INSURANCE CODE
CHAPTER 886. LOCAL MUTUAL AID ASSOCIATIONS
SUBCHAPTER A. GENERAL PROVISIONS
§ 886.001. DEFINITION. In this chapter, "local mutual
aid association" means an entity, including a society or
association of any sort, authorized under this chapter to engage in
the business of insurance and pay benefits with money provided by
assessments on the members as needed, including a burial
association described by Section 888.001.
Added by Acts 2001, 77th Leg., ch. 1419, § 1, eff. June 1, 2003.
§ 886.002. APPLICABILITY OF CHAPTER;
EXEMPTIONS. (a) Except as provided by Subsection (b), this
chapter and Chapters 887 and 888 apply to local mutual aid
associations.
(b) This chapter does not apply to the following entities
unless the entity is a burial association described by Section
888.001:
(1) a labor union, domestic order, or association that
does not provide a death benefit of more than $150;
(2) an association described by Section 885.004; or
(3) any society or association operating before March
21, 1929, statewide on an assessment basis under a charter granted
under another statute of this state.
Added by Acts 2001, 77th Leg., ch. 1419, § 1, eff. June 1, 2003.
§ 886.003. LIMITED EXEMPTION FROM INSURANCE LAWS. A
local mutual aid association is subject only to this chapter and
Chapters 887 and 888. Except as otherwise provided by this chapter,
a local mutual aid association is exempt from all other insurance
laws of this state, unless a local mutual aid association is
expressly designated in the law.
Added by Acts 2001, 77th Leg., ch. 1419, § 1, eff. June 1, 2003.
§ 886.004. ORGANIZATION OF NEW ASSOCIATION
PROHIBITED. A new local mutual aid association may not be
organized under this chapter.
Added by Acts 2001, 77th Leg., ch. 1419, § 1, eff. June 1, 2003.
SUBCHAPTER B. AUTHORITY TO ENGAGE IN BUSINESS
§ 886.051. OPERATION UNDER CERTIFICATE OF AUTHORITY. A
local mutual aid association engages in business under a
certificate of authority issued by the department.
Added by Acts 2001, 77th Leg., ch. 1419, § 1, eff. June 1, 2003.
§ 886.052. COMPLIANCE WITH LAW REQUIRED. An
individual, firm, or corporation may not engage in business in this
state as a local mutual aid society or association that pays a death
benefit or other benefit and that pays benefits with money provided
by assessments made as necessary unless the individual, firm, or
corporation is acting in accordance with this chapter or another
law of this state.
Added by Acts 2001, 77th Leg., ch. 1419, § 1, eff. June 1, 2003.
SUBCHAPTER C. POWERS AND DUTIES OF ASSOCIATION
§ 886.101. GENERAL POWERS OF ASSOCIATION. A local
mutual aid association is a body corporate that may sue and be sued
in its own name and exercise the other powers and functions
specifically granted in this chapter, but not otherwise.
Added by Acts 2001, 77th Leg., ch. 1419, § 1, eff. June 1, 2003.
§ 886.102. 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 local mutual
aid association. 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 local mutual aid associations.
(b) On advance approval of the commissioner, a local mutual
aid association may pay dividends to its members.
Added by Acts 2001, 77th Leg., ch. 1419, § 1, eff. June 1, 2003.
§ 886.103. ARTICLES OF ASSOCIATION, CONSTITUTION, AND
BYLAWS. (a) The articles of association of a local mutual aid
association must state:
(1) the name of the association, which must be
distinctly different from other associations operating in the same
area;
(2) the purpose for which the association is created,
including the upper and lower age limits of individuals to whom
benefit certificates may be issued;
(3) the location of the principal office of the
association;
(4) the territory in which the association will engage
in business;
(5) the titles of the officers of the association; and
(6) the number of directors of the association.
(b) The constitution and bylaws of the association may not
violate, and must be in harmony with, this chapter.
Added by Acts 2001, 77th Leg., ch. 1419, § 1, eff. June 1, 2003.
§ 886.104. BENEFITS AUTHORIZED. (a) Except as
provided by Subsection (b), a local mutual aid association may
provide only for the payment of death benefits. An association may
not provide for old age benefits or benefits for accidental injury
or sickness.
(b) A local mutual aid association organized before March
21, 1929, that provides for the payment of death, old age, and
accident benefits may continue to provide those benefits.
(c) The policy issued by the association must clearly state
the benefits provided.
(d) A local mutual aid association may not issue a policy
providing for:
(1) a level premium;
(2) guaranteed benefits; or
(3) surrender of loan values.
Added by Acts 2001, 77th Leg., ch. 1419, § 1, eff. June 1, 2003.
§ 886.105. TERRITORIAL LIMITATIONS. (a) A local
mutual aid association may conduct business in any county in this
state.
(b) If the articles of association of an association provide
that the association engages in business only in a limited
territory, the association may amend the articles to permit
statewide business. After the amendment, the association is
entitled to receive a certificate of authority permitting statewide
business.
Added by Acts 2001, 77th Leg., ch. 1419, § 1, eff. June 1, 2003.
§ 886.106. CONNECTION WITH OTHER ASSOCIATIONS
PROHIBITED. (a) A local mutual aid association may not have any
connection with another local mutual aid association.
(b) An association may not contribute any form of salary or
compensation to an executive officer of another association.
Added by Acts 2001, 77th Leg., ch. 1419, § 1, eff. June 1, 2003.
§ 886.107. ANNUAL STATEMENT; FILING FEE. (a) For the
filing of each annual statement, the department shall charge the
appropriate fee. The fee must be:
(1) payable to the department; and
(2) deposited in the Texas Department of Insurance
operating account.
(b) Article 1.31A applies to the fee.
Added by Acts 2001, 77th Leg., ch. 1419, § 1, eff. June 1, 2003.
§ 886.108. SURETY BOND. (a) A local mutual aid
association's officer responsible for the funds of the association
shall file with the department a surety bond.
(b) The surety bond must be:
(1) executed by a surety company authorized to do
business in this state;
(2) satisfactory to the department; and
(3) payable in an amount and conditioned as specified
by Section 887.054.
(c) This section does not apply to a local mutual aid
association that:
(1) has a total membership of 1,000 or fewer members;
(2) charges $1 or less each for annual dues or
assessments; and
(3) charges $2.50 or less for a membership fee.
(d) An association exempted under Subsection (c) shall file
with the department a bond in the amount of $1,000 and conditioned
as provided by Section 887.054.
Added by Acts 2001, 77th Leg., ch. 1419, § 1, eff. June 1, 2003.
§ 886.109. VOLUNTARY DISSOLUTION. A local mutual aid
association may dissolve by vote of the majority of the members at:
(1) a regular meeting called by the secretary; or
(2) a special meeting called for the purpose of
considering dissolution.
Added by Acts 2001, 77th Leg., ch. 1419, § 1, eff. June 1, 2003.
§ 886.110. AUTOMATIC DISSOLUTION. A local mutual aid
association is dissolved automatically and forfeits its right to
engage in the business of insurance if:
(1) the association's membership falls below 25
percent of the maximum value of the policy issued; or
(2) the association's membership falls below 50
percent of the maximum value of the policy issued and the
association fails to notify each member of the amount paid on the
preceding death claim when assessment is made.
Added by Acts 2001, 77th Leg., ch. 1419, § 1, eff. June 1, 2003.
SUBCHAPTER O. DISCIPLINARY PROCEDURES AND CRIMINAL PENALTY
§ 886.701. REVOCATION. Except as otherwise provided by
law, the department may revoke the right of a local mutual aid
association to engage in the business of insurance in this state
only on:
(1) the judgment of a court;
(2) the filing of articles of dissolution by the
members of the association or by the officers on behalf of the
members; or
(3) a filing showing that the association's membership
has been merged and taken over by another association.
Added by Acts 2001, 77th Leg., ch. 1419, § 1, eff. June 1, 2003.
§ 886.702. GROUNDS FOR DISSOLUTION OR
FORFEITURE. (a) In addition to any other penalties imposed on a
local mutual aid association or on its members or officers, an
association is subject to dissolution and forfeiture of its right
to engage in the business of insurance if the association:
(1) ceases to engage in the business of insurance;
(2) falls below the requirements of this chapter;
(3) engages in the business of insurance without a
certificate of authority;
(4) fails to make reports as required by law;
(5) refuses to submit to examination by the department
or pay the cost of an examination;
(6) engages in the business of insurance in a
fraudulent, illegal, or dishonest manner; or
(7) violates this chapter.
(b) The attorney general shall, at the request of the
department, file any action necessary to wind up the affairs of an
association to which Subsection (a) applies and provide for the
appointment of a receiver if necessary.
(c) An action under this section must be brought in Travis
County.
Added by Acts 2001, 77th Leg., ch. 1419, § 1, eff. June 1, 2003.
§ 886.703. CRIMINAL PENALTY. (a) A person commits an
offense if the person violates this chapter.
(b) An offense under this section is a misdemeanor
punishable by a fine not to exceed $500.
Added by Acts 2001, 77th Leg., ch. 1419, § 1, eff. June 1, 2003.
