By: Ellis S.B. No. 137
(In the Senate - Filed November 22, 2002; January 29, 2003,
read first time and referred to Committee on State Affairs;
May 12, 2003, reported adversely, with favorable Committee
Substitute by the following vote: Yeas 6, Nays 0; May 12, 2003,
sent to printer.)
COMMITTEE SUBSTITUTE FOR S.B. No. 137 By: Nelson
A BILL TO BE ENTITLED
AN ACT
relating to insurance policies insuring the life of an employee or
former employee.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 1103.003, Insurance Code, as effective
June 1, 2003, is amended to read as follows:
Sec. 1103.003. CORPORATION, JOINT STOCK ASSOCIATION, OR
TRUST ESTATE AS BENEFICIARY. A corporation, a joint stock
association, or a trust estate that is engaging in business for
profit may be designated as a beneficiary in a policy that insures
the life of an officer, director, or stockholder of the
corporation, joint stock association, or trust estate.
SECTION 2. Subchapter B, Chapter 1103, Insurance Code, as
effective June 1, 2003, is amended by adding Section 1103.057 to
read as follows:
Sec. 1103.057. CERTAIN LIFE INSURANCE POLICIES INSURING
EMPLOYEES. (a) Except as provided by Subsection (b), an
individual whose life is insured under a life insurance policy may
not designate or consent 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) An individual may 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:
(1) the employer is an individual who is related by
blood or marriage to the individual whose life is insured under the
policy;
(2) the designation would be permitted under Section
1103.003 or 1103.004;
(3) the insured is a current employee who meets, or a
former employee who met at the time of retirement, the criteria set
forth in 29 C.F.R. Section 541.1, 541.2, 541.3, or 541.5; or
(4) at the time the employer is designated as a policy
beneficiary:
(A) the insured is an employee or former employee
who participates or is eligible to participate, on the satisfaction
of age, service, or similar eligibility criteria, in a plan that is
an employee welfare benefit plan or an employee pension plan under
which plan benefits are payable to the employee or former employee
or a beneficiary designated by the insured employee or former
employee; and
(B) the total amount of insurance coverage
designating the employer as beneficiary under this subsection is
reasonably related to the costs of employee or retiree benefits
already incurred in connection with the employee benefit plans plus
the projected future cost of the benefits as established by the
employer.
(c) An employer designated as a beneficiary of a life
insurance policy on the life of an employee under Subsection (b)
must:
(1) notify the employee in writing that coverage is
being obtained on the employee's life, specifying the minimum
initial death benefit;
(2) advise the employee that:
(A) the employee's consent is required for the
coverage to be obtained;
(B) once consent is given, it is irrevocable; and
(C) the employer may maintain the coverage after
the employee's employment has terminated; and
(3) obtain the employee's written consent to the
coverage, including the minimum initial death benefit.
(d) An employer may not:
(1) make consent under Subsection (c)(3) a condition
of employment; or
(2) retaliate against an employee for refusing to
provide the consent.
(e) An insurer may not issue 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) 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) 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 may maintain a civil action to recover
the damages against the employer or former employer in district
court.
SECTION 3. Subsection (b), Section 1131.703, Insurance
Code, as effective June 1, 2003, is amended to read as follows:
(b) In addition to satisfying the requirements of Article
3.42 of this code, the insurer shall certify [An employer shall
submit evidence of the purpose of the policy] to the commissioner
that the policy complies with Section 1103.057(e). The insurer
shall also 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. Section 1103.056, Insurance Code, is repealed.
SECTION 5. This Act takes effect September 1, 2003, and
applies only to an insurance policy that is delivered or issued for
delivery on or after that date. A policy that is delivered or
issued for delivery before September 1, 2003, is governed by the law
as it existed immediately before the effective date of this Act, and
that law is continued in effect for that purpose.
* * * * *