By Brimer, et al. H.B. No. 976 Substitute the following for H.B. No. 976: By Solomons C.S.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. TRANSFER TO THE TEXAS PROPERTY AND CASUALTY 1-7 INSURANCE GUARANTY ASSOCIATION. On September 1, 1997, the Texas 1-8 Property and Casualty Insurance Guaranty Association shall take 1-9 control of the operations and all of the assets, liabilities and 1-10 obligations of the Texas Workers' Compensation Insurance Facility. 1-11 SECTION 2. TEXAS PROPERTY AND CASUALTY INSURANCE GUARANTY 1-12 ASSOCIATION POWERS AND DUTIES. (a) Article 21.28-C, Insurance 1-13 Code is amended by adding the following before Section 1: 1-14 Part 1. Texas Property and Casualty Insurance Guaranty 1-15 Association. 1-16 (b) Article 21.28-C, Insurance Code is amended by 1-17 renumbering Section 1 through Section 25 as Section 1.01 through 1-18 Section 1.25. 1-19 (Sections 1.26 through 1.99 reserved for expansion 1-20 SECTION 3. TEXAS WORKERS' COMPENSATION INSURANCE FACILITY 1-21 ACCOUNT. Article 21.28-C, Insurance Code is amended by adding the 1-22 following after Part 1: 1-23 Part 2. Texas Workers' Compensation Insurance Facility 1-24 Account 2-1 Section 2.01. PURPOSES. The purposes of Part 2 of this Act 2-2 are to provide the authority for the transfer of control of the 2-3 Texas Workers' Compensation Insurance Facility's assets, 2-4 liabilities, and obligations to the Texas Property and Casualty 2-5 Insurance Guaranty Association. Further, it is the purpose of Part 2-6 2 of this Act to ensure that the Texas Property and Casualty 2-7 Insurance Guaranty Association has full authority to enforce the 2-8 rights of the Facility without limitation, except as expressly 2-9 provided herein. Part 2 of this Act shall be liberally construed 2-10 to effect these purposes. 2-11 Section 2.02. DEFINITIONS. (a) In Part 2 of this Act: 2-12 (1) "Comptroller" means the Texas Comptroller of 2-13 Public Accounts. 2-14 (2) "Facility" means the Texas Workers' Compensation 2-15 Insurance Facility. 2-16 (3) "Fund" means the Texas Workers' Compensation 2-17 Insurance Fund. 2-18 (4) "Insurer" means an insurance company licensed to 2-19 do business in the State of Texas. 2-20 (5) "Texas Workers' Compensation Insurance Facility 2-21 Account" means the account maintained by the association for the 2-22 assets of the facility. 2-23 (b) Any other terms shall have the same meaning as defined 2-24 in Part 1, Article 21.28-C, Insurance Code. 2-25 Section 2.03. POWERS AND DUTIES OF THE ASSOCIATION RELATIVE 2-26 TO THE TEXAS WORKERS' COMPENSATION INSURANCE FACILITY ACCOUNT. 2-27 (a) The association shall have the authority to take control of 3-1 the facility's assets, liabilities and obligations and to 3-2 administer all remaining aspects of the facility's operation. 3-3 (b) The association shall maintain the Texas Workers' 3-4 Compensation Insurance Facility Account separate from the 3-5 association's accounts described in Section 1.06 of Article 3-6 21.28-C, Insurance Code. 3-7 (c) All claims, expenses and other liabilities related to 3-8 the assets, liabilities and obligations of the facility shall be 3-9 paid from and all collections and receipts shall be deposited into 3-10 the Texas Workers' Compensation Insurance Facility Account. 3-11 (d) Not later than June 1 of each year, the association 3-12 shall report its operating results for the Texas Workers' 3-13 Compensation Insurance Facility Account to the commissioner on a 3-14 calendar year premium and an accident year loss basis. 3-15 (e) For claims with an accident date before January 1, 1992, 3-16 the association shall calculate at least annually its results for 3-17 incurred losses in the Texas Workers' Compensation Insurance 3-18 Facility Account, including incurred but not reported losses, by 3-19 accident year. If there is a deficit or surplus from operation of 3-20 the Texas Workers' Compensation Insurance Facility Account for such 3-21 claims, the amount of the deficit or surplus shall be assessed or 3-22 rebated to the member insurers licensed in this state who were 3-23 members of the facility during the calendar year. Each member 3-24 insurer shall pay a proportion of the total assessment or receive a 3-25 proportion of the total rebate based on its proportion of the total 3-26 voluntary workers' compensation insurance writings during the 3-27 calendar year. The association may provide for the redistribution 4-1 of all or part of an assessment that would otherwise be levied on a 4-2 member insurer if the member insurer is unable to pay the full 4-3 assessment because the member insurer is in liquidation at the time 4-4 of the assessment. The fund is not liable for any deficits 4-5 incurred on policies with an effective date before January 1, 1992. 4-6 (f) For claims with an accident date on or after January 1, 4-7 1992, the association shall calculate at least annually its results 4-8 for incurred losses in the Texas Workers' Compensation Insurance 4-9 Facility Account, including incurred but not reported losses, by 4-10 accident year. If there is a deficit or surplus from operation of 4-11 the Texas Workers' Compensation Insurance Facility Account for such 4-12 claims, the amount of the deficit or surplus shall be assessed or 4-13 rebated to the member insurers licensed in this state who were 4-14 members of the facility during the calendar year and to the fund. 4-15 Each member insurer and the fund shall pay a proportion of the 4-16 total assessment or receive a proportion of the total rebate based 4-17 on its proportion of the total voluntary workers' compensation 4-18 insurance writings during the calendar year. The association may 4-19 provide for the redistribution of all or part of an assessment that 4-20 would otherwise be levied on a member insurer if the member insurer 4-21 is unable to pay the full assessment because the member insurer is 4-22 in liquidation at the time of the assessment. 4-23 (g) The association may authorize the deferment of the 4-24 payment of an assessment made under Subsection (e) and (f) of this 4-25 section. Deferments may only be allowed if the cash flow of the 4-26 Texas Workers' Compensation Insurance Facility Account is adequate 4-27 to meet all needs. 5-1 (h) If a member insurer or the fund elects to defer any 5-2 portion of an assessment as provided herein, the entire unpaid, 5-3 assessed portion thereof and accrued interest, if any, must be 5-4 shown as a liability on all of its financial and annual statements. 5-5 (i) No member insurer shall be allowed a credit against any 5-6 tax levied by this state as a result of an assessment paid pursuant 5-7 to this section. 5-8 (j) Funds in the Texas Workers' Compensation Insurance 5-9 Facility Account are outside the state treasury. 5-10 (k) The association shall invest Texas Workers' Compensation 5-11 Insurance Facility Account funds only in investments authorized by 5-12 law for the investment of state funds as provided in Chapter 404, 5-13 Government Code. The association shall develop an investment 5-14 policy for the Texas Workers' Compensation Insurance Facility 5-15 Account and submit the policy to the comptroller for review and 5-16 approval. 5-17 Section 2.04. PLAN OF OPERATION. (a) The association shall 5-18 submit to the commissioner for approval a plan of operation to 5-19 ensure the fair, reasonable, and equitable administration of the 5-20 Texas Workers' Compensation Insurance Facility Account within 30 5-21 days after the effective date of this Act. 5-22 (b) The commissioner shall approve or disapprove the 5-23 association's plan of operation of the Texas Workers' Compensation 5-24 Insurance Facility Account within 60 days after its receipt from 5-25 the association. 5-26 (c) If the commissioner does not approve the plan of 5-27 operation, the association shall submit to the commissioner a plan 6-1 of operation and any amendments necessary or suitable to ensure the 6-2 fair, reasonable, and equitable administration of the Texas 6-3 Workers' Compensation Insurance Facility Account. The plan of 6-4 operation and any amendments take effect on approval in writing by 6-5 the commissioner. 6-6 (d) If the association fails to submit suitable amendments 6-7 to the plan, the commissioner, after notice and hearing, shall 6-8 adopt reasonable rules as necessary or advisable to implement Part 6-9 2, Article 21.28-C, Insurance Code. Those rules shall continue in 6-10 force until modified by the commissioner or superseded by a plan 6-11 submitted by the association and approved by the commissioner. 6-12 Section 2.05. IMMUNITY, INDEMNIFICATION, LITIGATION AND 6-13 RELATED MATTERS. (a) In addition to all immunities and 6-14 protections provided elsewhere in Article 21.28-C, Insurance Code, 6-15 the association shall succeed to all rights, defenses, immunities 6-16 and liabilities of the facility in all litigation and all other 6-17 proceedings and causes of action pending by or against the facility 6-18 on September 1, 1997, or filed thereafter. 6-19 (b) The immunity provisions of Article 5.76-2, Section 6-20 2.05(h) and Section 2.12, Insurance Code shall continue to apply to 6-21 all acts or omissions before, on or after September 1, 1997, by the 6-22 persons or entities covered therein. 6-23 (c) In the event that any party institutes or continues any 6-24 action against the facility, or its Governing Committee, Executive 6-25 Director, member insurers (solely in their capacity as member 6-26 insurers), staff, agents, servants, attorneys, consultants or 6-27 employees, whether or not serving as such as of September 1, 1997, 7-1 in connection with, or arising from (1) the facility's operations 7-2 or (2) the transactions contemplated by this Act, the association 7-3 shall defend, indemnify and hold harmless such persons or entity 7-4 from liability for any action or omission taken in connection with, 7-5 or arising from the performance of their powers and duties on 7-6 behalf of the facility. 7-7 (d) The litigation, proceedings and causes of action 7-8 described in this section shall continue to be governed by and 7-9 conducted under this section and Article 5.76-2, Texas Insurance 7-10 Code and the applicable Bylaws, Rules and Regulations of the 7-11 facility, which are continued in effect for the purposes of this 7-12 section. 7-13 (Sections 2.06 through 2.99 reserved for expansion 7-14 SECTION 4. PRIVATIZATION OF THE TEXAS WORKERS' COMPENSATION 7-15 INSURANCE FACILITY ACCOUNT. Article 21.28-C, Insurance Code is 7-16 amended by adding the following after Part 2: 7-17 Part 3. Privatization of the Texas Workers' Compensation 7-18 Insurance Facility Account 7-19 Section 3.01. The association may enter into negotiations 7-20 for the privatization of all the assets, liabilities, and 7-21 obligations maintained in the Texas Workers' Compensation Insurance 7-22 Facility Account to a single insurer. 7-23 Section 3.02. If the association determines that 7-24 privatization under Section 3.01 is in the best interest of the 7-25 State of Texas, it shall get the written approval of the 7-26 commissioner before consummating the transaction. 7-27 Section 3.03. Any net proceeds from the privatization of the 8-1 Texas Workers' Compensation Insurance Facility Account shall be 8-2 rebated in accordance with Section 2.03 of Article 21.28-C, 8-3 Insurance Code. 8-4 Section 3.04. In the event that after privatization, the 8-5 insurer becomes an impaired insurer, any remaining facility claims 8-6 shall be covered claims within the meaning of Article 21.28-C, 8-7 Insurance Code. 8-8 SECTION 5. NO ASSIGNMENT. The association shall have full 8-9 authority to enforce the contract rights or statutory rights of the 8-10 facility under any servicing company agreements and nothing in this 8-11 Act shall be construed to be an assignment of the facility's rights 8-12 or obligations pursuant to such agreements. 8-13 SECTION 6. SEVERABILITY CLAUSE. If any provision of this 8-14 Act or the application thereof to any person or entity or 8-15 circumstance is held invalid by any court of competent 8-16 jurisdiction, such invalidity shall not affect other provisions or 8-17 applications of the Act which can be given effect without the 8-18 invalid provision or application, and to this end the provisions of 8-19 this Act are declared to be severable. 8-20 SECTION 7. CONTROLLING LAW. If a conflict exists between 8-21 this Act and any other statutory provision relating to the facility 8-22 or the association, this Act shall control. 8-23 SECTION 8. REPEALER. The following laws are repealed: 8-24 (a) Article 5.76-2, Insurance Code. 8-25 (b) Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Section 8-26 18.24(b), as amended by Acts 1993, 73rd Leg., ch. 885, Section 8. 8-27 (c) Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Section 9-1 18.24(b). 9-2 SECTION 9. SAVINGS CLAUSE. The repeal of Article 5.76-2, 9-3 Insurance Code made by this Act does not affect rights and 9-4 liabilities accruing before the effective date of this Act. 9-5 Article 5.76-2, Insurance Code is continued in effect to govern 9-6 such rights and liabilities. 9-7 SECTION 10. This Act takes effect September 1, 1997. 9-8 SECTION 11. The importance of this legislation and the 9-9 crowded condition of the calendars in both houses create an 9-10 emergency and an imperative public necessity that the 9-11 constitutional rule requiring bills to be read on three several 9-12 days in each house be suspended, and this rule is hereby suspended, 9-13 and that this Act take effect and be in force from and after its 9-14 passage, and it is so enacted.