Amend HB 976 by striking all below the enacting clause and
substituting the following.
PART 1. PRIVATIZATION OF FACILITY
SECTION 1.01. PURPOSE. The purpose of this part is to
provide a means to:
(1) convert the Texas workers' compensation insurance
facility into a stock insurance company and facilitate the transfer
of control to a third party as provided by this part; and
(2) ensure that the converted facility has full
authority to enforce the rights of the facility existing
immediately before the effective date of the conversion without
impairment or limitation, except as expressly provided by this
part.
SECTION 1.02. DEFINITIONS. In this part:
(1) "Closing date" means the effective date of the
closing of the transactions contemplated by a conversion agreement,
as provided by that agreement, and is the effective date of the
conversion.
(2) "Commission" means the Texas Workers' Compensation
Commission.
(3) "Commissioner" means the commissioner of
insurance.
(4) "Converted facility" means the entity that exists
after the facility is converted under this part.
(5) "Facility" means the Texas workers' compensation
insurance facility that was established under Article 5.76-2,
Insurance Code.
(6) "Fund" means the employers' rejected risk fund for
providing workers' compensation coverages for rejected risks, as
provided by Article 5.76-2, Insurance Code, as that article existed
before its repeal.
(7) "Insurer" means a stock company, mutual company,
reciprocal, or interinsurance exchange, the Texas Workers'
Compensation Insurance Fund, or a Lloyd's association authorized to
write workers' compensation insurance in this state.
(8) "Servicing company" means a member of the facility
or other eligible entity that is designated by the commissioner to
issue a policy that evidences the insurance coverages provided by
the fund to a rejected risk and to service the risk as provided by
Article 5.76-2, Insurance Code, as that article existed before its
repeal.
SECTION 1.03. CONVERSION; CONVERSION EFFECTIVE DATE;
CONTINGENT TRANSFER. (a) If a conversion agreement receives the
approvals described by Sections 1.04 and 1.05 of this part, the
facility shall convert from a nonprofit unincorporated association
to a Texas stock property and casualty insurance company
incorporated under Chapter 2, Insurance Code, effective on the
consummation of the transactions contemplated by the agreement.
(b) If the required approvals are not obtained or the
transactions are not consummated on or before August 31, 1997, the
facility may not be converted, and instead, the operation of the
facility shall be transferred to the Texas Property and Casualty
Insurance Guaranty Association in accordance with Part 2 of this
Act.
SECTION 1.04. CONVERSION AGREEMENT. The facility may enter
into an agreement to issue and sell shares of the capital stock
created as a result of the conversion described by Section 1.03 of
this part. To take effect, the agreement must be approved by a
majority of the voting members of the governing committee of the
facility at a meeting at which a quorum is present.
SECTION 1.05. COMMISSIONER APPROVAL. (a) On approval under
Section 1.04 of this part, an agreement shall be submitted to the
commissioner for approval. The agreement must be submitted to the
commissioner not later than June 30, 1997. The commissioner shall
review the agreement in the manner provided for review of a filing
under Article 21.49-1, Insurance Code.
(b) If the commissioner approves the agreement, the
commissioner shall order that the facility be converted.
SECTION 1.06. EFFECT OF CONVERSION. (a) The converted
facility may exercise all the rights, privileges, powers, and
authority of any other stock corporation organized to transact
property and casualty insurance business in this state, subject to
the requirements of this part. On the closing date:
(1) the converted facility is considered to be a
continuation of the facility; and
(2) subject to Section 1.07 of this part, the
converted facility is vested with all property of the facility.
(b) The converted facility may enforce all contract and
statutory rights of the facility under any servicing company
arrangements, and this part may not be construed as an assignment
of the facility's rights or obligations under those agreements.
(c) Each debt, claim, and cause of action of the facility,
and all property rights, privileges, franchises, and other
interests of the facility, remain the property of the converted
facility.
(d) The rights of all policyholders and creditors and the
standing of all claims under the facility shall be preserved
unimpaired under the converted facility.
(e) Subject to Section 1.07 of this part, each debt,
liability, and duty of the facility becomes a debt, liability, or
duty of the converted facility and may be enforced against the
converted facility as if it were incurred or contracted by the
converted facility.
(f) A cause of action or similar proceeding in which the
facility was a party that is pending on the effective date of the
conversion:
(1) is not affected by the conversion;
(2) may be continued to be prosecuted by or against
the converted facility; and
(3) continues to be governed by and conducted under
Article 5.76-2, Insurance Code, as that article existed before its
repeal, and the applicable bylaws, rules, and regulations of the
facility, as amended by the converted facility.
(g) The converted facility may not, without the prior
consent of the commissioner, amend its bylaws, rules, or
regulations in a manner that would reasonably be likely to have a
material adverse effect on employees, beneficiaries, or the holders
of or insureds under policies issued under Article 5.76, Insurance
Code, or under Article 5.76-2, Insurance Code, as that article
existed before its repeal.
(h) The converted facility may audit, at the converted
facility's expense, the books and records of each company that
services policies of insurance issued under Article 5.76, Insurance
Code, or under Article 5.76-2, Insurance Code, as that article
existed before its repeal. The audit must be limited to:
(1) the books and records that relate to the policies
described by this subsection; and
(2) claims paid on behalf of or charged to the
converted facility.
SECTION 1.07. APPLICABLE LAW. Except as otherwise provided
by this part, Article 5.76-2, Insurance Code, ceases to apply to
the facility on the closing date and does not apply to the
converted facility. Specifically, neither the converted facility
nor any other insurer succeeds to the facility's right to assess
the facility's member insurers under Section 4.04, Article 5.76-2,
Insurance Code.
SECTION 1.08. COMPLIANCE; CAPITALIZATION REQUIREMENTS. (a)
The converted facility shall comply with the Insurance Code and
rules adopted by the commissioner except as otherwise provided by
this part. If the converted facility does not issue any policies
of insurance after the closing date, the converted facility:
(1) is exempt from:
(A) the risk-based capital and surplus
regulations adopted under Article 2.02, Insurance Code; and
(B) the requirements adopted under Article
21.45, Insurance Code;
(2) may discount the reserves for losses and loss
adjustment expenses in a manner and to the extent authorized by the
commissioner in the order approving the conversion agreement;
(3) may reflect accounts receivable as an admitted
asset, notwithstanding the regulations adopted under Articles 2.08
and 2.10, Insurance Code, if those accounts receivable are
guaranteed by an insurance company authorized to do business in
this state:
(A) in an amount not to exceed $15 million; and
(B) in a manner and to the extent authorized by
the commissioner in the order approving the conversion agreement;
and
(4) may receive full credit for the reinsurance
contemplated by the conversion agreement to the extent ordered by
the commissioner, notwithstanding Article 5.75-1, Insurance Code,
and the rules adopted under that article.
(b) The commissioner shall set the capitalization
requirements of the converted facility in the order approving the
conversion agreement.
SECTION 1.09. FINAL ASSESSMENT. (a) The facility, through
action by its governing committee, may make a final assessment of
the insurance carriers licensed in this state in accordance with
Section 4.04, Article 5.76-2, Insurance Code, as that section
existed before its repeal, and the facility's bylaws, rules, and
regulations in the amount that the governing committee determines
is necessary to consummate the transactions contemplated by the
conversion agreement. The final assessment must be made at a time
to allow the assessment to be paid in full on or before the closing
date.
(b) On or before the closing date, and under terms and
conditions the governing committee considers necessary or advisable
to consummate the transactions contemplated by the conversion
agreement, the governing committee may:
(1) bind the carriers described by Subsection (a) of
this section to reinsure a portion of the facility's liabilities
instead of payment of any or all of the final assessment under
Subsection (a) of this section; or
(2) defer payment on any or all of the final
assessment.
(c) A reinsurance arrangement approved by the governing
committee must compute a member insurer's participation in
reinsurance in the same manner that is used for the computation of
assessments under Section 4.04, Article 5.76-2, Insurance Code, as
that section existed before its repeal.
SECTION 1.10. IMMUNITY. The immunity provisions of Sections
2.05(h) and 2.12, Article 5.76-2, Insurance Code, as those
provisions existed before their repeal, continue to apply to each
act or omission that occurs before, on, or after the closing date
and that is performed by the persons or entities covered by those
provisions, including an act or omission related to the powers and
duties contained in this part.
SECTION 1.11. DEFENSE; INDEMNIFICATION. If any party
institutes or continues an action against the facility, or the
governing committee, executive director, staff, agents, servants,
or employees of the facility, whether or not serving in that
capacity on the closing date, in connection with or arising from
either the facility's operations or the transactions contemplated
by the conversion agreement, the converted facility shall defend,
indemnify, and hold harmless that person or entity from liability
for any act or omission of that person or entity in connection
with, or arising from the performance of, the powers and duties
exercised under Article 5.76-2, Insurance Code, as that article
existed before its repeal, but only on, and subject to, the terms
and conditions set forth in the conversion agreement, which must be
substantially as beneficial to the indemnified person or entity as
the indemnification set forth in the facility's bylaws in effect on
the closing date.
SECTION 1.12. CONTROLLING LAW. If a conflict exists between
this part and any other statute relating to the facility, this part
controls.
SECTION 1.13. CONFORMING AMENDMENT. Article 21.28-C,
Insurance Code, is amended by adding Sections 26 and 27 to read as
follows:
Sec. 26. COVERAGE FOR WORKERS' COMPENSATION INSURANCE
POLICIES ISSUED BY TEXAS WORKERS' COMPENSATION INSURANCE FACILITY.
(a) Notwithstanding any other provision of this article, this
article applies to each policy of insurance issued under Article
5.76 of this code or Article 5.76-2 of this code, as that article
existed before its repeal.
(b) Notwithstanding any other provision of this article,
after the conversion of the Texas workers' compensation insurance
facility to a stock insurance company, that converted facility
shall be considered an impaired insurer for purposes of this
article if any of the actions described by Section 5(9)(A) or (B)
of this article occurs to the converted facility.
(c) A claim under such an insurance policy is a covered
claim for purposes of this article if the claim satisfies the
definition under Section 5(8) of this article, whether or not the
converted facility:
(1) issued or assumed the policy; or
(2) was licensed to do business in this state at the
time:
(A) the policy was written; or
(B) the converted facility became an impaired
insurer.
(d) If a conflict exists between this section and any other
statute relating to the Texas workers' compensation insurance
facility or the Texas Property and Casualty Insurance Guaranty
Association, this section controls.
Sec. 27. IMMUNITY. There is no liability on the part of,
and a cause of action does not arise against, any member insurer of
the association, the association, an agent or employee of the
association, a member of the board of directors of the association,
or the commissioner or the commissioner's representative for any
act or omission in the performance of any activity related to the
negotiations relating to the privatization of the Texas workers'
compensation insurance facility. This section applies to each
activity undertaken by such a person or entity, regardless of the
date of the act or omission.
SECTION 1.14. EFFECTIVE DATE FOR PART 1. This part takes
effect immediately.
PART 2. CONTINGENT TRANSFER
SECTION 2.01. TRANSFER TO TEXAS PROPERTY AND CASUALTY
INSURANCE GUARANTY ASSOCIATION; EFFECTIVE DATE. (a) If the
conversion required under Part 1 of this Act does not occur on or
before August 31, 1997, the Texas Property and Casualty Insurance
Guaranty Association, on September 1, 1997, shall take control of
the operations and all of the assets, liabilities, and obligations
of the Texas workers' compensation insurance facility as provided
by this part.
(b) This part takes effect September 1, 1997, but only if
the conversion described by Subsection (a) of this section does not
occur before that date. If that conversion does occur before that
date, this part has no effect.
SECTION 2.02. CONFORMING AMENDMENT. Article 21.28-C,
Insurance Code, is amended by adding Section 26 to read as
follows:
Sec. 26. TRANSFER OF FACILITY TO ASSOCIATION. (a) The
purpose of this section is to:
(1) provide a means for the transfer of control of the
assets, liabilities, and obligations of the Texas workers'
compensation insurance facility to the Texas Property and Casualty
Insurance Guaranty Association; and
(2) ensure that the association has full authority to
enforce the rights of the facility without limitation, except as
expressly provided by this section.
(b) In addition to the definitions under Section 5 of this
Act, in this section:
(1) "Comptroller" means the Texas comptroller of
public accounts.
(2) "Facility" means the Texas workers' compensation
insurance facility.
(3) "Fund" means the Texas Workers' Compensation
Insurance Fund.
(4) "Insurer" means an insurance company licensed to
do business in this state.
(5) "Texas workers' compensation insurance facility
account" means the account maintained by the association for the
assets of the facility.
(c) The association shall take control of the facility's
assets, liabilities, and obligations and may administer all of the
remaining aspects of the facility's operation. The association has
full authority to enforce the contract or statutory rights of the
facility under any servicing company agreements. This section may
not be construed to be an assignment of the facility's rights or
obligations under those agreements.
(d) The association shall maintain the Texas workers'
compensation insurance facility account separately from the
association's accounts described by Section 6 of this Act. Each
claim, expense, or other liability related to the assets,
liabilities, and obligations of the facility shall be paid from,
and all collections and receipts shall be deposited into, the Texas
workers' compensation insurance facility account. Funds in the
Texas workers' compensation insurance facility account shall be
maintained outside the state treasury.
(e) Not later than June 1 of each year, the association
shall report its operating results for the Texas workers'
compensation insurance facility account to the commissioner on a
calendar year premium and an accident year loss basis.
(f) For a claim in which the compensable injury occurred
before January 1, 1992, the association shall compute at least
annually its results for incurred losses in the Texas workers'
compensation insurance facility account, including incurred but not
reported losses, by accident year. If there is a deficit or
surplus from the operation of the Texas workers' compensation
insurance facility account for those claims, the amount of the
deficit or surplus shall be assessed or rebated to the member
insurers licensed in this state who were members of the facility
during the calendar year. Each member insurer shall pay a
proportionate share of the total assessment or receive a
proportionate share of the total rebate based on that insurer's
portion of the total voluntary workers' compensation insurance
writings during the calendar year. The fund is not liable for any
deficit incurred on a policy with an effective date before January
1, 1992.
(g) For claims with an accident date on or after January 1,
1992, the association shall compute at least annually its results
for incurred losses in the Texas workers' compensation insurance
facility account, including incurred but not reported losses, by
accident year. If there is a deficit or surplus from operation of
the Texas workers' compensation insurance facility account for
those claims, the amount of the deficit or surplus shall be
assessed or rebated to the member insurers licensed in this state
who were members of the facility during the calendar year and to
the fund. Each member insurer and the fund shall pay a
proportionate share of the total assessment or receive a
proportionate share of the total rebate based on its portion of the
total voluntary workers' compensation insurance writings during the
calendar year.
(h) The association may provide for the redistribution of
all or part of an assessment that would otherwise be levied on a
member insurer under Subsection (f) or (g) of this section if the
member insurer is unable to pay the full assessment because the
member insurer is in liquidation at the time of the assessment.
(i) The association may authorize the deferment of the
payment of an assessment made under Subsection (f) or (g) of this
section. A deferment may be allowed only if the cash flow of the
Texas workers' compensation insurance facility account is adequate
to meet all needs.
(j) If a member insurer or the fund elects to defer any
portion of an assessment as provided by this section, the entire
unpaid portion of the assessment and any accrued interest must be
shown as a liability on each financial and annual statement of that
insurer.
(k) A member insurer may not be allowed a credit against any
tax levied by this state as a result of an assessment paid under
this section.
(l) The association may invest Texas workers' compensation
insurance facility account funds in the types of investments
authorized by law for an insurer authorized to write workers'
compensation insurance coverage in this state. The association
shall develop an investment policy for the Texas workers'
compensation insurance facility account and shall submit that
policy to the commissioner for review and approval.
(m) The association shall submit to the commissioner for
approval a plan of operation to ensure the fair, reasonable, and
equitable administration of the Texas workers' compensation
insurance facility account not later than October 1, 1997. The
commissioner shall approve or disapprove the association's plan of
operation of the Texas workers' compensation insurance facility
account not later than the 60th day after the date on which the
association submits the plan to the commissioner.
(n) If the commissioner does not approve the plan of
operation, the association shall submit to the commissioner an
amended plan of operation with any amendments necessary or suitable
to ensure the fair, reasonable, and equitable administration of the
Texas workers' compensation insurance facility account. The plan
of operation and any amendments take effect on approval in writing
by the commissioner. If the association fails to submit suitable
amendments to the plan, the commissioner, after notice and hearing,
shall adopt reasonable rules as necessary or advisable to implement
this section. Those rules shall continue in force until modified
by the commissioner or superseded by a plan submitted by the
association and approved by the commissioner.
(o) In addition to all immunities and protections otherwise
provided by this article, the association succeeds to all rights,
defenses, immunities, and liabilities of the facility in each
cause of action or other proceeding pending by or against the
facility on September 1, 1997, or filed after that date. The
immunity provisions of Sections 2.05(h) and 2.12, Article 5.76-2 of
this code, as those provisions existed before their repeal,
continue to apply to each act or omission that occurs before, on,
or after September 1, 1997, and that is performed by the persons or
entities covered by those provisions.
(p) If any party institutes or continues an action against
the facility, the governing committee of the facility, the
executive director of the facility, a member insurer solely in that
insurer's capacity as a member insurer, or an agent, servant,
attorney, consultant, or employee of the facility, whether or not
serving in that capacity on September 1, 1997, in connection with
or arising from either the facility's operations or the
transactions contemplated by this section, the association shall
defend, indemnify, and hold harmless that person or entity from
liability for any act or omission of that person or entity in
connection with, or arising from the performance of, the person's
or entity's powers and duties on behalf of the facility. A cause
of action or other proceeding described by this subsection shall
continue to be governed by and conducted under this section and
Article 5.76-2 of this code, as that article existed before its
repeal, and the applicable bylaws, rules, and regulations of the
facility, and those provisions are continued in effect for the
purposes of this section.
(q) The association may enter into negotiations for the
privatization to a single insurer of all the assets, liabilities,
and obligations maintained in the Texas workers' compensation
insurance facility account. If the association determines that
privatization under this subsection is in the best interest of this
state, the association shall obtain the written approval of the
commissioner before entering into a privatization agreement to
consummate the applicable transaction.
(r) Any net proceeds from the privatization of the Texas
workers' compensation insurance facility account shall be rebated
in accordance with Subsection (g) of this section.
(s) If an insurer that assumes the assets, liabilities, and
obligations maintained in the Texas workers' compensation insurance
facility account under a privatization agreement approved under
Subsection (q) of this section becomes an impaired insurer after
that privatization agreement takes effect, any remaining facility
claims shall be covered claims under this article.
(t) If a conflict exists between this section and any other
statute relating to the facility or the association, this section
controls.
PART 3. REPEALER; TRANSITION; EMERGENCY
SECTION 3.01. REPEALER. Except as otherwise provided by this
Act, the following laws are repealed on the effective date of this
Act:
(1) Article 5.76-2, Insurance Code; and
(2) Section 18.24(b), Chapter 12, Acts of the 72nd
Legislature, 2nd Called Session, 1991, as amended by Section 8,
Chapter 885, Acts of the 73rd Legislature, Regular Session, 1993.
SECTION 3.02. SEVERABILITY CLAUSE. If any provision of this
Act or the application of this Act to any person or entity or
circumstance is held invalid by a court of competent jurisdiction,
that invalidity does not affect other provisions or applications of
this Act that can be given effect without the invalid provision or
application, and to this end the provisions of this Act are
declared to be severable.
SECTION 3.03. SAVING CLAUSE. The repeal of Article 5.76-2,
Insurance Code, under Section 3.01 of this Act does not affect
rights and liabilities accruing under that article before the
effective date of this Act, and that article is continued in effect
for that purpose and for the purposes expressly provided by this
Act or Section 26, Article 21.28-C, Insurance Code, as added by
this Act.
SECTION 3.04. INFORMATION RELATING TO CRIMINAL WRONGDOING.
The Texas workers' compensation insurance facility shall deliver to
the office of the district attorney of Travis County, not later
than the 30th day after the effective date of the conversion or
transfer occurring under this Act, any evidence of possible
criminal wrongdoing or fraud by others that is known, as the result
of litigation or otherwise, to the facility or an employee or agent
of the facility.
SECTION 3.05. EFFECTIVE DATE. This part takes effect:
(1) on the closing date of the conversion of the Texas
workers' compensation insurance facility under Part 1 of this Act
as that date is defined by Section 1.02 of this Act; or
(2) on September 1, 1997, if Part 2 of this Act takes
effect.
SECTION 3.06. EMERGENCY. The importance of this legislation
and the crowded condition of the calendars in both houses create an
emergency and an imperative public necessity that the
constitutional rule requiring bills to be read on three several
days in each house be suspended, and this rule is hereby suspended,
and that this Act take effect and be in force according to its
terms, and it is so enacted.