79C19(3) KLA

 

CHAPTER 462.  TEXAS PROPERTY AND CASUALTY INSURANCE GUARANTY ASSOCIATION

SUBCHAPTER A. GENERAL PROVISIONS

Revised Law

Sec. 462.001.  SHORT TITLE.  This chapter may be cited as the Texas Property and Casualty Insurance Guaranty Act.  (V.T.I.C. Art. 21.28-C, Sec. 1.)

Source Law

Art. 21.28-C

Sec. 1.  This article shall be known as the Texas Property and Casualty Insurance Guaranty Act.

Revised Law

Sec. 462.002.  PURPOSES.  The purposes of this chapter are to:

(1)  provide a mechanism for the payment of covered claims under certain insurance policies to avoid excessive delay in payment;

(2)  avoid financial loss to claimants or policyholders because of an insurer's impairment;

(3)  assist in the detection and prevention of insurer insolvencies; and

(4)  provide an association to assess the cost of that protection among insurers.  (V.T.I.C. Art. 21.28-C, Sec. 2.)

Source Law

Sec. 2.  The purpose of this Act is to:

(1)  provide a mechanism for the payment of covered claims under certain insurance policies to avoid excessive delay in payment;

(2)  avoid financial loss to claimants or policyholders because of the impairment of an insurer;

(3)  assist in the detection and prevention of insurer insolvencies; and

(4)  provide an association to assess the cost of that protection among insurers.

Revised Law

Sec. 462.003.  CONSTRUCTION.  This chapter shall be liberally construed to implement the purposes of this chapter described by Section 462.002, which shall be used to aid and guide interpretation of this chapter.  (V.T.I.C. Art. 21.28-C, Sec. 4.)

Source Law

Sec. 4.  This Act shall be liberally construed to effect the purposes under Section 2 of this Act, which will constitute an aid and guide to interpretation.

Revised Law

Sec. 462.004.  GENERAL DEFINITIONS.  In this chapter:

(1)  "Affiliate" means a person who, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with an impaired insurer on December 31 of the year preceding the date the insurer becomes an impaired insurer.

(2)  "Association" means the Texas Property and Casualty Insurance Guaranty Association.

(3)  "Board" means the board of directors of the association.

(4)  "Claimant" means an insured making a first-party claim or a person instituting a liability claim.

(5)  "Impaired insurer" means a member insurer that is:

(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.

(6)  "Member insurer" means an insurer, including a stock insurance company, a mutual insurance company, a Lloyd's plan, a reciprocal or interinsurance exchange, or a county mutual insurance company, that:

(A)  writes any kind of insurance to which this chapter applies under Sections 462.007 and 462.008, including reciprocal or interinsurance exchange contracts; and

(B)  holds a certificate of authority to engage in the business of insurance in this state.

(7)  "Person" means an individual, corporation, partnership, association, or voluntary organization.  (V.T.I.C. Art. 21.28-C, Secs. 5(2), (3), (4), (5) (part), (9), (10), (12).)

Source Law

(2)  "Affiliate" means a person who, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with an impaired insurer on December 31 of the year next preceding the date the insurer becomes an impaired insurer.

(3)  "Association" means the Texas Property and Casualty Insurance Guaranty Association.

(4)  "Board" means the board of directors of the association.

(5)  "Claimant" means any insured making a first-party claim or any person instituting a liability claim… .

(9)  "Impaired insurer" means:

(A)  a member insurer that is placed in temporary or permanent receivership or liquidation under an order of a court of competent jurisdiction, including the courts of any other state, based on a finding of insolvency and that has been designated an impaired insurer by the commissioner;  or

(B)  a member insurer placed in conservatorship after it has been determined by the commissioner to be insolvent and that has been designated an impaired insurer by the commissioner.

(10)  "Member insurer" means any insurer who:

(A)  writes any kind of insurance to which this Act applies under Section 3 of this Act, including the exchange of reciprocal or inter-insurance contracts; and

(B)  is licensed to transact insurance in this state, including any stock, mutual, Lloyds insurer, reciprocal or inter-insurance exchange, or county mutual insurance company.

(12)  "Person" means any individual, corporation, partnership, association, or voluntary organization.

Revisor's Note

(1)  Section 5(1), V.T.I.C. Article 21.28-C, defines "account" to mean certain specific accounts created under this chapter.  The revised law omits the definition as unnecessary because the revised law, when referring to one of the specific accounts included in the definition, incorporates references to indicate to which account the revised law refers.  The omitted law reads:

Sec. 5.  In this Act:

(1)  "Account" means any one of the three accounts created under Section 6 of this Act.

(2)  Section 5(2), V.T.I.C. Article 21.28-C, refers to December 31 of "the year next preceding." The revised law omits "next" as unnecessary. "The year preceding" means "the year next preceding."

(3)  Section 5(6), V.T.I.C. Article 21.28-C, defines "commissioner."  The revised law omits the definition as unnecessary because Section 31.001 of this code  defines "commissioner" to mean the "commissioner of insurance" for purposes of this code.  The omitted law reads:

(6)  "Commissioner" means the commissioner of insurance.

(4)  Section 5(9), V.T.I.C. Article 21.28-C, refers to  a court "of competent jurisdiction."  Throughout this chapter, the revised law omits the quoted language as unnecessary because the general laws of civil jurisdiction determine which courts have jurisdiction over the matter.  For example, see Sections 24.007-24.011, Government Code, for the general jurisdiction of district courts in this state.

(5)  Section 5(10), V.T.I.C. Article 21.28-C, refers to  a "Lloyds insurer" and a "reciprocal or inter-insurance exchange." For consistency of terminology within this code, the revised law substitutes a reference to a "Lloyd's plan" for the reference to "Lloyds insurer," and substitutes a reference to "interinsurance" for the reference to "inter-insurance."

(6)  Section 5(10), V.T.I.C. Article 21.28-C,  refers to an insurer "licensed" to engage in business in this state.  Throughout this chapter, the revised law substitutes "that holds a certificate of authority" or "authorized" for "licensed" because "certificate of authority" is the term used throughout this code in relation to an entity's authority to engage in business.

Revised Law

Sec. 462.005.  DESCRIPTION OF CONTROL.  (a)  For purposes of this chapter, control is the power to direct, or cause the direction of, the management and policies of a person, other than power that results from an official position with the person or a corporate office held by the person.  The power may be possessed  directly or indirectly by any means, including through the ownership of voting securities or by contract, other than a commercial contract for goods or nonmanagement services.

(b)  A person is presumed to control another person if the person directly or indirectly owns, controls, holds with the power to vote, or holds proxies representing 10 percent or more of the voting securities of the other person.  This presumption may be rebutted by a showing that the person does not in fact control the other person.  (V.T.I.C. Art. 21.28-C, Sec. 5(7).)

Source Law

(7)  "Control" means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract other than a commercial contract for goods or nonmanagement services, or otherwise, unless the power is the result of an official position with or corporate office held by the person.  Control is presumed to exist if any person, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing 10 percent or more of the voting securities of any other person.  This presumption may be rebutted by a showing that control does not exist in fact.

Revised Law

Sec. 462.006.  NET DIRECT WRITTEN PREMIUMS.  (a)  Except as provided by Subsection (b) and subject to Subsection (c), in this chapter, "net direct written premiums" means direct premiums written in this state on insurance policies to which this chapter applies, less return premiums on those policies and dividends paid or credited to policyholders on that direct business.

(b)  Subject to Subsection (c), for assessing the workers' compensation line of business, the term "net direct written premiums" includes the modified annual premium before the application of a deductible premium credit, less return premiums on those policies and dividends paid or credited to policyholders on that direct business.

(c)  The term "net direct written premiums" does not include premiums on contracts between insurers or reinsurers.  (V.T.I.C. Art. 21.28-C, Sec. 5(11).)

Source Law

(11)  "Net direct written premiums", when assessing other than the workers' compensation line of business, means direct premiums written in this state on insurance policies to which this Act applies, less return premiums on those policies and dividends paid or credited to policyholders on that direct business.  The term does not include premiums on contracts between insurers or reinsurers.  When assessing the workers' compensation line of business, the term "net direct written premiums" includes the modified annual premium prior to the application of any deductible premium credit, less return premiums on those policies and dividends paid or credited to policyholders on that direct business.  The term does not include premiums on contracts between insurers or reinsurers.

Revised Law

Sec. 462.007.  APPLICABILITY IN GENERAL; EXCEPTIONS.  (a)  Except as provided by Subsection (b), this chapter applies to each kind of direct insurance.

(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;  or

(9)  insurance provided by or guaranteed by government.  (V.T.I.C. Art. 21.28-C, Sec. 3(a).)

Source Law

Sec. 3.  (a)  This Act applies to all kinds of direct insurance, and except as provided in Section 12 of this Act, is not applicable to the following:

(1)  life, annuity, health, or disability insurance;

(2)  mortgage guaranty, financial guaranty, or other forms of insurance offering protection against investment risks;

(3)  fidelity or surety bonds, or any other bonding obligations;

(4)  credit insurance, vendors' single-interest insurance, collateral protection insurance, or any similar insurance protecting the interests of a creditor arising out of a creditor-debtor transaction;

(5)  insurance of warranties or service contracts;

(6)  title insurance;

(7)  ocean marine insurance;

(8)  any transaction or combination of transactions between a person, including an affiliate of such a person, and an insurer, including an affiliate of such an insurer, that involves the transfer of investment or credit risk unaccompanied by the transfer of insurance risk;  or

(9)  any insurance provided by or guaranteed by government.

Revised Law

Sec. 462.008.  APPLICABILITY TO TEXAS MUTUAL INSURANCE COMPANY.  (a)  This chapter applies to insurance written through the Texas Mutual Insurance Company only as provided by this section.

(b)  This chapter applies to the Texas Mutual Insurance Company on a prospective basis on and after January 1, 2000.  The Texas Mutual Insurance Company is only liable for assessments for a claim with a date of injury that occurs on or after January 1, 2000.  The association, with respect to an insolvency of the Texas Mutual Insurance Company, is only liable for a claim with a date of injury that occurs on or after January 1, 2000.  (V.T.I.C. Art. 21.28-C, Sec. 3(b).)

Source Law

(b)  This Act applies to insurance written through the Texas Mutual Insurance Company only as provided by this subsection.  The application of this article to the Texas Mutual Insurance Company is on a prospective basis on and after January 1, 2000.  That company is only liable for assessments for a claim with a date of injury that occurs on or after January 1, 2000.  The association, with respect to an insolvency of the company, is only liable for a claim with a date of injury that occurs on or after January 1, 2000.

Revised Law

Sec. 462.009.  APPLICABILITY TO FORMER TEXAS WORKERS' COMPENSATION INSURANCE FACILITY AND SUCCESSOR.  (a)  Notwithstanding any other provision of this chapter, this chapter applies to each insurance policy issued under Article 5.76 or 5.76-2, as those articles existed before their repeal.

(b)  Notwithstanding any other provision of this chapter, the stock insurance company that resulted from the transfer of the former Texas workers' compensation insurance facility is considered an impaired insurer for purposes of this chapter if any action described by Section 462.004(5) is taken with respect to the company.

(c)  A claim under an insurance policy described by Subsection (a) is a covered claim for purposes of this chapter if the claim is a covered claim for purposes of Sections 462.201-462.203, 462.205-462.210, 462.213, 462.214, and 462.305(d) without regard to whether the stock insurance company described by Subsection (b):

(1)  issued or assumed the policy; or

(2)  was authorized to engage in business in this state at the time:

(A)  the policy was written; or

(B)  the company became an impaired insurer.

(d)  If a conflict exists between this section and any other statute relating to the former Texas workers' compensation insurance facility or the association, this section controls.  (V.T.I.C. Art. 21.28-C, Sec. 26.)

Source Law

Sec. 26.  (a)  Notwithstanding any other provision of this article, this article applies to each policy of insurance issued under Article 5.76 of this code or Article 5.76-2 of this code, as that article existed before its repeal.

(b)  Notwithstanding any other provision of this article, after the conversion of the Texas workers' compensation insurance facility to a stock insurance company, that converted facility shall be considered an impaired insurer for purposes of this article if any of the actions described by Section 5(9)(A) or (B) of this article occur to the converted facility.

(c)  A claim under such an insurance policy is a covered claim for purposes of this article if the claim satisfies the definition under Section 5(8) of this article, whether or not the converted facility:

(1)  issued or assumed the policy;  or

(2)  was licensed to do business in this state at the time:

(A)  the policy was written;  or

(B)  the converted facility became an impaired insurer.

(d)  If a conflict exists between this section and any other statute relating to the Texas workers' compensation insurance facility or the Texas Property and Casualty Insurance Guaranty Association, this section controls.

Revisor's Note

(1)  Section 26(a), V.T.I.C. Article 21.28-C, refers to an insurance policy issued under "Article 5.76 of this code or Article 5.76-2 of this code, as that article existed before its repeal." Section 26 was added by Chapter 594, Acts of the 75th Legislature, Regular Session, 1997.  V.T.I.C. Article 5.76-2 was repealed by the same act. At the time of enactment of Section 26, V.T.I.C. Article 5.76 had been repealed by Chapter 1, Acts of the 71st Legislature, 2nd Called Session, 1989.  For clarity and consistency, the revised law refers to both articles as they existed before repeal.

(2)  Section 26(b), V.T.I.C. Article 21.28-C, governs the applicability of the article after the conversion of the Texas workers' compensation insurance facility to a stock insurance company.  Section 1.03, Chapter 594, Acts of the 75th Legislature, Regular Session, 1997, directed that the facility be converted to a Texas stock property and casualty insurance company or, in specified circumstances, the operation of the facility be transferred to the Texas Property and Casualty Insurance Guaranty Association.  However, following enactment of Chapter 594 in 1997, the facility was transferred to a private stock insurance company.  The revised law is drafted accordingly.

Revised Law

Sec. 462.010.  CONFLICT WITH OTHER LAWS.  (a)  Except as provided by Subsection (b), if this chapter  conflicts with another statute relating to the association, this chapter controls.

(b)  This section does not apply to a conflict between this chapter and:

(1)  Subtitle A, Title 5, Labor Code, except as described by Subsection (c); or

(2)  Subtitle E, Title 10.

(c)  This chapter controls with respect to subrogation rights of an insurance carrier under Chapter 417, Labor Code, against an impaired insurer's insured or the association.  (V.T.I.C. Art. 21.28-C, Sec. 25.)

Source Law

Sec. 25.  (a)  Except as provided in Subsection (b) of this section, if a conflict exists between this Act and any other statutory provision relating to the association, this Act shall control.

(b)  This section does not apply to a conflict between this Act and:

(1)  Subtitle A, Title 5, Labor Code, except that this Act controls with respect to subrogation rights of an insurance carrier under Chapter 417, Labor Code, against an insured of an impaired insurer or the association;

(2)  Subchapter D, Chapter 5, of this code; or

(3)  Article 5.76-2, 5.76-3, 5.76-4, or 5.76-5 of this code.

Revisor's Note

Section 25(b)(3), V.T.I.C. Article 21.28-C, provides that Section 25 does not apply to a conflict between Article 21.28-C, revised as this chapter, and V.T.I.C. Article 5.76-2.  The revised law omits the reference to Article 5.76-2 because that article was repealed by Chapter 594, Acts of the 75th Legislature, Regular Session, 1997.  In addition, Section 1.13 of that act added Section 26, V.T.I.C. Article 21.28-C, revised in this chapter as Section 462.009, which governs applicability of this chapter to insurance policies issued under former Article 5.76-2.

Revised Law

Sec. 462.011.  IMMUNITY IN GENERAL.  (a)  Liability does not exist and a cause of action does not arise against any of the following persons for any good faith act or omission in performing the person's powers and duties under this chapter:

(1)  the commissioner or the commissioner's representative;

(2)  the association or the association's agent or employee;

(3)  a member insurer;

(4)  the board;

(5)  the receiver; or

(6)  a special deputy receiver or the special deputy receiver's agent or employee.

(b)  The attorney general shall defend any action to which this section applies that is brought against the commissioner or the commissioner's representative, the association or the association's agent or employee, a member insurer or the insurer's agent or employee, a board member, or a special deputy receiver or the special deputy receiver's agent or employee, including an action instituted after the defendant's service with the association, commissioner, or department has terminated.  This subsection does not require the attorney general to defend a person with respect to an issue other than the applicability or effect of the immunity created by Subsection (a).  The attorney general is not required to defend the association or the association's agent or employee, a member insurer or the member insurer's agent or employee, a board member, or a special deputy receiver or the special deputy receiver's agent or employee against an action regarding the disposition of a claim filed with the association under this chapter or any issue other than the applicability or effect of the immunity created by Subsection (a). The association may contract with the attorney general under Chapter 771, Government Code, for legal services not covered by this subsection.  (V.T.I.C. Art. 21.28-C, Sec. 16.)

Source Law

Sec. 16.  (a)  There is no liability on the part of, and no cause of action of any nature arises against, any member insurer, the association or its agents or employees, the board of directors, receiver, special deputy receiver or its agents or employees, or the commissioner or the commissioner's representatives for any good faith action or failure to act in the performance of powers and duties under this Act.

(b)  The attorney general shall defend any action to which Subsection (a) applies that is brought against a member insurer or its agents or employees, the association or its agents or employees, members of the association's board of directors, a special deputy receiver to its agents or employees, or the commissioner or the commissioner's representatives.  This subsection continues to apply to an action instituted after the defendant's service with the guaranty association, commissioner, or department has terminated.  This subsection does not require the attorney general to defend any person or entity with respect to an issue other than the applicability or effect of the immunity created by Subsection (a).  The attorney general is not required to defend any member insurer of the association or its agents or employees, the association or its agents or employees, members of the association's board of directors, a special deputy receiver or its agents or employees with respect to any actions filed regarding the disposition of a claim filed with the guaranty association under this Act or to an issue other than the applicability or effect of the immunity created by Subsection (a).  The association may contract with the attorney general under the Interagency Cooperation Act (Article 4413(32), Vernon's Texas Civil Statutes) to provide legal services not covered under this subsection.

Revisor's Note

(1)  Section 16(a), V.T.I.C. Article 21.28-C, limits the liability of certain persons for an "action or failure to act."  Section 27, V.T.I.C. Article 21.28-C, revised in this chapter as Section 462.013, limits the liability of certain persons for their "act or omission."  The quoted phrases are synonymous, and for consistency the revised law uses "act or omission" in both instances.

(2)  Section 16(b), V.T.I.C. Article 21.28-C, requires the attorney general to defend certain actions against "a member insurer or its agents or employees, the association or its agents or employees, members of the association's board of directors, a special deputy receiver to its agents or employees, or the commissioner or the commissioner's representatives."  The section further states defense of "any person or entity" is not required with respect to an issue other than the applicability or effect of the immunity created by Section 16. The revised law omits the reference to "entity" because the term "person," as defined by Section 5(12), V.T.I.C. Article 21.28-C, revised in this chapter as Section 462.004(7), describes all of the types of entities to which the required defense would apply.

(3)  Section 16(b), V.T.I.C. Article 21.28-C, refers to the Interagency Cooperation Act (Article 4413(32), Vernon's Texas Civil Statutes). That act was codified in 1991 as Chapter 771, Government Code.  The revised law is drafted accordingly.

Revised Law

Sec. 462.012.  IMMUNITY IN RELATION TO CERTAIN REPORTS AND RECOMMENDATIONS.  Liability does not exist and a cause of action does not arise against any of the following persons for a statement made in good faith by the person in a report or recommendation made under Section 462.111 or 462.113:

(1)  the commissioner or the commissioner's representative;

(2)  the association or the association's agent or employee;

(3)  a member insurer;  or

(4)  the board.  (V.T.I.C. Art. 21.28-C, Sec. 13(c).)

Source Law

(c)  There shall be no liability on the part of, and no cause of action of any nature shall arise against the association or its agents or employees, the board of directors, member insurers, or the commissioner or the commissioner's authorized representative for any statement made in good faith by them in any report or recommendation made under this section.

Revisor's Note

Section 13(c), V.T.I.C. Article 21.28-C, refers to "the  commissioner's authorized representative."  The revised law omits "authorized" as unnecessary in this context.  A person is not a representative of the commissioner of insurance if the person is not authorized to act as a representative.

Revised Law

Sec. 462.013.  IMMUNITY IN RELATION TO CERTAIN NEGOTIATIONS.  (a)  Liability does not exist and a cause of action does not arise against any of the following persons for an act or omission in the performance of an activity related to the negotiations relating to the privatization of the former Texas workers' compensation facility:

(1)  the commissioner or the commissioner's representative;

(2)  the association or the association's agent or employee;

(3)  a member insurer; or

(4)  a board member.

(b)  This section applies to each activity undertaken by a person described by Subsection (a), regardless of the date of the act or omission.  (V.T.I.C. Art. 21.28-C, Sec. 27.)

Source Law

Sec. 27.  There is no liability on the part of, and a cause of action does not arise against, any member insurer of the association, the association, an agent or employee of the association, a member of the board of directors of the association, or the commissioner or the commissioner's representative for any act or omission in the performance of any activity related to the negotiations relating to the privatization of the Texas workers' compensation insurance facility.  This section applies to each activity undertaken by such a person or entity, regardless of the date of the act or omission.

Revisor's Note

Section 27, V.T.I.C. Article 21.28-C, refers to the liability of "any member insurer of the association, the association, an agent or employee of the association, a member of the board of directors of the association, or the commissioner or the commissioner's representative." The section subsequently refers to "such a person or entity." The revised law omits the reference to "entity" because the term "person," as defined by Section 5(12), V.T.I.C. Article 21.28-C, revised in this chapter as Section 462.004(7), describes all of the listed entities.

Revised Law

Sec. 462.014.  RULES.  The commissioner shall adopt reasonable rules as necessary to implement and supplement this chapter and this chapter's purposes.  (V.T.I.C. Art. 21.28-C, Sec. 23.)

Source Law

Sec. 23.  The State Board of Insurance is authorized and directed to issue such reasonable rules and regulations as may be necessary to carry out the various purposes and provisions of this article, and in augmentation thereof.

Revisor's Note

(1)  Section 23, V.T.I.C. Article 21.28-C, refers to the "State Board of Insurance." Chapter 685, Acts  of  the  73rd  Legislature,  Regular Session, 1993, abolished the board and transferred its functions to the commissioner of insurance and the Texas Department of Insurance.   Throughout this chapter, references to the State Board of Insurance have been changed appropriately.

(2)  Section 23, V.T.I.C. Article 21.28-C,  refers to "rules and regulations."  The revised law omits the reference to "regulations" because under Section 311.005(5), Government Code (Code Construction Act), applicable to the revised law, a rule is defined to include a regulation.  That definition applies to the revised law.

Revised Law

Sec. 462.015.  INFORMATION PROVIDED BY OR TO COMMISSIONER.  (a)  The commissioner shall notify the association of the existence of an impaired insurer not later than the third day after the date the commissioner gives notice of the designation of impairment.  The association is entitled to a copy of any complaint seeking an order of receivership with a finding of insolvency against a member insurer at the time the complaint is filed with a court.

(b)  On the board's request, the commissioner shall provide the association with a statement of the net direct written premiums of each member insurer.  (V.T.I.C. Art. 21.28-C, Secs. 10(a), (b).)

Source Law

Sec. 10.  (a)  The commissioner shall notify the association of the existence of an impaired insurer not later than three days after the commissioner gives notice of the designation of impairment.  The association is entitled to a copy of any complaint seeking an order of receivership with a finding of insolvency against a member company at the same time that the complaint is filed with a court of competent jurisdiction.

(b)  On request of the board of directors, the commissioner shall provide the association with a statement of the net direct written premiums of each member insurer.

Revised Law

Sec. 462.016.  PENALTY FOR FAILURE TO PAY ASSESSMENTS OR COMPLY WITH PLAN OF OPERATION.  (a)  The commissioner shall suspend or revoke, after notice and hearing, the certificate of authority to engage in the business of insurance in this state of a member insurer that:

(1)  fails to pay an assessment at the time the assessment is due; or

(2)  otherwise fails to comply with the plan of operation.

(b)  As an alternative to action under Subsection (a), the commissioner may assess a fine on a member insurer that fails to pay an assessment at the time the assessment is due.  The fine may not exceed the lesser of:

(1)  five percent of the unpaid assessment per month; or

(2)  $100 per month.  (V.T.I.C. Art. 21.28-C, Sec. 10(d).)

Source Law

(d)  The commissioner shall suspend or revoke, after notice and hearing, the certificate of authority to transact insurance in this state of any member insurer that fails to pay an assessment when due or otherwise fails to comply with the plan of operation.  As an alternative, the commissioner may assess a fine on any member insurer that fails to pay an assessment when due.  The fine may not exceed the lesser of five percent of the unpaid assessment per month or $100 per month.

Revised Law

Sec. 462.017.  APPEALS AND OTHER ACTIONS.  (a)  A final action or order of the commissioner under this chapter is subject to judicial review by a court.

(b)  Venue in a suit 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.  (V.T.I.C. Art. 21.28-C, Secs. 10(f), (g).)

Source Law

(f)  Any final action or order of the commissioner under this Act is subject to judicial review by a court of competent jurisdiction.

(g)  Venue in a suit against the association or commissioner relating to any action or ruling of the association or commissioner made under this Act is in Travis County.  The association or commissioner is not required to give an appeal bond in an appeal of a cause of action arising under this Act.

[Sections 462.018-462.050 reserved for expansion]

SUBCHAPTER B. GOVERNANCE OF ASSOCIATION

Revised Law

Sec. 462.051.  ASSOCIATION AS LEGAL ENTITY; MEMBERSHIP.  (a)  The Texas Property and Casualty Insurance Guaranty Association is a nonprofit unincorporated legal entity.

(b)  The association is composed of all member insurers. A member insurer must remain a member of the association as a condition of engaging in the business of insurance in this state.  (V.T.I.C. Art. 21.28-C, Sec. 6 (part).)

Source Law

Sec. 6.  The Texas Property and Casualty Insurance Guaranty Association is a nonprofit, unincorporated legal entity composed of all member insurers, who must be members of the association as a condition of their authority to transact insurance in this state… .

Revised Law

Sec. 462.052.  BOARD OF DIRECTORS.  (a)  The association's powers are exercised through a board of directors consisting of nine individuals.

(b)  Member insurers shall select five insurance industry board members, subject to the approval of the commissioner.  In approving selections to the board, the commissioner shall consider whether all member insurers are fairly represented.

(c)  Four board members must be public representatives appointed by the commissioner.  (V.T.I.C. Art. 21.28-C, Secs. 6 (part), 7(a) (part), (b).)

Source Law

Sec. 6.  … The association … shall exercise its powers through the board of directors… .

Sec. 7.  (a)  The board of directors of the association is composed of nine persons … .  Five members shall be selected by member insurers, subject to the approval of the commissioner.  [To be eligible to serve as an insurance industry board member … ]  The remaining members shall be representatives of the general public appointed by the commissioner… .

(b)  In approving selections to the board, the commissioner shall consider whether all member insurers are fairly represented.

Revised Law

Sec. 462.053.  ELIGIBILITY TO SERVE AS PUBLIC REPRESENTATIVE.  A board member who is a public representative may not be:

(1)  an officer, director, or employee of an insurer, insurance agency, agent, broker, adjuster, or any other business entity regulated by the department;

(2)  a person required to register with the Texas Ethics Commission under Chapter 305, Government Code, in connection with the person's representation of clients in the field of insurance; or

(3)  related to a person described by Subdivision (1) or (2) within the second degree of affinity or consanguinity.  (V.T.I.C. Art. 21.28-C, Sec. 7(d).)

Source Law

(d)  A public representative may not be:

(1)  an officer, director, or employee of an insurance company, insurance agency, agent, broker, solicitor, adjuster, or any other business entity regulated by the Texas Department of Insurance;

(2)  a person required to register with the Texas Ethics Commission under Chapter 305, Government Code, in connection with the person's representation of clients in the field of insurance;  or

(3)  related to a person described by Subdivision (1) or (2) of this subsection within the second degree of affinity or consanguinity.

Revisor's Note

(1)  Section 7(d)(1), V.T.I.C. Article 21.28-C, refers to a "solicitor."  The revised law omits that reference because that term, as it relates to a particular type of person engaged in the business of insurance, was eliminated by Chapter 703, Acts of the 77th Legislature, Regular Session, 2001, and a person who performs the duties formerly performed by a solicitor is now regulated as an "agent," to which Section 7(d)(1) refers.

(2)  Section 7(d)(1), V.T.I.C. Article 21.28-C, refers to the "Texas Department of Insurance."  The revised law substitutes "department" for the quoted reference because, under Section 31.001 of this code, "department" is defined for purposes of this code to mean the Texas Department of Insurance.

Revised Law

Sec. 462.054.  ELIGIBILITY TO SERVE AS INDUSTRY REPRESENTATIVE.  To be eligible to serve as an insurance industry board member, an individual must be a full-time employee of a member insurer.  (V.T.I.C. Art. 21.28-C, Sec. 7(a) (part).)

Source Law

(a)  …  To be eligible to serve as an insurance industry board member, a person must be a full-time employee of a member insurer… .

Revised Law

Sec. 462.055.  TERM; VACANCY.  (a)  A board member serves a term established by the plan of operation.

(b)  The remaining board members, by majority vote, shall fill a vacancy on the board for the unexpired term, subject to the commissioner's approval.  (V.T.I.C. Art. 21.28-C, Sec. 7(a) (part).)

Source Law

(a)  [The board of directors] … who serve terms as established in the plan of operation… . Vacancies on the board shall be filled for the remaining period of the term by a majority vote of the remaining board members, subject to the approval of the commissioner.

Revised Law

Sec. 462.056.  REIMBURSEMENT OF BOARD MEMBERS. A board member may be reimbursed from the assets of the association for expenses the board member incurs as a board member.  (V.T.I.C. Art. 21.28-C, Sec. 7(c).)

Source Law

(c)  Members of the board of directors may be reimbursed from the assets of the association for expenses incurred by them as members of the board of directors.

Revised Law

Sec. 462.057.  FINANCIAL STATEMENT OF BOARD MEMBER.  Each board member shall file with the Texas Ethics Commission a financial statement as provided by Subchapter B, Chapter 572, Government Code.  (V.T.I.C. Art. 21.28-C, Sec. 7(e).)

Source Law

(e)  Each member of the board of directors shall file a financial statement with the secretary of state in accordance with Sections 3 and 4, Chapter 421, Acts of the 63rd Legislature, Regular Session, 1973 (Article 6252-9b, Vernon's Texas Civil Statutes).

Revisor's Note

Section 7(e), V.T.I.C. Article 21.28-C, requires each board member to file a financial statement with the secretary of state as provided by Sections 3 and 4, Chapter 421, Acts of the 63rd Legislature, Regular Session, 1973 (Article 6252-9b, Vernon's Texas Civil Statutes). The duties of the secretary of state under Article 6252-9b were transferred to the Texas Ethics Commission in 1991, and Sections 3 and 4 of Article 6252-9b were codified in 1993 as Subchapter B, Chapter 572, Government Code.  The revised law is drafted accordingly.

Revised Law

Sec. 462.058.  CONFLICT OF INTEREST.  (a)  A director of the association or a member insurer or other entity represented by the director may not receive money or another valuable thing directly, indirectly, or through any substantial interest in any other corporation, firm, or business unit for negotiating, procuring, participating in, recommending, or aiding in a reinsurance agreement, merger, or other transaction, including the purchase, sale, or exchange of assets, insurance policies, or property made by the association or the supervisor, conservator, or receiver on behalf of an impaired insurer.

(b)  The director, member insurer, or entity may not be pecuniarily or contractually interested, as principal, coprincipal, agent, or beneficiary, directly, indirectly, or through any substantial interest in any other corporation, firm, or business unit, in the reinsurance agreement, merger, purchase, sale, exchange, or other transaction.  (V.T.I.C. Art. 21.28-C, Sec. 7(f).)

Source Law

(f)  A director of the association or any member company or other entity represented by the director may not receive any money or valuable thing directly, indirectly, or through any substantial interest in any other corporation, firm, or business unit for negotiating, procuring, participating, recommending, or aiding in a transaction, reinsurance agreement, merger, purchase, sale, or exchange of assets, policies of insurance, or property made by the association or the supervisor, conservator, or receiver on behalf of an impaired insurer.  The director, company, or entity may not be pecuniarily or contractually interested, as principal, co-principal, agent, or beneficiary, directly, indirectly, or through any substantial interest in any other corporation, firm, or business unit, in the transaction, reinsurance agreement, merger, purchase, sale, or exchange.

Revised Law

Sec. 462.059.  MEETING BY CONFERENCE CALL.  (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.

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

(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 and must be tape recorded.  The tape recording shall be made available to the public.  (V.T.I.C. Art. 21.28-C, Sec. 8(k).)

Source Law

(k)(1)  Notwithstanding Chapter 271, Acts of the 60th Legislature, Regular Session, 1967 (Article 6252-17, Vernon's Texas Civil Statutes), the board may hold an open meeting by telephone conference call if immediate action is required and the convening at one location of a quorum of the board is not reasonable or practical.

(2)  The meeting is subject to the notice requirements applicable to other meetings.

(3)  The notice of the meeting must specify as the location of the meeting the location where meetings of the board are usually held.

(4)  Each part of the meeting that is required to be open to the public shall be audible to the public at the location specified in the notice of the meeting as the location of the meeting and shall be tape recorded.  The tape recording shall be made available to the public.

Revisor's Note

Section 8(k)(1), V.T.I.C. Article 21.28-C, refers to Chapter 271, Acts of the 60th Legislature, Regular Session, 1967 (Article 6252-17, Vernon's Texas Civil Statutes).  That law was codified in 1993 as Chapter 551, Government Code.  The revised law is drafted accordingly.

[Sections 462.060-462.100 reserved for expansion]

SUBCHAPTER C. GENERAL POWERS AND DUTIES OF ASSOCIATION

Revised Law

Sec. 462.101.  GENERAL POWERS AND DUTIES.  (a)  The association may:

(1)  employ or retain persons as necessary to handle claims and perform other duties of the association;

(2)  borrow money necessary to implement this chapter in accordance with the plan of operation;

(3)  sue or be sued;

(4)  negotiate and enter into a contract as necessary to implement this chapter; and

(5)  perform other acts as necessary or proper to implement this chapter.

(b)  A contract authorized by Subsection (a)(4) includes a lump-sum or structured compromise and settlement agreement with a claimant who has a claim for medical or indemnity benefits for a period of three years or more, other than a settlement or lump-sum payment in violation of Subtitle A, Title 5, Labor Code.  (V.T.I.C. Art. 21.28-C, Sec. 8(h) (part).)

Source Law

(h)  The association may:

(1)  employ or retain persons as necessary to handle claims and perform other duties of the association;

(2)  borrow funds necessary to implement this Act in accordance with the plan of operation;

(3)  sue or be sued;

(4)  negotiate and become a party to contracts as necessary to implement this Act, including lump-sum or structured compromise and settlement agreements with claimants who have claims for medical or indemnity benefits for a period of three years or more other than a settlement or lump-sum payment in violation of the Texas Workers' Compensation Act (Article 8308-1.01 et seq., Vernon's Texas Civil Statutes);

(5)  perform other acts as necessary or proper to implement this Act; or

…

Revisor's Note

(1)  Section 8(h)(2), V.T.I.C. Article 21.28-C, refers to "funds."  Throughout this chapter, the revised law substitutes "money" for "funds" because, in context, "funds" and "money" are synonymous and "money" is more commonly used.

(2)  Section 8(h)(4), V.T.I.C. Article 21.28-C, refers to the Texas Workers' Compensation Act (Article 8308-1.01 et seq., Vernon's Texas Civil Statutes). That act was codified in 1993 as Subtitle A, Title 5, Labor Code. The revised law is drafted accordingly.

Revised Law

Sec. 462.102.  ASSOCIATION NOT IN PLACE OF IMPAIRED INSURER.  In performing the association's statutory obligations under this chapter, the association is not considered:

(1)  to be engaged in the business of insurance;

(2)  to have assumed or succeeded to a liability of the impaired insurer; or

(3)  to otherwise stand in the place of the impaired insurer for any purpose, including for the purpose of determining whether the association is subject to personal jurisdiction of the courts of another state.  (V.T.I.C. Art. 21.28-C, Sec. 8(b) (part).)

Source Law

(b)  …  In performing its statutory obligations under this Act, the association shall not be considered to be in the business of insurance, shall not be considered to have assumed or succeeded to any liabilities of the impaired insurer, and shall not be considered to otherwise stand in the shoes of the impaired insurer for any purpose, including the issue of whether the association is amenable to the personal jurisdiction of the courts of any other state.

Revised Law

Sec. 462.103.  PLAN OF OPERATION.  (a)  The association shall perform the association's functions under a plan of operation necessary or suitable to ensure the fair, reasonable, and equitable administration of the association.  The plan of operation must:

(1)  be submitted to and approved in writing by the commissioner;

(2)  establish:

(A)  procedures under which the powers and duties of the association are performed;

(B)  procedures for handling assets of the association;

(C)  the amount and method of reimbursing board members;

(D)  acceptable forms of proof of covered claims;

(E)  regular places and times for board meetings;

(F)  procedures for records to be kept of each financial transaction of the association, the association's agents, and the board; and

(G)  procedures under which selections for the board are submitted to the commissioner;

(3)  provide:

(A)  for the establishment of a claims filing procedure that includes:

(i)  notice by the association to claimants;

(ii)  procedures for filing claims seeking recovery from the association; and

(iii)  a procedure for appealing the denial of claims by the association; and

(B)  that a member insurer aggrieved by a final action or decision of the association may appeal to the commissioner not later than the 30th day after the date of the action or decision; and

(4)  contain additional provisions necessary or proper for the execution of the association's powers and duties.

(b)  The association shall submit to the commissioner any amendment to the plan of operation necessary or suitable to ensure the fair, reasonable, and equitable administration of the association. The amendment takes effect on the commissioner's written approval.

(c)  If the association does not submit a suitable amendment to the plan of operation, the commissioner after notice and hearing shall adopt reasonable rules as necessary or advisable to implement this chapter.  A rule continues in effect until modified by the commissioner or superseded by an amendment submitted by the association and approved by the commissioner.

(d)  Each member insurer shall comply with the plan of operation.  (V.T.I.C. Art. 21.28-C, Secs. 6 (part), 9(a), (b), (c), (d), (f).)

Source Law

Sec. 6.  …  The association shall perform its functions under a plan of operation approved under Section 9 of this Act and … .

Sec. 9.  (a)  The association shall submit to the commissioner a plan of operation and any amendments necessary or suitable to ensure the fair, reasonable, and equitable administration of the association.  The plan of operation and any amendments take effect on approval in writing by the commissioner.

(b)  If the association fails to submit suitable amendments to the plan, the commissioner, after notice and hearing, shall adopt reasonable rules as necessary or advisable to implement this Act.  Those rules shall continue in force until modified by the commissioner or superseded by a plan submitted by the association and approved by the commissioner.

(c)  All member insurers shall comply with the plan of operation.

(d)  The plan of operation must:

(1)  establish the procedures under which the powers and duties of the association are performed;

(2)  establish procedures for handling assets of the association;

(3)  establish the amount and method of reimbursing members of the board of directors;

(4)  provide for the establishment of a claims filing procedure that includes, but is not limited to, notice by the association to claimants, procedures for filing claims seeking recovery from the association, and a procedure for appealing the denial of claims by the association;  and

(5)  establish acceptable forms of proof of covered claims.

(f)  The plan of operation must:

(1)  establish regular places and times for meetings of the board of directors;

(2)  establish procedures for records to be kept of all financial transactions of the association, its agents, and the board of directors;

(3)  provide that any member insurer aggrieved by any final action or decision of the association may appeal to the commissioner not later than the 30th day after the date of the action or decision;

(4)  establish the procedures under which selections for the board of directors are submitted to the commissioner; and

(5)  contain additional provisions as necessary or proper for the execution of the powers and duties of the association.

Revisor's Note

Section 9(d)(4), V.T.I.C. Article 21.28-C, refers to a claims filing procedure that includes "but is not limited to" certain procedures.  The revised law omits the quoted language as unnecessary because Section 311.005(13), Government Code (Code Construction Act), applicable to the revised law, and Section 312.011(19), Government Code, applicable to civil statutes, provide that "includes" and "including" are terms of enlargement and not of limitation and do not create a presumption that components not expressed are excluded.

Revised Law

Sec. 462.104.  NOTICE TO INSUREDS.  (a)  The commissioner may require that the association notify an impaired insurer's insureds and any other interested parties of:

(1)  the designation of impairment; and

(2)  the insureds' and other parties' rights under this chapter.

(b)  The association shall give notice as the commissioner directs under this section.  The association shall mail the notice to the last known address, if available. If sufficient information for notification by mail is not available, notice by publication in a newspaper of general circulation is sufficient notice.  (V.T.I.C. Art. 21.28-C, Secs. 8(e), 10(c).)

Source Law

[Sec. 8]

(e)  The association shall give notice as the commissioner directs under Section 10(c) of this Act.

[Sec. 10]

(c)  The commissioner may require that the association notify the insureds of the impaired insurer and any other interested parties of the designation of impairment and of their rights under this Act.  The notification shall be by mail at the last known address, if available, but if sufficient information for notification by mail is not available, notice by publication in a newspaper of general circulation is sufficient.

Revised Law

Sec. 462.105.  ACCOUNTS.  For purposes of administration and assessment, the association is divided into:

(1)  the workers' compensation insurance account;

(2)  the automobile insurance account; and

(3)  the account for all other lines of insurance to which this chapter applies.  (V.T.I.C. Art. 21.28-C, Sec. 6 (part).)

Source Law

Sec. 6.  …  For purposes of administration and assessment, the association is divided into the workers' compensation insurance account, the automobile insurance account, and the account for all other lines of insurance to which this Act applies.

Revised Law

Sec. 462.106.  ADMINISTRATIVE EXPENSES.  (a)  The association may use money in the administrative account to pay administrative costs and other general expenses of the association.

(b)  The association may transfer income from investment of the association's money to the administrative account.

(c)  On notification by the association of the amount of any additional money needed for the administrative account, the association shall assess member insurers in the manner provided by Sections 462.159-462.168 for that money.  The commissioner shall consider the net direct written premiums collected in this state for all lines of business covered by this chapter.  An assessment for administrative expenses incurred by a supervisor or conservator appointed by the commissioner or a court-appointed receiver for a nonmember of the association or unauthorized insurer operating in this state may not exceed $1 million each calendar year.  (V.T.I.C. Art. 21.28-C, Sec. 18(g).)

Source Law

(g)  Income from the investment of any of the funds of the association may be transferred to the administrative account authorized under this Act.  The funds in the account may be used by the association for the purpose of meeting administrative costs and other general expenses of the association.  On notification by the association of the amount of any additional funds needed for the administrative account, the association shall assess member insurers to obtain the needed funds in the manner set out in this section.  The commissioner shall consider the net direct written premium collected in this state for all lines of business covered by this Act.  An assessment for administrative expenses incurred by a supervisor or conservator appointed by the commissioner or a receiver appointed by a court of competent jurisdiction for a nonmember of the association or unauthorized insurer operating in this state may not exceed $1,000,000 each calendar year.

Revisor's Note

Section 18(g), V.T.I.C. Article 21.28-C, requires the Texas Property and Casualty Insurance Guaranty Association to assess member insurers "in the manner set out in this section," meaning Section 18.  The provisions of Section 18 relating to assessment, together with certain provisions relating to assessments under that section, are revised as Sections 462.159-462.168 of this chapter.  The revised law is drafted accordingly.

Revised Law

Sec. 462.107.  EXAMINATION OF ASSOCIATION.  Not later than April 30 of each year, the association shall submit an audited financial statement for the preceding calendar year to the state auditor in a form approved by the state auditor's office.  (V.T.I.C. Art. 21.28-C, Sec. 14.)

Source Law

Sec. 14.  Not later than April 30 of each year, the association shall submit an audited financial statement to the state auditor for the preceding calendar year in a form approved by the state auditor's office.

Revised Law

Sec. 462.108.  DEPOSIT OF MONEY.  The board may deposit the money the association collects into the Texas Treasury Safekeeping Trust Company in accordance with procedures established by the comptroller.  The comptroller shall account to the association for the deposited money separately from all other money.  (V.T.I.C. Art. 21.28-C, Sec. 8(j).)

Source Law

(j)  The board of directors may deposit all money collected by the association into the Texas Treasury Safekeeping Trust Company in accordance with procedures established by the comptroller.  The funds deposited shall be accounted for separately from all other funds by the comptroller to the association.

Revised Law

Sec. 462.109.  DELEGATION OF POWERS AND DUTIES.  (a)  Except as provided by Subsection (b), the plan of operation may provide that, on approval of the board and the commissioner, the association may delegate by contract any or all powers or duties of the association to a corporation or other organization that:

(1)  performs or will perform in two or more states functions similar to those of the association or the association's equivalent; and

(2)  provides protection not substantially less favorable and effective than that provided by this chapter.

(b)  The association may not delegate a power or duty under Section 462.101(a)(2), 462.151, 462.154, 462.155, or 462.302(b) under this section.

(c)  The association shall:

(1)  reimburse the corporation or other organization as a servicing facility would be reimbursed; and

(2)  pay the corporation or other organization for the performance of any other functions of the association.

(d)  A contract entered into under this section is subject to the performance standards imposed under Section 442.112.  (V.T.I.C. Art. 21.28-C, Sec. 9(g).)

Source Law

(g)  The plan of operation may provide that any or all powers and duties of the association, except those under Section 8(c) and 8(h)(2) of this Act, are delegated by contract to a corporation, association, or other organization that performs or will perform functions similar to those of the association or its equivalent in two or more states.  The corporation, association, or organization shall be reimbursed as a servicing facility would be reimbursed and shall be paid for the performance of any other functions of the association.  A delegation under this subsection takes effect only with the approval of both the board of directors and the commissioner and may be made only to a corporation, association, or organization that extends protection not substantially less favorable and effective than that provided by this Act.  A contract entered into under this subsection is subject to the performance standards imposed under Section 2(a), Article 21.28, of this code.

Revisor's Note

(1)  Section 9(g), V.T.I.C. Article 21.28-C, provides that the Texas Property and Casualty Insurance Guaranty Association's plan of operation may delegate to a corporation, association, or other organization "any or all powers and duties of the association, except those under Section 8(c) and 8(h)(2) of this Act."  Although part of Section 8(c) is revised in this chapter as Section 462.152, the revised law omits the reference to that section because it does not contain a power or duty of the association.

(2)  Section 9(g), V.T.I.C. Article 21.28-C, refers to a "corporation, association, or [other] organization."  The revised law omits the reference to "association" because that term is included within the meaning of "organization."

(3)  Section 9(g), V.T.I.C. Article 21.28-C, provides that certain contracts are subject to the performance standards imposed by Section 2(a), V.T.I.C. Article 21.28.  The only provisions in Section 2(a) that could be construed as performance standards are revised in Chapter 442 of this code as Section 442.112, and the revised law is drafted accordingly.

Revised Law

Sec. 462.110.  EXEMPTION FROM CERTAIN FEES AND TAXES.  The association is exempt from payment of all fees and of all taxes levied by this state or a subdivision of this state, except taxes levied on real or personal property.  (V.T.I.C. Art. 21.28-C, Sec. 15.)

Source Law

Sec. 15.  The association is exempt from payment of all fees and all taxes levied by this state or any of its subdivisions except taxes levied on real or personal property.

Revised Law

Sec. 462.111.  ACCESS TO RECORDS OF MEMBER INSURER IN RECEIVERSHIP; ACTUARIAL AND OPERATIONAL ANALYSIS.  (a)  The association shall have access to the books and records of a member insurer in receivership to determine the extent of the impact on the association if the member becomes impaired.

(b)  The association may:

(1)  perform or cause to be performed an actuarial and operational analysis of the member insurer; and

(2)  prepare a report on matters relating to the impact or potential impact on the association in the event of impairment.

(c)  A report prepared under Subsection (b) is not a public document.  (V.T.I.C. Art. 21.28-C, Sec. 13(a).)

Source Law

Sec. 13.  (a)  The association shall have access to the books and records of a member insurer in receivership, in order to make a determination of the extent of the impact on the association in the event such member becomes impaired.  The association shall have the authority to perform or cause to be performed an actuarial and operational analysis of the member insurer and prepare a report on matters relating to the impact or potential impact on the association in the event of impairment.  Such reports shall not be public documents.

Revised Law

Sec. 462.112.  BOARD ACCESS TO RECORDS OF IMPAIRED INSURER.  The receiver or statutory successor of an impaired insurer covered by this chapter shall give the board or the board's representative:

(1)  access to the insurer's records as necessary for the board to perform the board's functions under this chapter relating to covered claims; and

(2)  copies of those records on the board's request and at the board's expense.  (V.T.I.C. Art. 21.28-C, Sec. 17(b) (part).)

Source Law

(b)  …  The receiver or statutory successor of an impaired insurer covered by this Act shall permit access by the board or its authorized representative to records of the impaired insurer as are necessary for the board in carrying out its functions under this Act with regard to covered claims.  In addition, the receiver or statutory successor shall provide the board or its representative with copies of the records on request of the board and at the expense of the board.

Revisor's Note

Section 17(b), V.T.I.C. Article 21.28-C, refers to the board of directors or its "authorized" representative.  The revised law omits "authorized" for the reason stated in the revisor's note to Section 462.012.

Revised Law

Sec. 462.113.  BOARD REPORT ON CONCLUSION OF INSOLVENCY.  On the conclusion of the insolvency of a domestic insurer with respect to which the association was obligated to pay covered claims, the board may:

(1)  prepare a report on the history and causes of the insolvency, based on information available to the association; and

(2)  submit the report to the commissioner.  (V.T.I.C. Art. 21.28-C, Sec. 13(b).)

Source Law

(b)  At the conclusion of any domestic insurer insolvency in which the association was obligated to pay covered claims, the board of directors may prepare a report on the history and causes of the insolvency, based on the information available to the association, and may submit the report to the commissioner.

Revised Law

Sec. 462.114.  DUTY OF RECEIVER.  The receiver shall periodically submit a list of claims to the association or similar organization in another state.  (V.T.I.C. Art. 21.28-C, Sec. 9(e).)

Source Law

(e)  A list of claims shall be submitted periodically to the association or similar organization in another state by the receiver.

[Sections 462.115-462.150 reserved for expansion]

SUBCHAPTER D.  ASSESSMENTS IN GENERAL

Revised Law

Sec. 462.151.  MAKING OF ASSESSMENT; AMOUNT.  (a)  The association shall assess member insurers the amount necessary to pay:

(1)  the association's obligations under Section 462.302 and the expenses of handling covered claims subsequent to an insolvency; and

(2)  other expenses authorized by this chapter.

(b)  The assessment of each member insurer must be in the proportion that the net direct written premiums of the insurer for the calendar year preceding the assessment bear to the net direct written premiums of all member insurers for that year.  (V.T.I.C. Art. 21.28-C, Sec. 8(c) (part).)

Source Law

(c)  The association shall assess insurers amounts necessary to pay the obligations of the association under Subsection (a) of this section after an insolvency, the expenses of handling covered claims subsequent to an insolvency, and other expenses authorized by this Act.  The assessments of each member insurer shall be in the proportion that the net direct written premiums of the member insurer for the calendar year preceding the assessment bears to the net direct written premiums of all member insurers for the calendar year preceding the assessment… .

Revisor's Note

(1)  Section 8(c), V.T.I.C. Article 21.28-C, provides that the Texas Property and Casualty Insurance Guaranty Association "shall assess insurers" and subsequently refers to the amount of the assessment on a "member insurer." For consistency and clarity, the revised law uses the term "member insurer."

(2)  Section 8(c), V.T.I.C. Article 21.28-C, references obligations of the Texas Property and Casualty Insurance Guaranty Association under Section 8(a) of that article.  Section 8(a) is revised in this chapter in Sections 462.302 and 462.305.  The portion relevant to the association's obligations is revised in Section 462.302.  The revised law is drafted accordingly.

Revised Law

Sec. 462.152.  MAXIMUM TOTAL ASSESSMENT.  (a)  The total assessment of a member insurer in a year may not exceed an amount equal to two percent of the insurer's net direct written premiums for the calendar year preceding the assessment.

(b)  If the maximum assessment and the association's other assets are insufficient in a year to make all necessary payments, the money available shall be prorated and the association shall pay the unpaid portion as soon as money becomes available.  (V.T.I.C. Art. 21.28-C, Sec. 8(c) (part).)

Source Law

(c)  …  A member insurer may not be assessed in any year an amount greater than two percent of that member insurer's net direct written premiums for the calendar year preceding the assessment.  If the maximum assessment, with the other assets of the association, does not provide in any one year an amount sufficient to make all necessary payments, the funds available shall be prorated, and the unpaid portion shall be paid as soon thereafter as funds become available… .

Revised Law

Sec. 462.153.  REFUND OF CONTRIBUTION.  The association may refund to the member insurers in proportion to the contribution of each member insurer to the association the amount by which the association's assets exceed the association's liabilities, if at the end of a calendar year the board finds that the assets of the association exceed the liabilities of the association as estimated by the board for the next year.  (V.T.I.C. Art. 21.28-C, Sec. 8(h) (part).)

Source Law

(h)  [The association may:]

…

(6)  refund to the member insurers in proportion to the contribution of each member insurer to the association that amount by which the assets of the association exceed the liabilities, if at the end of any calendar year the board of directors finds that the assets of the association exceed the liabilities of the association as estimated by the board of directors for the coming year.

Revised Law

Sec. 462.154.  NOTICE OF ASSESSMENT.  The association shall notify a member insurer of an assessment not later than the 30th day before the date the assessment is due.  (V.T.I.C. Art. 21.28-C, Sec. 8(c) (part).)

Source Law

(c)  …  Each member insurer shall be notified of the assessment not later than the 30th day before the date on which the assessment is due… .

Revised Law

Sec. 462.155.  DEFERMENT.  (a)  The association may defer wholly or partly an assessment of a member insurer that would cause the insurer's financial statement to show amounts of capital or surplus less than the minimum amounts required for a certificate of authority in any jurisdiction in which the insurer is authorized to engage in the business of insurance.

(b)  The member insurer shall pay the deferred assessment at the time payment will not reduce capital or surplus below required minimums.  The payment shall be refunded to or credited against future assessments of any member insurer receiving a larger assessment because of the deferment, as elected by that insurer.

(c)  During a period of deferment, the member insurer may not pay a dividend to shareholders or policyholders.  (V.T.I.C. Art. 21.28-C, Sec. 8(c) (part).)

Source Law

(c)  …  The association may defer, in whole or in part, the assessment of any member insurer if the assessment would cause the member insurer's financial statement to reflect amounts of capital or surplus less than the minimum amounts required for a certificate of authority by any jurisdiction in which the member insurer is authorized to transact insurance; provided, however, that during the period of deferment, dividends may not be paid to shareholders or policyholders.  Deferred assessments shall be paid when the payment will not reduce capital or surplus below required minimums.  The payments shall be refunded to those companies receiving larger assessments by virtue of the deferment, or at the election of such a company, credited against future assessments.

Revised Law

Sec. 462.156.  USE OF ASSESSMENTS.  (a)  The amounts provided under assessments made under this chapter supplement the marshaling of assets by the receiver under Chapter 442 to make payments on the impaired insurer's behalf.

(b)  This section does not require the receiver to exhaust the assets of the impaired insurer before an assessment is made or before money derived from an assessment may be used to pay covered claims.  (V.T.I.C. Art. 21.28-C, Sec. 19.)

Source Law

Sec. 19.  (a)  The amounts provided under assessments made under this Act are in addition to the marshaling of assets by the receiver under Article 21.28 of this code for the purpose of making payments on behalf of an impaired insurer.

(b)  This section does not require the receiver to exhaust the assets of the impaired insurer before an assessment is made or before funds derived from an assessment may be used to pay covered claims.

Revised Law

Sec. 462.157.  TAX CREDIT.  (a)  An insurer is entitled to a credit against the insurer's premium tax under Chapter 221 for the total amount of an assessment paid by the insurer under this chapter.

(b)  The tax credit may be taken at a rate of 10 percent each year for 10 successive years after the date of assessment.  At the option of the insurer, the tax credit may be taken over an additional number of years.

(c)  The balance of a tax credit not claimed in a particular year may be reflected in the books and records of the insurer as an admitted asset of the insurer for all purposes, including exhibition in an annual statement under Section 862.001.

(d)  Available credit against premium tax allowed under this section may be transferred or assigned among insurers if:

(1)  a merger, acquisition, or total assumption of reinsurance among the insurers occurs; or

(2)  the commissioner by order approves the transfer or assignment.  (V.T.I.C. Art. 21.28-C, Sec. 21.)

Source Law

Sec. 21.  (a)  One hundred percent of any assessment paid by an insurer under this Act shall be allowed to that insurer as a credit against its premium tax under Article 4.10 of this code.  The tax credit referred to in this section shall be allowed at a rate of 10 percent per year for 10 successive years following the date of assessment and, at the option of the insurer, may be taken over an additional number of years.  The balance of any tax credit not claimed in a particular year may be reflected in the books and records of the insurer as an admitted asset of the insurer for all purposes, including exhibition in annual statements under Article 6.12 of this code.

(b)  Available credit against premium tax allowed under Subsection (a) of this section may be transferred or assigned among or between insurers if:

(1)  a merger, acquisition, or total assumption of reinsurance among or between the insurers occurs; or

(2)  the commissioner by order approves the transfer or assignment.

Revisor's Note

Section 21(b), V.T.I.C. Article 21.28-C, refers to the transfer or assignment of premium tax credits "among or between" insurers.  The revised law omits "between" because the meaning of that term is included within the meaning of "among."

Revised Law

Sec. 462.158.  ADVANCE AS LOAN.  Money advanced by the association under this chapter is considered a special fund loan to the impaired insurer for payment of covered claims and does not become an asset of the impaired insurer.  The loan is repayable to the extent money from the impaired insurer is available.  (V.T.I.C. Art. 21.28-C, Sec. 18(f).)

Source Law

(f)  Funds advanced by the association under this Act shall not become assets of the impaired insurer but are considered a special fund loaned to the impaired insurer for payment of covered claims.  That loan is repayable to the extent available from the funds of the insurer.

Revised Law

Sec. 462.159.  ESTIMATE OF ADDITIONAL MONEY NEEDED ON IMPAIRMENT OF INSURER.  (a)  If the commissioner determines that an insurer has become an impaired insurer, the association shall promptly estimate the amount of additional money, by lines of business, needed to supplement the immediately available assets of the impaired insurer to pay covered claims.

(b)  The board shall make additional money available as the actual need arises for each impaired insurer.  (V.T.I.C. Art. 21.28-C, Sec. 18(a).)

Source Law

Sec. 18.  (a)  If the commissioner determines that an insurer has become an impaired insurer, the association shall promptly estimate the amount of additional funds, by lines of business, needed to supplement the assets of the impaired insurer immediately available to pay covered claims.  The board shall make additional funds available as the actual need arises for each impaired insurer.

Revised Law

Sec. 462.160.  ASSESSMENT FOR ADDITIONAL MONEY FOR ACCOUNTS.  If the board determines that additional money is needed in any of the three accounts described by Section 462.105, the board shall make assessments as needed to produce the necessary money.  (V.T.I.C. Art. 21.28-C, Sec. 18(b) (part).)

Source Law

(b)  If the board of directors determines that additional funds are needed in any of the three accounts, it shall make assessments as necessary to produce the necessary funds… .

Revised Law

Sec. 462.161.  AMOUNT OF ASSESSMENT; PRORATION OF PAYMENT.  (a)  The association, in determining the proportionate amount to be paid by individual insurers under an assessment under Section 462.160, shall consider the lines of business written by the impaired insurer and shall assess individual insurers in proportion to the ratio that the total net direct written premiums collected in this state by the insurer for those lines of business bears to the total net direct written premiums collected by all insurers, other than impaired insurers, in this state for those lines of business.

(b)  The association shall determine the total net direct written premiums of an individual insurer and of all insurers in the state from the insurers' annual statements for the year preceding assessment.  (V.T.I.C. Art. 21.28-C, Sec. 18(b) (part).)

Source Law

(b)  …  The association, in determining the proportionate amount to be paid by individual insurers under an assessment, shall take into consideration the lines of business written by the impaired insurer and shall assess individual insurers in proportion to the ratio that the total net direct written premium collected in this state by the insurer for those lines of business bears to the total net direct written premium collected by all insurers, other than impaired insurers, in this state for those lines of business.  The association shall determine the total net direct written premium of an individual insurer and for all insurers in the state from the insurers' annual statements for the year preceding assessment… .

Revised Law

Sec. 462.162.  MAXIMUM ASSESSMENT OF INSURER; ADDITIONAL ASSESSMENT AUTHORITY UNDER CERTAIN CIRCUMSTANCES.  (a)  Except as otherwise provided by this section, assessments under Section 462.160 during a calendar year may not exceed two percent of each insurer's net direct written premiums for the preceding calendar year in the lines of business for which the assessments are made.

(b)  In the event of a natural disaster or other catastrophe, the association may apply to the governor, in the manner prescribed by the plan of operation, for authority to assess each member insurer that writes insurance coverage, other than automobile insurance coverage or workers' compensation insurance coverage, an additional amount not to exceed two percent of the insurer's net direct written premiums for the preceding calendar year.

(c)  If the maximum assessment in a calendar year does not provide an amount sufficient for payment of covered claims of impaired insurers, the association may make assessments in successive calendar years.   (V.T.I.C. Art. 21.28-C, Sec. 18(b) (part).)

Source Law

(b)  …  Except as otherwise provided by this subsection, assessments under this subsection during a calendar year may be made up to, but not in excess of, two percent of each insurer's net direct written premium for the preceding calendar year in the lines of business for which the assessments are being made.  In the event of a natural disaster or other catastrophic event, the association may apply to the governor, in the manner prescribed by the plan of operation, for authority to assess each member insurer that writes insurance coverage, other than motor vehicle coverage or workers' compensation coverage, an additional amount not to exceed two percent of the insurer's net direct written premiums for the preceding calendar year.  If the maximum assessment in any calendar year does not provide an amount sufficient for payment of covered claims of impaired insurers, assessments may be made in the next and successive calendar years.

Revisor's Note

(1)  Section 18(b), V.T.I.C. Article 21.28-C, refers to "motor vehicle coverage."  The revised law substitutes "automobile insurance coverage" for the reference to "motor vehicle coverage" for consistency with terminology used in this code and because "automobile insurance" is the term more commonly used to describe the kind of insurance that provides coverage for motor vehicles.

(2)  Section 18(b), V.T.I.C. Article 21.28-C, provides that certain assessments may be made in "the next and successive calendar years."  The revised law omits the reference to the "next" calendar year because that term is included within the meaning of the "successive" calendar years.

Revised Law

Sec. 462.163.  PAYMENT OF ASSESSMENT.  An insurer shall pay the amount of an assessment under Section 462.160 or 462.162(b) to the association not later than the 30th day after the date the association gives notice of the assessment.  (V.T.I.C. Art. 21.28-C, Sec. 18(c).)

Source Law

(c)  It shall be the duty of each insurer to pay the amount of an assessment under Subsection (b) of this section to the association not later than the 30th day after the association gives notice of the assessment.

Revised Law

Sec. 462.164.  PARTICIPATION RECEIPTS.  (a)  On receipt from a member insurer of payment of an assessment or partial assessment under Section 462.160 or 462.162(b), the association shall provide the insurer with a participation receipt.  A participation receipt creates liability against the account described by Section 462.105 for the line or lines of business for which the assessment was made.

(b)  The account from which an advance is made to an impaired insurer for the payment of covered claims is a general creditor of the impaired insurer for the money advanced.  With reference to the remaining balance of an advance not used to pay covered claims, the claim of the account has preference over other general creditors.  (V.T.I.C. Art. 21.28-C, Secs. 20(a), (b) (part).)

Source Law

Sec. 20.  (a)  On receipt from an insurer of payment of an assessment or partial assessment required by the association under Section 18(b) of this Act, the association shall provide the insurer with a participation receipt, which shall create a liability against the account for the line or lines of business for which the assessment was made.

(b)  The account from which an advance is made to an impaired insurer for the payment of covered claims shall be regarded as a general creditor of the impaired insurer for the amount of funds so advanced; provided, however, that with reference to the remaining balance of any advances not expended in payment of covered claims, the claim of the account has preference over other general creditors… .

Revisor's Note

Section 20(a), V.T.I.C. Article 21.28-C, refers to receipt of a payment of an assessment from an "insurer," meaning a member insurer required to pay an assessment.  For consistency and clarity, the revised law uses the term "member insurer."

Revised Law

Sec. 462.165.  ACCOUNTING; REPORTS; REFUND.  (a)  The association, with respect to an impaired insurer, shall adopt accounting procedures that reflect the use of all money and shall make a final report of the use of the money to the commissioner.  The final report must state any remaining balance from the money advanced to an impaired insurer for the payment of covered claims.

(b)  The association shall make interim accounting reports as required by the commissioner or requested by the conservator.

(c)  As soon as practicable after completion of the final report, the association shall refund by line of business the remaining balance of those advances to the association's accounts.  (V.T.I.C. Art. 21.28-C, Sec. 20(b) (part).)

Source Law

(b)  …  The association of any impaired insurer shall adopt accounting procedures reflecting the expenditure and use of all funds and shall make a final report of the expenditure and use of the funds to the commissioner, which final report shall set forth the remaining balance, if any, from the moneys advanced.  The association shall also make any interim reports concerning such accounting as may be required by the commissioner or requested by the conservator.  On completion of the final report, the association shall, as soon thereafter as is practicable, refund by line of business the remaining balance of those advances to the accounts maintained by the association.

Revisor's Note

Section 20(b), V.T.I.C. Article 21.28-C, refers to the "expenditure and use" of money.  The revised law omits the reference to "expenditure" as unnecessary because "expenditure" is included within the meaning of "use."

Revised Law

Sec. 462.166.  USE OF EXCESS MONEY IN ACCOUNT.  (a)  If the association determines that money in the account described by Section 462.164(b) for a line of business exceeds the amount reasonably necessary for efficient future operation under this chapter, the association shall, after deducting any premium tax credit taken under Section 462.157, return the excess money pro rata to the holders of participation receipts:

(1)  on which an outstanding balance exists; and

(2)  that were issued for an assessment on the same line of business as the line for which the excess money is found to exist.

(b)  The association shall transfer an excess amount that exists in the account described by Section 462.164(b) to the comptroller to be deposited to the credit of the general revenue fund if:

(1)  after a distribution under this section the association finds that an excess amount still exists; or

(2)  participation receipts on which there is an outstanding balance do not exist.  (V.T.I.C. Art. 21.28-C, Sec. 20(c).)

Source Law

(c)  If the association at any time determines that there exist moneys in the account for any line of business in excess of those reasonably necessary for efficient future operation under the terms of this Act, it shall cause those excess moneys to be returned pro rata to the holders of any participation receipts on which there is a balance outstanding after deducting any credits taken against premium taxes as authorized in Section 21 of this Act, which receipts were issued for an assessment on the same line of business as that for which the excess moneys are found to exist.  If after such a distribution the association finds that an excess amount still exists in the fund, or if there are no such participation receipts on which there is an outstanding balance, it shall cause the excess amount to be deposited with the comptroller to the credit of the general revenue fund.

Revisor's Note

Section 20(c), V.T.I.C. Article 21.28-C, refers to a determination made by the Texas Property and Casualty Insurance Guaranty Association "at any time."  The revised law omits the reference to "at any time" because a provision referring to a determination refers to a determination made at any time unless the provision expressly provides otherwise.

Revised Law

Sec. 462.167.  COLLECTION OF ASSESSMENTS.  (a)  The commissioner may collect an assessment on behalf of the association through a suit brought for that purpose.

(b)  Venue for a suit under this section is in Travis County.

(c)  Either party to the suit may appeal to an appellate court.  The appeal is at once returnable to the appellate court.  The appeal has precedence in the appellate court over all causes of a different character pending before the court.

(d)  The commissioner is not required to give an appeal bond in any cause of action arising under this section.  (V.T.I.C. Art. 21.28-C, Sec. 18(d).)

Source Law

(d)  Assessments may be collected on behalf of the association by the commissioner through suits brought for that purpose.  Venue for those suits is in Travis County.  Either party to the action may appeal to the appellate court having jurisdiction over the cause, the appeal shall be at once returnable to the appellate court having jurisdiction over the cause, and the action so appealed shall have precedence in the appellate court over all causes of a different character pending before the court.  The commissioner is not required to give an appeal bond in any cause arising under this subsection.

Revisor's Note

Section 18(d), V.T.I.C. Article 21.28-C, refers to "the appellate court having jurisdiction over the cause." The reference is omitted for the reason stated in Revisor's Note (4) to Section 462.004.

Revised Law

Sec. 462.168.  EXEMPTION FOR IMPAIRED INSURER.  An impaired insurer is exempt from assessment from the date the insurer is designated an impaired insurer until the date the commissioner determines that the insurer is no longer an impaired insurer.  (V.T.I.C. Art. 21.28-C, Sec. 18(e).)

Source Law

(e)  An insurer designated as an impaired insurer by the commissioner is exempt from assessment from and after the date of the designation and until the commissioner determines that the insurer is no longer an impaired insurer.

[Sections 462.169-462.200 reserved for expansion]

SUBCHAPTER E.  COVERED CLAIMS; CLAIMANTS

Revised Law

Sec. 462.201.  COVERED CLAIMS IN GENERAL.  A claim is a covered claim if:

(1)  the claim is an unpaid claim;

(2)  the claim is made under an insurance policy to which this chapter applies that is:

(A)  issued by an insurer authorized to engage in business in this state; or

(B)  assumed by an insurer authorized to engage in business in this state that issues an assumption certificate to the insured;

(3)  the claim arises out of the policy and is within the coverage and applicable limits of the policy;

(4)  the insurer that issued the policy or assumed the policy under an assumption certificate issued to the insured is an impaired insurer; and

(5)  the claim:

(A)  is made by a liability claimant or insured who is a resident of this state at the time of the insured event; or

(B)  is a first-party claim for damage to property that is permanently located in this state.  (V.T.I.C. Art. 21.28-C, Sec. 5(8) (part).)

Source Law

(8)  "Covered claim" means an unpaid claim of an insured or third-party liability claimant that arises out of and is within the coverage and not in excess of the applicable limits of an insurance policy to which this Act applies, issued or assumed (whereby an assumption certificate is issued to the insured) by an insurer licensed to do business in this state, if that insurer becomes an impaired insurer and the third-party claimant or liability claimant or insured is a resident of this state at the time of the insured event, or the claim is a first-party claim for damage to property that is permanently located in this state… .

Revisor's Note

Section 5(8), V.T.I.C. Article 21.28-C, refers to a "third-party claimant or liability claimant." The portion of Section 5(8) revised in this subchapter as Section 462.305(d) uses the phrase "third-party liability claimant."  In addition, under Section 5(5), V.T.I.C. Article 21.28-C, revised in this chapter as Section 462.004(4), "claimant" is defined to mean "any insured making a first-party claim or any person instituting a liability claim."  Throughout this chapter, the revised law uses the phrase "liability claimant" for consistency and because, in context, "third-party claimant," "liability claimant," and "third-party liability claimant" are synonymous.

Revised Law

Sec. 462.202.  CLAIM FOR UNEARNED PREMIUMS.  (a)  A claim for unearned premiums is a covered claim.  A covered claim for unearned premiums may not exceed $25,000.

(b)  With respect to a covered claim for unearned premiums, a person has a covered claim under this chapter if the person is a resident of this state at the time:

(1)  the policy is issued; or

(2)  the insurer is determined to be an impaired insurer.  (V.T.I.C. Art. 21.28-C, Sec. 5(8) (part).)

Source Law

(8)  … "Covered claim" shall also include unearned premiums, but in no event shall a covered claim for unearned premiums exceed 25,000… . With respect to a covered claim for unearned premiums, both persons who were residents of this state at the time the policy was issued and persons who are residents of this state at the time the company is found to be an impaired insurer shall be considered to have covered claims under this Act… .

Revised Law

Sec. 462.203.  CERTAIN EXPENSES OF RECEIVERSHIP OR CONSERVATORSHIP ESTATE COVERED.  An administration expense incurred in processing or paying a claim against a receivership or conservatorship estate is a covered claim if the impaired insurer has insufficient assets to pay the expenses of administering the estate. (V.T.I.C. Art. 21.28-C, Sec. 5(8) (part).)

Source Law

(8)  … If the impaired insurer has insufficient assets to pay the expenses of administering the receivership or conservatorship estate, that portion of the expenses of administration incurred in the processing and payment of claims against the estate shall also be a covered claim under this Act.

Revised Law

Sec. 462.204.  AFFILIATE MAY NOT BE CLAIMANT.  A person who is an affiliate of an impaired insurer may not be a claimant of the insurer.  (V.T.I.C. Art. 21.28-C, Sec. 5(5) (part).)

Source Law

(5)  … A person who is an affiliate of the impaired insurer may not be a claimant.

Revised Law

Sec. 462.205.  DETERMINATION OF RESIDENCE OF ENTITIES.  A corporation or other entity that is not an individual is considered to be a resident of the state in which the entity's principal place of business is located.  (V.T.I.C. Art. 21.28-C, Sec. 5(8) (part).)

Source Law

(8)  … A corporation or other entity that is not an individual is considered to be a resident of the state in which the entity's principal place of business is located… .

Revised Law

Sec. 462.206.  CLAIMS NOT COVERED: PREMIUM UNDER RETROSPECTIVE RATING PLAN.  An amount sought as a return of premium under a retrospective rating plan is not a covered claim.  (V.T.I.C. Art. 21.28-C, Sec. 5(8) (part).)

Source Law

(8)  … "Covered claim" shall not include any amount sought as a return of premium under a retrospective rating plan or … .

Revised Law

Sec. 462.207.  CLAIMS NOT COVERED: AMOUNTS DUE CERTAIN ENTITIES.  (a)  Any amount 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 to the extent of the applicable liability limits of the insurance policy written and issued to the insured by the insolvent insurer.  (V.T.I.C. Art. 21.28-C, Sec. 5(8) (part).)

Source Law

(8)  … "Covered claim" shall not include … any amount due any reinsurer, insurer, self-insurer, insurance pool, or underwriting association, as subrogation recoveries, reinsurance recoveries, contribution, indemnification, or otherwise, and the insured of an impaired insurer is not liable, and the reinsurer, insurer, self-insurer, insurance pool, or underwriting association is not entitled to sue or continue a suit against that insured, for any subrogation recovery, reinsurance recovery, contribution, or indemnity to the extent of the applicable liability limits of the policy written and issued to the insured by the insolvent insurer… .

Revised Law

Sec. 462.208.  CLAIMS NOT COVERED: SUPPLEMENTARY PAYMENT OBLIGATIONS.  A  supplementary payment obligation, including an adjustment fee or expense, attorney's fee or expense, court cost, interest or penalty, or interest or bond premium, incurred before an insurer is determined to be an impaired insurer is not a covered claim.  (V.T.I.C. Art. 21.28-C, Sec. 5(8) (part).)

Source Law

(8)  … "Covered claim" shall not include supplementary payment obligations, including adjustment fees and expenses, attorney's fees and expenses, court costs, interest and penalties, and interest and bond premiums incurred prior to the determination that an insurer is an impaired insurer under this Act… .

Revised Law

Sec. 462.209.  CLAIMS NOT COVERED: PREJUDGMENT OR POSTJUDGMENT INTEREST.  Prejudgment or postjudgment interest that accrues after an insurer is determined to be an impaired insurer is not a covered claim.  (V.T.I.C. Art. 21.28-C, Sec. 5(8) (part).)

Source Law

(8)  …  "Covered claim" shall not include any prejudgment or postjudgment interest that accrues subsequent to the determination that an insurer is an impaired insurer under this Act… .

Revised Law

Sec. 462.210.  CLAIMS NOT COVERED: CERTAIN DAMAGES.  A claim against the insured, insurer, guaranty association, receiver, special deputy receiver, or commissioner for recovery of punitive, exemplary, extracontractual, or bad-faith damages awarded in a court judgment against an insured or insurer is not a covered claim.  (V.T.I.C. Art. 21.28-C, Sec. 5(8) (part).)

Source Law

(8)  …  "Covered claim" shall not include any claim for recovery of punitive, exemplary, extracontractual, or bad-faith damages, whether sought as a recovery against the insured, insurer, guaranty association, receiver, special deputy receiver, or commissioner, awarded in a court judgment against an insured or insurer… .

Revised Law

Sec. 462.211.  CLAIMS NOT COVERED: LATE FILED CLAIMS.  (a)   Notwithstanding any other provision of this chapter and except as provided by Subsection (b), a claim filed with the association on a date that is later than 18 months after the date of the order of liquidation 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 Texas Workers' Compensation Commission.  (V.T.I.C. Art. 21.28-C, Sec. 8(d) (part).)

Source Law

(d)  …  Notwithstanding any other provision of this Act, a covered claim shall not include any claim filed with the guaranty association on a date that is later than eighteen months after the date of the order of liquidation, except that a claim for workers' compensation benefits is governed by Title 5, Labor Code, and the applicable rules of the Texas Workers' Compensation Commission.

Revised Law

Sec. 462.212.  NET WORTH EXCLUSION.  (a)  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 the insured's parent, subsidiary, and affiliated companies, computed on a consolidated basis.

(c)  This section does not exclude the payment of a covered claim for workers' compensation benefits otherwise payable under this chapter. (V.T.I.C. Art. 21.28-C, Sec. 11A.)

Source Law

Sec. 11A.  (a)  The association is not liable to pay a first-party claim of an insured whose net worth on December 31 of the year next preceding the date the insurer becomes an impaired insurer exceeds $50 million.

(b)  The net worth of an insured for purposes of this section includes the aggregate net worth of the insured and all the insured's parent, subsidiary, and affiliated companies computed on a consolidated basis.

(c)  This section does not exclude the payment of a covered claim for workers' compensation benefits otherwise payable under this Act.

Revisor's Note

Section 11A, V.T.I.C. Article 21.28-C, refers to December 31 of "the year next preceding."  The revised law omits "next" for the reason stated in Revisor's Note (2) to Section 462.004.

Revised Law

Sec. 462.213.  AMOUNT OF INDIVIDUAL COVERED CLAIM; LIMIT.  (a)  Except as provided by Subsection (b) and Section 462.252, an individual covered claim may not exceed $300,000.

(b)  The association shall pay the full amount of a covered claim arising out of a workers' compensation claim made under a workers' compensation insurance policy.

(c)  For purposes of this section, an individual covered claim includes any derivative claims by more than one person that arise from the same occurrence.  The claims shall be considered collectively as a single claim under this chapter. (V.T.I.C. Art. 21.28-C, Sec. 5(8) (part).)

Source Law

(8)  …  Individual covered claims (including any and all derivative claims by more than one person which arise from the same occurrence, which shall be considered collectively as a single claim under this Act) shall be limited to $300,000, except that the association shall pay the full amount of any covered claim arising out of a workers' compensation claim made under a workers' compensation policy… .

Revised Law

Sec. 462.214.  CERTAIN SHAREHOLDERS' CLAIMS: LIMIT.  Notwithstanding any other provision of this chapter, the association's liability for shareholder derivative actions or other claims for economic loss incurred by a claimant in the claimant's capacity as a shareholder under an insurance policy placed in force on or after January 1, 1992, is limited to $300,000 for each policy, including defense costs, regardless of the number of claimants under each policy.  (V.T.I.C. Art. 21.28-C, Sec. 5(8) (part).)

Source Law

(8)  …  Notwithstanding any other provision of this Act, the association's liability for shareholder derivative actions or other claims for economic loss incurred by a claimant in the claimant's capacity as a shareholder under an insurance policy placed in force on or after January 1, 1992, is limited to $300,000 for each policy, inclusive of defense costs, regardless of the number of claimants under each policy… .

[Sections 462.215-462.250 reserved for expansion]

SUBCHAPTER F.  NONDUPLICATION OF RECOVERY

Revised Law

Sec. 462.251.  EXHAUSTION OF RIGHTS UNDER OTHER POLICY REQUIRED.  (a)  Any person who has a claim under an insurance policy, other than an impaired insurer's policy, and whose claim arises from the same facts, injury, or loss giving rise to a claim against an impaired insurer or the insurer's insured, must first exhaust the person's rights under the insurance policy, including:

(1)  a claim for benefits under a workers' compensation insurance policy or a claim for indemnity or medical benefits under a health, disability, uninsured motorist, personal injury protection, medical payment, liability, or other insurance policy; and

(2)  the right to defense under the insurance policy.

(b)  Subsection (a) applies without regard to whether the insurance policy is issued by a member insurer.  (V.T.I.C. Art. 21.28-C, Sec. 12(a) (part).)

Source Law

Sec. 12.  (a)  Any person who has a claim under an insurance policy, without regard to whether the policy is issued by a member insurer, other than a policy of an impaired insurer, that arises from the same facts, injury, or loss that gave rise to a claim against an impaired insurer or its insured, is required to first exhaust the person's rights under the policy, including any claim for indemnity or medical benefits under any workers' compensation, health, disability, uninsured motorist, personal injury protection, medical payment, liability, or other policy, and the right to defense under the policy… .

Revisor's Note

Section 12(a), V.T.I.C. Article 21.28-C, refers to a claim for "indemnity or medical benefits under any workers' compensation, health, disability, uninsured motorist, personal injury protection, medical payment, liability, or other policy."  The revised law omits the reference to "indemnity or medical" with respect to benefits under a workers' compensation insurance policy as unnecessary and misleading.  Under Section 401.011(5), Labor Code, "benefit" under a workers' compensation insurance policy is defined to mean medical benefits and other specified benefits that would be considered indemnity benefits, but are not explicitly referred to as indemnity benefits.

Revised Law

Sec. 462.252.  REDUCTION IN AMOUNT OF COVERED CLAIM FOR OTHER POLICY.  (a)  Except as provided by Subsection (b), an amount payable as a covered claim under this chapter is reduced by the full applicable limits of another insurance policy described by Section 462.251, and the association shall receive a full credit in the amount of the full applicable limits of the other policy.

(b)  A covered claim for workers' compensation benefits is subject to reduction only by a third-party liability recovery under Section 417.002, Labor Code.

(c)  The maximum amount payable by the association is the damages incurred by the claimant, less the association's credit or offset under this section.  The association's liability may not exceed the lesser of:

(1)  $300,000; or

(2)  the limits of the insurance policy under which the claim is made.  (V.T.I.C. Art. 21.28-C, Sec. 12(a) (part).)

Source Law

(a)  …  An amount payable as a covered claim under this Act is reduced by the full applicable limits of the other insurance policy and the association shall receive a full credit in the amount of the full applicable limits, except that a covered claim for workers' compensation benefits is subject only to reduction by a third-party liability recovery under Section 417.002, Labor Code.  Subject to the provisions of Subsection (a-1) below, the association's credit or setoff under this section shall be deducted from damages incurred by the claimant, and the remaining sum shall be the maximum amount payable by the association, except that the association's liability shall not exceed $300,000 or the limits of the policy under which the claim is made, whichever is less… .

Revisor's Note

(1)  Section 12(a), V.T.I.C. Article 21.28-C, refers to the Texas Property and Casualty Insurance Guaranty Association's "credit or setoff."  Section 12(a-1), revised in pertinent part in this chapter as Section 462.255, refers to the same amount, but uses the phrase "credit or offset."  For consistency and clarity, the revised law substitutes "offset" for "setoff" throughout this chapter.

(2)  Section 12(a), V.T.I.C. Article 21.28-C, provides that a deduction from damages incurred by a claimant is made "[s]ubject to the provisions of Subsection (a-1), below."  The revised law omits the quoted language as unnecessary.  Subsection (a-1), revised in pertinent part in this chapter in Section 462.255, operates as an exception to this section by its own terms.

Revised Law

Sec. 462.253.  EFFECT ON INSURED OF REDUCTION IN AMOUNT OF COVERED CLAIM.  To the extent that the association's obligation is reduced by the application of Sections 462.251 and 462.252, the liability of the person insured by the impaired insurer's policy for the claim is reduced in the same amount.  (V.T.I.C. Art. 21.28-C, Sec. 12(a) (part).)

Source Law

(a)  …  To the extent that the association's obligation is reduced by the application of this subsection, the liability of the person insured by the impaired insurer's policy for the claim is reduced in the same amount.

Revised Law

Sec. 462.254.  RECOVERY FROM MORE THAN ONE GUARANTY ASSOCIATION.  (a)  Except as provided by Subsections (b) and (c), a person who has a claim that may be recovered from more than one insurance guaranty association or the equivalent shall seek recovery first from the association of the insured's residence.

(b)  A claimant shall seek recovery of a first-party claim for damage to property with a permanent location first from the association of the location of the property.

(c)  A claimant shall seek recovery of a workers' compensation claim first from the association of the claimant's residence.

(d)  The association has a credit or offset against the benefits under this chapter in the amount of the claimant's recovery under this section.

(e)  The maximum amount payable by the association is the amount of damages incurred by the claimant, less the credit or offset. The association's liability may not exceed $300,000.  (V.T.I.C. Art. 21.28-C, Sec. 12(b).)

Source Law

(b)  A person who has a claim that may be recovered under more than one insurance guaranty association or its equivalent shall seek recovery first from the association of the place of residence of the insured, except that if it is a first-party claim for damage to property with a permanent location, the person shall seek recovery first from the association of the location of the property, and if it is a workers' compensation claim the person shall seek recovery first from the association of the residence of the claimant.  The association shall have a credit or setoff against any amount of benefits under this Act, in the amount of the claimant's recovery from the guaranty association or equivalent.  Subject to the provisions of Subsection (b-1) below, the association's credit or setoff under this Section shall be deducted from the damages incurred by the claimant, and the remaining sum shall be the maximum amount payable by the association, except that the association's liability shall not exceed $300,000.

Revisor's Note

Section 12(b), V.T.I.C. Article 21.28-C, provides that a deduction from damages incurred by a claimant is made "[s]ubject to the provisions of Subsection (b-1) below."  The revised law omits the quoted language as unnecessary. Subsection (b-1), revised in pertinent part in this chapter in Section 462.255, operates as an exception to this section by its own terms.

Revised Law

Sec. 462.255.  CERTAIN CLAIMS SUBJECT TO LIEN OR SUBROGATION.  Notwithstanding Sections 462.252(c) and 462.254(e), if a claimant is seeking recovery of insurance policy benefits that, had the impaired insurer not been insolvent, would be subject to lien or subrogation by any other insurer, including a workers' compensation insurer or health insurer, regardless of whether the other insurer is impaired, the association's credit or offset is deducted from the lesser of:

(1)  the damages incurred by the claimant; or

(2)  the limits of the policy under which the claim is made.  (V.T.I.C. Art. 21.28-C, Secs. 12(a-1) (part), (b-1) (part).)

Source Law

(a-1)  Notwithstanding Subsection (a) of this section, if a claimant is seeking recovery of policy benefits that, but for the insolvency of the impaired insurer, would be subject to lien or subrogation by a workers' compensation insurer, health insurer or any other insurer, whether impaired or not, then the association's credit or offset shall be deducted from the damages incurred by the claimant or the limits of the policy under which the claim is made, whichever is less… .

(b-1)  Notwithstanding Subsection (b) of this section, if a claimant is seeking recovery of policy benefits that, but for the insolvency of the impaired insurer, would be subject to lien or subrogation by a workers' compensation insurer, health insurer or any other insurer, whether impaired or not, then the association's credit or offset shall be deducted from the damages incurred by the claimant or the limits of the policy under which the claim is made, whichever is less… .

Revisor's Note

Sections 12(a-1) and (b-1), V.T.I.C. Article 21.28-C, establish the manner of computing a credit or offset in specific circumstances. Section 12(a-1) states that it  applies "[n]otwithstanding Subsection (a) of this section," meaning Subsection (a) of Section 12, V.T.I.C. Article 21.28-C, revised in this subchapter as Sections 462.251, 462.252, and 462.253.  Section 12(b-1) states that it  applies "[n]otwithstanding Subsection (b) of this section," meaning Subsection (b) of Section 12, V.T.I.C. Article 21.28-C, revised in this subchapter as Section 462.254.  The revised law substitutes references to Section 462.252(c) and 462.254(e), respectively, because these are the provisions that relate generally to computing the relevant credits or offsets.

Revised Law

Sec. 462.256.  LIMIT ON TOTAL RECOVERY.  (a)  A claimant's recovery under this chapter may not result in a total recovery to the claimant that is greater than the recovery that would have resulted had the impaired insurer not been insolvent.

(b)  Subject to Sections 462.201-462.203, 462.205-462.210, 462.213, 462.214, and 462.305(d) of this code and Title 5, Labor Code, a claim for workers' compensation benefits under this chapter may not result in a recovery to the claimant that is less than the recovery that would have resulted had the impaired insurer not been insolvent.  (V.T.I.C. Art. 21.28-C, Secs. 12(a-1) (part), (b-1) (part).)

Source Law

(a-1)  …  In no event shall a claimant's recovery under this Act result in a total recovery to the claimant that is greater than that which would have resulted but for the insolvency of the impaired insurer.  Subject to Section 5(8) of this Act and Title 5, Labor Code, a claim for workers' compensation benefits under this Act may not result in a recovery to the claimant that is less than that which would have resulted but for the insolvency of the impaired insurer.

(b-1)  …  In no event shall a claimant's recovery under this Act result in a total recovery to the claimant that is greater than that which would have resulted but for the insolvency of the impaired insurer.  Subject to Section 5(8) of this Act and Title 5, Labor Code, a claim for workers' compensation benefits under this Act shall not result in a recovery to the claimant that is less than that which would have resulted but for the insolvency of the impaired insurer.

[Sections 462.257-462.300 reserved for expansion]

SUBCHAPTER G. ASSOCIATION POWERS AND DUTIES RELATING TO COVERED CLAIMS

Revised Law

Sec. 462.301.  GENERAL POWERS AND DUTIES OF ASSOCIATION IN CONNECTION WITH PAYMENT OF COVERED CLAIMS.  (a)  The association shall investigate and adjust, compromise, settle, and pay covered claims to the extent of the association's obligation and deny all other claims.

(b)  The association may review a settlement, release, or judgment to which an impaired insurer or the impaired insurer's insured was a party to determine the extent to which the settlement, release, or judgment may be properly contested.  (V.T.I.C. Art. 21.28-C, Sec. 8(d) (part).)

Source Law

(d)  The association shall investigate and adjust, compromise, settle, and pay covered claims to the extent of the association's obligation and deny all other claims.  The association may review settlements, releases, and judgments to which the impaired insurer or its insureds were parties to determine the extent to which those settlements, releases, and judgments may be properly contested… .

Revised Law

Sec. 462.302.  PAYMENT OF COVERED CLAIMS.  (a)  The association shall pay covered claims that exist before the designation of impairment or that arise:

(1)  not later than the 30th day after the date of the designation of impairment;

(2)  before the insurance policy expiration date, if that date is not later than the 30th day after the date of the designation of impairment; or

(3)  before the insured replaces the insurance policy or causes the policy's cancellation, if the insured does so not later than the 30th day after the date of the designation of impairment.

(b)  The association shall pay claims in the order the association considers reasonable, including paying as claims are received from the claimants or in groups or categories of claims.  (V.T.I.C. Art. 21.28-C, Secs. 8(a) (part), (c) (part).)

Source Law

Sec. 8.  (a)  The association shall pay covered claims that exist before the designation of impairment or that arise within 30 days after the date of the designation of impairment, before the policy expiration date if the policy expiration date is within 30 days after the date of the designation of impairment, or before the insured replaces the policy or causes its cancellation if the insured does so within 30 days after the date of the designation. …

(c)  …  The association shall pay claims in any order it considers reasonable, including the payment of claims as they are received from the claimants or in groups or categories of claims… .

Revised Law

Sec. 462.303.  CERTAIN DETERMINATIONS NOT BINDING.  (a)  The association is not bound by:

(1)  a judgment taken before the designation of impairment in which an insured under a liability insurance policy or the insurer failed to exhaust all appeals;

(2)  a judgment taken by default or consent against an insured or the impaired insurer; or

(3)  a judgment, settlement, or release entered into by the insured or the impaired insurer.

(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 or another party under this chapter.  (V.T.I.C. Art. 21.28-C, Sec. 8(d) (part).)

Source Law

(d)  …  Any judgment taken before the designation of impairment in which an insured under a liability policy or the insurer failed to exhaust all appeals, any judgment taken by default or consent against an insured or the impaired insurer, and any settlement, release, or judgment entered into by the insured or the impaired insurer, is not binding on the association, and may not be considered as evidence of liability or of damages in connection with any claim brought against the association or any other party under this Act… .

Revised Law

Sec. 462.304.  SERVICING FACILITY.  (a)  The association shall handle claims through the association's employees or through one or more insurers or other persons designated, subject to the approval of the commissioner, as servicing facilities.

(b)  A member insurer may decline designation as a servicing facility.

(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; and

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

(d)  The commissioner may revoke the designation of a servicing facility if the commissioner finds that servicing facility is handling claims unsatisfactorily.  (V.T.I.C. Art. 21.28-C, Secs. 8(f), (g), 10(e).)

Source Law

[Sec. 8]

(f)  The association shall handle claims through its employees or through one or more insurers or other persons designated as servicing facilities.  Designation of a servicing facility is subject to the approval of the commissioner, but such a designation may be declined by a member insurer.

(g)  The association shall reimburse each servicing facility for obligations of the association paid by the facility and for expenses incurred by the facility while handling claims on behalf of the association and shall pay the other expenses of the association authorized by this Act.

[Sec. 10]

(e)  The commissioner may revoke the designation of any servicing facility if the commissioner finds that claims are being handled unsatisfactorily.

Revised Law

Sec. 462.305.  SATISFACTION OF OBLIGATION TO PAY COVERED CLAIMS; LIMITATION OF ASSOCIATION'S LIABILITY.  (a)  The association satisfies the obligation to pay a covered claim by paying the claimant the full amount of a covered claim for benefits.

(b)  The association's liability is limited to the payment of covered claims.  The association is not liable for any other claim or damages against the insured, an impaired insurer, the association, the receiver, the special deputy receiver, the commissioner, or the liquidator, including a claim for:

(1)  recovery of attorney's fees, prejudgment or postjudgment interest, or penalties;

(2)  extracontractual damages, multiple damages, or exemplary damages; or

(3)  any other amount sought in connection with the assertion or prosecution of a claim, without regard to whether the claim is a covered claim, by or on behalf of:

(A)  an insured or claimant; or

(B)  a provider of goods or services retained by an insured or claimant.

(c)  This section does not exclude the payment of workers' compensation benefits or other liabilities or penalties authorized by Title 5, Labor Code, arising from the association's processing and paying workers' compensation benefits after the designation of impairment.

(d)  The association is not liable to an insured or liability claimant for the association's failure to settle a liability claim within the limits of a covered claim under this chapter. A claim described by this section for failure to settle a liability claim is not a covered claim.  (V.T.I.C. Art. 21.28-C, Secs. 5(8) (part), 8(a) (part).)

Source Law

[Sec. 5]

(8)  …  "Covered claim" shall not include, and the association shall not have any liability to an insured or third-party liability claimant, for its failure to settle a liability claim within the limits of a covered claim under this Act… .

Sec. 8.  (a)  [The association shall pay covered claims] … .  The obligation is satisfied by paying to the claimant the full amount of a covered claim for benefits.  The association's liability is limited to the payment of covered claims.  The association has no liability for any other claim or damages, including claims for recovery of attorney's fees, prejudgment or postjudgment interest, or penalties, extracontractual damages, multiple damages, or exemplary damages, or any other amount sought by or on behalf of any insured or claimant or any other provider of goods or services retained by any insured or claimant in connection with the assertion or prosecution of any claims, without regard to whether the claims are covered, against the insured or an impaired insurer, the impaired insurer, the guaranty association, the receiver, the special deputy receiver, the commissioner, or the liquidator.  This subsection does not exclude the payment of workers' compensation benefits or other liabilities or penalties authorized by Title 5, Labor Code, arising from the association's processing and payment of workers' compensation benefits after the designation of impairment.

Revised Law

Sec. 462.306.  DISCHARGE OF POLICY OBLIGATION.  (a)  The association shall discharge an impaired insurer's policy obligations, including the duty to defend insureds under a liability insurance policy, to the extent that the policy obligation is a covered claim under this chapter.

(b)  In performing the association's statutory obligations, the association may also enforce a duty imposed on the insured or beneficiary under the terms of an insurance policy within the scope of this chapter.  (V.T.I.C. Art. 21.28-C, Sec. 8(b) (part).)

Source Law

(b)  The association shall undertake to discharge the policy obligations of the impaired insurer, including the duty to defend insureds under a liability policy, to the extent that the policy obligations are covered claims under this Act.  In performing its statutory obligations, the association may also enforce any duty imposed on the insured party or beneficiary under the terms of any policy of insurance within the scope of this Act… .

Revised Law

Sec. 462.307.  ASSIGNMENT OF RIGHTS.  (a)  A person recovering under this chapter assigns to the association the person's rights:

(1)  under the insurance policy; and

(2)  to recover for the occurrence that is the basis of the claim under this chapter under an insurance policy issued by an unimpaired insurer to the extent of the person's recovery from the association.

(b)  The association may pursue a claim to which the association is subrogated under Subsection (a) in the association's own name or in the name of the person recovering under this chapter.

(c)  An insured or claimant seeking the protection of this chapter shall cooperate with the association to the same extent as that person would have been required to cooperate with the impaired insurer.

(d)  Except as provided by Section 462.308, 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.

(e)  In the case of an impaired insurer operating on a plan with assessment liability, the payment of a claim of the association does not reduce the liability of the insured to the receiver or statutory successor for an unpaid assessment.  (V.T.I.C. Art. 21.28-C, Sec. 11(a).)

Source Law

Sec. 11.  (a)  A person recovering under this Act is considered to have assigned to the association the person's right under the policy, and the person's rights to recover for the occurrence made the basis of the claim under this Act under any policy of insurance issued by an unimpaired insurer to the extent of the person's recovery from the association.  The association may pursue any such claims to which it is subrogated under this provision in its own name or in the name of the person recovering under this Act.  Each insured or claimant seeking the protection of this Act shall cooperate with the association to the same extent as that person would have been required to cooperate with the impaired insurer.  The association does not have a cause of action against the insured of the impaired insurer for any sums it has paid out except those causes of action the impaired insurer would have had if the sums had been paid by the impaired insurer and except as provided in Subsection (b) of this section.  In the case of an impaired insurer operating on a plan with assessment liability, payments of claims of the association do not reduce the liability of the insureds to the receiver or statutory successor for unpaid assessments.

Revised Law

Sec. 462.308.  RECOVERY FROM CERTAIN PERSONS.  (a)  The association is entitled to recover the amount of a covered claim and the cost of defense paid 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; or

(2)  an insured:

(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.

(b)  The association is not entitled to recover under Subsection (a)(2) against an insured who is exempt from federal income tax under Section 501(a), Internal Revenue Code of 1986, by being described by Section 501(c)(3) of that code.

(c)  For purposes of Subsection (a)(2), an insured's net worth includes the aggregate net worth of the insured and the insured's parent, subsidiary, and affiliated companies, computed on a consolidated basis.  (V.T.I.C. Art. 21.28-C, Sec. 11(b).)

Source Law

(b)  The association is entitled to recover from the following persons the amount of any covered claim and costs of defense paid on behalf of that person under this Act:

(1)  any insured, other than an insured who is exempt from federal income tax under Section 501(a) of the Internal Revenue Code of 1986 (26 U.S.C. Section 501(a)) by being described by Section 501(c)(3) of that code, whose net worth on December 31 of the year next preceding the date the insurer becomes an impaired insurer exceeds $50 million, provided that an insured's net worth on that date is considered to include the aggregate net worth of the insured and all the insured's parent, subsidiary, and affiliated companies as computed on a consolidated basis, and whose obligations under a liability policy or contract of insurance written, issued, and placed in force after January 1, 1992, are satisfied in whole or in part by payments made under this Act; and

(2)  any person who is an affiliate of the impaired insurer and whose liability obligations to other persons are satisfied in whole or in part by payments made under this Act.

Revisor's Note

Section 11(b), V.T.I.C. Article 21.28-C, refers to December 31 of "the year next preceding."  The revised law omits "next" for the reason stated in Revisor's Note (2) to Section 462.004.

Revised Law

Sec. 462.309.  STAY OF PROCEEDINGS; CERTAIN DECISIONS NOT BINDING.  (a)  To permit the association to properly defend a pending cause of action, a proceeding in which an impaired insurer is a party or is obligated to defend a party in a court in this state, other than a proceeding directly related to the receivership or instituted by the receiver, is stayed for:

(1)  a six-month period beginning on the later of the date of the designation of impairment or the date an ancillary proceeding is brought in this state; and

(2)  a subsequent period as determined by the court, if any.

(b)  The stay applies to each party to the proceeding and the proceeding is stayed for all purposes.

(c)  A deadline imposed under the Texas Rules of Civil Procedure or the Texas Rules of Appellate Procedure is tolled during the stay.

(d)  The court in which the delinquency proceeding is pending has exclusive jurisdiction regarding the application, enforcement, and extension of the stay and may issue an injunction or another similar order to enforce the stay.

(e)  The commissioner may bring an ancillary delinquency proceeding under 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.

(f)  With respect to a covered claim arising from a judgment, order, decision, verdict, or finding based on the default of an impaired insurer or an impaired insurer's failure to defend the insured, the association, on the association's own behalf or on behalf of an insured and on application, shall be entitled to:

(1)  have the court or administrator that made the judgment, order, decision, verdict, or finding set aside the judgment, order, decision, verdict, or finding; and

(2)  defend the claim on the merits.  (V.T.I.C. Art. 21.28-C, Secs. 17(a), (b) (part).)

Source Law

Sec. 17.  (a)  All proceedings in which an impaired insurer is a party or is obligated to defend a party in any court in this state, except proceedings directly related to the receivership or instituted by the receiver, shall be stayed as to all parties and for all purposes for six months and any additional time thereafter as may be determined by the court from the date of the designation of impairment or an ancillary proceeding is instituted in the state, whichever is later, to permit proper defense by the association of all pending causes of action.  A deadline imposed under the Texas Rules of Civil Procedure or the Texas Rules of Appellate Procedure is tolled during the stay.  The court in which the delinquency proceeding is pending has exclusive jurisdiction regarding the application, enforcement, and extension of the stay and may issue injunctions or other similar orders to enforce the stay.  If the impaired insurer is not domiciled in this state, the commissioner may bring an ancillary delinquency proceeding under Section 13, Article 21.28 of this code, for the limited purpose of determining the application, enforcement, and extension of the stay.

(b)  As to any covered claims arising from a judgment under any decision, verdict, or finding based on the default of the impaired insurer or its failure to defend an insured, the association either on its own behalf or on behalf of the insured shall be entitled, upon application, to have the judgment, order, decision, verdict, or finding set aside by the same court or administrator that made the judgment, order, decision, verdict, or finding and shall be permitted to defend the claim on the merits… .

Revised Law

Sec. 462.310.  SETTLEMENT BY ASSOCIATION BINDING;  PRIORITY OF CLAIM AND EXPENSES.  (a)  The settlement of a covered claim by the association or a similar organization in another state binds the receiver or statutory successor of an impaired insurer.

(b)  The court having jurisdiction shall give the covered claim the same priority against assets of the impaired insurer that the claim would have had in the absence of this chapter.

(c)  The expenses of the association or a similar organization in another state in handling claims have the same priority as the receiver's expenses.  (V.T.I.C. Art. 21.28-C, Sec. 11(c).)

Source Law

(c)  The receiver or statutory successor of an impaired insurer is bound by settlements of covered claims by the association or a similar organization in another state.  The court having jurisdiction shall grant those claims priority equal to that which the claimant would have been entitled to in the absence of this Act against the assets of the impaired insurer.  The expenses of the association or similar organization in handling claims shall be accorded the same priority as the receiver's expenses.

Revisor's Note

Section 11(c), V.T.I.C. Article 21.28-C, refers to the court "having jurisdiction."  The revised law omits the quoted language as unnecessary for the reason stated in Revisor's Note (4) to Section 462.004.

Revised Law

Sec. 462.311.  REPORT TO RECEIVER.  The association shall periodically file with the receiver of an impaired insurer a statement of covered claims paid by the association and an estimate of claims anticipated against the association.  The statement preserves the rights of the association against the assets of the impaired insurer.  (V.T.I.C. Art. 21.28-C, Sec. 11(d).)

Source Law

(d)  The association shall file periodically with the receiver of the impaired insurer statements of the covered claims paid by the association and estimates of anticipated claims on the association that shall preserve the rights of the association against the assets of the impaired insurer.

[Sections 462.312-462.350 reserved for expansion]

SUBCHAPTER H. RELEASE FROM RECEIVERSHIP

Revised Law

Sec. 462.351.  ISSUANCE OF POLICIES AFTER RELEASE FROM RECEIVERSHIP.  (a)  Except as provided by Subsection (b), an impaired insurer placed in receivership for which money has been advanced under this chapter may not be authorized, on release from receivership, to issue new or renewal insurance policies until the insurer repays the advances to the association.

(b)  On application of the association and after hearing, the commissioner may permit the insurer to issue new insurance policies in accordance with the insurer's plan of operation for repayment of advances.

(c)  The commissioner, in approving the plan of operation, may place restrictions on the issuance of new or renewal insurance policies as the commissioner considers necessary to implement the plan.  (V.T.I.C. Art. 21.28-C, Sec. 22.)

Source Law

Sec. 22.  An impaired insurer placed in receivership for which advances have been made under this Act may not be authorized, on release from receivership, to issue new or renewal insurance policies until the impaired insurer has repaid in full to the association the funds advanced by it.  However, the commissioner may, on application of the association and after hearing, permit the issuance of new policies in accordance with a plan of operations by the released insurer for repayment of advances.  The commissioner, in approving the plan, may place restrictions on the issuance of new or renewal policies as the commissioner considers necessary to the implementation of the plan.