H.B. No. 1461
1-1 AN ACT
1-2 relating to insurance regulation and to the continuation, powers,
1-3 and duties of the Texas Department of Insurance and the office of
1-4 public insurance counsel; providing administrative penalties;
1-5 making an appropriation.
1-6 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-7 ARTICLE 1. ORGANIZATION OF TEXAS DEPARTMENT OF INSURANCE;
1-8 FUNCTIONS OF COMMISSIONER; ELIMINATION OF STATE BOARD OF INSURANCE
1-9 SECTION 1.01. Article 1.02, Insurance Code, is amended to
1-10 read as follows:
1-11 Art. 1.02. Operation of Department<; Board>. (a) A
1-12 provision of this code or another insurance law, including an
1-13 enactment or reenactment of a provision of this code or another
1-14 insurance law by the 73rd Legislature, Regular Session, 1993, that
1-15 references the State Board of Insurance is not intended to conflict
1-16 with this article. A reference in this code or another insurance
1-17 law to the State Board of Insurance means the Commissioner of
1-18 Insurance or the Texas Department of Insurance, as consistent with
1-19 the respective powers and duties of the Commissioner and the
1-20 department under this article. <The State Board of Insurance is
1-21 composed of three members, all of whom shall be citizens of Texas.
1-22 They shall be appointed by the Governor, by and with the advice and
1-23 consent of the Senate of Texas. The term of office of each member
1-24 shall be as provided in this Code. Each member of the Board shall
2-1 be a person with at least ten (10) years of successful experience
2-2 in business, professional or governmental activities, or a total of
2-3 at least ten (10) years in any combination of two or more of such
2-4 activities. Each member shall be available at all reasonable times
2-5 for the discharge of the duties and functions delegated to the
2-6 members of the Board by law, but the members shall act as a unit,
2-7 and in no event shall the individual members divide or confine
2-8 their activities to special fields of insurance regulation or
2-9 attempt to administer the functions hereinafter assigned to the
2-10 Commissioner.>
2-11 (b) The powers, functions, authority, prerogatives, duties,
2-12 obligations, and responsibilities vested in the department shall be
2-13 exercised, performed, carried out, and administered by the
2-14 Commissioner as the chief executive and administrative officer of
2-15 the department in accordance with the pertinent laws of this state
2-16 and the rules and regulations for uniform application adopted by
2-17 the Commissioner <Board and subject to the general supervision and
2-18 direction of the Board. The duties of the State Board of Insurance
2-19 shall be primarily in a supervisory capacity, and the carrying out
2-20 and administering the details of the Insurance Code, other
2-21 insurance laws of this state, and other laws providing jurisdiction
2-22 in or applicable to the department or the Commissioner shall be
2-23 primarily the duty and responsibility of the Commissioner acting
2-24 under the general supervision and direction of the Board>.
2-25 (c) <On February 10th of each odd-numbered year, the
2-26 Governor shall appoint from among the membership of the Board a
2-27 Chairman who shall be known and designated as the Chairman of the
3-1 State Board of Insurance.>
3-2 <(d)> The Texas Department of Insurance is subject to
3-3 Chapter 325, Government Code (Texas Sunset Act). Unless continued
3-4 in existence as provided by that chapter, the department is
3-5 abolished September 1, 2005 <1993>.
3-6 <(e) Appointments to the board shall be made without regard
3-7 to the race, creed, sex, religion, or national origin of the
3-8 appointees. In making appointments under this section, the
3-9 governor shall attempt to appoint members of different minority
3-10 groups including females, African-Americans, Hispanic-Americans,
3-11 Native Americans, and Asian-Americans.>
3-12 <(f) In addition to grounds provided by other applicable law
3-13 providing for removal from office, it is a ground for removal from
3-14 the board that a member:>
3-15 <(1) does not have at the time of appointment the
3-16 qualifications required by this article for appointment to the
3-17 board;>
3-18 <(2) does not maintain during the service on the board
3-19 the qualifications required by this article for appointment to the
3-20 board; or>
3-21 <(3) violates a prohibition established by Article
3-22 1.06A of this code.>
3-23 <(g) The validity of an action of the board is not affected
3-24 by the fact that it was taken when a ground for removal of a member
3-25 of the board existed.>
3-26 (d) <(h)> The Commissioner or the Commissioner's designee
3-27 <board> shall prepare and maintain a written policy statement
4-1 <plan> to ensure <assure> implementation of a program of equal
4-2 employment opportunity under which <whereby> all personnel
4-3 transactions are made without regard to race, color, disability,
4-4 sex, religion, age, or national origin. The policy statement
4-5 <plan> must include:
4-6 (1) personnel policies, including policies relating to
4-7 <a comprehensive analysis of all employees by race, sex, ethnic
4-8 origin, class of position, and salary or wage;>
4-9 <(2) plans for> recruitment, evaluation, selection,
4-10 appointment, training, and promotion of<, and other> personnel that
4-11 are in compliance with the Commission on Human Rights Act (Article
4-12 5221k, Vernon's Texas Civil Statutes) <policies>;
4-13 (2) a comprehensive analysis of the department work
4-14 force that meets federal and state guidelines;
4-15 (3) procedures by which a determination can be made of
4-16 significant underuse in the department work force of all persons
4-17 for whom federal or state guidelines encourage a more equitable
4-18 balance; and
4-19 (4) reasonable methods to appropriately address those
4-20 areas of significant underuse
4-21 <(3) steps reasonably designed to overcome any
4-22 identified underutilization of minorities and women in the
4-23 department's work force; and>
4-24 <(4) objectives and goals, timetables for the
4-25 achievement of those objectives and goals, and assignments of
4-26 responsibility for their achievement>.
4-27 (e) A policy statement prepared under Subsection (d) of this
5-1 article must cover an annual period, be updated annually, be
5-2 reviewed by the Commission on Human Rights for compliance with
5-3 Subsection (d)(1) of this article, and be filed with the governor's
5-4 office.
5-5 (f) The governor's office shall deliver a biennial report to
5-6 the legislature based on the information received under Subsection
5-7 (e) of this article. The report may be made separately or as a
5-8 part of other biennial reports made to the legislature.
5-9 (g) The Commissioner shall develop and implement policies
5-10 that clearly define the respective responsibilities of the
5-11 Commissioner and the staff of the department.
5-12 (h) The Commissioner shall provide to department employees,
5-13 as often as necessary, information regarding their qualification
5-14 for office or employment under this code and their responsibilities
5-15 under applicable laws relating to standards of conduct for state
5-16 employees.
5-17 <(i) The plan required by Section (h) of this article shall
5-18 be filed with the governor's office within 60 days after the
5-19 effective date of that section, cover an annual period, and be
5-20 updated at least annually. Progress reports shall be submitted to
5-21 the governor's office within 30 days before November 1 and April 1
5-22 of each year and shall include the steps the department has taken
5-23 within the reporting period to comply with those requirements.>
5-24 SECTION 1.02. Article 1.01A, Insurance Code, is amended to
5-25 read as follows:
5-26 Art. 1.01A. Creation and Structure of the Texas Department
5-27 of Insurance. (a) In this code and other insurance laws:
6-1 (1) <"Board" means the three-member State Board of
6-2 Insurance.>
6-3 <(2)> "Department" means the Texas Department of
6-4 Insurance.
6-5 (2) <(3)> "Commissioner" means the Commissioner of
6-6 Insurance appointed under Article 1.09 of this code.
6-7 (b) The Texas Department of Insurance is created to regulate
6-8 the business of insurance in this state. The department is
6-9 composed of <the board,> the Commissioner<,> and other officers and
6-10 employees required to efficiently implement the purpose of this
6-11 code, other insurance laws of this state, and other laws providing
6-12 jurisdiction in or applicable to the department<, board,> or
6-13 Commissioner.
6-14 (c) Except as otherwise provided by law, all references in
6-15 this code and other statutes of this state to the board, the Board
6-16 of Insurance Commissioners, the State Board of Insurance, or
6-17 individual commissioners mean the department<, the board,> or the
6-18 Commissioner as consistent with the respective duties of the
6-19 Commissioner or the department <those persons or entities> under
6-20 this code and other laws relating to the business of insurance in
6-21 this state.
6-22 SECTION 1.03. Chapter 1, Insurance Code, is amended by
6-23 amending Article 1.04 and adding Articles 1.03A, 1.04A, 1.04B, and
6-24 1.04C to read as follows:
6-25 Art. 1.03A. RULES FOR GENERAL APPLICATION. The Commissioner
6-26 may adopt <1.04. ><Duties and Organization of the State Board of
6-27 Insurance><. (a) The State Board of Insurance shall operate and
7-1 function as one body or a unit and a majority vote of the members
7-2 of the Board shall be necessary to transact any of its official
7-3 business. The Board shall maintain one official set of records of
7-4 its proceedings and actions.>
7-5 <(b) The State Board of Insurance shall determine policy for
7-6 the department, rules, rates, forms, and appeals as provided by
7-7 law, and shall assume other duties that are expressly assigned to
7-8 the Board by law, but otherwise the Board shall execute its duties
7-9 through the Commissioner as provided by law, in accordance with the
7-10 laws of this state and the rules and regulations for uniform
7-11 application as made by the Board.>
7-12 <(c) All> rules and regulations for the conduct and
7-13 execution of the duties and functions of the department only as
7-14 authorized by a statute. Rules and regulations adopted in
7-15 accordance with this subsection must <shall> be <rules> for general
7-16 and uniform application and shall be <adopted and> published by the
7-17 Commissioner <Board> on the basis of a systematic organization of
7-18 such rules by their subject matter and content. <The Commissioner
7-19 may make recommendations to the Board regarding such rules and
7-20 regulations, including amendments, changes and additions.> Such
7-21 published rules shall be kept current and shall be available in a
7-22 form convenient to all interested persons.
7-23 Art. 1.04. APPEAL OF DECISION OF COMMISSIONER.
7-24 (a) <(d) Any person or organization, private or public, that is
7-25 affected by any ruling or action of the Commissioner shall have the
7-26 right to have such ruling or action reviewed by the State Board of
7-27 Insurance by making an application to the Board. Such application
8-1 shall state the identities of the parties, the ruling or action
8-2 complained of, the interests of the parties in such ruling, the
8-3 grounds of such objections, the action sought of the Board and the
8-4 reasons and grounds for such action by the Board. The original
8-5 shall be filed with the Chief Clerk of the Board together with a
8-6 certification that a true and correct copy of such application has
8-7 been filed with the Commissioner. Within thirty (30) days after
8-8 the application is filed, and after ten (10) days written notice to
8-9 all parties of record, the Board shall review the action complained
8-10 of in a public hearing and render its decision at the earliest
8-11 possible date thereafter. The Board shall make such other rules
8-12 and regulations with regard to such applications and their
8-13 consideration as it deems advisable, not inconsistent with this
8-14 Article. Said application shall have precedence over all other
8-15 business of a different nature pending before the Board.>
8-16 <In the public hearing, any and all evidence and matters
8-17 pertinent to the appeal may be submitted to the Board, whether
8-18 included in the application or not.>
8-19 <(f)> If any insurance company or other party at interest be
8-20 dissatisfied with any ruling, action, decision, regulation, order,
8-21 rate, rule, form, act, or administrative ruling adopted by the
8-22 Commissioner <State Board of Insurance>, such dissatisfied company
8-23 or party at interest after failing to get relief from the
8-24 Commissioner <State Board of Insurance>, may file a petition
8-25 setting forth the particular objection to such ruling, action,
8-26 decision, regulation, order, rate, rule, form, act, or
8-27 administrative ruling, or to either or all of them, in the District
9-1 Court of Travis County, Texas, and not elsewhere, against the
9-2 Commissioner <State Board of Insurance> as defendant. Judicial
9-3 review of a ruling, action, decision, regulation, order, rate,
9-4 rule, form, act, or administrative ruling of the Commissioner
9-5 <Board> is subject to the substantial evidence rule and shall be
9-6 conducted under the Administrative Procedure and Texas Register Act
9-7 (Article 6252-13a, Vernon's Texas Civil Statutes). The filing of a
9-8 petition for judicial review of a ruling, action, decision,
9-9 regulation, order, rate, rule, form, act, or administrative ruling
9-10 of the Commissioner <Board> under this subsection does not vacate a
9-11 decision of the Commissioner <Board>. After notice and hearing,
9-12 the court may vacate the decision of the Commissioner <Board> if
9-13 the court finds it would serve the interest of justice to do so.
9-14 Any party to the action may appeal to the Appellate Court having
9-15 jurisdiction of the cause and the appeal shall be at once
9-16 returnable to the Appellate Court having jurisdiction of the cause
9-17 and the action so appealed shall have precedence in the Appellate
9-18 Court over all causes of a different character therein pending.
9-19 (b) The Commissioner <Board> is not required to give any
9-20 appeal bond in any cause arising under this article <hereunder>.
9-21 Art. 1.04A. SALARIED EXAMINERS. <(g)> In making
9-22 examinations of any insurance organization as provided by law, the
9-23 department may use its own salaried examiners or may use the
9-24 services of persons or firms qualified to perform such examinations
9-25 or assist in the performance of such examinations. Such
9-26 examination shall cover the period of time that the department
9-27 requests. In the event the department does not specify a longer
10-1 period of time, such examination shall be from the time of the last
10-2 examination theretofore made by the department to December 31st of
10-3 the year preceding the examination then being made. All fees paid
10-4 to those persons or firms whose services are used shall be paid at
10-5 the usual and customary rates charged for the performance of those
10-6 services, subject to the right of the Commissioner <Board> to
10-7 disapprove for payment any fees that are excessive in relation to
10-8 the services actually performed. Such payment shall be made by the
10-9 insurance organization being examined and all such examination fees
10-10 so paid shall be allowed as a credit on the amount of premium or
10-11 other taxes to be paid by any such insurance organization for the
10-12 taxable year during which examination fees are paid just as
10-13 examination fees are credited when the department uses its own
10-14 salaried examiners.
10-15 Art. 1.04B. POLICY HOLDER COMPLAINTS. <(h)> The department
10-16 shall establish a program to facilitate resolution of policy holder
10-17 complaints.
10-18 Art. 1.04C. PUBLIC ACCESS. (a) The Commissioner shall
10-19 prepare and maintain a written plan that describes how a person who
10-20 does not speak English can be provided reasonable access to the
10-21 department's programs. The department shall also comply with
10-22 federal and state laws for program and facility accessibility.
10-23 (b) The Commissioner shall develop and implement policies
10-24 that provide the public with a reasonable opportunity to appear
10-25 before the Commissioner and to speak on any issue under the
10-26 jurisdiction of the Commissioner.
10-27 SECTION 1.04. Chapter 1, Insurance Code, is amended by
11-1 amending Articles 1.06A and 1.06B and adding Article 1.06AA to
11-2 read as follows:
11-3 Art. 1.06A. Conflict of Interest; Trade Associations.
11-4 (a) An <A member of the State Board of Insurance, the
11-5 commissioner, or an employee of the department may not be an>
11-6 officer, employee, or paid consultant of a trade association in the
11-7 field of insurance may not be commissioner or an employee of the
11-8 department who is exempt from the state's position classification
11-9 plan or is compensated at or above the amount prescribed by the
11-10 General Appropriations Act for step 1, salary group 17, of the
11-11 position classification salary schedule <industry>.
11-12 (b) A person who is the spouse of an officer, manager, or
11-13 paid consultant of a trade association in the field of insurance
11-14 may not be commissioner or a department employee who is exempt from
11-15 the state's position classification plan or is compensated at or
11-16 above the amount prescribed by the General Appropriations Act for
11-17 step 1, salary group 17, of the position classification salary
11-18 schedule.
11-19 (c) For purposes of this article, a trade association is a
11-20 nonprofit, cooperative, and voluntarily joined association of
11-21 business or professional competitors designed to assist its members
11-22 and its industry or profession in dealing with mutual business or
11-23 professional problems and in promoting their common interest.
11-24 Art. 1.06AA. CONFLICT OF INTEREST; EXEMPT EMPLOYEES. A
11-25 <Any> person <whose employment commences after the effective date
11-26 of this Act> may not be <appointed as a member of the State Board
11-27 of Insurance or> employed in an exempt salary position as defined
12-1 by the General Appropriations Act who at the time of <appointment
12-2 or> employment resides in the same household as a person who is an
12-3 officer, managerial employee, or paid consultant in the insurance
12-4 industry.
12-5 Art. 1.06B. Lobbying Activities. A person may not serve as
12-6 commissioner or act as the general counsel to the commissioner if
12-7 the person <who> is required to register as a lobbyist under
12-8 Chapter 305, Government Code, because of the person's <by virtue of
12-9 his> activities for compensation <in or> on behalf of a profession
12-10 related to the operation of the department <may not serve as a
12-11 member of the board or act as the general counsel to the board>.
12-12 SECTION 1.05. Article 1.09, Insurance Code, is amended by
12-13 amending Subsections (a), (b), (f), (g), and (h) and by adding
12-14 Subsections (i) and (j) to read as follows:
12-15 (a) The Commissioner of Insurance is <Board shall appoint a
12-16 commissioner of insurance, who shall be> the department's chief
12-17 executive and administrative officer charged with the primary
12-18 responsibility of administering, enforcing, and carrying out the
12-19 provisions of the Insurance Code, other insurance laws of this
12-20 state, and other laws providing jurisdiction in or applicable to
12-21 the department or commissioner, except for responsibilities
12-22 relating to the reporting, collection, enforcement, and
12-23 administration of taxes and certain fees as described under this
12-24 code or another insurance law of this state that are assigned to
12-25 the comptroller of public accounts <under the general supervision
12-26 and direction of the Board. He shall hold his position at the
12-27 pleasure of the Board and may be discharged at any time>.
13-1 (b) The governor, with the advice and consent of the senate,
13-2 shall appoint the commissioner for a two-year term ending on
13-3 February 1 of each odd-numbered year. The commissioner must
13-4 <Commissioner of Insurance shall be a resident citizen of Texas,
13-5 for at least one (1) year immediately prior to his/her appointment
13-6 and shall> be a competent and experienced administrator, <who
13-7 shall> be well informed and qualified in the field of insurance and
13-8 insurance regulation,<. He/she shall> have had at least 10 <ten
13-9 (10)> years of <administrative or professional> experience as an
13-10 executive in the administration of business or government, or as a
13-11 practicing attorney or certified public accountant, and at least
13-12 five years of that <shall have had training and> experience in the
13-13 field of insurance or insurance regulation. The appointment of the
13-14 commissioner shall be made without regard to the race, color,
13-15 disability, sex, religion, age, or national origin of the
13-16 appointee. No former or present member of the State Board of
13-17 Insurance shall be appointed commissioner <Commissioner of
13-18 Insurance>. A person is not eligible for appointment as
13-19 commissioner if the person, the person's spouse, or any person that
13-20 resides in the same household as the person:
13-21 (1) is registered, certified, or licensed by the
13-22 department;
13-23 (2) is employed by or participates in the management
13-24 of a business entity or other organization regulated by the
13-25 department or receiving funds from the department;
13-26 (3) owns or controls, directly or indirectly, more
13-27 than a 10 percent interest in a business entity or other
14-1 organization regulated by the department or receiving funds from
14-2 the department; or
14-3 (4) uses or receives a substantial amount of tangible
14-4 goods, services, or funds from the department, other than
14-5 compensation or reimbursement authorized by law.
14-6 (f) The commissioner shall appoint such deputies,
14-7 assistants, and other personnel as are necessary to carry out the
14-8 duties and functions devolving upon the commissioner <him> and the
14-9 department under the Insurance Code, other insurance laws of this
14-10 state, and other laws providing jurisdiction in or applicable to
14-11 the department or the commissioner, subject to the authorization by
14-12 the Legislature in its appropriations bills or otherwise<, and to
14-13 the rules of the Board>. A person appointed under this subsection
14-14 must have the professional, administrative, and insurance
14-15 experience necessary to qualify the person for the particular
14-16 position to which the person is appointed. An associate or deputy
14-17 commissioner, or a person holding an equivalent position, must have
14-18 at least five years of the experience required for appointment as
14-19 Commissioner of Insurance under Subsection (b) of this article and
14-20 at least two years of this experience must be in work related to
14-21 the position to be held.
14-22 (g) The commissioner or the commissioner's <his> designee
14-23 shall develop an intra-agency <intraagency> career ladder program.
14-24 The program shall require intra-agency posting of all nonentry
14-25 level positions concurrently with any public posting<, one part of
14-26 which shall be the intraagency posting of each nonentry level
14-27 classified position for at least five days before the position is
15-1 filled. Notwithstanding any other law to the contrary, a posting
15-2 of a position is not required in the case of:>
15-3 <(1) a lateral intraagency transfer; or>
15-4 <(2) the promotion of a present employee to a position
15-5 in a higher pay group because of the employee's ability to assume
15-6 greater job responsibilities or additional duties or the employee's
15-7 greater expertise rather than for the mere purpose of filling an
15-8 existing vacancy>.
15-9 (h) The commissioner or the commissioner's <his> designee
15-10 shall develop a system of annual performance evaluations <reviews
15-11 that evaluate both the quality and quantity of the job tasks
15-12 performed>. All merit pay for department employees must be based
15-13 on the system established under this subsection <section>.
15-14 (i) It is a ground for removal from office if the
15-15 commissioner:
15-16 (1) does not have at the time of appointment the
15-17 qualifications required by Subsection (b) of this section;
15-18 (2) does not maintain during service as commissioner
15-19 the qualifications required by Subsection (b) of this section;
15-20 (3) violates a prohibition established by Subsection
15-21 (b) of this section or Article 1.06, 1.06A, or 1.06B of this code;
15-22 or
15-23 (4) cannot discharge the commissioner's duties for a
15-24 substantial part of the term for which the commissioner is
15-25 appointed because of illness or disability.
15-26 (j) The validity of an action of the commissioner or the
15-27 department is not affected by the fact that it is taken when a
16-1 ground for removal of the commissioner exists.
16-2 SECTION 1.06. Article 1.09-1(b), Insurance Code, is amended
16-3 to read as follows:
16-4 (b) <In all rate hearings and policy form proceedings before
16-5 the Board, except for those rate hearings and proceedings as
16-6 provided in Subsections (g) and (h), Article 1.35A, of this code,
16-7 the Attorney General may intervene in the public interest.> The
16-8 Commissioner <Board> shall have and exercise the power of subpoena
16-9 and subpoena duces tecum for witnesses, documents, and other
16-10 evidence to the extent of the jurisdiction of this state for such
16-11 hearings and proceedings on its own motion <or upon application of
16-12 the Attorney General>.
16-13 SECTION 1.07. Article 1.10, Insurance Code, is amended to
16-14 read as follows:
16-15 Art. 1.10. DUTIES OF THE DEPARTMENT <BOARD>. In addition to
16-16 the other duties required of the Department, the Department <Board,
16-17 it> shall perform duties as follows:
16-18 1. Shall Execute the Laws. See that all laws
16-19 respecting insurance and insurance companies are faithfully
16-20 executed.
16-21 2. File Articles of Incorporation and Other Papers.
16-22 File and preserve in its office all acts or articles of
16-23 incorporation of insurance companies and all other papers required
16-24 by law to be deposited with the Department <Board> and, upon
16-25 application of any party interested therein, furnish certified
16-26 copies thereof upon payment of the fees prescribed by law.
16-27 3. Shall Calculate Reserve. For every company
17-1 transacting any kind of insurance business in this State, for which
17-2 no basis is prescribed by law, the Department <Board> shall
17-3 calculate the reinsurance reserve upon the same basis prescribed in
17-4 Article 6.01 of this code as to companies transacting fire
17-5 insurance business.
17-6 4. To Calculate Re-insurance Reserve. On the
17-7 thirty-first day of December of each and every year, or as soon
17-8 thereafter as may be practicable, the Department <Board> shall have
17-9 calculated in the Department <its office> the re-insurance reserve
17-10 for all unexpired risks of all insurance companies organized under
17-11 the laws of this state, or transacting business in this state,
17-12 transacting any kind of insurance other than life, fire, marine,
17-13 inland, lightning or tornado insurance, which calculation shall be
17-14 in accordance with the provisions of Paragraph 3 hereof.
17-15 5. When a Company's Surplus is Impaired. No
17-16 impairment of the capital stock of a stock company shall be
17-17 permitted. No impairment of the surplus of a stock company, or of
17-18 the minimum required aggregate surplus of a mutual, Lloyd's, or
17-19 reciprocal insurer, shall be permitted in excess of that provided
17-20 by this section. Having charged against a company other than a
17-21 life insurance company, the reinsurance reserve, as prescribed by
17-22 the laws of this State, and adding thereto all other debts and
17-23 claims against the company, the Commissioner shall, (i) if it is
17-24 determined that the surplus required by Article 2.02 or 2.20 of
17-25 this code of a stock company doing the kind or kinds of insurance
17-26 business set out in its Certificate of Authority is impaired to the
17-27 extent of more than fifty (50%) per cent of the required surplus
18-1 for a capital stock insurance company, or is less than the minimum
18-2 level of surplus required by Commissioner <Board> promulgated
18-3 risk-based capital and surplus regulations, or (ii) if it is
18-4 determined that the required aggregate surplus of a reciprocal or
18-5 mutual company, or the required aggregate of guaranty fund and
18-6 surplus of a Lloyd's company, other than a life insurance company,
18-7 doing the kind or kinds of insurance business set out in its
18-8 Certificate of Authority is impaired to the extent of more than
18-9 twenty-five per cent (25%) of the required aggregate surplus, or is
18-10 less than the minimum level of surplus required by Commissioner
18-11 <Board> promulgated risk-based capital and surplus regulations, the
18-12 Commissioner shall order the company to remedy the impairment of
18-13 surplus to acceptable levels specified by the Commissioner or to
18-14 cease to do business within this State. The Commissioner shall
18-15 thereupon immediately institute such proceedings as may be
18-16 necessary to determine what further actions shall be taken in the
18-17 case.
18-18 6. Shall Publish Results of Investigation. The
18-19 Department <Board> shall publish the result of an <its> examination
18-20 of the affairs of any company whenever the Commissioner <Board>
18-21 deems it for the interest of the public.
18-22 7. May Order Sanctions. (a) After notice and
18-23 opportunity for a hearing, the Commissioner <State Board of
18-24 Insurance> may cancel or revoke any permit, license, certificate of
18-25 authority, certificate of registration, or other authorization
18-26 issued or existing under its authority or the authorization of this
18-27 Code if the holder or possessor of same is found to be in violation
19-1 of, or to have failed to comply with, a specific provision of the
19-2 Code or any duly promulgated rule or regulation of the Commissioner
19-3 <State Board of Insurance>. In lieu of such cancellation or
19-4 revocation, the Commissioner <State Board of Insurance> may order
19-5 one or more of the following sanctions if it determines from the
19-6 facts that such would be more fair, reasonable, or equitable:
19-7 (1) Suspend such authorization for a time
19-8 certain, not to exceed one year;
19-9 (2) Order the holder or possessor of such
19-10 authorization to cease and desist from the specified activity
19-11 determined to be in violation of specific provisions of this Code
19-12 or rules and regulations of the Commissioner <State Board of
19-13 Insurance> or from failure to comply with such provisions of this
19-14 Code or such rules and regulations;
19-15 (3) Direct the holder or possessor of such
19-16 authorization to pay an administrative penalty in accordance with
19-17 Article 1.10E of this code <remit within a specified time, not to
19-18 exceed sixty (60) days, a specified monetary forfeiture not to
19-19 exceed Twenty-five Thousand ($25,000) Dollars for such violation or
19-20 failure to comply>; or
19-21 (4) Direct the holder or possessor of such
19-22 authorization to make complete restitution to all Texas residents,
19-23 Texas insureds, and entities operating in Texas harmed by the
19-24 violation or failure to comply.
19-25 (b) Restitution under Subdivision (4) of
19-26 Subsection (a) must be made in the form and amount and within the
19-27 period determined by the Commissioner <State Board of Insurance>.
20-1 (c) <Any monetary forfeiture paid as a result of
20-2 an order issued pursuant to Subdivision (3) of Subsection (a) shall
20-3 be deposited with the State Treasurer to the credit of the General
20-4 Revenue Fund.>
20-5 <(d)> If it is found after hearing that any
20-6 holder or possessor has failed to comply with an order issued
20-7 pursuant to Subsection (a), the Commissioner <State Board of
20-8 Insurance> shall, unless its order is lawfully stayed, cancel all
20-9 authorizations of such holder or possessor.
20-10 (d) <(e)> The Commissioner may <State Board of
20-11 Insurance shall have authority to> informally dispose of any matter
20-12 specified in this section by consent order, agreed settlement,
20-13 stipulations, or default. An informal disposition or consent order
20-14 may include a provision under which the holder or possessor agrees
20-15 to a sanction under this section with the express reservation that:
20-16 (1) the holder or possessor is not
20-17 admitting any violation of this code or of a rule or regulation;
20-18 and
20-19 (2) the existence of a violation is in
20-20 dispute.
20-21 (e) <(f)> The Commissioner <Board> shall give
20-22 notice of any action taken pursuant to this section to the
20-23 Insurance Commissioner or other similar officer of every state.
20-24 (f) <(g)> The authority vested in the
20-25 Commissioner <State Board of Insurance> in this Article shall be in
20-26 addition to and not in lieu of any other authority to enforce or
20-27 cause to be enforced any sanctions, penalties, fines, forfeitures,
21-1 denials, suspensions, or revocations otherwise authorized by law,
21-2 and shall be applicable to every form of authorization to any
21-3 person or entity holding or possessing the same.
21-4 (g) <(h)> This section applies to all companies
21-5 regulated by the Commissioner, <State Board of Insurance> including
21-6 but not limited to domestic and foreign, stock and mutual life,
21-7 health, and accident insurance companies; domestic and foreign,
21-8 stock and mutual, fire and casualty insurance companies; Mexican
21-9 casualty companies; domestic and foreign Lloyd's plan insurers;
21-10 domestic and foreign reciprocal or interinsurance exchanges;
21-11 domestic and foreign fraternal benefit societies; domestic and
21-12 foreign title insurance companies; attorney's title insurance
21-13 companies; stipulated premium insurance companies; nonprofit legal
21-14 service corporations; health maintenance organizations; statewide
21-15 mutual assessment companies; local mutual aid associations; local
21-16 mutual burial associations; exempt associations under Article 14.17
21-17 of this Code; nonprofit hospital, medical, or dental service
21-18 corporations including but not limited to companies subject to
21-19 Chapter 20 of this Code; county mutual insurance companies; and
21-20 farm mutual insurance companies. Also, this section applies to all
21-21 agents of those companies and generally to all other individuals,
21-22 corporations, associations, partnerships, and other natural or
21-23 artificial persons engaged in the business of insurance or that
21-24 hold a permit, certificate, registration, license, or other
21-25 authority under this Code or that are regulated by the Commissioner
21-26 <State Board of Insurance>.
21-27 8. Report to Attorney General. The Department <It>
22-1 shall report promptly and in detail to the Attorney General any
22-2 violation of law relative to insurance companies or the business of
22-3 insurance.
22-4 9. Shall Furnish Blanks. The Department <It> shall
22-5 furnish to the companies required to report to the Department
22-6 <Board> the necessary blank forms for the statements required.
22-7 10. Shall Keep Records. The Department <It> shall
22-8 preserve in a permanent form a full record of the Department's
22-9 <its> proceedings and a concise statement of the condition of each
22-10 company or agency visited or examined.
22-11 11. Give Certified Copies. At the request of any
22-12 person, and on the payment of the legal fee, the Department <Board>
22-13 shall give certified copies of any record or papers in its office,
22-14 when the Commissioner <it> deems it not prejudicial to public
22-15 interest and shall give such other certificates as are provided for
22-16 by law. The fees collected by the Department <Board> under this
22-17 section shall be deposited in the State Treasury to the credit of
22-18 the Texas Department <State Board> of Insurance operating fund.
22-19 12. Report to Governor and Legislature. The
22-20 Department shall file annually with the Governor and the presiding
22-21 officer of each house of the Legislature a complete and detailed
22-22 written report accounting for all funds received and disbursed by
22-23 the Department during the preceding fiscal year. The annual report
22-24 must be in the form and reported in the time provided by the
22-25 General Appropriations Act. The report shall also contain the
22-26 Commissioner's <It shall report annually to the Governor the
22-27 receipts and expenses of its department for the year, its> official
23-1 acts, the condition of companies doing business in this State, and
23-2 such other information as will exhibit the affairs of the
23-3 Department <said department>. <Upon specific request by the
23-4 Governor, the Board shall report the names and compensations of its
23-5 clerks.>
23-6 13. Send Copies of Reports To. The Department <Board>
23-7 shall send a copy of the <its> annual report to the Insurance
23-8 Commissioner or other similar officer of every state and, on
23-9 request, shall send a copy to each company doing business in Texas.
23-10 14. Report Laws to Other States. On request, the
23-11 Department <it> shall communicate to the Insurance Commissioner or
23-12 other similar officer of any other state, in which the substantial
23-13 provisions of the law of this State relative to insurance have
23-14 been, or shall be, enacted, any facts which by law it is his duty
23-15 to ascertain respecting the companies of this State doing business
23-16 within such other state.
23-17 15. See That No Company Does Business. The
23-18 Commissioner <It> shall see that no company is permitted to
23-19 transact the business of life insurance in this State whose charter
23-20 authorizes it to do a fire, marine, lightning, tornado, or inland
23-21 insurance business, and that no company authorized to do a life
23-22 insurance business in this State be permitted to take fire, marine
23-23 or inland risks.
23-24 16. Admit Mutual Companies. The Commissioner <Board>
23-25 shall admit into this State mutual insurance companies engaged in
23-26 cyclone, tornado, hail and storm insurance which are organized
23-27 under the laws of other states and which have Two Million
24-1 ($2,000,000.00) Dollars assets in excess of liabilities.
24-2 17. Voluntary Deposits. (a) In the event any
24-3 insurance company organized and doing business under the provisions
24-4 of this Code shall be required by any other state, country or
24-5 province as a requirement for permission to do an insurance
24-6 business therein to make or maintain a deposit with an officer of
24-7 any state, country, or province, such company, at its discretion,
24-8 may voluntarily deposit with the State Treasurer such securities as
24-9 may be approved by the Commissioner of Insurance to be of the type
24-10 and character authorized by law to be legal investments for such
24-11 company, or cash, in any amount sufficient to enable it to meet
24-12 such requirements. The State Treasurer is hereby authorized and
24-13 directed to receive such deposit and hold it exclusively for the
24-14 protection of all policyholders or creditors of the company
24-15 wherever they may be located, or for the protection of the
24-16 policyholders or creditors of a particular state, country or
24-17 province, as may be designated by such company at the time of
24-18 making such deposit. The company may, at its option, withdraw such
24-19 deposit or any part thereof, first having deposited with the
24-20 Treasurer, in lieu thereof, other securities of like class and of
24-21 equal amount and value to those withdrawn, which withdrawal and
24-22 substitution must be approved by the Commissioner of Insurance.
24-23 The proper officer of each insurance company making such deposit
24-24 shall be permitted at all reasonable times to examine such
24-25 securities and to detach coupons therefrom, and to collect interest
24-26 thereon, under such reasonable rules and regulations as may be
24-27 prescribed by the State Treasurer and the Commissioner of
25-1 Insurance. Any deposit so made for the protection of policyholders
25-2 or creditors of a particular state, country or province shall not
25-3 be withdrawn, except by substitution as provided above, by the
25-4 company, except upon filing with the Commissioner of Insurance
25-5 evidence satisfactory to him that the company has withdrawn from
25-6 business, and has no unsecured liabilities outstanding or potential
25-7 policyholder liabilities or obligations in such other state,
25-8 country or province requiring such deposit, and upon the filing of
25-9 such evidence the company may withdraw such deposit at any time
25-10 upon the approval of the Commissioner of Insurance. Any deposit so
25-11 made for the protection of all policyholders or creditors wherever
25-12 they may be located shall not be withdrawn, except by substitution
25-13 as provided above, by the company except upon filing with the
25-14 Commissioner of Insurance evidence satisfactory to him that the
25-15 company does not have any unsecured liabilities outstanding or
25-16 potential policy liabilities or obligations anywhere, and upon
25-17 filing such evidence the company may withdraw such deposit upon the
25-18 approval of the Commissioner of Insurance. For the purpose of
25-19 state, county and municipal taxation, the situs of any securities
25-20 deposited with the State Treasurer hereunder shall be in the city
25-21 and county where the principal business office of such company is
25-22 fixed by its charter.
25-23 (b) Any voluntary deposit <now> held by the
25-24 State Treasurer or the Department <State Board of Insurance>
25-25 heretofore made by any insurance company in this State, and which
25-26 deposit was made for the purpose of gaining admission to another
25-27 state, may be considered, at the option of such company, to be
26-1 hereinafter held under the provisions of this Act.
26-2 (c) When two or more companies merge or
26-3 consolidate or enter a total reinsurance contract by which the
26-4 ceding company is dissolved and its assets acquired and liabilities
26-5 assumed by the surviving company, and the companies have on deposit
26-6 with the State Treasurer two or more deposits made for identical
26-7 purposes under this section <either Section 17 of Article 1.10 of
26-8 the Texas Insurance Code, as amended,> or Article 4739, Revised
26-9 <Civil> Statutes <of Texas (1925)>, as amended, and now repealed,
26-10 all such deposits, except the deposit of greatest amount and value,
26-11 may be withdrawn by the new surviving or reinsuring company, upon
26-12 proper showing of duplication of such deposits and that the company
26-13 is the owner thereof.
26-14 (d) Any company which has made a deposit or
26-15 deposits under this section <Article 1.10, Section 17, Texas
26-16 Insurance Code, as amended,> or Article 4739, Revised <Civil>
26-17 Statutes <of Texas (1925)>, as amended and now repealed, shall be
26-18 entitled to a return of such deposits upon proper application
26-19 therefor and a showing before the Commissioner that such deposit or
26-20 deposits are no longer required under the laws of any state,
26-21 country or province in which such company sought or gained
26-22 admission to do business upon the strength of a certificate of such
26-23 deposit <by the State Board of Insurance or its predecessor>.
26-24 (e) Upon being furnished a certified copy of the
26-25 Commissioner's order issued under Subsection (c) or (d) above, the
26-26 Treasurer of the State of Texas shall release, transfer and deliver
26-27 such deposit or deposits to the owner as directed in said order.
27-1 18. Complaint File. The Department <State Board of
27-2 Insurance> shall keep <maintain> an information file about
27-3 <relating to> each <written> complaint <that is> filed with the
27-4 Department concerning an activity that is regulated by the
27-5 Department or Commissioner <board concerning an activity that is
27-6 regulated by the board>.
27-7 19. Notice of Complaint Status. If a written
27-8 complaint is filed with the Department, the Department, at least
27-9 quarterly and until final disposition of the complaint, shall
27-10 notify the parties to the complaint of the status of the complaint
27-11 unless the notice would jeopardize an undercover investigation
27-12 <State Board of Insurance relating to an activity that is regulated
27-13 by the board, the board, at least quarterly and until final
27-14 disposition of the complaint, shall notify the person making the
27-15 complaint and the person complained against of the status of the
27-16 complaint unless:>
27-17 <(A) the complaint relates to an entity in
27-18 supervision, conservatorship, or liquidation; or>
27-19 <(B) giving such notice would jeopardize the
27-20 investigation of a possible violation of a law that is enforceable
27-21 by a criminal penalty>.
27-22 20. Electronic Transfer of Funds. The Commissioner
27-23 <Board> shall adopt rules for the electronic transfer of any taxes,
27-24 fees, guarantee funds, or other money owed to or held for the
27-25 benefit of the state and for which the Department has the
27-26 responsibility to administer under this code or another insurance
27-27 law of this state. The Commissioner <Board> shall require the
28-1 electronic transfer of any amounts held or owed in an amount
28-2 exceeding $500,000.
28-3 SECTION 1.08. Chapter 1, Insurance Code, is amended by
28-4 adding Articles 1.24D and 1.27 to read as follows:
28-5 Art. 1.24D. CONFIDENTIALITY OF UNDERWRITING GUIDELINES. (a)
28-6 The department or the office of public insurance counsel may
28-7 request and receive copies of an insurer's underwriting guidelines.
28-8 Underwriting guidelines are confidential and the department or the
28-9 office of public insurance counsel may not make the guidelines
28-10 available to the public, provided, however, that the department or
28-11 the office of public insurance counsel may disclose a summary of
28-12 the underwriting guidelines in a manner that does not directly or
28-13 indirectly identify the insurer who provided the guidelines.
28-14 (b) This law does not preclude the use of underwriting
28-15 guidelines as evidence to prosecute a violation of this code. If
28-16 guidelines are used to prosecute a violation of the law, all copies
28-17 of those guidelines shall be presumed confidential and subject to a
28-18 protective order until all appeals on the case have been exhausted.
28-19 After the exhaustion of all appeals, if an insurer is found to have
28-20 violated this code, the copies of the underwriting guidelines that
28-21 were used as evidence of the violation shall no longer be presumed
28-22 confidential.
28-23 (c) When such guidelines are furnished to the department or
28-24 the office of public insurance counsel, only those persons within
28-25 the department or the office of public insurance counsel with a
28-26 need to know will have access to such guidelines. The department
28-27 and the office of public insurance counsel shall establish internal
29-1 control systems to limit such access and keep a record thereof.
29-2 (d) Violations of the provisions of this article shall be
29-3 considered as violation of the open records law, Chapter 424, Acts
29-4 of the 63rd Legislature, Regular Session, 1973 (Article 6252-17a,
29-5 Vernon's Texas Civil Statutes).
29-6 Art. 1.27. APPLICATION OF PROVISIONS ADOPTED BY NATIONAL
29-7 ASSOCIATION OF INSURANCE COMMISSIONERS. The department may not
29-8 require an insurer to comply with any rule, regulation, directive,
29-9 or standard adopted by the National Association of Insurance
29-10 Commissioners unless application of the rule, regulation,
29-11 directive, or standard, including policy reserves, is expressly
29-12 authorized by statute and approved by the commissioner.
29-13 SECTION 1.09. Sections 1, 2, 3, 4, and 6, Article 1.31A,
29-14 Insurance Code, are amended to read as follows:
29-15 Sec. 1. Definition <Definitions>. In this article, "fund"<:>
29-16 <(1) "Board" means the State Board of Insurance.>
29-17 <(2) "Commissioner" means the commissioner of
29-18 insurance.>
29-19 <(3) "Fund"> means the Texas Department <State Board>
29-20 of Insurance operating fund.
29-21 Sec. 2. Creation of Fund. The Texas Department <State
29-22 Board> of Insurance operating fund is a fund <created> in the State
29-23 Treasury.
29-24 Sec. 3. Deposit of Revenues in Fund. Money received by the
29-25 commissioner or comptroller <board> from taxes and fees that are
29-26 required by this code to be credited to the fund and money received
29-27 by the commissioner <board> from sales, reimbursements, and fees
30-1 authorized by law other than this code shall be deposited in the
30-2 fund.
30-3 Sec. 4. Certain Money Included. The money received from
30-4 sales, reimbursements, and other fees authorized by law other than
30-5 this code includes money received from the following:
30-6 (1) <fees received by the board for filing charters
30-7 and charter amendments under Article 3914, Revised Statutes, as
30-8 amended;>
30-9 <(2)> fees received by the department <board> for
30-10 providing copies of public records under Chapter 424, Acts of the
30-11 63rd Legislature, Regular Session, 1973, as amended (Article
30-12 6252-17a, Vernon's Texas Civil Statutes);
30-13 <(3) money received by the state fire marshal for
30-14 licenses under Chapter 498, Acts of the 55th Legislature, Regular
30-15 Session, 1957, as amended (Article 9205, Vernon's Texas Civil
30-16 Statutes);>
30-17 (2) <(4)> money or credits received by the department
30-18 <board> for surplus or salvage property under Sections 9.04 and
30-19 9.05, State Purchasing and General Services Act <Chapter 773, Acts
30-20 of the 66th Legislature, Regular Session, 1979> (Article 601b,
30-21 Vernon's Texas Civil Statutes);
30-22 (3) <(5)> money received by the department <board>
30-23 from the sale of publications and other printed material under
30-24 Chapter 248, Acts of the 55th Legislature, Regular Session, 1957
30-25 (Article 4413(33), Vernon's Texas Civil Statutes);
30-26 (4) <(6)> receipts to the department <board> from
30-27 miscellaneous transactions and sources under Section 403.011 or
31-1 403.012, Government Code <Article 4344, Revised Statutes>, as
31-2 amended;
31-3 (5) <(7)> money received by the department <board>
31-4 from charges for postage spent to serve legal process under Section
31-5 17.025, Civil Practice and Remedies Code <Chapter 288, Acts of the
31-6 67th Legislature, Regular Session, 1981 (Article 2041b, Vernon's
31-7 Texas Civil Statutes)>;
31-8 (6) <(8)> receipts to the department <board> for
31-9 furnishing necessary and authorized special or technical services
31-10 under Chapter 741, Government Code <the Interagency Cooperation
31-11 Act,> as amended <(Article 4413(32), Vernon's Texas Civil
31-12 Statutes)>;
31-13 (7) <(9)> receipts to the department <board> from the
31-14 State Treasurer involving warrants for which payment is barred
31-15 under Chapter 404, Government Code <Article 4371, Revised
31-16 Statutes>, as amended;
31-17 (8) <(10)> money received by the department <board>
31-18 from sales or reimbursements authorized by the General
31-19 Appropriations Act; and
31-20 (9) <(11)> money received by the department <board>
31-21 from the sale of any property purchased with money from the <State
31-22 Board of Insurance operating> fund or a predecessor fund.
31-23 Sec. 6. Administration of Fund. (a) The commissioner shall
31-24 administer and may spend money from the fund pursuant to laws of
31-25 the state, rules adopted by the commissioner <of the board>, and
31-26 the General Appropriations Act.
31-27 (b) The commissioner <board> is responsible for the
32-1 development and maintenance of an accounting procedure for the
32-2 receipt, allocation, and disbursement of money deposited in the
32-3 fund. The procedure shall require adequate records for the
32-4 commissioner or comptroller, if applicable, <board> to adjust the
32-5 tax assessments and fee schedules as authorized by this code and
32-6 for the State Auditor to determine the source of all receipts and
32-7 expenditures.
32-8 SECTION 1.10. Article 1.35, Insurance Code, is amended to
32-9 read as follows:
32-10 Art. 1.35. Notice of Policyholder Complaint Procedures.
32-11 (a) Each insurance policy delivered or issued for delivery in this
32-12 state <on or after September 1, 1984,> shall be accompanied by a
32-13 brief written notice of suggested procedure to be followed by the
32-14 policyholder in the event of a dispute concerning a policyholder's
32-15 claim or premium.
32-16 (b) The notice must include the name and address of the
32-17 department and the toll-free telephone number maintained under
32-18 Article 1.35D of this code <State Board of Insurance>.
32-19 (c) The commissioner <State Board of Insurance> shall
32-20 promulgate the proper wording for the written notice.
32-21 SECTION 1.11. Article 1.35D(b), Insurance Code, is amended
32-22 to read as follows:
32-23 (b) The department, through the toll-free telephone number,
32-24 shall provide only the following to the public:
32-25 (1) information collected or maintained by the
32-26 department relating to the number of justified, verified as
32-27 accurate, and documented as valid complaints received against a
33-1 particular insurer, as a percentage of the number of insurance
33-2 policies written by the insurer and in force on the preceding
33-3 December 31, and the disposition of the complaints;
33-4 (2) the rating of the insurer, if any, as published by
33-5 a nationally recognized rating organization;
33-6 (3) the types of coverages available to a consumer
33-7 through any insurer writing insurance in this state; <and>
33-8 (4) the insurer's admitted assets-to-liabilities
33-9 ratio; and
33-10 (5) other appropriate information collected and
33-11 maintained by the department.
33-12 SECTION 1.12. Article 1.37, Insurance Code, is amended to
33-13 read as follows:
33-14 Art. 1.37. INFORMATION CONCERNING DEPARTMENT <STATE BOARD>
33-15 OF INSURANCE. The department <State Board of Insurance> shall
33-16 prepare information of public <consumer> interest describing the
33-17 <regulatory> functions of the department <board> and describing the
33-18 department's <board's> procedures by which <consumer> complaints
33-19 are filed with and resolved by the department <board>. The
33-20 department <board> shall make the information available <on
33-21 request> to the <general> public and appropriate state agencies.
33-22 SECTION 1.13. Chapter 1, Insurance Code, is amended by
33-23 adding Article 1.41 to read as follows:
33-24 Art. 1.41. LIMITATION ON DISCIPLINE. (a) Except as
33-25 provided by Subsections (b) and (c) of this article, the department
33-26 or commissioner may not commence an action to impose a sanction,
33-27 penalty, or fine, including an administrative penalty, against any
34-1 insurer, agent, or other licensee subject to the jurisdiction of
34-2 the department for any conduct that is in violation of this code or
34-3 another insurance law of this state after the earlier of:
34-4 (1) the fifth anniversary of the date on which the
34-5 conduct occurred; or
34-6 (2) the second anniversary of the earlier of:
34-7 (A) the date on which the conduct was first
34-8 discovered by the department; or
34-9 (B) the date on which the conduct was made known
34-10 to the department.
34-11 (b) The department or commissioner may not commence an
34-12 action to impose a sanction, penalty, or fine, including an
34-13 administrative penalty, against any insurer, agent, or other
34-14 licensee subject to the jurisdiction of the department for any
34-15 conduct that is in violation of this code or another insurance law
34-16 of this state and that involves fraud on the part of the insurer,
34-17 agent, or licensee after the fifth anniversary of the earlier of:
34-18 (1) the date on which the conduct was first discovered
34-19 by the department; or
34-20 (2) the date on which the conduct was made known to
34-21 the department.
34-22 (c) This article does not apply to a violation that is
34-23 ongoing at the time the department seeks to impose the sanction,
34-24 penalty, or fine.
34-25 SECTION 1.14. Chapter 1, Insurance Code, is amended by
34-26 adding Article 1.03B to read as follows:
34-27 Art. 1.03B. FISCAL IMPACT OF DEPARTMENT RULES. (a) This
35-1 article applies to any rule adopted by the commissioner in
35-2 accordance with the Administrative Procedure and Texas Register Act
35-3 (Article 6252-13a, Vernon's Texas Civil Statutes).
35-4 (b) If the fiscal note or the public benefit-cost note
35-5 required by Subdivisions (4) and (5), Section 5(a), Administrative
35-6 Procedure and Texas Register Act (Article 6252-13a, Vernon's Texas
35-7 Civil Statutes), fails to accurately state the reasonable actual
35-8 costs required, and the reasonable actual costs required exceed the
35-9 costs stated by at least 25 percent of the costs stated, the rule
35-10 is void effective on the date the rule is adopted.
35-11 SECTION 1.15. Section 323.007, Government Code, is amended
35-12 by adding Subsection (d) to read as follows:
35-13 (d) Upon the direction of the lieutenant governor and the
35-14 speaker of the house, the council shall prepare a revision of the
35-15 Insurance Code and other insurance laws of this state that are
35-16 included in Vernon's Texas Insurance Code for consideration by the
35-17 75th Legislature during its regular session. This subsection
35-18 expires June 1, 1997.
35-19 SECTION 1.16. Section 3.22(c), Texas Workers' Compensation
35-20 Act (Article 8308-3.22, Vernon's Texas Civil Statutes), is amended
35-21 to read as follows:
35-22 (c) The filing required under this section shall be filed
35-23 with the commission <State Board of Insurance> pursuant to Section
35-24 3.27 of this Act.
35-25 SECTION 1.17. Section 3.25(c), Texas Workers' Compensation
35-26 Act (Article 8308-3.25, Vernon's Texas Civil Statutes), is amended
35-27 to read as follows:
36-1 (c) The notice required under this section shall be filed
36-2 with the commission <State Board of Insurance> pursuant to Section
36-3 3.27 of this Act.
36-4 SECTION 1.18. Section 3.26(d), Texas Workers' Compensation
36-5 Act (Article 8308-3.26, Vernon's Texas Civil Statutes), is amended
36-6 to read as follows:
36-7 (d) The notice required under this section shall be filed
36-8 with the commission <State Board of Insurance> pursuant to Section
36-9 3.27 of this Act.
36-10 SECTION 1.19. Section 3.27, Texas Workers' Compensation Act
36-11 (Article 8308-3.27, Vernon's Texas Civil Statutes), is amended to
36-12 read as follows:
36-13 Art. 8308-3.27. Collecting, Maintaining, and Monitoring and
36-14 Enforcing Compliance <Cooperation between State Board of Insurance
36-15 and Texas Workers' Compensation Commission>. (a) The commission
36-16 <On and after September 1, 1991, the State Board of Insurance>
36-17 shall collect and maintain the information required <to be
36-18 provided> under this chapter and <shall provide this information in
36-19 the time and manner prescribed by the commission. The State Board
36-20 of Insurance> shall monitor compliance with the requirements <and
36-21 notify the commission of possible violations in the time and manner
36-22 prescribed by the commission>. The commission <State Board of
36-23 Insurance> is authorized to adopt rules as necessary to enforce
36-24 this chapter.
36-25 (b) The commission shall enforce the administrative
36-26 penalties established in this chapter according to Article 10 of
36-27 this Act.
37-1 SECTION 1.20. Section 3.28(e), Texas Workers' Compensation
37-2 Act (Article 8308-3.28, Vernon's Texas Civil Statutes), is amended
37-3 to read as follows:
37-4 (e) The notice required under this section shall be filed
37-5 with the commission <State Board of Insurance pursuant to Section
37-6 3.27 of this Act>.
37-7 SECTION 1.21. (a) Sections 3(g) and 4(e), Article 1.10A,
37-8 Insurance Code, are repealed.
37-9 (b) Articles 1.03, 1.05, 1.06D, and 1.08, Insurance Code,
37-10 are repealed.
37-11 (c) Subsection (e), Article 1.09, Insurance Code, is
37-12 repealed.
37-13 SECTION 1.22. (a) This section applies to any act of the
37-14 State Board of Insurance performed before September 1, 1994, that,
37-15 after September 1, 1994, is an act that shall or may be performed
37-16 only by the commissioner of insurance, including:
37-17 (1) issuance of a license, certificate, or other
37-18 similar form of permission;
37-19 (2) promulgation of a rule, standard, regulation, or
37-20 order;
37-21 (3) promulgation or approval of policy forms or policy
37-22 form endorsements; or
37-23 (4) adoption or approval of a plan of operation for an
37-24 organization subject to the jurisdiction of the Texas Department of
37-25 Insurance.
37-26 (b) An act governed by this section remains in effect until:
37-27 (1) it expires under its own terms or in accordance
38-1 with applicable law; or
38-2 (2) it is superseded by an act of the commissioner of
38-3 insurance.
38-4 SECTION 1.23. (a) As soon as possible on or after the
38-5 effective date of this Act, but not later than March 1, 1994, the
38-6 governor shall appoint a commissioner of insurance. The initial
38-7 term of the commissioner ends on February 1, 1995.
38-8 (b) On the effective date of this Act, the commissioner of
38-9 insurance serving immediately before the effective date of this Act
38-10 shall assume authority over any area of activity of the Texas
38-11 Department of Insurance not subject to the authority of the State
38-12 Board of Insurance under Subsection (c) of this section.
38-13 (c) On the effective date of this Act, the State Board of
38-14 Insurance serving immediately before the effective date of this Act
38-15 shall relinquish authority over all areas of activity of the Texas
38-16 Department of Insurance except:
38-17 (1) promulgation and approval of rates;
38-18 (2) promulgation and approval of policy forms and
38-19 policy form endorsements; and
38-20 (3) hearings, proceedings, and rules related to the
38-21 activities described by Subdivision (1) or (2) of this section.
38-22 (d) On the date a commissioner of insurance is appointed
38-23 under Subsection (a) of this section, that commissioner shall
38-24 assume the authority granted to the commissioner under Subsection
38-25 (b) of this section. On and after that date, the commissioner
38-26 shall cooperate with the State Board of Insurance to assume the
38-27 authority granted to the board under Subsection (c) of this section
39-1 and shall adopt rules as necessary to govern those activities in
39-2 accordance with Article 1.33C, Insurance Code, as added by this
39-3 Act. As soon as possible after the appointment of the commissioner
39-4 under Subsection (a) of this section but not later than September
39-5 1, 1994, the commissioner shall assume the authority granted to the
39-6 board under Subsection (c) of this section. After the commissioner
39-7 has assumed this authority, the board may advise the commissioner
39-8 with respect to that authority.
39-9 (e) A decision, rate, rule, or other act of the State Board
39-10 of Insurance is appealable in the same manner as a decision of the
39-11 commissioner of insurance under Article 1.04, Insurance Code, as
39-12 amended by this Act.
39-13 (f) Effective September 1, 1994, the State Board of
39-14 Insurance is abolished.
39-15 SECTION 1.24. On the effective date of this Act, the
39-16 comptroller shall redesignate the State Board of Insurance
39-17 operating fund (Fund No. 36) as the Texas Department of Insurance
39-18 operating account in the general revenue fund. All money in the
39-19 State Board of Insurance operating fund on the effective date of
39-20 this Act shall be transferred to the Texas Department of Insurance
39-21 operating account.
39-22 ARTICLE 2. TRANSFER OF CERTAIN FUNCTIONS TO STATE OFFICE OF
39-23 ADMINISTRATIVE HEARINGS
39-24 SECTION 2.01. Chapter 1, Insurance Code, is amended by
39-25 adding Article 1.33B to read as follows:
39-26 Art. 1.33B. CERTAIN HEARINGS HELD BY STATE OFFICE OF
39-27 ADMINISTRATIVE HEARINGS. (a) This article does not apply to a
40-1 hearing or proceeding:
40-2 (1) relating to the approval or review of rates or
40-3 rating manuals filed by individual companies, unless they are
40-4 contested;
40-5 (2) relating to the promulgation of rules;
40-6 (3) relating to the promulgation or approval of a
40-7 policy form or policy form endorsement;
40-8 (4) relating to the adoption or approval of a plan of
40-9 operation for an organization subject to the jurisdiction of the
40-10 department; or
40-11 (5) conducted in accordance with Article 1.04D of this
40-12 code.
40-13 (b) The State Office of Administrative Hearings established
40-14 under Chapter 591, Acts of the 72nd Legislature, Regular Session,
40-15 1991 (Article 6252-13f, Vernon's Texas Civil Statutes), and its
40-16 subsequent amendments shall conduct any administrative hearing
40-17 required to be held or that may be held under this code or another
40-18 insurance law of this state. This article applies only to hearings
40-19 required to be held before a decision may be rendered or action
40-20 taken by the commissioner or the department.
40-21 (c)(1) Rate promulgation proceedings shall be governed by
40-22 the provisions of this subsection and shall be treated as a
40-23 contested case under the Administrative Procedure and Texas
40-24 Register Act (Article 6252-13a, Vernon's Texas Civil Statutes).
40-25 Accordingly, the procedures before the commissioner shall be guided
40-26 by the principles and procedures for contested cases as provided in
40-27 the Administrative Procedure and Texas Register Act (Article
41-1 6252-13a, Vernon's Texas Civil Statutes) and the Texas Rules of
41-2 Civil Procedure to the extent not inconsistent with the provisions
41-3 of this subsection.
41-4 (2) Opportunity must be afforded all interested
41-5 parties to respond to and present evidence and argument concerning
41-6 all issues involved in the proceeding. The testimony of a witness,
41-7 other than an expert witness, may be presented either orally by the
41-8 witness at the hearing or by affidavit. Each party to the
41-9 proceeding shall be accorded the right to cross-examine each
41-10 witness called to testify by any other party to the proceeding.
41-11 Accordingly, the attendance of any person providing testimony by
41-12 affidavit shall be required if any party files a written request
41-13 that the witness appear for cross-examination. If the person
41-14 providing testimony by affidavit fails to appear for
41-15 cross-examination after the filing of a written request that the
41-16 person appear, the administrative law judge shall exclude the
41-17 affidavit from evidence and shall not consider the affidavit of
41-18 that person for any purpose. The direct testimony of each expert
41-19 witness to be called must be prefiled in accordance with a schedule
41-20 to be established by the administrative law judge. The
41-21 administrative law judge shall also establish reasonable deadlines
41-22 for the filing of affidavits, the designation of witnesses, and
41-23 such other matters as are necessary or appropriate.
41-24 (3) The commissioner may not attempt to influence the
41-25 administrative law judge's findings of fact, conclusions of law, or
41-26 the administrative law judge's application of the law to the facts
41-27 in any proceedings.
42-1 (4) The proposal for decision prepared by the
42-2 administrative law judge, which shall include the proposed findings
42-3 of fact and conclusions of law, shall be served by registered mail
42-4 upon the parties by the administrative law judge, and an
42-5 opportunity shall be given to each party to file exceptions to the
42-6 proposal and briefs related to the issues addressed in the proposal
42-7 for decision.
42-8 (5) The commissioner shall thereafter in open meeting
42-9 consider the proposal for decision prepared by the administrative
42-10 law judge, the exceptions of the parties, and the briefs and
42-11 arguments of the parties. The commissioner may amend the proposal
42-12 for decision, including any finding of fact, but any such amendment
42-13 thereto and the order of the commissioner promulgating the rate
42-14 shall be based solely upon the record made before the
42-15 administrative law judge. Any such amendment by the commissioner
42-16 shall be accompanied by an explanation of the basis of the
42-17 amendment. The commissioner may also refer the matter back to the
42-18 administrative law judge to reconsider findings and conclusions set
42-19 forth in the proposal for decision or to take additional evidence
42-20 or to make additional findings of fact or conclusions of law. The
42-21 commissioner shall serve a copy of the commissioner's order,
42-22 including the commissioner's findings of fact and conclusions of
42-23 law, upon each party.
42-24 (d) The commissioner and the chief administrative law judge
42-25 of the State Office of Administrative Hearings by rule shall adopt
42-26 a memorandum of understanding governing hearings held by the State
42-27 Office of Administrative Hearings under this code and other
43-1 insurance laws of this state. The memorandum of understanding
43-2 shall require the chief administrative law judge and the
43-3 commissioner to cooperate in conducting hearings under this article
43-4 and may authorize the State Office of Administrative Hearings to
43-5 perform any procedural act, including giving of notice, that is
43-6 required to be performed by the commissioner under this code or
43-7 another insurance law of this state.
43-8 (e) Any provision of this code or another insurance law of
43-9 this state that provides that the commissioner shall take an action
43-10 at a hearing subject to this article means that the commissioner
43-11 shall take the action after the receipt of a report from the State
43-12 Office of Administrative Hearings regarding the hearing conducted
43-13 by that agency.
43-14 (f) This article governs in the event of a conflict with
43-15 another provision of this code or another insurance law of this
43-16 state, unless the other provision or insurance law states that this
43-17 article does not apply.
43-18 SECTION 2.02. Chapter 1, Insurance Code, is amended by
43-19 adding Article 1.33C to read as follows:
43-20 Art. 1.33C. RATE AND FORM PROCEEDINGS. (a) The
43-21 commissioner shall adopt rules governing hearings and other
43-22 proceedings necessary for the promulgation or approval of rates and
43-23 approval or promulgation of policy forms or policy form
43-24 endorsements under this code or other insurance laws of this state.
43-25 The commissioner shall conduct these hearings or proceedings in
43-26 accordance with the rules adopted under this article.
43-27 (b) Rules adopted under this article must comply with this
44-1 code and any other insurance law of this state and must be adopted
44-2 in accordance with the Administrative Procedure and Texas Register
44-3 Act (Article 6252-13a, Vernon's Texas Civil Statutes).
44-4 (c) In adopting rules under this article, the commissioner
44-5 shall consider Article 5.121 of this code.
44-6 SECTION 2.03. Article 1.06C, Insurance Code, is amended to
44-7 read as follows:
44-8 Art. 1.06C. PROHIBITED REPRESENTATION. (a) A person
44-9 serving as a member of the former State Board of Insurance <board>,
44-10 commissioner, general counsel, public counsel, staff employee of a
44-11 member of the former State Board of Insurance, or an employee of
44-12 the State Office of Administrative Hearings who is involved in
44-13 hearing cases under this code or another insurance law of this
44-14 state <or head of a department division> may not, for a period of
44-15 one year <two years> after the date the person ceases to be a board
44-16 member, commissioner, general counsel, public counsel, or employee
44-17 <division head>, represent any person in a matter before the
44-18 department or receive compensation for services rendered on behalf
44-19 of any person regarding a matter pending before the department.
44-20 (b) <A person, other than a person subject to Subsection (a)
44-21 of this section, who is employed by the department or board may
44-22 not, for a period of two years after the date the person terminates
44-23 service with the department or board, represent any person in a
44-24 matter before the department or receive compensation for services
44-25 rendered on behalf of any person regarding a matter pending before
44-26 the department. This subsection does apply to an employee exempt
44-27 from the state's position classification plan, but does not apply
45-1 to an employee who was compensated at a salary less than the salary
45-2 prescribed by the General Appropriations Act for step 1, salary
45-3 group 17, of the position classification salary schedule.>
45-4 <(c)> A former member of the former State Board of Insurance
45-5 <board>, a former commissioner, a former general counsel, a former
45-6 public counsel, a staff employee of a member of the former State
45-7 Board of Insurance <a former head of a department division>, or a
45-8 former employee of the board or the State Office of Administrative
45-9 Hearings <department described by Subsection (b) of this section>
45-10 may not represent any person or receive compensation for services
45-11 rendered on behalf of any person regarding a matter with which the
45-12 former member, commissioner, general counsel, public counsel,
45-13 division head, or employee was directly concerned during the period
45-14 of service or employment on or with the board or State Office of
45-15 Administrative Hearings <department> or as commissioner, either
45-16 through personal involvement or because the matter was within the
45-17 member's, commissioner's, general counsel's, public counsel's,
45-18 <division head's,> or employee's official responsibility while
45-19 associated with the board or State Office of Administrative
45-20 Hearings.
45-21 (c) <(d)> A former member or employee of the former State
45-22 Board of Insurance <board> or State Office of Administrative
45-23 Hearings <department> or a former commissioner, general counsel,
45-24 <or> public counsel, or staff employee of a member of the former
45-25 State Board of Insurance commits an offense if the former member,
45-26 employee, commissioner, general counsel, or public counsel violates
45-27 this section. An offense under this subsection is a Class A
46-1 misdemeanor.
46-2 (d) <(e)> This section does not apply to an employee of the
46-3 Texas Department of Insurance whose employment is terminated based
46-4 on the elimination of the employee's position of employment that is
46-5 a direct result of a reduction in the agency's workforce.
46-6 SECTION 2.04. Article 1.09-4, Insurance Code, is repealed.
46-7 SECTION 2.05. (a) Not later than December 31, 1993, the
46-8 commissioner of insurance and the chief administrative law judge of
46-9 the State Office of Administrative Hearings shall adopt the
46-10 memorandum of understanding required by Article 1.33B, Insurance
46-11 Code, as added by this Act.
46-12 (b) This article applies only to a hearing that is not held
46-13 before or pending on January 1, 1994. Unless the commissioner of
46-14 insurance and the chief administrative law judge of the State
46-15 Office of Administrative Hearings agree to apply Article 1.33B,
46-16 Insurance Code, as added by this Act, a hearing that is held before
46-17 or pending on January 1, 1994, is governed by the law in effect
46-18 immediately before the effective date of this Act, and that law is
46-19 continued in effect for this purpose.
46-20 ARTICLE 3. TRANSFER OF CERTAIN TAX COLLECTION AND
46-21 AUDIT FUNCTIONS TO OFFICE OF THE COMPTROLLER
46-22 SECTION 3.01. Chapter 1, Insurance Code, is amended by
46-23 adding Article 1.04D to read as follows:
46-24 Art. 1.04D. DUTIES OF COMPTROLLER. (a) Except as otherwise
46-25 expressly provided for in this code or another insurance law of
46-26 this state, the duties of the department and commissioner relative
46-27 to the collection, reporting, and administration of taxes and
47-1 certain fees and assessments imposed under this code or another
47-2 insurance law of this state are transferred to the comptroller
47-3 effective September 1, 1993, as specifically provided in this code.
47-4 (b) The duties transferred to the comptroller relative to
47-5 taxes, fees, and assessments imposed under this code or another
47-6 insurance law of this state relate to the collection, reporting,
47-7 enforcement, and administration of all such amounts currently
47-8 provided for under this code or another insurance law of this
47-9 state, and also of any taxes, fees, or assessments that have been
47-10 repealed or are otherwise inactive but for which amounts may still
47-11 be owing or refunds may be due on or after the effective date of
47-12 this article.
47-13 (c) The comptroller may adopt rules to carry out the
47-14 collection, reporting, enforcement, and administration
47-15 responsibilities assigned to the comptroller under this code or
47-16 another insurance law of this state. The comptroller may also
47-17 prescribe appropriate report forms, establish or alter tax return
47-18 due dates not otherwise specifically set forth in this code or
47-19 another insurance law of this state, and otherwise adapt the
47-20 functions transferred to the comptroller to increase efficiency and
47-21 cost-effectiveness. With respect to rules related to the
47-22 collection, reporting, enforcement, or otherwise to the
47-23 administration of taxes imposed under this code, rules adopted by
47-24 the comptroller shall prevail in the event of conflict with rules,
47-25 policies, or procedures established by the department, the
47-26 commissioner, or otherwise.
47-27 (d) With respect to the comptroller's performance of the
48-1 duties relative to the taxes, fees, and assessments imposed under
48-2 this code or another insurance law of this state, the comptroller
48-3 has the administrative, enforcement, and collection powers provided
48-4 by Subtitles A and B, Title 2, Tax Code, and their subsequent
48-5 amendments. Except as otherwise expressly provided by this code,
48-6 those powers are granted to the comptroller without limiting and
48-7 exclusive of powers granted to the department or the commissioner
48-8 with respect to other fees and assessments under this code.
48-9 SECTION 3.02. Article 1.11(a), Insurance Code, is amended to
48-10 read as follows:
48-11 (a) The commissioner <Board> may, from time to time, make
48-12 such changes in the forms of the annual statements required of
48-13 insurance companies of any kind, as shall seem to it best adapted
48-14 to elicit a true exhibit of their condition and methods of
48-15 transacting business. Such form shall elicit only such information
48-16 as shall pertain to the business of the company.
48-17 If any annual statement, report, financial statement, <tax
48-18 return,> or <tax> payment required to be filed or deposited in the
48-19 offices of the commissioner, or any report, tax return, or payment
48-20 required to be filed or deposited in the offices of the comptroller
48-21 <State Board of Insurance>, is delivered by the United States
48-22 Postal Service to the offices of the commissioner or comptroller,
48-23 as required, <State Board of Insurance> after the prescribed date
48-24 on which the annual statement, report, financial statement, tax
48-25 return, or <tax> payment is to be filed, the date of the United
48-26 States Postal Service postmark stamped on the cover in which the
48-27 document <annual statement> is mailed, or any other evidence of
49-1 mailing authorized by the United States Postal Service reflected on
49-2 the cover in which the document <annual statement> is mailed, shall
49-3 be deemed to be the date of filing, unless otherwise specifically
49-4 made an exception to this general statute.
49-5 SECTION 3.03. Section 2(b), Article 1.14-1, Insurance Code,
49-6 is amended to read as follows:
49-7 (b) The provisions of this section do not apply to:
49-8 1. The lawful transaction of surplus lines insurance
49-9 pursuant to Article 1.14-2.
49-10 2. The lawful transaction of reinsurance by insurers.
49-11 3. Transactions in this state involving a policy
49-12 lawfully solicited, written, and delivered outside of this state
49-13 covering only subjects of insurance not resident, located, or
49-14 expressly to be performed in this state at the time of issuance,
49-15 and which transactions are subsequent to the issuance of such
49-16 policy.
49-17 4. Transactions involving contracts of insurance
49-18 independently procured through negotiations occurring entirely
49-19 outside of this state which are reported and on which premium tax
49-20 is paid in accordance with this Article.
49-21 5. Transactions in this state involving group life,
49-22 health or accident insurance (other than credit insurance) and
49-23 group annuities where the master policy of such groups was lawfully
49-24 issued and delivered in a state in which the company was authorized
49-25 to do an insurance business and such transactions are authorized by
49-26 other statutes of this state.
49-27 6. Lawful transactions by servicing companies of the
50-1 Texas workers' compensation employers' rejected risk fund pursuant
50-2 to Section 4.08, Article 5.76-2.
50-3 7. Management and accounting activities in this state
50-4 on behalf of a non-admitted captive insurance company that insures
50-5 solely directors' and officers' liability insurance for the
50-6 directors and officers of its parent and affiliated companies
50-7 and/or the risks of its parent and affiliated companies. This
50-8 provision does not exempt any insured or insurer from the payment
50-9 of any applicable tax on premiums or any other applicable provision
50-10 in this code.
50-11 SECTION 3.031. Section 2(a), Article 1.14-1, Insurance Code,
50-12 is amended to read as follows:
50-13 (a) Any of the following acts in this state effected by mail
50-14 or otherwise is defined to be doing an insurance business in this
50-15 state. The venue of an act committed by mail is at the point where
50-16 the matter transmitted by mail is delivered and takes effect.
50-17 Unless otherwise indicated, the term insurer as used in this
50-18 Article includes all corporations, associations, partnerships and
50-19 individuals engaged as principals in the business of insurance and
50-20 also includes interinsurance exchanges, mutual benefit societies,
50-21 and insurance exchanges and syndicates as defined by rules
50-22 promulgated by the State Board of Insurance.
50-23 1. The making of or proposing to make, as an insurer,
50-24 an insurance contract.
50-25 2. The making of or proposing to make, as guarantor or
50-26 surety, any contract of guaranty or suretyship as a vocation and
50-27 not merely incidental to any other legitimate business or activity
51-1 of the guarantor or surety.
51-2 3. The taking or receiving of any application for
51-3 insurance.
51-4 4. The receiving or collection of any premium,
51-5 commission, membership fees, assessments, dues or other
51-6 consideration for any insurance or any part thereof.
51-7 5. The issuance or delivery of contracts of insurance
51-8 to residents of this state or to persons authorized to do business
51-9 in this state.
51-10 6. Directly or indirectly acting as an agent for or
51-11 otherwise representing or aiding on behalf of another any person or
51-12 insurer in the solicitation, negotiation, procurement or
51-13 effectuation of insurance or renewals thereof or in the
51-14 dissemination of information as to coverage or rates, or forwarding
51-15 of applications, or delivery of policies or contracts, or
51-16 inspection of risks, a fixing of rates or investigation or
51-17 adjustment of claims or losses or in the transaction of matters
51-18 subsequent to effectuation of the contract and arising out of it,
51-19 or in any other manner representing or assisting a person or
51-20 insurer in the transaction of insurance with respect to subjects of
51-21 insurance resident, located or to be performed in this state. The
51-22 provisions of this subdivision shall not operate to prohibit
51-23 full-time salaried employees of a corporate insured from acting in
51-24 the capacity of an insurance manager or buyer in placing insurance
51-25 in behalf of such employer, its parent or affiliated companies.
51-26 7. Contracting to provide indemnification or expense
51-27 reimbursement in this state to persons domiciled in this state or
52-1 for risks located in this state, whether as an insurer, agent,
52-2 administrator, trust, funding mechanism, or by any other method,
52-3 for any type of medical expenses including, but not limited to
52-4 surgical, chiropractic, physical therapy, speech pathology,
52-5 audiology, professional mental health, dental, hospital, or
52-6 optometric expenses, whether this coverage is by direct payment,
52-7 reimbursement, or otherwise. This provision shall not apply to:
52-8 (i) any program otherwise authorized by law that
52-9 is established by any political subdivision of this state or under
52-10 the provisions of The Interlocal Cooperation Act (Article
52-11 4413(32c), Vernon's Texas Civil Statutes) or by a state agency; or
52-12 (ii) a multiple employer welfare arrangement
52-13 which is fully insured as defined in 29 U.S.C.A. Section 1144(b)(6)
52-14 except that the Commissioner may apply any laws that regulate the
52-15 business of insurance in this state to the extent that such laws
52-16 provide (1) standards requiring the maintenance of specified levels
52-17 of contributions, which any such plan, or any trust established
52-18 under such a plan, must meet in order to be considered under such
52-19 law able to pay benefits in full when due, and (2) provisions to
52-20 enforce such standards.
52-21 8. The doing of any kind of insurance business
52-22 specifically recognized as constituting the doing of an insurance
52-23 business within the meaning of the statutes relating to insurance.
52-24 9. The doing or proposing to do any insurance business
52-25 in substance equivalent to any of the foregoing in a manner
52-26 designed to evade the provisions of the statutes.
52-27 10. Any other transactions of business in this state
53-1 by an insurer.
53-2 11. With respect to policies authorized under Article
53-3 3.74 of this code, the use, creation, publication, mailing, or
53-4 dissemination of an advertisement relating to any of the acts
53-5 defined in this subsection to be doing an insurance business
53-6 unless:
53-7 (i) that advertisement is used, created,
53-8 published, mailed, or disseminated on behalf of a person or insurer
53-9 authorized under this title to engage in the business of insurance
53-10 in this state, who has actual knowledge of the content of the
53-11 advertisement and has authorized the advertisement to be used,
53-12 created, published, mailed, or disseminated on that person's or
53-13 insurer's behalf; and
53-14 (ii) the person or insurer on whose behalf the
53-15 advertisement is used, created, published, mailed, or disseminated
53-16 is, in that advertisement, clearly identified by name as the
53-17 sponsor of the advertisement.
53-18 SECTION 3.04. Section 11(a), Article 1.14-1, Insurance Code,
53-19 is amended to read as follows:
53-20 (a) Except as to premiums on lawfully procured surplus lines
53-21 insurance and premiums on independently procured insurance on which
53-22 a tax has been paid pursuant to this Article or Article 1.14-2,
53-23 every unauthorized insurer shall pay to the comptroller, on a form
53-24 prescribed by the comptroller, <State Board of Insurance> before
53-25 March 1 next succeeding the calendar year in which the insurance
53-26 was so effectuated, continued or renewed or another date as
53-27 prescribed by the comptroller a premium receipts tax of 4.85
54-1 percent of gross premiums charged for such insurance on subjects
54-2 resident, located or to be performed in this state. Such insurance
54-3 on subjects resident, located or to be performed in this state
54-4 procured through negotiations or an application, in whole or in
54-5 part occurring or made within or from within or outside of this
54-6 state, or for which premiums in whole or in part are remitted
54-7 directly or indirectly from within or outside of this state, shall
54-8 be deemed to be insurance procured, or continued or renewed in this
54-9 state. The term "premium" includes all premiums, membership fees,
54-10 assessments, dues and any other consideration for insurance. Such
54-11 tax shall be in lieu of all other insurance taxes. On default of
54-12 any such unauthorized insurer in the payment of such tax the
54-13 insured shall pay the tax. If the tax prescribed by this
54-14 subsection is not paid within the time stated, Subtitles A and B,
54-15 Title 2, Tax Code, and their subsequent amendments, apply <the tax
54-16 shall be increased by a penalty of 25 percent and by the amount of
54-17 an additional penalty computed at the rate of one percent per month
54-18 or any part thereof from the date such payment was due to the date
54-19 paid>.
54-20 SECTION 3.05. Sections 12(a), (c), and (e), Article 1.14-1,
54-21 Insurance Code, are amended to read as follows:
54-22 (a) Every insured who procures or causes to be procured or
54-23 continues or renews insurance with any unauthorized insurer, or any
54-24 insured or self-insurer who so procures or continues excess loss,
54-25 catastrophe or other insurance, upon a subject of insurance
54-26 resident, located or to be performed within this state, other than
54-27 insurance procured through a surplus lines agent pursuant to the
55-1 surplus lines law of this state shall, within 60 days after the
55-2 date such insurance was so procured, continued or renewed or before
55-3 a date prescribed by the comptroller, file a report of the same
55-4 with the comptroller <State Board of Insurance> in writing and upon
55-5 forms designated by the comptroller <State Board of Insurance> and
55-6 furnished to such an insured upon request. The report shall show
55-7 the name and address of the insured or insureds, name and address
55-8 of the insurer, the subject of the insurance, a general description
55-9 of the coverage, the amount of premium currently charged therefor,
55-10 and such additional pertinent information as is reasonably
55-11 requested by the comptroller <State Board of Insurance>.
55-12 (c) There is hereby levied upon the obligation, chose in
55-13 action, or right represented by the premium charged for such
55-14 insurance, a premium receipts tax of 3.85 percent of gross premiums
55-15 charged for such insurance. The term "premium" shall include all
55-16 premiums, membership fees, assessments, dues and any other
55-17 consideration for insurance. Such tax shall be in lieu of all
55-18 other insurance taxes. The insured shall, before March 1 next
55-19 succeeding the calendar year in which the insurance was so
55-20 procured, continued or renewed or another date prescribed by the
55-21 comptroller, pay the amount of the tax to the comptroller, on a
55-22 form prescribed by the comptroller <State Board of Insurance>. In
55-23 event of cancellation and rewriting of any such insurance contract
55-24 the additional premium for premium receipts tax purposes shall be
55-25 the premium in excess of the unearned premium of the canceled
55-26 insurance contract.
55-27 (e) If the insured fails to withhold from the premium the
56-1 amount of tax herein levied, the insured shall be liable for the
56-2 amount thereof and shall pay the same to the comptroller <State
56-3 Board of Insurance> within the time stated in Paragraph (c). If
56-4 the tax prescribed by this subsection is not paid within the time
56-5 stated in Paragraph (c), Subtitles A and B, Title 2, Tax Code, and
56-6 their subsequent amendments, apply <the tax shall be increased by a
56-7 penalty of 25 percent and by the amount of an additional penalty
56-8 computed at the rate of one percent per month or any part thereof
56-9 from the date such payment was due to the date paid>.
56-10 SECTION 3.06. Section 12A, Article 1.14-1, Insurance Code,
56-11 is amended to read as follows:
56-12 Sec. 12A. Exception in Respect of Filing of Reports of Taxes
56-13 Due. As respects corporations, the amount of taxes due and payable
56-14 to the State of Texas under the provisions or under authority of
56-15 Section 12 of this Article shall be reported directly to the
56-16 comptroller <State Board of Insurance> and shall be due when the
56-17 Franchise Tax Report is due or on another date prescribed by the
56-18 comptroller, any other provision of this Article to the contrary
56-19 notwithstanding. All companies or persons other than corporations
56-20 filing franchise tax returns shall report to the comptroller on or
56-21 before the date prescribed by the comptroller <State Board of
56-22 Insurance>.
56-23 SECTION 3.07. Sections 12(a) and (d), Article 1.14-2,
56-24 Insurance Code, are amended to read as follows:
56-25 (a) The premiums charged for surplus lines insurance are
56-26 subject to a premium receipts tax of 4.85 percent of gross premiums
56-27 charged for such insurance. The term premium includes all
57-1 premiums, membership fees, assessments, dues or any other
57-2 consideration for insurance. Such tax shall be in lieu of all
57-3 other insurance taxes. The surplus lines agent shall collect from
57-4 the insured the amount of the tax at the time of delivery of the
57-5 cover note, certificate of insurance, policy or other initial
57-6 confirmation of insurance, in addition to the full amount of the
57-7 gross premium charged by the insurer for the insurance. No agent
57-8 shall absorb such tax nor shall any agent, as an inducement for
57-9 insurance or for any other reason, rebate all or any part of such
57-10 tax or his commission. The surplus lines agent shall report<,
57-11 under oath,> to the comptroller <State Board of Insurance> within
57-12 30 days from the 1st day of January and July of each year the
57-13 amount of gross premiums paid for such insurance placed through him
57-14 in nonlicensed insurers, and shall pay to the comptroller <Board>
57-15 the tax provided for by this Article. If a surplus lines policy
57-16 covers risks or exposures only partially in this state, the tax
57-17 payable shall be computed on the portions of the premium which are
57-18 properly allocable to the risks or exposures located in this state.
57-19 In determining the amount of premiums taxable in this state, all
57-20 premiums written, procured, or received in this state and all
57-21 premiums on policies negotiated in this state shall be deemed
57-22 written on property or risks located or resident in this state,
57-23 except such premiums as are properly allocated or apportioned and
57-24 reported as taxable premiums of any other state or states. In
57-25 event of cancellation and rewriting of any surplus lines insurance
57-26 contract the additional premium for premium receipts tax purposes
57-27 shall be the premium in excess of the unearned premium of the
58-1 canceled insurance contract.
58-2 (d) The Attorney General, upon request of the commissioner
58-3 <State Board of Insurance>, shall proceed in the courts of this or
58-4 any other state or in any federal court or agency to recover <such>
58-5 license fees <or tax> not paid within the time prescribed in this
58-6 Article <section>. Notwithstanding the preceding sentence,
58-7 Subtitles A and B, Title 2, Tax Code, and their subsequent
58-8 amendments, apply to a tax collected under this Article.
58-9 SECTION 3.08. Sections 8 and 9, Article 1.14-3, Insurance
58-10 Code, are amended to read as follows:
58-11 Sec. 8. Maintenance Tax. (a) The commissioner <board>
58-12 annually shall determine the rate of assessment of a maintenance
58-13 tax to be paid on an annual, <or> semiannual, or other periodic
58-14 basis, as determined by the comptroller. The rate of assessment
58-15 may <basis and shall collect a maintenance tax in an amount> not
58-16 <to> exceed one percent of the correctly reported gross premiums on
58-17 all classes of insurance covered by this article and paid through
58-18 the exchange. The comptroller shall collect the maintenance tax.
58-19 (b) After taking into account the unexpended funds produced
58-20 by this tax, if any, the commissioner <board> shall adjust the rate
58-21 of assessment each year to produce the amount of funds that the
58-22 commissioner <board> estimates will be necessary to pay all the
58-23 expenses of regulating all classes of insurance covered by this
58-24 article during the succeeding year. In making an estimate under
58-25 this subsection, the commissioner shall take into account the
58-26 requirement that the general revenue fund be reimbursed under
58-27 Article 4.19 of this code and its subsequent amendments.
59-1 (c) The collected taxes shall be deposited in the State
59-2 Treasury to the credit of the general revenue fund to be
59-3 reallocated to the Texas Department <State Board> of Insurance
59-4 operating fund and shall be spent as authorized by legislative
59-5 appropriation <only> on warrants issued by the comptroller <of
59-6 public accounts> pursuant to duly certified requisitions of the
59-7 commissioner <board>. Amounts reallocated to the Texas Department
59-8 of Insurance operating fund under this subsection may be
59-9 transferred to the general revenue fund in accordance with Article
59-10 4.19 of this code and its subsequent amendments.
59-11 (d) The commissioner shall advise the comptroller of the
59-12 applicable rate of assessment no later than the date 45 days prior
59-13 to the due date of the tax return for the period for which such
59-14 taxes are due. If the commissioner has not advised the comptroller
59-15 of the applicable rate by such date, the applicable rate shall be
59-16 the rate applied in the previous tax period. If the commissioner
59-17 advises the comptroller of the applicable rate of assessment after
59-18 taxes have been assessed pursuant to this subsection, the
59-19 comptroller shall:
59-20 (1) advise each taxpayer in writing of the amount of
59-21 any additional taxes due; or
59-22 (2) refund any excess taxes paid.
59-23 Sec. 9. Application of This Article and Regulations. This
59-24 article and regulations promulgated by the commissioner or the
59-25 comptroller, as applicable, <board> apply to the exchange, its
59-26 members, and the insurance and reinsurance written through the
59-27 exchange, except to the extent exempt by regulations of the
60-1 commissioner or the comptroller, as applicable <board>. An
60-2 exemption may not be unfairly discriminatory or detrimental to the
60-3 solvency of licensed insurers.
60-4 SECTION 3.09. Article 1.35B(a), Insurance Code, is amended
60-5 to read as follows:
60-6 (a) To defray the costs of creating, administering, and
60-7 operating the office of public insurance counsel, the comptroller
60-8 <board> shall collect the following assessments annually in
60-9 connection with the collection of other taxes imposed on insurers:
60-10 (1) each property and casualty insurer authorized to
60-11 do business in this state shall pay an annual assessment of 5.7
60-12 cents for each policy of property and casualty insurance in force
60-13 at year end in this state;
60-14 (2) each insurer shall pay an annual assessment of 3
60-15 cents for each individual policy, and for each certificate of
60-16 insurance evidencing coverage under a group policy, of life,
60-17 health, or accident insurance written for delivery and placed in
60-18 force with the initial premium thereon paid in full in this state
60-19 during each calendar year if the insurer is authorized to do
60-20 business in this state under:
60-21 (A) Chapter 3, 10, 11, 14, 20, 22, 23, or 25 of
60-22 this code;
60-23 (B) Chapter 113, Acts of the 53rd Legislature,
60-24 Regular Session, 1953 (Article 3.49-1, Vernon's Texas Insurance
60-25 Code);
60-26 (C) Section 1, Chapter 417, Acts of the 56th
60-27 Legislature, Regular Session, 1959 (Article 3.49-2, Vernon's Texas
61-1 Insurance Code);
61-2 (D) the Texas Employees Uniform Group Insurance
61-3 Benefits Act (Article 3.50-2, Vernon's Texas Insurance Code);
61-4 (E) the Texas State College and University
61-5 Employees Uniform Insurance Benefits Act (Article 3.50-3, Vernon's
61-6 Texas Insurance Code);
61-7 (F) Section 1, Chapter 123, Acts of the 60th
61-8 Legislature, Regular Session, 1967 (Article 3.51-3, Vernon's Texas
61-9 Insurance Code);
61-10 (G) Section 1, Chapter 387, Acts of the 55th
61-11 Legislature, Regular Session, 1957 (Article 3.62-1, Vernon's Texas
61-12 Insurance Code);
61-13 (H) Sections 1 to 3A and 4 to 13, Chapter 397,
61-14 Acts of the 54th Legislature, Regular Session, 1955 (Articles
61-15 3.70-1 to 3.70-3A and 3.70-4 to 3.70-11, Vernon's Texas Insurance
61-16 Code); or
61-17 (I) the Texas Health Maintenance Organization
61-18 Act (Chapter 20A, Vernon's Texas Insurance Code); and
61-19 (3) each title insurance company authorized to do
61-20 business in this state shall pay an annual assessment of 5.7 cents
61-21 for each owner policy and mortgage policy of title insurance
61-22 written for delivery in this state during each calendar year and
61-23 for which the full basic premium is charged.
61-24 SECTION 3.10. Articles 4.05 and 4.07, Insurance Code, are
61-25 amended to read as follows:
61-26 Art. 4.05. TAXES TO BE PAID BEFORE CERTIFICATE IS ISSUED.
61-27 <Upon the receipt of sworn statements showing the gross premium
62-1 receipts of any insurance organization, the Board of Insurance
62-2 Commissioners shall certify to the State Treasurer the amount of
62-3 taxes due by such insurance organization for the preceding year,
62-4 which taxes shall be paid to the State Treasurer for the use of the
62-5 State, by such company. Upon his receipt of such certificate and
62-6 the payment of such tax, the Treasurer shall execute a receipt
62-7 therefor, which receipt shall be evidence of the payment of such
62-8 taxes.> No <such> life insurance company shall receive a
62-9 certificate of authority to do business in this State until all
62-10 <such> taxes imposed under this code or another insurance law of
62-11 this state are paid. If, upon the examination of any company, or
62-12 in any other manner, the commissioner <Board> shall be informed
62-13 that the gross premium receipts of any year exceed in amount those
62-14 shown by the report thereof, theretofore made as above provided,
62-15 the commissioner shall report this fact to the comptroller. The
62-16 comptroller shall institute a collection action, as the comptroller
62-17 considers appropriate in accordance with Subtitles A and B, Title
62-18 2, Tax Code, and their subsequent amendments, to collect taxes due
62-19 on unreported gross premium receipts. The comptroller shall
62-20 deposit taxes collected under this article to the credit of the
62-21 general revenue fund <it shall be the duty of such Board to file
62-22 with the State Treasurer a supplemental certificate showing the
62-23 additional amount of taxes due by such company, which shall be paid
62-24 by such company upon notice thereof. The State Treasurer if,
62-25 within fifteen (15) days after the receipt by him of any
62-26 certificate or supplemental certificate provided for by this
62-27 article, the taxes due as shown thereby have not been paid, shall
63-1 report the facts to the Attorney General, who shall immediately
63-2 institute suit in the proper court in Travis County to recover such
63-3 taxes>.
63-4 Art. 4.07. FEES OF TEXAS DEPARTMENT <STATE BOARD> OF
63-5 INSURANCE. A. With respect to all authorized insurers writing
63-6 classes of insurance in this State <which are covered by Chapter 3
63-7 of this code>, the Texas Department <State Board> of Insurance
63-8 shall charge and receive for the use of the State fees in an amount
63-9 to be determined by the department <Board> not to exceed the
63-10 following:
63-11 (1) <For filing the annual statement, $500.00.>
63-12 <(2)> For filing an amendment to a certificate of
63-13 authority if the charter is not amended, $100.00.
63-14 (2) <(3)> For affixing the official seal and
63-15 certifying to the seal, $20.00.
63-16 (3) <(4)> For reservation of name, $200.00.
63-17 (4) <(5)> For renewal of reservation of name, $50.00.
63-18 (5) <(6)> For filing an application for admission of a
63-19 foreign or alien company, $4,000.00.
63-20 (6) <(7)> For filing an original charter of a company
63-21 including issuance of a certificate of authority, $3,000.00.
63-22 (7) <(8)> For filing an amendment to a charter if a
63-23 hearing is held, $500.00.
63-24 (8) <(9)> For filing an amendment to a charter if a
63-25 hearing is not held, $250.00.
63-26 (9) <(10)> For filing a designation of an attorney for
63-27 service of process or amendment of the designation, $50.00.
64-1 (10) <(11)> For filing a copy of a total reinsurance
64-2 agreement, $1,500.00.
64-3 (11) <(12)> For filing a copy of a partial reinsurance
64-4 agreement, $300.00.
64-5 (12) <(13)> For accepting a security deposit, $200.00.
64-6 (13) <(14)> For substitution or amendment of a
64-7 security deposit, $100.00.
64-8 (14) <(15)> For certification of statutory deposits,
64-9 $20.00.
64-10 (15) <(16)> For filing a notice of intent to relocate
64-11 books and records pursuant to Article 1.28 of this code, $300.00.
64-12 (16) <(17)> For filing a statement pursuant to Section
64-13 5, Article 21.49-1 of this code, for the first $9,900,000.00 of the
64-14 purchase price or consideration, $1,000.00.
64-15 (17) <(18)> For filing a statement pursuant to Section
64-16 5, Article 21.49-1 of this code, if the purchase price or
64-17 consideration exceeds $9,900,000.00, an additional $500.00 for each
64-18 $10,000,000.00 exceeding $9,900,000.00, but not more than
64-19 $10,000.00 total fee under this subdivision and the preceding
64-20 subdivision.
64-21 (18) <(19)> For filing a registration statement
64-22 pursuant to Section 3, Article 21.49-1 of this code, $300.00.
64-23 (19) <(20)> For filing for review pursuant to Section
64-24 4, Article 21.49-1 or Article 22.15 of this code, $500.00.
64-25 (20) <(21)> For filing of a direct reinsurance
64-26 agreement pursuant to Article 22.19 of this code, $300.00.
64-27 (21) <(22)> For filing for approval of a merger
65-1 pursuant to Article 21.25 of this code, $1,500.00.
65-2 (22) <(23)> For filing for approval of reinsurance
65-3 pursuant to Article 21.26 of this code, $1,500.00.
65-4 (23) <(24)> For filing of restated articles of
65-5 incorporation for <both> domestic, <and> foreign or alien
65-6 companies, $500.00.
65-7 (24) <(25)> For filing a joint control agreement,
65-8 $100.00.
65-9 (25) <(26)> For filing a substitution or amendment to
65-10 a joint control agreement, $40.00.
65-11 (26) <(27)> For filing a change of attorney in fact,
65-12 $500.00.
65-13 <(28) For valuing policies of life insurance, and for
65-14 each one million of insurance or fraction thereof, $10.00.>
65-15 B. For an authorized insurer writing a class of insurance in
65-16 this state that is subject to Chapter 3 of this code, the Texas
65-17 Department of Insurance shall charge and the comptroller shall
65-18 collect for the use of the state fees in an amount to be determined
65-19 by the commissioner not to exceed the following:
65-20 (1) For valuing policies of life insurance, and for
65-21 each one million dollars of insurance or fraction thereof, $10.00.
65-22 (2) For filing the annual statement, $500.00.
65-23 The provisions of Subtitles A and B, Title 2, Tax Code, and
65-24 their subsequent amendments, apply to fees collected by the
65-25 comptroller under this section.
65-26 C. The department <Board> shall, within the limits fixed by
65-27 this Article <section>, prescribe the fees to be charged under this
66-1 Article <section>.
66-2 D. Except as provided by Section B of this Article, the
66-3 <The> insurers subject to the fees imposed by this Article
66-4 <section> shall include any and all stock and mutual insurance
66-5 companies, local mutual aid associations, statewide mutual
66-6 assessment companies, group hospital service plan corporations, and
66-7 stipulated premium insurance companies.
66-8 E. <B.> The Texas Department <State Board> of Insurance
66-9 shall set and collect a sales charge for making copies of any paper
66-10 of record in the Texas Department <State Board> of Insurance, such
66-11 charge to be in an amount deemed sufficient to reimburse the State
66-12 for the actual expense; provided, however, that the department
66-13 <State Board of Insurance> may make and distribute copies of papers
66-14 containing rating information without charge or for such charge as
66-15 the commissioner <Board> shall deem appropriate to administer the
66-16 premium rating laws by properly disseminating such rating
66-17 information; and provided further that Article 5.29, Texas
66-18 Insurance Code, shall remain in full force and effect without
66-19 amendment.
66-20 F. <C.> All fees collected by virtue of Section A of this
66-21 Article shall be deposited in the State Treasury to the credit of
66-22 the Texas Department <State Board> of Insurance operating fund and
66-23 appropriated to the use and benefit of the department <State Board
66-24 of Insurance> to be used in the payment of salaries and other
66-25 expenses arising out of and in connection with the examination of
66-26 insurance companies and/or the licensing of insurance companies and
66-27 investigations of violations of the insurance laws of this State in
67-1 such manner as provided in the general appropriation bill.
67-2 G. All fees collected by the comptroller under Section B of
67-3 this Article shall be deposited in the general revenue fund. Those
67-4 amounts are available for appropriation to the Texas Department of
67-5 Insurance for its use in paying salaries and other expenses arising
67-6 out of the examination or licensing of insurance companies and
67-7 investigations of the violations of this code or other insurance
67-8 laws of this State as provided by the General Appropriations Act.
67-9 H. <D.> Notwithstanding any other provision of this article,
67-10 any insurer to which this article applies and whose gross premium
67-11 receipts are less than $450,000.00, according to its annual
67-12 statement for the preceding year ending December 31, shall be
67-13 required to pay only one-half the amount of the fees required to be
67-14 paid under this article and as set by the commissioner <State Board
67-15 of Insurance>.
67-16 SECTION 3.11. Sections 1, 6, 11, and 14, Article 4.10,
67-17 Insurance Code, are amended to read as follows:
67-18 Sec. 1. Payment of tax. Every insurance carrier, including
67-19 Lloyd's and reciprocal exchanges and any other organization or
67-20 concern receiving gross premiums from the business of fire, marine,
67-21 marine inland, accident, credit, livestock, fidelity, guaranty,
67-22 surety, casualty, workers' compensation, employers' liability, or
67-23 any other kind or character of insurance, except title insurance
67-24 and except as provided in Sections 2, 3, and 4 of this article,
67-25 shall pay to the comptroller <commissioner of insurance> for
67-26 transmittal to the state treasurer a <an annual> tax upon such
67-27 gross premium receipts as provided in this article. Any such
68-1 insurance carrier doing other kinds of insurance business shall pay
68-2 the tax levied upon its gross premiums received from such other
68-3 kinds of business as provided in Articles 4.03 and 4.11 of this
68-4 code <Article 4769 and Article 7064a, Revised Civil Statutes of
68-5 Texas, 1925>.
68-6 Sec. 6. Time of Filing and Payment. (a) A premium tax
68-7 return for each taxable year ending the 31st day of December
68-8 preceding shall be filed and the total amount of the tax due under
68-9 this article shall be paid on or before the 1st day of March of
68-10 each year.
68-11 (b) A semiannual <quarterly> prepayment of premium tax must
68-12 be made on March 1st and August 1st<, May 15th, August 15th, and
68-13 November 15th> by all insurers with net tax liability for the
68-14 previous calendar year in excess of $1,000. The tax paid on each
68-15 date must equal one-half <one-fourth> of the total premium tax paid
68-16 for the previous calendar year. Should no premium tax have been
68-17 paid during the previous calendar year, the semiannual <quarterly>
68-18 payment shall equal the tax which would be owed on the aggregate of
68-19 the gross premium receipts for <during> the two previous calendar
68-20 quarters <quarter ending March 31st, June 30th, September 30th, or
68-21 December 31st> at the minimum tax rate specified by law. The
68-22 comptroller <State Board of Insurance> is authorized to certify for
68-23 refund to the State Treasurer any overpayment of premium taxes that
68-24 results from the semiannual <quarterly> prepayment system herein
68-25 established.
68-26 (c) The comptroller by rule may change the dates for
68-27 reporting and payment of taxes to improve operating efficiencies
69-1 within the agency, so long as a system of semiannual prepayment of
69-2 taxes imposed by this article is maintained <The State Board of
69-3 Insurance may establish such rules, regulations, minimum standards,
69-4 or limitations which are fair and reasonable as may be appropriate
69-5 for the augmentation and implementation of this article>.
69-6 Sec. 11. ANNUAL TAX RETURN. Each insurance carrier which is
69-7 liable under this article for tax on premiums shall file a tax
69-8 return annually<, under oath by two officers of such carrier,> on
69-9 forms prescribed by the comptroller <State Board of Insurance>.
69-10 Sec. 14. No Other Taxes to be Levied or Collected;
69-11 Exceptions. No occupational tax shall be levied on insurance
69-12 carriers or companies herein subjected to this premium receipts tax
69-13 by any county, city, or town. The taxes in this article shall
69-14 constitute all taxes collectible under the laws of Texas against
69-15 any such insurance carrier, except maintenance taxes specifically
69-16 levied under the laws of Texas and assessed by the commissioner and
69-17 administered by the comptroller <State Board of Insurance to
69-18 support the various activities of the divisions of the State Board
69-19 of Insurance>. Farm mutuals, local mutual aid associations and
69-20 burial associations are not subject to the franchise tax.
69-21 No other tax shall be levied or collected from any insurance
69-22 carrier by the state, county, or city or any town, but this law
69-23 shall not be construed to prohibit the levy and collection of
69-24 state, county, and municipal taxes upon the real and personal
69-25 property of such carrier.
69-26 SECTION 3.12. Sections 1, 3, 6, 10, and 13, Article 4.11,
69-27 Insurance Code, are amended to read as follows:
70-1 Sec. 1. Insurance Carriers Required to Pay Premium Tax.
70-2 Every insurance carrier receiving premiums from the business of
70-3 life insurance, accident insurance, health insurance, life and
70-4 accident insurance, life and health insurance, health and accident
70-5 insurance, or life, health, and accident insurance, including
70-6 variable life insurance, credit life insurance, and credit accident
70-7 and health insurance for profit or otherwise or for mutual benefit
70-8 or protection, in this state, shall pay to the comptroller <State
70-9 Board of Insurance> for transmittal to the state treasurer a <an
70-10 annual> tax upon its gross premiums as provided in this article.
70-11 Sec. 3. Date for Filing Return and Paying Tax. A premium
70-12 tax return for each tax year ending the 31st day of December
70-13 preceding shall be filed and the total amount of the tax due under
70-14 this article shall be paid on or before either March 1 of each
70-15 year, <or> the date the annual statement for such carrier is
70-16 required to be filed with the commissioner, or another date
70-17 prescribed by the comptroller <State Board of Insurance>.
70-18 Sec. 6. Annual Sworn Returns; Forms; Additional Information.
70-19 Each insurance carrier which is liable under this article for tax
70-20 on premiums shall file a tax return annually<, under oath by two
70-21 officers of such carrier,> on forms prescribed by the comptroller
70-22 <State Board of Insurance>. The comptroller <commissioner of
70-23 insurance> may require such carrier to file any relevant additional
70-24 information reasonably necessary to verify the amount of tax due.
70-25 Sec. 10. Failure to Pay Taxes. Any insurance carrier
70-26 failing to pay all taxes imposed by this article shall be subject
70-27 to the provisions of Article 4.05, Insurance Code, and of Subtitles
71-1 A and B, Title 2, Tax Code, and their subsequent amendments.
71-2 Sec. 13. Prepayment of Tax; Rules, Regulations, Standards,
71-3 Limitations. (a) A semiannual <quarterly> prepayment of premium
71-4 tax must be made on March 1 and August 1<, May 15, August 15, and
71-5 November 15> by all insurers with net tax liability for the
71-6 previous calendar year in excess of $1,000. The tax paid on each
71-7 date must equal one-half <one-fourth> of the total premium tax paid
71-8 for the previous calendar year. Should no premium tax have been
71-9 paid during the previous calendar year, the semiannual <quarterly>
71-10 payment shall equal the tax which would be owed on the aggregate of
71-11 the gross premium receipts for <during> the two previous calendar
71-12 quarters <quarter ending March 31, June 30, September 30, or
71-13 December 31> at the minimum tax rate specified by law. The
71-14 comptroller <State Board of Insurance> is authorized to certify for
71-15 refund to the state treasurer any overpayment of premium taxes that
71-16 results from the semiannual <quarterly> prepayment system herein
71-17 established.
71-18 (b) The comptroller by rule may change the dates for
71-19 reporting and payment of taxes to improve operating efficiencies
71-20 within the agency, so long as a system of semiannual prepayment of
71-21 taxes imposed by this article is maintained <The State Board of
71-22 Insurance may establish such rules, regulations, minimum standards,
71-23 or limitations which are fair and reasonable as may be appropriate
71-24 for the augmentation and implementation of this article>.
71-25 SECTION 3.13. Sections 2, 3, and 4, Article 4.11C, Insurance
71-26 Code, are amended to read as follows:
71-27 Sec. 2. A reciprocal exchange may elect to be subject to the
72-1 tax imposed under Article 4.10 of this code, or to be subject to
72-2 the tax imposed under Article 4.11B of this code. A reciprocal
72-3 exchange that elects to be taxed under Article 4.10 of this code
72-4 must file with the comptroller <commissioner of insurance> not
72-5 later than the 31st day before the day on which the tax year for
72-6 which the election is to be effective begins a written statement on
72-7 a form adopted by the comptroller <State Board of Insurance>
72-8 stating that an election has been made. If a reciprocal exchange
72-9 does not file an election as provided by this article or has
72-10 withdrawn the election, the reciprocal exchange is subject to the
72-11 tax imposed under Article 4.11B of this code.
72-12 Sec. 3. A reciprocal exchange that elects to be taxed under
72-13 Article 4.10 of this code will continue to be taxed under that
72-14 article for each tax year until written notice is given to the
72-15 comptroller <commissioner> that the election to be taxed under that
72-16 article is withdrawn. The notice of withdrawal must be filed with
72-17 the comptroller <commissioner of insurance> not later than the 31st
72-18 day before the beginning of the tax year for which the withdrawal
72-19 is to be effective.
72-20 Sec. 4. The comptroller <State Board of Insurance> by rule
72-21 may adopt necessary forms and procedures to carry out this article.
72-22 The comptroller by rule may change the dates for reporting and
72-23 payment of taxes to improve operating efficiencies within the
72-24 agency, so long as a system of semiannual prepayment of taxes
72-25 imposed by this article is maintained.
72-26 SECTION 3.14. Article 4.17, Insurance Code, is amended by
72-27 amending Subsections (a), (c), (d), and (e) and adding Subsection
73-1 (g) to read as follows:
73-2 (a) The commissioner <State Board of Insurance> shall
73-3 annually determine the rate of assessment of a maintenance tax to
73-4 be paid on an annual, <or> semiannual, or other periodic basis, as
73-5 determined by the comptroller. The rate of assessment may <basis
73-6 and collect a maintenance tax in an amount> not <to> exceed .04
73-7 percent of the correctly reported gross premiums of life, health,
73-8 and accident insurance coverages and the gross considerations for
73-9 annuity and endowment contracts collected by all authorized
73-10 insurers writing life, health, and accident insurance, annuity, or
73-11 endowment contracts in this state. The comptroller shall collect
73-12 the maintenance tax.
73-13 (c) The commissioner <State Board of Insurance>, after
73-14 taking into account the unexpended funds produced by this tax, if
73-15 any, shall adjust the rate of assessment each year to produce the
73-16 amount of funds that it estimates will be necessary to pay all the
73-17 expenses of regulating life, health, and accident insurers during
73-18 the succeeding year. In making an estimate under this subsection,
73-19 the commissioner shall take into account the requirement that the
73-20 general revenue fund be reimbursed under Article 4.19 of this code.
73-21 (d) The taxes collected shall be deposited in the state
73-22 treasury to the credit of the general revenue fund to be
73-23 reallocated to the Texas Department <State Board> of Insurance
73-24 operating fund and shall be spent as authorized by legislative
73-25 appropriation <only> on warrants issued by the comptroller <of
73-26 public accounts> pursuant to duly certified requisitions of the
73-27 commissioner <State Board of Insurance>. Amounts reallocated to
74-1 the Texas Department of Insurance operating fund under this
74-2 subsection may be transferred to the general revenue fund in
74-3 accordance with Article 4.19 of this code.
74-4 (e) The comptroller <State Board of Insurance> may collect
74-5 the tax assessed under this article on a semiannual or other
74-6 periodic basis <semiannually> from those insurers whose tax
74-7 liability under this article for the previous year was $2,000 or
74-8 more. <The State Board of Insurance may prescribe and adopt
74-9 reasonable rules to implement these payments that are not
74-10 inconsistent with this article.>
74-11 (g) The commissioner shall advise the comptroller of the
74-12 applicable rate of assessment no later than the date 45 days prior
74-13 to the due date of the tax return for the period for which such
74-14 taxes are due. If the commissioner has not advised the comptroller
74-15 of the applicable rate by such date, the applicable rate shall be
74-16 the rate applied in the previous tax period. If the commissioner
74-17 advises the comptroller of the applicable rate of assessment after
74-18 taxes have been assessed pursuant to this subsection, the
74-19 comptroller shall:
74-20 (1) advise each taxpayer in writing of the amount of
74-21 any additional taxes due; or
74-22 (2) refund any excess taxes paid.
74-23 SECTION 3.15. Chapter 4, Insurance Code, is amended by
74-24 adding Articles 4.18 and 4.19 to read as follows:
74-25 Art. 4.18. TAX ADMINISTRATION FUNCTIONS; COOPERATION BETWEEN
74-26 DEPARTMENT AND COMPTROLLER. (a) The commissioner and the
74-27 comptroller shall cooperate fully in performing their respective
75-1 duties under this code and other insurance laws of this state.
75-2 (b) The department shall comply with all reasonable requests
75-3 of the comptroller relating to the sharing of information gathered
75-4 or compiled in connection with functions carried out under this
75-5 code or other insurance laws of this state.
75-6 (c) The department shall maintain the federal identification
75-7 number of all entities subject to regulation under this code or
75-8 another insurance law of this state and shall include the
75-9 appropriate number in any communication to or information shared
75-10 with the comptroller.
75-11 Art. 4.19. TAX ADMINISTRATION FUNCTIONS; REIMBURSEMENT OF
75-12 GENERAL REVENUE FUND. (a) The department shall reimburse the
75-13 general revenue fund for the amount of expenses incurred by the
75-14 comptroller in administering the taxes imposed under this code or
75-15 another insurance law of this state in accordance with this
75-16 article.
75-17 (b) The comptroller shall certify to the commissioner the
75-18 total amount of expenses estimated to be required to perform the
75-19 comptroller's duties under this code or another insurance law of
75-20 this state for each fiscal biennium. The comptroller shall provide
75-21 copies of the certification to the budget division of the
75-22 governor's office and to the Legislative Budget Board.
75-23 (c) The amount certified by the comptroller under Subsection
75-24 (b) of this article shall be transferred from the Texas Department
75-25 of Insurance operating fund to the general revenue fund. It is the
75-26 intent of the legislature that the money in the department's
75-27 operating fund that is to be transferred into the general revenue
76-1 fund under this subsection should reflect the revenues from the
76-2 various maintenance taxes paid by insurers under this code or other
76-3 insurance laws of this state.
76-4 (d) In setting the maintenance taxes for each fiscal year,
76-5 the commissioner shall ensure that the amount of the taxes imposed
76-6 is sufficient to fully reimburse the general revenue fund for the
76-7 expenses incurred by the comptroller in administering the taxes
76-8 imposed under this code and other insurance laws of this state. If
76-9 the amount of maintenance taxes collected is insufficient to
76-10 reimburse the general revenue fund for the expenses incurred by the
76-11 comptroller in administering the taxes imposed under this code and
76-12 other insurance laws of this state, other money in the department's
76-13 operating fund shall be used to reimburse the general revenue fund
76-14 in accordance with Subsection (b) of this article.
76-15 SECTION 3.16. Articles 5.12, 5.24, 5.49, and 5.68, Insurance
76-16 Code, are amended to read as follows:
76-17 Art. 5.12. Maintenance Tax on Gross Premiums. (a) The
76-18 State of Texas by and through the commissioner <State Board of
76-19 Insurance> shall annually determine the rate of assessment of a
76-20 maintenance tax to be paid <and collect> on an annual or semiannual
76-21 basis, as determined by the comptroller. The rate of assessment
76-22 may <Board, a maintenance tax in an amount> not <to> exceed
76-23 one-fifth of one percent of the correctly reported gross motor
76-24 vehicle insurance premiums of all authorized insurers writing motor
76-25 vehicle insurance in this state. The comptroller shall collect the
76-26 maintenance tax.
76-27 (b) The tax required by this article is in addition to all
77-1 other taxes now imposed or that may be subsequently imposed and
77-2 that are not in conflict with this article.
77-3 (c) The commissioner <State Board of Insurance>, after
77-4 taking into account the unexpended funds produced by this tax, if
77-5 any, shall adjust the rate of assessment each year to produce the
77-6 amount of funds that it estimates will be necessary to pay all the
77-7 expenses of regulating motor vehicle insurance during the
77-8 succeeding year. In making an estimate under this subsection, the
77-9 commissioner shall take into account the requirement that the
77-10 general revenue fund be reimbursed under Article 4.19 of this code.
77-11 (d) The taxes collected shall be deposited in the State
77-12 Treasury to the credit of the general revenue fund to be
77-13 reallocated to the Texas Department <State Board> of Insurance
77-14 operating fund and shall be spent as authorized by legislative
77-15 appropriation only on warrants issued by the comptroller <of public
77-16 accounts> pursuant to duly certified requisitions of the
77-17 commissioner <State Board of Insurance>. Amounts reallocated to
77-18 the Texas Department of Insurance operating fund under this
77-19 subsection may be transferred to the general revenue fund in
77-20 accordance with Article 4.19 of this code.
77-21 (e) The comptroller <State Board of Insurance> may elect to
77-22 collect on a semiannual or other periodic basis the tax assessed
77-23 under this article only from insurers whose tax liability under
77-24 this article for the previous tax year was $2,000 or more<. The
77-25 State Board of Insurance may prescribe and adopt reasonable rules
77-26 to implement such payments as it deems advisable, not inconsistent
77-27 with this article>.
78-1 (f) The commissioner shall advise the comptroller of the
78-2 applicable rate of assessment no later than the date 45 days prior
78-3 to the due date of the tax return for the period for which such
78-4 taxes are due. If the commissioner has not advised the comptroller
78-5 of the applicable rate by such date, the applicable rate shall be
78-6 the rate applied in the previous tax period. If the commissioner
78-7 advises the comptroller of the applicable rate of assessment after
78-8 taxes have been assessed pursuant to this subsection, the
78-9 comptroller shall:
78-10 (1) advise each taxpayer in writing of the amount of
78-11 any additional taxes due; or
78-12 (2) refund any excess taxes paid.
78-13 Art. 5.24. Maintenance Tax on Gross Premiums. (a) The
78-14 State of Texas by and through the commissioner <State Board of
78-15 Insurance> shall annually determine the rate of assessment of a
78-16 maintenance tax to be paid <and collect> on an annual or semiannual
78-17 basis, as determined by the comptroller. The rate of assessment
78-18 may <Board, a maintenance tax in an amount> not <to> exceed
78-19 two-fifths of one percent of the correctly reported gross premiums
78-20 of all classes of insurance covered by this subchapter of all
78-21 authorized insurers writing those classes of insurance in this
78-22 state. The comptroller shall collect the maintenance tax.
78-23 (b) The tax required by this article is in addition to all
78-24 other taxes now imposed or that may be subsequently imposed and
78-25 that are not in conflict with this article.
78-26 (c) The commissioner <State Board of Insurance>, after
78-27 taking into account the unexpended funds produced by this tax, if
79-1 any, shall adjust the rate of assessment each year to produce the
79-2 amount of funds that it estimates will be necessary to pay all the
79-3 expenses of regulating all classes of insurance covered by this
79-4 subchapter during the succeeding year. In making an estimate under
79-5 this subsection, the board shall take into account the requirement
79-6 that the general revenue fund be reimbursed under Article 4.19 of
79-7 this code.
79-8 (d) The taxes collected shall be deposited in the State
79-9 Treasury to the credit of the general revenue fund to be
79-10 reallocated to the Texas Department <State Board> of Insurance
79-11 operating fund and shall be spent as authorized by legislative
79-12 appropriation <only> on warrants issued by the comptroller <of
79-13 public accounts> pursuant to duly certified requisitions of the
79-14 commissioner <State Board of Insurance>. Amounts reallocated to
79-15 the Texas Department of Insurance operating fund under this
79-16 subsection may be transferred to the general revenue fund in
79-17 accordance with Article 4.19 of this code.
79-18 (e) The comptroller <State Board of Insurance> may elect to
79-19 collect on a semiannual basis the tax assessed under this article
79-20 only from insurers whose tax liability under this article for the
79-21 previous tax year was $2,000 or more<. The State Board of
79-22 Insurance may prescribe and adopt reasonable rules to implement
79-23 such payments as it deems advisable, not inconsistent with this
79-24 article>.
79-25 (f) The commissioner shall advise the comptroller of the
79-26 applicable rate of assessment no later than the date 45 days prior
79-27 to the due date of the tax return for the period for which such
80-1 taxes are due. If the commissioner has not advised the comptroller
80-2 of the applicable rate by such date, the applicable rate shall be
80-3 the rate applied in the previous tax period. If the commissioner
80-4 advises the comptroller of the applicable rate of assessment after
80-5 taxes have been assessed pursuant to this subsection, the
80-6 comptroller shall:
80-7 (1) advise each taxpayer in writing of the amount of
80-8 any additional taxes due; or
80-9 (2) refund any excess taxes paid.
80-10 Art. 5.49. Maintenance tax on gross premiums. (a) The
80-11 State of Texas by and through the commissioner <State Board of
80-12 Insurance> shall annually determine the rate of assessment of a
80-13 maintenance tax to be paid on an annual or semiannual basis, as
80-14 determined by the comptroller. The rate of assessment may <Board,
80-15 and collect a maintenance tax in an amount> not <to> exceed one and
80-16 one-fourth percent of the correctly reported gross premiums of
80-17 fire, lightning, tornado, windstorm, hail, smoke or smudge,
80-18 cyclone, earthquake, volcanic eruption, rain, frost and freeze,
80-19 weather or climatic conditions, excess or deficiency of moisture,
80-20 flood, the rising of the waters of the ocean or its tributaries,
80-21 bombardment, invasion, insurrection, riot, civil war or commotion,
80-22 military or usurped power, any order of a civil authority made to
80-23 prevent the spread of a conflagration, epidemic, or catastrophe,
80-24 vandalism or malicious mischief, strike or lockout, explosion as
80-25 defined in Article 5.52 of this code, water or other fluid or
80-26 substance resulting from the breakage or leakage of sprinklers,
80-27 pumps, or other apparatus erected for extinguishing fires, water
81-1 pipes, or other conduits or containers insurance coverage collected
81-2 by all authorized insurers writing those types of insurance in this
81-3 state. The comptroller shall collect the maintenance tax.
81-4 (b) The tax required by this article is in addition to all
81-5 other taxes now imposed or that may be subsequently imposed and
81-6 that are not in conflict with this article.
81-7 (c) The commissioner <State Board of Insurance>, after
81-8 taking into account the unexpended funds produced by this tax, if
81-9 any, shall adjust the rate of assessment each year to produce the
81-10 amount of funds that it estimates will be necessary to pay all the
81-11 expenses of regulating all classes of insurance specified by this
81-12 subchapter during the succeeding year. In making an estimate under
81-13 this subsection, the commissioner shall take into account the
81-14 requirement that the general revenue fund be reimbursed under
81-15 Article 4.19 of this code.
81-16 (d) The taxes collected shall be deposited in the State
81-17 Treasury to the credit of the general revenue fund to be
81-18 reallocated to the Texas Department <State Board> of Insurance
81-19 operating fund and shall be spent as authorized by legislative
81-20 appropriation <only> on warrants issued by the comptroller <of
81-21 public accounts> pursuant to duly certified requisitions of the
81-22 commissioner <State Board of Insurance>. Amounts reallocated to
81-23 the Texas Department of Insurance operating fund under this
81-24 subsection may be transferred to the general revenue fund in
81-25 accordance with Article 4.19 of this code.
81-26 (e) The comptroller <State Board of Insurance> may elect to
81-27 collect on a semiannual or other periodic basis the tax assessed
82-1 under this article only from insurers whose tax liability under
82-2 this article for the previous tax year was $2,000 or more<. The
82-3 State Board of Insurance may prescribe and adopt reasonable rules
82-4 to implement such payments as it deems advisable, not inconsistent
82-5 with this article>.
82-6 (f) The commissioner shall advise the comptroller of the
82-7 applicable rate of assessment no later than the date 45 days prior
82-8 to the due date of the tax return for the period for which such
82-9 taxes are due. If the commissioner has not advised the comptroller
82-10 of the applicable rate by such date, the applicable rate shall be
82-11 the rate applied in the previous tax period. If the commissioner
82-12 advises the comptroller of the applicable rate of assessment after
82-13 taxes have been assessed pursuant to this subsection, the
82-14 comptroller shall:
82-15 (1) advise each taxpayer in writing of the amount of
82-16 any additional taxes due; or
82-17 (2) refund any excess taxes paid.
82-18 Art. 5.68. Maintenance tax on gross premiums. (a) The
82-19 State of Texas by and through the commissioner <State Board of
82-20 Insurance> shall<, as determined by the Board,> annually determine
82-21 the rate of assessment of a maintenance tax <and collect> on an
82-22 annual or semiannual basis. The comptroller shall collect the
82-23 maintenance tax<,> from each stock company, mutual company,
82-24 reciprocal or interinsurance exchange, and Lloyd's association.
82-25 The rate of assessment may <a maintenance tax in an amount> not
82-26 <to> exceed three-fifths of one percent of the correctly reported
82-27 gross workers' compensation insurance premiums of all authorized
83-1 insurers writing workers' compensation insurance in this state.
83-2 (b) For purposes of this article and Section 2.22, Texas
83-3 Workers' Compensation Act (Article 8308-2.22, Vernon's Texas Civil
83-4 Statutes), gross workers' compensation insurance premiums include
83-5 the modified annual premium of a policyholder that purchases a
83-6 deductible pursuant to Article 5.55C of this code, and the rate of
83-7 assessment shall be applied to the modified annual premium prior to
83-8 application of any deductible premium credit.
83-9 (c) The tax required by this article is in addition to all
83-10 other taxes now imposed or that may be subsequently imposed and
83-11 that are not in conflict with this article.
83-12 (d) The commissioner <State Board of Insurance>, after
83-13 taking into account the unexpended funds produced by this tax, if
83-14 any, shall adjust the rate of assessment each year to produce the
83-15 amount of funds that it estimates will be necessary to pay all the
83-16 expenses of regulating workers' compensation insurance during the
83-17 succeeding year. In making an estimate under this subsection, the
83-18 commissioner shall take into account the requirement that the
83-19 general revenue fund be reimbursed under Article 4.19 of this code.
83-20 (e) The taxes collected shall be deposited in the State
83-21 Treasury to the credit of the general revenue fund to be
83-22 reallocated to the Texas Department <State Board> of Insurance
83-23 operating fund and shall be spent as authorized by legislative
83-24 appropriation <only> on warrants issued by the comptroller <of
83-25 public accounts> pursuant to duly certified requisitions of the
83-26 commissioner <State Board of Insurance>. Amounts reallocated to
83-27 the Texas Department of Insurance operating fund under this
84-1 subsection may be transferred to the general revenue fund in
84-2 accordance with Article 4.19 of this code.
84-3 (f) The comptroller <State Board of Insurance> may elect to
84-4 collect on a semiannual basis the tax assessed under this article
84-5 only from insurers whose tax liability under this article for the
84-6 previous tax year was $2,000 or more<. The State Board of
84-7 Insurance may prescribe and adopt reasonable rules to implement
84-8 such payments as it deems advisable, not inconsistent with this
84-9 article>.
84-10 (g) The commissioner shall advise the comptroller of the
84-11 applicable rate of assessment no later than the date 45 days prior
84-12 to the due date of the tax return for the period for which such
84-13 taxes are due. If the commissioner has not advised the comptroller
84-14 of the applicable rate by such date, the applicable rate shall be
84-15 the rate applied in the previous tax period. If the commissioner
84-16 advises the comptroller of the applicable rate of assessment after
84-17 taxes have been assessed pursuant to this subsection, the
84-18 comptroller shall:
84-19 (1) advise each taxpayer in writing of the amount of
84-20 any additional taxes due; or
84-21 (2) refund any excess taxes paid.
84-22 SECTION 3.17. Section 10(b), Article 5.76-5, Insurance Code,
84-23 is amended to read as follows:
84-24 (b) The maintenance tax surcharge shall be set in an amount
84-25 sufficient to pay all debt service on the bonds. The maintenance
84-26 tax surcharge is set by the commissioner <State Board of Insurance>
84-27 in the same time and shall be collected by the comptroller on
85-1 behalf of the fund in the same manner as provided under Article
85-2 5.68 of this code.
85-3 SECTION 3.18. Articles 5.91 and 9.46, Insurance Code, are
85-4 amended to read as follows:
85-5 Art. 5.91. Maintenance Tax on Gross Premiums. (a) The
85-6 State of Texas by and through the commissioner <State Board of
85-7 Insurance> shall annually determine the rate of assessment of a
85-8 maintenance tax to be paid on an annual or semiannual basis, as
85-9 determined by the comptroller. The rate of assessment may <Board,
85-10 and collect a maintenance tax in an amount> not <to> exceed
85-11 two-fifths of one percent of the correctly reported gross premiums
85-12 on all classes of insurance covered by this subchapter of all
85-13 authorized insurers writing those classes of insurance in this
85-14 state. The comptroller shall collect the maintenance tax.
85-15 (b) The tax required by this article is in addition to all
85-16 other taxes now imposed or that may be subsequently imposed and
85-17 that are not in conflict with this article.
85-18 (c) The commissioner <State Board of Insurance>, after
85-19 taking into account the unexpended funds produced by this tax, if
85-20 any, shall adjust the rate of assessment each year to produce the
85-21 amount of funds that it estimates will be necessary to pay all the
85-22 expenses of regulating all classes of insurance specified by this
85-23 subchapter during the succeeding year. In making an estimate under
85-24 this subsection, the commissioner shall take into account the
85-25 requirement that the general revenue fund be reimbursed under
85-26 Article 4.19 of this code.
85-27 (d) The taxes collected shall be deposited in the State
86-1 Treasury to the credit of the general revenue fund to be
86-2 reallocated to the Texas Department <State Board> of Insurance
86-3 operating fund and shall be spent as authorized by legislative
86-4 appropriation <only> on warrants issued by the comptroller <of
86-5 public accounts> pursuant to duly certified requisitions of the
86-6 commissioner <State Board of Insurance>. Amounts reallocated to
86-7 the Texas Department of Insurance operating fund under this
86-8 subsection may be transferred to the general revenue fund in
86-9 accordance with Article 4.19 of this code.
86-10 (e) The comptroller <State Board of Insurance> may elect to
86-11 collect on a semiannual basis the tax assessed under this article
86-12 only from insurers whose tax liability under this article for the
86-13 previous tax year was $2,000 or more<. The State Board of
86-14 Insurance may prescribe and adopt reasonable rules to implement
86-15 such payments as it deems advisable, not inconsistent with this
86-16 article>.
86-17 (f) The commissioner shall advise the comptroller of the
86-18 applicable rate of assessment no later than the date 45 days prior
86-19 to the due date of the tax return for the period for which such
86-20 taxes are due. If the commissioner has not advised the comptroller
86-21 of the applicable rate by such date, the applicable rate shall be
86-22 the rate applied in the previous tax period. If the commissioner
86-23 advises the comptroller of the applicable rate of assessment after
86-24 taxes have been assessed pursuant to this subsection, the
86-25 comptroller shall:
86-26 (1) advise each taxpayer in writing of the amount of
86-27 any additional taxes due; or
87-1 (2) refund any excess taxes paid.
87-2 Art. 9.46. Maintenance FEE <Tax on Gross Premiums>. (a)
87-3 The State of Texas by and through the commissioner <State Board of
87-4 Insurance> shall annually determine the rate of assessment of a
87-5 maintenance fee to be paid on an annual, <or> semiannual, or other
87-6 periodic basis, as determined by the comptroller. The rate of
87-7 assessment may <Board, and collect a maintenance tax in an amount>
87-8 not <to> exceed one percent of the correctly reported gross title
87-9 insurance premiums of all authorized insurers writing title
87-10 insurance in this state. This fee is not a tax and shall be
87-11 reported and paid separately from premium and retaliatory taxes.
87-12 The fee is included in the division of premium and may not be
87-13 separately charged to the title insurance agent. The comptroller
87-14 shall collect the maintenance fee. <The tax required by this
87-15 article is in addition to all other taxes now imposed or that may
87-16 be subsequently imposed and that are not in conflict with this
87-17 article.>
87-18 (b) The commissioner <State Board of Insurance>, after
87-19 taking into account the unexpended funds produced by this fee
87-20 <tax>, if any, shall adjust the rate of assessment each year to
87-21 produce the amount of funds that it estimates will be necessary to
87-22 pay all the expenses of regulating title insurance during the
87-23 succeeding year. In making an estimate under this subsection, the
87-24 commissioner shall take into account the requirement that the
87-25 general revenue fund be reimbursed under Article 4.19 of this code.
87-26 (c) The fees <taxes> collected shall be deposited in the
87-27 State Treasury to the credit of the general revenue fund to be
88-1 reallocated to the Texas Department <State Board> of Insurance
88-2 operating fund and shall be spent as authorized by legislative
88-3 appropriation <only> on warrants issued by the comptroller <of
88-4 public accounts> pursuant to duly certified requisitions of the
88-5 commissioner <State Board of Insurance>. Amounts reallocated to
88-6 the Texas Department of Insurance operating fund under this
88-7 subsection may be transferred to the general revenue fund in
88-8 accordance with Article 4.19 of this code.
88-9 (d) The comptroller <State Board of Insurance> may elect to
88-10 collect on a semiannual or other periodic basis the fee <tax>
88-11 assessed under this article only from insurers whose <tax>
88-12 liability under this article for the previous <tax> year was $2,000
88-13 or more. <The State Board of Insurance may prescribe and adopt
88-14 reasonable rules to implement such payments as it deems advisable,
88-15 not inconsistent with this article.>
88-16 (e) The commissioner shall advise the comptroller of the
88-17 applicable rate of assessment no later than the date 45 days prior
88-18 to the due date of the maintenance fee return for the period for
88-19 which such fees are due. If the commissioner has not advised the
88-20 comptroller of the applicable rate by such date, the applicable
88-21 rate shall be the rate applied in the previous period. If the
88-22 commissioner advises the comptroller of the applicable rate of
88-23 assessment after maintenance fees have been assessed pursuant to
88-24 this subsection, the comptroller shall:
88-25 (1) advise each insurer in writing of the amount of
88-26 any additional maintenance fees due; or
88-27 (2) refund any excess maintenance fees paid.
89-1 SECTION 3.19. Sections 1, 3, and 5, Article 9.59, Insurance
89-2 Code, are amended to read as follows:
89-3 Sec. 1. Payment of tax. Each title insurance company
89-4 receiving premiums from the business of title insurance shall pay
89-5 to the comptroller <commissioner of insurance> for transmittal to
89-6 the state treasurer a <an annual> tax on those premiums as provided
89-7 in this article.
89-8 Sec. 3. Time of filing and payment. (a) A premium tax
89-9 return for each taxable year ending on December 31 of the preceding
89-10 year shall be filed and the total amount of the tax due under this
89-11 article shall be paid on or before March 1 of each year or another
89-12 date prescribed by the comptroller.
89-13 (b) A semiannual <quarterly> prepayment of premium tax must
89-14 be made on March 1 and August 1<, May 15, August 15, and November
89-15 15> by all insurers with net tax liability for the previous
89-16 calendar year of more than $1,000. The tax paid on each date must
89-17 equal one-half <one-fourth> of the total premium tax paid for the
89-18 previous calendar year. If no premium tax has been paid during the
89-19 previous calendar year, the semiannual <quarterly> payment shall
89-20 equal the tax that would be owed on the aggregate of the gross
89-21 premium receipts for <during> the two previous calendar quarters
89-22 <quarter ending March 31, June 30, September 30, or December 31> at
89-23 the minimum tax rate specified by law. The comptroller
89-24 <commissioner> may certify for refund to the state treasurer any
89-25 overpayment of premium taxes that results from the semiannual
89-26 <quarterly> prepayment system established by this subsection.
89-27 (c) Without limiting the general authority of the
90-1 comptroller to adopt rules to promote the efficient administration,
90-2 collection, enforcement, and reporting of taxes under this code or
90-3 another insurance law of this state, the commissioner or
90-4 comptroller, as appropriate, <The State Board of Insurance> may
90-5 adopt rules, regulations, minimum standards, and limitations that
90-6 are fair and reasonable as may be appropriate for the augmentation
90-7 and implementation of this article.
90-8 Sec. 5. ANNUAL TAX RETURN. Each title insurance company
90-9 that is liable under this article to remit tax on premium shall
90-10 file a tax return annually<, under oath by two officers of the
90-11 title insurance company,> on forms prescribed by the comptroller
90-12 <State Board of Insurance>.
90-13 SECTION 3.20. Section 33, Texas Health Maintenance
90-14 Organization Act (Article 20A.33, Vernon's Texas Insurance Code),
90-15 is amended by amending Subsection (d) and adding Subsections (e),
90-16 (f), (g), (h), and (i) to read as follows:
90-17 (d) The commissioner <State Board of Insurance> shall
90-18 annually determine the rate of assessment of <and collect> a per
90-19 capita maintenance tax to be paid on an annual or semiannual basis,
90-20 on the correctly reported gross revenues for the issuance of health
90-21 maintenance certificates or contracts collected by all authorized
90-22 health maintenance organizations issuing such coverages in this
90-23 state. The rate of assessment may <in an amount> not <to> exceed
90-24 $2 for each enrollee. The rate of assessment may differ between
90-25 basic health care plans and single health care service plans and
90-26 shall equitably reflect any differences in regulatory resources
90-27 attributable to each type of plan. The comptroller shall collect
91-1 the maintenance tax.
91-2 (e) The tax required by this section <article> is in
91-3 addition to all other taxes now imposed or that may be subsequently
91-4 imposed and that are not in conflict with this section.
91-5 (f) The commissioner <State Board of Insurance>, after
91-6 taking into account the unexpended funds produced by this tax, if
91-7 any, shall adjust the rate of assessment each year to produce the
91-8 amount of funds that it estimates will be necessary to pay all the
91-9 expenses of regulating health maintenance organizations during the
91-10 succeeding year. In making an estimate under this subsection, the
91-11 commissioner shall take into account the requirement that the
91-12 general revenue fund be reimbursed under Article 4.19, Insurance
91-13 Code.
91-14 (g) The taxes collected shall be deposited in the State
91-15 Treasury to the credit of the general revenue fund to be
91-16 reallocated to the Texas Department <State Board> of Insurance
91-17 operating fund and shall be spent as authorized by legislative
91-18 appropriation <only> on warrants issued by the comptroller <of
91-19 public accounts> pursuant to duly certified requisitions of the
91-20 commissioner <State Board of Insurance>. Amounts reallocated to
91-21 the Texas Department of Insurance operating fund under this
91-22 subsection may be transferred to the general revenue fund in
91-23 accordance with Article 4.19, Insurance Code.
91-24 (h) The comptroller <State Board of Insurance> may collect
91-25 the tax assessed under this section on a semiannual or other
91-26 periodic basis <semiannually> from those health maintenance
91-27 organizations whose tax liability under this section for the
92-1 previous year was $2,000 or more<. The State Board of Insurance
92-2 may prescribe and adopt reasonable rules to implement such payments
92-3 as it deems advisable, not inconsistent with this section>.
92-4 (i) The commissioner shall advise the comptroller of the
92-5 applicable rate of assessment no later than the date 45 days prior
92-6 to the due date of the tax return for the period for which such
92-7 taxes are due. If the commissioner has not advised the comptroller
92-8 of the applicable rate by such date, the applicable rate shall be
92-9 the rate applied in the previous tax period. If the commissioner
92-10 advises the comptroller of the applicable rate of assessment after
92-11 taxes have been assessed pursuant to this subsection, the
92-12 comptroller shall:
92-13 (1) advise each taxpayer in writing of the amount of
92-14 any additional taxes due; or
92-15 (2) refund any excess taxes paid.
92-16 SECTION 3.21. Section 21, Article 21.07-6, Insurance Code,
92-17 is amended by amending Subsections (a), (c), and (d) and adding
92-18 Subsection (e) to read as follows:
92-19 (a) The commissioner <board> annually shall determine the
92-20 rate of assessment of a maintenance tax to be paid on an annual,
92-21 <or> semiannual, or other periodic basis, as determined by the
92-22 comptroller. The rate of assessment may <and collect a maintenance
92-23 tax in an amount> not <to> exceed one percent of the correctly
92-24 reported administrative or service fees of all administrators that
92-25 are covered by certificates of authority. The comptroller shall
92-26 collect the maintenance tax.
92-27 (c) The commissioner <board>, after taking into account the
93-1 unexpended funds produced by this tax, if any, shall adjust the
93-2 rate of assessment each year to produce the amount of funds that it
93-3 estimates will be necessary to pay all the expenses of regulating
93-4 administrators. In making an estimate under this subsection, the
93-5 commissioner shall take into account the requirement that the
93-6 general revenue fund be reimbursed under Article 4.19 of this code.
93-7 (d) The taxes collected under this section shall be
93-8 deposited in the state treasury to the credit of the general
93-9 revenue fund to be reallocated to the Texas Department <State
93-10 Board> of Insurance operating fund and shall be spent as authorized
93-11 by legislative appropriation <only> on warrants issued by the
93-12 comptroller <of public accounts> pursuant to duly certified
93-13 requisitions of the commissioner <board>. Amounts reallocated to
93-14 the Texas Department of Insurance operating fund under this
93-15 subsection may be transferred to the general revenue fund in
93-16 accordance with Article 4.19 of this code.
93-17 (e) The commissioner shall advise the comptroller of the
93-18 applicable rate of assessment no later than the date 45 days prior
93-19 to the due date of the tax return for the period for which such
93-20 taxes are due. If the commissioner has not advised the comptroller
93-21 of the applicable rate by such date, the applicable rate shall be
93-22 the rate applied in the previous tax period. If the commissioner
93-23 advises the comptroller of the applicable rate of assessment after
93-24 taxes have been assessed pursuant to this subsection, the
93-25 comptroller shall:
93-26 (1) advise each taxpayer in writing of the amount of
93-27 any additional taxes due; or
94-1 (2) refund any excess taxes paid.
94-2 SECTION 3.22. Sections 4(e) and (f), Article 21.54,
94-3 Insurance Code, are amended to read as follows:
94-4 (e) A filing fee not to exceed $500 as established by
94-5 commissioner <board> regulation may be imposed for the filing of
94-6 the financial statement under Subdivision (1) of Subsection (d) of
94-7 this section. Fees collected for filing the statement shall be
94-8 deposited in the State Treasury to the credit of the general
94-9 revenue fund to be reallocated to the Texas Department <State
94-10 Board> of Insurance operating fund.
94-11 (f) Such risk retention group shall be liable for the
94-12 payment of premium and maintenance taxes and taxes on premiums of
94-13 direct business for risks located within this state and shall
94-14 report to the commissioner of this state the net premiums written
94-15 for risks located within this state. Such risk retention group
94-16 shall be subject to taxation, and any applicable fines and
94-17 penalties related thereto, on the same basis as a foreign admitted
94-18 insurer pursuant to Chapters 4 and 5 of this code. Groups shall
94-19 provide to the comptroller all information the comptroller may
94-20 request in connection with the reporting, collection, enforcement,
94-21 and administration of taxes due under this article and of the fee
94-22 imposed under Subsection (e) of this section.
94-23 SECTION 3.23. Chapter 23, Insurance Code, is amended by
94-24 amending Article 23.08 and adding Article 23.08A to read as
94-25 follows:
94-26 Art. 23.08. FEES <AND TAXES>. <(a)> The commissioner
94-27 <State Board of Insurance> shall charge a fee determined by the
95-1 commissioner <Board> in an amount not to exceed $400 for filing the
95-2 annual statement of each corporation operating under this chapter;
95-3 an application fee determined by the commissioner <Board> in an
95-4 amount not to exceed $3,000 for each corporation applying under
95-5 this chapter which includes the fee for the issuance of a
95-6 certificate of authority; and a fee determined by the commissioner
95-7 <Board> in an amount not to exceed $100 for the issuance of each
95-8 additional certificate of authority and amendment of a certificate
95-9 of authority to the corporation. The commissioner <Board> shall,
95-10 within the limits fixed by this article <subsection>, prescribe the
95-11 fees to be charged under this article <subsection>. The fees
95-12 collected by the commissioner <Board> under this article
95-13 <subsection> shall be deposited in the State Treasury to the credit
95-14 of the Texas Department <State Board> of Insurance operating fund,
95-15 and Article 1.31A of this code applies to fees collected under this
95-16 article <subsection>.
95-17 Art. 23.08A. MAINTENANCE TAX. (a) <(b)> The State of Texas
95-18 by and through the commissioner <State Board of Insurance> shall
95-19 annually determine the rate of assessment of a maintenance tax to
95-20 be paid <and collect as determined by the Board,> on an annual or
95-21 semiannual basis. The rate of assessment may<, a maintenance tax
95-22 in an amount> not <to> exceed one percent of the correctly reported
95-23 gross revenues received by all corporations issuing prepaid legal
95-24 services contracts in this state. The comptroller shall collect
95-25 the maintenance tax.
95-26 (b) The tax required by this article is in addition to all
95-27 other taxes now imposed or that may be subsequently imposed and
96-1 that are not in conflict with this article.
96-2 (c) The commissioner <State Board of Insurance>, after
96-3 taking into account the unexpended funds produced by this tax, if
96-4 any, shall adjust the rate of assessment each year to produce the
96-5 amount of funds that it estimates will be necessary to pay all the
96-6 expenses of regulating nonprofit legal services corporations during
96-7 the succeeding year. In making an estimate under this subsection,
96-8 the commissioner shall take into account the requirement that the
96-9 general revenue fund be reimbursed under Article 4.19 of this code.
96-10 (d) The taxes collected shall be deposited in the State
96-11 Treasury to the credit of the general revenue fund to be
96-12 reallocated to the Texas Department <State Board> of Insurance
96-13 operating fund and shall be spent as authorized by legislative
96-14 appropriation <only> on warrants issued by the comptroller <of
96-15 public accounts> pursuant to duly certified requisitions of the
96-16 commissioner <State Board of Insurance>. Amounts reallocated to
96-17 the Texas Department of Insurance operating fund under this
96-18 subsection may be transferred to the general revenue fund in
96-19 accordance with Article 4.19 of this code.
96-20 (e) Article 1.31A of this code applies to taxes collected
96-21 under this article <section>.
96-22 (f) The comptroller <State Board of Insurance> may elect to
96-23 collect on a semiannual basis the tax assessed under this article
96-24 only from insurers whose tax liability under this article for the
96-25 previous tax year was $2,000 or more. The comptroller <State Board
96-26 of Insurance> may prescribe and adopt reasonable rules to implement
96-27 such payments as it deems advisable, not inconsistent with this
97-1 article.
97-2 (g) The commissioner shall advise the comptroller of the
97-3 applicable rate of assessment no later than the date 45 days prior
97-4 to the due date of the tax return for the period for which such
97-5 taxes are due. If the commissioner has not advised the comptroller
97-6 of the applicable rate by such date, the applicable rate shall be
97-7 the rate applied in the previous tax period. If the commissioner
97-8 advises the comptroller of the applicable rate of assessment after
97-9 taxes have been assessed pursuant to this subsection, the
97-10 comptroller shall:
97-11 (1) advise each taxpayer in writing of the amount of
97-12 any additional taxes due; or
97-13 (2) refund any excess taxes paid.
97-14 SECTION 3.24. Section 2.21, Texas Workers' Compensation Act
97-15 (Article 8308-2.21, Vernon's Texas Civil Statutes), is amended to
97-16 read as follows:
97-17 Sec. 2.21. Commission funding. Unless otherwise provided,
97-18 all proceeds, including administrative penalties and advance
97-19 deposits for purchase of services, collected under this Act shall
97-20 be deposited in the General Revenue Fund of the state treasury to
97-21 the credit of the commission. The funds may be spent as authorized
97-22 by legislative appropriation on warrants issued by the comptroller
97-23 <of public accounts> under requisitions made by the commission.
97-24 Proceeds deposited in the General Revenue Fund under this section
97-25 may be used to satisfy the requirements of Article 4.19, Insurance
97-26 Code.
97-27 SECTION 3.25. Section 2.23(a), Texas Workers' Compensation
98-1 Act (Article 8308-2.23, Vernon's Texas Civil Statutes), is amended
98-2 to read as follows:
98-3 (a) The commission shall set and certify to the comptroller
98-4 <State Board of Insurance> the rate of assessment no later than
98-5 October 31 of each year, taking into account the following factors:
98-6 (1) expenditures projected as necessary for the
98-7 commission to administer this Act during the fiscal year for which
98-8 the rate of assessment is set and to reimburse the general revenue
98-9 fund in accordance with Article 4.19, Insurance Code;
98-10 (2) projected employee benefits paid from general
98-11 revenues;
98-12 (3) surpluses or deficits produced by this tax in the
98-13 preceding year; and
98-14 (4) revenue recovered from other sources, including
98-15 reappropriated receipts, grants, payments, fees, gifts, and
98-16 penalties recovered under this Act.
98-17 SECTION 3.26. Section 11.09(c), Texas Workers' Compensation
98-18 Act (Article 8308-11.09, Vernon's Texas Civil Statutes), is amended
98-19 to read as follows:
98-20 (c) Amounts received under this section shall be deposited
98-21 in the state treasury to the credit of a special fund to be used
98-22 for the operation of the research center and to reimburse the
98-23 general revenue fund in accordance with Article 4.19, Insurance
98-24 Code.
98-25 SECTION 3.27. Section 101.003, Tax Code, is amended by
98-26 amending Subdivisions (8) and (11) and adding Subdivision (12) to
98-27 read as follows:
99-1 (8) "Taxpayer" means a person liable for a tax, fee,
99-2 assessment, or other amount imposed by law administered by the
99-3 comptroller <this title>.
99-4 (11) "Report" means a tax return, declaration,
99-5 statement, or other document required to be filed with the
99-6 comptroller <by a provision of this title>.
99-7 (12) "Obligation" means the duty of a person to pay a
99-8 tax, fee, assessment, or other amount or to make, file, or keep a
99-9 report, certificate, affidavit, or other document.
99-10 SECTION 3.28. Subchapter A, Chapter 111, Tax Code, is
99-11 amended by adding Section 111.0022 to read as follows:
99-12 Sec. 111.0022. APPLICATION TO OTHER PROGRAMS. This subtitle
99-13 and Subtitle A apply to the administration of other programs or
99-14 functions assigned to the comptroller by law.
99-15 SECTION 3.29. The following laws are repealed:
99-16 (1) Section 12(f), Article 1.14-1, Insurance Code;
99-17 (2) Sections 12 and 16, Article 4.10, Insurance Code;
99-18 (3) Sections 7 and 11, Article 4.11, Insurance Code;
99-19 (4) Articles 4.13, 4.14, 4.15, and 4.16, Insurance
99-20 Code;
99-21 (5) Sections 6 and 10, Article 9.59, Insurance Code;
99-22 and
99-23 (6) Section 33(b), Texas Health Maintenance
99-24 Organization Act (Article 20A.33, Vernon's Texas Insurance Code).
99-25 SECTION 3.30. (a) The State Board of Insurance, the
99-26 Commissioner of Insurance, and the Texas Department of Insurance
99-27 shall transfer and the comptroller shall assume the duties assigned
100-1 to the comptroller under Article 1.04D, Insurance Code, as added by
100-2 this Act, on September 1, 1993. In assuming these duties, the
100-3 comptroller shall assume responsibility for the collection,
100-4 reporting, enforcement, and administration of any tax, assessment,
100-5 or fee owing on or before September 1, 1993, to the extent such
100-6 responsibility is transferred to the comptroller under this article
100-7 and for the payment of any refund owing on or before September 1,
100-8 1993, without regard to whether the law on which the tax,
100-9 assessment, fee, or refund was based has been repealed on or before
100-10 that date.
100-11 (b) The comptroller may modify procedures that had been used
100-12 by the State Board of Insurance or the Texas Department of
100-13 Insurance in performing the functions that are transferred to the
100-14 comptroller under this article to increase efficiency and cost
100-15 effectiveness.
100-16 (c) Rules of the Texas Department of Insurance that are in
100-17 effect on September 1, 1993, and that relate to the functions
100-18 transferred to the comptroller under this article remain in effect
100-19 until repealed or amended by the comptroller.
100-20 SECTION 3.31. (a) To assist the comptroller of public
100-21 accounts in implementing the reporting, collection, enforcement,
100-22 and administration functions with respect to insurance taxes and
100-23 selected fees as described in this article, there is hereby
100-24 appropriated to the comptroller of public accounts from the general
100-25 revenue fund the sums of $1,570,432 for the fiscal year ending
100-26 August 31, 1994, and $1,042,138 for the fiscal year ending August
100-27 31, 1995. Any unexpended balances remaining as of August 31, 1994
101-1 are hereby reappropriated for the fiscal year ending August 31,
101-2 1995. The comptroller may transfer the sum appropriated into the
101-3 comptroller's operating fund No. 062 and into the appropriate
101-4 program appropriations identified in the General Appropriations
101-5 Act.
101-6 (b) The transfer required by this article includes all
101-7 duties and obligations of any kind, except as otherwise
101-8 specifically provided, relating to the reporting, collection,
101-9 enforcement, and administration of all taxes and of selected fees
101-10 and assessments as set forth in the Insurance Code, and includes
101-11 all assets, liabilities, real or personal property, personnel,
101-12 furniture, computers, and other equipment, files, and related
101-13 materials used by the State Board of Insurance, the commissioner,
101-14 or the department to perform the aspects and functions transferred
101-15 by this article.
101-16 SECTION 3.32. The change in law made by this article to
101-17 Section 6(b), Article 4.10, Insurance Code, Section 13, Article
101-18 4.11, Insurance Code, and Section 3(b), Article 9.59, Insurance
101-19 Code, relating to the dates for prepayment of tax, apply only to
101-20 the prepayment of premium taxes beginning with prepayments that
101-21 become due after March 1, 1994. The dates for prepayment of
101-22 premium taxes under those articles before March 1, 1994, are
101-23 governed by the law as it existed before the effective date of this
101-24 article and that law is continued in effect for that purpose.
101-25 ARTICLE 4. APPEAL OF DECISIONS OF COMMISSIONER
101-26 SECTION 4.01. Section 4, Article 1.15, Insurance Code, is
101-27 amended to read as follows:
102-1 Sec. 4. Any rule, regulation, order, decision or finding of
102-2 the Board under this Act shall be subject to <full> review in
102-3 accordance with Article 1.04 of this code <any suit filed by any
102-4 interested party in any District Court of the State of Texas in
102-5 Travis County, Texas, and not elsewhere>. The filing of such suit
102-6 shall operate as a stay of any such rule, regulation, order,
102-7 decision or finding of the Board until the court directs otherwise.
102-8 <The court may review all the facts, shall hear, try and determine
102-9 said suit de novo as other civil cases in said court; and in
102-10 disposing of the issues before it, may modify, affirm, or reverse
102-11 the action of the Board in whole or in part.>
102-12 SECTION 4.02. Section 8(A)(4), Article 3.53, Insurance Code,
102-13 is amended to read as follows:
102-14 (4) Any person aggrieved by the action of the board in
102-15 the setting of a presumptive rate or any other action taken with
102-16 regard to the setting of such presumptive rate may within 30 days
102-17 from the date the board took the action complained of appeal in
102-18 accordance with Article 1.04 of this code<, file a suit in a
102-19 district court of Travis County to review the action. Such cases
102-20 shall be tried de novo in the district court and shall be governed
102-21 by the same rules of procedure and evidence as in other civil cases
102-22 in such courts. The court may enter an order setting aside or
102-23 affirming the action of the board>.
102-24 SECTION 4.03. Article 5.26(g), Insurance Code, is amended to
102-25 read as follows:
102-26 (g) The Board may call a public hearing on any application
102-27 for permission to file a deviation or a hearing on a permitted
103-1 deviation and shall call a hearing upon the request of any
103-2 aggrieved policyholder of the company filing the deviation made
103-3 within thirty (30) days after the granting or denying of any
103-4 deviation. The Board shall give reasonable notice of such hearings
103-5 and shall hear witnesses respecting such matters. Any applicant
103-6 dissatisfied with any order of the Board made without a hearing
103-7 under this Article may within thirty (30) days after entry of such
103-8 order make written request of the Board for a hearing thereon. The
103-9 Board shall hear such applicant within twenty (20) days after
103-10 receiving such request and shall give not less than ten (10) days
103-11 written notice of the time and place of the hearing. Within
103-12 fifteen (15) days after such hearing the Board shall affirm,
103-13 reverse or modify by order its previous action, specifying in such
103-14 order its reasons therefor. Any applicant who may be dissatisfied
103-15 with any order of the Board respecting its application may appeal
103-16 in accordance with Article 1.04 of this code. <to the District
103-17 Court of Travis County, Texas, and not elsewhere, by filing a
103-18 petition within thirty (30) days after the rendition or entry of
103-19 such order setting forth its grounds of objection thereto, in which
103-20 said action the appealing applicant shall be plaintiff and the
103-21 Board shall be defendant. The action shall not be limited to
103-22 questions of law and the substantial evidence rule shall not apply,
103-23 but such action shall be tried and determined upon a trial de novo
103-24 to the same extent as now provided in the case of an appeal from
103-25 the Justice Court to the County Court.> The judgment of the
103-26 District Court shall be appealable as in any other civil case.
103-27 Such action shall have precedence over other civil cases on the
104-1 dockets of the appellate courts. Should the Board terminate or
104-2 refuse to renew a permitted deviation or refuse permission for
104-3 filing of a deviation under subdivision (f) hereof, then such
104-4 deviation shall remain in effect during the course of any hearing
104-5 thereon and thirty (30) days thereafter, and during the course of
104-6 any appeal taken from such order and until final judgment of the
104-7 courts. <The Board shall not be required to give any appeal or
104-8 supersedeas bond in any cause arising hereunder. All hearings
104-9 before the Board and appeals to the District Courts under this
104-10 Article shall be governed exclusively by this Article.>
104-11 SECTION 4.04. Article 9.33, Insurance Code, is amended to
104-12 read as follows:
104-13 Art. 9.33. To Cancel License; Appeals by Companies. (a)
104-14 The terms and provisions of this Act are conditions upon which
104-15 corporations doing the business provided for in this Act may
104-16 continue to exist, and failure to comply with any of them or a
104-17 violation of any of the terms of this Act shall be proper cause for
104-18 revocation of the permit and forfeiture of charter of a domestic
104-19 corporation or the permit of a foreign corporation.
104-20 (b) Any company qualified or seeking to qualify under this
104-21 Act, feeling aggrieved by any action of the Board, especially, but
104-22 not limited to, any action against such company, shall have the
104-23 right to file a suit in the District Court of Travis County, within
104-24 thirty (30) days after the Board has made its order or ruling;
104-25 provided, however, that if the order or ruling is directed against
104-26 such company, whether or not directed against other companies, such
104-27 company shall have thirty (30) days after receipt of official
105-1 notice of such ruling from the Board to review such action of the
105-2 Board. Such cases shall be subject to the same standard of review
105-3 as other appeals under this code in accordance with Article 1.04 of
105-4 this code <tried de novo in such District Court in accordance with
105-5 the provisions of Article 21.44 of the Insurance Code and shall be
105-6 governed by the same rules of pleading, including rights of
105-7 amendments thereof, evidence, and procedure as are applicable to
105-8 other civil cases in the original jurisdiction of a District
105-9 Court>.
105-10 SECTION 4.05. Article 14.06, Insurance Code, is amended to
105-11 read as follows:
105-12 Art. 14.06. Refusal of Certificate or Permit. (a) No such
105-13 corporation shall continue to operate in this State if the Board
105-14 has notified it in writing of the refusal of the Board to issue it
105-15 a certificate and permit. But any such corporation may within
105-16 sixty (60) days after receiving such notice file a suit <in any
105-17 district court of Travis County, Texas,> to review the said action
105-18 of the Board in accordance with Article 1.04 of this code <and may
105-19 by trial de novo have all necessary relief both in law and equity
105-20 to enforce its rights under this chapter>.
105-21 (b) Nothing in this chapter shall be construed to validate
105-22 or otherwise sanction any unlawful act of any such corporation,
105-23 except when such unlawful act may have been construed to be
105-24 unlawful simply by reason of the fact that the law under which said
105-25 corporation was created has since been repealed or amended so as to
105-26 omit therefrom such corporations as are described in this chapter.
105-27 SECTION 4.06. Section 6(b), Article 21.21-2, Insurance Code,
106-1 is amended to read as follows:
106-2 (b) Any insurer affected by a ruling or order of the board
106-3 pursuant to the provisions of this Act may appeal same by filing
106-4 suit <in any of the district courts of Travis County, Texas,>
106-5 within 20 days from the date of the order of said board. Such
106-6 appeal shall be governed by Article 1.04 of this code <by trial de
106-7 novo>. Reasonable attorneys' fees shall be awarded the board if
106-8 judicial action is necessary for the enforcement of its orders.
106-9 SECTION 4.07. Section 7, Article 21.28-A, Insurance Code, is
106-10 amended to read as follows:
106-11 Sec. 7. Review and Stay of Action. During the period of
106-12 supervision and during the period of conservatorship, the insurance
106-13 company may request the Commissioner of Insurance or in his
106-14 absence, the duly appointed deputy for such purpose, to review an
106-15 action taken or proposed to be taken by the supervisor or
106-16 conservator, specifying wherein the action complained of is
106-17 believed not to be in the best interests of the insurance company,
106-18 and such request shall stay the action specified pending review of
106-19 such action by the Commissioner or his duly appointed deputy. Any
106-20 order entered by the Commissioner appointing a supervisor and
106-21 providing that the insurance company shall not do certain acts as
106-22 provided in Section 4 of this Article, any order entered by the
106-23 Commissioner appointing a conservator, and any order by the
106-24 Commissioner following the review of an action of the supervisor or
106-25 conservator as hereinabove provided may be appealed under Article
106-26 1.04 of this code <shall be immediately reviewed by the State Board
106-27 of Insurance upon the filing of an appeal by the insurance company.
107-1 The Board shall review the action complained of in a public hearing
107-2 and render its decision at the earliest possible date thereafter,
107-3 and the requirement of ten (10) days notice set out in Article
107-4 1.04(d) of this Code may be waived by the parties of record. The
107-5 Board may stay the effectiveness of any order of the Commissioner,
107-6 pending its review of such order. Such appeal shall have
107-7 precedence over all other business of a different nature pending
107-8 before the Board, and in the public hearing any and all evidence
107-9 and matters pertaining to the appeal may be submitted to the Board,
107-10 whether included in the appeal or not, and the Board shall make
107-11 such other rules and regulations with regard to such applications
107-12 and their consideration as it deems advisable. If such insurance
107-13 company be dissatisfied with any decision, regulation, order, rule,
107-14 act or administrative ruling adopted by the State Board of
107-15 Insurance, such dissatisfied insurance company after failing to get
107-16 relief from the State Board of Insurance, may initiate an action by
107-17 filing a petition setting forth the particular objection to such
107-18 decision, regulation, order, rule, act or administrative ruling, or
107-19 to either or all of them, in the District Court of Travis County,
107-20 Texas, and not elsewhere, against the State Board of Insurance as
107-21 defendant. Notwithstanding any other statute or rule of procedure,
107-22 the filing of a petition for the purpose of initiating such an
107-23 action with respect to this article does not stay or vacate the
107-24 decision, regulation, order, rule, act, or administrative ruling or
107-25 either or all of them unless the court that acquires jurisdiction,
107-26 after hearing and by order, specifically stays or vacates the
107-27 decision, regulation, order, rule, act, or administrative ruling
108-1 that is the subject of the action. The action shall not be limited
108-2 to questions of law and the substantial evidence rule shall not
108-3 apply, except as interpretation of the Constitution may require,
108-4 but such action shall be tried and determined upon a trial de novo
108-5 to the same extent as now provided for in the case of an appeal
108-6 from the Justice Court to the County Court>. Either party to said
108-7 action may appeal to the Appellate Court having jurisdiction of
108-8 said cause and said appeal shall be at once returnable to said
108-9 Appellate Court having jurisdiction of said cause and said action
108-10 so appealed shall have precedence in said Appellate Court over all
108-11 causes of a different character therein pending. <The Board shall
108-12 not be required to give any appeal bond in any cause arising
108-13 hereunder.>
108-14 SECTION 4.08. The change in law made by this article and
108-15 made by this Act to Article 9.07, Insurance Code, Article 9.37,
108-16 Insurance Code, Section 5, Article 9.44, Insurance Code, and
108-17 Section 8(e), Article 9.56, Insurance Code, that relate to the
108-18 standard for judicial review of a ruling, action, order, decision,
108-19 or other act of the commissioner of insurance or the state board of
108-20 insurance applies only to judicial review of a ruling, action,
108-21 order, decision, or other act made or committed on or after the
108-22 effective date of this Act. Judicial review of a ruling, action,
108-23 order, decision, or other act made or committed before the
108-24 effective date of this Act is governed by the law in effect
108-25 immediately before the effective date of this Act, and that law is
108-26 continued in effect for that purpose.
108-27 ARTICLE 5. ADMINISTRATIVE PENALTIES
109-1 SECTION 5.01. Chapter 1, Insurance Code, is amended by
109-2 adding Article 1.10E to read as follows:
109-3 Art. 1.10E. ADMINISTRATIVE PENALTIES
109-4 Sec. 1. DEFINITIONS. In this article:
109-5 (1) "Person" means an individual, corporation, trust,
109-6 partnership, association, or any other legal entity.
109-7 (2) "Administrative penalty" means any monetary
109-8 penalty which may be imposed under this article by the
109-9 commissioner.
109-10 Sec. 2. PENALTY AUTHORIZED. On written notification of a
109-11 specific violation, the commissioner may impose an administrative
109-12 penalty against a person licensed or regulated under this code or
109-13 another insurance law of this state who violates this code, another
109-14 insurance law of this state, or a rule or order adopted under this
109-15 code or another insurance law of this state.
109-16 Sec. 3. AMOUNT OF PENALTY. (a) The penalty for a violation
109-17 may be in an amount not to exceed $25,000, unless a greater or
109-18 lesser penalty is specified by a provision of this code or another
109-19 insurance law of this state.
109-20 (b) The amount of the penalty shall be based on:
109-21 (1) the seriousness of the violation, including the
109-22 nature, circumstances, extent, and gravity of any prohibited acts,
109-23 and the hazard or potential hazard created to the health, safety,
109-24 or economic welfare of the public;
109-25 (2) the economic harm to the public's interests or
109-26 confidences caused by the violation;
109-27 (3) the history of previous violations;
110-1 (4) the amount necessary to deter future violations;
110-2 (5) efforts to correct the violation;
110-3 (6) whether the violation was intentional or
110-4 unintentional; and
110-5 (7) any other matter that justice may require.
110-6 Sec. 4. PROCEDURES FOR ASSESSING PENALTY; HEARING. (a) If
110-7 the department determines that a violation has occurred, the
110-8 department may issue to the commissioner a report that states the
110-9 facts on which the determination is based and the department's
110-10 recommendation on the imposition of a penalty, including a
110-11 recommendation on the amount of the penalty.
110-12 (b) Within 14 days after the date the report is issued, the
110-13 department shall give written notice of the report to the person.
110-14 The notice may be given by certified mail. The notice must include
110-15 a brief summary of the alleged violation and a statement of the
110-16 amount of the recommended penalty and must inform the person that
110-17 the person has a right to a hearing on the occurrence of the
110-18 violation, the amount of the penalty, or both the occurrence of the
110-19 violation and the amount of the penalty.
110-20 (c) Within 20 days after the date the person receives the
110-21 notice, the person in writing may accept the determination and
110-22 recommended penalty of the department or may make a written request
110-23 for a hearing on the occurrence of the violation, the amount of the
110-24 penalty, or both the occurrence of the violation and the amount of
110-25 the penalty.
110-26 (d) If the person accepts the determination and recommended
110-27 penalty of the department, the commissioner by order shall approve
111-1 the determination and impose the recommended penalty.
111-2 (e) If the person requests a hearing or fails to respond
111-3 timely to the notice, the department shall set a hearing and give
111-4 notice of the hearing to the person. The hearing shall be held by
111-5 an administrative law judge of the State Office of Administrative
111-6 Hearings. The administrative law judge shall make findings of fact
111-7 and conclusions of law and promptly issue to the commissioner a
111-8 proposal for a decision about the occurrence of the violation and
111-9 the amount of a proposed penalty. Based on the findings of fact,
111-10 conclusions of law, and proposal for decision, the commissioner by
111-11 order may find that a violation has occurred and impose a penalty
111-12 or may find that no violation occurred.
111-13 (f) The notice of the commissioner's order given to the
111-14 person under the Administrative Procedure and Texas Register Act
111-15 (Article 6252-13a, Vernon's Texas Civil Statutes) and its
111-16 subsequent amendments must include a statement of the right of the
111-17 person to judicial review of the order.
111-18 (g) Within 30 days after the date the commissioner's order
111-19 is final as provided by Section 16(c), Administrative Procedure and
111-20 Texas Register Act (Article 6252-13a, Vernon's Texas Civil
111-21 Statutes), and its subsequent amendments, the person shall:
111-22 (1) pay the amount of the penalty;
111-23 (2) pay the amount of the penalty and file a petition
111-24 for judicial review contesting the occurrence of the violation, the
111-25 amount of the penalty, or both; or
111-26 (3) without paying the amount of the penalty, file a
111-27 petition for judicial review contesting the occurrence of the
112-1 violation, the amount of the penalty, or both the occurrence of the
112-2 violation and the amount of the penalty.
112-3 (h) Within the 30-day period, a person who acts under
112-4 Subsection (g)(3) of this section may:
112-5 (1) stay enforcement of the penalty by:
112-6 (A) paying the amount of the penalty to the
112-7 court for placement in an escrow account; or
112-8 (B) giving the court a supersedeas bond that is
112-9 approved by the court for the amount of the penalty and that is
112-10 effective until all judicial review of the board's order is final;
112-11 or
112-12 (2) request the court to stay enforcement of the
112-13 penalty by:
112-14 (A) filing with the court a sworn affidavit of
112-15 the person stating that the person is financially unable to pay the
112-16 amount of the penalty and is financially unable to give the
112-17 supersedeas bond; and
112-18 (B) giving a copy of the affidavit to the
112-19 commissioner by certified mail.
112-20 (i) If the commissioner receives a copy of an affidavit
112-21 under Subsection (h)(2) of this section, the commissioner may file
112-22 with the court, within five days after the date the copy is
112-23 received, a contest to the affidavit. The court shall hold a
112-24 hearing on the facts alleged in the affidavit as soon as
112-25 practicable and shall stay the enforcement of the penalty on
112-26 finding that the alleged facts are true. The person who files an
112-27 affidavit has the burden of proving that the person is financially
113-1 unable to pay the amount of the penalty and to give a supersedeas
113-2 bond.
113-3 (j) If the person does not pay the amount of the penalty and
113-4 the enforcement of the penalty is not stayed, the commissioner may
113-5 refer the matter to the attorney general for collection of the
113-6 amount of the penalty.
113-7 Sec. 5. JUDICIAL REVIEW. (a) Judicial review of the order
113-8 of the commissioner:
113-9 (1) is instituted by filing a petition as provided by
113-10 Section 19, Administrative Procedure and Texas Register Act
113-11 (Article 6252-13a, Vernon's Texas Civil Statutes); and
113-12 (2) is under the substantial evidence rule.
113-13 (b) If the court sustains the occurrence of the violation,
113-14 the court may uphold or reduce the amount of the penalty and order
113-15 the person to pay the full or reduced amount of the penalty. If
113-16 the court does not sustain the occurrence of the violation, the
113-17 court shall order that no penalty is owed.
113-18 (c) When the judgment of the court becomes final, the court
113-19 shall proceed under this subsection. If the person paid the amount
113-20 of the penalty and if that amount is reduced or is not upheld by
113-21 the court, the court shall order that the appropriate amount plus
113-22 accrued interest be remitted to the person. The rate of the
113-23 interest is the rate charged on loans to depository institutions by
113-24 the New York Federal Reserve Bank, and the interest shall be paid
113-25 for the period beginning on the date the penalty was paid and
113-26 ending on the date the penalty is remitted. If the person gave a
113-27 supersedeas bond and if the amount of the penalty is not upheld by
114-1 the court, the court shall order the release of the bond. If the
114-2 person gave a supersedeas bond and if the amount of the penalty is
114-3 reduced, the court shall order the release of the bond after the
114-4 person pays the amount.
114-5 Sec. 6. DEPOSIT TO GENERAL REVENUE FUND. A penalty
114-6 collected under this section shall be remitted to the comptroller
114-7 for deposit in the general revenue fund.
114-8 Sec. 7. APPLICATION OF ADMINISTRATIVE PROCEDURE AND TEXAS
114-9 REGISTER ACT. All proceedings under this section are subject to
114-10 the Administrative Procedure and Texas Register Act (Article
114-11 6252-13a, Vernon's Texas Civil Statutes) and its subsequent
114-12 amendments.
114-13 Sec. 8. APPLICATION TO OTHER LAWS. This article applies to
114-14 any monetary penalty imposed by the department or commissioner
114-15 under this code or another insurance law of this state.
114-16 SECTION 5.02. Section 17A, Article 1.14-2, Insurance Code,
114-17 is amended to read as follows:
114-18 Sec. 17A. Administrative penalty. <(a)> If a surplus lines
114-19 agent violates Section 8 of this article or a rule, regulation, or
114-20 order adopted under that provision, the State Board of Insurance
114-21 may assess an administrative <a> penalty against that agent as
114-22 provided by Article 1.10E of this code <Section 7, Article 1.10, of
114-23 this code.>
114-24 <(b) In determining the amount of the penalty, the State
114-25 Board of Insurance shall consider:>
114-26 <(1) the nature, circumstances, extent, and gravity of
114-27 the violation;>
115-1 <(2) any economic benefit gained through the
115-2 violation;>
115-3 <(3) the amount necessary to deter future violations;
115-4 and>
115-5 <(4) any other matters that justice may require>.
115-6 SECTION 5.03. Section 19, Managing General Agents' Licensing
115-7 Act (Article 21.07-3, Vernon's Texas Insurance Code), is amended to
115-8 read as follows:
115-9 Sec. 19. Violations of act. Any person, firm, or
115-10 corporation who violates any of the provisions of this Act or any
115-11 rule, regulation, or order adopted under this Act shall be subject
115-12 to sanctions under Section 7, Article 1.10, Insurance Code. <In
115-13 determining the amount of any penalty, the State Board of Insurance
115-14 shall consider:>
115-15 <(1) the nature, circumstances, extent, and gravity of
115-16 the violation;>
115-17 <(2) any economic benefit gained through the
115-18 violation;>
115-19 <(3) the amount necessary to deter future violations;
115-20 and>
115-21 <(4) any other matters that justice may require.>
115-22 SECTION 5.04. Article 21.11-1, Insurance Code, is amended by
115-23 amending Section 6 and adding Section 7 to read as follows:
115-24 Sec. 6. If it is found, after notice and an opportunity to
115-25 be heard as determined by the board, that an insurance company has
115-26 violated this article, the insurance company shall be subject to an
115-27 administrative <a civil> penalty under Article 1.10E of this code
116-1 of not less than $1,000 nor more than $10,000<, and it shall be
116-2 subject to a civil suit by the agent for damages suffered because
116-3 of the premature termination of the contract by the company>.
116-4 Sec. 7. Any agent who has sustained actual damages as a
116-5 result of a company's violation of this article may maintain an
116-6 action against the company, without regard to whether or not there
116-7 has been a finding by the board that there has been a violation of
116-8 this article.
116-9 SECTION 5.05. Sections 7(c) and (d), Article 21.21,
116-10 Insurance Code, are amended to read as follows:
116-11 (c) Any person who violates the terms of a cease and desist
116-12 order under this section is subject to an administrative penalty
116-13 under Article 1.10E of this code. An administrative penalty
116-14 assessed under this subsection may not exceed $1,000 for each
116-15 violation and a total of $5,000 for all violations <shall be given
116-16 notice to appear and show cause, at a hearing to be held in
116-17 conformity with Section 6 of this Article, why he should not
116-18 forfeit and pay to the state a civil penalty of not more than
116-19 $1,000 per violation and not to exceed a total of $5,000>. In
116-20 determining whether or not a cease and desist order has been
116-21 violated, the Board shall take into consideration the maintenance
116-22 of procedures reasonably adapted to insure compliance with the
116-23 order.
116-24 (d) An order of the Board awarding an administrative penalty
116-25 <civil penalties> under Subsection (c) of this section applies only
116-26 to violations of this order incurred prior to the awarding of the
116-27 penalty order.
117-1 SECTION 5.06. Section 5(k), Article 21.49-1, Insurance Code,
117-2 is amended to read as follows:
117-3 (k) Additional Violations. Each director or officer of an
117-4 insurance company subject to this article, or of an insurance
117-5 holding company system subject to this article, who knowingly and
117-6 wilfully violates, participates in, or assents to or who knowingly
117-7 and wilfully permits any of the officers, agents, or employees of
117-8 the insurer or holding company system to engage in transactions or
117-9 make investments that have not been properly reported or submitted
117-10 under this article or that knowingly and wilfully violate this
117-11 article is subject to an administrative penalty under Article 1.10E
117-12 of this code<, shall pay, in the person's individual capacity, a
117-13 civil penalty> of not more than $10,000 for each violation<, after
117-14 notice and an opportunity for hearing before the commissioner. In
117-15 determining the amount of the civil penalty, the commissioner shall
117-16 consider the appropriateness of the penalty with respect to the
117-17 gravity of the violation, the history of previous violations, and
117-18 any other matters that justice requires>.
117-19 SECTION 5.07. Section 17(a), Article 21.49-3b, Insurance
117-20 Code, is amended to read as follows:
117-21 (a) An association that violates this article or any rule or
117-22 order adopted under this article is subject to sanctions under
117-23 Section 7, Article 1.10 of this code. <In determining the amount
117-24 of any penalty, the board shall consider:>
117-25 <(1) the nature, circumstances, extent, and gravity of
117-26 the violation;>
117-27 <(2) any economic benefit gained through the
118-1 violation;>
118-2 <(3) the amount necessary to deter future violations;
118-3 and>
118-4 <(4) any other matters that justice may require.>
118-5 SECTION 5.08. This article applies only to the assessment of
118-6 an administrative penalty on or after September 1, 1993.
118-7 Assessment of an administrative penalty before September 1, 1993,
118-8 is governed by the law in effect immediately before the effective
118-9 date of this Act, and that law is continued in effect for this
118-10 purpose.
118-11 ARTICLE 6. RATE AND POLICY FORM REGULATION
118-12 SECTION 6.01. Chapter 5, Insurance Code, is amended by
118-13 adding Subchapter N to read as follows:
118-14 SUBCHAPTER N. STREAMLINED PROCEDURES FOR RATEMAKING
118-15 Art. 5.121. STUDY AND IMPLEMENTATION. The department shall
118-16 study and the commissioner may adopt and implement procedures for
118-17 streamlining insurance rate proceedings under this chapter, this
118-18 code, and other insurance laws of this state. The procedures must
118-19 ensure due process to all affected parties.
118-20 SECTION 6.02. Chapter 1, Insurance Code, is amended by
118-21 adding Article 1.50 to read as follows:
118-22 Art. 1.50. SELECT COMMITTEE ON RATE AND POLICY FORM
118-23 REGULATION
118-24 Sec. 1. DEFINITION. In this article, "committee" means the
118-25 select committee on rate and policy form regulation established
118-26 under this article.
118-27 Sec. 2. COMPOSITION OF COMMITTEE. (a) The select committee
119-1 on rate and policy form regulation is composed of:
119-2 (1) three members, appointed by the governor;
119-3 (2) three members of the senate, appointed by the
119-4 lieutenant governor; and
119-5 (3) three members of the house of representatives,
119-6 appointed by the speaker of the house of representatives.
119-7 (b) The governor shall designate a member of the committee
119-8 to serve as presiding officer of the committee.
119-9 Sec. 3. PURPOSE; DUTIES; MEETINGS. (a) The committee shall
119-10 study insurance rate and policy form regulation in this state. The
119-11 committee shall assess:
119-12 (1) the effects of changes made by the 72nd
119-13 Legislature in insurance regulation to identify whether the purpose
119-14 of the department should be further changed from insurance rate and
119-15 policy form regulation and directed to:
119-16 (A) regulation of the financial conditions of
119-17 companies and market conduct; and
119-18 (B) provision of consumer services;
119-19 (2) the degree of competition in the insurance
119-20 industry in this state; and
119-21 (3) the availability of motor vehicle insurance, the
119-22 number of uninsured drivers, and the number of drivers insured
119-23 through the Texas Automobile Insurance Plan Association, on a
119-24 geographic area basis, to assess if certain geographic areas of the
119-25 state are underserved.
119-26 (b) The committee shall meet monthly or as needed to carry
119-27 out its duties under this section.
120-1 (c) The committee may appoint subcommittees, task groups, or
120-2 advisory groups to assist it in its work. Members of these groups
120-3 are not required to be members of the committee.
120-4 Sec. 4. REPORT. (a) Not later than December 1, 1994, the
120-5 committee shall issue a report of its findings. The committee
120-6 shall file copies of the report with the Legislative Reference
120-7 Library, the governor's office, the secretary of the senate, the
120-8 chief clerk of the house of representatives, the department, and
120-9 the office of public insurance counsel. The department shall make
120-10 copies of the report available to the public at cost.
120-11 (b) The report shall include recommended rule or statutory
120-12 changes to implement the committee's recommendations.
120-13 Sec. 5. STAFF. On request of the committee, the Texas
120-14 Legislative Council, governor's office, senate, and house of
120-15 representatives shall provide staff as necessary to carry out the
120-16 duties of the committee.
120-17 Sec. 6. WITNESSES; PROCESS. The committee may issue a
120-18 subpoena or other process to a witness at any place in this state,
120-19 compel the attendance of the witness, and compel the production of
120-20 a book, record, document, or instrument that the committee
120-21 requires. If necessary to obtain compliance with a subpoena or
120-22 other process, the committee may issue a writ of attachment. A
120-23 subpoena or other process issued by the committee may be addressed
120-24 to and served by any peace officer of this state or a political
120-25 subdivision of this state. The presiding officer shall issue, in
120-26 the name of the committee, a subpoena or other process as the
120-27 committee directs. If the presiding officer is absent, the
121-1 assistant presiding officer or a designee of the presiding officer
121-2 may issue a subpoena or other process in the same manner as the
121-3 presiding officer. A witness attending proceedings of the
121-4 committee under process is entitled to the same mileage and per
121-5 diem payments as a witness before a grand jury in this state. The
121-6 testimony given at any hearing conducted under this article shall
121-7 be given under oath subject to the penalties of perjury.
121-8 Sec. 7. COOPERATION OF OTHER AGENCIES. If necessary to the
121-9 discharge of its duties, the committee may request the assistance
121-10 of a state agency, department, or office. The agency, department,
121-11 or office shall provide the requested assistance.
121-12 Sec. 8. EXPENSES. The operating expenses of the committee
121-13 shall be paid from available funds of the Texas Department of
121-14 Insurance operating fund. A member of the committee appointed
121-15 under Section 2(a)(1) of this article is entitled to reimbursement
121-16 from those funds for expenses incurred in carrying out official
121-17 duties as a member of the committee at the rate specified in the
121-18 General Appropriations Act. Other members of the committee are not
121-19 entitled to reimbursement for their expenses.
121-20 Sec. 9. PROGRESS REPORT. Not later than December 1, 1996,
121-21 the department shall issue a report on the department's progress in
121-22 implementing recommendations for rule changes made by the committee
121-23 and in implementing any changes in law made by the 74th Legislature
121-24 in response to the recommendations of the committee.
121-25 Sec. 10. COMMITTEE ABOLISHED; EXPIRATION OF ARTICLE. (a)
121-26 The committee is abolished on December 31, 1994.
121-27 (b) This article expires January 1, 1997.
122-1 SECTION 6.03. Chapter 3, Insurance Code, is amended by
122-2 adding Subchapter H to read as follows:
122-3 SUBCHAPTER H. RATE REPORTING
122-4 Art. 3.90. HEALTH INSURER REPORTING. (a) This article
122-5 applies to any insurance company, group hospital service
122-6 corporation, or health maintenance organization that issues:
122-7 (1) an individual, group, blanket, or franchise
122-8 insurance policy, or an insurance agreement, a group hospital
122-9 service contract, or an evidence of coverage, that provides
122-10 benefits for medical or surgical expenses incurred as a result of
122-11 an accident or sickness; or
122-12 (2) a long-term care insurance policy, as that term is
122-13 defined by Section 2, Article 3.70-12, of this code and its
122-14 subsequent amendments.
122-15 (b) Each insurer subject to this article shall submit to the
122-16 department information required by the department relating to the
122-17 insurer's loss experience, overhead, and operating expenses. The
122-18 department may also request information about characteristics of
122-19 persons insured by the insurer, including information on age,
122-20 gender, health status, job classifications, and geographic
122-21 distribution.
122-22 (c) The commissioner shall adopt rules governing the
122-23 submission of information under this article. The rules may not
122-24 require an insurer to submit the information more than annually.
122-25 SECTION 6.04. Section 3(c), Article 5.101, Insurance Code,
122-26 is amended to read as follows:
122-27 (c) Each initial flexibility band is based on a benchmark
123-1 rate promulgated by the board. On or before January 1, 1992, and
123-2 annually thereafter, the board shall conduct hearings to determine
123-3 the benchmark rates and flexibility bands by line. The
123-4 determination of the rate shall not include disallowed expenses
123-5 under Subsection (h) of this section. An insurer, the public
123-6 insurance counsel, and any other interested person may present
123-7 testimony at the hearing and may file information for consideration
123-8 by the board. An advisory organization which collects ratemaking
123-9 data shall not be a party to the hearing. A trade association that
123-10 does not collect historical data and that does not provide
123-11 statistical plans, prospective loss costs, or supplementary rating
123-12 information to its members may, on behalf of its members that are
123-13 small or medium-sized insurers, as defined by the commissioner,
123-14 present rate making data and make recommendations to the board at
123-15 the hearing. There is no immunity from antitrust liability for a
123-16 trade association that presents rate making data or makes
123-17 recommendations to the board at the hearing. The definition of
123-18 "small and medium-sized insurers" shall be a limitation upon the
123-19 scope of the presentation to be made by a trade association, but
123-20 may not limit the participation of a trade association because its
123-21 membership includes other sized insurers. An insurer shall use
123-22 that benchmark rate and the flexibility band to develop rates used
123-23 for the line for the year following the setting of the benchmark
123-24 rate and the flexibility band.
123-25 SECTION 6.05. Article 1.09-5(c), Insurance Code, is amended
123-26 to read as follows:
123-27 (c) An employee of the department may appear before the
124-1 board or its designated hearings officer only as follows:
124-2 (1) a member of the department's legal staff may
124-3 assist the board or its designated hearings officer in the
124-4 prehearing process and in aligning parties to board proceedings;
124-5 (2) one or more employees of the department may appear
124-6 as a party, present evidence, and question witnesses in a
124-7 proceeding in which the public counsel under Section 5(b)(1),
124-8 Article 1.35A<(h)(1)> of this code is not authorized by law to
124-9 appear;
124-10 (3) an employee responsible for collecting and
124-11 compiling rate data may appear and present evidence relating to the
124-12 validity of the compiled data and a licensed attorney employed as
124-13 part of the legal staff of the department may assist such employee
124-14 in making the presentation;
124-15 (4) one or more employees of the department may
124-16 present evidence in any rate filing case under Article 5.13-2,
124-17 5.15, 5.55, or 5.81 of this code;
124-18 (5) <(4)> the general counsel or an assistant general
124-19 counsel may assist the board in any proceeding in which insurance
124-20 rates are set; and
124-21 (6) <(5)> the general counsel or an assistant general
124-22 counsel may be designated by the board and may serve as a hearings
124-23 officer in any proceeding in which insurance rates are set or any
124-24 prehearing proceeding provided that any final decision relating to
124-25 rates to be set must be set by the board.
124-26 SECTION 6.06. Article 3.42, Insurance Code, is amended by
124-27 adding Section (k) to read as follows:
125-1 (k) The department shall develop and implement rules to
125-2 improve procedures for approval of policy forms under this article.
125-3 SECTION 6.07. Sections 1 and 2, Article 5.13-2, Insurance
125-4 Code, are amended to read as follows:
125-5 Sec. 1. Purpose<; expiration date>. (a) This article
125-6 governs the regulation of general liability, <lines and> commercial
125-7 property, all commercial casualty, and medical professional
125-8 liability insurance rates and forms. It does not govern
125-9 automobile, <lines insurance rates and forms, other than> fidelity,
125-10 surety, or guaranty bonds. The purposes of this article are to:
125-11 (1) promote the public welfare by regulating insurance
125-12 rates to prohibit excessive, inadequate, or unfairly discriminatory
125-13 rates;
125-14 (2) promote availability of insurance;
125-15 (3) promote price competition among insurers to
125-16 provide rates and premiums that are responsive to competitive
125-17 market conditions;
125-18 (4) prohibit price-fixing agreements and other
125-19 anticompetitive behavior by insurers;
125-20 (5) regulate the insurance forms used for lines of
125-21 insurance subject to this article to ensure that they are not
125-22 unjust, unfair, inequitable, misleading, or deceptive; and
125-23 (6) provide regulatory procedures for the maintenance
125-24 of appropriate information reporting systems.
125-25 (b) This article expires December 31, 1995.
125-26 Sec. 2. SCOPE. This article applies to all lines of general
125-27 liability, <or> commercial property, all commercial casualty, and
126-1 medical professional liability insurance written under policies or
126-2 contracts of insurance issued by a licensed insurer, other than a
126-3 fidelity, surety, or guaranty bond or an automobile insurance
126-4 policy.
126-5 SECTION 6.08. Sections 3(5) and (6), Article 5.13-2,
126-6 Insurance Code, are amended to read as follows:
126-7 (5) "Supplementary rating information" means any
126-8 manual, rating schedule, plan of rules, rating rules,
126-9 classification systems, territory codes and descriptions, rating
126-10 plans, and other similar information used by the insurer <required
126-11 by the board> to determine the applicable premium for an insured.
126-12 The term includes factors and relativities, such as increased
126-13 limits factors, classification relativities, deductible
126-14 relativities, premium discount, and <or> other similar factors and
126-15 rating plans such as experience, schedule, and retrospective
126-16 rating.
126-17 (6) "Supporting information" means:
126-18 (A) the experience and judgment of the filer and
126-19 the experience or information of other insurers or advisory
126-20 organizations relied on by the filer;
126-21 (B) the interpretation of any other information
126-22 relied on by the filer;
126-23 (C) descriptions of methods used in making the
126-24 rates; and
126-25 (D) any other information required by the
126-26 department <board> to be filed.
126-27 SECTION 6.09. Sections 5, 7, 8, and 9, Article 5.13-2,
127-1 Insurance Code, are amended to read as follows:
127-2 Sec. 5. Rate filings; legislative report. (a) Each insurer
127-3 shall file with the commissioner <board> all rates, supplementary
127-4 rating information, and reasonable and pertinent supporting
127-5 information for risks written in this state.
127-6 (b) If the commissioner <board> determines after a hearing
127-7 that an insurer's rates require supervision because of the
127-8 insurer's financial condition or the insurer's rating practices,
127-9 the commissioner <board> may require the insurer to file with the
127-10 commissioner <board> all rates, supplementary rate information, and
127-11 any supporting information prescribed by the commissioner <board>.
127-12 (c) An insured that is aggrieved with respect to any filing
127-13 in effect, or the public insurance counsel, may make a written
127-14 application to the commissioner <board> for a hearing on the
127-15 filing. The application must specify the grounds on which the
127-16 applicant bases the grievance. If the commissioner <board> finds
127-17 that the application is made in good faith, that the applicant
127-18 would be so aggrieved if the grounds in the application are
127-19 established, and that those grounds otherwise justify holding the
127-20 hearing, the commissioner <board> shall hold a hearing not later
127-21 than the 30th day after the date of receipt of the application.
127-22 The commissioner <board> must give at least 10 days' written notice
127-23 to the applicant and to each insurer that made the filing in
127-24 question.
127-25 (d) If, after the hearing, the commissioner <board> finds
127-26 that the filing does not meet the requirements of this article, the
127-27 commissioner <board> shall issue an order specifying how the filing
128-1 fails to meet the requirements of this article and stating the date
128-2 on which, within a reasonable period after the order date, the
128-3 filing is no longer in effect. The commissioner <board> shall send
128-4 copies of the order to the applicant and to each affected insurer.
128-5 (e) The commissioner <board> shall require each insurer
128-6 subject to this article to file information with the commissioner
128-7 <board> on a quarterly basis. Each insurer shall provide the
128-8 commissioner <board> with information relating to changes in
128-9 losses, premiums, and market share since January 1, 1993. The
128-10 commissioner <board> shall report to the governor, lieutenant
128-11 governor, and speaker of the house of representatives on a
128-12 quarterly basis, relating to the information provided by the
128-13 insurers' reports and to market conduct, especially consumer
128-14 complaints.
128-15 Sec. 7. Disapproval. (a) The commissioner <board> shall
128-16 disapprove a rate if the commissioner <board> determines that the
128-17 rate filing made under this article does not meet the standards
128-18 established under that section.
128-19 (b) If the commissioner <board> disapproves a filing, the
128-20 commissioner <board> shall issue an order specifying in what
128-21 respects the filing fails to meet the requirements of this article.
128-22 The filer is entitled to a hearing on written request made to the
128-23 commissioner <board> not later than the 30th day after the
128-24 effective date of the disapproval order.
128-25 (c) If the commissioner <board> disapproves a rate that is
128-26 in effect, the commissioner <board> may issue a disapproval order
128-27 only after a hearing held after at least 20 days' written notice to
129-1 the insurer that made the filing. The disapproval order must be
129-2 issued not later than the 15th day after the close of the hearing
129-3 and must specify how the rate fails to meet the requirements of
129-4 this article. The disapproval order must state the date on which
129-5 the further use of that rate is prohibited. The commissioner
129-6 <board> shall set the date not earlier than the 45th day after the
129-7 date on which the hearing closes.
129-8 Sec. 8. Forms. (a) An insurance policy or printed
129-9 endorsement form for use in writing the types of insurance subject
129-10 to this article may not be delivered or issued for delivery in this
129-11 state unless the form has been filed with and approved by the
129-12 commissioner <board>.
129-13 (b) Each filing shall be made not later than the 60th day
129-14 before the date of any use or delivery for use. At the expiration
129-15 of the 60-day period a filed form is approved unless, before the
129-16 expiration of the 60 days, the commissioner <board> approves or
129-17 disapproves the form by order. Approval of a form by the
129-18 commissioner <board> constitutes a waiver of any unexpired portion
129-19 of the 60-day period. The commissioner <board> may extend by not
129-20 more than an additional 10 <60> days the period during which it may
129-21 approve or disapprove a form by giving notice to the filer of the
129-22 extension before the expiration of the initial period. At the
129-23 expiration of any extension and in the absence of any earlier
129-24 approval or disapproval, the form shall be considered approved.
129-25 For good cause shown, the commissioner <board> may withdraw the
129-26 commissioner's <its> approval at any time after notice and a
129-27 hearing.
130-1 (c) A commissioner's <An> order <of the board> disapproving
130-2 any form or any notice of the commissioner's <board's> intention to
130-3 withdraw a previous approval must state the grounds for the
130-4 disapproval in enough detail to reasonably inform the filer of the
130-5 grounds. An order of withdrawal of a previously approved form
130-6 takes effect on the expiration of the prescribed period, but not
130-7 sooner than the 30th day after the effective date of the withdrawal
130-8 order, as prescribed by the commissioner <board>.
130-9 (d) An insurer may not use in this state any form after
130-10 disapproval of the form or withdrawal of approval by the
130-11 commissioner <board>.
130-12 (e) The commissioner <board> may promulgate standard
130-13 insurance policy forms, endorsements, and other related forms that
130-14 may be used, at the discretion of the insurer, by an insurer
130-15 instead of the insurer's own forms in writing insurance subject to
130-16 this article. Forms submitted by insurers for approval under this
130-17 section must provide coverage equivalent to that provided in the
130-18 policy forms used for these lines of coverage on the effective date
130-19 of this article. An endorsement may not reduce coverage provided
130-20 under the approved policy form.
130-21 (f) Policy forms for use with large risks are exempt from
130-22 the requirements of Subsections (a), (b), and (e) of this section.
130-23 For purposes of this subsection, "large risk" means:
130-24 (1) an insured that has total insured property values
130-25 of $10 million or more;
130-26 (2) an insured that has total annual gross revenues of
130-27 $20 million or more; or
131-1 (3) an insured that has a total premium of $50,000 or
131-2 more for property insurance, $50,000 or more for general liability
131-3 insurance, or $100,000 or more for multiperil insurance.
131-4 Sec. 9. COMMISSIONER <BOARD> AUTHORITY. If the commissioner
131-5 <board> determines at any time that the implementation of this
131-6 article or any part thereof is contrary to the public interest and
131-7 has resulted in or may result in imminent peril to the insurance
131-8 consumers of this state, the commissioner <board> may issue an
131-9 order stating the harm to the public and shall thereafter rely upon
131-10 Subchapters A-L of this chapter, or parts thereof, in the
131-11 regulation of property and casualty insurance.
131-12 SECTION 6.10. Article 5.15(h), Insurance Code, is amended to
131-13 read as follows:
131-14 (h) Notwithstanding Subsections (a)-(g) of this article, <on
131-15 and after October 1, 1991,> rates for general liability, <and>
131-16 commercial property, and all commercial casualty insurance coverage
131-17 under this article are determined, and hearings related to those
131-18 rates are conducted, as provided by Article 5.13-2 of this code.
131-19 This subsection expires December 31, 1995.
131-20 SECTION 6.11. Section 4(a), Article 5.15-1, Insurance Code,
131-21 is amended to read as follows:
131-22 (a) The provisions of Article 5.13-2 of this code <5.15,
131-23 Insurance Code,> shall apply to the filing of rates and rating
131-24 information required under this article.
131-25 SECTION 6.12. Section 4A, Article 5.15-1, Insurance Code, is
131-26 repealed.
131-27 SECTION 6.13. Section 1, Article 3.50, Insurance Code, is
132-1 amended to read as follows:
132-2 Sec. 1. Definitions. No policy of group life insurance
132-3 shall be delivered in this state unless it conforms to one of the
132-4 following descriptions:
132-5 (1) A policy issued to an employer, or to the trustees
132-6 of a fund established by an employer, which employer or trustees
132-7 shall be deemed the policyholder, to insure employees of the
132-8 employer for the benefit of persons other than the employer,
132-9 subject to the following requirements:
132-10 (a) The employees eligible for insurance under
132-11 the policy shall be all of the employees of the employer, or all of
132-12 any class or classes thereof determined by conditions pertaining to
132-13 their employment. The policy may provide that the term "employees"
132-14 shall include the employees of one or more subsidiary corporations,
132-15 and the employees, individual proprietors, and partners of one or
132-16 more affiliated corporations, proprietors or partnerships if the
132-17 business of the employer and of such affiliated corporations,
132-18 proprietors or partnerships is under common control through stock
132-19 ownership, contract, or otherwise. The policy may provide that the
132-20 term "employees" shall include the individual proprietor or
132-21 partners if the employer is an individual proprietor or a
132-22 partnership. The policy may provide that the term "employees"
132-23 shall include retired employees.
132-24 (b) The premium for the policy shall be paid by
132-25 the policyholder, either wholly from the employer's fund or funds
132-26 contributed by him, or partly from such funds and partly from funds
132-27 contributed by the insured employees. No policy may be issued on
133-1 which the entire premium is to be derived from funds contributed by
133-2 the insured employees. A policy on which part of the premium is to
133-3 be derived from funds contributed by the insured employees may be
133-4 placed in force only if at least seventy-five percent (75%) of the
133-5 then eligible employees, excluding any as to whom evidence of
133-6 individual insurability is not satisfactory to the insurer, elect
133-7 to make the required contributions. A policy on which no part of
133-8 the premium is to be derived from funds contributed by the insured
133-9 employees must insure all eligible employees, or all except any as
133-10 to whom evidence of individual insurability is not satisfactory to
133-11 the insurer.
133-12 (c) The policy must cover at least ten (10)
133-13 employees at date of issue.
133-14 (d) The amounts of insurance under the policy
133-15 must be based upon some plan precluding individual selection either
133-16 by the employees or by the employer or trustees. No policy may be
133-17 issued which provides insurance on any employee which together with
133-18 any other insurance under any group life insurance policies issued
133-19 to the employer or to the trustees of a fund established by the
133-20 employer exceeds One Hundred Thousand Dollars ($100,000.00), unless
133-21 four hundred percent (400%) of the annual compensation of such
133-22 employee from his employer or employers exceeds One Hundred
133-23 Thousand Dollars ($100,000.00), in which event all such term
133-24 insurance shall not exceed four hundred percent (400%) of such
133-25 annual compensation, except that this limitation shall not apply to
133-26 group insurance on other than the term plan where such insurance is
133-27 to be used to fund the benefits under a pension or profit sharing
134-1 plan and the amount of such insurance does not exceed that required
134-2 to provide at normal retirement date the pension specified by the
134-3 plan, and except that a group policy which is issued by the same or
134-4 another carrier to replace another group policy may provide term
134-5 insurance not to exceed the amounts provided by the policy which it
134-6 replaces, or the amounts provided above, whichever are greater.
134-7 (2) A policy issued to a labor union, which shall be
134-8 deemed the employer and policyholder, to insure the members of such
134-9 union who are actively engaged in the same occupation and who shall
134-10 be deemed to be the employees of such union within the meaning of
134-11 this Article.
134-12 (3) A policy issued to any association of employees of
134-13 the United States Government or any subdivision thereof, provided
134-14 the majority of the members of such association are residents of
134-15 this state, an association of public employees, an incorporated
134-16 city, town or village, an independent school district, common
134-17 school district, state colleges or universities, any association of
134-18 state employees, any association of state, county and city, town or
134-19 village employees, and any association of any combination of state,
134-20 county or city, town or village employees and any department of the
134-21 state government which employer or association shall be deemed the
134-22 policyholder to insure the employees of any such incorporated city,
134-23 town or village, of any such independent school district, of any
134-24 common school district, of any such state college or university, of
134-25 any such department of the state government, members of any
134-26 association of state, county or city, town or village or of the
134-27 United States Government or any subdivision thereof, provided the
135-1 majority of such employees reside in this state, employees for the
135-2 benefit of persons other than the policyholder subject to the
135-3 following requirements:
135-4 (a) The persons eligible for insurance under the
135-5 policy shall be all of the employees of the employer or if the
135-6 policyholder is an association, all of the members of the
135-7 association.
135-8 (b) The premium for a policy issued to any
135-9 policyholder authorized to be such policyholder under Subsection
135-10 (3) of Section 1, Article 3.50, Texas Insurance Code, may be paid
135-11 in whole or in part from funds contributed by the employer, or in
135-12 whole or in part from funds contributed by the persons insured
135-13 under said policy; or in whole or in part from funds contributed by
135-14 the insured employees who are members of such association of
135-15 employees; provided, however, that any monies or credits received
135-16 by or allowed to the policyholder pursuant to any participation
135-17 agreement contained in or issued in connection with the policy
135-18 shall be applied to the payment of future premiums and to the pro
135-19 rata abatement of the insured employees' contribution therefor; and
135-20 provided further, that the employer may deduct from the employees'
135-21 salaries the employees' contributions for the premiums when
135-22 authorized in writing by the respective employees so to do. Such
135-23 policy may be placed in force only if at least 75% of the eligible
135-24 employees or if an association of employees is the policyholder,
135-25 75% of the eligible members of said association, excluding any as
135-26 to whom evidence of individual insurability is not satisfactory to
135-27 the insurer, elect to make the required premium contributions and
136-1 become insured thereunder. Any group policies heretofore issued
136-2 to any of the groups named in Section 1(3) above and in existence
136-3 on the effective date of this Act shall continue in force even
136-4 though the number of employees or members insured thereunder is
136-5 less than 75% of the eligible employees or members on the effective
136-6 date of this Act.
136-7 (c) The policy must cover at least ten (10)
136-8 employees at date of issue, or if an association of employees is
136-9 the policyholder, ten (10) members of said association at date of
136-10 issue.
136-11 (d) The term employees as used herein in
136-12 addition to its usual meaning shall include elective and appointive
136-13 officials of the state.
136-14 (4) A policy issued to a creditor, who shall be deemed
136-15 the policyholder, to insure debtors of the creditor, subject to the
136-16 following requirements:
136-17 (a) The debtors eligible for insurance under the
136-18 policy shall all be members of a group of persons numbering not
136-19 less than fifty (50) at all times, who become borrowers, or
136-20 purchasers of securities, merchandise or other property, under
136-21 agreement to repay the sum borrowed or to pay the balance of the
136-22 price of the securities, merchandise or other property purchased,
136-23 to the extent of their respective indebtedness, but not to exceed
136-24 Fifty Thousand Dollars ($50,000.00) on any one life or not to
136-25 exceed One Hundred Twenty-Five Thousand Dollars ($125,000.00) on
136-26 any one life if the indebtedness is secured by a first lien on real
136-27 estate; provided, however, the face amount of any loan or loan
137-1 commitment, totally or partially executed, made to a debtor for
137-2 educational purposes or to a debtor with seasonal income by a
137-3 creditor in good faith for general agricultural or horticultural
137-4 purposes, secured or unsecured, where the debtor becomes personally
137-5 liable for the payment of such loan, may be so insured in an
137-6 initial amount of such insurance not to exceed the total amount
137-7 repayable under the contract of indebtedness and, when such
137-8 indebtedness is repayable in substantially equal installments, the
137-9 amount of insurance shall at no time exceed the scheduled or actual
137-10 amount of unpaid indebtedness, whichever is greater, and such
137-11 insurance on such credit commitments not exceeding one year in
137-12 duration may be written up to the amount of the loan commitment on
137-13 a nondecreasing or level term plan, but such insurance shall not
137-14 exceed One Hundred Thousand Dollars ($100,000.00) on any one life.
137-15 (b) The premium for the policy shall be paid by
137-16 the policyholder, either from the creditor's funds or from charges
137-17 collected from the insured debtors, or both.
137-18 (c) The insurance issued shall not include
137-19 annuities or endowment insurance.
137-20 (d) The insurance shall be payable to the
137-21 policyholder. Such payment shall reduce or extinguish the unpaid
137-22 indebtedness of the debtor to the extent of such payment; provided
137-23 that in the case of a debtor for educational purposes or of a
137-24 debtor with seasonal income, under a loan or loan commitment for
137-25 general agricultural or horticultural purposes of the type
137-26 described in paragraph (a), the insurance in excess of the
137-27 indebtedness to the creditor, if any, shall be payable to the
138-1 estate of the debtor or under the provision of a facility of
138-2 payment clause.
138-3 (5) A policy issued to the trustees of a fund
138-4 established by two or more employers in the same industry or by one
138-5 or more labor unions, or to the trustees of a fund established by
138-6 one or more employers in the same industry and one or more labor
138-7 unions, or by one or more employers and one or more labor unions
138-8 whose members are in the same or related occupations or trades,
138-9 which trustees shall be deemed the policyholder, to insure
138-10 employees of the employers or members of the unions for the benefit
138-11 of persons other than the employers or the union, subject to the
138-12 following requirements:
138-13 (a) The persons eligible for insurance shall be
138-14 all of the employees of the employers and the employees of the
138-15 trade association of such employers or all of the members of the
138-16 union, or all of any class or classes thereof determined by
138-17 conditions pertaining to their employment, or to membership in the
138-18 unions, or both. The policy may provide that the term "employees"
138-19 shall include retired employees, and the individual proprietor or
138-20 partners if an employer is an individual proprietor or a
138-21 partnership. No director of a corporate employer shall be eligible
138-22 for insurance under the policy unless such person is otherwise
138-23 eligible as a bona fide employee of the corporation by performing
138-24 services other than the usual duties of a director. No individual
138-25 proprietor or partner shall be eligible for insurance under the
138-26 policy unless he is actively engaged in and devotes a substantial
138-27 part of his time to the conduct of the business of the proprietor
139-1 or partnership. The policy may provide that the term "employees"
139-2 shall include the trustees or their employees, or both, if their
139-3 duties are principally connected with such trusteeship.
139-4 (b) The premium for the policy shall be paid by
139-5 the trustees wholly from funds contributed by the employer or
139-6 employers of the insured persons, or by the union or unions, or by
139-7 both, or, partly from such funds and partly from funds contributed
139-8 by the insured persons, except that in no event shall the
139-9 contribution by an insured person toward the cost of his insurance
139-10 exceed forty cents per thousand per month. A policy on which part
139-11 of the premium is to be derived from funds contributed by the
139-12 insured persons specifically for their insurance may be placed in
139-13 force only if at least seventy-five percent (75%) of the then
139-14 eligible persons of each participating employer unit, excluding any
139-15 as to whom evidence of insurability is not satisfactory to the
139-16 insurer, elect to make the required contributions. A policy on
139-17 which no part of the premium is to be derived from funds
139-18 contributed by the insured persons specifically for their insurance
139-19 must insure all eligible persons, or all except any as to whom
139-20 evidence of individual insurability is not satisfactory to the
139-21 insurer. The policy may provide that a participating employer or
139-22 labor union may pay the premium directly to the insurer for the
139-23 policy issued to the trustee, and in that event, the employer or
139-24 labor union becomes the premium payor for the insured employees or
139-25 union members for that employer unit.
139-26 (c) The policy must cover at date of issue at
139-27 least one hundred (100) persons; unless the policy is issued to the
140-1 trustees of a fund established by employers which have assumed
140-2 obligations through a collective bargaining agreement and are
140-3 participating in the fund either pursuant to those obligations with
140-4 regard to one or more classes of their employees which are
140-5 encompassed in the collective bargaining agreement or as a method
140-6 of providing insurance benefits for other classes of their
140-7 employees, or unless the policy is issued to the trustees of a fund
140-8 established by one or more labor unions.
140-9 (d) The amounts of insurance under the policy
140-10 must be based upon some plan precluding individual selection either
140-11 by the insured persons or by the policyholder or employer. No
140-12 policy may be issued which provides term insurance on any person
140-13 which together with any other term insurance under any group life
140-14 insurance policy or policies issued to trustees or employers
140-15 exceeds One Hundred Thousand Dollars ($100,000.00), unless four
140-16 hundred percent (400%) of the annual compensation of such employee
140-17 from his employer or employers exceeds One Hundred Thousand Dollars
140-18 ($100,000.00), in which event all such term insurance shall not
140-19 exceed four hundred percent (400%) of such annual compensation.
140-20 (e) The limitation as to amount of group
140-21 insurance on any person shall not apply to group insurance on other
140-22 than the term plan where such insurance is to be used to fund the
140-23 benefits under a pension plan and the amount of such insurance does
140-24 not exceed that required to provide at normal retirement date the
140-25 pension specified by the plan, and except that a group policy which
140-26 is issued by the same or another carrier to replace another group
140-27 policy may provide term insurance not to exceed the amount provided
141-1 by the policy which it replaces, or the amounts provided above
141-2 whichever is greater.
141-3 (f) No policy may be issued (i) to insure
141-4 employees of any employer whose eligibility to participate in the
141-5 fund as an employer arises out of considerations directly related
141-6 to the employer being a commercial correspondent or business client
141-7 or patron of another employer (regardless of whether such other
141-8 employer is or is not participating in the fund); or (ii) to insure
141-9 employees of any employer which is not located in this state,
141-10 unless the majority of the employers whose employees are to be
141-11 insured are located in this state, or unless the policy is issued
141-12 to the trustees of a fund established by one or more labor unions.
141-13 (5A) A policy issued to an association or trust for a
141-14 group of individuals for the payment of future funeral expenses.
141-15 (6) A policy issued to cover any other group subject
141-16 to the following requirements:
141-17 (a) No such group life insurance policy shall be
141-18 delivered in this state unless the Commissioner of Insurance finds
141-19 that:
141-20 (i) the issuance of such group policy is
141-21 not contrary to the best interest of the public;
141-22 (ii) the issuance of the group policy
141-23 would result in economies of acquisition or administration; and
141-24 (iii) the benefits are reasonable in
141-25 relation to the premiums charged.
141-26 (b) No such group life insurance coverage may be
141-27 offered in this state by an insurer under a policy issued in
142-1 another state unless this state or another state having
142-2 requirements substantially similar to those contained in Paragraph
142-3 (a) of Subdivision (6) has made a determination that such
142-4 requirements have been met.
142-5 (c) The premium for the policy shall be paid
142-6 either from the policyholder's funds or from funds contributed by
142-7 the covered person or from both.
142-8 (d) Notwithstanding other provisions of law, an
142-9 employer may insure the lives of its officers, directors,
142-10 employees, and retirees under this subdivision for the purpose of
142-11 and in an amount necessary to provide funds to offset fringe
142-12 benefit-related liabilities. Evidence of the purpose of the policy
142-13 shall be submitted to the Commissioner of Insurance. A policy
142-14 issued for such purpose shall not diminish other life insurance
142-15 benefits if any are offered or provided by such employer. The
142-16 provisions of Subdivisions 5 through 10 of Section 2 of this
142-17 article shall not apply to such policies.
142-18 (7) No policy of wholesale, franchise or employee life
142-19 insurance, as hereinafter defined, shall be issued or delivered in
142-20 this state unless it conforms to the following requirements:
142-21 (a) Wholesale, franchise or employee life
142-22 insurance is hereby defined as: a term life insurance plan under
142-23 which a number of individual term life insurance policies are
142-24 issued at special rates to a selected group. A special rate is any
142-25 rate lower than the rate shown in the issuing insurance company's
142-26 manual for individually issued policies of the same type and to
142-27 insureds of the same class.
143-1 (b) Wholesale, franchise or employee life
143-2 insurance may be issued to (1) the employees of a common employer
143-3 or employers, covering at date of issue not less than five
143-4 employees; or (2) the members of a labor union or unions covering
143-5 at date of issue not less than five members; or (3) the members of
143-6 a credit union or credit unions covering at date of issue not less
143-7 than five (5) members.
143-8 (c) The premium for the policy shall be paid
143-9 either wholly from funds contributed by the employer or employers
143-10 of the insured persons, or by the union or unions or by both, or
143-11 partly from such funds and partly from funds contributed by the
143-12 insured person, except that in no event shall the contribution by
143-13 an insured person toward the cost of his insurance exceed forty
143-14 cents per thousand per month.
143-15 (d) No policy may be issued on a wholesale,
143-16 franchise or employee life insurance basis which, together with any
143-17 other term life insurance policy or policies issued on a wholesale,
143-18 franchise, employee life insurance or group basis, provides term
143-19 life insurance coverage for an amount in excess of One Hundred
143-20 Thousand Dollars ($100,000.00), unless four hundred percent (400%)
143-21 of the annual compensation of such employee from his employer or
143-22 employers exceeds One Hundred Thousand Dollars ($100,000.00), in
143-23 which event all such term insurance shall not exceed four hundred
143-24 percent (400%) of such annual compensation. An individual
143-25 application shall be taken for each such policy and the insurer
143-26 shall be entitled to rely upon the applicant's statements as to
143-27 applicant's other similar coverage upon his life.
144-1 (e) Each such policy of insurance shall contain
144-2 a provision substantially as follows:
144-3 A provision that if the insurance on an insured person ceases
144-4 because of termination of employment or of membership in the union,
144-5 such person shall be entitled to have issued to him by the insurer,
144-6 without evidence of insurability an individual policy of life
144-7 insurance without disability or other supplementary benefits,
144-8 provided application for the individual policy shall be made, and
144-9 the first premium paid to the insurer, within thirty-one (31) days
144-10 after such termination.
144-11 (f) Each such policy may contain any provision
144-12 substantially as follows:
144-13 (1) A provision that the policy is
144-14 renewable at the option of the insurer only;
144-15 (2) A provision for termination of
144-16 coverage by the insurer upon termination of employment by the
144-17 insured employee;
144-18 (3) A provision requiring a person
144-19 eligible for insurance to furnish evidence of individual
144-20 insurability satisfactory to the insurer as condition to coverage.
144-21 (g) The limitation as to amount of group and
144-22 wholesale, franchise or employee life insurance on any person shall
144-23 not apply to group insurance on other than the term plan where such
144-24 insurance is to be used to fund benefits under a pension plan and
144-25 the amount of such insurance does not exceed that required to
144-26 provide at normal retirement date the pension specified by the
144-27 plan, and except that a group policy which is issued by the same or
145-1 another carrier to replace another group policy may provide term
145-2 insurance not to exceed the amounts provided by the policy which it
145-3 replaces, or the amounts provided above, whichever are greater.
145-4 (h) Nothing contained in this Subsection (7)
145-5 shall in any manner alter, impair or invalidate (1) any policy
145-6 heretofore issued prior to the effective date of this Act; nor (2)
145-7 any such plan heretofore placed in force and effect provided such
145-8 prior plan was at date of issue legal and valid; nor (3) any policy
145-9 issued on a salary savings franchise plan, bank deduction plan,
145-10 pre-authorized check plan or similar plan of premium collection.
145-11 (7A) A policy may be issued to a principal, or if such
145-12 principal is a life or life and accident or life, accident and
145-13 health insurer, by or to such principal, covering when issued not
145-14 less than ten (10) agents of the principal, subject to the
145-15 following requirements:
145-16 (a) As used in this section, the term "agents"
145-17 shall be deemed to include general agents, subagents and salesmen.
145-18 (b) The agents eligible for insurance under the
145-19 policy shall be those who are under contract to render personal
145-20 services for the principal for a commission or other fixed or
145-21 ascertainable compensation.
145-22 (c) The premium for the policy shall be paid
145-23 either wholly by the principal or partly from funds contributed by
145-24 the principal and partly from funds contributed by the insured
145-25 agents. A policy on which no part of the premium is to be derived
145-26 from funds contributed by the insured agents must insure all of the
145-27 eligible agents or all of any class or classes thereof determined
146-1 by conditions pertaining to the services to be rendered by the
146-2 agents to the principal. A policy on which part of the premium is
146-3 to be derived from funds contributed by the insured agents must
146-4 cover at issue at least seventy-five percent (75%) of the eligible
146-5 agents or at least seventy-five percent (75%) of any class or
146-6 classes thereof determined by conditions pertaining to the services
146-7 to be rendered by the agents; provided, however, that the benefits
146-8 may be extended to other classes of agents as seventy-five percent
146-9 (75%) thereof express the desire to be covered.
146-10 (d) The amounts of insurance under the policy
146-11 must be based upon some plan precluding individual selection either
146-12 by the principal or by the agents. No policy may be issued which
146-13 provides term insurance on any agent which together with any other
146-14 term insurance under any group life insurance policy or policies
146-15 issued to the principal exceeds One Hundred Thousand Dollars
146-16 ($100,000.00), unless four hundred percent (400%) of the annual
146-17 commissions or other fixed or ascertainable compensation of such
146-18 agent from the principal exceeds One Hundred Thousand Dollars
146-19 ($100,000.00), in which event all such term insurance shall not
146-20 exceed four hundred percent (400%) of such annual commissions or
146-21 other fixed or ascertainable compensation.
146-22 (e) The insurance shall be for the benefit of
146-23 persons other than the principal.
146-24 (8) A policy issued to the Veterans Land Board of the
146-25 State of Texas, who shall be deemed the policyholder to insure
146-26 persons purchasing land under the Texas Veterans Land Program as
146-27 provided in Section 16(B) of Article 5421m, Vernon's Texas Civil
147-1 Statutes (Chapter 318, Acts of the 51st Legislature, Regular
147-2 Session, 1949, as amended).
147-3 (9) Any policy of group term life insurance may be
147-4 extended, in the form of group term life insurance only, to insure
147-5 the spouse and minor children, natural or adopted, of an insured
147-6 employee, provided the policy constitutes a part of the employee
147-7 benefit program established for the benefit of employees of the
147-8 United States government or any subdivision thereof, and provided
147-9 further, that the spouse or children of other employees covered by
147-10 the same employee benefit program in other states of the United
147-11 States are or may be covered by group term life insurance, subject
147-12 to the following requirements:
147-13 (a) The premiums for the group term life
147-14 insurance shall be paid by the policyholder from funds solely
147-15 contributed by the insured employee.
147-16 (b) The amounts of insurance under the policy
147-17 must be based upon some plan precluding individual selection either
147-18 by the insured employee or by the policyholder, provided that group
147-19 term life insurance upon the life of a spouse shall not exceed the
147-20 lesser of (1) Ten Thousand Dollars ($10,000.00) or (2) one-half of
147-21 the amount of insurance on the life of the insured employee under
147-22 the group policy; and provided that group term life insurance on
147-23 the life of any minor child shall not exceed Two Thousand Dollars
147-24 ($2,000.00).
147-25 (c) Upon termination of the group term life
147-26 insurance with respect to the spouse of any insured employee by
147-27 reason of such person's termination of employment or death, or
148-1 termination of the group contract, the spouse insured pursuant to
148-2 this section shall have the same conversion rights as to the group
148-3 term life insurance on his or her life as is provided for the
148-4 insured employee.
148-5 (d) Only one certificate need be issued for
148-6 delivery to an insured employee if a statement concerning any
148-7 dependent's coverage is included in such certificate.
148-8 (10) A policy of group life insurance may be issued to
148-9 a nonprofit service, civic, fraternal, or community organization or
148-10 association which has had an active existence for at least two
148-11 years, has a constitution or bylaws, was formed for purposes other
148-12 than obtaining insurance, and which association shall be deemed the
148-13 policyholder to insure members and employees of such association
148-14 for the benefit of persons other than the association or any of its
148-15 officers, subject to the following requirements:
148-16 (a) The persons eligible for insurance shall be
148-17 all the members of the association, or all of any class thereof
148-18 determined by conditions pertaining to membership in the
148-19 association.
148-20 (b) The amounts of insurance under the policy
148-21 shall be based upon some plan precluding individual selection
148-22 either by the insured members or by the association.
148-23 (c) The premium for the policy shall be paid by
148-24 the policyholder from the policyholder's own funds or from funds
148-25 contributed by the employees or members specifically for their
148-26 insurance, or from both. The policy may provide that the premium
148-27 may be paid directly to the insurer by individual employees or
149-1 members from their own funds, and in that event, the respective
149-2 employees or members become the premium payor for that particular
149-3 certificate.
149-4 (d) The policy shall cover at least twenty-five
149-5 (25) persons at date of issue.
149-6 ARTICLE 7. FINANCIAL SUPERVISION OF ENTITIES REGULATED
149-7 BY TEXAS DEPARTMENT OF INSURANCE
149-8 SECTION 7.01. Section 2A(a)(1), Article 3.28, Insurance
149-9 Code, is amended to read as follows:
149-10 (1) In conjunction with the annual statement and in
149-11 addition to other information required by this article, every life
149-12 insurance company doing business in this state shall annually
149-13 submit to the State Board of Insurance the opinion of a qualified
149-14 <an> actuary <or other financial specialist as defined by Board
149-15 rule> as to whether the reserves and related actuarial items held
149-16 in support of the policies and contracts specified by rule of the
149-17 Board are computed appropriately, are based on assumptions which
149-18 satisfy contractual provisions, are consistent with prior reported
149-19 amounts, and comply with applicable laws of this state. The Board
149-20 by rule shall define the specific requirements of this opinion<,
149-21 the qualifications of the persons who may certify to such an
149-22 opinion,> and shall include any matters deemed to be necessary to
149-23 the opinion's scope. For purposes of this subdivision, "qualified
149-24 actuary" has the meaning assigned by Article 1.11(d) of this code.
149-25 A person who, before September 1, 1993, satisfied the requirements
149-26 of the Board to submit an opinion under this subdivision may also
149-27 submit the opinion required by this subdivision.
150-1 SECTION 7.02. Section 2A(b), Article 3.28, Insurance Code,
150-2 is amended to read as follows:
150-3 (b) Actuarial Analysis of Reserves and Assets Supporting
150-4 Such Reserves. Every life insurance company, except as exempted by
150-5 or pursuant to rule adopted by the Board, shall also annually
150-6 include in the opinion required by Subsection (a)(1) of this
150-7 section, an opinion of the same person who certifies to the opinion
150-8 under Subsection (a)(1) of this section as to whether the reserves
150-9 and related actuarial items held in support of the policies and
150-10 contracts specified by Board rule, when considered in light of the
150-11 assets held by the company with respect to the reserves and related
150-12 actuarial items, including but not limited to the investment
150-13 earnings on the assets and the considerations anticipated to be
150-14 received and retained under the policies and contracts, make
150-15 adequate provision for the company's obligations under the policies
150-16 and contracts, including but not limited to the benefits under and
150-17 expenses associated with the policies and contracts. The rules
150-18 adopted by the Board under this section may <shall> exempt those
150-19 companies that would be exempted from the requirements stated in
150-20 this subsection (b) according to the most recently adopted
150-21 regulation by the National Association of Insurance Commissioners
150-22 entitled "Model Actuarial Opinion and Memorandum Regulation" or
150-23 its successor regulation if the Board considers the exemption
150-24 appropriate.
150-25 SECTION 7.03. Article 1.11, Insurance Code, is amended by
150-26 amending Subsection (c) and adding Subsection (d) to read as
150-27 follows:
151-1 (c) Included on or attached to page 1 of the annual
151-2 statement shall be the statement of a qualified actuary<, who is a
151-3 member in good standing of the American Academy of Actuaries>,
151-4 entitled "Statement of Actuarial Opinion," setting forth his or her
151-5 opinion relating to policy reserves and other actuarial items for
151-6 life, accident and health, and annuities, or loss and loss
151-7 adjustment expense reserves for property and casualty risks, as
151-8 described in the NAIC annual statement instructions as appropriate
151-9 for the type of risks insured.
151-10 (d) In this article, "qualified actuary" means a member in
151-11 good standing of the American Academy of Actuaries or a person who
151-12 has otherwise demonstrated actuarial competence to the satisfaction
151-13 of the commissioner of insurance or other insurance regulatory
151-14 official of the insurer's domiciliary state.
151-15 SECTION 7.04. Chapter 1, Insurance Code, is amended by
151-16 adding Article 1.11A to read as follows:
151-17 Art. 1.11A. ACCEPTANCE OF ACTUARIAL OPINION. (a) In any
151-18 case in which the commissioner requests or requires the opinion of
151-19 an actuary under this code, another insurance law of this state, or
151-20 a rule adopted by the commissioner, including an opinion of a
151-21 qualified actuary submitted in accordance with Section 2A, Article
151-22 3.28, of this code, the opinion is presumed to be accurate and
151-23 valid and the department shall accept the opinion unless
151-24 controverted.
151-25 (b) The department may employ, at the department's expense,
151-26 an actuary other than the actuary who provides an opinion under
151-27 Subsection (a) of this section to provide an alternative opinion.
152-1 SECTION 7.05. Article 1.15, Insurance Code, is amended by
152-2 adding Sections 8, 9, and 10 to read as follows:
152-3 Sec. 8. (a) In conducting an examination under this
152-4 article, the department shall use audits and work papers prepared
152-5 by an accountant or accounting firm that meets the requirements of
152-6 Section 12, Article 1.15A, of this code that are made available to
152-7 the department by the carrier. If necessary, the department may
152-8 conduct a separate audit of the carrier.
152-9 (b) The carrier shall provide the department with the work
152-10 papers of an accountant or accounting firm or the carrier and a
152-11 record of any communications between the accountant or accounting
152-12 firm and the carrier that relate to the audit. The accountant or
152-13 accounting firm shall deliver that information to the department's
152-14 examiners, who shall retain the information during the course of
152-15 the department's examination of the carrier. Information obtained
152-16 under this section is confidential and may not be disclosed to the
152-17 public except when introduced as evidence in a hearing.
152-18 (c) For purposes of this section, "work papers" has the
152-19 meaning assigned by Section 17(a), Article 1.15A, of this code.
152-20 Work papers developed in an audit conducted under this section
152-21 shall be maintained in the manner provided by Sections 17(b) and
152-22 (c), Article 1.15A, of this code.
152-23 Sec. 9. A final or preliminary examination report, and any
152-24 information obtained during the course of an examination, is
152-25 confidential and is not subject to disclosure under the open
152-26 records law, Chapter 424, Acts of the 63rd Legislature, Regular
152-27 Session, 1973 (Article 6252-17a, Vernon's Texas Civil Statutes),
153-1 and its subsequent amendments. This section applies if the carrier
153-2 examined is under supervision or conservation but does not apply to
153-3 an examination conducted in connection with a liquidation or a
153-4 receivership under this code or another insurance law of this
153-5 state.
153-6 Sec. 10. If the Commissioner determines that the financial
153-7 strength of a carrier justifies less-frequent examinations than are
153-8 required by Section 1 of this article, the Commissioner may conduct
153-9 the examination of a carrier at intervals not to exceed five years.
153-10 The Commissioner shall adopt rules governing the determination of
153-11 whether the financial strength of a carrier justifies examination
153-12 under this section. This section applies only to examination of a
153-13 carrier that has been incorporated or organized for more than three
153-14 years.
153-15 SECTION 7.06. Section 10, Article 1.15A, Insurance Code, is
153-16 amended by adding Subsection (f) to read as follows:
153-17 (f) The audited financial report must also include
153-18 information required by the department to conduct the examination
153-19 of the insurer under Article 1.15 of this code. The commissioner
153-20 shall adopt rules governing the information to be included in the
153-21 report under this subsection.
153-22 SECTION 7.07. Chapter 1, Insurance Code, is amended by
153-23 adding Article 1.15B to read as follows:
153-24 Art. 1.15B. CONFIDENTIALITY OF EARLY WARNING SYSTEM
153-25 INFORMATION. Any information relating to the financial solvency of
153-26 any organization regulated by the department under this code or
153-27 another insurance law of this state obtained by the department's
154-1 early warning system is confidential and is not subject to
154-2 disclosure under the open records law, Chapter 424, Acts of the
154-3 63rd Legislature, Regular Session, 1973 (Article 6252-17a, Vernon's
154-4 Texas Civil Statutes), and its subsequent amendments.
154-5 SECTION 7.08. Section 8, Article 1.14-2, Insurance Code, is
154-6 amended by amending Subsections (b) and (c) and adding Subsection
154-7 (d) to read as follows:
154-8 (b) No surplus lines agent shall place any coverage with an
154-9 <unauthorized> insurer unless the insurer has met the eligibility
154-10 requirements of this section and the stamping office provides
154-11 evidence that the insurer has met the requirements to the State
154-12 Board of Insurance. An <unauthorized> insurer shall not be
154-13 eligible unless the insurer has a minimum capital and surplus of
154-14 $15 million <that are not less than the following amounts for the
154-15 following dates:>
154-16 <(1) $4.5 million capital and surplus as of December
154-17 31, 1991; or>
154-18 <(2) $6 million capital and surplus as of December 31,
154-19 1992>.
154-20 (c) An <unauthorized> insurer may be exempt from the minimum
154-21 capital and surplus requirements provided by Subsection (b) of this
154-22 section if the Commissioner of Insurance finds, after public
154-23 hearing, that the exemption is warranted based on factors such as
154-24 quality of management, capital and surplus of any parent company,
154-25 company underwriting profit and investment income trends,
154-26 reinsurance contracts, company record and reputation within the
154-27 industry, and other information the commissioner requires to make a
155-1 determination. The commissioner, by rule, shall exempt an insurer
155-2 from the minimum capital and surplus requirements of Subsection (b)
155-3 of this section if the insurer writes less than a minimum level of
155-4 insurance premium in this state. The rules must specify the
155-5 minimum level of insurance premium.
155-6 (d) A surplus lines insurer may be exempt from the minimum
155-7 capital and surplus requirements of this article if the
155-8 commissioner finds, after a public hearing, that the applicant for
155-9 exemption complies with each of the following conditions:
155-10 1. the insurer has at least $6 million in capital and
155-11 surplus;
155-12 2. the amount of net risk retained after ceding to a
155-13 reinsurer is reasonable and does not exceed 10 percent of the
155-14 capital and surplus of the insurer;
155-15 3. the annual ratio of net written premiums to surplus
155-16 of the insurer does not exceed 2.5 to 1;
155-17 4. the reinsurance company of the insurer is rated at
155-18 least "B+" by the A.M. Best Company;
155-19 5. the ownership interest in the insurer of an agent
155-20 who places insurance with it does not exceed 10 percent;
155-21 6. the officers, directors, or managing head have
155-22 sufficient insurance ability, standing, and good record to render
155-23 continued success of the company probable;
155-24 7. the composition, quality, duration, and liquidity
155-25 of the insurer's investment portfolio are prudent;
155-26 8. the insurer is audited annually by an independent
155-27 certified public accountant who is in good standing with the
156-1 American Institute of Certified Public Accountants and is licensed
156-2 to practice by the Texas State Board of Public Accountancy, and a
156-3 copy of such audit is filed with the commissioner;
156-4 9. the number and type of complaints are not excessive
156-5 relative to the number of insurance policies written; and
156-6 10. the insurer is acting in good faith in applying
156-7 for an exemption.
156-8 The commissioner may continue the exemption in force on an
156-9 annual basis upon the filing of a certificate by the insurer that
156-10 the above conditions remain true and correct. The commissioner may
156-11 hold a public hearing, however, at any time to determine that the
156-12 continued exemption is warranted. The commissioner may waive any
156-13 of the above 10 conditions if in her or his judgment the
156-14 policyholders of the insurer would not be adversely affected
156-15 thereby.
156-16 SECTION 7.09. Article 1.16(b), Insurance Code, is amended to
156-17 read as follows:
156-18 (b) Assessments for the expenses of such domestic
156-19 examination which shall be sufficient to meet all the expenses and
156-20 disbursements necessary to comply with the provisions of the laws
156-21 of Texas relating to the examination of insurance companies and to
156-22 comply with the provisions of this Article and Articles 1.17 and
156-23 1.18 of this Code, shall be made by the State Board of Insurance
156-24 upon the corporations or associations to be examined taking into
156-25 consideration annual premium receipts, and/or admitted assets that
156-26 are not attributable to 90 percent of pension plan contracts as
156-27 defined in Section 818(a) of the Internal Revenue Code of 1986 (26
157-1 U.S.C. Section 818(a)), and/or insurance in force; provided such
157-2 assessments shall be made and collected as follows: (1) expenses
157-3 attributable directly to a specific examination including
157-4 employees' salaries and expenses and expenses provided by Article
157-5 1.28 of this Code shall be collected at the time of examination;
157-6 (2) assessments calculated annually for each corporation or
157-7 association which take into consideration annual premium receipts,
157-8 and/or admitted assets that are not attributable to 90 percent of
157-9 pension plan contracts as defined in Section 818(a) of the Internal
157-10 Revenue Code of 1986 (26 U.S.C. Section 818(a)), and/or insurance
157-11 in force shall be assessed annually for each such corporation or
157-12 association. In computing the assessments, the board may not
157-13 consider insurance premiums for insurance contracted for by a state
157-14 or federal governmental entity to provide welfare benefits to
157-15 designated welfare recipients or contracted for in accordance with
157-16 or in furtherance of Title 2, Human Resources Code, or the federal
157-17 Social Security Act (42 U.S.C. Section 301 et seq.). The <Provided
157-18 further that the> amount of the <all such> assessments paid in each
157-19 taxable year to or for the use of the State of Texas by any
157-20 insurance corporation or association hereby affected shall be
157-21 allowed as a credit on the amount of premium taxes to be paid by
157-22 any such insurance corporation or association for such taxable year
157-23 except as provided by Article 1.28 of this Code.
157-24 SECTION 7.10. Article 1.39, Insurance Code, is amended to
157-25 read as follows:
157-26 Art. 1.39. Subordinated Indebtedness. (a) This article
157-27 applies to an insurer as that term is defined by Article 1.15A of
158-1 this code.
158-2 (b) An insurer may obtain a loan or an advance of cash or
158-3 property, repayable with interest and may assume a subordinated
158-4 liability for repayment of the advance and payment of interest on
158-5 the advance if the insurer and creditor execute a written agreement
158-6 stating that the creditor may be paid only out of that <the>
158-7 portion of the insurer's surplus that exceeds the greater of a
158-8 minimum surplus stated and fixed in the agreement or a minimum
158-9 surplus of $500,000 for that insurer. The department or the
158-10 commissioner may not require the agreement to provide another
158-11 minimum surplus amount.
158-12 (c) <Before an insurer may assume a subordinated liability
158-13 under Subsection (a) of this article, the agreement must be
158-14 approved by the commissioner.>
158-15 <(d) An insurer may not repay principal or pay interest on a
158-16 subordinate liability assumed under this article unless the
158-17 repayment or payment is approved by the commissioner. The
158-18 commissioner may approve the repayment or payment only if satisfied
158-19 that the repayment or payment is appropriate, considering the
158-20 financial condition of the insurer. The commissioner may not deny
158-21 approval of the repayment or payment if the insurer submits
158-22 evidence, satisfactory to the commissioner, that the insurer has at
158-23 least the minimum surplus stated in the agreement.>
158-24 <(e)> A loan or advance made under this article, and any
158-25 interest accruing on the loan or advance, is <not> a legal
158-26 liability and <or> financial statement liability of the insurer
158-27 only to the extent provided by the terms and conditions of the loan
159-1 or advance agreement, and the loan or advance may not otherwise be
159-2 a legal liability or financial statement liability of the insurer.
159-3 <until the commissioner authorizes repayment or payment under
159-4 Subsection (d) of this article. Until the commissioner authorizes
159-5 the repayment or payment, all financial statements published by the
159-6 insurer or filed with the commissioner must show as a liability
159-7 that portion of the insurer's surplus that exceeds the minimum
159-8 surplus as defined in the subordinated agreement to the extent of
159-9 the unpaid balance thereon, and must show the amount of that
159-10 minimum surplus as a special surplus account.>
159-11 (d) If the loan or advance agreement provides for a sinking
159-12 fund out of which the loan or advance is to be repaid, then the
159-13 loan or advance shall be a legal liability and financial statement
159-14 liability of the insurer only to the extent of those funds
159-15 accumulated and held in the sinking fund, and the loan or advance
159-16 may not otherwise be a legal liability or financial statement
159-17 liability of the insurer. By mutual agreement of the parties to
159-18 the agreement, any portion of the accumulated funds in the sinking
159-19 fund may be returned to the surplus of the insurer at any time and
159-20 from time to time and thereafter may not be considered as a legal
159-21 liability or financial statement liability of the insurer.
159-22 SECTION 7.11. Section 4, Article 3.33, Insurance Code, is
159-23 amended to read as follows:
159-24 Sec. 4. AUTHORIZED INVESTMENTS AND LOANS. Subject to the
159-25 limitations and restrictions herein contained, the investments and
159-26 loans described in the following subsections, and none other, are
159-27 authorized for the insurers subject hereto:
160-1 (a) United States Government Bonds. Bonds, evidences
160-2 of indebtedness or obligations of the United States of America, or
160-3 bonds, evidences of indebtedness or obligations guaranteed as to
160-4 principal and interest by the full faith and credit of the United
160-5 States of America, and bonds, evidences of indebtedness, or
160-6 obligations of agencies and instrumentalities of the government of
160-7 the United States of America;
160-8 (b) Other Governmental Bonds. Bonds, evidences of
160-9 indebtedness or obligations of governmental units in the United
160-10 States, Canada, or any province or city of Canada, and of the
160-11 instrumentalities of such governmental units; provided:
160-12 (1) such governmental unit or instrumentality is
160-13 not in default in the payment of principal or interest in any of
160-14 its obligations; and
160-15 (2) investments in the obligations of any one
160-16 governmental unit or instrumentality may not exceed 20 percent of
160-17 the insurer's capital and surplus;
160-18 (c) Obligations of Business Entities. Obligations,
160-19 including bonds or evidences of indebtedness, or participations in
160-20 those bonds or evidences of indebtedness, that are issued, assumed,
160-21 guaranteed, or insured by any business entity, including a sole
160-22 proprietorship, a corporation, an association, a general or limited
160-23 partnership, a joint-stock company, a joint venture, a trust, or
160-24 any other form of business organization, whether for-profit or
160-25 not-for-profit, that is organized under the laws of the United
160-26 States, another state, Canada, or any state, district, province, or
160-27 territory of Canada, subject to all conditions set forth below:
161-1 (1) an insurer may acquire obligations in any
161-2 one business entity rated one or two by the Securities Valuation
161-3 Office of the National Association of Insurance Commissioners, but
161-4 not to exceed 20 percent of the insurer's statutory capital and
161-5 surplus as reported in the most recent annual statement filed with
161-6 the department;
161-7 (2) an insurer may acquire obligations rated
161-8 three or lower by the Securities Valuation Office if, after giving
161-9 effect to such an acquisition, the aggregate amount of all
161-10 obligations rated three or lower then held by the domestic insurer
161-11 does not exceed 20 percent of its admitted assets. Not more than
161-12 10 percent of the admitted assets of that insurer may consist of
161-13 obligations rated four, five, or six by the Securities Valuation
161-14 Office. Not more than three percent of the admitted assets of that
161-15 insurer may consist of obligations rated five or six by the
161-16 Securities Valuation Office. Not more than one percent of the
161-17 admitted assets of that insurer may consist of obligations rated
161-18 six by the Securities Valuation Office. Attaining or exceeding the
161-19 limit in any one category does not preclude an insurer from
161-20 acquiring obligations in other categories, subject to the specific
161-21 and multi-category limits;
161-22 (3) an insurer may not invest more than an
161-23 aggregate of one percent of its admitted assets in obligations
161-24 rated three by the Securities Valuation Office that are issued,
161-25 assumed, guaranteed, or insured by any one business entity, or more
161-26 than one-half percent of its admitted assets in obligations rated
161-27 four, five, or six by the Securities Valuation Office that are
162-1 issued, assumed, guaranteed, or insured by any one business entity.
162-2 An insurer may not invest more than one percent of its admitted
162-3 assets in any obligations rated three, four, five, or six by the
162-4 Securities Valuation Office that are issued, assumed, guaranteed,
162-5 or insured by any one business entity;
162-6 (4) notwithstanding the foregoing, an insurer
162-7 may acquire an obligation of a business entity in which the insurer
162-8 already has one or more obligations if the obligation is acquired
162-9 in order to protect an investment previously made in that business
162-10 entity. Such acquired obligations may not exceed one-half percent
162-11 of the insurer's admitted assets; and
162-12 (5) this subsection does not prohibit an insurer
162-13 from acquiring an obligation as a result of a restructuring of an
162-14 already held obligation that is rated three or lower by the
162-15 Securities Valuation Office;
162-16 <Corporate Bonds. Bonds, evidences of indebtedness or
162-17 obligations of corporations organized under the laws of the United
162-18 States of America or its states or Canada or any state, district,
162-19 province, or territory of Canada; provided:>
162-20 <(1) any such corporation must be solvent with
162-21 at least $1,000,000 of net worth as of the date of its latest
162-22 annual or more recent certified audited financial statement or will
162-23 have at least $1,000,000 of net worth after completion of a
162-24 securities offering which is being subscribed to by the insurer, or
162-25 the obligation is guaranteed as to principal and interest by a
162-26 solvent corporation meeting such net worth requirements which is
162-27 organized under the laws of the United States of America or one of
163-1 its states or Canada or any state, district, province, or territory
163-2 of Canada;>
163-3 <(2) investments in the obligations of any one
163-4 corporation may not exceed 20 percent of the insurer's capital and
163-5 surplus; and>
163-6 <(3) the aggregate of all investments under this
163-7 subsection may not exceed:>
163-8 <(A) one hundred percent of the insurer's
163-9 assets (excluding, however, those assets representing the minimum
163-10 capital required for the insurer), but only if more than 75 percent
163-11 of the total amount invested by the insurer in such bonds,
163-12 evidences of indebtedness, or obligations of any such corporations
163-13 qualifying under Subdivision (1) of this subsection are rated
163-14 either: (i) AA or better by Standard and Poor's Bond Ratings
163-15 service; or (ii) Aa or better by Moody's Bond Ratings service; or>
163-16 <(B) eighty percent of the insurer's
163-17 assets (excluding, however, those assets representing the minimum
163-18 capital required for the insurer), but only if more than 50 percent
163-19 of the total amount invested by the insurer in such bonds,
163-20 evidences of indebtedness or obligations of any such corporations
163-21 qualifying under Subdivision (1) of this subsection are rated
163-22 either: (i) BBB or better by Standard and Poor's Bond Ratings
163-23 service; or (ii) Baa or better by Moody's Bond Ratings service; or>
163-24 <(C) fifty percent of the insurer's
163-25 assets;>
163-26 (d) International Market. Bonds issued, assumed, or
163-27 guaranteed by the Interamerican Development Bank, the International
164-1 Bank for Reconstruction and Development (the World Bank), the Asian
164-2 Development Bank, the State of Israel, the African Development
164-3 Bank, and the International Finance Corporation; provided:
164-4 (1) investments in the bonds of any one of the
164-5 entities specified above may not exceed 20 percent of the insurer's
164-6 capital and surplus; and
164-7 (2) the aggregate of all investments made under
164-8 this subsection may not exceed 20 percent of the insurer's assets;
164-9 (e) Policy Loans. Loans upon the security of the
164-10 insurer's own policies not in excess of the amount of the reserve
164-11 values thereof;
164-12 (f) Time and Savings Deposits. Any type or form of
164-13 savings deposits, time deposits, certificates of deposit, NOW
164-14 accounts, and money market accounts in solvent banks, savings and
164-15 loan associations, and credit unions and branches thereof,
164-16 organized under the laws of the United States of America or its
164-17 states, when made in accordance with the laws or regulations
164-18 applicable to such entities; provided the amount of the deposits in
164-19 any one bank, savings and loan association, or credit union will
164-20 not exceed the greater of:
164-21 (1) twenty percent of the insurer's capital and
164-22 surplus;
164-23 (2) the amount of federal or state deposit
164-24 insurance coverage pertaining to such deposit; or
164-25 (3) ten percent of the amount of capital,
164-26 surplus, and undivided profits of the entity receiving such
164-27 deposits;
165-1 (g) Equipment Trusts. Equipment trust obligations or
165-2 certificates; provided:
165-3 (1) any such obligation or certificate is
165-4 secured by an interest in transportation equipment that is in whole
165-5 or in part within the United States of America <and the amount of
165-6 the obligation or certificate may not exceed 90 percent of the
165-7 value of the equipment>;
165-8 (2) the obligation or certificate provides a
165-9 right to receive determined portions of rental, purchase, or other
165-10 fixed obligatory payments for the use or purchase of the
165-11 transportation equipment;
165-12 (3) the obligation is classified as an
165-13 obligation of a business entity and is subject to the limitations
165-14 on obligations of business entities set forth in Subsection (c) of
165-15 this section <investment in any one equipment trust obligation or
165-16 certificate may not exceed 10 percent of the insurer's capital and
165-17 surplus>; and
165-18 (4) the aggregate of all investments made under
165-19 this subsection may not exceed 10 percent of the insurer's assets;
165-20 (h) Common Stock. Common stock of any corporation
165-21 organized under the laws of the United States of America or any of
165-22 its states, shares of mutual funds doing business under the
165-23 Investment Company Act of 1940 (15 U.S.C. Section 80a-1 et seq.),
165-24 other than money market funds as defined in Subsection (s) of this
165-25 section, and shares in real estate investment trusts as defined in
165-26 the Internal Revenue Code of 1954 (26 U.S.C. Section 856);
165-27 provided:
166-1 (1) any such corporation, other than a mutual
166-2 fund, must be solvent with at least $1,000,000 net worth as of the
166-3 date of its latest annual or more recent certified audited
166-4 financial statement or will have at least $1,000,000 of net worth
166-5 after completion of a securities offering which is being subscribed
166-6 to by the insurer;
166-7 (2) mutual funds, other than money market funds
166-8 as defined in Subsection (s) of this section, and real estate
166-9 investment trusts must be solvent with at least $1,000,000 of net
166-10 assets as of the date of its latest annual or more recent certified
166-11 audited financial statement;
166-12 (3) investments in any one corporation, mutual
166-13 fund, other than a money market fund as defined in Subsection (s)
166-14 of this section, or real estate investment trust may not exceed 15
166-15 <10> percent of the insurer's capital and surplus; and
166-16 (4) the aggregate of all investments made under
166-17 this subsection may not exceed 25 <20> percent of the insurer's
166-18 assets;
166-19 (i) Preferred Stock. Preferred stock of corporations
166-20 organized under the laws of the United States of America or any of
166-21 its states; provided:
166-22 (1) such corporation must be solvent with at
166-23 least $1,000,000 of net worth as of the date of its latest annual
166-24 or more recent certified audited financial statement or will have
166-25 at least $1,000,000 of net worth after completion of a security
166-26 offering which is being subscribed to by the insurer;
166-27 (2) investments in the preferred stock of any
167-1 one corporation will not exceed 20 percent of the insurer's capital
167-2 and surplus;
167-3 (3) in the aggregate not more than 10 percent of
167-4 the insurer's assets may be invested in preferred stock, the
167-5 redemption and retirement of which is not provided for by a sinking
167-6 fund meeting the standards established by the National Association
167-7 of Insurance Commissioners to value the preferred stock at cost;
167-8 and
167-9 (4) the aggregate of all investments made under
167-10 this subsection may not exceed 40 percent of the insurer's assets;
167-11 (j) Collateral Loans. Collateral loans secured by a
167-12 first lien upon or a valid and perfected first security interest in
167-13 an asset; provided:
167-14 (1) the amount of any such collateral loan will
167-15 not exceed 80 percent of the value of the collateral asset at any
167-16 time during the duration of the loan; and
167-17 (2) the asset used as collateral would be
167-18 authorized for direct investment by the insurer under other
167-19 provisions of this Section 4, except real property in Subsection
167-20 (l);
167-21 (k) Real Estate Loans. Notes, evidences of
167-22 indebtedness, or participations therein secured by a valid first
167-23 lien upon real property or leasehold estate therein located in the
167-24 United States of America; provided:
167-25 (1) the amount of any such obligation secured by
167-26 a first lien upon real property or leasehold estate therein shall
167-27 not exceed 90 percent of the value of such real property or
168-1 leasehold estate therein, but the amount of such obligation:
168-2 (A) may exceed 90 percent but shall not
168-3 exceed 100 percent of the value of such real property or leasehold
168-4 estate therein if the insurer or one or more wholly owned
168-5 subsidiaries of the insurer owns in the aggregate a 10 percent or
168-6 greater equity interest in such real property or leasehold estate
168-7 therein;
168-8 (B) may be 95 percent of the value of such
168-9 real property or leasehold estate therein if it contains only a
168-10 dwelling designed exclusively for occupancy by not more than four
168-11 families for residential purposes, and the portion of the unpaid
168-12 balance of such obligation which is in excess of an amount equal to
168-13 90 percent of such value is guaranteed or insured by a mortgage
168-14 insurance company qualified to do business in the State of Texas;
168-15 or
168-16 (C) may be greater than 90 percent of the
168-17 value of such real property or leasehold estate therein to the
168-18 extent the obligation is insured or guaranteed by the United States
168-19 of America, the Federal Housing Administration pursuant to the
168-20 National Housing Act of 1934, as amended (12 U.S.C. Section 1701 et
168-21 seq.), or the State of Texas; and
168-22 (2) the term of an obligation secured by a first
168-23 lien upon a leasehold estate in real property shall not exceed a
168-24 period equal to four-fifths of the then unexpired term of such
168-25 leasehold estate; provided the unexpired term of the leasehold
168-26 estate must extend at least 10 years beyond the term of the
168-27 obligation, and each obligation shall be payable in an installment
169-1 or installments of sufficient amount or amounts so that at any time
169-2 after the expiration of two-thirds of the original loan term, the
169-3 principal balance will be no greater than the principal balance
169-4 would have been if the loan had been amortized over the original
169-5 loan term in equal monthly, quarterly, semiannual, or annual
169-6 payments of principal and interest, it being required that under
169-7 any method of repayment such obligation will fully amortize during
169-8 a period of time not exceeding four-fifths of the then unexpired
169-9 term of the security leasehold estate; and
169-10 (3) if any part of the value of buildings is to
169-11 be included in the value of such real property or leasehold estate
169-12 therein to secure the obligations provided for in this subsection,
169-13 such buildings shall be covered by adequate property insurance,
169-14 including but not limited to fire and extended coverage insurance
169-15 issued by a company authorized to transact business in the State of
169-16 Texas or by a company recognized as acceptable for such purpose by
169-17 the insurance regulatory official of the state in which such real
169-18 estate is located, and the amount of insurance granted in the
169-19 policy or policies shall be not less than the unpaid balance of the
169-20 obligation or the insurable value of such buildings, whichever is
169-21 the lesser; the loss clause shall be payable to the insurer as its
169-22 interest may appear; and
169-23 (4) to the extent any note, evidence of
169-24 indebtedness, or participation therein under this subsection
169-25 represents an equity interest in the underlying real property, the
169-26 value of such equity interest shall be determined at the time of
169-27 execution of such note, evidence of indebtedness, or participation
170-1 therein and that portion shall be designated as an investment
170-2 subject to the provisions of Subsection (l)(2) of this section; and
170-3 (5) the amount of any one such obligation may
170-4 not exceed 25 percent of the insurer's capital and surplus; and
170-5 (6) a first lien on real property may be
170-6 purchased after its origination if the first lien is insured by a
170-7 mortgagee's title policy issued to the original mortgagee that
170-8 contains a provision that inures the policy to the use and benefit
170-9 of the owners of the evidence of debt indicated in the policy and
170-10 to any subsequent owners of that evidence of debt, and if the
170-11 insurer maintains evidence of assignments or other transfers of the
170-12 first lien on real property to the insurer. An assignment or other
170-13 transfer to the insurer, duly recorded in the county in which the
170-14 real property is located, shall be presumed to create legal
170-15 ownership of the first lien by the insurer;
170-16 (l) Real Estate. Real property fee simple or
170-17 leasehold estates located within the United States of America, as
170-18 follows:
170-19 (1) home and branch office real property or
170-20 participations therein, which must be materially enhanced in value
170-21 by the construction of durable, permanent-type buildings and other
170-22 improvements costing an amount at least equal to the cost of such
170-23 real property, exclusive of buildings and improvements at the time
170-24 of acquisition, or by the construction of such buildings and
170-25 improvements which must be commenced within two years of the date
170-26 of the acquisition of such real property; provided:
170-27 (A) at least 30 percent of the available
171-1 space in such building shall be occupied for the business purposes
171-2 of the insurer and its affiliates; and
171-3 (B) the aggregate investment in such home
171-4 and branch offices shall not exceed 20 percent of the insurer's
171-5 assets; and
171-6 (2) other investment property or participations
171-7 therein, which must be materially enhanced in value by the
171-8 construction of durable, permanent-type buildings and other
171-9 improvements costing an amount at least equal to the cost of such
171-10 real property, exclusive of buildings and improvements at the time
171-11 of acquisition, or by the construction of such buildings and
171-12 improvements which must be commenced within two years of the date
171-13 of acquisition of such real property; provided that such investment
171-14 in any one piece of property or interest therein, including the
171-15 improvements, fixtures, and equipment pertaining thereto may not
171-16 exceed five percent of the insurer's assets; provided, however,
171-17 nothing in this article shall allow ownership of, development of,
171-18 or equity interest in any residential property or subdivision,
171-19 single or multiunit family dwelling property, or undeveloped real
171-20 estate for the purpose of subdivision for or development of
171-21 residential, single, or multiunit family dwellings, except
171-22 acquisitions as provided in Subdivision (4) below, and such
171-23 ownership, development, or equity interests shall be specifically
171-24 prohibited;
171-25 (3) the admissible asset value of each such
171-26 investment in the properties acquired under Subdivisions (1) and
171-27 (2) of this subsection shall be subject to review and approval by
172-1 the Commissioner of Insurance. The commissioner shall have
172-2 discretion at the time such investment is made or any time when an
172-3 examination of the company is being made to cause any such
172-4 investment to be appraised by an appraiser, appointed by the
172-5 commissioner, and the reasonable expense of such appraisal shall be
172-6 paid by such insurance company and shall be deemed to be a part of
172-7 the expense of examination of such company; if the appraisal is
172-8 made upon application of the company, the expense of such appraisal
172-9 shall not be considered a part of the expense of examination of
172-10 such company; no insurance company may hereafter make any write-up
172-11 in the valuation of any of the properties described in Subdivision
172-12 (1) or (2) of this subsection unless and until it makes application
172-13 therefor and such increase in valuation shall be approved by the
172-14 commissioner; and
172-15 (4) other real property acquired:
172-16 (A) in good faith by way of security for
172-17 loans previously contracted or money due; or
172-18 (B) in satisfaction of debts previously
172-19 contracted for in the course of its dealings; or
172-20 (C) by purchase at sales under judgment or
172-21 decrees of court, or mortgage or other lien held by such insurer;
172-22 and
172-23 (5) regardless of the mode of acquisition
172-24 specified herein, upon sale of any such real property, the fee
172-25 title to the mineral estate or any portion thereof may be retained
172-26 by the insurance company indefinitely;
172-27 (m) Oil, Gas, and Minerals. In addition to and
173-1 without limitation on the purposes for which real property may be
173-2 acquired, secured, held, or retained pursuant to other provisions
173-3 of this section, every such insurance company may secure, hold,
173-4 retain, and convey production payments, producing royalties and
173-5 producing overriding royalties, or participations therein as an
173-6 investment for the production of income; provided:
173-7 (1) in no event may such company carry such
173-8 assets in an amount in excess of 90 percent of the appraised value
173-9 thereof; and
173-10 (2) no one investment under this subsection may
173-11 exceed 10 percent of the insurer's capital and surplus in excess of
173-12 statutory minimum capital and surplus applicable to that insurer,
173-13 and the aggregate of all such investments may not exceed 10 percent
173-14 of the insurer's assets as of December 31st next preceding the date
173-15 of such investment; and
173-16 (3) for the purposes of this subsection, the
173-17 following definitions apply:
173-18 (A) a production payment is defined to
173-19 mean a right to oil, gas, or other minerals in place or as produced
173-20 that entitles its owner to a specified fraction of production until
173-21 a specified sum of money, or a specified number of units of oil,
173-22 gas, or other minerals, has been received;
173-23 (B) a royalty and an overriding royalty
173-24 are each defined to mean a right to oil, gas, and other minerals in
173-25 place or as produced that entitles the owner to a specified
173-26 fraction of production without limitation to a specified sum of
173-27 money or a specified number of units of oil, gas, or other
174-1 minerals;
174-2 (C) "producing" is defined to mean
174-3 producing oil, gas, or other minerals in paying quantities,
174-4 provided that it shall be deemed that oil, gas, or other minerals
174-5 are being produced in paying quantities if a well has been "shut
174-6 in" and "shut-in royalties" are being paid;
174-7 (n) Foreign Countries and United States Territories.
174-8 In addition to the investments in Canada authorized in other
174-9 subsections of this section, investments <Investments> in other
174-10 foreign countries or in commonwealths, territories, or possessions
174-11 of the United States <where the insurer conducts an insurance
174-12 business>; provided:
174-13 (1) such investments are similar to those
174-14 authorized for investment within the United States of America or
174-15 Canada by other provisions of this section and are rated one or two
174-16 by the Securities Valuation Office of the National Association of
174-17 Insurance Commissioners; and
174-18 (2) such investments when added to the amount of
174-19 similar investments made within the United States and Canada do not
174-20 result in the combined total of such investments exceeding the
174-21 limitations specified in Subsections (a) through (p) of this
174-22 section; and
174-23 (3) such investments may not exceed the sum of:
174-24 (A) the amount of reserves attributable to
174-25 the business in force in said countries, if any, and any additional
174-26 investments<; provided, however, such investments may exceed such
174-27 reserves to the extent> required by any country as a condition to
175-1 doing business therein, <but to the extent such investments exceed
175-2 such reserves said investments shall not be considered as admitted
175-3 assets of the insurer>; and
175-4 (B) five percent of the insurer's assets;
175-5 (o) Investments Not Otherwise Specified. Investments
175-6 which are not otherwise authorized by this article and which are
175-7 not specifically prohibited by statute, including that portion of
175-8 any investments which may exceed the limits specified in
175-9 Subsections (a) through (n) of this section; provided:
175-10 (1) if any aggregate or individual specified
175-11 investment limitation in Subsections (a) through (n) of this
175-12 section is exceeded, then the excess portion of such investment
175-13 shall be an investment under this subsection; and
175-14 (2) the burden of establishing the value of such
175-15 investments shall be upon the insurer; and
175-16 (3) the amount of any one such investment may
175-17 not exceed 10 percent of the insurer's capital and surplus in
175-18 excess of the statutory minimum capital and surplus applicable to
175-19 that insurer; and
175-20 (4) the aggregate of all investments made under
175-21 this subsection may not exceed the lesser of either five percent of
175-22 the insurer's assets or the insurer's capital and surplus in excess
175-23 of the statutory minimum capital and surplus applicable to that
175-24 insurer;
175-25 (p) Other Authorized Investments. Those other
175-26 investments as follows:
175-27 (1) any investment held by an insurer on the
176-1 effective date of this Act, which was legally authorized at the
176-2 time it was made or acquired or which the insurer was authorized to
176-3 hold or possess immediately prior to such effective date, but which
176-4 does not conform to the requirements of the investments authorized
176-5 in Subsections (a) through (o) of this section, may continue to be
176-6 held by and considered as an admitted asset of the insurer;
176-7 provided the investment is disposed of at its maturity date, if
176-8 any, or within the time prescribed by the law under which it was
176-9 acquired, if any; and provided further, in no event shall the
176-10 provisions of this subdivision alter the legal or accounting status
176-11 of such asset; and
176-12 (2) any other investment which may be authorized
176-13 by other provisions of this code or by other laws of this state for
176-14 the insurers which are subject to this article.
176-15 (q) Special Limitations for Certain Fixed Annuity
176-16 Insurers. The quantitative limitations imposed above in
176-17 Subsections (b)(2), (c)(2), (f)(1), (g)(3), (h)(3), (i)(2), and
176-18 (k)(5) of this section shall not apply to any insurer with assets
176-19 in excess of $2,500,000,000 and that receives more than 90 percent
176-20 of its premium income from fixed rate annuity contracts and that
176-21 has more than 90 percent of its assets allocated to its reserves
176-22 held for fixed rate annuity contracts, excluding, however, any
176-23 premium income, assets, and reserves received from, held for, or
176-24 allocated to separate accounts from the computation of the above
176-25 percentages, and in lieu thereof, the following quantitative
176-26 limitations shall apply to such insurers:
176-27 (1) the limitation in Subsection (b)(2) of this
177-1 section shall be two percent of the insurer's assets;
177-2 (2) the limitation in Subsection (c)(2) of this
177-3 section shall be two percent of the insurer's assets;
177-4 (3) the limitation in Subsection (f)(1) of this
177-5 section shall be two percent of the insurer's assets;
177-6 (4) the limitation in Subsection (g)(3) of this
177-7 section shall be one percent of the insurer's assets;
177-8 (5) the limitation in Subsection (h)(3) of this
177-9 section shall be one percent of the insurer's assets;
177-10 (6) the limitation in Subsection (i)(2) of this
177-11 section shall be two percent of the insurer's assets; and
177-12 (7) the limitation in Subsection (k)(5) of this
177-13 section shall be two percent of the insurer's assets.
177-14 (r) Premium Loans. Loans to finance the payment of
177-15 premiums for the insurer's own insurance policies or annuity
177-16 contracts; provided that the amount of any such loan does not
177-17 exceed the sum of: (i) the available cash value of such insurance
177-18 policy or annuity contract; and (ii) the amount of any escrowed
177-19 commissions payable relating to such insurance policy or annuity
177-20 contract for which the premium loan is made; and
177-21 (s) Money Market Funds. (1) Money market funds as
177-22 defined by 17 CFR 270.2a-7 under the Investment Company Act of 1940
177-23 (15 U.S.C. 80a-1 et seq.) that meet the following additional
177-24 conditions:
177-25 (A) the funds invest 100 percent of total
177-26 assets in United States treasury bills, notes, and bonds, and
177-27 collateralized repurchase agreements composed of those obligations
178-1 at all times;
178-2 (B) the funds invest 100 percent of total
178-3 assets in other full faith and credit instruments of the United
178-4 States; or
178-5 (C) the funds invest at least 95 percent
178-6 of total assets in exempt securities, short-term debt instruments
178-7 with a maturity of 397 days or less, class one bonds, and
178-8 collateralized repurchase agreements composed of those securities
178-9 at all times;
178-10 (2) For purposes of complying with Subsection
178-11 (h) of this section, money market funds qualifying for listing
178-12 within these categories must conform to the purpose and procedures
178-13 manual of the valuation of securities manual of the National
178-14 Association of Insurance Commissioners.
178-15 (t) The percentage authorizations and limitations set
178-16 forth in any and all of the provisions of this section shall apply
178-17 at the time of originally making such investments and shall not be
178-18 applicable to the company or such investment thereafter.
178-19 SECTION 7.12. Section 3(d), Article 21.49-1, Insurance Code,
178-20 is amended to read as follows:
178-21 (d) Amendments to Registration Statements. Each registered
178-22 insurer shall keep current the information required to be disclosed
178-23 in its registration statement by reporting all material changes or
178-24 additions within 15 days after the end of the month in which it
178-25 learns of each such change or addition, except that the insurer is
178-26 not required to report a transaction under this subsection that is
178-27 authorized under Subsection 4(d) of this section. In addition,<;
179-1 provided, however, that> subject to Subsection (c) of Section 4,
179-2 each registered insurer shall <so> report all dividends and other
179-3 distributions to shareholders within two business days following
179-4 the declaration thereof<;> and at least 10 days before the date of
179-5 payment. For purposes of determining compliance with those
179-6 deadlines, reports are considered to be made when received by the
179-7 Texas Department of Insurance. Reports under this subsection are
179-8 for informational purposes only. The commissioner shall adopt
179-9 rules that establish procedures to:
179-10 (1) consider the prepayment notices promptly, that
179-11 shall include the standards set forth under Section 4(b), Article
179-12 21.49-1 of this code;
179-13 (2) review annually all reported ordinary dividends
179-14 paid within the preceding twelve months; and
179-15 (3) take such appropriate actions as may be authorized
179-16 by other provisions of this code <provided further that any
179-17 transaction authorized by Section 4(d) hereof need not be reported
179-18 under this subsection>.
179-19 SECTION 7.13. Section 4(b), Article 21.49-1, Insurance Code,
179-20 is amended to read as follows:
179-21 (b) Adequacy of Surplus. For the purposes of this
179-22 article, in determining whether an insurer's surplus as regards
179-23 policyholders is reasonable in relation to the insurer's
179-24 outstanding liabilities and adequate to its financial needs, the
179-25 following factors, among others, shall be considered:
179-26 (1) the size of the insurer as measured by its assets,
179-27 capital and surplus, reserves, premium writings, insurance in
180-1 force, and other appropriate criteria;
180-2 (2) the extent to which the insurer's business is
180-3 diversified among the several lines of insurance;
180-4 (3) the number and size of risks insured in each line
180-5 of business;
180-6 (4) the extent of the geographical dispersion of the
180-7 insurer's insured risks;
180-8 (5) the nature and extent of the insurer's reinsurance
180-9 program;
180-10 (6) the quality, diversification, and liquidity of the
180-11 insurer's investment portfolio;
180-12 (7) the recent past and projected future trend in the
180-13 size of the insurer's surplus as regards policyholders and the
180-14 insurer's investment portfolio;
180-15 (8) the surplus as regards policyholders maintained by
180-16 other comparable insurers;
180-17 (9) the adequacy of the insurer's reserves; <and>
180-18 (10) the quality and liquidity of investments in
180-19 subsidiaries made pursuant to Section 6. The commissioner may
180-20 treat any such investment as a nonadmitted or disallowed asset for
180-21 purposes of determining the adequacy of surplus as regards
180-22 policyholders whenever in his judgment such investment so warrants;
180-23 and
180-24 (11) the quality of the insurer's earnings and the
180-25 extent to which the insurer's reported earnings include
180-26 extraordinary items.
180-27 SECTION 7.14. Section 3A, Article 21.39-A, Insurance Code,
181-1 is amended by adding Subsection (c) to read as follows:
181-2 (c) This Act does not apply to a reinsurance agreement or
181-3 any trust account related to the reinsurance agreement if the
181-4 agreement and trust account meet the requirements of Article 3.10
181-5 or 5.75-1 of this code.
181-6 SECTION 7.15. Section 1, Article 21.39-B, Insurance Code, is
181-7 amended to read as follows:
181-8 Sec. 1. Any director, member of a committee, or officer, or
181-9 any clerk of a domestic company, who is charged with the duty of
181-10 handling or investing its funds, shall not:
181-11 (1) deposit or invest such funds, except in the
181-12 corporate name of such company, provided, however, that securities
181-13 kept under a custodial agreement or trust agreement with a bank,
181-14 federal home loan bank, or trust company may be issued in the name
181-15 of a nominee of such bank, federal home loan bank, or trust company
181-16 if such bank, federal home loan bank, or trust company has
181-17 corporate trust powers and is duly authorized to act as a custodian
181-18 or trustee and is organized under the laws of the United States of
181-19 America or any state thereof and either (i) is a member of the
181-20 Federal Reserve System, (ii) is a member of or is eligible to
181-21 receive deposits which are insured by the Federal Deposit Insurance
181-22 Corporation, <or> (iii) maintains an account with a Federal Reserve
181-23 Bank and is subject to supervision and examination by the Board of
181-24 Governors of the Federal Reserve System, or (iv) is subject to
181-25 supervision and examination by the Federal Housing Finance Board;
181-26 (2) borrow the funds of such company;
181-27 (3) be interested in any way in any loan, pledge,
182-1 security, or property of such company, except as stockholder; or
182-2 (4) take or receive to his own use any fee, brokerage,
182-3 commission, gift, or other consideration for, or on account of, a
182-4 loan made by or on behalf of such company.
182-5 SECTION 7.16. Section 4(a), Article 21.39-B, Insurance Code,
182-6 is amended to read as follows:
182-7 (a) A domestic insurance company may evidence its ownership
182-8 of securities either through definitive certificates or through
182-9 uncertificated securities as defined by the Business & Commerce
182-10 Code and as provided by Section 6 of this article. The insurance
182-11 company<, or it> may deposit or arrange through its agents,
182-12 brokers, or dealers for the deposit of securities held in or
182-13 purchased for its general account or its separate accounts in
182-14 either a clearing corporation or the Federal Reserve Book Entry
182-15 System. When securities are deposited with a clearing corporation
182-16 directly or deposited indirectly through a participating custodian
182-17 bank, certificates representing securities of the same class of the
182-18 same issuer may be merged and held in bulk in the name of nominee
182-19 of such clearing corporation with any other securities deposited
182-20 with such clearing corporation by any person, regardless of the
182-21 ownership of such securities, and certificates representing
182-22 securities of small denominations may be merged into one or more
182-23 certificates of larger denominations. The records of any agent,
182-24 broker, dealer, or member banks through which an insurance company
182-25 holds securities in the Federal Reserve Book Entry System and the
182-26 record of any custodian banks through which an insurance company
182-27 holds securities in a clearing corporation shall at all times show
183-1 that such securities are held for such insurance company and for
183-2 which accounts thereof. To be eligible to act as a participating
183-3 custodian bank under this subsection, a bank must enter a custodial
183-4 agreement with the insurance company for which it is to act as a
183-5 participating custodian bank.
183-6 SECTION 7.17. Article 21.39-B, Insurance Code, is amended by
183-7 adding Section 6 to read as follows:
183-8 Sec. 6. The State Board of Insurance shall adopt rules
183-9 authorizing a domestic insurance company to demonstrate ownership
183-10 of an uncertificated security consistent with common practices of
183-11 securities exchanges and markets. The rules shall establish:
183-12 (1) standards for the types of uncertificated
183-13 securities that may be held;
183-14 (2) the manner in which ownership of the security may
183-15 be demonstrated; and
183-16 (3) adequate financial safeguards relating to the
183-17 ownership of uncertificated securities.
183-18 SECTION 7.18. Notwithstanding Section 8(b), Article 1.14-2,
183-19 Insurance Code, as amended by this Act, each insurer subject to the
183-20 minimum capital and surplus requirements of that section shall have
183-21 a minimum capital and surplus of not less than:
183-22 (1) $9 million not later than December 31, 1993;
183-23 (2) $12 million not later than December 31, 1994; and
183-24 (3) $15 million not later than December 31, 1995.
183-25 SECTION 7.19. Article 1.16(b), Insurance Code, as amended by
183-26 this Act, applies only to an assessment made by the State Board of
183-27 Insurance on or after September 1, 1993. An assessment made
184-1 before that date is governed by the law in effect on the date that
184-2 the assessment is made, and the former law is continued in effect
184-3 for that purpose.
184-4 SECTION 7.20. Article 1.39, Insurance Code, as amended by
184-5 this Act, applies only to a subordinated indebtedness created on or
184-6 after the effective date of this Act.
184-7 SECTION 7.21. (a) Section 4(c), Article 3.33, Insurance
184-8 Code, as amended by this Act, does not prohibit an insurer from
184-9 acquiring an obligation that it has committed to acquire within the
184-10 nine months preceding the effective date of this Act if the insurer
184-11 would have been permitted to acquire that obligation under Section
184-12 4, Article 3.33, Insurance Code, as it existed before amendment by
184-13 this Act on the date on which the insurer committed to purchase
184-14 that obligation.
184-15 (b) Section 4(c), Article 3.33, Insurance Code, as amended
184-16 by this Act, does not require an insurer to sell or otherwise
184-17 dispose of any obligation:
184-18 (1) legally acquired before the effective date of this
184-19 Act; or
184-20 (2) if acquired on or after the effective date of this
184-21 Act, that satisfied the conditions of that subsection on the date
184-22 of the acquisition, but that subsequently fails to satisfy those
184-23 conditions.
184-24 SECTION 7.22. Section 8(e), Article 1.14-2, Insurance Code,
184-25 is amended to read as follows:
184-26 (e) Instead of the minimum capital and surplus requirements
184-27 provided by this section, a <an unincorporated> group of <alien
185-1 individual> insurers, which group includes unincorporated
185-2 individual insurers, may maintain a trust fund in an amount not
185-3 less than $50 million as security to the full amount of the trust
185-4 fund for all policyholders and creditors in the United States of
185-5 each member of the group. Except as specifically otherwise
185-6 provided by this subsection, the trust fund must comply with the
185-7 terms and conditions provided by Subsection (d) of this section for
185-8 the trust fund required by that subsection.
185-9 ARTICLE 8. CONSOLIDATION, LIQUIDATION, REHABILITATION,
185-10 REORGANIZATION, OR CONSERVATION OF INSURERS
185-11 SECTION 8.01. Subsection (a), Section 2, Article 21.28,
185-12 Insurance Code, is amended to read as follows:
185-13 (a) Receiver Taking Charge; Commissioner and Powers and
185-14 Duties. Whenever under the law of this State a court of competent
185-15 jurisdiction finds that a receiver should take charge of the assets
185-16 of an insurer domiciled in this State, the commissioner of
185-17 insurance or a person designated by the commissioner under contract
185-18 shall act as receiver. The receiver shall forthwith take
185-19 possession of the assets of such insurer and deal with the same in
185-20 the person's own name as receiver or in the name of the insurer as
185-21 the court may direct. The receiver has the powers specified in
185-22 this code. A person designated by the commissioner to act as
185-23 special deputy receiver under contract is subject to the
185-24 performance standards imposed by this subsection. It is the intent
185-25 of the legislature that <continuous> oversight of the special
185-26 deputy receivers and guaranty associations shall be conducted by
185-27 the commissioner. The commissioner shall use a competitive bidding
186-1 process in the selection of special deputy receivers and shall
186-2 establish specifications for the position of special deputy
186-3 receiver. The special deputy receiver shall submit monthly written
186-4 reports to the court and commissioner that state the special deputy
186-5 receiver's business plan for the receivership, including expenses
186-6 incurred in administering the receivership during the preceding
186-7 month and an estimate of those expenses for the succeeding month.
186-8 The report must include a cost-benefit analysis on the expenditure
186-9 of funds other than funds spent for the payment of claims. The
186-10 business plan report must include a budget of monthly expenses that
186-11 explains any variation from the original projection. The business
186-12 plan report must include a list of any lawyers or law firms that
186-13 offered to or did represent the special deputy receiver in relation
186-14 to its duties under this article, and any hours billed or fees paid
186-15 to a lawyer or law firm that represented the special deputy
186-16 receiver. The special deputy receiver shall submit the business
186-17 plan report to the attorney general on a quarterly basis, and the
186-18 attorney general may make recommendations to the commissioner based
186-19 on the report. In addition to the business plan report, the
186-20 special deputy receiver shall submit a monthly report to the
186-21 commissioner relating to the special deputy receiver's activities
186-22 in administering the receivership. Upon written application by the
186-23 special deputy receiver and with approval of the commissioner, the
186-24 court may suspend the requirement for monthly reports or require
186-25 reports less frequently based upon a showing that the costs of such
186-26 reports exceed the benefit derived from their filing.
186-27 SECTION 8.02. Sections 3(f) and (g), Article 21.28,
187-1 Insurance Code, are amended to read as follows:
187-2 (f) Offsets. In all cases of mutual debts or mutual
187-3 credits, whether arising out of one or more contracts between the
187-4 insurer and another person in connection with any claim or
187-5 proceeding under this Article, such credits and debts shall be set
187-6 off and the balance only shall be allowed or paid, except as
187-7 provided in subsection (g).
187-8 (g) No Offsets. No offsets shall be allowed in favor of any
187-9 person where (1) the obligation of the insurer to such person would
187-10 not at the date of the commencement of the delinquency proceedings
187-11 or as otherwise provided in Section 2(c), entitle him to share as a
187-12 claimant in the assets of such insurer, or (2) the obligation of
187-13 the insurer to such person was purchased by or transferred to such
187-14 person subsequent to the commencement of the delinquency
187-15 proceedings or for the purpose of increasing offset rights <with a
187-16 view of its being used as an offset>, or (3) the obligation of such
187-17 person is to pay an assessment levied against the members of a
187-18 mutual insurer, or reciprocal exchange, or underwriters at Lloyds,
187-19 or to pay a balance upon a subscription to the capital stock of a
187-20 stock insurance corporation, or (4) the obligation of such person
187-21 is as a trustee or fiduciary, or (5) the obligations between the
187-22 person and the insurer arise from reinsurance transactions in which
187-23 either the person or the insurer has assumed risks and obligations
187-24 from the other party and then has ceded back to that party
187-25 substantially the same risks and obligations. The receiver shall
187-26 provide persons with accounting statements identifying all debts
187-27 that are due and payable. If a person owes the insurer amounts
188-1 that are due and payable, against which the person asserts offset
188-2 of mutual credits that may become due and payable from the insurer
188-3 in the future, the person shall promptly pay to the receiver the
188-4 amounts due and payable. Notwithstanding Section 8, or any other
188-5 provision of this Article, the receiver shall promptly and fully
188-6 refund, to the extent of the person's prior payments, any mutual
188-7 credits that become due and payable to the person by the insurer.
188-8 SECTION 8.03. Article 21.28, Insurance Code, is amended by
188-9 adding Section 7A to read as follows:
188-10 Sec. 7A. EARLY ACCESS DISTRIBUTION. (a) Within 120 days of
188-11 the commencement of the insolvency proceeding against an impaired
188-12 insurer, the liquidator or a special deputy receiver appointed
188-13 under this Article may make application to the court for approval
188-14 of a proposal to disburse assets out of marshaled assets, from time
188-15 to time as such assets become available, to a guaranty association
188-16 or foreign guaranty association having Class 1 or Class 2 claims
188-17 against the estate of the impaired insurer because of such
188-18 insolvency. If the receiver or special deputy receiver fails to
188-19 make such application within 120 days, the guaranty association may
188-20 submit an application to the court requesting that the receiver or
188-21 special deputy receiver submit a proposal to disburse assets. If
188-22 the liquidator or special deputy receiver determines that there are
188-23 insufficient assets to disburse, the application required by this
188-24 section shall be considered satisfied by a filing by the liquidator
188-25 or special deputy receiver stating the reasons for this
188-26 determination.
188-27 (b) Such proposal shall, at a minimum, include provisions
189-1 for:
189-2 (1) reserving amounts sufficient to allow the payment
189-3 of Class 1 claims, and to the extent the assets of the insolvent
189-4 insurer will allow any payment to be made on Class 2 claims,
189-5 reserving amounts sufficient to provide equal pro-rata
189-6 distributions to the Class 2 claimants other than the guaranty
189-7 associations;
189-8 (2) disbursement of the assets marshaled to date and
189-9 the subsequent distribution of assets as they become available;
189-10 (3) equitable allocation of disbursements to each of
189-11 the guaranty associations and foreign guaranty associations
189-12 entitled thereto;
189-13 (4) the securing of the liquidator or special deputy
189-14 receiver from each of the associations entitled to disbursements
189-15 pursuant to this section of an agreement to return to the
189-16 liquidator upon request and approval by the court such assets,
189-17 together with income on assets previously disbursed, as may be
189-18 required to pay Class 1 claimants and any federal claimants
189-19 asserting priority claims. No bond shall be required of any such
189-20 association; and
189-21 (5) a full report to be made by each association to
189-22 the liquidator or special deputy receiver, as requested by the
189-23 liquidator or special deputy receiver, but no more frequently than
189-24 quarterly, accounting for the assets so disbursed to the
189-25 association, all disbursements made therefrom, any interest earned
189-26 by the association on such assets and any other matter as the court
189-27 may direct.
190-1 (c) The proposal submitted by the liquidator or special
190-2 deputy receiver shall provide for disbursements to the associations
190-3 in amounts estimated at least equal to the claim payments made or
190-4 to be made thereby for which such associations could assert a claim
190-5 against the liquidator, and shall further provide that if the
190-6 assets available for disbursement from time to time do not equal or
190-7 exceed the amount of such claim payments made or to be made by the
190-8 association, then disbursements shall be made for the pro-rata
190-9 amount of the association's Class 2 claim.
190-10 (d) The proposal submitted by the liquidator or special
190-11 deputy receiver shall, with respect to an insolvent insurer writing
190-12 life or health insurance or annuities, provide for disbursement of
190-13 assets to any guaranty association or foreign guaranty association
190-14 covering life or health insurance or annuities or to any other
190-15 entity or organization reinsuring, assuming, or guaranteeing
190-16 policies or contracts of insurance under the acts creating such
190-17 associations.
190-18 (e) Notice of the application shall be given to the
190-19 association in and to the commissioners of insurance of each of the
190-20 states. Notice shall be considered to have been given when
190-21 deposited in the United States certified mail, first class postage
190-22 prepaid, at least 30 days prior to the submission of the
190-23 application to the court. Action of the application may be taken
190-24 by the court if notice has been given and if the liquidator's or
190-25 special deputy receiver's proposal complies with the requirements
190-26 of this section. Notice of the application shall be given to those
190-27 Class 1 and Class 2 claimants that are reasonably ascertainable in
191-1 a manner deemed appropriate by the court, including notice by
191-2 publication.
191-3 SECTION 8.04. Subsection (a), Section 8, Article 21.28,
191-4 Insurance Code, is amended to read as follows:
191-5 (a) Priority of Distribution of Assets. The
191-6 <Notwithstanding any other provision of law, the> priority of
191-7 distribution of assets from the insurer's estate shall be in
191-8 accordance with the disbursement plan approved by the court
191-9 pursuant to Section 7A of this Article, and in accordance with the
191-10 order of each class as provided by this subsection. Every claim in
191-11 each class shall be paid in full or adequate funds retained for
191-12 such payment before the members of the next class receive any
191-13 payment. No subclasses shall be established within any class.
191-14 <Additional subclasses may not be established within any class.>
191-15 Class 1.
191-16 (1) All of the receiver's, conservator's, and
191-17 supervisor's costs and expenses of administration, including
191-18 repayment of funds advanced to the receiver from the abandoned
191-19 property fund of the State Board of Insurance.
191-20 (2) All of the expenses of an insurance guaranty
191-21 association or foreign insurance guaranty association in handling
191-22 claims.
191-23 (3) Wages owed to employees of the insurer as provided
191-24 for in Section 6 of this Article.
191-25 (4) Secured creditors to the extent of the value of
191-26 the security as provided by Section 8(c) of this Article.
191-27 Class 2.
192-1 (1) All claims by policyholders, beneficiaries,
192-2 insureds, and liability claims against insureds covered under
192-3 insurance policies and insurance contracts issued by the insurer.
192-4 (2) All claims by an insurance guaranty association or
192-5 a foreign insurance guaranty association that are payments of
192-6 proper policyholder claims.
192-7 Class 3.
192-8 All other claims of general creditors not falling within any
192-9 other priority under this section including claims for taxes and
192-10 debts due the federal government or any state or local government
192-11 which are not secured claims.
192-12 Class 4.
192-13 Claims of surplus or contribution note holders, holders of
192-14 debentures or holders of similar obligations and proprietary claims
192-15 of shareholders, members, or other owners according to the terms of
192-16 the instruments.
192-17 SECTION 8.05. Section 8, Article 21.28, Insurance Code, is
192-18 amended by adding Subsection (k) to read as follows:
192-19 (k) Every claim under a separate account established under
192-20 Article 3.75 of this code, providing that the income, gains, and
192-21 losses, realized and unrealized, from assets allocated to the
192-22 separate account shall be credited to or charged against the
192-23 account, without regard to other income, gains, or losses of the
192-24 life insurance company, shall be satisfied out of the assets in the
192-25 separate account equal to the reserves maintained in such account
192-26 for the contracts. To the extent provided under contracts
192-27 established under Article 3.75 of this code, that portion of the
193-1 assets of any separate account equal to the reserves and other
193-2 contract liabilities for the separate account is not chargeable
193-3 with liabilities arising out of any other business of the company.
193-4 To the extent, if any, reserves maintained in the separate account
193-5 are in excess of the amounts needed to satisfy claims under the
193-6 separate account contracts, the excess shall be treated as general
193-7 assets of the life insurance company.
193-8 SECTION 8.06. Section 9, Article 21.28, Insurance Code, is
193-9 amended to read as follows:
193-10 Sec. 9. CLOSING. (a) Excess Assets--Stock Companies. When
193-11 the receiver shall have made provision for unclaimed dividends and
193-12 all of the liabilities of a stock insurance company, he shall call
193-13 a meeting of the stockholders of the insurer by giving notice
193-14 thereof in one (1) or more newspapers in the county where the
193-15 principal office of the insurer was located, and by written notice
193-16 to the stockholders of record at their last known address. At such
193-17 meeting, the stockholders shall appoint an agent or agents to take
193-18 over the affairs to continue the liquidation for benefit of the
193-19 stockholders. Voting privileges shall be governed by the insurer's
193-20 bylaws. A majority of the stock shall be represented at the
193-21 agent's appointment. Such agent or agents shall execute and file
193-22 with the court such bond or bonds as shall be approved by it,
193-23 conditioned on the faithful performance of all the duties of the
193-24 trust. Under order of the court the receiver shall then transfer
193-25 and deliver to such agent or agents for continued liquidation under
193-26 the court's supervision all assets of insurer remaining in his
193-27 hands, whereupon the receiver and the Board, and each member and
194-1 employee thereof, shall be discharged from any further liability to
194-2 such insurer and its creditors and stockholders; provided, however,
194-3 that nothing herein contained shall be so construed as to permit
194-4 the insurer to continue in business as such, but the charter of
194-5 such insurer and all permits and licenses issued thereunder or in
194-6 connection therewith shall be ipso facto revoked and annulled by
194-7 such order of the court directing the receiver to transfer and
194-8 deliver the remaining assets of such insurer to such agent or
194-9 agents.
194-10 (b) Excess Assets--Other Companies. After the receiver
194-11 shall have made provision for unclaimed dividends and all of the
194-12 liabilities of any insurer other than a stock insurance company, he
194-13 shall dispose of any remaining assets as directed by the
194-14 receivership court.
194-15 (c) Excess Assets--Guaranty Associations. Notwithstanding
194-16 any other provisions of this article in closing an estate, a
194-17 special deputy receiver, on approval of the court, may transfer any
194-18 remaining assets, causes of action asserted on behalf of the
194-19 impaired insurer, judgment, claims, or liens to the appropriate
194-20 guaranty association and this transfer shall not be a preference or
194-21 voidable transfer but shall be considered a distribution under
194-22 Section 8(a)(1) of this article. In the event the sum realized by
194-23 the guaranty association is materially larger than the amount
194-24 loaned to the estate by the guaranty association, the court may
194-25 order reopening of the estate to disburse the excess funds.
194-26 Nothing in this section shall be construed as a transfer of any
194-27 liability of an impaired insurer to the guaranty association that
195-1 would not constitute a claim payable under Articles 9.48, 21.28-C,
195-2 or 21.28-D of this code.
195-3 (d) Limitation. Except as otherwise provided by this
195-4 subsection, each receivership or other delinquency proceeding
195-5 prescribed by this Article shall be administered in accordance with
195-6 Section 64.072, Civil Practice and Remedies Code. To the extent a
195-7 receivership or delinquency proceeding initiated against an insurer
195-8 applies to claims against a workers' compensation insurance policy
195-9 or a title insurance policy, the receivership or delinquency
195-10 proceeding shall be administered continuously for whatever length
195-11 of time is necessary to effectuate its purposes, and no arbitrary
195-12 period prescribed elsewhere by the laws of Texas limiting the time
195-13 for the administration of receiverships or of corporate affairs
195-14 generally shall be applicable thereto. Instead of the winding up
195-15 and distribution of a receivership estate of an insurer without
195-16 capital stock, the court shall order revival and reinstatement of
195-17 the charter, permits, licenses, franchises, and management
195-18 contracts or other control instruments of the insurer if the
195-19 insurer's remaining cash on hand and on deposit, less any
195-20 outstanding valid and enforceable liabilities, exceeds the minimum
195-21 amount of capital and surplus prescribed for that insurer under
195-22 Article 2.02 or Section 1 of Article 3.02 of this code.
195-23 (e) <(d)> Reopening. If after the receivership shall have
195-24 been closed by final order of the court, the liquidator shall
195-25 discover assets not known to him during receivership, he shall
195-26 report his findings to the court. It shall be within the
195-27 discretion of the court as to whether the value of the
196-1 after-discovered assets shall justify the reopening of the
196-2 receivership for continued liquidation.
196-3 SECTION 8.07. Subsection (d), Section 11, Article 21.28,
196-4 Insurance Code, is amended to read as follows:
196-5 (d) Maintenance of Records. The receiver may devise a
196-6 method for the effective, efficient, and economical maintenance of
196-7 the records of the delinquent insurer and of the liquidator's
196-8 office including maintaining those records on any medium approved
196-9 by the Records Management Division of the Texas State Library. A
196-10 copy of an original record or any other record that is maintained
196-11 on any medium approved by the Records Management Division of the
196-12 Texas State Library within the scope of this section that is
196-13 produced by the receiver or his authorized representative under
196-14 this Article shall have the same force and effect as the original
196-15 record and may be used the same as the original record in any
196-16 judicial or administrative proceeding in this state. In order to
196-17 maintain the records of delinquent insurers after the closing of
196-18 the receivership proceedings, the receiver may reserve assets of an
196-19 estate to be deposited in an account to be used for the specific
196-20 purpose of maintenance, storage, and disposal of records in closed
196-21 receivership estates. <If the need exists for the continued
196-22 maintenance of any records of a delinquent insurer after the
196-23 closing of the receivership proceedings, the receiver may reserve
196-24 sufficient assets, including cash, to be transferred to the
196-25 liquidator on closing of the receivership for the specific purpose
196-26 of meeting the reasonable cost of maintaining those records.>
196-27 SECTION 8.08. Section 3, Article 21.28-A, Insurance Code, is
197-1 amended to read as follows:
197-2 Sec. 3. Notice to comply with written requirements of
197-3 commissioner; noncompliance; taking charge as conservator. If upon
197-4 examination or at any other time it appears to or is the opinion of
197-5 the Commissioner of Insurance that any insurance company is
197-6 insolvent, or its condition is such as to render the continuance of
197-7 its business hazardous to the public or to holders of its policies
197-8 or certificates of insurance, or if such company appears to have
197-9 exceeded its powers (as defined herein) or has failed to comply
197-10 with the law, or if such insurance company gives its consent (as
197-11 defined herein), then the Commissioner of Insurance shall upon his
197-12 determination (a) notify the insurance company of his
197-13 determination, and (b) furnish to the insurance company a written
197-14 list of the Commissioner's requirements to abate his determination,
197-15 and (c) if the Commissioner makes a further determination to
197-16 supervise he shall notify the insurance company that it is under
197-17 the supervision of the Commissioner of Insurance and that the
197-18 Commissioner is applying and effecting the provisions of this
197-19 Article. Such insurance company shall comply with the lawful
197-20 requirements of the Commissioner of Insurance. If placed under
197-21 supervision, the insurance company shall have not more than one
197-22 hundred-eighty (180) <sixty (60)> days from the date of the
197-23 Commissioner's notice of supervision to comply with the
197-24 requirements of the Commissioner. <The Commissioner may extend the
197-25 supervision for an additional period not to exceed thirty (30) days
197-26 on written determination by the Commissioner that there is a
197-27 substantial likelihood of rehabilitation. No hearing is required
198-1 before the Commissioner makes the determination.> During the
198-2 period of supervision, the insurance company shall continue to pay
198-3 claims according to terms of the insurance policy, and the
198-4 Commissioner may schedule a hearing relating to the insurance
198-5 company in supervision with not less than ten (10) days' written
198-6 notice to all parties of record on his own motion or that of any
198-7 party of record. However, notice may be waived by the parties of
198-8 record. If after hearing it is determined that the insurance
198-9 company has failed to comply with the lawful requirements of the
198-10 Commissioner, it has not been rehabilitated, it is insolvent, or it
198-11 is otherwise in such a condition as to render the continuance of
198-12 its business hazardous to the public or to holders of its policies
198-13 or certificates of insurance, or if the company appears to have
198-14 exceeded its powers as defined in this Article, the Commissioner of
198-15 Insurance, acting for himself, or through a conservator appointed
198-16 by the Commissioner of Insurance for that purpose, shall take
198-17 charge as conservator of the insurance company and all of the
198-18 property and effects thereof. If after hearing it is determined
198-19 that the insurance company has been rehabilitated or its condition
198-20 has otherwise been remedied such that the continuance of its
198-21 business is no longer hazardous to the public or to holders of its
198-22 policies or certificates of insurance, the Commissioner may release
198-23 that insurance company from supervision. Section 15,
198-24 Administrative Procedure and Texas Register Act (Article 6252-13a,
198-25 Vernon's Texas Civil Statutes), does not apply to hearings held by
198-26 the Commissioner or his representative under this Article.
198-27 SECTION 8.09. Sections 3A(a) and (e), Article 21.28-A,
199-1 Insurance Code, are amended to read as follows:
199-2 (a) All <Notwithstanding any other provision of law,>
199-3 hearings, orders, notices, correspondence, reports, records, and
199-4 other information in the possession of the Texas Department <State
199-5 Board> of Insurance relating to the supervision or conservatorship
199-6 of any insurance company are <not> confidential <unless the
199-7 Commissioner of Insurance determines that confidentiality> during
199-8 the <initial> period of supervision and conservatorship. On
199-9 termination of the supervision and conservatorship, the information
199-10 in the custody of the department that relates to the supervision
199-11 and conservatorship becomes public information <is necessary to
199-12 accomplish the purposes of this article. The Commissioner of
199-13 Insurance shall make this determination of confidentiality on the
199-14 date the first notice of supervision is given. The period of
199-15 confidentiality determined by the Commissioner of Insurance may not
199-16 be for a period that exceeds 60 days after the date of the
199-17 Commissioner's determination>.
199-18 (e) An officer or employee of the Texas Department <State
199-19 Board> of Insurance is not liable for release of information
199-20 without a showing that the release of information was accomplished
199-21 with actual malice.
199-22 This section does not apply to information (1) if the
199-23 insureds of the insurance company are not protected by Article
199-24 9.48, 21.28-C, or 21.28-D of this code or by statutes substantially
199-25 similar to those Articles, or (2) on the appointment of a receiver
199-26 for the insurance company by a court of competent jurisdiction.
199-27 SECTION 8.10. Article 21.28-A, Insurance Code, is amended by
200-1 adding Section 13 to read as follows:
200-2 Sec. 13. INSURER'S ATTORNEY, ACTUARY, AND ACCOUNTANT. (a)
200-3 Notwithstanding any other provision of this article, during a
200-4 supervision proceeding, the insurer may employ an attorney,
200-5 actuary, and accountant of the insurer's choice to assist the
200-6 insurer during the supervision.
200-7 (b) The supervisor shall authorize the payment of reasonable
200-8 fees and expenses from the insurer for the attorney, actuary, or
200-9 accountant.
200-10 SECTION 8.11. Section 17(a), Article 21.28-A, Insurance
200-11 Code, is amended to read as follows:
200-12 (a) The State Board of Insurance may collect fees from any
200-13 entity that is regulated by the board as provided by Subsection (h)
200-14 of Section 7 of Article 1.10 of this code and that is successfully
200-15 rehabilitated by the board. The fees shall be in amounts
200-16 sufficient to cover but not exceed the costs of rehabilitation of
200-17 that entity. The board shall use the fees for the sole purpose of
200-18 the rehabilitation of the entity from which they are collected.
200-19 Fees collected under this subsection shall be deposited in and
200-20 expended through the State Board of Insurance Operating Fund. The
200-21 supervisor, conservator, or commissioner shall use the employees of
200-22 the entity being rehabilitated, to the maximum extent possible,
200-23 instead of outside consultants, actuaries, attorneys, accountants,
200-24 other personnel or departmental employees, in order to minimize the
200-25 expense of rehabilitation or the necessity of fees for
200-26 rehabilitation.
200-27 SECTION 8.12. Article 1.24A, Insurance Code, is repealed.
201-1 SECTION 8.13. Article 5.58A, Insurance Code, is repealed.
201-2 SECTION 8.14. Section 5, Article 1.24B, Insurance Code, is
201-3 amended to read as follows:
201-4 Sec. 5. RULES AND FORMS. (a) The State Board of Insurance
201-5 may promulgate necessary rules to carry out this article, to define
201-6 terminology, criteria, content, and other matters relating to the
201-7 reports, and to designate other types or lines of liability
201-8 insurance required to provide information under this article and
201-9 may prescribe the form and content of the closed claim reports and
201-10 summary claims reports to be filed.
201-11 (b) In lieu of requiring insurers to file the reports
201-12 required by Section 2, the State Board of Insurance may, following
201-13 notice and public hearing, provide for alternative reporting in the
201-14 form of sampling of the required closed claim data.
201-15 SECTION 8.15. Section 6, Article 1.24B, Insurance Code, is
201-16 amended by adding Subsection (d) to read as follows:
201-17 (d) The board may establish an electronic data base composed
201-18 of reports filed with the board, provide the public with access to
201-19 that data, establish a system to provide access by electronic data
201-20 transmittal processes to that data, and set and charge a fee for
201-21 electronic access to the data base in an amount reasonable and
201-22 necessary to cover the costs of access.
201-23 ARTICLE 9. TEXAS PROPERTY AND CASUALTY INSURANCE GUARANTY
201-24 ASSOCIATION
201-25 SECTION 9.01. Section 3, Article 21.28-C, Insurance Code, is
201-26 amended to read as follows:
201-27 Sec. 3. Scope. This Act applies to all kinds of direct
202-1 insurance, and except as provided in Section 12 of this Act, <but>
202-2 is not applicable to the following:
202-3 (1) life, annuity, health, or disability insurance;
202-4 (2) mortgage guaranty, financial guaranty, or other
202-5 forms of insurance offering protection against investment risks;
202-6 (3) fidelity or surety bonds, or any other bonding
202-7 obligations;
202-8 (4) credit insurance, vendors' single-interest
202-9 insurance, collateral protection insurance, or any similar
202-10 insurance protecting the interests of a creditor arising out of a
202-11 creditor-debtor transaction;
202-12 (5) insurance of warranties or service contracts;
202-13 (6) title insurance;
202-14 (7) ocean marine insurance;
202-15 (8) any transaction or combination of transactions
202-16 between a person, including an affiliate of such a person, and an
202-17 insurer, including an affiliate of such an insurer, that involves
202-18 the transfer of investment or credit risk unaccompanied by the
202-19 transfer of insurance risk; or
202-20 (9) any insurance provided by or guaranteed by
202-21 government.
202-22 SECTION 9.02. Subdivision (8), Section 5, Article 21.28-C,
202-23 Insurance Code, is amended to read as follows:
202-24 (8) "Covered claim" means an unpaid claim of an
202-25 insured or third-party liability claimant that arises out of and is
202-26 within the coverage and not in excess of the applicable limits of
202-27 an insurance policy to which this Act applies, issued or assumed
203-1 (whereby an assumption certificate is issued to the insured) by an
203-2 insurer licensed to do business in this state, if that insurer
203-3 becomes an impaired insurer and the third-party claimant or
203-4 liability claimant or insured is a resident of this state at the
203-5 time of the insured event, or the property from which the claim
203-6 arises is permanently located in this state. "Covered claim" shall
203-7 also include 75 percent of unearned premiums, but in no event
203-8 shall a covered claim for unearned premiums exceed $1,000.
203-9 Individual covered claims (including any and all derivative claims
203-10 by more than one person which arise from the same occurrence, which
203-11 shall be considered collectively as a single claim under this Act)
203-12 shall be limited to $100,000, except that the association shall pay
203-13 the full amount of any covered claim arising out of a workers'
203-14 compensation claim made under a workers' compensation policy.
203-15 "Covered claim" shall not include any amount sought as a return of
203-16 premium under a retrospective rating plan or any amount due any
203-17 reinsurer, insurer, insurance pool, or underwriting association, as
203-18 subrogation recoveries or otherwise. "Covered claim" shall not
203-19 include supplementary payment obligations, including adjustment
203-20 fees and expenses, attorney's fees and expenses, court costs,
203-21 interest and penalties, and interest and bond premiums incurred
203-22 prior to the determination that an insurer is an impaired insurer
203-23 under this Act. "Covered claim" shall not include any prejudgment
203-24 or postjudgment interest that accrues subsequent to the
203-25 determination that an insurer is an impaired insurer under this
203-26 Act. "Covered claim" shall not include any claim for recovery of
203-27 punitive, exemplary, extracontractual, or bad-faith damages,
204-1 whether sought as a recovery against the insured, insurer, guaranty
204-2 association, receiver, special deputy receiver, or commissioner,
204-3 awarded in a court judgment against an insured or insurer.
204-4 "Covered claim" shall not include, and the association shall not
204-5 have any liability to an insured or third-party liability claimant,
204-6 for its failure to settle a liability claim within the limits of a
204-7 covered claim under this Act. With respect to a covered claim for
204-8 unearned premiums, both persons who were residents of this state at
204-9 the time the policy was issued and persons who are residents of
204-10 this state at the time the company is found to be an impaired
204-11 insurer shall be considered to have covered claims under this Act.
204-12 If the impaired insurer has insufficient assets to pay the expenses
204-13 of administering the receivership or conservatorship estate, that
204-14 portion of the expenses of administration incurred in the
204-15 processing and payment of claims against the estate shall also be a
204-16 covered claim under this Act.
204-17 SECTION 9.03. Subdivision (9), Section 5, Article 21.28-C,
204-18 Insurance Code, is amended to read as follows:
204-19 (9) "Impaired insurer" means:
204-20 (A) a member insurer that is placed in temporary
204-21 or permanent receivership under an order of a court of competent
204-22 jurisdiction, including the courts of any other state, based on a
204-23 finding of insolvency and that has been designated an impaired
204-24 insurer by the commissioner; or
204-25 (B) a member insurer placed in conservatorship
204-26 after it has been determined by the commissioner to be insolvent
204-27 and that has been designated an impaired insurer by the
205-1 commissioner.
205-2 SECTION 9.04. Subdivision (11), Section 5, Article 21.28-C,
205-3 Insurance Code, is amended to read as follows:
205-4 (11) "Net direct written premiums", when assessing
205-5 other than the workers' compensation line of business, means direct
205-6 premiums written in this state on insurance policies to which this
205-7 Act applies, less return premiums on those policies and dividends
205-8 paid or credited to policyholders on that direct business. The
205-9 term does not include premiums on contracts between insurers or
205-10 reinsurers. When assessing the workers' compensation line of
205-11 business, the term "net direct written premiums" includes the
205-12 modified annual premium prior to the application of any deductible
205-13 premium credit, less return premiums on those policies and
205-14 dividends paid or credited to policyholders on that direct
205-15 business. The term does not include premiums on contracts between
205-16 insurers or reinsurers.
205-17 SECTION 9.05. Subsection (d), Section 7, Article 21.28-C,
205-18 Insurance Code, is amended to read as follows:
205-19 (d) A public representative may not be:
205-20 (1) an officer, director, or employee of an insurance
205-21 company, insurance agency, agent, broker, solicitor, adjuster, or
205-22 any other business entity regulated by the Texas Department of
205-23 Insurance;
205-24 (2) a person required to register with the Texas
205-25 Ethics Commission <secretary of state> under Chapter 305,
205-26 Government Code, in connection with the person's representation of
205-27 clients in the field of insurance; or
206-1 (3) related to a person described by Subdivision (1)
206-2 or (2) of this subsection within the second degree of affinity or
206-3 consanguinity.
206-4 SECTION 9.06. Section 7, Article 21.28-C, Insurance Code, is
206-5 amended by adding Subsection (f) to read as follows:
206-6 (f) A director of the association or any member company or
206-7 other entity represented by the director may not receive any money
206-8 or valuable thing directly, indirectly, or through any substantial
206-9 interest in any other corporation, firm, or business unit for
206-10 negotiating, procuring, participating, recommending, or aiding in a
206-11 transaction, reinsurance agreement, merger, purchase, sale, or
206-12 exchange of assets, policies of insurance, or property made by the
206-13 association or the supervisor, conservator, or receiver on behalf
206-14 of an impaired insurer. The director, company, or entity may not
206-15 be pecuniarily or contractually interested, as principal,
206-16 co-principal, agent, or beneficiary, directly, indirectly, or
206-17 through any substantial interest in any other corporation, firm, or
206-18 business unit, in the transaction, reinsurance agreement, merger,
206-19 purchase, sale, or exchange.
206-20 SECTION 9.07. Subsection (b), Section 8, Article 21.28-C,
206-21 Insurance Code, is amended to read as follows:
206-22 (b) The association shall undertake to discharge the policy
206-23 obligations of the impaired insurer, including the duty to defend
206-24 insureds under a liability policy, to the extent that the policy
206-25 obligations are covered claims under this Act. In performing its
206-26 statutory obligations, the association may also enforce any duty
206-27 imposed on the insured party or beneficiary under the terms of any
207-1 policy of insurance within the scope of this Act. In performing
207-2 its statutory obligations under this Act, the association shall not
207-3 be considered to be in the business of insurance, shall not be
207-4 considered to have assumed or succeeded to any liabilities of the
207-5 impaired insurer, and shall not be considered to otherwise stand in
207-6 the shoes of the impaired insurer for any purpose, including the
207-7 issue of whether the association is amenable to the personal
207-8 jurisdiction of the courts of any other state. The association is
207-9 considered the insurer to the extent of its obligation on the
207-10 covered claims and to that extent has all rights, duties, and
207-11 obligations of the impaired insurer as if the insurer had not
207-12 become impaired.
207-13 SECTION 9.08. Subsection (d), Section 8, Article 21.28-C,
207-14 Insurance Code, is amended to read as follows:
207-15 (d) The association shall investigate <claims brought
207-16 against the association> and <shall> adjust, compromise, settle,
207-17 and pay covered claims to the extent of the association's
207-18 obligation and deny all other claims. The association may review
207-19 settlements, releases, and judgments to which the impaired insurer
207-20 or its insureds were parties to determine the extent to which those
207-21 settlements, releases, and judgments may be properly contested.
207-22 Any judgment taken by default or consent against an insured or the
207-23 impaired insurer, and any settlement, release, or judgment entered
207-24 into by the insured or the impaired insurer, is not binding on the
207-25 association, and may not be considered as evidence of liability or
207-26 of damages in connection with any claim brought against the
207-27 association or any other party under this Act. Notwithstanding any
208-1 other provision of this Act, a covered claim shall not include any
208-2 claim filed with the guaranty association after the later of the
208-3 final date for filing claims against the liquidator or receiver of
208-4 an insolvent insurer or eighteen months after the order of
208-5 liquidation.
208-6 SECTION 9.09. Subsection (h), Section 8, Article 21.28-C,
208-7 Insurance Code, is amended to read as follows:
208-8 (h) The association may:
208-9 (1) employ or retain persons as necessary to handle
208-10 claims and perform other duties of the association;
208-11 (2) borrow funds necessary to implement this Act in
208-12 accordance with the plan of operation;
208-13 (3) sue or be sued;
208-14 (4) negotiate and become a party to contracts as
208-15 necessary to implement this Act, including lump-sum or structured
208-16 compromise and settlement agreements with claimants who have claims
208-17 for medical or indemnity benefits for a period of three years or
208-18 more other than a settlement or lump-sum payment in violation of
208-19 the Texas Workers' Compensation Act (Article 8308-1.01 et seq.,
208-20 Vernon's Texas Civil Statutes);
208-21 (5) perform other acts as necessary or proper to
208-22 implement this Act; or
208-23 (6) refund to the member insurers in proportion to the
208-24 contribution of each member insurer to the association that amount
208-25 by which the assets of the association exceed the liabilities, if
208-26 at the end of any calendar year the board of directors finds that
208-27 the assets of the association exceed the liabilities of the
209-1 association as estimated by the board of directors for the coming
209-2 year.
209-3 SECTION 9.10. Subsection (i), Section 8, Article 21.28-C,
209-4 Insurance Code, is repealed.
209-5 SECTION 9.11. Section 8, Article 21.28-C, Insurance Code, is
209-6 amended by adding Subsection (k) to read as follows:
209-7 (k)(1) Notwithstanding Chapter 271, Acts of the 60th
209-8 Legislature, Regular Session, 1967 (Article 6252-17, Vernon's Texas
209-9 Civil Statutes), the board may hold an open meeting by telephone
209-10 conference call if immediate action is required and the convening
209-11 at one location of a quorum of the board is not reasonable or
209-12 practical.
209-13 (2) The meeting is subject to the notice requirements
209-14 applicable to other meetings.
209-15 (3) The notice of the meeting must specify as the
209-16 location of the meeting the location where meetings of the board
209-17 are usually held.
209-18 (4) Each part of the meeting that is required to be
209-19 open to the public shall be audible to the public at the location
209-20 specified in the notice of the meeting as the location of the
209-21 meeting and shall be tape recorded. The tape recording shall be
209-22 made available to the public.
209-23 SECTION 9.12. Subsection (d), Section 9, Article 21.28-C,
209-24 Insurance Code, is amended to read as follows:
209-25 (d) The plan of operation must:
209-26 (1) establish the procedures under which the powers
209-27 and duties of the association are performed;
210-1 (2) establish procedures for handling assets of the
210-2 association;
210-3 (3) establish the amount and method of reimbursing
210-4 members of the board of directors;
210-5 (4) provide for the establishment of a claims filing
210-6 procedure that includes, but is not limited to, notice by the
210-7 association to claimants, procedures for filing claims seeking
210-8 recovery from the association, and a procedure for appealing the
210-9 denial of claims by the association <establish procedures by which
210-10 claims may be filed with the association>; and
210-11 (5) establish acceptable forms of proof of covered
210-12 claims.
210-13 SECTION 9.13. Subsection (e), Section 9, Article 21.28-C,
210-14 Insurance Code, is amended to read as follows:
210-15 (e) <Notice of claims to the receiver of the impaired
210-16 insurer constitutes notice to the association or its agent.> A
210-17 list of claims shall be submitted periodically to the association
210-18 or similar organization in another state by the receiver.
210-19 SECTION 9.14. Subsection (a), Section 11, Article 21.28-C,
210-20 Insurance Code, is amended to read as follows:
210-21 (a) A person recovering under this Act is considered to have
210-22 assigned to the association the person's right under the policy,
210-23 and the person's rights to recover for the occurrence made the
210-24 basis of the claim under this Act under any policy of insurance
210-25 issued by an unimpaired insurer <the person's rights under the
210-26 policy to the association> to the extent of the person's recovery
210-27 from the association. The association may pursue any such claims
211-1 to which it is subrogated under this provision in its own name or
211-2 in the name of the person recovering under this Act. Each insured
211-3 or claimant seeking the protection of this Act shall cooperate with
211-4 the association to the same extent as that person would have been
211-5 required to cooperate with the impaired insurer. The association
211-6 does not have a cause of action against the insured of the impaired
211-7 insurer for any sums it has paid out except those causes of action
211-8 the impaired insurer would have had if the sums had been paid by
211-9 the impaired insurer and except as provided in Subsection (b) of
211-10 this section. In the case of an impaired insurer operating on a
211-11 plan with assessment liability, payments of claims of the
211-12 association do not reduce the liability of the insureds to the
211-13 receiver or statutory successor for unpaid assessments.
211-14 SECTION 9.15. Subsection (a), Section 12, Article 21.28-C,
211-15 Insurance Code, is amended to read as follows:
211-16 (a) A person who has a claim against an insurer under any
211-17 provision in an insurance policy other than a policy of an impaired
211-18 insurer that is also a covered claim shall exhaust first the
211-19 person's rights under the policy, including any claim for indemnity
211-20 or medical benefits under any workers' compensation, health,
211-21 disability, uninsured motorist, personal injury protection, medical
211-22 payment, liability, or other policy. The association shall have a
211-23 credit or setoff against any amount of benefits which would
211-24 otherwise be payable by the association to the claimant under this
211-25 Act, in the amount of the claimant's recovery under any policy
211-26 issued by an unimpaired insurer. Subject to the provisions of
211-27 Subsection (a-1) below, the association's credit or setoff under
212-1 this section shall be deducted from damages incurred by the
212-2 claimant, and the remaining sum shall be the maximum amount payable
212-3 by the association, except that the association's liability shall
212-4 not exceed $100,000 or the limits of the policy under which the
212-5 claim is made, whichever is less.
212-6 (a-1) Notwithstanding Subsection (a) of this section, if a
212-7 claimant is seeking recovery of policy benefits that, but for the
212-8 insolvency of the impaired insurer, would be subject to lien or
212-9 subrogation by a workers' compensation insurer, health insurer or
212-10 any other insurer, whether impaired or not, then the association's
212-11 credit or offset shall be deducted from the damages incurred by the
212-12 claimant or the limits of the policy under which the claim is made,
212-13 whichever is less. In no event shall a claimant's recovery under
212-14 this Act result in a total recovery to the claimant that is greater
212-15 than that which would have resulted but for the insolvency of the
212-16 impaired insurer. Subject to Section 5(8) of this Act, a
212-17 claimant's recovery under this Act may not result in a recovery to
212-18 the claimant that is less than that which would have resulted but
212-19 for the insolvency of the impaired insurer<. Any amount payable on
212-20 a covered claim under this Act shall be reduced by the amount of
212-21 any recovery under the insurance policy>.
212-22 SECTION 9.16. Subsection (b), Section 12, Article 21.28-C,
212-23 Insurance Code, is amended to read as follows:
212-24 (b) A person who has a claim that may be recovered under
212-25 more than one insurance guaranty association or its equivalent
212-26 shall seek recovery first from the association of the place of
212-27 residence of the insured, except that if it is a first-party claim
213-1 for damage to property with a permanent location, the person shall
213-2 seek recovery first from the association of the location of the
213-3 property, and if it is a workers' compensation claim the person
213-4 shall seek recovery first from the association of the residence of
213-5 the claimant. The association shall have a credit or setoff
213-6 against any amount of benefits under this Act, in the amount of the
213-7 claimant's recovery from the guaranty association or equivalent.
213-8 Subject to the provisions of Subsection (b-1) below, the
213-9 association's credit or setoff under this Section shall be deducted
213-10 from the damages incurred by the claimant, and the remaining sum
213-11 shall be the maximum amount payable by the association, except that
213-12 the association's liability shall not exceed $100,000.
213-13 (b-1) Notwithstanding Subsection (b) of this section, if a
213-14 claimant is seeking recovery of policy benefits that, but for the
213-15 insolvency of the impaired insurer, would be subject to lien or
213-16 subrogation by a workers' compensation insurer, health insurer or
213-17 any other insurer, whether impaired or not, then the association's
213-18 credit or offset shall be deducted from the damages incurred by the
213-19 claimant or the limits of the policy under which the claim is made,
213-20 whichever is less. In no event shall a claimant's recovery under
213-21 this Act result in a total recovery to the claimant that is greater
213-22 than that which would have resulted but for the insolvency of the
213-23 impaired insurer. Subject to Section 5(8) of this Act, a
213-24 claimant's recovery under this Act shall not result in a recovery
213-25 to the claimant that is less than that which would have resulted
213-26 but for the insolvency of the impaired insurer <Any recovery under
213-27 this Act shall be reduced by the amount of recovery from any other
214-1 insurance guaranty association or its equivalent>.
214-2 SECTION 9.17. Section 13, Article 21.28-C, Insurance Code,
214-3 is amended to read as follows:
214-4 Sec. 13. FINANCIAL CONDITION OF MEMBER INSURERS; PREVENTION
214-5 OF INSOLVENCIES. (a) The association shall have access to the
214-6 books and records of a member insurer in receivership, in order to
214-7 make a determination of the extent of the impact on the association
214-8 in the event such member becomes impaired. The association shall
214-9 have the authority to perform or cause to be performed an actuarial
214-10 and operational analysis of the member insurer and prepare a report
214-11 on matters relating to the impact or potential impact on the
214-12 association in the event of impairment. Such reports shall not be
214-13 public documents. <To aid in the detection and prevention of
214-14 insurer insolvencies, the board of directors, on majority vote, may
214-15 make recommendations to the commissioner for the detection and
214-16 prevention of insurer insolvencies and respond to requests by the
214-17 commissioner to discuss and make recommendations regarding the
214-18 status of any member insurer whose financial condition may be
214-19 hazardous to policyholders or the public. Those recommendations
214-20 are not public documents and are not subject to the open records
214-21 law, Chapter 424, Acts of the 63rd Legislature, Regular Session,
214-22 1973 (Article 6252-17a, Vernon's Texas Civil Statutes), until such
214-23 time as an insurer is declared to be impaired.>
214-24 (b) At the conclusion of any domestic insurer insolvency in
214-25 which the association was obligated to pay covered claims, the
214-26 board of directors may prepare a report on the history and causes
214-27 of the insolvency, based on the information available to the
215-1 association, and may submit the report to the commissioner.
215-2 (c) There shall be no liability on the part of, and no cause
215-3 of action of any nature shall arise against the association or its
215-4 agents or employees, the board of directors, member insurers, or
215-5 the commissioner or the commissioner's authorized representative
215-6 for any statement made in good faith by them in any report or
215-7 recommendation made under this section.
215-8 SECTION 9.18. Section 14, Article 21.28-C, Insurance Code,
215-9 is amended to read as follows:
215-10 Sec. 14. Examination of the association. <The association
215-11 shall be subject to examination and regulation by the commissioner
215-12 in the same manner as other insurers under this code.> Not later
215-13 than March 30 of each year, the association <board of directors>
215-14 shall submit an audited financial statement to the state auditor <a
215-15 financial report> for the preceding calendar year in a form
215-16 approved by the state auditor's office <commissioner>.
215-17 SECTION 9.19. Subsection (a), Section 16, Article 21.28-C,
215-18 Insurance Code, is amended to read as follows:
215-19 (a) There is no liability on the part of, and no cause of
215-20 action of any nature arises against, any member insurer, the
215-21 association or its agents or employees, the board of directors,
215-22 receiver, special deputy receiver or its agents or employees, or
215-23 the commissioner or the commissioner's representatives for any good
215-24 faith action or failure to act in the performance of powers and
215-25 duties under this Act.
215-26 SECTION 9.20. Section 17, Article 21.28-C, Insurance Code,
215-27 is amended to read as follows:
216-1 Sec. 17. Stay of proceedings. All proceedings in which an
216-2 impaired insurer is a party or is obligated to defend a party in
216-3 any court in this state, except proceedings directly related to the
216-4 receivership or instituted by the receiver, shall be stayed for six
216-5 months and any additional time thereafter as may be determined by
216-6 the court from the date of the designation of impairment or an
216-7 ancillary proceeding is instituted in the state, whichever is
216-8 later, to permit proper defense by the receiver or the association
216-9 of all pending causes of action. As to any covered claims arising
216-10 from a judgment under any decision, verdict, or finding based on
216-11 the default of the impaired insurer or its failure to defend an
216-12 insured, the association either on its own behalf or on behalf of
216-13 the insured shall be entitled, upon application, <may apply> to
216-14 have the judgment, order, decision, verdict, or finding set aside
216-15 by the same court or administrator that made the judgment, order,
216-16 decision, verdict, or finding and shall be permitted to defend the
216-17 claim on the merits. The receiver or statutory successor of an
216-18 impaired insurer covered by this Act shall permit access by the
216-19 board or its authorized representative to records of the impaired
216-20 insurer as are necessary for the board in carrying out its
216-21 functions under this Act with regard to covered claims. In
216-22 addition, the receiver or statutory successor shall provide the
216-23 board or its representative with copies of the records on request
216-24 of the board and at the expense of the board.
216-25 SECTION 9.21. Section 18, Article 21.28-C, Insurance Code,
216-26 is amended by adding Subsection (h) to read as follows:
216-27 (h) Notwithstanding Subsection (b) of this section, the
217-1 association may assess the workers' compensation line of business
217-2 during a calendar year not more than three percent of each
217-3 insurer's net direct written premium for the preceding calendar
217-4 year for assessments made on or before December 31, 1995. An
217-5 assessment under this subsection may be made only if the
217-6 association finds that the assessment is necessary to meet the
217-7 obligations of the association. This subsection expires January 1,
217-8 1996.
217-9 SECTION 9.22. Article 21.28-C, Insurance Code, is amended by
217-10 adding Section 25 to read as follows:
217-11 Sec. 25. CONTROLLING LAW. (a) Except as provided in
217-12 Subsection (b) of this section, if a conflict exists between this
217-13 Act and any other statutory provision relating to the association,
217-14 this Act shall control.
217-15 (b) This section does not apply to a conflict between this
217-16 Act and:
217-17 (1) the Texas Workers' Compensation Act (Article
217-18 8308-1.01, et seq., Vernon's Texas Civil Statutes);
217-19 (2) Subchapter D, Chapter 5, of this code; or
217-20 (3) Article 5.76-2, 5.76-3, 5.76-4, or 5.76-5 of this
217-21 code.
217-22 SECTION 9.23. Notwithstanding Subsection (b), Section 1.27,
217-23 Chapter 12, Acts of 72nd Legislature, 2nd Called Session, 1991, the
217-24 Texas Property and Casualty Insurance Guaranty Association may
217-25 assume its responsibilities under this Act in proceedings initiated
217-26 before January 1, 1992, prior to September 1, 1994, on an
217-27 estate-by-estate basis. Assumption of its responsibilities in
218-1 proceedings initiated before January 1, 1992, shall not impose upon
218-2 the Texas Property and Casualty Insurance Guaranty Association a
218-3 duty to defend insureds who have been sued under a liability policy
218-4 issued by an impaired insurer.
218-5 ARTICLE 10. LIFE, ACCIDENT, HEALTH, AND HOSPITAL SERVICE
218-6 INSURANCE GUARANTY ASSOCIATION
218-7 SECTION 10.01. Section 7, Article 21.28-D, Insurance Code,
218-8 is amended by adding Subsection (d) to read as follows:
218-9 (d) A director of the association or any member company or
218-10 other entity represented by the director may not receive any money
218-11 or valuable thing directly, indirectly, or through any substantial
218-12 interest in any other corporation, firm, or business unit for
218-13 negotiating, procuring, participating, recommending, or aiding in a
218-14 transaction, reinsurance agreement, merger, purchase, sale, or
218-15 exchange of assets, policies of insurance, or property made by the
218-16 association or the supervisor, conservator, or receiver on behalf
218-17 of an impaired insurer. The director, company, or entity may not
218-18 be pecuniarily or contractually interested, as principal,
218-19 co-principal, agent, or beneficiary, directly, indirectly, or
218-20 through any substantial interest in any other corporation, firm, or
218-21 business unit, in the transaction, reinsurance agreement, merger,
218-22 purchase, sale, or exchange.
218-23 SECTION 10.02. Section 17(a), Article 21.28-D, Insurance
218-24 Code, is amended to read as follows:
218-25 (a) There is no liability on the part of and no cause of
218-26 action of any nature arises against any member insurer or its
218-27 agents or employees, the association or its agents or employees,
219-1 members of the board of directors, the receiver, the special deputy
219-2 or its agents or employees, or the commissioner or the
219-3 commissioner's representatives, for any good faith action or
219-4 omission in the performance of powers and duties under this Act.
219-5 This immunity extends to the participation in any organization of
219-6 one or more other state associations of similar purposes and to any
219-7 similar organization and its agents or employees.
219-8 ARTICLE 11. TITLE INSURANCE GUARANTY ASSOCIATION
219-9 SECTION 11.01. Section 5(2), Article 9.48, Insurance Code,
219-10 is amended by amending Paragraph B and by adding Paragraph C to
219-11 read as follows:
219-12 B. "Covered claim" shall not include any amount
219-13 due any reinsurer, insurer, insurance pool, or underwriting
219-14 association, as subrogation recoveries or otherwise. "Covered
219-15 claim" shall not include supplementary payment obligations,
219-16 including but not limited to adjustment fees and expenses,
219-17 attorneys' fees and expenses, court costs, interest, enhanced
219-18 damages, whether sought as a recovery against the insured, the
219-19 impaired insurer, the impaired agent, or the association, that
219-20 arise <arising> under Article 21.21 of this code or under the
219-21 Deceptive Trade Practices-Consumer Protection Act (Section 17.41 et
219-22 seq., Business & Commerce Code), and bond premiums, incurred prior
219-23 to the determination that an insurer or agent is "impaired" under
219-24 this article. "Covered claim" shall also not include any shortage
219-25 of trust funds, shortage in an escrow account resulting from the
219-26 insolvency of a financial institution, or punitive, exemplary,
219-27 extracontractual, or bad faith damages awarded by a court judgment
220-1 against an insured or insurer. A "covered claim" does not include
220-2 a claim under Subparagraph (ii) or (iv) of Paragraph A of
220-3 Subdivision (2) of Section 5 if the claimant has a lien against the
220-4 real estate that was the subject of the transaction from which the
220-5 claim arises unless that lien is held to be invalid as a matter of
220-6 law. No claimant who has caused or substantially contributed to
220-7 his loss by his action or failure to act shall have a covered claim
220-8 under Paragraph A of Subdivision (2) of Section 5.
220-9 C. If an impaired insurer or an impaired agent
220-10 has insufficient assets to pay the expenses of administering the
220-11 receivership or conservatorship estate, the association may advance
220-12 funds necessary to pay those expenses on the terms it may
220-13 negotiate. Any funds advanced with regard to the expenses of
220-14 administering the estate of an impaired agent may be paid only from
220-15 the guaranty fee account.
220-16 SECTION 11.02. Section 5, Article 9.48, Insurance Code, is
220-17 amended by adding Subdivisions (14) and (15) to read as follows:
220-18 (14) "Affiliate" means a person who directly or
220-19 indirectly, through one or more intermediaries, controls, is
220-20 controlled by, or is under common control with an impaired insurer
220-21 on December 31 of the year next proceeding the date the insurer
220-22 becomes an impaired insurer.
220-23 (15) "Control" means the possession, direct or
220-24 indirect, of the power to direct or cause the direction of the
220-25 management and policies of a person, whether through the ownership
220-26 of voting securities, by contract other than a commercial contract
220-27 for goods or nonmanagement services, or otherwise, unless the power
221-1 is the result of an official position with or corporate office held
221-2 by the person. Control is presumed to exist if any person,
221-3 directly or indirectly, owns, controls, holds with the power to
221-4 vote, or holds proxies representing 10 percent or more of the
221-5 voting securities of any other person. This presumption may be
221-6 rebutted by a showing that control does not exist in fact.
221-7 SECTION 11.03. Section 7, Article 9.48, Insurance Code, is
221-8 amended by adding Subsection (g) to read as follows:
221-9 (g) An insurer designated as an impaired insurer by the
221-10 commissioner is exempt from assessment from and after the date of
221-11 designation and until the commissioner determines that the insurer
221-12 is no longer an impaired insurer.
221-13 SECTION 11.04. Sections 7A and 8, Article 9.48, Insurance
221-14 Code, are amended to read as follows:
221-15 Sec. 7A. Purpose of Assessments. (a) The amounts provided
221-16 pursuant to assessments made under this article are considered to
221-17 be supplemental to the marshaling of assets for the purpose of
221-18 making payments on behalf of an impaired insurer.
221-19 (b) The association may assess its insurers or use funds
221-20 derived from assessments to pay covered claims before the receiver
221-21 exhausts the assets of the impaired insurer.
221-22 Sec. 8. Penalty for failure to pay assessments. (a) The
221-23 commissioner may suspend or revoke, after notice and hearing, the
221-24 certificate of authority to transact business in this state of any
221-25 insurer who fails to pay an assessment when due, and the
221-26 association shall promptly report the failure to pay to the
221-27 commissioner. As an alternative, the commissioner may assess an
222-1 administrative penalty in accordance with Article 1.10E of this
222-2 code on any insurer that fails to pay an assessment when due. The
222-3 fine may not exceed the greater of five percent of the unpaid
222-4 assessment per month or $100 per month.
222-5 (b) Any insurer whose certificate or authority to do
222-6 business in this state is cancelled or surrendered shall be liable
222-7 for any unpaid assessments made prior to the date of such
222-8 cancellation or surrender.
222-9 SECTION 11.05. Section 10, Article 9.48, Insurance Code, is
222-10 amended by amending Subsections (d) and (e) and by adding
222-11 Subsection (j) to read as follows:
222-12 (d) The association stands in the place of the impaired
222-13 insurer or agent to the extent of its obligation on the covered
222-14 claims and, to that extent, has all rights, duties, and obligations
222-15 of the impaired insurer or agent as if the insurer or agent had not
222-16 become impaired. In performing its obligations under this article,
222-17 the association shall not be considered to be in the business of
222-18 insurance, shall not be considered to have assumed or succeeded to
222-19 any liabilities of the impaired insurer or the impaired agent, and
222-20 shall not be considered to otherwise stand in the shoes of the
222-21 impaired insurer or the impaired agent for any purpose, including,
222-22 but not limited to, the issue of whether the association is
222-23 amenable to the personal jurisdiction of the courts of any other
222-24 state.
222-25 (e) The association shall investigate claims brought against
222-26 the association, the commissioner, or a special deputy receiver
222-27 appointed under Article 21.28 of this code if the claims involve or
223-1 may involve the association's rights and obligations under this
223-2 article, and shall adjust, compromise, settle, and pay covered
223-3 claims to the extent of the association's obligation, and deny all
223-4 other claims. The association may review settlements, releases,
223-5 and judgments to which the impaired insurer or agent or its
223-6 insureds were parties to determine the extent to which the
223-7 settlements, releases, and judgments are contested.
223-8 (j) Funds advanced by the association under this article do
223-9 not become assets of the impaired insurer or the impaired agent but
223-10 are considered special fund loans to the impaired insurer or the
223-11 impaired agent for payment of covered claims. That loan is
223-12 repayable to the extent available from the funds of the impaired
223-13 insurer or the impaired agent.
223-14 SECTION 11.06. Section 11, Article 9.48, Insurance Code, is
223-15 amended to read as follows:
223-16 Sec. 11. Approval of covered claims. (a) Funds received
223-17 from assessments or from guaranty fees shall be liable only for the
223-18 difference between the amount of the covered claims and the amount
223-19 of the assets marshalled by the receiver for payment to holders of
223-20 covered claims. In ancillary receiverships in this state, funds
223-21 received from assessments shall be liable only for the difference
223-22 between the amount of the covered claims and the amount of assets
223-23 marshalled by the receivers in other states for application to
223-24 payment of covered claims within this state.
223-25 (b) If a conservator is appointed to handle the affairs of
223-26 an impaired insurer or agent, the conservator shall determine
223-27 whether or not covered claims should or can be provided for in
224-1 whole or in part by reinsurance, assumption, or substitution. Upon
224-2 determination by the conservator that actual payment of covered
224-3 claims should be made, the conservator shall give notice of such
224-4 determination to claimants falling within the class of "covered
224-5 claims." The conservator shall mail such notice to the latest
224-6 address reflected in the records of the impaired insurer or agent.
224-7 If the records of the impaired insurer or agent do not reflect the
224-8 address of a claimant, the conservator may give notice by
224-9 publication in a newspaper of general circulation. Such notice
224-10 shall state the time within which the claimant must file his claim
224-11 with the conservator, which time shall in no event be less than 90
224-12 days from the date of the mailing or publication of such notice.
224-13 The conservator may require, in whole or in part, that sworn claim
224-14 forms be filed and may require that additional information or
224-15 evidence be filed as may be reasonably necessary for the
224-16 conservator to determine the legality or the amount due under a
224-17 covered claim. When an impaired insurer or agent has been placed
224-18 in conservatorship, the funds received from assessments or from
224-19 guaranty fees shall be liable only for the difference between the
224-20 amount of the covered claim approved by the conservator and the
224-21 amount of assets marshalled by the conservator for payment to
224-22 holders of covered claims.
224-23 (c) Upon determination by the conservator that actual
224-24 payment of covered claims should be made or upon order of the court
224-25 to the receiver to give notice for the filing of claims, any person
224-26 who has a cause of action against an insured of the impaired
224-27 insurer under a title insurance policy issued or assumed by such
225-1 insurer shall, if such cause of action meets the definition of
225-2 "covered claim," have the right to file a claim with the receiver
225-3 or the conservator, regardless of the fact that such claim may be
225-4 unliquidated or undetermined, and such claim may be approved as a
225-5 "covered claim" (1) if it may be reasonably inferred from the proof
225-6 presented upon such claim that such person would be able to obtain
225-7 a judgment upon such cause of action against such insured; and (2)
225-8 if such person shall furnish suitable proof that no further valid
225-9 claims against such insurer arising out of his cause of action
225-10 other than those already presented can be made; and (3) if the
225-11 total liability of such insurer to all claimants arising from the
225-12 same title insurance policy shall be no greater than its total
225-13 liability would be were it not in liquidation, rehabilitation, or
225-14 conservation. In the proceedings of considering "covered claims,"
225-15 no judgment against an insured taken after the date of the
225-16 commencement of the delinquency proceedings or the appointment of a
225-17 conservator shall be considered as evidence of liability, or of the
225-18 amount of damages, and no judgment <against an insured> taken by
225-19 default or consent against an insured or the impaired insurer and
225-20 any settlement, release, or judgment entered into by the insured or
225-21 the impaired insurer may not be considered to be binding on the
225-22 association and may not <by collusion prior to the commencement of
225-23 the delinquency proceedings or the appointment of a conservator
225-24 shall> be considered as <conclusive> evidence <either (1)> of the
225-25 liability <of such insured to such person upon such cause of
225-26 action,> or <(2) of the amount> of damages in connection with any
225-27 claim brought against the association or any other party under this
226-1 article <to which such person is therein entitled>.
226-2 (d) The acceptance of payment from the association by the
226-3 holder of a covered claim or the acceptance of the benefits of
226-4 contracts by the association providing for reinsurance or
226-5 assumption of liabilities or for substitution shall constitute an
226-6 assignment to the association of any cause of action or right of
226-7 the holder of such covered claim arising from the occurrence upon
226-8 which the covered claim is based. Such assignment shall be to the
226-9 extent of the amount accepted or the value of the benefits provided
226-10 by such contracts of reinsurance or assumption of liabilities or
226-11 substitution. Such assignment to the association may be assigned
226-12 to the insurer executing such reinsurance, assumption or
226-13 substitution agreement.
226-14 (e) The receiver or statutory successor of an impaired
226-15 insurer is bound by settlements of covered claims by the
226-16 association. The court having jurisdiction shall grant those
226-17 claims priority equal to that to which the claimant would have been
226-18 entitled in the absence of this article against the assets of the
226-19 impaired insurer. The expenses of the association in handling
226-20 claims shall be accorded the same priority as the receiver's
226-21 expenses.
226-22 (f) The association shall file periodically with the
226-23 receiver of the impaired insurer statements of the covered claims
226-24 paid by the association and estimates of anticipated claims on the
226-25 association that shall preserve the rights of the association
226-26 against the assets of the impaired insurer.
226-27 SECTION 11.07. Section 14, Article 9.48, Insurance Code, is
227-1 amended by amending Subsection (c) and by adding Subsection (g) to
227-2 read as follows:
227-3 (c) Powers and duties of association. In addition to the
227-4 powers and duties provided by other sections of this article, the
227-5 association:
227-6 (1) may render assistance and advice to the
227-7 commissioner, upon his request, concerning rehabilitation, payment
227-8 of claims, continuations of coverage, or the performance of other
227-9 contractual obligations of any impaired insurer or agent;
227-10 (2) has standing to appear before any court in this
227-11 state with jurisdiction over an impaired insurer or agent
227-12 concerning which the association is or may become obligated under
227-13 this article;
227-14 (3) Each director of the association shall file a
227-15 financial statement with the Texas Ethics Commission <secretary of
227-16 state> in accordance with Sections 3 and 4, Chapter 421, Acts of
227-17 the 63rd Legislature, Regular Session, 1973 (Article 6252-9b,
227-18 Vernon's Texas Civil Statutes).
227-19 (4) may borrow funds as necessary to implement this
227-20 article in accordance with the plan of operation;
227-21 (5) may lend money to an impaired insurer;
227-22 (6) sue or be sued, including taking any legal actions
227-23 necessary or proper for recovery of any unpaid assessments;
227-24 (7) may enter into contracts as necessary or proper to
227-25 implement this article;
227-26 (8) <(5)> may employ or retain such persons who are
227-27 necessary to handle the financial transactions of the association,
228-1 and to perform any other functions that become necessary or proper
228-2 under this article;
228-3 (9) may ensure payment of the policy obligations of an
228-4 impaired insurer;
228-5 (10) <(6)> may negotiate and contract with any
228-6 liquidator, rehabilitator, conservator, receiver, or ancillary
228-7 receiver to carry out the powers and duties of the association;
228-8 (11) may guarantee, assume, or reinsure, or cause to
228-9 be guaranteed, assumed, or reinsured, a policy or contract of an
228-10 impaired insurer;
228-11 (12) <(7)> may take legal action as necessary to avoid
228-12 the payment of improper claims, or to settle claims or potential
228-13 claims against the impaired insurer or association;
228-14 (13) <(8)> shall, on the request of the commissioner,
228-15 authorize the expenditure of funds from the guaranty fee account to
228-16 retain, compensate, and reimburse for reasonable and necessary
228-17 expenses, a person or persons who will audit and review agent and
228-18 insurer escrow and trust accounts and make reports relating to
228-19 those accounts to the commissioner, solely under the direction of
228-20 and as assigned by the commissioner; <and>
228-21 (14) <(9)> shall collect, receive, retain, and
228-22 disburse the income provided by Section 6 of this article solely
228-23 for the purposes, to the persons, and under the circumstances that
228-24 are specifically stated in this article; and
228-25 (15) may perform other acts as necessary or proper to
228-26 implement this article.
228-27 (g) Notwithstanding Chapter 271, Acts of the 60th
229-1 Legislature, Regular Session, 1967 (Article 6252-17, Vernon's Texas
229-2 Civil Statutes), the board may hold an open meeting by telephone
229-3 conference call if immediate action is required and the convening
229-4 at one location of a quorum of the board is not reasonable or
229-5 practical. The meeting is subject to the notice requirements
229-6 applicable to other meetings. The notice of the meeting must
229-7 specify as the location of the meeting the location at which
229-8 meetings of the board are usually held. Each part of the meeting
229-9 that is required to be open to the public shall be audible to the
229-10 public at the location specified in the notice of the meeting as
229-11 the location of the meeting and shall be tape recorded. The tape
229-12 recording shall be made available to the public for 30 days after
229-13 the meeting date.
229-14 SECTION 11.08. Article 9.48, Insurance Code, is amended by
229-15 adding Section 15A to read as follows:
229-16 Sec. 15A. DUTIES AND POWERS OF COMMISSIONER. (a) The
229-17 commissioner shall notify the association of the existence of an
229-18 impaired insurer not later than the third day after the date on
229-19 which the commissioner gives notice of the designation of
229-20 impairment. The association is entitled to a copy of any complaint
229-21 seeking an order of receivership with a finding of insolvency
229-22 against an insurer at the same time that the complaint is filed
229-23 with a court of competent jurisdiction.
229-24 (b) The commissioner shall notify the board when the
229-25 commissioner receives a report from the commissioner of insurance
229-26 or other analogous officer of another state that indicates that an
229-27 insurer has been designated impaired in another state. The report
230-1 to the board must contain all significant details of the action
230-2 taken or the report received from the other commissioner or
230-3 analogous officer.
230-4 (c) The commissioner shall report to the board when the
230-5 commissioner has reasonable cause to believe from any examination,
230-6 whether completed or in process, of any insurer that the insurer
230-7 may be an impaired insurer. The board may use this information in
230-8 carrying out its duties and responsibilities under this article.
230-9 The board shall keep the report and the information contained in
230-10 the report confidential until it is made public by the commissioner
230-11 or other lawful authority.
230-12 (d) On the request of the board, the commissioner shall
230-13 provide the association with a statement of the net direct written
230-14 premiums of each insurer.
230-15 (e) The commissioner may require that the association notify
230-16 the insureds of the impaired insurer and any other interested
230-17 parties of the designation of impairment and of their rights under
230-18 this article. Notification by publication in a newspaper of
230-19 general circulation is sufficient notice under this section.
230-20 SECTION 11.09. Section 17(a), Article 9.48, Insurance Code,
230-21 is amended to read as follows:
230-22 (a) There shall be no liability on the part of and no cause
230-23 of action of any nature shall arise against any member insurer of
230-24 the association or its agents or employees, the association or its
230-25 agents or employees, members of the association's board of
230-26 directors, the receiver, a special deputy receiver or its agents or
230-27 employees, or the commissioner or his representatives for any good
231-1 faith action or omission in the performance of their powers and
231-2 duties under this article.
231-3 SECTION 11.10. Sections 20(c) and (d), Article 9.48,
231-4 Insurance Code, are amended to read as follows:
231-5 (c) If an insurer is appealing an assessment, the amount
231-6 assessed shall be paid to the association and shall be available to
231-7 meet association obligations during the pendency of an appeal. If
231-8 the appeal on the assessment is upheld, the amount paid in error or
231-9 excess shall be returned to the insurer. <The liability of the
231-10 appealing insurer for an assessment shall be suspended pending
231-11 appeal by such insurer contesting the amount or legality of such
231-12 assessment.>
231-13 (d) Venue in a suit <against the association> relating to
231-14 any action or ruling <of the association> made under this article
231-15 is in Travis County. Either party to the action may appeal to the
231-16 appellate court having jurisdiction over the cause. The appeal
231-17 shall be at once returnable to the appellate court having
231-18 jurisdiction over the cause, and the action so appealed shall have
231-19 precedence in the appellate court over all cases of a different
231-20 character pending before the court. The commissioner and
231-21 association are <is> not required to give an appeal bond in an
231-22 appeal of a cause of action arising under this article.
231-23 SECTION 11.11. Article 9.48, Insurance Code, is amended by
231-24 adding Section 23 to read as follows:
231-25 Sec. 23. MISCELLANEOUS PROVISIONS. (a) The association
231-26 shall maintain records of all negotiations and meetings in which
231-27 the association or its representatives discuss the activities of
232-1 the association in carrying out its powers and duties under this
232-2 article. Records of the negotiations or meetings may be made
232-3 public only on the termination of a liquidation, rehabilitation, or
232-4 conservation proceeding involving the impaired or insolvent
232-5 insurer, on the termination of the impairment or insolvency of the
232-6 insurer, or on the order of a court of competent jurisdiction.
232-7 This subsection does not limit the duty of the association to
232-8 report on its activities under Section 14 of this article.
232-9 (b) To carry out its obligations under this article, the
232-10 association is considered a creditor of the impaired or insolvent
232-11 insurer to the extent of assets attributable to covered policies,
232-12 reduced by any amounts that the association recovers as a subrogee
232-13 under this article. Assets of the impaired or insolvent insurer
232-14 attributable to covered policies shall be used to continue all
232-15 covered policies and pay all contractual obligations of the
232-16 impaired or insolvent insurer as required by this article. For
232-17 purposes of this subsection, assets attributable to covered
232-18 policies are that proportion of the assets that the reserves that
232-19 should have been established for the covered policies bear to the
232-20 reserves that should have been established for all policies of
232-21 insurance written by the impaired or insolvent insurer.
232-22 (c) A distribution to stockholders of an impaired or
232-23 insolvent insurer may not be made until the total amount of valid
232-24 claims of the association for funds expended in carrying out its
232-25 powers and duties under this article with respect to the insurer
232-26 have been recovered with interest by the association.
232-27 (d) If an order of receivership of an insurer domiciled in
233-1 this state has been entered, the receiver appointed under the order
233-2 may recover on behalf of the insurer, from any affiliate that
233-3 controlled it, the amount of distributions, other than stock
233-4 dividends paid by the insurer on its capital stock, made at any
233-5 time during the five years preceding the petition for liquidation
233-6 or rehabilitation, subject to the limitations imposed under
233-7 Subsections (e), (f), and (g) of this section.
233-8 (e) A distribution to stockholders is not recoverable under
233-9 Subsection (d) of this section if the insurer shows that the
233-10 distribution was lawful and reasonable as of the date of payment,
233-11 and that the insurer did not know and could not reasonably have
233-12 known that the distribution might adversely affect the ability of
233-13 the insurer to fulfill its contractual obligations.
233-14 (f) A person that was an affiliate that controlled the
233-15 insurer at the time distributions subject to Subsection (d) of this
233-16 section were paid is liable for the amount of distributions
233-17 received. A person that was an affiliate that controlled the
233-18 insurer at the time the distributions were declared is liable for
233-19 the amount of distributions the person would have received if they
233-20 had been paid immediately. If two or more persons are liable with
233-21 respect to the same distributions, those persons are jointly and
233-22 severally liable.
233-23 (g) The maximum amount recoverable under Subsections (d) and
233-24 (f) of this section is the amount needed in excess of all other
233-25 available assets of the insolvent insurer to pay the contractual
233-26 obligations of the insolvent insurer.
233-27 (h) If a person liable under Subsection (f) of this section
234-1 is insolvent, all of its affiliates that controlled it at the time
234-2 the distribution was paid are jointly and severally liable for any
234-3 resulting deficiency in the amount recovered from the insolvent
234-4 affiliate.
234-5 (i) An impaired insurer placed in conservatorship or
234-6 receivership for which assessments have been made under this
234-7 article, or for which association funds have been provided, may
234-8 not, on release from conservatorship or receivership, issue new or
234-9 renewal insurance policies until the insurer has repaid in full the
234-10 amount of guaranty fees furnished by the association. The
234-11 commissioner may permit, on application of the association and
234-12 after hearing, the issuance of new policies in accordance with a
234-13 plan of operation by the released insurer for repayment. The
234-14 commissioner, in approving the plan, may place restrictions on the
234-15 issuance of new or renewal policies as necessary for the
234-16 implementation of the plan. The commissioner shall give notice of
234-17 a hearing under this subsection to the association not later than
234-18 the 11th day before the date on which the hearing is scheduled.
234-19 The association and member insurers that paid assessments in
234-20 relation to the impaired insurer are entitled to appear at and
234-21 participate in the hearing. Money recovered by the association
234-22 under this subsection shall be repaid to the member insurers that
234-23 paid assessments in relation to the impaired insurer on return of
234-24 the appropriate certificate of contribution.
234-25 ARTICLE 12. REGULATION OF CERTAIN LICENSE HOLDERS
234-26 SECTION 12.01. Subchapter A, Chapter 21, Insurance Code, is
234-27 amended by adding Article 21.01-2 to read as follows:
235-1 Art. 21.01-2. GENERAL PROVISIONS APPLICABLE TO CERTAIN
235-2 LICENSE HOLDERS
235-3 Sec. 1. APPLICATION. Except as otherwise provided by this
235-4 article, this article applies to licensing of persons under:
235-5 (1) Section 4, Article 1.14-2, Insurance Code;
235-6 (2) Section 7, Article 3.75, Insurance Code;
235-7 (3) Article 9.36, 9.42, or 9.43, Insurance Code;
235-8 (4) Section 6, Article 9.56, Insurance Code;
235-9 (5) Section 15 or 15A, Texas Health Maintenance
235-10 Organization Act (Section 20A.15 or 20A.15A, Vernon's Texas
235-11 Insurance Code);
235-12 (6) Article 21.07, Insurance Code;
235-13 (7) Chapter 213, Acts of the 54th Legislature, Regular
235-14 Session, 1955 (Article 21.07-1, Vernon's Texas Insurance Code);
235-15 (8) Chapter 29, Acts of the 54th Legislature, Regular
235-16 Session, 1955 (Article 21.07-2, Vernon's Texas Insurance Code);
235-17 (9) the Managing General Agents' Licensing Act
235-18 (Article 21.07-3, Vernon's Texas Insurance Code);
235-19 (10) Chapter 407, Acts of the 63rd Legislature,
235-20 Regular Session, 1973 (Article 21.07-4, Vernon's Texas Insurance
235-21 Code);
235-22 (11) Article 21.07-6, Insurance Code;
235-23 (12) Article 21.07-7, Insurance Code;
235-24 (13) Article 21.09, Insurance Code;
235-25 (14) Article 21.11, Insurance Code;
235-26 (15) Article 21.14, Insurance Code;
235-27 (16) Article 21.14-1, Insurance Code;
236-1 (17) Article 21.14-2, Insurance Code; or
236-2 (18) Article 23.23, Insurance Code.
236-3 Sec. 2. RENEWAL OF LICENSES. (a) A person may renew an
236-4 unexpired license by filing a renewal application with the
236-5 department in the form prescribed by the department and paying to
236-6 the department before the expiration date of the license the
236-7 required renewal fee. A renewal fee paid under this section is
236-8 nonrefundable.
236-9 (b) If a person's license has been expired for 90 days or
236-10 less, the person may renew the license by filing a renewal
236-11 application with the department in the form prescribed by the
236-12 department and paying to the department the required renewal fee
236-13 and a fee that is equal to one-half of the license fee, if any, for
236-14 the license.
236-15 (c) If a person's license has been expired for longer than
236-16 90 days, the person may not renew the license. The person may
236-17 obtain a new license by submitting to reexamination, if examination
236-18 is required for original issuance of the license, and complying
236-19 with the requirements and procedures for obtaining an original
236-20 license. However, the department may renew without reexamination
236-21 an expired license of a person who was licensed in this state,
236-22 moved to another state, and is currently licensed and has been in
236-23 practice in the other state for the two years preceding
236-24 application. The person must pay to the department a fee that is
236-25 equal to the license fee.
236-26 (d) At least 30 days before the expiration of a person's
236-27 license, the department shall send written notice of the impending
237-1 license expiration to the person at the person's last known address
237-2 according to the records of the department.
237-3 (e) The commissioner by rule may adopt a system under which
237-4 licenses expire on various dates during a licensing period. For
237-5 the licensing period in which the license expiration is changed,
237-6 license fees shall be prorated on a monthly basis so that each
237-7 license holder shall pay only that portion of the license fee that
237-8 is allocable to the number of months during which the license is
237-9 valid. On renewal of the license on the new expiration date, the
237-10 total license renewal fee is payable. The commissioner shall adopt
237-11 a system under which a person who holds more than one license may
237-12 renew all the licenses held in a single process.
237-13 (f) This section is not applicable to a license issued under
237-14 Article 21.07-6 of this code.
237-15 Sec. 3. LICENSING BY ENDORSEMENT. The department may waive
237-16 any license requirement for an applicant with a valid license from
237-17 another state having license requirements substantially equivalent
237-18 to those of this state.
237-19 Sec. 4. CONTINUING EDUCATION. (a) The department may
237-20 recognize, prepare, or administer continuing education programs for
237-21 persons whose licenses are subject to this article.
237-22 (b) Except as otherwise provided by this code or another
237-23 insurance law of this state, participation in continuing education
237-24 programs is voluntary.
237-25 Sec. 5. DISCIPLINE OF LICENSE HOLDERS. (a) The department
237-26 shall refuse to issue an original license, revoke, suspend, or
237-27 refuse to renew a license, place on probation a person whose
238-1 license has been suspended, assess an administrative penalty, or
238-2 reprimand a license holder for a violation of this code, another
238-3 insurance law of this state, or a rule of the commissioner or the
238-4 board. If a license suspension is probated, the commissioner may
238-5 require the person to:
238-6 (1) report regularly to the department on matters that
238-7 are the basis of the probation;
238-8 (2) limit the person's practice to the areas
238-9 prescribed by the department; or
238-10 (3) continue or review professional education until
238-11 the person attains a degree of skill satisfactory to the
238-12 commissioner in those areas that are the basis of the probation.
238-13 (b) If the department proposes to refuse to issue an
238-14 original license, or to suspend, revoke, or refuse to renew a
238-15 license, the person affected is entitled to a hearing conducted by
238-16 the State Office of Administrative Hearings in accordance with
238-17 Article 1.33B of this code. Notice of the hearing shall be
238-18 provided to the person and to any insurance carrier appearing on
238-19 the application as desiring that the license be issued. The
238-20 commissioner shall prescribe procedures by which all decisions to
238-21 deny, suspend, or revoke a license, or to refuse to renew a
238-22 license, are made by or are appealable to the commissioner.
238-23 Sec. 6. STATUTORY REFERENCES. A reference in this article
238-24 to a statutory provision applies to all reenactments, revisions, or
238-25 amendments of that provision.
238-26 SECTION 12.02. Section 7(f), Article 3.75, Insurance Code,
238-27 is amended to read as follows:
239-1 (f) Licenses which have not expired or which have not been
239-2 suspended or revoked may be renewed by filing with the State Board
239-3 of Insurance a completed renewal application and paying the
239-4 nonrefundable renewal fee set by the board in an amount not to
239-5 exceed $50 on or before the expiration date of the license in
239-6 accordance with Article 21.01-2 of this code. <If a license has
239-7 been expired for not longer than 90 days, the licensee may renew
239-8 the license by paying to the board the required nonrefundable
239-9 renewal fee and a nonrefundable fee that is one-half of the
239-10 original license fee. If a license has been expired for more than
239-11 90 days, the license may not be renewed. A new license may be
239-12 obtained by complying with the requirements and procedures for
239-13 obtaining an original license. At least 30 days before the
239-14 expiration of a license, the commissioner shall send written notice
239-15 of the impending license expiration to the licensee at the
239-16 licensee's last known address. This subsection may not be
239-17 construed to prevent the board from denying or refusing to renew a
239-18 license under applicable law or rules of the State Board of
239-19 Insurance.>
239-20 SECTION 12.03. Article 21.01-1, Insurance Code, is amended
239-21 to read as follows:
239-22 Art. 21.01-1. Agents' Qualifying Examination <to be
239-23 Prescribed by the Board>. (a) The State Board of Insurance may,
239-24 at its discretion, accept examinations administered by a testing
239-25 service as satisfying the examination requirements of persons
239-26 seeking license as agents, solicitors, counselors, or adjusters
239-27 under this code. The State Board of Insurance may negotiate
240-1 agreements with such testing services to include performance of
240-2 examination development, test scheduling, examination site
240-3 arrangements, and test administration, grading, reporting and
240-4 analysis. The State Board of Insurance may require such testing
240-5 services to correspond directly with the applicants with regard to
240-6 the administration of such examinations and that such testing
240-7 services collect fees for administering such examinations directly
240-8 from the applicants. The State Board of Insurance may stipulate
240-9 that any agreements with such testing services provide for the
240-10 administration of examinations in specific locales and at specified
240-11 frequencies. The State Board of Insurance shall retain the
240-12 authority to establish the scope and type of all examinations.
240-13 Prior to negotiating and making any agreement with any testing
240-14 service as authorized hereby, the State Board of Insurance shall
240-15 hold a public hearing thereon in accordance with the provisions of
240-16 Section 5 of the Administrative Procedure and Texas Register Act
240-17 (Article 6252-13a, Vernon's Texas Civil Statutes), and shall adopt
240-18 such rules, regulations, and standards as may be deemed appropriate
240-19 by the Board to implement the authority granted in this Article.
240-20 (b) The commissioner may appoint advisory boards consisting
240-21 of any of the following persons: persons holding a license for
240-22 which the respective examinations are intended, persons who are
240-23 employed by insurance companies appointing such licensees, persons
240-24 acting as general agents or managers, persons teaching insurance at
240-25 an accredited college or university in Texas, persons who are
240-26 citizens of the State of Texas but who are not of any of the
240-27 preceding descriptions, or any combination of such persons. The
241-1 function of such advisory boards will be to make recommendations to
241-2 the State Board of Insurance or the testing service with respect to
241-3 the scope, type, and conduct of such examinations and the times and
241-4 places within the state where they shall be held. The members of
241-5 such advisory boards shall serve without pay but shall be
241-6 reimbursed for their reasonable expenses in attending meetings of
241-7 their respective advisory boards.
241-8 (c) In the absence of an agreement with a testing service,
241-9 the State Board of Insurance shall administer any required
241-10 qualifying examination in accordance with the provisions of the
241-11 respective statutes governing the issuance of the license sought by
241-12 the applicant.
241-13 (d) Not later than the 30th day after the date on which a
241-14 licensing examination is administered under this code, the
241-15 department shall notify each examinee of the results of the
241-16 examination. However, if an examination is graded or reviewed by a
241-17 testing service, the department shall notify examinees of the
241-18 results of the examination not later than the 14th day after the
241-19 date on which the department receives the results from the testing
241-20 service. If the notice of examination results graded or reviewed
241-21 by a testing service will be delayed for longer than 90 days after
241-22 the examination date, the department shall notify the examinee of
241-23 the reason for the delay before the 90th day. The department may
241-24 require a testing service to notify examinees of the results of an
241-25 examination.
241-26 (e) If requested in writing by a person who fails a
241-27 licensing examination administered under this code, the department
242-1 shall furnish the person with an analysis of the person's
242-2 performance on the examination.
242-3 SECTION 12.04. Sections 4(c) and (d), Article 1.14-2,
242-4 Insurance Code, are amended to read as follows:
242-5 (c) Unless the State Board of Insurance adopts a system for
242-6 staggered renewal of licenses, as provided by Article 21.01-2 of
242-7 this code <this section>, each license issued under this section is
242-8 for a two-year term that expires on December 31; however, the term
242-9 of the initial licensing period shall expire on December 31 of the
242-10 year following the year in which the license is issued. A license
242-11 may be renewed for periods of two years.
242-12 (d) By filing a completed written application in the form
242-13 prescribed by the State Board of Insurance and paying the
242-14 nonrefundable renewal fee set by the board in an amount not to
242-15 exceed $50, an unexpired license may be renewed on or before the
242-16 expiration date of the license. <If a license has been expired for
242-17 not longer than 90 days, the licensee may renew the license by
242-18 filing a completed written application for renewal and by paying to
242-19 the board the required nonrefundable renewal fee and a
242-20 nonrefundable fee that is one-half of the original fee for the
242-21 license. If a license has been expired for more than 90 days, the
242-22 license may not be renewed. A new license may be obtained by
242-23 complying with the requirements and procedures for obtaining an
242-24 original license. This subsection may not be construed to prevent
242-25 the board from denying or refusing to renew a license under
242-26 applicable law or rules of the State Board of Insurance.>
242-27 SECTION 12.05. Section 2(b), Article 9.36, Insurance Code,
243-1 is amended to read as follows:
243-2 (b) Unless a staggered renewal system is adopted under
243-3 Article 21.01-2 of this code and its subsequent amendments <Section
243-4 5 of this article>, a license shall continue in force until June 1
243-5 after the second anniversary of the date on which the license was
243-6 issued unless previously cancelled.
243-7 SECTION 12.06. Sections B and E, Article 9.37, Insurance
243-8 Code, are amended to read as follows:
243-9 B. The department may discipline <license of> any agent or
243-10 direct operation or deny an application under Section 5, Article
243-11 21.01-2, of this code and its subsequent amendments <may be denied,
243-12 or a license duly issued may be suspended or revoked or a renewal
243-13 thereof refused by the Board,> if<, after notice and hearing as
243-14 hereafter provided,> it finds that the applicant for or holder of
243-15 such license:
243-16 (1) Has wilfully violated any provision of this Act;
243-17 <or>
243-18 (2) Has intentionally made a material misstatement in
243-19 the application for such license; <or>
243-20 (3) Has obtained, or attempted to obtain, such license
243-21 by fraud or misrepresentation; <or>
243-22 (4) Has misappropriated or converted to his own use or
243-23 illegally withheld money belonging to a title insurance company, an
243-24 insured or any other person; <or>
243-25 (5) <Has otherwise demonstrated lack of
243-26 trustworthiness or competence to act as an agent or direct
243-27 operation; or>
244-1 <(6)> Has been guilty of fraudulent or dishonest
244-2 practices; <or>
244-3 (6) <(7)> Has materially misrepresented the terms and
244-4 conditions of title insurance policies or contracts; or
244-5 (7) <(8) Is not of good character or reputation; or>
244-6 <(9)> Has failed to maintain a separate and distinct
244-7 accounting of escrow funds, and has failed to maintain an escrow
244-8 bank account or accounts separate and apart from all other
244-9 accounts.
244-10 E. A disciplinary action or denial of an application under
244-11 this article may be appealed under Article 1.04 of this code and
244-12 its subsequent amendments <If the Board shall refuse an application
244-13 for any license provided for in this Act, or shall suspend, revoke
244-14 or refuse to renew any such license at said hearing, then any such
244-15 applicant or licensee, and any title insurance company or companies
244-16 concerned, may appeal from said order by filing suit against the
244-17 Board as defendant in any of the District Courts of Travis County,
244-18 Texas, and not elsewhere, within twenty (20) days from the date of
244-19 the order of said Board. The action shall not be limited to
244-20 questions of law and shall be tried and determined upon a trial de
244-21 novo to the same extent as now provided for in the case of an
244-22 appeal from the justice court to the county court. Any party to
244-23 said action may appeal to the appellate court having jurisdiction
244-24 of said cause, and said appeal shall be at once returnable to said
244-25 appellate court having jurisdiction of said cause and said action
244-26 so appealed shall have precedence in said appellate court over all
244-27 causes of a different character therein pending. The Board shall
245-1 not be required to give any appeal bond in any cause arising
245-2 hereunder>.
245-3 SECTION 12.07. Section 1(b), Article 9.42, Insurance Code,
245-4 is amended to read as follows:
245-5 (b) Unless a system of staggered renewal is adopted under
245-6 Article 21.01-2 of this code and its subsequent amendments <Section
245-7 2 of this article>, a license shall continue in force until the
245-8 second June 1 after its issuance, unless previously cancelled.
245-9 Provided, however, that if any title insurance agent or direct
245-10 operation surrenders its license or has its license revoked by the
245-11 Board, all existing licenses of its escrow officers shall
245-12 automatically terminate without notice.
245-13 SECTION 12.08. Section B, Article 9.43, Insurance Code, is
245-14 amended to read as follows:
245-15 B. Such application shall contain the following:
245-16 (1) that the proposed escrow officer is a natural
245-17 person, a bona fide resident of the State of Texas, and either an
245-18 attorney or a bona fide employee of an attorney licensed as an
245-19 escrow officer, a bona fide employee of a title insurance agent, or
245-20 a bona fide employee of a direct operation;
245-21 (2) that the proposed escrow officer has reasonable
245-22 experience or instruction in the field of title insurance; and
245-23 (3) that <the proposed escrow officer is known to the
245-24 direct operation or title insurance agent to have a good business
245-25 reputation and is worthy of the public trust and> the direct
245-26 operation or title insurance agent knows of no fact or condition
245-27 which would disqualify the proposed escrow officer from receiving a
246-1 license.
246-2 SECTION 12.09. Sections 2 and 5, Article 9.44, Insurance
246-3 Code, are amended to read as follows:
246-4 Sec. 2. The department may discipline an <license of any>
246-5 escrow officer or deny an application under Section 5, Article
246-6 21.01-2, of this code and its subsequent amendments <may be denied,
246-7 or a license duly issued may be suspended or revoked or a renewal
246-8 thereof refused by the Board,> if<, after notice and hearing as
246-9 hereafter provided,> it finds that the applicant for or holder of
246-10 such license:
246-11 (1) has wilfully violated any provision of this Act;
246-12 (2) has intentionally made a material misstatement in
246-13 the application for such license;
246-14 (3) has obtained, or attempted to obtain, such license
246-15 by fraud or misrepresentation;
246-16 (4) has misappropriated or converted to the escrow
246-17 officer's own use or illegally withheld money belonging to a direct
246-18 operation, title insurance agent, or any other person;
246-19 (5) <has otherwise demonstrated lack of
246-20 trustworthiness or competence to act as escrow officer;>
246-21 <(6)> has been guilty of fraudulent or dishonest
246-22 practices;
246-23 (6) <(7)> has materially misrepresented the terms and
246-24 conditions of title insurance policies or contracts;
246-25 <(8) is not of good character or reputation;> or
246-26 (7) <(9)> has failed to complete all educational
246-27 requirements.
247-1 Sec. 5. A disciplinary action or denial of an application
247-2 under this article may be appealed under Article 1.04 of this code
247-3 and its subsequent amendments <If the Board shall refuse an
247-4 application for any license provided for in this Article, or shall
247-5 suspend, revoke or refuse to renew any such license at said
247-6 hearing, then any such applicant may appeal from said order by
247-7 filing suit against the Board as defendant in any of the District
247-8 Courts of Travis County, Texas, and not elsewhere, within twenty
247-9 (20) days from the date of the order of said Board. The action
247-10 shall not be limited to questions of law and shall be tried and
247-11 determined upon a trial de novo to the same extent as now provided
247-12 for in the case of an appeal from the justice court to the county
247-13 court. Either party to said action may appeal to the appellate
247-14 court having jurisdiction of said cause, and said appeal shall be
247-15 at once returnable to said appellate court having jurisdiction of
247-16 said cause and said action so appealed shall have precedence in
247-17 said appellate court over all causes of a different character
247-18 therein pending. The Board shall not be required to give any
247-19 appeal bond in any cause arising hereunder>.
247-20 SECTION 12.10. Section 6(b), Article 9.56, Insurance Code,
247-21 is amended to read as follows:
247-22 (b) Unless a system of staggered renewal is adopted under
247-23 Article 21.01-2 of this code and its subsequent amendments
247-24 <Subsection (d) of this section>, on or before the first day of
247-25 June of each year, every attorney's title insurance company
247-26 operating under the provisions of this Chapter 9 shall certify to
247-27 the board, on forms provided by the board, the names and addresses
248-1 of every title attorney of said attorney's title insurance company,
248-2 and shall apply for and pay a fee in an amount not to exceed $50 as
248-3 determined by the board for an annual license in the name of each
248-4 title attorney included in said list; if any such attorney's title
248-5 insurance company shall terminate any licensed title attorney, it
248-6 shall immediately notify the board in writing of such act and
248-7 request cancellation of such license, notifying the title attorney
248-8 of such action. No such attorney's title insurance company shall
248-9 permit any title attorney appointed by it to write, sign, or
248-10 deliver title insurance policies within the state until the
248-11 foregoing conditions have been complied with, and the board has
248-12 granted said license. The board shall deliver such license to the
248-13 attorney's title insurance company for transmittal to the title
248-14 attorney.
248-15 Unless a system of staggered renewal is adopted under Article
248-16 21.01-2 of this code and its subsequent amendments <Subsection (d)
248-17 of this section>, licenses shall continue until the first day of
248-18 the next June unless previously cancelled; provided, however, that
248-19 if any attorney's title insurance company surrenders or has its
248-20 certificate of authority revoked by the board, all existing
248-21 licenses of its title attorneys shall automatically terminate
248-22 without notice.
248-23 The board shall keep a record of the names and addresses of
248-24 all licensed title attorneys in such manner that the title
248-25 attorneys appointed by any attorney's title insurance company
248-26 authorized to transact the business of an attorney's title
248-27 insurance company within the State of Texas may be conveniently
249-1 ascertained and inspected by any person upon request.
249-2 SECTION 12.11. Sections 8(b) and (e), Article 9.56,
249-3 Insurance Code, are amended to read as follows:
249-4 (b) The department may discipline a <license of any> title
249-5 attorney or deny an application under Section 5, Article 21.01-2,
249-6 of this code and its subsequent amendments <may be denied, or a
249-7 license duly issued may be suspended or revoked or a renewal
249-8 thereof refused by the board,> if<, after notice and hearing as
249-9 hereafter provided,> it finds that the applicant for or holder of
249-10 such license:
249-11 (1) has wilfully violated any provision of this
249-12 Chapter 9; <or>
249-13 (2) has intentionally made a material misstatement in
249-14 the application for such license; <or>
249-15 (3) has obtained, or attempted to obtain, such license
249-16 by fraud or misrepresentation; <or>
249-17 (4) has misappropriated or converted to his own use or
249-18 illegally withheld money belonging to an attorney's title insurance
249-19 company, an insured, or any other person; <or>
249-20 (5) <has otherwise demonstrated lack of
249-21 trustworthiness or competence to act as a title attorney; or>
249-22 <(6)> has been guilty of fraudulent or dishonest
249-23 practices; <or>
249-24 (6) <(7)> has materially misrepresented the terms and
249-25 conditions of title insurance policies or contracts; <or>
249-26 <(8) is not of good character or reputation; or>
249-27 (7) <(9)> has failed to maintain a separate and
250-1 distinct accounting of escrow funds, and has failed to maintain an
250-2 escrow bank account or accounts separate and apart from all other
250-3 accounts; <or>
250-4 (8) <(10)> has failed to remain a member of the State
250-5 Bar of Texas, or has been disbarred; or
250-6 (9) <(11)> is no longer actively engaged in the
250-7 practice of law.
250-8 (e) A disciplinary action or denial of an application under
250-9 this article may be appealed under Article 1.04 of this code and
250-10 its subsequent amendments <If the board shall refuse an application
250-11 for any license provided for in this Act, or shall suspend, revoke,
250-12 or refuse to renew any such license at said hearing, then any such
250-13 applicant or licensee, and any attorney's title insurance company
250-14 concerned, may appeal from said order by filing suit against the
250-15 board as defendant in any of the district courts of Travis County,
250-16 Texas, and not elsewhere, within 20 days from the date of the order
250-17 of said board. The action shall not be limited to questions of law
250-18 and shall be tried and determined upon a trial de novo to the same
250-19 extent as now provided for in the case of an appeal from the
250-20 justice court to the county court. Any party to said action may
250-21 appeal to the appellate court having jurisdiction of said cause,
250-22 and said appeal shall be at once returnable to said appellate court
250-23 having jurisdiction of said cause and said action so appealed shall
250-24 have precedence in said appellate court over all causes of a
250-25 different character therein pending. The board shall not be
250-26 required to give any appeal bond in any cause arising hereunder>.
250-27 SECTION 12.12. Chapter 10, Insurance Code, is amended by
251-1 adding Article 10.37-2 to read as follows:
251-2 Art. 10.37-2. CERTAIN PERSONS MAY NOT SOLICIT. A fraternal
251-3 benefit society may not employ or otherwise retain a person to
251-4 solicit business if that person has had a license revoked under
251-5 Articles 21.07 or 21.14, Insurance Code, or under Chapter 213, Acts
251-6 of the 54th Legislature, Regular Session, 1955 (Article 21.07-1,
251-7 Vernon's Texas Insurance Code).
251-8 SECTION 12.13. Section 15(c), Texas Health Maintenance
251-9 Organization Act (Section 20A.15, Vernon's Texas Insurance Code),
251-10 is amended to read as follows:
251-11 (c) Except as may be provided by a staggered renewal system
251-12 adopted under Article 21.01-2, Insurance Code, and its subsequent
251-13 amendments <Subsection (i) of this section>, each license issued to
251-14 a health maintenance organization agent shall expire two years
251-15 following the date of issue, unless prior thereto it is suspended
251-16 or revoked by the commissioner or the authority of the agent to act
251-17 for the health maintenance organization is terminated.
251-18 SECTION 12.14. Sections 15A(c) and (i), Texas Health
251-19 Maintenance Organization Act (Section 20A.15A, Vernon's Texas
251-20 Insurance Code), are amended to read as follows:
251-21 (c) Except as may be provided by a staggered renewal system
251-22 adopted under Article 21.01-2, Insurance Code, and its subsequent
251-23 amendments <Section 15(i) of this Act>, each license issued to a
251-24 health maintenance organization agent under this section shall
251-25 expire two years following the date of issuance, unless before that
251-26 time the license is suspended or revoked by the commissioner or the
251-27 authority of the agent to act for the health maintenance
252-1 organization is terminated.
252-2 (i) A licensee may renew an unexpired license issued under
252-3 this section by filing the required renewal application and paying
252-4 a nonrefundable fee with the State Board of Insurance on or before
252-5 the expiration date of the license. <If a license has been expired
252-6 for not longer than 90 days, the licensee may renew the license by
252-7 filing a completed application and paying to the State Board of
252-8 Insurance the required nonrefundable renewal fee and a
252-9 nonrefundable fee that is one-half of the original license fee. If
252-10 a license has been expired for more than 90 days, the license may
252-11 not be renewed. A new license may be obtained by complying with
252-12 the requirements and procedures for obtaining an original license.
252-13 At least 30 days before the expiration of a license, the
252-14 commissioner shall send written notice of the impending license
252-15 expiration to the licensee at the licensee's last known address.
252-16 This section does not prevent the State Board of Insurance from
252-17 denying or refusing to renew a license under applicable law or
252-18 rules.>
252-19 SECTION 12.15. Article 21.06, Insurance Code, is amended to
252-20 read as follows:
252-21 Art. 21.06. Certificates for Agents. Each such foreign
252-22 insurance company shall, by resolution of its board of directors,
252-23 designate some officer or agent who is empowered to appoint or
252-24 employ its agents or solicitors in this State, and such officer or
252-25 agent shall promptly notify the Board in writing of the name, title
252-26 and address of each person so appointed or employed. Upon receipt
252-27 of this notice, <if such person is of good reputation and
253-1 character,> the Board shall issue to him a certificate which shall
253-2 include a copy of the certificate of authority authorizing the
253-3 company requesting it to do business in this State, and the name
253-4 and title of the person to whom the certificate is issued. Such
253-5 certificate, unless sooner revoked by the Board for cause or
253-6 cancelled at the request of the company employing the holder
253-7 thereof, shall continue in force until the first day of March next
253-8 after its issuance, and must be renewed annually.
253-9 SECTION 12.16. Section 1, Article 21.07, Insurance Code, is
253-10 amended by adding Subsection (c) to read as follows:
253-11 (c) A person who has had a license revoked under Section 10
253-12 of this article may not solicit or otherwise transact business
253-13 under Chapter 10 of this code.
253-14 SECTION 12.17. Section 2(b), Article 21.07, Insurance Code,
253-15 is amended to read as follows:
253-16 (b) The application must bear a signed endorsement by an
253-17 officer or properly authorized representative of the insurance
253-18 carrier that the individual applicant or each member of the
253-19 partnership or each officer, director, and shareholder of the
253-20 corporation is <trustworthy, of good character and good reputation,
253-21 and> qualified to hold himself or the partnership or the
253-22 corporation out in good faith to the general public as an insurance
253-23 agent, and that the insurance carrier desires that the applicant
253-24 act as an insurance agent to represent it in this State.
253-25 SECTION 12.18. Section 3, Article 21.07, Insurance Code, is
253-26 amended to read as follows:
253-27 Sec. 3. Issuance of License Under Certain Circumstances.
254-1 The <After the State Board of Insurance has determined that such
254-2 applicant is of good character and trustworthy, the> State Board of
254-3 Insurance shall issue a license to a <such> person or corporation
254-4 in such form as it may prepare authorizing such applicant to write
254-5 the types of insurance authorized by law to be issued by
254-6 applicant's appointing insurance carrier, except that:
254-7 (a) Such applicant shall not be authorized to write
254-8 health and accident insurance unless: (i) applicant, if not a
254-9 partnership or corporation, shall have first passed a written
254-10 examination as provided for in this Article 21.07, as amended, or
254-11 (ii) applicant will act only as a ticket-selling agent of a public
254-12 carrier with respect to accident life insurance covering risks of
254-13 travel or as an agent selling credit life, health and accident
254-14 insurance issued exclusively in connection with credit
254-15 transactions, or (iii) applicant will write policies or riders to
254-16 policies providing only lump sum cash benefits in the event of the
254-17 accidental death, or death by accidental means, or dismemberment,
254-18 or providing only ambulance expense benefits in the event of
254-19 accident or sickness; and
254-20 (b) Such applicant, if not a partnership or
254-21 corporation, shall not be authorized to write life insurance in
254-22 excess of $7,500 <$5,000> upon any one life unless: (i) applicant,
254-23 if not a partnership or corporation, shall have first passed a
254-24 written examination as provided for in this Article 21.07, as
254-25 amended, or (ii) applicant will act only as a ticket-selling agent
254-26 of a public carrier with respect to accident life insurance
254-27 covering risks of travel or as an agent selling credit life, health
255-1 and accident insurance issued exclusively in connection with credit
255-2 transactions, or (iii) applicant will write policies or riders to
255-3 policies providing only lump sum cash benefits in the event of the
255-4 accidental death, or death by accidental means, or dismemberment,
255-5 or providing only ambulance expense benefits in the event of
255-6 accident or sickness.
255-7 SECTION 12.19. Section 4(c), Article 21.07, Insurance Code,
255-8 is amended to read as follows:
255-9 (c) After the State Board of Insurance shall determine that
255-10 such applicant has successfully passed the written examination or
255-11 it has been waived, <and is a person of good character and
255-12 reputation,> the State Board of Insurance shall forthwith issue a
255-13 license to such applicant which shall also authorize such applicant
255-14 to write health and accident insurance for the designated insurance
255-15 carrier.
255-16 SECTION 12.20. Sections 4A(a), (c), and (e), Article 21.07,
255-17 Insurance Code, are amended to read as follows:
255-18 (a) Each applicant for a license under the provisions of
255-19 this Article 21.07, Insurance Code, as amended, who desires to
255-20 write life insurance in excess of $7,500 <$5,000> upon any one
255-21 life, other than as excepted in Section 3 of this Article 21.07,
255-22 within this state shall submit to a personal written examination
255-23 prescribed by the State Board of Insurance and administered in the
255-24 English or Spanish language to determine his competency with
255-25 respect to life insurance and his familiarity with the pertinent
255-26 provisions of the laws of the State of Texas relating to life
255-27 insurance and shall pass the same to the satisfaction of the State
256-1 Board of Insurance; except that no written examination shall be
256-2 required of an applicant that is a partnership or corporation.
256-3 (c) After the State Board of Insurance shall determine that
256-4 such applicant has successfully passed the written examination or
256-5 it has been waived <and is a person of good character and
256-6 reputation>, the State Board of Insurance shall forthwith issue a
256-7 license to such applicant which shall also authorize such applicant
256-8 to write life insurance upon any one life in excess of $7,500 <Five
256-9 Thousand Dollars ($5,000.00)> for the designated insurance carrier.
256-10 (e) When any license shall be issued by the State Board of
256-11 Insurance to an applicant entitled to write life insurance upon any
256-12 one life in excess of $7,500 <Five Thousand Dollars ($5,000.00)>,
256-13 the license shall have stamped thereon the words, "Life Insurance
256-14 in Excess of $7,500 <$5,000.00>."
256-15 SECTION 12.21. Sections 5, 8, and 11, Article 21.07,
256-16 Insurance Code, are amended to read as follows:
256-17 Sec. 5. Failure of Applicant to Qualify for License. If
256-18 <the State Board of Insurance is not satisfied that> the applicant
256-19 for a license <is trustworthy and of good character, or, if
256-20 applicable, that the applicant>, if required to do so, has not
256-21 passed the written examination to the satisfaction of the State
256-22 Board of Insurance, the State Board of Insurance shall forthwith
256-23 notify the applicant and the insurance carrier in writing that the
256-24 license will not be issued to the applicant.
256-25 Sec. 8. Temporary license. The department<, if it is
256-26 satisfied with the honesty and trustworthiness of any applicant who
256-27 desires to write health and accident insurance,> may issue a
257-1 temporary agent's license, authorizing the applicant to write
257-2 health and accident insurance, as well as all other insurance
257-3 authorized to be written by the appointing insurance carrier,
257-4 effective for ninety (90) days, without requiring the applicant to
257-5 pass a written examination, as follows:
257-6 To any applicant who has been appointed or who is being
257-7 considered for appointment as an agent by an insurance carrier
257-8 authorized to write health and accident insurance immediately upon
257-9 receipt by the department of an application executed by such person
257-10 in the form required by this Article, together with a nonrefundable
257-11 filing fee of $100 and a certificate signed by an officer or
257-12 properly authorized representative of such insurance carrier
257-13 certifying:
257-14 (a) <that such insurance carrier has
257-15 investigated the character and background of such person and is
257-16 satisfied that he is trustworthy and of good character;>
257-17 <(b)> that such person has been appointed or is
257-18 being considered for appointment by such insurance carrier as its
257-19 agent; and
257-20 (b) <(c)> that such insurance carrier desires
257-21 that such person be issued a temporary license; provided that if
257-22 such temporary license shall not have been received from the
257-23 department within seven days from the date on which the application
257-24 and certificate were delivered to or mailed to the department, the
257-25 insurance carrier may assume that such temporary license will be
257-26 issued in due course and the applicant may proceed to act as an
257-27 agent; provided, however, that no temporary license shall be
258-1 renewable or issued more than once in a consecutive six months
258-2 period to the same applicant; and provided further, that no
258-3 temporary license shall be granted to any person who does not
258-4 intend to actively sell health and accident insurance to the public
258-5 generally and it is intended to prohibit the use of a temporary
258-6 license to obtain commissions from sales to persons of family
258-7 employment or business relationships to the temporary licensee, to
258-8 accomplish which purposes an insurance carrier is hereby prohibited
258-9 from knowingly paying directly or indirectly to the holder of a
258-10 temporary license under this Section any commissions on the sale of
258-11 a contract of health and accident insurance to any person related
258-12 to temporary licensee by blood or marriage, and the holder of a
258-13 temporary license is hereby prohibited from receiving or accepting
258-14 commissions on the sale of a contract of health and accident
258-15 insurance to any person included in the foregoing classes of
258-16 relationship.
258-17 Sec. 11. Judicial review of acts of State Board of
258-18 Insurance. If the commissioner refuses an application for license
258-19 as provided by this Article, or suspends, revokes, or refuses to
258-20 renew a license at a hearing as provided by this Article, <and this
258-21 action is upheld on review to the Board as provided by this code,>
258-22 and if the applicant or accused is dissatisfied with the action of
258-23 the commissioner <and the Board>, the applicant or accused may
258-24 appeal from the action as provided by <Section (f),> Article
258-25 1.04<,> of this code.
258-26 SECTION 12.22. Section 10(a), Article 21.07, Insurance Code,
258-27 is amended to read as follows:
259-1 (a) The department may discipline a <A> license holder or
259-2 deny an application under Section 5, Article 21.01-2, of this code
259-3 <may be denied, or a license duly issued may be suspended or
259-4 revoked or the renewal thereof refused by the State Board of
259-5 Insurance> if<, after notice and hearing as hereafter provided,> it
259-6 finds that the applicant, individually or through any officer,
259-7 director, or shareholder, for, or holder of, such license:
259-8 (1) Has wilfully violated any provision of the
259-9 insurance laws of this State; <or>
259-10 (2) Has intentionally made a material misstatement in
259-11 the application for such license; <or>
259-12 (3) Has obtained, or attempted to obtain, such license
259-13 by fraud or misrepresentation; <or>
259-14 (4) Has misappropriated or converted to his or its own
259-15 use or illegally withheld money belonging to an insurance carrier
259-16 or an insured or beneficiary; <or>
259-17 (5) <Has otherwise demonstrated lack of
259-18 trustworthiness or competence to act as an agent; or>
259-19 <(6)> Has been guilty of fraudulent or dishonest
259-20 practices; <or>
259-21 (6) <(7)> Has materially misrepresented the terms and
259-22 conditions of any insurance policy or contract; <or>
259-23 (7) <(8)> Has made or issued, or caused to be made or
259-24 issued, any statement misrepresenting or making incomplete
259-25 comparisons regarding the terms or conditions of any insurance
259-26 contract legally issued by any insurance carrier, for the purpose
259-27 of inducing or attempting to induce the owner of such contract to
260-1 forfeit or surrender such contract or allow it to lapse for the
260-2 purpose of replacing such contract with another; <or>
260-3 <(9) Is not of good character or reputation;> or
260-4 (8) <(10)> Is convicted of a felony.
260-5 SECTION 12.23. Section 19(b), Article 21.07, Insurance Code,
260-6 is amended to read as follows:
260-7 (b) The State Board of Insurance may, upon request of such
260-8 insurer on application forms furnished by the State Board of
260-9 Insurance and upon payment of a nonrefundable license fee in an
260-10 amount not to exceed $50 as determined by the State Board of
260-11 Insurance, issue such license to such person which will be valid
260-12 only for such limited representation of such insurer as provided
260-13 herein. The application shall be accompanied by a certificate, on
260-14 forms to be prescribed and furnished by the State Board of
260-15 Insurance and signed by an officer or properly authorized
260-16 representative of the insurance company the applicant proposes to
260-17 represent, stating that the insurance company <has investigated the
260-18 character and background of the applicant and is satisfied that the
260-19 applicant is trustworthy and qualified to hold himself out in good
260-20 faith as an insurance agent, and that the insurance company>
260-21 desires that the applicant act as an insurance agent to represent
260-22 the insurance company. The insurer shall also certify to the State
260-23 Board of Insurance that it has provided the applicant with at least
260-24 forty (40) hours of training, has tested the applicant and found
260-25 the applicant qualified to represent the insurer, and that the
260-26 insurer is willing to be bound by the acts of such applicant within
260-27 the scope of such limited representation.
261-1 SECTION 12.24. Section 3, Chapter 213, Acts of the 54th
261-2 Legislature, Regular Session, 1955 (Article 21.07-1, Vernon's Texas
261-3 Insurance Code), is amended by adding Subsection (c) to read as
261-4 follows:
261-5 (c) A person who has had a license revoked under Section 12
261-6 of this Act may not solicit or otherwise transact business under
261-7 Chapter 10 of this code.
261-8 SECTION 12.25. Section 4(b), Chapter 213, Acts of the 54th
261-9 Legislature, Regular Session, 1955 (Article 21.07-1, Vernon's Texas
261-10 Insurance Code), is amended to read as follows:
261-11 (b) The application shall be accompanied by a certificate on
261-12 forms furnished by the Commissioner and signed by an officer or
261-13 properly authorized representative of the life insurance company
261-14 the applicant proposes to represent, stating that <the insurer has
261-15 investigated the character and background of the applicant and is
261-16 satisfied that the applicant or the partners of the partnership or
261-17 the officers, directors, and shareholders of the corporation are
261-18 trustworthy and qualified to act as a life insurance agent, that>
261-19 the applicant has completed the educational requirements as
261-20 provided in this Act, and that the insurer desires that the
261-21 applicant be licensed as a life insurance agent to represent it in
261-22 this State.
261-23 SECTION 12.26. Section 6, Chapter 213, Acts of the 54th
261-24 Legislature, Regular Session, 1955 (Article 21.07-1, Vernon's Texas
261-25 Insurance Code), is amended to read as follows:
261-26 Sec. 6. Issuance or Denial of License. After <If the
261-27 Commissioner is satisfied that the applicant is trustworthy and
262-1 competent and after> the applicant, if required to do so, has
262-2 passed the written examination to the satisfaction of the
262-3 Commissioner, a license shall be issued forthwith. If the license
262-4 is denied for any of the reasons set forth in Section 12 of this
262-5 Act, the Commissioner shall notify the applicant and the insurer in
262-6 writing that the license will not be issued to the applicant.
262-7 SECTION 12.27. Section 9(a), Chapter 213, Acts of the 54th
262-8 Legislature, Regular Session, 1955 (Article 21.07-1, Vernon's Texas
262-9 Insurance Code), is amended to read as follows:
262-10 (a) Except as may be provided by a staggered renewal system
262-11 adopted under Article 21.01-2, Insurance Code <Subsection (e) of
262-12 this section>, each license issued to a life insurance agent shall
262-13 expire two years following the date of issue, unless prior thereto
262-14 it is suspended or revoked by the Commissioner.
262-15 SECTION 12.28. Section 10, Chapter 213, Acts of the 54th
262-16 Legislature, Regular Session, 1955 (Article 21.07-1, Vernon's Texas
262-17 Insurance Code), is amended to read as follows:
262-18 Sec. 10. Temporary License. (a) The department<, if it is
262-19 satisfied with the honesty and trustworthiness of the applicant,>
262-20 may issue a temporary life insurance agent's license, effective for
262-21 ninety days, without requiring the applicant to pass a written
262-22 examination, as follows:
262-23 (1) <(a)> To an applicant who has fulfilled the
262-24 provisions of Section 4 of this Act where such applicant will
262-25 actually collect the premiums on industrial life insurance
262-26 contracts during the period of such temporary license; provided,
262-27 however, that if such temporary license is not received from the
263-1 department within seven days from the date the application was sent
263-2 to the department, the company may assume that the temporary
263-3 license will be issued in due course and the applicant may proceed
263-4 to act as an agent. For the purpose of this subsection an
263-5 industrial life insurance contract shall mean a contract for which
263-6 the premiums are payable at monthly or more frequent intervals
263-7 directly by the owner thereof, or by a person representing the
263-8 owner, to a representative of the company;
263-9 (2) <(b)> To any person who is being considered for
263-10 appointment as an agent by an insurer immediately upon receipt by
263-11 the department of an application executed by such person in the
263-12 form required by Section 4 of this Act, together with a
263-13 nonrefundable filing fee of $100 and a certificate signed by an
263-14 officer or properly authorized representative of such insurer
263-15 stating:
263-16 (A) <(1) that such insurer has investigated the
263-17 character and background of such person and is satisfied that he is
263-18 trustworthy;>
263-19 <(2)> that such person is being considered for
263-20 appointment by such insurer as its full-time agent; <and>
263-21 (B) <(3)> that such insurer desires that such
263-22 person be issued a temporary license; provided that if such
263-23 temporary license shall not have been received from the department
263-24 within seven days from the date on which the application and
263-25 certificate were delivered to or mailed to the department the
263-26 insurer may assume that such temporary license will be issued in
263-27 due course and the applicant may proceed to act as an agent;
264-1 provided, however, that no temporary license shall be renewable nor
264-2 issued more than once in a consecutive six months period to the
264-3 same applicant; and provided further, that no temporary license
264-4 shall be granted to any person who does not intend to apply for a
264-5 license to sell life insurance to the public generally and it is
264-6 intended to prohibit the use of a temporary license to obtain
264-7 commissions from sales to persons of family employment or business
264-8 relationships to the temporary licensee, to accomplish which
264-9 purposes an insurer is hereby prohibited from knowingly paying
264-10 directly or indirectly to the holder of a temporary license under
264-11 this subsection any commissions on the sale of a contract of
264-12 insurance on the life of the temporary licensee, or on the life of
264-13 any person related to him by blood or marriage, or on the life of
264-14 any person who is or has been during the past six months his
264-15 employer either as an individual or as a member of a partnership,
264-16 association, firm or corporation, or on the life of any person who
264-17 is or who has been during the past six months his employee, and the
264-18 holder of a temporary license is hereby prohibited from receiving
264-19 or accepting commissions on the sale of a contract of insurance to
264-20 any person included in the foregoing classes of relationship;
264-21 (C) <(4)> that a person who has been issued a
264-22 temporary license under this subsection and is acting under the
264-23 authority of the temporary license may not engage in any insurance
264-24 solicitation, sale, or other agency transaction that results in or
264-25 is intended to result in the replacement of any existing individual
264-26 life insurance policy form or annuity contract that is in force or
264-27 receive, directly or indirectly, any commission or other
265-1 compensation that may or does result from such solicitation, sale,
265-2 or other agency transaction; and that any person holding a
265-3 permanent license may not circumvent or attempt to circumvent the
265-4 intent of this subdivision by acting for or with a person holding
265-5 such a temporary license. As used in this subdivision,
265-6 "replacement" means any transaction in which a new life insurance
265-7 or annuity contract is to be purchased, and it is known or should
265-8 be known to the temporary agent that by reason of the solicitation,
265-9 sale, or other transaction the existing life insurance or annuity
265-10 contract has been or is to be:
265-11 (i) <(A)> lapsed, forfeited, surrendered,
265-12 or otherwise terminated;
265-13 (ii) <(B)> converted to reduced paid-up
265-14 insurance, continued as extended term insurance, or otherwise
265-15 reduced in value by the use of nonforfeiture benefits or other
265-16 policy values;
265-17 (iii) <(C)> amended so as to effect either
265-18 a reduction in benefits or in the term for which coverage would
265-19 otherwise remain in force or for which benefits would be paid;
265-20 (iv) <(D)> reissued with any reduction in
265-21 cash value; or
265-22 (v) <(E)> pledged as collateral or
265-23 subjected to borrowing, whether in a single loan or under a
265-24 schedule of borrowing over a period of time for amounts in the
265-25 aggregate exceeding 25 percent of the loan value set forth in the
265-26 policy; and
265-27 (D) <(5)> that such person will complete, under
266-1 such insurer's supervision, at least forty hours of training as
266-2 prescribed by Subsection (c) of this Section within fourteen days
266-3 from the date on which the application and certificate were
266-4 delivered or mailed to the department.
266-5 (b) <(6)> The department shall have the authority to cancel,
266-6 suspend, or revoke the temporary appointment powers of any life
266-7 insurance company, if, after notice and hearing, he finds that such
266-8 company has abused such temporary appointment powers. In
266-9 considering such abuse, the department may consider, but is not
266-10 limited to, the number of temporary appointments made by a company
266-11 as provided by Subsection (f) <(e)> of this Section, the percentage
266-12 of appointees sitting for the examination as life insurance agents
266-13 under this Article as it may be in violation of Subsection (e)
266-14 <(d)> of this Section, and the number of appointees successfully
266-15 passing said examination in accordance with Subsection (e) <(d)>.
266-16 Appeals from the department's decision shall be made in accordance
266-17 with Section 13 hereof.
266-18 (c) At least forty hours of training must be administered to
266-19 any applicant for a temporary license as herein defined within
266-20 fourteen days from the date on which the application and
266-21 certificate were delivered or mailed to the department. Of this
266-22 forty-hour requirement, ten hours must be taught in a classroom
266-23 setting, including but not limited to an accredited college,
266-24 university, junior or community college, business school, or
266-25 private institute or classes sponsored by the insurer and
266-26 especially established for this purpose. Such training program
266-27 shall be constructed so as to provide an applicant with the basic
267-1 knowledge of:
267-2 (1) the broad principles of insurance, licensing, and
267-3 regulatory laws of this State; and
267-4 (2) the obligations and duties of a life insurance
267-5 agent.
267-6 (d) The Commissioner of Insurance may, in his discretion,
267-7 require that the <such> training program required by Subsection (c)
267-8 of this Section <shall> be filed with the department for approval
267-9 in the event the commissioner <he> finds an abuse of temporary
267-10 appointment powers under Subsection (b)<(6)> of this Section.
267-11 (e) <(d)> Each insurer is responsible for requiring that not
267-12 less than 70 percent of such insurer's applicants for temporary
267-13 licenses sit for an examination during any two consecutive calendar
267-14 quarters. At least 50 percent of those applicants sitting for the
267-15 examination must pass during such a period.
267-16 (f) <(e)> Each insurer may make no more than two hundred and
267-17 fifty temporary licensee appointments during a calendar year under
267-18 Subsection (a)(2) <(b)> of this Section.
267-19 SECTION 12.29. Section 12(a), Chapter 213, Acts of the 54th
267-20 Legislature, Regular Session, 1955 (Article 21.07-1, Vernon's Texas
267-21 Insurance Code), is amended to read as follows:
267-22 (a) The commissioner may discipline a <A> license holder or
267-23 deny an application under Section 5, Article 21.01-2, Insurance
267-24 Code, <may be denied, or a license duly issued may be suspended or
267-25 revoked or the renewal thereof refused by the Commissioner> if<,
267-26 after notice and hearing as hereafter provided,> the Commissioner
267-27 finds that the applicant, individually or through any officer,
268-1 director, or shareholder, for, or holder of such license:
268-2 (1) Has wilfully violated any provision of the
268-3 insurance laws of this State;
268-4 (2) Has intentionally made a material misstatement in
268-5 the application for such license;
268-6 (3) Has obtained, or attempted to obtain, such license
268-7 by fraud or misrepresentation;
268-8 (4) Has misappropriated or converted to the
268-9 applicant's or licensee's own use or illegally withheld money
268-10 belonging to an insurer or an insured or beneficiary;
268-11 (5) <Has otherwise demonstrated lack of
268-12 trustworthiness or competence to act as a life insurance agent;>
268-13 <(6)> Has been guilty of fraudulent or dishonest
268-14 practices;
268-15 (6) <(7)> Has materially misrepresented the terms and
268-16 conditions of life insurance policies or contracts;
268-17 (7) <(8)> Has made or issued, or caused to be made or
268-18 issued, any statement misrepresenting or making incomplete
268-19 comparisons regarding the terms or conditions of any insurance or
268-20 annuity contract legally issued by any insurer, for the purpose of
268-21 inducing or attempting to induce the owner of such contract to
268-22 forfeit or surrender such contract or allow it to lapse for the
268-23 purpose of replacing such contract with another;
268-24 (8) <(9)> Has obtained, or attempted to obtain such
268-25 license, not for the purpose of holding himself or itself out to
268-26 the general public as a life insurance agent, but primarily for the
268-27 purpose of soliciting, negotiating or procuring life insurance or
269-1 annuity contracts covering the applicant or licensee, members of
269-2 the applicant's or licensee's family, or the applicant's or
269-3 licensee's business associates;
269-4 (9) <(10) Is not of good character or reputation; or>
269-5 <(11)> Is convicted of a felony; or
269-6 (10) Is guilty of rebating an insurance premium or
269-7 commission to an insured.
269-8 SECTION 12.30. Section 13, Chapter 213, Acts of the 54th
269-9 Legislature, Regular Session, 1955 (Article 21.07-1, Vernon's Texas
269-10 Insurance Code), is amended to read as follows:
269-11 Sec. 13. Judicial review of acts of commissioner. If the
269-12 Commissioner refuses an application for license as provided by this
269-13 Act or suspends, revokes, or refuses to renew a license at a
269-14 hearing provided by this Act, <and the action is upheld on review
269-15 to the Board as provided by this Code,> and if the applicant or
269-16 accused is dissatisfied with the action of the Commissioner and the
269-17 Board, the applicant or accused may appeal from that action in
269-18 accordance with <Section (f),> Article 1.04, Insurance Code.
269-19 SECTION 12.31. Section 16(h), Chapter 213, Acts of the 54th
269-20 Legislature, Regular Session, 1955 (Article 21.07-1, Vernon's Texas
269-21 Insurance Code), is amended to read as follows:
269-22 (h) After the State Board of Insurance determines that an
269-23 applicant has successfully passed the written examination or is
269-24 exempt therefrom as provided in Subsection (d) above, <and the
269-25 board has determined the applicant to be of good character and
269-26 reputation,> has been appointed to act as an agent by one or more
269-27 legal reserve life insurance companies, and has paid a
270-1 nonrefundable license fee not to exceed $50 as determined by the
270-2 board, the board shall issue a license to such applicant
270-3 authorizing the applicant to act as an accident and health
270-4 insurance agent for the appointing insurance carrier.
270-5 SECTION 12.32. Section 5, Chapter 29, Acts of the 54th
270-6 Legislature, Regular Session, 1955 (Article 21.07-2, Vernon's Texas
270-7 Insurance Code), is amended to read as follows:
270-8 Sec. 5. Mode of Licensing and Regulation. (a) The
270-9 licensing and regulation of a Life Insurance Counselor, as that
270-10 term is defined herein, shall be in the same manner and subject to
270-11 the same requirements as applicable to the licensing of agents of
270-12 legal reserve life insurance companies as provided in Article
270-13 21.07-1 of the Texas Insurance Code, 1951, or as provided by any
270-14 existing or subsequent applicable law governing the licensing of
270-15 such agents, and all the provisions thereof are hereby made
270-16 applicable to applicants and licensees under this Act, except that
270-17 a Life Insurance Counselor shall not advertise in any manner and
270-18 shall not circulate materials indicating professional superiority
270-19 or the performance of professional service in a superior manner;
270-20 provided, however, that an appointment to act for an insurer shall
270-21 not be a condition to the licensing of a Life Insurance Counselor.
270-22 (b) In addition to the above requirements, the applicant for
270-23 licensure as a Life Insurance Counselor shall submit to the
270-24 Commissioner <evidence of high moral and ethical character,>
270-25 documentation that he has been licensed as a life insurance agent
270-26 in excess of three years. After the Insurance Commissioner has
270-27 satisfied himself as to these requirements, he shall then cause the
271-1 applicant for a Life Insurance Counselor's license to sit for an
271-2 examination which shall include the following<:>
271-3 <Such examination shall consist of> five subjects and subject
271-4 areas:
271-5 (1) <(a)> Fundamentals of life and health insurance;
271-6 (2) <(b)> Group life insurance, pensions and health
271-7 insurance;
271-8 (3) <(c)> Law, trust and taxation;
271-9 (4) <(d)> Finance and economics; and
271-10 (5) <(e)> Business insurance and estate planning.
271-11 (c) No license shall be granted until such individual shall
271-12 have successfully passed each of the five parts under Subsection
271-13 (b) of this section <above enumerated>. Such examinations may be
271-14 given and scheduled by the Commissioner at his discretion.
271-15 Individuals currently holding Life Insurance Counselor licenses
271-16 issued by the Texas State Board of Insurance, who do not have the
271-17 equivalent of the requirements above listed, shall have one year
271-18 from the date of enactment hereof to so qualify.
271-19 <Unless the State Board of Insurance accepts a qualifying
271-20 examination administered by a testing service, as provided under
271-21 Article 21.01-1, Insurance Code, as amended, not later than the
271-22 30th day after the day on which a licensing examination is
271-23 administered under this Section, the Commissioner shall send notice
271-24 to each examinee of the results of the examination. If an
271-25 examination is graded or reviewed by a testing service, the
271-26 Commissioner shall send, or require the testing service to send,
271-27 notice to the examinees of the results of the examination within
272-1 two weeks after the date on which the Commissioner receives the
272-2 results from the testing service. If the notice of the examination
272-3 results will be delayed for longer than 90 days after the
272-4 examination date, the Commissioner shall send, or require the
272-5 testing service to send, notice to the examinee of the reason for
272-6 the delay before the 90th day. If requested in writing by a person
272-7 who fails the licensing examination administered under this
272-8 Section, the Commissioner shall send, or require the testing
272-9 service to send, to the person an analysis of the person's
272-10 performance on the examination.>
272-11 SECTION 12.33. Sections 9, 12, and 14, Managing General
272-12 Agents' Licensing Act (Article 21.07-3, Vernon's Texas Insurance
272-13 Code), are amended to read as follows:
272-14 Sec. 9. Expiration of License; Renewal. <(a)> Except as
272-15 may be provided by a staggered renewal system adopted under Article
272-16 21.01-2, Insurance Code <Subsection (c) of this section>, every
272-17 license issued under this Act expires two years from the date of
272-18 issuance, unless a completed application to qualify for renewal of
272-19 such license shall be filed with the commissioner and a
272-20 nonrefundable fee paid on or before such date, in which event the
272-21 license sought to be renewed shall continue in full force and
272-22 effect until renewed or renewal is denied.
272-23 <(b) An unexpired license may be renewed by paying the
272-24 required nonrefundable renewal fee to the board not later than the
272-25 expiration date of the license. If a license has been expired for
272-26 not longer than 90 days, the licensee may renew the license by
272-27 paying to the board the required nonrefundable renewal fee and a
273-1 nonrefundable fee that is one-half of the original license fee. If
273-2 a license has been expired for more than 90 days, the license may
273-3 not be renewed. A new license may be obtained by complying with
273-4 the requirements and procedures for obtaining an original license.
273-5 At least 30 days before the expiration of a license, the
273-6 commissioner shall send written notice of the impending license
273-7 expiration to the licensee at the licensee's last known address.
273-8 This subsection may not be construed to prevent the board from
273-9 denying or refusing to renew a license under applicable law or
273-10 rules of the State Board of Insurance.>
273-11 <(c) The State Board of Insurance by rule may adopt a system
273-12 under which licenses expire on various dates during the year. For
273-13 the period in which the license is valid for less than two years,
273-14 the license fee shall be prorated on a monthly basis so that each
273-15 licensee shall pay only that portion of the license fee that is
273-16 allocable to the number of months during which the license is
273-17 valid. On each subsequent renewal of the license, the total
273-18 license renewal fee is payable.>
273-19 Sec. 12. Denial, Refusal, Suspension, or Revocation of
273-20 Licenses. The commissioner may discipline a <A> license holder or
273-21 deny an application under Section 5, Article 21.01-2, Insurance
273-22 Code, if it <may be denied, suspended for a period of time, revoked
273-23 or the renewal thereof refused by the commissioner if, after notice
273-24 and hearing as hereinafter provided, he> finds that the applicant
273-25 for, or holder of such license:
273-26 (a) has wilfully violated or participated in the
273-27 violation of any provisions of this Act or any of the insurance
274-1 laws of this state; <or>
274-2 (b) has intentionally made a material misstatement in
274-3 the application for such license; <or>
274-4 (c) has obtained, or attempted to obtain such license
274-5 by fraud or misrepresentation; <or>
274-6 (d) has misappropriated or converted to his own use or
274-7 has illegally withheld moneys required to be held in a fiduciary
274-8 capacity; <or>
274-9 (e) has with intent to deceive materially
274-10 misrepresented the terms or effect of any contract of insurance, or
274-11 has engaged in any fraudulent transaction; or
274-12 (f) has been convicted of a felony, or of any
274-13 misdemeanor of which criminal fraud is an essential element<; or>
274-14 <(g) has shown himself to be, and is so deemed by the
274-15 commissioner, incompetent, or untrustworthy, or not of good
274-16 character and reputation>.
274-17 Sec. 14. JUDICIAL REVIEW OF ACTS OF COMMISSIONER <AND THE
274-18 BOARD>. If the commissioner shall refuse an application for
274-19 license as provided in this Act, or shall suspend, revoke or refuse
274-20 to renew any license at a hearing as provided by this Act, <and
274-21 such action is upheld upon review to the board as in this Code
274-22 provided,> and if the applicant or accused thereafter is
274-23 dissatisfied with the action of the commissioner <and the board>,
274-24 the applicant or accused may appeal from that action in accordance
274-25 with <Section (f),> Article 1.04, Insurance Code.
274-26 SECTION 12.34. Sections 10 and 18, Chapter 407, Acts of the
274-27 63rd Legislature, Regular Session, 1973 (Article 21.07-4, Vernon's
275-1 Texas Insurance Code), are amended to read as follows:
275-2 Sec. 10. Examination for License. <(a)> Each applicant for
275-3 a license as an adjuster shall, prior to the issuance of such
275-4 license, personally take and pass, to the satisfaction of the
275-5 commissioner, an examination as a test of his qualifications and
275-6 competency; but the requirement of an examination shall not apply
275-7 to any of the following:
275-8 (1) an applicant who for the 90-day period next
275-9 preceding the effective date of this Act has been principally
275-10 engaged in the investigation, adjustment, or supervision of losses
275-11 and who is so engaged on the effective date of this Act;
275-12 (2) an applicant for the renewal of a license issued
275-13 hereunder; <or>
275-14 (3) an applicant who is licensed as an insurance
275-15 adjuster, as defined by this statute, in another state with which
275-16 state a reciprocal agreement has been entered into by the
275-17 commissioner; or
275-18 (4) any person who has completed a course or training
275-19 program in adjusting of losses as prescribed and approved by the
275-20 commissioner and is certified to the commissioner upon completion
275-21 of the course that such person has completed said course or
275-22 training program, and has passed an examination testing his
275-23 knowledge and qualification, as prescribed by the commissioner.
275-24 <(b) Unless the State Board of Insurance accepts a
275-25 qualifying examination administered by a testing service, as
275-26 provided under Article 21.01-1, Insurance Code, as amended, not
275-27 later than the 30th day after the day on which a licensing
276-1 examination is administered under this section, the commissioner
276-2 shall send notice to each examinee of the results of the
276-3 examination. If an examination is graded or reviewed by a testing
276-4 service, the commissioner shall send, or require the testing
276-5 service to send, notice to the examinees of the results of the
276-6 examination within two weeks after the date on which the
276-7 commissioner receives the results from the testing service. If the
276-8 notice of the examination results will be delayed for longer than
276-9 90 days after the examination date, the commissioner shall send, or
276-10 require the testing service to send, notice to the examinee of the
276-11 reason for the delay before the 90th day.>
276-12 <(c) If requested in writing by a person who fails the
276-13 licensing examination administered under this section, the
276-14 commissioner shall send, or require the testing service to send, to
276-15 the person an analysis of the person's performance on the
276-16 examination.>
276-17 Sec. 18. Automatic <Procedure for Refusal, Suspension, or>
276-18 Revocation. <(a)> The commissioner may revoke or refuse to renew
276-19 any license of an adjuster immediately and without hearing, upon
276-20 the licensee's conviction of a felony, by final judgment, in any
276-21 court of competent jurisdiction.
276-22 <(b) The commissioner may deny, suspend, revoke, or refuse
276-23 to renew a license:>
276-24 <(1) by order or notice given to the licensee not less
276-25 than 15 days in advance of the effective date of the order or
276-26 notice, subject to the right of the licensee to demand in writing,
276-27 a hearing, before the board after receipt of notice and before the
277-1 effective date of the revocation. Pending such hearing, the
277-2 license may be suspended.>
277-3 <(2) by an order after a hearing which is effective 10
277-4 days after the order is issued subject to appeal to a district
277-5 court in Travis County.>
277-6 SECTION 12.35. Section 16(a), Chapter 407, Acts of the 63rd
277-7 Legislature, Regular Session, 1973 (Article 21.07-4, Vernon's Texas
277-8 Insurance Code), is amended to read as follows:
277-9 (a) Except as may be provided by a staggered renewal system
277-10 adopted under Article 21.01-2, Insurance Code <Subsection (e) of
277-11 this section>, an adjuster's license expires two years after the
277-12 date of issuance.
277-13 SECTION 12.36. Section 17(a), Chapter 407, Acts of the 63rd
277-14 Legislature, Regular Session, 1973 (Article 21.07-4, Vernon's Texas
277-15 Insurance Code), is amended to read as follows:
277-16 (a) The department <commissioner> may discipline an adjuster
277-17 or deny an application under Section 5, Article 21.01-2, Insurance
277-18 Code, <deny, suspend, revoke, or refuse to renew any adjuster's
277-19 license> for any of the following causes:
277-20 (1) for any cause for which issuance of the license
277-21 could have been refused had it been existent and been known to the
277-22 board;
277-23 (2) if the applicant or licensee willfully violates or
277-24 knowingly participates in the violation of any provision of this
277-25 Act;
277-26 (3) if the applicant or licensee has obtained or
277-27 attempted to obtain any such license through willful
278-1 misrepresentation or fraud, or has failed to pass any examination
278-2 required under this Act;
278-3 (4) if the applicant or licensee has misappropriated,
278-4 or converted to the applicant's or licensee's own use, or has
278-5 illegally withheld moneys required to be held in a fiduciary
278-6 capacity;
278-7 (5) if the applicant or licensee has, with intent to
278-8 deceive, materially misrepresented the terms or effect of an
278-9 insurance contract, or has engaged in any fraudulent transactions;
278-10 or
278-11 (6) if the applicant or licensee is convicted, by
278-12 final judgment, of a felony<; or>
278-13 <(7) if in the conduct of the licensee's affairs under
278-14 the license, the licensee has proven to be, and is so deemed by the
278-15 commissioner, incompetent, untrustworthy, or a source of injury to
278-16 the public>.
278-17 SECTION 12.37. Section 5(a), Article 21.07-6, Insurance
278-18 Code, is amended to read as follows:
278-19 (a) The commissioner shall approve an application for a
278-20 certificate of authority to conduct a business in this state as an
278-21 administrator if the commissioner is satisfied that the application
278-22 meets the following criteria:
278-23 (1) the granting of the application would not violate
278-24 a federal or state law;
278-25 (2) the <competence, trustworthiness, experience,>
278-26 financial condition<, or integrity> of an administrator applicant
278-27 or those persons who would operate or control an administrator
279-1 applicant are such that the granting of a certificate of authority
279-2 would not be adverse to the public interest;
279-3 (3) the applicant has not attempted through fraud or
279-4 bad faith to obtain the certificate of authority;
279-5 (4) the applicant has complied with this article and
279-6 rules adopted by the board under this article; and
279-7 (5) the name under which the applicant will conduct
279-8 business in this state is not so similar to that of another
279-9 administrator or insurer that it is likely to mislead the public.
279-10 SECTION 12.38. Section 3(e), Article 21.07-7, Insurance
279-11 Code, is amended to read as follows:
279-12 (e) The department <commissioner> may discipline a license
279-13 holder or deny an application under Section 5, Article 21.01-2, of
279-14 this code if it <deny a license application or suspend, revoke, or
279-15 refuse to renew a license if, after notice and hearing as provided
279-16 by this code, the commissioner> determines that the applicant for
279-17 or holder of a license, or any person who would be authorized to
279-18 act on behalf of the applicant or the license holder under
279-19 Subsection (c) of this section has:
279-20 (1) wilfully violated or participated in the violation
279-21 of this article or any of the insurance laws of this state;
279-22 (2) intentionally made a material misstatement in the
279-23 license application;
279-24 (3) obtained or attempted to obtain the license by
279-25 fraud or misrepresentation;
279-26 (4) misappropriated, converted to his own use, or
279-27 illegally withheld money required to be held in a fiduciary
280-1 capacity;
280-2 (5) materially misrepresented the terms or effect of
280-3 any contract of insurance or reinsurance, or engaged in any
280-4 fraudulent transaction; or
280-5 (6) been convicted of a felony or of any misdemeanor
280-6 of which criminal fraud is an essential element<; or>
280-7 <(7) shown himself to be, and is so determined to be
280-8 by the commissioner, incompetent, untrustworthy, or not of good
280-9 character and reputation>.
280-10 SECTION 12.39. Section 2(b), Article 21.14, Insurance Code,
280-11 is amended to read as follows:
280-12 (b) Nothing contained in this article shall be so construed
280-13 as to affect or apply to orders, societies, or associations which
280-14 admit to membership only persons engaged in one or more crafts or
280-15 hazardous occupations in the same or similar lines of business, and
280-16 the ladies' societies, or ladies' auxiliary to such orders,
280-17 societies or associations, or any secretary of a Labor Union or
280-18 organization, or any secretary or agent of any fraternal benefit
280-19 society, which does not operate at a profit, except that a person
280-20 who has had a license revoked under Section 16 of this article may
280-21 not solicit or otherwise transact business under Chapter 10 of this
280-22 code.
280-23 SECTION 12.40. Sections 3(a) and (c), Article 21.14,
280-24 Insurance Code, are amended to read as follows:
280-25 (a) When any person, partnership or corporation shall desire
280-26 to engage in business as a local recording agent for an insurance
280-27 company, or insurance carrier, he or it shall make application for
281-1 a license to the State Board of Insurance, in such form as the
281-2 Board may require. Such application shall bear a signed
281-3 endorsement by a general, state or special agent of a qualified
281-4 insurance company, or insurance carrier that applicant or each
281-5 member of the partnership or each stockholder of the corporation is
281-6 a resident of this state <Texas, trustworthy, of good character and
281-7 good reputation, and is worthy of a license>.
281-8 (c) The Board shall issue a license to a corporation if the
281-9 Board finds:
281-10 (1) That the corporation is a Texas corporation
281-11 organized or existing under the Texas Business Corporation Act or
281-12 the Texas Professional Corporation Act having its principal place
281-13 of business in the State of Texas and having as one of its purposes
281-14 the authority to act as a local recording agent; and
281-15 (2) That every officer, director and shareholder of
281-16 the corporation is individually licensed as a local recording agent
281-17 under the provisions of this Insurance Code, except as may be
281-18 otherwise permitted by this Section or Section 3a of this article,
281-19 or that every officer and director of the corporation is
281-20 individually licensed as a local recording agent under this
281-21 Insurance Code, that the corporation is a wholly owned subsidiary
281-22 of a parent corporation that is licensed as a local recording agent
281-23 under this Insurance Code, and that every shareholder of the parent
281-24 corporation is individually licensed as a local recording agent
281-25 under this Insurance Code, and except as specifically provided by
281-26 this article, that no shareholder of the corporation is a corporate
281-27 entity; and
282-1 (3) That such corporation will have the ability to pay
282-2 any sums up to $25,000 which it might become legally obligated to
282-3 pay on account of any claim made against it by any customer and
282-4 caused by any negligent act, error or omission of the corporation
282-5 or any person for whose acts the corporation is legally liable in
282-6 the conduct of its business as a local recording agent. The term
282-7 "customer" as used herein shall mean any person, firm or
282-8 corporation to whom such corporation sells or attempts to sell a
282-9 policy of insurance, or from whom such corporation accepts an
282-10 application for insurance. Such ability shall be proven in one of
282-11 the following ways:
282-12 (A) <(a)> An errors and omissions policy
282-13 insuring such corporation against errors and omissions, in at least
282-14 the sum of $100,000<,> with no more than a $10,000 deductible
282-15 feature or the sum of at least $300,000 with no more than a $25,000
282-16 deductible feature, issued by an insurance company licensed to do
282-17 business in the State of Texas or, if a policy cannot be obtained
282-18 from a company licensed to do business in Texas, a policy issued by
282-19 a company not licensed to do business in Texas, on filing an
282-20 affidavit with the State Board of Insurance stating the inability
282-21 to obtain coverage and receiving the Board's approval; or
282-22 (B) <(b)> A bond executed by such corporation as
282-23 principal and a surety company authorized to do business in this
282-24 state, as surety, in the principal sum of $25,000, payable to the
282-25 State Board of Insurance for the use and benefit of customers of
282-26 such corporation, conditioned that such corporation shall pay any
282-27 final judgment recovered against it by any customer; or
283-1 (C) <(c)> A deposit of cash or securities of the
283-2 class authorized by Articles 2.08 and 2.10 of this Code, having a
283-3 fair market value of $25,000 with the State Treasurer. The State
283-4 Treasurer is hereby authorized and directed to accept and receive
283-5 such deposit and hold it exclusively for the protection of any
283-6 customer of such corporation recovering a final judgment against
283-7 such corporation. Such deposit may be withdrawn only upon filing
283-8 with the Board evidence satisfactory to it that the corporation has
283-9 withdrawn from business, and has no unsecured liabilities
283-10 outstanding, or that such corporation has provided for the
283-11 protection of its customers by furnishing an errors and omissions
283-12 policy or a bond as hereinbefore provided. Securities so deposited
283-13 may be exchanged from time to time for other qualified securities.
283-14 A binding commitment to issue such a policy or bond, or the
283-15 tender of such securities, shall be sufficient in connection with
283-16 any application for license.
283-17 Nothing contained herein shall be construed to permit any
283-18 unlicensed employee or agent of any corporation to perform any act
283-19 of a local recording agent without obtaining a local recording
283-20 agent's license. The Board shall not require a corporation to take
283-21 the examination provided in Section 6 of this Article 21.14.
283-22 If at any time, any corporation holding a local recording
283-23 agent's license does not maintain the qualifications necessary to
283-24 obtain a license, the license of such corporation to act as a local
283-25 recording agent shall be cancelled or denied in accordance with the
283-26 provisions of Sections 16, 17 and 18 of this Article 21.14;
283-27 provided, however, that should any person who is not a licensed
284-1 local recording agent acquire shares in such a corporation by
284-2 devise or descent, they shall have a period of 90 days from date of
284-3 acquisition within which to obtain a license as a local recording
284-4 agent or to dispose of the shares to a licensed local recording
284-5 agent except as may be permitted by Section 3a of this article.
284-6 Should such an unlicensed person, except as may be permitted
284-7 by Section 3a of this article, acquire shares in such a corporation
284-8 and not dispose of them within said period of 90 days to a licensed
284-9 local recording agent, then they must be purchased by the
284-10 corporation for their book value, that is, the value of said shares
284-11 of stock as reflected by the regular books and records of said
284-12 corporation, as of the date of the acquisition of said shares by
284-13 said unlicensed person. Should the corporation fail or refuse to
284-14 so purchase such shares, its license shall be cancelled.
284-15 Any such corporation shall have the power to redeem the
284-16 shares of any shareholder, or the shares of a deceased shareholder,
284-17 upon such terms as may be agreed upon by the Board of Directors and
284-18 such shareholder or his personal representative, or at such price
284-19 and upon such terms as may be provided in the Articles of
284-20 Incorporation, the Bylaws, or an existing contract entered into
284-21 between the shareholders of the corporation.
284-22 Each corporation licensed as a local recording agent shall
284-23 file, under oath, a list of the names and addresses of all of its
284-24 officers, directors and shareholders with its application for
284-25 renewal license.
284-26 Each corporation licensed as a local recording agent shall
284-27 notify the State Board of Insurance upon any change in its
285-1 officers, directors or shareholders not later than the 30th day
285-2 after the date on which the change became effective.
285-3 The term "firm" as it applies to local recording agents in
285-4 Sections 2, 12 and 16 of this Article 21.14 shall be construed to
285-5 include corporations.
285-6 SECTION 12.41. Sections 5, 8, and 18, Article 21.14,
285-7 Insurance Code, are amended to read as follows:
285-8 Sec. 5. ACTIVE AGENTS OR SOLICITORS ONLY TO BE LICENSED. No
285-9 license shall be granted to any person, firm, partnership or
285-10 corporation as a local recording agent or to a person as a
285-11 solicitor, for the purpose of writing any form of insurance, unless
285-12 it is found by the State Board of Insurance that such person, firm,
285-13 partnership or corporation, is or intends to be, actively engaged
285-14 in the soliciting or writing of insurance for the public generally;
285-15 that each person or individual of a firm is a resident of Texas<,
285-16 of good character and good reputation, worthy of a license,> and is
285-17 to be actively engaged in good faith in the business of insurance,
285-18 and that the application is not being made in order to evade the
285-19 laws against rebating and discrimination either for the applicant
285-20 or for some other person, firm, partnership or corporation.
285-21 Nothing herein contained shall prohibit an applicant insuring
285-22 property which the applicant owns or in which the applicant has an
285-23 interest; but it is the intent of this Section to prohibit coercion
285-24 of insurance and to preserve to each citizen the right to choose
285-25 his own agent or insurance carrier, and to prohibit the licensing
285-26 of an individual, firm, partnership or corporation to engage in the
285-27 insurance business principally to handle business which the
286-1 applicant controls only through ownership, mortgage or sale, family
286-2 relationship or employment, which shall be taken to mean that an
286-3 applicant who is making an original application for license shall
286-4 show the State Board of Insurance that the applicant has a bona
286-5 fide intention to engage in business in which, in any calendar
286-6 year, at least twenty-five per cent (25%) of the total volume of
286-7 premiums shall be derived from persons or organizations other than
286-8 applicant and from property other than that on which the applicant
286-9 shall control the placing of insurance through ownership, mortgage,
286-10 sale, family relationship or employment. Nothing herein contained
286-11 shall be construed to authorize a partnership or corporation to
286-12 receive a license as a solicitor.
286-13 Sec. 8. EXPIRATION OF LICENSE; RENEWAL. <(a)> Except as
286-14 may be provided by a staggered renewal system adopted under Article
286-15 21.01-2 of this code <Subsection (c) of this section>, every
286-16 license issued to a local recording agent or a solicitor shall
286-17 expire two years from the date of its issue, unless a completed
286-18 application to qualify for the renewal of any such license shall be
286-19 filed with the State Board of Insurance and a nonrefundable fee
286-20 paid on or before such date, in which event the license sought to
286-21 be renewed shall continue in full force and effect until renewed or
286-22 renewal is denied.
286-23 <(b) An unexpired license may be renewed by filing a
286-24 completed application and paying the required nonrefundable renewal
286-25 fee to the State Board of Insurance not later than the expiration
286-26 date of the license. If a license has been expired for not longer
286-27 than 90 days, the licensee may renew the license by paying to the
287-1 State Board of Insurance the required nonrefundable renewal fee and
287-2 a nonrefundable fee that is one-half of the original license fee.
287-3 If a license has been expired for more than 90 days, the license
287-4 may not be renewed. A new license may be obtained by complying
287-5 with the requirements and procedures for obtaining an original
287-6 license. At least 30 days before the expiration of a license, the
287-7 commissioner shall send written notice of the impending license
287-8 expiration to the licensee at the licensee's last known address.
287-9 This subsection may not be construed to prevent the board from
287-10 denying or refusing to renew a license under applicable law or
287-11 rules of the State Board of Insurance.>
287-12 <(c) The State Board of Insurance by rule may adopt a system
287-13 under which licenses expire on various dates during the year. For
287-14 the period in which the license is valid for less than two years,
287-15 the license fee shall be prorated on a monthly basis so that each
287-16 licensee shall pay only that portion of the license fee that is
287-17 allocable to the number of months during which the license is
287-18 valid. On each subsequent renewal of the license, the total
287-19 license renewal fee is payable.>
287-20 Sec. 18. APPEAL. If the Commissioner refuses an application
287-21 for license as provided by this article, or suspends, revokes, or
287-22 refuses to renew any license at a hearing as provided by this
287-23 article, <and the action is upheld on review to the Board as
287-24 provided by this Code,> and if the applicant or accused is
287-25 dissatisfied with the action of the Commissioner <and the Board>,
287-26 the applicant or accused may appeal from the action in accordance
287-27 with <Section (f),> Article 1.04<,> of this Code.
288-1 SECTION 12.42. Section 16, Article 21.14, Insurance Code, as
288-2 amended by Chapters 242 and 790, Acts of the 72nd Legislature,
288-3 Regular Session, 1991, is reenacted and amended to read as follows:
288-4 Sec. 16. SUSPENSION OR REVOCATION OF LICENSE. (a) The
288-5 license of any local recording agent shall be suspended during a
288-6 period in which the agent does not have outstanding a valid
288-7 appointment to act as an agent for an insurance company. The Board
288-8 shall end the suspension on receipt of evidence satisfactory to the
288-9 board that the agent has a valid appointment. The Board shall
288-10 cancel the license of a solicitor if the solicitor does not have
288-11 outstanding a valid appointment to act as a solicitor for a local
288-12 recording agent, and shall suspend the license during a period that
288-13 the solicitor's local recording agent does not have outstanding a
288-14 valid appointment to act as an agent under this Article.
288-15 (b) The department may discipline <license of> any local
288-16 recording agent or solicitor or deny an application under Section
288-17 5, Article 21.01-2, of this code <may be denied or a license duly
288-18 issued may be suspended or revoked or the renewal thereof refused
288-19 by the State Board of Insurance> if<, after notice and hearing as
288-20 hereafter provided,> it finds that the applicant, individually or
288-21 through any officer, director, or shareholder, for or holder of
288-22 such license:
288-23 (1) Has wilfully violated any provision of the
288-24 insurance laws of this state;
288-25 (2) Has intentionally made a material misstatement in
288-26 the application for such license;
288-27 (3) Has obtained, or attempted to obtain, such license
289-1 by fraud or misrepresentation;
289-2 (4) Has misappropriated or converted to the
289-3 applicant's or licensee's own use or illegally withheld money
289-4 belonging to an insurer or an insured or beneficiary;
289-5 (5) <Has otherwise demonstrated lack of
289-6 trustworthiness or competence to act as an insurance agent;>
289-7 <(6)> Has been guilty of fraudulent or dishonest acts;
289-8 (6) <(7)> Has materially misrepresented the terms and
289-9 conditions of any insurance policies or contracts;
289-10 (7) <(8)> Has made or issued, or caused to be made or
289-11 issued, any statement misrepresenting or making incomplete
289-12 comparisons regarding the terms or conditions of any insurance
289-13 contract legally issued by an insurance carrier for the purpose of
289-14 inducing or attempting to induce the owner of such contract to
289-15 forfeit or surrender such contract or allow it to expire for the
289-16 purpose of replacing such contract with another;
289-17 (8) <(9) Is not of good character or reputation;>
289-18 <(10)> Is convicted of a felony;
289-19 (9) <(11)> Is guilty of rebating any insurance premium
289-20 or discriminating as between insureds; <or>
289-21 (10) <(12)> Is not engaged in the soliciting or
289-22 writing of insurance for the public generally as required by
289-23 Section 5 of this Article; or
289-24 (11) <(12)> Is afflicted with a disability as that
289-25 term is defined by Subsection (a) of Article 21.15-6 of this code.
289-26 (c) <(b)> The State Board of Insurance may order that a
289-27 local recording agent or solicitor who is afflicted with a
290-1 disability be placed on disability probation under the terms and
290-2 conditions specified under Article 21.15-6 of this code instead of
290-3 taking disciplinary action under Subsection (b) <(a)> of this
290-4 section.
290-5 (d) <(c)> A license applicant or licensee whose license
290-6 application or license has been denied, refused, or revoked under
290-7 this section may not apply for any license as an insurance agent
290-8 before the first anniversary of the effective date of the denial,
290-9 refusal, or revocation, or, if the applicant or licensee seeks
290-10 judicial review of the denial, refusal, or revocation before the
290-11 first anniversary of the date of the final court order or decree
290-12 affirming that action. The Commissioner may deny an application
290-13 timely filed if the applicant does not show good cause why the
290-14 denial, refusal, or revocation of the previous license application
290-15 or license should not be considered a bar to the issuance of a new
290-16 license. This subsection does not apply to an applicant whose
290-17 license application was denied for failure to pass a required
290-18 written examination.
290-19 SECTION 12.43. Section 18, Article 21.14, Insurance Code, is
290-20 amended to read as follows:
290-21 Sec. 18. APPEAL. If the Commissioner refuses an application
290-22 for license as provided by this article, or suspends, revokes, or
290-23 refuses to renew any license at a hearing as provided by this
290-24 article, <and the action is upheld on review to the Board as
290-25 provided by this Code,> and if the applicant or accused is
290-26 dissatisfied with the action of the Commissioner and the Board, the
290-27 applicant or accused may appeal from the action in accordance with
291-1 <Section (f),> Article 1.04<,> of this Code.
291-2 SECTION 12.44. Sections 5, 8, and 10, Article 21.14-1,
291-3 Insurance Code, are amended to read as follows:
291-4 Sec. 5. Qualifications for risk manager's license. To
291-5 qualify for a license under this article, a person must:
291-6 (1) be at least 18 years of age;
291-7 (2) maintain a place of business in this state;
291-8 (3) <be a trustworthy and competent person;>
291-9 <(4)> meet the application requirements required by
291-10 this article and rules of the board;
291-11 (4) <(5)> take and pass the licensing examination; and
291-12 (5) <(6)> pay the examination and licensing fees.
291-13 Sec. 8. License renewal; renewal fee. Except as provided by
291-14 a staggered renewal system adopted under Article 21.01-2 of this
291-15 code, a <(a) A> license issued under this article expires two
291-16 years after the date of issuance. A licensee may renew an
291-17 unexpired license by filing a completed application for renewal
291-18 with the board and paying the nonrefundable renewal fee, in an
291-19 amount not to exceed $50 as determined by the board, on or before
291-20 the expiration date of the license. The commissioner shall issue a
291-21 renewal certificate to the licensee at the time of the renewal if
291-22 the commissioner determines the licensee continues to be eligible
291-23 for the license.
291-24 <(b) If a person's license has been expired for not longer
291-25 than 90 days, the licensee may renew the license by paying the
291-26 nonrefundable renewal fee plus a nonrefundable late fee in an
291-27 amount not to exceed one-half of the original license fee as
292-1 determined by the board.>
292-2 <(c) If the license has been expired for more than 90 days,
292-3 the person may not renew the license. The person may obtain a new
292-4 license by submitting to reexamination, if the person was
292-5 originally required to take the examination, and complying with the
292-6 requirements and procedures for obtaining an original license.>
292-7 <(d) The commissioner shall notify each licensee in writing
292-8 at the licensee's last known address of the pending license
292-9 expiration not later than the 30th day before the date on which the
292-10 license expires.>
292-11 Sec. 10. Denial, suspension, or revocation of a license.
292-12 <(a)> The department may discipline a risk manager or deny an
292-13 application under Section 5, Article 21.01-2, of this code <State
292-14 Board of Insurance may deny an application or suspend, revoke, or
292-15 refuse to renew a risk manager's license for any of the following
292-16 reasons>:
292-17 (1) for any cause for which issuance of the license
292-18 could have been refused had it been known to the board;
292-19 (2) if the licensee wilfully violates or knowingly
292-20 participates in the violation of this article, any insurance law of
292-21 this state, or rules of the board;
292-22 (3) if the licensee has obtained or attempted to
292-23 obtain a license through wilful misrepresentation or fraud, or has
292-24 failed to pass the examination required under this article; or
292-25 (4) if a licensee is convicted, by final judgment, of
292-26 a felony<; or>
292-27 <(5) if in the conduct of his affairs under the
293-1 license, the licensee has shown himself to be, and is so deemed by
293-2 the commissioner, incompetent, untrustworthy, or a source of injury
293-3 to the public.>
293-4 <(b) A risk manager's license may not be suspended or
293-5 revoked without notice and hearing by the board>.
293-6 SECTION 12.45. Sections 2(a) and (c), Article 21.14-2,
293-7 Insurance Code, are amended to read as follows:
293-8 (a) To obtain a license to act as an agent under this
293-9 article, an applicant must submit a completed written application
293-10 to the commissioner of insurance on a form prescribed by the State
293-11 Board of Insurance and pay a $50 nonrefundable fee. The
293-12 application must bear an endorsement signed by an agent of an
293-13 insurance company that meets the requirements of Section 1 of this
293-14 article and must state that the applicant is a resident of this
293-15 state<, is of good character and good reputation, and is worthy of
293-16 a license>.
293-17 (c) Except as provided by a staggered renewal system adopted
293-18 under Article 21.01-2 of this code, a <A> license issued under this
293-19 article expires two years after the date of its issuance unless a
293-20 completed application to renew the license is filed with the
293-21 commissioner and the $50 nonrefundable renewal fee is paid on or
293-22 before that date, in which case the license continues in full force
293-23 and effect until renewed or the renewal is denied. <If a license
293-24 has been expired for not longer than 90 days, the licensee may
293-25 renew the license by filing with the State Board of Insurance the
293-26 required nonrefundable renewal fee and a nonrefundable fee that is
293-27 one-half of the original license fee. If a license has been
294-1 expired for more than 90 days, the license may not be renewed. A
294-2 new license may be obtained by complying with the procedures for
294-3 obtaining an original license. At least 30 days before the
294-4 expiration of a license the commissioner of insurance shall send
294-5 written notice of the impending license expiration to the licensee
294-6 at the licensee's last known address. This section may not be
294-7 construed to prevent the board from denying or refusing to renew a
294-8 license under applicable law or the rules of the State Board of
294-9 Insurance.>
294-10 SECTION 12.46. Section 3, Article 21.14-2, Insurance Code,
294-11 is amended to read as follows:
294-12 Sec. 3. The license of an agent is automatically suspended
294-13 or canceled if the agent does not have outstanding a valid
294-14 appointment to act as an agent for an insurance company described
294-15 in Section 1 of this article. The department may discipline a
294-16 licensee or deny an application under Section 5, Article 21.01-2,
294-17 of this code if it <commissioner of insurance may deny a license
294-18 application and may suspend or revoke a license or deny the renewal
294-19 of a license if, after notice and hearing, the commissioner>
294-20 determines that the license applicant or licensee:
294-21 (1) has intentionally or knowingly violated the
294-22 insurance laws of this state;
294-23 (2) has obtained or attempted to obtain a license by
294-24 fraud or misrepresentation;
294-25 (3) has misappropriated, converted, or illegally
294-26 withheld money belonging to an insurer or an insured or
294-27 beneficiary;
295-1 (4) <has otherwise demonstrated lack of
295-2 trustworthiness or competence to act as an insurance agent;>
295-3 <(5)> has been guilty of fraudulent or dishonest acts;
295-4 (5) <(6)> has materially misrepresented the terms and
295-5 conditions of an insurance policy or contract;
295-6 (6) <(7)> has made or issued or caused to be made or
295-7 issued any statement misrepresenting or making incomplete
295-8 comparisons regarding the terms or conditions of an insurance
295-9 contract legally issued by an insurance carrier for the purpose of
295-10 inducing or attempting to induce the owner of the contract to
295-11 forfeit or surrender the contract or allow the contract to expire
295-12 or for the purpose of replacing the contract with another contract;
295-13 (7) <(8)> has been convicted of a felony; or
295-14 (8) <(9)> is guilty of rebating an insurance premium
295-15 or discriminating between insureds.
295-16 SECTION 12.47. Article 21.15, Insurance Code, is amended to
295-17 read as follows:
295-18 Art. 21.15. Revocation of Agent's Certificate. Cause for
295-19 the discipline under Section 5, Article 21.01-2, of this code
295-20 <revocation of the certificate of authority> of an agent or
295-21 solicitor for an insurance company may exist <for violation of any
295-22 of the insurance laws, or> if <it shall appear to the Board upon
295-23 due proof, after notice that> such agent or solicitor has knowingly
295-24 deceived or defrauded a policyholder or a person having been
295-25 solicited for insurance<,> or <that such agent or solicitor> has
295-26 unreasonably failed and neglected to pay over to the company, or
295-27 its agent entitled thereto, any premium or part thereof collected
296-1 by him on any policy of insurance or application therefor. The
296-2 Board shall publish such revocation in such manner as it deems
296-3 proper for the protection of the public; and no person whose
296-4 certificate of authority as agent or solicitor has been revoked
296-5 shall be entitled to again receive a certificate of authority as
296-6 such agent or solicitor for any insurance company in this State for
296-7 a period of one year.
296-8 SECTION 12.48. Amend Subchapter E, Chapter 21, Insurance
296-9 Code, by adding Article 21.35A to read as follows:
296-10 Art. 21.35A. PERMISSIBLE REIMBURSEMENT. (a) In this
296-11 article, "client" means an applicant for insurance coverage or an
296-12 insured.
296-13 (b) A local recording agent may charge a client a fee to
296-14 reimburse the agent for costs incurred by the agent in obtaining a
296-15 motor vehicle record of a person, or a photograph of property,
296-16 insured under, or to be insured under, an insurance policy. The
296-17 fee may not exceed the actual costs incurred by the agent. The
296-18 agent may obtain the record or photograph in connection with an
296-19 application for insurance coverage by the client or the issuance of
296-20 an insurance policy to the client or on the client's request. The
296-21 agent must provide a copy of the motor vehicle record to the
296-22 client.
296-23 (c) An agent may not charge a client a fee under this
296-24 article unless the agent notifies the client of the agent's
296-25 reimbursement requirement and obtains the client's written consent
296-26 for each fee charged before the agent incurs the expense for the
296-27 client.
297-1 SECTION 12.49. Section (a), Article 21.35B, Insurance Code,
297-2 is amended to read as follows:
297-3 (a) No payment may be solicited or collected by an insurer,
297-4 its agent, or sponsoring organization in connection with an
297-5 application for insurance or the issuance of a policy other than
297-6 premiums, taxes, finance charges, policy fees, agent fees, service
297-7 fees, inspection fees, or membership dues in a sponsoring
297-8 organization. The commissioner by rule shall permit sponsoring
297-9 organizations to solicit voluntary contributions with a membership
297-10 renewal solicitation when the membership renewal solicitation is
297-11 separate from an insurance billing.
297-12 SECTION 12.50. Section (c), Article 23.23, Insurance Code,
297-13 is amended to read as follows:
297-14 (c) Except as may be provided by a staggered renewal system
297-15 adopted under Section 2(f), Article 21.01-2 <section (h)> of this
297-16 code <article>, each license issued to agents of corporations
297-17 complying with this chapter shall expire two years following the
297-18 date of issue, unless prior thereto it is suspended or revoked by
297-19 the Commissioner of Insurance or the authority of the agent to act
297-20 for the corporation complying with this chapter is terminated.
297-21 SECTION 12.51. The following laws are repealed:
297-22 (1) Section 4(e), Article 1.14-2, Insurance Code;
297-23 (2) Sections 5, 6, and 7, Article 9.36, Insurance
297-24 Code;
297-25 (3) Section C, Article 9.37, Insurance Code;
297-26 (4) Sections 2, 3, and 4, Article 9.42, Insurance
297-27 Code;
298-1 (5) Section 3, Article 9.44, Insurance Code;
298-2 (6) Sections 6(d), (e), (f), and (g) and Section 8(c),
298-3 Article 9.56, Insurance Code;
298-4 (7) Sections 15(h), (i), (j), (k), and (l), Texas
298-5 Health Maintenance Organization Act (Section 20A.15, Vernon's Texas
298-6 Insurance Code);
298-7 (8) Section 15A(j), Texas Health Maintenance
298-8 Organization Act (Section 20A.15A, Vernon's Texas Insurance Code);
298-9 (9) Sections 4(e) and (f), Article 21.07, Insurance
298-10 Code;
298-11 (10) Section 10(b), Article 21.07, Insurance Code;
298-12 (11) Sections 3A and 15A, Article 21.07, Insurance
298-13 Code;
298-14 (12) Sections 5(e), 9(d) and (e), and 12(b), Chapter
298-15 213, Acts of the 54th Legislature, Regular Session, 1955 (Article
298-16 21.07-1, Vernon's Texas Insurance Code);
298-17 (13) Section 5A, Managing General Agents' Licensing
298-18 Act (Article 21.07-3, Vernon's Texas Insurance Code);
298-19 (14) Sections 16(c), (d), and (e), Chapter 407, Acts
298-20 of the 63rd Legislature, Regular Session, 1973 (Article 21.07-4,
298-21 Vernon's Texas Insurance Code);
298-22 (15) Sections 3(j) and (k), Article 21.07-7, Insurance
298-23 Code;
298-24 (16) Article 21.13, Insurance Code;
298-25 (17) Sections 4(e), 7a, and 17, Article 21.14,
298-26 Insurance Code;
298-27 (18) Sections 6(f) and (h), Article 21.14-1, Insurance
299-1 Code; and
299-2 (19) Sections (g), (h), (i), (j), (k), and (l),
299-3 Article 23.23, Insurance Code.
299-4 SECTION 12.52. (a) The change in law made by this article
299-5 to Section 4A, Article 21.07, Insurance Code, does not affect the
299-6 validity of a license issued under that section on or before the
299-7 effective date of this Act.
299-8 (b) A person who holds a license issued under Section 4A,
299-9 Article 21.07, Insurance Code, on or before the effective date of
299-10 this Act may renew that license in accordance with Article 21.07,
299-11 Insurance Code, as amended by this Act. On renewal, the license
299-12 shall be conformed to Section 4A, Article 21.07, Insurance Code, as
299-13 amended by this Act, and a new license shall be issued in
299-14 conformity with Section 4A(e), Article 21.07, Insurance Code, as
299-15 amended by this Act.
299-16 SECTION 12.53. This article applies only to issuance or
299-17 renewal of a license or discipline of a license holder on or after
299-18 September 1, 1993. Issuance or renewal of a license or discipline
299-19 of a license holder before September 1, 1993, is governed by the
299-20 law in effect immediately before the effective date of this Act,
299-21 and that law is continued in effect for this purpose.
299-22 ARTICLE 13. REINSURANCE ISSUES
299-23 SECTION 13.01. Article 3.10(a), Insurance Code, is amended
299-24 to read as follows:
299-25 (a) Any insurer authorized to do the business of insurance
299-26 in this state may reinsure in any solvent assuming insurer, any
299-27 risk or part of a risk which both are authorized to assume;
300-1 provided, however, no credit for reinsurance, either as an asset or
300-2 a deduction of liability, may be taken by the ceding insurer except
300-3 as provided in this article, and, provided further, no insurer
300-4 operating under Section 2(a) of Article 3.02 shall reinsure any
300-5 risk or part of a risk with any insurer which is not licensed to
300-6 engage in the business of insurance in this state. This article
300-7 applies to all insurers regulated by the State Board of Insurance,
300-8 including any stock and mutual life, accident, and health insurers,
300-9 fraternal benefit societies, health maintenance organizations
300-10 operating under the Texas Health Maintenance Organization Act
300-11 (Chapter 20A, Vernon's Texas Insurance Code), and nonprofit
300-12 hospital, medical, or dental service corporations, including
300-13 companies subject to Chapter 20 of this code. No such insurer
300-14 shall have the power to reinsure its entire outstanding business to
300-15 an assuming insurer unless the assuming insurer is licensed in this
300-16 state and until the contract therefor shall be submitted to the
300-17 Commissioner and approved by him as protecting fully the interests
300-18 of all policy holders. This article does not apply to ceding
300-19 insurers domiciled in another state that regulates credit for
300-20 reinsurance under statutes, rules, or regulations substantially
300-21 similar in substance or effect to this article. To qualify for
300-22 this exception, the ceding insurer must provide the Commissioner on
300-23 request with evidence of the similarity in the form of statutes,
300-24 rules, or regulations, and an interpretation of the statutes,
300-25 rules, or regulations and the standards used by the state of
300-26 domicile. This article is supplementary to and cumulative of other
300-27 provisions of this code and other insurance laws of this state
301-1 relating to reinsurance to the extent those provisions are not in
301-2 conflict with this article.
301-3 SECTION 13.02. Section 2(c), Article 4.11, Insurance Code,
301-4 is amended to read as follows:
301-5 (c) "Gross premiums" are the total gross amount of all
301-6 premiums, membership fees, assessments, dues, and any other
301-7 considerations for such insurance received during the taxable year
301-8 on each and every kind of such insurance policy or contract
301-9 covering persons located in the State of Texas and arising from the
301-10 types of insurance specified in Section 1 of this article, but
301-11 deducting returned premiums, any dividends applied to purchase
301-12 paid-up additions to insurance or to shorten the endowment or
301-13 premium payment period, and excluding those premiums received from
301-14 insurance carriers for reinsurance and there shall be no deduction
301-15 for premiums paid for reinsurance. For purposes of this article, a
301-16 stop-loss or excess loss insurance policy issued to a health
301-17 maintenance organization, as defined under the Texas Health
301-18 Maintenance Organization Act (Chapter 20A, Vernon's Texas Insurance
301-19 Code), shall be considered reinsurance. Such gross premiums shall
301-20 not include premiums received from the Treasury of the State of
301-21 Texas or from the Treasury of the United States for insurance
301-22 contracted for by the state or federal government for the purpose
301-23 of providing welfare benefits to designated welfare recipients or
301-24 for insurance contracted for by the state or federal government in
301-25 accordance with or in furtherance of the provisions of Title 2,
301-26 Human Resources Code, or the Federal Social Security Act. The
301-27 gross premiums receipts so reported shall not include the amount of
302-1 premiums paid on group health, accident, and life policies in which
302-2 the group covered by the policy consists of a single nonprofit
302-3 trust established to provide coverage primarily for municipal or
302-4 county employees of this state.
302-5 SECTION 13.03. Article 5.75-1(n), Insurance Code, is amended
302-6 to read as follows:
302-7 (n) An insurer shall account for reinsurance agreements and
302-8 shall record those agreements in the insurer's financial statements
302-9 in a manner that accurately reflects the effect of the reinsurance
302-10 agreements on the financial condition of the insurer. The State
302-11 Board of Insurance may adopt reasonable rules relating to the
302-12 accounting and financial statement requirements of this subsection
302-13 and the treatment of reinsurance agreements between insurers,
302-14 including asset debits or credits, reinsurance debits or credits,
302-15 and reserve debits or credits relating to the transfer of risks or
302-16 liabilities by reinsurance agreements and to any contingencies
302-17 arising from reinsurance agreements. Reinsurance agreements may
302-18 contain a provision allowing the offset of mutual debts and credits
302-19 between the ceding insurer and the assuming insurer whether arising
302-20 out of one or more reinsurance agreements.
302-21 SECTION 13.04. Section 6(a), Texas Health Maintenance
302-22 Organization Act (Article 20A.06, Vernon's Texas Insurance Code),
302-23 is amended to read as follows:
302-24 (a) The powers of a health maintenance organization include,
302-25 but are not limited to, the following:
302-26 (1) the purchase, lease, construction, renovation,
302-27 operation, or maintenance of hospitals, medical facilities, or
303-1 both, and ancillary equipment and such property as may reasonably
303-2 be required for its principal office or for such other purposes as
303-3 may be necessary in the transaction of the business of the health
303-4 maintenance organization;
303-5 (2) the making of loans to a medical group, under an
303-6 independent contract with it in furtherance of its program, or
303-7 corporations under its control, for the purpose of acquiring or
303-8 constructing medical facilities and hospitals, or in the
303-9 furtherance of a program providing health care services to
303-10 enrollees;
303-11 (3) the furnishing of or arranging for medical care
303-12 services only through physicians or groups of physicians who have
303-13 independent contracts with the health maintenance organizations;
303-14 the furnishing of or arranging for the delivery of health care
303-15 services only through providers or groups of providers who are
303-16 under contract with or employed by the health maintenance
303-17 organization or through physicians or providers who have contracted
303-18 for health care services with those physicians or providers, except
303-19 for the furnishing of or authorization for emergency services,
303-20 services by referral, and services to be provided outside of the
303-21 service area as approved by the commissioner; provided, however,
303-22 that a health maintenance organization is not authorized to employ
303-23 or contract with physicians or providers in any manner which is
303-24 prohibited by any licensing law of this state under which such
303-25 physicians or providers are licensed;
303-26 (4) the contracting with any person for the
303-27 performance on its behalf of certain functions such as marketing,
304-1 enrollment, and administration;
304-2 (5) the contracting with an insurance company licensed
304-3 in this state, or with a group hospital service corporation
304-4 authorized to do business in the state, for the provision of
304-5 insurance, reinsurance, indemnity, or reimbursement against the
304-6 cost of health care and medical care services provided by the
304-7 health maintenance organization;
304-8 (6) the offering of:
304-9 (A) indemnity benefits covering out-of-area
304-10 emergency services; and
304-11 (B) indemnity benefits in addition to those
304-12 relating to out-of-area and emergency services, provided through
304-13 insurers or group hospital service corporations;
304-14 (7) receiving and accepting from government or private
304-15 agencies payments covering all or part of the cost of the services
304-16 provided or arranged for by the organization;
304-17 (8) all powers given to corporations (including
304-18 professional corporations and associations), partnerships, and
304-19 associations pursuant to their organizational documents which are
304-20 not in conflict with provisions of this Act, or other applicable
304-21 law.
304-22 SECTION 13.05. Article 5.75-1(b), Insurance Code, is amended
304-23 to read as follows:
304-24 (b) Credit for reinsurance shall be allowed a ceding insurer
304-25 as either an asset or a deduction from liability on account of
304-26 reinsurance ceded only when:
304-27 (1) the reinsurance is ceded to an assuming insurer
305-1 which is licensed to transact insurance or reinsurance in this
305-2 state; or
305-3 (2) the reinsurance is ceded to an assuming insurer
305-4 which is accredited as a reinsurer in this state. An accredited
305-5 reinsurer is one which: submits to this state's jurisdiction;
305-6 submits to this state's authority to examine its books and records;
305-7 is domiciled and licensed to transact insurance or reinsurance in
305-8 at least one state, or in the case of a United States branch of an
305-9 alien assuming insurer is entered through and licensed to transact
305-10 insurance or reinsurance in at least one state; files annually a
305-11 copy of its annual statement, filed with the insurance department
305-12 of its state of domicile, with the State Board of Insurance; and
305-13 maintains a surplus as regards policyholders in an amount not less
305-14 than $20 million; or
305-15 (3) the reinsurance is ceded to an assuming insurer
305-16 which maintains a trust fund in a qualified United States financial
305-17 institution, as defined in Subsection (e)(2), for the payment of
305-18 the valid claims of its United States policyholders and ceding
305-19 insurers, their assigns, and successors in interest. The trusteed
305-20 assuming insurer shall report annually not later than March 1 to
305-21 the State Board of Insurance information substantially the same as
305-22 that required to be reported on the NAIC Annual Statement form by
305-23 licensed insurers to enable the State Board of Insurance to
305-24 determine the sufficiency of the trust fund. In the case of a
305-25 single assuming insurer, the trust shall consist of a trusteed
305-26 account representing the assuming insurer's liabilities
305-27 attributable to business written in the United States and, in
306-1 addition, include a trusteed surplus of not less than $20 million.
306-2 In the case of a group of insurers, which group includes
306-3 unincorporated individual insurers <individual unincorporated
306-4 underwriters>, the trust shall consist of a trusteed account
306-5 representing the group's liabilities attributable to business
306-6 written in the United States and, in addition, include a trusteed
306-7 surplus of not less than $100 million; and the group shall make
306-8 available to the State Board of Insurance an annual certification
306-9 by the group's domiciliary regulator and its independent public
306-10 accountants of the solvency of each underwriter. In the case of a
306-11 group of incorporated insurers under common administration which
306-12 has continuously transacted an insurance business for at least
306-13 three years, which is under the supervision of the Department of
306-14 Trade and Industry of the United Kingdom, and which has aggregate
306-15 policyholder's surplus of $10 billion, the trust shall consist of a
306-16 trusteed account representing the group's several liabilities
306-17 attributable to business written in the United States pursuant to
306-18 reinsurance contracts issued in the name of the group and, in
306-19 addition, include a trusteed surplus of not less than $100 million
306-20 which shall be held jointly for the benefit of United States
306-21 insurers ceding business to any member of the group, and each
306-22 member of the group shall make available to the State Board of
306-23 Insurance an annual certification by the member's domiciliary
306-24 regulator and its independent public accountants of the solvency of
306-25 each member. Such trust shall be established in a form approved by
306-26 the State Board of Insurance. The trust instrument shall provide
306-27 that contested claims shall be valid and enforceable upon the final
307-1 order of any court of competent jurisdiction in the United States.
307-2 The trust shall vest legal title to its assets in the trustees of
307-3 the trust for its United States policyholders and ceding insurers,
307-4 their assigns, and successors in interest. The trust and the
307-5 assuming insurer shall be subject to examination as determined by
307-6 the State Board of Insurance. The trust described herein must
307-7 remain in effect for as long as the assuming insurer shall have
307-8 outstanding obligations due under the reinsurance agreements
307-9 subject to the trust. Not later than February 28 of each year the
307-10 trustees of the trust shall report to the State Board of Insurance
307-11 in writing setting forth the balance of the trust and listing the
307-12 trust's investments at the preceding year end and shall certify the
307-13 date of termination of the trust, if so planned, or certify that
307-14 the trust shall not expire prior to the next following December 31;
307-15 or
307-16 (4) the reinsurance is ceded to an assuming insurer
307-17 not meeting the requirements of Subdivision (1), (2), or (3), but
307-18 only with respect to the insurance of risks located in a
307-19 jurisdiction where such reinsurance is required by applicable law
307-20 or regulation of that jurisdiction to be ceded to an assuming
307-21 insurer that does not meet the requirements of Subdivision (1),
307-22 (2), or (3) of this subsection.
307-23 SECTION 13.06. Article 3.10(b), Insurance Code, is amended
307-24 to read as follows:
307-25 (b) Credit for reinsurance shall be allowed a ceding insurer
307-26 as either an asset or a deduction from liability on account of
307-27 reinsurance ceded only when:
308-1 (1) the reinsurance is ceded to an assuming insurer
308-2 which is licensed to transact insurance or reinsurance in this
308-3 state; or
308-4 (2) the reinsurance is ceded to an assuming insurer
308-5 which is accredited as a reinsurer in this state. An accredited
308-6 reinsurer is one which: submits to this state's jurisdiction;
308-7 submits to this state's authority to examine its books and records;
308-8 is domiciled and licensed to transact insurance or reinsurance in
308-9 at least one state, or in the case of a United States branch of an
308-10 alien assuming insurer is entered through and licensed to transact
308-11 insurance or reinsurance in at least one state; files annually a
308-12 copy of its annual statement, filed with the insurance department
308-13 of its state of domicile, with the State Board of Insurance; and
308-14 maintains a surplus as regards policy holders in an amount not less
308-15 than $20 million; or
308-16 (3) the reinsurance is ceded to an assuming insurer
308-17 which maintains a trust fund in a qualified United States financial
308-18 institution, as defined in Subsection (e)(2), for the payment of
308-19 the valid claims of its United States policy holders and ceding
308-20 insurers, their assigns, and successors in interest. The trusteed
308-21 assuming insurer shall report annually not later than March 1 to
308-22 the State Board of Insurance information substantially the same as
308-23 that required to be reported on the NAIC Annual Statement form by
308-24 licensed insurers to enable the State Board of Insurance to
308-25 determine the sufficiency of the trust fund. In the case of a
308-26 single assuming insurer, the trust shall consist of a trusteed
308-27 account representing the assuming insurer's liabilities
309-1 attributable to business written in the United States and, in
309-2 addition, include a trusteed surplus of not less than $20 million.
309-3 In the case of a group of insurers, which group includes
309-4 unincorporated individual insurers <individual unincorporated
309-5 underwriters>, the trust shall consist of a trusteed account
309-6 representing the group's liabilities attributable to business
309-7 written in the United States and, in addition, include a trusteed
309-8 surplus of not less than $100 million and the group shall make
309-9 available to the State Board of Insurance an annual certification
309-10 by the group's domiciliary regulator and its independent public
309-11 accountants of the solvency of each underwriter. Such trust shall
309-12 be established in a form approved by the State Board of Insurance.
309-13 The trust instrument shall provide that contested claims shall be
309-14 valid and enforceable upon the final order of any court of
309-15 competent jurisdiction in the United States. The trust shall vest
309-16 legal title to its assets in the trustees of the trust for its
309-17 United States policy holders and ceding insurers, their assigns,
309-18 and successors in interest. The trust and the assuming insurer
309-19 shall be subject to examination as determined by the State Board of
309-20 Insurance. The trust described herein must remain in effect for as
309-21 long as the assuming insurer shall have outstanding obligations due
309-22 under the reinsurance agreements subject to the trust. Not later
309-23 than February 28 of each year the trustees of the trust shall
309-24 report to the State Board of Insurance in writing setting forth the
309-25 balance of the trust and listing the trust's investments at the
309-26 preceding year end and shall certify the date of termination of the
309-27 trust, if so planned, or certify that the trust shall not expire
310-1 prior to the next following December 31; or
310-2 (4) the reinsurance is ceded to an assuming insurer
310-3 not meeting the requirements of Subdivision (1), (2), or (3), but
310-4 only with respect to the insurance of risks located in a
310-5 jurisdiction where such reinsurance is required by applicable law
310-6 or regulation of that jurisdiction to be ceded to an assuming
310-7 insurer that does not meet the requirements of Subdivision (1),
310-8 (2), or (3) of this subsection.
310-9 ARTICLE 14. MOTOR VEHICLE INSURANCE
310-10 SECTION 14.01. Section 1B, Texas Motor Vehicle
310-11 Safety-Responsibility Act (Article 6701h, Vernon's Texas Civil
310-12 Statutes), is amended by amending Subsection (a) and adding
310-13 Subsection (d) to read as follows:
310-14 (a) As a condition of operating a motor vehicle in this
310-15 state, the operator of the motor vehicle shall furnish, on request
310-16 of a peace officer or a person involved in an accident with the
310-17 operator:
310-18 (1) a liability insurance policy in at least the
310-19 minimum amounts required by this Act, or a photocopy of that
310-20 policy, that covers the vehicle;
310-21 (2) a standard proof of liability insurance form
310-22 promulgated by the Texas Department of Insurance and issued by a
310-23 liability insurer that:
310-24 (A) includes the name of the insurer;
310-25 (B) includes the insurance policy number;
310-26 (C) includes the policy period;
310-27 (D) includes the name and address of each
311-1 insured;
311-2 (E) includes the policy limits or a statement
311-3 that the coverage of the policy complies with at least the minimum
311-4 amounts of liability insurance required by this Act; and
311-5 (F) includes the make and model of each covered
311-6 vehicle;
311-7 (3) an insurance binder that confirms that the
311-8 operator is in compliance with this Act;
311-9 (4) a certificate or copy of a certificate issued by
311-10 the department that shows the vehicle is covered by self-insurance;
311-11 (5) a certificate issued by the state treasurer that
311-12 shows that the owner of the vehicle has on deposit with the
311-13 treasurer money or securities in at least the amount required by
311-14 Section 25 of this Act;
311-15 (6) a certificate issued by the department that shows
311-16 that the vehicle is a vehicle for which a bond is on file with the
311-17 department as provided by Section 24 of this Act; or
311-18 (7) a copy of a certificate issued by the county judge
311-19 of a county in which the vehicle is registered that shows that the
311-20 owner of the vehicle has on deposit with the county judge cash or a
311-21 cashier's check in at least the amount required by Section 1A(b)(6)
311-22 of this Act.
311-23 (d) A standard proof of liability insurance form described
311-24 in Subsection (A)(2) of this section, or a document that is an
311-25 unauthorized version of the form, is a governmental record for
311-26 purposes of Chapter 37, Penal Code. A standard proof of liability
311-27 insurance form is unauthorized for purposes of this subsection if
312-1 it is not issued by an insurer authorized to transact motor vehicle
312-2 liability insurance in this state.
312-3 SECTION 14.02. Section 19, Texas Motor Vehicle
312-4 Safety-Responsibility Act (Article 6701h, Vernon's Texas Civil
312-5 Statutes), is amended by adding Subsection (c) to read as follows:
312-6 (c) A certificate described in Subsection (a) of this
312-7 section, or a document that is an unauthorized version of the
312-8 certificate, is a governmental record for purposes of Chapter 37,
312-9 Penal Code. A certificate is unauthorized for purposes of this
312-10 subsection if it is not issued by an insurer authorized to transact
312-11 motor vehicle liability insurance in this state.
312-12 SECTION 14.03. Subchapter F, Chapter 21, Insurance Code, is
312-13 amended by adding Article 21.81 to read as follows:
312-14 Art. 21.81. TEXAS AUTOMOBILE INSURANCE PLAN ASSOCIATION
312-15 Sec. 1. DEFINITIONS. In this article:
312-16 (1) "Association" means the Texas Automobile Insurance
312-17 Plan Association established under this article.
312-18 (2) "Authorized insurer" means any insurer authorized
312-19 by the Texas Department of Insurance to write motor vehicle
312-20 liability coverage under the provisions of Chapter 5 of this code.
312-21 The term does not include an insurer organized under Chapter 17 of
312-22 this code.
312-23 (3) "Insurance" means an insurance policy that meets
312-24 the requirements of the Texas Motor Vehicle Safety-Responsibility
312-25 Act (Article 6701h, Vernon's Texas Civil Statutes).
312-26 (4) "Plan of operation" means the plan for operating
312-27 the association to provide a means by which insurance may be
313-1 assigned to an eligible person who is required by law to show proof
313-2 of financial responsibility for the future.
313-3 Sec. 2. CREATION OF THE ASSOCIATION. (a) The Texas
313-4 Automobile Insurance Plan Association is established. The
313-5 association is a nonprofit corporate body composed of all
313-6 authorized insurers. Each authorized insurer shall be a member of
313-7 the association and shall remain a member of the association so
313-8 long as the association is in existence as a condition of its
313-9 authority to write motor vehicle liability insurance in this state.
313-10 (b) The association shall be administered by a governing
313-11 committee composed of fifteen members selected as follows:
313-12 (1) eight members who represent the interests of
313-13 insurers, elected by the members of the association according to a
313-14 method determined by such members;
313-15 (2) five public members nominated by the Office of
313-16 Public Insurance Counsel and selected by the commissioner; and
313-17 (3) two members who are licensed local recording
313-18 agents, as defined by the plan of operation.
313-19 (c) To be eligible to serve on the governing committee as a
313-20 representative of insurers, a person must be a full-time employee
313-21 of an authorized insurer.
313-22 (d) A person may not serve on the governing committee as a
313-23 public member if that person, an individual related to that person
313-24 within the second degree of consanguinity or affinity, or an
313-25 individual residing in the same household with that person is:
313-26 (1) required to be registered or licensed under this
313-27 code or another insurance law of this state;
314-1 (2) employed by or acts as a consultant to a person
314-2 required to be registered or licensed under this code or another
314-3 insurance law of this state;
314-4 (3) the owner of, has a financial interest in, or
314-5 participates in the management of an organization required to be
314-6 registered or licensed under this code or another insurance law of
314-7 this state;
314-8 (4) an officer, employer, or consultant of an
314-9 association in the field of insurance; or
314-10 (5) required to register as a lobbyist under Chapter
314-11 305, Government Code.
314-12 Sec. 3. AUTHORITY OF THE ASSOCIATION; PLAN OF OPERATION.
314-13 (a) The governing committee has the responsibility for the
314-14 administration of the association through the plan of operation.
314-15 The association may collect funds from the member companies to
314-16 provide for the operation of the association. Assessments must be
314-17 made upon member companies in proportion to their writings of motor
314-18 vehicle liability insurance in this state. If an assessment made
314-19 upon a member insurer is not paid within a reasonable time, the
314-20 association may bring an action to collect the assessment. In
314-21 addition, the association may report the failure to pay to the
314-22 commissioner, who may institute a disciplinary action under Article
314-23 1.10 of this code. The association has the powers granted to
314-24 nonprofit corporations under the Texas Non-Profit Corporation Act
314-25 (Article 1396-1.01 et seq., Vernon's Texas Civil Statutes).
314-26 (b) The plan of operation of the association must provide
314-27 for the efficient, economical, fair, and nondiscriminatory
315-1 administration of the association.
315-2 (c) Subject to the approval of the commissioner, the
315-3 governing committee may make and amend the plan of operation.
315-4 (d) If the commissioner at any time believes that any part
315-5 of the plan of operation is not in keeping with the purposes of the
315-6 Texas Motor Vehicle Safety-Responsibility Act (Article 6701h,
315-7 Vernon's Texas Civil Statutes), the commissioner shall notify the
315-8 governing committee in writing so that the governing committee may
315-9 take corrective action.
315-10 (e) Among other provisions, the plan of operation must
315-11 contain incentive programs to encourage members to write insurance
315-12 on a voluntary basis and to minimize the use of the association as
315-13 a means to obtain insurance. The incentive programs are effective
315-14 on approval of the commissioner. One of these programs shall
315-15 target underserved geographic areas which shall be determined and
315-16 designated by the commissioner by rule. In determining which areas
315-17 will be designated as underserved, the commissioner shall consider
315-18 the availability of insurance, the number of uninsured drivers, the
315-19 number of drivers insured through the association, and any other
315-20 relevant factor.
315-21 (f) The plan of operation must include a voluntary,
315-22 competitive limited assignment distribution plan that allows
315-23 members to contract directly with a servicing carrier to accept
315-24 assignments to that carrier by the association. A servicing
315-25 carrier must be an insurance company licensed to write automobile
315-26 insurance in this state and is qualified if it has written
315-27 automobile liability insurance in Texas for at least five years or
316-1 is currently engaged as a servicing carrier for assigned risk
316-2 automobile business in at least one other state. After notice and
316-3 hearing, the commissioner may prohibit an insurer from acting as a
316-4 servicing carrier. The terms of the contract between the servicing
316-5 carrier and the insurer, including the buy-out fee, shall be
316-6 determined by negotiation between the parties. The governing
316-7 committee may adopt reasonable rules for the conduct of business
316-8 under the contract and may establish reasonable standards of
316-9 eligibility for servicing carriers.
316-10 Sec. 4. DUTIES AND FUNCTIONS OF THE ASSOCIATION. (a) The
316-11 association shall provide a means by which insurance may be
316-12 assigned to an authorized insurance company for a person required
316-13 by the Texas Motor Vehicle Safety-Responsibility Act (Article
316-14 6701h, Vernon's Texas Civil Statutes) to show proof of financial
316-15 responsibility for the future.
316-16 (b) An applicant is not eligible for insurance through the
316-17 association unless the applicant and the servicing agent certify as
316-18 part of the application to the association that the applicant has
316-19 been rejected for insurance by at least two insurers licensed to do
316-20 business in this state and actually writing automobile insurance in
316-21 this state, including insurers that are not rate regulated.
316-22 (c) A person who obtains, from any source, excess private
316-23 passenger auto liability insurance coverage over the minimum auto
316-24 liability coverage required by law shall be ineligible for
316-25 insurance through the association. The coverage for the excess and
316-26 basic limits policies is not affected by a violation of this
316-27 section unless the insurer shows that the insured had actual
317-1 knowledge that they were ineligible for coverage through the
317-2 association. An agent may not knowingly write excess private
317-3 passenger auto liability insurance coverage if the minimum auto
317-4 liability coverage required by law is provided through the
317-5 association. If an agent violates this section, the agent, after
317-6 notice and hearing, is subject to the penalties provided by Section
317-7 7, Article 1.10, of this code.
317-8 Sec. 5. RATES FOR INSURANCE. (a) At least annually, the
317-9 commissioner shall conduct a hearing for the purpose of determining
317-10 appropriate rates to be charged for insurance provided through the
317-11 association. The association may appear as a matter of right,
317-12 shall be admitted as a party to present testimony at the hearing,
317-13 and may file information for consideration by the commissioner.
317-14 The commissioner shall determine and prescribe rates that are just,
317-15 reasonable, adequate, not excessive, not confiscatory, and not
317-16 unfairly discriminatory for the risks to which they apply. Rates
317-17 shall be set in an amount sufficient to carry all claims to
317-18 maturity and to meet the expenses incurred in the writing and
317-19 servicing of the business. In making a determination, the
317-20 commissioner shall consider the reports of aggregated premiums
317-21 earned and losses and expenses incurred in the writing of motor
317-22 vehicle insurance through the plan collected under the statistical
317-23 plan provided for by Subsection (b) of this section.
317-24 (b) The commissioner shall promulgate reasonable rules and
317-25 statistical plans to be used by each insurer in the recording and
317-26 reporting of its premium, loss, and expense experience which must
317-27 be reported separately for business assigned to it and other data
318-1 required by the commissioner.
318-2 Sec. 6. IMMUNITY FROM LIABILITY. (a) The association, a
318-3 member of the governing committee, and any employee of the
318-4 association is not personally liable for any act performed in good
318-5 faith within the scope of the person's authority as determined
318-6 under this article or the plan of operation or for damages
318-7 occasioned by his or her official acts or omissions except for an
318-8 act or omission that is corrupt or malicious. The association
318-9 shall provide counsel to defend any action brought against a member
318-10 of the governing committee or an employee by reason of the person's
318-11 official act or omission whether or not at the time of the
318-12 institution of the action the defendant has terminated service with
318-13 the association.
318-14 (b) This section is cumulative with and does not affect or
318-15 modify any common law or statutory privilege or immunity.
318-16 SECTION 14.04. Article 5.06, Insurance Code, is amended by
318-17 adding Subsections (9) and (10) to read as follows:
318-18 (9) An insurance policy or other document evidencing proof
318-19 of purchase of a personal automobile insurance policy written for a
318-20 term of less than 30 days may not be used to obtain an original or
318-21 renewal driver's license, an automobile registration or license
318-22 plates, or a motor vehicle inspection certificate and must contain
318-23 a statement as follows:
318-24 "TEXAS LAW PROHIBITS USE OF THIS DOCUMENT TO OBTAIN A MOTOR
318-25 VEHICLE INSPECTION CERTIFICATE, AN ORIGINAL OR RENEWAL DRIVER'S
318-26 LICENSE, OR AN AUTOMOBILE REGISTRATION OR LICENSE PLATES."
318-27 (10) Before accepting any premium or fee for a personal
319-1 automobile insurance policy or binder for a term of less than 30
319-2 days, an agent or insurer must make the following written
319-3 disclosure to the applicant or insured:
319-4 "TEXAS LAW PROHIBITS USE OF THIS POLICY OR BINDER TO OBTAIN A
319-5 MOTOR VEHICLE INSPECTION CERTIFICATE, AN ORIGINAL OR RENEWAL
319-6 DRIVER'S LICENSE, OR AN AUTOMOBILE REGISTRATION OR LICENSE PLATES."
319-7 SECTION 14.05. Section 6(c), Chapter 173, Acts of the 47th
319-8 Legislature, Regular Session, 1941 (Article 6687b, Vernon's Texas
319-9 Civil Statutes), is amended to read as follows:
319-10 (c) An application for an original or renewal driver's
319-11 license must be accompanied by evidence of financial responsibility
319-12 or a statement that the applicant does not own a motor vehicle for
319-13 which maintenance of financial responsibility is required under the
319-14 Texas Motor Vehicle Safety-Responsibility Act (Article 6701h,
319-15 Vernon's Texas Civil Statutes). Evidence of financial
319-16 responsibility presented under this subsection must be in at least
319-17 the minimum amounts required by Subdivision 10, Section 1, Texas
319-18 Motor Vehicle Safety-Responsibility Act (Article 6701h, Vernon's
319-19 Texas Civil Statutes), must cover each motor vehicle that the
319-20 applicant owns and for which the applicant is required to maintain
319-21 financial responsibility, and may be shown in the manner specified
319-22 under Section 1B(a)<(b)> of that Act. A personal automobile
319-23 insurance policy used as evidence of financial responsibility under
319-24 this subsection must be written for a term of 30 days or more as
319-25 required by Article 5.06, Insurance Code. A statement that the
319-26 applicant does not own an applicable motor vehicle must be sworn to
319-27 and signed by the applicant.
320-1 SECTION 14.06. Subsection (a), Section 2a, Chapter 88,
320-2 General Laws, Acts of the 41st Legislature, 2nd Called Session,
320-3 1929 (Article 6675a-2a, Vernon's Texas Civil Statutes), is amended
320-4 to read as follows:
320-5 (a) The owner of a motor vehicle covered by Section 1A,
320-6 Texas Motor Vehicle Safety-Responsibility Act (Article 6701h,
320-7 Vernon's Texas Civil Statutes), shall submit with the application
320-8 for registration under Section 3 of this Act evidence of financial
320-9 responsibility that is <currently> valid. A personal automobile
320-10 insurance policy used as evidence of financial responsibility under
320-11 this subsection must be written for a term of 30 days or more as
320-12 required by Article 5.06, Insurance Code.
320-13 SECTION 14.07. Section 140(a), Uniform Act Regulating
320-14 Traffic on Highways (Article 6701d, Vernon's Texas Civil Statutes),
320-15 is amended to read as follows:
320-16 (a) Every motor vehicle, trailer, semitrailer, pole trailer,
320-17 or mobile home, registered in this state and operated on the
320-18 highways of this state, shall have the tires, brake system
320-19 (including power brake unit), lighting equipment, horns and warning
320-20 devices, mirrors, windshield wipers, front seat belts in vehicles
320-21 where seat belt anchorages were part of the manufacturer's original
320-22 equipment on the vehicle, steering system (including power
320-23 steering), wheel assembly, safety guards or flaps if required by
320-24 Section 139A of this Act, tax decal if required by Section 141(d)
320-25 of this Act, sunscreening devices unless the vehicle is exempt from
320-26 sunscreen device restrictions under Section 134C(k) or (l) of this
320-27 Act, exhaust system, and exhaust emission system inspected at
321-1 state-appointed inspection stations or by State Inspectors as
321-2 hereinafter provided. Provisions relating to the inspection of
321-3 trailers, semitrailers, pole trailers, or mobile homes shall not
321-4 apply when the registered or gross weight of such vehicles and the
321-5 load carried thereon is four thousand five hundred (4,500) pounds
321-6 or less. Only the mechanism and equipment designated in this
321-7 section may be inspected, and the owner shall not be required to
321-8 have any other equipment or part of his motor vehicle inspected as
321-9 a prerequisite for the issuance of an inspection certificate. At
321-10 the time of inspection the owner or operator shall furnish evidence
321-11 of financial responsibility. The evidence of financial
321-12 responsibility may be shown in the manner specified under Section
321-13 1B(a)<(b)>, Texas Motor Vehicle Safety-Responsibility Act (Article
321-14 6701h, Vernon's Texas Civil Statutes). A personal automobile
321-15 insurance policy used as evidence of financial responsibility under
321-16 this subsection must be written for a term of 30 days or more as
321-17 required by Article 5.06, Insurance Code. An inspection
321-18 certificate may not be issued for a vehicle for which the owner or
321-19 operator fails to furnish the required evidence of financial
321-20 responsibility. An inspection facility or station is not liable to
321-21 any person, including a third party, for issuing an inspection
321-22 certificate in reliance on evidence of financial responsibility
321-23 submitted to the facility or station. If the inspection facility
321-24 or station is the seller of a motor vehicle, the inspection
321-25 facility or station may rely on an oral insurance binder.
321-26 SECTION 14.08. Section 35, Texas Motor Vehicle
321-27 Safety-Responsibility Act (Article 6701h, Vernon's Texas Civil
322-1 Statutes), is repealed.
322-2 SECTION 14.09. (a) Not later than December 31, 1993, the
322-3 plan of operation for the Texas Automobile Insurance Plan
322-4 Association established under Article 21.81, Insurance Code, as
322-5 added by this Act, shall include the limited assignment
322-6 distribution plan required by Section 3(f) of that article.
322-7 (b) The administrative agency created under Section 35,
322-8 Texas Motor Vehicle Safety-Responsibility Act (Article 6701h,
322-9 Vernon's Texas Civil Statutes), shall continue to operate in
322-10 accordance with that section as it existed immediately before the
322-11 effective date of this Act until a governing committee is selected
322-12 and a plan of operation for the Texas Automobile Insurance Plan
322-13 Association is adopted and approved under Article 21.81, Insurance
322-14 Code, as added by this Act. On the effective date of the plan of
322-15 operation, the administrative agency shall transfer all of its
322-16 assets and obligations to the Texas Automobile Insurance Plan
322-17 Association. On and after the effective date of the plan of
322-18 operation, the administrative agency established under Section 35,
322-19 Texas Motor Vehicle Safety-Responsibility Act (Article 6701h,
322-20 Vernon's Texas Civil Statutes), is abolished.
322-21 ARTICLE 15. WORKERS' COMPENSATION INSURANCE
322-22 SECTION 15.01. Section 4.06(d), Article 5.76-2, Insurance
322-23 Code, is amended to read as follows:
322-24 (d) A policyholder in the facility who is insured under the
322-25 rejected risk fund shall obtain a safety consultation if the
322-26 employer:
322-27 (1) has a Texas <an> experience modifier greater than
323-1 1.25;
323-2 (2) has a national experience modifier greater than
323-3 1.25 and estimated premium allocable to Texas of $2,500 or more;
323-4 (3) <(2)> does not have an experience modifier but has
323-5 had a loss ratio greater than 0.70 in at least two of the three
323-6 most recent policy years for which information is available; or
323-7 (4) <(3)> has not been in business three years and
323-8 meets criteria established by the commission, which may include the
323-9 number and classification of employees, the policyholder's
323-10 industry, and previous workers' compensation experience in this
323-11 state or another jurisdiction.
323-12 SECTION 15.02. Section 10(c), Article 5.76-3, Insurance
323-13 Code, is amended to read as follows:
323-14 (c) A policyholder in the fund who is insured under Article
323-15 5.76-4 of this code shall obtain a safety consultation if the
323-16 policyholder:
323-17 (1) has a Texas <an> experience modifier greater than
323-18 1.25; <or>
323-19 (2) has a national experience modifier greater than
323-20 1.25 and estimated premium allocable to Texas of $2,500 or more; or
323-21 (3) does not have an experience modifier but has had a
323-22 loss ratio greater than 0.70 in at least two of the three most
323-23 recent policy years for which information is available.
323-24 SECTION 15.03. Article 5.76-4(d), Insurance Code, is amended
323-25 to read as follows:
323-26 (d) The fund shall decline to insure any risk if insuring
323-27 that risk would cause the fund to exceed the premium-to-surplus
324-1 ratios established by Article 5.76-3 of this code or if the risk is
324-2 not in good faith entitled to insurance through the fund. For
324-3 purposes of this subsection only, "good faith" means honesty in
324-4 fact in any conduct or transaction.
324-5 ARTICLE 16. TITLE INSURANCE
324-6 SECTION 16.01. Articles 9.02(a) and (i), Insurance Code,
324-7 are amended to read as follows:
324-8 (a) "Title Insurance" means insuring, guaranteeing or
324-9 indemnifying owners of real property or others interested therein
324-10 against loss or damage suffered by reason of liens, encumbrances
324-11 upon, or defects in the title to said property, and the invalidity
324-12 or impairment of liens thereon, or doing any business in substance
324-13 equivalent to any of the foregoing in a manner designed to evade
324-14 the provisions of this Act.
324-15 (i) "Abstract plant" as used herein shall mean a
324-16 geographical abstract plant such as is defined by the Board <from
324-17 time to time> and the Board, in defining an abstract plant, shall
324-18 require a geographically arranged plant, currently kept to date,
324-19 that is found by the Board to be adequate for use in insuring
324-20 titles, so as to provide for the safety and protection of the
324-21 policyholders.
324-22 SECTION 16.02. Articles 9.03 and 9.07, Insurance Code, are
324-23 amended to read as follows:
324-24 Art. 9.03. May Incorporate. (a) Private corporations may
324-25 be created and licensed under this chapter to <for the following
324-26 named purposes:>
324-27 <(1) To> compile and own or lease, or to acquire and
325-1 own or lease, records or abstracts of title to lands and interests
325-2 in land<;> and to insure titles to lands or interests therein, both
325-3 in Texas and other jurisdictions <states of the United States>, and
325-4 indemnify the owners of such lands, or the holders of interests in
325-5 or liens on such lands, against loss or damage on account of
325-6 incumbrances upon or defects in the title to such lands or
325-7 interests therein; and in transactions in which title insurance is
325-8 to be or is being issued, to supervise or approve the signing of
325-9 legal instruments (but not the preparation of such instruments)
325-10 affecting land titles, disbursement of funds, prorations, delivery
325-11 of legal instruments, closing of deals, issuance of commitments for
325-12 title insurance specifying the requirements for title insurance and
325-13 the defects in title necessary to be cured or corrected. Nothing<;
325-14 provided, however, that nothing> herein contained shall authorize
325-15 such corporation to practice law, as that term is defined by the
325-16 courts of this state, and in the event of any conflict herein, this
325-17 clause shall be controlling.
325-18 (b) A corporation described by Subsection (a) of this
325-19 article <Such corporations> may also exercise the following powers
325-20 by including same in the charter when filed originally, or by
325-21 amendment:
325-22 (1) <(2)> To make and sell abstracts of title in any
325-23 counties of Texas or other states;
325-24 (2) <(3)> To accumulate and lend money, to purchase,
325-25 sell or deal in notes, bonds, and securities, but without banking
325-26 privileges;
325-27 (3) <(4)> To act as trustee under any lawful trust
326-1 committed to it by contract or will, appointment by any court
326-2 having jurisdiction of the subject matter as trustee, receiver or
326-3 guardian and as executor or guardian under the terms of any will
326-4 and as any administrator of the estates of decedents under the
326-5 appointment of the court.
326-6 Art. 9.07. Policy Forms and Premiums. (a) Corporations
326-7 organized under this Chapter, as well as foreign corporations and
326-8 those created under Subdivision 57, Article 1302, of the Revised
326-9 Civil Statutes of 1925 before the repeal of that statute, or under
326-10 Chapter 8 of this Code, or any other law insofar as the business of
326-11 either may be the business of title insurance, shall operate in
326-12 Texas under the control and supervision and under such uniform
326-13 rules and regulations as to forms of policies and underwriting
326-14 contracts and premiums therefor, and such underwriting standards
326-15 and practices as may be <from time to time> prescribed by the
326-16 Board; and no Texas or foreign corporation, whether incorporated
326-17 under this Chapter or any other law of the State of Texas, shall be
326-18 permitted to issue any title policy of any character, or
326-19 underwriting contract, to delete any policy exclusion or to
326-20 reinsure any portion of the risk assumed by any title policy, on
326-21 Texas real property other than under this Chapter and under such
326-22 rules and regulations. No policy of title insurance, title
326-23 insurance coverage, reinsurance of any risk assumed under any
326-24 policy of title insurance, or any guarantee of any character made
326-25 when insuring <on> Texas titles shall be issued or valid unless
326-26 written by a corporation complying with the provisions of and
326-27 authorized or qualified under this Chapter, except as is provided
327-1 in Article 9.19D. Before any premium rate provided for herein
327-2 shall be fixed or charged, reasonable notice shall issue, and a
327-3 hearing afforded to the title insurance companies and title
327-4 insurance agents authorized or qualified under this Chapter and the
327-5 public. Under no circumstances may any title insurance company or
327-6 title insurance agent use any form which is required under the
327-7 provisions of this Chapter 9 to be promulgated or approved until
327-8 the same shall have been so promulgated or approved by the Board.
327-9 (b) The Board shall have the duty to fix and promulgate the
327-10 premium rates to be charged by title insurance companies and title
327-11 insurance agents created or operating under this Chapter for
327-12 policies of title insurance or other promulgated or approved forms,
327-13 and the premiums therefor shall be paid in the due and ordinary
327-14 course of business. Premium rates for reinsurance as between title
327-15 insurance companies qualified under this Chapter shall not be fixed
327-16 or promulgated by the Board, and title insurance companies may set
327-17 such premium rates for reinsurance as such title insurance
327-18 companies shall agree upon. Under no circumstance shall any
327-19 premium be charged for any policy of title insurance or other
327-20 promulgated or approved forms different from those fixed and
327-21 promulgated by the Board, except for premiums charged for
327-22 reinsurance. The premium rates fixed by the Board shall be
327-23 reasonable to the public and nonconfiscatory as to the title
327-24 insurance companies and title insurance agents. For the purpose
327-25 of collecting data on which to determine the proper rates to be
327-26 fixed, the Board shall require all title insurance companies and
327-27 all title insurance agents operating in Texas to submit such
328-1 information in such form as it may deem proper, all information as
328-2 to loss experience, expense of operation, and other material matter
328-3 for the Board's consideration.
328-4 (c) The Board shall hold a biennial <an annual> hearing not
328-5 earlier than October 1 or later than December 15 of each
328-6 even-numbered calendar year, to consider adoption of premium rates
328-7 and such other matters and subjects relative to the regulation of
328-8 the business of title insurance as may be requested by any title
328-9 insurance company, any title insurance agent, any member of the
328-10 public, or as the Board may determine necessary to consider.
328-11 Proper notice of such public hearing and the items to be considered
328-12 shall be made to the public and shall be sent direct to all title
328-13 insurance companies and title insurance agents qualified or
328-14 authorized to do business under this Chapter for at least four (4)
328-15 weeks in advance of such hearing.
328-16 (d) Premium rates when once fixed shall not be changed until
328-17 after a public hearing shall be had by the Board, after proper
328-18 notice sent direct to all title insurance companies and title
328-19 insurance agents qualified or authorized to do business under this
328-20 Chapter, and after public notice in such manner as to give fair
328-21 publicity thereto for at least four (4) weeks in advance. The
328-22 Board must call such additional hearings to consider premium rate
328-23 changes at the request of a title insurance company or the office
328-24 of public insurance counsel.
328-25 (e) The Board may, on its own motion, following notice as
328-26 required for the biennial <annual> hearing hold at any time a
328-27 public hearing to consider adoption of premium rates and such other
329-1 matters and subjects relative to the regulation of the business of
329-2 title insurance as the Board shall determine necessary or proper.
329-3 (f) Any title insurance company, any title insurance agent,
329-4 or other person or association of persons interested, feeling
329-5 injured by any action of the Board or the Commissioner with regard
329-6 to premium rates or other action taken by the Board or the
329-7 Commissioner, shall have the right to appeal in accordance with
329-8 Article 1.04 of this code <file a suit in the District Court of
329-9 Travis County, within thirty (30) days after the Board has made
329-10 such order, to review the action. Such cases shall be tried de
329-11 novo in the District Court in accordance with the provisions of
329-12 Article 21.80 of the Insurance Code and shall be governed by the
329-13 same rules of evidence and procedure as other civil cases in said
329-14 court; in which suit the court may enter a judgment setting aside
329-15 the Board's order, or affirming, the action of the Board>.
329-16 SECTION 16.03. Chapter 9, Insurance Code, is amended by
329-17 adding Article 9.07B to read as follows:
329-18 Art. 9.07B. ABSTRACT OF TITLE; COMMITMENT FOR TITLE
329-19 INSURANCE DISTINGUISHED. (a) An abstract of title prepared from
329-20 an abstract plant for a chain of title of real property described
329-21 in the abstract of title is not title insurance, a commitment for
329-22 title insurance, or any other title insurance form.
329-23 (b) The Board may not adopt regulations relating to
329-24 abstracts of title.
329-25 (c) A "commitment for title insurance" means a title
329-26 insurance form that offers to issue a title policy subject to
329-27 stated exceptions, requirements, and terms. The term includes a
330-1 mortgagee title policy binder on an interim construction loan. The
330-2 commitment, binder, title policy, or other insurance form is not an
330-3 abstract of title. The commitment or binder constitutes a
330-4 statement of the terms and conditions on which the title insurance
330-5 company is willing to issue its policy. The title insurance policy
330-6 or other insurance form constitutes a statement of the terms and
330-7 conditions of the indemnity under the title insurance policy or
330-8 other form.
330-9 SECTION 16.04. Article 9.09, Insurance Code, is amended to
330-10 read as follows:
330-11 Art. 9.09. Prohibiting Transacting of Other Kinds of
330-12 Insurance by Title Insurance Companies or the Transacting of Title
330-13 Insurance by Other Types of Insurance Companies. Corporations,
330-14 domestic or foreign, operating under this Chapter shall not
330-15 transact, underwrite or issue any kind of insurance other than
330-16 title insurance on real property; nor shall title insurance be
330-17 transacted, underwritten or issued by any company transacting any
330-18 other kinds of insurance<; provided, however, that the above
330-19 prohibitions shall not apply as to any corporation, domestic or
330-20 foreign, which on October 1, 1967 was transacting, underwriting and
330-21 issuing within the State of Texas title insurance and any other
330-22 kind of insurance. Any corporation now organized and doing
330-23 business under the provisions of Chapter 8 and actively writing
330-24 title insurance shall be subject to all the provisions of this
330-25 Chapter except Article 9.18 relating to investments>.
330-26 SECTION 16.05. Chapter 9, Insurance Code, is amended by
330-27 adding Article 9.09A to read as follows:
331-1 Art. 9.09A. PROHIBITING UNMARKETABILITY OF TITLE INSURANCE.
331-2 An insurance company may not insure against loss or damage by
331-3 reason of unmarketability of title. The commissioner may not
331-4 promulgate rules or forms providing for that coverage.
331-5 SECTION 16.06. Article 9.17(a), Insurance Code, is amended
331-6 to read as follows:
331-7 (a) All title insurance companies operating under the
331-8 provisions of this Act shall at all times establish and maintain,
331-9 in addition to other reserves, a reserve against (1) unpaid losses,
331-10 and (2) loss expense for costs of defense of the insured and other
331-11 costs expected to be paid to other parties in the defense,
331-12 settlement, or processing of the claim under the terms of the title
331-13 insurance policy, and shall calculate such reserves by making a
331-14 careful estimate in each case of the loss and loss expense likely
331-15 to be incurred, by reason of every claim presented, pursuant to
331-16 notice from or on behalf of the insured, of a title defect in or
331-17 lien or adverse claim against the title insured, that may result in
331-18 a loss or cause expense to be incurred for the proper disposition
331-19 of the claim. The sums of items so estimated for payment of loss
331-20 and costs of defense of the insured and other costs expected to be
331-21 paid to other parties in the defense, settlement, or processing
331-22 under the terms of the title insurance policy shall be the total
331-23 expenses of such title insurance company.
331-24 SECTION 16.07. Articles 9.18 and 9.21, Insurance Code, are
331-25 amended to read as follows:
331-26 Art. 9.18. Admissible Investments for Title Insurance
331-27 Companies. Investments of all title insurance companies operating
332-1 under the provisions of this Act shall be held in cash or may be
332-2 invested in the following:
332-3 (a) Any corporation organized under this Act having the
332-4 right to do a title insurance business may invest as much as 50
332-5 <fifty (50%)> percent of its capital stock in an abstract plant or
332-6 plants, provided that the valuation to be placed upon such plant or
332-7 plants shall be approved by the Board; provided, however, that if
332-8 such corporation maintains with the Board the deposit of One
332-9 Hundred Thousand Dollars ($100,000) in securities as provided in
332-10 Article 9.12 of this Act, such of its capital in excess of 50
332-11 <fifty (50%)> percent, as deemed necessary to its business by its
332-12 board of directors may be invested in abstract plants; and provided
332-13 further, that a corporation created or operating under the
332-14 provisions of this Act may own or acquire more than one abstract
332-15 plant in any one county but only one abstract plant in any one
332-16 county is admissible as an investment.
332-17 (b) Those securities set forth in Article 3.39, Insurance
332-18 Code, <as authorized investments for life insurance companies> and
332-19 in authorized investments for title insurance companies under the
332-20 laws of any other state in which the affected company may be
332-21 authorized to do business from time to time.
332-22 (c) Real estate or any interest therein which may be:
332-23 (1) required for its convenient accommodation in the
332-24 transaction of its business with reasonable regard to future needs;
332-25 (2) acquired in connection with a claim under a policy
332-26 of title insurance;
332-27 (3) acquired in satisfaction or on account of loans,
333-1 mortgages, liens, judgments or decrees, previously owing to it in
333-2 the course of its business;
333-3 (4) acquired in part payment of the consideration of
333-4 the sale of real property owned by it if the transaction shall
333-5 result in a net reduction in the company's investment in real
333-6 estate;
333-7 (5) reasonably necessary for the purpose of
333-8 maintaining or enhancing the sale value of real property previously
333-9 acquired or held by it under Subparagraphs (1), (2), (3) or (4) of
333-10 this Section; provided, however, that no title insurance company
333-11 shall hold any real estate acquired under Subparagraphs (2), (3) or
333-12 (4) for more than ten (10) years without written approval of the
333-13 Board.
333-14 (d) First mortgage notes secured by:
333-15 (1) abstract plants and connected personalty within or
333-16 without the State of Texas;
333-17 (2) stock of title insurance agents within or without
333-18 the State of Texas;
333-19 (3) construction contract or contracts for the purpose
333-20 of building an abstract plant and connected personalty;
333-21 (4) any combination of two or more of items (1), (2),
333-22 and (3).
333-23 In no event shall the amount of any first mortgage note
333-24 exceed 80 <eighty (80%)> percent of the appraised value of the
333-25 security for such note as set out above.
333-26 (e) The shares of any federal home loan bank in the amount
333-27 necessary to qualify for membership and any additional amounts
334-1 approved by the Commissioner.
334-2 (f) Investments in foreign securities that are substantially
334-3 of the same kinds, classes, and investment-grade as those eligible
334-4 for investment under other provisions of this Article. Unless the
334-5 investment is also authorized under Subsection (b) of this Article
334-6 the aggregate amount of foreign investments made under this Section
334-7 may not exceed:
334-8 (1) five percent of the insurer's admitted assets at
334-9 the last year end;
334-10 (2) two percent of the insurer's admitted assets at
334-11 the last year end invested in the securities of all entities
334-12 domiciled in any one foreign country; and
334-13 (3) one-half of one percent of the insurer's admitted
334-14 assets at the last year end invested in the securities of any one
334-15 individual entity domiciled in a foreign country.
334-16 Any investments which do not <now> qualify under this Article
334-17 <the provisions of Subsections (a), (b), (c), or (d) above> and
334-18 which were owned by the title insurance company on October 1, 1967,
334-19 <are owned as of the effective date of this Act shall> continue to
334-20 qualify.
334-21 If any otherwise valid investment which qualifies under the
334-22 provisions of this Article shall exceed in amount any of the
334-23 limitations on investment contained in this Article, it shall be
334-24 inadmissible only to the extent that it exceeds such limitation.
334-25 Art. 9.21. Authority of Board of Insurance of the State of
334-26 Texas. (a) If any company operating under the provisions of this
334-27 Act shall engage in the characters of business described in
335-1 Subdivisions (1) and (2) <and (3)> of Article 9.03 of this Act, in
335-2 such manner as might bring it within the provision of any other
335-3 regulatory statute now or hereafter to be in force within the State
335-4 of Texas, all examination and regulation shall be exercised by the
335-5 Board rather than any other state agency which may be named in such
335-6 other laws, so long as such corporation engages in the title
335-7 guaranty or insurance business.
335-8 (b) The Board is hereby vested with power and authority
335-9 under this Act to promulgate and enforce rules and regulations
335-10 prescribing underwriting standards and practices upon which title
335-11 insurance contracts are to be issued, and is hereby further vested
335-12 with the power and authority to define risks which may not be
335-13 assumed under title insurance contracts, including risks that may
335-14 not be assumed because of the insolvency of the parties to the
335-15 transaction. In addition, the Board is hereby vested with power
335-16 and authority to promulgate and enforce all other such rules and
335-17 regulations which in the discretion of the Board are deemed
335-18 necessary to accomplish the purposes of this Act.
335-19 SECTION 16.08. Article 9.49, Insurance Code, is amended to
335-20 read as follows:
335-21 Art. 9.49. Insured Closing. (a) Title insurance companies
335-22 operating under the provisions of this chapter are hereby expressly
335-23 authorized and empowered to issue upon request on real property
335-24 transactions in this state at no charge whatever insured closing
335-25 and settlement letters, in the form prescribed by the board, in
335-26 connection with the closing and settlement of loans <made> by a
335-27 title insurance agent or direct operation <agents> for any title
336-1 insurance company operating under the provisions of this chapter.
336-2 Only <After January 1, 1976, only> the form prescribed by the board
336-3 shall be used <thereafter> in issuing such insured closing and
336-4 settlement letters. The liability of the title insurance company
336-5 under a policy of title insurance that is issued shall not be
336-6 changed or altered by the failure of the title insurance company to
336-7 issue such insured closing and settlement letters <as authorized by
336-8 this Article 9.49>.
336-9 (b) When an owner policy of title insurance is to be issued
336-10 in connection with a real property transaction involving real
336-11 property located in this state, only the title insurance company
336-12 issuing that owner policy is hereby expressly authorized and
336-13 empowered, at or before closing, to issue, upon written request, to
336-14 the buyer or seller of the real property in connection with such
336-15 closing and settlement by a title insurance agent or direct
336-16 operation an insured closing and settlement letter, provided that
336-17 the sale price of the real property exceeds the guaranty amount
336-18 specified in Article 9.48 of this Insurance Code. Only the form of
336-19 letter and the manner of issuance prescribed by the board shall be
336-20 used in issuing such buyer's or seller's insured closing and
336-21 settlement letters. The liability of the title insurance company
336-22 under any issued policy of title insurance shall not be changed or
336-23 altered by the failure of the title insurance company to issue the
336-24 authorized buyer's or seller's insured closing and settlement
336-25 letters. The board may promulgate a charge, if any, to be made in
336-26 the form and manner prescribed by the board for the issuance of
336-27 each insured closing and settlement letter.
337-1 SECTION 16.09. This article applies only to a policy or
337-2 contract of title insurance that is delivered, issued for delivery,
337-3 or renewed on or after January 1, 1994. A policy or contract
337-4 delivered, issued for delivery, or renewed before January 1, 1994,
337-5 is governed by the law that existed immediately before the
337-6 effective date of this Act, and that law is continued in effect for
337-7 that purpose.
337-8 ARTICLE 17. TEXAS CATASTROPHE PROPERTY INSURANCE POOL
337-9 SECTION 17.01. Section 3(d), Article 21.49, Insurance Code,
337-10 is amended to read as follows:
337-11 (d) "Texas Windstorm and Hail Insurance" means deductible
337-12 insurance against direct loss, and indirect losses resulting from a
337-13 direct loss, to insurable property as a result of windstorm or
337-14 hail, as such terms shall be defined and limited in policies and
337-15 forms approved by the State Board of Insurance.
337-16 SECTION 17.02. Article 21.49, Insurance Code, is amended by
337-17 adding Section 6B to read as follows:
337-18 Sec. 6B. ASSESSMENT FOR INSPECTIONS. (a) The board shall
337-19 assess each insurer who provides property insurance in a first tier
337-20 coastal county in accordance with this section.
337-21 (b) The total assessment under this section must be in the
337-22 amount the board estimates is necessary to cover the cost of
337-23 administration of the windstorm inspection program in the first
337-24 tier coastal counties under Section 6A of this article in the state
337-25 fiscal year in which the assessment is made, reduced by the total
337-26 amount of fees the board estimates will be collected for that year
337-27 under Section 6A(c) of this article.
338-1 (c) The assessment must be based on each insurer's
338-2 proportionate share of the total extended coverage and other allied
338-3 lines premium received by all insurers for property insurance in
338-4 the first tier coastal counties in the calendar year preceding the
338-5 year in which the assessment is made. The board shall adopt rules
338-6 to implement the assessment of insurers under this section.
338-7 (d) For purposes of this section, "property insurance" means
338-8 any commercial or residential policy promulgated or approved by the
338-9 board that provides coverage for the perils of windstorm and hail,
338-10 including a Texas Windstorm and Hail Insurance Policy.
338-11 SECTION 17.03. Sections 5(e), (h), and (l), Article 21.49,
338-12 Insurance Code, are amended to read as follows:
338-13 (e) The Board may <shall> develop programs to improve the
338-14 efficient operation of the Association, including a program
338-15 designed to create incentives for insurers to write windstorm and
338-16 hail insurance voluntarily to cover property located in a
338-17 catastrophe area, especially property located on the barrier
338-18 islands. <The Board shall implement the incentive program not
338-19 later than April 1, 1992. The program shall be designed in a way
338-20 that reduces the number of policies that are not written in the
338-21 voluntary market in catastrophe areas by not less than 10 percent
338-22 by January 1, 1993, not less than 25 percent by January 1, 1994,
338-23 and not less than 40 percent by January 1, 1995, based on the
338-24 number of risks underwritten by the Association on January 1, 1991.
338-25 The Board shall report its results to the legislature on March 1 of
338-26 each year beginning in 1993.>
338-27 (h) Members of the board of directors of the Association
339-1 serve three-year staggered terms, with the terms of three members
339-2 expiring on the third Tuesday of March of each year. A person may
339-3 hold a seat on the board of directors for not more than three
339-4 consecutive full terms, not to exceed nine years <If an insurer
339-5 member has been elected and served two full terms, such insurer
339-6 shall provide for a reasonable rotation of persons designated by it
339-7 to serve on the board>.
339-8 (l) If an occurrence or series of occurrences within the
339-9 defined catastrophe area results in insured losses that result in
339-10 tax credits under Section 19(4) of this article <in excess of $100
339-11 million> in a single calendar year, the Association shall
339-12 immediately notify the Board of that fact. The Board on receiving
339-13 notice shall immediately notify the Governor and appropriate
339-14 committees of each house of the Legislature of the amount of
339-15 insured losses eligible for tax credits under Section 19(4) of this
339-16 article <in excess of $100 million>.
339-17 SECTION 17.04. Sections 8(h) and (i), Article 21.49,
339-18 Insurance Code, are amended to read as follows:
339-19 (h) Each extended coverage benchmark rate, flexibility band,
339-20 and promulgated rate established by the Board in accordance with
339-21 Chapter 5, Insurance Code, must be uniform throughout the first
339-22 tier of coastal counties.
339-23 The rates for noncommercial windstorm and hail insurance
339-24 written by the association before December 31, 1995, shall be 90
339-25 percent of the modified extended coverage rates. For purposes of
339-26 this section, the modified extended coverage rate is the greater of
339-27 the upper flexibility band for extended coverage established by the
340-1 board under Article 5.101 of this code or 25 percent above the
340-2 extended coverage benchmark rate established by the board under
340-3 that article.
340-4 The rates for noncommercial windstorm and hail insurance
340-5 written by the association after December 31, 1995, shall be 90
340-6 percent of <Rates, including extended coverage rates covering risks
340-7 or classes of risks written by the Association before December 31,
340-8 1995, may not exceed the benchmark rates promulgated by the Board
340-9 under Subchapter M, Chapter 5, Insurance Code, for noncommercial
340-10 lines of insurance. Rates for noncommercial lines of insurance
340-11 written by the Association on or after December 31, 1995, may not
340-12 exceed> the manual rate for monoline extended coverage promulgated
340-13 by the Board for noncommercial risks under Subchapter C, Chapter 5,
340-14 Insurance Code. Notwithstanding Article 5.13-2, Insurance Code,
340-15 the Board shall promulgate a manual rate for commercial risks and
340-16 classes of risks written by the Association in accordance with
340-17 Subchapter C, Chapter 5, Insurance Code. Article 5.13-2, Insurance
340-18 Code, does not apply to the rates of insurance written by the
340-19 Association. The rates for commercial windstorm and hail insurance
340-20 written by the Association shall be 90 percent of the manual rates
340-21 for extended coverage promulgated by the Board for commercial risks
340-22 under Subchapter C, Chapter 5, Insurance Code.
340-23 If valid flood or rising water insurance coverage exists and
340-24 is maintained on any risk being insured in the pool the State Board
340-25 of Insurance may provide for a rate and reduction in rate of
340-26 premium as may be appropriate.
340-27 The catastrophe element of extended coverage rates
341-1 promulgated by the Board under this Act applicable to commercial
341-2 risks written by the Association shall be uniform throughout the
341-3 seacoast territory and shall be based on all monoline extended
341-4 coverage loss experience of all regulated insurers authorized to do
341-5 business in this state, including the Association, for property
341-6 located in the seacoast territory, using the most recent 30 years'
341-7 experience available. Surcharges collected in the past and used in
341-8 the development of current manual rates may not be excluded from
341-9 future rate development as long as those surcharges were collected
341-10 during the experience period used by the Board.
341-11 The association shall either establish a reinsurance program
341-12 or enter into a contract as provided in Subsection (i) of this
341-13 section. The Texas Department of Insurance may approve any
341-14 reinsurance program. <The State Board of Insurance shall make
341-15 provision by rule and regulation requiring catastrophe reserves as
341-16 part of the premium received on risks or classes of risks located
341-17 in a catastrophe area and shall approve a catastrophe reinsurance
341-18 pool or program that is funded through the excess of premiums over
341-19 losses in a calendar year and may approve a catastrophe reinsurance
341-20 pool funded through assessments of members of the Association. The
341-21 amount required to be reserved for catastrophes (as such
341-22 catastrophes are defined by the Board) shall be that portion of the
341-23 pure premium as is actuarially made attributable, as ascertained by
341-24 the Board, to prospective catastrophic loss. The portion of the
341-25 pure premium attributable to prospective catastrophic loss shall
341-26 not be income and shall be unearned until the occurrence of an
341-27 applicable catastrophe as defined and shall be held in trust by the
342-1 pool or trustee of the pool until losses are paid therefrom under
342-2 such reasonable rules and regulations as the State Board of
342-3 Insurance shall prescribe or approve.>
342-4 (i) The association may enter into a written agreement with
342-5 the Texas Department of Insurance under which the association
342-6 members relinquish their net equity pursuant to the written
342-7 agreement on an annual basis by making payments to a fund known as
342-8 the catastrophe reserve trust fund to be held by the Texas
342-9 Department of Insurance outside the state treasury to protect
342-10 policyholders of the association and to reduce the potential for
342-11 payments by members of the association giving rise to tax credits
342-12 in the event of loss or losses.
342-13 The catastrophe reserve trust fund shall be kept and
342-14 maintained by the Texas Department of Insurance pursuant to the
342-15 written agreement between the association, the Texas Department of
342-16 Insurance, the state treasurer, and the comptroller. Legal title
342-17 to money and investments in the fund is in the Texas Department of
342-18 Insurance unless or until paid out as provided by the written
342-19 agreement. The state treasurer, as custodian, shall administer the
342-20 funds strictly and solely as provided by the agreement and the
342-21 state may not take any action with respect to the fund other than
342-22 as specified by this act and the agreement.
342-23 On the effective date of an agreement, all funds held on
342-24 behalf of or paid to the association under one or more reinsurance
342-25 plans or programs may be immediately paid to the catastrophe
342-26 reserve trust fund. Thereafter, at the end of either each calendar
342-27 year or policy year, the association may pay the net equity of a
343-1 member, including all premium and other revenue of the association
343-2 in excess of incurred losses and operating expenses to the
343-3 catastrophe reserve trust fund or a reinsurance program approved by
343-4 the Commissioner of Insurance.
343-5 The written agreement shall establish the procedure relating
343-6 to the disbursement of funds from the catastrophe reserve trust
343-7 fund to policyholders in the event of an occurrence or series of
343-8 occurrences within the defined catastrophe area that results in
343-9 insured losses and operating expenses of the association greater
343-10 than $100 million <The Board annually shall promulgate extended
343-11 coverage rates based on sound actuarial principles. Rates for
343-12 windstorm and hail insurance shall be 90 percent of the extended
343-13 coverage rates. Extended coverage rates shall be uniform
343-14 throughout the first tier coastal counties. The catastrophe
343-15 element of extended coverage rates shall be uniform throughout the
343-16 seacoast territory and shall be based on all monoline extended
343-17 coverage loss experience of all regulated insurers authorized to do
343-18 business in this state, including the Association, for property
343-19 located in the seacoast territory, using the most recent 30 years'
343-20 experience available. Surcharges collected in the past and used in
343-21 the development of current manual rates may not be excluded from
343-22 future rate development as long as those surcharges were collected
343-23 during the experience period used by the Board>.
343-24 SECTION 17.05. Article 21.49, Insurance Code, is amended by
343-25 adding Section 8B to read as follows:
343-26 Sec. 8B. INDIRECT LOSSES; PERSONAL LINES. (a) Except as
343-27 provided by Subsections (b) and (c) of this section, a policy of
344-1 windstorm and hail insurance issued by the association for a
344-2 dwelling, as that term is defined by the Texas Department of
344-3 Insurance or its successor, must include coverage for wind-driven
344-4 rain damage, regardless of whether an opening is made by the wind,
344-5 loss of use, and consequential losses, according to forms approved
344-6 by the commissioner and for a premium paid by the insured based on
344-7 rates established by rule adopted by the commissioner. A policy of
344-8 windstorm and hail insurance issued by the association for tenant
344-9 contents of a dwelling or other residential building must include
344-10 coverage for loss of use and consequential losses, according to
344-11 forms approved by the board and for a premium paid by the insured
344-12 based on rates established by rule adopted by the commissioner.
344-13 The association shall provide coverage under this section as
344-14 directed by rule of the commissioner.
344-15 (b) The association is not required to offer coverage for
344-16 indirect losses as provided by Subsection (a) of this section
344-17 unless that coverage was excluded from a companion policy in the
344-18 voluntary market.
344-19 (c) The association is not required to provide coverage for
344-20 (1) "loss of use" if such "loss of use" is loss of rents or loss of
344-21 rental value; or (2) "additional living expenses" when the property
344-22 insured is a secondary or a non-primary residence.
344-23 SECTION 17.06. Sections 10, 12A, and 19, Article 21.49,
344-24 Insurance Code, are amended to read as follows:
344-25 Sec. 10. Immunity From Liability. There shall be no
344-26 liability on the part of and no cause of action of any nature shall
344-27 arise against a director of the association, the Board or any of
345-1 its staff, the Association or its agents or employees, or against
345-2 any participating insurer or its agents or employees, for any
345-3 inspections made under the plan of operation or any statements made
345-4 in good faith by them in any reports or communications concerning
345-5 risks submitted to the Association, or at any administrative
345-6 hearings conducted in connection therewith under the provisions of
345-7 this Act.
345-8 Sec. 12A. Legal counsel. The association shall establish a
345-9 plan in its plan of operation under which the association's legal
345-10 representation before the State Board of Insurance, the Texas
345-11 Department of Insurance, and the Texas legislature is without
345-12 conflict of interest or the appearance of a conflict of interest as
345-13 defined in the Texas Disciplinary Rules of Professional Conduct.
345-14 The association shall also adopt separate and distinct procedures
345-15 for legal counsel in the handling of disputes involving
345-16 policyholder claims against the association <is a state agency for
345-17 purposes of employing or authorizing legal representation and shall
345-18 be represented by the attorney general in the manner provided by
345-19 general law for representation of any other state agency by the
345-20 attorney general>.
345-21 Sec. 19. Payment of Losses <Exceeding $100 Million in Year>;
345-22 Premium Tax Credit. (a) If, in any calendar year, an occurrence
345-23 or series of occurrences within the defined catastrophe area
345-24 results in insured losses and operating expenses of the association
345-25 in excess of premium and other revenue of the association, any
345-26 excess losses shall be paid as follows:
345-27 (1) $100 million shall be assessed to the members of
346-1 the association with the proportion of the loss allocable to each
346-2 insurer determined in the same manner as its participation in the
346-3 association has been determined for the year under Section 5(c) of
346-4 this Act;
346-5 (2) any losses in excess of $100 million shall be paid
346-6 from either the catastrophe reserve trust fund established under
346-7 Section 8(i) of this Act or any reinsurance program established by
346-8 the association;
346-9 (3) for losses in excess of those paid under
346-10 Subdivisions (1) and (2) of this subsection, an additional $200
346-11 million shall be assessed to the members of the association with
346-12 the proportion of the loss allocable to each insurer determined in
346-13 the same manner as its participation in the association has been
346-14 determined for the year under Section 5(c) of this Act;
346-15 (4) any losses in excess of those paid under
346-16 Subdivisions (1), (2), and (3) of this subsection shall be assessed
346-17 against members of the association, with the proportion of the
346-18 total loss allocable to each insurer determined in the same manner
346-19 as its participation in the association has been determined for the
346-20 year under Section 5(c) of this Act.
346-21 (b) An insurer may credit any amount paid in accordance with
346-22 Subsection (a)(4) of this section in a calendar year against its
346-23 premium tax under Article 4.10 of this code <In the event any
346-24 occurrence or series of occurrences within the defined catastrophe
346-25 area results in insured losses of the association totaling in
346-26 excess of $100 million within a single calendar year, the
346-27 proportion of the total loss allocable to each insurer shall be
347-1 determined in the same manner as its participation in the
347-2 association has been determined for the year under Subsection (c)
347-3 of Section 5 of the Texas Catastrophe Insurance Pool Act, as
347-4 amended, and any insurer which has paid its share of total losses
347-5 exceeding $100 million in a calendar year shall be entitled to
347-6 credit the amount of that excess share against its premium tax
347-7 under Article 7064, Revised Civil Statutes of Texas, 1925, as
347-8 amended>. The tax credit herein authorized shall be allowed at a
347-9 rate not to exceed 20 percent per year for five or more successive
347-10 years following the year of payment of the claims. The balance of
347-11 payments paid by the insurer and not claimed as such tax credit may
347-12 be reflected in the books and records of the insurer as an admitted
347-13 asset of the insurer for all purposes, including exhibition in
347-14 annual statements pursuant to Article 6.12 of this code <Insurance
347-15 Code>.
347-16 SECTION 17.07. Section 8E, Article 21.49, Insurance Code, is
347-17 repealed.
347-18 SECTION 17.08. (a) Except as provided by Subsection (c) of
347-19 this section, this article takes effect September 1, 1993.
347-20 (b) The change in law made to Article 21.49, Insurance Code,
347-21 by this article applies only to an insurance policy that is
347-22 delivered, issued for delivery, or renewed on or after October 1,
347-23 1993. An insurance policy that is delivered, issued for delivery,
347-24 or renewed before October 1, 1993, is governed by the law as it
347-25 existed immediately before the effective date of this article, and
347-26 that law is continued in effect for that purpose.
347-27 (c) Section 17.02 of this article takes effect immediately.
348-1 The State Board of Insurance may not make the first assessment
348-2 under Section 6B, Article 21.49, Insurance Code, as added by this
348-3 article, for windstorm and hail inspections before August 31, 1993.
348-4 The first assessment must be in the amount the board estimates is
348-5 necessary to cover the cost of administration of the windstorm
348-6 inspection program in the first tier coastal counties under Article
348-7 21.49, Insurance Code, in the period beginning September 1, 1993,
348-8 and ending August 31, 1994, reduced by the total amount of fees the
348-9 board estimates will be collected for that period under Section
348-10 6A(c), Article 21.49, Insurance Code.
348-11 ARTICLE 18
348-12 ADMISSION OF INSURERS ORGANIZED UNDER THE LAWS OF ANOTHER STATE
348-13 OR ORGANIZED UNDER THE LAWS OF A FOREIGN COUNTRY USING TEXAS AS
348-14 A STATE OF ENTRY INTO THE UNITED STATES
348-15 SECTION 18.01. Section 6, Article 3.01, Insurance Code, is
348-16 amended to read as follows:
348-17 Sec. 6. The term "foreign company" means any life, accident
348-18 or health insurance company organized under the laws of any other
348-19 state or territory of the United States <or foreign country>.
348-20 SECTION 18.02. Article 3.01, Insurance Code, is amended by
348-21 adding Sections 7A and 13 to read as follows:
348-22 Sec. 7A. The term "alien company" means any life, accident,
348-23 or health insurance company organized under the laws of any foreign
348-24 country.
348-25 Sec. 13. The "United States branch" means:
348-26 (a) the business unit through which business is
348-27 transacted within the United States by an alien insurer;
349-1 (b) the assets and liabilities of the insurer within
349-2 the United States pertaining to such business;
349-3 (c) the management powers pertaining to such business
349-4 and to the assets and liabilities; or
349-5 (d) any combination of the foregoing.
349-6 SECTION 18.03. Subchapter B, Chapter 3, Insurance Code, is
349-7 amended to read as follows:
349-8 SUBCHAPTER B. FOREIGN OR ALIEN COMPANIES
349-9 Art. 3.20. SCOPE. This subchapter applies to any life
349-10 insurance company, or accident insurance company, or life and
349-11 accident, or health and accident, or life, health and accident
349-12 insurance company, incorporated under the laws of any other state,
349-13 territory or country, desiring to transact the business of such
349-14 insurance in this State.
349-15 Art. 3.20-1. Statement to be Filed. (a) Any foreign or
349-16 alien life insurance company, or accident insurance company, or
349-17 life and accident, health and accident, or life, health and
349-18 accident insurance company, incorporated under the laws of any
349-19 other state, territory or country, desiring to transact the
349-20 business of such insurance in this State, shall furnish the Texas
349-21 Department of Insurance <said Board of Insurance Commissioners>
349-22 with a written or printed statement under oath of the president or
349-23 vice president, or treasurer and secretary of such company which
349-24 statement shall show:
349-25 1. The name and locality of the company.
349-26 2. The amount of its capital stock.
349-27 3. The amount of its capital stock paid up.
350-1 4. The assets of the company, including: first, the
350-2 amount of cash on hand and in the hands of other persons, naming
350-3 such persons and their residence; second, real estate unincumbered,
350-4 where situated and its value; third, the bonds owned by the company
350-5 and how they are secured, with the rate of interest thereon;
350-6 fourth, debts due the company secured by mortgage, describing the
350-7 property mortgaged and its market value; fifth, debts otherwise
350-8 secured, stating how secured; sixth, debts for premiums; seventh,
350-9 all other moneys and securities.
350-10 5. Amount of liabilities of the company, stating the
350-11 name of the person or corporation to whom liable.
350-12 6. Losses adjusted and due.
350-13 7. Losses adjusted and not due.
350-14 8. Losses adjusted.
350-15 9. Losses in suspense and for what cause.
350-16 10. All other claims against the company, describing
350-17 the same.
350-18 The Department <Board of Insurance Commissioners> may require
350-19 any additional facts to be shown by such annual statement.
350-20 (b) Each foreign <such> company shall be required to file a
350-21 similar statement not later than March 1 of each year.
350-22 (c) Each alien company shall be required to file a financial
350-23 statement as provided in Article 3.27-2 of this subchapter.
350-24 Art. 3.21. Articles of Incorporation to be Filed. Any such
350-25 foreign or alien insurance company shall accompany the statement
350-26 required in the foregoing article with a certified copy of its acts
350-27 or articles of incorporation, and all amendments thereto, and a
351-1 copy of its by-laws, together with the name and residence of each
351-2 of its officers and directors. The same shall be certified under
351-3 the hand of the president or secretary of such company.
351-4 Art. 3.22. Capital Stock and Surplus Requirements. No
351-5 <such> foreign or alien stock insurance company shall be licensed
351-6 by the Department <Board of Insurance Commissioners> or shall
351-7 transact any such business of insurance in this State unless such
351-8 company is possessed of not less than the minimum capital and
351-9 surplus required by this chapter of a similar domestic company in
351-10 similar circumstances, including the same character of investments
351-11 for its minimum capital and surplus. No such foreign or alien
351-12 mutual insurance company shall be licensed by the Department <Board
351-13 of Insurance Commissioners> or shall transact any such business of
351-14 insurance in this State unless such company is possessed of not
351-15 less than the minimum free surplus required by Chapter 11 of this
351-16 Code of a similar domestic company in similar circumstances
351-17 including the same character of investments for its minimum free
351-18 surplus.
351-19 Art. 3.23. ALIEN <FOREIGN> COMPANIES TO DEPOSIT. (a) No
351-20 alien <such foreign> insurance company <incorporated by or
351-21 organized under the laws of any foreign government,> shall transact
351-22 business in this State, unless it shall first deposit and keep
351-23 deposited with the Treasurer of this State, for the benefit of the
351-24 policyholders of such company, citizens or residents of the United
351-25 States, bonds or securities of the United States or the State of
351-26 Texas in an <to the> amount at least equal to the minimum capital
351-27 required to be maintained by a domestic stock insurer licensed to
352-1 transact the same kind of insurance, or at least equal to one-half
352-2 the minimum free surplus required to be maintained by a domestic
352-3 mutual insurer licensed to transact the same kind of insurance <of
352-4 One Hundred Thousand ($100,000.00) Dollars>.
352-5 (b) Upon approval of the commissioner in accordance with
352-6 Article 3.27-1 of this subchapter, a licensed alien insurer may be
352-7 permitted to deposit assets with a trustee or trustees for the
352-8 security of its policyholders in the United States in lieu of
352-9 making the deposit with the Treasurer of this State so long as such
352-10 assets are composed of securities or bonds of the United States or
352-11 this State and are maintained in accordance with provisions of
352-12 Article 3.27-1 of this code.
352-13 Art. 3.24. DEPOSIT LIABLE FOR JUDGMENT; DURATION. The
352-14 deposit required by the preceding article shall be held liable to
352-15 pay the judgments of policyholders of the insurer in the United
352-16 States <in such company>, and may be so decreed by the court
352-17 adjudicating the same. It shall be maintained so long as any
352-18 liability of the insurer arising out of its insurance transactions
352-19 in the United States remains outstanding.
352-20 Art. 3.24-1. Certificate of Authority. When a foreign or
352-21 alien company has complied with the requirements of this Subchapter
352-22 and all other requirements imposed on such company by law and has
352-23 paid any deposit imposed by law, and the operational history of the
352-24 company when reviewed in conjunction with its loss experience, the
352-25 kinds and nature of risks insured, the financial condition of the
352-26 company and its ownership, its proposed method of operation, its
352-27 affiliations, its investments, any contracts leading to contingent
353-1 liability or agreements in respect to guaranty and surety, other
353-2 than insurance, and the ratio of total annual premium and net
353-3 investment income to commission expenses, general insurance
353-4 expenses, policy benefits paid and required policy reserve
353-5 increases, indicates a condition such that the expanded operation
353-6 of the company in this State or its operations outside this State
353-7 will not create a condition which might be hazardous to its
353-8 policyholders, creditors or the general public, the Commissioner
353-9 shall file in the office the documents delivered to him and shall
353-10 issue to the company a certificate of authority to transact in this
353-11 State the kind or kinds of business specified therein. Such
353-12 certificate shall continue in full force and effect upon the
353-13 condition that the company shall continue to comply with the laws
353-14 of this State.
353-15 Art. 3.25. Law Deemed Accepted. Each life insurance company
353-16 not organized under the laws of this State, hereafter granted a
353-17 certificate of authority to transact business in this State, shall
353-18 be deemed to have accepted such certificate and to transact such
353-19 business hereunder subject to the conditions and requirements that,
353-20 after it shall cease to transact new business in this State under a
353-21 certificate of authority, and so long as it shall continue to
353-22 collect renewal premiums from citizens of this State, it shall be
353-23 subject to the payment of the same occupation tax in proportion to
353-24 its gross premiums during any year, from citizens of this State, as
353-25 is or may be imposed by law on such companies transacting new
353-26 business within this State, under certificates of authority during
353-27 such year. The rate of such tax to be so paid by any such company
354-1 shall never exceed the rate imposed by law upon insurance companies
354-2 transacting business in this State. Each such company shall make
354-3 the same reports of its gross premium receipts for each such year
354-4 and within the same period as is or may be required of such
354-5 companies holding certificates of authority and shall at all times
354-6 be subject to examination by the Board of Insurance Commissioners
354-7 or some one selected by it for that purpose, in the same way and to
354-8 the same extent as is or may be required of companies transacting
354-9 new business under certificates of authority in this State, the
354-10 expenses of such examination to be paid by the company examined.
354-11 The respective duties of the Board in certifying to the amount of
354-12 such taxes and of the State Treasurer and Attorney General in their
354-13 collection shall be the same as are or may be prescribed respecting
354-14 taxes due from companies authorized to transact new business within
354-15 this State.
354-16 Art. 3.26. WHEN ALIEN <FOREIGN> COMPANIES NEED NOT DEPOSIT.
354-17 If the deposit required by Article 3.23 of this code has been made
354-18 in any State of the United States, under the laws of such State, in
354-19 such manner as to secure equally all the policyholders of such
354-20 Company who are citizens and residents of the United States, then
354-21 no deposit shall be required in this State; but a certificate of
354-22 such deposit under the hand and seal of the officer of such other
354-23 State with whom the same has been made shall be filed with the
354-24 Department <Board of Insurance Commissioners>.
354-25 Art. 3.27. Companies Desiring to Loan Money. Any life
354-26 insurance company not desiring to engage in the business of writing
354-27 life insurance in this State, but desiring to loan its funds in
355-1 this State, may obtain a permit to do so from the Secretary of
355-2 State by complying with the laws of this State relating to foreign
355-3 corporations engaged in loaning money in this State, without being
355-4 required to secure a certificate of authority to write life
355-5 insurance in this State.
355-6 Art. 3.27-1. TRUSTEED ASSETS OF AN ALIEN INSURER. (a)
355-7 Assets which any authorized alien insurer is required or permitted
355-8 by this subchapter to deposit with a trustee or trustees for the
355-9 security of its policyholders in the United States shall be known
355-10 as "trusteed assets". All trusteed assets shall be continuously
355-11 kept within the United States, and the trusteed assets of an alien
355-12 insurer entering the United States through this State shall be kept
355-13 continuously in this State.
355-14 (b) The deed of trust and all amendments to the deed of
355-15 trust of such insurer shall be authenticated in such form and
355-16 manner as prescribed by the commissioner, and shall not be
355-17 effective unless approved by the commissioner.
355-18 (c) The commissioner shall give approval to a deed of trust
355-19 if the commissioner finds:
355-20 (1) the deed of trust or its amendments are sufficient
355-21 in form and are in conformity with applicable law;
355-22 (2) the trustee or trustees are eligible as such; and
355-23 (3) the deed of trust is adequate to protect the
355-24 interests of the beneficiaries of the trust.
355-25 (d) If after notice and hearing the commissioner finds that
355-26 the requisites for approval of the deed of trust no longer exist,
355-27 the commissioner may withdraw approval.
356-1 (e) The commissioner may from time to time approve
356-2 modifications of, or variations in any deed of trust, which in the
356-3 commissioner's judgment are in the best interests of the
356-4 policyholders of the alien insurer within the United States.
356-5 (f) The deed of trust shall contain provisions which:
356-6 (1) vest legal title to trusteed assets in the trustee
356-7 or trustees and successors lawfully appointed, in trust for the
356-8 security of all policyholders of the alien insurer within the
356-9 United States;
356-10 (2) provide for substitution of a new trustee or
356-11 trustees in the event of vacancy by death, resignation, or other
356-12 incapacity, subject to the approval of the commissioner; and
356-13 (3) require that the trustee or trustees shall
356-14 continuously maintain a record at all times sufficient to identify
356-15 the assets of the trust fund.
356-16 (g) The deed of trust may provide that income, earnings,
356-17 dividends, or interest accumulations of the assets of the fund may
356-18 be paid over to the United States manager of the alien insurer,
356-19 upon request.
356-20 (h) The deed of trust shall provide that no withdrawal of
356-21 assets, other than income as specified in Subsection (g) of this
356-22 article, shall be made or permitted by the trustee or trustees
356-23 without prior written approval of the commissioner, except:
356-24 (1) to make deposits required by law in any state for
356-25 the security or benefit of all policyholders of the alien insurer
356-26 in the United States;
356-27 (2) to substitute other assets permitted by law and at
357-1 least equal in value to those withdrawn upon the specific written
357-2 direction of the United States manager or an assistant United
357-3 States manager when duly empowered and acting pursuant to either
357-4 general or specific written authority previously given or delegated
357-5 by the board of directors; or
357-6 (3) to transfer such assets to an official liquidator
357-7 or rehabilitator pursuant to an order of a court of competent
357-8 jurisdiction.
357-9 (i) Upon withdrawal of trusteed assets deposited in another
357-10 state in which the insurer is authorized to do business, the deed
357-11 of trust may require similar written approval of the insurance
357-12 supervising official of that state in lieu of approval of the
357-13 commissioner as provided in Subsection (h) of this article. In all
357-14 such instances, the alien insurer shall notify the commissioner in
357-15 writing of the nature and extent of the withdrawal.
357-16 Art. 3.27-2. TRUSTEED SURPLUS OF ALIEN INSURERS. (a) Every
357-17 authorized alien insurer shall file with the Department a financial
357-18 statement not later than March 1 of each year on a form prescribed
357-19 by the commissioner showing at last year end the following:
357-20 (1) all its general deposits of assets within the
357-21 United States deposited with officers of any state in trust for the
357-22 exclusive benefit, security, and protection of its policyholders
357-23 within the United States;
357-24 (2) all its special deposits of assets within the
357-25 United States deposited with officers of any state in trust for the
357-26 exclusive benefit, security, and protection of its policyholders
357-27 within a particular state;
358-1 (3) all its trusteed assets within the United States
358-2 held by a trustee or trustees for the exclusive benefit, security,
358-3 and protection of all its policyholders within the United States;
358-4 (4) the amount of its policy loans to policyholders
358-5 within the United States, not exceeding the amount of the legal
358-6 reserve required on each such policy;
358-7 (5) all its reserves and other liabilities arising out
358-8 of policies or obligations issued, assumed or incurred in the
358-9 United States; and
358-10 (6) such further information as determined necessary
358-11 to implement provisions of this article.
358-12 (b) In determining the net amount of an alien insurer's
358-13 liabilities in the United States, a deduction may be made for the
358-14 following:
358-15 (1) reinsurance on losses with insurers qualifying for
358-16 credit, less unpaid reinsurance premiums, with a schedule showing
358-17 by company the amount deducted; and
358-18 (2) unearned premiums on agents' balances or
358-19 uncollected premiums not more than 90 days past due. Any liability
358-20 on an asset not considered in the statement may be applied against
358-21 such asset.
358-22 (c) No credit shall be allowed in the statement for any
358-23 special state deposit held for the exclusive benefit of
358-24 policyholders of any particular state except as an offset against
358-25 the liabilities of the alien insurer in that state.
358-26 (d) The accrued interest at the date of the statement on
358-27 assets deposited with states and trustees shall be allowed in the
359-1 statement where the interest is collected by the states or
359-2 trustees.
359-3 (e) The aggregate value of the insurer's general state
359-4 deposits and trusteed assets less the aggregate net amount of all
359-5 its liabilities and reserves in the United States as determined in
359-6 accordance with this section shall be known as its "trusteed"
359-7 surplus in the United States. Whenever it appears to the
359-8 commissioner from any such statement or any report that an alien
359-9 insurer's trusteed surplus is reduced below the greater of minimum
359-10 capital required of, or the minimum surplus required to be
359-11 maintained by, a domestic insurer licensed to transact the same
359-12 kinds of insurance, the commissioner shall determine the amount of
359-13 the impairment and order the insurer, through its United States
359-14 manager or attorney, to eliminate the impairment within such period
359-15 as the commissioner designates, not more than 90 days from service
359-16 of the order. The commissioner may also by order revoke or suspend
359-17 the insurer's license or prohibit it from issuing new policies in
359-18 the United States while the impairment exists. If at the
359-19 expiration of the designated period has not satisfied the
359-20 commissioner that the impairment has been eliminated, the
359-21 commissioner may proceed against such insurer pursuant to the
359-22 provisions of Article 21.28-A of this code as an insurer whose
359-23 further transaction of the business of insurance in the United
359-24 States will be hazardous to its policyholders in the United States.
359-25 (f) The trusteed surplus statement shall be signed and
359-26 verified by the United States manager, attorney-in-fact, or a duly
359-27 empowered assistant United States manager of the alien insurer.
360-1 The items of securities and other property held under trust deeds
360-2 shall be certified to by the United States trustee or trustees.
360-3 The commissioner may at any time and for any time period determined
360-4 necessary require further statements of the same kind.
360-5 Art. 3.27-3. EXAMINATION OF ALIEN INSURERS. (a) The books,
360-6 records, accounting, and verification pertaining to the trusteed
360-7 assets of any authorized alien insurer are subject to examination
360-8 by the Department or its duly appointed representative at the
360-9 United States branch office of such insurer, in the same manner and
360-10 to the same extent that applies under Articles 1.15 and 1.16 of
360-11 this code to domestic and foreign insurers licensed to transact the
360-12 same kind of insurance.
360-13 (b) The books, records, and accounting for trusteed assets
360-14 shall be kept and maintained, in English, in the Texas branch
360-15 office of any alien insurer entering the United States through this
360-16 State.
360-17 SECTION 18.04. Article 21.43, Insurance Code, is amended to
360-18 read as follows:
360-19 Art. 21.43. FOREIGN OR ALIEN INSURANCE CORPORATIONS
360-20 Sec. 1. DEFINITIONS. In this article:
360-21 (a) The term "foreign insurance corporation" means any
360-22 insurance company other than one subject to provisions of
360-23 Subchapter B, Chapter 3, of this code organized under the laws of
360-24 any other state or territory of the United States.
360-25 (b) The term "alien insurance corporation" means an
360-26 insurance company other than one subject to provisions of
360-27 Subchapter B, Chapter 3, of this code organized under the laws of
361-1 any foreign country. For the purposes of this article, the term
361-2 also includes any nonincorporated insurer organized under the laws
361-3 of any foreign country in a form recognized by the department.
361-4 (c) The term "United States branch" means:
361-5 (1) the business unit through which business is
361-6 transacted within the United States by an alien insurer;
361-7 (2) the assets and liabilities of the insurer
361-8 within the United States pertaining to such business;
361-9 (3) the management powers pertaining to such
361-10 business and to the assets and liabilities; or
361-11 (4) any combination of the foregoing.
361-12 Sec. 2. SCOPE. This article applies to any insurance
361-13 corporation other than one subject to Subchapter B, Chapter 3, of
361-14 this code incorporated under the laws of any other state,
361-15 territory, or country desiring to be licensed to transact the
361-16 business of insurance in this State.
361-17 Sec. 3. CERTIFICATE OF AUTHORITY REQUIRED. (a) It shall be
361-18 unlawful, except as provided in Articles 1.14-1 and 1.14-2 of this
361-19 code, for any foreign insurance corporation or alien insurance
361-20 corporation of the type provided for in any chapter of this code to
361-21 engage in the business of insuring others against losses which may
361-22 be insured against under the laws of this state without initially
361-23 procuring a certificate of authority from the commissioner of
361-24 insurance permitting it to engage in those business activities.
361-25 (b) This article does not prohibit a foreign insurer from
361-26 reinsuring a domestic insurer or prohibit the location in Texas of
361-27 a company that does not directly insure either persons domiciled or
362-1 other risks located in this state.
362-2 Sec. 4. ANNUAL FINANCIAL STATEMENT TO BE FILED. (a) Any
362-3 foreign or alien insurance corporation desiring to transact the
362-4 business of insurance in this state shall furnish the Texas
362-5 Department of Insurance with copies of its annual financial
362-6 statements for the two most recent years, certified by the
362-7 commissioner or other insurance supervising official of the state
362-8 or country in which the insurer is organized and incorporated. The
362-9 Department may require any additional facts to be shown by such
362-10 annual statement.
362-11 (b) Each foreign insurance corporation shall be required to
362-12 file a statement similar to that required in Subsection (a) not
362-13 later than March 1 of each year.
362-14 (c) Each alien insurance corporation shall be required to
362-15 file a financial statement as provided in Section 11 of this
362-16 article.
362-17 Sec. 5. ARTICLES OF INCORPORATION TO BE FILED. Any foreign
362-18 or alien insurance corporation shall accompany the statement
362-19 required in Section 4 of this article with a certified copy of its
362-20 acts or articles of incorporation, and all amendments thereto, and
362-21 a copy of its by-laws, together with the name and residence of each
362-22 of its officers and directors. These documents shall be certified
362-23 under the hand of the president or secretary of such company.
362-24 Sec. 6. EXAMINATION REQUIRED. Before issuing a certificate
362-25 of authority to a foreign or alien insurance corporation to do
362-26 business in this state, the commissioner shall either make an
362-27 examination of the insurer at the expense of such insurer at its
363-1 principal office within the United States or accept a report of an
363-2 examination made by the insurance department or other insurance
363-3 supervisory official of any other state or of any government of a
363-4 foreign country.
363-5 Sec. 7. ALIEN CORPORATIONS TO DEPOSIT. (a) No alien
363-6 insurance corporation shall transact business in this State, unless
363-7 it shall first deposit and keep deposited with the Treasurer of
363-8 this State, for the benefit of the policyholders of such company,
363-9 citizens, or residents of the United States, bonds or securities of
363-10 the United States or the State of Texas in an amount at least equal
363-11 to the minimum capital required to be maintained by a domestic
363-12 stock insurer licensed to transact the same kind of insurance, or
363-13 at least equal to one-half the minimum free surplus required to be
363-14 maintained by a domestic mutual insurer licensed to transact the
363-15 same kind of insurance.
363-16 (b) Upon approval of the commissioner in accordance with
363-17 Section 10 of this article, a licensed alien insurer may be
363-18 permitted to deposit assets with a trustee or trustees for the
363-19 security of its policyholders in the United States in lieu of
363-20 making the deposit with the Treasurer of this State so long as such
363-21 assets are composed of securities or bonds of the United States or
363-22 this State and are maintained in accordance with provisions of
363-23 Section 10 of this article.
363-24 (c) If the deposit required by Subsection (a) of this
363-25 section has been made in any State of the United States, under the
363-26 laws of such State, in such manner as to secure equally all the
363-27 policyholders of such Company who are citizens and residents of
364-1 the United States, then no deposit shall be required in this State;
364-2 but a certificate of such deposit under the hand and seal of the
364-3 officer of such other State with whom the same has been made shall
364-4 be filed with the Department.
364-5 Sec. 8. PURPOSE AND DURATION OF DEPOSIT. The deposit
364-6 required by Section 7 of this article shall be for the exclusive
364-7 benefit, security, and protection of policyholders of the insurer
364-8 in the United States. It shall be maintained so long as any
364-9 liability of the insurer arising out of its insurance transactions
364-10 in the United States remains outstanding.
364-11 Sec. 9. TEXAS LAW DEEMED ACCEPTED. The provisions of this
364-12 code are conditions on which foreign or alien insurance
364-13 corporations are permitted to do the business of insurance in this
364-14 state, and any of the foreign or alien corporations engaged in
364-15 issuing contracts or policies in this state are deemed to have
364-16 agreed to fully comply with these provisions as a prerequisite to
364-17 the right to engage in business in this state.
364-18 Sec. 10. TRUSTEED ASSETS OF ALIEN INSURANCE CORPORATIONS.
364-19 (a) Assets which any authorized alien insurer is required or
364-20 permitted by this article to deposit with a trustee or trustees for
364-21 the security of its policyholders in the United States shall be
364-22 known as "trusteed assets." All trusteed assets shall be
364-23 continuously kept within the United States, and the trusteed assets
364-24 of an alien insurer entering the United States through this State
364-25 shall be kept continuously in this State.
364-26 (b) The deed of trust and all amendments to the deed of
364-27 trust of such insurer shall be authenticated in such form and
365-1 manner as prescribed by the commissioner and shall not be effective
365-2 unless approved by the commissioner.
365-3 (c) The commissioner shall give approval to a deed of trust
365-4 if the commissioner finds:
365-5 (1) the deed of trust or its amendments are sufficient
365-6 in form and are in conformity with applicable law;
365-7 (2) the trustee or trustees are eligible as such; and
365-8 (3) the deed of trust is adequate to protect the
365-9 interests of the beneficiaries of the trust.
365-10 (d) If after notice and hearing the commissioner finds that
365-11 the requisites for approval of the deed of trust no longer exist,
365-12 the commissioner may withdraw approval.
365-13 (e) The commissioner may from time to time approve
365-14 modifications of, or variations in any deed of trust, which in the
365-15 commissioner's judgment are in the best interests of the
365-16 policyholders of the alien insurer corporation within the United
365-17 States.
365-18 (f) The deed of trust shall contain provisions which:
365-19 (1) vest legal title to trusteed assets in the trustee
365-20 or trustees and successors lawfully appointed, in trust for the
365-21 security of all policyholders of the alien insurer within the
365-22 United States;
365-23 (2) provide for substitution of a new trustee or
365-24 trustees in the event of vacancy by death, resignation, or other
365-25 incapacity, subject to the approval of the commissioner; and
365-26 (3) require that the trustee or trustees shall
365-27 continuously maintain a record at all times sufficient to identify
366-1 the assets of the trust fund.
366-2 (g) The deed of trust may provide that income, earnings,
366-3 dividends, or interest accumulations of the assets of the fund may
366-4 be paid over to the United States manager of the alien insurer,
366-5 upon request.
366-6 (h) The deed of trust shall provide that no withdrawal of
366-7 assets, other than income as specified in Subsection (g) of this
366-8 section, shall be made or permitted by the trustee or trustees
366-9 without prior written approval of the commissioner, except:
366-10 (1) to make deposits required by law in any state for
366-11 the security or benefit of all policyholders of the alien insurer
366-12 in the United States;
366-13 (2) to substitute other assets permitted by law and at
366-14 least equal in value to those withdrawn, upon the specific written
366-15 direction of the United States manager or an assistant United
366-16 States manager when duly empowered and acting pursuant to either
366-17 general or specific written authority previously given or delegated
366-18 by the board of directors; or
366-19 (3) to transfer such assets to an official liquidator
366-20 or rehabilitator pursuant to an order of a court of competent
366-21 jurisdiction.
366-22 (i) Upon withdrawal of trusteed assets deposited in another
366-23 state in which the insurer is authorized to do business, the deed
366-24 of trust may require similar written approval of the insurance
366-25 supervising official of that state in lieu of approval of the
366-26 commissioner as provided in Subsection (h) of this section. In all
366-27 such instances, the alien insurer shall notify the commissioner in
367-1 writing of the nature and extent of the withdrawal.
367-2 Sec. 11. TRUSTEED SURPLUS OF ALIEN INSURANCE CORPORATIONS.
367-3 (a) Every authorized alien insurer shall file with the Department
367-4 a financial statement not later than March 1 of each year on a form
367-5 prescribed by the commissioner showing at last year end the
367-6 following:
367-7 (1) all its general deposits of assets within the
367-8 United States deposited with officers of any state in trust for
367-9 the exclusive benefit, security, and protection of its
367-10 policyholders within the United States;
367-11 (2) all its special deposits of assets within the
367-12 United States deposited with officers of any state in trust for
367-13 the exclusive benefit, security, and protection of its
367-14 policyholders within a particular state;
367-15 (3) all its trusteed assets within the United States
367-16 held by a trustee or trustees for the exclusive benefit, security,
367-17 and protection of all its policyholders within the United States;
367-18 (4) all its reserves and other liabilities arising out
367-19 of policies or obligations issued, assumed, or incurred in the
367-20 United States; and
367-21 (5) such further information as determined necessary
367-22 to implement provisions of this section.
367-23 (b) In determining the net amount of an alien insurer's
367-24 liabilities in the United States, a deduction may be made for the
367-25 following:
367-26 (1) reinsurance on losses with insurers qualifying for
367-27 credit, less unpaid reinsurance premiums, with a schedule showing
368-1 by company the amount deducted; and
368-2 (2) unearned premiums on agents' balances or
368-3 uncollected premiums not more than 90 days past due. Any liability
368-4 on an asset not considered in the statement may be applied against
368-5 such asset.
368-6 (c) No credit shall be allowed in the statement for any
368-7 special state deposit held for the exclusive benefit of
368-8 policyholders of any particular state except as an offset against
368-9 the liabilities of the alien insurer in that state.
368-10 (d) The accrued interest at the date of the statement on
368-11 assets deposited with states and trustees shall be allowed in the
368-12 statement where the interest is collected by the states or
368-13 trustees.
368-14 (e) The aggregate value of the insurer's general state
368-15 deposits and trusteed assets less the aggregate net amount of all
368-16 its liabilities and reserves in the United States as determined in
368-17 accordance with this section shall be known as its "trusteed"
368-18 surplus in the United States. Whenever it appears to the
368-19 commissioner from any such statement or any report that an alien
368-20 insurer's trusteed surplus is reduced below the greater of minimum
368-21 capital required of, or the minimum surplus required to be
368-22 maintained by, a domestic insurer licensed to transact the same
368-23 kinds of insurance, the commissioner shall determine the amount of
368-24 the impairment and order the insurer, through its United States
368-25 manager or attorney, to eliminate the impairment within such period
368-26 as the commissioner designates, not more than 90 days from service
368-27 of the order. The commissioner may also by order revoke or suspend
369-1 the insurer's license or prohibit it from issuing new policies in
369-2 the United States while the impairment exists. If at the
369-3 expiration of the designated period has not satisfied the
369-4 commissioner that the impairment has been eliminated, the
369-5 commissioner may proceed against such insurer pursuant to the
369-6 provisions of Article 21.28-A of this code as an insurer whose
369-7 further transaction of the business of insurance in the United
369-8 States will be hazardous to its policyholders in the United States.
369-9 (f) The trusteed surplus statement shall be signed and
369-10 verified by the United States manager, attorney-in-fact, or a duly
369-11 empowered assistant United States manager of the alien insurer.
369-12 The items of securities and other property held under trust deeds
369-13 shall be certified to by the United States trustee or trustees.
369-14 The commissioner may at any time and for any time period determined
369-15 necessary require further statements of the same kind.
369-16 Sec. 12. EXAMINATION OF ALIEN INSURANCE CORPORATIONS.
369-17 (a) The books, records, accounting, and verification pertaining to
369-18 the trusteed assets of any authorized alien insurer are subject to
369-19 examination by the Department or its duly appointed representative
369-20 at the United States branch office of such insurer in the same
369-21 manner and to the same extent that applies under Articles 1.15 and
369-22 1.16 of this code to domestic and foreign insurers licensed to
369-23 transact the same kind of insurance.
369-24 (b) The books, records, and accounting for trusteed assets
369-25 shall be kept and maintained, in English, in the Texas branch
369-26 office of any alien insurer entering the United States through this
369-27 State.
370-1 Sec. 13. MISCELLANEOUS PROVISIONS. (a) <It shall be
370-2 unlawful, except as is provided for surplus lines in Articles
370-3 1.14-1 and 1.14-2 of this code, for any foreign insurance
370-4 corporation of the type provided for in any chapter of this code to
370-5 engage in the business of insuring others against losses which may
370-6 be insured against under the laws of this state without initially
370-7 procuring a certificate of authority from the commissioner of
370-8 insurance permitting it to engage in those business activities.>
370-9 <(b) This article does not prohibit a foreign insurer from
370-10 reinsuring a domestic insurer or prohibit the location in Texas of
370-11 a company that does not directly insure either persons domiciled or
370-12 other risks located in this state.>
370-13 <(c) The provisions of this code are conditions on which the
370-14 foreign insurance corporations are permitted to do business in this
370-15 state, and any of the foreign corporations engaged in issuing
370-16 contracts or policies in this state are deemed to have agreed to
370-17 these conditions as a prerequisite to the right to engage in
370-18 business in this state.>
370-19 <(d)> A foreign or alien insurance corporation may not be
370-20 denied permission to do business in this state on the ground that
370-21 all of its authorized capital stock has not been fully subscribed
370-22 and paid for if:
370-23 (1) at least the minimum dollar amount of capital
370-24 stock of the corporation required by the laws of this state (which
370-25 may be less than all of its authorized capital stock) has been
370-26 subscribed and paid for;
370-27 (2) it has at least the minimum dollar amount of
371-1 surplus required by the laws of this state for the kinds of
371-2 business the corporation seeks to write; and
371-3 (3) the corporation has fully complied with the laws
371-4 of its domiciliary state or country relating to authorization and
371-5 issuance of capital stock.
371-6 (b) <(e)> A foreign casualty insurer may not be required to
371-7 make or maintain the deposit required of domestic casualty insurers
371-8 by Article 8.05 of this code if a similar deposit has been made in
371-9 any state of the United States, under the laws of that state, in a
371-10 manner that secures equally all the policyholders of the company
371-11 who are citizens and residents of the United States. A certificate
371-12 of the deposit under the signature and seal of the officer of the
371-13 other state with whom the deposit is made must be filed with the
371-14 department <board>.
371-15 (c) <(f)> A foreign or alien insurance corporation subject
371-16 to this code may not be denied permission to do business in this
371-17 state because the name of the corporation is the same as, or
371-18 deceptively similar to, the name of any domestic corporation
371-19 existing under the laws of this state or of any foreign or alien
371-20 corporation authorized to transact business in this state if the
371-21 foreign or alien insurance corporation:
371-22 (1) files an assumed name certificate setting forth a
371-23 name permitted under the laws of this state with the Texas
371-24 Department <State Board> of Insurance and with any county clerks as
371-25 provided by Section 36.10 or 36.11, Business & Commerce Code; and
371-26 (2) does not transact or conduct any business in this
371-27 state except under the assumed name.
372-1 (d) <(g)> No action on or involving any contract entered
372-2 into in this state between an insurance corporation and a resident
372-3 of this state shall be commenced in or transferred to a court in
372-4 another state without the consent of the resident of this state.
372-5 SECTION 18.05. Article 21.44, Insurance Code, is amended to
372-6 read as follows:
372-7 Art. 21.44. CAPITAL AND SURPLUS REQUIREMENTS FOR FOREIGN OR
372-8 ALIEN INSURANCE COMPANIES OTHER THAN LIFE. No foreign or alien
372-9 insurance company subject to the provisions of Article 21.43 of
372-10 this code <other than one doing a life insurance business> shall be
372-11 permitted to do business within this State unless it shall have and
372-12 maintain the minimum requirements of this Code as to capital or
372-13 surplus or both, applicable to companies organized under this Code
372-14 doing the same kind or kinds of business.
372-15 ARTICLE 19. HEALTH CARE PROVIDERS
372-16 SECTION 19.01. Subsection (B), Section 2, Chapter 397, Acts
372-17 of the 54th Legislature, 1955 (Article 3.70-2, Vernon's Texas
372-18 Insurance Code), is amended to read as follows:
372-19 (B) No policy of accident and sickness insurance shall make
372-20 benefits contingent upon treatment or examination by a particular
372-21 practitioner or by particular practitioners of the healing arts
372-22 hereinafter designated unless such policy contains a provision
372-23 designating the practitioner or practitioners who will be
372-24 recognized by the insurer and those who will not be recognized by
372-25 the insurer. Such provision may be located in the "Exceptions" or
372-26 "Exceptions and Reductions" provisions, or elsewhere in the policy,
372-27 or by endorsement attached to the policy, at the insurer's option.
373-1 In designating the practitioners who will and will not be
373-2 recognized, such provision shall use the following terms: Doctor
373-3 of Medicine, Doctor of Osteopathy, Doctor of Dentistry, Doctor of
373-4 Chiropractic, Doctor of Optometry, Doctor of Podiatry, Licensed
373-5 Audiologist, Licensed Speech-language Pathologist, Doctor in
373-6 Psychology, Certified Social Worker--Advanced Clinical
373-7 Practitioner, Licensed Dietitian, Licensed Professional Counselor,
373-8 <and> Licensed Marriage and Family Therapist, and Licensed Hearing
373-9 Aid Fitter and Dispenser.
373-10 For purposes of this Act, such designations shall have the
373-11 following meanings:
373-12 Doctor of Medicine: One licensed by the Texas State Board of
373-13 Medical Examiners on the basis of the degree "Doctor of Medicine";
373-14 Doctor of Osteopathy: One licensed by the Texas State Board
373-15 of Medical Examiners on the basis of the degree of "Doctor of
373-16 Osteopathy";
373-17 Doctor of Dentistry: One licensed by the State Board of
373-18 Dental Examiners;
373-19 Doctor of Chiropractic: One licensed by the Texas Board of
373-20 Chiropractic Examiners;
373-21 Doctor of Optometry: One licensed by the Texas Optometry
373-22 Board;
373-23 Doctor of Podiatry: One licensed by the State Board of
373-24 Podiatry Examiners;
373-25 Licensed Audiologist: One with a master's or doctorate
373-26 degree in audiology from an accredited college or university and
373-27 who is licensed as an audiologist by the State Committee of
374-1 Examiners for Speech-Language Pathology and Audiology <certified by
374-2 the American Speech-language and Hearing Association>;
374-3 Licensed Speech-language Pathologist: One with a master's or
374-4 doctorate degree in speech pathology or speech-language pathology
374-5 from an accredited college or university and who is licensed as a
374-6 speech-language pathologist by the State Committee of Examiners for
374-7 Speech-Language Pathology and Audiology <certified by the American
374-8 Speech-language and Hearing Association>;
374-9 Doctor in Psychology: One licensed by the Texas State Board
374-10 of Examiners of Psychologists and certified as a Health Service
374-11 Provider;
374-12 Certified Social Worker--Advanced Clinical Practitioner: One
374-13 certified by the Texas Department of Human Services as a Certified
374-14 Social Worker with the order of recognition of Advanced Clinical
374-15 Practitioner;
374-16 Licensed Dietitian: One licensed by the Texas State Board of
374-17 Examiners of Dietitians;
374-18 Licensed Professional Counselor: One licensed by the Texas
374-19 State Board of Examiners of Professional Counselors; <and>
374-20 Licensed Marriage and Family Therapist: One licensed by the
374-21 Texas State Board of Examiners of Marriage and Family Therapists;
374-22 and
374-23 Licensed Hearing Aid Fitter and Dispenser: One licensed by
374-24 the Texas Board of Examiners in the Fitting and Dispensing of
374-25 Hearing Aids.
374-26 SECTION 19.02. Sections 1 and 3, Article 21.52, Insurance
374-27 Code, as amended by Chapters 242 and 824, Acts of the 72nd
375-1 Legislature, Regular Session, 1991, are reenacted and amended to
375-2 read as follows:
375-3 Sec. 1. DEFINITIONS. As used in this article:
375-4 (a) "health insurance policy" means any individual,
375-5 group, blanket, or franchise insurance policy, insurance agreement,
375-6 or group hospital service contract, providing benefits for medical
375-7 or surgical expenses incurred as a result of an accident or
375-8 sickness;
375-9 (b) "doctor of podiatric medicine" includes D.P.M.,
375-10 podiatrist, doctor of surgical chiropody, D.S.C. and chiropodist;
375-11 (c) "doctor of optometry" includes optometrist, doctor
375-12 of optometry, and O.D.;
375-13 (d) "doctor of chiropractic" means a person who is
375-14 licensed by the Texas Board of Chiropractic Examiners to practice
375-15 chiropractic;
375-16 (e) "licensed dentist" means a person who is licensed
375-17 to practice dentistry by the State Board of Dental Examiners;
375-18 (f) "licensed audiologist" means a person who has
375-19 received a master's or doctorate degree in audiology from an
375-20 accredited college or university and is licensed as an audiologist
375-21 by the State Committee of Examiners for Speech-Language Pathology
375-22 and Audiology <certified by the American Speech-language and
375-23 Hearing Association>;
375-24 (g) "licensed speech-language pathologist" means a
375-25 person who has received a master's or doctorate degree in
375-26 speech-language pathology from an accredited college or university
375-27 and is licensed as a speech-language pathologist by the State
376-1 Committee of Examiners for Speech-Language Pathology and Audiology
376-2 <certified by the American Speech-language and Hearing Association
376-3 to restore speech loss or correct a speech impairment>;
376-4 (h) "certified social worker--advanced clinical
376-5 practitioner" means a person who is certified by the Texas
376-6 Department of Human Services as a certified social worker with the
376-7 order of recognition of advanced clinical practitioner;
376-8 (i) "licensed dietitian" means a person who is
376-9 licensed by the Texas State Board of Examiners of Dietitians;
376-10 (j) "licensed professional counselor" means a person
376-11 who is licensed by the Texas State Board of Examiners of
376-12 Professional Counselors; <and>
376-13 (k) "psychologist" means a person licensed to practice
376-14 psychology by the Texas State Board of Examiners of Psychologists;
376-15 (l) <(k)> "licensed marriage and family therapist"
376-16 means a person who is licensed by the Texas State Board of
376-17 Examiners of Marriage and Family Therapists; and
376-18 (m) "licensed hearing aid fitter and dispenser" means
376-19 a person who is licensed by the Texas Board of Examiners in the
376-20 Fitting and Dispensing of Hearing Aids.
376-21 Sec. 3. SELECTION OF PRACTITIONERS. Any person who is
376-22 issued, who is a party to, or who is a beneficiary under any health
376-23 insurance policy delivered, renewed, or issued for delivery in this
376-24 state by any insurance company, association, or organization to
376-25 which this article applies may select a licensed doctor of
376-26 podiatric medicine, a licensed dentist, or a doctor of chiropractic
376-27 to perform the medical or surgical services or procedures scheduled
377-1 in the policy which fall within the scope of the license of that
377-2 practitioner, a licensed doctor of optometry to perform the
377-3 services or procedures scheduled in the policy which fall within
377-4 the scope of the license of that doctor of optometry, a licensed
377-5 <an> audiologist to measure hearing for the purpose of determining
377-6 the presence or extent of a hearing loss and to provide aural
377-7 rehabilitation services to a person with a hearing loss if those
377-8 services or procedures are scheduled in the policy, a licensed
377-9 speech-language pathologist to evaluate speech and language and to
377-10 provide habilitative and rehabilitative services to restore speech
377-11 or language loss or to correct a speech or language impairment if
377-12 those services or procedures are scheduled in the policy, a
377-13 certified social worker--advanced clinical practitioner to provide
377-14 the services that fall within the scope of the license of such
377-15 certified practitioner and which are specified as services within
377-16 the terms of the policy of insurance, including the provision of
377-17 direct, diagnostic, preventive, or clinical services to
377-18 individuals, families, and groups whose functioning is threatened
377-19 or affected by social or psychological stress or health impairment,
377-20 if those services or procedures are scheduled in the policy, a
377-21 licensed dietitian including a provisional licensed dietitian under
377-22 a licensed dietitian's supervision to provide the services that
377-23 fall within the scope of the license of that dietitian if those
377-24 services are scheduled in the policy, a licensed professional
377-25 counselor to provide the services that fall within the scope of the
377-26 license of that professional if those services are scheduled in the
377-27 policy, <or> a licensed marriage and family therapist to provide
378-1 the services that fall within the scope of the license of that
378-2 professional if those services are scheduled in the policy, <or> a
378-3 psychologist to perform the services or procedures scheduled in the
378-4 policy that fall within the scope of the license of that
378-5 psychologist, or a licensed hearing aid fitter and dispenser to
378-6 provide the services or procedures scheduled in the policy that
378-7 fall within the scope of the license of that practitioner. The
378-8 services of a certified social worker--advanced clinical
378-9 practitioner, licensed professional counselor, or licensed marriage
378-10 and family therapist that are included in this Act may require a
378-11 professional recommendation by a doctor of medicine or doctor of
378-12 osteopathy unless the health insurance policy terms do not require
378-13 such a recommendation. The payment or reimbursement by the
378-14 insurance company, association, or organization for those services
378-15 or procedures in accordance with the payment schedule or the
378-16 payment provisions in the policy shall not be denied because the
378-17 same were performed by a licensed doctor of podiatric medicine, a
378-18 licensed doctor of optometry, a licensed doctor of chiropractic, a
378-19 licensed dentist, a licensed <an> audiologist, a licensed
378-20 speech-language pathologist, a certified social worker--advanced
378-21 clinical practitioner, a licensed dietitian, a licensed
378-22 professional counselor, <or> a licensed marriage and family
378-23 therapist, <or> a psychologist, or a licensed hearing aid fitter
378-24 and dispenser. There shall not be any classification,
378-25 differentiation, or other discrimination in the payment schedule or
378-26 the payment provisions in a health insurance policy, nor in the
378-27 amount or manner of payment or reimbursement thereunder, between
379-1 scheduled services or procedures when performed by a doctor of
379-2 podiatric medicine, a doctor of optometry, a doctor of
379-3 chiropractic, a licensed dentist, a licensed <an> audiologist, a
379-4 licensed speech-language pathologist, a certified social
379-5 worker--advanced clinical practitioner, a licensed dietitian, a
379-6 licensed professional counselor, <or> a licensed marriage and
379-7 family therapist, <or> a psychologist, or a licensed hearing aid
379-8 fitter and dispenser which fall within the scope of his license or
379-9 certification and the same services or procedures when performed by
379-10 any other practitioner of the healing arts whose services or
379-11 procedures are covered by the policy. Any provision in a health
379-12 insurance policy contrary to or in conflict with the provisions of
379-13 this article shall, to the extent of the conflict, be void, but
379-14 such invalidity shall not affect the validity of the other
379-15 provisions of this policy. Any presently approved policy form
379-16 containing any provision in conflict with the requirements of this
379-17 Act shall be brought into compliance with this Act by the use of
379-18 riders and endorsements which have been approved by the State Board
379-19 of Insurance or by the filing of new or revised policy forms for
379-20 approval by the State Board of Insurance.
379-21 SECTION 19.03. The Texas Health Maintenance Organization Act
379-22 (Chapter 20A, Vernon's Texas Insurance Code) is amended by adding
379-23 Section 6A to read as follows:
379-24 Sec. 6A. GROUP MODEL HEALTH MAINTENANCE ORGANIZATIONS. (a)
379-25 Unless this section and the powers specified in Section 6(a) of
379-26 this Act are specifically amended by law, a law, whether enacted
379-27 before or after this enactment of this section, may not be
380-1 construed to prohibit or restrict a group model health maintenance
380-2 organization from:
380-3 (1) selectively contracting with or declining to
380-4 contract with any or all providers as the health maintenance
380-5 organization considers necessary;
380-6 (2) contracting for or declining to contract for an
380-7 individual health care service or full range of health care
380-8 services as the health maintenance organization considers
380-9 necessary, if the service or services may be legally provided by
380-10 the contracting provider; or
380-11 (3) requiring enrolled members of the health
380-12 maintenance organization who wish to obtain the services covered by
380-13 the health maintenance organization to use the providers specified
380-14 by the health maintenance organization.
380-15 (b) For purposes of this section "group model health
380-16 maintenance organization" means a health maintenance organization
380-17 that provides the majority of its professional services through a
380-18 single group medical practice that is formally affiliated with the
380-19 medical school component of a Texas, state-supported, public
380-20 college or university.
380-21 SECTION 19.04. Article 21.52, Insurance Code, is amended by
380-22 adding Section 3A to read as follows:
380-23 Sec. 3A. PROVISION OF PHYSICAL MODALITIES AND PROCEDURES.
380-24 (a) A health insurer or licensed third party administrator may not
380-25 deny reimbursement to a practitioner for the provision of covered
380-26 services of physical modalities and procedures that are within the
380-27 scope of such practitioner's practice provided such services are
381-1 performed in strict conformity with applicable laws and regulations
381-2 relating to the licensure of the practitioner and with the terms of
381-3 the insurance policy or other coverage agreement.
381-4 (b) A health maintenance organization or preferred provider
381-5 organization may not deny reimbursement to a participating
381-6 practitioner for services provided pursuant to a coverage agreement
381-7 solely because of the type of practitioner who provided such
381-8 services as long as the services are performed in strict conformity
381-9 with applicable laws and regulations relating to the licensure of
381-10 the practitioner and with the terms of the insurance policy or
381-11 other coverage agreement.
381-12 (c) Nothing herein shall be construed to circumvent
381-13 contractual provider network agreements between a health insurer or
381-14 a third party administrator and licensed practitioners.
381-15 SECTION 19.05. Article 21.52, Insurance Code, is amended by
381-16 adding Section 4 to read as follows:
381-17 Sec. 4. PROVIDER CONTRACTORS. Each person who arranges
381-18 contracts with providers on behalf of a health maintenance
381-19 organization or health insurer shall comply with laws relating to
381-20 the duties of the health maintenance organization or health insurer
381-21 to notify and consider providers for those contracts. A violation
381-22 of this section constitutes restraint of trade and is an unlawful
381-23 practice under Section 15.05, Business & Commerce Code.
381-24 SECTION 19.06. (a) Section 6, Article 21.52B, Insurance
381-25 Code, is repealed.
381-26 (b) This section takes effect August 30, 1993.
381-27 SECTION 19.07. Section 2(b), Article 21.52B, Insurance Code,
382-1 is amended to read as follows:
382-2 (b) This section does not prohibit:
382-3 (1) a provision of a policy from limiting the quantity
382-4 or dosage supply of pharmaceutical products for which coverage is
382-5 provided or providing financial incentives to encourage the
382-6 beneficiary and prescribing physician to use a program that
382-7 provides pharmaceutical products in quantities that result in cost
382-8 savings to the insurance plan and beneficiary if the provision
382-9 applies equally to all designated providers of pharmaceutical
382-10 services under the policy; or
382-11 (2) a pharmacy card program that provides a <for an
382-12 alternative> means of obtaining pharmaceutical services offered by
382-13 the <such> policy through all designated providers of
382-14 pharmaceutical services.
382-15 SECTION 19.08. Section 5, Article 21.52B, Insurance Code, is
382-16 amended to read as follows:
382-17 Sec. 5. APPLICATION OF PROHIBITION. The provisions of
382-18 Section 2 of this article do not apply to a self-insured <an>
382-19 employee benefit plan that is subject to the Employee Retirement
382-20 Income Security Act of 1974 (29 U.S.C. Section 1001, et seq.).
382-21 SECTION 19.09. (a) The Legislature hereby creates an
382-22 interim select committee to study the impact of requiring a health
382-23 insurance policy or health maintenance organization to allow any
382-24 qualified provider who is a physician, physician's assistant,
382-25 advanced nurse practitioner, or any class of provider enumerated in
382-26 Articles 21.52 and 21.52B, Insurance Code, to participate as a
382-27 contracting provider for such policy or plan.
383-1 (b) The committee is composed of:
383-2 (1) three members of the senate, appointed by the
383-3 lieutenant governor; and
383-4 (2) three members of the house of representatives,
383-5 appointed by the speaker of the house of representatives.
383-6 (c) Not later than December 1, 1994, the committee shall
383-7 report its findings and any recommendations for changes in the law
383-8 to the 74th Legislature.
383-9 SECTION 19.10. Sections 19.01 and 19.02 of this article
383-10 apply only to an insurance policy that is delivered, issued for
383-11 delivery, or renewed on or after January 1, 1994. An insurance
383-12 policy that is delivered, issued for delivery, or renewed before
383-13 January 1, 1994, is governed by the law as it existed immediately
383-14 before the effective date of this Act, and that law is continued in
383-15 effect for that purpose.
383-16 ARTICLE 20. PARTICULAR FUNCTIONS OF THE STATE BOARD OF INSURANCE
383-17 SECTION 20.01. Subchapter B, Chapter 21, Insurance Code, is
383-18 amended by adding Article 21.20-1 to read as follows:
383-19 Art. 21.20-1. RULES RESTRICTING COMPETITIVE BIDDING OR
383-20 ADVERTISING. The commissioner may not adopt rules restricting
383-21 competitive bidding or advertising by a person regulated by the
383-22 department except to prohibit false, misleading, or deceptive
383-23 practices by the person.
383-24 SECTION 20.02. Section 2, Article 1.10D, Insurance Code, is
383-25 amended by adding Subsection (d-1) to read as follows:
383-26 (d-1) An authorized governmental agency and any state
383-27 licensing agency shall furnish any materials, documents, reports,
384-1 complaints, or other evidence to the insurance fraud unit on the
384-2 request of the unit. Compliance with this subsection by an
384-3 authorized governmental agency or state licensing agency does not
384-4 constitute waiver of any privilege or requirement of
384-5 confidentiality otherwise applicable. Notwithstanding Section 5(a)
384-6 of this article, the commissioner may not release evidence obtained
384-7 under this subsection for public inspection if release of the
384-8 evidence would violate a privilege held by or a requirement of
384-9 confidentiality imposed on the agency from which the evidence was
384-10 obtained.
384-11 SECTION 20.03. Sections 1(a) and (c), Article 1.28,
384-12 Insurance Code, are amended to read as follows:
384-13 (a) On giving written notice of intent to the commissioner
384-14 of insurance, and if the commissioner of insurance does not
384-15 disapprove within 30 days after that notice is given, a domestic
384-16 insurance company, including a life, health, and accident insurance
384-17 company, fire and marine insurance company, surety and trust
384-18 company, general casualty company, title insurance company,
384-19 fraternal benefit society, mutual life insurance company, local
384-20 mutual aid association, statewide mutual assessment company, mutual
384-21 insurance company other than life, farm mutual insurance company,
384-22 county mutual insurance company, Lloyds plan, reciprocal exchange,
384-23 group hospital service corporation, health maintenance
384-24 organization, stipulated premium insurance company, nonprofit legal
384-25 services corporation, or any other entity licensed under the
384-26 Insurance Code or chartered or organized under the laws of this
384-27 state that is an affiliated member of an insurance holding company
385-1 system, as defined by Article 21.49-1 <21.49>, Insurance Code, as
385-2 added by Chapter 356, Acts of the 62nd Legislature, Regular
385-3 Session, 1971 (Article 21.49-1, Vernon's Texas Insurance Code), may
385-4 locate and maintain all or any portion of its books, records, and
385-5 accounts and its principal offices outside this state at a location
385-6 within the United States if the company meets the requirements of
385-7 this section. This article does not apply to or prohibit the
385-8 location and maintenance of the normal books, records, and accounts
385-9 of either a branch office or agency office of a domestic insurance
385-10 company at the branch office or agency office, if that office is
385-11 located in the United States.
385-12 (c) The ultimate controlling person of the insurance holding
385-13 company system, the immediate controlling person of the domestic
385-14 insurance company, or an intermediate controlling person of the
385-15 domestic insurance company must be legally domiciled, licensed, or
385-16 admitted to transact business in a jurisdiction within the United
385-17 States.
385-18 SECTION 20.04. Article 16.01(b), Insurance Code, is amended
385-19 to read as follows:
385-20 (b) Farm mutual insurance companies may insure rural and
385-21 urban dwellings and attendant outhouses and yard buildings, and all
385-22 their contents for home and personal use, musical instruments and
385-23 libraries, barns and ranch buildings of every description together
385-24 with vehicles and implements used thereon, and<;> agricultural
385-25 products produced or kept on farms and ranches <but not including
385-26 growing crops>. No building, or its contents, with more than 40
385-27 per cent of its floor space or more than 500 square feet of floor
386-1 space, whichever is the lesser amount, used for business purposes
386-2 may be insured by a farm mutual insurance company except church
386-3 buildings, fraternal lodge halls, private and church schools, and
386-4 non-industrial use buildings owned by non-profit organizations may
386-5 be insured, wherever situated. Farm mutual insurance companies
386-6 shall not insure any type of commercial or private passenger motor
386-7 vehicle except trailers and mobile homes. A farm mutual insurance
386-8 company may not insure growing crops unless that insurance is
386-9 reinsured by:
386-10 (1) the Federal Crop Insurance Corporation under
386-11 Section 508, Federal Crop Insurance Act (7 U.S.C. Section 1508); or
386-12 (2) a property and casualty insurance company licensed
386-13 to write insurance in this state that has a rating by the A.M. Best
386-14 Company of A- or better.
386-15 SECTION 20.05. Section 10, Chapter 273, Acts of the 71st
386-16 Legislature, Regular Session, 1989, as amended by Section 13.29,
386-17 Chapter 242, Acts of the 72nd Legislature, Regular Session, 1991,
386-18 is amended to read as follows:
386-19 Sec. 10. A farm mutual that was engaged in the business of
386-20 insuring commercial or private passenger motor vehicles on January
386-21 1, 1989, may continue to insure motor vehicles until January 1,
386-22 1996; provided, however, this authorization shall terminate
386-23 immediately if the company ceases insuring motor vehicles, or if
386-24 there is a change of control of the company as defined in Article
386-25 21.49-1, Insurance Code. A company insuring motor vehicles under
386-26 this provision shall not use more than 33 <25> percent of its gross
386-27 income for expenses unless otherwise approved by the commissioner
387-1 of insurance.
387-2 A farm mutual that on January 1, 1989, was operated under or
387-3 controlled by a plan or method other than that provided in Section
387-4 (c) or Section (d) of Article 16.01, Insurance Code, may continue
387-5 under such plan or operation or method of control, as the case may
387-6 be, but shall be required to comply with Sections (c) and (d) of
387-7 Article 16.01 and all other provisions of Chapter 16, Insurance
387-8 Code, including Section (g) of Article 16.08, on or before January
387-9 1, 1996, or immediately on any change of control as defined in
387-10 Article 21.49-1, Insurance Code.
387-11 SECTION 20.06. Section 4, Article 4.10, Insurance Code, is
387-12 amended to read as follows:
387-13 Sec. 4. INAPPLICABILITY OF ARTICLE. (a) Except as provided
387-14 by Subsection (b) of this section, this <This> article shall not
387-15 apply to purely cooperative or mutual fire insurance companies
387-16 carried on by the members thereof solely for the protection of
387-17 their own property and not for profit.
387-18 (b) This article applies to crop insurance premiums only
387-19 written by a farm mutual insurance company on or after January 1,
387-20 1994.
387-21 SECTION 20.07. Chapter 16, Insurance Code, is amended by
387-22 adding Article 16.24A to read as follows:
387-23 Art. 16.24A. LICENSING OF AGENTS FOR CROP
387-24 INSURANCE. (a) No person or firm shall solicit, write, sign,
387-25 execute or deliver insurance policies, bind insurance risks,
387-26 collect premiums, or otherwise act in the capacity of a local
387-27 recording agent in the solicitation or sale of crop insurance for a
388-1 farm mutual insurance company unless the person or firm is licensed
388-2 under Article 21.14 of this code.
388-3 (b) A farm mutual insurance company may not appoint and act
388-4 through an agent who qualifies for a license as an agricultural
388-5 insurance agent under Article 21.14-2 of this code.
388-6 SECTION 20.08. Section 2, Article 21.49-1, Insurance Code,
388-7 is amended to read as follows:
388-8 Sec. 2. Definitions. As used in this article, the following
388-9 terms shall have the respective meanings hereinafter set forth,
388-10 unless the context shall otherwise require:
388-11 (a) Affiliate. An "affiliate" of, or person
388-12 "affiliated" with, a specific person, is a person that directly, or
388-13 indirectly through one or more intermediaries, controls, or is
388-14 controlled by, or is under common control with, the person
388-15 specified.
388-16 (b) Commercially Domiciled Insurer. The term
388-17 "commercially domiciled insurer" means a foreign or alien insurer
388-18 authorized to do business in this state that during its three
388-19 preceding fiscal years taken together, or any lesser period if it
388-20 has been licensed to transact business in this state only for that
388-21 lesser period, has written an average of more gross premiums in
388-22 this state than it has written in its state of domicile during the
388-23 same period, with those gross premiums constituting 20 percent or
388-24 more of its total gross premiums everywhere in the United States
388-25 for that three-year or lesser period, as reported in its three most
388-26 recent annual statements.
388-27 (c) Commissioner. The term "Commissioner" shall mean
389-1 the Commissioner of Insurance, the commissioner's deputies, or the
389-2 State Board of Insurance, as appropriate.
389-3 (d) <(c)> Control. The term "control," including the
389-4 terms "controlling," "controlled by," and "under common control
389-5 with," means the possession, direct or indirect, of the power to
389-6 direct or cause the direction of the management and policies of a
389-7 person, whether through the ownership of voting securities, by
389-8 contract other than a commercial contract for goods or
389-9 non-management services, or otherwise, unless the power is the
389-10 result of an official position with or corporate office held by the
389-11 person. Control shall be presumed to exist if any person, directly
389-12 or indirectly, or with members of the person's immediate family,
389-13 owns, controls, or holds with the power to vote, or if any person
389-14 other than a corporate officer or director of a person holds
389-15 proxies representing, 10 percent or more of the voting securities
389-16 or authority of any other person, or if any person by contract or
389-17 <contractor> agreement is designated as an attorney-in-fact for a
389-18 Lloyd's Plan insurer under Article 18.02 of this code or for a
389-19 reciprocal or interinsurance exchange under Articles 19.02 and
389-20 19.10 of this code. This presumption may be rebutted by a showing
389-21 made in the manner provided by Section 3(j) that control does not
389-22 exist in fact and that the person rebutting the presumption is in
389-23 compliance with Sections 5(a) through (c) of this article. The
389-24 commissioner may determine, after furnishing all persons in
389-25 interest notice and opportunity to be heard and making specific
389-26 findings of fact to support such determination, that control exists
389-27 in fact, notwithstanding the absence of a presumption to that
390-1 effect, where a person exercises directly or indirectly either
390-2 alone or pursuant to an agreement with one or more other persons
390-3 such a controlling influence over the management or policies of an
390-4 authorized insurer as to make it necessary or appropriate in the
390-5 public interest or for the protection of the policyholders of the
390-6 insurer that the person be deemed to control the insurer.
390-7 (e) <(d)> Holding Company. The term "holding company"
390-8 means any person who directly or indirectly controls any insurer.
390-9 (f) <(e)> Controlled Insurer. The term "controlled
390-10 insurer" means an insurer controlled directly or indirectly by a
390-11 holding company.
390-12 (g) <(f)> Controlled Person. The term "controlled
390-13 person" means any person, other than a controlled insurer who is
390-14 controlled directly or indirectly by a holding company.
390-15 (h) Domestic Insurer. The term "domestic insurer"
390-16 includes a commercially domiciled insurer.
390-17 (i) <(g)> Insurance Holding Company System. The term
390-18 "insurance holding company system" consists of two or more
390-19 affiliated persons, one or more of which is an insurer.
390-20 (j) <(h)> Insurer. The term "insurer" shall include
390-21 all insurance companies organized or chartered under the laws of
390-22 this State, commercially domiciled insurers, or insurers licensed
390-23 to do business in this State, including capital stock companies,
390-24 mutual companies, farm mutual insurance companies, title insurance
390-25 companies, fraternal benefit societies, local mutual aid
390-26 associations, Statewide mutual assessment companies, county mutual
390-27 insurance companies, Lloyds' Plan companies, reciprocal or
391-1 interinsurance exchanges, stipulated premium insurance companies,
391-2 and group hospital service companies, except that it shall not
391-3 include agencies, authorities, or instrumentalities of the United
391-4 States, its possessions and territories, the Commonwealth of Puerto
391-5 Rico, the District of Columbia, or a state or political subdivision
391-6 of a state.
391-7 (k) <(i)> Person. A "person" is an individual, a
391-8 corporation, a partnership, an association, a joint stock company,
391-9 a trust, an unincorporated organization, any similar entity or any
391-10 combination of the foregoing acting in concert, but shall not
391-11 include any securities broker performing no more than the usual and
391-12 customary broker's function.
391-13 (l) <(j)> Securityholder. A "securityholder" of a
391-14 specified person is one who owns any security of such person,
391-15 including common stock, preferred stock, debt obligations, and any
391-16 other security convertible into or evidencing the right to acquire
391-17 any of the foregoing.
391-18 (m) <(k)> Subsidiary. A "subsidiary" of a specified
391-19 person is an affiliate controlled by such person directly or
391-20 indirectly through one or more intermediaries.
391-21 (n) <(l)> Voting Security. The term "voting security"
391-22 means any security or other instrument which has the power to vote
391-23 at a meeting of shareholders of a person for or against the
391-24 election of directors or any other matter involving the direction
391-25 of the management and policies of such person, or any other
391-26 security or instrument which the State Board of Insurance deems to
391-27 be of similar nature and considers necessary or appropriate, by
392-1 which such rules and regulations as it may prescribe in the public
392-2 interest deems to treat as a voting security.
392-3 (o) <(m)> Notwithstanding any other provision of this
392-4 article, the following shall not be deemed holding companies: the
392-5 United States, a state or any political subdivision, agency, or
392-6 instrumentality thereof, or any corporation which is wholly owned
392-7 directly or indirectly by one or more of the foregoing.
392-8 (p) <(n)> Immediate Family. The term "immediate
392-9 family" means a person's spouse, father, mother, children,
392-10 brothers, sisters, and grandchildren, the father, mother, brothers,
392-11 and sisters of the person's spouse, and the spouse of the person's
392-12 child, brother or sister, mother, father, or grandparent.
392-13 (q) <(o)> Ultimate Controlling Person. The term
392-14 "ultimate controlling person" means that person who is not
392-15 controlled by another person.
392-16 (r) <(p)> Notwithstanding any other provision of this
392-17 article, this article shall not be applicable to any insurance
392-18 holding company system in which the insurer, the holding company,
392-19 if any, the subsidiaries, if any, the affiliates, if any, and each
392-20 and every other member thereof, if any, is privately owned by not
392-21 more than five (5) securityholders, each of whom is and must be an
392-22 individual or a natural person, and the commissioner has found that
392-23 it is not necessary that such holding company system be regulated
392-24 under this article or certain provisions of this article and has
392-25 issued a total or partial exemption certificate to such holding
392-26 company which shall effect the exemption until revoked by the
392-27 commissioner.
393-1 (s) The commissioner may exempt from the provisions of
393-2 this article any commercially domiciled insurer if the commissioner
393-3 determines that the insurer has assets physically located in this
393-4 state or an asset to liability ratio sufficient to justify the
393-5 conclusion that there is no reasonable danger that the operations
393-6 or conduct of the business of the insurer could present a danger of
393-7 loss to the policyholders of this state.
393-8 SECTION 20.09. Sections 3(a) and (j), Article 21.49-1,
393-9 Insurance Code, are amended to read as follows:
393-10 (a) Registration. Every insurer which is authorized to do
393-11 business in this State and which is a member of an insurance
393-12 holding company system shall register with the commissioner, except
393-13 a foreign or non-domestic insurer subject to disclosure
393-14 requirements and standards adopted by statute or regulation in the
393-15 jurisdiction of its domicile which are substantially similar to
393-16 those contained in this article. The exemption from registration
393-17 for a foreign insurer does not apply to a commercially domiciled
393-18 insurer doing business in this state. Any insurer which is subject
393-19 to registration under this section shall register within 15 days
393-20 after it becomes subject to registration unless the commissioner
393-21 for good cause shown extends the time for registration, and then
393-22 within such extended time. The commissioner may require any
393-23 authorized insurer which is a member of an insurance holding
393-24 company system which is not subject to registration under this
393-25 section to furnish a copy of the registration statement or other
393-26 information filed by such insurance company with the insurance
393-27 regulatory authority of its domiciliary jurisdiction.
394-1 (j) Disclaimer. Any person may file with the commissioner a
394-2 disclaimer of affiliation with any authorized insurer or such a
394-3 disclaimer may be filed by such insurer or any member of an
394-4 insurance holding company system. The disclaimer shall fully
394-5 disclose all material relationships and bases for affiliation
394-6 between such person and such insurer as well as the basis for
394-7 disclaiming such affiliation. After a disclaimer has been filed,
394-8 the insurer shall be relieved of any duty to register or report
394-9 under this section which may arise out of the insurer's
394-10 relationship with such person unless and until the commissioner
394-11 disallows such a disclaimer. Unless disallowed by the
394-12 commissioner, a <A> disclaimer filed under this subsection relieves
394-13 <does not relieve> a person of the duty to comply with the
394-14 requirements of Sections 5(a) through (c) of this article. The
394-15 commissioner shall disallow such a disclaimer only after furnishing
394-16 all parties in interest with notice and opportunity to be heard and
394-17 after making specific findings of fact to support such
394-18 disallowance.
394-19 SECTION 20.10. Section 5(e), Article 21.49-1, Insurance
394-20 Code, is amended to read as follows:
394-21 (e) Exemptions. The provisions of this section shall not
394-22 apply to:
394-23 (1) any acquisition by a person who is a broker-dealer
394-24 under state or federal securities laws of any voting security
394-25 which, immediately prior to consummation of such acquisition, was
394-26 not issued and outstanding and which acquisition is solely for
394-27 resale under a plan approved by the commissioner that will not
395-1 reasonably result in an acquisition of control on resale and where
395-2 during the period prior to resale no actual positive act of control
395-3 by virtue of those shares is committed;
395-4 (2) any transaction which is subject to the provisions
395-5 of: (i) Article 21.25, Sections 1 through 5, of this code, dealing
395-6 with the merger or consolidation of two or more insurers and
395-7 complying with the terms of such article until the plan of merger
395-8 or consolidation has been filed by the domestic insurer with the
395-9 Commissioner of Insurance in accordance with such Article 21.25.
395-10 After the filing of such plan of merger or consolidation the
395-11 transaction shall be subject to the approval provisions of
395-12 Subsection (c) of Section 5 of this article, but the Commissioner
395-13 may exempt such transaction from any or all of the other provisions
395-14 and requirements of Section 5 of this article if the commissioner
395-15 finds that the notice, proxy statement, and other materials
395-16 furnished to shareholders and security holders in connection with
395-17 such merger or consolidation contained reasonable and adequate
395-18 factual and financial disclosure, material and information relating
395-19 to such transaction, (ii) Article 11.20 of this code, (iii) Article
395-20 11.21 of this code, (iv) Article 14.13 of this code, (v) Article
395-21 14.61 of this code, (vi) Article 14.63 of this code, (vii) Article
395-22 21.26 of this code, provided that the requirements of said article
395-23 are fully complied with, <and> (viii) Article 22.15 of this code,
395-24 provided that the requirements of said article are fully complied
395-25 with, and (ix) Article 22.19 of this code, provided that the
395-26 reinsurance is a total direct reinsurance agreement;
395-27 (3) any offer, request, invitation, agreement, or
396-1 acquisition which the commissioner by order shall exempt therefrom
396-2 as (i) not having been made or entered into for the purpose and not
396-3 having the effect of changing or influencing the control of a
396-4 domestic insurer, or (ii) as otherwise not comprehended within the
396-5 purposes of this section;
396-6 (4) any acquisition of a voting security of a domestic
396-7 insurer by a person in control of such domestic insurer if, after
396-8 such acquisition, such person, directly or indirectly, owns or
396-9 controls less than 50 percent of the then issued and outstanding
396-10 voting securities of such domestic insurer;
396-11 (5) any acquisition of a voting security of a domestic
396-12 insurer by a person that, directly or indirectly, owns or controls
396-13 as much as 10 percent but less than 50 percent of the then issued
396-14 and outstanding voting securities of such domestic insurer, and
396-15 such person would, after such acquisition, directly or indirectly,
396-16 own or control 50 percent or more of the then issued and
396-17 outstanding voting securities of such domestic insurer, provided
396-18 such person has made written application for such exemption and the
396-19 commissioner by order has determined that such acquisition will not
396-20 jeopardize the financial stability of the domestic insurer,
396-21 prejudice the interests of its policyholders, or adversely affect
396-22 the public interest; or
396-23 (6) any acquisition of a voting security of a domestic
396-24 insurer by a person that, prior thereto, directly or indirectly,
396-25 owns or controls more than 50 percent of the then issued and
396-26 outstanding voting securities of such domestic insurer.
396-27 SECTION 20.11. Article 21.49-2A(b), Insurance Code, is
397-1 amended to read as follows:
397-2 (b) Except as provided by Section (c) of this article, an
397-3 insurer may not cancel:
397-4 (1) a policy of liability insurance that is a renewal
397-5 or continuation policy; or
397-6 (2) a policy of liability insurance that is in its
397-7 initial policy period after the 60th day following the date on
397-8 which the policy was issued.
397-9 SECTION 20.12. Section 7(d), Article 21.49-2B, Insurance
397-10 Code, is amended to read as follows:
397-11 (d) An insurer may <shall> notify an insured who has filed
397-12 two claims in a period of less than three years that the insurer
397-13 may decline to renew the policy if the insured files a third claim
397-14 during the three-year period. If the insurer does not notify the
397-15 insured in accordance with this subsection, the insurer may not
397-16 refuse to renew the policy because of losses. The notice form must
397-17 list the policyholder's claims and contain the sentence: "Another
397-18 non-weather related loss could cause us to refuse to renew your
397-19 policy." <The notice must be in a form approved by the board.>
397-20 SECTION 20.13. Section 2(g), Article 22.13, Insurance Code,
397-21 is amended to read as follows:
397-22 (g) If a stipulated premium company ceases to write new
397-23 health, accident, sickness, or hospitalization policies, or any
397-24 combination of those policies, in an amount in excess of $10,000
397-25 for any one risk, and so notifies the commissioner, the
397-26 requirements imposed under Subsection (d) of this section relating
397-27 to increase of minimum capital shall be suspended until the date on
398-1 which the stipulated premium company resumes writing those health,
398-2 accident, sickness, or hospitalization policies, and upon such
398-3 resumption of writing of such policies, the stipulated premium
398-4 company shall be required to increase its capital to the amount
398-5 required by Subsection (d) as of the date of such resumption of
398-6 such policy writings. For purposes of this subsection, renewal of
398-7 a policy is not the writing of a new health, accident, sickness, or
398-8 hospitalization policy.
398-9 SECTION 20.14. Article 23.01, Insurance Code, is amended to
398-10 read as follows:
398-11 Art. 23.01. Incorporation; Definitions. (a) Any seven or
398-12 more persons on application to the secretary of state for a
398-13 corporate charter under the Texas Non-Profit Corporation Act as a
398-14 nonmembership corporation may be incorporated for the sole purpose
398-15 of establishing, maintaining, and operating non-profit legal
398-16 service plans, whereby legal services may be provided by such
398-17 corporation through contracting attorneys as is hereinafter
398-18 provided.
398-19 (b) As used in this chapter, the following words, unless the
398-20 context of their use clearly indicates otherwise, shall have the
398-21 following meanings:
398-22 (1) "Attorney" means a person <currently> licensed
398-23 <by the Supreme Court of Texas> to practice law in the jurisdiction
398-24 in which the legal services are to be provided.
398-25 (2) "Applicant" means a person applying for a legal
398-26 services contract for performance of legal services through a
398-27 corporation qualified under this chapter.
399-1 (3) "Benefit certificate" means a writing setting
399-2 forth the benefits and other required matters issued to a
399-3 participant under a group contract for legal services and also an
399-4 individual contract for legal services issued to a participant.
399-5 (4) "Contracting attorney" means an attorney who has
399-6 entered into the contract provided by Article 23.11 of this code.
399-7 (5) "Participant" means the person entitled to
399-8 performance of legal services under contract with a corporation
399-9 qualified under this chapter.
399-10 (6) "State Board of Insurance" means all of the
399-11 insurance regulatory officials whose duties and functions are
399-12 designated by the Insurance Code of Texas as such now exists or may
399-13 be amended in the future. Any duty stated by this chapter to be
399-14 performed by or to be placed on the State Board of Insurance is
399-15 placed upon and is to be performed by the insurance regulatory
399-16 official or group of officials on whom similar duties are placed or
399-17 to be performed for insurers or the business of insurance by the
399-18 Insurance Code. The multimember insurance regulatory body
399-19 designated by the Insurance Code as the uniform insurance
399-20 rule-making authority is authorized to enact rules designating the
399-21 proper insurance regulatory official to perform any duty placed by
399-22 this chapter on the insurance regulatory officials where such duty
399-23 is not similar to duties otherwise performed by a specific official
399-24 or group of such officials.
399-25 SECTION 20.15. Article 23.22, Insurance Code, is amended to
399-26 read as follows:
399-27 Art. 23.22. Complaints. The State Board of Insurance shall
400-1 refer a complaint <any complaints> received by it concerning the
400-2 performance of an <any> attorney licensed in this state who is
400-3 connected with a <any> corporation complying with this chapter to
400-4 the Supreme Court of the State of Texas or to any person designated
400-5 by the Supreme Court to receive attorney grievances from the
400-6 public. The board shall refer a complaint regarding an attorney
400-7 licensed in another jurisdiction who is connected with a
400-8 corporation complying with this chapter to the appropriate
400-9 licensing agency of the other jurisdiction.
400-10 SECTION 20.16. Article 1.24, Insurance Code, is amended to
400-11 read as follows:
400-12 Art. 1.24. To Make Inquiries. The Board is authorized to
400-13 address any reasonable inquiries to any insurance company or
400-14 insurance agent, or to the holder of any permit, certificate of
400-15 registration, or other authorization issued or existing under the
400-16 authority or authorization of this code, in relation to the
400-17 company's, agent's, or holder's business condition, or any matter
400-18 connected with its transactions which the Board may deem necessary
400-19 for the public good or for a proper discharge of its duties. It
400-20 shall be the duty of the addressee to <promptly> answer such
400-21 inquiries in writing not later than the 10th day after the date the
400-22 request is received. A response made under this article that is
400-23 otherwise privileged or confidential by law remains privileged or
400-24 confidential unless and until introduced into evidence at an
400-25 administrative hearing or in a court of competent jurisdiction.
400-26 SECTION 20.17. Section 1(a), Article 21.21, Insurance Code,
400-27 is amended to read as follows:
401-1 (a) The purpose of this Act is to regulate trade practices
401-2 in the business of insurance <in accordance with the intent of
401-3 Congress as expressed in the Act of Congress of March 9, 1945
401-4 (Public Law 15, 79th Congress),> by defining, or providing for the
401-5 determination of, all such practices in this state which constitute
401-6 unfair methods of competition or unfair or deceptive acts or
401-7 practices and by prohibiting the trade practices so defined or
401-8 determined.
401-9 SECTION 20.18. Section 1A, Article 21.50, Insurance Code, is
401-10 amended to read as follows:
401-11 Sec. 1A. POLICY FORMS; RATES AND RATE INFORMATION; FILING
401-12 REQUIREMENTS. (a) The procedures as set forth herein shall govern
401-13 mortgage guaranty insurance as defined in this article but shall
401-14 not affect any other of the provisions of this code.
401-15 (b) All policy forms, related forms, classifications, and
401-16 rules used by a mortgage guaranty insurer in this state shall be
401-17 exempt from approval by the board, but all such policy forms,
401-18 related forms, classifications, and rules which are to be used in
401-19 this state, except those filed under Subsection (l), shall be filed
401-20 with the board at least 15 days before they are to become
401-21 effective. The board may, after a hearing held on not less than 20
401-22 days' notice, specifying the matters to be considered at such
401-23 hearing, to every insurer which made such filing, and upon finding
401-24 that such filing is no longer in the best interest of the public of
401-25 this state, issue an order suspending such exemption as to any or
401-26 all insurers which made such filings and ordering such insurers to
401-27 cease and desist from the use of such policy forms, related forms,
402-1 classifications, and rules as the board may specify in its order.
402-2 <A mortgage guaranty insurer shall not issue or use policy forms
402-3 or related forms in this state until such forms are filed and
402-4 approved by the board. As soon as reasonably possible after the
402-5 filing has been made, the board shall approve or disapprove the
402-6 same; provided, however, that any filing shall be deemed approved
402-7 unless disapproved within 30 days; provided further, that the board
402-8 may by official order postpone action for such further time not
402-9 exceeding 30 days as it deems necessary for proper consideration.
402-10 The board shall approve uniform policy forms, related forms,
402-11 classifications, and rules for all lines and types of insurance
402-12 applicable to the various risks under this article except as
402-13 provided in Subsection (k) hereof.>
402-14 (c) No policy of mortgage guaranty insurance shall contain a
402-15 provision which allows subrogation rights or any other claim by the
402-16 insurer against the borrower for a deficiency arising from a
402-17 foreclosure sale of a single-family dwelling occupied by the
402-18 borrower as the principal residence of the borrower. The
402-19 commissioner <board> shall disapprove any such form if:
402-20 (1) It is in any respect in violation of or does not
402-21 comply with this code or rules adopted by the commissioner.
402-22 (2) It contains provisions which encourage
402-23 misrepresentation or are unjust, unfair, inequitable, misleading,
402-24 deceptive, or contrary to law or to the public policy of this
402-25 state.
402-26 (d) The commissioner may, after notice and hearing, adopt
402-27 reasonable rules relating to the minimum standards for coverage
403-1 under such policy forms consistent with the purpose of this article
403-2 and the public policy of this state.
403-3 (e) <(d)> The board may, after notice and hearing, adopt
403-4 reasonable rules and amendments to rules that are necessary for it
403-5 to establish guidelines, procedures, methods, standards, and
403-6 criteria by which the various and different types of forms and
403-7 documents submitted to the board are to be reviewed and acted on by
403-8 the board.
403-9 (f) <(e)> A mortgage guaranty insurer shall file with the
403-10 board all rates and supplementary rate information and all changes
403-11 and amendments thereto which are to be used in this state at least
403-12 15 days before they are to become effective. Rates, rating plans,
403-13 and charges shall not be excessive, inadequate, or unfairly
403-14 discriminatory and shall be reasonable with respect to the benefits
403-15 provided.
403-16 (g) <(f)> On any filing of rates or changes and amendments
403-17 to these rates, the insurer shall file adequate supporting data,
403-18 including:
403-19 (1) information on past and prospective loss
403-20 experience within and outside the state, on catastrophe hazards, on
403-21 expenses of operation, on a reasonable margin for profit and
403-22 contingencies;
403-23 (2) an explanation of the filer's interpretation of
403-24 any statistical data relied on by it;
403-25 (3) an explanation and description of the methods used
403-26 in making the rates;
403-27 (4) certification by an appropriate official of the
404-1 insurer relating to the appropriateness of the charges, rates or
404-2 rating plans based on reasonable assumptions and accompanied by
404-3 adequate supporting information.
404-4 (h) <(g)> The board may establish requirements for data and
404-5 information to be filed under this article.
404-6 (i) <(h)> The board shall, after due consideration,
404-7 promulgate reasonable rules and statistical plans which may be
404-8 modified from time to time and which shall be used thereafter by
404-9 each insurer in the recording and reporting of its loss experience
404-10 and such other data as may be required, in order that the total
404-11 loss and expense experience of all insurers may be made available
404-12 in such form and detail as may be deemed necessary by the board.
404-13 (j) <(i)> Nothing in this Act shall be considered as
404-14 compelling the State Board of Insurance to establish standard and
404-15 absolute rates and the board is specifically authorized, in its
404-16 discretion, to accept different rates for different insurers for
404-17 the same risk or risks on the types of insurance covered by this
404-18 article; nor shall this article be construed as to require the
404-19 board to establish a single and uniform rate for each risk or risks
404-20 or to compel all insurers to adhere to such rates previously filed
404-21 by other insurers; and the board is empowered to accept such
404-22 different rates for different insurers as filed by any qualified
404-23 insurer unless it finds that such filing does not meet the
404-24 requirements of this article.
404-25 (k) <(j)> If at any time the board finds that a policy form
404-26 or rate filing no longer meets the requirements of this code, it
404-27 may, after a hearing held on not less than 20 days' notice,
405-1 specifying the matters to be considered at such hearing, to every
405-2 insurer which made such filing, issue an order withdrawing its
405-3 approval thereof. Said order shall specify in what respects the
405-4 board finds that such filing no longer meets the requirements of
405-5 this code and shall be effective not less than 30 days after its
405-6 issuance.
405-7 (l) <(k)> Policies providing coverage for a pool or group of
405-8 loans in connection with the issuance of mortgage-backed securities
405-9 or bonds shall be exempt from approval by the board under
405-10 Subsection (b) of this section, but all such policy forms, related
405-11 forms, classifications, and rules which are to be used in this
405-12 state shall be filed with the board at least 15 days after <before>
405-13 they are to become effective. Mortgage guaranty insurers are
405-14 prohibited from discrimination in the issuance or extension of
405-15 mortgage guaranty insurance on the basis of the applicant's sex,
405-16 marital status, race, color, creed, national origin, disability,
405-17 age, or solely on the geographic location of the property unless
405-18 (1) the discrimination related to geographic location of the
405-19 property is for a business purpose that is not a mere pretext for
405-20 unfair discrimination; or (2) the refusal, cancellation, or
405-21 limitation is required by law or regulatory mandate. <The board
405-22 may, after a hearing held on not less than 20 days' notice,
405-23 specifying the matters to be considered at such hearing, to every
405-24 insurer which made such filing, and upon finding that such filing
405-25 is no longer in the best interest of the public of this state,
405-26 issue an order suspending such exemption as to any or all insurers
405-27 which made such filings and ordering such insurers to cease and
406-1 desist from the use of such policy forms, related forms,
406-2 classifications, and rules as the board may specify in its order.>
406-3 SECTION 20.19. The heading to Article 21.22, Insurance Code,
406-4 is amended to read as follows:
406-5 Art. 21.22. UNLIMITED EXEMPTION OF INSURANCE BENEFITS AND
406-6 CERTAIN ANNUITY PROCEEDS FROM SEIZURE UNDER PROCESS
406-7 SECTION 20.20. Article 21.22, Insurance Code, is amended by
406-8 amending Sections 1, 4, and 5 and adding Section 6 to read as
406-9 follows:
406-10 Sec. 1. Notwithstanding any provision of this code other
406-11 than this article, all money or benefits of any kind, including
406-12 policy proceeds and cash values, to be paid or rendered to the
406-13 insured or any beneficiary under any policy of insurance or annuity
406-14 contract issued by a life, health or accident insurance company,
406-15 including mutual and fraternal insurance, or under any plan or
406-16 program of annuities and benefits in use by any employer or
406-17 individual, shall:
406-18 (1) inure exclusively to the benefit of the person for
406-19 whose use and benefit the insurance or annuity is designated in the
406-20 policy or contract;
406-21 (2) be fully exempt from execution, attachment,
406-22 garnishment or other process;
406-23 (3) be fully exempt from being seized, taken or
406-24 appropriated or applied by any legal or equitable process or
406-25 operation of law to pay any debt or liability of the insured or of
406-26 any beneficiary, either before or after said money or benefits is
406-27 or are paid or rendered; and
407-1 (4) be fully exempt from all demands in any bankruptcy
407-2 proceeding of the insured or beneficiary.
407-3 Sec. 4. This article does not prevent the proper assignment
407-4 of any money or benefits to be paid or rendered under an insurance
407-5 policy or annuity contract to which this article applies, or any
407-6 rights under the policy or contract, by the insured, <or> owner, or
407-7 annuitant in accordance with the terms of the policy or contract.
407-8 Sec. 5. Wherever any policy of insurance, annuity contract,
407-9 or plan or program of annuities and benefits mentioned in Section 1
407-10 of this article shall contain a provision against assignment or
407-11 commutation by any beneficiary thereunder of the money or benefits
407-12 to be paid or rendered thereunder, or any rights therein, any
407-13 assignment or commutation or any attempted assignment or
407-14 commutation by such beneficiary of such money or benefits or rights
407-15 in violation of such provision shall be wholly void.
407-16 Sec. 6. For purposes of regulation under this code, an
407-17 annuity contract issued by a life, health, or accident insurance
407-18 company, including a mutual company or fraternal company, or under
407-19 any plan or program of annuities or benefits in use by an employer
407-20 or individual, shall be considered a policy or contract of
407-21 insurance.
407-22 SECTION 20.21. Subchapter G, Chapter 3, Insurance Code, is
407-23 amended by adding Article 3.70-13 to read as follows:
407-24 Art. 3.70-13. CERTAIN POLICIES CONTINUOUS. A guaranteed
407-25 renewable policy or a noncancellable policy shall be deemed to be a
407-26 continuous policy, subject only to the terms and conditions
407-27 thereof, including payment of policy premiums, and such policies
408-1 shall be considered to be continued in force by the payment of the
408-2 policy premium in accordance with the policy terms and conditions,
408-3 and such policies shall not be deemed or treated as renewed
408-4 policies by the payment of such contracted policy premiums. This
408-5 article does not apply to a health benefit plan adopted in
408-6 accordance with Chapter 26 of this code, as added by H.B. No. 2055,
408-7 Acts of the 73rd Legislature, Regular Session, 1993.
408-8 SECTION 20.22. Article 1.33, Insurance Code, is amended by
408-9 adding Section (e) to read as follows:
408-10 (e) Without limiting the authority granted by the other
408-11 sections of this article, the commissioner may, upon written
408-12 agreement or stipulation of all parties and any intervenor, in the
408-13 commissioner's sole discretion: (i) waive or modify the
408-14 publication of notice required by Articles 2.01, 2.03, 3.04, 3.05,
408-15 22.03, and 22.04 of this code, and (ii) informally dispose of any
408-16 contested case as provided by Section 13(e), Administrative
408-17 Procedure and Texas Register Act (Article 6252-13a, Vernon's Texas
408-18 Civil Statutes), or any subsequent amendment thereto,
408-19 notwithstanding any provision of this code which would otherwise
408-20 require a hearing before the commissioner.
408-21 SECTION 20.23. Subchapter C, Chapter 5, Insurance Code, is
408-22 amended by adding Article 5.35-2 to read as follows:
408-23 Art. 5.35-2. COVERAGE FOR REAL PROPERTY FOUNDATIONS. The
408-24 commissioner shall adopt an endorsement form that excludes coverage
408-25 for damage to foundations or slabs of the insured dwelling, other
408-26 than loss caused by fire, lightning, smoke, windstorm, hurricane,
408-27 hail, explosion, aircraft, vehicles, vandalism, malicious mischief,
409-1 riot, civil commotion, and falling objects, from a homeowner's,
409-2 farm and ranch owner's, or fire insurance policy promulgated under
409-3 Article 5.35 of this code. An insurer may attach this endorsement
409-4 only if the insured dwelling is more than 10 years old.
409-5 SECTION 20.24. Article 21.46, Insurance Code, is amended to
409-6 read as follows:
409-7 Art. 21.46. A. Whenever by the laws of any other state or
409-8 territory of the United States any taxes, including income and
409-9 corporate franchise, licenses, fees, fines, penalties, deposit
409-10 requirements or other obligations, prohibitions or restrictions are
409-11 imposed upon any insurance company organized in this State and
409-12 licensed and actually doing business in such other state or
409-13 territory which, in the aggregate are in excess of the aggregate of
409-14 the taxes, including income and corporate franchise, licenses,
409-15 fees, fines, penalties, deposit requirements or other obligations,
409-16 prohibitions or restrictions directly imposed upon a similar
409-17 insurance company of such other state or territory doing business
409-18 in this State, the State Board of Insurance shall impose upon any
409-19 similar company of such state or territory in the same manner and
409-20 for the same purpose, the same taxes, licenses, fees, fines,
409-21 penalties, deposit requirements or other obligations, prohibitions
409-22 or restrictions; provided, however, the aggregate of taxes,
409-23 licenses, fees, fines, penalties or other obligations imposed by
409-24 this State pursuant to this Article on an insurance company of
409-25 another state or territory shall not exceed the aggregate of such
409-26 charges imposed by such other state or territory on a similar
409-27 insurance company of this State actually licensed and doing
410-1 business therein; provided, further, that wherever under any law of
410-2 this State the basic rate of taxation of any insurance company of
410-3 another state or territory is reduced if any such insurance company
410-4 has made investments in Texas securities then in computing the
410-5 aggregate Texas premium tax burdens of any such insurance company
410-6 of any other state or territory each shall for purposes of
410-7 comparison with the premium tax laws of its home state be
410-8 considered to have assumed and paid an aggregate premium tax burden
410-9 equal to the basic rate; provided, further, that for the purpose of
410-10 this Section, an alien insurer shall be deemed a company of the
410-11 State designated by it wherein it has
410-12 (a) established its principal office or agency in the
410-13 United States, or
410-14 (b) maintains the largest amount of its assets held in
410-15 trust or on deposit for the security of its policyholders or
410-16 policyholders and creditors in the United States, or
410-17 (c) in which it was admitted to do business in the
410-18 United States.
410-19 Licenses and fees collected by the State Board of Insurance
410-20 under this Article shall be deposited in the State Treasury to the
410-21 credit of the general revenue fund.
410-22 The provisions of this Section shall not apply to ad valorem
410-23 taxes on real or personal property or to personal income taxes.
410-24 The provisions of this Act shall not apply to a company of
410-25 any other state doing business in this State if fifteen per cent
410-26 (15%) or more of the voting stock of said company is owned by a
410-27 corporation organized under the laws of this State, and domiciled
411-1 in this State; however, the prior provisions of this Act shall
411-2 apply without exception to any and all person or persons, company
411-3 or companies, firm or firms, association or associations, group or
411-4 groups, corporation or corporations, or any insurance organization
411-5 or organizations of any kind, which did not qualify as a matter of
411-6 fact, under the exception of this paragraph, on or before January
411-7 29, 1957.
411-8 B. Should the insurance department, commissioner, director,
411-9 or other similar insurance regulatory official of any other state
411-10 or territory of the United States impose any sanctions, fines,
411-11 penalties, financial or deposit requirements, prohibitions,
411-12 restrictions, regulatory requirements, or other obligations of any
411-13 kind upon any insurance company organized or chartered in this
411-14 state and licensed to transact business in such other state or
411-15 territory, because of the failure of the Texas Department of
411-16 Insurance to obtain, maintain, or receive accreditation
411-17 certification or any similar form of approval, compliance, or
411-18 acceptance from, by, or as a member of the National Association of
411-19 Insurance Commissioners, or any committee, task force, working
411-20 group, or advisory committee thereof, or because of the failure of
411-21 the Texas Department of Insurance to comply with any directive,
411-22 financial annual statement requirement, model act or regulation,
411-23 market conduct or financial examination report or requirement, or
411-24 any report of any kind of the National Association of Insurance
411-25 Commissioners, or any committee, task force, working group, or
411-26 advisory committee thereof, the Texas Department of Insurance
411-27 shall, without exception or exclusion, impose upon any and all
412-1 insurance companies organized or chartered in such other state or
412-2 territory and licensed to do business in this state the same
412-3 sanctions, fines, penalties, deposit requirements, prohibitions,
412-4 restrictions, or other obligations imposed upon the insurance
412-5 company of this state.
412-6 SECTION 20.25. (a) The changes in law made to Articles
412-7 23.01 and 23.22, Insurance Code, by this article apply only to a
412-8 contract entered into or renewed by a nonprofit legal services
412-9 corporation on or after January 1, 1994. A contract that is
412-10 entered into or renewed before January 1, 1994, is governed by the
412-11 law as it existed immediately before the effective date of this
412-12 Act, and that law is continued in effect for that purpose.
412-13 (b) This article applies only to an insurance policy that is
412-14 delivered, issued for delivery, or renewed on or after January 1,
412-15 1994. A policy that is delivered, issued for delivery, or renewed
412-16 before January 1, 1994, is governed by the law as it existed
412-17 immediately before the effective date of this Act, and that law is
412-18 continued in effect for that purpose.
412-19 (c) The change in law made by this Act to Article 21.22,
412-20 Insurance Code, applies to money or benefits to be paid or rendered
412-21 to an insured or a beneficiary under an insurance policy or annuity
412-22 contract issued by a life, health, or accident insurance company
412-23 without regard to whether the policy or contract was issued or
412-24 entered into before, on, or after the effective date of this Act.
412-25 (d) The change in law made by Section 20.06 of this article
412-26 to Section 4, Article 4.10, Insurance Code, applies only to crop
412-27 insurance premiums written by a farm mutual insurance company on or
413-1 after January 1, 1994, and the current law shall otherwise continue
413-2 in effect.
413-3 (e) The change in law made by Section 20.07 of this article
413-4 applies only to an agent selling crop insurance for a farm mutual
413-5 insurance company and the current law shall otherwise continue in
413-6 effect.
413-7 SECTION 20.26. (a) Section 4.04, Article 5.76-2, Insurance
413-8 Code, is amended by adding Subsection (q) to read as follows:
413-9 (q) The pass-through allowances authorized in Subsections
413-10 (d) and (e) hereof shall be deemed exclusive subsequent to the
413-11 effective date of this article, but other methods utilized prior to
413-12 such effective date shall be deemed valid if consistent with the
413-13 purpose of this article and if the premium resulting from their use
413-14 is less than the premium which would have been charged for a
413-15 similarly rated risk in the Rejected Risk Fund.
413-16 (b) The validation made by this amendment shall govern any
413-17 civil or regulatory proceeding except a civil proceeding pending in
413-18 a court of competent jurisdiction on May 1, 1993, including civil
413-19 proceedings filed on or before May 1, 1993, which are seeking class
413-20 action status, whether or not the plaintiff or defendant classes
413-21 have been certified.
413-22 ARTICLE 21. CONTINUATION AND FUNCTIONS OF
413-23 OFFICE OF PUBLIC INSURANCE COUNSEL
413-24 SECTION 21.01. Article 1.35A, Insurance Code, is amended to
413-25 read as follows:
413-26 Art. 1.35A. Office of Public Insurance Counsel<.>
413-27 Sec. 1. CREATION; PURPOSE. <(a)> The independent office of
414-1 public insurance counsel is created to represent the interests of
414-2 insurance consumers in Texas.
414-3 Sec. 2. APPOINTMENT, QUALIFICATIONS, AND REMOVAL OF PUBLIC
414-4 COUNSEL. (a) <(b)> The governor with the advice and consent of
414-5 the senate shall appoint a public counsel who shall serve as the
414-6 executive director of the office of public insurance counsel.
414-7 (b) <(c)> To be eligible to serve as public counsel for the
414-8 office of public insurance counsel, a person must be a resident of
414-9 Texas and be licensed <eligible> to practice law in Texas. The
414-10 public counsel shall be a person who has demonstrated a strong
414-11 commitment and involvement in efforts to safeguard the rights of
414-12 the public and who possesses the knowledge and experience necessary
414-13 to practice effectively in insurance proceedings.
414-14 (c) A person is not eligible for appointment as public
414-15 counsel if the person or the person's spouse:
414-16 (1) is employed by or participates in the management
414-17 of a business entity or other organization regulated by the
414-18 department or receiving funds from the department;
414-19 (2) owns or controls, directly or indirectly, more
414-20 than a 10 percent interest in a business entity or other
414-21 organization regulated by the department or receiving funds from
414-22 the department or the office of public insurance counsel; or
414-23 (3) uses or receives a substantial amount of tangible
414-24 goods, services, or funds from the department or the office of
414-25 public insurance counsel, other than compensation or reimbursement
414-26 authorized by law for department or office of public insurance
414-27 counsel membership, attendance, or expenses.
415-1 (d) Appointment of the public counsel shall be made without
415-2 regard to the race, color, handicap, sex, religion, age, or
415-3 national origin of the appointee.
415-4 (e) <(d)> The public counsel shall serve for a term of two
415-5 years expiring on February 1 of each odd-numbered year.
415-6 (f) It is a ground for removal from office if the public
415-7 counsel:
415-8 (1) does not have at the time of appointment the
415-9 qualifications required by Subsection (b) of this section;
415-10 (2) does not maintain during service as public counsel
415-11 the qualifications required by Subsection (b) of this section;
415-12 (3) violates a prohibition established by Subsection
415-13 (c) of this section or Section 4 of this article; or
415-14 (4) cannot discharge the public counsel's duties for a
415-15 substantial part of the term for which the public counsel is
415-16 appointed because of illness or disability.
415-17 (g) The validity of an action of the office of public
415-18 insurance counsel is not affected by the fact that it is taken when
415-19 a ground for removal of the public counsel exists.
415-20 Sec. 3. ADMINISTRATION. (a) <(e)> The public counsel, as
415-21 executive director of the office of public insurance counsel, shall
415-22 be charged with the responsibility of administering, enforcing, and
415-23 carrying out the provisions of this article, including preparation
415-24 and submission to the legislature of a budget for the office,
415-25 employing all necessary professional, technical, and other
415-26 employees to carry out the provisions of this article, approval of
415-27 expenditures for professional services, travel, per diem, and other
416-1 actual and necessary expenses incurred in administering the office.
416-2 Expenses for the office shall be paid from the assessment imposed
416-3 in Article 1.35B of this chapter. The compensation for employees
416-4 of the office of public insurance counsel shall be fixed by the
416-5 legislature as provided by the General Appropriations Act.
416-6 (b) The office of public insurance counsel shall file
416-7 annually with the governor and the presiding officer of each house
416-8 of the legislature a complete and detailed written report
416-9 accounting for all funds received and disbursed by the office of
416-10 public insurance counsel during the preceding fiscal year. The
416-11 annual report must be in the form and reported in the time provided
416-12 by the General Appropriations Act.
416-13 (c) All money paid to the office of public insurance counsel
416-14 under this article shall be deposited in the state treasury.
416-15 (d) The public counsel or the public counsel's designee
416-16 shall prepare and maintain a written policy statement to ensure
416-17 implementation of a program of equal employment opportunity under
416-18 which all personnel transactions are made without regard to race,
416-19 color, disability, sex, religion, age, or national origin. The
416-20 policy statement must include:
416-21 (1) personnel policies, including policies relating to
416-22 recruitment, evaluation, selection, appointment, training, and
416-23 promotion of personnel that are in compliance with the Texas
416-24 Commission on Human Rights Act (Article 5221k, Vernon's Texas Civil
416-25 Statutes) and its subsequent amendments;
416-26 (2) a comprehensive analysis of the office of public
416-27 insurance counsel work force that meets federal and state
417-1 guidelines;
417-2 (3) procedures by which a determination can be made of
417-3 significant underuse in the office of public insurance counsel work
417-4 force of all persons for whom federal or state guidelines encourage
417-5 a more equitable balance; and
417-6 (4) reasonable methods to appropriately address those
417-7 areas of significant underuse.
417-8 (e) A policy statement prepared under Subsection (d) of this
417-9 section must cover an annual period, be updated at least annually
417-10 and reviewed by the Commission on Human Rights for compliance with
417-11 Subsection (d)(1) of this section, and be filed with the governor's
417-12 office.
417-13 (f) The governor's office shall deliver a biennial report to
417-14 the legislature based on the information received under Subsection
417-15 (e) of this section. The report may be made separately or as a
417-16 part of other biennial reports made to the legislature.
417-17 (g) The public counsel or the public counsel's designee
417-18 shall develop an intra-agency career ladder program. The program
417-19 shall require intra-agency posting of all nonentry level positions
417-20 concurrently with any public posting.
417-21 (h) The public counsel or the public counsel's designee
417-22 shall develop a system of annual performance evaluations. All
417-23 merit pay for office of public insurance counsel employees must be
417-24 based on the system established under this subsection.
417-25 (i) The office of public insurance counsel shall provide to
417-26 its public counsel and employees, as often as necessary,
417-27 information regarding their qualification for office or employment
418-1 under this article and their responsibilities under applicable laws
418-2 relating to standards of conduct for state officers or employees.
418-3 Sec. 4. CONFLICT OF INTEREST. (a) A person may not serve
418-4 as the public counsel or act as the general counsel for the office
418-5 of public insurance counsel if the person is required to register
418-6 as a lobbyist under Chapter 305, Government Code, because of the
418-7 person's activities for compensation related to the operation of
418-8 the department or the office of public insurance counsel.
418-9 (b) <(f)> A person serving as the public counsel may not,
418-10 for a period of two years after the date the person ceases to be
418-11 public counsel, represent any person in a proceeding before the
418-12 board or receive compensation for services rendered on behalf of
418-13 any person regarding a case pending before the rate board,
418-14 commissioner, or department <board>.
418-15 (c) An officer, employee, or paid consultant of a trade
418-16 association in the field of insurance may not serve as the public
418-17 counsel or be an employee of the office of public insurance counsel
418-18 who is exempt from the state's position classification plan or is
418-19 compensated at or above the amount prescribed by the General
418-20 Appropriations Act for step 1, salary group 17, of the position
418-21 classification salary schedule.
418-22 (d) A person who is the spouse of an officer, manager, or
418-23 paid consultant of a trade association in the field of insurance
418-24 may not serve as the public counsel and may not be an office of
418-25 public insurance counsel employee who is exempt from the state's
418-26 position classification plan or is compensated at or above the
418-27 amount prescribed by the General Appropriations Act for step 1,
419-1 salary group 17, of the position classification salary schedule.
419-2 (e) For purposes of this section, a trade association is a
419-3 nonprofit, cooperative, and voluntarily joined association of
419-4 business or professional competitors designed to assist its members
419-5 and its industry or profession in dealing with mutual business or
419-6 professional problems and in promoting their common interest.
419-7 Sec. 5. POWERS AND DUTIES. (a) <(g)> The office of public
419-8 insurance counsel may assess the impact of insurance rates, rules,
419-9 and forms on insurance consumers in Texas and, in its own name,
419-10 shall act as an advocate of positions that are most advantageous to
419-11 a substantial number of insurance consumers as determined by the
419-12 public counsel for the office.
419-13 (b) <(h)> The public counsel:
419-14 (1) may appear or intervene as a matter of right
419-15 before the commissioner or department <State Board of Insurance> as
419-16 a party or otherwise on behalf of insurance consumers as a class
419-17 in:
419-18 (A) matters involving rates, rules, and forms
419-19 affecting property and casualty insurance;
419-20 (B) matters involving rates, rules, and forms
419-21 affecting title insurance;
419-22 (C) matters involving rules affecting life,
419-23 health, and accident insurance;
419-24 (D) matters involving rates, rules, and forms
419-25 affecting credit life, and credit accident and health insurance;
419-26 (E) matters involving rates, rules, and forms
419-27 affecting all other lines of insurance for which the commissioner
420-1 or department <State Board of Insurance> promulgates, sets, or
420-2 approves rates, rules, and/or forms; and
420-3 (F) matters involving withdrawal of approval of
420-4 policy forms in proceedings initiated by the department under
420-5 Articles <Article> 3.42(f) and 3.42(g) of this code or if the
420-6 public counsel presents persuasive evidence to the department
420-7 <determines> that such forms do not comply with such articles of
420-8 this code or any valid rule relating thereto duly adopted by the
420-9 commissioner <State Board of Insurance> or are <is> otherwise
420-10 contrary to law;
420-11 (2) may initiate or intervene as a matter of right or
420-12 otherwise appear in a judicial proceeding involving or arising out
420-13 of any action taken by an administrative agency in a proceeding in
420-14 which the public counsel previously appeared under the authority
420-15 granted by this article;
420-16 (3) is entitled to access to any records of the
420-17 department that are available to any party other than the
420-18 department <board's> staff in a proceeding before the commissioner
420-19 or department under the authority granted public counsel by this
420-20 article <board>;
420-21 (4) is entitled to obtain discovery under the
420-22 Administrative Procedure and Texas Register Act (Article 6252-13a,
420-23 Vernon's Texas Civil Statutes) of any nonprivileged matter that is
420-24 relevant to the subject matter involved in a <any> proceeding or
420-25 submission before the commissioner or department as authorized by
420-26 this article <State Board of Insurance>;
420-27 (5) may recommend legislation to the legislature that,
421-1 in the judgment of the public counsel, would affect positively the
421-2 interests of insurance consumers;
421-3 (6) may appear or intervene as a matter of right as a
421-4 party or otherwise on behalf of insurance consumers as a class in
421-5 all proceedings in which the public counsel determines that
421-6 insurance consumers need representation, except that the public
421-7 counsel may not intervene in any enforcement or parens patriae
421-8 proceeding brought by the attorney general; <and>
421-9 (7) may appear or intervene before the commissioner or
421-10 department as a party or otherwise on behalf of small commercial
421-11 insurance consumers, as a class, in matters involving rates, rules,
421-12 and forms affecting commercial insurance consumers, as a class, in
421-13 all proceedings where it is deemed by the counsel that small
421-14 commercial consumers are in need of representation; and
421-15 (8) shall submit to the department for adoption a
421-16 consumer bill of rights appropriate to each personal line of
421-17 insurance regulated by the department <board> to be distributed
421-18 upon the issuance of a policy by insurers to each policyholder
421-19 under rules adopted by the department.
421-20 (c) <(i)> The public counsel may not intervene or appear in
421-21 any proceedings or hearings before the <board or> commissioner or
421-22 department, or other proceedings, that relate to approval or
421-23 consideration of individual charters, licenses, acquisitions,
421-24 mergers, <or> examinations, proceedings concerning the solvency of
421-25 individual insurers <after a receiver is appointed>, financial
421-26 issues, policy forms, advertising, or other regulatory issues <or
421-27 other matters> affecting individual insurers <insurer> or agents
422-1 <agent licenses>. The confidentiality requirements applicable to
422-2 examination reports under Article 1.18 of this code and to the
422-3 commissioner under Section 3A, Article 21.28, of this code shall
422-4 apply to the public counsel.
422-5 (d) <(j)> Any order of the commissioner <board> which
422-6 determines, approves, or sets a rate under this code and is
422-7 appealed shall be and remain in effect during the pendency of an
422-8 appeal. During the pendency of the appeal, an insurer shall use
422-9 the rate provided in the order being appealed. Such rate shall be
422-10 lawful and valid during such appeal, and an insurer shall not be
422-11 required to make any refund therefrom after a decision on the
422-12 appeal. If a decision on appeal shall vacate the order, the rate
422-13 established by the commissioner <board> prior to the rendition of
422-14 the vacated order shall be in effect from and after the date of
422-15 remand and until the commissioner <board> shall make a further
422-16 determination; however, the commissioner <board> shall consider the
422-17 order of the court in setting future rates.
422-18 Sec. 6. PUBLIC ACCESS AND INFORMATION. (a) The office of
422-19 public insurance counsel shall prepare information of public
422-20 interest describing the functions of the office. The office of
422-21 public insurance counsel shall make the information available to
422-22 the public and appropriate state agencies.
422-23 (b) The office of public insurance counsel shall prepare and
422-24 maintain a written plan that describes how a person who does not
422-25 speak English can be provided reasonable access to the office of
422-26 public insurance counsel's programs. The office of public
422-27 insurance counsel shall also comply with federal and state laws for
423-1 program and facility accessibility.
423-2 Sec. 7. APPLICABILITY OF SUNSET ACT. <(k)> The office of
423-3 public insurance counsel is subject to Chapter 325, Government Code
423-4 (Texas Sunset Act). Unless continued in existence as provided by
423-5 that chapter, the office is abolished September 1, 2005 <1993>.
423-6 ARTICLE 22. REDESIGNATION OF PROVISIONS WITH
423-7 DUPLICATE DESIGNATIONS; CONFORMING AMENDMENTS
423-8 SECTION 22.01. Article 3.77, Insurance Code, as added by
423-9 Chapter 800, Acts of the 71st Legislature, Regular Session, 1989,
423-10 is reenacted and redesignated as Article 3.78, Insurance Code, to
423-11 read as follows:
423-12 Art. 3.78 <3.77>. Eligibility for Benefits for Alzheimer's
423-13 Disease. If an individual or group policy, contract, or
423-14 certificate, or evidence of coverage providing coverage for
423-15 Alzheimer's disease is delivered or issued for delivery in this
423-16 state by an insurer, including a group hospital service corporation
423-17 under Chapter 20 of this code, and the policy, contract,
423-18 certificate, or evidence requires demonstrable proof of organic
423-19 disease or other proof before the insurer will authorize payment of
423-20 benefits for Alzheimer's disease, a clinical diagnosis of
423-21 Alzheimer's disease by a physician licensed in this state,
423-22 including history and physical, neurological, psychological and/or
423-23 psychiatric evaluations, and laboratory studies, shall satisfy the
423-24 requirement for demonstrable proof of organic disease or other
423-25 proof under the coverage.
423-26 SECTION 22.02. Subsection (e), Section 2, Article 21.48A,
423-27 Insurance Code, as added by Section 2, Chapter 327, Acts of the
424-1 72nd Legislature, Regular Session, 1991, is reenacted and
424-2 redesignated as Subsection (f) to read as follows:
424-3 (f) <(e)> A Lender that requires a Borrower to secure
424-4 insurance coverage before the Lender will provide a residential
424-5 mortgage loan shall accept an insurance binder as evidence of the
424-6 required insurance if:
424-7 (1) the insurance binder is issued by a licensed local
424-8 recording agent as that term is defined by Article 21.14 of this
424-9 code and, if requested to do so, the agent shall furnish
424-10 appropriate evidence to the Lender;
424-11 (2) the local recording agent is appointed to
424-12 represent the insurance company whose name appears on the binder
424-13 and is authorized to issue binders and, if requested to do so, the
424-14 agent shall furnish appropriate evidence to the Lender;
424-15 (3) the insurance binder is accompanied by evidence of
424-16 payment of the required premium; and
424-17 (4) the insurance binder will be replaced by an
424-18 original insurance policy for the required coverage within 30 days
424-19 of the date of the issuance of the insurance binder.
424-20 If the foregoing conditions are met, a Lender may not require
424-21 a Borrower to provide an original insurance policy in lieu of the
424-22 insurance binder.
424-23 SECTION 22.03. Article 21.49-14, Insurance Code, as added by
424-24 Section 5.08, Chapter 1, Acts of the 70th Legislature, 1st Called
424-25 Session, 1987, is reenacted and redesignated as Article 21.49-13,
424-26 Insurance Code, to read as follows:
424-27 Art. 21.49-13 <21.49-14>. Excess Liability Pools
425-1 Sec. 1. Definitions. In this article:
425-2 (1) "Pool" means an excess liability pool created
425-3 under this article.
425-4 (2) "Fund" means an excess liability fund.
425-5 (3) "Board" means the board of trustees of a pool.
425-6 (4) "County" means a county in this state.
425-7 (5) "School district" means a public school district
425-8 created under the laws of this state.
425-9 (6) "Junior college district" means a junior college
425-10 district organized under the laws of this state.
425-11 (7) "Entity" means a county, school district, or
425-12 junior college district.
425-13 Sec. 2. Creation of pools. (a) Separate excess liability
425-14 pools may be created for counties, school districts, and junior
425-15 college districts as provided by this article.
425-16 (b) An excess liability pool may be created:
425-17 (1) for counties, on written agreement to create the
425-18 pool by the county judges of not fewer than five counties in this
425-19 state;
425-20 (2) for school districts, on written agreement to
425-21 create the pool by the presidents of the boards of trustees, acting
425-22 on behalf of their boards, of not fewer than five school districts
425-23 in this state; or
425-24 (3) for junior college districts, on written agreement
425-25 to create the pool by the presiding officers of the boards of
425-26 trustees, acting on behalf of their boards, of not fewer than five
425-27 junior college districts in this state.
426-1 (c) An excess liability pool is created to provide excess
426-2 liability insurance coverage as provided by this article and the
426-3 plan.
426-4 (d) An entity may participate only in a pool created for
426-5 that type of entity. There may not be more than one county excess
426-6 liability pool, one school district excess liability pool, and one
426-7 junior college district excess liability pool.
426-8 Sec. 3. Scope of coverage. (a) A pool shall insure an
426-9 entity and its officers and employees against liability for acts
426-10 and omissions under the laws governing that entity and its officers
426-11 and employees in their official or employment capacities.
426-12 (b) Under excess liability insurance coverage, a pool shall
426-13 pay that portion of a claim against an entity and its officers and
426-14 employees that is finally determined or settled or is included in a
426-15 final judgment of a court and that is in excess of $500,000, but
426-16 the amount paid by the pool may not be in excess of the amount
426-17 determined by the board to be actuarially sound for the pool.
426-18 (c) Under the insurance coverage, the pool may participate
426-19 in the evaluation, settlement, or defense of any claim.
426-20 Sec. 4. Participation in pool. An entity is entitled to
426-21 coverage from the pool on:
426-22 (1) submitting a complete application;
426-23 (2) providing any other information required by the
426-24 pool;
426-25 (3) meeting the underwriting standards established by
426-26 the pool; and
426-27 (4) paying the premiums required for the coverage.
427-1 Sec. 5. Payment of contributions and premiums. An entity
427-2 purchasing excess liability insurance coverage from the pool may
427-3 use funds of the entity to pay any contributions or premiums
427-4 required by the pool for the coverage.
427-5 Sec. 6. Plan of operation. (a) At the time the written
427-6 agreement is executed under Section 2 of this article, the creators
427-7 shall select nine persons to serve as a temporary board to draft
427-8 the plan of operation for a pool.
427-9 (b) Within 30 days after selection, the members of a
427-10 temporary board shall meet to prepare a detailed plan of operation
427-11 for the pool.
427-12 (c) The plan of operation may include any matters relating
427-13 to the organization and operation of the pool and the pool's
427-14 finances. The plan must include:
427-15 (1) the organizational structure of the pool,
427-16 including the method of selection of the board, the method of
427-17 procedure and operation of the board, and a summary of the method
427-18 for managing and operating the pool;
427-19 (2) a description of the contributions and other
427-20 financial arrangements necessary to cover the initial expenses of
427-21 the pool and estimates supported by statistical data of the amounts
427-22 of those contributions or other financial arrangements;
427-23 (3) underwriting standards and procedures for the
427-24 evaluation of risks;
427-25 (4) procedures for purchase of reinsurance;
427-26 (5) methods, procedures, and guidelines for
427-27 establishing rates for premiums for and maximum limits of excess
428-1 coverage available from the pool;
428-2 (6) procedures for the processing and payment of
428-3 claims;
428-4 (7) methods and procedures for defraying any losses
428-5 and expenses of the pool;
428-6 (8) methods, procedures, and guidelines for the
428-7 management and investment of the fund;
428-8 (9) guidelines for nonrenewal of coverage;
428-9 (10) minimum limits of capital and surplus to be
428-10 maintained by the pool; and
428-11 (11) minimum standards for reserve requirements for
428-12 the pool.
428-13 (d) The temporary board shall complete and adopt the plan of
428-14 operation within 90 days after the date of the appointment of the
428-15 temporary board.
428-16 (e) Within 15 days following the day on which the plan of
428-17 operation is adopted, the first board must be selected as provided
428-18 by the plan of operation. The members of the first board shall
428-19 take office not later than the 30th day following the date of the
428-20 adoption of the plan of operation.
428-21 Sec. 7. Board of trustees. (a) A pool is governed by a
428-22 board of nine trustees selected as provided by the plan of
428-23 operation.
428-24 (b) Members of the board serve for terms of two years with
428-25 the terms expiring at the time provided by the plan of operation.
428-26 (c) A vacancy on the board shall be filled as provided by
428-27 the plan of operation.
429-1 (d) A person serving on the board who is an officer or
429-2 employee of an entity covered by the pool performs duties on the
429-3 board as additional duties required of his original office or
429-4 employment.
429-5 (e) Each member of the board shall execute a bond in the
429-6 amount required by the plan of operation payable to the pool and
429-7 conditioned on the faithful performance of his duties. The pool
429-8 shall pay the cost of the bond.
429-9 (f) Members of the board are not entitled to compensation
429-10 for their service on the board.
429-11 (g) The board shall select from its membership persons to
429-12 serve as chairman, vice-chairman, and secretary. The persons
429-13 selected serve for terms of one year that expire as provided by the
429-14 plan of operation.
429-15 (h) The board shall hold meetings at the call of the
429-16 chairman and at times established by its rules.
429-17 (i) A majority of the members of the board constitutes a
429-18 quorum.
429-19 (j) In addition to other duties provided by this article and
429-20 the plan of operation, the board shall:
429-21 (1) approve contracts other than excess liability
429-22 insurance contracts issued to entities by the pool;
429-23 (2) consider and adopt premium rate schedules for the
429-24 pool;
429-25 (3) consider and adopt policy forms for the pool;
429-26 (4) receive service of summons on behalf of the pool;
429-27 and
430-1 (5) appoint and supervise the activities of the pool
430-2 manager.
430-3 (k) In addition to other authority provided by this article,
430-4 the board may:
430-5 (1) adopt necessary rules;
430-6 (2) delegate specific responsibilities to the pool
430-7 manager; and
430-8 (3) amend the plan of operation to assure the orderly
430-9 management and operation of the pool.
430-10 (l) A member of the board is not liable with respect to a
430-11 claim or judgment for which coverage is provided by the pool or for
430-12 a claim or judgment against an entity covered by the pool against
430-13 whom a claim is made.
430-14 Sec. 8. Pool Manager. (a) The board shall appoint a pool
430-15 manager who shall serve at the pleasure of the board.
430-16 (b) The pool manager is entitled to receive the compensation
430-17 authorized by the board.
430-18 (c) The pool manager shall execute a bond in the amount
430-19 determined by the board, payable to the pool, conditioned on the
430-20 faithful performance of his duties. The pool shall pay the cost of
430-21 the bond.
430-22 (d) The pool manager shall manage and conduct the affairs of
430-23 the pool under the general supervision of the board and shall
430-24 perform any other duties directed by the board.
430-25 (e) In addition to any other duties provided by this article
430-26 or by the board, the pool manager shall:
430-27 (1) receive and pass on applications from entities for
431-1 excess liability coverage from the pool;
431-2 (2) negotiate contracts for the pool;
431-3 (3) prepare premium rate schedules for the approval of
431-4 the board;
431-5 (4) collect and compile statistical data relating to
431-6 the excess liability coverage provided by the pool, including
431-7 relevant loss, expense, and premium data, and make that information
431-8 available to the board and to the public; and
431-9 (5) prepare and submit to the board for approval
431-10 proposed policy forms for pool coverage.
431-11 (f) The pool manager may refuse to renew the coverage of any
431-12 entity insured by the pool based on the guidelines provided by the
431-13 plan of operation.
431-14 Sec. 9. Employees and other personnel. (a) The pool
431-15 manager shall employ or contract with persons necessary to assist
431-16 the board and pool manager in carrying out the powers and duties of
431-17 the pool.
431-18 (b) The board shall approve compensation paid to employees
431-19 of the pool and contracts made with other persons under this
431-20 section.
431-21 (c) The board may require any employee or person with whom
431-22 it contracts under this section to execute a bond in an amount
431-23 determined by the board, payable to the board, and conditioned on
431-24 the faithful performance of the employee's or person's duties or
431-25 responsibilities to the pool.
431-26 (d) An employee or person with whom the pool has contracted
431-27 under this section is not liable with respect to any claim or
432-1 judgment for which coverage is provided by the pool or for any
432-2 claim or judgment against any entity covered by the pool against
432-3 whom a claim is made.
432-4 Sec. 10. Office. (a) A pool shall maintain its principal
432-5 office in Austin, Texas.
432-6 (b) The records, files, and other documents and information
432-7 relating to the pool must be maintained in the pool's principal
432-8 office.
432-9 Sec. 11. Rules. The board may adopt and amend rules to
432-10 carry out this article.
432-11 Sec. 12. General powers and duties. (a) A pool shall:
432-12 (1) issue excess liability coverage to each entity
432-13 entitled to coverage under this article;
432-14 (2) collect premiums for coverage issued or renewed by
432-15 the pool;
432-16 (3) process and pay valid claims; and
432-17 (4) maintain detailed data regarding the pool.
432-18 (b) The pool may:
432-19 (1) enter into contracts;
432-20 (2) purchase reinsurance;
432-21 (3) cancel or refuse to renew coverage; and
432-22 (4) perform any other acts necessary to carry out this
432-23 article, the plan of operation, and the rules adopted by the board.
432-24 Sec. 13. Excess liability fund. (a) On creation of a pool,
432-25 the first board shall create an excess liability fund.
432-26 (b) The fund is composed of:
432-27 (1) premiums paid by entities for coverage by the
433-1 pool;
433-2 (2) contributions and other money received by the pool
433-3 to cover the initial expenses of the fund;
433-4 (3) investments and money earned from investments of
433-5 the fund; and
433-6 (4) any other money received by the pool.
433-7 (c) The pool manager shall manage the fund under the general
433-8 supervision of the board.
433-9 (d) Administrative expenses of the pool may be paid from the
433-10 fund, but payments for this purpose during any fiscal year of the
433-11 pool may not exceed the amount established by the board.
433-12 (e) Money in the fund may not be used to pay punitive
433-13 damages, fines or penalties for violation of a civil or criminal
433-14 statute, or fines or penalties imposed for violation of an
433-15 administrative rule or regulation, or an order, rule, or ordinance.
433-16 (f) Money for a claim may not be paid from the fund under
433-17 excess liability insurance coverage unless and until all benefits
433-18 payable under any other underlying policy of liability insurance
433-19 covering the claim or judgment are exhausted.
433-20 (g) The board may select one or more banks to serve as
433-21 depository for money of the fund. Before the pool manager deposits
433-22 fund money in a depository bank in an amount that exceeds the
433-23 maximum amount secured by the Federal Deposit Insurance
433-24 Corporation, the bank must execute a bond or provide other security
433-25 in an amount sufficient to secure from loss the fund money that
433-26 exceeds the amount secured by the Federal Deposit Insurance
433-27 Corporation.
434-1 (h) Each year as provided by the plan of operation, the
434-2 board shall have an actuary who is a member of the American Academy
434-3 of Actuaries audit the capital, surplus, and reserves of the pool
434-4 and prepare for the pool and its members a formal report.
434-5 Sec. 14. Investments. (a) The fund manager, under the
434-6 general supervision of the board, shall manage and invest the money
434-7 in the fund in the manner provided by the plan of operation.
434-8 (b) Money earned by investment of money in the fund must be
434-9 deposited in the fund or reinvested for the fund.
434-10 Sec. 15. Contributions. The board shall determine the
434-11 amount of any contributions necessary to meet initial expenses of
434-12 the pool. The board shall make this determination based on the
434-13 data provided in the plan of operation.
434-14 Sec. 16. Premium rates; limits of coverage. (a) The board
434-15 shall determine the rates for premiums that will be charged and the
434-16 maximum limits of coverage provided to assure that the pool is
434-17 actuarially sound.
434-18 (b) The pool manager shall prepare the statistical data and
434-19 other information and the proposed rate schedules and maximum
434-20 limits of coverage for consideration of the board.
434-21 (c) The board shall periodically reexamine the rate
434-22 schedules and the maximum limits of coverage as conditions change.
434-23 Sec. 17. Coverage period. (a) On accepting coverage from
434-24 the pool, an entity shall maintain that coverage for a period not
434-25 less than 36 calendar months following the month the coverage is
434-26 issued.
434-27 (b) An entity that voluntarily discontinues coverage in the
435-1 pool may not again obtain coverage from the pool for at least 36
435-2 calendar months following the month in which the coverage was
435-3 discontinued.
435-4 Sec. 18. Coverage. Excess liability coverage provided by
435-5 the pool may be provided on a claims-made or an occurrence basis.
435-6 Sec. 19. Nonrenewal. (a) Except as provided by Subsection
435-7 (b) of this section, the pool may refuse to renew the coverage of
435-8 any entity that fails to comply with the pool's underwriting
435-9 standards.
435-10 (b) The pool may not refuse to renew the coverage of an
435-11 entity for the first 36 calendar months following the month in
435-12 which the entity was first insured by the pool.
435-13 (c) Section 17(b) of this article does not apply to
435-14 discontinuance of an entity's coverage if the pool refuses renewal
435-15 under this section. An entity whose coverage is not renewed is not
435-16 eligible to apply for new coverage during the 12 calendar months
435-17 beginning after the month in which the pool gave written notice
435-18 that it would not renew the coverage.
435-19 Sec. 20. Shortage of available money. (a) If money in the
435-20 fund will be exhausted by payment of all final and settled claims
435-21 and final judgments during the fiscal year, the amount paid by the
435-22 pool to each person having a claim or judgment shall be prorated,
435-23 with each person receiving an amount that is equal to the
435-24 percentage the amount owed to him by the pool bears to the total
435-25 amount owed, outstanding, and payable by the pool.
435-26 (b) The remaining amount that is due and unpaid to a person
435-27 who receives prorated payment under Subsection (a) of this section
436-1 must be paid in the immediately following fiscal year.
436-2 Sec. 21. Commissions. A pool may pay commissions from the
436-3 fund on approval of the board.
436-4 Sec. 22. Application of other laws. (a) Except as provided
436-5 by Subsection (b) of this section, the pool is not considered
436-6 insurance under the Insurance Code and other laws of this state,
436-7 and the State Board of Insurance has no jurisdiction over the pool.
436-8 (b) The pool shall collect the necessary data, information,
436-9 and statements and shall file with the State Board of Insurance the
436-10 reports and statements required by Articles 1.24A and 1.24B and is
436-11 subject to 21.21 of this code.
436-12 SECTION 22.04. Section 5, Article 17.25, Insurance Code, is
436-13 amended to read as follows:
436-14 Sec. 5. Policy Forms Prescribed. Each county mutual
436-15 insurance company shall be subject to the provisions of Article
436-16 5.06 and <of> Article 5.35 <and of Article 5.36> of this Code. The
436-17 Board of Insurance Commissioners pursuant to Article 5.35 may in
436-18 its discretion make, promulgate and establish uniform policies for
436-19 county mutual insurance companies different from the uniform
436-20 policies made, promulgated and established for use by companies
436-21 other than county mutual insurance companies, and shall prescribe
436-22 the conditions under which such policies may be adopted and used by
436-23 county mutual insurance companies, and the conditions under which
436-24 such companies shall adopt and use the same forms and no others as
436-25 are prescribed for other companies.
436-26 SECTION 22.05. Article 8.24(i), Insurance Code, is amended
436-27 to read as follows:
437-1 (i) The department shall have authority to suspend or revoke
437-2 the certificate of authority of any insurance carrier authorized to
437-3 do business in Texas under this Article, if the State Board of
437-4 Insurance, after notice and opportunity for hearing, shall find
437-5 that such carrier has systematically, with neglect and with willful
437-6 disregard, failed to comply with its obligations derived from the
437-7 contracts of insurance, and the laws applicable thereto, as
437-8 contained in policies issued in the State of Texas.
437-9 Any carrier aggrieved by an order of the State Board of
437-10 Insurance hereunder shall be entitled to appeal therefrom pursuant
437-11 to the provisions of Article 1.04 <1.04(f)> of this code <the
437-12 Insurance Code>.
437-13 SECTION 22.06. Section 9, Article 21.49, Insurance Code, is
437-14 amended to read as follows:
437-15 Sec. 9. Appeals. Any person insured pursuant to this Act,
437-16 or his duly authorized representative, or any affected insurer who
437-17 may be aggrieved by an act, ruling or decision of the Association,
437-18 may, within 30 days after such act, ruling or decision, appeal to
437-19 the commissioner. In the event the Association is aggrieved by the
437-20 action of the commissioner with respect to any ruling, order, or
437-21 determination of the commissioner, it may, within 30 days after
437-22 such action, make a written request to the commissioner, for a
437-23 hearing thereon. The commissioner shall hear the Association, or
437-24 the appeal from an act, ruling or decision of the Association,
437-25 within 30 days after receipt of such request or appeal and shall
437-26 give not less than 10 days' written notice of the time and place of
437-27 hearing to the Association making such request or the person, or
438-1 his duly authorized representative, appealing from the act, ruling
438-2 or decision of the Association. A hearing on an act, ruling or
438-3 decision of the Association relating to the payment of, the amount
438-4 of, or the denial of a particular claim shall be held, at the
438-5 request of the claimant, in either the county in which the covered
438-6 property is located or Travis County. Within 30 days after the
438-7 hearing, the commissioner shall affirm, reverse or modify its
438-8 previous action or the act, ruling or decision appealed to the
438-9 commissioner. Pending such hearing and decision thereon, the
438-10 commissioner may suspend or postpone the effective date of its
438-11 previous rule or of the act, ruling or decision appealed to the
438-12 commissioner. The Association, or the person aggrieved by any
438-13 order or decision of the commissioner, may thereafter appeal to
438-14 either a District Court of Travis County, Texas, or a District
438-15 Court in the county in which the covered property is located. An
438-16 action brought under this section is subject to the procedures
438-17 established under Article 1.04 <1.04(f)> of this code.
438-18 SECTION 22.07. Section 7(b), Article 21.49-3, Insurance
438-19 Code, is amended to read as follows:
438-20 (b) In the event any person insured or applying for
438-21 insurance is aggrieved by the final action of the board of
438-22 directors of the association, the aggrieved party may, within 30
438-23 days after such action, make a written request to the commissioner
438-24 for a hearing thereon. The commissioner shall hear the appeal from
438-25 an act, ruling, or decision of the association, within 30 days
438-26 after receipt of such request or appeal and shall give not less
438-27 than 10 days' written notice of the time and place of hearing to
439-1 the person, or his duly authorized representative, appealing from
439-2 the act, ruling, or decision of the board of directors of the
439-3 association. Within 30 days after such hearing, the commissioner
439-4 shall affirm, reverse, or modify the act, ruling, or decision
439-5 appealed to the commissioner. Pending such hearing and decision
439-6 thereon, the commissioner may suspend or postpone the effective
439-7 date of the rule or of the act, ruling, or decision appealed. The
439-8 association, or the person aggrieved by any order or decision of
439-9 the commissioner, may thereafter appeal in accordance with Article
439-10 1.04 <1.04(f)> of this code.
439-11 ARTICLE 23. CONSOLIDATION OF FUNDS
439-12 SECTION 23.01. The application of Sections 403.094 and
439-13 403.095, Government Code, to a fund or the permissible uses of
439-14 revenue or fund balances is not affected by this Act.
439-15 ARTICLE 24. CERTAIN INFORMATION RELATING TO RATES
439-16 SECTION 24.01. Section 4(a), Article 5.73, Insurance Code,
439-17 is amended to read as follows:
439-18 (a) The Board shall annually require an audit of any
439-19 advisory organization that provides statistics or other information
439-20 to the Board in a proceeding to set rates. The audit shall be
439-21 conducted under rules adopted by the Board, at the expense of the
439-22 advisory organization. The audit must examine the advisory
439-23 organization's method of collecting, analyzing, and reporting data
439-24 to assure the accuracy of data. The audit may examine source
439-25 documents within individual companies. Except for individual
439-26 company information, an audit is public information.
439-27 SECTION 24.02. Article 5.73, Insurance Code, is amended by
440-1 adding Sections 4A, 4B, 4C, and 4D to read as follows:
440-2 Sec. 4A. (a) An advisory organization may not receive from
440-3 or supply to insurers transacting insurance in this state the
440-4 information described in Section 1 of this article unless the
440-5 advisory organization establishes a subsidiary that:
440-6 (1) is domiciled in this state;
440-7 (2) has an office in this state; and
440-8 (3) has a governing board composed of:
440-9 (A) an ex officio member appointed by the
440-10 commissioner; and
440-11 (B) five representatives of property and
440-12 casualty insurers licensed in this state who subscribe to or
440-13 purchase products from the advisory organization.
440-14 (b) Each advisory organization shall file with the
440-15 commissioner a copy of its constitution and bylaws, article of
440-16 agreement or association, or certificate of incorporation and a
440-17 copy of the rules governing its activities.
440-18 (c) Each advisory organization shall file with the
440-19 commissioner a list showing each subscriber company doing business
440-20 in this state and the products or information the subscriber
440-21 company purchases. The filing required by this subsection shall be
440-22 made at least quarterly.
440-23 (d) On request by the commissioner, each advisory
440-24 organization shall report to the department a summary of the
440-25 actuarial assumptions, trend factors, economic factors, and other
440-26 criteria used in trending data for companies doing business in this
440-27 state.
441-1 Sec. 4B. Each insurer relying on prospective loss costs
441-2 provided by an advisory organization must justify, by expert
441-3 evidence, its need for that information on the grounds of
441-4 insufficiency of that insurer's data and experience. Such
441-5 justification may be made by affidavit by a qualified actuary or
441-6 after notice and opportunity for a hearing. An insurer unable to
441-7 demonstrate its need for prospective loss costs provided by an
441-8 advisory organization may not file or use that information.
441-9 Sec. 4C. An insurer may not receive from an advisory
441-10 organization prospective loss costs for personal automobile,
441-11 homeowners', or dwelling fire insurance.
441-12 Sec. 4D. The select committee on rate and form regulation
441-13 created under Article 1.50 of this code shall appoint an
441-14 independent consulting firm to evaluate the activities of advisory
441-15 organizations in this state, including their impact on competition
441-16 in the insurance market, their use by insurers, and their impact on
441-17 availability and affordability of coverage, and any other matters
441-18 relevant to determining their continued authorization. The
441-19 committee shall include in its report to the legislature a
441-20 recommendation for the future role of advisory organizations in
441-21 this state.
441-22 SECTION 24.03. Section 5, Article 5.73, Insurance Code, is
441-23 amended to read as follows:
441-24 Sec. 5. The authority granted under this article expires
441-25 September 1, 1997 <1993>.
441-26 SECTION 24.04. Article 21.69, Insurance Code, is amended to
441-27 read as follows:
442-1 Art. 21.69. PARALLEL STATISTICAL DATA COLLECTION <BOARD MAY
442-2 CONTRACT FOR PREMIUM AND LOSS DATA>. (a) Except as provided in
442-3 Article 5.58 of this code, the commissioner shall contract with one
442-4 statistical entity for each line of insurance to compile and
442-5 maintain historical premium and loss data pursuant to statistical
442-6 plans adopted by the commissioner. A statistical entity designated
442-7 by the commissioner must provide sufficient evidence of five years
442-8 of experience in data collection, data maintenance, data quality
442-9 control, accounting and related areas <board may contract with any
442-10 qualified entity to collect historical premium and loss data as
442-11 defined by the board and pursuant to statistical plans promulgated
442-12 or approved by the board>.
442-13 (b) An insurer may continue to provide historical premium
442-14 and loss data to a statistical agent designated by the board prior
442-15 to April 1, 1993, as required by a statistical plan in use on that
442-16 date. The board shall receive that information, and the
442-17 statistical agent may return that information to its subscribers.
442-18 The board may utilize this information in all rate hearings.
442-19 (c) The select committee on rate and form regulation created
442-20 under Article 1.50 of this code shall appoint an independent
442-21 consulting firm to evaluate the costs and benefits of each of the
442-22 systems and include in its report to the legislature a
442-23 recommendation for future data collection consistent with its
442-24 recommendations on rates.
442-25 SECTION 24.05. Not later than December 31, 1993, each
442-26 advisory organization governed by Article 5.73, Insurance Code,
442-27 shall establish a subsidiary domiciled in this state as required by
443-1 Section 4A(a), Article 5.73, Insurance Code, as added by this Act.
443-2 ARTICLE 25. EFFECTIVE DATE; EMERGENCY
443-3 SECTION 25.01. Except as otherwise provided by this Act,
443-4 this Act takes effect September 1, 1993.
443-5 SECTION 25.02. Section 20.18 of this Act shall only apply
443-6 to policies and certificates of insurance issued on or after
443-7 September 1, 1993.
443-8 SECTION 25.03. The importance of this legislation and the
443-9 crowded condition of the calendars in both houses create an
443-10 emergency and an imperative public necessity that the
443-11 constitutional rule requiring bills to be read on three several
443-12 days in each house be suspended, and this rule is hereby suspended,
443-13 and that this Act take effect and be in force according to its
443-14 terms, and it is so enacted.