BILL ANALYSIS


                                                        S.B. 1232
                                                   By: Armbrister
                                             Economic Development
                                                           4-6-95
                                       Committee Report (Amended)
BACKGROUND

Volunteer fire departments (VFDs) serve rural and suburban areas of
Texas. Since few government programs exist to help them, most
remain underfunded. Their precarious financial position makes it
difficult to acquire and maintain equipment and deters potential
members reluctant to spend the time necessary to raise money.

In addition to fire trucks, hoses, and helmets, VFDs must buy
liability insurance, at the very minimum for their vehicles,
required by Texas law for all cars and trucks. VFD liability
insurance, however, seems to be overpriced. A survey of 519 VFDs in
Texas found that they had paid around $4.5 million in premiums over
a three-year period in the early 1990s but had had claims for only
$264,000. Since fire trucks rarely leave the station unless they
are on their way to a fire, there are few opportunities for
accidents. Oklahoma has found, in fact, that most of the claims
against VFDs come from their own volunteers whose cars get bumped
by fire trucks at the scene of the fire. Market competition alone
will not lower prices for liability insurance, since only two
companies write most of the VFD insurance in Texas.

PURPOSE

As proposed, S.B. 1232 provides a motor vehicle self-insurance
program for volunteer fire departments.

RULEMAKING AUTHORITY

It is the committee's opinion that rulemaking authority is granted
to the director of the Texas Forest Service under SECTION 1 (Sec.
3(b), Art. 21.61, Insurance Code) of this bill.

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Chapter 21E, Insurance Code, by adding Article
21.61, as follows:

Art. 21.61. VOLUNTEER FIRE DEPARTMENT MOTOR VEHICLE SELF-INSURANCE PROGRAM

     Sec. 1. DEFINITIONS. Defines "fund," "program," "service," and
     "volunteer fire department."
     
     Sec. 2. ADMINISTRATION OF PROGRAM. Requires the Texas Forest
     Service to administer the volunteer fire department motor
     vehicle self-insurance program (program) established under
     this article. Authorizes the service to employ staff to
     administer the program.
     
     Sec. 3. SELF-INSURANCE PROGRAM. (a) Sets forth provisions for
     which the service shall establish the program.
     
     (b) Authorizes the director of the service to adopt rules to
       implement and administer the program.
       
       Sec. 4. SELF-INSURANCE COVERAGE. (a) Requires the program to
     establish a self-insurance pool to provide coverage for motor
     vehicles used for fire fighting by a volunteer fire
     department.
     
     (b) Authorizes the coverage to indemnify an official,
       employee, member, or volunteer of a volunteer fire
       department for liability arising from the use of a covered
       motor vehicle in the performance of the fire fighting duties
       of the official, employee, member, or volunteer. Requires
       the coverage to be subject to a maximum limit of $100,000
       for damages for bodily injury, death, or property damage
       arising out of a single occurrence.
       
       (c) Authorizes the director of the service to establish
       eligibility requirements for participation in coverage and
       equipment and safety standards for the motor vehicle to be
       covered under this section.
       
       (d) Requires a volunteer fire department, to participate in
       coverage provided under this section, to submit a written
       request to the program. Requires the director of the program
       to approve the request if each motor vehicle to be covered
       meets the eligibility requirements and equipment and safety
       standards established under Subsection (c) of this section.
       
       Sec. 5. FUND. (a) Provides that the volunteer fire department
     self-insurance fund is an account in the general revenue fund.
     
     (b) Provides that the fund is composed of money collected
       under Section 6 of this article and interest accruing on
       money in the fund.
       
       (c) Authorizes money in the fund to be expended in
       accordance with legislative appropriation only for
       administration of this article, including the salaries and
       expenses of staff for the program and the fund; or funding
       self-insurance under the program.
       
       (d) Authorizes self-insurance coverage provided under
       Section 4 of this article to be funded only from money
       available from the fund.
       
       (e) Requires coverage limits of self-insurance provided
       under Section 4 of this article to be based on the liquidity
       of the fund after deduction of the cost of administration of
       this article.
       
       (f) Provides that the state's liability for a loss covered
       by self-insurance provided under this article is limited to
       the assets of the fund, and the state is not otherwise
       liable for that loss.
       
       Sec. 6. SELF-INSURANCE FEE. (a) Authorizes the service to levy
     and collect a fee from participating volunteer fire
     departments to provide self-insurance coverage under this
     article. Requires the service, in establishing the amount of
     the fee, to consider the amount that could be charged to the
     volunteer fire department for similar insurance coverage
     provided to the department in accordance with this code.
     
     (b) Requires fees collected under this section to be
       deposited to the credit of the fund.
       
       Sec. 7. REPRESENTATION OF INSURED. (a) Authorizes the service
     to employ an attorney to represent a volunteer fire department
     or an official, employee, member, or volunteer of a volunteer
     fire department in a liability action for which insurance
     coverage is provided under this article.
     
     (b) Prohibits the attorney general from providing the
       services described by Subsection (a) of this section.
       
       SECTION 2.   (a) Effective date: September 1, 1995.

     (b) Prohibits the volunteer fire department motor vehicle
     self-insurance program established under Section 3, Article
     21.61, Insurance Code, from providing insurance coverage under
     Section 4 of that article before January 1, 1996.
     
     (c) Authorizes the volunteer fire department self-insurance
     fund created under Section 5, Article 21.61, Insurance Code,
     to include amounts appropriated to the fund until September 1,
     1998. Requires the initial self-insurance fee set under
     Section 6, Article 21.61, to be established in an amount
     sufficient to refund to the general revenue fund any
     appropriation made to the volunteer fire department self-insurance fund. Requires the refund contemplated by this
     subsection to be made no later than September 1, 1998.
     
     SECTION 3.     Emergency clause.