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A BILL TO BE ENTITLED
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AN ACT
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relating to a lender's release of insurance proceeds. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Section 557.002, Insurance Code is amended to |
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read as follows: |
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Sec. 557.002. NOTIFICATION BY LENDER TO INSURED CONCERNING |
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INSURANCE PROCEEDS. (a) If a claim under an insurance policy for |
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damage to residential real property is paid to the insured and a |
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lender, and the lender holds all or part of the proceeds from the |
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insurance claim payment pending completion of all or part of the |
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repairs to the property, the lender shall specifically notify the |
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insured of each reasonable requirement with which the insured must |
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comply for the lender to release the insurance proceeds. |
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(b) The notice required under this section must be provided |
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not later than the 10th day after the date the lender receives |
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payment of the insurance proceeds. |
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SECTION 2. Section 557.003, Insurance Code is amended to |
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read as follows: |
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Sec. 557.003. LENDER'S RELEASE OR REFUSAL TO RELEASE |
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INSURANCE PROCEEDS. Not later than the 10th day after the date a |
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lender receives from the insured a request for release of all or |
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part of the insurance proceeds held by the lender, the lender shall: |
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(1) if the lender has received [sufficient] evidence |
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of the insured's compliance with the requirements specified by the |
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lender under Section 557.002 for release of the proceeds, release |
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to the insured, as requested, all or part of the proceeds; or |
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(2) provide notice to the insured that explains |
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specifically: |
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(A) the good faith reason for the lender's |
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refusal to release the proceeds to the insured; and |
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(B) each requirement as specified by the lender |
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under Section 557.002 with which the insured must comply for the |
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lender to release the proceeds. |
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SECTION 3. Section 557.004, Insurance Code is amended to |
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read as follows: |
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Sec. 557.004. LIABILITY FOR VIOLATION OF SUBCHAPTER. |
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(a) If a lender is not in compliance with this subchapter, the |
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lender is liable to pay insured the proceeds held by the lender, |
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interest at the rate of 18 percent a year on the proceeds held by the |
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lender as damages, together with reasonable attorney's fees. |
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(b) If a suit is filed, the attorney's fees shall be taxed as |
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part of the costs in the case. [PAYMENT OF INTEREST; RATE.
A lender
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who fails to provide notice as required by Section 557.002 or
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557.003 or to release insurance proceeds as required by Section
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557.003 shall pay to the insured interest at the rate of 10 percent
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a year on the proceeds held by the lender.] |
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SECTION 4. Section 557.005, Insurance Code is amended to |
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read as follows: |
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Sec. 557.005. REMEDIES NOT EXCLUSIVE. The remedies |
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provided by this subchapter are in addition to any other remedy or |
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procedure provided by law or at common law. [ACCRUAL OF INTEREST.
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(a)
If a lender fails to provide notice as required by Section
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557.002 or 557.003, interest begins to accrue on the date the lender
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received the insurance proceeds.
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(b)
If a lender fails to release insurance proceeds as
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required by Section 557.003, interest begins to accrue on the date
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the lender receives sufficient evidence of the insured's compliance
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with the requirements specified by the lender under Section 557.002
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or 557.003 for release of the proceeds.
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(c)
Interest stops accruing on the date the lender complies
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with Section 557.002 or 557.003, as applicable.] |
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SECTION 5. Section 557.006, Insurance Code is repealed. |