By Counts 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 deputy
1-20 receivers and guaranty associations shall be conducted by the
1-21 commissioner. The commissioner's oversight of the guaranty
1-22 associations shall consist solely of the appointment of their
1-23 boards of directors and approval of their plans of operation. The
2-1 commissioner shall use a competitive bidding process in the
2-2 selection of special deputy receivers and shall establish
2-3 specifications for the position of special deputy receiver. The
2-4 special deputy receiver shall submit monthly written reports to the
2-5 court and commissioner that state the special deputy receiver's
2-6 business plan for the receivership, including expenses incurred in
2-7 administering the receivership during the preceding month and an
2-8 estimate of those expenses for the succeeding month. The report
2-9 must include a cost-benefit analysis on the expenditure of funds
2-10 other than funds spent for the payment of claims. The business
2-11 plan report must include a budget of monthly expenses that explains
2-12 any variation from the original projection. The business plan
2-13 report must include a list of any lawyers or law firms that offered
2-14 to or did represent the special deputy receiver in relation to its
2-15 duties under this article, and any hours billed or fees paid to a
2-16 lawyer or law firm that represented the special deputy receiver.
2-17 The special deputy receiver shall submit the business plan report
2-18 to the attorney general on a quarterly basis, and the attorney
2-19 general may make recommendations to the commissioner based on the
2-20 report. In addition to the business plan report, the special
2-21 deputy receiver shall submit a monthly report to the commissioner
2-22 relating to the special deputy receiver's activities in
2-23 administering the receivership. Upon written application by the
2-24 special deputy receiver and with approval of the commissioner, the
2-25 court may suspend the requirement for monthly reports or require
3-1 reports less frequently based upon a showing that the costs of such
3-2 reports exceeds the benefit derived from their filing.
3-3 Closing
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 liquidator
3-15 or special deputy receiver determines that there are insufficient
3-16 assets to disburse, the application required by this section shall
3-17 be considered satisfied by a filing by the liquidator or special
3-18 deputy receiver stating the reasons for this determination.
3-19 (b) Such proposal shall, at a minimum, include provisions
3-20 for:
3-21 (1) reserving amounts sufficient to allow the payment
3-22 of Class 1 claims, and to the extent the assets of the insolvent
3-23 insurer will allow any payment to be made on Class 2 claims,
3-24 reserving amounts sufficient to provide equal pro-rata
3-25 distributions to the Class 2 claimants other than the guaranty
4-1 associations;
4-2 (2) disbursement of the assets marshaled to date and
4-3 the subsequent distribution of assets as they become available;
4-4 (3) equitable allocation of disbursements to each of
4-5 the guaranty associations and foreign guaranty associations
4-6 entitled thereto;
4-7 (4) the securing of the liquidator or special deputy
4-8 receiver from each of the associations entitled to disbursements
4-9 pursuant to this section of an agreement to return to the
4-10 liquidator such assets, together with income on assets previously
4-11 disbursed, as may be required to pay Class 1 claimants and any
4-12 federal claimants asserting priority claims. No bond shall be
4-13 required of any such association; and
4-14 (5) a full report to be made by each association to
4-15 the liquidator or special deputy receiver, as requested by the
4-16 liquidator or special deputy receiver, but no more frequently than
4-17 quarterly, accounting for the assets so disbursed to the
4-18 association, all disbursements made therefrom, any interest earned
4-19 by the association on such assets and any other matter as the court
4-20 may direct.
4-21 (c) The proposal submitted by the liquidator or special
4-22 deputy receiver shall provide for disbursements to the associations
4-23 in amounts estimated at least equal to the claim payments made or
4-24 to be made thereby for which such associations could assert a claim
4-25 against the liquidator, and shall further provide that if the
5-1 assets available for disbursement from time to time do not equal or
5-2 exceed the amount of such claim payments made or to be made by the
5-3 association, then disbursements shall be made for the pro-rata
5-4 amount of the association's Class 2 claim.
5-5 (d) The proposal submitted by the liquidator or special
5-6 deputy receiver shall, with respect to an insolvent insurer writing
5-7 life or health insurance or annuities, provide for disbursement of
5-8 assets to any guaranty association or foreign guaranty association
5-9 covering life or health insurance or annuities or to any other
5-10 entity or organization reinsuring, assuming, or guaranteeing
5-11 policies or contracts of insurance under the acts creating such
5-12 associations.
5-13 (e) Notice of such application shall be given to the
5-14 association in and to the commissioners of insurance of each of the
5-15 states. Any such notice shall be deemed to have been given when
5-16 deposited in the United States certified mails, first class postage
5-17 prepaid, at least 30 days prior to the submission of such
5-18 application to the court. Action of the application may be taken
5-19 by the court provided the above required notice has been given and
5-20 provided further the liquidator's or special deputy receiver's
5-21 proposal complies with the requirements of this Section.
5-22 SECTION 3. Paragraph (a) of Section 8, Article 21.28,
5-23 Insurance Code, is amended to read as follows:
5-24 (a) Priority of Distribution of Assets. <Notwithstanding
5-25 any other provision of law,> The priority of distribution of assets
6-1 from the insurer's estate shall be in accordance with the
6-2 disbursement plan approved by the court pursuant to Section 7A of
6-3 this Article, and in accordance with the order of each class as
6-4 provided by this subsection. Every claim in each class shall be
6-5 paid in full or adequate funds retained for such payment before the
6-6 members of the next class receive any payment. No subclasses shall
6-7 be established within any class. <Additional subclasses may not be
6-8 established within any class.>
6-9 (The remainder of the Paragraph is unchanged.)
6-10 SECTION 4. Section 9, Article 21.28, Insurance Code is
6-11 amended to read as follows:
6-12 (a) Excess Assets--Stock Companies. When the receiver shall
6-13 have made provision for unclaimed dividends and all of the
6-14 liabilities of a stock insurance company, he shall call a meeting
6-15 of the stockholders of the insurer by giving notice thereof in one
6-16 (1) or more newspapers in the county where the principal office of
6-17 the insurer was located, and by written notice to the stockholders
6-18 of record at their last known address. At such meeting, the
6-19 stockholders shall appoint an agent or agents to take over the
6-20 affairs to continue the liquidation for benefit of the
6-21 stockholders. Voting privileges shall be governed by the insurer's
6-22 bylaws. A majority of the stock shall be represented at the
6-23 agent's appointment. Such agent or agents shall execute and file
6-24 with the court such bond or bonds as shall be approved by it,
6-25 conditioned on the faithful performance of all the duties of the
7-1 trust. Under order of the court the receiver shall then transfer
7-2 and deliver to such agent or agents for continued liquidation under
7-3 the court's supervision all assets of insurer remaining in his
7-4 hands, whereupon the receiver and the Board, and each member and
7-5 employee thereof, shall be discharged from any further liability to
7-6 such insurer and its creditors and stockholders; provided, however,
7-7 that nothing herein contained shall be so construed as to permit
7-8 the insurer to continue in business as such, but the charter of
7-9 such insurer and all permits and licenses issued thereunder or in
7-10 connection therewith shall be ipso facto revoked and annulled by
7-11 such order of the court directing the receiver to transfer and
7-12 deliver the remaining assets of such insurer to such agent or
7-13 agents.
7-14 (b) Excess Assets--Other Companies. After the receiver
7-15 shall have made provision for unclaimed dividends and all of the
7-16 liabilities of any insurer other than a stock insurance company, he
7-17 shall dispose of any remaining assets as directed by the
7-18 receivership court.
7-19 (c) Notwithstanding any other provisions of this article in
7-20 closing an estate, a special deputy receiver, upon approval of the
7-21 court, may transfer any remaining assets, causes of action asserted
7-22 on behalf of the impaired insurer, judgment, claims, or liens to
7-23 the appropriate guaranty association and such transfer shall not be
7-24 a preference or avoidable transfer but shall be considered a
7-25 distribution under Section 8(a)1. In the event the sum realized by
8-1 the guaranty association is materially larger than the amount
8-2 loaned to the estate by the guaranty association, the court may
8-3 order reopening of the estate to disburse the excess funds.
8-4 Nothing in this section shall be construed as a transfer of any
8-5 liability of an impaired insurer to the guaranty association that
8-6 would not constitute a claim payable under Articles 9.48, 21.28-C
8-7 or 21.28-D of the Insurance Code.
8-8 (d) Limitation. Except as otherwise provided by this
8-9 subsection, each receivership or other delinquency proceeding
8-10 prescribed by this Article shall be administered in accordance with
8-11 Section 64.072, Civil Practice and Remedies Code. To the extent a
8-12 receivership or delinquency proceeding initiated against an insurer
8-13 applies to claims against a workers' compensation insurance policy
8-14 or a title insurance policy, the receivership or delinquency
8-15 proceeding shall be administered continuously for whatever length
8-16 of time is necessary to effectuate its purposes, and no arbitrary
8-17 period prescribed elsewhere by the laws of Texas limiting the time
8-18 for the administration of receiverships or of corporate affairs
8-19 generally shall be applicable thereto. Instead of the winding up
8-20 and distribution of a receivership estate of an insurer without
8-21 capital stock, the court shall order revival and reinstatement of
8-22 the charter, permits, licenses, franchises, and management
8-23 contracts or other control instruments of the insurer if the
8-24 insurer's remaining cash on hand and on deposit, less any
8-25 outstanding valid and enforceable liabilities, exceeds the minimum
9-1 amount of capital and surplus prescribed for that insurer under
9-2 Article 2.02 or Section 1 of Article 3.02 of this code.
9-3 (e) Reopening. If after the receivership shall have been
9-4 closed by final order of the court, the liquidator shall discover
9-5 assets not known to him during receivership, he shall report his
9-6 findings to the court. It shall be within the discretion of the
9-7 court as to whether the value of the after-discovered assets shall
9-8 justify the reopening of the receivership for continued
9-9 liquidation.
9-10 SECTION 5. Paragraph (d) of Section 11, Art. 21.28,
9-11 Insurance Code is amended to read as follows:
9-12 Maintenance of Records. The receiver may devise a method for
9-13 the effective, efficient, and economical maintenance of the records
9-14 of the delinquent insurer and of the liquidator's office including
9-15 maintaining those records on any medium approved by the Records
9-16 Management Division of the Texas State Library. A copy of an
9-17 original record or any other record that is maintained on any
9-18 medium approved by the Records Management Division of the Texas
9-19 State Library within the scope of this section that is produced by
9-20 the receiver or his authorized representative under this Article
9-21 shall have the same force and effect as the original record and may
9-22 be used the same as the original record in any judicial or
9-23 administrative proceeding in this state.
9-24 In order to maintain the records of delinquent insurers after
9-25 the closing of the receivership proceedings, the receiver may
10-1 reserve assets of an estate to be deposited in an account to be
10-2 used for the specific purpose of maintenance, storage and disposal
10-3 of records in closed receivership estates. <If the need exists for
10-4 the continued maintenance of any records of a delinquent insurer
10-5 after the closing of the receivership proceedings, the receiver may
10-6 reserve sufficient assets, including cash, to be transferred to the
10-7 liquidator on closing of the receivership for the specific purpose
10-8 of meeting the reasonable cost of maintaining those records.>
10-9 SECTION 6. Section 3, Article 21.28-C, Insurance Code, is
10-10 amended to read as follows:
10-11 This Act applies to all kinds of direct insurance, but except
10-12 where indicated elsewhere in this Act is not applicable to the
10-13 following:
10-14 (1) life, annuity, health, or disability insurance;
10-15 (2) mortgage guaranty, financial guaranty, or other
10-16 forms of insurance offering protection against investment risks;
10-17 (3) fidelity or surety bonds, or any other bonding
10-18 obligations;
10-19 (4) credit insurance, vendors' single-interest
10-20 insurance, collateral protection insurance, or any similar
10-21 insurance protecting the interests of a creditor arising out of a
10-22 creditor-debtor transaction;
10-23 (5) insurance of warranties or service contracts;
10-24 (6) title insurance;
10-25 (7) ocean marine insurance;
11-1 (8) any transactions or combination of transactions
11-2 between a person, including an affiliate of such a person, and an
11-3 insurer, including an affiliate of such an insurer, that involves
11-4 the transfer of investment or credit risk unaccompanied by the
11-5 transfer of insurance risk; or
11-6 (9) any insurance provided by or guaranteed by
11-7 government.
11-8 SECTION 7. Paragraph (8) of Section 5, Article 21.28-C,
11-9 Insurance Code, is amended to read as follows:
11-10 (8) "Covered claim" means an unpaid claim of an
11-11 insured or third-party liability claimant that arises out of and is
11-12 within the coverage and not in excess of the applicable limits of
11-13 an insurance policy to which this Act applies, issued or assumed
11-14 (whereby an assumption certificate is issued to the insured) by an
11-15 insurer licensed to do business in this state, if that insurer
11-16 becomes impaired and the third-party claimant or liability claimant
11-17 or insured is a resident of this state at the time of the insured
11-18 event, or the property from which the claim arises is permanently
11-19 located in this state. "Covered claim" shall also include 75
11-20 percent of unearned premiums, but in no event shall a covered claim
11-21 for unearned premiums, including any such claim arising from a
11-22 workers' compensation policy, exceed $1,000. Individual covered
11-23 claims (including any and all derivative claims by more than one
11-24 person which arise from the same occurrence, which shall be
11-25 considered collectively as a single claim under this Act) shall be
12-1 limited to $100,000, except that the association shall pay the full
12-2 amount of any covered claim arising out of a workers' compensation
12-3 claim made under a workers' compensation policy. For purposes of
12-4 this Act, any claim made for recovery of attorneys fees under a
12-5 policy, regardless of whether such claim is presented together with
12-6 or separately from a claim for policy benefits, shall be considered
12-7 as part of the claim under the policy and not as a separate
12-8 "Covered claim." "Covered claim" shall not include any amount
12-9 sought as a return of premium under a retrospective rating plan; or
12-10 any amount due any reinsurer, insurer, insurance pool, or
12-11 underwriting association, as subrogation recoveries or otherwise.
12-12 "Covered claim" shall not include supplementary payment
12-13 obligations, including adjustment fees and expenses, attorney's
12-14 fees and expenses, court costs, interest and penalties, and
12-15 interest and bond premiums incurred prior to the determination that
12-16 an insurer is an impaired insurer under this Act. "Covered claim"
12-17 shall not include any prejudgment or postjudgment interest which
12-18 accrues subsequent to the determination that an insurer is an
12-19 impaired insurer under this Act. "Covered claim" shall not include
12-20 any claim for recovery of punitive, exemplary, extracontractual, or
12-21 bad-faith damages, whether sought as a recovery against the
12-22 insured, the insurer, or the association awarded in a court
12-23 judgment against an insured or insurer. "Covered claim" shall not
12-24 include, and the association shall not have any liability to an
12-25 insured or third-party liability claimant, for its failure to
13-1 settle a liability claim within the limits of a covered claim under
13-2 this Act. With respect to a covered claim for unearned premiums,
13-3 both persons who were residents of this state at the time the
13-4 policy was issued and persons who are residents of this state at
13-5 the time the company is found to be an impaired insurer shall be
13-6 considered to have covered claims under this Act. If the impaired
13-7 insurer has insufficient assets to pay the expenses of
13-8 administering the receivership or conservatorship estate, the
13-9 portion of the expenses of administration incurred in the
13-10 processing and payment of claims against the estate shall also be a
13-11 covered claim under this Act.
13-12 SECTION 8. Paragraph (9) of Section 5, Article 21.28-C,
13-13 Insurance Code, is amended to read as follows:
13-14 (9) "Impaired insurer" means:
13-15 (A) a member insurer that is placed in temporary
13-16 or permanent receivership under an order of a court of competent
13-17 jurisdiction, including the Courts of any other State, based on a
13-18 finding of insolvency and that has been designated an impaired
13-19 insurer by the commissioner; or
13-20 (B) a member insurer placed in conservatorship
13-21 after it has been determined by the commissioner to be insolvent
13-22 and that has been designated an impaired insurer by the
13-23 commissioner.
13-24 SECTION 9. Paragraph (d) of Section 7, Article 21.28-C,
13-25 Insurance Code, is amended to read as follows:
14-1 (d) A public representative may not be:
14-2 (1) an officer, director, or employee of an insurance
14-3 company, insurance agency, agent, broker, solicitor, adjuster, or
14-4 any other business entity regulated by the Texas Department of
14-5 Insurance;
14-6 (2) a person required to register with the secretary
14-7 of state under Chapter 305, Government Code in connection with
14-8 their representation of clients in the field of insurance; or
14-9 (3) related to a person described by Subdivision (1)
14-10 or (2) of this subsection within the second degree of affinity or
14-11 consanguinity.
14-12 SECTION 10. Paragraph (b) of Section 8, Article 21.38-C.,
14-13 Insurance Code, is amended to read as follows:
14-14 <The association is considered the insurer to the extent of
14-15 its obligation on the covered claims and to that extent has all
14-16 rights, duties, and obligations of the impaired insurer as if the
14-17 insurer had not become impaired.>
14-18 The association shall undertake to discharge the policy
14-19 obligations of the impaired insurer, including the duty to defend
14-20 insureds under a liability policy, to the extent that such policy
14-21 obligations are covered claims under this Act. In performing its
14-22 statutory obligations, the association may also enforce any duty
14-23 imposed on the insured party or beneficiary under the terms of any
14-24 policy of insurance within the scope of this Act. In performing
14-25 its statutory obligations under this Act, the association shall not
15-1 be considered to be in the business of insurance, shall not be
15-2 considered to have assumed or succeeded to any liabilities of the
15-3 impaired insurer, and shall not be considered to otherwise stand in
15-4 the shoes of the impaired insurer for any purpose, including but
15-5 not limited to the issue of whether the association is amenable to
15-6 the personal jurisdiction of the Courts of any other State.
15-7 SECTION 11. Paragraph (d) of Section 8, Article 21.28-C,
15-8 Insurance Code, is amended to read as follows:
15-9 (1) General Provisions. The association shall investigate
15-10 claims brought against the association, and the association may
15-11 investigate claims brought against the impaired insurer, any person
15-12 named as an insured under a liability policy issued by the impaired
15-13 insurer, the commissioner, or a special deputy receiver appointed
15-14 pursuant to Article 21.28 of this Code if such claims involve or
15-15 may involve the association's rights and obligations under this
15-16 Act, and shall adjust, compromise, settle, and pay covered claims
15-17 to the extent of the association's obligation and deny all other
15-18 claims. The association may review settlements, releases, and
15-19 judgments to which the impaired insurer or its insureds were
15-20 parties to determine the extent to which those settlements,
15-21 releases, and judgments may be properly contested. Any judgment
15-22 taken by default or consent against an insured or the impaired
15-23 insurer, and any settlement, release or judgment entered into by
15-24 the insured or the impaired insurer, shall not be considered to be
15-25 binding upon the association, and shall not be considered as
16-1 evidence of liability or of damages in connection with any claim
16-2 brought against the association or any other party under this Act.
16-3 Notwithstanding any other provision of this Act, a covered
16-4 claim shall not include any claim filed with the guaranty
16-5 association after the earlier of the final date for filing claims
16-6 against the liquidator or receiver of an insolvent insurer, or
16-7 eighteen months after the order of liquidation.
16-8 (2) Claims Procedures. Claims under this Act, or
16-9 against person insured under a liability policy issued by an
16-10 impaired insurer subject to this Act, shall be made in accordance
16-11 with the following procedures:
16-12 (i) Liability Claims Against Insureds.
16-13 Subject to the provisions of Section 17 of this Act, a third-party
16-14 liability claimant may assert claims persons insured under a
16-15 liability policy issued by an impaired insurer in the same manner
16-16 as if the insurer not become impaired. The tender of a defense by
16-17 the association to an insured under a liability policy issued by an
16-18 impaired insurer shall not operate as a waiver of any of the
16-19 provisions of this Act which would limit the liability of the
16-20 association, but the association shall notify the insured of any
16-21 reservation of rights under the terms of the policy issued by the
16-22 impaired insurer. Any issues relating to the association's
16-23 obligations under this act or under an insurance policy issued by
16-24 the impaired insurer shall not be determined in a suit brought
16-25 against an insured. Evidence that a person is or is not be
17-1 entitled to indemnity by the association under this Act is not
17-2 admissible unless such evidence would have been properly admissible
17-3 against the impaired insurer under Rule 411 of the Texas Rules of
17-4 Evidence.
17-5 (ii) First-Party Claims and Claims
17-6 relating to Association's Rights and Obligations. For purposes of
17-7 this Section, a "First-Party or Coverage Claim" shall include: 1)
17-8 any direct claim against the association by an insured,
17-9 policyholder or beneficiary of a policy issued by an impaired
17-10 insurer and under which the insurer was obligated to pay the person
17-11 directly; and 2) any claim by an insured or policyholder, relating
17-12 to the association's rights and obligations under this Act or under
17-13 an insurance policy issued by the impaired insurer. Any person
17-14 making a First-Party or Coverage Claim under this Act shall deliver
17-15 to the association a written statement reasonably apprising the
17-16 association of the facts which form the basis of the claim. The
17-17 association may, but is not required to, accept for processing any
17-18 such written notice filed with the impaired insurer and contained
17-19 in the claim files provided to the association. The claimant shall
17-20 also specify an address to which any correspondence or other
17-21 notices may be sent to the claimant by mail, and shall promptly
17-22 advise the association in writing of any change of address while
17-23 the claim is pending. In addition, the claimant shall provide the
17-24 association with such additional information relating to the claim
17-25 as is requested in writing by the association.
18-1 The association shall notify each first-party or coverage
18-2 claimant, at the address specified by the claimant, of its
18-3 acceptance or rejection of a claim, and if the claim has been
18-4 accepted, the amount for which the claim has been accepted by the
18-5 association. The claimant may appeal the association's
18-6 determination of the validity, nature and amount of the claim by
18-7 filing an action against the association in any District Court of
18-8 Travis County for the recovery of a covered claim under this Act.
18-9 The association may be served with citation by serving its
18-10 executive director at the association's principal place of business
18-11 in Travis County. Such an appeal shall be filed within one year of
18-12 the date the association's notice of its acceptance or rejection of
18-13 the claim was delivered to the address specified by the claimant,
18-14 whether or not such notice was actually received by the claimant.
18-15 An action filed under this Act shall be de novo, as if originally
18-16 filed in said court and subject to the Texas Rules of Civil
18-17 Procedure.
18-18 (iii). Workers' Compensation Claim.
18-19 Claims for benefits under the Workers' Compensation Act shall be
18-20 made in accordance with the provisions of the Workers' Compensation
18-21 Act, except that the venue of all workers' compensation claims
18-22 against the association shall be Travis County, Texas. The
18-23 association shall not be subject to any administrative fines or
18-24 penalties under the Workers' Compensation Act.
18-25 SECTION 12. Paragraph (h) of Section 8, Article 21.28-C,
19-1 Insurance Code, is amended to read as follows:
19-2 The association may:
19-3 (1) employ or retain persons as necessary to handle
19-4 claims and perform other duties of the association;
19-5 (2) borrow funds necessary to implement this Act in
19-6 accordance with the plan of operation;
19-7 (3) sue or be sued;
19-8 (4) negotiate and become a party to contracts as
19-9 necessary to implement this Act, including lump-sum or structured
19-10 compromise and settlement agreements with claimants who have claims
19-11 for medical and/or indemnity benefits for a period of three years
19-12 or more.
19-13 (5) perform other acts as necessary or proper to
19-14 implement this Act; or
19-15 (6) refund to the member insurers in proportion to the
19-16 contribution of each member insurer of the association that amount
19-17 by which the assets of the association exceed the liabilities, if
19-18 at the end of any calendar year the board of directors finds that
19-19 the assets of the association exceed the liabilities of the
19-20 association as estimated by the board of directors for the coming
19-21 year.
19-22 SECTION 13. Paragraph (i) of Section 8, Article 21.28-C,
19-23 Insurance Code, is repealed.
19-24 SECTION 14. Paragraph (e) of Section 9, Article 21.28-C,
19-25 Insurance Code, is amended to read as follows:
20-1 <Notice of claims to the receiver of the impaired insurer
20-2 constitutes notice to the association or its agent.> A list of
20-3 claims shall be submitted periodically to the association or
20-4 similar organization in another state by the receiver.
20-5 SECTION 15. Paragraph (a) of Section 11, Article 21.28-C,
20-6 Insurance Code, is amended to read as follows:
20-7 A person recovering under this Act is considered to have
20-8 assigned to the association the person's right under the policy,
20-9 and the person's rights to recover for the occurrence made the
20-10 basis of the claim under this Act under any policy of insurance
20-11 issued by an unimpaired insurer <to the association> to the extent
20-12 of the person's recovery from the association. The association may
20-13 pursue any such claims to which it is subrogated under this
20-14 provision in its own name or in the name of the person recovering
20-15 under this Act.
20-16 SECTION 16. Paragraph (a) of Section 12, Article 21.28-C,
20-17 Insurance Code, is amended to read as follows:
20-18 A person who has a claim against an insurer under any
20-19 provision in an insurance policy other than a policy of an impaired
20-20 insurer that is also a covered claim shall exhaust first the
20-21 person's rights under the policy, including but not limited to any
20-22 claim for indemnity or medical benefits under any workers'
20-23 compensation, health, disability, uninsured motorist, personal
20-24 injury protection, medical payment, liability, or other policy.
20-25 <Any amount payable on a covered claim under this Act shall be
21-1 reduced by the amount of any recovery under the insurance policy.>
21-2 The association shall have a credit or setoff against any amount of
21-3 benefits which would otherwise by payable by the association to the
21-4 claimant under this Act, in the amount of the claimant's recovery
21-5 under any policy issued by an unimpaired insurer. Subject to the
21-6 provisions of subsections (1) and (2) below, the association's
21-7 credit or setoff under this Section shall be deducted from damages
21-8 incurred by the claimant, and the remaining sum shall be the
21-9 maximum amount payable by the association, except that the
21-10 association's liability shall not exceed $100,000 or the limits of
21-11 the policy under which the claim is made, whichever is less.
21-12 (1) Notwithstanding the foregoing, if a claimant is
21-13 seeking recovery of policy benefits that, but for the insolvency of
21-14 the impaired insurer, would be subject to lien or subrogation by a
21-15 workers' compensation insurer, health insurer or any other insurer,
21-16 whether impaired or not, then the association's credit or offset
21-17 shall be deducted from the damages incurred by the claimant or the
21-18 limits of the policy under which the claim is made, whichever is
21-19 less.
21-20 (2) In no event shall a claimant's recovery under this
21-21 Act result in a total recovery to the claimant that is greater than
21-22 that which would have resulted but for the insolvency of the
21-23 impaired insurer. Subject to Section 5(8) of this Act, a
21-24 claimant's recovery under this Act shall not result in a recovery
21-25 to the claimant that is less than that which would have resulted
22-1 but for the insolvency of the impaired insurer.
22-2 SECTION 17. Paragraph (b) of Section 12, Article 21.28-C,
22-3 Insurance Code, is amended to read as follows:
22-4 A person who has a claim that may be recovered under more
22-5 than one insurance guaranty association or its equivalent shall
22-6 seek recovery first from the association of the place of residence
22-7 of the insured, except that if it is a first-party claim for damage
22-8 to property with a permanent location, the person shall seek
22-9 recovery first from the association of the location of the
22-10 property, and if it is a workers' compensation claim the person
22-11 shall seek recovery first from the association of the residence of
22-12 the claimant. <Any recovery under this Act shall be reduced by the
22-13 amount of recovery from any other insurance guaranty association or
22-14 its equivalent.> The Association shall have a credit or setoff
22-15 against any amount of benefits under this Act, in the amount of the
22-16 claimant's recovery from the guaranty association or equivalent.
22-17 Subsection to the provisions of subsections (1) and (2) below, the
22-18 association's credit of setoff under this Section shall be deducted
22-19 from the damages incurred by the claimant, and the remaining sum
22-20 shall be the maximum amount payable by the association, except that
22-21 the association's liability shall not exceed $100,000 or the limits
22-22 of the policy under which the claim is made, whichever is less.
22-23 (2) In no event shall a claimant's recovery under this
22-24 Act result in a total recovery to the claimant that is greater than
22-25 that which would have resulted but for the insolvency of the
23-1 impaired insurer. Subject to Section 5(8) of this Act, a
23-2 claimant's recovery under this Act shall not result in a recovery
23-3 to the claimant that is less than that which would have resulted
23-4 but for the insolvency of the impaired insurer.
23-5 SECTION 18. Section 13, Article 21.28-C, Insurance Code, is
23-6 repealed.
23-7 SECTION 19. Section 14, Article 21.28-C, Insurance Code, is
23-8 amended to read as follows:
23-9 <The association shall be subject to examination and
23-10 regulation by the commissioner in the same manner as other insurers
23-11 under this code.> Not later than March 30 of each year, the
23-12 association <board of directors> shall submit an audited financial
23-13 statement <a financial report> for the preceding calendar year. <in
23-14 a form approved by the commissioner.>
23-15 SECTION 20. Paragraph (a) of Section 16, Article 21.28-C,
23-16 Insurance Code, is amended to read as follows:
23-17 There is no liability on the part of, and no cause of a
23-18 action of any nature arises against, any member insurer, the
23-19 association or its agents or employees, the board of directors,
23-20 special deputy receiver or its agents or employees, or the
23-21 commissioner or the commissioner's representatives for any <good
23-22 faith> act or failure to act in the performance of powers and
23-23 duties under this Act.
23-24 SECTION 21. Section 17, Article 21.28-C, Insurance Code, is
23-25 amended to read as follows:
24-1 All proceedings in which an impaired insurer is a party or is
24-2 obligated to defend a party in any court in this state, except
24-3 proceedings directly related to the receivership or instituted by
24-4 the receiver, shall be stayed for six months and any additional
24-5 time thereafter as may be determined by the court from the date of
24-6 the designation of impairment or an ancillary proceeding is
24-7 instituted in the state, whichever is later, to permit proper
24-8 defense by the receiver or the association of all pending causes of
24-9 action. As to any covered claims arising from a judgment under any
24-10 decision, verdict, or finding based on the default of the impaired
24-11 insurer or its failure to defend an insured, the association either
24-12 on its own behalf or on behalf of the insured <may apply> shall be
24-13 entitled, upon application, to have the judgment, order, decision,
24-14 verdict, or finding set aside by the same court or administrator
24-15 that made the judgment, order, decision, verdict, or finding and
24-16 shall be permitted to defend the claim on the merits.
24-17 SECTION 22. Paragraph (b) of Section 1.27 of Acts 1991, 72nd
24-18 Legislature, Second Called Session, Chapter 12, is amended to read
24-19 as follows:
24-20 A guaranty association established under Article 9.48,
24-21 21.28-C, or 21.28-D, Insurance Code, may elect to assume its
24-22 responsibilities under this Act in proceedings initiated before
24-23 January 1, 1992. A proceeding covered by such an election is
24-24 subject to Article 9.48, 21.28-C, or 21.28-D, as appropriate, as
24-25 amended by this article. On and after September 1, 1994, the
25-1 appropriate guaranty association shall assume its responsibilities
25-2 under Article 9.48, 21.28-C, or 21.28-D, Insurance Code, as amended
25-3 by this article, in any proceeding pending on that date that was
25-4 initiated under Article 9.48, 21.28-C, or 21.28-D, Insurance Code.
25-5 Provided however, that any such assumption of responsibilities by
25-6 the Texas Property and Casualty Insurance Guaranty Association
25-7 shall not affect the substantive law governing the rights of
25-8 policyholders and claimants asserting claims under Article 21.28-C,
25-9 Insurance Code, which rights shall be governed by the law in effect
25-10 as of the date of commencement of the delinquency proceeding
25-11 against the insolvent insurer, and the former law is continued in
25-12 effect for that purpose. After assuming its responsibilities under
25-13 Art. 21.28-C, Insurance Code, as amended by this Act, the Texas
25-14 Property and Casualty Insurance Guaranty Association may approve,
25-15 compromise, settle, or reject claims filed against the Receiver
25-16 which are asserted to be covered claims under Article 21.28-C, and
25-17 may intervene in any litigation arising from the Receiver's
25-18 rejection of any such claims. By assuming its responsibilities,
25-19 the Texas Property and Casualty Insurance Guaranty Association does
25-20 not assume any liabilities of the Receiver which are not covered
25-21 claims as defined in Article 21.28-C, Insurance Code, as of the
25-22 date of commencement of the delinquency proceeding against the
25-23 insolvent insurer.
25-24 SECTION 23. Article 21.28-C, Insurance Code, is amended by
25-25 adding the following Section 24:
26-1 Sec. 24. The association, its employees and board of
26-2 directors are not required to register with the secretary of state
26-3 pursuant to Art. 1.06-D, Insurance Code.
26-4 SECTION 24. Article 21.28-C, Insurance Code, is amended by
26-5 adding the following Section 25:
26-6 Sec. 25. Controlling Law. In the event of a conflict
26-7 between this Act and any other statutory provisions relating to the
26-8 association, the provisions of this Act will control.
26-9 SECTION 25. Subject to the continuation of the former law
26-10 pursuant to Section 19 of this Act, this Act takes effect on
26-11 September 1, 1993.
26-12 SECTION 26. The importance of this legislation and the
26-13 crowded condition of the calendars in both houses create an
26-14 emergency and an imperative public necessity that the
26-15 constitutional rule requiring bills to be read on three several
26-16 days in each house be suspended, and this rule is hereby suspended.
26-17 SECTION 27. Any laws or portions of laws in conflict with
26-18 this Act are hereby repealed.