What is TMLT?

What is TMLT?

Texas Medical Liability Trust is known as "TMLT" in legal circles. It is a liability trust that was authorized under a Texas Statute that was inserted into the Texas Insurance Code. Back in the day it was known as Chapter 2212, but it has since been moved to Tex.Ins.Code Art. 21.49-4

The text of this statute is as follows, along with some pertinent amendments. As you read below, note that TMLT was created at the behest of perhaps the strongest lobby in Texas, the Texas Medical Association. When TMA wanted this statute, the medical liability insurance carriers - who all must abide by the provisions of the Texas Insurance Code - cried foul because they feared that this new trust would have an unfair advantage in the insurance marketplace. TMA promised the Texas legislature that the trust would not be an insurance company and would not have an unfair advantage.

Now, the protections of the Texas Insurance Code, which TMA wanted to get around required such things as minimum surpluses and oversight by the Texas Insurance Commission. So, in order to get exemption from these parts of the Texas Insurance Code, the legislature required a couple things: 1) that the personal assets of each and every member of TMLT be available to satisfy judgments against TMLT's members, and 2) that each and every member of TMLT be jointly and severally liable for such judgments. Should you want to confirm that, you can click here to read the Final Report of the Texas Medical Professional Liability Study Commission to the 68th Texas Legislature stating that each member of TMLT would be jointly and severally liable for liabilities of the trust. And, you can click here to read a portion of the House Debate on the Nugent amendment regarding self-insurance trusts, which would become the TMLT enabling statute. This floor debate took place on March 22, 1977 and you will find pages 1 through 6 where the sponsor explains the issues, and then pages 128 through 138 where Rep. Nugent explains that the normal capital and surplus arrangements required of an insurance company are gone and substituted in their place are the individual assets of the member physicians of TMLT.

Based on these arrangements and promises, and on the inclusion of section 2212.054 limiting the trust's powers, the statute passed and TMA created TMLT.

CHAPTER 2212. SELF-INSURANCE TRUSTS FOR HEALTH CARE LIABILITY CLAIMS

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 2212.001. DEFINITIONS. In this chapter:

(1) "Dentist" means a person licensed to practice dentistry in

this state.

(2) "Health care liability claim" means a cause of action

against a physician or dentist for treatment, lack of treatment,

or other claimed departure from accepted standards of health care

or safety that proximately results in injury to or death of the

patient, whether the patient's claim or cause of action sounds in

tort or contract.

(3) "Physician" means a person licensed to practice medicine in

this state.

(4) "Trust" means a self-insurance trust organized and operated

under this chapter. (V.T.I.C. Art. 21.49-4, Sec. (a); New.)

Sec. 2212.002. TRUST NOT ENGAGED IN BUSINESS OF INSURANCE. A

trust is not engaged in the business of insurance under this code

and other laws of this state, and this code, other than this

chapter, does not apply to the trust, except as provided by

Section 2212.052. (V.T.I.C. Art. 21.49-4, Sec. (e) (part).)

[Sections 2212.003-2212.050 reserved for expansion]

SUBCHAPTER B. CREATION AND OPERATION OF TRUST

Sec. 2212.051. CREATION OF TRUST. (a) Subject to Subsection

(b), an incorporated association, a purpose of which is to unite

in one compact organization the entire profession licensed to

practice medicine or dentistry in this state, or a portion of the

members of the profession licensed to practice medicine who are

practicing a particular specialty within the practice of medicine

in the state or are practicing within a particular region of the

state, may create a trust to self-insure physicians or dentists

and agree, by contract or otherwise, to insure other members of

the organization or association against health care liability

claims and related risks.

(b) The organization or association must:

(1) have been in continuing existence for at least two years;

(2) have established a health care liability claim trust or

other agreement to provide coverage against health care liability

claims and related risks; and

(3) employ appropriate professional staff and consultants for

program management. (V.T.I.C. Art. 21.49-4, Sec. (b).)

Sec. 2212.052. MINIMUM REQUIREMENTS. (a) The department may

require a trust to satisfy reasonable minimum requirements that

ensure the trust is able to satisfy the trust's contractual

obligations.

(b) On request, a trust shall provide books, records, and

documents required by the department to fulfill the requirements

of this section relating to the trust's solvency. (V.T.I.C. Art.

21.49-4, Secs. (e) (part), (f).)

Sec. 2212.053. FILING REQUIREMENTS. (a) A trust shall file with

the department:

(1) all rates and forms, for informational purposes only;

(2) all liability claims reports required under Subchapter D,

Chapter 38; and

(3) the trust's independently audited annual financial

statement.

(b) An audited annual financial statement filed under this

section may not be considered an examination document. (V.T.I.C.

Art. 21.49-4, Secs. (g), (h), (j).)

Sec. 2212.054. POWERS OF TRUST. (a) A trust may:

(1) purchase, on behalf of the members of the association that

created the trust, medical professional liability insurance,

specific excess insurance, aggregate excess insurance, and

reinsurance, as necessary in the opinion of the trustees;

(2) purchase required risk management services; and

(3) pay claims that arise under any deductible provisions.

(b) A trust's investment powers and limitations are the same as

the investment powers and limitations of a state bank with trust

powers. (V.T.I.C. Art. 21.49-4, Secs. (c), (d) (part).)

Sec. 2212.055. GUARANTEE OF CERTAIN LIABILITIES. The trust

shall adopt rules to guarantee all contingent liabilities in the

event of dissolution. (V.T.I.C. Art. 21.49-4, Sec. (d) (part).)

Sec. 2212.056. ADMINISTRATIVE SANCTIONS. If a trust is found to

have violated this code or a rule adopted by the commissioner

that is declared applicable to the trust, the commissioner may

order sanctions under Chapter 82 for the violation. (V.T.I.C.

Art. 21.49-4, Sec. (i).)

[Sections 2212.057-2212.100 reserved for expansion]

SUBCHAPTER C. INSURANCE CONTRACTS ISSUED BY TRUST

Sec. 2212.101. COVERAGE UNDER CONTRACT. A contract of

professional liability insurance issued by a trust may include

coverage of:

(1) a professional association or partnership of physicians,

with respect to health care liability claims and related risks if

a majority of the persons having a proprietary interest in the

association or partnership are members of the association that

created the trust;

(2) proprietary members, associates, stockholders, and

executive officers and directors of an association or partnership

described by Subdivision (1), with respect to potential vicarious

liability for acts or omissions of others giving rise to health

care liability claims and related risks;

(3) an insured physician and, as applicable, an insured

professional association or partnership, including proprietary

members, associates, stockholders, and executive officers and

directors of the association or partnership, with respect to

liability of an insured arising out of:

(A) injury to a patient related to ownership, maintenance, or

use of premises for the practice of medicine, including necessary

or incidental operations;

(B) service by an insured physician as a member of a committee,

board, or similar group of a hospital medical staff or of a

professional association or society with respect to medical staff

privileges, accreditation, or disciplinary matters relating to

competency or patient safety and risk reduction programs; or

whole or part on an act or omission occurring before the date a

contract of professional insurance is issued by the trust; or

(4) an applicant for membership in the association that created

the trust, pending final action on the application, with respect

to health care liability claims and related risks, including

coverage described by Subdivision (1), (2), or (3), as

applicable. (V.T.I.C. Art. 21.49-4a.)

  SECTION 3. Subsection (a), Article 21.49-4, Insurance Code, is

amended by adding Subdivisions (4) and (5) to read as follows:

  (4) "Charitable organization" has the meaning assigned by

Section 84.003, Civil Practice and Remedies Code.

  (5) "Volunteer health care provider" has the meaning assigned

by Section 84.003, Civil Practice and Remedies Code.

  SECTION 4. Article 21.49-4, Insurance Code, is amended by

adding Subsection (c-1) to read as follows:

  (c-1) The trust, in accordance with Subsection (c) of this

article, may make available professional liability insurance

covering a volunteer health care provider for an act or omission

resulting in death, damage, or injury to a patient while the

person is acting in the course and scope of the person's duties

as a volunteer health care provider as described by Chapter 84,

Civil Practice and Remedies Code. This subsection does not affect

the liability of a volunteer health care provider who is serving

as a direct service volunteer of a charitable organization.

Section 84.004(c), Civil Practice and Remedies Code, applies to

the volunteer health care provider without regard to whether the

volunteer health care provider obtains liability insurance under

this subsection. The trust may make professional liability

insurance available under this subsection to a volunteer health

care provider without regard to whether the volunteer health care

provider is a physician or dentist.

2003:

                    ARTICLE 19. CERTAIN INSURANCE TRUSTS

  SECTION 19.01. Subsection (b), Article 21.49-4, Insurance Code,

is amended to read as follows:

  (b) An incorporated association, the purpose of which, among other

things, shall be to federate and bring into one compact organization the

entire profession licensed to practice medicine and surgery or dentistry

in the State of Texas, or a portion of the members of the profession

licensed to practice medicine who are practicing a particular specialty

within the practice of medicine or surgery in the state or are practicing

within a particular region of the state [and to unite with similar

associations of other states to form a nationwide medical association or

dental association], may create a trust to self-insure physicians or

dentists and by contract or otherwise agree to insure other members of

the organization or association against health care liability claims and

related risks on complying with the following conditions:

  (1) the organization or association must have been in continuing

existence for a period of at least two years [prior to the effective date

of this Act];

  (2) establishment of a health care liability claim trust or other

agreement to provide coverage against health care liability claims and

related risks; and

  (3) employment of appropriate professional staff and consultants for

program management.

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