H.B. No. 4339
AN ACT
relating to the establishment and operation of the unauthorized
insurance guaranty fund.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subtitle D, Title 4, Insurance Code, is amended
by adding Chapter 464 to read as follows:
CHAPTER 464. UNAUTHORIZED INSURANCE GUARANTY FUND ACT
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 464.001. SHORT TITLE. This chapter may be cited as the
Unauthorized Insurance Guaranty Fund Act.
Sec. 464.002. CONSTRUCTION AND PURPOSE. (a) The purpose of
this chapter is to alleviate the financial hardship imposed on
persons who are harmed by the sale of unauthorized insurance in this
state. Persons who suffer damages as a result of unpaid claims on
policies issued by unauthorized insurers in this state are not
covered under guaranty acts, which provide protection to persons
with claims against authorized insurers. The legislature finds
that it is appropriate to provide additional remedies to these
persons.
(b) The commissioner's powers under this Act shall be
liberally construed to support the purpose stated in Subsection
(a).
(c) This chapter does not limit the powers granted the
commissioner under other provisions of law. The powers and
authority of the commissioner under this chapter are cumulative and
are in addition to all other powers and authority that are available
to the commissioner.
Sec. 464.003. DEFINITIONS. In this chapter:
(1) "Delinquency proceeding" has the meaning assigned
by Section 443.004.
(2) "Fund" means the unauthorized insurance guaranty
fund.
(3) "Fund account" means the account established for
the deposit of money held by the fund.
(4) "Policy claim" means an obligation incurred under
a contract or policy of insurance issued by an unauthorized insurer
as described by Chapter 101. The term does not include claims under
reinsurance contracts or claims of other creditors.
(5) "Receiver" means the receiver of an unauthorized
insurer in a delinquency proceeding, including the commissioner
when acting in that capacity, or a special deputy receiver.
(6) "Unauthorized insurer" has the meaning assigned by
Section 443.004.
Sec. 464.004. APPLICABILITY. This chapter applies to a
delinquency proceeding under Chapter 443 of an unauthorized
insurer.
Sec. 464.005. IMMUNITY. Liability does not exist and a
cause of action does not arise against the commissioner or an agent,
employee, or representative of the commissioner for any good faith
act or omission in performing the commissioner's, or the agent's,
employee's, or representative's powers and duties under this
chapter.
Sec. 464.006. EXEMPTION FROM CERTAIN FEES AND TAXES. The
fund is exempt from payment of all fees and taxes levied by this
state or a political subdivision of this state.
Sec. 464.007. RULES. The commissioner may adopt rules as
necessary to implement this chapter.
[Sections 464.008-464.050 reserved for expansion]
SUBCHAPTER B. FUND
Sec. 464.051. CREATION OF UNAUTHORIZED INSURANCE GUARANTY
FUND. The unauthorized insurance guaranty fund is established.
Sec. 464.052. DEPOSIT OF FUNDS. (a) The fund account shall
be established with the Texas Treasury Safekeeping Trust Company in
accordance with procedures adopted by the comptroller. The
comptroller shall account for the deposited money separately from
all other money.
(b) The commissioner may identify collected penalties to be
deposited into the fund account from:
(1) administrative penalties assessed by the
commissioner for violations of Chapter 101 or penalties under
Section 861.702, including amounts collected through state warrant
holds;
(2) civil penalties assessed under Chapter 101 when
the commissioner is the party requesting penalties;
(3) administrative penalties assessed by the
commissioner against a person holding a certificate of authority,
license, registration, or other authorization to engage in the
business of insurance that is issued or recognized by the
commissioner for engaging in conduct outside the scope of the
person's certificate, license, registration, or authorization;
(4) administrative penalties assessed by the
commissioner against a person holding a certificate of authority,
license, registration, or authorization issued or recognized by the
commissioner for using unapproved forms, rates, or advertisements
if the forms, rates, or advertisements are required to be approved
by the commissioner before being used in this state; and
(5) forfeitures of bonds issued under Section 101.353
or 101.354.
(c) In determining the amounts to be deposited into the fund
account, the commissioner shall consider:
(1) the amount existing in the fund account;
(2) the anticipated penalties described by Subsection
(b) that have been or may be collected;
(3) the estimated assets, administrative expenses,
and claims of any unauthorized insurers subject to a delinquency
proceeding; and
(4) any anticipated delinquency proceedings of
unauthorized insurers.
(d) If the commissioner determines that the amounts on
deposit in the fund account exceed the amount required to pay
administrative expenses and claims of existing and anticipated
delinquency proceedings of unauthorized insurers, the commissioner
may transfer the excess amount from the fund to the comptroller for
deposit into the general revenue fund.
(e) The commissioner shall notify the comptroller of the
existence of money under Subsection (c) to be credited to the fund
account. The commissioner must enter an order to transfer amounts
from the fund account.
Sec. 464.053. ADVANCE OF FUNDS. (a) In the event of a
delinquency proceeding of an unauthorized insurer, the
commissioner may advance funds from the fund account if the assets
of the unauthorized insurer are insufficient to pay administrative
expenses or policy claims. The commissioner shall hold the funds in
a separate account. Funds advanced under this section are
available to supplement the assets of the unauthorized insurer, and
do not become property of the unauthorized insurer or the
receivership estate.
(b) In determining an amount to be advanced, the
commissioner shall consider:
(1) the amount existing in the fund, and any estimated
future amounts to be deposited in the fund;
(2) the assets of the unauthorized insurer that are
anticipated to be available to pay administrative expenses and
claims;
(3) the projected administrative expenses and claims
in the delinquency proceeding; and
(4) the projected administrative expenses and claims
in other existing and anticipated delinquency proceedings of
unauthorized insurers.
Sec. 464.054. USE OF FUNDS. (a) An amount advanced under
Section 464.053 may be used to supplement the assets of an
unauthorized insurer to pay administrative expenses and policy
claims that are approved by:
(1) the commissioner in a proceeding under Section
443.051; or
(2) the receiver in a proceeding under Section
443.052.
(b) For the purposes of Section 443.301(b), approved policy
claims under this chapter shall be classified as Class 2 claims.
(c) The commissioner or receiver, as applicable, is not
required to make distributions from the assets of the unauthorized
insurer before using amounts advanced under Section 464.053. Any
payment of a policy claim made under Subsection (a) shall be treated
as a distribution under Section 443.302. If approved policy claims
cannot be paid in full from the funds advanced under Section 464.053
and the assets of the unauthorized insurer available for
distribution, the claims shall be paid on a pro rata basis in the
manner described in Section 443.301.
(d) Amounts advanced that are not needed to pay
administrative expenses or policy claims shall be returned to the
fund account. On a final distribution under Section 443.302 or the
termination of a delinquency proceeding, any funds of the
unauthorized insurer remaining after the payment in full of
administrative expenses and policy claims shall be used to repay
the advance, up to the amount of the advance.
(e) A person who has a policy claim may receive funds
deposited or advanced under this chapter only in accordance with
this section.
SECTION 2. This Act takes effect immediately if it receives
a vote of two-thirds of all the members elected to each house, as
provided by Section 39, Article III, Texas Constitution. If this
Act does not receive the vote necessary for immediate effect, this
Act takes effect September 1, 2009.
______________________________ ______________________________
President of the Senate Speaker of the House
I certify that H.B. No. 4339 was passed by the House on April
15, 2009, by the following vote: Yeas 147, Nays 0, 1 present, not
voting.
______________________________
Chief Clerk of the House
I certify that H.B. No. 4339 was passed by the Senate on May
21, 2009, by the following vote: Yeas 31, Nays 0.
______________________________
Secretary of the Senate
APPROVED: _____________________
Date
_____________________
Governor