82R3936 TJS-F
 
  By: Carona S.B. No. 735
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to prohibition of certain extra hazardous coverages by
  title insurance companies.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Subchapter A, Chapter 2502, Insurance Code, is
  amended by adding Section 2502.006 to read as follows:
         Sec. 2502.006.  CERTAIN EXTRA HAZARDOUS COVERAGES
  PROHIBITED. (a) A title insurance company may not insure against
  loss or damage sustained by reason of any claim that under federal
  bankruptcy, state insolvency, or similar creditor's rights laws the
  transaction vesting title in the insured as shown in the policy or
  creating the lien of the insured mortgage is:
               (1)  a preference or preferential transfer under 11
  U.S.C. Section 547;
               (2)  a fraudulent transfer under 11 U.S.C. Section 548;
               (3)  a transfer that is fraudulent as to present and
  future creditors under Section 24.005, Business & Commerce Code, or
  a similar law of another state; or
               (4)  a transfer that is fraudulent as to present
  creditors under Section 24.006, Business & Commerce Code, or a
  similar law of another state.
         (b)  The commissioner may by rule designate coverages that
  violate this section. It is not a defense against a claim that a
  title insurance company has violated this section that the
  commissioner has not adopted a rule under this subsection.
         (c)  Title insurance issued in or on a form prescribed by the
  commissioner shall be considered to comply with this section.
         (d)  Nothing in this section prohibits title insurance with
  respect to liens, encumbrances, or other defects to title to land
  that:
               (1)  appear in the public records before the date on
  which the contract of title insurance is made;
               (2)  occur or result from transactions before the
  transaction vesting title in the insured or creating the lien of the
  insured mortgage; or
               (3)  result from failure to timely perfect or record
  any instrument before the date on which the contract of title
  insurance is made.
         (e)  A title insurance company may not engage in the business
  of title insurance in this state if the title insurance company
  provides insurance of the type prohibited by Subsection (a)
  anywhere in the United States, except to the extent that the laws of
  another state require the title insurance company to provide that
  type of insurance.
         SECTION 2.  Section 2502.006, Insurance Code, as added by
  this Act, applies only to an insurance policy that is delivered,
  issued for delivery, or renewed on or after January 1, 2012. A
  policy delivered, issued for delivery, or renewed before January 1,
  2012, is governed by the law as it existed immediately before the
  effective date of this Act, and that law is continued in effect for
  that purpose.
         SECTION 3.  This Act takes effect September 1, 2011.