1-1 By: Smithee (Senate Sponsor - Sibley) H.B. No. 1975
1-2 (In the Senate - Received from the House April 18, 1997;
1-3 April 22, 1997, read first time and referred to Committee on
1-4 Economic Development; April 29, 1997, reported adversely, with
1-5 favorable Committee Substitute by the following vote: Yeas 8, Nays
1-6 1; April 29, 1997, sent to printer.)
1-7 COMMITTEE SUBSTITUTE FOR H.B. No. 1975 By: Sibley
1-8 A BILL TO BE ENTITLED
1-9 AN ACT
1-10 relating to the examination of certain insurance companies.
1-11 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-12 SECTION 1. Article 9.22, Insurance Code, is amended to read
1-13 as follows:
1-14 Art. 9.22. ANNUAL STATEMENT OF TITLE INSURANCE COMPANIES;
1-15 EXAMINATION. (a) Every title insurance company, domestic and
1-16 foreign, operating under the provisions of this Act shall, on or
1-17 before the first of March every year, file with the commissioner
1-18 [Board] a verified statement, in such form as the commissioner
1-19 [Board] may require, setting forth the statement of the business
1-20 done by it during the preceding year, and the condition of its
1-21 affairs as of December 31st preceding.
1-22 (b) Each title insurance company is subject to Articles 1.15
1-23 and 1.16 of this code. [It shall be the duty of the Board,
1-24 biennially, or oftener if it shall be deemed advisable, in person
1-25 or through a duly appointed representative, to make a thorough
1-26 examination of the company's books and affairs and the transactions
1-27 in which it is engaged at the expense of said company, for which
1-28 purpose the Board or its representatives shall have access to the
1-29 books and records of the said company, and shall have the right to
1-30 interrogate and require answer under oath from any officer, agent
1-31 or employee of the said company concerning any matters pertaining
1-32 to the business thereof.]
1-33 SECTION 2. Article 10.33, Insurance Code, is amended to read
1-34 as follows:
1-35 Art. 10.33. EXAMINATION OF DOMESTIC SOCIETIES. (a) Each
1-36 domestic society is subject to Articles 1.15 and 1.16 of this code.
1-37 (b) [The Board of Insurance Commissioners or any person it
1-38 may appoint, shall have the power of visitation and examination
1-39 into the affairs of any domestic society. It may employ assistants
1-40 for the purpose of such examination, and it, or any person it may
1-41 appoint, shall have free access to all the books, papers and
1-42 documents that relate to the business of the society, and may
1-43 summon and qualify as witnesses under oath and examine its
1-44 officers, agents and employees or other persons in relation to the
1-45 affairs, transactions and conditions of the society. The expense
1-46 of such examination shall be paid by the society examined, upon
1-47 statement furnished by the Board of Insurance Commissioners, and
1-48 the examination shall be made at least once in three (3) years.]
1-49 Whenever after examination the commissioner [Board] is satisfied
1-50 that any domestic society has failed to comply with any provisions
1-51 of this chapter, or is exceeding its powers, or is not carrying out
1-52 its contracts in good faith, or is transacting business
1-53 fraudulently; or whenever any domestic society, after the existence
1-54 of one (1) year or more, shall have a membership of less than four
1-55 hundred (400), or shall determine to discontinue business, the
1-56 commissioner [said Board] may present the facts relating thereto to
1-57 the Attorney General, who shall, if he deem the circumstances
1-58 warrant, commence an action in quo warranto in a court of competent
1-59 jurisdiction, and if it shall then appear upon the trial that such
1-60 society should be closed, said society shall be enjoined from
1-61 carrying on any further business and some person shall be appointed
1-62 receiver of such society and shall proceed at once to take
1-63 possession of the books, papers, moneys and other assets of the
1-64 society, and shall forthwith, under the direction of the court,
2-1 proceed to close the affairs of the society, and to distribute its
2-2 funds to those entitled thereto.
2-3 SECTION 3. Article 10.35, Insurance Code, is amended to read
2-4 as follows:
2-5 Art. 10.35. EXAMINATION OF FOREIGN SOCIETIES. The
2-6 commissioner [Board of Insurance Commissioners], or any person
2-7 appointed by the commissioner [whom it may appoint], may examine
2-8 any foreign society transacting or applying for admission to
2-9 transact business in this State. The commissioner [said Board] may
2-10 employ assistants, and the commissioner [it,] or the commissioner's
2-11 appointee [any person it may appoint,] shall have free access to
2-12 all the books, papers and documents that relate to the business of
2-13 the society, and may summon and qualify as witnesses under oath and
2-14 examine its officers, agents and employees and other persons in
2-15 relation to the affairs, transactions and conditions of the
2-16 society. The commissioner [It] may[, in its discretion,] accept in
2-17 lieu of such examination the examination of the Insurance
2-18 Department of the state, territory, district, province or country
2-19 where such society is organized. [The actual expense of examiners
2-20 making such examination shall be paid by the society, upon
2-21 statements furnished by the Board.] If any such society or its
2-22 officers refuse to permit such examination or to comply with the
2-23 provisions of the law relative thereto, the authority of such
2-24 society to write new business in this State shall be suspended, or
2-25 license refused, until satisfactory evidence is furnished to the
2-26 commissioner [the Board of Insurance Commissioners] relating to the
2-27 condition and affairs of the society, and during suspension the
2-28 society shall not write any new business in this State. Each
2-29 foreign society is subject to the provisions of Articles 1.15 and
2-30 1.16 of this code that are applicable to insurance carriers that
2-31 are not organized under the laws of this State but are authorized
2-32 to transact business in this State.
2-33 SECTION 4. Article 13.09, Insurance Code, is amended to read
2-34 as follows:
2-35 Art. 13.09. EXCEPTIONS AND EXEMPTIONS; EXAMINATIONS.
2-36 (a) This chapter shall in no wise affect or apply to companies
2-37 operating as local mutual aids, as fraternal benefit societies,
2-38 reciprocal exchanges, or to foreign assessment companies operating
2-39 under any other law in this State, or any other form of insurance
2-40 other than those corporations carrying on in this State the
2-41 statewide business of mutually protecting or insuring the lives of
2-42 their members by assessments made upon their members. Except as
2-43 expressly provided in this chapter and in Chapter 14 of this code,
2-44 no insurance law of this State shall apply to any corporation
2-45 operating under this chapter, and no law hereafter enacted shall
2-46 apply to them unless they be expressly designated therein.
2-47 (b) Articles 1.15 and 1.16 of this code apply to
2-48 corporations and associations regulated under this chapter.
2-49 SECTION 5. Article 14.16, Insurance Code, is amended to read
2-50 as follows:
2-51 Art. 14.16. Examination. Articles 1.15 and 1.16 of this
2-52 code apply to corporations and associations regulated under this
2-53 chapter. [In addition to the annual report required by this
2-54 chapter, the State Board of Insurance shall, once in every two (2)
2-55 years or oftener if it deems it advisable, require the books,
2-56 records, accounts, and affairs of any corporation or association
2-57 qualifying and acting under this chapter to be examined and audited
2-58 by an accountant or accountants or examiner designated and
2-59 commissioned by the Board. For the purpose of any examination, the
2-60 Board and the auditors and examiners shall have free access to all
2-61 books, records, papers, and accounts of the corporation; and the
2-62 cost for the time required in making such examination and audit and
2-63 all necessary expenses in connection therewith shall be paid by the
2-64 corporation upon presentation of a bill showing the charges made by
2-65 the Board, which shall include the salaries, traveling expenses,
2-66 hotel bills, and other expenses of such auditors and/or examiners,
2-67 together with all other expenses in connection with such
2-68 examination. Each corporation or association shall be charged with
2-69 the salary of the auditors and examiners for the time required in
3-1 making such examination and the time required in connection with
3-2 going to and coming from the place or places necessary in
3-3 connection with such examination, together with all expenses
3-4 incurred by such auditors and/or examiners, and in addition thereto
3-5 such corporation or association shall be charged by the Board with
3-6 an amount equal to the salaries of the actuaries, examination clerk
3-7 or clerks, stenographers, and all other employees employed in
3-8 connection with the examination work in the Board for the time said
3-9 employees are performing duties in connection with the examination
3-10 of each corporation so examined.]
3-11 [The amounts so collected shall be paid into the State
3-12 Treasury to the credit of the State Board of Insurance operating
3-13 fund and shall be spent as authorized by legislative appropriation
3-14 only on warrants issued by the comptroller of public accounts
3-15 pursuant to duly certified requisitions of the State Board of
3-16 Insurance.]
3-17 [The Commissioner of Insurance or any deputy or examiner
3-18 shall have the right to require any officer, agent, or employee of
3-19 any company or association operating under this law, or any other
3-20 person, to be sworn and to answer under oath any questions
3-21 regarding the affairs or activities of said association or company,
3-22 and said Commissioner deputy, examiner, or auditor is hereby
3-23 authorized to administer such oath.]
3-24 SECTION 6. Article 17.22(a), Insurance Code, is amended to
3-25 read as follows:
3-26 (a) County mutual insurance companies shall be exempt from
3-27 the operation of all insurance laws of this state, except such laws
3-28 as are made applicable by their specific terms or as in this
3-29 Chapter specifically provided. In addition to such other Articles
3-30 as may be made to apply by other Articles of this Code, county
3-31 mutual insurance companies shall be subject to:
3-32 (1) Subdivision 7 of Article 1.10 of this Code; and
3-33 (2) Articles 1.15, 1.15A, 1.16, 1.24, 2.04, 2.05,
3-34 2.08, 2.10, 4.10, 5.12, 5.37, 5.38, 5.39, 5.40, 5.49, 21.21, and
3-35 21.49 of this Code[; and]
3-36 [(3) Article 7064, Revised Statutes].
3-37 SECTION 7. Article 20.21, Insurance Code, is amended to read
3-38 as follows:
3-39 Art. 20.21. [EXAMINATION OF] BOOKS AND RECORDS; EXAMINATION.
3-40 (a) Every such corporation shall keep complete books and records[,
3-41 showing all funds collected and disbursed, and all books and
3-42 records shall be subject to examination by the Board of Insurance
3-43 Commissioners annually, the expense of such examination to be borne
3-44 by said corporation].
3-45 (b) Articles 1.15 and 1.16 of this code apply to
3-46 corporations regulated under this article.
3-47 SECTION 8. Section 5B(a), Article 21.49, Insurance Code, is
3-48 amended to read as follows:
3-49 (a) The association is subject to Articles 1.15 and 1.16 of
3-50 this code [Board shall, once in each two-year period, or more often
3-51 if the Board considers it necessary, examine the financial
3-52 condition of the Association and its abilities to meet its
3-53 liabilities, as well as its compliance with the law of this state
3-54 affecting the conduct of its business. The examination shall be
3-55 made by the Board, one or more examiners, or commission of an
3-56 independent certified public accountant. The Board or its
3-57 commissioned examiners are entitled to free access to all the books
3-58 and records of the Association or agents writing business in the
3-59 Association and may summon and examine under oath officers,
3-60 employees, agents, and any other persons in the state relative to
3-61 the affairs of the Association].
3-62 SECTION 9. Section 10, Article 21.49-3, Insurance Code, is
3-63 amended to read as follows:
3-64 Sec. 10. Examinations. The association is subject to
3-65 Articles 1.15 and 1.16 of this code [board shall make an
3-66 examination into the affairs of the association at least annually.
3-67 Such examination shall be conducted, the report thereon filed, and
3-68 expenses borne and paid for, in the manner prescribed in Articles
3-69 1.15 and 1.16 of the Insurance Code].
4-1 SECTION 10. REPEALER. The following laws are repealed:
4-2 (1) Article 17.18, Insurance Code; and
4-3 (2) Section 5B(c), Article 21.49, Insurance Code.
4-4 (3) Article 5.73, Sec. 5, Insurance Code.
4-5 SECTION 11. This Act takes effect September 1, 1997, and
4-6 applies only to an examination conducted by the Texas Department of
4-7 Insurance on or after that date.
4-8 SECTION 12. The importance of this legislation and the
4-9 crowded condition of the calendars in both houses create an
4-10 emergency and an imperative public necessity that the
4-11 constitutional rule requiring bills to be read on three several
4-12 days in each house be suspended, and this rule is hereby suspended.
4-13 * * * * *