BILL ANALYSIS
C.S.H.B. 2749
By: Uher
04-12-95
Committee Report (Substituted)
BACKGROUND
The 73rd Legislature enacted House Bill 1461 which made
substantial changes to the Texas Insurance Code including abolition
of the State Board of Insurance and consolidation of the authority
of the Board in the Commissioner of Insurance. These changes also
affected ratemaking and rulemaking procedures relating to many
lines of insurance including title insurance. One such change
involved the role of the State Office of Administrative Hearings in
industry-wide ratemaking proceedings. During the 1994 biennial
title insurance hearing, questions arose about the role of the
Commissioner and the State Office of Administrative Hearings with
respect to title insurance ratemaking and rulemaking aspects of
that biennial hearing. The Commissioner of insurance requested
that legislation be considered to clarify rulemaking and ratemaking
procedures relating to title insurance. In addition, over the last
20 years, changes to the law affecting title insurance have been
pronounced by Texas courts but the statutory provisions in Chapter
9 of the Insurance Code have not always been updated to reflect
these changes.
PURPOSE
As proposed, House Bill 2749 brings Chapter 9 of the Texas
Insurance Code up to date, in closer conformity with changes in
state and federal laws including interpretations of law by the
courts. This includes technical corrections reflecting the
abolition of the State Board of Insurance, strengthening and
clarifying requirements for title insurance abstract plants and the
definition of the business of title insurance and clarifying the
ratemaking and rulemaking process for title insurance biennial and
other hearings.
RULEMAKING AUTHORITY
It is the committee's opinion that this bill does grant
additional rulemaking authority to Insurance Commissioner under
SECTION 7 (Article 9.07, Insurance Code) of this bill specifies
that the data collected for consideration by the commissioner in
title insurance ratemaking shall be submitted in such form as may
be promulgated by the Commissioner after notice and hearing. This
Section also provides that changes to the Basic Manual of Rules,
Rates, and Forms for the Writing of Title Insurance if the State of
Texas may be proposed and adopted by reference.
SECTION BY SECTION ANALYSIS
SECTION 1.
Amends Article 9.01(b) to clarify legislative intent that
regulation of title insurance includes providing for adequate and
reasonable rates of return for title insurance companies and title
insurance agents.
SECTION 2.
Amends Article 9.02(b) to define the "business of title insurance"
to include the making as insurer, guarantor or surety of any
contract or policy of title insurance or its equivalent and
includes the making of a guaranty or warranty of a title search,
title examination or any component thereof by one other than the
person performing the examination or search. Provides that doing
any business in substance equivalent to activities specifically
defined is the "business of title insurance" whether or not
designed to evade the provisions of the Act.
Amends Article 9.02(c) to substitute the phrase "conducting the
business of title insurance" for the phrase "insuring titles to
real property."
Amends Article 9.02(i) to substitute "commissioner" for "Board,"
the State Board of Insurance having previously been abolished and
the commissioner substituted in its stead.
Amends Article 9.02(m) to provide that title examination is to
determine the conditions of title and evaluate risk to be
undertaken in the issuance of a title insurance policy or other
title insurance form.
SECTION 3.
Amends Article 9.07 as follows:
(a) Substitutes "commissioner" for "Board." Inserts the phrase
"conduct the business of title insurance."
(b) Substitutes "commissioner" for "Board." Provides that rate
making shall consider all relevant income and expenses of
title insurance companies and agents attributable to Texas.
(c) Provides the biennial hearing shall be held not earlier than
July 1 of each even-numbered calendar year. Provides that
associations may request consideration of matters at the
biennial hearing. Provides any person, association or entity
recommending subjects for consideration at the hearing shall
be admitted as parties. Provides for sixty days notice of the
biennial hearing and for reasonable notice to the public.
(d) Provides that the hearing shall consist of two phases.
Provides that the commissioner shall certify which matters
have rate implications for consideration in the rate making
phase of the hearing. Provides that except as stated in
Subsection (e), the commissioner shall conduct both phases of
the hearing.
(e) Provides that the rate making phase of the hearing will be
conducted by the State Office of Administrative Hearings at
the direction of the commissioner or on written request of a
person seeking admission as a party. Provides that relevant,
admissible oral testimony may not be limited. Provides that
the rate making phase of the hearing shall be conducted as a
contested case under the Government Code. Provides that
matters considered by the commissioner shall be rendered in
open meeting.
(f) Authorizes the Commissioner to propose and adopt by reference
changes to the Basic Manual of Rules, Rates, and Forms for the
Writing of Title Insurance in the State of Texas.
(g) Provides for sixty days notice of public hearings on premium
rate changes. Substitutes "commissioner" for "Board."
(h) Substitutes "commissioner" for "Board."
(f) Substitutes "commissioner" for "Board."
SECTION 4.
Amends Article 9.07A(b) to provide that plain language owner
policies of title insurance are issued to natural persons. Changes
"board" to "commissioner."
SECTION 5.
Amends Article 9.08 to substitute the term "title insurance
company" for the term "issuer" and to substitute the "commissioner"
for "Board." States when a title insurance company knows that an
outstanding enforceable recorded matter exists. Provides that the
title insurance company may determine the insurability of title but
prohibits insuring around enforceable recorded liens except as
allowed by rule.
SECTION 6.
Amends Article 9.09 to include the phrase "the business of" title
insurance.
SECTION 7.
Amends Article 9.11 to refer to corporations conducting the
business of title insurance. Substitutes the term "commissioner"
for the term "Board."
SECTION 8.
Amends Article 9.30(B) to add a new subsection exempting normal
promotional and educational activities. Substitutes "commissioner"
for "Board."
SECTION 9.
Amends Article 9.55 to require the issuance of an owner policy of
title insurance where a mortgagee policy of title insurance or its
equivalent is issued and eliminating the requirement of the
applicability of the article only if certain persons have actually
handled the closing or settlement of the real estate transaction.
SECTION 10.
Amends Article 9.58 as follows:
A. Substitutes "commissioner" for "Board."
B. Substitutes "commissioner" for "Board." Authorizes the
requirement of 15 hours or less of education for
licensees as established by the commissioner.
C. Substitutes "commissioner" for "Board."
D. Substitutes "commissioner" for "Board." Provides the
commissioner shall promulgate rules.
E. Substitutes "commissioner" for "Board."
SECTION 11.
Amends Article 9.59 to delete references to Articles 4.13, 4.14,
4.15 and 4.16 which have been repealed.
SECTION 12.
Effective date: September 1, 1995. Provides the Act applies to
title insurance policies or contracts issued for delivery or
renewal on or after January 1, 1996 and continues in effect the
existing law for policies or contracts delivered, issued or renewed
before that date.
SECTION 13. Emergency Clause.
COMPARISON OF ORIGINAL TO SUBSTITUTE
The substitute consolidates SECTIONS 2, 3, 4 and 5 of the
introduced Bill by amending Subsections (b), (c), (i) and (m),
Article 9.02, Insurance Code. The substitute revises Subparagraph
(3) of Subsection (b), Article 9.02, Insurance Code to insert the
word "or" after the word "guaranty" and before the word "warranty"
and to delete the words "or insurance" after the word "warranty."
The substitute deletes the requirement abstract plant shall
contain geographically indexed records showing instruments of
record affecting the real property within the county for a period
commencing no later than September 1, 1970, until and including the
time immediately prior to the date of search after the word
"policyholders" in Subsection (i), Article 9.02, Insurance Code
which had been added by SECTION 4 of the Bill as introduced.
The substitute revises the definition of "Title Examination"
formerly contained in SECTION 5 of the filed bill by deleting from
Subsection (m), Article 9.02, Insurance Code, the words "for the
benefit of the title insurance company, title insurance agent, or
direct operation".
The substitute deletes all of former SECTION 6 of the introduced
bill.
The substitute reorganizes Article 9.07, Insurance Code by
including language in Subsections (d), (e) and (f), Article 9.07
that was added by other subsections of the filed bill and deletes
the words "except lobbying expenses and charitable contributions"
after the word "business" in Subsection (b), Article 9.07.
The substitute removes the defraying of expenses that
otherwise would be incurred by persons in a position to refer title
insurance business and adds new SECTION 11 amending Article 9.59,
Section 15, Insurance Code to reflect the prior repeal of Articles
4.13, 4.14, 4.15 and 4.16, Insurance Code.
SUMMARY OF COMMITTEE ACTION
In accordance with House rules, H.B. 2749 was heard in a
public hearing on April 12, 1995. The Chair (Averitt) laid out
H.B. 2749 and a substitute to H.B. 2749 along with an amendment to
the substitute to H.B. 2749 and recognized Representative Uher to
explain the difference between the filed bill, substitute, and the
amendment. The Chair recognized the following persons to testify
in support of H.B. 2749: Tom Rutledge, Texas Land Title
Association; Jim Gosdin, Stewart Title Guaranty Company. The Chair
left H.B. 2749 pending before the Committee.
The Chair laid out H.B. 2749 as pending business and
recognized Representative Counts who offered the substitute to H.B.
2749. The Chair recognized Representative Counts who offered an
amendment to the un-adopted substitute of H.B. 2749. The Chair
heard no objections and the amendment to the substitute of H.B.
2749 was adopted.
The Chair recognized Representative Counts who moved the
Committee adopt the substitute to H.B. 2749 as amended. The Chair
heard no objections and the substitute to H.B. 2749 as amended was
adopted.
The Chair recognized Representative Dutton who moved the
Committee re-draft H.B. 2749 as substituted incorporating the
adopted amendment into a complete and new substitute of H.B. 2749.
The Chair heard no objections and the motion was adopted.
The Chair recognized Representative Dutton who moved the
Committee report H.B. 2749 as substituted to the full House with
the recommendation that it do pass, be printed, and be sent to the
Committee on Local and Consent Calendars. Representative Driver
seconded the motion and the motion prevailed by the following vote:
AYES (9); NAYS (0); ABSENT (0); PNV (0).