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.