S.B. 137 78(R)    BILL ANALYSIS


S.B. 137
By: Ellis, Rodney
Insurance
Committee Report (Unamended)

BACKGROUND AND PURPOSE 

Since 1999, corporate-owned life insurance (COLI) policies have been legal
in Texas.  A COLI is a life insurance policy on an employee in which the
beneficiary is the employer.  There are no standards in current law for
disclosure by the employer of, and consent by the employee to, a COLI
policy.  S.B. 137 regulates COLI policies in Texas and provides guidelines
for employee notification and consent. 

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly grant any
additional rulemaking authority to a state officer, department, agency, or
institution. 

ANALYSIS

SECTION 1.  Amends Section 1103.003, Insurance Code, as effective June 1,
2003, to authorize a corporation, a joint stock association, or a trust
estate engaging in business for profit to be designated as a beneficiary
in a policy that insures the life of a director of the corporation, joint
stock association, or trust estate. 

SECTION 2.  Amends Subchapter B, Chapter 1103, Insurance Code, as
effective June 1, 2003, by adding Section 1103.057, as follows: 

Sec. 1103.057.  CERTAIN LIFE INSURANCE POLICIES INSURING EMPLOYEES.  (a)
Prohibits an individual, except as provided by Subsection (b), whose life
is insured under a life insurance policy from designating or consenting to
the designation of an individual, partnership, association, corporation,
or other legal entity that is the individual's employer as a beneficiary
of the policy. 

(b)  Authorizes an individual to designate a legal entity that is the
individual's employer as a beneficiary of a life insurance policy under
which the individual's life is insured if the employer complies with
Subsection (c) and meets other specified requirements.  

(c)  Provides that an employer designated as a beneficiary of a life
insurance policy on the life of an employee under Subsection (b) must
notify, advise, and obtain consent of the employee, following certain
guidelines. 

(d)  Prohibits an employer from making consent under Subsection (c)(3) a
condition of employment, or retaliating against an employee for refusing
to provide the consent. 

(e)  Prohibits an insurer from issuing a policy or certificate to an
employer insuring the life of an employee of that employer under
Subsection (c) unless the insurer receives the employee's written consent
that complies with Subsection (c)(3). 

(f)  Provides that benefits of a life insurance policy for which consent
was not obtained as required by Subsection (c) or for which consent was
coerced in violation of Subsection (d) are not payable to the employer and
are payable instead to the estate of the deceased insured. 

(g)  Authorizes a person or the estate of a person who has sustained
damages as a result of an action of an employer or former employer in
violation of this section to maintain a civil action to recover the
damages against the employer or former employer in district court. 
 
SECTION 3.  Amends Section 1131.703(b), Insurance Code, as effective June
1, 2003, to require the insurer, in addition to satisfying the
requirements of Article 3.42 of this code, to certify to the commissioner
of insurance that the policy complies with Section 1103.057(e).  Requires
the insurer to submit a sworn affidavit executed by the employer and, in
the case of a corporate employer, an officer of the corporation,
certifying that the group insurance plan complies with Sections
1103.057(c) and (d). 

SECTION 4.  Repealer:  Section 1103.056 (Purchase of or Application for
Policy by Third Party), Insurance Code. 

SECTION 5.   Effective date:  September 1, 2003.  Makes application of
this Act prospective. 

EFFECTIVE DATE

September 1, 2003.