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Art. 21.28-D. LIFE, ACCIDENT, HEALTH, AND HOSPITAL SERVICE INSURANCE GUARANTY ASSOCIATION. Article repealed effective April 1, 2007 Short title Sec. 1. This Act shall be known and may be cited as the Life, Accident, Health, and Hospital Service Insurance Guaranty Association Act. Purpose Sec. 2. The purpose of this Act is to protect, subject to certain limitations, the persons specified in Section 3(a) of this Act against failure in the performance of contractual obligations, under life, accident, and health insurance policies and annuity contracts specified in Section 3(b) of this Act, because of the impairment or insolvency of the member insurer that issued the policies or contracts. To provide this protection, an association of insurers is created to pay benefits and to continue coverages as limited in this Act, and members of the association are subject to assessment to provide funds to carry out the purpose of this Act. Coverage and Limitations Sec. 3. (a) Subject to Subsections (a-1) and (a-2) of this section, this Act provides coverage for a policy or contract specified in Subsection (b) of this section to the following persons: (1) a person, other than a nonresident certificate holder under a group policy or contract, who is the beneficiary, assignee, or payee of a person covered under Paragraph (2) of this subsection; (2) a person who is an owner of or certificate holder under the policy or contract, other than an unallocated annuity contract or structured settlement annuity, and who: (A) is a resident; or (B) is not a resident, but only under all of the following conditions: (i) the insurers that issued the policies or contracts are domiciled in this state; (ii) the state in which the person resides has an association similar to the association created by this Act; and (iii) the person is not eligible for coverage by an association in any other state because the insurers were not licensed in the state at the time specified in that state's guaranty association law; (3) a person who is the owner of an unallocated annuity contract issued to or in connection with: (A) a benefit plan whose plan sponsor has the sponsor's principal place of business in this state; or (B) a government lottery, if the owner is a resident; and (4) a person who is the payee under a structured settlement annuity, or beneficiary of the payee if the payee is deceased, if: (A) the payee is a resident, regardless of where the contract owner resides; (B) the payee is not a resident, the contract owner of the structured settlement annuity is a resident, and the payee is not eligible for coverage by the association in the state in which the payee resides; or (C) the payee and the contract owner are not residents, the insurer that issued the structured settlement annuity is domiciled in this state, the state in which the contract owner resides has an association similar to the association created by this Act, and neither the payee or, if applicable, the payee's beneficiary, nor the contract owner is eligible for coverage by the association in the state in which the payee or contract owner resides. (a-1) This Act does not provide coverage to: (1) a person who is a payee or the beneficiary of a payee with respect to a contract the owner of which is a resident of this state, if the payee or the payee's beneficiary is afforded any coverage by the association of another state; or (2) a person otherwise described by Subsection (a)(3) of this section, if any coverage is provided by the association of another state to that person. (a-2) This Act is intended to provide coverage to persons who are residents of this state, and in those limited circumstances as described in this Act, to nonresidents. In order to avoid duplicate coverage, if a person who would otherwise receive coverage under this Act is provided coverage under the laws of any other state, the person may not be provided coverage under this Act. In determining the application of the provisions of this subsection in situations in which a person could be covered by the association of more than one state, whether as an owner, payee, beneficiary, or assignee, this Act shall be construed in conjunction with other state laws to result in coverage by only one association. (b) This Act provides coverage to the persons specified in Subsection (a) of this section, and subject to Subsections (a-1) and (a-2) of this section, for direct, non-group life, health, accident, annuity, and supplemental policies or contracts, for certificates under direct group policies and contracts, group hospital service contracts, and for unallocated annuity contracts issued by member insurers, except as limited by this Act. This Act also provides coverage for all other insurance coverages written by mutual assessment corporations, local mutual aid associations, statewide mutual assessment companies, and stipulated premium companies licensed to do business in this state. Annuity contracts and certificates under group annuity contracts include guaranteed investment contracts, deposit administration contracts, unallocated funding agreements, allocated funding agreements, structured settlement annuities, annuities issued to or in connection with government lotteries, and any immediate or deferred annuity contracts. (c) This Act does not provide coverage for: (1) a portion of a policy or contract not guaranteed by the insurer, or under which the risk is borne by the policy or contract owner; (2) a policy or contract of reinsurance, unless assumption certificates have been issued; (3) a portion of a policy or contract to the extent that the rate of interest on which it is based: (A) averaged over the period of four years before the date on which the member insurer becomes impaired or insolvent under this Act, whichever is earlier, exceeds a rate of interest determined by subtracting two percentage points from Moody's Corporate Bond Yield Average averaged for that same four-year period or for a lesser period if the policy or contract was issued less than four years before the member insurer becomes impaired or insolvent under this Act, whichever is earlier; and (B) on and after the date on which the member insurer becomes impaired or insolvent under this Act, whichever is earlier, exceeds the rate of interest determined by subtracting three percentage points from Moody's Corporate Bond Yield Average as most recently available; (4) a portion of a policy or contract issued to a plan or program of an employer, association, similar entity, or other person to provide life, health, or annuity benefits to its employees, members, or others, to the extent that the plan or program is self-funded or uninsured, including but not limited to benefits payable by an employer, association, or similar entity under: (A) a multiple employer welfare arrangement as defined by the Employee Retirement Income Security Act of 1974 (29 U.S.C. Section 1002); (B) a minimum premium group insurance plan; (C) a stop-loss group insurance plan; or (D) an administrative services-only contract; (5) a portion of a policy or contract, to the extent that it provides dividends or experience rating credits, voting rights, or provides that fees or allowances be paid to any person, including the policy or contract owner, in connection with the service to or administration of the policy or contract; (6) a policy or contract issued in this state by a member insurer at a time when it was not licensed to issue the policy or contract in this state; (7) an unallocated annuity contract issued to or in connection with a benefit plan protected under the federal Pension Benefit Guaranty Corporation, regardless of whether the Pension Benefit Guaranty Corporation has not yet become liable to make any payments with respect to the benefit plan; (8) a portion of an unallocated annuity contract that is not issued to or in connection with a specific employee, benefit plan for a union or association of natural persons, or a government lottery; (9) any portion of a financial guarantee, funding agreement, or guaranteed investment contract which (1) contains no mortality guarantees and (2) is not issued to or in connection with a specific employee, benefit plan, or a governmental lottery; (10) a portion of a policy or contract to the extent that the assessments required by Section 9 of this Act with respect to the policy or contract are preempted by federal or state law; (11) a contractual agreement that established the member insurer's obligations to provide a book value accounting guaranty for defined contribution benefit plan participants by reference to a portfolio of assets that is owned by the benefit plan or the plan's trustee in a case in which neither the benefit plan sponsor nor its trustee is an affiliate of the member insurer; and (12) a portion of a policy or contract to the extent the policy or contract provides for interest or other changes in value that are to be determined by the use of an index or external reference stated in the policy or contract, but that have not been credited to the policy or contract, or as to which the policy or contract owner's rights are subject to forfeiture, as of the date the member insurer becomes an impaired or insolvent insurer under this Act, whichever date is earlier; provided, however, if a policy's or contract's interest or changes in value are credited less frequently than annually, for purposes of determining the values that have been credited and are not subject to forfeiture as described by this paragraph, the interest or change in value determined by using the procedures defined in the policy or contract is credited as if the contractual date of crediting interest or changing values is the earlier of the date of impairment or the date of insolvency, and is not subject to forfeiture. (d) The benefits for which the association may become liable shall not exceed the contractual obligations for which the insurer is liable or would have been liable if it were not an impaired or insolvent insurer. The association has no obligation to provide benefits outside the express written terms of the policy or contract, including: (1) claims based on marketing materials; (2) claims based on side letters, riders, or other documents that were issued without meeting applicable policy form filing or approval requirements; (3) claims based on misrepresentation of or regarding policy benefits; (4) extracontractual claims; or (5) claims for penalties or consequential or incidental damages. (e) The limitations set forth in this Act are limitations on the benefits for which the association is obligated before taking into account either the association's subrogation and assignment rights or the extent to which those benefits could be provided out of the assets of the impaired or insolvent insurer attributable to covered policies. The costs of the association's obligations under this Act may be met by the use of assets attributable to covered policies or reimbursed to the association pursuant to the association's subrogation and assignment rights. Construction Sec. 4. This Act shall be liberally construed to effect the purpose under Section 2 of this Act. Section 2 of this Act shall be used as an aid and guide to interpretation. Definitions Sec. 5. As used in this Act: (1) "Account" means the four accounts created under Section 6 of this Act. (2) "Association" means the Texas Life, Accident, Health, and Hospital Service Insurance Guaranty Association created under Section 6 of this Act. (2-a) "Benefit plan" means a specific employee, union, or association of natural persons benefit plan. (3) "Contractual obligation" means an obligation under a policy or contract or certificate under a group policy or contract, or portion thereof for which coverage is provided under Section 3 of this Act. A contractual obligation does not include: (A) death benefits in an amount in excess of $300,000 or a net cash surrender or net cash withdrawal value in an amount in excess of $100,000 under one or more covered policies on any one life; (B) an amount in excess of $100,000 in the present value under one or more annuity contracts within the scope of this Act issued with respect to one life under individual annuity policies or group annuity policies or an amount in excess of $5,000,000 in unallocated annuity contract benefits with respect to any one contract holder irrespective of the number of such contracts; (C) an amount in excess of the following amounts, including any net cash surrender or cash withdrawl values, under one or more accident and health, accident, health, or long-term care insurance policies on any one life: (i) $500,000 for basic hospital, medical-surgical, or major medical insurance, as those terms are defined in this code or rules adopted by the commissioner; (ii) $300,000 for disability and long-term care insurance, as those terms are defined in this code or rules adopted by the commissioner; or (iii) $200,000 for coverages that are not defined as basic hospital, medical-surgical, major medical, disability, or long-term care insurance; (D) an amount in excess of $100,000 in present value annuity benefits, in the aggregate, including any net cash surrender and net cash withdrawal values, with respect to each individual participating in a governmental retirement benefit plan established under Section 401, 403(b), or 457, Internal Revenue Code of 1986 (26 U.S.C. Sections 401, 403(b), and 457), covered by an unallocated annuity contract or the beneficiary or beneficiaries of the individual if the individual is deceased; (E) an amount in excess of $100,000 in present value annuity benefits, in the aggregate, including any net cash surrender and net cash withdrawal values, with respect to each payee of a structured settlement annuity or the beneficiary or beneficiaries of the payee if the payee is deceased; (F) aggregate benefits in an amount in excess of $300,000 with respect to one life, except with respect to: (i) benefits paid under basic hospital, medical-surgical, or major medical insurance policies, described by Paragraph (C)(i) of this subdivision, in which case the aggregate benefits are $500,000; and (ii) benefits paid to one owner of multiple nongroup policies of life insurance, whether the policy owner is an individual, firm, corporation, or other person, and whether the persons insured are officers, managers, employees, or other persons, in which case the maximum benefits are $5,000,000 regardless of the number of policies and contracts held by the owner; (G) an amount in excess of $5,000,000 in benefits, with respect to either one plan sponsor whose plans own directly or in trust one or more unallocated annuity contracts not included in Paragraph (D) of this subdivision irrespective of the number of contracts with respect to the contract owner or plan sponsor or one contract owner provided coverage under Section 3(a)(3)(B) of this Act, except that, if one or more unallocated annuity contracts are covered contracts under this Act and are owned by a trust or other entity for the benefit of two or more plan sponsors, coverage shall be afforded by the association if the largest interest in the trust or entity owning the contract or contracts is held by a plan sponsor whose principal place of business is in this state and in no event shall the association be obligated to cover more than $5,000,000 in benefits with respect to all these unallocated contracts; (H) any contractual obligations of the insolvent or impaired insurer under a covered policy or contract that do not materially affect the economic value of economic benefits of the covered policy or contract; or (I) punitive, exemplary, extracontractual, or bad faith damages, whether agreed to or assumed by an insurer or insured or imposed by a court of competent jurisdiction. (4) "Covered policy" means any policy or contract, or portion of a policy or contract, within the scope of this Act under Section 3 of this Act. (5) "Impaired insurer" means a member insurer that is designated an "impaired insurer" by the commissioner and is: (A) placed by a court in this state or another state under an order of supervision, liquidation, rehabilitation, or conservation; (B) placed under an order of liquidation or rehabilitation under the provisions of Article 21.28 of this code; or (C) placed under an order of supervision or conservation by the commissioner under the provisions of Article 21.28-A of this code. (6) "Insolvent insurer" means a member insurer that has been placed under an order of liquidation with a finding of insolvency by a court in this state or another state. (7) "Member insurer" means any insurer licensed or that holds a certificate of authority to transact in this state any kind of insurance for which coverage is provided under Section 3 of this Act, and includes any insurer whose license or certificate of authority in this state may have been suspended, revoked, not renewed, or voluntarily withdrawn, including a mutual assessment corporation, a local mutual association, a statewide mutual assessment company, and a stipulated premium company licensed to do business in this state, but does not include: (A) a health maintenance organization; (B) a fraternal benefit society; (C) a mandatory state pooling plan; (D) an insurance exchange; (E) an organization which has a certificate of authority or license limited to the issuance of charitable gift annuities as defined in this code or rules adopted by the commissioner; or (F) any entity similar to any of those described by Paragraphs (A)-(E) of this subdivision. (8) "Moody's Corporate Bond Yield Average" means the Monthly Average Corporates as published by Moody's Investors Service, Inc., or any successor to that entity. (8-a) "Owner" means the owner of a policy or contract and "policy owner" and "contract owner" mean the person who is identified as the legal owner under the terms of the policy or contract or who is otherwise vested with legal title to the policy or contract through a valid assignment completed in accordance with the terms of the policy or contract and is properly recorded as the owner on the books of the insurer. The terms owner, contract owner, and policy owner do not include persons with a mere beneficial interest in a policy or contract. (9) "Person" means any individual, corporation, limited liability company, partnership, association, governmental body or entity, or voluntary organization. (9-a) "Plan sponsor" means: (A) the employer in the case of a benefit plan established or maintained by a single employer; (B) the employee organization in the case of a benefit plan established or maintained by an employee organization; or (C) in a case of a benefit plan established or maintained by two or more employers or jointly by one or more employers and one or more employee organizations, the association, committee, joint board of trustees, or other similar group of representatives of the parties who establish or maintain the benefit plan. (10) "Premiums" means amounts received on covered policies or contracts less premiums, considerations, and deposits returned on those policies or contracts, and less dividends and experience credits on those policies or contracts. "Premiums" does not include amounts received for policies or contracts or for the portions of any policies or contracts for which coverage is not provided under Section 3(b) of this Act, except that assessable premiums shall not be reduced on account of Section 3(c)(3) of this Act relating to interest limitations and Section 5(3) of this Act relating to limitations with respect to any one individual, any one participant, any one annuitant, and any one contract owner. "Premiums" does not include premiums in excess of $5,000,000 on any unallocated annuity contract not issued under a governmental benefit plan established under Section 401, 403(b), or 457 of the United States Internal Revenue Code (26 U.S.C. Sections 401, 403(b) and 457). "Premiums" does not include premiums in excess of $5,000,000 with respect to multiple nongroup policies of life insurance owned by one owner, whether the policy owner is an individual, firm, corporation, or other person, and whether the persons insured are officers, managers, employees, or other persons, regardless of the number of policies or contracts held by the owner. "Premiums" also does not include premiums received from the Treasury of the State of Texas or from the Treasury of the United States for insurance contracted for by the state or federal government for the purpose of providing welfare benefits to designated welfare recipients or for insurance contracted for by the state or federal government in accordance with or in furtherance of the provisions of Title 2, Human Resources Code, or the Federal Social Security Act. (11) "Resident" means any person who resides in this state on the earlier of the date a member insurer becomes an impaired insurer or the date of entry of a court order that determines a member insurer to be an impaired insurer or the date of entry of a court order that determines a member insurer to be an insolvent insurer and to whom a contractual obligation is owed. A person may be a resident of only one state, which in the case of a person other than a natural person is its principal place of business. A United States citizen that is either a resident of a foreign country or a resident of a United States possession, territory, or protectorate that does not have an association similar to the association created by this Act is considered a resident of the state of domicile of the insurer that issued the policy or contract. (11-a) "Structured settlement annuity" means an annuity purchased to fund periodic payments for a plaintiff or other claimant in payment for or with respect to personal injury suffered by the plaintiff or other claimant. (12) "Supplemental contract" means any written agreement entered into for the distribution of policy or contract proceeds. (13) "Unallocated annuity contract" means any annuity contract or group annuity certificate that is not issued to and owned by an individual, except to the extent of any annuity benefits guaranteed to an individual by an insurer under the contract or certificate. Definition of Principal Place of Business of Plan Sponsor or Other Person Sec. 5A. (a) Except as otherwise provided by this section, in this Act, the "principal place of business" of a plan sponsor or a person other than an individual means the single state in which the individuals who establish policy for the direction, control, and coordination of the operations of the plan sponsor or person as a whole primarily exercise that function, as determined by the association in its reasonable judgment by considering the following factors: (1) the state in which the primary executive and administrative headquarters of the plan sponsor or person is located; (2) the state in which the principal office of the chief executive officer of the plan sponsor or person is located; (3) the state in which the board of directors, or similar governing person or persons, of the plan sponsor or person conduct the majority of their meetings; (4) the state in which the executive or management committee of the board of directors, or similar governing person or persons, of the plan sponsor or person conduct the majority of their meetings; (5) the state from which the management of the overall operations of the plan sponsor or person is directed; and (6) in the case of a benefit plan sponsored by affiliated companies comprising a consolidated corporation, the state in which the holding company or controlling affiliate has its principal place of business as determined using the factors described by Subdivisions (1)-(5) of this subsection. (b) In the case of a plan sponsor, if more than 50 percent of the participants in the benefit plan are employed in a single state, that state is the principal place of business of the plan sponsor. (c) The principal place of business of a plan sponsor of a benefit plan described in Section 5(9-a)(C) of this Act is the principal place of business of the association, committee, joint board of trustees, or other similar group of representatives of the parties who establish or maintain the benefit plan that, in lieu of a specific or clear designation of a principal place of business, shall be deemed to be the principal place of business of the employer or employee organization that has the largest investment in that benefit plan. Creation of association Sec. 6. (a) The Texas Life, Accident, Health, and Hospital Service Insurance Guaranty Association is a nonprofit legal entity. All member insurers shall be and remain members of the association as a condition of their authority to transact insurance in this state. The association shall perform its functions under the plan of operation established and approved under Section 10 of this Act and shall exercise its powers through a board of directors established under Section 7 of this Act. For purposes of administration and assessment, the association shall maintain four accounts: (1) the accident, health, and hospital services insurance account; (2) the life insurance account; (3) the annuity account; and (4) the administrative account. (b) The association is under the immediate supervision of the commissioner and is subject to the applicable provisions of this code and any other law governing insurance in this state. Board of directors Sec. 7. (a) The commissioner shall appoint a board of directors of the association consisting of nine members, three of whom shall be chosen from employees or officers chosen from the 50 member companies having the largest total direct premium income based on the latest financial statement on file at date of appointment, two of whom shall be chosen from the other companies to give fair representation to member insurers based on due consideration of their varying categories of premium income and geographical location, and four of whom shall be representatives of the general public. Members serve for six-year staggered terms, with the terms of three members expiring each odd-numbered year. All directors shall serve until their successors are appointed, except that in the case of any vacancy, the unexpired term of office shall be filled by the appointment of a director by the commissioner. If a director ceases to be an officer or employee of a member insurer during the director's term of office, that office becomes vacant until the director's successor is appointed. All directors are eligible to succeed themselves in office. A public representative may not be: (1) an officer, director, or employee of an insurance company, insurance agency, agent, broker, solicitor, adjuster, or any other business entity regulated by the department; (2) a person required to register with the secretary of state under Chapter 305, Government Code; or (3) related to a person described by Subparagraph (1) or (2) of this paragraph within the second degree of affinity or consanguinity. (b) Each director of the association shall file a financial statement with the secretary of state in accordance with Sections 3 and 4, Chapter 421, Acts of the 63rd Legislature, Regular Session, 1973 (Article 6252-9b, Vernon's Texas Civil Statutes). (c) Members of the board may be reimbursed from the assets of the association for expenses incurred by them as members of the board of directors but members of the board may not otherwise be compensated by the association for their services. (d) A director of the association may not receive any money or valuable thing directly, indirectly, or through any substantial interest in any other corporation, firm, or business unit for negotiating, procuring, participating, recommending, or aiding in a transaction, reinsurance agreement, merger, purchase, sale, contribution, or exchange of assets, policies of insurance, or property made by the association or the supervisor, conservator, or receiver on behalf of an impaired insurer. A director of the association may not have a pecuniary interest, as principal, co-principal, agent, or beneficiary, directly, indirectly, or through any substantial interest in any other corporation, firm, or business unit, in the transaction, reinsurance agreement, merger, purchase, sale, contribution, or exchange. Powers and duties of the association Sec. 8. (a) If a member insurer is an impaired domestic insurer, the association may, subject to the approval of the commissioner, and subject to any conditions imposed by the association that do not impair the contractual obligations of the impaired insurer that are approved by the commissioner, and that are, except in cases of court-ordered conservation or rehabilitation, also approved by the impaired insurer: (1) guarantee, assume, or reinsure, or cause to be guaranteed, assumed, or reinsured, any or all of the policies or contracts of the impaired insurer; (2) provide the moneys, pledges, notes, guarantees, or other means as are proper to effectuate Subdivision (1) of this subsection and assure payment of the contractual obligations of the impaired insurer pending action under Subdivision (1) of this subsection; or (3) loan money to the impaired insurer. (b) If a member insurer is an impaired insurer, whether domestic, foreign or alien, and the insurer is not paying claims timely, subject to the conditions specified in Subsection (c) of this section, the association shall: (1) take any of the actions specified in Subsection (a) of this section, subject to the conditions in that subsection; or (2) provide substitute benefits in lieu of the contractual obligations of the impaired insurer solely for health claims, periodic annuity benefit payments, death benefits, supplemental benefits, and cash withdrawals for policy or contract owners who petition for substitute benefits under claims of emergency or hardship under standards proposed by the association and approved by the commissioner. (c) The association is subject to Subsection (b) of this section only if: (1) the laws of the impaired insurer's state of domicile provided that, until all payments of or on account of the impaired insurer's contractual obligations by all guaranty associations, along with all expenses of the associations and interest on all those payments and expenses have been repaid to the guaranty associations or a plan of repayment by the impaired insurer has been approved by the guaranty associations: (A) the delinquency proceeding may not be dismissed; (B) the impaired insurer and its assets may not be returned to the control of its shareholders or private management; and (C) the impaired insurer may not solicit or accept new business or have any suspended or revoked license restored; and (2) the impaired insurer is a domestic insurer, and has been placed under an order of rehabilitation by a court of competent jurisdiction in this state; or (3) the impaired insurer is a foreign or alien insurer and: (A) it has been prohibited from soliciting or accepting new business in this state; (B) its certificate of authority has been suspended or revoked in this state; and (C) a petition for rehabilitation or liquidation has been filed in a court of competent jurisdiction in its state of domicile by the commissioner of the state. (d) Except as provided by Subsection (e) of this section, if a member insurer is an insolvent insurer, the association shall provide the moneys, pledges, guarantees, or other means as are reasonably necessary to discharge the duties of the insolvent insurer and: (1) guarantee, assume, or reinsure, or cause to be guaranteed, assumed, or reinsured, the policies or contracts of the insolvent insurer; or (2) assure payment of the contractual obligations of the insolvent insurer. (e) When proceeding under Subsections (b)(2) or (d) of this section, with respect to only life and health insurance policies the association shall: (1) assure payment of benefits for premiums identical to the premiums and benefits, except for terms of conversion and renewability that would have been payable under the policies of the impaired or insolvent insurer, for claims incurred: (A) with respect to a group policy or contract, the later of: (i) the earlier of the next renewal date under the policy or contract or the 45th day after the date the association becomes obligated with respect to the policy; or (ii) the 30th day after the date the association becomes obligated with respect to the policy; or (B) with respect to an individual policy, the later of: (i) the earlier of the next renewal date under the policy, if any, or the date one year after the date the association becomes obligated with respect to the policy; or (ii) the 30th day after the date the association becomes obligated with respect to the policy; (2) make diligent efforts to provide all known insureds or group policyholders notice before the 30th day before the benefits provided are terminated; and (3) with respect to individual policies, make available to each known insured, or owner if other than the insured, and with respect to an individual formerly insured under a group policy who is not eligible for replacement group coverage, substitute coverage on an individual basis in accordance with the provisions of Subsection (f) of this section, if the insureds had a right under law or the terminated policy to convert coverage to individual coverage or to continue an individual policy in force until a specified age or for a specified time, during which the insurer had no right unilaterally to make changes in any provision of the policy or had a right only to make changes in premium by class. (f) In providing the substitute coverage required under Subsection (e)(3) of this section, the association may offer either to reissue the terminated coverage or to issue an alternative policy. Alternative or reissued policies shall be offered without requiring evidence of insurability, and may not provide for any waiting period or exclusion that would not have applied under the terminated policy. The association may reinsure any alternative or reissued policy. (g) An alternative policy adopted by the association is subject to the approval of the commissioner. The association may adopt alternative policies of various types for future issuance without regard to any particular impairment or insolvency. (h) An alternative policy issued by the association must contain at least the minimum statutory provisions required in this state and provide benefits that are not unreasonable in relation to the premium charged. The association shall set the premium in accordance with a table of rates adopted by the association. The premium shall reflect the amount of insurance to be provided and the age and class of risk of each insured, but may not reflect any changes in the health of the insured after the original policy was last underwritten. (i) An alternative policy issued by the association must provide coverage of a type similar to that of the policy issued by the impaired or insolvent insurer, as determined by the association. (j) If the association elects to reissue terminated coverage at a premium rate different from that charged under the terminated policy, the premium shall be set by the association in accordance with the amount of insurance provided and the age and class of risk, subject to approval of the commissioner or by a court of competent jurisdiction. (k) The association's obligations with respect to coverage under any policy of the impaired or insolvent insurer or under any reissued or alternative policy cease on the date the coverage or policy is replaced by another similar policy by the policyholder, the insured, or the association. (l) When proceeding under Subsection (b)(2) or (d) of this section with respect to a policy or contract carrying guaranteed minimum interest rates, the association shall assure the payment or crediting of a rate of interest consistent with Section 3(c)(3) of this Act. (m) Failure to pay premiums before the 32nd day after the date required under the terms of any guaranteed, assumed, alternative, or reissued policy or contract or substitute coverage terminates the association's obligations under the policy or coverage under this Act with respect to that policy or coverage, except with respect to any claims incurred or any net cash surrender value due in accordance with the provisions of this Act. (n) Premiums due for coverage after entry of an order of receivership of an impaired or insolvent insurer belong to and are payable at the direction of the association, and the association is liable for unearned premiums due to policy or contract owners arising after the entry of the order. (o) The protection provided by this Act does not apply if any guaranty protection is provided to residents of this state by the laws of the domiciliary state or jurisdiction of the impaired or insolvent insurer other than this state. (p) In carrying out its duties under this section, the association may, subject to approval by the court: (1) impose permanent policy or contract liens in connection with any guarantee, assumption, or reinsurance agreement if the association finds that the amounts that can be assessed under this Act are less than the amounts needed to assure full and prompt performance of the association's duties under this Act, or that the economic or financial conditions as they affect member insurers are sufficiently adverse to make the imposition of the permanent policy or contract liens in the public interest; or (2) impose temporary moratoriums or liens on payments of cash values and policy loans, or any other right to withdraw funds held in conjunction with policies or contracts, in addition to any contractual provisions for deferral of cash or policy loan value. (q) If the association fails to act within a reasonable period of time as provided in Subsections (b)(2), (d), and (e) of this section, the commissioner may assume the powers and duties of the association under this Act with respect to impaired or insolvent insurers. (r) The association may render assistance and advice to the commissioner, on request, concerning rehabilitation, payment of claims, continuance of coverage, or the performance of other contractual obligations of an impaired or insolvent insurer. (s) The association may appear before any court in this state with jurisdiction over an impaired or insolvent insurer concerning which the association is or may become obligated under this Act. This right extends to all matters germane to the powers and duties of the association, including proposals for reinsuring, modifying, or guaranteeing the policies or contracts of the impaired or insolvent insurer and the determination of the policies or contracts and contractual obligations. The association may appear or intervene before a court in another state with jurisdiction over an impaired or insolvent insurer for which the association is or may become obligated or with jurisdiction over a third party against whom the association may have rights through subrogation of the insurer's policyholders. (t) A person receiving benefits under this Act is considered to have assigned the rights under, and any causes of action relating to, the covered policy or contract to the association to the extent of the benefits received under this Act, whether the benefits are payments of or on account of contractual obligations, continuation of coverage, or provision of substitute or alternative coverages. The association may require an assignment to it of the rights and cause of action by any payee, policy or contract owner, beneficiary, insured, or annuitant as a condition to the receipt of a right or benefit under this Act. The subrogation rights of the association under this subsection have the same priority against the assets of the impaired or insolvent insurer as that possessed by the person entitled to receive benefits under this Act. (u) The association has all common-law rights of subrogation and any other equitable or legal remedy that would have been available to the impaired or insolvent insurer or holder of a policy or contract with respect to such a policy or contract. (u-1) The rights of the association under Subsection (u) include, in the case of a structured settlement annuity, any rights of the owner, beneficiary, or payee of the annuity, to the extent of benefits received under this Act, against any person originally or by succession responsible for the losses arising from the personal injury relating to the annuity or payment for the annuity, other than a person responsible solely by reason of serving as an assignee in respect of a qualified assignment under Section 130, Internal Revenue Code of 1986 (26 U.S.C. Section 130). (u-2) If a provision of Subsection (t), (u), or (u-1) of this section is invalid or ineffective with respect to any person or claim for any reason, the amount payable by the association with respect to the related covered obligations is reduced by the amount realized by any other person with respect to the person or claim that is attributable to the policies, or portion of the policies, covered by the association. If the association has provided benefits with respect to a covered obligation and a person recovers amounts as to which the association has rights described in Subsection (t), (u), or (u-1) of this section, the person shall pay to the association the portion of the recovery attributable to the policies, or portion of the policies, covered by the association. (u-3) A deposit in this state, held under law or required by the commissioner for the benefit of creditors, including policy owners, that is not turned over to the domiciliary liquidator upon the entry of a final order of liquidation or order approving a rehabilitation plan of an insurer domiciled in this state or a reciprocal state in accordance with Section 13, Article 21.28, of this code, shall be promptly paid to the association. The association is entitled to retain a portion of any amount paid to the association under this subsection equal to the percentage determined by dividing the aggregate amount of policy owners' claims related to that insolvency for which the association has provided statutory benefits by the aggregate amount of all policy owners' claims in this state related to that insolvency and shall remit to the domiciliary receiver the amount paid to the association and retained under this subsection. The amount paid to the association under this subsection, less the amount retained by the association under this subsection, is treated as a distribution of estate assets under Section 7A(a), Article 21.28, of this code, or the similar law of the state of domicile of the impaired or insolvent insurer. (v) The association may: (1) enter into contracts as are necessary or proper to carry out the provisions and purposes of this Act; (2) sue or be sued, including taking any legal actions necessary or proper to recover any unpaid assessments under Section 9 of this Act and to settle claims or potential claims against it; (3) borrow money to effect the purposes of this Act, and any notes or other evidence of indebtedness of the association not in default are legal investments for domestic insurers and may be carried as admitted assets; (4) employ or retain employees or contractors to handle the financial transactions of the association and to perform other functions under this Act; (5) take legal action as may be necessary to avoid payment of improper claims; (6) exercise, for the purposes of this Act and to the extent approved by the commissioner, the powers of a domestic life, accident, health, or hospital service insurer, but the association may not issue insurance policies or annuity contracts other than those issued to perform its obligations under this Act; (7) request information from a person seeking coverage from the association in determining its obligations under this Act with respect to the person, and the person shall promptly comply with the request; and (8) take any other necessary or appropriate action to discharge the association's duties and obligations under this Act or to exercise the association's powers under this Act. (w) The association may join an organization of one or more other state associations of similar purposes to further the purposes and administer the powers and duties of the association. (x) The board of directors of the association shall have discretion and may exercise reasonable business judgment to determine the means by which the association is to provide the benefits of this Act in an economical and efficient manner. (y) If the association arranges or offers to provide the benefits of this Act to a covered person under a plan or arrangement that fulfills the association's obligations under this Act, the person is not entitled to benefits from the association in addition to or other than those provided under the plan or arrangement. Assessments Sec. 9. (a) For the purpose of providing the funds necessary to carry out the powers and duties of the association, the board of directors shall determine the amount necessary and the association shall assess the member insurers, separately for each account established by Section 6(a) of this Act, at such times and for such amounts as the board of directors finds necessary. All assessments are due on a date specified by the association that may not be earlier than the 30th day after the date on which prior written notice is given to the member insurers. Interest accrues on the unpaid amount at a rate of 10 percent beginning on the due date. (b) There are two classes of assessments, as follows: (1) Class A assessments are authorized and called to meet administrative costs of the association, administrative expenses properly incurred under this Act relating to any unauthorized insurer or nonmember of the association, and other general expenses not related to a particular insolvent or impaired insurer; and (2) Class B assessments are authorized and called to the extent necessary to carry out the powers and duties of the association under Section 8 with regard to an insolvent or impaired insurer. (b-1) For purposes of Subsection (b) of this section, an assessment is authorized at the time a resolution by the board of directors is passed under which an assessment will be called immediately or in the future from member insurers for a specified amount and an assessment is called at the time a notice has been issued by the association to member insurers requiring that an authorized assessment be paid within a period stated in the notice. An authorized assessment becomes a called assessment at the time notice is mailed by the association to member insurers. (c) The amount of a Class A assessment for each account is determined by the board of directors taking into consideration one or more of the following: annual premium receipts, admitted assets, or insurance in force, as reflected in the annual statements for the year preceding the assessment. (d) The amount of a Class B assessment shall be allocated among the separate accounts in accordance with an allocation formula that may be based on: (1) the premiums or reserves of the impaired or insolvent insurer; or (2) any other standard deemed by the board of directors in the board's sole discretion as being fair and reasonable under the circumstances. (e) Class A assessments shall be allowed as a credit on the amount of premium taxes in the manner provided by Article 1.16 of this code. (f) Class B assessments against member insurers for each account shall be in the proportion that the premiums received on business in this state by each assessed member insurer on policies or contracts covered by each account for the three most recent calendar years for which information is available preceding the year in which the insurer became impaired or insolvent bear to premiums received on business in this state for those calendar years by all assessed member insurers. (g) Assessments for funds to meet the requirements of the association with respect to an insolvent or impaired insurer may not be authorized and called until necessary to implement the purposes of this Act. Classification of assessments under Subsection (b) of this section and computation of assessments under this section shall be made with a reasonable degree of accuracy, recognizing that exact determinations may not always be possible. The association shall notify each member insurer of its anticipated pro rata share of an authorized assessment not yet called not later than the 180th day after the date the assessment is authorized. (h) The association may defer, in whole or in part, the assessment of a member insurer if, in the opinion of the association, payment of the assessment would endanger the ability of the member insurer to fulfill its contractual obligations. The total of all assessments on a member insurer for each account may not exceed two percent of the insurer's premiums on the policies covered by the account during the three calendar years preceding the year in which the insurer became an impaired or insolvent insurer. If two or more assessments are authorized in a calendar year with respect to insurers that become impaired or insolvent in different calendar years, the average annual premiums for purposes of the aggregate assessment percentage limitation described by this subsection shall be equal to the higher of the three-year average annual premiums for the applicable subaccount or account as computed in accordance with this section. (i) If an assessment against a member insurer is deferred under Subsection (h) of this section, in whole or in part, the amount by which the assessment is deferred may be assessed against the other member insurers in a manner consistent with the basis for assessments set forth in this subsection. If the maximum assessment, together with the other assets of the association, does not provide in any one year an amount sufficient to carry out the responsibilities of the association, the necessary additional funds shall be assessed as soon thereafter as permitted by this Act. (j) The board of directors may, by an equitable method as established in the plan of operation, refund to member insurers, in proportion to the contribution of each member insurer, the amount by which the assets exceed the amount the board of directors finds is necessary to carry out during the coming year the obligations of the association with regard to that amount, including assets accruing from net realized gains and income from investments. A reasonable amount may be retained to provide funds for the continuing expenses of the association and for future losses if refunds are impractical. (k) The association shall issue to each insurer paying a Class B assessment under this Act a certificate of contribution, in a form prescribed by the commissioner, for the amount so paid. All outstanding certificates shall be of equal dignity and priority without reference to amounts or date of issue. (l) Any insurer whose certificate of authority to do business in this state is canceled or surrendered shall be liable for any unpaid assessments made prior to the date of such cancellation or surrender. (m) The amounts provided according to assessments made under this section are supplemental to the marshaling of assets for the purpose of making payments on behalf of an impaired insurer. (n) All assessments collected by the association may be deposited into the Texas Treasury Safekeeping Trust Company in accordance with procedures established by the comptroller. The funds deposited shall be accounted for separately from all other funds by the comptroller to the association. Plan of operation Sec. 10. (a) The association operates under a plan of operation approved by the commissioner. The association may amend the plan, subject to the approval of the commissioner. An amendment to the plan becomes effective on the date on which the commissioner approves the amendment, or on the 30th day after the date the amendment is submitted to the commissioner for approval, if the commissioner does not approve or disapprove the amendment before that date. (b) All member insurers shall comply with the plan of operation. (c) The plan of operation must, in addition to requirements of this Act: (1) establish procedures for handling the assets of the association; (2) establish the amount and method of reimbursing members of the board of directors under Section 7 of this Act; (3) establish regular places and times for meetings, including telephone conference calls, of the board of directors; (4) establish procedures for records to be kept of all financial transactions of the association, its agents, and the board of directors; (5) establish any additional procedures for assessments under Section 9 of this Act; and (6) contain additional provisions necessary or proper for the execution of the powers and duties of the association. (d) The plan of operation may provide that any or all powers and duties of the association, except those under Sections 8(u) and 9 of this Act, are delegated to a corporation, association, or other organization that performs functions similar to those of this association, or its equivalent, in two or more states. The corporation, association, or organization shall be reimbursed for any payments made on behalf of the association and shall be paid for its performance of any function of the association. A delegation under this subsection may take effect only with the approval of both the board of directors and the commissioner, and may be made only to a corporation, association, or organization that extends protection not substantially less favorable and effective than that provided by this Act. Duties and powers of the commissioner Sec. 11. (a) In addition to the duties and powers enumerated elsewhere in this Act, the commissioner shall provide the association, on request, with a statement of the premiums in this and any other appropriate states for each member insurer. (b) When an impairment is declared and the amount of the impairment is determined, the commissioner shall serve a demand upon the impaired insurer to make good the impairment within a reasonable time. Notice to the impaired insurer constitutes notice to its shareholders, if any. The failure of the insurer to promptly comply with the demand does not excuse the association from the performance of its powers and duties under this Act. (c) The commissioner may suspend or revoke, after notice and hearing, the certificate of authority to transact insurance in this state of any member insurer that fails to pay an assessment when due or fails to comply with the plan of operation. As an alternative, the commissioner may levy a forfeiture on any member insurer that fails to pay an assessment when due. The forfeiture may not exceed five percent of the unpaid assessment per month and may not be less than $100 per month. (d) An action of the board of directors or the association may be appealed to the commissioner by a member insurer if the appeal is taken before the 61st day after the final action being appealed. If a member company is appealing an assessment, the amount assessed shall be paid to the association and available to meet association obligations during the pendency of an appeal. If the appeal on the assessment is upheld, the amount paid in error or excess shall be returned to the member company. (e) The commissioner, as receiver of an impaired insurer, may notify all interested persons of the effect of this Act. Prevention of insolvencies Sec. 12. (a) The commissioner shall: (1) notify the commissioners of all the other states, territories of the United States, and the District of Columbia by mail not later than the 30th day after the commissioner takes any of the following actions against a member insurer: (A) revokes a license; (B) suspends a license; or (C) makes any formal order that the insurer restrict its premium writing, obtain additional contributions to surplus, withdraw from the state, reinsure all or any part of its business, or increase capital, surplus, or any other account for the security of policyholders or creditors; (2) report to the board of directors when the commissioner has taken any of the actions set forth in Subdivision (1) of this subsection or has received a report from any other commissioner indicating that a similar action has been taken in another state; the report to the board of directors must contain all significant details of the action taken or the report received from the other commissioner; (3) report to the board of directors when the commissioner has reasonable cause to believe from any examination, whether completed or in process, of any member insurer that the insurer may be an impaired or insolvent insurer; and (4) furnish to the board of directors the National Association of Insurance Commissioners Insurance Regulatory Information System ratios and listings of companies not included in the ratios developed by the National Association of Insurance Commissioners. (b) The board may use the information described by Subsection (a) of this section in carrying out its duties and responsibilities under this Act. The board shall keep the report and the information contained in the report confidential until it is made public by the commissioner or other lawful authority. (c) The commissioner may seek the advice and recommendations of the board of directors concerning any matter affecting the commissioner's duties and responsibilities regarding the financial condition of member insurers and companies seeking admission to transact insurance business in this state. (d) The board of directors, on majority vote, may make reports and recommendations to the commissioner upon any matter germane to the solvency, liquidation, rehabilitation, or conservation of any member insurer or germane to the solvency of any company seeking to do an insurance business in this state. These reports and recommendations are not public documents and are not subject to the open records law, Chapter 424, Acts of the 63rd Legislature, Regular Session, 1973 (Article 6252-17a, Vernon's Texas Civil Statutes), until such time as an insurer is declared to be impaired. (e) The board of directors, on majority vote, shall notify the commissioner of information indicating a member insurer may be an impaired or insolvent insurer. (f) The board of directors, on majority vote, may request that the commissioner order an examination of any member insurer that the board in good faith believes may be an impaired or insolvent insurer. Not later than the 30th day after the receipt of the request, the commissioner shall begin the examination. The examination may be conducted as a National Association of Insurance Commissioners examination or may be conducted by persons designated by the commissioner. The cost of the examination shall be paid by the association and the examination report shall be treated as are other examination reports. In no event shall the examination report be released to the board of directors before its release to the public, but this does not preclude the commissioner from complying with Subsection (a) of this section. The commissioner shall notify the board of directors when the examination is completed. The request for an examination shall be kept on file by the commissioner but it is open to public inspection before the release of the examination report to the public. (g) The board of directors, on majority vote, may make recommendations to the commissioner for the detection and prevention of insurer insolvencies. (h) The board of directors, at the conclusion of any insurer insolvency in which the association was obligated to pay covered claims, shall prepare a report to the commissioner containing any information as it has in its possession bearing on the history and causes of the insolvency. The board shall cooperate with the boards of directors of guaranty associations in other states in preparing a report on the history and causes of insolvency of a particular insurer, and may adopt by reference any report prepared by the other associations. Credits for assessments paid Sec. 13. (a) Unless a longer period of time has been required by the commissioner, a member insurer shall at its option have the right to show a certificate of contribution as an admitted asset in the form approved by the commissioner under Section 9(k) of this Act at percentages of the original face amount approved by the commissioner, for calendar years as follows: 100 percent for the calendar year of issuance, which shall be reduced 20 percent a year for each year thereafter for a period of five years. (b) The insurer may offset the amount written off by it in a calendar year under Subsection (a) of this section against its premium tax liability to this state accrued with respect to business transacted in that year. An insurer may not be required to write off in any one year, an amount in excess of its premium tax liability to this state accruing within the year. (c) Any sums acquired by refund, pursuant to Section 9(j) of this Act, from the association which have theretofore been written off by contributing insurers and offset against premium taxes as provided in Subsection (b) of this section, and are not then needed for purposes of this Act, shall be paid by the association to the commissioner and by him deposited with the comptroller for credit to the general fund of this state. (d) A member insurer may assign or transfer a credit against premium tax to another member insurer if: (1) an acquisition, merger, or total assumption of reinsurance has occurred between the insurers; or (2) the commissioner by order approves the assignment or transfer. (e) Not later than November 1 or the 60th day after the date of an assignment or transfer under Subsection (d) of this section, whichever is later, each member insurer shall report, on a form prescribed by the comptroller, the assignment or transfer to the comptroller. The member insurer shall provide with the report any documents from the commissioner that show approval of the assignment or transfer. Miscellaneous provisions Sec. 14. (a) This Act does not reduce the liability for unpaid assessments of the insureds of an impaired or insolvent insurer operating under a plan with assessment liability. (b) The association shall maintain records of all negotiations and meetings in which the association or its representatives discuss the activities of the association in carrying out its powers and duties under Section 8 of this Act. Records of the negotiations or meetings may be made public only on the termination of a liquidation, rehabilitation, or conservation proceeding involving the impaired or insolvent insurer, on the termination of the impairment or insolvency of the insurer, or on the order of a court of competent jurisdiction. This subsection does not limit the duty of the association to report on its activities under Section 15 of this Act. (c) To carry out its obligations under this Act, the association is considered a creditor of the impaired or insolvent insurer to the extent of assets attributable to covered policies reduced by any amounts to which the association is entitled as subrogee under Sections 8(t) and (u) of this Act. Assets of the impaired or insolvent insurer attributable to covered policies shall be used to continue all covered policies and pay all contractual obligations of the impaired or insolvent insurer as required by this Act. Assets attributable to covered policies, as used in this subsection, are that proportion of the assets that the reserves that should have been established for the policies bear to the reserves that should have been established for all policies of insurance written by the impaired or insolvent insurer. (d) Before the termination of any receivership, the court may take into consideration the contributions of the respective parties, including the association, the shareholders, and policyholders of the impaired or insolvent insurer, and any other party with a bona fide interest, in making an equitable distribution of the ownership rights of the impaired or insolvent insurer. In making this determination, the court shall consider the welfare of the policyholders of the continuing or successor insurer. (e) A distribution to stockholders of an impaired or insolvent insurer may not be made until the total amount of valid claims of the association for funds expended in carrying out its powers and duties under Section 8 of this Act with respect to the insurer have been recovered with interest by the association. (f) If an order of receivership of an insurer domiciled in this state has been entered, the receiver appointed under the order may recover on behalf of the insurer, from any affiliate that controlled it, the amount of distributions, other than stock dividends paid by the insurer on its capital stock, made at any time during the five years preceding the petition for liquidation or rehabilitation subject to the limitations of Subsections (g), (h), and (i) of this section. (g) A distribution to stockholders is not recoverable under Subsection (f) of this section if the insurer shows that when paid the distribution was lawful and reasonable, and that the insurer did not know and could not reasonably have known that the distribution might adversely affect the ability of the insurer to fulfill its contractual obligations. (h) A person that was an affiliate that controlled the insurer at the time distributions subject to Subsection (f) of this section were paid is liable for the amount of distributions received. A person that was an affiliate that controlled the insurer at the time the distributions were declared is liable for the amount of distributions the person would have received if they had been paid immediately. If two or more persons are liable with respect to the same distributions, they are jointly and severally liable. (i) The maximum amount recoverable under Subsections (f) and (h) of this section is the amount needed in excess of all other available assets of the impaired or insolvent insurer to pay the contractual obligations of the impaired or insolvent insurer. (j) If a person liable under Subsection (h) of this section is insolvent, all its affiliates that controlled it at the time the distribution was paid are jointly and severally liable for any resulting deficiency in the amount recovered from the insolvent affiliate. (k) An impaired insurer placed in conservatorship or receivership for which assessments have been made under the provisions of this article, or for which guaranty fees have been provided, may not, on release from conservatorship or receivership, issue new or renewal insurance policies until the insurer has repaid in full the amount of guaranty fees furnished by the association. The commissioner may, on application of the association and after hearing, permit the issuance of new policies in accordance with a plan of operation by the released insurer for repayment. The commissioner may, in approving such plan, place restrictions on the issuance of new or renewal policies as necessary to the implementation of the plan. The commissioner shall give 10 days' notice of a hearing under this subsection to the association, and the association and member insurers that paid assessments in relation to the impaired insurer are entitled to appear at and participate in the hearing. Money recovered by the association under this subsection shall be repaid to the member insurers that paid assessments in relation to the impaired insurer on return of the appropriate certificate of contribution. Examination of the association; annual report Sec. 15. The association shall be subject to examination and regulation by the commissioner in the same manner as other insurers under this code. The board of directors shall submit to the commissioner each year, not later than the 120th day after the last day of the association's fiscal year, a financial report in a form approved by the commissioner and a report of the association's activities during the preceding fiscal year. Tax exemptions Sec. 16. The association is exempt from payment of all fees and all taxes levied by this state or any of its subdivisions, except taxes levied on real or personal property. Immunity; attorney general representation Sec. 17. (a) There is no liability on the part of and no cause of action of any nature arises against any member insurer or its agents or employees, the association or its agents or employees, members of the board of directors, the receiver, the special deputy or its agents or employees, or the commissioner or the commissioner's representatives, for any good faith action or omission in the performance of powers and duties under this Act. This immunity extends to the participation in any organization of one or more other state associations of similar purposes and to any similar organization and its agents or employees. (b) The attorney general shall defend any action to which Subsection (a) applies that is brought against a member insurer or its agents or employees, the association or its agents or employees, members of the association's board of directors, a special deputy receiver to its agents or employees, or the commissioner or the commissioner's representatives. This subsection continues to apply to an action instituted after the defendant's service with the guaranty association, commissioner, or department has terminated. This subsection does not require the attorney general to defend any person or entity with respect to an issue other than the applicability or effect of the immunity created by Subsection (a). The attorney general is not required to defend any member insurer of the association or its agents or employees, the association or its agents or employees, members of the association's board of directors, a special deputy receiver or its agents or employees with respect to any actions filed regarding the disposition of a claim filed with the guaranty association under this Act or to an issue other than the applicability or effect of the immunity created by Subsection (a). The association may contract with the attorney general under the Interagency Cooperation Act (Article 4413(32), Vernon's Texas Civil Statutes) to provide legal services not covered under this subsection. Stay of proceedings Sec. 18. All proceedings in which an impaired insurer is a party or is obligated to defend a party in any court in this state, except proceedings directly related to the receivership or instituted by the receiver, shall be stayed for six months and any additional time thereafter as may be determined by the court from the date of the designation of impairment or an ancillary proceeding is instituted in the state, whichever is later, to permit proper defense by the receiver or the association of all pending causes of action. As to any covered claims arising from a judgment under any decision, verdict, or finding based on the default of the impaired insurer or its failure to defend an insured, the association either on its own behalf or on behalf of the insured may apply to have the judgment, order, decision, verdict, or finding set aside by the same court or administrator that made the judgment, order, decision, verdict, or finding and shall be permitted to defend the claim on the merits. The receiver or statutory successor of an impaired insurer covered by this Act shall permit access by the board or its authorized representative to records of the impaired insurer as are necessary for the board in carrying out its functions under this Act with regard to covered claims. In addition, the receiver or statutory successor shall provide the board or its representative with copies of the records on request of the board and at the expense of the board. Prohibited advertisement of insurance guaranty association act in insurance sales; notice to policyholders Sec. 19. (a) A person may not make, publish, disseminate, circulate, or place before the public or cause, directly or indirectly, to be made, published, disseminated, circulated, or placed before the public, in any newspaper, magazine or other publication, or in the form of a notice, circular, pamphlet, letter, or poster, or over any radio station or television station, or in any other way, any advertisement, announcement, or statement, written or oral, that uses the existence of the association for the purpose of sales, solicitation, or inducement to purchase any form of insurance covered by this Act. This section does not apply to the association or any other entity which does not sell or solicit insurance. The use of the protection afforded by this Act, other than as provided by this section, by any person in the sale of insurance constitutes unfair competition and unfair practices under Article 21.21 of this code, and is subject to the sanctions imposed under that article. (b) The association shall prepare a summary document describing the general purposes and current limitations of the Act and complying with Subsection (c) of this section. This document shall be submitted to the commissioner for approval. Unless Subsection (d) of this section applies, at the expiration of the 60th day after the date on which the commissioner approves the document, an insurer may not deliver a policy or contract described in Section 3 of this Act to a policy or contract holder unless the summary document is delivered to the policy or contract holder before or at the time of delivery of the policy or contract. The document shall be available on request by a policyholder. The distribution, delivery, or contents or interpretation of this document does not guarantee that the policy or the contract or the holder of the contract or policy is covered in the event of the impairment or insolvency of a member insurer. The document shall be revised by the association as amendments to the Act may require. Failure to receive this document does not give the policyholder, contract holder, certificate holder, or insured any greater rights than those stated in this Act. (c) The document prepared under Subsection (b) of this section must contain a clear and conspicuous disclaimer on its face. The commissioner shall promulgate a rule establishing the form and content of the disclaimer. The disclaimer shall: (1) state the name and address of the association and insurance department; (2) warn the policy or contract holder that the association may not cover the policy or, if coverage is available, it will be subject to substantial limitations and exclusions and conditioned on continued residence in the state; (3) state that the insurer and its agents are prohibited by law from using the existence of the association for the purpose of sales, solicitation, or inducement to purchase any form of insurance; (4) state that the policy or contract holder should not rely on coverage under the association when selecting an insurer; and (5) provide other information as directed by the commissioner. (d) An insurer or agent may not deliver a policy or contract described in Section 3(b) of this Act and excluded under Section 3(c) of this Act from coverage under this Act unless the insurer or agent, before or at the time of delivery, gives the policy or contract holder a separate written notice that clearly and conspicuously discloses that the policy or contract is not covered by the association. The commissioner shall by rule specify the form and content of the notice. Suits against association Sec. 20. (a) Venue in a suit against the association arising under this article is in Travis County. (b) The association is not required to give an appeal bond in an appeal of a cause of action under this article. Rules and regulations Sec. 21. The State Board of Insurance is authorized and directed to issue such reasonable rules and regulations as may be necessary to carry out the various purposes and provisions of this article, and in augmentation thereof. Added by Acts 1973, 63rd Leg., p. 1052, ch. 408, Sec. 1, eff. Aug. 27, 1973. Amended by Acts 1981, 67th Leg., p. 429, ch. 181, Sec. 1, 2, eff. May 20, 1981. Sec. 5(4) amended by Acts 1983, 68th Leg., p. 3999, ch. 622, Sec. 90, eff. Sept. 1, 1983; Sec. 3 amended by Acts 1987, 70th Leg., ch. 1073, Sec. 38, eff. Sept. 1, 1987; Sec. 5(1), (4), (9) amended and (11) to (14) added by Acts 1987, 70th Leg., ch. 1073, Sec. 39, eff. Sept. 1, 1987; Sec. 6(1) amended by Acts 1987, 70th Leg., ch. 1073, Sec. 40, eff. Sept. 1, 1987; Sec. 9(1) to (3) amended by Acts 1987, 70th Leg., ch. 1073, Sec. 41, eff. Sept. 1, 1987; Sec. 10(1), (4) amended by Acts 1987, 70th Leg., ch. 1073, Sec. 42, eff. Sept. 1, 1987; Secs. 11, 12 amended by Acts 1987, 70th Leg., ch. 1073, Sec. 43, eff. Sept. 1, 1987; Sec. 13(2), (3) amended by Acts 1987, 70th Leg., ch. 1073, Sec. 44, eff. Sept. 1, 1987; Sec. 17 amended by Acts 1987, 70th Leg., ch. 1073, Sec. 45, eff. Sept. 1, 1987; Sec. 20A added by Acts 1987, 70th Leg., ch. 1073, Sec. 46, eff. Sept. 1, 1987; Sec. 5(4) amended by Acts 1989, 71st Leg., ch. 1082, Sec. 6.17, eff. Sept. 1, 1989; Sec. 9(1) amended by Acts 1989, 71st Leg., ch. 1082, Sec. 6.18, eff. Sept. 1, 1989; Sec. 9(3) amended by Acts 1989, 71st Leg., ch. 1082, Sec. 6.19, eff. Sept. 1, 1989; Sec. 9(10) added by Acts 1989, 71st Leg., ch. 1082, Sec. 6.24, eff. Sept. 1, 1989; Sec. 13(5)(f), (g) added by Acts 1989, 71st Leg., ch. 1082, Sec. 6.20, eff. Sept. 1, 1989; Sec. 5(9) amended by Acts 1991, 72nd Leg., ch. 242, Sec. 11.06, eff. Sept. 1, 1991; Sec. 7(1) amended by Acts 1991, 72nd Leg., ch. 242, Sec. 9.10, eff. Sept. 1, 1991; Sec. 7(3) added by Acts 1991, 72nd Leg., ch. 242, Sec. 11.26, Sept. 1, 1991; Sec. 19(1) amended by Acts 1991, 72nd Leg., ch. 242, Sec. 11.07, eff. Sept. 1, 1991. Amended by Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Sec. 1.21, eff. Jan. 1, 1992; Sec. 7(d) added by Acts 1993, 73rd Leg., ch. 685, Sec. 10.01, eff. Sept. 1, 1993; Sec. 17(a) amended by Acts 1993, 73rd Leg., ch. 685, Sec. 10.02, eff. Sept. 1, 1993; Sec. 7(a) and (d) amended by Acts 1997, 75th Leg., ch. 184, Sec. 1, eff. Sept. 1, 1997; Sec. 9(n) amended by Acts 1997, 75th Leg., ch. 1423, Sec. 11.54, eff. Sept. 1, 1997; Sec. 13(c) amended by Acts 1997, 75th Leg., ch. 1423, Sec. 11.55, eff. Sept. 1, 1997; Sec. 13(d), (e) added by Acts 2001, 77th Leg., ch. 848, Sec. 1, eff. Sept. 1, 2001; Sec. 3 amended by Acts 2005, 79th Leg., ch. 753, Sec. 1, eff. Sept. 1, 2005; Sec. 5(2), (3), (4), (5), (6), (7), (9), (10), (11), (12) amended by Acts 2005, 79th Leg., ch. 753, Sec. 2, eff. Sept. 1, 2005; Sec. 5(2-a), (8-a), (9-a), (11-a) added by Acts 2005, 79th Leg., ch. 753, Sec. 2, eff. Sept. 1, 2005; Sec. 5A added by Acts 2005, 79th Leg., ch. 753, Sec. 3, eff. Sept. 1, 2005; Sec. 6(a) amended by Acts 2005, 79th Leg., ch. 753, Sec. 4, eff. Sept. 1, 2005; Sec. 8(e), (n), (v) amended by Acts 2005, 79th Leg., ch. 753, Sec. 5, eff. Sept. 1, 2005; Sec. 8(u-1), (u-2), (u-3), (x), (y) added by Acts 2005, 79th Leg., ch. 753, Sec. 5, eff. Sept. 1, 2005; Sec. 9(b), (d), (f), (g), (h) amended by Acts 2005, 79th Leg., ch. 753, Sec. 6, eff. Sept. 1, 2005; Sec. 9(b-1) added by Acts 2005, 79th Leg., ch. 753, Sec. 6, eff. Sept. 1, 2005; Sec. 13(a) amended by Acts 2005, 79th Leg., ch. 753, Sec. 7, eff. Sept. 1, 2005; Sec. 14(d), (i) amended by Acts 2005, 79th Leg., ch. 753, Sec. 8, eff. Sept. 1, 2005.

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Texas Insurance Code - Not Codified - Article 21.28-D. Life, Accident, Health, And Hospital Service Insurance Guaranty Association

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