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A BILL TO BE ENTITLED
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AN ACT
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relating to prohibition of certain extra hazardous coverages by |
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title insurance companies. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Subchapter A, Chapter 2502, Insurance Code, is |
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amended by adding Section 2502.006 to read as follows: |
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Sec. 2502.006. CERTAIN EXTRA HAZARDOUS COVERAGES |
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PROHIBITED. (a) A title insurance company may not insure against |
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loss or damage sustained by reason of any claim that under federal |
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bankruptcy, state insolvency, or similar creditor's rights laws the |
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transaction vesting title in the insured as shown in the policy or |
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creating the lien of the insured mortgage is: |
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(1) a preference or preferential transfer under 11 |
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U.S.C. Section 547; |
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(2) a fraudulent transfer under 11 U.S.C. Section 548; |
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(3) a transfer that is fraudulent as to present and |
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future creditors under Section 24.005, Business & Commerce Code, or |
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a similar law of another state; or |
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(4) a transfer that is fraudulent as to present |
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creditors under Section 24.006, Business & Commerce Code, or a |
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similar law of another state. |
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(b) The commissioner may by rule designate coverages that |
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violate this section. It is not a defense against a claim that a |
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title insurance company has violated this section that the |
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commissioner has not adopted a rule under this subsection. |
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(c) Title insurance issued in or on a form prescribed by the |
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commissioner shall be considered to comply with this section. |
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(d) Nothing in this section prohibits title insurance with |
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respect to liens, encumbrances, or other defects to title to land |
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that: |
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(1) appear in the public records before the date on |
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which the contract of title insurance is made; |
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(2) occur or result from transactions before the |
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transaction vesting title in the insured or creating the lien of the |
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insured mortgage; or |
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(3) result from failure to timely perfect or record |
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any instrument before the date on which the contract of title |
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insurance is made. |
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(e) A title insurance company may not engage in the business |
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of title insurance in this state if the title insurance company |
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provides insurance of the type prohibited by Subsection (a) |
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anywhere in the United States, except to the extent that the laws of |
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another state require the title insurance company to provide that |
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type of insurance. |
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SECTION 2. Section 2502.006, Insurance Code, as added by |
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this Act, applies only to an insurance policy that is delivered, |
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issued for delivery, or renewed on or after January 1, 2012. A |
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policy delivered, issued for delivery, or renewed before January 1, |
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2012, is governed by the law as it existed immediately before the |
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effective date of this Act, and that law is continued in effect for |
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that purpose. |
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SECTION 3. This Act takes effect September 1, 2011. |