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Cap: The statutory maximum amount payable by the guaranty association on an individual covered claim. The cap is $300,000 or the limits of the policy, whichever is less, for claims arising out of receiverships instituted on or after September 1, 1997.  There is no cap on worker's compensation claims. [§462.213]

Claimant: A liability claimant or insured who is a resident of this state at the time of the insured event.[§462.201]

Conservation/Supervision: Administrative remedies employed by the Texas Department of Insurance with respect to financially troubled insurance companies. Each action has timetables and requirements of Departmental approval for specific activities of companies placed under such proceedings. [Chap. 441]

Covered Claim: Generally, an unpaid claim of an insured or liability claimant that arises out of and is within the coverage of an insurance policy issued or assumed by an insurer authorized to do business in Texas, if that insurer becomes impaired and the claimant or insured is a resident of Texas at the time of the insured event or the claim is a first-party claim for damage to property that is permanently located in this state.  Refer to "Exceptions to TPCIGA Coverage," below, and to chapter 462 for additional limitations on covered claims. [§462.201]

Delinquency Proceeding: A proceeding commenced in court against an insurer for the purpose of liquidating, rehabilitating, reorganizing or conserving such insurer. [§443.004]

Distribution of Assets: Claims against the assets of a receivership estate are paid in a certain order of priority pursuant to the liquidation statute's "Priority of Distribution of Assets." Class 1 includes claims for the administrative expenses of the receiver and guaranty associations. Class 2 includes claims by policyholders and liability claimants for amounts not covered by the guaranty association, as well as claims by guaranty associations for reimbursement of covered claims payments. [§443.301]

Domiciliary Receivership:  A receivership proceeding instituted in the state where the impaired insurer was originally incorporated.

Early Access: A court-approved process whereby receivers can distribute estate assets to guaranty associations prior to a final estate distribution in order to decrease the need for assessments against member insurers. [§443.303]

Exceptions to TPCIGA Coverage:

Types of Insurance Not Covered [§462.007]

• Surplus Lines Insurance
• Life, annuity, health, or disability
• Mortgage guaranty, financial guaranty, or other forms of protection against investment risk
• Fidelity or surety bonds, or any other bonding obligations
• Credit insurance, vendors' single interest, collateral protection, or similar insurance protecting interests or a creditor arising out of a creditor-debtor transaction
• Warranties or service contracts
• Title
• Ocean Marine
• Transactions that involve transfer of investment or credit risk unaccompanied by transfer of insurance risk
• Insurance provided by or guaranteed by government

Types of Claims Not Covered [§462.202 et seq.]

• Unearned premium claims over $25,000
• Return of premiums under retrospective rating plans
• Individual covered claims over $300,000 (except for workers' compensation claims)
• Any claims by reinsurers, insurers, insurance pools or underwriting associations, including those for subrogation recoveries, reinsurance recoveries, contributions, indemnification or otherwise.
• Supplementary payment obligations including adjustment fees and expenses, attorneys' fees and expenses, court costs, interest and penalties and interest and bond premiums incurred prior to impairment
• Prejudgment or postjudgment interest

• Punitive, exemplary, extracontractual or bad-faith damages

General Creditor Claims: Claims which are lesser priority in receivership distributions than policyholder level claims.[§443.301]

Guaranty Act: Refers to Texas Insurance Code chapter 462.

Impaired Insurer: A member insurer that is placed in receivership or liquidation under a court order based on a finding of insolvency and designated by the Commissioner as an "impaired" insurer. [§462.004]

Line Account/Line of Business: The types of property and casualty coverage for which TPCIGA makes assessments: Auto, Other Lines and Workers Compensation. [§462.105]

Rehabilitation and Liquidation Oversight: Division within the Texas Department of Insurance responsible for managing special deputy receivers and overseeing the insolvency process.

Liquidator: May also be referred to as "receiver." The term includes the commissioner of insurance and/or the commissioner's designee to act as special deputy receiver. [§443.004]

Member Insurer: An insurer that writes any kind of business to which chap. 462 applies and holds a certificate of authority to engage in the business of insurance in Texas. [§462.004]

Net Worth Exclusion: Provision in the Guaranty Act that excludes from coverage any claim, other than a worker's compensation claim, arising from an insurance policy of an insured whose aggregate net worth exceeds $50 million. [§462.212]  The Association may also recover the amount of any worker's compensation claim paid on behalf of such insureds. [§462.308(a) (2)]

Non-Duplication of Recovery: Statutory provision requiring claimants to first exhaust their rights, including the right to a defense, under insurance policies of solvent insurers, including health insurance and uninsured motorists' coverage. The provision allows TPCIGA to offset any amounts recovered from other insurance. Also requires claimants to exhaust claims against other guaranty associations based upon residence of claimant for workers compensation claims and residence of insured for all other claims. [§462.251, et seq.]

Over the Cap Claims: Claims for amounts in excess of the guaranty association's cap but within the limits of the insurance policy issued by the impaired insurer.

Plan of Operation: A document created by the guaranty association providing for the fair, reasonable and equitable administration of the association. [§462.103]

Pre-'92 Estates: Insurers that became impaired prior to January 1, 1992.  Prior to 1992, covered claims were paid by the Receiver with funds advanced by the guaranty association, and such claim handling did not include the duty to defend policyholders under liability policies. Effective January 1, 1992, the legislature gave TPCIGA direct responsibility for handling claims and defending insureds of insurers who became impaired on or after that date.  Although the revised law also transferred claims handling responsibility for the pre-'92 estates to TPCIGA, no duty to defend was assumed for these estates. [Former art. 21.28-C, Footnotes: Acts 1991, 1993].

Premium Tax Offset: In Texas, assessments paid by member insurers can be allowed as an offset to the insurers' future insurance premium taxes at a rate of 10% for 10 years. [§462.157]  Some guaranty associations utilize other methods of recoupment, including policy surcharges and incorporation of recoupment into premium rate filings.

Proof of Claim (POC): A written statement of claim against the assets of the receivership estate filed with the receiver on a form approved by the receivership court as a necessary prerequisite to share in the distribution of estate assets. [§443.252]

Receivership Court: The court in which the delinquency proceeding is pending.  Texas insurance receivership proceedings are filed in the district court of Travis County, which maintains control over the receivership process. [§ 443.051]

SDR: Special Deputy Receiver - A person or entity contracted to administer receivership estates under the authority of the Commissioner as Receiver. [§443.154]

Special Master: A person appointed by the receivership court to provide additional oversight and recommendations to the court regarding Texas insurance receivership proceedings. Many legal matters entrusted to the receivership court are referred to the Special Master for hearing and recommendations. The Special Master holds quarterly status conferences related to receiverships which normally include Insurance Department representatives, Special Deputy Receivers, guaranty associations and other interested parties.

TDI: Texas Department of Insurance

Trigger: Event which causes a guaranty association to become responsible for payment of covered claims.  An impairment order signed by the Commissioner is the trigger in Texas.  Many other guaranty associations are triggered by a final order of liquidation of an insurer that contains a finding of insolvency.

 

Glossary of Terms

Ancillary Receivership: A receivership proceeding in a state other than the state in which the insurer is legally domiciled.  Also see "Domiciliary Receivership."

Assessments: Sums of money paid periodically to the guaranty association by solvent member insurers to provide funds to pay claims of impaired insurers. [Statutory reference Tex.Ins.Code §462.151, et seq.]

Bar Date: Deadline for presenting a claim to the guaranty association [§462.211] or filing a Proof of Claim with the statutory receiver. [§ 443.251]  

Information on this site is not legal advice and is not intended to be a comprehensive statement of the law or of the TPCIGA's policies and procedures.  References to the laws of any jurisdiction are for informational purposes only and are not a substitute for the official version of a statute. TPCIGA makes no warranty as to the accuracy or reliability of the content of this website or other related websites.  

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