CHAPTER 912. COUNTY MUTUAL INSURANCE COMPANIES
INSURANCE CODE
TITLE 6. ORGANIZATION OF INSURERS AND RELATED ENTITIES
SUBTITLE F. FARM AND COUNTY MUTUAL INSURANCE COMPANIES
CHAPTER 912. COUNTY MUTUAL INSURANCE COMPANIES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 912.001. DEFINITIONS. In this chapter:
(1) "Member" includes a policyholder or another person who is
insured by a county mutual insurance company.
(2) "Policy" includes a certificate or contract of insurance,
certificate of membership, or other document through which
insurance is effected or evidenced.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 912.002. LIMITED EXEMPTION FROM INSURANCE LAWS;
APPLICABILITY OF CERTAIN LAWS. (a) A county mutual insurance
company is exempt from the operation of all insurance laws of
this state except laws that are made applicable by their specific
terms or except as specifically provided by this chapter.
(b) A county mutual insurance company is subject to:
(1) Sections 38.001, 401.051, 401.052, 401.054-401.062, 401.151,
401.152, 401.155, 401.156, 501.159, 501.202, 501.203, 822.204,
1806.001, 1806.101, 1806.103(b), 1806.104-1806.107, 2002.002, and
2002.005;
(2) Subchapter A, Chapter 86;
(3) Subchapter A, Chapter 401;
(4) the provisions of Subchapter B, Chapter 424, other than
Sections 424.052, 424.072, and 424.073;
(5) Chapters 221, 251, 252, 254, 541, and 2210; and
(6) Articles 5.39 and 5.40.
(c) Rate regulation for a residential fire and allied lines
insurance policy written by a county mutual insurance company is
subject to Chapter 2253. On and after December 1, 2004, rate
regulation for a personal automobile insurance policy and a
residential fire and allied lines insurance policy written by a
county mutual insurance company is subject to Article 5.13-2 and
Chapter 2251. A county mutual insurance company is subject to
Chapter 2253. The commissioner may adopt rules as necessary to
implement this subsection.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003. Amended by Acts 2003, 78th Leg., ch. 206, Sec. 21.40(a),
(b), eff. June 11, 2003; Acts 2003, 78th Leg., ch. 209, Sec. 10,
eff. Oct. 1, 2003.
Amended by:
Acts 2005, 79th Leg., Ch.
631, Sec. 4, eff. September 1, 2005.
Acts 2007, 80th Leg., R.S., Ch.
730, Sec. 2E.109, eff. April 1, 2009.
Sec. 912.003. FEES. The department shall charge and collect a
fee in the amount of $1 for the issuance of a county mutual
insurer's certificate of authority.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 912.004. FORMATION OF NEW COUNTY MUTUAL COMPANY PROHIBITED.
A new county mutual insurance company may not be formed under
this chapter.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 912.005. LIMITATION ON TRANSFER OF BUSINESS TO COUNTY
MUTUAL INSURANCE COMPANY. An insurer may not transfer more than
10 percent of the insurer's insurance policies to a county mutual
insurance company without the prior approval of the commissioner.
Added by Acts 2003, 78th Leg., ch. 206, Sec. 21.405, eff. June
11, 2003.
SUBCHAPTER B. ORGANIZATION OF COUNTY MUTUAL INSURANCE COMPANY;
DIRECTORS
Sec. 912.051. APPLICABILITY OF TEXAS NON-PROFIT CORPORATION ACT.
(a) Except to the extent of any conflict with this code, the
Texas Non-Profit Corporation Act (Article 1396-1.01 et seq.,
Vernon's Texas Civil Statutes) applies to a county mutual
insurance company. The commissioner has each power and duty of,
and shall perform each act to be performed by, the secretary of
state under that Act with respect to county mutual insurance
companies.
(b) On advance approval of the commissioner, a county mutual
insurance company may pay dividends to its members.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 912.052. ELIGIBILITY OF BOARD OF DIRECTORS; TERM. (a) An
individual is eligible to serve as a director of a county mutual
insurance company if the individual is a policyholder who
maintains insurance coverage in the amount of at least $1,000
written by the company on the individual's property.
(b) Except as otherwise provided by the company's bylaws, a
director serves for a term of one year or until the director's
successor qualifies for office.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 912.053. GENERAL POWERS OF BOARD OF DIRECTORS. The board
of directors of a county mutual insurance company has the powers
provided by the company's charter.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 912.054. AUTHORITY TO BORROW MONEY. (a) The board of
directors of a county mutual insurance company may borrow money
in an amount determined to be necessary to pay the company's
accrued or unaccrued losses.
(b) The board may pledge as security for a loan the assets of
the company, including the contingent liability of its
policyholders.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 912.055. CHARTER AND ARTICLES OF INCORPORATION. The
charter and articles of incorporation of a county mutual
insurance company must state:
(1) the name of the company, which must include the words
"County Mutual Insurance Company";
(2) the location of the principal office of the company; and
(3) the number of the directors, which must be at least five.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 912.056. CREATION OF LOCAL CHAPTERS AND DISTRICTS. (a) A
county mutual insurance company's bylaws may provide for:
(1) the organization of local chapters to transact the company's
business; and
(2) the creation of districts in and for which directors may be
elected.
(b) The bylaws may also provide that delegates from the
company's local chapters are the company's supreme governing
body.
(c) The company may consider the hazards against which the
company insures and the company's classes of risks and territory
of operation in organizing the local chapters and creating the
districts.
(d) A company organized and operating under this chapter that,
as of September 1, 2001, and continuously thereafter, appointed
managing general agents, created districts, or organized local
chapters to manage a portion of the company's business
independent of all other business of the company may continue to
operate in that manner and may appoint and contract with one or
more managing general agents in accordance with this code only if
the company:
(1) cedes 85 percent or more of the company's direct and assumed
risks to one or more reinsurers; and
(2) has a private passenger automobile insurance business:
(A) with a market share of not greater than five percent; or
(B) that is predominantly nonstandard.
(e) A company described by Subsection (d) shall file, for each
managing general agent, district, or local chapter program, the
rating information required by the commissioner by rule. Each
managing general agent, district, or local chapter program shall
be treated as a separate insurer for the purposes of Chapters
544, 2251, 2253, and 2254.
(f) Notwithstanding any other provision of this code, a company
operating under Subsection (d) that cedes 85 percent or more of
the company's direct and assumed risks to one or more
nonaffiliated reinsurers shall maintain unencumbered surplus, or
guaranty fund and unencumbered surplus, equal to the greater of
$2 million or five percent of the company's recoverable for
reinsurance after taking full credit against the recoverable as
otherwise permitted for:
(1) premium payable to ceding insurers, net of any ceding
commission due the company;
(2) collateral held as required by Section 493.104, letters of
credit, and security trusts that secure the collection of the
reinsurance; and
(3) reinsurance through reinsurers whose financial strength is
rated "A" or better by the A. M. Best Company, Incorporated, or
another nationally recognized statistical rating organization
acceptable to the commissioner.
(g) The commissioner by rule shall adopt a transition period for
insurance companies subject to Subsection (f) to meet the
requirements of that subsection and for the pro rata elimination
of any deficiencies in the amounts required under that
subsection. The transition period adopted under this subsection
must be for a period of not less than five years.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Amended by:
Acts 2009, 81st Leg., R.S., Ch.
677, Sec. 3, eff. September 1, 2009.
Sec. 912.057. POLICYHOLDER MEETINGS. (a) A county mutual
insurance company shall hold a policyholder meeting to elect
directors and transact business at the time and place and in the
manner prescribed by the company's bylaws.
(b) A special meeting of a company's policyholders may be called
by:
(1) the president, the general manager, or one-third of the
company's directors; or
(2) the commissioner.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 912.058. VOTING BY POLICYHOLDERS. (a) Each policyholder
of a county mutual insurance company is entitled to only one vote
at a policyholders' meeting.
(b) A policyholder may not vote by proxy unless the company's
bylaws specifically authorize voting in that manner.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 912.059. AMENDMENT TO BYLAWS. (a) A majority of the
members of a county mutual insurance company, either in person or
by proxy when ratified by the board of directors, may amend the
company's bylaws at a regular meeting or at a special meeting
called for that purpose.
(b) Notice of a regular or special meeting at which an amendment
to the bylaws will be considered must be mailed or delivered
personally to each member.
(c) An amendment to the bylaws is not effective until approved
by the commissioner as meeting the requirements of this chapter.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 912.060. AUTHORITY TO PROHIBIT WAIVER OF BYLAWS. A county
mutual insurance company may provide in its bylaws that a local
chapter or an officer or agent elected by the local chapter may
not waive a provision of the bylaws.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 912.061. APPLICATION FOR EXTENSION OF CHARTER; TERM. (a)
Before a county mutual insurance company's charter or extension
of the charter expires, the company may apply to the department
for an extension of the charter for a term of 50 years from the
date the charter would otherwise expire.
(b) The application for an extension must:
(1) demonstrate that the application was authorized either by a
two-thirds vote of the company's directors or by a majority vote
at a policyholders' meeting;
(2) state in full the charter to be extended;
(3) state the period for which the charter is to be extended;
(4) be signed and acknowledged by the president and secretary of
the company; and
(5) be accompanied by a fee of $50.
(c) A company whose charter is extended retains the rights,
privileges, and immunities granted a county mutual insurance
company by this chapter.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
SUBCHAPTER C. AUTHORITY TO ENGAGE IN BUSINESS IN THIS STATE
Sec. 912.101. OPERATION UNDER CERTIFICATE OF AUTHORITY. A
county mutual insurance company engages in the business of
insurance under a certificate of authority issued by the
department.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 912.102. AUTHORITY TO ENGAGE IN BUSINESS. A county mutual
insurance company may engage in the business of insurance in
accordance with this chapter and other applicable laws only if:
(1) the company was formed before September 6, 1955, and was
actively engaged in the business of insurance on that date; or
(2) the company was formed under a permit to solicit insurance
issued before September 6, 1955.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
SUBCHAPTER D. POLICIES AND COVERAGE
Sec. 912.151. KINDS OF INSURANCE AUTHORIZED. (a) A county
mutual insurance company that qualifies to write casualty lines
for statewide operation may write all lines of automobile
insurance. The company may not assume a risk on any one hazard
that is greater than five percent of its assets, unless the
company promptly reinsures the excess amount of risk.
(b) A county mutual insurance company may insure property
against loss or damage by:
(1) fire, lightning, gas explosion, theft, windstorm, and hail
or for any combination of these hazards; or
(2) any other hazard against which any other fire or windstorm
insurance company operating in this state may write insurance on
property described by Subsection (c).
(c) Unless restricted by its charter, the company may write
insurance against the hazards described by Subsection (b) on:
(1) a rural or urban dwelling and attendant outhouses and yard
buildings;
(2) the contents, for home and personal use, of a rural or urban
dwelling, an attendant outhouse, or a yard building, including a
family vehicle, musical instrument, and library;
(3) a barn or other farm, dairy, truck garden, hennery, or ranch
building and any other improvement;
(4) a vehicle, harness, implement, tool, or machinery of any
description used on and about a farm, truck garden, dairy,
hennery, or ranch;
(5) fruit and products, other than growing crops, and any fowl,
livestock, or domestic animals that are produced, raised, grown,
kept, or used on a farm, truck garden, dairy, hennery, or ranch;
(6) a church house, country school house, country lodge room, or
country recreation hall, other than a road house or public dance
hall; and
(7) the contents of a church house, country school house,
country lodge room, or country recreation hall.
(d) An insurance policy written by a county mutual insurance
company against loss or damage by windstorm or hail, as described
by Subsection (a), may include coverage for:
(1) a building or other structure that is built wholly or
partially over water; and
(2) the corporeal movable property contained in a building or
structure described by Subdivision (1).
(e) The county mutual insurance company may impose appropriate
limits of coverage and deductibles for coverage described by
Subsection (d).
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Amended by:
Acts 2005, 79th Leg., Ch.
1153, Sec. 5, eff. September 1, 2005.
Sec. 912.152. POLICY FORMS. (a) A county mutual insurance
company is subject to:
(1) Sections 1952.051-1952.055;
(2) Subchapter B, Chapter 2002;
(3) Chapter 2301; and
(4) Articles 5.06 and 5.35.
(b) County mutual insurance companies shall file policy forms
under Subchapter B, Chapter 2301, or continue to use the standard
policy forms and endorsements promulgated under former Articles
5.06 and 5.35 on notification to the commissioner in writing in
the manner prescribed by those articles that those forms will
continue to be used.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003. Amended by Acts 2003, 78th Leg., ch. 206, Sec. 21.41, eff.
June 11, 2003.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
730, Sec. 2E.110, eff. April 1, 2009.
Sec. 912.153. CONTRACT TERMS: INCORPORATION OF BYLAWS. (a) A
county mutual insurance company's bylaws are part of each
contract between the company and an insured.
(b) Each policy issued by the company must state that the
company's bylaws are part of the contract.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 912.154. AMOUNT OF INSURANCE UNDER MULTIPLE HAZARDS POLICY.
The amount of risk or insurance coverage in a policy that
insures a risk against more than one hazard is the maximum loss
the county mutual insurance company may sustain under the policy
at any one time, regardless of the number of hazards against
which the company insures.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 912.155. REPAIR OR REPLACEMENT OF INSURED PROPERTY. (a)
The county mutual insurance company's bylaws may authorize the
company to require, at its option, that all or a percentage of
the money paid for a loss be used to replace or repair the
damaged or destroyed property. The requirement may apply equally
to personal and real property, including personal and real
property exempt from execution, such as a homestead or a building
on the homestead. The company may provide in its bylaws that the
requirements of Section 862.053 do not apply to its insurance
policies.
(b) This section does not apply to a company that meets the
requirements of Section 912.308(a)(3), but such a company is
subject to Sections 883.154, 883.155, and 883.156.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 912.156. CONTESTING CLAIM FOR CERTAIN PURPOSES PROHIBITED.
(a) In this section, "full payment" means payment of the full
amount of a loss actually sustained on the occurrence of the
contingency against which the insurance coverage is obtained, not
to exceed the maximum amount stated in the policy.
(b) A county mutual insurance company may not contest a claim:
(1) only for delay or a captious or inconsequential reason; or
(2) to force a settlement for less than full payment.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 912.157. DENIAL OF CLAIM: NOTICE REQUIRED. (a) A county
mutual insurance company shall notify a claimant of the company's
intent to deny liability on a claim not later than the 60th day
after the date the company receives due proofs that the claim
will not be paid.
(b) A company that does not notify a claimant as required by
Subsection (a) is presumed as a matter of law to have accepted
liability on the claim.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
SUBCHAPTER E. CHARGES, PREMIUMS, AND ASSESSMENTS
Sec. 912.201. SCHEDULE OF CHARGES. A county mutual insurance
company shall file with the department a schedule of the amounts
the company charges a policyholder or an applicant for a policy,
regardless of the term the company uses to refer to those
charges, including "rate," "policy fee," "inspection fee,"
"membership fee," or "initial charge." A county mutual insurance
company shall file premium, expense, and loss experience data
with the department in the manner prescribed by the commissioner.
An insurer shall file the schedules and data required under this
section according to rules promulgated by the commissioner.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003. Amended by Acts 2003, 78th Leg., ch. 206, Sec. 21.42, eff.
June 11, 2003.
Sec. 912.202. PAYMENT OF PREMIUM OR ASSESSMENT. (a) A county
mutual insurance company's bylaws must:
(1) state the time and manner of the levy and payment of a
premium or assessment for policies written by the company;
(2) in addition to the regular premium or assessment under
Subdivision (1), establish the contingent liability of a
policyholder for all losses accrued while a policy is in force in
the amount of $2 for each $100 of insurance coverage; and
(3) state the time and manner of payment of a policyholder's
contingent liability established under Subdivision (2).
(b) As required by its bylaws, a county mutual insurance company
shall establish and levy premiums and assessments, including the
contingent liability of a policyholder, for all insurance written
by the company.
(c) A policyholder shall pay premiums and assessments as
required by the company's bylaws.
(d) The premium or assessment for a policy shall be secured by a
lien on each item of real or personal property, other than a
homestead, covered by the policy, including the land on which an
insured building is located. The lien remains on the property
while the insured owns the property.
(e) Subsection (a) does not apply to a company that meets the
requirements of Section 912.308(a)(3), but such a company is
subject to Sections 883.154, 883.155, and 883.156.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 912.203. NONPAYMENT OF PREMIUM OR ASSESSMENT: FILING OF
ACTION. (a) A county mutual insurance company may bring an
action in the home county of the company against a policyholder
who defaults on the payment of an assessment or premium.
(b) The company is entitled to judgment against the policyholder
for:
(1) delinquent premiums or assessments;
(2) foreclosure of the lien described by Section 912.202; and
(3) the costs of an action, including a reasonable attorney's
fee in the amount of at least $5.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 912.204. POLICYHOLDER LIABILITY. A policyholder is liable
for the losses of a county mutual insurance company only as
provided by Section 912.202 and the company's bylaws, and only in
proportion to the amount that the premium or assessment for the
policyholder's policy bears to the total amount of premiums or
assessments for all policies written by the company in the class
to which the policyholder's policy belongs.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
SUBCHAPTER F. AGENTS
Sec. 912.251. LICENSING AND APPOINTMENT OF AGENTS. An agent for
a county mutual insurance company must be licensed and appointed
as provided by Title 13.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003. Amended by Acts 2003, 78th Leg., ch. 1276, Sec. 10A.224(a),
eff. Sept. 1, 2003.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
730, Sec. 2E.111, eff. April 1, 2009.
SUBCHAPTER G. REGULATION OF COUNTY MUTUAL INSURANCE COMPANY;
FINANCIAL REQUIREMENTS
Sec. 912.301. REPORT REGARDING CONDITION OF COMPANY. (a) The
commissioner may, at any time the commissioner determines
advisable, compel written reports from a county mutual insurance
company regarding the company's condition.
(b) The commissioner may require that the report be verified
under oath by a responsible officer of the company.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 912.302. ANNUAL STATEMENT FEE. The department shall charge
and the comptroller shall collect a fee of $20 for the filing of
an annual statement by a county mutual insurance company.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 912.303. BOOKS AND RECORDS. (a) A county mutual insurance
company shall maintain the company's books and records in a form
and manner that accurately reflects the condition of the company
or the facts essential to the company's faithful and effective
operation.
(b) The company shall use forms or systems that most effectively
serve the purposes of this section.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 912.304. REINSURANCE. (a) A county mutual insurance
company may reinsure any or all of the company's risks with
another company against any hazard against which the county
mutual insurance company is permitted to insure.
(b) The county mutual insurance company may contract for mutual
or reciprocal reinsurance with another company on the mutual or
cooperative plan subject to the following conditions:
(1) the county mutual insurance company may assume the
reinsurance on the risks of the other company only if the other
company reinsures the risks of the county mutual insurance
company; and
(2) the county mutual insurance company may write or assume the
reinsurance only on property that the company is authorized to
insure and that is located in this state.
(c) A county mutual insurance company that reinsures another
company's property is liable for the losses of the other company
only as specified in the reinsurance contract. The county mutual
insurance company does not become a member or partner of the
other company as a result of the reinsurance.
(d) A county mutual insurance company may pay or collect
additional assessments or premiums for the purpose of a contract
described by Subsection (b).
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 912.305. SECURITY DEPOSIT. (a) A county mutual insurance
company shall maintain with the comptroller through the
department a deposit in cash or, subject to the commissioner's
approval, convertible securities. The deposit must be equal to:
(1) the largest amount assumed by the company on any one risk;
or
(2) on a demonstration of reinsurance acceptable to the
commissioner, the largest amount retained by the company on any
one risk after reinsurance.
(b) The deposit is liable for the payment of all judgments
against the company and is subject to garnishment after final
judgment against the company. The company, on the commissioner's
demand, must immediately replenish the deposit when the deposit
is impounded or depleted. If the company does not immediately
replenish the deposit, the company may be regarded as insolvent.
(c) If a county mutual insurance company makes a statement,
including a statement contained in an advertisement, letter, or
literature, that the company deposited cash or securities as
required by this section, the company must also state in full:
(1) the purpose, exact amount, and character of the deposit; and
(2) the conditions under which the deposit was made.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 912.306. REQUIRED BONDS. (a) A county mutual insurance
company shall obtain a bond for:
(1) the officer responsible for handling the funds of the
company's members; and
(2) all other office employees who may have access to the
company's funds.
(b) The bonds required under this section must:
(1) be with a surety authorized by the department to engage in
business in this state;
(2) be made payable to the department for the use and benefit of
the company's members; and
(3) obligate the principal and surety to pay pecuniary losses
that the company sustains through an act of fraud, dishonesty,
forgery, theft, embezzlement, wrongful abstraction, or wilful
misapplication, regardless of whether the act is committed by the
officer or employee directly and alone, or in cooperation with
another person.
(c) A bond under this section must:
(1) be in an amount that is at least the greater of $1,000 or
the amount of cash assets on hand, but not more than $20,000, if
the bond covers the officer; or
(2) be in an amount established by the department that is at
least $1,000 but not more than $5,000, if the bond covers office
employees.
(d) One or more persons may recover on a bond under this section
until the bond is exhausted.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 912.307. RESERVE REQUIREMENTS. (a) A county mutual
insurance company shall maintain unearned premium reserves as
provided by Section 862.102.
(b) The company shall invest the unearned premium reserves and
any other type of reserves authorized by the company's board of
directors in the same type of securities in which the reserve
funds of insurance companies engaged in the same kind of business
are required to be invested by law.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 912.308. AMOUNT AND INVESTMENT OF SURPLUS. (a) A county
mutual insurance company shall maintain an unencumbered surplus
which may be invested only in items listed in Section 822.204.
The unencumbered surplus must be at least:
(1) $25,000, if the company is organized to write insurance
coverage locally in only the county of its domicile;
(2) $50,000, if the company is organized to write insurance
coverage in only the county of its domicile and any adjacent
county; or
(3) an amount equal to the aggregate of the minimum capital and
minimum surplus required under Sections 822.054, 822.202,
822.210, and 822.211, for a fire insurance company if the county
mutual insurance company is organized to write insurance coverage
statewide.
(b) Except as provided by Section 912.056, a county mutual
insurance company is subject to Subchapter B, Chapter 404, and
Sections 822.203, 822.210, and 822.212.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
730, Sec. 2E.112, eff. April 1, 2009.
Acts 2009, 81st Leg., R.S., Ch.
677, Sec. 2, eff. September 1, 2009.
Sec. 912.309. POLICYHOLDER LOANS TO COMPANY. (a) A
policyholder may loan to a county mutual insurance company money
as necessary:
(1) for the company to engage in the company's business; or
(2) to enable the company to comply with a requirement of this
chapter, including the unencumbered surplus requirement under
Section 912.308.
(b) Subject to the approval of the commissioner, the county
mutual insurance company may repay a loan and agreed interest, at
an annual rate not to exceed 10 percent, only from the surplus
remaining after the company provides for the company's reserves,
other liabilities, and required surplus.
(c) A loan under this section or interest on a loan is not
otherwise a liability or claim against the company or any of its
assets.
(d) A county mutual insurance company may not pay a commission,
promotion expense, or other bonus in connection with a loan made
to the company.
(e) A county mutual insurance company shall report in its annual
statement the amount of each loan made to the company.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 912.310. CERTAIN COMPANIES EXEMPT. (a) Chapter 196, Acts
of the 53rd Legislature, Regular Session, 1953, and Chapter 117,
Acts of the 54th Legislature, Regular Session, 1955, do not apply
to a county mutual insurance company:
(1) that was organized and operating as a county mutual fire
insurance company on May 22, 1953; and
(2) the business of which is devoted exclusively to the writing
of industrial fire insurance policies covering dwellings,
household goods and wearing apparel on a weekly, monthly, or
quarterly basis on a continuous premium payment plan.
(b) The exemption established by this section applies only so
long as the company is engaged exclusively in the writing of
industrial fire insurance policies described by Subsection (a).
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
SUBCHAPTER O. GENERAL FINANCIAL REGULATION
Sec. 912.701. HAZARDOUS FINANCIAL CONDITION, SUPERVISION,
CONSERVATORSHIP, AND LIQUIDATION. Subchapter A, Chapter 404, and
Chapters 441 and 443 apply to a county mutual insurance company
engaged in the business of insurance in this state.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
730, Sec. 2E.113, eff. April 1, 2009.
SUBCHAPTER P. DISCIPLINARY ACTION AND PROCEDURES IN GENERAL
Sec. 912.751. OFFICER OR DIRECTOR UNWORTHY OF TRUST: REMOVAL AND
REVOCATION OF CERTIFICATE OF AUTHORITY. (a) After notice and
hearing, the commissioner shall order the removal of an officer
or director of a county mutual insurance company holding a
certificate of authority if the officer or director is found
unworthy of the trust or confidence of the public.
(b) If a county mutual insurance company does not remove an
officer or director as required by an order issued under
Subsection (a), the commissioner shall:
(1) revoke the company's certificate of authority; and
(2) treat the company as insolvent.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 912.752. FRAUDULENT OPERATION OR IMPROPER CONTESTS:
REVOCATION OF CERTIFICATE OF AUTHORITY. After notice and
hearing, the commissioner shall revoke the certificate of
authority of a county mutual insurance company that is:
(1) operating fraudulently; or
(2) improperly contesting the company's claims.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 912.753. TIME LIMIT TO APPEAL. An individual or a county
mutual insurance company may appeal an order or a ruling of the
commissioner under this chapter not later than the 60th day after
the date of the order or ruling, in accordance with Subchapter D,
Chapter 36.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
SUBCHAPTER Q. GENERAL CRIMINAL PENALTIES
Sec. 912.801. VIOLATION OF CHAPTER; CRIMINAL PENALTY. (a)
Except as otherwise provided by this subchapter, a person,
including a director, officer, agent, employee, attorney at law,
or attorney in fact of a county mutual insurance company, commits
an offense if the person violates this chapter.
(b) An offense under this section is punishable by:
(1) a fine of not more than $500;
(2) confinement in jail for a term of not more than 180 days; or
(3) both a fine and confinement as provided by Subdivisions (1)
and (2).
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 912.802. CONVERSION; CRIMINAL PENALTY. (a) A director,
officer, agent, employee, attorney at law, or attorney in fact of
a county mutual insurance company commits an offense if the
person fraudulently takes or converts to the person's own use or
secretes with the intent to take or convert to the person's own
use, and with knowledge that the person is not entitled to
receive it, any property or other thing of value of the company
that is in the person's custody, control, or possession as a
result of the person's office, directorship, agency, or
employment or in any other manner.
(b) A director, officer, agent, employee, attorney at law, or
attorney in fact of a county mutual insurance company commits an
offense if the person pays or delivers property or another thing
of value described by Subsection (a) to another person knowing
that the person is not entitled to receive it.
(c) An offense under this section is punishable by imprisonment
in the Texas Department of Criminal Justice for a term of not
more than 10 years or less than 2 years.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Amended by:
Acts 2009, 81st Leg., R.S., Ch.
87, Sec. 25.126, eff. September 1, 2009.
Sec. 912.803. UNLAWFUL DIVERSION OF FUNDS; CRIMINAL PENALTY.
(a) A director, officer, agent, employee, attorney at law, or
attorney in fact of a county mutual insurance company commits an
offense if the person wilfully borrows, withholds, or diverts
from its purpose in any manner all or part of a special fund
that:
(1) belongs to or is under the control and management of the
company; and
(2) is designated by law for that purpose.
(b) An offense under this section is punishable by imprisonment
in the Texas Department of Criminal Justice for a term of not
more than 10 years or less than 2 years.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Amended by:
Acts 2009, 81st Leg., R.S., Ch.
87, Sec. 25.127, eff. September 1, 2009.
Sec. 912.804. FALSE AFFIDAVIT; CRIMINAL PENALTY. (a) An
officer, director, agent, employee, attorney at law, or attorney
in fact of a county mutual insurance company commits an offense
if the person wilfully makes a false affidavit in connection with
the requirements of this chapter.
(b) An offense under this section is punishable by:
(1) a fine of not more than $500; or
(2) confinement in jail or imprisonment in the Texas Department
of Criminal Justice for a term of not more than two years.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Amended by:
Acts 2009, 81st Leg., R.S., Ch.
87, Sec. 25.128, eff. September 1, 2009.