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Insurance Code Proposed Chapters
CHAPTER 2213

CHAPTER 2213.  SELF-INSURANCE TRUSTS FOR BANKS AND SAVINGS AND LOAN ASSOCIATIONS

SUBCHAPTER A.  GENERAL PROVISIONS

Revised Law

Sec. 2213.001.  DEFINITIONS.  In this chapter:

     (1)  "Bank" means a bank chartered under federal or state law.

     (2)  "Plan" means a trust's plan of organization and operation.

     (3)  "Savings and loan association" means a savings and loan association chartered under federal or state law.

     (4)  "Trust" means a self-insurance trust organized and operated under this chapter.

     (5)  "Trustees" means the trustees of a trust.  (V.T.I.C. Art. 21.49-6, Secs. 1(1), (3); Art. 21.49-7, Secs. 1(1) (part), (3); New.)

Source Law

Art. 21.49-6

Sec. 1.  In this article:

     (1)  "Bank" means any bank chartered under the provisions of federal or state law.

     (3)  "Trustees" means the trustees of a self-insurance trust created under this article.

Art. 21.49-7

Sec. 1.  In this article:

     (1)  "Savings and loan association" means a savings and loan association chartered under federal or state law … .

     (3)  "Trustees" means the trustees of a self-insurance trust created under this article.

Revisor's Note

(1)  Section 1(2), V.T.I.C. Article 21.49-6, and Section 1(2), V.T.I.C. Article 21.49-7, define "board" as the State Board of Insurance.  Chapter 685, Acts of the 73rd Legislature, Regular Session, 1993, abolished the State Board of Insurance and transferred its functions to the commissioner of insurance and the Texas Department of Insurance.  Throughout this chapter, references to the board have been changed appropriately.  For this reason, the revised law omits the definitions of "board." The omitted law reads:

[Art. 21.49-6]

[Sec. 1.  In this article:]

     (2)  "Board" means the State Board of Insurance.

[Art. 21.49-7]

[Sec. 1.  In this article:]

     (2)  "Board" means the State Board of Insurance.

(2)  The revised law adds a definition of "plan" and a definition of "trust" for drafting convenience and to eliminate frequent, unnecessary repetition of the substance of the definitions.

Revised Law

Sec. 2213.002.  TRUST NOT ENGAGED IN BUSINESS OF INSURANCE.  (a)  A trust is not engaged in the business of insurance under this code or other laws of this state.

(b)  The provisions of this code other than this chapter, including _________ [[[V.T.I.C. Article 21.28-C]]], do not apply to a trust.  (V.T.I.C. Art. 21.49-6, Sec. 11; Art. 21.49-7, Sec. 11.)

Source Law

[Art. 21.49-6]

Sec. 11.  A self-insurance trust created under this article is not engaged in the business of insurance under this code and under other laws of this state, and the provisions of any chapters or articles of this code, including Article 21.28-C, are declared inapplicable to a trust organized and operated under this article.

[Art. 21.49-7]

Sec. 11.  A trust created under this article is not engaged in the business of insurance under this code and under other laws of this state, and this code, including the Texas Property and Casualty Insurance Guaranty Act (Article 21.28-C, Vernon's Texas Insurance Code), is inapplicable to a trust organized and operated under this article.

[Sections 2213.003-2213.050 reserved for expansion]

SUBCHAPTER B.  CREATION AND OPERATION OF TRUST

Revised Law

Sec. 2213.051.  CREATION OF BANK SELF-INSURANCE TRUST; COVERAGE.  (a)  A group or association of banks or bankers, composed of any number of members, may create a bank self-insurance trust to self-insure banks that are members of the group or association, or that have any officers who are members of the group or association, against losses described by this section.

(b)  The trust may self-insure a bank described by Subsection (a) against losses resulting from:

     (1)  an employee's dishonest or criminal act;

     (2)  a robbery or other act commonly included within a bank's bond coverage; and

     (3)  indemnification for a wrongful act committed by a director, officer, or employee of a member of the group or association, subject to the limitations under Chapter 8, Business Organizations Code.

(c)  The trustees shall determine, according to the plan, the amount of coverage to be provided to a bank participating in the trust.

(d)  Notwithstanding Subsection (b), on or before December 31, 2009, the trust may self-insure a bank described by Subsection (a) against losses resulting from:

     (1)  an employee's dishonest or criminal act;

     (2)  a robbery or other act commonly included within a bank's bond coverage; and

     (3)  indemnification for a wrongful act committed by a director, officer, or employee of a member of the group or association, subject to the limitations under Article 2.02-1, Texas Business Corporation Act, or Chapter 8, Business Organizations Code, as applicable.

(e)  This subsection and Subsection (d) expire January 1, 2010.  (V.T.I.C. Art. 21.49-6, Secs. 2, 7 (part).)

Source Law

Sec. 2.  On approval of its plan of organization and operation as provided in Section 3 of this article, a group or association of banks or bankers, composed of any number of members, may create a trust to self-insure banks that are members of the group or association or any of whose officers are members of the group or association against losses resulting from (a) dishonest acts and criminal acts of employees or losses resulting from robbery or other acts commonly included within a bank's bond coverage, and (b) indemnification for wrongful acts committed by directors, officers, and employees of a member of the group or association subject to the limitations contained in Article 2.02-1, Texas Business Corporation Act.

Sec. 7.  The amount of coverage to be provided banks participating in the trust and … shall be determined by the trustees as provided in the plan.

Revisor's Note

(1)  Section 2, V.T.I.C. Article 21.49-6, states that a bank self-insurance trust may be created "[o]n approval of its plan of organization and operation as provided in Section 3 of this article."  The revised law omits the quoted language as unnecessary because it duplicates the requirements established by Section 3, Article 21.49-6, revised in this chapter as Section 2213.053.

(2)  Section 2, V.T.I.C. Article 21.49-6, refers to Article 2.02-1, Texas Business Corporation Act.  Article 2.02-1 was codified as Chapter 8, Business Organizations Code, by Chapter 182, Acts of the 78th Legislature, Regular Session, 2003.  The Business Organizations Code takes effect January 1, 2006, and applies only to domestic business entities formed on or after that date, to domestic business entities formed before that date that elect to have that code govern their operations, and to certain foreign business entities.  On January 1, 2010, the Texas Business Corporation Act expires, and the Business Organizations Code will apply to all business entities without regard to date of formation or whether an entity is a foreign or domestic business entity.  The revised law is drafted to reflect the applicability of these statutes in accordance with their effective dates or on election by a business entity.

Revised Law

Sec. 2213.052.  CREATION OF SAVINGS AND LOAN SELF-INSURANCE TRUST; COVERAGE. (a)  Two or more savings and loan associations that have their principal offices located in this state may create a savings and loan self-insurance trust to provide insurance and indemnity coverage for the trust's members and the officers and directors of the trust's members.

(b)  Insurance and indemnity coverage provided by the trust is limited to savings and loan blanket bonds covering losses resulting from:

     (1)  an employee's dishonest or criminal act; or

     (2)  robbery.

(c)  The trustees shall determine, according to the plan, the amount of coverage to be provided to a savings and loan association participating in the trust. (V.T.I.C. Art. 21.49-7, Secs. 1(1) (part), 2, 7 (part).)

Source Law

Sec. 1.  [In this article:]

     (1)  ["Savings and loan association" means a savings and loan association] … whose principal office is located in this state.

Sec. 2.  (a)  Two or more savings and loan associations may create a trust under this article to provide insurance and indemnity coverage for its members and their officers and directors.

(b)  Insurance and indemnity coverage provided by the trust shall be limited to savings and loan blanket bonds covering losses resulting from dishonest acts and criminal acts of employees or losses resulting from robbery or both.

Sec. 7.  The trustees shall determine in accordance with the plan the amount of coverage to be provided savings and loan associations participating in the trust and … .

Revised Law

Sec. 2213.053.  PLAN OF ORGANIZATION AND OPERATION; TRUSTEES.  (a)  Before organizing and operating a trust, the group or association or the savings and loan associations, as applicable, proposing to organize the trust shall:

     (1)  select trustees to administer the trust; and

     (2)  prepare a detailed plan of organization and operation in the form and manner prescribed by the department.

(b)  The group or association or the savings and loan associations shall submit the proposed plan to the department for examination, suggested changes, and final approval.

(c)  The department shall approve the proposed plan only if the department is satisfied that the trust is able and will continue to be able to pay valid claims made to the trust.

(d)  After final approval, the plan may be amended with the department's approval.  (V.T.I.C. Art. 21.49-6, Secs. 3, 4; Art. 21.49-7, Secs. 3, 4.)

Source Law

[Art. 21.49-6]

Sec. 3.  Before organizing and operating a trust as provided in this article, the group or association proposing to organize the trust shall select trustees to administer the trust and shall prepare a detailed plan of organization and operation in the form and manner prescribed by the board.  The plan shall be submitted to the board for examination, suggested changes, and final approval, and may be amended from time to time with the approval of the board.

Sec. 4.  The board shall approve a self-insurance plan under this article only if it is satisfied that the trust has and will continue to possess the ability to pay valid claims made against it.

[Art. 21.49-7]

Sec. 3.  Before organizing and operating a trust under this article, the savings and loan associations proposing to organize the trust shall select trustees to administer the trust and shall prepare a detailed plan of organization and operation in the form and manner prescribed by the board.  The proposed plan shall be submitted to the board for examination, suggested changes, and final approval.  After final approval the plan may be amended with the approval of the board.

Sec. 4.  The board shall approve a proposed plan under this article only if it is satisfied that the trust has and will continue to possess the ability to pay valid claims made to it.

Revisor's Note

Section 3, V.T.I.C. Article 21.49-6, provides that a trust may amend a plan of organization and operation "from time to time."  The revised law omits "from time to time" as unnecessary because, without an express limitation, the authority to amend the plan includes the authority to amend the plan "from time to time."

Revised Law

Sec. 2213.054.  MINIMUM REQUIREMENTS; DEPARTMENT SUPERVISION.  (a)  After approval of a trust's plan, the trust is subject to continuing supervision by the department relating to:

     (1)  the solvency of the trust; and

     (2)  the approval of the trust's policy forms.

(b)  The department may set minimum requirements to ensure that a trust is able to satisfy the trust's contractual obligations.  (V.T.I.C. Art. 21.49-6, Sec. 9; Art. 21.49-7, Sec. 9.)

Source Law

[Art. 21.49-6]

Sec. 9.  A self-insurance trust approved by the board under the provisions of this article is subject to the continuing supervision of the board relating to its solvency and to approval of its policy forms, and the board may set certain minimum requirements to ensure the capability of the trust to satisfy its contractual obligations.

[Art. 21.49-7]

Sec. 9.  A trust whose plan is approved by the board under this article is subject to the continuing supervision of the board relating to its solvency and to approval of its policy forms.  The board may set certain minimum requirements to ensure the capability of the trust to satisfy its contractual obligations.

Revised Law

Sec. 2213.055.  CREATION OF TRUST FUND.  (a)  The trustees shall create a trust fund to pay claims made under the coverage provided by the trust under Section 2213.051 or 2213.052, as applicable.

(b)  The trustees shall administer and control the trust fund and shall pay claims from and invest the money of the trust fund as provided by the plan.  (V.T.I.C. Art. 21.49-6, Sec. 5; Art. 21.49-7, Sec. 5.)

Source Law

[Art. 21.49-6]

Sec. 5.  (a)  The trustees of the self-insurance trust shall create a trust fund to pay claims made under the coverage provided in Section 2 of this article.

(b)  The fund shall be under the administration and control of the trustees and shall be paid out on claims and shall be invested as provided in the plan.

[Art. 21.49-7]

Sec. 5.  (a)  The trustees of the trust shall create a trust fund to pay claims made under the coverage provided by the trust.

(b)  The trustees shall administer and control the trust fund and shall pay claims and invest money of the trust fund as provided by the plan.

Revised Law

Sec. 2213.056.  PERSONNEL; PAYMENT OF EXPENSES.  (a)  The trustees shall employ appropriate professional employees and consultants for management of the trust program.

(b)  The trustees shall pay the salaries of professional employees and consultants and other costs of administering the trust program from the trust fund.

(c)  The total amount paid for salaries and administration may not exceed an amount set by the department.  The amount set by the department may not exceed 35 percent of the total amount of money in the trust fund in any year.  (V.T.I.C. Art. 21.49-6, Sec. 8; Art. 21.49-7, Sec. 8.)

Source Law

[Art. 21.49-6]

Sec. 8.  (a)  The trustees shall employ appropriate professional staff and consultants for program management.

(b)  Salaries for professional staff and consultants and for paying the costs of administering the trust program shall be paid from the trust fund;  provided that, the total amount for payment of salaries and administration shall not exceed an amount fixed by the board but in no event to exceed 35 percent of the total amount of money in the trust fund in any one year.

[Art. 21.49-7]

Sec. 8.  (a)  The trustees shall employ appropriate professional staff and consultants for management of the trust program.

(b)  The trustees shall pay the salaries of professional staff and consultants and other costs of administering the trust program from the trust fund.  The total amount paid for payment of salaries and administration may not exceed an amount fixed by the board, which amount may not exceed 35 percent of the total amount of money in the trust fund in any one year.

[Sections 2213.057-2213.100 reserved for expansion]

SUBCHAPTER C.  PARTICIPATION IN TRUST

Revised Law

Sec. 2213.101.  PARTICIPATION IN SELF-INSURANCE TRUST. A bank that is a member, or that has an officer who is a member, of a group or association organizing a trust or savings and loan associations organizing a trust may participate in the trust by:

     (1)  entering into a contract or agreement with the trustees for coverage that the trust may provide under Section 2213.051 or 2213.052, as applicable; and

     (2)  paying the required contribution to the trust fund in the amount determined by the trustees in accordance with the plan.  (V.T.I.C. Art. 21.49-6, Secs. 6, 7 (part); Art. 21.49-7, Secs. 6, 7 (part).)

Source Law

[Art. 21.49-6]

Sec. 6.  Any bank that is a member or any of whose officers are members of the group or association organizing the trust may participate in the self-insurance trust by entering into contract or agreement with the trustees for insurance under the trust against losses resulting from (a) dishonest acts or criminal acts of its employees or losses resulting from robbery or other acts commonly included within a bank's bond coverage, and (b) indemnification for wrongful acts committed by directors, officers, and employees of a member of the group or association subject to the limitations contained in Article 2.02-1, Texas Business Corporation Act.  The bank or officers shall pay the required contribution to the trust fund.

Sec. 7.  … the amount of contributions to be paid by those banks shall be determined by the trustees as provided in the plan.

[Art. 21.49-7]

Sec. 6.  A savings and loan association that is one of the associations organizing the trust may participate in the trust by entering into contracts or agreements with the trustees for insurance and indemnity coverage that the trust may provide and paying the required contribution to the trust fund.

Sec. 7.  The trustees shall determine in accordance with the plan … the amount of contributions to be paid by those associations.

Revisor's Note

(End of Chapter)

Section 10, V.T.I.C. Article 21.49-6, and Section 10, V.T.I.C. Article 21.49-7, authorize the board, meaning the State Board of Insurance, to adopt "reasonable" or "necessary" rules to implement those articles.  The revised law omits the provisions as unnecessary.  For the reasons stated in Revisor's Note (1) to Section 2213.001, the commissioner of insurance has the authority formerly granted to the board.  Section 36.001 of this code authorizes the commissioner to adopt any rules necessary and appropriate to implement the powers and duties of the Texas Department of Insurance under this code.  The omitted law reads:

[Art. 21.49-6]

Sec. 10.  The board may adopt necessary rules to carry out the provisions of this article.

[Art. 21.49-7]

Sec. 10.  The board may adopt reasonable rules that are necessary to carry out this article.

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