By Ellis S.B. No. 330
74R2846 PB-D
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the establishment, powers, and duties of the Texas
1-3 Residential and Commercial Insurance Plan Association.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Subchapter E, Chapter 21, Insurance Code, is
1-6 amended by adding Article 21.49B to read as follows:
1-7 Art. 21.49B. TEXAS RESIDENTIAL AND COMMERCIAL INSURANCE PLAN
1-8 ASSOCIATION
1-9 Sec. 1. DEFINITIONS. In this article:
1-10 (1) "Association" means the Texas Residential and
1-11 Commercial Insurance Plan Association established under this
1-12 article.
1-13 (2) "Authorized insurer" means any insurer authorized
1-14 by the Texas Department of Insurance to write coverage under
1-15 Subchapters B and C, Chapter 5, of this code, except that the term
1-16 does not include an insurer organized under Chapter 17 of this
1-17 code.
1-18 (3) "Insurance" means all coverages available on the
1-19 policy applicable to the risk to be insured adopted by the
1-20 commissioner under Article 5.35 of this code for fire and allied
1-21 lines of business and under Section 6 of this article for
1-22 commercial property and casualty insurance.
1-23 (4) "Plan of operation" means the plan for operating
1-24 the association to provide a means by which insurance may be
2-1 assigned to an eligible person.
2-2 Sec. 2. ESTABLISHMENT OF ASSOCIATION. (a) The Texas
2-3 Residential and Commercial Insurance Plan Association is
2-4 established. The association is a nonprofit corporate body
2-5 composed of all authorized insurers. Each authorized insurer shall
2-6 be a member of the association and shall remain a member of the
2-7 association as long as the association is in existence as a
2-8 condition of its authority to write residential and commercial
2-9 property and casualty insurance in this state.
2-10 (b) The association shall be administered by a governing
2-11 committee composed of fifteen members selected as follows:
2-12 (1) eight members who represent the interests of
2-13 insurers, elected by the members of the association according to a
2-14 method determined by the members;
2-15 (2) five public members nominated by the Office of
2-16 Public Insurance Counsel and selected by the commissioner; and
2-17 (3) two members who are licensed local recording
2-18 agents, as defined by the plan of operation, appointed by the
2-19 commissioner.
2-20 (c) Members of the governing committee are selected to serve
2-21 staggered terms of six years with five members' terms expiring
2-22 February 1 of each odd-numbered year.
2-23 (d) To be eligible to serve on the governing committee as a
2-24 representative of insurers, a person must be a full-time employee
2-25 of an authorized insurer.
2-26 (e) A person may not serve on the governing committee as a
2-27 public member if that person, an individual related to that person
3-1 within the second degree of consanguinity or affinity, or an
3-2 individual residing in the same household with that person is:
3-3 (1) required to be registered or licensed under this
3-4 code or another insurance law of this state;
3-5 (2) employed by or acts as a consultant to a person
3-6 required to be registered or licensed under this code or another
3-7 insurance law of this state;
3-8 (3) the owner of, has a financial interest in, or
3-9 participates in the management of an organization required to be
3-10 registered or licensed under this code or another insurance law of
3-11 this state;
3-12 (4) an officer, employer, or consultant of an
3-13 association in the field of insurance; or
3-14 (5) required to register as a lobbyist under Chapter
3-15 305, Government Code.
3-16 Sec. 3. AUTHORITY OF ASSOCIATION; PLAN OF OPERATION.
3-17 (a) The governing committee has the responsibility for the
3-18 administration of the association through the plan of operation.
3-19 The association may collect funds from the member companies to
3-20 provide for the operation of the association. Assessments must be
3-21 made on member companies in proportion to their writings of
3-22 residential and commercial property and casualty insurance in this
3-23 state. If an assessment made on a member insurer is not paid
3-24 within a reasonable time, the association may bring an action to
3-25 collect the assessment. In addition, the association may report
3-26 the failure to pay to the commissioner, who may institute a
3-27 disciplinary action under Article 1.10 of this code. The
4-1 association has the powers granted to nonprofit corporations under
4-2 the Texas Non-Profit Corporation Act (Article 1396-1.01 et seq.,
4-3 Vernon's Texas Civil Statutes).
4-4 (b) The plan of operation of the association must provide
4-5 for the efficient, economical, fair, and nondiscriminatory
4-6 administration of the association.
4-7 (c) Subject to the approval of the commissioner, the
4-8 governing committee may make and amend the plan of operation.
4-9 (d) If the commissioner at any time believes that any part
4-10 of the plan of operation is not in keeping with the purpose of
4-11 providing residential and commercial property and casualty
4-12 insurance to persons that otherwise could not obtain insurance
4-13 coverage, the commissioner shall notify the governing committee in
4-14 writing so that the governing committee may take corrective action.
4-15 (e) Among other provisions, the plan of operation must
4-16 contain incentive programs to encourage members to write insurance
4-17 on a voluntary basis and to minimize the use of the association as
4-18 a means to obtain insurance. The incentive programs are effective
4-19 on approval of the commissioner. One of these programs must target
4-20 underserved geographic areas which shall be determined and
4-21 designated by the commissioner by rule. In determining which areas
4-22 will be designated as underserved, the commissioner shall consider
4-23 the availability of insurance, the number of uninsured property
4-24 owners, the number of property owners insured through the
4-25 association, and any other relevant factor.
4-26 (f) The plan of operation must include a voluntary,
4-27 competitive limited assignment distribution plan that allows
5-1 members to contract directly with a servicing carrier to accept
5-2 assignments to that carrier by the association. A servicing
5-3 carrier must be an insurance company licensed to write residential
5-4 and commercial property and casualty insurance in this state and
5-5 is qualified if it has written residential and commercial property
5-6 and casualty insurance in this state for at least five years or is
5-7 currently engaged as a servicing carrier for assigned risk
5-8 residential and commercial property and casualty business in at
5-9 least one other state. After notice and hearing, the commissioner
5-10 may prohibit an insurer from acting as a servicing carrier. The
5-11 terms of the contract between the servicing carrier and the
5-12 insurer, including the buy-out fee, shall be determined by
5-13 negotiation between the parties. The governing committee may adopt
5-14 reasonable rules for the conduct of business under the contract and
5-15 may establish reasonable standards of eligibility for servicing
5-16 carriers.
5-17 Sec. 4. DUTIES AND FUNCTIONS OF ASSOCIATION. (a) The
5-18 association shall provide a means by which insurance may be
5-19 assigned to an authorized insurance company for a person seeking
5-20 residential or commercial property or commercial casualty
5-21 insurance.
5-22 (b) An applicant is not eligible for insurance through the
5-23 association unless the applicant and the servicing agent certify as
5-24 part of the application to the association that the applicant has
5-25 been rejected for insurance by at least two insurers licensed to do
5-26 business in this state and actually writing residential or
5-27 commercial property or casualty insurance in this state, including
6-1 insurers that are not rate regulated.
6-2 Sec. 5. RATES FOR INSURANCE. (a) At least annually, the
6-3 commissioner shall conduct a hearing for the purpose of determining
6-4 appropriate rates to be charged for insurance provided through the
6-5 association. The association may appear as a matter of right,
6-6 shall be admitted as a party to present testimony at the hearing,
6-7 and may file information for consideration by the commissioner.
6-8 The commissioner shall determine and prescribe rates that are just,
6-9 reasonable, adequate, not excessive, not confiscatory, and not
6-10 unfairly discriminatory for the risks to which they apply. Rates
6-11 shall be set in an amount sufficient to carry all claims to
6-12 maturity and to meet the expenses incurred in the writing and
6-13 servicing of the business. In making a determination, the
6-14 commissioner shall consider the reports of aggregated premiums
6-15 earned and losses and expenses incurred in the writing of
6-16 residential and commercial property and casualty insurance through
6-17 the plan collected under the statistical plan provided for by
6-18 Subsection (b) of this section.
6-19 (b) The commissioner shall adopt reasonable rules and
6-20 statistical plans to be used by each insurer in the recording and
6-21 reporting of its premium, loss, and expense experience which must
6-22 be reported separately for business assigned to it and other data
6-23 required by the commissioner.
6-24 Sec. 6. POLICY FORMS. For purposes of this article, the
6-25 commissioner shall adopt policy forms and endorsements for each
6-26 kind of insurance to be sold through the association for which the
6-27 commissioner has not otherwise adopted policy forms and
7-1 endorsements.
7-2 Sec. 7. IMMUNITY FROM LIABILITY. (a) The association, a
7-3 member of the governing committee, or an employee of the
7-4 association is not personally liable for an act performed in good
7-5 faith within the scope of the person's authority under this article
7-6 or the plan of operation or for damages occasioned by the person's
7-7 official acts or omissions except for an act or omission that is
7-8 corrupt or malicious. The association shall provide counsel to
7-9 defend an action brought against a member of the governing
7-10 committee or an employee by reason of the person's official act or
7-11 omission whether or not at the time of the institution of the
7-12 action the defendant has terminated service with the association.
7-13 (b) This section is cumulative with and does not affect or
7-14 modify any common law or statutory privilege or immunity.
7-15 Sec. 8. PERSONS ELIGIBLE FOR COVERAGE THROUGH CATASTROPHE
7-16 PROPERTY INSURANCE POOL. The association may not insure a person
7-17 eligible for insurance under Article 21.49 of this code.
7-18 SECTION 2. Of the initial members selected to the governing
7-19 committee of the Texas Residential and Commercial Insurance Plan
7-20 Association, five are selected to serve terms expiring February 1,
7-21 1997, five are selected to serve terms expiring February 1, 1999,
7-22 and five are selected to serve terms expiring February 1, 2001.
7-23 The initial members shall draw lots to determine which members
7-24 serve which terms.
7-25 SECTION 3. Not later than December 31, 1995, the governing
7-26 committee of the Texas Residential and Commercial Insurance Plan
7-27 Association established under Article 21.49B, Insurance Code, as
8-1 added by this Act, shall adopt a plan of operation and submit the
8-2 plan to the commissioner of insurance for approval.
8-3 SECTION 4. This Act takes effect September 1, 1995, and
8-4 applies only to an insurance policy delivered, issued for delivery,
8-5 or renewed after March 1, 1996. A policy delivered, issued for
8-6 delivery, or renewed before March 1, 1996, is governed by the law
8-7 as it existed immediately before the effective date of this Act,
8-8 and that law is continued in effect for that purpose.
8-9 SECTION 5. The importance of this legislation and the
8-10 crowded condition of the calendars in both houses create an
8-11 emergency and an imperative public necessity that the
8-12 constitutional rule requiring bills to be read on three several
8-13 days in each house be suspended, and this rule is hereby suspended.