IMF H.B. 1338 75(R)BILL ANALYSIS STATE AFFAIRS H.B. 1338 By: Junell 4-27-97 Committee Report (Substituted) BACKGROUND In 1972, the General Appropriations Act included a provision that prohibited the expenditure of appropriated funds for the purchase of liability insurance to cover tort claims arising under the Tort Claims Act of 1969. In 1993, Section 53 of the General Appropriations Act was amended to allow state agencies to purchase directors' and officers' liability insurance, However, the Attorney General opined that this section was limited to policies designed to cover suits arising under the Torts Claims Act. In 1995, the Legislature attempted to broaden the scope of Section 53 by renaming it "Purchase of Insurance." Some ambiguity remained and although the Comptroller has agreed to allow the renewal of existing directors' and officers' insurance policies, the Attorney General has limited this authority until the Legislature has had an opportunity to enact a general law authorizing state agencies to purchase the policies covering claims other than those arising under the Tort Claims Act. PURPOSE As proposed, H.B. 1338 allows a state agency to purchase directors' and officers' liability insurance policies covering commission or board members and executive staff for claims arising outside of the Tort Claims Act. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Chapter 14 of the Civil Practices and Remedies Code by adding Section 104.009 as follows: Section 104.009(a) allows a state agency, institution, or department to purchase directors's and officer's liability insurance. Section 104.009(b) requires that an insurance policy procured under this section must have a deductible in an amount equal to the limits of liability established under Section 104.003. Section 104.009(c) provides that purchase of an insurance policy under this section does not waive the right to immunity, defense, or jurisdictional bar. SECTION 2. Amends Section 104.003(b) of the Civil Practices and Remedies Code with a conforming change. SECTION 3. Emergency clause. Effective date: upon passage. COMPARISON OF ORIGINAL TO SUBSTITUTE SECTION 1: Subsection (a) clarifies that the statute allows the purchase of policies covering not only tort liability, but also for other conduct which is customarily covered by these types of policies. Subsection (b) conforms the statute with the current practice of providing a policy with two deductibles, one applicable to the liability of the state agency, and another optional deductible applicable to the individual's liability. SECTION 2: Subsection (b) makes conforming changes. The language clarifies that the state is not liable to the extend the damages are recoverable under and are in excess of the deductible limits of the insurance contract.