Sec. 2.09. INSURANCE. (a) The board may purchase from an insurer authorized to do business in this state one or more insurance policies that provide for the reimbursement of a trustee, officer, or employee of the board for liability imposed as damages caused by, and for costs and expenses incurred by the person in defense of, an alleged act, error, or omission committed in the person's capacity as fiduciary of assets of the fund. The board may not purchase an insurance policy that provides for the reimbursement of a trustee, officer, or employee of the board for liability imposed or costs and expenses incurred because of the trustee's, officer's, or employee's personal dishonesty, fraudulent breach of trust, lack of good faith, intentional fraud or deception, or intentional failure to act prudently. The board of trustees shall use money in the fund to purchase an insurance policy under this subsection.

(b) If an insurance policy described by Subsection (a) of this section is not available, sufficient, adequate, or otherwise in effect, the board may indemnify a trustee, officer, or employee of the board for liability imposed as damages caused by, and for reasonable costs and expenses incurred by the person in defense of, an alleged act, error, or omission committed in the person's fiduciary capacity. The board may not indemnify a trustee, officer, or employee of the board for liability imposed or costs and expenses incurred because of the trustee's, officer's, or employee's personal dishonesty, fraudulent breach of trust, lack of good faith, intentional fraud or deception, or intentional failure to act prudently.

(c) A decision to indemnify under this section must be made by five trustees. If a proposed indemnification is of a trustee, the trustee may not vote on the matter.

(d) The board may adopt a rule establishing a method for presentation, approval, and payment of claims for indemnification under this section.