By: Moncrief S.B. No. 1594
2001S0783/1
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the creation of a long-term care facility liability
1-3 insurance fund; authorizing the issuance of bonds; providing
1-4 administrative penalties.
1-5 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-6 SECTION 1. Chapter 5, Insurance Code, is amended by adding
1-7 Subchapter P to read as follows:
1-8 SUBCHAPTER P. LONG-TERM CARE FACILITY LIABILITY INSURANCE
1-9 Art. 5.151. LONG-TERM CARE FACILITY LIABILITY INSURANCE
1-10 FUND.
1-11 Sec. 1. DEFINITIONS. In this article:
1-12 (1) "Board" means the board of directors of the fund.
1-13 (2) "Facility" means a long-term care facility.
1-14 (3) "Fund" means the long-term care facility liability
1-15 insurance fund.
1-16 (4) "Long-term care facility" means:
1-17 (A) a nursing home, custodial care home, or
1-18 other institution licensed by the Texas Department of Human
1-19 Services under Chapter 242, Health and Safety Code;
1-20 (B) an assisted living facility licensed by the
1-21 Texas Department of Human Services under Chapter 247, Health and
1-22 Safety Code; and
1-23 (C) a continuing care facility authorized by the
1-24 department under Chapter 246.
1-25 (5) "Long-term care facility liability insurance"
2-1 means an insurance policy that:
2-2 (A) provides coverage for a long-term care
2-3 facility; and
2-4 (B) covers liability for bodily injury, death,
2-5 and property damage arising from the operation of a long-term care
2-6 facility.
2-7 Sec. 2. CREATION; OPERATION. (a) The long-term care
2-8 facility liability insurance fund is created as a corporate body
2-9 with the powers provided by this subchapter and with all general
2-10 corporate powers incident to its operation as a corporate body.
2-11 The fund shall:
2-12 (1) serve as a competitive force in the marketplace;
2-13 (2) guarantee the availability of long-term care
2-14 facility liability insurance in this state; and
2-15 (3) serve as an insurer of last resort as provided
2-16 under Article 5.151-1 of this code.
2-17 (b) Except as otherwise provided by this subsection, the
2-18 fund is subject to Chapters 551 and 552, Government Code. The
2-19 board may hold closed meetings to consider and refuse to release
2-20 information relating to claims, rates, the fund's underwriting
2-21 guidelines, and other information that would give advantage to
2-22 competitors or bidders.
2-23 (c) A decision by the fund to deny, cancel, or refuse to
2-24 renew a policy or risk insured under Article 5.151-1 of this code
2-25 is appealable to the board not later than the 30th day after the
2-26 date on which the affected party received actual notice that the
3-1 act occurred or that the decision was made. The board shall hear
3-2 the appeal not later than the 30th day after the date on which the
3-3 request for hearing is made and shall notify the fund and the
3-4 appellant in writing of the time and place of the hearing not later
3-5 than the 10th day before the date of the hearing. Not later than
3-6 the 30th day after the last day of the hearing, the board shall
3-7 affirm, reverse, or modify the act appealed to the board. A
3-8 hearing under this subsection does not suspend the operation of any
3-9 act, ruling, decision, or order of the fund, unless the board
3-10 specifically so orders.
3-11 (d) A decision of the board under this section is subject to
3-12 review by the commissioner in the manner provided by Chapter 2001,
3-13 Government Code. The commissioner's review of a decision by the
3-14 board does not suspend the operation of any act, ruling, decision,
3-15 or order of the fund unless the commissioner specifically so orders
3-16 on a showing by an aggrieved party of:
3-17 (1) immediate, irreparable injury, loss, or damage;
3-18 and
3-19 (2) probable success on the merits.
3-20 (e) A person aggrieved by the decision of the commissioner
3-21 may appeal that decision to the district court. Judicial review
3-22 under this section is governed by the substantial evidence rule.
3-23 (f) The fund is subject to Chapter 325, Government Code
3-24 (Texas Sunset Act). Unless continued in effect as provided by that
3-25 chapter, the fund is abolished September 1, 2005.
3-26 (g) In addition to other rights of the fund under this
4-1 article, the fund has the legal rights of a private person in this
4-2 state and the power to sue in its own name. No procedure
4-3 established under this article is a prerequisite to the exercise of
4-4 the power by the fund to sue.
4-5 (h) The fund shall prepare annually a complete and detailed
4-6 written report accounting for all funds received and disbursed by
4-7 the fund during the preceding fiscal year. The annual report must
4-8 meet the reporting requirements applicable to financial reporting
4-9 provided by the General Appropriations Act.
4-10 Sec. 3. BOARD OF DIRECTORS. (a) The fund is governed by a
4-11 board of directors composed of nine members, all of whom must be
4-12 citizens of this state. The members shall be appointed by the
4-13 governor with the advice and consent of the senate, and vacancies
4-14 shall be filled in the same manner.
4-15 (b) The members of the board serve staggered six-year terms,
4-16 with the terms of three members expiring February 1 of each
4-17 odd-numbered year. A member of the board whose term has expired
4-18 shall continue to serve until the member's replacement is appointed
4-19 by the governor.
4-20 (c) In making appointments to the board, the governor shall
4-21 attempt to reflect the social, geographic, and economic diversity
4-22 of the state. To ensure balanced representation, the governor may
4-23 consider the geographic location of a prospective appointee's
4-24 domicile and the prospective appointee's experience in business and
4-25 insurance matters, including experience in the business of
4-26 providing long-term care, and shall consider those factors in
5-1 appointing members to fill vacancies on the board. Appointments to
5-2 the board shall be made without regard to the race, color,
5-3 disability, sex, religion, age, or national origin of the
5-4 appointees.
5-5 (d) A person may not serve as a member of the board if the
5-6 person, an individual related to the person within the second
5-7 degree by consanguinity or affinity, or an individual residing in
5-8 the same household with the person:
5-9 (1) is required to be registered or licensed under
5-10 this code;
5-11 (2) is employed by or acts as a consultant to a person
5-12 required to be registered or licensed under this code;
5-13 (3) owns, controls, has a financial interest in, or
5-14 participates in the management of an organization required to be
5-15 registered or licensed under this code;
5-16 (4) receives a substantial tangible benefit from the
5-17 fund or the department; or
5-18 (5) is an officer, employee, or consultant of an
5-19 association in the field of insurance.
5-20 (e) It is a ground for removal from the board if a member:
5-21 (1) does not have at the time of appointment the
5-22 qualifications required by this section;
5-23 (2) does not maintain during service on the board the
5-24 qualifications required by this section;
5-25 (3) cannot because of illness or disability discharge
5-26 the member's duties for a substantial part of the term for which
6-1 the member is appointed; or
6-2 (4) is absent from more than half of the regularly
6-3 scheduled board meetings that the member is eligible to attend
6-4 during a calendar year.
6-5 (f) The validity of an action of the board is not affected
6-6 by the fact that it is taken when a ground for removal of a board
6-7 member exists.
6-8 (g) If the president has knowledge that a potential ground
6-9 for removal exists, the president shall notify the chairman of the
6-10 board of the potential ground. The chairman shall then notify the
6-11 governor and the attorney general that a potential ground for
6-12 removal exists. If the potential ground for removal involves the
6-13 chairman, the president shall notify the next highest officer of
6-14 the board, who shall notify the governor and the attorney general
6-15 that a potential ground for removal exists.
6-16 (h) Subsection (d) of this section does not prohibit a
6-17 person who is only a consumer of insurance or insurance products
6-18 from serving as a member of the board.
6-19 (i) A person who is ineligible to serve on the board under
6-20 Subsection (d) of this section may not serve as a member of the
6-21 board for one year after the date on which the condition that makes
6-22 the person ineligible ends.
6-23 (j) Each member shall receive actual and necessary travel
6-24 expenses and expenses incurred in the performance of the member's
6-25 duties as a member.
6-26 (k) The governor shall designate a member of the board as
7-1 the chairman of the board to serve in that capacity at the pleasure
7-2 of the governor. The members of the board shall elect annually
7-3 from their number a vice-chairman and a secretary.
7-4 (l) The board shall hold meetings at least once each
7-5 calendar quarter and at other times at the call of the chairman and
7-6 at times established by board rule. Special meetings may be called
7-7 by any two members of the board on two days notice.
7-8 (m) A majority of the board members constitutes a quorum.
7-9 (n) The board shall maintain the principal office of the
7-10 fund in Austin, Texas.
7-11 (o) For cost control purposes and as is determined to be
7-12 cost-effective, as many functions as possible shall be performed by
7-13 the fund.
7-14 (p) A person may not serve as a member of the board or act
7-15 as the general counsel to the board or the fund if the person is
7-16 required to register as a lobbyist under Chapter 305, Government
7-17 Code, because of the person's activities for compensation on behalf
7-18 of any person or entity other than the fund.
7-19 (q) The board shall develop and implement policies that
7-20 clearly separate the policymaking responsibilities of the board and
7-21 the management responsibilities of the president and the staff of
7-22 the fund.
7-23 Sec. 4A. TRAINING PROGRAM FOR BOARD MEMBER. (a) Before a
7-24 member of the board may assume the member's duties, the member must
7-25 complete the training program established under this section.
7-26 (b) A training program established under this section shall
8-1 provide information to the member regarding:
8-2 (1) the enabling legislation that created the fund and
8-3 the board;
8-4 (2) the programs operated by the fund;
8-5 (3) the role and functions of the fund;
8-6 (4) the current budget for the fund;
8-7 (5) the results of the most recent independent audit
8-8 of the fund;
8-9 (6) the requirements of:
8-10 (A) Chapter 551, Government Code; and
8-11 (B) Chapter 552, Government Code;
8-12 (7) the requirements of the conflict of interest laws
8-13 and other laws relating to members of the board; and
8-14 (8) any applicable ethics policies adopted by the fund
8-15 or the Texas Ethics Commission.
8-16 Sec. 5. AUTHORITY AND PURPOSE. (a) According to this
8-17 article and the plan of operation, the board shall, on behalf of
8-18 the fund:
8-19 (1) provide for the acceptance of applications and
8-20 delivery or issuance for delivery in this state of long-term care
8-21 facility liability insurance and for the transaction of long-term
8-22 care facility liability insurance business to the same extent as
8-23 any other insurance carrier transacting long-term care facility
8-24 liability insurance business in this state;
8-25 (2) enter into and approve contracts;
8-26 (3) propose rates for long-term care facility
9-1 liability insurance issued by the fund;
9-2 (4) appoint and supervise the activities of the
9-3 president of the fund and other officers and employees;
9-4 (5) adopt necessary bylaws and rules for the operation
9-5 of the fund;
9-6 (6) delegate specific responsibilities to the
9-7 president of the fund;
9-8 (7) develop a general plan of operation, in accordance
9-9 with Section 6 of this article, to assure the orderly management
9-10 and operation of the fund; and
9-11 (8) exercise any other authority necessary to conduct
9-12 a long-term care facility liability insurance business for the
9-13 fund.
9-14 (b) The fund may not have affiliates, interlocking boards of
9-15 directors, spinoffs, or subsidiaries that write lines of insurance
9-16 other than long-term care facility liability insurance.
9-17 (c) The board shall appoint an internal auditor in
9-18 compliance with Chapter 2102, Government Code. The internal
9-19 auditor serves at the pleasure of the board.
9-20 (d) If the fund obtains legal services through the use of
9-21 outside counsel, the attorney general shall annually review the use
9-22 of outside counsel by the fund to ensure that:
9-23 (1) the use of outside counsel does not result in a
9-24 conflict of interest; and
9-25 (2) the persons used as outside counsel comply with
9-26 state and federal policies regarding the treatment of persons who
10-1 are members of minority groups.
10-2 (e) The board shall provide requested information to
10-3 appropriate legislative committees in the manner requested by those
10-4 committees.
10-5 Sec. 6. PLAN OF OPERATION. (a) The initial board shall
10-6 prepare and adopt a plan of operation that is consistent with this
10-7 article. The plan must provide for the:
10-8 (1) economic, fair, and nondiscriminatory
10-9 administration of the fund and its duties;
10-10 (2) prompt and efficient provision of long-term care
10-11 facility liability insurance;
10-12 (3) establishment of necessary facilities;
10-13 (4) management of the fund;
10-14 (5) reasonable and objective underwriting standards;
10-15 and
10-16 (6) obtainment of reinsurance.
10-17 (b) The initial plan of operation is subject to approval by
10-18 the department.
10-19 (c) With consent of the department, the board may amend the
10-20 plan of operation to provide for operation of the fund in a manner
10-21 consistent with this article.
10-22 Sec. 7. PRESIDENT AND CHIEF EXECUTIVE OFFICER. (a) The
10-23 board shall appoint a person to serve as president and chief
10-24 executive officer of the fund who serves at the pleasure of the
10-25 board. The board shall appoint other officers as necessary to
10-26 manage the fund prudently.
11-1 (b) To be eligible for appointment as president, an
11-2 individual must have had at least 10 years of administrative or
11-3 professional experience and training and experience in the field of
11-4 insurance.
11-5 (c) The president shall manage and conduct the affairs of
11-6 the fund under the general supervision of the board and shall
11-7 perform duties as provided by this article and as directed by the
11-8 board.
11-9 (d) In addition to any other duties provided by this article
11-10 or by the board, the president shall:
11-11 (1) hire employees as necessary to conduct the
11-12 business and carry out the provisions of this article or to perform
11-13 the duties imposed on the president by this article;
11-14 (2) receive and approve applications for long-term
11-15 care facility liability insurance and issue policies to applicants
11-16 who are eligible for long-term care facility liability insurance
11-17 provided by the fund;
11-18 (3) negotiate contracts on behalf of the fund;
11-19 (4) issue renewals of long-term care facility
11-20 liability insurance for those who qualify for renewal;
11-21 (5) process and pay valid claims according to the
11-22 rules of the board and the appropriate long-term care facility
11-23 liability insurance laws;
11-24 (6) collect premiums for long-term care facility
11-25 liability insurance issued or renewed by the fund; and
11-26 (7) collect and compile statistical information
12-1 relating to the fund and provide this information to the board.
12-2 (e) In addition to any other authority provided by this
12-3 article or by the board, the president shall have full power and
12-4 authority, in the name of the fund, to:
12-5 (1) sue and be sued in all of the courts of the state
12-6 in all actions arising out of any act, deed, matter, or things
12-7 made, omitted, entered into, done, or suffered in connection with
12-8 the fund and its administration, management, or conduct of its
12-9 business and affairs;
12-10 (2) delegate to any officer of the fund, subject to
12-11 any conditions prescribed by the president, any of the powers,
12-12 functions, or duties conferred or imposed on the president under
12-13 this article in connection with the fund, its administration,
12-14 management, and conduct of business or related affairs; an officer
12-15 to whom such a delegation is made may exercise the delegated powers
12-16 with the same force and effect as the president, subject to
12-17 approval by the president;
12-18 (3) inspect and audit a facility that applies to the
12-19 fund for issuance of long-term care facility liability insurance or
12-20 who seek renewal of that insurance;
12-21 (4) purchase reinsurance from insurance carriers
12-22 admitted or accredited to reinsure risks in this state;
12-23 (5) cancel or refuse to renew long-term care facility
12-24 liability insurance if a risk does not comply with a board-approved
12-25 plan or any provision of this article;
12-26 (6) with the approval of the board, enter into
13-1 contracts on behalf of the fund;
13-2 (7) draft guidelines for approval of the board
13-3 relating to the settlement of claims against the fund; and
13-4 (8) perform any other acts authorized by the board to
13-5 carry out this article and the rules of the board.
13-6 (f) The president shall develop a career ladder program that
13-7 addresses opportunities for mobility and advancement for employees
13-8 within the fund. The program shall require internal posting of all
13-9 positions concurrently with any public posting.
13-10 (g) The president shall develop a system of annual
13-11 performance evaluations that are based on documented employee
13-12 performance. All merit pay for fund employees must be based on the
13-13 system established under this subsection.
13-14 (h) The president shall prepare and maintain a written
13-15 policy statement to assure implementation of a program of equal
13-16 employment opportunity under which all personnel transactions are
13-17 made without regard to race, color, disability, sex, religion, age,
13-18 or national origin. The policy statement must include:
13-19 (1) personnel policies, including policies relating to
13-20 recruitment, evaluation, selection, appointment, training, and
13-21 promotion of personnel, that are in compliance with the
13-22 requirements of Chapter 21, Labor Code;
13-23 (2) a comprehensive analysis of the fund workforce
13-24 that meets federal and state guidelines;
13-25 (3) procedures by which a determination can be made
13-26 about the extent of underuse in the fund workforce of all persons
14-1 for whom federal or state guidelines encourage a more equitable
14-2 balance; and
14-3 (4) reasonable methods to appropriately address those
14-4 areas of underuse.
14-5 (i) A policy statement prepared under Subsection (h) of this
14-6 section must:
14-7 (1) cover an annual period;
14-8 (2) be updated annually;
14-9 (3) be reviewed annually by the Commission on Human
14-10 Rights for compliance with Subsection (h)(1); and
14-11 (4) be filed with the governor's office.
14-12 (j) The governor's office shall deliver a biennial report to
14-13 the legislature based on the information received under Subsection
14-14 (i) of this section. The report may be made separately or as a
14-15 part of other biennial reports made to the legislature.
14-16 (k) The president shall provide to members of the board and
14-17 to fund employees, as often as necessary, information regarding
14-18 their qualification for office or employment under this article and
14-19 their responsibilities under applicable laws relating to standards
14-20 of conduct for board members or employees.
14-21 (l) In hiring employees for the fund under this article, the
14-22 president shall ensure that the fund complies with the minority
14-23 hiring practices guidelines adopted for state agencies and
14-24 institutions by the General Appropriations Act.
14-25 Sec. 8. APPLICATIONS. (a) Applications to the fund shall
14-26 be submitted on forms prescribed by the board and shall be made:
15-1 (1) directly by the applicant; or
15-2 (2) on behalf of the applicant by a local recording
15-3 agent.
15-4 (b) The fund shall adopt such rules as required to provide
15-5 for the financing of all or part of the premiums by the fund or a
15-6 person licensed under Chapter 24 of this code. Those rules shall
15-7 require that the fund receive a minimum initial premium sufficient
15-8 to cover the administrative costs of issuing and booking the policy
15-9 in the event of cancellation. Those rules shall not unfairly
15-10 discriminate against applicants based on the amount of premium to
15-11 be paid by the applicant for long-term care facility liability
15-12 coverage. Notwithstanding the foregoing, the premium financing
15-13 rules adopted by the fund may provide that premium financing shall
15-14 not be offered to any applicant who appears to present an
15-15 unacceptable credit risk.
15-16 (c) If the premium is financed by the fund as provided by
15-17 Subsection (b) of this section, the payment deferred earns interest
15-18 payable to the fund at a rate annually determined by the board.
15-19 (d) If an applicant is identified as a credit risk, the fund
15-20 may refuse to write insurance coverage if the applicant does not:
15-21 (1) pay the total estimated premium and related
15-22 charges before the policy is issued; or
15-23 (2) provide security for payment of the total
15-24 estimated premium and related charges before the policy is issued.
15-25 (e) If the policy is written through a licensed agent, the
15-26 fund shall pay the agent a reasonable commission. The commission
16-1 shall be paid at the time of the initial deposit, based on the
16-2 annual estimated premium, and shall be adjusted at the final audit.
16-3 (f) Notwithstanding any other provision of this code or
16-4 another insurance law of this state, the fund is not required to
16-5 appoint a local recording agent to act as an agent for the fund.
16-6 An agent transacting business with the fund does so as an agent for
16-7 the applicant and not as an agent for the fund.
16-8 (g) Information submitted to the fund by a licensed agent on
16-9 behalf of a facility, including a policy expiration date, is the
16-10 work product of that agent, and the fund may not use that
16-11 information in any marketing or direct sales activity. Except as
16-12 required or permitted by Chapter 552, Government Code, the fund may
16-13 not provide information obtained from a licensed agent to any other
16-14 licensed agent. This subsection does not prevent a facility from
16-15 designating another licensed agent or the fund as the agent of
16-16 record and does not prevent the fund from using the information
16-17 submitted to the fund under this subsection for the purpose of
16-18 underwriting or fraud investigation. The fund shall adopt
16-19 reasonable guidelines in the plan of operation to implement this
16-20 subsection.
16-21 Sec. 9. LIABILITY. Neither a member of the board nor the
16-22 president or any officer or employee of the fund is personally
16-23 liable in the person's private capacity for any act performed or
16-24 for any contract or other obligation entered into or undertaken in
16-25 an official capacity in good faith and without intent to defraud in
16-26 connection with the administration, management, or conduct of the
17-1 fund, its business, or other related affairs.
17-2 Sec. 10. RATES. (a) Except as otherwise provided by this
17-3 subsection, the board shall have full power and authority to
17-4 propose rates to be charged by the fund for insurance. The board
17-5 shall engage the services of an independent actuary who is a member
17-6 in good standing with the Casualty Actuarial Society or the
17-7 American Academy of Actuaries to develop and recommend actuarially
17-8 sound rates.
17-9 (b) Rates shall be set in amounts sufficient, when invested,
17-10 to:
17-11 (1) carry all claims to maturity;
17-12 (2) meet the reasonable expenses of conducting the
17-13 business of the fund; and
17-14 (3) maintain a reasonable surplus.
17-15 (c) Notwithstanding any other provision of this code or any
17-16 other insurance law of this state, the fund may establish
17-17 multitiered premium systems to price long-term care facility
17-18 liability insurance policies to insureds in the fund's competitive
17-19 programs as well as to insureds to whom policies are offered by the
17-20 fund under Article 5.151-1 of this code. The systems may provide
17-21 for higher or lower premium payments by insureds based on the
17-22 fund's evaluation of the underwriting characteristics of the
17-23 individual risk and the appropriate premium to be charged for the
17-24 policy coverages.
17-25 Sec. 11. ACCIDENT PREVENTION. (a) The fund may make and
17-26 enforce rules for the prevention of injuries to residents of its
18-1 policyholders or applicants for insurance under this article. For
18-2 this purpose, representatives of the fund, representatives of the
18-3 Texas Department of Human Services, or representatives of the
18-4 department on reasonable notice shall be granted free access to the
18-5 premises of each policyholder or applicant during regular working
18-6 hours.
18-7 (b) Failure or refusal by any policyholder or applicant to
18-8 comply with any rule prescribed by the fund for the prevention of
18-9 injuries or failure or refusal to make full disclosure of all
18-10 information pertinent to the insuring or servicing of the
18-11 policyholder or applicant constitutes sufficient grounds for the
18-12 fund to cancel a policy or deny an application for insurance.
18-13 (c) A policyholder in the fund who is insured under Article
18-14 5.151-1 of this code shall obtain a safety consultation if the
18-15 policyholder:
18-16 (1) has a Texas experience modifier greater than 1.25;
18-17 (2) has a national experience modifier greater than
18-18 1.25 and estimated premium allocable to Texas of $2,500 or more; or
18-19 (3) does not have an experience modifier but has had a
18-20 loss ratio greater than 0.70 in at least two of the three most
18-21 recent policy years for which information is available.
18-22 (d) A policyholder in the fund who is insured under Article
18-23 5.151-1 of this code shall obtain a safety consultation as required
18-24 by the fund if the policyholder:
18-25 (1) has been in business for less than three years;
18-26 and
19-1 (2) meets criteria for a safety consultation
19-2 established by the fund, which may include the number and
19-3 classification of residents and the policyholder's previous
19-4 liability experience in this state or another jurisdiction.
19-5 (e) The policyholder shall obtain the safety consultation
19-6 not later than the 30th day after the effective date of the policy
19-7 and shall obtain the safety consultation from the Texas Department
19-8 of Human Services, the fund, or another professional source
19-9 approved for that purpose by the Texas Department of Human
19-10 Services. The safety consultant shall file a written report with
19-11 that department and the policyholder setting out any hazardous
19-12 conditions or practices identified by the safety consultation.
19-13 (f) The policyholder and the consultant shall develop a
19-14 specific injury prevention plan that addresses the hazards
19-15 identified by the consultant. The safety consultant may approve an
19-16 existing injury prevention plan. The policyholder shall comply
19-17 with the injury prevention plan.
19-18 (g) The Texas Department of Human Services may investigate
19-19 injuries occurring at the facilities of a policyholder for whom a
19-20 plan has been developed under Subsection (f) of this section, and
19-21 that department may otherwise monitor the implementation of the
19-22 injury prevention plan as it finds necessary.
19-23 (h) In accordance with rules adopted by the Texas Department
19-24 of Human Services, not earlier than 90 days or later than six
19-25 months after the development of an injury prevention plan under
19-26 Subsection (f) of this section, that department shall conduct a
20-1 follow-up inspection of the policyholder's premises. The Texas
20-2 Department of Human Services may require the participation of the
20-3 safety consultant who performed the initial consultation and
20-4 developed the safety plan. If the Texas Department of Human
20-5 Services determines that the policyholder has complied with the
20-6 terms of the injury prevention plan or has implemented other
20-7 accepted corrective measures, it shall so certify. If a
20-8 policyholder fails or refuses to implement the injury prevention
20-9 plan or other suitable hazard abatement measures, the policyholder
20-10 may elect to cancel coverage not later than the 30th day after the
20-11 date of determination of the Texas Department of Human Services.
20-12 If the policyholder does not elect to cancel, the fund may cancel
20-13 the coverage or the Texas Department of Human Services may assess
20-14 an administrative penalty not to exceed $5,000. Each day of
20-15 noncompliance constitutes a separate violation. Penalties
20-16 collected under this section shall be deposited in the general
20-17 revenue fund to the credit of the Texas Department of Human
20-18 Services or reappropriated to that department to offset the costs
20-19 of implementing and administering this section.
20-20 (i) In assessing an administrative penalty, the Texas
20-21 Department of Human Services may consider any matter that justice
20-22 may require and shall consider:
20-23 (1) the seriousness of the violation, including the
20-24 nature, circumstances, consequences, extent, and gravity of the
20-25 prohibited act;
20-26 (2) the history and extent of previous administrative
21-1 violations;
21-2 (3) the demonstrated good faith of the violator,
21-3 including actions taken to rectify the consequences of the
21-4 prohibited act;
21-5 (4) any economic benefit resulting from the prohibited
21-6 act; and
21-7 (5) the penalty necessary to deter future violations.
21-8 (j) The procedures established under this section must be
21-9 followed each year the policyholder meets the qualifications
21-10 established under Subsection (c) of this section and is insured
21-11 through Article 5.151-1 of this code.
21-12 (k) The Texas Department of Human Services shall charge the
21-13 policyholder for the reasonable cost of services provided under
21-14 Subsections (e), (f), and (h) of this section. The fees for those
21-15 services shall be set at a cost-reimbursement level including a
21-16 reasonable allocation of that department's administrative costs.
21-17 Sec. 12. CONTROL OF FRAUD. (a) The fund shall develop and
21-18 implement a program to identify and investigate fraud and
21-19 violations of this code relating to long-term care facility
21-20 liability insurance by an applicant, policyholder, claimant, agent,
21-21 insurer, health care provider, or other person. The fund shall
21-22 contract with the Texas Department of Human Services to compile and
21-23 maintain information necessary to detect practices or patterns of
21-24 conduct that violate this code relating to the long-term care
21-25 facility liability insurance.
21-26 (b) The fund may conduct investigations of cases of
22-1 suspected fraud and violations of this code relating to long-term
22-2 care facility liability insurance. The fund shall:
22-3 (1) coordinate its investigations with those conducted
22-4 by the Texas Department of Human Services to avoid duplication of
22-5 efforts; and
22-6 (2) refer cases that are not resolved by the fund to
22-7 the Texas Department of Human Services to:
22-8 (A) perform any further investigations that are
22-9 necessary under the circumstances;
22-10 (B) conduct administrative violation
22-11 proceedings; and
22-12 (C) assess and collect penalties and
22-13 restitution.
22-14 (c) The fund may enter into interdepartmental funding
22-15 agreements with local prosecutors for the prosecution of offenses
22-16 against the fund.
22-17 (d) Restitution collected under Subsection (b) of this
22-18 section shall be deposited to the fund.
22-19 (e) Penalties collected under Subsection (b) of this section
22-20 shall be deposited in the general revenue fund to the credit of the
22-21 Texas Department of Human Services and shall be appropriated to
22-22 that department to offset the costs of this program.
22-23 (f) The board, fund, and employees of the fund are not
22-24 liable in a civil action for any action made in good faith in the
22-25 execution of duties under this section including the identification
22-26 and referral of a person for investigation and prosecution for a
23-1 possible administrative violation or criminal offense.
23-2 Sec. 13. INVESTIGATION FILES CONFIDENTIAL. (a) Information
23-3 maintained in the investigation files of the fund is confidential
23-4 and may not be disclosed except:
23-5 (1) in a criminal proceeding;
23-6 (2) in a hearing conducted by the fund or the Texas
23-7 Department of Human Services;
23-8 (3) on a judicial determination of good cause; or
23-9 (4) to a governmental agency, political subdivision,
23-10 or regulatory body if the disclosure is necessary or proper for the
23-11 enforcement of the laws of this or another state or of the United
23-12 States.
23-13 (b) Fund investigation files are not open records for
23-14 purposes of Chapter 552, Government Code.
23-15 (c) Information in an investigation file that is information
23-16 in or derived from a claim file, or an employer injury report is
23-17 governed by the confidentiality provisions relating to that
23-18 information.
23-19 (d) For purposes of this section, "investigation file" means
23-20 any information compiled or maintained by the fund with respect to
23-21 a fund investigation authorized by law.
23-22 Sec. 14. PAYMENT OF TAXES AND FEES; GUARANTY ASSOCIATION.
23-23 (a) The fund shall pay premium taxes, maintenance taxes, and the
23-24 maintenance tax surcharge established under Article 5.151-2 of this
23-25 code in the same manner as an insurance carrier authorized by the
23-26 department to write commercial liability insurance in this state.
24-1 (b) The fund shall pay taxes and fees or any payments due in
24-2 lieu of taxes in the same manner as an insurance carrier authorized
24-3 and admitted by the department to do insurance business in this
24-4 state.
24-5 (c) The fund is a member of and is protected by the Texas
24-6 Property and Casualty Insurance Guaranty Association. The fund is
24-7 subject to assessment under the Texas Property and Casualty
24-8 Insurance Guaranty Act (Article 21.28-C, Insurance Code).
24-9 Sec. 15. FINANCIAL ADMINISTRATION. (a) Revenues of the
24-10 fund consist of:
24-11 (1) premiums paid by a facility for long-term care
24-12 facility liability insurance from the fund;
24-13 (2) investments and money earned from investments of
24-14 the fund;
24-15 (3) money received from the issuance and sale of bonds
24-16 under Article 5.151-2 of this code; and
24-17 (4) any other money received by the fund.
24-18 (b) Administrative expenses of the fund shall be paid from
24-19 the fund at the direction of the board.
24-20 (c) Money in the fund shall be paid from the fund, without
24-21 legislative appropriation, on vouchers approved by the board. That
24-22 money shall be held exclusively for the purposes stated in this
24-23 article and may not be used or appropriated for any other purpose.
24-24 (d) Money in the fund shall be invested, subject to a policy
24-25 developed by the board and approved by the Texas Department of
24-26 Human Services, in the types of investments authorized by law for
25-1 an insurer authorized to write commercial liability insurance
25-2 coverage in this state.
25-3 (e) The fund shall establish and maintain reserves for
25-4 losses on an actuarially sound basis.
25-5 (f) The fund must maintain a ratio of net written premiums
25-6 on policies written after reinsurance to surplus of not more than
25-7 3.0 to one.
25-8 (g) Not more than once in any calendar year, the board may
25-9 use up to 20 percent of any surplus that exceeds the ratio
25-10 specified in Subsection (f) of this section to assist in prepaying
25-11 or retiring before maturity the bonds issued under Article 5.151-2
25-12 of this code.
25-13 (h) The fund may pay cash dividends or allow a credit on
25-14 renewal premium for each policyholder insured with the fund other
25-15 than a policyholder insured under Article 5.151-1 of this code. A
25-16 dividend or credit requires prior approval of the department.
25-17 (i) The fund shall file annual statements with the
25-18 department and the Texas Department of Human Services.
25-19 (j) If the fund incurs a deficit for any reason, no other
25-20 insurer is liable for or subject to an assessment for that deficit.
25-21 Sec. 16. REPORT TO BOARD. The president shall make periodic
25-22 reports to the board with regard to the status of the fund and its
25-23 investments.
25-24 Sec. 17. POLICY FORMS. The fund shall use the uniform
25-25 policy and standard policy forms prescribed by the department.
25-26 Sec. 18. CANCELLATION AND NONRENEWAL. (a) The fund may
26-1 cancel or refuse to renew coverage on a policyholder. If the fund
26-2 cancels a policy of long-term care facility liability insurance or
26-3 does not renew a policy by the anniversary date of the policy, it
26-4 shall deliver notice of the cancellation or nonrenewal by certified
26-5 mail or in person to the facility and the Texas Department of Human
26-6 Services not later than:
26-7 (1) the 30th day before the date on which the
26-8 cancellation or nonrenewal takes effect; or
26-9 (2) the 10th day before the date on which the
26-10 cancellation or nonrenewal takes effect if the insurance company
26-11 cancels or does not renew because of:
26-12 (A) fraud in obtaining coverage;
26-13 (B) failure to pay a premium when due;
26-14 (C) an increase in risk of injury that results
26-15 from an act or omission of the facility and that would produce an
26-16 increase in the rate, including an increase because of a failure to
26-17 comply with:
26-18 (i) reasonable recommendations for loss
26-19 control; or
26-20 (ii) recommendations designed to reduce a
26-21 hazard under the facility's control within a reasonable period; or
26-22 (D) a determination made by the commissioner
26-23 that the continuation of the policy would place the insurer in
26-24 violation of the law or would be hazardous to the interest of
26-25 subscribers, creditors, or the general public.
26-26 (b) Failure of the fund to give notice as required by this
27-1 section extends the policy until the date on which the required
27-2 notice is provided to the facility and the Texas Department of
27-3 Human Services.
27-4 Sec. 19. ANNUAL REPORT; OTHER REPORTS. (a) The board shall
27-5 publish an independently audited report analyzing the fund's
27-6 activities and fiscal condition during the preceding fiscal year
27-7 and shall file the report with the department. The board shall
27-8 file the audited report with the department for submission
27-9 simultaneously with its annual financial report. The board's
27-10 annual financial report shall be submitted by the department by the
27-11 date provided for in the General Appropriations Act.
27-12 (b) The fund shall file with the department and the Texas
27-13 Department of Human Services all reports required of other
27-14 long-term care facility liability insurers.
27-15 Sec. 20. ADDITIONAL AUDIT REQUIREMENTS; INTERNAL AUDIT
27-16 REPORT. (a) The state auditor shall periodically identify issues
27-17 related to the operational efficiency, effectiveness, and statutory
27-18 compliance of the fund. The fund shall include all issues
27-19 identified by the state auditor in the fund's annual independent
27-20 and internal audit plans.
27-21 (b) Each person who conducts an independent audit or
27-22 internal audit of the fund shall send a copy of the audit report
27-23 prepared by the person to the office of the state auditor. The
27-24 state auditor shall summarize the audit reports presented under
27-25 this subsection in an annual memorandum to the Legislative Audit
27-26 Committee.
28-1 (c) The internal auditor appointed under Section 5 of this
28-2 article shall submit the internal audit report directly to the
28-3 board and shall provide a summary of the report to the governor,
28-4 lieutenant governor, and speaker of the house of representatives.
28-5 Sec. 21. EXAMINATION OF FUND. (a) The department shall
28-6 conduct an examination of the fund in the manner and under the
28-7 conditions provided by Articles 1.15 through 1.19 of this code for
28-8 the examination of insurance carriers.
28-9 (b) The board shall pay the costs of the examination from
28-10 the fund.
28-11 (c) The fund is subject to all provisions of this code and
28-12 to the jurisdiction of the department in the same manner as private
28-13 insurance carriers.
28-14 Sec. 22. ASSISTANCE FROM INSURANCE DEPARTMENT. On the
28-15 request of the board, the Texas Department of Insurance shall
28-16 provide technical assistance to the board and the president as
28-17 reasonably necessary to implement this article.
28-18 Sec. 23. PUBLIC INFORMATION; ACCESSIBILITY. (a) The fund
28-19 shall prepare information of public interest describing the
28-20 functions of the fund and the procedures by which complaints are
28-21 filed with and resolved by the fund. The fund shall make the
28-22 information available to the public and appropriate state agencies.
28-23 (b) The board shall establish methods by which consumers and
28-24 service recipients are notified of the name, mailing address, and
28-25 telephone number of the fund for the purpose of directing
28-26 complaints to the fund. The board may provide for that
29-1 notification:
29-2 (1) by a supplement or endorsement to a written
29-3 policy;
29-4 (2) on a sign prominently displayed in each place of
29-5 business of the fund; or
29-6 (3) in a bill for services provided by the fund.
29-7 (c) The fund shall comply with federal and state laws
29-8 related to program and facility accessibility. The president shall
29-9 also prepare and maintain a written plan that describes how a
29-10 person who does not speak English can be provided reasonable access
29-11 to the fund's programs and services.
29-12 (d) The board shall develop and implement policies that
29-13 provide the public with a reasonable opportunity to appear before
29-14 the board and to speak on any issue under the jurisdiction of the
29-15 fund.
29-16 Sec. 24. COMPLAINT RESOLUTION. (a) The fund shall keep
29-17 information about each written complaint submitted to the fund.
29-18 The information shall include:
29-19 (1) the date the complaint is received;
29-20 (2) the name of the complainant;
29-21 (3) the subject matter of the complaint;
29-22 (4) a record of all persons contacted in relation to
29-23 the complaint;
29-24 (5) a summary of the results of the review or
29-25 investigation of the complaint; and
29-26 (6) for complaints for which the fund took no action,
30-1 an explanation of the reason the complaint was closed without
30-2 action.
30-3 (b) For each written complaint that the fund has authority
30-4 to resolve, the fund shall provide to the person filing the
30-5 complaint and the persons or entities complained about the fund's
30-6 policies and procedures pertaining to complaint investigation and
30-7 resolution. The fund, at least quarterly and until final
30-8 disposition of the complaint, shall notify the person filing the
30-9 complaint and the persons or entities complained about of the
30-10 status of the complaint unless the notice would jeopardize an
30-11 undercover investigation.
30-12 Sec. 25. FUND SOLVENCY. (a) In addition to other
30-13 regulatory authority granted the commissioner, if the commissioner
30-14 finds that the fund does not own assets at least equal to all
30-15 liabilities and required reserves, together with the minimum basic
30-16 surplus required under this article, or that the condition of the
30-17 fund is such that continuing operation of the fund is hazardous to
30-18 the public or to the policyholders of the fund, the commissioner
30-19 shall:
30-20 (1) notify the president and board of the finding; and
30-21 (2) furnish the fund with a written list of the
30-22 commissioner's recommendations to abate the problems.
30-23 (b) If the fund fails to comply with the recommendations of
30-24 the commissioner not later than the 60th day after the date of the
30-25 recommendations, the commissioner shall notify the governor, the
30-26 lieutenant governor, and the speaker of the house of
31-1 representatives of the recommendations with which the fund is not
31-2 in compliance, together with solutions and estimations of all
31-3 fiscal implications.
31-4 Sec. 26. APPLICABILITY OF OTHER STATUTES. (a) All
31-5 regulatory authority granted the commissioner of insurance relating
31-6 to a stock or mutual insurance company is applicable to the fund.
31-7 (b) Unless specifically defined as a state agency in a
31-8 specific statute, the fund is not a state agency.
31-9 Art. 5.151-1. FUND AS INSURER OF LAST RESORT. (a) The
31-10 long-term care facility liability insurance fund may not, except as
31-11 otherwise provided by this article and by Section 18, Article 5.151
31-12 of this code, refuse to insure any risk that tenders the necessary
31-13 premium and any applicable injury prevention service fees.
31-14 (b) If an applicant to the fund would be rejected for
31-15 long-term care facility liability insurance under the fund's
31-16 underwriting standards, the risk may not be rejected, but shall be
31-17 insured at a higher premium as provided by the fund's rules. The
31-18 risk may be required to meet other conditions considered necessary
31-19 to protect the fund's interests.
31-20 (c) The fund shall develop statistical and other information
31-21 as necessary to allow the fund to distinguish between its writings
31-22 in the voluntary market and its writings as the insurer of last
31-23 resort.
31-24 (d) The fund shall decline to insure any risk if insuring
31-25 that risk would cause the fund to exceed the premium-to-surplus
31-26 ratios established by Article 5.151 of this code or if the risk is
32-1 not in good faith entitled to insurance through the fund. For
32-2 purposes of this subsection, "good faith" means honesty in fact in
32-3 any conduct or transaction.
32-4 (e) The department shall develop and publish classification
32-5 relativities specifically designed for the risks insured under this
32-6 article.
32-7 (f) If the fund suspects fraud or identifies conditions that
32-8 may result in acts of fraud, the fund may require an applicant for
32-9 long-term care facility liability insurance coverage who is
32-10 identified as a risk for purposes of Subsection (b) of this article
32-11 to insure all business entities that are commonly owned or commonly
32-12 controlled by the applicant.
32-13 Art. 5.151-2. REVENUE BOND PROGRAM AND PROCEDURES.
32-14 Sec. 1. LEGISLATIVE FINDING; PURPOSE. The legislature finds
32-15 that the issuance of bonds for the purposes of providing a method
32-16 to raise funds to provide long-term care facility liability
32-17 insurance coverage through the long-term care facility liability
32-18 insurance fund is for the benefit of the public and in furtherance
32-19 of a public purpose.
32-20 Sec. 2. DEFINITIONS. In this article:
32-21 (1) "Bond resolution" means the resolution or order
32-22 authorizing the bonds to be issued under this article.
32-23 (2) "Board" means the board of directors of the Texas
32-24 Public Finance Authority.
32-25 (3) "Fund" means the long-term care facility liability
32-26 insurance fund.
33-1 Sec. 3. BONDS AUTHORIZED; APPLICATION OF TEXAS PUBLIC
33-2 FINANCE AUTHORITY ACT. (a) On behalf of the fund, the Texas
33-3 Public Finance Authority shall issue revenue bonds to:
33-4 (1) establish the initial surplus of the fund;
33-5 (2) establish and maintain reserves;
33-6 (3) pay initial operating costs;
33-7 (4) pay costs related to issuance of the bonds; and
33-8 (5) pay such other costs related to the bonds as may
33-9 be determined by the board.
33-10 (b) To the extent not inconsistent with this article,
33-11 Chapter 1232, Government Code, applies to bonds issued under this
33-12 article. In the event of a conflict, this article controls.
33-13 Sec. 4. APPLICABILITY OF OTHER STATUTES. Chapters 1201,
33-14 1202, 1204, 1205, 1231, and 1371, Government Code, apply to bonds
33-15 issued under this article to the extent consistent with this
33-16 article.
33-17 Sec. 5. LIMITS. The Texas Public Finance Authority may
33-18 issue, on behalf of the fund, bonds in a total amount not to exceed
33-19 $300 million.
33-20 Sec. 6. CONDITIONS. (a) Bonds may be issued at public or
33-21 private sale.
33-22 (b) Bonds must mature not more than 20 years after the date
33-23 issued.
33-24 (c) Bonds must be issued in the name of the fund.
33-25 Sec. 7. ADDITIONAL COVENANTS. In a bond resolution, the
33-26 board may make additional covenants with respect to the bonds and
34-1 the designated income and receipts of the fund pledged to their
34-2 payment and may provide for the flow of funds and the
34-3 establishment, maintenance, and investment of funds and accounts
34-4 with respect to the bonds.
34-5 Sec. 8. SPECIAL ACCOUNTS. (a) A bond resolution may
34-6 establish special accounts including an interest and sinking fund
34-7 account, reserve account, and other accounts.
34-8 (b) The president of the fund or the president's designee
34-9 shall administer the accounts in accordance with Article 5.151 of
34-10 this code.
34-11 Sec. 9. SECURITY. (a) Bonds are payable only from sources
34-12 the fund is authorized to levy, charge, and collect in connection
34-13 with paying any portion of the bonds.
34-14 (b) Bonds are obligations solely of the fund. Bonds do not
34-15 create a pledging, giving, or lending of the faith, credit, or
34-16 taxing authority of this state.
34-17 (c) Each bond must include a statement that the state is not
34-18 obligated to pay any amount on the bond and that the faith, credit,
34-19 and taxing authority of this state are not pledged, given, or lent
34-20 to those payments.
34-21 (d) Each bond issued under this article must state on its
34-22 face that the bond is payable solely from the revenues pledged for
34-23 that purpose and that the bond does not and may not constitute a
34-24 legal or moral obligation of the state.
34-25 Sec. 10. TAX EXEMPT. The bonds issued under this article,
34-26 and any interest from the bonds, and all assets pledged to secure
35-1 the payment of the bonds are free from taxation by the state or a
35-2 political subdivision of the state.
35-3 Sec. 11. AUTHORIZED INVESTMENTS. The bonds issued under
35-4 this article constitute authorized investments under Article 2.10
35-5 and Subpart A, Part I, Article 3.39 of this code.
35-6 Sec. 12. STATE PLEDGE. The state pledges to and agrees with
35-7 the owners of any bonds issued in accordance with this article that
35-8 the state will not limit or alter the rights vested in the fund to
35-9 fulfill the terms of any agreements made with the owners of the
35-10 bonds or in any way impair the rights and remedies of those owners
35-11 until the bonds, any premium or interest, and all costs and
35-12 expenses in connection with any action or proceeding by or on
35-13 behalf of those owners are fully met and discharged. The fund may
35-14 include this pledge and agreement of the state in any agreement
35-15 with the owners of the bonds.
35-16 Sec. 13. ENFORCEMENT BY MANDAMUS. A writ of mandamus and
35-17 all other legal and equitable remedies are available to any party
35-18 at interest to require the fund and any other party to carry out
35-19 agreements and to perform functions and duties under this article,
35-20 the Texas Constitution, or a bond resolution.
35-21 SECTION 2. This Act takes effect January 1, 2002.