80R7203 AJA-D

By: Brimer S.B. No. 1136

A BILL TO BE ENTITLED

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(3) eliminating repealed, duplicative, unconstitutional, expired, executed, and other ineffective provisions; and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. (a) An insurer, group of 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. (a) Each certified capital company shall report to the 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. Any offering material involving the sale of securities of 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. (a) In this section:

(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. A certified capital company shall invest any 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. (a) A business that 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. A certified investor is not required to reduce the 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. (a) A material violation of Section 228.105, 228.106, 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. (a) Decertification of a 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. The comptroller shall send written notice to the 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. (a) A certified capital company may agree to 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 AND CONFORMING AMENDMENTS TO TITLE 5, INSURANCE

CODE

SECTION 1D.001. CONFORMING AMENDMENT. Section 542.103(a), Insurance Code, is amended to read as follows:

(a) An insurer shall provide the information requested under Section 542.101 or 542.102 [this subchapter] in writing not later than the 30th day after the date the insurer receives the request for the information.

SECTION 1D.002. CONFORMING AMENDMENT. Section 542.104, Insurance Code, is amended to read as follows:

Sec. 542.104. RULES. The commissioner may by rule prescribe forms for requesting information and for providing requested information under Section 542.101 or 542.102 [this subchapter].

SECTION 1D.003. ADDITION. Subchapter C, Chapter 542, Insurance Code, is amended by adding Section 542.105 to read as follows:

Sec. 542.105. 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.004. 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. (a) An insurer may not use a rate that violates this 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. (a) An automobile club may provide insurance 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. (a) Except as provided by 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. A spouse, without the joinder or consent of the other 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 Chapter 843; 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 Chapter 843; 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 Chapter 843;

(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. Except as provided by Section 1550.054, an 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. (a) This section applies only 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. (a) The commissioner shall adopt 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. The commissioner may adopt reasonable 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. To further the uniform administration of rating 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 responsible managing employee must hold 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. (a) The Texas Department of 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 (] Chapter 843 [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 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) [(4)] Chapter 843;

(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;

(4) Chapters 222, 251, and 258, as applicable to a health maintenance organization; and

(5) 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 841.705[;

[(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 Chapter 3, 841, 1251, 1505, 1651, 1652, or 1701 or Subchapter A, Chapter 1507; 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 Subchapters A-E, 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 Subchapters A-E, 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. Subchapters A-E, Chapter 4054, apply [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 Subchapters A-E, 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 Subchapters A-E, 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 issued under one of the following provisions revoked:

(1) Chapter 4001;

(2) Subchapters A-E and G, Chapter 4051; or

(3) Chapter 4054 [under 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, 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, 401.061, 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(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.

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. In making an equitable distribution of the 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, Subchapters A-D, 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, Subchapters A-D, 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.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.