1-1 By: Rosson S.B. No. 1284
1-2 (In the Senate - Filed March 10, 1995; March 20, 1995, read
1-3 first time and referred to Committee on Economic Development;
1-4 April 12, 1995, reported adversely, with favorable Committee
1-5 Substitute by the following vote: Yeas 9, Nays 1; April 12, 1995,
1-6 sent to printer.)
1-7 COMMITTEE SUBSTITUTE FOR S.B. No. 1284 By: Rosson
1-8 A BILL TO BE ENTITLED
1-9 AN ACT
1-10 relating to regulation of the business of title insurance.
1-11 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-12 SECTION 1. Section B, Article 9.01, Insurance Code, is
1-13 amended to read as follows:
1-14 B. The Legislature of the State of Texas finds that the
1-15 business of title insurance, both the direct issuance of policies
1-16 and the reinsurance of any assumed risks, of every type, shall in
1-17 all respects be totally regulated by the State of Texas so as to
1-18 provide for the protection of every consumer and purchaser of a
1-19 title insurance policy and to provide for adequate and reasonable
1-20 rates of return for title insurance companies and title insurance
1-21 agents. It is the express legislative intent that this Chapter 9
1-22 accomplish such a result.
1-23 SECTION 2. Subsection (b), Article 9.02, Insurance Code, is
1-24 amended to read as follows:
1-25 (b) The "business of title insurance" shall be deemed to be
1-26 (1) the making as insurer, guarantor or surety, or proposing to
1-27 make as insurer, guarantor or surety, of any contract or policy of
1-28 title insurance or any equivalent thereof; (2) the transacting or
1-29 proposing to transact, any phase of title insurance, including
1-30 solicitation, title examination, except when conducted by an
1-31 attorney, closing the transaction, except when conducted by an
1-32 attorney, execution of a contract of title insurance, insuring and
1-33 transacting matters subsequent to the execution of the contract and
1-34 arising out of it, including reinsurance; <or> (3) the making of a
1-35 guaranty or warranty of a title search, a title examination, or any
1-36 component thereof by a person other than the one performing the
1-37 search or examination; or (4) the doing, or proposing to do, any
1-38 business in substance equivalent to any of the foregoing whether or
1-39 not <in a manner> designed to evade the provisions of this Act.
1-40 SECTION 3. Subsection (c), Article 9.02, Insurance Code, is
1-41 amended to read as follows:
1-42 (c) "Title Insurance Company" means any domestic company
1-43 organized under the provisions of this Act for the purpose of
1-44 conducting the business of title insurance <insuring titles to real
1-45 property>, any title insurance company organized under the laws of
1-46 another state or foreign government meeting the requirements of
1-47 this Act and holding a certificate of authority to transact
1-48 business in Texas and any domestic or foreign company having a
1-49 certificate of authority to insure titles to real estate within
1-50 this state and which meet the requirements of this Act.
1-51 SECTION 4. Subsection (i), Article 9.02, Insurance Code, is
1-52 amended to read as follows:
1-53 (i) "Abstract plant" as used herein shall mean a
1-54 geographical abstract plant such as is defined by the commissioner,
1-55 <Board> and the commissioner <Board>, in defining an abstract
1-56 plant, shall require a geographically arranged plant, currently
1-57 kept to date, that is found by the commissioner <Board> to be
1-58 adequate for use in insuring titles, so as to provide for the
1-59 safety and protection of the policyholders.
1-60 SECTION 5. Subsection (m), Article 9.02, Insurance Code, is
1-61 amended to read as follows:
1-62 (m) "Title Examination" means the search and examination of
1-63 a title to determine the conditions of the title to be insured and
1-64 to evaluate the risk to be undertaken in the issuance of a title
1-65 insurance policy or other title insurance form.
1-66 SECTION 6. Article 9.07, Insurance Code, is amended to read
1-67 as follows:
1-68 Art. 9.07. Policy Forms and Premiums. (a) Corporations
2-1 organized under this Chapter, as well as foreign corporations and
2-2 those created under Subdivision 57, Article 1302, of the Revised
2-3 Civil Statutes of 1925 before the repeal of that statute, or under
2-4 Chapter 8 of this Code, or any other law insofar as the business of
2-5 either may be the business of title insurance, shall operate in
2-6 Texas under the control and supervision and under such uniform
2-7 rules and regulations as to forms of policies and underwriting
2-8 contracts and premiums therefor, and such underwriting standards
2-9 and practices as may be prescribed by the commissioner <Board>; and
2-10 no Texas or foreign corporation, whether incorporated under this
2-11 Chapter or any other law of the State of Texas, shall be permitted
2-12 to conduct the business of title insurance, to issue any title
2-13 policy of any character, or underwriting contract, to delete any
2-14 policy exclusion or to reinsure any portion of the risk assumed by
2-15 any title policy, on Texas real property other than under this
2-16 Chapter and under such rules and regulations. No policy of title
2-17 insurance, title insurance coverage, reinsurance of any risk
2-18 assumed under any policy of title insurance, or any guarantee of
2-19 any character made when insuring Texas titles shall be issued or
2-20 valid unless written by a corporation complying with the provisions
2-21 of and authorized or qualified under this Chapter, except as is
2-22 provided in Article 9.19D. Before any premium rate provided for
2-23 herein shall be fixed or charged, reasonable notice shall issue,
2-24 and a hearing afforded to the title insurance companies and title
2-25 insurance agents authorized or qualified under this Chapter and the
2-26 public. Under no circumstances may any title insurance company or
2-27 title insurance agent use any form which is required under the
2-28 provisions of this Chapter 9 to be promulgated or approved until
2-29 the same shall have been so promulgated or approved by the
2-30 commissioner <Board>.
2-31 (b) The commissioner <Board> shall have the duty to fix and
2-32 promulgate the premium rates to be charged by title insurance
2-33 companies and title insurance agents created or operating under
2-34 this Chapter for policies of title insurance or other promulgated
2-35 or approved forms, and the premiums therefor shall be paid in the
2-36 due and ordinary course of business. Premium rates for reinsurance
2-37 as between title insurance companies qualified under this Chapter
2-38 shall not be fixed or promulgated by the commissioner <Board>, and
2-39 title insurance companies may set such premium rates for
2-40 reinsurance as such title insurance companies shall agree upon.
2-41 Under no circumstance shall any premium be charged for any policy
2-42 of title insurance or other promulgated or approved forms different
2-43 from those fixed and promulgated by the commissioner <Board>,
2-44 except for premiums charged for reinsurance. The premium rates
2-45 fixed by the commissioner <Board> shall be reasonable to the public
2-46 and nonconfiscatory as to the title insurance companies and title
2-47 insurance agents. For the purpose of collecting data on which to
2-48 determine the proper rates to be fixed, the commissioner <Board>
2-49 shall require all title insurance companies and all title insurance
2-50 agents operating in Texas to submit such information in such form
2-51 as the commissioner <it> may deem proper, all information as to
2-52 loss experience, expense of operation, and other material matters
2-53 <matter> for the commissioner's <Board's> consideration. In fixing
2-54 the rate of premiums, the commissioner shall consider all relevant
2-55 income and expenses of title insurance companies and title
2-56 insurance agents attributable to Texas title insurance business.
2-57 (c) The commissioner <Board> shall hold a biennial hearing
2-58 not earlier than July 1 <October 1 or later than December 15> of
2-59 each even-numbered calendar year, to consider adoption of premium
2-60 rates and such other matters and subjects relative to the
2-61 regulation of the business of title insurance as may be requested
2-62 by any association, any title insurance company, any title
2-63 insurance agent, any member of the public, or as the commissioner
2-64 <Board> may determine necessary to consider. Any person,
2-65 association, or entity recommending adoption of premium rates or
2-66 other matters and subjects shall be admitted as a party to the
2-67 hearing. Not less than 60 days prior to the <Proper notice of
2-68 such> public hearing, notice of the hearing and the items to be
2-69 considered shall be <made to the public and shall be> sent direct
2-70 to all title insurance companies and title insurance agents
3-1 qualified or authorized to do business under this Chapter and to
3-2 the public in such a manner as to give fair publicity thereto. The
3-3 hearing shall consist of a rulemaking phase for consideration of
3-4 rules, forms, and endorsements, and related matters not having rate
3-5 implications and a ratemaking phase for consideration of fixing the
3-6 premium rate and other matters with rate implications. The
3-7 commissioner shall certify which matters have rate implications to
3-8 be considered in the ratemaking phase of the hearing. The
3-9 commissioner shall conduct both phases of the hearing; provided,
3-10 however, that the ratemaking phase of the hearing shall be
3-11 conducted by the State Office of Administrative Hearings in
3-12 accordance with Article 1.33B of this code at the direction of the
3-13 commissioner or at the written request of any person seeking
3-14 admission as a party to the ratemaking phase of the hearing. Such
3-15 request must be made at the time a person seeks to be admitted as a
3-16 party to the hearing but in no event more than 10 days after
3-17 issuance of public notice of the hearing. The ratemaking phase of
3-18 the hearing shall be conducted as a contested case pursuant to
3-19 Chapter 2001, Government Code (Administrative Procedure Act).
3-20 Presentation by any party of relevant, admissible oral testimony
3-21 shall not be limited. All matters in all phases of the hearing
3-22 shall be considered by the commissioner and decisions thereon
3-23 rendered in open meeting. Changes to the Basic Manual of Rules,
3-24 Rates, and Forms for the Writing of Title Insurance in the State of
3-25 Texas, including additions or amendments thereto, may be proposed
3-26 and adopted by reference by publishing a notice of such proposal or
3-27 adoption by reference in the Texas Register. The notice must
3-28 include a brief summary of the substance of the matter to be added
3-29 or changed and a statement that the full text of the matter is
3-30 available for review in the office of the chief clerk of the Texas
3-31 Department of Insurance <for at least four (4) weeks in advance of
3-32 such hearing>.
3-33 (d) Premium rates when once fixed shall not be changed until
3-34 after a public hearing shall be had by the commissioner. Not less
3-35 than 60 days prior to the public hearing, notice of the hearing and
3-36 the items to be considered shall be <Board, after proper notice>
3-37 sent direct to all title insurance companies and title insurance
3-38 agents qualified or authorized to do business under this Chapter,
3-39 and <after> public notice shall be provided in such manner as to
3-40 give fair publicity thereto <for at least four (4) weeks in
3-41 advance>. The commissioner <Board> must call such additional
3-42 hearings to consider premium rate changes at the request of a title
3-43 insurance company or the office of public insurance counsel.
3-44 (e) The commissioner <Board> may, on his or her <its> own
3-45 motion, following notice as required for the biennial hearing hold
3-46 at any time a public hearing to consider adoption of premium rates
3-47 and such other matters and subjects relative to the regulation of
3-48 the business of title insurance as the commissioner <Board> shall
3-49 determine necessary or proper.
3-50 (f) Any title insurance company, any title insurance agent,
3-51 or other person or association of persons interested, feeling
3-52 injured by any action of the commissioner <Board or the
3-53 Commissioner> with regard to premium rates or other action taken by
3-54 the commissioner <Board or the Commissioner>, shall have the right
3-55 to appeal in accordance with Article 1.04 of this code.
3-56 SECTION 7. Subsection (b), Article 9.07A, Insurance Code, is
3-57 amended to read as follows:
3-58 (b) A title insurance company or title insurance agent shall
3-59 use a form adopted by the commissioner <board> under this article
3-60 in issuing owner policies to natural persons relating to
3-61 residential real property in this state.
3-62 SECTION 8. Article 9.08, Insurance Code, is amended to read
3-63 as follows:
3-64 Art. 9.08. Prohibiting Guarantee of Payment of Obligations
3-65 of Others--and "Insuring Around." Title insurance companies,
3-66 domestic or foreign, operating under this chapter shall not have
3-67 the right to guarantee the payment of mortgages which cover real
3-68 estate, and if any such corporation shall do so it shall forthwith
3-69 forfeit and surrender its permit to do business.
3-70 "Insuring around" is defined as the willful issuance of a
4-1 title binder or title insurance policy showing no outstanding
4-2 enforceable recorded liens while the title insurance company
4-3 <issuer> knows that in fact a lien or liens are of record against
4-4 the real property, and shall be prohibited, except under
4-5 circumstances as the commissioner <State Board of Insurance> under
4-6 his or her <its> rule-making powers shall approve. A title
4-7 insurance company knows that an outstanding enforceable recorded
4-8 matter exists if it determines that the matter is valid and
4-9 enforceable based on the examination of the title pursuant to which
4-10 the title binder or title insurance policy is issued. In its
4-11 discretion, the title insurance company may determine the
4-12 insurability of title and those matters which it considers to be
4-13 insurable under the title binder or title insurance policy;
4-14 provided, however, that insuring around enforceable recorded liens
4-15 shall be prohibited except as allowed by regulation.
4-16 Any person who willfully violates the provisions of this
4-17 Article 9.08, or who disobeys an order of the commissioner <Board>
4-18 refusing to approve an application to insure around, shall, upon
4-19 proof thereof to the satisfaction of the District Court of Travis
4-20 County, Texas, forfeit and pay to the State of Texas a sum not to
4-21 exceed $5,000, which may be recovered in a civil action by the
4-22 commissioner.
4-23 The commissioner <Board>, upon giving thirty (30) days'
4-24 notice by registered mail, and upon hearing had for that purpose,
4-25 may forfeit the Certificate of Authority to do business of any
4-26 company violating the provisions of this Article 9.08.
4-27 SECTION 9. Article 9.09, Insurance Code, is amended to read
4-28 as follows:
4-29 Art. 9.09. Prohibiting Transacting of Other Kinds of
4-30 Insurance by Title Insurance Companies or the Transacting of Title
4-31 Insurance by Other Types of Insurance Companies. Corporations,
4-32 domestic or foreign, operating under this Chapter shall not
4-33 transact, underwrite or issue any kind of insurance other than
4-34 title insurance on real property; nor shall the business of title
4-35 insurance be transacted, underwritten, or issued by any company
4-36 transacting any other kinds of insurance.
4-37 SECTION 10. Article 9.11, Insurance Code, is amended to read
4-38 as follows:
4-39 Art. 9.11. Revocation of Right to do Business. Any foreign
4-40 or domestic corporations conducting the business of title insurance
4-41 or issuing any form of title insurance policy or other promulgated
4-42 or approved forms, or charging any premium rates on an owner,
4-43 mortgagee, or other title insurance policy, or on other promulgated
4-44 or approved forms, except for the premium rates charged for
4-45 reinsurance, on Texas real property other than forms and premium
4-46 rates prescribed by the commissioner <Board>, under the provisions
4-47 of this Chapter shall forfeit its right to do business in this
4-48 state. The provisions of this Article 9.11 shall not, however, be
4-49 applicable to premium rates charged in connection with reinsurance
4-50 transactions between or among title insurance companies doing
4-51 business under the provisions of this Chapter, provided any such
4-52 reinsurance contract complies with the provisions of Article 9.19
4-53 of this Chapter.
4-54 SECTION 11. Section B, Article 9.30, Insurance Code, is
4-55 amended to read as follows:
4-56 B. This Article may not be construed as prohibiting:
4-57 (1) a foreign or domestic title insurance company
4-58 doing business in this state under this Chapter, from appointing as
4-59 its title insurance agent pursuant to this Chapter a person owning
4-60 or leasing and operating an abstract plant of such county and
4-61 making the arrangement for division of premiums with the agent as
4-62 shall be set by the commissioner <Board>;
4-63 (2) payments for services actually performed by a
4-64 title insurance company, a title insurance agent, or a direct
4-65 operation, in connection with closing the transaction, furnishing
4-66 of title evidence, or title examination, which payment may not
4-67 exceed the percentages of the premium or amounts established by the
4-68 commissioner <Board> for those payments; or
4-69 (3) payment of bona fide compensation to a bona fide
4-70 employee principally employed by a title insurance company, direct
5-1 operation, title insurance agent, or other reasonable payment for
5-2 goods or facilities actually furnished and received; or
5-3 (4) payments for services actually performed by an
5-4 attorney in connection with title examination or closing a
5-5 transaction, which payment may not exceed a reasonable charge for
5-6 such services.
5-7 (5) Nothing in this article shall affect the division
5-8 of premium between a title insurance company and its subsidiary
5-9 title insurance agent when the title insurance company directly
5-10 issues its policy or contract of title insurance pursuant to
5-11 Article 9.34. For purposes of this provision, a subsidiary is a
5-12 company at least 50 percent of the voting stock of which is owned
5-13 by the title insurance company or by a wholly owned subsidiary of
5-14 the title insurance company.
5-15 (6) normal promotional and educational activities that
5-16 are not conditioned on the referral of title insurance business.
5-17 SECTION 12. Article 9.55, Insurance Code, is amended to read
5-18 as follows:
5-19 Art. 9.55. Requirement for Issuance of Owners and Mortgagee
5-20 Title Policies in Connection With Residential Property. After
5-21 January 1, 1976, whenever any improved residential real property
5-22 situated in the State of Texas shall be sold and a mortgagee policy
5-23 of title insurance or other form or agreement or the equivalent
5-24 thereof that constitutes the business of title insurance is issued
5-25 in connection with <title policy issued to guarantee the validity
5-26 of> a lien thereon, the title insurance company or title insurance
5-27 agent so issuing such mortgagee <title> policy of title insurance
5-28 form or agreement or the equivalent thereof shall also issue an
5-29 owner <title> policy of title insurance to the owner of such
5-30 property and the required premium as promulgated by the
5-31 commissioner <board> shall be charged.
5-32 The provisions of this article may, however, be rejected,
5-33 provided that the person acquiring title shall, at or prior to
5-34 closing and settlement, execute a written and acknowledged
5-35 rejection wherein the purchaser rejects issuance of such owner
5-36 title policy. The form of such rejection shall be prescribed,
5-37 after notice and hearing, by the commissioner <board>.
5-38 <The provisions of this Article 9.55 of this Chapter 9 shall
5-39 not apply to a settlement or closing if neither a title insurance
5-40 company, a title insurance agent, an attorney for a title insurance
5-41 company or title insurance agent, nor a representative of the title
5-42 insurance company, title insurance agent or attorney for a title
5-43 insurance company or title insurance agent has actually handled the
5-44 closing or settlement of such real estate transaction.>
5-45 SECTION 13. Article 9.58, Insurance Code, is amended to read
5-46 as follows:
5-47 Art. 9.58. Continuing Education. A. For protection of the
5-48 public and to preserve and improve competence of licensees, the
5-49 commissioner shall <board may in its sole discretion> require as a
5-50 condition to continuation of license as a title insurance agent or
5-51 escrow officer that during the 24 months next preceding expiration
5-52 of the current license period the licensee has enrolled in and
5-53 attended or taught <up to> 15 hours or such lesser amount
5-54 established by the commissioner in <of> class instruction,
5-55 lectures, seminars, or other forms of education approved by the
5-56 commissioner <board> for the particular license.
5-57 B. The instruction shall be designed to refresh the
5-58 licensee's understanding of basic principles and coverages
5-59 involved, recent and prospective changes in those principles and
5-60 coverages, applicable laws and rules and regulations of the
5-61 commissioner <board>, proper conduct of the licensee's business,
5-62 and duties and responsibilities of the licensee.
5-63 C. The commissioner <board> may permit licensees who because
5-64 of remoteness of residence or business cannot with reasonable
5-65 convenience attend these educational sessions to take and
5-66 successfully complete an equivalent course of study and instruction
5-67 by mail.
5-68 D. The commissioner shall <board may> promulgate rules and
5-69 regulations to carry out the purposes and requirements of this
5-70 article.
6-1 E. On written request of the licensee, the commissioner
6-2 <board> may extend the time for the licensee to comply with the
6-3 requirements of this article or may exempt the licensee from some
6-4 or all of the requirements for a licensing period if the
6-5 commissioner <board> finds that the licensee is unable to comply
6-6 with the requirements because of illness, medical disability, or
6-7 another extenuating circumstance beyond the control of the
6-8 licensee. The criteria for such exemptions and extensions shall be
6-9 established by rule.
6-10 SECTION 14. Section 15, Article 9.59, Insurance Code, is
6-11 amended to read as follows:
6-12 Sec. 15. Other laws to govern. Article <Articles> 4.12
6-13 applies<, 4.13, 4.14, 4.15, and 4.16, Insurance Code, apply> to
6-14 title insurance companies which are subject to this article.
6-15 SECTION 15. This Act takes effect September 1, 1995.
6-16 SECTION 16. The importance of this legislation and the
6-17 crowded condition of the calendars in both houses create an
6-18 emergency and an imperative public necessity that the
6-19 constitutional rule requiring bills to be read on three several
6-20 days in each house be suspended, and this rule is hereby suspended.
6-21 * * * * *