| evidence of a conflicts check shall be
maintained by the general manager in the association's records as confidential
and not available for public inspection.
(IV) The general manager may approve, in accordance with Rule
1.06(c) of the Texas Disciplinary Rules of Professional Conduct and the official
Comments to this rule and any related ethics opinions issued by the Professional
Ethics Committee of the Supreme Court of Texas, an attorney to represent
the association in a matter involving a policyholder claim against the association
in which a potential conflict of interest may exist if:
(-a-) the attorney reasonably believes the representation of
the association will not be materially adversely affected; and
(-b-) the general manager consents to such representation
after full disclosure of the existence, nature, implications, and possible
adverse consequences of the common representation and the advantages involved,
if any.
(V) If legal counsel accepts an engagement from the association
to represent it in a dispute involving a policyholder claim against the association
and fails to disclose a conflict of interest, as required in this clause,
such legal counsel shall be barred for a period of five years, from the date
on which the conflict of interest is disclosed to the association, from representing
the association as legal counsel in any dispute involving a policyholder claim
against the association.
(iv) Review and Termination.
(I) The general manager shall report to the executive committee
at each of its regular meetings all information relating to the selection
of and the service of legal counsel in handling policyholder claims against
the association.
(II) At the general manager's discretion or at the direction
of the executive committee, the general manager shall discharge legal counsel
from any matter involving a policyholder claim against the association on
five days' written notice to the legal counsel.
(5) Fiscal year. The fiscal year of the
association shall be the calendar year.
(6) Waiver of notice. Whenever any notice is required
to be given to any member or director of the association under the provision
of this section a waiver thereof in writing signed by the person or persons
entitled to such notice, whether before or after the time stated therein,
shall be deemed equivalent to the giving of such notice.
(7) Protection of directors, members, officers, and employees.
The association shall indemnify each former, present, and future director,
member, officer, and employee of the association against, and each such director,
member, officer, and employee shall be entitled without further act on his/her
part of indemnity from the association for, all costs and expenses (including
the amount of judgments and the amount of reasonable settlements made with
a view to the curtailment of costs of litigation, other than amounts paid
to the association itself) reasonably incurred by him/her in connection with
or arising out of any action, suit, or proceeding in which he/she may be involved
by reason of his/her being or having been a director, member, officer, or
employee of the association or of any other association or company which he/she
serves as a director, member, officer, or employee at the request of the association,
whether or not he/she continues to be such director, member, officer, or employee
at the time of incurring such costs or expenses; provided, however, that
such indemnity shall not include any costs or expenses incurred by any such
director, member, officer, or employee in respect of matters as to which he/she
shall be finally adjudged in any such action, suit, or proceeding to be liable
for willful misconduct in the performance of his/her duty as such director,
member, officer, or employee, or in respect of any matter in which any settlement
is effected in any amount in excess of the amount of expenses which might
reasonably have been incurred by such director, member, officer, or employee
had such litigation been conducted to a final conclusion; provided, further,
that in no event shall anything herein contained be so construed as to protect,
or to authorize the association to indemnify such director, member, officer,
or employee against any liability to the association or to its members to
which he/she would otherwise be subject by reason of his/her willful misfeasance
or malfeasance, bad faith, dishonesty, gross negligence, or reckless disregard
of the duties or responsibilities involved in the conduct of his/her office
or employment as such director, member, officer, or employee. The foregoing
right of indemnification shall inure to the benefit of the heirs, executors,
or administrators of each such director, member, officer, or employee and
shall be in addition to all other rights to which such director, member, officer,
or employee may be entitled as a matter of law. This indemnification shall
in no way indemnify a member of the association from participating in the
writings, expenses, profits, and losses of the association in the manner
set out in this plan of operation or the Act.
(8) Annual report. The secretary-treasurer shall file
with the Department annually a statement which shall summarize the transactions,
conditions, operation, and affairs of the association during the preceding
calendar year at such times and covering such periods as may be designated
by the Department. Such statement shall contain such matters and information
as are prescribed by the Department and shall be in such form as required
by the Department.
(c) Financial Operation of the Association.
(1) Collection, investment, and allocation of funds.
(A) Collection. The secretary-treasurer shall collect all
of the premiums received by the association from the sale of catastrophe insurance,
all assessments levied against the members, and all proceeds from the investment
of funds.
(B) Investment. All funds collected by the association which
are not otherwise required to be expended as provided in paragraph (4) of
this subsection may be retained in a checking account or accounts in any bank
or banks doing business in the State of Texas and/or may be invested only
in the following:
(i) in interest-bearing time deposits or certificates of deposit
in any bank or banks doing business in the State of Texas; and/or
(ii) in treasury notes of the government of the United States
of America; and/or
(iii) in money market funds which invest exclusively in the
bonds or other evidence of indebtedness of the United States of America or
any of its agencies when such obligations are guaranteed as to principal and
interest by the United States of America; except, however:
(I) such money market funds may make loans to or purchases
of the described bonds and other evidence of indebtedness from a solvent bank
or securities broker, registered under the Securities Act of 1934, under an
agreement (commonly called a "repurchase agreement") which provides for the
purchase by the money market fund of the type of securities described and
which agreement matures in 90 days or less and provides for the repurchase
by such entity of the same or similar securities purchased by the money market
fund, provided that the total market value of such securities shall equal
or exceed the amount of such loan or repurchase when it is made; and
(II) such loan collateral or securities purchased from any
one bank or securities broker may not exceed the greater of 5.0% of the assets
of the money market fund or 5.0% of the amount of capital, surplus, or individual
profits of such bank or securities broker; and/or
(iv) in such other investments as may be proposed by the board
of directors and approved by the Commissioner. The board of directors shall
determine what portion of such funds shall be retained in a checking account
or accounts and what portion of such reserve shall be invested in the investments
listed in this subparagraph, as well as which specific investments, if any,
shall be made.
(C) Allocation.
(i) Each year the association will prepare a statement of earnings
by syndicate year. All premiums written, commissions paid, unearned and earned
premiums, loss and loss expenses paid and pending will be charged to the syndicate
year. All general expense and interest income received will be charged or
credited to the current syndicate year. Syndicate year is determined by the
effective date of a policy. For example, policies written in calendar year
1972 with an effective date of 1972 will be charged to the syndicate year
1972. All premiums and loss-loss expense transactions affecting these policies
will be assigned to syndicate year 1972. Likewise, all premiums and loss-loss
expense transactions in calendar year 1972 affecting policies with an effective
date of 1971 will be charged to syndicate year 1971.
Cont'd... |
