By Brimer H.B. No. 976 A BILL TO BE ENTITLED 1-1 AN ACT 1-2 relating to the abolition of the Texas Workers' Compensation 1-3 Insurance Facility and the transfer of the assets and liabilities 1-4 of that facility. 1-5 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-6 SECTION 1. The Texas Property and Casualty Insurance 1-7 Guaranty Act (Article 21.28-C, Insurance Code) is amended by adding 1-8 Section 26 to read as follows: 1-9 Sec. 26. TRANSFER OF FACILITY TO ASSOCIATION. (a) The 1-10 purpose of this section is to: 1-11 (1) provide a means for the transfer of control of the 1-12 assets, liabilities, and obligations of the Texas workers' 1-13 compensation insurance facility to the Texas Property and Casualty 1-14 Insurance Guaranty Association; and 1-15 (2) ensure that the association has full authority to 1-16 enforce the rights of the facility without limitation, except as 1-17 expressly provided by this section. 1-18 (b) In addition to the definitions under Section 5 of this 1-19 Act, in this section: 1-20 (1) "Comptroller" means the Texas comptroller of 1-21 public accounts. 1-22 (2) "Facility" means the Texas workers' compensation 1-23 insurance facility. 1-24 (3) "Fund" means the Texas Workers' Compensation 2-1 Insurance Fund. 2-2 (4) "Insurer" means an insurance company licensed to 2-3 do business in this state. 2-4 (5) "Texas workers' compensation insurance facility 2-5 account" means the account maintained by the association for the 2-6 assets of the facility. 2-7 (c) The association shall take control of the facility's 2-8 assets, liabilities, and obligations and may administer all of the 2-9 remaining aspects of the facility's operation. The association has 2-10 full authority to enforce the contract or statutory rights of the 2-11 facility under any servicing company agreements. This section may 2-12 not be construed to be an assignment of the facility's rights or 2-13 obligations under those agreements. 2-14 (d) The association shall maintain the Texas workers' 2-15 compensation insurance facility account separately from the 2-16 association's accounts described by Section 6 of this Act. Each 2-17 claim, expense, or other liability related to the assets, 2-18 liabilities, and obligations of the facility shall be paid from, 2-19 and all collections and receipts shall be deposited into, the Texas 2-20 workers' compensation insurance facility account. Funds in the 2-21 Texas workers' compensation insurance facility account shall be 2-22 maintained outside the state treasury. 2-23 (e) Not later than June 1 of each year, the association 2-24 shall report its operating results for the Texas workers' 2-25 compensation insurance facility account to the commissioner on a 2-26 calendar year premium and an accident year loss basis. 2-27 (f) For a claim in which the compensable injury occurred 3-1 before January 1, 1992, the association shall compute at least 3-2 annually its results for incurred losses in the Texas workers' 3-3 compensation insurance facility account, including incurred but not 3-4 reported losses, by accident year. If there is a deficit or 3-5 surplus from the operation of the Texas workers' compensation 3-6 insurance facility account for those claims, the amount of the 3-7 deficit or surplus shall be assessed or rebated to the member 3-8 insurers licensed in this state who were members of the facility 3-9 during the calendar year. Each member insurer shall pay a 3-10 proportionate share of the total assessment or receive a 3-11 proportionate share of the total rebate based on that insurer's 3-12 portion of the total voluntary workers' compensation insurance 3-13 writings during the calendar year. The fund is not liable for any 3-14 deficit incurred on a policy with an effective date before January 3-15 1, 1992. 3-16 (g) For claims with an accident date on or after January 1, 3-17 1992, the association shall compute at least annually its results 3-18 for incurred losses in the Texas workers' compensation insurance 3-19 facility account, including incurred but not reported losses, by 3-20 accident year. If there is a deficit or surplus from operation of 3-21 the Texas workers' compensation insurance facility account for 3-22 those claims, the amount of the deficit or surplus shall be 3-23 assessed or rebated to the member insurers licensed in this state 3-24 who were members of the facility during the calendar year and to 3-25 the fund. Each member insurer and the fund shall pay a 3-26 proportionate share of the total assessment or receive a 3-27 proportionate share of the total rebate based on its portion of the 4-1 total voluntary workers' compensation insurance writings during the 4-2 calendar year. 4-3 (h) The association may provide for the redistribution of 4-4 all or part of an assessment that would otherwise be levied on a 4-5 member insurer under Subsection (f) or (g) of this section if the 4-6 member insurer is unable to pay the full assessment because the 4-7 member insurer is in liquidation at the time of the assessment. 4-8 (i) The association may authorize the deferment of the 4-9 payment of an assessment made under Subsection (f) or (g) of this 4-10 section. A deferment may be allowed only if the cash flow of the 4-11 Texas workers' compensation insurance facility account is adequate 4-12 to meet all needs. 4-13 (j) If a member insurer or the fund elects to defer any 4-14 portion of an assessment as provided by this section, the entire 4-15 unpaid portion of the assessment and any accrued interest must be 4-16 shown as a liability on each financial and annual statement of that 4-17 insurer. 4-18 (k) A member insurer may not be allowed a credit against any 4-19 tax levied by this state as a result of an assessment paid under 4-20 this section. 4-21 (l) The association may invest Texas workers' compensation 4-22 insurance facility account funds only in investments authorized for 4-23 the investment of state funds as provided by Chapter 404, 4-24 Government Code. The association shall develop an investment 4-25 policy for the Texas workers' compensation insurance facility 4-26 account and shall submit that policy to the comptroller for review 4-27 and approval. 5-1 (m) The association shall submit to the commissioner for 5-2 approval a plan of operation to ensure the fair, reasonable, and 5-3 equitable administration of the Texas workers' compensation 5-4 insurance facility account not later than October 1, 1997. The 5-5 commissioner shall approve or disapprove the association's plan of 5-6 operation of the Texas workers' compensation insurance facility 5-7 account not later than the 60th day after the date on which the 5-8 association submits the plan to the commissioner. 5-9 (n) If the commissioner does not approve the plan of 5-10 operation, the association shall submit to the commissioner an 5-11 amended plan of operation with any amendments necessary or suitable 5-12 to ensure the fair, reasonable, and equitable administration of the 5-13 Texas workers' compensation insurance facility account. The plan 5-14 of operation and any amendments take effect on approval in writing 5-15 by the commissioner. If the association fails to submit suitable 5-16 amendments to the plan, the commissioner, after notice and hearing, 5-17 shall adopt reasonable rules as necessary or advisable to implement 5-18 this section. Those rules shall continue in force until modified 5-19 by the commissioner or superseded by a plan submitted by the 5-20 association and approved by the commissioner. 5-21 (o) In addition to all immunities and protections otherwise 5-22 provided by this article, the association succeeds to all rights, 5-23 defenses, immunities, and liabilities of the facility in each cause 5-24 of action or other proceeding pending by or against the facility on 5-25 September 1, 1997, or filed after that date. The immunity 5-26 provisions of Sections 2.05(h) and 2.12, Article 5.76-2 of this 5-27 code, as those provisions existed before their repeal, continue to 6-1 apply to each act or omission that occurs before, on, or after 6-2 September 1, 1997, and that is performed by the persons or entities 6-3 covered by those provisions. 6-4 (p) If any party institutes or continues an action against 6-5 the facility, the governing committee of the facility, the 6-6 executive director of the facility, a member insurer solely in that 6-7 insurer's capacity as a member insurer, or an agent, servant, 6-8 attorney, consultant, or employee of the facility, whether or not 6-9 serving in that capacity on September 1, 1997, in connection with 6-10 or arising from either the facility's operations or the 6-11 transactions contemplated by this section, the association shall 6-12 defend, indemnify, and hold harmless that person or entity from 6-13 liability for any act or omission of that person or entity in 6-14 connection with, or arising from the performance of, the person's 6-15 or entity's powers and duties on behalf of the facility. A cause 6-16 of action or other proceeding described by this subsection shall 6-17 continue to be governed by and conducted under this section and 6-18 Article 5.76-2 of this code, as that article existed before its 6-19 repeal, and the applicable bylaws, rules, and regulations of the 6-20 facility, and those provisions are continued in effect for the 6-21 purposes of this section. 6-22 (q) The association may enter into negotiations for the 6-23 privatization to a single insurer of all the assets, liabilities, 6-24 and obligations maintained in the Texas workers' compensation 6-25 insurance facility account. If the association determines that 6-26 privatization under this subsection is in the best interest of this 6-27 state, the association shall obtain the written approval of the 7-1 commissioner before entering into a privatization agreement to 7-2 consummate the applicable transaction. 7-3 (r) Any net proceeds from the privatization of the Texas 7-4 workers' compensation insurance facility account shall be rebated 7-5 in accordance with Subsection (g) of this section. 7-6 (s) If an insurer that assumes the assets, liabilities, and 7-7 obligations maintained in the Texas workers' compensation insurance 7-8 facility account under a privatization agreement approved under 7-9 Subsection (q) of this section becomes an impaired insurer after 7-10 that privatization agreement takes effect, any remaining facility 7-11 claims shall be covered claims under this article. 7-12 (t) If a conflict exists between this section and any other 7-13 statute relating to the facility or the association, this section 7-14 controls. 7-15 SECTION 2. Except as otherwise provided by this Act, the 7-16 following laws are repealed on the effective date of this Act: 7-17 (1) Article 5.76-2, Insurance Code; and 7-18 (2) Section 18.24(b), Chapter 12, Acts of the 72nd 7-19 Legislature, 2nd Called Session, 1991, as amended by Section 8, 7-20 Chapter 885, Acts of the 73rd Legislature, Regular Session, 1993. 7-21 SECTION 3. If any provision of this Act or the application 7-22 of this Act to any person or entity or circumstance is held invalid 7-23 by a court of competent jurisdiction, that invalidity does not 7-24 affect other provisions or applications of this Act that can be 7-25 given effect without the invalid provision or application, and to 7-26 this end the provisions of this Act are declared to be severable. 7-27 SECTION 4. The repeal of Article 5.76-2, Insurance Code, 8-1 under Section 2 of this Act does not affect rights and liabilities 8-2 accruing under that article before the effective date of this Act, 8-3 and that article is continued in effect for that purpose and for 8-4 the purposes expressly provided by Section 26, Texas Property and 8-5 Casualty Insurance Guaranty Act (Article 21.28-C, Insurance Code), 8-6 as added by this Act. 8-7 SECTION 5. The importance of this legislation and the 8-8 crowded condition of the calendars in both houses create an 8-9 emergency and an imperative public necessity that the 8-10 constitutional rule requiring bills to be read on three several 8-11 days in each house be suspended, and this rule is hereby suspended, 8-12 and that this Act take effect and be in force from and after its 8-13 passage, and it is so enacted.