By Counts H.B. No. 2224
Substitute the following for H.B. No. 2224:
By Counts C.S.H.B. No. 2224
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the liquidation of insolvent insurers and the insurance
1-3 guaranty associations.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Paragraph (a) of Section 2, Article 21.28,
1-6 Insurance Code, is amended to read as follows:
1-7 Receiver Taking Charge; Commissioner and Powers and Duties.
1-8 Whenever under the law of this State a court of competent
1-9 jurisdiction finds that a receiver should take charge of the assets
1-10 of an insurer domiciled in this State, the commissioner of
1-11 insurance or a person designated by the commissioner under contract
1-12 shall act as receiver. The receiver shall forthwith take
1-13 possession of the assets of such insurer and deal with the same in
1-14 the person's own name as receiver or in the name of the insurer as
1-15 the court may direct. The receiver has the powers specified in
1-16 this code. A person designated by the commissioner to act as
1-17 special deputy receiver under contract is subject to the
1-18 performance standards imposed by this subsection. It is the intent
1-19 of the legislature that <continuous> oversight of the special
1-20 deputy receivers and guaranty associations shall be conducted by
1-21 the commissioner. The commissioner's oversight of the guaranty
1-22 associations shall consist solely of the appointment of their
1-23 boards of directors (to the extent that right is defined in Art.
2-1 9.48. Art. 21.28-C and 21.28-D) and approval of their plans of
2-2 operation. The commissioner shall use a competitive bidding
2-3 process in the selection of special deputy receivers and shall
2-4 establish specifications for the position of special deputy
2-5 receiver. The special deputy receiver shall submit monthly written
2-6 reports to the court and commissioner that state the special deputy
2-7 receiver's business plan for the receivership, including expenses
2-8 incurred in administering the receivership during the preceding
2-9 month and an estimate of those expenses for the succeeding month.
2-10 The report must include a cost-benefit analysis on the expenditure
2-11 of funds other than funds spent for the payment of claims. The
2-12 business plan report must include a budget of monthly expenses that
2-13 explains any variation from the original projection. The business
2-14 plan report must include a list of any lawyers or law firms that
2-15 offered to or did represent the special deputy receiver in relation
2-16 to its duties under this article, and any hours billed or fees paid
2-17 to a lawyer or law firm that represented the special deputy
2-18 receiver; The special deputy receiver shall submit the business
2-19 plan report to the attorney general on a quarterly basis, and the
2-20 attorney general may make recommendations to the commissioner based
2-21 on the report. In addition to the business plan report, the
2-22 special deputy receiver shall submit a monthly report to the
2-23 commissioner relating to the special deputy receiver's activities
2-24 in administering the receivership. Upon written application by the
2-25 special deputy receiver and with approval of the commissioner, the
3-1 court may suspend the requirement for monthly reports or require
3-2 reports less frequently based upon a showing that the costs of such
3-3 reports exceeds the benefit derived from their filing.
3-4 SECTION 2. Article 21.28, Insurance Code, is amended by
3-5 adding the following Section 7A:
3-6 Sec. 7A. Early Access Distribution.
3-7 (a) Within 120 days of the commencement of the insolvency
3-8 proceeding against an impaired insurer, the liquidator or a special
3-9 deputy receiver appointed under this Article shall make application
3-10 to the court for approval of a proposal to disburse assets out of
3-11 marshaled assets, from time to time as such assets become
3-12 available, to a guaranty association or foreign guaranty
3-13 association having Class 1 or Class 2 claims against the estate of
3-14 the impaired insurer because of such insolvency. If the receiver
3-15 or special deputy receiver is unable to make such application
3-16 within 120 days, the guaranty association may submit an application
3-17 to the court requesting that the receiver or special deputy
3-18 receiver submit a proposal to disburse assets. If the liquidator
3-19 or special deputy receiver determines that there are insufficient
3-20 assets to disburse, the application required by this section shall
3-21 be considered satisfied by a filing by the liquidator or special
3-22 deputy receiver stating the reasons for this determination.
3-23 (b) Such proposal shall, at a minimum, include provisions
3-24 for:
3-25 (1) reserving amounts sufficient to allow the payment
4-1 of Class 1 claims, and to the extent the assets of the insolvent
4-2 insurer will allow any payment to be made on Class 2 claims,
4-3 reserving amounts sufficient to provide equal pro-rata
4-4 distributions to the Class 2 claimants other than the guaranty
4-5 associations;
4-6 (2) disbursement of the assets marshaled to date and
4-7 the subsequent distribution of assets as they become available;
4-8 (3) equitable allocation of disbursements to each of
4-9 the guaranty associations and foreign guaranty associations
4-10 entitled thereto;
4-11 (4) the securing of the liquidator or special deputy
4-12 receiver from each of the associations entitled to disbursements
4-13 pursuant to this section of an agreement to return to the
4-14 liquidator upon request and approval by the court such assets,
4-15 together with income on assets previously disbursed, as may be
4-16 required to pay Class 1 claimants and any federal claimants
4-17 asserting priority claims. No bond shall be required of any such
4-18 association; and
4-19 (5) a full report to be made by each association to
4-20 the liquidator or special deputy receiver, as requested by the
4-21 liquidator or special deputy receiver, but no more frequently than
4-22 quarterly, accounting for the assets so disbursed to the
4-23 association, all disbursements made therefrom, any interest earned
4-24 by the association on such assets and any other matter as the court
4-25 may direct.
5-1 (c) The proposal submitted by the liquidator or special
5-2 deputy receiver shall provide for disbursements to the associations
5-3 in amounts estimated at least equal to the claim payments made or
5-4 to be made thereby for which such associations could assert a claim
5-5 against the liquidator, and shall further provide that if the
5-6 assets available for disbursement from time to time do not equal or
5-7 exceed the amount of such claim payments made or to be made by the
5-8 association, then disbursements shall be made for the pro-rata
5-9 amount of the association's Class 2 claim.
5-10 (d) The proposal submitted by the liquidator or special
5-11 deputy receiver shall, with respect to an insolvent insurer writing
5-12 life or health insurance or annuities, provide for disbursement of
5-13 assets to any guaranty association or foreign guaranty association
5-14 covering life or health insurance or annuities or to any other
5-15 entity or organization reinsuring, assuming, or guaranteeing
5-16 policies or contracts of insurance under the acts creating such
5-17 associations.
5-18 (e) Notice of such application shall be given to the
5-19 association in and to the commissioners of insurance of each of the
5-20 states. Any such notice shall be deemed to have been given when
5-21 deposited in the United States certified mails, first class postage
5-22 prepaid, at least 30 days prior to the submission of such
5-23 application to the court. Action of the application may be taken
5-24 by the court provided the above required notice has been given and
5-25 provided further the liquidator's or special deputy receiver's
6-1 proposal complies with the requirements of this Section. Notice of
6-2 such application shall be given to those Class 1 and Class 2
6-3 claimants that are reasonably ascertainable in a manner deemed
6-4 appropriate by the court, including notice by publication.
6-5 SECTION 3. Paragraph (a) of Section 8, Article 21.28,
6-6 Insurance Code, is amended to read as follows:
6-7 (a) Priority of Distribution of Assets. <Notwithstanding
6-8 any other provision of law,> The priority of distribution of assets
6-9 from the insurer's estate shall be in accordance with the
6-10 disbursement plan approved by the court pursuant to Section 7A of
6-11 this Article, and in accordance with the order of each class as
6-12 provided by this subsection. Every claim in each class shall be
6-13 paid in full or adequate funds retained for such payment before the
6-14 members of the next class receive any payment. No subclasses shall
6-15 be established within any class. <Additional subclasses may not be
6-16 established within any class.>
6-17 (The remainder of the Paragraph is unchanged.)
6-18 SECTION 4. Section 9, Article 21.28, Insurance Code is
6-19 amended to read as follows:
6-20 (a) Excess Assets--Stock Companies. When the receiver shall
6-21 have made provision for unclaimed dividends and all of the
6-22 liabilities of a stock insurance company, he shall call a meeting
6-23 of the stockholders of the insurer by giving notice thereof in one
6-24 (1) or more newspapers in the county where the principal office of
6-25 the insurer was located, and by written notice to the stockholders
7-1 of record at their last known address. At such meeting, the
7-2 stockholders shall appoint an agent or agents to take over the
7-3 affairs to continue the liquidation for benefit of the
7-4 stockholders. Voting privileges shall be governed by the insurer's
7-5 bylaws. A majority of the stock shall be represented at the
7-6 agent's appointment. Such agent or agents shall execute and file
7-7 with the court such bond or bonds as shall be approved by it,
7-8 conditioned on the faithful performance of all the duties of the
7-9 trust. Under order of the court the receiver shall then transfer
7-10 and deliver to such agent or agents for continued liquidation under
7-11 the court's supervision all assets of insurer remaining in his
7-12 hands, where upon the receiver and the Board, and each member and
7-13 employee thereof, shall be discharged from any further liability to
7-14 such insurer and its creditors and stockholders; provided, however,
7-15 that nothing herein contained shall be so construed as to permit
7-16 the insurer to continue in business as such, but the charter of
7-17 such insurer and all permits and licenses issued thereunder or in
7-18 connection therewith shall be ipso facto revoked and annulled by
7-19 such order of the court directing the receiver to transfer and
7-20 deliver the remaining assets of such insurer to such agent or
7-21 agents.
7-22 (b) Excess Assets--Other Companies. After the receiver
7-23 shall have made provision for unclaimed dividends and all of the
7-24 liabilities of any insurer other than a stock insurance company, he
7-25 shall dispose of any remaining assets as directed by the
8-1 receivership court.
8-2 (c) Notwithstanding any other provisions of this article in
8-3 closing an estate, a special deputy receiver, upon approval of the
8-4 court, may transfer any remaining assets, causes of action asserted
8-5 on behalf of the impaired insurer, judgment, claims, or liens to
8-6 the appropriate guaranty association and such transfer shall not be
8-7 a preference or voidable transfer but shall be considered a
8-8 distribution under Section 8(a)1. In the event the sum realized by
8-9 the guaranty association is materially larger than the amount
8-10 loaned to the estate by the guaranty association, the court may
8-11 order reopening of the estate to disburse the excess funds.
8-12 Nothing in this section shall be construed as a transfer of any
8-13 liability of an impaired insurer to the guaranty association that
8-14 would not constitute a claim payable under Articles 9.48, 21.28-C
8-15 or 21.28-D of the Insurance Code.
8-16 (d) Limitation. Except as otherwise provided by this
8-17 subsection, each receivership or other delinquency proceeding
8-18 prescribed by this Article shall be administered in accordance with
8-19 Section 64.072, Civil Practice and Remedies Code. To the extent a
8-20 receivership or delinquency proceeding initiated against an insurer
8-21 applies to claims against a workers' compensation insurance policy
8-22 or a title insurance policy, the receivership or delinquency
8-23 proceeding shall be administered continuously for whatever length
8-24 of time is necessary to effectuate its purposes, and no arbitrary
8-25 period prescribed elsewhere by the laws of Texas limiting the time
9-1 for the administration of receiverships or of corporate affairs
9-2 generally shall be applicable thereto. Instead of the winding up
9-3 and distribution of a receivership estate of an insurer without
9-4 capital stock, the court shall order revival and reinstatement of
9-5 the charter, permits, licenses, franchises, and management
9-6 contracts or other control instruments of the insurer if the
9-7 insurer's remaining cash on hand and on deposit, less any
9-8 outstanding valid and enforceable liabilities, exceeds the minimum
9-9 amount of capital and surplus prescribed for that insurer under
9-10 Article 2.02 or Section 1 of Article 3.02 of this code.
9-11 (e) Reopening. If after the receivership shall have been
9-12 closed by final order of the court, the liquidator shall discover
9-13 assets not known to him during receivership, he shall report his
9-14 findings to the court. It shall be within the discretion of the
9-15 court as to whether the value of the after-discovered assets shall
9-16 justify the reopening of the receivership for continued
9-17 liquidation.
9-18 SECTION 5. Paragraph (d) of Section 11, Art. 21.28,
9-19 Insurance Code is amended to read as follows:
9-20 Maintenance of Records. The receiver may devise a method for
9-21 the effective, efficient, and economical maintenance of the records
9-22 of the delinquent insurer and of the liquidator's office including
9-23 maintaining those records on any medium approved by the Records
9-24 Management Division of the Texas State Library. A copy of an
9-25 original record or any other record that is maintained on any
10-1 medium approved by the Records Management Division of the Texas
10-2 State Library within the scope of this section that is produced by
10-3 the receiver or his authorized representative under this Article
10-4 shall have the same force and effect as the original record and may
10-5 be used the same as the original record in any judicial or
10-6 administrative proceeding in this state.
10-7 In order to maintain the records of delinquent insurers after
10-8 the closing of the receivership proceedings, the receiver may
10-9 reserve assets of an estate to be deposited in an account to be
10-10 used for the specific purpose of maintenance, storage and disposal
10-11 of records in closed receivership estates. <If the need exists for
10-12 the continued maintenance of any records of a delinquent insurer
10-13 after the closing of the receivership proceedings, the receiver may
10-14 reserve sufficient assets, including cash, to be transferred to the
10-15 liquidator on closing of the receivership for the specific purpose
10-16 of meeting the reasonable cost of maintaining those records.>
10-17 SECTION 6. Section 3, Article 21.28-C, Insurance Code, is
10-18 amended to read as follows:
10-19 This Act applies to all kinds of direct insurance, but except
10-20 where indicated elsewhere in this Act is not applicable to the
10-21 following:
10-22 (1) life, annuity, health, or disability insurance;
10-23 (2) mortgage guaranty, financial guaranty, or other
10-24 forms of insurance offering protection against investment risks;
10-25 (3) fidelity or surety bonds, or any other bonding
11-1 obligations;
11-2 (4) credit insurance, vendors' single-interest
11-3 insurance, collateral protection insurance, or any similar
11-4 insurance protecting the interests of a creditor arising out of a
11-5 creditor-debtor transaction;
11-6 (5) insurance of warranties or service contracts;
11-7 (6) title insurance;
11-8 (7) ocean marine insurance;
11-9 (8) any transactions or combination of transactions
11-10 between a person, including an affiliate of such a person, and an
11-11 insurer, including an affiliate of such an insurer, that involves
11-12 the transfer of investment or credit risk unaccompanied by the
11-13 transfer of insurance risk; or
11-14 (9) any insurance provided by or guaranteed by
11-15 government.
11-16 SECTION 7. Paragraph (8) of Section 5, Article 21.28-C,
11-17 Insurance Code, is amended to read as follows:
11-18 (8) "Covered claim" means an unpaid claim of an
11-19 insured or third-party liability claimant that arises out of and is
11-20 within the coverage and not in excess of the applicable limits of
11-21 an insurance policy to which this Act applies, issued or assumed
11-22 (whereby an assumption certificate is issued to the insured) by an
11-23 insurer licensed to do business in this state, if that insurer
11-24 becomes impaired and the third-party claimant or liability claimant
11-25 or insured is a resident of this state at the time of the insured
12-1 event, or the property from which the claim arises is permanently
12-2 located in this state. "Covered claim" shall also include 75
12-3 percent of unearned premiums, but in no event shall a covered claim
12-4 for unearned premiums, including any such claim arising from a
12-5 workers' compensation policy, according to the following
12-6 schedule: 100% of the first $0 to $10,000, 90% of the next $10,001
12-7 to $20,000, 80% of the next $20,001 to $30,000, 70% of the next
12-8 $30,001 to $40,000, 60% of the next $40,001 to $50,000, 50% of the
12-9 next $50,001 to $60,000, 40% of the next $60,001 to $70,000, 30% of
12-10 the next $70,001 to $80,000, 20% of the next $80,001 to $90,000 and
12-11 10% of the next $90,001 to $100,000. <but in no event shall a
12-12 covered claim for unearned premiums exceed $1,000>. Individual
12-13 covered claims (including any and all derivative claims by more
12-14 than one person which arise from the same occurrence, which shall
12-15 be considered collectively as a single claim under this Act) shall
12-16 be limited to $100,000, except that the association shall pay the
12-17 full amount of any covered claim arising out of a workers'
12-18 compensation claim made under a workers' compensation policy. For
12-19 purposes of this Act, any claim made for recovery of attorneys fees
12-20 under a policy, regardless of whether such claim is presented
12-21 together with or separately from a claim for policy benefits, shall
12-22 be considered as part of the claim under the policy and not as a
12-23 separate "Covered claim." "Covered claim" shall not include any
12-24 amount sought as a return of premium under a retrospective rating
12-25 plan; or any amount due any reinsurer, insurer, insurance pool, or
13-1 underwriting association, as subrogation recoveries or otherwise.
13-2 "Covered claim" shall not include supplementary payment
13-3 obligations, including adjustment fees and expenses, attorney's
13-4 fees and expenses, court costs, interest and penalties, and
13-5 interest and bond premiums incurred prior to the determination that
13-6 an insurer is an impaired insurer under this Act. "Covered claim"
13-7 shall not include any prejudgment or postjudgment interest which
13-8 accrues subsequent to the determination that an insurer is an
13-9 impaired insurer under this Act. "Covered claim" shall not include
13-10 any claim for recovery of punitive, exemplary, extracontractual, or
13-11 bad-faith damages, whether sought as a recovery against the
13-12 insured, insurer, guaranty association, receiver, special deputy
13-13 receiver or commissioner, awarded in a court-judgment against an
13-14 insured or insurer. "Covered claim" shall not include, and the
13-15 association shall not have any liability to an insured or
13-16 third-party liability claimant, for its failure to settle a
13-17 liability claim within the limits of a covered claim under this
13-18 Act. With respect to a covered claim for unearned premiums, both
13-19 persons who were residents of this state at the time the policy was
13-20 issued and persons who are residents of this state at the time the
13-21 company is found to be an impaired insurer shall be considered to
13-22 have covered claims under this Act. If the impaired insurer has
13-23 insufficient assets to pay the expenses of administering the
13-24 receivership or conservatorship estate, the portion of the expenses
13-25 of administration incurred in the processing and payment of claims
14-1 against the estate shall also be a covered claim under this Act.
14-2 SECTION 8. Paragraph (9) of Section 5, Article 21.28-C,
14-3 Insurance Code, is amended to read as follows:
14-4 (9) "Impaired insurer" means:
14-5 (A) a member insurer that is placed in temporary
14-6 or permanent receivership under an order of a court of competent
14-7 jurisdiction, including the Courts of any other State, based on a
14-8 finding of insolvency and that has been designated an impaired
14-9 insurer by the commissioner; or
14-10 (B) a member insurer placed in conservatorship
14-11 after it has been determined by the commissioner to be insolvent
14-12 and that has been designated an impaired insurer by the
14-13 commissioner.
14-14 SECTION 9. Paragraph (d) of Section 7, Article 21.28-C,
14-15 Insurance Code, is amended to read as follows:
14-16 (d) A public representative may not be:
14-17 (1) an officer, director, or employee of an insurance
14-18 company, insurance agency, agent, broker, solicitor, adjuster, or
14-19 any other business entity regulated by the Texas Department of
14-20 Insurance;
14-21 (2) a person required to register with the secretary
14-22 of state under Chapter 305, Government Code in connection with
14-23 their representation of clients in the field of insurance; or
14-24 (3) related to a person described by Subdivision (1)
14-25 or (2) of this subsection within the second degree of affinity or
15-1 consanguinity.
15-2 SECTION 10. Paragraph (b) of Section 8, Article 21.28-C.,
15-3 Insurance Code, is amended to read as follows:
15-4 <The association is considered the insurer to the extent of
15-5 its obligation on the covered claims and to that extent has all
15-6 rights, duties, and obligations of the impaired insurer as if the
15-7 insurer had not become impaired.>
15-8 The association shall undertake to discharge the policy
15-9 obligations of the impaired insurer, including the duty to defend
15-10 insureds under a liability policy, to the extent that such policy
15-11 obligations are covered claims under this Act. In performing its
15-12 statutory obligations, the association may also enforce any duty
15-13 imposed on the insured party or beneficiary under the terms of any
15-14 policy of insurance within the scope of this Act. In performing
15-15 its statutory obligations under this Act, the association shall not
15-16 be considered to be in the business of insurance, shall not be
15-17 considered to have assumed or succeeded to any liabilities of the
15-18 impaired insurer, and shall not be considered to otherwise stand in
15-19 the shoes of the impaired insurer for any purpose, including but
15-20 not limited to the issue of whether the association is amenable to
15-21 the personal jurisdiction of the Courts of any other State.
15-22 SECTION 11. Paragraph (d) of Section 8, Article 21.28-C,
15-23 Insurance Code, is amended to read as follows:
15-24 (1) General Provisions. The association shall investigate
15-25 claims brought against the association, and the association may
16-1 investigate claims brought against the impaired insurer, any person
16-2 named as an insured under a liability policy issued by the impaired
16-3 insurer, the commissioner, or a special deputy receiver appointed
16-4 pursuant to Article 21.28 of this Code if such claims involve or
16-5 may involve the association's rights and obligations under this
16-6 Act, and shall adjust, compromise, settle, and pay covered claims
16-7 to the extent of the association's obligation and deny all other
16-8 claims. The association may review settlements, releases, and
16-9 judgments to which the impaired insurer or its insureds were
16-10 parties to determine the extent to which those settlements,
16-11 releases, and judgments may be properly contested. Any judgment
16-12 taken by default or consent against an insured or the impaired
16-13 insurer, and any settlement, release or judgment entered into by
16-14 the insured or the impaired insurer, shall not be considered to be
16-15 binding upon the association, and shall not be considered as
16-16 evidence of liability or of damages in connection with any claim
16-17 brought against the association or any other party under this Act.
16-18 Notwithstanding any other provision of this Act, a covered
16-19 claim shall not include any claim filed with the guaranty
16-20 association after the later of the final date for filing claims
16-21 against the liquidator or receiver of an insolvent insurer, or
16-22 eighteen months after the order of liquidation.
16-23 (2) Claims Procedures. Claims under this Act, or
16-24 against persons insured under a liability policy issued by an
16-25 impaired insurer subject to this Act, shall be made in accordance
17-1 with the following procedures:
17-2 (i) Liability Claims Against Insureds.
17-3 Subject to the provisions of Section 17 of this Act, a third-party
17-4 liability claimant may assert claims against persons insured under
17-5 a liability policy issued by an impaired insurer in the same manner
17-6 as if the insurer not become impaired. The tender of a defense by
17-7 the association to an insured under a liability policy issued by an
17-8 impaired insurer shall not operate as a waiver of any of the
17-9 provisions of this Act which would limit the liability of the
17-10 association, but the association shall notify the insured of any
17-11 reservation of rights under the terms of the policy issued by the
17-12 impaired insurer. Any issues relating to the association's
17-13 obligations under this Act or under an insurance policy issued by
17-14 the impaired insurer shall not be determined in a suit brought
17-15 against an insured. Evidence that a person is or is not be
17-16 entitled to indemnity by the association under this Act is not
17-17 admissible unless such evidence would have been properly admissible
17-18 against the impaired insurer under Rule 411 of the Texas Rules of
17-19 Evidence.
17-20 (ii) First-Party Claims and Claims
17-21 relating to Association's Rights and Obligations. For purposes of
17-22 this Section, a "First-Party or Coverage Claim" shall include: 1)
17-23 any direct claim against the association by an insured,
17-24 policyholder or beneficiary of a policy issued by an impaired
17-25 insurer and under which the insurer was obligated to pay the person
18-1 directly; and 2) any claim by an insured or policyholder, relating
18-2 to the association's rights and obligations under this Act or under
18-3 an insurance policy issued by the impaired insurer. Any person
18-4 making a First-Party or Coverage Claim under this Act shall deliver
18-5 to the association a written statement reasonably apprising the
18-6 association of the facts which form the basis of the claim. The
18-7 association may, but is not required to, accept for processing any
18-8 such written notice filed with the impaired insurer and contained
18-9 in the claim files provided to the association. The claimant shall
18-10 also specify an address to which any correspondence or other
18-11 notices may be sent to the claimant by mail, and shall promptly
18-12 advise the association in writing of any change of address while
18-13 the claim is pending. In addition, the claimant shall provide the
18-14 association with such additional information relating to the claim
18-15 as is requested in writing by the association.
18-16 The association shall notify each first-party or coverage
18-17 claimant, at the address specified by the claimant, of its
18-18 acceptance or denial of a claim, and if the claim has been
18-19 accepted, the amount for which the claim has been accepted by the
18-20 association. Such notification shall be given within 6 months
18-21 after the guaranty association has received all of the information
18-22 necessary to make a final disposition of the claim. The claimant
18-23 may appeal the association's determination of the validity, nature
18-24 and amount of the claim by filing an action against the association
18-25 in any District Court of Travis County for the recovery of a
19-1 covered claim under this Act. The association may be served with
19-2 citation by serving its executive director at the association's
19-3 principal place of business in Travis County. Such an appeal shall
19-4 be filed within 90 days of the date the association's notice of its
19-5 acceptance or denial of the claim was delivered to the address
19-6 specified by the claimant, whether or not such notice was actually
19-7 received by the claimant. An action filed under this Act shall be
19-8 de novo, as if originally filed in said court and subject to the
19-9 Texas Rules of Civil Procedure.
19-10 (iii). Workers' Compensation Claim.
19-11 Claims for benefits under the Workers' Compensation Act shall be
19-12 made in accordance with the provisions of the Workers' Compensation
19-13 Act. The association shall not be subject to any administrative
19-14 fines or penalties under the Workers' Compensation Act.
19-15 SECTION 12. Paragraph (h) of Section 8, Article 21.28-C,
19-16 Insurance Code, is amended to read as follows:
19-17 The association may:
19-18 (1) employ or retain persons as necessary to handle
19-19 claims and perform other duties of the association;
19-20 (2) borrow funds necessary to implement this Act in
19-21 accordance with the plan of operation;
19-22 (3) sue or be sued;
19-23 (4) negotiate and become a party to contracts as
19-24 necessary to implement this Act, including lump-sum or structured
19-25 compromise and settlement agreements with claimants who have claims
20-1 for medical and/or indemnity benefits for a period of three years
20-2 or more.
20-3 (5) perform other acts as necessary or proper to
20-4 implement this Act; or
20-5 (6) refund to the member insurers in proportion to the
20-6 contribution of each member insurer of the association that amount
20-7 by which the assets of the association exceed the liabilities, if
20-8 at the end of any calendar year the board of directors finds that
20-9 the assets of the association exceed the liabilities of the
20-10 association as estimated by the board of directors for the coming
20-11 year.
20-12 SECTION 13. Paragraph (i) of Section 8, Article 21.28-C,
20-13 Insurance Code, is repealed.
20-14 SECTION 14. Section 8, Art. 21.28-C, Insurance Code, is
20-15 amended to include the following paragraph (k):
20-16 (k)(1) Notwithstanding Chapter 271, Acts of the 60th
20-17 Legislature, Regular Session, 1967 (Article 6252-17, Vernon's Texas
20-18 Civil Statutes), the board may hold an open or closed meeting by
20-19 telephone conference call if immediate action is required and the
20-20 convening at one location of a quorum of the board is inconvenient
20-21 for any member of the board.
20-22 (2) The meeting is subject to the notice requirements
20-23 applicable to other meetings.
20-24 (3) The notice of the meeting must specify as the
20-25 location of the meeting the location where meetings of the board
21-1 are usually held.
21-2 (4) Each part of the meeting that is required to be
21-3 open to the public shall be audible to the public at the location
21-4 specified in the notice of the meeting as the location of the
21-5 meeting and shall be tape recorded. The tape recording shall be
21-6 made available to the public for 30 days after the meeting date.
21-7 SECTION 15. Paragraph (e) of Section 9, Article 21.28-C,
21-8 Insurance Code, is amended to read as follows:
21-9 <Notice of claims to the receiver of the impaired insurer
21-10 constitutes notice to the association or its agent.> A list of
21-11 claims shall be submitted periodically to the association or
21-12 similar organization in another state by the receiver.
21-13 SECTION 16. Paragraph (a) of Section 11, Article 21.28-C,
21-14 Insurance Code, is amended to read as follows:
21-15 A person recovering under this Act is considered to have
21-16 assigned to the association the person's right under the policy,
21-17 and the person's rights to recover for the occurrence made the
21-18 basis of the claim under this Act under any policy of insurance
21-19 issued by an unimpaired insurer <to the association> to the extent
21-20 of the person's recovery from the association. The association may
21-21 pursue any such claims to which it is subrogated under this
21-22 provision in its own name or in the name of the person recovering
21-23 under this Act.
21-24 SECTION 17. Paragraph (a) of Section 12, Article 21.28-C,
21-25 Insurance Code, is amended to read as follows:
22-1 A person who has a claim against an insurer under any
22-2 provision in an insurance policy other than a policy of an impaired
22-3 insurer that is also a covered claim shall exhaust first the
22-4 person's rights under the policy, including but not limited to any
22-5 claim for indemnity or medical benefits under any workers'
22-6 compensation, health, disability, uninsured motorist, personal
22-7 injury protection, medical payment, liability, or other policy.
22-8 <Any amount payable on a covered claim under this Act shall be
22-9 reduced by the amount of any recovery under the insurance policy.>
22-10 The association shall have a credit or setoff against any amount of
22-11 benefits which would otherwise by payable by the association to the
22-12 claimant under this Act, in the amount of the claimant's recovery
22-13 under any policy issued by an unimpaired insurer. Subject to the
22-14 provisions of subsections (1) and (2) below, the association's
22-15 credit or setoff under this Section shall be deducted from damages
22-16 incurred by the claimant, and the remaining sum shall be the
22-17 maximum amount payable by the association, except that the
22-18 association's liability shall not exceed $100,000 or the limits of
22-19 the policy under which the claim is made, whichever is less.
22-20 (1) Notwithstanding the foregoing, if a claimant is
22-21 seeking recovery of policy benefits that, but for the insolvency of
22-22 the impaired insurer, would be subject to lien or subrogation by a
22-23 workers' compensation insurer, health insurer or any other insurer,
22-24 whether impaired or not, then the association's credit or offset
22-25 shall be deducted from the damages incurred by the claimant or the
23-1 limits of the policy under which the claim is made, whichever is
23-2 less.
23-3 (2) In no event shall a claimant's recovery under this
23-4 Act result in a total recovery to the claimant that is greater than
23-5 that which would have resulted but for the insolvency of the
23-6 impaired insurer. Subject to Section 5(8) of this Act, a
23-7 claimant's recovery under this Act shall not result in a recovery
23-8 to the claimant that is less than that which would have resulted
23-9 but for the insolvency of the impaired insurer.
23-10 SECTION 18. Paragraph (b) of Section 12, Article 21.28-C,
23-11 Insurance Code, is amended to read as follows:
23-12 A person who has a claim that may be recovered under more
23-13 than one insurance guaranty association or its equivalent shall
23-14 seek recovery first from the association of the place of residence
23-15 of the insured, except that if it is a first-party claim for damage
23-16 to property with a permanent location, the person shall seek
23-17 recovery first from the association of the location of the
23-18 property, and if it is a workers' compensation claim the person
23-19 shall seek recovery first from the association of the residence of
23-20 the claimant. <Any recovery under this Act shall be reduced by the
23-21 amount of recovery from any other insurance guaranty association or
23-22 its equivalent.> The Association shall have a credit or setoff
23-23 against any amount of benefits under this Act, in the amount of the
23-24 claimant's recovery from the guaranty association or equivalent.
23-25 Subject to the provisions of subsections (1) and (2) below, the
24-1 association's credit or setoff under this Section shall be deducted
24-2 from the damages incurred by the claimant, and the remaining sum
24-3 shall be the maximum amount payable by the association, except that
24-4 the association's liability shall not exceed $100,000 or the limits
24-5 of the policy under which the claim is made, whichever is less.
24-6 (2) In no event shall a claimant's recovery under this
24-7 Act result in a total recovery to the claimant that is greater than
24-8 that which would have resulted but for the insolvency of the
24-9 impaired insurer. Subject to Section 5(8) of this Act, a
24-10 claimant's recovery under this Act shall not result in a recovery
24-11 to the claimant that is less than that which would have resulted
24-12 but for the insolvency of the impaired insurer.
24-13 SECTION 19. Section 13, Article 21.28-C, Insurance Code, is
24-14 amended to read as follows:
24-15 Sec. 13 <Prevention of Insolvencies. (a) To aid in the
24-16 detection and prevention of insurer insolvencies, the board of
24-17 directors, on majority vote, may make recommendations to the
24-18 commissioner for the detection and prevention of insurer
24-19 insolvencies and respond to requests by the commissioner to discuss
24-20 and make recommendations regarding the status of any member insurer
24-21 whose financial condition may be hazardous to policyholders or the
24-22 public. Those recommendations are not public documents and are not
24-23 subject to the open records law, Chapter 424, Acts of the 63rd
24-24 Legislature, Regular Session, 1973 (Article 6252-17a, Vernons Texas
24-25 Civil Statutes), until such time as an insurer is declared to be
25-1 impaired. (b). At the conclusion of any domestic insurer
25-2 insolvency in which the association was obligated to pay covered
25-3 claims, the board of directos amy prepare a report on the history
25-4 and causes of the insolvency, based on the information available to
25-5 the association, and may submit the report to the commissioner.>
25-6 Financial Condition of Member Insurers. The association shall have
25-7 authority to perform on-site visits of member insurers which have
25-8 been placed into conservatorship pursuant to Art. 21.28-A,
25-9 Insurance Code or into receivership, and prepare reports on matters
25-10 relating to the impact or potential impact of covered claims of
25-11 such member in the event of impairment. The association shall have
25-12 free access to all the books and papers of the member insurer or
25-13 agents thereof relating to covered or potentially covered
25-14 liabilities of the member insurer. Such reports and
25-15 recommendations shall not be public documents. There shall be no
25-16 liability on the part of, and no cause of action of any nature
25-17 shall arise against the association or its agents or employees, the
25-18 board of directors, member insurers or the commissioner or her
25-19 authorized representative for any statements made by them in any
25-20 reports or recommendations made hereunder.
25-21 SECTION 20. Section 14, Article 21.28-C, Insurance Code, is
25-22 amended to read as follows:
25-23 <The association shall be subject to examination and
25-24 regulation by the commissioner in the same manner as other insurers
25-25 under this code.> Not later than March 30 of each year, the
26-1 association <board of directors> shall submit an audited financial
26-2 statement to the state auditor <a financial report> for the
26-3 preceding calendar year in a form approved by the state auditor's
26-4 office <commissioner.>.
26-5 SECTION 21. Paragraph (a) of Section 16, Article 21.28-C,
26-6 Insurance Code, is amended to read as follows:
26-7 There is no liability on the part of, and no cause of action
26-8 of any nature arises against, any member insurer, the association
26-9 or its agents or employees, the board of directors, special deputy
26-10 receiver or its agents or employees, or the commissioner or the
26-11 commissioner's representatives for any <good faith> act or failure
26-12 to act in the performance of powers and duties under this Act.
26-13 SECTION 22. Section 17, Article 21.28-C, Insurance Code, is
26-14 amended to read as follows:
26-15 All proceedings in which an impaired insurer is a party or is
26-16 obligated to defend a party in any court in this state, except
26-17 proceedings directly related to the receivership or instituted by
26-18 the receiver, shall be stayed for six months and any additional
26-19 time thereafter as may be determined by the court from the date of
26-20 the designation of impairment or an ancillary proceeding is
26-21 instituted in the state, whichever is later, to permit proper
26-22 defense by the receiver or the association of all pending causes of
26-23 action. As to any covered claims arising from a judgment under any
26-24 decision, verdict, or finding based on the default of the impaired
26-25 insurer or its failure to defend an insured, the association either
27-1 on its own behalf or on behalf of the insured <may apply> shall be
27-2 entitled, upon application, to have the judgment, order, decision,
27-3 verdict, or finding set aside by the same court or administrator
27-4 that made the judgment, order, decision, verdict, or finding and
27-5 shall be permitted to defend the claim on the merits.
27-6 SECTION 23. Paragraph (b) of Section 18, Article 21.28-C,
27-7 Insurance Code, is amended to read as follows:
27-8 (b) If the board of directors determines that additional
27-9 funds are needed in any of the three accounts, it shall make
27-10 assessments as necessary to produce the necessary funds. The
27-11 association, in determining the proportionate amount to be paid by
27-12 individual insurers under an assessment, shall take into
27-13 consideration the lines of business written by the impaired insurer
27-14 and shall assess individual insurers in proportion to the ratio
27-15 that the total net direct written premium collected in this state
27-16 by the insurer for those lines of business bears to the total net
27-17 direct written premium collected by all insurer, other than
27-18 impaired insurers, in this state for those lines of business. The
27-19 association shall determine the total net direct written premium of
27-20 an individual insurer and for all insurers in the state from the
27-21 insurers' annual statements for the year preceding assessment.
27-22 Assessments under this subsection during a calendar year may be
27-23 made up to, but not in excess of, two percent of each insurer's net
27-24 direct written premium for the preceding calendar year in the lines
27-25 of business for which the assessments are being made, except the
28-1 workers' compensation line of business which may be assessed up to,
28-2 but not in excess of, 4%. However, in the event the of a natural
28-3 disaster or other catastrophic event, the commissioner may seek
28-4 approval from the governor, lieutenant governor and speaker of the
28-5 house for an emergency increase in the assessment cap. If the
28-6 maximum assessment in any calendar year does not provide an amount
28-7 sufficient for payment of covered claims of impaired insurers,
28-8 assessments may be made in the next and successive calendar years.
28-9 SECTION 24. Paragraph (b) of Section 1.27 of Acts 1991, 72nd
28-10 Legislature, Second Called Session, Chapter 12, is amended to read
28-11 as follows:
28-12 A guaranty association established under Article 9.48,
28-13 21.28-C, or 21.28-D, Insurance Code, may elect to assume its
28-14 responsibilities under this Act in proceedings initiated before
28-15 January 1, 1992. A proceeding covered by such an election is
28-16 subject to Article 9.48, 21.28-C, or 21.28-D, as appropriate, as
28-17 amended by this article. On and after September 1, 1994, the
28-18 appropriate guaranty association shall assume its responsibilities
28-19 under Article 9.48, 21.28-C, or 21.28-D, Insurance Code, as amended
28-20 by this article, in any proceeding pending on that date that was
28-21 initiated under Article 9.48, 21.28-C, or 21.28-D, Insurance Code.
28-22 Provided however, that any such assumption of responsibilities by
28-23 the Texas Property and Casualty Insurance Guaranty Association
28-24 shall not affect the substantive law governing the rights of
28-25 policyholders and claimants asserting claims under Article 21.28-C,
29-1 Insurance Code, which rights shall be governed by the law in effect
29-2 as of the date of commencement of the delinquency proceeding
29-3 against the insolvent insurer, and the former law is continued in
29-4 effect for that purpose. After assuming its responsibilities under
29-5 Art. 21.28-C, Insurance Code, as amended by this Act, the Texas
29-6 Property and Casualty Insurance Guaranty Association may approve,
29-7 compromise, settle, or reject claims filed against the Receiver
29-8 which are asserted to be covered claims under Article 21.28-C, and
29-9 may intervene in any litigation arising from the Receiver's
29-10 rejection of any such claims. By assuming its responsibilities,
29-11 the Texas Property and Casualty Insurance Guaranty Association does
29-12 not assume any liabilities of the Receiver which are not covered
29-13 claims as defined in Article 21.28-C, Insurance Code, as of the
29-14 date of commencement of the delinquency proceeding against the
29-15 insolvent insurer.
29-16 SECTION 25. Article 21.28-C, Insurance Code, is amended by
29-17 adding the following Section 24:
29-18 Sec. 24. Controlling Law. In the event of a conflict
29-19 between this Act and any other statutory provisions relating to the
29-20 association, the provisions of this Act will control.
29-21 SECTION 26. Subject to the continuation of the former law
29-22 pursuant to Section 23 of this Act, this Act takes effect on
29-23 September 1, 1993.
29-24 SECTION 27. The amendment contained in Section 23, raising
29-25 the maximum assessment on workers' compensation to 4% shall remain
30-1 in effect until August 31, 1995. On September 1, 1995 the 2%
30-2 assessment cap for all lines of business shall be reinstated.
30-3 SECTION 28. The importance of this legislation and the
30-4 crowded condition of the calendars in both houses create an
30-5 emergency and an imperative public necessity that the
30-6 constitutional rule requiring bills to be read on three several
30-7 days in each house be suspended, and this rule is hereby suspended.
30-8 SECTION 29. Any laws or portions of laws in conflict with
30-9 this Act are hereby repealed.