74R10922 E
By Uher H.B. No. 2749
Substitute the following for H.B. No. 2749:
By Counts C.S.H.B. No. 2749
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. Section B, Article 9.01, Insurance Code, is
1-5 amended to read as follows:
1-6 B. The Legislature of the State of Texas finds that the
1-7 business of title insurance, both the direct issuance of policies
1-8 and the reinsurance of any assumed risks, of every type, shall in
1-9 all respects be totally regulated by the State of Texas so as to
1-10 provide for the protection of every consumer and purchaser of a
1-11 title insurance policy and for adequate and reasonable rates of
1-12 return for title insurance companies and title insurance agents.
1-13 It is the express legislative intent that this Chapter 9 accomplish
1-14 such a result.
1-15 SECTION 2. Subsections (b), (c), (i), and (m), Article 9.02,
1-16 Insurance Code, are amended to read as follows:
1-17 (b) The "business of title insurance" means: <shall be
1-18 deemed to be>
1-19 (1) the making as insurer, guarantor or surety, or
1-20 proposing to make as insurer, guarantor or surety, of any contract
1-21 or policy of title insurance or any equivalent of a contract or
1-22 policy of title insurance;
1-23 (2) the transacting or proposing to transact, any
2-1 phase of title insurance, including solicitation, title
2-2 examination, except when conducted by an attorney, closing the
2-3 transaction, except when conducted by an attorney, execution of a
2-4 contract of title insurance, insuring and transacting matters
2-5 subsequent to the execution of the contract and arising out of it,
2-6 including reinsurance; <or>
2-7 (3) the making, by a person other than the person who
2-8 performs the title search or title examination, of a guaranty or
2-9 warranty of a title search, a title examination, or any component
2-10 of a title search or title examination; or
2-11 (4) the doing, or proposing to do, any business in
2-12 substance equivalent to any of the foregoing whether or not <in a
2-13 manner> designed to evade the provisions of this Act.
2-14 (c) "Title Insurance Company" means:
2-15 (1) any domestic company organized under the
2-16 provisions of this Act for the purpose of conducting the business
2-17 of title insurance;
2-18 (2) <insuring titles to real property,> any title
2-19 insurance company organized under the laws of another state or
2-20 foreign government meeting the requirements of this Act and holding
2-21 a certificate of authority to transact business in Texas; and
2-22 (3) any domestic or foreign company having a
2-23 certificate of authority to insure titles to real estate within
2-24 this state and which meet the requirements of this Act.
2-25 (i) "Abstract plant" as used herein shall mean a
3-1 geographical abstract plant such as is defined by the commissioner,
3-2 <Board> and the commissioner <Board>, in defining an abstract
3-3 plant, shall require a geographically arranged plant, currently
3-4 kept to date, that is found by the commissioner <Board> to be
3-5 adequate for use in insuring titles, so as to provide for the
3-6 safety and protection of the policyholders.
3-7 (m) "Title Examination" means the search and examination of
3-8 a title to determine the conditions of the title to be insured and
3-9 to evaluate the risk to be undertaken in the issuance of a title
3-10 insurance policy or other title insurance form.
3-11 SECTION 3. Article 9.07, Insurance Code, is amended to read
3-12 as follows:
3-13 Art. 9.07. POLICY FORMS AND PREMIUMS. (a) Corporations
3-14 organized under this Chapter, as well as foreign corporations and
3-15 those created under Subdivision 57, Article 1302, of the Revised
3-16 Civil Statutes of 1925 before the repeal of that statute, or under
3-17 Chapter 8 of this Code, or any other law insofar as the business of
3-18 either may be the business of title insurance, shall operate in
3-19 Texas under the control and supervision and under such uniform
3-20 rules and regulations as to forms of policies and underwriting
3-21 contracts and premiums therefor, and such underwriting standards
3-22 and practices as may be prescribed by the commissioner <Board>; and
3-23 no Texas or foreign corporation, whether incorporated under this
3-24 Chapter or any other law of the State of Texas, shall be permitted
3-25 to conduct the business of title insurance, issue any title policy
4-1 <of any character> or underwriting contract, <to> delete any policy
4-2 exclusion, or <to> reinsure any portion of the risk assumed by any
4-3 title policy, on Texas real property other than under this Chapter
4-4 and under such rules and regulations. No policy of title
4-5 insurance, title insurance coverage, reinsurance of any risk
4-6 assumed under any policy of title insurance, or any guarantee of
4-7 any character made when insuring Texas titles shall be issued or
4-8 valid unless written by a corporation complying with the provisions
4-9 of and authorized or qualified under this Chapter, except as is
4-10 provided in Section D, Article 9.19 <9.19D>. Before any premium
4-11 rate provided for herein shall be fixed or charged, reasonable
4-12 notice shall issue, and a hearing afforded to the title insurance
4-13 companies and title insurance agents authorized or qualified under
4-14 this Chapter and the public. Under no circumstances may any title
4-15 insurance company or title insurance agent use any form which is
4-16 required under the provisions of this Chapter 9 to be promulgated
4-17 or approved until the same shall have been so promulgated or
4-18 approved by the commissioner <Board>.
4-19 (b) The commissioner <Board> shall have the duty to fix and
4-20 promulgate the premium rates to be charged by title insurance
4-21 companies and title insurance agents created or operating under
4-22 this Chapter for policies of title insurance or other promulgated
4-23 or approved forms, and the premiums therefor shall be paid in the
4-24 due and ordinary course of business. In fixing the rate of
4-25 premiums, the commissioner shall consider all relevant income and
5-1 expenses of title insurance companies and title insurance agents
5-2 that are attributable to title insurance business in this state.
5-3 Premium rates for reinsurance as between title insurance companies
5-4 qualified under this Chapter shall not be fixed or promulgated by
5-5 the commissioner <Board>, and title insurance companies may set
5-6 such premium rates for reinsurance as such title insurance
5-7 companies shall agree upon. Under no circumstance shall any
5-8 premium be charged for any policy of title insurance or other
5-9 promulgated or approved forms different from those fixed and
5-10 promulgated by the commissioner <Board>, except for premiums
5-11 charged for reinsurance. The premium rates fixed by the
5-12 commissioner <Board> shall be reasonable to the public and
5-13 nonconfiscatory as to the title insurance companies and title
5-14 insurance agents. For the purpose of collecting data on which to
5-15 determine the proper rates to be fixed, the commissioner <Board>
5-16 shall require all title insurance companies and all title insurance
5-17 agents operating in Texas to submit such information in such form
5-18 as the commissioner considers <it may deem> proper, all information
5-19 as to loss experience, expense of operation, and other material
5-20 matters <matter> for the commissioner's <Board's> consideration.
5-21 (c) The commissioner <Board> shall hold a biennial hearing
5-22 not earlier than July <October> 1 <or later than December 15> of
5-23 each even-numbered calendar year, to consider adoption of premium
5-24 rates and such other matters and subjects relative to the
5-25 regulation of the business of title insurance as may be requested
6-1 by any association, any title insurance company, any title
6-2 insurance agent, any member of the public, or as the commissioner
6-3 <Board> may determine necessary to consider. A person,
6-4 association, or other entity that recommends adoption of premium
6-5 rates or other matters shall be admitted as a party to the hearing.
6-6 Not later than the 60th day before the date of the <Proper notice
6-7 of such> public hearing, notice of the hearing and of the items to
6-8 be considered shall be <made to the public and shall be> sent
6-9 directly <direct> to all title insurance companies and title
6-10 insurance agents qualified or authorized to do business under this
6-11 Chapter and made to the public in a manner that provides reasonable
6-12 public notice <for at least four (4) weeks in advance of such
6-13 hearing>.
6-14 (d) The hearing shall consist of a rule-making phase for
6-15 consideration of rules, forms, and endorsements, and related
6-16 matters not having rate implications and a rate-making phase for
6-17 consideration of the establishment of the premium rate and other
6-18 matters with rate implications. The commissioner shall certify the
6-19 matters that have rate implications to be considered in the
6-20 rate-making phase of the hearing. Except as provided by Subsection
6-21 (e) of this section, the commissioner shall conduct both phases of
6-22 the hearing.
6-23 (e) At the direction of the commissioner or on the written
6-24 request of a person seeking admission as a party to the rate-making
6-25 phase of the hearing, the State Office of Administrative Hearings
7-1 shall conduct the rate-making phase of the hearing in accordance
7-2 with Article 1.33B of this code. The request must be made at the
7-3 time that the person seeks to be admitted as a party but not later
7-4 than the 10th day after the date that public notice of the hearing
7-5 is issued. The rate-making phase of the hearing shall be conducted
7-6 as a contested case under Chapter 2001, Government Code. The person
7-7 who conducts the hearing may not limit presentation by a party of
7-8 relevant, admissible oral testimony. The commissioner shall
7-9 consider each matter in each phase of the hearing and shall render
7-10 decisions on those matters in an open meeting.
7-11 (f) The commissioner may propose and adopt by reference
7-12 changes to the basic manual of rules, rates, and forms for the
7-13 writing of title insurance in this state, including additions or
7-14 amendments, by publishing a notice of the proposal or adoption by
7-15 reference in the Texas Register. The notice must include a brief
7-16 summary of the substance of the matter to be added or changed and a
7-17 statement that the full text of the matter is available for review
7-18 in the department's main administrative office.
7-19 (g) Premium rates when once fixed shall not be changed until
7-20 after a public hearing is conducted by the commissioner. Not later
7-21 than the 60th day before the date scheduled for the public hearing,
7-22 the department shall send notice of the hearing and the matters to
7-23 be considered directly <be had by the Board, after proper notice
7-24 sent direct> to all title insurance companies and title insurance
7-25 agents qualified or authorized to do business under this Chapter,
8-1 and shall provide <after> public notice in such manner as to give
8-2 fair publicity thereto <for at least four (4) weeks in advance>.
8-3 The commissioner shall <Board must> call such additional hearings
8-4 to consider premium rate changes at the request of a title
8-5 insurance company or the office of public insurance counsel.
8-6 (h) <(e)> The commissioner <Board> may, on the
8-7 commissioner's <its> own motion, following notice as required for
8-8 the biennial hearing hold at any time a public hearing to consider
8-9 adoption of premium rates and such other matters and subjects
8-10 relative to the regulation of the business of title insurance as
8-11 the commissioner <Board> shall determine necessary or proper.
8-12 (i) <(f)> Any title insurance company, any title insurance
8-13 agent, or other person or association of persons interested,
8-14 feeling injured by any action of the commissioner <Board or the
8-15 Commissioner> with regard to premium rates or other action taken by
8-16 the commissioner <Board or the Commissioner>, shall have the right
8-17 to appeal in accordance with Article 1.04 of this code.
8-18 SECTION 4. Article 9.07A(b), Insurance Code, is amended to
8-19 read as follows:
8-20 (b) A title insurance company or title insurance agent shall
8-21 use a form adopted by the commissioner <board> under this article
8-22 in issuing owner policies to individuals relating to residential
8-23 real property in this state.
8-24 SECTION 5. Article 9.08, Insurance Code, is amended to read
8-25 as follows:
9-1 Art. 9.08. PROHIBITING GUARANTEE OF PAYMENT OF OBLIGATIONS
9-2 OF OTHERS--AND "INSURING AROUND". (a) Title insurance companies,
9-3 domestic or foreign, operating under this chapter shall not have
9-4 the right to guarantee the payment of mortgages which cover real
9-5 estate, and if any such corporation shall do so it shall forthwith
9-6 forfeit and surrender its permit to do business.
9-7 (b) "Insuring around" is defined as the willful issuance of
9-8 a title binder or title insurance policy showing no outstanding
9-9 enforceable recorded liens while the title insurance company
9-10 <issuer> knows that in fact a lien or liens are of record against
9-11 the real property, and shall be prohibited, except under
9-12 circumstances as the commissioner <State Board of Insurance> under
9-13 the commissioner's <its> rule-making powers shall approve. For
9-14 purposes of this article, a title insurance company knows that an
9-15 outstanding enforceable recorded matter exists if the company
9-16 determines that the matter is valid and enforceable based on the
9-17 examination of the title under which the title binder or title
9-18 insurance policy is issued. The title insurance company may
9-19 determine the insurability of title and those matters that the
9-20 company considers to be insurable under the title binder or title
9-21 insurance policy, but "insuring around" enforceable recorded liens
9-22 is prohibited except as allowed by rule.
9-23 (c) Any person who willfully violates the provisions of this
9-24 Article 9.08, or who disobeys an order of the commissioner <Board>
9-25 refusing to approve an application to insure around, shall, upon
10-1 proof thereof to the satisfaction of the District Court of Travis
10-2 County, Texas, forfeit and pay to the State of Texas a sum not to
10-3 exceed $5,000, which may be recovered in a civil action by the
10-4 commissioner.
10-5 (d) The commissioner <Board>, upon giving thirty (30) days'
10-6 notice by registered mail, and upon hearing had for that purpose,
10-7 may revoke <forfeit> the Certificate of Authority to do business of
10-8 any company violating the provisions of this Article 9.08.
10-9 SECTION 6. Article 9.09, Insurance Code, is amended to read
10-10 as follows:
10-11 Art. 9.09. PROHIBITING TRANSACTING OF OTHER KINDS OF
10-12 INSURANCE BY TITLE INSURANCE COMPANIES OR THE TRANSACTING OF TITLE
10-13 INSURANCE BY OTHER TYPES OF INSURANCE COMPANIES. Corporations,
10-14 domestic or foreign, operating under this Chapter shall not
10-15 transact, underwrite or issue any kind of insurance other than
10-16 title insurance on real property; nor shall the business of title
10-17 insurance be transacted, underwritten or issued by any company
10-18 transacting any other kinds of insurance.
10-19 SECTION 7. Article 9.11, Insurance Code, is amended to read
10-20 as follows:
10-21 Art. 9.11. REVOCATION OF RIGHT TO DO BUSINESS. Any foreign
10-22 or domestic corporations conducting the business of title insurance
10-23 or issuing any form of title insurance policy or other promulgated
10-24 or approved forms, or charging any premium rates on an owner,
10-25 mortgagee, or other title insurance policy, or on other promulgated
11-1 or approved forms, except for the premium rates charged for
11-2 reinsurance, on Texas real property other than forms and premium
11-3 rates prescribed by the commissioner <Board>, under the provisions
11-4 of this Chapter shall forfeit its right to do business in this
11-5 state. The provisions of this Article 9.11 shall not, however, be
11-6 applicable to premium rates charged in connection with reinsurance
11-7 transactions between or among title insurance companies doing
11-8 business under the provisions of this Chapter, provided any such
11-9 reinsurance contract complies with the provisions of Article 9.19
11-10 of this Chapter.
11-11 SECTION 8. Article 9.30, Insurance Code, is amended to read
11-12 as follows:
11-13 Art. 9.30. REBATES AND DISCOUNTS. A. No commission,
11-14 rebate, discount, portion of any title insurance premium, or other
11-15 thing of value shall be directly or indirectly paid, allowed or
11-16 permitted by any person doing the business of title insurance or
11-17 received or accepted by any person for doing the business of title
11-18 insurance or for soliciting or referring title insurance business.
11-19 B. This Article may not be construed as prohibiting:
11-20 (1) a foreign or domestic title insurance company
11-21 doing business in this state under this Chapter, from appointing as
11-22 its title insurance agent pursuant to this Chapter a person owning
11-23 or leasing and operating an abstract plant of such county and
11-24 making the arrangement for division of premiums with the agent as
11-25 shall be set by the commissioner <Board>;
12-1 (2) payments for services actually performed by a
12-2 title insurance company, a title insurance agent, or a direct
12-3 operation, in connection with closing the transaction, furnishing
12-4 of title evidence, or title examination, which payment may not
12-5 exceed the percentages of the premium or amounts established by the
12-6 commissioner <Board> for those payments; <or>
12-7 (3) payment of bona fide compensation to a bona fide
12-8 employee principally employed by a title insurance company, direct
12-9 operation, title insurance agent, or other reasonable payment for
12-10 goods or facilities actually furnished and received; <or>
12-11 (4) payments for services actually performed by an
12-12 attorney in connection with title examination or closing a
12-13 transaction, which payment may not exceed a reasonable charge for
12-14 such services; or
12-15 (5) normal promotional and educational activities that
12-16 are not conditioned on the referral of title insurance business.
12-17 C. <(5)> Nothing in this article shall affect the division
12-18 of premium between a title insurance company and its subsidiary
12-19 title insurance agent when the title insurance company directly
12-20 issues its policy or contract of title insurance pursuant to
12-21 Article 9.34. For purposes of this provision, a subsidiary is a
12-22 company at least 50 percent of the voting stock of which is owned
12-23 by the title insurance company or by a wholly owned subsidiary of
12-24 the title insurance company.
12-25 D. <C.> A person receiving any form of compensation under
13-1 Section B(2) of this Article must be licensed as provided for under
13-2 this Chapter.
13-3 E. <D.> The payment or receipt of a commission, rebate,
13-4 discount, or other thing of value to or by any person for
13-5 soliciting or referring title insurance business in violation of
13-6 this Article is engaging in the unauthorized business of insurance,
13-7 and in addition to any other penalty, after notice and opportunity
13-8 for hearing, is subject to a monetary forfeiture not less than the
13-9 value nor more than three times the value of the commission,
13-10 rebate, discount, or other thing of value.
13-11 F. <E.> No person shall give and no person shall accept any
13-12 portion, split, or percentage of any charge made or received for
13-13 the rendering of a real estate settlement or closing in connection
13-14 with a transaction involving the conveyance or mortgaging of real
13-15 estate located in the State of Texas other than for services
13-16 actually performed.
13-17 SECTION 9. Article 9.55, Insurance Code, is amended to read
13-18 as follows:
13-19 Art. 9.55. REQUIREMENT FOR ISSUANCE OF OWNERS AND MORTGAGEE
13-20 TITLE POLICIES IN CONNECTION WITH RESIDENTIAL PROPERTY. (a) After
13-21 January 1, 1976, whenever any improved residential real property
13-22 situated in the State of Texas shall be sold and a mortgagee policy
13-23 of title insurance, other form of agreement, or an equivalent of
13-24 that policy or agreement that constitutes the business of title
13-25 insurance is issued in connection with <policy issued to guarantee
14-1 the validity of> a lien thereon, the title insurance company or
14-2 title insurance agent so issuing such mortgagee <title> policy of
14-3 title insurance, other form of agreement, or an equivalent of that
14-4 policy or agreement shall also issue an owner <title> policy of
14-5 title insurance to the owner of such property and the required
14-6 premium as promulgated by the commissioner <board> shall be
14-7 charged.
14-8 (b) The provisions of this article may, however, be
14-9 rejected, provided that the person acquiring title shall, at or
14-10 prior to closing and settlement, execute a written and acknowledged
14-11 rejection wherein the purchaser rejects issuance of such owner
14-12 title policy. The form of such rejection shall be prescribed,
14-13 after notice and hearing, by the commissioner <board>.
14-14 <The provisions of this Article 9.55 of this Chapter 9 shall
14-15 not apply to a settlement or closing if neither a title insurance
14-16 company, a title insurance agent, an attorney for a title insurance
14-17 company or title insurance agent, nor a representative of the title
14-18 insurance company, title insurance agent or attorney for a title
14-19 insurance company or title insurance agent has actually handled the
14-20 closing or settlement of such real estate transaction.>
14-21 SECTION 10. Article 9.58, Insurance Code, is amended to read
14-22 as follows:
14-23 Art. 9.58. CONTINUING EDUCATION. A. For protection of the
14-24 public and to preserve and improve competence of licensees, the
14-25 commissioner shall <board may in its sole discretion> require as a
15-1 condition to continuation of license as a title insurance agent or
15-2 escrow officer that during the 24 months next preceding expiration
15-3 of the current license period the licensee has enrolled in and
15-4 attended or taught <up to> 15 hours, or a lesser number set by the
15-5 commissioner, of class instruction, lectures, seminars, or other
15-6 forms of education approved by the commissioner <board> for the
15-7 particular license.
15-8 B. The instruction shall be designed to refresh the
15-9 licensee's understanding of basic principles and coverages
15-10 involved, recent and prospective changes in those principles and
15-11 coverages, applicable laws and rules and regulations of the
15-12 commissioner <board>, proper conduct of the licensee's business,
15-13 and duties and responsibilities of the licensee.
15-14 C. The commissioner <board> may permit licensees who because
15-15 of remoteness of residence or business cannot with reasonable
15-16 convenience attend these educational sessions to take and
15-17 successfully complete an equivalent course of study and instruction
15-18 by mail.
15-19 D. The commissioner shall <board may> promulgate rules and
15-20 regulations to carry out the purposes and requirements of this
15-21 article.
15-22 E. On written request of the licensee, the commissioner
15-23 <board> may extend the time for the licensee to comply with the
15-24 requirements of this article or may exempt the licensee from some
15-25 or all of the requirements for a licensing period if the
16-1 commissioner <board> finds that the licensee is unable to comply
16-2 with the requirements because of illness, medical disability, or
16-3 another extenuating circumstance beyond the control of the
16-4 licensee. The criteria for such exemptions and extensions shall be
16-5 established by rule.
16-6 SECTION 11. Section 15, Article 9.59, Insurance Code, is
16-7 amended to read as follows:
16-8 Sec. 15. OTHER LAWS TO GOVERN. Article <Articles> 4.12,
16-9 <4.13, 4.14, 4.15, and 4.16,> Insurance Code, applies <apply> to
16-10 title insurance companies which are subject to this article.
16-11 SECTION 12. This Act takes effect September 1, 1995, and
16-12 applies only to a policy or contract of title insurance that is
16-13 delivered, issued for delivery, or renewed on or after January 1,
16-14 1996. A policy or contract that is delivered, issued for delivery,
16-15 or renewed before January 1, 1996, is governed by the law as it
16-16 existed immediately before the effective date of this Act, and that
16-17 law is continued in effect for that purpose.
16-18 SECTION 13. The importance of this legislation and the
16-19 crowded condition of the calendars in both houses create an
16-20 emergency and an imperative public necessity that the
16-21 constitutional rule requiring bills to be read on three several
16-22 days in each house be suspended, and this rule is hereby suspended.