1-1 By: Brimer (Senate Sponsor - Duncan) H.B. No. 3458
1-2 (In the Senate - Received from the House May 2, 2001;
1-3 May 3, 2001, read first time and referred to Committee on Business
1-4 and Commerce; May 10, 2001, reported favorably, as amended, by the
1-5 following vote: Yeas 7, Nays 0; May 10, 2001, sent to printer.)
1-6 COMMITTEE AMENDMENT NO. 1
1-7 Amend Engrossed H.B. 3458 in Section 1.01 of the bill by
1-8 striking the text beginning on page 14, line 19 and ending on page
1-9 15, line 41.
1-10 A BILL TO BE ENTITLED
1-11 AN ACT
1-12 relating to the operation of the Texas Workers' Compensation
1-13 Insurance Fund as a domestic mutual insurance company and to the
1-14 continuation of that entity as the Texas Mutual Insurance Company.
1-15 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-16 ARTICLE 1. OPERATION OF FUND AS MUTUAL INSURANCE COMPANY
1-17 SECTION 1.01. Article 5.76-3, Insurance Code, is amended to
1-18 read as follows:
1-19 Art. 5.76-3. TEXAS MUTUAL [WORKERS' COMPENSATION] INSURANCE
1-20 COMPANY [FUND].
1-21 Sec. 1. DEFINITIONS. In this article:
1-22 (1) "Board" means the board of directors of the
1-23 company [fund].
1-24 (2) "Commission" means the Texas Workers' Compensation
1-25 Commission.
1-26 (3) "Company" means the Texas Mutual Insurance
1-27 Company.
1-28 (4) "Fund" means the Texas Workers' Compensation
1-29 Insurance Fund.
1-30 (5) [(4)] "Workers' compensation insurance" means the
1-31 insurance for any risk under:
1-32 (A) Subtitle A, Title 5, Labor Code (the Texas
1-33 Workers' Compensation Act);
1-34 (B) the Longshore and Harbor Workers'
1-35 Compensation Act (33 U.S.C. Section 901);
1-36 (C) the Federal Mine Safety and Health Act of
1-37 1977 (33 U.S.C. Section 801 et seq.); [or]
1-38 (D) the Defense Base Act (42 U.S.C. Sections
1-39 1651-1654);
1-40 (E) the federal Employers' Liability Act (45
1-41 U.S.C. Section 51 et seq.);
1-42 (F) the Nonappropriated Fund Instrumentalities
1-43 Act (5 U.S.C. Sections 8171-8173);
1-44 (G) the Outer Continental Shelf Lands Act (43
1-45 U.S.C. Section 1331 et seq.);
1-46 (H) the Merchant Marine Act of 1920 (46 U.S.C.
1-47 Section 861 et seq.); or
1-48 (I) Chapter 504, Labor Code.
1-49 Sec. 2. CREATION; OPERATION. (a) Effective September 1,
1-50 2001, the [The] Texas Workers' Compensation Insurance Fund shall
1-51 operate as, and exercise the powers of, a domestic mutual insurance
1-52 company in accordance with Chapter 15 of this code, and shall be
1-53 called the Texas Mutual Insurance Company. A reference in the laws
1-54 of this state to the Texas Workers' Compensation Insurance Fund
1-55 means the Texas Mutual Insurance Company. The commissioner shall
1-56 issue a certificate of authority to the company as provided by
1-57 Chapter 15 of this code to write workers' compensation insurance,
1-58 not later than September 1, 2001 [is created as a corporate body
1-59 with the powers provided by this subchapter and with all general
1-60 corporate powers incident to its operation as a corporate body].
1-61 (b) The company is subject to Chapter 15 of this code, other
1-62 than Article 15.22 of this code. In the event of a conflict
1-63 between this article and Chapter 15 of this code or another law of
2-1 this state applicable to a nonlife mutual insurance company, this
2-2 article controls.
2-3 (c) The company [fund] shall:
2-4 (1) serve as a competitive force in the marketplace;
2-5 (2) guarantee the availability of workers'
2-6 compensation insurance in this state; and
2-7 (3) serve as an insurer of last resort as provided
2-8 under Article 5.76-4 of this code.
2-9 (d) [(b)] Except as otherwise provided by this subsection,
2-10 the company [fund] is subject to the open meetings law, Chapter
2-11 551, Government Code, and the open records law, Chapter 552,
2-12 Government Code. The board may hold closed meetings to consider and
2-13 refuse to release information relating to claims, rates, the
2-14 company's [fund's] underwriting guidelines, and other information
2-15 that would give advantage to competitors or bidders.
2-16 (e) [(c)] A decision by the company [fund] to deny, cancel,
2-17 or refuse to renew a policy or risk insured under Article 5.76-4 of
2-18 this code is appealable to the board not later than the 30th day
2-19 after the date on which the affected party received actual notice
2-20 that the act occurred or that the decision was made. The company
2-21 [board] shall hear the appeal not later than the 30th day after the
2-22 date on which the request for hearing is made and shall notify the
2-23 [fund and the] appellant in writing of the time and place of the
2-24 hearing not later than the 10th day before the date of the hearing.
2-25 Not later than the 30th day after the last day of the hearing, the
2-26 board shall affirm, reverse, or modify the act appealed to the
2-27 board. A hearing under this subsection does not suspend the
2-28 operation of any act, ruling, decision, or order of the company
2-29 [fund], unless the board specifically so orders.
2-30 (f) [(d)] A decision of the board under this section is
2-31 subject to review by the commissioner [of insurance] in the manner
2-32 provided by the administrative procedure law, Chapter 2001,
2-33 Government Code. The commissioner's review of a decision by the
2-34 board does not suspend the operation of any act, ruling, decision,
2-35 or order of the company [fund] unless the commissioner specifically
2-36 so orders on a showing by an aggrieved party of:
2-37 (1) immediate, irreparable injury, loss, or damage;
2-38 and
2-39 (2) probable success on the merits.
2-40 (g) [(e)] A person aggrieved by the decision of the
2-41 commissioner may appeal that decision to the district court.
2-42 Judicial review under this section is governed by the substantial
2-43 evidence rule.
2-44 (h) [(f) The fund is subject to Chapter 325, Government Code
2-45 (Texas Sunset Act). Unless continued in effect as provided by that
2-46 chapter, the fund is abolished September 1, 2007.]
2-47 [(g)] In addition to other rights of the company [fund]
2-48 under this article, the company [fund] has the legal rights of a
2-49 mutual insurance company operating under Chapter 15 of this code,
2-50 and of a private person in this state, and has the power to sue in
2-51 its own name. No procedure [established under this article] is a
2-52 prerequisite to the exercise of the power by the company [fund] to
2-53 sue.
2-54 (i) [(h)] The company [fund] shall prepare annually a
2-55 complete and detailed written report accounting for all funds
2-56 received and disbursed by the company [fund] during the preceding
2-57 fiscal year.
2-58 (j) The company may not be dissolved. [The annual report
2-59 must meet the reporting requirements applicable to financial
2-60 reporting provided by the General Appropriations Act.]
2-61 Sec. 3. BOARD OF DIRECTORS. (a) The company [fund] is
2-62 governed by a board of directors composed of nine members, all of
2-63 whom shall be citizens of this state. Five [The] members shall be
2-64 appointed by the governor with the advice and consent of the
2-65 senate. The remaining members shall be elected by the company's
2-66 policyholders[, and vacancies shall be filled in the same manner].
2-67 (b) The members of the board of directors serve staggered
2-68 six-year terms, with the terms of three members expiring July
2-69 [February] 1 of each odd-numbered year. A member of the board
3-1 whose term has expired shall continue to serve until the member's
3-2 replacement is elected by the policyholders or appointed by the
3-3 governor, as applicable.
3-4 (c) The governor shall fill a vacancy in the appointed
3-5 directors by appointment with the advice and consent of the senate.
3-6 A vacancy in the elected directors shall be filled as provided by
3-7 the company's bylaws. If a vacancy occurs before the date on which
3-8 the vacating member's term is set to expire, the successor member
3-9 shall be elected or appointed for a term to expire on the same date
3-10 as the vacating member's term. [In making appointments to the
3-11 board, the governor shall attempt to reflect the social,
3-12 geographic, and economic diversity of the state. To ensure
3-13 balanced representation, the governor may consider the geographic
3-14 location of a prospective appointee's domicile and the prospective
3-15 appointee's experience in business and insurance matters and shall
3-16 consider those factors in appointing members to fill vacancies on
3-17 the board. Appointments to the board shall be made without regard
3-18 to the race, color, disability, sex, religion, age, or national
3-19 origin of the appointees.]
3-20 (d) A person may not serve as a member of the board if the
3-21 person, an individual related to the person within the second
3-22 degree by consanguinity or affinity, or an individual residing in
3-23 the same household with the person:
3-24 (1) is registered or licensed under this code or is
3-25 required to be registered or licensed under this code;
3-26 (2) is employed by or acts as a consultant to a person
3-27 registered or licensed under this code or required to be registered
3-28 or licensed under this code;
3-29 (3) owns, controls, has a financial interest in, or
3-30 participates in the management of an organization registered or
3-31 licensed under this code or required to be registered or licensed
3-32 under this code;
3-33 (4) receives a substantial tangible benefit from the
3-34 company [fund] or the Texas Department of Insurance; or
3-35 (5) is an officer, employee, or consultant of an
3-36 association in the field of insurance.
3-37 (e) It is a ground for removal from the board if a member:
3-38 (1) does not have at the time of appointment the
3-39 qualifications required by this section;
3-40 (2) does not maintain during service on the board the
3-41 qualifications required by this section;
3-42 (3) cannot because of illness or disability discharge
3-43 the member's duties for a substantial part of the term for which
3-44 the member is appointed; or
3-45 (4) is absent from more than half of the regularly
3-46 scheduled board meetings that the member is eligible to attend
3-47 during a calendar year.
3-48 (f) The validity of an action of the board is not affected
3-49 by the fact that it is taken when a ground for removal of a board
3-50 member exists.
3-51 (g) If the president has knowledge that a potential ground
3-52 for removal exists, the president shall notify the chairman of the
3-53 board of the potential ground. If the potential ground for removal
3-54 involves an appointed board member, the [The] chairman shall then
3-55 notify the governor and the attorney general that a potential
3-56 ground for removal exists. If the potential ground for removal
3-57 involves the chairman, the president shall notify the next highest
3-58 officer of the board, who shall notify the governor and the
3-59 attorney general that a potential ground for removal exists. If the
3-60 potential ground for removal involves a board member elected by the
3-61 policyholders, the board shall act on the potential ground for
3-62 removal as provided by the company's bylaws.
3-63 (h) Subsection (d) of this section does not prohibit a
3-64 person who is only a policyholder or a consumer of insurance or
3-65 insurance products from serving as a member of the board.
3-66 (i) A person who is ineligible to serve on the board under
3-67 Subsection (d) of this section may not serve as a member of the
3-68 board for one year after the date on which the condition that makes
3-69 the person ineligible ends.
4-1 (j) Each member shall receive fees for service on the board
4-2 commensurate with industry standards and actual and necessary
4-3 travel expenses and expenses incurred in the performance of the
4-4 member's duties as a member.
4-5 (k) The governor shall designate a member of the board as
4-6 the chairman of the board to serve in that capacity at the pleasure
4-7 of the governor. The members of the board shall elect annually any
4-8 other officers the board considers necessary for the performance of
4-9 its duties. The board may create committees and subcommittees
4-10 [from their number a vice-chairman and a secretary].
4-11 (l) The board shall hold meetings at least once each
4-12 calendar quarter and at other times at the call of the chairman and
4-13 at times established in the company's bylaws [by board rule].
4-14 Special meetings may be called by any two members of the board on
4-15 two days notice.
4-16 (m) Five [A majority of the] board members constitutes a
4-17 quorum.
4-18 (n) The board shall maintain the principal office of the
4-19 company [fund] in Travis County [Austin], Texas.
4-20 [(o) For cost control purposes and as is determined to be
4-21 cost-effective, as many functions as possible shall be performed by
4-22 the fund.]
4-23 [(p) A person may not serve as a member of the board or act
4-24 as the general counsel to the board or the fund if the person is
4-25 required to register as a lobbyist under Chapter 305, Government
4-26 Code, because of the person's activities for compensation on behalf
4-27 of any person or entity other than the fund.]
4-28 [(q) The board shall develop and implement policies that
4-29 clearly separate the policymaking responsibilities of the board and
4-30 the management responsibilities of the president and the staff of
4-31 the fund.]
4-32 [Sec. 3A. TRAINING PROGRAM FOR BOARD MEMBER. (a) Before a
4-33 member of the board may assume the member's duties, the member must
4-34 complete the training program established under this section.]
4-35 [(b) A training program established under this section shall
4-36 provide information to the member regarding:]
4-37 [(1) the enabling legislation that created the fund
4-38 and the board;]
4-39 [(2) the programs operated by the fund;]
4-40 [(3) the role and functions of the fund;]
4-41 [(4) the current budget for the fund;]
4-42 [(5) the results of the most recent independent audit
4-43 of the fund;]
4-44 [(6) the requirements of:]
4-45 [(A) the open meetings law, Chapter 551,
4-46 Government Code; and]
4-47 [(B) the open records law, Chapter 552,
4-48 Government Code;]
4-49 [(7) the requirements of the conflict of interest laws
4-50 and other laws relating to members of the board; and]
4-51 [(8) any applicable ethics policies adopted by the
4-52 fund or the Texas Ethics Commission.]
4-53 Sec. 4. POWERS AND DUTIES OF BOARD OF DIRECTORS [AUTHORITY
4-54 AND PURPOSE]. (a) The [According to this article and the plan of
4-55 operation, the] board has full power, authority, and jurisdiction
4-56 over the company. The board may perform all acts necessary or
4-57 convenient in the administration of the company or in connection
4-58 with the insurance business to be carried on by the company. In
4-59 this regard, the board is empowered to function in all aspects as a
4-60 governing body of a domestic mutual insurance company. The board
4-61 shall[, on behalf of the fund]:
4-62 (1) provide for the [acceptance of applications and
4-63 delivery or issuance for] delivery in this state of workers'
4-64 compensation insurance and for the transaction of workers'
4-65 compensation insurance business to the same extent as any other
4-66 insurance carrier transacting workers' compensation insurance
4-67 business in this state;
4-68 (2) [enter into and approve contracts;]
4-69 [(3)] propose rates for workers' compensation
5-1 insurance issued by the company [fund];
5-2 [(4) appoint and supervise the activities of the
5-3 president of the fund and other officers and employees;]
5-4 [(5) adopt necessary bylaws and rules for the
5-5 operation of the fund;]
5-6 [(6) delegate specific responsibilities to the
5-7 president of the fund;]
5-8 [(7) develop a general plan of operation, in
5-9 accordance with Section 5 of this article, to assure the orderly
5-10 management and operation of the fund;] and
5-11 (3) [(8)] exercise any other authority necessary to
5-12 conduct a workers' compensation insurance business [for the fund].
5-13 (b) The company [fund] may not have affiliates, interlocking
5-14 boards of directors, spinoffs, or subsidiaries that write lines of
5-15 insurance other than workers' compensation insurance.
5-16 (c) The board shall appoint an internal auditor [in
5-17 compliance with Chapter 2102, Government Code]. The internal
5-18 auditor serves at the pleasure of the board.
5-19 (d) The board shall appoint a president who shall serve at
5-20 the pleasure of the board. The president must have proven
5-21 successful experience as an executive at the general management
5-22 level in the business of insurance. The president shall receive
5-23 compensation as set by the board. [If the fund obtains legal
5-24 services through the use of outside counsel, the attorney general
5-25 shall annually review the use of outside counsel by the fund to
5-26 ensure that:]
5-27 [(1) the use of outside counsel does not result in a
5-28 conflict of interest; and]
5-29 [(2) the persons used as outside counsel comply with
5-30 state and federal policies regarding the treatment of persons who
5-31 are members of minority groups.]
5-32 (e) The company [board] shall provide requested information
5-33 to appropriate legislative committees in the manner requested by
5-34 those committees.
5-35 Sec. 5. [PLAN OF OPERATION. (a) The initial board of
5-36 directors shall prepare and adopt a plan of operation that is
5-37 consistent with this article. The plan must provide for the:]
5-38 [(1) economic, fair, and nondiscriminatory
5-39 administration of the fund and its duties;]
5-40 [(2) prompt and efficient provision of workers'
5-41 compensation insurance;]
5-42 [(3) establishment of necessary facilities;]
5-43 [(4) management of the fund;]
5-44 [(5) reasonable and objective underwriting standards;
5-45 and]
5-46 [(6) obtainment of reinsurance.]
5-47 [(b) The initial plan of operation is subject to approval by
5-48 the State Board of Insurance.]
5-49 [(c) With consent of the State Board of Insurance, the board
5-50 may amend the plan of operation to provide for operation of the
5-51 fund in a manner consistent with this article.]
5-52 [Sec. 6. PRESIDENT AND CHIEF EXECUTIVE OFFICER. (a) The
5-53 board shall appoint a person to serve as president and chief
5-54 executive officer who serves at the pleasure of the board. The
5-55 board shall appoint other officers as necessary to manage the fund
5-56 prudently.]
5-57 [(b) To be eligible for appointment as president, an
5-58 individual must have had at least 10 years of administrative or
5-59 professional experience and training and experience in the field of
5-60 insurance.]
5-61 [(c) The president shall manage and conduct the affairs of
5-62 the fund under the general supervision of the board and shall
5-63 perform duties as provided by this article and as directed by the
5-64 board.]
5-65 [(d) In addition to any other duties provided by this
5-66 article or by the board, the president shall:]
5-67 [(1) hire employees as necessary to conduct the
5-68 business and carry out the provisions of this article or to perform
5-69 the duties imposed on the president by this article;]
6-1 [(2) receive and approve applications for workers'
6-2 compensation insurance and issue policies to applicants who are
6-3 eligible for workers' compensation insurance provided by the fund;]
6-4 [(3) negotiate contracts on behalf of the fund;]
6-5 [(4) issue renewals of workers' compensation insurance
6-6 for those who qualify for renewal;]
6-7 [(5) process and pay valid claims according to the
6-8 rules of the board and the appropriate workers' compensation
6-9 insurance laws;]
6-10 [(6) collect premiums for workers' compensation
6-11 insurance issued or renewed by the fund; and]
6-12 [(7) collect and compile statistical information
6-13 relating to the fund and provide this information to the board.]
6-14 [(e) In addition to any other authority provided by this
6-15 article or by the board, the president shall have full power and
6-16 authority, in the name of the fund, to:]
6-17 [(1) sue and be sued in all of the courts of the state
6-18 in all actions arising out of any act, deed, matter, or things
6-19 made, omitted, entered into, done, or suffered in connection with
6-20 the fund and its administration, management, or conduct of its
6-21 business and affairs;]
6-22 [(2) delegate to any officer of the fund, subject to
6-23 any conditions prescribed by the president, any of the powers,
6-24 functions, or duties conferred or imposed on the president under
6-25 this article in connection with the fund, its administration,
6-26 management, and conduct of business or related affairs; an officer
6-27 to whom such a delegation is made may exercise the delegated powers
6-28 with the same force and effect as the president, subject to
6-29 approval by the president;]
6-30 [(3) inspect and audit employers who apply to the fund
6-31 for issuance of workers' compensation insurance or who seek renewal
6-32 of that insurance;]
6-33 [(4) purchase reinsurance from insurance carriers
6-34 admitted or accredited to reinsure risks in this state;]
6-35 [(5) cancel or refuse to renew workers' compensation
6-36 insurance if a risk does not comply with a board-approved plan or
6-37 any provision of this article;]
6-38 [(6) with the approval of the board, enter into
6-39 contracts on behalf of the fund;]
6-40 [(7) draft guidelines for approval of the board
6-41 relating to the settlement of claims against the fund; and]
6-42 [(8) perform any other acts authorized by the board to
6-43 carry out this article and the rules of the board.]
6-44 [(f) The president shall develop a career ladder program
6-45 that addresses opportunities for mobility and advancement for
6-46 employees within the fund. The program shall require internal
6-47 posting of all positions concurrently with any public posting.]
6-48 [(g) The president shall develop a system of annual
6-49 performance evaluations that are based on documented employee
6-50 performance. All merit pay for fund employees must be based on the
6-51 system established under this subsection.]
6-52 [(h) The president shall prepare and maintain a written
6-53 policy statement to assure implementation of a program of equal
6-54 employment opportunity under which all personnel transactions are
6-55 made without regard to race, color, disability, sex, religion, age,
6-56 or national origin. The policy statement must include:]
6-57 [(1) personnel policies, including policies relating
6-58 to recruitment, evaluation, selection, appointment, training, and
6-59 promotion of personnel that are in compliance with the requirements
6-60 of Chapter 21, Labor Code;]
6-61 [(2) a comprehensive analysis of the fund workforce
6-62 that meets federal and state guidelines;]
6-63 [(3) procedures by which a determination can be made
6-64 about the extent of underuse in the fund workforce of all persons
6-65 for whom federal or state guidelines encourage a more equitable
6-66 balance; and]
6-67 [(4) reasonable methods to appropriately address those
6-68 areas of underuse.]
6-69 [(i) A policy statement prepared under Subsection (h) of
7-1 this section must:]
7-2 [(1) cover an annual period;]
7-3 [(2) be updated annually;]
7-4 [(3) be reviewed annually by the Commission on Human
7-5 Rights for compliance with Subsection (h)(1); and]
7-6 [(4) be filed with the governor's office.]
7-7 [(j) The governor's office shall deliver a biennial report
7-8 to the legislature based on the information received under
7-9 Subsection (i) of this section. The report may be made separately
7-10 or as a part of other biennial reports made to the legislature.]
7-11 [(k) The president shall provide to members of the board and
7-12 to fund employees, as often as necessary, information regarding
7-13 their qualification for office or employment under this article and
7-14 their responsibilities under applicable laws relating to standards
7-15 of conduct for board members or employees.]
7-16 [(l) In hiring employees for the fund under this article,
7-17 the president shall ensure that the fund complies with the minority
7-18 hiring practices guidelines adopted for state agencies and
7-19 institutions by the General Appropriations Act.]
7-20 [Sec. 7.] APPLICATIONS. (a) Applications to the company for
7-21 workers' compensation insurance coverage [fund] shall be submitted
7-22 on forms prescribed by the company [board] and shall be made:
7-23 (1) directly by the applicant; or
7-24 (2) on behalf of the applicant by a local recording
7-25 agent.
7-26 (b) [The fund shall adopt such rules as required to provide
7-27 for the financing of all or part of the premiums by the fund or a
7-28 person licensed under Chapter 24 of this code. Those rules shall
7-29 require that the fund receive a minimum initial premium sufficient
7-30 to cover the administrative costs of issuing and booking the policy
7-31 in the event of cancellation. Those rules shall not unfairly
7-32 discriminate against applicants based upon the amount of premium to
7-33 be paid by the applicant for workers' compensation coverage.
7-34 Notwithstanding the foregoing, the premium financing rules adopted
7-35 by the fund may provide that premium financing shall not be offered
7-36 to any applicant who appears to present an unacceptable credit
7-37 risk.]
7-38 [(c) If the premium is financed by the fund as provided by
7-39 Subsection (b) of this section, the payment deferred earns interest
7-40 payable to the fund at a rate annually determined by the board.]
7-41 [(d)] If an applicant is identified by the company as a
7-42 credit risk, the company [fund] may refuse to write insurance
7-43 coverage if the applicant does not:
7-44 (1) pay the total estimated premium and related
7-45 charges before the policy is issued; or
7-46 (2) provide security for payment of the total
7-47 estimated premium and related charges before the policy is issued.
7-48 (c) [(e)] If the policy is written through a licensed agent,
7-49 the company [fund] shall pay the agent a reasonable commission[.
7-50 The commission shall be paid at the time of the initial deposit,
7-51 based on the annual estimated premium, and shall be adjusted at the
7-52 final audit].
7-53 (d) [(f)] Notwithstanding any other provision of this code
7-54 or another insurance law of this state, the company [fund] is not
7-55 required to appoint a local recording agent to act as an agent for
7-56 the company [fund]. An agent transacting business with the company
7-57 [fund] does so as an agent for the applicant and not as an agent
7-58 for the company, unless there is an express written agreement
7-59 between the company and the agent that the agent acts on behalf of
7-60 the company [fund].
7-61 (e) [(g)] Information submitted to the company [fund] by a
7-62 licensed agent on behalf of an employer, including a policy
7-63 expiration date, is the work product of that agent, and the company
7-64 [fund] may not use that information in any marketing or direct
7-65 sales activity. Except as required or permitted by the open
7-66 records law, Chapter 552, Government Code, the company [fund] may
7-67 not provide information obtained from a licensed agent to any other
7-68 licensed agent. This subsection does not prevent an employer from
7-69 designating another licensed agent or the company [fund] as the
8-1 agent of record and does not prevent the company [fund] from using
8-2 the information submitted to the company [fund] under this
8-3 subsection for the purpose of underwriting or fraud investigation.
8-4 [The fund shall adopt reasonable guidelines in the plan of
8-5 operation to implement this subsection.]
8-6 Sec. 6 [8]. LIABILITY. Neither a member of the board nor
8-7 the president or any officer or employee of the company [fund] is
8-8 personally liable in the person's private capacity for any act
8-9 performed or for any contract or other obligation entered into or
8-10 undertaken in an official capacity in good faith and without intent
8-11 to defraud, in connection with the administration, management, or
8-12 conduct of the company [fund], its business, or other related
8-13 affairs.
8-14 Sec. 7 [9]. RATES. (a) Except as otherwise provided by this
8-15 subsection, the board shall have full power and authority to
8-16 propose rates to be charged by the company [fund] for insurance.
8-17 The board shall engage the services of an independent actuary who
8-18 is a member in good standing with the Casualty Actuarial Society or
8-19 the American Academy of Actuaries to develop and recommend
8-20 actuarially sound rates. The company [fund] is subject to the
8-21 requirements of Article 5.55 of this code and shall include the
8-22 recommendations of its independent actuary as part of its filing
8-23 under that article.
8-24 (b) Rates shall be set in amounts sufficient, when invested,
8-25 to:
8-26 (1) carry all claims to maturity;
8-27 (2) meet the reasonable expenses of conducting the
8-28 business of the company [fund]; and
8-29 (3) maintain a reasonable surplus.
8-30 (c) Notwithstanding any other provision of this code or any
8-31 other insurance law of this state, the company [fund] may establish
8-32 multitiered premium systems to price workers' compensation
8-33 insurance policies to insureds in the company's [fund's]
8-34 competitive programs, as well as to insureds to whom policies are
8-35 offered by the company [fund] under Article 5.76-4 of this code.
8-36 Those multitiered systems shall be filed in accordance with Article
8-37 5.55 of this code. The systems may provide for higher or lower
8-38 premium payments by insureds based on the company's [fund's]
8-39 evaluation of the underwriting characteristics of the individual
8-40 risk and the appropriate premium to be charged for the policy
8-41 coverages.
8-42 Sec. 8 [10]. ACCIDENT PREVENTION. (a) The company [fund]
8-43 may make and enforce requirements [rules] for the prevention of
8-44 injuries to employees of its policyholders or applicants for
8-45 insurance under this article. For this purpose, representatives of
8-46 the company [fund], representatives of the commission, or
8-47 representatives of the department [Texas Department of Insurance]
8-48 on reasonable notice shall be granted free access to the premises
8-49 of each policyholder or applicant during regular working hours.
8-50 (b) Failure or refusal by any such policyholder or applicant
8-51 to comply with any requirement [rule] prescribed by the company
8-52 [fund] for the prevention of injuries, or failure or refusal to
8-53 make full disclosure of all information pertinent to the insuring
8-54 or servicing of the policyholder or applicant, constitutes
8-55 sufficient grounds for the company [fund] to cancel a policy or
8-56 deny an application for insurance.
8-57 (c) A policyholder in the company [fund] who is insured
8-58 under Article 5.76-4 of this code shall obtain a safety
8-59 consultation if the policyholder:
8-60 (1) has a Texas experience modifier greater than 1.25;
8-61 (2) has a national experience modifier greater than
8-62 1.25 and estimated premium allocable to Texas of $2,500 or more; or
8-63 (3) does not have an experience modifier but has had a
8-64 loss ratio greater than 0.70 in at least two of the three most
8-65 recent policy years for which information is available.
8-66 (d) A policyholder in the company [fund] who is insured
8-67 under Article 5.76-4 of this code shall obtain a safety
8-68 consultation as required by the company [fund] if the policyholder:
8-69 (1) has been in business for less than three years;
9-1 and
9-2 (2) meets criteria for a safety consultation
9-3 established by the company [fund], which may include the number and
9-4 classification of employees, the policyholder's industry, and the
9-5 policyholder's previous workers' compensation experience in this
9-6 state or another jurisdiction.
9-7 (e) The policyholder shall obtain the safety consultation
9-8 not later than the 30th day after the effective date of the policy
9-9 and shall obtain the safety consultation from the division of
9-10 workers' health and safety [division] of the commission, the
9-11 company [fund], or another professional source approved for that
9-12 purpose by the division of workers' health and safety [division].
9-13 The safety consultant shall file a written report with the
9-14 commission and the policyholder setting out any hazardous
9-15 conditions or practices identified by the safety consultation.
9-16 (f) The policyholder and the consultant shall develop a
9-17 specific accident prevention plan that addresses the hazards
9-18 identified by the consultant. The safety consultant may approve an
9-19 existing accident prevention plan. The policyholder shall comply
9-20 with the accident prevention plan.
9-21 (g) The division of workers' health and safety of the
9-22 commission [division] may investigate accidents occurring at the
9-23 work sites of a policyholder for whom a plan has been developed
9-24 under Subsection (f) of this section, and the division may
9-25 otherwise monitor the implementation of the accident prevention
9-26 plan as it finds necessary.
9-27 (h) In accordance with rules adopted by the commission, not
9-28 earlier than 90 days or later than six months after the development
9-29 of an accident prevention plan under Subsection (f) of this
9-30 section, the division of workers' health and safety [division] of
9-31 the commission shall conduct a follow-up inspection of the
9-32 policyholder's premises. The commission may require the
9-33 participation of the safety consultant who performed the initial
9-34 consultation and developed the safety plan. If the [health and
9-35 safety] division [of the commission] determines that the
9-36 policyholder has complied with the terms of the accident prevention
9-37 plan or has implemented other accepted corrective measures, the
9-38 [health and safety] division shall so certify. If a policyholder
9-39 fails or refuses to implement the accident prevention plan or other
9-40 suitable hazard abatement measures, the policyholder may elect to
9-41 cancel coverage not later than the 30th day after the date of the
9-42 division determination. If the policyholder does not elect to
9-43 cancel, the company [fund] may cancel the coverage or the
9-44 commission may assess an administrative penalty not to exceed
9-45 $5,000. Each day of noncompliance constitutes a separate
9-46 violation. Penalties collected under this section shall be
9-47 deposited in the general revenue fund to the credit of the
9-48 commission or reappropriated to the commission to offset the costs
9-49 of implementing and administering this section.
9-50 (i) In assessing an administrative penalty, the commission
9-51 may consider any matter that justice may require and shall
9-52 consider:
9-53 (1) the seriousness of the violation, including the
9-54 nature, circumstances, consequences, extent, and gravity of the
9-55 prohibited act;
9-56 (2) the history and extent of previous administrative
9-57 violations;
9-58 (3) the demonstrated good faith of the violator,
9-59 including actions taken to rectify the consequences of the
9-60 prohibited act;
9-61 (4) any economic benefit resulting from the prohibited
9-62 act; and
9-63 (5) the penalty necessary to deter future violations.
9-64 (j) The procedures established under this section must be
9-65 followed each year the policyholder meets the qualifications
9-66 established under Subsection (c) of this section and is insured
9-67 through Article 5.76-4 of this code.
9-68 (k) The commission shall charge the policyholder for the
9-69 reasonable cost of services provided under Subsections (e), (f),
10-1 and (h) of this section. The fees for those services shall be set
10-2 at a cost-reimbursement level including a reasonable allocation of
10-3 the commission's administrative costs.
10-4 (l) The compliance and practices division of the commission
10-5 shall enforce compliance with this section through the
10-6 administrative violation proceedings under Chapter 415, Labor Code.
10-7 Sec. 9 [11]. CONTROL OF FRAUD. (a) The company [fund] shall
10-8 develop and implement a program to identify and investigate fraud
10-9 and violations of this code relating to workers' compensation
10-10 insurance by an applicant, policyholder, claimant, agent, insurer,
10-11 health care provider, or other person. The company [fund] shall
10-12 cooperate [contract] with the commission to compile and maintain
10-13 information necessary to detect practices or patterns of conduct
10-14 that violate this code relating to the workers' compensation
10-15 insurance or Subtitle A, Title 5, Labor Code (the Texas Workers'
10-16 Compensation Act).
10-17 (b) The company [fund] may conduct investigations of cases
10-18 of suspected fraud and violations of this code relating to workers'
10-19 compensation insurance. The company may [fund shall]:
10-20 (1) coordinate its investigations with those conducted
10-21 by the commission to avoid duplication of efforts; and
10-22 (2) refer cases that are not otherwise resolved by the
10-23 company [fund] to the commission to:
10-24 (A) perform any further investigations that are
10-25 necessary under the circumstances;
10-26 (B) conduct administrative violation
10-27 proceedings; and
10-28 (C) assess and collect penalties and
10-29 restitution.
10-30 (c) The company [fund] may enter into [interdepartmental]
10-31 funding agreements with local prosecutors for the prosecution of
10-32 offenses against the company [fund].
10-33 (d) Restitution collected under Subsection (b) of this
10-34 section shall be paid [deposited] to the company [fund].
10-35 (e) Penalties collected under Subsection (b) of this section
10-36 shall be deposited in the general revenue fund to the credit of the
10-37 commission and shall be appropriated to the commission to offset
10-38 the costs of this program.
10-39 (f) The board, company [fund], and employees of the company
10-40 [fund] are not liable in a civil action for any action made in good
10-41 faith in the execution of duties under this section including the
10-42 identification and referral of a person for investigation and
10-43 prosecution for a possible administrative violation or criminal
10-44 offense.
10-45 Sec. 10 [11A]. INVESTIGATION FILES CONFIDENTIAL. (a)
10-46 Information maintained in the investigation files of the company
10-47 [fund] is confidential and may not be disclosed except:
10-48 (1) in a criminal proceeding;
10-49 (2) in a hearing conducted by the [fund or the]
10-50 commission;
10-51 (3) on a judicial determination of good cause; or
10-52 (4) to a governmental agency, political subdivision,
10-53 or regulatory body if the disclosure is necessary or proper for the
10-54 enforcement of the laws of this or another state or of the United
10-55 States.
10-56 (b) Company [Fund] investigation files are not open records
10-57 for purposes of the open records law, Chapter 552, Government Code.
10-58 (c) Information in an investigation file that is information
10-59 in or derived from a claim file, or an employer injury report or
10-60 occupational disease report, is governed by the confidentiality
10-61 provisions relating to that information.
10-62 (d) For purposes of this section, "investigation file" means
10-63 any information compiled or maintained by the company [fund] with
10-64 respect to a company [fund] investigation authorized by law.
10-65 Sec. 11 [12]. PAYMENT OF TAXES AND FEES; GUARANTY
10-66 ASSOCIATION. (a) The company [fund] shall pay premium taxes,
10-67 maintenance taxes, and the maintenance tax surcharge established
10-68 under Article 5.76-5 of this code in the same manner as a domestic
10-69 mutual [an] insurance carrier authorized by the department [Texas
11-1 Department of Insurance] to write workers' compensation insurance
11-2 in this state.
11-3 (b) The company [fund] shall pay taxes and fees or any
11-4 payments due in lieu of taxes in the same manner as a domestic
11-5 mutual [an] insurance carrier authorized and admitted by the
11-6 department [Texas Department of Insurance] to engage in the
11-7 business of [do] insurance [business] in this state under a
11-8 certificate of authority that includes authorization to write
11-9 workers' compensation insurance.
11-10 (c) The company [fund] is a member of and is protected by
11-11 the Texas Property and Casualty Insurance Guaranty Association.
11-12 The company [fund] is subject to assessment under the Texas
11-13 Property and Casualty Insurance Guaranty Act (Article 21.28-C,
11-14 Insurance Code).
11-15 (d) Notwithstanding any other provision of this section, the
11-16 company is only liable for assessments by the Texas Property and
11-17 Casualty Insurance Guaranty Association regarding, and that
11-18 association, with respect to an insolvency of the company, is only
11-19 liable for, a claim with a date of injury that occurs on or after
11-20 January 1, 2000.
11-21 Sec. 12 [13]. FINANCIAL ADMINISTRATION; NO STATE LIABILITY.
11-22 (a) All revenues, monies, and assets of the company belong solely
11-23 to the company and are governed by the laws applicable to domestic
11-24 mutual insurance companies. The State of Texas covenants with the
11-25 policyholders of the company, persons receiving workers'
11-26 compensation benefits, and the company's creditors that the state
11-27 will not borrow, appropriate, or direct payments from those
11-28 revenues, monies, and/or assets for any purpose. The state has no
11-29 liability to or responsibility to the policyholders, persons
11-30 receiving workers' compensation benefits, or the creditors of the
11-31 company if the company is placed in conservatorship or
11-32 receivership, or becomes insolvent [Revenues of the fund consist
11-33 of:]
11-34 [(1) premiums paid by employers for workers'
11-35 compensation insurance from the fund;]
11-36 [(2) investments and money earned from investments of
11-37 the fund;]
11-38 [(3) money received from the issuance and sale of
11-39 bonds under Article 5.76-5 of this code; and]
11-40 [(4) any other money received by the fund].
11-41 (b) [Administrative expenses of the fund shall be paid from
11-42 the fund at the direction of the board.]
11-43 [(c) Money in the fund shall be paid from the fund, without
11-44 legislative appropriation, on vouchers approved by the board. That
11-45 money shall be held exclusively for the purposes stated in this
11-46 article and may not be used or appropriated for any other purpose.]
11-47 [(d) Money in the fund shall be invested, subject to a
11-48 policy developed by the board and approved by the comptroller
11-49 commissioner, in the types of investments authorized by law for an
11-50 insurer authorized to write workers' compensation insurance
11-51 coverage in this state.]
11-52 [(e)] The company [fund] shall establish and maintain
11-53 reserves for losses on an actuarially sound basis in accordance
11-54 with Article 5.61 of this code.
11-55 (c) [(f)] The company [fund] must maintain a ratio of net
11-56 written premiums on policies written after reinsurance to surplus
11-57 of not more than [:]
11-58 [(1) 3.1 to one, for the period beginning on September
11-59 1, 1997 and extending through August 31, 1998; and]
11-60 [(2)] 3.0 to one [on and after September 1, 1998].
11-61 [(g) Not more than once in any calendar year, the board may
11-62 use up to 20 percent of any surplus that exceeds the ratio
11-63 specified in Subsection (f) of this section to assist in prepaying
11-64 or retiring before maturity the bonds issued pursuant to Article
11-65 5.76-5, Insurance Code.]
11-66 (d) [(h)] The company [fund] may pay cash dividends or allow
11-67 a credit on renewal premium for policyholders [each policyholder]
11-68 insured with the company [fund] other than a policyholder insured
11-69 under Article 5.76-4 of this code, in accordance with criteria
12-1 approved by the board, which may consider the policyholder's
12-2 safety record and performance. A dividend or credit requires prior
12-3 approval of the department.
12-4 (e) [(i)] The company [fund] shall file annual statements
12-5 with the department and the commission in the same manner as
12-6 required of other workers' compensation insurance carriers, and the
12-7 commissioner shall include a report on the company's [fund's]
12-8 condition in the commissioner's annual report under Section 32.021
12-9 [Article 1.25] of this code.
12-10 (f) [(j) If the fund incurs a deficit for any reason, no
12-11 other insurer is liable for or subject to an assessment for that
12-12 deficit.]
12-13 [(l)] Notwithstanding any other law, the company [fund] may
12-14 issue grants to the commission [Texas Workers' Compensation
12-15 Commission] as provided by Section 402.062, Labor Code. Funding
12-16 for a grant under this subsection may come only from the company's
12-17 surplus. The amount of the grants may [grant is] not [to] exceed
12-18 $2.2 million for the four-year period of September 1, 1999, through
12-19 September 1, 2003. This subsection expires September 1, 2003.
12-20 Sec. 13 [14]. REPORT TO BOARD. The president shall make
12-21 periodic reports to the board with regard to the status of the
12-22 company [fund] and its investments.
12-23 Sec. 14 [15]. POLICY FORMS. The company [fund] shall use
12-24 the uniform policy and standard policy forms prescribed by the
12-25 department [State Board of Insurance] under Articles 5.56 and 5.57
12-26 of this code.
12-27 Sec. 15 [16]. CANCELLATION AND NONRENEWAL. The company
12-28 [fund] may cancel or refuse to renew coverage on a policyholder as
12-29 provided by Section 406.008, Labor Code.
12-30 Sec. 16 [17]. ANNUAL REPORT; OTHER REPORTS. (a) The board
12-31 shall publish an independently audited report analyzing the
12-32 company's [fund's] activities and fiscal condition during the
12-33 preceding fiscal year and shall file the report with the department
12-34 [Texas Department of Insurance]. The board shall file the audited
12-35 report with the department [Texas Department of Insurance] for
12-36 submission simultaneously with its annual financial report. [The
12-37 board's annual financial report shall be submitted by the Texas
12-38 Department of Insurance by the date provided for in the General
12-39 Appropriations Act.]
12-40 (b) The company [fund] shall file with the department [State
12-41 Board of Insurance] and the commission all reports required of
12-42 other workers' compensation insurers.
12-43 Sec. 17 [17A]. ADDITIONAL AUDIT REQUIREMENTS; INTERNAL AUDIT
12-44 REPORT. (a) [The state auditor shall periodically identify issues
12-45 related to the operational efficiency, effectiveness, and statutory
12-46 compliance of the fund. The fund shall include all issues
12-47 identified by the state auditor in the fund's annual independent
12-48 and internal audit plans.]
12-49 [(b)] Each person who conducts an independent audit or
12-50 internal audit of the company [fund] shall send a copy of the audit
12-51 report prepared by the person to the office of the state auditor.
12-52 The state auditor shall summarize the audit reports presented under
12-53 this subsection in an annual memorandum to the Legislative Audit
12-54 Committee.
12-55 (b) [(c)] The internal auditor appointed under Section 4 of
12-56 this article shall submit the internal audit report directly to the
12-57 board and shall provide a summary of the report to the governor,
12-58 lieutenant governor, and speaker of the house of representatives.
12-59 The internal auditor's summary report must include an analysis of
12-60 the use by the company [fund] of historically underutilized
12-61 businesses. For purposes of this subsection, "historically
12-62 underutilized business" has the meaning assigned by Section
12-63 2161.001, Government Code [1.02, State Purchasing and General
12-64 Services Commission Act (Article 601b, Vernon's Texas Civil
12-65 Statutes)].
12-66 Sec. 18. EXAMINATION OF COMPANY [FUND]. (a) The department
12-67 [State Board of Insurance] shall conduct an examination of the
12-68 company [fund] in the manner and under the conditions provided by
12-69 Articles 1.15 through 1.19 of this code for the examination of
13-1 insurance carriers.
13-2 (b) The company [board] shall pay the costs of the
13-3 examination [from the fund].
13-4 (c) The company [fund] is subject to all provisions of this
13-5 code and to the jurisdiction of the commissioner [of insurance] and
13-6 the department [State Board of Insurance] in the same manner as
13-7 private insurance carriers.
13-8 Sec. 19. [ASSISTANCE FROM INSURANCE DEPARTMENT. On the
13-9 request of the board, the Texas Department of Insurance shall
13-10 provide technical assistance to the board and the president as
13-11 reasonably necessary to implement this article.]
13-12 [Sec. 19A.] PUBLIC INFORMATION; ACCESSIBILITY. (a) The
13-13 company [fund] shall prepare information of public interest
13-14 describing the functions of the company [fund] and the procedures
13-15 by which complaints are filed with and resolved by the company
13-16 [fund]. The company [fund] shall make the information available to
13-17 the public and appropriate state agencies.
13-18 (b) The company [board] shall establish methods by which
13-19 consumers and service recipients are notified of the name, mailing
13-20 address, and telephone number of the company [fund] for the purpose
13-21 of directing complaints to the company [fund]. The company [board]
13-22 may provide for that notification:
13-23 (1) by a supplement or endorsement to a written
13-24 policy;
13-25 (2) on a sign prominently displayed in the place of
13-26 business of each regional office of the company [fund]; or
13-27 (3) in a bill for services provided by the company
13-28 [fund].
13-29 (c) The company [fund] shall comply with federal and state
13-30 laws related to program and facility accessibility. The president
13-31 shall also prepare and maintain a written plan that describes how a
13-32 person who does not speak English can be provided reasonable access
13-33 to the company's [fund's] programs and services.
13-34 (d) The board shall develop and implement policies that
13-35 provide the public with a reasonable opportunity to appear before
13-36 the board and to speak on any issue under the jurisdiction of the
13-37 company [fund].
13-38 Sec. 20 [19B]. COMPLAINT RESOLUTION. (a) The company [fund]
13-39 shall keep information about each written complaint submitted to
13-40 the company [fund]. The information shall include:
13-41 (1) the date the complaint is received;
13-42 (2) the name of the complainant;
13-43 (3) the subject matter of the complaint;
13-44 (4) a record of all persons contacted in relation to
13-45 the complaint;
13-46 (5) a summary of the results of the review or
13-47 investigation of the complaint; and
13-48 (6) for complaints for which the company [fund] took
13-49 no action, an explanation of the reason the complaint was closed
13-50 without action.
13-51 (b) For each written complaint that the company [fund] has
13-52 authority to resolve, the company [fund] shall provide to the
13-53 person filing the complaint and the persons or entities complained
13-54 about the company's [fund's] policies and procedures pertaining to
13-55 complaint investigation and resolution. The company [fund], at
13-56 least quarterly and until final disposition of the complaint, shall
13-57 notify the person filing the complaint and the persons or entities
13-58 complained about of the status of the complaint unless the notice
13-59 would jeopardize an undercover investigation.
13-60 [Sec. 20. FUND SOLVENCY. (a) In addition to other
13-61 regulatory authority granted the commissioner of insurance, if the
13-62 commissioner finds that the fund does not own assets at least equal
13-63 to all liabilities and required reserves, together with the minimum
13-64 basic surplus required under this article, or that the condition of
13-65 the fund is such that continuing operation of the fund is hazardous
13-66 to the public or to the policyholders of the fund, the commissioner
13-67 shall:]
13-68 [(1) notify the president and board of the finding;
13-69 and]
14-1 [(2) furnish the fund with a written list of the
14-2 commissioner's recommendations to abate the problems.]
14-3 [(b) If the fund fails to comply with the recommendations of
14-4 the commissioner not later than the 60th day after the date of the
14-5 recommendations, the commissioner shall notify the governor, the
14-6 lieutenant governor, and the speaker of the house of
14-7 representatives of the recommendations with which the fund is not
14-8 in compliance, together with solutions and estimations of all
14-9 fiscal implications.]
14-10 Sec. 21. APPLICABILITY OF OTHER STATUTES; COMPANY NOT STATE
14-11 AGENCY. (a) The company [fund] is an insurance company for
14-12 purposes of Subtitle A, Title 5, Labor Code (the Texas Workers'
14-13 Compensation Act).
14-14 (b) All regulatory authority granted to the commissioner [of
14-15 insurance] relating to a [stock or] mutual insurance company is
14-16 applicable to the company [fund].
14-17 (c) The company [Unless specifically defined as a state
14-18 agency in a specific statute, the fund] is not a state agency.
14-19 Sec. 22. TMIC STABILIZATION FUND. (a) In this section:
14-20 (1) "Hazard Group III and IV" means the classification
14-21 codes listed in the Table of Classifications by Hazard Group,
14-22 "Texas Retrospective Rating Plan Manual, Workers' Compensation and
14-23 Employers Liability Insurance."
14-24 (2) "Net underwriting loss" means the company's net
14-25 premiums earned less total losses and expenses. Recoveries from
14-26 the TMIC stabilization fund may not be included in computing the
14-27 net underwriting loss.
14-28 (3) "Net written premium" means premium income
14-29 retained by the company, directly or through reinsurance, after
14-30 payments made for reinsurance.
14-31 (4) "Reserves" means an amount representing
14-32 liabilities for losses, loss adjustment expenses, and reinsurance
14-33 payable on paid loss and loss adjustment expenses, as reflected in
14-34 the company's annual statement prepared in accordance with
14-35 statutory accounting principles.
14-36 (5) "Statutory accounting principles" means those
14-37 principles that must be followed by an insurance company when
14-38 submitting its financial statements to the department.
14-39 (6) "Surplus" means the amount by which the value of
14-40 the company's assets exceeds its liabilities.
14-41 (7) "TMIC stabilization fund" means the Texas Mutual
14-42 Insurance Company stabilization fund established under this
14-43 section.
14-44 (b) The TMIC stabilization fund is established as a special
14-45 fund of the company with the comptroller to be used for the sole
14-46 benefit of the company. The comptroller is the custodian of the
14-47 TMIC stabilization fund. The TMIC stabilization fund is composed of
14-48 the initial deposit made under this section and any net investment
14-49 income accruing to the fund. Not later than October 15, 2001, the
14-50 company shall make a one-time deposit from its surplus of $150
14-51 million in cash or securities to the TMIC stabilization fund. The
14-52 comptroller shall invest the monies in the TMIC stabilization fund
14-53 only as directed by the company and may sell fund investments only
14-54 as directed by the company. The State of Texas covenants with the
14-55 policyholders of the company, the persons receiving workers'
14-56 compensation benefits through the company, and the creditors of the
14-57 company that the state will not borrow, appropriate, or direct
14-58 payments from the TMIC stabilization fund for any purpose. The TMIC
14-59 stabilization fund may not be used by or for the benefit of the
14-60 state or for the benefit of a creditor of the state and may not be
14-61 commingled with other assets.
14-62 (c) Beginning in 2003, and not later than April 1 of that
14-63 year and each subsequent year, the company's independent auditor
14-64 shall provide to the company's board of directors and president a
14-65 report stating:
14-66 (1) the company's net written premium to surplus ratio
14-67 as of the end of the preceding calendar year, computed in
14-68 accordance with statutory accounting principles; and
14-69 (2) the company's reserves to surplus ratio as of the
15-1 end of the preceding calendar year, computed in accordance with
15-2 statutory accounting principles.
15-3 (d) If the company's independent auditor reports that the
15-4 company's net written premium to surplus ratio for the preceding
15-5 calendar year exceeded 1 to 1, the company's independent auditor
15-6 shall specify the amount of monies needed to establish a 1 to 1
15-7 ratio. If the company's independent auditor reports that the
15-8 company's reserves to surplus ratio for the preceding calendar year
15-9 exceeded 1 to 1, the company's independent auditor shall specify
15-10 the amount of monies needed to establish a 1 to 1 ratio.
15-11 (e) Based on the independent auditor's report as provided by
15-12 Subsection (c) of this section, not later than April 15 of each
15-13 year the company's president shall certify to the comptroller the
15-14 amount to be issued from the TMIC stabilization fund for deposit
15-15 into the company's surplus to restore the applicable ratio to 1 to
15-16 1. The comptroller shall issue payments to the company not later
15-17 than the 30th day after the date on which the comptroller receives
15-18 the president's written certification.
15-19 (f) The company shall recover net underwriting losses for
15-20 Hazard Group III and IV policies and policies with a premium of
15-21 $10,000 or less from the TMIC stabilization fund, for the preceding
15-22 calendar year, as specified by Subsections (g) and (h) of this
15-23 section.
15-24 (g) Beginning in 2002, and not later than April 1 of each
15-25 year, the company's independent auditor shall provide to the
15-26 company's board of directors and president a report stating:
15-27 (1) the company's net underwriting loss for the
15-28 preceding calendar year, if any, for Hazard Group III and IV
15-29 policies; and
15-30 (2) the company's net underwriting loss, if any, for
15-31 policies with a premium of $10,000 or less.
15-32 (h) Based on the company's independent auditor's report as
15-33 provided by Subsection (g), if there is a net underwriting loss for
15-34 Hazard Group III and IV policies and/or policies with a premium of
15-35 $10,000 or less, the company's president, on or before April 15 of
15-36 each year, shall certify to the comptroller the amount of the net
15-37 underwriting loss to be recovered from the TMIC stabilization fund
15-38 for deposit into the company's operating income. The comptroller
15-39 shall issue payments to the company under this subsection not later
15-40 than the 30th day after the date on which the comptroller receives
15-41 the president's written certification.
15-42 ARTICLE 2. CONFORMING AMENDMENTS
15-43 SECTION 2.01. Article 5.76-4, Insurance Code, is amended to
15-44 read as follows:
15-45 Art. 5.76-4. COMPANY [FUND] AS INSURER OF LAST RESORT. (a)
15-46 The Texas Mutual [Workers' Compensation] Insurance Company [Fund]
15-47 may not, except as otherwise provided by this article and by
15-48 Section 15 [16], Article 5.76-3 of this code, refuse to insure any
15-49 risk that tenders the necessary premium and any applicable accident
15-50 prevention service fees.
15-51 (b) If an applicant to the company [fund] would be rejected
15-52 for workers' compensation insurance under the company's [fund's]
15-53 underwriting standards, the risk may not be rejected, but shall be
15-54 insured at a higher premium as provided by the company's
15-55 requirements [fund's rules]. The risk may be required to meet
15-56 other conditions considered necessary to protect the company's
15-57 [fund's] interests.
15-58 (c) The company [fund] shall develop statistical and other
15-59 information as necessary to allow the company [fund] to distinguish
15-60 between its writings in the voluntary market and its writings as
15-61 the insurer of last resort.
15-62 (d) The company [fund] shall decline to insure any risk if
15-63 insuring that risk would cause the company [fund] to exceed the
15-64 premium-to-surplus ratios established by Article 5.76-3 of this
15-65 code or if the risk is not in good faith entitled to insurance
15-66 through the company [fund]. For purposes of this subsection only,
15-67 "good faith" means honesty in fact in any conduct or transaction.
15-68 (e) The department [Texas Department of Insurance] shall
15-69 develop and publish classification relativities specifically
16-1 designed for the risks insured under this article.
16-2 (f) The company [fund] and the Texas workers' compensation
16-3 insurance facility may exchange information relating to actual or
16-4 suspected fraud by any applicant, policyholder, claimant, agent, or
16-5 insurer with respect to workers' compensation insurance policies
16-6 issued by, or applications for coverage submitted to, the facility
16-7 or the company [fund]. That information may be kept confidential
16-8 and is not subject to disclosure under the open records act,
16-9 Chapter 424, Acts of the 63rd Legislature, Regular Session, 1973
16-10 (Article 6252-17a, Vernon's Texas Civil Statutes).
16-11 (g) If the company [fund] suspects fraud or identifies
16-12 conditions that may result in acts of fraud, the company [fund] may
16-13 require an applicant for workers' compensation insurance coverage
16-14 who is identified as a risk for purposes of Subsection (b) of this
16-15 article to insure all business entities that are commonly owned or
16-16 commonly controlled by the applicant.
16-17 (h) The company [fund] shall report the statistical and
16-18 other information developed under Subsection (c) of this article on
16-19 request to the [Texas Workers' Compensation] Research and Oversight
16-20 Council on Workers' Compensation [Center and the legislative
16-21 oversight committee on workers' compensation], or to any successor
16-22 entity for research and oversight of the workers' compensation
16-23 system of this state.
16-24 SECTION 2.02. Article 5.76-5, Insurance Code, is amended by
16-25 adding Section 15 to read as follows:
16-26 Sec. 15. APPLICATION TO TEXAS MUTUAL INSURANCE COMPANY. (a)
16-27 Notwithstanding any other provision of this article, effective
16-28 September 1, 2001:
16-29 (1) the fund is operated as the Texas Mutual Insurance
16-30 Company as provided by Article 5.76-3 of this code; and
16-31 (2) additional bonds may not be issued under this
16-32 article.
16-33 (b) The Texas Mutual Insurance Company may exercise any
16-34 power, and is liable to perform any duty, imposed on the fund as
16-35 this article existed immediately before September 1, 2001.
16-36 SECTION 2.03. Section 1(2), Article 5.55, Insurance Code, is
16-37 amended to read as follows:
16-38 (2) "Insurer" means a person authorized and admitted
16-39 by the Texas Department of Insurance to do insurance business in
16-40 this state under a certificate of authority that includes
16-41 authorization to write workers' compensation insurance. The term
16-42 includes the Texas Mutual [Workers' Compensation] Insurance Company
16-43 [Fund].
16-44 SECTION 2.04. Article 5.59, Insurance Code, is amended to
16-45 read as follows:
16-46 Art. 5.59. MAY REQUIRE SWORN STATEMENTS. The department
16-47 [Board] may require sworn statements from any insurance company,
16-48 including [or] the Texas Mutual [Workers' Compensation] Insurance
16-49 Company, [Fund] showing the payroll reported to the company [it]
16-50 and incurred losses by classifications and such other information
16-51 which in the judgment of the department [Board] may be necessary to
16-52 carry out its duties. The department [Board] shall prescribe the
16-53 necessary forms for such statements and reports, having due regard
16-54 to the methods and forms in use in other states for similar purpose
16-55 in order that uniformity of statistics may not be disturbed.
16-56 SECTION 2.05. Article 5.60(c), Insurance Code, is amended to
16-57 read as follows:
16-58 (c) This subchapter may not be construed to prohibit any
16-59 stock company, mutual company, including the Texas Mutual Insurance
16-60 Company, reciprocal or interinsurance exchange, [the Texas Workers'
16-61 Compensation Insurance Fund,] or Lloyd's plan [association] from
16-62 issuing participating policies; however, a dividend to
16-63 policyholders under Subtitle A, Title 5, Labor Code, [the Texas
16-64 Workers' Compensation Act (Article 8308-1.01 et seq., Vernon's
16-65 Texas Civil Statutes)] may not take effect until approved by the
16-66 department [Board]. Such a dividend may not be approved until
16-67 adequate reserves have been provided, those reserves to be computed
16-68 on the same basis for all classes of companies operating under this
16-69 subchapter.
17-1 SECTION 2.06. Article 5.65C(d), Insurance Code, is amended to
17-2 read as follows:
17-3 (d) If a policyholder commits an administrative violation
17-4 under this article and obtains workers' compensation insurance
17-5 coverage at a premium less than the premium that would have been
17-6 charged had the policyholder not committed the administrative
17-7 violation, the policyholder is liable to the insurer for the
17-8 difference between the premium due and the premium actually
17-9 charged, plus reasonable interest and reasonable attorney fees. For
17-10 the purposes of this subsection, "insurer" includes the [Texas
17-11 workers' compensation insurance facility and the] Texas Mutual
17-12 [Workers' Compensation] Insurance Company [Fund].
17-13 SECTION 2.07. Section 3(b), Article 21.28-C, Insurance Code,
17-14 is amended to read as follows:
17-15 (b) This Act applies to insurance written through the Texas
17-16 Mutual [Workers' Compensation] Insurance Company [Fund] only as
17-17 provided by this subsection. The application of this article to
17-18 the Texas Mutual [Workers' Compensation] Insurance Company [Fund]
17-19 is on a prospective basis on and after January 1, 2000. That
17-20 company [fund] is only liable for assessments for a claim with a
17-21 date of injury that occurs on or after January 1, 2000. The
17-22 association, with respect to an insolvency of the company [fund],
17-23 is only liable for a claim with a date of injury that occurs on or
17-24 after January 1, 2000.
17-25 SECTION 2.08. Section 402.062(b), Labor Code, is amended to
17-26 read as follows:
17-27 (b) Notwithstanding Chapter 575, Government Code, the
17-28 commission may accept a grant paid by [from] the Texas Mutual
17-29 [Workers' Compensation] Insurance Company [Fund] established under
17-30 Article 5.76-3, Insurance Code, to implement specific steps to
17-31 control and lower medical costs in the workers' compensation system
17-32 and to ensure the delivery of quality medical care. The commission
17-33 must publish the name of the grantor and the purpose and conditions
17-34 of the grant in the Texas Register and provide for a 20-day public
17-35 comment period before the commission may accept the grant. The
17-36 commission shall acknowledge acceptance of the grant at a public
17-37 meeting. The minutes of the public meeting must include the name
17-38 of the grantor, a description of the grant, and a general statement
17-39 of the purposes for which the grant will be used.
17-40 SECTION 2.09. Section 404.002(b), Labor Code, is amended to
17-41 read as follows:
17-42 (b) The council shall conduct professional studies and
17-43 research related to:
17-44 (1) the delivery of benefits;
17-45 (2) litigation and controversy related to workers'
17-46 compensation;
17-47 (3) insurance rates and rate-making procedures;
17-48 (4) rehabilitation and reemployment of injured
17-49 workers;
17-50 (5) workplace health and safety issues;
17-51 (6) the quality and cost of medical benefits;
17-52 (7) the Texas Mutual [Workers' Compensation] Insurance
17-53 Company [Fund] and the impact of that company [fund] on the
17-54 workers' compensation system; and
17-55 (8) other matters relevant to the cost, quality, and
17-56 operational effectiveness of the workers' compensation system.
17-57 SECTION 2.10. Section 404.007(a), Labor Code, is amended to
17-58 read as follows:
17-59 (a) The board shall:
17-60 (1) approve the operating budget of the council;
17-61 (2) adopt rules for the operations of the board and
17-62 the council;
17-63 (3) conduct professional studies and research on all
17-64 matters relevant to the cost, quality, and operational
17-65 effectiveness of the workers' compensation system;
17-66 (4) monitor the cost of income benefits under this
17-67 subtitle, with emphasis on the availability and cost of
17-68 supplemental income benefits;
17-69 (5) monitor the performance and operation of the Texas
18-1 Mutual [Workers' Compensation] Insurance Company [Fund], with
18-2 emphasis on the insurer of last resort program;
18-3 (6) hold regular public hearings and receive testimony
18-4 and reports from:
18-5 (A) the commission;
18-6 (B) the Texas Mutual [Workers' Compensation]
18-7 Insurance Company [Fund];
18-8 (C) the Texas Department of Insurance;
18-9 (D) the State Office of Risk Management; and
18-10 (E) any other public or private entity that is
18-11 involved in the workers' compensation system;
18-12 (7) receive information about workers' compensation
18-13 rules and operations of an entity listed in Subdivision (6); and
18-14 (8) review specific recommendations for legislation
18-15 relating to the Texas Workers' Compensation Act formally proposed
18-16 by an entity listed in Subdivision (6).
18-17 SECTION 2.11. Section 404.010(a), Labor Code, is amended to
18-18 read as follows:
18-19 (a) As required to fulfill the objectives of the council,
18-20 the council is entitled to access to the files and records of:
18-21 (1) the commission;
18-22 (2) the Texas Workforce Commission;
18-23 (3) the Texas Department of Insurance;
18-24 (4) the Texas Department of Human Services;
18-25 (5) the Texas Mutual [Workers' Compensation] Insurance
18-26 Company [Fund]; and
18-27 (6) other state agencies.
18-28 SECTION 2.12. Section 418.002(c), Labor Code, is amended to
18-29 read as follows:
18-30 (c) The court may order a person to pay restitution to an
18-31 insurance company, including [the Texas workers' compensation
18-32 insurance facility, or] the Texas Mutual [Workers' Compensation]
18-33 Insurance Company, [Fund] if the person commits an offense under
18-34 this section.
18-35 ARTICLE 3. TRANSITION; EFFECTIVE DATE
18-36 SECTION 3.01. GENERAL TRANSITION. (a) The Texas Mutual
18-37 Insurance Company may exercise all the rights, privileges, powers,
18-38 and authority of any other mutual insurance company organized to
18-39 transact workers' compensation insurance business in this state,
18-40 subject to the requirements of Article 5.76-3, Insurance Code, as
18-41 amended by this Act. On the effective date of this Act:
18-42 (1) the company is considered to be a continuation of
18-43 the Texas Workers' Compensation Insurance Fund; and
18-44 (2) the company is vested with all property of that
18-45 fund.
18-46 (b) The Texas Mutual Insurance Company may enforce all
18-47 contract and statutory rights of the Texas Workers' Compensation
18-48 Insurance Fund.
18-49 SECTION 3.02. ASSETS AND LIABILITIES. (a) Each debt, claim,
18-50 and cause of action of the Texas Workers' Compensation Insurance
18-51 Fund, and each property right, privilege, franchise, or other
18-52 interest of the Texas Workers' Compensation Insurance Fund, remains
18-53 the property of the Texas Mutual Insurance Company.
18-54 (b) The rights of all policyholders and creditors and the
18-55 standing of all claims under the Texas Workers' Compensation
18-56 Insurance Fund shall be preserved unimpaired under the Texas Mutual
18-57 Insurance Company.
18-58 (c) Each debt, liability, and duty of the Texas Workers'
18-59 Compensation Insurance Fund becomes a debt, liability, or duty of
18-60 the Texas Mutual Insurance Company and may be enforced against the
18-61 Texas Mutual Insurance Company as if it were incurred or contracted
18-62 by the company.
18-63 SECTION 3.03. CAUSES OF ACTION. A cause of action or similar
18-64 proceeding to which the Texas Workers' Compensation Insurance Fund
18-65 was a party that is pending on the effective date of this Act:
18-66 (1) is not affected by the establishment of the Texas
18-67 Mutual Insurance Company under this Act;
18-68 (2) may be continued to be prosecuted by or against
18-69 the company; and
19-1 (3) continues to be governed by and conducted under
19-2 Article 5.76-3 and Article 5.76-4, Insurance Code, as applicable,
19-3 as those articles existed before the effective date of this Act,
19-4 and the applicable bylaws, rules, and regulations of the Texas
19-5 Workers' Compensation Insurance Fund, as amended by the Texas
19-6 Mutual Insurance Company.
19-7 SECTION 3.04. INITIAL BOARD OF DIRECTORS. (a) The members
19-8 of the board of directors of the Texas Workers' Compensation
19-9 Insurance Fund who are serving on the effective date of this Act
19-10 shall serve as the initial board of directors of the Texas Mutual
19-11 Insurance Company. Board members who are qualified to serve on the
19-12 effective date of this Act are not disqualified by the amendments
19-13 to Section 3(d), Article 5.76-3, Insurance Code, and may serve out
19-14 their initial terms. The terms of the initial board members are
19-15 extended from February 1 to July 1 of their respective expiring
19-16 years, subject to Section 3, Article 5.76-3, Insurance Code, as
19-17 amended by this Act, regarding election of members.
19-18 (b) Before July 1, 2002, the company's initial board of
19-19 directors shall draw lots to determine which four positions on the
19-20 board shall be converted to elected board positions. The drawing by
19-21 lot shall be conducted in a manner to ensure that not more than two
19-22 board positions appointed to terms expiring in the same year will
19-23 be converted to elected positions.
19-24 (c) On or before July 1, 2002, the company shall hold its
19-25 first meeting of the policyholders. At that meeting the
19-26 policyholders shall elect four directors. The method of election
19-27 shall be specified in the company's bylaws.
19-28 (d) The remaining five directors from the initial board of
19-29 directors shall constitute the appointed directors.
19-30 (e) The bylaws and board policies of the fund on the
19-31 effective date of this Act become the bylaws and board policies of
19-32 the company until amended or revised by the company's board.
19-33 SECTION 3.05. INITIAL RATES. The premium rates on file with
19-34 the Texas Department of Insurance on the effective date of this Act
19-35 for the Texas Workers' Compensation Insurance Fund are the initial
19-36 premium rates for the Texas Mutual Insurance Company.
19-37 SECTION 3.06. EFFECTIVE DATE. This Act takes effect
19-38 September 1, 2001.
19-39 * * * * *