By Brimer H.B. No. 113
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to an insurance claim payment held by a lender during
1-3 repair of residential real property subject to security interest.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Subchapter E, Chapter 21, Insurance Code, is
1-6 amended by adding Article 21.48B to read as follows:
1-7 Art. 21.48B. INSURANCE CLAIM PAYMENT HELD BY LENDER PENDING
1-8 REPAIR OF RESIDENTIAL REAL PROPERTY
1-9 Sec. 1. DEFINITIONS. In this article:
1-10 (1) "Lender" means a person holding a mortgage, lien,
1-11 deed of trust, or other security interest in property.
1-12 (2) "Residential real property" means a single-family
1-13 house, a duplex, triplex, or quadraplex, or a unit in a multi-unit
1-14 residential structure in which title to an individual unit is
1-15 transferred to the owner of the unit under a condominium or
1-16 cooperative system.
1-17 Sec. 2. NOTIFICATION REQUIREMENT; PAYMENT. (a) If a claim
1-18 under an insurance policy for damage to residential real property
1-19 is paid to the insured and a lender holding a security interest in
1-20 the property, and the lender holds all or part of the insurance
1-21 claim payment pending completion of all or part of the repairs, the
1-22 lender not later than the 10th day after the date the payment of
1-23 the insurance proceeds is received shall notify the insured of the
1-24 requirements that the insured must satisfy before the lender
2-1 releases the insurance proceeds.
2-2 (b) Not later than the 10th day after the date the insured's
2-3 request for payment of all or part of the insurance proceeds is
2-4 received by the lender, the lender shall:
2-5 (1) pay to the insured, if the lender has received
2-6 sufficient evidence of compliance with the requirements and
2-7 conditions for release of the funds as specified in Subsection (a)
2-8 of this section, all or part of the proceeds held by the lender, as
2-9 requested; or
2-10 (2) explain, in specific detail, the reason for the
2-11 lender's refusal to pay the proceeds to the insured and the
2-12 requirements the insured must satisfy before the lender releases
2-13 the insurance proceeds.
2-14 Sec. 3. INTEREST. (a) If the lender fails to give the
2-15 notice required under Section 2(a) or (b)(2) of this article or
2-16 fails to make a payment within the time required by Section 2(b)(1)
2-17 of this article, the lender shall pay to the insured interest on
2-18 the money held at the rate of 10 percent a year.
2-19 (b) If the lender fails to give the notice required under
2-20 Section 2(a) or (b)(2) of this article, the interest begins to
2-21 accrue on the date the lender receives the insurance proceeds. If
2-22 the lender fails to make a payment within the time required by
2-23 Section 2(b)(1) of this article, the interest begins to accrue on
2-24 the date the lender receives satisfactory evidence of compliance
2-25 with the requirements and conditions for release of the funds as
2-26 specified in Section 2(a) or 2(b)(1) of this article.
2-27 (c) Interest terminates on the date the lender complies with
3-1 Section 2 of this article.
3-2 (d) A lender is not required to pay interest on money
3-3 applied, in accordance with the terms and conditions of a deed of
3-4 trust or other security agreement, to reduce the note.
3-5 SECTION 2. This Act takes effect September 1, 1993, and
3-6 applies only to an insurance claim payment paid on or after January
3-7 1, 1994. A payment that is paid before January 1, 1994, is
3-8 governed by the law as it existed immediately before the effective
3-9 date of this Act, and that law is continued in effect for that
3-10 purpose.
3-11 SECTION 3. The importance of this legislation and the
3-12 crowded condition of the calendars in both houses create an
3-13 emergency and an imperative public necessity that the
3-14 constitutional rule requiring bills to be read on three several
3-15 days in each house be suspended, and this rule is hereby suspended.