CHAPTER 886. LOCAL MUTUAL AID ASSOCIATIONS - Texas Statutes

INSURANCE CODE

TITLE 6. ORGANIZATION OF INSURERS AND RELATED ENTITIES

SUBTITLE E. MUTUAL AND FRATERNAL COMPANIES AND RELATED ENTITIES

CHAPTER 886. LOCAL MUTUAL AID ASSOCIATIONS

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 886.001. DEFINITION. In this chapter, "local mutual aid

association" means an entity, including a society or association

of any sort, authorized under this chapter to engage in the

business of insurance and pay benefits with money provided by

assessments on the members as needed, including a burial

association described by Section 888.001.

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

2003.

Sec. 886.002. APPLICABILITY OF CHAPTER; EXEMPTIONS. (a) Except

as provided by Subsection (b), this chapter and Chapters 887 and

888 apply to local mutual aid associations.

(b) This chapter does not apply to the following entities unless

the entity is a burial association described by Section 888.001:

(1) a labor union, domestic order, or association that does not

provide a death benefit of more than $150;

(2) an association described by Section 885.004; or

(3) any society or association operating before March 21, 1929,

statewide on an assessment basis under a charter granted under

another statute of this state.

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

2003.

Sec. 886.003. LIMITED EXEMPTION FROM INSURANCE LAWS. A local

mutual aid association is subject only to this chapter and

Chapters 887 and 888. Except as otherwise provided by this

chapter, a local mutual aid association is exempt from all other

insurance laws of this state, unless a local mutual aid

association is expressly designated in the law.

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

2003.

Sec. 886.004. ORGANIZATION OF NEW ASSOCIATION PROHIBITED. A new

local mutual aid association may not be organized under this

chapter.

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

2003.

SUBCHAPTER B. AUTHORITY TO ENGAGE IN BUSINESS

Sec. 886.051. OPERATION UNDER CERTIFICATE OF AUTHORITY. A local

mutual aid association engages in business under a certificate of

authority issued by the department.

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

2003.

Sec. 886.052. COMPLIANCE WITH LAW REQUIRED. An individual,

firm, or corporation may not engage in business in this state as

a local mutual aid society or association that pays a death

benefit or other benefit and that pays benefits with money

provided by assessments made as necessary unless the individual,

firm, or corporation is acting in accordance with this chapter or

another law of this state.

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

2003.

SUBCHAPTER C. POWERS AND DUTIES OF ASSOCIATION

Sec. 886.101. GENERAL POWERS OF ASSOCIATION. A local mutual aid

association is a body corporate that may sue and be sued in its

own name and exercise the other powers and functions specifically

granted in this chapter, but not otherwise.

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

2003.

Sec. 886.102. APPLICABILITY OF TEXAS NON-PROFIT CORPORATION ACT.

(a) Except to the extent of any conflict with this code, the

Texas Non-Profit Corporation Act (Article 1396-1.01 et seq.,

Vernon's Texas Civil Statutes) applies to a local mutual aid

association. The commissioner has each power and duty of, and

shall perform each act to be performed by, the secretary of state

under that Act with respect to local mutual aid associations.

(b) On advance approval of the commissioner, a local mutual aid

association may pay dividends to its members.

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

2003.

Sec. 886.103. ARTICLES OF ASSOCIATION, CONSTITUTION, AND BYLAWS.

(a) The articles of association of a local mutual aid

association must state:

(1) the name of the association, which must be distinctly

different from other associations operating in the same area;

(2) the purpose for which the association is created, including

the upper and lower age limits of individuals to whom benefit

certificates may be issued;

(3) the location of the principal office of the association;

(4) the territory in which the association will engage in

business;

(5) the titles of the officers of the association; and

(6) the number of directors of the association.

(b) The constitution and bylaws of the association may not

violate, and must be in harmony with, this chapter.

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

2003.

Sec. 886.104. BENEFITS AUTHORIZED. (a) Except as provided by

Subsection (b), a local mutual aid association may provide only

for the payment of death benefits. An association may not provide

for old age benefits or benefits for accidental injury or

sickness.

(b) A local mutual aid association organized before March 21,

1929, that provides for the payment of death, old age, and

accident benefits may continue to provide those benefits.

(c) The policy issued by the association must clearly state the

benefits provided.

(d) A local mutual aid association may not issue a policy

providing for:

(1) a level premium;

(2) guaranteed benefits; or

(3) surrender of loan values.

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

2003.

Sec. 886.105. TERRITORIAL LIMITATIONS. (a) A local mutual aid

association may conduct business in any county in this state.

(b) If the articles of association of an association provide

that the association engages in business only in a limited

territory, the association may amend the articles to permit

statewide business. After the amendment, the association is

entitled to receive a certificate of authority permitting

statewide business.

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

2003.

Sec. 886.106. CONNECTION WITH OTHER ASSOCIATIONS PROHIBITED.

(a) A local mutual aid association may not have any connection

with another local mutual aid association.

(b) An association may not contribute any form of salary or

compensation to an executive officer of another association.

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

2003.

Sec. 886.107. ANNUAL STATEMENT; FILING FEE. (a) For the filing

of each annual statement, the department shall charge the

appropriate fee. The fee must be:

(1) payable to the department; and

(2) deposited in the Texas Department of Insurance operating

account.

(b) Sections 201.001 and 201.002 apply to the fee.

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.102, eff. April 1, 2009.

Sec. 886.108. SURETY BOND. (a) A local mutual aid

association's officer responsible for the funds of the

association shall file with the department a surety bond.

(b) The surety bond must be:

(1) executed by a surety company authorized to do business in

this state;

(2) satisfactory to the department; and

(3) payable in an amount and conditioned as specified by Section

887.054.

(c) This section does not apply to a local mutual aid

association that:

(1) has a total membership of 1,000 or fewer members;

(2) charges $1 or less each for annual dues or assessments; and

(3) charges $2.50 or less for a membership fee.

(d) An association exempted under Subsection (c) shall file with

the department a bond in the amount of $1,000 and conditioned as

provided by Section 887.054.

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

2003.

Sec. 886.109. VOLUNTARY DISSOLUTION. A local mutual aid

association may dissolve by vote of the majority of the members

at:

(1) a regular meeting called by the secretary; or

(2) a special meeting called for the purpose of considering

dissolution.

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

2003.

Sec. 886.110. AUTOMATIC DISSOLUTION. A local mutual aid

association is dissolved automatically and forfeits its right to

engage in the business of insurance if:

(1) the association's membership falls below 25 percent of the

maximum value of the policy issued; or

(2) the association's membership falls below 50 percent of the

maximum value of the policy issued and the association fails to

notify each member of the amount paid on the preceding death

claim when assessment is made.

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

2003.

SUBCHAPTER O. DISCIPLINARY PROCEDURES AND CRIMINAL PENALTY

Sec. 886.701. REVOCATION. Except as otherwise provided by law,

the department may revoke the right of a local mutual aid

association to engage in the business of insurance in this state

only on:

(1) the judgment of a court;

(2) the filing of articles of dissolution by the members of the

association or by the officers on behalf of the members; or

(3) a filing showing that the association's membership has been

merged and taken over by another association.

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

2003.

Sec. 886.702. GROUNDS FOR DISSOLUTION OR FORFEITURE. (a) In

addition to any other penalties imposed on a local mutual aid

association or on its members or officers, an association is

subject to dissolution and forfeiture of its right to engage in

the business of insurance if the association:

(1) ceases to engage in the business of insurance;

(2) falls below the requirements of this chapter;

(3) engages in the business of insurance without a certificate

of authority;

(4) fails to make reports as required by law;

(5) refuses to submit to examination by the department or pay

the cost of an examination;

(6) engages in the business of insurance in a fraudulent,

illegal, or dishonest manner; or

(7) violates this chapter.

(b) The attorney general shall, at the request of the

department, file any action necessary to wind up the affairs of

an association to which Subsection (a) applies and provide for

the appointment of a receiver if necessary.

(c) An action under this section must be brought in Travis

County.

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

2003.

Sec. 886.703. CRIMINAL PENALTY. (a) A person commits an

offense if the person violates this chapter.

(b) An offense under this section is a misdemeanor punishable by

a fine not to exceed $500.

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

2003.