INSURANCE CODE CHAPTER 443. INSURER RECEIVERSHIP ACT
INSURANCE CODE
CHAPTER 443. INSURER RECEIVERSHIP ACT
SUBCHAPTER A. GENERAL PROVISIONS
§ 443.001. CONSTRUCTION AND PURPOSE. (a) This chapter
may be cited as the Insurer Receivership Act.
(b) This chapter may not be interpreted to limit the powers
granted the commissioner under other provisions of law.
(c) This chapter shall be liberally construed to support the
purpose stated in Subsection (e).
(d) All powers and authority of a receiver under this
chapter are cumulative and are in addition to all powers and
authority that are available to a receiver under law other than this
chapter.
(e) The purpose of this chapter is to protect the interests
of insureds, claimants, creditors, and the public generally,
through:
(1) early detection of any potentially hazardous
condition in an insurer and prompt application of appropriate
corrective measures;
(2) improved methods for conserving and
rehabilitating insurers;
(3) enhanced efficiency and economy of liquidation,
through clarification of the law, to minimize legal uncertainty and
litigation;
(4) apportionment of any unavoidable loss in
accordance with the statutory priorities set out in this chapter;
(5) lessening the problems of interstate receivership
by:
(A) facilitating cooperation between states in
delinquency proceedings; and
(B) extending the scope of personal jurisdiction
over debtors of the insurer located outside this state;
(6) regulation of the business of insurance by the
impact of the law relating to delinquency procedures and related
substantive rules; and
(7) providing for a comprehensive scheme for the
receivership of insurers and those subject to this chapter as part
of the regulation of the business of insurance in this state because
proceedings in cases of insurer insolvency and delinquency are
deemed an integral aspect of the business of insurance and are of
vital public interest and concern.
Added by Acts 2005, 79th Leg., Ch. 995, § 1, eff. September 1,
2005.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.001 by
Acts 2007, 80th Leg., R.S., Ch. 730, § 3B.004(a)(1), eff.
September 1, 2007.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.001 by
Acts 2007, 80th Leg., R.S., Ch. 921, § 9.004(a)(1), eff.
September 1, 2007.
§ 443.002. CONFLICTS OF LAW. This chapter and the state
law governing insurance guaranty associations constitute this
state's insurer receivership laws and shall be construed together
in a manner that is consistent. In the event of a conflict between
the insurer receivership laws and the provisions of any other law,
the insurer receivership laws prevail.
Added by Acts 2005, 79th Leg., Ch. 995, § 1, eff. September 1,
2005.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.002 by
Acts 2007, 80th Leg., R.S., Ch. 730, § 3B.004(a)(1), eff.
September 1, 2007.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.002 by
Acts 2007, 80th Leg., R.S., Ch. 921, § 9.004(a)(1), eff.
September 1, 2007.
§ 443.003. COVERED PERSONS. The provisions of this
chapter apply to all:
(1) insurers who are doing or have done an insurance
business in this state and against whom claims arising from that
business may exist now or in the future and to all persons subject
to examination by the commissioner;
(2) insurers who purport to do an insurance business
in this state;
(3) insurers who have insureds resident in this state;
(4) other persons organized or doing insurance
business, or in the process of organizing with the intent to do
insurance business in this state;
(5) nonprofit health corporations and all fraternal
benefit societies subject to Chapters 844 and 885, respectively;
(6) title insurance companies subject to Title 11;
(7) health maintenance organizations subject to
Chapter 843; and
(8) surety and trust companies subject to Chapter 7,
general casualty companies subject to Chapter 861, statewide mutual
assessment companies subject to Chapter 881, mutual insurance
companies subject to Chapter 882 or 883, local mutual aid
associations subject to Chapter 886, burial associations subject to
Chapter 888, farm mutual insurance companies subject to Chapter
911, county mutual insurance companies subject to Chapter 912,
Lloyd's plans subject to Chapter 941, reciprocal or interinsurance
exchanges subject to Chapter 942, and fidelity, guaranty, and
surety companies.
Added by Acts 2005, 79th Leg., Ch. 995, § 1, eff. September 1,
2005.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.003 by
Acts 2007, 80th Leg., R.S., Ch. 730, § 3B.004(a)(1), eff.
September 1, 2007.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.003 by
Acts 2007, 80th Leg., R.S., Ch. 921, § 9.004(a)(1), eff.
September 1, 2007.
§ 443.004. DEFINITIONS. (a) For the purposes of this
chapter:
(1) "Affiliate," "control," and "subsidiary" have the
meanings assigned by Chapter 823.
(2) "Alien insurer" means an insurer incorporated or
organized under the laws of a jurisdiction that is not a state.
(3) "Creditor" or "claimant" means a person having any
claim against an insurer, whether the claim is matured or not,
liquidated or unliquidated, secured or unsecured, absolute, fixed,
or contingent.
(4) "Delinquency proceeding" means any proceeding
instituted against an insurer for the purpose of liquidating,
rehabilitating, or conserving the insurer, and any proceeding under
Section 443.051.
(5) "Doing business," including "doing insurance
business" and the "business of insurance," includes any of the
following acts, whether effected by mail, electronic means, or
otherwise:
(A) the issuance or delivery of contracts of
insurance, either to persons resident or covering a risk located in
this state;
(B) the solicitation of applications for
contracts described by Paragraph (A) or other negotiations
preliminary to the execution of the contracts;
(C) the collection of premiums, membership fees,
assessments, or other consideration for contracts described by
Paragraph (A);
(D) the transaction of matters subsequent to the
execution of contracts described by Paragraph (A) and arising out
of those contracts; or
(E) operating as an insurer under a certificate
of authority issued by the department.
(6) "Domiciliary state" means the state in which an
insurer is incorporated or organized or, in the case of an alien
insurer, its state of entry.
(7) "Foreign insurer" means an insurer domiciled in
another state.
(8) "Formal delinquency proceeding" means any
rehabilitation or liquidation proceeding.
(9) "General assets" includes:
(A) all property of the estate that is not:
(i) subject to a secured claim or a valid
and existing express trust for the security or benefit of specified
persons or classes of persons; or
(ii) required by the insurance laws of this
state or any other state to be held for the benefit of specified
persons or classes of persons; and
(B) all property of the estate and the proceeds
of that property in excess of the amount necessary to discharge any
secured claims described by Paragraph (A).
(10) "Good faith" means honesty in fact and intention,
and for the purposes of Subchapter F also requires the absence of:
(A) information that would lead a reasonable
person in the same position to know that the insurer is financially
impaired or insolvent; and
(B) knowledge regarding the imminence or
pendency of any delinquency proceeding against the insurer.
(11) "Guaranty association" means any mechanism
mandated by Chapter 462, 463, or 2602 or other laws of this state or
a similar mechanism in another state that is created for the payment
of claims or continuation of policy obligations of financially
impaired or insolvent insurers.
(12) "Impaired" means that an insurer does not have
admitted assets at least equal to all its liabilities together with
the minimum surplus required to be maintained under this code.
(13) "Insolvency" or "insolvent" means an insurer:
(A) is unable to pay its obligations when they
are due;
(B) does not have admitted assets at least equal
to all its liabilities; or
(C) has a total adjusted capital that is less
than that required under:
(i) Chapter 822, 841, or 843, as
applicable; or
(ii) applicable rules or guidelines adopted
by the commissioner under Section 822.210, 841.205, or 843.404.
(14) "Insurer" means any person that has done,
purports to do, is doing, or is authorized to do the business of
insurance in this state, and is or has been subject to the authority
of or to liquidation, rehabilitation, reorganization, supervision,
or conservation by any insurance commissioner. For purposes of
this chapter, any other persons included under Section 443.003 are
insurers.
(15) "Netting agreement" means a contract or
agreement, including terms and conditions incorporated by
reference in a contract or agreement, and a master agreement (which
master agreement, together with all schedules, confirmations,
definitions, and addenda to the agreement and transactions under
the agreement, schedules, confirmations, definitions, or addenda,
are to be treated as one netting agreement) that documents one or
more transactions between the parties to the contract or agreement
for or involving one or more qualified financial contracts and
that, among the parties to the netting agreement, provides for the
netting or liquidation of qualified financial contracts, present or
future payment obligations, or payment entitlements under the
contract or agreement, including liquidation or close-out values
relating to the obligations or entitlements.
(16) "New value" means money, money's worth in goods,
services, or new credit, or release by a transferee of property
previously transferred to the transferee in a transaction that is
neither void nor voidable by the insurer or the receiver under any
applicable law, including proceeds of the property. The term does
not include an obligation substituted for an existing obligation.
(17) "Party in interest" means the commissioner, a 10
percent or greater equity security holder in the insolvent insurer,
any affected guaranty association, any nondomiciliary commissioner
for a jurisdiction in which the insurer has outstanding claims
liabilities, and any of the following parties that have filed a
request for inclusion on the service list under Section 443.007:
(A) an insurer that ceded to or assumed business
from the insolvent insurer; and
(B) an equity shareholder, policyholder,
third-party claimant, creditor, and any other person, including any
indenture trustee, with a financial or regulatory interest in the
receivership proceeding.
(18) "Person" means individual, aggregation of
individuals, partnership, corporation, or other entity.
(19) "Policy" means a written contract of insurance,
written agreement for or effecting insurance, or the certificate
for or effecting insurance, by whatever name. The term includes
all clauses, riders, endorsements, and papers that are a part of the
contract, agreement, or certificate. The term does not include a
contract of reinsurance.
(20) "Property of the insurer" or "property of the
estate" includes:
(A) all right, title, and interest of the insurer
in property, whether legal or equitable, tangible or intangible,
choate or inchoate, and includes choses in action, contract rights,
and any other interest recognized under the laws of this state;
(B) entitlements that:
(i) existed prior to the entry of an order
of rehabilitation or liquidation; and
(ii) may arise by operation of the
provisions of this chapter or other provisions of law allowing the
receiver to avoid prior transfers or assert other rights; and
(C) all records and data that are otherwise the
property of the insurer, in whatever form maintained, within the
possession, custody, or control of a managing general agent,
third-party administrator, management company, data processing
company, accountant, attorney, affiliate, or other person,
including:
(i) claims and claim files;
(ii) policyholder lists;
(iii) application files;
(iv) litigation files;
(v) premium records;
(vi) rate books and underwriting manuals;
(vii) personnel records; and
(viii) financial records or similar
records.
(21) "Qualified financial contract" means a commodity
contract, forward contract, repurchase agreement, securities
contract, swap agreement, and any similar agreement that the
commissioner determines by rule to be a qualified financial
contract for the purposes of this chapter.
(22) "Receiver" means liquidator, rehabilitator, or
ancillary conservator, as the context requires.
(23) "Receivership" means any liquidation,
rehabilitation, or ancillary conservation, as the context
requires.
(24) "Receivership court" refers to the court in which
a delinquency proceeding is pending, unless the context requires
otherwise.
(25) "Reinsurance" means transactions or contracts by
which an assuming insurer agrees to indemnify a ceding insurer
against all, or a part, of any loss that the ceding insurer might
sustain under the policy or policies that it has issued or will
issue.
(26) "Secured claim" means any claim secured by an
asset that is not a general asset. The term includes the right to
set off as provided in Section 443.209. The term does not include a
claim arising from a constructive or resulting trust, a special
deposit claim, or a claim based on mere possession.
(27) "Special deposit" means a deposit established
pursuant to statute for the security or benefit of a limited class
or limited classes of persons.
(28) "Special deposit claim" means any claim secured
by a special deposit. The term does not include any claim secured
by the general assets of the insurer.
(29) "State" means any state, district, or territory
of the United States.
(30) "Transfer" includes the sale and every other and
different mode, direct or indirect, of disposing of or of parting
with property or with an interest in property, including a setoff,
or with the possession of property or of fixing a lien upon property
or upon an interest in property, absolutely or conditionally,
voluntarily or involuntarily, by or without judicial
proceedings. The retention of a security title in property
delivered to an insurer is deemed a transfer suffered by the
insurer.
(31) "Unauthorized insurer" means an insurer doing the
business of insurance in this state that has not received from this
state a certificate of authority or some other type of authority
that allows for doing the business of insurance in this state.
(b) For purposes of this chapter, "admitted assets" and
"liabilities" have the meanings assigned by the department in rules
relating to risk-based capital.
(c) For purposes of Subsection (a)(21):
(1) "Commodity contract" means:
(A) a contract for the purchase or sale of a
commodity for future delivery on or subject to the rules of a board
of trade designated as a contract market by the Commodity Futures
Trading Commission under the Commodity Exchange Act (7 U.S.C.
Section 1 et seq.) or a board of trade outside the United States;
(B) an agreement that is subject to regulation
under Section 19, Commodity Exchange Act (7 U.S.C. Section 23), and
that is commonly known to the commodities trade as a margin account,
margin contract, leverage account, or leverage contract; or
(C) an agreement or transaction that is subject
to regulation under Section 4c(b), Commodity Exchange Act (7 U.S.C.
Section 6c(b)), and that is commonly known to the commodities trade
as a commodity option.
(2) "Forward contract" means a contract, other than a
commodity contract, with a maturity date more than two days after
the date the contract is entered into, that is for the purchase,
sale, or transfer of a commodity, as defined by Section 1a,
Commodity Exchange Act (7 U.S.C. Section 1a), or any similar good,
article, service, right, or interest that is presently or in the
future becomes the subject of dealing in the forward contract trade
or product or byproduct of the contract. The term includes a
repurchase transaction, reverse repurchase transaction,
consignment, lease, swap, hedge transaction, deposit, loan,
option, allocated transaction, unallocated transaction, or a
combination of these or option on any of them.
(3) "Repurchase agreement" includes a reverse
repurchase agreement and means an agreement, including related
terms, that provides for the transfer of certificates of deposit,
eligible bankers' acceptances, or securities that are direct
obligations of or that are fully guaranteed as to principal and
interest by the United States against the transfer of funds by the
transferee of the certificates of deposit, eligible bankers'
acceptances, or securities with a simultaneous agreement by the
transferee to transfer to the transferor certificates of deposit,
eligible bankers' acceptances, or securities as described in this
subdivision, on demand or at a date certain not later than one year
after the transfers, against the transfer of funds. For the
purposes of this subdivision, the items that may be subject to a
repurchase agreement:
(A) include mortgage-related securities and a
mortgage loan and an interest in a mortgage loan; and
(B) do not include any participation in a
commercial mortgage loan unless the commissioner determines by rule
to include the participation within the meaning of the term.
(4) "Securities contract" means a contract for the
purchase, sale, or loan of a security, including an option for the
repurchase or sale of a security, certificate of deposit, or group
or index of securities or an interest in the group or index or based
on the value of the group or index, an option entered into on a
national securities exchange relating to foreign currencies, or the
guarantee of a settlement of cash or securities by or to a
securities clearing agency. For the purposes of this subdivision,
the term "security" includes a mortgage loan, a mortgage-related
security, and an interest in any mortgage loan or mortgage-related
security.
(5) "Swap agreement" means an agreement, including the
terms and conditions incorporated by reference in an agreement,
that is a rate swap agreement, basis swap, commodity swap, forward
rate agreement, interest rate future, interest rate option, forward
foreign exchange agreement, spot foreign exchange agreement, rate
cap agreement, rate floor agreement, rate collar agreement,
currency swap agreement, cross-currency rate swap agreement,
currency future, or currency option or any other similar
agreement. The term includes any combination agreements described
by this subdivision and an option to enter into any agreement
described by this subdivision.
(d) The definitions under this section apply only to this
chapter unless the context of another law requires otherwise.
Added by Acts 2005, 79th Leg., Ch. 995, § 1, eff. September 1,
2005.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.004 by
Acts 2007, 80th Leg., R.S., Ch. 730, § 3B.004(a)(1), eff.
September 1, 2007.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 730, § 3B.004(b), eff.
September 1, 2007.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.004 by
Acts 2007, 80th Leg., R.S., Ch. 921, § 9.004(a)(1), eff.
September 1, 2007.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 921, § 9.004(b), eff.
September 1, 2007.
§ 443.005. JURISDICTION AND VENUE. (a) A delinquency
proceeding may not be commenced under this chapter by a person other
than the commissioner, and a court does not have jurisdiction to
entertain, hear, or determine any delinquency proceeding commenced
by any other person.
(b) A court of this state does not have jurisdiction, other
than in accordance with this chapter, to entertain, hear, or
determine any complaint praying for:
(1) the liquidation, rehabilitation, seizure,
sequestration, conservation, or receivership of any insurer; or
(2) a stay, injunction, restraining order, or other
relief preliminary, incidental, or relating to proceedings
described by Subdivision (1).
(c) The receivership court, as of the commencement of a
delinquency proceeding under this chapter, has exclusive
jurisdiction of all property of the insurer, wherever located,
including property located outside the territorial limits of the
state. The receivership court has original but not exclusive
jurisdiction of all civil proceedings arising:
(1) under this chapter; or
(2) in or related to delinquency proceedings under
this chapter.
(d) In addition to other grounds for jurisdiction provided
by the law of this state, a court having jurisdiction of the subject
matter has jurisdiction over a person served pursuant to Rules 21
and 21a, Texas Rules of Civil Procedure, or other applicable
provisions of law in an action brought by the receiver if the person
served:
(1) is or has been an agent, or other person who, at
any time, has written policies of insurance for or has acted in any
manner on behalf of an insurer against which a delinquency
proceeding has been instituted, in any action resulting from or
incident to such a relationship with the insurer;
(2) is or has been an insurer or reinsurer who, at any
time, has entered into a contract of reinsurance with an insurer
against which a delinquency proceeding has been instituted, or who
is an agent of or for the reinsurer, in any action on or incident to
the reinsurance contract;
(3) is or has been an officer, director, manager,
trustee, organizer, promoter, or other person in a position of
comparable authority or influence over an insurer against which a
delinquency proceeding has been instituted, in any action resulting
from or incident to such a relationship with the insurer;
(4) at the time of the institution of the delinquency
proceeding against the insurer, is or was holding assets in which
the receiver claims an interest on behalf of the insurer in any
action concerning the assets; or
(5) is obligated to the insurer in any way, in any
action on or incident to the obligation.
(e) If, on motion of any party, the receivership court finds
that any action, as a matter of substantial justice, should be tried
in a forum outside this state, the receivership court may enter an
appropriate order to stay further proceedings on the action in this
state. Except as to claims against the estate, nothing in this
chapter deprives a party of any contractual right to pursue
arbitration. A party in arbitration may bring a claim or
counterclaim against the estate, but the claim or counterclaim is
subject to Section 443.209.
(f) Service must be made upon the person named in the
petition in accordance with Rules 21 and 21a, Texas Rules of Civil
Procedure. In lieu of such service, upon application to the
receivership court, service may be made in any manner the
receivership court directs if it is satisfactorily shown by
affidavit:
(1) in the case of a corporation, that the officers of
the corporation cannot be served because they have departed from
the state or otherwise concealed themselves with intent to avoid
service;
(2) in the case of a Lloyd's plan or reciprocal or
interinsurance exchange, that the individual attorney in fact or
the officers of the corporate attorney in fact cannot be served
because of departure or concealment; or
(3) in the case of an individual, that the person
cannot be served because of the individual's departure or
concealment.
(g) An action authorized by this section must be brought in
a district court in Travis County.
(h) At any time after an order is entered pursuant to
Section 443.051, 443.101, or 443.151, the commissioner or receiver
may transfer the case to the county of the principal office of the
person proceeded against. In the event of transfer, the court in
which the proceeding was commenced, upon application of the
commissioner or receiver, shall direct its clerk to transmit the
court's file to the clerk of the court to which the case is to be
transferred. The proceeding, after transfer, shall be conducted
in the same manner as if it had been commenced in the court to which
the matter is transferred.
(i) A person may not intervene in any delinquency proceeding
in this state for the purpose of seeking or obtaining payment of any
judgment, lien, or other claim of any kind. The claims procedure
set forth in this chapter constitutes the exclusive means for
obtaining payment of claims from the receivership estate. This
provision is not intended to affect the rights conferred on the
guaranty associations by Section 443.008(l).
(j) The foregoing provisions of this section
notwithstanding, the provisions of this chapter do not confer
jurisdiction on the receivership court to resolve coverage disputes
between guaranty associations and those asserting claims against
them resulting from the initiation of a delinquency proceeding
under this chapter. The determination of any dispute with respect
to the statutory coverage obligations of any guaranty association
by a court or administrative agency or body with jurisdiction in the
guaranty association's state of domicile is binding and conclusive
as to the parties in a delinquency proceeding initiated in the
receivership court, including the policyholders of the
insurer. With respect to a guaranty association's obligations
under a rehabilitation plan, the receivership court has
jurisdiction only if the guaranty association expressly consents to
the jurisdiction of the court.
Added by Acts 2005, 79th Leg., Ch. 995, § 1, eff. September 1,
2005.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.005 by
Acts 2007, 80th Leg., R.S., Ch. 730, § 3B.004(a)(1), eff.
September 1, 2007.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 730, § 3B.004(c), eff.
September 1, 2007.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.005 by
Acts 2007, 80th Leg., R.S., Ch. 921, § 9.004(a)(1), eff.
September 1, 2007.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 921, § 9.004(c), eff.
September 1, 2007.
§ 443.006. EXEMPTION FROM FEES. The receiver may not be
required to pay any filing, recording, transcript, or
authenticating fee to any public officer in this state.
Added by Acts 2005, 79th Leg., Ch. 995, § 1, eff. September 1,
2005.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.006 by
Acts 2007, 80th Leg., R.S., Ch. 730, § 3B.004(a)(1), eff.
September 1, 2007.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.006 by
Acts 2007, 80th Leg., R.S., Ch. 921, § 9.004(a)(1), eff.
September 1, 2007.
§ 443.007. NOTICE, HEARING, AND APPEAL ON MATTERS
SUBMITTED BY RECEIVER FOR RECEIVERSHIP COURT APPROVAL. (a) Upon
written request to the receiver, a person must be placed on the
service list to receive notice of matters filed by the
receiver. It is the responsibility of the person requesting notice
to inform the receiver in writing of any changes in the person's
address or to request that the person's name be deleted from the
service list. The receiver may require that the persons on the
service list provide confirmation that they wish to remain on the
service list. Any person who fails to confirm the person's intent
to remain on the service list may be purged from the service
list. Inclusion on the service list does not confer standing in
the delinquency proceeding to raise, appear, or be heard on any
issue.
(b) Except as otherwise provided by this chapter, notice and
hearing of any matter submitted by the receiver to the receivership
court for approval under this chapter must be conducted in
accordance with Subsections (c)-(g).
(c) The receiver shall file an application explaining the
proposed action and the basis of the proposed action. The receiver
may include any evidence in support of the application. If the
receiver determines that any documents supporting the application
are confidential, the receiver may submit them to the receivership
court under seal for in camera inspection.
(d) The receiver shall provide notice of the application to
all persons on the service list and any other parties as determined
by the receiver. Notice may be provided by first class mail
postage paid, electronic mail, or facsimile transmission, at the
receiver's discretion. For purposes of this section, notice is
deemed to be given on the date that it is deposited with the U.S.
Postmaster or transmitted, as applicable, to the last known address
as shown on the service list.
(e) Any party in interest objecting to the application must
file an objection specifying the grounds for the objection not
later than the 20th day after the date of the notice of the filing of
the application or within another period as the receivership court
may set, and must serve copies on the receiver and any other persons
served with the application within the same period. An objecting
party has the burden of showing why the receivership court should
not authorize the proposed action.
(f) If no objection to the application is timely filed, the
receivership court may enter an order approving the application
without a hearing, or hold a hearing to determine if the receiver's
application should be approved. The receiver may request that the
receivership court enter an order or hold a hearing on an expedited
basis.
(g) If an objection is timely filed, the receivership court
may hold a hearing. If the receivership court approves the
application and, upon a motion by the receiver, determines that the
objection was frivolous or filed merely for delay or for another
improper purpose, the receivership court shall order the objecting
party to pay the receiver's reasonable costs and fees of defending
the action.
Added by Acts 2005, 79th Leg., Ch. 995, § 1, eff. September 1,
2005.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.007 by
Acts 2007, 80th Leg., R.S., Ch. 730, § 3B.004(a)(1), eff.
September 1, 2007.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.007 by
Acts 2007, 80th Leg., R.S., Ch. 921, § 9.004(a)(1), eff.
September 1, 2007.
§ 443.008. INJUNCTIONS AND ORDERS. (a) The
receivership court may issue any order, process, or judgment,
including stays, injunctions, or other orders, as necessary or
appropriate to carry out the provisions of this chapter or an
approved rehabilitation plan.
(b) This chapter may not be construed to limit the ability
of the receiver to apply to a court other than the receivership
court in any jurisdiction to carry out any provision of this chapter
or for the purpose of pursuing claims against any person.
(c) Except as provided by Subsection (e) or as otherwise
provided by this chapter and subject to Subsection (g), the
commencement of a delinquency proceeding under this chapter
operates as a stay, applicable to all persons, of:
(1) the commencement or continuation, including the
issuance or employment of process, of a judicial, administrative,
or other action or proceeding against the insurer, including an
arbitration proceeding, that was or could have been commenced
before the commencement of the delinquency proceeding under this
chapter, or to recover a claim against the insurer that arose before
the commencement of the delinquency proceeding under this chapter;
(2) the enforcement against the insurer or against
property of the insurer of a judgment obtained before the
commencement of the delinquency proceeding under this chapter;
(3) any act to obtain or retain possession of property
of the insurer or of property from the insurer or to exercise
control over property or records of the insurer;
(4) any act to create, perfect, or enforce any lien
against property of the insurer;
(5) any act to collect, assess, or recover a claim
against the insurer that arose before the commencement of a
delinquency proceeding under this chapter;
(6) the commencement or continuation of an action or
proceeding against a reinsurer of the insurer, by the holder of a
claim against the insurer, seeking reinsurance recoveries that are
contractually due to the insurer; and
(7) except as provided by Subsection (e)(1), the
commencement or continuation of an action or proceeding by a
governmental unit to terminate or revoke an insurance license.
(d) Except as provided in Subsection (e) or as otherwise
provided by this chapter, the commencement of a delinquency
proceeding under this chapter operates as a stay, applicable to all
persons, of any judicial, administrative, or other action or
proceeding, including the enforcement of any judgment, against any
insured that was or could have been commenced before the
commencement of the delinquency proceeding under this chapter, or
to recover a claim against the insured that arose before or after
the commencement of the delinquency proceeding under this chapter
and for which the insurer is or may be liable under a policy of
insurance or is obligated to defend a party. The stay provided by
this subsection terminates 90 days after the date of appointment of
the receiver, unless, for good cause shown, the stay is extended by
order of the receivership court after notice to any affected
parties and any hearing the receivership court determines is
appropriate.
(e) Notwithstanding Subsection (c), the commencement of a
delinquency proceeding under this chapter does not operate as a
stay of:
(1) regulatory actions not described by Subsection
(c)(7) that are taken by the commissioners of nondomiciliary
states, including the suspension of licenses;
(2) criminal proceedings;
(3) any act to perfect or to maintain or continue the
perfection of an interest in property to the extent that the act is
accomplished within any relation back period under applicable law;
(4) set off as permitted by Section 443.209;
(5) pursuit and enforcement of nonmonetary
governmental claims, judgments, and proceedings;
(6) presentment of a negotiable instrument and the
giving of notice and protesting dishonor of the instrument;
(7) enforcement of rights against single beneficiary
trusts established pursuant to and in compliance with laws relating
to credit for reinsurance;
(8) termination, liquidation, and netting of
obligations under qualified financial contracts as provided for in
Section 443.261;
(9) discharge by a guaranty association of statutory
responsibilities under any law governing guaranty associations; or
(10) any of the following actions:
(A) an audit by a governmental unit to determine
tax liability;
(B) the issuance to the insurer by a governmental
unit of a notice of tax deficiency;
(C) a demand for tax returns; or
(D) the making of an assessment for any tax and
issuance of a notice and demand for payment of the assessment.
(f) Except as provided by Subsection (h):
(1) the stay of an act against property of the insurer
under Subsection (c) continues until the property is no longer
property of the receivership estate; and
(2) the stay of any other act under Subsection (c)
continues until the earlier of the time the delinquency proceeding
is closed or dismissed.
(g) Notwithstanding the provisions of Subsection (c),
claims against the insurer that arose before the commencement of
the delinquency proceeding under this chapter may be asserted as a
counterclaim in any judicial, administrative, or other action or
proceeding initiated by or on behalf of the receiver against the
holder of the claims.
(h) On request of a party in interest and after notice and
any hearing the receivership court determines is appropriate, the
receivership court may grant relief from the stay of Subsection (c)
or (d), such as by terminating, annulling, modifying, or
conditioning the stay:
(1) for cause as described by Subsection (i); or
(2) with respect to a stay of an act against property
under Subsection (c) if:
(A) the insurer does not have equity in the
property; and
(B) the property is not necessary to an effective
rehabilitation plan.
(i) For purposes of Subsection (h), "cause" includes the
receiver canceling a policy, surety bond, or surety undertaking if
the creditor is entitled, by contract or by law, to require the
insured or the principal to have a policy, surety bond, or surety
undertaking and the insured or the principal fails to obtain a
replacement policy, surety bond, or surety undertaking not later
than the later of:
(1) the 30th day after the date the receiver cancels
the policy, surety bond, or surety undertaking; or
(2) the time permitted by contract or law.
(j) In any hearing under Subsection (h), the party seeking
relief from the stay has the burden of proof on each issue, which
must be established by clear and convincing evidence.
(k) The estate of an insurer that is injured by any wilful
violation of a stay provided by this section is entitled to actual
damages, including costs and attorney's fees. In appropriate
circumstances, the receivership court may impose additional
sanctions.
(l) Any guaranty association or its designated
representative may intervene as a party as a matter of right or
otherwise appear and participate in any court proceeding concerning
a delinquency proceeding if the association is or may become liable
to act as a result of the rehabilitation or liquidation of the
insurer. Exercise by any guaranty association or its designated
representative of the right to intervene conferred under this
subsection does not constitute grounds to establish general
personal jurisdiction by the courts of this state. The intervening
guaranty association or its designated representative are subject
to the receivership court's jurisdiction for the limited purpose
for which it intervenes.
(m) Notwithstanding any other provision of law, bond may not
be required of the commissioner or receiver in relation to any stay
or injunction under this section.
Added by Acts 2005, 79th Leg., Ch. 995, § 1, eff. September 1,
2005.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.008 by
Acts 2007, 80th Leg., R.S., Ch. 730, § 3B.004(a)(1), eff.
September 1, 2007.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 730, § 3B.004(d), eff.
September 1, 2007.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.008 by
Acts 2007, 80th Leg., R.S., Ch. 921, § 9.004(a)(1), eff.
September 1, 2007.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 921, § 9.004(d), eff.
September 1, 2007.
§ 443.009. STATUTES OF LIMITATIONS. (a) If applicable
law, an order, or an agreement fixes a period within which the
insurer may commence an action, and this period has not expired
before the date of the filing of the initial petition in a
delinquency proceeding, the receiver may commence an action only
before the later of:
(1) the end of the period, including any suspension of
the period occurring on or after the filing of the initial petition
in a delinquency proceeding; or
(2) four years after the later of the date of entry of
an order for either rehabilitation or liquidation.
(b) Except as provided by Subsection (a), if applicable law,
an order, or an agreement fixes a period within which the insurer
may file any pleading, demand, notice, or proof of claim or loss,
cure a default in a case or proceeding, or perform any other similar
act, and the period has not expired before the date of the filing of
the petition initiating formal delinquency proceedings, the
receiver may file, cure, or perform, as the case may be, only before
the later of:
(1) the end of the period, including any suspension of
the period occurring on or after the filing of the initial petition
in the delinquency proceeding; or
(2) 60 days after the later of the date of entry of an
order for either rehabilitation or liquidation.
(c) If applicable law, an order, or an agreement fixes a
period for commencing or continuing a civil action in a court other
than the receivership court on a claim against the insurer, and the
period has not expired before the date of the initial filing of the
petition in a delinquency proceeding, then the period does not
expire until the later of:
(1) the end of the period, including any suspension of
the period occurring on or after the filing of the initial petition
in the delinquency proceeding; or
(2) 30 days after termination or expiration of the
stay under Section 443.008 with respect to the claim.
(d) If the otherwise applicable limitations period has not
expired prior to the initial filing of the petition commencing a
delinquency proceeding, any other action or proceeding filed by a
receiver may be commenced at any time within four years after the
date upon which the cause of action accrues or four years after the
date on which the receiver is appointed, whichever is later.
Added by Acts 2005, 79th Leg., Ch. 995, § 1, eff. September 1,
2005.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.009 by
Acts 2007, 80th Leg., R.S., Ch. 730, § 3B.004(a)(1), eff.
September 1, 2007.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 730, § 3B.004(e), eff.
September 1, 2007.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.009 by
Acts 2007, 80th Leg., R.S., Ch. 921, § 9.004(a)(1), eff.
September 1, 2007.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 921, § 9.004(e), eff.
September 1, 2007.
§ 443.010. COOPERATION OF OFFICERS, OWNERS, AND
EMPLOYEES. (a) Any present or former officer, manager, director,
trustee, owner, employee, or agent of any insurer, or any other
persons with authority over or in charge of any segment of the
insurer's affairs, shall cooperate with the commissioner or
receiver in any proceeding under this chapter or any investigation
preliminary to the proceeding. For purposes of this section:
(1) "person" includes any person who exercises control
directly or indirectly over activities of the insurer through any
holding company or other affiliate of the insurer; and
(2) "cooperate" includes:
(A) replying promptly in writing to any inquiry
from the commissioner or receiver requesting the reply; and
(B) promptly making available to the
commissioner or receiver any books, accounts, documents, or other
records or information or property of or pertaining to the insurer
and in the person's possession, custody, or control.
(b) A person may not obstruct or interfere with the
commissioner or receiver in the conduct of any delinquency
proceeding or any preliminary or incidental investigation.
(c) This section may not be construed to abridge otherwise
existing legal rights, including the right to resist a petition for
liquidation or other delinquency proceedings, or other orders.
(d) Any person described by Subsection (a) who fails to
cooperate with the commissioner or receiver, or any person who
obstructs or interferes with the commissioner or receiver in the
conduct of any delinquency proceeding or any preliminary or
incidental investigation, or who violates any order validly issued
under this chapter:
(1) commits an offense; and
(2) is subject to the imposition by the commissioner
of an administrative penalty not to exceed $10,000 and subject to
the revocation or suspension of any licenses issued by the
commissioner in accordance with Chapters 82 and 84.
(e) An offense under Subsection (d) is punishable by a fine
not exceeding $10,000 or imprisonment for not more than one year, or
both fine and imprisonment.
Added by Acts 2005, 79th Leg., Ch. 995, § 1, eff. September 1,
2005.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.010 by
Acts 2007, 80th Leg., R.S., Ch. 730, § 3B.004(a)(1), eff.
September 1, 2007.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.010 by
Acts 2007, 80th Leg., R.S., Ch. 921, § 9.004(a)(1), eff.
September 1, 2007.
§ 443.011. ACTIONS BY AND AGAINST RECEIVER. (a) An
allegation by the receiver of improper or fraudulent conduct
against any person may not be the basis of a defense to the
enforcement of a contractual obligation owed to the insurer by a
third party, unless the conduct is found to have been materially and
substantially related to the contractual obligation for which
enforcement is sought.
(b) A prior wrongful or negligent action of any present or
former officer, manager, director, trustee, owner, employee, or
agent of the insurer may not be asserted as a defense to a claim by
the receiver under a theory of estoppel, comparative fault,
intervening cause, proximate cause, reliance, mitigation of
damages, or otherwise, except that the affirmative defense of fraud
in the inducement may be asserted against the receiver in a claim
based on a contract, and a principal under a surety bond or a surety
undertaking is entitled to credit against any reimbursement
obligation to the receiver for the value of any property pledged to
secure the reimbursement obligation to the extent that the receiver
has possession or control of the property or that the insurer or its
agents commingled or otherwise misappropriated the
property. Evidence of fraud in the inducement is admissible only
if the evidence is contained in the records of the insurer.
(c) An action or inaction by the department or the insurance
regulatory authorities in any state may not be asserted as a defense
to a claim by the receiver.
(d) Except as provided by Subsection (e), a judgment or
order entered against an insured or the insurer in contravention of
any stay or injunction under this chapter, or at any time by default
or collusion, may not be considered as evidence of liability or of
the amount of damages in adjudicating claims filed in the estate
arising out of the subject matter of the judgment or order.
(e) Subsection (d) does not apply to guaranty associations'
claims for amounts paid on settlements and judgments in pursuit of
their statutory obligations.
(f) The receiver may not be deemed a governmental entity for
the purposes of any state law awarding fees to a litigant who
prevails against a governmental entity.
Added by Acts 2005, 79th Leg., Ch. 995, § 1, eff. September 1,
2005.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.011 by
Acts 2007, 80th Leg., R.S., Ch. 730, § 3B.004(a)(1), eff.
September 1, 2007.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.011 by
Acts 2007, 80th Leg., R.S., Ch. 921, § 9.004(a)(1), eff.
September 1, 2007.
§ 443.012. UNRECORDED OBLIGATIONS AND DEFENSES OF
AFFILIATES. (a) In any proceeding or claim by the receiver, an
affiliate, controlled or controlling person, or present or former
officer, manager, director, trustee, or shareholder of the insurer
may not assert any defense, unless evidence of the defense was
recorded in the books and records of the insurer at or about the
time the events giving rise to the defense occurred and, if required
by statutory accounting practices and procedures, was timely
reported on the insurer's official financial statements filed with
the department.
(b) An affiliate, controlled or controlling person, or
present or former officer, manager, director, trustee, or
shareholder of the insurer may not assert any claim, unless the
obligations were recorded in the books and records of the insurer at
or about the time the obligations were incurred and, if required by
statutory accounting practices and procedures, were timely
reported on the insurer's official financial statements filed with
the department.
(c) Claims by the receiver against any affiliate,
controlled or controlling person, or present or former officer,
manager, director, trustee, or shareholder of the insurer based on
unrecorded or unreported transactions are not barred by this
section.
Added by Acts 2005, 79th Leg., Ch. 995, § 1, eff. September 1,
2005.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.012 by
Acts 2007, 80th Leg., R.S., Ch. 730, § 3B.004(a)(1), eff.
September 1, 2007.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.012 by
Acts 2007, 80th Leg., R.S., Ch. 921, § 9.004(a)(1), eff.
September 1, 2007.
§ 443.013. EXECUTORY CONTRACTS AND UNEXPIRED LEASES.
(a) The receiver may assume or reject any executory contract or
unexpired lease of the insurer.
(b) Neither the filing of a petition commencing delinquency
proceedings under this chapter nor the entry of an order for a
delinquency proceeding constitutes a breach or anticipatory breach
of any contract or lease of the insurer.
(c) If there has been a default in an executory contract or
unexpired lease of the insurer, the receiver may not assume the
contract or lease unless, at the time of the assumption of the
contract or lease, the receiver:
(1) cures or provides adequate assurance that the
receiver will promptly cure the default; and
(2) provides adequate assurance of future performance
under the contract or lease.
(d) Subsection (c) does not apply to a default that is a
breach of a provision relating to:
(1) the insolvency or financial condition of the
insurer at any time before the closing of the delinquency
proceeding;
(2) the appointment of or taking possession by a
receiver in a case under this chapter or a custodian before the
commencement of the delinquency proceeding; or
(3) the satisfaction of any penalty rate or provision
relating to a default arising from any failure of the insurer to
perform nonmonetary obligations under the executory contract or
unexpired lease.
(e) A claim arising from the rejection, under this section
or a plan of rehabilitation, of an executory contract or unexpired
lease of the insurer that has not been assumed shall be determined,
treated, and classified as if the claim had arisen before the date
of the filing of a successful petition commencing the delinquency
proceeding.
Added by Acts 2005, 79th Leg., Ch. 995, § 1, eff. September 1,
2005.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.013 by
Acts 2007, 80th Leg., R.S., Ch. 730, § 3B.004(a)(1), eff.
September 1, 2007.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.013 by
Acts 2007, 80th Leg., R.S., Ch. 921, § 9.004(a)(1), eff.
September 1, 2007.
§ 443.0135. CONTRACTS FOR SPECIAL DEPUTIES. (a) The
receiver shall use a competitive bidding process in the selection
of any special deputies appointed under Section 443.102 or
443.154. The process must include procedures to promote the
participation of historically underutilized businesses that have
been certified by the comptroller under Section 2161.061,
Government Code.
(b) A proposal submitted in connection with a bid
solicitation under Subsection (a) must describe the efforts that
have been made to include historically underutilized businesses as
subcontractors and the plan for using the historically
underutilized businesses in the administration of the receivership
estate. A special deputy appointed under Section 443.102 or
443.154 shall make a good faith effort to implement the plan and
shall report to the receiver the special deputy's efforts to
identify and subcontract with historically underutilized
businesses.
Added by Acts 2005, 79th Leg., Ch. 995, § 1, eff. September 1,
2005.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 730, § 3B.004(f), eff.
September 1, 2007.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.0135
by Acts 2007, 80th Leg., R.S., Ch. 921, § 9.004(a)(1), eff.
September 1, 2007.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 921, § 9.004(f), eff.
September 1, 2007.
Acts 2007, 80th Leg., R.S., Ch. 937, § 1.98, eff.
September 1, 2007.
§ 443.014. IMMUNITY AND INDEMNIFICATION OF RECEIVER AND
ASSISTANTS. (a) For the purposes of this section, the persons
entitled to immunity and indemnification and those entitled to
immunity only, as applicable, are:
(1) all present and former receivers responsible for
the conduct of a delinquency proceeding under this chapter;
(2) all of the receiver's present and former
assistants, including:
(A) all present and former special deputies and
assistant special deputies engaged by contract or otherwise;
(B) all persons whom the receiver, special
deputies, or assistant special deputies have employed to assist in
a delinquency proceeding under this chapter; and
(C) any state employees acting with respect to a
delinquency proceeding under this chapter; and
(3) all of the receiver's present and former
contractors, including all persons with whom the receiver, special
deputies, or assistant special deputies have contracted to assist
in a delinquency proceeding under this chapter, including
attorneys, accountants, auditors, actuaries, investment bankers,
financial advisors, and any other professionals or firms who are
retained or contracted with by the receiver as independent
contractors and all employees of the contractors.
(b) The receiver, the receiver's assistants, and the
receiver's contractors have immunity under this chapter, as
described by Subsections (c) and (d).
(c) The receiver, the receiver's assistants, and the
receiver's contractors are immune from suit and liability, both
personally and in their representative capacities, for any claim
for damage to or loss of property or personal injury or other civil
liability caused by or resulting from any alleged act, error, or
omission of the receiver or any assistant or contractor that arises
out of or by reason of their duties or employment or is taken at the
direction of the receivership court, providing that the alleged
act, error, or omission is performed in good faith.
(d) Any immunity granted by this section is in addition to
any immunity granted by other law.
(e) The receiver and the receiver's assistants are entitled
to indemnification under this chapter, as described by Subsections
(f)-(l).
(f) If any legal action is commenced against the receiver or
any assistant, whether against the receiver or assistant personally
or in their official capacity, alleging property damage, property
loss, personal injury, or other civil liability caused by or
resulting from any alleged act, error, or omission of the receiver
or any assistant arising out of or by reason of their duties or
employment, the receiver and any assistant are indemnified from the
assets of the insurer for all expenses, attorney's fees, judgments,
settlements, decrees, or amounts due and owing or paid in
satisfaction of or incurred in the defense of the legal action,
unless it is determined upon a final adjudication on the merits that
the alleged act, error, or omission of the receiver or assistant
giving rise to the claim:
(1) did not arise out of or by reason of their duties
or employment; or
(2) was caused by intentional or wilful and wanton
misconduct.
(g) Attorney's fees and any and all related expenses
incurred in defending a legal action for which immunity or
indemnity is available under this section must be paid from the
assets of the insurer, as the fees and expenses are incurred, and in
advance of the final disposition of the legal action upon receipt of
an agreement by or on behalf of the receiver or assistant to repay
the attorney's fees and expenses, if it is ultimately determined
upon a final adjudication on the merits that the receiver or
assistant is not entitled to immunity or indemnity under this
section.
(h) Any indemnification for expense payments, judgments,
settlements, decrees, attorney's fees, surety bond premiums, or
other amounts paid or to be paid from the insurer's assets pursuant
to this section are an administrative expense of the insurer.
(i) In the event of any actual or threatened litigation
against a receiver or any assistant for whom immunity or indemnity
may be available under this section, a reasonable amount of funds,
which in the judgment of the receiver may be needed to provide
immunity or indemnity, must be segregated and reserved from the
assets of the insurer as security for the payment of indemnity
until:
(1) all applicable statutes of limitation have run;
(2) all actual or threatened actions against the
receiver or any assistant have been completely and finally
resolved; and
(3) all obligations under this section have been
satisfied.
(j) Instead of segregating and reserving funds under
Subsection (i), the receiver may, in the receiver's discretion,
obtain a surety bond or make other arrangements that will enable the
receiver to secure fully the payment of all obligations under this
section.
(k) If any legal action against an assistant for whom
indemnity may be available under this section is settled prior to
final adjudication on the merits, the receiver must pay the
settlement amount on behalf of the assistant, or indemnify the
assistant for the settlement amount, unless the receiver determines
that the claim:
(1) did not arise out of or by reason of the
assistant's duties or employment; or
(2) was caused by the intentional or wilful and wanton
misconduct of the assistant.
(l) In any legal action in which a claim is asserted against
the receiver, that portion of any settlement relating to the
alleged act, error, or omission of the receiver is subject to the
approval of the receivership court. The receivership court may not
approve that portion of the settlement if it determines that the
claim:
(1) did not arise out of or by reason of the receiver's
duties or employment; or
(2) was caused by the intentional or wilful and wanton
misconduct of the receiver.
(m) Nothing contained or implied in this section may operate
or be construed or applied to deprive the receiver, the receiver's
assistants, or receiver's contractors of any immunity, indemnity,
benefits of law, rights, or defense otherwise available.
(n) The immunity and indemnification provided to the
receiver's assistants and the immunity provided to the receiver's
contractors under this section do not apply to any action by the
receiver against that person.
(o) Subsection (b) applies to any suit based in whole or in
part on any alleged act, error, or omission that takes place on or
after September 1, 2005.
(p) Subsections (e)-(l) apply to any suit that is pending on
or filed after September 1, 2005, without regard to when the alleged
act, error, or omission took place.
Added by Acts 2005, 79th Leg., Ch. 995, § 1, eff. September 1,
2005.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.014 by
Acts 2007, 80th Leg., R.S., Ch. 730, § 3B.004(a)(1), eff.
September 1, 2007.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.014 by
Acts 2007, 80th Leg., R.S., Ch. 921, § 9.004(a)(1), eff.
September 1, 2007.
§ 443.015. APPROVAL AND PAYMENT OF EXPENSES. (a) The
receiver may pay any expenses under contracts, leases, employment
agreements, or other arrangements entered into by the insurer prior
to receivership, as the receiver deems necessary for the purposes
of this chapter. The receiver is not required to pay any expenses
that the receiver determines are not necessary, and may reject any
contract pursuant to Section 443.013.
(b) Receivership expenses other than those described in
Subsection (a) must be paid in accordance with Subsections (c)-(f).
(c) The receiver shall submit to the receivership court an
application pursuant to Section 443.007 to approve:
(1) the terms of compensation of each special deputy
or contractor with respect to which the total amount of the
compensation is reasonably expected by the receiver for the
duration of the delinquency proceeding to exceed $250,000, or
another amount established by the receivership court; and
(2) any other anticipated expense in excess of
$25,000, or another amount established by the receivership court.
(d) The receiver may, as the receiver deems appropriate,
submit an application to approve any compensation, anticipated
expenses, or incurred expenses not described by Subsection (c)(1).
(e) The receiver may pay any expenses not requiring
receivership court approval and any expenses approved by the
rehabilitation or liquidation order as the expenses are incurred.
(f) The approval of expenses by the receivership court does
not prejudice the right of the receiver to seek any recovery,
recoupment, disgorgement, or reimbursement of fees based on
contract or causes of action recognized in law or in equity.
(g) On a quarterly basis, or as otherwise provided by the
receivership court, the receiver shall submit to the receivership
court a report summarizing the expenses incurred during the period.
(h) Receivership court approval may not be required to pay
expenses incurred by the receiver in connection with the appeal of
an order of the receivership court.
(i) All expenses of receivership shall be paid from the
assets of the insurer, except as provided by this subsection. In
the event that the property of the insurer does not contain
sufficient cash or liquid assets to defray the expenses incurred,
the commissioner may advance funds from the account established
under Section 443.304(c). Any amounts advanced shall be repaid to
the account out of the first available money of the insurer.
Added by Acts 2005, 79th Leg., Ch. 995, § 1, eff. September 1,
2005.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.015 by
Acts 2007, 80th Leg., R.S., Ch. 730, § 3B.004(a)(1), eff.
September 1, 2007.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 730, § 3B.004(g), eff.
September 1, 2007.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.015 by
Acts 2007, 80th Leg., R.S., Ch. 921, § 9.004(a)(1), eff.
September 1, 2007.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 921, § 9.004(g), eff.
September 1, 2007.
§ 443.016. FINANCIAL REPORTING. (a) Not later than the
120th day after the date of entry of an order of receivership by the
receivership court, and at least quarterly after that date, the
receiver shall file a financial report with the receivership
court. A financial report filed under this subsection at a
minimum, must include:
(1) a statement of the assets and liabilities of the
insurer;
(2) the changes in those assets and liabilities; and
(3) all funds received or disbursed by the receiver
during the period covered by the report.
(b) The receivership court shall require a financial report
filed under Subsection (a) to comply with all receivership
financial reporting requirements specified by the National
Association of Insurance Commissioners and adopted in this state by
rule by the commissioner.
(c) Not later than the 120th day after the date of entry of
an order of liquidation by the receivership court, and at least
quarterly after that date, or at other intervals as may be agreed to
between the liquidator and the guaranty associations, but in no
event less than annually, each affected guaranty association shall
file reports with the liquidator. The reports must be in a format
compatible with that specified by the National Association of
Insurance Commissioners. Reports under this subsection shall be
filed with the receivership court.
Added by Acts 2005, 79th Leg., Ch. 995, § 1, eff. September 1,
2005.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.016 by
Acts 2007, 80th Leg., R.S., Ch. 730, § 3B.004(a)(1), eff.
September 1, 2007.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.016 by
Acts 2007, 80th Leg., R.S., Ch. 921, § 9.004(a)(1), eff.
September 1, 2007.
§ 443.017. RECORDS. (a) Upon entry of an order of
rehabilitation or liquidation, the receiver is vested with title to
all of the books, documents, papers, policy information, and claim
files, and all other records of the insurer, of whatever nature, in
whatever medium, and wherever located, regardless of whether the
records are in the custody and control of a third-party
administrator, managing general agent, attorney, or other
representative of the insurer. The receiver may immediately take
possession and control of all of the records of the insurer, and of
the premises where the records are located. A third-party
administrator, managing general agent, attorney, or other
representative of the insurer shall release all records described
by this subsection to the receiver, or the receiver's designee, at
the request of the receiver. A guaranty association that has or
may have obligations under a policy issued by the insurer has the
right, with the receiver's approval, to take actions as are
necessary to obtain directly from any third-party administrator,
managing general agent, attorney, or other representative of the
insurer all records described by this section that pertain to the
insurer's business and that are appropriate or necessary for the
guaranty association to fulfill the association's statutory
obligations.
(b) The receiver has the authority to certify the records of
a delinquent insurer described by Subsection (a) and the records of
the receiver's office created and maintained in connection with a
delinquent insurer, as follows:
(1) records of a delinquent insurer may be certified
by the receiver in an affidavit stating that the records:
(A) are true and correct copies of records of the
insurer; and
(B) were received from the custody of the insurer
or found among its effects; and
(2) records created by or filed with the receiver's
office in connection with a delinquent insurer may be certified by
the receiver's affidavit stating that the records are true and
correct copies of records maintained by the receiver's office.
(c) Original books, documents, papers, and other records,
or copies of original records certified under Subsection (b), when
admitted in evidence, are prima facie evidence of the facts
disclosed.
(d) The records of a delinquent insurer held by the receiver
may not be considered records of the department for any purposes,
and Chapter 552, Government Code, does not apply to those records.
Added by Acts 2005, 79th Leg., Ch. 995, § 1, eff. September 1,
2005.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.017 by
Acts 2007, 80th Leg., R.S., Ch. 730, § 3B.004(a)(1), eff.
September 1, 2007.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.017 by
Acts 2007, 80th Leg., R.S., Ch. 921, § 9.004(a)(1), eff.
September 1, 2007.
SUBCHAPTER B. PROCEEDINGS
§ 443.051. RECEIVERSHIP COURT'S SEIZURE ORDER. (a) The
commissioner may file in a district court of Travis County a
petition with respect to an insurer domiciled in this state, an
unauthorized insurer, or, pursuant to Section 443.401, a foreign
insurer:
(1) alleging that grounds exist that would justify a
court order for a formal delinquency proceeding against the insurer
under this chapter;
(2) alleging that the interests of policyholders,
creditors, or the public will be endangered by delay; and
(3) setting forth the contents of a seizure order
deemed to be necessary by the commissioner.
(b) Upon a filing under Subsection (a), the receivership
court may issue, ex parte and without notice or hearing, the
requested seizure order directing the commissioner to take
possession and control of all or a part of the property, books,
accounts, documents, and other records of an insurer, and of the
premises occupied by it for transaction of its business, and until
further order of the receivership court, enjoining the insurer and
its officers, managers, agents, and employees from disposition of
its property and from the transaction of its business except with
the written consent of the commissioner. Any person having
possession or control of and refusing to deliver any of the books,
records, or assets of a person against whom a seizure order has been
issued commits an offense. An offense under this subsection is
punishable in the manner described by Section 443.010(e).
(c) A petition that prays for injunctive relief must be
verified by the commissioner or the commissioner's designee, but
need not plead or prove irreparable harm or inadequate remedy at
law. The commissioner shall provide only the notice as the
receivership court may require.
(d) The receivership court shall specify in the seizure
order the duration of the seizure order, which shall be a period the
receivership court deems necessary for the commissioner to
ascertain the condition of the insurer. On motion of the
commissioner or the insurer, or the court's own motion, the
receivership court may, from time to time, hold hearings as it deems
desirable after notice as it deems appropriate, and may extend,
shorten, or modify the terms of the seizure order. The
receivership court shall vacate the seizure order if the
commissioner fails to commence a formal delinquency proceeding
under this chapter after having had a reasonable opportunity to do
so. An order of the receivership court pursuant to a formal
proceeding under this chapter vacates the seizure order.
(e) Entry of a seizure order under this section does not
constitute a breach or an anticipatory breach of any contract of the
insurer.
(f) An insurer subject to an ex parte seizure order under
this section may petition the receivership court at any time after
the issuance of a seizure order for a hearing and review of the
seizure order. The receivership court shall hold the hearing and
conduct the review not later than the 15th day after the date of the
request. A hearing under this subsection may be held privately in
chambers, and a hearing shall be held privately in chambers if the
insurer proceeded against so requests.
(g) If, at any time after the issuance of a seizure order, it
appears to the receivership court that any person whose interest is
or will be substantially affected by the seizure order did not
appear at the hearing and has not been served, the receivership
court may order that notice be given to the person. An order that
notice be given does not stay the effect of any seizure order
previously issued by the receivership court.
(h) Whenever the commissioner makes any seizure as provided
by Subsection (b), on the demand of the commissioner, the sheriff of
any county and the police department of any municipality shall
furnish the commissioner with the deputies, patrolmen, or officers
as may be necessary to assist the commissioner in making and
enforcing the seizure order.
(i) In all proceedings and judicial reviews under this
section, all records of the insurer, department files, court
records and papers, and other documents, so far as they pertain to
or are a part of the record of the proceedings, are confidential,
and all papers filed with the clerk of the court shall be held by the
clerk in a confidential file as permitted by law, except to the
extent necessary to obtain compliance with any order entered in
connection with the proceedings, unless and until:
(1) the court, after hearing argument in chambers,
orders otherwise;
(2) the insurer requests that the matter be made
public; or
(3) the commissioner applies for an order under
Section 443.057.
Added by Acts 2005, 79th Leg., Ch. 995, § 1, eff. September 1,
2005.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.051 by
Acts 2007, 80th Leg., R.S., Ch. 730, § 3B.004(a)(1), eff.
September 1, 2007.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 730, § 3B.004(h), eff.
September 1, 2007.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.051 by
Acts 2007, 80th Leg., R.S., Ch. 921, § 9.004(a)(1), eff.
September 1, 2007.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 921, § 9.004(h), eff.
September 1, 2007.
§ 443.052. COMMENCEMENT OF FORMAL DELINQUENCY
PROCEEDING. (a) Any formal delinquency proceeding against a
person shall be commenced by filing a petition in the name of the
commissioner or department.
(b) The petition must state the grounds upon which the
proceeding is based and the relief requested and may include a
prayer for restraining orders and injunctive relief as described in
Section 443.008. On the filing of the petition or order, a copy
shall be forwarded by first class mail or electronic communication
as permitted by the receivership court to the insurance regulatory
officials and guaranty associations in states in which the insurer
did business.
(c) Any petition that prays for injunctive relief must be
verified by the commissioner or the commissioner's designee, but
need not plead or prove irreparable harm or inadequate remedy at
law. The commissioner shall provide only the notice as the
receivership court may require.
(d) If any temporary restraining order is prayed for:
(1) the receivership court may issue an initial order
containing the relief requested;
(2) the receivership court shall set a time and date
for the return of summons, not later than 10 days after the time and
date of the issuance of the initial order, at which time the person
proceeded against may appear before the receivership court for a
summary hearing;
(3) the order must state the time and date of its
issuance; and
(4) the order may not continue in effect beyond the
time and date set for the return of summons, unless the receivership
court expressly enters one or more orders extending the restraining
order.
(e) If a temporary restraining order is not requested, the
receivership court shall cause summons to be issued. The summons
must specify a return date not later than the 30th day after the
date of issuance and that an answer must be filed at or before the
return date.
Added by Acts 2005, 79th Leg., Ch. 995, § 1, eff. September 1,
2005.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.052 by
Acts 2007, 80th Leg., R.S., Ch. 730, § 3B.004(a)(1), eff.
September 1, 2007.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 730, § 3B.004(i), eff.
September 1, 2007.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.052 by
Acts 2007, 80th Leg., R.S., Ch. 921, § 9.004(a)(1), eff.
September 1, 2007.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 921, § 9.004(i), eff.
September 1, 2007.
§ 443.053. RETURN OF SUMMONS AND SUMMARY HEARING.
(a) The receivership court shall hold a summary hearing at the
time and date for the return of summons on a petition to commence a
formal delinquency proceeding.
(b) If a person is not served with summons on a petition to
commence a formal delinquency proceeding and fails to appear for
the summary hearing, the receivership court shall:
(1) continue the summary hearing not more than 10
days;
(2) provide for alternative service of summons upon
the person; and
(3) extend any restraining order.
(c) Upon a showing of good faith efforts to effect personal
service upon a person who has failed to appear for a continued
summary hearing, the receivership court shall order notice of the
petition to commence a formal delinquency proceeding to be
published. The order and notice shall specify a return date not
less than 10 or later than 20 days after the date of publication and
that the restraining order has been extended to the continued
hearing date.
(d) If a person fails to appear for a summary hearing on a
petition to commence a formal delinquency proceeding after service
of summons, the receivership court shall enter judgment in favor of
the commissioner against that person.
(e) A person who appears for the summary hearing on a
petition to commence a formal delinquency proceeding shall file the
person's answer at the hearing, and the receivership court shall:
(1) determine whether to extend any temporary
restraining orders pending final judgment; and
(2) set the case for trial on a date not later than 10
days after the date of the summary hearing.
(f) The receivership court may not grant a continuance for
filing an answer.
Added by Acts 2005, 79th Leg., Ch. 995, § 1, eff. September 1,
2005.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.053 by
Acts 2007, 80th Leg., R.S., Ch. 730, § 3B.004(a)(1), eff.
September 1, 2007.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.053 by
Acts 2007, 80th Leg., R.S., Ch. 921, § 9.004(a)(1), eff.
September 1, 2007.
§ 443.054. PROCEEDINGS FOR EXPEDITED
TRIAL: CONTINUANCES, DISCOVERY, EVIDENCE. (a) The receivership
court shall proceed to hear the case on the petition to commence a
formal delinquency proceeding at the time and date set forth for
trial. To the extent practicable, the receivership court shall
give precedence to the matter over all other matters. To the
extent authorized by law, the receivership court may assign the
matter to other judges if necessary to comply with the need for
expedited proceedings under this chapter.
(b) Continuances for trial may be granted only in extreme
circumstances.
(c) The receivership court shall admit into evidence, as
self-authenticated, certified copies of any of the following when
offered by the commissioner:
(1) the financial statements made by the insurer or an
affiliate;
(2) examination reports of the insurer or an affiliate
made by or on behalf of the commissioner; and
(3) any other document filed with any insurance
department by the insurer or an affiliate.
(d) The facts contained in any examination report of the
insurer or an affiliate made by or on behalf of the commissioner are
presumed to be true as of the date of the hearing if the examination
was made as of a date not more than 270 days before the date the
petition was filed. The presumption is rebuttable, and shifts the
burden of production and persuasion to the insurer.
(e) Discovery is limited to grounds alleged in the petition
and shall be concluded on an expedited basis.
Added by Acts 2005, 79th Leg., Ch. 995, § 1, eff. September 1,
2005.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.054 by
Acts 2007, 80th Leg., R.S., Ch. 730, § 3B.004(a)(1), eff.
September 1, 2007.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.054 by
Acts 2007, 80th Leg., R.S., Ch. 921, § 9.004(a)(1), eff.
September 1, 2007.
§ 443.055. DECISION AND APPEALS. (a) The receivership
court shall enter judgment on the petition to commence formal
delinquency proceedings not later than the 15th day after the date
of conclusion of the evidence.
(b) The judgment is final when entered. Any appeal must be
prosecuted on an expedited basis and must be taken not later than
the fifth day after the date of entry of the judgment. A request
for reconsideration, review, or appeal, or posting of a bond does
not dissolve or stay the judgment.
Added by Acts 2005, 79th Leg., Ch. 995, § 1, eff. September 1,
2005.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.055 by
Acts 2007, 80th Leg., R.S., Ch. 730, § 3B.004(a)(1), eff.
September 1, 2007.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.055 by
Acts 2007, 80th Leg., R.S., Ch. 921, § 9.004(a)(1), eff.
September 1, 2007.
§ 443.056. CONFIDENTIALITY. (a) The commissioner,
rehabilitator, or liquidator may share documents, materials, or
other information in the possession, custody, or control of the
department without regard to the confidentiality of those
documents, materials, or information, pertaining to an insurer that
is the subject of a proceeding under this chapter with other state,
federal, and international regulatory agencies, with the National
Association of Insurance Commissioners and its affiliates and
subsidiaries, with state, federal, and international law
enforcement authorities, with an auditor appointed by the
receivership court in accordance with Section 443.355, and,
pursuant to Section 443.105, with representatives of guaranty
associations that may have statutory obligations as a result of the
insolvency of the insurer, provided that the recipient agrees to
maintain the confidentiality, if any, of the documents, material,
or other information. Nothing in this section limits the power of
the commissioner to disclose information under other applicable
law.
(b) A domiciliary receiver shall permit a commissioner of
another state or a guaranty association to obtain a listing of
policyholders and certificate holders residing in the requestor's
state, including current addresses and summary policy information,
provided that the commissioner of the other state or the guaranty
association agrees to maintain the confidentiality of the records
and agrees that the records will be used only for regulatory or
guaranty association purposes. Access to records may be limited to
normal business hours. In the event that the domiciliary receiver
believes that certain information is sensitive and that disclosure
may cause a diminution in recovery, the receiver may apply for a
protective order imposing additional restrictions on access.
(c) The Texas Workers' Compensation Commission shall report
to the department any information that a workers' compensation
insurer has committed acts that indicate that the insurer is
impaired or insolvent. A report made under this subsection is
confidential under this section.
(d) The confidentiality obligations imposed by this section
end upon the entry of an order of liquidation against the insurer,
unless otherwise agreed to by the parties or pursuant to an order of
the receivership court.
(e) A waiver of any applicable privilege or claim of
confidentiality does not occur as a result of any disclosure, or any
sharing of documents, materials, or other information, made
pursuant to this section.
Added by Acts 2005, 79th Leg., Ch. 995, § 1, eff. September 1,
2005.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.056 by
Acts 2007, 80th Leg., R.S., Ch. 730, § 3B.004(a)(1), eff.
September 1, 2007.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 730, § 3B.004(j), eff.
September 1, 2007.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.056 by
Acts 2007, 80th Leg., R.S., Ch. 921, § 9.004(a)(1), eff.
September 1, 2007.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 921, § 9.004(j), eff.
September 1, 2007.
§ 443.057. GROUNDS FOR CONSERVATION, REHABILITATION, OR
LIQUIDATION. The commissioner may file with a court in this state
a petition with respect to an insurer domiciled in this state or an
unauthorized insurer for an order of rehabilitation or liquidation
on any one or more of the following grounds:
(1) the insurer is impaired;
(2) the insurer is insolvent;
(3) the insurer is about to become insolvent, with
"about to become insolvent" being defined as reasonably anticipated
that the insurer will not have liquid assets to meet its next 90
days' current obligations;
(4) the insurer has neglected or refused to comply
with an order of the commissioner to make good within the time
prescribed by law any deficiency, whenever its capital and minimum
required surplus, if a stock company, or its surplus, if a company
other than stock, has become impaired;
(5) the insurer, its parent company, its subsidiaries,
or its affiliates have converted, wasted, or concealed property of
the insurer or have otherwise improperly disposed of, dissipated,
used, released, transferred, sold, assigned, hypothecated, or
removed the property of the insurer;
(6) the insurer is in a condition such that it could
not meet the requirements for organization and authorization as
required by law, except as to the amount of the original surplus
required of a stock company under Title 6, and except as to the
amount of the surplus required of a company other than a stock
company in excess of the minimum surplus required to be maintained;
(7) the insurer, its parent company, its subsidiaries,
or its affiliates have concealed, removed, altered, destroyed, or
failed to establish and maintain books, records, documents,
accounts, vouchers, and other pertinent material adequate for the
determination of the financial condition of the insurer by
examination under Chapter 401 or has failed to properly administer
claims or maintain claims records that are adequate for the
determination of its outstanding claims liability;
(8) at any time after the issuance of an order under
Section 404.003 or Chapter 441, or at the time of instituting any
proceeding under this chapter, it appears to the commissioner that,
upon good cause shown, it would not be in the best interest of the
policyholders, creditors, or the public to proceed with the conduct
of the business of the insurer;
(9) the insurer is in a condition such that the further
transaction of business would be hazardous financially, according
to Subchapter A, Chapter 404, or otherwise, to its policyholders,
creditors, or the public;
(10) there is reasonable cause to believe that there
has been embezzlement from the insurer, wrongful sequestration or
diversion of the insurer's property, forgery or fraud affecting the
insurer, or other illegal conduct in, by, or with respect to the
insurer that, if established, would endanger assets in an amount
threatening the solvency of the insurer;
(11) control of the insurer is in a person who is:
(A) dishonest or untrustworthy; or
(B) so lacking in insurance company managerial
experience or capability as to be hazardous to policyholders,
creditors, or the public;
(12) any person who in fact has executive authority in
the insurer, whether an officer, manager, general agent, director,
trustee, employee, shareholder, or other person, has refused to be
examined under oath by the commissioner concerning the insurer's
affairs, whether in this state or elsewhere or if examined under
oath, refuses to divulge pertinent information reasonably known to
the person; and after reasonable notice of the fact, the insurer has
failed promptly and effectively to terminate the employment and
status of the person and all the person's influence on management;
(13) after demand by the commissioner under Chapter
401 or under this chapter, the insurer has failed promptly to make
available for examination any of its own property, books, accounts,
documents, or other records, or those of any subsidiary or related
company within the control of the insurer or of any person having
executive authority in the insurer, so far as they pertain to the
insurer;
(14) without first obtaining the written consent of
the commissioner, the insurer has transferred, or attempted to
transfer, in a manner contrary to Chapter 823 or any law relating to
bulk reinsurance, substantially its entire property or business, or
has entered into any transaction the effect of which is to merge,
consolidate, or reinsure substantially its entire property or
business in or with the property or business of any other person;
(15) the insurer or its property has been or is the
subject of an application for the appointment of a receiver,
trustee, custodian, conservator, sequestrator, or similar
fiduciary of the insurer or its property otherwise than as
authorized under the insurance laws of this state;
(16) within the previous five years, the insurer has
wilfully and continuously violated its charter, articles of
incorporation or bylaws, any insurance law of this state, or any
valid order of the commissioner;
(17) the insurer has failed to pay within 60 days after
the due date any obligation to any state or political subdivision of
a state or any judgment entered in any state, if the court in which
the judgment was entered had jurisdiction over the subject matter,
except that nonpayment is not a ground until 60 days after any good
faith effort by the insurer to contest the obligation has been
terminated, whether it is before the commissioner or in the courts;
(18) the insurer has systematically engaged in the
practice of reaching settlements with and obtaining releases from
claimants, and then unreasonably delayed payment, failed to pay the
agreed-upon settlements, or systematically attempted to compromise
with claimants or other creditors on the ground that it is
financially unable to pay its claims or obligations in full;
(19) the insurer has failed to file its annual report
or other financial report required by statute within the time
allowed by law;
(20) the board of directors or the holders of a
majority of the shares entitled to vote, or a majority of those
individuals entitled to the control of those entities specified by
Section 443.003, request or consent to rehabilitation or
liquidation under this chapter;
(21) the insurer does not comply with its domiciliary
state's requirements for issuance to it of a certificate of
authority, or its certificate of authority has been revoked by its
state of domicile; or
(22) when authorized by department rules.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 730, § 3B.004(k), eff.
September 1, 2007.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.057 by
Acts 2007, 80th Leg., R.S., Ch. 921, § 9.004(a)(1), eff.
September 1, 2007.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 921, § 9.004(k), eff.
September 1, 2007.
§ 443.058. ENTRY OF ORDER. If the commissioner
establishes any of the grounds provided in Section 443.057, the
receivership court shall grant the petition and issue the order of
rehabilitation or liquidation requested in the petition.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 730, § 3B.004(l), eff.
September 1, 2007.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.058 by
Acts 2007, 80th Leg., R.S., Ch. 921, § 9.004(a)(1), eff.
September 1, 2007.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 921, § 9.004(l), eff.
September 1, 2007.
§ 443.059. EFFECT OF PETITION OR ORDER ON CONTRACT OR
LEASE. Neither the filing of a petition under this chapter nor the
entry of any order of seizure, rehabilitation, or liquidation
constitutes a breach or an anticipatory breach of any contract or
lease of the insurer.
Added by Acts 2005, 79th Leg., Ch. 995, § 1, eff. September 1,
2005.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.059 by
Acts 2007, 80th Leg., R.S., Ch. 730, § 3B.004(a)(1), eff.
September 1, 2007.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.059 by
Acts 2007, 80th Leg., R.S., Ch. 921, § 9.004(a)(1), eff.
September 1, 2007.
SUBCHAPTER C. REHABILITATION
§ 443.101. REHABILITATION ORDERS. (a) An order to
rehabilitate the business of an insurer must appoint the
commissioner and the commissioner's successors in office as the
rehabilitator and must direct the rehabilitator to take possession
of the property of the insurer wherever located and to administer it
subject to this chapter. The rehabilitator is entitled to request
the receivership court to appoint a single judge to supervise the
rehabilitation and hear any cases or controversies arising out of
or related to the rehabilitation. Rehabilitation proceedings are
exempt from any dormancy or similar program maintained by the
receivership court for the early closure of civil actions. The
filing or recording of the order with the clerk of the court or
recorder of deeds of the county in which the principal business of
the company is conducted, or, in the case of real estate, the county
in which its principal office or place of business is located,
imparts the same notice as a deed, bill of sale, or other evidence
of title filed or recorded with the recorder of deeds would
impart. The order to rehabilitate the insurer must, by operation
of law, vest title to all property of the insurer in the
rehabilitator.
(b) Any order issued under this section must require
accountings to the receivership court by the
rehabilitator. Accountings must be at the intervals specified by
the receivership court in its order, but not less frequently than
semi-annually. Each accounting must include a report concerning
the rehabilitator's opinion as to the likelihood that a plan under
Section 443.103 will be prepared by the rehabilitator and the
timetable for doing so.
(c) In recognition of the need for a prompt and final
resolution for all persons affected by a plan of rehabilitation,
any appeal from an order of rehabilitation or an order approving a
plan of rehabilitation must be heard on an expedited basis. A stay
of an order of rehabilitation or an order approving a plan of
rehabilitation may not be granted unless the appellant demonstrates
that extraordinary circumstances warrant delaying the recovery
under the plan of rehabilitation of all other persons, including
policyholders. If the plan provides an appropriate mechanism for
adjustment in the event of any adverse ruling from an appeal, a stay
may not be granted.
Added by Acts 2005, 79th Leg., Ch. 995, § 1, eff. September 1,
2005.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.101 by
Acts 2007, 80th Leg., R.S., Ch. 730, § 3B.004(a)(1), eff.
September 1, 2007.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 730, § 3B.004(m), eff.
September 1, 2007.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.101 by
Acts 2007, 80th Leg., R.S., Ch. 921, § 9.004(a)(1), eff.
September 1, 2007.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 921, § 9.004(m), eff.
September 1, 2007.
§ 443.102. POWERS AND DUTIES OF REHABILITATOR. (a) The
rehabilitator may appoint one or more special deputies. A special
deputy serves at the pleasure of the rehabilitator and has all the
powers and responsibilities of the rehabilitator granted under this
section, unless specifically limited by the rehabilitator. The
rehabilitator may employ or contract with legal counsel, actuaries,
accountants, appraisers, consultants, clerks, assistants, and
other personnel as may be deemed necessary. Any special deputy or
any other person with whom the rehabilitator contracts under this
subsection may act on behalf of the commissioner only in the
commissioner's capacity as rehabilitator. Any person with whom
the rehabilitator contracts under this subsection is not considered
an agent of the state, and any contract entered into under this
subsection does not constitute a contract with the state. The
provisions of any law governing the procurement of goods and
services by the state does not apply to any contract entered into by
the commissioner as rehabilitator. The compensation of any
special deputies, employees, and contractors and all expenses of
taking possession of the insurer and of conducting the
rehabilitation shall be fixed by the rehabilitator, with the
approval of the receivership court in accordance with Section
443.015, and shall be paid out of the property of the insurer. The
persons appointed under this subsection serve at the pleasure of
the rehabilitator. If the rehabilitator deems it necessary to the
proper performance of the rehabilitator's duties under this
chapter, the rehabilitator may appoint an advisory committee of
policyholders, claimants, or other creditors, including guaranty
associations. The advisory committee serves at the pleasure of the
rehabilitator and without compensation or reimbursement for
expenses. The rehabilitator or the receivership court in
rehabilitation proceedings conducted under this chapter may not
appoint another committee of any nature.
(b) The rehabilitator may take action as the rehabilitator
deems necessary or appropriate to reform and revitalize the
insurer, including canceling policies, insurance and reinsurance
contracts other than life or health insurance or annuities, or
surety bonds or surety undertakings or transferring policies,
insurance and reinsurance contracts, or surety bonds or surety
undertakings to a solvent assuming insurer, with court
approval. The rehabilitator has all the powers of the directors,
officers, and managers of the insurer, whose authority is
suspended, except as redelegated by the rehabilitator. The
rehabilitator has full power to direct and manage, hire and
discharge employees, and deal with the property and business of the
insurer.
(c) If it appears to the rehabilitator that there has been
criminal or tortious conduct or breach of any contractual or
fiduciary obligation detrimental to the insurer by any officer,
manager, agent, broker, employee, affiliate or other person, the
rehabilitator may pursue all appropriate legal remedies on behalf
of the insurer.
(d) The rehabilitator may assert all defenses available to
the insurer as against third persons, including statutes of
limitations, statutes of frauds, and the defense of usury. A
waiver of any defense by the insurer after a petition under this
chapter has been filed does not bind the rehabilitator.
(e) The enumeration, in this section, of the powers and
authority of the rehabilitator may not be construed as a limitation
upon the rehabilitator, nor shall it exclude in any manner the right
to do other acts not specifically enumerated or otherwise provided
for, as may be necessary or appropriate for the accomplishment of or
in aid of the purpose of rehabilitation.
Added by Acts 2005, 79th Leg., Ch. 995, § 1, eff. September 1,
2005.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.102 by
Acts 2007, 80th Leg., R.S., Ch. 730, § 3B.004(a)(1), eff.
September 1, 2007.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 730, § 3B.004(n), eff.
September 1, 2007.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.102 by
Acts 2007, 80th Leg., R.S., Ch. 921, § 9.004(a)(1), eff.
September 1, 2007.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 921, § 9.004(n), eff.
September 1, 2007.
§ 443.103. REHABILITATION PLANS. (a) The
rehabilitator shall prepare and file a plan to effect
rehabilitation with the receivership court not later than the first
anniversary of the entry of the rehabilitation order or another
further time as the receivership court may allow. Upon application
of the rehabilitator for approval of the plan, and after the notice
and hearings the receivership court may prescribe, the receivership
court may approve or disapprove the proposed plan or may modify it
and approve it as modified. Any plan approved under this section
must be, in the judgment of the receivership court, fair and
equitable to all parties concerned. If the plan is approved, the
rehabilitator shall carry out the plan. A plan for a life insurer
may propose imposition of a moratorium upon loan and cash surrender
rights under policies, for a period not to exceed one year from the
entry of the rehabilitation order approving the rehabilitation
plan, unless the receivership court, for good cause shown, extends
the moratorium.
(b) Once a plan has been filed, any party in interest may
object to the plan.
(c) A plan must:
(1) except as provided by Subsection (e), provide no
less favorable treatment of a claim or class of claims than would
occur in liquidation, unless the holder of a particular claim or
interest agrees to a less favorable treatment of that particular
claim or interest;
(2) provide adequate means for the plan's
implementation;
(3) contain information concerning the financial
condition of the insurer and the operation and effect of the plan,
as far as is reasonably practicable in light of the nature and
history of the insurer, the condition of the insurer's books and
records, and the nature of the plan; and
(4) provide for the disposition of the books, records,
documents, and other information relevant to the duties and
obligations covered by the plan.
(d) A plan may include any other provision not inconsistent
with the provisions of this chapter, including:
(1) payment of distributions;
(2) assumption or reinsurance of all or a portion of
the insurer's remaining liabilities by, and transfer of assets and
related books and records to, an authorized insurer or other
entity;
(3) to the extent appropriate, application of
insurance company regulatory market conduct standards to any entity
administering claims on behalf of the receiver or assuming direct
liabilities of the insurer;
(4) contracting with a state guaranty association or
any other qualified entity to perform the administration of claims;
(5) annual independent financial and performance
audits of any entity administering claims on behalf of the receiver
that is not otherwise subject to examination pursuant to state
insurance law; and
(6) termination of the insurer's liabilities other
than those under policies of insurance as of a date certain.
(e) A plan may designate and separately treat one or more
separate subclasses of claims consisting only of claims within the
subclasses that are for or reduced to de minimis amounts. For
purposes of this subsection, a "de minimis amount" means any amount
equal to or less than a maximum de minimis amount approved by the
receivership court as being reasonable and necessary for
administrative convenience.
Added by Acts 2005, 79th Leg., Ch. 995, § 1, eff. September 1,
2005.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.103 by
Acts 2007, 80th Leg., R.S., Ch. 730, § 3B.004(a)(1), eff.
September 1, 2007.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.103 by
Acts 2007, 80th Leg., R.S., Ch. 921, § 9.004(a)(1), eff.
September 1, 2007.
§ 443.104. TERMINATION OF REHABILITATION. (a) When the
rehabilitator believes further attempts to rehabilitate an insurer
would substantially increase the risk of loss to creditors,
policyholders, or the public or would be futile, the rehabilitator
may move for an order of liquidation. In accordance with Section
443.105, the rehabilitator or the rehabilitator's designated
representative shall coordinate with the guaranty associations
that may become liable as a result of the liquidation and any
national association of guaranty associations to plan for
transition to liquidation.
(b) Because the protection of the interests of insureds,
claimants, and the public requires the timely performance of all
insurance policy obligations, if the payment of policy obligations
is suspended in substantial part for a period of six months at any
time after the appointment of the rehabilitator and the
rehabilitator has not filed an application for approval of a plan
under Section 443.103, the rehabilitator shall petition the
receivership court for an order of liquidation.
(c) The rehabilitator or the directors of the insurer may at
any time petition the receivership court for, or the receivership
court on its own motion may enter, an order terminating
rehabilitation of an insurer. Subject to the provisions of Section
443.351, if the receivership court finds that rehabilitation has
been accomplished and that grounds for rehabilitation under Section
443.057 no longer exist, it shall order that the insurer be restored
to title and possession of its property and the control of the
business.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 730, § 3B.004(o), eff.
September 1, 2007.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.104 by
Acts 2007, 80th Leg.