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Texas Insurance Code - Not Codified - Section 21A.213. Administration Of Deductible Agreements And Policyholder Collateral

Legal Research Home > Texas Lawyer > Insurance Code - Not Codified > Texas Insurance Code - Not Codified - Section 21A.213. Administration Of Deductible Agreements And Policyholder Collateral

Sec. 21A.213. ADMINISTRATION OF DEDUCTIBLE AGREEMENTS AND
POLICYHOLDER COLLATERAL.  (a) Any collateral held to secure the
obligations of a policyholder under a deductible agreement with an
insurer subject to a delinquency proceeding under this chapter must
be maintained and administered as provided in this section.  For
purposes of this section, a "deductible agreement" is any
combination of one or more policies, endorsements, contracts, or
security agreements that:
	(1)  provide for the policyholder to bear the risk of loss
within a specified amount per claim or occurrence covered under a
policy of insurance;  and
	(2)  may be subject to an aggregate limit of policyholder
reimbursement obligations.
	(b)  This section applies to any collateral described by
Subsection (a), regardless of whether the collateral is held by,
for the benefit of, or assigned to the insurer under a deductible
agreement.  The collateral shall be used to secure the
policyholder's obligation to fund or reimburse claims payments
within the agreed deductible amount, subject to this section.
	(c)  If the contract between the policyholder and the insurer
allows the policyholder to fund claims within the deductible amount
through a third-party administrator or otherwise, the receiver
shall allow that funding arrangement to continue, except as
prohibited by Title 5, Labor Code.  If a policyholder funds claims
within the deductible amount, the receiver or any guaranty
association has no obligation to pay claims for the amount funded by
the policyholder, and the policyholder or its third-party
administrator is not obligated to reimburse a guaranty association
for any amount funded.  A charge of any kind may not be made against
a guaranty association based on the funding of claims payments by a
policyholder under this subsection.
	(d)  If the receiver is holding collateral provided by a
policyholder to secure both a deductible agreement and other
obligations of the policyholder, the receiver shall:
	(1)  allocate the collateral among these obligations in
accordance with the deductible agreement;  or
	(2)  in the absence of an allocation provision in the
deductible agreement and with the approval of the receivership
court, allocate the collateral equitably among these obligations.
	(e)  If, under Subsection (d), the collateral secures
reimbursement obligations under more than one line of insurance,
the receiver shall equitably allocate the collateral among the
various lines based on the estimated ultimate exposure within the
deductible amount for each line.
	(f)  If a guaranty association is obligated to pay claims
under a policy under Subsection (d), the receiver shall give notice
to the guaranty associations of any allocation under this section.
	(g)  Once all claims covered by the collateral have been paid
and the receiver is satisfied that no new claims may be presented,
the receiver shall release any remaining collateral to the
policyholder in accordance with the provisions of the contract and
of this chapter.
	(h)  To the extent a guaranty association is required by
applicable law to pay any claims for which the insurer would have
been entitled to reimbursement from the policyholder, the following
provisions apply:
	(1)  The receiver shall promptly invoice the policyholder
for the reimbursement due under the agreement, and the policyholder
is obligated to pay the amount invoiced to the receiver for the
benefit of the guaranty associations that paid the claims.  Neither
the insolvency of the insurer nor the insurer's inability to
perform any obligations under the deductible agreement is a defense
to the policyholder's reimbursement obligation under the
deductible agreement.  At the time the policyholder reimbursements
are collected, the receiver shall promptly forward those amounts to
the guaranty association, based on the claims paid by the guaranty
association that were subject to the deductible.
	(2)  If the collateral is insufficient to reimburse the
guaranty association for claims paid within the deductible, the
receiver shall use any existing collateral to make a partial
reimbursement to the guaranty association, subject to any
allocation under Subsection (d), (e), or (f).  If more than one
guaranty association has a claim against the same collateral, the
receiver shall prorate payments to each guaranty association based
on the amount of the claims each guaranty association has paid.
	(3)  The receiver is entitled to deduct from reimbursements
owed to a guaranty association or collateral to be returned to a
policyholder reasonable actual expenses incurred in fulfilling the
receiver's responsibilities under this section.  Expenses incurred
to collect reimbursements for the benefit of a guaranty association
are subject to the approval of the guaranty association.  Any
remaining expenses that are not deducted from the reimbursements
are payable subject to Section 21A.015.
	(4)  The receiver shall provide any affected guaranty
associations with a complete accounting of the receiver's
deductible billing and collection activities on a quarterly basis,
or at other intervals as may be agreed to between the receiver and
the guaranty associations.  Accountings under this subdivision must
include copies of the policyholder billings, the reimbursements
collected, the available amounts and use of collateral for each
account, and any prorating of payments.
	(5)  If the receiver fails to make a good faith effort to
collect reimbursements due from a policyholder under a deductible
agreement within 120 days of receipt of claims payment reports from
a guaranty association, the guaranty association may, after notice
to the receiver, collect the reimbursements that are due, and, in so
doing, the guaranty association shall have the same rights and
remedies as the receiver.  A guaranty association shall report any
amounts collected under this subdivision and expenses incurred in
collecting those amounts to the receiver.
	(6)  The receiver shall periodically adjust the collateral
held as the claims subject to the deductible agreement are paid,
provided that adequate collateral is maintained.  The receiver is
not required to adjust the collateral more than once a year.  The
receiver shall inform the guaranty associations of all collateral
reviews, including the basis for the adjustment.
	(7)  Reimbursements received or collected by a guaranty
association under this section may not be considered a distribution
of the insurer's assets.  A guaranty association shall provide the
receiver with an accounting of any amounts it has received or
collected under this section and any expenses incurred in
connection with that receipt or collection.  The amounts received,
net of any expenses incurred in connection with collection of the
amounts, must be set off against the guaranty association's claim
filed under Section 21A.251 for the payments that were reimbursed.
	(8)  To the extent that a guaranty association pays a claim
within the deductible amount that is not reimbursed by either the
receiver or by policyholder payments, the guaranty association has
a claim for those amounts in the delinquency proceeding in
accordance with Section 21A.251.
	(9)  Nothing in this section limits any rights of a guaranty
association under applicable law to obtain reimbursement for claims
payments made by the guaranty association under policies of the
insurer or for the association's related expenses.
	(i)  If a claim that is subject to a deductible agreement and
secured by collateral is not covered by any guaranty association,
the following provisions apply:
	(1)  The receiver is entitled to retain as an asset of the
estate any collateral or deductible reimbursements obtained by the
receiver.
	(2)  If a policyholder fails to assume an obligation under a
deductible agreement to pay a claim, the receiver shall use the
collateral to adjust and pay the claim to the extent that the
available collateral, after any allocation under Subsection (d),
(e), or (f), is sufficient to pay all outstanding and anticipated
claims within the deductible.  If the collateral is exhausted and
all reasonable means of collection against the insured have been
exhausted, the remaining claims shall be subject to the provisions
of Sections 21A.251 and 21A.301.
	(3)  The receiver is entitled to deduct from collateral
reasonable actual expenses incurred in fulfilling the receiver's
responsibilities under this section.  Any remaining expenses that
are not deducted from the reimbursements are payable subject to
Section 21A.015.

Added by Acts 2005, 79th Leg., ch. 995, Sec. 1, eff. Sept. 1, 2005.

Last modified: August 11, 2007