By: Cook of Colorado H.B. No. 1353
A BILL TO BE ENTITLED
AN ACT
relating to creation and maintenance of a guaranty fund for groups
certified to self insure for workers' compensation under Chapter
407A, Labor Code.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Chapter 407A, Labor Code, is amended by adding a
new Subchapter J to read as follows:
SUBCHAPTER J. GUARANTY FUND
Sec. 407A.451. DEFINITIONS: In this subchapter,
(1) "Fund" means the Texas Self-Insurance Group Fund
created under this subchapter; and
(2) "Board" means the Texas Self-Insurance Group Board
created under this subchapter.
Sec. 407A.452. GUARANTY FUND. (a) The Texas
Self-Insurance Group Fund is a non-profit association that provides
for the payment of workers' compensation insurance benefits for the
injured employees covered by a group declared insolvent under Sec.
407A.355 of this chapter.
(b) Each group certified by the commissioner under this
chapter must participate in the fund.
Sec. 407A.453. BOARD OF THE FUND. (a) The fund is managed
by the Texas Self-Insurance Group Board.
(b) The board is composed of the following voting members:
(1) three members who represent different groups under
this chapter;
(2) one commission member representing wage earners;
(3) one member designated by the commissioner of
insurance; and
(4) the public counsel of the office of public
insurance counsel.
(c) Representatives of each group certified under this
chapter may participate equally in the election of the three
members of the board representing groups, which appointment shall
be subject to approval by the commissioner.
(d) The three group representatives on the board shall serve
staggered three-year terms.
(e) Notwithstanding subsection (c), the initial members of
the board representing groups certified under this chapter shall be
appointed by the commissioner of insurance. One shall serve a one
year term, one shall serve a two-year term, and one shall serve a
three-year term. All initial appointees may serve additional terms
upon election by the members of the fund.
(f) A member of the board or a member of the staff of the
board is not liable in a civil action for an act performed in good
faith in the execution of that person's powers or duties.
Sec. 407A.454. GENERAL DUTIES OF THE BOARD. (a) The board
shall:
(1) create and maintain the trust fund for payment of
compensation liabilities of an insolvent group;
(2) hire staff as necessary;
(3) provide recommendations to the commissioner of
insurance on rules or guidelines applicable to groups;
(4) receive reports from the Department of Insurance
on the financial condition of groups, including examination and
audit reports, which will remain confidential;
(5) engage consulting experts as necessary to review
information provided by or filed with the Texas Department of
Insurance to ensure financial solvency of groups under this
chapter;
(6) provide advisory recommendations as necessary
regarding an applicant's compliance with subchapter B relating to
application requirements for certification, which recommendations
may be made between board meetings; and
(7) take action, in response to a commissioner's
finding that a group is insolvent, to use the fund's resources to
ensure the payment of the group's valid workers' compensation
claims and related administrative expenses.
(b) All monies in the trust fund, including investment of
funds, are controlled by the board.
Sec. 407A.455. BOARD PLAN OF OPERATION. (a) The board
shall adopt a Plan of Operation governing the Board's activities
and the operation of the fund.
(b) The Plan of Operation adopted by the board is subject to
the approval of the commissioner of insurance.
Sec. 407A.456. TRUST FUND; SCHEDULE. (a) Each group shall
contribute an amount, based on total amount of income benefit
payments made in this state for the preceding reported calendar
year, to create, over a period of 10 years beginning January 1,
2006, a trust fund of at least $1 million for the emergency payment
of the compensation liabilities of an insolvent group and
administration of the fund.
(b) The Board may adopt provisions in its Plan of Operation
that provide for the indexing of the amount of the fund to a risk
analysis.
(c) At least annually, the board shall adopt a year-by-year
schedule of contributions to meet the funding goal of the trust
fund.
(d) The Board may consider deferring contributions if the
fund equals or exceeds $2 million and allow the fund to accrete
based on its investment earnings.
(e) The contribution for the first year after a group is
issued a certificate of authority under this chapter shall be based
on the estimated income benefit payments for the first year of
operation of the group.
(f) All groups certified under this chapter shall
contribute to the trust fund, and the board shall provide a
mechanism in the Plan of Operation to ensure that all groups
contribute equitably to the trust fund.
(g) The board shall administer the trust fund in accordance
with the Plan of Operation adopted by the board and approved by the
commissioner of insurance.
Sec. 407A.457. INSOLVENT GROUP. (a) On determination that
a group has become insolvent, the commissioner of insurance shall
secure release of the security deposit required by this chapter and
shall promptly estimate:
(1) the amount of additional funds needed to
supplement the security deposit; and
(2) the available assets of the insolvent group for
the purpose of making payment of all incurred liabilities for
compensation.
(b) If the security and available assets of the group are
insufficient to cover all incurred liabilities for compensation,
the commissioner shall direct the insolvent group to immediately
assess its members to cover all incurred liabilities under a
schedule approved by the commissioner.
(c) If the assessments will not be sufficient to cover the
incurred liabilities, the commissioner shall estimate the
additional funds necessary to cover the incurred liabilities for
benefit compensation and related administration expenses for the
insolvent group.
(d) Upon receipt of the commissioner's estimation, the
board shall provide the additional funds needed from the trust fund
for benefit compensation and related administrative expenses for
the insolvent group.
(e) Such disbursements from the fund shall be replenished by
adjusting the next year's schedule of contributions from groups, if
within the 10 year funding period of the Trust, or by assessment of
all groups, if beyond the initial 10 year funding period.
(f) If funds available in the trust fund remain
insufficient, then the board shall assess all groups for the
remaining deficiency.
(g) The commissioner may exempt a group from assessment
under this section on a determination that the payment of the
assessment would render the group insolvent.
(h) The Commissioner may, upon a finding of insolvency,
commence a delinquency proceeding for the purpose of liquidating,
rehabilitating, reorganizing or conserving a group and such group
shall be considered an insurer for purposes of article 21.28 and 11
USC 109.
(i) The conservator, liquidator or other statutory
successor of a group shall coordinate with the board in the
furtherance of the purposes of this subchapter J.
Sec. 407A.458. COLLECTION OF ASSESSMENTS FROM GROUP
MEMBERS; CONTINUATION OF JOINT AND SEVERAL LIABILITY. (a) Each
member of an insolvent group shall pay the amount of its assessment
under this chapter to the commissioner of insurance not later than
the 30th day after the date on which the commissioner of insurance
notifies the member of the assessment. The commissioner of
insurance shall collect assessments and costs from the members of
the insolvent group.
(b) The joint and several liability of the members of a
group under Sec. 407A.056 continue and are not terminated by
payment of benefits through the fund.
(c) If the fund assumes payment of benefits for the
compensation liabilities on behalf of an insolvent group, the fund
may collect delinquent assessments and costs through suit. Venue
is in Travis County.
Sec. 407A.459. PAYMENT OF BENEFITS THROUGH FUND. (a) If
the commissioner of insurance determines that the payment of
benefits and claims administration shall be made through the fund,
the fund assumes the workers' compensation obligations on behalf of
the insolvent group and shall begin the payment of the obligations
for which it is liable not later than the 30th day after the date of
notification by the commissioner of insurance.
(b) The fund shall make payments to claimants whose
entitlement to benefits can be ascertained by the fund.
(c) Notwithstanding Subsection (a), the fund is not liable
for the payment of any penalties assessed for any act or omission on
the part of any person other than the fund.
Sec. 407A.460. POSSESSION OF SECURITY BY FUND. On the
assumption of obligations on behalf of an insolvent group by the
fund under the commissioner's determination, the fund is entitled
to immediate possession of any assets and deposited security, along
with all interest on the security, of the insolvent group, and all
assessments from members of the insolvent group shall be paid to the
fund.
Sec. 407A.461. RELEASE OF CLAIM INFORMATION TO FUND.
Information on a workers' compensation claim may be released to the
fund as provided by Section 402.084(a) of this title, if the fund
has assumed the obligations on behalf of an insolvent group.
Sec. 407A.462. FUND AS PARTY IN INTEREST. (a) The fund is a
party in interest in a proceeding involving a workers' compensation
claim against an insolvent group whose compensation obligations
have been paid or assumed by the fund.
(b) The fund has the same rights and defenses as the
insolvent group, including the right to:
(1) appear, defend, or appeal a claim;
(2) receive notice of, investigate, adjust,
compromise, settle, or pay a claim; and
(3) investigate, handle, or deny a claim.
Sec. 407A.463. PREFERENCES. (a) The benefit payments made
by the fund under this chapter are entitled to the same preference
over other debts of the insolvent group as provided by law to
benefit payments owed by the insolvent group to the person entitled
to the benefits.
(b) The fund has the priority status provided by art. 21.28,
sec. 8.
Sec. 407A.464. SPECIAL FUND. Monies advanced by the fund
under this chapter do not become assets of the insolvent group but
are advanced to the commissioner, receiver or other statutory
successor only for the payment of compensation liabilities,
including the costs of claim administration and legal costs.
SECTION 2. Amend sections 407A.051(c)(12) and (13) as
follows:
(12) $250,000 fidelity [performance] bond for the
administrator in the form prescribed by the commissioner;
(13) a $250,000 fidelity [performance] bond for the
servicing company in the form prescribed the commissioner;
SECTION 3. REPEALER. Sections 407A.356 and 407A.357 of
Chapter 407A, Labor Code, are repealed.
SECTION 4. This Act takes effect September 1, 2005.