By Bonnen                                             H.B. No. 2437

                                A BILL TO BE ENTITLED

 1-1                                   AN ACT

 1-2     relating to the Texas Property and Casualty Guaranty Association.

 1-3           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

 1-4           SECTION 1.  Article 21.28-C, Section 5, Insurance Code, is

 1-5     amended to read as follows:

 1-6           Sec. 5.  (8)  "Covered claim" means an unpaid claim of an

 1-7     insured or third-party liability claimant that arises out of and is

 1-8     within the coverage and not in excess of the applicable limits of

 1-9     an insurance policy to which this Act applies, issued or assumed

1-10     (whereby an assumption certificate is issued to the insured) by an

1-11     insurer licensed to do business in this state, if that insurer

1-12     becomes an impaired insurer and the third-party claimant or

1-13     liability claimant or insured is a resident of this state at the

1-14     time of the insured event, or the claim is a first-party claim for

1-15     damage to property that is permanently located in this state.

1-16     "Covered claim" shall also include [75 percent of] unearned

1-17     premiums, but in no event shall a covered claim for unearned

1-18     premiums exceed $25,000 [$1,000].  Individual covered claims

1-19     (including any and all derivative claims by more than one person

1-20     which arise from the same occurrence, which shall be considered

1-21     collectively as a single claim under this Act) shall be limited to

1-22     $300,000 [$100,000], except that the association shall pay the full

1-23     amount of any covered claim arising out of a workers' compensation

1-24     claim made under a workers' compensation policy.  "Covered claim"

 2-1     shall not include any amount sought as a return of premium under a

 2-2     retrospective rating plan or any amount due any reinsurer, insurer,

 2-3     insurance pool, or underwriting association, as subrogation

 2-4     recoveries, reinsurance recoveries, contribution, indemnification,

 2-5     or otherwise, and the insured of an impaired insurer is not liable,

 2-6     and the insurer is not entitled to use or continue a suit against

 2-7     that insured, for any subrogation recovery, reinsurance recovery,

 2-8     contribution, or indemnity asserted by a reinsurer, insurer,

 2-9     insurance pool, or underwriting association to the extent of the

2-10     applicable liability limits of the policy written and issued to the

2-11     insured by the insolvent insurer.  "Covered claim" shall not

2-12     include supplementary payment obligations, including adjustment

2-13     fees and expenses, attorney's fees and expenses, court costs,

2-14     interest and penalties, and interest and bond premiums incurred

2-15     prior to the determination that an insurer is an impaired insurer

2-16     under this Act.  "Covered claim" shall not include any prejudgment

2-17     or postjudgment interest that accrues subsequent to the

2-18     determination that an insurer is an impaired insurer under this

2-19     Act.  "Covered claim" shall not include any claim for recovery of

2-20     punitive, exemplary, extracontractual, or bad-faith damages,

2-21     whether sought as a recovery against the insured, insurer, guaranty

2-22     association, receiver, special deputy receiver, or commissioner,

2-23     awarded in a court judgment against an insured or insurer.

2-24     "Covered claim" shall not include, and the association shall not

2-25     have any liability to an insured or third-party liability claimant,

2-26     for its failure to settle a liability claim within the limits of a

2-27     covered claim under this Act.  With respect to a covered claim for

 3-1     unearned premiums, both persons who were residents of this state at

 3-2     the time the policy was issued and persons who are residents of

 3-3     this state at the time the company is found to be an impaired

 3-4     insurer shall be considered to have covered claims under this Act.

 3-5     If the impaired insurer has insufficient assets to pay the expenses

 3-6     of administering the receivership or conservatorship estate, that

 3-7     portion of the expenses of administration incurred in the

 3-8     processing and payment of claims against the estate shall also be a

 3-9     covered claim under this Act.

3-10           SECTION 2.  This Act shall take effect on September 1, 1997,

3-11     and shall apply to claims against insurers which are impaired under

3-12     Article 21.28-C, Insurance Code, on or after such date.

3-13           SECTION 3.  The importance of this legislation and the

3-14     crowded condition of the calendars in both houses create an

3-15     emergency and an imperative public necessity that the

3-16     constitutional rule requiring bills to be read on three several

3-17     days in each house be suspended, and this rule is hereby suspended.