By: Carona S.B. No. 1166
A BILL TO BE ENTITLED
AN ACT
relating to prepaid funeral benefits contracts and the prepaid
funeral contract guaranty fund.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subsection (a), Section 154.351, Finance Code,
is amended to read as follows:
(a) The commission by rule shall establish and the
department shall maintain a fund to guarantee performance by
sellers of prepaid funeral benefits contracts and funeral providers
under those contracts of their obligations to the purchasers.
SECTION 2. Section 154.353, Finance Code, is amended to
read as follows:
Sec. 154.353. DEPOSIT OF FUND OR PORTION OF FUND. (a) The
fund or a portion of the fund may be deposited [with]:
(1) with the comptroller;
(2) with a federally insured financial institution
that has its main office or a branch in this state; or
(3) in trust with a financial institution that has its
main office or a branch in this state and is authorized to act as a
fiduciary in this state.
(b) If the fund or a portion of the fund is deposited with
the comptroller, the comptroller shall manage the deposit [fund] as
trustee of money outside the state treasury.
SECTION 3. Section 154.355, Finance Code, is amended by
amending Subsection (a) and adding Subsection (d) to read as
follows:
(a) An advisory council composed of the following
individuals shall supervise the operation and maintenance of the
fund:
(1) the commissioner or the commissioner's
representative;
(2) [the attorney general or the attorney general's
representative;
[(3)] two representatives of the prepaid funeral
industry appointed by the commission, one of whom represents
trust-funded prepaid funeral benefits contract sellers and one of
whom represents insurance-funded prepaid funeral benefits contract
sellers; and
(3) [(4)] one consumer representative appointed by
the commission.
(d) Notwithstanding Chapter 551, Government Code, or any
other law, the advisory council may hold an open or closed meeting
by telephone conference call, videoconference, or other similar
telecommunication method if:
(1) notice is given for the meeting as for other
meetings;
(2) the notice specifies a location for the meeting at
which the public may attend;
(3) each part of the meeting that is required to be
open to the public is audible to the public at the location
specified in the notice of the meeting; and
(4) the meeting is recorded by electronic or other
means and the recording of each portion of the meeting that is
required to be open to the public is made available to the public.
SECTION 4. Section 154.357, Finance Code, is amended to
read as follows:
Sec. 154.357. CLAIM AGAINST SELLER, FUNERAL PROVIDER, OR
DEPOSITORY. The department may assert a claim against a seller,
funeral provider, or depository that commits a violation of this
chapter that could result in a claim against the fund.
SECTION 5. Subsection (b), Section 154.358, Finance Code,
is amended to read as follows:
(b) A claim against the fund may be made by:
(1) a purchaser of a prepaid funeral benefits
contract;
(2) a purchaser's estate;
(3) a permit holder or funeral provider who assumes or
performs a contract; or
(4) a claimant for the benefit of a group of purchasers
of prepaid funeral benefits contracts as part of a plan to arrange
for another permit holder or funeral provider to assume the
contract obligations.
SECTION 6. Subsection (a), Section 154.359, Finance Code,
is amended to read as follows:
(a) In addition to uses authorized by Section 154.354, the
fund may be used to pay:
(1) a loss attributable to the failure or inability of
a permit holder or funeral provider to perform its [the permit
holder's] obligations under a prepaid funeral benefits contract;
(2) expenses of a plan to arrange for another permit
holder or funeral provider to assume the obligations of the permit
holder or funeral provider under a prepaid funeral benefits
contract or a group of prepaid funeral benefits contracts if the
commissioner finds, with the advice and consent of the advisory
council, that the plan is reasonable and in the best interests of
the contract beneficiaries;
(3) administrative expenses related to servicing and
handling outstanding prepaid funeral benefits contracts:
(A) that have not been assumed by another permit
holder; or
(B) the obligations under which have not been
assumed by another funeral provider;
(4) expenses for administering the receivership of an
insolvent permit holder or funeral provider if the permit holder's
or funeral provider's assets are insufficient to pay those
expenses; and
(5) expenses to employ and compensate a consultant, an
agent, legal counsel, an accountant, and any other person
appropriate and consistent with the purpose of the fund, as
determined by the advisory council.
SECTION 7. Subchapter H, Chapter 154, Finance Code, is
amended by adding Section 154.3595 to read as follows:
Sec. 154.3595. DEFAULT BY FUNERAL PROVIDER. (a) This
section applies to a permit holder that sold and administers a
prepaid funeral benefits contract for which:
(1) the permit holder is not the funeral provider; and
(2) there is an actual or anticipated failure or
inability of the funeral provider to perform its obligations under
the contract.
(b) A permit holder to which this section applies shall make
a reasonable effort to find a substitute funeral provider willing
to assume the contractual obligations of the defaulting funeral
provider. A reasonable effort includes:
(1) identifying and contacting at least three funeral
providers within the same community or geographic service area as
the defaulting funeral provider;
(2) if at least three funeral providers do not exist
within the same community or geographic service area, identifying
and contacting at least three funeral providers within a 50-mile
radius of the defaulting funeral provider; and
(3) for both Subdivisions (1) and (2), first
contacting those funeral providers that the permit holder considers
have services and facilities that are comparable to the defaulting
funeral provider.
(c) A permit holder that is unable to locate a substitute
funeral provider as required by Subsection (b) shall submit
information to the advisory council describing or identifying:
(1) all prepaid funeral benefits contracts to which
the defaulting funeral provider is a party;
(2) to the extent known, the circumstances underlying
the default by the original funeral provider and any attempt by the
permit holder to address the default with the defaulting funeral
provider;
(3) any effort by the permit holder to find a
substitute funeral provider, including:
(A) the location and identity of each contacted
funeral provider;
(B) the terms offered to the funeral provider;
and
(C) the terms of any counteroffer or other
response made by the funeral provider; and
(4) other information known to the permit holder that
the permit holder believes may be relevant or useful to the advisory
council.
(d) The permit holder shall cooperate with the department
and the advisory council in facilitating selection of a substitute
funeral provider by complying with any reasonable request for:
(1) additional information;
(2) assistance in negotiating with a potential
substitute funeral provider; or
(3) assistance in communicating with a purchaser of an
affected prepaid funeral benefits contract.
SECTION 8. The changes in law made by this Act to Subchapter
H, Chapter 154, Finance Code, do not apply to a loss under a prepaid
funeral benefits contract sold before the effective date of this
Act that arises from or relates to the occurrence of one of the
following events:
(1) an event of default under the contract
attributable to the funeral provider unless the funeral provider is
also the contract seller; or
(2) the bankruptcy, receivership, seizure, or other
failure of the funeral provider unless the funeral provider is also
the contract seller.
SECTION 9. 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, 2011.