AN ACT
1-1 relating to the application of insurance law to certain service
1-2 contracts and asset management contracts.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Subsection (b), Section 2, Article 1.14-1,
1-5 Insurance Code, is amended to read as follows:
1-6 (b) The provisions of this section do not apply to:
1-7 (1) the lawful transaction of surplus lines insurance
1-8 pursuant to Article 1.14-2;
1-9 (2) the lawful transaction of reinsurance by insurers;
1-10 (3) transactions in this state involving a policy
1-11 lawfully solicited, written, and delivered outside of this state
1-12 covering only subjects of insurance not resident, located, or
1-13 expressly to be performed in this state at the time of issuance,
1-14 and which transactions are subsequent to the issuance of such
1-15 policy;
1-16 (4) transactions involving contracts of insurance
1-17 independently procured through negotiations occurring entirely
1-18 outside of this state which are reported and on which premium tax
1-19 is paid in accordance with this Article;
1-20 (5) transactions in this state involving group life,
1-21 health or accident insurance (other than credit insurance) and
1-22 group annuities where the master policy of such groups was lawfully
1-23 issued and delivered in a state in which the company was authorized
2-1 to do an insurance business and such transactions are authorized by
2-2 other statutes of this state;
2-3 (6) lawful transactions by servicing companies of the
2-4 Texas workers' compensation employers' rejected risk fund pursuant
2-5 to Section 4.08, Article 5.76-2;
2-6 (7) management and accounting activities in this state
2-7 on behalf of a non-admitted captive insurance company that insures
2-8 solely directors' and officers' liability insurance for the
2-9 directors and officers of its parent and affiliated companies
2-10 and/or the risks of its parent and affiliated companies; provided,
2-11 that this provision does not exempt any insured or insurer from the
2-12 payment of any applicable tax on premiums or any other applicable
2-13 provision in this code; [or]
2-14 (8) the issuance of qualified charitable gift
2-15 annuities under Article 1.14-1A of this code;
2-16 (9) transactions in this state involving service
2-17 contracts sold by the manufacturer or seller of the property
2-18 covered by the service contract where the manufacturer or seller of
2-19 the property or a third party is the obligor of the service
2-20 contract; provided that, in the case of a third party obligor, the
2-21 third party's obligation is insured by an insurer licensed to do
2-22 business in this state and the third party obligor is acting
2-23 through or with the written agreement of the manufacturer or seller
2-24 of the property. For purposes of this subdivision, "service
2-25 contract" means a contract or agreement for a separately stated
3-1 consideration for a specific duration to perform the repair,
3-2 replacement, or maintenance of property or indemnification for
3-3 repair, replacement, or maintenance, for the operational or
3-4 structural failure due to a defect in materials, workmanship, or
3-5 normal wear and tear, with or without additional provision for
3-6 incidental payment of indemnity under limited circumstances,
3-7 including but not limited to towing, rental, and emergency road
3-8 service, but the term does not include mechanical breakdown
3-9 insurance agreements sold by a person as defined in Section 2(a),
3-10 Article 21.21 of this code; or
3-11 (10) transactions in this state involving asset
3-12 management contracts with owners of capital equipment. For the
3-13 purposes of this subdivision, "asset management contract" means a
3-14 contract or agreement for a separately stated consideration for a
3-15 specific duration to manage the capital equipment assets of the
3-16 owner of the equipment including, but not limited to, the
3-17 maintenance costs associated with service and repair incidents
3-18 arising from equipment failure, provided the contractor notifies
3-19 the owner of the capital equipment that the asset management
3-20 contract is exempt from the provisions of the Insurance Code.
3-21 SECTION 2. This Act takes effect September 1, 1997.
3-22 SECTION 3. The importance of this legislation and the
3-23 crowded condition of the calendars in both houses create an
3-24 emergency and an imperative public necessity that the
3-25 constitutional rule requiring bills to be read on three several
4-1 days in each house be suspended, and this rule is hereby suspended.
_______________________________ _______________________________
President of the Senate Speaker of the House
I hereby certify that S.B. No. 1913 passed the Senate on
April 29, 1997, by a viva-voce vote.
_______________________________
Secretary of the Senate
I hereby certify that S.B. No. 1913 passed the House on
May 6, 1997, by a non-record vote.
_______________________________
Chief Clerk of the House
Approved:
_______________________________
Date
_______________________________
Governor