By Eiland                                             H.B. No. 1089
         76R2211 DB-D                           
                                A BILL TO BE ENTITLED
 1-1                                   AN ACT
 1-2     relating to fraternal benefit societies.
 1-3           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
 1-4           SECTION 1.  Article 10.03, Insurance Code, is amended to read
 1-5     as follows:
 1-6           Art. 10.03.  REPRESENTATIVE FORM OF GOVERNMENT DEFINED.  A
 1-7     society has a representative form of government if:
 1-8                 (1)  the society has a supreme governing body
 1-9     constituted:
1-10                       (A)  as an assembly as described by Article
1-11     10.03A of this chapter; or
1-12                       (B)  as a board as described by Article 10.03B of
1-13     this chapter;
1-14                 (2)  the officers of the society are elected by the
1-15     supreme governing body or by the board of directors;
1-16                 (3)  only benefit members are eligible to serve as
1-17     members of the supreme governing body, the board of directors, or
1-18     an intermediate assembly of the society;
1-19                 (4)  only benefit members may vote on the management of
1-20     insurance affairs of the society;
1-21                 (5)  a voting member of the society has only one vote;
1-22     and
1-23                 (6)  a voting member may not cast a vote by proxy. [Any
1-24     society shall be deemed to have a representative form of government
 2-1     when it shall provide in its constitution and laws for a supreme
 2-2     legislative or governing body, composed of representatives elected
 2-3     either by the members or by delegates elected directly or
 2-4     indirectly by the members, together with such other members as may
 2-5     be prescribed by its constitution and laws;  provided, that the
 2-6     elective members shall constitute a majority in number and not less
 2-7     than the number of votes required to amend its constitution and
 2-8     laws; and provided, further, that the meetings of the supreme or
 2-9     governing body, and the election of officers, representatives or
2-10     delegates shall be held as often as once in four calendar years.
2-11     No member under age sixteen shall have voice or vote in the
2-12     management of the society.  No member, officer, representative or
2-13     delegate shall vote by proxy.]
2-14           SECTION 2.  Chapter 10, Insurance Code, is amended by adding
2-15     Article 10.03A to read as follows:
2-16           Art. 10.03A.  ASSEMBLY AS FORM OF SUPREME GOVERNING BODY;
2-17     BOARD OF DIRECTORS.  (a)  The supreme governing body is an assembly
2-18     if it is composed of:
2-19                 (1)  delegates elected directly by the members or at
2-20     intermediate assemblies or conventions by the members or their
2-21     representatives; and
2-22                 (2)  other delegates as prescribed by the society's
2-23     laws.
2-24           (b)  A society may provide for election of delegates by mail.
2-25           (c)  The elected delegates to the assembly must:
2-26                 (1)  constitute a majority of the assembly in number;
2-27     and
 3-1                 (2)  have at least:
 3-2                       (A)  two-thirds of the votes in the assembly; and
 3-3                       (B)  the number of votes required to amend the
 3-4     society's laws, other than laws of the society, if any, that must
 3-5     be amended by direct vote of the members.
 3-6           (d)  The assembly shall:
 3-7                 (1)  meet at least once every four years; and
 3-8                 (2)  elect a board of directors to conduct the business
 3-9     of the society between meetings of the assembly.
3-10           (e)  A vacancy on the board of directors that occurs between
3-11     elections may be filled as prescribed in the society's laws.
3-12           SECTION 3.  Chapter 10, Insurance Code, is amended by adding
3-13     Article 10.03B to read as follows:
3-14           Art. 10.03B.  BOARD AS FORM OF SUPREME GOVERNING BODY.  (a)
3-15     The supreme governing body is a board if it is composed of:
3-16                 (1)  persons elected either directly by the members or
3-17     at intermediate assemblies by the members or their representatives;
3-18     and
3-19                 (2)  other persons as prescribed by the society's laws.
3-20           (b)  A society may provide for election of the board by mail.
3-21           (c)  The persons elected to the board must:
3-22                 (1)  constitute a majority of the board in number; and
3-23                 (2)  have at least the number of votes required to
3-24     amend the society's laws, other than laws of the society, if any,
3-25     that must be amended by direct vote of the members.
3-26           (d)  The term of a board member may not exceed four years.
3-27           (e)  A vacancy on the board that occurs between elections may
 4-1     be filled in the manner prescribed by the society's laws.  A person
 4-2     filling the unexpired term of an elected board member is considered
 4-3     to be an elected member.
 4-4           (f)  A board shall meet at least quarterly to conduct the
 4-5     business of the society.
 4-6           SECTION 4.  Chapter 10, Insurance Code, is amended by adding
 4-7     Article 10.03-1 to read as follows:
 4-8           Art. 10.03-1.  DEFINITIONS.  In this chapter:
 4-9                 (1)  "Benefit contract" means the agreement for
4-10     provision of benefits authorized by Article 10.05 of this chapter,
4-11     as that agreement is described in Article 10.15 of this chapter.
4-12                 (2)  "Benefit member" means an adult member who is
4-13     designated by the laws or rules of the society as a benefit member
4-14     under a benefit contract.
4-15                 (3)  "Certificate" means a document issued as written
4-16     evidence of a benefit contract.
4-17                 (4)  "Laws" means a society's articles of
4-18     incorporation, constitution, and bylaws, however designated.
4-19                 (5)  "Lodge" means a subordinate member unit of a
4-20     society, including a camp, court, council, or branch.
4-21                 (6)  "Premiums" means a premium, a rate, dues, or other
4-22     required contributions that are payable under a certificate or
4-23     benefit contract.
4-24                 (7)  "Rules" means a rule, regulation, or resolution
4-25     adopted by the supreme governing body or board of directors that
4-26     has general application to the members of the society.
4-27           SECTION 5.  Article 10.05, Insurance Code, is amended to read
 5-1     as follows:
 5-2           Art. 10.05.  BENEFITS.  (a) [(1)]  A society authorized to do
 5-3     business in this State may provide for the payment of:
 5-4                 (1) [(a)]  Death benefits in any form;
 5-5                 (2) [(b)]  Endowment benefits;
 5-6                 (3) [(c)]  Annuity benefits;
 5-7                 (4) [(d)]  Temporary or permanent disability benefits
 5-8     as a result of disease or accident;
 5-9                 (5) [(e)]  Hospital, medical or nursing benefits due to
5-10     sickness or bodily infirmity or accident;
5-11                 (6) [(f)]  Monument or tombstone benefits to the memory
5-12     of deceased members [not exceeding in any case the sum of Three
5-13     Hundred Dollars ($300)];
5-14                 (7)  Funeral [(g)  For the payment of funeral]
5-15     benefits; [,] and
5-16                 (8)  Any other benefit that may be provided by a life
5-17     insurance company and that may be provided consistent with this
5-18     chapter.
5-19           (b)  A society shall:
5-20                 (1)  specify in its laws or rules those persons to whom
5-21     a certificate may be issued or who may be covered by benefits; and
5-22                 (2)  make the provision of those benefits consistent
5-23     with the provision of benefits to members and their beneficiaries.
5-24                 [(2) Such benefits may be provided on the lives of
5-25     members or, upon application of a member, on the lives of the
5-26     member's family, including the member, the member's spouse and
5-27     minor children, in the same or separate certificates.]
 6-1           SECTION 6.  Article 10.07(a), Insurance Code, is amended to
 6-2     read as follows:
 6-3           (a)  Fraternal benefit societies shall establish reserves for
 6-4     the types of coverage specified in Articles 10.05(a)(4) and (5)
 6-5     [Article 10.05(1)(d) and (e)] of this code in the same manner and
 6-6     to the same extent as required for companies organized under
 6-7     Chapter 3 of this code except:
 6-8                 (1)  for certificates issued during the calendar year
 6-9     1988, only one-third of the unearned premium reserve is required to
6-10     be maintained during the first policy year; and
6-11                 (2)  for certificates issued during the calendar year
6-12     1989, only two-thirds of the unearned premium reserve is required
6-13     to be maintained during the first policy year.
6-14           SECTION 7.  Article 10.12, Insurance Code, is amended to read
6-15     as follows:
6-16           Art. 10.12. QUALIFICATIONS FOR MEMBERSHIP; GRIEVANCE
6-17     PROCEDURES.  (a)  A society shall specify in its laws or rules:
6-18                 (1)  the eligibility standards for each membership
6-19     class, provided that if benefits are provided on the lives of
6-20     children, the minimum age for adult membership is not less than 15
6-21     years of age and not more than 21 years of age;
6-22                 (2)  the process for admission for each membership
6-23     class; and
6-24                 (3)  the rights and privileges of each membership
6-25     class, provided that only benefit members may vote on the
6-26     management of the insurance affairs of the society.
6-27           (b)  A society may admit social members.  A social member may
 7-1     not vote in the management of the insurance affairs of the society.
 7-2           (c)  Membership rights in the society are personal to the
 7-3     member.  A member may not assign membership rights.
 7-4           (d)  A society may provide in its laws or rules for grievance
 7-5     or complaint procedures for members.
 7-6           (e)  [MEMBERS AND BENEFICIARIES.  Any person may be admitted
 7-7     to beneficial, or general, or social membership in any society in
 7-8     such manner and upon such showing of eligibility as the laws of the
 7-9     society may provide, and any beneficial member may direct any
7-10     benefit to be paid to such person or persons, entity, or interest
7-11     as may be permitted by the laws of the society;  provided, that no
7-12     beneficiary shall have or obtain any vested interest in the said
7-13     benefit until the same has become due and payable in conformity
7-14     with the provisions of the contract of membership, and the member
7-15     shall have full right to change his beneficiary, or beneficiaries,
7-16     in accordance with the laws, rules, and regulations of the
7-17     society.]
7-18           Nothing contained in this chapter shall be construed to
7-19     affect or apply to societies which admit to membership only persons
7-20     engaged in one or more hazardous occupations, in the same or
7-21     similar lines of business.
7-22           SECTION 8.  Chapter 10, Insurance Code, is amended by adding
7-23     Article 10.12-1 to read as follows:
7-24           Art. 10.12-1.  BENEFICIARIES.  (a)  The owner of a benefit
7-25     contract may change the beneficiary at any time in accordance with
7-26     the laws or rules of the society unless the owner waives this right
7-27     by specifically requesting in writing that the beneficiary
 8-1     designation be irrevocable.  A society may, through its laws or
 8-2     rules, limit the scope of beneficiary designations and shall
 8-3     provide that a person whose designation as beneficiary is revocable
 8-4     may not have or obtain a vested interest in the proceeds, in
 8-5     conformity with the benefit contract.
 8-6           (b)  If, at the death of the deceased insured, a lawful
 8-7     beneficiary to whom the proceeds of the benefit contract are
 8-8     payable does not exist under the benefit contract, the amount of a
 8-9     benefit under a benefit contract shall be paid to:
8-10                 (1)  the personal representative of the deceased
8-11     insured; or
8-12                 (2)  if the owner of the certificate is a person other
8-13     than the deceased insured, to the owner of the certificate.
8-14           (c)  Subsection (b) of this article does not apply to the
8-15     extent funeral benefits may be paid under the benefit contract.
8-16           SECTION 9.  Article 10.15, Insurance Code, is amended to read
8-17     as follows:
8-18           Art. 10.15.  CERTIFICATE.  (a)  Every certificate issued by
8-19     any such society shall specify the amount of benefit provided
8-20     thereby, and shall provide that the certificate, the charter or
8-21     articles of incorporation, or, if a voluntary association, the
8-22     articles of association, the constitution and laws of the society,
8-23     and the application for membership and medical examination, signed
8-24     by the applicant, and all amendments to each thereof, shall
8-25     constitute the agreement between the society and the member, and
8-26     copies of the same, certified by the secretary of the society, or
8-27     corresponding officer, shall  be received in evidence of the terms
 9-1     and conditions thereof.  Any changes, additions or amendments to
 9-2     said charter or articles of  incorporation, or articles of
 9-3     association, or constitution or laws duly made or enacted
 9-4     subsequent to the issuance of the benefit certificates shall bind
 9-5     the member and the member's [his] beneficiaries, and shall govern
 9-6     and control the agreement in all respects the same as though such
 9-7     changes, additions or amendments had been made prior to and were in
 9-8     force at the time of the application for membership.
 9-9           (b)  A certificate may not be delivered or issued for
9-10     delivery in this state unless the form of the certificate has been
9-11     filed with the department under Article 3.42 of this code.  A life,
9-12     accident, health, or disability insurance certificate or annuity
9-13     certificate issued by a society must meet the requirements
9-14     applicable to similar policies issued by an insurer in this state
9-15     that are not inconsistent with this chapter as determined by rule
9-16     of the commissioner.
9-17           (c)  A society may include in the terms of a certificate a
9-18     grace period of one month for payment of premiums.
9-19           (d)  Each certificate must state the amount of premiums that
9-20     are payable under the certificate and state or summarize the
9-21     society's laws or rules in force at the time of issuance of the
9-22     certificate that, if violated, will result in the termination or
9-23     reduction of benefits payable under the certificate.
9-24           (e)  If the laws of the society provide for expulsion or
9-25     suspension of a member, the certificate must provide that a member
9-26     who is expelled or suspended may maintain the certificate in force
9-27     by continuing payment of the required premium, unless the expulsion
 10-1    or suspension is:
 10-2                (1)  for nonpayment of a premium; or
 10-3                (2)  occurs within the contestable period of the
 10-4    benefit contract and is for material misrepresentation in the
 10-5    application for membership or insurance.
 10-6          (f)  A benefit contract issued on the life of a person who is
 10-7    younger than the society's minimum age for adult membership may
 10-8    provide for transfer of control or ownership to the insured at an
 10-9    age specified in the certificate.  A society may require approval
10-10    of an application for membership in order to effect the transfer
10-11    and may provide in all other respects for the regulation,
10-12    government, and control of certificates and rights, obligations,
10-13    and liabilities incident and connected to the certificate.
10-14    Ownership rights under the certificate before a transfer must be
10-15    specified in the certificate.
10-16          (g)  A society may specify the terms and conditions for the
10-17    assignment of a benefit contract.
10-18          SECTION 10.  Article 10.18, Insurance Code, is amended by
10-19    adding Subsection (c) to read as follows:
10-20          (c)  A society may, pursuant to a resolution of its supreme
10-21    governing body, establish and operate one or more separate accounts
10-22    and issue benefit contracts on a variable basis, subject to the
10-23    provisions of law regulating a life insurance company that
10-24    establishes those types of accounts and issues those types of
10-25    contracts.  In order to comply with applicable federal or state
10-26    laws or rules, the society may:
10-27                (1)  issue contracts on a variable basis to which
 11-1    Articles 10.15 and 10.30(e) of this chapter do not apply; and
 11-2                (2) adopt special procedures for the conduct of the
 11-3    business and affairs of a separate account and provide special
 11-4    voting and other rights for a person having beneficial interests in
 11-5    a separate account, including special procedures and rights
 11-6    relating to:
 11-7                      (A)  investment policy;
 11-8                      (B)  investment advisory services;
 11-9                      (C)  selection of certified public accountants;
11-10    and
11-11                      (D)  selection of a committee to manage the
11-12    business and affairs of the account.
11-13          SECTION 11.  Article 10.19, Insurance Code, is amended to
11-14    read as follows:
11-15          Art. 10.19.  QUALIFICATION.  (a)  Hereafter, only such
11-16    corporation, society, order of voluntary association, having not
11-17    less than five  hundred (500) members and ten (10) subordinate
11-18    lodges, without capital stock organized and carried on solely for
11-19    the mutual benefit of its members, and not for profit, and having a
11-20    lodge system and representative form of government, or which limits
11-21    its membership to a secret fraternity having a lodge system and
11-22    representative form of government, may, provided that it has been
11-23    in continuous operation for a period of not less than five (5)
11-24    years immediately preceding the filing of its articles of
11-25    incorporation or association as hereinafter provided, qualify as a
11-26    Fraternal Benefit Society as defined in Article 10.01 for the
11-27    purpose of providing for the payment of benefits as provided in
 12-1    Article 10.05, by filing with the department [Board] duly certified
 12-2    articles of incorporation or association.  Such articles shall set
 12-3    out:
 12-4                (1) [1.]  The name of the society, which shall not so
 12-5    closely resemble the name of any society or insurance company
 12-6    already transacting business in this state as to mislead the public
 12-7    or lead to confusion.
 12-8                (2) [2.]  The purpose for which it is formed, which
 12-9    shall not include more  liberal powers than are granted by this
12-10    Chapter.  Any lawful, social, intellectual, educational,
12-11    charitable, benevolent, moral, fraternal, patriotic, or religious
12-12    advantages may be set forth among the purposes of the society, and
12-13    the mode in which its corporate powers are to be exercised.  These
12-14    purposes may be carried out directly by the society or indirectly
12-15    through subsidiary corporations or affiliated organizations.
12-16          (b)  Such articles of incorporation or association and duly
12-17    certified copies of the Constitution and laws, rules and
12-18    regulations, and copies of all proposed forms of benefit
12-19    certificates, applications therefor and circulars to be issued by
12-20    such society, and a bond in the sum of not less than Three Hundred
12-21    Thousand Dollars ($300,000.00) and not more than One Million Five
12-22    Hundred Thousand Dollars ($1,500,000.00), as required by the
12-23    commissioner [Five Thousand Dollars ($5,000.00)], with sureties
12-24    approved by the commissioner [State Board of Insurance],
12-25    conditioned upon the return of the advance payments, as provided in
12-26    this article, to applicants, if the organization fails to qualify
12-27    within one (1) year, shall be filed with the commissioner, [such
 13-1    Board] who may require such further information as the commissioner
 13-2    [it] deems necessary, and if the purposes of the society conform to
 13-3    the requirements of this law, and all provisions of law have been
 13-4    complied with, the commissioner [said Board] shall so certify and
 13-5    retain and record or file the articles of incorporation or
 13-6    association and furnish the incorporators a preliminary certificate
 13-7    authorizing said society to solicit from its members applications
 13-8    for insurance benefits as hereinafter provided.
 13-9          (c)  Upon receipt of said certificate from the department
13-10    [State Board of Insurance], said society may solicit from its
13-11    members applications for insurance benefits for the purpose of
13-12    completing its qualification and shall collect from each applicant
13-13    the amount of not less than one (1) regular monthly payment, in
13-14    accordance with its table of rates as provided by its constitution
13-15    and laws, and shall issue to each such applicant a receipt for the
13-16    amount so collected.  No such society shall incur any liability
13-17    other than for such advanced payments, nor issue any benefit
13-18    certificate nor pay or allow, or offer or promise to pay or allow,
13-19    to any person any death or disability benefit until actual bona
13-20    fide applications for death benefit certificates have been secured
13-21    upon at least five hundred (500) lives for at least One Thousand
13-22    Dollars ($1,000.00) each, and all such applicants for death
13-23    benefits shall have been regularly examined by legally qualified
13-24    practicing physicians, and certificates of such examination have
13-25    been duly filed and approved by the chief medical examiner of such
13-26    society;  nor until there shall be established ten (10) subordinate
13-27    lodges or branches into which said five hundred (500) applicants
 14-1    have been initiated; nor until there has been submitted to the
 14-2    department [said Board], under oath of the president and secretary
 14-3    or corresponding officers of such society, a list of such
 14-4    applicants, giving their names, addresses, date examined, date
 14-5    approved, date initiated, name and number of the subordinate branch
 14-6    of which each applicant is a member, amount of benefits to be
 14-7    granted, rate of stated periodical contributions, which shall be
 14-8    sufficient to provide for meeting the mortuary obligation
 14-9    contracted, when valued for death benefits upon the basis of the
14-10    National Fraternal Congress Table of Mortality, as adopted by the
14-11    National Fraternal Congress, August 23, 1899, or any higher
14-12    standard, at the option of the society, and for disability benefits
14-13    by tables based upon reliable experience and for combined death and
14-14    permanent total disability benefits by tables based upon reliable
14-15    experience, with an interest assumption not higher than four per
14-16    cent (4%) per annum; nor until it shall be shown to the department
14-17    [Board] by the sworn statement of the treasurer or corresponding
14-18    officer of such society, that at least five hundred (500)
14-19    applicants have each paid in cash at least one (1) regular monthly
14-20    payment as herein provided per One Thousand Dollars ($1,000.00) of
14-21    indemnity to be effected, which payments in the aggregate shall
14-22    amount to at least One Hundred Fifty Thousand Dollars ($150,000.00)
14-23    [Twenty-Five Hundred Dollars ($2,500.00)]; all of which shall be
14-24    credited to the mortuary or disability fund on account of such
14-25    applicants and no part of which may be used for expenses.
14-26          (d)  Said advanced payments shall, during the period of
14-27    completing qualification, be held in trust, and if such
 15-1    qualification is not completed within one (1) year as hereinafter
 15-2    provided, returned to said applicants.
 15-3          (e)  The department [Board] may make such examination and
 15-4    require such further information as it deems advisable; and upon
 15-5    presentation of satisfactory evidence that the society has complied
 15-6    with all the provisions of law, the department [Board] shall issue
 15-7    to such society a certificate to that effect.  Such certificate
 15-8    shall be prima facie evidence of the qualification of such society
 15-9    at the date of such certificate.  The department [Board] shall
15-10    cause a record of such certificate to be made and a certified copy
15-11    of such record may be given in evidence with like effect as the
15-12    original certificate.
15-13          (f)  Unless the five hundred (500) applicants herein required
15-14    have been secured and the organization has qualified as a fraternal
15-15    benefit society as herein provided, the preliminary certificate
15-16    granted under the provisions of this article shall be null and void
15-17    after one (1) year from its date, or after such further period, not
15-18    exceeding one (1) year, as may be authorized by the department
15-19    [State Board of Insurance] upon cause shown.
15-20          (g)  Provided, however, that this Article shall not apply to
15-21    societies specifically exempted from the provisions of Chapter 10
15-22    of the Insurance Code and provided further, that the above
15-23    provisions of this article shall not apply to Fraternal Benefit
15-24    Societies authorized to transact business in this state on June 1,
15-25    1965, so long as their licenses or renewals or extensions thereof
15-26    continue in force.  The following provisions of this article shall
15-27    apply to such Fraternal Benefit Societies authorized to transact
 16-1    business in this state on June 1, 1965.
 16-2          (h)  When any domestic society shall have discontinued
 16-3    business for the period of one (1) year, or has less than four
 16-4    hundred (400) members holding benefit certificates, its permanent
 16-5    certificate shall become null and void.  Every such society shall
 16-6    have the power to make a constitution and bylaws for the government
 16-7    of the society, the admission of its members, the management of its
 16-8    affairs and the fixing and readjusting of the rates of contribution
 16-9    of its members from time to time; and it shall have the power to
16-10    change, alter, add to, or amend such constitution and bylaws and
16-11    shall have such other powers as are necessary and incidental to
16-12    carrying into effect its object and purposes.
16-13          SECTION 12.  Article 10.26, Insurance Code, is amended to
16-14    read as follows:
16-15          Art. 10.26.  NO PERSONAL LIABILITY; INDEMNIFICATION OR
16-16    REIMBURSEMENT.  (a)  Officers and members of the supreme, grand or
16-17    any subordinate body of an [any such] incorporated society are
16-18    [shall] not [be] individually liable for the payment of any
16-19    disability or death benefit provided for in the laws and agreements
16-20    of the [such] society.  Those payments are [The same shall be]
16-21    payable only out of the funds of the [such] society and in the
16-22    manner provided by its law.
16-23          (b)  A society may indemnify and reimburse a person for
16-24    expenses reasonably incurred by, and liabilities imposed on, that
16-25    person in connection with or arising out of an action, suit, or
16-26    other proceeding, whether civil, criminal, administrative, or
16-27    investigative, in which the person is involved, or in connection
 17-1    with or arising out of a threat of a proceeding against that
 17-2    person, because that person is or was a director, officer,
 17-3    employee, or agent of:
 17-4                (1)  the society; or
 17-5                (2)  a firm, corporation, or organization with which
 17-6    the person served in any capacity at the request of the society.
 17-7          (c)  Except as provided by Subsection (d) of this article, a
 17-8    person may not be indemnified or reimbursed in relation to:
 17-9                (1)  a matter in an action, suit, or other proceeding
17-10    in which the person is finally adjudged guilty of breach of a duty
17-11    as a director, officer, employee, or agent of the society; or
17-12                (2)  an agreement that settles:
17-13                      (A)  a matter in an action, suit, or other
17-14    proceeding described by Subdivision (1) of this subsection; or
17-15                      (B)  the threat of the proceeding.
17-16          (d)  A society may indemnify or reimburse a person in
17-17    relation to a matter described by Subsection (c) of this article
17-18    only if the supreme governing body, the board of directors, or a
17-19    court of competent jurisdiction determines that:
17-20                (1)  the person acted in good faith for a purpose the
17-21    person reasonably believed to be in or not opposed to the best
17-22    interests of the society; and
17-23                (2)  in a criminal action or proceeding, the person had
17-24    no reasonable cause to believe that the person's conduct was
17-25    unlawful.
17-26          (e)  A determination by a supreme governing body or board of
17-27    directors under Subsection (d) of this article must be made by
 18-1    majority vote of a quorum consisting of persons who were not
 18-2    parties to the action, suit, or other proceeding under review.
 18-3          (f)  The termination of an action or other proceeding by
 18-4    judgment, order, settlement, or conviction or on a plea of no
 18-5    contest does not create a conclusive presumption that a person does
 18-6    not meet the standard of conduct required in order to justify
 18-7    indemnification and reimbursement.
 18-8          (g)  The right of indemnification and reimbursement under
 18-9    this article is not exclusive of other rights to which a person may
18-10    be entitled as a matter of law and inures to the benefit of the
18-11    person's devisees, legatees, heirs, and estate.
18-12          (h)  A society may purchase and maintain insurance on behalf
18-13    of a person who is or was a director, officer, employee, or agent
18-14    of the society or who is or was serving at the request of the
18-15    society as a director, officer, employee, or agent of another firm,
18-16    corporation, or organization against a liability asserted against
18-17    that person or incurred by that person in any capacity or arising
18-18    out of that person's status as a director, officer, employee, or
18-19    agent of the society or the other firm, corporation, or
18-20    organization.  A society may purchase and maintain insurance under
18-21    this subsection regardless of whether the society has the power to
18-22    indemnify or reimburse the person with respect to the covered
18-23    liability under this article.
18-24          (i)  A director, officer, employee, member, or volunteer of a
18-25    society serving without compensation is not liable, and a cause of
18-26    action may not be brought, for damages resulting from an act or
18-27    omission in the exercise of judgment or discretion in connection
 19-1    with the duties of that person for the society unless the act or
 19-2    omission involved wilful or wanton misconduct.
 19-3          SECTION 13.  Article 10.30, Insurance Code, is amended to
 19-4    read as follows:
 19-5          Art. 10.30.  ANNUAL REPORTS.  (a)  Every society transacting
 19-6    business in this State shall annually, on or before the first day
 19-7    of March, file with the department [State Board of Insurance] in
 19-8    such form as the commissioner [Board] may require, a statement
 19-9    under oath of its president and secretary or corresponding
19-10    officers, of its condition and standing on the thirty-first day of
19-11    December next preceding, and its transactions for the year ending
19-12    on that date, and shall furnish such other information as the
19-13    commissioner [said Board] may deem necessary to a proper exhibit of
19-14    its business and plan of working.  The commissioner [Board] may at
19-15    other times require any further statement it may deem necessary to
19-16    be made relating to such society.
19-17          (b)  Each society shall include in its annual report to the
19-18    department [said Board] a valuation of its certificates in force on
19-19    December 31st last preceding.  Such report of valuation shall show
19-20    as contingent liabilities the present mid-year value of the
19-21    promised benefits provided in the constitution and laws of such
19-22    society, under the certificates subject to valuation; and as
19-23    contingent assets the present mid-year value of the future net
19-24    contributions provided in the Constitution and laws as the same are
19-25    in practice actually collected.  At the option of any society, in
19-26    lieu of the above, the valuation may show the net value of the
19-27    certificates subject to valuation hereinbefore provided, and said
 20-1    net value, when computed in case of monthly contributions, may be
 20-2    the mean of the terminal values for the end of the preceding and of
 20-3    the current insurance years.  Such valuation including valuation of
 20-4    certificates shall be certified by an actuary, or, at the request
 20-5    and expense of the society, verified by the actuary of the
 20-6    Department of Insurance of the home State of the society.  The
 20-7    legal minimum standard of valuation for all certificates, except
 20-8    for accident and health benefits, shall be the National Fraternal
 20-9    Congress Table of Mortality as adopted by the National Congress,
20-10    August 23, 1899; or, at the option of the society, any table
20-11    producing reserves in the aggregate at least as great as the
20-12    National Fraternal Congress Table of Mortality as adopted by the
20-13    National Fraternal Congress, August 23, 1899; at the option of the
20-14    society, the Commissioners 1941 Standard Ordinary Mortality Table;
20-15    or at the option of the society, the Commissioners 1958 Standard
20-16    Ordinary Mortality Table, except that for any category of such
20-17    certificates issued on female risks, all modified net premiums and
20-18    present values referred to in Article 3.28 of this code may be
20-19    calculated according to an age not more than six (6) years younger
20-20    than the actual age of the insured.  The interest assumption to be
20-21    used with any of the preceding mortality tables may not be more
20-22    than four and one-half (4 1/2%) per centum per annum.  As an
20-23    alternative, the society may use a table based upon the society's
20-24    own experience of at least twenty (20) years, and covering not less
20-25    than one hundred thousand (100,000) lives with interest assumption
20-26    not more than four (4%) per centum per annum, provided, however,
20-27    that any society may value its certificates in accordance with
 21-1    valuation standards otherwise authorized by the laws of this state
 21-2    for the valuation of similar policies issued by life insurance
 21-3    companies provided that no society may use a table based on its own
 21-4    experience for certificates issued on or after January 1, 1989.
 21-5    Each such valuation report shall set forth clearly and fully the
 21-6    mortality and interest bases and the method of valuation.  The
 21-7    annual report required by this article shall also include a
 21-8    valuation of certificates in accordance with Article 10.07 of this
 21-9    code.
21-10          (c)  Any society providing for disability benefits shall keep
21-11    the net contributions for such benefits in a fund separate and
21-12    apart from all other benefit and expense funds and the valuation of
21-13    all other business of the society; provided, that where a combined
21-14    contribution table is used by a society for both death and
21-15    permanent total disability benefits, the valuation shall be
21-16    according to tables of reliable experiences, and in such cases a
21-17    separation of the funds shall not be required.
21-18          (d)  The annual report herein provided for may be used by the
21-19    department [State Board of Insurance] or the State of Texas in
21-20    determining the financial solvency of the society.  A statement of
21-21    the valuation provided by this article and an explanation of the
21-22    facts concerning the condition of the society thereby disclosed
21-23    shall be printed and mailed to each beneficiary [member] of the
21-24    society not later than June 1st of each year; or in lieu thereof,
21-25    such statement of valuation and showing of the society's condition
21-26    as thereby disclosed may be published in the society's official
21-27    paper and the issue containing the same mailed to each beneficiary
 22-1    [member] of the society.
 22-2          (e)  The laws of such society shall provide that if the
 22-3    stated periodical contributions of the members are insufficient to
 22-4    pay all matured death and disability claims in full, and to provide
 22-5    for the creation and maintenance of the funds required by its laws
 22-6    additional, increased or extra rates of contributions shall be
 22-7    collected from the members to meet such deficiency; and such laws
 22-8    may provide that, upon the written application or consent of the
 22-9    member, the [his] certificate may be charged with its proportion of
22-10    any deficiency disclosed by valuation, with interest not exceeding
22-11    the rate specified for certificate loans under the certificate
22-12    [five (5%) per  centum per annum].  The existence of the right to
22-13    assess members as provided by this article does not affect the test
22-14    for financial solvency of the society.  If the owner of a
22-15    certificate is not a member, the assessment shall be levied against
22-16    the owner.
22-17          (f)  This chapter may not be construed to prevent or in any
22-18    way limit any action by or remedy available to the department
22-19    [State Board of Insurance] or the State of Texas under Article
22-20    21.28 or 21.28-A of this code or other applicable law.
22-21          SECTION 14.  Chapter 10, Insurance Code, is amended by adding
22-22    Article 10.31 to read as follows:
22-23          Art. 10.31.  NONFORFEITURE BENEFITS, CASH SURRENDER VALUES,
22-24    CERTIFICATE LOANS, AND OTHER OPTIONS.  (a)  For a certificate
22-25    issued before January 1, 2000, the value of the paid-up
22-26    nonforfeiture benefit and the amount of a cash surrender value,
22-27    loan, or other option granted under the certificate must comply
 23-1    with the law applicable to the certificate immediately before that
 23-2    date.
 23-3          (b)  For a certificate issued on or after January 1, 2000,
 23-4    the value of the paid-up nonforfeiture benefit and the amount of a
 23-5    cash surrender value, loan, or other option granted under the
 23-6    certificate is computed as provided under the provisions of
 23-7    Articles 3.44a and 3.44b of this code applicable to life insurance
 23-8    companies issuing policies containing similar benefits and under
 23-9    the applicable tables established under those articles.
23-10          SECTION 15.  Chapter 10, Insurance Code, is amended by adding
23-11    Article 10.37-3 to read as follows:
23-12          Art. 10.37-3.  LICENSING OF AGENTS.  (a)  A person may not
23-13    solicit or procure insurance contracts for a society unless the
23-14    person is licensed as a legal reserve life insurance agent under
23-15    Chapter 213, Acts of the 54th Legislature, Regular Session, 1955
23-16    (Article 21.07-1, Vernon's Texas Insurance Code).  An individual
23-17    who is authorized to solicit or procure insurance contracts on
23-18    behalf of a society on June 1, 1999, is exempt from the personal
23-19    written examination required by Section 5, Chapter 213, Acts of the
23-20    54th Legislature, Regular Session, 1955 (Article 21.07-1, Vernon's
23-21    Texas Insurance Code), if the society certifies to the commissioner
23-22    the name and address of that individual on or before September 1,
23-23    1999.
23-24          (b)  A license is not required for a regular salaried
23-25    officer, employee, or member of a society who:
23-26                (1)  devotes substantially all of that person's
23-27    services to activities other than the solicitation of fraternal
 24-1    insurance contracts from the public; and
 24-2                (2)  does not receive a commission or other
 24-3    compensation that is directly dependent on the amount of business
 24-4    obtained for the solicitation of those contracts.
 24-5          (c)  An agent, representative, or member of a fraternal
 24-6    benefit society who devotes less than 50 percent of the person's
 24-7    time to the solicitation and procurement of insurance contracts for
 24-8    that society is exempt from the requirements of Subsection (a) of
 24-9    this article.
24-10          (d)  A person is presumed for a calendar year to have devoted
24-11    at least 50 percent of the person's time to the solicitation or
24-12    procurement of insurance contracts if, in the preceding calendar
24-13    year, the person solicited or procured on behalf of a society:
24-14                (1)  life insurance contracts that have generated, in
24-15    the aggregate, more than $20,000 of direct premiums for all lives
24-16    insured, provided that:
24-17                      (A)  a permanent life insurance contract has not
24-18    been written that exceeds $10,000 of coverage on an individual
24-19    life; and
24-20                      (B)  a term life insurance contract has not been
24-21    written that exceeds $50,000 of coverage on an individual life;
24-22                (2)  insurance contracts other than life that have
24-23    insured the individual lives of more than 25 persons; or
24-24                (3)  variable life insurance or variable annuity
24-25    contracts.
24-26          SECTION 16.  Section 5(a), Chapter 213, Acts of the 54th
24-27    Legislature, Regular Session, 1955 (Article 21.07-1, Vernon's Texas
 25-1    Insurance Code), as amended by Chapters 596 and 716, Acts of the
 25-2    75th Legislature, Regular Session, 1997, is reenacted and amended
 25-3    to read as follows:
 25-4          (a)  Each prospective applicant for a license to act as an
 25-5    agent within this State shall submit to a personal written
 25-6    examination administered in the English or Spanish language, as
 25-7    prescribed by the department [Texas Department of Insurance], to
 25-8    determine the applicant's competence with respect to insurance and
 25-9    annuity contracts, including medicare supplement contracts, and
25-10    memberships, and the applicant's familiarity with the pertinent
25-11    provisions of the laws of this State and the obligations and duties
25-12    of an agent, and shall pass the same to the satisfaction of the
25-13    department [Texas Department of Insurance].  A nonrefundable
25-14    examination fee, in an amount determined by the Commissioner but
25-15    not more than $20, must accompany the application to take the
25-16    examination.  The department shall charge the fee each time the
25-17    examination is taken.  The department shall give certifications of
25-18    a passing score to those applicants that obtain such a score.  No
25-19    written examination shall be required of:
25-20                (1)  An applicant for the renewal of a license issued
25-21    under [by the department pursuant to] Article 21.07, [Texas]
25-22    Insurance Code, [1951,] which is currently in force at the time of
25-23    the effective date of this Act;
25-24                (2)  An applicant whose license as an agent expired
25-25    less than one year prior to the date of application may, in the
25-26    discretion of the department [Texas Department of Insurance], be
25-27    issued a license without written examination;
 26-1                (3)  A person who holds the designation Chartered Life
 26-2    Underwriter (CLU);
 26-3                (4)  An applicant that is a partnership, corporation,
 26-4    or bank; or
 26-5                (5)  A person who holds the designation of Fraternal
 26-6    Insurance Counselor (FIC).
 26-7          SECTION 17.  Articles 10.05-1 and 10.05-2, Insurance Code,
 26-8    are repealed.
 26-9          SECTION 18.  (a)  This Act takes effect September 1, 1999,
26-10    except that Section 17 of this Act takes effect September 1, 2000.
26-11          (b)  The change made by this Act to Article 10.15, Insurance
26-12    Code, applies only to a certificate that is delivered, issued for
26-13    delivery, or renewed on or after September 1, 2000.  A certificate
26-14    that is delivered, issued for delivery, or renewed before September
26-15    1, 2000, is governed by the law as it existed immediately before
26-16    the effective date of this Act, and that law is continued in effect
26-17    for that purpose.
26-18          (c)  A person is not required to be licensed in the manner
26-19    required by Article 10.37-3, Insurance Code, as added by this Act,
26-20    before January 1, 2000.
26-21          SECTION 19.  The importance of this legislation and the
26-22    crowded condition of the calendars in both houses create an
26-23    emergency and an imperative public necessity that the
26-24    constitutional rule requiring bills to be read on three several
26-25    days in each house be suspended, and this rule is hereby suspended.