GEC C.S.H.B. 976 75(R) BILL ANALYSIS BUSINESS & INDUSTRY C.S.H.B. 976 By: Brimer 3-27-97 Committee Report (Substituted) BACKGROUND In 1989, Senate Bill 1 changed the Texas Workers' Compensation Assigned Risk Pool to the Texas Workers' Compensation Insurance Facility (Facility). In 1991, House Bill 62 mandated that the Facility should cease writing new policies on or after January 1, 1994 and cease being the insurer of last resort, and required that its claim assets and liabilities be transferred to the Texas Workers' Compensation Insurance Fund (Fund) no later than January 1, 1999. No steps were taken to plan the 1999 transfer until 1995, when Governor George Bush stated that he favored an earlier closure of the Facility. Two meetings between the Facility and the Fund were held in 1995, but discussions stopped. Representative Kim Brimer and Senator Bill Ratliff took the Governor's charge to the Research and Oversight Council (ROC) in April 1996. Meetings with both board members and staffs of the Texas Property and Casualty Insurance Guaranty Association (Association), the Texas Department of Insurance (TDI), the Texas Workers' Compensation Insurance Facility (Facility), the Texas Workers' Compensation Insurance Fund (Fund), as well as ROC staff were held in 1996 and 1997 to accomplish this charge. PURPOSE The purpose of this proposed legislation is to transfer control of all of the assets, liabilities and obligations of the Facility to the Association. It also provides for the privatization of the Account should the Association, with approval of the Commissioner of Insurance, determine that privatization is in the best interest of the State of Texas. RULEMAKING AUTHORITY This bill delegates rulemaking authority to the Commissioner of Insurance in SECTION 3 Section 2.04 (d). SECTION BY SECTION ANALYSIS SECTION 1. TRANSFER TO THE TEXAS PROPERTY AND CASUALTY INSURANCE GUARANTY ASSOCIATION. Transfers control of the operations, assets, liabilities, and obligations of the Texas Workers' Compensation Insurance Facility to the Texas Property and Casualty Insurance Guaranty Association on September 1, 1997. SECTION 2. TEXAS PROPERTY AND CASUALTY INSURANCE GUARANTY ASSOCIATION POWERS AND DUTIES. (a) Amends Article 21.28-C, Insurance Code, to read: "Part 1. Texas Property and Casualty Insurance Guaranty Association". (b) Amends Article 21.28-C, Insurance Code, by renumbering Section 1 through 25 of the current statute as Section 1.01 through 1.25. SECTION 3. TEXAS WORKERS' COMPENSATION INSURANCE FACILITY ACCOUNT. Amends Article 21.28-C, Insurance Code by adding a new Part 2 to set up the Texas Workers' Compensation Insurance Facility Account (Account). Section 2.01. PURPOSES. States purposes of Part 2 are to (1) provide the authority for the Association to take control of the Facility's assets, liabilities, and obligations and (2) provide the Association with full authority to enforce the rights of the Facility. Section 2.02. DEFINITIONS. (a) Defines "comptroller," "facility," "fund," "insurer," and "Texas Workers' Compensation Insurance Facility Account." (b) Provides that any other terms in the Act have the same meaning as those defined in Part 1, Article 21.28-C, Insurance Code. Section 2.03. POWERS AND DUTIES OF THE ASSOCIATION RELATIVE TO THE TEXAS WORKERS' COMPENSATION INSURANCE FACILITY ACCOUNT. (a) Gives Association authority to take control of the Facility's assets, claims, and obligations and to administer all remaining aspects of the Facility's operations. (b) Requires Association to maintain the Account separate from the Association's current accounts. (c) Requires that all claims, expenses, and other liabilities related to the Facility's assets, liabilities, and obligations be paid from, and all collections and receipts deposited into, the Account. (d) Requires Association to report to the Commissioner of Insurance, not later than June 1 of each year, the Account's operating results on a calendar year premium and an accident year loss basis. (e) For claims with an accident date before January 1, 1992, establishes authority and mechanism through which the Association assesses or rebates to member insurers. Excludes the Fund. (f) For claims with accident dates on or after January 1, 1992, establishes authority and mechanism through which the Association assesses or rebates to member insurers. Includes the Fund. (g) Allows Association to authorize deferment of assessment payments only if the Account's cash flow is adequate to meet all needs. (h) Requires an Account member insurer, who elects to defer any portion of an assessment, to include as a liability the entire unpaid portion and any accrued interest on all of its financial and annual statements. (i) Prohibits any member insurer of the Account from taking a credit against any tax levied by the State as a result of a paid assessment. (j) Requires that Account funds are outside the state treasury. (k) Requires Association to invest Account funds only in investments authorized by law for the investment of state funds. Requires Association to develop and submit investment policy to the comptroller for approval. Section 2.04. PLAN OF OPERATION. (a) Requires Association to submit to the Commissioner of Insurance for approval a plan of operation for the administration of the Account within 30 days of the effective date of this Act. (b) Requires Commissioner to approve or disapprove the plan of operation within 60 days after its receipt from the Association. (c) Requires Association to submit a plan of operation and any amendments to the Commissioner if the plan of operation is not originally approved. The plan of operation and any amendments take effect upon written approval by the Commissioner. (d) Authorizes Commissioner, after notice and hearing, to adopt rules to implement Part 2 if Association fails to submit suitable amendments to the plan of operation. Section 2.05. IMMUNITY, INDEMNIFICATION, LITIGATION, AND RELATED MATTERS. (a) Provides that in addition to all immunities and protections provided elsewhere in Article 21.28-C, Insurance Code, Association succeeds to all rights, defenses, immunities, and liabilities of the Facility in all litigation and all other proceedings and causes of action pending by or against the Facility on September 1, 1997, or filed thereafter. (b) Continues application of the immunity provisions of Article 5.76-2, Sections 2.05(h) and 2.12, Insurance Code to all acts or omissions before, on or after September 1, 1997 by the persons or entities covered therein. (c) Requires Association to defend, indemnify and hold harmless from liability, the Facility's Governing Committee, Executive Director, member insurers, staff, agents, servants, attorneys, consultants, or employees, in the event of any action against the Facility. (d) Continues Article 5.76-2, Insurance Code, and the applicable Bylaws, Rules and Regulations of the Facility for immunity in litigation, proceedings, and causes of action. SECTION 4. PRIVATIZATION OF THE TEXAS WORKERS' COMPENSATION INSURANCE FACILITY ACCOUNT. Amends Article 21.28-C, Insurance Code by adding a Part 3. Privatization of the Texas Workers' Compensation Insurance Facility Account. Section 3.01. Allows the Association to enter into negotiations for the privatization of all of the assets, liabilities, and obligations maintained in the Account to a single insurer. Section 3.02. Requires that Association receive written approval by the Commissioner prior to consummating a transaction, if it determines that privatization is in the best interests of the State. Section 3.03. Requires that any net proceeds from the privatization of the Account be rebated in accordance with Section 2.03 of this Act. Section 3.04. Provides that if, after privatization, the acquiring insurer becomes an impaired insurer, any remaining Facility claims are deemed covered claims within the meaning of Article 21.28-C, Insurance Code. SECTION 5. NO ASSIGNMENT. Gives Association full authority to enforce the contract or statutory rights of the Facility under any servicing company agreements. Provides that nothing in the Act shall be construed as an assignment of the Facility's rights or obligations. SECTION 6. SEVERABILITY. Deems the provisions of the Act severable. SECTION 7. CONTROLLING LAW. Deems that the Act shall control in the event of conflict between the Act and any other statutory provisions relating to the Facility or the Association. SECTION 8. REPEALER. Repeals the following laws: (1) Article 5.76-2, Insurance Code; (2) Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Section 18.24(b), as amended by Acts 1993, 73rd Leg., ch. 885, Section 8; and (3) Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Section 18.24(b). SECTION 9. SAVINGS CLAUSE. Continues Article 5.76-2, Insurance Code, to govern the rights and liabilities accruing before the effective date of this Act. SECTION 10. Sets September 1, 1997 as the effective date of this Act. SECTION 11. Suspends three day rule. COMPARISON OF ORIGINAL TO SUBSTITUTE Page 1, line 7--Begin the sentence with "On" and delete the words "As of". Page 1, line 8--after the word "shall", substitute the words "take control of the operations and" for the word "assume". Page 2, line 4--after the words "authority for the", substitute the words "transfer of control" for the word "assumption". Page 2, line 6--after the word "obligations", substitute the word "to" for the word "by". Page 2, line 9--after the words "authority to enforce the", delete the word "existing". Page 3, line 2-3--after the words "authority to", insert the words "take control of" and delete the words "assume the". Page 3, line 11--after the words "paid from", insert the following: "and all collections and receipts shall be deposited into". Page 3, line 21--after the words "deficit or surplus", substitute the words "from operation of" for the word "in". Page 5, line 6--after the words "portion of an" substitute the word "assessment" for the words "assessed deficit". Page 6, line 18--insert after the word "IMMUNITY" the following: ", INDEMNIFICATION, LITIGATION AD RELATED MATTERS". Page 6, line 24--delete last sentence of subsection (a) beginning with "The litigation..." Page 7, line 13--insert the following as a new subsection (d): "(d) The litigation, proceedings and causes of action described in this section shall continue to be governed by and conducted under this section and Article 5.76-2, Insurance Code and the applicable Bylaws, Rules and Regulations of the facility, which are continued in effect for the purposes of this section." Page 7, line 1--after the word "covered", substitute the word "therein" for the words "by such provisions in this Act". Page 8, line 5--insert after the word "commissioner" the following: "before consummating the transaction". Page 8, line 15--insert after the words "contract rights" the following:"or statutory rights".