By Brimer                                             H.B. No. 2847
         Line and page numbers may not match official copy.
         Bill not drafted by TLC or Senate E&E.
                                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           Sec. 3.  (a)  Time for Filing.  Where a liquidation,
 1-7     rehabilitation, or conservation order has been entered in a
 1-8     proceeding against an insurer under this Article, all persons who
 1-9     may have claims against such insurer as set out in Subsection (a)
1-10     of Section 8 of this Article, including claimants with secured
1-11     claims and claims based on trust or escrow funds, shall present
1-12     proof of the same to the receiver at a place specified by him
1-13     within a period of time to be specified by the court, in no event,
1-14     however, less than ninety (90) days nor more than fifteen (15)
1-15     months after the date of the entry of the order specifying such
1-16     time.  The receiver shall notify all persons who may have claims
1-17     against such insurer as disclosed by its books and records, to
1-18     present proof of the same to him within the time as fixed. The last
1-19     day for the filing of proofs of claim shall be specified in the
1-20     notice.  Such notice shall be given in a manner determined by the
1-21     court.  Receipt of the required proof of claim by the receiver is a
 2-1     condition precedent to the payment of any claim, and except as
 2-2     provided by Subsection (b) of this section, claims that are not
 2-3     filed within the time specified by the court shall not participate
 2-4     in any distribution of the assets by the receiver.
 2-5           SECTION 2.  Amend Sec. 8 (d), Art. 21.28-C, Insurance Code,
 2-6     to read as follows:
 2-7           (d) (1)  The association shall investigate and adjust,
 2-8     compromise, settle, and pay covered claims to the extent of the
 2-9     association's obligation and deny all other claims.  The
2-10     association may review settlements, releases, and judgments to
2-11     which the impaired insurer or its insureds were parties to
2-12     determine the extent to which those settlements, releases, and
2-13     judgments may be properly contested.  Any judgment taken by default
2-14     or consent against an insured or the impaired insurer, and any
2-15     settlement, release, or judgment entered into by the insured or the
2-16     impaired insurer, is not binding on the association and may not be
2-17     considered as evidence of liability or of damages in connection
2-18     with any claim brought against the association or any other party
2-19     under this Act.  Notwithstanding any other provision of this Act, a
2-20     covered claim shall not include any claim filed with the guaranty
2-21     association after [the later of] the final date for filing claims
2-22     against the liquidator or receiver of an insolvent insurer [or
2-23     eighteen months after the order of liquidation].  The final date
2-24     for filing claims with the liquidator or receiver and association
2-25     shall be the same but in no event more than fifteen (15) months
 3-1     after the order of impairment.  In the event no necessity exists
 3-2     for a receivership estate to receive claim filings, the final date
 3-3     for filing claims with the association shall be fifteen (15) months
 3-4     after the order of impairment.
 3-5                 (2)  Notwithstanding any other provisions of this Act,
 3-6     except in the case of a claim for benefits under a policy of
 3-7     workers' compensation insurance, any obligation of the association
 3-8     to any and all persons shall cease when $10,000,000 in the
 3-9     aggregate shall have been paid to or on behalf of any insured or
3-10     its affiliates for covered or allowed claims and all expenses
3-11     incurred in connection therewith arising under a policy or policies
3-12     of any one insolvent insurer by the association, any other similar
3-13     state associations, and any property and casualty insurance
3-14     security fund which obtains contributions from insurers on a
3-15     pre-insolvency basis.  For purposes of this section, the term
3-16     "affiliate" means a person who directly, or indirectly or through
3-17     one or more intermediaries, controls, is controlled by, or is under
3-18     common control with the insurer.  If the association determines
3-19     that there may be more than one claimant having a covered or
3-20     allowed claim against the association, any other similar state
3-21     association or any property and casualty insurance security fund
3-22     under a policy or policies of any one insolvent insurer, the
3-23     association may establish a plan to allocate amounts payable by the
3-24     association in such manner as the association in its discretion
3-25     deems equitable.
 4-1           SECTION 3.  Amend Sec. 11 (b), Art. 21.28-C, Insurance Code,
 4-2     to read as follows:
 4-3           (b)  The association is entitled to recover from the
 4-4     following persons the amount of any covered claim all expenses
 4-5     incurred and arising out of that covered claim, including legal and
 4-6     defense costs, paid on behalf of that person under this Act:
 4-7                 (1)  any insured, other than an insured who is exempt
 4-8     from federal income tax under Section 501(a) of the Internal
 4-9     Revenue Code of 1986 (26 U.S.C.  Section 501(a)) by being described
4-10     by Section 501(c)(3) of that code, whose net worth on December 31
4-11     of the year next preceding the date the insurer becomes an impaired
4-12     insurer exceeds $[50] 10 million and whose liability obligations to
4-13     other persons [under a policy or contract of insurance written,
4-14     issued, and placed in force after January 1, 1992,] are satisfied
4-15     in whole or in part by payments made under this Act; and
4-16                 (2)  any person who is an affiliate of the impaired
4-17     insurer and whose liability obligations to other persons are
4-18     satisfied in whole or in part by payments made under this Act.
4-19           SECTION 4.  This Act shall take effect on September 1, 1999,
4-20     and be applicable only to receivership estates for which the order
4-21     of impairment is entered on or after that date.
4-22           SECTION 5.  The importance of this legislation and the
4-23     crowded condition of the calendars in both houses create an
4-24     emergency and an imperative public necessity that the
4-25     constitutional rule requiring bills to be read on three several
 5-1     days in each house be suspended, and this, rule is hereby
 5-2     suspended.