Bill not drafted by TLC or Senate E&E.

      Line and page numbers may not match official copy.

      By Eiland                                       H.B. No. 3032

                                A BILL TO BE ENTITLED

 1-1                                   AN ACT

 1-2     relating to receiverships and guaranty associations.

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

 1-4           SECTION 1.  Amend Sec. 3 (a), Art. 21.28, Insurance Code, to

 1-5     read as follows:

 1-6           SECTION 2.  Amend Sec. 8 (d), Art. 21.28-C, Insurance Code,

 1-7     to read as follows:

 1-8           (d)(1)  The association shall investigate and adjust,

 1-9     compromise, settle, and pay covered claims to the extent of the

1-10     association's obligation and deny all other claims.  The

1-11     association may review settlements, releases, and judgments to

1-12     which the impaired insurer or its insureds were parties to

1-13     determine the extent to which those settlements, releases and

1-14     judgments may be properly contested.  Any judgment taken by default

1-15     or consent against an insured or the impaired insurer, and any

1-16     settlement, release or judgment entered into by the insured or the

1-17     impaired insurer, is not binding on the association and may not be

1-18     considered as evidence of liability or of damages in connection

1-19     with any claim brought against the association or any other party

1-20     under this Act.  Notwithstanding any other provision of this Act, a

1-21     covered claim shall not include any claim filed with the guaranty

1-22     association after [the later of] the final date for filing claims

1-23     against the liquidator or receiver of an insolvent insurer [or

1-24     eighteen months after the order of liquidation].  The final date

 2-1     for filing claims with the liquidator or receiver and association

 2-2     shall be the same.  In the event no necessity exists for a

 2-3     receivership estate to receive claim filings, the final date for

 2-4     filing claims with the association shall be fifteen (15) months

 2-5     after the order of impairment.

 2-6                 (2)  Notwithstanding any other provisions of this Act,

 2-7     except in the case of a claim for benefits under a policy of

 2-8     workers' compensation insurance, any obligation of the association

 2-9     to any and all persons shall cease when $10,000,000 in the

2-10     aggregate shall have been paid to or on behalf of any insured or

2-11     its affiliates for covered or allowed claims and all expenses

2-12     incurred in connection therewith arising under a policy or policies

2-13     of any one insolvent insurer by the association, any other similar

2-14     state associations, and any property and casualty insurance

2-15     security fund which obtains contributions from insurers on a

2-16     pre-insolvency basis.  For purposes of this section, the term

2-17     "affiliate" means a person who directly, or indirectly, or through

2-18     one or more intermediaries, controls, is controlled by, or is under

2-19     common control with the insurer.  If the association determines

2-20     that there may be more than one claimant having a covered or

2-21     allowed claim against the association, any other similar state

2-22     association or any property and casualty insurance security fund

2-23     under a policy or policies of any one insolvent insurer, the

2-24     association may establish a plan to allocate amounts payable by the

2-25     association in such manner as the association in its discretion

2-26     deems equitable.

2-27           SECTION 3.  Amend Sec. 11 (b), Art. 21.28-C, Insurance Code,

2-28     to read as follows:

2-29           (b)  The association is entitled to recover from the

2-30     following persons the amount of any covered claim and all expenses

 3-1     incurred and arising out of that covered claim, including legal and

 3-2     defense costs, paid on behalf of that person under this Act:

 3-3                 (1)  any insured, other than an insured who is exempt

 3-4     from federal income tax under Section 501(a) of the Internal

 3-5     Revenue Code of 1986 (26 U.S.C.  Section 501(a)) by being described

 3-6     by Section 501(c)(3) of that code, whose net worth on December 31

 3-7     of the year next preceding the date the insurer becomes an impaired

 3-8     insurer exceeds $[50] 10 million and whose liability obligations to

 3-9     other persons [under a policy or contract of insurance written,

3-10     issued, and placed in force after January 1, 1992,] are satisfied

3-11     in whole or in part by payments made under this Act; and

3-12                 (2)  any person who is an affiliate of the impaired

3-13     insurer and whose liability obligations to other persons are

3-14     satisfied in whole or in part by payments made under this Act.

3-15           SECTION 4.  This Act shall take effect on September 1, 1997,

3-16     and be applicable only to receivership estates for which the order

3-17     of impairment is entered on or after that date.

3-18           SECTION 5.  The importance of this legislation and the

3-19     crowded condition of the calendars in both houses create an

3-20     emergency and an imperative public necessity that the

3-21     constitutional rule requiring bills to be read on three several

3-22     days in each house be suspended, and this rule is hereby suspended.