Texas Insurance Code 885.256 – Indemnification or Reimbursement in Relation to Breach of Duty Prohibited
(a) Except as provided by Subsection (b), a person may not be indemnified or reimbursed under Section 885.255 in relation to:
(1) a matter in a proceeding in which the person is finally adjudged guilty of breach of a duty as a director, officer, employee, or agent of the fraternal benefit society; or
(2) an agreement that settles:
(A) a matter in a proceeding described by Subdivision (1); or
(B) the threat of a proceeding involving the person’s alleged breach of a duty as a director, officer, employee, or agent of a fraternal benefit society.
(b) A fraternal benefit society may indemnify or reimburse a person in relation to a matter described by Subsection (a) only if the supreme governing body, the board of directors, or a court determines that:
(1) the person acted in good faith for a purpose the person reasonably believed to be in or not opposed to the best interests of the society; and
(2) in a criminal proceeding, the person had no reasonable cause to believe that the person’s conduct was unlawful.
Terms Used In Texas Insurance Code 885.256
- Conviction: A judgement of guilt against a criminal defendant.
- Indemnification: In general, a collateral contract or assurance under which one person agrees to secure another person against either anticipated financial losses or potential adverse legal consequences. Source: FDIC
- Person: includes corporation, organization, government or governmental subdivision or agency, business trust, estate, trust, partnership, association, and any other legal entity. See Texas Government Code 311.005
- Plea: In a criminal case, the defendant's statement pleading "guilty" or "not guilty" in answer to the charges, a declaration made in open court.
- Quorum: The number of legislators that must be present to do business.
- Settlement: Parties to a lawsuit resolve their difference without having a trial. Settlements often involve the payment of compensation by one party in satisfaction of the other party's claims.
(c) A determination by a supreme governing body or board of directors under Subsection (b) must be made by majority vote of a quorum consisting of persons who were not parties to the proceeding under review.
(d) The termination of a proceeding by judgment, order, settlement, or conviction or on a plea of no contest does not create a conclusive presumption that a person does not meet the standard of conduct required to justify indemnification and reimbursement.