By: Hancock S.B. No. 1063

A BILL TO BE ENTITLED

AN ACT

relating to the operation of the Texas Property and Casualty Insurance Guaranty Association.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Section 462.004(5), Insurance Code, is amended to read as follows:

(5) "Impaired insurer" means a member insurer that is subject to a final, nonappealable order of liquidation that includes a finding of insolvency issued by a court of competent jurisdiction in this state or in the insurer's state of domicile[:

[(A) placed in:

[(i) temporary or permanent receivership or liquidation under a court order, including a court order of another state, based on a finding of insolvency; or

[(ii) conservatorship after the commissioner determines that the insurer is insolvent; and

[(B) designated by the commissioner as an impaired insurer].

SECTION 2. Section 462.055(b), Insurance Code, is amended to read as follows:

(b) The remaining board members, by majority vote, shall fill a vacancy on the board for the unexpired term of a director who serves as an insurance industry board member, subject to the commissioner's approval. The commissioner shall appoint a director to fill a vacancy on the board for the unexpired term of a director who serves as a public representative.

SECTION 3. Section 462.059, Insurance Code, is amended by amending Subsections (a), (b), and (c) and adding Subsection (a-1) to read as follows:

(a) Notwithstanding Chapter 551, Government Code, the board may hold an open meeting by telephone conference call [if immediate action is required and convening of a quorum of the board at a single location is not reasonable or practical]. A meeting held by telephone conference call:

(1) must be audible to the public at the location specified in the notice described by Subsection (c); and

(2) must allow two-way audio communication during the entire meeting between the members of the board attending a meeting authorized by this section.

(a-1) If the two-way audio communication required under Subsection (a) is disrupted during a meeting so that a quorum of the board is no longer able to participate, the meeting may not continue until the two-way audio communication is reestablished.

(b) The meeting is subject to the notice requirements that apply to other meetings of the board of directors.

(c) The notice of the meeting must specify [as] the location of the meeting [the location at which meetings of the board are usually held], and each part of the meeting that is required to be open to the public must be audible to the public at that location. The association must make an audio recording of the meeting. The recording of the open portion of the meeting must be posted publicly to the association's Internet website [and must be tape recorded. The tape recording shall be made available to the public].

SECTION 4. Section 462.207, Insurance Code, is amended by amending Subsection (b) and adding Subsection (c) to read as follows:

(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, indemnification, or any other claim asserted directly or indirectly by a reinsurer, insurer, self-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.

(c) The association is entitled to recover the association's costs, expenses, and reasonable attorney's fees incurred in defending the association or an impaired insurer's insured against a claim brought in violation of this subsection by a reinsurer, insurer, self-insurer, insurance pool, or underwriting association, on that entity's own behalf or on behalf of the entity's insured, after the date on which the entity is provided notice by the association or otherwise of the provisions of this section applicable to the entity's suit.

SECTION 5. Sections 462.212(d), (e), and (f), Insurance Code, are amended to read as follows:

(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. A court shall award the association the association's costs, expenses, and reasonable attorney's fees incurred in seeking recovery under this section.

(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 insureds [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 requested by the association [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 and shall pay[. 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 the association's [its full] costs, expenses, and reasonable attorney's fees incurred in attempting to obtain the insured's financial information [in contesting the claim].

SECTION 6. Section 462.303, Insurance Code, is amended by amending Subsection (b) and adding Subsection (c) to read as follows:

(b) A judgment, settlement, or release described by Subsection (a) is not evidence of liability or of damages in connection with a claim brought against the association, an impaired insurer's insured, or another party under this chapter.

(c) The association is entitled to recover the association's costs, expenses, and reasonable attorney's fees incurred in contesting a claim based on a judgment, settlement, or release described by Subsection (a) on the association's behalf or on behalf of an impaired insurer's insured after the date on which the party asserting the claim is provided notice by the association or otherwise of the provisions of this section applicable to the judgment, settlement, or release.

SECTION 7. Sections 462.304(a) and (c), Insurance Code, are amended to read as follows:

(a) The association shall handle claims through:

(1) the association's employees or contract claims adjusters; or

(2) subject to the approval of the commissioner, [through] one or more insurers [or other persons] designated[, subject to the approval of the commissioner,] as a servicing facility under a servicing agreement or loss portfolio transfer agreement [facilities].

(c) The association shall[:

[(1)] reimburse a servicing facility for[:

[(A)] obligations of the association paid by the facility[;] and

[(B)] expenses incurred by the facility in handling claims for the association. The association shall reimburse a servicing facility under this subsection in a manner that is consistent with the applicable servicing agreement or loss portfolio agreement[; and

[(2) pay the other expenses of the association authorized by this chapter].

SECTION 8. Section 462.307, Insurance Code, is amended by amending Subsection (d) and adding Subsection (f) to read as follows:

(d) Except as provided by Section 462.308 or 462.212, the association does not have a cause of action against the impaired insurer's insured for money the association has paid, other than a cause of action that the impaired insurer would have had if the money had been paid by the impaired insurer.

(f) To the extent the association has a right to recover proceeds from the sale of salvage property related to a covered claim, the association's right to recover the proceeds may not be reduced in the amount of any pre-impairment costs, fees, or expenses related to the salvage property that are not part of a covered claim under Subchapter E. A person or entity in possession of salvage property subject to the association's right of recovery may not seek recovery from the association for any pre-impairment costs, fees, or expenses related to the salvage property that are not a covered claim under Subchapter E.

SECTION 9. Section 462.308, Insurance Code, is amended by amending Subsection (a) and adding Subsection (d) 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 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

(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 or any successor entity to the insured employer under state, federal, or international law whose net worth on December 31 of the year preceding the date the insurer becomes an impaired insurer exceeds $50 million.

(d) A court shall award the association the association's costs, expenses, and reasonable attorney's fees incurred in seeking recovery under this section.

SECTION 10. Except as provided by this section, the changes in law made by this Act apply only with respect to a property and casualty insurance company that is designated as an impaired insurer on or after the effective date of this Act. The law as it existed immediately before the effective date of this Act applies with respect to a property and casualty insurance company that is designated as an impaired insurer before the effective date of this Act, and that law is continued in effect for that purpose.

SECTION 11. This Act takes effect September 1, 2019.