Texas Insurance Code - Not Codified - Article 21.49-13. Excess Liability Pools
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Art. 21.49-13. EXCESS LIABILITY POOLS.
Article repealed effective April 1, 2007
Definitions
Sec. 1. In this article:
(1) "Pool" means an excess liability pool created under this
article.
(2) "Fund" means an excess liability fund.
(3) "Board" means the board of trustees of a pool.
(4) "County" means a county in this state.
(5) "School district" means a public school district
created under the laws of this state.
(6) "Junior college district" means a junior college
district organized under the laws of this state.
(7) "Entity" means a county, school district, or junior
college district.
Creation of pools
Sec. 2. (a) Separate excess liability pools may be created
for counties, school districts, and junior college districts as
provided by this article.
(b) An excess liability pool may be created:
(1) for counties, on written agreement to create the pool by
the county judges of not fewer than five counties in this state;
(2) for school districts, on written agreement to create the
pool by the presidents of the boards of trustees, acting on behalf
of their boards, of not fewer than five school districts in this
state; or
(3) for junior college districts, on written agreement to
create the pool by the presiding officers of the boards of trustees,
acting on behalf of their boards, of not fewer than five junior
college districts in this state.
(c) An excess liability pool is created to provide excess
liability insurance coverage as provided by this article and the
plan.
(d) An entity may participate only in a pool created for
that type of entity. There may not be more than one county excess
liability pool, one school district excess liability pool, and one
junior college district excess liability pool.
Scope of coverage
Sec. 3. (a) A pool shall insure an entity and its officers and
employees against liability for acts and omissions under the laws
governing that entity and its officers and employees in their
official or employment capacities.
(b) Under excess liability insurance coverage, a pool shall
pay that portion of a claim against an entity and its officers and
employees that is finally determined or settled or is included in a
final judgment of a court and that is in excess of $500,000, but the
amount paid by the pool may not be in excess of the amount
determined by the board to be actuarially sound for the pool.
(c) Under the insurance coverage, the pool may participate
in the evaluation, settlement, or defense of any claim.
Participation in pool
Sec. 4. An entity is entitled to coverage from the pool on:
(1) submitting a complete application;
(2) providing any other information required by the pool;
(3) meeting the underwriting standards established by the
pool; and
(4) paying the premiums required for the coverage.
Payment of contributions and premiums
Sec. 5. An entity purchasing excess liability insurance
coverage from the pool may use funds of the entity to pay any
contributions or premiums required by the pool for the coverage.
Plan of operation
Sec. 6. (a) At the time the written agreement is executed
under Section 2 of this article, the creators shall select nine
persons to serve as a temporary board to draft the plan of operation
for a pool.
(b) Within 30 days after selection, the members of a
temporary board shall meet to prepare a detailed plan of operation
for the pool.
(c) The plan of operation may include any matters relating
to the organization and operation of the pool and the pool's
finances. The plan must include:
(1) the organizational structure of the pool, including the
method of selection of the board, the method of procedure and
operation of the board, and a summary of the method for managing and
operating the pool;
(2) a description of the contributions and other financial
arrangements necessary to cover the initial expenses of the pool
and estimates supported by statistical data of the amounts of those
contributions or other financial arrangements;
(3) underwriting standards and procedures for the
evaluation of risks;
(4) procedures for purchase of reinsurance;
(5) methods, procedures, and guidelines for establishing
rates for premiums for and maximum limits of excess coverage
available from the pool;
(6) procedures for the processing and payment of claims;
(7) methods and procedures for defraying any losses and
expenses of the pool;
(8) methods, procedures, and guidelines for the management
and investment of the fund;
(9) guidelines for nonrenewal of coverage;
(10) minimum limits of capital and surplus to be maintained
by the pool; and
(11) minimum standards for reserve requirements for the
pool.
(d) The temporary board shall complete and adopt the plan of
operation within 90 days after the date of the appointment of the
temporary board.
(e) Within 15 days following the day on which the plan of
operation is adopted, the first board must be selected as provided
by the plan of operation. The members of the first board shall take
office not later than the 30th day following the date of the
adoption of the plan of operation.
Board of trustees
Sec. 7. (a) A pool is governed by a board of nine trustees
selected as provided by the plan of operation.
(b) Members of the board serve for terms of two years with
the terms expiring at the time provided by the plan of operation.
(c) A vacancy on the board shall be filled as provided by the
plan of operation.
(d) A person serving on the board who is an officer or
employee of an entity covered by the pool performs duties on the
board as additional duties required of his original office or
employment.
(e) Each member of the board shall execute a bond in the
amount required by the plan of operation payable to the pool and
conditioned on the faithful performance of his duties. The pool
shall pay the cost of the bond.
(f) Members of the board are not entitled to compensation
for their service on the board.
(g) The board shall select from its membership persons to
serve as chairman, vice-chairman, and secretary. The persons
selected serve for terms of one year that expire as provided by the
plan of operation.
(h) The board shall hold meetings at the call of the
chairman and at times established by its rules.
(i) A majority of the members of the board constitutes a
quorum.
(j) In addition to other duties provided by this article and
the plan of operation, the board shall:
(1) approve contracts other than excess liability insurance
contracts issued to entities by the pool;
(2) consider and adopt premium rate schedules for the pool;
(3) consider and adopt policy forms for the pool;
(4) receive service of summons on behalf of the pool; and
(5) appoint and supervise the activities of the pool
manager.
(k) In addition to other authority provided by this article,
the board may:
(1) adopt necessary rules;
(2) delegate specific responsibilities to the pool manager;
and
(3) amend the plan of operation to assure the orderly
management and operation of the pool.
(l) A member of the board is not liable with respect to a
claim or judgment for which coverage is provided by the pool or for
a claim or judgment against an entity covered by the pool against
whom a claim is made.
Pool manager
Sec. 8. (a) The board shall appoint a pool manager who shall
serve at the pleasure of the board.
(b) The pool manager is entitled to receive the compensation
authorized by the board.
(c) The pool manager shall execute a bond in the amount
determined by the board, payable to the pool, conditioned on the
faithful performance of his duties. The pool shall pay the cost of
the bond.
(d) The pool manager shall manage and conduct the affairs of
the pool under the general supervision of the board and shall
perform any other duties directed by the board.
(e) In addition to any other duties provided by this article
or by the board, the pool manager shall:
(1) receive and pass on applications from entities for
excess liability coverage from the pool;
(2) negotiate contracts for the pool;
(3) prepare premium rate schedules for the approval of the
board;
(4) collect and compile statistical data relating to the
excess liability coverage provided by the pool, including relevant
loss, expense, and premium data, and make that information
available to the board and to the public; and
(5) prepare and submit to the board for approval proposed
policy forms for pool coverage.
(f) The pool manager may refuse to renew the coverage of any
entity insured by the pool based on the guidelines provided by the
plan of operation.
Employees and other personnel
Sec. 9. (a) The pool manager shall employ or contract with
persons necessary to assist the board and pool manager in carrying
out the powers and duties of the pool.
(b) The board shall approve compensation paid to employees
of the pool and contracts made with other persons under this
section.
(c) The board may require any employee or person with whom
it contracts under this section to execute a bond in an amount
determined by the board, payable to the board, and conditioned on
the faithful performance of the employee's or person's duties or
responsibilities to the pool.
(d) An employee or person with whom the pool has contracted
under this section is not liable with respect to any claim or
judgment for which coverage is provided by the pool or for any claim
or judgment against any entity covered by the pool against whom a
claim is made.
Office
Sec. 10. (a) A pool shall maintain its principal office in
Austin, Texas.
(b) The records, files, and other documents and information
relating to the pool must be maintained in the pool's principal
office.
Rules
Sec. 11. The board may adopt and amend rules to carry out this
article.
General powers and duties
Sec. 12. (a) A pool shall:
(1) issue excess liability coverage to each entity entitled
to coverage under this article;
(2) collect premiums for coverage issued or renewed by the
pool;
(3) process and pay valid claims; and
(4) maintain detailed data regarding the pool.
(b) The pool may:
(1) enter into contracts;
(2) purchase reinsurance;
(3) cancel or refuse to renew coverage; and
(4) perform any other acts necessary to carry out this
article, the plan of operation, and the rules adopted by the board.
Excess liability fund
Sec. 13. (a) On creation of a pool, the first board shall
create an excess liability fund.
(b) The fund is composed of:
(1) premiums paid by entities for coverage by the pool;
(2) contributions and other money received by the pool to
cover the initial expenses of the fund;
(3) investments and money earned from investments of the
fund; and
(4) any other money received by the pool.
(c) The pool manager shall manage the fund under the general
supervision of the board.
(d) Administrative expenses of the pool may be paid from the
fund, but payments for this purpose during any fiscal year of the
pool may not exceed the amount established by the board.
(e) Money in the fund may not be used to pay punitive
damages, fines or penalties for violation of a civil or criminal
statute, or fines or penalties imposed for violation of an
administrative rule or regulation, or an order, rule, or ordinance.
(f) Money for a claim may not be paid from the fund under
excess liability insurance coverage unless and until all benefits
payable under any other underlying policy of liability insurance
covering the claim or judgment are exhausted.
(g) The board may select one or more banks to serve as
depository for money of the fund. Before the pool manager deposits
fund money in a depository bank in an amount that exceeds the
maximum amount secured by the Federal Deposit Insurance
Corporation, the bank must execute a bond or provide other security
in an amount sufficient to secure from loss the fund money that
exceeds the amount secured by the Federal Deposit Insurance
Corporation.
(h) Each year as provided by the plan of operation, the
board shall have an actuary who is a member of the American Academy
of Actuaries audit the capital, surplus, and reserves of the pool
and prepare for the pool and its members a formal report.
Investments
Sec. 14. (a) The fund manager, under the general supervision
of the board, shall manage and invest the money in the fund in the
manner provided by the plan of operation.
(b) Money earned by investment of money in the fund must be
deposited in the fund or reinvested for the fund.
Contributions
Sec. 15. The board shall determine the amount of any
contributions necessary to meet initial expenses of the pool. The
board shall make this determination based on the data provided in
the plan of operation.
Premium rates; limits of coverage
Sec. 16. (a) The board shall determine the rates for premiums
that will be charged and the maximum limits of coverage provided to
assure that the pool is actuarially sound.
(b) The pool manager shall prepare the statistical data and
other information and the proposed rate schedules and maximum
limits of coverage for consideration of the board.
(c) The board shall periodically reexamine the rate
schedules and the maximum limits of coverage as conditions change.
Coverage period
Sec. 17. (a) On accepting coverage from the pool, an entity
shall maintain that coverage for a period not less than 36 calendar
months following the month the coverage is issued.
(b) An entity that voluntarily discontinues coverage in the
pool may not again obtain coverage from the pool for at least 36
calendar months following the month in which the coverage was
discontinued.
Coverage
Sec. 18. Excess liability coverage provided by the pool may
be provided on a claims-made or an occurrence basis.
Nonrenewal
Sec. 19. (a) Except as provided by Subsection (b) of this
section, the pool may refuse to renew the coverage of any entity
that fails to comply with the pool's underwriting standards.
(b) The pool may not refuse to renew the coverage of an
entity for the first 36 calendar months following the month in which
the entity was first insured by the pool.
(c) Section 17(b) of this article does not apply to
discontinuance of an entity's coverage if the pool refuses renewal
under this section. An entity whose coverage is not renewed is not
eligible to apply for new coverage during the 12 calendar months
beginning after the month in which the pool gave written notice that
it would not renew the coverage.
Shortage of available money
Sec. 20. (a) If money in the fund will be exhausted by payment
of all final and settled claims and final judgments during the
fiscal year, the amount paid by the pool to each person having a
claim or judgment shall be prorated, with each person receiving an
amount that is equal to the percentage the amount owed to him by the
pool bears to the total amount owed, outstanding, and payable by the
pool.
(b) The remaining amount that is due and unpaid to a person
who receives prorated payment under Subsection (a) of this section
must be paid in the immediately following fiscal year.
Commissions
Sec. 21. A pool may pay commissions from the fund on approval
of the board.
Application of other laws
Sec. 22. (a) Except as provided by Subsection (b) of this
section, the pool is not considered insurance under the Insurance
Code and other laws of this state, and the State Board of Insurance
has no jurisdiction over the pool.
(b) The pool shall collect the necessary data, information,
and statements and shall file with the State Board of Insurance the
reports and statements required by Articles 1.24A and 1.24B and is
subject to 21.21 of this code.
Added by Acts 1987, 70th Leg., 1st C.S., ch. 1, Sec. 5.08, eff.
Sept. 2, 1987. Renumbered from Sec. 21.49-14 by Acts 1993, 73rd
Leg., ch. 685, Sec. 22.03, eff. Sept. 1, 1993.
Article: 21.49-4 21.49-4a 21.49-5 21.49-6 21.49-7 21.49-8 21.49-11 21.49-13 21.49-14 21.49-15 21.49-15A 21.49-16 21.49-17 21.49-18 21.49-20
Last modified: August 11, 2007
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