US Laws, Codes, Statutes & Cases

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Article repealed effective April 1, 2007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 respec