1-1     By:  Bonnen (Senate Sponsor - Sibley)                 H.B. No. 2437

 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; May 16, 1997, reported adversely, with

 1-5     favorable Committee Substitute by the following vote:  Yeas 8, Nays

 1-6     0; May 16, 1997, sent to printer.)

 1-7     COMMITTEE SUBSTITUTE FOR H.B. No. 2437                  By:  Sibley

 1-8                            A BILL TO BE ENTITLED

 1-9                                   AN ACT

1-10     relating to the Texas Property and Casualty Insurance Guaranty

1-11     Association.

1-12           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

1-13           SECTION 1.  Section 5(8), Article 21.28-C, Insurance Code, is

1-14     amended to read as follows:

1-15                 (8)  "Covered claim" means an unpaid claim of an

1-16     insured or third-party liability claimant that arises out of and is

1-17     within the coverage and not in excess of the applicable limits of

1-18     an insurance policy to which this Act applies, issued or assumed

1-19     (whereby an assumption certificate is issued to the insured) by an

1-20     insurer licensed to do business in this state, if that insurer

1-21     becomes an impaired insurer and the third-party claimant or

1-22     liability claimant or insured is a resident of this state at the

1-23     time of the insured event, or the claim is a first-party claim for

1-24     damage to property that is permanently located in this state.

1-25     "Covered claim" shall also include [75 percent of] unearned

1-26     premiums, but in no event shall a covered claim for unearned

1-27     premiums exceed $25,000 [$1,000]. Individual covered claims

1-28     (including any and all derivative claims by more than one person

1-29     which arise from the same occurrence, which shall be considered

1-30     collectively as a single claim under this Act) shall be limited to

1-31     $300,000 [$100,000], except that the association shall pay the full

1-32     amount of any covered claim arising out of a workers' compensation

1-33     claim made under a workers' compensation policy.  "Covered claim"

1-34     shall not include any amount sought as a return of premium under a

1-35     retrospective rating plan or any amount due any reinsurer, insurer,

1-36     insurance pool, or underwriting association, as subrogation

1-37     recoveries, reinsurance recoveries, contribution, indemnification,

1-38     or otherwise, and the insured of an impaired insurer is not liable,

1-39     and the insurer is not entitled to sue or continue a suit against

1-40     that insured, for any subrogation recovery, reinsurance recovery,

1-41     contribution, or indemnity asserted by a reinsurer, insurer,

1-42     insurance pool, or underwriting association to the extent of the

1-43     applicable liability limits of the policy written and issued to the

1-44     insured by the insolvent insurer.  "Covered claim" shall not

1-45     include supplementary payment obligations, including adjustment

1-46     fees and expenses, attorney's fees and expenses, court costs,

1-47     interest and penalties, and interest and bond premiums incurred

1-48     prior to the determination that an insurer is an impaired insurer

1-49     under this Act.  "Covered claim" shall not include any prejudgment

1-50     or postjudgment interest that accrues subsequent to the

1-51     determination that an insurer is an impaired insurer under this

1-52     Act.  "Covered claim" shall not include any claim for recovery of

1-53     punitive, exemplary, extracontractual, or bad-faith damages,

1-54     whether sought as a recovery against the insured, insurer, guaranty

1-55     association, receiver, special deputy receiver, or commissioner,

1-56     awarded in a court judgment against an insured or insurer.

1-57     "Covered claim" shall not include, and the association shall not

1-58     have any liability to an insured or third-party liability claimant,

1-59     for its failure to settle a liability claim within the limits of a

1-60     covered claim under this Act.  With respect to a covered claim for

1-61     unearned premiums, both persons who were residents of this state at

1-62     the time the policy was issued and persons who are residents of

1-63     this state at the time the company is found to be an impaired

1-64     insurer shall be considered to have covered claims under this Act.

 2-1     If the impaired insurer has insufficient assets to pay the expenses

 2-2     of administering the receivership or conservatorship estate, that

 2-3     portion of the expenses of administration incurred in the

 2-4     processing and payment of claims against the estate shall also be a

 2-5     covered claim under this Act.

 2-6           SECTION 2.  Section 5(10)(A), Article 21.28-C, Insurance

 2-7     Code, is amended to read as follows:

 2-8                 (10)  "Member insurer" means any person who:

 2-9                       (A)  writes any kind of insurance to which this

2-10     Act applies under Section 3 of this Act, including [the] Lloyds,

2-11     [exchange of] reciprocal exchanges and county mutual insurance

2-12     companies [or inter-insurance contracts]; and

2-13                       (B)  is licensed to transact insurance in this

2-14     state.

2-15           SECTION 3.  (a)  SECTION 1 of this Act shall take effect on

2-16     September 1, 1997, and shall apply to claims against insurers which

2-17     are impaired under Article 21.28-C, Insurance Code, on or after

2-18     such date.

2-19           (b)  SECTION 2 of this Act shall take effect on September 1,

2-20     1997.

2-21           SECTION 4.  The importance of this legislation and the

2-22     crowded condition of the calendars in both houses create an

2-23     emergency and an imperative public necessity that the

2-24     constitutional rule requiring bills to be read on three several

2-25     days in each house be suspended, and this rule is hereby suspended.

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