Bill Text: TX HB1982 | 2019-2020 | 86th Legislature | Introduced

---

Bill Title: Relating to the operation of the Texas Property and Casualty Insurance Guaranty Association.

Sponsorship: Partisan Bill (Republican 1)

Status: (Introduced - Dead) 2019-04-16 - Companion considered in lieu of in committee [HB1982 Detail]

Download: Texas-2019-HB1982-Introduced.html

---

86R7110 JES-F
By: Paul H.B. No. 1982

A BILL TO BE ENTITLED
AN ACT
relating to the operation of the Texas Property and Casualty
Insurance Guaranty Association.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 462.004(5), Insurance Code, is amended
to read as follows:
(5) "Impaired insurer" means a member insurer that is
subject to a final, nonappealable order of liquidation that
includes a finding of insolvency issued by a court of competent
jurisdiction in this state or in the insurer's state of domicile[:
[(A) placed in:
[(i) temporary or permanent receivership or
liquidation under a court order, including a court order of another
state, based on a finding of insolvency; or
[(ii) conservatorship after the
commissioner determines that the insurer is insolvent; and
[(B) designated by the commissioner as an
impaired insurer].
SECTION 2. Section 462.055(b), Insurance Code, is amended
to read as follows:
(b) The remaining board members, by majority vote, shall
fill a vacancy on the board for the unexpired term of a director who
serves as an insurance industry board member, subject to the
commissioner's approval. The commissioner shall appoint a director
to fill a vacancy on the board for the unexpired term of a director
who serves as a public representative.
SECTION 3. Section 462.059, Insurance Code, is amended by
amending Subsections (a), (b), and (c) and adding Subsection (a-1)
to read as follows:
(a) Notwithstanding Chapter 551, Government Code, the board
may hold an open meeting by telephone conference call [if immediate
action is required and convening of a quorum of the board at a
single location is not reasonable or practical]. A meeting held by
telephone conference call:
(1) must be audible to the public at the location
specified in the notice described by Subsection (c); and
(2) must allow two-way audio communication during the
entire meeting between the members of the board attending a meeting
authorized by this section.
(a-1) If the two-way audio communication required under
Subsection (a) is disrupted during a meeting so that a quorum of the
board is no longer able to participate, the meeting may not continue
until the two-way audio communication is reestablished.
(b) The meeting is subject to the notice requirements that
apply to other meetings of the board of directors.
(c) The notice of the meeting must specify [as] the location
of the meeting [the location at which meetings of the board are
usually held], and each part of the meeting that is required to be
open to the public must be audible to the public at that location.
The association must make an audio recording of the meeting. The
recording of the open portion of the meeting must be posted publicly
to the association's Internet website [and must be tape recorded.
The tape recording shall be made available to the public].
SECTION 4. Section 462.207, Insurance Code, is amended by
amending Subsection (b) and adding Subsection (c) to read as
follows:
(b) An impaired insurer's insured is not liable, and the
reinsurer, insurer, self-insurer, insurance pool, or underwriting
association is not entitled to sue or continue a suit against the
insured, for a subrogation recovery, reinsurance recovery,
contribution, indemnification, or any other claim asserted
directly or indirectly by a reinsurer, insurer, self-insurer,
insurance pool, or underwriting association to the extent of the
applicable liability limits of the insurance policy written and
issued to the insured by the insolvent insurer.
(c) The association is entitled to recover the
association's costs, expenses, and reasonable attorney's fees
incurred in defending the association or an impaired insurer's
insured against a claim brought in violation of this subsection by a
reinsurer, insurer, self-insurer, insurance pool, or underwriting
association, on that entity's own behalf or on behalf of the
entity's insured, after the date on which the entity is provided
notice by the association or otherwise of the provisions of this
section applicable to the entity's suit.
SECTION 5. Sections 462.212(d), (e), and (f), Insurance
Code, are amended to read as follows:
(d) In an instance described by Subsection (c), the
association is entitled to assert a claim in the bankruptcy or
receivership proceeding to recover the amount of any covered claim
and costs of defense paid on behalf of the insured. A court shall
award the association the association's costs, expenses, and
reasonable attorney's fees incurred in seeking recovery under this
section.
(e) The association may establish procedures for requesting
financial information from an insured [or claimant] on a
confidential basis for the purpose of applying sections concerning
the net worth of insureds [first-party and third-party claimants],
subject to any information requested under this subsection being
shared with any other association similar to the association and
with the liquidator for the impaired insurer on the same
confidential basis. If the insured [or claimant] refuses to
provide the requested financial information, the [association
requests an auditor's certification of that information, and the
auditor's certification is available but not provided, the]
association may deem the net worth of the insured [or claimant] to
be in excess of $50 million at the relevant time.
(f) In any lawsuit contesting the applicability of Section
462.308 or this section when the insured [or claimant] has declined
to provide financial information requested by the association
[under the procedure provided in the plan of operation under
Section 462.103], the insured [or claimant] bears the burden of
proof concerning its net worth at the relevant time and shall pay[.
If the insured or claimant fails to prove that its net worth at the
relevant time was less than the applicable amount, the court shall
award] the association the association's [its full] costs,
expenses, and reasonable attorney's fees incurred in attempting to
obtain the insured's financial information [in contesting the
claim].
SECTION 6. Section 462.303, Insurance Code, is amended by
amending Subsection (b) and adding Subsection (c) to read as
follows:
(b) A judgment, settlement, or release described by
Subsection (a) is not evidence of liability or of damages in
connection with a claim brought against the association, an
impaired insurer's insured, or another party under this chapter.
(c) The association is entitled to recover the
association's costs, expenses, and reasonable attorney's fees
incurred in contesting a claim based on a judgment, settlement, or
release described by Subsection (a) on the association's behalf or
on behalf of an impaired insurer's insured after the date on which
the party asserting the claim is provided notice by the association
or otherwise of the provisions of this section applicable to the
judgment, settlement, or release.
SECTION 7. Sections 462.304(a) and (c), Insurance Code, are
amended to read as follows:
(a) The association shall handle claims through:
(1) the association's employees or contract claims
adjusters; or
(2) subject to the approval of the commissioner,
[through] one or more insurers [or other persons] designated[,
subject to the approval of the commissioner,] as a servicing
facility under a servicing agreement or loss portfolio transfer
agreement [facilities].
(c) The association shall[:
[(1)] reimburse a servicing facility for[:
[(A)] obligations of the association paid by the
facility[;] and
[(B)] expenses incurred by the facility in
handling claims for the association. The association shall
reimburse a servicing facility under this subsection in a manner
that is consistent with the applicable servicing agreement or loss
portfolio agreement[; and
[(2) pay the other expenses of the association
authorized by this chapter].
SECTION 8. Section 462.307, Insurance Code, is amended by
amending Subsection (d) and adding Subsection (f) to read as
follows:
(d) Except as provided by Section 462.308 or 462.212, the
association does not have a cause of action against the impaired
insurer's insured for money the association has paid, other than a
cause of action that the impaired insurer would have had if the
money had been paid by the impaired insurer.
(f) To the extent the association has a right to recover
proceeds from the sale of salvage property related to a covered
claim, the association's right to recover the proceeds may not be
reduced in the amount of any pre-impairment costs, fees, or
expenses related to the salvage property that are not part of a
covered claim under Subchapter E. A person or entity in possession
of salvage property subject to the association's right of recovery
may not seek recovery from the association for any pre-impairment
costs, fees, or expenses related to the salvage property that are
not a covered claim under Subchapter E.
SECTION 9. Section 462.308, Insurance Code, is amended by
amending Subsection (a) and adding Subsection (d) to read as
follows:
(a) The association is entitled to recover:
(1) the amount of a covered claim and the cost of
defense paid on behalf of a person:
(A) who is an affiliate of the impaired insurer;
and
(B) whose liability obligations to other persons
are satisfied wholly or partly by payment made under this chapter;
and
(2) the amount of a covered claim for workers'
compensation insurance benefits and the costs of administration and
defense of the claim paid under this chapter from an insured
employer or any successor entity to the insured employer under
state, federal, or international law whose net worth on December 31
of the year preceding the date the insurer becomes an impaired
insurer exceeds $50 million.
(d) A court shall award the association the association's
costs, expenses, and reasonable attorney's fees incurred in seeking
recovery under this section.
SECTION 10. Except as provided by this section, the changes
in law made by this Act apply only with respect to a property and
casualty insurance company that is designated as an impaired
insurer on or after the effective date of this Act. The law as it
existed immediately before the effective date of this Act applies
with respect to a property and casualty insurance company that is
designated as an impaired insurer before the effective date of this
Act, and that law is continued in effect for that purpose.
SECTION 11. This Act takes effect September 1, 2019.