Texas Insurance Code - Not Codified - Article 21.49-3c. Texas Nonprofit Organization Liability Insurance Underwriting Association
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Art. 21.49-3c. TEXAS NONPROFIT ORGANIZATION LIABILITY
INSURANCE UNDERWRITING ASSOCIATION.
Definitions
Sec. 1. In this article:
(1) "Association" means the Texas Nonprofit Organization
Liability Insurance Underwriting Association.
(2) "Board" means the State Board of Insurance.
(3) "Board of directors" means the board of directors of the
association.
(4) "Fund" means the policyholder stabilization reserve
fund.
(5) "Net direct premiums" means gross direct premiums
written on automobile liability and liability other than automobile
insurance written under this code, less the total of the
policyholder dividends, return premiums for the unused or
unabsorbed portion of premium deposits, and return premiums on
canceled contracts written on those liability risks.
(6) "Nonprofit organization" means an organization that is
listed under Section 501(c)(3) or (4), Internal Revenue Code of
1986.
(7) "Nonprofit organization liability insurance" means
primary insurance coverage against the legal liability of the
insured organization and its officers and employees acting on
behalf of the organization and against any loss, damage, or expense
incident to a claim arising out of the acts of the insured
organization or its officers and employees acting on behalf of the
organization.
Creation; composition of the association; dissolution
Sec. 2. (a) The Texas Nonprofit Organization Liability
Insurance Underwriting Association is created if, after notice and
hearing, the board determines that a market assistance program
created under Article 21.49-12 of this code has not alleviated a
problem in the availability of liability insurance to nonprofit
organizations. The board may not make this determination until a
market assistance program has been in operation for at least 180
days.
(b) The association is composed of all insurers authorized
to write and engaged in writing, on or after January 1, 1987,
automobile liability insurance and liability other than automobile
insurance in this state on a direct basis as provided by this code
and includes Lloyd's and reciprocal or interinsurance exchanges.
(c) The association does not include farm mutual insurance
companies authorized by Chapter 16 of this code and mutual
insurance companies authorized by Chapter 17 of this code.
(d) Each insurer covered by Subsection (b) of this section
must be a member of the association as a condition of its authority
to continue to transact a liability insurance business in this
state.
(e) The association is not a licensed insurer under Article
1.14-2 of this code.
(f) Not later than the first anniversary of the creation of
the association under this section, the board shall give notice and
hold a hearing to determine whether it is necessary to continue the
association beyond the first anniversary of its creation. If the
association is continued beyond the first anniversary of its
creation, the board shall give notice and hold a hearing annually to
determine whether it is necessary to continue the association for
another year.
Insurer participation in association
Sec. 3. (a) Each insurer that is a member of the association
shall participate in its writings, expenses, and losses in the
proportion that the net direct premiums of each member, excluding
that portion of premiums attributable to the operation of the
association, written during the preceding calendar year bears to
the aggregate net direct premiums written in this state by all
members of the association.
(b) Each insurer's participation in the association shall
be determined annually on the basis of net direct premiums written
during the preceding calendar year, as reported in the annual
statements and other reports filed by the insurer with the board.
(c) A member of the association is not obligated in any one
year to reimburse the association in excess of one percent of its
surplus to policyholders on account of its proportionate share in
the deficit from the operations of the association in that year.
The aggregate amount not reimbursed shall be reallocated among the
remaining members under the method of determining participation
provided by this section, after excluding from the computation the
total net direct premiums of all members not sharing in the excess
deficit.
(d) If the deficit from the operations allocated to all
members of the association in a calendar year exceeds one percent of
their respective surplus to policyholders, the amount of the
deficit shall be allocated to each member under the method of
determining participation under this section.
General responsibility of association
Sec. 4. The association shall provide liability insurance on
a self-supporting basis to nonprofit organizations.
General authority
Sec. 5. Pursuant to this article and the plan of operation,
the association may:
(1) issue, or cause to be issued, nonprofit organization
liability insurance policies that include primary and incidental
coverages in amounts not to exceed $750,000 per occurrence and $1.5
million aggregate a year for an individual insured;
(2) underwrite association insurance and adjust and pay
losses with respect to that insurance;
(3) appoint service companies to adjust and pay losses for
the association; and
(4) purchase reinsurance.
Board of directors
Sec. 6. (a) The association is governed by a board of
directors composed of nine members.
(b) Members of the board of directors serve for terms of one
year.
(c) Four members of the board of directors shall be members
of the general public, appointed by the board. The remaining
members of the board of directors shall be selected by members of
the association and must be selected so that they fairly represent
various classes of insurers and organizations that are members of
the association.
(d) The plan of operation shall provide a process for the
selection of members of the board of directors who are
representatives of the insurance industry.
(e) A public representative who is a member of the board of
directors 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 State Board of
Insurance;
(2) a person required to register with the secretary of
state under Chapter 305, Government Code; or
(3) related to a person described by Subdivision (1) or (2)
of this subsection within the second degree of affinity or
consanguinity.
Plan of operation
Sec. 7. (a) The initial board of directors of the association
shall prepare and adopt a plan of operation that is consistent with
this article.
(b) The plan must provide for:
(1) economic, fair, and nondiscriminatory administration of
the association and its duties;
(2) prompt and efficient provision of primary liability
insurance for nonprofit organizations;
(3) preliminary assessment of association members for
initial expenses necessary to begin operations;
(4) establishing necessary facilities;
(5) management of the association;
(6) assessment of members and policyholders to defray
losses and expenses;
(7) administration of the policyholder stabilization
reserve fund;
(8) commission arrangements;
(9) reasonable and objective underwriting standards;
(10) obtaining reinsurance;
(11) appointment of servicing carriers; and
(12) determining amounts of insurance to be provided by the
association.
(c) The plan of operation must provide that any balance
remaining in the various funds of the association at the close of
its fiscal year shall be added to the reserves of the association.
A balance remaining at the close of the fiscal year means the excess
of revenue over expenditures after reimbursement of members'
contributions as provided by Section 12 of this article.
(d) The board of directors may amend the plan of operation
with the approval of the board and shall amend the plan of operation
at the direction of the board.
Eligibility for coverage
Sec. 8. (a) The board, by order, shall establish the
categories of nonprofit organizations that are eligible to obtain
coverage from the association and may amend the order to include or
exclude from eligibility particular categories of nonprofit
organizations.
(b) If a category of nonprofit organizations is excluded
from eligibility to obtain coverage from the association, the
board, after notice and hearing, may determine that liability
insurance for nonprofit organizations in that category is not
available, and on that determination that category of nonprofit
organizations is eligible to obtain insurance coverage from the
association.
Application for coverage
Sec. 9. (a) A nonprofit organization included in a category
eligible for coverage by the association is entitled to submit an
application to the association for coverage as provided by this
article and the plan of operation.
(b) An agent authorized under Article 21.14 of this code may
submit the application to the association on behalf of an
applicant.
(c) If the association determines that the applicant meets
the underwriting standards provided by the plan of operation and
that there is no unpaid, uncontested premium, policyholder
stabilization reserve fund charge, or assessment owed by the
applicant for prior insurance, the association, on receipt of the
premium and the policyholder stabilization reserve fund charge or
the portion of that charge required by the plan of operation, shall
cause a liability insurance policy to be issued to the nonprofit
organization for one year.
Rates and policy forms
Sec. 10. (a) The rates, rating plans, rating rules, rating
classification, territories, and policy forms that apply to
liability insurance written by the association and the statistics
relating to that insurance coverage are governed by Subchapter B,
Chapter 5, of this code, except to the extent that this article is
in conflict. This article prevails over any conflict with
Subchapter B, Chapter 5, of this code.
(b) In carrying out its responsibilities under Subsection
(a) of this section, the board shall give due consideration to the
past and prospective loss and expense experience, as available, for
liability insurance covering nonprofit organizations inside and
outside this state for all member companies of the association,
trends in frequency and severity of losses, the investment income
of the association, and other information the board may require.
(c) After the initial year of operation for the association,
rates, rating plans, and rating rules and any provision for
recoupment shall be based on the association's loss and expense
experience to the extent credible, together with other information
based on that experience. The board of directors shall engage the
services of an independent actuarial firm to develop and recommend
actuarially sound rates, rating plans, and rating rules and
classifications. Those recommendations shall become effective
unless, after hearing and not later than the 30th day after the date
the recommendations are submitted, the commissioner determines the
recommendations to be arbitrary and capricious.
Association deficit
Sec. 11. (a) A deficit sustained by the association in any
year shall be recouped pursuant to the plan of operation and the
rating plan that is in effect at the time of the deficit.
(b) The association shall recoup the deficit by following
one or more of the following procedures in this sequence:
(1) a contribution from the policyholder stabilization
reserve fund until that fund is exhausted;
(2) an assessment on the policyholders under Section 13 of
this article; and
(3) an assessment on the members of the association as
provided by Section 12 of this article.
Assessment of association members
Sec. 12. (a) In addition to assessments paid as provided by
the plan of operation and contributions from the policyholder
stabilization reserve fund, if sufficient funds are not available
for the sound financial operation of the association, the members
of the association shall contribute to the financial requirements
of the association on the basis and for the period considered
necessary by the board.
(b) A member of the association shall be reimbursed for any
assessment or contribution made under this section plus interest at
a rate determined by the board.
(c) Pending the recoupment or reimbursement of assessments
or contributions paid by a member to the association, the unrepaid
balance of the assessments and contributions may be reflected in
the books of the member of the association as an admitted asset of
the insurer for all purposes including exhibition in the annual
statement under Article 6.12 of this code.
(d) To the extent that a member of the association has paid
one or more assessments and has not received reimbursement from the
association as provided by Subsection (b) of this section, the
member is entitled to a credit against its premium taxes under
Article 4.10 of this code. The tax credit shall be allowed at a rate
of 20 percent a year over a period of five successive years
following the year in which the deficit is sustained or over a
different number of years at the option of the member.
Policyholder assessment
Sec. 13. (a) Each policyholder of the association has a
contingent liability for a proportionate share of any assessment of
policyholders made under this article.
(b) If a deficit as calculated under the plan of operation
is sustained by the association in any year, the board of directors
shall levy an assessment only on those policyholders who had
policies in force at any time during the two most recently completed
calendar years in which the association issued policies preceding
the date on which the assessment is levied.
(c) The aggregate amount of the assessment shall be equal to
that part of the deficit that is not paid from the policyholder
stabilization reserve fund.
(d) The maximum aggregate assessment for each policyholder
may not exceed the annual premium for the liability policy from the
association most recently in effect.
(e) Subject to the limitation provided by Subsection (d) of
this section, each policyholder shall be assessed for that portion
of the deficit that reflects the proportion that the earned premium
on the policies of the policyholder bears to the total earned
premium for all policies of the association in the two most recently
completed calendar years.
Policyholder stabilization reserve fund
Sec. 14. (a) The policyholder stabilization reserve fund is
created and shall be administered as provided by this article and
the plan of operation.
(b) Each policyholder shall pay to the fund annually an
amount determined annually by the board of directors as provided by
the plan of operation.
(c) The charge shall be computed in proportion to each
premium payment due for liability insurance through the
association.
(d) The policy shall state the charge separately. The
charge is not part of the premium and is not subject to premium
taxes, servicing fees, acquisition costs, or any other similar
charges.
(e) The association shall collect money for and administer
the fund, and the fund shall be treated as a liability of the
association along with and in the same manner as premium and loss
reserves.
(f) The board of directors shall value the fund annually at
the close of the last preceding year.
(g) The association shall continue to collect the charge
until the time the net balance of the fund is not less than the
projected sum of premiums to be written in the year following the
valuation date under Subsection (f) of this section.
(h) All charges collected from policyholders shall be
credited to the fund, and the fund shall be charged with any deficit
from operations of the association during the previous year.
Appeal
Sec. 15. (a) A person insured or applying for insurance under
this article or his authorized representative or an affected
insurer who may be aggrieved by an act, ruling, or decision of the
association may appeal the act, ruling, or decision to the board of
directors not later than the 30th day after the date on which the
act took place or the ruling or decision was issued.
(b) The board of directors shall hold a hearing on the
appeal not later than the 30th day after the date the appeal is
filed and shall give at least 10 days' written notice of the time
and place of the hearing to the person filing the appeal or his
authorized representative.
(c) Not later than the 10th day after the date the hearing
ends, the board of directors shall issue an order affirming,
reversing, or modifying the appealed act, ruling, or decision.
(d) A person or entity that is a party to an appeal under
Subsection (a) of this section may appeal the board of directors'
decision to the board.
(e) The board shall hold a hearing on an appeal filed under
Subsection (d) of this section not later than the 30th day after the
date on which the appeal is filed with the board and shall give
written notice to any person or entity filing the appeal or his
authorized representative not later than the 10th day before the
date on which the appeal is to be heard.
(f) Not later than the 30th day after the date on which the
board's hearing ends, the board shall decide the appeal and shall
issue an order.
(g) Pending a hearing and decision on an appeal to the
board, the board may suspend or postpone the effective date of the
decision appealed.
(h) A final decision of the board may be appealed as
provided by Subsection (f), Article 1.04, of this code.
Immunity
Sec. 16. The association, its agents and employees, an
insurer, a licensed agent, or the board or its authorized
representatives are not liable for any statements made in good
faith by them.
Annual statements
Sec. 17. (a) The association shall file with the board a
statement that includes information with respect to its
transactions, condition, operations, and affairs during the
preceding calendar year. This statement must be filed each year on
or before March 1.
(b) The statement shall include those matters and that
information that is required by the board and shall be in the form
approved by the board.
(c) The board may require the association to furnish
additional information with regard to the association's
transactions, condition, or any matter connected with its
transactions and condition considered to be material and of
assistance in evaluating the scope, operation, and experience of
the association.
Examinations
Sec. 18. The board shall make an examination into the affairs
of the association at least annually. The examination shall be
conducted, the report of the examination filed, and the expenses
borne and paid in the manner provided by Articles 1.15 and 1.16 of
this code.
Filing information with state
Sec. 19. The association shall collect the data, information,
and statements and shall file with the board the reports and
statements required by Articles 1.24A and 1.24B of this code.
Added by Acts 1987, 70th Leg., 1st C.S., ch. 1, Sec. 5.06, eff.
Sept. 2, 1987. Sec. 6 amended by Acts 1991, 72nd Leg., ch. 242, Sec.
9.13, eff. Sept. 1, 1991.
Article: 21.42 21.47 21.49 21.49-2V 21.49-3 21.49-3a 21.49-3b 21.49-3c 21.49-3d 21.49-4 21.49-4a 21.49-5 21.49-6 21.49-7 21.49-8
Last modified: August 11, 2007
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