1-1     By:  Harris                                           S.B. No. 1155

 1-2           (In the Senate - Filed March 11, 1997; March 17, 1997, read

 1-3     first time and referred to Committee on Economic Development;

 1-4     April 29, 1997, reported adversely, with favorable Committee

 1-5     Substitute by the following vote:  Yeas 10, Nays 0; April 29, 1997,

 1-6     sent to printer.)

 1-7     COMMITTEE SUBSTITUTE FOR S.B. No. 1155                  By:  Harris

 1-8                            A BILL TO BE ENTITLED

 1-9                                   AN ACT

1-10     relating to certain business practices in and licenses for the

1-11     writing of title insurance.

1-12           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

1-13           SECTION 1.  Article 9.37, Insurance Code, is amended by

1-14     adding Section F to read as follows:

1-15           F.  After notice and hearing, the commissioner may revoke or

1-16     suspend a license issued under this chapter if the commissioner

1-17     finds the existence of any material fact or condition that either

1-18     did not exist or was not disclosed at the time of the original

1-19     application for the license but was required to be disclosed at

1-20     that time and that, had such fact or condition existed or been

1-21     disclosed at that time, clearly would have warranted refusal to

1-22     issue the license.

1-23           SECTION 2.  Chapter 9, Insurance Code, is amended by adding

1-24     Article 9.36B to read as follows:

1-25           Art. 9.36B.  ADDITIONAL LICENSING REQUIREMENTS.  (a)  A

1-26     person, firm, entity, association, or corporation licensed or

1-27     applying for a license as a title insurance agent or direct

1-28     operation in a county in this state shall provide evidence to the

1-29     department that:

1-30                 (1)  the title insurance agent or direct operation

1-31     operates a fully operating abstract plant that provides abstract

1-32     and title examination services for the county in this state in

1-33     which the title insurance agent's or direct operation's abstract

1-34     plant is licensed, including independent abstract and examination

1-35     of titles in that county performed by bona fide employees of the

1-36     title insurance agent or direct operation;

1-37                 (2)  the title insurance agent or direct operation is

1-38     actually involved in closing the transaction, as defined by the

1-39     procedural rules, and that such services are performed by (i) bona

1-40     fide employees or officers of the title insurance agent or direct

1-41     operation who are licensed escrow officers of the title insurance

1-42     agent or direct operation; or (ii) another licensed title insurance

1-43     agent or direct operation pursuant to a written agreement;

1-44     provided, however, that the fee paid for such services shall be no

1-45     less than 40 percent of the total retained title premium;

1-46                 (3)  the title insurance agent or direct operation will

1-47     not close or settle real estate transactions for real property

1-48     located in counties in this state other than those for which the

1-49     title insurance agent or direct operation is licensed, unless the

1-50     title insurance agent or direct operation pays a fee for abstract

1-51     and examination services to the licensed title insurance agents or

1-52     direct operations from which the other county's abstract and

1-53     examination is derived of not less than:

1-54                       (A)  24.5 percent of the total retained premium

1-55     collected in the settlement for the services, if the county for

1-56     which the abstract and examination is performed has a population of

1-57     100,000 or more; and

1-58                       (B)  36.5 percent of the total retained premium

1-59     collected in the settlement for the services if the county for

1-60     which the abstract and examination is performed has a population of

1-61     less than 100,000;

1-62                 (4)  except as provided in Subdivision (5) of this

1-63     subsection, the title insurance agent or direct operation will not

1-64     engage in the examination of abstract information for a fee with

 2-1     respect to counties other than the counties in which the title

 2-2     insurance agent's or direct operation's abstract plant is licensed;

 2-3     and

 2-4                 (5)  in counties with a population in excess of 500,000

 2-5     or counties adjacent thereto with a population in excess of

 2-6     100,000, a title insurance agent or direct operation may engage in

 2-7     the examination of abstract information for a fee with respect to

 2-8     counties other than the counties in which the title insurance

 2-9     agent's or direct operation's abstract plant is licensed only so

2-10     long as the fee paid for such service is no more than 20 percent of

2-11     the total retained premium collected in the settlement.

2-12           (b)  This article does not apply to services provided by an

2-13     attorney in connection with a title examination or closing a

2-14     transaction if the services are provided in accordance with this

2-15     chapter and department rules.

2-16           (c)  Each person, firm, entity, association, or corporation

2-17     that has been licensed as a title insurance agent or direct

2-18     operation and that received more than 50 percent of its gross title

2-19     premium revenues during the preceding calendar year from owners or

2-20     affiliates of the title insurance agent or direct operation shall

2-21     make, purchase, and file a bond with a corporate surety company

2-22     authorized to write bonds in this state, payable to the department,

2-23     in the amount of $500,000.  The bond must obligate the principal

2-24     and surety to pay the pecuniary losses that result to a participant

2-25     in an insured real estate transaction that are sustained through

2-26     acts of fraud, dishonesty, theft, embezzlement, or wilful

2-27     misapplication of funds by the title insurance agent or direct

2-28     operation or that result to the department because of

2-29     administrative expenses incurred in receivership of the title

2-30     insurance agent or direct operation.  The bond required by this

2-31     subsection is in addition to and must be in the same form as the

2-32     bond required of a title insurance agent or direct operation under

2-33     Article 9.38 of this code.

2-34           (d)  Instead of the bond required by Subsection (c) of this

2-35     article, a title insurance agent or direct operation may deposit

2-36     with the department cash or irrevocable letters of credit issued by

2-37     a financial institution in this state insured by an agency of the

2-38     United States.  A deposit made under this subsection is subject to

2-39     the same conditions as the bond.

2-40           (e)  A material agreement, as defined by the commissioner,

2-41     between a title insurance company and the company's title insurance

2-42     agents or direct operations must, for informational purposes only,

2-43     be provided to the commissioner by both the title insurance company

2-44     and the title insurance agents or direct operations as a part of

2-45     the application or renewal of any license.  A subsequent material

2-46     agreement, as defined by the commissioner, between those parties

2-47     must, for informational purposes only, be provided to the

2-48     commissioner at the time the agreement is executed.

2-49           (f)  This article does not impair any insurance activity

2-50     expressly authorized by federal law.

2-51           (g)  The term affiliate as used in this article means:

2-52                 (1)  a direct or indirect parent or subsidiary of the

2-53     title insurance agent or direct operation;

2-54                 (2)  an entity owned or controlled by an entity

2-55     described in Subdivision (1) of this subsection;

2-56                 (3)  an officer, director, or owner of more than five

2-57     percent of the title insurance agent or direct operation or an

2-58     entity described in Subdivision (1) or (2) of this subsection; or

2-59                 (4)  a spouse or relative within the second degree by

2-60     blood or marriage of an officer, director, or owner of more than

2-61     five percent of the title insurance agent or direct operation.

2-62           SECTION 3.  (a)  For title insurance agents and direct

2-63     operations that are currently licensed, this Act takes effect

2-64     September 1, 1998.  For all new applications for licensing, this

2-65     Act takes effect September 1, 1997.

2-66           (b)  A title insurance agent or direct operation is not

2-67     required to file the bond required by Subsection (c), Article 9.37,

2-68     Insurance Code, as added by this Act, before April 1, 1999.

2-69           SECTION 4.  The importance of this legislation and the

 3-1     crowded condition of the calendars in both houses create an

 3-2     emergency and an imperative public necessity that the

 3-3     constitutional rule requiring bills to be read on three several

 3-4     days in each house be suspended, and this rule is hereby suspended.

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