77R12106 E
By Brimer H.B. No. 3458
Substitute the following for H.B. No. 3458:
By Brimer C.S.H.B. No. 3458
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the operation of the Texas Workers' Compensation
1-3 Insurance Fund as a domestic mutual insurance company and to the
1-4 continuation of that entity as the Texas Mutual Insurance Company.
1-5 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-6 ARTICLE 1. OPERATION OF FUND AS MUTUAL INSURANCE COMPANY
1-7 SECTION 1.01. Article 5.76-3, Insurance Code, is amended to
1-8 read as follows:
1-9 Art. 5.76-3. TEXAS MUTUAL [WORKERS' COMPENSATION] INSURANCE
1-10 COMPANY [FUND].
1-11 Sec. 1. DEFINITIONS. In this article:
1-12 (1) "Board" means the board of directors of the
1-13 company [fund].
1-14 (2) "Commission" means the Texas Workers' Compensation
1-15 Commission.
1-16 (3) "Company" means the Texas Mutual Insurance
1-17 Company.
1-18 (4) "Fund" means the Texas Workers' Compensation
1-19 Insurance Fund.
1-20 (5) [(4)] "Workers' compensation insurance" means the
1-21 insurance for any risk under:
1-22 (A) Subtitle A, Title 5, Labor Code (the Texas
1-23 Workers' Compensation Act);
1-24 (B) the Longshore and Harbor Workers'
2-1 Compensation Act (33 U.S.C. Section 901);
2-2 (C) the Federal Mine Safety and Health Act of
2-3 1977 (33 U.S.C. Section 801 et seq.); [or]
2-4 (D) the Defense Base Act (42 U.S.C. Sections
2-5 1651-1654);
2-6 (E) the federal Employers' Liability Act (45
2-7 U.S.C. Section 51 et seq.);
2-8 (F) the Nonappropriated Fund Instrumentalities
2-9 Act (5 U.S.C. Sections 8171-8173);
2-10 (G) the Outer Continental Shelf Lands Act (43
2-11 U.S.C. Section 1331 et seq.);
2-12 (H) the Merchant Marine Act of 1920 (46 U.S.C.
2-13 Section 861 et seq.); or
2-14 (I) Chapter 504, Labor Code.
2-15 Sec. 2. CREATION; OPERATION. (a) Effective September 1,
2-16 2001, the [The] Texas Workers' Compensation Insurance Fund shall
2-17 operate as, and exercise the powers of, a domestic mutual insurance
2-18 company in accordance with Chapter 15 of this code, and shall be
2-19 called the Texas Mutual Insurance Company. A reference in the laws
2-20 of this state to the Texas Workers' Compensation Insurance Fund
2-21 means the Texas Mutual Insurance Company. The commissioner shall
2-22 issue a certificate of authority to the company as provided by
2-23 Chapter 15 of this code to write workers' compensation insurance,
2-24 not later than September 1, 2001 [is created as a corporate body
2-25 with the powers provided by this subchapter and with all general
2-26 corporate powers incident to its operation as a corporate body].
2-27 (b) All of the provisions of Chapter 15 of this code apply
3-1 to the company, except that in the event of a conflict between this
3-2 article and Chapter 15 of this code, this article controls.
3-3 (c) The company [fund] shall:
3-4 (1) serve as a competitive force in the marketplace;
3-5 (2) guarantee the availability of workers'
3-6 compensation insurance in this state; and
3-7 (3) serve as an insurer of last resort as provided
3-8 under Article 5.76-4 of this code.
3-9 (d) [(b)] Except as otherwise provided by this subsection,
3-10 the company [fund] is subject to the open meetings law, Chapter
3-11 551, Government Code, and the open records law, Chapter 552,
3-12 Government Code. The board may hold closed meetings to consider and
3-13 refuse to release information relating to claims, rates, the
3-14 company's [fund's] underwriting guidelines, and other information
3-15 that would give advantage to competitors or bidders.
3-16 (e) [(c)] A decision by the company [fund] to deny, cancel,
3-17 or refuse to renew a policy or risk insured under Article 5.76-4 of
3-18 this code is appealable to the board not later than the 30th day
3-19 after the date on which the affected party received actual notice
3-20 that the act occurred or that the decision was made. The company
3-21 [board] shall hear the appeal not later than the 30th day after the
3-22 date on which the request for hearing is made and shall notify the
3-23 [fund and the] appellant in writing of the time and place of the
3-24 hearing not later than the 10th day before the date of the hearing.
3-25 Not later than the 30th day after the last day of the hearing, the
3-26 board shall affirm, reverse, or modify the act appealed to the
3-27 board. A hearing under this subsection does not suspend the
4-1 operation of any act, ruling, decision, or order of the company
4-2 [fund], unless the board specifically so orders.
4-3 (f) [(d)] A decision of the board under this section is
4-4 subject to review by the commissioner [of insurance] in the manner
4-5 provided by the administrative procedure law, Chapter 2001,
4-6 Government Code. The commissioner's review of a decision by the
4-7 board does not suspend the operation of any act, ruling, decision,
4-8 or order of the company [fund] unless the commissioner specifically
4-9 so orders on a showing by an aggrieved party of:
4-10 (1) immediate, irreparable injury, loss, or damage;
4-11 and
4-12 (2) probable success on the merits.
4-13 (g) [(e)] A person aggrieved by the decision of the
4-14 commissioner may appeal that decision to the district court.
4-15 Judicial review under this section is governed by the substantial
4-16 evidence rule.
4-17 (h) [(f) The fund is subject to Chapter 325, Government Code
4-18 (Texas Sunset Act). Unless continued in effect as provided by that
4-19 chapter, the fund is abolished September 1, 2007.]
4-20 [(g)] In addition to other rights of the company [fund]
4-21 under this article, the company [fund] has the legal rights of a
4-22 mutual insurance company operating under Chapter 15 of this code,
4-23 and of a private person in this state, and has the power to sue in
4-24 its own name. No procedure established under this article is a
4-25 prerequisite to the exercise of the power by the company [fund] to
4-26 sue.
4-27 (i) [(h)] The company [fund] shall prepare annually a
5-1 complete and detailed written report accounting for all funds
5-2 received and disbursed by the company [fund] during the preceding
5-3 fiscal year.
5-4 (j) The company may not be dissolved except by action of the
5-5 legislature. [The annual report must meet the reporting
5-6 requirements applicable to financial reporting provided by the
5-7 General Appropriations Act.]
5-8 Sec. 3. BOARD OF DIRECTORS. (a) The company [fund] is
5-9 governed by a board of directors composed of nine members, all of
5-10 whom shall be citizens of this state. Five [The] members shall be
5-11 appointed by the governor with the advice and consent of the
5-12 senate. The remaining members shall be elected by the company's
5-13 policyholders[, and vacancies shall be filled in the same manner].
5-14 (b) The members of the board of directors serve staggered
5-15 six-year terms, with the terms of three members expiring July
5-16 [February] 1 of each odd-numbered year. A member of the board
5-17 whose term has expired shall continue to serve until the member's
5-18 replacement is elected by the policyholders or appointed by the
5-19 governor, as applicable.
5-20 (c) The governor shall fill a vacancy in the appointed
5-21 directors by appointment with the advice and consent of the senate.
5-22 A vacancy in the elected directors shall be filled as provided by
5-23 the company's bylaws. If a vacancy occurs before the date on which
5-24 the vacating member's term is set to expire, the successor member
5-25 shall be elected or appointed for a term to expire on the same date
5-26 as the vacating member's term. [In making appointments to the
5-27 board, the governor shall attempt to reflect the social,
6-1 geographic, and economic diversity of the state. To ensure
6-2 balanced representation, the governor may consider the geographic
6-3 location of a prospective appointee's domicile and the prospective
6-4 appointee's experience in business and insurance matters and shall
6-5 consider those factors in appointing members to fill vacancies on
6-6 the board. Appointments to the board shall be made without regard
6-7 to the race, color, disability, sex, religion, age, or national
6-8 origin of the appointees.]
6-9 (d) A person may not serve as a member of the board if the
6-10 person, an individual related to the person within the second
6-11 degree by consanguinity or affinity, or an individual residing in
6-12 the same household with the person:
6-13 (1) is registered or licensed under this code or is
6-14 required to be registered or licensed under this code;
6-15 (2) is employed by or acts as a consultant to a person
6-16 registered or licensed under this code or required to be registered
6-17 or licensed under this code;
6-18 (3) owns, controls, has a financial interest in, or
6-19 participates in the management of an organization registered or
6-20 licensed under this code or required to be registered or licensed
6-21 under this code;
6-22 (4) receives a substantial tangible benefit from the
6-23 company [fund] or the Texas Department of Insurance; or
6-24 (5) is an officer, employee, or consultant of an
6-25 association in the field of insurance.
6-26 (e) It is a ground for removal from the board if a member:
6-27 (1) does not have at the time of appointment the
7-1 qualifications required by this section;
7-2 (2) does not maintain during service on the board the
7-3 qualifications required by this section;
7-4 (3) cannot because of illness or disability discharge
7-5 the member's duties for a substantial part of the term for which
7-6 the member is appointed; or
7-7 (4) is absent from more than half of the regularly
7-8 scheduled board meetings that the member is eligible to attend
7-9 during a calendar year.
7-10 (f) The validity of an action of the board is not affected
7-11 by the fact that it is taken when a ground for removal of a board
7-12 member exists.
7-13 (g) If the president has knowledge that a potential ground
7-14 for removal exists, the president shall notify the chairman of the
7-15 board of the potential ground. If the potential ground for removal
7-16 involves an appointed board member, the [The] chairman shall then
7-17 notify the governor and the attorney general that a potential
7-18 ground for removal exists. If the potential ground for removal
7-19 involves the chairman, the president shall notify the next highest
7-20 officer of the board, who shall notify the governor and the
7-21 attorney general that a potential ground for removal exists if the
7-22 chair is an appointed board member. If the potential ground for
7-23 removal involves a board member elected by the policyholders, the
7-24 board shall act on the potential ground for removal as provided by
7-25 the company's bylaws.
7-26 (h) Subsection (d) of this section does not prohibit a
7-27 person who is only a policyholder or a consumer of insurance or
8-1 insurance products from serving as a member of the board.
8-2 (i) A person who is ineligible to serve on the board under
8-3 Subsection (d) of this section may not serve as a member of the
8-4 board for one year after the date on which the condition that makes
8-5 the person ineligible ends.
8-6 (j) Each member shall receive fees for service on the board
8-7 commensurate with industry standards and actual and necessary
8-8 travel expenses and expenses incurred in the performance of the
8-9 member's duties as a member.
8-10 (k) The governor shall designate a member of the board as
8-11 the chairman of the board to serve in that capacity at the pleasure
8-12 of the governor. The members of the board shall elect annually any
8-13 other officers the board considers necessary for the performance of
8-14 its duties. The board may create committees and subcommittees
8-15 [from their number a vice-chairman and a secretary].
8-16 (l) The board shall hold meetings at least once each
8-17 calendar quarter and at other times at the call of the chairman and
8-18 at times established in the company's bylaws [by board rule].
8-19 Special meetings may be called by any two members of the board on
8-20 two days notice.
8-21 (m) Five [A majority of the] board members constitutes a
8-22 quorum.
8-23 (n) The board shall maintain the principal office of the
8-24 company [fund] in Travis County [Austin], Texas.
8-25 [(o) For cost control purposes and as is determined to be
8-26 cost-effective, as many functions as possible shall be performed by
8-27 the fund.]
9-1 [(p) A person may not serve as a member of the board or act
9-2 as the general counsel to the board or the fund if the person is
9-3 required to register as a lobbyist under Chapter 305, Government
9-4 Code, because of the person's activities for compensation on behalf
9-5 of any person or entity other than the fund.]
9-6 [(q) The board shall develop and implement policies that
9-7 clearly separate the policymaking responsibilities of the board and
9-8 the management responsibilities of the president and the staff of
9-9 the fund.]
9-10 [Sec. 3A. TRAINING PROGRAM FOR BOARD MEMBER. (a) Before a
9-11 member of the board may assume the member's duties, the member must
9-12 complete the training program established under this section.]
9-13 [(b) A training program established under this section shall
9-14 provide information to the member regarding:]
9-15 [(1) the enabling legislation that created the fund
9-16 and the board;]
9-17 [(2) the programs operated by the fund;]
9-18 [(3) the role and functions of the fund;]
9-19 [(4) the current budget for the fund;]
9-20 [(5) the results of the most recent independent audit
9-21 of the fund;]
9-22 [(6) the requirements of:]
9-23 [(A) the open meetings law, Chapter 551,
9-24 Government Code; and]
9-25 [(B) the open records law, Chapter 552,
9-26 Government Code;]
9-27 [(7) the requirements of the conflict of interest laws
10-1 and other laws relating to members of the board; and]
10-2 [(8) any applicable ethics policies adopted by the
10-3 fund or the Texas Ethics Commission.]
10-4 Sec. 4. POWERS AND DUTIES OF BOARD OF DIRECTORS [AUTHORITY
10-5 AND PURPOSE]. (a) The [According to this article and the plan of
10-6 operation, the] board has full power, authority, and jurisdiction
10-7 over the company. The board may perform all acts necessary or
10-8 convenient in the administration of the company or in connection
10-9 with the insurance business to be carried on by the company. In
10-10 this regard, the board is empowered to function in all aspects as a
10-11 governing body of a domestic mutual insurance company. The board
10-12 shall[, on behalf of the fund]:
10-13 (1) provide for the [acceptance of applications and
10-14 delivery or issuance for] delivery in this state of workers'
10-15 compensation insurance and for the transaction of workers'
10-16 compensation insurance business to the same extent as any other
10-17 insurance carrier transacting workers' compensation insurance
10-18 business in this state;
10-19 (2) [enter into and approve contracts;]
10-20 [(3)] propose rates for workers' compensation
10-21 insurance issued by the company [fund];
10-22 [(4) appoint and supervise the activities of the
10-23 president of the fund and other officers and employees;]
10-24 [(5) adopt necessary bylaws and rules for the
10-25 operation of the fund;]
10-26 [(6) delegate specific responsibilities to the
10-27 president of the fund;]
11-1 [(7) develop a general plan of operation, in
11-2 accordance with Section 5 of this article, to assure the orderly
11-3 management and operation of the fund;] and
11-4 (3) [(8)] exercise any other authority necessary to
11-5 conduct a workers' compensation insurance business [for the fund].
11-6 (b) The company [fund] may not have affiliates, interlocking
11-7 boards of directors, spinoffs, or subsidiaries that write lines of
11-8 insurance other than workers' compensation insurance.
11-9 (c) The board shall appoint an internal auditor [in
11-10 compliance with Chapter 2102, Government Code]. The internal
11-11 auditor serves at the pleasure of the board.
11-12 (d) The board shall appoint a president who shall serve at
11-13 the pleasure of the board. The president must have proven
11-14 successful experience as an executive at the general management
11-15 level in the business of insurance. The president shall receive
11-16 compensation as set by the board. [If the fund obtains legal
11-17 services through the use of outside counsel, the attorney general
11-18 shall annually review the use of outside counsel by the fund to
11-19 ensure that:]
11-20 [(1) the use of outside counsel does not result in a
11-21 conflict of interest; and]
11-22 [(2) the persons used as outside counsel comply with
11-23 state and federal policies regarding the treatment of persons who
11-24 are members of minority groups.]
11-25 (e) The company [board] shall provide requested information
11-26 to appropriate legislative committees in the manner requested by
11-27 those committees.
12-1 Sec. 5. [PLAN OF OPERATION. (a) The initial board of
12-2 directors shall prepare and adopt a plan of operation that is
12-3 consistent with this article. The plan must provide for the:]
12-4 [(1) economic, fair, and nondiscriminatory
12-5 administration of the fund and its duties;]
12-6 [(2) prompt and efficient provision of workers'
12-7 compensation insurance;]
12-8 [(3) establishment of necessary facilities;]
12-9 [(4) management of the fund;]
12-10 [(5) reasonable and objective underwriting standards;
12-11 and]
12-12 [(6) obtainment of reinsurance.]
12-13 [(b) The initial plan of operation is subject to approval by
12-14 the State Board of Insurance.]
12-15 [(c) With consent of the State Board of Insurance, the board
12-16 may amend the plan of operation to provide for operation of the
12-17 fund in a manner consistent with this article.]
12-18 [Sec. 6. PRESIDENT AND CHIEF EXECUTIVE OFFICER. (a) The
12-19 board shall appoint a person to serve as president and chief
12-20 executive officer who serves at the pleasure of the board. The
12-21 board shall appoint other officers as necessary to manage the fund
12-22 prudently.]
12-23 [(b) To be eligible for appointment as president, an
12-24 individual must have had at least 10 years of administrative or
12-25 professional experience and training and experience in the field of
12-26 insurance.]
12-27 [(c) The president shall manage and conduct the affairs of
13-1 the fund under the general supervision of the board and shall
13-2 perform duties as provided by this article and as directed by the
13-3 board.]
13-4 [(d) In addition to any other duties provided by this
13-5 article or by the board, the president shall:]
13-6 [(1) hire employees as necessary to conduct the
13-7 business and carry out the provisions of this article or to perform
13-8 the duties imposed on the president by this article;]
13-9 [(2) receive and approve applications for workers'
13-10 compensation insurance and issue policies to applicants who are
13-11 eligible for workers' compensation insurance provided by the fund;]
13-12 [(3) negotiate contracts on behalf of the fund;]
13-13 [(4) issue renewals of workers' compensation insurance
13-14 for those who qualify for renewal;]
13-15 [(5) process and pay valid claims according to the
13-16 rules of the board and the appropriate workers' compensation
13-17 insurance laws;]
13-18 [(6) collect premiums for workers' compensation
13-19 insurance issued or renewed by the fund; and]
13-20 [(7) collect and compile statistical information
13-21 relating to the fund and provide this information to the board.]
13-22 [(e) In addition to any other authority provided by this
13-23 article or by the board, the president shall have full power and
13-24 authority, in the name of the fund, to:]
13-25 [(1) sue and be sued in all of the courts of the state
13-26 in all actions arising out of any act, deed, matter, or things
13-27 made, omitted, entered into, done, or suffered in connection with
14-1 the fund and its administration, management, or conduct of its
14-2 business and affairs;]
14-3 [(2) delegate to any officer of the fund, subject to
14-4 any conditions prescribed by the president, any of the powers,
14-5 functions, or duties conferred or imposed on the president under
14-6 this article in connection with the fund, its administration,
14-7 management, and conduct of business or related affairs; an officer
14-8 to whom such a delegation is made may exercise the delegated powers
14-9 with the same force and effect as the president, subject to
14-10 approval by the president;]
14-11 [(3) inspect and audit employers who apply to the fund
14-12 for issuance of workers' compensation insurance or who seek renewal
14-13 of that insurance;]
14-14 [(4) purchase reinsurance from insurance carriers
14-15 admitted or accredited to reinsure risks in this state;]
14-16 [(5) cancel or refuse to renew workers' compensation
14-17 insurance if a risk does not comply with a board-approved plan or
14-18 any provision of this article;]
14-19 [(6) with the approval of the board, enter into
14-20 contracts on behalf of the fund;]
14-21 [(7) draft guidelines for approval of the board
14-22 relating to the settlement of claims against the fund; and]
14-23 [(8) perform any other acts authorized by the board to
14-24 carry out this article and the rules of the board.]
14-25 [(f) The president shall develop a career ladder program
14-26 that addresses opportunities for mobility and advancement for
14-27 employees within the fund. The program shall require internal
15-1 posting of all positions concurrently with any public posting.]
15-2 [(g) The president shall develop a system of annual
15-3 performance evaluations that are based on documented employee
15-4 performance. All merit pay for fund employees must be based on the
15-5 system established under this subsection.]
15-6 [(h) The president shall prepare and maintain a written
15-7 policy statement to assure implementation of a program of equal
15-8 employment opportunity under which all personnel transactions are
15-9 made without regard to race, color, disability, sex, religion, age,
15-10 or national origin. The policy statement must include:]
15-11 [(1) personnel policies, including policies relating
15-12 to recruitment, evaluation, selection, appointment, training, and
15-13 promotion of personnel that are in compliance with the requirements
15-14 of Chapter 21, Labor Code;]
15-15 [(2) a comprehensive analysis of the fund workforce
15-16 that meets federal and state guidelines;]
15-17 [(3) procedures by which a determination can be made
15-18 about the extent of underuse in the fund workforce of all persons
15-19 for whom federal or state guidelines encourage a more equitable
15-20 balance; and]
15-21 [(4) reasonable methods to appropriately address those
15-22 areas of underuse.]
15-23 [(i) A policy statement prepared under Subsection (h) of
15-24 this section must:]
15-25 [(1) cover an annual period;]
15-26 [(2) be updated annually;]
15-27 [(3) be reviewed annually by the Commission on Human
16-1 Rights for compliance with Subsection (h)(1); and]
16-2 [(4) be filed with the governor's office.]
16-3 [(j) The governor's office shall deliver a biennial report
16-4 to the legislature based on the information received under
16-5 Subsection (i) of this section. The report may be made separately
16-6 or as a part of other biennial reports made to the legislature.]
16-7 [(k) The president shall provide to members of the board and
16-8 to fund employees, as often as necessary, information regarding
16-9 their qualification for office or employment under this article and
16-10 their responsibilities under applicable laws relating to standards
16-11 of conduct for board members or employees.]
16-12 [(l) In hiring employees for the fund under this article,
16-13 the president shall ensure that the fund complies with the minority
16-14 hiring practices guidelines adopted for state agencies and
16-15 institutions by the General Appropriations Act.]
16-16 [Sec. 7.] APPLICATIONS. (a) Applications to the company for
16-17 workers' compensation insurance coverage [fund] shall be submitted
16-18 on forms prescribed by the company [board] and shall be made:
16-19 (1) directly by the applicant; or
16-20 (2) on behalf of the applicant by a local recording
16-21 agent.
16-22 (b) [The fund shall adopt such rules as required to provide
16-23 for the financing of all or part of the premiums by the fund or a
16-24 person licensed under Chapter 24 of this code. Those rules shall
16-25 require that the fund receive a minimum initial premium sufficient
16-26 to cover the administrative costs of issuing and booking the policy
16-27 in the event of cancellation. Those rules shall not unfairly
17-1 discriminate against applicants based upon the amount of premium to
17-2 be paid by the applicant for workers' compensation coverage.
17-3 Notwithstanding the foregoing, the premium financing rules adopted
17-4 by the fund may provide that premium financing shall not be offered
17-5 to any applicant who appears to present an unacceptable credit
17-6 risk.]
17-7 [(c) If the premium is financed by the fund as provided by
17-8 Subsection (b) of this section, the payment deferred earns interest
17-9 payable to the fund at a rate annually determined by the board.]
17-10 [(d)] If an applicant is identified by the company as a
17-11 credit risk, the company [fund] may refuse to write insurance
17-12 coverage if the applicant does not:
17-13 (1) pay the total estimated premium and related
17-14 charges before the policy is issued; or
17-15 (2) provide security for payment of the total
17-16 estimated premium and related charges before the policy is issued.
17-17 (c) [(e)] If the policy is written through a licensed agent,
17-18 the company [fund] shall pay the agent a reasonable commission[.
17-19 The commission shall be paid at the time of the initial deposit,
17-20 based on the annual estimated premium, and shall be adjusted at the
17-21 final audit].
17-22 (d) [(f)] Notwithstanding any other provision of this code
17-23 or another insurance law of this state, the company [fund] is not
17-24 required to appoint a local recording agent to act as an agent for
17-25 the company [fund]. An agent transacting business with the company
17-26 [fund] does so as an agent for the applicant and not as an agent
17-27 for the company, unless there is an express written agreement
18-1 between the company and the agent that the agent acts on behalf of
18-2 the company [fund].
18-3 (e) [(g)] Information submitted to the company [fund] by a
18-4 licensed agent on behalf of an employer, including a policy
18-5 expiration date, is the work product of that agent, and the company
18-6 [fund] may not use that information in any marketing or direct
18-7 sales activity. Except as required or permitted by the open
18-8 records law, Chapter 552, Government Code, the company [fund] may
18-9 not provide information obtained from a licensed agent to any other
18-10 licensed agent. This subsection does not prevent an employer from
18-11 designating another licensed agent or the company [fund] as the
18-12 agent of record and does not prevent the company [fund] from using
18-13 the information submitted to the company [fund] under this
18-14 subsection for the purpose of underwriting or fraud investigation.
18-15 [The fund shall adopt reasonable guidelines in the plan of
18-16 operation to implement this subsection.]
18-17 Sec. 6 [8]. LIABILITY. Neither a member of the board nor
18-18 the president or any officer or employee of the company [fund] is
18-19 personally liable in the person's private capacity for any act
18-20 performed or for any contract or other obligation entered into or
18-21 undertaken in an official capacity in good faith and without intent
18-22 to defraud, in connection with the administration, management, or
18-23 conduct of the company [fund], its business, or other related
18-24 affairs.
18-25 Sec. 7 [9]. RATES. (a) Except as otherwise provided by this
18-26 subsection, the board shall have full power and authority to
18-27 propose rates to be charged by the company [fund] for insurance.
19-1 The board shall engage the services of an independent actuary who
19-2 is a member in good standing with the Casualty Actuarial Society or
19-3 the American Academy of Actuaries to develop and recommend
19-4 actuarially sound rates. The company [fund] is subject to the
19-5 requirements of Article 5.55 of this code and shall include the
19-6 recommendations of its independent actuary as part of its filing
19-7 under that article.
19-8 (b) Rates shall be set in amounts sufficient, when invested,
19-9 to:
19-10 (1) carry all claims to maturity;
19-11 (2) meet the reasonable expenses of conducting the
19-12 business of the company [fund]; and
19-13 (3) maintain a reasonable surplus.
19-14 (c) Notwithstanding any other provision of this code or any
19-15 other insurance law of this state, the company [fund] may establish
19-16 multitiered premium systems to price workers' compensation
19-17 insurance policies to insureds in the company's [fund's]
19-18 competitive programs, as well as to insureds to whom policies are
19-19 offered by the company [fund] under Article 5.76-4 of this code.
19-20 Those multitiered systems shall be filed in accordance with Article
19-21 5.55 of this code. The systems may provide for higher or lower
19-22 premium payments by insureds based on the company's [fund's]
19-23 evaluation of the underwriting characteristics of the individual
19-24 risk and the appropriate premium to be charged for the policy
19-25 coverages.
19-26 Sec. 8 [10]. ACCIDENT PREVENTION. (a) The company [fund]
19-27 may make and enforce requirements [rules] for the prevention of
20-1 injuries to employees of its policyholders or applicants for
20-2 insurance under this article. For this purpose, representatives of
20-3 the company [fund], representatives of the commission, or
20-4 representatives of the department [Texas Department of Insurance]
20-5 on reasonable notice shall be granted free access to the premises
20-6 of each policyholder or applicant during regular working hours.
20-7 (b) Failure or refusal by any such policyholder or applicant
20-8 to comply with any requirement [rule] prescribed by the company
20-9 [fund] for the prevention of injuries, or failure or refusal to
20-10 make full disclosure of all information pertinent to the insuring
20-11 or servicing of the policyholder or applicant, constitutes
20-12 sufficient grounds for the company [fund] to cancel a policy or
20-13 deny an application for insurance.
20-14 (c) A policyholder in the company [fund] who is insured
20-15 under Article 5.76-4 of this code shall obtain a safety
20-16 consultation if the policyholder:
20-17 (1) has a Texas experience modifier greater than 1.25;
20-18 (2) has a national experience modifier greater than
20-19 1.25 and estimated premium allocable to Texas of $2,500 or more; or
20-20 (3) does not have an experience modifier but has had a
20-21 loss ratio greater than 0.70 in at least two of the three most
20-22 recent policy years for which information is available.
20-23 (d) A policyholder in the company [fund] who is insured
20-24 under Article 5.76-4 of this code shall obtain a safety
20-25 consultation as required by the company [fund] if the policyholder:
20-26 (1) has been in business for less than three years;
20-27 and
21-1 (2) meets criteria for a safety consultation
21-2 established by the company [fund], which may include the number and
21-3 classification of employees, the policyholder's industry, and the
21-4 policyholder's previous workers' compensation experience in this
21-5 state or another jurisdiction.
21-6 (e) The policyholder shall obtain the safety consultation
21-7 not later than the 30th day after the effective date of the policy
21-8 and shall obtain the safety consultation from the division of
21-9 workers' health and safety [division] of the commission, the
21-10 company [fund], or another professional source approved for that
21-11 purpose by the division of workers' health and safety [division].
21-12 The safety consultant shall file a written report with the
21-13 commission and the policyholder setting out any hazardous
21-14 conditions or practices identified by the safety consultation.
21-15 (f) The policyholder and the consultant shall develop a
21-16 specific accident prevention plan that addresses the hazards
21-17 identified by the consultant. The safety consultant may approve an
21-18 existing accident prevention plan. The policyholder shall comply
21-19 with the accident prevention plan.
21-20 (g) The division of workers' health and safety of the
21-21 commission [division] may investigate accidents occurring at the
21-22 work sites of a policyholder for whom a plan has been developed
21-23 under Subsection (f) of this section, and the division may
21-24 otherwise monitor the implementation of the accident prevention
21-25 plan as it finds necessary.
21-26 (h) In accordance with rules adopted by the commission, not
21-27 earlier than 90 days or later than six months after the development
22-1 of an accident prevention plan under Subsection (f) of this
22-2 section, the division of workers' health and safety [division] of
22-3 the commission shall conduct a follow-up inspection of the
22-4 policyholder's premises. The commission may require the
22-5 participation of the safety consultant who performed the initial
22-6 consultation and developed the safety plan. If the [health and
22-7 safety] division [of the commission] determines that the
22-8 policyholder has complied with the terms of the accident prevention
22-9 plan or has implemented other accepted corrective measures, the
22-10 [health and safety] division shall so certify. If a policyholder
22-11 fails or refuses to implement the accident prevention plan or other
22-12 suitable hazard abatement measures, the policyholder may elect to
22-13 cancel coverage not later than the 30th day after the date of the
22-14 division determination. If the policyholder does not elect to
22-15 cancel, the company [fund] may cancel the coverage or the
22-16 commission may assess an administrative penalty not to exceed
22-17 $5,000. Each day of noncompliance constitutes a separate
22-18 violation. Penalties collected under this section shall be
22-19 deposited in the general revenue fund to the credit of the
22-20 commission or reappropriated to the commission to offset the costs
22-21 of implementing and administering this section.
22-22 (i) In assessing an administrative penalty, the commission
22-23 may consider any matter that justice may require and shall
22-24 consider:
22-25 (1) the seriousness of the violation, including the
22-26 nature, circumstances, consequences, extent, and gravity of the
22-27 prohibited act;
23-1 (2) the history and extent of previous administrative
23-2 violations;
23-3 (3) the demonstrated good faith of the violator,
23-4 including actions taken to rectify the consequences of the
23-5 prohibited act;
23-6 (4) any economic benefit resulting from the prohibited
23-7 act; and
23-8 (5) the penalty necessary to deter future violations.
23-9 (j) The procedures established under this section must be
23-10 followed each year the policyholder meets the qualifications
23-11 established under Subsection (c) of this section and is insured
23-12 through Article 5.76-4 of this code.
23-13 (k) The commission shall charge the policyholder for the
23-14 reasonable cost of services provided under Subsections (e), (f),
23-15 and (h) of this section. The fees for those services shall be set
23-16 at a cost-reimbursement level including a reasonable allocation of
23-17 the commission's administrative costs.
23-18 (l) The compliance and practices division of the commission
23-19 shall enforce compliance with this section through the
23-20 administrative violation proceedings under Chapter 415, Labor Code.
23-21 Sec. 9 [11]. CONTROL OF FRAUD. (a) The company [fund] shall
23-22 develop and implement a program to identify and investigate fraud
23-23 and violations of this code relating to workers' compensation
23-24 insurance by an applicant, policyholder, claimant, agent, insurer,
23-25 health care provider, or other person. The company [fund] shall
23-26 cooperate [contract] with the commission to compile and maintain
23-27 information necessary to detect practices or patterns of conduct
24-1 that violate this code relating to the workers' compensation
24-2 insurance or Subtitle A, Title 5, Labor Code (the Texas Workers'
24-3 Compensation Act).
24-4 (b) The company [fund] may conduct investigations of cases
24-5 of suspected fraud and violations of this code relating to workers'
24-6 compensation insurance. The company may [fund shall]:
24-7 (1) coordinate its investigations with those conducted
24-8 by the commission to avoid duplication of efforts; and
24-9 (2) refer cases that are not otherwise resolved by the
24-10 company [fund] to the commission to:
24-11 (A) perform any further investigations that are
24-12 necessary under the circumstances;
24-13 (B) conduct administrative violation
24-14 proceedings; and
24-15 (C) assess and collect penalties and
24-16 restitution.
24-17 (c) The company [fund] may enter into [interdepartmental]
24-18 funding agreements with local prosecutors for the prosecution of
24-19 offenses against the company [fund].
24-20 (d) Restitution collected under Subsection (b) of this
24-21 section shall be paid [deposited] to the company [fund].
24-22 (e) Penalties collected under Subsection (b) of this section
24-23 shall be deposited in the general revenue fund to the credit of the
24-24 commission and shall be appropriated to the commission to offset
24-25 the costs of this program.
24-26 (f) The board, company [fund], and employees of the company
24-27 [fund] are not liable in a civil action for any action made in good
25-1 faith in the execution of duties under this section including the
25-2 identification and referral of a person for investigation and
25-3 prosecution for a possible administrative violation or criminal
25-4 offense.
25-5 Sec. 10 [11A]. INVESTIGATION FILES CONFIDENTIAL. (a)
25-6 Information maintained in the investigation files of the company
25-7 [fund] is confidential and may not be disclosed except:
25-8 (1) in a criminal proceeding;
25-9 (2) in a hearing conducted by the [fund or the]
25-10 commission;
25-11 (3) on a judicial determination of good cause; or
25-12 (4) to a governmental agency, political subdivision,
25-13 or regulatory body if the disclosure is necessary or proper for the
25-14 enforcement of the laws of this or another state or of the United
25-15 States.
25-16 (b) Company [Fund] investigation files are not open records
25-17 for purposes of the open records law, Chapter 552, Government Code.
25-18 (c) Information in an investigation file that is information
25-19 in or derived from a claim file, or an employer injury report or
25-20 occupational disease report, is governed by the confidentiality
25-21 provisions relating to that information.
25-22 (d) For purposes of this section, "investigation file" means
25-23 any information compiled or maintained by the company [fund] with
25-24 respect to a company [fund] investigation authorized by law.
25-25 Sec. 11 [12]. PAYMENT OF TAXES AND FEES; GUARANTY
25-26 ASSOCIATION. (a) The company [fund] shall pay premium taxes,
25-27 maintenance taxes, and the maintenance tax surcharge established
26-1 under Article 5.76-5 of this code in the same manner as a domestic
26-2 mutual [an] insurance carrier authorized by the department [Texas
26-3 Department of Insurance] to write workers' compensation insurance
26-4 in this state.
26-5 (b) The company [fund] shall pay taxes and fees or any
26-6 payments due in lieu of taxes in the same manner as a domestic
26-7 mutual [an] insurance carrier authorized and admitted by the
26-8 department [Texas Department of Insurance] to engage in the
26-9 business of [do] insurance [business] in this state under a
26-10 certificate of authority that includes authorization to write
26-11 workers' compensation insurance.
26-12 (c) The company [fund] is a member of and is protected by
26-13 the Texas Property and Casualty Insurance Guaranty Association.
26-14 The company [fund] is subject to assessment under the Texas
26-15 Property and Casualty Insurance Guaranty Act (Article 21.28-C,
26-16 Insurance Code).
26-17 (d) Notwithstanding any other provision of this section, the
26-18 company is only liable for assessments by the Texas Property and
26-19 Casualty Insurance Guaranty Association regarding, and that
26-20 association, with respect to an insolvency of the company, is only
26-21 liable for, a claim with a date of injury that occurs on or after
26-22 January 1, 2000.
26-23 Sec. 12 [13]. FINANCIAL ADMINISTRATION; NO STATE LIABILITY.
26-24 (a) All revenues, monies, and assets of the company belong solely
26-25 to the company and are governed by the laws applicable to domestic
26-26 mutual insurance companies. The State of Texas covenants with the
26-27 policyholders of the company, persons receiving workers'
27-1 compensation benefits, and the company's creditors that the state
27-2 will not borrow, appropriate, or direct payments from those
27-3 revenues, monies, and/or assets for any purpose. The state has no
27-4 liability to or responsibility to the policyholders, persons
27-5 receiving workers' compensation benefits, or the creditors of the
27-6 company if the company is placed in conservatorship or
27-7 receivership, or becomes insolvent [Revenues of the fund consist
27-8 of:]
27-9 [(1) premiums paid by employers for workers'
27-10 compensation insurance from the fund;]
27-11 [(2) investments and money earned from investments of
27-12 the fund;]
27-13 [(3) money received from the issuance and sale of
27-14 bonds under Article 5.76-5 of this code; and]
27-15 [(4) any other money received by the fund].
27-16 (b) [Administrative expenses of the fund shall be paid from
27-17 the fund at the direction of the board.]
27-18 [(c) Money in the fund shall be paid from the fund, without
27-19 legislative appropriation, on vouchers approved by the board. That
27-20 money shall be held exclusively for the purposes stated in this
27-21 article and may not be used or appropriated for any other purpose.]
27-22 [(d) Money in the fund shall be invested, subject to a
27-23 policy developed by the board and approved by the comptroller
27-24 commissioner, in the types of investments authorized by law for an
27-25 insurer authorized to write workers' compensation insurance
27-26 coverage in this state.]
27-27 [(e)] The company [fund] shall establish and maintain
28-1 reserves for losses on an actuarially sound basis in accordance
28-2 with Article 5.61 of this code.
28-3 (c) [(f)] The company [fund] must maintain a ratio of net
28-4 written premiums on policies written after reinsurance to surplus
28-5 of not more than [:]
28-6 [(1) 3.1 to one, for the period beginning on September
28-7 1, 1997 and extending through August 31, 1998; and]
28-8 [(2)] 3.0 to one [on and after September 1, 1998].
28-9 [(g) Not more than once in any calendar year, the board may
28-10 use up to 20 percent of any surplus that exceeds the ratio
28-11 specified in Subsection (f) of this section to assist in prepaying
28-12 or retiring before maturity the bonds issued pursuant to Article
28-13 5.76-5, Insurance Code.]
28-14 (d) [(h)] The company [fund] may pay cash dividends or allow
28-15 a credit on renewal premium for policyholders [each policyholder]
28-16 insured with the company [fund] other than a policyholder insured
28-17 under Article 5.76-4 of this code, in accordance with criteria
28-18 approved by the board, which may consider the policyholder's
28-19 safety record and performance. A dividend or credit requires prior
28-20 approval of the department.
28-21 (e) [(i)] The company [fund] shall file annual statements
28-22 with the department and the commission in the same manner as
28-23 required of other workers' compensation insurance carriers, and the
28-24 commissioner shall include a report on the company's [fund's]
28-25 condition in the commissioner's annual report under Article 1.25 of
28-26 this code.
28-27 (f) [(j) If the fund incurs a deficit for any reason, no
29-1 other insurer is liable for or subject to an assessment for that
29-2 deficit.]
29-3 [(l)] Notwithstanding any other law, the company [fund] may
29-4 issue grants to the commission [Texas Workers' Compensation
29-5 Commission] as provided by Section 402.062, Labor Code. Funding
29-6 for a grant under this subsection may come only from the company's
29-7 surplus. The amount of the grants may [grant is] not [to] exceed
29-8 $2.2 million for the four-year period of September 1, 1999, through
29-9 September 1, 2003. This subsection expires September 1, 2003.
29-10 Sec. 13 [14]. REPORT TO BOARD. The president shall make
29-11 periodic reports to the board with regard to the status of the
29-12 company [fund] and its investments.
29-13 Sec. 14 [15]. POLICY FORMS. The company [fund] shall use
29-14 the uniform policy and standard policy forms prescribed by the
29-15 department [State Board of Insurance] under Articles 5.56 and 5.57
29-16 of this code.
29-17 Sec. 15 [16]. CANCELLATION AND NONRENEWAL. The company
29-18 [fund] may cancel or refuse to renew coverage on a policyholder as
29-19 provided by Section 406.008, Labor Code.
29-20 Sec. 16 [17]. ANNUAL REPORT; OTHER REPORTS. (a) The board
29-21 shall publish an independently audited report analyzing the
29-22 company's [fund's] activities and fiscal condition during the
29-23 preceding fiscal year and shall file the report with the department
29-24 [Texas Department of Insurance]. The board shall file the audited
29-25 report with the department [Texas Department of Insurance] for
29-26 submission simultaneously with its annual financial report. [The
29-27 board's annual financial report shall be submitted by the Texas
30-1 Department of Insurance by the date provided for in the General
30-2 Appropriations Act.]
30-3 (b) The company [fund] shall file with the department [State
30-4 Board of Insurance] and the commission all reports required of
30-5 other workers' compensation insurers.
30-6 Sec. 17 [17A]. ADDITIONAL AUDIT REQUIREMENTS; INTERNAL AUDIT
30-7 REPORT. (a) [The state auditor shall periodically identify issues
30-8 related to the operational efficiency, effectiveness, and statutory
30-9 compliance of the fund. The fund shall include all issues
30-10 identified by the state auditor in the fund's annual independent
30-11 and internal audit plans.]
30-12 [(b)] Each person who conducts an independent audit or
30-13 internal audit of the company [fund] shall send a copy of the audit
30-14 report prepared by the person to the office of the state auditor.
30-15 The state auditor shall summarize the audit reports presented under
30-16 this subsection in an annual memorandum to the Legislative Audit
30-17 Committee.
30-18 (b) [(c)] The internal auditor appointed under Section 4 of
30-19 this article shall submit the internal audit report directly to the
30-20 board and shall provide a summary of the report to the governor,
30-21 lieutenant governor, and speaker of the house of representatives.
30-22 The internal auditor's summary report must include an analysis of
30-23 the use by the company [fund] of historically underutilized
30-24 businesses. For purposes of this subsection, "historically
30-25 underutilized business" has the meaning assigned by Section
30-26 2161.001, Government Code [1.02, State Purchasing and General
30-27 Services Commission Act (Article 601b, Vernon's Texas Civil
31-1 Statutes)].
31-2 Sec. 18. EXAMINATION OF COMPANY [FUND]. (a) The department
31-3 [State Board of Insurance] shall conduct an examination of the
31-4 company [fund] in the manner and under the conditions provided by
31-5 Articles 1.15 through 1.19 of this code for the examination of
31-6 insurance carriers.
31-7 (b) The company [board] shall pay the costs of the
31-8 examination [from the fund].
31-9 (c) The company [fund] is subject to all provisions of this
31-10 code and to the jurisdiction of the commissioner [of insurance] and
31-11 the department [State Board of Insurance] in the same manner as
31-12 private insurance carriers.
31-13 Sec. 19. [ASSISTANCE FROM INSURANCE DEPARTMENT. On the
31-14 request of the board, the Texas Department of Insurance shall
31-15 provide technical assistance to the board and the president as
31-16 reasonably necessary to implement this article.]
31-17 [Sec. 19A.] PUBLIC INFORMATION; ACCESSIBILITY. (a) The
31-18 company [fund] shall prepare information of public interest
31-19 describing the functions of the company [fund] and the procedures
31-20 by which complaints are filed with and resolved by the company
31-21 [fund]. The company [fund] shall make the information available to
31-22 the public and appropriate state agencies.
31-23 (b) The company [board] shall establish methods by which
31-24 consumers and service recipients are notified of the name, mailing
31-25 address, and telephone number of the company [fund] for the purpose
31-26 of directing complaints to the company [fund]. The company [board]
31-27 may provide for that notification:
32-1 (1) by a supplement or endorsement to a written
32-2 policy;
32-3 (2) on a sign prominently displayed in the place of
32-4 business of each regional office of the company [fund]; or
32-5 (3) in a bill for services provided by the company
32-6 [fund].
32-7 (c) The company [fund] shall comply with federal and state
32-8 laws related to program and facility accessibility. The president
32-9 shall also prepare and maintain a written plan that describes how a
32-10 person who does not speak English can be provided reasonable access
32-11 to the company's [fund's] programs and services.
32-12 (d) The board shall develop and implement policies that
32-13 provide the public with a reasonable opportunity to appear before
32-14 the board and to speak on any issue under the jurisdiction of the
32-15 company [fund].
32-16 Sec. 20 [19B]. COMPLAINT RESOLUTION. (a) The company [fund]
32-17 shall keep information about each written complaint submitted to
32-18 the company [fund]. The information shall include:
32-19 (1) the date the complaint is received;
32-20 (2) the name of the complainant;
32-21 (3) the subject matter of the complaint;
32-22 (4) a record of all persons contacted in relation to
32-23 the complaint;
32-24 (5) a summary of the results of the review or
32-25 investigation of the complaint; and
32-26 (6) for complaints for which the company [fund] took
32-27 no action, an explanation of the reason the complaint was closed
33-1 without action.
33-2 (b) For each written complaint that the company [fund] has
33-3 authority to resolve, the company [fund] shall provide to the
33-4 person filing the complaint and the persons or entities complained
33-5 about the company's [fund's] policies and procedures pertaining to
33-6 complaint investigation and resolution. The company [fund], at
33-7 least quarterly and until final disposition of the complaint, shall
33-8 notify the person filing the complaint and the persons or entities
33-9 complained about of the status of the complaint unless the notice
33-10 would jeopardize an undercover investigation.
33-11 [Sec. 20. FUND SOLVENCY. (a) In addition to other
33-12 regulatory authority granted the commissioner of insurance, if the
33-13 commissioner finds that the fund does not own assets at least equal
33-14 to all liabilities and required reserves, together with the minimum
33-15 basic surplus required under this article, or that the condition of
33-16 the fund is such that continuing operation of the fund is hazardous
33-17 to the public or to the policyholders of the fund, the commissioner
33-18 shall:]
33-19 [(1) notify the president and board of the finding;
33-20 and]
33-21 [(2) furnish the fund with a written list of the
33-22 commissioner's recommendations to abate the problems.]
33-23 [(b) If the fund fails to comply with the recommendations of
33-24 the commissioner not later than the 60th day after the date of the
33-25 recommendations, the commissioner shall notify the governor, the
33-26 lieutenant governor, and the speaker of the house of
33-27 representatives of the recommendations with which the fund is not
34-1 in compliance, together with solutions and estimations of all
34-2 fiscal implications.]
34-3 Sec. 21. APPLICABILITY OF OTHER STATUTES; COMPANY NOT STATE
34-4 AGENCY. (a) The company [fund] is an insurance company for
34-5 purposes of Subtitle A, Title 5, Labor Code (the Texas Workers'
34-6 Compensation Act).
34-7 (b) All regulatory authority granted to the commissioner [of
34-8 insurance] relating to a [stock or] mutual insurance company is
34-9 applicable to the company [fund].
34-10 (c) The company [Unless specifically defined as a state
34-11 agency in a specific statute, the fund] is not a state agency.
34-12 Sec. 22. TMIC STABILIZATION FUND. (a) In this section:
34-13 (1) "Hazard Group III and IV" means the classification
34-14 codes listed in the Table of Classifications by Hazard Group,
34-15 "Texas Retrospective Rating Plan Manual, Workers' Compensation and
34-16 Employers Liability Insurance."
34-17 (2) "Net underwriting loss" means the company's net
34-18 premiums earned less total losses and expenses. Recoveries from
34-19 the TMIC stabilization fund may not be included in computing the
34-20 net underwriting loss.
34-21 (3) "Net written premium" means premium income
34-22 retained by the company, directly or through reinsurance, after
34-23 payments made for reinsurance.
34-24 (4) "Reserves" means an amount representing
34-25 liabilities for losses, loss adjustment expenses, and reinsurance
34-26 payable on paid loss and loss adjustment expenses, as reflected in
34-27 the company's annual statement prepared in accordance with
35-1 statutory accounting principles.
35-2 (5) "Statutory accounting principles" means those
35-3 principles that must be followed by an insurance company when
35-4 submitting its financial statements to the department.
35-5 (6) "Surplus" means the amount by which the value of
35-6 the company's assets exceeds its liabilities.
35-7 (7) "TMIC stabilization fund" means the Texas Mutual
35-8 Insurance Company stabilization fund established under this
35-9 section.
35-10 (b) The TMIC stabilization fund is established as a special
35-11 fund of the company with the comptroller to be used for the sole
35-12 benefit of the company. The comptroller is the custodian of the
35-13 TMIC stabilization fund. The TMIC stabilization fund is composed of
35-14 the initial deposit made under this section and any net investment
35-15 income accruing to the fund. Not later than October 15, 2001, the
35-16 company shall make a one-time deposit from its surplus of $150
35-17 million in cash or securities to the TMIC stabilization fund. The
35-18 comptroller shall invest the monies in the TMIC stabilization fund
35-19 only as directed by the company and may sell fund investments only
35-20 as directed by the company. The State of Texas covenants with the
35-21 policyholders of the company, the persons receiving workers'
35-22 compensation benefits through the company, and the creditors of the
35-23 company that the state will not borrow, appropriate, or direct
35-24 payments from the TMIC stabilization fund for any purpose. The TMIC
35-25 stabilization fund may not be used by or for the benefit of the
35-26 state or for the benefit of a creditor of the state and may not be
35-27 commingled with other assets.
36-1 (c) Beginning in 2003, and not later than April 1 of that
36-2 year and each subsequent year, the company's independent auditor
36-3 shall provide to the company's board of directors and president a
36-4 report stating:
36-5 (1) the company's net written premium to surplus ratio
36-6 as of the end of the preceding calendar year, computed in
36-7 accordance with statutory accounting principles; and
36-8 (2) the company's reserve to surplus ratio as of the
36-9 end of the preceding calendar year, computed in accordance with
36-10 statutory accounting principles.
36-11 (d) If the company's independent auditor reports that the
36-12 company's net written premium to surplus ratio for the preceding
36-13 calendar year exceeded 1 to 1, the company's independent auditor
36-14 shall specify the amount of monies needed to establish a 1 to 1
36-15 ratio. If the company's independent auditor reports that the
36-16 company's reserve to surplus ratio for the preceding calendar year
36-17 exceeded 1 to 1, the company's independent auditor shall specify
36-18 the amount of monies needed to establish a 1 to 1 ratio.
36-19 (e) Based on the independent auditor's report as provided by
36-20 Subsection (c) of this section, not later than April 15 of each
36-21 year the company's president shall certify to the comptroller the
36-22 amount to be issued from the TMIC stabilization fund for deposit
36-23 into the company's surplus to restore the applicable ratio to 1 to
36-24 1. The comptroller shall issue payments to the company not later
36-25 than the 30th day after the date on which the comptroller receives
36-26 the president's written certification.
36-27 (f) The company shall recover net underwriting losses for
37-1 Hazard Group III and IV policies and policies with a premium of
37-2 $10,000 or less from the TMIC stabilization fund, for the preceding
37-3 calendar year, as specified by Subsections (g) and (h) of this
37-4 section.
37-5 (g) Beginning in 2002, and not later than April 1 of each
37-6 year, the company's independent auditor shall provide to the
37-7 company's board of directors and president a report stating:
37-8 (1) the company's net underwriting loss for the
37-9 preceding calendar year, if any, for Hazard Group III and IV
37-10 policies; and
37-11 (2) the company's net underwriting loss, if any, for
37-12 policies with a premium of $10,000 or less.
37-13 (h) Based on the company's independent auditor's report as
37-14 provided by Subsection (g), if there is a net underwriting loss for
37-15 Hazard Group III and IV policies and/or policies with a premium of
37-16 $10,000 or less, the company's president, on or before April 15 of
37-17 each year, shall certify to the comptroller the amount of the net
37-18 underwriting loss to be recovered from the TMIC stabilization fund
37-19 for deposit into the company's operating income. The comptroller
37-20 shall issue payments to the company under this subsection not later
37-21 than the 30th day after the date on which the comptroller receives
37-22 the president's written certification.
37-23 ARTICLE 2. CONFORMING AMENDMENTS
37-24 SECTION 2.01. Article 5.76-4, Insurance Code, is amended to
37-25 read as follows:
37-26 Art. 5.76-4. COMPANY [FUND] AS INSURER OF LAST RESORT. (a)
37-27 The Texas Mutual [Workers' Compensation] Insurance Company [Fund]
38-1 may not, except as otherwise provided by this article and by
38-2 Section 15 [16], Article 5.76-3 of this code, refuse to insure any
38-3 risk that tenders the necessary premium and any applicable accident
38-4 prevention service fees.
38-5 (b) If an applicant to the company [fund] would be rejected
38-6 for workers' compensation insurance under the company's [fund's]
38-7 underwriting standards, the risk may not be rejected, but shall be
38-8 insured at a higher premium as provided by the company's [fund's]
38-9 rules. The risk may be required to meet other conditions
38-10 considered necessary to protect the company's [fund's] interests.
38-11 (c) The company [fund] shall develop statistical and other
38-12 information as necessary to allow the company [fund] to distinguish
38-13 between its writings in the voluntary market and its writings as
38-14 the insurer of last resort.
38-15 (d) The company [fund] shall decline to insure any risk if
38-16 insuring that risk would cause the company [fund] to exceed the
38-17 premium-to-surplus ratios established by Article 5.76-3 of this
38-18 code or if the risk is not in good faith entitled to insurance
38-19 through the company [fund]. For purposes of this subsection only,
38-20 "good faith" means honesty in fact in any conduct or transaction.
38-21 (e) The department [Texas Department of Insurance] shall
38-22 develop and publish classification relativities specifically
38-23 designed for the risks insured under this article.
38-24 (f) The company [fund] and the Texas workers' compensation
38-25 insurance facility may exchange information relating to actual or
38-26 suspected fraud by any applicant, policyholder, claimant, agent, or
38-27 insurer with respect to workers' compensation insurance policies
39-1 issued by, or applications for coverage submitted to, the facility
39-2 or the fund. That information may be kept confidential and is not
39-3 subject to disclosure under the open records act, Chapter 424, Acts
39-4 of the 63rd Legislature, Regular Session, 1973 (Article 6252-17a,
39-5 Vernon's Texas Civil Statutes).
39-6 (g) If the company [fund] suspects fraud or identifies
39-7 conditions that may result in acts of fraud, the company [fund] may
39-8 require an applicant for workers' compensation insurance coverage
39-9 who is identified as a risk for purposes of Subsection (b) of this
39-10 article to insure all business entities that are commonly owned or
39-11 commonly controlled by the applicant.
39-12 (h) The company [fund] shall report the statistical and
39-13 other information developed under Subsection (c) of this article on
39-14 request to the [Texas Workers' Compensation] Research and Oversight
39-15 Council on Workers' Compensation [Center and the legislative
39-16 oversight committee on workers' compensation], or to any successor
39-17 entity for research and oversight of the workers' compensation
39-18 system of this state.
39-19 SECTION 2.02. Article 5.76-5, Insurance Code, is amended by
39-20 adding Section 15 to read as follows:
39-21 Sec. 15. APPLICATION TO TEXAS MUTUAL INSURANCE COMPANY. (a)
39-22 Notwithstanding any other provision of this article, effective
39-23 September 1, 2001:
39-24 (1) the fund is operated as the Texas Mutual Insurance
39-25 Company as provided by Article 5.76-3 of this code; and
39-26 (2) additional bonds may not be issued under this
39-27 article.
40-1 (b) The Texas Mutual Insurance Company may exercise any
40-2 power, and is liable to perform any duty, imposed on the fund as
40-3 this article existed immediately before September 1, 2001.
40-4 SECTION 2.03. Section 1(2), Article 5.55, Insurance Code, is
40-5 amended to read as follows:
40-6 (2) "Insurer" means a person authorized and admitted
40-7 by the Texas Department of Insurance to do insurance business in
40-8 this state under a certificate of authority that includes
40-9 authorization to write workers' compensation insurance. The term
40-10 includes the Texas Mutual [Workers' Compensation] Insurance Company
40-11 [Fund].
40-12 SECTION 2.04. Article 5.59, Insurance Code, is amended to
40-13 read as follows:
40-14 Art. 5.59. MAY REQUIRE SWORN STATEMENTS. The department
40-15 [Board] may require sworn statements from any insurance company,
40-16 including [or] the Texas Mutual [Workers' Compensation] Insurance
40-17 Company, [Fund] showing the payroll reported to the company [it]
40-18 and incurred losses by classifications and such other information
40-19 which in the judgment of the department [Board] may be necessary to
40-20 carry out its duties. The department [Board] shall prescribe the
40-21 necessary forms for such statements and reports, having due regard
40-22 to the methods and forms in use in other states for similar purpose
40-23 in order that uniformity of statistics may not be disturbed.
40-24 SECTION 2.05. Article 5.60(c), Insurance Code, is amended to
40-25 read as follows:
40-26 (c) This subchapter may not be construed to prohibit any
40-27 stock company, mutual company, including the Texas Mutual Insurance
41-1 Company, reciprocal or interinsurance exchange, [the Texas Workers'
41-2 Compensation Insurance Fund,] or Lloyd's plan [association] from
41-3 issuing participating policies; however, a dividend to
41-4 policyholders under Subtitle A, Title 5, Labor Code, [the Texas
41-5 Workers' Compensation Act (Article 8308-1.01 et seq., Vernon's
41-6 Texas Civil Statutes)] may not take effect until approved by the
41-7 department [Board]. Such a dividend may not be approved until
41-8 adequate reserves have been provided, those reserves to be computed
41-9 on the same basis for all classes of companies operating under this
41-10 subchapter.
41-11 SECTION 2.06. Article 5.65C(d), Insurance Code, is amended to
41-12 read as follows:
41-13 (d) If a policyholder commits an administrative violation
41-14 under this article and obtains workers' compensation insurance
41-15 coverage at a premium less than the premium that would have been
41-16 charged had the policyholder not committed the administrative
41-17 violation, the policyholder is liable to the insurer for the
41-18 difference between the premium due and the premium actually
41-19 charged, plus reasonable interest and reasonable attorney fees. For
41-20 the purposes of this subsection, "insurer" includes the [Texas
41-21 workers' compensation insurance facility and the] Texas Mutual
41-22 [Workers' Compensation] Insurance Company [Fund].
41-23 SECTION 2.07. Section 3(b), Article 21.28-C, Insurance Code,
41-24 is amended to read as follows:
41-25 (b) This Act applies to insurance written through the Texas
41-26 Mutual [Workers' Compensation] Insurance Company [Fund] only as
41-27 provided by this subsection. The application of this article to
42-1 the Texas Mutual [Workers' Compensation] Insurance Company [Fund]
42-2 is on a prospective basis on and after January 1, 2000. That
42-3 company [fund] is only liable for assessments for a claim with a
42-4 date of injury that occurs on or after January 1, 2000. The
42-5 association, with respect to an insolvency of the company [fund],
42-6 is only liable for a claim with a date of injury that occurs on or
42-7 after January 1, 2000.
42-8 SECTION 2.08. Section 402.062(b), Labor Code, is amended to
42-9 read as follows:
42-10 (b) Notwithstanding Chapter 575, Government Code, the
42-11 commission may accept a grant paid by [from] the Texas Mutual
42-12 [Workers' Compensation] Insurance Company [Fund] established under
42-13 Article 5.76-3, Insurance Code, to implement specific steps to
42-14 control and lower medical costs in the workers' compensation system
42-15 and to ensure the delivery of quality medical care. The commission
42-16 must publish the name of the grantor and the purpose and conditions
42-17 of the grant in the Texas Register and provide for a 20-day public
42-18 comment period before the commission may accept the grant. The
42-19 commission shall acknowledge acceptance of the grant at a public
42-20 meeting. The minutes of the public meeting must include the name
42-21 of the grantor, a description of the grant, and a general statement
42-22 of the purposes for which the grant will be used.
42-23 SECTION 2.09. Section 404.002(b), Labor Code, is amended to
42-24 read as follows:
42-25 (b) The council shall conduct professional studies and
42-26 research related to:
42-27 (1) the delivery of benefits;
43-1 (2) litigation and controversy related to workers'
43-2 compensation;
43-3 (3) insurance rates and rate-making procedures;
43-4 (4) rehabilitation and reemployment of injured
43-5 workers;
43-6 (5) workplace health and safety issues;
43-7 (6) the quality and cost of medical benefits;
43-8 (7) the Texas Mutual [Workers' Compensation] Insurance
43-9 Company [Fund] and the impact of that company [fund] on the
43-10 workers' compensation system; and
43-11 (8) other matters relevant to the cost, quality, and
43-12 operational effectiveness of the workers' compensation system.
43-13 SECTION 2.10. Section 404.007(a), Labor Code, is amended to
43-14 read as follows:
43-15 (a) The board shall:
43-16 (1) approve the operating budget of the council;
43-17 (2) adopt rules for the operations of the board and
43-18 the council;
43-19 (3) conduct professional studies and research on all
43-20 matters relevant to the cost, quality, and operational
43-21 effectiveness of the workers' compensation system;
43-22 (4) monitor the cost of income benefits under this
43-23 subtitle, with emphasis on the availability and cost of
43-24 supplemental income benefits;
43-25 (5) monitor the performance and operation of the Texas
43-26 Mutual [Workers' Compensation] Insurance Company [Fund], with
43-27 emphasis on the insurer of last resort program;
44-1 (6) hold regular public hearings and receive testimony
44-2 and reports from:
44-3 (A) the commission;
44-4 (B) the Texas Mutual [Workers' Compensation]
44-5 Insurance Company [Fund];
44-6 (C) the Texas Department of Insurance;
44-7 (D) the State Office of Risk Management; and
44-8 (E) any other public or private entity that is
44-9 involved in the workers' compensation system;
44-10 (7) receive information about workers' compensation
44-11 rules and operations of an entity listed in Subdivision (6); and
44-12 (8) review specific recommendations for legislation
44-13 relating to the Texas Workers' Compensation Act formally proposed
44-14 by an entity listed in Subdivision (6).
44-15 SECTION 2.11. Section 404.010(a), Labor Code, is amended to
44-16 read as follows:
44-17 (a) As required to fulfill the objectives of the council,
44-18 the council is entitled to access to the files and records of:
44-19 (1) the commission;
44-20 (2) the Texas Workforce Commission;
44-21 (3) the Texas Department of Insurance;
44-22 (4) the Texas Department of Human Services;
44-23 (5) the Texas Mutual [Workers' Compensation] Insurance
44-24 Company [Fund]; and
44-25 (6) other state agencies.
44-26 SECTION 2.12. Section 418.002(c), Labor Code, is amended to
44-27 read as follows:
45-1 (c) The court may order a person to pay restitution to an
45-2 insurance company, including [the Texas workers' compensation
45-3 insurance facility, or] the Texas Mutual [Workers' Compensation]
45-4 Insurance Company, [Fund] if the person commits an offense under
45-5 this section.
45-6 ARTICLE 3. TRANSITION; EFFECTIVE DATE
45-7 SECTION 3.01. GENERAL TRANSITION. (a) The Texas Mutual
45-8 Insurance Company may exercise all the rights, privileges, powers,
45-9 and authority of any other mutual insurance company organized to
45-10 transact workers' compensation insurance business in this state,
45-11 subject to the requirements of Article 5.76-3, Insurance Code, as
45-12 amended by this Act. On the effective date of this Act:
45-13 (1) the company is considered to be a continuation of
45-14 the Texas Workers' Compensation Insurance Fund; and
45-15 (2) the company is vested with all property of that
45-16 fund.
45-17 (b) The Texas Mutual Insurance Company may enforce all
45-18 contract and statutory rights of the Texas Workers' Compensation
45-19 Insurance Fund.
45-20 SECTION 3.02. ASSETS AND LIABILITIES. (a) Each debt, claim,
45-21 and cause of action of the Texas Workers' Compensation Insurance
45-22 Fund, and each property right, privilege, franchise, or other
45-23 interest of the Texas Workers' Compensation Insurance Fund, remains
45-24 the property of the Texas Mutual Insurance Company.
45-25 (b) The rights of all policyholders and creditors and the
45-26 standing of all claims under the Texas Workers' Compensation
45-27 Insurance Fund shall be preserved unimpaired under the Texas Mutual
46-1 Insurance Company.
46-2 (c) Each debt, liability, and duty of the Texas Workers'
46-3 Compensation Insurance Fund becomes a debt, liability, or duty of
46-4 the Texas Mutual Insurance Company and may be enforced against the
46-5 Texas Mutual Insurance Company as if it were incurred or contracted
46-6 by the company.
46-7 SECTION 3.03. CAUSES OF ACTION. (a) A cause of action or
46-8 similar proceeding to which the Texas Workers' Compensation
46-9 Insurance Fund was a party that is pending on the effective date of
46-10 this Act:
46-11 (1) is not affected by the establishment of the Texas
46-12 Mutual Insurance Company under this Act;
46-13 (2) may be continued to be prosecuted by or against
46-14 the company; and
46-15 (3) continues to be governed by and conducted under
46-16 Article 5.76-3 and Article 5.76-4, Insurance Code, as applicable,
46-17 as those articles existed before the effective date of this Act,
46-18 and the applicable bylaws, rules, and regulations of the Texas
46-19 Workers' Compensation Insurance Fund, as amended by the Texas
46-20 Mutual Insurance Company.
46-21 SECTION 3.04. INITIAL BOARD OF DIRECTORS. (a) The members
46-22 of the board of directors of the Texas Workers' Compensation
46-23 Insurance Fund who are serving on the effective date of this Act
46-24 shall serve as the initial board of directors of the Texas Mutual
46-25 Insurance Company. Board members who are qualified to serve on the
46-26 effective date of this Act are not disqualified by the amendments
46-27 to Section 3(d), Article 5.76-3, Insurance Code, and may serve out
47-1 their initial terms. The terms of those members are extended from
47-2 February 1 to July 1 of their respective expiring years, subject to
47-3 Section 3, Article 5.76-3, Insurance Code, as amended by this Act,
47-4 regarding election of members.
47-5 (b) Before July 1, 2002, the company's initial board of
47-6 directors shall draw lots to determine which four positions on the
47-7 board shall be converted to elected board positions. The drawing by
47-8 lot shall be conducted in a manner to ensure that not more than two
47-9 board positions appointed to terms expiring in the same year will
47-10 be converted to elected positions.
47-11 (c) On or before July 1, 2002, the company shall hold its
47-12 first meeting of the policyholders. At that meeting the
47-13 policyholders shall elect four directors. The method of election
47-14 shall be specified in the company's bylaws.
47-15 (d) The remaining five directors from the initial board of
47-16 directors shall constitute the appointed directors.
47-17 (e) The bylaws and board policies of the fund on the
47-18 effective date of this Act become the bylaws and board policies of
47-19 the company until amended or revised by the company's board.
47-20 SECTION 3.05. INITIAL RATES. The premium rates on file with
47-21 the Texas Department of Insurance on the effective date of this Act
47-22 for the Texas Workers' Compensation Insurance Fund are the initial
47-23 premium rates for the Texas Mutual Insurance Company.
47-24 SECTION 3.06. EFFECTIVE DATE. This Act takes effect
47-25 September 1, 2001.