BILL ANALYSIS
H.B. 2960
By: Counts (Armbrister)
Economic Development
05-18-95
Senate Committee Report (Unamended)
BACKGROUND
Articles 9.48 and 21.28-C of the Insurance Code establish
provisions for the payment of covered claims under insurance
policies of impaired title and property and casualty insurers in
the state. Article 21.28 of the Insurance Code governs the
liquidation of insolvent insurers in Texas.
PURPOSE
As proposed, H.B. 2960 requires the Texas Title Guaranty
Association to authorize the expenditure of funds from the guaranty
fee account to retain, compensate, and reimburse for expenses, a
person or persons who will audit and review agent, rather than
agent and insurer, escrow and trust accounts, financial condition,
and compliance with applicable statutes and rules; limits the
liability of a receiver, special deputy receiver, or the
commissioner of insurance; amends provisions for the settlement of
claims and debts.
RULEMAKING AUTHORITY
It is the committee's opinion that this bill does not grant any
additional rulemaking authority to a state officer, institution, or
agency.
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Section 14(c), Article 9.48, Insurance Code, to
require, among other duties, the Texas Title Insurance Guaranty
Association, on the request of the commissioner of insurance
(commissioner), to authorize the expenditure of funds from the
guaranty fee account to retain, compensate, and reimburse for
expenses, a person or persons who will audit and review agent,
rather than agent and insurer, escrow and trust accounts, financial
condition, and compliance with applicable statutes and rules and
make reports relating to the accounts, agent financial condition,
and compliance to the commissioner, solely under the direction of
and as assigned by the commissioner. Makes nonsubstantive changes.
SECTION 2. Amends Section 2, Article 21.28, Insurance Code, by
amending Subsection (g) and by adding Subsections (j) and (k), as
follows:
(g) Disposal of Property; Settling Claims. Authorizes the
receiver to compromise or compound doubtful or uncollectible
debt or claim or sell real or personal property upon such
terms as the receiver may deem for the best interest of the
insurer without obtaining approval of the court whenever the
amount of any such debt or claim owed by or owing to the
insurer or the value of any item of property of the insurer
does not exceed $10,000, rather than $1,000. Authorizes the
receiver, subject to the approval of the court and the
commissioner, rather than the State Board of Insurance, to
sell or otherwise dispose of the charter or license of the
insurer separate and apart from its outstanding liabilities.
(j) Immunity. Provides that there is no liability on the part
of, and a cause of action does not arise against, the
receiver, a special deputy receiver, the commissioner, or an
agent or employee of one of these people for a good faith
action or failure to act in performance of powers and duties
under this article.
(k) Representation by Attorney General. Requires the attorney
general to defend an action to which Subsection (j) applies
that is brought against the receiver, a special deputy
receiver, or the commissioner, or an agent or employee of one
of these people. Provides that this subsection continues to
apply to an action that is brought after the defendant's
service with the receiver, a special deputy receiver, the
commissioner, or the Texas Department of Insurance has
terminated or after the close of the receivership out of which
the action arises. Provides that the attorney general is not
required to defend any person with respect to an issue other
than the applicability or effect of the judicial immunity
codified by Subsection (j).
SECTION 3. Amends Section 8(a), Article 21.28, Insurance Code, as
follows:
(a) Priority of Distribution of Assets. Includes in Class 1
of an insurer's estate disbursement plan all of an insurance
guaranty association's or foreign insurance guaranty
association's costs and expenses of administration related to
the receivership. Provides that for purposes of this
subdivision, attorney's fees incurred by an insurance guaranty
association or foreign insurance guaranty association in the
defense of an insured under a policy issued by an impaired
insurer constitute an expense incurred in handling claims.
SECTION 4. Amends Section 5(8), Article 21.28-C, Insurance Code,
to redefine "covered claim."
SECTION 5. Amends Section 7(a), Article 21.28-C, Insurance Code,
to require a person to be a full-time employee of a member insurer
to be eligible to serve as an insurance industry board member.
SECTION 6. Amends Section 8(b), Article 21.28-C, Insurance Code,
to delete language providing that the Texas Property and Casualty
Insurance Guarantee Association (association) is considered the
insurer to the extent of its obligation on the covered claims and
to that extent has all rights, duties, and obligations of the
impaired insurer as if the insurer had not been impaired.
SECTION 7. Amends Section 12(a), Article 21.28-C, Insurance Code,
to require a person who has a claim against an insurer under any
provision of the insurance policy other than a policy of an
impaired insurer that is also a covered claim to exhaust first the
person's rights under policy the policy, including any claim for
indemnity or medical benefits under certain policies, and the right
to defense under the policy.
SECTION 8. Amends Section 14, Article 21.28-C, Insurance Code, to
require the association, by April 30, rather than March 30, to
submit an audited financial statement to the state auditor for the
preceding calendar year in a form approved by the state auditor's
office.
SECTION 9. Amends Section 17, Article 21.28-C, Insurance Code, to
provide that a deadline imposed under the Texas Rules of Civil
Procedure or the Texas Rules of Appellate Procedure is tolled
during the stay. Provides that the court in which the delinquency
proceeding is pending has exclusive jurisdiction regarding the
application, enforcement, and extension of the stay of proceedings
in which an impaired insurer is a party.
SECTION 10. Amends Sections 18(b), (c), and (h), Article 21.28-C, Insurance Code, as follows:
(b) Authorizes assessments under this subsection during a
calendar year, except as otherwise provided by this
subsection, to be made up to, but not in excess of, two
percent of each insurer's net direct written premium for the
preceding calendar year in the lines of business for which
assessments are being made. Authorizes the association, in
the event of a natural disaster or other catastrophic event,
to apply to the governor, in the manner prescribed by the plan
of operation, for authority to assess each member insurer that
writes insurance coverage, other than motor vehicle or
workers' compensation coverage, an additional amount not to
exceed two percent of the insurer's net direct written
premiums for the preceding calendar year.
(c) Requires it to be the duty of each insurer to pay the
amount of an assessment to the association by the 30th day
after the association, rather than the commissioner, gives
notice of the assessment.
(h) Authorizes the association to assess the workers'
compensation line of business during a calendar year not more
than three percent of each insurer's net direct written
premium for the preceding calendar year for assessments made
by December 31, 1997, rather than 1995. Provides that this
subsection expires January 1, 1998, rather than 1996.
SECTION 11. Amends Section 11(b), Article 21.54, Insurance Code,
to prohibit a purchasing group, its members or claimants against
the group, or its members from receiving any benefit from funds for
claims arising under the insurance policies procured through the
purchasing group unless the policies are underwritten by insurance
companies that are state-licensed and have capital and surplus of
at least $25 million, or insurance companies that are state-licensed that are members of company groups with the combined
capital and surplus of at least $25 million, at the time of policy
issuance.
SECTION 12. Makes application of this Act prospective.
SECTION 13. Emergency clause.
Effective date: upon passage.