86R7110 JES-F
 
  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.