76R14403 DB-D                          
         By Bivins                                             S.B. No. 1153
         Substitute the following for S.B. No. 1153:
         By Eiland                                         C.S.S.B. No. 1153
                                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.  Subsection (b), Article 10.01, Insurance Code, is
 1-5     amended to read as follows:
 1-6           (b)  A characteristic of a fraternal benefit society as
 1-7     defined by Section (a)  of this article is that control must be
 1-8     ultimately vested in the membership as provided by this article,
 1-9     Articles 10.02 and 10.03 of this code, and other provisions of this
1-10     chapter, and that control of the fraternal benefit society may be
1-11     exercised by lodges and a supreme legislative or governing body
1-12     elected in the manner provided by Article 10.03 of this code.  The
1-13     methods provided by this section for exercising control over a
1-14     fraternal benefit society are exclusive.  In this section,
1-15     "control" has the meaning assigned by Section 2(d) [2(c)], Article
1-16     21.49-1, of this code.
1-17           SECTION 2.  Article 10.03, Insurance Code, is amended to read
1-18     as follows:
1-19           Art. 10.03.  REPRESENTATIVE FORM OF GOVERNMENT DEFINED.  A
1-20     society has a representative form of government if:
1-21                 (1)  the society has a supreme governing body
1-22     constituted:
1-23                       (A)  as an assembly as described by Article
1-24     10.03A of this chapter; or
 2-1                       (B)  as a board as described by Article 10.03B of
 2-2     this chapter;
 2-3                 (2)  the officers of the society are elected by the
 2-4     supreme governing body or by the board of directors;
 2-5                 (3)  only benefit members are eligible to serve as
 2-6     members of the supreme governing body, the board of directors, or
 2-7     an intermediate assembly of the society;
 2-8                 (4)  only benefit members may vote on the management of
 2-9     insurance affairs of the society;
2-10                 (5)  a voting member of the society has only one vote;
2-11     and
2-12                 (6)  a voting member may not cast a vote by proxy. [Any
2-13     society shall be deemed to have a representative form of government
2-14     when it shall provide in its constitution and laws for a supreme
2-15     legislative or governing body, composed of representatives elected
2-16     either by the members or by delegates elected directly or
2-17     indirectly by the members, together with such other members as may
2-18     be prescribed by its constitution and laws; provided, that the
2-19     elective members shall constitute a majority in number and not less
2-20     than the number of votes required to amend its constitution and
2-21     laws; and provided, further, that the meetings of the supreme or
2-22     governing body, and the election of officers, representatives or
2-23     delegates shall be held as often as once in four calendar years.
2-24     No member under age sixteen shall have voice or vote in the
2-25     management of the society.  No member, officer, representative or
2-26     delegate shall vote by proxy.]
2-27           SECTION 3.  Chapter 10, Insurance Code, is amended by adding
 3-1     Article 10.03A to read as follows:
 3-2           Art. 10.03A.  ASSEMBLY AS FORM OF SUPREME GOVERNING BODY;
 3-3     BOARD OF DIRECTORS.  (a)  The supreme governing body is an assembly
 3-4     if it is composed of:
 3-5                 (1)  delegates elected directly by the members or at
 3-6     intermediate assemblies or conventions by the members or their
 3-7     representatives; and
 3-8                 (2)  other delegates as prescribed by the society's
 3-9     laws.
3-10           (b)  A society may provide for election of delegates by mail.
3-11           (c)  The elected delegates to the assembly must:
3-12                 (1)  constitute a majority of the assembly in number;
3-13     and
3-14                 (2)  be entitled to the greater of:
3-15                       (A)  two-thirds of the votes in the assembly; or
3-16                       (B)  the number of votes required to amend the
3-17     society's laws.
3-18           (d)  The assembly shall:
3-19                 (1)  meet at least once every four years; and
3-20                 (2)  elect a board of directors to conduct the business
3-21     of the society between meetings of the assembly.
3-22           (e)  A vacancy on the board of directors that occurs between
3-23     elections may be filled as prescribed in the society's laws.
3-24           SECTION 4.  Chapter 10, Insurance Code, is amended by adding
3-25     Article 10.03B to read as follows:
3-26           Art. 10.03B.  BOARD AS FORM OF SUPREME GOVERNING BODY.
3-27     (a)  The supreme governing body is a board if it is composed of:
 4-1                 (1)  persons elected either directly by the members or
 4-2     at intermediate assemblies by the members or their representatives;
 4-3     and
 4-4                 (2)  other persons as prescribed by the society's laws.
 4-5           (b)  A society may provide for election of the board by mail.
 4-6           (c)  The persons elected to the board must:
 4-7                 (1)  constitute a majority of the board in number; and
 4-8                 (2)  have at least the number of votes required to
 4-9     amend the society's laws, other than laws of the society, if any,
4-10     that must be amended by direct vote of the members.
4-11           (d)  The term of a board member may not exceed four years.
4-12           (e)  A vacancy on the board that occurs between elections may
4-13     be filled in the manner prescribed by the society's laws.  A person
4-14     filling the unexpired term of an elected board member is considered
4-15     to be an elected member.
4-16           (f)  A board shall meet at least once each year to conduct
4-17     the business of the society.
4-18           SECTION 5.  Chapter 10, Insurance Code, is amended by adding
4-19     Article 10.03-1 to read as follows:
4-20           Art. 10.03-1.  DEFINITIONS.  In this chapter:
4-21                 (1)  "Benefit contract" means the agreement for
4-22     provision of benefits authorized by Article 10.05 of this chapter,
4-23     as that agreement is described in Article 10.15 of this chapter.
4-24                 (2)  "Benefit member" means an adult member who is
4-25     designated by the laws or rules of the society as a benefit member
4-26     under a benefit contract.
4-27                 (3)  "Certificate" means a document issued as written
 5-1     evidence of a benefit contract.
 5-2                 (4)  "Laws" means a society's articles of
 5-3     incorporation, constitution, and bylaws, however designated.
 5-4                 (5)  "Lodge" means a subordinate member unit of a
 5-5     society, including a camp, court, council, or branch.
 5-6                 (6)  "Premiums" means a premium, a rate, dues, or other
 5-7     required contributions that are payable under a certificate or
 5-8     benefit contract.
 5-9                 (7)  "Rules" means a rule, regulation, or resolution
5-10     adopted by the supreme governing body or board of directors that
5-11     has general application to the members of the society.
5-12           SECTION 6.  Article 10.05, Insurance Code, is amended to read
5-13     as follows:
5-14           Art. 10.05.  BENEFITS.  (a) [(1)]  A society authorized to do
5-15     business in this State may provide for the payment of:
5-16                 (1) [(a)]  Death benefits in any form;
5-17                 (2) [(b)]  Endowment benefits;
5-18                 (3) [(c)]  Annuity benefits;
5-19                 (4) [(d)]  Temporary or permanent disability benefits
5-20     as a result of disease or accident;
5-21                 (5) [(e)]  Hospital, medical or nursing benefits due to
5-22     sickness or bodily infirmity or accident;
5-23                 (6) [(f)]  Monument or tombstone benefits to the memory
5-24     of deceased members [not exceeding in any case the sum of Three
5-25     Hundred Dollars ($300)];
5-26                 (7)  Funeral [(g)  For the payment of funeral]
5-27     benefits;[,] and
 6-1                 (8)  Any other benefit that may be provided by a life,
 6-2     accident, or health insurance company, provided that the benefit
 6-3     is:
 6-4                       (A)  offered in compliance with Chapter 3 of this
 6-5     code; and
 6-6                       (B)  consistent with this chapter.
 6-7           (b)  A society shall:
 6-8                 (1)  specify in its laws or rules those persons to whom
 6-9     a certificate may be issued or who may be covered by benefits; and
6-10                 (2)  make the provision of those benefits consistent
6-11     with the provision of benefits to members and their beneficiaries.
6-12           (c)  A society may appoint an agent licensed by the
6-13     department under Chapter 213, Acts of the 54th Legislature, Regular
6-14     Session, 1955 (Article 21.07-1, Vernon's Texas Insurance Code), to
6-15     sell benefits listed under Subsection (a) of this article to
6-16     society members.
6-17                 [(2)  Such benefits may be provided on the lives of
6-18     members or, upon application of a member, on the lives of the
6-19     member's family, including the member, the member's spouse and
6-20     minor children, in the same or separate certificates.]
6-21           SECTION 7.  Subsection (a), Article 10.07, Insurance Code, is
6-22     amended to read as follows:
6-23           (a)  Fraternal benefit societies shall establish reserves for
6-24     the types of coverage specified in Articles 10.05(a)(4) and (5)
6-25     [Article 10.05(1)(d) and (e)] of this code in the same manner and
6-26     to the same extent as required for companies organized under
6-27     Chapter 3 of this code except:
 7-1                 (1)  for certificates issued during the calendar year
 7-2     1988, only one-third of the unearned premium reserve is required to
 7-3     be maintained during the first policy year; and
 7-4                 (2)  for certificates issued during the calendar year
 7-5     1989, only two-thirds of the unearned premium reserve is required
 7-6     to be maintained during the first policy year.
 7-7           SECTION 8.  Article 10.12, Insurance Code, is amended to read
 7-8     as follows:
 7-9           Art. 10.12. QUALIFICATIONS FOR MEMBERSHIP; GRIEVANCE
7-10     PROCEDURES.  (a)  A society shall specify in its laws or rules:
7-11                 (1)  the eligibility standards for each membership
7-12     class, provided that if benefits are provided on the lives of
7-13     children, the minimum age for adult membership is not less than 15
7-14     years of age and not more than 21 years of age;
7-15                 (2)  the process for admission for each membership
7-16     class; and
7-17                 (3)  the rights and privileges of each membership
7-18     class, provided that only benefit members may vote on the
7-19     management of the insurance affairs of the society.
7-20           (b)  A society may admit social members.  A social member may
7-21     not vote in the management of the insurance affairs of the society.
7-22           (c)  Membership rights in the society are personal to the
7-23     member.  A member may not assign membership rights.
7-24           (d)  A society may provide in its laws or rules for grievance
7-25     or complaint procedures for members.
7-26           (e)  [MEMBERS AND BENEFICIARIES.  Any person may be admitted
7-27     to beneficial, or general, or social membership in any society in
 8-1     such manner and upon such showing of eligibility as the laws of the
 8-2     society may provide, and any beneficial member may direct any
 8-3     benefit to be paid to such person or persons, entity, or interest
 8-4     as may be permitted by the laws of the society;  provided, that no
 8-5     beneficiary shall have or obtain any vested interest in the said
 8-6     benefit until the same has become due and payable in conformity
 8-7     with the provisions of the contract of membership, and the member
 8-8     shall have full right to change his beneficiary, or beneficiaries,
 8-9     in accordance with the laws, rules, and regulations of the
8-10     society.]
8-11           Nothing contained in this chapter shall be construed to
8-12     affect or apply to societies which admit to membership only persons
8-13     engaged in one or more hazardous occupations, in the same or
8-14     similar lines of business.
8-15           SECTION 9.  Chapter 10, Insurance Code, is amended by adding
8-16     Article 10.12-1 to read as follows:
8-17           Art. 10.12-1.  BENEFICIARIES.  (a)  The owner of a benefit
8-18     contract may change the beneficiary at any time in accordance with
8-19     the laws or rules of the society unless the owner waives this right
8-20     by specifically requesting in writing that the beneficiary
8-21     designation be irrevocable.  A society may, through its laws or
8-22     rules, limit the scope of beneficiary designations and shall
8-23     provide that a person whose designation as beneficiary is revocable
8-24     may not have or obtain a vested interest in the proceeds, in
8-25     conformity with the benefit contract.
8-26           (b)  If, at the death of the deceased insured, a lawful
8-27     beneficiary to whom the proceeds of the benefit contract are
 9-1     payable does not exist under the benefit contract, the amount of a
 9-2     benefit under a benefit contract shall be paid:
 9-3                 (1)  to the personal representative of the deceased
 9-4     insured; or
 9-5                 (2)  if the owner of the certificate is a person other
 9-6     than the deceased insured, to the owner of the certificate.
 9-7           (c)  Subsection (b) of this article does not apply to the
 9-8     extent funeral benefits may be paid under the benefit contract.
 9-9           SECTION 10.  Article 10.15, Insurance Code, is amended to
9-10     read as follows:
9-11           Art. 10.15.  CERTIFICATE.  (a)  Every certificate issued by
9-12     any such society shall specify the amount of benefit provided
9-13     thereby, and shall provide that the certificate, the charter or
9-14     articles of incorporation, or, if a voluntary association, the
9-15     articles of association, the constitution and laws of the society,
9-16     and the application for membership and medical examination, signed
9-17     by the applicant, and all amendments to each thereof, shall
9-18     constitute the agreement between the society and the member, and
9-19     copies of the same, certified by the secretary of the society, or
9-20     corresponding officer, shall be received in evidence of the terms
9-21     and conditions thereof.  Any changes, additions or amendments to
9-22     said charter or articles of incorporation, or articles of
9-23     association, or constitution or laws duly made or enacted
9-24     subsequent to the issuance of the benefit certificates shall bind
9-25     the member and the member's [his] beneficiaries, and shall govern
9-26     and control the agreement in all respects the same as though such
9-27     changes, additions or amendments had been made prior to and were in
 10-1    force at the time of the application for membership.
 10-2          (b)  A certificate may not be delivered or issued for
 10-3    delivery in this state unless the form of the certificate has been
 10-4    filed with the department under Article 3.42 of this code.  A life,
 10-5    accident, health, or disability insurance certificate or annuity
 10-6    certificate issued by a society must meet the requirements
 10-7    applicable to similar policies issued by an insurer in this state
 10-8    that are not inconsistent with this chapter as determined by rule
 10-9    of the commissioner.
10-10          (c)  A society shall include in the terms of a certificate a
10-11    grace period of at least one month for payment of premiums.
10-12          (d)  Each certificate must state the amount of premiums that
10-13    are payable under the certificate.
10-14          (e)  If the laws of the society provide for expulsion or
10-15    suspension of a member, the certificate must provide that a member
10-16    who is expelled or suspended may maintain the certificate in force
10-17    by continuing payment of the required premium, unless the expulsion
10-18    or suspension:
10-19                (1)  is for nonpayment of a premium; or
10-20                (2)  occurs within the contestable period of the
10-21    benefit contract and is for material misrepresentation in the
10-22    application for membership or insurance.
10-23          (f)  A life insurance benefit contract issued on the life of
10-24    a person who is younger than the society's minimum age for adult
10-25    membership may provide for transfer of control or ownership to the
10-26    insured at an age specified in the certificate.  A society may
10-27    require approval of an application for membership in order to
 11-1    effect the transfer and may provide in all other respects for the
 11-2    regulation, government, and control of certificates and rights,
 11-3    obligations, and liabilities incident and connected to the
 11-4    certificate.  Ownership rights under the certificate before a
 11-5    transfer must be specified in the certificate.
 11-6          (g)  A society may specify the terms and conditions for the
 11-7    assignment of a life insurance benefit contract.
 11-8          SECTION 11.  Article 10.18, Insurance Code, is amended by
 11-9    adding Subsection (c) to read as follows:
11-10          (c)  A society may, pursuant to a resolution of its supreme
11-11    governing body, establish and operate one or more separate accounts
11-12    and issue benefit contracts on a variable basis, subject to the
11-13    provisions of law regulating a life insurance company that
11-14    establishes those types of accounts and issues those types of
11-15    contracts.  In order to comply with applicable federal or state
11-16    laws or rules, the society may:
11-17                (1)  issue contracts on a variable basis to which
11-18    Articles 10.15(a) and 10.30(e) of this chapter do not apply; and
11-19                (2)  adopt special procedures for the conduct of the
11-20    business and affairs of a separate account and provide special
11-21    voting and other rights for a person having beneficial interests in
11-22    a separate account, including special procedures and rights
11-23    relating to:
11-24                      (A)  investment policy;
11-25                      (B)  investment advisory services;
11-26                      (C)  selection of certified public accountants;
11-27    and
 12-1                      (D)  selection of a committee to manage the
 12-2    business and affairs of the account.
 12-3          SECTION 12.  Article 10.19, Insurance Code, is amended to
 12-4    read as follows:
 12-5          Art. 10.19.  QUALIFICATION.  (a)  Hereafter, only such
 12-6    corporation, society, order of voluntary association, having not
 12-7    less than five hundred (500) members and ten (10) subordinate
 12-8    lodges, without capital stock organized and carried on solely for
 12-9    the mutual benefit of its members, and not for profit, and having a
12-10    lodge system and representative form of government, or which limits
12-11    its membership to a secret fraternity having a lodge system and
12-12    representative form of government, may, provided that it has been
12-13    in continuous operation for a period of not less than five (5)
12-14    years immediately preceding the filing of its articles of
12-15    incorporation or association as hereinafter provided, qualify as a
12-16    Fraternal Benefit Society as defined in Article 10.01 for the
12-17    purpose of providing for the payment of benefits as provided in
12-18    Article 10.05, by filing with the department [Board] duly certified
12-19    articles of incorporation or association.  Such articles shall set
12-20    out:
12-21                (1) [1.]  The name of the society, which shall not so
12-22    closely resemble the name of any society or insurance company
12-23    already transacting business in this state as to mislead the public
12-24    or lead to confusion.
12-25                (2) [2.]  The purpose for which it is formed, which
12-26    shall not include more liberal powers than are granted by this
12-27    Chapter.  Any lawful, social, intellectual, educational,
 13-1    charitable, benevolent, moral, fraternal, patriotic, or religious
 13-2    advantages may be set forth among the purposes of the society, and
 13-3    the mode in which its corporate powers are to be exercised.  These
 13-4    purposes may be carried out directly by the society or indirectly
 13-5    through subsidiary corporations or affiliated organizations.
 13-6          (b)  Such articles of incorporation or association and duly
 13-7    certified copies of the Constitution and laws, rules and
 13-8    regulations, and copies of all proposed forms of benefit
 13-9    certificates, applications therefor and circulars to be issued by
13-10    such society, and a bond in the sum of not less than Three Hundred
13-11    Thousand Dollars ($300,000.00) and not more than One Million Five
13-12    Hundred Thousand Dollars ($1,500,000.00), as required by the
13-13    commissioner [Five Thousand Dollars ($5,000.00)], with sureties
13-14    approved by the commissioner [State Board of Insurance],
13-15    conditioned upon the return of the advance payments, as provided in
13-16    this article, to applicants, if the organization fails to qualify
13-17    within one (1) year, shall be filed with the commissioner, [such
13-18    Board] who may require such further information as the commissioner
13-19    [it] deems necessary, and if the purposes of the society conform to
13-20    the requirements of this law, and all provisions of law have been
13-21    complied with, the commissioner [said Board] shall so certify and
13-22    retain and record or file the articles of incorporation or
13-23    association and furnish the incorporators a preliminary certificate
13-24    authorizing said society to solicit from its members applications
13-25    for insurance benefits as hereinafter provided.
13-26          (c)  Upon receipt of said certificate from the department
13-27    [State Board of Insurance], said society may solicit from its
 14-1    members applications for insurance benefits for the purpose of
 14-2    completing its qualification and shall collect from each applicant
 14-3    the amount of not less than one (1) regular monthly payment, in
 14-4    accordance with its table of rates as provided by its constitution
 14-5    and laws, and shall issue to each such applicant a receipt for the
 14-6    amount so collected.  No such society shall incur any liability
 14-7    other than for such advanced payments, nor issue any benefit
 14-8    certificate nor pay or allow, or offer or promise to pay or allow,
 14-9    to any person any death or disability benefit until actual bona
14-10    fide applications for death benefit certificates have been secured
14-11    upon at least five hundred (500) lives for at least Two [One]
14-12    Thousand Dollars ($2,000.00) [($1,000.00)] each, and all such
14-13    applicants for death benefits shall have been regularly examined by
14-14    legally qualified practicing physicians, and certificates of such
14-15    examination have been duly filed and approved by the chief medical
14-16    examiner of such society;  nor until there shall be established ten
14-17    (10) subordinate lodges or branches into which said five hundred
14-18    (500) applicants have been initiated; nor until there has been
14-19    submitted to the department [said Board], under oath of the
14-20    president and secretary or corresponding officers of such society,
14-21    a list of such applicants, giving their names, addresses, date
14-22    examined, date approved, date initiated, name and number of the
14-23    subordinate branch of which each applicant is a member, amount of
14-24    benefits to be granted, rate of stated periodical contributions,
14-25    which shall be sufficient to provide for meeting the mortuary
14-26    obligation contracted, when valued for death benefits upon the
14-27    basis of the National Fraternal Congress Table of Mortality, as
 15-1    adopted by the National Fraternal Congress, August 23, 1899, or any
 15-2    higher standard, at the option of the society, and for disability
 15-3    benefits by tables based upon reliable experience and for combined
 15-4    death and permanent total disability benefits by tables based upon
 15-5    reliable experience, with an interest assumption not higher than
 15-6    four per cent (4%) per annum; nor until it shall be shown to the
 15-7    department [Board] by the sworn statement of the treasurer or
 15-8    corresponding officer of such society, that at least five hundred
 15-9    (500) applicants have each paid in cash at least one (1) regular
15-10    monthly payment as herein provided per One Thousand Dollars
15-11    ($1,000.00) of indemnity to be effected, which payments in the
15-12    aggregate shall amount to at least One Hundred Fifty Thousand
15-13    Dollars ($150,000.00) [Twenty-Five Hundred Dollars ($2,500.00)];
15-14    all of which shall be credited to the mortuary or disability fund
15-15    on account of such applicants and no part of which may be used for
15-16    expenses.
15-17          (d)  Said advanced payments shall, during the period of
15-18    completing qualification, be held in trust, and if such
15-19    qualification is not completed within one (1) year as hereinafter
15-20    provided, returned to said applicants.
15-21          (e)  The department [Board] may make such examination and
15-22    require such further information as it deems advisable; and upon
15-23    presentation of satisfactory evidence that the society has complied
15-24    with all the provisions of law, the department [Board] shall issue
15-25    to such society a certificate to that effect.  Such certificate
15-26    shall be prima facie evidence of the qualification of such society
15-27    at the date of such certificate.  The department [Board] shall
 16-1    cause a record of such certificate to be made and a certified copy
 16-2    of such record may be given in evidence with like effect as the
 16-3    original certificate.
 16-4          (f)  Unless the five hundred (500) applicants herein required
 16-5    have been secured and the organization has qualified as a fraternal
 16-6    benefit society as herein provided, the preliminary certificate
 16-7    granted under the provisions of this article shall be null and void
 16-8    after one (1) year from its date, or after such further period, not
 16-9    exceeding one (1) year, as may be authorized by the department
16-10    [State Board of Insurance] upon cause shown.
16-11          (g)  Provided, however, that this Article shall not apply to
16-12    societies specifically exempted from the provisions of Chapter 10
16-13    of the Insurance Code and provided further, that the above
16-14    provisions of this article shall not apply to Fraternal Benefit
16-15    Societies authorized to transact business in this state on June 1,
16-16    1965, so long as their licenses or renewals or extensions thereof
16-17    continue in force.  The following provisions of this article shall
16-18    apply to such Fraternal Benefit Societies authorized to transact
16-19    business in this state on June 1, 1965.
16-20          (h)  When any domestic society shall have discontinued
16-21    business for the period of one (1) year, or has less than four
16-22    hundred (400) members holding benefit certificates, its permanent
16-23    certificate shall become null and void.  Every such society shall
16-24    have the power to make a constitution and bylaws for the government
16-25    of the society, the admission of its members, the management of its
16-26    affairs and the fixing and readjusting of the rates of contribution
16-27    of its members from time to time; and it shall have the power to
 17-1    change, alter, add to, or amend such constitution and bylaws and
 17-2    shall have such other powers as are necessary and incidental to
 17-3    carrying into effect its object and purposes.
 17-4          SECTION 13.  Article 10.21, Insurance Code, is amended to
 17-5    read as follows:
 17-6          Art. 10.21.  MERGERS AND TRANSFERS.  (a)  No domestic society
 17-7    shall merge with or accept the transfer of the membership or funds
 17-8    of any other society unless such merger or transfer is evidenced by
 17-9    a contract in writing, setting out in full the terms and conditions
17-10    of such merger or transfer, and filed with the department [State
17-11    Board of Insurance], together with a sworn statement of the
17-12    financial condition of each of said societies by its president and
17-13    secretary, or corresponding officers, and a certificate of such
17-14    officers, duly verified under oath of said officers of each of the
17-15    contracting societies, that such merger or transfer has been
17-16    approved by a vote of two-thirds (2/3) of the members of the
17-17    supreme legislative or governing body of each of said societies[.
17-18    A merger or transfer may not be made other than to another
17-19    fraternal benefit society].
17-20          (b)  Upon the submission of said contract, financial
17-21    statements and certificates, the department [said Board] shall
17-22    examine the same, and if it shall find that such statements are
17-23    correct and the said contract to be in conformity with the
17-24    provisions of this article, that such merger or transfer is just
17-25    and equitable to the members of each of said societies, and that
17-26    the new or surviving society complies with all of the requirements
17-27    of a fraternal benefit society as set forth in this chapter, the
 18-1    department [Board] shall approve said merger or transfer, issue its
 18-2    certificate to that effect, and thereupon the said contract or
 18-3    merger or transfer shall be of full force and effect.
 18-4          (c)  Article 21.49-1 of this code applies to fraternal
 18-5    benefit societies.  There may be no change in control of a
 18-6    fraternal benefit society that is inconsistent with the nature of a
 18-7    fraternal benefit society as specified in Article 10.01, 10.02, or
 18-8    10.03 of this code and other applicable provisions of law.
 18-9          SECTION 14.  Article 10.26, Insurance Code, is amended to
18-10    read as follows:
18-11          Art. 10.26.  NO PERSONAL LIABILITY; INDEMNIFICATION OR
18-12    REIMBURSEMENT.  (a)  Officers and members of the supreme, grand or
18-13    any subordinate body of an [any such] incorporated society are
18-14    [shall] not [be] individually liable for the payment of any
18-15    disability or death benefit provided for in the laws and agreements
18-16    of the [such] society.  Those payments are [The same shall be]
18-17    payable only out of the funds of the [such] society and in the
18-18    manner provided by its law.
18-19          (b)  A society may indemnify and reimburse a person for
18-20    expenses reasonably incurred by, and liabilities imposed on, that
18-21    person in connection with or arising out of an action, suit, or
18-22    other proceeding, whether civil, criminal, administrative, or
18-23    investigative, in which the person is involved, or in connection
18-24    with or arising out of a threat of a proceeding against that
18-25    person, because that person is or was a director, officer,
18-26    employee, or agent of:
18-27                (1)  the society; or
 19-1                (2)  a firm, corporation, or organization with which
 19-2    the person served in any capacity at the request of the society.
 19-3          (c)  Except as provided by Subsection (d) of this article, a
 19-4    person may not be indemnified or reimbursed in relation to:
 19-5                (1)  a matter in an action, suit, or other proceeding
 19-6    in which the person is finally adjudged guilty of breach of a duty
 19-7    as a director, officer, employee, or agent of the society; or
 19-8                (2)  an agreement that settles:
 19-9                      (A)  a matter in an action, suit, or other
19-10    proceeding described by Subdivision (1) of this subsection; or
19-11                      (B)  the threat of the proceeding.
19-12          (d)  A society may indemnify or reimburse a person in
19-13    relation to a matter described by Subsection (c) of this article
19-14    only if the supreme governing body, the board of directors, or a
19-15    court of competent jurisdiction determines that:
19-16                (1)  the person acted in good faith for a purpose the
19-17    person reasonably believed to be in or not opposed to the best
19-18    interests of the society; and
19-19                (2)  in a criminal action or proceeding, the person had
19-20    no reasonable cause to believe that the person's conduct was
19-21    unlawful.
19-22          (e)  A determination by a supreme governing body or board of
19-23    directors under Subsection (d) of this article must be made by
19-24    majority vote of a quorum consisting of persons who were not
19-25    parties to the action, suit, or other proceeding under review.
19-26          (f)  The termination of an action or other proceeding by
19-27    judgment, order, settlement, or conviction or on a plea of no
 20-1    contest does not create a conclusive presumption that a person does
 20-2    not meet the standard of conduct required in order to justify
 20-3    indemnification and reimbursement.
 20-4          (g)  The right of indemnification and reimbursement under
 20-5    this article is not exclusive of other rights to which a person may
 20-6    be entitled as a matter of law and inures to the benefit of the
 20-7    person's devisees, legatees, heirs, and estate.
 20-8          (h)  A society may purchase and maintain insurance on behalf
 20-9    of a person who is or was a director, officer, employee, or agent
20-10    of the society or who is or was serving at the request of the
20-11    society as a director, officer, employee, or agent of another firm,
20-12    corporation, or organization against a liability asserted against
20-13    that person or incurred by that person in any capacity or arising
20-14    out of that person's status as a director, officer, employee, or
20-15    agent of the society or the other firm, corporation, or
20-16    organization.  A society may purchase and maintain insurance under
20-17    this subsection regardless of whether the society has the power to
20-18    indemnify or reimburse the person with respect to the covered
20-19    liability under this article.
20-20          (i)  A director, officer, employee, member, or volunteer of a
20-21    society serving without compensation is not personally liable for
20-22    damages resulting from an act or omission in the exercise of
20-23    judgment or discretion in connection with the duties of that person
20-24    for the society unless the act or omission involved wilful or
20-25    wanton misconduct.  This subsection does not limit a society's
20-26    direct or indirect liability.
20-27          SECTION 15.  Article 10.30, Insurance Code, is amended to
 21-1    read as follows:
 21-2          Art. 10.30.  ANNUAL REPORTS.  (a)  Every society transacting
 21-3    business in this State shall annually, on or before the first day
 21-4    of March, file with the department [State Board of Insurance] in
 21-5    such form as the commissioner [Board] may require, a statement
 21-6    under oath of its president and secretary or corresponding
 21-7    officers, of its condition and standing on the thirty-first day of
 21-8    December next preceding, and its transactions for the year ending
 21-9    on that date, and shall furnish such other information as the
21-10    commissioner [said Board] may deem necessary to a proper exhibit of
21-11    its business and plan of working.  The commissioner [Board] may at
21-12    other times require any further statement it may deem necessary to
21-13    be made relating to such society.
21-14          (b)  Each society shall include in its annual report to the
21-15    department [said Board] a valuation of its certificates in force on
21-16    December 31st last preceding.  Such report of valuation shall show
21-17    as contingent liabilities the present mid-year value of the
21-18    promised benefits provided in the constitution and laws of such
21-19    society, under the certificates subject to valuation; and as
21-20    contingent assets the present mid-year value of the future net
21-21    contributions provided in the Constitution and laws as the same are
21-22    in practice actually collected.  At the option of any society, in
21-23    lieu of the above, the valuation may show the net value of the
21-24    certificates subject to valuation hereinbefore provided, and said
21-25    net value, when computed in case of monthly contributions, may be
21-26    the mean of the terminal values for the end of the preceding and of
21-27    the current insurance years.  Such valuation including valuation of
 22-1    certificates shall be certified by an actuary, or, at the request
 22-2    and expense of the society, verified by the actuary of the
 22-3    Department of Insurance of the home State of the society.  The
 22-4    legal minimum standard of valuation for all certificates, except
 22-5    for accident and health benefits, shall be the National Fraternal
 22-6    Congress Table of Mortality as adopted by the National Congress,
 22-7    August 23, 1899; or, at the option of the society, any table
 22-8    producing reserves in the aggregate at least as great as the
 22-9    National Fraternal Congress Table of Mortality as adopted by the
22-10    National Fraternal Congress, August 23, 1899; at the option of the
22-11    society, the Commissioners 1941 Standard Ordinary Mortality Table;
22-12    or at the option of the society, the Commissioners 1958 Standard
22-13    Ordinary Mortality Table, except that for any category of such
22-14    certificates issued on female risks, all modified net premiums and
22-15    present values referred to in Article 3.28 of this code may be
22-16    calculated according to an age not more than six (6) years younger
22-17    than the actual age of the insured.  The interest assumption to be
22-18    used with any of the preceding mortality tables may not be more
22-19    than four and one-half (4 1/2%) per centum per annum.  As an
22-20    alternative, the society may use a table based upon the society's
22-21    own experience of at least twenty (20) years, and covering not less
22-22    than one hundred thousand (100,000) lives with interest assumption
22-23    not more than four (4%) per centum per annum, provided, however,
22-24    that any society may value its certificates in accordance with
22-25    valuation standards otherwise authorized by the laws of this state
22-26    for the valuation of similar policies issued by life insurance
22-27    companies provided that no society may use a table based on its own
 23-1    experience for certificates issued on or after January 1, 1989.
 23-2    Each such valuation report shall set forth clearly and fully the
 23-3    mortality and interest bases and the method of valuation.  The
 23-4    annual report required by this article shall also include a
 23-5    valuation of certificates in accordance with Article 10.07 of this
 23-6    code.
 23-7          (c)  Any society providing for disability benefits shall keep
 23-8    the net contributions for such benefits in a fund separate and
 23-9    apart from all other benefit and expense funds and the valuation of
23-10    all other business of the society; provided, that where a combined
23-11    contribution table is used by a society for both death and
23-12    permanent total disability benefits, the valuation shall be
23-13    according to tables of reliable experiences, and in such cases a
23-14    separation of the funds shall not be required.
23-15          (d)  The annual report herein provided for may be used by the
23-16    department [State Board of Insurance] or the State of Texas in
23-17    determining the financial solvency of the society.  A statement of
23-18    the valuation provided by this article and an explanation of the
23-19    facts concerning the condition of the society thereby disclosed
23-20    shall be printed [and mailed to each beneficiary member of the
23-21    society not later than June 1st of each year; or in lieu thereof,
23-22    such statement of valuation and showing of the society's condition
23-23    as thereby disclosed may be published] in the society's official
23-24    paper [and the issue containing the same mailed to each beneficiary
23-25    member of the society].
23-26          (e)  A society shall provide in the society's laws that if
23-27    the society's reserves for any class of the society's certificates
 24-1    become impaired, the society's supreme governing body or board of
 24-2    directors may require the certificate holder to pay the society an
 24-3    equitable proportion of the deficiency as determined by the
 24-4    governing body or board.
 24-5          (f)  If the certificate holder does not pay the society the
 24-6    amount determined under Subsection (e) of this article, the holder,
 24-7    in a manner determined by the society, may elect to accept:
 24-8                (1)  the amount determined under Subsection (e) of this
 24-9    article as an indebtedness against the certificate, with the amount
24-10    drawing interest at a rate that does not exceed the rate specified
24-11    for a certificate loan under a certificate that has cash value;
24-12                (2)  a proportionate reduction in the benefits under
24-13    the certificate; or
24-14                (3)  a combination of the limitations on the
24-15    certificate as described by Subdivisions (1) and (2) of this
24-16    subsection.
24-17          (g)  The society may determine a presumed election for the
24-18    certificate holder under Subsection (f) of this article if the
24-19    holder fails to make an election.
24-20          (h)  [The laws of such society shall provide that if the
24-21    stated periodical contributions of the members are insufficient to
24-22    pay all matured death and disability claims in full, and to provide
24-23    for the creation and maintenance of the funds required by its laws
24-24    additional, increased or extra rates of contributions shall be
24-25    collected from the members to meet such deficiency; and such laws
24-26    may provide that, upon the written application or consent of the
24-27    member, his certificate may be charged with its proportion of any
 25-1    deficiency disclosed by valuation, with interest not exceeding five
 25-2    (5%) per centum per annum.  The existence of the right to assess
 25-3    members as provided by this article does not affect the test for
 25-4    financial solvency of the society.]
 25-5          This chapter may not be construed to prevent or in any way
 25-6    limit any action by or remedy available to the department [State
 25-7    Board of Insurance] or the State of Texas under Article 21.28 or
 25-8    21.28-A of this code or other applicable law.
 25-9          SECTION 16.  Chapter 10, Insurance Code, is amended by adding
25-10    Article 10.31 to read as follows:
25-11          Art. 10.31.  NONFORFEITURE BENEFITS.  (a)  For a certificate
25-12    providing a nonforfeiture benefit that is issued before January 1,
25-13    2001, the value of the nonforfeiture benefit granted under the
25-14    certificate must comply with the law applicable to the certificate
25-15    immediately before that date.
25-16          (b)  For a certificate providing a nonforfeiture benefit that
25-17    is issued on or after January 1, 2001, the value of the
25-18    nonforfeiture benefit granted under the certificate shall be
25-19    computed as provided under the provisions of Articles 3.44a and
25-20    3.44b of this code applicable to life insurance companies issuing
25-21    policies containing similar benefits and under the applicable
25-22    tables established under those articles.
25-23          SECTION 17.  Subsection (a), Article 10.33, Insurance Code,
25-24    is amended to read as follows:
25-25          (a)  Each domestic society is subject to Articles 1.15,
25-26    1.15A, and 1.16 of this code.
25-27          SECTION 18.  Chapter 10, Insurance Code, is amended by adding
 26-1    Article 10.37-3 to read as follows:
 26-2          Art. 10.37-3.  LICENSING OF AGENTS.  (a)  A person may not
 26-3    solicit or procure insurance contracts for a society unless the
 26-4    person is licensed as an agent under Chapter 213, Acts of the 54th
 26-5    Legislature, Regular Session, 1955 (Article 21.07-1, Vernon's Texas
 26-6    Insurance Code).
 26-7          (b)  An agent, representative, or member of a fraternal
 26-8    benefit society who devotes less than 50 percent of the person's
 26-9    time to the solicitation and procurement of insurance contracts for
26-10    that society is exempt from the requirements of Subsection (a) of
26-11    this article.
26-12          (c)  For the purposes of Subsection (b) of this article, a
26-13    person is presumed for a calendar year to have devoted at least 50
26-14    percent of the person's time to the solicitation or procurement of
26-15    insurance contracts if, in the preceding calendar year, the person
26-16    solicited or procured on behalf of a society:
26-17                (1)  life insurance contracts that have generated, in
26-18    the aggregate, more than $20,000 of direct premiums for all lives
26-19    insured, provided that an interest-sensitive life insurance
26-20    contract has not been solicited or procured by a person that
26-21    exceeds $35,000 of coverage on an individual life unless that
26-22    person holds the designation of "Fraternal Benefit Counselor";
26-23                (2)  insurance contracts, other than life insurance
26-24    contracts, that have insured the individual lives of more than 25
26-25    persons; or
26-26                (3)  variable life insurance or variable annuity
26-27    contracts.
 27-1          SECTION 19.  Subsection (b), Section 1, Chapter 213, Acts of
 27-2    the 54th Legislature, Regular Session, 1955 (Article 21.07-1,
 27-3    Vernon's Texas Insurance Code), is amended to read as follows:
 27-4          (b)  The term "agent" for the purpose of this Act means any
 27-5    person, corporation, or bank that is an authorized agent of a legal
 27-6    reserve life insurance company, fraternal benefit society, or
 27-7    health maintenance organization, and any person who is a sub-agent
 27-8    of such agent, who acts as such, whether through an oral, written,
 27-9    or electronic communication or otherwise, in the solicitation of,
27-10    negotiation for, or procurement of, or collection of premiums on,
27-11    an insurance or annuity contract with a legal reserve life
27-12    insurance company or who acts as described by Subsection (a-1) of
27-13    this section.  The term "agent" shall not include:
27-14                (1)  any regular salaried officer or employee of a
27-15    legal reserve life insurance company or a fraternal benefit
27-16    society, or of a licensed life insurance agent, who devotes
27-17    substantially all of the officer's or employee's time to activities
27-18    other than the solicitation of applications for insurance or
27-19    annuity contracts and receives no commission or other compensation
27-20    directly dependent upon the business obtained, and who does not
27-21    solicit or accept from the public applications for insurance or
27-22    annuity contracts;
27-23                (1-A)  any regular salaried officer or employee of a
27-24    health maintenance organization or of a licensed health maintenance
27-25    organization agent, who devotes substantially all of the officer's
27-26    or employee's time to activities other than the solicitation of
27-27    applications for health maintenance organization membership and
 28-1    receives no commission or other compensation directly dependent
 28-2    upon the business obtained and who does not solicit or accept from
 28-3    the public applications for health maintenance organization
 28-4    membership;
 28-5                (2)  employers or their officers or employees, or the
 28-6    trustees of any employee benefit plan, to the extent that such
 28-7    employers, officers, employees or trustees are engaged in the
 28-8    administration or operation of any program of employee benefits
 28-9    involving the use of insurance or annuities issued by a legal
28-10    reserve life insurance company or memberships issued by a health
28-11    maintenance organization, provided that such employers, officers,
28-12    employees or trustees are not in any manner compensated, directly
28-13    or indirectly, by the legal reserve life insurance company or
28-14    health maintenance organization issuing the insurance or annuity
28-15    contracts or memberships;
28-16                (3)  except as provided by Section 4(f) of this act,
28-17    banks, savings and loan associations, or credit unions, or the
28-18    officers and employees of banks, savings and loan associations, or
28-19    credit unions, to the extent that such banks, savings and loan
28-20    associations, credit unions, or officers and employees collect and
28-21    remit premiums or charges by charging same against accounts of
28-22    depositors on the orders of such depositors;
28-23                (4)  a ticket-selling agent of a public carrier with
28-24    respect to accident life insurance tickets covering risks of
28-25    travel;
28-26                (5)  an agent selling credit life, health and accident
28-27    insurance issued exclusively in connection with credit
 29-1    transactions, or acting as agent or solicitor for health and
 29-2    accident insurance under license issued pursuant to the provisions
 29-3    of Article 21.14 of the Texas Insurance Code; or
 29-4                (6)  a person or the employee of a person who has
 29-5    contracted to provide administrative, management, or health care
 29-6    services to a health maintenance organization and who is
 29-7    compensated for those services by the payment of an amount
 29-8    calculated as a percentage of the revenues, net income, or profit
 29-9    of the health maintenance organization, if that method of
29-10    compensation is the sole basis for subjecting that person or the
29-11    employee of the person to this section.
29-12          SECTION 20.  Subsection (a), Section 5, Chapter 213, Acts of
29-13    the 54th Legislature, Regular Session, 1955 (Article 21.07-1,
29-14    Vernon's Texas Insurance Code), as amended by Chapters 596 and 716,
29-15    Acts of the 75th Legislature, Regular Session, 1997, is reenacted
29-16    and amended to read as follows:
29-17          (a)  Each prospective applicant for a license to act as an
29-18    agent within this State shall submit to a personal written
29-19    examination administered in the English or Spanish language, as
29-20    prescribed by the department [Texas Department of Insurance], to
29-21    determine the applicant's competence with respect to insurance and
29-22    annuity contracts, including medicare supplement contracts, and
29-23    memberships, and the applicant's familiarity with the pertinent
29-24    provisions of the laws of this State and the obligations and duties
29-25    of an agent, and shall pass the same to the satisfaction of the
29-26    department [Texas Department of Insurance].  A nonrefundable
29-27    examination fee, in an amount determined by the Commissioner but
 30-1    not more than $20, must accompany the application to take the
 30-2    examination.  The department shall charge the fee each time the
 30-3    examination is taken.  The department shall give certifications of
 30-4    a passing score to those applicants that obtain such a score.  No
 30-5    written examination shall be required of:
 30-6                (1)  An applicant for the renewal of a license issued
 30-7    under [by the department pursuant to] Article 21.07, [Texas]
 30-8    Insurance Code, [1951,] which is currently in force at the time of
 30-9    the effective date of this Act;
30-10                (2)  An applicant whose license as an agent expired
30-11    less than one year prior to the date of application may, in the
30-12    discretion of the department [Texas Department of Insurance], be
30-13    issued a license without written examination;
30-14                (3)  A person who holds the designation Chartered Life
30-15    Underwriter (CLU);
30-16                (4)  An applicant that is a partnership, corporation,
30-17    or bank; or
30-18                (5)  An applicant for a license under this section who
30-19    is authorized to solicit or procure insurance for a fraternal
30-20    benefit society on September 1, 1999, provided that the applicant:
30-21                      (A)  solicited or procured insurance on behalf of
30-22    the fraternal benefit society for a period of at least 24 months
30-23    immediately preceding September 1, 1999;
30-24                      (B)  does not solicit or procure insurance for
30-25    any other insurer or a different fraternal benefit society on or
30-26    after September 1, 1999;
30-27                      (C)  does not solicit or procure an insurance
 31-1    contract on or after September 1, 1999, except from a person who is
 31-2    eligible for membership in the fraternal benefit society; and
 31-3                      (D)  does not solicit or procure an
 31-4    interest-sensitive life insurance contract that exceeds $35,000 of
 31-5    coverage on an individual life on or after September 1, 1999,
 31-6    unless the applicant holds the designation of "Fraternal Insurance
 31-7    Counselor" at the time the contract is solicited or procured.
 31-8          SECTION 21.  Section 16, Chapter 213, Acts of the 54th
 31-9    Legislature, Regular Session, 1955 (Article 21.07-1, Vernon's Texas
31-10    Insurance Code), is amended by adding Subsection (d-1) to read as
31-11    follows:
31-12          (d-1) A written examination is not required of an applicant
31-13    for a license under this section who is authorized to solicit or
31-14    procure insurance for a fraternal benefit society on September 1,
31-15    1999, provided that the applicant:
31-16                (1)  solicited or procured insurance on behalf of the
31-17    fraternal benefit society for a period of at least 24 months
31-18    immediately preceding September 1, 1999;
31-19                (2)  does not solicit or procure insurance for any
31-20    other insurer or a different fraternal benefit society on or after
31-21    September 1, 1999;
31-22                (3)  does not solicit or procure an insurance contract
31-23    on or after September 1, 1999, except from a person who is eligible
31-24    for membership in the fraternal benefit society; and
31-25                (4)  does not solicit or procure an interest-sensitive
31-26    life insurance contract that exceeds $35,000 of coverage on an
31-27    individual life on or after September 1, 1999, unless the applicant
 32-1    holds the designation of "Fraternal Insurance Counselor" at the
 32-2    time the contract is solicited or procured.
 32-3          SECTION 22.  Articles 10.05-1 and 10.05-2, Insurance Code,
 32-4    are repealed.
 32-5          SECTION 23.  (a)  This Act takes effect January 1, 2000,
 32-6    except that Section 22 of this Act takes effect January 1, 2001.
 32-7          (b)  The change made by this Act to Article 10.15, Insurance
 32-8    Code, applies only to a certificate that is delivered, issued for
 32-9    delivery, or renewed on or after January 1, 2001.  A certificate
32-10    that is delivered, issued for delivery, or renewed before January
32-11    1, 2001, is governed by the law as it existed immediately before
32-12    the effective date of this Act, and that law is continued in effect
32-13    for that purpose.
32-14          SECTION 24.  The importance of this legislation and the
32-15    crowded condition of the calendars in both houses create an
32-16    emergency and an imperative public necessity that the
32-17    constitutional rule requiring bills to be read on three several
32-18    days in each house be suspended, and this rule is hereby suspended.