharmaceutical services under the policy or plan; (2) a pharmacy card program that provides a means of obtaining pharmaceutical services offered by the policy or plan through all designated providers of pharmaceutical services; or (3) a plan from establishing reasonable application and recertification fees for a pharmacy which provides pharmaceutical services as a contract provider under the plan, provided that such fees are uniformly charged to each pharmacy under contract to the plan.
Provision void
Sec. 3. A provision of a health insurance policy or managed care plan that is delivered, issued for delivery, entered into, or renewed in this state that conflicts with Section 2 of this article is void to the extent of the conflict.
Construction of article
Sec. 4. This article does not require a health insurance policy or managed care plan to provide pharmaceutical services.
Application of prohibition
Sec. 5. The provisions of Section 2 of this article do not apply to a self-insured employee benefit plan that is subject to the Employee Retirement Income Security Act of 1974 (29 U.S.C. Section 1001, et seq.). Sec. 6. Repealed by Acts 1993, 73rd Leg., ch. 685, Sec. 19.06, eff. Aug. 30, 1993. Added by Acts 1991, 72nd Leg., ch. 182, Sec. 1, eff. Sept. 1, 1991. Sec. 2(b) amended by Acts 1993, 73rd Leg., ch. 685, Sec. 19.07, eff. Sept. 1, 1993; Sec. 5 amended by Acts 1993, 73rd Leg., ch. 685, Sec. 19.08, eff. Sept. 1, 1993; Sec. 6 repealed by Acts 1993, 73rd Leg., ch. 685, Sec. 19.06, eff. Aug. 30, 1993; Sec. 1(6) added by Acts 1995, 74th Leg., ch. 852, Sec. 1, eff. Sept. 1, 1995; Sec. 2 amended by Acts 1995, 74th Leg., ch. 852, Sec. 2, eff. Sept. 1, 1995; Sec. 3 amended by Acts 1995, 74th Leg., ch. 852, Sec. 3, eff. Sept. 1, 1995; Sec. 4 amended by Acts 1995, 74th Leg., ch. 852, Sec. 4, eff. Sept. 1, 1995. Art. 21.53X. PROHIBITED PRACTICES RELATED TO EXPOSURE TO ASBESTOS OR SILICA. (a) In this article, "health benefit plan" means a plan that provides benefits for medical, surgical, or other treatment expenses incurred as a result of a health condition, a mental health condition, an accident, sickness, or substance abuse, including an individual, group, blanket, or franchise insurance policy or insurance agreement, a group hospital service contract, or an individual or group evidence of coverage or similar coverage document. The term includes: (1) a small employer health benefit plan or a health benefit plan written to provide coverage with a cooperative under Chapter 26 of this code; (2) a standard health benefit plan offered under Article 3.80 of this code or Section 9N, Texas Health Maintenance Organization Act (Article 20A.09N, Vernon's Texas Insurance Code); and (3) a health benefit plan offered under Chapter 1551, 1575, 1579, or 1601 of this code. (b) This article applies to any entity that offers a health benefit plan or an annuity or life insurance policy or contract in this state, including: (1) a stock or mutual life, health, or accident insurance company; (2) a group hospital service corporation operating under Chapter 842 of this code; (3) a fraternal benefit society operating under Chapter 885 of this code; (4) a stipulated premium insurance company operating under Chapter 884 of this code; (5) a Lloyd's plan operating under Chapter 941 of this code; (6) an exchange operating under Chapter 942 of this code; (7) a health maintenance organization operating under Chapter 843 of this code; (8) a multiple employer welfare arrangement that holds a certificate of authority under Chapter 846 of this code; (9) an approved nonprofit health corporation that holds a certificate of authority under Chapter 844 of this code; (10) a statewide mutual assessment company operating under Chapter 881 of this code; (11) a local mutual aid association operating under Chapter 886 of this code; and (12) a local mutual burial association operating under Chapter 888 of this code. (c) An entity that offers a health benefit plan or an annuity or life insurance policy or contract may not use the fact that a person has been exposed to asbestos fibers or silica or has filed a claim governed by Chapter 90, Civil Practice and Remedies Code, to reject, deny, limit, cancel, refuse to renew, increase the premiums for, or otherwise adversely affect the person's eligibility for or coverage under the policy or contract. Added by Acts 2005, 79th Leg., ch. 97, Sec. 8, eff. Sept. 1, 2005. Art. 21.54. RISK RETENTION GROUPS AND PURCHASING GROUPS.
Article repealed effective April 1, 2007
Purpose
Sec. 1. The purpose of this article is to regulate the formation and operation of risk retention groups and purchasing groups in this state formed pursuant to the provisions of the federal Product Liability Risk Retention Act of 1981 (Public Law 97-45) and the federal Liability Risk Retention Act of 1986 and to protect the public by the appropriate regulation of these groups to the extent permitted by law.
Definitions
Sec. 2. In this article: (1) "Board" means the State Board of Insurance. (2) "Commissioner" means the commissioner of insurance of the State of Texas or the commissioner, director, or superintendent of insurance in any other state. (3) "Completed operations liability" means liability, including liability for activities that are completed or abandoned before the date of the occurrence giving rise to the liability, arising out of the installation, maintenance, or repair of any product at a site that is not owned or controlled by: (A) a person who performs that work; or (B) a person who hires an independent contractor to perform that work. (4) "Insurance" means primary insurance, excess insurance, reinsurance, surplus lines insurance, and any other arrangement for transferring and distributing risk that is determined to be insurance under the law of this state. (5) "Product liability" means liability for damages because of any personal injury, death, emotional harm, consequential economic damage, or property damage, including damage resulting from the loss of use of property, arising out of the manufacture, design, importation, distribution, packaging, labeling, lease, or sale of a product, but does not include the liability of any person for those damages if the product involved was in the possession of such person when the incident giving rise to the claim occurred. (6) "Liability": (A) means legal liability for damages, including costs of defense, legal costs, fees, and other claims expenses, because of injuries to other persons, damage to their property, or other damage or loss to other persons resulting from or arising out of: (i) a business, whether profit or nonprofit, a trade, a product, services, including professional services, premises, or operations; or (ii) any activity of any state or local government or any agency or political subdivision thereof; but (B) does not include personal risk liability or an employer's liability with respect to its employees other than legal liability under the Federal Employers' Liability Act (45 U.S.C. 51 et seq.). (7) "Personal risk liability" means liability for damages because of injury to any person, damage to property, or other loss or damage resulting from any personal, familial, or household responsibilities or activities rather than responsibilities or activities covered by Subdivision (6) of this section. (8) "Plan of operation or feasibility study" means an analysis that presents the expected activities and results of a risk retention group including, at a minimum: (A) information sufficient to verify that its members are engaged in businesses or activities that are similar or related with respect to the liability to which such members are exposed by virtue of any related, similar, or common business, trade, product, services, premises, or operations; (B) for each state in which it intends to operate, the coverages, deductibles, coverage limits, rates, and rating classification systems for each line of insurance the group intends to offer; (C) historical and expected loss experience of the proposed members and national experience of similar exposures to the extent that this experience is reasonably available; (D) pro forma financial statements and projections; (E) appropriate opinions by a qualified, independent casualty actuary who is a member in good standing of the American Academy of Actuaries or an individual who is recognized by the commissioner of this state as having comparable training and experience, including a determination of minimum premium or participation levels required to commence operations and to prevent a hazardous financial condition; (F) identification of management, underwriting and claims procedures, marketing methods, managerial oversight methods, and investment policies; and (G) other matters as may be prescribed by the insurance laws of the state in which the risk retention group is chartered. (9) "Purchasing group" means any group that: (A) has as one of its purposes the purchase of liability insurance on a group basis; (B) purchases such insurance only for its group members and only to cover their similar or related liability exposure, as described in Paragraph (C) of this subdivision; (C) is composed of members whose businesses or activities are similar or related with respect to the liability to which members are exposed by virtue of any related, similar, or common business, trade, product, services, premises, or operations; and (D) is domiciled in any state. (10) "Risk retention group" means any corporation or other limited liability association: (A) which is organized for the primary purpose of conducting the activity described under Paragraph (B) of this subdivision; (B) whose primary activity consists of assuming and spreading all or any portion of the liability exposure of its group members; and (C) which: (i) is chartered and licensed as a liability insurance company and authorized to engage in the business of insurance under the laws of any state; or (ii) before January 1, 1985, was chartered or licensed and authorized to engage in the business of insurance under the laws of Bermuda or the Cayman Islands and, before such date, had certified to the commissioner of at least one state that it satisfied the capitalization requirements of that state, except that any such group shall be considered to be a risk retention group only if it has been engaged in business continuously since such date and only for the purpose of continuing to provide insurance to cover product liability or completed operations liability as those terms were defined in the Product Liability Risk Retention Act of 1981 before the effective date of the federal Liability Risk Retention Act of 1986; (D) which does not exclude any person from membership in the group solely to provide for members of that group a competitive advantage over such a person; (E) which: (i) has as its members only persons who comprise the membership of the risk retention group and who are provided insurance by such group; or (ii) has as its sole owner an organization which has as its members only persons who comprise the membership of the risk retention group and which has as its owners only persons who comprise the membership of the risk retention group and who are provided insurance by such group; (F) whose members are engaged in similar or related businesses or activities with respect to the liability to which those members are exposed by virtue of any related, similar, or common business trade, product, services, premises, or operations; (G) whose activities do not include the provision of insurance other than liability insurance for assuming and spreading all or any portion of the liability of its group members, and reinsurance with respect to the liability of any other risk retention group, or any members of such other group, which is engaged in businesses or activities so that the group or member meets the requirement of Subdivision (6) of this section for membership in the risk retention group which provides the reinsurance; and (H) the name of which includes the phrase "Risk Retention Group". (11) "State" means any state of the United States or the District of Columbia. (12) "Hazardous financial condition" means that, based on its present or reasonably anticipated financial condition, a risk retention group, although not yet financially impaired or insolvent, is unlikely to be able to: (A) meet obligations to policyholders with respect to known claims and reasonably anticipated claims; or (B) pay other obligations in the normal course of business. (13) "Agent" includes the terms "agent" and "broker" as used in the federal Liability Risk Retention Act of 1986. (14) "Located" or "location," for the purposes of determining the state in which a purchasing group is located, means the state in which the highest aggregate premiums are in force on the date the group policy is written or renewed and shall be ascertained upon each placement of renewal by the purchasing group of insurance with an insurer or risk retention group. For the purpose of determining the purchasing group's location, the group policy shall be deemed to be renewed annually.
Risk retention groups chartered in this state
Sec. 3. (a) Except as otherwise provided by this article, a risk retention group seeking to be chartered in this state must: (1) be chartered and licensed as an insurance company authorized by Chapter 2, 8, 15, or 19 of this code; and (2) comply with all of the laws, rules, regulations, and requirements applicable to insurers chartered and licensed under those chapters and with Section 4 of this article to the extent such requirements are not a limitation on laws, rules, regulations, or requirements of this state.
Text of subsec. (b) as amended by Acts 1987, 70th Leg., ch. 46, Sec. 6
(b) Except as required by this article, a risk retention group seeking to be chartered in this state must be chartered and licensed as an insurance company authorized by Chapters 2 and 8 of this code and must comply with all of the laws, rules, regulations, and requirements, including Article 1.36 of this code, applicable to insurers chartered and licensed under those chapters.
Text of subsec. (b) as amended by Acts 1987, 70th Leg., ch. 115, Sec. 1
(b) Before it may offer insurance in any state, each risk retention group also must submit for approval to the commissioner of this state a plan of operation or a feasibility study. The risk retention group shall not offer any additional lines of insurance in this state or in any other state or effect any change in its operations as described in its plan of operation before a revision of the plan is submitted to and approved by the commissioner. (c) The provisions of Subsection (b) of this section relating to the submission of a plan of operation or feasibility study shall not apply with respect to any kind or classification of liability insurance which: (1) was defined in the federal Product Liability Risk Retention Act of 1981 (Public Law 97-45) before October 27, 1986; and (2) was offered before such date by any risk retention group which had been chartered and operating for not less than three years before such date. (d) With its application for charter, a risk retention group seeking to be chartered in this state shall provide to the commissioner of this state in accordance with rules adopted by the board, the following: (1) the name of the risk retention group; (2) the identity of the initial members of the group; (3) the identity of those individuals who organized the group or who will provide administrative services or otherwise influence or control the activities of the group; (4) the amount and nature of initial capitalization; (5) the coverages to be afforded; and (6) the states in which the group intends to operate. (e) Immediately on receipt of an application for charter, the commissioner of this state shall provide summary information concerning the filing to the National Association of Insurance Commissioners, including the information furnished pursuant to Subsection (d) of this section. (f) In addition to all other fees imposed on an insurance company chartered and licensed pursuant to Chapter 2, 8, 15, or 19 of this code, the risk retention group shall pay a filing fee not to exceed $1,000 as established by board regulation for expenses incurred by the board in connection with Subsections (b), (d), and (e) of this section. Fees collected under this section shall be deposited in the State Treasury to the credit of the State Board of Insurance operating fund.
Risk retention groups not chartered in this state
Sec. 4. (a) A risk retention group chartered and licensed in another state, Bermuda, or the Cayman Islands and seeking to do business as a risk retention group in this state must comply with this section. (b) Before offering insurance in this state, a risk retention group shall submit to the commissioner of this state the following: (1) a statement identifying the state or states in which the risk retention group is chartered and licensed as a liability insurance company, date of chartering, its principal place of business, and such other information, including information on its membership, as the commissioner of this state may require to verify that the group qualifies as a risk retention group under the definition in Subdivision (10) of Section 2 of this article; (2) a copy of its plan of operation or a feasibility study and revisions of that plan or study submitted to the state in which it is chartered and licensed, provided, however, this provision relating to the submission of a plan of operation or feasibility study shall not apply with respect to any line or classification of liability insurance which: (A) was defined in the Product Liability Risk Retention Act of 1981 before October 27, 1986; and (B) was offered before such date by any risk retention group which had been chartered and operating for not less than three years before that date; and (3) a statement of registration that designates the commissioner as its agent for the purpose of receiving service of legal documents or process as provided by Chapter 804. (c) A filing fee not to exceed $500 as established by board regulation shall be imposed for filing the items under Subdivisions (1) and (2) of Subsection (b) of this section. Fees collected under Subsection (b) shall be deposited in the State Treasury to the credit of the State Board of Insurance operating fund. (d) Any such risk retention group doing business in this state shall submit to the commissioner of this state: (1) a copy of the group's financial statement submitted to the state in which the risk retention group is chartered and licensed, which shall be certified by an independent public accountant and contain a statement of opinion on loss and loss adjustment expense reserves made by a member of the American Academy of Actuaries or a qualified loss reserve specialist, under criteria established by the National Association of Insurance Commissioners; (2) a copy of each examination of the risk retention group as certified by the commissioner or public official conducting the examination; (3) on request by the commissioner of this state, a copy of any audit performed with respect to the risk retention group; and (4) such information as may be required to verify its continuing qualification under the definition of risk retention group in Subdivision (10) of Section 2 of this article. (e) A filing fee not to exceed $500 as established by commissioner regulation may be imposed for the filing of the financial statement under Subdivision (1) of Subsection (d) of this section. Fees collected for filing the statement shall be deposited in the State Treasury to the credit of the general revenue fund to be reallocated to the Texas Department of Insurance operating fund. (f) Such risk retention group shall be liable for the payment of premium and maintenance taxes and taxes on premiums of direct business for risks located within this state and shall report to the commissioner of this state the net premiums written for risks located within this state. Such risk retention group shall be subject to taxation, and any applicable fines and penalties related thereto, on the same basis as a foreign admitted insurer pursuant to Chapters 4 and 5 of this code. Groups shall provide to the comptroller all information the comptroller may request in connection with the reporting, collection, enforcement, and administration of taxes due under this article and of the fee imposed under Subsection (e) of this section. (g) A risk retention group and its agents and representatives shall comply with Article 21.21-2 of this code. (h) A risk retention group shall comply with the laws of this state relating to deceptive, false, or fraudulent acts or practices, including Articles 21.21 and 21.21-A of this code. (i) A risk retention group must submit to an examination by the commissioner of this state to determine its financial condition if the commissioner of the jurisdiction in which the group is chartered and licensed has not initiated an examination or does not initiate an examination within 60 days after the date the request is made by the commissioner of this state. Any such examination shall be coordinated to avoid unjustified repetition and conducted in an expeditious manner in accordance with the National Association of Insurance Commissioners Examiner Handbook and pursuant to Articles 1.15, 1.16, 1.17, 1.18, 1.19, and 1.28 of this code. (j) A risk retention group not chartered in this state and doing business in this state must comply with a lawful order issued in a voluntary dissolution proceeding or in a delinquency proceeding commenced by a commissioner if there has been a finding of financial impairment after an examination under Subsection (i) of this section. (k) A risk retention group not chartered in this state must comply with the terms of an injunction issued by a court of competent jurisdiction of this state or any other state based upon a finding that such group is in hazardous financial condition or is financially impaired. (l) Any risk retention group which was doing business in this state prior to the enactment of this article shall, within 30 days after the effective date of this article, furnish notice to the commissioner of this state pursuant to the provisions of Subsection (b) of this section and shall thereafter comply with all other provisions pertaining to risk retention groups not chartered in this state as provided by this article. (m) A risk retention group which violates any provision of this article shall be subject to fines and penalties applicable to foreign admitted insurers generally, including revocation of its right to do business in this state.
Risk retention groups; notice, prohibited solicitation and ownership
Sec. 5. (a) Any policy issued by a risk retention group shall contain in 10-point type on the front page and the declaration page the following notice:
This policy is issued by your risk retention group. Your risk retention group may not be subject to all of the insurance laws and regulations of your state. State insurance insolvency guaranty funds are not available for your risk retention group.
NOTICE
(b) The following acts by a risk retention group are prohibited: (1) the solicitation or sale of insurance by a risk retention group to any person who is not eligible for membership in the group; and (2) the solicitation or sale of insurance by or operation of a risk retention group that is in a hazardous financial condition or is financially impaired. (c) A risk retention group shall not do business in this state if an insurance company is directly or indirectly a member or owner of the risk retention group, other than in the case of a risk retention group all of whose members are insurance companies. (d) A risk retention group may engage in the business of insurance in this state only as such a group and only for conducting the activities described in this article.
Purchasing groups: exemption from certain laws relating to group purchase of insurance
Sec. 6. Any purchasing group meeting the criteria established under the federal Liability Risk Retention Act of 1986 shall be exempt from any law of this state relating to the creation of groups for the purchase of insurance, the requirement of countersignatures, or the prohibition of group purchasing or any law that would discriminate against a purchasing group or its members. Also, an insurer shall be exempt from any law of this state that prohibits providing or offering to provide to a purchasing group or its members advantages based on their loss and expense experience not afforded to other persons with respect to rates, policy forms, coverages, or other matters. A purchasing group shall be subject to all other applicable laws of this state.
Notice and registration requirements of purchasing groups
Sec. 7. (a) A purchasing group that intends to do business in this state shall, prior to doing such business, furnish notice to the commissioner of this state. A filing fee not to exceed $100 as established by board regulation shall be imposed for the filing of such notice. Fees collected under this subsection shall be deposited in the State Treasury to the credit of the State Board of Insurance operating fund. The notice shall: (1) identify the state in which the group is domiciled; (2) specify the lines and classifications of liability insurance that the purchasing group intends to purchase; (3) specify the method by which and the person or persons, if any, through whom insurance will be offered to its members whose risks are located in this state; (4) identify the insurance company from which the group intends to purchase its insurance and the domicile of that company; (5) identify the principal place of business of the group and, if ascertainable at the time of filing, the location of the group; and (6) provide such other information as may be required by the commissioner of this state to verify that the purchasing group is qualified under Subdivision (9) of Section 2 of this article. (b) The purchasing group shall register with and designate the commissioner of this state or other appropriate authority as its agent solely for the purpose of receiving service of legal documents or process, except that these requirements do not apply in the case of a purchasing group which: (1) was domiciled before April 1, 1986, in any state of the United States and is domiciled on and after October 27, 1986, in any state of the United States; (2) before October 27, 1986, purchased its insurance from an insurance carrier licensed in any state and since October 27, 1986, purchased its insurance from an insurance carrier licensed in any state; (3) was a purchasing group under the requirements of the Product Liability Risk Retention Act of 1981 before October 27, 1986; and (4) does not purchase insurance that was not authorized for purposes of an exemption under that Act, as effective before October 27, 1986. A fee not to exceed $50 as established by board regulation may be imposed for each document served on the commissioner of this state and forwarded to the purchasing group. Fees collected under this subsection shall be deposited in the State Treasury to the credit of the State Board of Insurance operating fund. (c) Any purchasing group which was doing business in this state prior to the enactment of this article shall, within 30 days after the effective date of this article, furnish notice to the commissioner pursuant to the provisions of Subsection (a) of this section such information as may be required pursuant to Subsection (b) of this section.
Restrictions on insurance purchased by purchasing groups
Sec. 8. (a) A purchasing group located in this state shall not purchase liability insurance from a risk retention group that is not chartered in a state or from an insurer that does not hold a certificate of authority to do the business of insurance in the state in which the purchasing group is located, unless the purchase is effected through a licensed agent acting pursuant to Article 1.14-2 of this code. (b) A purchasing group which obtains liability insurance from an insurer or a risk retention group shall inform each of the members of such group which have a risk located in this state that such risk is not protected by an insurance insolvency guaranty fund in this state and that such risk retention group or such insurer may not be subject to all insurance laws and regulations of this state. (c) No purchasing group may offer insurance policy coverage declared unlawful by the highest court of this state.
Taxation of premiums paid by purchasing groups
Sec. 9. (a) Premiums paid for coverage of risks located in this state by purchasing groups or any members of the purchasing group are subject to taxation at the same rate and subject to the same interest, fines, and penalties for nonpayment as that applicable to premiums paid for similar coverage by other insureds. (b) Chapter 4 of this code shall be used to calculate applicable tax rates when the purchasing group or any members of the purchasing group pay premiums for coverage of risks located in this state to an insurance company holding a certificate of authority to do the business of insurance in this state or a risk retention group qualified to do business in this state. Article 1.14-2 of this code is to be used to calculate the applicable tax rates when the purchasing group or any members of the purchasing group pay premiums for coverage of risks located in this state to a surplus lines insurance carrier. (c) To the extent that the purchasing group or its members pay premiums for coverage of risks located within this state to an insurance company holding a certificate of authority to do the business of insurance in this state or a risk retention group qualified to do business in this state, the insurance company or risk retention group receiving those premiums is responsible for remitting the tax to the board. (d) To the extent that the purchasing group or its members pay premiums for coverage of risks located within this state to a surplus lines insurance carrier, the surplus lines agent shall report and pay the taxes for premiums. To the extent the surplus lines agent does not remit the tax, the purchasing group shall pay the tax for coverage of risks located in this state.
Duty of agents
Sec. 10. (a) No person, firm, partnership, or corporation shall act or offer to act as an agent for a risk retention group, or aid in any manner in the solicitation, negotiation, or placement of insurance on behalf of a risk retention group operating in this state or any of its members in this state without first obtaining a license as an agent under Article 21.14 of this code in the case of a resident of this state or Article 21.11 of this code in the case of a nonresident of this state. (b) No person, firm, partnership, or corporation shall act or offer to act as an agent for a purchasing group or aid in any manner in the solicitation, negotiation, or placement of insurance on behalf of a purchasing group operating in this state or any of its members in this state without first obtaining a license as an agent pursuant to Article 21.14 of this code in the case of a resident of this state or Article 21.11 of this code in the case of a nonresident of this state. Furthermore, no person, firm, partnership, or corporation shall act or offer to act as an agent or aid in any manner in the solicitation, negotiation, or placement of insurance with an insurer not qualified to do business in this state on behalf of a purchasing group or its members located in this state without first complying with Article 1.14-2 of this code. No person, firm, partnership, or corporation shall solicit members of the purchasing group for coverage under the purchasing group's policy without first obtaining proper licensing to act as an insurance agent. (c) Any provision of Article 1.14-2, 21.09, or 21.11 of this code, requiring residency in this state, requiring countersignatures, prohibiting the payment of commissions to a nonresident, prohibiting the solicitation of insurance in this state by a nonresident, or prohibiting a nonresident from acting as a surplus or excess lines agent shall not apply in the case of an agent licensed pursuant to those articles when the agent acts on behalf of a risk retention group or purchasing group operating in this state or any of their members in this state in the provision or placement of liability insurance for risks located in this state. (d) Before placing business with a risk retention group, each agent shall secure from the appropriate insurance regulatory authority a certified copy of the certificate of authority verifying that the insurer is authorized in its domiciliary jurisdiction to write the liability insurance policy proposed to be procured from it by the agent. (e) An agent licensed as provided by Subsection (a) or (b) of this section must report to the commissioner of this state not later than March 1 of each year the activities and scope of services being provided to the risk retention group or purchasing group in accordance with rules promulgated by the board. (f) Every person, firm, partnership, or corporation licensed pursuant to the provisions of Article 1.14-2, 21.11, or 21.14 of this code on business placed with risk retention groups or written through a purchasing group shall inform each prospective insured of the provisions of the notice required by Subsection (a) of Section 5 of this article in the case of a risk retention group and Subsection (b) of Section 8 of this article in the case of a purchasing group.
Compulsory associations
Sec. 11. (a) No risk retention group shall be required or permitted to join or contribute financially to any insurance insolvency guaranty fund or similar mechanism in this state, nor shall a risk retention group or its insureds or claimants against its insureds receive any benefit from such fund for claims arising under the insurance policies issued by such retention group. (b) No claim against a purchasing group or its members shall be entitled to payment from any insurance insolvency guaranty fund or similar mechanism in this state, nor shall a purchasing group or its members or claimants against the group or its members receive any benefit from such fund for claims arising under the insurance policies procured through the purchasing group unless the policies are underwritten by insurance companies that are licensed in this state and have capital and surplus of at least $25 million, or insurance companies that are licensed in this state that are members of company groups with combined capital and surplus of at least $25 million, at the time of policy issuance. (c) A risk retention group chartered and licensed in this state and a risk retention group qualified to do business in this state must participate in the catastrophe property insurance pool, joint underwriting associations, mandatory liability and assigned risk pools, and residual market facilities on the same basis as a liability insurer holding a certificate of authority to do the business of insurance in this state.
Administrative and procedural authority regarding risk retention groups and purchasing groups
Sec. 12. (a) The commissioner of this state is authorized to make use of any of the powers under this code to enforce the laws of this state so long as those powers are not specifically preempted by the Product Liability Risk Retention Act of 1981, as amended by the Liability Risk Retention Act of 1986. These powers include the commissioner's administrative authority to investigate, issue subpoenas, conduct depositions and hearings, issue orders, and impose penalties. (b) With regard to any investigation, administrative proceedings, or litigation, the commissioner of this state shall rely on the procedural law and regulations of the state. (c) Injunctive relief must be issued by a court of competent jurisdiction when the board seeks to enjoin a risk retention group not chartered in this state from: (1) violating the law of this state prohibiting deceptive, false, or fraudulent acts or practices; (2) soliciting or selling insurance to a person who is not eligible for membership in the risk retention group; or (3) soliciting or selling insurance by or operation of a risk retention group that is in hazardous financial condition or is financially impaired.
Penalties
Sec. 13. (a) A risk retention group that is qualified to do business in this state under Section 3 or 4 of this article and that violates this article is subject to all sanctions and penalties applicable to an insurer that holds a certificate of authority under Chapters 2 and 8 of this code including revocation of its license and the right to do business in this state. (b) A risk retention group doing business in this state that is not qualified to do business in this state under Section 3 or 4 of this article is considered an unauthorized insurer and is subject to Articles 1.14, 1.14-1, 1.36, 21.28, and 21.28-A of this code.
Binding effect of orders issued in U.S. district court
Sec. 14. An order issued by any district court of the United States enjoining a risk retention group from soliciting or selling insurance or operating in any state, in all states, or in any territory or possession of the United States on a finding that the group is in a hazardous financial condition, is financially impaired, or is insolvent is enforceable in the courts of this state.
Rules
Sec. 15. The board may adopt rules relating to risk retention groups and purchasing groups that are necessary to carry out this article. Added by Acts 1983, 68th Leg., p. 4991, ch. 893, Sec. 1, eff. June 19, 1983; Sec. 3(b) amended by Acts 1987, 70th Leg., ch. 46, Sec. 6, eff. Sept. 1, 1987; Sec. 4(a) amended by Acts 1987, 70th Leg., ch. 46, Sec. 7, eff. Sept. 1, 1987; Sec. 14(b) amended by Acts 1987, 70th Leg., ch. 46, Sec. 8, eff. Sept. 1, 1987. Amended by Acts 1987, 70th Leg., ch. 115, Sec. 1, eff. May 19, 1987; Sec. 3(a), (f), amended by Acts 1987, 70th Leg., 2nd C.S., ch. 67, Sec. 13, eff. Aug. 4, 1987; Sec. 11(b) amended by Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Sec. 1.23, eff. Jan. 1, 1992; Sec. 4(e), (f) amended by Acts 1993, 73rd Leg., ch. 685, Sec. 3.22, eff. Sept. 1, 1993; Sec. 11(b) amended by Acts 1995, 74th Leg., ch. 1055, Sec. 11, eff. June 17, 1995; Sec. 4(b) amended by Acts 2001, 77th Leg., ch. 1419, Sec. 15, eff. June 1, 2003. Art. 21.58A. HEALTH CARE UTILIZATION REVIEW AGENTS.
Article repealed effective April 1, 2007
Purpose
Sec. 1. The purpose of this article is to: (1) promote the delivery of quality health care in a cost-effective manner; (2) assure that utilization review agents adhere to reasonable standards for conducting utilization reviews; (3) foster greater coordination and cooperation between health care providers and utilization review agents; (4) improve communications and knowledge of benefits among all parties concerned before expenses are incurred; and (5) ensure that utilization review agents maintain the confidentiality of medical records in accordance with applicable law.
Definitions
Sec. 2. In this article: (1) "Administrative procedure act" means Chapter 2001, Government Code. (2) "Administrator" means a person holding a certificate of authority under Article 21.07-6 of this code. (3) "Adverse determination" means a determination by a utilization review agent that the health care services furnished or proposed to be furnished to a patient are not medically necessary. (4) "Certificate" means a certificate of registration granted by the commissioner to a utilization review agent. (5) "Commissioner" means the commissioner of insurance. (6) "Emergency care" means health care services provided in a hospital emergency facility or comparable facility to evaluate and stabilize medical conditions of a recent onset and severity, including but not limited to severe pain, that would lead a prudent layperson possessing an average knowledge of medicine and health to believe that his or her condition, sickness, or injury is of such a nature that failure to get immediate medical care could result in: (A) placing the patient's health in serious jeopardy; (B) serious impairment to bodily functions; (C) serious dysfunction of any bodily organ or part; (D) serious disfigurement; or (E) in the case of a pregnant woman, serious jeopardy to the health of the fetus. (7) "Dental plan" means an insurance policy or health benefit plan, including a policy written by a company subject to Chapter 20 of this code, that provides coverage for expenses for dental services. (8) "Enrollee" means a person covered by a health insurance policy or plan and includes a person who is covered as an eligible dependent of another person. (9) "Health benefit plan" means a plan of benefits that defines the coverage provisions for health care for enrollees offered or provided by any organization, public or private, other than health insurance. (10) "Health care provider" means any person, corporation, facility, or institution licensed by a state to provide or otherwise lawfully providing health care services that is eligible for independent reimbursement for those services. (11) "Health insurance policy" means an insurance policy, including a policy written by a company subject to Chapter 20 of this code, that provides coverage for medical or surgical expenses incurred as a result of accident or sickness. (12) "Life threatening" means a disease or condition for which the likelihood of death is probable unless the course of the disease or condition is interrupted. (13) "Nurse" means a professional or registered nurse, a licensed vocational nurse, or a licensed practical nurse. (14) "Open meetings law" means Chapter 551, Government Code . (15) "Open records law" means Chapter 552, Government Code. (16) "Patient" means the enrollee or an eligible dependent of the enrollee under a health benefit plan or health insurance plan. (17) "Payor" means: (A) an insurer writing health insurance policies; (B) any preferred provider organization, health maintenance organization, self-insurance plan; or (C) any other person or entity which provides, offers to provide, or administers hospital, outpatient, medical, or other health benefits to persons treated by a health care provider in this state pursuant to any policy, plan, or contract. (18) "Physician" means a licensed doctor of medicine or a doctor of osteopathy. (19) "Provider of record" means the physician or other health care provider that has primary responsibility for the care, treatment, and services rendered to the enrollee and includes any health care facility when treatment is rendered on an inpatient or outpatient basis. (20) "Utilization review" means a system for prospective or concurrent review of the medical necessity and appropriateness of health care services being provided or proposed to be provided to an individual within this state. Utilization review shall not include elective requests for clarification of coverage. (21) "Utilization review agent" means an entity that conducts utilization review for: (A) an employer with employees in this state who are covered under a health benefit plan or health insurance policy; (B) a payor; or (C) an administrator. (22) "Utilization review plan" means the screening criteria and utilization review procedures of a utilization review agent. (23) "Working day" means a weekday, excluding a legal holiday.
Certification
Sec. 3. (a) A utilization review agent may not conduct utilization review of health care provided in this state unless the commissioner has granted the utilization review agent a certificate pursuant to this article. (b) The commissioner may only issue a certificate to an applicant that has met all the requirements of this article and all applicable rules and regulations of the commissioner. (c) A certificate issued under this article is not transferable. (d) Certification may be renewed biennially by filing, not later than March 1, a renewal form with the commissioner accompanied by a renewal fee in an amount set by the commissioner. (e) The commissioner shall promulgate certification and renewal forms to be filed under this section. The form for initial certification must require the following: (1) the entity's name, address, telephone number, and normal business hours; (2) the name and address of an agent for service of process in this state; (3) a summary of the utilization review plan, but in no event shall proprietary details be subject to inclusion in the summary; (4) information concerning the personnel categories that will perform utilization review for the utilization review agent; (5) a copy of the procedure established by the utilization review agent as required by this article for appeal of an adverse determination; (6) a certification that the utilization review agent will comply with the provisions of this article; and (7) a copy of the procedures for handling oral and written complaints by enrollees, patients, or health care providers. (f) The commissioner shall establish, administer, and enforce the certification and renewal fees under this section in amounts not greater than that necessary to cover the cost of administration of this article. (g) A utilization review agent shall report any material changes in the information in a certification or renewal form filed under this section not later than the 30th day after the date on which the change takes effect.
Standards for utilization review
Sec. 4. (a) As a condition of certification or renewal thereof, a utilization review agent shall be required to maintain compliance with the provisions of this section. (b) The utilization review plan, including reconsideration and appeal requirements, shall be reviewed by a physician and conducted in accordance with standards developed with input from appropriate health care providers and approved by a physician. (c) Personnel employed by or under contract with the utilization review agent to perform utilization review shall be appropriately trained and qualified. Personnel who obtain information regarding a patient's specific medical condition, diagnosis, and treatment options or protocols directly from the physician or health care provider, either orally or in writing, and who are not physicians shall be nurses, physician assistants, or health care providers qualified to provide the service requested by the provider. This provision shall not be interpreted to require such qualifications for personnel who perform clerical or administrative tasks. (d) A utilization review agent shall not set or impose any notice or other review procedures contrary to the requirements of the health insurance policy or health benefit plan. (e) Unless approved for an individual patient by the provider of record or modified by contract, a utilization review agent shall be prohibited from observing, participating in, or otherwise being present during a patient's examination, treatment, procedure, or therapy. In no event shall this section otherwise be construed to limit or deny contact with a patient for purposes of conducting utilization review unless otherwise specifically prohibited by law. (f) A utilization review agent may not permit or provide compensation or any thing of value to its employees or agents, condition employment of its employee or agent evaluations, or set its employee or agent performance standards, based on the amount of volume of adverse determinations, reductions or limitations on lengths of stay, benefits, services, or charges or on the number or frequency of telephone calls or other contacts with health care providers or patients, which are inconsistent with the provisions of this article. (g) A health care provider may designate one or more individuals as the initial contact or contacts for utilization review agents seeking routine information or data. In no event shall the designation of such an individual or individuals preclude a utilization review agent or medical advisor from contacting a health care provider or others in his or her employ where a review might otherwise be unreasonably delayed or where the designated individual is unable to provide the necessary information or data requested by the utilization review agent. (h) Utilization review conducted by a utilization review agent shall be under the direction of a physician licensed to practice medicine by a state licensing agency in the United States. (i) Each utilization review agent shall utilize written medically acceptable screening criteria and review procedures which are established and periodically evaluated and updated with appropriate involvement from physicians, including practicing physicians, dentists, and other health care providers. Utilization review decisions shall be made in accordance with currently accepted medical or health care practices, taking into account special circumstances of each case that may require deviation from the norm stated in the screening criteria. Screening criteria must be objective, clinically valid, compatible with established principles of health care, and flexible enough to allow deviations from the norms when justified on a case-by-case basis. Screening criteria must be used to determine only whether to approve the requested treatment. Denials must be referred to an appropriate physician, dentist, or other health care provider to determine medical necessity. Such written screening criteria and review procedures shall be available for review and inspection to determine appropriateness and compliance as deemed necessary by the commissioner and copying as necessary for the commissioner to carry out his or her lawful duties under this code, provided, however, that any information obtained or acquired under the authority of this subsection and article is confidential and privileged and not subject to the open records law or subpoena except to the extent necessary for the commissioner to enforce this article. (j) A utilization review agent may not engage in unnecessary or unreasonable repetitive contacts with the health care provider or patient and shall base the frequency of contacts or reviews on the severity or complexity of the patient's condition or on necessary treatment and discharge planning activity. (k) Subject to the notice requirements of Section 5 of this article, in any instance where the utilization review agent is questioning the medical necessity or appropriateness of health care services, the health care provider who ordered the services shall be afforded a reasonable opportunity to discuss the plan of treatment for the patient and the clinical basis for the utilization review agent's decision with a physician prior to issuance of an adverse determination. (l) Unless precluded or modified by contract, a utilization review agent shall reimburse health care providers for the reasonable costs for providing medical information in writing, including copying and transmitting any requested patient records or other documents. A health care provider's charges for providing medical information to a utilization review agent shall not exceed the cost of copying set by rule of the commissioner of workers' compensation for records regarding a workers' compensation claim and may not include any costs that are otherwise recouped as a part of the charge for health care. (m) A utilization review agent shall establish and maintain a complaint system that provides reasonable procedures for the resolution of oral or written complaints initiated by enrollees, patients, or health care providers concerning the utilization review and shall maintain records of such complaints for three years from the time the complaints are filed. The complaint procedure shall include a written response to the complainant by the agent within 30 days. The utilization review agent shall submit to the commissioner a summary report of all complaints at such times and in such forms as the commissioner may require and shall permit the commissioner to examine the complaints and all relevant documents at any time. (n) The utilization review agent may delegate utilization review to qualified personnel in the hospital or health care facility where the health care services were or are to be provided. However, such delegation shall not relieve the utilization review agent of full responsibility for compliance with this article, including the conduct of those to whom utilization review has been delegated. (o) A utilization review agent may not require, as a condition of treatment approval or for any other reason, the observation of a psychotherapy session or the submission or review of a mental health therapist's process or progress notes. Notwithstanding this subsection, a utilization review agent may require submission of a patient's medical record summary.
Notice of determinations made by utilization review agents
Sec. 5. (a) A utilization review agent shall notify the enrollee or a person acting on behalf of the enrollee and the enrollee's provider of record of a determination made in a utilization review. (b) The notification required by this section must be mailed or otherwise transmitted not later than two working days after the date of the request for utilization review and all information necessary to complete the review is received by the agent. (c) In the event of an adverse determination, the notification by the utilization review agent must include: (1) the principal reasons for the adverse determination; (2) the clinical basis for the adverse determination; (3) a description or the source of the screening criteria that were utilized as guidelines in making the determination; and (4) a description of the procedure for the complaint and appeal process, including: (A) notification to the enrollee of the enrollee's right to appeal an adverse determination to an independent review organization; (B) notification to the enrollee of the procedures for appealing an adverse determination to an independent review organization; and (C) notification to an enrollee who has a life-threatening condition of the enrollee's right to an immediate review by an independent review organization and the procedures to obtain that review. (d) The notification of adverse determination required by this section shall be provided by the utilization review agent: (1) within one working day by telephone or electronic transmission to the provider of record in the case of a patient who is hospitalized at the time of the adverse determination, to be followed by a letter notifying the patient and the provider of record of an adverse determination within three working days; (2) within three working days in writing to the provider of record and the patient if the patient is not hospitalized at the time of the adverse determination; or (3) within the time appropriate to the circumstances relating to the delivery of the services and the condition of the patient, but in no case to exceed one hour from notification when denying poststabilization care subsequent to emergency treatment as requested by a treating physician or provider. In such circumstances, notification shall be provided to the treating physician or health care provider.
Appeal of Adverse Determinations of Utilization Review Agents
Sec. 6. (a) A utilization review agent shall maintain and make available a written description of appeal procedures involving an adverse determination. For the purposes of this section, a complaint filed concerning dissatisfaction or disagreement with an adverse determination constitutes an appeal of that adverse determination. (b) The procedures for appeals must be reasonable and must include the following: (1) a provision that an enrollee, a person acting on behalf of the enrollee, or the enrollee's physician or health care provider may appeal the adverse determination orally or in writing; (2) a provision that, within five working days from receipt of the appeal, the utilization review agent shall send to the appealing party a letter acknowledging the date of the utilization review agent's receipt of the appeal. The letter must also include the provisions listed in this subsection and a list of the documents that the appealing party must submit for review by the utilization review agent. When the utilization review agent receives an oral appeal of adverse determination, the utilization review agent shall send a one-page appeal form to the appealing party; (3) a provision that appeal decisions shall be made by a physician, provided that, if the appeal is denied and within 10 working days the health care provider sets forth in writing good cause for having a particular type of a specialty provider review the case, the denial shall be reviewed by a health care provider in the same or similar specialty as typically manages the medical or dental condition, procedure, or treatment under discussion for review of the adverse determination, and that specialty review shall be completed within 15 working days of receipt of the request; (4) in addition to the written appeal, a method for an expedited appeal procedure for emergency care denials and denials of continued stays for hospitalized patients. That procedure must include a review by a health care provider who has not previously reviewed the case and who is of the same or a similar specialty as typically manages the medical condition, procedure, or treatment under review. The time frame in which the appeal must be completed shall be based on the medical or dental immediacy of the condition, procedure, or treatment, but may not exceed one working day from the date all information necessary to complete the appeal is received; (5) a provision that after the utilization review agent has sought review of the appeal of the adverse determination, the utilization review agent shall issue a response letter to the patient or a person acting on behalf of the patient, and the patient's physician or health care provider, explaining the resolution of the appeal; and (6) written notification to the appealing party of the determination of the appeal, as soon as practical, but in no case later than the 30th calendar day after the date the utilization agent receives the appeal. If the appeal is denied, the written notification shall include a clear and concise statement of: (A) the clinical basis for the appeal's denial; (B) the specialty of the physician or other health care provider making the denial; and (C) notice of the appealing party's right to seek review of the denial by an independent review organization under Section 6A of this article and the procedures for obtaining that review. (c) Notwithstanding this article or any other law, in a circumstance involving an enrollee's life-threatening condition, the enrollee is entitled to an immediate appeal to an independent review organization as provided by Section 6A of this article and is not required to comply with procedures for an internal review of the utilization review agent's adverse determination.
Independent review of adverse determinations
Sec. 6A. A utilization review agent shall: (1) permit any party whose appeal of an adverse determination is denied by the utilization review agent to seek review of that determination by an independent review organization assigned to the appeal in accordance with Article 21.58C of this code; (2) provide to the appropriate independent review organization not later than the third business day after the date that the utilization review agent receives a request for review a copy of: (A) any medical records of the enrollee that are relevant to the review; (B) any documents used by the plan in making the determination to be reviewed by the organization; (C) the written notification described by Section 6(b)(5) of this article; (D) any documentation and written information submitted to the utilization review agent in support of the appeal; and (E) a list of each physician or health care provider who has provided care to the enrollee and who may have medical records relevant to the appeal; (3) comply with the independent review organization's determination with respect to the medical necessity or appropriateness of health care items and services for an enrollee; and (4) pay for the independent review.
Telephone access
Sec. 7. (a) A utilization review agent shall have appropriate personnel reasonably available by toll-free telephone at least 40 hours per week during normal business hours in Texas to discuss patients' care and allow response to telephone review requests. (b) A utilization review agent must have a telephone system capable of accepting or recording or providing instructions to incoming phone calls during other than normal business hours and shall respond to such calls not later than two working days of the later of the date on which the call was received or the date the details necessary to respond have been received from the caller. (c) A utilization review agent must provide a written description to the commissioner setting forth the procedures to be used when responding to poststabilization care subsequent to emergency treatment as requested by a treating physician or health care provider.
Confidentiality
Sec. 8. (a) A utilization review agent shall preserve the confidentiality of individual medical records to the extent required by law. (b) A utilization review agent may not disclose or publish individual medical records, personal information, or other confidential information about a patient obtained in the performance of utilization review without the prior written consent of the patient or as otherwise required by law. If such authorization is submitted by anyone other than the individual who is the subject of the personal or confidential information requested, such authorization must: (1) be dated; and (2) contain the signature of the individual who is the subject of the personal or confidential information requested. The signature must have been obtained one year or less prior to the date the disclosure is sought or the authorization is invalid. (c) A utilization review agent may provide confidential information to a third party under contract or affiliated with the utilization review agent for the sole purpose of performing or assisting with utilization review. Information provided to third parties shall remain confidential. (d) If an individual submits a written request to the utilization review agent for access to recorded personal information about the individual, the utilization review agent shall within 10 business days from the date such request is received: (1) inform the individual submitting the request of the nature and substance of the recorded personal information in writing; and (2) permit the individual to see and copy, in person, the recorded personal information pertaining to the individual or to obtain a copy of the recorded personal information by mail, at the discretion of the individual, unless the recorded personal information is in coded form, in which case an accurate translation in plain language shall be provided in writing. (e) A utilization review agent's charges for providing a copy of recorded personal information to individuals shall be reasonable, as determined by rule of the commissioner, and may not include any costs that are otherwise recouped as part of the charge for utilization review.
Text of subsec. (f) as added by Acts 1997, 75th Leg., ch. 163, Sec. 1
(f) Confidential information in the custody of a utilization review agent may be provided to an independent review organization, subject to rules and standards adopted by the commissioner under Article 21.58C of this code.
Text of subsec. (f) as added by Acts 1997, 75th Leg., ch. 1025, Sec. 7
(f) The utilization review agent may not publish data which identifies a particular physician or health care provider, including any quality review studies or performance tracking data, without prior written notice to the involved provider. This prohibition does not apply to internal systems or reports used by the utilization review agent. (g) Documents in the custody of the utilization review agent that contain confidential patient information or physician or health care provider financial data shall be destroyed by a method which induces complete destruction of the information when the agent determines the information is no longer needed. (h) All patient, physician, and health care provider data shall be maintained by the utilization review agent in a confidential manner which prevents unauthorized disclosure to third parties. Nothing in this article shall be construed to allow a utilization review agent to take actions that violate a state or federal statute or regulation concerning confidentiality of patient records. (i) Notwithstanding the provisions in Subsections (a) through (h) of this section, the utilization review agent shall provide to the commissioner on request individual medical records or other confidential information for determination of compliance with this article. The information is confidential and privileged and is not subject to the open records law, Chapter 552, Government Code, or to subpoena, except to the extent necessary to enable the commissioner to enforce this article.
Violations
Sec. 9. (a) If the commissioner believes that any person or entity conducting utilization review pursuant to this article is in violation of this article or applicable regulations, the commissioner shall notify the utilization review agent, health maintenance organization, or insurer of the alleged violation and may compel the production of any and all documents or other information as necessary in order to determine whether or not such violation has taken place. (b) The commissioner may initiate the proceedings under this section. (c) Proceedings under this article are a contested case for the purposes of the administrative procedure act. (d) If the commissioner determines that the utilization review agent, health maintenance organization, insurer, or other person or entity conducting utilization review pursuant to this article has violated or is violating any provision of this article, the commissioner may: (1) impose sanctions under Section 7, Article 1.10 of this code; (2) issue a cease and desist order under Article 1.10A of this code; or (3) assess administrative penalties under Article 1.10E of this code. Sec. 10. Repealed by Acts 2001, 77th Leg., ch. 703, Sec. 8.01(18), eff. Sept. 1, 2001.
Claims reviews of medical necessity
Sec. 11. (a) When a retrospective review of the medical necessity and appropriateness of health care service is made under a health insurance policy or plan: (1) such retrospective review shall be based on written screening criteria established and periodically updated with appropriate involvement from physicians, including practicing physicians, and other health care providers; and (2) the payor's system for such retrospective review of medical necessity and appropriateness shall be under the direction of a physician. (b) When an adverse determination is made under a health insurance policy or plan based on a retrospective review of the medical necessity and appropriateness of the allocation of health care resources and services, the payor shall afford the health care providers the opportunity to appeal the determination in the same manner afforded the enrollee, with the enrollee's consent to act on his or her behalf, but in no event shall health care providers be precluded from appeal if the enrollee is not reasonably available or competent to consent. Such appeal shall not be construed to imply or confer on such health care providers any contract rights with respect to the enrollee's health insurance policy or plan that the health care provider does not otherwise have.
Lists of utilization review agents
Sec. 12. The commissioner shall maintain and update monthly a list of utilization review agents issued certificates and the renewal date for those certificates. The commissioner shall provide the list at cost to all individuals or organizations requesting the list.
Authority to Adopt Rules
Sec. 13. The commissioner may have the authority to adopt rules and regulations to implement the provisions of this article. The commissioner shall appoint an advisory committee to advise the commissioner in developing rules and regulations to administer this article as authorized by Section 2001.031, Government Code. The committee's deliberations shall be subject to the open meetings law. The committee shall include the public counsel and one representative for each of the following: insurance companies, health maintenance organizations, group hospital service corporations, utilization review agents, employers, consumer organizations, physicians, dentists, hospitals, registered nurses, and other health care providers.
Application
Sec. 14. (a) This article shall not apply to a person who provides information to enrollees about scope of coverage or benefits provided under a health insurance policy or health benefit plan and who does not determine whether particular health care services provided or to be provided to an enrollee are medically necessary or appropriate. (b)(1) This article shall not apply to any contract with the federal government for utilization review of patients eligible for services under Title XVIII or XIX of the Social Security Act (42 U.S.C. Section 1395 et seq. or Section 1396 et seq.). (2) Except as provided by Subsection (g) of this section, this article shall not apply to the Texas Medicaid Program, the services program for children with special health care needs created pursuant to Chapter 35, Health and Safety Code, any program administered under Title 2, Human Resources Code, any program of the Texas Department of Mental Health and Mental Retardation, or any program of the Texas Department of Criminal Justice. (c) Except as otherwise provided by this subsection, this article applies to utilization review of health care services provided to persons eligible for workers' compensation medical benefits under Title 5, Labor Code. The commissioner of workers' compensation shall regulate in the manner provided by this article a person who performs review of a medical benefit provided under Title 5, Labor Code. In the event of a conflict between this article and Title 5, Labor Code, Title 5, Labor Code, prevails. The commissioner of workers' compensation may adopt rules as necessary to implement this subsection. (d) This article shall not apply to utilization review of health care services provided under a policy or contract of automobile insurance promulgated by the board under Subchapter A, Chapter 5 of this code or issued pursuant to Article 1.14-2 of this code. (e) This article shall not apply to the terms or benefits of employee welfare benefit plans as defined in Section 3(1) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. Section 1002(1) ). (f) Any regulations promulgated pursuant to this article shall relate only to persons or entities subject to this article. (g) A health maintenance organization, including a health maintenance organization that contracts with the Health and Human Services Commission or an agency operating part of the state Medicaid managed care program to provide health care services to recipients of medical assistance under Chapter 32, Human Resources Code, is subject to this article except as expressly provided in this subsection and Subsection (i) of this section. If such health maintenance organization performs utilization review as defined herein, it shall, as a condition of licensure: (1) comply with this article, except Sections 3 and 10, and the commissioner shall promulgate rules for appropriate verification and enforcement of compliance. However, nothing in this article shall be construed to prohibit or limit the distribution of a proportion of the savings from the reduction or elimination of unnecessary medical services, treatment, supplies, confinements, or days of confinement in a health care facility through profit sharing, bonus, or withhold arrangements to participating physicians or participating health care providers for rendering health care services to enrollees; and (2) submit to assessment of maintenance taxes under Article 20A.33, Texas Health Maintenance Organization Act (Article 20A.33, Vernon's Texas Insurance Code), to cover the costs of administering compliance of health maintenance organizations under this section. (h) An insurer which delivers or issues for delivery a health insurance policy in Texas and is subject to this code is subject to this article except as expressly provided in this subsection and Subsection (i) of this section. If an insurer performs utilization review as defined herein it shall, as a condition of licensure, comply with this article, except Sections 3 and 10, and the commissioner shall promulgate rules for appropriate verification and enforcement of compliance. Such insurers shall be subject to assessment of maintenance tax under Article 4.17 of this code to cover the costs of administering compliance of insurers under this section. (i) However, when an insurer subject to this code or a health maintenance organization performs utilization review for a person or entity subject to this article other than one for which it is the payor, such insurer or health maintenance organization shall be required to obtain a certificate under Section 3 of this article and comply with all the provisions of this article. (j) A specialty utilization review agent is not subject to Section 4(b), (c), (h), or (k) or Section 6(b)(3) of this article. For purposes of this subsection, a specialty utilization review agent means a utilization review agent that conducts utilization review for specialty health care services, including but not limited to dentistry, chiropractic, or physical therapy. A specialty utilization review agent shall comply with the following requirements: (1) the utilization review plan, including reconsideration and appeal requirements, shall be reviewed by a health care provider of the appropriate specialty and conducted in accordance with standards developed with input from a health care provider of the appropriate specialty; (2) personnel employed by or under contract with a specialty utilization review agent to perform utilization review shall be appropriately trained and qualified. Personnel who obtain information directly from the physician or health care provider, either orally or in writing, shall be nurses, physician assistants, or other health care providers of the same specialty as the utilization review agent and who are licensed or otherwise authorized to provide the specialty health care service by a state licensing agency in the United States, except that this provision does not require those qualifications for personnel who perform solely clerical or administrative tasks; (3) utilization review conducted by a specialty utilization review agent shall be conducted under the direction of a health care provider of the same specialty and shall be licensed or otherwise authorized to provide the specialty health care service by a state licensing agency in the United States; (4) subject to the notice requirements of Section 5 of this article, in any instance where the specialty utilization review agent questions the medical necessity or appropriateness of health care services, the health care provider who ordered the services shall, prior to the issuance of an adverse determination, be afforded a reasonable opportunity to discuss the plan of treatment for the patient and the clinical basis for the decision of the utilization review agent with a health care provider of the same specialty as the utilization review agent; and (5) appeal decisions shall be made by a physician or health care provider in the same or a similar specialty as typically manages the medical, dental, or specialty condition, procedure, or treatment under discussion for review of the adverse determination. Added by Acts 1991, 72nd Leg., ch. 242, Sec. 11.03(a), eff. Sept. 1, 1991. Sec. 2 amended by Acts 1997, 75th Leg., ch. 1025, Sec. 1, eff. Sept. 1, 1997; Sec. 3(b), (d), (e), (f) amended by Acts 1997, 75th Leg., ch. 1025, Sec. 2, eff. Sept. 1, 1997; Sec. 4(c), (h), (i), (k), (m), (n) amended by Acts 1997, 75th Leg., ch. 1025, Sec. 3, eff. Sept. 1, 1997; Sec. 5(c), (d) amended by Acts 1997, 75th Leg., ch. 1025, Sec. 4, eff. Sept. 1, 1997; Sec. 6 amended by Acts 1997, 75th Leg., ch. 1025, Sec. 5, eff. Sept. 1, 1997; Sec. 6(b), (c), amended by Acts 1997, 75th Leg., ch. 163, Sec. 2, eff. Sept. 1, 1997; Sec. 6A added by Acts 1997, 75th Leg., ch. 163, Sec. 3, eff. Sept. 1, 1997; Sec. 7(c) added by Acts 1997, 75th Leg., ch. 1025, Sec. 6, eff. Sept. 1, 1997; Sec. 8 amended by Acts 1997, 75th Leg., ch. 1025, Sec. 7, eff. Sept. 1, 1997; Sec. 8(f) added by Acts 1997, 75th Leg., ch. 163, Sec. 4, eff. Sept. 1, 1997; Sec. 9(a), (b), (d) amended by Acts 1997, 75th Leg., ch. 1025, Sec. 8, eff. Sept. 1, 1997; Sec. 13 amended by Acts 1997, 75th Leg., ch. 1025, Sec. 9, eff. Sept. 1, 1997; Sec. 14(b) amended by Acts 1997, 75th Leg., ch. 1025, Sec. 10, eff. Sept. 1, 1997; Sec. 14(c) amended by Acts 1997, 75th Leg., ch. 903, Sec. 1, eff. Sept. 1, 1997; Sec. 14(e), (g), (h) amended by Acts 1997, 75th Leg., ch. 1025, Sec. 10, eff. Sept. 1, 1997; Sec. 14(j) added by Acts 1997, 75th Leg., ch. 1025, Sec. 10, eff. Sept. 1, 1997; Sec. 4(o) added by Acts 1999, 76th Leg., ch. 579, Sec. 1, eff. Sept. 1, 1999; Sec. 5(a), (c) amended by Acts 1999, 76th Leg., ch. 1456, Sec. 1, eff. Sept. 1, 1999; Sec. 6(a) amended by Acts 1999, 76th Leg., ch. 1456, Sec. 2, eff. Sept. 1, 1999; Sec. 6(b) amended by Acts 1999, 76th Leg., ch. 1456, Sec. 3, eff. Sept. 1, 1999; Sec. 6(c) amended by Acts 1999, 76th Leg., ch. 1456, Sec. 4, eff. Sept. 1, 1999; Sec. 14(b)(2) amended by Acts 1999, 76th Leg., ch. 1505, Sec. 3.13, eff. Sept. 1, 1999; Sec. 10 repealed by Acts 2001, 77th Leg., ch. 703, Sec. 8.01(18), eff. Sept. 1, 2001; Sec. 4(l) amended by Acts 2005, 79th Leg., ch. 265, Sec. 6.071, eff. Sept. 1, 2005; Sec. 14(c) amended by Acts 2005, 79th Leg., ch. 265, Sec. 6.072, eff. Sept. 1, 2005. Art. 21.58B. PROHIBITION OF CONSULTANT ACTIVITIES.
Article repealed effective April 1, 2007
A member or employee of the Board of Chiropractic Examiners shall be prohibited from acting as a consultant or performing any consultant activities for any insurance company or business, individual or utilization review agent that audits chiropractic claims, charges or services. For the purposes of this section, the term "consultant" means a person who: (1) for compensation and at the request of an insurance company, business, individual or utilization review agent, reviews, assesses or evaluates any claim, charge, treatment or service of another chiropractor for the purposes of determining if said claims, charges, treatment or services are medically necessary, reasonable, appropriate or are recommended for payment or non-payment; or (2) for compensation and at the request of an insurance company, business, individual or utilization review agent, advises or recommends to any insurance company or utilization review agent, guidelines regarding chiropractic charges, treatment or services. Added by Acts 1991, 72nd Leg., ch. 242, Sec. 11.03(a), eff. Sept. 1, 1991. Art. 21.58C. STANDARDS FOR INDEPENDENT REVIEW ORGANIZATIONS.
Article repealed effective April 1, 2007
Definitions
Sec. 1. In this article: (1) "Life-threatening condition" has the meaning assigned by Section 6, Article 21.58A of this code. (2) "Payor" has the meaning assigned by Section 2, Article 21.58A of this code.
Certification and designation of independent review organizations
Sec. 2. (a) The commissioner shall: (1) promulgate standards and rules for: (A) the certification, selection, and operation of independent review organizations to perform independent review described by Section 6, Article 21.58A of this code; and (B) the suspension and revocation of the certification; (2) designate annually each organization that meets the standards as an independent review organization; (3) charge payors fees in accordance with this article as necessary to fund the operations of independent review organizations; and (4) provide ongoing oversight of the independent review organizations to ensure continued compliance with this article and the standards and rules adopted under this article. (b) The standards required by Subsection (a)(1) of this section must ensure: (1) the timely response of an independent review organization selected under this article; (2) the confidentiality of medical records transmitted to an independent review organization for use in independent reviews; (3) the qualifications and independence of each health care provider or physician making review determinations for an independent review organization; (4) the fairness of the procedures used by an independent review organization in making the determinations; and (5) timely notice to enrollees of the results of the independent review, including the clinical basis for the determination. (c) The standards adopted under Subsection (a)(1) of this section must include standards that require each independent review organization to make its determination: (1) not later than the earlier of: (A) the 15th day after the date the independent review organization receives the information necessary to make the determination; or (B) the 20th day after the date the independent review organization receives the request that the determination be made; and (2) in the case of a life-threatening condition, not later than the earlier of: (A) the fifth day after the date the independent review organization receives the information necessary to make the determination; or (B) the eighth day after the date the independent review organization receives the request that the determination be made. (d) To be certified as an independent review organization under this article, an organization must submit to the commissioner an application in the form required by the commissioner. The application must include: (1) for an applicant that is publicly held, the name of each stockholder or owner of more than five percent of any stock or options; (2) the name of any holder of bonds or notes of the applicant that exceed $100,000; (3) the name and type of business of each corporation or other organization that the applicant controls or is affiliated with and the nature and extent of the affiliation or control; (4) the name and a biographical sketch of each director, officer, and executive of the applicant and any entity listed under Subdivision (3) of this subsection and a description of any relationship the named individual has with: (A) a health benefit plan; (B) a health maintenance organization; (C) an insurer; (D) a utilization review agent; (E) a nonprofit health corporation; (F) a payor; (G) a health care provider; or (H) a group representing any of the entities described by Paragraphs (A) through (G) of this subdivision; (5) the percentage of the applicant's revenues that are anticipated to be derived from reviews conducted under Section 6A, Article 21.58A of this code; (6) a description of the areas of expertise of the health care professionals making review determinations for the applicant; and (7) the procedures to be used by the independent review organization in making review determinations with respect to reviews conducted under Section 6A, Article 21.58A of this code. (e) The independent review organization shall annually submit the information required by Subsection (d) of this section. If at any time there is a material change in the information included in the application under Subsection (d) of this section, the independent review organization shall submit updated information to the commissioner. (f) An independent review organization may not be a subsidiary of, or in any way owned or controlled by, a payor or a trade or professional association of payors. (g) An independent review organization conducting a review under Section 6A, Article 21.58A of this code is not liable for damages arising from the determination made by the organization. This subsection does not apply to an act or omission of the independent review organization that is made in bad faith or that involves gross negligence. (h) Information that reveals the identity of a physician or individual health care provider who makes a review determination for an independent review organization is confidential. Added by Acts 1997, 75th Leg., ch. 163, Sec. 8, eff. Sept. 1, 1997. Sec. 2(h) added by Acts 2003, 78th Leg., ch. 727, Sec. 1, eff. June 20, 2003. Art. 21.61. VOLUNTEER FIRE DEPARTMENT MOTOR VEHICLE SELF-INSURANCE PROGRAM.
Article repealed effective April 1, 2007
Definitions
Sec. 1. In this article: (1) "Fund" means the volunteer fire department self-insurance fund established under Section 5 of this article. (2) "Program" means the volunteer fire department motor vehicle self-insurance program established under this article. (3) "Service" means the Texas Forest Service of The Texas A&M University System. (4) "Volunteer fire department" means a fire department operated by its members that is operated on a not-for-profit basis, including a department that is exempt from federal income tax under Section 501(a) of the Internal Revenue Code of 1986 (26 U.S.C. Section 501(a)) by being listed as an exempt organization in Section 501(c)(3) of that code (26 U.S.C. Section 501(c)(3)).
Administration of Program
Sec. 2. (a) The Texas Forest Service shall administer the volunteer fire department motor vehicle self-insurance program established under this article. (b) The service may employ staff to administer the program.
Self-Insurance Program
Sec. 3. (a) The service shall establish the program to: (1) identify and evaluate risks arising from the use of motor vehicles by volunteer fire departments; (2) maintain a loss-prevention and loss-control program to reduce risks arising from the use of motor vehicles by volunteer fire departments; (3) consolidate and administer volunteer fire department risk management and self-insurance programs; and (4) provide motor vehicle self-insurance coverage in accordance with Section 4 of this article. (b) The director of the service may adopt rules to implement and administer the program.
Self-Insurance Coverage
Sec. 4. (a) The program shall establish a self-insurance pool to provide coverage for motor vehicles used for fire fighting by a volunteer fire department. (b) The coverage may indemnify an official, employee, member, or volunteer of a volunteer fire department for liability arising from the use of a covered motor vehicle in the performance of the fire fighting duties of the official, employee, member, or volunteer. The coverage must be subject to a maximum limit of $100,000 for each person and $300,000 for each single occurrence for bodily injury or death and $100,000 for each single occurrence for injury to or destruction of property. (c) The director of the service may establish: (1) eligibility requirements for participation in coverage under this section; and (2) equipment and safety standards for the motor vehicle to be covered under this section. (d) To participate in coverage provided under this section, a volunteer fire department must submit a written request to the program. The director of the program shall approve the request if each motor vehicle to be covered meets the eligibility requirements and equipment and safety standards established under Subsection (c) of this section.
Fund
Sec. 5. (a) The volunteer fire department self-insurance fund is an account in a depository selected by the board of regents of The Texas A&M University System in the manner provided by Section 51.003, Education Code, for funds subject to the control of institutions of higher education under Section 51.002, Education Code. (b) The fund is composed of: (1) money collected under Section 6 of this article; and (2) interest accruing on money in the fund. (c) Money in the fund may be expended only for: (1) administration of this article, including the salaries and expenses of staff for the program and the fund; or (2) funding self-insurance under the program. (d) Self-insurance coverage provided under Section 4 of this article may be funded only from money available from the fund. (e) Coverage limits of self-insurance provided under Section 4 of this article must be based on the liquidity of the fund after deduction of the cost of administration of this article. (f) The state's liability for a loss covered by self-insurance provided under this article is limited to the assets of the fund, and the state is not otherwise liable for that loss.
Self-Insurance Fee
Sec. 6. (a) The service may levy and collect a reasonable fee from participating volunteer fire departments to provide self-insurance coverage under this article. In establishing the amount of the fee, the service shall consider the amount that could be charged to the volunteer fire department for similar insurance coverage provided to the department in accordance with this code. (b) Fees collected under this section shall be deposited to the credit of the fund.
Representation of Insured
Sec. 7. (a) The service may employ an attorney to represent a volunteer fire department or an official, employee, member, or volunteer of a volunteer fire department in a liability action for which insurance coverage is provided under this article. (b) The attorney general may not provide the services described by Subsection (a) of this section. Added by Acts 1995, 74th Leg., ch. 867, Sec. 1, eff. Sept. 1, 1995. Sec. 4(b) amended by Acts 1997, 75th Leg., ch. 968, Sec. 3, eff. Sept. 1, 1997; Sec. 5(a) amended by Acts 2005, 79th Leg., ch. 217, Sec. 1, eff. May 27, 2005; Sec. 5(c) amended by Acts 2005, 79th Leg., ch. 217, Sec. 1, eff. May 27, 2005. Art. 21.70. NOTICE TO STATE BOARD OF INSURANCE BY PROPERTY AND CASUALTY COMPANIES. (a) A company licensed to transact business in this state under Chapter 5, 6, 7, 8, 15, 16, 17, 18, or 19 of this code shall notify the State Board of Insurance on forms promulgated by the board not later than the 30th day after the day on which any of the following circumstances occurs: (1) balances due from an agent for more than 90 days exceed $1 million or 10 percent of the company's policyholder surplus calculated on either December 31 of the preceding year or the most recent quarter if a report is specifically required by the State Board of Insurance; (2) authority for an agent to settle claims for the company is withdrawn; or (3) the contract with an agent is cancelled or terminated. (b) The requirement to file under Section (a)(1) of this article may be met with a single annual report if the reporting company routinely operates above the limit provided by that section and the commissioner verifies that fact under procedures adopted by the commissioner. Added by Acts 1989, 71st Leg., ch. 1114, Sec. 6, eff. Sept. 1, 1989. Art. 21.72. GENERAL REINSURANCE REQUIREMENTS.
Article repealed effective April 1, 2007
Sec. 1. (a) An insurance company incorporated under the laws of this state, another state, or the United States and authorized to do business in this state may not expose itself to any loss or hazard on any one risk in an amount that exceeds 10 percent of the company's surplus as regards policyholders unless the excess is reinsured by the company in another solvent insurer. (b) An insurance company incorporated under a jurisdiction other than that of this state, another state, or the United States and authorized to do business in this state may not expose itself to any loss or hazard on any one risk in an amount that exceeds 10 percent of the company's deposit with the statutory officer in the state through which the company gains admission to the United States, together with 10 percent of the other surplus to policyholders of the company's United States branch, unless the excess is reinsured by the company in another solvent insurer. Sec. 2. An insurance or reinsurance company authorized to transact insurance or reinsurance in this state may reinsure the whole or any part of an individual risk in another solvent insurer. Sec. 3. This article does not apply to: (1) life insurance; (2) health insurance; (3) annuity contracts; (4) title insurance; (5) workers' compensation insurance; (6) employers' liability insurance coverage; or (7) any policy or type of coverage as to which the maximum possible loss to the insurer is not readily ascertainable on issuance of the policy. Sec. 4. Any reinsurance required or permitted by this article must comply with Article 5.75-1 of this code. Added by Acts 1995, 74th Leg., ch. 614, Sec. 14, eff. Sept. 1, 1995. Sec. 1(a) amended by Acts 1997, 75th Leg., ch. 441, Sec. 1, eff. Sept. 1, 1997. Art. 21.77. GROUP MARKETING OF MOTOR VEHICLE INSURANCE.
Article repealed effective April 1, 2007
Purpose
Sec. 1. The purpose of this article is to authorize the writing of motor vehicle insurance covering persons over 55 years of age in this state on a group marketing basis subject to the conditions stated in this article and to set forth the terms and conditions under which insurance covering persons over 55 years of age on a group marketing basis may be written.
Definitions
Sec. 2. As used in this article: (1) "Group motor vehicle insurance" means all motor vehicle insurance covering persons over 55 years of age that is offered by a licensed insurer in this state on a group marketing plan to an eligible group as defined in this article. (2) "Group marketing" means the marketing of group motor vehicle insurance by a licensed insurer otherwise engaged in insuring independent individual risks to an eligible group on a guaranteed basis under a single insurance program without individual underwriting selection or individual proof of insurability.
Eligible Group
Sec. 3. Any group, to be eligible for group marketing, must have been in existence for at least six months before the purchase of the insurance and must be a group organized for a purpose other than to become an insurance group under this Act, and the group may include any group that will be actuarially credible for underwriting purposes.
Eligible Members of Group
Sec. 4. Eligible members of a group shall include all members in good standing in the group who are over 55 years of age and lawful drivers.
Conditions
Sec. 5. (a) Group motor vehicle insurance may be issued in this state provided the conditions in this section are met. (b) The insurer and the group insured must accept all members who are eligible and wish to participate in the plan. (c) To qualify to write the group insurance defined in this article, an insurer must also be engaged in the business of writing the type of coverage offered for insureds other than group and may not be organized solely for the purpose of furnishing coverage to such groups. (d) Each member of the group shall be issued a policy on forms prescribed for issue in this state by the State Board of Insurance. (e) Insurance must be provided by individual policies to each member of the group under an agreement whereby the premiums on the policies will be paid to the insurer periodically by the group. (f) An insurer may not cancel the insurance of an individual member of the group except for the nonpayment of premiums by the member or unless the insurance for the entire group is cancelled, and in such cases, notice of cancellation as provided in like nongroup policies shall be given to each member. (g) The plan shall provide that only those motor vehicles owned by members of the group or their spouses jointly or severally shall be eligible for coverage.
Maintenance of Records
Sec. 6. Every insurer writing insurance under a group marketing plan shall keep and maintain separate experience data on this type of business, including complete records of premium income, losses, and expenses so that the experience may be fairly ascertained.
Rates
Sec. 7. Rates for the type of business authorized under this article shall be determined, fixed, prescribed, and promulgated in the manner provided in Article 5.01, Insurance Code, as amended, so far as it is applicable.
Policy Forms
Sec. 8. All policy forms for insurance written under this article shall be prescribed by the commissioner as provided in Article 5.06 of this code or filed and in effect as provided in Article 5.145 of this code.
Rules
Sec. 9. The board may make any rules necessary to carry out the provisions of this article.
Construction of Other Provisions
Sec. 10. The provisions of Article 21.02 of this code may not be construed to apply to groups participating in group plans approved under this article. Added by Acts 1979, 66th Leg., p. 1028, ch. 461, Sec. 1, eff. Aug. 27, 1979. Sec. 8 amended by Acts 2003, 78th Leg., ch. 206, Sec. 21.37, eff. June 11, 2003. Art. 21.79. GROUP INSURANCE OF PRIVATE PASSENGER AUTO AND RESIDENTIAL PROPERTY INSURANCE IN UNDERSERVED AREAS.
Article repealed effective April 1, 2007
Sec. 1. (a) By rule the commissioner may determine and designate areas as underserved areas for private passenger auto insurance or residential property insurance. In determining which areas will be designated as underserved, the commissioner shall consider whether such insurance is not reasonably available to a substantial number of insurable risks and the availability of insurance and any other relevant factors as determined by the commissioner. For purposes of this article, residential property insurance means insurance against loss to real or tangible personal property at a fixed location provided in a homeowners policy, residential fire and allied lines policy, or farm and ranch owners policy. (b) Group insurance provided under this article may not include windstorm and hail insurance coverage for a risk eligible for that coverage under Article 21.49 of this code. Sec. 2. All insurers authorized to write property or casualty insurance in this state and writing private passenger auto insurance or residential property insurance in this state, including insurers licensed under Chapters 18 and 19 of this code, are authorized to write such insurance on a group basis in underserved areas as designated by the commissioner. Sec. 3. A group may be formed solely for the purpose of purchasing insurance subject to this article. Sec. 4. All policy forms and certificates for use in underserved areas as designated by the commissioner shall be adopted by the commissioner. Sec. 5. The rates for coverage shall be subject to the applicable statutory provisions relating to the respective insurers. Sec. 6. The commissioner may adopt any other rules that are appropriate and necessary to implement this article. Added by Acts 1995, 74th Leg., ch. 415, Sec. 4, eff. Aug. 28, 1995. Art. 21.79E. CREDIT INVOLUNTARY UNEMPLOYMENT INSURANCE.
Article repealed effective April 1, 2007
Any insurer authorized to write any form of casualty insurance in this state shall also be authorized to write group or individual credit involuntary unemployment insurance indemnifying a debtor for installment or other periodic payments on the indebtedness while the debtor is involuntarily unemployed, including policy forms and endorsements which define involuntary unemployment to provide coverage and a premium charge for interruption or reduction of a debtor's income during periods of leave (paid or otherwise) authorized by the Federal Family and Medical Leave Act of 1993 (29 U.S.C. Section 2601 et seq.), as amended, or other state or federal laws. Such insurance may be written alone or in conjunction with credit life insurance, credit accident and health insurance, or both, in policies issued by any authorized insurer, but not in contravention of the Texas Free Enterprise and Antitrust Act of 1983 (Chapter 15, Business & Commerce Code). Rates and forms for such insurance may be made and filed in accordance with Article 5.13-2 of this code. Added by Acts 1991, 72nd Leg., ch. 242, Sec. 2.17C, eff. Sept. 1, 1991. Amended by Acts 1997, 75th Leg., ch. 1396, Sec. 32, eff. Sept. 1, 1997; Amended by Acts 2003, 78th Leg., ch. 206, Sec. 21.38, eff. June 11, 2003. Art. 21.79H. RECOVERY OF CERTAIN COSTS FROM THIRD PARTY. (a) This article applies to any insurer that delivers, issues for delivery, or renews a private passenger automobile insurance policy in this state, including a county mutual, a reciprocal or interinsurance exchange, or a Lloyd's plan. (b) An insurer that brings suit or takes other action described by Section 542.202 of this code against a responsible third party relating to a loss that is covered under a private passenger automobile insurance policy issued by the insurer and for which the responsible third party is uninsured is entitled to recover, in addition to payments made by the insurer or insured, the costs of bringing the suit or taking the action, including reasonable attorney's fees and court costs. Added by Acts 2005, 79th Leg., ch. 1074, Sec. 1, eff. Sept. 1, 2005.
SUBCHAPTER F. JUDICIAL REVIEW
Art. 21.80. LICENSING REQUIREMENTS FOR AUTOMOBILE CLUBS. (a) An automobile club as defined in Section 722.002(2), Transportation Code, may provide insurance service only as provided by this section. (b) An automobile club may provide a member accidental injury and death benefit insurance coverage through purchase of a group policy of insurance issued to the automobile club for the benefit of its members. The coverage must be purchased from an insurance company authorized to sell that type of coverage in this state. The automobile club shall provide each member covered by the insurance a certificate of participation. The certificate of participation must state on its face in at least 14-point black boldfaced type that the certificate is only a certificate of participation in a group accidental injury and death policy and is not motor vehicle liability insurance coverage. (c) An automobile club may endorse insurance products and refer members to agents or insurers authorized to provide the insurance products in this state. The automobile club or an agent of the automobile club may not receive remuneration for the referral. (d) Except as provided by Subsection (e) of this article, an automobile club performing services permitted by this article is not subject to regulation under the insurance laws of this state because of the performance of those services. (e) An automobile club may sell insurance products to a member for a consideration separate from the amount that the member pays for membership in the automobile club if the automobile club is properly licensed as an agent under the applicable provisions of this code. (f) In addition to reimbursement services enumerated in Section 722.002(2), Transportation Code, an automobile club may contract with a member to reimburse the member for expenses the member incurs for towing, emergency road service, and lockout or lost key service and to provide immediate destination assistance and trip interruption service. The insurance laws of this state do not apply to reimbursement provided under this subsection. Added by Acts 1999, 76th Leg., ch. 1530, Sec. 5.01, eff. Sept. 1, 1999. Art. 21.81. TEXAS AUTOMOBILE INSURANCE PLAN ASSOCIATION.
Article repealed effective April 1, 2007
Definitions
Sec. 1. In this article: (1) "Association" means the Texas Automobile Insurance Plan Association established under this article. (2) "Authorized insurer" means any insurer authorized by the Texas Department of Insurance to write motor vehicle liability coverage under the provisions of Chapter 5 of this code. Except as provided by Section 13(f), Article 5.13-2 of this code, the term does not include an insurer organized under Chapter 17 of this code. (3) "Insurance" means an insurance policy that meets the requirements of the Texas Motor Vehicle Safety-Responsibility Act (Article 6701h, Vernon's Texas Civil Statutes). (4) "Plan of operation" means the plan for operating the association to provide a means by which insurance may be assigned to an eligible person who is required by law to show proof of financial responsibility for the future.
Creation of the Association
Sec. 2. (a) The Texas Automobile Insurance Plan Association is established. The association is a nonprofit corporate body composed of all authorized insurers. Each authorized insurer shall be a member of the association and shall remain a member of the association so long as the association is in existence as a condition of its authority to write motor vehicle liability insurance in this state. (b) The association shall be administered by a governing committee composed of fifteen members selected as follows: (1) eight members who represent the interests of insurers, elected by the members of the association according to a method determined by such members; (2) five public members nominated by the Office of Public Insurance Counsel and selected by the commissioner; and (3) two members who are licensed local recording agents, as defined by the plan of operation. (c) To be eligible to serve on the governing committee as a representative of insurers, a person must be a full-time employee of an authorized insurer. (d) A person may not serve on the governing committee as a public member if that person, an individual related to that person within the second degree of consanguinity or affinity, or an individual residing in the same household with that person is: (1) required to be registered or licensed under this code or another insurance law of this state; (2) employed by or acts as a consultant to a person required to be registered or licensed under this code or another insurance law of this state; (3) the owner of, has a financial interest in, or participates in the management of an organization required to be registered or licensed under this code or another insurance law of this state; (4) an officer, employer, or consultant of an association in the field of insurance; or (5) required to register as a lobbyist under Chapter 305, Government Code.
Authority of the Association; Plan of Operation
Sec. 3. (a) The governing committee has the responsibility for the administration of the association through the plan of operation. The association may collect funds from the member companies to provide for the operation of the association. Assessments must be made upon member companies in proportion to their writings of motor vehicle liability insurance in this state. If an assessment made upon a member insurer is not paid within a reasonable time, the association may bring an action to collect the assessment. In addition, the association may report the failure to pay to the commissioner, who may institute a disciplinary action under Article 1.10 of this code. The association has the powers granted to nonprofit corporations under the Texas Non-Profit Corporation Act (Article 1396-1.01 et seq., Vernon's Texas Civil Statutes). (b) The plan of operation of the association must provide for the efficient, economical, fair, and nondiscriminatory administration of the association. (c) Subject to the approval of the commissioner, the governing committee may make and amend the plan of operation. (d) If the commissioner at any time believes that any part of the plan of operation is not in keeping with the purposes of the Texas Motor Vehicle Safety-Responsibility Act (Article 6701h, Vernon's Texas Civil Statutes), the commissioner shall notify the governing committee in writing so that the governing committee may take corrective action. (e) Among other provisions, the plan of operation must contain incentive programs to encourage members to write insurance on a voluntary basis and to minimize the use of the association as a means to obtain insurance. The incentive programs are effective on approval of the commissioner. One of these programs shall target underserved geographic areas which shall be determined and designated by the commissioner by rule. In determining which areas will be designated as underserved, the commissioner shall consider the availability of insurance, the number of uninsured drivers, the number of drivers insured through the association, and any other relevant factor. (f) The plan of operation must include a voluntary, competitive limited assignment distribution plan that allows members to contract directly with a servicing carrier to accept assignments to that carrier by the association. A servicing carrier must be an insurance company licensed to write automobile insurance in this state and is qualified if it has written automobile liability insurance in Texas for at least five years or is currently engaged as a servicing carrier for assigned risk automobile business in at least one other state. After notice and hearing, the commissioner may prohibit an insurer from acting as a servicing carrier. The terms of the contract between the servicing carrier and the insurer, including the buy-out fee, shall be determined by negotiation between the parties. The governing committee may adopt reasonable rules for the conduct of business under the contract and may establish reasonable standards of eligibility for servicing carriers.
Duties and Functions of the Association
Sec. 4. (a) The association shall provide a means by which insurance may be assigned to an authorized insurance company for a person required by the Texas Motor Vehicle Safety-Responsibility Act (Article 6701h, Vernon's Texas Civil Statutes) to show proof of financial responsibility for the future. (b) An applicant is not eligible for insurance through the association unless the applicant and the servicing agent certify as part of the application to the association that the applicant has been rejected for insurance by at least two insurers licensed to do business in this state and actually writing automobile insurance in this state, including insurers that are not rate regulated. (c) Repealed by Acts 1995, 74th Leg., ch. 619, Sec. 1, eff. Sept. 1, 1995.
Rates for insurance; hearing
Sec. 5. (a) The commissioner shall determine and prescribe appropriate rates to be charged for insurance provided through the association that are just, reasonable, adequate, not excessive, not confiscatory, and not unfairly discriminatory for the risks to which they apply. Rates shall be set in an amount sufficient to carry all claims to maturity and to meet the expenses incurred in the writing and servicing of the business. In making a determination, the commissioner shall consider the reports of aggregated premiums earned and losses and expenses incurred in the writing of motor vehicle insurance through the plan collected under the statistical plan provided for by Subsection (b) of this section. (b) The commissioner shall promulgate reasonable rules and statistical plans to be used by each insurer in the recording and reporting of its premium, loss, and expense experience which must be reported separately for business assigned to it and other data required by the commissioner. (c) The association shall file annually with the department for approval by the commissioner rates to be charged for insurance provided through the association. The association may not make such a filing more than once in any 12-month period. Subchapter B, Chapter 40, of this code does not apply to: (1) a filing made under this subsection; (2) Subsections (d)-(h) of this section; or (3) a department action with respect to such a filing. (d) Before approving, disapproving, or modifying a filing made under Subsection (c) of this section, the commissioner shall provide all interested persons a reasonable opportunity to: (1) review the filing; (2) obtain copies of the filing on payment of any legally required copying cost; and (3) submit to the commissioner written comments, analyses, or information related to the filing. (e) Not later than the 45th day after the date on which the department receives the filing required under Subsection (c) of this section, the commissioner shall schedule a hearing at which interested persons may present written or oral comments relating to the filing. A hearing under this subsection is not a contested case hearing under Chapter 2001, Government Code. The association, the public insurance counsel, and any other interested person or entity that has submitted proposed changes or actuarial analyses may ask questions of any person testifying at the hearing. (f) The department shall file with the Texas Register notice that a filing has been made under Subsection (c) of this section not later than the seventh day after the date the filing is received by the department. The notice must include information relating to: (1) the availability of the filing for public inspection at the department during regular business hours and the procedures for obtaining copies of the filing; (2) procedures for making written comments related to the filing; and (3) the time, place, and date of the hearing scheduled under Subsection (e) of this section. (g) After the conclusion of the hearing, the commissioner shall approve, disapprove, or modify the filing in writing. If the commissioner disapproves a filing, the commissioner shall state in writing the reasons for the disapproval and the criteria to be met by the association to obtain approval. The association may file with the commissioner, not later than the 10th day after the date on which the association receives the commissioner's written disapproval, an amended filing to comply with the commissioner's comments. (h) Before approving or disapproving an amended filing, the commissioner shall provide all interested persons a reasonable opportunity to review the amended filing, obtain copies of the amended filing on payment of any legally required copying cost, and submit to the commissioner written comments or information related to the amended filing in the manner provided by Subsection (d) of this section, and may hold a hearing not later than the 20th day after the date on which the department receives the amended filing in the manner provided by Subsection (e) of this section. Not later than the 10th day after the date on which the hearing on the amended filing is concluded, the commissioner shall approve or disapprove the amended filing. Not later than the 30th day after the date on which the amended filing is received by the department, the commissioner shall disapprove the amended filing or it is considered approved. The requirements adopted under Subsections (f) and (g) of this section apply to a hearing conducted under this subsection. (i) A person aggrieved by a decision of the commissioner under this section may, not later than the 30th day after the date of the commissioner's decision, appeal the decision. An appeal of a commissioner's decision under this section must be made in accordance with Subchapter D, Chapter 36, of this code.
Immunity from Liability
Sec. 6. (a) The association, a member of the governing committee, and any employee of the association is not personally liable for any act performed in good faith within the scope of the person's authority as determined under this article or the plan of operation or for damages occasioned by his or her official acts or omissions except for an act or omission that is corrupt or malicious. The association shall provide counsel to defend any action brought against a member of the governing committee or an employee by reason of the person's official act or omission whether or not at the time of the institution of the action the defendant has terminated service with the association. (b) This section is cumulative with and does not affect or modify any common law or statutory privilege or immunity. Added by Acts 1993, 73rd Leg., ch. 685, Sec. 14.03, eff. Sept. 1, 1993. Sec. 4(c) repealed by Acts 1995, 74th Leg., ch. 619, Sec. 1, eff. Sept. 1, 1995; Sec. 5 amended by Acts 2001, 77th Leg., ch. 1071, Sec. 4, eff. Sept. 1, 2001; Sec. 1(2) amended by Acts 2003, 78th Leg., ch. 206, Sec. 21.39, eff. June 11, 2003.

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