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Texas Insurance Code - Not Codified - Section 21A.256. Special Provisions For Third-Party Claims

Legal Research Home > Texas Lawyer > Insurance Code - Not Codified > Texas Insurance Code - Not Codified - Section 21A.256. Special Provisions For Third-Party Claims

Sec. 21A.256. SPECIAL PROVISIONS FOR THIRD-PARTY
CLAIMS.  (a) When any third party asserts a cause of action against
an insured of an insurer in liquidation, the third party may file a
claim with the liquidator on or before the last day for filing
claims.
	(b)  Whether or not the third party files a claim, the
insured may file a claim on the insured's own behalf in the
liquidation.
	(c)  The liquidator may make recommendations to the
receivership court for the allowance of an insured's claim after
consideration of the probable outcome of any pending action against
the insured on which the claim is based, the probable damages
recoverable in the action, and the probable costs and expenses of
defense.  After allowance by the receivership court, the liquidator
shall withhold any distribution payable on the claim, pending the
outcome of litigation and negotiation between the insured and the
third party.  The liquidator may reconsider the claim as provided in
Section 21A.253(j).  As claims against the insured are settled or
barred, the insured or third party, as appropriate, shall be paid
from the amount withheld the same percentage distribution as was
paid on other claims of like priority, based on the lesser of the
amount actually due from the insured by action or paid by agreement
plus the reasonable costs and expense of defense, or the amount
allowed on the claims by the receivership court.  After all claims
are settled or barred, any sum remaining from the amount withheld
shall revert to the undistributed property of the insurer.
	(d)  If several claims founded upon one policy are timely
filed under this section, whether by third parties or as claims by
the insured, and the aggregate amount of the timely filed allowed
claims exceeds the aggregate policy limits, the liquidator may:
	(1)  apportion the policy limits ratably among the timely
filed allowed claims;  or
	(2)  give notice to the insured, known third parties, and
affected guaranty associations that the aggregate policy limits
have been exceeded.  On and after the 30th day after the date of the
liquidator's notice, further amounts may not be allowed, the policy
limits shall be apportioned ratably among the timely filed allowed
claims, and any additional claims shall be rejected.
	(e)  Claims by the insured under Subsection (d) must be
evaluated as described by Subsection (c).  If any insured's claim is
subsequently reduced under Subsection (c), the amount freed by the
reduction must be apportioned ratably among the claims which have
been reduced under Subsection (d).
	(f)  A claim may not be allowed under this section to the
extent the claim is covered by any guaranty association.
	(g)  A claimant may withdraw a proof of claim with the
liquidator's approval.  The liquidator may approve the withdrawal
only upon a showing of good cause and after giving notice of the
withdrawal to the insured.
	(h)  The filing of a proof of claim in connection with a claim
against an insured has the following effect on the rights of the
claimant and the insured:
	(1)  By filing a proof of claim, a claimant waives any right
to pursue the personal assets of the insured with respect to the
claim, to the extent of the coverage or policy limits provided by
the insurer, and agrees that to the extent of the coverage or policy
limits provided by the insurer, the claimant will seek satisfaction
of the claim against the insured solely from distributions paid by
the liquidator on the claim and from any payments that a guaranty
association may pay on account of the claim, except as provided in
this section.
	(2)  The waiver provided under this section is conditioned
upon the cooperation of the insured with the liquidator and any
applicable guaranty association in the defense of the claim.  The
waiver provided under this section does not operate to:
	(A)  discharge the guaranty association from any of the
association's responsibilities and duties;
	(B)  release the insured with respect to any claim in excess
of the coverage or policy limits provided by the insurer or any
other responsible party;  or
	(C)  release the insured with respect to any claim by a
guaranty association for reimbursement under the law applicable to
the guaranty association.
	(3)  The waiver provided under this section is void if:
	(A)  a claimant withdraws the claimant's proof of claim under
Subsection (g);  or
	(B)  the liquidator avoids insurance coverage in connection
with a proof of the claim.
	(4)  The liquidator shall provide, where applicable, notice
of the election of remedies provision in this section on any proof
of claim form the liquidator distributes.  The notice must be
inserted above the claimant's signature line in typeface not
smaller than the typeface of the rest of the notice and, in any
event not smaller than a 14-point font, and must include a statement
substantially similar to the following:  "I understand by filing
this claim in the estate of the insurer I am waiving any right to
pursue the personal assets of the insured to the extent that there
are policy limits or coverage provided by the now insolvent
insurer."

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

Last modified: August 11, 2007