1-1 By: Wentworth S.B. No. 1365
1-2 (In the Senate - Filed March 13, 1995; March 20, 1995, read
1-3 first time and referred to Committee on State Affairs;
1-4 April 21, 1995, reported favorably, as amended, by the following
1-5 vote: Yeas 11, Nays 1; April 21, 1995, sent to printer.)
1-6 COMMITTEE AMENDMENT NO. 1 By: Wentworth
1-7 Amend S.B. No. 1365 in SECTION 2 (Introduced version, page 3, line
1-8 19; committee printing page 2, line 27) after "non-profit" by
1-9 striking "nonmembership".
1-10 COMMITTEE AMENDMENT NO. 2 By: Wentworth
1-11 Amend S.B. No. 1365 on page 3 between lines 15 and 16 insert the
1-12 following:
1-13 SECTION 2. Subsection (a), Section 23.01, Insurance Code, is
1-14 amended to read as follows:
1-15 (a) On application of any <Any> seven or more persons <on
1-16 application> to the secretary of state for a corporate charger
1-17 under the Texas Non-Profit Corporation Act a <as a nonmembership>
1-18 corporation may be incorporated for the sole purpose of
1-19 establishing, maintaining, and operating non-profit legal service
1-20 plans, whereby legal services may be provided by such corporation
1-21 through contracting attorneys as is hereinafter provided.
1-22 A BILL TO BE ENTITLED
1-23 AN ACT
1-24 relating to prepaid legal services contracts.
1-25 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-26 SECTION 1. Article 5.13-1, Insurance Code, is amended by
1-27 amending Subsections (a), (b), and (f) and by adding Subsection (g)
1-28 to read as follows:
1-29 (a) Every insurer governed by Subchapter B of Chapter 5 of
1-30 the Insurance Code, as amended, and every life, health, and
1-31 accident insurer governed by Chapter 3 of the Insurance Code, as
1-32 amended, is authorized to issue prepaid legal services contracts.
1-33 Every such insurer or rating organization authorized under Article
1-34 5.16 of the Insurance Code shall file with the State Board of
1-35 Insurance all rules and forms applicable to prepaid legal service
1-36 contracts in a manner to be established by the State Board of
1-37 Insurance. <All rates, rating plans, and charges shall be
1-38 established in accordance with actuarial principles for various
1-39 categories of insureds. Rates, rating plans, and charges shall not
1-40 be excessive, inadequate, unfairly discriminatory, and the benefits
1-41 shall be reasonable with respect to the rates charged.>
1-42 Certification, by a qualified actuary, to the appropriateness of
1-43 the charges, rates, or rating plans, based upon reasonable
1-44 assumptions, shall accompany the filing along with adequate
1-45 supporting information.
1-46 (b) The State Board of Insurance shall, within a reasonable
1-47 period, approve any form if the requirements of this section are
1-48 met. It shall be unlawful to issue such forms until approved or to
1-49 use such schedules of charges, rates, or rating plans until filed
1-50 <and approved>. If the State Board of Insurance has good cause to
1-51 believe such rates and rating plans do not comply with the
1-52 standards of this article, it shall give notice in writing to every
1-53 insurer or rating organization which filed such rates or rating
1-54 plans, stating therein in what manner and to what extent such
1-55 noncompliance is alleged to exist and specifying therein a
1-56 reasonable time, not less than 30 days thereafter, in which such
1-57 noncompliance may be corrected. If the board has not acted on any
1-58 form, rate, rating plan, or charges within 30 days after the filing
1-59 of same, they shall be deemed approved. The board may require the
1-60 submission of whatever relevant information is deemed necessary in
1-61 determining whether to approve or disapprove a filing made pursuant
1-62 to this section.
1-63 (f) To provide for the actuarial soundness of a prepaid
1-64 legal services contract issued under this article, the State Board
1-65 of Insurance may require that prepaid legal services contracts have
1-66 rates that are adequate to reasonably provide the benefits under
1-67 the prepaid legal services contracts. This subsection does not
1-68 apply to a prepaid legal services contract that provides only
2-1 consultation and advice on simple legal matters, either alone or in
2-2 combination with a referral service, and that provides fee
2-3 discounts for other matters.
2-4 (g) The State Board of Insurance may not determine, fix,
2-5 prescribe, set, or promulgate maximum rates or maximum amounts of
2-6 premium to be charged for a prepaid legal services contract issued
2-7 under this chapter. Nothing in this Act shall be construed as
2-8 compelling the State Board of Insurance to establish standard or
2-9 absolute rates and the board is specifically authorized, in its
2-10 discretion, to approve different rates for different insurers for
2-11 the same risk or risks on the types of insurance covered by this
2-12 article. The board shall<; nor shall this article be construed as
2-13 to require the State Board of Insurance to establish a single or
2-14 uniform rate for each risk or risks or to compel all insurers to
2-15 adhere to such rates previously filed by other insurers; and the
2-16 board is empowered to approve such different rates for different
2-17 insurers, and is required to> approve such rates as filed by any
2-18 insurer unless it finds that such filing does not meet the
2-19 requirements of this article.
2-20 SECTION 2. Articles 23.10, 23.14, and 23.15, Insurance Code,
2-21 are amended to read as follows:
2-22 Art. 23.10. CORPORATIONS NON-PROFIT; FUNDS; INVESTMENTS.
2-23 The corporations complying with the requirements of this chapter
2-24 shall be governed and conducted as non-profit nonmembership
2-25 organizations for the purpose of contracting for and obtaining
2-26 legal services for their participants through contracting
2-27 attorneys, in consideration of the payment by the participants of a
2-28 definite sum to fund the payment of attorneys fees for the legal
2-29 services to be furnished by the contracting attorneys. Provided
2-30 further, that each such corporation shall have two funds, namely:
2-31 the claim fund and the expense fund. The claim fund shall be
2-32 composed of at least 70 <80> percent of the regular payments by
2-33 participants, and the application fees. The percentage amounts
2-34 above stated may be modified by the State Board of Insurance upon
2-35 showing that such is in the best interest of the then existing
2-36 persons receiving legal services under contract or that such is
2-37 necessary for the development of the corporation during its first
2-38 year of existence. The application fees shall be paid by
2-39 applicants prior to issuance of a benefit certificate, and shall
2-40 not apply as a part of the cost of receiving benefits under the
2-41 benefit certificate issued. Claim fund investments may include,
2-42 besides lawful money and demand deposits, only certificates of
2-43 deposits, share accounts, and time deposits in public banks and
2-44 savings and loan institutions whose deposits are insured by a
2-45 federal governmental agency, and obligations of a state or the
2-46 federal government; and the expense fund investments may include
2-47 only such as are legal investments for the capital, surplus, and
2-48 contingency funds of capital stock life insurance companies. The
2-49 net income from the investments shall accrue to the funds,
2-50 respectively, from which the investments were made. The claim fund
2-51 shall be disbursed only for the payment of valid claims, taxes on
2-52 income of such fund, security transfer costs, <and> refunds of fees
2-53 paid into such fund,<; and to the extent approved by the State
2-54 Board of Insurance,> cost of settling contested claims, expenses
2-55 directly incurred on or for preservation of investments of the
2-56 claim fund, and contracts authorized under Article 23.19 of this
2-57 code.
2-58 Art. 23.14. SUPERVISION. (a) Every corporation complying
2-59 with the requirements of this chapter shall, before accepting
2-60 applications for participation in said non-profit legal service
2-61 plan, have sufficient money in its expense fund to cover initial
2-62 operations and shall submit to the State Board of Insurance a plan
2-63 of operation together with a rate schedule of its charges to
2-64 participants and a schedule and projections of costs of legal
2-65 services to be contracted for on behalf of the participants; which
2-66 plan<, rate schedule,> and the sufficiency of expense fund shall
2-67 first be approved by the State Board of Insurance as adequate,
2-68 fair, and reasonable <and not excessive> before such corporation
2-69 shall engage in business. The State Board of Insurance shall have
2-70 continuing control over the plan of operation of such corporation
3-1 <and its rate schedule of charges to participants>. No change in
3-2 such plan <or rate schedule> shall be effectuated without its first
3-3 being filed and approved by the State Board of Insurance.
3-4 (b) The State Board of Insurance may not determine, fix,
3-5 prescribe, set, or promulgate maximum rates or maximum amounts of
3-6 premium to be charged for a non-profit legal services plan under
3-7 this chapter.
3-8 Art. 23.15. DUTIES OF CONTRACTING ATTORNEYS; ADEQUATE
3-9 FINANCIAL STANDING <APPROVAL OF RATES>. <The State Board of
3-10 Insurance shall likewise approve the ratio of benefits to be paid
3-11 to anticipated revenues from the rate schedule proposed to be used
3-12 if such be found to be actuarially sound. No prepaid legal
3-13 services contract or benefit certificate thereunder shall be issued
3-14 by corporations complying with this chapter without such finding.>
3-15 The contracting attorneys shall guarantee to the participants the
3-16 services stated under the benefit certificates and shall agree to
3-17 perform such services which they agree to render to the
3-18 participants under the benefit certificates without there being any
3-19 liability for the cost thereof to the participants beyond the
3-20 funds of such corporation held for their benefit in accordance with
3-21 the plan of operation of the corporation. Such corporations may
3-22 issue prepaid legal service contracts without such guarantees and
3-23 providing for indemnity for costs of attorney services where the
3-24 attorney is not a contracting attorney under such rules and
3-25 regulations as may be approved by the State Board of Insurance
3-26 provided that the State Board of Insurance be satisfied that the
3-27 plan of operation, financial standing and experience of the
3-28 corporation (including but not limited to a proper amount of free
3-29 surplus) is adequate to assure the performance of such contracts.
3-30 SECTION 3. This Act takes effect September 1, 1995, and
3-31 applies only to a prepaid legal services contract or a contract or
3-32 benefit certificate under a nonprofit legal services plan that is
3-33 delivered, issued for delivery, or renewed on or after January 1,
3-34 1996. A contract or benefit certificate that is delivered, issued
3-35 for delivery, or renewed before January 1, 1996, is governed by the
3-36 law as it existed immediately before the effective date of this
3-37 Act, and that law is continued in effect for that purpose.
3-38 SECTION 4. The importance of this legislation and the
3-39 crowded condition of the calendars in both houses create an
3-40 emergency and an imperative public necessity that the
3-41 constitutional rule requiring bills to be read on three several
3-42 days in each house be suspended, and this rule is hereby suspended.
3-43 * * * * *