Texas Laws - Insurance Code
INSURANCE CODE
TITLE 6. ORGANIZATION OF INSURERS AND RELATED ENTITIES

SUBTITLE F. FARM AND COUNTY MUTUAL INSURANCE COMPANIES (22800)(1-click HTML)

CHAPTER 911. FARM MUTUAL INSURANCE COMPANIES (22801)(1-click HTML)
Sec. 911.001. LIMITED EXEMPTION FROM INSURANCE LAWS; APPLICABILITY OF CERTAIN LAWS. (22802)(1-click HTML)

(a) A provision of this code, other than this chapter, does not apply to a farm mutual insurance company holding a certificate of authority under this chapter unless farm mutual insurance companies are expressly mentioned in the other law. (22803)

(b) A law enacted after May 20, 1973, does not apply to a farm mutual insurance company unless the law states that it applies to a farm mutual insurance company. (22804)

(c) Except to the extent of any conflict with this chapter, the following provisions apply to a farm mutual insurance company: (22805)

(1) Subchapter A, Chapter 32; (22806)

(2) Subchapter D, Chapter 36; (22807)

(3) Sections 31.002(2), 32.021(c), 32.023, 32.041, 33.002, 38.001, 81.001-81.004, 201.005, 201.055, 401.051, 401.052, 401.054-401.062, 401.103-401.106, 401.151, 401.152, 401.155, 401.156, 421.001, 801.051-801.055, 801.057, 801.101, 801.102, 822.204, 841.004, 841.251, 841.252, 862.101, 1806.001, 1806.101, 1806.103(b), and 1806.104-1806.107; (22808)

(4) Chapter 86; (22809)

(5) Subchapter A, Chapter 401; (22810)

(6) Subchapter B, Chapter 404; (22811)

(7) Chapter 422; (22812)

(8) Subchapter B, Chapter 424, other than Section 424.052, 424.072, or 424.073; (22813)

(9) Chapter 441; (22814)

(10) Chapter 443; (22815)

(11) Chapter 462; (22816)

(12) Chapter 481; (22817)

(13) Chapter 541; (22818)

(14) Chapter 802; (22819)

(15) Subchapter A, Chapter 805; (22820)

(16) Chapter 824; and (22821)

(17) Article 1.09-1. (22822)

(d) After hearing, the commissioner may adopt rules regarding the application of a law referred to in Subsection (c) to farm mutual insurance companies. The department may enforce rules adopted under this subsection. (22823)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (22824)

Amended by: (22825)

Acts 2005, 79th Leg., Ch. 631 (H.B. 2565), Sec. 3, eff. September 1, 2005. (22826)

Acts 2007, 80th Leg., R.S., Ch. 730 (H.B. 2636), Sec. 2E.106, eff. April 1, 2009. (22827)

Sec. 911.002. GENERAL RULEMAKING AUTHORITY; ENFORCEMENT. (22828)(1-click HTML)

After hearing, the commissioner may adopt rules to clarify and augment this chapter as determined by the commissioner to be necessary to accomplish the purposes of this chapter. The department may enforce rules adopted under this section. (22829)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (22830)

Sec. 911.003. FEES. (22831)(1-click HTML)

(a) The department shall charge and collect the following fees: (22832)

(1) $10 for an amendment to a farm mutual insurance company's charter; and (22833)

(2) $1 for the issuance of a company's certificate of authority. (22834)

(b) The department shall charge and the comptroller shall collect a fee of $20 for the filing of an annual statement required by the department. (22835)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (22836)

SUBCHAPTER B. ORGANIZATION OF FARM MUTUAL INSURANCE COMPANY; DIRECTORS (22837)(1-click HTML)
Sec. 911.051. APPLICABILITY OF TEXAS NON-PROFIT CORPORATION ACT. (22838)(1-click HTML)

Except to the extent of any conflict with this chapter, the Texas Non-Profit Corporation Act (Article 1396-1.01 et seq., Vernon's Texas Civil Statutes) applies to a farm 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 farm mutual insurance companies. (22839)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (22840)

Sec. 911.052. FORMATION OF COMPANY: INCORPORATION REQUIRED. (22841)(1-click HTML)

To form a farm mutual insurance company, an association of individuals that does not hold a certificate of authority issued by the department must obtain a charter as required by this subchapter. (22842)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (22843)

Sec. 911.053. INCORPORATION REQUIREMENTS. (22844)(1-click HTML)

(a) In this section, "separate risk" means one or more items of real property and the property's contents, if any, that is not exposed to any other property on which insurance is applied for in the association seeking the charter. (22845)

(b) To be granted a charter as a farm mutual insurance company, an association must: (22846)

(1) demonstrate that the association: (22847)

(A) has existed as an association of individuals for at least three years; (22848)

(B) has at least 100 individual members; (22849)

(C) operates for the purpose of membership recreation or welfare under a system of subordinate lodges, locals, or districts; (22850)

(D) does not have capital stock; (22851)

(E) is organized and operates solely for the mutual benefit of its members and not for profit; (22852)

(F) has a representative form of government; and (22853)

(G) has decided by a majority vote of the association's members to apply for a charter as a farm mutual insurance company under this chapter; and (22854)

(2) have: (22855)

(A) at least 100 written applications for insurance on at least 400 separate risks; and (22856)

(B) an unencumbered surplus as required by Section 911.308(b). (22857)

(c) Coverage for a risk described by Subsection (b)(2)(A) may not be in an amount that exceeds one percent of the total amount of insurance coverage to be issued by the association as stated in its application for a charter. (22858)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (22859)

Sec. 911.054. CHARTER AND ARTICLES OF INCORPORATION. (22860)(1-click HTML)

(a) The charter and articles of incorporation of an association that wants to form a farm mutual insurance company must state the names and post office addresses of at least 25 charter members of the company, all of whom are residents of one or more adjoining counties in this state and each of whom must: (22861)

(1) be a member of the association; (22862)

(2) own at least $5,000 of insurable property for which the member has applied in writing for insurance coverage from the company to be formed; and (22863)

(3) sign the charter and articles of incorporation. (22864)

(b) In addition to the requirements of Subsection (a), the charter must: (22865)

(1) be acknowledged before a notary public by at least five of the charter members described by Subsection (a); (22866)

(2) state: (22867)

(A) the name of the company, which must include the words "Farm Mutual" or "Farmers Mutual"; (22868)

(B) the location of the company's principal office; (22869)

(C) the number, names, and post office addresses of each of the company's first directors, of which there must be at least five; and (22870)

(D) the type of property the company will insure and the risk to be insured against; and (22871)

(3) include any other provision the incorporators want consistent with this chapter. (22872)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (22873)

Sec. 911.055. APPLICATION FOR PERMIT TO SOLICIT INSURANCE. (22874)(1-click HTML)

(a) At least 10 residents described by Section 911.054(a) that want to form a farm mutual insurance company may apply to the department for a permit to solicit insurance on the mutual or cooperative plan. (22875)

(b) The application for a permit to solicit insurance must: (22876)

(1) state: (22877)

(A) that at least 100 individuals are members of an association described by Section 911.053(b)(1); (22878)

(B) that the association has indicated, by majority vote, that the association wants to: (22879)

(i) insure property of the association's members under this chapter; and (22880)

(ii) be chartered as a farm mutual insurance company; (22881)

(C) the name of the company, which must include the words "Farm Mutual" or "Farmers Mutual"; (22882)

(D) the location of the company's principal office; (22883)

(E) the risks the company proposes to insure; and (22884)

(F) the names and places of residence of at least 10 of the applicants; and (22885)

(2) be accompanied by: (22886)

(A) affidavits of at least two of the applicants, each of whom must: (22887)

(i) state the applicant's name and residence; and (22888)

(ii) verify the facts stated in the application; and (22889)

(B) a filing fee in the amount of $25. (22890)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (22891)

Sec. 911.056. ISSUANCE OF PERMIT TO SOLICIT INSURANCE; TERM. (22892)(1-click HTML)

(a) The department shall approve or deny an application for a permit to solicit insurance under Section 911.055. If the department finds that the application complies with this chapter, the department shall issue to the applicants a permit to solicit insurance. (22893)

(a-1) If the department finds that the application does not comply with this chapter, the department shall deny the application. On the applicant's request, the commissioner shall hold a hearing on a denial. Not later than the 30th day after the date of the applicant's request for a hearing, the commissioner shall request a hearing date. (22894)

(b) A permit issued under this section authorizes the permit holders to solicit insurance on the mutual or cooperative plan in accordance with the terms of the application. The permit does not authorize the permit holders to: (22895)

(1) issue insurance policies; or (22896)

(2) pay losses. (22897)

(c) A permit issued under this section is valid for six months. On receipt of an application for renewal and a fee in the amount of $10, the department may renew a permit issued under Section 911.055 as frequently and for the period as the department determines necessary. (22898)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (22899)

Amended by: (22900)

Acts 2009, 81st Leg., R.S., Ch. 1022 (H.B. 4291), Sec. 16, eff. June 19, 2009. (22901)

Sec. 911.057. COLLECTION AND REFUND OF MONEY FROM CERTAIN INDIVIDUALS APPLYING FOR INSURANCE. (22902)(1-click HTML)

An association described by Section 911.053(b)(1) of which the applicants for a permit to solicit insurance are members shall hold in trust money collected from an individual applying for insurance in the association until the association is incorporated. If the association's incorporation is not perfected, the association shall refund the money to the individual applying for the insurance. (22903)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (22904)

Sec. 911.058. MEMBERSHIP CONTROL OF COMPANY. (22905)(1-click HTML)

(a) The control of a farm mutual insurance company must be ultimately vested as provided by this chapter in the company's members through a supreme legislative or governing body, the members of which must be elected directly by the company's members or by delegates elected by the company's members. (22906)

(b) Through the company's governing body, the company's members may establish local chapters, branches, lodges, or similar organizations. (22907)

(c) The methods provided by this section for the control of a farm mutual insurance company are exclusive. (22908)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (22909)

Sec. 911.059. ELIGIBILITY OF BOARD OF DIRECTORS; TERM. (22910)(1-click HTML)

(a) An individual is eligible to serve as a director of a farm mutual insurance company if the individual is a policyholder who maintains insurance coverage in the amount of at least $3,000 written by the company on the individual's property. (22911)

(b) Except as otherwise provided by the company's bylaws or constitution, a director serves for a term of one year or until the director's successor qualifies for office. (22912)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (22913)

Sec. 911.060. GENERAL POWERS OF BOARD OF DIRECTORS. (22914)(1-click HTML)

The board of directors of a farm mutual insurance company has the powers provided by: (22915)

(1) this chapter; and (22916)

(2) the company's charter, constitution, and bylaws to the extent those powers do not conflict with this chapter. (22917)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (22918)

Sec. 911.061. AUTHORITY TO BORROW MONEY. (22919)(1-click HTML)

(a) The board of directors of a farm mutual insurance company, acting through its authorized officers, may borrow money in an amount determined to be necessary to pay the company's accrued or unaccrued losses. (22920)

(b) The board may pledge as security for a loan the assets of the company, including the contingent liability of its policyholders. (22921)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (22922)

Sec. 911.062. REMOVAL OF OFFICER OR DIRECTOR. (22923)(1-click HTML)

(a) The board of directors of a farm mutual insurance company, at a meeting, may remove an officer or director of the company if, by a two-thirds majority vote of all the company's directors, the board determines that the removal of the individual is in the best interest of the company. The board may remove an officer or director under this subsection without stating a reason for the removal. (22924)

(b) The board may appoint one or more individuals to assume the duties and serve the unexpired term of an officer or director removed under this section. (22925)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (22926)

Sec. 911.063. CREATION OF LOCAL CHAPTERS AND DISTRICTS. (22927)(1-click HTML)

(a) A farm mutual insurance company's bylaws may provide for: (22928)

(1) the organization of local chapters to transact the company's business; and (22929)

(2) the creation of districts in and for which directors may be elected. (22930)

(b) The bylaws may also provide that delegates from the company's local chapters are the company's supreme governing body. (22931)

(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. (22932)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (22933)

Sec. 911.064. POLICYHOLDER MEETINGS. (22934)(1-click HTML)

(a) A farm 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. (22935)

(b) A special meeting of a company's policyholders may be called by: (22936)

(1) the president, the general manager, or one-third of the company's directors; or (22937)

(2) the commissioner. (22938)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (22939)

Sec. 911.065. VOTING BY POLICYHOLDER. (22940)(1-click HTML)

(a) Each policyholder of a farm mutual insurance company is entitled to only one vote at a policyholders' meeting. (22941)

(b) A policyholder may not vote by proxy. (22942)

(c) A farm mutual insurance company may provide in its constitution or bylaws that a policyholder may vote electronically or by mail without making a personal appearance at a policyholders' meeting. (22943)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (22944)

Amended by: (22945)

Acts 2017, 85th Leg., R.S., Ch. 1083 (H.B. 3496), Sec. 3, eff. September 1, 2017. (22946)

Sec. 911.066. AUTHORITY TO PROHIBIT WAIVER OF BYLAWS. (22947)(1-click HTML)

A farm mutual insurance company may provide in its bylaws that a company adjuster, representative appointed by the company, or local chapter or officer or agent elected by the local chapter may not waive a provision in the company's constitution or bylaws or in a policy issued by the company. (22948)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (22949)

Sec. 911.067. APPLICATION FOR EXTENSION OF CHARTER FOR CERTAIN COMPANIES; TERM. (22950)(1-click HTML)

(a) Before a farm mutual insurance company's charter expires, the company may apply to the department for an extension of the company's charter if: (22951)

(1) the company was chartered, holding a certificate of authority, and operating before May 21, 1973, under Chapter 16, Insurance Code, as it existed on that date; or (22952)

(2) the company was organized and engaging in business before April 6, 1937, and the company continues to engage in business. (22953)

(b) A farm mutual insurance company described by Subsection (a) and whose charter has expired may apply to the department to have the charter extended perpetually if the company is engaged in business in this state. (22954)

(c) The term of the charter begins on the date that the charter is extended or, if the original charter expired before the charter is extended, the date the original charter expired. (22955)

(d) An application for an extension must be authorized by either a two-thirds majority vote of the company's directors or by a simple majority vote of those voting at a policyholders' meeting and must: (22956)

(1) state in full the charter to be extended; (22957)

(2) state the period for which the charter is to be extended; and (22958)

(3) be signed and acknowledged by the president and secretary of the company. (22959)

(e) A company whose charter is extended retains the rights, privileges, and immunities granted the company under the company's original charter. (22960)

(f) The department shall charge and collect a fee of $10 for the extension of a farm mutual insurance company's charter. (22961)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (22962)

Sec. 911.101. AUTHORITY TO ENGAGE IN BUSINESS. (22963)(1-click HTML)

Except to the extent of any conflict with this chapter, a farm mutual insurance company must hold a certificate of authority under Section 801.051 to engage in the business of insurance in this state under this chapter. (22964)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (22965)

SUBCHAPTER D. POLICIES AND COVERAGE (22966)(1-click HTML)
Sec. 911.151. KINDS OF INSURANCE AUTHORIZED. (22967)(1-click HTML)

(a) A farm mutual insurance company may insure property against loss or damage by: (22968)

(1) fire, lightning, explosion, theft, windstorm, hurricane, hail, riot, civil commotion, smoke, aircraft, or land vehicles; or (22969)

(2) any other hazard against which any other fire or windstorm insurance company operating in this state under Chapter 862 may write insurance on property described by Subsection (b). (22970)

(b) The company may write insurance against the hazards described by Subsection (a) on: (22971)

(1) a rural or urban dwelling and attendant outhouses and yard buildings and all their contents for home and personal use, musical instruments and libraries, barns and ranch buildings of any description and vehicles and implements used on or about barns or ranch buildings; (22972)

(2) agricultural products that are produced or kept on farms or ranches; (22973)

(3) a church building, fraternal lodge hall, private or church school, or nonindustrial use building owned by a nonprofit organization, regardless of the location; (22974)

(4) a trailer or mobile home; and (22975)

(5) growing crops if the insurance is reinsured by: (22976)

(A) the Federal Crop Insurance Corporation under Section 508, Federal Crop Insurance Act (7 U.S.C. Section 1508); or (22977)

(B) a property and casualty insurance company that: (22978)

(i) is authorized to write insurance in this state; and (22979)

(ii) has a rating by the A.M. Best Company of A- or better. (22980)

(c) An insurance policy written by a farm mutual insurance company against loss or damage by windstorm, hurricane, or hail, as described by Subsection (a), may include coverage for: (22981)

(1) a building or other structure that is built wholly or partially over water; and (22982)

(2) the corporeal movable property contained in a building or structure described by Subdivision (1). (22983)

(d) The farm mutual insurance company may impose appropriate limits of coverage and deductibles for coverage described by Subsection (c). (22984)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (22985)

Amended by: (22986)

Acts 2005, 79th Leg., Ch. 1153 (H.B. 3048), Sec. 4, eff. September 1, 2005. (22987)

Sec. 911.152. PROPERTY AND HAZARDS AGAINST WHICH COMPANY MAY NOT INSURE. (22988)(1-click HTML)

(a) A farm mutual insurance company may not insure: (22989)

(1) a building, or the building's contents, with more than 40 percent of the building's floor space or more than 500 square feet of floor space, whichever is less, used for business purposes, except as provided by Section 911.151(b)(3); or (22990)

(2) any type of commercial or private passenger motor vehicle, except as provided by Section 911.151(b)(4). (22991)

(b) A farm mutual insurance company may not assume or issue an insurance policy that: (22992)

(1) indemnifies an insured for liability to a third party the insured incurs in committing a tortious act; or (22993)

(2) covers an insured for liability the insured incurs under a contract to maintain, hold, or store property belonging to another. (22994)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (22995)

Sec. 911.153. CONTRACT TERMS: INCORPORATION OF BYLAWS. (22996)(1-click HTML)

(a) A farm mutual insurance company's bylaws are part of each contract between the company and an insured. (22997)

(b) Each policy issued by the company must state that the company's bylaws are part of the contract. (22998)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (22999)

Sec. 911.154. CONTRACT TERMS: ADOPTION OF ADDITIONAL PROVISIONS. (23000)(1-click HTML)

(a) A farm mutual insurance company may adopt as part of the company's bylaws and insurance policies any provision contained in the standard policies of companies writing fire or windstorm insurance as adopted by the commissioner to the extent the provision applies to a farm mutual insurance company. (23001)

(b) A company that adopts a provision as provided by Subsection (a) shall state in the company's bylaws or in each policy issued by the company that the provision has been adopted as provided by Subsection (a). (23002)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23003)

Sec. 911.155. REPAIR OR REPLACEMENT OF INSURED PROPERTY. (23004)(1-click HTML)

The 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. (23005)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23006)

SUBCHAPTER E. CHARGES, PREMIUMS, AND ASSESSMENTS (23007)(1-click HTML)
Sec. 911.201. PAYMENT OF PREMIUM OR ASSESSMENT. (23008)(1-click HTML)

(a) A farm mutual insurance company's bylaws must: (23009)

(1) state the time and manner of the levy and payment of a premium or assessment for policies written by the company; (23010)

(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 at least $1 for each $100 of insurance coverage, except as provided by Subsection (b); and (23011)

(3) state the time and manner of payment of a policyholder's contingent liability established under Subdivision (2). (23012)

(b) A company's bylaws may provide for the issuance of policies without contingent liability as required by Subsection (a)(2) if the company has policyholder surplus in the amount of at least $1,000,000. (23013)

(c) As required by its bylaws, a farm mutual insurance company shall establish and levy premiums and assessments, including the contingent liability of a policyholder, for all insurance written by the company. (23014)

(d) A policyholder shall pay premiums and assessments as required by the company's bylaws. (23015)

(e) 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. (23016)

(f) A conservator, receiver, or liquidator of a farm mutual insurance company may not make an assessment against a policyholder for the contingent liability established under Subsection (a)(2). (23017)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23018)

Sec. 911.202. NONPAYMENT OF PREMIUMS OR ASSESSMENTS: FILING OF ACTION. (23019)(1-click HTML)

(a) A farm mutual insurance company may bring an action in the county in which the company's home office is located against a policyholder who defaults on the payment of a premium or an assessment. (23020)

(b) The company is entitled to judgment against the policyholder for: (23021)

(1) delinquent premiums or assessments; (23022)

(2) foreclosure of the lien described by Section 911.201; and (23023)

(3) the costs of an action, including a reasonable attorney's fee. (23024)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23025)

Sec. 911.203. POLICYHOLDER LIABILITY. (23026)(1-click HTML)

A policyholder is liable for the losses of a farm mutual insurance company only as provided by the company's constitution and 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. (23027)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23028)

SUBCHAPTER F. AGENTS (23029)(1-click HTML)
Sec. 911.251. LICENSING AND APPOINTMENT OF CERTAIN AGENTS. (23030)(1-click HTML)

(a) An individual or firm may not solicit, write, sign, execute, or deliver insurance policies, bind insurance risks, collect premiums, or otherwise act on behalf of a farm mutual insurance company in the capacity of an insurance agent in the solicitation or sale of crop insurance unless the individual or firm holds a license issued under Title 13. (23031)

(b) A farm mutual insurance company may not appoint and act through an agent under Subchapter F, Chapter 4051. (23032)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. Amended by Acts 2003, 78th Leg., ch. 1276, Sec. 10A.223(a), eff. Sept. 1, 2003. (23033)

Amended by: (23034)

Acts 2007, 80th Leg., R.S., Ch. 730 (H.B. 2636), Sec. 2E.107, eff. April 1, 2009. (23035)

SUBCHAPTER G. REGULATION OF FARM MUTUAL INSURANCE COMPANY; FINANCIAL REQUIREMENTS (23036)(1-click HTML)
Sec. 911.301. GENERAL OPERATING REQUIREMENTS. (23037)(1-click HTML)

(a) In this section, "rural property" means property located outside an area of land subject to the taxing authority of a municipality with a population of more than 2,500. (23038)

(b) A farm mutual insurance company shall: (23039)

(1) maintain a majority of the company's total insurance in force on rural property at all times the insurance is written; and (23040)

(2) operate on a regular and special assessment basis. (23041)

(c) Except as otherwise approved by the commissioner, a farm mutual insurance company may not use more than 33 percent of the company's gross income for expenses. (23042)

(d) Property that is rural property at the time the property is originally insured continues to be classified as rural property if: (23043)

(1) the policy or policies that insure the property are written by the same farm mutual insurance company; and (23044)

(2) the coverage continues in effect without lapse of coverage for more than 60 days. (23045)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23046)

Sec. 911.302. LOCATION OF BUSINESS. (23047)(1-click HTML)

(a) Except as provided by Subsection (b), a farm mutual insurance company may write insurance in: (23048)

(1) the county in which the company's home office is located at the time of incorporation and in any county adjoining the county in and for which the company is organized; (23049)

(2) any county in which another farm mutual insurance company is not organized; and (23050)

(3) any county in this state if the company's reserve fund exceeds $200,000 in cash or securities in which the reserve fund of a stock fire insurance company may be invested. (23051)

(b) This section does not apply to a farm mutual insurance company organized and operating in this state under a certificate of authority issued before May 21, 1973, under former Chapter 16 of this code. (23052)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23053)

Sec. 911.303. REINSURANCE. (23054)(1-click HTML)

(a) A farm mutual insurance company may reinsure the company's risks with another company against any hazard against which the farm mutual insurance company is permitted to insure. (23055)

(b) The farm mutual insurance company may contract for mutual or reciprocal reinsurance with another company on the mutual or cooperative plan subject to the following conditions: (23056)

(1) the farm mutual company may assume the reinsurance on the risks of the other company only if the other company reinsures the risks of the farm mutual insurance company; and (23057)

(2) the farm mutual company may write or assume the reinsurance only on property that the company is authorized to insure and that is located in this state. (23058)

(c) A farm 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 farm mutual insurance company does not become a member or partner of the other company as a result of the reinsurance. (23059)

(d) A farm mutual insurance company may pay or collect additional assessments or premiums for the purpose of a contract described by Subsection (b). (23060)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23061)

Sec. 911.304. ANNUAL REPORTS REQUIRED. (23062)(1-click HTML)

(a) A farm mutual insurance company shall annually prepare a written report as required by this section and submit the report to the company's policyholders. (23063)

(b) The annual report must show: (23064)

(1) the total amount of premiums paid during the year for the policyholders' insurance; (23065)

(2) the company's operating expenses; and (23066)

(3) the total amount of claims paid and the amount paid for each covered peril. (23067)

(c) Repealed by Acts 2007, 80th Leg., R.S., Ch. 47, Sec. 2, eff. May 8, 2007. (23068)

(d) The company shall make available to each policyholder a copy of the annual report at the time and in the manner prescribed by the company's bylaws. (23069)

(e) A farm mutual insurance company shall make annual reports to the department as required by the commissioner or by law. (23070)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23071)

Amended by: (23072)

Acts 2007, 80th Leg., R.S., Ch. 47 (S.B. 849), Sec. 1, eff. May 8, 2007. (23073)

Acts 2007, 80th Leg., R.S., Ch. 47 (S.B. 849), Sec. 2, eff. May 8, 2007. (23074)

Sec. 911.305. EXAMINATION OF COMPANY. (23075)(1-click HTML)

The department shall examine each farm mutual insurance company as often as the department determines necessary. (23076)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23077)

Sec. 911.306. SOLVENCY REQUIREMENTS. (23078)(1-click HTML)

(a) A farm mutual insurance company is solvent if: (23079)

(1) the company's assets, including the policyholders' contingent liability for the company's losses, are reasonably sufficient to pay the company's losses according to the terms of the policies; and (23080)

(2) the company's required unencumbered surplus, if any, has not been impaired in excess of 16-2/3 percent of the required unencumbered surplus. (23081)

(b) A company that is solvent as provided by this section may continue to engage in the business of insurance. (23082)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23083)

Sec. 911.307. RESERVE REQUIREMENTS. (23084)(1-click HTML)

(a) A farm mutual insurance company's board of directors may provide for the accumulation of reserve funds. (23085)

(b) The company shall invest the reserve funds in the same type of securities in which the reserve funds of other fire insurance companies are required to be invested by law. (23086)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23087)

Sec. 911.308. SURPLUS REQUIREMENTS. (23088)(1-click HTML)

(a) A farm mutual insurance company organized between January 1, 1955, and May 21, 1973, shall maintain an unencumbered surplus of $2 for each $100 of insurance in force or an unencumbered surplus of $200,000, whichever amount is less. (23089)

(b) A farm mutual insurance company organized under this chapter on or after May 21, 1973, shall maintain an unencumbered surplus in cash of $2 for each $100 of insurance in force or an unencumbered surplus of $200,000, whichever amount is greater. (23090)

(c) A company described by Subsection (b) shall invest the minimum unencumbered surplus as provided by Section 822.204. The company may invest funds in excess of the minimum unencumbered surplus as provided by the provisions of Subchapter B, Chapter 424, other than Sections 424.052, 424.072, and 424.073. (23091)

(d) A company described by Subsection (b) shall, without delay, restore the minimum unencumbered surplus if the surplus is impaired. The department shall proceed as provided by Subchapter B, Chapter 404. (23092)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23093)

Amended by: (23094)

Acts 2007, 80th Leg., R.S., Ch. 730 (H.B. 2636), Sec. 2E.108, eff. April 1, 2009. (23095)

CHAPTER 912. COUNTY MUTUAL INSURANCE COMPANIES (23096)(1-click HTML)
Sec. 912.001. DEFINITIONS. (23097)(1-click HTML)

In this chapter: (23098)

(1) "Member" includes a policyholder or another person who is insured by a county mutual insurance company. (23099)

(2) "Policy" includes a certificate or contract of insurance, certificate of membership, or other document through which insurance is effected or evidenced. (23100)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23101)

Sec. 912.002. LIMITED EXEMPTION FROM INSURANCE LAWS; APPLICABILITY OF CERTAIN LAWS. (23102)(1-click HTML)

(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. (23103)

(b) A county mutual insurance company is subject to: (23104)

(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, 1953.051(b), 2002.002, and 2002.005; (23105)

(2) Subchapter A, Chapter 86; (23106)

(3) Subchapter A, Chapter 401; (23107)

(4) the provisions of Subchapter B, Chapter 424, other than Sections 424.052, 424.072, and 424.073; (23108)

(5) Chapters 221, 251, 252, 254, 541, and 2210; and (23109)

(6) Articles 5.39 and 5.40. (23110)

(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. (23111)

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. (23112)

Amended by: (23113)

Acts 2005, 79th Leg., Ch. 631 (H.B. 2565), Sec. 4, eff. September 1, 2005. (23114)

Acts 2007, 80th Leg., R.S., Ch. 730 (H.B. 2636), Sec. 2E.109, eff. April 1, 2009. (23115)

Acts 2015, 84th Leg., R.S., Ch. 1137 (S.B. 189), Sec. 3, eff. September 1, 2015. (23116)

Sec. 912.003. FEES. (23117)(1-click HTML)

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. (23118)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23119)

Sec. 912.004. FORMATION OF NEW COUNTY MUTUAL COMPANY PROHIBITED. (23120)(1-click HTML)

A new county mutual insurance company may not be formed under this chapter. (23121)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23122)

Sec. 912.005. LIMITATION ON TRANSFER OF BUSINESS TO COUNTY MUTUAL INSURANCE COMPANY. (23123)(1-click HTML)

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. (23124)

Added by Acts 2003, 78th Leg., ch. 206, Sec. 21.405, eff. June 11, 2003. (23125)

SUBCHAPTER B. ORGANIZATION OF COUNTY MUTUAL INSURANCE COMPANY; DIRECTORS (23126)(1-click HTML)
Sec. 912.051. APPLICABILITY OF TEXAS NON-PROFIT CORPORATION ACT. (23127)(1-click HTML)

(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. (23128)

(b) On advance approval of the commissioner, a county mutual insurance company may pay dividends to its members. (23129)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23130)

Sec. 912.052. ELIGIBILITY OF BOARD OF DIRECTORS; TERM. (23131)(1-click HTML)

(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. (23132)

(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. (23133)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23134)

Sec. 912.053. GENERAL POWERS OF BOARD OF DIRECTORS. (23135)(1-click HTML)

The board of directors of a county mutual insurance company has the powers provided by the company's charter. (23136)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23137)

Sec. 912.054. AUTHORITY TO BORROW MONEY. (23138)(1-click HTML)

(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. (23139)

(b) The board may pledge as security for a loan the assets of the company, including the contingent liability of its policyholders. (23140)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23141)

Sec. 912.055. CHARTER AND ARTICLES OF INCORPORATION. (23142)(1-click HTML)

The charter and articles of incorporation of a county mutual insurance company must state: (23143)

(1) the name of the company, which must include the words "County Mutual Insurance Company"; (23144)

(2) the location of the principal office of the company; and (23145)

(3) the number of the directors, which must be at least five. (23146)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23147)

Sec. 912.056. CREATION OF LOCAL CHAPTERS AND DISTRICTS. (23148)(1-click HTML)

(a) A county mutual insurance company's bylaws may provide for: (23149)

(1) the organization of local chapters to transact the company's business; and (23150)

(2) the creation of districts in and for which directors may be elected. (23151)

(b) The bylaws may also provide that delegates from the company's local chapters are the company's supreme governing body. (23152)

(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. (23153)

(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: (23154)

(1) cedes 85 percent or more of the company's direct and assumed risks to one or more reinsurers; and (23155)

(2) has a private passenger automobile insurance business: (23156)

(A) with a market share of not greater than five percent; or (23157)

(B) that is predominantly nonstandard. (23158)

(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. (23159)

(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: (23160)

(1) premium payable to ceding insurers, net of any ceding commission due the company; (23161)

(2) collateral held as required by Section 493.104, letters of credit, and security trusts that secure the collection of the reinsurance; and (23162)

(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. (23163)

(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. (23164)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23165)

Amended by: (23166)

Acts 2009, 81st Leg., R.S., Ch. 677 (H.B. 2449), Sec. 3, eff. September 1, 2009. (23167)

Sec. 912.057. POLICYHOLDER MEETINGS. (23168)(1-click HTML)

(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. (23169)

(b) A special meeting of a company's policyholders may be called by: (23170)

(1) the president, the general manager, or one-third of the company's directors; or (23171)

(2) the commissioner. (23172)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23173)

Sec. 912.058. VOTING BY POLICYHOLDERS. (23174)(1-click HTML)

(a) Each policyholder of a county mutual insurance company is entitled to only one vote at a policyholders' meeting. (23175)

(b) A policyholder may not vote by proxy unless the company's bylaws specifically authorize voting in that manner. (23176)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23177)

Sec. 912.059. AMENDMENT TO BYLAWS. (23178)(1-click HTML)

(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. (23179)

(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. (23180)

(c) An amendment to the bylaws is not effective until approved by the commissioner as meeting the requirements of this chapter. (23181)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23182)

Sec. 912.060. AUTHORITY TO PROHIBIT WAIVER OF BYLAWS. (23183)(1-click HTML)

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. (23184)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23185)

Sec. 912.061. APPLICATION FOR EXTENSION OF CHARTER; TERM. (23186)(1-click HTML)

(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. (23187)

(b) The application for an extension must: (23188)

(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; (23189)

(2) state in full the charter to be extended; (23190)

(3) state the period for which the charter is to be extended; (23191)

(4) be signed and acknowledged by the president and secretary of the company; and (23192)

(5) be accompanied by a fee of $50. (23193)

(c) A company whose charter is extended retains the rights, privileges, and immunities granted a county mutual insurance company by this chapter. (23194)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23195)

Sec. 912.101. OPERATION UNDER CERTIFICATE OF AUTHORITY. (23196)(1-click HTML)

A county mutual insurance company engages in the business of insurance under a certificate of authority issued by the department. (23197)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23198)

Sec. 912.102. AUTHORITY TO ENGAGE IN BUSINESS. (23199)(1-click HTML)

A county mutual insurance company may engage in the business of insurance in accordance with this chapter and other applicable laws only if: (23200)

(1) the company was formed before September 6, 1955, and was actively engaged in the business of insurance on that date; or (23201)

(2) the company was formed under a permit to solicit insurance issued before September 6, 1955. (23202)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23203)

Sec. 912.151. KINDS OF INSURANCE AUTHORIZED. (23204)(1-click HTML)

(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. (23205)

(b) A county mutual insurance company may insure property against loss or damage by: (23206)

(1) fire, lightning, gas explosion, theft, windstorm, and hail or for any combination of these hazards; or (23207)

(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). (23208)

(c) Unless restricted by its charter, the company may write insurance against the hazards described by Subsection (b) on: (23209)

(1) a rural or urban dwelling and attendant outhouses and yard buildings; (23210)

(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; (23211)

(3) a barn or other farm, dairy, truck garden, hennery, or ranch building and any other improvement; (23212)

(4) a vehicle, harness, implement, tool, or machinery of any description used on and about a farm, truck garden, dairy, hennery, or ranch; (23213)

(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; (23214)

(6) a church house, country school house, country lodge room, or country recreation hall, other than a road house or public dance hall; and (23215)

(7) the contents of a church house, country school house, country lodge room, or country recreation hall. (23216)

(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: (23217)

(1) a building or other structure that is built wholly or partially over water; and (23218)

(2) the corporeal movable property contained in a building or structure described by Subdivision (1). (23219)

(e) The county mutual insurance company may impose appropriate limits of coverage and deductibles for coverage described by Subsection (d). (23220)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23221)

Amended by: (23222)

Acts 2005, 79th Leg., Ch. 1153 (H.B. 3048), Sec. 5, eff. September 1, 2005. (23223)

Sec. 912.152. POLICY FORMS. (23224)(1-click HTML)

(a) A county mutual insurance company is subject to: (23225)

(1) Sections 1952.051-1952.055; (23226)

(2) Subchapter B, Chapter 2002; (23227)

(3) Chapter 2301; and (23228)

(4) Articles 5.06 and 5.35. (23229)

(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. (23230)

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. (23231)

Amended by: (23232)

Acts 2007, 80th Leg., R.S., Ch. 730 (H.B. 2636), Sec. 2E.110, eff. April 1, 2009. (23233)

Sec. 912.153. CONTRACT TERMS: INCORPORATION OF BYLAWS. (23234)(1-click HTML)

(a) A county mutual insurance company's bylaws are part of each contract between the company and an insured. (23235)

(b) Each policy issued by the company must state that the company's bylaws are part of the contract. (23236)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23237)

Sec. 912.154. AMOUNT OF INSURANCE UNDER MULTIPLE HAZARDS POLICY. (23238)(1-click HTML)

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. (23239)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23240)

Sec. 912.155. REPAIR OR REPLACEMENT OF INSURED PROPERTY. (23241)(1-click HTML)

(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. (23242)

(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. (23243)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23244)

Sec. 912.156. CONTESTING CLAIM FOR CERTAIN PURPOSES PROHIBITED. (23245)(1-click HTML)

(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. (23246)

(b) A county mutual insurance company may not contest a claim: (23247)

(1) only for delay or a captious or inconsequential reason; or (23248)

(2) to force a settlement for less than full payment. (23249)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23250)

Sec. 912.157. DENIAL OF CLAIM: NOTICE REQUIRED. (23251)(1-click HTML)

(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. (23252)

(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. (23253)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23254)

Sec. 912.201. SCHEDULE OF CHARGES. (23255)(1-click HTML)

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. (23256)

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. (23257)

Sec. 912.202. PAYMENT OF PREMIUM OR ASSESSMENT. (23258)(1-click HTML)

(a) A county mutual insurance company's bylaws must: (23259)

(1) state the time and manner of the levy and payment of a premium or assessment for policies written by the company; (23260)

(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 (23261)

(3) state the time and manner of payment of a policyholder's contingent liability established under Subdivision (2). (23262)

(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. (23263)

(c) A policyholder shall pay premiums and assessments as required by the company's bylaws. (23264)

(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. (23265)

(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. (23266)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23267)

Sec. 912.203. NONPAYMENT OF PREMIUM OR ASSESSMENT: FILING OF ACTION. (23268)(1-click HTML)

(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. (23269)

(b) The company is entitled to judgment against the policyholder for: (23270)

(1) delinquent premiums or assessments; (23271)

(2) foreclosure of the lien described by Section 912.202; and (23272)

(3) the costs of an action, including a reasonable attorney's fee in the amount of at least $5. (23273)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23274)

Sec. 912.204. POLICYHOLDER LIABILITY. (23275)(1-click HTML)

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. (23276)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23277)

Sec. 912.251. LICENSING AND APPOINTMENT OF AGENTS. (23278)(1-click HTML)

An agent for a county mutual insurance company must be licensed and appointed as provided by Title 13. (23279)

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. (23280)

Amended by: (23281)

Acts 2007, 80th Leg., R.S., Ch. 730 (H.B. 2636), Sec. 2E.111, eff. April 1, 2009. (23282)

SUBCHAPTER G. REGULATION OF COUNTY MUTUAL INSURANCE COMPANY; FINANCIAL REQUIREMENTS (23283)(1-click HTML)
Sec. 912.301. REPORT REGARDING CONDITION OF COMPANY. (23284)(1-click HTML)

(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. (23285)

(b) The commissioner may require that the report be verified under oath by a responsible officer of the company. (23286)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23287)

Sec. 912.302. ANNUAL STATEMENT FEE. (23288)(1-click HTML)

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. (23289)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23290)

Sec. 912.303. BOOKS AND RECORDS. (23291)(1-click HTML)

(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. (23292)

(b) The company shall use forms or systems that most effectively serve the purposes of this section. (23293)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23294)

Sec. 912.304. REINSURANCE. (23295)(1-click HTML)

(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. (23296)

(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: (23297)

(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 (23298)

(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. (23299)

(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. (23300)

(d) A county mutual insurance company may pay or collect additional assessments or premiums for the purpose of a contract described by Subsection (b). (23301)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23302)

Sec. 912.305. SECURITY DEPOSIT. (23303)(1-click HTML)

(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: (23304)

(1) the largest amount assumed by the company on any one risk; or (23305)

(2) on a demonstration of reinsurance acceptable to the commissioner, the largest amount retained by the company on any one risk after reinsurance. (23306)

(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. (23307)

(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: (23308)

(1) the purpose, exact amount, and character of the deposit; and (23309)

(2) the conditions under which the deposit was made. (23310)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23311)

Sec. 912.306. REQUIRED BONDS. (23312)(1-click HTML)

(a) A county mutual insurance company shall obtain a bond for: (23313)

(1) the officer responsible for handling the funds of the company's members; and (23314)

(2) all other office employees who may have access to the company's funds. (23315)

(b) The bonds required under this section must: (23316)

(1) be with a surety authorized by the department to engage in business in this state; (23317)

(2) be made payable to the department for the use and benefit of the company's members; and (23318)

(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. (23319)

(c) A bond under this section must: (23320)

(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 (23321)

(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. (23322)

(d) One or more persons may recover on a bond under this section until the bond is exhausted. (23323)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23324)

Sec. 912.307. RESERVE REQUIREMENTS. (23325)(1-click HTML)

(a) A county mutual insurance company shall maintain unearned premium reserves as provided by Section 862.102. (23326)

(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. (23327)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23328)

Sec. 912.308. AMOUNT AND INVESTMENT OF SURPLUS. (23329)(1-click HTML)

(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: (23330)

(1) $25,000, if the company is organized to write insurance coverage locally in only the county of its domicile; (23331)

(2) $50,000, if the company is organized to write insurance coverage in only the county of its domicile and any adjacent county; or (23332)

(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. (23333)

(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. (23334)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23335)

Amended by: (23336)

Acts 2007, 80th Leg., R.S., Ch. 730 (H.B. 2636), Sec. 2E.112, eff. April 1, 2009. (23337)

Acts 2009, 81st Leg., R.S., Ch. 677 (H.B. 2449), Sec. 2, eff. September 1, 2009. (23338)

Sec. 912.309. POLICYHOLDER LOANS TO COMPANY. (23339)(1-click HTML)

(a) A policyholder may loan to a county mutual insurance company money as necessary: (23340)

(1) for the company to engage in the company's business; or (23341)

(2) to enable the company to comply with a requirement of this chapter, including the unencumbered surplus requirement under Section 912.308. (23342)

(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. (23343)

(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. (23344)

(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. (23345)

(e) A county mutual insurance company shall report in its annual statement the amount of each loan made to the company. (23346)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23347)

Sec. 912.310. CERTAIN COMPANIES EXEMPT. (23348)(1-click HTML)

(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: (23349)

(1) that was organized and operating as a county mutual fire insurance company on May 22, 1953; and (23350)

(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. (23351)

(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). (23352)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23353)

Sec. 912.701. HAZARDOUS FINANCIAL CONDITION, SUPERVISION, CONSERVATORSHIP, AND LIQUIDATION. (23354)(1-click HTML)

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. (23355)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23356)

Amended by: (23357)

Acts 2007, 80th Leg., R.S., Ch. 730 (H.B. 2636), Sec. 2E.113, eff. April 1, 2009. (23358)

SUBCHAPTER P. DISCIPLINARY ACTION AND PROCEDURES IN GENERAL (23359)(1-click HTML)
Sec. 912.751. OFFICER OR DIRECTOR UNWORTHY OF TRUST: REMOVAL AND REVOCATION OF CERTIFICATE OF AUTHORITY. (23360)(1-click HTML)

(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. (23361)

(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: (23362)

(1) revoke the company's certificate of authority; and (23363)

(2) treat the company as insolvent. (23364)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23365)

Sec. 912.752. FRAUDULENT OPERATION OR IMPROPER CONTESTS: REVOCATION OF CERTIFICATE OF AUTHORITY. (23366)(1-click HTML)

After notice and hearing, the commissioner shall revoke the certificate of authority of a county mutual insurance company that is: (23367)

(1) operating fraudulently; or (23368)

(2) improperly contesting the company's claims. (23369)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23370)

Sec. 912.753. TIME LIMIT TO APPEAL. (23371)(1-click HTML)

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. (23372)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23373)

SUBCHAPTER Q. GENERAL CRIMINAL PENALTIES (23374)(1-click HTML)
Sec. 912.801. VIOLATION OF CHAPTER; CRIMINAL PENALTY. (23375)(1-click HTML)

(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. (23376)

(b) An offense under this section is punishable by: (23377)

(1) a fine of not more than $500; (23378)

(2) confinement in jail for a term of not more than 180 days; or (23379)

(3) both a fine and confinement as provided by Subdivisions (1) and (2). (23380)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23381)

Sec. 912.802. CONVERSION; CRIMINAL PENALTY. (23382)(1-click HTML)

(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. (23383)

(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. (23384)

(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. (23385)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23386)

Amended by: (23387)

Acts 2009, 81st Leg., R.S., Ch. 87 (S.B. 1969), Sec. 25.126, eff. September 1, 2009. (23388)

Sec. 912.803. UNLAWFUL DIVERSION OF FUNDS; CRIMINAL PENALTY. (23389)(1-click HTML)

(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: (23390)

(1) belongs to or is under the control and management of the company; and (23391)

(2) is designated by law for that purpose. (23392)

(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. (23393)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23394)

Amended by: (23395)

Acts 2009, 81st Leg., R.S., Ch. 87 (S.B. 1969), Sec. 25.127, eff. September 1, 2009. (23396)

Sec. 912.804. FALSE AFFIDAVIT; CRIMINAL PENALTY. (23397)(1-click HTML)

(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. (23398)

(b) An offense under this section is punishable by: (23399)

(1) a fine of not more than $500; or (23400)

(2) confinement in jail or imprisonment in the Texas Department of Criminal Justice for a term of not more than two years. (23401)

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. (23402)

Amended by: (23403)

Acts 2009, 81st Leg., R.S., Ch. 87 (S.B. 1969), Sec. 25.128, eff. September 1, 2009. (23404)

  

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