CHAPTER 407. SELF-INSURANCE REGULATION - Texas Statutes

LABOR CODE

TITLE 5. WORKERS' COMPENSATION

SUBTITLE A. TEXAS WORKERS' COMPENSATION ACT

CHAPTER 407. SELF-INSURANCE REGULATION

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 407.001. DEFINITIONS. In this chapter:

(1) "Association" means the Texas Certified Self-Insurer

Guaranty Association.

(2) Repealed by Acts 2005, 79th Leg., Ch. 265, Sec. 7.01(17),

eff. September 1, 2005.

(3) "Impaired employer" means a certified self-insurer:

(A) who has suspended payment of compensation as determined by

the division;

(B) who has filed for relief under bankruptcy laws;

(C) against whom bankruptcy proceedings have been filed; or

(D) for whom a receiver has been appointed by a court of this

state.

(4) "Incurred liabilities for compensation" means the amount

equal to the sum of:

(A) the estimated amount of the liabilities for outstanding

workers' compensation claims, including claims incurred but not

yet reported; and

(B) the estimated amount necessary to provide for the

administration of those claims, including legal costs.

(5) "Qualified claims servicing contractor" means a person who

provides claims service for a certified self-insurer, who is a

separate business entity from the affected certified

self-insurer, and who holds a certificate of authority under

Chapter 4151.

Acts 1993, 73rd Leg., ch. 269, Sec. 1, eff. Sept. 1, 1993.

Amended by:

Acts 2005, 79th Leg., Ch.

265, Sec. 3.042, eff. September 1, 2005.

Acts 2005, 79th Leg., Ch.

265, Sec. 7.01(17), eff. September 1, 2005.

Acts 2005, 79th Leg., Ch.

728, Sec. 11.137, eff. September 1, 2005.

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

1176, Sec. 3.02, eff. September 1, 2007.

SUBCHAPTER B. DIVISION OF SELF-INSURANCE REGULATION

Sec. 407.023. EXCLUSIVE POWERS AND DUTIES OF COMMISSIONER. The

commissioner shall:

(1) approve or deny the issuance or revocation of a certificate

of authority to self-insure; and

(2) certify that a certified self-insurer has suspended payment

of compensation or has otherwise become an impaired employer.

Acts 1993, 73rd Leg., ch. 269, Sec. 1, eff. Sept. 1, 1993.

Amended by:

Acts 2005, 79th Leg., Ch.

265, Sec. 3.0421, eff. September 1, 2005.

Sec. 407.024. CLAIM OR SUIT. (a) A claim or suit brought by a

claimant or a certified self-insurer shall be styled "in re:

[name of employee] and [name of certified self-insurer]."

(b) The commissioner is the agent for service of process for a

claim or suit brought by a workers' compensation claimant against

the qualified claims servicing contractor of a certified

self-insurer.

Acts 1993, 73rd Leg., ch. 269, Sec. 1, eff. Sept. 1, 1993.

Amended by:

Acts 2005, 79th Leg., Ch.

265, Sec. 3.0422, eff. September 1, 2005.

SUBCHAPTER C. CERTIFICATE OF AUTHORITY TO SELF-INSURE

Sec. 407.041. APPLICATION. (a) An employer who desires to

self-insure under this chapter must submit an application to the

division for a certificate of authority to self-insure.

(b) The application must be:

(1) submitted on a form adopted by the commissioner; and

(2) accompanied by a nonrefundable $1,000 application fee.

(c) Not later than the 60th day after the date on which the

application is received, the commissioner shall approve or deny

the application.

(d) During the pendency of the approval or denial of the

application, the applicant may not operate as a self-insurer

under this chapter.

Acts 1993, 73rd Leg., ch. 269, Sec. 1, eff. Sept. 1, 1993.

Amended by:

Acts 2005, 79th Leg., Ch.

265, Sec. 3.043, eff. September 1, 2005.

Sec. 407.042. ISSUANCE OF CERTIFICATE. With the approval of the

Texas Certified Self-Insurer Guaranty Association, the

commissioner shall issue a certificate of authority to

self-insure to an applicant who meets the certification

requirements under this chapter and pays the required fee.

Acts 1993, 73rd Leg., ch. 269, Sec. 1, eff. Sept. 1, 1993.

Amended by:

Acts 2005, 79th Leg., Ch.

265, Sec. 3.044, eff. September 1, 2005.

Sec. 407.043. PROCEDURES ON DENIAL OF APPLICATION. (a) If the

commissioner determines that an applicant for a certificate of

authority to self-insure does not meet the certification

requirements, the division shall notify the applicant in writing

of the commissioner's determination, stating the specific reasons

for the denial and the conditions to be met before approval may

be granted.

(b) The applicant is entitled to a reasonable period, as

determined by the commissioner, to meet the conditions for

approval before the application is considered rejected for

purposes of appeal.

Acts 1993, 73rd Leg., ch. 269, Sec. 1, eff. Sept. 1, 1993.

Amended by:

Acts 2005, 79th Leg., Ch.

265, Sec. 3.045, eff. September 1, 2005.

Sec. 407.044. TERM OF CERTIFICATE OF AUTHORITY; RENEWAL. (a) A

certificate of authority to self-insure is valid for one year

after the date of issuance and may be renewed under procedures

prescribed by the commissioner.

(b) The commissioner may stagger the renewal dates of

certificates of authority to self-insure to facilitate the work

load of the division.

Acts 1993, 73rd Leg., ch. 269, Sec. 1, eff. Sept. 1, 1993.

Amended by:

Acts 2005, 79th Leg., Ch.

265, Sec. 3.046, eff. September 1, 2005.

Sec. 407.045. WITHDRAWAL FROM SELF-INSURANCE. (a) A certified

self-insurer may withdraw from self-insurance at any time with

the approval of the commissioner. The commissioner shall approve

the withdrawal if the certified self-insurer shows to the

satisfaction of the commissioner that the certified self-insurer

has established an adequate program to pay all incurred losses,

including unreported losses, that arise out of accidents or

occupational diseases first distinctly manifested during the

period of operation as a certified self-insurer.

(b) A certified self-insurer who withdraws from self-insurance

shall surrender to the division the certificate of authority to

self-insure.

Acts 1993, 73rd Leg., ch. 269, Sec. 1, eff. Sept. 1, 1993.

Amended by:

Acts 2005, 79th Leg., Ch.

265, Sec. 3.047, eff. September 1, 2005.

Sec. 407.046. REVOCATION OF CERTIFICATE OF AUTHORITY. (a) The

commissioner may revoke the certificate of authority to

self-insure of a certified self-insurer who fails to comply with

requirements or conditions established by this chapter or a rule

adopted by the commissioner under this chapter.

(b) If the commissioner believes that a ground exists to revoke

a certificate of authority to self-insure, the commissioner shall

refer the matter to the State Office of Administrative Hearings.

That office shall hold a hearing to determine if the certificate

should be revoked. The hearing shall be conducted in the manner

provided for a contested case hearing under Chapter 2001,

Government Code.

(c) The State Office of Administrative Hearings shall notify the

certified self-insurer of the hearing and the grounds not later

than the 30th day before the scheduled hearing date.

(d) If the certified self-insurer fails to show cause why the

certificate should not be revoked, the commissioner immediately

shall revoke the certificate.

Acts 1993, 73rd Leg., ch. 269, Sec. 1, eff. Sept. 1, 1993.

Amended by Acts 1995, 74th Leg., ch. 76, Sec. 5.95(49), eff.

Sept. 1, 1995; Acts 1995, 74th Leg., ch. 980, Sec. 1.21, eff.

Sept. 1, 1995.

Amended by:

Acts 2005, 79th Leg., Ch.

265, Sec. 3.048, eff. September 1, 2005.

Sec. 407.047. EFFECT OF REVOCATION. (a) A certified

self-insurer whose certificate of authority to self-insure is

revoked is not relieved of the obligation for compensation to an

employee for an accidental injury or occupational disease that

occurred during the period of self-insurance.

(b) The security required under Sections 407.064 and 407.065

shall be maintained with the division or under the division's

control until each claim for workers' compensation benefits is

paid, is settled, or lapses under this subtitle.

Acts 1993, 73rd Leg., ch. 269, Sec. 1, eff. Sept. 1, 1993.

Amended by:

Acts 2005, 79th Leg., Ch.

265, Sec. 3.049, eff. September 1, 2005.

SUBCHAPTER D. REQUIREMENTS FOR CERTIFICATE OF AUTHORITY

Sec. 407.061. GENERAL REQUIREMENTS. (a) To be eligible for a

certificate of authority to self-insure, an applicant for an

initial or renewal certificate must present evidence satisfactory

to the commissioner and the association of sufficient financial

strength and liquidity, under standards adopted by the

commissioner, to ensure that all workers' compensation

obligations incurred by the applicant under this chapter are met

promptly.

(b) The applicant must:

(1) be a business entity, or one of the consolidated

subsidiaries of the entity, that is required to register under

the Securities Act of 1933 (15 U.S.C. Section 77a et seq.) and

furnish financial information prepared in accordance with the

requirements for those business entities; or

(2) annually furnish audited financial statements comparable in

form and manner of preparation to those filed by a business

entity required to register under the Securities Act of 1933 (15

U.S.C. Section 77a et seq.).

(c) The applicant must present a plan for claims administration

that:

(1) is acceptable to the commissioner;

(2) designates a qualified claims servicing contractor; and

(3) complies with Chapter 4151, Insurance Code.

(d) The applicant must demonstrate the existence of an effective

safety program for each location in the state at which it

conducts business.

(e) The applicant must provide to the commissioner a copy of

each contract entered into with a person that provides claims

services, underwriting services, or accident prevention services

if the provider of those services is not an employee of the

applicant. The contract must be acceptable to the commissioner

and must be submitted in a standard form adopted by the

commissioner, if the commissioner adopts such a form.

(f) The commissioner shall adopt rules for the requirements for

the financial statements required by Subsection (b)(2).

Acts 1993, 73rd Leg., ch. 269, Sec. 1, eff. Sept. 1, 1993.

Amended by:

Acts 2005, 79th Leg., Ch.

265, Sec. 3.050, eff. September 1, 2005.

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

1176, Sec. 3.03, eff. September 1, 2007.

Sec. 407.062. FINANCIAL STRENGTH AND LIQUIDITY REQUIREMENTS. In

assessing the financial strength and liquidity of an applicant,

the commissioner shall consider:

(1) the applicant's organizational structure and management

background;

(2) the applicant's profit and loss history;

(3) the applicant's compensation loss history;

(4) the source and reliability of the financial information

submitted by the applicant;

(5) the number of employees affected by self-insurance;

(6) the applicant's access to excess insurance markets;

(7) financial ratios, indexes, or other financial measures that

the commissioner finds appropriate; and

(8) any other information considered appropriate by the

commissioner.

Acts 1993, 73rd Leg., ch. 269, Sec. 1, eff. Sept. 1, 1993.

Amended by:

Acts 2005, 79th Leg., Ch.

265, Sec. 3.051, eff. September 1, 2005.

Sec. 407.063. PREMIUM REQUIREMENTS. (a) In addition to meeting

the other certification requirements imposed under this chapter,

an applicant for an initial certificate of authority to

self-insure must present evidence satisfactory to the

commissioner of a total unmodified workers' compensation

insurance premium in this state in the calendar year of

application of at least $500,000.

(b) Instead of the state premium required under this section,

the applicant may present evidence of a total unmodified national

workers' compensation insurance premium of at least $10 million.

(c) Expired.

Acts 1993, 73rd Leg., ch. 269, Sec. 1, eff. Sept. 1, 1993.

Amended by:

Acts 2005, 79th Leg., Ch.

265, Sec. 3.052, eff. September 1, 2005.

Sec. 407.064. GENERAL SECURITY REQUIREMENTS. (a) Each

applicant shall provide security for incurred liabilities for

compensation through a deposit with the division, in a

combination and from institutions approved by the commissioner,

of the following security:

(1) cash or negotiable securities of the United States or of

this state;

(2) a surety bond that names the commissioner as payee; or

(3) an irrevocable letter of credit that names the commissioner

as payee.

(b) If an applicant who has provided a letter of credit as all

or part of the security required under this section desires to

cancel the existing letter of credit and substitute a different

letter of credit or another form of security, the applicant shall

notify the division in writing not later than the 60th day before

the effective date of the cancellation of the original letter of

credit.

(c) An estimate of the applicant's incurred liabilities for

compensation must be signed and sworn to by an accredited

casualty actuary and submitted with the application.

(d) The sum of the deposited securities must be at least equal

to the greater of:

(1) $300,000; or

(2) 125 percent of the applicant's incurred liabilities for

compensation.

(e) If an applicant is granted a certificate of authority to

self-insure, any interest or other income that accrues from cash

or negotiable securities deposited by the applicant as security

under this section while the cash or securities are on deposit

with the division shall be paid to the applicant quarterly.

Acts 1993, 73rd Leg., ch. 269, Sec. 1, eff. Sept. 1, 1993.

Amended by:

Acts 2005, 79th Leg., Ch.

265, Sec. 3.053, eff. September 1, 2005.

Sec. 407.065. SPECIFIC SECURITY REQUIREMENTS. (a) A security

deposit must include within its coverage all amounts covered by

terminated surety bonds or terminated excess insurance policies.

(b) A surety bond, irrevocable letter of credit, or document

indicating issuance of an irrevocable letter of credit must be in

a form approved by the commissioner and must be issued by an

institution acceptable to the commissioner. The instrument may

be released only according to its terms but may not be released

by the deposit of additional security.

(c) The certified self-insurer shall deposit the security with

the comptroller on behalf of the division. The comptroller may

accept securities for deposit or withdrawal only on the written

order of the commissioner.

(d) On receipt by the division of a request to renew, submit, or

increase or decrease a security deposit, a perfected security

interest is created in the certified self-insurer's assets in

favor of the commissioner to the extent of any then unsecured

portion of the self-insurer's incurred liabilities for

compensation. That perfected security interest transfers to cash

or securities deposited by the self-insurer with the division

after the date of the request and may be released only on:

(1) the acceptance by the commissioner of a surety bond or

irrevocable letter of credit for the full amount of the incurred

liabilities for compensation; or

(2) the return of cash or securities by the division.

(e) The certified self-insurer loses all right to, title to,

interest in, and control of the assets or obligations submitted

or deposited as security. The commissioner may liquidate the

deposit and apply it to the certified self-insurer's incurred

liabilities for compensation either directly or through the

association.

(f) If the commissioner determines that a security deposit is

not immediately available for the payment of compensation, the

commissioner shall determine the appropriate method of payment

and claims administration, which may include payment by the

surety that issued the bond or by the issuer of an irrevocable

letter of credit, and administration by a surety, an adjusting

agency, the association, or through any combination of those

entities approved by the commissioner.

Acts 1993, 73rd Leg., ch. 269, Sec. 1, eff. Sept. 1, 1993.

Amended by Acts 1997, 75th Leg., ch. 1423, Sec. 12.12, eff. Sept.

1, 1997.

Amended by:

Acts 2005, 79th Leg., Ch.

265, Sec. 3.054, eff. September 1, 2005.

Sec. 407.066. EFFECT OF DISPUTE. (a) The commissioner, after

notice to the concerned parties and an opportunity for a hearing,

shall resolve a dispute concerning the deposit, renewal,

termination, release, or return of all or part of the security,

liability arising out of the submission or failure to submit

security, or the adequacy of the security or reasonableness of

the administrative costs, including legal fees, that arises

among:

(1) a surety;

(2) an issuer of an agreement of assumption and guarantee of

workers' compensation liabilities;

(3) an issuer of a letter of credit;

(4) a custodian of the security deposit;

(5) a certified self-insurer; or

(6) the association.

(b) A party aggrieved by a decision of the commissioner is

entitled to judicial review. Venue for an appeal is in Travis

County.

(c) Payment of claims from the security deposit or by the

association may not be stayed pending the resolution of a dispute

under this section unless the court issues a determination

staying the payment of claims.

Acts 1993, 73rd Leg., ch. 269, Sec. 1, eff. Sept. 1, 1993.

Amended by:

Acts 2005, 79th Leg., Ch.

265, Sec. 3.055, eff. September 1, 2005.

Sec. 407.067. EXCESS INSURANCE; REINSURANCE; ADMINISTRATIVE

VIOLATION. (a) Each applicant shall obtain excess insurance or

reinsurance to cover liability for losses not paid by the

self-insurer in an amount not less than the amount required by

the commissioner.

(b) The commissioner shall require excess insurance or

reinsurance in at least the amount of $5 million per occurrence.

(c) A certified self-insurer shall notify the division not later

than the 10th day after the date on which the certified

self-insurer has notice of the cancellation or termination of

excess insurance or reinsurance coverage required under this

section.

(d) A person commits an administrative violation if the person

violates Subsection (c).

Acts 1993, 73rd Leg., ch. 269, Sec. 1, eff. Sept. 1, 1993.

Amended by:

Acts 2005, 79th Leg., Ch.

265, Sec. 3.056, eff. September 1, 2005.

Sec. 407.068. GUARANTEE BY PARENT ORGANIZATION. If an applicant

for a certificate of authority to self-insure is a subsidiary,

the parent organization of the applicant must guarantee the

obligations imposed by this chapter.

Acts 1993, 73rd Leg., ch. 269, Sec. 1, eff. Sept. 1, 1993.

SUBCHAPTER E. POWERS AND DUTIES OF CERTIFIED SELF-INSURER

Sec. 407.081. ANNUAL REPORT. (a) Each certified self-insurer

shall file an annual report with the division. The commissioner

shall prescribe the form of the report and shall furnish blank

forms for the preparation of the report to each certified

self-insurer.

(b) The report must:

(1) include payroll information, in the form prescribed by this

chapter and the commissioner;

(2) state the number of injuries sustained in the three

preceding calendar years; and

(3) indicate separately the amount paid during each year for

income benefits, medical benefits, death benefits, burial

benefits, and other proper expenses related to worker injuries.

(c) Each certified self-insurer shall file with the division as

part of the annual report annual independent financial statements

that reflect the financial condition of the self-insurer. The

division shall make a financial statement filed under this

subsection available for public review.

(d) The division may require that the report include additional

financial and statistical information.

(e) The certified self-insurer shall present evidence in the

report of sufficient financial ability to meet all obligations

under this chapter.

(f) The report must include an estimate of future liability for

compensation. The estimate must be signed and sworn to by a

certified casualty actuary every third year, or more frequently

if required by the commissioner.

(g) If the commissioner considers it necessary, the commissioner

may order a certified self-insurer whose financial condition or

claims record warrants closer supervision to report as provided

by this section more often than annually.

Acts 1993, 73rd Leg., ch. 269, Sec. 1, eff. Sept. 1, 1993.

Amended by:

Acts 2005, 79th Leg., Ch.

265, Sec. 3.057, eff. September 1, 2005.

Sec. 407.082. EXAMINATION OF RECORDS; ADMINISTRATIVE VIOLATION.

(a) Each certified self-insurer shall maintain the books,

records, and payroll information necessary to compile the annual

report required under Section 407.081 and any other information

reasonably required by the commissioner.

(b) The certified self-insurer may maintain the books, records,

and payroll information in locations outside this state.

(c) The material maintained by the certified self-insurer shall

be open to examination by an authorized agent or representative

of the division at reasonable times to ascertain the correctness

of the information.

(d) The examination may be conducted at any location, including

the division's Austin offices, or, at the certified

self-insurer's option, in the offices of the certified

self-insurer. The certified self-insurer shall pay the

reasonable expenses, including travel expenses, of an inspector

who conducts an inspection at its offices.

(e) An unreasonable refusal on the part of a certified

self-insurer to make available for inspection the books, records,

payroll information, or other required information constitutes

grounds for the revocation of the certificate of authority to

self-insure and is an administrative violation.

Acts 1993, 73rd Leg., ch. 269, Sec. 1, eff. Sept. 1, 1993.

Amended by:

Acts 2005, 79th Leg., Ch.

265, Sec. 3.058, eff. September 1, 2005.

Sec. 407.083. PAYMENT OF INSURANCE AGENT'S COMMISSION. This

chapter does not prohibit a certified self-insurer from paying a

commission to an insurance agent licensed in this state.

Acts 1993, 73rd Leg., ch. 269, Sec. 1, eff. Sept. 1, 1993.

SUBCHAPTER F. FINANCING OF SELF-INSURANCE PROGRAM

Sec. 407.101. FUND. (a) The workers' compensation

self-insurance fund is a fund in the state treasury. The fund may

be used only for the regulation of certified self-insurers.

(b) The department shall deposit the application fee for a

certificate of authority to self-insure in the Texas Department

of Insurance operating account to the credit of the division.

(c) Any amount remaining in the fund at the end of a fiscal year

shall be used to reduce the regulatory fee assessed under Section

407.102 in the succeeding fiscal year.

Acts 1993, 73rd Leg., ch. 269, Sec. 1, eff. Sept. 1, 1993.

Amended by:

Acts 2005, 79th Leg., Ch.

265, Sec. 3.059, eff. September 1, 2005.

Sec. 407.102. REGULATORY FEE. (a) Each certified self-insurer

shall pay an annual fee to cover the administrative costs

incurred by the division in implementing this chapter.

(b) The division shall base the fee on the total amount of

income benefit payments made in the preceding calendar year. The

division shall assess each certified self-insurer a pro rata

share based on the ratio that the total amount of income benefit

payments made by that certified self-insurer bears to the total

amount of income benefit payments made by all certified

self-insurers.

Acts 1993, 73rd Leg., ch. 269, Sec. 1, eff. Sept. 1, 1993.

Amended by:

Acts 2005, 79th Leg., Ch.

265, Sec. 3.060, eff. September 1, 2005.

Sec. 407.103. SELF-INSURER MAINTENANCE TAX; EFFECT ON GENERAL

MAINTENANCE TAX. (a) Each certified self-insurer shall pay a

self-insurer maintenance tax for the administration of the

division and the office of injured employee counsel and to

support the prosecution of workers' compensation insurance fraud

in this state. Not more than two percent of the total tax base

of all certified self-insurers, as computed under Subsection (b),

may be assessed for a maintenance tax under this section.

(b) To determine the tax base of a certified self-insurer for

purposes of this chapter, the department shall multiply the

amount of the certified self-insurer's liabilities for workers'

compensation claims incurred in the previous year, including

claims incurred but not reported, plus the amount of expense

incurred by the certified self-insurer in the previous year for

administration of self-insurance, including legal costs, by 1.02.

(c) The tax liability of a certified self-insurer under this

section is the tax base computed under Subsection (b) multiplied

by the rate assessed workers' compensation insurance companies

under Sections 403.002 and 403.003.

(d) In setting the rate of maintenance tax assessment for

insurance companies, the commissioner of insurance may not

consider revenue or expenditures related to the operation of the

self-insurer program under this chapter.

Acts 1993, 73rd Leg., ch. 269, Sec. 1, eff. Sept. 1, 1993.

Amended by Acts 1995, 74th Leg., ch. 980, Sec. 1.22, eff. Sept.

1, 1995; Acts 1997, 75th Leg., ch. 1443, Sec. 6, eff. Sept. 1,

1997.

Amended by:

Acts 2005, 79th Leg., Ch.

265, Sec. 3.061, eff. September 1, 2005.

Sec. 407.104. COLLECTION OF TAXES AND FEES; ADMINISTRATIVE

VIOLATION. (a) The regulatory fee imposed by Section 407.102

and the taxes imposed by Section 407.103 are due on the 60th day

after the issuance of a certificate of authority to self-insure

and on the 60th day after each annual renewal date.

(b) The department shall compute the fee and taxes of a

certified self-insurer and notify the certified self-insurer of

the amounts due. The taxes and fees shall be remitted to the

division.

(c) The regulatory fee imposed under Section 407.102 shall be

deposited in the Texas Department of Insurance operating account

to the credit of the division. The self-insurer maintenance tax

shall be deposited in the Texas Department of Insurance operating

account to the credit of the division.

(d) A certified self-insurer commits an administrative violation

if the self-insurer does not pay the taxes and fee imposed under

Sections 407.102 and 407.103 in a timely manner.

(e) If the certificate of authority to self-insure of a

certified self-insurer is terminated, the commissioner or the

commissioner of insurance shall proceed immediately to collect

taxes due under this subtitle, using legal process as necessary.

Acts 1993, 73rd Leg., ch. 269, Sec. 1, eff. Sept. 1, 1993.

Amended by:

Acts 2005, 79th Leg., Ch.

265, Sec. 3.062, eff. September 1, 2005.

SUBCHAPTER G. TEXAS CERTIFIED SELF-INSURER GUARANTY ASSOCIATION

Sec. 407.121. GUARANTY ASSOCIATION. (a) The Texas Certified

Self-Insurer Guaranty Association provides for the payment of

workers' compensation insurance benefits for the injured

employees of an impaired employer.

(b) Each employer who desires to become a certified self-insurer

must be a member of the association.

Acts 1993, 73rd Leg., ch. 269, Sec. 1, eff. Sept. 1, 1993.

Sec. 407.122. BOARD OF DIRECTORS. (a) The members of the

association shall elect a board of directors.

(b) The board of directors is composed of the following voting

members:

(1) three certified self-insurers;

(2) one member designated by the commissioner; and

(3) the public counsel of the office of public insurance

counsel.

(c) Repealed by Acts 2005, 79th Leg., Ch. 265, Sec. 7.01(19),

eff. September 1, 2005.

(d) A member of the board of directors or a member of the staff

of the board of directors is not liable in a civil action for an

act performed in good faith in the execution of that person's

powers or duties.

Acts 1993, 73rd Leg., ch. 269, Sec. 1, eff. Sept. 1, 1993.

Amended by Acts 1995, 74th Leg., ch. 980, Sec. 1.23, eff. Sept.

1, 1995.

Amended by:

Acts 2005, 79th Leg., Ch.

265, Sec. 3.063, eff. September 1, 2005.

Acts 2005, 79th Leg., Ch.

265, Sec. 7.01(19), eff. September 1, 2005.

Sec. 407.123. BOARD RULES. (a) The board of directors may

adopt rules for the operation of the association.

(b) Rules adopted by the board are subject to the approval of

the commissioner.

Acts 1993, 73rd Leg., ch. 269, Sec. 1, eff. Sept. 1, 1993.

Amended by:

Acts 2005, 79th Leg., Ch.

265, Sec. 3.064, eff. September 1, 2005.

Sec. 407.124. IMPAIRED EMPLOYER; ASSESSMENTS. (a) On

determination by the division that a certified self-insurer has

become an impaired employer, the commissioner shall secure

release of the security deposit required by this chapter and

shall promptly estimate:

(1) the amount of additional funds needed to supplement the

security deposit;

(2) the available assets of the impaired employer for the

purpose of making payment of all incurred liabilities for

compensation; and

(3) the funds maintained by the association for the emergency

payment of compensation liabilities.

(b) The commissioner shall advise the board of directors of the

association of the estimate of necessary additional funds, and

the board shall promptly assess each certified self-insurer to

collect the required funds. An assessment against a certified

self-insurer shall be made in proportion to the ratio that the

total paid income benefit payment for the preceding reported

calendar year for that self-insurer bears to the total paid

income benefit payment by all certified self-insurers, except

impaired employers, in this state in that calendar year.

(c) A certified self-insurer designated as an impaired employer

is exempt from assessments beginning on the date of the

designation until the division determines that the employer is no

longer impaired.

Acts 1993, 73rd Leg., ch. 269, Sec. 1, eff. Sept. 1, 1993.

Amended by:

Acts 2005, 79th Leg., Ch.

265, Sec. 3.065, eff. September 1, 2005.

Sec. 407.125. PAYMENT OF ASSESSMENTS. Each certified

self-insurer shall pay the amount of its assessment to the

association not later than the 30th day after the date on which

the division notifies the self-insurer of the assessment. A

delinquent assessment may be collected on behalf of the

association through suit. Venue is in Travis County.

Acts 1993, 73rd Leg., ch. 269, Sec. 1, eff. Sept. 1, 1993.

Sec. 407.126. TRUST FUND; FEE; SCHEDULE. (a) Each member of

the association shall be assessed a fee, based on total amount of

income benefits payments made in this state for the preceding

reported calendar year, to create, over a period of 10 years

beginning January 1, 1993, a Texas certified self-insurer

guaranty trust fund of at least $1 million for the emergency

payment of the compensation liabilities of an impaired employer.

The fund may not exceed $2 million.

(b) The board of directors shall adopt a year-by-year schedule

of assessments to meet the 10-year funding goal of the trust

fund.

(c) The assessment for the first year after an employer is

issued a certificate of authority to self-insure shall be based

on the income benefit payments paid by the employer's insurance

carrier on the employer's policy in the year before the

certificate was issued.

(d) The board of directors shall administer the trust fund in

accordance with rules adopted by the commissioner.

Acts 1993, 73rd Leg., ch. 269, Sec. 1, eff. Sept. 1, 1993.

Amended by Acts 1995, 74th Leg., ch. 980, Sec. 1.24, eff. Sept.

1, 1995.

Amended by:

Acts 2005, 79th Leg., Ch.

265, Sec. 3.066, eff. September 1, 2005.

Sec. 407.127. PAYMENT OF BENEFITS THROUGH ASSOCIATION. (a) If

the commissioner determines that the payment of benefits and

claims administration shall be made through the association, the

association assumes the workers' compensation obligations of the

impaired employer and shall begin the payment of the obligations

for which it is liable not later than the 30th day after the date

of notification by the director.

(b) The association shall make payments to claimants whose

entitlement to benefits can be ascertained by the association.

(c) Notwithstanding Subsection (a), the association is not

liable for the payment of any penalties assessed for any act or

omission on the part of any person other than the association.

Acts 1993, 73rd Leg., ch. 269, Sec. 1, eff. Sept. 1, 1993.

Amended by Acts 1995, 74th Leg., ch. 76, Sec. 9.52(a), eff. Sept.

1, 1995.

Amended by:

Acts 2005, 79th Leg., Ch.

265, Sec. 3.067, eff. September 1, 2005.

Sec. 407.128. POSSESSION OF SECURITY BY ASSOCIATION. On the

assumption of obligations by the association under the

commissioner's determination, the association is entitled to

immediate possession of any deposited security, and the

custodian, surety, or issuer of an irrevocable letter of credit

shall deliver the security to the association with any accrued

interest.

Acts 1993, 73rd Leg., ch. 269, Sec. 1, eff. Sept. 1, 1993.

Amended by:

Acts 2005, 79th Leg., Ch.

265, Sec. 3.068, eff. September 1, 2005.

Sec. 407.129. RELEASE OF CLAIM INFORMATION TO ASSOCIATION.

Information on a workers' compensation claim may be released to

the association as provided by Section 402.084(a), if the

association has assumed the obligations of an impaired employer.

Acts 1993, 73rd Leg., ch. 269, Sec. 1, eff. Sept. 1, 1993.

Sec. 407.130. ASSOCIATION AS PARTY IN INTEREST. (a) The

association is a party in interest in a proceeding involving a

workers' compensation claim against an impaired employer whose

compensation obligations have been paid or assumed by the

association.

(b) The association has the same rights and defenses as the

impaired employer, including the right to:

(1) appear, defend, or appeal a claim;

(2) receive notice of, investigate, adjust, compromise, settle,

or pay a claim; and

(3) investigate, handle, or deny a claim.

Acts 1993, 73rd Leg., ch. 269, Sec. 1, eff. Sept. 1, 1993.

Sec. 407.131. PREFERENCE. The benefit payments made by the

association or the surety under this chapter are entitled to the

same preference over other debts of the impaired employer or the

impaired employer's estate as provided by law to benefit payments

owed by the employer or employer's estate to the person entitled

to the benefits.

Acts 1993, 73rd Leg., ch. 269 , Sec. 1, eff. Sept. 1, 1993.

Sec. 407.132. SPECIAL FUND. Funds advanced by the association

under this subchapter do not become assets of the impaired

employer but are a special fund advanced to the commissioner,

trustee in bankruptcy, receiver, or other lawful conservator only

for the payment of compensation liabilities, including the costs

of claims administration and legal costs.

Acts 1993, 73rd Leg., ch. 269, Sec. 1, eff. Sept. 1, 1993.

Amended by:

Acts 2005, 79th Leg., Ch.

265, Sec. 3.069, eff. September 1, 2005.

Sec. 407.133. SUSPENSION OR REVOCATION OF CERTIFICATE FOR

FAILURE TO PAY ASSESSMENT. (a) The commissioner may suspend or

revoke the certificate of authority to self-insure of a certified

self-insurer who fails to pay an assessment. The association

promptly shall report such a failure to the director.

(b) A certified self-insurer whose certificate of authority to

self-insure is revoked or surrendered remains liable for any

unpaid assessments made against an impaired employer who becomes

an impaired employer before the date of the revocation or

surrender.

(c) Repealed by Acts 1995, 74th Leg., ch. 76, Sec. 9.52(b), eff.

Sept. 1, 1995.

Acts 1993, 73rd Leg., ch. 269, Sec. 1, eff. Sept. 1, 1993.

Amended by Acts 1995, 74th Leg., ch. 76, Sec. 9.52(b), eff. Sept.

1, 1995.

Amended by:

Acts 2005, 79th Leg., Ch.

265, Sec. 3.070, eff. September 1, 2005.