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Texas Insurance Code - Section 463.302. Distributions To Shareholders And Affiliates

Legal Research Home > Texas Lawyer > Insurance Code > Texas Insurance Code - Section 463.302. Distributions To Shareholders And Affiliates

§ 463.302. DISTRIBUTIONS TO SHAREHOLDERS AND 
AFFILIATES.  (a) An impaired or insolvent insurer may not make a 
distribution to shareholders until the association has recovered 
the total amount of valid claims for money spent in carrying out the 
association's powers and performing the association's duties under 
Section 463.101, 463.103, 463.109, or 463.111(c) or Subchapter F 
with respect to that insurer, plus interest on that amount.
	(b)  Except as otherwise provided by this section, a receiver 
appointed under an order of receivership for an insurer domiciled 
in this state may recover on behalf of the insurer from an affiliate 
that controlled the insurer the amount of any distribution, other 
than a stock dividend the insurer paid on the insurer's capital 
stock, made during the five years preceding the date of the petition 
for liquidation or rehabilitation.
	(c)  A person who was an affiliate that controlled the 
insurer when a distribution described by Subsection (b) was paid is 
liable for the amount of the distribution received.  A person who 
was an affiliate that controlled the insurer when the distribution 
was declared is liable for the amount of the distribution the 
affiliate would have received if the distribution had been paid 
immediately.  Two or more persons liable for the same distribution 
are jointly and severally liable.  If a person liable under this 
subsection is insolvent, all of the affiliates that controlled the 
insolvent person when the distribution was paid are jointly and 
severally liable for any resulting deficiency in the amount 
recovered from the insolvent person.
	(d)  The maximum amount recoverable under Subsections (b) 
and (c) is the amount needed in excess of all other available assets 
of the insolvent insurer to pay the insurer's contractual 
obligations.
	(e)  The receiver may not recover a distribution to 
shareholders under Subsection (b) if the insurer shows that, at the 
time the distribution was 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 the insurer's contractual 
obligations.

Added by Acts 2005, 79th Leg., ch. 727, § 1, eff. April 1, 2007.           

Last modified: August 10, 2007