CHAPTER 887. PROVISIONS APPLICABLE TO CERTAIN MUTUAL ASSESSMENT COMPANIES
INSURANCE CODE
TITLE 6. ORGANIZATION OF INSURERS AND RELATED ENTITIES
SUBTITLE E. MUTUAL AND FRATERNAL COMPANIES AND RELATED ENTITIES
CHAPTER 887. PROVISIONS APPLICABLE TO CERTAIN MUTUAL ASSESSMENT
COMPANIES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 887.001. DEFINITIONS. In this chapter:
(1) "Assessment" means any money or thing of value, including
premiums, paid in consideration of insurance provided by an
insurance certificate.
(2) "Association" means an organization subject to this chapter.
(3) "Insurance certificate" means an insurance policy, contract
of insurance, certificate of membership, or other document
through which insurance is effected or evidenced.
(4) "Member" includes a certificate holder or any other insured
of an association.
(5) "Membership fee" means the amount of the first assessment or
assessments placed in the expense fund of an association and
representing the cost of soliciting or procuring a member, as
permitted by the department.
(6) "Mortuary fund" includes a mortuary fund, relief fund, claim
fund, or similar fund.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.002. PURPOSE. The primary purpose of this chapter and
Chapter 888 is to secure to members and the beneficiaries of
members the full and prompt payment of all claims, according to
the maximum benefit provided under the insurance certificate.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.003. APPLICABILITY OF CHAPTER. (a) This chapter
governs:
(1) local mutual aid associations;
(2) statewide mutual life associations;
(3) life, health, and accident associations;
(4) mutual assessment life, health, and accident associations;
(5) burial associations; and
(6) similar entities.
(b) Except as provided by Section 887.004, this chapter applies
to insurance companies and associations, whether incorporated or
not:
(1) that issue policies or certificates of insurance on the
lives of individuals on a mutual assessment plan or that provide
health and accident benefits on a mutual assessment plan or whose
funds are derived from assessments on certificate holders or
members; and
(2) that are not governed by:
(A) Chapter 841, 861, 882, 883, 885, 941, or 942; or
(B) Chapter 5, Title 78, Revised Statutes, as provided by
Section 18, Chapter 40, Acts of the 41st Legislature, 1st Called
Session, 1929, as amended by Section 1, Chapter 60, General Laws,
Acts of the 41st Legislature, 2nd Called Session, 1929.
(c) This chapter does not apply to mutual fire insurance
companies.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.004. INAPPLICABILITY TO CERTAIN ORGANIZATIONS OF
MEMBERS OF RELIGIOUS DENOMINATION. This chapter does not apply
to an association that:
(1) is not operated for profit;
(2) is composed only of the members of a particular religious
denomination;
(3) does not provide insurance benefits in an amount greater
than $1,000 on any one individual; and
(4) does not pay any officer of the association a salary greater
than $100 a month.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.005. DEPARTMENT OF PUBLIC SAFETY EMPLOYEE MUTUAL
ASSOCIATION. Notwithstanding any other provision of this
chapter, a mutual association for employees of the Department of
Public Safety may provide coverage and benefits to retired
officers and employees of that department.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.006. CONSTRUCTION. (a) This chapter does not:
(1) enlarge the powers or rights of any association;
(2) enlarge the scope of an association's legal or corporate
existence; or
(3) authorize the creation of any association or corporation to
engage in the business of insurance described by Section
887.003(b) if that creation is not specifically permitted by law.
(b) The laws prohibiting or limiting creation of an association
and the exercise of corporate power are not affected by this
chapter.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.007. DEPOSIT OF FEES. The department shall deposit a
fee collected under this chapter to the credit of the Texas
Department of Insurance operating account.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.008. INTERPRETATION OF CHAPTER BY COMMISSIONER. If a
provision of this chapter appears obscure when applied to health,
accident, or disability provisions in an insurance certificate
issued by an association authorized to issue health, accident, or
disability certificates, the commissioner shall interpret the
provision in accordance with the expressed purpose of this
chapter and looking to the full payment of claims and preserving
to members the benefit of the association's protection.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.009. RULES. The commissioner may adopt reasonable
rules to implement the purposes of this chapter.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
SUBCHAPTER B. GENERAL POWERS AND DUTIES; OFFICERS AND DIRECTORS
Sec. 887.051. BYLAWS. (a) An association shall submit to the
department a copy of the association's bylaws. The department
shall examine the bylaws and approve the bylaws if they comply
with this chapter. The association shall conform the bylaws to
this chapter if they are not in compliance.
(b) On approval of the bylaws under Subsection (a), an
association shall file with the department a copy of the bylaws
certified by the president or general manager and the secretary
of the association.
(c) An association's bylaws must contain all things required by
this chapter and may not contain any provision in conflict with
this chapter.
(d) An association's bylaws must provide for periodic and
special meetings of the membership.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.052. AMENDMENT OF BYLAWS. (a) A majority of an
association's members present at a regular meeting or at a
meeting called for the purpose may amend the association's
bylaws.
(b) An association shall mail to all members notice of any
regular or special meeting at which amendments to bylaws will be
considered. The notice must contain:
(1) a complete copy of the proposed amendments; and
(2) a fair explanation of the intent and effect of the proposed
amendments.
(c) An amendment must be ratified by the association's board of
directors.
(d) An association shall file with the department, in the same
manner provided for filing bylaws under Section 887.051, an
amendment adopted by the association. An amendment is not
effective unless approved by the department.
(e) An association shall mail to each member a certified copy of
any amendment to the association's bylaws at the next assessment
after the amendment to the bylaws is made.
(f) On adoption of an amendment to an association's bylaws that
might affect the insurance rights of the association's members,
the association shall immediately send a copy of the amendment by
first class mail to each affected member. The burden of proof is
on the association to prove that the association mailed the
amendment.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.053. IMMUNITY. An officer, director, or member of an
association is not individually liable because of an insurance
certificate issued by the association or a claim arising from an
insurance certificate.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.054. FINANCIAL OFFICER; BOND. (a) An association, by
resolution entered in its minutes, shall designate an officer to
be responsible for handling the association's funds. The
president, secretary, or general manager of the association must
certify a copy of the resolution, and the association shall file
the copy with the department.
(b) Except as provided by Subsection (c) or (d), the association
shall make and file a surety bond covering the officer designated
under Subsection (a). The bond must:
(1) be issued by a corporate surety company authorized to issue
surety bonds in this state;
(2) be satisfactory to the department and payable to the
department for the use and benefit of the association;
(3) obligate the principal and surety to pay any monetary loss
sustained by the association through an act of fraud, dishonesty,
forgery, theft, embezzlement, or wilful misapplication by the
officer, whether acting alone or with other persons, while
employed as or exercising the powers of an officer designated
under Subsection (a); and
(4) be in an amount of:
(A) at least $2,500; or
(B) if the association's mortuary fund exceeds $2,500, an amount
equal to the lesser of:
(i) the amount of the association's mortuary fund; or
(ii) $20,000.
(c) Instead of the bond required by Subsection (b), the officer
designated under Subsection (a) may deposit with the department
cash or securities approved by the department in the amount and
subject to the conditions applicable to the bond.
(d) Except as provided by Subsection (e), this section does not
apply to a local mutual aid association that was operating on May
12, 1939, and has never:
(1) had a total membership of more than 1,000 members;
(2) charged more than $1 each for annual dues and assessments;
and
(3) charged more than $2.50 for membership fees.
(e) An association to which Subsection (d) applies must file
with the department a bond in the amount of $1,000, conditioned
as provided for a bond under Subsection (b).
(f) Successive recoveries may be made on a bond under this
section until the amount of the bond is exhausted.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.055. BOND REQUIREMENTS FOR CERTAIN PERSONS. (a) In
addition to the bond required by Section 887.054 and any other
bond required by law, an association shall obtain a separate or
blanket surety bond covering each other person who may have
access to the association's mortuary funds. The bond must:
(1) be issued by a surety authorized by the department to engage
in business in this state;
(2) be payable to the department for the use and benefit of the
association;
(3) obligate the principal and surety to pay any monetary loss
sustained by the association through an act of fraud, dishonesty,
forgery, theft, embezzlement, or wilful misapplication by a
covered person, whether acting alone or with other persons; and
(4) be in an amount determined by the department of at least
$1,000 but not more than $5,000.
(b) Successive recoveries may be made on a bond under this
section until the amount of the bond is exhausted.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.056. RECOVERY ON BOND. (a) On receipt of information
that an officer of an association has violated the terms of a
bond under Section 887. 054 or 887.055, the department shall
demand from the officer a written explanation of the charge.
(b) If after an explanation under Subsection (a) the department
is not satisfied regarding the existing facts in controversy, the
department shall:
(1) notify the officer to appear in Travis County, not earlier
than the 11th day or later than the 16th day after service of
notice, with any records and other information the department
considers proper; and
(2) conduct an examination into the charge against the officer.
(c) If after an examination under Subsection (b) the department
is satisfied that the officer violated the terms of the bond, the
department shall:
(1) immediately notify the company executing the bond;
(2) prepare a written statement covering the facts; and
(3) deliver the statement to the attorney general.
(d) On receipt of a statement under Subsection (c), the attorney
general shall investigate the charges. If the attorney general is
satisfied that the officer violated the terms of the bond, the
attorney general shall:
(1) enforce the liability against the cash or securities
provided as surety by the officer; or
(2) in the name of the commissioner, file suit in Travis County
on the bond for the benefit of the bond's beneficiaries against
the officer as principal and the sureties for the recovery of:
(A) any amounts due by the officer; and
(B) all costs of the suit.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.057. DEPOSIT. (a) An association shall, through the
department, deposit with the comptroller an amount equal to the
largest risk assumed by the association on any one life or
individual.
(b) A deposit under this section must be cash or convertible
securities subject to approval by the department.
(c) A deposit is liable for the payment of any final judgment
against the association and is subject to garnishment after a
final judgment against the association.
(d) An association shall immediately replenish a deposit under
this section if the deposit is impounded or depleted. If the
association fails to immediately replenish the deposit on demand
by the department, the department may consider the association
insolvent and take appropriate action.
(e) An association may not state in an advertisement, in a
letter, in literature, or otherwise that it has made a deposit
with the department as required by law, unless the association
also states fully:
(1) the purpose of the deposit;
(2) the conditions under which the deposit is made; and
(3) the exact amount and character of the deposit.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.058. CHANGE OF ASSOCIATION'S NAME. An association may
change its name by amending the association's charter if:
(1) the association submits the proposed amendment to the
department for approval; and
(2) the department does not determine that the proposed name is
confusing and misleading to the public.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.059. BOOKS AND RECORDS. (a) An association shall keep
the association's books and records in a form and manner that:
(1) accurately reflects the condition of the association or the
facts essential to the association's faithful and effective
operation; and
(2) is acceptable to the department.
(b) The association shall adopt forms or systems that are
acceptable to the department and will most effectively serve the
purpose described by Subsection (a)(1).
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.060. ANNUAL STATEMENT. (a) Not later than April 1 of
each year, an association shall file with the department a sworn
statement of the association's condition on the preceding
December 31.
(b) A statement under this section must be on a form provided by
the department for that purpose and include a complete account
of:
(1) the association's real and contingent assets;
(2) the association's liabilities; and
(3) income to and disbursements from the association's mortuary
and expense funds during the year.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.061. REPORT ON CONDITION OF ASSOCIATION. The
department may require from an association written reports on the
condition of the association at any time the department considers
advisable. The department may require that a report be verified
by the oath of a responsible officer of the association.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.062. EXAMINATION. The following provisions apply to an
association:
(1) Subchapter A, Chapter 86; and
(2) Sections 401.051, 401.052, 401.054-401.062, 401.151,
401.152, 401.155, and 401.156.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
730, Sec. 2E.103, eff. April 1, 2009.
Sec. 887.063. ADMITTED ASSETS. An association may include among
its admitted assets, within the assets of the expense fund only,
any asset designated as a net asset under Section 841.004.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.064. DIVIDENDS. If the amount of an association's
mortuary fund exceeds the amount of reserves required by
Subchapter I, the association may pay dividends from the fund to
its certificate holders. The amount of the dividends and the
method of distribution of the dividends must be:
(1) equitable and nondiscriminatory; and
(2) approved by the department before payment.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.065. MERGER. (a) An association may not merge with
another association without the advance approval of the
department.
(b) The department may grant approval under Subsection (a) only
after the department:
(1) completely investigates the facts; and
(2) determines that the proposed merger is to the advantage of
the members.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
SUBCHAPTER C. AUTHORITY TO ENGAGE IN BUSINESS
Sec. 887.101. CERTIFICATE OF AUTHORITY REQUIRED. (a) Except as
provided by Section 887.102, the department shall require an
association or person to hold a certificate of authority issued
by the department before the association or person may engage in
the business of insurance in this state.
(b) If an association or person writes insurance without a
certificate of authority issued under Subsection (a), the
department shall notify the attorney general. The attorney
general shall institute proceedings in the district court of
Travis County to restrain the association or person from writing
insurance without a certificate of authority.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.102. EXEMPT ASSOCIATION; PERMIT. (a) An association
is not required to hold a certificate of authority under Section
887.101 if the association:
(1) limits its membership to:
(A) the employees and the families of employees of a particular
designated firm, corporation, or individual; or
(B) borrowers of a federal agency in this state and members of
the borrower's immediate family who are living with the borrower
and are not engaged in nonfarm work for their chief income;
(2) has been in existence for at least five years;
(3) is not operated for profit; and
(4) does not pay commissions.
(b) An association exempt under this section shall:
(1) make annual reports to the department, on forms provided for
that purpose, showing the financial condition of the association,
receipts and expenditures of the association, and any other facts
required by the department; and
(2) obtain from the department a permit to engage in the
business of insurance.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.103. REFUSAL OF CERTIFICATE OF AUTHORITY OR PERMIT.
(a) An association may not continue to engage in the business of
insurance in this state if the commissioner notifies the
association in writing of the commissioner's refusal to issue a
certificate of authority or a permit.
(b) Not later than the 60th day after the date notice is
received under Subsection (a), an association may file suit to
review the commissioner's action in accordance with Subchapter D,
Chapter 36.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.104. REFUSAL OR REMOVAL FOR UNWORTHINESS OF PUBLIC
TRUST. (a) The department may not issue a certificate of
authority to an association if the department determines that an
officer, employee, or member of the board of directors of the
association is unworthy of the trust or confidence of the public.
(b) On issuance of a certificate of authority to an association,
the commissioner shall order the removal of an officer, employee,
or director of the association if the officer, employee, or
director is found unworthy of the trust or confidence of the
public.
(c) If the association does not remove an officer, employee, or
director as required by an order issued under Subsection (b), the
commissioner shall:
(1) revoke the certificate of authority; and
(2) treat the association as insolvent.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
SUBCHAPTER D. MEMBERS
Sec. 887.151. CLASSES OF MEMBERS. (a) An association's
constitution and bylaws shall state the number of members to be
admitted in a class of the association.
(b) An association shall keep the accounts of the classes'
mortuary assessments separate. The association may not use the
funds of a class to pay claims for any other class.
(c) Not later than six months after the date a class of members
is created, an association must build the class up to the
required membership to pay claims in full. Until the required
membership level is reached, the insurance certificates for the
class may not provide for a benefit greater than $500, unless the
association has sufficient funds to lawfully make the full
payment of benefits.
(d) Creation of any new class is subject to advance approval of
the department.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.152. QUALIFYING MEMBERSHIP IN ASSOCIATION. (a) An
individual must qualify under an association's bylaws to become a
member of the association.
(b) An association must maintain the qualifying membership at
all times. If an association fails to maintain the qualifying
membership, the commissioner shall treat the association as
insolvent.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.153. VOTING RIGHTS OF MEMBERS. An association shall
permit each member of the association to vote at any periodic
meeting or special meeting of the members.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.154. MEMBERSHIP RECORDS. An association shall keep:
(1) a complete and correct roster of the association's members,
with proper statistical records for determining by age or some
other method the proper cost of insurance;
(2) accurate records of classes of memberships; and
(3) records of amounts of assessments paid by each member and by
each class that show:
(A) how the funds are distributed between mortuary and expense
funds for each class; and
(B) the amounts paid out of the funds of the whole membership or
each class in death claims or other benefits.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.155. TRANSFER OF MEMBERSHIP OR MERGER OF CLASSES. (a)
Without advance approval of the department, an association may
not:
(1) transfer any part or class of membership or all membership
to another association; or
(2) merge classes or transfer a member from one class to another
in the association.
(b) The department may grant approval under Subsection (a) only
after the department:
(1) completely investigates the facts; and
(2) determines that the proposed merger or transfer is to the
advantage of the members or classes affected by the merger or
transfer.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
SUBCHAPTER E. POWERS AND DUTIES RELATING TO INSURANCE AND
COVERAGES
Sec. 887.201. LIMIT ON LIFE INSURANCE. An association may not
insure an individual life for more than $5,000.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.202. STIPULATED PREMIUM PLAN; DEDUCTION OF UNPAID
PREMIUM BALANCE. (a) An association may issue an insurance
certificate on a stipulated premium plan that provides for the
insured to pay regular premiums weekly, monthly, quarterly,
semiannually, or annually, as determined by the insured.
(b) An association may issue an insurance certificate that
provides that on the maturity of benefits payable under the
certificate any balance of premium for the certificate year
remaining unpaid is deducted from the benefits payable.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.203. ISSUANCE OF LIFE INSURANCE POLICY BY CERTAIN
ASSOCIATIONS. (a) A local mutual aid association or statewide
mutual assessment company that has a mortuary fund and expense
fund with a combined value of at least $100,000 greater than the
liabilities of the combined funds may issue a life insurance
policy in the same manner as a company organized under Chapter
841.
(b) An insurance policy issued as provided by Subsection (a):
(1) may not insure an individual life for more than $5,000;
(2) must be reserved as required for a company organized under
Chapter 841; and
(3) may be issued only on an endowment or limited pay basis.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.204. RENEWAL OR REINSTATEMENT OF INSURANCE CERTIFICATE.
(a) If an insurance certificate terminates for any reason and
the association's rules provide that a reinstated certificate is
regarded as a new certificate, an application for reinstatement
must state in at least 10-point type that:
(1) the same rules that apply to the original certificate apply
to the reinstated certificate; and
(2) the association may invalidate the certificate within the
contestable period for a false statement regarding the
applicant's health or physical condition or another matter
material to the risk.
(b) On reinstatement of an insurance certificate, an association
shall send to the certificate holder by first class mail a copy
of the application for reinstatement. The burden of proof is on
the association to prove that the association mailed the
application.
(c) If a renewal insurance certificate is issued after
termination of an insurance certificate, the association shall
attach to the renewal insurance certificate a copy of the
application for reinstatement. The application is part of the
renewal insurance certificate.
(d) If an association renews or reinstates an insurance
certificate after termination of the certificate, the association
shall divide the reinstated member's payments between the funds
in the same percentage as is required of regular payments in the
association's bylaws, except that if the period between
termination and reinstatement is nine months or longer, the
association may:
(1) charge a reinstatement fee not greater than the membership
fee; and
(2) place the fee in the expense fund.
(e) A renewal or reinstatement certificate may not be
contestable for any cause except nonpayment of assessments for a
period longer than six months from the date of renewal or
reinstatement, except that if the renewal or reinstatement occurs
within the certificate's original two-year contestable period,
the contestable period may be extended for six months from the
date it would have originally expired.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.205. LIFE INSURANCE CERTIFICATE BENEFICIARIES. (a) An
association may pay death benefits only to:
(1) a member's spouse;
(2) a member's relative by blood to the fourth degree or by
marriage to the third degree;
(3) a person actually dependent on the member;
(4) a creditor, estate, or other person with an insurable
interest; or
(5) a purely charitable or religious institution.
(b) A beneficiary of a life insurance certificate forfeits the
beneficiary's interest in the certificate if the beneficiary is
the principal or an accomplice in wilfully bringing about the
death of the insured. The nearest relative of the insured is
entitled to the proceeds of an insurance certificate forfeited
under this subsection.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.206. PAYMENT OF CLAIM; PROOF OF CLAIM. (a) An
association shall pay each claim under an insurance certificate
in full not later than the 60th day after the date of receipt of
due proof of claim.
(b) Written notice of a claim given to an association is
considered due proof of claim if the association does not provide
the claimant with the forms usually provided for filing claims
before the 16th day after the date notice is received.
(c) If an association is unable to pay a valid claim in full
within the time prescribed by Subsection (a), the commissioner
shall treat the association as insolvent.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.207. EXCEPTION TO FULL PAYMENT REQUIREMENT:
ASSESSMENT-AS-NEEDED ASSOCIATIONS. (a) Section 887.206 does not
apply to a class organized before May 12, 1939, and operating on
the postmortem or assessment-as-needed plan on that date.
(b) An association with a postmortem or assessment-as-needed
class to which Subsection (a) applies may continue to operate on
the plan only if:
(1) the class has a sufficient membership at the assessment rate
charged to produce for the mortuary fund at least 50 percent of
the maximum value of the largest certificate in the class; and
(2) the association receives the amount required by Subdivision
(1).
(c) If the membership of a class is sufficient in number to pay
more than 50 percent but less than 100 percent of the maximum
value of the largest certificate in the class, an officer of the
association shall print on each assessment notice the percentage
of the maximum value of the certificate actually paid on the last
claim for death benefits in the class.
(d) If the amount realized on an assessment is not sufficient to
pay 50 percent of the maximum amount of promised benefits as
shown on the certificate, the commissioner shall treat the
association as insolvent.
(e) Any benefits paid by an association operating on a
postmortem or assessment-as-needed basis are dependent on the
amount realized from assessments on the membership. Each of the
association's insurance certificates must state:
(1) that any benefits paid are dependent on the amount realized
from assessments on the membership; and
(2) the certificate's maximum payment.
(f) An association or a class in an association organized after
May 12, 1939, may not operate on the postmortem or
assessment-as-needed plan.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.208. CONTESTED CLAIMS. (a) An association may not
contest a claim:
(1) only for delay or for a captious or inconsequential reason;
or
(2) to force settlement at less than full payment.
(b) An association shall notify a claimant of the association's
intent to deny liability on a claim not later than the 60th day
after the date the association receives due proof of claim.
(c) An association that does not notify a claimant as provided
by Subsection (b) is presumed as a matter of law to have accepted
liability on the claim.
(d) The commissioner shall revoke the certificate of authority
of any association the commissioner finds is operating
fraudulently or improperly contesting claims.
(e) An association shall report to the department the costs of
contests in the annual statement under Section 887.060. The
report must be verified by an officer of the association.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.209. VENUE. An action brought against an association
that grows out of or is based on any right of claim or loss or
proceeds due, arising from or predicated on any claim for
benefits under an insurance certificate issued by the
association, may be brought in:
(1) the county where the certificate holder or beneficiary
instituting the action resides; or
(2) the county of the principal office of the association.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.210. REINSURANCE. (a) An association may enter into a
reinsurance agreement with a legal reserve company that:
(1) is authorized to write life, health, and accident insurance
in this state; and
(2) has capital or surplus of at least $100,000.
(b) A reinsurance agreement under this section is subject to the
commissioner's approval.
(c) An association may not pay more out from its mortuary fund
for reinsurance under this section than is received at the time
of reinsurance by the mortuary fund on the insurance certificates
or members reinsured.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
SUBCHAPTER F. CONTENTS OF APPLICATIONS AND INSURANCE CERTIFICATES
Sec. 887.251. GENERAL REQUIREMENTS FOR INSURANCE CERTIFICATE AND
APPLICATION FORMS; INCONTESTABILITY. (a) An insurance
certificate issued by an association must include:
(1) any condition of the certificate, including any portion of
the bylaws of the association that affects the insurance rights
of the parties in any material way; and
(2) a statement that the certificate is issued subject to:
(A) the association's constitution and bylaws; and
(B) any amendments to the constitution and bylaws approved by
the commissioner.
(b) An insurance certificate must provide that a certificate in
force for two years becomes incontestable, except for nonpayment
of dues or assessments, on the second anniversary of the date of
issuance, if the insured does not die before that date.
(c) An insurance certificate issued by an association or an
application for the certificate may not contain language or be in
a form that misleads the certificate holder or applicant about
the kind of insurance provided under the certificate.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.252. APPLICATION FOR INSURANCE CERTIFICATE. (a) An
application for an insurance certificate issued by an association
must be signed by the applicant. If the applicant is a minor, the
application may be signed by a parent or guardian.
(b) The application for an insurance certificate that provides
that a misstatement relating to the applicant's health or
physical condition may void the certificate within the
contestable period must state that provision in language approved
by the commissioner. The statement must be in at least 10-point
type.
(c) An association shall attach to an insurance certificate a
copy of the application for the certificate. The application is
part of the insurance certificate.
(d) In the absence of fraud, each statement in an application
for an insurance certificate is regarded as a representation and
not a warranty.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.253. LIFE INSURANCE CERTIFICATE FORMS. (a) A life
insurance certificate issued by an association must include:
(1) on the front page of the certificate, a definitive statement
of the amount of the death benefit to be paid; and
(2) a plain statement of the circumstances or conditions under
which the benefit is to be paid.
(b) A life insurance certificate must provide that if the age of
the insured is misstated, the amount of insurance is the amount
that the premium paid would have purchased if the age had been
stated correctly, based on rates in effect when the insured dies.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.254. HEALTH AND ACCIDENT INSURANCE CERTIFICATE FORMS.
An insurance certificate issued by an association must include a
plain statement of each health, accident, or other benefit under
the certificate and the terms under which each benefit is paid.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.255. LIFE INSURANCE BENEFIT REDUCTIONS AND EXCLUSIONS.
(a) An association may, with the commissioner's approval, issue
an insurance certificate that provides for:
(1) reduced benefits if the insured:
(A) dies or is injured while engaged in:
(i) military, naval, or aerial service or aerial flight during
peace or war; or
(ii) a hazardous occupation specified in the certificate;
(B) dies by the insured's own hand, regardless of whether the
insured was sane or insane; or
(C) dies or is injured by mob violence or legal execution; or
(2) reduced or excluded benefits for sickness from certain
causes specified in the certificate.
(b) The front page of an insurance certificate must call
attention to any reduction or exclusion of benefits provided by
the certificate. The circumstances or conditions under which the
reduction or exclusion applies must be stated plainly in the
certificate.
(c) If an insurance certificate that provides natural death
benefits contains a provision for reducing the greatest death
benefit provided by the certificate for a specified insured for a
reason other than a reason specified by Subsection (a):
(1) the reduced death benefit for the insured must at all times
when the reduction is in effect equal or exceed 120 percent of
the total premium paid on that certificate by the insured; and
(2) the reduction must end before the fifth anniversary of the
date the certificate is issued.
(d) Subsection (c) does not apply to a life insurance
certificate on which the reduction of the death benefit does not
apply at the time of the death of the specified insured.
(e) If a life insurance certificate provides for an increase of
the initial amount of the death benefit for a specified insured
one or more times during the first five years of the certificate,
the amount of the death benefit for the insured must at all times
during the period of the increasing benefit equal at least 120
percent of the premiums paid on that certificate by the insured
during the period of the increase.
(f) Subsection (e) does not apply to a life insurance
certificate that has been in force for more than five years from
the date the certificate was issued.
(g) Subsections (c)-(f) do not apply to a family group life
insurance certificate described by Section 887.402.
(h) This section does not apply to health and accident insurance
policies.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.256. FORM APPROVAL. (a) The commissioner shall
approve the form and language of an insurance certificate before
the certificate is used by an association. The commissioner
shall, in cooperation with the several associations, ensure that
the certificate forms are as uniform as feasible. Forms for all
associations are not required to be uniform.
(b) An insurance certificate form used by an association after
May 12, 1939, must comply with this chapter and with any other
laws regulating the association.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
SUBCHAPTER G. ASSESSMENTS AND REVENUE
Sec. 887.301. ASSESSMENTS REQUIRED. (a) An association shall
levy regular and periodic assessments on its membership in
amounts and at intervals necessary to:
(1) meet the reasonable operating expenses of the association;
and
(2) allow the association to pay in full any claims arising
under its insurance certificates.
(b) An association may also levy an assessment for surplus
funds.
(c) An association shall specify the purpose of an assessment.
(d) An assessment on a life insurance certificate issued after
May 21, 1965, insuring the life of one or more individuals must
be:
(1) in accordance with the reserve standard adopted by the
association and approved by the commissioner, except that an
association may use the 1956 Chamberlain Reserve Table with
interest not to exceed 3-1/2 percent a year; and
(2) in an amount sufficient to deposit in the mortuary fund an
amount at least equal to the renewal net premiums computed in
accordance with the reserve standard adopted by the association
and approved by the commissioner.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.302. AUTHORITY TO INCREASE ASSESSMENT RATES ON CERTAIN
INSURANCE CERTIFICATES. (a) An association's board of directors
may by resolution increase assessment rates on life insurance
certificates in force up to the rate on an attained age basis in
accordance with the 1956 Chamberlain Reserve Table, with interest
at 3-1/2 percent a year, or any other reasonable, equitable, or
necessary increase. The board may also adjust assessment rates on
accident, health, and hospitalization insurance certificates in
force.
(b) An assessment rate increase or adjustment under this section
on insurance certificates in force applies to all classes of the
same or similar certificates.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.303. APPROVAL REQUIRED FOR CERTAIN RATE INCREASES. An
association may not implement a rate increase on insurance
certificates in force before the commissioner approves the rate
increase as complying with this chapter.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.304. LIMIT ON RATE INCREASES. Notwithstanding any
other provision of this chapter, on a life insurance certificate
issued after May 21, 1965, an association may not during any
consecutive five-year period increase the rate to more than
double the rate charged the insured at the time of the rate
increase.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.305. EXPENSE LOADING ON CERTAIN INSURANCE CERTIFICATES.
If an association increases a life insurance assessment rate at
any age other than at age of issue, the expense loading on the
new assessments may not, on 50 years of age or greater, exceed 25
percent of the gross assessment charged, unless an additional
expense loading is approved by the commissioner as reasonable and
necessary.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.306. ASSESSMENT-AS-NEEDED ASSOCIATIONS: PAYMENTS ON
CERTAIN INSURANCE CERTIFICATES. (a) This section applies only
to an association operating on an assessment-as-needed basis.
(b) If the members' payments on insurance certificates issued
and in force before May 12, 1939, or on the reinsurance or
renewals of those certificates, are not sufficient to pay matured
death and disability claims in the maximum amount stated in the
certificates and to provide for the creation and maintenance of
the funds required by the association's bylaws, the association
may, with the commissioner's approval and after proper hearing
before the commissioner, provide for meeting the deficiency by
additional, increased, or extra rates of payment.
(c) The association may give the members the option of agreeing
to reduced maximum benefits or making increased payments.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.307. REVENUE OF ASSOCIATION; DEPOSIT. (a) The revenue
of an association must be derived from:
(1) membership fees; and
(2) assessments.
(b) Not later than the fifth day after the date an association
collects revenue, the association shall deposit the revenue in a
state or national bank.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.308. SUSPENSION OF MEMBER FOR NONPAYMENT. Before
suspending a member from membership for nonpayment of assessments
or membership fees, an association shall send notice to the
member by first class mail stating the final date of payment.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.309. FAILURE TO COMPLY WITH CERTAIN COMMISSIONER
ORDERS. If an association refuses to comply with an order of the
commissioner regarding rates or assessments under this chapter,
the commissioner shall treat the association as insolvent.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
SUBCHAPTER H. MORTUARY AND EXPENSE FUNDS
Sec. 887.351. MORTUARY AND EXPENSE FUNDS. An association's
bylaws must provide for the method and procedure for allocating
assessments between the association's mortuary and expense funds.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.352. LIMITS ON USE OF FUNDS. An association may spend
or invest money from a mortuary fund or expense fund only as
provided for each fund by this subchapter.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.353. DIVISION OF FUNDS: CERTAIN LIFE INSURANCE
CERTIFICATES. (a) This section applies to a life insurance
certificate insuring the life of one or more individuals issued:
(1) after December 31, 1965; or
(2) before December 31, 1965, and on which the assessment rate
has been increased based on an age other than age on the date the
certificate was issued.
(b) To the extent consistent with this subchapter, an
association shall divide collected assessments into at least two
funds.
(c) An association shall deposit in a mortuary fund a portion of
the association's assessments at least equal to the renewal net
premium computed at the age of issue or some other advanced age
in accordance with the reserve standard adopted by the
association. The association may pay from the mortuary fund only:
(1) fund claims under insurance certificates;
(2) dividends to certificate holders as provided by Section
887.064; and
(3) any other expenditures permitted by law.
(d) An association shall deposit in an expense fund the
remaining portion of the assessments not deposited under
Subsection (c). The association may pay expenses from the expense
fund.
(e) This section does not apply to an association operating on
an assessment-as-needed basis.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.354. DIVISION OF FUNDS: ACCIDENT AND HEALTH INSURANCE
CERTIFICATES AND CERTAIN LIFE INSURANCE CERTIFICATES. (a) This
section applies to:
(1) a life insurance certificate in force on December 31, 1965,
to which Section 887.353 does not apply; and
(2) an accident, health, or hospitalization insurance
certificate.
(b) An association shall deposit in a mortuary fund an amount
equal to at least 60 percent of the association's assessments,
not including membership fees.
(c) An association shall deposit in an expense fund:
(1) membership fees; and
(2) the remaining portion of the assessments not deposited under
Subsection (b).
(d) This section does not apply to an association operating on
an assessment-as-needed basis.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.355. DIVISION OF FUNDS: CERTAIN LIFE INSURANCE
CERTIFICATES WITH NO RATE INCREASE. (a) This section applies to
a life insurance certificate in force on December 31, 1965, on
which the assessment rate has not been increased.
(b) An association may:
(1) deposit in a mortuary fund at least the net renewal premium,
based on the reserve table adopted by the association; and
(2) deposit in an expense fund the remaining portion of the
premium.
(c) This section does not apply to an association operating on
an assessment-as-needed basis.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.356. DIVISION OF FUNDS: ASSESSMENT-AS-NEEDED
ASSOCIATIONS. (a) An association operating on an
assessment-as-needed basis shall divide collected assessments
into at least:
(1) a mortuary fund; and
(2) an expense fund.
(b) An association under this section shall deposit into a
mortuary fund an amount equal to at least 60 percent of the
association's assessments, not including membership fees.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.357. INVESTMENT OF FUNDS. (a) An association may
invest money from a mortuary fund only in securities and
investments that are a legal investment for the reserve funds of
a domestic life, accident, and health insurance company operating
under Chapter 841.
(b) An association may invest money from an expense fund only in
securities and investments that are a legal investment for the
surplus funds of a domestic life, accident, and health insurance
company operating under Chapter 841.
(c) An association may invest surplus funds belonging to the
association only in securities that are a legal investment for
the surplus funds of a domestic life, accident, and health
insurance company operating under Chapter 841.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.358. PAYMENT OF TAXES ON MORTUARY FUND INCOME. An
association may pay from a mortuary fund any taxes that are
assessed against income on the fund and required to be paid by
the association.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.359. PAYMENT OF REINSURANCE PREMIUM. An association
may pay from a mortuary fund the premiums for any reinsurance
under Section 887.210.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.360. COST OF DEFENDING CONTESTED CLAIMS. An
association authorized to write accident, health, or
hospitalization insurance may pay the reasonable costs of
defending a contested claim on an accident, health, or
hospitalization insurance certificate from the mortuary fund of
the association if:
(1) the expenditure is approved by the commissioner; and
(2) the association has the reserves required by Subchapter I.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
SUBCHAPTER I. RESERVES
Sec. 887.401. RESERVES ON INDIVIDUAL LIFE INSURANCE
CERTIFICATES. (a) An association shall reserve an individual
life insurance certificate insuring one or more persons at
individual premiums for each person as provided by this section.
(b) An association shall maintain reserves on each of its
individual life insurance certificates in accordance with the
reserve standard adopted by the association and approved by the
commissioner. The standard must provide reserves that in the
aggregate are at least equal to the reserve amounts computed
using the 1956 Chamberlain Reserve Table with interest not to
exceed 3-1/2 percent a year. An association may use the 1956
Chamberlain Reserve Table with interest not to exceed 3-1/2
percent a year.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.402. RESERVES ON FAMILY GROUP LIFE INSURANCE
CERTIFICATES. (a) An association shall reserve a family group
life insurance certificate on which the association charges a
group premium that is not reduced on the death of an insured as
provided by this section.
(b) An association shall maintain reserves on each of its family
group life insurance certificates using one of the following
methods:
(1) the reserves must be equal to the reserves that would be
required under Section 887.401 on individual life insurance
certificates on the lives of the two oldest living members of the
family group, with the amount of insurance for those two members
determined assuming that the elder of the two will die first;
(2) the reserves must be equal to the reserves required under
Section 887.401 on individual life insurance certificates on the
lives of the living members of the family group, with the amount
of insurance for each member of the family group determined
assuming that each member will die first; or
(3) any other table or method of computing reserves approved in
advance by the commissioner.
(c) An association may select the method to be used to compute
the reserves under Subsection (b).
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.403. ISSUE YEAR AND ISSUE AGE IN CERTAIN INSURANCE
CERTIFICATES. (a) In this section, "gross premium" means the
renewal net premium plus any expense loading designated by the
association or as otherwise regulated by this chapter.
(b) For an individual or family group life insurance certificate
in force on December 31, 1965, or an individual or family group
life insurance certificate with a rate increase effective after
December 31, 1965, the reserves may be computed as if:
(1) the issue year is the last calendar year that the gross
premium computed using the reserve table and interest rate
adopted by the association at the insured's age in that calendar
year is equal to or less than the premium rate charged by the
association on the reserved certificate; and
(2) the issue age is the insured's age in the calendar year
under Subdivision (1).
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.404. RESERVES ON ACCIDENT, HEALTH, AND HOSPITALIZATION
INSURANCE CERTIFICATES. An association shall maintain reserves
on each of its accident, health, and hospitalization insurance
certificates in the manner required of a company authorized to
issue that type of coverage under Chapter 841.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.405. COMPUTATION OF RESERVE LIABILITY. (a) Each year,
an association shall compute its reserve liability on all
outstanding insurance certificates.
(b) To make the computation, an association:
(1) shall use the net premium basis in accordance with the
reserve table and interest rate adopted by the association and
approved by the commissioner; and
(2) may use group methods and approximate averages for fractions
of a year.
(c) The reserve liability may be computed on not more than a
one-year preliminary term.
(d) As soon as practical each year, the commissioner shall
compute or cause to be computed the reserve liability of each
association. To make the computation, the commissioner may use
group methods and approximate averages for fractions of a year.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.406. INCREASE OF RESERVES. (a) If an association does
not have in its mortuary fund the reserves required by this
subchapter, the association's board of directors by appropriate
action shall increase assessment rates on insurance certificates
in force by advancing the age of each insured from the age at the
date the certificate is issued or from the age previously
advanced or otherwise equitably or reasonably adjust assessment
rates to correct the reserve inadequacy. The board shall take
that action not later than the 30th day after the date the
reserves are computed.
(b) An association may make an assessment rate adjustment under
Subsection (a) at any time if it appears that a reserve
inadequacy will exist as of December 31 of the year in which the
rate adjustment is made.
(c) The commissioner shall order an association to comply with
this chapter.
(d) If the board of directors does not comply with Subsection
(a), the commissioner shall treat the association as insolvent.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.407. NONAPPLICABILITY TO ASSESSMENT-AS-NEEDED
ASSOCIATIONS. This subchapter does not apply to an association
operating on an assessment-as-needed basis.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
SUBCHAPTER J. CONVERSION TO LEGAL RESERVE INSURANCE COMPANY
Sec. 887.451. AUTHORIZATION TO CONVERT OR REINSURE. Subject to
the requirements of this subchapter, an association may convert
or reinsure itself to a legal reserve insurance company operating
under Chapter 882.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.452. PROPOSAL FOR CONVERSION OR REINSURANCE. An
association's board of directors may determine by majority vote
to submit a proposed conversion or reinsurance under Section
887.451 to the members of the association. Before the proposed
conversion or reinsurance may be submitted to the members, the
board must prepare detailed plans for the conversion or
reinsurance and submit the plans to the commissioner.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.453. MEMBERS MEETING; NOTICE. (a) On receipt of the
commissioner's written approval of proposed plans under Section
887.452 or of the plans as amended to meet the commissioner's
requirements in accordance with Chapter 882, an association's
board of directors or an officer of the association authorized by
its bylaws to call a meeting of its members shall:
(1) call a meeting of the association's members for voting on
ratification of the proposed conversion or reinsurance; and
(2) mail to each member of the association:
(A) a copy of the proposed plans; and
(B) a notice of the meeting.
(b) The meeting may not be held before the 16th day after the
date the notice is mailed under Subsection (a)(2).
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.454. MEMBERS MEETING; PROCEDURES. (a) In a meeting
called under Section 887.453, a member may vote in person, by
proxy, or by mail.
(b) All votes must be cast by ballot. A majority vote of the
members participating in the election is required to ratify the
conversion or reinsurance.
(c) The person presiding at the meeting shall supervise and
direct the procedure of the meeting and appoint an adequate
number of inspectors to conduct the voting.
(d) Under rules adopted by the commissioner, the inspectors may
determine all questions concerning the qualifications of the
voters and the verification, canvassing, and validity of the
ballots. The inspectors shall certify the result of the election
to the commissioner and to the association.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.455. COMPLETION AND LEGAL EFFECT OF CONVERSION OR
REINSURANCE. (a) An association's conversion or reinsurance is
complete when the association has:
(1) complied with all laws regulating the incorporation of a
mutual legal reserve insurance company; and
(2) received from the commissioner its charter and certificate
of authority to engage in business as a mutual insurance company.
(b) An association that converts or reinsures to a mutual legal
reserve insurance company:
(1) is considered by law to have each right, privilege, power,
or authority of any other mutual legal reserve company;
(2) is considered by law to be a continuation of the business of
the association; and
(3) succeeds to and is invested with:
(A) each right or privilege of the former association that is
not inconsistent with Chapter 882;
(B) each franchise or other interest of the former association;
and
(C) all property of the former association, including debts due
on any account and all choses in action.
(c) On conversion or reinsurance of an association to a mutual
legal reserve insurance company, the title to any real estate by
deed or otherwise vested in the former association vests in the
company, and the title is not in any way impaired because of the
conversion or reinsurance.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 887.456. CONTINUING OBLIGATIONS OF CONVERTED OR REINSURED
ASSOCIATION. (a) The standing of each claim against an
association that converts or reinsures under this subchapter must
be preserved unimpaired under the reorganized company or the
company reinsuring the membership of the association.
(b) Each debt, liability, and duty of a converted or reinsured
association attaches to the reorga