28 Tex. Admin. Code § 5.2004 - Medical Liability Insurance and General Liability Insurance
(a) The policy.
(1) Approval. The procedures regarding rates,
rating plans, rating rules, rating classifications, territories, and policy
forms applicable to insurance written by the association and related statistics
must comply with Insurance Code Chapter 2203, Subchapter E.
(2) Duration of policies.
(A) All policies issued by the association
must be written for a term of one year or less, as determined by the
association, to begin at 12:01 a.m. on their respective effective
dates.
(B) The association may not
issue a policy with an effective date after a date set under Insurance Code
Article 21.49-3, §11 for a plan of suspension to become effective and
operative.
(C) All policies must be
written on forms approved by the department, and must contain a provision that
requires, as a condition precedent to settlement or compromise of any claim,
the consent or acquiescence of the insured. If, however, the insured refuses to
consent to any settlement recommended in writing by the association and elects
to contest or continue any legal proceedings, the liability of the association
must not exceed the amount for which the claim could have been settled plus the
cost and expenses incurred up to the date of the refusal.
(3) Installment payment plan. The association
may offer an installment plan for coverage obtained through the association or
for payment of the stabilization reserve fund charge. The association may
require the policyholder to pay the stabilization reserve fund charge as an
annual lump sum.
(4) Limits of
liability.
(A) No individual or organization
may be insured by a policy issued, or caused to be issued, by the association
for an amount exceeding a total of $1 million per occurrence (for all coverages
combined) and $3 million aggregate per annum (for all coverages combined). As
used in this paragraph, the terms "individual" and "organization" mean each
physician, health care provider, health care practitioner, and health care
facility holding a separate license or accreditation from the appropriate
licensing or accrediting agency as applicable.
(B) If provided, general liability limits
must be the same as medical liability limits subject to the maximum policy
limits specified in subparagraph (A) of this paragraph.
(5) Special provisions.
(A) The association may issue policies with
deductibles.
(B) The association
may issue policies subject to retrospective rating plans.
(C) Policies of excess medical liability
insurance and excess general liability insurance written by the association
must:
(i) be on a following form basis to the
underlying medical liability insurance or underlying general liability
insurance coverage over which it is written;
(ii) be issued subject to review of the
underlying coverage if review is deemed necessary by the association or its
representatives;
(iii) not be
issued in those cases where the net retention at risk by the primary carrier is
less than $100,000 per occurrence or less than $300,000 aggregate per annum
after applying any applicable deductible;
(iv) be issued only when the underlying
insurance coverage is underwritten by a member of the association and the
underlying insurance coverage does not have a deductible in excess of
$25,000;
(v) terminate
automatically if the underlying primary medical liability insurance policy or
underlying primary general liability insurance is not maintained for any
reason, except exhaustion by payment of a loss or losses. If the aggregate
underlying primary medical liability insurance or general liability insurance
is exhausted by the payment of a loss or losses occurring during the policy
period, the insurance provided by the excess policy must apply in the same
manner as if the underlying primary insurance was in full force and
effect;
(vi) not be accepted for a
hospital or other institutional health care provider or health care facility if
the applicant does not provide evidence that all physicians, surgeons,
podiatrists, dentists, pharmacists, chiropractors, or other health care
providers or health care practitioners with staff privileges are insured for
their individual medical liability with limits of liability of at least
$100,000 per occurrence and $300,000 aggregate per annum; and
(vii) not be accepted for physicians,
surgeons, podiatrists, dentists, pharmacists, chiropractors, or other health
care providers or health care practitioners who employ or contract with other
physicians, surgeons, podiatrists, dentists, pharmacists, chiropractors, or
other health care providers or health care practitioners if the applicant does
not provide evidence that all employed physicians, surgeons, podiatrists,
dentists, pharmacists, chiropractors, or other health care providers or health
care practitioners who are eligible to obtain coverage from the association are
insured for their individual medical liability with limits of liability of at
least $100,000 per occurrence and $300,000 aggregate per annum.
(D) No hospital or other
institutional health care provider, health care facility or physicians,
surgeons, podiatrists, dentists, pharmacists, chiropractors, or other health
care providers or health care practitioners that have employed or contracted
physicians, surgeons, podiatrists, dentists, pharmacists, chiropractors, or
other health care providers or health care practitioners can be accepted for
coverage in the association without evidence that all physicians, surgeons,
podiatrists, dentists, pharmacists, chiropractors, or other health care
providers, or health care practitioners with staff privileges or employed or
contracted by the applicant are insured for their individual medical liability
with limits of at least $100,000 per occurrence and $300,000 aggregate per
annum.
(E) For purposes of this
section, the term "health care providers or health care practitioners" does not
include personnel at or below the level of employed registered nurse. Insurance
required for physicians, surgeons, podiatrists, dentists, pharmacists,
chiropractors, health care practitioners, or other health care providers with
hospital staff privileges or employed or contracted by the applicant must be
limited to any one of the following entities:
(i) an insurance company authorized and
licensed to write and writing health care liability or medical liability
insurance in Texas under Insurance Code Chapter 801;
(ii) an insurance company eligible to write
and writing health care liability or medical liability insurance in Texas as a
surplus lines carrier under Insurance Code Chapter 981;
(iii) the Texas Medical Liability Insurance
Underwriting Association, established under Insurance Code Chapter
2203;
(iv) a self-insurance trust
created to provide health care liability or medical liability insurance,
established under Insurance Code Chapter 2212;
(v) a risk retention group or purchasing
group writing health care liability or medical liability insurance in Texas,
registered under Insurance Code Chapter 2201;
(vi) a plan of self-insurance of an
institution of higher education that provides health care liability or medical
liability coverage, established under Education Code Chapter 59; or
(vii) a plan of self-insurance that meets
each of the following criteria:
(I) the
plan's liabilities must be fully funded, and the plan must be solvent. The plan
must have a minimum net worth equal to the lesser of $1 million or that amount
of net worth that results in a capitalization ratio of 5%. As used in this
subclause, "net worth" is calculated by determining the excess, if any, of the
plan's total assets over the plan's total liabilities. As used in this
subclause, "capitalization ratio" means the ratio of the plan's net worth (as
the numerator) to the plan's total assets (as the denominator). Notwithstanding
the preceding, the net worth requirements in this subclause do not apply to a
plan that lawfully has taxing authority over a segment of the Texas public,
provided that the taxing authority may be used to meet the plan's liabilities
and other obligations;
(II) the
plan must annually obtain from a qualified actuary who is a member in good
standing of the American Academy of Actuaries an actuarial analysis that
reflects that its operations are viable. Notwithstanding the preceding, an
actuarial opinion filed with the department under Insurance Code §
802.002 may be
accepted for purposes of this subsection;
(III) financial statements of the plan must
annually be audited by an independent certified public accountant who is a
member in good standing of the American Institute of Certified Public
Accountants (AICPA). The audits must use generally accepted auditing standards
and must result in a report that attests to whether the financial statements
comply with generally accepted accounting principles adopted by the AICPA.
Notwithstanding the preceding, an audit report filed with the department under
Insurance Code Chapter 401 may be accepted for purposes of this subsection;
and
(IV) the plan must have
competent and trustworthy management who are generally knowledgeable of
insurance matters. A plan is not eligible if a plan officer or member of the
plan's board of directors or similar governing body has been convicted of a
felony involving moral turpitude or breach of fiduciary duty.
(6) Rates,
rating plans, and rating rules applicable. The rates, rating plans, rating
rules, rating classifications, and territories applicable must be those
established under Insurance Code Chapter 2203, Subchapter E.
(b) Application, underwriting
standards, and acceptance or rejection.
(1)
Eligibility and forms.
(A) Any physician and
any health care provider as defined in Insurance Code §
2203.002 and any
health care practitioner and health care facility as defined in Insurance Code
§
2203.103 that falls
within any of the categories of physicians, health care providers, health care
practitioners, or health care facilities established by order of the
Commissioner from time to time as being eligible to obtain coverage from the
association is entitled to apply to the association for a medical liability
insurance policy. However, if the applicant is a partnership, professional
association, or corporation (other than a nonprofit corporation certified under
Occupations Code Chapter 162) composed of eligible health care providers or
health care practitioners (such as physicians, dentists, or podiatrists), all
of the partners, professional association members, or shareholders must also be
individually insured in the association.
(i)
Any category of physician or health care provider, which by order of the
Commissioner has been excluded from eligibility to obtain coverage from the
association, may be eligible for coverage in the association if, after at least
10 days' notice and an opportunity for a hearing, the Commissioner determines
that medical liability insurance is not available for the category of physician
or health care provider. In addition, a for-profit or not-for-profit nursing
home or assisted living facility not otherwise eligible for coverage from the
association is eligible for coverage if the nursing home or assisted living
facility demonstrates, in accordance with the requirements of the association,
that the nursing home or assisted living facility made a verifiable effort to
obtain coverage from authorized insurers and eligible surplus lines insurers
and was unable to obtain substantially equivalent coverage and rates.
(ii) All applications for medical liability
and general liability insurance must be made on forms prescribed by the board
of directors of the association and approved by the department. The application
forms must contain a statement as to whether or not there are any unpaid
premiums, assessments, or stabilization reserve fund charges due from the
applicant for prior insurance. Application may be made on behalf of the
applicant by an agent authorized under Insurance Code Chapter 4051. The agent
need not be appointed by a servicing company.
(B) The association may issue a general
liability insurance policy to an applicant specified in subparagraph (A) of
this paragraph only if the association issues to that applicant a medical
liability insurance policy.
(2) Licensed agent. If a liability insurance
policy is written through a licensed agent, then:
(A) the commission paid to the licensed agent
must be 10% of the first $1,000 of the policy premium, 5% of the next $9,000 of
the policy premium, and 2% of the policy premium in excess of $10,000 for
policies written by the association on the form approved for physicians and
noninstitutional health care providers;
(B) the commission paid to the licensed agent
must be 12.5% of the first $2,000 of the policy premium, 7.5% of the next
$3,000 of the policy premium, 5% of the next $15,000 of the policy premium, and
2% of the policy premium in excess of $20,000 for policies written by the
association on the form approved for hospitals and other institutional health
care providers;
(C) the commission
paid to the licensed agent must be 10% of the policy premium for an excess
liability insurance policy written by the association for a physician or any
other health care provider as defined in Insurance Code §
2203.002. The
commission, however, may not exceed $250 for a policy written on the form
approved for physicians and other noninstitutional health care providers, and
may not exceed $500 for a policy written on the form approved for hospitals and
other institutional health care providers; and
(D) no commission may be payable for any
assessment payable by the policyholder by reason of a deficit incurred by the
association, including charges for the stabilization reserve funds. On
cancellation, the agent must refund any unearned portion of the commission to
the association.
(3)
Submission. Application for medical liability or general liability insurance on
the prescribed form must be accompanied by tender of the amount of the deposit
premium and the charge for the stabilization reserve fund required to bind the
policy.
(4) Underwriting standards.
(A) On initial application and every
reapplication to the association, the following underwriting standards must
apply for policies of medical liability insurance written by the association:
(i) all applicants to the association must be
currently licensed, chartered, certified, or accredited to practice or provide
their respective health care services in Texas;
(ii) all health care provider, practitioner
and facility and physician applicants to the association must provide evidence
of inability to obtain medical liability coverage. The evidence must be two
written rejections by carriers licensed and engaged in writing the coverage
applied for in Texas or by a self-insurance trust created under Insurance Code
Chapter 2212;
(iii) all for-profit
and not-for-profit nursing home and assisted living facility applicants to the
association must provide evidence of inability to obtain coverage from
authorized insurers and eligible surplus lines insurers for substantially
equivalent coverage and rates. The evidence must be two written rejections by
insurers licensed and engaged in writing the coverage applied for in Texas or
by eligible surplus lines insurers. For purposes of this subsection, a
rejection has occurred if the applicant:
(I)
made a verifiable effort to obtain insurance coverage from authorized insurers
and eligible surplus lines insurers; and
(II) was unable to obtain substantially
equivalent insurance coverage and rates.
(iv) any material misrepresentation in the
application for coverage must be cause to decline coverage on discovery by the
association or its authorized representative;
(v) each application must be accompanied by
authorization for and consent to investigations of material information bearing
on the moral character, professional reputation, and fitness to engage in the
activities embraced by the applicant's license with respect to applicants who
are to be provided coverage on the form approved for physicians and
noninstitutional health care providers, or the reputation, method of operation,
accident prevention programs, and fitness to engage in the activities embraced
by the applicant's license, charter, certificate, or accreditation for
applicants who are to be provided coverage on the form approved for hospitals
and other institutional health care providers, including authorization to every
person or entity, public or private, to release to the association any
documents, records, or other information bearing on this information;
(vi) no coverage may be afforded either by
binder or by policy issuance to any applicant whose license, charter,
certificate, or accreditation has been ordered canceled, revoked, or suspended,
provided that, if the order has been probated by the appropriate regulatory
body or licensing agency, then the probation may be reviewed by the association
for a determination whether and on what basis coverage may be afforded in the
association;
(vii) the applicant,
to be eligible for coverage in the association, must comply with all
significant recommendations arising out of a loss control or risk management
report either before binding coverage or as soon as practicable concurrently
with coverage;
(viii) there must be
no unpaid, uncontested premium; assessment; or charge due from the applicant;
and
(ix) there must be no unpaid
deductible, in whole or part, owed to the association.
(5) Receipt of the application. On
receipt of the application, the required deposit premium, and the applicable
stabilization reserve fund charge, the association must, within 30 days:
(A) cause a binder or insurance policy to be
issued; or
(B) advise the agent or
applicant that the applicant does not meet the underwriting standards of the
association, in which case the association must indicate the reasons the
applicant does not meet the underwriting standards.
(c) Cancellation, nonrenewal, and
notice.
(1) Cancellation by the association.
The association may not cancel an insurance policy except for:
(A) nonpayment of premium;
(B) nonpayment of the applicable
stabilization reserve fund charge;
(C) nonpayment of assessment;
(D) evidence of fraud or material
misrepresentation;
(E) cause that
would have been grounds for nonacceptance of the risk under this subchapter had
the cause been known to the association at the time the policy was
issued;
(F) any cause arising after
the policy is issued that would have been grounds for nonacceptance of the risk
under this subchapter had the cause existed at the time of acceptance;
or
(G) noncompliance with
reasonable loss control or risk management recommendations under subsection
(b)(4)(A)(vii) of this section. On cancellation of an insurance policy by the
association, the association must refund to the insured the unearned portion of
any paid premium and, if canceled within the 90th day of coverage, the unearned
portion of the paid fund charges under Insurance Code Chapter 2203, Subchapter
G on a pro rata basis, provided that all assessments and fund charges earned
under Insurance Code Chapter 2203, Subchapter G have been fully paid;
otherwise, only that portion of unearned premium over any unpaid assessment and
fund charges under Insurance Code Chapter 2203, Subchapter G will be refunded.
Policyholder assessments and fund charges under Insurance Code Chapter 2203,
Subchapter G are fully earned on payment; therefore, except as provided in
Insurance Code Chapter 2203 or §
5.2003(c)(2) of
this title (relating to Members and Policyholders Participation in the Texas
Medical Liability Insurance Underwriting Association), no portion is
refundable.
(2)
Cancellation by the insured. An insurance policy may be canceled at any time:
(A) by the insured, on written request for
cancellation of the policy; or
(B)
by an insurance premium finance company in accordance with Insurance Code
Chapter 651.
(3) Refund
of unearned portion of paid premium. The association must refund the unearned
portion of any paid premium and, if canceled within the 90th day of coverage,
the unearned portion of the paid fund charges under Insurance Code Chapter
2203, Subchapter G according to the approved short-rate table, provided all
assessments and fund charges under Insurance Code Chapter 2203, Subchapter G
earned have been fully paid; otherwise, only that portion of the unearned
premium over any unpaid assessment and fund charges under Insurance Code
Chapter 2203, Subchapter G will be refunded. Policyholder assessments and fund
charges under Insurance Code Chapter 2203, Subchapter G are fully earned on
payment; therefore, except as provided in Insurance Code Chapter 2203 or §
5.2003(c)(2) of
this title, no portion is refundable.
(4) Exhausted policy limits. If there is an
outstanding claim or claims under any insurance policy on which a reserve or
reserves have been established, which in the aggregate or when combined with
losses previously paid under the policy equal or exceed the aggregate limits of
coverage under the policy, the association must notify the insured. At the
insured's option, the policy may be canceled. If the policy is canceled, the
premium must be considered fully earned and the insured may apply for a new
policy to be effective concurrently with the termination date of the canceled
policy.
(5) Notice of cancellation,
nonrenewal, or premium increase.
(A) The
association may cancel a medical liability insurance policy and general
liability insurance policy, or decline to renew a policy for any reason listed
in paragraph (1) of this subsection at any time within the first 90 days from
the effective date of the policy by sending 90 days written notice to the
insured.
(B) The association may
cancel a medical liability insurance policy and general liability insurance
policy or decline to renew a policy for nonpayment of premium, assessments, or
fund charges under Insurance Code Chapter 2203, Subchapter G, or for loss of
license, charter, certification, or accreditation at any time during the policy
period by sending 10 days' written notice to the insured.
(C) Notice of cancellation or nonrenewal
under subparagraphs (A) and (B) of this paragraph must contain a statement of
the reason for the cancellation or nonrenewal and a statement that the insured
has the right to appeal under Insurance Code Chapter 2203, Subchapter
I.
(D) The association must give at
least 90 days' written notice to an insured before increasing the premium by
reason of a rate increase on the insured's medical liability insurance policy.
The notice must state the amount of the increase.
(6) General liability insurance. A general
liability insurance policy issued by the association under Insurance Code §
2203.151(b)
automatically terminates on the same effective date and time as the termination
of the medical liability insurance policy.
(d) Suspension of policy. The association
must, on written request from a policyholder subject to the Servicemembers
Civil Relief Act of 2003 (50 United States Code App. §§501, et seq.), suspend
the policy issued by the association, in accordance with the Servicemembers
Civil Relief Act of 2003.
(e)
Removal of risks. Any member, or self-insurance trust established under
Insurance Code Chapter 2212, at any time, on written consent from the insured
filed with the association, may write the risk as regular business, in which
event the association must cancel its policy pro rata as of a date and time
specified by the manager of the association. The association will require
written confirmation that the member or self-insurance trust is taking the risk
out of the association before allowing pro rata cancellation.
(f) Payment of claims.
(1) Report of loss. All losses must be
reported to the association in the manner prescribed by the board of
directors.
(2) Adjustment of loss.
All losses must be adjusted in the manner designated by the board of directors
subject to the provisions of this plan of operation and the insurance laws of
Texas.
Notes
State regulations are updated quarterly; we currently have two versions available. Below is a comparison between our most recent version and the prior quarterly release. More comparison features will be added as we have more versions to compare.
No prior version found.