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House Bill 3762 |
House Author: Flynn |
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Effective: See below |
Senate Sponsor: Deuell |
House Bill 3762 amends provisions of the Finance Code relating to the regulation of prepaid funeral benefits. Effective June 1, 2010, the bill requires the Finance Commission of Texas to adopt rules for recordkeeping by permit holders, clarifies the Texas Department of Banking's authority to require annual reports from a permit holder, and requires the department to examine each permit holder's records at least once every 18-month period or more frequently under certain conditions. The bill allows a record to be maintained and provided for examination in electronic format if the record is reliable and readily retrievable, and it requires the department to develop an examination manual in consultation with a newly created advisory committee.
House Bill 3762 creates separate permit categories. To obtain a permit to sell insurance‑funded prepaid funeral benefits contracts, a person must be a funeral provider, an insurance company, or the insurance holding company for an insurance company; to obtain a permit to sell trust-funded prepaid funeral benefits contracts, a person must be a funeral provider. The bill expands notice requirements following a transfer of a permit holder's business ownership to include the issuer of an insurance policy funding a contract as a notice recipient and requires the commissioner to act on the proposed transferee's application for a permit before the 16th day after receipt of application if the proposed transferee is not a permit holder.
Effective June 1, 2010, the bill requires a seller to provide to each potential buyer of a prepaid funeral benefits contract a department-approved brochure describing the statutory and regulatory provisions governing such contracts, requires the department to establish and maintain a website that provides consumer information, and requires any sales literature or websites promoting such sales to include a reference or link to the website. The bill requires a funeral provider designated in a prepaid funeral benefits contract who is not the licensed seller to agree, by signing the contract, to discharge the provider's responsibilities as specified in the bill.
The bill authorizes a purchaser to agree to advance funds for all or part of the estimated cost of cash advance items included in a contract whose prices are neither fixed nor guaranteed but are determined at the time of delivery or provision in connection with at-need performance of the funeral; requires the items to be grouped together and segregated from prepaid funeral benefits in the contract; sets out the funeral provider's obligation, after the contract beneficiary's death, to apply the proportionate part of the proceeds derived from advance payment of cash advance items to the items' current purchase price; and authorizes modification of the cash advance items after the beneficiary's death under certain conditions.
The bill removes the 15-day waiting period after the date of purchase before the purchaser may waive the purchaser's rights to cancel a contract, and it changes the period during which a seller must notify the department of any change in the designation of one or more agents from the 10-day period before the change to the 10-day period after the change.
House Bill 3762 sets forth a funeral provider's responsibilities under a prepaid funeral benefits contract; sets forth form and content requirements for an insurance policy used to fund prepaid funeral benefits, including a requirement to state that the contract's cancellation does not automatically cancel the policy and a limitation on a policy's aggregate initial face value; allows premiums for such a policy to be collected only by a licensed insurance agent appointed by the company issuing the policy; and establishes that the premiums' receipt by the agent is considered receipt by the company.
House Bill 3762 establishes separate provisions for the cancellation of an insurance‑funded prepaid funeral benefits contract to clarify the difference between such cancellation and the cancellation of a trust-funded contract. The bill prohibits a purchaser's assignment of ownership and rights to benefits under an insurance policy to the seller, funeral provider, or affiliated trustee from being made irrevocable except under certain conditions.
House Bill 3762 requires the commissioner, not later than November 1, 2009, to appoint an advisory committee to review and make recommendations regarding the department's technical procedures and processes to regulate insurance-funded prepaid funeral benefits and monitor compliance of sellers of insurance-funded contracts.
House Bill 3762 expands the prepaid funeral contract guaranty fund to include insurance‑funded contracts, requires the department to maintain separate accounts within the fund for trust-funded contracts and insurance-funded contracts, and under certain conditions, authorizes borrowing between accounts to facilitate resolution of claims against an account with an insufficient balance. The bill requires the department to collect up to $1 from a seller for each insurance-funded contract sold during each calendar year and to deposit the assessments in the insurance-funded contract account until the account reaches $1 million. The bill increases the membership on the advisory council supervising the fund's operation and maintenance to provide for representation of sellers of trust-funded and insurance-funded prepaid funeral benefits contracts, increases the term limits for the industry and consumer representatives, and limits a member's personal liability for damages arising from an official act or omission unless the act or omission is corrupt or malicious. The bill requires the attorney general to defend an action brought against a member from an official act or omission and authorizes the commissioner on the fund's behalf to contract with the attorney general for legal services not covered under these provisions. The bill authorizes the advisory council, when the insurance-funded contract account balance is insufficient to pay that claim, to assess each permit holder with outstanding insurance‑funded contracts an amount based on the holder's proportionate share of all such outstanding contracts as of the end of the preceding calendar year.
House Bill 3762 lists the entities authorized to make a claim against the fund and sets out the permissible uses of the fund. The bill prohibits a claim from being approved for a loss to the extent the claim is insured, bonded, or otherwise covered, protected, or reimbursed from other sources. The bill establishes that a person receiving a benefit from the guaranty fund is considered to have assigned to the fund the rights under, and any cause of action relating to, the prepaid funeral benefits contract to the extent of the benefit received. The bill authorizes the commissioner to require a payee to execute a formal assignment of the person's rights and cause of action to the fund as a condition of receiving a right or benefit. The bill authorizes the commissioner, on the fund's behalf, to bring an action against any person and to hire and pay any person the commissioner considers appropriate to collect a subrogated account.
House Bill 3762 authorizes the commissioner to issue an emergency cease and desist order or an order to seize prepaid funeral accounts and records that takes effect immediately on finding of a threat of immediate and irreparable harm to the public or to a beneficiary under a prepaid funeral benefits contract, and it provides the opportunity for a hearing to stay the order at the request of the person named in the order. The bill authorizes the commissioner, after issuing an order to seize accounts or records, to initiate an administrative claim for ancillary relief.
House Bill 3762 amends the Insurance Code to establish that provisions relating to policy forms do not apply to the modification of a previously approved insurance policy form for the sole purpose of adding a specific statement required by the Finance Code. The bill takes effect September 1, 2009, except as otherwise noted above.