CHAPTER 912. COUNTY MUTUAL INSURANCE COMPANIES - Texas Statutes

INSURANCE CODE

TITLE 6. ORGANIZATION OF INSURERS AND RELATED ENTITIES

SUBTITLE F. FARM AND COUNTY MUTUAL INSURANCE COMPANIES

CHAPTER 912. COUNTY MUTUAL INSURANCE COMPANIES

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 912.001. DEFINITIONS. In this chapter:

(1) "Member" includes a policyholder or another person who is

insured by a county mutual insurance company.

(2) "Policy" includes a certificate or contract of insurance,

certificate of membership, or other document through which

insurance is effected or evidenced.

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

2003.

Sec. 912.002. LIMITED EXEMPTION FROM INSURANCE LAWS;

APPLICABILITY OF CERTAIN LAWS. (a) A county mutual insurance

company is exempt from the operation of all insurance laws of

this state except laws that are made applicable by their specific

terms or except as specifically provided by this chapter.

(b) A county mutual insurance company is subject to:

(1) Sections 38.001, 401.051, 401.052, 401.054-401.062, 401.151,

401.152, 401.155, 401.156, 501.159, 501.202, 501.203, 822.204,

1806.001, 1806.101, 1806.103(b), 1806.104-1806.107, 2002.002, and

2002.005;

(2) Subchapter A, Chapter 86;

(3) Subchapter A, Chapter 401;

(4) the provisions of Subchapter B, Chapter 424, other than

Sections 424.052, 424.072, and 424.073;

(5) Chapters 221, 251, 252, 254, 541, and 2210; and

(6) Articles 5.39 and 5.40.

(c) Rate regulation for a residential fire and allied lines

insurance policy written by a county mutual insurance company is

subject to Chapter 2253. On and after December 1, 2004, rate

regulation for a personal automobile insurance policy and a

residential fire and allied lines insurance policy written by a

county mutual insurance company is subject to Article 5.13-2 and

Chapter 2251. A county mutual insurance company is subject to

Chapter 2253. The commissioner may adopt rules as necessary to

implement this subsection.

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

2003. Amended by Acts 2003, 78th Leg., ch. 206, Sec. 21.40(a),

(b), eff. June 11, 2003; Acts 2003, 78th Leg., ch. 209, Sec. 10,

eff. Oct. 1, 2003.

Amended by:

Acts 2005, 79th Leg., Ch.

631, Sec. 4, eff. September 1, 2005.

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

730, Sec. 2E.109, eff. April 1, 2009.

Sec. 912.003. FEES. The department shall charge and collect a

fee in the amount of $1 for the issuance of a county mutual

insurer's certificate of authority.

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

2003.

Sec. 912.004. FORMATION OF NEW COUNTY MUTUAL COMPANY PROHIBITED.

A new county mutual insurance company may not be formed under

this chapter.

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

2003.

Sec. 912.005. LIMITATION ON TRANSFER OF BUSINESS TO COUNTY

MUTUAL INSURANCE COMPANY. An insurer may not transfer more than

10 percent of the insurer's insurance policies to a county mutual

insurance company without the prior approval of the commissioner.

Added by Acts 2003, 78th Leg., ch. 206, Sec. 21.405, eff. June

11, 2003.

SUBCHAPTER B. ORGANIZATION OF COUNTY MUTUAL INSURANCE COMPANY;

DIRECTORS

Sec. 912.051. 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 county mutual

insurance company. 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 county mutual insurance

companies.

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

insurance company may pay dividends to its members.

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

2003.

Sec. 912.052. ELIGIBILITY OF BOARD OF DIRECTORS; TERM. (a) An

individual is eligible to serve as a director of a county mutual

insurance company if the individual is a policyholder who

maintains insurance coverage in the amount of at least $1,000

written by the company on the individual's property.

(b) Except as otherwise provided by the company's bylaws, a

director serves for a term of one year or until the director's

successor qualifies for office.

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

2003.

Sec. 912.053. GENERAL POWERS OF BOARD OF DIRECTORS. The board

of directors of a county mutual insurance company has the powers

provided by the company's charter.

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

2003.

Sec. 912.054. AUTHORITY TO BORROW MONEY. (a) The board of

directors of a county mutual insurance company may borrow money

in an amount determined to be necessary to pay the company's

accrued or unaccrued losses.

(b) The board may pledge as security for a loan the assets of

the company, including the contingent liability of its

policyholders.

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

2003.

Sec. 912.055. CHARTER AND ARTICLES OF INCORPORATION. The

charter and articles of incorporation of a county mutual

insurance company must state:

(1) the name of the company, which must include the words

"County Mutual Insurance Company";

(2) the location of the principal office of the company; and

(3) the number of the directors, which must be at least five.

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

2003.

Sec. 912.056. CREATION OF LOCAL CHAPTERS AND DISTRICTS. (a) A

county mutual insurance company's bylaws may provide for:

(1) the organization of local chapters to transact the company's

business; and

(2) the creation of districts in and for which directors may be

elected.

(b) The bylaws may also provide that delegates from the

company's local chapters are the company's supreme governing

body.

(c) The company may consider the hazards against which the

company insures and the company's classes of risks and territory

of operation in organizing the local chapters and creating the

districts.

(d) A company organized and operating under this chapter that,

as of September 1, 2001, and continuously thereafter, appointed

managing general agents, created districts, or organized local

chapters to manage a portion of the company's business

independent of all other business of the company may continue to

operate in that manner and may appoint and contract with one or

more managing general agents in accordance with this code only if

the company:

(1) cedes 85 percent or more of the company's direct and assumed

risks to one or more reinsurers; and

(2) has a private passenger automobile insurance business:

(A) with a market share of not greater than five percent; or

(B) that is predominantly nonstandard.

(e) A company described by Subsection (d) shall file, for each

managing general agent, district, or local chapter program, the

rating information required by the commissioner by rule. Each

managing general agent, district, or local chapter program shall

be treated as a separate insurer for the purposes of Chapters

544, 2251, 2253, and 2254.

(f) Notwithstanding any other provision of this code, a company

operating under Subsection (d) that cedes 85 percent or more of

the company's direct and assumed risks to one or more

nonaffiliated reinsurers shall maintain unencumbered surplus, or

guaranty fund and unencumbered surplus, equal to the greater of

$2 million or five percent of the company's recoverable for

reinsurance after taking full credit against the recoverable as

otherwise permitted for:

(1) premium payable to ceding insurers, net of any ceding

commission due the company;

(2) collateral held as required by Section 493.104, letters of

credit, and security trusts that secure the collection of the

reinsurance; and

(3) reinsurance through reinsurers whose financial strength is

rated "A" or better by the A. M. Best Company, Incorporated, or

another nationally recognized statistical rating organization

acceptable to the commissioner.

(g) The commissioner by rule shall adopt a transition period for

insurance companies subject to Subsection (f) to meet the

requirements of that subsection and for the pro rata elimination

of any deficiencies in the amounts required under that

subsection. The transition period adopted under this subsection

must be for a period of not less than five years.

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

2003.

Amended by:

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

677, Sec. 3, eff. September 1, 2009.

Sec. 912.057. POLICYHOLDER MEETINGS. (a) A county mutual

insurance company shall hold a policyholder meeting to elect

directors and transact business at the time and place and in the

manner prescribed by the company's bylaws.

(b) A special meeting of a company's policyholders may be called

by:

(1) the president, the general manager, or one-third of the

company's directors; or

(2) the commissioner.

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

2003.

Sec. 912.058. VOTING BY POLICYHOLDERS. (a) Each policyholder

of a county mutual insurance company is entitled to only one vote

at a policyholders' meeting.

(b) A policyholder may not vote by proxy unless the company's

bylaws specifically authorize voting in that manner.

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

2003.

Sec. 912.059. AMENDMENT TO BYLAWS. (a) A majority of the

members of a county mutual insurance company, either in person or

by proxy when ratified by the board of directors, may amend the

company's bylaws at a regular meeting or at a special meeting

called for that purpose.

(b) Notice of a regular or special meeting at which an amendment

to the bylaws will be considered must be mailed or delivered

personally to each member.

(c) An amendment to the bylaws is not effective until approved

by the commissioner as meeting the requirements of this chapter.

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

2003.

Sec. 912.060. AUTHORITY TO PROHIBIT WAIVER OF BYLAWS. A county

mutual insurance company may provide in its bylaws that a local

chapter or an officer or agent elected by the local chapter may

not waive a provision of the bylaws.

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

2003.

Sec. 912.061. APPLICATION FOR EXTENSION OF CHARTER; TERM. (a)

Before a county mutual insurance company's charter or extension

of the charter expires, the company may apply to the department

for an extension of the charter for a term of 50 years from the

date the charter would otherwise expire.

(b) The application for an extension must:

(1) demonstrate that the application was authorized either by a

two-thirds vote of the company's directors or by a majority vote

at a policyholders' meeting;

(2) state in full the charter to be extended;

(3) state the period for which the charter is to be extended;

(4) be signed and acknowledged by the president and secretary of

the company; and

(5) be accompanied by a fee of $50.

(c) A company whose charter is extended retains the rights,

privileges, and immunities granted a county mutual insurance

company by this chapter.

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

2003.

SUBCHAPTER C. AUTHORITY TO ENGAGE IN BUSINESS IN THIS STATE

Sec. 912.101. OPERATION UNDER CERTIFICATE OF AUTHORITY. A

county mutual insurance company engages in the business of

insurance under a certificate of authority issued by the

department.

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

2003.

Sec. 912.102. AUTHORITY TO ENGAGE IN BUSINESS. A county mutual

insurance company may engage in the business of insurance in

accordance with this chapter and other applicable laws only if:

(1) the company was formed before September 6, 1955, and was

actively engaged in the business of insurance on that date; or

(2) the company was formed under a permit to solicit insurance

issued before September 6, 1955.

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

2003.

SUBCHAPTER D. POLICIES AND COVERAGE

Sec. 912.151. KINDS OF INSURANCE AUTHORIZED. (a) A county

mutual insurance company that qualifies to write casualty lines

for statewide operation may write all lines of automobile

insurance. The company may not assume a risk on any one hazard

that is greater than five percent of its assets, unless the

company promptly reinsures the excess amount of risk.

(b) A county mutual insurance company may insure property

against loss or damage by:

(1) fire, lightning, gas explosion, theft, windstorm, and hail

or for any combination of these hazards; or

(2) any other hazard against which any other fire or windstorm

insurance company operating in this state may write insurance on

property described by Subsection (c).

(c) Unless restricted by its charter, the company may write

insurance against the hazards described by Subsection (b) on:

(1) a rural or urban dwelling and attendant outhouses and yard

buildings;

(2) the contents, for home and personal use, of a rural or urban

dwelling, an attendant outhouse, or a yard building, including a

family vehicle, musical instrument, and library;

(3) a barn or other farm, dairy, truck garden, hennery, or ranch

building and any other improvement;

(4) a vehicle, harness, implement, tool, or machinery of any

description used on and about a farm, truck garden, dairy,

hennery, or ranch;

(5) fruit and products, other than growing crops, and any fowl,

livestock, or domestic animals that are produced, raised, grown,

kept, or used on a farm, truck garden, dairy, hennery, or ranch;

(6) a church house, country school house, country lodge room, or

country recreation hall, other than a road house or public dance

hall; and

(7) the contents of a church house, country school house,

country lodge room, or country recreation hall.

(d) An insurance policy written by a county mutual insurance

company against loss or damage by windstorm or hail, as described

by Subsection (a), may include coverage for:

(1) a building or other structure that is built wholly or

partially over water; and

(2) the corporeal movable property contained in a building or

structure described by Subdivision (1).

(e) The county mutual insurance company may impose appropriate

limits of coverage and deductibles for coverage described by

Subsection (d).

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

2003.

Amended by:

Acts 2005, 79th Leg., Ch.

1153, Sec. 5, eff. September 1, 2005.

Sec. 912.152. POLICY FORMS. (a) A county mutual insurance

company is subject to:

(1) Sections 1952.051-1952.055;

(2) Subchapter B, Chapter 2002;

(3) Chapter 2301; and

(4) Articles 5.06 and 5.35.

(b) County mutual insurance companies shall file policy forms

under Subchapter B, Chapter 2301, or continue to use the standard

policy forms and endorsements promulgated under former Articles

5.06 and 5.35 on notification to the commissioner in writing in

the manner prescribed by those articles that those forms will

continue to be used.

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

2003. Amended by Acts 2003, 78th Leg., ch. 206, Sec. 21.41, eff.

June 11, 2003.

Amended by:

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

730, Sec. 2E.110, eff. April 1, 2009.

Sec. 912.153. CONTRACT TERMS: INCORPORATION OF BYLAWS. (a) A

county mutual insurance company's bylaws are part of each

contract between the company and an insured.

(b) Each policy issued by the company must state that the

company's bylaws are part of the contract.

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

2003.

Sec. 912.154. AMOUNT OF INSURANCE UNDER MULTIPLE HAZARDS POLICY.

The amount of risk or insurance coverage in a policy that

insures a risk against more than one hazard is the maximum loss

the county mutual insurance company may sustain under the policy

at any one time, regardless of the number of hazards against

which the company insures.

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

2003.

Sec. 912.155. REPAIR OR REPLACEMENT OF INSURED PROPERTY. (a)

The county mutual insurance company's bylaws may authorize the

company to require, at its option, that all or a percentage of

the money paid for a loss be used to replace or repair the

damaged or destroyed property. The requirement may apply equally

to personal and real property, including personal and real

property exempt from execution, such as a homestead or a building

on the homestead. The company may provide in its bylaws that the

requirements of Section 862.053 do not apply to its insurance

policies.

(b) This section does not apply to a company that meets the

requirements of Section 912.308(a)(3), but such a company is

subject to Sections 883.154, 883.155, and 883.156.

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

2003.

Sec. 912.156. CONTESTING CLAIM FOR CERTAIN PURPOSES PROHIBITED.

(a) In this section, "full payment" means payment of the full

amount of a loss actually sustained on the occurrence of the

contingency against which the insurance coverage is obtained, not

to exceed the maximum amount stated in the policy.

(b) A county mutual insurance company may not contest a claim:

(1) only for delay or a captious or inconsequential reason; or

(2) to force a settlement for less than full payment.

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

2003.

Sec. 912.157. DENIAL OF CLAIM: NOTICE REQUIRED. (a) A county

mutual insurance company shall notify a claimant of the company's

intent to deny liability on a claim not later than the 60th day

after the date the company receives due proofs that the claim

will not be paid.

(b) A company that does not notify a claimant as required by

Subsection (a) is presumed as a matter of law to have accepted

liability on the claim.

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

2003.

SUBCHAPTER E. CHARGES, PREMIUMS, AND ASSESSMENTS

Sec. 912.201. SCHEDULE OF CHARGES. A county mutual insurance

company shall file with the department a schedule of the amounts

the company charges a policyholder or an applicant for a policy,

regardless of the term the company uses to refer to those

charges, including "rate," "policy fee," "inspection fee,"

"membership fee," or "initial charge." A county mutual insurance

company shall file premium, expense, and loss experience data

with the department in the manner prescribed by the commissioner.

An insurer shall file the schedules and data required under this

section according to rules promulgated by the commissioner.

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

2003. Amended by Acts 2003, 78th Leg., ch. 206, Sec. 21.42, eff.

June 11, 2003.

Sec. 912.202. PAYMENT OF PREMIUM OR ASSESSMENT. (a) A county

mutual insurance company's bylaws must:

(1) state the time and manner of the levy and payment of a

premium or assessment for policies written by the company;

(2) in addition to the regular premium or assessment under

Subdivision (1), establish the contingent liability of a

policyholder for all losses accrued while a policy is in force in

the amount of $2 for each $100 of insurance coverage; and

(3) state the time and manner of payment of a policyholder's

contingent liability established under Subdivision (2).

(b) As required by its bylaws, a county mutual insurance company

shall establish and levy premiums and assessments, including the

contingent liability of a policyholder, for all insurance written

by the company.

(c) A policyholder shall pay premiums and assessments as

required by the company's bylaws.

(d) The premium or assessment for a policy shall be secured by a

lien on each item of real or personal property, other than a

homestead, covered by the policy, including the land on which an

insured building is located. The lien remains on the property

while the insured owns the property.

(e) Subsection (a) does not apply to a company that meets the

requirements of Section 912.308(a)(3), but such a company is

subject to Sections 883.154, 883.155, and 883.156.

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

2003.

Sec. 912.203. NONPAYMENT OF PREMIUM OR ASSESSMENT: FILING OF

ACTION. (a) A county mutual insurance company may bring an

action in the home county of the company against a policyholder

who defaults on the payment of an assessment or premium.

(b) The company is entitled to judgment against the policyholder

for:

(1) delinquent premiums or assessments;

(2) foreclosure of the lien described by Section 912.202; and

(3) the costs of an action, including a reasonable attorney's

fee in the amount of at least $5.

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

2003.

Sec. 912.204. POLICYHOLDER LIABILITY. A policyholder is liable

for the losses of a county mutual insurance company only as

provided by Section 912.202 and the company's bylaws, and only in

proportion to the amount that the premium or assessment for the

policyholder's policy bears to the total amount of premiums or

assessments for all policies written by the company in the class

to which the policyholder's policy belongs.

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

2003.

SUBCHAPTER F. AGENTS

Sec. 912.251. LICENSING AND APPOINTMENT OF AGENTS. An agent for

a county mutual insurance company must be licensed and appointed

as provided by Title 13.

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

2003. Amended by Acts 2003, 78th Leg., ch. 1276, Sec. 10A.224(a),

eff. Sept. 1, 2003.

Amended by:

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

730, Sec. 2E.111, eff. April 1, 2009.

SUBCHAPTER G. REGULATION OF COUNTY MUTUAL INSURANCE COMPANY;

FINANCIAL REQUIREMENTS

Sec. 912.301. REPORT REGARDING CONDITION OF COMPANY. (a) The

commissioner may, at any time the commissioner determines

advisable, compel written reports from a county mutual insurance

company regarding the company's condition.

(b) The commissioner may require that the report be verified

under oath by a responsible officer of the company.

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

2003.

Sec. 912.302. ANNUAL STATEMENT FEE. The department shall charge

and the comptroller shall collect a fee of $20 for the filing of

an annual statement by a county mutual insurance company.

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

2003.

Sec. 912.303. BOOKS AND RECORDS. (a) A county mutual insurance

company shall maintain the company's books and records in a form

and manner that accurately reflects the condition of the company

or the facts essential to the company's faithful and effective

operation.

(b) The company shall use forms or systems that most effectively

serve the purposes of this section.

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

2003.

Sec. 912.304. REINSURANCE. (a) A county mutual insurance

company may reinsure any or all of the company's risks with

another company against any hazard against which the county

mutual insurance company is permitted to insure.

(b) The county mutual insurance company may contract for mutual

or reciprocal reinsurance with another company on the mutual or

cooperative plan subject to the following conditions:

(1) the county mutual insurance company may assume the

reinsurance on the risks of the other company only if the other

company reinsures the risks of the county mutual insurance

company; and

(2) the county mutual insurance company may write or assume the

reinsurance only on property that the company is authorized to

insure and that is located in this state.

(c) A county mutual insurance company that reinsures another

company's property is liable for the losses of the other company

only as specified in the reinsurance contract. The county mutual

insurance company does not become a member or partner of the

other company as a result of the reinsurance.

(d) A county mutual insurance company may pay or collect

additional assessments or premiums for the purpose of a contract

described by Subsection (b).

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

2003.

Sec. 912.305. SECURITY DEPOSIT. (a) A county mutual insurance

company shall maintain with the comptroller through the

department a deposit in cash or, subject to the commissioner's

approval, convertible securities. The deposit must be equal to:

(1) the largest amount assumed by the company on any one risk;

or

(2) on a demonstration of reinsurance acceptable to the

commissioner, the largest amount retained by the company on any

one risk after reinsurance.

(b) The deposit is liable for the payment of all judgments

against the company and is subject to garnishment after final

judgment against the company. The company, on the commissioner's

demand, must immediately replenish the deposit when the deposit

is impounded or depleted. If the company does not immediately

replenish the deposit, the company may be regarded as insolvent.

(c) If a county mutual insurance company makes a statement,

including a statement contained in an advertisement, letter, or

literature, that the company deposited cash or securities as

required by this section, the company must also state in full:

(1) the purpose, exact amount, and character of the deposit; and

(2) the conditions under which the deposit was made.

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

2003.

Sec. 912.306. REQUIRED BONDS. (a) A county mutual insurance

company shall obtain a bond for:

(1) the officer responsible for handling the funds of the

company's members; and

(2) all other office employees who may have access to the

company's funds.

(b) The bonds required under this section must:

(1) be with a surety authorized by the department to engage in

business in this state;

(2) be made payable to the department for the use and benefit of

the company's members; and

(3) obligate the principal and surety to pay pecuniary losses

that the company sustains through an act of fraud, dishonesty,

forgery, theft, embezzlement, wrongful abstraction, or wilful

misapplication, regardless of whether the act is committed by the

officer or employee directly and alone, or in cooperation with

another person.

(c) A bond under this section must:

(1) be in an amount that is at least the greater of $1,000 or

the amount of cash assets on hand, but not more than $20,000, if

the bond covers the officer; or

(2) be in an amount established by the department that is at

least $1,000 but not more than $5,000, if the bond covers office

employees.

(d) One or more persons may recover on a bond under this section

until the bond is exhausted.

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

2003.

Sec. 912.307. RESERVE REQUIREMENTS. (a) A county mutual

insurance company shall maintain unearned premium reserves as

provided by Section 862.102.

(b) The company shall invest the unearned premium reserves and

any other type of reserves authorized by the company's board of

directors in the same type of securities in which the reserve

funds of insurance companies engaged in the same kind of business

are required to be invested by law.

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

2003.

Sec. 912.308. AMOUNT AND INVESTMENT OF SURPLUS. (a) A county

mutual insurance company shall maintain an unencumbered surplus

which may be invested only in items listed in Section 822.204.

The unencumbered surplus must be at least:

(1) $25,000, if the company is organized to write insurance

coverage locally in only the county of its domicile;

(2) $50,000, if the company is organized to write insurance

coverage in only the county of its domicile and any adjacent

county; or

(3) an amount equal to the aggregate of the minimum capital and

minimum surplus required under Sections 822.054, 822.202,

822.210, and 822.211, for a fire insurance company if the county

mutual insurance company is organized to write insurance coverage

statewide.

(b) Except as provided by Section 912.056, a county mutual

insurance company is subject to Subchapter B, Chapter 404, and

Sections 822.203, 822.210, and 822.212.

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.112, eff. April 1, 2009.

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

677, Sec. 2, eff. September 1, 2009.

Sec. 912.309. POLICYHOLDER LOANS TO COMPANY. (a) A

policyholder may loan to a county mutual insurance company money

as necessary:

(1) for the company to engage in the company's business; or

(2) to enable the company to comply with a requirement of this

chapter, including the unencumbered surplus requirement under

Section 912.308.

(b) Subject to the approval of the commissioner, the county

mutual insurance company may repay a loan and agreed interest, at

an annual rate not to exceed 10 percent, only from the surplus

remaining after the company provides for the company's reserves,

other liabilities, and required surplus.

(c) A loan under this section or interest on a loan is not

otherwise a liability or claim against the company or any of its

assets.

(d) A county mutual insurance company may not pay a commission,

promotion expense, or other bonus in connection with a loan made

to the company.

(e) A county mutual insurance company shall report in its annual

statement the amount of each loan made to the company.

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

2003.

Sec. 912.310. CERTAIN COMPANIES EXEMPT. (a) Chapter 196, Acts

of the 53rd Legislature, Regular Session, 1953, and Chapter 117,

Acts of the 54th Legislature, Regular Session, 1955, do not apply

to a county mutual insurance company:

(1) that was organized and operating as a county mutual fire

insurance company on May 22, 1953; and

(2) the business of which is devoted exclusively to the writing

of industrial fire insurance policies covering dwellings,

household goods and wearing apparel on a weekly, monthly, or

quarterly basis on a continuous premium payment plan.

(b) The exemption established by this section applies only so

long as the company is engaged exclusively in the writing of

industrial fire insurance policies described by Subsection (a).

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

2003.

SUBCHAPTER O. GENERAL FINANCIAL REGULATION

Sec. 912.701. HAZARDOUS FINANCIAL CONDITION, SUPERVISION,

CONSERVATORSHIP, AND LIQUIDATION. Subchapter A, Chapter 404, and

Chapters 441 and 443 apply to a county mutual insurance company

engaged in the business of insurance in this state.

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.113, eff. April 1, 2009.

SUBCHAPTER P. DISCIPLINARY ACTION AND PROCEDURES IN GENERAL

Sec. 912.751. OFFICER OR DIRECTOR UNWORTHY OF TRUST: REMOVAL AND

REVOCATION OF CERTIFICATE OF AUTHORITY. (a) After notice and

hearing, the commissioner shall order the removal of an officer

or director of a county mutual insurance company holding a

certificate of authority if the officer or director is found

unworthy of the trust or confidence of the public.

(b) If a county mutual insurance company does not remove an

officer or director as required by an order issued under

Subsection (a), the commissioner shall:

(1) revoke the company's certificate of authority; and

(2) treat the company as insolvent.

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

2003.

Sec. 912.752. FRAUDULENT OPERATION OR IMPROPER CONTESTS:

REVOCATION OF CERTIFICATE OF AUTHORITY. After notice and

hearing, the commissioner shall revoke the certificate of

authority of a county mutual insurance company that is:

(1) operating fraudulently; or

(2) improperly contesting the company's claims.

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

2003.

Sec. 912.753. TIME LIMIT TO APPEAL. An individual or a county

mutual insurance company may appeal an order or a ruling of the

commissioner under this chapter not later than the 60th day after

the date of the order or ruling, in accordance with Subchapter D,

Chapter 36.

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

2003.

SUBCHAPTER Q. GENERAL CRIMINAL PENALTIES

Sec. 912.801. VIOLATION OF CHAPTER; CRIMINAL PENALTY. (a)

Except as otherwise provided by this subchapter, a person,

including a director, officer, agent, employee, attorney at law,

or attorney in fact of a county mutual insurance company, commits

an offense if the person violates this chapter.

(b) An offense under this section is punishable by:

(1) a fine of not more than $500;

(2) confinement in jail for a term of not more than 180 days; or

(3) both a fine and confinement as provided by Subdivisions (1)

and (2).

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

2003.

Sec. 912.802. CONVERSION; CRIMINAL PENALTY. (a) A director,

officer, agent, employee, attorney at law, or attorney in fact of

a county mutual insurance company commits an offense if the

person fraudulently takes or converts to the person's own use or

secretes with the intent to take or convert to the person's own

use, and with knowledge that the person is not entitled to

receive it, any property or other thing of value of the company

that is in the person's custody, control, or possession as a

result of the person's office, directorship, agency, or

employment or in any other manner.

(b) A director, officer, agent, employee, attorney at law, or

attorney in fact of a county mutual insurance company commits an

offense if the person pays or delivers property or another thing

of value described by Subsection (a) to another person knowing

that the person is not entitled to receive it.

(c) An offense under this section is punishable by imprisonment

in the Texas Department of Criminal Justice for a term of not

more than 10 years or less than 2 years.

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

2003.

Amended by:

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

87, Sec. 25.126, eff. September 1, 2009.

Sec. 912.803. UNLAWFUL DIVERSION OF FUNDS; CRIMINAL PENALTY.

(a) A director, officer, agent, employee, attorney at law, or

attorney in fact of a county mutual insurance company commits an

offense if the person wilfully borrows, withholds, or diverts

from its purpose in any manner all or part of a special fund

that:

(1) belongs to or is under the control and management of the

company; and

(2) is designated by law for that purpose.

(b) An offense under this section is punishable by imprisonment

in the Texas Department of Criminal Justice for a term of not

more than 10 years or less than 2 years.

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

2003.

Amended by:

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

87, Sec. 25.127, eff. September 1, 2009.

Sec. 912.804. FALSE AFFIDAVIT; CRIMINAL PENALTY. (a) An

officer, director, agent, employee, attorney at law, or attorney

in fact of a county mutual insurance company commits an offense

if the person wilfully makes a false affidavit in connection with

the requirements of this chapter.

(b) An offense under this section is punishable by:

(1) a fine of not more than $500; or

(2) confinement in jail or imprisonment in the Texas Department

of Criminal Justice for a term of not more than two years.

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

2003.

Amended by:

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

87, Sec. 25.128, eff. September 1, 2009.