1-1     By:  Sibley                                           S.B. No. 1913

 1-2           (In the Senate - Filed March 25, 1997; April 3, 1997, read

 1-3     first time and referred to Committee on Economic Development;

 1-4     April 11, 1997, reported adversely, with favorable Committee

 1-5     Substitute by the following vote:  Yeas 11, Nays 0; April 11, 1997,

 1-6     sent to printer.)

 1-7     COMMITTEE SUBSTITUTE FOR S.B. No. 1913                  By:  Sibley

 1-8                            A BILL TO BE ENTITLED

 1-9                                   AN ACT

1-10     relating to service contracts sold by a manufacturer or seller of

1-11     property covered by a service contract.


1-13           SECTION 1.  Subsection (b), Section 2, Article 1.14-1,

1-14     Insurance Code, is amended to read as follows:

1-15           (b)  The provisions of this section do not apply to:

1-16                 (1)  the lawful transaction of surplus lines insurance

1-17     pursuant to Article 1.14-2;

1-18                 (2)  the lawful transaction of reinsurance by insurers;

1-19                 (3)  transactions in this state involving a policy

1-20     lawfully solicited, written, and delivered outside of this state

1-21     covering only subjects of insurance not resident, located, or

1-22     expressly to be performed in this state at the time of issuance,

1-23     and which transactions are subsequent to the issuance of such

1-24     policy;

1-25                 (4)  transactions involving contracts of insurance

1-26     independently procured through negotiations occurring entirely

1-27     outside of this state which are reported and on which premium tax

1-28     is paid in accordance with this Article;

1-29                 (5)  transactions in this state involving group life,

1-30     health or accident insurance (other than credit insurance) and

1-31     group annuities where the master policy of such groups was lawfully

1-32     issued and delivered in a state in which the company was authorized

1-33     to do an insurance business and such transactions are authorized by

1-34     other statutes of this state;

1-35                 (6)  lawful transactions by servicing companies of the

1-36     Texas workers' compensation employers' rejected risk fund pursuant

1-37     to Section 4.08, Article 5.76-2;

1-38                 (7)  management and accounting activities in this state

1-39     on behalf of a non-admitted captive insurance company that insures

1-40     solely directors' and officers' liability insurance for the

1-41     directors and officers of its parent and affiliated companies

1-42     and/or the risks of its parent and affiliated companies; provided,

1-43     that this provision does not exempt any insured or insurer from the

1-44     payment of any applicable tax on premiums or any other applicable

1-45     provision in this code; [or]

1-46                 (8)  the issuance of qualified charitable gift

1-47     annuities under Article 1.14-1A of this code; or

1-48                 (9)  transactions in this state involving service

1-49     contracts sold by the manufacturer or seller of the property

1-50     covered by the service contract where the manufacturer or seller of

1-51     the property or a third party is the obligor of the service

1-52     contract; provided that, in the case of a third party obligor, the

1-53     third party's obligation is insured by an insurer licensed to do

1-54     business in this state and the third party obligor is acting

1-55     through or with the written agreement of the manufacturer or seller

1-56     of the property.  For purposes of this subdivision, "service

1-57     contract" means a contract or agreement for a separately stated

1-58     consideration for a specific duration to perform the repair,

1-59     replacement, or maintenance of property or indemnification for

1-60     repair, replacement, or maintenance, for the operational or

1-61     structural failure due to a defect in materials, workmanship, or

1-62     normal wear and tear, with or without additional provision for

1-63     incidental payment of indemnity under limited circumstances,

1-64     including but not limited to towing, rental, and emergency road

 2-1     service, but the term does not include mechanical breakdown

 2-2     insurance agreements sold by a person as defined in Section 2(a),

 2-3     Article 21.21 of this code.

 2-4           SECTION 2.  This Act takes effect September 1, 1997.

 2-5           SECTION 3.  The importance of this legislation and the

 2-6     crowded condition of the calendars in both houses create an

 2-7     emergency and an imperative public necessity that the

 2-8     constitutional rule requiring bills to be read on three several

 2-9     days in each house be suspended, and this rule is hereby suspended.

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