By: Rosson S.B. No. 1284
A BILL TO BE ENTITLED
AN ACT
1-1 relating to regulation of the business of title insurance.
1-2 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-3 SECTION 1. Section B, Article 9.01, Insurance Code, is
1-4 amended to read as follows:
1-5 B. The Legislature of the State of Texas finds that the
1-6 business of title insurance, both the direct issuance of policies
1-7 and the reinsurance of any assumed risks, of every type, shall in
1-8 all respects be totally regulated by the State of Texas so as to
1-9 provide for the protection of every consumer and purchaser of a
1-10 title insurance policy and to provide for adequate and reasonable
1-11 rates of return for title insurance companies and title insurance
1-12 agents. It is the express legislative intent that this Chapter 9
1-13 accomplish such a result.
1-14 SECTION 2. Subsection (b), Article 9.02, Insurance Code, is
1-15 amended to read as follows:
1-16 (b) The "business of title insurance" shall be deemed to be
1-17 (1) the making as insurer, guarantor or surety, or proposing to
1-18 make as insurer, guarantor or surety, of any contract or policy of
1-19 title insurance or any equivalent thereof; (2) the transacting or
1-20 proposing to transact, any phase of title insurance, including
1-21 solicitation, title examination, except when conducted by an
1-22 attorney, closing the transaction, except when conducted by an
1-23 attorney, execution of a contract of title insurance, insuring and
2-1 transacting matters subsequent to the execution of the contract and
2-2 arising out of it, including reinsurance; <or> (3) the making of a
2-3 guaranty or warranty of a title search, a title examination, or any
2-4 component thereof by a person other than the one performing the
2-5 search or examination; or (4) the doing, or proposing to do, any
2-6 business in substance equivalent to any of the foregoing whether or
2-7 not <in a manner> designed to evade the provisions of this Act.
2-8 SECTION 3. Subsection (c), Article 9.02, Insurance Code, is
2-9 amended to read as follows:
2-10 (c) "Title Insurance Company" means any domestic company
2-11 organized under the provisions of this Act for the purpose of
2-12 conducting the business of title insurance <insuring titles to real
2-13 property>, any title insurance company organized under the laws of
2-14 another state or foreign government meeting the requirements of
2-15 this Act and holding a certificate of authority to transact
2-16 business in Texas and any domestic or foreign company having a
2-17 certificate of authority to insure titles to real estate within
2-18 this state and which meet the requirements of this Act.
2-19 SECTION 4. Subsection (i), Article 9.02, Insurance Code, is
2-20 amended to read as follows:
2-21 (i) "Abstract plant" as used herein shall mean a
2-22 geographical abstract plant such as is defined by the commissioner,
2-23 <Board> and the commissioner <Board>, in defining an abstract
2-24 plant, shall require a geographically arranged plant, currently
2-25 kept to date, that is found by the commissioner <Board> to be
3-1 adequate for use in insuring titles, so as to provide for the
3-2 safety and protection of the policyholders.
3-3 SECTION 5. Subsection (m), Article 9.02, Insurance Code, is
3-4 amended to read as follows:
3-5 (m) "Title Examination" means the search and examination of
3-6 a title to determine the conditions of the title to be insured and
3-7 to evaluate the risk to be undertaken in the issuance of a title
3-8 insurance policy or other title insurance form.
3-9 SECTION 6. Article 9.07, Insurance Code, is amended to read
3-10 as follows:
3-11 Art. 9.07. Policy Forms and Premiums. (a) Corporations
3-12 organized under this Chapter, as well as foreign corporations and
3-13 those created under Subdivision 57, Article 1302, of the Revised
3-14 Civil Statutes of 1925 before the repeal of that statute, or under
3-15 Chapter 8 of this Code, or any other law insofar as the business of
3-16 either may be the business of title insurance, shall operate in
3-17 Texas under the control and supervision and under such uniform
3-18 rules and regulations as to forms of policies and underwriting
3-19 contracts and premiums therefor, and such underwriting standards
3-20 and practices as may be prescribed by the commissioner <Board>; and
3-21 no Texas or foreign corporation, whether incorporated under this
3-22 Chapter or any other law of the State of Texas, shall be permitted
3-23 to conduct the business of title insurance, to issue any title
3-24 policy of any character, or underwriting contract, to delete any
3-25 policy exclusion or to reinsure any portion of the risk assumed by
4-1 any title policy, on Texas real property other than under this
4-2 Chapter and under such rules and regulations. No policy of title
4-3 insurance, title insurance coverage, reinsurance of any risk
4-4 assumed under any policy of title insurance, or any guarantee of
4-5 any character made when insuring Texas titles shall be issued or
4-6 valid unless written by a corporation complying with the provisions
4-7 of and authorized or qualified under this Chapter, except as is
4-8 provided in Article 9.19D. Before any premium rate provided for
4-9 herein shall be fixed or charged, reasonable notice shall issue,
4-10 and a hearing afforded to the title insurance companies and title
4-11 insurance agents authorized or qualified under this Chapter and the
4-12 public. Under no circumstances may any title insurance company or
4-13 title insurance agent use any form which is required under the
4-14 provisions of this Chapter 9 to be promulgated or approved until
4-15 the same shall have been so promulgated or approved by the
4-16 commissioner <Board>.
4-17 (b) The commissioner <Board> shall have the duty to fix and
4-18 promulgate the premium rates to be charged by title insurance
4-19 companies and title insurance agents created or operating under
4-20 this Chapter for policies of title insurance or other promulgated
4-21 or approved forms, and the premiums therefor shall be paid in the
4-22 due and ordinary course of business. Premium rates for reinsurance
4-23 as between title insurance companies qualified under this Chapter
4-24 shall not be fixed or promulgated by the commissioner <Board>, and
4-25 title insurance companies may set such premium rates for
5-1 reinsurance as such title insurance companies shall agree upon.
5-2 Under no circumstance shall any premium be charged for any policy
5-3 of title insurance or other promulgated or approved forms different
5-4 from those fixed and promulgated by the commissioner <Board>,
5-5 except for premiums charged for reinsurance. The premium rates
5-6 fixed by the commissioner <Board> shall be reasonable to the public
5-7 and nonconfiscatory as to the title insurance companies and title
5-8 insurance agents. For the purpose of collecting data on which to
5-9 determine the proper rates to be fixed, the commissioner <Board>
5-10 shall require all title insurance companies and all title insurance
5-11 agents operating in Texas to submit such information in such form
5-12 as the commissioner <it> may deem proper, all information as to
5-13 loss experience, expense of operation, and other material matters
5-14 <matter> for the commissioner's <Board's> consideration. In fixing
5-15 the rate of premiums, the commissioner shall consider all relevant
5-16 income and expenses of title insurance companies and title
5-17 insurance agents attributable to Texas title insurance business.
5-18 (c) The commissioner <Board> shall hold a biennial hearing
5-19 not earlier than July 1 <October 1 or later than December 15> of
5-20 each even-numbered calendar year, to consider adoption of premium
5-21 rates and such other matters and subjects relative to the
5-22 regulation of the business of title insurance as may be requested
5-23 by any association, any title insurance company, any title
5-24 insurance agent, any member of the public, or as the commissioner
5-25 <Board> may determine necessary to consider. Any person,
6-1 association, or entity recommending adoption of premium rates or
6-2 other matters and subjects shall be admitted as a party to the
6-3 hearing. Not less than 60 days prior to the <Proper notice of
6-4 such> public hearing, notice of the hearing and the items to be
6-5 considered shall be <made to the public and shall be> sent direct
6-6 to all title insurance companies and title insurance agents
6-7 qualified or authorized to do business under this Chapter and to
6-8 the public in such a manner as to give fair publicity thereto. The
6-9 hearing shall consist of a rulemaking phase for consideration of
6-10 rules, forms, and endorsements, and related matters not having rate
6-11 implications and a ratemaking phase for consideration of fixing the
6-12 premium rate and other matters with rate implications. The
6-13 commissioner shall certify which matters have rate implications to
6-14 be considered in the ratemaking phase of the hearing. The
6-15 commissioner shall conduct both phases of the hearing; provided,
6-16 however, that the ratemaking phase of the hearing shall be
6-17 conducted by the State Office of Administrative Hearings in
6-18 accordance with Article 1.33B of this code at the direction of the
6-19 commissioner or at the written request of any person seeking
6-20 admission as a party to the ratemaking phase of the hearing. Such
6-21 request must be made at the time a person seeks to be admitted as a
6-22 party to the hearing but in no event more than 10 days after
6-23 issuance of public notice of the hearing. The ratemaking phase of
6-24 the hearing shall be conducted as a contested case pursuant to
6-25 Chapter 2001, Government Code (Administrative Procedure Act).
7-1 Presentation by any party of relevant, admissible oral testimony
7-2 shall not be limited. All matters in all phases of the hearing
7-3 shall be considered by the commissioner and decisions thereon
7-4 rendered in open meeting. Changes to the Basic Manual of Rules,
7-5 Rates, and Forms for the Writing of Title Insurance in the State of
7-6 Texas, including additions or amendments thereto, may be proposed
7-7 and adopted by reference by publishing a notice of such proposal or
7-8 adoption by reference in the Texas Register. The notice must
7-9 include a brief summary of the substance of the matter to be added
7-10 or changed and a statement that the full text of the matter is
7-11 available for review in the office of the chief clerk of the Texas
7-12 Department of Insurance <for at least four (4) weeks in advance of
7-13 such hearing>.
7-14 (d) Premium rates when once fixed shall not be changed until
7-15 after a public hearing shall be had by the commissioner. Not less
7-16 than 60 days prior to the public hearing, notice of the hearing and
7-17 the items to be considered shall be <Board, after proper notice>
7-18 sent direct to all title insurance companies and title insurance
7-19 agents qualified or authorized to do business under this Chapter,
7-20 and <after> public notice shall be provided in such manner as to
7-21 give fair publicity thereto <for at least four (4) weeks in
7-22 advance>. The commissioner <Board> must call such additional
7-23 hearings to consider premium rate changes at the request of a title
7-24 insurance company or the office of public insurance counsel.
7-25 (e) The commissioner <Board> may, on his or her <its> own
8-1 motion, following notice as required for the biennial hearing hold
8-2 at any time a public hearing to consider adoption of premium rates
8-3 and such other matters and subjects relative to the regulation of
8-4 the business of title insurance as the commissioner <Board> shall
8-5 determine necessary or proper.
8-6 (f) Any title insurance company, any title insurance agent,
8-7 or other person or association of persons interested, feeling
8-8 injured by any action of the commissioner <Board or the
8-9 Commissioner> with regard to premium rates or other action taken by
8-10 the commissioner <Board or the Commissioner>, shall have the right
8-11 to appeal in accordance with Article 1.04 of this code.
8-12 SECTION 7. Subsection (b), Article 9.07A, Insurance Code, is
8-13 amended to read as follows:
8-14 (b) A title insurance company or title insurance agent shall
8-15 use a form adopted by the commissioner <board> under this article
8-16 in issuing owner policies to natural persons relating to
8-17 residential real property in this state.
8-18 SECTION 8. Article 9.08, Insurance Code, is amended to read
8-19 as follows:
8-20 Art. 9.08. Prohibiting Guarantee of Payment of Obligations
8-21 of Others--and "Insuring Around." Title insurance companies,
8-22 domestic or foreign, operating under this chapter shall not have
8-23 the right to guarantee the payment of mortgages which cover real
8-24 estate, and if any such corporation shall do so it shall forthwith
8-25 forfeit and surrender its permit to do business.
9-1 "Insuring around" is defined as the willful issuance of a
9-2 title binder or title insurance policy showing no outstanding
9-3 enforceable recorded liens while the title insurance company
9-4 <issuer> knows that in fact a lien or liens are of record against
9-5 the real property, and shall be prohibited, except under
9-6 circumstances as the commissioner <State Board of Insurance> under
9-7 his or her <its> rule-making powers shall approve. A title
9-8 insurance company knows that an outstanding enforceable recorded
9-9 matter exists if it determines that the matter is valid and
9-10 enforceable based on the examination of the title pursuant to which
9-11 the title binder or title insurance policy is issued. In its
9-12 discretion, the title insurance company may determine the
9-13 insurability of title and those matters which it considers to be
9-14 insurable under the title binder or title insurance policy;
9-15 provided, however, that insuring around enforceable recorded liens
9-16 shall be prohibited except as allowed by regulation.
9-17 Any person who willfully violates the provisions of this
9-18 Article 9.08, or who disobeys an order of the commissioner <Board>
9-19 refusing to approve an application to insure around, shall, upon
9-20 proof thereof to the satisfaction of the District Court of Travis
9-21 County, Texas, forfeit and pay to the State of Texas a sum not to
9-22 exceed $5,000, which may be recovered in a civil action by the
9-23 commissioner.
9-24 The commissioner <Board>, upon giving thirty (30) days'
9-25 notice by registered mail, and upon hearing had for that purpose,
10-1 may forfeit the Certificate of Authority to do business of any
10-2 company violating the provisions of this Article 9.08.
10-3 SECTION 9. Article 9.09, Insurance Code, is amended to read
10-4 as follows:
10-5 Art. 9.09. Prohibiting Transacting of Other Kinds of
10-6 Insurance by Title Insurance Companies or the Transacting of Title
10-7 Insurance by Other Types of Insurance Companies. Corporations,
10-8 domestic or foreign, operating under this Chapter shall not
10-9 transact, underwrite or issue any kind of insurance other than
10-10 title insurance on real property; nor shall the business of title
10-11 insurance be transacted, underwritten, or issued by any company
10-12 transacting any other kinds of insurance.
10-13 SECTION 10. Article 9.11, Insurance Code, is amended to read
10-14 as follows:
10-15 Art. 9.11. Revocation of Right to do Business. Any foreign
10-16 or domestic corporations conducting the business of title insurance
10-17 or issuing any form of title insurance policy or other promulgated
10-18 or approved forms, or charging any premium rates on an owner,
10-19 mortgagee, or other title insurance policy, or on other promulgated
10-20 or approved forms, except for the premium rates charged for
10-21 reinsurance, on Texas real property other than forms and premium
10-22 rates prescribed by the commissioner <Board>, under the provisions
10-23 of this Chapter shall forfeit its right to do business in this
10-24 state. The provisions of this Article 9.11 shall not, however, be
10-25 applicable to premium rates charged in connection with reinsurance
11-1 transactions between or among title insurance companies doing
11-2 business under the provisions of this Chapter, provided any such
11-3 reinsurance contract complies with the provisions of Article 9.19
11-4 of this Chapter.
11-5 SECTION 11. Section B, Article 9.30, Insurance Code, is
11-6 amended to read as follows:
11-7 B. This Article may not be construed as prohibiting:
11-8 (1) a foreign or domestic title insurance company
11-9 doing business in this state under this Chapter, from appointing as
11-10 its title insurance agent pursuant to this Chapter a person owning
11-11 or leasing and operating an abstract plant of such county and
11-12 making the arrangement for division of premiums with the agent as
11-13 shall be set by the commissioner <Board>;
11-14 (2) payments for services actually performed by a
11-15 title insurance company, a title insurance agent, or a direct
11-16 operation, in connection with closing the transaction, furnishing
11-17 of title evidence, or title examination, which payment may not
11-18 exceed the percentages of the premium or amounts established by the
11-19 commissioner <Board> for those payments; or
11-20 (3) payment of bona fide compensation to a bona fide
11-21 employee principally employed by a title insurance company, direct
11-22 operation, title insurance agent, or other reasonable payment for
11-23 goods or facilities actually furnished and received; or
11-24 (4) payments for services actually performed by an
11-25 attorney in connection with title examination or closing a
12-1 transaction, which payment may not exceed a reasonable charge for
12-2 such services.
12-3 (5) Nothing in this article shall affect the division
12-4 of premium between a title insurance company and its subsidiary
12-5 title insurance agent when the title insurance company directly
12-6 issues its policy or contract of title insurance pursuant to
12-7 Article 9.34. For purposes of this provision, a subsidiary is a
12-8 company at least 50 percent of the voting stock of which is owned
12-9 by the title insurance company or by a wholly owned subsidiary of
12-10 the title insurance company.
12-11 (6) legal promotional and educational activities that
12-12 are not conditioned on the referral of title insurance business.
12-13 SECTION 12. Article 9.55, Insurance Code, is amended to read
12-14 as follows:
12-15 Art. 9.55. Requirement for Issuance of Owners and Mortgagee
12-16 Title Policies in Connection With Residential Property. After
12-17 January 1, 1976, whenever any improved residential real property
12-18 situated in the State of Texas shall be sold and a mortgagee policy
12-19 of title insurance or other form of agreement or the equivalent
12-20 thereof that constitutes the business of title insurance is issued
12-21 in connection with <title policy issued to guarantee the validity
12-22 of> a lien thereon, the title insurance company or title insurance
12-23 agent so issuing such mortgagee <title> policy of title insurance
12-24 form or agreement or the equivalent thereof shall also issue an
12-25 owner <title> policy of title insurance to the owner of such
13-1 property and the required premium as promulgated by the
13-2 commissioner <board> shall be charged.
13-3 The provisions of this article may, however, be rejected,
13-4 provided that the person acquiring title shall, at or prior to
13-5 closing and settlement, execute a written and acknowledged
13-6 rejection wherein the purchaser rejects issuance of such owner
13-7 title policy. The form of such rejection shall be prescribed,
13-8 after notice and hearing, by the commissioner <board>.
13-9 <The provisions of this Article 9.55 of this Chapter 9 shall
13-10 not apply to a settlement or closing if neither a title insurance
13-11 company, a title insurance agent, an attorney for a title insurance
13-12 company or title insurance agent, nor a representative of the title
13-13 insurance company, title insurance agent or attorney for a title
13-14 insurance company or title insurance agent has actually handled the
13-15 closing or settlement of such real estate transaction.>
13-16 SECTION 13. Article 9.58, Insurance Code, is amended to read
13-17 as follows:
13-18 Art. 9.58. Continuing Education. A. For protection of the
13-19 public and to preserve and improve competence of licensees, the
13-20 commissioner shall <board may in its sole discretion> require as a
13-21 condition to continuation of license as a title insurance agent or
13-22 escrow officer that during the 24 months next preceding expiration
13-23 of the current license period the licensee has enrolled in and
13-24 attended or taught <up to> 15 hours or such lesser amount
13-25 established by the commissioner in <of> class instruction,
14-1 lectures, seminars, or other forms of education approved by the
14-2 commissioner <board> for the particular license.
14-3 B. The instruction shall be designed to refresh the
14-4 licensee's understanding of basic principles and coverages
14-5 involved, recent and prospective changes in those principles and
14-6 coverages, applicable laws and rules and regulations of the
14-7 commissioner <board>, proper conduct of the licensee's business,
14-8 and duties and responsibilities of the licensee.
14-9 C. The commissioner <board> may permit licensees who because
14-10 of remoteness of residence or business cannot with reasonable
14-11 convenience attend these educational sessions to take and
14-12 successfully complete an equivalent course of study and instruction
14-13 by mail.
14-14 D. The commissioner shall <board may> promulgate rules and
14-15 regulations to carry out the purposes and requirements of this
14-16 article.
14-17 E. On written request of the licensee, the commissioner
14-18 <board> may extend the time for the licensee to comply with the
14-19 requirements of this article or may exempt the licensee from some
14-20 or all of the requirements for a licensing period if the
14-21 commissioner <board> finds that the licensee is unable to comply
14-22 with the requirements because of illness, medical disability, or
14-23 another extenuating circumstance beyond the control of the
14-24 licensee. The criteria for such exemptions and extensions shall be
14-25 established by rule.
15-1 SECTION 14. Section 15, Article 9.59, Insurance Code, is
15-2 amended to read as follows:
15-3 Sec. 15. Other laws to govern. Article <Articles> 4.12
15-4 applies<, 4.13, 4.14, 4.15, and 4.16, Insurance Code, apply> to
15-5 title insurance companies which are subject to this article.
15-6 SECTION 15. This Act takes effect September 1, 1995.
15-7 SECTION 16. The importance of this legislation and the
15-8 crowded condition of the calendars in both houses create an
15-9 emergency and an imperative public necessity that the
15-10 constitutional rule requiring bills to be read on three several
15-11 days in each house be suspended, and this rule is hereby suspended.