By Bivins S.B. No. 1153
76R8951 DB-F
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) be entitled to the greater of:
3-2 (A) two-thirds of the votes in the assembly; or
3-3 (B) the number of votes required to amend the
3-4 society's laws.
3-5 (d) The assembly shall:
3-6 (1) meet at least once every four years; and
3-7 (2) elect a board of directors to conduct the business
3-8 of the society between meetings of the assembly.
3-9 (e) A vacancy on the board of directors that occurs between
3-10 elections may be filled as prescribed in the society's laws.
3-11 SECTION 3. Chapter 10, Insurance Code, is amended by adding
3-12 Article 10.03B to read as follows:
3-13 Art. 10.03B. BOARD AS FORM OF SUPREME GOVERNING BODY. (a)
3-14 The supreme governing body is a board if it is composed of:
3-15 (1) persons elected either directly by the members or
3-16 at intermediate assemblies by the members or their representatives;
3-17 and
3-18 (2) other persons as prescribed by the society's laws.
3-19 (b) A society may provide for election of the board by mail.
3-20 (c) The persons elected to the board must:
3-21 (1) constitute a majority of the board in number; and
3-22 (2) have at least the number of votes required to
3-23 amend the society's laws, other than laws of the society, if any,
3-24 that must be amended by direct vote of the members.
3-25 (d) The term of a board member may not exceed four years.
3-26 (e) A vacancy on the board that occurs between elections may
3-27 be filled in the manner prescribed by the society's laws. A person
4-1 filling the unexpired term of an elected board member is considered
4-2 to be an elected member.
4-3 (f) A board shall meet at least once each year to conduct
4-4 the business of the society.
4-5 SECTION 4. Chapter 10, Insurance Code, is amended by adding
4-6 Article 10.03-1 to read as follows:
4-7 Art. 10.03-1. DEFINITIONS. In this chapter:
4-8 (1) "Benefit contract" means the agreement for
4-9 provision of benefits authorized by Article 10.05 of this chapter,
4-10 as that agreement is described in Article 10.15 of this chapter.
4-11 (2) "Benefit member" means an adult member who is
4-12 designated by the laws or rules of the society as a benefit member
4-13 under a benefit contract.
4-14 (3) "Certificate" means a document issued as written
4-15 evidence of a benefit contract.
4-16 (4) "Laws" means a society's articles of
4-17 incorporation, constitution, and bylaws, however designated.
4-18 (5) "Lodge" means a subordinate member unit of a
4-19 society, including a camp, court, council, or branch.
4-20 (6) "Premiums" means a premium, a rate, dues, or other
4-21 required contributions that are payable under a certificate or
4-22 benefit contract.
4-23 (7) "Rules" means a rule, regulation, or resolution
4-24 adopted by the supreme governing body or board of directors that
4-25 has general application to the members of the society.
4-26 SECTION 5. Article 10.05, Insurance Code, is amended to read
4-27 as follows:
5-1 Art. 10.05. BENEFITS. (a) [(1)] A society authorized to do
5-2 business in this State may provide for the payment of:
5-3 (1) [(a)] Death benefits in any form;
5-4 (2) [(b)] Endowment benefits;
5-5 (3) [(c)] Annuity benefits;
5-6 (4) [(d)] Temporary or permanent disability benefits
5-7 as a result of disease or accident;
5-8 (5) [(e)] Hospital, medical or nursing benefits due to
5-9 sickness or bodily infirmity or accident;
5-10 (6) [(f)] Monument or tombstone benefits to the memory
5-11 of deceased members [not exceeding in any case the sum of Three
5-12 Hundred Dollars ($300)];
5-13 (7) Funeral [(g) For the payment of funeral]
5-14 benefits; [,] and
5-15 (8) Any other benefit that may be provided by a life,
5-16 accident, or health insurance company, provided that the benefit
5-17 is:
5-18 (A) offered in compliance with Chapter 3 of this
5-19 code; and
5-20 (B) consistent with this chapter.
5-21 (b) A society shall:
5-22 (1) specify in its laws or rules those persons to whom
5-23 a certificate may be issued or who may be covered by benefits; and
5-24 (2) make the provision of those benefits consistent
5-25 with the provision of benefits to members and their beneficiaries.
5-26 (c) A society may appoint a legal reserve life insurance
5-27 agent licensed by the department under Chapter 213, Acts of the
6-1 54th Legislature, Regular Session, 1955 (Article 21.07-1, Vernon's
6-2 Texas Insurance Code), to sell benefits listed under Subsection (a)
6-3 of this article to society members.
6-4 [(2) Such benefits may be provided on the lives of
6-5 members or, upon application of a member, on the lives of the
6-6 member's family, including the member, the member's spouse and
6-7 minor children, in the same or separate certificates.]
6-8 SECTION 6. Article 10.07(a), Insurance Code, is amended to
6-9 read as follows:
6-10 (a) Fraternal benefit societies shall establish reserves for
6-11 the types of coverage specified in Articles 10.05(a)(4) and (5)
6-12 [Article 10.05(1)(d) and (e)] of this code in the same manner and
6-13 to the same extent as required for companies organized under
6-14 Chapter 3 of this code except:
6-15 (1) for certificates issued during the calendar year
6-16 1988, only one-third of the unearned premium reserve is required to
6-17 be maintained during the first policy year; and
6-18 (2) for certificates issued during the calendar year
6-19 1989, only two-thirds of the unearned premium reserve is required
6-20 to be maintained during the first policy year.
6-21 SECTION 7. Article 10.12, Insurance Code, is amended to read
6-22 as follows:
6-23 Art. 10.12. QUALIFICATIONS FOR MEMBERSHIP; GRIEVANCE
6-24 PROCEDURES. (a) A society shall specify in its laws or rules:
6-25 (1) the eligibility standards for each membership
6-26 class, provided that if benefits are provided on the lives of
6-27 children, the minimum age for adult membership is not less than 15
7-1 years of age and not more than 21 years of age;
7-2 (2) the process for admission for each membership
7-3 class; and
7-4 (3) the rights and privileges of each membership
7-5 class, provided that only benefit members may vote on the
7-6 management of the insurance affairs of the society.
7-7 (b) A society may admit social members. A social member may
7-8 not vote in the management of the insurance affairs of the society.
7-9 (c) Membership rights in the society are personal to the
7-10 member. A member may not assign membership rights.
7-11 (d) A society may provide in its laws or rules for grievance
7-12 or complaint procedures for members.
7-13 (e) [MEMBERS AND BENEFICIARIES. Any person may be admitted
7-14 to beneficial, or general, or social membership in any society in
7-15 such manner and upon such showing of eligibility as the laws of the
7-16 society may provide, and any beneficial member may direct any
7-17 benefit to be paid to such person or persons, entity, or interest
7-18 as may be permitted by the laws of the society; provided, that no
7-19 beneficiary shall have or obtain any vested interest in the said
7-20 benefit until the same has become due and payable in conformity
7-21 with the provisions of the contract of membership, and the member
7-22 shall have full right to change his beneficiary, or beneficiaries,
7-23 in accordance with the laws, rules, and regulations of the
7-24 society.]
7-25 Nothing contained in this chapter shall be construed to
7-26 affect or apply to societies which admit to membership only persons
7-27 engaged in one or more hazardous occupations, in the same or
8-1 similar lines of business.
8-2 SECTION 8. Chapter 10, Insurance Code, is amended by adding
8-3 Article 10.12-1 to read as follows:
8-4 Art. 10.12-1. BENEFICIARIES. (a) The owner of a benefit
8-5 contract may change the beneficiary at any time in accordance with
8-6 the laws or rules of the society unless the owner waives this right
8-7 by specifically requesting in writing that the beneficiary
8-8 designation be irrevocable. A society may, through its laws or
8-9 rules, limit the scope of beneficiary designations and shall
8-10 provide that a person whose designation as beneficiary is revocable
8-11 may not have or obtain a vested interest in the proceeds, in
8-12 conformity with the benefit contract.
8-13 (b) If, at the death of the deceased insured, a lawful
8-14 beneficiary to whom the proceeds of the benefit contract are
8-15 payable does not exist under the benefit contract, the amount of a
8-16 benefit under a benefit contract shall be paid:
8-17 (1) to the personal representative of the deceased
8-18 insured; or
8-19 (2) if the owner of the certificate is a person other
8-20 than the deceased insured, to the owner of the certificate.
8-21 (c) Subsection (b) of this article does not apply to the
8-22 extent funeral benefits may be paid under the benefit contract.
8-23 SECTION 9. Article 10.15, Insurance Code, is amended to read
8-24 as follows:
8-25 Art. 10.15. CERTIFICATE. (a) Every certificate issued by
8-26 any such society shall specify the amount of benefit provided
8-27 thereby, and shall provide that the certificate, the charter or
9-1 articles of incorporation, or, if a voluntary association, the
9-2 articles of association, the constitution and laws of the society,
9-3 and the application for membership and medical examination, signed
9-4 by the applicant, and all amendments to each thereof, shall
9-5 constitute the agreement between the society and the member, and
9-6 copies of the same, certified by the secretary of the society, or
9-7 corresponding officer, shall be received in evidence of the terms
9-8 and conditions thereof. Any changes, additions or amendments to
9-9 said charter or articles of incorporation, or articles of
9-10 association, or constitution or laws duly made or enacted
9-11 subsequent to the issuance of the benefit certificates shall bind
9-12 the member and the member's [his] beneficiaries, and shall govern
9-13 and control the agreement in all respects the same as though such
9-14 changes, additions or amendments had been made prior to and were in
9-15 force at the time of the application for membership.
9-16 (b) A certificate may not be delivered or issued for
9-17 delivery in this state unless the form of the certificate has been
9-18 filed with the department under Article 3.42 of this code. A life,
9-19 accident, health, or disability insurance certificate or annuity
9-20 certificate issued by a society must meet the requirements
9-21 applicable to similar policies issued by an insurer in this state
9-22 that are not inconsistent with this chapter as determined by rule
9-23 of the commissioner.
9-24 (c) A society may include in the terms of a certificate a
9-25 grace period of one month for payment of premiums.
9-26 (d) Each certificate must state the amount of premiums that
9-27 are payable under the certificate and state or summarize the
10-1 society's laws or rules in force at the time of issuance of the
10-2 certificate that, if violated, will result in the termination or
10-3 reduction of benefits payable under the certificate.
10-4 (e) If the laws of the society provide for expulsion or
10-5 suspension of a member, the certificate must provide that a member
10-6 who is expelled or suspended may maintain the certificate in force
10-7 by continuing payment of the required premium, unless the expulsion
10-8 or suspension:
10-9 (1) is for nonpayment of a premium; or
10-10 (2) occurs within the contestable period of the
10-11 benefit contract and is for material misrepresentation in the
10-12 application for membership or insurance.
10-13 (f) A benefit contract issued on the life of a person who is
10-14 younger than the society's minimum age for adult membership may
10-15 provide for transfer of control or ownership to the insured at an
10-16 age specified in the certificate. A society may require approval
10-17 of an application for membership in order to effect the transfer
10-18 and may provide in all other respects for the regulation,
10-19 government, and control of certificates and rights, obligations,
10-20 and liabilities incident and connected to the certificate.
10-21 Ownership rights under the certificate before a transfer must be
10-22 specified in the certificate.
10-23 (g) A society may specify the terms and conditions for the
10-24 assignment of a benefit contract.
10-25 SECTION 10. Article 10.18, Insurance Code, is amended by
10-26 adding Subsection (c) to read as follows:
10-27 (c) A society may, pursuant to a resolution of its supreme
11-1 governing body, establish and operate one or more separate accounts
11-2 and issue benefit contracts on a variable basis, subject to the
11-3 provisions of law regulating a life insurance company that
11-4 establishes those types of accounts and issues those types of
11-5 contracts. In order to comply with applicable federal or state
11-6 laws or rules, the society may:
11-7 (1) issue contracts on a variable basis to which
11-8 Articles 10.15 and 10.30(e) of this chapter do not apply; and
11-9 (2) adopt special procedures for the conduct of the
11-10 business and affairs of a separate account and provide special
11-11 voting and other rights for a person having beneficial interests in
11-12 a separate account, including special procedures and rights
11-13 relating to:
11-14 (A) investment policy;
11-15 (B) investment advisory services;
11-16 (C) selection of certified public accountants;
11-17 and
11-18 (D) selection of a committee to manage the
11-19 business and affairs of the account.
11-20 SECTION 11. Article 10.19, Insurance Code, is amended to
11-21 read as follows:
11-22 Art. 10.19. QUALIFICATION. (a) Hereafter, only such
11-23 corporation, society, order of voluntary association, having not
11-24 less than five hundred (500) members and ten (10) subordinate
11-25 lodges, without capital stock organized and carried on solely for
11-26 the mutual benefit of its members, and not for profit, and having a
11-27 lodge system and representative form of government, or which limits
12-1 its membership to a secret fraternity having a lodge system and
12-2 representative form of government, may, provided that it has been
12-3 in continuous operation for a period of not less than five (5)
12-4 years immediately preceding the filing of its articles of
12-5 incorporation or association as hereinafter provided, qualify as a
12-6 Fraternal Benefit Society as defined in Article 10.01 for the
12-7 purpose of providing for the payment of benefits as provided in
12-8 Article 10.05, by filing with the department [Board] duly certified
12-9 articles of incorporation or association. Such articles shall set
12-10 out:
12-11 (1) [1.] The name of the society, which shall not so
12-12 closely resemble the name of any society or insurance company
12-13 already transacting business in this state as to mislead the public
12-14 or lead to confusion.
12-15 (2) [2.] The purpose for which it is formed, which
12-16 shall not include more liberal powers than are granted by this
12-17 Chapter. Any lawful, social, intellectual, educational,
12-18 charitable, benevolent, moral, fraternal, patriotic, or religious
12-19 advantages may be set forth among the purposes of the society, and
12-20 the mode in which its corporate powers are to be exercised. These
12-21 purposes may be carried out directly by the society or indirectly
12-22 through subsidiary corporations or affiliated organizations.
12-23 (b) Such articles of incorporation or association and duly
12-24 certified copies of the Constitution and laws, rules and
12-25 regulations, and copies of all proposed forms of benefit
12-26 certificates, applications therefor and circulars to be issued by
12-27 such society, and a bond in the sum of not less than Three Hundred
13-1 Thousand Dollars ($300,000.00) and not more than One Million Five
13-2 Hundred Thousand Dollars ($1,500,000.00), as required by the
13-3 commissioner [Five Thousand Dollars ($5,000.00)], with sureties
13-4 approved by the commissioner [State Board of Insurance],
13-5 conditioned upon the return of the advance payments, as provided in
13-6 this article, to applicants, if the organization fails to qualify
13-7 within one (1) year, shall be filed with the commissioner, [such
13-8 Board] who may require such further information as the commissioner
13-9 [it] deems necessary, and if the purposes of the society conform to
13-10 the requirements of this law, and all provisions of law have been
13-11 complied with, the commissioner [said Board] shall so certify and
13-12 retain and record or file the articles of incorporation or
13-13 association and furnish the incorporators a preliminary certificate
13-14 authorizing said society to solicit from its members applications
13-15 for insurance benefits as hereinafter provided.
13-16 (c) Upon receipt of said certificate from the department
13-17 [State Board of Insurance], said society may solicit from its
13-18 members applications for insurance benefits for the purpose of
13-19 completing its qualification and shall collect from each applicant
13-20 the amount of not less than one (1) regular monthly payment, in
13-21 accordance with its table of rates as provided by its constitution
13-22 and laws, and shall issue to each such applicant a receipt for the
13-23 amount so collected. No such society shall incur any liability
13-24 other than for such advanced payments, nor issue any benefit
13-25 certificate nor pay or allow, or offer or promise to pay or allow,
13-26 to any person any death or disability benefit until actual bona
13-27 fide applications for death benefit certificates have been secured
14-1 upon at least five hundred (500) lives for at least Two [One]
14-2 Thousand Dollars ($2,000.00) [($1,000.00)] each, and all such
14-3 applicants for death benefits shall have been regularly examined by
14-4 legally qualified practicing physicians, and certificates of such
14-5 examination have been duly filed and approved by the chief medical
14-6 examiner of such society; nor until there shall be established ten
14-7 (10) subordinate lodges or branches into which said five hundred
14-8 (500) applicants have been initiated; nor until there has been
14-9 submitted to the department [said Board], under oath of the
14-10 president and secretary or corresponding officers of such society,
14-11 a list of such applicants, giving their names, addresses, date
14-12 examined, date approved, date initiated, name and number of the
14-13 subordinate branch of which each applicant is a member, amount of
14-14 benefits to be granted, rate of stated periodical contributions,
14-15 which shall be sufficient to provide for meeting the mortuary
14-16 obligation contracted, when valued for death benefits upon the
14-17 basis of the National Fraternal Congress Table of Mortality, as
14-18 adopted by the National Fraternal Congress, August 23, 1899, or any
14-19 higher standard, at the option of the society, and for disability
14-20 benefits by tables based upon reliable experience and for combined
14-21 death and permanent total disability benefits by tables based upon
14-22 reliable experience, with an interest assumption not higher than
14-23 four per cent (4%) per annum; nor until it shall be shown to the
14-24 department [Board] by the sworn statement of the treasurer or
14-25 corresponding officer of such society, that at least five hundred
14-26 (500) applicants have each paid in cash at least one (1) regular
14-27 monthly payment as herein provided per One Thousand Dollars
15-1 ($1,000.00) of indemnity to be effected, which payments in the
15-2 aggregate shall amount to at least One Hundred Fifty Thousand
15-3 Dollars ($150,000.00) [Twenty-Five Hundred Dollars ($2,500.00)];
15-4 all of which shall be credited to the mortuary or disability fund
15-5 on account of such applicants and no part of which may be used for
15-6 expenses.
15-7 (d) Said advanced payments shall, during the period of
15-8 completing qualification, be held in trust, and if such
15-9 qualification is not completed within one (1) year as hereinafter
15-10 provided, returned to said applicants.
15-11 (e) The department [Board] may make such examination and
15-12 require such further information as it deems advisable; and upon
15-13 presentation of satisfactory evidence that the society has complied
15-14 with all the provisions of law, the department [Board] shall issue
15-15 to such society a certificate to that effect. Such certificate
15-16 shall be prima facie evidence of the qualification of such society
15-17 at the date of such certificate. The department [Board] shall
15-18 cause a record of such certificate to be made and a certified copy
15-19 of such record may be given in evidence with like effect as the
15-20 original certificate.
15-21 (f) Unless the five hundred (500) applicants herein required
15-22 have been secured and the organization has qualified as a fraternal
15-23 benefit society as herein provided, the preliminary certificate
15-24 granted under the provisions of this article shall be null and void
15-25 after one (1) year from its date, or after such further period, not
15-26 exceeding one (1) year, as may be authorized by the department
15-27 [State Board of Insurance] upon cause shown.
16-1 (g) Provided, however, that this Article shall not apply to
16-2 societies specifically exempted from the provisions of Chapter 10
16-3 of the Insurance Code and provided further, that the above
16-4 provisions of this article shall not apply to Fraternal Benefit
16-5 Societies authorized to transact business in this state on June 1,
16-6 1965, so long as their licenses or renewals or extensions thereof
16-7 continue in force. The following provisions of this article shall
16-8 apply to such Fraternal Benefit Societies authorized to transact
16-9 business in this state on June 1, 1965.
16-10 (h) When any domestic society shall have discontinued
16-11 business for the period of one (1) year, or has less than four
16-12 hundred (400) members holding benefit certificates, its permanent
16-13 certificate shall become null and void. Every such society shall
16-14 have the power to make a constitution and bylaws for the government
16-15 of the society, the admission of its members, the management of its
16-16 affairs and the fixing and readjusting of the rates of contribution
16-17 of its members from time to time; and it shall have the power to
16-18 change, alter, add to, or amend such constitution and bylaws and
16-19 shall have such other powers as are necessary and incidental to
16-20 carrying into effect its object and purposes.
16-21 SECTION 12. Article 10.26, Insurance Code, is amended to
16-22 read as follows:
16-23 Art. 10.26. NO PERSONAL LIABILITY; INDEMNIFICATION OR
16-24 REIMBURSEMENT. (a) Officers and members of the supreme, grand or
16-25 any subordinate body of an [any such] incorporated society are
16-26 [shall] not [be] individually liable for the payment of any
16-27 disability or death benefit provided for in the laws and agreements
17-1 of the [such] society. Those payments are [The same shall be]
17-2 payable only out of the funds of the [such] society and in the
17-3 manner provided by its law.
17-4 (b) A society may indemnify and reimburse a person for
17-5 expenses reasonably incurred by, and liabilities imposed on, that
17-6 person in connection with or arising out of an action, suit, or
17-7 other proceeding, whether civil, criminal, administrative, or
17-8 investigative, in which the person is involved, or in connection
17-9 with or arising out of a threat of a proceeding against that
17-10 person, because that person is or was a director, officer,
17-11 employee, or agent of:
17-12 (1) the society; or
17-13 (2) a firm, corporation, or organization with which
17-14 the person served in any capacity at the request of the society.
17-15 (c) Except as provided by Subsection (d) of this article, a
17-16 person may not be indemnified or reimbursed in relation to:
17-17 (1) a matter in an action, suit, or other proceeding
17-18 in which the person is finally adjudged guilty of breach of a duty
17-19 as a director, officer, employee, or agent of the society; or
17-20 (2) an agreement that settles:
17-21 (A) a matter in an action, suit, or other
17-22 proceeding described by Subdivision (1) of this subsection; or
17-23 (B) the threat of the proceeding.
17-24 (d) A society may indemnify or reimburse a person in
17-25 relation to a matter described by Subsection (c) of this article
17-26 only if the supreme governing body, the board of directors, or a
17-27 court of competent jurisdiction determines that:
18-1 (1) the person acted in good faith for a purpose the
18-2 person reasonably believed to be in or not opposed to the best
18-3 interests of the society; and
18-4 (2) in a criminal action or proceeding, the person had
18-5 no reasonable cause to believe that the person's conduct was
18-6 unlawful.
18-7 (e) A determination by a supreme governing body or board of
18-8 directors under Subsection (d) of this article must be made by
18-9 majority vote of a quorum consisting of persons who were not
18-10 parties to the action, suit, or other proceeding under review.
18-11 (f) The termination of an action or other proceeding by
18-12 judgment, order, settlement, or conviction or on a plea of no
18-13 contest does not create a conclusive presumption that a person does
18-14 not meet the standard of conduct required in order to justify
18-15 indemnification and reimbursement.
18-16 (g) The right of indemnification and reimbursement under
18-17 this article is not exclusive of other rights to which a person may
18-18 be entitled as a matter of law and inures to the benefit of the
18-19 person's devisees, legatees, heirs, and estate.
18-20 (h) A society may purchase and maintain insurance on behalf
18-21 of a person who is or was a director, officer, employee, or agent
18-22 of the society or who is or was serving at the request of the
18-23 society as a director, officer, employee, or agent of another firm,
18-24 corporation, or organization against a liability asserted against
18-25 that person or incurred by that person in any capacity or arising
18-26 out of that person's status as a director, officer, employee, or
18-27 agent of the society or the other firm, corporation, or
19-1 organization. A society may purchase and maintain insurance under
19-2 this subsection regardless of whether the society has the power to
19-3 indemnify or reimburse the person with respect to the covered
19-4 liability under this article.
19-5 (i) A director, officer, employee, member, or volunteer of a
19-6 society serving without compensation is not personally liable for
19-7 damages resulting from an act or omission in the exercise of
19-8 judgment or discretion in connection with the duties of that person
19-9 for the society unless the act or omission involved wilful or
19-10 wanton misconduct. This subsection does not limit a society's
19-11 direct or indirect liability.
19-12 SECTION 13. Article 10.30, Insurance Code, is amended to
19-13 read as follows:
19-14 Art. 10.30. ANNUAL REPORTS. (a) Every society transacting
19-15 business in this State shall annually, on or before the first day
19-16 of March, file with the department [State Board of Insurance] in
19-17 such form as the commissioner [Board] may require, a statement
19-18 under oath of its president and secretary or corresponding
19-19 officers, of its condition and standing on the thirty-first day of
19-20 December next preceding, and its transactions for the year ending
19-21 on that date, and shall furnish such other information as the
19-22 commissioner [said Board] may deem necessary to a proper exhibit of
19-23 its business and plan of working. The commissioner [Board] may at
19-24 other times require any further statement it may deem necessary to
19-25 be made relating to such society.
19-26 (b) Each society shall include in its annual report to the
19-27 department [said Board] a valuation of its certificates in force on
20-1 December 31st last preceding. Such report of valuation shall show
20-2 as contingent liabilities the present mid-year value of the
20-3 promised benefits provided in the constitution and laws of such
20-4 society, under the certificates subject to valuation; and as
20-5 contingent assets the present mid-year value of the future net
20-6 contributions provided in the Constitution and laws as the same are
20-7 in practice actually collected. At the option of any society, in
20-8 lieu of the above, the valuation may show the net value of the
20-9 certificates subject to valuation hereinbefore provided, and said
20-10 net value, when computed in case of monthly contributions, may be
20-11 the mean of the terminal values for the end of the preceding and of
20-12 the current insurance years. Such valuation including valuation of
20-13 certificates shall be certified by an actuary, or, at the request
20-14 and expense of the society, verified by the actuary of the
20-15 Department of Insurance of the home State of the society. The
20-16 legal minimum standard of valuation for all certificates, except
20-17 for accident and health benefits, shall be the National Fraternal
20-18 Congress Table of Mortality as adopted by the National Congress,
20-19 August 23, 1899; or, at the option of the society, any table
20-20 producing reserves in the aggregate at least as great as the
20-21 National Fraternal Congress Table of Mortality as adopted by the
20-22 National Fraternal Congress, August 23, 1899; at the option of the
20-23 society, the Commissioners 1941 Standard Ordinary Mortality Table;
20-24 or at the option of the society, the Commissioners 1958 Standard
20-25 Ordinary Mortality Table, except that for any category of such
20-26 certificates issued on female risks, all modified net premiums and
20-27 present values referred to in Article 3.28 of this code may be
21-1 calculated according to an age not more than six (6) years younger
21-2 than the actual age of the insured. The interest assumption to be
21-3 used with any of the preceding mortality tables may not be more
21-4 than four and one-half (4 1/2%) per centum per annum. As an
21-5 alternative, the society may use a table based upon the society's
21-6 own experience of at least twenty (20) years, and covering not less
21-7 than one hundred thousand (100,000) lives with interest assumption
21-8 not more than four (4%) per centum per annum, provided, however,
21-9 that any society may value its certificates in accordance with
21-10 valuation standards otherwise authorized by the laws of this state
21-11 for the valuation of similar policies issued by life insurance
21-12 companies provided that no society may use a table based on its own
21-13 experience for certificates issued on or after January 1, 1989.
21-14 Each such valuation report shall set forth clearly and fully the
21-15 mortality and interest bases and the method of valuation. The
21-16 annual report required by this article shall also include a
21-17 valuation of certificates in accordance with Article 10.07 of this
21-18 code.
21-19 (c) Any society providing for disability benefits shall keep
21-20 the net contributions for such benefits in a fund separate and
21-21 apart from all other benefit and expense funds and the valuation of
21-22 all other business of the society; provided, that where a combined
21-23 contribution table is used by a society for both death and
21-24 permanent total disability benefits, the valuation shall be
21-25 according to tables of reliable experiences, and in such cases a
21-26 separation of the funds shall not be required.
21-27 (d) The annual report herein provided for may be used by the
22-1 department [State Board of Insurance] or the State of Texas in
22-2 determining the financial solvency of the society. A statement of
22-3 the valuation provided by this article and an explanation of the
22-4 facts concerning the condition of the society thereby disclosed
22-5 shall be printed and mailed to each beneficiary [member] of the
22-6 society not later than June 1st of each year; or in lieu thereof,
22-7 such statement of valuation and showing of the society's condition
22-8 as thereby disclosed may be published in the society's official
22-9 paper and the issue containing the same mailed to each beneficiary
22-10 [member] of the society.
22-11 (e) The laws of such society shall provide that if the
22-12 stated periodical contributions of the members are insufficient to
22-13 pay all matured death and disability claims in full, and to provide
22-14 for the creation and maintenance of the funds required by its laws
22-15 additional, increased or extra rates of contributions shall be
22-16 collected from the members to meet such deficiency; and such laws
22-17 may provide that, upon the written application or consent of the
22-18 member, the [his] certificate may be charged with its proportion of
22-19 any deficiency disclosed by valuation, with interest not exceeding
22-20 the rate specified for certificate loans under the certificate
22-21 [five (5%) per centum per annum]. The existence of the right to
22-22 assess members as provided by this article does not affect the test
22-23 for financial solvency of the society. If the owner of a
22-24 certificate is not a member, the assessment shall be levied against
22-25 the owner.
22-26 (f) This chapter may not be construed to prevent or in any
22-27 way limit any action by or remedy available to the department
23-1 [State Board of Insurance] or the State of Texas under Article
23-2 21.28 or 21.28-A of this code or other applicable law.
23-3 SECTION 14. Chapter 10, Insurance Code, is amended by adding
23-4 Article 10.31 to read as follows:
23-5 Art. 10.31. NONFORFEITURE BENEFITS, CASH SURRENDER VALUES,
23-6 CERTIFICATE LOANS, AND OTHER OPTIONS. (a) For a certificate
23-7 issued before January 1, 2001, the value of the paid-up
23-8 nonforfeiture benefit and the amount of a cash surrender value,
23-9 loan, or other option granted under the certificate must comply
23-10 with the law applicable to the certificate immediately before that
23-11 date.
23-12 (b) For a certificate issued on or after January 1, 2001,
23-13 the value of the paid-up nonforfeiture benefit and the amount of a
23-14 cash surrender value, loan, or other option granted under the
23-15 certificate is computed as provided under the provisions of
23-16 Articles 3.44a and 3.44b of this code applicable to life insurance
23-17 companies issuing policies containing similar benefits and under
23-18 the applicable tables established under those articles.
23-19 SECTION 15. Articles 10.05-1 and 10.05-2, Insurance Code,
23-20 are repealed.
23-21 SECTION 16. (a) This Act takes effect January 1, 2000,
23-22 except that Section 15 of this Act takes effect January 1, 2001.
23-23 (b) The change made by this Act to Article 10.15, Insurance
23-24 Code, applies only to a certificate that is delivered, issued for
23-25 delivery, or renewed on or after January 1, 2001. A certificate
23-26 that is delivered, issued for delivery, or renewed before January
23-27 1, 2001, is governed by the law as it existed immediately before
24-1 the effective date of this Act, and that law is continued in effect
24-2 for that purpose.
24-3 SECTION 17. The importance of this legislation and the
24-4 crowded condition of the calendars in both houses create an
24-5 emergency and an imperative public necessity that the
24-6 constitutional rule requiring bills to be read on three several
24-7 days in each house be suspended, and this rule is hereby suspended.