Bill Text: TX HB1833 | 2013-2014 | 83rd Legislature | Comm Sub

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Bill Title: Relating to the residual market for workers' compensation insurance in this state and to the operation, governance, and organization of the Texas Mutual Insurance Company; authorizing administrative penalties; imposing fees.

Spectrum: Partisan Bill (Republican 3-0)

Status: (Introduced - Dead) 2013-05-09 - Placed on General State Calendar [HB1833 Detail]

Download: Texas-2013-HB1833-Comm_Sub.html

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83R19822 TJS-F
By: Sheets, Lewis, et al. H.B. No. 1833
Substitute the following for H.B. No. 1833:
By: Sheets C.S.H.B. No. 1833

A BILL TO BE ENTITLED
AN ACT
relating to the residual market for workers' compensation insurance
in this state and to the operation, governance, and organization of
the Texas Mutual Insurance Company; authorizing administrative
penalties; imposing fees.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
ARTICLE 1. RESIDUAL MARKET FOR WORKERS' COMPENSATION INSURANCE
SECTION 1.01. WORKERS' COMPENSATION ASSIGNED RISK PROGRAM.
Subtitle E, Title 10, Insurance Code, is amended by adding Chapter
2056 to read as follows:
CHAPTER 2056. WORKERS' COMPENSATION ASSIGNED RISK PROGRAM
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 2056.001. DEFINITIONS. In this chapter:
(1) "Assigned risk program" means the program
established under Section 2056.002 by which insurers provide
workers' compensation insurance to residual market employers.
(2) "Insurer" means an insurance company as defined by
Section 2053.001.
(3) "Residual market employer" means an eligible
employer that is unable to obtain workers' compensation insurance
in the usual manner through the voluntary insurance market in this
state.
Sec. 2056.002. ASSIGNED RISK PROGRAM; PLAN OF OPERATION.
(a) The commissioner by rule shall:
(1) establish an assigned risk program through which
residual market employers may obtain workers' compensation
insurance in this state; and
(2) approve a plan of operation for the assigned risk
program established under this section, which must:
(A) specify the eligibility criteria and
procedures for obtaining insurance through the assigned risk
program;
(B) provide for the implementation and
administration of the assigned risk program, including reasonable
service standards, policies, forms, and contracts; and
(C) provide for the equitable apportionment of
risk among the insurers required to participate in the assigned
risk program.
(b) The commissioner shall contract with a statistical
agent for workers' compensation in this state to administer the
assigned risk program.
(c) The commissioner shall require each insurer to
participate in the assigned risk program in proportion to the
insurer's workers' compensation voluntary premium market share in
this state as a condition of the insurer's authority to engage in
the business of insurance in this state.
(d) The commissioner may provide for an insurer to meet the
insurer's obligation under this section through direct policy
assignment, participation in a reinsurance pooling mechanism, or
otherwise.
Sec. 2056.003. RATES AND FUNDING. (a) The statistical
agent contracted to administer the assigned risk program under
Section 2056.002 shall file rates for review following the
procedures for insurers under Subchapter A, Chapter 2053.
(b) Rates for insurance procured through the assigned risk
program must be:
(1) actuarially sufficient to cover all incurred
losses, operating expenses, and administrative expenses of the
program;
(2) consistent with classification and ratemaking
methodologies generally accepted in the insurance industry; and
(3) calculated to enable the program to be
self-sustaining.
(c) Rates for insurance procured through the assigned risk
program must not be excessive, inadequate, or unfairly
discriminatory and are subject to adjustment under Section
2053.055.
SUBCHAPTER B. ACCIDENT PREVENTION
Sec. 2056.051. DEFINITIONS. In this subchapter:
(1) "Assigned carrier" means an insurer that provides
workers' compensation insurance to a residual market employer under
the assigned risk program.
(2) "Division" means the division of workers'
compensation of the department.
Sec. 2056.052. REQUIREMENTS FOR PREVENTION OF INJURIES. An
assigned carrier may make and enforce requirements for the
prevention of injuries to an employee of a policyholder or
applicant for insurance under this chapter. On reasonable notice,
a policyholder or applicant shall grant representatives of an
assigned carrier or the department free access to the premises of
the policyholder or applicant during regular working hours for
purposes of this section.
Sec. 2056.053. GROUNDS FOR CANCELLATION OR DENIAL OF
COVERAGE. A failure or refusal by a policyholder or applicant for
insurance to comply with a requirement prescribed by an assigned
carrier under Section 2056.052, or a failure or refusal to fully
disclose all information pertinent to insuring or servicing the
policyholder or applicant, constitutes sufficient grounds for the
assigned carrier to cancel a policy or deny an application.
Sec. 2056.054. SAFETY CONSULTATION FOR CERTAIN INSUREDS.
(a) A policyholder who is insured under this chapter shall obtain a
safety consultation:
(1) if the policyholder:
(A) has a Texas experience modifier greater than
1.25;
(B) has a national experience modifier greater
than 1.25 and estimated premium allocable to this state of $2,500 or
more; or
(C) does not have an experience modifier but has
had a loss ratio greater than 0.70 in at least two of the three most
recent policy years for which information is available; or
(2) as required by the plan of operation, if the
policyholder:
(A) has been in business for less than three
years; and
(B) meets the criteria established by the plan of
operation.
(b) The criteria under Subsection (a)(2)(B) may include:
(1) the number and classification of employees;
(2) the policyholder's industry; and
(3) the policyholder's previous workers' compensation
experience in this state or another jurisdiction.
Sec. 2056.055. SAFETY CONSULTATION PROCEDURES. Not later
than the 30th day after the effective date of a policy, the
policyholder shall obtain a safety consultation required under
Section 2056.054 from a safety consultant. The safety consultant
must be:
(1) an assigned carrier;
(2) the division; or
(3) a professional source approved for that purpose by
the division.
Sec. 2056.056. SAFETY CONSULTANT REPORT. A safety
consultant acting under this subchapter shall file a written report
with the division and the policyholder specifying any hazardous
condition or practice identified in the safety consultation.
Sec. 2056.057. ACCIDENT PREVENTION PLAN. (a) If a safety
consultant identifies a hazardous condition or practice, the
policyholder and the safety consultant shall develop a specific
accident prevention plan that addresses the condition or practice.
(b) The safety consultant may approve an existing accident
prevention plan.
(c) The policyholder shall comply with the accident
prevention plan.
Sec. 2056.058. ACCIDENT INVESTIGATIONS; OTHER MONITORING.
The division may:
(1) investigate an accident that occurs at a work site
of a policyholder for whom an accident prevention plan was
developed under Section 2056.057; and
(2) otherwise monitor as the division determines
necessary the implementation of the accident prevention plan.
Sec. 2056.059. FOLLOW-UP INSPECTION. (a) Not earlier than
the 90th day after or later than the sixth month after the date an
accident prevention plan is developed under Section 2056.057, the
division shall conduct a follow-up inspection of the policyholder's
premises in accordance with rules adopted by the commissioner of
workers' compensation.
(b) The division may require the participation of the safety
consultant who performed the initial consultation and developed the
accident prevention plan.
(c) If the commissioner of workers' compensation determines
that a policyholder has complied with the terms of the accident
prevention plan or has implemented other accepted corrective
measures, the commissioner of workers' compensation shall certify
that determination.
(d) If the commissioner of workers' compensation determines
that a policyholder has failed or refuses to implement the accident
prevention plan or other suitable hazard abatement measures, the
policyholder may elect to cancel coverage not later than the 30th
day after the date of the determination.
Sec. 2056.060. CANCELLATION OF COVERAGE BY ASSIGNED
CARRIER; IMPOSITION OF ADMINISTRATIVE PENALTY. (a) If a
policyholder described by Section 2056.059(d) does not elect to
cancel coverage as provided by that section:
(1) the assigned carrier may cancel the coverage; or
(2) the commissioner of workers' compensation may
impose an administrative penalty on the policyholder.
(b) The amount of an administrative penalty under
Subsection (a)(2) may not exceed $5,000. Each day of noncompliance
constitutes a separate violation.
(c) In imposing an administrative penalty, the commissioner
of workers' compensation may consider any matter that justice may
require and shall consider:
(1) the seriousness of the violation, including the
nature, circumstances, consequences, extent, and gravity of the
prohibited act;
(2) the history and extent of previous administrative
violations;
(3) the demonstrated good faith of the violator,
including actions taken to rectify the consequences of the
prohibited act;
(4) any economic benefit resulting from the prohibited
act; and
(5) the penalty necessary to deter future violations.
(d) A penalty collected under this section:
(1) must be deposited in the general revenue fund; and
(2) may be appropriated to the division to offset the
costs of implementing and administering this subchapter.
Sec. 2056.061. CONTINUING COMPLIANCE WITH SUBCHAPTER. The
procedures established under this subchapter must be followed each
year the policyholder meets the criteria established by Section
2056.054(a)(1).
Sec. 2056.062. FEES FOR SERVICES. The division shall:
(1) charge a policyholder for the reasonable cost of
services provided to the policyholder under Sections 2056.055,
2056.056, 2056.057, 2056.059, and 2056.060(a); and
(2) set the fees for the services at a
cost-reimbursement level, including a reasonable allocation of the
division's administrative costs.
Sec. 2056.063. ENFORCEMENT OF SUBCHAPTER. The division
shall enforce compliance with this subchapter through the
administrative violation proceedings under Chapter 415, Labor
Code.
ARTICLE 2. OPERATION AND ORGANIZATION OF TEXAS
MUTUAL INSURANCE COMPANY
SECTION 2.01. ARTICLES OF INCORPORATION. (a) Not later
than January 1, 2015, the board of directors of the Texas Mutual
Insurance Company shall file with the commissioner of insurance
articles of incorporation, which must state:
(1) the name of the company;
(2) the purpose of the company;
(3) the location of the company's principal or home
office; and
(4) the name and address of each member of the board of
directors.
(b) Notwithstanding any other law, the articles of
incorporation filed under this Act shall be considered restated
articles of incorporation.
SECTION 2.02. BOARD OF DIRECTORS. (a) Not later than
December 31, 2014, the Texas Mutual Insurance Company shall hold a
meeting of its policyholders to elect a board of directors to govern
the company beginning January 1, 2015.
(b) The board of directors established under Section
2054.051, Insurance Code, is abolished effective January 1, 2015.
SECTION 2.03. CONTINUATION OF CORPORATE EXISTENCE. (a) The
corporate existence of the Texas Mutual Insurance Company
continues, and all assets, liabilities, earned surplus, rights,
licenses, and permits of the company as it existed under Chapter
2054, Insurance Code, before January 1, 2015, remain in full force
and effect as the assets, liabilities, earned surplus, rights,
licenses, and permits of the company.
(b) All policies of insurance and other contracts entered
into or issued by the Texas Mutual Insurance Company before January
1, 2015, remain in full force and effect in accordance with their
respective terms.
(c) The certificate of authority issued to the Texas Mutual
Insurance Company as the company existed under Chapter 2054,
Insurance Code, before January 1, 2015, continues in effect.
(d) Effective January 1, 2015, the Texas Mutual Insurance
Company operates under Chapter 883, Insurance Code, and is neither
subject to obligations or limitations not imposed on, nor given
advantages not granted to, other mutual insurance companies
operating under Chapter 883, Insurance Code.
ARTICLE 3. CONFORMING AMENDMENTS
SECTION 3.01. REPEALER. The following laws are repealed:
(1) Section 552.0225(c), Government Code;
(2) Section 552.143(f), Government Code;
(3) Section 462.008, Insurance Code;
(4) Section 2051.153(b), Insurance Code; and
(5) Chapter 2054, Insurance Code.
SECTION 3.02. CONFORMING AMENDMENT TO LABOR CODE. Section
418.002(c), Labor Code, is amended to read as follows:
(c) The court may order a person to pay restitution to an
insurance company[, including the Texas Mutual Insurance Company,]
if the person commits an offense under this section.
SECTION 3.03. CONFORMING AMENDMENTS TO INSURANCE CODE. (a)
Section 2052.004(a), Insurance Code, is amended to read as follows:
(a) Subject to Subsections (b) and (c), this subtitle may
not be construed to prohibit an insurance company[, including the
Texas Mutual Insurance Company,] from issuing participating
policies.
(b) Section 2053.001(2), Insurance Code, is amended to read
as follows:
(2) "Insurance company" means a person authorized to
engage in the business of workers' compensation insurance in this
state. The term includes:
(A) [the Texas Mutual Insurance Company;
[(B)] a Lloyd's plan under Chapter 941; and
(B) [(C)] a reciprocal and interinsurance
exchange under Chapter 942.
(c) Section 2053.154(a), Insurance Code, is amended to read
as follows:
(a) For purposes of this section, "insurance company" means
a stock company, mutual insurance company, reciprocal or
interinsurance exchange, or Lloyd's plan authorized to engage in
the business of workers' compensation insurance in this state.
[The term includes the Texas Mutual Insurance Company.]
SECTION 3.04. EFFECTIVE DATE OF ARTICLE. This article
takes effect January 1, 2015.
ARTICLE 4. TRANSITION
SECTION 4.01. TRANSITION. (a) As soon as practicable after
the effective date of this Act, but not later than January 1, 2015,
the commissioner of insurance shall adopt rules necessary to
implement the assigned risk program required by Chapter 2056,
Insurance Code, as added by this Act.
(b) As soon as practicable after the Texas Mutual Insurance
Company files articles of incorporation with the commissioner of
insurance and elects a board of directors as required by Article 2
of this Act, the commissioner shall take any action necessary to
reflect the fact that the Texas Mutual Insurance Company is a mutual
insurance company organized under and governed by Chapter 883,
Insurance Code, and other laws applicable to mutual insurance
companies in this state.
ARTICLE 5. EFFECTIVE DATE
SECTION 5.01. EFFECTIVE DATE OF ACT. Except as otherwise
provided by this Act, this Act takes effect September 1, 2013.