By Counts H.B. No. 766
74R4245 PB-F
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the regulation of title insurance.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Article 9.02, Insurance Code, is amended by
1-5 adding Subsections (r) and (s) to read as follows:
1-6 (r) "Examined title evidence" means title evidence that has
1-7 been subjected to a title examination for title insurance purposes
1-8 and that is based on title evidence prepared from an abstract plant
1-9 owned by, or leased and operated by, a licensed title insurance
1-10 agent or direct operation.
1-11 (s) "Agent's retained premium" means the amount of the gross
1-12 premium retained by the agent after payment of the underwriting
1-13 portion of the gross premium to the title insurance company under
1-14 an approved agency contract.
1-15 SECTION 2. Article 9.30, Insurance Code, is amended by
1-16 amending Sections B and C and adding Sections F and G to read as
1-17 follows:
1-18 B. This Article may not be construed as prohibiting:
1-19 (1) a foreign or domestic title insurance company
1-20 doing business in this state under this Chapter, from appointing as
1-21 its title insurance agent pursuant to this Chapter a person owning
1-22 or leasing and operating an abstract plant of such county and
1-23 making the arrangement for division of premiums with the agent as
1-24 shall be set by the Board;
2-1 (2) payment by a title insurance agent or direct
2-2 operation issuing the policy or furnishing examined title evidence
2-3 for a directly issued policy to another title insurance agent or
2-4 direct operation for closing the transaction for the benefit of a
2-5 seller, purchaser, or borrower to be insured <payments for services
2-6 actually performed by a title insurance company, a title insurance
2-7 agent, or a direct operation, in connection with closing the
2-8 transaction, furnishing of title evidence, or title examination,
2-9 which payment may not exceed the percentages of the premium or
2-10 amounts established by the Board for those payments>; <or>
2-11 (3) payment of bona fide compensation to a bona fide
2-12 employee principally employed by a title insurance company, direct
2-13 operation, or title insurance agent<, or other reasonable payment
2-14 for goods or facilities actually furnished and received>; or
2-15 (4) payments for services actually performed by an
2-16 attorney in connection with title examination or closing a
2-17 transaction, which payment may not exceed a reasonable charge for
2-18 such services.
2-19 (5) Nothing in this article shall affect the division
2-20 of premium between a title insurance company and its subsidiary
2-21 title insurance agent when the title insurance company directly
2-22 issues its policy or contract of title insurance pursuant to
2-23 Article 9.34. For purposes of this provision, a subsidiary is a
2-24 company at least 50 percent of the voting stock of which is owned
2-25 by the title insurance company or by a wholly owned subsidiary of
2-26 the title insurance company.
2-27 C. A person receiving any form of compensation under Section
3-1 B(2) or F of this Article must be licensed as provided for under
3-2 this Chapter.
3-3 F. (a) A portion, split, or percentage of any title
3-4 insurance premium may not be paid, either directly or indirectly,
3-5 to any person, firm, or organization for title insurance, title
3-6 evidence, title examination, determining status of title, or
3-7 closing a transaction regarding the issuance of a title insurance
3-8 policy, binder, commitment, or endorsement except as provided by
3-9 this Section.
3-10 (b) A title insurance company licensed to do business in
3-11 this state and a licensed title insurance agent may divide a
3-12 premium under an agency agreement approved by the Texas Department
3-13 of Insurance. A title insurance company may divide a premium with
3-14 a licensed title insurance agent or direct operation in a county in
3-15 which the title insurance company does not have an agency agreement
3-16 or direct operation if the licensed agent or direct operation is
3-17 furnishing examined title evidence for a directly issued policy. A
3-18 division of premium under this Subsection must be equal to a
3-19 division promulgated by the Texas Department of Insurance for the
3-20 division of a title insurance premium between a title insurance
3-21 company and its licensed title insurance agent under an approved
3-22 agency agreement.
3-23 (c) Licensed title insurance agents and direct operations
3-24 that cooperate on the issuance of a title policy, binder,
3-25 commitment, or endorsement on property located in more than one
3-26 county in this state to be insured in a single policy may divide a
3-27 premium if each agent or direct operation renders part of the
4-1 services included in the premium.
4-2 (d) A licensed title insurance agent or direct operation and
4-3 another licensed title insurance agent or direct operation in a
4-4 county that shares a common boundary line that cooperate on the
4-5 issuance of a policy and the closing of a transaction may divide a
4-6 premium if the agent or direct operation in each county has entered
4-7 a prior written agreement describing the split or percentage to be
4-8 paid and accepted for the services each entity shall render and
4-9 that agreement is filed with the Texas Department of Insurance.
4-10 The Texas Department of Insurance may, after notice and hearing,
4-11 require termination of the agreement if it finds the agreement has
4-12 an adverse affect on consumers or rates for title insurance.
4-13 G. Payment made to a title insurance agent or direct
4-14 operation under Section B(2), of this article shall be paid from
4-15 the agent's retained premium. The board must approve the amount of
4-16 the gross premium that is assigned to underwriting. The payment
4-17 must equal:
4-18 (1) 10 percent of the agent's retained premium for a
4-19 policy amount of not more than $100,000;
4-20 (2) 40 percent of the agent's retained premium for a
4-21 policy amount greater than $100,000 but not more than $2 million;
4-22 and
4-23 (3) 50 percent of the agent's retained premium for a
4-24 policy amount greater than $2 million.
4-25 SECTION 3. Article 9.34, Insurance Code, is amended to read
4-26 as follows:
4-27 Art. 9.34. POLICY ISSUANCE; DETERMINATION OF INSURABILITY
5-1 Sec. 1. (a) Except as otherwise provided by this section,
5-2 each policy, binder, commitment, or endorsement of title insurance
5-3 must be based on an examination of title made from title evidence
5-4 prepared from an abstract plant owned, or leased and operated, by a
5-5 licensed title insurance agent or direct operation and issued by a
5-6 licensed title insurance agent or direct operation in the county in
5-7 which the real property is located under an agency agreement
5-8 approved by the Texas Department of Insurance.
5-9 (b) If a title insurance company does not have an approved
5-10 agency agreement with a licensed title insurance agent or direct
5-11 operation in the county in which the affected real property is
5-12 located, the title insurance company may issue directly its policy,
5-13 binder, commitment, or endorsement of title insurance based on
5-14 examined title evidence furnished to the title insurance company by
5-15 a licensed title insurance agent or direct operation in the county
5-16 in which the real property is located. If a licensed title
5-17 insurance agent or direct operation does not exist for the county
5-18 in which the real property is located, a title insurance company
5-19 may issue directly its policy of title insurance based on the best
5-20 available evidence.
5-21 (c) If, within a reasonable time as determined by the
5-22 commissioner, all of the licensed title insurance agents and direct
5-23 operations in the county in which the real property is located
5-24 refuse to issue the policy or contract of title insurance or to
5-25 provide examined title evidence for a directly issued policy, a
5-26 title insurance company may issue directly its policy of title
5-27 insurance based on the best available evidence.
6-1 Sec. 2. If a policy or contract of title insurance covers
6-2 properties located in more than one county to be insured in a
6-3 single policy and the title insurance agent or direct operation
6-4 issuing the policy is not licensed in each of the counties, the
6-5 policy or contract of title insurance shall be issued directly by
6-6 the title insurance company in compliance with this Article.
6-7 Sec. 3. A licensed title insurance agent or direct operation
6-8 may request that a policy, binder, commitment, or endorsement of
6-9 title insurance be issued directly by a title insurance company
6-10 with which the agent or direct operation has an approved agency
6-11 contract. The title insurance company may issue directly the
6-12 policy, binder, commitment, or endorsement of title insurance if:
6-13 (1) the licensed title insurance agent or direct
6-14 operation perceives or determines a conflict of interest in issuing
6-15 the policy on behalf of the title insurance company; or
6-16 (2) the licensed title insurance agent or direct
6-17 operation cooperates on the issuance of a policy and closing of a
6-18 transaction with a licensed title insurance agent or direct
6-19 operation in a county that shares a common boundary line under a
6-20 written agreement between the licensed title insurance agents or
6-21 direct operations in each county that:
6-22 (A) is executed before the issuance of the
6-23 policy;
6-24 (B) describes the services to be provided and
6-25 the split or percentage of premium to be paid and accepted by each
6-26 licensed title insurance agent or direct operation; and
6-27 (C) is filed with the Texas Department of
7-1 Insurance.
7-2 Sec. 4. A policy or contract of title insurance may not be
7-3 written or issued except in compliance with Article 9.30 of this
7-4 code and with a determination of insurability of title made in
7-5 accordance with sound underwriting practices.
7-6 Sec. 5. Examined title evidence or the best evidence on
7-7 which a policy, binder, commitment, or endorsement of title
7-8 insurance is issued must be preserved and retained in the files of
7-9 the title insurance company, direct operation, or licensed title
7-10 insurance agent for at least 15 years after the date on which the
7-11 policy or contract is issued.
7-12 Sec. 6. <No policy or contract of title insurance shall be
7-13 written unless (1) there has been compliance with the provisions of
7-14 Article 9.30(B), (2) said policy or contract of title insurance is
7-15 based on an examination of title made from title evidence prepared
7-16 from an abstract plant owned, or leased and operated by a licensed
7-17 Texas title insurance agent or direct operation for the county in
7-18 which the real property is located, (3) there has been made a
7-19 determination of insurability of title in accordance with sound
7-20 title underwriting practices, and (4) evidence thereof shall be
7-21 preserved and retained in the files of the title insurance company,
7-22 direct operation, or title insurance agent for a period of not less
7-23 than fifteen (15) years after the policy or contract of title
7-24 insurance has been issued. If no licensed title insurance agent or
7-25 direct operation exists for the county in which the real property
7-26 is located, a title insurance company may directly issue its policy
7-27 of title insurance based on the best title evidence available. If
8-1 all licensed title insurance agents and direct operations for the
8-2 county refuse to provide the title evidence within such reasonable
8-3 time as determined by the Board, and in compliance with the
8-4 provisions of Article 9.30(B)(2), the title insurance company may
8-5 directly issue its policy if the title insurance company obtains
8-6 the best title evidence available.> The licensed <Texas> title
8-7 insurance agent or direct operation that provides <which provided>
8-8 the examined title evidence on which the directly issued policies
8-9 or contracts of title insurance are issued shall be provided with
8-10 legible complete copies of all policies or contracts of title
8-11 insurance actually issued in the transactions within a reasonable
8-12 period of time as determined by the commissioner <Board>.
8-13 Sec. 7. This Article shall not apply to (a) a company
8-14 assuming no primary liability in a contract of reinsurance, or (b)
8-15 a company acting as a co-insurer if one of the other co-insuring
8-16 companies has complied with this Article.
8-17 SECTION 4. This Act takes effect September 1, 1995, and
8-18 applies to a policy or contract of title insurance that is
8-19 delivered, issued for delivery, or renewed on or after January 1,
8-20 1996. A policy or contract delivered, issued for delivery, or
8-21 renewed before January 1, 1996, is governed by the law that existed
8-22 immediately before the effective date of this Act, and that law is
8-23 continued in effect for that purpose.
8-24 SECTION 5. The importance of this legislation and the
8-25 crowded condition of the calendars in both houses create an
8-26 emergency and an imperative public necessity that the
8-27 constitutional rule requiring bills to be read on three several
9-1 days in each house be suspended, and this rule is hereby suspended.