86R3945 JES-F
 
  By: Creighton S.B. No. 2333
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to the operation of the Texas Title Insurance Guaranty
  Association.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Section 2602.008(a), Insurance Code, is amended
  to read as follows:
         (a)  Liability does not exist and a cause of action does not
  arise against any of the following persons for a good faith action
  or omission of the person in exercising the person's powers and
  performing the person's duties under this chapter:
               (1)  the commissioner or the commissioner's
  representative;
               (2)  the association or the association's agent,
  representative, or employee;
               (3)  a title insurance company or the company's agent or
  employee;
               (4)  a board member; and
               (5)  a special deputy receiver or the special deputy
  receiver's agent or employee.
         SECTION 2.  Subchapter A, Chapter 2602, Insurance Code, is
  amended by adding Section 2602.013 to read as follows:
         Sec. 2602.013.  VENUE. An action against the association or
  an action against the association's board member, agent,
  representative, or employee that arises from the exercise of the
  person's powers or performance of the person's duties under this
  chapter must be brought in a district court in Travis County.
         SECTION 3.  Section 2602.057(a), Insurance Code, is amended
  to read as follows:
         (a)  A title insurance company is not prohibited, because the
  company has an officer, director, or employee serving as a board
  member, from negotiating for or entering into a contract of
  reinsurance or assumption of liability or a contract of
  substitution to provide for liabilities for covered claims with the
  association, the commissioner, or the receiver or conservator of an
  impaired title insurance company or agent.
         SECTION 4.  Section 2602.101(a), Insurance Code, is amended
  to read as follows:
         (a)  In addition to the other powers and duties provided by
  this chapter, the association may:
               (1)  borrow money as necessary to implement this
  chapter according to the plan of operation;
               (2)  lend money to the receiver, supervisor, or
  conservator of an impaired title insurance company or its agent;
               (3)  sue and be sued, including taking any legal action
  necessary or proper to recover an unpaid assessment;
               (4)  enter into contracts as necessary or proper to
  implement this chapter;
               (5)  ensure payment of the policy obligations of an
  impaired title insurance company;
               (6)  negotiate and contract with a rehabilitator,
  conservator, supervisor, receiver, [or] ancillary receiver, or
  other third party to exercise the powers and perform the duties of
  the association;
               (7)  guarantee, assume, or reinsure, or cause to be
  guaranteed, assumed, or reinsured, a policy or contract of an
  impaired title insurance company;
               (8)  take legal action necessary to avoid the payment
  of improper claims or to settle claims or potential claims against
  an impaired title insurance company or agent, or the association;
               (9)  assume control of and consolidate the escrow
  accounts transferred to the association by an impaired title agent
  that has been placed in receivership, supervision, or
  conservatorship, and pay covered claims and administrative
  expenses from the consolidated escrow accounts to facilitate
  processing and payment of claims; and
               (10) [(9)]  perform any other acts as necessary or
  proper to implement this chapter.
         SECTION 5.  Section 2602.102(b), Insurance Code, is amended
  to read as follows:
         (b)  The association shall submit to the commissioner any
  amendment to the plan of operation necessary or suitable to ensure
  the fair, reasonable, and equitable administration of the
  association. The amendment takes effect on the commissioner's
  written approval or the 30th day after the date the amendment is
  submitted unless disapproved by the commissioner.
         SECTION 6.  Sections 2602.103(b) and (c), Insurance Code,
  are amended to read as follows:
         (b)  On the commissioner's approval [request], the
  association shall reimburse the department out of the guaranty fee
  account for the cost, including reasonable and necessary expenses,
  to employ or retain one or more persons to:
               (1)  audit and review agent escrow and trust accounts,
  financial condition, and compliance with applicable statutes and
  rules; [and]
               (2)  report to the commissioner on the accounts,
  condition, and compliance; or
               (3)  supervise a person employed or retained to perform
  audit and review under Subdivision (1).
         (c)  A person employed or retained under Subsection (b) acts
  solely under the direction of and as assigned by the commissioner
  but shall report the person's activity and expenses to the
  association on the request of the association.
         SECTION 7.  Section 2602.104(a), Insurance Code, is amended
  to read as follows:
         (a)  The association shall maintain a record of its [each
  negotiation or meeting in which the association or the
  association's representative discusses the association's]
  activities in exercising its powers and performing its duties under
  this chapter.
         SECTION 8.  Section 2602.105, Insurance Code, is amended to
  read as follows:
         Sec. 2602.105.  MEETING BY CONFERENCE CALL. Notwithstanding
  Chapter 551, Government Code, the board may hold an open meeting by
  telephone conference call if immediate action is required and
  convening of a quorum of the board at a single location is not
  reasonable or practical. The meeting is subject to the notice
  requirements that apply to other meetings. The notice of the
  meeting must specify as the location of the meeting the location at
  which meetings of the board are usually held. Each[, and each] part
  of the meeting that is required to be open to the public must be
  audible to the public at that location and must be recorded. The
  audio [tape-recorded. The tape] recording shall be retained and
  made available to the public for 30 days after the meeting date.
         SECTION 9.  Section 2602.107, Insurance Code, is amended by
  amending Subsection (b) and adding Subsection (e) to read as
  follows:
         (b)  The association may transfer income from investment of
  the association's money in any account to the administrative
  account.
         (e)  The association may advance money from any account to
  the administrative account to pay the administrative expenses of
  the association.
         SECTION 10.  Section 2602.109(a), Insurance Code, is amended
  to read as follows:
         (a)  The [If the] association shall reserve in the title
  account the amount of money the association determines [that money
  in the title account exceeds the amount] reasonably necessary for
  efficient future administration [operation] under this chapter.
  The[, the] association shall return the excess money pro rata to
  the holders of participation receipts on which an outstanding
  balance exists after deducting any credits against premium taxes
  taken under Section 2602.210. The amount deducted for those credits
  shall be deposited with the comptroller for credit to the general
  revenue fund. The association shall transfer to the guaranty fee
  account any excess money remaining in the title account after the
  distribution and reservation of money for administration.
         SECTION 11.  Section 2602.110, Insurance Code, is amended to
  read as follows:
         Sec. 2602.110.  EXPENSES OF ADMINISTERING IMPAIRED INSURER
  OR IMPAIRED AGENT. (a) The association may spend or advance money
  necessary to pay the expenses of administering the supervision,
  rehabilitation, receivership, conservatorship, or, as determined
  by a court of competent jurisdiction, other insolvency of an
  impaired title insurance company or impaired agent, on terms the
  association negotiates, if the company's or agent's assets are
  insufficient to pay those expenses.
         (b)  Money spent by or due to the association as a result of
  payments or advances shall be given Class 1 priority in
  distribution of the impaired title insurance company's or impaired
  agent's assets under Section 443.301 or similar law of any
  jurisdiction in which the impairment action is pending.
         SECTION 12.  Section 2602.111(a), Insurance Code, is amended
  to read as follows:
         (a)  The plan of operation may provide that, on approval of
  the board [and the commissioner], a power or duty of the association
  may be delegated to a corporation or other organization that:
               (1)  performs or will perform in two or more states
  functions similar to those of the association or its equivalent;
  and
               (2)  provides protection not substantially less
  favorable and effective than that provided by this chapter.
         SECTION 13.  Section 2602.114, Insurance Code, is amended by
  amending Subsection (b) and adding Subsection (c-1) to read as
  follows:
         (b)  The meeting is not open to the public. Only board
  members, association counsel and other association
  representatives, the commissioner, and persons the commissioner
  authorizes may attend the meeting.
         (c-1)  The board may subpoena the officers, directors,
  members, managers, employees, or partners of an impaired title
  agent to compel their attendance before the board to provide sworn
  testimony regarding the location and disposition of the assets,
  money, and books and records of the agent and to discuss the causes
  of any possible remedial action related to a title agent insolvency
  or impairment.
         SECTION 14.  Section 2602.116, Insurance Code, is amended to
  read as follows:
         Sec. 2602.116.  BOARD ACCESS TO RECORDS. The receiver,
  supervisor, conservator, or other statutory successor of an
  impaired title insurance company or agent shall give the board or
  its representative:
               (1)  access to the company's or agent's records as
  necessary for the board to perform its functions under this chapter
  relating to covered claims; and
               (2)  copies of those records on the board's request and
  at the board's expense.
         SECTION 15.  Section 2602.153, Insurance Code, is amended by
  amending Subsection (a) and adding Subsection (e) to read as
  follows:
         (a)  The association shall collect, receive, retain, [and]
  disburse, and advance the guaranty fees only as specifically
  provided by this chapter.
         (e)  The association may advance money from the guaranty fee
  account as the association considers necessary to provide for the
  payment of covered claims related to an impaired title insurance
  agent and administrative expenses related to the evaluation and
  payment of those claims. The advanced money shall be repaid to the
  guaranty fee account as soon as is practicable with money from
  guaranty fees or the estate of the impaired title insurance agent.
  No interest may accrue on the advanced money.
         SECTION 16.  Section 2602.201(a), Insurance Code, is amended
  to read as follows:
         (a)  If the commissioner determines that a title insurance
  company [or agent] has become impaired, the association shall
  promptly estimate the amount of additional money needed to
  supplement the assets of the impaired title insurance company [or
  agent] to pay all covered claims and administrative expenses,
  including expenses related to processing and payment of the claims.
         SECTION 17.  Section 2602.202(b), Insurance Code, is amended
  to read as follows:
         (b)  The assessment of each title insurance company must be
  in the proportion that the net direct written premiums of that
  company for the calendar year preceding the assessment bear to the
  net direct written premiums of all title insurance companies for
  that year. Assessments and partial assessments may be made in
  consecutive years until the association has collected an amount
  sufficient to pay the obligations and expenses described under
  Subsection (a).
         SECTION 18.  Section 2602.203, Insurance Code, is amended to
  read as follows:
         Sec. 2602.203.  NOTICE AND PAYMENT. The [(a) Not later than
  the 30th day before the date an assessment is due, the] association
  shall give all affected [notify the] title insurance companies at
  least 90 days' written notice of the due date of an assessment
  [company].
         [(b)     Not later than the 30th day after the date an
  assessment is made, the title insurance company shall pay the
  association the amount of the assessment.]
         SECTION 19.  Section 2602.206(b), Insurance Code, is amended
  to read as follows:
         (b)  The holder of the receipt is a general creditor of the
  impaired title insurance company, except that if the amount of
  assessments the association receives exceeds the amount paid for
  covered claims and administrative expenses, the holders of
  participation receipts have preference over other general
  creditors to, and are entitled to share pro rata in, the excess.
         SECTION 20.  Section 2602.208(a), Insurance Code, is amended
  to read as follows:
         (a)  Money from assessments is considered to supplement the
  marshalling of an impaired title insurance company's assets to make
  payments of covered claims on the impaired title insurance
  company's behalf and to pay administrative expenses related to
  payment of covered claims. The association may assess title
  insurance companies or use money from assessments to pay covered
  claims before the receiver exhausts the impaired title insurance
  company's assets.
         SECTION 21.  Section 2602.210, Insurance Code, is amended by
  amending Subsection (a) and adding Subsection (d) to read as
  follows:
         (a)  A title insurance company is entitled to recover in its
  rates for the succeeding 12 months [calendar year] amounts paid in
  assessments not to exceed one percent of the company's net direct
  written premiums. In promulgating or establishing rates the
  commissioner shall consider assessments and refunds of assessments
  and shall adjust the rates to allow for recovery under this
  subsection.
         (d)  If the association receives money related to a title
  insurance company receivership from any source, including payment
  of a claim made by the association against the estate of the title
  insurance company, that is in excess of the amount title insurance
  companies are entitled to recover under this section, the excess
  money shall be held by the association in its title account to
  offset the amounts required for future assessments or
  administrative expenses of the association.
         SECTION 22.  Section 2602.251, Insurance Code, is amended to
  read as follows:
         Sec. 2602.251.  COVERED CLAIMS IN GENERAL. An unpaid claim
  is a covered claim if:
               (1)  the claim is made by an insured under a title
  insurance policy to which this chapter applies;
               (2)  the claim arises out of the policy and is within
  the coverage and applicable limits of the policy, subject to all
  applicable policy provisions and defenses available under the
  policy and applicable law;
               (3)  the title insurance company that issued the policy
  or assumed the policy under an assumption certificate is an
  impaired title insurance company; and
               (4)  the insured real property or a lien on the property
  is located in this state.
         SECTION 23.  Section 2602.252, Insurance Code, is amended to
  read as follows:
         Sec. 2602.252.  CLAIM AGAINST TRUST FUNDS OR ESCROW ACCOUNT.
  An unpaid claim is a covered claim if the claim:
               (1)  is:
                     (A)  against trust funds or an escrow account of
  an impaired title insurance company or agent; or
                     (B)  for money provided to an impaired title
  insurance company or the company's agent for deposit into trust
  funds or an escrow account; and
               (2)  is unpaid because of a shortage of those funds or
  in that account, including a shortage that exists because the money
  was not deposited by the impaired title insurance company or the
  company's agent in those funds or that account.
         SECTION 24.  Section 2602.255, Insurance Code, is amended to
  read as follows:
         Sec. 2602.255.  CLAIMS NOT COVERED. The following are not
  covered claims:
               (1)  an amount due a reinsurer, title insurance
  company, insurance pool, or underwriting association as a
  subrogation recovery or otherwise;
               (2)  a supplementary payment obligation incurred
  before a determination is made under this chapter that a title
  insurance company or agent is impaired, including:
                     (A)  adjustment fees or expenses;
                     (B)  attorney's fees or expenses;
                     (C)  court costs;
                     (D)  interest;
                     (E)  enhanced damages, sought as a recovery
  against the insured, the impaired title insurance company or agent,
  or the association, that arise under Chapter 541 of this code or
  Subchapter E, Chapter 17, Business & Commerce Code, or a similar law
  of another state; and
                     (F)  bond premiums;
               (3)  a shortage of trust funds or in an escrow account
  resulting from the insolvency of a financial institution;
               (4)  exemplary, extracontractual, or bad faith damages
  awarded against an insured or title insurance company by a court
  judgment;
               (5)  a claim under Section 2602.252 by a claimant who
  has a lien against the real property that was the subject of the
  transaction from which the claim arises, unless the lien is held to
  be invalid as a matter of law;
               (6)  a claim under Section 2602.251, 2602.252, or
  2602.253 by a claimant who caused or substantially contributed to
  the claimant's loss by the claimant's action or omission, as
  determined by the association or the association's agent; and
               (7)  a claim filed with the association after the final
  date set by the commissioner or court for the filing of claims
  against a receiver of an impaired title insurance company or agent.
         SECTION 25.  Section 2602.256, Insurance Code, is amended to
  read as follows:
         Sec. 2602.256.  AMOUNT OF COVERED CLAIM; LIMIT. (a) A
  covered claim under Section 2602.251 or 2602.253 may not exceed the
  lesser of $500,000 [$250,000] for each claimant or $500,000
  [$250,000] for each policy.
         (b)  A covered claim under Section 2602.252 may not exceed
  the lesser of $500,000 [$250,000] for each claimant or the amount of
  money actually delivered to the impaired title insurance company or
  agent as trust funds or an escrow account for each claimant in a
  transaction from which the claim arises, except that the cumulative
  amount of covered claims arising from a single transaction may not
  exceed $500,000 [$250,000].
         SECTION 26.  Section 2602.259(c), Insurance Code, is amended
  to read as follows:
         (c)  In a proceeding considering a covered claim, a judgment
  against an insured taken after the date the delinquency proceeding
  or supervision begins or a conservator is appointed is not evidence
  of liability or of the amount of damages, and a default or consent
  judgment against an insured or the impaired title insurance company
  or a settlement, release, or judgment entered into by the insured or
  the impaired title insurance company does not bind the association
  and is not evidence of liability or of the amount of damages in
  connection with a claim brought against the association or another
  party under this chapter.
         SECTION 27.  Section 2602.260, Insurance Code, is amended to
  read as follows:
         Sec. 2602.260.  ADMISSIBILITY OF PAYMENT. In a lawsuit
  brought by a conservator, supervisor, or receiver of an impaired
  title insurance company or agent to recover assets of the company or
  agent, the fact that a claim against the company or agent has been
  or will be paid under this chapter is not admissible and may not be
  placed before a jury by evidence, argument, or reference.
         SECTION 28.  Subchapter F, Chapter 2602, Insurance Code, is
  amended by adding Section 2602.261 to read as follows:
         Sec. 2602.261.  APPEAL OF CLAIM DETERMINATION. A claimant's
  right of appeal with respect to a claim determination by the
  association is governed by the association's plan of operation. A
  claimant must bring an action, including an action for declaratory
  relief, challenging denial of a claim not later than one year after
  the date the claim was denied.
         SECTION 29.  Section 2602.302, Insurance Code, is amended by
  adding Subsections (b-1), (b-2), and (b-3) to read as follows:
         (b-1)  On good cause shown by the association or the
  commissioner, the court in which the receivership proceedings are
  pending may extend a cancellation date or deadline imposed under
  Subsection (b) for a period not to exceed one year.
         (b-2)  If an impaired title insurance company or agent is not
  in receivership in this state, the commissioner shall set a claim
  deadline, which may not be later than the first anniversary of the
  date of the determination of impairment.
         (b-3)  On payment of the last timely filed covered claim or
  accepted late filed claim, the association is discharged from the
  association's obligations under this chapter and the estate of the
  impaired insurer or agent is closed.
         SECTION 30.  Section 2602.452(b), Insurance Code, is amended
  to read as follows:
         (b)  The association may employ or retain a person or persons
  to perform any action required under Subsection (a), in accordance
  with Section 2602.103(a).
         SECTION 31.  Section 2602.103(d), Insurance Code, is
  repealed.
         SECTION 32.  (a) Except as provided by this section, the
  changes in law made by this Act apply only with respect to a title
  insurance company or agent that is designated as impaired on or
  after the effective date of this Act. The law as it existed
  immediately before the effective date of this Act applies with
  respect to a title insurance company or agent that was designated as
  impaired before the effective date of this Act, and that law is
  continued in effect for that purpose.
         (b)  Section 2602.013, Insurance Code, as added by this Act,
  and Section 2602.260, Insurance Code, as amended by this Act, apply
  only to an action commenced on or after the effective date of this
  Act. An action commenced before the effective date of this Act is
  governed by the law applicable to the action immediately before the
  effective date of this Act, and that law is continued in effect for
  that purpose.
         SECTION 33.  This Act takes effect September 1, 2019.