Texas Administrative Code
Title 28 - INSURANCE
Part 1 - TEXAS DEPARTMENT OF INSURANCE
Chapter 5 - PROPERTY AND CASUALTY INSURANCE
Subchapter C - TEXAS MEDICAL LIABILITY INSURANCE UNDERWRITING ASSOCIATION
Section 5.2002 - Operation of the Texas Medical Liability Insurance Underwriting Association
Universal Citation: 28 TX Admin Code § 5.2002
Current through Reg. 50, No. 13; March 28, 2025
(a) Membership. The association is governed by Insurance Code Chapter 2203. Any insurer authorized to write and engaged in writing any insurance, the writing of which requires the insurer to become a member of the association under Insurance Code § 2203.055, will become a member of the association on the first day of January immediately following the date the insurer started writing such insurance. The determination of the insurer's participation in the association will be made as of the date of such membership in the same manner as for all members of the association. Any member that ceases to be authorized to write or that ceases to engage in the writing of any insurance that would require such insurer to become a member of the association will remain a member of the association until midnight of December 31 next following the date the insurer ceases to be authorized to write or ceases to write such insurance, and the insurer's participation in the association will cease as of that time; provided, however, that each member must participate in any financial deficit of the association for all calendar years subsequent to December 31, 1976, during which the insurer was a member of the association, whenever such deficit is determined. The member must be charged or credited in due course with its proper share of all expenses or losses and any recoupment or reimbursement allocable to the member. If a member is merged or consolidated with another insurer, the continuing insurer will become a member of the association in place of the merged or consolidated member, provided that such member will be deemed to have become a member of the association on the date the merged or consolidated member became a member and provided, further, that such member will pay no initial expense fee.
(b) Expense fees.
(1) Initial expense fee. Each member must pay
to the association an initial expense fee of $100. All members of the
association must pay such fees on or before the date they become members of the
association.
(2) Annual expense
fee. In addition to the initial expense fee, each member must pay to the
association an annual expense fee in an amount to be determined by the board of
directors and approved by the Commissioner. All members of the association must
pay such annual expense fee on or before the first of January for each year
during which the association exists.
(3) Remedy for failure to pay fees. If any
member fails or refuses to pay either the initial expense fee or the annual
expense fee after receipt of written notice by the association that such fee is
due and payable, then such member will be subject to the same remedies as
provided in §
5.2003(d)(4) of
this title (relating to Property and Casualty Insurance) for the failure of the
member to pay any assessment levied by the association.
(4) Use of fees. All expense fees paid to the
association will be used in such manner as the board of directors may from time
to time direct in accordance with this subchapter.
(c) Meetings of members.
(1) Notice of meetings. Written or printed
notice stating the place, date, hour, subjects of the meeting, and the purpose
or purposes for which the meeting is called, must be delivered not less than 10
nor more than 50 days before the date of the meeting, either personally or by
mail, by or at the direction of the chair of the board of directors, the
secretary, or other person calling the meeting, to each member entitled to vote
at such meeting. Public notice of meetings must be given as required by
Government Code Chapter 551.
(2)
Meetings.
(A) Annual meeting. The annual
meeting of the members must be held not later than the 30th day of September of
each year at an hour and place to be determined by the board of directors for
the purpose of electing directors and for the transaction of such other
business as may come before the meeting. If the election of directors is not
held on the day designated for any annual meeting of the members, the board of
directors must cause the election to be held at a special meeting of the
members as soon as may be convenient after the annual meeting.
(B) Special meetings. The board of directors,
the chair of the board of directors, or 20% of the members may call a special
meeting of the members and designate any place as the place of the special
meeting.
(3) Quorum.
Fifty members, represented by person or by proxy, is a quorum at a meeting of
the members. If fewer than 50 members are represented at a meeting, a majority
of the members represented may adjourn the meeting from time to time without
further notice. At the next meeting after adjournment at which a quorum is
present or represented, any business may be transacted at the meeting as
originally notified. The members represented at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough persons to leave less than a quorum.
(4) Voting.
(A) Each member is entitled to one vote at
the annual meeting and each special meeting.
(B) A member may vote by proxy executed in
writing by the member. No proxy will be valid after the next annual meeting
after the date of its execution unless otherwise provided in the proxy. Each
proxy is revocable.
(C) Each
member's vote may be voted by such officer, agent, or proxy as the bylaws of
such member may authorize or, in the absence of such authorization, as such
member may determine.
(D) Voting on
any question or in any election may be by voice vote or by show of hands unless
the presiding officer orders, or any member demands, that voting be by written
ballot.
(5) Rules. To
the extent applicable, Robert's Rules of Order govern the conduct of and
procedure at all meetings of the members.
(d) Directors.
(1) Selection. At each annual meeting of
members or as otherwise provided in subsection (c)(2) of this section, the
members must elect five directors from member companies for the categories set
forth in paragraph (2)(B) and (C) of this subsection. Four directors must be
selected in the manner set forth in paragraph (2)(D) - (F) of this subsection.
Directors take office on October 1 of each year and will hold office until the
next election of directors or until a successor has been selected and
qualified.
(2) Membership.
(A) The number of the directors of the
association must be nine.
(B) Three
directors to be elected in accordance with paragraph (1) of this subsection
must be elected by the members and be separate members of the association
representing each of the following:
(i) the
American Property Casualty Insurers Association;
(ii) the National Association of Mutual
Insurance Companies; and
(iii) the
Insurance Council of Texas.
(C) Two directors must be elected by the
members and must be:
(i) a member insurer
organized under the laws of and domiciled in Texas; and
(ii) a member insurer that is either (or
both):
(I) not a member of those associations
described in subparagraph (B) of this paragraph, or
(II) an insurer that is not domiciled in
Texas.
(D)
One director must be a physician who is appointed by the Texas Medical
Association or its successor.
(E)
One director must be a representative of hospitals appointed by the Texas
Hospital Association or its successor.
(F) Two directors must be members of the
public to be appointed by the Commissioner.
(G) No director may fill more than one seat
on the board of directors, and no member affiliated by ownership, management,
or control may simultaneously occupy seats on the board of directors. No later
than 60 days before the annual meeting, the board of directors must select a
nominating committee of three member companies. The three directors who will
represent the organizations set forth in subparagraph (B) of this paragraph
must be nominated by the nominating committee. The two directors described in
subparagraph (C) of this paragraph must be nominated by any member of the
association by submitting the nominee's name to the nominating committee. To be
eligible for selection to the board of directors by the members, a member must
be nominated at least 30 days before the annual meeting at which such directors
are selected.
(3) Term
of office. Unless removed in accordance with this subchapter, each director
will hold office until the next election of directors or until a successor has
been selected and qualified.
(4)
Regular meetings. A regular meeting of the board of directors must be held with
notice as provided for in this subsection, immediately after and at the same
place as the annual meeting of the members. The board of directors may provide,
by resolution, the time and place for the holding of additional regular
meetings with notice to the directors at least 10 days before each regular
meeting as provided in this subsection.
(5) Notice of regular or special meeting.
Notice of any regular or special meeting must be given at least 10 days before
the meeting. The association must provide notice by personal delivery, mail,
electronic, or other means to each director. If mailed, notice will be deemed
to be delivered when deposited in the United States mail, addressed with
postage prepaid. If the notice is by other reasonable means, the association
must maintain a written record of the method of notification. Any director may
waive notice of any meeting. The attendance of a director at a meeting is a
waiver of notice of the meeting, except where a director attends a meeting for
the express purpose of objection to the transaction of any business because the
meeting is not lawfully called or convened.
(6) Special meetings. Special meetings of the
board of directors may be called by the chair of the board, or at the request
of any two directors. The person or persons who call special meetings of the
board of directors may fix any place that is accessible to the public as the
place for holding any special meeting of the board of directors called by
them.
(7) Statement of purpose of
meeting required. The business to be transacted at, and the purpose of, any
regular or special meeting of the board of directors must be specified in the
notice, or waiver of notice, of the meeting, and in the notice required by
Government Code Chapter 551.
(8)
Quorum. A majority of directors is a quorum for the transaction of business at
any meeting of the board of directors. Action taken by a majority of directors
present at a meeting at which a quorum is present will be the act of the board
of directors. If at any meeting of the board of directors there is less than a
quorum present, a majority of those present may adjourn the meeting from time
to time until a quorum is obtained, and no further notice need be given other
than by announcement at the meeting that will be adjourned.
(9) Presumption of assent. A director of the
association who is present at the meeting of the board of directors at which
action on any matter is taken is presumed to have assented to the action taken
unless the director's dissent is entered in the minutes of the meeting, or
unless a written dissent to the action is filed with the person acting as
secretary of the meeting before the adjournment. The right to dissent is not
available to a director who voted in favor of the action.
(10) Compensation. By resolution of the board
of directors, the directors and members of committees of the association may be
paid their expenses, if any, of attendance at each meeting of the board of
directors or each meeting of a committee of the association. No other payment
may be made to directors other than that provided in this paragraph except that
nothing in this subchapter may be construed as preventing any director from
receiving compensation for serving the association in any other
capacity.
(11) General powers. The
board of directors must manage the business and affairs of the association
subject to the supervision and control, at all times, of the Commissioner and
the department as set forth in this subchapter and in the Act. Included among
the powers of the board of directors, but not in limitation thereof, are the
following:
(A) to purchase or otherwise
acquire for the association any property, rights, or privileges that the
association is authorized to acquire;
(B) to remove any officer summarily for
cause, or without cause and, in their discretion, from time to time to dissolve
the powers and duties of any officers and to confer the powers and duties upon
any other person;
(C) to appoint
and remove or suspend such subordinate officers, agents, employees, or
representatives as they may deem necessary and to determine their duties, and
fix, and from time to time change, their salaries or remuneration, and to
require security as and when they think fit;
(D) to confer upon any officer of the
association the power to appoint, remove, and suspend subordinate officers or
employees;
(E) to determine who may
be authorized on the association's behalf to make and sign bills, notes,
acceptances, endorsements, checks, releases, receipts, contracts, and other
instruments;
(F) to delegate any of
the powers of the board of directors in relation to the ordinary business of
the association to any standing or special committee, or to any officers or
agent (with power to subdelegate) upon such terms as they think fit;
(G) to contract, from time to time, with one
or more members for single or multiyear terms, to act as servicing carriers to
perform all policy functions of the association, including, without limitation
to, underwriting, issuance of policy, coding and premium accounting, settlement
of claims to conclusion, and reporting to the association, as may be directed
by the association, subject to provisions of law and this subchapter, upon the
terms and for the consideration expressed. Such contracts may not become
effective until the contracts have been approved by the department;
(H) to approve expenses and levy assessments,
including preliminary assessments for initial expenses necessary to commence
operations, and assessments to defray losses and expenses;
(I) to establish necessary
facilities;
(J) to enter into
commission arrangements with agents regarding the sale of medical liability
insurance through the association;
(K) to promulgate reasonable and objective
underwriting standards;
(L) to
either or both accept and refuse the assumption of reinsurance from its members
and cede and purchase reinsurance, provided, however, that the reinsurance is
governed by rules promulgated by the Commissioner; and
(M) to direct the collection, administration,
investment, and valuation of the stabilization reserve funds consistent with
the Act and this subchapter.
(12) Committees.
(A) The board of directors, by resolution or
resolutions passed by a majority of the board of directors, may designate one
or more committees, each committee to consist of two or more of the directors
of the association that, to the extent provided in the resolution or
resolutions, will have and may exercise the powers of the board of directors in
the management of the business and affairs of the association. The committee or
committees will have the name or names as may be determined from time to time
by appropriate resolution. All committees must keep regular minutes of their
proceedings and report the minutes to the board of directors when
required.
(B) The chair may appoint
the members of the committees as may be appropriate to carry out the business
of the association.
(C) The
delegation to a committee of authority consistent with this section may not
operate to relieve the board of directors, or any director, of any
responsibility imposed upon the board of directors or director by
law.
(13) Removal. Any
person serving as a director may be removed from a position as director either
with or without cause at any special meeting of members if notice of intention
to remove the director has been stated as one of the purposes of the meeting.
This paragraph may not be construed to allow the removal of any member from the
board of directors.
(14) Vacancies.
(A) A director position is considered vacant
upon the resignation of the member serving as director.
(B) Any vacancy occurring in the board of
directors may be filled at the next meeting of the board of directors following
the occurrence of such vacancy. Subject to the provisions of paragraph (2) of
this subsection, such vacancy must be filled by the affirmative vote of a
majority of the remaining directors though less than a quorum. A director
elected to fill a vacancy must be elected for the unexpired term of its
predecessor.
(15)
Executive committee. The board of directors, by resolution or resolutions
passed by a majority of the board of directors, may designate an executive
committee to consist of a chair, a vice chair, a secretary, a treasurer, and
the immediate past chair, provided the immediate past chair is a director. The
general manager must be an ex officio member of the executive committee. To the
extent provided in the resolution or resolutions, the executive committee has
and may exercise the powers of the board of directors in the management of the
business and affairs of the association. The executive committee must keep
regular minutes of its proceedings and report the minutes to the board of
directors. The delegation authority consistent with this section does not
operate to relieve the board of directors, or any director, of any
responsibility imposed by law upon the board of directors or any
director.
(e) Officers.
(1) Number. The officers of the association
are the chair of the board of directors, the vice chair of the board of
directors, the secretary, the treasurer, and other officers as the Commissioner
may desire, all of whom are elected by the board of directors. No two offices
may be held by the same person except for the offices of secretary and
treasurer.
(2) Election and term of
office. The officers of the association are elected annually by the board of
directors at the first meeting of the board of directors held after each annual
meeting of the members or as soon as practical following the annual meeting.
Each officer must hold office until a successor has been duly elected and
qualified or until the officer's resignation, death, or removal.
(3) Removal and vacancies. Any officer or
agent elected or appointed by the board of directors may be removed by the
board of directors whenever, in its judgment, the best interests of the
association would be served or otherwise in accordance with this subchapter,
but such removal is without prejudice to the contract rights, if any, of the
person so removed. A vacancy in any office because of death, resignation,
removal, disqualification, or otherwise may be filled by the board of directors
for the unexpired portion of the term.
(4) Chair of the board. The chair of the
board must preside at all meetings of the members and at all meetings of the
directors, appoint and discharge employees and agents of the association
subject to the approval of the directors, fix the compensation of employees and
agents, make and sign contracts and agreements in the name of the association,
and appoint committees. The chair of the board must ensure that the books,
reports, statements, and certificates are properly kept, made, and filed, if
necessary, and the chair of the board must generally do and perform all acts
incident to the office of chair of the board or that may be authorized or
required by law, by this subchapter, or by the board of directors, not
inconsistent with this subchapter.
(5) Vice chair of the board. The vice chair,
elected by the board of directors, has powers and must perform duties as
assigned to the vice chair, not inconsistent with this subchapter.
(6) Secretary. The secretary must:
(A) keep the minutes of the members and of
the board of directors' meetings in one or more books provided for that
purpose;
(B) provide all notices as
required by the provisions of this subchapter. In case of the secretary's
absence or refusal or neglect to give the required notice, notice may be given
at the direction of the chair of the board of directors, or of the members upon
whose request the meeting is called;
(C) be custodian of the association's
records;
(D) keep a register of the
post office address of each member;
(E) annually determine each member's
participation in the association in the manner required by the Act and this
subchapter and keep a register of each member's percentage of participation;
and
(F) in general, perform all
duties incident to the office of secretary and such other duties as from time
to time may be delegated to the secretary by the chair of the board or by the
board of directors.
(7)
Treasurer. The treasurer must have custody of all funds, securities, evidences
of indebtedness, and other valuable documents of the association, including
those attributable to the stabilization reserve funds. The treasurer must
receive and give, or cause to be given, receipts and acquittances for money
paid in on account of the association, and pay out of the funds on hand all
just debts of the association, of whatever nature, upon maturity of the debts.
The treasurer must enter, or cause to be entered, in books of the association
to be kept for that purpose, full and accurate accounts of all money received
and paid out on account of the association, and whenever required by the board
of directors, the treasurer must keep, or cause to be kept, other books as
would show a true record of the reserves, expenses, losses, gains, assets, and
liabilities of the association.
(f) Fiscal year. The fiscal year of the association is the calendar year.
(g) Waiver of notice. Whenever any notice is required to be given to any members or director of the association under the provisions of this subchapter, a waiver in writing signed by the person or persons entitled to notice is deemed equivalent to the giving of such notice.
(h) Protection of directors and officers.
(1) Any person or insurer made
or threatened to be made a party to any civil, criminal, administrative, or
investigative action, suit, or proceeding (other than an action by or in the
right of the association) because such person or insurer is or was a member or
is serving or served on a committee or is or was an officer or employee of the
association or is or was serving any other entity or organization at the
request of the association is entitled to be indemnified by the association
against all judgments, fines, amounts paid in settlement, reasonable costs and
expenses (including attorneys' fees), and other liabilities actually and
reasonably incurred (other than for amounts paid to the association itself) as
a result of such threatened or actual action, suit, or proceeding except in
relation to matters as to which that person or insurer is finally adjudged in
such action, suit, or proceeding to be liable by reason of willful misconduct
in the performance of that person's or insurer's duties or obligations to the
association or other entity as previously provided and, with respect to any
criminal actions or proceedings, except when such person or insurer believed or
had reasonable cause to believe that their conduct was unlawful.
(2) Indemnification must be provided whether
or not such person or insurer is a member or is holding office or is employed
or serving at the time of such action, suit, or proceeding, and whether or not
any such liability was incurred prior to the adoption of this
subchapter.
(3) Indemnification is
not exclusive of other rights such person or insurer may have, and passes to
the successors, heirs, executors, or administrators of such person or
insurer.
(4) The termination of any
such action, suit, or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent will not in itself create a
presumption that such person or insurer was liable by reason of willful
misconduct or that they had reasonable cause to believe that their conduct was
unlawful.
(5) In each instance that
a question of indemnification arises, entitlements thereto, pursuant to the
condition set forth in this subsection, must be determined by the board of
directors by a majority vote of a quorum consisting of directors that were not
parties to such action, suit, or proceeding or by the board of directors,
whether interested or disinterested, if based upon a written opinion of legal
counsel that the action, suit, or proceeding could qualify for indemnification
because of reasonable doubt that the directors were liable by reason of willful
misconduct in the performance of duties or obligations to the association or
other entity as provided in this subsection, or that there was reasonable doubt
that the directors believed or had reasonable cause to believe that the conduct
was unlawful, and the board of directors must also determine the time and
manner of payment of such indemnification; provided, however, if any such
action, suit, or proceeding is terminated by compromise settlement,
indemnification in respect of such disposition must be made only if such
settlement had the prior approval of the board of directors, and provided
further that a person or insurer who or that has been wholly successful, on the
merit or otherwise, in the defense of a civil or criminal action, suit, or
proceeding of the character described in this subsection will be entitled in
every instance to indemnification as authorized in this subchapter.
(6) Expense incurred in defending a civil or
criminal action, suit, or proceeding may be paid by the association in advance
of the final disposition of the action, suit, or proceeding, as authorized by
the board of directors in the specific case, upon receipt of an undertaking by
or on behalf of the person or insurer to repay the amount, unless it is
determined that the person or insurer is not entitled to be indemnified by the
association.
(7) Nothing in this
subsection is deemed to preclude a person or insurer who or that the board of
directors has determined not to be entitled to indemnification from asserting
the right to such indemnification by legal proceedings.
(8) Indemnification as provided in this
subsection is apportioned among all members, including any named in any such
action, suit, or proceeding, in the same manner as other operating expenses of
the association.
(i) Annual report. The treasurer must file with the department annually, on or before the first day of March, a statement that contains information on the association's transactions, condition, operations, and affairs during the preceding calendar year. Such statement must be in the form and contain the matters and information prescribed by the department. The department may, at any time, require the association to furnish additional information with respect to its transactions, condition, or any matter considered to be material and of assistance in evaluating the scope, operation, and experience of the association.
(j) Examinations. The department must examine the affairs of the association in accordance with Insurance Code Chapter 401.
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