HBA-NIK H.B. 2847 76(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 2847 By: Brimer Insurance 4/14/1999 Introduced BACKGROUND AND PURPOSE The Texas Property and Casualty Insurance Guaranty Act (Article 21.28C, Insurance Code) was enacted to protect policy holders of insurance companies that become impaired. It is administered by the commissioner of insurance in conjunction with the board of directors of the Texas Property and Casualty Insurance Guaranty Association (association), whose membership includes public and insurer representatives. When an insurance company becomes impaired, it is placed in receivership, and a court, acting upon a recommendation of the commissioner, appoints a receiver for the company. The receiver then takes over the company, determines the assets available for covered claims and permitted expenses, receives and determines what claims and expense filings are proper to pay, and then pays such claims and expenses. If assets are insufficient to pay these claims and expenses, the receiver notifies the association. H.B. 2847 provides a specified date for filing claims with the receiver, limits claims on behalf of certain large insureds, and reduces the net worth requirement for insureds from whom recovery of covered claims and expenses can be sought from $50 million to $10 million. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 3(a), Article 21.28, Insurance Code, to require all persons who may have claims against a specified insurer to present proof of the same to the receiver, at a place specified by him within a period of time to be specified by the court, between 90 days and 15 months after the date of the entry of the order specifying the time. SECTION 2. Amends Section 8(d), Article 21.28-C, Insurance Code, as follows: (d)(1) Requires the final date for filing claims with the liquidator or receiver and Texas Property and Casualty Insurance Guaranty Association (association) to be the same, but in no event more than 15 months after the order of impairment. Requires the final date for filing claims with the association to be 15 months after the order of impairment in the event no necessity exists for a receivership estate to receive claim filings. Deletes the period of eighteen months after the order of liquidation as the other time period after which a covered claim is prohibited from including any claim filed with the guaranty association. (2) Requires any obligation of the association to any and all persons to cease when $10,000,000 in the aggregate shall have been paid to or on behalf of any insured or its affiliates for covered or allowed claims and all expenses incurred in connection therewith arising under a policy or policies of any one insolvent insurer by the association, any other similar state associations, and any property and casualty insurance security fund which obtains contributions from insurers on a preinsolvency basis. Provides that such obligations cease except in the case of a workers' compensation claim and not withstanding other provisions of this article. Defines the term "affiliate."Authorizes the association to establish, under specified circumstances, a plan to allocate amounts payable by the association in such manner as the association, in its discretion, deems equitable. SECTION 3. Amends Section 11(b), Article 21.28-C, Insurance Code, to include all expenses incurred and arising out of covered claim, including legal and defense costs, which the association is entitled to recover from specified persons. Provides that such expenses may be recovered by the association from an insured whose net worth, as of December 31 of the next year preceding the date the insurer becomes impaired, exceeds $10 million, rather than $50 million, and whose liability obligations to other persons are satisfied in whole or in part by payments made under this article. Deletes the provision specifying that those liability obligations to other persons are under a policy or contract of insurance written, issued, and placed in force after January 1, 1992. SECTION 4. Effective date: September 1, 1999. Makes application of this Act prospective. SECTION 5. Emergency clause.