H.B. No. 2636
 
AN ACT
relating to the nonsubstantive revision of statutes relating to the
Texas Department of Insurance, the business of insurance, and
certain related businesses, to nonsubstantive additions to and
corrections in the codified Insurance Code, and to conforming the
provisions of that code that were codified by the 79th Legislature
to other Acts of that legislature, including conforming amendments,
repeals, and penalties.
       BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
ARTICLE 1.  REVISION OF THE INSURANCE CODE OF 1951
PART A.  ADDITIONS AND CONFORMING AMENDMENTS TO TITLE 2,
INSURANCE CODE
       SECTION 1A.001.  CONFORMING AMENDMENT.  Chapter 30,
Insurance Code, is amended to read as follows:
CHAPTER 30.  GENERAL PROVISIONS
       Sec. 30.001.  PURPOSE OF TITLES 2, 3, 4, 5, 6, 7, 8, 9, 10,
11, 12, 13, [AND] 14, AND 20.  (a)  This title and Titles 3, 4, 5, 6,
7, 8, 9, 10, 11, 12, 13, [and] 14, and 20 are enacted as a part of the
state's continuing statutory revision program, begun by the Texas
Legislative Council in 1963 as directed by the legislature in the
law codified as Section 323.007, Government Code.  The program
contemplates a topic-by-topic revision of the state's general and
permanent statute law without substantive change.
       (b)  Consistent with the objectives of the statutory
revision program, the purpose of this title and Titles 3, 4, 5, 6,
7, 8, 9, 10, 11, 12, 13, [and] 14, and 20 is to make the law
encompassed by the titles more accessible and understandable by:
             (1)  rearranging the statutes into a more logical
order;
             (2)  employing a format and numbering system designed
to facilitate citation of the law and to accommodate future
expansion of the law;
             (3)  eliminating repealed, duplicative,
unconstitutional, expired, executed, and other ineffective
provisions; and
             (4)  restating the law in modern American English to
the greatest extent possible.
       Sec. 30.002.  CONSTRUCTION.  Except as provided by Section
30.003 and as otherwise expressly provided in this code, Chapter
311, Government Code (Code Construction Act), applies to the
construction of each provision in this title and in Titles 3, 4, 5,
6, 7, 8, 9, 10, 11, 12, 13, [and] 14, and 20.
       Sec. 30.003.  DEFINITION OF PERSON.  The definition of
"person" assigned by Section 311.005, Government Code, does not
apply to any provision in this title or in Title 3, 4, 5, 6, 7, 8, 9,
10, 11, 12, 13, [or] 14, or 20.
       Sec. 30.004.  REFERENCE IN LAW TO STATUTE REVISED BY TITLE 2,
3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, [OR] 14, OR 20.  A reference in a
law to a statute or a part of a statute revised by this title or by
Title 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, [or] 14, or 20 is
considered to be a reference to the part of this code that revises
that statute or part of that statute.
SECTION 1A.002.  ADDITION. Subchapter A, Chapter 32,
Insurance Code, is amended by adding Sections 32.0015 and 32.004 to
read as follows:
       Sec. 32.0015.  FILING ARTICLES OF INCORPORATION AND OTHER
PAPERS; CERTIFIED COPIES. (a)  The department shall file and
maintain in a department office:
             (1)  all insurance companies' acts or articles of
incorporation; and
             (2)  any other paper required by law to be filed with
the department.
       (b)  The department shall provide a certified copy of a
document described by Subsection (a)(1) or (2) to a party
interested in the document who:
             (1)  submits an application; and
             (2)  pays the fee prescribed by law. (V.T.I.C. Art.
1.10, Sec. 2.)
       Sec. 32.004.  PUBLICATION OF RESULTS OF EXAMINATION. The
department shall publish the results of an examination of a
company's affairs if the commissioner determines that publication
is in the public interest.  (V.T.I.C. Art. 1.10, Sec. 6.)
PART B.  ADDITIONS TO TITLE 3, INSURANCE CODE
       SECTION 1B.001.  ADDITION.  Subtitle B, Title 3, Insurance
Code, is amended by adding Chapter 228 to read as follows:
CHAPTER 228.  PREMIUM TAX CREDIT FOR CERTAIN INVESTMENTS
SUBCHAPTER A.  GENERAL PROVISIONS
       Sec.228.001.GENERAL DEFINITIONS.  In this chapter:
             (1)  "Allocation date" means the date on which
certified investors are allocated premium tax credits.
             (2)  "Certified capital" means cash invested by a
certified investor that fully funds the purchase price of an equity
interest in a certified capital company or a qualified debt
instrument issued by the company.
             (3)  "Certified capital company" means a partnership,
corporation, or trust or limited liability company, whether
organized on a profit or nonprofit basis, that:
                   (A)  has as the company's primary business
activity the investment of cash in qualified businesses; and
                   (B)  is certified as meeting the criteria of this
chapter.
             (4)  "Certified investor" means an insurer or other
person that has state premium tax liability and that contributes
certified capital pursuant to a premium tax credit allocation under
this chapter.
             (5)  "Early stage business" means a business described
by Section 228.152(a).
             (6)  "Person" means an individual or entity, including
a corporation, general or limited partnership, or trust or limited
liability company.
             (7)  "Premium tax credit allocation claim" means a
claim for allocation of premium tax credits.
             (8)  "Qualified business" means a business described by
Section 228.201.
             (9)  "Qualified debt instrument" means a debt
instrument issued by a certified capital company, at par value or a
premium, that:
                   (A)  has an original maturity date that is a date
on or after the fifth anniversary of the date of issuance;
                   (B)  has a repayment schedule that is not faster
than a level principal amortization over five years; and
                   (C)  does not have interest, distribution, or
payment features that are related to:
                         (i)  the profitability of the company; or
                         (ii)  the performance of the company's
investment portfolio.
             (10)  "Qualified investment" means the investment of
cash by a certified capital company in a qualified business for the
purchase of any debt, debt participation, equity, or hybrid
security of any nature or description, including a debt instrument
or security that has the characteristics of debt but that provides
for conversion into equity or equity participation instruments such
as options or warrants.
             (11)  "State premium tax liability" means:
                   (A)  any liability incurred by any person under
Chapter 221, 222, 223, or 224; or
                   (B)  if the tax liability imposed under Chapter
221, 222, 223, or 224 is eliminated or reduced, any tax liability
imposed on an insurer or other person that had premium tax liability
under Subchapter A, Chapter 4, or Article 9.59 as those laws existed
on January 1, 2003.
             (12)  "Strategic investment business" means a business
described by Section 228.153(a). (V.T.I.C. Art. 4.51, Subdivs.
(2), (3), (4), (5), (6) (part), (7), (8), (9) (part), (10), (12),
(13), (15) (part).)
       Sec.228.002.DEFINITION OF AFFILIATE.  In this chapter,
"affiliate" of another person means:
             (1)  a person that is an affiliate for purposes of
Section 823.003;
             (2)  a person that directly or indirectly:
                   (A)  beneficially owns 10 percent or more of the
outstanding voting securities or other voting or management
interests of the other person, whether through rights, options,
convertible interests, or otherwise; or
                   (B)  controls or holds power to vote 10 percent or
more of the outstanding voting securities or other voting or
management interests of the other person;
             (3)  a person 10 percent or more of the outstanding
voting securities or other voting or management interests of which
are directly or indirectly:
                   (A)  beneficially owned by the other person,
whether through rights, options, convertible interests, or
otherwise; or
                   (B)  controlled or held with power to vote by the
other person;
             (4)  a partnership in which the other person is a
general partner;
             (5)  an officer, director, employee, or agent of the
other person; or
             (6)  an immediate family member of an officer,
director, employee, or agent described by Subdivision (5). 
(V.T.I.C. Art. 4.51, Subdiv. (1).)
[Sections 228.003-228.050 reserved for expansion]
SUBCHAPTER B.  ADMINISTRATION AND PROMOTION
       Sec.228.051.ADMINISTRATION BY COMPTROLLER. The
comptroller shall administer this chapter. (V.T.I.C. Art. 4.52
(part).)
       Sec.228.052.RULES; FORMS. The comptroller shall adopt
rules and forms as necessary to implement this chapter, including
rules that:
             (1)  establish the application procedures for
certified capital companies; and
             (2)  facilitate the transfer or assignment of premium
tax credits by certified investors. (V.T.I.C. Art. 4.52 (part);
Art. 4.53, Sec. (a); Art. 4.71, Sec. (a) (part).)
       Sec.228.053.REPORT TO LEGISLATURE.  (a)  The comptroller
shall prepare a biennial report concerning the results of the
implementation of this chapter.  The report must include:
             (1)  the number of certified capital companies holding
certified capital;
             (2)  the amount of certified capital invested in each
certified capital company;
             (3)  the amount of certified capital the certified
capital company invested in qualified businesses as of January 1,
2006, and the cumulative total for each subsequent year;
             (4)  the total amount of tax credits granted under this
chapter for each year that credits have been granted;
             (5)  the performance of each certified capital company
with respect to renewal and reporting requirements imposed under
this chapter;
             (6)  with respect to the qualified businesses in which
certified capital companies have invested:
                   (A)  the classification of the qualified
businesses according to the industrial sector and size of the
business;
                   (B)  the total number of jobs created by the
investment and the average wages paid for the jobs; and
                   (C)  the total number of jobs retained as a result
of the investment and the average wages paid for the jobs; and
             (7)  the certified capital companies that have been
decertified or that have failed to renew the certification and the
reason for any decertification.
       (b)  The comptroller shall file the report with the governor,
the lieutenant governor, and the speaker of the house of
representatives not later than December 15 of each even-numbered
year. (V.T.I.C. Art. 4.73.)
       Sec.228.054.PROMOTION OF PROGRAM.  The Texas Economic
Development and Tourism Office shall promote the program
established under this chapter in the Texas Business and Community
Economic Development Clearinghouse. (V.T.I.C. Art. 4.72.)
[Sections 228.055-228.100 reserved for expansion]
SUBCHAPTER C. APPLICATION FOR AND GENERAL OPERATION OF CERTIFIED
CAPITAL COMPANIES
       Sec.228.101.APPLICATION FOR CERTIFICATION.  (a)  An
applicant for certification must file the application in the form
prescribed by the comptroller.  The application must be accompanied
by a nonrefundable application fee of $7,500.
       (b)  The application must include an audited balance sheet of
the applicant, with an unqualified opinion from an independent
certified public accountant, as of a date not more than 35 days
before the date of the application. (V.T.I.C. Art. 4.53, Sec. (b).)
       Sec.228.102.QUALIFICATION.  To qualify as a certified
capital company:
             (1)  the applicant must have, at the time of
application for certification, an equity capitalization of at least
$500,000 in unencumbered cash or cash equivalents;
             (2)  at least two principals or persons employed to
manage the funds of the applicant must have at least four years of
experience in the venture capital industry; and
             (3)  the applicant must satisfy any additional
requirement imposed by the comptroller by rule. (V.T.I.C. Art.
4.53, Sec. (c).)
       Sec.228.103.MANAGEMENT BY AND CERTAIN OWNERSHIP INTERESTS OF INSURANCE ENTITIES PROHIBITED
OF INSURANCE ENTITIES PROHIBITED
insurers, or other persons who may have state premium tax liability
or the insurer's or person's affiliates may not directly or
indirectly:
             (1)  manage a certified capital company;
             (2)  beneficially own, whether through rights,
options, convertible interests, or otherwise, more than 10 percent
of the outstanding voting securities of a certified capital
company; or
             (3)  control the direction of investments for a
certified capital company.
       (b)  Subsection (a) applies without regard to whether the
insurer or other person or the affiliate of the insurer or other
person is authorized by or engages in business in this state.
       (c)  Subsections (a) and (b) do not preclude an insurer,
certified investor, or any other party from exercising its legal
rights and remedies, including interim management of a certified
capital company, if authorized by law, with respect to a certified
capital company that is in default of the company's statutory or
contractual obligations to the insurer, certified investor, or
other party.
       (d)  This chapter does not limit an insurer's ownership of
nonvoting equity interests in a certified capital company. 
(V.T.I.C. Art. 4.54; Art. 4.56, Sec. (d).)
       Sec.228.104.ACTION ON APPLICATION.  (a)  The comptroller
shall:
             (1)  review the application, organizational documents,
and business history of each applicant; and
             (2)  ensure that the applicant satisfies the
requirements of this chapter.
       (b)  Not later than the 30th day after the date an
application is filed, the comptroller shall:
             (1)  issue the certification; or
             (2)  refuse to issue the certification and communicate
in detail to the applicant the grounds for the refusal, including
suggestions for the removal of those grounds. (V.T.I.C. Art. 4.53,
Secs. (d), (e).)
       Sec.228.105.CONTINUATION OF CERTIFICATION.  To continue
to be certified, a certified capital company must make qualified
investments according to the schedule established by Section
228.151. (V.T.I.C. Art. 4.56, Sec. (a) (part).)
       Sec.228.106.REPORTS TO COMPTROLLER; AUDITED FINANCIAL STATEMENT
STATEMENT
comptroller as soon as practicable after the receipt of certified
capital:
             (1)  the name of each certified investor from whom the
certified capital was received, including the certified investor's
insurance premium tax identification number;
             (2)  the amount of each certified investor's investment
of certified capital and premium tax credits; and
             (3)  the date on which the certified capital was
received.
       (b)  Not later than January 31 of each year, each certified
capital company shall report to the comptroller:
             (1)  the amount of the company's certified capital at
the end of the preceding year;
             (2)  whether or not the company has invested more than
15 percent of the company's total certified capital in a single
business;
             (3)  each qualified investment that the company made
during the preceding year and, with respect to each qualified
investment, the number of employees of the qualified business at
the time the qualified investment was made; and
             (4)  any other information required by the comptroller,
including any information required by the comptroller to comply
with Section 228.053.
       (c)  Not later than April 1 of each year, each certified
capital company shall provide to the comptroller an annual audited
financial statement that includes the opinion of an independent
certified public accountant. The audit must address the methods of
operation and conduct of the business of the company to determine
whether:
             (1)  the company is complying with this chapter and the
rules adopted under this chapter;
             (2)  the funds received by the company have been
invested as required within the time provided by Section 228.151;
and
             (3)  the company has invested the funds in qualified
businesses. (V.T.I.C. Art. 4.58.)
       Sec.228.107.RENEWAL FEE; LATE FEE; EXCEPTION.  (a)  Not
later than January 31 of each year, each certified capital company
shall pay a nonrefundable renewal fee of $5,000 to the comptroller.
       (b)  If a certified capital company fails to pay the renewal
fee on or before the date specified by Subsection (a), the company
must pay, in addition to the renewal fee, a late fee of $5,000 to
continue the company's certification.
       (c)  Notwithstanding Subsection (a), a renewal fee is not
required within six months of the date on which a certified capital
company's initial certification is issued under Section
228.104(b). (V.T.I.C. Art. 4.59.)
       Sec.228.108.OFFERING MATERIAL USED BY CERTIFIED CAPITAL COMPANY
COMPANY
the certified capital company must include the following statement:
             By authorizing the formation of a certified
capital company, the State of Texas does not endorse
the quality of management or the potential for
earnings of the company and is not liable for damages
or losses to a certified investor in the company. Use
of the word "certified" in an offering does not
constitute a recommendation or endorsement of the
investment by the comptroller of public accounts. If
applicable provisions of law are violated, the State
of Texas may require forfeiture of unused premium tax
credits and repayments of used premium tax credits.
(V.T.I.C. Art. 4.55.)
[Sections 228.109-228.150 reserved for expansion]
SUBCHAPTER D.  INVESTMENT BY CERTIFIED CAPITAL COMPANIES
       Sec.228.151.REQUIRED SCHEDULE OF INVESTMENT.  (a)  Before
the third anniversary of a certified capital company's allocation
date, the company must make qualified investments in an amount
cumulatively equal to at least 30 percent of the company's
certified capital, subject to Section 228.153(b).
       (b)  Before the fifth anniversary of a certified capital
company's allocation date, the company must make qualified
investments in an amount cumulatively equal to at least 50 percent
of the company's certified capital, subject to Sections 228.152(b)
and 228.153(b). (V.T.I.C. Art. 4.56, Sec. (a) (part).)
       Sec.228.152.INVESTMENT IN EARLY STAGE BUSINESS REQUIRED.  
(a)  In this section, "early stage business" means a qualified
business that:
             (1)  is involved, at the time of a certified capital
company's first investment, in activities related to the
development of initial product or service offerings, such as
prototype development or establishment of initial production or
service processes;
             (2)  was initially organized less than two years before
the date of the certified capital company's first investment; or
             (3)  during the fiscal year immediately preceding the
year of the certified capital company's first investment had, on a
consolidated basis with the business's affiliates, gross revenues
of not more than $2 million as determined in accordance with
generally accepted accounting principles.
       (b)  A certified capital company must place at least 50
percent of the amount of qualified investments required by Section
228.151(b) in early stage businesses. (V.T.I.C. Art. 4.51, Subdiv.
(6); Art. 4.56, Sec. (b) (part).)
       Sec.228.153.INVESTMENT IN STRATEGIC INVESTMENT BUSINESS REQUIRED
REQUIRED
             (1)  "Strategic investment area" means an area of this
state that qualifies as a strategic investment area under
Subchapter O, Chapter 171, Tax Code, or, after the date that
subchapter expires, an area that qualified as a strategic
investment area under that subchapter immediately before that date.
             (2)  "Strategic investment business" means a qualified
business that:
                   (A)  has the business's principal business
operations located in one or more strategic investment areas; and
                   (B)  intends to maintain business operations in
the strategic investment areas after receipt of the investment by
the certified capital company.
       (b)  A certified capital company must place at least 30
percent of the amount of qualified investments required by Sections
228.151(a) and (b) in a strategic investment business. (V.T.I.C.
Art. 4.51, Subdivs. (14), (15); Art. 4.56, Sec. (b) (part).)
       Sec.228.154.CERTIFIED CAPITAL NOT INVESTED IN QUALIFIED INVESTMENTS
INVESTMENTS
certified capital not invested in qualified investments only in:
             (1)  cash deposited with a federally insured financial
institution;
             (2)  certificates of deposit in a federally insured
financial institution;
             (3)  investment securities that are:
                   (A)  obligations of the United States or agencies
or instrumentalities of the United States; or
                   (B)  obligations that are guaranteed fully as to
principal and interest by the United States;
             (4)  debt instruments rated at least "A" or the
equivalent by a nationally recognized credit rating organization,
or issued by, or guaranteed with respect to payment by, an entity
whose unsecured indebtedness is rated at least "A" or the
equivalent by a nationally recognized credit rating organization,
and which indebtedness is not subordinated to other unsecured
indebtedness of the issuer or the guarantor;
             (5)  obligations of this state or a municipality or
political subdivision of this state; or
             (6)  any other investment approved in advance in
writing by the comptroller. (V.T.I.C. Art. 4.56, Sec. (h).)
       Sec.228.155.COMPUTATION OF AMOUNT OF INVESTMENTS.  (a)  
The aggregate cumulative amount of all qualified investments made
by a certified capital company after the company's allocation date
shall be considered in the computation of the percentage
requirements under this subchapter.
       (b)  A certified capital company may invest proceeds
received from a qualified investment in another qualified
investment, and that investment counts toward any requirement of
this chapter with respect to investments of certified capital.
(V.T.I.C. Art. 4.56, Sec. (c).)
       Sec.228.156.LIMIT ON QUALIFIED INVESTMENT. A certified
capital company may not make a qualified investment at a cost to the
company that is greater than 15 percent of the company's total
certified capital at the time of investment. (V.T.I.C. Art. 4.56,
Sec. (f).)
       Sec.228.157.DISTRIBUTIONS BY CERTIFIED CAPITAL COMPANY.  
(a)  In this section, "qualified distribution" means any
distribution or payment from certified capital by a certified
capital company in connection with:
             (1)  the reasonable costs and expenses of forming,
syndicating, managing, and operating the company, provided that the
distribution or payment is not made directly or indirectly to a
certified investor, including:
                   (A)  reasonable and necessary fees paid for
professional services, including legal and accounting services,
related to the company's formation and operation; and
                   (B)  an annual management fee in an amount that
does not exceed 2.5 percent of the company's certified capital; and
             (2)  a projected increase in federal or state taxes,
including penalties and interest related to state and federal
income taxes, of the company's equity owners resulting from the
earnings or other tax liability of the company to the extent that
the increase is related to the ownership, management, or operation
of the company.
       (b)  A certified capital company may make a qualified
distribution at any time. To make a distribution or payment other
than a qualified distribution, a company must have made qualified
investments in an amount cumulatively equal to 100 percent of the
company's certified capital.
       (c)  If a business in which a qualified investment is made
relocates the business's principal business operations to another
state during the term of the certified capital company's investment
in the business, the cumulative amount of qualified investments
made by the certified capital company for purposes of satisfying
the requirements of Subsection (b) only is reduced by the amount of
the certified capital company's qualified investments in the
business that has relocated.
       (d)  Subsection (c) does not apply if the business
demonstrates that the business has returned the business's
principal business operations to this state not later than the 90th
day after the date of the relocation. (V.T.I.C. Art. 4.51, Subdiv.
(11); Art. 4.60, Secs. (a), (c).)
       Sec.228.158.REPAYMENT OF DEBT.  Notwithstanding Section
228.157(b), a certified capital company may make repayments of
principal and interest on the company's indebtedness without any
restriction, including repaying the company's indebtedness on
which certified investors earned premium tax credits. (V.T.I.C.
Art. 4.60, Sec. (b).)
[Sections 228.159-228.200 reserved for expansion]
SUBCHAPTER E.  QUALIFIED BUSINESS
       Sec.228.201.DEFINITION OF QUALIFIED BUSINESS. (a)  In
this chapter, "qualified business" means a business that complies
with this section at the time of a certified capital company's first
investment in the business.
       (b)  A qualified business must:
             (1)  be headquartered in this state and intend to
remain in this state after receipt of the certified capital
company's investment; and
             (2)  have the business's principal business operations
located in this state and intend to maintain business operations in
this state after receipt of the certified capital company's
investment.
       (c)  A qualified business must agree to use the qualified
investment primarily to:
             (1)  support business operations in this state, other
than advertising, promotion, and sales operations which may be
conducted outside of this state; or
             (2)  in the case of a start-up company, establish and
support business operations in this state, other than advertising,
promotion, and sales operations which may be conducted outside of
this state.
       (d)  A qualified business may not have more than 100
employees and must:
             (1)  employ at least 80 percent of the business's
employees in this state; or
             (2)  pay 80 percent of the business's payroll to
employees in this state.
       (e)  A qualified business must be primarily engaged in:
             (1)  manufacturing, processing, or assembling
products;
             (2)  conducting research and development; or
             (3)  providing services.
       (f)  A qualified business may not be primarily engaged in:
             (1)  retail sales;
             (2)  real estate development;
             (3)  the business of insurance, banking, or lending; or
             (4)  the provision of professional services provided by
accountants, attorneys, or physicians. (V.T.I.C. Art. 4.51,
Subdiv. (9).)
       Sec.228.202.RELOCATION OF PRINCIPAL BUSINESS OPERATIONS.  
If, before the 90th day after the date a certified capital company
makes an investment in a qualified business, the qualified business
moves the business's principal business operations from this state,
the investment may not be considered a qualified investment for
purposes of the percentage requirements under this chapter. 
(V.T.I.C. Art. 4.56, Sec. (g).)
       Sec.228.203.EVALUATION OF BUSINESS BY COMPTROLLER.  (a)  A
certified capital company may, before making an investment in a
business, request a written opinion from the comptroller as to
whether the business in which the company proposes to invest is a
qualified business, an early stage business, or a strategic
investment business.
       (b)  Not later than the 15th business day after the date of
the receipt of a request under Subsection (a), the comptroller
shall:
             (1)  determine whether the business meets the
definition of a qualified business, an early stage business, or a
strategic investment business, as applicable, and notify the
certified capital company of the determination and provide an
explanation of the determination; or
             (2)  notify the company that an additional 15 days will
be needed to review the request and make the determination.
       (c)  If the comptroller fails to notify the certified capital
company with respect to the proposed investment within the period
specified by Subsection (b), the business in which the company
proposes to invest is considered to be a qualified business, an
early stage business, or a strategic investment business, as
appropriate. (V.T.I.C. Art. 4.57.)
       Sec.228.204.CONTINUATION OF CLASSIFICATION AS QUALIFIED BUSINESS; FOLLOW-ON INVESTMENTS AUTHORIZED
BUSINESS; FOLLOW-ON INVESTMENTS AUTHORIZED
is classified as a qualified business at the time of the first
investment in the business by a certified capital company:
             (1)  remains classified as a qualified business; and
             (2)  may receive follow-on investments from any
certified capital company.
       (b)  Except as provided by Subsection (c), a follow-on
investment made under Subsection (a) is a qualified investment even
though the business may not meet the definition of a qualified
business at the time of the follow-on investment.
       (c)  A follow-on investment does not qualify as a qualified
investment if, at the time of the follow-on investment, the
qualified business no longer has the business's principal business
operations in this state. (V.T.I.C. Art. 4.56, Sec. (e).)
[Sections 228.205-228.250 reserved for expansion]
SUBCHAPTER F.  PREMIUM TAX CREDIT
       Sec.228.251.PREMIUM TAX CREDIT.  (a)  A certified investor
who makes an investment of certified capital shall earn in the year
of investment a vested credit against state premium tax liability
equal to 100 percent of the certified investor's investment of
certified capital, subject to the limits imposed by this chapter.
       (b)  Beginning with the tax report due March 1, 2009, for the
2008 tax year, a certified investor may take up to 25 percent of the
vested premium tax credit in any taxable year of the certified
investor.  The credit may not be applied to estimated payments due
in 2008. (V.T.I.C. Art. 4.65, Sec. (a).)
       Sec.228.252.LIMIT ON PREMIUM TAX CREDIT. (a)  The credit
to be applied against state premium tax liability of a certified
investor in any one year may not exceed the state premium tax
liability of the investor for the taxable year.
       (b)  A certified investor may carry forward any unused credit
against state premium tax liability indefinitely until the premium
tax credits are used. (V.T.I.C. Art. 4.65, Sec. (b).)
       Sec.228.253.PREMIUM TAX CREDIT ALLOCATION CLAIM REQUIRED.  
(a)  A certified investor must prepare and execute a premium tax
credit allocation claim on a form provided by the comptroller.
       (b)  The certified capital company must have filed the claim
with the comptroller on the date on which the comptroller accepted
premium tax credit allocation claims on behalf of certified
investors under the comptroller's rules.
       (c)  The premium tax credit allocation claim form must
include an affidavit of the certified investor under which the
certified investor becomes legally bound and irrevocably committed
to make an investment of certified capital in a certified capital
company in the amount allocated even if the amount allocated is less
than the amount of the claim, subject only to the receipt of an
allocation under Section 228.255.
       (d)  A certified investor may not claim a premium tax credit
under Section 228.251 for an investment that has not been funded,
without regard to whether the certified investor has committed to
fund the investment. (V.T.I.C. Art. 4.66.)
       Sec.228.254.TOTAL LIMIT ON PREMIUM TAX CREDITS.  (a)  The
total amount of certified capital for which premium tax credits may
be allowed under this chapter for all years in which premium tax
credits are allowed is $200 million.
       (b)  The total amount of certified capital for which premium
tax credits may be allowed for all certified investors under this
chapter may not exceed the amount that would entitle all certified
investors in certified capital companies to take total credits of
$50 million in a year.
       (c)  A certified capital company and the company's
affiliates may not file premium tax credit allocation claims in
excess of the maximum amount of certified capital for which premium
tax credits may be allowed as provided by this section. (V.T.I.C.
Art. 4.67.)
       Sec.228.255.ALLOCATION OF PREMIUM TAX CREDIT.  (a)  If the
total premium tax credits claimed by all certified investors
exceeds the total limits on premium tax credits established by
Section 228.254(a), the comptroller shall allocate the total amount
of premium tax credits allowed under this chapter to certified
investors in certified capital companies on a pro rata basis in
accordance with this section.
       (b)  The pro rata allocation for each certified investor
shall be the product of:
             (1)  a fraction, the numerator of which is the amount of
the premium tax credit allocation claim filed on behalf of the
investor and the denominator of which is the total amount of all
premium tax credit allocation claims filed on behalf of all
certified investors; and
             (2)  the total amount of certified capital for which
premium tax credits may be allowed under this chapter.
       (c)  The maximum amount of certified capital for which
premium tax credit allocation may be allowed on behalf of a single
certified investor and the investor's affiliates, whether by one or
more certified capital companies, may not exceed the greater of:
             (1)  $10 million; or
             (2)  15 percent of the maximum aggregate amount
available under Section 228.254(a). (V.T.I.C. Art. 4.68, Secs.
(a), (b), (e).)
       Sec.228.256.TREATMENT OF CREDITS AND CAPITAL.  In any case
under this code or another insurance law of this state in which the
assets of a certified investor are examined or considered, the
certified capital may be treated as an admitted asset, subject to
the applicable statutory valuation procedures. (V.T.I.C. Art.
4.69.)
       Sec.228.257.TRANSFERABILITY OF CREDIT.  (a) A certified
investor may transfer or assign premium tax credits only in
compliance with the rules adopted under Section 228.052.
       (b)  The transfer or assignment of a premium tax credit does
not affect the schedule for taking the premium tax credit under this
chapter. (V.T.I.C. Art. 4.71, Secs. (a) (part), (b).)
       Sec.228.258.IMPACT OF PREMIUM TAX CREDIT ON INSURANCE RATEMAKING
RATEMAKING
amount of premium tax included by the investor in connection with
ratemaking for an insurance contract written in this state because
of a reduction in the investor's Texas premium tax derived from
premium tax credits granted under this chapter. (V.T.I.C. Art.
4.70.)
       Sec.228.259.RETALIATORY TAX.  A certified investor
claiming a credit against state premium tax liability earned
through an investment in a company is not required to pay any
additional retaliatory tax levied under Chapter 281 as a result of
claiming that credit. (V.T.I.C. Art. 4.65, Sec. (c) (part).)
[Sections 228.260-228.300 reserved for expansion]
SUBCHAPTER G.  ENFORCEMENT
       Sec.228.301.ANNUAL REVIEW BY COMPTROLLER.  (a)  The
comptroller shall conduct an annual review of each certified
capital company to:
             (1)  ensure that the company:
                   (A)  continues to satisfy the requirements of this
chapter; and
                   (B)  has not made any investment in violation of
this chapter; and
             (2)  determine the eligibility status of the company's
qualified investments.
       (b)  Each certified capital company shall pay the cost of the
annual review according to a reasonable fee schedule adopted by the
comptroller. (V.T.I.C. Art. 4.61, Secs. (a), (b).)
       Sec.228.302.DECERTIFICATION OF CERTIFIED CAPITAL COMPANY
COMPANY
228.107, 228.151, 228.152, 228.153, 228.154, 228.155, 228.156,
228.202, or 228.204 is grounds for decertification of a certified
capital company.
       (b)  If the comptroller determines that a certified capital
company is not in compliance with a law listed in Subsection (a),
the comptroller shall notify the company's officers in writing that
the company may be subject to decertification after the 120th day
after the date the notice is mailed unless the company:
             (1)  corrects the deficiencies; and
             (2)  returns to compliance with the law.
       (c)  The comptroller may decertify a certified capital
company, after opportunity for hearing, if the comptroller finds
that the company is not in compliance with a law listed in
Subsection (a) at the end of the period established by Subsection
(b).
       (d)  Decertification under this section is effective on
receipt of notice of decertification by the certified capital
company.
       (e)  The comptroller shall notify any appropriate state
agency of a decertification of a certified capital company. 
(V.T.I.C. Art. 4.61, Secs. (c), (d).)
       Sec.228.303.ADMINISTRATIVE PENALTY.  (a)  The comptroller
may impose an administrative penalty on a certified capital company
that violates this chapter.
       (b)  The amount of the penalty may not exceed $25,000. Each
day a violation continues or occurs is a separate violation for the
purpose of imposing the penalty. The amount of the penalty shall be
based on:
             (1)  the seriousness of the violation, including the
nature, circumstances, extent, and gravity of the violation;
             (2)  the economic harm caused by the violation;
             (3)  the history of previous violations;
             (4)  the amount necessary to deter a future violation;
             (5)  efforts to correct the violation; and
             (6)  any other matter that justice may require.
       (c)  A certified capital company assessed a penalty under
this chapter may request a redetermination as provided by Chapter
111, Tax Code.
       (d)  The attorney general may sue to collect the penalty.
       (e)  A proceeding to impose the penalty is a contested case
under Chapter 2001, Government Code. (V.T.I.C. Art. 4.62.)
[Sections 228.304-228.350 reserved for expansion]
SUBCHAPTER H.  RECAPTURE AND FORFEITURE OF PREMIUM TAX CREDITS
       Sec.228.351.RECAPTURE AND FORFEITURE OF PREMIUM TAX CREDIT FOLLOWING DECERTIFICATION
CREDIT FOLLOWING DECERTIFICATION
certified capital company may, in accordance with this section,
cause:
             (1)  the recapture of premium tax credits previously
claimed by the company's certified investors; and
             (2)  the forfeiture of future premium tax credits to be
claimed by the investors.
       (b)  Decertification of a certified capital company on or
before the third anniversary of the company's allocation date
causes the recapture of any premium tax credits previously claimed
and the forfeiture of any future premium tax credits to be claimed
by a certified investor with respect to the company.
       (c)  For a certified capital company that meets the
requirements for continued certification under Section 228.151(a)
and subsequently fails to meet the requirements for continued
certification under Subsection (b) of that section:
             (1)  any premium tax credit that has been or will be
taken by a certified investor on or before the third anniversary of
the allocation date is not subject to recapture or forfeiture; and
             (2)  any premium tax credit that has been or will be
taken by a certified investor after the third anniversary of the
company's allocation date is subject to recapture or forfeiture.
       (d)  For a certified capital company that has met the
requirements for continued certification under Section 228.151 and
is subsequently decertified:
             (1)  any premium tax credit that has been or will be
taken by a certified investor on or before the fifth anniversary of
the allocation date is not subject to recapture or forfeiture; and
             (2)  any premium tax credit to be taken after the fifth
anniversary of the allocation date is subject to forfeiture only if
the company is decertified on or before the fifth anniversary of the
company's allocation date.
       (e)  For a certified capital company that has invested an
amount cumulatively equal to 100 percent of the company's certified
capital in qualified investments, any premium tax credit claimed or
to be claimed by a certified investor is not subject to recapture or
forfeiture under this section. (V.T.I.C. Art. 4.63, Sec. (a).)
       Sec.228.352.NOTICE OF RECAPTURE AND FORFEITURE OF PREMIUM TAX CREDIT
TAX CREDIT
address of each certified investor whose premium tax credit is
subject to recapture or forfeiture, using the address shown on the
investor's last premium tax filing. (V.T.I.C. Art. 4.63, Sec.
(b).)
       Sec.228.353.INDEMNITY AGREEMENTS AND INSURANCE AUTHORIZED
AUTHORIZED
indemnify, or purchase insurance for the benefit of, a certified
investor for losses resulting from the recapture or forfeiture of
premium tax credits under Section 228.351.
       (b)  Any guaranty, indemnity, bond, insurance policy, or
other payment undertaking made under this section may not be
provided by more than one certified investor of the certified
capital company or affiliate of the certified investor. (V.T.I.C.
Art. 4.64.)
PART C.  ADDITIONS TO TITLE 4, INSURANCE CODE
       SECTION 1C.001.  ADDITION.  Subtitle A, Title 4, Insurance
Code, is amended by adding Chapter 406 to read as follows:
CHAPTER 406. SPECIAL DEPOSITS REQUIRED UNDER POTENTIALLY
HAZARDOUS CONDITIONS
       Sec.406.001.DEFINITION. In this chapter, "insurer"
includes:
             (1)  a capital stock insurance company;
             (2)  a reciprocal or interinsurance exchange;
             (3)  a Lloyd's plan;
             (4)  a fraternal benefit society;
             (5)  a mutual company, including a mutual assessment
company;
             (6)  a statewide mutual assessment company;
             (7)  a local mutual aid association;
             (8)  a burial association;
             (9)  a county mutual insurance company;
             (10)  a farm mutual insurance company;
             (11)  a fidelity, guaranty, or surety company;
             (12)  a title insurance company;
             (13)  a stipulated premium company;
             (14)  a group hospital service corporation;
             (15)  a health maintenance organization;
             (16)  a risk retention group; and
             (17)  any other organization or person engaged in the
business of insurance. (V.T.I.C. Art. 1.33, Sec. 1.)
       Sec.406.002.APPLICABILITY OF CHAPTER. This chapter
applies to a person or organization engaged in the business of
insurance without regard to whether the person or organization is
listed in Section 406.001, unless another statute specifically
cites this chapter and exempts the person or organization from this
chapter. (V.T.I.C. Art. 1.33, Sec. 2.)
       Sec.406.003.REQUIRED DEPOSIT: STANDARDS AND CRITERIA.
The commissioner, in the commissioner's sole discretion, may
require an insurer to make a deposit under this chapter if the
commissioner determines that one of the following conditions, if
not rectified, may potentially be hazardous to the insurer's
policyholders, enrollees, or creditors, or to the public:
             (1)  the insurer's financial or operating condition,
reviewed in conjunction with the kinds and nature of risks insured;
             (2)  the insurer's method of operation;
             (3)  the insurer's relationship with affiliates;
             (4)  the nature and amount of the insurer's
investments;
             (5)  the insurer's contracts that may lead to a
contingent liability; or
             (6)  the insurer's agreements with respect to guaranty
and surety. (V.T.I.C. Art. 1.33, Sec. 3.)
       Sec.406.004.REQUIRED DEPOSIT: FORM OF SECURITY. A
deposit required under Section 406.003 must be made with the
comptroller and approved by the commissioner. The deposit must be
made in:
             (1)  cash;
             (2)  securities authorized under this code to be a
legal investment for the insurer that:
                   (A)  are readily marketable over a national
exchange with a maturity date of not more than one year, are listed
by the Securities Valuation Office of the National Association of
Insurance Commissioners, and qualify as admitted assets; or
                   (B)  are clean, irrevocable, and unconditional
letters of credit issued or confirmed by a financial institution
organized and licensed under the laws of the United States or a
state of the United States; or
             (3)  another form of security acceptable to the
commissioner. (V.T.I.C. Art. 1.33, Sec. 4.)
       Sec.406.005.DURATION OF DEPOSIT. Subject to Section
406.006, the comptroller shall hold a deposit required under this
chapter until the commissioner issues a written order finding that
the condition for which the deposit was required no longer exists.
(V.T.I.C. Art. 1.33, Sec. 5.)
       Sec.406.006.SUBSTITUTION OR WITHDRAWAL OF DEPOSIT. (a)
An insurer may file a written application with the commissioner
requesting:
             (1)  withdrawal of all or part of the deposit held by
the comptroller under this chapter; or
             (2)  substitution of all or part of the deposited
securities held by the comptroller under this chapter.
       (b)  The application must state the basis for the request to
withdraw the deposit or to substitute the deposited security.
       (c)  An insurer's application for the substitution of a
deposited security must provide specific information regarding the
security to be deposited as a substitute for the security held by
the comptroller.
       (d)  The commissioner shall issue an order approving or
denying an application under this section not later than the 30th
day after the date the department receives the application. If the
commissioner does not approve or deny the application within that
period, the application is denied.
       (e)  The commissioner may, in the commissioner's sole
discretion, approve an application to withdraw a deposit or
substitute a deposited security if the commissioner determines that
the withdrawal or substitution will not be hazardous to the
insurer's policyholders, enrollees, or creditors, or to the public.
       (f)  The comptroller may not release a deposit made under
this chapter, or any part of the deposit, and may not accept a
substitute for a deposited security unless the commissioner issues
an order approving the withdrawal or substitution. (V.T.I.C. Art.
1.33, Sec. 6.)
       Sec.406.007.APPEAL. An insurer may appeal an action of
the commissioner under this chapter in accordance with Subchapter
D, Chapter 36. (V.T.I.C. Art. 1.33, Sec. 7.)
       Sec.406.008.CUMULATIVE OF OTHER DEPOSITS. A deposit
required to be made under this chapter is in addition to any other
deposit that the insurer is required or authorized to make under
this code. (V.T.I.C. Art. 1.33, Sec. 8.)
PART D.  ADDITIONS TO TITLE 5, INSURANCE CODE
       SECTION 1D.001. ADDITION. Chapter 542, Insurance Code, is
amended by adding Subchapter C-1 to read as follows:
SUBCHAPTER C-1. REQUEST FOR CLAIMS INFORMATION BY CERTAIN
OFFICIALS
       Sec. 542.131.  REQUEST BY CERTAIN OFFICIALS ENGAGED IN
CRIMINAL INVESTIGATION. (a)  This section applies only to a claim
for a burglary or robbery loss or a death claim seeking life
insurance proceeds that is filed with an insurance company on or
after September 1, 2001.
       (b)  In the course of a criminal investigation and subject to
Subsection (c), the state fire marshal, the fire marshal of a
political subdivision of this state, the chief of a fire department
in this state, a chief of police of a municipality in this state, or
a sheriff in this state may request in writing that an insurance
company investigating a claimed burglary or robbery loss or a death
claim seeking life insurance proceeds release information in the
company's possession that relates to that claimed loss. The
company shall release the information to any official authorized to
request the information under this subsection if the company has
reason to believe that the insurance claim is false or fraudulent.
       (c)  An official who requests information under this section
may not request anything other than:
             (1)  an insurance policy relevant to an insurance claim
under investigation and the application for that policy;
             (2)  policy premium payment records;
             (3)  the history of the insured's previous claims; and
             (4)  material relating to the investigation of the
insurance claim, including:
                   (A)  statements of any person;
                   (B)  proof of loss; or
                   (C)  other relevant evidence.
       (d)  This section does not authorize a public official or
agency to adopt or require any form of periodic report by an
insurance company.
       (e)  In the absence of fraud or malice, an insurance company
or a person who releases information on behalf of an insurance
company is not liable for damages in a civil action or subject to
criminal prosecution for an oral or written statement made, or any
other action taken, that relates to the information required to be
released under this section.
       (f)  An official or department employee receiving
information under this section shall maintain the confidentiality
of the information until the information is required to be released
during a criminal or civil proceeding.
       (g)  An insurance company or the company's representative
may not intentionally refuse to release to an official described by
Subsection (b) the information required to be released to that
official under this section. (V.T.I.C. Art. 21.49C.)
       SECTION 1D.002.  ADDITION.  Subtitle C, Title 5, Insurance
Code, is amended by adding Chapter 560 to read as follows:
CHAPTER 560.  PROHIBITED RATES
       Sec.560.001.DEFINITION OF INSURER. In this chapter,
"insurer" means an insurance company, reciprocal or interinsurance
exchange, mutual insurance company, farm mutual insurance company,
capital stock insurance company, county mutual insurance company,
Lloyd's plan, surplus lines insurer, or other legal entity engaged
in the business of insurance in this state. The term includes:
             (1)  an affiliate described by Section 823.003(a);
             (2)  the Texas Windstorm Insurance Association
established under Chapter 2210;
             (3)  the FAIR Plan Association established under
Chapter 2211; and
             (4)  the Texas Automobile Insurance Plan Association
established under Chapter 2151. (V.T.I.C. Art. 1.02, Sec. (a).)
       Sec.560.002.USE OF CERTAIN RATES PROHIBITED; RATE REQUIREMENTS
REQUIREMENTS
chapter.
       (b)  A rate used under this code:
             (1)  must be just, fair, reasonable, and adequate; and
             (2)  may not be:
                   (A)  confiscatory;
                   (B)  excessive for the risks to which the rate
applies; or
                   (C)  unfairly discriminatory.
       (c)  For purposes of this section, a rate is:
             (1)  inadequate if the rate is insufficient to sustain
projected losses and expenses to which the rate applies, and
continued use of the rate:
                   (A)  endangers the solvency of an insurer using
the rate; or
                   (B)  has the effect of substantially lessening
competition or creating a monopoly in any market;
             (2)  excessive if the rate is likely to produce a
long-term profit that is unreasonably high in relation to the
insurance coverage provided; or
             (3)  unfairly discriminatory if the rate:
                   (A)  is not based on sound actuarial principles;
                   (B)  does not bear a reasonable relationship to
the expected loss and expense experience among risks; or
                   (C)  is based wholly or partly on the race, creed,
color, ethnicity, or national origin of the policyholder or an
insured. (V.T.I.C. Art. 1.02, Secs. (b), (c).)
PART E.  ADDITIONS TO TITLE 6, INSURANCE CODE
       SECTION 1E.001. ADDITION. Subtitle H, Title 6, Insurance
Code, is amended by adding Chapter 963 to read as follows:
CHAPTER 963.  AUTOMOBILE CLUBS
       Sec.963.001.DEFINITION.  In this chapter, "automobile
club" has the meaning assigned by Section 722.002, Transportation
Code. (V.T.I.C. Art. 21.80, Sec. (a) (part).)
       Sec.963.002.PROVISION OF CERTAIN INSURANCE SERVICES BY AUTOMOBILE CLUB
AUTOMOBILE CLUB
services only as provided by this chapter.
       (b)  An automobile club may provide accidental injury and
death benefit insurance coverage to a member through purchase of a
group policy of insurance issued to the automobile club for the
benefit of its members. The coverage must be purchased from an
insurance company authorized to engage in the business of that type
of coverage in this state. (V.T.I.C. Art. 21.80, Secs. (a) (part),
(b) (part).)
       Sec.963.003.CERTIFICATE OF PARTICIPATION.  (a)  The
automobile club shall provide each member covered by insurance
described by Section 963.002 a certificate of participation.
       (b)  The certificate of participation must state on its face
in at least 14-point black boldfaced type that the certificate is
only a certificate of participation in a group accidental injury
and death policy and is not automobile liability insurance
coverage.  (V.T.I.C. Art. 21.80, Sec. (b) (part).)
       Sec.963.004.  CERTAIN ACTIVITIES PROHIBITED.  An automobile
club may endorse insurance products and refer members to agents or
insurers authorized to provide the insurance products in this
state. The automobile club or an agent of the automobile club may
not receive consideration for the referral.  (V.T.I.C. Art. 21.80,
Sec. (c).)
       Sec.963.005.CERTAIN TRANSPORTATION-RELATED SERVICES.  In
addition to reimbursement services described by Section
722.002(2), Transportation Code, an automobile club may contract
with a member to:
             (1)  reimburse the member for expenses the member
incurs for towing, emergency road service, and lockout or lost key
services; and
             (2)  provide immediate destination assistance and trip
interruption service.  (V.T.I.C. Art. 21.80, Sec. (f) (part).)
       Sec.963.006.APPLICABILITY OF INSURANCE LAWS.  (a)  Except
as provided by Subsection (b), an automobile club performing
services permitted by this chapter is not subject to regulation
under the insurance laws of this state because of the performance of
those services.
       (b)  An automobile club may sell insurance products to a
member for a consideration separate from the amount that the member
pays for membership in the automobile club if the automobile club is
properly licensed as an agent under the applicable provisions of
this code.
       (c)  The insurance laws of this state do not apply to
reimbursement provided under Section 963.005. (V.T.I.C. Art.
21.80, Secs. (d), (e), (f) (part).)
PART F.  ADDITIONS TO TITLE 7, INSURANCE CODE
       SECTION 1F.001.  ADDITION.  Subtitle A, Title 7, Insurance
Code, is amended by adding Chapters 1112 and 1113 to read as
follows:
CHAPTER 1112. CERTAIN GUARANTEES IN LIFE INSURANCE POLICIES
       Sec.1112.001.CERTAIN GUARANTEES NOT PROHIBITED. Section
841.253 does not prohibit the issuance of a life insurance policy
that guarantees, by coupons or otherwise, definite payments or
reductions in premiums. (V.T.I.C. Art. 3.11 (part).)
       Sec.1112.002.CERTAIN GUARANTEES CONSTITUTE DEFINITE CONTRACT BENEFIT; VALUATION OF BENEFIT
CONTRACT BENEFIT; VALUATION OF BENEFIT
Subsection (e), a guarantee described by Section 1112.001 that is
in a policy or coupon issued after September 5, 1955, shall be
treated as a definite contract benefit and valued according to this
section and the reserve requirements of Chapter 425.
       (b)  Except as provided by Subsection (c), for a policy or
coupon issued before the date determined under Section 1105.002(a)
or (b), as applicable to the company, a contract benefit described
by Subsection (a) shall be valued using the reserve valuation net
premium for the benefits that is a uniform percentage of the gross
premiums.
       (c)  A policy described by Subsection (b) that contains a
contract benefit described by Subsection (a) may be valued on a
basis that provides for not more than one year preliminary term
insurance.
       (d)  For a policy or coupon issued on or after the date
determined under Section 1105.002(a) or (b), as applicable to the
company, a contract benefit described by Subsection (a) shall be
valued using the commissioners reserve valuation method described
by Section 425.064.
       (e)  A provision of this section relating to reserves does
not apply to a policy issued before September 7, 1955. (V.T.I.C.
Art. 3.11 (part).)
CHAPTER 1113. MANAGEMENT, CONTROL, AND DISPOSITION OF CERTAIN LIFE
INSURANCE AND ANNUITY CONTRACTS
       Sec.1113.001.LIFE INSURANCE AND ANNUITY CONTRACTS OF SPOUSE
SPOUSE
spouse, has management, control, and disposition of any contract of
life insurance or annuity issued in the spouse's name or to the
extent provided by the contract or any assignment of the contract,
regardless of whether the contract was issued before, on, or after
January 1, 1968. (V.T.I.C. Art. 3.49-3.)
PART G.  ADDITIONS TO TITLE 8, INSURANCE CODE
SECTION 1G.001.  ADDITION.  Subtitle A, Title 8, Insurance
Code, is amended by adding Chapter 1214 to read as follows:
CHAPTER 1214. ADVERTISING FOR CERTAIN HEALTH BENEFITS
       Sec.1214.001.APPLICABILITY OF CHAPTER.  This chapter
applies only to a health benefit plan that provides benefits for
medical or surgical expenses incurred as a result of a health
condition, accident, or sickness, including an individual, group,
blanket, or franchise insurance policy or agreement, a group
hospital service contract, or an individual or group evidence of
coverage issued by:
             (1)  an insurance company;
             (2)  a group hospital service corporation operating
under Chapter 842;
             (3)  a health maintenance organization operating under
Section 1367.053, Subchapter A, Chapter 1452, Subchapter B, Chapter
1507, Chapter 222, 251, or 258, as applicable to a health
maintenance organization, Chapter 843, Chapter 1271, and Chapter
1272; or
             (4)  an approved nonprofit health corporation holding a
certificate of authority under Chapter 844.  (V.T.I.C.
Art. 21.20-2, Sec. 1(a).)
       Sec.1214.002.EXCEPTION.  This chapter does not apply to:
             (1)  a health benefit plan that provides coverage:
                   (A)  only for a specified disease;
                   (B)  only for accidental death or dismemberment;
or
                   (C)  for wages or payments in lieu of wages for a
period during which an employee is absent from work because of
sickness or injury; or
             (2)  a long-term care insurance policy, including a
nursing home fixed indemnity policy, unless the commissioner
determines that the policy provides benefits so comprehensive that
the policy is a health benefit plan as described by Section
1214.001. (V.T.I.C. Art. 21.20-2, Sec. 1(b).)
       Sec.1214.003.RATE INFORMATION DISCLAIMERS.  (a)  Subject
to Chapter 541 and Section 543.001, an advertisement for a health
benefit plan may include rate information without including
information about each benefit exclusion or limitation if the
advertisement includes prominent disclaimers clearly indicating
that:
             (1)  the rates are illustrative;
             (2)  a person should not send money to the health
benefit plan issuer in response to the advertisement;
             (3)  a person cannot obtain coverage under the plan
until the person completes an application for coverage; and
             (4)  benefit exclusions or limitations may apply to the
plan.
       (b)  An advertisement that states a rate must also indicate
the age, gender, and geographic location on which the rate is based.
(V.T.I.C. Art. 21.20-2, Sec. 2.)
       SECTION 1G.002.  ADDITION.  Subtitle H, Title 8, Insurance
Code, is amended by adding Chapter 1550 to read as follows:
CHAPTER 1550.  CERTAIN REQUIREMENTS FOR INSURERS CONTRACTING WITH
GOVERNMENTAL ENTITIES
SUBCHAPTER A. REPORTING REQUIREMENTS
       Sec.1550.001.DEFINITIONS. In this subchapter:
             (1)  "Governmental entity" means:
                   (A)  a state agency; or
                   (B)  a county, municipality, school district,
special purpose district, or other subdivision of state government
that has jurisdiction limited to a geographic portion of the state.
             (2)  "Insurer" means:
                   (A)  an insurance company;
                   (B)  a health maintenance organization operating
under Section 1367.053, Subchapter A, Chapter 1452, Subchapter B,
Chapter 1507, Chapter 222, 251, or 258, as applicable to a health
maintenance organization, Chapter 843, Chapter 1271, and Chapter
1272; or
                   (C)  an approved nonprofit health corporation
that holds a certificate of authority issued under Chapter 844.
(V.T.I.C. Art. 21.49-15, Sec. 1.)
       Sec.1550.002.REPORT REQUIRED. (a) This section applies
to a contract subject to competitive bidding under which an insurer
delivers, issues for delivery, or renews a health insurance policy
or contract or an evidence of coverage.
       (b)  An insurer that enters into a contract described by
Subsection (a) with a governmental entity shall provide to the
governmental entity a detailed report that includes:
             (1)  the claims experience of the governmental entity
during the preceding calendar year; and
             (2)  the dollar amount of each large claim, as defined
by the governmental entity, paid by the insurer under the contract
during the preceding calendar year. (V.T.I.C. Art. 21.49-15, Sec.
2(a).)
       Sec.1550.003.CLAIM INFORMATION. (a) An insurer
providing claim information to a governmental entity in the report
under Section 1550.002 shall provide the information in the
aggregate, without information through which a specific individual
covered by the health insurance or evidence of coverage may be
identified.
       (b)  Claim information provided by an insurer to a
governmental entity in the report under Section 1550.002:
             (1)  may be viewed or used only for contract bidding
purposes; and
             (2)  is confidential for purposes of Chapter 552,
Government Code. (V.T.I.C. Art. 21.49-15, Sec. 2(b).)
[Sections 1550.004-1550.050 reserved for expansion]
SUBCHAPTER B. CERTAIN CONTRACTS
WITH MUNICIPALITIES
       Sec.1550.051.DEFINITION OF INSURER. In this subchapter,
"insurer" means:
             (1)  an insurance company, including a company
providing stop-loss or excess loss insurance;
             (2)  a health maintenance organization operating under
Section 1367.053, Subchapter A, Chapter 1452, Subchapter B, Chapter
1507, Chapter 222, 251, or 258, as applicable to a health
maintenance organization, Chapter 843, Chapter 1271, and Chapter
1272;
             (3)  an approved nonprofit health corporation that
holds a certificate of authority issued under Chapter 844; or
             (4)  a third-party administrator that holds a
certificate of authority under Chapter 4151. (V.T.I.C. Art.
21.49-16, Sec. 1(1).)
       Sec.1550.052.BID REQUIREMENTS. (a)  Except as provided by
Section 1550.054, an insurer that bids on a contract subject to the
competitive bidding and competitive proposal requirements adopted
under Section 252.021, Local Government Code, may not submit a bid
for a contract to provide stop-loss or other insurance coverage
that is subject to any qualification imposed by the insurer that
permits the insurer to modify or limit the terms of insurance
coverage to be provided after the contract has been made.
       (b)  An insurer's bid submitted under Section 252.021, Local
Government Code, must contain the insurer's entire offer.
(V.T.I.C. Art. 21.49-16, Sec. 2(a).)
       Sec.1550.053.CERTAIN EXCLUSIONS AND INCREASED DEDUCTIBLES PROHIBITED
DEDUCTIBLES PROHIBITED
insurer that provides stop-loss or other insurance coverage for
health benefits under a contract subject to this subchapter may
not, based on an individual's prior medical history:
             (1)  exclude from coverage an individual who is
otherwise eligible for the health benefits coverage; or
             (2)  assign a higher deductible to the individual. 
(V.T.I.C. Art. 21.49-16, Sec. 2(b).)
       Sec.1550.054.EXCEPTION FOR WRITTEN WAIVER. By executing
a written waiver in favor of the insurer, a municipality as defined
by Section 1.005, Local Government Code, may waive a requirement of
Section 1550.052 or 1550.053(2). (V.T.I.C. Art. 21.49-16, Secs.
1(2), 2(c).)
       SECTION 1G.003.  ADDITION. Subchapter C, Chapter 1579,
Insurance Code, is amended by adding Sections 1579.106, 1579.107,
and 1579.108 to read as follows:
       Sec. 1579.106.  PRIOR AUTHORIZATION FOR CERTAIN DRUGS.  (a)  
In this section, "drug formulary" means a list of drugs preferred
for use and eligible for coverage by a health coverage plan.
       (b)  A health coverage plan provided under this chapter that
uses a drug formulary in providing a prescription drug benefit must
require prior authorization for coverage of the following
categories of prescribed drugs if the specific drug prescribed is
not included in the formulary:
             (1)  a gastrointestinal drug;
             (2)  a cholesterol-lowering drug;
             (3)  an anti-inflammatory drug;
             (4)  an antihistamine drug; and
             (5)  an antidepressant drug.
       (c)  Every six months the trustee shall submit to the
comptroller and the Legislative Budget Board a report regarding any
cost savings achieved in the program through implementation of the
prior authorization requirement of this section. The report must
cover the previous six-month period.  (V.T.I.C. Art. 3.50-7A, as
added Acts 78th Leg., R.S., Ch. 213.)
       Sec.1579.107.DISEASE MANAGEMENT SERVICES. (a)  In this
section, "disease management services" means services to assist an
individual manage a disease or other chronic health condition, such
as heart disease, diabetes, respiratory illness, end-stage renal
disease, HIV infection, or AIDS, and with respect to which the
trustee identifies populations requiring disease management.
       (b)  A health coverage plan provided under this chapter must
provide disease management services or coverage for disease
management services in the manner required by the trustee,
including:
             (1)  patient self-management education;
             (2)  provider education;
             (3)  evidence-based models and minimum standards of
care;
             (4)  standardized protocols and participation
criteria; and
             (5)  physician-directed or physician-supervised care.
(V.T.I.C. Art. 3.50-7B.)
       Sec.1579.108.LIMITATIONS. The trustee may not contract
for or provide a health coverage plan that excludes from
participation in the network a general hospital that:
             (1)  is located in the geographical service area or
areas of the health coverage plan that includes a county that:
                   (A)  has a population of at least 100,000 and not
more than 175,000; and
                   (B)  is located in the Texas-Louisiana border
region, as that term is defined in Section 2056.002(e), Government
Code; and
             (2)  agrees to provide medical and health care services
under the plan subject to the same terms as other hospital providers
under the plan. (V.T.I.C. Art. 3.50-7A, Sec. (b), as added Acts
78th Leg., R.S., Ch. 201.)
PART H.  ADDITIONS TO TITLE 10, INSURANCE CODE
       SECTION 1H.001.  ADDITION.  Subtitle C, Title 10, Insurance
Code, is amended by adding Chapter 1953 to read as follows:
CHAPTER 1953. RATE REGULATION AND RATEMAKING FOR AUTOMOBILE
INSURANCE
SUBCHAPTER A.  RATE REGULATION
       Sec.1953.001.EXCLUSION OF CERTAIN TYPES OR CLASSES OF INSURANCE FROM CERTAIN REGULATIONS
INSURANCE FROM CERTAIN REGULATIONS
to insurance against liability for damages arising out of the
ownership, operation, maintenance, or use of a motor vehicle
described by Article 5.01 or against loss of or damage to a motor
vehicle described by Article 5.01 that, in the judgment of the
commissioner, is a type or class of insurance that is also the
subject of or is more properly regulated under other insurance
rating laws that cover that type or class of insurance.
       (b)  A type or class of insurance to which this section
applies is excluded from regulation under this chapter and:
             (1)  Articles 5.01, 5.01B, 5.03, 5.04, 5.04-1, 5.06,
5.10, and 5.11;
             (2)  Chapters 251 and 254;
             (3)  Subchapters A and B, Chapter 1806; and
             (4)  Chapters 1951 and 1952.
       (c)  If the commissioner finds that a type or class of
insurance to which this section applies is also the subject of or is
more properly regulated under other insurance rating laws that
cover that type or class of insurance, the commissioner shall issue
an order declaring which other insurance rating laws apply to:
             (1)  the type or class of insurance; and
             (2)  any motor vehicle equipment described by Article
5.01. (V.T.I.C. Art. 5.02.)
[Sections 1953.002-1953.050 reserved for expansion]
SUBCHAPTER B. RATEMAKING
       Sec.1953.051.CERTAIN RATING PLANS PROHIBITED. A rating
plan regarding the writing of automobile insurance, other than
insurance written under Chapter 2151, may not:
             (1)  assign a rate consequence to a charge or
conviction for a violation of Subtitle C, Title 7, Transportation
Code; or
             (2)  otherwise cause premiums for automobile insurance
to be increased because of a charge or conviction described by
Subdivision (1). (V.T.I.C. Art. 5.01-1.)
       Sec.1953.052.PREMIUM SURCHARGE REQUIRED. (a) An insurer
described by Section 1952.001 shall assess a premium surcharge in
an amount prescribed by the department against an insured for no
more than three years immediately following the date the insured is
convicted of:
             (1)  an offense relating to the operating of a motor
vehicle while intoxicated in violation of Section 49.04 or 49.07,
Penal Code; or
             (2)  an offense under Section 49.08, Penal Code.
       (b)  An insurer may apply the premium surcharge described by
Subsection (a) only to a private passenger automobile policy, as
defined by the department.
       (c)  If an insured assessed a premium surcharge under
Subsection (a) is convicted of an offense under one of the statutes
listed in Subsection (a)(1) or (2) during the period the insured is
assessed the premium surcharge, the period for which the premium
surcharge is assessed is increased by three additional consecutive
years for each conviction. (V.T.I.C. Art. 5.03-1.)
[Sections 1953.053-1953.100 reserved for expansion]
SUBCHAPTER C.  LOSS AND EXPENSE EXPERIENCE
       Sec.1953.101.RECORDING AND REPORTING OF LOSS AND EXPENSE EXPERIENCE AND OTHER DATA
EXPERIENCE AND OTHER DATA
reasonable rules and statistical plans for the recording and
reporting of loss experience and other required data by insurers.
The rules and plans must ensure that each insurer's total loss and
expense experience is made available at least as frequently as
annually in the form and with the detail necessary to aid in
determining whether rates and rating systems in use under the
following provisions comply with the standards adopted under those
provisions:
             (1)  this chapter;
             (2)  Articles 5.01, 5.03, and 5.04, if applicable;
             (3)  Subchapters A and B, Chapter 1806; and
             (4)  Chapters 1951 and 1952.
       (b)  In adopting the rules, the commissioner shall adopt
rules that are as uniform as is practicable to the rules and forms
of statistical plans used in other states.
       (c)  Each insurer shall use the statistical plans adopted
under this section to record and report loss experience and other
required data in accordance with the rules adopted by the
commissioner.
       (d)  The commissioner may modify statistical plans adopted
under this section. (V.T.I.C. Art. 5.05, Sec. (a).)
       Sec.1953.102.RULES ALLOWING INTERCHANGE OF LOSS EXPERIENCE INFORMATION
EXPERIENCE INFORMATION
rules to allow the interchange of loss experience information as
necessary for the application of rating plans. (V.T.I.C. Art.
5.05, Sec. (b).)
       Sec.1953.103.EXCHANGE OF INFORMATION AND EXPERIENCE DATA WITH OTHER STATES
WITH OTHER STATES
laws, the department or an insurer may:
             (1)  exchange information and experience data with
insurance supervisory officials, insurers, and rating
organizations in other states; and
             (2)  consult and cooperate with the individuals or
entities described by Subdivision (1) with respect to ratemaking
and the application of rating systems. (V.T.I.C. Art. 5.05, Sec.
(c).)
       Sec.1953.104.SWORN STATEMENTS. (a)  The department may
require a sworn statement from an insurer affected by this
subchapter that shows:
             (1)  the insurer's experience on any classification or
classifications of risks; and
             (2)  other information that is necessary or helpful in
performing duties or exercising authority imposed by law.
       (b)  The department shall prescribe the necessary forms for
statements and reports required under Subsection (a) with due
regard for the rules, methods, and forms in use in other states for
similar purposes so that uniformity of statistics is not disturbed. 
(V.T.I.C. Art. 5.05, Sec. (d).)
       SECTION 1H.002.  ADDITION.  Subtitle D, Title 10, Insurance
Code, is amended by adding Chapter 2008 to read as follows:
CHAPTER 2008.  COVERAGE FOR CERTAIN DAMAGE
TO PROPERTY BUILT WHOLLY OR PARTIALLY OVER WATER
       Sec.2008.001.APPLICABILITY OF CHAPTER. This chapter
applies only to an insurer described by Section 2251.003(a).
(V.T.I.C. Art. 5.14, Sec. (a).)
       Sec.2008.002.COVERAGE; LIMITS AND DEDUCTIBLES. (a) An
insurance policy written by an insurer against loss or damage by
windstorm, hurricane, or hail may include coverage for:
             (1)  a building or other structure that is built wholly
or partially over water; and
             (2)  the corporeal movable property contained in a
building or structure described by Subdivision (1).
       (b)  An insurer that writes coverage described by Subsection
(a) may impose appropriate limits of coverage and deductibles for
the coverage. (V.T.I.C. Art. 5.14, Secs. (b), (c).)
PART I.  ADDITIONS TO TITLE 13, INSURANCE CODE
       SECTION 1I.001.  ADDITION.  Subtitle A, Title 13, Insurance
Code, is amended by adding Chapter 4007 to read as follows:
CHAPTER 4007.  NOTICE TO DEPARTMENT BY CERTAIN PROPERTY AND
CASUALTY INSURANCE COMPANIES REGARDING AGENTS
       Sec.4007.001.APPLICABILITY OF CHAPTER. This chapter
applies only to an insurance company authorized to engage in the
business of insurance in this state under:
             (1)  a provision of:
                   (A)  Chapter 5, 1805, or 2171; or
                   (B)  Subtitle B, C, D, E, F, H, or I, Title 10; or
             (2)  Chapter 861, 862, 883, 911, 912, 941, 942, 984, or
3503. (V.T.I.C. Art. 21.70, Sec. (a) (part).)
       Sec.4007.002.NOTICE TO DEPARTMENT REQUIRED. (a) On forms
prescribed by the commissioner, an insurance company shall notify
the department not later than the 30th day after the date on which:
             (1)  balances due from an insurance agent for more than
90 days exceed $1 million or 10 percent of the company's
policyholder surplus computed on December 31 of the preceding year
or the most recent quarter if a report is specifically required by
the department;
             (2)  an agent's authority to settle claims for the
company is withdrawn; or
             (3)  the contract with an agent is canceled or
terminated.
       (b)  An insurance company may comply with the notification
requirement of Subsection (a)(1) by submitting a single annual
report if:
             (1)  the company routinely operates above the limit
established by Subsection (a)(1); and
             (2)  the commissioner verifies that fact under a
procedure adopted by the commissioner. (V.T.I.C. Art. 21.70, Secs.
(a) (part), (b).)
PART J.  ADDITION OF TITLE 20, INSURANCE CODE
       SECTION 1J.001. TITLE 20.  The Insurance Code is amended by
adding Title 20 to read as follows:
TITLE 20.  REGULATION OF OTHER OCCUPATIONS
CHAPTER 6001. FIRE EXTINGUISHER SERVICE AND INSTALLATION
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 6001.001.  PURPOSE 
Sec. 6001.002.  DEFINITIONS 
[Sections 6001.003-6001.050 reserved for expansion]
SUBCHAPTER B. POWERS AND DUTIES OF COMMISSIONER,
DEPARTMENT, AND STATE FIRE MARSHAL
Sec. 6001.051.  ADMINISTRATION OF CHAPTER 
Sec. 6001.052.  ADOPTION OF RULES 
Sec. 6001.053.  RULES RESTRICTING ADVERTISING OR
                 COMPETITIVE BIDDING 
Sec. 6001.054.  GENERAL POWERS AND DUTIES OF DEPARTMENT 
Sec. 6001.055.  FEES 
Sec. 6001.056.  DEPOSIT IN OPERATING ACCOUNT 
[Sections 6001.057-6001.100 reserved for expansion]
SUBCHAPTER C. FIRE EXTINGUISHER ADVISORY COUNCIL
Sec. 6001.101.  ADVISORY COUNCIL; APPOINTMENT 
Sec. 6001.102.  ADVISORY COUNCIL DUTIES 
[Sections 6001.103-6001.150 reserved for expansion]
SUBCHAPTER D. REGISTRATION, LICENSE, AND PERMIT REQUIREMENTS
Sec. 6001.151.  FIRM REGISTRATION CERTIFICATE REQUIRED 
Sec. 6001.152.  BRANCH OFFICE REGISTRATION CERTIFICATE
                 REQUIRED 
Sec. 6001.153.  HYDROSTATIC TESTING; REGISTRATION
                 CERTIFICATE REQUIRED 
Sec. 6001.154.  REQUIRED INSURANCE COVERAGE FOR
                 REGISTRATION CERTIFICATE 
Sec. 6001.155.  EMPLOYEE LICENSE REQUIRED 
Sec. 6001.156.  ACTIVITIES NOT REGULATED BY CHAPTER 
Sec. 6001.157.  LICENSE EXAMINATION 
Sec. 6001.158.  EXAMINATION RESULTS 
Sec. 6001.159.  CONTINUING EDUCATION REQUIREMENTS 
Sec. 6001.160.  RECIPROCAL LICENSE 
Sec. 6001.161.  APPRENTICE PERMIT REQUIRED 
Sec. 6001.162.  NOT TRANSFERABLE 
[Sections 6001.163-6001.200 reserved for expansion]
SUBCHAPTER E. RENEWAL OF REGISTRATION, LICENSE, OR PERMIT
Sec. 6001.201.  RENEWAL REQUIRED; FEE 
Sec. 6001.202.  NOTICE OF EXPIRATION 
Sec. 6001.203.  RENEWAL PROCEDURES 
[Sections 6001.204-6001.250 reserved for expansion]
SUBCHAPTER F. PROHIBITED PRACTICES
AND DISCIPLINARY PROCEDURES
Sec. 6001.251.  PROHIBITED PRACTICES 
Sec. 6001.252.  DISCIPLINARY ACTIONS 
Sec. 6001.253.  DISCIPLINARY HEARING 
Sec. 6001.254.  REAPPLICATION REQUIREMENTS 
Sec. 6001.255.  REEXAMINATION AFTER REVOCATION 
[Sections 6001.256-6001.300 reserved for expansion]
SUBCHAPTER G. CRIMINAL PENALTY
Sec. 6001.301.  CRIMINAL PENALTY 
CHAPTER 6001. FIRE EXTINGUISHER SERVICE AND INSTALLATION
SUBCHAPTER A. GENERAL PROVISIONS
       Sec.6001.001.PURPOSE. The purpose of this chapter is to
safeguard lives and property by:
             (1)  regulating:
                   (A)  the leasing, selling, installing, and
servicing of portable fire extinguishers; and
                   (B)  the planning, certifying, installing, and
servicing of fixed fire extinguisher systems; and
             (2)  prohibiting portable fire extinguishers, fixed
fire extinguisher systems, or extinguisher equipment that is not
labeled or listed by a testing laboratory approved by the
department.  (V.T.I.C. Art. 5.43-1, Sec. 1.)
       Sec.6001.002.DEFINITIONS. In this chapter:
             (1)  "Firm" means an individual, partnership,
corporation, or association.
             (2)  "Fixed fire extinguisher system" means an assembly
of piping, conduits, or containers that convey liquid, powder, or
gases to dispersal openings or devices protecting one or more
hazards by suppressing or extinguishing fires.
             (3)  "Hydrostatic testing" means pressure testing by
hydrostatic methods.
             (4)  "Insurance agent" means:
                   (A)  an individual, firm, or corporation licensed
under:
                         (i)  Subchapter E, Chapter 981; or
                         (ii)  Subchapter A, B, C, D, E, or G, Chapter
4051; or
                   (B)  an individual authorized to represent an
insurance fund or pool created by a municipality, county, or other
political subdivision of this state under Chapter 791, Government
Code.
             (5)  "Portable fire extinguisher" means any device that
contains liquid, powder, or gases for suppressing or extinguishing
fires.
             (6)  "Registered firm" means a firm that holds a
registration certificate.
             (7)  "Service" and "servicing" mean servicing a
portable fire extinguisher or a fixed fire extinguisher system by
inspecting, charging, filling, maintaining, recharging, refilling,
repairing, or testing. (V.T.I.C. Art. 5.43-1, Sec. 3.)
       [Sections 6001.003-6001.050 reserved for expansion]
SUBCHAPTER B. POWERS AND DUTIES OF COMMISSIONER,
DEPARTMENT, AND STATE FIRE MARSHAL
       Sec.6001.051.ADMINISTRATION OF CHAPTER. (a)  The
department shall administer this chapter.
       (b)  The commissioner may issue rules the commissioner
considers necessary to administer this chapter through the state
fire marshal. (V.T.I.C. Art. 5.43-1, Sec. 2 (part).)
       Sec.6001.052.ADOPTION OF RULES. (a) In adopting
necessary rules, the commissioner may use recognized standards,
including standards:
             (1)  published by the National Fire Protection
Association;
             (2)  recognized by federal law or regulation;
             (3)  published by any nationally recognized
standards-making organization; or
             (4)  contained in the manufacturer's installation
manuals.
       (b)  The commissioner shall adopt and administer rules
determined essentially necessary for the protection and
preservation of life and property regarding:
             (1)  registration of firms engaged in the business of:
                   (A)  installing or servicing portable fire
extinguishers or planning, certifying, installing, or servicing
fixed fire extinguisher systems; or
                   (B)  hydrostatic testing of fire extinguisher
cylinders;
             (2)  the examination and licensing of individuals to:
                   (A)  install or service portable fire
extinguishers; and
                   (B)  plan, certify, install, or service fixed fire
extinguisher systems; and
             (3)  requirements for:
                   (A)  installing or servicing portable fire
extinguishers; and
                   (B)  planning, certifying, installing, or
servicing fixed fire extinguisher systems.
       (c)  The commissioner by rule shall prescribe requirements
for applications and qualifications for licenses, permits, and
certificates issued under this chapter. (V.T.I.C. Art. 5.43-1,
Secs. 2 (part), 7(a), 8 (part).)
       Sec. 6001.053.  RULES RESTRICTING ADVERTISING OR
COMPETITIVE BIDDING. (a)  The commissioner may not adopt rules
restricting advertising or competitive bidding by the holder of a
license, permit, certificate, or approval issued under this chapter
except to prohibit false, misleading, or deceptive practices.
       (b)  In the commissioner's rules to prohibit false,
misleading, or deceptive practices, the commissioner may not
include a rule that:
             (1)  restricts the use of any medium for advertising;
             (2)  restricts the use of a license, permit,
certificate, or approval holder's personal appearance or voice in
an advertisement;
             (3)  relates to the size or duration of an
advertisement by the license, permit, certificate, or approval
holder; or
             (4)  restricts the license, permit, certificate, or
approval holder's advertisement under a trade name. (V.T.I.C. Art.
5.43-1, Sec. 8A.)
       Sec.6001.054.GENERAL POWERS AND DUTIES OF DEPARTMENT.  
(a)  The department shall evaluate the qualifications of a firm:
             (1)  applying for a registration certificate to engage
in the business of installing or servicing portable fire
extinguishers or planning, certifying, installing, or servicing
fixed fire extinguisher systems; or
             (2)  seeking approval as a testing laboratory.
       (b)  The department shall issue:
             (1)  registration certificates for firms that qualify
under commissioner rules to engage in the business of installing or
servicing portable fire extinguishers or planning, certifying,
installing, or servicing fixed fire extinguisher systems; and
             (2)  licenses, apprentice permits, and authorizations
to perform hydrostatic testing to firms or individuals that
qualify. (V.T.I.C. Art. 5.43-1, Sec. 8 (part).)
       Sec.6001.055.FEES. (a) The commissioner shall set the
fee for:
             (1)  an initial firm registration certificate in an
amount not to exceed $450;
             (2)  the renewal of a firm registration certificate in
an amount not to exceed $300 annually;
             (3)  an initial branch office registration certificate
in an amount not to exceed $100;
             (4)  the renewal of a branch office registration
certificate in an amount not to exceed $100 annually;
             (5)  an initial registration certificate to perform
hydrostatic testing of fire extinguishers manufactured in
accordance with the specifications and procedures of the United
States Department of Transportation in an amount not to exceed
$250;
             (6)  the renewal of a registration certificate to
perform hydrostatic testing of fire extinguishers manufactured in
accordance with the specifications and procedures of the United
States Department of Transportation in an amount not to exceed $150
annually;
             (7)  an initial employee license fee in an amount not to
exceed $70;
             (8)  the annual renewal of an employee license in an
amount not to exceed $50; and
             (9)  an apprentice permit in an amount not to exceed
$30.
       (b)  Unless the examination or reexamination for an employee
license is administered by a testing service, the commissioner
shall set a nonrefundable fee for:
             (1)  the initial examination in an amount not to exceed
$30; and
             (2)  each reexamination in an amount not to exceed $20.
       (c)  The commissioner shall set a fee in an amount not to
exceed $20 for:
             (1)  a duplicate registration certificate, license, or
apprentice permit issued under this chapter; or
             (2)  any request requiring changes to a registration
certificate, license, or permit.
       (d)  On a change of ownership of a registered firm, the
department shall issue a new registration certificate with a new
number for a fee set by the commissioner in an amount not to exceed
$450.  On a change of ownership of a branch office, the commissioner
shall charge a fee in an amount not to exceed $100. (V.T.I.C. Art.
5.43-1, Secs. 4(a) (part), (b), (c-1), (d) (part), (e) (part),
(f).)
       Sec.6001.056.DEPOSIT IN OPERATING ACCOUNT. All money
collected under this chapter, other than penalties and monetary
forfeitures, shall be paid to the department and deposited in the
state treasury to the credit of the Texas Department of Insurance
operating account for use in administering this chapter.  (V.T.I.C.
Art. 5.43-1, Sec. 11.)
[Sections 6001.057-6001.100 reserved for expansion]
SUBCHAPTER C. FIRE EXTINGUISHER ADVISORY COUNCIL
       Sec.6001.101.ADVISORY COUNCIL; APPOINTMENT. (a)  The
commissioner may delegate the exercise of all or part of the
commissioner's functions, powers, and duties under this chapter,
other than the issuance of licenses, certificates, and permits, to
a fire extinguisher advisory council.
       (b)  The commissioner shall appoint the members of the
advisory council.  The members of the council must:
             (1)  be experienced and knowledgeable in one or more of
the following:
                   (A)  fire services;
                   (B)  fire extinguisher manufacturing;
                   (C)  fire insurance inspection or underwriting;
or
                   (D)  fire extinguisher servicing; or
             (2)  be members of a fire protection association or
industrial safety association. (V.T.I.C. Art. 5.43-1, Secs. 9(a)
(part), (b).)
       Sec.6001.102.ADVISORY COUNCIL DUTIES. (a) The fire
extinguisher advisory council shall assist in the formulation and
review of rules adopted under this chapter.
       (b)  The advisory council shall periodically:
             (1)  review rules implementing this chapter; and
             (2)  recommend rule changes to the commissioner.
(V.T.I.C. Art. 5.43-1, Sec. 9(a) (part).)
[Sections 6001.103-6001.150 reserved for expansion]
SUBCHAPTER D. REGISTRATION, LICENSE, AND PERMIT REQUIREMENTS
       Sec.6001.151.FIRM REGISTRATION CERTIFICATE REQUIRED.  
Unless the firm holds a registration certificate issued by the
department, a firm may not engage in the business of:
             (1)  installing or servicing portable fire
extinguishers; or
             (2)  planning, certifying, installing, or servicing
fixed fire extinguisher systems. (V.T.I.C. Art. 5.43-1, Sec. 4(a)
(part).)
       Sec. 6001.152.  BRANCH OFFICE REGISTRATION CERTIFICATE
REQUIRED.  (a)  Each separate office location of a firm holding a
registration certificate, other than the location identified on the
firm's certificate, must have a branch office registration
certificate issued by the department.
       (b)  Before issuing a branch office registration
certificate, the department must determine that the branch office
location is part of a registered firm. (V.T.I.C. Art. 5.43-1, Sec.
4(a) (part).)
       Sec. 6001.153.  HYDROSTATIC TESTING; REGISTRATION
CERTIFICATE REQUIRED. (a)  A firm may not perform hydrostatic
testing of fire extinguishers manufactured in accordance with the
specifications and procedures of the United States Department of
Transportation unless the firm:
             (1)  complies with the procedures specified by that
department for compressed gas cylinders; and
             (2)  holds a registration certificate issued by the
state fire marshal authorizing hydrostatic testing.
       (b)  The license of an individual qualified to do work
described by Subsection (a) must indicate the authority of the
individual to perform that work.
       (c)  Hydrostatic testing of fire extinguishers that is not
performed under the specifications of the United States Department
of Transportation must be performed in the manner recommended by
the National Fire Protection Association.  (V.T.I.C. Art. 5.43-1,
Sec. 4(e) (part).)
       Sec. 6001.154.  REQUIRED INSURANCE COVERAGE FOR
REGISTRATION CERTIFICATE. (a)  The department may not issue a
registration certificate under this chapter unless the applicant
files with the department evidence of a general liability insurance
policy that includes products and completed operations coverage.
The policy must be conditioned to pay on behalf of the insured those
amounts that the insured becomes legally obligated to pay as
damages because of bodily injury and property damage caused by an
occurrence involving the insured or the insured's officer, agent,
or employee in the conduct of any activity that requires a
registration certificate or license under this chapter.
       (b)  Unless the commissioner, after notice and an
opportunity for a hearing, increases or decreases the limits, the
limits of insurance coverage required by Subsection (a) must be at
least:
             (1)  $100,000 combined single limits for bodily injury
and property damage for each occurrence; and
             (2)  $300,000 aggregate for all occurrences for each
policy year.
       (c)  The evidence of insurance required by this section must
be in the form of a certificate of insurance executed by an insurer
authorized to engage in the business of insurance in this state and
countersigned by an insurance agent licensed in this state. A
certificate of insurance for surplus lines coverage procured in
compliance with Chapter 981 through a surplus lines agent that is
licensed under Subchapter E, Chapter 981, and resident in this
state may be filed with the department as evidence of the coverage
required by this section.
       (d)  An insurance certificate executed and filed with the
department under this section remains in force until the insurer
has terminated future liability by the notice required by the
department.
       (e)  Failure to maintain the liability insurance required by
this section constitutes grounds for the denial, suspension, or
revocation, after notice and opportunity for hearing, of a
registration certificate issued under this chapter. (V.T.I.C. Art.
5.43-1, Secs. 4A, 8 (part).)
       Sec.6001.155.EMPLOYEE LICENSE REQUIRED. (a) Except as
provided by Section 6001.156, an individual, other than an
apprentice, must hold a license issued by the department before:
             (1)  installing or servicing portable fire
extinguishers;
             (2)  installing, servicing, or certifying
preengineered fixed fire extinguisher systems; or
             (3)  planning, supervising, servicing, or certifying
the installation of fixed fire extinguisher systems other than
preengineered systems.
       (b)  An individual who holds a license to install or service
portable fire extinguishers or install and service fixed fire
extinguisher systems must be an employee or agent of a registered
firm. (V.T.I.C. Art. 5.43-1, Secs. 4(c), 5(c).)
       Sec.6001.156.ACTIVITIES NOT REGULATED BY CHAPTER. (a)
The licensing provisions of this chapter do not apply to:
             (1)  the filling or charging of a portable fire
extinguisher by the manufacturer before initial sale of the fire
extinguisher;
             (2)  the servicing by a firm of the firm's portable fire
extinguishers or fixed systems by the firm's personnel who are
specially trained for that servicing;
             (3)  the installation of portable fire extinguishers in
a building by the building owner, the owner's managing agent, or an
employee of the building owner or the owner's managing agent;
             (4)  the installation or servicing of water sprinkler
systems installed in compliance with the National Fire Protection
Association's Standards for the Installation of Sprinkler Systems;
             (5)  a firm that is engaged in the retail or wholesale
sale of portable fire extinguishers that carry an approval label or
listing of a testing laboratory approved by the department, but
that is not engaged in the installation or servicing of those
extinguishers;
             (6)  a fire department that services portable fire
extinguishers as a public service without charge, if the members of
the fire department are trained in the proper servicing of the fire
extinguishers;
             (7)  a firm that is a party to a contract under which:
                   (A)  the installation of portable fire
extinguishers or a fixed fire extinguisher system is performed
under the direct supervision of and certified by a firm
appropriately registered to install and certify portable
extinguishers or fixed systems; and
                   (B)  the registered firm assumes full
responsibility for the installation; or
             (8)  an engineer licensed under Chapter 1001,
Occupations Code, while acting solely in the engineer's
professional capacity.
       (b)  Except as provided by Subsection (a), only the holder of
a license or an apprentice permit issued under this chapter may:
             (1)  install or service portable fire extinguishers; or
             (2)  install and maintain fixed fire extinguisher
systems. (V.T.I.C. Art. 5.43-1, Secs. 5(b), 6.)
       Sec.6001.157.LICENSE EXAMINATION. (a) The state fire
marshal shall:
             (1)  establish the scope and type of an examination
required by this chapter; and
             (2)  examine each applicant for a license under this
chapter.
       (b)  The state fire marshal may administer the examination or
may enter into an agreement with a testing service.
       (c)  If a testing service is used, the state fire marshal may
contract with the testing service regarding requirements for the
examination, including:
             (1)  examination development;
             (2)  scheduling;
             (3)  site arrangements;
             (4)  grading;
             (5)  reporting;
             (6)  analysis; or
             (7)  other administrative duties.
       (d)  The state fire marshal may require the testing service
to:
             (1)  correspond directly with a license applicant
regarding the administration of the examination;
             (2)  collect a reasonable fee from an applicant for
administering the examination; or
             (3)  administer the examination at a specific location
or time.
       (e)  The state fire marshal shall adopt rules as necessary to
implement examination requirements under this chapter.  (V.T.I.C.
Art. 5.43-1, Secs. 7(e), (f), (j), 8 (part).)
       Sec.6001.158.EXAMINATION RESULTS.  (a)  Not later than
the 30th day after the date on which a licensing examination is
administered under this chapter, the state fire marshal shall send
notice to each examinee of the results of the examination.
       (b)  If an examination is conducted, graded, or reviewed by a
testing service, the state fire marshal shall send notice to the
examinees of the results of the examination not later than the 14th
day after the date on which the state fire marshal receives the
results from the testing service.
       (c)  If the notice of the examination results will be delayed
for more than 90 days after the examination date, the state fire
marshal, before the 90th day, shall send notice to the examinee of
the reason for the delay.
       (d)  The state fire marshal may require a testing service to
notify an examinee of the results of the examinee's examination
under Subsections (a) and (b).
       (e)  If requested in writing by an individual who fails the
licensing examination administered under this chapter, the state
fire marshal shall send to the individual an analysis of the
individual's performance on the examination.  (V.T.I.C. Art.
5.43-1, Secs. 7(g), (g-1).)
       Sec.6001.159.CONTINUING EDUCATION REQUIREMENTS. (a) The
commissioner may adopt procedures for certifying and may certify
continuing education programs for individuals licensed under this
chapter.
       (b)  Participation in the continuing education programs is
voluntary. (V.T.I.C. Art. 5.43-1, Sec. 7(h).)
       Sec.6001.160.RECIPROCAL LICENSE. The department may waive
any license requirement for an applicant who holds a license issued
by another state that has license requirements substantially
equivalent to the license requirements of this state. (V.T.I.C.
Art. 5.43-1, Sec. 7(i).)
       Sec.6001.161.APPRENTICE PERMIT REQUIRED. (a)  An
individual may not install or service portable fire extinguishers
or fixed fire extinguisher systems as an apprentice unless the
individual holds an apprentice permit issued by the department.
       (b)  An apprentice may perform a service described by
Subsection (a) only under the direct supervision of an individual
who holds a license issued under this chapter and who works for the
same firm as the apprentice.  (V.T.I.C. Art. 5.43-1, Secs. 4(d)
(part), 5(b) (part).)
       Sec.6001.162.NOT TRANSFERABLE. A registration
certificate, license, or permit issued under this chapter is not
transferable. (V.T.I.C. Art. 5.43-1, Sec. 5(d).)
[Sections 6001.163-6001.200 reserved for expansion]
SUBCHAPTER E. RENEWAL OF REGISTRATION, LICENSE, OR PERMIT
       Sec.6001.201.RENEWAL REQUIRED; FEE. (a) A renewal of a
registration certificate or license issued under this chapter is
valid for a period of two years. The license or registration fee
for each year of the two-year period is payable on renewal.
       (b)  An apprentice permit expires on the first anniversary of
the date of issuance.
       (c)  The commissioner by rule may adopt a system under which
registration certificates, licenses, and permits expire on various
dates during the year. For the year in which an expiration date of a
registration certificate, license, or permit is less than one year
from its issuance or anniversary date, the fee shall be prorated on
a monthly basis so that each holder of a registration certificate,
license, or permit pays only that portion of the renewal fee that is
allocable to the number of months during which the registration
certificate, license, or permit is valid. On each subsequent
renewal, the total renewal fee is payable. (V.T.I.C. Art. 5.43-1,
Secs. 4(d) (part), 7A(a), (c).)
       Sec.6001.202.NOTICE OF EXPIRATION. At least 30 days
before the expiration date of a registration certificate or
license, the state fire marshal shall send written notice of the
impending expiration to the holder of the registration certificate
or license at the holder's last known address. (V.T.I.C. Art.
5.43-1, Sec. 7A(b) (part).)
       Sec.6001.203.RENEWAL PROCEDURES. (a)  The holder of an
unexpired registration certificate or license may renew the
certificate or license by paying the required renewal fee to the
department before the expiration date of the certificate or
license.
       (b)  A firm or individual whose registration certificate or
license has been expired for 90 days or less may renew the
certificate or license by paying to the department:
             (1)  the required renewal fee; and
             (2)  a fee equal to one-half of the initial fee for the
certificate or license.
       (c)  A firm or individual whose registration certificate or
license has been expired for more than 90 days but less than two
years may renew the certificate or license by paying to the
department:
             (1)  all unpaid renewal fees; and
             (2)  a fee that is equal to the initial fee for the
certificate or license.
       (d)  A firm or individual whose registration certificate or
license has been expired for two years or longer may not renew the
certificate or license. The firm or individual may obtain a new
registration certificate or license by complying with the
requirements and procedures for obtaining an initial registration
certificate or license.
       (e)  This section may not be construed to prevent the
department from denying or refusing to renew a license under
applicable law or commissioner rules. (V.T.I.C. Art. 5.43-1, Sec.
7A(b) (part).)
[Sections 6001.204-6001.250 reserved for expansion]
SUBCHAPTER F. PROHIBITED PRACTICES
AND DISCIPLINARY PROCEDURES
       Sec.6001.251.PROHIBITED PRACTICES. (a)  An individual or
firm may not:
             (1)  engage in the business of installing or servicing
portable fire extinguishers without holding a registration
certificate;
             (2)  engage in the business of planning, certifying,
installing, or servicing fixed fire extinguisher systems without
holding a registration certificate;
             (3)  install, service, or certify the servicing of
portable fire extinguishers or plan, certify, service, or install
fixed fire extinguisher systems without holding a license;
             (4)  perform hydrostatic testing of fire extinguisher
cylinders manufactured in accordance with the specifications and
requirements of the United States Department of Transportation
without holding a hydrostatic testing registration certificate;
             (5)  obtain or attempt to obtain a registration
certificate or license by fraudulent representation;
             (6)  install or service portable fire extinguishers or
plan, certify, service, or install fixed fire extinguisher systems
in violation of this chapter or the rules adopted and administered
under this chapter;
             (7)  except as provided by Subsection (b), install,
service, or hydrostatically test a fire extinguisher that does not
have the proper identifying labels;
             (8)  sell, install, service, or recharge a carbon
tetrachloride fire extinguisher; or
             (9)  except as provided by Subsection (b), lease, sell,
service, or install a portable fire extinguisher, a fixed fire
extinguisher system, or extinguisher equipment unless it carries an
approval label or listing label issued by a testing laboratory
approved by the department.
       (b)  The commissioner by rule shall permit an individual or
firm to service a portable fire extinguisher regardless of whether
the extinguisher carries a label described by Subsection (a).  
(V.T.I.C. Art. 5.43-1, Secs. 5(a), (e), 10.)
       Sec.6001.252.DISCIPLINARY ACTIONS. (a)  The state fire
marshal may suspend, revoke, or refuse to issue or renew a
registration certificate, license, or permit if, after notice and
hearing, the state fire marshal finds that the applicant,
registrant, license holder, or permit holder has engaged in acts
that:
             (1)  violate this chapter;
             (2)  violate rules or standards adopted under this
chapter; or
             (3)  constitute misrepresentation made in connection
with:
                   (A)  the sale of products; or
                   (B)  services rendered.
       (b)  Subject to Section 6001.253, the commissioner may
suspend, revoke, or refuse to issue or renew a certificate,
license, permit, or approval.  (V.T.I.C. Art. 5.43-1, Secs. 7(b),
12(a).)
       Sec.6001.253.DISCIPLINARY HEARING. (a) If the state fire
marshal proposes to suspend, revoke, or refuse to renew a license,
permit, certificate, or approval issued under this chapter, the
holder of the license, permit, certificate, or approval is entitled
to a hearing conducted by the State Office of Administrative
Hearings.
       (b)  Proceedings for a disciplinary action are governed by
Chapter 2001, Government Code.
       (c)  Rules of practice adopted by the commissioner
applicable to the proceedings for a disciplinary action may not
conflict with rules adopted by the State Office of Administrative
Hearings. (V.T.I.C. Art. 5.43-1, Sec. 13.)
       Sec.6001.254.REAPPLICATION REQUIREMENTS. (a)  An
applicant or holder of a registration certificate, license, or
permit whose certificate, license, or permit has been refused or
revoked under this chapter, other than for failure to pass a
required written examination, may not file another application for
a registration certificate, license, or permit before the first
anniversary of the effective date of the refusal or revocation.
       (b)  After the first anniversary of the effective date of the
refusal or revocation, the applicant may:
             (1)  reapply; and
             (2)  in a public hearing, show good cause why the
issuance of the registration certificate, license, or permit is not
against the public safety and welfare. (V.T.I.C. Art. 5.43-1, Sec.
7(c).)
       Sec.6001.255.REEXAMINATION AFTER REVOCATION.  An
individual whose license to service portable fire extinguishers or
to install or service fixed fire extinguisher systems has been
revoked must retake and pass the required written examination
before a new license may be issued.  (V.T.I.C. Art. 5.43-1, Sec.
7(d).)
[Sections 6001.256-6001.300 reserved for expansion]
SUBCHAPTER G. CRIMINAL PENALTY
       Sec.6001.301.CRIMINAL PENALTY. (a) A person commits an
offense if the person knowingly violates Section 6001.251(a).
       (b)  An offense under this section is a Class B misdemeanor.
       (c)  Venue for an offense under this section is in Travis
County or the county in which the offense is committed. (V.T.I.C.
Art. 5.43-1, Secs. 12(b), (c); New.)
CHAPTER 6002.  FIRE DETECTION AND ALARM DEVICE INSTALLATION
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 6002.001.  PURPOSE
Sec. 6002.002.  DEFINITIONS
Sec. 6002.003.  EFFECT ON LOCAL REGULATION
Sec. 6002.004.  PROVISION OF CERTAIN SERVICES BY
                 POLITICAL SUBDIVISION
[Sections 6002.005-6002.050 reserved for expansion]
SUBCHAPTER B. POWERS AND DUTIES OF COMMISSIONER, DEPARTMENT,
AND STATE FIRE MARSHAL
Sec. 6002.051.  ADMINISTRATION OF CHAPTER; RULES
Sec. 6002.052.  ADOPTION OF RULES; STANDARDS
Sec. 6002.053.  RULES RESTRICTING ADVERTISING OR
                 COMPETITIVE BIDDING
Sec. 6002.054.  FEES
Sec. 6002.055.  DEPOSIT IN OPERATING ACCOUNT
[Sections 6002.056-6002.100 reserved for expansion]
SUBCHAPTER C. FIRE DETECTION AND ALARM DEVICES ADVISORY COUNCIL
Sec. 6002.101.  ADVISORY COUNCIL; APPOINTMENT
Sec. 6002.102.  ADVISORY COUNCIL DUTIES
[Sections 6002.103-6002.150 reserved for expansion]
SUBCHAPTER D. REGISTRATION, LICENSE, AND APPROVAL REQUIREMENTS
Sec. 6002.151.  FIRM REGISTRATION CERTIFICATE REQUIRED;
                 LIMITED CERTIFICATE
Sec. 6002.152.  BRANCH OFFICE REGISTRATION CERTIFICATE
                 REQUIRED
Sec. 6002.153.  REQUIRED INSURANCE COVERAGE FOR
                 REGISTRATION CERTIFICATE
Sec. 6002.154.  FIRE ALARM TECHNICIAN, RESIDENTIAL FIRE
                 ALARM SUPERINTENDENT, AND FIRE ALARM
                 PLANNING SUPERINTENDENT
Sec. 6002.155.  ACTIVITIES NOT REGULATED BY CHAPTER
Sec. 6002.156.  LICENSE EXAMINATION
Sec. 6002.157.  EXAMINATION RESULTS
Sec. 6002.158.  TRAINING SCHOOLS AND INSTRUCTORS;
                 APPROVAL
Sec. 6002.159.  CONTINUING EDUCATION PROGRAMS
Sec. 6002.160.  RECIPROCAL LICENSE
Sec. 6002.161.  NOT TRANSFERABLE
[Sections 6002.162-6002.200 reserved for expansion]
SUBCHAPTER E. RENEWAL OF REGISTRATION CERTIFICATE OR LICENSE
Sec. 6002.201.  RENEWAL REQUIRED; FEE
Sec. 6002.202.  NOTICE OF EXPIRATION
Sec. 6002.203.  RENEWAL PROCEDURES
Sec. 6002.204.  RENEWAL OF CERTAIN LICENSES
[Sections 6002.205-6002.250 reserved for expansion]
SUBCHAPTER F. SELLING OR LEASING OF FIRE ALARM
OR FIRE DETECTION DEVICES
Sec. 6002.251.  REQUIRED LABEL; EXCEPTIONS
Sec. 6002.252.  REQUIRED PURCHASE AND INSTALLATION
                 INFORMATION
Sec. 6002.253.  TRAINING AND SUPERVISION OF CERTAIN
                 EXEMPT EMPLOYEES
[Sections 6002.254-6002.300 reserved for expansion]
SUBCHAPTER G. PROHIBITED PRACTICES AND DISCIPLINARY PROCEDURES
Sec. 6002.301.  PROHIBITED PRACTICES
Sec. 6002.302.  DISCIPLINARY ACTIONS
Sec. 6002.303.  DISCIPLINARY HEARING
Sec. 6002.304.  REAPPLICATION REQUIREMENTS
[Sections 6002.305-6002.350 reserved for expansion]
SUBCHAPTER H.  CRIMINAL PENALTY
Sec. 6002.351.  CRIMINAL PENALTY
CHAPTER 6002.  FIRE DETECTION AND ALARM DEVICE INSTALLATION
SUBCHAPTER A. GENERAL PROVISIONS
       Sec.6002.001.PURPOSE. The purpose of this chapter is to
safeguard lives and property by:
             (1)  regulating the planning, certifying, leasing,
selling, servicing, installing, monitoring, and maintaining of
fire detection and fire alarm devices and systems; and
             (2)  except as provided by rules adopted under Section
6002.051 or 6002.052, prohibiting fire detection and fire alarm
devices, equipment, and systems not labeled or listed by a
nationally recognized testing laboratory.  (V.T.I.C. Art. 5.43-2,
Sec. 1.)
       Sec.6002.002.DEFINITIONS. Except as otherwise provided
by this chapter, in this chapter:
             (1)  "Fire alarm device" means any device capable,
through audible or visible means, of warning that fire or
combustion has occurred or is occurring.
             (2)  "Fire alarm planning superintendent" means a
licensed individual designated by a registered firm to:
                   (A)  plan a fire alarm or detection system that
conforms to applicable adopted National Fire Protection
Association standards or other adopted standards; and
                   (B)  certify that each fire alarm or detection
system as planned meets the standards as provided by law.
             (3)  "Fire alarm technician" means a licensed
individual designated by a registered firm to:
                   (A)  inspect and certify that each fire alarm or
detection system as installed meets the standards provided by law;
or
                   (B)  perform or directly supervise the servicing
or maintaining of a previously installed fire alarm device or
system and certify that service or maintenance.
             (4)  "Fire detection device" means any arrangement of
materials, the sole function of which is to indicate the existence
of fire, smoke, or combustion in its incipient stages.
             (5)  "Individual" means a natural person, including an
owner, manager, officer, employee, occupant, or other individual.
             (6)  "Installation" means:
                   (A)  the initial placement of equipment; or
                   (B)  the extension, modification, or alteration
of equipment already in place.
             (7)  "Insurance agent" means:
                   (A)  an individual, firm, or corporation licensed
under:
                         (i)  Subchapter E, Chapter 981; or
                         (ii)  Subchapter A, B, C, D, E, or G, Chapter
4051; or
                   (B)  an individual authorized to represent an
insurance fund or pool created by a municipality, county, or other
political subdivision of this state under Chapter 791, Government
Code.
             (8)  "Maintenance" means the maintenance of a fire
alarm device or a fire detection device in a condition of repair
that provides performance as originally designed or intended.
             (9)  "Monitoring" means the receipt of fire alarm and
supervisory signals and the retransmission or communication of
those signals to a fire service communications center in this state
or serving property in this state.
             (10)  "Organization" means a corporation, a government
or a governmental subdivision or agency, a business trust, an
estate, a trust, a partnership, a firm or association, two or more
individuals with a joint or common interest, or any other legal or
commercial entity.
             (11)  "Registered firm" means an individual or
organization that holds a registration certificate.
             (12)  "Residential fire alarm superintendent" means a
licensed individual designated by a registered firm to:
                   (A)  plan a residential single-family or
two-family fire alarm or detection system that conforms to
applicable adopted National Fire Protection Association standards
or other adopted standards; and
                   (B)  certify that each fire alarm or detection
system as planned meets the standards as provided by law.
             (13)  "Sale" means the sale or offer for sale, lease, or
rent of any merchandise, equipment, or service at wholesale or
retail, to the public or any individual, for an agreed sum of money
or other consideration.
             (14)  "Service" or "servicing" means inspection,
maintenance, repair, or testing of a fire alarm device or a fire
detection device. (V.T.I.C. Art. 5.43-2, Secs. 2(1), (2), (5),
(6), (7), (8), (9), (10), (11), (12) (part), (13) (part), (14),
(15), (16) (part).)
       Sec.6002.003.EFFECT ON LOCAL REGULATION. (a) This
chapter and the rules adopted under this chapter have uniform force
and effect throughout this state. A municipality or county may not
enact an ordinance or rule inconsistent with this chapter or rules
adopted under this chapter. An inconsistent ordinance or rule is
void and has no effect.
       (b)  Notwithstanding Subsection (a), a municipality or
county may:
             (1)  mandate that a fire alarm or detection system be
installed in certain facilities, if the installation conforms to
applicable state law;
             (2)  require a better type of alarm or detection system
or otherwise safer condition than the minimum required by state
law; and
             (3)  require regular inspections by local officials of
smoke detectors in dwelling units, as that term is defined by
Section 92.251, Property Code, and require the smoke detectors to
be operational at the time of inspection.
       (c)  A municipality, county, or other political subdivision
of this state may not require, as a condition of engaging in
business or performing any activity authorized under this chapter,
that a registered firm, a license holder, or an employee of a
license holder:
             (1)  obtain a registration, franchise, or license from
the political subdivision;
             (2)  pay any fee or franchise tax to the political
subdivision; or
             (3)  post a bond.
       (d)  Notwithstanding any other provision of this section or
Section 6002.155, a municipality or county may require a registered
firm to obtain a permit and pay a permit fee for the installation of
a fire alarm or fire detection device or system and require that the
installation of such a system be in conformance with the building
code or other construction requirements of the municipality or
county and state law.
       (e)  Notwithstanding Subsection (d), a municipality or
county may not impose qualification or financial responsibility
requirements other than proof of a registration certificate.
(V.T.I.C. Art. 5.43-2, Secs. 3(a), (c).)
       Sec. 6002.004.  PROVISION OF CERTAIN SERVICES BY POLITICAL
SUBDIVISION. (a) In this section, "monitoring" means the receipt
of fire alarm or supervisory signals or retransmission or
communication of those signals to a fire service communications
center that is located in this state or serves property in this
state.
       (b)  Except as provided by Subsection (c), a political
subdivision may not offer residential alarm system sales, service,
installation, or monitoring unless the political subdivision has
been providing monitoring services to residences within the
boundaries of the political subdivision as of September 1, 1999.
Any fee charged by the political subdivision under this subsection
may not exceed the cost of the monitoring.
       (c)  A political subdivision may:
             (1)  offer service, installation, or monitoring for
property owned by the political subdivision or another political
subdivision;
             (2)  allow for the response to an alarm or detection
device by:
                   (A)  a law enforcement agency or fire department;
or
                   (B)  a law enforcement officer or firefighter
acting in an official capacity; or
             (3)  offer monitoring to a financial institution, as
defined by Section 59.301, Finance Code, that requests, in writing,
that the political subdivision provide monitoring service to the
financial institution.
       (d)  Subsection (b) does not apply to a political
subdivision:
             (1)  in a county with a population of less than 80,000;
or
             (2)  in which monitoring is not otherwise provided or
available.
       (e)  This section is not intended to require a political
subdivision to hold a license under this chapter. (V.T.I.C. Art.
5.43-2, Secs. 7(b), (c), (d), (e).)
[Sections 6002.005-6002.050 reserved for expansion]
SUBCHAPTER B. POWERS AND DUTIES OF COMMISSIONER, DEPARTMENT,
AND STATE FIRE MARSHAL
       Sec.6002.051.ADMINISTRATION OF CHAPTER; RULES. (a)  The
department shall administer this chapter.
       (b)  The commissioner may adopt rules as necessary to
administer this chapter, including rules the commissioner
considers necessary to administer this chapter through the state
fire marshal. (V.T.I.C. Art. 5.43-2, Secs. 4 (part), 6(a) (part).)
       Sec.6002.052.ADOPTION OF RULES; STANDARDS. (a) In
adopting necessary rules, the commissioner may use:
             (1)  recognized standards, such as, but not limited to:
                   (A)  standards of the National Fire Protection
Association;
                   (B)  standards recognized by federal law or
regulation; or
                   (C)  standards published by a nationally
recognized standards-making organization;
             (2)  the National Electrical Code; or
             (3)  information provided by individual manufacturers.
       (b)  Under rules adopted under Section 6002.051, the
department may create specialized licenses or registration
certificates for an organization or individual engaged in the
business of planning, certifying, leasing, selling, servicing,
installing, monitoring, or maintaining fire alarm or fire detection
devices or systems. The rules must establish appropriate training
and qualification standards for each kind of license and
certificate.
       (c)  The commissioner shall also adopt standards applicable
to fire alarm devices, equipment, or systems regulated under this
chapter. In adopting standards under this subsection, the
commissioner may allow the operation of a fire alarm monitoring
station that relies on fire alarm devices or equipment approved or
listed by a nationally recognized testing laboratory without regard
to whether the monitoring station is approved or listed by a
nationally recognized testing laboratory if the operator of the
station demonstrates that the station operating standards are
substantially equivalent to those required to be approved or
listed. (V.T.I.C. Art. 5.43-2, Secs. 4 (part), 6(a) (part), (b).)
       Sec. 6002.053.  RULES RESTRICTING ADVERTISING OR
COMPETITIVE BIDDING. (a)  The commissioner may not adopt rules
restricting advertising or competitive bidding by the holder of a
license or registration certificate issued under this chapter
except to prohibit false, misleading, or deceptive practices.
       (b)  In the commissioner's rules to prohibit false,
misleading, or deceptive practices, the commissioner may not
include a rule that:
             (1)  restricts the use of any medium for advertising;
             (2)  restricts the use of a license or registration
certificate holder's personal appearance or voice in an
advertisement;
             (3)  relates to the size or duration of an
advertisement by the license or registration certificate holder; or
             (4)  restricts the license or registration certificate
holder's advertisement under a trade name. (V.T.I.C. Art. 5.43-2,
Sec. 6A.)
       Sec.6002.054.FEES. (a) The commissioner shall set the
fee for:
             (1)  an initial registration certificate in an amount
not to exceed $500;
             (2)  the renewal of a registration certificate for each
year in an amount not to exceed $500;
             (3)  the renewal of a registration certificate for an
individual or organization engaged in the business of planning,
certifying, leasing, selling, servicing, installing, monitoring,
or maintaining exclusively single station devices in an amount not
to exceed $250 annually;
             (4)  an initial branch office registration certificate
in an amount not to exceed $150;
             (5)  the renewal of a branch office registration
certificate for each year in an amount not to exceed $150;
             (6)  an initial or renewal training school approval in
an amount not to exceed $500 annually;
             (7)  an initial or renewal of a training school
instructor approval in an amount not to exceed $50 annually;
             (8)  an initial license in an amount not to exceed $120;
and
             (9)  the renewal of a license for each year in an amount
not to exceed $100.
       (b)  Unless the examination or reexamination for a license is
administered by a testing service, the commissioner shall set a
nonrefundable fee for:
             (1)  the initial examination in an amount not to exceed
$30; and
             (2)  each reexamination in an amount not to exceed $20.
       (c)  The commissioner shall set a fee in an amount not to
exceed $20 for:
             (1)  a duplicate registration certificate or license
issued under this chapter; and
             (2)  any request requiring changes to a registration
certificate or license. (V.T.I.C. Art. 5.43-2, Secs. 5(a) (part),
(b) (part), (c) (part), (d), (i), 5D(b) (part), (c) (part).)
       Sec.6002.055.DEPOSIT IN OPERATING ACCOUNT. The fees
collected under this chapter shall be deposited in the state
treasury to the credit of the Texas Department of Insurance
operating account.  (V.T.I.C. Art. 5.43-2, Sec. 8.)
[Sections 6002.056-6002.100 reserved for expansion]
SUBCHAPTER C. FIRE DETECTION AND ALARM DEVICES ADVISORY COUNCIL
       Sec.6002.101.ADVISORY COUNCIL; APPOINTMENT. The
commissioner shall appoint an advisory council consisting of seven
individuals as follows:
             (1)  three individuals who are employed by a registered
firm in the fire protection industry and who have at least three
years' experience in the sale, installation, maintenance, or
manufacture of fire alarm or fire detection devices;
             (2)  two individuals who:
                   (A)  are experienced in the engineering of fire
prevention services; or
                   (B)  are members of a fire protection association;
             (3)  one individual who is an experienced fire
prevention officer employed by a municipality or county; and
             (4)  one individual who:
                   (A)  is employed by a registered firm; and
                   (B)  has at least three years' experience in the
operation of a central fire alarm monitoring station.  (V.T.I.C.
Art. 5.43-2, Sec. 6(d).)
       Sec.6002.102.ADVISORY COUNCIL DUTIES. The advisory
council shall periodically:
             (1)  review rules implementing this chapter; and
             (2)  recommend rule changes to the commissioner.  
(V.T.I.C. Art. 5.43-2, Sec. 6(c).)
[Sections 6002.103-6002.150 reserved for expansion]
SUBCHAPTER D. REGISTRATION, LICENSE, AND APPROVAL REQUIREMENTS
       Sec. 6002.151.  FIRM REGISTRATION CERTIFICATE REQUIRED;
LIMITED CERTIFICATE.  (a)  An individual or organization may not
engage in the business of planning, certifying, leasing, selling,
installing, servicing, monitoring, or maintaining fire alarm or
fire detection devices or systems unless the individual or
organization holds a registration certificate issued by the
department.
       (b)  The department may issue a limited registration
certificate to an individual or organization whose business is
restricted to monitoring.
       (c)  Applications for registration certificates and
qualifications for those certificates are subject to rules adopted
by the commissioner.  (V.T.I.C. Art. 5.43-2, Secs. 5(a) (part),
7(a) (part), 10(a) (part).)
       Sec. 6002.152.  BRANCH OFFICE REGISTRATION CERTIFICATE
REQUIRED.  (a)  Except as provided by Subsection (c), each separate
office location of a registered firm, other than the location
identified on the firm's registration certificate, must have a
branch office registration certificate issued by the department.
       (b)  Before issuing a branch office registration
certificate, the department must determine that the branch office
location is part of a registered firm.
       (c)  A registered firm that is engaged in the business of
planning, certifying, leasing, selling, servicing, installing,
monitoring, or maintaining exclusively single station devices is
not required to apply for or obtain a branch office registration
certificate for a separate office or location of the firm.  
(V.T.I.C. Art. 5.43-2, Sec. 5(b) (part).)
       Sec. 6002.153.  REQUIRED INSURANCE COVERAGE FOR
REGISTRATION CERTIFICATE. (a)  The department may not issue a
registration certificate under this chapter unless the applicant
files with the department evidence of a general liability insurance
policy that includes products and completed operations coverage.
The policy must be conditioned to pay on behalf of the insured those
amounts that the insured becomes legally obligated to pay as
damages because of bodily injury and property damage caused by an
occurrence involving the insured or the insured's officer, agent,
or employee in the conduct of any business that requires a
registration certificate or license under this chapter.
       (b)  Unless the commissioner increases or decreases the
limits under rules adopted under Section 6002.051(b), the limits of
insurance coverage required by Subsection (a) must be at least:
             (1)  $100,000 combined single limits for bodily injury
and property damage for each occurrence; and
             (2)  $300,000 aggregate for all occurrences for each
policy year.
       (c)  The evidence of insurance required by this section must
be in the form of a certificate of insurance executed by an insurer
authorized to engage in the business of insurance in this state and
countersigned by an insurance agent licensed in this state. A
certificate of insurance for surplus lines coverage procured in
compliance with Chapter 981 through a surplus lines agent that is
licensed under Subchapter E, Chapter 981, and resident in this
state may be filed with the department as evidence of the coverage
required by this section.
       (d)  An insurance certificate executed and filed with the
department under this section remains in force until the insurer
has terminated future liability by the notice required by the
department.
       (e)  Failure to maintain the liability insurance required by
this section constitutes grounds for the denial, suspension, or
revocation, after notice and opportunity for hearing, of a
registration certificate issued under this chapter.
       (f)  For an individual or organization licensed to install or
service burglar alarms under Chapter 1702, Occupations Code,
compliance with the insurance requirements of that chapter
constitutes compliance with the insurance requirements of this
section if the insurance held by the individual or organization
complies with the requirements of this section in amounts and types
of coverage.
       (g)  This section does not affect the rights of the insured
to negotiate or contract for limitations of liability with a third
party, including a customer of the insured.  (V.T.I.C. Art. 5.43-2,
Secs. 5B(a), (b), (c), (d), (e), (g).)
       Sec. 6002.154.  FIRE ALARM TECHNICIAN, RESIDENTIAL FIRE
ALARM SUPERINTENDENT, AND FIRE ALARM PLANNING SUPERINTENDENT. (a)  
Each registered firm, including a firm engaged in the business of
planning, certifying, leasing, selling, servicing, installing,
monitoring, or maintaining exclusively single station devices,
must employ at least one employee who is a fire alarm technician,
residential fire alarm superintendent, or fire alarm planning
superintendent.
       (b)  A fire alarm technician, residential fire alarm
superintendent, or fire alarm planning superintendent must hold a
license issued by the department, conditioned on the successful
completion of a written license examination.
       (c)  To engage in the activity for which the license is
granted, an individual licensed under this chapter must be an
employee or agent of an individual or entity that holds a
registration certificate.
       (d)  A fire alarm technician may perform or supervise
monitoring. A fire alarm planning superintendent may act as a fire
alarm technician or a residential fire alarm superintendent. A
residential fire alarm superintendent may act as a fire alarm
technician.
       (e)  Applications for licenses and qualifications for those
licenses are subject to rules adopted by the commissioner.
(V.T.I.C. Art. 5.43-2, Secs. 2(12) (part), (13) (part), (16)
(part), 5(a) (part), (c) (part), (f), 5D(a) (part), 10(a) (part).)
       Sec.6002.155.ACTIVITIES NOT REGULATED BY CHAPTER.  The
licensing provisions of this chapter do not apply to:
             (1)  an individual or organization in the business of
building construction that installs electrical wiring and devices
that may include, in part, the installation of a fire alarm or
detection system if:
                   (A)  the individual or organization is a party to
a contract that provides that:
                         (i)  the installation will be performed
under the direct supervision of and certified by a licensed
employee or agent of a firm registered to install and certify such
an alarm or detection device; and
                         (ii)  the registered firm assumes full
responsibility for the installation of the alarm or detection
device; and
                   (B)  the individual or organization does not plan,
certify, lease, sell, service, or maintain fire alarms or detection
devices or systems;
             (2)  an individual or organization that:
                   (A)  owns and installs a fire detection or fire
alarm device on the individual's or organization's own property; or
                   (B)  if the individual or organization does not
charge for the device or its installation, installs the device for
the protection of the individual's or organization's personal
property located on another's property and does not install the
device as a normal business practice on the property of another;
             (3)  an individual who holds a license or other
authority issued by a municipality to practice as an electrician
and who installs fire or smoke detection and alarm devices only in a
single family or multifamily residence if:
                   (A)  the devices installed are:
                         (i)  single station detectors; or
                         (ii)  multiple station detectors capable of
being connected in a manner that actuation of one detector causes
all integral or separate alarms to operate if the detectors are not
connected to a control panel or to an outside alarm, do not transmit
a signal off the premises, and do not use more than 120 volts; and
                   (B)  all installations comply with the adopted
edition of Household Fire Warning Equipment, National Fire
Protection Association Standard No. 74;
             (4)  an individual or organization that:
                   (A)  sells fire detection or fire alarm devices
exclusively over-the-counter or by mail order; and
                   (B)  does not plan, certify, install, service, or
maintain the devices;
             (5)  a law enforcement agency or fire department or a
law enforcement officer or firefighter acting in an official
capacity that responds to a fire alarm or detection device;
             (6)  an engineer licensed under Chapter 1001,
Occupations Code, acting solely in the engineer's professional
capacity;
             (7)  an individual or organization that provides and
installs at no charge to the property owners or residents a
battery-powered smoke detector in a single-family or two-family
residence if:
                   (A)  the smoke detector bears a label of listing
or approval by a testing laboratory approved by the department;
                   (B)  the installation complies with the adopted
edition of National Fire Protection Association Standard No. 74;
                   (C)  the installers are knowledgeable in fire
protection and the proper use of smoke detectors; and
                   (D)  the detector is a single station installation
and not a part of or connected to any other detection device or
system;
             (8)  a regular employee of a registered firm who is
under the direct supervision of a license holder;
             (9)  a building owner, the owner's managing agent, or an
employee of the owner or agent who installs battery-operated single
station smoke detectors or monitor fire alarm or fire detection
devices or systems in the owner's building, and in which the
monitoring:
                   (A)  is performed at the owner's property at no
charge to the occupants of the building;
                   (B)  complies with applicable standards of the
National Fire Protection Association as may be adopted by rule
under this chapter; and
                   (C)  uses equipment approved by a testing
laboratory approved by the department for fire alarm monitoring;
             (10)  an individual employed by a registered firm that
sells and installs a smoke or heat detector in a single-family or
two-family residence if:
                   (A)  the detector bears a label of listing or
approval by a testing laboratory approved by the department;
                   (B)  the installation complies with the adopted
edition of National Fire Protection Association Standard No. 74;
                   (C)  the installers are knowledgeable in fire
protection and the proper use and placement of detectors; and
                   (D)  the detector is a single station installation
and not a part of or connected to any other detection device or
system; or
             (11)  an individual or organization licensed to install
or service burglar alarms under Chapter 1702, Occupations Code,
that provides and installs in a single-family or two-family
residence a combination keypad that includes a panic button to
initiate a fire alarm signal if the fire alarm signal:
                   (A)  is monitored by a fire alarm firm registered
under this chapter; and
                   (B)  is not initiated by a fire or smoke detection
device. (V.T.I.C. Art. 5.43-2, Sec. 3(b).)
       Sec.6002.156.LICENSE EXAMINATION. (a) The state fire
marshal shall establish the scope and type of an examination
required by this chapter.  The examination must cover this chapter
and commissioner rules and include specific testing of all license
categories.
       (b)  The state fire marshal may administer the examination or
may enter into an agreement with a testing service.
       (c)  If a testing service is used, the state fire marshal may
contract with the testing service regarding requirements for the
examination, including:
             (1)  examination development;
             (2)  scheduling;
             (3)  site arrangements;
             (4)  grading;
             (5)  reporting;
             (6)  analysis; or
             (7)  other administrative duties.
       (d)  The state fire marshal may require the testing service
to:
             (1)  correspond directly with an applicant regarding
the administration of the examination;
             (2)  collect a reasonable fee from an applicant for
administering the examination; or
             (3)  administer the examination at a specific location
or time.
       (e)  Approval for a testing service is valid for one year.
       (f)  The state fire marshal shall adopt rules as necessary to
implement examination requirements under this chapter.  (V.T.I.C.
Art. 5.43-2, Secs. 5D(a) (part), (b) (part), (f), (g), (h).)
       Sec.6002.157.EXAMINATION RESULTS.  (a)  Not later than the
30th day after the date on which an examination is administered
under this chapter, the state fire marshal shall send notice to each
examinee of the results of the examination.
       (b)  If an examination is conducted, graded, or reviewed by a
testing service, the state fire marshal shall send notice to each
examinee of the results of the examination within two weeks after
the date on which the state fire marshal receives the results from
the testing service.
       (c)  If the notice of the examination results will be delayed
for more than 90 days after the examination date, the state fire
marshal shall send notice to the examinee of the reason for the
delay before the 90th day.
       (d)  The state fire marshal may require a testing service to
notify an examinee of the results of the examinee's examination
under this section.
       (e)  If requested in writing by an individual who fails the
examination administered under this chapter, the state fire marshal
shall send to the individual an analysis of the individual's
performance on the examination.  (V.T.I.C. Art. 5.43-2, Secs. 5D(a)
(part), (a-1).)
       Sec.6002.158.TRAINING SCHOOLS AND INSTRUCTORS; APPROVAL.
(a)  An applicant for approval as a training school must submit an
application to the state fire marshal, accompanied by the
applicant's complete course or testing curriculum. A registered
firm, or an affiliate of a registered firm, is not eligible for
approval as a training school.
       (b)  The state fire marshal shall review the materials
submitted for course approval and shall approve or deny approval in
a letter provided not later than the 60th day after the date of
receipt of the application. A denial of approval must disclose
specific reasons for the denial. An applicant whose approval is
denied may reapply at any time.
       (c)  Training school instructors must be approved by the
state fire marshal. To be eligible for approval, an instructor must
hold a fire alarm planning superintendent license and have at least
three years of experience in fire alarm installation, service, or
monitoring.
       (d)  Approval for a training school or instructor is valid
for one year.
       (e)  The curriculum for a fire alarm technician course or a
residential fire alarm superintendent course must consist of 16
hours of classroom instruction for each license category.
       (f)  After approval, each training school must annually
conduct, within 125 miles of each county with a population greater
than 500,000, at least two classes that are open to the public.
(V.T.I.C. Art. 5.43-2, Secs. 5D(b) (part), (c) (part), (d), (e);
New.)
       Sec.6002.159.CONTINUING EDUCATION PROGRAMS. (a) The
commissioner may adopt procedures for certifying and may certify
continuing education programs.
       (b)  Participation in the continuing education programs is
voluntary. (V.T.I.C. Art. 5.43-2, Sec. 5E.)
       Sec.6002.160.RECIPROCAL LICENSE.  The department may
waive any license requirement for an applicant who holds a license
issued by another state that has license requirements substantially
equivalent to the license requirements of this state. (V.T.I.C.
Art. 5.43-2, Sec. 5F.)
       Sec.6002.161.NOT TRANSFERABLE. A registration
certificate or license issued under this chapter is not
transferable. (V.T.I.C. Art. 5.43-2, Sec. 5(h).)
[Sections 6002.162-6002.200 reserved for expansion]
SUBCHAPTER E. RENEWAL OF REGISTRATION CERTIFICATE OR LICENSE
       Sec.6002.201.RENEWAL REQUIRED; FEE. (a) A renewal of a
registration certificate or license issued under this chapter is
valid for a period of two years. The license or registration
renewal fee for each year of the two-year period is payable on
renewal.
       (b)  The commissioner by rule may adopt a system under which
registration certificates and licenses expire on various dates
during the year. For the year in which an expiration date of a
registration certificate or license is less than one year from its
issuance or anniversary date, the fee shall be prorated on a monthly
basis so that each holder of a registration certificate or license
pays only that portion of the renewal fee that is allocable to the
number of months during which the registration certificate or
license is valid. The total renewal fee is payable on renewal on
the new expiration date. (V.T.I.C. Art. 5.43-2, Secs. 5A, 5C(b).)
       Sec.6002.202.NOTICE OF EXPIRATION. At least 30 days
before the expiration date of a registration certificate or
license, the state fire marshal shall send written notice of the
impending expiration to the holder of the registration certificate
or license at the holder's last known address. (V.T.I.C. Art.
5.43-2, Sec. 5C(a) (part).)
       Sec.6002.203.RENEWAL PROCEDURES. (a)  The holder of an
unexpired registration certificate or license may renew the
certificate or license by paying the required renewal fee to the
department before the expiration date of the certificate or
license.
       (b)  An individual or organization whose registration
certificate or license has been expired for 90 days or less may
renew the certificate or license by paying to the department:
             (1)  the required renewal fee; and
             (2)  a fee that does not exceed one-fourth of the
initial fee for the certificate or license.
       (c)  An individual or organization whose registration
certificate or license has been expired for more than 90 days but
less than two years may renew the certificate or license by paying
to the department:
             (1)  all unpaid renewal fees; and
             (2)  a fee that does not exceed the initial fee for the
certificate or license.
       (d)  An individual or organization whose registration
certificate or license has been expired for two years or longer may
not renew the certificate or license. The individual or
organization may obtain a new registration certificate or license
by complying with the requirements and procedures for obtaining an
initial registration certificate or license.
       (e)  This section may not be construed to prevent the
department from denying or refusing to renew a license under
applicable law or commissioner rules.
       (f)  A license or registration certificate issued under this
chapter expires at midnight on the date printed on the license or
certificate. A renewal application and fee for the license or
registration certificate must be postmarked on or before the
expiration date to be accepted as timely.
       (g)  If a renewal application is not complete but there has
been no lapse in the required insurance, the applicant is entitled
to 30 days from the date that the applicant is notified by the
department of the deficiencies in the renewal application to comply
with any additional requirement. If an applicant fails to respond
and correct all deficiencies in the renewal application within the
30-day period, the department may charge a late fee.  (V.T.I.C. Art.
5.43-2, Secs. 5C(a) (part), (c).)
       Sec.6002.204.RENEWAL OF CERTAIN LICENSES. A license
holder with an unexpired license who is not employed by a registered
firm at the time of the license renewal may renew that license, but
the license holder may not engage in any activity for which the
license was granted until the license holder is employed by a
registered firm. (V.T.I.C. Art. 5.43-2, Sec. 5C(a) (part).)
[Sections 6002.205-6002.250 reserved for expansion]
SUBCHAPTER F. SELLING OR LEASING OF FIRE ALARM
OR FIRE DETECTION DEVICES
       Sec.6002.251.REQUIRED LABEL; EXCEPTIONS. (a)  Except as
provided by Subsections (b) and (c), a detection or alarm device,
alarm system, or item of monitoring equipment, a purpose of which is
to detect or give alarm of fire, may not be sold, offered for sale,
leased, installed, or used to monitor property in this state unless
the device, system, or item of equipment carries a label of approval
or listing of a testing laboratory approved by the department.
       (b)  Except as provided by Subsection (c), a detection or
alarm device, alarm system, or item of monitoring equipment in a
one-family or two-family residence, a purpose of which is to detect
or give alarm of fire, may not be sold, offered for sale, leased,
installed, or used to monitor property in this state after April 14,
1989, unless the device, system, or equipment carries a label of
approval or listing of a testing laboratory approved by the
department.
       (c)  Subsections (a) and (b) do not prohibit the continued
use or monitoring of equipment in place if the equipment:
             (1)  complied with the law applicable on the date of the
equipment's original placement; and
             (2)  has not been extended, modified, or altered.
       (d)  Fire alarm devices that are not required by this chapter
or rules adopted under this chapter and that do not impair the
operation of fire alarm or fire detection devices required by this
chapter or the rules adopted under this chapter are exempt from the
label and listing requirements described by Subsections (a) and (b)
if the devices are approved by the local authority with
jurisdiction.  (V.T.I.C. Art. 5.43-2, Secs. 9(a), (b), (c).)
       Sec. 6002.252.  REQUIRED PURCHASE AND INSTALLATION
INFORMATION. A fire detection or fire alarm device may not be sold
or installed in this state unless the device is accompanied by
printed information that:
             (1)  is supplied to the owner by the supplier or
installing contractor; and
             (2)  concerns:
                   (A)  instructions describing the installation,
operation, testing, and proper maintenance of the device;
                   (B)  information to aid in establishing an
emergency evacuation plan for the protected premises; and
                   (C)  the telephone number and location, including
notification procedures, of the nearest fire department. (V.T.I.C.
Art. 5.43-2, Sec. 9(d).)
       Sec. 6002.253.  TRAINING AND SUPERVISION OF CERTAIN EXEMPT
EMPLOYEES. Each registered firm that employs an individual who is
exempt from the licensing requirements of this chapter under
Section 6002.155(10) shall appropriately train and supervise the
individual to ensure that:
             (1)  each installation complies with the adopted
provisions of National Fire Protection Standard No. 74 or other
adopted standards;
             (2)  each smoke or heat detector installed or sold
carries a label or listing of approval by a testing laboratory
approved by the department; and
             (3)  the individual is knowledgeable in fire protection
and the proper use and placement of detectors. (V.T.I.C. Art.
5.43-2, Sec. 9(e).)
[Sections 6002.254-6002.300 reserved for expansion]
SUBCHAPTER G. PROHIBITED PRACTICES AND DISCIPLINARY PROCEDURES
       Sec.6002.301.PROHIBITED PRACTICES. An individual or
organization may not:
             (1)  plan, certify, lease, sell, service, install,
monitor, or maintain a fire alarm or fire detection device or system
without a license or registration certificate;
             (2)  obtain or attempt to obtain a registration
certificate or license by fraudulent representation; or
             (3)  plan, certify, lease, sell, service, install,
monitor, or maintain a fire alarm or fire detection device or system
in violation of this chapter or the rules adopted under this
chapter.  (V.T.I.C. Art. 5.43-2, Sec. 7(a).)
       Sec.6002.302.DISCIPLINARY ACTIONS. (a)  The state fire
marshal may suspend, revoke, or refuse to issue or renew a
registration certificate or license if, after notice and hearing,
the state fire marshal finds that the applicant, registrant, or
license holder has engaged in acts that:
             (1)  violate this chapter;
             (2)  violate rules or standards adopted under this
chapter; or
             (3)  constitute misrepresentation made in connection
with the sale of products or services rendered.
       (b)  An original or renewal registration certificate,
license, or testing laboratory approval may be denied, suspended,
or revoked, if after notice and public hearing the commissioner,
through the state fire marshal, determines from the evidence
presented at the hearing that this chapter or a rule adopted under
this chapter has been violated.  (V.T.I.C. Art. 5.43-2, Secs.
10(b), (c).)
       Sec.6002.303.DISCIPLINARY HEARING. (a) If the state fire
marshal proposes to suspend, revoke, or refuse to renew a license or
registration certificate issued under this chapter, the holder of
the license or certificate is entitled to a hearing conducted by the
State Office of Administrative Hearings.
       (b)  Proceedings for a disciplinary action are governed by
Chapter 2001, Government Code.
       (c)  Rules of practice adopted by the commissioner
applicable to the proceedings for a disciplinary action may not
conflict with rules adopted by the State Office of Administrative
Hearings.  (V.T.I.C. Art. 5.43-2, Sec. 10A.)
       Sec.6002.304.REAPPLICATION REQUIREMENTS. (a)  A holder
of a registration certificate, license, or testing laboratory
approval that has been revoked under this chapter may not file
another application for a registration certificate, license, or
approval before the first anniversary of the effective date of the
revocation.
       (b)  An individual or organization reapplying under this
section must request a public hearing to show cause why the issuance
of a new registration certificate, license, or approval should not
be denied. (V.T.I.C. Art. 5.43-2, Sec. 10(d).)
[Sections 6002.305-6002.350 reserved for expansion]
SUBCHAPTER H.  CRIMINAL PENALTY
       Sec.6002.351.CRIMINAL PENALTY. (a)  An individual or
organization commits an offense if the individual or organization
violates Section 6002.151, 6002.152, or 6002.154.
       (b)  An offense under this section is a Class B misdemeanor.
       (c)  Venue for an offense under this section is in Travis
County or the county in which the offense is committed. (V.T.I.C. Art. 5.43-2, Sec. 11.)
CHAPTER 6003. FIRE PROTECTION SPRINKLER SYSTEM SERVICE AND
INSTALLATION
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 6003.001.  DEFINITIONS
Sec. 6003.002.  APPLICABILITY OF CHAPTER
Sec. 6003.003.  EFFECT ON LOCAL REGULATION
[Sections 6003.004-6003.050 reserved for expansion]
SUBCHAPTER B. POWERS AND DUTIES OF COMMISSIONER,
DEPARTMENT, AND STATE FIRE MARSHAL
Sec. 6003.051.  ADMINISTRATION OF CHAPTER
Sec. 6003.052.  ADOPTION OF RULES
Sec. 6003.053.  RULES RESTRICTING ADVERTISING OR
                 COMPETITIVE BIDDING
Sec. 6003.054.  GENERAL POWERS AND DUTIES OF
                 COMMISSIONER, STATE FIRE MARSHAL, AND
                 DEPARTMENT
Sec. 6003.055.  FEES
Sec. 6003.056.  DEPOSIT IN OPERATING ACCOUNT
[Sections 6003.057-6003.100 reserved for expansion]
SUBCHAPTER C. FIRE PROTECTION ADVISORY COUNCIL
Sec. 6003.101.  ADVISORY COUNCIL; APPOINTMENT
Sec. 6003.102.  ADVISORY COUNCIL DUTIES
[Sections 6003.103-6003.150 reserved for expansion]
SUBCHAPTER D. REGISTRATION AND LICENSE REQUIREMENTS
Sec. 6003.151.  FIRE PROTECTION SPRINKLER SYSTEM
                 CONTRACTOR; REGISTRATION CERTIFICATE
                 REQUIRED
Sec. 6003.152.  REQUIRED INSURANCE COVERAGE FOR
                 REGISTRATION CERTIFICATE
Sec. 6003.153.  RESPONSIBLE MANAGING EMPLOYEE: LICENSE
                 REQUIRED
Sec. 6003.154.  POSTING OF LICENSE OR CERTIFICATE
                 REQUIRED
Sec. 6003.155.  DISPLAY OF REGISTRATION CERTIFICATE
                 NUMBER ON CERTAIN DOCUMENTS REQUIRED
Sec. 6003.156.  LICENSE EXAMINATION
Sec. 6003.157.  EXAMINATION RESULTS
Sec. 6003.158.  CONTINUING EDUCATION REQUIREMENTS
Sec. 6003.159.  RECIPROCAL LICENSE
Sec. 6003.160.  NOT TRANSFERABLE
[Sections 6003.161-6003.200 reserved for expansion]
SUBCHAPTER E. RENEWAL OF REGISTRATION CERTIFICATE OR LICENSE
Sec. 6003.201.  RENEWAL REQUIRED; FEE
Sec. 6003.202.  NOTICE OF EXPIRATION
Sec. 6003.203.  RENEWAL PROCEDURES
[Sections 6003.204-6003.250 reserved for expansion]
SUBCHAPTER F. PROHIBITED PRACTICES
AND DISCIPLINARY PROCEDURES
Sec. 6003.251.  PROHIBITED PRACTICES
Sec. 6003.252.  DISCIPLINARY ACTIONS
Sec. 6003.253.  DISCIPLINARY HEARING
Sec. 6003.254.  APPLICABILITY OF ADMINISTRATIVE
                 PROCEDURE ACT
Sec. 6003.255.  REAPPLICATION REQUIREMENTS
[Sections 6003.256-6003.300 reserved for expansion]
SUBCHAPTER G. CRIMINAL PENALTY
Sec. 6003.301.  CRIMINAL PENALTY
CHAPTER 6003. FIRE PROTECTION SPRINKLER SYSTEM SERVICE AND
INSTALLATION
SUBCHAPTER A. GENERAL PROVISIONS
       Sec.6003.001.DEFINITIONS. In this chapter:
             (1)  "Fire protection sprinkler system" means an
assembly of underground or overhead piping or conduits that conveys
water with or without other agents to dispersal openings or devices
to:
                   (A)  extinguish, control, or contain fire; and
                   (B)  provide protection from exposure to fire or
the products of combustion.
             (2)  "Fire protection sprinkler system contractor"
means an individual or organization that offers to undertake,
represents itself as being able to undertake, or undertakes the
plan, sale, installation, maintenance, or servicing of:
                   (A)  a fire protection sprinkler system; or
                   (B)  any part of a fire protection sprinkler
system.
             (3)  "Individual" means a natural person, including an
owner, manager, officer, employee, or occupant.
             (4)  "Installation" means:
                   (A)  the initial placement of equipment; or
                   (B)  the extension, modification, or alteration
of equipment after initial placement.
             (5)  "Insurance agent" means:
                   (A)  an individual, firm, or corporation licensed
under:
                         (i)  Subchapter E, Chapter 981; or
                         (ii)  Subchapter A, B, C, D, E, or G, Chapter
4051; or
                   (B)  an individual authorized to represent an
insurance fund or pool created by a municipality, county, or other
political subdivision of this state under Chapter 791, Government
Code.
             (6)  "License" means the document issued to a
responsible managing employee authorizing the employee to engage in
the fire protection sprinkler system business in this state.
             (7)  "Maintenance" means the maintenance of a fire
protection sprinkler system or any part of a fire protection
sprinkler system in the condition of repair that provides
performance as originally planned.
             (8)  "Organization" means a corporation, a partnership
or other business association, a governmental entity, or any other
legal or commercial entity.
             (9)  "Registration certificate" means the document
issued to a fire protection sprinkler system contractor authorizing
the contractor to engage in business in this state.
             (10)  "Responsible managing employee" means an
individual designated by a company that plans, sells, installs,
maintains, or services fire protection sprinkler systems to ensure
that each fire protection sprinkler system, as installed,
maintained, or serviced, meets the standards for the system as
provided by law.
             (11)  "Service" means maintenance, repair, or testing.
(V.T.I.C. Art. 5.43-3, Secs. 1(1), (2), (5), (6), (7), (8), (9),
(10), (11), (12), (13) as added Acts 71st Leg., R.S., Ch. 823.)
       Sec.6003.002.APPLICABILITY OF CHAPTER. (a) This chapter
does not apply to:
             (1)  an employee of the United States, this state, or
any political subdivision of this state who acts as a fire
protection sprinkler system contractor for the employing
governmental entity;
             (2)  the plan, sale, installation, maintenance, or
servicing of a fire protection sprinkler system in any property
owned by the United States or this state;
             (3)  an individual or organization acting under court
order as authorization;
             (4)  an individual or organization that sells or
supplies products or materials to a registered fire protection
sprinkler system contractor;
             (5)  an installation, maintenance, or service project
for which the total contract price for labor, materials, and all
other services is less than $100, if:
                   (A)  the project is not a part of a complete or
more costly project, whether the complete project is to be
undertaken by one or more fire protection sprinkler system
contractors; or
                   (B)  the project is not divided into contracts of
less than $100 for the purpose of evading this chapter;
             (6)  an engineer licensed under Chapter 1001,
Occupations Code, acting solely in the engineer's professional
capacity;
             (7)  a regular employee of a registered fire protection
sprinkler system contractor; or
             (8)  an owner or lessee of property that:
                   (A)  installs a fire protection sprinkler system
on the owned or leased property for the owner's or lessee's own use
or for family members' use; and
                   (B)  does not offer the property for sale or lease
before the first anniversary of the date of installation of the fire
protection sprinkler system.
       (b)  This chapter does not authorize an individual or
organization to practice professional engineering other than in
compliance with Chapter 1001, Occupations Code. (V.T.I.C. Art.
5.43-3, Secs. 2(b), 11.)
       Sec.6003.003.EFFECT ON LOCAL REGULATION. (a) This
chapter and the rules adopted under this chapter have uniform force
and effect throughout this state. A municipality or county may not
enact an order, ordinance, or rule requiring a fire protection
sprinkler system contractor to obtain a registration certificate
from the municipality or county.  A municipality or county may not
impose on a fire protection sprinkler system contractor
qualification or financial responsibility requirements other than
proof of a registration certificate.
       (b)  Notwithstanding any other provision of this chapter, a
municipality or county may require a fire protection sprinkler
system contractor to obtain a permit and pay a permit fee for the
installation of a fire protection sprinkler system and require the
installation of a fire protection sprinkler system to conform to
the building code or other construction requirements of the
municipality or county.
       (c)  A municipal or county order, ordinance, or rule in
effect on September 1, 1983, is not invalidated because of any
provision of this chapter. (V.T.I.C. Art. 5.43-3, Sec. 2(a).)
       [Sections 6003.004-6003.050 reserved for expansion]
SUBCHAPTER B. POWERS AND DUTIES OF COMMISSIONER,
DEPARTMENT, AND STATE FIRE MARSHAL
       Sec.6003.051.ADMINISTRATION OF CHAPTER. (a)  The
department shall administer this chapter.
       (b)  The commissioner may issue rules necessary to
administer this chapter through the state fire marshal. (V.T.I.C.
Art. 5.43-3, Sec. 3(a) (part).)
       Sec.6003.052.ADOPTION OF RULES. (a) In adopting
necessary rules, the commissioner may use recognized standards,
including standards:
             (1)  adopted by federal law or regulation;
             (2)  published by a nationally recognized
standards-making organization; or
             (3)  developed by individual manufacturers.
       (b)  Under rules adopted under Section 6003.051(b), the
department may create a specialized licensing or registration
program for fire protection sprinkler system contractors.
(V.T.I.C. Art. 5.43-3, Secs. 3(a) (part), (b).)
       Sec. 6003.053.  RULES RESTRICTING ADVERTISING OR
COMPETITIVE BIDDING. (a)  The commissioner may not adopt rules
restricting advertising or competitive bidding by the holder of a
license or registration certificate issued under this chapter
except to prohibit false, misleading, or deceptive practices.
       (b)  In the commissioner's rules to prohibit false,
misleading, or deceptive practices, the commissioner may not
include a rule that:
             (1)  restricts the use of any medium for advertising;
             (2)  restricts the use of a license or registration
certificate holder's personal appearance or voice in an
advertisement;
             (3)  relates to the size or duration of an
advertisement by the license or registration certificate holder; or
             (4)  restricts the license or registration certificate
holder's advertisement under a trade name. (V.T.I.C. Art. 5.43-3,
Sec. 7A.)
       Sec. 6003.054.  GENERAL POWERS AND DUTIES OF COMMISSIONER,
STATE FIRE MARSHAL, AND DEPARTMENT.  (a)  The commissioner may
delegate authority to exercise all or part of the commissioner's
functions, powers, and duties under this chapter, including the
issuance of licenses and registration certificates, to the state
fire marshal.  The state fire marshal shall implement the rules
adopted by the commissioner for the protection and preservation of
life and property in controlling:
             (1)  the registration of an individual or an
organization engaged in the business of planning, selling,
installing, maintaining, or servicing fire protection sprinkler
systems; and
             (2)  the requirements for the plan, sale, installation,
maintenance, or servicing of fire protection sprinkler systems by:
                   (A)  determining the criteria and qualifications
for registration certificate and license holders;
                   (B)  evaluating the qualifications of an
applicant for a registration certificate to engage in the business
of planning, selling, installing, maintaining, or servicing fire
protection sprinkler systems;
                   (C)  conducting examinations and evaluating the
qualifications of a license applicant; and
                   (D)  issuing registration certificates and
licenses to qualified applicants.
       (b)  The commissioner shall establish a procedure for
reporting and processing complaints relating to the business of
planning, selling, installing, maintaining, or servicing fire
protection sprinkler systems in this state. (V.T.I.C. Art. 5.43-3,
Secs. 7(a), (b).)
       Sec.6003.055.FEES. (a) The commissioner shall set the
fee for:
             (1)  a registration certificate application in an
amount not to exceed $100;
             (2)  an initial or renewal registration certificate in
an amount not to exceed $1,200 annually; and
             (3)  an initial or renewal responsible managing
employee license fee in an amount not to exceed $200 annually.
       (b)  Unless the examination for a responsible managing
employee license is administered by a testing service, the
commissioner shall set a nonrefundable fee for each examination in
an amount not to exceed $100.
       (c)  The commissioner shall set a fee in an amount not to
exceed $70 for:
             (1)  a duplicate registration certificate or license
issued under this chapter; or
             (2)  any request requiring changes to a registration
certificate or license.  (V.T.I.C. Art. 5.43-3, Secs. 4(a) (part),
(c) (part), (d) (part), (e), (i) (part), 5A(a) (part).)
       Sec.6003.056.DEPOSIT IN OPERATING ACCOUNT. All fees
collected under this chapter shall be deposited in the state
treasury to the credit of the Texas Department of Insurance
operating account for use in administering this chapter.  (V.T.I.C.
Art. 5.43-3, Sec. 4(i) (part).)
[Sections 6003.057-6003.100 reserved for expansion]
SUBCHAPTER C. FIRE PROTECTION ADVISORY COUNCIL
       Sec.6003.101.ADVISORY COUNCIL; APPOINTMENT. (a)  The
commissioner shall appoint the members of the fire protection
advisory council, who serve at the pleasure of the commissioner.
       (b)  The advisory council is composed of seven members as
follows:
             (1)  three members who have been actively engaged in
the management of a fire protection sprinkler system business for
not less than five years preceding appointment;
             (2)  one member who represents the engineering section
of the department's property and casualty program;
             (3)  one member who is a volunteer firefighter; and
             (4)  two members who each represent a different
municipal fire department in this state.
       (c)  The State Firemen's and Fire Marshals' Association of
Texas, on the commissioner's request, may recommend a volunteer
firefighter for appointment to the advisory council.  (V.T.I.C.
Art. 5.43-3, Secs. 6(a) (part), (c), (e).)
       Sec.6003.102.ADVISORY COUNCIL DUTIES. (a) In addition to
other duties delegated by the commissioner, the fire protection
advisory council shall:
             (1)  advise the state fire marshal regarding practices
in the fire protection sprinkler system industry and the rules
necessary to implement and administer this chapter; and
             (2)  make recommendations to the state fire marshal
regarding forms and procedures for registration certificates and
licenses.
       (b)  The advisory council shall periodically:
             (1)  review rules implementing this chapter; and
             (2)  recommend rule changes to the commissioner.  
(V.T.I.C. Art. 5.43-3, Secs. 6(b), (d).)
[Sections 6003.103-6003.150 reserved for expansion]
SUBCHAPTER D. REGISTRATION AND LICENSE REQUIREMENTS
       Sec. 6003.151.  FIRE PROTECTION SPRINKLER SYSTEM
CONTRACTOR; REGISTRATION CERTIFICATE REQUIRED.  (a)  Unless the
individual or organization holds a registration certificate issued
by the department, an individual or organization may not plan,
sell, install, maintain, or service a fire protection sprinkler
system.
       (b)  An applicant for a registration certificate must apply
to the department on a form prescribed by the commissioner.
       (c)  An organization that is a partnership or joint venture
is not required to register under the name of the organization if
each partner or joint venturer holds a registration certificate.
(V.T.I.C. Art. 5.43-3, Secs. 4(a) (part), 8 (part).)
       Sec. 6003.152.  REQUIRED INSURANCE COVERAGE FOR
REGISTRATION CERTIFICATE. (a)  The department may not issue a
registration certificate under this chapter unless the applicant
files with the department evidence of a general liability insurance
policy that includes products and completed operations coverage.
The policy must be conditioned to pay on behalf of the insured those
amounts that the insured becomes legally obligated to pay as
damages because of bodily injury and property damage caused by an
occurrence involving the insured or the insured's officer, agent,
or employee in the conduct of any activity that requires a
registration certificate or license under this chapter.
       (b)  Unless the commissioner, after notice and an
opportunity for a hearing, increases or decreases the limits, the
limits of insurance coverage required by Subsection (a) must be at
least:
             (1)  $100,000 combined single limits for bodily injury
and property damage for each occurrence; and
             (2)  $300,000 aggregate for all occurrences for each
policy year.
       (c)  The evidence of insurance required by this section must
be in the form of a certificate of insurance executed by an insurer
authorized to engage in the business of insurance in this state and
countersigned by an insurance agent licensed in this state. A
certificate of insurance for surplus lines coverage procured in
compliance with Chapter 981 through a surplus lines agent that is
licensed under Subchapter E, Chapter 981, and resident in this
state may be filed with the department as evidence of the coverage
required by this section.
       (d)  An insurance certificate executed and filed with the
department under this section remains in force until the insurer
has terminated future liability by the notice required by the
department.
       (e)  Failure to maintain the liability insurance required by
this section constitutes grounds for the denial, suspension, or
revocation, after notice and opportunity for hearing, of a
registration certificate issued under this chapter. (V.T.I.C. Art.
5.43-3, Secs. 5, 7(c).)
       Sec. 6003.153.  RESPONSIBLE MANAGING EMPLOYEE: LICENSE
REQUIRED. (a)  Each fire protection sprinkler system contractor
must employ at least one licensed responsible managing employee on
a full-time basis.
       (b)  A person may not act as a responsible managing employee
unless the person holds a license issued by the department,
conditioned on the successful completion of the license examination
and compliance with the requirements of the rules adopted under
this chapter.
       (c)  Notwithstanding Subsection (a), an individual or
organization with a current registration certificate may act as a
fire protection sprinkler system contractor for 30 days after the
death or dissociation of its licensed responsible managing employee
or for a longer period approved by the commissioner under the rules
adopted under this chapter. (V.T.I.C. Art. 5.43-3, Secs. 4(b), (c)
(part), 8 (part).)
       Sec.6003.154.POSTING OF LICENSE OR CERTIFICATE REQUIRED.
Each registration certificate and license issued under this chapter
must be posted in a conspicuous place in the fire protection
sprinkler system contractor's place of business. (V.T.I.C. Art.
5.43-3, Sec. 4(f).)
       Sec. 6003.155.  DISPLAY OF REGISTRATION CERTIFICATE NUMBER
ON CERTAIN DOCUMENTS REQUIRED. Each bid, proposal, offer, and
installation drawing for a fire protection sprinkler system must
prominently display the registration certificate number of the fire
protection sprinkler system contractor. (V.T.I.C. Art. 5.43-3,
Sec. 4(g).)
       Sec.6003.156.LICENSE EXAMINATION. (a) The state fire
marshal shall establish the scope and type of an examination
required by this chapter.
       (b)  The state fire marshal may administer the examination or
may enter into an agreement with a testing service.
       (c)  If a testing service is used, the state fire marshal may
contract with the testing service regarding requirements for the
examination, including:
             (1)  examination development;
             (2)  scheduling;
             (3)  site arrangements;
             (4)  grading;
             (5)  reporting;
             (6)  analysis; or
             (7)  other administrative duties.
       (d)  The state fire marshal may require the testing service
to:
             (1)  correspond directly with an applicant regarding
the administration of the examination;
             (2)  collect a reasonable fee from an applicant for
administering the examination; or
             (3)  administer the examination at a specific location
or time.
       (e)  The state fire marshal shall adopt rules as necessary to
implement examination requirements under this chapter.  (V.T.I.C.
Art. 5.43-3, Secs. 5B(a), (b), (e).)
       Sec.6003.157.EXAMINATION RESULTS.  (a)  Not later than the
30th day after the date on which an examination is administered
under this chapter, the state fire marshal shall send notice to each
examinee of the results of the examination.
       (b)  If an examination is graded or reviewed by a testing
service, the state fire marshal shall send notice to each examinee
of the results of the examination not later than the 14th day after
the date on which the state fire marshal receives the results from
the testing service.
       (c)  If the notice of the examination results will be delayed
for more than 90 days after the examination date, the state fire
marshal, before the 90th day, shall send notice to the examinee of
the reason for the delay.
       (d)  The state fire marshal may require a testing service to
notify an examinee of the results of the examinee's examination.
       (e)  If requested in writing by an individual who fails the
examination administered under this chapter, the state fire marshal
shall send to the individual an analysis of the individual's
performance on the examination.  (V.T.I.C. Art. 5.43-3, Secs.
5B(c), (d).)
       Sec.6003.158.CONTINUING EDUCATION REQUIREMENTS. (a) The
commissioner may adopt procedures for certifying and may certify
continuing education programs.
       (b)  Participation in the continuing education programs is
voluntary. (V.T.I.C. Art. 5.43-3, Sec. 5C.)
       Sec.6003.159.RECIPROCAL LICENSE. The department may waive
any license requirement for an applicant who holds a license issued
by another state that has license requirements substantially
equivalent to the license requirements of this state. (V.T.I.C.
Art. 5.43-3, Sec. 5D.)
       Sec.6003.160.NOT TRANSFERABLE. A registration
certificate or license issued under this chapter is not
transferable. (V.T.I.C. Art. 5.43-3, Sec. 4(h).)
[Sections 6003.161-6003.200 reserved for expansion]
SUBCHAPTER E. RENEWAL OF REGISTRATION CERTIFICATE OR LICENSE
       Sec.6003.201.RENEWAL REQUIRED; FEE.  (a)  Except as
otherwise provided by this subsection, an initial registration
certificate or license is valid for a period of one year from the
date of issue and is renewable on payment of the renewal fee. An
initial registration certificate or license issued on or after
September 1, 1983, may be issued for a period of less than one year
and the renewal fee shall be prorated proportionally.
       (b)  A renewal of a registration certificate or license
issued under this chapter is valid for a period of two years. The
license or registration fee for each year of the two-year period is
payable on renewal.
       (c)  The commissioner by rule may adopt a system under which
registration certificates and licenses expire on various dates
during the year. For the year in which an expiration date of a
registration certificate or license is less than one year from its
issuance or anniversary date, the fee shall be prorated on a monthly
basis so that each holder of a registration certificate or license
pays only that portion of the renewal fee that is allocable to the
number of months during which the registration certificate or
license is valid. On renewal on the new expiration date, the total
renewal fee is payable. (V.T.I.C. Art. 5.43-3, Secs. 4(d) (part),
5A(a), (c).)
       Sec.6003.202.NOTICE OF EXPIRATION. At least 30 days
before the expiration date of a registration certificate or
license, the department shall send written notice of the impending
expiration to the holder of the registration certificate or
license at the holder's last known address. (V.T.I.C. Art. 5.43-3,
Sec. 5A(b) (part).)
       Sec.6003.203.RENEWAL PROCEDURES. (a)  The holder of an
unexpired registration certificate or license may renew the
certificate or license by paying the required renewal fee to the
department before the expiration date of the certificate or
license.
       (b)  An individual or organization whose registration
certificate or license has been expired for 90 days or less may
renew the certificate or license by paying to the department:
             (1)  the required renewal fee; and
             (2)  a fee equal to one-half of the initial fee for the
certificate or license.
       (c)  An individual or organization whose registration
certificate or license has been expired for more than 90 days but
less than two years may renew the certificate or license by paying
to the department:
             (1)  all unpaid renewal fees; and
             (2)  a fee that is equal to the initial fee for the
certificate or license.
       (d)  An individual or organization whose registration
certificate or license has been expired for two years or longer may
not renew the certificate or license. The individual or
organization may obtain a new registration certificate or license
by complying with the requirements and procedures for obtaining an
initial registration certificate or license.
       (e)  This section may not be construed to prevent the
department from denying or refusing to renew a license under
applicable law or commissioner rules. (V.T.I.C. Art. 5.43-3, Sec.
5A(b) (part).)
[Sections 6003.204-6003.250 reserved for expansion]
SUBCHAPTER F. PROHIBITED PRACTICES
AND DISCIPLINARY PROCEDURES
       Sec.6003.251.PROHIBITED PRACTICES. An individual or
organization may not:
             (1)  obtain or attempt to obtain a registration
certificate or license by fraudulent representation; or
             (2)  plan, sell, install, maintain, or service a fire
protection sprinkler system in violation of this chapter or the
rules adopted under this chapter.  (V.T.I.C. Art. 5.43-3, Sec. 8
(part).)
       Sec.6003.252.DISCIPLINARY ACTIONS. The state fire
marshal may suspend, revoke, or refuse to issue or renew a
registration certificate or license if, after notice and hearing,
the state fire marshal finds that the applicant, registrant, or
license holder has engaged in acts that:
             (1)  violate this chapter;
             (2)  violate rules or standards adopted under this
chapter; or
             (3)  constitute misrepresentation made in connection
with:
                   (A)  the sale of products; or
                   (B)  services rendered.  (V.T.I.C. Art. 5.43-3,
Sec. 9(a).)
       Sec.6003.253.DISCIPLINARY HEARING. (a) If the state fire
marshal proposes to suspend, revoke, or refuse to renew a license or
registration certificate issued under this chapter, the holder of
the license or certificate is entitled to a hearing conducted by the
State Office of Administrative Hearings.
       (b)  Rules of practice adopted by the commissioner
applicable to the proceedings for a disciplinary action may not
conflict with rules adopted by the State Office of Administrative
Hearings.  (V.T.I.C. Art. 5.43-3, Sec. 9A (part).)
       Sec. 6003.254.  APPLICABILITY OF ADMINISTRATIVE PROCEDURE
ACT.  Proceedings for the denial, suspension, or revocation of a
registration certificate or license, appeals from those
proceedings, and any other proceedings for a disciplinary action
are governed by Chapter 2001, Government Code.  (V.T.I.C. Art.
5.43-3, Secs. 9(b), 9A (part).)
       Sec.6003.255.REAPPLICATION REQUIREMENTS. (a)  An
applicant or holder of a registration certificate or license whose
certificate or license has been denied, refused, or revoked under
this chapter, other than for failure to pass a required written
examination, may not file another application for a registration
certificate or license before:
             (1)  the first anniversary of the effective date of the
denial, refusal, or revocation; or
             (2)  if judicial review of the denial, refusal, or
revocation is sought, before the first anniversary of the date of
the final court order or decree affirming the action.
       (b)  The commissioner may deny an application described by
Subsection (a) unless the applicant shows good cause why the
denial, refusal, or revocation of the registration certificate or
license should not be considered a bar to the issuance of a new
registration certificate or license. (V.T.I.C. Art. 5.43-3, Sec.
9(c).)
[Sections 6003.256-6003.300 reserved for expansion]
SUBCHAPTER G. CRIMINAL PENALTY
       Sec.6003.301.CRIMINAL PENALTY. (a)  A person commits an
offense if the person knowingly violates Section 6003.151(a),
6003.153, or 6003.251.
       (b)  An offense under this section is a Class B misdemeanor.
       (c)  Venue for an offense under this section is in Travis
County or the county in which the offense is committed. (V.T.I.C.
Art. 5.43-3, Sec. 10; New.)
PART K.  ADDITIONS TO GOVERNMENT CODE AND LOCAL GOVERNMENT CODE
       SECTION 1K.001.  ADDITION.  Subchapter A, Chapter 533,
Government Code, is amended by adding Section 533.019 to read as
follows:
       Sec.533.019.MANAGED CARE ORGANIZATIONS: FISCAL SOLVENCY AND COMPLAINT SYSTEM GUIDELINES
AND COMPLAINT SYSTEM GUIDELINES
Insurance, in conjunction with the commission, shall establish
fiscal solvency standards and complaint system guidelines for
managed care organizations that serve Medicaid recipients.
       (b)  The guidelines must require that information regarding
a managed care organization's complaint process be made available
to a recipient in an appropriate communication format when the
recipient enrolls in the Medicaid managed care program. (V.T.I.C.
Art. 1.61.)
       SECTION 1K.002.  ADDITION.  Subtitle C, Title 5, Local
Government Code, is amended by adding Chapter 177 to read as
follows:
CHAPTER 177. LIFE, HEALTH, AND ACCIDENT INSURANCE FOR OFFICIALS,
EMPLOYEES, AND RETIREES OF POLITICAL SUBDIVISIONS
SUBCHAPTER A.  GENERAL PROVISIONS
       Sec.177.001.CERTAIN COVERAGE AUTHORIZED.  (a)  A county or
other political subdivision of this state may procure contracts
insuring the political subdivision's officials, employees, and
retirees or any class of the political subdivision's officials,
employees, and retirees under a policy of group life, group health,
accident, accidental death and dismemberment, or hospital,
surgical, or medical expense insurance.
       (b)  The dependents of those officials, employees, and
retirees may be insured under a group policy that provides:
             (1)  health insurance; or
             (2)  hospital, surgical, or medical expense insurance. 
(V.T.I.C. Art. 3.51-2, Sec. (a) (part).)
       Sec.177.002.PAYMENT OF PREMIUMS.  (a)  A county or other
political subdivision of this state that is authorized to procure a
contract insuring the political subdivision's officials,
employees, and retirees or any class of the political subdivision's
officials, employees, and retirees under a policy of group
insurance that covers one or more risks may pay from the local funds
of the political subdivision all or any portion of the premiums for
the policy.  The political subdivision may also pay all or any
portion of the premiums on group health, hospital, surgical, or
medical expense insurance for dependents of the political
subdivision's officials, employees, and retirees.
       (b)  If authorized by the official, employee, or retiree in
writing to make the deduction, the county or other political
subdivision may deduct from the person's salary an amount equal to
any required contribution by the person to the premiums for the
insurance issued under Section 177.001 to the political
subdivision as the policyholder. (V.T.I.C. Art. 3.51-2, Secs. (a)
(part), (b), (c) (part).)
       Sec.177.003.USE OF STATE FUNDS.  State funds may not be
used to procure a contract under this subchapter or pay premiums
under that contract. (V.T.I.C. Art. 3.51-2, Sec. (a) (part).)
[Sections 177.004-177.050 reserved for expansion]
SUBCHAPTER B. HEALTH AND INSURANCE FUND
       Sec.177.051.FUND AUTHORIZED.  (a)  A county or other
political subdivision of this state may establish a fund to provide
insurance authorized by Subchapter A.
       (b)  A fund established under Subsection (a) shall be known
as the "health and insurance fund--employees and dependents." 
(V.T.I.C. Art. 3.51-2, Sec. (c) (part).)
       Sec.177.052.PAYMENT OF MONEY INTO FUND.  There shall be
credited to a fund established under this subchapter:
             (1)  any salary deduction to which an official,
employee, or retiree agrees in writing; and
             (2)  contributions from the county or other political
subdivision. (V.T.I.C. Art. 3.51-2, Sec. (c) (part).)
       Sec.177.053.USE OF MONEY IN FUND.  Payment from a fund
established under this subchapter:
             (1)  is authorized only for the payment of premiums on
life, group health, accident, accidental death and dismemberment,
or hospital, surgical, or medical expense insurance for officials,
employees, retirees, and their dependents; and
             (2)  must be made in accordance with rules adopted by
the county or other political subdivision establishing the fund.
(V.T.I.C. Art. 3.51-2, Sec. (c) (part).)
       Sec.177.054.PAYMENT OF CLAIMS FROM FUND. A claim against
a fund established under this subchapter shall be payable in the
same manner as other claims of the county or other political
subdivision. (V.T.I.C. Art. 3.51-2, Sec. (c) (part).)
PART L.  REPEALER
       SECTION 1L.001.  REPEALER.  (a)  The following Acts and
articles as compiled in Vernon's Texas Insurance Code are repealed:
             (1)  1.01, 1.02, 1.10, 1.12, 1.13, 1.33, and 1.61;
             (2)  3.11, 3.38, 3.49-3, 3.50-7B, and 3.51-2;
             (3)  3.50-7A, as added by Chapter 201, Acts of the 78th
Legislature, Regular Session, 2003;
             (4)  3.50-7A, as added by Chapter 213, Acts of the 78th
Legislature, Regular Session, 2003;
             (5)  5.01-1, 5.02, 5.03-1, 5.05, 5.14, 5.43-1, 5.43-2,
5.43-3, and 5.66; and
             (6)  21.20-2, 21.49-15, 21.49-16, 21.49C, 21.70, and
21.80.
       (b)  Subsection (b), Article 1.09-1, Insurance Code, is
repealed.
       (c)  Subchapter B, Chapter 4, Insurance Code, is repealed.
PART M.  LEGISLATIVE INTENT
       SECTION 1M.001.  LEGISLATIVE INTENT.  This article is
enacted under Section 43, Article III, Texas Constitution.  This
article is intended as a recodification only, and no substantive
change in law is intended by this article.
PART N.  EFFECTIVE DATE
       SECTION 1N.001.  EFFECTIVE DATE.  This article takes effect
April 1, 2009.
ARTICLE 2.  UPDATES OF CROSS-REFERENCES IN TITLES 2, 3, 5, 6, 7, 8,
10, 11, AND 13, INSURANCE CODE
PART A.  GENERAL PROVISIONS
       SECTION 2A.001.  This article is enacted as part of the
state's continuing statutory revision program under Chapter 323,
Government Code.  This article is a revision for purposes of Section
43, Article III, Texas Constitution, and has the purpose of making
necessary corrections to enacted codifications of the Insurance
Code.
       SECTION 2A.002.  If any provision of this article conflicts
with a statute enacted by the 80th Legislature, Regular Session,
2007, the statute controls.
PART B.  CROSS-REFERENCE UPDATES:  TITLE 2, INSURANCE CODE
SECTION 2B.001.  Section 34.004(a), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (a)  A person is not liable in a civil action, including an
action for libel or slander, for collecting, reviewing, analyzing,
disseminating, or reporting information collected from annual
statements filed under Chapter 802 [Article 1.11] if the person is:
             (1)  the department, the commissioner, or an employee
of the department;
             (2)  a member or employee of or delegate to the National
Association of Insurance Commissioners or an authorized committee,
subcommittee, or task force of that association; or
             (3)  another person who is responsible for collecting,
reviewing, analyzing, and disseminating information from filed
annual statement convention blanks.
       SECTION 2B.002.  Section 36.002, Insurance Code, is amended
to correct cross-references to read as follows:
       Sec. 36.002.  ADDITIONAL RULEMAKING AUTHORITY. The
commissioner may adopt reasonable rules that are:
             (1)  necessary to effect the purposes of a provision
of:
                   (A)  Subchapter B, Chapter 5;
                   (B)  Subchapter C, Chapter 1806;
                   (C)  Subchapter A, Chapter 2301;
                   (D)  Chapter 251, as that chapter relates to
casualty insurance and fidelity, guaranty, and surety bond
insurance;
                   (E)  Chapter 253;
                   (F)  Chapter 2008, 2251, or 2252; or
                   (G)  Subtitle B, Title 10; or
             (2)  appropriate to accomplish the purposes of a
provision of:
                   (A)  Section 37.051(a), 403.002, 492.051(b) or
(c), 501.159, 941.003(b)(1) [941.003(b)(3)] or (c), or
942.003(b)(1) [942.003(b)(3)] or (c);
                   (B)  Subchapter H, Chapter 544;
                   (C)  Chapter 251, as that chapter relates to:
                         (i)  automobile insurance;
                         (ii)  casualty insurance and fidelity,
guaranty, and surety bond insurance;
                         (iii)  fire insurance and allied lines;
                         (iv)  workers' compensation insurance; or
                         (v)  aircraft insurance;
                   (D)  Chapter 5, 252, 253, 254, 255, 256, 426, 493,
494, 1804, 1805, 1806, [or] 2171, 6001, 6002, or 6003;
                   (E)  Subtitle B, C, D, E, F, H, or I, Title 10;
                   (F)  Section 417.008, Government Code; or
                   (G)  [Chapter 406A, Labor Code; or
                   [(H)]  Chapter 2154, Occupations Code.
       SECTION 2B.003.  Section 36.106, Insurance Code, is amended
to correct cross-references to read as follows:
       Sec. 36.106.  WAIVER OF CERTAIN NOTICE REQUIREMENTS.  The
commissioner may, on written agreement or stipulation of each party
and any intervenor, waive or modify the notice publication
requirement of Section 822.059 [Article 2.01], 822.157 [2.03],
841.060 [3.04], or 884.058 [22.03].
       SECTION 2B.004.  Section 38.002(a)(1), Insurance Code, is
amended to correct a cross-reference to read as follows:
             (1)  "Insurer" means an insurance company, reciprocal
or interinsurance exchange, mutual insurance company, capital
stock company, county mutual insurance company, Lloyd's plan, or
other legal entity engaged in the business of personal automobile
insurance or residential property insurance in this state. The
term includes:
                   (A)  an affiliate as described by [Section 2,
Article 21.49-1, or] Section 823.003(a) if that affiliate is
authorized to write and is writing personal automobile insurance or
residential property insurance in this state;
                   (B)  the Texas Windstorm Insurance Association
created and operated under Chapter 2210 [Article 21.49];
                   (C)  the FAIR Plan Association under Chapter 2211
[Article 21.49A]; and
                   (D)  the Texas Automobile Insurance Plan
Association under Chapter 2151 [Article 21.81].
       SECTION 2B.005.  Section 38.003(b), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (b)  For purposes of this section, "insurer" means a
reciprocal or interinsurance exchange, mutual insurance company,
capital stock company, county mutual insurance company, Lloyd's
plan, life, accident, or health or casualty insurance company,
health maintenance organization, mutual life insurance company,
mutual insurance company other than life, mutual, or natural
premium life insurance company, general casualty company,
fraternal benefit society, group hospital service company, or other
legal entity engaged in the business of insurance in this state.
The term includes an affiliate as described by [Section 2, Article
21.49-1, or] Section 823.003(a) if that affiliate is authorized to
write and is writing insurance in this state.
       SECTION 2B.006.  Section 38.051, Insurance Code, is amended
to correct cross-references to read as follows:
       Sec. 38.051.  DEFINITION.  In this subchapter, "health
benefit plan provider" means an insurance company, group hospital
service corporation, or health maintenance organization that
issues:
             (1)  an individual, group, blanket, or franchise
insurance policy, an insurance agreement, a group hospital service
contract, or an evidence of coverage, that provides benefits for
medical or surgical expenses incurred as a result of an accident or
sickness; or
             (2)  a long-term care benefit plan [insurance policy],
as defined by Section 1651.003 [2, Article 3.70-12].
       SECTION 2B.007.  Section 38.101(2), Insurance Code, is
amended to correct cross-references to read as follows:
             (2)  "Health benefit plan coverage" means a group
policy, contract, or certificate of health insurance or benefits
delivered, issued for delivery, or renewed in this state by:
                   (A)  an insurance company subject to a law
described by Section 841.002 [Chapter 3];
                   (B)  a group hospital service corporation under
Chapter 842 [20];
                   (C)  a health maintenance organization under
Section 1367.053, Subchapter A, Chapter 1452, Subchapter B, Chapter
1507, Chapters 222, 251, and 258, as applicable to a health
maintenance organization, and Chapters 843, 1271, and 1272 [the
Texas Health Maintenance Organization Act (Chapter 20A, Vernon's
Texas Insurance Code)]; or
                   (D)  a self-insurance trust or mechanism
providing health care benefits.
       SECTION 2B.008.  Section 38.152, Insurance Code, is amended
to correct a cross-reference to read as follows:
       Sec. 38.152.  EXEMPTION.  This subchapter does not apply to
a farm mutual insurance company or to a county mutual fire insurance
company writing exclusively industrial fire insurance as described
by Section 912.310 [Article 17.02].
       SECTION 2B.009.  Section 38.252(c), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (c)  The commissioner shall not require reporting of data:
             (1)  that could reasonably be used to identify a
specific enrollee in a health benefit plan;
             (2)  in any way that violates confidentiality
requirements of state or federal law applicable to an enrollee in a
health benefit plan; or
             (3)  in which the health maintenance organization
operating under [the Texas Health Maintenance Organization Act (]
Section 1367.053, Subchapter A, Chapter 1452, Subchapter B, Chapter
1507, Chapter 222, 251, or 258, as applicable to a health
maintenance organization, Chapter 843, Chapter 1271, and Chapter
1272 [20A, Vernon's Texas Insurance Code)] does not directly
process the claim or does not receive complete and accurate
encounter data.
       SECTION 2B.010.  Section 82.002(a), Insurance Code, is
amended to correct cross-references to read as follows:
       (a)  This chapter applies to each company regulated by the
commissioner, including:
             (1)  a domestic or foreign, stock or mutual, life,
health, or accident insurance company;
             (2)  a domestic or foreign, stock or mutual, fire or
casualty insurance company;
             (3)  a Mexican casualty company;
             (4)  a domestic or foreign Lloyd's plan insurer;
             (5)  a domestic or foreign reciprocal or interinsurance
exchange;
             (6)  a domestic or foreign fraternal benefit society;
             (7)  a domestic or foreign title insurance company;
             (8)  an attorney's title insurance company;
             (9)  a stipulated premium insurance company;
             (10)  a nonprofit legal service corporation;
             (11)  a health maintenance organization;
             (12)  a statewide mutual assessment company;
             (13)  a local mutual aid association;
             (14)  a local mutual burial association;
             (15)  an association exempt under Section 887.102
[Article 14.17];
             (16)  a nonprofit hospital, medical, or dental service
corporation, including a company subject to Chapter 842 [20];
             (17)  a county mutual insurance company; and
             (18)  a farm mutual insurance company.
       SECTION 2B.011.  Section 83.001(4), Insurance Code, is
amended to correct cross-references to read as follows:
             (4)  "Unfair act" means an unfair method of
competition, an unfair or deceptive act or practice, or an unfair
claim settlement practice as defined under Chapter 541 [Article
21.21] or 542 [21.21-2] or a rule adopted under either chapter
[article].
       SECTION 2B.012.  Section 83.002(a), Insurance Code, is
amended to correct cross-references to read as follows:
       (a)  This chapter applies to each company regulated by the
commissioner, including:
             (1)  a domestic or foreign, stock or mutual, life,
health, or accident insurance company;
             (2)  a domestic or foreign, stock or mutual, fire or
casualty insurance company;
             (3)  a Mexican casualty company;
             (4)  a domestic or foreign Lloyd's plan insurer;
             (5)  a domestic or foreign reciprocal or interinsurance
exchange;
             (6)  a domestic or foreign fraternal benefit society;
             (7)  a domestic or foreign title insurance company;
             (8)  an attorney's title insurance company;
             (9)  a stipulated premium insurance company;
             (10)  a nonprofit legal service corporation;
             (11)  a statewide mutual assessment company;
             (12)  a local mutual aid association;
             (13)  a local mutual burial association;
             (14)  an association exempt under Section 887.102
[Article 14.17];
             (15)  a nonprofit hospital, medical, or dental service
corporation, including a company subject to Chapter 842 [20];
             (16)  a county mutual insurance company; and
             (17)  a farm mutual insurance company.
       SECTION 2B.013. Section 83.051(a), Insurance Code, is
amended to correct cross-references to read as follows:
       (a)  The commissioner ex parte may issue an emergency cease
and desist order if:
             (1)  the commissioner believes that:
                   (A)  an authorized person engaging in the business
of insurance is:
                         (i)  committing an unfair act; or
                         (ii)  in a hazardous condition or a
hazardous financial condition under Section 843.406 [19, Texas
Health Maintenance Organization Act (Article 20A.19, Vernon's
Texas Insurance Code),] or Subchapter A, Chapter 404 [Article
1.32], as determined by the commissioner; or
                   (B)  an unauthorized person:
                         (i)  is engaging in the business of
insurance in violation of Chapter 101 or in violation of a rule
adopted under that chapter; or
                         (ii)  is engaging in the business of
insurance in violation of Chapter 101 and is committing an unfair
act; and
             (2)  it appears to the commissioner that the alleged
conduct:
                   (A)  is fraudulent;
                   (B)  is hazardous or creates an immediate danger
to the public safety; or
                   (C)  is causing or can be reasonably expected to
cause public injury that:
                         (i)  is likely to occur at any moment;
                         (ii)  is incapable of being repaired or
rectified; and
                         (iii)  has or is likely to have influence or
effect.
       SECTION 2B.014. Section 101.001(a), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (a)  It is a state concern that many residents of this state
hold insurance policies issued by persons or insurers who are not
authorized to do insurance business in this state and who are not
qualified as eligible surplus lines insurers under Chapter 981
[Article 1.14-2]. These residents face often insurmountable
obstacles in asserting legal rights under the policies in foreign
forums under unfamiliar laws and rules of practice.
       SECTION 2B.015. Section 101.002(2), Insurance Code, is
amended to correct a cross-reference to read as follows:
             (2)  "Unfair act" means an unfair method of competition
or an unfair or deceptive act or practice as defined under Chapter
541 [Article 21.21] or a rule adopted under that chapter [article].
       SECTION 2B.016. Section 101.052, Insurance Code, is amended
to correct cross-references to read as follows:
       Sec. 101.052.  ADVERTISING RELATING TO MEDICARE SUPPLEMENT
BENEFIT PLANS [POLICIES].  With respect to a Medicare supplement
benefit plan [policy] authorized under Chapter 1652 [Article 3.74],
the business of insurance in this state includes using, creating,
publishing, mailing, or disseminating in this state an
advertisement relating to an act that constitutes the business of
insurance under Section 101.051 unless the advertisement is used,
created, published, mailed, or disseminated on behalf of an insurer
or person who:
             (1)  is authorized under this code to engage in the
business of insurance in this state;
             (2)  has actual knowledge of the content of the
advertisement;
             (3)  has authorized the advertisement to be used,
created, published, mailed, or disseminated on that insurer's or
person's behalf; and
             (4)  is clearly identified by name in the advertisement
as the sponsor of the advertisement.
       SECTION 2B.017. Section 101.101, Insurance Code, is amended
to correct a cross-reference to read as follows:
       Sec. 101.101.  DEFINITION.  In this subchapter, "person"
means an individual or entity that is a person for purposes of
Section 541.002 [2(a), Article 21.21].
       SECTION 2B.018. Section 101.203(c), Insurance Code, is
amended to correct cross-references to read as follows:
       (c)  This section does not apply to:
             (1)  a transaction in this state that:
                   (A)  involves a policy that:
                         (i)  is lawfully solicited, negotiated,
written, and delivered outside this state; and
                         (ii)  covers, at the time the policy is
issued, only subjects of insurance that are not resident, located,
or expressly to be performed in this state; and
                   (B)  takes place after the policy is issued; or
             (2)  surplus lines insurance procured through eligible
surplus lines insurers [carriers] as defined by Section 981.002
[Article 1.14-2].
       SECTION 2B.019. Section 101.301(b), Insurance Code, is
amended to correct cross-references to read as follows:
       (b)  This section does not apply to:
             (1)  a transaction described by Section 101.053(b)(4);
or
             (2)  surplus lines insurance procured through eligible
surplus lines insurers [carriers] as defined by Section 981.002
[Article 1.14-2].
PART C.  CROSS-REFERENCE UPDATES:  TITLE 3, INSURANCE CODE
SECTION 2C.001.  Section 252.002(b), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (b)  The commissioner shall annually adjust the rate of
assessment of the maintenance tax so that the tax imposed that year,
together with any unexpended funds produced by the tax, produces
the amount the commissioner determines is necessary to pay the
expenses during the succeeding year of regulating all classes of
insurance specified under:
             (1)  Chapters 1807, 2001-2006, 2171, 6001, 6002, and
6003;
             (2)  Subchapter C, Chapter 5;
             (3)  Subchapter H, Chapter 544;
             (4)  Subchapter D, Chapter 1806;
             (5)  Section 403.002;
             (6)  Sections 417.007, 417.008, and 417.009,
Government Code; and
             (7)  Chapter 2154, Occupations Code.
       SECTION 2C.002.  Section 252.003, Insurance Code, is amended
to correct a cross-reference to read as follows:
       Sec. 252.003.  PREMIUMS SUBJECT TO TAXATION. An insurer
shall pay maintenance taxes under this chapter on the correctly
reported gross premiums collected from writing insurance in this
state against loss or damage by:
             (1)  bombardment;
             (2)  civil war or commotion;
             (3)  cyclone;
             (4)  earthquake;
             (5)  excess or deficiency of moisture;
             (6)  explosion as defined by Section 2002.006(b)
[Article 5.52];
             (7)  fire;
             (8)  flood;
             (9)  frost and freeze;
             (10)  hail;
             (11)  insurrection;
             (12)  invasion;
             (13)  lightning;
             (14)  military or usurped power;
             (15)  an order of a civil authority made to prevent the
spread of a conflagration, epidemic, or catastrophe;
             (16)  rain;
             (17)  riot;
             (18)  the rising of the waters of the ocean or its
tributaries;
             (19)  smoke or smudge;
             (20)  strike or lockout;
             (21)  tornado;
             (22)  vandalism or malicious mischief;
             (23)  volcanic eruption;
             (24)  water or other fluid or substance resulting from
the breakage or leakage of sprinklers, pumps, or other apparatus
erected for extinguishing fires, water pipes, or other conduits or
containers;
             (25)  weather or climatic conditions; or
             (26)  windstorm.
       SECTION 2C.003.  Section 253.002(b), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (b)  The commissioner shall annually adjust the rate of
assessment of the maintenance tax so that the tax imposed that year,
together with any unexpended funds produced by the tax, produces
the amount the commissioner determines is necessary to pay the
expenses during the succeeding year of regulating all classes of
insurance specified under Section 253.003 [Subchapter B, Chapter
5].
       SECTION 2C.004.  Section 253.003, Insurance Code, is amended
to correct a cross-reference to read as follows:
       Sec. 253.003.  PREMIUMS SUBJECT TO TAXATION. An insurer
shall pay maintenance taxes under this chapter on the correctly
reported gross premiums from writing a class of insurance specified
under:
             (1)  Chapters 2008, 2251, and 2252;
             (2)  Subchapter B, Chapter 5;
             (3)  Subchapter C, Chapter 1806;
             (4)  Subchapter A, Chapter 2301; and
             (5)  Subtitle B, Title 10.
       SECTION 2C.005.  Section 255.003(a), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (a)  An insurer shall pay maintenance taxes under this
chapter on the correctly reported gross workers' compensation
insurance premiums from writing workers' compensation insurance in
this state, including the modified annual premium of a policyholder
that purchases an optional deductible plan under Subchapter E,
Chapter 2053 [Article 5.55C].
       SECTION 2C.006.  Section 256.002(b), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (b)  The commissioner shall annually adjust the rate of
assessment of the maintenance tax so that the tax imposed that year,
together with any unexpended funds produced by the tax, produces
the amount the commissioner determines is necessary to pay the
expenses during the succeeding year of regulating all classes of
insurance specified under Chapter 2101 [Subchapter K, Chapter 5].
       SECTION 2C.007.  Section 256.003, Insurance Code, is amended
to correct a cross-reference to read as follows:
       Sec. 256.003.  PREMIUMS SUBJECT TO TAXATION. An insurer
shall pay maintenance taxes under this chapter on the correctly
reported gross premiums from writing a class of insurance specified
under Chapter 2101 [Subchapter K, Chapter 5].
       SECTION 2C.008.  Section 261.003(b), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (b)  The commissioner shall annually adjust the rate of
assessment of the maintenance tax so that the tax imposed that year,
together with any unexpended funds produced by the tax, produces
the amount the commissioner determines is necessary to pay the
expenses during the succeeding year of regulating all classes of
insurance specified under Chapter 2204 [Article 1.14-3].
       SECTION 2C.009.  Section 261.004, Insurance Code, is amended
to correct a cross-reference to read as follows:
       Sec. 261.004.  PREMIUMS SUBJECT TO TAXATION. The exchange
shall pay maintenance taxes under this chapter on the correctly
reported gross premiums paid through the exchange on all classes of
insurance specified under Chapter 2204 [Article 1.14-3].
PART D.  CROSS-REFERENCE UPDATES:  TITLE 5, INSURANCE CODE
       SECTION 2D.001.  Section 501.158, Insurance Code, is amended
to correct cross-references to read as follows:
       Sec. 501.158.  CONFIDENTIALITY REQUIREMENTS.
Confidentiality requirements applicable to examination reports
under Sections 401.105 and 401.106 [Article 1.18] and to the
commissioner under Section 441.201 [3A, Article 21.28-A,] apply to
the public counsel.
       SECTION 2D.002.  Section 501.204(a), Insurance Code, is
amended to correct a cross-reference and to conform more closely to
the source law from which the section is derived to read as follows:
       (a)  This section applies to each insurer authorized to
engage in business in this state under:
             (1)  [Chapter 25;
             [(2)] Chapter 841;
             (2) [(3)]  Chapter 842;
             (3)  Section 1367.053, Subchapter A, Chapter 1452,
Subchapter B, Chapter 1507, Chapter 222, 251, or 258, as applicable
to a health maintenance organization, [(4)] Chapter 843, Chapter
1271, or Chapter 1272;
             (4) [(5)]  Chapter 882;
             (5) [(6)]  Chapter 884;
             (6) [(7)]  Chapter 885;
             (7) [(8)]  Chapter 887;
             (8) [(9)]  Chapter 888;
             (9) [(10)]  Chapter 961;
             (10)  Chapter 962;
             (11)  Chapter 982;
             (12)  Subchapter B, Chapter 1103;
             (13)  Subchapter A, Chapter 1104;
             (14)  Chapter 1201, or a provision listed in Section
1201.005;
             (15)  Chapter 1551;
             (16)  Chapter 1578; or
             (17)  Chapter 1601.
       SECTION 2D.003.  Sections 523.051(a) and (c), Insurance
Code, are amended to correct a cross-reference to read as follows:
       (a)  The market assistance program is a voluntary program
designed to assist applicants for insurance and insureds in this
state in obtaining residential property insurance coverage in
underserved areas. The commissioner by rule shall designate
underserved areas using the standards described by Section 2004.002
[1, Article 5.35-3].
       (c)  The market assistance program may not provide
assistance regarding windstorm and hail insurance coverage for a
risk eligible for that coverage under Chapter 2210 [Article 21.49].
       SECTION 2D.004.  Section 523.202(b), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (b)  After each review, the executive committee shall report
to the commissioner regarding:
             (1)  the need to continue operating the voluntary
market assistance program;
             (2)  the need to establish a mandatory market
assistance program;
             (3)  the need to establish a FAIR (Fair Access to
Insurance Requirements) Plan under Chapter 2211 [Article 21.49A];
or
             (4)  other recommendations the executive committee
considers appropriate.
       SECTION 2D.005.  Section 541.005(a), Insurance Code, is
amended to correct cross-references to read as follows:
       (a)  A risk retention group or purchasing group described by
Subchapter B, Chapter 2201, or [, as those terms are defined by]
Section 2201.251 that is [2, Article 21.54,] not chartered in this
state may not engage in a trade practice in this state that is
defined as unlawful under this chapter.
       SECTION 2D.006.  Section 541.454(a), Insurance Code, is
amended to correct cross-references to read as follows:
       (a)  Civil penalties, premium refunds, judgments,
compensatory judgments, individual recoveries, orders, class
action awards, costs, damages, or attorney's fees assessed or
awarded under this chapter:
             (1)  may be paid only from the capital or surplus funds
of the offending insurer; and
             (2)  may not take precedence over, be in priority to, or
in any other manner apply to:
                   (A)  Chapter 462 or 463 [Article 21.28-C or
21.28-D] or any other insurance guaranty act; or
                   (B)  Chapter 422 [Article 21.39-A].
       SECTION 2D.007.  Section 542.052, Insurance Code, is amended
to correct a cross-reference to read as follows:
       Sec. 542.052.  APPLICABILITY OF SUBCHAPTER. This subchapter
applies to any insurer authorized to engage in business as an
insurance company or to provide insurance in this state, including:
             (1)  a stock life, health, or accident insurance
company;
             (2)  a mutual life, health, or accident insurance
company;
             (3)  a stock fire or casualty insurance company;
             (4)  a mutual fire or casualty insurance company;
             (5)  a Mexican casualty insurance company;
             (6)  a Lloyd's plan;
             (7)  a reciprocal or interinsurance exchange;
             (8)  a fraternal benefit society;
             (9)  a stipulated premium company;
             (10)  a nonprofit legal services corporation;
             (11)  a statewide mutual assessment company;
             (12)  a local mutual aid association;
             (13)  a local mutual burial association;
             (14)  an association exempt under Section 887.102;
             (15)  a nonprofit hospital, medical, or dental service
corporation, including a corporation subject to Chapter 842;
             (16)  a county mutual insurance company;
             (17)  a farm mutual insurance company;
             (18)  a risk retention group;
             (19)  a purchasing group;
             (20)  an eligible surplus lines insurer; and
             (21)  except as provided by Section 542.053(b), a
guaranty association operating under Chapter 462 or 463 [Article
21.28-C or 21.28-D].
       SECTION 2D.008.  Sections 542.053(a) and (b), Insurance
Code, are amended to correct cross-references to read as follows:
       (a)  This subchapter does not apply to:
             (1)  workers' compensation insurance;
             (2)  mortgage guaranty insurance;
             (3)  title insurance;
             (4)  fidelity, surety, or guaranty bonds;
             (5)  marine insurance as defined by Section 1807.001
[Article 5.53]; or
             (6)  a guaranty association created and operating under
Chapter 2602.
       (b)  A guaranty association operating under Chapter 462 or
463 [Article 21.28-C or 21.28-D] is not subject to the damage
provisions of Section 542.060.
       SECTION 2D.009.  Section 542.102(b), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (b)  This section does not apply to a workers' compensation
insurance policy subject to Section 2051.151 [Article 5.65A].
       SECTION 2D.010.  Section 542.152, Insurance Code, is amended
to correct a cross-reference to read as follows:
       Sec. 542.152.  EXCEPTION. This subchapter does not apply
to:
             (1)  a casualty insurance policy that requires the
insured's consent to settle a claim against the insured;
             (2)  fidelity, surety, or guaranty bonds; or
             (3)  marine insurance as defined by Section 1807.001
[Article 5.53].
       SECTION 2D.011.  Section 544.301(1), Insurance Code, is
amended to correct cross-references to read as follows:
             (1)  "Insurer" means an insurance company, reciprocal
or interinsurance exchange, mutual insurance company, capital
stock company, county mutual insurance company, farm mutual
insurance company, Lloyd's plan, or other legal entity authorized
to write residential property insurance in this state. The term
includes an affiliate, as described by Section 823.003(a), if that
affiliate is authorized to write and is writing residential
property insurance in this state. The term does not include:
                   (A)  an eligible surplus lines insurer regulated
under Chapter 981;
                   (B)  the Texas Windstorm Insurance Association
under Chapter 2210 [Article 21.49]; or
                   (C)  the FAIR Plan Association under Chapter 2211
[Article 21.49A].
       SECTION 2D.012.  Section 551.001, Insurance Code, is amended
to correct cross-references by amending Subsection (a) and adding
Subsection (a-1) to read as follows:
       (a)  The commissioner may, as necessary, adopt and enforce
reasonable rules, including notice requirements, relating to the
cancellation and nonrenewal of any insurance policy regulated by
the department under:
             (1)  Chapter 5;
             (2)  Chapter 1804, 1805, 2171, or 2301; or
             (3)  Subtitle C, D, E, or F, Title 10[, other than:
             [(1)a policy subject to Subchapter B or C; or
             [(2)  a marine insurance policy other than inland
marine].
       (a-1)  Notwithstanding Subsection (a), Subsection (a) does
not apply to:
             (1)  an insurance policy subject to Subchapter B or C of
this chapter; or
             (2)  a marine insurance policy other than inland
marine.
       SECTION 2D.013.  Sections 551.107(b) and (e), Insurance
Code, are amended to correct cross-references to read as follows:
       (b)  A claim under this section does not include a claim:
             (1)  resulting from a loss caused by natural causes;
             (2)  that is filed but is not paid or payable under the
policy; or
             (3)  that an insurer is prohibited from using under
Section 544.353 [3, Article 5.35-4].
       (e)  An insurer may notify an insured who has filed two
claims in a period of less than three years that the insurer may
refuse to renew the policy if the insured files a third claim during
the three-year period. If the insurer does not notify the insured
in accordance with this subsection, the insurer may not refuse to
renew the policy because of claims. The notice form must:
             (1)  list the policyholder's claims; and
             (2)  contain the sentence: "The filing by you of
another claim, except for a claim resulting from a loss caused by
natural causes, a claim filed but not paid or payable under the
policy under which it was filed, or an appliance-related claim that
we are prohibited from using under Section 544.353 [3, Article
5.35-4], Texas Insurance Code, could cause us to refuse to renew
your policy."
       SECTION 2D.014.  Section 553.004(a), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (a)  If the commissioner considers it necessary, the
commissioner may initiate an examination of an insurer under
Sections 401.051, 401.052, and 401.054-401.062 [Article 1.15].
       SECTION 2D.015.  Section 558.001, Insurance Code, is amended
to correct a cross-reference to read as follows:
       Sec. 558.001.  DEFINITION. In this chapter, "insurer" means
an insurance company or other entity authorized to engage in the
business of insurance in this state. The term includes:
             (1)  a stock life, health, or accident insurance
company;
             (2)  a mutual life, health, or accident insurance
company;
             (3)  a stock fire or casualty insurance company;
             (4)  a mutual fire or casualty insurance company;
             (5)  a Mexican casualty insurance company;
             (6)  a farm mutual insurance company;
             (7)  a county mutual insurance company;
             (8)  a Lloyd's plan;
             (9)  a reciprocal or insurance exchange;
             (10)  a fraternal benefit society;
             (11)  a stipulated premium company;
             (12)  a nonprofit legal services corporation;
             (13)  a statewide mutual assessment company;
             (14)  a local mutual aid association;
             (15)  a local mutual burial association;
             (16)  an association exempt under Section 887.102;
             (17)  a nonprofit hospital, medical, or dental service
corporation, including a corporation subject to Chapter 842;
             (18)  a risk retention group;
             (19)  a purchasing group;
             (20)  an eligible surplus lines insurer; and
             (21)  a guaranty association operating under Chapter
462 or 463 [Article 21.28-C or 21.28-D].
       SECTION 2D.016.  Section 558.002(c), Insurance Code, is
amended to correct cross-references to read as follows:
       (c)  A guaranty association shall promptly refund any
unearned premium as described by Subchapter E, Chapter 462 [Section
5(8), Article 21.28-C], or Sections 463.003(9) [5(10)] and 463.259
[8(n), Article 21.28-D].
       SECTION 2D.017.  Section 706.001(a), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (a)  The definitions adopted under Sections 2251.002 and
2301.002 and the terms described by Sections 2251.003 and 2301.003
[Article 5.13-2] apply to this chapter.
       SECTION 2D.018.  Section 706.004, Insurance Code, is amended
to correct a cross-reference to read as follows:
       Sec. 706.004.  RATES AND FORMS. Notwithstanding any other
law, rates and forms for insurance coverage issued under this
chapter are governed by:
             (1)  Subchapters A-E, Chapter 2251;
             (2)  Subchapter A, Chapter 2301; and
             (3)  Article 5.13-2.
PART E.  CROSS-REFERENCE UPDATES:  TITLE 6, INSURANCE CODE
SECTION 2E.001.  Section 802.056, Insurance Code, is amended
to correct cross-references to read as follows:
       Sec. 802.056.  STATUS OF REPORTS AND OTHER INFORMATION.  A
report or any other information resulting from the collection,
review, analysis, and distribution of information developed from
the filing of annual statement convention blanks and provided to
the department by the National Association of Insurance
Commissioners is considered part of the process of examination of
insurance companies under this code, including Chapters 86 and 401 
[Articles 1.15-1.19].
       SECTION 2E.002.  Section 803.009, Insurance Code, is amended
to correct cross-references to read as follows:
       Sec. 803.009.  CONFLICTING PROVISIONS.  This chapter
prevails over a conflicting provision of any other law of this
state, including:
             (1)  Chapters 221, 222, and 223;
             (2)  Sections 401.151, 401.152, 401.155, and 401.156;
and
             (3)  Section 171.0525, Tax Code [Articles 1.16, 4.10,
4.11, and 9.59].
       SECTION 2E.003.  Section 804.104, Insurance Code, is amended
to correct a cross-reference to read as follows:
       Sec. 804.104.  RISK RETENTION GROUP NOT CHARTERED IN THIS
STATE.  A risk retention group that is not chartered but that is
registered in this state under Section 2201.152 [4(b)(3), Article
21.54], must designate the commissioner as its agent for service of
process and receipt of legal documents.
       SECTION 2E.004.  Section 804.201(a), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (a)  Process served by serving the commissioner under this
chapter must be directed to the defendant and include:
             (1)  for an unauthorized person or insurer, the name
and address of the person or insurer to be served;
             (2)  for a risk retention group, the name and address of
the group to be served;
             (3)  for a surplus lines insurer, the name and address
of the insurer to be served;
             (4)  for an unincorporated association, trust, or other
organization formed under Chapter 1505 [Article 3.71], the name and
address of the association, trust, or organization; or
             (5)  for an authorized company, the name and address of
the company as it appears in the department records.
       SECTION 2E.005.  Section 822.056(e), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (e)  If all of the authorized shares of stock without par
value are not subscribed and paid for when the charter is granted or
the amendment is filed, respectively, the insurance company shall
file with the department a certificate authenticated by a majority
of the directors stating the number of shares without par value
issued and the consideration received for those shares. An
insurance company may issue and dispose of those remaining
authorized shares for money or an instrument authorized for minimum
capital under:
             (1)  a provision of Subchapter B, Chapter 424, other
than Section 424.052, 424.072, or 424.073; and
             (2)  Section 822.204 [and Article 2.10].
       SECTION 2E.006.  Sections 822.061(a) and (b), Insurance
Code, are amended to correct a cross-reference to read as follows:
       (a)  On receipt of a charter fee in the amount determined
under Chapter 202 [Article 4.07], the commissioner shall examine
the articles of incorporation filed with the department under
Section 822.060 and any certificate filed under Section
822.057(a)(4).
       (b)  If the commissioner approves the articles of
incorporation and, if applicable, the certificate filed under
Section 822.057(a)(4), the commissioner shall certify and file the
approved documents with the department records and, on receipt of a
fee in the amount determined under Chapter 202 [Article 4.07], the
commissioner shall issue a certified copy of the charter to the
incorporators.
       SECTION 2E.007.  Section 822.155, Insurance Code, is amended
to correct a cross-reference to read as follows:
       Sec. 822.155.  APPLICATION FOR AMENDMENT OF CHARTER.  A
domestic insurance company may amend its charter by paying to the
commissioner a fee in the amount determined under Chapter 202 
[Article 4.07] and by filing with the department:
             (1)  an application for a charter amendment on the form
and containing the information prescribed by the commissioner; and
             (2)  the company's proposed amendment.
       SECTION 2E.008.  Sections 822.158(a) and (e), Insurance
Code, are amended to correct cross-references to read as follows:
       (a)  Not later than the 60th day after the date the
application under Section 822.155 is filed, the commissioner shall
determine whether:
             (1)  the proposed capital structure of the insurance
company meets the requirements of this code;
             (2)  the officers, directors, and managing head of the
insurance company have sufficient insurance experience, ability,
standing, and good record to make success of the company probable;
             (3)  the applicants are acting in good faith;
             (4)  if the proposed amendment relates to a diminution
of the insurance company's charter powers with respect to the kinds
of insurance business in which the company may be engaged, all
liabilities incidental to the exercise of the powers to be
eliminated have been terminated or wholly reinsured; and
             (5)  the property involved in an increase of capital or
surplus, or both, is:
                   (A)  properly valued; and
                   (B)  in the form authorized by the following
provisions [Section 822.204 and Article 2.10], to the extent those
provisions apply:
                         (i)  Subchapter B, Chapter 424, other than
Sections 424.052, 424.072, and 424.073; and
                         (ii)  Section 822.204.
       (e)  On approval of a certificate required under Section
822.156 and receipt of a fee in the amount determined under Chapter
202 [Article 4.07], the commissioner shall issue to the directors a
certified copy of an amendment authorizing the issuance of shares
of stock without par value that is filed under this section. The
amendment is effective on issuance of the certified copy of the
amendment.
       SECTION 2E.009.  Section 822.211, Insurance Code, is amended
to correct cross-references to read as follows:
       Sec. 822.211.  ACTION OF COMMISSIONER WHEN CAPITAL OR
SURPLUS REQUIREMENTS NOT SATISFIED.  If an insurance company does
not comply with the capital and surplus requirements of this
chapter, the commissioner may enter an order prohibiting the
company from writing new business and may:
             (1)  place the company under state supervision or
conservatorship;
             (2)  declare the company to be in a hazardous condition
as provided by Subchapter A, Chapter 404 [Article 1.32];
             (3)  declare the company to be impaired as provided by
Subchapter B, Chapter 404 [Section 5, Article 1.10]; or
             (4)  apply to the company any other applicable sanction
provided by this code.
       SECTION 2E.010.  Section 823.001(c), Insurance Code, is
amended to read as follows:
       (c)  The purpose of this chapter [article] is to promote the
public interest by:
             (1)  facilitating the achievement of the objectives
described by Subsection (a);
             (2)  requiring disclosure of pertinent information
relating to and approval of changes in control of an insurer;
             (3)  requiring disclosure and approval of material
transactions and relationships between the insurer and the
insurer's affiliates, including certain dividends to shareholders
paid by the insurer; and
             (4)  providing standards governing material
transactions between the insurer and the insurer's affiliates.
       SECTION 2E.011.  Section 823.353(a), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (a)  Each registered insurer that complies with an order
under Section 823.351(a) shall pay the expense of the examination
in accordance with Sections 401.151, 401.152, 401.155, and 401.156 
[Article 1.16].
       SECTION 2E.012.  Section 823.451, Insurance Code, is amended
to correct cross-references to read as follows:
       Sec. 823.451.  RECEIVERSHIP.  If it appears to the
commissioner that a person's violation of this chapter so impairs
the financial condition of a domestic insurer as to threaten the
insurer's insolvency or make the further transaction of the
insurer's business hazardous to the insurer's policyholders or
creditors or the public, the commissioner may proceed under
Chapters 441 and 443 [Articles 21.28 and 21.28-A] to take
possession of the insurer's property and conduct the business of
the insurer.
       SECTION 2E.013.  Section 824.151(b), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (b)  Except as provided by Section 824.152, the provisions of
Subchapter D, Chapter 425, [Article 3.39] that limit investments in
the corporate stock of another corporation do not apply to a
purchase made under this section.
       SECTION 2E.014.  Sections 824.152(d) and (g), Insurance
Code, are amended to correct a cross-reference to read as follows:
       (d)  A purchase, offer to purchase, tender offer, request to
purchase, or invitation to purchase shares in excess of the limits
imposed under Subchapter D, Chapter 425, [Article 3.39] may not be
made until it is filed with and approved by the commissioner in
accordance with Chapter 823.
       (g)  If the merger or consolidation does not take effect
within the period finally determined and extended by the
commissioner, the purchasing corporation must sell or otherwise
dispose of the purchased shares that exceed the investment
limitations imposed under Subchapter D, Chapter 425, [Article 3.39]
within six months of the final effective date.
       SECTION 2E.015.  Section 828.051, Insurance Code, is amended
to correct cross-references to read as follows:
       Sec. 828.051.  EXCEPTION TO LIMITATION ON PURCHASING SHARES
OF OTHER COMPANY.  Subchapters C and D, Chapter 425, [Articles 3.33
and 3.39] do not apply to a purchase or contract described by
Section 828.001 if all requirements of this subchapter are met.
       SECTION 2E.016.  Section 828.054, Insurance Code, is amended
to correct cross-references to read as follows:
       Sec. 828.054.  APPROVAL REQUIRED.  A purchase, offer to
purchase, tender offer, request to purchase, or invitation to
purchase shares in excess of the limits imposed under Subchapter C
or D, Chapter 425, [Article 3.33 or 3.39] may not be made until it is
filed with and approved by the commissioner in accordance with
Chapter 823.
       SECTION 2E.017.  Section 828.056(b), Insurance Code, is
amended to correct cross-references to read as follows:
       (b)  If the reinsurance agreement does not take effect within
the period finally determined and extended by the commissioner, the
purchasing company shall sell or otherwise dispose of the purchased
shares that exceed the investment limitations imposed under
Subchapter C or D, Chapter 425, [Article 3.33 or 3.39] within six
months of the final effective date.
       SECTION 2E.018.  Section 841.002, Insurance Code, is amended
to correct cross-references to read as follows:
       Sec. 841.002.  APPLICABILITY OF CHAPTER AND OTHER
LAW.  Except as otherwise expressly provided by this code, each
insurance company incorporated or engaging in business in this
state as a life insurance company, an accident insurance company, a
life and accident insurance company, a health and accident
insurance company, or a life, health, and accident insurance
company is subject to:
             (1)  this chapter;
             (2)  Chapter 3;
             (3)  Chapters 425 and 492; [and]
             (4) [(3)]  Title 7;
             (5)  Sections 1202.051, 1204.151, 1204.153, and
1204.154;
             (6)  Subchapter A, Chapter 1202, Subchapters A and F,
Chapter 1204, Subchapter A, Chapter 1273, Subchapters A, B, and D,
Chapter 1355, and Subchapter A, Chapter 1366;
             (7)  Subchapter A, Chapter 1507;
             (8)  Chapters 1203, 1210, 1251-1254, 1301, 1351, 1354,
1359, 1364, 1368, 1505, 1506, 1651, 1652, and 1701; and
             (9)  Chapter 177, Local Government Code.
       SECTION 2E.019.  Section 841.054(c), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (c)  At the time of incorporation, the required capital and
surplus shall consist only of:
             (1)  United States currency;
             (2)  bonds of the United States, this state, or a county
or municipality of this state; or
             (3)  government insured mortgage loans that are
authorized by this chapter or Chapter 425 [3], with not more than 50
percent of the required capital invested in first mortgage real
property loans.
       SECTION 2E.020.  Section 841.058(a), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (a)  To obtain a charter for a domestic insurance company,
the incorporators must pay to the department the charter fee in an
amount determined under Chapter 202 [Article 4.07] and file with
the department:
             (1)  an application for charter on the form and
containing the information prescribed by the commissioner;
             (2)  the company's articles of incorporation; and
             (3)  an affidavit made by two or more of the
incorporators that states that:
                   (A)  the minimum capital and surplus requirements
of Section 841.054 are satisfied;
                   (B)  the capital and surplus are the bona fide
property of the company; and
                   (C)  the information in the articles of
incorporation is true and correct.
       SECTION 2E.021.  Section 841.061(c), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (c)  If the commissioner does not reject the application
under Subsection (b), the commissioner shall approve the
application. On approval of an application, the department shall
record the information required by Section 841.058 in records
maintained for that purpose. On receipt of a fee in the amount
determined under Chapter 202 [Article 4.07], the commissioner shall
provide to the incorporators a certified copy of the application,
articles of incorporation, and submitted affidavit.
       SECTION 2E.022.  Section 841.207, Insurance Code, is amended
to correct a cross-reference to read as follows:
       Sec. 841.207.  ACTIONS OF COMMISSIONER WHEN CAPITAL AND
SURPLUS REQUIREMENTS NOT SATISFIED.  If an insurance company does
not comply with the capital and surplus requirements of this
chapter, the commissioner may order the insurance company to cease
writing new business and may:
             (1)  place the insurance company under state
supervision or conservatorship;
             (2)  declare the insurance company to be in a hazardous
condition as provided by Subchapter A, Chapter 404 [Article 1.32];
             (3)  declare the insurance company to be impaired as
provided by Section 841.206; or
             (4)  apply to the insurance company any other
applicable sanction provided by this code.
       SECTION 2E.023.  Section 841.255(a), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (a)  Not later than March 1 of each year, a domestic
insurance company shall:
             (1)  prepare a statement showing the condition of the
company on December 31 of the preceding year; and
             (2)  deliver the statement to the department
accompanied by a filing fee in the amount determined under Chapter
202 [Article 4.07].
       SECTION 2E.024.  Section 841.257, Insurance Code, is amended
to correct cross-references to read as follows:
       Sec. 841.257.  KINDS OF BUSINESS LIMITED.  An insurance
company authorized to engage in the business of insurance under
this chapter or in accordance with Section 982.051 may not accept a
risk or write an insurance policy in this state or any other state
or country other than:
             (1)  a life, accident, or health insurance policy;
             (2)  reinsurance under Sections 492.051(b) and (c) or
Chapter 493 [Article 5.75-1] by a life insurance company authorized
to engage in the business of insurance in this state; or
             (3)  reinsurance under Chapter 494 [Article 5.75-3] by
a domestic insurance company.
       SECTION 2E.025.  Section 842.201(c), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (c)  The department shall charge a fee in an amount
determined under Chapter 202 [Article 4.07] for filing the
statement.
       SECTION 2E.026.  Section 842.209, Insurance Code, is amended
to correct cross-references to read as follows:
       Sec. 842.209.  EXAMINATIONS.  The following laws [Articles
1.15 and 1.16] apply to a group hospital service corporation:
             (1)  Subchapter A, Chapter 86; and
             (2)  Sections 401.051, 401.052, 401.054-401.062,
401.151, 401.152, 401.155, and 401.156.
       SECTION 2E.027.  Section 842.210, Insurance Code, is amended
to correct cross-references to read as follows:
       Sec. 842.210.  LIQUIDATION, REHABILITATION, OR CONSERVATION
OF GROUP HOSPITAL SERVICE CORPORATION.  The dissolution,
liquidation, rehabilitation, or conservation of a group hospital
service corporation is subject to Chapters 441 and 443 [Articles
21.28 and 21.28-A].
       SECTION 2E.028.  Section 842.253, Insurance Code, is amended
to correct a cross-reference to read as follows:
       Sec. 842.253.  POLICY, CERTIFICATE, AND APPLICATION
FORMS.  A policy, certificate, or application form used by a group
hospital service corporation is subject to Chapter 1701 [Article
3.42].
       SECTION 2E.029.  Sections 843.002(20), (28), and (30),
Insurance Code, are amended to correct cross-references to read as
follows:
             (20)  "Net worth" means the amount by which total
liabilities, excluding liability for subordinated debt issued in
compliance with Chapter 427 [Article 1.39], is exceeded by total
admitted assets.
             (28)  "Uncovered expenses" means the estimated amount
of administrative expenses and the estimated cost of health care
services that are not guaranteed, insured, or assumed by a person
other than the health maintenance organization. The term does not
include the cost of health care services if the physician or
provider agrees in writing that an enrollee is not liable,
assessable, or in any way subject to making payment for the services
except as described in the evidence of coverage issued to the
enrollee under Chapter 1271 [Article 20A.09]. The term includes
any amount due on loans in the next calendar year unless the amount
is specifically subordinated to uncovered medical and health care
expenses or the amount is guaranteed by a sponsoring organization.
             (30)  "Delegated entity" means an entity, other than a
health maintenance organization authorized to engage in business
under this chapter, that by itself, or through subcontracts with
one or more entities, undertakes to arrange for or provide medical
care or health care to an enrollee in exchange for a predetermined
payment on a prospective basis and that accepts responsibility for
performing on behalf of the health maintenance organization a
function regulated by this chapter, Section 1367.053, Subchapter A,
Chapter 1452, Subchapter B, Chapter 1507, Chapter 222, 251, or 258,
as applicable to a health maintenance organization, or Chapter 1271
or 1272 [or Chapter 20A]. The term does not include:
                   (A)  an individual physician; or
                   (B)  a group of employed physicians, practicing
medicine under one federal tax identification number, whose total
claims paid to providers not employed by the group constitute less
than 20 percent of the group's total collected revenue computed on a
calendar year basis.
       SECTION 2E.030.  Section 843.006(a), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (a)  Except as provided by Subsection (b), each application,
filing, and report required under this chapter, Section 1367.053,
Subchapter A, Chapter 1452, Subchapter B, Chapter 1507, Chapter
222, 251, or 258, as applicable to a health maintenance
organization, or Chapter 1271 or 1272 [or Chapter 20A] is a public
document.
       SECTION 2E.031.  Section 843.007(a), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (a)  Any information relating to the diagnosis, treatment,
or health of an enrollee or applicant obtained by a health
maintenance organization from the enrollee or applicant or from a
physician or provider shall be held in confidence and may not be
disclosed to any person except:
             (1)  to the extent necessary to accomplish the purposes
of this chapter or:
                   (A)  Section 1367.053;
                   (B)  Subchapter A, Chapter 1452;
                   (C)  Subchapter B, Chapter 1507;
                   (D)  Chapter 222, 251, or 258, as applicable to a
health maintenance organization; or
                   (E)  Chapter 1271 or 1272 [Chapter 20A];
             (2)  with the express consent of the enrollee or
applicant;
             (3)  in compliance with a statute or court order for the
production or discovery of evidence; or
             (4)  in the event of a claim or litigation between the
enrollee or applicant and the health maintenance organization in
which the information is pertinent.
       SECTION 2E.032.  Section 843.008, Insurance Code, is amended
to correct cross-references to read as follows:
       Sec. 843.008.  COSTS OF ADMINISTERING HEALTH MAINTENANCE
ORGANIZATION LAWS.  Money collected under this chapter and
Chapters 222, 251, and 258, as applicable to a health maintenance
organization, [Article 20A.33] must be sufficient to administer
this chapter and:
             (1)  Section 1367.053;
             (2)  Subchapter A, Chapter 1452;
             (3)  Subchapter B, Chapter 1507;
             (4)  Chapters 222, 251, and 258, as applicable to a
health maintenance organization; and
             (5)  Chapters 1271 and 1272 [Chapter 20A].
       SECTION 2E.033.  Sections 843.051(a), (b), and (e),
Insurance Code, are amended to correct cross-references to read as
follows:
       (a)  Except to the extent that the commissioner determines
that the nature of health maintenance organizations, health care
plans, or evidences of coverage renders a provision of the
following laws clearly inappropriate, Subchapter A, Chapter 542,
Subchapters D and E, Chapter 544, and Chapters 541, 543, and 547 
[Articles 21.21, 21.21A, 21.21-2, 21.21-5, and 21.21-6, as added by
Chapter 522, Acts of the 74th Legislature, Regular Session, 1995,
and the Unauthorized Insurers False Advertising Process Act
(Article 21.21-1, Vernon's Texas Insurance Code)] apply to:
             (1)  health maintenance organizations that offer
basic, limited, and single health care coverages;
             (2)  basic, limited, and single health care plans; and
             (3)  evidences of coverage under basic, limited, and
single health care plans.
       (b)  A health maintenance organization is subject to:
             (1)  Chapter 402 [Section 3B, Article 3.51-6];
             (2)  Chapter 827 and is an authorized insurer for
purposes of that chapter; and
             (3)  Subchapter G, Chapter 1251, and Section 1551.064 
[Article 21.49-8].
       (e)  Except for Chapter 251, as applicable to a third-party
administrator, and Chapters 259, 4151, and 4201 [Articles 21.07-6
and 21.58A], insurance laws and group hospital service corporation
laws do not apply to a physician or provider. Notwithstanding this
subsection, a physician or provider who conducts a utilization
review during the ordinary course of treatment of patients under a
joint or delegated review agreement with a health maintenance
organization on services provided by the physician or provider is
not required to obtain certification under Subchapter C, Chapter
4201 [Section 3, Article 21.58A].
       SECTION 2E.034.  Section 843.071(b), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (b)  A person may not use "health maintenance organization"
or "HMO" in the course of operation unless the person:
             (1)  complies with this chapter and:
                   (A)  Section 1367.053;
                   (B)  Subchapter A, Chapter 1452;
                   (C)  Subchapter B, Chapter 1507;
                   (D)  Chapters 222, 251, and 258, as applicable to
a health maintenance organization; and
                   (E)  Chapters 1271 and 1272 [Chapter 20A]; and
             (2)  holds a certificate of authority under this
chapter.
       SECTION 2E.035.  Section 843.073(b), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (b)  Except as provided by Section 843.101 or 843.318(a), a
physician or provider that employs or enters into a contractual
arrangement with a provider or group of providers to provide basic
or limited health care services or a single health care service is
subject to this chapter and the following provisions [Chapter 20A]
and is required to obtain a certificate of authority under this
chapter:
             (1)  Section 1367.053;
             (2)  Subchapter A, Chapter 1452;
             (3)  Subchapter B, Chapter 1507;
             (4)  Chapters 222, 251, and 258, as applicable to a
health maintenance organization; and
             (5)  Chapters 1271 and 1272.
       SECTION 2E.036.  Sections 843.078(j), (m), and (n),
Insurance Code, are amended to correct cross-references to read as
follows:
       (j)  An application for a certificate of authority must
include a description of the procedures and programs to be
implemented by the applicant to meet the quality of health care
requirements of this chapter and:
             (1)  Section 1367.053;
             (2)  Subchapter A, Chapter 1452;
             (3)  Subchapter B, Chapter 1507; and
             (4)  Chapters 1271 and 1272 [Chapter 20A].
       (m)  An application for a certificate of authority must
include documentation demonstrating that the applicant will comply
with Section 1271.005(c) [Article 20A.09Z].
       (n)  An application for a certificate of authority must
include any other information that the commissioner requires to
make the determinations required by this chapter and:
             (1)  Section 1367.053;
             (2)  Subchapter A, Chapter 1452;
             (3)  Subchapter B, Chapter 1507;
             (4)  Chapters 222, 251, and 258, as applicable to a
health maintenance organization; and
             (5)  Chapters 1271 and 1272 [Chapter 20A].
       SECTION 2E.037.  Section 843.084, Insurance Code, is amended
to correct a cross-reference to read as follows:
       Sec. 843.084.  DURATION OF CERTIFICATE OF AUTHORITY.  A
certificate of authority continues in effect:
             (1)  while the certificate holder meets the
requirements of this chapter and:
                   (A)  Section 1367.053;
                   (B)  Subchapter A, Chapter 1452;
                   (C)  Subchapter B, Chapter 1507;
                   (D)  Chapters 222, 251, and 258, as applicable to
a health maintenance organization; and
                   (E)  Chapters 1271 and 1272 [Chapter 20A]; or
             (2)  until the commissioner suspends or revokes the
certificate or the commissioner terminates the certificate at the
request of the certificate holder.
       SECTION 2E.038.  Section 843.107, Insurance Code, is amended
to correct a cross-reference to read as follows:
       Sec. 843.107.  INDEMNITY BENEFITS; POINT-OF-SERVICE
PROVISIONS.  A health maintenance organization may offer:
             (1)  indemnity benefits covering out-of-area emergency
care;
             (2)  indemnity benefits, in addition to those relating
to out-of-area and emergency care, provided through an insurer or
group hospital service corporation;
             (3)  a point-of-service plan under Subchapter A,
Chapter 1273 [Article 3.64]; or
             (4)  a point-of-service rider under Section 843.108.
       SECTION 2E.039.  Section 843.151, Insurance Code, is amended
to correct a cross-reference to read as follows:
       Sec. 843.151.  RULES.  The commissioner may adopt reasonable
rules as necessary and proper to:
             (1)  implement this chapter and Section 1367.053,
Subchapter A, Chapter 1452, Subchapter B, Chapter 1507, Chapters
222, 251, and 258, as applicable to a health maintenance
organization, and Chapters 1271 and 1272 [Chapter 20A], including
rules to:
                   (A)  prescribe authorized investments for a
health maintenance organization for all investments not otherwise
addressed in this chapter;
                   (B)  ensure that enrollees have adequate access to
health care services; and
                   (C)  establish minimum physician-to-patient
ratios, mileage requirements for primary and specialty care,
maximum travel time, and maximum waiting time for obtaining an
appointment; and
             (2)  meet the requirements of federal law and
regulations.
       SECTION 2E.040.  Section 843.152, Insurance Code, is amended
to correct a cross-reference to read as follows:
       Sec. 843.152.  SUBPOENA AUTHORITY.  In implementing this
chapter and the following provisions [Chapter 20A], the
commissioner may exercise subpoena authority in accordance with
Subchapter C, Chapter 36:
             (1)  Section 1367.053;
             (2)  Subchapter A, Chapter 1452;
             (3)  Subchapter B, Chapter 1507;
             (4)  Chapters 222, 251, and 258, as applicable to a
health maintenance organization; and
             (5)  Chapters 1271 and 1272.
       SECTION 2E.041.  Section 843.153, Insurance Code, is amended
to correct a cross-reference to read as follows:
       Sec. 843.153.  AUTHORITY TO CONTRACT.  In performing duties
under this chapter and the following provisions [Chapter 20A], the
commissioner may contract with a state agency or, after notice and
opportunity for hearing, with a qualified person to make
recommendations concerning determinations to be made by the
commissioner:
             (1)  Section 1367.053;
             (2)  Subchapter A, Chapter 1452;
             (3)  Subchapter B, Chapter 1507;
             (4)  Chapters 222, 251, and 258, as applicable to a
health maintenance organization; and
             (5)  Chapters 1271 and 1272.
       SECTION 2E.042.  Sections 843.155(b) and (c), Insurance
Code, are amended to correct cross-references to read as follows:
       (b)  The report shall:
             (1)  be verified by at least two principal officers;
             (2)  be in a form prescribed by the commissioner; and
             (3)  include:
                   (A)  a financial statement of the health
maintenance organization, including its balance sheet and receipts
and disbursements for the preceding calendar year, certified by an
independent public accountant;
                   (B)  the number of individuals enrolled during the
preceding calendar year, the number of enrollees as of the end of
that year, and the number of enrollments terminated during that
year;
                   (C)  updated financial projections for the next
calendar year of the type described in Section 843.078(e), until
the health maintenance organization has had a net income for 12
consecutive months; and
                   (D)  other information relating to the
performance of the health maintenance organization as necessary to
enable the commissioner to perform the commissioner's duties under:
                         (i)  this chapter;
                         (ii)  Section 1367.053;
                         (iii)  Subchapter A, Chapter 1452;
                         (iv)  Subchapter B, Chapter 1507;
                         (v)  Chapters 222, 251, and 258, as
applicable to a health maintenance organization; and
                         (vi)  Chapters 1271 and 1272 [and Chapter
20A].
       (c)  Sections 36.108 and 201.055 and Chapter 802 [and Article
1.11] apply to the annual report of a health maintenance
organization.
       SECTION 2E.043.  Sections 843.156(f), (h), and (i),
Insurance Code, are amended to correct cross-references to read as
follows:
       (f)  The commissioner may examine and use the records of a
health maintenance organization, including records of a quality of
care assurance program and records of a medical peer review
committee, as necessary to implement the purposes of this chapter,
Section 1367.053, Subchapter A, Chapter 1452, Subchapter B, Chapter
1507, Chapters 222, 251, and 258, as applicable to a health
maintenance organization, and Chapters 1271 and 1272 [and Chapter
20A], including commencement of an enforcement action under Section
843.461 or 843.462. Information obtained under this subsection is
confidential and privileged and is not subject to the public
information law, Chapter 552, Government Code, or to subpoena
except as necessary for the commissioner to enforce this chapter,
Section 1367.053, Subchapter A, Chapter 1452, Subchapter B, Chapter
1507, Chapter 222, 251, or 258, as applicable to a health
maintenance organization, or Chapter 1271 or 1272 [or Chapter 20A].
In this subsection, "medical peer review committee" has the meaning
assigned by Section 151.002, Occupations Code.
       (h)  Chapter 86, Section 401.101, and Subchapters B and D,
Chapter 401, [Articles 1.04A, 1.15, 1.16, and 1.19] apply to a
health maintenance organization, except to the extent that the
commissioner determines that the nature of the examination of a
health maintenance organization renders the applicability of those
provisions clearly inappropriate.
       (i)  Section 38.001, Section 81.003, and Chapter 82[, and
Article 1.12] apply to a health maintenance organization.
       SECTION 2E.044.  Section 843.157(a), Insurance Code, is
amended to correct cross-references to read as follows:
       (a)  The rehabilitation, liquidation, supervision, or
conservation of a health maintenance organization shall be treated
as the rehabilitation, liquidation, supervision, or conservation
of an insurer and be conducted under the supervision of the
commissioner under Chapter 441 or 443 [Article 21.28 or 21.28-A],
as appropriate.
       SECTION 2E.045.  Sections 843.204(b) and (c), Insurance
Code, are amended to correct cross-references to read as follows:
       (b)  In this chapter, Section 1367.053, Subchapter A,
Chapter 1452, Subchapter B, Chapter 1507, Chapters 222, 251, and
258, as applicable to a health maintenance organization, and
Chapters 1271 and 1272 [and Chapter 20A], a statement or item of
information is:
             (1)  considered to be untrue if the statement or item
does not conform to fact in any respect that is or may be
significant to an enrollee of, or person considering enrollment in,
a health care plan; and
             (2)  considered to be misleading, whether or not the
statement or item is literally untrue, if, in the total context in
which the statement is made or the item is communicated, the
statement or item may be reasonably understood by a reasonable
person who does not possess special knowledge regarding health care
coverage as indicating:
                   (A)  the inclusion of a benefit or advantage that
does not exist and that is of possible significance to an enrollee
of, or person considering enrollment in, a health care plan; or
                   (B)  the absence of an exclusion, limitation, or
disadvantage that does exist and that is of possible significance
to an enrollee of, or person considering enrollment in, a health
care plan.
       (c)  In this chapter, Section 1367.053, Subchapter A,
Chapter 1452, Subchapter B, Chapter 1507, Chapters 222, 251, and
258, as applicable to a health maintenance organization, and
Chapters 1271 and 1272 [and Chapter 20A], an evidence of coverage is
considered to be deceptive if the evidence of coverage, taken as a
whole and with consideration given to typography and format as well
as language, would cause a reasonable person who does not possess
special knowledge regarding health care plans and evidences of
coverage for health care plans to expect charges or benefits,
services, or other advantages that the evidence of coverage does
not provide or that the health care plan issuing the evidence of
coverage does not regularly make available for enrollees covered
under the evidence of coverage.
       SECTION 2E.046.  Sections 843.261(a), (c), and (d),
Insurance Code, are amended to correct cross-references to read as
follows:
       (a)  A health maintenance organization shall implement and
maintain an internal appeal system that:
             (1)  provides reasonable procedures for the resolution
of an oral or written appeal concerning dissatisfaction or
disagreement with an adverse determination; and
             (2)  includes procedures for notification, review, and
appeal of an adverse determination in accordance with Chapter 4201 
[Article 21.58A].
       (c)  When an enrollee, a person acting on behalf of an
enrollee, or an enrollee's provider of record expresses orally or
in writing any dissatisfaction or disagreement with an adverse
determination, the health maintenance organization or utilization
review agent shall:
             (1)  consider the expression of dissatisfaction or
disagreement as an appeal of the adverse determination; and
             (2)  review and resolve the appeal in accordance with
Chapter 4201 [Article 21.58A].
       (d)  A health maintenance organization may integrate its
appeal procedures related to adverse determinations with the
complaint and appeal procedures established by the health
maintenance organization under Section 843.251 and otherwise
governed by this subchapter only if the procedures related to
adverse determinations comply with this section and Chapter 4201 
[Article 21.58A].
       SECTION 2E.047.  Section 843.282(a), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (a)  Any person, including a person who has attempted to
resolve a complaint through a health maintenance organization's
complaint system process and is dissatisfied with the resolution,
may submit a complaint to the department alleging a violation of:
             (1)  this chapter;
             (2)  Section 1367.053;
             (3)  Subchapter A, Chapter 1452;
             (4)  Subchapter B, Chapter 1507;
             (5)  Chapters 222, 251, and 258, as applicable to a  
health maintenance organization; or
             (6)  Chapter 1271 or 1272 [or Chapter 20A].
       SECTION 2E.048.  Section 843.301, Insurance Code, is amended
to correct a cross-reference to read as follows:
       Sec. 843.301.  PRACTICE OF MEDICINE NOT AFFECTED.  This
chapter, Section 1367.053, Subchapter A, Chapter 1452, Subchapter
B, Chapter 1507, Chapters 222, 251, and 258, as applicable to a
health maintenance organization, and Chapters 1271 and 1272 [and
Chapter 20A] do not:
             (1)  authorize any person, other than a licensed
physician or practitioner of the healing arts, acting within the
scope of the person's license, to engage directly or indirectly in
the practice of medicine or a healing art; or
             (2)  authorize any person to regulate, interfere with,
or intervene in any manner in the practice of medicine or a healing
art.
       SECTION 2E.049.  Section 843.337(e), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (e)  Except as provided by Chapter 1213 [Article 21.52Z], a
physician or provider may, as appropriate:
             (1)  mail a claim by United States mail, first class, or
by overnight delivery service;
             (2)  submit the claim electronically;
             (3)  fax the claim; or
             (4)  hand deliver the claim.
       SECTION 2E.050.  Section 843.352, Insurance Code, is amended
to correct a cross-reference to read as follows:
       Sec. 843.352.  CONFLICT WITH OTHER LAW.  To the extent of
any conflict between this subchapter and Subchapter C, Chapter 1204 
[Article 21.52C], this subchapter controls.
       SECTION 2E.051.  Sections 843.407(a), (b), and (c),
Insurance Code, are amended to correct cross-references to read as
follows:
       (a)  In addition to all other remedies available by law, if
the commissioner believes that a health maintenance organization or
another person is insolvent or does not maintain the net worth
required under Sections 843.403, 843.4031, and 843.404, the
commissioner may bring an action in a Travis County district court
to be named receiver in accordance with Section 843.157 and Chapter
443 [Article 21.28].
       (b)  The court may:
             (1)  find that a receiver should take charge of the
assets of the health maintenance organization; and
             (2)  name the commissioner as the receiver of the
health maintenance organization in accordance with Section 843.157
and Chapter 443 [Article 21.28].
       (c)  The operations and business of a health maintenance
organization represent the business of insurance for purposes of
Section 843.157 and Chapters 441 and 443 [Articles 21.28 and
21.28-A].
       SECTION 2E.052.  Section 843.461(b), Insurance Code, is
amended to correct cross-references to read as follows:
       (b)  The commissioner may take an enforcement action listed
in Subsection (a) against a health maintenance organization if the
commissioner finds that the health maintenance organization:
             (1)  is operating in a manner that is:
                   (A)  significantly contrary to its basic
organizational documents or health care plan; or
                   (B)  contrary to the manner described in and
reasonably inferred from other information submitted under Section
843.078, 843.079, or 843.080;
             (2)  issues an evidence of coverage or uses a schedule
of charges for health care services that does not comply with the
requirements of Sections 843.346, 1271.001-1271.005, 1271.007,
1271.151, 1271.152, and 1271.156, and Subchapters B, C, E, F, and G,
Chapter 1271 [Article 20A.09];
             (3)  does not meet the requirements of Section
843.082(1);
             (4)  provides a health care plan that does not provide
or arrange for basic health care services, provides a limited
health care service plan that does not provide or arrange for the
plan's limited health care services, or provides a single health
care service plan that does not provide or arrange for a single
health care service;
             (5)  cannot fulfill its obligation to provide:
                   (A)  health care services as required under its
health care plan;
                   (B)  limited health care services as required
under its limited health care service plan; or
                   (C)  a single health care service as required
under its single health care service plan;
             (6)  is no longer financially responsible and may
reasonably be expected to be unable to meet its obligations to
enrollees or prospective enrollees;
             (7)  has not implemented the complaint system required
by Section 843.251 in a manner to resolve reasonably valid
complaints;
             (8)  has advertised or merchandised its services in an
untrue, misrepresentative, misleading, deceptive, or unfair manner
or a person on behalf of the health maintenance organization has
advertised or merchandised the health maintenance organization's
services in an untrue, misrepresentative, misleading, deceptive,
or untrue manner;
             (9)  would be hazardous to its enrollees if it
continued in operation;
             (10)  has not complied substantially with:
                   (A)  this chapter [or Chapter 20A] or a rule
adopted under this chapter; or
                   (B)  Section 1367.053, Subchapter A, Chapter
1452, Subchapter B, Chapter 1507, Chapter 222, 251, or 258, as
applicable to a health maintenance organization, or Chapter 1271 or
1272 or a rule adopted under one of those provisions [Chapter 20A];
or
             (11)  has not taken corrective action the commissioner
considers necessary to correct a failure to comply with this
chapter, any applicable provision of this code, or any applicable
rule or order of the commissioner not later than the 30th day after
the date of notice of the failure or within any longer period
specified in the notice and determined by the commissioner to be
reasonable.
       SECTION 2E.053.  Section 843.463, Insurance Code, is amended
to correct a cross-reference to read as follows:
       Sec. 843.463.  INJUNCTIONS.  If the commissioner believes
that a health maintenance organization or another person is
violating or has violated this chapter [or Chapter 20A] or a rule
adopted under this chapter or Section 1367.053, Subchapter A,
Chapter 1452, Subchapter B, Chapter 1507, Chapter 222, 251, or 258,
as applicable to a health maintenance organization, or Chapter 1271
or 1272 or a rule adopted under one of those provisions [Chapter
20A], the commissioner may bring an action in a Travis County
district court to enjoin the violation and obtain other relief the
court considers appropriate.
       SECTION 2E.054.  Section 843.464(a), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (a)  A person, including an agent or officer of a health
maintenance organization, commits an offense if the person:
             (1)  wilfully violates this chapter or [Chapter 20A or]
a rule adopted under this chapter or Section 1367.053, Subchapter
A, Chapter 1452, Subchapter B, Chapter 1507, Chapter 222, 251, or
258, as applicable to a health maintenance organization, or Chapter
1271 or 1272 or a rule adopted under one of those provisions 
[Chapter 20A]; or
             (2)  knowingly makes a false statement with respect to
a report or statement required under this chapter or Section
1367.053, Subchapter A, Chapter 1452, Subchapter B, Chapter 1507,
Chapter 222, 251, or 258, as applicable to a health maintenance
organization, or Chapter 1271 or 1272 [Chapter 20A].
       SECTION 2E.055.  Section 845.051, Insurance Code, is amended
to correct a cross-reference to read as follows:
       Sec. 845.051.  STATEWIDE RURAL HEALTH CARE SYSTEM.  The
commissioner shall designate a single organization as the statewide
rural health care system. The system is authorized to sponsor,
arrange for the provision of, or provide health care services to
enrollees in programs in rural areas. The programs are not subject
to:
             (1)  a law requiring the coverage or the offer of
coverage for services by a particular health care provider under:
                   (A)  Chapter 62, Health and Safety Code;
                   (B)  Chapter 32, Human Resources Code;
                   (C)  a state-, county-, or local
government-sponsored indigent care initiative; or
                   (D)  a federal Medicare Plus Choice program; or
             (2)  Subchapters A-I, Chapter 1251, Subchapter A,
Chapter 1364, Subchapter A, Chapter 1366, or Section 1551.064 
[Article 3.51-6] under a state-, county-, or local
government-sponsored uninsured or indigent care initiative.
       SECTION 2E.056.  Section 846.003(b), Insurance Code, is
amended to correct cross-references to read as follows:
       (b)  A multiple employer welfare arrangement is subject to
the following laws:
             (1)  Subchapters C and D, Chapter 36;
             (2)  Section 38.001;
             (3)  Section 81.002;
             (4)  Chapter 82;
             (5)  Chapter 83;
             (6)  Chapter 86;
             (7)  Section 201.003;
             (8)  Sections 401.051, 401.052, 401.054-401.062,
401.151, 401.152, 401.155, and 401.156;
             (9)  Chapter 441;
             (10)  Chapter 443;
             (11)  Chapter 461;
             (12)  Section 521.005;
             (13)  Chapter 541;
             (14)  Chapter 701;
             (15)  Chapter 801;
             (16) [(7)]  Chapter 803;
             (17) [(8)]  Chapter 804;
             (18) [(9)]  Subchapter A, Chapter 805; and
             (19) [(10)]  Sections 841.259, 841.701-841.702, and
841.704-841.705[;
             [(11)Section 841.704;
             [(12)Section 841.259;
             [(13)Article 1.10D;
             [(14)Article 1.12;
             [(15)Article 1.13;
             [(16)Article 1.15;
             [(17)Article 1.16;
             [(18)Article 1.19;
             [(19)Article 1.35;
             [(20)Article 1.31;
             [(21)Article 3.56;
             [(22)Article 21.21;
             [(23)Article 21.28;
             [(24)Article 21.28A; and
             [(25)Article 21.28E].
       SECTION 2E.057.  Section 846.007(d), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (d)  A multiple employer welfare arrangement may establish
premium discounts, rebates, or a reduction in otherwise applicable
copayments or deductibles in return for adherence to programs of
health promotion and disease prevention. A discount, rebate, or
reduction established under this subsection does not violate
Section 541.056(a) [4(8), Article 21.21].
       SECTION 2E.058.  Section 846.158(c), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (c)  Each multiple employer welfare arrangement shall pay
the expenses of the examination as provided by Sections 401.151,
401.152, 401.155, and 401.156 [Article 1.16].
       SECTION 2E.059.  Section 846.202(a), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (a)  In this section, "creditable coverage" has the meaning
assigned by Section 1205.004 [Section 3, Article 21.52G, as added
by Chapter 955, Acts of the 75th Legislature, Regular Session,
1997].
       SECTION 2E.060.  Sections 861.052(b) and (d), Insurance
Code, are amended to correct a cross-reference to read as follows:
       (b)  The incorporators shall file with the department:
             (1)  articles of incorporation for the general casualty
company;
             (2)  a charter fee in the amount determined under
Chapter 202 [Article 4.07]; and
             (3)  an affidavit, made by two or more of the
incorporators, that all of the general casualty company's stock is
subscribed in good faith and fully paid for.
       (d)  On receipt of a fee in the amount determined under
Chapter 202 [Article 4.07], the department shall provide the
incorporators with a certified copy of the articles of
incorporation.
       SECTION 2E.061.  Section 861.154, Insurance Code, is amended
to correct a cross-reference to read as follows:
       Sec. 861.154.  DIVIDENDS.  Except as authorized by Sections
403.001 and 403.051 [Article 21.31], the directors of a general
casualty company may not issue dividends.
       SECTION 2E.062.  Section 861.251(b), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (b)  After incorporation and issuance of a certificate of
authority, a general casualty company shall invest the minimum
capital and surplus as provided by Section 822.204. The company
shall invest all other funds of the company in excess of the minimum
capital and surplus as provided by:
             (1)  a provision of Subchapter B, Chapter 424, other
than Section 424.052, 424.072, or 424.073; [Article 2.10] and
             (2)  Section 862.002.
       SECTION 2E.063.  Section 861.252(a), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (a)  On granting of the charter to a general casualty
company, the company shall deposit with the comptroller $50,000 in:
             (1)  cash; or
             (2)  securities of the kind described by a provision of
Subchapter B, Chapter 424, other than Section 424.052, 424.072, or
424.073 [Article 2.10].
       SECTION 2E.064.  Section 861.254(h), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (h)  Except as provided by Chapter 202 [Article 4.07], the
department shall charge a fee of $20 for filing the annual statement
required by this section. The comptroller shall collect the fee.
       SECTION 2E.065.  Section 861.257, Insurance Code, is amended
to correct cross-references to read as follows:
       Sec. 861.257.  EXAMINATION OF COMPANY.  A general casualty
company is subject to:
             (1)  Subchapter A, Chapter 86; and
             (2)  Sections 401.051, 401.052, 401.054-401.062,
401.151, 401.152, 401.155, and 401.156 [Articles 1.15 and 1.16].
       SECTION 2E.066.  Section 861.258(d), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (d)  Subsection (b) does not apply to:
             (1)  real property occupied by buildings used in whole
or in part by a general casualty company in the transaction of
business;
             (2)  an interest in minerals or royalty reserved on the
sale of real property acquired under Sections 862.002(c)(1)-(3);
and
             (3)  investment real property acquired under Section
424.064 [Article 2.10(e)(11)].
       SECTION 2E.067.  Section 862.101(f), Insurance Code, is
amended to correct cross-references to read as follows:
       (f)  Reinsurance that is required or permitted by this
section must comply with:
             (1)  Subchapter A, Chapter 491;
             (2)  Sections 492.051(b) and (c); and
             (3)  Chapter 493 [Articles 5.75-1 and 21.72].
       SECTION 2E.068.  Section 862.151, Insurance Code, is amended
to correct a cross-reference to read as follows:
       Sec. 862.151.  REDUCTION OF CAPITAL STOCK AND PAR VALUE OF
SHARES.  (a)  If the minimum surplus of a fire, marine, or inland
marine insurance company is impaired in excess of the amount
permitted under Subchapter B, Chapter 404 [Section 5, Article
1.10], the commissioner may allow the company to amend its charter
as provided by Sections 822.157 and 822.158 to reduce the amount of
the company's capital stock and the par value of its shares in
proportion to the extent of the permitted amount of impairment.
       (b)  A company acting under Subsection (a):
             (1)  may not reduce the par value of its shares below
the sum computed under Section 822.055;
             (2)  may not deduct from the assets and property on hand
more than $125,000;
             (3)  shall retain the remainder of the assets and
property on hand as surplus assets;
             (4)  may not distribute any of the assets or property to
the shareholders; and
             (5)  may not reduce the capital stock or surplus of the
company to an amount less than the minimum capital and the minimum
surplus required by Sections 822.202, 822.210, and 822.211, subject
to Subchapter B, Chapter 404 [Section 5, Article 1.10].
       SECTION 2E.069.  Sections 862.152(a) and (b), Insurance
Code, are amended to correct a cross-reference to read as follows:
       (a)  This section applies to a fire, marine, or inland marine
insurance company that receives notice from the commissioner under
Subchapter B, Chapter 404 [Section 5, Article 1.10], to make good
within 60 days:
             (1)  any impairment of the company's required capital;
or
             (2)  the company's surplus.
       (b)  The company shall promptly call on its shareholders for
an amount necessary to make the company's capital and surplus equal
to the amount required by Sections 822.054 and 822.210, subject to
Subchapter B, Chapter 404 [Section 5, Article 1.10].
       SECTION 2E.070.  Section 862.153(a), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (a)  If a shareholder of the insurance company who is given
notice under Section 862.152 does not pay the amount called for by
the company under that section, the company may:
             (1)  require the return of the original certificate of
stock held by the shareholder; and
             (2)  issue a new certificate for a number of shares that
the shareholder may be entitled to in the proportion that the value
of the funds of the company, computed without inclusion of any money
or other property paid by shareholders in response to the notice
under Section 862.152, bears to the total amount of the original
capital and the minimum surplus of the company required by Section
822.054 or 822.210, subject to Subchapter B, Chapter 404 [Section
5, Article 1.10].
       SECTION 2E.071.  Section 862.154(b), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (b)  The insurance company shall sell any new stock created
under Subsection (a) for an amount sufficient to make up any
impairment of the company's required minimum capital and to make up
the surplus of the company as required by Section 822.054 or
822.210, subject to Subchapter B, Chapter 404 [Section 5, Article
1.10], but may not impair the capital of the company.
       SECTION 2E.072.  Section 881.006(b), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (b)  Sections 201.001 and 201.002 apply [Article 1.31A
applies] to the fee.
       SECTION 2E.073.  Section 882.002, Insurance Code, is amended
to correct cross-references to read as follows:
       Sec. 882.002.  EXAMINATION OF COMPANY.  The following
provisions [Articles 1.15 and 1.16] apply to a mutual life
insurance company organized under this chapter:
             (1)  Subchapter A, Chapter 86; and
             (2)  Sections 401.051, 401.052, 401.054-401.062,
401.151, 401.152, 401.155, and 401.156.
       SECTION 2E.074.  Section 882.056(a), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (a)  To obtain a charter for a mutual life insurance company
under this chapter, the incorporators must pay the charter fee in
the amount determined under Chapter 202 [Article 4.07] and file
with the department:
             (1)  an application for charter on the form and
including the information prescribed by the commissioner;
             (2)  the company's articles of incorporation; and
             (3)  an affidavit made by two or more of the
incorporators that states that:
                   (A)  the unencumbered surplus requirements of
Section 882.055 are satisfied;
                   (B)  the unencumbered surplus is the bona fide
property of the company; and
                   (C)  the information in the application and
articles of incorporation is true and correct.
       SECTION 2E.075.  Section 883.202(a), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (a)  A domestic mutual insurance company that writes
fidelity and surety bond coverage shall maintain on deposit with
the comptroller cash or securities of the kind described by a
provision of Subchapter B, Chapter 424, other than Section 424.052,
424.072, or 424.073, [Article 2.10] in an amount equal to the amount
of cash or securities required of a domestic stock insurance
company.
       SECTION 2E.076.  Section 884.002(c), Insurance Code, is
amended to correct cross-references to read as follows:
       (c)  The following provisions of this code apply to a
stipulated premium company:
             (1)  Article [1.15;
             [(2)Article 1.15A;
             [(3)Article 1.16;
             [(4)Article 1.19;
             [(5)Article 1.32;
             [(6)Article 3.10;
             [(7)Article 3.39;
             [(8)Article 3.40;
             [(9)Article 21.07-7;
             [(10)Article 21.21;
             [(11)Article 21.28;
             [(12)Article 21.32;
             [(13)Article 21.39;
             [(14)Article] 21.47;
             (2) [(15)]  Section 38.001;
             (3)  Chapter 86;
             (4)  Subchapter A, Chapter 401;
             (5)  Sections 401.051, 401.052, 401.054-401.062,
401.151, 401.152, 401.155, and 401.156;
             (6)  Sections 403.001, 403.052, and 403.102;
             (7)  Subchapter A, Chapter 404;
             (8)  Section 421.001;
             (9)  Subchapter D, Chapter 425;
             (10)  Chapter 443;
             (11)  Chapter 492, other than Sections 492.051(b) and
(c);
             (12)  Chapter 541;
             (13) [(16)]  Sections 801.001-801.002;
             (14) [(17)]  Sections 801.051-801.055;
             (15) [(18)]  Section 801.057;
             (16) [(19)]  Sections 801.101-801.102;
             (17) [(20)]  Subchapter A, Chapter 821;
             (18) [(21)]  Chapter 824;
             (19) [(22)]  Chapter 828;
             (20) [(23)]  Section 841.251;
             (21) [(24)]  Section 841.259;
             (22) [(25)]  Section 841.261; [and]
             (23) [(26)]  Section 841.703; and
             (24)  Chapter 4152.
       SECTION 2E.077.  Section 884.056(a), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (a)  To obtain a charter for a stipulated premium company
under this chapter, the incorporators must pay a charter fee in an
amount determined under Chapter 202 [Article 4.07] and file with
the department:
             (1)  an application for charter on the form and
containing the information prescribed by the department;
             (2)  the company's articles of incorporation; and
             (3)  an affidavit made by two or more of the
incorporators that states that:
                   (A)  the minimum capital and surplus requirements
of Section 884.054 are satisfied;
                   (B)  the capital and surplus is the bona fide
property of the company; and
                   (C)  the information in the application and
articles of incorporation is true and correct.
       SECTION 2E.078.  Section 884.059(c), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (c)  If the commissioner does not reject the application
under Subsection (b), the commissioner shall approve the
application and on receipt of a fee in the amount determined under
Chapter 202 [Article 4.07] shall provide to the incorporators a
certified copy of the application, articles of incorporation, and
submitted affidavit.
       SECTION 2E.079.  Section 884.201, Insurance Code, is amended
to correct a cross-reference to read as follows:
       Sec. 884.201.  FORM OF CAPITAL AND SURPLUS.  After a charter
is granted under this chapter, the stipulated premium company:
             (1)  shall maintain the company's minimum capital at
all times in a form described by Section 884.054(d); and
             (2)  may invest the company's surplus as provided by
Sections 425.203-425.228 [Article 3.39].
       SECTION 2E.080.  Section 884.253(c), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (c)  A stipulated premium company that complies with
Subsection (b) may pay cash dividends in accordance with Sections
403.001 and 403.052 [Article 21.32].
       SECTION 2E.081.  Sections 884.256(a) and (e), Insurance
Code, are amended to correct cross-references to read as follows:
       (a)  Except as provided by Section 884.406, not later than
March 31 of each year a stipulated premium company shall:
             (1)  prepare a statement showing the condition of the
company on December 31 of the preceding year; and
             (2)  deliver the statement to the department
accompanied by a filing fee in the amount determined under Chapter
202 [Article 4.07].
       (e)  Fees collected under this section shall be deposited to
the credit of the Texas Department of Insurance operating account.
Sections 201.001 and 201.002 apply [Article 1.31A applies] to fees
collected under this section.
       SECTION 2E.082.  Section 884.307(a), Insurance Code, is
amended to correct cross-references to read as follows:
       (a)  A stipulated premium company that possesses capital and
unencumbered surplus in a combined amount of at least $100,000 more
than all of its liabilities, including contingent liabilities, may
issue annuity contracts as authorized by Chapters [Chapter] 3 and
1701 and Title 7.
       SECTION 2E.083.  Section 884.310, Insurance Code, is amended
to correct a cross-reference to read as follows:
       Sec. 884.310.  AGENT.  Each agent of a stipulated premium
company must be licensed under Title 13 [Subchapter A, Chapter 21].
       SECTION 2E.084.  Sections 884.311(a) and (c), Insurance
Code, are amended to correct cross-references to read as follows:
       (a)  A stipulated premium insurance company issuing life,
health, or accident coverages or maintaining policies in force that
were issued in accordance with Subchapter I may elect that the
company's investments and transactions be governed by Subchapter C,
Chapter 425 [Article 3.33 of this code].
       (c)  After the second anniversary of the effective date of an
initial election authorized by this section, the stipulated premium
insurance company may elect that the company's investments and
transactions be governed by Sections 425.203-425.228 [Article 3.39
of this code].
       SECTION 2E.085.  Section 884.357, Insurance Code, is amended
to correct a cross-reference to read as follows:
       Sec. 884.357.  FORM APPROVAL.  The approval of a form of an
insurance policy issued by a stipulated premium company is governed
by Chapter 1701 [Article 3.42].
       SECTION 2E.086.  Section 884.402, Insurance Code, is amended
to correct cross-references to read as follows:
       Sec. 884.402.  ADDITIONAL COVERAGE.  A stipulated premium
company that, at the time it begins to issue coverages under this
subchapter, possesses the amounts of capital and unencumbered
surplus equal to or greater than the corresponding amounts required
for organization of a life and health company under Sections
841.052, 841.054, 841.204, 841.205, 841.301, and 841.302 may,
subject to Section 884.403:
             (1)  issue any kind of life insurance coverage
authorized by Chapter 3, 841, or 1701 or Title 7;
             (2)  issue any kind of health or accident insurance
coverage authorized by:
                   (A)  Title 7;
                   (B)  Chapter 3, 704, 841, 846, 982, 1201, 1202,
1203, 1210, 1251, 1252, 1253, 1254, 1301, 1351, 1354, 1359, 1364,
1368, 1501, 1504, 1505, 1506, 1552, 1575, 1576, 1579, 1581, 1625,
1651, 1652, or 1701;
                   (C)  Chapter 492, other than Sections 492.051(b)
and (c);
                   (D)  Subchapter B, Chapter 38, Subchapter D,
Chapter 425, Subchapter A or F, Chapter 1204, Subchapter A, Chapter
1273, Subchapter A, B, or D, Chapter 1355, Subchapter A, Chapter
1366, Subchapter A, Chapter 1507;
                   (E)  Section 1204.151, 1204.153, 1204.154, or
1451.051; or
                   (F)  Chapter 177, Local Government Code; or
             (3)  issue life insurance coverage through policies
without cash surrender values or nonforfeiture values and that
exceed $10,000 on one life.
       SECTION 2E.087.  Section 884.405, Insurance Code, is amended
to correct cross-references to read as follows:
       Sec. 884.405.  AGENT; LICENSE.  (a)  An agent may not
solicit or write any coverage authorized by this subchapter unless
the agent:
             (1)  holds a license issued under Chapter 4054 [Chapter
213, Acts of the 54th Legislature, Regular Session, 1955 (Article
21.07-1, Vernon's Texas Insurance Code)]; and
             (2)  is appointed by the stipulated premium company for
which the agent is soliciting and writing coverage under this
subchapter.
       (b)  The commissioner may issue under Chapter 4054 [Chapter
213, Acts of the 54th Legislature, Regular Session, 1955 (Article
21.07-1, Vernon's Texas Insurance Code),] a license for an agent to
solicit and write any coverage authorized by this subchapter for a
stipulated premium company. Chapter 4054 applies [Chapter 213,
Acts of the 54th Legislature, Regular Session, 1955 (Article
21.07-1, Vernon's Texas Insurance Code), applies] to the stipulated
premium company as if the company were a legal reserve life
insurance company.
       SECTION 2E.088.  Section 884.455, Insurance Code, is amended
to correct a cross-reference to read as follows:
       Sec. 884.455.  REQUIRED SECURITIES.  The commissioner shall
require that a stipulated premium company have securities of the
class and character required by Sections 425.203-425.228 [Article
3.39] in the amount of the reserve liability computed for the
company under Section 884.454 less any deficiency reserve under
Section 884.453 after all the debts and claims against the company
and the minimum capital required by this chapter have been applied.
       SECTION 2E.089.  Section 884.601(a), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (a)  The shareholders of a stipulated premium company that
possesses capital in an amount equal to at least $700,000,
unencumbered surplus in an amount equal to at least $700,000, and
sufficient reserves on hand for the company's policies as required
under provisions of Chapter 425, other than Sections
425.002-425.005, [Subchapter C, Chapter 3,] may convert the company
to a legal reserve company that operates under Chapter 841 by
complying with each requirement applicable to a company operating
under that chapter.
       SECTION 2E.090.  Section 884.701, Insurance Code, is amended
to correct cross-references to read as follows:
       Sec. 884.701.  HAZARDOUS FINANCIAL CONDITION, SUPERVISION,
CONSERVATORSHIP, AND LIQUIDATION.  Subchapter A, Chapter 404, and
Chapters 441 and 443 [Articles 1.32, 21.28, and 21.28-A] apply to a
stipulated premium company engaged in the business of insurance in
this state.
       SECTION 2E.091.  Section 885.301(a), Insurance Code, is
amended to correct cross-references to read as follows:
       (a)  A fraternal benefit society may provide for the payment
of:
             (1)  death benefits in any form;
             (2)  endowment benefits;
             (3)  annuity benefits;
             (4)  benefits for temporary or permanent disability
resulting from disease or accident;
             (5)  benefits for hospital, medical, or nursing
expenses resulting from sickness, bodily infirmity, or accident;
             (6)  benefits for the erection of a monument or
tombstone to the memory of a deceased member;
             (7)  funeral benefits; and
             (8)  any other benefit that may be provided by a life,
accident, or health insurance company and that is:
                   (A)  offered in compliance with a law described by
Section 841.002 [the provisions of Chapter 3 and Title 7]
applicable to a life, accident, or health insurance company; and
                   (B)  consistent with this chapter.
       SECTION 2E.092.  Section 885.306(a), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (a)  A fraternal benefit society may not deliver or issue for
delivery in this state a benefit certificate unless the form of the
certificate has been filed under Chapter 1701 [Article 3.42].
       SECTION 2E.093.  Section 885.351, Insurance Code, is amended
to correct cross-references to read as follows:
       Sec. 885.351.  AGENTS.  (a)  A fraternal benefit society may
appoint an agent licensed by the department under Subchapter B,
Chapter 4054, [Article 21.07-1] to sell benefits listed under
Section 885.301(a) to society members.
       (b)  Except as provided by Section 885.352, a person may not
solicit or procure benefit contracts for a fraternal benefit
society unless the person is licensed as a general life, accident,
and health agent under Subchapter B, Chapter 4054 [Article
21.07-1].
       (c)  The licensing and regulation of agents for fraternal
benefit societies is subject to Title 13 [Subchapter A, Chapter
21,] and other laws regulating those agents.
       SECTION 2E.094.  Section 885.353, Insurance Code, is amended
to correct cross-references to read as follows:
       Sec. 885.353.  EMPLOYMENT OF CERTAIN PERSONS TO SOLICIT
BUSINESS PROHIBITED.  A fraternal benefit society may not employ or
otherwise retain a person to solicit business if the person has had
a license revoked under Chapter 4005 [Article 21.07 or 21.14, or
under Chapter 213, Acts of the 54th Legislature, Regular Session,
1955 (Article 21.07-1, Vernon's Texas Insurance Code)].
       SECTION 2E.095.  Section 885.404(c), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (c)  For any category of benefit certificates issued to
insure a female risk, a modified net premium or present value
referred to in Subchapter B, Chapter 425, [Article 3.28] may be
computed according to an age not more than six years younger than
the actual age of the insured.
       SECTION 2E.096.  Section 885.408(b), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (b)  Sections 425.203-425.228 apply [Article 3.39 applies]
to reserve investments for a domestic fraternal benefit society.
       SECTION 2E.097.  Section 885.410, Insurance Code, is amended
to correct cross-references to read as follows:
       Sec. 885.410.  EXAMINATION OF DOMESTIC FRATERNAL BENEFIT
SOCIETIES.  A domestic fraternal benefit society is subject to:
             (1)  Subchapter A, Chapter 86;
             (2)  Subchapter A, Chapter 401; and
             (3)  Sections 401.051, 401.052, 401.054-401.062,
401.151, 401.152, 401.155, and 401.156 [Articles 1.15, 1.15A, and
1.16].
       SECTION 2E.098.  Section 885.411(e), Insurance Code, is
amended to correct cross-references to read as follows:
       (e)  A foreign fraternal benefit society is subject to the
provisions of Subchapter A, Chapter 86, and Sections 401.051,
401.052, 401.054-401.062, 401.151, 401.152, 401.155, and 401.156
[Articles 1.15 and 1.16] that apply to an insurer that is not
organized under the laws of this state but is authorized to engage
in business in this state.
       SECTION 2E.099.  Section 885.412(b), Insurance Code, is
amended to correct cross-references to read as follows:
       (b)  This section does not apply to a proceeding involving a
fraternal benefit society instituted by the commissioner or the
state, including an administrative hearing, a proceeding under
Chapter 441 or 443 [Article 21.28 or 21.28-A], or a court
proceeding.
       SECTION 2E.100.  Section 885.413, Insurance Code, is amended
to correct a cross-reference to read as follows:
       Sec. 885.413.  FEES.  The department shall deposit fees
collected under this chapter to the credit of the Texas Department
of Insurance operating account. Sections 201.001 and 201.002 apply
[Article 1.31A applies] to fees collected under this chapter.
       SECTION 2E.101.  Section 885.414(a), Insurance Code, is
amended to correct cross-references to read as follows:
       (a)  This chapter does not prevent or limit any action by or
remedy available to the department or the state under Chapter 441 or
443 [Article 21.28 or 21.28-A] or other applicable law.
       SECTION 2E.102.  Section 886.107(b), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (b)  Sections 201.001 and 201.002 apply [Article 1.31A
applies] to the fee.
       SECTION 2E.103.  Section 887.062, Insurance Code, is amended
to correct cross-references to read as follows:
       Sec. 887.062.  EXAMINATION.  The following provisions
[Articles 1.15 and 1.16] apply to an association:
             (1)  Subchapter A, Chapter 86; and
             (2)  Sections 401.051, 401.052, 401.054-401.062,
401.151, 401.152, 401.155, and 401.156.
       SECTION 2E.104.  Section 887.551, Insurance Code, is amended
to correct cross-references to read as follows:
       Sec. 887.551.  HAZARDOUS FINANCIAL CONDITION, SUPERVISION,
CONSERVATORSHIP, AND LIQUIDATION.  The following provisions
[Articles 1.32, 21.28, and 21.28-A] apply to an association engaged
in the business of insurance in this state:
             (1)  Subchapter A, Chapter 404;
             (2)  Chapter 441; and
             (3)  Chapter 443.
       SECTION 2E.105.  Section 888.052(b), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (b)  Annual assessments collected under this section shall
be deposited to the credit of the Texas Department of Insurance
operating account. Sections 201.001 and 201.002 apply [Article
1.31A applies] to the assessments.
       SECTION 2E.106.  Section 911.001(c), Insurance Code, is
amended to correct cross-references to read as follows:
       (c)  Except to the extent of any conflict with this chapter,
the following provisions apply to a farm mutual insurance company:
             (1)  Subchapter A, Chapter 32;
             (2)  Subchapter D, Chapter 36;
             (3)  Sections 31.002(2), 32.021(c), 32.023, 32.041,
33.002, 38.001, 81.001-81.004, 201.005, 201.055, 401.051, 401.052,
401.054-401.062, 401.103-401.106, 401.151, 401.152, 401.155,
401.156, 421.001, 801.051-801.055, 801.057, 801.101, 801.102,
822.204, 841.004, 841.251, 841.252, [and] 862.101, 1806.001,
1806.101, 1806.103(b), and 1806.104-1806.107;
             (4)  Chapter 86;
             (5)  Subchapter A, Chapter 401;
             (6)  Subchapter B, Chapter 404;
             (7)  Chapter 422;
             (8)  Subchapter B, Chapter 424, other than Section
424.052, 424.072, or 424.073;
             (9)  Chapter 441;
             (10)  Chapter 443;
             (11)  Chapter 462;
             (12)  Chapter 481;
             (13)  Chapter 541;
             (14) [(5)]  Chapter 802;
             (15) [(6)]  Subchapter A, Chapter 805;
             (16) [(7)]  Chapter 824; and
             (17)  Article [(8)  Sections 2, 5, 6, and 17, Article
1.10, and Articles] 1.09-1[, 1.12, 1.13, 1.15, 1.15A, 1.16, 1.17,
1.18, 1.19, 2.10, 5.20, 21.28, 21.28--A, 21.28--C, 21.39, and
21.39--A].
       SECTION 2E.107.  Section 911.251, Insurance Code, is amended
to correct cross-references to read as follows:
       Sec. 911.251.  LICENSING AND APPOINTMENT OF CERTAIN
AGENTS.  (a)  An individual or firm may not solicit, write, sign,
execute, or deliver insurance policies, bind insurance risks,
collect premiums, or otherwise act on behalf of a farm mutual
insurance company in the capacity of an insurance agent in the
solicitation or sale of crop insurance unless the individual or
firm holds a license issued under Title 13 [Subchapter A, Chapter
21].
       (b)  A farm mutual insurance company may not appoint and act
through an agent under Subchapter F, Chapter 4051 [Article
21.14-2].
       SECTION 2E.108.  Sections 911.308(c) and (d), Insurance
Code, are amended to correct cross-references to read as follows:
       (c)  A company described by Subsection (b) shall invest the
minimum unencumbered surplus as provided by Section 822.204. The
company may invest funds in excess of the minimum unencumbered
surplus as provided by the provisions of Subchapter B, Chapter 424,
other than Sections 424.052, 424.072, and 424.073 [Article 2.10].
       (d)  A company described by Subsection (b) shall, without
delay, restore the minimum unencumbered surplus if the surplus is
impaired. The department shall proceed as provided by Subchapter
B, Chapter 404 [Section 5, Article 1.10].
       SECTION 2E.109.  Sections 912.002(b) and (c), Insurance
Code, are amended to correct cross-references to read as follows:
       (b)  A county mutual insurance company is subject to:
             (1)  Sections 38.001, 401.051, 401.052,
401.054-401.062, 401.151, 401.152, 401.155, 401.156, 501.159,
501.202, 501.203, [and] 822.204, 1806.001, 1806.101, 1806.103(b),
1806.104-1806.107, 2002.002, and 2002.005;
             (2)  Subchapter A, Chapter 86;
             (3)  Subchapter A, Chapter 401;
             (4)  the provisions of Subchapter B, Chapter 424, other
than Sections 424.052, 424.072, and 424.073;
             (5)  Chapters 221, 251, 252, 254, [and] 541, and 2210;
and
             (6) [(3)]  Articles [1.15, 1.15A, 1.16, 2.10, 5.20,
5.37, 5.38,] 5.39 and [,] 5.40[, and 21.49].
       (c)  Rate regulation for a residential fire and allied lines
insurance policy written by a county mutual insurance company is
subject to Chapter 2253 [Subchapters Q and U, Chapter 5]. On and
after December 1, 2004, rate regulation for a personal automobile
insurance policy and a residential fire and allied lines insurance
policy written by a county mutual insurance company is subject to
Article 5.13-2 and Chapter 2251. A county mutual insurance company
is subject to Chapter 2253 [Subchapter U, Chapter 5]. The
commissioner may adopt rules as necessary to implement this
subsection.
       SECTION 2E.110.  Section 912.152, Insurance Code, is amended
to correct cross-references to read as follows:
       Sec. 912.152.  POLICY FORMS.  (a)  A county mutual insurance
company is subject to:
             (1)  Sections 1952.051-1952.055;
             (2)  Subchapter B, Chapter 2002;
             (3)  Chapter 2301; and
             (4)  Articles 5.06 and[,] 5.35[, and 5.145].
       (b)  County mutual insurance companies shall file policy
forms under Subchapter B, Chapter 2301, [Article 5.145] or continue
to use the standard policy forms and endorsements promulgated under
former Articles 5.06 and 5.35 on notification to the commissioner
in writing in the manner prescribed by those articles that those
forms will continue to be used.
       SECTION 2E.111.  Section 912.251, Insurance Code, is amended
to correct a cross-reference to read as follows:
       Sec. 912.251.  LICENSING AND APPOINTMENT OF AGENTS.  An
agent for a county mutual insurance company must be licensed and
appointed as provided by Title 13 [Subchapter A, Chapter 21].
       SECTION 2E.112.  Section 912.308(b), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (b)  A county mutual insurance company is subject to
Subchapter B, Chapter 404, and Sections 822.203, 822.205, 822.210,
and 822.212 [and Section 5, Article 1.10].
       SECTION 2E.113.  Section 912.701, Insurance Code, is amended
to correct cross-references to read as follows:
       Sec. 912.701.  HAZARDOUS FINANCIAL CONDITION, SUPERVISION,
CONSERVATORSHIP, AND LIQUIDATION.  Subchapter A, Chapter 404, and
Chapters 441 and 443 [Articles 1.32, 21.28, and 21.28-A] apply to a
county mutual insurance company engaged in the business of
insurance in this state.
       SECTION 2E.114.  Section 941.003(c), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (c)  Chapter 2007 [Subchapter M, Chapter 5,] applies to rates
for motor vehicle insurance written by a Lloyd's plan.
       SECTION 2E.115.  Section 941.102(d), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (d)  Sections 201.001 and 201.002 apply [Article 1.31A
applies] to a fee collected under Subsection (c).
       SECTION 2E.116.  Section 941.204(b), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (b)  Funds of a Lloyd's plan other than the minimum guaranty
fund and surplus described by Subsection (a) must, if invested, be
invested as provided by:
             (1)  the provisions of Subchapter B, Chapter 424, other
than Sections 424.052, 424.072, and 424.073 [Article 2.10]; or
             (2)  any other law governing the investment of the
funds of a capital stock insurance company engaged in the same kind
of business.
       SECTION 2E.117.  Section 941.206, Insurance Code, is amended
to correct cross-references to read as follows:
       Sec. 941.206.  HAZARDOUS FINANCIAL CONDITION, SUPERVISION,
CONSERVATORSHIP, AND LIQUIDATION; IMPAIRMENT OF SURPLUS.  (a)  
Subchapter A, Chapter 404, and Chapters 441 and 443 [Articles 1.32,
21.28, and 21.28-A] apply to a Lloyd's plan engaged in the business
of insurance in this state.
       (b)  Subchapter B, Chapter 404, [Section 5, Article 1.10,]
applies to a Lloyd's plan.
       SECTION 2E.118.  Section 941.251(a), Insurance Code, is
amended to correct cross-references to read as follows:
       (a)  The provisions of Sections 86.001, 86.002, 401.051,
401.052, 401.054-401.062, 401.151, 401.152, 401.155, and 401.156 
[The provisions of Articles 1.15 and 1.16] that relate to the
examination of insurers apply to a Lloyd's plan.
       SECTION 2E.119.  Section 942.003(c), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (c)  Chapter 2007 [Subchapter M, Chapter 5,] applies to rates
for motor vehicle insurance written by an exchange.
       SECTION 2E.120.  Section 942.155(c), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (c)  An exchange shall maintain the required assets as to:
             (1)  minimum surplus requirements, as provided by
Section 822.204; and
             (2)  other funds, as provided by the provisions of
Subchapter B, Chapter 424, other than Sections 424.052, 424.072,
and 424.073 [Article 2.10].
       SECTION 2E.121.  Section 942.156, Insurance Code, is amended
to correct a cross-reference to read as follows:
       Sec. 942.156.  ISSUANCE OF FIDELITY AND SURETY BOND
INSURANCE; DEPOSIT REQUIRED.  (a)  If a domestic exchange writes
fidelity or surety bond insurance in this state, the exchange shall
keep on deposit with the comptroller money, bonds, or other
securities in an amount of not less than $50,000. The department
shall approve for the deposit securities described by the
provisions of Subchapter B, Chapter 424, other than Sections
424.052, 424.072, and 424.073, [Article 2.10,] and the exchange
shall maintain the approved securities intact at all times.
       (b)  A foreign exchange that writes fidelity or surety bond
insurance in this state shall file with the department evidence
satisfactory to the department that the exchange has, for the
protection of its subscribers, at least $100,000 in money, bonds,
or other securities as described by the provisions of Subchapter B,
Chapter 424, other than Sections 424.052, 424.072, and 424.073, 
[Article 2.10] on deposit with the comptroller or other appropriate
official of its state of domicile or in escrow under that official's
supervision and control in a reliable bank or trust company. If
those bonds or other securities are not acceptable to and approved
by the department, the department may deny the attorney in fact for
the exchange a certificate of authority.
       SECTION 2E.122.  Sections 942.203(a) and (b), Insurance
Code, are amended to correct cross-references to read as follows:
       (a)  To the extent applicable, the schedule of fees
established under Chapter 202 [Article 4.07] applies to an exchange
and the exchange's attorney in fact.
       (b)  An exchange is subject to:
             (1)  Chapters 221 and 222; and
             (2)  Chapters 251-255 [Articles 4.04, 4.10, 4.11, 5.12,
5.24, 5.49, and 5.68].
       SECTION 2E.123.  Section 961.002(b), Insurance Code, is
amended to correct cross-references to read as follows:
       (b)  The following provisions of this code apply to a
nonprofit legal services corporation in the same manner that they
apply to an insurer or a person engaged in the business of
insurance, to the extent the provisions do not conflict with this
chapter:
             (1)  Articles [1.01,] 1.09-1 and[, 1.11, 1.12, 1.13,
1.15, 1.15A, 1.16, 1.17, 1.18, 1.19, 1.20, 1.21, 1.22, 21.21,
21.21-2, 21.28, 21.28-A,] 21.47[, and 21.49-8];
             (2)  [Sections 2, 6, and 17, Article 1.10;
             [(3)]  Sections 31.002, 31.004, 31.007, 31.021,
31.022, 31.023, [31.025,] 31.026, 31.027, [32.001, 32.002,
32.003,] 32.021, 32.022(a), 32.023, [32.041,] 33.002, 33.006,
36.108, 38.001, 81.004, 201.005, 201.055, 401.051, 401.052,
401.054-401.062, 401.103-401.106, 401.151, 401.152, 401.155,
401.156, 801.001, 801.002, 801.051-801.055, 801.057, 801.101,
801.102, [802.003,] 841.251, and 841.252;
             (3) [(4)]  Subchapter B, Chapter 31;
             (4)  Subchapters A and C, Chapter 32;
             (5)  Subchapter D, Chapter 36;
             (6)  Subchapter A, Chapter 401;
             (7)  Subchapter A, Chapter 542;
             (8)  Subchapter A, Chapter 805; and
             (9)  Chapters 86, 402, 441, 443, 481, 541, 802, and [(7)  
Chapter] 824.
       SECTION 2E.124.  Section 961.005, Insurance Code, is amended
to correct a cross-reference to read as follows:
       Sec. 961.005.  AGENTS.  The licensing and regulation of an
agent authorized to solicit prepaid legal services contracts for a
nonprofit legal services corporation is subject to Title 13 
[Subchapter A, Chapter 21].
       SECTION 2E.125.  Section 981.005, Insurance Code, is amended
to correct a cross-reference to read as follows:
       Sec. 981.005.  VALIDITY OF CONTRACTS.  (a)  Unless a material
and intentional violation of this chapter or Chapter 225 [Section
12, Article 1.14-2,] exists, an insurance contract obtained from an
eligible surplus lines insurer is:
             (1)  valid and enforceable as to all parties; and
             (2)  recognized in the same manner as a comparable
contract issued by an authorized insurer.
       (b)  A material and intentional violation of this chapter or
Chapter 225 [Section 12, Article 1.14-2,] does not preclude the
insured from enforcing the insured's rights under the contract.
       SECTION 2E.126.  Section 981.006, Insurance Code, is amended
to correct a cross-reference to read as follows:
       Sec. 981.006.  SANCTIONS.  Chapter 82 applies to a surplus
lines agent or an eligible surplus lines insurer that violates:
             (1)  this chapter;
             (2)  Chapter 225 [Section 12, Article 1.14-2]; or
             (3)  a rule or order adopted under Subchapter B or
Section 981.005.
       SECTION 2E.127.  Section 981.008, Insurance Code, is amended
to correct a cross-reference to read as follows:
       Sec. 981.008.  SURPLUS LINES INSURANCE PREMIUM TAX.  The
premiums charged for surplus lines insurance are subject to the
premium tax imposed under Chapter 225 [Section 12, Article 1.14-2].
       SECTION 2E.128.  Section 981.101(b), Insurance Code, is
amended to correct cross-references to read as follows:
       (b)  A surplus lines document must state, in 11-point type,
the following:
This insurance contract is with an insurer not licensed to transact
insurance in this state and is issued and delivered as surplus line
coverage under the Texas insurance statutes. The Texas Department
of Insurance does not audit the finances or review the solvency of
the surplus lines insurer providing this coverage, and the insurer
is not a member of the property and casualty insurance guaranty
association created under Chapter 462 [Article 21.28-C], Insurance
Code. Chapter 225 [Section 12, Article 1.14-2], Insurance Code,
requires payment of a __________ (insert appropriate tax rate)
percent tax on gross premium.
       SECTION 2E.129.  Section 981.104(b), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (b)  A change made under Subsection (a) may not result in
coverage or an insurance contract that would violate this chapter
or Chapter 225 [Section 12, Article 1.14-2], if originally issued
on that basis.
       SECTION 2E.130.  Section 981.160, Insurance Code, is amended
to correct a cross-reference to read as follows:
       Sec. 981.160.  NO ENFORCEMENT AUTHORITY.  This subchapter
does not give the stamping office authority to enforce this chapter
or Chapter 225 [Section 12, Article 1.14-2].
       SECTION 2E.131.  Section 981.201, Insurance Code, is amended
to correct a cross-reference to read as follows:
       Sec. 981.201.  DEFINITION.  In this subchapter, "managing
general agent" means an agent licensed under Chapter 4053 [the
Managing General Agents' Licensing Act (Article 21.07-3, Vernon's
Texas Insurance Code)].
       SECTION 2E.132.  Section 981.203(a), Insurance Code, is
amended to correct cross-references to read as follows:
       (a)  The department may issue a surplus lines license to an
applicant who the department determines complies with Subsection
(b) and is:
             (1)  an individual who:
                   (A)  has passed an examination under Chapter 4002 
[Article 21.01-1] and department rules; and
                   (B)  holds a current license as:
                         (i)  a general property and casualty agent
authorized under Subchapter B, Chapter 4051 [Article 21.14]; or
                         (ii)  a managing general agent; or
             (2)  a corporation, limited liability company, or
partnership that:
                   (A)  has at least one officer or director or at
least one active partner who has passed the required surplus lines
license examination;
                   (B)  holds a current license as:
                         (i)  a general property and casualty agent
authorized under Subchapter B, Chapter 4051 [Article 21.14]; or
                         (ii)  a managing general agent; and
                   (C)  conducts insurance activities under this
chapter only through an individual licensed under this section.
       SECTION 2E.133.  Section 981.220(b), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (b)  A surplus lines license granted to a managing general
agent who is not also licensed under Subchapters A-E, Chapter 4051, 
[Article 21.14] is limited to the acceptance of business
originating through a licensed general property and casualty agent.
The license does not authorize the agent to engage in business
directly with the insurance applicant.
       SECTION 2E.134.  Section 981.221, Insurance Code, is amended
to correct a cross-reference to read as follows:
       Sec. 981.221.  SUSPENSION OR REVOCATION OF LICENSE.  If a
license holder does not maintain the qualifications necessary to
obtain the license, the department may revoke or suspend the
license or deny the renewal of that license in accordance with
Chapter 4003 and Subchapters B and C, Chapter 4005 [Article
21.01-2].
       SECTION 2E.135.  Section 981.222, Insurance Code, is amended
to correct cross-references to read as follows:
       Sec. 981.222.  APPLICABILITY OF OTHER LAW.  In addition to
the requirements of this chapter, the administration and regulation
of a surplus lines agent's license is governed by Title 13 
[Subchapter A, Chapter 21], except that the provisions of Sections
4001.002(b)(2)-(6), 4001.003, and 4001.004 and Subchapters C-G,
Chapter 4001, do [Article 21.07 does] not apply to a license issued
under this subchapter.
       SECTION 2E.136.  Section 982.107, Insurance Code, is amended
to correct a cross-reference to read as follows:
       Sec. 982.107.  APPLICABILITY OF OTHER LAW.  Chapter 402 
[Article 21.49-8] applies to a foreign or alien insurance company.
       SECTION 2E.137.  Section 982.254, Insurance Code, is amended
to correct a cross-reference to read as follows:
       Sec. 982.254.  FAILURE TO ELIMINATE IMPAIRMENT OF TRUSTEED
SURPLUS.  If an alien insurance company has not satisfied the
commissioner at the end of the designated period under Section
982.253(a) that the impairment has been eliminated, the
commissioner may proceed against the company as provided by Chapter
441 [Article 21.28-A] as an insurance company whose further
transaction of the business of insurance in the United States will
be hazardous to its policyholders in the United States.
       SECTION 2E.138.  Section 982.255(a), Insurance Code, is
amended to correct cross-references to read as follows:
       (a)  The books, records, accounting, and verification
relating to an authorized alien insurance company's trusteed assets
are subject to examination by the department or the department's
appointed representative at the United States branch office of the
company, in the same manner and to the same extent that applies
under Subchapter A, Chapter 86, and Sections 401.051, 401.052,
401.054-401.062, 401.151, 401.152, 401.155, and 401.156 [Articles
1.15 and 1.16] to domestic and foreign insurance companies
authorized to engage in the same kind of insurance.
       SECTION 2E.139.  Section 984.002, Insurance Code, is amended
to correct cross-references to read as follows:
       Sec. 984.002.  AUTHORIZED AGENT REQUIRED.  A Mexican
casualty insurance company may engage in the business of insurance
in this state only through an agent licensed by the department under  
Subchapters A-E and G, Chapter 4051, or Chapter 4055 [Article 21.09
or 21.14].
PART F.  CROSS-REFERENCE UPDATES:  TITLE 7, INSURANCE CODE
SECTION 2F.001. Section 1101.055(b), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (b)  A life insurance policy may provide for a settlement
that will be less than the amount required under Subsection (a) if
the death of the insured is:
             (1)  by the insured's own hand regardless of whether the
insured is sane or insane;
             (2)  caused by following a hazardous occupation that is
stated in the policy; or
             (3)  the result of aviation activities under conditions
specified in the policy and approved by the department under
Chapter 1701 [Article 3.42].
       SECTION 2F.002. Section 1101.101(b), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (b)  Notwithstanding Chapter 1701 [Article 3.42], a policy
issued or delivered in another state, territory, district, or
county by a life insurance company organized under the laws of this
state may contain any provision required by the laws of that state,
territory, district, or county.
       SECTION 2F.003. Section 1102.004(b), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (b)  This section does not require the resubmission for
approval of any previously approved insurance policy form unless:
             (1)  withdrawal of approval is authorized under this
section or Chapter 1701 [Article 3.42]; or
             (2)  after notice and hearing, the commissioner
determines that approval was obtained by improper means, including
by misrepresentation, fraud, or a misleading statement or document.
       SECTION 2F.004. Section 1105.007(b), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (b)  Subsection (a) does not require a cash surrender value
greater than the reserve for the policy computed as provided by
Subchapter B, Chapter 425 [Article 3.28].
       SECTION 2F.005. Section 1105.056, Insurance Code, is
amended to correct a cross-reference to read as follows:
       Sec. 1105.056.  NONFORFEITURE INTEREST RATE.  The annual
nonforfeiture interest rate for a policy issued in a particular
calendar year is equal to 125 percent of the calendar year statutory
valuation interest rate for that policy as defined by Subchapter B,
Chapter 425 [Article 3.28], rounded to the nearest one-fourth of
one percent.
       SECTION 2F.006. Section 1111.006, Insurance Code, is
amended to correct cross-references to read as follows:
       Sec. 1111.006.  APPLICABILITY OF OTHER INSURANCE LAWS.  The
following laws apply to a person engaged in the business of life or
viatical settlements:
             (1)  [Articles 1.10, 1.10D, 1.19, and 21.21;
             [(2)]  Chapters 82, 83, [and] 84, 481, 541, and 701;
             (2) [(3)] Sections 31.002, [32.001, 32.002, 32.003,]
32.021, 32.023, 32.041, 38.001, 81.004, 86.001, 86.051, 86.052,
201.004, 401.051, 401.054, 401.151(a), 521.003, 521.004,
543.001(c), 801.056, and 862.052;
             (3)  Subchapter A, Chapter 32; [and]
             (4)  Subchapter C, Chapter 36;
             (5)  Subchapter B, Chapter 404; and
             (6)  Subchapter B, Chapter 491.
       SECTION 2F.007. Section 1131.007, Insurance Code, is
amended to correct a cross-reference to read as follows:
       Sec. 1131.007.  POLICY FORM.  A policy of group life
insurance is subject to Chapter 1701 [Article 3.42].
       SECTION 2F.008. Section 1151.101, Insurance Code, is
amended to correct a cross-reference to read as follows:
       Sec. 1151.101.  AUTHORIZED PROVISIONS.  In addition to the
provisions required by Subchapter B and Section 1151.152, an
industrial life insurance policy may:
             (1)  exclude liability or promise a benefit that is
less than the full amount payable as a death benefit if the insured:
                   (A)  dies by the insured's own hand, regardless of
whether the insured is sane or insane; or
                   (B)  dies as a result of engaging in a stated
hazardous occupation;
             (2)  promise a benefit that is less than the full amount
payable if the insured dies as a result of an aviation activity
under a condition specified in the policy approved by the
department as provided by Chapter 1701 [Article 3.42];
             (3)  limit the maximum amount payable on the death of a
child younger than 15 years of age; and
             (4)  include any other provision not otherwise
prohibited by this chapter.
       SECTION 2F.009. Section 1152.151, Insurance Code, is
amended to correct cross-references to read as follows:
       Sec. 1152.151.  AGENT'S LICENSE REQUIRED.  (a) A person may
not sell or offer for sale in this state a variable contract, or act
to negotiate, make, or consummate a variable contract for another,
unless the department has licensed the person under Chapter 4054
[Article 21.07-1] as a general life, accident, and health agent.
       (b)  The licensing and regulation of a person acting as a
variable contract agent is subject to the same provisions
applicable to the licensing and regulation of other agents under
Title 13 [Subchapter A, Chapter 21].
PART G.  CROSS-REFERENCE UPDATES:  TITLE 8, INSURANCE CODE
SECTION 2G.001.  Section 1251.202, Insurance Code, is
amended to correct cross-references to read as follows:
       Sec. 1251.202.  NOTICE REGARDING CERTAIN EMPLOYER HEALTH
BENEFIT PLANS.  (a)  In this section, "standard health benefit plan"
means a plan offered under [Article 3.80, Article 20A.09N, or]
Chapter 1507.
       (b)  If an employer offers to employees a standard health
benefit plan, the employer shall:
             (1)  provide a copy of the disclosure statement
provided to the employer by the plan issuer under [Section 6,
Article 3.80, Article 20A.09N(g),] Section 1507.006[,] or
[Section] 1507.056 to:
                   (A)  each employee:
                         (i)  before the employee initially enrolls
in the plan, unless the employee received notice under Paragraph
(B) on or after the 90th day before the date the employee initially
enrolls; and
                         (ii)  not later than the 30th day before the
date the employee renews enrollment in the plan; and
                   (B)  each prospective employee before the
prospective employee is hired by the employer; and
             (2)  obtain a copy of the notice signed by the employee
or prospective employee at the time the notice is provided.
       SECTION 2G.002.  Section 1272.052(c), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (c)  The parties to the delegation agreement shall determine
which party bears the expense of complying with a requirement of
this subchapter, including the cost of an examination required by
the department under Subchapter B, Chapter 401 [Article 1.15], if
applicable.
       SECTION 2G.003.  Section 1272.058, Insurance Code, is
amended to correct a cross-reference to read as follows:
       Sec. 1272.058.  INFORMATION RELATING TO DELEGATED THIRD
PARTY.  A delegation agreement required by Section 1272.052 must
require the delegated entity to provide the license number of a
delegated third party performing a function that requires:
             (1)  a license as a third-party administrator under
Chapter 4151 or utilization review agent under Chapter 4201
[Article 21.58A]; or
             (2)  another license under this code or another
insurance law of this state.
       SECTION 2G.004.  Section 1272.060, Insurance Code, is
amended to correct a cross-reference to read as follows:
       Sec. 1272.060.  UTILIZATION REVIEW.  A delegation agreement
required by Section 1272.052 must provide that:
             (1)  enrollees shall receive notification at the time
of enrollment of which entity is responsible for performing
utilization review;
             (2)  the delegated entity or third party performing
utilization review shall perform that review in accordance with
Chapter 4201 [Article 21.58A]; and
             (3)  the delegated entity or third party shall forward
utilization review decisions made by the entity or third party to
the health maintenance organization on a monthly basis.
       SECTION 2G.005.  Section 1272.301(d), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (d)  A denial of out-of-network services under this section
is subject to appeal under Chapter 4201 [Article 21.58A].
       SECTION 2G.006.  Section 1274.004(b), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (b)  Before adopting rules under this section, the
commissioner shall consult and receive advice from the technical
advisory committee on claims processing established under Chapter
1212 [Article 21.52Y].
       SECTION 2G.007.  Sections 1305.004(a)(11), (12), (17),
(27), and (28), Insurance Code, are amended to correct
cross-references to read as follows:
             (11)  "Independent review organization" means an
entity that is certified by the commissioner to conduct independent
review under Chapter 4202 [Article 21.58C] and rules adopted by the
commissioner.
             (12)  "Life-threatening" has the meaning assigned by
Section 4201.002 [2, Article 21.58A].
             (17)  "Nurse" has the meaning assigned by Section
4201.002 [Section 2, Article 21.58A].
             (27)  "Utilization review" has the meaning assigned by
Section 4201.002 [2, Article 21.58A].
             (28)  "Utilization review agent" has the meaning
assigned by Section 4201.002 [Article 21.58A].
       SECTION 2G.008.  Section 1305.056(c), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (c)  A network is subject to Chapters 441 and 443 [Articles
21.28 and 21.28-A] and is considered an insurer or insurance
company, as applicable, for purposes of those laws.
       SECTION 2G.009.  Section 1305.154(c), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (c)  A network's contract with a carrier must include:
             (1)  a description of the functions that the carrier
delegates to the network, consistent with the requirements of
Subsection (b), and the reporting requirements for each function;
             (2)  a statement that the network and any management
contractor or third party to which the network delegates a function
will perform all delegated functions in full compliance with all
requirements of this chapter, the Texas Workers' Compensation Act,
and rules of the commissioner or the commissioner of workers'
compensation;
             (3)  a provision that the contract:
                   (A)  may not be terminated without cause by either
party without 90 days' prior written notice; and
                   (B)  must be terminated immediately if cause
exists;
             (4)  a hold-harmless provision stating that the
network, a management contractor, a third party to which the
network delegates a function, and the network's contracted
providers are prohibited from billing or attempting to collect any
amounts from employees for health care services under any
circumstances, including the insolvency of the carrier or the
network, except as provided by Section 1305.451(b)(6);
             (5)  a statement that the carrier retains ultimate
responsibility for ensuring that all delegated functions and all
management contractor functions are performed in accordance with
applicable statutes and rules and that the contract may not be
construed to limit in any way the carrier's responsibility,
including financial responsibility, to comply with all statutory
and regulatory requirements;
             (6)  a statement that the network's role is to provide
the services described under Subsection (b) as well as any other
services or functions delegated by the carrier, including functions
delegated to a management contractor, subject to the carrier's
oversight and monitoring of the network's performance;
             (7)  a requirement that the network provide the
carrier, at least monthly and in a form usable for audit purposes,
the data necessary for the carrier to comply with reporting
requirements of the department and the division of workers'
compensation with respect to any services provided under the
contract, as determined by commissioner rules;
             (8)  a requirement that the carrier, the network, any
management contractor, and any third party to which the network
delegates a function comply with the data reporting requirements of
the Texas Workers' Compensation Act and rules of the commissioner
of workers' compensation;
             (9)  a contingency plan under which the carrier would,
in the event of termination of the contract or a failure to perform,
reassume one or more functions of the network under the contract,
including functions related to:
                   (A)  payments to providers and notification to
employees;
                   (B)  quality of care;
                   (C)  utilization review;
                   (D)  retrospective review; and
                   (E)  continuity of care, including a plan for
identifying and transitioning employees to new providers;
             (10)  a provision that requires that any agreement by
which the network delegates any function to a management contractor
or any third party be in writing, and that such an agreement require
the delegated third party or management contractor to be subject to
all the requirements of this subchapter;
             (11)  a provision that requires the network to provide
to the department the license number of a management contractor or
any delegated third party who performs a function that requires a
license as a utilization review agent under Chapter 4201 [Article
21.58A] or any other license under this code or another insurance
law of this state;
             (12)  an acknowledgment that:
                   (A)  any management contractor or third party to
whom the network delegates a function must perform in compliance
with this chapter and other applicable statutes and rules, and that
the management contractor or third party is subject to the
carrier's and the network's oversight and monitoring of its
performance; and
                   (B)  if the management contractor or the third
party fails to meet monitoring standards established to ensure that
functions delegated to the management contractor or the third party
under the delegation contract are in full compliance with all
statutory and regulatory requirements, the carrier or the network
may cancel the delegation of one or more delegated functions;
             (13)  a requirement that the network and any management
contractor or third party to which the network delegates a function
provide all necessary information to allow the carrier to provide
information to employees as required by Section 1305.451; and
             (14)  a provision that requires the network, in
contracting with a third party directly or through another third
party, to require the third party to permit the commissioner to
examine at any time any information the commissioner believes is
relevant to the third party's financial condition or the ability of
the network to meet the network's responsibilities in connection
with any function the third party performs or has been delegated.
       SECTION 2G.010.  Section 1305.351(a), Insurance Code, is
amended to correct cross-references to read as follows:
       (a)  The requirements of Chapter 4201 [Article 21.58A] apply
to utilization review conducted in relation to claims in a workers'
compensation health care network. In the event of a conflict
between Chapter 4201 [Article 21.58A] and this chapter, this
chapter controls.
       SECTION 2G.011.  Section 1305.355(a), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (a)  The utilization review agent shall:
             (1)  permit the employee or person acting on behalf of
the employee and the employee's requesting provider whose
reconsideration of an adverse determination is denied to seek
review of that determination within the period prescribed by
Subsection (b) by an independent review organization assigned in
accordance with Chapter 4202 [Article 21.58C] and commissioner
rules; and
             (2)  provide to the appropriate independent review
organization, not later than the third business day after the date
the utilization review agent receives notification of the
assignment of the request to an independent review organization:
                   (A)  any medical records of the employee that are
relevant to the review;
                   (B)  any documents used by the utilization review
agent in making the determination;
                   (C)  the response letter described by Section
1305.354(a)(4);
                   (D)  any documentation and written information
submitted in support of the request for reconsideration; and
                   (E)  a list of the providers who provided care to
the employee and who may have medical records relevant to the
review.
       SECTION 2G.012.  Section 1369.056, Insurance Code, is
amended to correct cross-references to read as follows:
       Sec. 1369.056.  ADVERSE DETERMINATION.  (a)  The refusal of a
group health benefit plan issuer to provide benefits to an enrollee
for a prescription drug is an adverse determination for purposes of
Section 4201.002 [2, Article 21.58A,] if:
             (1)  the drug is not included in a drug formulary used
by the group health benefit plan; and
             (2)  the enrollee's physician has determined that the
drug is medically necessary.
       (b)  The enrollee may appeal the adverse determination under
Subchapters H and I, Chapter 4201 [Sections 6 and 6A, Article
21.58A].
       SECTION 2G.013.  Sections 1501.002(8) and (14), Insurance
Code, are amended to correct cross-references to read as follows:
             (8)  "Large employer" means a person who employed an
average of at least 51 eligible employees on business days during
the preceding calendar year and who employs at least two employees
on the first day of the plan year. The term includes a governmental
entity subject to Article 3.51-1, [3.51-2,] 3.51-4, or 3.51-5, to
Subchapter C, Chapter 1364, [or] to Chapter 1578, or to Chapter 177,
Local Government Code, that otherwise meets the requirements of
this subdivision. For purposes of this definition, a partnership
is the employer of a partner.
             (14)  "Small employer" means a person who employed an
average of at least two employees but not more than 50 eligible
employees on business days during the preceding calendar year and
who employs at least two employees on the first day of the plan
year. The term includes a governmental entity subject to Article
3.51-1, [3.51-2,] 3.51-4, or 3.51-5, to Subchapter C, Chapter 1364,
[or] to Chapter 1578, or to Chapter 177, Local Government Code, that
otherwise meets the requirements of this subdivision. For purposes
of this definition, a partnership is the employer of a partner.
       SECTION 2G.014.  Section 1501.009(b), Insurance Code, is
amended to correct cross-references to read as follows:
       (b)  An independent school district that is participating in
the uniform group coverage program established under Chapter 1579
[Article 3.50-7] may not participate in the small employer market
under this section for health insurance coverage and may not renew a
health insurance contract obtained in accordance with this section
after the date on which the program of coverages provided under
Chapter 1579 [Article 3.50-7] is implemented. This subsection does
not affect a contract for the provision of optional coverages not
included in a health benefit plan under this chapter.
       SECTION 2G.015.  Section 1501.257(c), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (c)  Utilization review performed for any cost containment,
case management, or managed care arrangement must comply with
Chapter 4201 [Article 21.58A].
       SECTION 2G.016.  Section 1504.001(4), Insurance Code, is
amended to correct a cross-reference to read as follows:
             (4)  "Health benefit plan issuer" means:
                   (A)  an insurance company, group hospital service
corporation, or health maintenance organization that delivers or
issues for delivery an individual, group, blanket, or franchise
insurance policy or agreement, a group hospital service contract,
or an evidence of coverage that provides benefits for medical or
surgical expenses incurred as a result of an accident or sickness;
                   (B)  a governmental entity subject to Subchapter
D, Chapter 1355, Subchapter C, Chapter 1364, Chapter 1578, [or]
Article 3.51-1, [3.51-2,] 3.51-4, or 3.51-5, or Chapter 177, Local
Government Code;
                   (C)  the issuer of a multiple employer welfare
arrangement as defined by Section 846.001; or
                   (D)  the issuer of a group health plan as defined
by Section 607, Employee Retirement Income Security Act of 1974 (29
U.S.C. Section 1167).
       SECTION 2G.017.  Section 1506.109(a), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (a)  The pool shall provide for and use cost containment
measures and requirements to make the coverage offered by the pool
more cost-effective. To the extent the board determines it is
cost-effective, the cost containment measures must include
individual case management and disease management. The cost
containment measures may include preadmission screening, the
requirement of a second surgical opinion, and concurrent
utilization review subject to Chapter 4201 [Article 21.58A].
       SECTION 2G.018.  Section 1551.003(12), Insurance Code, is
amended to correct a cross-reference to read as follows:
             (12)  "Serious mental illness" has the meaning assigned
by Section 1355.001 [1, Article 3.51-14].
       SECTION 2G.019.  Sections 1551.064(a) and (b), Insurance
Code, are amended to correct cross-references to read as follows:
       (a)  This section applies only to a group policy or contract
described by Section 1251.301 [3B(a), Article 3.51-6]. A policy or
contract executed under this chapter must provide that:
             (1)  premium payments must be:
                   (A)  paid directly to the Employees Retirement
System of Texas; and
                   (B)  postmarked or received not later than the
10th day of the month for which the premium is due;
             (2)  the premium for group continuation coverage under
Subchapter G, Chapter 1251 [Section 3B, Article 3.51-6], may not
exceed the level established for other surviving dependents of
deceased employees and annuitants;
             (3)  at the time the group policy or contract is
delivered, issued for delivery, renewed, amended, or extended, the
Employees Retirement System of Texas shall give notice of the
continuation option to each state agency covered by the group
benefits program; and
             (4)  each state agency shall give written notice of the
continuation option to each employee and dependent of an employee
who is covered by the group benefits program.
       (b)  A group policy or contract executed under this chapter
must provide that, not later than the 15th day after the date of any
severance of the family relationship that might activate the
continuation option under Subchapter G, Chapter 1251 [Section 3B,
Article 3.51-6], the group member shall give written notice of the
severance to the employing state agency.
       SECTION 2G.020.  Section 1601.109(a), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (a)  In this section, "serious mental illness" has the
meaning assigned by Section 1355.001 [1, Article 3.51-14].
PART H.  CROSS-REFERENCE UPDATES:  TITLE 10, INSURANCE CODE
SECTION 2H.001.  Section 1805.001, Insurance Code, is
amended to correct cross-references to read as follows:
       Sec. 1805.001.  APPLICABILITY OF CHAPTER.  This chapter
applies to the kinds of insurance and insurers subject to:
             (1)  Section 403.002;
             (2)  Section 941.003 with respect to the application of
a law described by Section 941.003(b)(1) [941.003(b)(3)] or (c);
             (3)  Section 942.003 with respect to the application of
a law described by Section 942.003(b)(1) [942.003(b)(3)] or (c);
             (4)  Subchapter A, B, or C, [or D,] Chapter 5;
             (5)  Subchapter H, Chapter 544;
             (6)  Subchapter A, Chapter 2301;
             (7)  Chapter 252, 253, 254, 255, 426, 1806, 1807, 2001,
2002, 2003, 2004, 2005, 2006, 2008, 2051, 2052, 2053, 2055, 2171,
2251, or 2252;
             (8)  Subtitle B or C, Title 10; or
             (9)  [Chapter 406A, Labor Code; or
             [(10)]  Chapter 2154, Occupations Code.
       SECTION 2H.002.  Section 1951.004(a), Insurance Code, is
amended to correct cross-references to read as follows:
       (a)  An insurer, or an officer or representative of an
insurer, commits an offense if the insurer, officer, or
representative violates:
             (1)  Section 1951.001, 1951.002, 1952.051, 1952.052,
1952.053, 1952.054, or 1952.055;
             (2)  Subchapter B, Chapter 1806;
             (3)  Subchapter C, Chapter 1953;
             (4)  Chapter 254; or
             (5) [(4)]  Article 5.01, [5.02,] 5.03, [5.05,] 5.06,
5.10, or 5.11.
       SECTION 2H.003.  Section 2051.002, Insurance Code, is
amended to correct cross-references to read as follows:
       Sec. 2051.002.  CONSTRUCTION OF CERTAIN LAWS. The following
shall be construed and applied independently of any other law that
relates to insurance rates and forms or prescribes the duties of the
commissioner or the department:
             (1)  this chapter;
             (2)  [Subchapter D, Chapter 5;
             [(3)] Chapter 251, as that chapter relates to workers'
compensation insurance; and
             (3) [(4)]  Chapters 255, 426, 2052, [and] 2053, and
2055[; and
             [(5)Chapter 406A, Labor Code].
       SECTION 2H.004.  Section 2051.157, Insurance Code, is
amended to correct a cross-reference to read as follows:
       Sec. 2051.157.  PENALTY FOR CERTAIN VIOLATIONS. An officer
or other representative of an insurance company is subject to a fine
of not less than $100 or more than $500 if the officer or other
representative violates any provision of the following relating to
the company's business:
             (1)  Subchapter A or B;
             (2)  Section 2051.156 or 2051.201;
             (3)  Chapter 426 or 2052;
             (4)  Subchapter A, C, or D, Chapter 2053; or
             (5)  Section 2053.051, 2053.052, 2053.053, or
2053.055[; or
             [(6)Article 5.66].
       SECTION 2H.005.  Section 2052.004(a), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (a)  Subject to Subsections (b) and (c), this subtitle [and
Article 5.66] may not be construed to prohibit an insurance
company, including the Texas Mutual Insurance Company, from issuing
participating policies.
       SECTION 2H.006.  Section 2201.155(a), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (a)  A risk retention group not chartered in this state is
liable for the payment of premium and maintenance taxes and taxes on
premiums of direct business for risks located in this state and
shall report to the commissioner the net premiums written for risks
located in this state. The group is subject to taxation, and any
fine or penalty related to that taxation, on the same basis as a
foreign admitted insurer in accordance with Chapters 4, 201, 202,
203, 221, 222, 224, 227, 228, and 251-257.
       SECTION 2H.007.  Section 2204.101(d), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (d)  The exchange and the members are considered insurers for
purposes of:
             (1)  Sections 201.052, 201.053, and 201.054;
             (2)  Chapters 4, 202, 203, 221, 222, 224, 227, 228, 251,
257, and 1109; and
             (3)  Section 171.0525, Tax Code.
PART I.  CROSS-REFERENCE UPDATES:  TITLE 11, INSURANCE CODE
SECTION 2I.001.  Section 2551.001(c), Insurance Code, is
amended to correct cross-references to read as follows:
       (c)  To the extent applicable, the following provisions of
this code apply to a title insurance company:
             (1)  Articles [1.01, 1.04A,] 1.09-1 and[, 1.12, 1.13,
1.15-1.19, 21.31,] 21.47[, and 21.49-8];
             (2)  Subsection (b), Article 1.04D;
             (3)  [Article 1.14-3, other than Section 8;
             [(4)Subchapter F, Chapter 5;
             [(5)]  Chapters 33, 82, 83, 84, 86, 102, 261, 281, 401,
402, 493, 494, 541, 547, 555, 701, 801, 802, 824, [and] 828, 1805,
and 2204;
             (4) [(6)]  Chapter 31, other than Section 31.005;
             (5) [(7)]  Chapter 32, other than Section 32.022(b);
             (6) [(8)]  Chapter 36, other than Sections 36.003,
36.004, and 36.101-36.106;
             (7) [(9)]  Subchapter A, Chapter 38;
             (8) [(10)]  Subchapters A-G, Chapter 101;
             (9) [(11)]  Chapter 982, other than Sections 982.003,
982.051, 982.101, 982.105, 982.106(b), 982.109, and 982.113; and
             (10) [(12)]  Sections 37.052, 39.001, 39.002, 81.002,
81.004, 201.004, 201.005, 201.051, 201.055, 403.001, 403.051,
403.101, 521.002-521.004, 805.021, 822.001, 822.051, 822.052(1),
(2), and (3), 822.053, 822.057, except Subsection (a)(4), 822.058,
822.059, 822.060, 822.155, 822.157, 822.158, except Subsection
(a)(5), 841.004, 841.251, 841.252(a)-(c), and 4001.103.
       SECTION 2I.002.  Sections 2551.151(a) and (g), Insurance
Code, are amended to correct cross-references to read as follows:
       (a)  A title insurance company shall hold all investments in
cash or in the following:
             (1)  an abstract plant or plants, provided that:
                   (A)  the corporation is organized under this title
and has the right to engage in the business of title insurance;
                   (B)  except as provided by Subsection (b), the
investment is not more than 50 percent of the corporation's capital
stock; and
                   (C)  the valuation of the plant or plants is
approved by the department;
             (2)  securities described by Subchapter D, Chapter 425,
other than Sections 425.202 and 425.229-425.232, [Article 3.39] or
investments authorized for title insurance companies under the laws
of any other state in which the company is authorized to engage in
business;
             (3)  real property or any real property interest that
is:
                   (A)  required for the company's convenient
accommodation in the transaction of business with reasonable regard
to future needs;
                   (B)  acquired in connection with a claim under a
title insurance policy;
                   (C)  acquired in satisfaction or on account of
loans, mortgages, liens, judgments, or decrees previously owed to
the company in the course of business;
                   (D)  acquired in partial payment of the
consideration of the sale of real property owned by the company if
the transaction results in a net reduction in the company's
investment in real property; or
                   (E)  reasonably necessary to maintain or enhance
the sale value of real property previously acquired or held by the
company under this subdivision;
             (4)  a first mortgage note secured by any of the
following, provided that the amount of the note does not exceed 80
percent of the appraised value of the security for the note:
                   (A)  an abstract plant and connected personal
property in or outside this state;
                   (B)  stock of a title insurance agent in or
outside this state;
                   (C)  a construction contract to build an abstract
plant and connected personal property; or
                   (D)  any two or more of the items listed in this
subdivision;
             (5)  the shares of any federal home loan bank in an
amount necessary to qualify for membership and any additional
amounts approved by the commissioner;
             (6)  foreign securities that are substantially of the
same kinds, classes, and investment grade as securities otherwise
qualified for investment under this section, provided that, unless
the investment is also qualified under Subdivision (2), the
aggregate amount of foreign investments made under this subdivision
does not exceed:
                   (A)  five percent of the insurer's admitted assets
at the end of the preceding year;
                   (B)  two percent of the insurer's admitted assets
at the end of the preceding year invested in the securities of all
entities domiciled in any one foreign country; and
                   (C)  one-half of one percent of the insurer's
admitted assets at the end of the preceding year invested in the
securities of any one individual entity domiciled in a foreign
country;
             (7)  securities lending, repurchase, reverse
repurchase, and dollar roll transactions, as described by Section
425.121 [4(q), Article 3.33]; or
             (8)  money market funds, as described by Section
425.123 [4(s), Article 3.33].
       (g)  A title insurance company may invest in a certified
capital company in the manner provided by Chapter 228 [Subchapter
B, Chapter 4].
       SECTION 2I.003.  Section 2601.001, Insurance Code, is
amended to correct a cross-reference to read as follows:
       Sec. 2601.001.  SUPERVISION, LIQUIDATION, REHABILITATION,
REORGANIZATION, OR CONSERVATION OF TITLE INSURANCE COMPANIES AND
AGENTS. Each title insurance agent and title insurance company is
subject to Chapters 441 and 443 [Articles 21.28 and 21.28-A].
       SECTION 2I.004.  Section 2602.002(a), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (a)  This chapter is for:
             (1)  the purposes and findings stated in Sections
441.001, 441.003, 441.005, and 441.006 [Section 1, Article
21.28-A]; and
             (2)  the protection of holders of covered claims.
       SECTION 2I.005.  Section 2602.005(b), Insurance Code, is
amended to correct cross-references to read as follows:
       (b)  If this chapter conflicts with another law relating to
the subject matter of this chapter or its application, other than
Chapter 441 or 443 [Article 21.28 or 21.28-A], this chapter
controls. If this chapter conflicts with Chapter 441 or 443
[Article 21.28 or 21.28-A], that chapter [article] controls.
       SECTION 2I.006.  Section 2602.114(e), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (e)  A board member may not disclose information received in
the meeting unless authorized by the commissioner or required as
witness in court. A board member and the meeting are subject to the
confidentiality standard imposed on an examiner under Sections
401.105 and 401.106 [Article 1.18], except that a bond is not
required of a board member.
       SECTION 2I.007.  Section 2602.254, Insurance Code, is
amended to correct a cross-reference to read as follows:
       Sec. 2602.254.  CERTAIN CONSERVATOR AND RECEIVER EXPENSES
COVERED. Reasonable and necessary administrative expenses
incurred by a conservator appointed by the commissioner or a
receiver appointed by a court for an unauthorized insurer operating
in this state are covered claims if the commissioner has notified
the association or the association has otherwise become aware that:
             (1)  the unauthorized insurer has insufficient liquid
assets to pay those expenses; and
             (2)  insufficient money is available from:
                   (A)  abandoned money under Section 443.304 [8,
Article 21.28]; and
                   (B)  department appropriations for use in paying
those expenses.
       SECTION 2I.008.  Section 2602.301(a), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (a)  The association shall:
             (1)  investigate a claim brought against the
association, the commissioner, or a special deputy receiver
appointed under Chapter 443 [Article 21.28] if the claim involves
or may involve the association's rights and obligations under this
chapter; and
             (2)  adjust, compromise, settle, and pay a covered
claim to the extent of the association's obligation, and deny all
other claims.
PART J.  CROSS-REFERENCE UPDATES:  TITLE 13, INSURANCE CODE
SECTION 2J.001.  Section 4001.002(a), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (a)  Except as otherwise provided by this code, this title
applies to each person licensed under:
             (1)  Subchapter H, Chapter 885;
             (2)  Subchapter F, Chapter 911;
             (3)  Section 912.251;
             (4)  Section 961.005;
             (5)  Subchapter E, Chapter 981;
             (6) [(5)]  Subchapter D, Chapter 1152;
             (7) [(6)]  Subchapter C or D of this chapter;
             (8) [(7)]  Subtitle B, C, or D of this title;
             [(8)Article 23.23A;] or
             (9)  Subsection (c), Article 5.13-1.
       SECTION 2J.002.  Section 4001.009(a), Insurance Code, is
amended to correct cross-references to read as follows:
       (a)  As referenced in Section 4001.003(9), a reference to an
agent in the following laws includes a subagent without regard to
whether a subagent is specifically mentioned:
             (1)  Chapters 281, 402, 421-423, 441, 444, 461-463,
523, 541-556, 558, 559, 702, 703, 705, 821, 823-825, 827, 828, 844,
963, 1108, 1205-1209, 1211-1214 [1211-1213], 1352, 1353, 1357,
1358, 1360-1363, 1369, 1453-1455, 1503, 1550, 1801, 1803,
2151-2154, 2201-2203, 2205-2213, 3501, 3502, 4007, [and] 4102, and
4201-4203;
             (2)  Chapter 403, excluding Section 403.002;
             (3)  Subchapter A, Chapter 491;
             (4)  Subchapter C, Chapter 521;
             [(3)Subchapter F, Chapter 542;
             [(4)Subchapters G and I, Chapter 544;]
             (5)  Subchapter A, Chapter 557;
             (6)  Subchapter B, Chapter 805;
             (7)  Subchapters D, E, and F, Chapter 982;
             (8) [(7)]  Subchapter D, Chapter 1103;
             (9) [(8)]  Subchapters B, C, D, and E, Chapter 1204,
excluding Sections 1204.153 and 1204.154;
             (10) [(9)]  Subchapter B, Chapter 1366;
             (11) [(10)]  Subchapters B, C, and D, Chapter 1367,
excluding Section 1367.053(c);
             (12) [(11)]  Subchapters A, C, D, E, F, H, and I,
Chapter 1451;
             (13) [(12)]  Subchapter B, Chapter 1452;
             (14) [(13)]  Sections 551.004, 841.303, 982.001,
982.002, 982.004, 982.052, 982.102, 982.103, 982.104, 982.106,
982.107, 982.108, 982.110, 982.111, [and] 982.112, and 1802.001;
and
             (15) [(14)Subchapters D, E, and F, Chapter 982;
             [(15)Section 1101.003(a); and
             [(16)]  Chapter 107, Occupations Code.
       SECTION 2J.003.  Section 4051.002, Insurance Code, is
amended to correct a cross-reference to read as follows:
       Sec. 4051.002.  REQUIREMENTS APPLICABLE TO CERTAIN AGENT
CONTRACTS. An agent's contract entered into on or after August 27,
1973, by an insurer engaged in the business of property and casualty
insurance in this state is subject to Chapter 444 [Article
21.11-2].
       SECTION 2J.004.  Section 4051.101(a), Insurance Code, is
amended to correct cross-references to read as follows:
       (a)  Except as provided by Section 4051.052, a person is
required to hold a limited property and casualty license if the
person acts as an agent who writes:
             (1)  job protection insurance as defined by Section
962.002 [Article 25.01];
             (2)  exclusively, insurance on growing crops under
Subchapter F;
             (3)  any form of insurance authorized under Chapter 911
for a farm mutual insurance company;
             (4)  exclusively, any form of insurance authorized to
be solicited and written in this state that relates to:
                   (A)  the ownership, operation, maintenance, or
use of a motor vehicle designed for use on the public highways,
including a trailer or semitrailer, and the motor vehicle's
accessories or equipment; or
                   (B)  the ownership, occupancy, maintenance, or
use of a manufactured home classified as personal property under
Section 2.001, Property Code;
             (5)  a prepaid legal services contract under Article
5.13-1 or Chapter 961;
             (6)  exclusively, an industrial fire insurance policy:
                   (A)  covering dwellings, household goods, and
wearing apparel;
                   (B)  written on a weekly, monthly, or quarterly
basis on a continuous premium payment plan; and
                   (C)  written for an insurer exclusively engaged in
the business as described by Section 912.310;
             (7)  credit insurance, except as otherwise provided by
Chapter 4055; or
             (8)  any other kind of insurance, if holding a limited
property and casualty license to write that kind of insurance is
determined necessary by the commissioner for the protection of the
insurance consumers of this state.
       SECTION 2J.005.  Section 4152.104(b), Insurance Code, is
amended to correct a cross-reference to read as follows:
       (b)  Expenses relating to an examination conducted under
this subchapter may be charged to the person examined in accordance
with Sections 401.151, 401.152, 401.155, and 401.156 [Article
1.16].
       SECTION 2J.006.  Section 4152.152, Insurance Code, is
amended to correct cross-references to read as follows:
       Sec. 4152.152.  PLACEMENT OF REINSURANCE WITH UNAUTHORIZED
REINSURER. Unless the ceding insurer releases the broker in
writing from the broker's obligations under this section, a broker
who places reinsurance on behalf of an authorized ceding insurer
with a reinsurer that is not authorized, accredited, or trusteed in
this state under Chapter 492 [Article 3.10] or 493 [5.75-1] shall:
             (1)  exercise due diligence in inquiring into the
financial condition of the reinsurer;
             (2)  disclose to the ceding insurer the broker's
findings in connection with the inquiry under Subdivision (1); and
             (3)  make available to the ceding insurer a copy of the
current financial statement of the reinsurer.
       SECTION 2J.007.  Section 4152.214(a), Insurance Code, is
amended to correct cross-references to read as follows:
       (a)  Unless the ceding insurer releases the manager in
writing from the manager's obligations under this section, a
manager who places reinsurance on behalf of an authorized ceding
insurer with a reinsurer that is not authorized, accredited, or
trusteed in this state under Chapter 492 [Article 3.10] or 493
[5.75-1] shall:
             (1)  exercise due diligence in inquiring into the
financial condition of the reinsurer;
             (2)  disclose to the ceding insurer the manager's
findings in connection with the inquiry under Subdivision (1); and
             (3)  make available to the ceding insurer a copy of the
current financial statement of the reinsurer.
PART K.  EFFECTIVE DATE
       SECTION 2K.001.  This article takes effect April 1, 2009.
ARTICLE 3.  INSURANCE CODE UPDATE
PART A. GENERAL PROVISIONS
       SECTION 3A.001.  This article is enacted as part of the
state's continuing statutory revision program under Chapter 323,
Government Code. This article is a revision for purposes of Section
43, Article III, Texas Constitution, and has the purposes of:
             (1)  conforming codifications enacted by the 79th
Legislature to other Acts of that legislature that amended the laws
codified or added new law to subject matter codified;
             (2)  making necessary corrections to enacted
codifications; and
             (3)  renumbering titles, chapters, and sections of
codes that duplicate title, chapter, or section numbers.
       SECTION 3A.002.  (a) The repeal of a statute by this article
does not affect an amendment, revision, or reenactment of the
statute by the 80th Legislature, Regular Session, 2007. The
amendment, revision, or reenactment is preserved and given effect
as part of the code provision that revised the statute so amended,
revised, or reenacted.
       (b)  If any provision of this article conflicts with a
statute enacted by the 80th Legislature, Regular Session, 2007, the
statute controls.
       (c)  If any provision of this article conflicts with a
provision of H.B. No. 3167, Acts of the 80th Legislature, Regular
Session, 2007, this article controls.
       SECTION 3A.003.  (a) A transition or saving provision of a
law codified by this article applies to the codified law to the same
extent as it applied to the original law.
       (b)  The repeal of a transition or saving provision by this
article does not affect the application of the provision to the
codified law.
       (c)  In this section, "transition provision" includes any
temporary provision providing for a special situation in the
transition period between the existing law and the establishment or
implementation of the new law.
PART B.  CHANGES UPDATING INSURANCE CODE
       SECTION 3B.001.  (a) Section 401.010(a), Insurance Code, is
amended to conform to Section 2, Chapter 408, Acts of the 79th
Legislature, Regular Session, 2005, to read as follows:
       (a)  An accountant must audit the financial reports provided
by an insurer or health maintenance organization for purposes of an
audit under this subchapter.  The accountant who audits the reports
must conduct the audit in accordance with generally accepted
auditing standards or with standards adopted by the Public Company
Accounting Oversight Board, as applicable, and must consider the
standards specified [other procedures described] in the Financial
Condition Examiner's Handbook adopted by the National Association
of Insurance Commissioners or other analogous nationally
recognized standards adopted by commissioner rule.
       (b)  Section 2, Chapter 408, Acts of the 79th Legislature,
Regular Session, 2005, which amended former Subsection (b), Section
14, Article 1.15A, Insurance Code, is repealed.
       SECTION 3B.002.  (a) Section 401.011(d), Insurance Code, is
amended to conform to Section 1, Chapter 408, Acts of the 79th
Legislature, Regular Session, 2005, to read as follows:
       (d)  The commissioner may not accept an audited financial
report prepared wholly or partly by an individual or firm who the
commissioner finds:
             (1)  has been convicted of fraud, bribery, a violation
of the Racketeer Influenced and Corrupt Organizations Act (18
U.S.C. Section 1961 et seq.), or a state or federal criminal offense
involving dishonest conduct;
             (2)  has violated the insurance laws of this state with
respect to a report filed under this subchapter; [or]
             (3)  has demonstrated a pattern or practice of failing
to detect or disclose material information in reports filed under
this subchapter; or
             (4)  has directly  or indirectly entered into an
agreement of indemnity or release of liability regarding an audit
of an insurer.
       (b)  Section 1, Chapter 408, Acts of the 79th Legislature,
Regular Session, 2005, which amended former Subsection (c), Section
12, Article 1.15A, Insurance Code, is repealed.
       SECTION 3B.003.  Subchapters A, B, C, D, E, F, G, H, I, J, K,
L, M, N, O, and P, Chapter 442, Insurance Code, and Section 6.069,
Chapter 265, Acts of the 79th Legislature, Regular Session, 2005,
which amended former Section 3A, Article 21.28, Insurance Code, are
repealed to conform to the repeal of Article 21.28, Insurance Code,
by Section 9, Chapter 995, Acts of the 79th Legislature, Regular
Session, 2005.
       SECTION 3B.004.  (a)  The following changes are made to Title
1, Insurance Code, and Subtitle C, Title 4, Insurance Code, for
organizational purposes:
             (1)  Chapter 21A, Insurance Code, is redesignated as
Chapter 443, Subtitle C, Title 4, Insurance Code, and:
                   (A)  Subchapter A in the redesignated chapter is
redesignated as Subchapter A, Chapter 443, Insurance Code, and the
sections in the redesignated subchapter, Sections 21A.001,
21A.002, 21A.003, 21A.004, 21A.005, 21A.006, 21A.007, 21A.008,
21A.009, 21A.010, 21A.011, 21A.012, 21A.013, 21A.0135, 21A.014,
21A.015, 21A.016, and 21A.017, are redesignated as Sections
443.001, 443.002, 443.003, 443.004, 443.005, 443.006, 443.007,
443.008, 443.009, 443.010, 443.011, 443.012, 443.013, 443.0135,
443.014, 443.015, 443.016, and 443.017, respectively;
                   (B)  Subchapter B in the redesignated chapter is
redesignated as Subchapter B, Chapter 443, Insurance Code, and the
sections in the redesignated subchapter, Sections 21A.051 through
21A.059, are redesignated as Sections 443.051 through 443.059;
                   (C)  Subchapter C in the redesignated chapter is
redesignated as Subchapter C, Chapter 443, Insurance Code, and the
sections in the redesignated subchapter, Sections 21A.101 through
21A.105, are redesignated as Sections 443.101 through 443.105;
                   (D)  Subchapter D in the redesignated chapter is
redesignated as Subchapter D, Chapter 443, Insurance Code, and the
sections in the redesignated subchapter, Sections 21A.151 through
21A.156, are redesignated as Sections 443.151 through 443.156;
                   (E)  Subchapter E in the redesignated chapter is
redesignated as Subchapter E, Chapter 443, Insurance Code, and the
sections in the redesignated subchapter, Sections 21A.201 through
21A.213, are redesignated as Sections 443.201 through 443.213;
                   (F)  Subchapter F in the redesignated chapter is
redesignated as Subchapter F, Chapter 443, Insurance Code, and the
sections in the redesignated subchapter, Sections 21A.251 through
21A.261, are redesignated as Sections 443.251 through 443.261;
                   (G)  Subchapter G in the redesignated chapter is
redesignated as Subchapter G, Chapter 443, Insurance Code, and the
sections in the redesignated subchapter, Sections 21A.301 through
21A.304, are redesignated as Sections 443.301 through 443.304;
                   (H)  Subchapter H in the redesignated chapter is
redesignated as Subchapter H, Chapter 443, Insurance Code, and the
sections in the redesignated subchapter, Sections 21A.351 through
21A.355, are redesignated as Sections 443.351 through 443.355; and
                   (I)  Subchapter I in the redesignated chapter is
redesignated as Subchapter I, Chapter 443, Insurance Code, and the
sections in the redesignated subchapter, Sections 21A.401 and
21A.402, are redesignated as Sections 443.401 and 443.402,
respectively; and
             (2)  Subchapter Q, Chapter 442, Insurance Code, is
redesignated as Chapter 444, Insurance Code, the heading of
Subchapter Q is amended to read as follows:  "CHAPTER 444 
[SUBCHAPTER Q].  AGENCY CONTRACTS WITH CERTAIN INSURERS", and
Sections 442.801, 442.802, 442.803, and 442.804 in the redesignated
subchapter are redesignated as Sections 444.001, 444.002, 444.003,
and 444.004, respectively.
       (b)  Sections 21A.004(a)(4), (11), (14), (17), and (26),
Insurance Code, redesignated as Sections 443.004(a)(4), (11),
(14), (17), and (26), Insurance Code, respectively, by Subsection
(a)(1)(A) of this section, are amended to conform to the additional
changes made by Subsection (a)(1) of this section and to the
recodification and repeal of Articles 21.28-C and 21.28-D,
Insurance Code, by Chapter 727, Acts of the 79th Legislature,
Regular Session, 2005, to read as follows:
             (4)  "Delinquency proceeding" means any proceeding
instituted against an insurer for the purpose of liquidating,
rehabilitating, or conserving the insurer, and any proceeding under
Section 443.051 [21A.051].
             (11)  "Guaranty association" means any mechanism
mandated by [Article 21.28-C or 21.28-D,] Chapter 462, 463, or
2602[,] or other laws of this state or a similar mechanism in
another state that is created for the payment of claims or
continuation of policy obligations of financially impaired or
insolvent insurers.
             (14)  "Insurer" means any person that has done,
purports to do, is doing, or is authorized to do the business of
insurance in this state, and is or has been subject to the authority
of or to liquidation, rehabilitation, reorganization, supervision,
or conservation by any insurance commissioner. For purposes of
this chapter, any other persons included under Section 443.003 
[21A.003] are insurers.
             (17)  "Party in interest" means the commissioner, a 10
percent or greater equity security holder in the insolvent insurer,
any affected guaranty association, any nondomiciliary commissioner
for a jurisdiction in which the insurer has outstanding claims
liabilities, and any of the following parties that have filed a
request for inclusion on the service list under Section 443.007 
[21A.007]:
                   (A)  an insurer that ceded to or assumed business
from the insolvent insurer; and
                   (B)  an equity shareholder, policyholder,
third-party claimant, creditor, and any other person, including any
indenture trustee, with a financial or regulatory interest in the
receivership proceeding.
             (26)  "Secured claim" means any claim secured by an
asset that is not a general asset. The term includes the right to
set off as provided in Section 443.209 [21A.209]. The term does not
include a claim arising from a constructive or resulting trust, a
special deposit claim, or a claim based on mere possession.
       (c)  Sections 21A.005(e), (h), and (i), Insurance Code,
redesignated as Sections 443.005(e), (h), and (i), Insurance Code,
respectively, by Subsection (a)(1)(A) of this section, are amended
to conform to the additional changes made by Subsection (a)(1) of
this section to read as follows:
       (e)  If, on motion of any party, the receivership court finds
that any action, as a matter of substantial justice, should be tried
in a forum outside this state, the receivership court may enter an
appropriate order to stay further proceedings on the action in this
state. Except as to claims against the estate, nothing in this
chapter deprives a party of any contractual right to pursue
arbitration. A party in arbitration may bring a claim or
counterclaim against the estate, but the claim or counterclaim is
subject to Section 443.209 [21A.209].
       (h)  At any time after an order is entered pursuant to
Section 443.051, 443.101, or 443.151 [21A.051, 21A.101, or
21A.151], the commissioner or receiver may transfer the case to the
county of the principal office of the person proceeded against. In
the event of transfer, the court in which the proceeding was
commenced, upon application of the commissioner or receiver, shall
direct its clerk to transmit the court's file to the clerk of the
court to which the case is to be transferred. The proceeding, after
transfer, shall be conducted in the same manner as if it had been
commenced in the court to which the matter is transferred.
       (i)  A person may not intervene in any delinquency proceeding
in this state for the purpose of seeking or obtaining payment of any
judgment, lien, or other claim of any kind. The claims procedure
set forth in this chapter constitutes the exclusive means for
obtaining payment of claims from the receivership estate. This
provision is not intended to affect the rights conferred on the
guaranty associations by Section 443.008(l) [21A.008(l)].
       (d)  Section 21A.008(e), Insurance Code, redesignated as
Section 443.008(e), Insurance Code, by Subsection (a)(1)(A) of this
section, is amended to conform to the additional changes made by
Subsection (a)(1) of this section to read as follows:
       (e)  Notwithstanding Subsection (c), the commencement of a
delinquency proceeding under this chapter does not operate as a
stay of:
             (1)  regulatory actions not described by Subsection
(c)(7) that are taken by the commissioners of nondomiciliary
states, including the suspension of licenses;
             (2)  criminal proceedings;
             (3)  any act to perfect or to maintain or continue the
perfection of an interest in property to the extent that the act is
accomplished within any relation back period under applicable law;
             (4)  set off as permitted by Section 443.209 [21A.209];
             (5)  pursuit and enforcement of nonmonetary
governmental claims, judgments, and proceedings;
             (6)  presentment of a negotiable instrument and the
giving of notice and protesting dishonor of the instrument;
             (7)  enforcement of rights against single beneficiary
trusts established pursuant to and in compliance with laws relating
to credit for reinsurance;
             (8)  termination, liquidation, and netting of
obligations under qualified financial contracts as provided for in
Section 443.261 [21A.261];
             (9)  discharge by a guaranty association of statutory
responsibilities under any law governing guaranty associations; or
             (10)  any of the following actions:
                   (A)  an audit by a governmental unit to determine
tax liability;
                   (B)  the issuance to the insurer by a governmental
unit of a notice of tax deficiency;
                   (C)  a demand for tax returns; or
                   (D)  the making of an assessment for any tax and
issuance of a notice and demand for payment of the assessment.
       (e)  Section 21A.009(c), Insurance Code, redesignated as
Section 443.009(c), Insurance Code, by Subsection (a)(1)(A) of this
section, is amended to conform to the additional changes made by
Subsection (a)(1) of this section to read as follows:
       (c)  If applicable law, an order, or an agreement fixes a
period for commencing or continuing a civil action in a court other
than the receivership court on a claim against the insurer, and the
period has not expired before the date of the initial filing of the
petition in a delinquency proceeding, then the period does not
expire until the later of:
             (1)  the end of the period, including any suspension of
the period occurring on or after the filing of the initial petition
in the delinquency proceeding; or
             (2)  30 days after termination or expiration of the
stay under Section 443.008 [21A.008] with respect to the claim.
       (f)  Section 21A.0135, Insurance Code, redesignated as
Section 443.0135, Insurance Code, by Subsection (a)(1)(A) of this
section, is amended to conform to the additional changes made by
Subsection (a)(1) of this section to read as follows:
       Sec. 443.0135 [21A.0135].  CONTRACTS FOR SPECIAL DEPUTIES.  
(a)  The receiver shall use a competitive bidding process in the
selection of any special deputies appointed under Section 443.102
or 443.154 [21A.102 or 21A.154]. The process must include
procedures to promote the participation of historically
underutilized businesses that have been certified by the Texas
Building and Procurement Commission under Section 2161.061,
Government Code.
       (b)  A proposal submitted in connection with a bid
solicitation under Subsection (a) must describe the efforts that
have been made to include historically underutilized businesses as
subcontractors and the plan for using the historically
underutilized businesses in the administration of the receivership
estate. A special deputy appointed under Section 443.102 or
443.154 [21A.102 or 21A.154] shall make a good faith effort to
implement the plan and shall report to the receiver the special
deputy's efforts to identify and subcontract with historically
underutilized businesses.
       (g)  Sections 21A.015(a), (c), and (i), Insurance Code,
redesignated as Sections 443.015(a), (c), and (i), Insurance Code,
respectively, by Subsection (a)(1)(A) of this section, are amended
to conform to the additional changes made by Subsection (a)(1) of
this section to read as follows:
       (a)  The receiver may pay any expenses under contracts,
leases, employment agreements, or other arrangements entered into
by the insurer prior to receivership, as the receiver deems
necessary for the purposes of this chapter. The receiver is not
required to pay any expenses that the receiver determines are not
necessary, and may reject any contract pursuant to Section 443.013
[21A.013].
       (c)  The receiver shall submit to the receivership court an
application pursuant to Section 443.007 [21A.007] to approve:
             (1)  the terms of compensation of each special deputy
or contractor with respect to which the total amount of the
compensation is reasonably expected by the receiver for the
duration of the delinquency proceeding to exceed $250,000, or
another amount established by the receivership court; and
             (2)  any other anticipated expense in excess of
$25,000, or another amount established by the receivership court.
       (i)  All expenses of receivership shall be paid from the
assets of the insurer, except as provided by this subsection. In
the event that the property of the insurer does not contain
sufficient cash or liquid assets to defray the expenses incurred,
the commissioner may advance funds from the account established
under Section 443.304(c) [21A.304(c)]. Any amounts advanced shall
be repaid to the account out of the first available money of the
insurer.
       (h)  Sections 21A.051(a), (b), and (i), Insurance Code,
redesignated as Sections 443.051(a), (b), and (i), Insurance Code,
respectively, by Subsection (a)(1)(B) of this section, are amended
to conform to the additional changes made by Subsection (a)(1) of
this section to read as follows:
       (a)  The commissioner may file in a district court of Travis
County a petition with respect to an insurer domiciled in this
state, an unauthorized insurer, or, pursuant to Section 443.401
[21A.401], a foreign insurer:
             (1)  alleging that grounds exist that would justify a
court order for a formal delinquency proceeding against the insurer
under this chapter;
             (2)  alleging that the interests of policyholders,
creditors, or the public will be endangered by delay; and
             (3)  setting forth the contents of a seizure order
deemed to be necessary by the commissioner.
       (b)  Upon a filing under Subsection (a), the receivership
court may issue, ex parte and without notice or hearing, the
requested seizure order directing the commissioner to take
possession and control of all or a part of the property, books,
accounts, documents, and other records of an insurer, and of the
premises occupied by it for transaction of its business, and until
further order of the receivership court, enjoining the insurer and
its officers, managers, agents, and employees from disposition of
its property and from the transaction of its business except with
the written consent of the commissioner. Any person having
possession or control of and refusing to deliver any of the books,
records, or assets of a person against whom a seizure order has been
issued commits an offense. An offense under this subsection is
punishable in the manner described by Section 443.010(e)
[21A.010(e)].
       (i)  In all proceedings and judicial reviews under this
section, all records of the insurer, department files, court
records and papers, and other documents, so far as they pertain to
or are a part of the record of the proceedings, are confidential,
and all papers filed with the clerk of the court shall be held by the
clerk in a confidential file as permitted by law, except to the
extent necessary to obtain compliance with any order entered in
connection with the proceedings, unless and until:
             (1)  the court, after hearing argument in chambers,
orders otherwise;
             (2)  the insurer requests that the matter be made
public; or
             (3)  the commissioner applies for an order under
Section 443.057 [21A.057].
       (i)  Section 21A.052(b), Insurance Code, redesignated as
Section 443.052(b), Insurance Code, by Subsection (a)(1)(B) of this
section, is amended to conform to the additional changes made by
Subsection (a)(1) of this section to read as follows:
       (b)  The petition must state the grounds upon which the
proceeding is based and the relief requested and may include a
prayer for restraining orders and injunctive relief as described in
Section 443.008 [21A.008]. On the filing of the petition or order,
a copy shall be forwarded by first class mail or electronic
communication as permitted by the receivership court to the
insurance regulatory officials and guaranty associations in states
in which the insurer did business.
       (j)  Section 21A.056(a), Insurance Code, redesignated as
Section 443.056(a), Insurance Code, by Subsection (a)(1)(B) of this
section, is amended to conform to the additional changes made by
Subsection (a)(1) of this section to read as follows:
       (a)  The commissioner, rehabilitator, or liquidator may
share documents, materials, or other information in the possession,
custody, or control of the department without regard to the
confidentiality of those documents, materials, or information,
pertaining to an insurer that is the subject of a proceeding under
this chapter with other state, federal, and international
regulatory agencies, with the National Association of Insurance
Commissioners and its affiliates and subsidiaries, with state,
federal, and international law enforcement authorities, with an
auditor appointed by the receivership court in accordance with
Section 443.355 [21A.355], and, pursuant to Section 443.105
[21A.105], with representatives of guaranty associations that may
have statutory obligations as a result of the insolvency of the
insurer, provided that the recipient agrees to maintain the
confidentiality, if any, of the documents, material, or other
information. Nothing in this section limits the power of the
commissioner to disclose information under other applicable law.
       (k)  Section 21A.057, Insurance Code, redesignated as
Section 443.057, Insurance Code, by Subsection (a)(1)(B) of this
section, is amended to conform to the additional changes made by
Subsection (a)(1) of this section and to the recodification and
repeal of Articles 1.15, 1.15A, 1.16, 1.32, and 21.28-A, Insurance
Code, by Chapter 727, Acts of the 79th Legislature, Regular
Session, 2005, to read as follows:
       Sec. 443.057 [21A.057].  GROUNDS FOR CONSERVATION,
REHABILITATION, OR LIQUIDATION. The commissioner may file with a
court in this state a petition with respect to an insurer domiciled
in this state or an unauthorized insurer for an order of
rehabilitation or liquidation on any one or more of the following
grounds:
             (1)  the insurer is impaired;
             (2)  the insurer is insolvent;
             (3)  the insurer is about to become insolvent, with
"about to become insolvent" being defined as reasonably anticipated
that the insurer will not have liquid assets to meet its next 90
days' current obligations;
             (4)  the insurer has neglected or refused to comply
with an order of the commissioner to make good within the time
prescribed by law any deficiency, whenever its capital and minimum
required surplus, if a stock company, or its surplus, if a company
other than stock, has become impaired;
             (5)  the insurer, its parent company, its subsidiaries,
or its affiliates have converted, wasted, or concealed property of
the insurer or have otherwise improperly disposed of, dissipated,
used, released, transferred, sold, assigned, hypothecated, or
removed the property of the insurer;
             (6)  the insurer is in a condition such that it could
not meet the requirements for organization and authorization as
required by law, except as to the amount of the original surplus
required of a stock company under Title 6, and except as to the
amount of the surplus required of a company other than a stock
company in excess of the minimum surplus required to be maintained;
             (7)  the insurer, its parent company, its subsidiaries,
or its affiliates have concealed, removed, altered, destroyed, or
failed to establish and maintain books, records, documents,
accounts, vouchers, and other pertinent material adequate for the
determination of the financial condition of the insurer by
examination under Chapter 401 [Article 1.15, 1.15A, or 1.16] or has
failed to properly administer claims or maintain claims records
that are adequate for the determination of its outstanding claims
liability;
             (8)  at any time after the issuance of an order under
Section 404.003 or Chapter 441 [Article 1.32 or 21.28-A], or at the
time of instituting any proceeding under this chapter, it appears
to the commissioner that, upon good cause shown, it would not be in
the best interest of the policyholders, creditors, or the public to
proceed with the conduct of the business of the insurer;
             (9)  the insurer is in a condition such that the further
transaction of business would be hazardous financially, according
to Subchapter A, Chapter 404, [Article 1.32] or otherwise, to its
policyholders, creditors, or the public;
             (10)  there is reasonable cause to believe that there
has been embezzlement from the insurer, wrongful sequestration or
diversion of the insurer's property, forgery or fraud affecting the
insurer, or other illegal conduct in, by, or with respect to the
insurer that, if established, would endanger assets in an amount
threatening the solvency of the insurer;
             (11)  control of the insurer is in a person who is:
                   (A)  dishonest or untrustworthy; or
                   (B)  so lacking in insurance company managerial
experience or capability as to be hazardous to policyholders,
creditors, or the public;
             (12)  any person who in fact has executive authority in
the insurer, whether an officer, manager, general agent, director,
trustee, employee, shareholder, or other person, has refused to be
examined under oath by the commissioner concerning the insurer's
affairs, whether in this state or elsewhere or if examined under
oath, refuses to divulge pertinent information reasonably known to
the person; and after reasonable notice of the fact, the insurer has
failed promptly and effectively to terminate the employment and
status of the person and all the person's influence on management;
             (13)  after demand by the commissioner under Chapter
401 [Article 1.15, 1.15A, or 1.16] or under this chapter, the
insurer has failed promptly to make available for examination any
of its own property, books, accounts, documents, or other records,
or those of any subsidiary or related company within the control of
the insurer or of any person having executive authority in the
insurer, so far as they pertain to the insurer;
             (14)  without first obtaining the written consent of
the commissioner, the insurer has transferred, or attempted to
transfer, in a manner contrary to Chapter 823 or any law relating to
bulk reinsurance, substantially its entire property or business, or
has entered into any transaction the effect of which is to merge,
consolidate, or reinsure substantially its entire property or
business in or with the property or business of any other person;
             (15)  the insurer or its property has been or is the
subject of an application for the appointment of a receiver,
trustee, custodian, conservator, sequestrator, or similar
fiduciary of the insurer or its property otherwise than as
authorized under the insurance laws of this state;
             (16)  within the previous five years, the insurer has
wilfully and continuously violated its charter, articles of
incorporation or bylaws, any insurance law of this state, or any
valid order of the commissioner;
             (17)  the insurer has failed to pay within 60 days after
the due date any obligation to any state or political subdivision of
a state or any judgment entered in any state, if the court in which
the judgment was entered had jurisdiction over the subject matter,
except that nonpayment is not a ground until 60 days after any good
faith effort by the insurer to contest the obligation has been
terminated, whether it is before the commissioner or in the courts;
             (18)  the insurer has systematically engaged in the
practice of reaching settlements with and obtaining releases from
claimants, and then unreasonably delayed payment, failed to pay the
agreed-upon settlements, or systematically attempted to compromise
with claimants or other creditors on the ground that it is
financially unable to pay its claims or obligations in full;
             (19)  the insurer has failed to file its annual report
or other financial report required by statute within the time
allowed by law;
             (20)  the board of directors or the holders of a
majority of the shares entitled to vote, or a majority of those
individuals entitled to the control of those entities specified by
Section 443.003 [21A.003], request or consent to rehabilitation or
liquidation under this chapter;
             (21)  the insurer does not comply with its domiciliary
state's requirements for issuance to it of a certificate of
authority, or its certificate of authority has been revoked by its
state of domicile; or
             (22)  when authorized by department rules.
       (l)  Section 21A.058, Insurance Code, redesignated as
Section 443.058, Insurance Code, by Subsection (a)(1)(B) of this
section, is amended to conform to the additional changes made by
Subsection (a)(1) of this section to read as follows:
       Sec. 443.058 [21A.058].  ENTRY OF ORDER.  If the
commissioner establishes any of the grounds provided in Section
443.057 [21A.057], the receivership court shall grant the petition
and issue the order of rehabilitation or liquidation requested in
the petition.
       (m)  Section 21A.101(b), Insurance Code, redesignated as
Section 443.101(b), Insurance Code, by Subsection (a)(1)(C) of this
section, is amended to conform to the additional changes made by
Subsection (a)(1) of this section to read as follows:
       (b)  Any order issued under this section must require
accountings to the receivership court by the rehabilitator.
Accountings must be at the intervals specified by the receivership
court in its order, but not less frequently than semi-annually.
Each accounting must include a report concerning the
rehabilitator's opinion as to the likelihood that a plan under
Section 443.103 [21A.103] will be prepared by the rehabilitator and
the timetable for doing so.
       (n)  Section 21A.102(a), Insurance Code, redesignated as
Section 443.102(a), Insurance Code, by Subsection (a)(1)(C) of this
section, is amended to conform to the additional changes made by
Subsection (a)(1) of this section to read as follows:
       (a)  The rehabilitator may appoint one or more special
deputies. A special deputy serves at the pleasure of the
rehabilitator and has all the powers and responsibilities of the
rehabilitator granted under this section, unless specifically
limited by the rehabilitator. The rehabilitator may employ or
contract with legal counsel, actuaries, accountants, appraisers,
consultants, clerks, assistants, and other personnel as may be
deemed necessary. Any special deputy or any other person with whom
the rehabilitator contracts under this subsection may act on behalf
of the commissioner only in the commissioner's capacity as
rehabilitator. Any person with whom the rehabilitator contracts
under this subsection is not considered an agent of the state, and
any contract entered into under this subsection does not constitute
a contract with the state. The provisions of any law governing the
procurement of goods and services by the state does not apply to any
contract entered into by the commissioner as rehabilitator. The
compensation of any special deputies, employees, and contractors
and all expenses of taking possession of the insurer and of
conducting the rehabilitation shall be fixed by the rehabilitator,
with the approval of the receivership court in accordance with
Section 443.015 [21A.015], and shall be paid out of the property of
the insurer. The persons appointed under this subsection serve at
the pleasure of the rehabilitator. If the rehabilitator deems it
necessary to the proper performance of the rehabilitator's duties
under this chapter, the rehabilitator may appoint an advisory
committee of policyholders, claimants, or other creditors,
including guaranty associations. The advisory committee serves at
the pleasure of the rehabilitator and without compensation or
reimbursement for expenses. The rehabilitator or the receivership
court in rehabilitation proceedings conducted under this chapter
may not appoint another committee of any nature.
       (o)  Section 21A.104, Insurance Code, redesignated as
Section 443.104, Insurance Code, by Subsection (a)(1)(C) of this
section, is amended to conform to the additional changes made by
Subsection (a)(1) of this section to read as follows:
       Sec. 443.104 [21A.104].  TERMINATION OF REHABILITATION.  (a)  
When the rehabilitator believes further attempts to rehabilitate an
insurer would substantially increase the risk of loss to creditors,
policyholders, or the public or would be futile, the rehabilitator
may move for an order of liquidation. In accordance with Section
443.105 [21A.105], the rehabilitator or the rehabilitator's
designated representative shall coordinate with the guaranty
associations that may become liable as a result of the liquidation
and any national association of guaranty associations to plan for
transition to liquidation.
       (b)  Because the protection of the interests of insureds,
claimants, and the public requires the timely performance of all
insurance policy obligations, if the payment of policy obligations
is suspended in substantial part for a period of six months at any
time after the appointment of the rehabilitator and the
rehabilitator has not filed an application for approval of a plan
under Section 443.103 [21A.103], the rehabilitator shall petition
the receivership court for an order of liquidation.
       (c)  The rehabilitator or the directors of the insurer may at
any time petition the receivership court for, or the receivership
court on its own motion may enter, an order terminating
rehabilitation of an insurer. Subject to the provisions of Section
443.351 [21A.351], if the receivership court finds that
rehabilitation has been accomplished and that grounds for
rehabilitation under Section 443.057 [21A.057] no longer exist, it
shall order that the insurer be restored to title and possession of
its property and the control of the business.
       (p)  Sections 21A.151(b) and (e), Insurance Code,
redesignated as Sections 443.151(b) and (e), Insurance Code,
respectively, by Subsection (a)(1)(D) of this section, are amended
to conform to the additional changes made by Subsection (a)(1) of
this section to read as follows:
       (b)  Upon issuance of the order of liquidation, the rights
and liabilities of the insurer and of its creditors, policyholders,
shareholders, members, and all other persons interested in its
estate become fixed as of the date of entry of the order of
liquidation, except as provided by Sections 443.152 and 443.255
[21A.152 and 21A.255], unless otherwise fixed by the court.
       (e)  In the event an order of liquidation is set aside on
appeal, the company may not be released from delinquency
proceedings except in accordance with Section 443.351 [21A.351].
       (q)  Sections 21A.152(b), (c), and (d), Insurance Code,
redesignated as Sections 443.152(b), (c), and (d), Insurance Code,
respectively, by Subsection (a)(1)(D) of this section, are amended
to conform to the additional changes made by Subsection (a)(1) of
this section to read as follows:
       (b)  Notwithstanding any policy or contract language or any
other statute, all policies, insurance contracts other than
reinsurance by which the insurer has ceded insurance obligations to
another person, and surety bonds or surety undertakings, other than
life or health insurance or annuities, in effect at the time of
issuance of an order of liquidation, unless further extended by the
receiver with the approval of the receivership court, continue in
force only until the earlier of:
             (1)  the 30th day after the date of entry of the
liquidation order;
             (2)  the date of expiration of the policy coverage;
             (3)  the date the insured has replaced the insurance
coverage with equivalent insurance with another insurer or
otherwise terminated the policy;
             (4)  the date the liquidator has effected a transfer of
the policy obligation pursuant to Section 443.154(h) [21A.154(h)];
or
             (5)  the date proposed by the liquidator and approved
by the receivership court to cancel coverage.
       (c)  An order of liquidation under Section 443.151 [21A.151]
must terminate coverages at the time specified by Subsections (a)
and (b) for purposes of any other statute.
       (d)  Policies of life or health insurance or annuities
covered by a guaranty association and any portion of policies of
life or health insurance or annuities covered by a guaranty
association continue in force for the period and under the terms
provided for by any applicable guaranty association law. Policies
of life or health insurance or annuities not covered by a guaranty
association and any portion of policies of life or health insurance
or annuities not covered by a guaranty association terminate under
Subsection (b), except to the extent the liquidator proposes and
the receivership court approves the use of property of the estate,
consistent with Section 443.301 [21A.301], for the purpose of
continuing the contracts or coverage by transferring them to an
assuming reinsurer.
       (r)  Sections 21A.154(a), (b), (h), (k), (l), (y), and (z),
Insurance Code, redesignated as Sections 443.154(a), (b), (h), (k),
(l), (y), and (z), Insurance Code, respectively, by Subsection
(a)(1)(D) of this section, are amended to conform to the additional
changes made by Subsection (a)(1) of this section to read as
follows:
       (a)  The liquidator may appoint a special deputy or deputies
to act for the liquidator under this chapter and employ or contract
with legal counsel, actuaries, accountants, appraisers,
consultants, clerks, assistants, and other personnel the
liquidator may deem necessary to assist in the liquidation. A
special deputy has all powers of the liquidator granted by this
section, unless specifically limited by the liquidator, and serves
at the pleasure of the liquidator. A special deputy or any other
person with whom the liquidator contracts under this subsection may
act on behalf of the commissioner only in the commissioner's
capacity as liquidator. Any person with whom the liquidator
contracts is not considered to be an agent of the state and any
contract under this subsection is not a contract with the state.
The provisions of any law governing the procurement of goods and
services by the state do not apply to any contract entered into by
the commissioner as liquidator. This subsection does not waive any
immunity granted by Section 443.014 [21A.014] or create any cause
of action against the state.
       (b)  The liquidator may determine the reasonable
compensation for any special deputies, employees, or contractors
retained by the liquidator as provided in Subsection (a) and pay
compensation in accordance with Section 443.015 [21A.015].
       (h)  The liquidator may use property of the estate of an
insurer under a liquidation order to transfer to a solvent assuming
insurer policy obligations or the insurer's obligations under
surety bonds and surety undertakings as well as collateral held by
the insurer with respect to the reimbursement obligations of the
principals under those surety bonds and surety undertakings, if the
transfer can be arranged without prejudice to applicable priorities
under Section 443.301 [21A.301]. If all insureds, principals,
third-party claimants, and obligees under the policies, surety
bonds, and surety undertakings consent or if the receivership court
so orders, the estate has no further liability under the
transferred policies, surety bonds, or surety undertakings after
the transfer is made.
       (k)  The liquidator may enter into contracts as necessary to
carry out the order to liquidate and, subject to the provisions of
Section 443.013 [21A.013], may assume or reject any executory
contract or unexpired lease to which the insurer is a party.
       (l)  The liquidator may continue to prosecute and institute
in the name of the insurer or in the liquidator's own name any and
all suits and other legal proceedings, in this state or elsewhere,
and abandon the prosecution of claims the liquidator deems
unprofitable to pursue further. If the insurer is dissolved under
Section 443.153 [21A.153], the liquidator has the power to apply to
any court in this state or elsewhere for leave to substitute the
liquidator for the insurer as a party.
       (y)  The liquidator may hypothecate, encumber, lease, sell,
transfer, abandon, or otherwise dispose of or deal with any
property of the insurer, settle or resolve any claim brought by the
liquidator on behalf of the insurer, or commute or settle any claim
of reinsurance under any contract of reinsurance, as follows:
             (1)  if the property or claim has a market or settlement
value that does not exceed the lesser of $1 million or 10 percent of
the general assets of the estate as shown on the receivership's
financial statements, the liquidator may take action at the
liquidator's discretion, provided that the receivership court may,
upon petition of the liquidator, increase the threshold upon a
showing that compliance with this requirement is burdensome to the
liquidator in administering the estate and is unnecessary to
protect the material interests of creditors;
             (2)  in all instances other than those described in
Subdivision (1), the liquidator may take the action only after
obtaining approval of the receivership court as provided by Section
443.007 [21A.007];
             (3)  the liquidator may, at the liquidator's
discretion, request the receivership court to approve a proposed
action as provided by Section 443.007 [21A.007] if the value of the
property or claim appears to be less than the threshold provided by
Subdivision (1) but cannot be ascertained with certainty, or for
any other reason as determined by the liquidator; and
             (4)  after obtaining approval of the receivership court
as provided in Section 443.007 [21A.007], the liquidator may,
subject to Subsection (z), transfer rights to payment under ceding
reinsurance agreements covering policies to a third-party
transferee.
       (z)  The transferee of a right to payment under Subsection
(y)(4) has the rights to collect and enforce collection of the
reinsurance for the amount payable to the ceding insurer or to its
receiver, without diminution because of the insolvency or because
the receiver has failed to pay all or a portion of the claim, based
on the amounts paid or allowed pursuant to Section 443.211
[21A.211]. The transfer of the rights does not give rise to any
defense regarding the reinsurer's obligations under the
reinsurance agreement regardless of whether an agreement or other
applicable law prohibits the transfer of rights under the
reinsurance agreement. Except as provided in this subsection, any
transfer of rights pursuant to Subsection (y)(4) does not impair
any rights or defenses of the reinsurer that existed prior to the
transfer or that would have existed in the absence of the transfer.
Except as otherwise provided in this subsection, any transfer of
rights pursuant to Subsection (y)(4) does not relieve the
transferee or the liquidator from obligations owed to the reinsurer
pursuant to the reinsurance or other agreement.
       (s)  Section 21A.155(b), Insurance Code, redesignated as
Section 443.155(b), Insurance Code, by Subsection (a)(1)(D) of this
section, is amended to conform to the additional changes made by
Subsection (a)(1) of this section to read as follows:
       (b)  The notice of the entry of an order of liquidation must
contain or provide directions for obtaining the following
information:
             (1)  a statement that the insurer has been placed in
liquidation;
             (2)  a statement that certain acts are stayed under
Section 443.008 [21A.008] and describe any additional injunctive
relief ordered by the receivership court;
             (3)  a statement whether, and to what extent, the
insurer's policies continue in effect;
             (4)  to the extent applicable, a statement that
coverage by state guaranty associations may be available for all or
part of policy benefits in accordance with applicable state
guaranty laws;
             (5)  a statement of the deadline for filing claims, if
established, and the requirements for filing a proof of claim
pursuant to Section 443.251 [21A.251] on or before that date;
             (6)  a statement of the date, time, and location of any
initial status hearing scheduled at the time the notice is sent;
             (7)  a description of the process for obtaining notice
of matters before the receivership court; and
             (8)  any other information the liquidator or the
receivership court deems appropriate.
       (t)  Section 21A.156(a), Insurance Code, redesignated as
Section 443.156(a), Insurance Code, by Subsection (a)(1)(D) of this
section, is amended to conform to the additional changes made by
Subsection (a)(1) of this section to read as follows:
       (a)  Every person who represented the insurer as an agent and
receives notice in the form prescribed in Section 443.155 [21A.155]
that the insurer is the subject of a liquidation order, not later
than the 30th day after the date of the notice, shall provide to the
liquidator, in addition to the information the agent may be
required to provide pursuant to Section 443.010 [21A.010], the
information in the agent's records related to any policy issued by
the insurer through the agent and any policy issued by the insurer
through an agent under contract to the agent, including the name and
address of any subagent. For purposes of this subsection, a policy
is issued through an agent if the agent has a property interest in
the expiration of the policy or if the agent has had in the agent's
possession a copy of the declarations of the policy at any time
during the life of the policy, except where the ownership of the
expiration of the policy has been transferred to another.
       (u)  Sections 21A.207(a), (d), and (f), Insurance Code,
redesignated as Sections 443.207(a), (d), and (f), Insurance Code,
respectively, by Subsection (a)(1)(E) of this section, are amended
to conform to the additional changes made by Subsection (a)(1) of
this section to read as follows:
       (a)  Except as otherwise provided in this section, to the
extent that the receiver obtains an order under Section 443.201
[21A.201] or avoids a transfer under Section 443.202, 443.203,
443.204, 443.205, or 443.206 [Sections 21A.202, 21A.203, 21A.204,
21A.205, or 21A.206], the receiver may recover the property
transferred, or the value of the property, from:
             (1)  the initial transferee of the transfer or the
entity for whose benefit the transfer was made; or
             (2)  any immediate or mediate transferee of the initial
transferee.
       (d)  In addition to the remedies specifically provided under
Sections 443.201-443.206 [21A.201-21A.206] and Subsection (a), if
the receiver is successful in establishing a claim to the property
or any part of the property, the receiver is entitled to recover
judgment for:
             (1)  rental for the use of the tangible property from
the later of the entry of the receivership order or the date of the
transfer;
             (2)  in the case of funds or intangible property, the
greater of:
                   (A)  the actual interest or income earned by the
property; or
                   (B)  interest at the statutory rate for judgments
from the later of the date of the entry of the receivership order or
the date of the transfer; and
             (3)  except as to recoveries from guaranty
associations, all costs, including investigative costs and other
expenses necessary to the recovery of the property or funds, and
reasonable attorney's fees.
       (f)  In any action under Sections 443.201-443.206
[21A.201-21A.206], the receiver has the burden of proving the
avoidability of a transfer, and the person against whom recovery or
avoidance is sought has the burden of proving the nature and extent
of any affirmative defense.
       (v)  Section 21A.208(b), Insurance Code, redesignated as
Section 443.208(b), Insurance Code, by Subsection (a)(1)(E) of this
section, is amended to conform to the additional changes made by
Subsection (a)(1) of this section to read as follows:
       (b)  A claim allowable under Subsection (a) by reason of the
avoidance, whether voluntary or involuntary, or a preference, lien,
conveyance, transfer, assignment, or encumbrance, may be filed as
an excused late filing under Section 443.251(b) [21A.251(b)] if
filed not later than the 30th day after the date of the avoidance,
or within the further time allowed by the receivership court under
Subsection (a).
       (w)  Section 21A.210(j), Insurance Code, redesignated as
Section 443.210(j), Insurance Code, by Subsection (a)(1)(E) of this
section, is amended to conform to the additional changes made by
Subsection (a)(1) of this section to read as follows:
       (j)  Any claim filed by an assessee who fails to pay an
assessment, after the conclusion of any legal action by the
assessee objecting to the assessment, is deemed a late filed claim
under Section 443.251 [21A.251].
       (x)  Sections 21A.211(b) and (f), Insurance Code,
redesignated as Sections 443.211(b) and (f), Insurance Code,
respectively, by Subsection (a)(1)(E) of this section, are amended
to conform to the additional changes made by Subsection (a)(1) of
this section and to the recodification and repeal of Articles
21.28-C and 21.28-D, Insurance Code, by Chapter 727, Acts of the
79th Legislature, Regular Session, 2005, to read as follows:
       (b)  Except as provided by Subsection (a), any reinsurance
shall be payable to the receiver under a policy reinsured by the
assuming insurer on the basis of claims:
             (1)  allowed under Section 443.253 [21A.253]; and
             (2)  paid under:
                   (A)  Chapter 462, 463, or [Article 21.28-C or
21.28-D;
                   [(B)Chapter] 2602; or
                   (B) [(C)]  the guaranty associations of other
states.
       (f)  Nothing in this chapter shall be construed as
authorizing the receiver, or other entity, to compel payment from a
non-life reinsurer on the basis of estimated incurred but not
reported losses or outstanding reserves, except outstanding
reserves with respect to claims made pursuant to Section 443.255
[21A.255] and approved workers compensation claims filed under
Section 443.252(d) [21A.252(d)].
       (y)  Sections 21A.212(a), (b), and (c), Insurance Code,
redesignated as Sections 443.212(a), (b), and (c), Insurance Code,
respectively, by Subsection (a)(1)(E) of this section, are amended
to conform to the additional changes made by Subsection (a)(1) of
this section to read as follows:
       (a)  An insured shall pay, either directly to the receiver or
to any agent that has paid or is obligated to pay the receiver on
behalf of the insured, any unpaid earned premium or retrospectively
rated premium due the insurer based on the termination of coverage
under Section 443.152 [21A.152]. Premium on surety business is
deemed earned at inception if a policy term cannot be determined.
All other premium is deemed earned and is prorated equally over the
determined policy term, regardless of any provision in the bond,
guaranty, contract or other agreement.
       (b)  Any person, other than the insured, shall turn over to
the receiver any unpaid premium due and owing as shown on the
records of the insurer, including any amount representing
commissions, for the full policy term due the insurer at the time of
the entry of the receivership order, whether earned or unearned,
based on the termination of coverage under Section 443.152
[21A.152]. The unpaid premium due the receiver from any person
other than the insured excludes any premium not collected from the
insured and not earned based on the termination of coverage under
Section 443.152 [21A.152].
       (c)  Any person, other than the insured, responsible for the
remittance of a premium, shall turn over to the receiver any
unearned commission of the person based on the termination of
coverage under Section 443.152 [21A.152]. Credits, setoffs, or
both may not be allowed to an agent, broker, premium finance
company, or any other person for any amounts advanced to the insurer
by the person on behalf of, but in the absence of a payment by, the
insured, or for any other amount paid by the person to any other
person after the entry of the order of receivership.
       (z)  Sections 21A.213(h) and (i), Insurance Code,
redesignated as Sections 443.213(h) and (i), Insurance Code,
respectively, by Subsection (a)(1)(E) of this section, are amended
to conform to the additional changes made by Subsection (a)(1) of
this section to read as follows:
       (h)  To the extent a guaranty association is required by
applicable law to pay any claims for which the insurer would have
been entitled to reimbursement from the policyholder, the following
provisions apply:
             (1)  The receiver shall promptly invoice the
policyholder for the reimbursement due under the agreement, and the
policyholder is obligated to pay the amount invoiced to the
receiver for the benefit of the guaranty associations that paid the
claims. Neither the insolvency of the insurer nor the insurer's
inability to perform any obligations under the deductible agreement
is a defense to the policyholder's reimbursement obligation under
the deductible agreement. At the time the policyholder
reimbursements are collected, the receiver shall promptly forward
those amounts to the guaranty association, based on the claims paid
by the guaranty association that were subject to the deductible.
             (2)  If the collateral is insufficient to reimburse the
guaranty association for claims paid within the deductible, the
receiver shall use any existing collateral to make a partial
reimbursement to the guaranty association, subject to any
allocation under Subsection (d), (e), or (f). If more than one
guaranty association has a claim against the same collateral, the
receiver shall prorate payments to each guaranty association based
on the amount of the claims each guaranty association has paid.
             (3)  The receiver is entitled to deduct from
reimbursements owed to a guaranty association or collateral to be
returned to a policyholder reasonable actual expenses incurred in
fulfilling the receiver's responsibilities under this section.
Expenses incurred to collect reimbursements for the benefit of a
guaranty association are subject to the approval of the guaranty
association. Any remaining expenses that are not deducted from the
reimbursements are payable subject to Section 443.015 [21A.015].
             (4)  The receiver shall provide any affected guaranty
associations with a complete accounting of the receiver's
deductible billing and collection activities on a quarterly basis,
or at other intervals as may be agreed to between the receiver and
the guaranty associations. Accountings under this subdivision must
include copies of the policyholder billings, the reimbursements
collected, the available amounts and use of collateral for each
account, and any prorating of payments.
             (5)  If the receiver fails to make a good faith effort
to collect reimbursements due from a policyholder under a
deductible agreement within 120 days of receipt of claims payment
reports from a guaranty association, the guaranty association may,
after notice to the receiver, collect the reimbursements that are
due, and, in so doing, the guaranty association shall have the same
rights and remedies as the receiver. A guaranty association shall
report any amounts collected under this subdivision and expenses
incurred in collecting those amounts to the receiver.
             (6)  The receiver shall periodically adjust the
collateral held as the claims subject to the deductible agreement
are paid, provided that adequate collateral is maintained. The
receiver is not required to adjust the collateral more than once a
year. The receiver shall inform the guaranty associations of all
collateral reviews, including the basis for the adjustment.
             (7)  Reimbursements received or collected by a guaranty
association under this section may not be considered a distribution
of the insurer's assets. A guaranty association shall provide the
receiver with an accounting of any amounts it has received or
collected under this section and any expenses incurred in
connection with that receipt or collection. The amounts received,
net of any expenses incurred in connection with collection of the
amounts, must be set off against the guaranty association's claim
filed under Section 443.251 [21A.251] for the payments that were
reimbursed.
             (8)  To the extent that a guaranty association pays a
claim within the deductible amount that is not reimbursed by either
the receiver or by policyholder payments, the guaranty association
has a claim for those amounts in the delinquency proceeding in
accordance with Section 443.251 [21A.251].
             (9)  Nothing in this section limits any rights of a
guaranty association under applicable law to obtain reimbursement
for claims payments made by the guaranty association under policies
of the insurer or for the association's related expenses.
       (i)  If a claim that is subject to a deductible agreement and
secured by collateral is not covered by any guaranty association,
the following provisions apply:
             (1)  The receiver is entitled to retain as an asset of
the estate any collateral or deductible reimbursements obtained by
the receiver.
             (2)  If a policyholder fails to assume an obligation
under a deductible agreement to pay a claim, the receiver shall use
the collateral to adjust and pay the claim to the extent that the
available collateral, after any allocation under Subsection (d),
(e), or (f), is sufficient to pay all outstanding and anticipated
claims within the deductible. If the collateral is exhausted and
all reasonable means of collection against the insured have been
exhausted, the remaining claims shall be subject to the provisions
of Sections 443.251 and 443.301 [21A.251 and 21A.301].
             (3)  The receiver is entitled to deduct from collateral
reasonable actual expenses incurred in fulfilling the receiver's
responsibilities under this section. Any remaining expenses that
are not deducted from the reimbursements are payable subject to
Section 443.015 [21A.015].
       (aa)  Sections 21A.251(a) and (b), Insurance Code,
redesignated as Sections 443.251(a) and (b), Insurance Code,
respectively, by Subsection (a)(1)(F) of this section, are amended
to conform to the additional changes made by Subsection (a)(1) of
this section to read as follows:
       (a)  Except as provided by this subsection, proof of all
claims must be filed with the liquidator in the form required by
Section 443.252 [21A.252] on or before the last day for filing
specified in the notice required under Section 443.155 [21A.155],
which date may not be later than 18 months after entry of the order
of liquidation, unless the receivership court, for good cause
shown, extends the time, except that proofs of claims for cash
surrender values or other investment values in life insurance and
annuities and for any other policies insuring the lives of persons
need not be filed unless the liquidator expressly so requires. The
receivership court, only upon application of the liquidator, may
allow alternative procedures and requirements for the filing of
proofs of claim or for allowing or proving claims. Upon
application, if the receivership court dispenses with the
requirements of filing a proof of claim by a person or a class or
group of persons, a proof of claim for the person, class, or group
is deemed to have been filed for all purposes, except that the
receivership court's waiver of proof of claim requirements does not
impact guaranty association proof of claim filing requirements or
coverage determinations to the extent the guaranty fund statute or
filing requirements are inconsistent with the receivership court's
waiver of proof.
       (b)  The liquidator shall permit a claimant that makes a late
filing to share ratably in distributions, whether past or future,
as if the claim were not filed late, to the extent that the payment
will not prejudice the orderly administration of the liquidation,
under the following circumstances:
             (1)  the eligibility to file a proof of claim was not
known to the claimant, and the claimant filed a proof of claim not
later than the 90th day after the date of first learning of the
eligibility;
             (2)  a transfer to a creditor was avoided under Section
443.202, 443.203, 443.204, or 443.206 [21A.202, 21A.203, 21A.204,
or 21A.206], or was voluntarily surrendered under Section 443.208
[21A.208], and the filing satisfies the conditions of Section
443.208 [21A.208]; or
             (3)  the valuation under Section 443.260 [21A.260], of
security held by a secured creditor shows a deficiency, and the
claim for the deficiency is filed not later than the 30th day after
the valuation.
       (bb)  Sections 21A.253(b), (d), (i), and (k), Insurance
Code, redesignated as Sections 443.253(b), (d), (i), and (k),
Insurance Code, respectively, by Subsection (a)(1)(F) of this
section, are amended to conform to the additional changes made by
Subsection (a)(1) of this section to read as follows:
       (b)  Pursuant to the review, the liquidator shall provide
written notice of the claim determination by any means authorized
by Section 443.007 [21A.007] to the claimant or the claimant's
attorney and may provide notice to any reinsurer that is or may be
liable in respect of the claim. The notice must set forth the
amount of the claim allowed by the liquidator, if any, and the
priority class of the claim as established in Section 443.301
[21A.301].
       (d)  A claim that has not become mature as of the coverage
termination date established under Section 443.201 [21A.201]
because payment on the claim is not yet due may be allowed as if it
were mature. A claim that is allowed under this subsection may be
discounted to present value based upon a reasonable estimated date
of the payment, if the liquidator determines that the present value
of the payment is materially less than the amount of the payment.
       (i)  A claim that does not contain all the applicable
information required by Section 443.252 [21A.252] need not be
further reviewed or adjudicated, and may be denied or disallowed by
the liquidator subject to the notice and objection procedures in
this section.
       (k)  The liquidator is not required to process claims for any
class until it appears reasonably likely that property will be
available for a distribution to that class. If there are
insufficient assets to justify processing all claims for any class
listed in Section 443.301 [21A.301], the liquidator shall report
the facts to the receivership court and make such recommendations
as may be appropriate for handling the remainder of the claims.
       (cc)  Section 21A.254, Insurance Code, redesignated as
Section 443.254, Insurance Code, by Subsection (a)(1)(F) of this
section, is amended to conform to the additional changes made by
Subsection (a)(1) of this section to read as follows:
       Sec. 443.254 [21A.254].  CLAIMS UNDER OCCURRENCE POLICIES,
SURETY BONDS, AND SURETY UNDERTAKINGS.  (a)  Subject to the
provisions of Section 443.253 [21A.253], any insured has the right
to file a claim for the protection afforded under the insured's
policy, regardless of whether a claim is known at the time of
filing, if the policy is an occurrence policy.
       (b)  Subject to the provisions of Section 443.253 [21A.253],
an obligee under a surety bond or surety undertaking has the right
to file a claim for the protection afforded under the surety bond or
surety undertaking issued by the insurer under which the obligee is
the beneficiary, regardless of whether a claim is known at the time
of filing.
       (c)  After a claim is filed under Subsection (a) or (b), at
the time that a specific claim is made by or against the insured or
by the obligee, the insured or the obligee shall supplement the
claim, and the receiver shall treat the claim as a contingent or
unliquidated claim under Section 443.255 [21A.255].
       (dd)  Sections 21A.255(a) and (c), Insurance Code,
redesignated as Sections 443.255(a) and (c), Insurance Code,
respectively, by Subsection (a)(1)(F) of this section, are amended
to conform to the additional changes made by Subsection (a)(1) of
this section to read as follows:
       (a)  A claim of an insured or third party may be allowed under
Section 443.253 [21A.253], regardless of the fact that the claim
was contingent or unliquidated, if any contingency is removed in
accordance with Subsection (b) and the value of the claim is
determined. For purposes of this section, a claim is contingent if:
             (1)  the accident, casualty, disaster, loss, event, or
occurrence insured, reinsured, or bonded or reinsured against
occurred on or before the date fixed under Section 443.151
[21A.151]; and
             (2)  the act or event triggering the insurer's
obligation to pay has not occurred as of the date fixed under
Section 443.151 [21A.151].
       (c)  The liquidator may petition the receivership court to
set a date before which all claims under this section are final. In
addition to the notice requirements of Section 443.007 [21A.007],
the liquidator shall give notice of the filing of the petition to
all claimants with claims that remain contingent or unliquidated
under this section.
       (ee)  Section 21A.256(c), Insurance Code, redesignated as
Section 443.256(c), Insurance Code, by Subsection (a)(1)(F) of this
section, is amended to conform to the additional changes made by
Subsection (a)(1) of this section to read as follows:
       (c)  The liquidator may make recommendations to the
receivership court for the allowance of an insured's claim after
consideration of the probable outcome of any pending action against
the insured on which the claim is based, the probable damages
recoverable in the action, and the probable costs and expenses of
defense. After allowance by the receivership court, the liquidator
shall withhold any distribution payable on the claim, pending the
outcome of litigation and negotiation between the insured and the
third party. The liquidator may reconsider the claim as provided in
Section 443.253(j) [21A.253(j)]. As claims against the insured are
settled or barred, the insured or third party, as appropriate,
shall be paid from the amount withheld the same percentage
distribution as was paid on other claims of like priority, based on
the lesser of the amount actually due from the insured by action or
paid by agreement plus the reasonable costs and expense of defense,
or the amount allowed on the claims by the receivership court.
After all claims are settled or barred, any sum remaining from the
amount withheld shall revert to the undistributed property of the
insurer.
       (ff)  Section 21A.257(a), Insurance Code, redesignated as
Section 443.257(a), Insurance Code, by Subsection (a)(1)(F) of this
section, is amended to conform to the additional changes made by
Subsection (a)(1) of this section to read as follows:
       (a)  When objections to the liquidator's proposed treatment
of a claim are filed and the liquidator does not alter the
determination of the claim as a result of the objections, the
liquidator shall ask the receivership court for a hearing pursuant
to Section 443.007 [21A.007].
       (gg)  Section 21A.258, Insurance Code, redesignated as
Section 443.258, Insurance Code, by Subsection (a)(1)(F) of this
section, is amended to conform to the additional changes made by
Subsection (a)(1) of this section to read as follows:
       Sec. 443.258 [21A.258].  LIQUIDATOR'S RECOMMENDATIONS TO
RECEIVERSHIP COURT.  The liquidator shall present to the
receivership court, for approval, reports of claims settled or
determined by the liquidator under Section 443.253 [21A.253]. The
reports must be presented from time to time as determined by the
liquidator and must include information identifying the claim and
the amount and priority class of the claim.
       (hh)  Sections 21A.260(e) and (g), Insurance Code,
redesignated as Sections 443.260(e) and (g), Insurance Code,
respectively, by Subsection (a)(1)(F) of this section, are amended
to conform to the additional changes made by Subsection (a)(1) of
this section to read as follows:
       (e)  If collateral is insufficient to satisfy in full all
potential claims against it under Subsections (c) and (g), the
claims against the collateral must be paid on a pro rata basis, and
an obligee or completion contractor under Subsection (c) has a
claim, subject to allowance under Section 443.253 [21A.253], for
any deficiency.
       (g)  To the extent that a guaranty association has made a
payment relating to a claim against a surety bond, the guaranty
association shall first be reimbursed for that payment and related
expenses out of the available collateral or proceeds related to the
surety bond. To the extent that the collateral is sufficient, the
guaranty association shall be reimbursed 100 percent of its
payment. If the collateral is insufficient to satisfy in full all
potential claims against the collateral under Subsection (c) and
this subsection, a guaranty association that has paid claims on the
surety bond is entitled to a pro rata share of the available
collateral in accordance with Subsection (e), and the guaranty
association has claims against the general assets of the estate in
accordance with Section 443.253 [21A.253] for any deficiency. Any
payment made to a guaranty association under this subsection from
collateral may not be deemed early access or otherwise deemed a
distribution out of the general assets or property of the estate,
and the guaranty association receiving payment shall subtract any
payment from the collateral from the association's final claims
against the estate.
       (ii)  Sections 21A.261(a) and (e), Insurance Code,
redesignated as Sections 443.261(a) and (e), Insurance Code,
respectively, by Subsection (a)(1)(F) of this section, are amended
to conform to the additional changes made by Subsection (a)(1) of
this section to read as follows:
       (a)  Notwithstanding any other provision of this chapter,
including any other provision of this chapter permitting the
modification of contracts, or other law of this state, a person may
not be stayed or prohibited from exercising:
             (1)  a contractual right to terminate, liquidate, or
close out any netting agreement or qualified financial contract
with an insurer because of:
                   (A)  the insolvency, financial condition, or
default of the insurer at any time, provided that the right is
enforceable under applicable law other than this chapter; or
                   (B)  the commencement of a formal delinquency
proceeding under this chapter;
             (2)  any right under a pledge, security, collateral, or
guarantee agreement, or any other similar security arrangement or
credit support document, relating to a netting agreement or
qualified financial contract; or
             (3)  subject to any provision of Section 443.209(b)
[21A.209(b)], any right to set off or net out any termination value,
payment amount, or other transfer obligation arising under or in
connection with a netting agreement or qualified financial contract
where the counterparty or its guarantor is organized under the laws
of the United States or a state or foreign jurisdiction approved by
the Securities Valuation Office of the National Association of
Insurance Commissioners as eligible for netting.
       (e)  Notwithstanding any other provision of this chapter, a
receiver may not avoid a transfer of money or other property arising
under or in connection with a netting agreement or qualified
financial contract, or any pledge, security, or collateral or
guarantee agreement or any other similar security arrangement or
credit support document relating to a netting agreement or
qualified financial contract, that is made before the commencement
of a formal delinquency proceeding under this chapter. However, a
transfer may be avoided under Section 443.205(a) [21A.205(a)] if
the transfer was made with actual intent to hinder, delay, or
defraud the insurer, a receiver appointed for the insurer, or
existing or future creditors.
       (jj)  Section 21A.301, Insurance Code, redesignated as
Section 443.301, Insurance Code, by Subsection (a)(1)(G) of this
section, is amended to conform to the additional changes made by
Subsection (a)(1) of this section and to the recodification and
repeal of Section 2(3), Article 21.28-C, and Section 12, Article
21.28-D, Insurance Code, by Chapter 727, Acts of the 79th
Legislature, Regular Session, 2005, to read as follows:
       Sec. 443.301 [21A.301].  PRIORITY OF DISTRIBUTION. The
priority of payment of distributions on unsecured claims must be in
accordance with the order in which each class of claims is set forth
in this section. Every claim in each class shall be paid in full, or
adequate funds retained for their payment, before the members of
the next class receive payment, and all claims within a class must
be paid substantially the same percentage of the amount of the
claim. Except as provided by Subsections (a)(2), (a)(3), (i), and
(k), subclasses may not be established within a class. No claim by
a shareholder, policyholder, or other creditor shall be permitted
to circumvent the priority classes through the use of equitable
remedies. The order of distribution of claims shall be:
       (a)  Class 1. (1) The costs and expenses of administration
expressly approved or ratified by the liquidator, including the
following:
                   (A)  the actual and necessary costs of preserving
or recovering the property of the insurer;
                   (B)  reasonable compensation for all services
rendered on behalf of the administrative supervisor or receiver;
                   (C)  any necessary filing fees;
                   (D)  the fees and mileage payable to witnesses;
                   (E)  unsecured loans obtained by the receiver; and
                   (F)  expenses, if any, approved by the
rehabilitator of the insurer and incurred in the course of the
rehabilitation that are unpaid at the time of the entry of the order
of liquidation.
             (2)  The reasonable expenses of a guaranty association,
including overhead, salaries and other general administrative
expenses allocable to the receivership to include administrative
and claims handling expenses and expenses in connection with
arrangements for ongoing coverage, other than expenses incurred in
the performance of duties under Section 462.002(3), 463.108,
463.111, 463.113, 463.353, or 2602.113[, Section 2(3) of Article
21.28-C, and Section 12 of Article 21.28-D] or similar duties under
the statute governing a similar organization in another state. In
the case of the Texas Property and Casualty Insurance Guaranty
Association and other property and casualty guaranty associations,
the expenses shall include loss adjustment expenses, including
adjusting and other expenses and defense and cost containment
expenses. In the event that there are insufficient assets to pay
all of the costs and expenses of administration under Subsection
(a)(1) and the expenses of a guaranty association, the costs and
expenses under Subsection (a)(1) shall have priority over the
expenses of a guaranty association. In this event, the expenses of
a guaranty association shall be paid on a pro rata basis after the
payment of costs and expenses under Subsection (a)(1) in full.
             (3)  For purposes of Subsection (a)(1)(E), any
unsecured loan obtained by the receiver, unless by its terms it
otherwise provides, has priority over all other costs of
administration. Absent agreement to the contrary, all claims in
this subclass share pro rata.
             (4)  Except as expressly approved by the receiver, any
expenses arising from a duty to indemnify the directors, officers,
or employees of the insurer are excluded from this class and, if
allowed, are Class 5 claims.
       (b)  Class 2.  All claims under policies of insurance,
including third-party claims, claims under nonassessable policies
for unearned premium, claims of obligees and, subject to the
discretion of the receiver, completion contractors under surety
bonds and surety undertakings other than bail bonds, mortgage or
financial guaranties, or other forms of insurance offering
protection against investment risk, claims by principals under
surety bonds and surety undertakings for wrongful dissipation of
collateral by the insurer or its agents, and claims incurred during
the extension of coverage provided for in Section 443.152
[21A.152]. All other claims incurred in fulfilling the statutory
obligations of a guaranty association not included in Class 1,
including indemnity payments on covered claims and, in the case of
the Life, Accident, Health, and Hospital Service Insurance Guaranty
Association or another life and health guaranty association, all
claims as a creditor of the impaired or insolvent insurer for all
payments of and liabilities incurred on behalf of covered claims or
covered obligations of the insurer and for the funds needed to
reinsure those obligations with a solvent insurer. Notwithstanding
any provision of this chapter, the following claims are excluded
from Class 2 priority:
             (1)  obligations of the insolvent insurer arising out
of reinsurance contracts;
             (2)  obligations, excluding unearned premium claims on
policies other than reinsurance agreements, incurred after:
                   (A)  the expiration date of the insurance policy;
                   (B)  the policy has been replaced by the insured
or canceled at the insured's request; or
                   (C)  the policy has been canceled as provided by
this chapter;
             (3)  obligations to insurers, insurance pools, or
underwriting associations and their claims for contribution,
indemnity, or subrogation, equitable or otherwise;
             (4)  any claim that is in excess of any applicable
limits provided in the insurance policy issued by the insurer;
             (5)  any amount accrued as punitive or exemplary
damages unless expressly covered under the terms of the policy;
             (6)  tort claims of any kind against the insurer and
claims against the insurer for bad faith or wrongful settlement
practices; and
             (7)  claims of the guaranty associations for
assessments not paid by the insurer, which must be paid as claims in
Class 5.
       (c)  Class 3.  Claims of the federal government not included
in Class 3.
       (d)  Class 4.  Debts due employees for services or benefits
to the extent that the debts do not exceed $5,000 or two months
salary, whichever is the lesser, and represent payment for services
performed within one year before the entry of the initial order of
receivership. This priority is in lieu of any other similar
priority that may be authorized by law as to wages or compensation
of employees.
       (e)  Class 5.  Claims of other unsecured creditors not
included in Classes 1 through 4, including claims under reinsurance
contracts, claims of guaranty associations for assessments not paid
by the insurer, and other claims excluded from Class 2.
       (f)  Class 6.  Claims of any state or local governments,
except those specifically classified elsewhere in this section.
Claims of attorneys for fees and expenses owed them by an insurer
for services rendered in opposing a formal delinquency proceeding.
In order to prove the claim, the claimant must show that the insurer
that is the subject of the delinquency proceeding incurred the fees
and expenses based on its best knowledge, information, and belief,
formed after reasonable inquiry, indicating opposition was in the
best interests of the insurer, was well grounded in fact, and was
warranted by existing law or a good faith argument for the
extension, modification, or reversal of existing law, and that
opposition was not pursued for any improper purpose, such as to
harass or to cause unnecessary delay or needless increase in the
cost of the litigation.
       (g)  Class 7.  Claims of any state or local government for a
penalty or forfeiture, but only to the extent of the pecuniary loss
sustained from the act, transaction, or proceeding out of which the
penalty or forfeiture arose, with reasonable and actual costs
occasioned thereby. The balance of the claims must be treated as
Class 9 claims under Subsection (i).
       (h)  Class 8.  Except as provided in Sections 443.251(b)
[21A.251(b)] and (d), late filed claims that would otherwise be
classified in Classes 2 through 7.
       (i)  Class 9.  Surplus notes, capital notes or contribution
notes or similar obligations, premium refunds on assessable
policies, and any other claims specifically assigned to this class.
Claims in this class are subject to any subordination agreements
related to other claims in this class that existed before the entry
of the liquidation order.
       (j)  Class 10.  Interest on allowed claims of Classes 1
through 9, according to the terms of a plan proposed by the
liquidator and approved by the receivership court.
       (k)  Class 11.  Claims of shareholders or other owners
arising out of their capacity as shareholders or other owners, or
any other capacity, except as they may be qualified in Class 2, 5,
or 10. Claims in this class are subject to any subordination
agreements related to other claims in this class that existed
before the entry of the liquidation order.
       (kk)  Section 21A.302(f), Insurance Code, redesignated as
Section 443.302(f), Insurance Code, by Subsection (a)(1)(G) of this
section, is amended to conform to the additional changes made by
Subsection (a)(1) of this section to read as follows:
       (f)  Any claim payments made under Subsection (d) and any
related expenses must be treated as early access payments under
Section 443.303 [21A.303] to the guaranty association responsible
for the claims.
       (ll)  Sections 21A.303(a), (b), (c), (e), (f), and (g),
Insurance Code, redesignated as Sections 443.303(a), (b), (c), (e),
(f), and (g), Insurance Code, respectively, by Subsection (a)(1)(G)
of this section, are amended to conform to the additional changes
made by Subsection (a)(1) of this section to read as follows:
       (a)  For purposes of this section, "distributable assets"
means all general assets of the liquidation estate less:
             (1)  amounts reserved, to the extent necessary and
appropriate, for the entire Section 443.301(a) [21A.301(a)]
expenses of the liquidation through and after its closure; and
             (2)  to the extent necessary and appropriate, reserves
for distributions on claims other than those of the guaranty
associations falling within the priority classes of claims
established in Section 443.301(c) [21A.301(c)].
       (b)  Early access payments to guaranty associations must be
made as soon as possible after the entry of a liquidation order and
as frequently as possible after the entry of the order, but at least
annually if distributable assets are available to be distributed to
the guaranty associations, and must be in amounts consistent with
this section. Amounts advanced to an affected guaranty association
pursuant to this section shall be accounted for as advances against
distributions to be made under Section 443.302 [21A.302]. Where
sufficient distributable assets are available, amounts advanced
are not limited to the claims and expenses paid to date by the
guaranty associations; however, the liquidator may not distribute
distributable assets to the guaranty associations in excess of the
anticipated entire claims of the guaranty associations falling
within the priority classes of claims established in Sections
443.301(b) [21A.301(b)] and (c).
       (c)  Within 120 days after the entry of an order of
liquidation by the receivership court, and at least annually after
the entry of the order, the liquidator shall apply to the
receivership court for approval to make early access payments out
of the general assets of the insurer to any guaranty associations
having obligations arising in connection with the liquidation or
shall report that there are no distributable assets at that time
based on financial reporting as required in Section 443.016
[21A.016]. The liquidator may apply to the receivership court for
approval to make early access payments more frequently than
annually based on additional information or the recovery of
material assets.
       (e)  Notice of each application for early access payments, or
of any report required pursuant to this section, must be given in
accordance with Section 443.007 [21A.007] to the guaranty
associations that may have obligations arising from the
liquidation. Notwithstanding the provisions of Section 443.007
[21A.007], the liquidator shall provide these guaranty
associations with at least 30 days' actual notice of the filing of
the application and with a complete copy of the application prior to
any action by the receivership court. Any guaranty association
that may have obligations arising in connection with the
liquidation has:
             (1)  the right to request additional information from
the liquidator, who may not unreasonably deny such request; and
             (2)  the right to object as provided by Section 443.007
[21A.007] to any part of each application or to any report filed by
the liquidator pursuant to this section.
       (f)  In each application regarding early access payments,
the liquidator shall, based on the best information available to
the liquidator at the time, provide, at a minimum, the following:
             (1)  to the extent necessary and appropriate, the
amount reserved for the entire expenses of the liquidation through
and after its closure and for distributions on claims falling
within the priority classes of claims established in Sections
443.301(b) [21A.301(b)] and (c);
             (2)  the computation of distributable assets and the
amount and method of equitable allocation of early access payments
to each of the guaranty associations; and
             (3)  the most recent financial information filed with
the National Association of Insurance Commissioners by the
liquidator.
       (g)  Each guaranty association that receives any payments
pursuant to this section agrees, upon depositing the payment in any
account to its benefit, to return to the liquidator any amount of
these payments that may be required to pay claims of secured
creditors and claims falling within the priority classes of claims
established in Section 443.301(a) [21A.301(a)], (b), or (c). No
bond may be required of any guaranty association.
       (mm)  Sections 21A.304(a), (b), and (d), Insurance Code,
redesignated as Sections 443.304(a), (b), and (d), Insurance Code,
respectively, by Subsection (a)(1)(G) of this section, are amended
to conform to the additional changes made by Subsection (a)(1) of
this section to read as follows:
       (a)  If any funds of the receivership estate remain unclaimed
after the final distribution under Section 443.302 [21A.302], the
funds must be placed in a segregated unclaimed funds account held by
the commissioner. If the owner of any of the unclaimed funds
presents proof of ownership satisfactory to the commissioner before
the second anniversary of the date of the termination of the
delinquency proceeding, the commissioner shall remit the funds to
the owner. The interest earned on funds held in the unclaimed funds
account may be used to pay any administrative costs related to the
handling or return of unclaimed funds.
       (b)  If any amounts held in the unclaimed funds account
remain unclaimed on or after the second anniversary of the date of
the termination of the delinquency proceeding, the commissioner may
file a motion for an order directing the disposition of the funds in
the court in which the delinquency proceeding was pending. Any
costs incurred in connection with the motion may be paid from the
unclaimed funds account. The motion shall identify the name of the
insurer, the names and last known addresses of the persons entitled
to the unclaimed funds, if known, and the amount of the funds.
Notice of the motion shall be given as directed by the court. Upon a
finding by the court that the funds have not been claimed before the
second anniversary of the date of the termination of the
delinquency proceeding, the court shall order that any claims for
unclaimed funds and any interest earned on the unclaimed funds that
has not been expended under Subsection (a) are abandoned and that
the funds must be disbursed under one of the following methods:
             (1)  the amounts may be deposited in the general
receivership expense account under Subsection (c);
             (2)  the amounts may be transferred to the comptroller,
and deposited into the general revenue fund; or
             (3)  the amounts may be used to reopen the receivership
in accordance with Section 443.353 [21A.353] and be distributed to
the known claimants with approved claims.
       (d)  Any advance to a receivership under Subsection (c)(2)
may be treated as a claim under Section 443.301 [21A.301] as agreed
at the time the advance is made or, in the absence of an agreement,
in the priority determined to be appropriate by the court.
       (nn)  Section 21A.352, Insurance Code, redesignated as
Section 443.352, Insurance Code, by Subsection (a)(1)(H) of this
section, is amended to conform to the additional changes made by
Subsection (a)(1) of this section to read as follows:
       Sec. 443.352 [21A.352].  TERMINATION OF LIQUIDATION
PROCEEDINGS.  When all property justifying the expense of
collection and distribution has been collected and distributed
under this chapter, the liquidator shall apply to the receivership
court for an order discharging the liquidator and terminating the
proceeding. The receivership court may grant the application and
make any other orders, including orders to transfer any remaining
funds that are uneconomic to distribute, or pursuant to Section
443.302(c) [21A.302(c)], assign any assets that remain
unliquidated, including claims and causes of action, as may be
deemed appropriate.
       (oo)  Section 21A.354(b), Insurance Code, redesignated as
Section 443.354(b), Insurance Code, by Subsection (a)(1)(H) of this
section, is amended to conform to the additional changes made by
Subsection (a)(1) of this section to read as follows:
       (b)  If the receiver determines that any records should be
maintained after the closing of the delinquency proceeding, the
receiver may reserve property from the receivership estate for the
maintenance of the records, and any amounts so retained are
administrative expenses of the estate under Section 443.301(a)
[21A.301(a)]. Any records retained pursuant to this subsection
must be transferred to the custody of the commissioner, and the
commissioner may retain or dispose of the records as appropriate,
at the commissioner's discretion. Any records of a delinquent
insurer that are transferred to the commissioner may not be
considered records of the department for any purposes, and Chapter
552, Government Code, does not apply to those records.
       (pp)  Sections 21A.401(a) and (d), Insurance Code,
redesignated as Sections 443.401(a) and (d), Insurance Code,
respectively, by Subsection (a)(1)(I) of this section, are amended
to conform to the changes made by Subsection (a)(1) of this section
and to the recodification and repeal of Section 17, Article
21.28-C, and Section 18, Article 21.28-D, Insurance Code, by
Chapter 727, Acts of the 79th Legislature, Regular Session, 2005,
to read as follows:
       (a)  The commissioner may initiate an action against a
foreign insurer pursuant to Section 443.051 [21A.051] on any of the
grounds stated in that section or on the basis that:
             (1)  any of the foreign insurer's property has been
sequestered, garnished, or seized by official action in its
domiciliary state or in any other state;
             (2)  the foreign insurer's certificate of authority to
do business in this state has been revoked or was never issued and
there are residents of this state with unpaid claims or in-force
policies; or
             (3)  initiation of the action is necessary to enforce a
stay under Section 462.309, 463.404, or [17, Article 21.28-C,
Section 18, Article 21.28-D, or Section] 2602.259.
       (d)  Notwithstanding Section 443.201(c) [21A.201(c)], the
conservator shall hold and conserve the assets located in this
state until the commissioner in the insurer's domiciliary state is
appointed its receiver or until an order terminating conservation
is entered under Subsection (g). Once a domiciliary receiver is
appointed, the conservator shall turn over to the domiciliary
receiver all property subject to an order under this section.
       (qq)  Sections 21A.402(a) and (c), Insurance Code,
redesignated as Sections 443.402(a) and (c), Insurance Code,
respectively, by Subsection (a)(1)(I) of this section, are amended
to conform to the additional changes made by Subsection (a)(1) of
this section to read as follows:
       (a)  A domiciliary receiver appointed in another state is
vested by operation of law with title to, and may summarily take
possession of, all property and records of the insurer in this
state. Notwithstanding any other provision of law regarding
special deposits, special deposits held in this state shall be,
upon the entry of an order of liquidation with a finding of
insolvency, distributed to the guaranty associations in this state
as early access payments subject to Section 443.303 [21A.303], in
relation to the lines of business for which the special deposits
were made. The holder of any special deposit shall account to the
domiciliary receiver for all distributions from the special deposit
at the time of the distribution. The statutory provisions of
another state and all orders entered by courts of competent
jurisdiction in relation to the appointment of a domiciliary
receiver of an insurer and any related proceedings in another state
must be given full faith and credit in this state. For purposes of
this section, "another state" means any state other than this
state. This state shall treat any other state than this state as a
reciprocal state.
       (c)  Except as provided in Subsection (a), the domiciliary
receiver shall handle special deposits and special deposit claims
in accordance with federal law and the statutes pursuant to which
the special deposits are required. All amounts in excess of the
estimated amount necessary to administer the special deposit and
pay the unpaid special deposit claims are deemed general assets of
the estate. If there is a deficiency in any special deposit so that
the claims secured by the special deposit are not fully discharged
from the deposit, the claimants may share in the general assets of
the insurer to the extent of the deficiency at the same priority as
other claimants in their class of priority under Section 443.301
[21A.301], but the sharing must be deferred until the other
claimants of their class have been paid percentages of their claims
equal to the percentage paid from the special deposit. The intent
of this provision is to equalize to this extent the advantage gained
by the security provided by the special deposits.
       (rr)  Section 442.801, Insurance Code, redesignated as
Section 444.001, Insurance Code, by Subsection (a)(2) of this
section, is amended to conform to the repeal of Article 21.28,
Insurance Code, and the enactment of Chapter 21A, Insurance Code,
by Chapter 995, Acts of the 79th Legislature, Regular Session,
2005, and to the changes made by Subsection (a)(1) of this section
to read as follows:
       Sec. 444.001 [442.801].  REQUIRED CONTRACT PROVISION.  An
agency contract entered into on or after August 27, 1973, by an
insurer writing fire and casualty insurance in this state must
contain, or shall be construed to contain, the following provision:
       Notwithstanding any other provision of this contract, the
obligation of the agent to remit written premiums to the insurer
shall be changed on the commencement of a delinquency proceeding as
defined by Chapter 443 [442], Insurance Code, as amended. After the
commencement of the delinquency proceeding, the obligation of the
agent to remit premiums is limited to premiums earned before the
cancellation date of insurance policies stated in the order of a
court of competent jurisdiction under Chapter 443 [442], Insurance
Code, canceling the policies. The agent does not owe and may not be
required to remit to the insurer or to the receiver any premiums
that are unearned as of the cancellation date stated in the order.
       (ss)  Section 442.803, Insurance Code, redesignated as
Section 444.003, Insurance Code, by Subsection (a)(2) of this
section, is amended to conform to the additional changes made by
Subsection (a)(2) of this section to read as follows:
       Sec. 444.003 [442.803].  EFFECT OF CHAPTER [SUBCHAPTER] ON
ACTION BY RECEIVER AGAINST AGENT.  This chapter [subchapter] does
not prejudice a cause of action by the receiver against an agent to
recover:
             (1)  unearned premiums that were not returned to
policyholders; or
             (2)  earned premiums that were not promptly remitted to
the receiver.
       (tt)  Section 442.804, Insurance Code, redesignated as
Section 444.004, Insurance Code, by Subsection (a)(2) of this
section, is amended to conform to the additional changes made by
Subsection (a)(2) of this section to read as follows:
       Sec. 444.004 [442.804].  AGENT NOT RECEIVER'S AGENT.  This
chapter [subchapter] does not render the agent an agent of the
receiver for earned or unearned premiums.
       SECTION 3B.005.  (a)  Section 462.007(b), Insurance Code,
is amended to conform to Section 2, Chapter 995, Acts of the 79th
Legislature, Regular Session, 2005, to read as follows:
       (b)  Except as provided by Subchapter F, this chapter does
not apply to:
             (1)  life, annuity, health, or disability insurance;
             (2)  mortgage guaranty, financial guaranty, or other
kinds of insurance offering protection against investment risks;
             (3)  a fidelity or surety bond, or any other bonding
obligation;
             (4)  credit insurance, vendors' single-interest
insurance, collateral protection insurance, or similar insurance
protecting a creditor's interest arising out of a creditor-debtor
transaction;
             (5)  insurance of warranties or service contracts;
             (6)  title insurance;
             (7)  ocean marine insurance;
             (8)  a transaction or combination of transactions
between a person, including an affiliate of the person, and an
insurer, including an affiliate of the insurer, that involves the
transfer of investment or credit risk unaccompanied by the transfer
of insurance risk, including transactions, except for workers' 
compensation insurance, involving captive insurers, policies in
which deductible or self-insured retention is substantially equal
in amount to the limit of the liability under the policy, and
transactions in which the insured retains a substantial portion of
the risk; or
             (9)  insurance provided by or guaranteed by government.
       (b)  Section 2, Chapter 995, Acts of the 79th Legislature,
Regular Session, 2005, which  amended former Subsection (a),
Section 3, Article 21.28-C, Insurance Code, is repealed.
       SECTION 3B.006.  (a)  Section 462.207, Insurance Code, is
amended to conform to Section 3, Chapter 995, Acts of the 79th
Legislature, Regular Session, 2005, to read as follows:
       Sec. 462.207.  CLAIMS NOT COVERED: AMOUNTS DUE CERTAIN
ENTITIES.  (a)  Any amount directly or indirectly due any
reinsurer, insurer, self-insurer, insurance pool, or underwriting
association, as a subrogation recovery, reinsurance recovery,
contribution, or indemnification, or otherwise, is not a covered
claim.
       (b)  An impaired insurer's insured is not liable, and the
reinsurer, insurer, self-insurer, insurance pool, or underwriting
association is not entitled to sue or continue a suit against the
insured, for a subrogation recovery, reinsurance recovery,
contribution, [or] indemnification, or any other claim asserted
directly or indirectly by a reinsurer, insurer, insurance pool, or
underwriting association to the extent of the applicable liability
limits of the insurance policy written and issued to the insured by
the insolvent insurer.
       (b)  Section 3, Chapter 995, Acts of the 79th Legislature,
Regular Session, 2005, which amended former Subdivision (8),
Section 5, Article 21.28-C, Insurance Code, is repealed.
       SECTION 3B.007.  (a)  Section 462.211, Insurance Code, is
amended to conform to Section 4, Chapter 995, Acts of the 79th
Legislature, Regular Session, 2005, and Section 6.070, Chapter 265,
Acts of the 79th Legislature, Regular Session, 2005, to read as
follows:
       Sec. 462.211.  CLAIMS NOT COVERED:  LATE FILED CLAIMS.  (a)  
Notwithstanding any other provision of this chapter or any other
law to the contrary, and subject to [except as provided by]
Subsection (b), a claim that is filed with the association on a date
that is later than 18 months after the date of the order of
liquidation or that is unknown  and unreported as of the date is not
a covered claim.
       (b)  This section does not apply to a claim for workers'
compensation benefits governed by Title 5, Labor Code, and the
applicable rules of the commissioner of workers' compensation 
[Texas Workers' Compensation Commission].
       (b)  Subchapter C, Chapter 462, Insurance Code, is amended to
conform to Section 4, Chapter 995, Acts of the 79th Legislature,
Regular Session, 2005, by adding Section 462.1121 to read as
follows:
       Sec. 462.1121.  ACTION TO OBTAIN INFORMATION CONCERNING
INSURER IN RECEIVERSHIP AUTHORIZED.  (a)  The association may bring
an action against any third-party administrator, agent, attorney,
or other representative of an insurer for which a receiver has been
appointed to obtain custody and control of all information,
including files, records, and electronic data, related to the
insurer that is appropriate or necessary for the association, or a
similar association in other states, to carry out its duties under
this chapter or a similar law of another state. The association has
the absolute right to obtain information under this section through
emergency equitable relief, regardless of where the information is
physically located.
       (b)  In bringing an action under this section, the
association is not subject to any defense, possessory lien or other
type of lien, or other legal or equitable ground for refusal to
surrender the information that may be asserted against the receiver
of the insurer.
       (c)  The association is entitled to an award of reasonable
attorney's fees and costs incurred by the association in any action
to obtain information under this section.
       (d)  The rights granted to the association under this section
do not affect the receiver's title to information, and information
obtained under this section remains the property of the receiver
while in the custody of the association.
       (c)  The following are repealed:
             (1)  Section 4, Chapter 995, Acts of the 79th
Legislature, Regular Session, 2005, which amended former Section 8,
Article 21.28-C, Insurance Code, by amending Subsection (d) and
adding Subsection (i); and
             (2)  Section 6.070, Chapter 265, Acts of the 79th
Legislature, Regular Session, 2005, which amended former
Subsection (d), Section 8, Article 21.28-C, Insurance Code.
       SECTION 3B.008.  (a)  Section 462.017(b), Insurance Code,
is amended to conform to Section 5, Chapter 995, Acts of the 79th
Legislature, Regular Session, 2005, to read as follows:
       (b)  Venue in a suit by or against the commissioner or
association relating to an action or ruling of the commissioner or
association under this chapter is in Travis County. The
commissioner or association is not required to give an appeal bond
in an appeal of a cause of action arising under this chapter.
       (b)  Section 5, Chapter 995, Acts of the 79th Legislature,
Regular Session, 2005, which amended former Subsection (g), Section
10, Article 21.28-C, Insurance Code, is repealed.
       SECTION 3B.009.  (a)  Sections 462.308(a) and (c),
Insurance Code, are amended to conform to Section 6, Chapter 995,
Acts of the 79th Legislature, Regular Session, 2005, to read as
follows:
       (a)  The association is entitled to recover:
             (1)  the amount of a covered claim and the cost of
defense paid on behalf of [under this chapter from the person on
whose behalf the payment was made if the person is:
             [(1)]  a person:
                   (A)  who is an affiliate of the impaired insurer;
and
                   (B)  whose liability obligations to other persons
are satisfied wholly or partly by payment made under this chapter;
and [or]
             (2)  the amount of a covered claim for workers' 
compensation insurance benefits and the costs of administration and
defense of the claim paid under this chapter from an insured
employer[:
                   [(A)]  whose net worth on December 31 of the year
preceding the date the insurer becomes an impaired insurer exceeds
$50 million[; and
                   [(B)  whose obligations under a liability policy
or contract of insurance written, issued, and placed in force after
January 1, 1992, are satisfied wholly or partly by payment made
under this chapter].
       (c)  For purposes of Subsection (a)(2), an insured's net
worth is deemed to include [includes] the aggregate net worth of the
insured and of the insured's parent, subsidiary, and affiliated
companies[,] computed on a consolidated basis.
       (b)  Section 6, Chapter 995, Acts of the 79th Legislature,
Regular Session, 2005, which amended former Subsection (b), Section
11, Article 21.28-C, Insurance Code, is repealed.
       SECTION 3B.010.  (a)  Section 462.212, Insurance Code, is
amended to conform to Section 7, Chapter 995, Acts of the 79th
Legislature, Regular Session, 2005, to read as follows:
       Sec. 462.212.  NET WORTH EXCLUSION.  (a)  Except for a
workers' compensation claim governed by Title 5, Labor Code, a
covered claim does not include, and the association is not liable
for, any claim arising from an insurance policy of any [The
association is not liable to pay a first-party claim of an] insured
whose net worth on December 31 of the year preceding the date the
insurer becomes an impaired insurer exceeds $50 million.
       (b)  For purposes of this section, an insured's net worth
includes the aggregate net worth of the insured and of the insured's
parent, subsidiary, and affiliated companies[,] computed on a
consolidated basis.
       (c)  This section does not apply:
             (1)  to third-party claims against an insured that has:
                   (A)  applied for or consented to the appointment
of a receiver, trustee, or liquidator for all or a substantial part
of the insurer's assets;
                   (B)  filed a voluntary petition in bankruptcy; or
                   (C)  filed a petition or an answer seeking a
reorganization or arrangement with creditors or to take advantage
of any insolvency law; or
             (2)  if an order, judgment, or decree is entered by a
court of competent jurisdiction, on the application of a creditor,
adjudicating the insured bankrupt or insolvent or approving a
petition seeking reorganization of the insured or of all or a
substantial part of its assets.
       (d)  In an instance described by Subsection (c), the
association is entitled to assert a claim in the bankruptcy or
receivership proceeding to recover the amount of any covered claim
and costs of defense paid on behalf of the insured.
       (e)  The association may establish procedures for requesting
financial information from an insured or claimant on a confidential
basis for the purpose of applying sections concerning the net worth
of first-party and third-party claimants, subject to any
information requested under this subsection being shared with any
other association similar to the association and with the
liquidator for the impaired insurer on the same confidential basis.
If the insured or claimant refuses to provide the requested
financial information, the association requests an auditor's
certification of that information, and the auditor's certification
is available but not provided, the association may deem the net
worth of the insured or claimant to be in excess of $50 million at
the relevant time.
       (f)  In any lawsuit contesting the applicability of Section
462.308 or this section when the insured or claimant has declined to
provide financial information under the procedure provided in the
plan of operation under Section 462.103, the insured or claimant
bears the burden of proof concerning its net worth at the relevant
time. If the insured or claimant fails to prove that its net worth
at the relevant time was less than the applicable amount, the court
shall award the association its full costs, expenses, and
reasonable attorney's fees in contesting the claim  [This section
does not exclude the payment of a covered claim for workers' 
compensation benefits otherwise payable under this chapter].
       (b)  Section 7, Chapter 995, Acts of the 79th Legislature,
Regular Session, 2005, which amended former Section 11A, Article
21.28-C, Insurance Code, is repealed.
       SECTION 3B.011.  (a)  Sections 462.309(c) and (e),
Insurance Code, are amended to conform to Section 8, Chapter 995,
Acts of the 79th Legislature, Regular Session, 2005, to read as
follows:
       (c)  A deadline imposed under the Texas Rules of Civil
Procedure or the Texas Rules of Appellate Procedure is tolled
during the stay.  Statutes of limitation or repose are not tolled
during the stay, and any action filed during the stay is stayed upon
the filing of the action.
       (e)  The commissioner may bring an ancillary conservation 
[delinquency] proceeding under Section 443.401 [Sections 442.751,
442.752, and 442.754] for the [limited] purpose of determining the
application, enforcement, and extension of the stay to an impaired
insurer that is not domiciled in this state.
       (b)  Section 8, Chapter 995, Acts of the 79th Legislature,
Regular Session, 2005, which amended former Subsection (a), Section
17, Article 21.28-C, Insurance Code, is repealed.
       SECTION 3B.012.  (a)  The heading to Chapter 463, Insurance
Code, is amended to conform to Section 9, Chapter 753, Acts of the
79th Legislature, Regular Session, 2005, to read as follows:
CHAPTER 463. TEXAS LIFE, ACCIDENT, HEALTH, AND HOSPITAL SERVICE
INSURANCE GUARANTY ASSOCIATION
       (b)  Section 463.001, Insurance Code, is amended to conform
to Section 9, Chapter 753, Acts of the 79th Legislature, Regular
Session, 2005, to read as follows:
       Sec.463.001.SHORT TITLE.  This chapter may be cited as
the Texas Life, Accident, Health, and Hospital Service Insurance
Guaranty Association Act.
       SECTION 3B.013.  (a)  Section 463.003, Insurance Code, is
amended to conform to Sections 2 and 3, Chapter 753, Acts of the
79th Legislature, Regular Session, 2005, and to more closely
conform to the source law from which the section was derived, to
read as follows:
       Sec.463.003.GENERAL DEFINITIONS.  In this chapter:
             (1)  "Association" means the Texas Life, Accident,
Health, and Hospital Service Insurance Guaranty Association.
             (1-a)  "Benefit plan" means a specific employee, union,
or association of natural persons benefit plan.
             (2)  "Board" means the board of directors of the
association.
             (3)  "Contractual obligation" means an obligation
under a policy or contract or certificate under a group policy or
contract, or part of a policy or contract or certificate, for which
coverage is provided under Subchapter E.
             (4)  "Covered policy" means a policy or contract, or
portion of a policy or contract, with respect to which this chapter
provides coverage as determined under Subchapter E.
             (5)  "Impaired insurer" means a member insurer that is
designated an "impaired insurer" by the commissioner and is:
                   (A)  [is] placed by a court in this state or
another state under an order of supervision, liquidation,
rehabilitation, or conservation [under Chapter 441 or 442 and is
designated by the commissioner as an impaired insurer]; [or]
                   (B)  placed under an order of liquidation or
rehabilitation under Chapter 443; or
                   (C)  placed under an order of supervision or
conservation by the commissioner under Chapter 441 [is determined
in good faith by the commissioner to be unable or potentially unable
to fulfill the insurer's contractual obligations].
             (6)  "Insolvent insurer" means a member insurer that[:
                   [(A)] has been placed under an order of
liquidation with a finding of insolvency by a court in this state or
another state [a minimum free surplus, if a mutual insurance
company, or required capital, if a stock insurance company, that is
impaired to an extent prohibited by law; and
                   [(B)  the commissioner designates as an insolvent
insurer].
             (7)  "Member insurer" means an insurer that is required
to participate in the association under Section 463.052.
             (7-a)  "Owner" means the owner of a policy or contract
and "policy owner" and "contract owner" mean the person who is
identified as the legal owner under the terms of the policy or
contract or who is otherwise vested with legal title to the policy
or contract through a valid assignment completed in accordance with
the terms of the policy or contract and is properly recorded as the
owner on the books of the insurer. The terms "owner," "contract
owner," and "policy owner" do not include persons with a mere
beneficial interest in a policy or contract.
             (8)  "Person" means an individual, corporation,
limited liability company, partnership, association, governmental
body or entity, or voluntary organization.
             (8-a)  "Plan sponsor" means:
                   (A)  the employer in the case of a benefit plan
established or maintained by a single employer;
                   (B)  the employee organization in the case of a
benefit plan established or maintained by an employee organization;
or
                   (C)  in a case of a benefit plan established or
maintained by two or more employers or jointly by one or more
employers and one or more employee organizations, the association,
committee, joint board of trustees, or other similar group of
representatives of the parties who establish or maintain the
benefit plan.
             (9)  "Premium" means an amount received on a covered
policy, less any premium, consideration, or deposit returned on the
policy, and any dividend or experience credit on the policy.  The
term does not include:
                   (A)  an amount received for a policy or contract
or part of a policy or contract for which coverage is not provided
under Section 463.202, except that assessable premiums may not be
reduced because of:
                         (i)  an interest limitation provided by
Section 463.203(b)(3); or
                         (ii)  a limitation provided by Section
463.204 with respect to a single individual, participant,
annuitant, or contract owner [holder];
                   (B)  premiums in excess of $5 million on an
unallocated annuity contract not issued under a governmental
benefit  [retirement] plan established under Section 401, 403(b),
or 457, Internal Revenue Code of 1986; [or]
                   (C)  premiums received from the state treasury or
the United States treasury for insurance for which this state or the
United States contracts to:
                         (i)  provide welfare benefits to designated
welfare recipients; or
                         (ii)  implement Title 2, Human Resources
Code, or the Social Security Act (42 U.S.C. Section 301 et seq.); or
                   (D)  premiums in excess of $5 million with respect
to multiple nongroup policies of life insurance owned by one owner,
regardless of whether the policy owner is an individual, firm,
corporation, or other person and regardless of whether the persons
insured are officers, managers, employees, or other persons,
regardless of the number of policies or contracts held by the owner.
             (10)  "Resident" means a person who resides in this
state on the earlier of the date a member insurer becomes an
impaired insurer or the date of entry of a court order that
determines a member insurer to be an impaired insurer or the date of
entry of a court order that determines a member insurer to be an
insolvent insurer and to whom the [at the time a] member insurer
[that] owes a contractual obligation [to the person is determined
to be impaired or insolvent]. For the purposes of this subdivision:
                   (A)  a person is considered to be a resident of
only one state; [and]
                   (B)  a person other than an individual is
considered to be a resident of the state in which the person's
principal place of business is located; and
                   (C)  a United States citizen who is either a
resident of a foreign country or a resident of a United States
possession, territory, or protectorate that does not have an
association similar to the association created by this chapter is
considered a resident of the state of domicile of the insurer that
issued the policy or contract.
             (10-a)  "Structured settlement annuity" means an
annuity purchased to fund periodic payments for a plaintiff or
other claimant in payment for or with respect to personal injury
suffered by the plaintiff or other claimant.
             (11)  "Supplemental contract" means a written [an]
agreement for the distribution of policy or contract proceeds.
             (12)  "Unallocated annuity contract" means an annuity
contract or group annuity certificate that is not issued to and
owned by an individual, except to the extent of any annuity benefits
guaranteed to an individual by an insurer under the contract or
certificate.
       (b)  Subchapter A, Chapter 463, Insurance Code, is amended to
conform to Section 3, Chapter 753, Acts of the 79th Legislature,
Regular Session, 2005, by adding Section 463.0031 to read as
follows:
       Sec. 463.0031.  DEFINITION OF PRINCIPAL PLACE OF BUSINESS OF
PLAN SPONSOR OR OTHER PERSON.  (a)  Except as otherwise provided by
this section, in this chapter, the "principal place of business" of
a plan sponsor or a person other than an individual means the single
state in which the individuals who establish policy for the
direction, control, and coordination of the operations of the plan
sponsor or person as a whole primarily exercise that function, as
determined by the association in its reasonable judgment by
considering the following factors:
             (1)  the state in which the primary executive and
administrative headquarters of the plan sponsor or person is
located;
             (2)  the state in which the principal office of the
chief executive officer of the plan sponsor or person is located;
             (3)  the state in which the board of directors, or
similar governing person or persons, of the plan sponsor or person
conduct the majority of their meetings;
             (4)  the state in which the executive or management
committee of the board of directors, or similar governing person or
persons, of the plan sponsor or person conduct the majority of their
meetings;
             (5)  the state from which the management of the overall
operations of the plan sponsor or person is directed; and
             (6)  in the case of a benefit plan sponsored by
affiliated companies comprising a consolidated corporation, the
state in which the holding company or controlling affiliate has its
principal place of business as determined using the factors
described by Subdivisions (1)-(5).
       (b)  In the case of a plan sponsor, if more than 50 percent of
the participants in the benefit plan are employed in a single state,
that state is the principal place of business of the plan sponsor.
       (c)  The principal place of business of a plan sponsor of a
benefit plan described in Section 463.003(8-a)(C) is the principal
place of business of the association, committee, joint board of
trustees, or other similar group of representatives of the parties
who establish or maintain the benefit plan that, in lieu of a
specific or clear designation of a principal place of business,
shall be deemed to be the principal place of business of the
employer or employee organization that has the largest investment
in that benefit plan.
       (c)  Section 463.052(b), Insurance Code, is amended to
conform to Section 2, Chapter 753, Acts of the 79th Legislature,
Regular Session, 2005, to read as follows:
       (b)  The following do not participate as member insurers:
             (1)  a health maintenance organization;
             (2)  a fraternal benefit society;
             (3)  a mandatory state pooling plan;
             (4)  a reciprocal or interinsurance exchange; [and]
             (5)  an organization which has a certificate of
authority or license limited to the issuance of charitable gift
annuities, as defined by this code or rules adopted by the
commissioner; and
             (6)  an entity similar to an entity described by
Subdivision (1), (2), (3), [or] (4), or (5).
       (d)  Section 463.204, Insurance Code, is amended to conform
to Section 2, Chapter 753, Acts of the 79th Legislature, Regular
Session, 2005, to read as follows:
       Sec. 463.204.  OBLIGATIONS EXCLUDED.  A contractual
obligation does not include:
             (1)  death benefits in an amount in excess of $300,000
or a net cash surrender or net cash withdrawal value in an amount in
excess of $100,000 [in the aggregate] under one or more policies on
a single life;
             (2)  an amount in excess of:
                   (A)  $100,000 in the present value [aggregate]
under one or more annuity contracts issued with respect to a single
life under [to the same holder of] individual annuity policies or
[to the same annuitant or participant under] group annuity
policies; or
                   (B)  $5 million in unallocated annuity contract
benefits with respect to a single contract owner [holder]
regardless of the number of those contracts;
             (3)  an amount in excess of the following amounts,
including any net cash surrender or cash withdrawal values, 
[$200,000 in the aggregate] under one or more accident, health,
[or] accident and health, or long-term care insurance policies on a
single life:
                   (A)  $500,000 for basic hospital,
medical-surgical, or major medical insurance, as those terms are
defined by this code or rules adopted by the commissioner;
                   (B)  $300,000 for disability and long-term care
insurance, as those terms are defined by this code or rules adopted
by the commissioner; or
                   (C)  $200,000 for coverages that are not defined
as basic hospital, medical-surgical, major medical, disability, or
long-term care insurance;
             (4)  an amount in excess of $100,000 in present value
annuity benefits, in the aggregate, including any net cash
surrender and net cash withdrawal values, with respect to each
individual participating in a governmental retirement benefit plan
established under Section 401, 403(b), or 457, Internal Revenue
Code of 1986 (26 U.S.C. Sections 401, 403(b), and 457), covered by
an unallocated annuity contract or the beneficiary or beneficiaries
of the individual if the individual is deceased;
             (5)  an amount in excess of $100,000 in present value
annuity benefits, in the aggregate, including any net cash
surrender and net cash withdrawal values, with respect to each
payee of a structured settlement annuity or the beneficiary or
beneficiaries of the payee if the payee is deceased;
             (6)  aggregate benefits in an amount in excess of
$300,000 with respect to a single life, except with respect to:
                   (A)  benefits paid under basic hospital,
medical-surgical, or major medical insurance policies, described
by Subdivision (3)(A), in which case the aggregate benefits are
$500,000; and
                   (B)  benefits paid to one owner of multiple
nongroup policies of life insurance, whether the policy owner is an
individual, firm, corporation, or other person, and whether the
persons insured are officers, managers, employees, or other
persons, in which case the maximum benefits are $5 million
regardless of the number of policies and contracts held by the
owner;
             (7)  an amount in excess of $5 million in benefits, with
respect to either one plan sponsor whose plans own directly or in
trust one or more unallocated annuity contracts not included in
Subdivision (4) irrespective of the number of contracts with
respect to the contract owner or plan sponsor or one contract owner
provided coverage under Section 463.201(a)(3)(B), except that, if
one or more unallocated annuity contracts are covered contracts
under this chapter and are owned by a trust or other entity for the
benefit of two or more plan sponsors, coverage shall be afforded by
the association if the largest interest in the trust or entity
owning the contract or contracts is held by a plan sponsor whose
principal place of business is in this state, and in no event shall
the association be obligated to cover more than $5 million in
benefits with respect to all these unallocated contracts;
             (8)  any contractual obligations of the insolvent or
impaired insurer under a covered policy or contract that do not
materially affect the economic value of economic benefits of the
covered policy or contract; or
             (9) [(4)]  punitive, exemplary, extracontractual, or
bad faith damages, regardless of whether the damages are:
                   (A)  agreed to or assumed by an insurer or
insured; or
                   (B)  imposed by a court.
       (e)  The following are repealed:
             (1)  Section 2, Chapter 753, Acts of the 79th
Legislature, Regular Session, 2005, which amended former Section 5,
Article 21.28-D, Insurance Code, by amending Subdivisions (2), (3),
(4), (5), (6), (7), (9), (10), (11), and (12) and adding
Subdivisions (2-a), (8-a), (9-a), and (11-a); and
             (2)  Section 3, Chapter 753, Acts of the 79th
Legislature, Regular Session, 2005, which added Section 5A to
former Article 21.28-D, Insurance Code.
       SECTION 3B.014.  (a)  Section 463.051(a), Insurance Code,
is amended to conform to Section 4, Chapter 753, Acts of the 79th
Legislature, Regular Session, 2005, to read as follows:
       (a)  The Texas Life, Accident, Health, and Hospital Service
Insurance Guaranty Association is a nonprofit legal entity existing
to pay benefits and continue coverage as provided by this chapter.
       (b)  Section 4, Chapter 753, Acts of the 79th Legislature,
Regular Session, 2005, which amended former Subsection (a), Section
6, Article 21.28-D, Insurance Code, is repealed.
       SECTION 3B.015.  (a)  Section 463.101(a), Insurance Code,
is amended to conform to Section 5, Chapter 753, Acts of the 79th
Legislature, Regular Session, 2005, to read as follows:
       (a)  The association may:
             (1)  enter into contracts as necessary or proper to
carry out this chapter and the purposes of this chapter;
             (2)  sue or be sued, including taking:
                   (A)  necessary or proper legal action to:
                         (i)  recover an unpaid assessment under
Subchapter D; or
                         (ii)  settle a claim or potential claim
against the association; or
                   (B)  necessary legal action to avoid payment of an
improper claim;
             (3)  borrow money to effect the purposes of this
chapter;
             (4)  exercise, for the purposes of this chapter and to
the extent approved by the commissioner, the powers of a domestic
life, accident, or health insurance company or a group hospital
service corporation, except that the association may not issue an
insurance policy or annuity contract other than to perform the
association's obligations under this chapter; [and]
             (5)  to further the association's purposes, exercise
the association's powers, and perform the association's duties,
join an organization of one or more state associations that have
similar purposes;
             (6)  request information from a person seeking coverage
from the association in determining its obligations under this
chapter with respect to the person, and the person shall promptly
comply with the request; and
             (7)  take any other necessary or appropriate action to
discharge the association's duties and obligations under this
chapter or to exercise the association's powers under this chapter.
       (b)  Subchapter E, Chapter 463, Insurance Code, is amended to
conform to Section 5, Chapter 753, Acts of the 79th Legislature,
Regular Session, 2005, by adding Section 463.206 to read as
follows:
       Sec. 463.206.  ASSOCIATION DISCRETION IN MANNER OF PROVIDING
BENEFITS.  (a)  The board shall have discretion and may exercise
reasonable business judgment to determine the means by which the
association is to provide the benefits of this chapter in an
economical and efficient manner.
       (b)  If the association arranges or offers to provide the
benefits of this chapter to a covered person under a plan or
arrangement that fulfills the association's obligations under this
chapter, the person is not entitled to benefits from the
association in addition to or other than those provided under the
plan or arrangement.
       (c)  Section 463.259, Insurance Code, is amended to conform
to Section 5, Chapter 753, Acts of the 79th Legislature, Regular
Session, 2005, to read as follows:
       Sec. 463.259.  PREMIUM DUE DURING RECEIVERSHIP. After a
court enters an order of receivership with respect to an impaired or 
insolvent insurer, a premium due for coverage issued by the insurer
is owned by and is payable at the direction of the association. The
association is liable for an unearned premium owed to a policy or
contract owner that arises after the court enters the order.
       (d)  Section 463.261, Insurance Code, is amended to conform
to Section 5, Chapter 753, Acts of the 79th Legislature, Regular
Session, 2005, by adding Subsections (d) and (e) to read as follows:
       (d)  The rights of the association under Subsection (c)
include, in the case of a structured settlement annuity, any rights
of the owner, beneficiary, or payee of the annuity, to the extent of
benefits received under this chapter, against any person originally
or by succession responsible for the losses arising from the
personal injury relating to the annuity or payment for the annuity,
other than a person responsible solely by reason of serving as an
assignee in respect of a qualified assignment under Section 130,
Internal Revenue Code of 1986 (26 U.S.C. Section 130).
       (e)  If a provision of this section is invalid or ineffective
with respect to any person or claim for any reason, the amount
payable by the association with respect to the related covered
obligations is reduced by the amount realized by any other person
with respect to the person or claim that is attributable to the
policies, or portion of the policies, covered by the association.
If the association has provided benefits with respect to a covered
obligation and a person recovers amounts as to which the
association has rights described in this section, the person shall
pay to the association the portion of the recovery attributable to
the policies, or portion of the policies, covered by the
association.
       (e)  Subchapter F, Chapter 463, Insurance Code, is amended to
conform to Section 5, Chapter 753, Acts of the 79th Legislature,
Regular Session, 2005, by adding Section 463.263 to read as
follows:
       Sec. 463.263.  DEPOSIT TO BE PAID TO ASSOCIATION.  (a)  A
deposit in this state, held under law or required by the
commissioner for the benefit of creditors, including policy owners,
that is not turned over to the domiciliary receiver on the entry of
a final order of liquidation or order approving a rehabilitation
plan of an insurer domiciled in this state or a reciprocal state in
accordance with Section 443.402 shall be promptly paid to the
association.
       (b)  The association is entitled to retain a portion of any
amount paid to the association under this section equal to the
percentage determined by dividing the aggregate amount of policy
owners' claims related to that insolvency for which the association
has provided statutory benefits by the aggregate amount of all
policy owners' claims in this state related to that insolvency and
shall remit to the domiciliary receiver the amount paid to the
association and retained under this section.
       (c)  The amount paid to the association under this section,
less the amount retained by the association under this section, is
treated as a distribution of estate assets under Section 443.303 or
the similar law of the state of domicile of the impaired or
insolvent insurer.
       (f)  Section 5, Chapter 753, Acts of the 79th Legislature,
Regular Session, 2005, which amended former Section 8, Article
21.28-D, Insurance Code, by amending Subsections (e), (n), and (v)
and adding Subsections (u-1), (u-2), (u-3), (x), and (y), is
repealed.
       SECTION 3B.016.  (a)  Section 463.151, Insurance Code, is
amended to conform to Section 6, Chapter 753, Acts of the 79th
Legislature, Regular Session, 2005, by amending Subsection (a) and
adding Subsection (a-1) to read as follows:
       (a)  The association shall assess member insurers,
separately for each account under Section 463.105, in the amounts
and at the times the board determines necessary to provide money for
the association to exercise the association's powers, perform the
association's duties, and carry out the purposes of this chapter.
The association may not authorize and call [make] an assessment to
meet the requirements of the association with respect to an
impaired or insolvent insurer until the assessment is necessary to
carry out the purposes of this chapter. The board shall classify
assessments under Section 463.152 and determine the amount of
assessments with reasonable accuracy, recognizing that exact
determinations may not always be possible.
       (a-1)  The association shall notify each member insurer of
its anticipated pro rata share of an authorized assessment not yet
called not later than the 180th day after the date the assessment is
authorized.
       (b)  Section 463.152, Insurance Code, is amended to conform
to Section 6, Chapter 753, Acts of the 79th Legislature, Regular
Session, 2005, by amending Subsections (b) and (c) and adding
Subsection (d) to read as follows:
       (b)  Class A assessments are authorized and called [made] to
pay:
             (1)  the association's administrative costs;
             (2)  administrative expenses that:
                   (A)  are properly incurred under this chapter; and
                   (B)  relate to an unauthorized insurer or to an
entity that is not a member insurer; and
             (3)  other general expenses not related to a particular
impaired or insolvent insurer.
       (c)  Class B assessments are authorized and called [made] to
the extent necessary for the association to carry out the
association's powers and duties under Sections 463.101, 463.103,
463.109, and 463.111(c) and Subchapter F with regard to an impaired
or insolvent insurer.
       (d)  For purposes of this section, an assessment is
authorized at the time a resolution by the board is passed under
which an assessment will be called immediately or in the future from
member insurers for a specified amount and an assessment is called
at the time a notice has been issued by the association to member
insurers requiring that an authorized assessment be paid within a
period stated in the notice. An authorized assessment becomes a
called assessment at the time notice is mailed by the association to
member insurers.
       (c)  Sections 463.153(b) and (c), Insurance Code, are
amended to conform to Section 6, Chapter 753, Acts of the 79th
Legislature, Regular Session, 2005, to read as follows:
       (b)  Class B assessments against a member insurer for each
account under Section 463.105 shall be authorized and called [made]
in the proportion that the premiums received on [all] business in
this state by the insurer on policies or contracts covered by each
account for the three most recent calendar years for which
information is available preceding the year in which the insurer
became impaired or insolvent bear to [the] premiums received on
[all] business in this state for those calendar years by all
assessed member insurers.  The amount of a Class B assessment shall
be allocated [divided] among the separate accounts in accordance
with an allocation formula that may be based on:
             (1)  the premiums or reserves of the impaired or
insolvent insurer; or
             (2)  any other standard deemed by the board in the
board's sole discretion as being fair and reasonable under the
circumstances [the proportion that the premiums on the policies
covered by each account were received by the impaired or insolvent
insurer from all covered policies during the year preceding the
date of the impairment, as shown in the annual statements for the
year preceding the date of the assessment].
       (c)  The total amount of assessments on a member insurer for
each account under Section 463.105 may not exceed two [one] percent
of the insurer's premiums on the policies covered by the account
during the three [in a single] calendar years preceding the year in
which the insurer became an impaired or insolvent insurer.  If two
or more assessments are authorized in a calendar year with respect
to insurers that become impaired or insolvent in different calendar
years, the average annual premiums for purposes of the aggregate
assessment percentage limitation described by this subsection
shall be equal to the higher of the three-year average annual
premiums for the applicable subaccount or account as computed in
accordance with this section [year]. If the maximum assessment and
the other assets of the association do not provide in a year an
amount sufficient to carry out the association's responsibilities,
the association shall make necessary additional assessments as soon
as this chapter permits.
       (d)  Section 6, Chapter 753, Acts of the 79th Legislature,
Regular Session, 2005, which amended former Section 9, Article
21.28-D, Insurance Code, by amending Subsections (b), (d), (f),
(g), and (h) and adding Subsection (b-1), is repealed.
       SECTION 3B.017.  (a)  Section 463.161(a), Insurance Code, is
amended to conform to Section 7, Chapter 753, Acts of the 79th
Legislature, Regular Session, 2005, to read as follows:
       (a)  A member insurer is entitled to show as an admitted
asset a certificate of contribution in the form the commissioner
approves under Section 463.156. Unless the commissioner requires a
longer period, the certificate may be shown at:
             (1)  for the calendar year of issuance, an amount equal
to the certificate's original face value approved by the
commissioner; and
             (2)  beginning with the year following the calendar
year of issuance, an amount equal to the certificate's original
face value, reduced by 20 [10] percent a year for each year after
the year of issuance, for a period of five [10] years.
       (b)  Section 7, Chapter 753, Acts of the 79th Legislature,
Regular Session, 2005, which amended former Subsection (a), Section
(13), Article 21.28-D, Insurance Code, is repealed.
       SECTION 3B.018.  (a)  Section 463.201, Insurance Code, is
amended to conform to Section 1, Chapter 753, Acts of the 79th
Legislature, Regular Session, 2005, and to conform more closely to
the source law from which the section was derived to read as
follows:
       Sec. 463.201.  INSUREDS COVERED. (a) Subject to Subsections
(b) and (c), this [This] chapter provides coverage for a policy or
contract described by Section 463.202 to a person who is:
             (1)  a person, other than a certificate holder under a
group policy or contract who is not a resident, who is a
beneficiary, assignee, or payee of a person described by
Subdivision (2);
             (2)  a person who is [subject to Subsection (b),] an
owner of or certificate holder under a policy or contract specified
by Section 463.202, other than [or a contract holder under] an
unallocated annuity contract or structured settlement annuity, and
who is:
                   (A)  a resident; or
                   (B)  not a resident, but only under all of the
following conditions:
                         (i)  the insurers that issued the policies
or contracts are domiciled in this state;
                         (ii)  the state in which the person resides
has an association similar to the association; and
                         (iii)  the person is not eligible for
coverage by an association in any other state because the insurer
was not licensed in the state at the time specified in that state's
guaranty association law;
             (3)  a person who is the owner of an unallocated annuity
contract issued to or in connection with:
                   (A)  a benefit plan whose plan sponsor has the
sponsor's principal place of business in this state; or
                   (B)  a government lottery, if the owner is a
resident; or
             (4)  a person who is the payee under a structured
settlement annuity, or beneficiary of the payee if the payee is
deceased, if:
                   (A)  the payee is a resident, regardless of where
the contract owner resides;
                   (B)  the payee is not a resident, the contract
owner of the structured settlement annuity is a resident, and the
payee is not eligible for coverage by the association in the state
in which the payee resides; or
                   (C)  the payee and the contract owner are not
residents, the insurer that issued the structured settlement
annuity is domiciled in this state, the state in which the contract
owner resides has an association similar to the association, and
neither the payee or, if applicable, the payee's beneficiary, nor
the contract owner is eligible for coverage by the association in
the state in which the payee or contract owner resides [(2) a
beneficiary, assignee, or payee, other than a certificate holder
under a group policy or contract who is not a resident, of a person
described by Subdivision (1)].
       (b)  This chapter does not provide coverage to:
             (1)  a person who is a payee or the beneficiary of a
payee with respect to a contract the owner of which is a resident of
this state, if the payee or the payee's beneficiary is afforded any
coverage by the association of another state; or
             (2)  a person otherwise described by Subsection (a)(3),
if any coverage is provided by the association of another state to
that person.
       (c)  This chapter is intended to provide coverage to persons
who are residents of this state, and in those limited circumstances
as described in this chapter, to nonresidents. In order to avoid
duplicate coverage, if a person who would otherwise receive
coverage under this chapter is provided coverage under the laws of
any other state, the person may not be provided coverage under this
chapter. In determining the application of the provisions of this
subsection in situations in which a person could be covered by the
association of more than one state, whether as an owner, payee,
beneficiary, or assignee, this chapter shall be construed in
conjunction with other state laws to result in coverage by only one
association.  [Coverage under Subsection (a)(1) applies to a person
who is not a resident, only if:
             [(1)  the insurer that issued the policy or contract is
domiciled in this state;
             [(2)  the insurer never held a certificate of authority
in the state in which the person resides;
             [(3)  the state in which the person resides has an
association similar to the association; and
             [(4)  the person is not eligible for coverage by the
association in the state in which the person resides.]
       (b)  Sections 463.202(a) and (c), Insurance Code, are
amended to conform to Section 1, Chapter 753, Acts of the 79th
Legislature, Regular Session, 2005, to read as follows:
       (a)  Except as limited by this chapter, the coverage provided
by this chapter to a person specified by Section 463.201, subject to
Sections 463.201(b) and (c), applies with respect to the following
policies and contracts issued by a member insurer:
             (1)  a direct, nongroup life, health, accident,
annuity, or supplemental policy or contract;
             (2)  a certificate under a direct group policy or
contract;
             (3)  a group hospital service contract; and
             (4)  an unallocated annuity contract.
       (c)  For the purposes of this section, an annuity contract or
a certificate under a group annuity contract includes:
             (1)  a guaranteed investment contract;
             (2)  a deposit administration contract;
             (3)  an allocated or unallocated funding agreement;
             (4)  a structured settlement annuity [agreement];
             (5)  an annuity issued to or in connection with a
government lottery [a lottery contract]; and
             (6)  an immediate or deferred annuity contract.
       (c)  Section 463.203, Insurance Code, is amended to conform
to Section 1, Chapter 753, Acts of the 79th Legislature, Regular
Session, 2005, by amending Subsection (b) and adding Subsection (c)
to read as follows:
       (b)  This chapter does not provide coverage for:
             (1)  any part of a policy or contract not guaranteed by
the insurer or under which the risk is borne by the policy or
contract owner [holder];
             (2)  a policy or contract of reinsurance, unless an
assumption certificate has been issued;
             (3)  any part of a policy or contract to the extent that
the rate of interest on which that part is based:
                   (A)  as averaged over the period of four years
before the date the member insurer becomes impaired or insolvent
under this chapter, whichever is earlier [association became
obligated with respect to the policy or contract], exceeds a rate of
interest determined by subtracting two percentage points from
Moody's Corporate Bond Yield Average averaged for the same
four-year period or for a lesser period if the policy or contract
was issued less than four years before the date the member insurer
becomes impaired or insolvent under this chapter, whichever is
earlier [association became obligated]; and
                   (B)  on and after the date the member insurer
becomes impaired or insolvent under this chapter, whichever is
earlier [association became obligated with respect to the policy or
contract], exceeds the rate of interest determined by subtracting
three percentage points from Moody's Corporate Bond Yield Average
as most recently available;
             (4)  a portion of a policy or contract issued to a plan
or program of an employer, association, [or] similar entity, or
other person to provide life, health, or annuity benefits to the
entity's employees, [or] members, or others, to the extent that the
plan or program is self-funded or uninsured, including benefits
payable by an employer, association, or similar entity under:
                   (A)  a multiple employer welfare arrangement as
defined by Section 3, Employee Retirement Income Security Act of
1974 (29 U.S.C. Section 1002);
                   (B)  a minimum premium group insurance plan;
                   (C)  a stop-loss group insurance plan; or
                   (D)  an administrative services-only contract;
             (5)  any part of a policy or contract to the extent that
the part provides dividends, [or] experience rating credits, or
voting rights, or provides that fees or allowances be paid to any
person, including the policy or contract owner [holder], in
connection with the service to or administration of the policy or
contract;
             (6)  a policy or contract issued in this state by a
member insurer at a time the insurer was not authorized to issue the
policy or contract in this state;
             (7)  an unallocated annuity contract issued to or in
connection with a [an employee] benefit plan protected under the
federal Pension Benefit Guaranty Corporation, regardless of
whether the Pension Benefit Guaranty Corporation has not yet become
liable to make any payments with respect to the benefit plan;
             (8)  any part of an unallocated annuity contract that
is not issued to or in connection with a specific employee, a
benefit plan for a union or association of individuals, or a
governmental lottery; [or]
             (9)  any part of a financial guarantee, funding
agreement, or guaranteed investment contract that:
                   (A)  does not contain a mortality guarantee; and
                   (B)  is not issued to or in connection with a
specific employee, a benefit plan, or a governmental lottery;
             (10)  a part of a policy or contract to the extent that
the assessments required by Subchapter D with respect to the policy
or contract are preempted by federal or state law;
             (11)  a contractual agreement that established the
member insurer's obligations to provide a book value accounting
guaranty for defined contribution benefit plan participants by
reference to a portfolio of assets that is owned by the benefit plan
or the plan's trustee in a case in which neither the benefit plan
sponsor nor its trustee is an affiliate of the member insurer; or
             (12)  a part of a policy or contract to the extent the
policy or contract provides for interest or other changes in value
that are to be determined by the use of an index or external
reference stated in the policy or contract, but that have not been
credited to the policy or contract, or as to which the policy or
contract owner's rights are subject to forfeiture, as of the date
the member insurer becomes an impaired or insolvent insurer under
this chapter, whichever date is earlier, subject to Subsection (c).
       (c)  For purposes of determining the values that have been
credited and are not subject to forfeiture as described by
Subsection (b)(12), if a policy's or contract's interest or changes
in value are credited less frequently than annually, the interest
or change in value determined by using the procedures defined in the
policy or contract is credited as if the contractual date of
crediting interest or changing values is the earlier of the date of
impairment or the date of insolvency, and is not subject to
forfeiture.
       (d)  Section 463.260(a), Insurance Code, is amended to
conform to Section 1, Chapter 753, Acts of the 79th Legislature,
Regular Session, 2005, to read as follows:
       (a)  The association is not liable for benefits that exceed
the contractual obligations for which the insurer is liable or
would have been liable if not impaired or insolvent.  The
association has no obligation to provide benefits outside the
express written terms of the policy or contract, including:
             (1)  claims based on marketing materials;
             (2)  claims based on side letters, riders, or other
documents that were issued without meeting applicable policy form
filing or approval requirements;
             (3)  claims based on misrepresentation of or regarding
policy benefits;
             (4)  extracontractual claims; or
             (5)  claims for penalties or consequential or
incidental damages.
       (e)  Subchapter F, Chapter 463, Insurance Code, is amended to
conform to Section 1, Chapter 753, Acts of the 79th Legislature,
Regular Session, 2005, by adding Section 463.262 to read as
follows:
       Sec. 463.262.  EFFECT OF SUBROGATION AND ASSIGNMENT OF
RIGHTS AND AVAILABLE ASSETS ON ASSOCIATION OBLIGATION.  (a)  The
limitations set forth in this chapter are limitations on the
benefits for which the association is obligated before taking into
account either the association's subrogation and assignment rights
or the extent to which those benefits could be provided out of the
assets of the impaired or insolvent insurer attributable to covered
policies.
       (b)  The costs of the association's obligations under this
chapter may be met by the use of assets attributable to covered
policies or reimbursed to the association pursuant to the
association's subrogation and assignment rights.
       (f)  Section 1, Chapter 753, Acts of the 79th Legislature,
Regular Session, 2005, which amended former Section 3, Article
21.28-D, Insurance Code, is repealed.
       SECTION 3B.019.  (a)  Section 463.302(d), Insurance Code,
is amended to conform to Section 8, Chapter 753, Acts of the 79th
Legislature, Regular Session, 2005, to read as follows:
       (d)  The maximum amount recoverable under Subsections (b)
and (c) is the amount needed in excess of all other available assets
of the impaired or insolvent insurer to pay the insurer's
contractual obligations.
       (b)  Section 463.304, Insurance Code, is amended to conform
to Section 8, Chapter 753, Acts of the 79th Legislature, Regular
Session, 2005, to read as follows:
       Sec.463.304.DISTRIBUTION OF OWNERSHIP RIGHTS OF IMPAIRED OR INSOLVENT INSURER
OR INSOLVENT INSURER
ownership rights of an impaired or insolvent insurer before the
termination of a receivership, the court:
             (1)  shall consider the welfare of the policyholders of
the continuing or successor insurer; and
             (2)  may consider the contributions of the respective
parties, including the association, the shareholders and
policyholders of the impaired or insolvent insurer, and any other
party with a bona fide interest.
       (c)  Section 8, Chapter 753, Acts of the 79th Legislature,
Regular Session, 2005, which amended former Subsections (d) and
(i), Section 14, Article 21.28-D, Insurance Code, is repealed.
       SECTION 3B.020.  (a) Article 21.79H, Insurance Code, is
transferred to Chapter 542, Insurance Code, redesignated as
Subchapter G of that chapter, and amended to read as follows:
SUBCHAPTER G. INSURER'S RECOVERY FROM UNINSURED THIRD PARTY
       Sec. 542.301.  APPLICABILITY OF SUBCHAPTER [Art. 21.79H.
RECOVERY OF CERTAIN COSTS FROM THIRD PARTY].  [(a)] This subchapter
[article] applies to any insurer that delivers, issues for
delivery, or renews a private passenger automobile insurance policy
in this state, including a county mutual, a reciprocal or
interinsurance exchange, or a Lloyd's plan.
       Sec. 542.302.  RECOVERY IN SUIT OR OTHER ACTION. [(b)]  An
insurer that brings suit or takes other action described by Section
542.202 [of this code] against a responsible third party relating
to a loss that is covered under a private passenger automobile
insurance policy issued by the insurer and for which the
responsible third party is uninsured is entitled to recover, in
addition to payments made by the insurer or insured, the costs of
bringing the suit or taking the action, including reasonable
attorney's fees and court costs.
       (b)  For organizational purposes, the heading to Subchapter
E, Chapter 542, Insurance Code, is amended to read as follows:
SUBCHAPTER E. RECOVERY OF DEDUCTIBLE [COLLECTION] FROM THIRD
PARTIES UNDER CERTAIN AUTOMOBILE INSURANCE POLICIES
       SECTION 3B.021.  (a)  Section 544.303, Insurance Code, is
amended to conform to Section 1, Chapter 149, Acts of the 79th
Legislature, Regular Session, 2005, to read as follows:
       Sec. 544.303.  PROHIBITION OF CERTAIN UNDERWRITING
DECISIONS BASED ON PREVIOUS MOLD CLAIM OR DAMAGE. An insurer may
not make an underwriting decision regarding a residential property
insurance policy based on previous mold damage or a claim for mold
damage if:
             (1)  the applicant for insurance coverage has property
eligible for coverage under a residential property policy;
             (2)  the property has had mold damage;
             (3)  mold remediation has been performed on the
property; and
             (4)  the property was:
                   (A)  remediated, as evidenced by a certificate of
mold remediation issued to the property owner under Section
1958.154, Occupations Code, that establishes with reasonable
certainty that the underlying cause of the mold at the property has
been remediated; or
                   (B)  inspected by an independent assessor or
adjustor who determined, based on the inspection, that the property
does not contain evidence of mold damage.
       (b)  Section 1, Chapter 149, Acts of the 79th Legislature,
Regular Session, 2005, which amended former Section 3, Article
21.21-11, Insurance Code, is repealed.
       SECTION 3B.022.  (a)  Section 544.352, Insurance Code, is
amended to conform to Section 1, Chapter 528, Acts of the 79th
Legislature, Regular Session, 2005, and further amended to read as
follows:
       Sec. 544.352.  DEFINITIONS. In this subchapter:
             (1)  "Appliance" means a household device operated by
gas or electric current, including hoses directly attached to the
device. The term includes air conditioning units, heating units,
refrigerators, dishwashers, icemakers, clothes washers, water
heaters, and disposals.
             (2)  "Insurer" means an insurance company, reciprocal
or interinsurance exchange, mutual insurance company, capital
stock company, county mutual insurance company, farm mutual
insurance company, association, Lloyd's plan, or other entity
writing residential property insurance in this state. The term
includes an affiliate, as described by Section 823.003(a), if that
affiliate is authorized to write and is writing residential
property insurance in this state. The term does not include:
                   (A)  the Texas Windstorm Insurance Association
created and operated under Chapter 2210 [Article 21.49]; or
                   (B)  the FAIR Plan created and operated under
Chapter 2211 [Article 21.49A].
             (3) [(2)]  "Residential property insurance" means
insurance against loss to residential real property at a fixed
location or tangible personal property provided in a homeowners
policy, which includes a tenant policy, a condominium owners
policy, or a residential fire and allied lines policy.
             (4) [(3)]  "Underwriting guideline" means a rule,
standard, guideline, or practice, whether written, oral, or
electronic, that is used by an insurer or an agent of an insurer to:
                   (A)  decide whether to accept or reject an
application for a residential property insurance policy; or
                   (B)  determine how to classify the risks that are
accepted for the purpose of determining a rate.
       (b)  Section 1, Chapter 528, Acts of the 79th Legislature,
Regular Session, 2005, which added Subdivision (4) to former
Section 2, Article 5.35-4, Insurance Code, is repealed.
       SECTION 3B.023.  (a)  Chapter 544, Insurance Code, is
amended to codify Article 21.53X, Insurance Code, as added by
Section 8, Chapter 97, Acts of the 79th Legislature, Regular
Session, 2005, by adding Subchapter J and is further amended to read
as follows:
SUBCHAPTER J. PROHIBITED PRACTICES RELATING TO EXPOSURE TO
ASBESTOS OR SILICA
       Sec. 544.451.  DEFINITION.  In this subchapter, "health
benefit plan" means a plan that provides benefits for medical,
surgical, or other treatment expenses incurred as a result of a
health condition, a mental health condition, an accident, sickness,
or substance abuse, including an individual, group, blanket, or
franchise insurance policy or insurance agreement, a group hospital
service contract, or an individual or group evidence of coverage or
similar coverage document. The term includes:
             (1)  a small employer health benefit plan or a health
benefit plan written to provide coverage with a cooperative under
Chapter 1501;
             (2)  a standard health benefit plan offered under
Subchapter A or Subchapter B, Chapter 1507; and
             (3)  a health benefit plan offered under Chapter 1551,
1575, 1579, or 1601.
       Sec. 544.452.  APPLICABILITY OF SUBCHAPTER. This subchapter
applies to any entity that offers a health benefit plan or an
annuity or life insurance policy or contract in this state,
including:
             (1)  a stock or mutual life, health, or accident
insurance company;
             (2)  a group hospital service corporation operating
under Chapter 842;
             (3)  a fraternal benefit society operating under
Chapter 885;
             (4)  a stipulated premium insurance company operating
under Chapter 884;
             (5)  a Lloyd's plan operating under Chapter 941;
             (6)  an exchange operating under Chapter 942;
             (7)  a health maintenance organization operating under
Chapter 843;
             (8)  a multiple employer welfare arrangement that holds
a certificate of authority under Chapter 846;
             (9)  an approved nonprofit health corporation that
holds a certificate of authority under Chapter 844;
             (10)  a statewide mutual assessment company operating
under Chapter 881;
             (11)  a local mutual aid association operating under
Chapter 886; and
             (12)  a local mutual burial association operating under
Chapter 888.
       Sec. 544.453.  PROHIBITION. An entity that offers a health
benefit plan or an annuity or life insurance policy or contract may
not use the fact that a person has been exposed to asbestos fibers
or silica or has filed a claim governed by Chapter 90, Civil
Practice and Remedies Code, to reject, deny, limit, cancel, refuse
to renew, increase the premiums for, or otherwise adversely affect
the person's eligibility for or coverage under the policy or
contract.
       (b)  Article 21.53X, Insurance Code, as added by Section 8,
Chapter 97, Acts of the 79th Legislature, Regular Session, 2005, is
repealed.
       SECTION 3B.024.  Section 551.004, Insurance Code, is amended
to correct references to read as follows:
       Sec. 551.004.  TRANSFER NOT CONSIDERED A REFUSAL TO RENEW.
For purposes of this chapter and Subchapters C and D, Chapter 1952
[Articles 5.06-1 and 5.06-3 of this code], the transfer of a
policyholder between admitted companies within the same insurance
group is not considered a refusal to renew.
       SECTION 3B.0245.  (a)  Subchapter A, Chapter 551, Insurance
Code, is amended to conform to the enactment of Article 21.49-2V,
Insurance Code, by Section 8.02, Chapter 206, Acts of the 78th
Legislature, Regular Session, 2003, by adding Section 551.005 to
read as follows:
       Sec. 551.005.  MEMBERSHIP DUES. (a) In this section,
"insurer" includes a county mutual insurance company, a Lloyd's
plan, and a reciprocal or interinsurance exchange.
       (b)  Except as otherwise provided by law, an insurer may
require that membership dues in its sponsoring organization be paid
as a condition for issuance or renewal of a policy.
       (b)  Article 21.49-2V, Insurance Code, as added by Section
8.02, Chapter 206, Acts of the 78th Legislature, Regular Session,
2003, is repealed.
       SECTION 3B.025.  Section 843.318(a), Insurance Code, is
amended to conform more closely to the source law from which the
section was derived to read as follows:
       (a)  This chapter and this code do not prohibit a physician
or provider who is participating in a health maintenance
organization delivery network, whether by contracting with a health
maintenance organization under Section 843.101 or by
subcontracting with a physician or provider in the health
maintenance organization delivery network, from entering into a
contractual arrangement [authorized by this section] within a
health maintenance organization delivery network described by
Subsections (b)-(e).
       SECTION 3B.026.   Section 941.003(b), Insurance Code, as
amended by Chapters 631 and 1295, Acts of the 79th Legislature,
Regular Session, 2005, is reenacted and is amended to correct
references to read as follows:
       (b)  A Lloyd's plan is subject to:
             (1)  Subchapter [Section 5, Article 1.10;
             [(2)Article 1.15A;
             [(3)Subchapters] A, [Q, T, and U,] Chapter 5, Chapter
254, Subchapters A and B, Chapter 1806, and Subtitle C, Title 10;
             (2) [(4)] Articles [5.20,] 5.35, [5.38,] 5.39, and
5.40;
             (3) [(5) Article 21.49-8;
             [(6)Sections 822.203, 822.205, 822.210, and 822.212;
             [(7)] Article 5.13-2, as provided by that article,
Chapter 2251, as provided by that chapter, and Chapter 2301, as
provided by that chapter;
             (4) [(8)] Chapters 251, 252, 402, [and] 541, and 2253;
             (5)  Subchapter A, Chapter 401;
             (6)  Subchapter B, Chapter 404;
             (7)  Subchapter C, Chapter 1806; and
             (8)  Sections [(9) Section] 38.001, 501.159, 822.203,
822.205, 822.210, 822.212, 2002.005, 2002.051, and 2002.052.
       SECTION 3B.027.  Section 942.003(b), Insurance Code, as
amended by Chapters 631 and 1295, Acts of the 79th Legislature,
Regular Session, 2005, is reenacted and is amended to correct
references to read as follows:
       (b)  An exchange is subject to:
             (1)  Subchapter [Section 5, Article 1.10;
             [(2)Articles 1.15, 1.15A, and 1.16;
             [(3)Subchapters] A, [Q, T, and U,] Chapter 5, Chapter
254, Subchapters A and B, Chapter 1806, and Subtitle C, Title 10;
             (2) [(4)] Articles [5.20,] 5.35, [5.37, 5.38,] 5.39,
and 5.40;
             (3) [(5) Article 21.49-8;
             [(6)  Sections 822.203, 822.205, 822.210, 822.212,
861.254(a)-(f), 861.255, 862.001(b), and 862.003;
             [(7)] Article 5.13-2, as provided by that article,
Chapter 2251, as provided by that chapter, and Chapter 2301, as
provided by that chapter;
             (4)  Chapters 402, [(8) Chapter] 541, and 2253;
             (5)  Subchapter A, Chapter 401, and Sections 401.051,
401.052, 401.054, 401.055, 401.056, 401.057, 401.058, 401.059,
401.060, 401.061, 401.062, 401.151, 401.152, 401.155, and 401.156;
             (6)  Subchapter B, Chapter 404;
             (7)  Subchapter C, Chapter 1806; and
             (8)  Sections [(9) Section] 38.001, 501.159, 822.203,
822.205, 822.210, 822.212, 861.254(a)-(f), 861.255, 862.001(b),
862.003, 2002.002, 2002.005, 2002.051, and 2002.052.
       SECTION 3B.02701.  Sections 1272.001(a)(1), (3), and (4),
Insurance Code, are amended to conform more closely to the source
law from which they were derived to read as follows:
             (1)  "Delegated entity" means an entity, other than a
health maintenance organization authorized to engage in business
under Chapter 843, that by itself, or through subcontracts with one
or more entities, undertakes to arrange for or provide medical care
or health care to an enrollee in exchange for a predetermined
payment on a prospective basis and that accepts responsibility for
performing on behalf of the health maintenance organization a
function regulated by this chapter, Chapter 222, 251, or 258, as
applicable to a health maintenance organization, Chapter 843 or [,]
1271, Section 1367.053 [or 1367], Subchapter A, Chapter 1452, or
Subchapter B, Chapter 1507. The term does not include:
                   (A)  an individual physician; or
                   (B)  a group of employed physicians, practicing
medicine under one federal tax identification number, whose total
claims paid to providers not employed by the group constitute less
than 20 percent of the group's total collected revenue computed on a
calendar year basis.
             (3)  "Delegated third party" means a third party other
than a delegated entity that contracts with a delegated entity,
either directly or through another third party, to:
                   (A)  accept responsibility for performing a
function regulated by this chapter, Chapter 222, 251, or 258, as
applicable to a health maintenance organization, Chapter 843 or [,]
1271, Section 1367.053 [or 1367], Subchapter A, Chapter 1452, or
Subchapter B, Chapter 1507; or
                   (B)  receive, handle, or administer funds, if the
receipt, handling, or administration is directly or indirectly
related to a function regulated by this chapter, Chapter 222, 251,
or 258, as applicable to a health maintenance organization, Chapter
843 or [,] 1271, Section 1367.053 [or 1367], Subchapter A, Chapter
1452, or Subchapter B, Chapter 1507.
             (4)  "Delegation agreement" means an agreement by which
a health maintenance organization assigns the responsibility for a
function regulated by this chapter, Chapter 222, 251, or 258, as
applicable to a health maintenance organization, Chapter 843 or [,]
1271, Section 1367.053 [or 1367], Subchapter A, Chapter 1452, or
Subchapter B, Chapter 1507.
       SECTION 3B.0271.  (a)  Section 1301.004, Insurance Code, to
conform more closely to the source law from which it was derived, is
transferred to Section 1301.061, Insurance Code, redesignated as
Subsection (c) of that section, and amended to read as follows:
       (c)  [Sec. 1301.004. COMPLIANCE WITH CHAPTER
REQUIRED.]  Each preferred provider benefit plan offered in this
state must comply with this chapter.
       (b)  Subchapter A, Chapter 1301, Insurance Code, is amended
to conform more closely to the source law from which Chapter 1301
was derived by adding Section 1301.0041 to read as follows:
       Sec. 1301.0041.  APPLICABILITY. This chapter applies to any
preferred provider benefit plan in which an insurer provides,
through the insurer's health insurance policy, for the payment of a
level of coverage that is different from the basic level of coverage
provided by the health insurance policy if the insured uses a
preferred provider.
       SECTION 3B.028.  Section 1365.004, Insurance Code, is
amended to conform more closely to the source law from which the
section was derived to read as follows:
       Sec. 1365.004.  RIGHT TO REJECT COVERAGE OR SELECT
ALTERNATIVE BENEFITS [COVERAGE]. An offer of coverage required
under Section 1365.003 is subject to the right of the group contract
holder to reject the coverage or to select an alternative level of
benefits [coverage] that is offered by or negotiated with the group
health benefit plan issuer.
       SECTION 3B.0281.  Section 1367.053(c), Insurance Code, is
amended to conform more closely to the source law from which the
section was derived to read as follows:
       (c)  In addition to the immunizations required under
Subsection (a), a health maintenance organization that issues a
health benefit plan shall provide under the plan coverage for
immunization against rotovirus and any other immunization required
for a child by law.
       SECTION 3B.029.  (a)  Section 1507.003(b), Insurance Code,
is amended to conform to Section 2, Chapter 577, Acts of the 79th
Legislature, Regular Session, 2005, to read as follows:
       (b)  For purposes of this subchapter, "state-mandated health
benefits" does not include benefits that are mandated by federal
law or standard provisions or rights required under this code or
other laws of this state to be provided in an individual, blanket,
or group policy for accident and health insurance that are
unrelated to a specific health illness, injury, or condition of an
insured, including provisions related to:
             (1)  continuation of coverage under:
                   (A)  Subchapters F and G, Chapter 1251;
                   (B)  Section 1201.059; and
                   (C)  Subchapter B, Chapter 1253;
             (2)  termination of coverage under Sections 1202.051
and 1501.108;
             (3)  preexisting conditions under Subchapter D,
Chapter 1201, and Sections 1501.102-1501.105;
             (4)  coverage of children, including newborn or adopted
children, under:
                   (A)  Subchapter D, Chapter 1251;
                   (B)  Sections 1201.053, 1201.061,
1201.063-1201.065, and Subchapter A, Chapter 1367;
                   (C)  Chapter 1504;
                   (D)  Chapter 1503;
                   (E)  Section 1501.157;
                   (F)  Section 1501.158; and
                   (G)  Sections 1501.607-1501.609;
             (5)  services of practitioners under:
                   (A)  Subchapters A, B, and C, Chapter 1451; or
                   (B)  Section 1301.052;
             (6)  supplies and services associated with the
treatment of diabetes under Subchapter B, Chapter 1358;
             (7)  coverage for serious mental illness under
Subchapter A, Chapter 1355[, if the standard health benefit plan is
issued to a large employer as defined by Section 1501.002];
             (8)  coverage for childhood immunizations and hearing
screening as required by Subchapters B and C, Chapter 1367, other
than Section 1367.053(c) and Chapter 1353;
             (9)  coverage for reconstructive surgery for certain
craniofacial abnormalities of children as required by Subchapter D,
Chapter 1367;
             (10)  coverage for the dietary treatment of
phenylketonuria as required by Chapter 1359;
             (11)  coverage for referral to a non-network physician
or provider when medically necessary covered services are not
available through network physicians or providers, as required by
Section 1271.055; and
             (12)  coverage for cancer screenings under:
                   (A)  Chapter 1356;
                   (B)  Chapter 1362; [and]
                   (C)  Chapter 1363; and
                   (D)  Chapter 1370.
       (b)  Section 2, Chapter 577, Acts of the 79th Legislature,
Regular Session, 2005, which amended former Subsection (b), Section
3, Article 3.80, Insurance Code, is repealed.
       SECTION 3B.030.  (a)  Section 1507.053(b), Insurance Code,
is amended to conform to Section 3, Chapter 577, Acts of the 79th
Legislature, Regular Session, 2005, to read as follows:
       (b)  For purposes of this subchapter, "state-mandated health
benefits" does not include coverage that is mandated by federal law
or standard provisions or rights required under this code or other
laws of this state to be provided in an evidence of coverage that
are unrelated to a specific health illness, injury, or condition of
an enrollee, including provisions related to:
             (1)  continuation of coverage under Subchapter G,
Chapter 1251;
             (2)  termination of coverage under Sections 1202.051
and 1501.108;
             (3)  preexisting conditions under Subchapter D,
Chapter 1201, and Sections 1501.102-1501.105;
             (4)  coverage of children, including newborn or adopted
children, under:
                   (A)  Chapter 1504;
                   (B)  Chapter 1503;
                   (C)  Section 1501.157;
                   (D)  Section 1501.158; and
                   (E)  Sections 1501.607-1501.609;
             (5)  services of providers under Section 843.304;
             (6)  coverage for serious mental health illness under
Subchapter A, Chapter 1355[, if the standard health benefit plan is
issued to a large employer as defined by Section 1501.002]; and
             (7)  coverage for cancer screenings under:
                   (A)  Chapter 1356;
                   (B)  Chapter 1362; [and]
                   (C)  Chapter 1363; and
                   (D)  Chapter 1370.
       (b)  Section 3, Chapter 577, Acts of the 79th Legislature,
Regular Session, 2005, which amended former Subsection (d), Article
20A.09N, Insurance Code, is repealed.
       SECTION 3B.031.  Section 1801.002, Insurance Code, is
repealed to conform to Section 5.01(4), Chapter 1227, Acts of the
79th Legislature, Regular Session, 2005.
       SECTION 3B.032.  (a) Section 1806.101, Insurance Code, is
amended to conform to Section 2, Chapter 631, Acts of the 79th
Legislature, Regular Session, 2005, to read as follows:
       Sec. 1806.101.  DEFINITIONS.  In this subchapter:
             (1)  "Insurance" includes a suretyship.
             (2)  "Insurer" means an insurance company or other
legal entity described by Sections 1806.102(a) and (b).
             (3)  "Policy" includes a bond.
       (b)  Sections 1806.104(a) and (b), Insurance Code, are
amended to conform to Section 2, Chapter 631, Acts of the 79th
Legislature, Regular Session, 2005, to read as follows:
       (a)  Except as otherwise provided by this subchapter, an
insurer, an insurer's employee, or a broker or agent may not
knowingly:
             (1)  issue an insurance policy that is not in
accordance with an applicable filing [that is filed and in effect
under Chapter 2251 or 2301 or Article 5.13-2]; or
             (2)  charge, demand, or receive a premium on an
insurance policy that is not in accordance with an applicable
filing [that is filed and in effect under Chapter 2251 or 2301 or
Article 5.13-2].
       (b)  Except as provided in an applicable filing [that is
filed and in effect under Chapter 2251 or 2301 or Article 5.13-2],
an insurer, an insurer's employee, or a broker or agent may not
directly or indirectly pay, allow, or give, or offer to pay, allow,
or give, as an inducement to insurance, or after insurance has been
written, a rebate, discount, abatement, credit or reduction of the
premium stated in an insurance policy, or a special favor or
advantage in the dividends or other benefits to accrue on the
policy, or any valuable consideration or inducement, not specified
in the policy.
       (c)  Section 2, Chapter 631, Acts of the 79th Legislature,
Regular Session, 2005, which amended former Subsections (a) and
(d), Article 5.20, Insurance Code, is repealed.
       SECTION 3B.033.  Section 1806.102, Insurance Code, is
amended to conform to Section 1, Chapter 631, Acts of the 79th
Legislature, Regular Session, 2005, to read as follows:
       Sec. 1806.102.  APPLICABILITY OF SUBCHAPTER.  (a)  This 
[Except as provided by Subsections (b) and (c), this] subchapter
applies to an insurer, including a corporation, reciprocal or
interinsurance exchange, mutual insurance company, association,
Lloyd's plan, or other organization, writing casualty insurance or
writing fidelity, surety, or guaranty bonds, on risks or operations
in this state.
       (b)  This subchapter applies [does not apply] to:
             (1)  a farm mutual insurance company with respect to
each line of insurance that a farm mutual insurance company is
authorized to write under Section 911.151 [or association regulated
under Chapter 911]; and [or]
             (2)  a county mutual insurance company with respect to
each line of insurance that a county mutual insurance company is
authorized to write under Section 912.151 [regulated under Chapter
912].
       (c)  Except as otherwise provided by this subchapter, this 
[This] subchapter does not apply to the writing of:
             (1)  automobile insurance;
             (2)  life, health, or accident insurance;
             (3)  professional liability insurance;
             (4)  reinsurance;
             (5)  aircraft insurance;
             (6)  fraternal benefit insurance;
             (7)  fire insurance;
             (8)  workers' compensation insurance;
             (9)  marine insurance, including noncommercial inland
marine insurance and ocean marine insurance;
             (10)  title insurance;
             (11)  explosion insurance, except insurance against
loss from personal injury or property damage resulting accidentally
from:
                   (A)  a steam boiler;
                   (B)  a heater or pressure vessel;
                   (C)  an electrical device;
                   (D)  an engine; or
                   (E)  all machinery and appliances used in
connection with or in the operation of a boiler, heater, vessel,
electrical device, or engine described by Paragraphs (A)-(D); or
             (12)  insurance coverage for any of the following
conditions or risks:
                   (A)  weather or climatic conditions, including
lightning, tornado, windstorm, hail, cyclone, rain, or frost and
freeze;
                   (B)  earthquake or volcanic eruption;
                   (C)  smoke or smudge;
                   (D)  excess or deficiency of moisture;
                   (E)  flood;
                   (F)  the rising water of an ocean or an ocean's
tributary;
                   (G)  bombardment, invasion, insurrection, riot,
civil war or commotion, military or usurped power, or any order of a
civil authority made to prevent the spread of a conflagration,
epidemic or catastrophe;
                   (H)  vandalism or malicious mischief;
                   (I)  strike or lockout;
                   (J)  water or other fluid or substance resulting
from:
                         (i)  the breakage or leakage of a sprinkler,
pump, or other apparatus erected for extinguishing fire, or a water
pipe or other conduit or container; or
                         (ii)  casual water entering a building
through a leak or opening in the building or by seepage through
building walls; or
                   (K)  accidental damage to a sprinkler, pump, fire
apparatus, pipe, or other conduit or container described by
Paragraph (J)(i).
       SECTION 3B.034.  (a) Section 1901.054(b), Insurance Code,
is amended to conform to Section 1, Chapter 1135, Acts of the 79th
Legislature, Regular Session, 2005, to read as follows:
       (b)  A rate is not excessive unless[:
             [(1)]  the rate is unreasonably high for the insurance
coverage provided[; and
             [(2)  a reasonable degree of competition does not exist
in the area with respect to the classification to which the rate
applies].
       (b)  Section 1901.057, Insurance Code, is amended to conform
to Section 1, Chapter 1135, Acts of the 79th Legislature, Regular
Session, 2005, to read as follows:
       Sec.1901.057.CONSIDERATIONS IN APPROVING RATES.  In
approving rates under this chapter, the department [commissioner]
shall consider the impact of risk management courses taken by
physicians and health care providers in this state.
       (c)  Section 1, Chapter 1135, Acts of the 79th Legislature,
Regular Session, 2005, which amended former Section 3, Article
5.15-1, Insurance Code, is repealed.
       SECTION 3B.035.  (a) Subchapter B, Chapter 1901, Insurance
Code, is amended by adding Section 1901.0541 to conform to Section
2, Chapter 1135, Acts of the 79th Legislature, Regular Session,
2005, to read as follows:
       Sec. 1901.0541.  USE IN UNDERWRITING OF CERTAIN INFORMATION
RELATED TO LAWSUITS; REFUND.  (a) Notwithstanding any other
provision of this code, an insurer may not consider for the purpose
of setting premiums or reducing a claims-free discount for a
particular insured physician's professional liability insurance a
lawsuit filed against the physician if:
             (1)  before trial, the lawsuit was dismissed by the
claimant or nonsuited; and
             (2)  no payment was made to the claimant under a
settlement agreement.
       (b)  An insurer that, in setting premiums or reducing a
claims-free discount for a physician's professional liability
insurance, considers a lawsuit filed against the physician shall
refund to the physician any increase in premiums paid by the
physician that is attributable to that lawsuit or reinstate the
claims-free discount if the lawsuit is dismissed by the claimant or
nonsuited without payment to the claimant under a settlement
agreement. The insurer shall issue the refund or reinstate the
discount on or before the 30th day after the date the insurer
receives written evidence that the lawsuit was dismissed or
nonsuited without payment to the claimant under a settlement
agreement.
       (c)  This section does not prohibit an insurer from
considering and using aggregate historical loss and expense
experience applicable generally to a classification of physicians'  
professional liability insurance to set rates for that
classification to the extent authorized by Chapter 2251 and Article
5.13-2.  Notwithstanding Section 2251.052(c), an insurer may not
assign a physician to a particular classification based on a factor
described by Subsection (a).
       (b)  Subchapter F, Chapter 1901, Insurance Code, is amended
by adding Section 1901.254 to conform to Section 2, Chapter 1135,
Acts of the 79th Legislature, Regular Session, 2005, to read as
follows:
       Sec. 1901.254.  PROHIBITION OF USE OF CERTAIN INFORMATION
FOR PHYSICIAN OR HEALTH CARE PROVIDER.  (a)  For the purpose of
writing professional liability insurance for physicians and health
care providers, an insurer may not consider whether, or the extent
to which, a physician or health care provider provides services in
this state to individuals who are recipients of Medicaid or covered
by the state child health plan program established by Chapter 62,
Health and Safety Code, including any consideration resulting in:
             (1)  denial of coverage;
             (2)  refusal to renew coverage;
             (3)  cancellation of coverage;
             (4)  limitation of the amount, extent, or kind of
coverage available; or
             (5)  a determination of the rate or premium to be paid.
       (b)  The commissioner may adopt rules as necessary to
implement this section.
       (c)  Section 2, Chapter 1135, Acts of the 79th Legislature,
Regular Session, 2005, which added Sections 12 and 13 to former
Article 5.15-1, Insurance Code, is repealed.
       SECTION 3B.036.  (a)  Subchapter F, Chapter 1901, Insurance
Code, is amended by adding Section 1901.255 to conform to Section 1,
Chapter 184, Acts of the 79th Legislature, Regular Session, 2005,
to read as follows:
       Sec. 1901.255.  COVERAGE FOR VOLUNTEER HEALTH CARE
PROVIDERS.  (a)  In this section:
             (1)  "Charitable organization" has the meaning
assigned by Section 84.003, Civil Practice and Remedies Code.
             (2)  "Volunteer health care provider" has the meaning
assigned by Section 84.003, Civil Practice and Remedies Code.
       (b)  An insurer may make available professional liability
insurance covering a volunteer health care provider for an act or
omission resulting in death, damage, or injury to a patient while
the person is acting in the course and scope of the person's duties
as a volunteer health care provider as described by Chapter 84,
Civil Practice and Remedies Code.
       (c)  This section does not affect the liability of a
volunteer health care provider who is serving as a direct service
volunteer of a charitable organization. Section 84.004(c), Civil
Practice and Remedies Code, applies to the volunteer health care
provider without regard to whether the volunteer health care
provider obtains liability insurance under this section.
       (d)  An insurer may make professional liability insurance
available under this section to a volunteer health care provider
without regard to whether the volunteer health care provider is a
"health care provider" as defined by Section 1901.001.
       (b)  Section 1, Chapter 184, Acts of the 79th Legislature,
Regular Session, 2005, which added Section 12 to former Article
5.15-1, Insurance Code, is repealed.
       SECTION 3B.037.  (a) Section 1952.101(c), Insurance Code,
is amended to conform to Section 3, Chapter 1159, Acts of the 79th
Legislature, Regular Session, 2005, to read as follows:
       (c)  The coverage required by this subchapter does not apply
if any insured named in the insurance policy rejects the coverage in
writing. Unless the named insured requests in writing the coverage
required by this subchapter, the insurer is not required to provide
that coverage in or supplemental to a reinstated insurance policy
or renewal insurance policy if the named insured rejected the
coverage in connection with that insurance policy or an insurance
policy previously issued to the insured by the same insurer or by an
affiliated insurer.
       (b)  Section 3, Chapter 1159, Acts of the 79th Legislature,
Regular Session, 2005, which amended former Section (1), Article
5.06-1, Insurance Code, is repealed.
       SECTION 3B.038.  (a) Section 1952.152(b), Insurance Code,
is amended to conform to Section 4, Chapter 1159, Acts of the 79th
Legislature, Regular Session, 2005, to read as follows:
       (b)  The coverage required by this subchapter does not apply
if any insured named in the insurance policy rejects the coverage in
writing.  Unless the named insured requests in writing the coverage
required by this subchapter, the insurer is not required to provide
that coverage in or supplemental to a reinstated insurance policy
or renewal insurance policy if the named insured rejected the
coverage in connection with that insurance policy or an insurance
policy previously issued to the insured by the same insurer or by an
affiliated insurer.
       (b)  Section 4, Chapter 1159, Acts of the 79th Legislature,
Regular Session, 2005, which amended former Subsection (a), Article
5.06-3, Insurance Code, is repealed.
       SECTION 3B.039.  (a) Section 1952.155, Insurance Code, is
amended by amending Subsection (b) and adding Subsection (c) to
conform to Section 2, Chapter 1074, Acts of the 79th Legislature,
Regular Session, 2005, to read as follows:
       (b)  Except as provided by Subsection (c), an [An] insurer
paying benefits under coverage required by this subchapter does not
have a right of subrogation or claim against any other person or
insurer to recover any benefits by reason of the alleged fault of
the other person in causing or contributing to the accident.
       (c)  An insurer paying benefits pursuant to this subchapter,
including a county mutual insurance company, shall have a right of
subrogation and a claim against a person causing or contributing to
the accident if, on the date of loss, financial responsibility as
required by Chapter 601, Transportation Code, has not been
established for a motor vehicle involved in the accident and
operated by that person.
       (b)  Section 2, Chapter 1074, Acts of the 79th Legislature,
Regular Session, 2005, which amended former Article 5.06-3,
Insurance Code, by amending Subsection (c) and adding Subsection
(i), is repealed.
       SECTION 3B.040.  (a) Section 2006.052, Insurance Code, is
amended to conform to Sections 4 and 6, Chapter 291, Acts of the
79th Legislature, Regular Session, 2005, by amending Subsection (b)
and adding Subsection (c) to read as follows:
       (b)  This section applies to an insurer that uses a tier
classification or discount program that has a premium consequence
based in whole or in part on claims experience, regardless of
whether any of the policies that continuously covered the
policyholder was a different kind of residential property insurance
policy from the policy eligible for the premium discount.
       (c)  A residential property insurance claim under this
section does not include a claim:
             (1)  resulting from a loss caused by natural causes;
             (2)  that is filed but is not paid or payable under the
policy; or
             (3)  that an insurer is prohibited from using under
Section 544.353.
       (b)  Subchapter B, Chapter 2006, Insurance Code, is amended
to conform to Section 4, Chapter 291, Acts of the 79th Legislature,
Regular Session, 2005, by adding Section 2006.0521 to read as
follows:
       Sec. 2006.0521.  COMPLIANCE WITH OTHER LAW REQUIRED.  Any
change in the amount of a premium discount provided under this
subchapter must comply with the requirements of Section 551.107.
       (c)  Sections 4 and 6, Chapter 291, Acts of the 79th
Legislature, Regular Session, 2005, which amended former Article
5.43, Insurance Code, by amending Subsection (d) and adding
Subsections (a-1) and (f), are repealed.
       SECTION 3B.041.  (a) Section 2051.151(a), Insurance Code,
is amended to conform to Section 6.062, Chapter 265, Acts of the
79th Legislature, Regular Session, 2005, to read as follows:
       (a)  Except as otherwise provided by Subsection (b), an
insurance company that writes workers' compensation insurance in
this state shall notify a policyholder of a claim that is filed
against the policyholder's policy and, after the initial notice,
the company shall notify the policyholder of:
             (1)  any proposal to settle the claim; or
             (2)  on receipt of a written request from the
policyholder, any administrative or judicial proceeding relating
to the resolution of the claim[, including a benefit review
conference conducted by the Texas Workers' Compensation
Commission].
       (b)  Section 6.062, Chapter 265, Acts of the 79th
Legislature, Regular Session, 2005, which amended former Section
(a), Article 5.65A, Insurance Code, is repealed.
       SECTION 3B.042.  (a) Section 2053.001, Insurance Code, is
amended to conform to Section 5.01, Chapter 265, Acts of the 79th
Legislature, Regular Session, 2005, by amending Subdivision (2) and
adding Subdivision (2-a) to read as follows:
             (2)  "Insurance company" means a person authorized to
engage in the business of workers' compensation insurance in this
state.  The term includes:
                   (A)  the Texas Mutual Insurance Company;
                   (B)  a Lloyd's plan under Chapter 941; and
                   (C)  a reciprocal and interinsurance exchange
under Chapter 942.
             (2-a)  "Premium" means the amount charged for a
workers' compensation insurance policy, including any
endorsements, after the application of individual risk variations
based on loss or expense considerations.
       (b)  Section 5.01, Chapter 265, Acts of the 79th Legislature,
Regular Session, 2005, which amended former Section 1, Article
5.55, Insurance Code, by amending Subdivision (2) and adding
Subdivision (2-a), is repealed.
       SECTION 3B.043.  (a) Sections 2053.002(a) and (b),
Insurance Code, are amended to conform to Section 5.02, Chapter
265, Acts of the 79th Legislature, Regular Session, 2005, to read as
follows:
       (a)  In setting rates, an insurance company shall consider:
             (1)  past and prospective loss cost experience;
             (2)  operation expenses;
             (3)  investment income;
             (4)  a reasonable margin for profit and contingencies;
[and]
             (5)  the effect on premiums of individual risk
variations based on loss or expense considerations; and
             (6)  any other relevant factor.
       (b)  A rate or premium established under this subchapter may
not be excessive, inadequate, or unfairly discriminatory.
       (b)  Section 5.02, Chapter 265, Acts of the 79th Legislature,
Regular Session, 2005, which amended former Subsections (b) and
(d), Section 2, Article 5.55, Insurance Code, is repealed.
       SECTION 3B.044.  Section 2053.007(c), Insurance Code, is
repealed to conform to Section 5.04, Chapter 265, Acts of the 79th
Legislature, Regular Session, 2005.
       SECTION 3B.045.  (a) Section 2053.010, Insurance Code, is
amended to conform to Section 5.05, Chapter 265, Acts of the 79th
Legislature, Regular Session, 2005, to read as follows:
       Sec. 2053.010.  PENALTIES [ADMINISTRATIVE PENALTY].  If a
workers' compensation insurance policy is issued and the
commissioner subsequently disapproves the rate or filing on which
the premium is based, the commissioner, after notice and the
opportunity for a hearing, may:
             (1)  impose sanctions under Chapter 82;
             (2)  issue a cease and desist order under Chapter 83;
             (3)  impose administrative penalties under Chapter 84;
or
             (4)  take any combination of these actions.  [(a)  The
commissioner may assess an administrative penalty against an
insurance company if the commissioner determines, based on a
pattern of charges for premiums, that the company is consistently
overcharging or undercharging the company's policyholders for
workers' compensation insurance.
       [(b)An administrative penalty under this section must be:
             [(1)  assessed in accordance with Section 415.021,
Labor Code; and
             [(2)  set by the commissioner in an amount reasonable
and necessary to deter overcharging or undercharging of
policyholders.]
       (b)  Section 5.05, Chapter 265, Acts of the 79th Legislature,
Regular Session, 2005, which amended former Section 7, Article
5.55, Insurance Code, is repealed.
       SECTION 3B.046.  (a) Subchapter A, Chapter 2053, Insurance
Code, is amended to conform to Section 5.055, Chapter 265, Acts of
the 79th Legislature, Regular Session, 2005, by adding Section
2053.011 to read as follows:
       Sec. 2053.011.  EXCLUSIVE JURISDICTION.  The department has
exclusive jurisdiction over all rates and premiums subject to this
subchapter.
       (b)  Section 5.055, Chapter 265, Acts of the 79th
Legislature, Regular Session, 2005, which added Section 8 to former
Article 5.55, Insurance Code, is repealed.
       SECTION 3B.047.  (a) Subchapter A, Chapter 2053, Insurance
Code, is amended to conform to Section 5.03, Chapter 265, Acts of
the 79th Legislature, Regular Session, 2005, by adding Sections
2053.012 and 2053.013 to read as follows:
       Sec. 2053.012.  REPORT ON LEGISLATIVE REFORMS REQUIRED.  (a)  
Not later than December 1 of each even-numbered year, the
commissioner shall report to the governor, lieutenant governor, and
speaker of the house of representatives regarding the impact that
legislation enacted during the regular session of the 79th
Legislature reforming the workers' compensation system of this
state has had on the affordability and availability of workers'
compensation insurance for the employers of this state. The report
must include an analysis of:
             (1)  the projected workers' compensation premium
savings realized by employers as a result of the reforms;
             (2)  the impact of the reforms on:
                   (A)  the percentage of employers who provide
workers' compensation insurance coverage for their employees; and
                   (B)  to the extent possible, economic development
and job creation;
             (3)  the effects of the reforms on market competition
and carrier financial solvency, including an analysis of how
carrier loss ratios, combined ratios, and use of individual risk
variations have changed since implementation of the reforms; and
             (4)  the extent of participation in workers'
compensation health care networks by small and medium-sized
employers.
       (b)  If the commissioner determines that workers'
compensation rate filings or premium levels analyzed by the
department do not appropriately reflect the savings associated with
the reforms described by Subsection (a), the commissioner shall
include in the report required under Subsection (a) any
recommendations, including any recommended legislative changes,
necessary to identify the tools needed by the department to more
effectively regulate workers' compensation rates.
       (c)  At the request of the department, each insurance company
shall submit to the department all data and other information
considered necessary by the commissioner to generate the report
required under Subsection (a). Failure by an insurance company to
submit the data and information in a timely fashion, as determined
by commissioner rule, constitutes grounds for sanctions under
Chapter 82.
       Sec. 2053.013.  REVIEW OF RATES; CONSIDERATION OF OTHER LAW.  
In reviewing rates under this subchapter, the commissioner shall
consider any state or federal legislation that has been enacted and
that may impact rates and premiums for workers' compensation
insurance coverage in this state.
       (b)  Section 5.03, Chapter 265, Acts of the 79th Legislature,
Regular Session, 2005, which added Subsections (e) through (h) to
former Section 3, Article 5.55, Insurance Code, is repealed.
       SECTION 3B.048.  (a) Chapter 2053, Insurance Code, is
amended to conform to Section 5.06, Chapter 265, Acts of the 79th
Legislature, Regular Session, 2005, by adding Subchapter A-1 to
read as follows:
SUBCHAPTER A-1.  UNDERWRITING GUIDELINES
       Sec. 2053.031.  DEFINITIONS.  In this subchapter:
             (1)  "Insurance company" has the meaning assigned by
Section 2053.001.
             (2)  "Underwriting guideline" means a rule, standard,
guideline, or practice, whether written, oral, or electronic, that
is used by an insurance company or its agent to decide whether to
accept or reject an application for coverage under a workers' 
compensation insurance policy or to determine how to classify those
risks that are accepted for the purpose of determining a rate.
       Sec. 2053.032.  UNDERWRITING GUIDELINES.  Each underwriting
guideline used by an insurance company in writing workers' 
compensation insurance must be sound, actuarially justified, or
otherwise substantially commensurate with the contemplated risk.  
An underwriting guideline may not be unfairly discriminatory.
       Sec. 2053.033.  ENFORCEMENT.  This subchapter may be
enforced in the manner provided by Section 38.003(g).
       Sec. 2053.034.  FILING REQUIREMENTS. Each insurance company
shall file with the department a copy of the insurance company's
underwriting guidelines. The insurance company shall update its
filing each time the underwriting guidelines are changed. If a
group of insurance companies files one set of underwriting
guidelines for the group, the group shall identify which
underwriting guidelines apply to each insurance company in the
group.
       Sec. 2053.035.  APPLICABILITY OF SECTION 38.003. Section
38.003 applies to this subchapter to the extent consistent with
this subchapter.
       (b)  Section 5.06, Chapter 265, Acts of the 79th Legislature,
Regular Session, 2005, which added Article 5.55A to former
Subchapter D, Chapter 5, Insurance Code, is repealed.
       SECTION 3B.049.  (a) Subchapter B, Chapter 2053, Insurance
Code, is amended to conform to Section 5.08, Chapter 265, Acts of
the 79th Legislature, Regular Session, 2005, by adding Section
2053.056 to read as follows:
       Sec. 2053.056.  RATE HEARINGS. (a) The commissioner shall
conduct a public hearing each biennium, beginning not later than
December 1, 2008, to review rates to be charged for workers'
compensation insurance written in this state.  A public hearing
under this section is not a contested case as defined by Section
2001.003, Government Code.
       (b)  Not later than the 30th day before the date of the public
hearing required under Subsection (a), each insurance company
subject to this subtitle and Article 5.66 shall file the insurance
company's rates, supporting information, and supplementary rating
information with the commissioner.
       (c)  The commissioner shall review the information submitted
under Subsection (b) to determine the positive or negative impact
of the enactment of workers' compensation reform legislation
enacted by the 79th Legislature, Regular Session, 2005, on workers'
compensation rates and premiums. The commissioner may consider
other factors, including relativities under Section 2053.051, in
determining whether a change in rates has impacted the premium
charged to policyholders.
       (d)  The commissioner shall implement rules as necessary to
mandate rate reductions or to modify the use of individual risk
variations if the commissioner determines that the rates or
premiums charged by insurance companies do not meet the rating
standards as defined in this code.
       (e)  The commissioner shall adopt rules as necessary to
mandate rate or premium reductions by insurance companies for the
use of cost-containment strategies that result in savings to the
workers' compensation system, including use of a workers'
compensation health care network health care delivery system, as
described by Chapter 1305.
       (b)  Section 5.08, Chapter 265, Acts of the 79th Legislature,
Regular Session, 2005, which amended former Article 5.60A,
Insurance Code, is repealed.
       SECTION 3B.050.  (a) Section 2053.151(b), Insurance Code,
is amended to conform to Section 5.07, Chapter 265, Acts of the 79th
Legislature, Regular Session, 2005, to read as follows:
       (b)  For purposes of Subsection (a), the commissioner shall
establish standards and procedures for categorizing insurance and
medical benefits required to be reported on each workers'
compensation claim.  In establishing the standards, the
commissioner shall consult with the commissioner of workers' 
compensation [Texas Workers' Compensation Commission] to ensure
that the data collection methodology will yield data necessary for
research and medical cost containment efforts.
       (b)  Section 5.07, Chapter 265, Acts of the 79th Legislature,
Regular Session, 2005, which amended former Subsection (b), Article
5.58, Insurance Code, is repealed.
       SECTION 3B.051.  (a) Section 2054.008(d), Insurance Code,
is amended to conform to Section 6.065, Chapter 265, Acts of the
79th Legislature, Regular Session, 2005, to read as follows:
       (d)  Except as provided by Subsection (e), a company
investigation file:
             (1)  is confidential and not subject to required
disclosure under Chapter 552, Government Code; and
             (2)  may be disclosed only:
                   (A)  in a criminal proceeding;
                   (B)  in a hearing conducted by the division of
workers' compensation of the department [commission];
                   (C)  on a judicial determination of good cause; or
                   (D)  to a governmental agency, political
subdivision, or regulatory body if the disclosure is necessary or
proper for the enforcement of a law of this state, another state, or
the United States.
       (b)  Section 6.065, Chapter 265, Acts of the 79th
Legislature, Regular Session, 2005, which amended former
Subsection (a), Section 10, Article 5.76-3, Insurance Code, is
repealed.
       SECTION 3B.052.  (a) Section 2054.204(a), Insurance Code,
is amended to conform to Section 6.066, Chapter 265, Acts of the
79th Legislature, Regular Session, 2005, to read as follows:
       (a)  The company shall file annual statements with the
department [and commission] in the same manner as is required of
other workers' compensation insurance companies.
       (b)  Section 6.066, Chapter 265, Acts of the 79th
Legislature, Regular Session, 2005, which amended former
Subsection (e), Section 12, Article 5.76-3, Insurance Code, is
repealed.
       SECTION 3B.053.  (a) Section 2054.206, Insurance Code, is
amended to conform to Section 6.067, Chapter 265, Acts of the 79th
Legislature, Regular Session, 2005, to read as follows:
       Sec. 2054.206.  ADDITIONAL REPORTS. The company shall file
with the department [and the commission] all reports required of
other workers' compensation insurance companies.
       (b)  Section 6.067, Chapter 265, Acts of the 79th
Legislature, Regular Session, 2005, which amended former
Subsection (b), Section 16, Article 5.76-3, Insurance Code, is
repealed.
       SECTION 3B.0531.  Section 2054.253(b), Insurance Code, is
amended to conform more closely to the source law from which the
section was derived to read as follows:
       (b)  The systems may provide for a higher or lower premium
payment by an insured based on[:
             [(1)]  the company's evaluation of the underwriting
characteristics of the individual risk[;] and
             [(2)]  the appropriate premium to be charged for the
policy coverages.
       SECTION 3B.054.  (a) Section 2054.451(b), Insurance Code,
is amended to conform to Section 6.064, Chapter 265, Acts of the
79th Legislature, Regular Session, 2005, to read as follows:
       (b)  The company shall cooperate with the division of
workers' compensation of the department [commission] to compile and
maintain information necessary to detect practices or patterns of
conduct that violate this code relating to workers' compensation
insurance or that violate Subtitle A, Title 5, Labor Code.
       (b)  Section 2054.452, Insurance Code, is amended to conform
to Section 6.064, Chapter 265, Acts of the 79th Legislature,
Regular Session, 2005, to read as follows:
       Sec. 2054.452.  INVESTIGATIONS; COORDINATION [WITH
COMMISSION].  (a)  The company may investigate cases of suspected
fraud and violations of this code relating to workers' compensation
insurance.
       (b)  The company may:
             (1)  coordinate the company's investigations with those
conducted by the division of workers' compensation of the
department [commission] to avoid duplication of efforts; and
             (2)  refer to the division of workers' compensation of
the department [commission] a case that is not otherwise resolved
by the company so that the division [commission] may:
                   (A)  perform any further investigation necessary
under the circumstances;
                   (B)  conduct administrative violation
proceedings; and
                   (C)  assess and collect penalties and
restitution.
       (c)  Section 2054.454, Insurance Code, is amended to conform
to Section 6.064, Chapter 265, Acts of the 79th Legislature,
Regular Session, 2005, to read as follows:
       Sec. 2054.454.  DEPOSIT AND USE OF PENALTIES COLLECTED BY
DIVISION [COMMISSION].  A penalty collected under Section
2054.452(b):
             (1)  must be deposited in the Texas Department of
Insurance operating account [general revenue fund to the credit of
the commission]; and
             (2)  may be appropriated only to the division of
workers' compensation of the department [commission] to offset the
costs of the program under Section 2054.451.
       (d)  Section 6.064, Chapter 265, Acts of the 79th
Legislature, Regular Session, 2005, which amended former
Subsections (a), (b), and (e), Section 9, Article 5.76-3, Insurance
Code, is repealed.
       SECTION 3B.055.  (a) Section 2054.501, Insurance Code, is
amended to conform to Section 6.063, Chapter 265, Acts of the 79th
Legislature, Regular Session, 2005, to read as follows:
       Sec. 2054.501.  DEFINITION.  In this subchapter, "division"
means the [commission's] division of workers' compensation of the
department [health and safety].
       (b)  Section 2054.502, Insurance Code, is amended to conform
to Section 6.063, Chapter 265, Acts of the 79th Legislature,
Regular Session, 2005, to read as follows:
       Sec. 2054.502.  REQUIREMENTS FOR PREVENTION OF INJURIES.  
The company may make and enforce requirements for the prevention of
injuries to an employee of a policyholder or applicant for
insurance under this chapter. On reasonable notice, a policyholder
or applicant shall grant representatives of the company[, the
commission,] or the department free access to the premises of the
policyholder or applicant during regular working hours for purposes
of this section.
       (c)  Section 2054.506, Insurance Code, is amended to conform
to Section 6.063, Chapter 265, Acts of the 79th Legislature,
Regular Session, 2005, to read as follows:
       Sec. 2054.506.  SAFETY CONSULTANT REPORT.  A safety
consultant acting under this subchapter shall file a written report
with the division [commission] and the policyholder specifying any
hazardous condition or practice identified in the safety
consultation.
       (d)  Section 2054.509, Insurance Code, is amended to conform
to Section 6.063, Chapter 265, Acts of the 79th Legislature,
Regular Session, 2005, to read as follows:
       Sec. 2054.509.  FOLLOW-UP INSPECTION.  (a) Not earlier than
the 90th day after or later than the sixth month after the date an
accident prevention plan is developed under Section 2054.507, the
division shall conduct a follow-up inspection of the policyholder's
premises in accordance with rules adopted by the commissioner of
workers' compensation [commission].
       (b)  The division [commission] may require the participation
of the safety consultant who performed the initial consultation and
developed the accident prevention plan.
       (c)  If the commissioner of workers' compensation [division]
determines that a policyholder has complied with the terms of the
accident prevention plan or has implemented other accepted
corrective measures, the commissioner of workers' compensation 
[division] shall certify that determination.
       (d)  If the commissioner of workers' compensation [division]
determines that a policyholder has failed or refuses to implement
the accident prevention plan or other suitable hazard abatement
measures, the policyholder may elect to cancel coverage not later
than the 30th day after the date of the determination.
       (e)  Sections 2054.510(a), (c), and (d), Insurance Code, are
amended to conform to Section 6.063, Chapter 265, Acts of the 79th
Legislature, Regular Session, 2005, to read as follows:
       (a)  If a policyholder described by Section 2054.509(d) does
not elect to cancel coverage as provided by that section:
             (1)  the company may cancel the coverage; or
             (2)  the commissioner of workers' compensation 
[commission] may impose an administrative penalty on the
policyholder.
       (c)  In imposing an administrative penalty, the commissioner
of workers' compensation [commission] may consider any matter that
justice may require and shall consider:
             (1)  the seriousness of the violation, including the
nature, circumstances, consequences, extent, and gravity of the
prohibited act;
             (2)  the history and extent of previous administrative
violations;
             (3)  the demonstrated good faith of the violator,
including actions taken to rectify the consequences of the
prohibited act;
             (4)  any economic benefit resulting from the prohibited
act; and
             (5)  the penalty necessary to deter future violations.
       (d)  A penalty collected under this section [must be]:
             (1)  must be deposited in the general revenue fund [to
the credit of the commission]; and [or]
             (2)  may be appropriated [reappropriated] to the
division [commission] to offset the costs of implementing and
administering this subchapter.
       (f)  Section 2054.512, Insurance Code, is amended to conform
to Section 6.063, Chapter 265, Acts of the 79th Legislature,
Regular Session, 2005, to read as follows:
       Sec. 2054.512.  FEES FOR SERVICES.  The division 
[commission] shall:
             (1)  charge a policyholder for the reasonable cost of
services provided to the policyholder under Sections 2054.505,
2054.506, 2054.507, 2054.509, and 2054.510(a); and
             (2)  set the fees for the services at a
cost-reimbursement level, including a reasonable allocation of the
division's [commission's] administrative costs.
       (g)  Section 2054.513, Insurance Code, is amended to conform
to Section 6.063, Chapter 265, Acts of the 79th Legislature,
Regular Session, 2005, to read as follows:
       Sec. 2054.513.  ENFORCEMENT OF SUBCHAPTER.  The [compliance
and practices] division [of the commission] shall enforce
compliance with this subchapter through the administrative
violation proceedings under Chapter 415, Labor Code.
       (h)  Section 6.063, Chapter 265, Acts of the 79th
Legislature, Regular Session, 2005, which amended former
Subsections (a), (e), (g), (h), (i), (k), and (l), Section 8,
Article 5.76-3, Insurance Code, is repealed.
       SECTION 3B.056.  Section 2054.001(2), Insurance Code, is
repealed to conform to Section 7.01, Chapter 265, Acts of the 79th
Legislature, Regular Session, 2005.
       SECTION 3B.057.  Section 6.068, Chapter 265, Acts of the
79th Legislature, Regular Session, 2005, which amended former
Subsections (a) and (c), Section 10, Article 5.76-5, Insurance
Code, is repealed.
       SECTION 3B.058.  Section 2151.154, Insurance Code, is
amended to conform more closely to the source law from which the
section was derived to read as follows:
       Sec. 2151.154.  ASSIGNMENT DISTRIBUTION PLAN.  (a)  The
plan of operation must include a voluntary, competitive limited
assignment distribution plan that allows an authorized insurer to
contract directly with a servicing carrier [insurer] to accept
assignments to the servicing carrier [insurer] by the association.
       (b)  A servicing carrier [insurer] must be authorized to
write automobile insurance in this state and must:
             (1)  have written automobile liability insurance in
this state for at least five years; or
             (2)  be currently engaged as a servicing carrier
[insurer] for assigned risk automobile business in at least one
other state.
       (c)  After notice and hearing, the commissioner may prohibit
an insurer from acting as a servicing carrier [insurer].
       (d)  An authorized insurer and a servicing carrier [insurer]
shall determine through negotiation the terms of a contract
described by this section, including the buy-out fee.
       (e)  The governing committee may:
             (1)  adopt reasonable rules for the conduct of business
under a contract described by this section; and
             (2)  establish reasonable standards of eligibility for
servicing carriers [insurers].
       SECTION 3B.059.  (a) Section 2154.005(a), Insurance Code,
is amended to conform to Section 1, Chapter 217, Acts of the 79th
Legislature, Regular Session, 2005, to read as follows:
       (a)  The fund is an account in a depository selected by the
board of regents of The Texas A&M University System in the manner
provided by Section 51.003, Education Code, for funds subject to
the control of institutions of higher education under Section
51.002, Education Code [the general revenue fund].
       (b)  Section 1, Chapter 217, Acts of the 79th Legislature,
Regular Session, 2005, which amended former Subsections (a) and
(c), Section 5, Article 21.61, Insurance Code, is repealed.
       SECTION 3B.0591.  (a) The following changes are made to
Subtitle A, Title 5, Labor Code, and Subtitle E, Title 10, Insurance
Code, for organizational purposes:
             (1)  Chapter 406A, Labor Code, is redesignated as
Chapter 2055, Subtitle E, Title 10, Insurance Code; and
             (2)  Sections 406A.001, 406A.002, 406A.003, 406A.004,
406A.005, 406A.006, 406A.007, and 406A.008 in the redesignated
chapter are redesignated as Sections 2055.001, 2055.002, 2055.003,
2055.004, 2055.005, 2055.006, 2055.007, and 2055.008, Insurance
Code, respectively.
       (b)  Section 406A.001, Labor Code, redesignated as Section
2055.001, Insurance Code, by Subsection (a)(2) of this section, is
amended to conform to that redesignation to read as follows:
       Sec. 2055.001 [406A.001].  DEFINITION [DEFINITIONS].  In
this chapter, "business[:
             [(1)"Business] entity" means a business enterprise
owned by a single person or a corporation, organization, business
trust, trust, partnership, joint venture, association, or other
business entity.
             [(2)  "Commissioner" means the commissioner of
insurance.
             [(3)  "Department" means the Texas Department of
Insurance.]
       (c)  Section 406A.008, Labor Code, redesignated as Section
2055.008, Insurance Code, by Subsection (a)(2) of this section, is
amended to conform to that redesignation to read as follows:
       Sec. 2055.008 [406A.008].  APPLICABILITY OF OTHER LAW. (a)
A group established under this chapter is entitled to any deviation
applicable under Section 2052.004, 2053.051, or 2053.052(a) or
(b)[, Insurance Code].
       (b)  A member of a group is not subject to the discounts and
surcharges established under Subchapter F, Chapter 2053[,
Insurance Code].
       (d)  Section 36.002, Insurance Code, is amended to conform to
the redesignation of Chapter 406A, Labor Code, as Chapter 2055,
Insurance Code, by Subsection (a)(1) of this section to read as
follows:
       Sec. 36.002.  ADDITIONAL RULEMAKING AUTHORITY. The
commissioner may adopt reasonable rules that are:
             (1)  necessary to effect the purposes of a provision
of:
                   (A)  Subchapter B, Chapter 5;
                   (B)  Subchapter C, Chapter 1806;
                   (C)  Subchapter A, Chapter 2301;
                   (D)  Chapter 251, as that chapter relates to
casualty insurance and fidelity, guaranty, and surety bond
insurance;
                   (E)  Chapter 253;
                   (F)  Chapter 2251 or 2252; or
                   (G)  Subtitle B, Title 10; or
             (2)  appropriate to accomplish the purposes of a
provision of:
                   (A)  Section 37.051(a), 403.002, 492.051(b) or
(c), 501.159, 941.003(b)(3) or (c), or 942.003(b)(3) or (c);
                   (B)  Subchapter H, Chapter 544;
                   (C)  Chapter 251, as that chapter relates to:
                         (i)  automobile insurance;
                         (ii)  casualty insurance and fidelity,
guaranty, and surety bond insurance;
                         (iii)  fire insurance and allied lines;
                         (iv)  workers' compensation insurance; or
                         (v)  aircraft insurance;
                   (D)  Chapter 5, 252, 253, 254, 255, 256, 426, 493,
494, 1804, 1805, 1806, or 2171;
                   (E)  Subtitle B, C, D, E, F, H, or I, Title 10;
                   (F)  Section 417.008, Government Code; or
                   (G)  [Chapter 406A, Labor Code; or
                   [(H)] Chapter 2154, Occupations Code.
       (e)  Section 1805.001, Insurance Code, is amended to conform
to the redesignation of Chapter 406A, Labor Code, as Chapter 2055,
Insurance Code, by Subsection (a)(1) of this section to read as
follows:
       Sec. 1805.001.  APPLICABILITY OF CHAPTER. This chapter
applies to the kinds of insurance and insurers subject to:
             (1)  Section 403.002;
             (2)  Section 941.003 with respect to the application of
a law described by Section 941.003(b)(3) or (c);
             (3)  Section 942.003 with respect to the application of
a law described by Section 942.003(b)(3) or (c);
             (4)  Subchapter A, B, C, or D, Chapter 5;
             (5)  Subchapter H, Chapter 544;
             (6)  Subchapter A, Chapter 2301;
             (7)  Chapter 252, 253, 254, 255, 426, 1806, 1807, 2001,
2002, 2003, 2004, 2005, 2006, 2051, 2052, 2053, 2055, 2171, 2251, or
2252;
             (8)  Subtitle B or C, Title 10; or
             (9)  [Chapter 406A, Labor Code; or
             [(10)] Chapter 2154, Occupations Code.
       (f)  Section 2051.002, Insurance Code, is amended to conform
to the redesignation of Chapter 406A, Labor Code, as Chapter 2055,
Insurance Code, by Subsection (a)(1) of this section to read as
follows:
       Sec. 2051.002.  CONSTRUCTION OF CERTAIN LAWS. The following
shall be construed and applied independently of any other law that
relates to insurance rates and forms or prescribes the duties of the
commissioner or the department:
             (1)  this chapter;
             (2)  Subchapter D, Chapter 5;
             (3)  Chapter 251, as that chapter relates to workers'
compensation insurance; and
             (4)  Chapters 255, 426, 2052, [and] 2053, and 2055[;
and
             [(5)Chapter 406A, Labor Code].
       SECTION 3B.060.  (a) Subchapter C, Chapter 2203, Insurance
Code, is amended to conform to Section 1, Chapter 246, Acts of the
79th Legislature, Regular Session, 2005, and Section 2, Chapter
1136, Acts of the 79th Legislature, Regular Session, 2005, by
adding Section 2203.1021 to read as follows:
       Sec. 2203.1021.  VOLUNTEER HEALTH CARE PROVIDERS.  (a)  In
this section:
             (1)  "Charitable organization" has the meaning
assigned by Section 84.003, Civil Practice and Remedies Code.
             (2)  "Volunteer health care provider" has the meaning
assigned by Section 84.003, Civil Practice and Remedies Code.
       (b)  The association shall make available medical liability
insurance or appropriate health care liability insurance covering a
volunteer health care provider for the legal liability of the
person against any loss, damage, or expense incident to a claim
arising out of the death or injury of any person as the result of
negligence in rendering or the failure to render professional
service while acting in the course and scope of the person's duties
as a volunteer health care provider as described by Chapter 84,
Civil Practice and Remedies Code.
       (c)  A volunteer health care provider who is serving as a
direct service volunteer of a charitable organization is eligible
to obtain from the association the liability insurance made
available under this section.  A volunteer health care provider who
obtains coverage under this section is subject to Section 2203.302
and the other provisions of this chapter in the same manner as
physicians who are eligible to obtain medical liability insurance
from the association.
       (d)  This section does not affect the liability of a
volunteer health care provider who is serving as a direct service
volunteer of a charitable organization.  Section 84.004(c), Civil
Practice and Remedies Code, applies to the volunteer health care
provider without regard to whether the volunteer health care
provider obtains liability insurance under this section.
       (b)  Section 1, Chapter 246, Acts of the 79th Legislature,
Regular Session, 2005, and Section 2, Chapter 1136, Acts of the 79th
Legislature, Regular Session, 2005, which added Section 3C to
former Article 21.49-3, Insurance Code, are repealed.
       SECTION 3B.061.  (a) Sections 2210.004(a) and (g),
Insurance Code, are amended to conform to Section 1, Chapter 1153,
Acts of the 79th Legislature, Regular Session, 2005, to read as
follows:
       (a)  For purposes of this chapter and subject to this
section, "insurable property" means immovable property at a fixed
location in a catastrophe area or corporeal movable property
located in that immovable property, as designated in the plan of
operation, that is determined by the association according to the
criteria specified in the plan of operation to be in an insurable
condition against windstorm and hail or fire and explosion, as
appropriate, as determined by normal underwriting standards.  The
term includes property described by Section 2210.209.
       (g)  For purposes of this chapter, a residential structure is
insurable property if:
             (1)  the residential structure is not:
                   (A)  a condominium, apartment, duplex, or other
multifamily residence; or
                   (B)  a hotel or resort facility;
             (2)  the residential structure is located within an
area designated as a unit under the Coastal Barrier Resources Act
(Pub. L. No. 97-348); and
             (3)  a building permit or plat for the residential
structure was filed with the municipality, the county, or the
United States Army Corps of Engineers before June 11, 2003 [January
1, 2004].
       (b)  Section 1, Chapter 1153, Acts of the 79th Legislature,
Regular Session, 2005, which amended former Subsection (f), Section
3, Article 21.49, Insurance Code, is repealed.
       SECTION 3B.062.  (a) Subchapter E, Chapter 2210, Insurance
Code, is amended to conform to Section 2, Chapter 1153, Acts of the
79th Legislature, Regular Session, 2005, by adding Section 2210.209
to read as follows:
       Sec. 2210.209.  WINDSTORM AND HAIL INSURANCE:  COVERAGE FOR
CERTAIN PROPERTY LOCATED OVER WATER. (a)  A windstorm and hail
insurance policy issued by the association may include coverage
for:
             (1)  a building or other structure located in the
seacoast territory that is built wholly or partially over water;
and
             (2)  the corporeal movable property contained in a
building or structure described by Subdivision (1).
       (b)  The association may impose appropriate limits of
coverage and deductibles for coverage described by Subsection (a).
       (c)  The board of directors of the association shall submit
any proposed changes to the plan of operation necessary to
implement Subsections (a) and (b) to the commissioner in the manner
provided by Section 2210.153.
       (d)  The commissioner shall adopt rules as necessary to
implement this section, including any rules necessary to implement
changes in the plan of operation proposed under Subsection (c).
       (b)  Section 2, Chapter 1153, Acts of the 79th Legislature,
Regular Session, 2005, which added Section 3A to former Article
21.49, Insurance Code, is repealed.
       SECTION 3B.063.  (a) Section 2210.006(b), Insurance Code,
is amended to conform to Section 1, Chapter 1251, Acts of the 79th
Legislature, Regular Session, 2005, to read as follows:
       (b)  This chapter does not apply to:
             (1)  a farm mutual insurance company operating under
Chapter 911;
             (2)  a nonaffiliated county mutual fire insurance
company described by Section 912.310 that is writing exclusively
industrial fire insurance policies as described by Section
912.310(a)(2); or
             (3)  a mutual insurance company or a statewide mutual
assessment company engaged in business under Chapter 12 or 13,
Title 78, Revised Statutes, respectively, before those chapters'
repeal by Section 18, Chapter 40, Acts of the 41st Legislature, 1st
Called Session, 1929, as amended by Section 1, Chapter 60, General
Laws, Acts of the 41st Legislature, 2nd Called Session, 1929, that
retains the rights and privileges under the repealed law to the
extent provided by those sections.
       (b)  Section 1, Chapter 1251, Acts of the 79th Legislature,
Regular Session, 2005, which amended former Subsection (k), Section
3, Article 21.49, Insurance Code, is repealed.
       SECTION 3B.0631.  Section 2210.359(a), Insurance Code, is
amended to conform more closely to the source law from which it was
derived to read as follows:
       (a)  Except as otherwise provided by this subsection, a [A]
rate approved by the commissioner under this subchapter may not
reflect an average rate change that is more than 10 percent higher
or lower than the rate for commercial windstorm and hail insurance
or 10 percent higher or lower than the rate for noncommercial
windstorm and hail insurance in effect on the date the filing is
made.  The rate may not reflect a rate change for an individual
rating class that is 15 percent higher or lower than the rate for
that individual rating class in effect on the date the filing is
made.  This subsection does not apply to a rate filed under Sections
2210.351(a)-(d).
       SECTION 3B.064.  Subchapter I, Chapter 2210, Insurance Code,
is repealed to conform to Section 1, Chapter 222, Acts of the 79th
Legislature, Regular Session, 2005.
       SECTION 3B.065.  (a) Section 2211.051, Insurance Code, is
amended to conform to Section 1, Chapter 1082, Acts of the 79th
Legislature, Regular Session, 2005, to read as follows:
       Sec. 2211.051.  ESTABLISHMENT OF FAIR PLAN.  The
commissioner may establish a Fair Access to Insurance Requirements
Plan to deliver residential property insurance to residents of this
state in underserved areas if the commissioner determines, after a
public hearing, that:
             (1)  in all or any part of the state, residential
property insurance is not reasonably available in the voluntary
market to a substantial number of insurable risks; or [and]
             (2)  at least 25 percent of the applicants to the
residential property market assistance program who are qualified
under that program's plan of operation have not been placed with an
insurer in the preceding six months.
       (b)  Section 2211.052, Insurance Code, is amended to conform
to Section 2, Chapter 1082, Acts of the 79th Legislature, Regular
Session, 2005, by amending Subsections (b) and (d) and adding
Subsection (e) to read as follows:
       (b)  The governing committee is composed of 11 members
appointed by the commissioner as follows:
             (1)  five members who represent the interests of
insurers;
             (2)  four public members who reside in this state; and
             (3)  two members who are general property and casualty
agents.
       (d)  Each member of the governing committee who represents
the interests of insurers must be a full-time employee of an insurer
that is a member of the association.
       (e)  The commissioner may remove a member of the governing
committee without cause and may replace the member in accordance
with Subsection (b).
       (c)  Subchapter B, Chapter 2211, Insurance Code, is amended
to conform to Section 2, Chapter 1082, Acts of the 79th Legislature,
Regular Session, 2005, by adding Section 2211.0521 to read as
follows:
       Sec. 2211.0521.  MEETINGS OF GOVERNING BODY.  (a)  
Notwithstanding Chapter 551, Government Code, or any other law,
members of the governing committee may meet by telephone conference
call, video conference, or other similar telecommunication method.  
The governing committee may use telephone conference call, video
conference, or other similar telecommunication method for purposes
of establishing a quorum or voting or for any other meeting purpose
in accordance with this subsection and Subsection (b).  This
subsection applies without regard to the subject matter discussed
or considered by the members of the governing committee at the
meeting.
       (b)  A meeting held by telephone conference call, video
conference, or other similar telecommunication method:
             (1)  is subject to the notice requirements applicable
to other meetings of the governing committee;
             (2)  may not be held unless notice of the meeting
specifies the location of the meeting at which at least one member
of the governing committee is physically present;
             (3)  must be audible to the public at the location
specified in the notice under Subdivision (2); and
             (4)  must provide two-way audio communication between
all members of the governing committee attending the meeting during
the entire meeting, and if the two-way audio communication link
with members attending the meeting is disrupted so that a quorum of
the governing committee is no longer participating in the meeting,
the meeting may not continue until the two-way audio communication
link is reestablished.
       (d)  Sections 2211.101(b) and (c), Insurance Code, are
amended to conform to Sections 1, 2, and 3, Chapter 1082, Acts of
the 79th Legislature, Regular Session, 2005, to read as follows:
       (b)  Except as provided by this subsection, each [Each]
insurer, as a condition of the insurer's authority to engage in the
business of residential property insurance in this state, shall
participate in the association in accordance with this chapter,
including participating in the association's assessments 
[writings, expenses, and losses] in the proportion that the
insurer's net direct premiums written in this state during the
preceding calendar year bear to the aggregate net direct premiums
written in this state by all participating insurers.  The Texas
Windstorm Insurance Association established by Chapter 2210 may not
participate in the association for any purpose.
       (c)  An insurer's participation under Subsection (b) in the
association's assessments [writings, expenses, and losses] must be
determined in accordance with the residential property statistical
plan adopted by the commissioner.
       (e)  The following are repealed:
             (1)  Section 1, Chapter 1082, Acts of the 79th
Legislature, Regular Session, 2005, which amended former
Subsections (a) and (b), Section 1, Article 21.49A, Insurance Code;
             (2)  Section 2, Chapter 1082, Acts of the 79th
Legislature, Regular Session, 2005, which amended former Section 3,
Article 21.49A, Insurance Code, by amending Subsections (b), (d),
and (e) and adding Subsections (f) and (g); and
             (3)  Section 3, Chapter 1082, Acts of the 79th
Legislature, Regular Session, 2005, which amended former
Subsection (d), Section 5, Article 21.49A, Insurance Code.
       SECTION 3B.066.  (a) Section 2211.104, Insurance Code, is
amended to conform to Section 4, Chapter 1082, Acts of the 79th
Legislature, Regular Session, 2005, by amending Subsections (b),
(c), and (d) and adding Subsection (e) to read as follows:
       (b)  As reimbursement for assessments paid under this
section or service fees paid under Section 2211.209, each [If the
association assesses participating insurers under this section,
each] insurer may charge a premium surcharge on every property
insurance policy insuring property in this state that the insurer
issues, the effective date of which is within the three-year period
beginning on the 90th day after the date of the assessment or the
90th day after the date the service fee under Section 2211.209 is
paid, as applicable.
       (c)  The insurer shall compute the amount of the surcharge
under Subsection (b) as a uniform percentage of the premium on each
policy described by Subsection (b).  The percentage must be equal to
one-third of the ratio of the amount of the participating insurer's
assessment or service fee payment to the amount of the insurer's
direct earned premiums, as reported to the department in the
insurer's financial statement for the calendar year preceding the
year in which the assessment or service fee payment is made so that,
over the three-year period, the aggregate of all surcharges by the
insurer under this section is at least equal to [equals] the amount
of the assessment or service fee payment.
       (d)  The amount of any assessment paid and surcharged under
this section may be carried by the insurer as an admitted asset of
the insurer for all purposes, including exhibition in annual
statements under Section 862.001, until collected [The minimum
surcharge on a policy may be $1.  A surcharge may be rounded to the
nearest dollar].
       (e)  The commissioner shall adopt rules and procedures as
necessary to implement this section.
       (b)  Section 4, Chapter 1082, Acts of the 79th Legislature,
Regular Session, 2005, which amended former Section 11, Article
21.49A, Insurance Code, is repealed.
       SECTION 3B.067.  (a) Subchapter B, Chapter 2211, Insurance
Code, is amended to conform to Section 5, Chapter 1082, Acts of the
79th Legislature, Regular Session, 2005, by adding Section 2211.059
to read as follows:
       Sec. 2211.059.  ASSETS OF ASSOCIATION.  On dissolution of
the association, all assets of the association shall be deposited
in the general revenue fund.
       (b)  Section 5, Chapter 1082, Acts of the 79th Legislature,
Regular Session, 2005, which added Section 16 to former Article
21.49A, Insurance Code, is repealed.
       SECTION 3B.068.  (a) Subchapter D, Chapter 2211, Insurance
Code, is amended to conform to Section 3, Chapter 1153, Acts of the
79th Legislature, Regular Session, 2005, by adding Section 2211.157
to read as follows:
       Sec. 2211.157.  COVERAGE FOR CERTAIN WINDSTORM AND HAIL
DAMAGE; COVERAGE FOR CERTAIN PROPERTY LOCATED OVER WATER.  (a)  A
policy issued by the association may include coverage against loss
or damage by windstorm or hail for:
             (1)  a building or other structure that is built wholly
or partially over water; and
             (2)  the corporeal movable property contained in a
building or structure described by Subdivision (1).
       (b)  The association may impose appropriate limits of
coverage and deductibles for coverage described by Subsection (a).
       (c)  The governing committee of the association shall submit
any proposed changes to the plan of operation necessary to
implement Subsections (a) and (b) to the commissioner for the
approval of the commissioner in the manner provided by Section
2211.053.
       (d)  The commissioner shall adopt rules as necessary to
implement this section, including any rules necessary to implement
changes in the plan of operation proposed under Subsections (a) and
(b).
       (b)  Section 3, Chapter 1153, Acts of the 79th Legislature,
Regular Session, 2005, which added Section 5A to former Article
21.49A, Insurance Code, is repealed.
       SECTION 3B.069.  (a) Section 2212.001, Insurance Code, is
amended to conform to Section 2, Chapter 184, Acts of the 79th
Legislature, Regular Session, 2005; Section 2, Chapter 246, Acts of
the 79th Legislature, Regular Session, 2005; and Section 3, Chapter
1136, Acts of the 79th Legislature, Regular Session, 2005, to read
as follows:
       Sec. 2212.001.  DEFINITIONS.  In this chapter:
             (1)  "Charitable organization" has the meaning
assigned by Section 84.003, Civil Practice and Remedies Code.
             (2)  "Dentist" means a person licensed to practice
dentistry in this state.
             (3) [(2)]  "Health care liability claim" means a cause
of action against a physician or dentist for treatment, lack of
treatment, or other claimed departure from accepted standards of
health care or safety that proximately results in injury to or death
of the patient, whether the patient's claim or cause of action
sounds in tort or contract.
             (4) [(3)]  "Physician" means a person licensed to
practice medicine in this state.
             (5) [(4)]  "Trust" means a self-insurance trust
organized and operated under this chapter.
             (6)  "Volunteer health care provider" has the meaning
assigned by Section 84.003, Civil Practice and Remedies Code.
       (b)  Section 2, Chapter 184, Acts of the 79th Legislature,
Regular Session, 2005; Section 2, Chapter 246, Acts of the 79th
Legislature, Regular Session, 2005; and Section 3, Chapter 1136,
Acts of the 79th Legislature, Regular Session, 2005, all of which
added Subdivisions (4) and (5) to former Subsection (a), Article
21.49-4, Insurance Code, are repealed.
       SECTION 3B.070.  (a) Subchapter C, Chapter 2212, Insurance
Code, is amended to conform to Section 3, Chapter 184, Acts of the
79th Legislature, Regular Session, 2005; Section 3, Chapter 246,
Acts of the 79th Legislature, Regular Session, 2005; and Section 4,
Chapter 1136, Acts of the 79th Legislature, Regular Session, 2005,
by adding Section 2212.102 to read as follows:
       Sec. 2212.102.  COVERAGE FOR VOLUNTEER HEALTH CARE
PROVIDERS.  (a)  The trust, in accordance with Section 2212.054, may
make available professional liability insurance covering a
volunteer health care provider for an act or omission resulting in
death, damage, or injury to a patient while the person is acting in
the course and scope of the person's duties as a volunteer health
care provider as described by Chapter 84, Civil Practice and
Remedies Code.
       (b)  This section does not affect the liability of a
volunteer health care provider who is serving as a direct service
volunteer of a charitable organization.  Section 84.004(c), Civil
Practice and Remedies Code, applies to the volunteer health care
provider without regard to whether the volunteer health care
provider obtains liability insurance under this section.
       (c)  The trust may make professional liability insurance
available under this section to a volunteer health care provider
without regard to whether the volunteer health care provider is a
physician or dentist.
       (b)  Section 3, Chapter 184, Acts of the 79th Legislature,
Regular Session, 2005; Section 3, Chapter 246, Acts of the 79th
Legislature, Regular Session, 2005; and Section 4, Chapter 1136,
Acts of the 79th Legislature, Regular Session, 2005, all of which
added Subsection (c-1) to former Article 21.49-4, Insurance Code,
are repealed.
       SECTION 3B.071.  (a) Section 2251.003(b), Insurance Code,
is amended to conform to Section 1, Chapter 70, Acts of the 79th
Legislature, Regular Session, 2005; Section 1, Chapter 71, Acts of
the 79th Legislature, Regular Session, 2005; and Section 4, Chapter
102, Acts of the 79th Legislature, Regular Session, 2005, to read as
follows:
       (b)  This subchapter and Subchapters B, C, D, and E apply to
all lines of the following kinds of insurance written under an
insurance policy or contract issued by an insurer authorized to
engage in the business of insurance in this state:
             (1)  general liability insurance;
             (2)  residential and commercial property insurance,
including farm and ranch insurance and farm and ranch owners
insurance;
             (3)  personal and commercial casualty insurance,
except as provided by Section 2251.004;
             (4)  medical professional liability insurance;
             (5)  fidelity, guaranty, and surety bonds other than
criminal court appearance bonds;
             (6)  personal umbrella insurance;
             (7)  personal liability insurance;
             (8)  guaranteed auto protection (GAP) insurance;
             (9)  involuntary unemployment insurance;
             (10)  financial guaranty insurance;
             (11)  inland marine insurance;
             (12)  rain insurance;
             (13)  hail insurance on farm crops; [and]
             (14)  personal and commercial automobile insurance;
             (15)  multi-peril insurance; and
             (16)  identity theft insurance issued under Chapter
706.
       (b)  Section 2301.003(b), Insurance Code, is amended to
conform to Section 1, Chapter 70, Acts of the 79th Legislature,
Regular Session, 2005; Section 1, Chapter 71, Acts of the 79th
Legislature, Regular Session, 2005; and Section 4, Chapter 102,
Acts of the 79th Legislature, Regular Session, 2005, to read as
follows:
       (b)  This subchapter applies to all lines of the following
kinds of insurance written under an insurance policy or contract
issued by an insurer authorized to engage in the business of
insurance in this state:
             (1)  general liability insurance;
             (2)  residential and commercial property insurance,
including farm and ranch insurance and farm and ranch owners
insurance;
             (3)  personal and commercial casualty insurance,
except as provided by Section 2301.005;
             (4)  medical professional liability insurance;
             (5)  fidelity, guaranty, and surety bonds other than
criminal court appearance bonds;
             (6)  personal umbrella insurance;
             (7)  personal liability insurance;
             (8)  guaranteed auto protection (GAP) insurance;
             (9)  involuntary unemployment insurance;
             (10)  financial guaranty insurance;
             (11)  inland marine insurance;
             (12)  rain insurance;
             (13)  hail insurance on farm crops; [and]
             (14)  personal and commercial automobile insurance;
             (15)  multi-peril insurance; and
             (16)  identity theft insurance issued under Chapter
706.
       (c)  Section 1, Chapter 70, Acts of the 79th Legislature,
Regular Session, 2005; Section 1, Chapter 71, Acts of the 79th
Legislature, Regular Session, 2005; and Section 4, Chapter 102,
Acts of the 79th Legislature, Regular Session, 2005, all of which
amended former Subsection (a), Section 2, Article 5.13-2, Insurance
Code, are repealed.
       SECTION 3B.072.  (a) Subchapter E, Chapter 2251, Insurance
Code, is amended by adding Section 2251.205 to conform to Section 1,
Chapter 1118, Acts of the 79th Legislature, Regular Session, 2005,
to read as follows:
       Sec. 2251.205.  APPLICATION OF FILING REQUIREMENTS TO OTHER
INSURERS.  An insurer is subject to the filing requirements
determined by the commissioner by rule under Section 2251.204 if:
             (1)  the insurer, along with the insurer's affiliated
companies or group, issues personal automobile liability insurance
policies only below 101 percent of the minimum limits required by
Chapter 601, Transportation Code; and
             (2)  the insurer, along with the insurer's affiliated
companies or group, has a market share of less than 3.5 percent of
the personal automobile insurance market in this state.
       (b)  Section 1, Chapter 1118, Acts of the 79th Legislature,
Regular Session, 2005, which added Subsection (h) to former Section
13, Article 5.13-2, Insurance Code, is repealed.
       SECTION 3B.073.  (a) Section 2253.001, Insurance Code, is
amended to conform to Section 2, Chapter 291, Acts of the 79th
Legislature, Regular Session, 2005, to read as follows:
       Sec.2253.001.RATING TERRITORIES.  (a)  Notwithstanding
any other provision of this code, an insurer, in writing
residential property or personal automobile insurance, may use
rating territories that subdivide a county only if:
             (1)  the county is subdivided; and
             (2)  the rate for any subdivision in the county is not
greater than 15 percent higher than the rate used in any other
subdivision in the county by that insurer.
       (b)  The [For residential property insurance or personal
automobile insurance, the] commissioner by rule may allow a greater
rate difference than the rate difference specified by Subsection
(a).
       (b)  Section 2, Chapter 291, Acts of the 79th Legislature,
Regular Session, 2005, which amended former Article 5.171,
Insurance Code, is repealed.
       SECTION 3B.074.  Section 4151.206(a), Insurance Code, is
amended to conform more closely to the source law from which the
section was derived to read as follows:
       (a)  The commissioner shall collect and an applicant or
administrator shall pay to the commissioner fees in an amount to be
determined by the commissioner as follows:
             (1)  a filing fee not to exceed $1,000 for processing an
original application for a certificate of authority for an
administrator;
             (2)  a fee not to exceed $500 for an examination under
Section 4151.201 [4201.201]; and
             (3)  a filing fee not to exceed $200 for an annual
report.
       SECTION 3B.075.  (a) Sections 4201.054(a) and (d),
Insurance Code, are amended to conform to Section 6.072, Chapter
265, Acts of the 79th Legislature, Regular Session, 2005, to read as
follows:
       (a)  Except as provided by this section, this chapter applies
to utilization review of a health care service provided to a person
eligible for workers' compensation medical benefits under Title 5,
Labor Code. The commissioner of workers' compensation shall
regulate as provided by this chapter a person who performs
utilization review of a medical benefit provided under Title 5 
[Chapter 408], Labor Code.
       (d)  The commissioner of workers' compensation [and the
Texas Workers' Compensation Commission] may adopt rules [and enter
into memoranda of understanding] as necessary to implement this
section.
       (b)  Section 4201.054(b), Insurance Code, is repealed to
conform to Section 6.072, Chapter 265, Acts of the 79th
Legislature, Regular Session, 2005.
       (c)  Section 6.072, Chapter 265, Acts of the 79th
Legislature, Regular Session, 2005, which amended former
Subsection (c), Section 14, Article 21.58A, Insurance Code, is
repealed.
       SECTION 3B.076.  (a) Section 4201.207(b), Insurance Code,
is amended to conform to Section 6.071, Chapter 265, Acts of the
79th Legislature, Regular Session, 2005, to read as follows:
       (b)  A health care provider's charges for providing medical
information to a utilization review agent may not:
             (1)  exceed the cost of copying records regarding a
workers' compensation claim as set by rules adopted by the
commissioner of workers' compensation [Texas Workers' Compensation
Commission]; or
             (2)  include any costs otherwise recouped as part of
the charges for health care.
       (b)  Section 6.071, Chapter 265, Acts of the 79th
Legislature, Regular Session, 2005, which amended former
Subsection (l), Section 4, Article 21.58A, Insurance Code, is
repealed.
       SECTION 3B.077.  This article takes effect September 1, 2007.
____________________________________________________________
   President of the SenateSpeaker of the House      
       I certify that H.B. No. 2636 was passed by the House on April
25, 2007, by the following vote:  Yeas 145, Nays 0, 1 present, not
voting; and that the House concurred in Senate amendments to H.B.
No. 2636 on May 17, 2007, by the following vote:  Yeas 144, Nays 0,
1 present, not voting.
______________________________
Chief Clerk of the House   
       I certify that H.B. No. 2636 was passed by the Senate, with
       I certify that H.B. No. 2636 was passed by the Senate, with
amendments, on May 15, 2007, by the following vote:  Yeas 31, Nays
0.
______________________________
Secretary of the Senate   
APPROVED: __________________
APPROVED: __________________
                Date       
 
 
         __________________
              Governor