BILL ANALYSIS

C.S.H.B. 2408

By: Darby

Insurance

Committee Report (Substituted)

BACKGROUND AND PURPOSE

Interested parties contend that the ratemaking process for title rates within the Texas Department of Insurance (TDI) could be streamlined to increase efficiencies while ensuring adequate due process protections for the regulated entities. The parties assert that legislation is needed to improve certain provisions and schedule requirements for public hearing by removing the requirement for a biennial rate hearing to allow additional interested parties to request a hearing when they consider it necessary, expanding provisions granting the standing of certain parties at a hearing, requiring a hearing if no hearing is called within a specified period from the previous hearing, and streamlining the public notice requirements for TDI.

C.S.H.B. 2408 seeks to address matters relating to administrative procedures for title insurance hearings, licensing, and enforcement.

RULEMAKING AUTHORITY

It is the committee's opinion that rulemaking authority is expressly granted to the commissioner of insurance in SECTION 7 of this bill.

ANALYSIS

C.S.H.B. 2408 amends the Insurance Code to establish that nothing in the code's provisions relating to insurance rebates and discounts prohibits a title insurance company or a title insurance agent from providing continuing education to one or more individuals at market rates, whether or not the continuing education is for accreditation.

C.S.H.B. 2408 requires the Texas Department of Insurance (TDI), not later than the 20th business day after the date TDI receives a renewal application for a title insurance agent's license or a license or license renewal application for an escrow officer's license, to notify the applicant or license holder, as applicable, in writing of any deficiencies in the application that render the application incomplete. The bill requires TDI, not later than the fifth business day after the date the renewal application or license application is complete, to notify the applicant or license holder, as applicable, in writing of the date that the application is complete. The bill establishes that a renewal application is automatically approved on the 30th business day after the date the application is complete unless on or before that date TDI notifies the applicant or license holder, as applicable, in writing of the factual grounds on which TDI proposes to deny the license application or renewal application. The bill authorizes TDI to provide such a notice by e-mail.

C.S.H.B. 2408 requires TDI, not later than the 20th business day after the date TDI receives a notice of the appointment of a licensed title insurance agent to represent an additional title insurance company, to notify the title insurance agent and appointing title insurance company in writing of any deficiencies in the notice that render the notice incomplete. The bill establishes that such a notice is considered complete on the date TDI receives the notice unless TDI provides notice of the deficiencies. The bill requires TDI, not later than the fifth business day after the date the notice is complete, to notify the title insurance agent and appointing title insurance company in writing of the date that the notice is complete.

C.S.H.B. 2408 establishes that the appointment is effective on the eighth business day following the date the notice of appointment is complete and TDI receives the required fee unless TDI proposes to reject the appointment. The bill requires TDI, if TDI proposes to reject the appointment, to notify the title insurance agent and the appointing title insurance company in writing of the factual grounds on which TDI proposes to reject the appointment not later than the seventh business day after the date on which the notice of appointment is complete. The bill authorizes TDI to provide such a notice by e-mail.  The bill removes provisions making such appointment effective on the eighth day following the date TDI receives the completed notice and fee unless TDI rejects the appointment and requiring TDI to state in writing the reasons for rejection not later than the seventh day after the day on which TDI receives the completed notice.

C.S.H.B. 2408 prohibits TDI from rejecting or delaying a notice of appointment of a title insurance agent to represent multiple companies based wholly or partly on a pending TDI audit or complaint investigation or a pending disciplinary action against a title insurance agent or appointing title insurance company that has not been closed or finally adjudicated on or before the date on which TDI receives the notice.

C.S.H.B. 2408 prohibits TDI from delaying or denying an application for a title insurance agent license or an escrow officer license, or a renewal application for such a license, based wholly or partly on a TDI audit or complaint investigation of, or disciplinary or enforcement action against, an applicant or license holder that is pending and has not been finally closed or adjudicated on or before the date on which the application is filed. The bill requires TDI to notify a licensed title insurance agent in writing of a disciplinary or enforcement action against the license holder not later than the 30th business day after the date TDI assigns a file number to the action and requires TDI to provide such notice to a licensed escrow agent not later than the 20th business day after the date TDI assigns a file number to the action. The bill authorizes such a notice to be provided to a licensed title insurance agent by e-mail.  The bill requires the notice to a licensed title insurance agent or to a licensed escrow agent to provide the license holder fair notice of the alleged facts known by TDI on the date of the notice that constitute grounds for the action. The bill establishes that a disciplinary or enforcement action is automatically dismissed with prejudice unless TDI serves a notice of hearing on the license holder not later than the 60th business day after the date TDI receives a hearing request from the license holder.

C.S.H.B. 2408 requires the contents of the statistical report submitted to TDI annually by each title insurance company and title insurance agent, including any amendments to the statistical report, to be established in a rulemaking hearing under state law. The bill prohibits an amendment to the contents of the statistical report from applying retroactively.

C.S.H.B. 2408, in a provision requiring the commissioner of insurance to order a public hearing to consider changing a premium rate at the request of a title insurance company or of the office of public insurance counsel, requires the commissioner to order such a public hearing also at the request of an association composed of at least 50 percent of the number of title insurance agents and title insurance companies licensed or authorized by TDI or at the request of an association composed of at least 20 percent of the number of title insurance agents licensed or authorized by TDI.  The bill adds to the purpose for ordering such a hearing the purpose of fixing a new premium rate and specifies that the request for such a hearing must be in writing.

C.S.H.B. 2408 requires such a public hearing to be conducted by the commissioner as a contested case hearing at the request of any one of the entities at whose request the commissioner is required to order a public hearing on premium rates. The bill requires the commissioner, if such a hearing is not conducted as a contested case hearing, to render a decision and issue a final order not later than the 120th day after the date the commissioner receives the written request for the public hearing. The bill requires the commissioner, if the hearing is conducted as a contested case hearing, to issue a notice of call for items to be considered at the hearing not later than the 30th day after the date the commissioner receives the request for a public hearing.

C.S.H.B. 2408 prohibits the commissioner from requiring responses to the notice of call before the 60th day after the date the commissioner issues the notice of call, requires the commissioner to issue the notice of public hearing not later than the 30th day after the date responses to the notice of call are required, and requires the commissioner to start the public hearing not earlier than the 120th day after the date the commissioner issues a notice of hearing. The bill requires the commissioner to close the public hearing not later than the 150th day after the date the commissioner issues the notice of hearing and requires the commissioner to render a decision and issue a final order not later than the 60th day after the record made in the public hearing is closed. The bill prohibits a party's presentation of relevant, admissible oral testimony in the hearing from being limited and requires the commissioner to consider each matter presented in the hearing and announce in a public hearing all decisions on all matters considered.

C.S.H.B. 2408 authorizes a party requesting the public hearing to petition a district court in Travis County to enter an order requiring the commissioner to comply with the deadlines described by the bill's provisions if the commissioner fails to meet a time frame requirement related to the hearing procedures. The bill authorizes a combination of at least three associations, persons, or entities who may request the hearing, subject to certain limitations, to jointly petition a Travis County district court to adopt a rate based on the record made in the hearing before the commissioner if the commissioner fails to render a final order and issue a final order within the specified deadlines. The bill requires the court, if the record made in the hearing before the commissioner is not complete before the request for the court to adopt a premium rate, to hold an evidentiary hearing to establish a record before adopting the premium rate. The bill prohibits the commissioner, after such a petition has been filed, from issuing findings or an order related to the subject matter of the petition until after the date the court enters a final judgment. The bill authorizes a district court to appoint a magistrate to adopt the rate.

C.S.H.B. 2408 removes a requirement for the commissioner to hold a biennial public hearing to consider adoption of premium rates and other matters relating to title insurance regulation that an affected entity requests to be considered or that the commissioner determines necessary to consider and instead requires the commissioner to hold such a hearing not earlier than July 1 after the fifth anniversary of the closing of a requested rate change or rate setting hearing.

C.S.H.B. 2408 requires a trade association whose membership is composed of at least 20 percent of the members of the industry or group represented by the association; an association, person, or entity at whose written request the commissioner is required to order a public rate change or rate setting hearing; or TDI staff to be admitted as a party to the periodic hearing held by the commissioner after July 1 after the fifth anniversary of the closing of a requested rate change  or rate setting hearing and removes a provision requiring an individual or association or other entity recommending adoption of a premium rate or another matter relating to regulating the business of title insurance to be admitted as a party to the biennial hearing.

C.S.H.B. 2408 clarifies that a party to any portion of the periodic hearing relating to ratemaking, rather than to the ratemaking phase of the biennial hearing, may request that the commissioner remove any other party to that portion of the hearing on the grounds that the other party does not have a substantial interest in title insurance.

C.S.H.B. 2408 requires notice of a requested rate change or rate setting hearing, a periodic hearing, or a rate adoption hearing called by the commissioner to be sent directly to all the parties to the previous such hearing if the hearing was conducted as a contested case hearing and to be published in the Texas Register and on TDI's Internet website.  The bill removes a requirement for notice to be sent to all title insurance companies and title insurance agents and to be provided to the public in a manner that gives fair notice concerning the hearing.

C.S.H.B. 2408 makes conforming and nonsubstantive changes and repeals Section 2703.205, Insurance Code, relating to the phases of the periodic hearing.

EFFECTIVE DATE

On passage, or, if the bill does not receive the necessary vote, September 1, 2011.

COMPARISON OF ORIGINAL AND SUBSTITUTE

C.S.H.B. 2408 contains a provision not included in the original establishing that nothing in Insurance Code provisions relating to insurance rebates and discounts prohibits a title insurance company or a title insurance agent from providing continuing education to one or more individuals at market rates, whether or not the continuing education is for accreditation.

C.S.H.B. 2408 contains provision not included in the original requiring the Texas Department of Insurance (TDI) to notify an applicant for a renewal of a title insurance agent's license of any deficiencies in the application that render the renewal application incomplete; requiring TDI to notify the applicant of the date that the application is complete; and establishing deadlines for such notifications.

C.S.H.B. 2408 differs from the original by establishing that a renewal application for a title insurance agent license is automatically approved on the 30th business day after the date the renewal application is complete, unless on or before that date TDI notifies the applicant of the factual grounds on which TDI proposes to deny the license, whereas the original establishes that an application for a license or license renewal is considered approved if TDI does not provide the applicant with a ground for denying the application before the 61st day after the date TDI receives the completed application.

C.S.H.B. 2408 contains a provision not included in the original authorizing e-mail delivery of notices relating to deficiencies in a renewal application, the completion of an application, and any factual grounds for denying the license.

C.S.H.B. 2408 differs from the original by prohibiting TDI from delaying or denying an application for a title insurance agent's license or an escrow license or for renewal of that license based wholly or partly on a TDI audit or complaint investigation of, or disciplinary or enforcement action against, an applicant or license holder that is pending and has not been finally closed or adjudicated on or before the date on which the application is filed, whereas the original prohibits TDI from delaying or denying a license approval or a renewal application  due to a pending enforcement action against the applicant.

C.S.H.B. 2408 contains provisions not included in the original requiring TDI to notify a title insurance agent and appointing title insurance company of any deficiencies in the notice of the agent's appointment to represent an additional title insurance company that render the notice incomplete; establishing that such a notice is considered complete on the date TDI receives the notice unless TDI provides notice of the deficiencies; requiring TDI to notify the title insurance agent and appointing title insurance company of the date that the notice is complete; and establishing deadlines for TDI to provide such notifications.  The substitute contains provisions not included in the original changing the day on which the appointment is effective from the eighth day following the date TDI receives the completed notice of appointment and the fee to the eighth business day following the date the notice of appointment is complete and TDI receives the fee and changing the basis for an exception to that provision from TDI's rejection of the appointment to TDI's proposal to reject the appointment. The substitute contains a provision not included in the original authorizing e-mail delivery of notices relating to deficiencies in a notice of appointment, the completion of such notice of appointment, and any factual grounds for denying the appointment.

C.S.H.B. 2408 contains a provision not included in the original prohibiting TDI from rejecting or delaying a notice of appointment of a title insurance agent based wholly or partly on a pending TDI audit or complaint investigation or a pending disciplinary action against a title insurance agent or appointing title insurance company that has not been closed or finally adjudicated on or before the date on which the notice is received by TDI.

C.S.H.B. 2408 differs from the original by requiring TDI to notify a title insurance agent license holder of a disciplinary or enforcement action against the license holder not later than the 30th business day after the date TDI assigns a file number to the action; requiring TDI to notify an escrow officer license holder of such disciplinary or enforcement action not later than the 20th business day after the date TDI assigns a file number to the action; and establishing that a disciplinary or enforcement action is automatically dismissed with prejudice unless TDI serves a notice of hearing on the license holder not later than the 60th business day after the date TDI receives a hearing request from the license holder, whereas the original requires TDI to notify a holder of a title insurance agent's license or of an escrow officer's license or an applicant for either of such licenses of a disciplinary action against the license holder or applicant not later than the 20th day after the date the action is initiated and establishes that the action is considered dismissed if the TDI does not pursue the action on or before the 60th day after the date TDI receives a response from the license holder or applicant.

C.S.H.B. 2408 contains provisions not included in the original authorizing a notice of a disciplinary or enforcement action against a licensed title insurance agent to be provided by e-mail and requiring such notice to either a licensed title insurance agent or licensed escrow officer to provide a license holder fair notice of the alleged facts known by TDI on the date of the notice that constitute grounds for the action.

C.S.H.B. 2408 contains provisions not included in the original relating to the denial of an application for an escrow officer license or for renewal of that license on the basis of deficiencies in the application, provisions for completing the application and automatic approval of a completed application, with certain exceptions, and authorizing e-mail notifications by TDI to the license holder or applicant.

C.S.H.B. 2408 differs from the original by requiring the contents of the statistical report submitted to TDI annually by each title insurance company and title insurance agent, including any amendments to the statistical report, to be established in a rulemaking hearing and prohibiting an amendment to the contents of the statistical report from applying retroactively, whereas the original requires TDI to promulgate the contents of the annual statistical report submitted by a title insurance company or title insurance agent in a hearing conducted by the commissioner of insurance as a rulemaking hearing and prohibits a change to the report from being retroactive.  The substitute omits a provision included in the original requiring the commissioner to implement any new amendments to the statistical report no earlier than the second anniversary of the adoption of the amendment.

C.S.H.B. 2408, in a provision requiring the commissioner to order a public hearing to consider changing a premium rate at the request of certain entities, adds a purpose for such hearing not included in the original requiring the commissioner to call such a hearing requested for the purpose of fixing a new premium rate and adds a specification for a written request not included in the original.

C.S.H.B. 2408 contains provisions not included in the original requiring such a public hearing to be conducted by the commissioner as a contested case hearing at the request of any of the entities at whose request the commissioner is required to hold a rate change or rate setting public hearing and requiring the commissioner, if such a hearing is not conducted as a contested case hearing, to render a decision and issue a final order within a specified time frame.

C.S.H.B. 2408 differs from the original by requiring the commissioner, if the hearing is conducted as a contested case hearing, to issue a notice of call for items to be considered at the contested case hearing not later than the 30th day after the date the commissioner receives the hearing request and prohibiting the commissioner from requiring responses to the notice of call before the 60th day after the date the commissioner issues the notice of call, whereas the original requires the commissioner to issue a notice of call for items for consideration not later than the 31st day after the date the request was sent to the commissioner and prohibits the commissioner from requiring responses to the notice before the 61st day after issuing the notice of call for items for consideration.

C.S.H.B. 2408 differs from the original by requiring the commissioner to issue the notice of public hearing requested as a contested case hearing not later than the 30th day after the date responses to the notice of call are required, whereas the original requires the commissioner to issue a notice of the requested public hearing that is no earlier than the 91st day after the date of the notice of call for items for consideration.  The substitute contains a provision not included in the original requiring the commissioner to start the public hearing not earlier than the 120th day after the date the commissioner issues a notice of hearing.

C.S.H.B. 2408 differs from the original by requiring the commissioner to close the public hearing not later than the 150th day after the date the commissioner issues the notice of hearing and requiring the commissioner to render a decision and issue a final order not later than the 60th day after the record made in the public hearing is closed, whereas the original requires the commissioner to conclude the hearing no later than the 121st day after issuing the notice of public hearing and requires the commissioner to issue a ruling not later than the 60th day after the date of the hearing.

C.S.H.B. 2408 differs from the original by requiring the commissioner to consider each matter presented in the hearing and announce in a public hearing all decisions on all matters considered, whereas the original requires each matter in each phase of the hearing to be considered by the commissioner and requires decisions on the matters to be made in an open meeting.

C.S.H.B. 2408 contains a provision not included in the original authorizing a party requesting the public hearing to petition a district court in Travis County to enter an order requiring the commissioner to comply with the deadlines described by the bill's provisions if the commissioner fails to meet a time frame requirement related to the hearing procedures.

C.S.H.B. 2408 differs from the original by authorizing a combination of at least three of the entities who may request the commissioner to order a public rate change or rate setting hearing, subject to certain limitations, to jointly petition a Travis County district court to adopt a rate based on the record made in the hearing before the commissioner if the commissioner fails to render a decision and issue a final order within the required deadlines, whereas the original authorizes a party that is entitled to request a public hearing on a premium rate change to petition the district court to adopt a rate if the commissioner fails to issue a notice of call for items for consideration, conclude the public hearing, or issue a ruling within the prescribed deadlines.

C.S.H.B. 2408 contains provisions not included in the original requiring the court, if the record made in the hearing before the commissioner is not complete before the request for the court to adopt a premium rate, to hold an evidentiary hearing to establish a record before adopting the premium rate and prohibiting the commissioner, after such a petition has been filed, from issuing findings or an order related to the subject matter of the petition until after the date the court enters a final judgment.

C.S.H.B. 2408 contains a provision not included in the original to clarify that a party to any portion of the periodic hearing relating to ratemaking may request that the commissioner remove any other party to that portion of the hearing on the grounds that the other party does not have a substantial interest in title insurance.

C.S.H.B. 2408 differs from the original by providing for immediate effect, if the bill receives the required vote, or an effective date of September 1, 2011, whereas the original provides for immediate effect or an effective date of September 1, 2010.

C.S.H.B. 2408 differs from the original in nonsubstantive ways by using language reflective of certain bill drafting conventions.