CHAPTER 885. FRATERNAL BENEFIT SOCIETIES - Texas Statutes

INSURANCE CODE

TITLE 6. ORGANIZATION OF INSURERS AND RELATED ENTITIES

SUBTITLE E. MUTUAL AND FRATERNAL COMPANIES AND RELATED ENTITIES

CHAPTER 885. FRATERNAL BENEFIT SOCIETIES

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 885.001. DEFINITIONS. In this chapter:

(1) "Benefit certificate" means a document issued as written

evidence of a benefit contract.

(2) "Benefit contract" means an agreement for provision of

benefits authorized by Section 885.301, as that agreement is

described by Section 885.306.

(3) "Benefit member" means an adult designated by the laws or

rules of a fraternal benefit society as a benefit member under a

benefit contract.

(4) "Fraternal benefit society's laws" means a fraternal benefit

society's articles of incorporation, constitution, and bylaws,

however designated.

(5) "Lodge" means a subordinate member unit of a fraternal

benefit society. The term includes a camp, court, council, or

branch.

(6) "Premium" means a premium, a rate, dues, or another required

contribution that is payable under a benefit certificate or

benefit contract.

(7) "Rule" means a rule, regulation, or resolution adopted by

the supreme governing body or board of directors that has general

application to the members of a fraternal benefit society.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.002. LIMITED EXEMPTION FROM INSURANCE LAWS. (a)

Except as provided by this chapter, a fraternal benefit society

is governed by this chapter and is exempt from all other

insurance laws of this state for all purposes.

(b) A law enacted after July 1, 1913, does not apply to

fraternal benefit societies unless a fraternal benefit society is

expressly designated in the law.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.003. EXEMPTION FROM TAXATION. (a) A fraternal benefit

society organized or holding a certificate of authority under

this chapter, including the former Chapter 10 of this code and

Chapter 8, Title 78, Revised Statutes, is a charitable and

benevolent institution. Except as provided by Subsection (b), all

funds of a fraternal benefit society described by this subsection

are exempt from any state, county, district, municipal, or school

tax, including an occupation tax.

(b) Real estate or office equipment used for a purpose other

than a lodge purpose is subject to taxation.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.004. INAPPLICABILITY TO CERTAIN SOCIETIES. (a) Except

as provided by Subsection (b), this chapter does not apply to:

(1) a grand or subordinate lodge of Masons, Odd Fellows, Knights

of Pythias, or the Junior Order of the United American Mechanics;

(2) a society that limits its membership to those engaged in one

or more hazardous occupations in the same or similar lines of

business;

(3) a society that does not issue benefit certificates;

(4) an association of local lodges of a society engaged in

business in this state on July 1, 1913, that provides:

(A) death benefits of not more than $500 to any one individual;

(B) disability benefits of not more than $300 in any one year to

any one individual; or

(C) both death benefits described by Paragraph (A) and

disability benefits described by Paragraph (B);

(5) a contract of reinsurance on a plan in this state described

by Subdivision (4);

(6) a domestic society that limits its membership to the

employees of:

(A) a particular municipality; or

(B) a designated firm or corporation; or

(7) a domestic lodge, order, or association of a purely

religious, charitable, and benevolent description that does not

provide:

(A) death benefits of more than $100; or

(B) disability benefits of more than $150 to any one individual

in any one year.

(b) This chapter applies to:

(1) the insurance department of the supreme lodge Knights of

Pythias; and

(2) the beneficiary degree of insurance branch of the Junior

Order of the United American Mechanics.

(c) The department may require from any society information that

will permit the department to determine whether the society is

exempt from this chapter.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.005. FRATERNAL BENEFIT SOCIETIES THAT PROVIDE BENEFITS

RESULTING FROM ACCIDENTS ONLY. (a) A fraternal benefit society

that provides benefits for death or disability resulting from

accidents only and does not provide death benefits or benefits

for sickness may hold a certificate of authority under this

chapter if the society:

(1) was organized and incorporated before July 1, 1913; and

(2) operates as provided by Sections 885.051-885.054 and

885.062.

(b) A fraternal benefit society that holds a certificate of

authority as provided by Subsection (a) may exercise all the

privileges provided by and is subject to this chapter other than:

(1) provisions requiring medical examination;

(2) provisions requiring that a benefit certificate specify the

amount of benefits; and

(3) provisions relating to the valuation of benefit

certificates.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.006. TREATMENT OF CERTAIN GRAND LODGES. A grand lodge,

by whatever name known and without regard to whether

incorporated, that holds a charter from any supreme governing

body and that was engaging in business in this state on July 1,

1913, as a fraternal beneficiary association under the separate

jurisdiction plan is considered to be a single state

organization.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

SUBCHAPTER B. STRUCTURE OF FRATERNAL BENEFIT SOCIETY

Sec. 885.051. FRATERNAL BENEFIT SOCIETY DEFINED. A corporation,

society, order, or voluntary association is a fraternal benefit

society if it:

(1) has a lodge system and a representative form of government

or limits its membership to a secret fraternity that has a lodge

system and a representative form of government;

(2) is organized and operated solely for the mutual benefit of

its members and their beneficiaries and not for profit;

(3) does not have capital stock; and

(4) provides for the payment of benefits in accordance with

Section 885.301.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.052. CONTROL OF FRATERNAL BENEFIT SOCIETY. (a) In

this section, "control" has the meaning described by Sections

823.005 and 823.151.

(b) Control of a fraternal benefit society must be ultimately

vested in the membership as provided by this chapter. Control of

a fraternal benefit society may be exercised by lodges and a

supreme governing body elected under Section 885.054.

(c) The methods provided by this section for exercising control

over a fraternal benefit society are exclusive.

(d) Chapter 823 applies to a fraternal benefit society. Each

change in control of a fraternal benefit society must be

consistent with the nature of a fraternal benefit society as

specified by this section, Sections 885.051, 885.053, and

885.054, and other applicable law.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.053. LODGE SYSTEM DEFINED. A fraternal benefit society

is considered to be operating on the lodge system if the society:

(1) has a supreme governing body; and

(2) has lodges:

(A) into which members are admitted in accordance with the

fraternal benefit society's laws, rituals, and rules; and

(B) that are required by the fraternal benefit society's laws to

hold periodic meetings.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.054. REPRESENTATIVE FORM OF GOVERNMENT DEFINED. A

fraternal benefit society has a representative form of government

if:

(1) the society has a supreme governing body constituted as:

(A) an assembly, as described by Section 885.055; or

(B) a board, as described by Section 885.057;

(2) the officers of the society are elected by the supreme

governing body or the board of directors;

(3) only a benefit member is eligible to serve as a member of

the supreme governing body, the board of directors, or an

intermediate assembly of the society;

(4) only a benefit member may vote on the management of the

society's insurance affairs;

(5) a voting member of the society has only one vote; and

(6) a voting member of the society may not cast a vote by proxy.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.055. ASSEMBLY AS SUPREME GOVERNING BODY. (a) The

supreme governing body of a fraternal benefit society is an

assembly if the body is composed of:

(1) delegates elected directly by the members or at intermediate

assemblies or conventions by the members or their

representatives; and

(2) other delegates as prescribed by the fraternal benefit

society's laws.

(b) The elected delegates to an assembly must:

(1) constitute a majority of the assembly in number; and

(2) be entitled to cast the greater of:

(A) two-thirds of the votes in the assembly; or

(B) the number of votes required to amend the fraternal benefit

society's laws.

(c) A fraternal benefit society may provide for election of

delegates by mail.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.056. ASSEMBLY MEETINGS; DIRECTORS. (a) An assembly

that is the supreme governing body of a fraternal benefit society

shall:

(1) meet at least once every four years; and

(2) elect a board of directors to conduct the business of the

society between meetings of the assembly.

(b) A vacancy on the board of directors that occurs between

elections may be filled in the manner prescribed by the fraternal

benefit society's laws.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.057. BOARD AS SUPREME GOVERNING BODY. (a) The supreme

governing body of a fraternal benefit society is a board if the

body is composed of:

(1) individuals elected directly by the members or at

intermediate assemblies by the members or their representatives;

and

(2) other individuals as prescribed by the fraternal benefit

society's laws.

(b) The individuals elected to the board must:

(1) constitute a majority of the board in number; and

(2) have at least the number of votes required to amend the

fraternal benefit society's laws, other than laws, if any, that

must be amended by direct vote of the members.

(c) A fraternal benefit society may provide for election of the

board by mail.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.058. BOARD MEMBERS; MEETINGS. (a) The term of a

member of a board that is the supreme governing body of a

fraternal benefit society may not exceed four years.

(b) A vacancy on the board that occurs between elections may be

filled in the manner prescribed by the fraternal benefit

society's laws. An individual filling the unexpired term of an

elected board member is considered to be an elected member.

(c) A board shall meet at least annually to conduct the business

of the fraternal benefit society.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.059. LOCATION OF MEETINGS OF SUPREME GOVERNING BODY.

(a) A domestic fraternal benefit society may provide that its

supreme governing body may hold meetings in any state, district,

province, or territory in which the society has a lodge.

(b) All business transacted at a meeting authorized under

Subsection (a) is as valid in all respects as if the meeting were

held in this state.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.060. FRATERNAL BENEFIT SOCIETY'S LAWS BINDING. A

fraternal benefit society's laws may provide that a lodge or a

subordinate officer or member of the society may not waive any

provision of those laws. Those laws are binding on:

(1) the society;

(2) each member of the society; and

(3) each beneficiary of a member.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.061. AMENDMENT OF FRATERNAL BENEFIT SOCIETY'S LAWS.

(a) A fraternal benefit society transacting business under this

chapter shall file with the department a certified copy of each

amendment of the fraternal benefit society's laws not later than

the 90th day after the date of enactment of the amendment.

(b) A printed copy of a fraternal benefit society's laws, as

amended, that is certified by the society's secretary or

corresponding officer is prima facie evidence that the laws were

legally adopted.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.062. QUARTERLY LODGE MEETINGS REQUIRED. A fraternal

benefit society's laws must require each lodge to hold regular

meetings at least once each calendar quarter to further the

society's purposes.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.063. MERGER OR TRANSFER OF MEMBERSHIP OR FUNDS. (a) A

domestic fraternal benefit society may not merge with or accept a

transfer of the membership or funds of another fraternal benefit

society unless:

(1) the merger or transfer is evidenced by a written contract

that fully sets out the terms of the merger or transfer; and

(2) the societies file with the department:

(A) a copy of the contract;

(B) a sworn statement of the financial condition of each society

by its president and secretary or corresponding officers; and

(C) a certificate of those officers, verified under oath, that

the merger or transfer has been approved by a vote of two-thirds

of the members of the supreme governing body of each society.

(b) On submission, the commissioner shall examine the contract,

financial statements, and certificates. The commissioner shall

approve the merger or transfer and issue a certificate to that

effect if the commissioner determines that:

(1) the contract conforms with this section and Section

885.052(d);

(2) the financial statements are correct;

(3) the merger or transfer is just and equitable to the members

of each society; and

(4) the new or surviving society complies with each requirement

of a fraternal benefit society under this chapter.

(c) A contract of merger or transfer takes effect on issuance of

a certificate under Subsection (b).

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

SUBCHAPTER C. MEMBERS

Sec. 885.101. QUALIFICATIONS FOR FRATERNAL BENEFIT SOCIETY

MEMBERSHIP. (a) A fraternal benefit society shall specify in

the fraternal benefit society's laws or rules:

(1) subject to Subsection (b), the eligibility standards for

each membership class;

(2) the process for admission for each membership class; and

(3) subject to Subsection (c), the rights and privileges of each

membership class.

(b) If a fraternal benefit society provides benefits on the

lives of children, the minimum age for adult membership may not

be less than 15 years or more than 21 years.

(c) Only a benefit member may vote on the management of the

insurance affairs of a fraternal benefit society.

(d) Membership rights in a fraternal benefit society are

personal to the member, and a member may not assign those rights.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.102. SOCIAL MEMBERS. A fraternal benefit society may

admit social members. A social member may not vote in the

management of the insurance affairs of the society.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.103. CHILDREN. (a) A fraternal benefit society may

organize and operate branches for children on whose lives the

society provides insurance or annuities.

(b) A child is not required to be a member of a lodge or to be

initiated in a lodge.

(c) A child may not have any voice in the management of a

fraternal benefit society.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.104. GRIEVANCE OR COMPLAINT PROCEDURES. A fraternal

benefit society's laws or rules may provide for grievance or

complaint procedures for members.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

SUBCHAPTER D. AUTHORITY TO ENGAGE IN BUSINESS

Sec. 885.151. APPLICABILITY TO CERTAIN FRATERNAL BENEFIT

SOCIETIES CONTINUOUSLY AUTHORIZED TO ENGAGE IN BUSINESS. This

subchapter does not apply to a fraternal benefit society

authorized to engage in business in this state on June 1, 1965,

as long as the society's certificate of authority or any renewal

or extension of its certificate of authority continues in force.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.152. ELIGIBILITY TO PROVIDE BENEFITS. After June 1,

1965, a corporation, society, order, or voluntary association may

qualify as a fraternal benefit society as defined by Section

885.051 for the purpose of providing for the payment of benefits

as provided by Section 885.301 only if it:

(1) has at least 500 members and at least 10 lodges; and

(2) has been in continuous operation for at least the five years

preceding the filing of its articles of incorporation or

association as provided by Section 885.153.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.153. FILING OF ARTICLES OF INCORPORATION OR

ASSOCIATION. A corporation, society, order, or voluntary

association eligible under Section 885.152 may qualify as a

fraternal benefit society by filing with the department:

(1) certified articles of incorporation or association that set

out:

(A) the name of the society;

(B) the purpose for which the society is formed; and

(C) the manner in which the society's corporate powers are to be

exercised;

(2) certified copies of the fraternal benefit society's laws and

rules;

(3) copies of all proposed forms of benefit certificates,

applications for benefit certificates, and circulars to be issued

by the society;

(4) a surety bond as required by Section 885.156; and

(5) additional information that the commissioner considers

necessary.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.154. NAME OF FRATERNAL BENEFIT SOCIETY. The name of a

fraternal benefit society may not so closely resemble the name of

any society or insurance company engaging in business in this

state as to mislead the public or lead to confusion.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.155. PURPOSES OF FRATERNAL BENEFIT SOCIETY. (a) The

purposes for which a fraternal benefit society is organized may

not include more liberal powers than are granted by this chapter.

Any lawful, social, intellectual, educational, charitable,

benevolent, moral, fraternal, patriotic, or religious advantages

may be set out among the society's purposes.

(b) A fraternal benefit society's purposes may be implemented

directly by the society or indirectly through subsidiary

corporations or affiliated organizations.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.156. SURETY BOND. (a) A fraternal benefit society

must file with the department a bond in an amount not less than

$300,000 and not more than $1.5 million, as required by the

commissioner, with sureties approved by the commissioner.

(b) The bond must be conditioned on the return of advance

payments to applicants for benefit certificates as provided by

this subchapter if the fraternal benefit society fails to qualify

under this subchapter within one year.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.157. ISSUANCE OF PRELIMINARY CERTIFICATE OF AUTHORITY.

If the purposes of a fraternal benefit society conform to the

requirements of this chapter and all provisions of law have been

complied with, the commissioner shall:

(1) certify that the society is in compliance with all

provisions of law;

(2) retain and record the articles of incorporation or

association; and

(3) issue to the society a preliminary certificate of authority.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.158. POWERS AND DUTIES UNDER PRELIMINARY CERTIFICATE OF

AUTHORITY; QUALIFICATION. (a) On receipt of a preliminary

certificate of authority from the department under Section

885.157, a fraternal benefit society:

(1) may solicit from its members applications for insurance

benefits for the purpose of completing the society's

qualification;

(2) shall collect from each applicant an amount equal to at

least one regular monthly payment, in accordance with the

society's table of rates as provided by the fraternal benefit

society's laws; and

(3) shall issue to each applicant a receipt for the amount

collected under Subdivision (2).

(b) A fraternal benefit society operating under a preliminary

certificate of authority may not incur a liability other than for

advance payments collected under Subsection (a)(2), issue a

benefit certificate, or pay, allow, or offer or promise to pay or

allow to any person a death or disability benefit until:

(1) the society has established 10 lodges into which at least

500 applicants have been initiated;

(2) the society has received bona fide applications for death

benefit certificates on at least 500 lives for at least $2,000

each;

(3) each applicant for death benefits under Subdivision (2) has

been regularly examined by a legally qualified practicing

physician;

(4) a certificate of each medical examination has been filed

with and approved by the chief medical examiner of the society;

(5) the society submits to the department a list of the

applicants for death benefits under Subdivision (2); and

(6) the society shows to the department, by the sworn statement

of its treasurer or corresponding officer, that at least 500

applicants have each paid in cash in advance at least one regular

monthly payment per $1,000 of indemnity to be provided and that

the payments in the aggregate amount to at least $150,000.

(c) The list of applicants for death benefits submitted under

Subsection (b)(5) must be under oath of the fraternal benefit

society's president and secretary or corresponding officers and

must provide for each applicant:

(1) the applicant's name and address;

(2) the date the applicant was examined;

(3) the date the applicant was approved;

(4) the date the applicant was initiated;

(5) the name and number of the lodge of which the applicant is a

member;

(6) the amount of benefits to be granted; and

(7) the rate of stated premiums.

(d) The rate of stated premiums under Subsection (c)(7) must be

sufficient to provide for meeting the obligations the fraternal

benefit society has contracted to pay, when valued for death

benefits on the basis of the National Fraternal Congress Table of

Mortality, as adopted by the National Fraternal Congress, August

23, 1899, or, at the society's option, any higher standard, and

for disability benefits or combined death and permanent total

disability benefits by tables based on reliable experience, with

an interest assumption not greater than a rate of four percent a

year.

(e) A fraternal benefit society shall hold advance payments

received under this section in trust during the period of

completing qualification. The society shall credit the advance

payments to the mortuary or disability fund on account of the

applicants and may not use any part of the payments for expenses.

If the society does not complete its qualification within one

year, as provided by this subchapter, the society shall return

the advance payments to the applicants.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.159. TERMINATION OF AUTHORITY UNDER PRELIMINARY

CERTIFICATE OF AUTHORITY. (a) Unless a fraternal benefit

society has qualified under this subchapter, a preliminary

certificate of authority granted under Section 885. 157 is void

on the first anniversary of the date the certificate is issued.

(b) The department, on cause shown, may extend the period

prescribed by Subsection (a). An extension may not exceed one

year.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.160. ISSUANCE OF CERTIFICATE OF AUTHORITY. (a) The

department may make an examination and require information in

addition to that required by Section 885.158(b) that the

department considers advisable. On presentation of satisfactory

evidence that a fraternal benefit society has complied with all

provisions of law, the department shall issue to the society a

certificate of authority.

(b) The certificate of authority issued is prima facie evidence

of the qualification of the fraternal benefit society as of the

date of the certificate.

(c) The department shall make a record of a certificate of

authority issued under Subsection (a). A certified copy or

duplicate of the department's record shall be accepted in

evidence with the same effect as the original certificate.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

SUBCHAPTER E. FOREIGN FRATERNAL BENEFIT SOCIETIES

Sec. 885.201. CERTIFICATE OF AUTHORITY REQUIRED. A foreign

fraternal benefit society organized and engaging in business

before July 1, 1913, that was not authorized to engage in

business in this state as of that date may not engage in business

in this state without a certificate of authority from the

commissioner.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.202. ADMISSION OF FOREIGN FRATERNAL BENEFIT SOCIETY.

(a) To engage in business in this state, a foreign fraternal

benefit society described by Section 885.201 must:

(1) have the qualifications required of a domestic fraternal

benefit society under this chapter; and

(2) have its assets invested as required by the laws of the

state, territory, district, province, or country in which the

society is organized.

(b) A foreign fraternal benefit society described by Section

885.201 is entitled to a certificate of authority to engage in

business in this state on filing with the department:

(1) a certified copy of the society's charter or articles of

association;

(2) a copy of the fraternal benefit society's laws, certified by

its secretary or corresponding officer;

(3) a statement of the society's business;

(4) a certificate from the proper official in the society's home

state, province, or country showing that the society is legally

organized;

(5) a copy of the society's benefit contract;

(6) information showing that the society's assets are invested

as required by Subsection (a)(2); and

(7) additional information the commissioner considers necessary

to demonstrate the society's business and method of operation.

(c) A statement of business filed by a foreign fraternal benefit

society under Subsection (b)(3) must:

(1) be under oath of the society's president and secretary or

corresponding officers;

(2) be in the form required by the commissioner; and

(3) be verified by an examination made by the supervising

insurance official of the society's home state or another state

satisfactory to the commissioner.

(d) A benefit contract filed by a foreign fraternal benefit

society under Subsection (b)(5) must show that benefits are

provided for by premiums paid by persons holding similar

contracts.

(e) The commissioner shall issue a certificate of authority to a

foreign fraternal benefit society that complies with Subsection

(b).

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.203. REFUSAL TO ISSUE CERTIFICATE OF AUTHORITY TO

FOREIGN FRATERNAL BENEFIT SOCIETY. (a) If the commissioner

refuses to issue a certificate of authority to a foreign

fraternal benefit society under Section 885.202, the commissioner

shall:

(1) make the refusal in writing;

(2) file the refusal in the department's office; and

(3) on request, provide a copy of the refusal and a statement of

the commissioner's reasons for the refusal to the society's

officers.

(b) The commissioner's refusal to issue a certificate of

authority to a foreign fraternal benefit society for authority to

engage in business in this state is reviewable by proper

proceedings in a state court.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.204. NOTICE OF INTENT TO REVOKE FOREIGN FRATERNAL

BENEFIT SOCIETY'S CERTIFICATE OF AUTHORITY. (a) The

commissioner shall notify a foreign fraternal benefit society

engaging in business under this chapter of the commissioner's

determination if, following an investigation, the commissioner

determines that the society:

(1) has failed to comply with this chapter;

(2) has exceeded its powers;

(3) is not fulfilling its contracts in good faith; or

(4) is engaging in business fraudulently.

(b) A notification under Subsection (a) must:

(1) state in writing the grounds of the commissioner's

dissatisfaction; and

(2) require that the society, after reasonable notice and on the

date stated in the notice, show cause why the society's

certificate of authority should not be revoked.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.205. REVOCATION OF FOREIGN FRATERNAL BENEFIT SOCIETY'S

CERTIFICATE OF AUTHORITY. (a) The commissioner may revoke a

foreign fraternal benefit society's certificate of authority to

engage in business in this state if, on the date stated in the

notice under Section 885.204, the society:

(1) has not, to the commissioner's satisfaction, removed the

commissioner's objections; or

(2) does not present good and sufficient reason why its

certificate of authority should not be revoked.

(b) Section 885.203 applies to a decision by the commissioner to

revoke a foreign fraternal benefit society's authority to engage

in business in this state as if it were a decision to refuse to

issue a certificate of authority.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.206. CONTINUANCE OF CONTRACTS FOLLOWING REVOCATION OF

CERTIFICATE OF AUTHORITY. This subchapter may not be construed

to prevent a foreign fraternal benefit society that has had its

certificate of authority refused under former Article 10.23,

Insurance Code, or a predecessor to that statute, or that has had

its certificate of authority revoked, from continuing in good

faith each contract made in this state during the time the

society was authorized to engage in business in this state.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

SUBCHAPTER F. POWERS AND DUTIES OF FRATERNAL BENEFIT SOCIETY

Sec. 885.251. GENERAL POWERS. A fraternal benefit society may:

(1) make a constitution and bylaws for the government of the

society, the admission of its members, the management of its

affairs, and the setting and readjusting of premiums;

(2) amend its constitution and bylaws; and

(3) exercise other powers necessary and incidental to achieving

its purposes.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.252. POWERS OF CERTAIN FRATERNAL BENEFIT SOCIETIES.

(a) A fraternal benefit society engaged in business in this

state on July 1, 1913, may exercise:

(1) each right conferred by this chapter; and

(2) if the society is incorporated, each right, power, or

privilege exercised or possessed as of July 1, 1913, by the

society under its charter or articles of incorporation consistent

with this chapter.

(b) A fraternal benefit society engaged in business in this

state on July 1, 1913, that is a voluntary association may

incorporate under this chapter.

(c) A fraternal benefit society organized as of July 1, 1913, is

not required to reincorporate under this chapter and may amend

the society's articles of incorporation in the manner provided in

the articles or the fraternal benefit society's laws. A society

shall file an amendment described by this subsection with the

department. The amendment becomes operative on filing unless a

later time is provided in the amendment or in the fraternal

benefit society's articles of incorporation or laws.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.253. PRINCIPAL OFFICE OF DOMESTIC FRATERNAL BENEFIT

SOCIETY. A domestic fraternal benefit society shall have its

principal office in this state.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.254. IMMUNITY. (a) A director, officer, employee,

member, or volunteer of a fraternal benefit society serving

without compensation is not personally liable for damages

resulting from an act or omission in the exercise of judgment or

discretion in connection with the duties of that person for the

society unless the act or omission involved wilful or wanton

misconduct.

(b) This section does not limit a fraternal benefit society's

direct or indirect liability.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.255. INDEMNIFICATION OR REIMBURSEMENT. (a) A

fraternal benefit society may indemnify and reimburse a person

for expenses reasonably incurred by, and liabilities imposed on,

that person in connection with or arising out of a proceeding,

whether civil, criminal, administrative, or investigative, in

which the person is involved, or in connection with or arising

out of a threat of a proceeding against that person, because that

person is or was a director, officer, employee, or agent of:

(1) the society; or

(2) a firm, corporation, or organization with which the person

served in any capacity at the request of the society.

(b) The right of indemnification and reimbursement under

Subsection (a) is not exclusive of other rights to which a person

may be entitled as a matter of law and inures to the benefit of

the person's devisees, legatees, heirs, and estate.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.256. INDEMNIFICATION OR REIMBURSEMENT IN RELATION TO

BREACH OF DUTY PROHIBITED. (a) Except as provided by Subsection

(b), a person may not be indemnified or reimbursed under Section

885.255 in relation to:

(1) a matter in a proceeding in which the person is finally

adjudged guilty of breach of a duty as a director, officer,

employee, or agent of the fraternal benefit society; or

(2) an agreement that settles:

(A) a matter in a proceeding described by Subdivision (1); or

(B) the threat of a proceeding involving the person's alleged

breach of a duty as a director, officer, employee, or agent of a

fraternal benefit society.

(b) A fraternal benefit society may indemnify or reimburse a

person in relation to a matter described by Subsection (a) only

if the supreme governing body, the board of directors, or a court

determines that:

(1) the person acted in good faith for a purpose the person

reasonably believed to be in or not opposed to the best interests

of the society; and

(2) in a criminal proceeding, the person had no reasonable cause

to believe that the person's conduct was unlawful.

(c) A determination by a supreme governing body or board of

directors under Subsection (b) must be made by majority vote of a

quorum consisting of persons who were not parties to the

proceeding under review.

(d) The termination of a proceeding by judgment, order,

settlement, or conviction or on a plea of no contest does not

create a conclusive presumption that a person does not meet the

standard of conduct required to justify indemnification and

reimbursement.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.257. INSURANCE FOR DIRECTORS, OFFICERS, EMPLOYEES, OR

AGENTS. (a) A fraternal benefit society may purchase and

maintain insurance on behalf of a person who is or was a

director, officer, employee, or agent of the society or who is or

was serving at the request of the society as a director, officer,

employee, or agent of another firm, corporation, or organization

against a liability asserted against that person or incurred by

that person in any capacity or arising out of that person's

status as a director, officer, employee, or agent of the society

or the other firm, corporation, or organization.

(b) A fraternal benefit society may purchase and maintain

insurance under this section regardless of whether the society

has the power to indemnify or reimburse the person with respect

to the covered liability under Sections 885.255 and 885.256.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.258. MANAGEMENT AND USE OF ASSETS AND FUNDS. (a) A

fraternal benefit society shall hold, invest, and disburse all

assets for the use and benefit of the society. A member or

beneficiary may not have or acquire individual rights in the

assets of a fraternal benefit society or become entitled to any

apportionment or surrender of any part of a society's assets

except as provided by a benefit contract.

(b) A fraternal benefit society may create, maintain, invest,

disburse, and apply any special fund necessary to implement any

purpose permitted by the fraternal benefit society's laws.

(c) A fraternal benefit society may create, maintain, invest,

disburse, and apply an emergency surplus or other similar fund in

accordance with the fraternal benefit society's laws. Unless

otherwise provided by a benefit contract, a fraternal benefit

society shall hold, invest, and disburse a fund created under

this subsection for the use and benefit of the society. A member

or beneficiary may not have or acquire individual rights in a

fund created under this subsection or become entitled to any

apportionment or the surrender of any part of the fund except as

provided by Section 885.301.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.259. SOURCE OF FUNDS. (a) A fraternal benefit society

shall derive the funds from which the society pays benefits and

the funds from which the society defrays its expenses from:

(1) premiums paid by members of the society; and

(2) accretions of those funds.

(b) A domestic or foreign fraternal benefit society may not

engage in business in this state unless the society provides for

stated premiums sufficient to permit meeting the obligations

contracted, when valued in accordance with the reserving

standards specified by this chapter.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.260. SPECIFIED PAYMENTS. (a) A fraternal benefit

society may provide in the fraternal benefit society's laws and

benefit certificates for specified payments on account of the

expense or general fund.

(b) A payment under this section may or may not be mingled with

the general fund of the fraternal benefit society as provided by

the society's constitution and bylaws.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.261. CONTROL OF FUND BY LODGE. (a) This section

applies if the constitution and bylaws of the grand lodge or

governing body of a fraternal benefit society:

(1) provide that all or part of the beneficiary, mortuary, or

insurance fund of the society that is paid by or collected from

the members of a lodge may be retained in the custody of and

controlled and managed by the lodge; and

(2) designate an officer of the lodge to have custody and

control of a fund described by Subdivision (1) and authority to

loan or invest the fund.

(b) A lodge officer having custody and control of a fund

described by Subsection (a)(1) shall execute a bond or other

written instrument to be prescribed and approved in terms and

amount by the commissioner to indemnify the fund against waste,

depletion, or loss. The lodge officer shall file the bond or

other written instrument with the department, if required to do

so by the department.

(c) A fund secured as provided by Subsection (b) is exempt from

this chapter.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.262. INVESTMENT OF FRATERNAL BENEFIT SOCIETY FUNDS.

(a) Except as provided by Subsection (b), a fraternal benefit

society may invest its funds only in securities permitted by

state law for the investment of the assets of life insurance

companies.

(b) A foreign fraternal benefit society authorized to or seeking

to engage in the business of insurance in this state that invests

its funds in accordance with the laws of the state in which the

society is incorporated is considered to meet the requirements of

this chapter for the investment of funds.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.263. TREATMENT OF DEFERRED CLAIMS. (a) A deferred

payment or an installment of a claim is considered to be a fixed

liability on the occurrence of the contingency on which the

payment or installment is to be paid. The amount of the liability

is the present value of the future payment or installment at the

rates of interest and mortality assumed by the fraternal benefit

society for valuation.

(b) A fraternal benefit society shall maintain a fund sufficient

to meet each fixed liability under Subsection (a) regardless of

proposed future collections to meet the liability.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

SUBCHAPTER G. BENEFITS PROVIDED BY FRATERNAL BENEFIT SOCIETIES

Sec. 885.301. TYPES OF BENEFITS PERMITTED. (a) A fraternal

benefit society may provide for the payment of:

(1) death benefits in any form;

(2) endowment benefits;

(3) annuity benefits;

(4) benefits for temporary or permanent disability resulting

from disease or accident;

(5) benefits for hospital, medical, or nursing expenses

resulting from sickness, bodily infirmity, or accident;

(6) benefits for the erection of a monument or tombstone to the

memory of a deceased member;

(7) funeral benefits; and

(8) any other benefit that may be provided by a life, accident,

or health insurance company and that is:

(A) offered in compliance with a law described by Section

841.002 applicable to a life, accident, or health insurance

company; and

(B) consistent with this chapter.

(b) A fraternal benefit society shall:

(1) specify in the fraternal benefit society's laws or rules

those persons to whom a benefit certificate may be issued or who

may be covered by benefits; and

(2) make the provision of those benefits consistent with the

provision of benefits to members and their beneficiaries.

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.091, eff. April 1, 2009.

Sec. 885.302. ISSUANCE OF BENEFIT CONTRACTS ON VARIABLE BASIS.

A fraternal benefit society may, as provided by a resolution of

its supreme governing body, establish and operate one or more

separate accounts and issue benefit contracts on a variable

basis, subject to laws regulating a life insurance company that

establishes those types of accounts and issues those types of

contracts. To comply with applicable federal or state laws or

rules, the society may:

(1) issue on a variable basis contracts to which Sections

885.306(b) and (c) and 885.311(a) do not apply; and

(2) adopt special procedures for conducting the business and

affairs of a separate account and provide special voting and

other rights for a person having beneficial interests in a

separate account, including special procedures and rights

relating to:

(A) investment policy;

(B) investment advisory services;

(C) selection of certified public accountants; and

(D) selection of a committee to manage the business and affairs

of the account.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.303. BENEFITS FOR CHILDREN. (a) A fraternal benefit

society may provide by its laws, in addition to other benefits

provided for by the fraternal benefit society's laws, for

insurance or annuities, or insurance and annuities, on the lives

of children of any age, on the application of an adult individual

related to or interested in the child, as provided by the

fraternal benefit society's laws.

(b) A life insurance benefit contract issued on the life of an

individual who is younger than a fraternal benefit society's

minimum age for adult membership may provide for transfer of

control or ownership to the insured at an age specified in the

benefit certificate. A fraternal benefit society may require

approval of an application for membership in order to make the

transfer and may provide in all other respects for control of the

benefit certificate and rights, obligations, and liabilities

incident and connected to the certificate. Ownership rights under

the benefit certificate before a transfer must be specified in

the certificate.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.304. BENEFICIARIES. (a) The owner of a benefit

contract may change the beneficiary at any time in accordance

with a fraternal benefit society's laws or rules unless the owner

waives that right by specifically requesting in writing that the

beneficiary designation be irrevocable.

(b) A fraternal benefit society may, through the fraternal

benefit society's laws or rules, limit the scope of beneficiary

designations and shall provide that a person whose designation as

a beneficiary is revocable may not have or obtain a vested

interest in the proceeds, in conformity with the benefit

contract.

(c) If, at the death of an insured, a lawful beneficiary to whom

the proceeds of the benefit contract are payable does not exist

under the benefit contract, a fraternal benefit society shall pay

the amount of the benefit under the benefit contract:

(1) to the personal representative of the insured; or

(2) if the owner of the benefit certificate is a person other

than the insured, to the owner of the certificate.

(d) Subsection (c) does not apply to the extent funeral benefits

may be paid under the benefit contract.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.305. ORGANIZATION AS BENEFICIARY. A fraternal benefit

society may provide in the fraternal benefit society's laws for

the issuance to its members of benefit certificates under which

an association, society, or corporation that is organized and

operated for religious, eleemosynary, or educational purposes is

named as beneficiary.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.306. BENEFIT CERTIFICATE. (a) A fraternal benefit

society may not deliver or issue for delivery in this state a

benefit certificate unless the form of the certificate has been

filed under Chapter 1701.

(b) Each benefit certificate issued by a fraternal benefit

society must:

(1) specify the amount of benefits provided under the

certificate;

(2) state the amount of premiums that are payable under the

certificate; and

(3) provide that the certificate, the society's charter or

articles of incorporation or, if the society is a voluntary

association, the society's articles of association, the fraternal

benefit society's laws, the application for membership and

medical examination, signed by the applicant, and all amendments

to each of those constitute the agreement between the society and

the member.

(c) An amendment to a fraternal benefit society's charter,

articles of incorporation or association, or laws made or enacted

after the issuance of a benefit certificate:

(1) binds the member and the member's beneficiaries; and

(2) controls the agreement in all respects as if the amendment

had been in force at the time of the application for membership.

(d) A life, accident, health, or disability insurance benefit

certificate or annuity benefit certificate issued by a fraternal

benefit society must meet the requirements applicable to similar

policies issued by an insurer in this state that are not

inconsistent with this chapter as determined by rule of the

commissioner.

(e) A copy of a document described by Subsection (b)(3),

certified by a fraternal benefit society's secretary or

corresponding officer, shall be admitted as evidence of the terms

of the agreement between the society and the member.

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.092, eff. April 1, 2009.

Sec. 885.307. GRACE PERIOD. A fraternal benefit society shall

include in the terms of a benefit certificate a grace period of

at least one month for payment of premiums.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.308. ASSIGNMENT OF LIFE INSURANCE BENEFIT CONTRACT. A

fraternal benefit society may specify the terms for the

assignment of a life insurance benefit contract.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.309. NONFORFEITURE BENEFITS. (a) The value of a

nonforfeiture benefit provided under a benefit certificate issued

before January 1, 2001, must comply with the law applicable to

the certificate immediately before that date.

(b) The value of a nonforfeiture benefit provided under a

benefit certificate issued on or after January 1, 2001, is

computed as provided under:

(1) the provisions of Chapters 1105 and 1107 applicable to life

insurance companies issuing policies containing similar benefits;

and

(2) the applicable tables required by those chapters.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.310. ENFORCING PAYMENT OF PREMIUMS; CONTROL OF BENEFIT

CERTIFICATES. A fraternal benefit society may provide for:

(1) enforcing payment of premiums;

(2) designating beneficiaries; and

(3) controlling benefit certificates and all rights,

obligations, and liabilities incident to the certificates not in

conflict with this chapter.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.311. DEFICIENCY PAYMENTS. (a) A fraternal benefit

society shall provide in the fraternal benefit society's laws

that if the society's reserves for any class of the society's

benefit certificates become impaired, the society's supreme

governing body or board of directors may require the certificate

holders to pay the society an equitable proportion of the

deficiency as determined by the governing body or board.

(b) If a holder of a benefit certificate does not pay a

fraternal benefit society the amount determined under Subsection

(a), the holder, in a manner determined by the society, may elect

to accept:

(1) the amount determined under Subsection (a) as an

indebtedness against the certificate, with the amount drawing

interest at a rate that does not exceed the rate specified for a

certificate loan under a certificate that has cash value;

(2) a proportionate reduction in the benefits payable under the

certificate; or

(3) a combination of the limitations on the certificate

described by Subdivisions (1) and (2).

(c) A fraternal benefit society may determine a presumed

election for a holder of a benefit certificate under Subsection

(b) if the holder fails to make an election.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.312. CONTINUATION OF BENEFIT CERTIFICATE ON EXPULSION

OR SUSPENSION OF MEMBER. If a fraternal benefit society's laws

provide for expulsion or suspension of a member, the benefit

certificate must provide that a member who is expelled or

suspended may maintain the certificate in force by continuing

payment of the required premium unless the expulsion or

suspension:

(1) is for nonpayment of a premium; or

(2) occurs within the contestable period of the benefit contract

and is for material misrepresentation in the application for

membership or insurance.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.313. CONTINUATION OF BENEFIT CERTIFICATE ISSUED ON

CHILD. If the membership in a fraternal benefit society of a

person responsible for the support of a child on whose account a

benefit certificate has been issued terminates, the certificate

may be continued for the benefit of:

(1) the child's estate, if payment of the premiums is continued;

or

(2) any other person responsible for the support and maintenance

of the child, if the person assumes the payment of the required

premiums.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.314. RESPONSIBILITY FOR PAYMENT OF BENEFITS. (a) An

officer or member of the supreme, the grand, or any subordinate

body of an incorporated fraternal benefit society is not

individually liable for the payment of any disability or death

benefit provided for by the fraternal benefit society's laws and

contracts.

(b) Benefits are payable only out of the fraternal benefit

society's funds and in the manner provided by the fraternal

benefit society's laws.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.315. DAMAGES FOR FAILURE TO TIMELY PAY BENEFITS. A

fraternal benefit society that is liable for a loss and that does

not pay benefits before the 61st day after the date of the demand

for payment is liable to the holder of the benefit certificate,

in addition to the amount of the loss, for damages of 12 percent

of the amount of the loss and reasonable attorney's fees for the

prosecution and collection of the loss.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.316. EXEMPTION OF BENEFITS. Money or another benefit

or charity to be paid or provided by a fraternal benefit society,

before or after payment is not subject to attachment,

garnishment, or other process and may not be seized or applied by

any legal or equitable process or operation of law to pay any

debt or liability of a member, a beneficiary, or any other person

who may have a right under the benefit contract.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

SUBCHAPTER H. AGENTS

Sec. 885.351. AGENTS. (a) A fraternal benefit society may

appoint an agent licensed by the department under Subchapter B,

Chapter 4054, to sell benefits listed under Section 885.301(a) to

society members.

(b) Except as provided by Section 885.352, a person may not

solicit or procure benefit contracts for a fraternal benefit

society unless the person is licensed as a general life,

accident, and health agent or a life agent under Subchapter B,

Chapter 4054.

(c) The licensing and regulation of agents for fraternal benefit

societies is subject to Title 13 and other laws regulating those

agents.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003. Amended by Acts 2003, 78th Leg., ch. 1276, Sec. 10A.222(a),

eff. Sept. 1, 2003.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

548, Sec. 2.08, eff. September 1, 2007.

Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 2E.093, eff. April 1, 2009.

Reenacted by Acts 2009, 81st Leg., R.S., Ch.

87, Sec. 14.011, eff. September 1, 2009.

Sec. 885.352. EXCEPTION. (a) Section 885.351(b) does not apply

to an agent, representative, or member of a fraternal benefit

society who devotes less than 50 percent of the person's time to

the solicitation and procurement of benefit contracts for that

society.

(b) For purposes of this section, a person is presumed for a

calendar year to have devoted at least 50 percent of the person's

time to the solicitation or procurement of benefit contracts if,

in the preceding calendar year, the person solicited or procured

on behalf of a fraternal benefit society:

(1) life insurance contracts that have generated, in the

aggregate, more than $20,000 of direct premiums for all lives

insured;

(2) benefit contracts other than life insurance contracts that

have insured the individual lives of more than 25 persons; or

(3) variable life insurance or variable annuity contracts.

(c) A person to whom this section applies may not solicit or

procure on behalf of a fraternal benefit society an

interest-sensitive life insurance contract that exceeds $35,000

of coverage on an individual life unless the person holds the

designation of fraternal insurance counselor.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003. Amended by Acts 2003, 78th Leg., ch. 1276, Sec. 10A.222(b),

eff. Sept. 1, 2003.

Sec. 885.353. EMPLOYMENT OF CERTAIN PERSONS TO SOLICIT BUSINESS

PROHIBITED. A fraternal benefit society may not employ or

otherwise retain a person to solicit business if the person has

had a license revoked under Chapter 4005.

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.094, eff. April 1, 2009.

SUBCHAPTER I. REGULATION OF FRATERNAL BENEFIT SOCIETIES

Sec. 885.401. ANNUAL REPORT. (a) Each fraternal benefit

society engaged in business in this state shall annually, on or

before March 1:

(1) file with the department in the form required by the

commissioner a statement, under oath of the society's president

and secretary or corresponding officers, of:

(A) the society's condition and standing on the preceding

December 31; and

(B) the society's transactions for the preceding calendar year;

and

(2) provide additional information the commissioner considers

necessary to demonstrate the society's business and method of

operation.

(b) The commissioner may periodically require any additional

statement the commissioner considers necessary relating to a

fraternal benefit society.

(c) The department or the state may use the report required

under Subsection (a) in determining a fraternal benefit society's

financial solvency.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.402. REPORTS OF CERTAIN GRAND LODGES. The officers of

the supreme state governing body of a grand lodge considered to

be a single state organization under Section 885.006 shall make

each report required by this chapter. The report must include the

transactions, liabilities, and assets of the state organization.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 885.403. VALUATION OF BENEFIT CERTIFICATES. (a) A

fraternal benefit society shall include in its report under

Section 885.401 a valuation of the society's benefit certificates

in force on the preceding December 31. The report of valuation

shall show:

(1) as contingent liabilities, the present midyear value of the

promised benefits provided by the fraternal benefit society's

laws under the benefit certificates subject to valuation; and

(2) as contingent assets, the present midyear value of the

future net premiums provided by the fraternal benefit society's

laws as the premiums are in practice actually collected.

(b) At the option of a fraternal benefit society, instead of the

valuation determined under Subsections (a)(1) and (2), the

valuation may show the net value of benefit certificates subject

to valuation under Subsection (a). The net value, when computed

in case of monthly premiums, may be the mean of the terminal

values for the end of the preceding and of the current insurance

years