1-1 By: Brimer (Senate Sponsor - Armbrister) H.B. No. 976 1-2 (In the Senate - Received from the House April 21, 1997; 1-3 April 22, 1997, read first time and referred to Committee on 1-4 Economic Development; May 12, 1997, reported favorably, as amended, 1-5 by the following vote: Yeas 9, Nays 0; May 12, 1997, sent to 1-6 printer.) 1-7 COMMITTEE AMENDMENT NO. 1 By: Cain 1-8 Amend House Bill 976 as follows: 1-9 In SECTION 1 of the bill, amending the Texas Property and 1-10 Casualty Insurance Guaranty Act (Article 21.28-C, Insurance Code), 1-11 in proposed Section 26, by striking subsection (l) and inserting 1-12 the following in lieu thereof: 1-13 (l) The association may invest Texas workers' compensation 1-14 insurance facility account funds in the types of investments 1-15 authorized by law for an insurer authorized to write workers' 1-16 compensation insurance coverage in this state. The association 1-17 shall develop an investment policy for the Texas workers' 1-18 compensation insurance facility account and shall submit that 1-19 policy to the comptroller for review and approval. 1-20 A BILL TO BE ENTITLED 1-21 AN ACT 1-22 relating to the abolition of the Texas Workers' Compensation 1-23 Insurance Facility and the transfer of the assets and liabilities 1-24 of that facility. 1-25 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-26 SECTION 1. The Texas Property and Casualty Insurance 1-27 Guaranty Act (Article 21.28-C, Insurance Code) is amended by adding 1-28 Section 26 to read as follows: 1-29 Sec. 26. TRANSFER OF FACILITY TO ASSOCIATION. (a) The 1-30 purpose of this section is to: 1-31 (1) provide a means for the transfer of control of the 1-32 assets, liabilities, and obligations of the Texas workers' 1-33 compensation insurance facility to the Texas Property and Casualty 1-34 Insurance Guaranty Association; and 1-35 (2) ensure that the association has full authority to 1-36 enforce the rights of the facility without limitation, except as 1-37 expressly provided by this section. 1-38 (b) In addition to the definitions under Section 5 of this 1-39 Act, in this section: 1-40 (1) "Comptroller" means the Texas comptroller of 1-41 public accounts. 1-42 (2) "Facility" means the Texas workers' compensation 1-43 insurance facility. 1-44 (3) "Fund" means the Texas Workers' Compensation 1-45 Insurance Fund. 1-46 (4) "Insurer" means an insurance company licensed to 1-47 do business in this state. 1-48 (5) "Texas workers' compensation insurance facility 1-49 account" means the account maintained by the association for the 1-50 assets of the facility. 1-51 (c) The association shall take control of the facility's 1-52 assets, liabilities, and obligations and may administer all of the 1-53 remaining aspects of the facility's operation. The association has 1-54 full authority to enforce the contract or statutory rights of the 1-55 facility under any servicing company agreements. This section may 1-56 not be construed to be an assignment of the facility's rights or 1-57 obligations under those agreements. 1-58 (d) The association shall maintain the Texas workers' 1-59 compensation insurance facility account separately from the 1-60 association's accounts described by Section 6 of this Act. Each 1-61 claim, expense, or other liability related to the assets, 1-62 liabilities, and obligations of the facility shall be paid from, 1-63 and all collections and receipts shall be deposited into, the Texas 1-64 workers' compensation insurance facility account. Funds in the 2-1 Texas workers' compensation insurance facility account shall be 2-2 maintained outside the state treasury. 2-3 (e) Not later than June 1 of each year, the association 2-4 shall report its operating results for the Texas workers' 2-5 compensation insurance facility account to the commissioner on a 2-6 calendar year premium and an accident year loss basis. 2-7 (f) For a claim in which the compensable injury occurred 2-8 before January 1, 1992, the association shall compute at least 2-9 annually its results for incurred losses in the Texas workers' 2-10 compensation insurance facility account, including incurred but not 2-11 reported losses, by accident year. If there is a deficit or 2-12 surplus from the operation of the Texas workers' compensation 2-13 insurance facility account for those claims, the amount of the 2-14 deficit or surplus shall be assessed or rebated to the member 2-15 insurers licensed in this state who were members of the facility 2-16 during the calendar year. Each member insurer shall pay a 2-17 proportionate share of the total assessment or receive a 2-18 proportionate share of the total rebate based on that insurer's 2-19 portion of the total voluntary workers' compensation insurance 2-20 writings during the calendar year. The fund is not liable for any 2-21 deficit incurred on a policy with an effective date before January 2-22 1, 1992. 2-23 (g) For claims with an accident date on or after January 1, 2-24 1992, the association shall compute at least annually its results 2-25 for incurred losses in the Texas workers' compensation insurance 2-26 facility account, including incurred but not reported losses, by 2-27 accident year. If there is a deficit or surplus from operation of 2-28 the Texas workers' compensation insurance facility account for 2-29 those claims, the amount of the deficit or surplus shall be 2-30 assessed or rebated to the member insurers licensed in this state 2-31 who were members of the facility during the calendar year and to 2-32 the fund. Each member insurer and the fund shall pay a 2-33 proportionate share of the total assessment or receive a 2-34 proportionate share of the total rebate based on its portion of the 2-35 total voluntary workers' compensation insurance writings during the 2-36 calendar year. 2-37 (h) The association may provide for the redistribution of 2-38 all or part of an assessment that would otherwise be levied on a 2-39 member insurer under Subsection (f) or (g) of this section if the 2-40 member insurer is unable to pay the full assessment because the 2-41 member insurer is in liquidation at the time of the assessment. 2-42 (i) The association may authorize the deferment of the 2-43 payment of an assessment made under Subsection (f) or (g) of this 2-44 section. A deferment may be allowed only if the cash flow of the 2-45 Texas workers' compensation insurance facility account is adequate 2-46 to meet all needs. 2-47 (j) If a member insurer or the fund elects to defer any 2-48 portion of an assessment as provided by this section, the entire 2-49 unpaid portion of the assessment and any accrued interest must be 2-50 shown as a liability on each financial and annual statement of that 2-51 insurer. 2-52 (k) A member insurer may not be allowed a credit against any 2-53 tax levied by this state as a result of an assessment paid under 2-54 this section. 2-55 (l) The association may invest Texas workers' compensation 2-56 insurance facility account funds only in investments authorized for 2-57 the investment of state funds as provided by Chapter 404, 2-58 Government Code. The association shall develop an investment 2-59 policy for the Texas workers' compensation insurance facility 2-60 account and shall submit that policy to the comptroller for review 2-61 and approval. 2-62 (m) The association shall submit to the commissioner for 2-63 approval a plan of operation to ensure the fair, reasonable, and 2-64 equitable administration of the Texas workers' compensation 2-65 insurance facility account not later than October 1, 1997. The 2-66 commissioner shall approve or disapprove the association's plan of 2-67 operation of the Texas workers' compensation insurance facility 2-68 account not later than the 60th day after the date on which the 2-69 association submits the plan to the commissioner. 3-1 (n) If the commissioner does not approve the plan of 3-2 operation, the association shall submit to the commissioner an 3-3 amended plan of operation with any amendments necessary or suitable 3-4 to ensure the fair, reasonable, and equitable administration of the 3-5 Texas workers' compensation insurance facility account. The plan 3-6 of operation and any amendments take effect on approval in writing 3-7 by the commissioner. If the association fails to submit suitable 3-8 amendments to the plan, the commissioner, after notice and hearing, 3-9 shall adopt reasonable rules as necessary or advisable to implement 3-10 this section. Those rules shall continue in force until modified 3-11 by the commissioner or superseded by a plan submitted by the 3-12 association and approved by the commissioner. 3-13 (o) In addition to all immunities and protections otherwise 3-14 provided by this article, the association succeeds to all rights, 3-15 defenses, immunities, and liabilities of the facility in each cause 3-16 of action or other proceeding pending by or against the facility on 3-17 September 1, 1997, or filed after that date. The immunity 3-18 provisions of Sections 2.05(h) and 2.12, Article 5.76-2 of this 3-19 code, as those provisions existed before their repeal, continue to 3-20 apply to each act or omission that occurs before, on, or after 3-21 September 1, 1997, and that is performed by the persons or entities 3-22 covered by those provisions. 3-23 (p) If any party institutes or continues an action against 3-24 the facility, the governing committee of the facility, the 3-25 executive director of the facility, a member insurer solely in that 3-26 insurer's capacity as a member insurer, or an agent, servant, 3-27 attorney, consultant, or employee of the facility, whether or not 3-28 serving in that capacity on September 1, 1997, in connection with 3-29 or arising from either the facility's operations or the 3-30 transactions contemplated by this section, the association shall 3-31 defend, indemnify, and hold harmless that person or entity from 3-32 liability for any act or omission of that person or entity in 3-33 connection with, or arising from the performance of, the person's 3-34 or entity's powers and duties on behalf of the facility. A cause 3-35 of action or other proceeding described by this subsection shall 3-36 continue to be governed by and conducted under this section and 3-37 Article 5.76-2 of this code, as that article existed before its 3-38 repeal, and the applicable bylaws, rules, and regulations of the 3-39 facility, and those provisions are continued in effect for the 3-40 purposes of this section. 3-41 (q) The association may enter into negotiations for the 3-42 privatization to a single insurer of all the assets, liabilities, 3-43 and obligations maintained in the Texas workers' compensation 3-44 insurance facility account. If the association determines that 3-45 privatization under this subsection is in the best interest of this 3-46 state, the association shall obtain the written approval of the 3-47 commissioner before entering into a privatization agreement to 3-48 consummate the applicable transaction. 3-49 (r) Any net proceeds from the privatization of the Texas 3-50 workers' compensation insurance facility account shall be rebated 3-51 in accordance with Subsection (g) of this section. 3-52 (s) If an insurer that assumes the assets, liabilities, and 3-53 obligations maintained in the Texas workers' compensation insurance 3-54 facility account under a privatization agreement approved under 3-55 Subsection (q) of this section becomes an impaired insurer after 3-56 that privatization agreement takes effect, any remaining facility 3-57 claims shall be covered claims under this article. 3-58 (t) If a conflict exists between this section and any other 3-59 statute relating to the facility or the association, this section 3-60 controls. 3-61 SECTION 2. Except as otherwise provided by this Act, the 3-62 following laws are repealed on the effective date of this Act: 3-63 (1) Article 5.76-2, Insurance Code; and 3-64 (2) Section 18.24(b), Chapter 12, Acts of the 72nd 3-65 Legislature, 2nd Called Session, 1991, as amended by Section 8, 3-66 Chapter 885, Acts of the 73rd Legislature, Regular Session, 1993. 3-67 SECTION 3. If any provision of this Act or the application 3-68 of this Act to any person or entity or circumstance is held invalid 3-69 by a court of competent jurisdiction, that invalidity does not 4-1 affect other provisions or applications of this Act that can be 4-2 given effect without the invalid provision or application, and to 4-3 this end the provisions of this Act are declared to be severable. 4-4 SECTION 4. The repeal of Article 5.76-2, Insurance Code, 4-5 under Section 2 of this Act does not affect rights and liabilities 4-6 accruing under that article before the effective date of this Act, 4-7 and that article is continued in effect for that purpose and for 4-8 the purposes expressly provided by Section 26, Texas Property and 4-9 Casualty Insurance Guaranty Act (Article 21.28-C, Insurance Code), 4-10 as added by this Act. 4-11 SECTION 5. The importance of this legislation and the 4-12 crowded condition of the calendars in both houses create an 4-13 emergency and an imperative public necessity that the 4-14 constitutional rule requiring bills to be read on three several 4-15 days in each house be suspended, and this rule is hereby suspended, 4-16 and that this Act take effect and be in force from and after its 4-17 passage, and it is so enacted. 4-18 * * * * *